Breaching the articles of association

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Practice notes

In-house

Breaching the articles of association

Published by a ��˾��ҹ�� Corporate expert

Practice notes

In-house

This Practice Note considers the unique contractual status of the articles of association between the company and its members, primarily under section 33(1) of the Companies Act 2006 (CA 2006). Various breaches of the articles are considered, with reference to the ability of the majority of members to ratify a breach in certain circumstances, or otherwise take appropriate action against the board or an individual director. Claims brought by a minority shareholder are discussed, particularly personal actions for alleged breaches of ‘membership rights’ arising under the constitutional contract. Reference is also briefly made to derivative actions, unfair prejudice claims and winding-up.

What is the company’s constitution

Unless the context otherwise requires, a company’s constitution is defined under CA 2006 to include:

•
the company’s articles of association, and
•
any resolutions and agreements affecting a company’s constitution

Before 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. However any provisions that were contained in the memorandum of a company

Jurisdiction(s):

United Kingdom

Key definition:

Unfair prejudice definition

What does Unfair prejudice mean?

An unfair prejudice petition is a statutory remedy available to shareholders of a company provided by CA 2006, ss 994–999. It is the primary procedure by which a minority shareholder who is the victim of 'unfairly prejudicial' conduct can obtain relief from the court.

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