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
5. The company 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.
