Constitution Flashcards
What is the constitution
The internal rules of the company (i.e articles)
What is a par value?
Represents the minimum amount for which shares can be issued.
What are the model articles?
The default set of rules for those setting up a co
Board of directors
Management organ
MA 2-6
Management power to the board
MA 16-20
Directors’ appointment
MA 7-16
Decision making by directors
General Meeting
Management organ
MA 37-41
regulate organisation of meetings
MA 42-47
regulate voting at meeting
Do articles provide for removal of directors? (Art 18)
No, except in incapacity or resignation
Which statute dictates directors removal
s168, CA 2006
s168, CA 2006
Gives members the right by simple majority (more than 50%) to remove a director for any reason
Where in the model articles delegates power to directors
MA 3 and 4
MA 3
- Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company.
MA 30
gives board the power to decide whether to distribute profits to the shareholders in the form of dividends
s21, CA 2006
GM can alter the articles if ¾ of members (by special resolution) vote in favour
s33, CA 2006
The provisions of a company’s constitution bind the company and its members to the same extent as if there were covenants on the part of the company and of each member to observe those provisions.
Are the contracts inter se?
General consensus is no ,but the case law is ambiguous
Foss v Harbottle rule
Individual shareholders are not empowered to initiate proceedings for a wrong to the co -
If the breach is a wrong to the co, only the co can sue
Shareholder agreement
Agreements between shareholders themselves or between the company and the shareholders
Bushell v Faith
- Articles contained a provision whereby in the event of a resolution to remove a director, that director’s shares would multiply by three
- Entrenched the director on the board, as other shareholders could never outvote him
- Article attempted to remove ability of members conferred by s168
- Held that the article was not inconsistent with the statutory power
Allen v Gold Reefs
exercised subject to those general principles of law and equity which are applicable to all powers conferred on majorities enabling them to bind minorities. It must be exercised, not only in the manner required by law, but also bona fide for the benefit of the company as a whole, and it must not be exceeded. These conditions are always implied, and are seldom, if ever, expressed.
What are the qualifications to GM ability to alter the articles
Alterations must not conflict with statutory provisions
Members must exercise their power to alter the articles in good faith.
What are entrenched articles
SS21, 22 CA 2006 - Certain provisions can be entrenched, requiring unanimous resolution to change them
Do new articles of association need to be sent to CH when amended
Only a copy of the changes to the articles need be submitted with the application for registration (s20(1)(b) CA 2006)
Procedure for amending ordinary articles
- Special resolution s21(1) CA 2006
- Must be passed by a majority of not less than 75% S283(1) CA 2006
- Sufficient votes passing the SR → article amendment
- Registrar of Companies to be sent a copy of the articles as amended not later than 15 days after the amendment takes effect s26(1) CA 2006
- Copy of the special resolution must be sent to Registrar of Companies within 15 days after it has been passed s30(1) CA 2006
Procedure for amending entrenched articles
- s22(2) only permits entrenched articles at co formation, or with the agreement of all shareholders post registration
- Co must also send Form CC01 (notice of restriction on the company’s articles)
- To remove an entreched article, they must send form CC02
- Where co articles already include an entrenched article and any of the co’s articles are altered, in addition to SR and new articles, co must send form CC03
