Companies Act Essay Example | Topics and Well Written Essays - 2500 words

Companies Act - Essay Example The Memorandum constitutes the company's charter with the outsiders dealing with the company and usually contains a number of statutory classes. The Articles of Association on the other hand are the regulations governing the internal management of the company. Section 7 of the Companies Act 1985 has given the option to the companies limited by shares to adopt Table A instead of filing separate Articles. It is established law that where there is a conflict between the Memorandum and Articles of Association the Memorandum prevails. Section 14 (1) of the Companies Act 1985 has given the character of a statutory contract for the Memorandum and Articles of Association of a Company. These documents have given rise to a contract between the company and the members of the company and among the members themselves. Thus the right of a company to make the calls on unpaid shares can be enforced by the company by means of the Articles. In the same way by using the Articles the member can enforce the entitlement for voting rights against the company and the pre-emption rights on a sale of his shares against another member can also be enforced through the Articles. This character of the Memorandum and Articles of Association is usually referred to as the Statutory Contract or Section 14 contract. The character of the Memorandum and Articles as a statutory contract wa... provided in the Articles of Association of the company that Eley will be the solicitor of the company to transact all legal business of the company and shall not be removed from the office except for misconduct. Subsequently Eley became the shareholder of the company. When the company started taking advice from another counsel, Eley brought an action for breach of contract under the Articles. His claim was dismissed on the ground that the Articles represent a contract between the members and the company or between the members themselves. It was held, as a solicitor Eley cannot enforce the contract under the Articles and the decision was upheld in the appeal. The position would have been different had Eley brought the action in his capacity as a member. But in the whole case the capacity of Eley was never brought into consideration and no ruling was given in that respect. "The Eley decision is quoted in most legal reference books as authority for the proposition that articles can only give rights to a member in his capacity as a member." Michael Grffiths2 As observed by Lord Cairns LC in this case the Articles represent either a stipulation to the members or it provides instructions to the directors for the conduct of the business of the company. In either of the cases the Articles represent a document to be considered as specifying the contractual relationship between the company and its members and directors and there is no place for an outsider to intervene in the operations of the Articles. 3.0 Enforcement of the Rights by a Non-member of the Company: In the case of Hickman v. Kent or Romney Marsh Sheep-Breeders' Association3 the rights of the members under the Articles of Association were more clearly established. The judge in this case observed 'that no right