Week 3 (w/c 16th Oct) - Constitution of A Company

Question 1

What is lifting the veil of incorporation?

Answer 1

On rare occasions, the courts can remove the veil of incorporation i.e. hold the individual member(s) of the company accountable for the company’s actions

This occurs when the incorporator has abused the corporate form (e.g. by seeking to gain an unfair advantage)

Question 2

what act are companies incorperated pre-Oct 2009
bound by?

Answer 2

Companies incorporated pre-Oct 2009 are bound by Companies Act 1985

Question 2

what act are companies incorperated post-Oct 2009
bound by?

Answer 2

Companies incorporated post-Oct 2009 are Bound by Companies Act 2006

Question 2

what constitutional docs do companies incorperated pre-Oct 2009 have?

Answer 2

Companies incorporated pre-Oct 2009 have Two constitutional docs:
the memorandum of association
and the articles of association

Memorandum used to include items such as the registered office, share capital, liability of members etc.

Question 3

What are the objects of a company?

Answer 3

Under CA 2006 (s 31), companies are deemed to have “unrestricted objects”, meaning no restrictions of the company to complete legal transactions

For certain companies (e.g. charities, social enterprises) the members may want to restrict the company’s objects

These restrictions need to be stated in the Articles of Association

Question 3

do the articles of asscoation bind the company or shareholders to anyone outisde of the compnay?

Answer 3

NOTE – The articles do not bind the company or the shareholders to anyone in their capacity as an “outsider”

See Eley v Positive Life Assurance Co (1876)

Even though Mr. Eley was a shareholder, the matter was not related to his rights as a shareholder

Question 3

How many constitutional documents do companies incorperated post Oct-2009 have?

Answer 3

Companies incorporated post-Oct 2009
Bound by Companies Act 2006 and have Just the one constitutional doc: the articles of association.

A lot of the information that was in the memorandum is now included in the IN01 application and the articles

Question 3

What 9 things are included in the articles of association?

Answer 3

included in the articles of association are:

1) Any restrictions on the company’s objects

2) How officers will be appointed, their powers and procedures

3) How management decisions will be made

4) Procedures of company meetings

5) Voting rights of members

6) How dividends will be paid

7) How accounts will be kept

8) How shares can be issued and transferred

9) The conditions and notice to members of winding up

Question 3

when can the articles of association be ammended?

Answer 3

The articles can be amended IF:

It passes a special resolution (>75% of the vote required)

It complies with company legislation
The amendment is made in good faith and for the benefit of the company as a whole

Remember that the rights of minority shareholders still apply (see next case)

Question 3

What is the binding power of the constitution?

Answer 3

Binding Power of the Constitution:

The shareholders are bound to the company – see Hickman v Kent

The company is bound to the shareholders (regarding their rights as shareholders) – see Pender v Lushington