This chapter discusses the process of registration for the incorporation of companies under the Companies Act 2006. It considers the distinction between private and public companies, the meaning of limited liability and the significant characteristics of the company created by the registration procedure at Companies House, such as a company’s separate corporate personality (which is highly artificial), its members, shareholding, directors, secretary, name, constitution and its registered office and domicile. To deter misuse of companies, the registration process involves disclosing much information about a company which is then available for public inspection. This process of public disclosure continues throughout a company’s existence.
Chapter
3. Registration
Chapter
3. Registration
This chapter discusses the process of registration for the incorporation of companies under the Companies Act 2006. It considers the distinction between private and public companies, the meaning of limited liability and the significant characteristics of the company created by the registration procedure at Companies House, such as a company’s separate corporate personality (which is highly artificial), its members, shareholding, directors, secretary, name, constitution and its registered office and domicile. To deter misuse of companies, the registration process involves disclosing much information about a company which is then available for public inspection. This process of public disclosure continues throughout a company’s existence.
Chapter
5. The company constitution
This chapter focuses on the company constitution and explores the meaning of ‘constitution’ in this context. For most companies, the constitution essentially is the articles of association and model articles may be adopted. The chapter covers the content of the articles, amending the articles, interpreting the articles, enforcing the articles, and shareholders’ agreements. While shareholders have a power to amend the articles, that power is limited at common law to prevent alterations that are not in good faith and the case law on that issue is explored. The courts are also constrained in how they interpret articles of association, given they are a public document, and the approach to interpretation is considered.
Chapter
1. Introduction to company law
Titles in the Core Text series take the reader straight to the heart of the subject, providing focused, concise, and reliable guides for students at all levels. This chapter presents an overview of company law, first by considering the company’s place within the various forms of business organisation. To get some comparative perspective on the relative merits of each type of organisation, three criteria for judging them are discussed: whether the form of business organisation facilitates investment in the business, mitigates or minimises the risk involved in the business venture, and whether it provides a clear organisational structure. Using these criteria, three forms of business organisation are analysed: the sole trader, a partnership, or a registered company. The chapter also explains the importance of the memorandum as part of the company’s constitution, as well as the distinction between private companies and public companies. Finally, it outlines the benefits of forming a company as opposed to the sole trader or a partnership.
Chapter
4. Articles of association
This chapter deals with articles of association, the principal element of a company’s constitution, under the Companies Act 2006. It describes the content of the articles, model articles of association which can be adopted by limited companies (either in whole or in part) on registration, and the function of articles as a contract between the company and its members and between the members themselves. It also considers provisions of articles that may be incorporated in other contracts and the right of members of a company to amend its articles. The chapter discusses a number of particularly significant court cases, including Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656 and Quin and Axtens Ltd v Salmon [1909] AC 442.
Chapter
10. Directors’ duties I: duties of performance
This chapter studies the codification of the director’s duties, how breach of duty can be avoided, and the duties in ss 171–74 of the Companies Act 2006 (CA 2006). Sections 171–74 of the CA 2006 provide that a director is under a duty to act in accordance with the company’s constitution; a duty to act in a way that would promote the success of the company; a duty to exercise independent judgement; and a duty to exercise reasonable skill, care, and diligence. Ultimately, the standard expected under s 174 is that of a reasonably diligent person with the general knowledge, skill, and experience that the director has. Meanwhile, a breach of duty may be avoided if the breach is approved or authorized, ratified under s 239, or if the court relieves the director of liability under s 1157.
Chapter
5. The constitution of the company
This chapter explores the various sources of a company’s constitution, how the constitution is amended and interpreted, and how the constitution can be enforced. A company’s constitution includes its articles, all resolutions and agreements affecting the company’s constitution, and other constitutional documents. All companies must have a memorandum of association, but its importance is now much reduced. As such, the articles of association form the principal constitutional document and set out the internal rules by which the company is to be run. The articles can be amended by passing a special resolution, but both statute and the common law impose limits on a company’s ability to amend its articles. Meanwhile, section 33 of the Companies Act 2006 (CA 2006) provides that the company’s constitution forms a contract between the company and its members, and between the members themselves.
Chapter
6. Corporate capacity and liability
This chapter focuses on the complex rules regarding who can act on behalf of the company, and how liability can be imposed on the company for the actions of others. A company can enter into a contract by affixing its common seal to the contract, by complying with the rules in ss 44(2)–(8) of the Companies Act 2006 (CA 2006), or by a person acting under the company’s express or implied authority. Section 39 of the CA 2006 provides that a contract cannot be invalidated on the ground that the contract is outside the scope of the company’s capacity. Meanwhile, section 40 of the CA 2006 provides that the power of the directors to bind the company, or authorize others to do so, is free of any limitation under the company’s constitution. The chapter then considers the four methods of liability: personal liability, strict liability, vicarious liability, and liability imposed via attribution.
Chapter
4. Articles of association
This chapter deals with articles of association, the principal element of a company’s constitution, under the Companies Act 2006. It describes the content of the articles, model articles of association which can be adopted by limited companies (either in whole or in part) on registration, and the function of articles as a contract between the company and its members and between the members themselves. It also considers provisions of articles that may be incorporated in other contracts and the right of members of a company to amend its articles. The chapter discusses a number of particularly significant court cases, including Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656 and Quin and Axtens Ltd v Salmon [1909] AC 442.
Chapter
8. The constitution of the company: dealing with insiders
Titles in the Core Text series take the reader straight to the heart of the subject, providing focused, concise, and reliable guides for students at all levels. This chapter discusses the constitution of the company, with emphasis on the articles of association. It first outlines the operation of the memorandum and the articles before turning to the law surrounding the contract of membership under s 33 of the Companies Act 2006. It then considers some elements of corporate theory in relation to the articles of association, contract between the company and the members, contract between the members, the question of who is entitled to sue to enforce the s 33 contract, and the issue of outsider rights with respect to the s 33 contract. The chapter also looks at the historical reforms proposed by the Company Law Review Steering Group for the Companies Act 2006 and concludes by analysing the effects of shareholder agreements on the statutory obligation of the company.
Chapter
3. The Corporate Constitution
The Concentrate Questions and Answers series offers the best preparation for tackling exam questions and coursework. Each book includes typical questions, suggested answers with commentary, illustrative diagrams, guidance on how to develop your answer, suggestions for further reading, and advice on exams and coursework. This chapter discusses the company’s constitution, which can be a popular area for examination questions. The chapter focuses on the company’s articles of association, considering in particular alteration of the articles and the legal effect of the articles (the ‘statutory contract’). The chapter also considers shareholder agreements, which are often used as a supplement to the company’s constitution.
Chapter
5. The company constitution
This chapter focuses on the company constitution, essentially the articles of association. The chapter covers the need for articles (including the adoption of the model articles), amending the articles, interpreting the articles, enforcing the articles, and shareholders’ agreements. It particularly considers the extent to which shareholders can alter the articles and the common law limits to the power to do so. Altering the articles to allow for the compulsory transfer of members’ interests is also considered. Interpreting the articles and enforcing the statutory contract created is addressed. Shareholder agreements can provide better protection for shareholders and the chapter considers how they can supplement the company's articles.
Chapter
5. The Board of Directors as an Organ of the Company
This chapter discusses: members’ rights and duties under the Companies Act 2006 and the company’s constitution; the problems in dividing power between the company’s members and directors, and the consequences of that division; the rules of interpretation that apply to constitutional documents; the practical exercise of the decision-making powers given to members, including the formalities of meetings and the possibility of informal agreements; the legal constraints on the exercise of power by shareholders; and the enforcement of the constitution by the members, and their potential use of shareholders’ agreements to achieve what they cannot achieve via the articles.
