The Constitution of a company

Question 1

What are the two key components of a company’s constitution?

Answer 1

The Memorandum of Association and the Articles of Association.

Question 2

What is the purpose of the Memorandum of Association?

Answer 2

It governs the relationship between the company and outsiders.

Question 3

What is the purpose of the Articles of Association?

Answer 3

It contains rules for internal the management of the company.

Question 4

What are some of the key contents of a company’s Articles of Association?

Answer 4

• Issue and allotment of shares
• Calls on shares
• Rules relating to the transfer of shares
• Procedures to be followed at general meetings
• Regulations relating to members voting

Question 5

What are some key contents of a company’s Memorandum of Association?

Answer 5

• Company name
• Restrictions, if any, imposed on the companys business
• liability of its members, whether limited or unlimited
• Company objectives
• Share Capital

Question 6

What is the legal effect of a company’s constitution?

Answer 6

It acts as a binding contract between firstly; the company and each member, secondly, between the members themselves and not outsiders.

Section 33 (3) of the Comapnies Act.

Question 7

Because of the constitution both the company and members have individual rights and obligations; what is the consequence of failing to comply with the constitution?

Answer 7

It amounts to breach of contract, entitling the innocent party to sue.

Question 8

What is the rule regarding conflicts between the Memorandum and the Articles of Association?

Answer 8

The Memorandum takes precedence over the Articles.

Question 9

In relation to the contractual effect of the constitution

What was the significance of the case Hickman v Kent (1915)?

Answer 9

It reinforced the principle that a companys articles are binding on its members and that members must follow the dispute resolution mechanisms outlined in the company’s Articles of Association.

What are the facts of the case?

Question 10

In relation to the contractual effect of the constitution

What is the signifcance of Rayfield v Hands (1960) Ch 1

Answer 10

This case reinforced the principle that companies must adhere to their own articles of association, particularly when they impose obligations on directors

What are the facts of the case?

Question 11

The Constitution only binds members, not external parties

What is the significance of the case Eley v Positive Government Security Life Association Co. Ltd (1876) 1 Ex D 88?

Answer 11

The court held that the articles of a company do not bind the company in its dealings with outsiders

What are the facts of the case?

Question 12

Can an outsider enforce provisions of a company’s Articles of Association?

Answer 12

No

Question 13

What is a Shareholders’ Agreement?

Answer 13

A private contract between shareholders that governs their rights and obligations within the company.

Question 14

What are some of the key components of the Shareholders Agreement?

Answer 14

• Rights and Obligations
• Decision-making process
• Dispute resolution
• Exit strategy

Question 15

Why might shareholders prefer a Shareholders’ Agreement over the Articles of Association?

Answer 15

• It is private
• Provides clarity about each shareholders vote, rights and obligations
• Protects MInority Shareholders from decisions made solely by majority shareholders that could be detrimental to their interests
• Reduces conflict by addressing potential disputes upfront

Question 16

Why is the MOA the more fundamental document?

Answer 16

Because it is the one to which the original parties forming the company will subscribe their names.

Question 17

What is the provision of section 34 of the Companies Act?

Answer 17

It allows the adoption of a model memorandum and articles of association as their constitution.

Question 18

What happens if a company does not file its own memorandum and articles of association?

Answer 18

It is deemed by the law that the company has adopted the prescribed model.

Question 19

What is a model memorandum and articles of association?

Answer 19

This is a standardized template that companies use when incorporating under a specific jurisdiction.

Question 20

What is the purpose of the model MOA and AOA?

Answer 20

• to simplify the incorporation process
• to ensure compliance with legal requirements
• to provide a standard structure for business

Question 21

In relation to company names

Comment on the reservation of a name

Answer 21

• it is allowed by section 45 of the companies act
• it may be revoked sooner by the Registrar, if it is not used for incorporation or for a change of name within 2 moths
• the law does not guarantee that the Registrar will permit the use of the reserved name once the proposer finally wants to use it

Question 22

In relation to company names

Comment on Prohibited names

Answer 22

• the registration of a name which is identical with that of an existing company or so nearly resembles that of an exisiting company as to be likely to mislead the public is prohibited under section 47 of the companies Act

Question 23

In relation to company names

What are the names that may only be registered with ministerial approval?

Answer 23

• Authority
• Corporation
• Government
• Malawi
• National

The approval is in the way of written consent

Question 24

In relation to company names

Why is ministerial approval required for the list of names provided for under the Act?

Answer 24

• To prevent misrepresntation
• To protect public interest
• Regulatory oversight

Question 25

# In relation to company names Expand on the points provided as to the reasons why ministerial approval is required

Answer 25

1. To prevent misrepresentation the names often imply a connection with the government, regulatory bodies or national institutions. Requiring ministerial approval ensures that private companes do not mislead the public into thinkinh they have official status. 2. Protecting public interest Unauthorised use of such terms could lead to fraud, misuse of trust and public confusion. 3. Regulatory oversight By requiring ministerial approval, the government can review all the applications and only grant the use of the names to companies that have a legitimate reason for using the names.

Question 26

It is important for companies to clearly state their name on all official documents, especially those that create legal obligations; why is this important?

Answer 26

* Ensures that businesses properly identify themselves in legal and financial dealings. * This prevents company representatives from being held personally liable by using misleading or incomplete names. * Ensures that companies operate under their registered legal names to maintain corporate governance standards.

Question 27

What is the consequence of using an incorrect name?

Answer 27

If a company fails to use its correct name, the individuals who issue or sign such documents could be personally liable for any resulting legal or financial consequences.

Question 28

How would a company, registered under the Companies Act, change its name?

Answer 28

There's one of three ways: * at the direction of the Registrar, where after registration, it appears to the Registrar that misleading information has been given for the purpose of a companys registation by a particular name. * By passing of a special resolution, followed by an application to the Registrar to change its name under section 52 of the companies act. * Through a court order

Question 29

# In relation to change of name What is the significance of Celtel Malawi ltd v Globally Advanced Integrated Networks ltd Com. Cause No. 177 of 2008

Answer 29

The court granted the injunction, restraining GAIN from using the name in the telecomunications sector. ## Footnote What were the facts of the case?

Question 30

# In relation to change of name What is the significance of Panjira Chicken v Panjira Poultry Com. Case No. 74 of 2007?

Answer 30

The court found in favor of Panjira Chicken and ordered Panjira Poultry to stop using the name "Panjira Poultry" ## Footnote What were the facts of the case?

Question 31

Why is it important for a company to have a registered office?

Answer 31

For general communication and in particular, service of summons and other legal documents

Question 32

How are the details of the registered office changed?

Answer 32

By filing a notice with the Registrar

Question 33

Explain with reasons why a company must have a registered office?

Answer 33

* The registered office serves as the primary contact point for receiving official documents, such as; court summons, notices, etc. * Investors, customers, and government agencies can verify the company’s authenticity and legitimacy through its registered office. * To comply with legal and regulatory requirements

Question 34

# In relation to registered office Explain the siginificance of the case, Cheseborough Ponds (Mal) ltd v Gala Estates ltd (1990) 13 MLR 83 ?

Answer 34

The high court held that the service of summons was ineffective because it was not served at Gala Estates ltd's registered office or registered postal address, as required by the Companies Act 1984. ## Footnote What are the facts of the case?

Question 35

What is the relationship between articles of association and the memorandum of association?

Answer 35

They are both foundational documents required for the incorporation and governance of a company.

Question 36

What are the key differences between the articles and memorandum of association?

Answer 36

* The MOA outlines the companys purpose and powers, whereas the AOA focuses on the internal management and the rules for day-to-day operations * The MOA can only be amended with shareholder approval and legal procedures, whereas the AOA can be amended by special resolution of members * The MOA takes precedence over the AOA in case of any conflict between the two.

Question 37

What is the significance of Duncan Gilmour and Co. Ltd (1952) 2 All ER 871?

Answer 37

The court held that the MOA prevails over the AOA in case of a conflict ## Footnote What are the facts of the case?