Any alteration of the articles must be done in good

This preview shows page 75 - 78 out of 250 pages.

Any alteration of the articles must be done in good faith and in the interest of the company as a whole. Moreover, no alteration would be valid if it contravenes the Companies Act 2006; imposes more shares or liability on members; or is oppressive of minority shareholders. • Unless articles of association impose limits on the capacity of a company or the power of its directors, a company is deemed to have unlimited capacity and directors unlimited power to bind it. • However, any limitations on a company’s capacity or directors’ powers will not affect the validity of any transaction undertaken by them in contravention of the provisions with third parties acting in good faith. Such limitations are now internal matters between a company and its directors who may incur personal liability for going against the constitutional limitations. Nebertheless, a company’s capacity to make political donations without the approval of members is limited to £5000 in any one year. Download free eBooks at bookboon.com
Image of page 75

Subscribe to view the full document.

BUSINESS ORGANISATIONS AND AGENCY 399 COMPANY CONSTITUTION AND CONTRACTUAL CAPACITY 21.6 PRACTICE QUESTIONS 1. Explain the legal effects of a company’s constitution 2. Explain the procedure for making changes in company’s constitution and the legal restrictions on the power of a company to make those changes. 3. Explain the terms “pure membership rights” and “outsider rights” in the context of a company’s constitution. 4. The articles of association of Telcon Ltd contain the following provisions among others: That any disputes between the company and its members should first be submitted to arbitration before it may be taken to court; That the directors of the company may, with the approval of the general meeting, declare a dividend to be paid to the members in cash and in proportion to their shares; • That in consideration for the sale of his property to the company, Adam would become a member of the company and would be a director for at least four years. In spite of these provisions, Sandra, a shareholder in the company, without going through arbitration, sued the company for a breach of contract for failing to pay her the agreed rate of dividend. The General meeting of the company, against the vote of Malcom, passed a resolution to pay dividends by way of debentures instead of cash. Adam never became a member of the company but was made a director. He was however, removed as a director before the stated four years. Advise Telcon Ltd, Sandra, Malcolm and Adam on their respective rights and liabilities under the company’s articles. 5. To what extent and effect can the capacity of a company or its directors now be limited in company law? Download free eBooks at bookboon.com
Image of page 76
BUSINESS ORGANISATIONS AND AGENCY COMPANY MEMBERS 400 22 COMPANY MEMBERS 22.1 INTRODUCTION Even though a company is a separate legal entity, it is unable to act or to do anything on its own. It needs human beings to act on its behalf. The members or directors of a company take decisions for the company and carry out its activities. Members of a company are often
Image of page 77

Subscribe to view the full document.

Image of page 78
  • Fall '19
  • Corporation, Managing Partner

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes