ABSTRACT
In this chapter, students are directed specifically to the internal relationships within a company. This involves the rights and duties of the members in their dealings with each other and with the company (see, also, Chapter 5). The articles of association are the primary source of the provisions determining these internal relationships. The status of the articles and their enforceability (which touches on the rule in Foss v Harbottle (1843)) is a standard area for questions, both problem and essay. Specific regard will also be paid to the appointment, remuneration and dismissal of officers of the company and the division of power between the shareholders and the directors. Such material can form the basis of single question or can be combined with aspects of directors’ duties, variation of class rights and s 994 of the Companies Act (CA) 2006 or the external relationships of the company. Students should have at least background knowledge of the types of resolution and the majorities required, and of the conduct of meetings and votes. Arguably, the duties of the directors could form part of this chapter, but it is such a large topic that they are dealt with separately (see, Chapter 4). The employees of the company are also insiders, but company law syllabuses rarely address issues relating to employees, other than directors. Employees have no locus standi to enforce either the company’s constitution or the duty owed by directors to have regard to the interests of employees when acting bona fide to promote the success of the company for the benefit of its members as a whole. Checklist
Students must be familiar with the following areas:
the nature of the articles and their legal effect;
amendment of the articles by the company (the CA 2006 substitutes the word ‘amendment’ for ‘alteration’, as formerly provided for by the CA 1985);
the appointment, remuneration and dismissal of directors; and
the division of power in a company.
Students should be aware that related issues which could be linked to questions based on this area include:
variation of class rights, reduction of capital and s 994 CA 2006;
directors’ duties and their enforcement; and
the ability of officers of a company to bind the company.
