The restrictions are as follows Any alteration must not be inconsistent with

The restrictions are as follows any alteration must

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minority members. The restrictions are as follows: Any alteration must not be inconsistent with the provisions of the Companies Act. Any inconsistent provision would be void. • The articles cannot be altered so as to compel a member to take more shares in the company unless the member agrees in writing before or after the alteration – s. 25 CA 2006. • The articles cannot be altered so as to impose more liability on a member to contribute to the company’s capital unless the member agrees in writing before or after the alteration – s. 25 CA 2006. Members of a company must exercise their powers to alter the articles in good faith and in the interest of the company or of the members as a whole. Download free eBooks at bookboon.com Click on the ad to read more
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BUSINESS ORGANISATIONS AND AGENCY 392 COMPANY CONSTITUTION AND CONTRACTUAL CAPACITY In Allen v. Gold Reefs of West Africa Ltd [1900] 1 Ch 656 , members altered a company’s articles to give the company a lien on the paid-up shares of shareholders who did not pay for other called-up shares. It was held that the alteration was valid. Lindley J the explained the power of companies to alter their articles as follows: The power thus conferred on companies to alter the regulations contained in their articles is limited only by the provisions contained in the statute and the conditions contained in the company’s memorandum of association […]. The power conferred on it must, like all other powers…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. The measure of what is in the best interest of the company as a whole is generally determined by reference to what the members who made the alteration genuinely considered to be in the best interest of the company. This is a subjective test. Sidebottom v. Kershaw, Leese & Co. Ltd [1920] 1 Ch. 154 – The defendant company altered its articles to enable its directors to buy out the shares of any member who carried on a business in competition with the company. The plaintiffs carried on such business and the directors compulsorily purchased their shares. It was held that it was primarily in the interest of the company that the alteration should be made. It is not generally, for the court to decide what is in the best interest of the company since it does not run the business of companies. But, as was held in Shuttleworth v. Cox Brothers & Co. Ltd. [1927] 2 KB 9, if the alteration was oppressive or suspicious, or extravagant such that no reasonable person would consider it to be in the best interest of the company, the court may set it aside, especially where the interest of minorities is concerned. Browne v. British Abrasive Wheel Co. Ltd. [1919] 2 Ch. 290 – Provisions of the articles of the defendant company were altered to enable holders of 98% of the shares to compulsorily buy the holders of the remaining 2%. The alteration was held to be invalid because it discriminated against the minority for the benefit of the majority. It was therefore not in the interest of the company as a whole.
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