Breaching the articles of association

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Breaching the articles of association
  • What is the company’s constitution
  • The articles of association
  • A contract between company and members?
  • A contract as between members?
  • Nature of the contract
  • Breaching the articles
  • Ratification
  • Individual membership rights
  • Shareholders’ agreements
  • More...

Breaching the articles of association

This Practice Note considers the unique contractual status of the articles of association between the company and its members, primarily under s 33(1) of the Companies Act 2006 (CA 2006). Various breaches of the articles are considered, with reference to the ability of the majority of members to ratify a breach in certain circumstances, or otherwise take appropriate action against the board or an individual director. Claims brought by a minority shareholder are discussed, particularly personal actions for alleged breaches of ‘membership rights’ arising under the constitutional contract. Reference is also briefly made to derivative actions, unfair prejudice claims and winding-up.

What is the company’s constitution

Unless the context otherwise requires, a company’s constitution is defined under the CA 2006 to include:

  1. the company’s articles of association, and

  2. any resolutions and agreements affecting a company’s constitution

Before 1 October 2009, the memorandum of association was an integral part of a company’s constitution, but its constitutional significance has been greatly reduced by the CA 2006. However any provisions that were contained in the memorandum of a company existing before 1 October 2009 are now to be treated as provisions of the company's articles.

Documents in addition to those above which may be classed as constitutional documents are indicated by CA 2006, s 32 ('Constitutional documents to be provided to the members') and also CA 2006,

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