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Flashcards in Internal Management- Constitution Deck (54):

whats inside the constitution

rules that govern internal management of company


what is constitution formerly known as before 2014 amendment.

memorandum and articles of association


where are the requirements to the constitution set out



company limited by guarantee which part of statue




company limited by guarantee
• If company is wound up when member is still a member or company is wound up within one year after he ceases to be a member, each member undertakes to contribute to the assets of the company (up to the specified amount agreed):
o For payment of debts and liabilities before ceasing to be a member
o For costs, charges and expenses of winding up
o For adjustment of rights of the contributories


Where are Restrictions on the company’s capacity, rights, powers and prvileges found

constitution. S 23(1B)


where are The company’s objects found.

constitution. s23(1A)


where must the memorandum be lodged

Registry of Companies - s19(1)


what does object clause contain

businesses that company can undertake.


why is the ultra vires doctrine no longer relevant in sg?

s23, 25, 25A.


where is the regulations for the internal governance of companies contained? which statue says must.

constitution. s35(1) says internal regulations must be inside.


what is the purpose of the constitution/M&A.

STATUTORY CONTRACT. between inter se, members and company.


How can the statutory contract embodied in constitution be changed?

by majority vote, by passing a special resolution at a general meeting. 26(1), 33(1), 37(1)


which section allows you to entrench a clause in the constitution? what is the effect of this?

s26A. clause cannot be altered. or resolution for alteration must be passed by a larger majority than required for special resolution.


what happens if an amendment to the constitution discriminates against a member?

member can apply for remedy under s216


How do you become a member?

must have your name entered in the company's register of members 19(6).


How do you become a member of a company limited by guarantee?

check the constitution its prescribed there


How do you become a member of a company with shares?

ACQURING SHARES + REGISTERING YOURSELF as holder. you'll need the Sh to submit and instrument of transfer to the company s126(1), 130(1). Person who presents transfer form for registration warrants that it is genuine.


what must the person who presents transfer form guarantee?

The person who presents a transfer for registration impliedly warrants that it is genuine and impliedly undertakes to INDEMNIFY the company against any loss that it may suffer by reason of registration (STANLEY YEUNG)


For private companies, when will the transfer be effective?

1. when the private company lodges notice of the transfer with the Registrar
*Note: Companies (Amendment) Act 2014
s126(2) -  Where there has been a transfer of shares, a private company shall lodge with the Registrar notice of that transfer of shares in the prescribed form.

2. when the electronic register of members maintained by ACRA is updated. s126(3) Companies (Amendment) Act 2014


Transfer of shares in SGX listed coys

Shares are immobilised by having them registered in the name of the Central Depository (CDP)
- CDP maintains a register of depositors.
- DEPOSITORS treated as though they are members of the company


what if you acquire shares without registering as member

the previous registered shareholder holds the shares on trust for the new owner. The new owner has an equitable interest pending registration.
Jimat bin Awang v Lai Wee Ngen


Share certificates. when must it be issued. what does a cert mean.

companies must issue cert within specified period s130AE. they are prima facie evidence of title to the shares. s123(1)


can there be transfer of title to shares merely by delivery of share cert to purchaser/donee?

NO. s126(1), 130(1)


If seller, is not owner, but only has restricted interest, does the buyer have a better interest than the seller? Unless what happens?

NO. Buyer can have no better interest than seller, as share certificates are non-negotiable instruments.

unless, owner is estopped from denying seller's authority to transfer title- where conduct of beneficial owner gave rise to a clear representation, which had to be implied, that the stockbroker had implied or ostensible authority to deal with the shares Pan-Electric Industries Ltd v OCBC


When can an owner be estopped from denying seller's authority to transfer title?

when conduct of beneficial owner gave rise to a clear representation, which had to be implied, that the stockbroker had implied or ostensible authority to deal with the shares Pan-Electric Industries Ltd v OCBC


what kind of coy MUST have a restriction on the transfer of shares?

private coy s18(1)(a)


2 Common ways of share transfer restrictions in a private company

I. directors discretion to refuse to register a transfer
II. pre-emptive rights', Giving to the existing members a right to have any shares offered to them first before they can be transferred


Where directors are given a discretion not to register a transfer, how must the discretion be exercised? what else must the coy do?

discretion for refusal to be exercised bona fide in the interest of the company
s129(3)- coy must state facts justifying the refusal


what happens if you sell shares in breach of pre-emptive rights

transfer is void. no legal or equitable rights are trasnfered to the purchaser. (Gan Sin Tuan v Chew Kian Kor) ... unclear if this works in sg.


status of transfer if pre-emption right waived

transfer not void. qn of fact


What to do if share transfer restrictions are not complied with? 2 things depending if transfer hasn't been executed, and if transfer has been executed.

• Injunction:
Member to apply to court for an injunction + for the share to be transferred to an existing member in accordance w the constitution
• Rectification of register of members (s194):
If the transfer has already been executed, the member may apply to court for a rectification of the register of members (s194) - court will then decide any questions concerning title to the shares


if you transfer the shares of X company which owns the shares of B company, does the pre-emptive rights of B company apply?

pre-emptive rights of B company does NOT apply. Share transfer restrictions only apply when transferring THE COMPANY'S shares


what is a member's principal right based on s39(1)

to have provisions of constitution COMPLIED WITH. since the constitution is a contract b/w coy and members, and among the members inter se.


based on statutory contract s39(1), what can the member insist?

member can insist that (1) company and (2)other members COMPLY with provisions of constitution, EVEN IF UNFAIR. Wong Kim Fatt v Leong & Co: fairness or unfairness of an article is not relevant in deciding whether it can be enforced.


Is the fairness or unfairness of an article relevant in deciding whether it can be enforced?

Wong Kim Fatt v Leong & Co: fairness or unfairness of an article is not relevant in deciding whether it can be enforced.


Interpretation of the constitution. How does it work?

like the interpretation of any contract. in CERTAIN CIRCUMSTANCES, court may construe it to include implied terms. Semcorp Marine


if right to remove director, is vested is director alone. and if other party served a letter of termination on the director,... what does this mean?

In removing X as director, the other party had REPUDIATED the relationship established in the SHA/AOA
A mandatory order should therefore be made to cause X to be reappointed as director. (Teo Choon Mong Frank v Wilh Schulz GmbH)


can you enforce the right that constitution purported to give you if youre not a member.

NO: not member = not privy to the constitution = cannot enforce any rights that M/A purport to confer upon them (Malayan Banking Ltd v Raffles Hotel)


You are contracted to be MD of coy for 10 years, then 3rd year your coy was taken over by another coy (B). B altered the articles, so that they can remove you as director. What can you do?

SUE FOR BREACH. company cannot justify a breach of contract with a 3p by amending its articles.
Southern Foundries v Shirlaw


Coy employ you as solicitor under articles. Then you became shareholder. Coy then used another lawyer instead of you. Can you sue for breach?

No cannot. because you have no contract as an employee. Articles of a company are ONLY CONTRACTUAL when looking at ordinary shareholder’s rights. you can't use your shareholder status to resolve the issue.


Articles of a company are only contractual when looking at WHO'S right?

ordinary shareholder’s rights.


What remedies can members seek from the court?

(1) injunction to restrain the breach
(2) can also apply to court for company to comply with the terms of the constitution.


a meeting is being called without special notice being given as required by the constitution, what can you as a member do?

apply to restrain the company from holding a meeting until proper notice is given.


if constitution requires that all profits are to be divided as dividends, and you (member) want it this way too, all the other members disagree. what can you do to get your way?

INSIST that the company do so - also apply to court for company to comply with the terms of the constitution. only way to prevent is to change the constitution


When the proper procedure in the appointment and removal of directors/ conduct of meetings has not been complied with. What can you do? Must you be a member to do so?

Can apply to court for a declaration to that effect and consequential relief. don't need to be member. note: ONLY for things concerning PROCEDURE. Thio Keng Poon v Thio Syn Pyn

Only members can apply to the court for breach of a provision in the constitution.


If no SUBSTANTIAL injustice done tho there are procedural irregularities, can the court validate those irregularities?

YES. s392(2) CA
(2) A proceeding under this Act is not invalidated by reason of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid.


what kind of non-compliance is needed for s392 to validate the resolution.



when can a non-compliance with a proceeding (removal of director), be held invalid by the court?

when non-compliance can be shown to cause substantial injustice to the intnerested party.


can a lack of quorum be validated by s392(2)?

depends. its procedural irregularity, but only validated if it doesn't cause substantial injustice. (Chang Benety v Tang Kin Fei )


Do members have a right to restrain ultra vires transaction?

YES. under S25(2), can use S409A Injunction for acts which contravene CA.


What powers can the directors exercise?

all such powers of the company, except those required to be exercised by the company in a general meeting.

No regulation made by coy in general meeting shall invalidate any prior act of the directors.


what powers do member have when the board is deadlock? effect of this?

reserve powers- authorise transactions- but must be in INTEREST OF COMPANY. (Chan Siew Lee v TYC investment)

note: reserve power is only useful if ONLY board is deadlock, not members deadlock.


what is the usual solution for members for a deadlock among directors?

remove recalcitrant directors, appoint more directors/ change the constitution.