Company law : Articles of Association - Coursework Example

The articles of association of a company stipulate the powers and capacity of members which are delegated to the company directors by the company members2. Generally, the articles provide that the company business is managed by the directors based on the provisions of the articles of association, and the mentioned directions stated by the company members in a general meeting. Members of the company have the powers and capacity to act in the company as provided in the articles of association3.

Members are also able to alter their relationship with the directors within their capacity according to the provisions of the company law. Although there is a binding contract between the company and the members, it is evident from the articles of association that the contract only binds the members within their capacity as members of the company. In addition, where the rights of the outsider are at issue, section 33 of the contract does not apply. This is justified in the following case laws4. . It was resolved that a company is entitled to let the action stay since the article of association amounts to a binding contract between Hickman and the company to make reference as disputes between them to arbitration.

However, in Beattie vs. E & F. Beattie Ltd (1938) case law, a dispute between a director of a company in his capacity as a director and the company would not exist within the terms of such articles of association even if the company director is also a company member6. Academically, a company is bound to the members through the provisions entailed in the articles of association. The company may exercise its rights against any company member only in accordance with and in pursuance of the articles of association.

Any particular member of the company has a right and is entitled to sue the company in order to prevent any breach of the articles of association that would otherwise affect his or her rights as a company member7. Thus the chairman of a company meeting cannot deprive a member of a company of his right to vote at the company meeting, where such a right has been conferred to him or her by the articles of association. According to Wood vs. Odessa Water Works Co. (1889) case law, the defendant company’s articles of association stipulated that “the directors, at a general meeting may with the sanction of the company, may dividends to be paid to the members of the company in cash”.

An ordinary resolution was passed so as to give the company members a debenture bonds rather than paying dividends in cash to the shareholders8. A member, the plaintiff sued the directors of the Odessa Water Works Co. for acting on such