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AOA OUTCOMES
Define and explain nature of AOA List and cite the contents and formalities required for AOA for different types of company Compare and contrast contractual effect of AOA in different scenarios company & member ,members & members , company and outsiders AOA and External Contract - based on articles by incorporation Review the conditions for alteration of MOA and the restriction Explain effect of Alteration and impact on pre existing contract.
NATURE OF ARTICLES
Regulate internal affairs of the company Subordinate to Memorandum and cannot overwrite Memorandum Ashbury Railway Carriage and Iron Co v Riche Public document open for inspection(S 11 (2)) Together with MOA forms the constitution of the company A Statutory contract via S33 between co and member and member inter se
EFFECT OF AOA
S 33 (1) CA Statutory contract Co and Member in capacity as member Between Members Not contractual effect Company and outsider ( nonmember) Co and member ( where member seek to enforce right in some other capacity than member) Company and its officers
MEMBER V CO
Woods v Odessa Waterworks Co Member of co successful in obtaining an injunction to prevent co from implementing an ordinary resolution which was passed to pay a dividend by way of debenture bonds bearing interest redeemable at par by annual drawing extending over 30 years. AOA empowered Co to declare dividend to be paid . Held that phrase meant to be paid in cash . The debenture bonds were not payment in cash but agreement to pay and not per AOA. Injunction granted against Co.
CONTRACT BY INCORPORATION
Articles provision conferring non membership rights are not enforceable against the company. However it may successfully be incorporated as evidence of contract between company and non member.
CONTRACT BY INCORPORATION
Re New British Iron Art 62 provided remuneration of D as 1.000 pounds per annum. D accepted appointment without express agreement for remuneration. D were not paid . Co went into liquidation .
Held Art 62 not itself a contract between co and directors. However it could be relied upon by director to incorporate the term of remuneration in an external contract implied by conduct of the parties
CONTRACT BY INCORPORATION
Swabey v Port Darwin Gold Mining Co (1889) AOA provided for director fees of 200 pounds per year . Special resolution passed reducing it to 5 pounds per month. S claimed 3 moths arrears at old rate. Held: AOA themselves not contract between director and Co but they provided the terms upon which directors were serving under external contract . Co has right to amend AOA but not retrospectively
ALTERATION OF AOA
Amended by Special Resolution unless restricted by MOA ( s 31(1)) Restriction MOA provision may restrict or impose additional requirements higher majority than 75 % , consent of particular person or particular condition being fulfilled CA S 33 (3) cannot increase existing member liability or require existing to increase shareholding unless written consent given Peter American Delicacy v Heath any agreement by co and members and between member to restrict alteration of AOA is of no effect.
ALTERATION OF AOA
Basic right to alter Punt v Symons Co purchased Mr Symons business and contract of sale said co would not alter its articles which appointed him to be governing director and the right to appoint and remove director which passed to trustees upon his death. After he dies co proposed to alter AOA depriving the trustees of this power. Court held that company cannot contract itself out of its statutory right to alter it AOA either by an agreement inside AOA or an external agreement
ALTERATION OF AOA
Amended by Special Resolution unless restricted by MOA ( s 31(1)) Restriction MOA provision may restrict or impose additional requirements higher majority than 75 % , consent of particular person or particular condition being fulfilled CA S 33 (3) cannot increase existing member liability or require existing to increase shareholding unless written consent given Peter American Delicacy v Heath any agreement by co and members and between member to restrict alteration of AOA is of no effect.
ALTERATION OF AOA
Greenhalgh v Arderne Cinemas ( 1951) Co AOA were altered to allow majority shareholders in family co to sell shares to an outsider by obtaining a ordinary resolution. This replaced a AOA provision that required members to offer to sell shares first to existing shareholder. G a minority shareholder sought declaration the alteration to AOA void as it sacrificed minority interest to majority without any benefit to Co.
Lord Evershed held alteration valid ; that though depreive right of minority to preemption C was unable to show it was not bona fide for benefit of company and there was no discrimination as it allowed any member to sell shares to outsider.
ALTERATION OF AOA
Peters American Delicacy v Heath & Ors AOA allowed undivided profits to be capitalized by distributing the same as a special dividend or bonus shares to existing shareholders in proportion to shares held by them. Art altered by special resolution that in future bonus payment based upon amount paid on existing shares. Share capital 2/3 fully paid. Pt brought action for declaration alteration not bona fide for the interest of co as a whole. Held that resolution valid as it was bonafide for the company as a whole
ALTERATION OF AOA
Peters American Delicacy v Heath & Ors Latham J having stated that it is immaterial that it SR prejudices or diminishes rights of partly paid up share or benefits fully paid shares If however the resolution was passed fraudulently or oppressively or was so extravagant that no reasonable person could believe that it was for the benefit of the company; it should be held invalid.
Define and explain nature of AOA List and cite the contents and formalities required for AOA for different types of company Compare and contrast contractual effect of AOA in different scenarios company & member ,members & members , company and outsiders AOA and External Contract - based on articles by incorporation Review the conditions for alteration of MOA and the restriction Explain effect of Alteration and impact on pre existing contract.