Professional Documents
Culture Documents
CHAPTER TWO: The Constitution of A Company
CHAPTER TWO: The Constitution of A Company
2.1 Introduction
(a) Every organisation must have a set of rules which set out its
objects, rights and obligations of members;
(b) In the case of a registered company, there are two documents
which form the constitution of the company namely MOA and
AOA;
(c) MOA sets out the company’s broad framework-it gives each
company’s distinctive characteristics such as name, address,
first directors and members, business identity etc
(d) AOA are rules of the companies internal management
COMPANY LAW for PAEC students BYALLAN HANS MUHOME LLB (HONS) MW 18
Lecturer in Law Courses
Additional contents for a company limited by guarantee
i. maximum number of membership if any
ii. that its income will be used solely towards its objects (i.e.
non profit making/ charitable purposes)
iii. guarantee as to contribution of each member upon
winding up
iv. state what organisation will take over its assets upon
winding up (charitable organisation)
How has the Companies Act affected the application of the doctrine of
Ultra Vires?
Prior to the passing of the Companies Act, it was the practice of every
company to list down all the objects it wished to carry on. In Ashbury
Carriage Co. Ltd vs. Riche, a company was formed with the objects
of making, selling and mending railway carriages (trams/rail cars).
The company purported to build a railway line. Held, ultra vires and
void.
The company bought a concession for the construction of a railway system in Belgium
and entered into an agreement to finance Riche to construct a railway line. The objects
clause in the memorandum of the company stated that it was established to manufacture
and sell railway carriages and other railway equipment and to buy and sell timber and
coal. Riche began work on the contract and sums of money were paid over by the
company in connection with the contract. The company later ran into difficulties, and the
shareholders wanted the directors to take over the contract in a personal capacity, and to
indemnify them against any loss. The directors then repudiated the contract on behalf of
the company, and Riche sued the company for breach of contract. Held: The financing of
the concession was ultra vires and void as it was not within the objects of the company -
the company could use its money to make things for railways, but not to make railways
as such. The contract with Riche was therefore void, and the directors were entitled to
repudiate it.
But now with the coming into force of the Companies Act 1984,
things have become easier for newly formed companies because all
they have to state in their MOA is whether or not there is any
restriction on the company’s business.
[See later- Royal British Bank vs. Turquand and S. 22 (1) and S.
22(2)]
Alteration of MOA
Conditions for alteration
By a special resolution passed in a general meeting
COMPANY LAW for PAEC students BYALLAN HANS MUHOME LLB (HONS) MW 20
Lecturer in Law Courses
The alteration is not binding if it imposes shares on a member-
need for consent
The alteration must be legal e.g. not against a court order
The alteration must be bona fide- not oppressive or ill-founded
Various procedures are laid down in the Act for alteration of the
MOA. Below is the procedure followed if a company desires to
change its name;
Alteration of AOA
4 Conditions
(i) Only by a special resolution
(ii) Legal alterations only i.e. not in conflict with laws
(iii) The alteration must be in tandem (agreement) with the MOA
[why?]
(iv) At common law an alteration will be void if ill-founded (not bona
fide)
COMPANY LAW for PAEC students BYALLAN HANS MUHOME LLB (HONS) MW 23
Lecturer in Law Courses
CHAPTER TWO: The Constitution of a Company
(A selection of non-factual past questions)
-----------------------------------------------------------------------------------
1. Mention the basic constitutional document of a company limited by
shares and state its usual contents (2 marks- Dec 2000, Dec 2009)
2. What is the relationship between a Memorandum of Association and
Articles of Association? (3 marks- June 2001, June 2003, June 2004
& June 2008)
3. What is the relationship between Memorandum of Association and
Articles of Association in case of a conflict between the two? (4
marks- Dec 2000, June 2001 & June 2008)
4. What is the contractual effect of the Memorandum of Association and
Articles of Association (3 marks- June 2001)
5. State the effect of the Articles of Association upon the company, its
members and outsiders (9 marks- June 2000, June 2004, Dec 2006 &
June 2007)
6. Explain the significance of the following in the formation of a
company;
(a) Memorandum of Association (5 marks- Dec 2002, Dec 2003, June
2005 & June 2007)
(b) Articles of Association (5 marks- Dec 2002, Dec 2003, June 2005
& June 2007)
7. Define the following;
i. Memorandum of Association (1 mark- June 2003)
ii. Articles of Association (1 mark- June 2003)
8. Outline the information required to be contained in the Memorandum
of Association (7 marks-June 2000, Dec 2002, June 2003, June 2004,
Dec 2006 & June 2007)
9. State six compulsory clauses that should be contained in a
memorandum of association of a company limited by shares (6 marks-
June 2009)
10.What conditions, if any, should be followed if a company wishes to
alter its Articles of Association or what is the legal position with
regard to the alteration of the altered Articles of Association. (8 marks
Dec 2005)
11.How would a company, registered under the Companies Act, change
its name? (6 marks- June 2009)
12.State what you understand by the doctrine of ultra vires in Company
Law. (5marks – Dec 2002 & Dec 2006).
COMPANY LAW for PAEC students BYALLAN HANS MUHOME LLB (HONS) MW 24
Lecturer in Law Courses
13.How has the Companies Act affected the application of the doctrine of
ultra vires? (5marks – Dec 2002 & Dec 2006).
14.How has section 6 of the Companies Act relaxed the application of the
doctrine of ultra vires? (5 marks- Dec 2000)
15.How far is the doctrine still important? (4 marks- Dec 2000)
Required
COMPANY LAW for PAEC students BYALLAN HANS MUHOME LLB (HONS) MW 25
Lecturer in Law Courses