1 Introduction
1.1 Articles are concerned with internal regulations of a company.
Table A contains the specimen format.
Table A applies unless excluded expressly or by implication.
2 Legal effect of the articles
The articles constitute a contract between (S14 CA 1985):
2.1 (a) Members and the company
Hickman v. Kent or Romney Marsh Sheepbreeders Assoc.
(b) The company and members
Pender v. Lushington
(c) The members inter se
Borland's Trustee v Steel Bros. Ltd.
The articles do not constitute a contract between:
2.2 The company and third parties: Eley v. Positive Life Co.
2.3 If someone has dual capacity the courts will distinguish between a person’s membership/non-membership rights and/or duties.
3 Alteration of the articles
Overview
Basic rules
3.1 S.9 The articles may be altered by a special resolution. The basic test is whether the alteration is for the benefit of the company as a whole. Greenhalgh v Arderne Cinemas.
3.2 The change cannot be prevented by declaring the articles/a clause to be unalterable.
3.3 No outside contract will prevent a change but the company may be liable for breach of contract. Southern Foundries v Shirlaw.
Case law
3.4 (a) Most alterations are allowed by the court. An alteration will not be prevented simply because it inflicts hardship on some members but not on others. Greenhalgh v. Arderne Cinemas
(b) Alterations which give the company the power to expel members are viewed with considerable suspicion. Dafen Tinplate Co. v. Llanelly Steel Co.
(c) However, such alterations will be allowed if the proposed clause is carefully worded, eg where a member is:
(i) competing with the company. Sidebottom v. Kershaw Leese & Co. Ltd.
(ii) defrauding the company. Shuttleworth v. Cox Brothers Ltd.
3.5 Alterations can be prevented by 'weighted voting rights' Bushell v Faith.
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