MA, AA, Meeting and Resolution Flashcards by Ferdousse Amrani

What are the two most important legal documents regarding the constitution of a company?

1) Memorandum of Association

2) Articles of Association

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The Constitution of registered companies consisted of…

What documents does the Companies Act 1985 include?

Memorandum of Association

- Articles of Association

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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)

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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.

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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)

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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.

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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)

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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…

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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

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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.

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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.

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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)

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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.

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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

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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

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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

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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

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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