In the context of the formation of companies, explain:
(b) the articles of association, paying particular regard to how these can be altered. (6 marks)
参考答案:
The articles of association are the main element of a company’s constitution and in effect they are the rules which govern a company’s internal affairs. Companies are free to make such rules about their internal affairs as they think appropriate, subject to the proviso that any such rules must not contain anything that is either contrary to:– the general law, or– the specific provisions of the Companies Act B00F. Articles of association form a statutory contract between the company and its members and between each of the members in their capacity as members (s.CC CA B00F). Section AH requires all registered companies to have articles of association, and they have to be contained in a single document and must be divided into consecutively numbered paragraphs (s.AH(C)). Section AI gives the Secretary of State the power to prescribe ‘default’ model articles for the different types of company. Such model articles apply to companies where they have not registered any articles of their own, or have not specifically excluded the operation of the model article in question. The articles of association for private and public companies are different in content, in recognition of the essential distinction between the ways in which the two business forms operate. Section BA CA B00F provides for the alteration of articles of association on the passing of a special resolution, requiring a GE% vote in favour of the proposition. Any such alteration has to be made ‘bona fide in the interest of the company as a whole’. This test involves a subjective element, in that those deciding the alteration must actually believe they are acting in the interest of the company. There is additionally, however, an objective element requiring that any alteration has to be in the interest of the ‘individual hypothetical member’ (Greenhalgh v Arderne Cinemas Ltd (AIEA)). Articles of association cannot be altered where the alteration would be contrary to specific provisions of the companies legislation or general law. In addition, s.BB CA B00F permits companies to ‘entrench’ provisions in their articles. This means specific provisions may only be amended or removed if certain conditions are met which are more restrictive than a special resolution. For example,any such entrenched right may require the agreement of all the members before it can be altered or removed. However, such rights must not be written so that the articles can never be amended. Further, there are other ways in which some provisions of the company’s constitution can effectively be made unalterable. Thus the articles may give a member additional voting power, sufficient to block a resolution to alter articles on particular points (Bushell v Faith (AIG0)). Alternatively, the articles may provide that when a meeting is held to vote on a proposed alteration of the articles, the quorum present must include the member concerned, thus indirectly allowing that person the power to prevent any alteration by simply refusing to attend the meeting.