6. Company Constitution Flashcards
Possible requirements of CA 06 (re: articles)
- CA silent - company can do what it wants
- CA gives complete freedom in statute - company can do what it wants
- CA prohibits variation - must follow section
- CA is not silent and in the provision, no qualifications permitted - must follow
- CA allows for qualifications (max and min) - follow but make sure compling
removing objects clauses
s. 28 - provisions of memorandum transfers to articles (incl. objects clause)
s. 21 - company can amend its articles at any time
SO ARTICLES CAN REMOVE OBJECTS CLAUSE (also compatible with s.31)
notice period to call BM
CA silent so no issues with compatibility (alter MA 9)
Removing casting vote of the chairperson
CA silent so no issues with compatibility (alter MA 13)
Requiring SH approval where the board collectively spends a certain amount of money (e.g. £100,000)
CA silent so no issues with compatibility (alter MA 3)
Requiring BR to approve of a director spending a certain amount of money (e.g. £10,000)
CA silent so no issues with compatibility (alter MA 5(1))
Allow BR for name change
S.77(1)(b) - SH approval OR by any means provided for in articles
SO CAN PUT THIS IN ARTICLES - BUT MOST FOLLOW S.79
Allow directors to amend articles
NOT ALLOWED - s.21 requires SR and does not include provision to change this in articles
Unanimity from SH to remove a director
s.168(1) - must be by OR (no qualification)
CANNOT PUT THIS IN ARTICLES (even though more onerous)
- could put this in shareholders’ agreement
Quorum for GM fixed to number of SH that the company has
YES - if company has more than 1 member (s.318(2))
NO - if company has 1 member (s.318(1))
Prevent the use of WR by SH (by saying all resolutions must be passed at GM)
NOT ALLOWED - S.300
preventing casting vote - commercially viable?
POSITIVES
if even amount of directors:
Directors more motivated to DEBATE + find CREATIVE ways of resolving differences in opinion
preventing casting vote - commercially viable?
DRAWBACKS
- Deadlock (if even amount, or risk if odd amount if one abstains)
- Means 1 director can always decide everything (if 2 directors) - means decision making not debate, other director just a sounding board
preventing casting vote - commercially viable?
RESOLVING DRAWBACKS
- Deadlock can be resolved by referring to SH level for resolution
(not useful if SH and director = same people, so deadlock at director level = no solution!)
Provision preventing the board collectively spending X amount without SH approval - commercially viable?
- POSITIVES
If SH is the parent company
parent company will want to be consulted on and approve of large expenditure
Provision preventing the board collectively spending X amount without SH approval - commercially viable?
- DRAWBACKS
- EXTRA procedure (esp. if directors and SH same people)
- FREEZES SPENDING LIMIT (amount set could be too low due to growth of company, in future, transactions at that value might be more frequent - repeat of same procedure)
Provision preventing the board collectively spending X amount without SH approval - commercially viable?
- SOLUTION TO DRAWBACK
Include it in SH agreement instead
= private
(BUT CUMBERSOME TO REVISE - req. unanimous approval)
Provision preventing individual directors spending more than X amount without BR - commercially viable?
- POSITIVES
Prevents directors going off on spending sprees
Helps collectively control spending by each director individually
Provision preventing individual directors spending more than X amount without BR - commercially viable?
- DRAWBACKS
If the company is a subsidiary, then parent company would want SH approval rather than just BR
Delegation to different directors for them to do jobs in each of their expertise is defeated
Freezes spending limit
Provision preventing individual directors spending more than X amount without BR - commercially viable?
- RESOLIVING DRAWBACKS
BR TO THIS EFFECT INSTEAD
- informal
- can be amended upwards easily (resolves freezing spending limit) in a more procedurally straight forward way
MA 14
where a director is interested in the transaction, the director cannot vote or count in the quorum for the BM (personal interest = conflict)
= problem if 2 directors only (won’t be quorate BM)
SOLUTION TO MA 14
MA 14(3) - 3 options
- OR to disapply provision (one-off, so must be repeated every time conflict, but unambiguous)
- not likely to be conflict of interest
- permitted cause
OR
SR TO REMOVE MA 14(1) APPLICABILITY
- permanent solution
- compatible with CA 06 (s.175 doesn’t apply when MA 14 applies, s.175(3), AND s.177 doesn’t prevent director voting or counting in quorum)
WRITTEN RESOLUTION
BM1 - BRs to pass
- propose WR to do X (s.288(3)a)
- approve form of WR including:
- must be accompanied by instructions to SH as to how to vote (s.291(4)a, s.296)
- must identify lapse date (s.291(4)b, s.297)
- must be designated as SR if SR (s.283(3)a) - Direct CS to send/submit resolution to each member (s.291(2)) and a copy to auditor (s.502(1))
WRITTEN RESOLUTION
whilst meeting is adjourned
do X using WR procedure
Corp rep can sign on behalf of SH
signing resolution indicates agreement
WR passed when required majority of members signify their agreement to it (s.283(2)) - specify the majority required
WRITTEN RESOLUTION
BM1 (reconvened) - generic
notice/who calls: notice requirement already satisifed, this is just reconvening BM1 so this is the same board meeting
quorum: must still be quorate
WRITTEN RESOLUTION
BM1 (reconvened) - BRs
Chairman reports SR has been passed to do X
BR:
- direct CS to deal with PMM
