Statutory contract of company's constitution Definition

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What does Statutory contract of company's constitution mean?

The effect of the company's constitution is to act as a statutory contract binding the company and its members.

The company's constitution with its specific provisions acts to bind the company and its members to the same extent as if there were covenants on the part of the company and of each member to observe those provisions. By virtue of this, the constitution becomes a contract between the company and its members; it is a 'statutory contract' of a special nature with its own distinctive features. A company may amend its articles of association (and, therefore, the statutory 'contract') by special resolution. Once a company's articles are registered, the court has no power to rectify them even if they do not accord with what is proved to be the concurrent intention of the members.

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A company’s constitution

What is a company's constitution?A company’s 'constitution' is defined under the Companies Act 2006 (CA 2006) as including:•the company’s articles of association, and•any resolutions and agreements affecting a company’s constitutionThe CA 2006 definition of 'constitution' is not exhaustive and also refers to other documents forming part of the constitution of a company, including:•the certificate of incorporation and any certificates of incorporation on change of name•a current statement of capital (or statement of guarantee for a company limited by guarantee), and•any court orders or enactments altering the company’s constitution or sanctioning a compromise, arrangement, reconstruction or amalgamationBefore 1 October 2009, the memorandum of association was an integral part of a company’s constitution, but its constitutional significance has been greatly reduced by CA 2006.What are the articles of association?A company's internal governing documentA company's articles of association are its main internal governing document, and the integral part of a company’s constitution. CA 2006 states that the articles of association 'prescribe regulations for the company'. In other words, the articles set out the...

Discover our 1 Practice Notes on Statutory contract of company's constitution

33 Effect of company's constitution

(1) The provisions of a company's constitution bind the company and its members to the same extent as if there were covenants on the part of the company and 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.In England and Wales and Northern Ireland it is of the nature of an ordinary contract debt.

Statutory contract of company's constitution is referenced 1 in UK Parliament Acts

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