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Company Constitution Notes

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This is an extract of our Company Constitution document, which we sell as part of our Company law Notes collection written by the top tier of Oxford students.

The following is a more accessble plain text extract of the PDF sample above, taken from our Company law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

CORPORATE CONSTITUTION

1. Section 17: companies' constitution includes: i) articles of association; ii) special resolutions

1. Is not possible to change constitution of company via ordinary resolution.

1. i.e. in matters of substance, constitution cannot be deviated from via ordinary resolution

2. e.g. Quin & Axtens v Salmon [1909]

2. Section 18: all companies MUST have articles of association

3. Articles may deal with any matter for which mandatory rules are not laid down by statute.
? British Company law much more liberal in this respect than other jurisdictions Model Articles

1. Section 18: any company may choose the Model Articles as their articles of association.

1. In case of limited companies, model articles apply automatically in absence of contrary provision.

2. Section 20(1): limited company may exclude operation of model articles in whole or in part.

LEGAL EFFECT OF CONSTITUTION

1. Section 33: provisions of constitution bind the company and its members as though there was covenant on part of company and each member to observe it.

*
Thus is a statutory form of contract.
? i.e. a "section 33 contract"

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Allows obligations and rights to be created without any consideration, offer/acceptance.

*
Company Law Review debated whether it was still appropriate to treat articles as having contractual effect, but decided not to change anything.

Enforcement

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Section 33 contract is enforceable: i) By members against company

1. Quin & Axtens [1909]
ii) By company against members

1. Hickman [1915]
iii) By members against other members

2. Rayfield v Hands [1960]

3. London Sack and Bag [1943]

1. However is NOT enforceable by outsiders to company

1. i.e. non-members

2. Eley v Positive Life [1876]

1. Additionally, Contracts (Rights of Third Parties) Act 1999 does not apply to company constitutions

2. C(RTP)A 1999 section 6

1. i)

Limits Capacity as a Member

*

People only have rights or obligations under the constitution in their capacity as a member.
? i.e. where C seeks to enforce a right against D which does not relate to D's membership of the company, cannot do so.
? Hickman v Kent or Romney Marsh Sheepbreeders' Association [1915]

4. "Hickman principle". Multiple Relationships to Company

*

Some people who are members may have some other capacity in which they relate to company

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Thus such people can only bound by constitution where: i) they are a member of company; and ii) the right is being enforced by/against them in their capacity as member
- And NOT in their capacity as director/solicitor etc.
- Eley v Positive Life [1876]
- Hickman [1915]

5. Court have taken lenient view of when a right is being enforced 'qua member'.

1. Quin & Axtens [1909]

2. Rayfield v Hands [1960]
Subsequent Attainment of Membership 1) Where an outsider with purported rights in a company's articles is subsequently granted shares in company, does not make those prior rights enforceable.
? i.e. C's claim in his capacity as outsider was unenforceable

1. thus does not become enforceable merely because he has since become member
? Eley [1876]
? As interpreted in Hickman [1915]
2) However has been suggested this view is wrong

2. i.e. once outsider is granted shares, becomes entitled to enforce his earlier right

3. as any member of company is entitled to enforce its constitution

4. See Lord Wedderburn (below) Member-Member Disputes

6. Fact that two people are both members of company does not mean articles can be invoked in disputes which have nothing to do with their membership of company.

1. Rather the dispute must fall within the 'company relationship'

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