2133 alteration of the articles of association a

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21.3.3 ALTERATION OF THE ARTICLES OF ASSOCIATION A company has the power to alter the contents of its articles at any time and cannot deprive itself of the power or ability to do so. The procedure for alteration depends on whether the provision to be altered is a general or entrenched provision. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 390 COMPANY CONSTITUTION AND CONTRACTUAL CAPACITY Entrenched provisions are those which the articles state may be altered by a special procedure or subject to the fulfilment of specified conditions. Entrenched provisions are usually more difficult to alter than general provisions. Entrenched provisions may also be altered or repealed by unanimous agreement of members of the company, or by the order of a court – s. 22 CA 2006. However, entrenched provisions will not be valid if they seek to make the articles impossible to alter. Whenever an entrenched provision is altered, a statement of compliance with the stipulated method must be submitted to the Registrar of Companies. Any entrenched provisions in the articles or its removal must be notified to the registrar – s. 23 CA 2006. General provisions are those other than entrenched ones. These may be altered by means of a special resolution – s. 21 CA 2006. The articles may give more weight to certain shares held in the company, thereby giving the holders more power in the alteration of the constitution. This is usually referred to as the Bushel v Faith clause. Such provisions are legal provided they do not attempt to make alteration of the articles impossible. Bushell v Faith [1970] AC 1099 (HL) – A company had 300 shares of £1 each and three shareholders – F and his two sisters. Each of them owned 100 shares. One of the sisters and F were the only directors of the company. The articles of association of the company provided that upon any motion to remove a director, the director concerned would have three votes for each share. At a general meeting, the two sisters proposed to remove F from the board and voted in favour. Mr. Faith voted against it. The sisters contended that F had been removed as a director by their 200 poll votes. F claimed that the proposal to remove him had been defeated by his weighted 300 votes. The House of Lords held that the articles of a company could assign more voting weight to certain shares and that the proposal to remove F had been defeated by F’s votes. A company must send to the registrar of companies a copy of the amended articles within 15 days of the amendment. It is an offence no to do so – s. 26. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY COMPANY CONSTITUTION AND CONTRACTUAL CAPACITY 391 21.3.3.1 Restrictions on the power of alteration Although members of a company have the power to alter the company’s articles at any time, there are statutory limitations on this power of alteration. These are designed to maintain the supremacy of the CA 2006 and protect the interest of the company and those of its minority members. The restrictions are as follows:
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