Shareholders’ Agreement
The articles as a contract:
Section 33 CA 2006
■ (1) The provisions of a company's constitution bind the company and its members to
the same extent as if there were covenants on the part of the company and of each
member to observe those provisions.
■ (2) Money payable by a member to the company under its constitution is a debt
due from him to the company.
■ In England and Wales and Northern Ireland it is of the nature of an ordinary contract
debt.
The Contractual Effect of the articles: s.33
■ Funny looking contract:
■ Privity: future shareholders ?
■ Alteration: unanimity not required
■ Allows share transfers
■ Hickman v Kent or Romney Marsh Sheep–Breeders Association [1915] 1 Ch 881
shareholder bound as against the company
Hickman v Kent or Romney Marsh Sheepbreeders’ Association
■ Astbury J “articles regulating the rights and obligations of the members generally as
such do create rights and obligations between them and the company respectively.”
■ Here the company enforced an arbitration clause in the articles against a member
BUT only rights in the articles given to person in the capacity of a member
enforceable
■ Articles regulating the rights and obligations of members generally as such do
create…
Special features of the s. 33 contract
■ Bratton Seymour Service Ltd v Oxborough [1992] BCLC 693
■ How to construe the articles?
■ How to imply a term?
■ Are background facts admissible? NO
Problems of enforcement of certain types of article by a member against a company
■ Eley v Positive Government Security Life Assurance Co Ltd (1876) 1 Ex D 88
■ Salmon v Quinn & Axtens Ltd [1909] 1 Ch 311 & [1909] AC 442
Member against Member
■ Rayfield v Hands [1960] Ch 1 cf Lord Herschell in Welton v Saffrey [1897] AC 299
■ Also remember Wood v Odessa
■ And think again about Salmon v Quinn & Axtens
Alteration: The common law requirement
Need a special resolution (75%) to alter the articles
SR must be passed bona fide for the benefit of the company as a whole: Allen v Gold Reefs
of West Africa Ltd [1900] 1 Ch 656
The articles as a contract:
Section 33 CA 2006
■ (1) The provisions of a company's constitution bind the company and its members to
the same extent as if there were covenants on the part of the company and of each
member to observe those provisions.
■ (2) Money payable by a member to the company under its constitution is a debt
due from him to the company.
■ In England and Wales and Northern Ireland it is of the nature of an ordinary contract
debt.
The Contractual Effect of the articles: s.33
■ Funny looking contract:
■ Privity: future shareholders ?
■ Alteration: unanimity not required
■ Allows share transfers
■ Hickman v Kent or Romney Marsh Sheep–Breeders Association [1915] 1 Ch 881
shareholder bound as against the company
Hickman v Kent or Romney Marsh Sheepbreeders’ Association
■ Astbury J “articles regulating the rights and obligations of the members generally as
such do create rights and obligations between them and the company respectively.”
■ Here the company enforced an arbitration clause in the articles against a member
BUT only rights in the articles given to person in the capacity of a member
enforceable
■ Articles regulating the rights and obligations of members generally as such do
create…
Special features of the s. 33 contract
■ Bratton Seymour Service Ltd v Oxborough [1992] BCLC 693
■ How to construe the articles?
■ How to imply a term?
■ Are background facts admissible? NO
Problems of enforcement of certain types of article by a member against a company
■ Eley v Positive Government Security Life Assurance Co Ltd (1876) 1 Ex D 88
■ Salmon v Quinn & Axtens Ltd [1909] 1 Ch 311 & [1909] AC 442
Member against Member
■ Rayfield v Hands [1960] Ch 1 cf Lord Herschell in Welton v Saffrey [1897] AC 299
■ Also remember Wood v Odessa
■ And think again about Salmon v Quinn & Axtens
Alteration: The common law requirement
Need a special resolution (75%) to alter the articles
SR must be passed bona fide for the benefit of the company as a whole: Allen v Gold Reefs
of West Africa Ltd [1900] 1 Ch 656
