Articles of Association Flashcards
(5 cards)
General
General - The Articles of Association are the internal rule book that every incorporated organisation must have and work by. It forms a part of the constitution of an organisation. They are a contract between the members (stockholders, subscribers) and the organization, and among the members themselves.
S33 CA 2006
S33 CA 2006 states “ the memorandum and articles bind the company and its members … As if they had signed covenants [contracts]. Essentially, they are binding as seen in Hickman v Kent and Romney Marsh Sheepbreeders’ Association (1915), and this was also confirmed in Pender v Lushington (1877).
Allen v Goldreefs of Africa Ltd 1900
Simon’s clause - The Articles could be changed under s21 CA2006 by a special (or written) resolution usually determined at a general meeting. Any changes require the consent of 75% of shareholders rather than a simple majority (if there are multiple share classes, then 75% of each share class must approve the changes). Any change must be in the genuine best interests of the whole company, not just designed to meet the needs of some members. Allen v Goldreefs of Africa Ltd (1900). There must also not be Entrenchment, which this clearly would be. Simon cannot change the articles without Sharon’s consent.
Rayfiled v Hands 1958
Sharon’s clause – Simon must also agree to change the articles as seen above. In Rayfield v Hands (1958) the court decided that ‘will’ indicated an obligation to take them. Each member is bound to the other members. Indicating that the other shareholders are obliged to buy them.
Eley v The Positive Government Security Life Assurance Company Ltd 1876
Eley v The Positive Government Security Life Assurance Company Ltd (1876) also suggests only enforceable if to do with members’ rights. So, as Sharon and Simon are members, they will both be required to buy the shares from the other, leaving themselves in a potential stalemate.
