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The Basis Of The Contract Between The Company And Its Members - Case Study Example

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A company is a separate legal entity and is competent to enter into a contract. The paper "The Basis Of The Contract Between The Company And Its Members" discusses the nature of a contract by a company with its shareholders and the manner in which it is enforced between them and among the members…
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The Basis Of The Contract Between The Company And Its Members
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Download file to see previous pages Enforcement of contract arises when one of the parties commits a breach of terms and conditions of the contract.
Section 14 of the Company Act 2006 (CA) makes the articles of association, on registration of the company, to become a contract between the company and members and it has been observed by Stein LJ in Bratton Seymour service Co Ltd v Oxborough1that “it is a statutory contract of special nature with distinctive features”2 Within the perspective of company law, it is of special nature because the terms of contract can be varied by special resolution and its enforcement by the members is limited to a certain extent and no outsider has any rights. And section 33(1) of the CA provides for a number of ways to be different from a normal contract. The provisions of the constitution of a company bind the company and its members in a manner as if there are covenants on the part of the company and on the part of each of its members to comply with those provisions. This position emerges once the company is registered as set in section 33 (1) of the CA. It, therefore, follows that provisions in the articles are enforceable by the company against its members, by a member against another member, and by a members against the company limited to their membership rights of attending meetings, voting, eligibility for dividend and to assert the rights to ensure that the company is managed as per the constitution.
Usually, there will be a condition in the articles to provide for referring by the company to arbitration disputes between the company and members. A company can enforce compliance of this obligation. This is supported by the decision in Hickman v Kent or Romney Marsh Sheep-Breeders’ Association where the court upheld the relevant clause in the articles for arbitration. ...Download file to see next pagesRead More
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