The constitution of the company. - Essay Example

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The constitution of the company.

The constitution of the company, i.e. its memorandum and articles of association, govern the way in which these relationships operate and has been referred to as a contract between the members, i.e. the shareholders and the company itself. In this paper, concerns that had previously been raised in relation to section 14 of the Companies Act 1985 are discussed and considered in the context of the new arrangements brought in by section 33 of the Companies Act 2006. In order to discuss these issues, the position under section 14 will first be considered along with relevant case law, before moving on to consider section 33 and the way in which this changes the contractual relationships between the relevant entities.
Closed companies present particular difficulties in this regard, due to the fact that control of the company is held either by five or fewer people or where all shareholders are also directors. Although it is recognised that a director is different in terms of entity to a shareholder when the same people undertake both roles, it is simply not practical to deal with the contractual relationship between the company, the members and the directors. Throughout this paper, the focus is on the difficulties, both historically and currently, in relation to the contract between the shareholders and the company where the company is a closed company of the nature described above.
As noted by Professor Rajak1, 'T ...Show more

Summary

A Limited company has long been recognised as a separate legal entity which is distinct from its owners or its management team. The owners of the company are the shareholders, whereas the directors deal with the day-to-day management of the company and make all of the key decisions in relation to the company…
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