Chapter 5: Company Constitution Flashcards
Does the memorandum of association need to be regularly updated?
No, it is essentially a historical document following incorporation
Do companies have restricted objects by default?
No, unless expressed otherwise in the articles, the company’s objects are unlimited.
What key matters are covered within the articles of association?
- shareholder rights
- transfer or transmission of shares
- rights attached to shares
- appointment, removal and powers and conduct of directors
- conduct of board and general meetings
- dividends
What happens by default if a company is incorporated without bespoke articles?
The model articles apply by default
What is the legal impact of the articles according to s 33 CA?
The articles bind the company and its members as though they had individually consented to obey their provisions.
What was the precedent set in Salmon v Quin and Axtens (1909)?
The company is bound to its members according to the terms of the articles.
What was the precedent set in Hickman v Kent or Romney Marsh Sheepbreeders Association (1915)`?
The members are bound to the company according to the terms of the articles.
What was the precedent set in Rayfield v Hands (1960)
The members are bound to each other according to the terms of the articles.
What was the precedent set in Eley v Positive Life Assurance Co Ltd (1876)?
The company is not bound to any person except in that person’s capacity as a member (e.g. a solicitor).
What format must the articles take according to S18 CA?
Printer, contained in a single document, divided into paragraphs, numbered consecutively, dated.
When may a company alter its articles?
At any time by special resolution.
What are the rules for alteration of the articles (4 rules)?
1 The alteration must be for the benefit of the company as a whole
2 The alteration must be retrospective
3 There must be no infringement of minority rights under s 994
4 If there are different share classes, the consent of the majority is required of the minority class.
What are “entrenched articles” according to s 22 CA?
Articles containing conditions which prevent them being changed without certain factors being met.
What steps must be taken to alter the articles?
- board resolves to amend articles
- convene general meeting (and send proxy form)
- pass special resolution
- issue altered articles to registrar within 15 days
- follow any requirements of the listing rules and DTRs
What was the outcome of Sidebottom v Kershaw (1920)
A proposed alteration to the articles would have allowed the directors to expropriate the shares of any member who carried a competing business. It was held that this alteration was valid since is was genuinely for the protection of the company,
