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Constitutional Documents of Company

 

Article of Association

The article of the association defines the duties, rights, and the powers of the governing body as between themselves and the company at large. It has rules and regulations that deal with the internal management of the company. The article of Association is subordinate to the memorandum thus the rule made in the Article of Association should comply with the memorandum and should also be in accordance with the Company Act 2017. The article of Association defines the rights and duties of the governing body of company, where is memorandum explains the particulars of the company. The article of association gives the mode and form in which changes in the internal regulations of the company may from time to time be made.

Form of Articles of Association

Section 41 provides the form of the Article of Association;

Content of Articles of Association

Table A of the first schedule S36 and 2(49) gives the content of the Article of Association;

·         Definition of important terms and phrase

·         Adoption of execution of pre-incorporation contracts

·         Share capital and the rights of the shareholder

·         Allotment of share

·         Procedure as to the making of calls of shares

·         Transfer of Shares

·         Lien on Shares

·         Share certificates and share warrants

·         Alteration of share capitals and else

Memorandum and Articles of Association as a Contract

After the registration, the memorandum and article of Association bind the company and the members of the company to the signed documents. Section 17(1) defines the effect of the memorandum and article. It says that the registered documents bind the company and members to the extent they have signed.

Binding on members in relation to the company

The memorandum and article of association bind the members with respect to their provisions. The company has the right to sue the members for the enforcement of the provisions.

Bradford Banking Company v Briggs

It was mentioned in the article that for a debt due from a member in the company, the company has the first charge on members' share. A member of the company owning debt also borrowed money from the bank on the security of his shares. The company claimed the prior charge but the court held that the company has the prior charge over the member's share. 

Binding on Company in relation to the members

The company is also bound to perform under the documents as the members are bound. A member may sue the company for the enforcement of the provisions and can also restrain from committing a breach of provisions.

Pender v Luchington

The right of veto is the right of the shareholder. The chairman of the meeting cannot deprive a member of his voting rights.

Binding on members inter se

The members are also bound to each other by provisions.

Rayfield v Hands and Others

The article mentioned that members shall inform during transferring the share to the director of his intentions. The member informed by the directors refused to take the share. It was held that the directors are bound to take the shares.

Not Binding on the Company in Relation to Outsider

The company and its members are not bound to outsiders. Thus a person stranger to the constitutional documents cannot bring an action on the basis of the contract.

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