Business - Company Constitution (5) Flashcards
What is the company constitution?
Company Constitution: Companies are governed by the general law as well as their own rulebooks, its ‘constitution’.
(1) Documents: Constitutions include the memorandum and articles of association, relevant resolutions of the board and shareholders, and other documents such as shareholders’ agreements.
What is the memorandum of association?
Memorandum of Association: The Memorandum is an incorporation document, and acts as a snapshot of the business on incorporation.
(1) Contents: Sets out a list of first members, the desire to establish a company, and an agreement to be members.
(2) Objects Clause: Pre-Oct 2009 companies may have an ‘objects clause’, restricting the nature of the business.
(3) Effect: The Memorandum has very little effect after incorporation.
What are the articles of association?
Articles of Association: Articles of Association are extremely important, and set out the rights of its directors and members. They bind all present and future members.
How do model articles and table A articles compare?
Model Articles and Table A Articles: Model Articles are the default articles which govern all companies.
(1) Alteration: Many of the articles can be and typically are altered by special resolution.
(2) Table A: Table A existed prior to the CA 2006, and may apply to some pre-Oct 2009 companies (CA 1985).
>These can be removed by special resolution.
What are bespoke articles?
Bespoke Articles: Companies tend to adopt bespoke articles by special resolution (s21).
(1) Entrenchment: Articles cannot become unremovable, but can be ‘entrenched’, such as requiring unanimous consent to alter (s22).
(2) Filing: Change of articles alongside the resolution must be filed to CH within 15 days (s26).
What is a shareholder agreement?
Shareholders’ Agreement: Shareholders’ agreements are a discretionary contract between the shareholders.
(1) Effect: These agreements only bind signatories to the contract.
(2) Purpose: Shareholders agreements tend to require signatories to vote in unison, in order to protect the interests of minority stakeholders. They cannot restrict how signatories act in a directorial capacity, though.
Transfer: They may restrict to whom and how shares can be transferred.
Non-Compete: They may restrict investment or management of competing businesses.
Bushell v Faith: Shareholders may be given increased voting rights in resolutions that personally affect them - typically votes to remove them as director, or to remove the clause itself.
(3) Breach: The agreement provides contractual liability for breach, usually in damages or compensation.
