Altering the constitution Flashcards
Where is the constitution of a company set?
In its memorandum and articles
When is it necessary to consider an alteration of the constitution?
When there is a change in the circumstances and always if a ready-made company is acquired
How can a company change its name?
By shareholders’ special resolution - s77 CA
What did CA 2006 do to company’s objects?
Made them unrestricted by default
Limitations to alteration of articles (5)
- any conditions contained in the memorandum
- the alteration being illegal or contrary to CA 2006
- the alteration being wholly or partially ineffective by s25 which provides that a member of a company is not bound where the alteration requires such a member to take or subscribe for more shares
- the alteration being subject to restriction where the share capital of the company contains different classes of share with different rights attaching to each class
- the alteration not being bona fide in the interests of the company as a whole
Allen v Gold Reefs of West Africa 1990
The court has indicated that it will not allow a majority of shareholders to benefit from the alteration to the disadvantage of minority
Greengalagh v Arderne Cinemas Ltd 1945
If the consensus of the majority of the members is that, even with regard to the personal interests involved, the decision was made in good faith and on reasonable grounds, the court will not overturn it
Dafen Tinplate Co Ltd v Llanelli Steel Co 1920
An alteration to the articles permitting the majority of the shareholders to force a minority shareholder to transfer his shares to an approved transferee not bona fide in the interests of the company as a whole
When will companies be able to adopt entrenchment provisions?
Only in their articles on formation or if all the shareholders agree to an amendment to the articles
Can the constitution be altered by written resolution?
Yes
