Changing Articles of Association

Question 1

S21 CA 2006

Answer 1

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)

Question 2

Two shareholders

Answer 2

As there are two equal shareholders, this potentially could cause a problem, and the courts may have to intervene.

Question 2

Special resolution - Companies Act conflict

Answer 2

Changing the articles can be done by special resolution, BUT a change to make Nick director for life would conflict with the Companies Act which says a director can be dismissed by a simple majority vote, so it would not be effective. A Bushell v Faith clause could be put into the articles saying that in a vote to remove a director that directors shares would have triple votes is effective in ensuring someones position as director.

Question 3

Bushell v Faith clause

Answer 3

Changing the articles can be done by special resolution, BUT a change to make Nick director for life would conflict with the Companies Act which says a director can be dismissed by a simple majority vote, so it would not be effective. A Bushell v Faith clause could be put into the articles saying that in a vote to remove a director that directors shares would have triple votes is effective in ensuring someones position as director.

Question 4

S994

Answer 4

If [original directors] promised to make [new person] a director in return for his buying shares, not to do so could be unfair prejudice. S994 may give protection to the “promise” given.