Module 11: Constitution of a Company Flashcards
What is the memorandum of association?
A brief document evidencing the intention of tis subscribers to form a company and become members on formation
Not possible to amend or update once submitted
What is the company’s constitution?
Comprises its Articles of Association and any resolutions and agreements which affect the constitution
Section 17 CA 2006 defines a company’s constitution as?
The company’s articles of association
Any resolutions and agreements affecting a company’s constitution
What are the articles of association?
Rules, agreed on by company’s members, which govern a company’s internal affairs
Internal rules set out in the AoA include?
Appointment and dismissal of directors Powers, responsibilities and liabilities Admin requirements relating to calling, conduct and voting at GMs Members rights Dividend policy
Articles cannot contain what?
Anything contrary to provisions of CA 2006 or general law
CA 2006 requires all companies to have AoA, how may this come about?
May chose to adopt a model
Draft own articles
How may companies amend its articles of association?
Special resolution
75% majority
Binding on all members
What is special resolution?
75% majority vote
What does section 22 CA 2006 provide for?
Conditional entrenchment of certain provisions
On formation of subsequently by unanimous agreement
If entrenched can only be altered/repealed by special res or stricter
Cannot prevent amendment
Safeguards to members for alteration to the articles?
Void if conflicts with Companies Act or general law
Member can’t be compelled by any alteration for shares
Can only vary class rights is procedure is followed
Subject to review by court if bona fide test is breached
When a company changes its articles when must they submit amended copy?
Within 15 days of the amendment taking effect
Could be fined
What is the bona fide test?
Strike a balance between:
Majority entitled to alter the articles even though minority believe is prejudicial to their interest
Minority being entitled to protection against alteration intended to benefit the majority rather than company as a whole
If purpose of the alteration is to benefit the company as a whole?
Normally valid even though it is shown that the minority does in fact suffer
Expulsion of Minorities is concerned with what?
Alteration of the articles in order to:
Remove director from office
Permit majority of members to enforce a transfer to themselves of the shareholding of a minority
Valid even if discriminatory provided benefits company as a whole
Sidebottom v Kershaw, Leese and Co Ltd 1920
Articles altered to enable directors to purchase shareholding of members that competed
Justifiable alteration if made bona fide in the interests of the company of a whole
Was justifiable
Dafen Tinplate CO Ltd v Llanelly Steel Co Ltd 1920
D minority shareholder transferred its custom from L to another supplier
Majority L sought to protect its interests by altering articles to provide for compulsory acquisition of D’s shares
What are the objects of a company?
Aims and purposes
The CA 2006 specifies what with regards to objects?
Company has unrestricted objects
Unless articles specifically restrict the company’s objects
Protection to 3rd parties in section 39 and 40 of CA 2006?
39: Validity of company’s acts can’t be called into question on ground of lack of capacity because of anything in its constitution
40: includes actions by directors
Main purpose of the rules on company name?
Ensure 3rd parties aren’t misled
Main rules related to choice of company name include?
End with plc or ltd Refused if same as another, is offensive Restrict certain words e.g connect with Her Majesty's Gov or local authority, international if not, profession if not Objections to the company names adjudicator- if similar to a name which has goodwill. Got to show: Circumstances apply, acted in good faith, interest not affected Passing-off action Disclosure requirements Protecting names Changing names
How long does the company names adjudicator have to publish a decision?
90 days of determining an application
Power to order to change
What is a passing off action?
May bring an action to prevent another party using if feel rights infringed
Interdict/injunction to prevent further violation and may have a claim for damages
Will have to shows word does not have a general use
Distinctive so confusion will result
