The Constitution of a company Flashcards
What are the two key components of a company’s constitution?
The Memorandum of Association and the Articles of Association.
What is the purpose of the Memorandum of Association?
It governs the relationship between the company and outsiders.
What is the purpose of the Articles of Association?
It contains rules for internal the management of the company.
What are some of the key contents of a company’s Articles of Association?
- Issue and allotment of shares
- Calls on shares
- Rules relating to the transfer of shares
- Procedures to be followed at general meetings
- Regulations relating to members voting
What are some key contents of a company’s Memorandum of Association?
- Company name
- Restrictions, if any, imposed on the companys business
- liability of its members, whether limited or unlimited
- Company objectives
- Share Capital
What is the legal effect of a company’s constitution?
It acts as a binding contract between firstly; the company and each member, secondly, between the members themselves and not outsiders.
Section 33 (3) of the Comapnies Act.
Because of the constitution both the company and members have individual rights and obligations; what is the consequence of failing to comply with the constitution?
It amounts to breach of contract, entitling the innocent party to sue.
What is the rule regarding conflicts between the Memorandum and the Articles of Association?
The Memorandum takes precedence over the Articles.
In relation to the contractual effect of the constitution
What was the significance of the case Hickman v Kent (1915)?
It reinforced the principle that a companys articles are binding on its members and that members must follow the dispute resolution mechanisms outlined in the company’s Articles of Association.
What are the facts of the case?
In relation to the contractual effect of the constitution
What is the signifcance of Rayfield v Hands (1960) Ch 1
This case reinforced the principle that companies must adhere to their own articles of association, particularly when they impose obligations on directors
What are the facts of the case?
The Constitution only binds members, not external parties
What is the significance of the case Eley v Positive Government Security Life Association Co. Ltd (1876) 1 Ex D 88?
The court held that the articles of a company do not bind the company in its dealings with outsiders
What are the facts of the case?
Can an outsider enforce provisions of a company’s Articles of Association?
No
What is a Shareholders’ Agreement?
A private contract between shareholders that governs their rights and obligations within the company.
What are some of the key components of the Shareholders Agreement?
- Rights and Obligations
- Decision-making process
- Dispute resolution
- Exit strategy
Why might shareholders prefer a Shareholders’ Agreement over the Articles of Association?
- It is private
- Provides clarity about each shareholders vote, rights and obligations
- Protects MInority Shareholders from decisions made solely by majority shareholders that could be detrimental to their interests
- Reduces conflict by addressing potential disputes upfront
Why is the MOA the more fundamental document?
Because it is the one to which the original parties forming the company will subscribe their names.
What is the provision of section 34 of the Companies Act?
It allows the adoption of a model memorandum and articles of association as their constitution.
What happens if a company does not file its own memorandum and articles of association?
It is deemed by the law that the company has adopted the prescribed model.
What is a model memorandum and articles of association?
This is a standardized template that companies use when incorporating under a specific jurisdiction.
What is the purpose of the model MOA and AOA?
- to simplify the incorporation process
- to ensure compliance with legal requirements
- to provide a standard structure for business
In relation to company names
Comment on the reservation of a name
- it is allowed by section 45 of the companies act
- it may be revoked sooner by the Registrar, if it is not used for incorporation or for a change of name within 2 moths
- the law does not guarantee that the Registrar will permit the use of the reserved name once the proposer finally wants to use it
In relation to company names
Comment on Prohibited names
- the registration of a name which is identical with that of an existing company or so nearly resembles that of an exisiting company as to be likely to mislead the public is prohibited under section 47 of the companies Act
In relation to company names
What are the names that may only be registered with ministerial approval?
- Authority
- Corporation
- Government
- Malawi
- National
The approval is in the way of written consent
In relation to company names
Why is ministerial approval required for the list of names provided for under the Act?
- To prevent misrepresntation
- To protect public interest
- Regulatory oversight
In relation to company names
Expand on the points provided as to the reasons why ministerial approval is required
- To prevent misrepresentation
the names often imply a connection with the government, regulatory bodies or national institutions. Requiring ministerial approval ensures that private companes do not mislead the public into thinkinh they have official status. - Protecting public interest
Unauthorised use of such terms could lead to fraud, misuse of trust and public confusion. - Regulatory oversight
By requiring ministerial approval, the government can review all the applications and only grant the use of the names to companies that have a legitimate reason for using the names.
It is important for companies to clearly state their name on all official documents, especially those that create legal obligations; why is this important?
- Ensures that businesses properly identify themselves in legal and financial dealings.
- This prevents company representatives from being held personally liable by using misleading or incomplete names.
- Ensures that companies operate under their registered legal names to maintain corporate governance standards.
What is the consequence of using an incorrect name?
If a company fails to use its correct name, the individuals who issue or sign such documents could be personally liable for any resulting legal or financial consequences.
How would a company, registered under the Companies Act, change its name?
There’s one of three ways:
* at the direction of the Registrar, where after registration, it appears to the Registrar that misleading information has been given for the purpose of a companys registation by a particular name.
* By passing of a special resolution, followed by an application to the Registrar to change its name under section 52 of the companies act.
* Through a court order
In relation to change of name
What is the significance of Celtel Malawi ltd v Globally Advanced Integrated Networks ltd Com. Cause No. 177 of 2008
The court granted the injunction, restraining GAIN from using the name in the telecomunications sector.
What were the facts of the case?
In relation to change of name
What is the significance of Panjira Chicken v Panjira Poultry Com. Case No. 74 of 2007?
The court found in favor of Panjira Chicken and ordered Panjira Poultry to stop using the name “Panjira Poultry”
What were the facts of the case?
Why is it important for a company to have a registered office?
For general communication and in particular, service of summons and other legal documents
How are the details of the registered office changed?
By filing a notice with the Registrar
Explain with reasons why a company must have a registered office?
- The registered office serves as the primary contact point for receiving official documents, such as; court summons, notices, etc.
- Investors, customers, and government agencies can verify the company’s authenticity and legitimacy through its registered office.
- To comply with legal and regulatory requirements
In relation to registered office
Explain the siginificance of the case, Cheseborough Ponds (Mal) ltd v Gala Estates ltd (1990) 13 MLR 83 ?
The high court held that the service of summons was ineffective because it was not served at Gala Estates ltd’s registered office or registered postal address, as required by the Companies Act 1984.
What are the facts of the case?
What is the relationship between articles of association and the memorandum of association?
They are both foundational documents required for the incorporation and governance of a company.
What are the key differences between the articles and memorandum of association?
- The MOA outlines the companys purpose and powers, whereas the AOA focuses on the internal management and the rules for day-to-day operations
- The MOA can only be amended with shareholder approval and legal procedures, whereas the AOA can be amended by special resolution of members
- The MOA takes precedence over the AOA in case of any conflict between the two.
What is the significance of Duncan Gilmour and Co. Ltd (1952) 2 All ER 871?
The court held that the MOA prevails over the AOA in case of a conflict
What are the facts of the case?
