Q&As

Is a contract between a company and a third party which is entered into in breach of the company’s articles of association enforceable?

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Produced in partnership with Lynne Counsell of 9 Stone Buildings
Published on LexisPSL on 18/06/2019

The following Commercial Q&A produced in partnership with Lynne Counsell of 9 Stone Buildings provides comprehensive and up to date legal information covering:

  • Is a contract between a company and a third party which is entered into in breach of the company’s articles of association enforceable?
  • Articles of association
  • Breach of the articles of association
  • Statutory protection
  • Summary

Is a contract between a company and a third party which is entered into in breach of the company’s articles of association enforceable?

This Q&A deals with the question of whether a contract between a company and a third party which is entered into in breach of the company’s articles of association is enforceable.

Articles of association

The articles of association set out the rules by which a company must be run and administered. The articles comprise the main constitutional document of the company, as from 1 October 2009 the memorandum of a company incorporated after that date has no practical relevance. For more details on the constitution of companies, (including companies incorporated under the Companies Act 1985 or earlier legislation, see Practice Note: A company’s constitution).

The articles are effectively a contract between the company and its members and can take one of three forms:

  1. bespoke articles—drafted specifically for the company in question

  2. statutory articles, for example those under the Companies Act 2006 (CA 2006)—the Companies (Model Articles) Regulations 2008 (Model Articles Regs 2008), SI 2008/3229, set out model articles for three main types of company: a private company limited by shares (Model Articles Regs 2008, SI 2008/3229, Sch 1), a private company limited by guarantee (Model Articles Regs 2008, SI 2008/3229, Sch 2), and a public company (Model Articles Regs 2008, SI 2008/3229, Sch 3)

  3. a

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