seeking to disregard the veto, was in effect attempting to bypass its own rules on decision-making; and that this was an irregular attempt to alter the company’s articles. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCYCOMPANY CONSTITUTION AND CONTRACTUAL CAPACITY388A member of a company may sue a fellow member to enforce the constitution. InWoods v Odesa Waterworks, the court made it clear that the articles constituted a contract also between each individual shareholder and every other shareholder. This was illustrated in Rayfield v Hands  Ch. 1:The articles of R’s company provided that any member who wished to transfer his shares should notify the directors who would take the shares among them at a fair price. R wanted to transfer his shares and informed H and the other directors accordingly. The directors refused to take the shares and denied any obligation to do so. R sued the directors. It was held that the directors must take the shares in accordance with the contractual provision of the articles.Download free eBooks at bookboon.comClick on the ad to read more
BUSINESS ORGANISATIONS AND AGENCY389COMPANY CONSTITUTION AND CONTRACTUAL CAPACITY21.3.2 THE NATURE OF THE S.33 CONTRACTThe “contract” under s. 33 has many features that are not the norm in an ordinary contract. First, unlike in normal contracts the courts cannot imply any terms into it. In Towcester Racecourse Co Ltd v The Racecourse Association 1 BCLC260, it was held that no terms could be implied into the articles of a company from extrinsic sources to make the company or its directors contractually liable to the members for the manner in which the company’s functions were carried out.Secondly, the court will not rectify the statutory contract nor vary its terms; and the statutory contract is not liable to be set aside on grounds of misrepresentation, duress, undue influence, or mistake.In Bratton Seymour Service Co Ltd v Oxborough BCC 471,it was held that: The articles of association of a company differ very considerably from a normal contract. They are a document, which has statutory force… The articles thus registered are one of the statutory documents of the company open for inspection by anyone minded to deal with the company or to take shares in the company. The court has no jurisdiction to rectify the articles of association of a company even if those articles do not accord with what is proved to be the concurrent intention of the signatories to the memorandum at the moment of signature (Emphasis added).Third, if the articles are not in accordance with the intentions of the subscribers, they have to be altered only by the statutory procedure laid down in the Company’s Act. This requires special resolution. Even where the articles are to be altered by the members, they are not allowed to thereby impose extra burden of financial contribution on any member who does not support the alteration.
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