By Roger Mason
This Report presents a whole and crucial knowing relating to corporation constitutions and their implications in the British context. even though it is written in an easy-to-understand kind, it offers an in-depth appreciation of things like all of the version articles, the default provision, the resolutions that could be a part of the structure, precisely and intimately how alterations to articles could be made, and it indicates alterations that are supposed to be thought of.
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Dangers to be avoided include the following: COMPROMISING LIMITED LIABILITY This is mentioned first because a mistake could have catastrophic consequences, in theory at least. Liability of the members is limited by shares or by guarantee if this is stated in the articles. Unless of course it is an unlimited company this statement of limited liability should on no account be omitted. A statement of limited liability (for a limited company) was a compulsory part of the memorandum until 1st October 2009.
A GENERAL WELCOME Inevitably some people have some reservations, but the model articles have been generally welcomed. Changing the articles and entrenchment of articles Considerations and procedures when changing the articles are examined in Chapters 5 and 6. The members ‘own’ the articles and indeed the constitution, so a change to the articles requires a vote of the members rather than of the directors (although this is often done on the recommendation of the directors). CA2006 section 21 states that a company may amend its articles by special resolution.
It is not possible to change the articles with a vote or procedure less demanding than a special resolution. It is not possible to entrench the articles so that they are unalterable. A unanimous vote of the members must override entrenchment. It is also not possible to take away the power of the court to change the articles. This power is very rarely used, but it can be done, for example, consequent to a successful claim of unfair prejudice. Companies House must be notified if and when articles are entrenched, and also if and when entrenchment ceases.