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BUSINESS ORGANISATIONS AND AGENCY 386 COMPANY CONSTITUTION AND CONTRACTUAL CAPACITY Section 33 CA 2006 is usually interpreted to mean that the articles of association form a statutory contract binding on a company and its members and enforceable by both. Moreover, the court must interpret them as a commercial or business document in order to give them reasonable business efficacy. In Wood v Odessa Waterworks [1889] 42 Ch D 636 , it was held that “the articles of association constitute a contract not merely between the shareholders and the company, but between each individual shareholder and every other.” In Hickman v. Kent and Romney Sheep breeders Association [1915] 1 Ch 881 , a company’s articles contained provision that any disputes between it and its members should first be submitted to arbitration. The claimant sued the company for an injunction stopping his expulsion. It was held that the action was in breach of the claimant’s obligation under the company’s articles requiring him to submit his grievance to arbitration. Members of a company can enforce against it only those rights arising from pure membership status. These include, for example, right to a declared dividend, right to attend members’ meetings, right to vote at members’ meetings, right to share certificate, right to sell shares, right to return of capital upon winding up; and right to be entered in the register of members. Wood v Odesa Waterworks Co [1889] 42 Ch. D 639 The articles of the company provided that the directors may, with the sanction of the ordinary meeting, declare a dividend to be paid to the members in proportion to their shares. The General meeting approved a resolution to pay dividends by way of debentures or bonds. An action was brought by dissenting shareholders to stop the company from implementing the resolution. It was held that the articles constitute a contract not merely between the shareholders and the company but between each individual shareholder and every other. Accordingly, since the provisions of the articles on the distribution of the profits have not been followed, an injunction was granted against the company.
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  • Fall '19
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