chapter
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The membership contract

The court has no jurisdiction to rectify the company’s articles or memorandum of association even though they do not represent the intention of those signing them. This was the ratio in Scott v Frank F Scott (London) Ltd (1940). In that case, it was contended by the defendants that the plaintiff was obliged to offer the shares of her deceased husband to them as the other shareholders of the company. It was argued on their behalf that the articles of association should be rectified so as to provide that all ordinary shares of a deceased member should be offered by his executors or administrators to the principal shareholders of the company. It was held that rectification has no part to play in relation to the membership contract. Luxmoore LJ said:

In this respect, the contract is quite different from a normal contract. However, if the understanding of the members

differs materially from the constitutional arrangements of the company, this may be a basis for winding the company up on the just and equitable ground under s 122(1)(g) of the Insolvency Act 1986. In the New Zealand case of Re North End Motels (Huntly) Ltd (1976), a retired farmer subscribed for half of the shares in a company on the basis that he would have a say in running the company. He found that he was in a minority on the board of directors and effectively had no say in running the company. He successfully petitioned to wind the company up on the just and equitable ground.