The Judiciary has made a real mess of interpreting the statutory contract (S,33)
and the rules regarding alteration of the articles present a problem in terms of
enforcement.
Discuss
1) EXPLAIN TO THE EXAMINER WHAT S.33 CA 2006 IS
Intro
- S 33 CA 2006 “The provisions of a company's constitution bind the company
and its members (shareholders) to the same extent as if there were
covenants on the part of the company and of each member to observe
those provisions”
- The company’s AA tends to bind its members as all its members are bound
by the terms of the company’s AA.
- The CA 2006 provides for a model article that applies to companies that do
not have a separate AA. It’s a default AA for companies.
- If a company has its own AA drafted then it will refer to that draft instead.
1) Model Articles
- A model article historically called the Table A but now called the model
articles under the S 19 CA 2006. It is a default for those setting up a
company.
- As a matter of practice most companies would adopt Table A with minor
amendments, as a result the model article becomes the backbone of
most of UK’s companies.
- In the past the CA 1985 provided for a “one size fits all” approach for Public
and Private Companies, but under the CA 2006 in response to criticism, the
, new law provides for two separate articles.
- The most important function of the AA is to allocate power of the company
between the board - And the general meeting, historically this made the old
Table A S 70 the most important article.
- Art 70 “ The memorandum and the Articles and to any directions given by
special resolution , the business of the companies shall be managed by the
directors who may exercise all the powers of the company”
- The delegation of power is now found in art 3 and 4 of the model articles
- Art 3 Directors General authority
- Subject to the articles, the directors are responsible to the management of the
company’s business for which purpose they may exercise the powers of the
company.
- Article 4 Shareholders
- The shareholders may via special resolution direct the directors to take, refrain
from taking a specified action.
- The above articles lead to the question as to whether Directors have the
authority to make a decision that a majority of members disagree to?
- The case of Howard Smith Ltd v Ampol Petroleum Ltd 1974 Lord Wilberforce
states that directors with their management powers may make decisions
against the wishes of the majority shareholders and indeed the majority of
shareholders cannot control them in the exercise of these powers while they
remain in office.
- But the special resolution would not invalidate any actions made by the
Directors prior to the passing of the resolution.
and the rules regarding alteration of the articles present a problem in terms of
enforcement.
Discuss
1) EXPLAIN TO THE EXAMINER WHAT S.33 CA 2006 IS
Intro
- S 33 CA 2006 “The provisions of a company's constitution bind the company
and its members (shareholders) to the same extent as if there were
covenants on the part of the company and of each member to observe
those provisions”
- The company’s AA tends to bind its members as all its members are bound
by the terms of the company’s AA.
- The CA 2006 provides for a model article that applies to companies that do
not have a separate AA. It’s a default AA for companies.
- If a company has its own AA drafted then it will refer to that draft instead.
1) Model Articles
- A model article historically called the Table A but now called the model
articles under the S 19 CA 2006. It is a default for those setting up a
company.
- As a matter of practice most companies would adopt Table A with minor
amendments, as a result the model article becomes the backbone of
most of UK’s companies.
- In the past the CA 1985 provided for a “one size fits all” approach for Public
and Private Companies, but under the CA 2006 in response to criticism, the
, new law provides for two separate articles.
- The most important function of the AA is to allocate power of the company
between the board - And the general meeting, historically this made the old
Table A S 70 the most important article.
- Art 70 “ The memorandum and the Articles and to any directions given by
special resolution , the business of the companies shall be managed by the
directors who may exercise all the powers of the company”
- The delegation of power is now found in art 3 and 4 of the model articles
- Art 3 Directors General authority
- Subject to the articles, the directors are responsible to the management of the
company’s business for which purpose they may exercise the powers of the
company.
- Article 4 Shareholders
- The shareholders may via special resolution direct the directors to take, refrain
from taking a specified action.
- The above articles lead to the question as to whether Directors have the
authority to make a decision that a majority of members disagree to?
- The case of Howard Smith Ltd v Ampol Petroleum Ltd 1974 Lord Wilberforce
states that directors with their management powers may make decisions
against the wishes of the majority shareholders and indeed the majority of
shareholders cannot control them in the exercise of these powers while they
remain in office.
- But the special resolution would not invalidate any actions made by the
Directors prior to the passing of the resolution.
