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Company Law Reform Bill [HL]


Company Law Reform Bill [HL]
Part 3 — A company’s constitution
Chapter 2 — Articles of association

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22      

Entrenched provisions of the articles

(1)   

A company’s articles may provide that specified provisions of the articles—

(a)   

may not be altered or repealed, or

(b)   

may be altered or repealed only if conditions are met, or procedures are

complied with, that are more restrictive than those applicable in the

5

case of a special resolution.

   

This is referred to as “provision for entrenchment”.

(2)   

Provision for entrenchment may only be made—

(a)   

in the company’s articles on formation, or

(b)   

by an amendment of the company’s articles agreed to by all the

10

members of the company.

23      

Notice to registrar in case of entrenched provisions

(1)   

Where—

(a)   

a company’s articles on formation contain provision for entrenchment,

or

15

(b)   

a company’s articles are altered so as to include such provision,

   

the company must give notice to the registrar.

(2)   

Where a company whose articles contain provision for entrenchment amends

its articles and is required to send to the registrar any document making or

evidencing the amendment, it must deliver with that document a statement of

20

compliance.

(3)   

The statement of compliance required is a statement certifying that the

amendment has been made in accordance with the company’s articles.

(4)   

The registrar may rely on the statement of compliance as sufficient evidence of

the matters stated in it.

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24      

Notice to registrar of removal of entrenched provisions

(1)   

Where a company whose articles contain provision for entrenchment alters its

articles so that they no longer contain any such provision, it must give notice

of that fact to the registrar.

(2)   

The notice must be accompanied by a statement of compliance.

30

(3)   

The statement of compliance required is a statement certifying that the

alteration has been made in accordance with the company’s articles.

(4)   

The registrar may rely on the statement of compliance as sufficient evidence of

the matters stated in it.

25      

Effect of alteration of articles on company’s members

35

(1)   

A member of a company is not bound by an alteration to its articles after the

date on which he became a member, if and so far as the alteration—

(a)   

requires him to take or subscribe for more shares than the number held

by him at the date on which the alteration is made, or

(b)   

in any way increases his liability as at that date to contribute to the

40

company’s share capital or otherwise to pay money to the company.

 
 

Company Law Reform Bill [HL]
Part 3 — A company’s constitution
Chapter 2 — Articles of association

10

 

(2)   

Subsection (1) does not apply in a case where the member agrees in writing,

either before or after the alteration is made, to be bound by the alteration.

26      

Registrar to be sent copy of amended articles

(1)   

Where a company amends its articles it must send to the registrar a copy of the

articles as amended not later than 15 days after the amendment takes effect.

5

(2)   

This section does not require a company to set out in its articles any provisions

of model articles that—

(a)   

are applied by the articles, or

(b)   

apply by virtue of section 20 (default application of model articles).

(3)   

If a company fails to comply with this section an offence is committed by—

10

(a)   

the company, and

(b)   

every officer of the company who is in default.

(4)   

A person guilty of an offence under this section is liable on summary

conviction to a fine not exceeding level 3 on the standard scale and, for

continued contravention, a daily default fine not exceeding one-tenth of level

15

3 on the standard scale.

27      

Registrar’s notice to comply in case of failure with respect to amended articles

(1)   

If it appears to the registrar that a company has failed to comply with any

enactment requiring it—

(a)   

to send to the registrar a document making or evidencing an alteration

20

in the company’s articles, or

(b)   

to send to the registrar a copy of the company’s articles as amended,

   

the registrar may give notice to the company requiring it to comply.

(2)   

The notice must—

(a)   

state the date on which it is issued, and

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(b)   

require the company to comply within 28 days from that date.

(3)   

If the company complies with the notice within the specified time, no criminal

proceedings may be brought in respect of the failure to comply with the

enactment mentioned in subsection (1).

(4)   

If the company does not comply with the notice within the specified time, it is

30

liable to a civil penalty of £200.

   

This is in addition to any liability to criminal proceedings in respect of the

failure mentioned in subsection (1).

(5)   

The penalty may be recovered by the registrar and is to be paid into the

Consolidated Fund.

35

Supplementary

28      

Existing companies: provisions of memorandum treated as provisions of

articles

(1)   

Provisions that immediately before the commencement of this Part were

contained in a company’s memorandum but are not provisions of the kind

40

mentioned in section 8 (provisions of new-style memorandum) are to be

 
 

Company Law Reform Bill [HL]
Part 3 — A company’s constitution
Chapter 3 — Resolutions and agreements affecting a company’s constitution

11

 

treated after the commencement of this Part as provisions of the company’s

articles.

(2)   

This applies not only to substantive provisions but also to provision for

entrenchment (as defined in section 22).

(3)   

The provisions of this Part about provision for entrenchment apply to such

5

provision as they apply to provision made on the company’s formation, except

that the duty under section 23(2) to give notice to the registrar does not apply.

Chapter 3

Resolutions and agreements affecting a company’s constitution

29      

Resolutions and agreements affecting a company’s constitution

10

(1)   

This Chapter applies to—

(a)   

any special resolution;

(b)   

any resolution or agreement agreed to by all the members of a company

that, if not so agreed to, would not have been effective for its purpose

unless passed as a special resolution;

15

(c)   

any resolution or agreement agreed to by all the members of a class of

shareholders that, if not so agreed to, would not have been effective for

its purpose unless passed by some particular majority or otherwise in

some particular manner;

(d)   

any resolution or agreement that effectively binds all members of a

20

class of shareholders though not agreed to by all those members;

(e)   

a resolution to give, vary, revoke or renew authority for the purposes

of section 542 (authority of company for allotment of shares by

directors);

(f)   

a resolution to redenominate share capital or a class of share capital

25

under section 586;

(g)   

a resolution of the directors of a company under section 147(2) of the

Companies Act 1985 (c. 6) (resolution in connection with re-registration

in consequence of company acquiring its own shares);

(h)   

a resolution conferring, varying, revoking or renewing authority under

30

section 166 of that Act (market purchase of company’s own shares);

(i)   

a resolution for voluntary winding up passed under section 84(1)(a) of

the Insolvency Act 1986 (c. 45) or Article 70(1)(a) of the Insolvency

(Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19));

(j)   

a resolution of the director of an old public company under section 2(1)

35

of the Companies Consolidation (Consequential Provisions) Act 1985

(c. 9) that the company should be re-registered as a public company;

(k)   

a resolution passed by virtue of regulations made under section 207 of

the Companies Act 1989 (c. 40) (transfer of securities).

(2)   

References in subsection (1) to a member of a company, or of a class of

40

members of a company, do not include the company itself where it is such a

member by virtue only of its holding shares as treasury shares.

 
 

Company Law Reform Bill [HL]
Part 3 — A company’s constitution
Chapter 4 — Miscellaneous and supplementary provisions

12

 

30      

Copies of resolutions or agreements to be forwarded to and recorded by

registrar

(1)   

A copy of every resolution or agreement to which this Chapter applies, or (in

the case of a resolution or agreement that is not in writing) a written

memorandum setting out its terms, must be—

5

(a)   

forwarded to the registrar within 15 days after it is passed or made, and

(b)   

recorded by him.

(2)   

If a company fails to comply with this section, an offence is committed by—

(a)   

the company, and

(b)   

every officer of it who is in default.

10

(3)   

A person guilty of an offence under this section is liable on summary

conviction to a fine not exceeding level 3 on the standard scale and, for

continued contravention, a daily default fine not exceeding one-tenth of level

3 on the standard scale.

(4)   

For the purposes of this section, a liquidator of the company is treated as an

15

officer of it.

31      

Resolutions and agreements to be embodied in or attached to issued copies of

articles

(1)   

Any resolution or agreement relating to a company that—

(a)   

has been recorded by the registrar—

20

(i)   

under section 30, or

(ii)   

before the commencement of this Part, under section 380 of the

Companies Act 1985 (c. 6) or Article 388 of the Companies

(Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) (which

made provision corresponding to this Chapter), and

25

(b)   

that is for the time being in force,

   

must be embodied in or annexed to every copy of the company’s articles issued

by the company.

(2)   

If a company fails to comply with this section, an offence is committed by every

officer of the company who is in default.

30

(3)   

A person guilty of an offence under this section is liable on summary

conviction to a fine not exceeding level 3 on the standard scale for each

occasion on which copies are issued or, as the case may be, requested.

(4)   

For the purposes of this section, a liquidator of the company is treated as an

officer of it.

35

Chapter 4

Miscellaneous and supplementary provisions

Statement of company’s objects

32      

Statement of company’s objects

(1)   

Unless a company’s articles specifically restrict the objects of the company, its

40

objects are unrestricted.

 
 

Company Law Reform Bill [HL]
Part 3 — A company’s constitution
Chapter 4 — Miscellaneous and supplementary provisions

13

 

(2)   

Where a company alters its articles so as to add, remove or alter a statement of

the company’s objects—

(a)   

it must give notice to the registrar,

(b)   

on receipt of the notice, the registrar shall register it, and

(c)   

the alteration is not effective until entry of that notice on the register.

5

(3)   

Any such alteration does not affect any rights or obligations of the company or

render defective any legal proceedings by or against it.

(4)   

In the case of a company that is a charity, the provisions of this section have

effect subject to—

(a)   

in England and Wales, section 64 of the Charities Act 1993 (c. 10);

10

(b)   

in Northern Ireland, Article 9 of the Charities (Northern Ireland) Order

1987 (S.I. 1987/2048 (N.I. 19)).

(5)   

In the case of a company that is entered in the Scottish Charity Register, the

provisions of this section have effect subject to the provisions of the Charities

and Trustee Investment (Scotland) Act 2005 (asp 10).

15

Other provisions with respect to a company’s constitution

33      

Constitutional documents to be provided to members

(1)   

A company must, on request by any member, send to him a copy of the

following documents—

(a)   

an up-to-date copy of the company’s articles incorporating any

20

alterations made to them;

(b)   

copies of any resolution or agreement relating to the company that has

been recorded by the registrar—

(i)   

under section 30, or

(ii)   

before the commencement of this Part, under section 380 of the

25

Companies Act 1985 (c. 6) or Article 388 of the Companies

(Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) (which

made provision corresponding to this Chapter),

   

and that is for the time being in force;

(c)   

a copy of the company’s current certificate of incorporation, and of any

30

past certificates of incorporation;

(d)   

in the case of a company with a share capital, a current statement of

capital;

(e)   

in the case of a company limited by guarantee, the statement of

guarantee.

35

(2)   

The statement of capital required by subsection (1)(d)(ii) is a statement of—

(a)   

the total number of shares of the company,

(b)   

the aggregate nominal value of those shares,

(c)   

for each class of shares—

(i)   

prescribed particulars of the rights attached to the shares,

40

(ii)   

the total number of shares of that class, and

(iii)   

the aggregate nominal value of shares of that class, and

(d)   

the amount paid up and the amount (if any) unpaid on each share

(whether on account of the nominal value of the share or by way of

premium).

45

 
 

Company Law Reform Bill [HL]
Part 3 — A company’s constitution
Chapter 4 — Miscellaneous and supplementary provisions

14

 

(3)   

If a company makes default in complying with this section, an offence is

committed by every officer of the company who is in default.

(4)   

A person guilty of an offence under this section is liable on summary

conviction to a fine not exceeding level 3 on the standard scale.

34      

Effect of company’s constitution

5

(1)   

The provisions of a company’s constitution, when registered, bind the

company and its members to the same extent as if there were covenants, signed

and sealed on the part of each member, to observe those provisions.

(2)   

Money payable by a member to the company under its constitution is a debt

due from him to the company.

10

   

In England and Wales and Northern Ireland it is of the nature of an ordinary

contract debt.

35      

Notice to registrar where company’s constitution altered by enactment

(1)   

This section applies where a company’s constitution is altered by an

enactment, other than an enactment amending the general law.

15

(2)   

The company must give notice of the alteration to the registrar, specifying the

enactment, not later than 15 days after the enactment comes into force.

   

In the case of a special enactment the notice must be accompanied by a copy of

the enactment.

(3)   

If the enactment amends—

20

(a)   

the company’s articles, or

(b)   

a resolution or agreement to which Chapter 3 applies (resolutions and

agreements affecting a company’s constitution),

   

the notice must be accompanied by a copy of the company’s articles, or the

resolution or agreement in question, as amended.

25

(4)   

A “special enactment” means an enactment that is not a public general

enactment, and includes—

(a)   

an Act for confirming a provisional order,

(b)   

any provision of a public general Act in relation to the passing of which

any of the standing orders of the House of Lords or the House of

30

Commons relating to Private Business applied, or

(c)   

any enactment to the extent that it is incorporated or applied for the

purposes of a special enactment.

(5)   

If a company fails to comply with this section an offence is committed by—

(a)   

the company, and

35

(b)   

every officer of the company who is in default.

(6)   

A person guilty of an offence under this section is liable on summary

conviction to a fine not exceeding level 3 on the standard scale and, for

continued contravention, a daily default fine not exceeding one-tenth of level

3 on the standard scale.

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