Question 3
This essay will analyse whether or not Nazir has the power to compel the others to
purchase the shares, as well as any other options available to him. I will examine the
articles of association and quasi-partnerships. I will use my analysis of legal
precedents and legislation, including sections of the Companies Act 2006 and the
Insolvency Act 1986, to reach my conclusion to justify that you can compel other
shareholders to purchase your shares because directors have a legal obligation to
acquire shares held by minority shareholders in accordance with the articles of
association.
To begin, the law governs many facets of society, from governments, corporations,
and consumers. So, the same goes for company leaders (directors) who need to be
held accountable for their actions in order to safeguard the interests of the
company's citizens (shareholders).1 This concept is known as the constitution of a
company and companies have these to outline several items. Some include, to
prevent imbalances of power between shareholders/directors, pre-define rights and
duties of shareholders and the company's policies/practises. 2
The ‘memorandum of association’ and the ‘articles of association’ 3 are the two
main documents of the company's constitution which are outlined in the CA 2006. 4
Since it is written for prospective consumers and creditors, the memorandum of
association is considered an external document. 5 Whereas the articles of association
are considered internal documents since they outline the procedures for
the company's organisation such as conducting company meetings and allocating
shares.6 Furthermore, the articles also specify in detail how directors are to act, what
rights shareholders have, and how they all tie together. 7 They have been updated8 in
accordance with the CA,9 although they still serve as the starting point for any
internal conflict resolution and encompass much of the company's inner workings.
Hickman v Kent10 was a case in which provisions in the articles required arbitration of
any disputes before any legal action could be taken. H decided to take the company
to court but the judge ruled he was unable to do so until the disagreement was
1
Chris Taylor , Company Law (5th Edition edn, Pearson2019) The Constitution of a Company, Page 65
2
Ansaradacom, 'Company Constitution ' (Ansarada, 2021)
<https://www.ansarada.com/business-readiness/corporate/company-constitution#:~:text=A%20company%20constitution
%20enables%20your,of%20evident%20gaps%20in%20control>accessed 6 April 2023
3
Govuk, 'Memorandum and articles of association'(Govuk, 2022) <https://www.gov.uk/limited-company-formation/
memorandum-and-articles-of-association>accessed 6 April 2023
4
The Companies Act 2006
5
Chris Taylor , Company Law (5th Edition edn, Pearson2019) The Constitution of a Company, Page 67
6
Chris Taylor , Company Law (5th Edition edn, Pearson2019) The Constitution of a Company, Page 71
7
Chris Taylor , Company Law (5th Edition edn, Pearson2019) The Constitution of a Company, Page 71
8
The pro-forma articles of association which are available for companies to adopt, are known as the ‘Model Articles’ and run to
over fifty ‘Articles’ (equivalent to section numbers). The articles of association were previously known as ‘Table A’ and you may
continue to see reference to these in companies that were registered under the old regime. Chris Taylor , Company Law (5th
Edition edn, Pearson2019) The Constitution of a Company, Page 71
9
The Companies Act 2006
10
Hickman v Kent or Romney Marsh Sheep Breeders Assoc [1915] 1 CH 881
This essay will analyse whether or not Nazir has the power to compel the others to
purchase the shares, as well as any other options available to him. I will examine the
articles of association and quasi-partnerships. I will use my analysis of legal
precedents and legislation, including sections of the Companies Act 2006 and the
Insolvency Act 1986, to reach my conclusion to justify that you can compel other
shareholders to purchase your shares because directors have a legal obligation to
acquire shares held by minority shareholders in accordance with the articles of
association.
To begin, the law governs many facets of society, from governments, corporations,
and consumers. So, the same goes for company leaders (directors) who need to be
held accountable for their actions in order to safeguard the interests of the
company's citizens (shareholders).1 This concept is known as the constitution of a
company and companies have these to outline several items. Some include, to
prevent imbalances of power between shareholders/directors, pre-define rights and
duties of shareholders and the company's policies/practises. 2
The ‘memorandum of association’ and the ‘articles of association’ 3 are the two
main documents of the company's constitution which are outlined in the CA 2006. 4
Since it is written for prospective consumers and creditors, the memorandum of
association is considered an external document. 5 Whereas the articles of association
are considered internal documents since they outline the procedures for
the company's organisation such as conducting company meetings and allocating
shares.6 Furthermore, the articles also specify in detail how directors are to act, what
rights shareholders have, and how they all tie together. 7 They have been updated8 in
accordance with the CA,9 although they still serve as the starting point for any
internal conflict resolution and encompass much of the company's inner workings.
Hickman v Kent10 was a case in which provisions in the articles required arbitration of
any disputes before any legal action could be taken. H decided to take the company
to court but the judge ruled he was unable to do so until the disagreement was
1
Chris Taylor , Company Law (5th Edition edn, Pearson2019) The Constitution of a Company, Page 65
2
Ansaradacom, 'Company Constitution ' (Ansarada, 2021)
<https://www.ansarada.com/business-readiness/corporate/company-constitution#:~:text=A%20company%20constitution
%20enables%20your,of%20evident%20gaps%20in%20control>accessed 6 April 2023
3
Govuk, 'Memorandum and articles of association'(Govuk, 2022) <https://www.gov.uk/limited-company-formation/
memorandum-and-articles-of-association>accessed 6 April 2023
4
The Companies Act 2006
5
Chris Taylor , Company Law (5th Edition edn, Pearson2019) The Constitution of a Company, Page 67
6
Chris Taylor , Company Law (5th Edition edn, Pearson2019) The Constitution of a Company, Page 71
7
Chris Taylor , Company Law (5th Edition edn, Pearson2019) The Constitution of a Company, Page 71
8
The pro-forma articles of association which are available for companies to adopt, are known as the ‘Model Articles’ and run to
over fifty ‘Articles’ (equivalent to section numbers). The articles of association were previously known as ‘Table A’ and you may
continue to see reference to these in companies that were registered under the old regime. Chris Taylor , Company Law (5th
Edition edn, Pearson2019) The Constitution of a Company, Page 71
9
The Companies Act 2006
10
Hickman v Kent or Romney Marsh Sheep Breeders Assoc [1915] 1 CH 881
