Company Law Reform Bill [HL] (9-15)

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL] (9-15)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 3 — A company’s constitution
Chapter 2 — Articles of association
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Alteration of articles
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Amendment of articles
(1)
A company may amend its articles by special resolution.
(2)
In the case of a company that is a charity, this is subject to—
(a)
in England and Wales, section 64 of the Charities Act 1993 (c. 10);
5
(b)
in Northern Ireland, Article 9 of the Charities (Northern Ireland) Order
1987 (S.I. 1987/2048 (N.I. 19)).
(3)
In the case of a company that is registered in the Scottish Charity Register, this
is subject to—
(a)
section 112 of the Companies Act 1989 (c. 40), and
10
(b)
section 16 of the Charities and Trustee Investment (Scotland) Act 2005
(asp 10).
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Entrenched provisions of the articles
(1)
A company’s articles may provide that specified provisions of the articles may
be amended or repealed only if conditions are met, or procedures are complied
15
with, that are more restrictive than those applicable in the 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
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(b)
by an amendment of the company’s articles agreed to by all the
members of the company.
(3)
Provision for entrenchment does not prevent amendment of the company’s
articles by agreement of all the members of the company.
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Notice to registrar in case of entrenched provisions
25
(1)
Where—
(a)
a company’s articles on formation contain provision for entrenchment,
or
(b)
a company’s articles are amended so as to include such provision,

the company must give notice to the registrar.
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(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
compliance.
(3)
The statement of compliance required is a statement certifying that the
35
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.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 3 — A company’s constitution
Chapter 2 — Articles of association
10

24
Notice to registrar of removal of entrenched provisions
(1)
Where a company whose articles contain provision for entrenchment amends
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.
5
(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.
25
Effect of alteration of articles on company’s members
10
(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
15
company’s share capital or otherwise to pay money to the company.
(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
20
articles as amended not later than 15 days after the amendment takes effect.
(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).
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(3)
If a company fails to comply with this section an offence is committed by—
(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
30
continued contravention, a daily default fine not exceeding one-tenth of level
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—
35
(a)
to send to the registrar a document making or evidencing an alteration
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—
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(a)
state the date on which it is issued, and

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 3 — A company’s constitution
Chapter 3 — Resolutions and agreements affecting a company’s constitution
11

(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
5
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.
10
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
15
mentioned in section 8 (provisions of new-style memorandum) are to be
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).
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(3)
The provisions of this Part about provision for entrenchment apply to such
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
25
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Resolutions and agreements affecting a company’s constitution
(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
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unless passed as a special resolution;
(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;
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(d)
any resolution or agreement that effectively binds all members of a
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 565 (authority of company for allotment of shares by
directors);
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(f)
a resolution to redenominate share capital or a class of share capital
under section 636;

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 3 — A company’s constitution
Chapter 3 — Resolutions and agreements affecting a company’s constitution
12

(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
section 166 of that Act (market purchase of company’s own shares);
5
(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)
of the Companies Consolidation (Consequential Provisions) Act 1985
10
(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
members of a company, do not include the company itself where it is such a
15
member by virtue only of its holding shares as treasury shares.
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
20
memorandum setting out its terms, must be—
(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
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(b)
every officer of it who is in default.
(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.
30
(4)
For the purposes of this section, a liquidator of the company is treated as an
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—
35
(a)
has been recorded by the registrar—
(i)
under section 30, or
(ii)
before the commencement of this Part, under section 380 of the
Companies Act 1985 or Article 388 of the Companies (Northern
Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) (which made
40
provision corresponding to this Chapter), and
(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.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 3 — A company’s constitution
Chapter 4 — Miscellaneous and supplementary provisions
13

(2)
If a company fails to comply with this section, an offence is committed by every
officer of the company who is in default.
(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.
5
(4)
For the purposes of this section, a liquidator of the company is treated as an
officer of it.
Chapter 4
Miscellaneous and supplementary provisions
Statement of company’s objects
10
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Statement of company’s objects
(1)
Unless a company’s articles specifically restrict the objects of the company, its
objects are unrestricted.
(2)
Where a company amends its articles so as to add, remove or alter a statement
of the company’s objects—
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(a)
it must give notice to the registrar,
(b)
on receipt of the notice, the registrar shall register it, and
(c)
the amendment is not effective until entry of that notice on the register.
(3)
Any such amendment does not affect any rights or obligations of the company
or render defective any legal proceedings by or against it.
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(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);
(b)
in Northern Ireland, Article 9 of the Charities (Northern Ireland) Order
1987 (S.I. 1987/2048 (N.I. 19)).
25
(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).
Other provisions with respect to a company’s constitution
33
Constitutional documents to be provided to members
30
(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;
(b)
a copy of any resolution or agreement relating to the company that has
been recorded by the registrar—
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(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),
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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 3 — A company’s constitution
Chapter 4 — Miscellaneous and supplementary provisions
14


and that is for the time being in force;
(c)
a copy of any document required to be sent to the registrar under—
(i)
section 35(2) (notice where company’s constitution altered by
enactment), or
(ii)
section 36(2)(a) (notice where order of court or other authority
5
alters company’s constitution);
(d)
a copy of the company’s current certificate of incorporation, and of any
past certificates of incorporation;
(e)
in the case of a company with a share capital, a current statement of
capital;
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(f)
in the case of a company limited by guarantee, the statement of
guarantee.
(2)
The statement of capital required by subsection (1)(e) is a statement of—
(a)
the total number of shares of the company,
(b)
the aggregate nominal value of those shares,
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(c)
for each class of shares—
(i)
prescribed particulars of the rights attached to the shares,
(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
20
(whether on account of the nominal value of the share or by way of
premium).
(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
25
conviction to a fine not exceeding level 3 on the standard scale.
34
Effect of company’s constitution
(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 the company and of each member, to observe those
30
provisions.
(2)
Money payable by a member to the company under its constitution is a debt
due from him to the company.

In England and Wales and Northern Ireland it is of the nature of an ordinary
contract debt.
35
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.
(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.
40

In the case of a special enactment the notice must be accompanied by a copy of
the enactment.
(3)
If the enactment amends—
(a)
the company’s articles, or

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 3 — A company’s constitution
Chapter 4 — Miscellaneous and supplementary provisions
15

(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.
(4)
A “special enactment” means an enactment that is not a public general
5
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
Commons relating to Private Business applied, or
10
(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
(b)
every officer of the company who is in default.
15
(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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Notice to registrar where company’s constitution altered by order
20
(1)
Where a company’s constitution is altered by an order of a court or other
authority, the company must give notice to the registrar of the alteration not
later than 15 days after the alteration takes effect.
(2)
The notice must be accompanied by—
(a)
a copy of the order, and
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(b)
if the order amends—
(i)
the company’s articles, or
(ii)
a resolution or agreement to which Chapter 3 applies
(resolutions and agreements affecting the company’s
constitution),
30

a copy of the company’s articles, or the resolution or agreement in
question, as amended.
(3)
If a company fails to comply with this section an offence is committed by—
(a)
the company, and
(b)
every officer of the company who is in default.
35
(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
3 on the standard scale.
Supplementary provisions
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37
Right to participate in profits otherwise than as member void

In the case of a company limited by guarantee and not having a share capital
any provision in the company’s articles, or in any resolution of the company,