Memorandums Flashcards
What is the purpose of the memorandum of association?
It serves as evidence that the subscribers intend to form a company and become members upon formation.
What is required for a company to have a memorandum of association?
It is essential as per sections 7 and 8 of the Companies Act 2006.
What restrictions apply to the choice of a company name?
The name must not be criminal, offensive, or give the impression of a connection with the government, and must not be the same as any other name in the Registrar’s index.
What sections of the Companies Act 2006 address the change of a company’s name?
Sections 77-81 allow a company to change its name by special resolution or other means provided for by its articles.
What happens when the registrar receives notice of a change of a company’s name?
If satisfied that the new name complies with the requirements, the registrar will register the change and issue a new certificate of incorporation.
What is the significance of the case Exxon Corporation v. Exxon Insurance Consultants International Ltd?
The court granted an injunction restraining the defendants from using the word Exxon in their company’s name.
What are the three basic elements of passing off according to Reckitt & Colman Ltd v Borden Inc?
Reputation, misrepresentation, and damage to goodwill.
What principle was established in Asprey & Garrard Ltd v WRA (Guns) Ltd?
One using their own name in business cannot prevent a passing off claim by a company operating under a similar name.
What is the ability to bind the company into a contract?
It includes three categories: 1) Ultra vires contracts, 2) Contracts within the objects of the company but outside the personal capacity of the director, 3) Unauthorised Agents.
What are Ultra Vires Contracts?
Contracts signed by a director that are outside the objects of the company.
Example: Ashbury Railway Carriage and Iron Co (1875) LR 7 HL 653.
What did the Old Law state about company objects?
Under s. 2(1)(c) Companies Act 1985, the memorandum of a company was required to state the objects of the company.
What was the legal effect of acts outside the company’s objects under the Old Law?
Such acts were considered wholly without legal effect (void).
What does the NEW law state about a company’s objects?
Unless restricted by the company’s articles, its objects are unrestricted.
What does S39 of the NEW law state about a company’s capacity?
The validity of an act done by a company shall not be questioned on the ground of lack of capacity due to anything in the company’s constitution.
What does S40 of the NEW law state about the power of directors?
It protects third parties acting in good faith regarding the power of directors to bind the company.
What is the power of directors to bind the company?
In favour of a person dealing with a company in good faith, the power of the directors to bind the company is deemed to be free of any limitation under the company’s constitution.
What is a person dealing with a company not bound to do?
A person dealing with a company is not bound to enquire as to any limitation on the powers of the directors.
How is good faith presumed for a person dealing with a company?
A person dealing with a company is presumed to have acted in good faith unless the contrary is proved.
Can a person be regarded as acting in bad faith if they know an act is beyond the powers of the directors?
A person is not regarded as acting in bad faith solely because they know an act is beyond the powers of the directors.
What rights does this section not affect?
This section does not affect any right of a member of the company to bring proceedings to restrain actions beyond the powers of the directors.
What liability does this section not affect?
This section does not affect any liability incurred by the directors or others due to exceeding their powers.
What happens when a company enters into a transaction involving a director?
The transaction is voidable at the instance of the company if it includes a director or a person connected with a director.
What are the exceptions to the validity of ultra vires contracts?
1) A director and their connected person are parties to the contract. 2) The third party acted in bad faith. 3) An injunction is raised in advance of the signing of the contract.
What is the duty of a director under Section 171 of CA2006?
A director must act in accordance with the company’s constitution and only exercise powers for the purposes for which they are conferred.
What does the case Criterion Properties Ple v Stratford UK Properties illustrate?
The case illustrates that the third party’s knowing assistance to a director in breaching their duty might indicate bad faith, but mere knowledge of the director acting outside the company’s objects is not enough for bad faith.
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2) Contracts with an object which falls within the objects of the company
but they are
outside of the capacity and powers of the directors to act.
Royal British Bank v. Turquand (1856) 6 E&B 327: “The directors may borrow money on
ehalf of the company provided that the total amount of the sums borrowed shall not at an
ime exceed two thirds of the capital of the Company”. “Persons outside a company ar
entitled to assume that internal procedures have been complied with.
See also: S40 and S161.
S161 reads:
(1) The acts of a person acting as a director are valid notwithstanding that it is afterwards
discovered-
(a) that there was a defect in his appointment
(b) that he was disqualified from holding office
(c) that he had ceased to hold office
(d) that he was not entitled to vote on the matter in question.
For almost all company law disputes this new legislation will form comprehensive
protection for third parties dealing with a company.
3) Unauthorised agents
Despite the reform of the law
a problem remains in that a person purporting to act for a
company may actually have either no connection with the company or be in a position which
does not involve the ability to create a commitment for the company.
Freeman & Lockyer v. Buckhurst Park Properties Ltd [1964] 2 QB 480
- Definition of “actual authority”
Note: the legal relationship between the company and the agent based on a contract; it creates
rights and liabilities between the company and the third party.
Example: A director has the actual authority to bind the company into a contract stemming
rom his position. An outsider is entitled to believe that the director of a company is in :
osition to bind the company into a contract. He is entitled to believe that all interna
requirements have been met.
- Definition of “apparent” or “ostensible” authority”.
Note: the legal relationship between the company and the third party created by a
representation made by the company to the third party that the agent has authority to enter
into a contract on behalf of the company.
Example of a potential representation: the use of the corporate office while signing the
ontact
the use of the official corporate stamp etc. An outsider is led to believe that th
erson in question has in fact the actual authority to bind the company into a contrac
Such a belief stems from a realistic representation made on the part of the agent to the
outsider.
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