The Company's Constitution Flashcards
What is the main constitutional document of a company under CA 2006?
A) Memorandum of Association
B) Articles of Association
C) Shareholders’ Agreement
D) Directors’ Resolution
B) Articles of Association
(s18 CA 2006 – The Articles regulate company operations and governance.)
What was the primary function of the Memorandum of Association under CA 1985?
A) Stated the company’s objects and capacity
B) Defined director duties
C) Determined dividend policies
D) Acted as a private contract between shareholders
A) Stated the company’s objects and capacity
(Under CA 1985, the Memorandum contained the objects clause, defining company activities.)
What is the default rule for companies that do not register Articles at Companies House?
A) They must draft their own Articles
B) They are automatically dissolved
C) Model Articles apply by default
D) They operate under a Shareholders’ Agreement
C) Model Articles apply by default (s20 CA 2006 – Default rules apply if no Articles are registered.)
Under CA 2006, what is required to amend a company’s Articles?
A) Ordinary resolution
B) Special resolution (75% shareholder approval)
C) Unanimous shareholder agreement
D) Board of directors’ decision
B) Special resolution (75% shareholder approval) (s21(1) CA 2006 – Shareholders must approve changes to the Articles by special resolution.)
Company XYZ Ltd was incorporated under CA 1985. Its Memorandum contains an objects clause restricting it to selling stationery. Under CA 2006, what happens to this restriction?
A) It is automatically removed.
B) It remains in effect as part of the company’s Articles.
C) The company must dissolve and re-register under CA 2006.
D) The directors can remove the restriction unilaterally.
B) It remains in effect as part of the company’s Articles. (s28 CA 2006 – Old Memorandum provisions are now part of the Articles unless amended.)
ABC Ltd has two shareholders. They want a legally binding agreement that governs dividend policies and how shares can be sold between them. What should they use?
A) Articles of Association
B) Shareholders’ Agreement
C) Directors’ Resolution
D) Memorandum of Association
B) Shareholders’ Agreement
(A Shareholders’ Agreement is a private contract, unlike the publicly registered Articles.)
DEF Ltd’s Articles state that directors can only be removed by a unanimous shareholder vote. However, CA 2006 states directors can be removed by an ordinary resolution. What applies?
A) The company must follow its Articles.
B) CA 2006 overrides the Articles.
C) The board of directors decides the procedure.
D) The shareholders can ignore CA 2006 and follow their own rules.
B) CA 2006 overrides the Articles. (Statutory rights override any conflicting Articles.)
XYZ Ltd wants to prevent amendments to a particular provision in its Articles. What mechanism is available under CA 2006?
A) Special resolution (75% approval)
B) Ordinary resolution (50% approval)
C) Entrenchment provision
D) Directors’ vote
C) Entrenchment provision (s22 CA 2006 – Entrenchment requires stricter conditions for amendment.)
The Articles of a company state that a shareholder who competes with the business must sell their shares at market value. Is this valid?
A) No, because it unfairly restricts shareholders.
B) Yes, if done in good faith and for the company’s benefit.
C) No, because Articles cannot control share transfers.
D) Yes, but only if the court approves.
B) Yes, if done in good faith and for the company’s benefit. (Sidebottom v Kershaw, Leese & Co Ltd [1920] – Such clauses are valid if in the company’s best interest.)
A shareholder writes a clause into a company’s Articles guaranteeing him lifetime employment as a solicitor for the company. Can he enforce this under s33 CA 2006?
A) Yes, because the Articles are binding on all members.
B) No, because the clause relates to employment, not membership rights.
C) Yes, if a special resolution is passed.
D) No, unless the directors approve the arrangement.
B) No, because the clause relates to employment, not membership rights. (Eley v Positive Government Security Life Assurance Co [1876] – Articles only bind members as members, not in other roles.)
Company ABC’s Articles state that all directors must have at least 10 years of experience. A new director is appointed with only 5 years of experience. What happens?
A) The appointment is invalid.
B) CA 2006 overrides this rule, and the appointment stands.
C) The shareholders must vote on whether to remove the director.
D) The board of directors can amend the Articles unilaterally.
A) The appointment is invalid. (Companies must follow their own Articles unless overridden by CA 2006.)
