Professional Documents
Culture Documents
Article of association
Articles of association
The article forms the internal constitution
of the company.
They
1) Set out the manner in which the
company is to be governed
2) To regulate the relationship between the
company and shareholder .
3) There are no mandatory contents.
) A Company :
) Adopt: model articles in Full or in Part
) Deemed to have Adopted: if there is No Express or
Implied provision to exclude them, or
) Draft its Own :unique articles
Model articles
Alteration(Amendments) of Articles
General Rule
The articles can usually be altered by
a special resolution (75% majority).
Copies of the Amended Articles must
be Sent/Reported to the Registrar
within 15 Days.
Exceptions
Entrenchment
It is possible to entrench some of the Articles. i.e. A
Specified procedure may be required to change
them.(90% agreed, all members agree, Mr A
agrees)
Any provision for entrenchment may only be made:
a) In the company articles on formation
b) By an amendments to the article agreed to by all
the members
) Members Increase Liability
) CA06 prevents a member being bound by any
alteration made after he becomes a member that
required him to increase his liability or contribute
further to the company.
Exceptions
Facts
Cox Bros and Co (Maidenhead) had appointed a
board of directorsfor life, and had fixed this under its
articles of association. Then it proposed to amend its
articles so that a director would lose his position if the
other directors requested in writing for him to resign. Mr
Shuttleworth, who was targeted by the changes, brought
a claim alleging that the alteration of the articles was
notbona fidefor the benefit of the company as a whole.
Held
The Court of Appeal dismissed the appeal holding that
the alteration of the articles wasbona fidefor the benefit
of the company and was valid. It reaffirmed thebona
fidetest laid down inSidebottom v Kershaw, Leese & Co
Fact
Z held fully paid up and partly paid up shares in
the company. The company's articles provided
for a lien* for all debts and liabilities of any
member upon Only All Partly Paid up Shares
held buy the member. Company by special
resolution altered so that the lien was available
on Fully Paid up shares as well.
Held
Alteration was accepted (Objection Overruled)
The company had power to alter its articles by
extending the lien to Fully Paid Shares Also
Fact
Dafen Tinplate Co Ltd was a shareholder in Llanelly
Steel Co. Llanelly realised that Dafen were buying
steelfrom an alternative source of supply, and also
to buy up the company's shares (an attempt which
failed). Llanelly responded by altering its articles
through aspecial resolutionto include a power to
compulsorily purchasethe shares of any member
requested to transfer them. Dafen Tinplate argued
the alteration was invalid.
Held
The court held that the alteration was too wide to
be valid
3. Beattie v EF Beattie
The Company's articles contained as
Arbitration (Negotiation) clause. B, a
Member and Director of the company, was
in dispute with the company concerning his
right as director because company denied
asses to minutes of directors meetings. He
Brought Court proceedings against the
company.(Can not rely on the contract)
Held :
He was NOT Bound by the Arbitration
clause since he was acting in his capacity
as Director, not a member.
EXAM IMPORTANT
In examination question - Check the
capacity in which the person is claiming. Is
it as a member, or in some other capacity,
such as a director or an accountant?
Obviously the articles have no effect as a
contract between the company and a
person who is NOT a member even it they
are named in them and given apparent
rights against the company
i.e. Articles is only Valid between :
Company --- Member only