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Lecture 5: Constitution - Coggle Diagram
Lecture 5: Constitution
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Essential requirements required before 31 Jan 2017
- MOA: outlines essential company features
- AOA: govern the company's relationships with and among its member
[Guinness v Land Corporation of Ireland (1882) Bowen LJ:
- MOA contains fundamental incorporation conditions
- MOA serves creditors, public and shareholders
- MOA establishes external operating conditions
- AOA are internal company regualtions
Contents of MOA
- Company name
- Objects clause
- Share capital details
- Liability clause
- Association clause
- Subscriber clause
Accessibility of MOA
- Public document submitted to SSM
- Accessible to external parties
- Electronically accessible through SSM e-info portals
AOA - Governance & powers
- Determines governance, management and ownership
- Can impose power restrictions
- Provides shareholder assurances
- Outlines decision-making rules & procedure
CA 2016
Constitution under CA 2016
- MA + AA = Constitution
- Only compulsory for companies limited by guarantees
- Other companies have a choice to either have a constitution or adopt provisions under the CA
Adoption of constitution by companies limited by shares
- Not required
- Can adopt via special resolution
- Must lodge with ROC within 30 days
Rights, powers, duties and obligations under CA 2016
- Without a constitution: Default to CA 2016
- With a constitution: Follow CA 2016 unless altered
- Constitution can adjust specific elements
Transition for pre-CA 2016 companies
- Governed by s619(3) CA 2016
- MOA & AOA deemed effective as if under CA 2016
- Served as constitution until altered by special resolution
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Provisions allowed in constitution of CA 2016
- Objects
- Capacity, rights, powers, privileges
- Matters contemplated by ACT
- Other desired matters
- Must not contravene CA 2016 (s.32(2))
Effects of Constitution
- Binding contract between company & members
- As if signed and sealed by each member
- Contains covenants to observe all provisions
Position of outsiders:
- Doctrine of privity: Outsiders cant enforce constitution
- Raffles Hotel v Malayan Banking Bhd (No.2) - Articles appointed bank rep to he board.
Held: No contract between hotel and bank, no enforceable rights
The effects of the constitution are limited to members. Outsiders (even if mentioned in the articles) cannot enforce those provisions. This ensures that the constitution remains an internal contract and doesn’t give rights to third parties.
Rights of members in different capacity: Articles only create rights as members, not in other roles
- Caley v Positive Assurance (1875): Made Eley company solicitor and Co gave work to others, Elay sued
Held: No contract between Eley as Solictor & co. His rights under articles only applied as a member.
- Beattie v E & F Beattie Ltd (1938): Articles required arbitration for member-co disputes. Co sued member-director, member wanted arbitration
Held: Sued as director not member, articles inapplicable
Constitution as contract - Articles a contract between company and members.
- S33(1) & s38(6) Hickman v Kent of Romney Marsh Sheep Breeder's Assoc (1915) :
- Hickman ignored arbitration clauses in the articles and went to court.
- Held: He was bound by the articles and had to arbitrate
- Quins & Axtens Ltd v Salmon (1909):
- Articles required Salmon and Axtens approval for contracts.
- Salmon refused and directors called EGM
- The court granted an injunction against member's resolution
For the cheat sheet:
- Hickman v Kent (1915) : A member must follow the company’s articles (e.g., arbitration clause), as they form a binding contract between the company and its members.
- Quins & Axtens Ltd v Salmon (1909): Directors must respect rights given to members in the articles; Salmon’s approval rights (as per articles) were enforceable.
- Raffles Hotel Ltd v Malayan Banking (1966): Outsiders (non-members) cannot enforce rights mentioned in the articles, even if named there, as articles are only a contract with members.
- Caley v Positive Assurance (1875): Articles don’t give a member rights in another capacity (e.g., solicitor); Eley couldn’t claim a right to be company solicitor based on articles.
- Beattie v E & F Beattie Ltd (1938): An arbitration clause in the articles only applies to members acting as members, not when they are acting as directors.
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