Constitution

Question 1

What is the constitution

Answer 1

The internal rules of the company (i.e articles)

Question 2

What is a par value?

Answer 2

Represents the minimum amount for which shares can be issued.

Question 3

What are the model articles?

Answer 3

The default set of rules for those setting up a co

Question 4

Board of directors

Answer 4

Management organ

Question 5

MA 2-6

Answer 5

Management power to the board

Question 6

MA 16-20

Answer 6

Directors’ appointment

Question 7

MA 7-16

Answer 7

Decision making by directors

Question 8

General Meeting

Answer 8

Management organ

Question 9

MA 37-41

Answer 9

regulate organisation of meetings

Question 10

MA 42-47

Answer 10

regulate voting at meeting

Question 11

Do articles provide for removal of directors? (Art 18)

Answer 11

No, except in incapacity or resignation

Question 12

Which statute dictates directors removal

Answer 12

s168, CA 2006

Question 13

s168, CA 2006

Answer 13

Gives members the right by simple majority (more than 50%) to remove a director for any reason

Question 14

Where in the model articles delegates power to directors

Answer 14

MA 3 and 4

Question 15

MA 3

Answer 15

3. Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company.

Question 16

MA 30

Answer 16

gives board the power to decide whether to distribute profits to the shareholders in the form of dividends

Question 17

s21, CA 2006

Answer 17

GM can alter the articles if ¾ of members (by special resolution) vote in favour

Question 18

s33, CA 2006

Answer 18

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.

Question 19

Are the contracts inter se?

Answer 19

General consensus is no ,but the case law is ambiguous

Question 20

Foss v Harbottle rule

Answer 20

Individual shareholders are not empowered to initiate proceedings for a wrong to the co -
If the breach is a wrong to the co, only the co can sue

Question 21

Shareholder agreement

Answer 21

Agreements between shareholders themselves or between the company and the shareholders

Question 22

Bushell v Faith

Answer 22

• Articles contained a provision whereby in the event of a resolution to remove a director, that director’s shares would multiply by three
• Entrenched the director on the board, as other shareholders could never outvote him
• Article attempted to remove ability of members conferred by s168
• Held that the article was not inconsistent with the statutory power

Question 23

Allen v Gold Reefs

Answer 23

exercised subject to those general principles of law and equity which are applicable to all powers conferred on majorities enabling them to bind minorities. It must be exercised, not only in the manner required by law, but also bona fide for the benefit of the company as a whole, and it must not be exceeded. These conditions are always implied, and are seldom, if ever, expressed.

Question 24

What are the qualifications to GM ability to alter the articles

Answer 24

Alterations must not conflict with statutory provisions
Members must exercise their power to alter the articles in good faith.

Question 25

What are entrenched articles

Answer 25

SS21, 22 CA 2006 - Certain provisions can be entrenched, requiring unanimous resolution to change them

Question 26

Do new articles of association need to be sent to CH when amended

Answer 26

Only a copy of the changes to the articles need be submitted with the application for registration (s20(1)(b) CA 2006)

Question 27

Procedure for amending ordinary articles

Answer 27

- Special resolution s21(1) CA 2006 - Must be passed by a majority of not less than 75% S283(1) CA 2006 - Sufficient votes passing the SR → article amendment - Registrar of Companies to be sent a copy of the articles as amended not later than 15 days after the amendment takes effect s26(1) CA 2006 - Copy of the special resolution must be sent to Registrar of Companies within 15 days after it has been passed s30(1) CA 2006

Question 28

Procedure for amending entrenched articles

Answer 28

- s22(2) only permits entrenched articles at co formation, or with the agreement of all shareholders post registration - Co must also send Form CC01 (notice of restriction on the company’s articles) - To remove an entreched article, they must send form CC02 - Where co articles already include an entrenched article and any of the co’s articles are altered, in addition to SR and new articles, co must send form CC03