Formation of a Company - The Constitution Flashcards
(18 cards)
What was the constitutional positions before CA 2006?
Under CA 1985, a company’s constitution consisted of 2 documents - the Memorandum and the Articles of Association
What forms part of the constitution under CA 2006?
Only the Articles of Association form part of the constitution; the memorandum is now just a procedural document
What is the purpose of the Memorandum under CA 2006?
It records that the subscribers agree to form a company and become members, but it no longer has constitutional effect
Do companies still need to include an objects clause in the Memorandum?
No - companies have unrestricted objects unless they restrict them voluntarily in their Articles
What happens to the objects clause of a pre-2006 company?
The objects clause in the old Memorandum becomes part of the Articles and remains effective unless removed
What is the purpose of the Articles of Association (AA)
To regulate the relationship between the company, its directors, and its members
Examples of provisions typically found in the AA?
- Appointment and powers of directors
- Quorum and board meeting rules
- Shareholder rights and voting
- Transfer of shares
- Share classes and rights
- Meeting procedures
What is the Legality Test regarding articles?
Provisions in AA cannot override mandatory statutory rights in CA.
Can the articles be more onerous than the statute?
Yes
What are the 3 options for adopting AA under CA 2006
- Model Articles (MAs) - default if none registered
- Amended MAs - custom modifications to MAs
- Tailor-made Articles - fully bespoke
How can a company aments its Articles?
By passing a special resolution
What condition must be met for an alteration of Articles to be valid?
The alteration must be made bona fide in the interests of the company as a whole
What are entrenched Articles?
Articles that can only be amended if specific conditions are met or more restrictive procedures than a special resolution are followed
Can entrenched Articles still be amended by unanimous consent
Yes - they can be amended by unanimous member agreement or court order
What is the legal effect of the Articles?
They are binding as a contract between the company and each member
What kind of rights can a member enforce under s.33?
The rights relevant to them in their capacity as a member eg,
- Right to vote
- Right to receive declared dividends
Can members enforce the Articles against each other directly?
Generally, no. Members cannot directly enforce Articles against one another - shareholders’ agreement is required for this
Can a member enforce the Articles against the company?
Yes - but only in their capacity as a member. The Courts may, for example, grant an injunction to prevent breach of voting rights
