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Contract Between the Members of the Company and the Company

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Peveril Gold Mines Ltd that a company’s articles of association could not bar an application for winding up by a shareholder because such a petition was permissible under the Companies Act.5 It, therefore, follows that the precise effect of Section 14 of the Companies Act 1985 was unclear. Section 33 of the Companies Act 2006 was intended to clarify the meaning and effect of Section 14. This paper explores the effect of Section 14 of the 1985 Act and what if any difference Section 33 makes in clarifying the contractual implications of Section 14.The Articles of Association is a document that makes provision for the internal governance of the company.6 Essentially, the layout of the article the framework for how corporate decisions are made, identification of the company’s officers and how these officers are to be elected.7 To this end, the company’s Articles forms the basis of the legal relationship between the company and its members8 and it also binds the members to each other.9 Ultimately the shareholders of the company are at liberty to force the company to adhere to the provisions contained in the Articles of Association.10 To this end the Articles will serve as evidence of the contract between the members of the company and the company.11Even so, by virtue of a special resolution, the Articles of Association may be altered by special resolution.12 The Memorandum of Association and Companies Acts dictate the manner in which an alteration may legally occur. The Memorandum is very important since it sets out the company’s objects and what the company may or may not do.13 The main purpose of the Memorandum is to provide external notice to outsiders of the company’s structure and permissible dealings.14 Therefore if a provision of the Articles of Association do not comport with the Memorandum that provision is voidable.15 For example, the Articles may not authorize any transaction that is inconsistent with the object clauses, as provided forin the Memorandum as that transaction would be ultra vires.