MA, AA, Meeting and Resolution Flashcards
What are the two most important legal documents regarding the constitution of a company?
1) Memorandum of Association
2) Articles of Association
The Constitution of registered companies consisted of…
What documents does the Companies Act 1985 include?
- Memorandum of Association
- Articles of Association
The Constitution of a registered company
What documents does the Companies Act 2006 include?
What changes were made since the previous 1985 Companies Act?
- Articles of Association
- Special Resolutions
- Agreements (passed as special resolutions)
The Constitutions of a registered company
Previous Companies Act 1985
Must keep in mind that there are still companies who are registered under the previous Companies Act 1985.
This means that the Memorandum of Association is still relevant to them as it is part of the constitution under the act.
Memorandum of Association (the intention of the subscribers to become members of a particular company)
Is not part of the constitution of a registered company under Companies Act 2006. However is it still required for registration (S.9)
Memorandum of Association Significance
Under the Companies Act 2006
The significance has reduced significantly in its role, complexity, and length (compared to 1985)
Today it is used as the….
- Intention to form a company
- Intention to be a member of the company on formation
- Take at least one share in the company (if limited by shares)
It is very brief. Includes statements of the agreement made by the members.
Memorandum of Association
Existing companies (1985 Act)
For existing companies registered under the previous companies act.
The provisions within the memorandum are treated as provisions of the articles (this is still part of the company’s constitution)
What is the Memorandum of Association used for?
It is used as an external document and is aimed to provide information about the company itself to third parties.
Eg Creditors, customers, employees ect…
Memorandum of Association
Issues contained within the memorandum (1985) until the new Companies Act 2006
- Company name
- The objects clause (capacity of the company)
- Capital
- Registered office
Memorandum of Association
Companies Act 1985
Company Name (Registration)
Application for registration includes the company’s proposed name.
There are certain limitations when picking a company name.
Memorandum of Association (Companies Act 1985)
Company Name (Registration)
Limitations (Warning Suffix)
Must include a warning suffix (this means the name must end with
Limited/Ltd - Private Limited Company
Public Limited/ Plc - Public Limited Company
This is so that third parties know they are dealing with a limited company and that the owners/members of these companies will have limited liability for the debts and obligations of the business.
Memorandum of Association (Companies Act 1985)
Company Name (Registration)
Prohibited Names
- Anything regarded offensive (e.g Prostitute Ltd)
- Approval is required from the Secretary of State. This includes names that suggest a connection with
- government
- local authority
- any public authority
- the Crown
- Cannot use a name which has already been registered on the Registrars index of names (over 2 million names)
Memorandum of Association (Companies Act 1985)
Company Name (Registration)
Prohibited Names (Confusion Example)
Tussaud v Tussaud (1890)
Companies can not use a name calculated to deceive the public by confusion with the name of an already existing business.
For example the Tussaud v Tussaud Case (1890)
Due to financial difficulties the Madame Tussaud wax work family sold the company and after a while one of the family members Louis Tussaud started up a similar type of wax work show business under his name.
The company who bought the original Madame Tussaud wasn’t happy with this new show so they went to the court and the court decided in favour of the company who owned the original Madame Tussaud.
Company name
Registration
Permission is needed from relevant professional body
Examples
Restricted term Relevant statute
Architect Architects Act 1997
Building Society Building Society Act 1986
Olympic Olympic Symbol etc.
(Protection) Act 1995
Red Cross Geneva Conventions Act
1957
Company name
Registration
The Company and Business Names Regulations 1981
Words that imply national or international pre-eminence
Example - British, England, Irish, Welsh, Scottish, National, European
Words that imply business pre-eminence
Example - Association, Institution, Board, Council, Authority, Society
Words that imply specific objects or functions
Example - Post Office, Stock Exchange, Trade Union
Others
Example - Charity, Dental, Health Service, Police, University
Company Name
A company may change its name by….
- A special resolution. Company must give notice to Registrar (prohibition rules still apply) and the Registrar will issue a new certificate of incorporation
- An ordinary resolution by following up the direction from the Secretary of State or a decision from the company names adjudicator
- Or by any other means provided by the company articles
Company Names
Publication of name & address
All companies must publish their names
- Outside the registered office and all places of business
- On all letters, invoices, notices, cheques, orders for goods & receipts (anything that goes out from the business)
- On company seal (if has one)
This is to ensure that people with the company know that they are dealing with a company
Memorandum of Association
The objects clause (the capacity of the company)
The objects clause lists the things which the company can do.
The objects must also be lawful activities. For example prostitution
These objects must be listed.
For example sell property, manufacture cars, provide services
Memorandum of Association
The objects clause (the capacity of the company)
What happens if the company enters into transactions not included in the clause
If the company enters into transaction which is not included in the clause then the transaction will be
Ultra vires (beyond its power) and Void (of no effect)
Because this is beyond the power of the company. The company should not carry out or enter into any transactions beyond the object clause.
Memorandum of Association
The objects clause (the capacity of the company)
What happens if the company enters into transactions not included in the clause
What shareholders can do in this situation
Internal Ultra Vires (shareholders)
Shareholders can try to stop the company from going into these types of transactions.
They can try to stop the directors if their intentions are discovered.
If the transaction has already been carried out then shareholders can claim for damages from the wrongdoer directors.
The objects clause (the capacity of the company)
What happens if the company enters into transactions not included in the clause
What creditors can do in this situation
External Ultra Vires (creditors)
When creditors supplied goods / services to a company for a purpose not contained in its objects clause
And the company then went liquidation, creditors would not be able to put in a claim (because of void transaction).
Transaction is beyond its power.
The objects clause (capacity of the company)
Under Companies Act 2006
- Object clause was removed from the memorandum and put into the Articles of Association
The reason for this was because companies object clauses were becoming far too long and complicated. This was also to avoid void transactions.
The objects are now unrestricted for companies formed under the Companies Act 2006.
- Not required to have an objects clause
- This is to protect creditors from void transactions
The objects clause (capacity of the company)
Under Companies Act 2006
Companies can decide to adopt an objects clause
This will limit the capacity of the company and the doctrine of ultra vires will still be relevant.
Therefore companies choosing to adopt an objects clause must be careful not to enter void transactions with shareholders and creditors.
Memorandum of Association
Companies Act 1985
Capital
On an application for registration (if the company is to be limited by share),
S.9(4) requires a statement of
- capital (snapshot of opening capital) and initial shareholding
- classes of shares (ordinary, preference)
- nominal value (of shares)
If the company is limited by guarantee then company will need to provide a statement of guarantee
Memorandum of Association
Companies Act 1985
Registered Office
This will be company’s official address → place where legal documents, notices and other communication can be served
- The company must state in all its business letters & order forms
- The country of domicile (e.g. registered in England, Scotland)
- Its registration number (from certificate of incorporation)
- Address of its registered office
Memorandum of Association
Companies Act 1985
Registered Office
Country of domicile
This is legal system under which the company is incorporated, where its registered office will be located
For example a company in Dundee Jurisdiction - Scotland Registration - Scottish Registrar of Companies in Edinburgh Nationality - British Domicile - Scottish
Memorandum of Association (Companies Act 1985)
Registered Office
Change in Country of domicile
If a company wanted to change the domicile (move from one jurisdiction to another) → the members of the company need to promote a private Act of Parliament.
This extremely costly, difficult, and time consuming.
Companies are not free to abandon one domicile in favour of another one.
Memorandum of Association (Companies Act 1985)
Registered Office
Country of Residence
This is where the company’s centre of control & management is.
However the company may be resident in a number of countries. This is very important in the case of tax liabilities.
Articles of Association
This is an internal document which regulates the internal affairs of a company subject to those matters which are otherwise specifically regulated by way of other sources of law.
What are the two types of Articles of Association?
1) Company’s own articles
2) Adopted (don’t need to provide articles to the registrar)
What is included in the Adopted Articles of Association?
1) Table A (under Companies Act 1985)
2) Model Articles (under Companies Act 2006) (apply to all companies incorporated under 2006 Act)
These are used as a default if companies don’t want to come up with their own.
Articles of Association
Instruction Book of a company
There will be model articles provided for different types of companies.
For example Private Companies Limited by shares
The model articles will be subject to the business type.
Look at Week 3 Lecture 3 Example
Articles of Association
Division of powers under the articles
This is between the
- Shareholders in General Meeting
- Board of Directors
If they wanted to change the AOA then..
The Articles of Association can only be changed by the amendment of the company’s articles of association by way of a special resolution in General Meeting.
This can be approved by the Shareholders in the General Meeting or it can also be changed by the decision of the court
Articles of Association
The legal effect of the articles
The AOA will form a contract between
- The company and its members
- The members themselves
This will be a binding contract which will bind the company and its members
Articles of Association
Shareholders Agreements
This is part of the company’s constitution under the Companies Act 2006.
This is a binding contract which is made by all members of the company or it can also be limited to a portion of members
Articles of Association
Shareholders Agreements
Advantages
This agreement can only be altered if there is a 100% agreement between those who signed the contract.
However the AOA can be changed and the alteration of the articles only requires a special resolution (75%)
The contents remain private & the agreement does not have to be registered at Companies house → not available for public inspection.
Might want to have a shareholders agreement for more sensitive issues which are kept off public report.
For example can deal with things such as the rights and duties of certain members, how the company is going to be run, how decisions are made, agreements on issue and transfer of shares, dividend payments.
Articles of Association
Meetings & Resolutions General Meetings of the company
Annual General Meeting (AGM)
Private companies → NOT required to hold AGM (only if it is required by the company’s articles)
Public companies → MUST be held within six months of the end of the financial year; Safeguard for the shareholders (provides opportunity of questioning directors on thing such as company accounts and reports produced)
Articles of Association
Meetings & Resolutions General Meetings of the company
General Meeting (GM)
can be called by
directors
auditor (if the want to resign)
court
minorities
Articles of Association
Meetings & Resolutions General Meetings of the company
Board Meeting
- Can be called by any of the directors
- Keep the records for at least 10 years
Articles of Association
Special Resolutions
These are passed by the majority of 75% of members. They are entitled to vote in person, or where proxies are allowed, by proxy
Special resolution are required by enactment or the articles, e.g. change of name, alteration of articles of association, reduction of share capital, winding up the company
All copies of special resolutions need to be filed with the Registrar of Companies within 15 days of the resolution being passed
Articles of Associations
Ordinary Resolutions
Where CA 2006 requires a resolution but it does not specify what kind an ordinary resolution (unless the company’s articles requires a higher majority or unanimity); e.g. appointment / removal of a director, approval of the company’s accounts for the year, approving dividend payment, amending directors’ powers
Passed by a simple majority (more than 50%)
No need to be filed, unless specified in CA 2006
Articles of Associations
Written Resolutions
This can only be used by private companies.
Members and directors of a private company may propose a written resolution on all kinds of matters without the need to hold a meeting.
With the exception of removal of directors and auditors.
Ongoing administrative matters
- Trading disclosures
- Maintenance of statutory registers
- Annual confirmation statement
- Annual accounts
- Submission and laying of accounts
- Audit and auditors
