The Constitution of a Company
Includes the company's articles and resolutions and agreements affecting the company's constitution
Memorandum of association
Merely states that the subscribers wish to form a company under the Act, agree to become members of the company and in the case of a company with share capital, to take at least one share each
The articles form the company's principal constitutional document and set out the company's internal rules
All companies must have a set of articles
As companies can draft their own articles, this affords companies considerable flexibility in determining how the company is to be run
CA2006 flows a company via its articles to exclude or modify certain statutory rule
Articles typically establish rules and procedures relating to issues such as
The powers and responsibilities of the directors
The rules by which board meetings and general meetings will be run
The rules relating to the appointment and removal of directors
The rules relating to allowing shares and paying dividends
The rules relating to capital and borrowing powers of the company
Model articles
The 2008 Regulations provide 3 sets of model articles
Private companies limited by shares
Private companies limited by guarantee
Public companies
If when a company is first incorporated the promoters do not register their own articles, then the applicable model articles will form the company's articles. Even if the promoters do register their own articles the applicable model articles will still apply, insofar as they are not excluded or modified by the company's own articles
Implying terms into the articles
Implying terms into the articles does not constitute an addition
Amending the articles
A company may amend its articles either by passing a special resolution or if all the members so agree
Within 15 days of the amendment taking effect it must send a copy of the amended articles to Companies House - failure to do so is a criminal offence
The power to amend the articles may be restricted by statute
CA2006 does allow companies to make it more difficult to amend the articles by entrenching article provisions
An article provision that has been entrenched can only be amended or repealed if certain conditions are met or procedures are complied with, that are more restrictive than those applicable in the case of a special resolution. This could include requiring a higher majority or unanimity instead of the usual special resolution or by requiring the alteration to be approved of by certain deified members or other persons
The courts have imposed several limitations on a company's ability to amend its articles
An amendment will not be valid if it deprives a member of a right that has already accrued unless the member agrees to the amendment
A company cannot contract out of the statutory ability to alter its articles
If the amendment of an article provision breaches a separate contract between the company and another person, the alteration will stand but the company can be liable for breach of contract
The power to alter the articles must be exercised not in the manner required by the law but also bona fide for the benefit of the company as a whole, if the amendment benefits the members but not the company, then it will be invalid