A guide of the sections and the powers granted by such sections to companies.
Powers Granted to a Company Only If Provided for in the Articles of Association
The Memorandum and Articles of Association represent the constitution
of the Company and, taken together, they form a statutory contract
which binds the Company and its members.
The Memorandum of Association (the “Memorandum”) is the public-
facing document which includes prescribed information of interest to
external parties, while the Articles of Association (the “Articles”) govern
the internal affairs of the Company.
The Articles is a very important document and must be carefully drafted.
This document may be described as the internal regulations of the
company governing its management and embodying the powers of the
directors and officers of the company as well as the rights of the
shareholders. Articles of Association generally prescribe the relation
between shareholders and the Board of Directors, the relation among
shareholders, and Directors themselves.
Articles of Association
The Articles run to more than 160 clauses. Initial clauses include
provisions dis-applying any statutory presumptions in relation to the
Articles and extensive Definitions and Interpretation provisions. The
substantive clauses cover the topics outlined below:
• Share Capital:
The Articles specify the powers of the directors in respect of
the disclosure of interests in shares by the underlying holder,
and outline the sanctions (including removal of voting and dividend
rights) applicable in the event of a failure to comply with a
disclosure request.
The Companies Act provides that a person, including a company
and other legal entities, that acquires any interest of 3% or more of
any class of the Company’s shares comprised in the Company’s
“relevant share capital” is required to notify the Company in writing
of its interest within two business days following the day on which
the obligation arises.
Relevant share capital, for these purposes, means the Company’s
issued share capital carrying the right to vote in all circumstances
at a general meeting. After the 3% level is exceeded, similar
notifications must be made where the interest falls below the 3%
level or otherwise in respect of increases or decreases of a whole
percentage point.
The interest of a person in shares means any kind of interest in
shares including interests in any shares:
• in which a spouse, or child or stepchild under the age of 18, is
interested;
• in which a corporate body is interested, which includes interests
held by other corporate bodies over which that corporate body has
effective voting power, and either (a) that corporate body or its
directors generally act in accordance with that person’s directions
or instructions or (b) that person controls one-third or more of the
voting power of that corporate body; or
• in which another party is interested and the person and that other
party are parties to a “concert party” agreement. A concert party
agreement is one which provides for one or more parties to acquire
interests in shares of a particular company and imposes obligations
or restrictions on any of the parties as to the use, retention or
disposal of such interests acquired pursuant to such agreement, if
any interest in our shares is in fact acquired by any of the parties
pursuant to the agreement.
Certain non-material interests may be disregarded for the purposes
of calculating the 3% threshold, but the obligation of disclosure will
still apply where such interests exceed 10% or more of any class of
the relevant share capital and to increases or decreases of a whole
percentage point.
Failure to comply with the obligations described above, regarding
disclosure of interests in shares, may result in criminal penalties.
• Powers of Directors
The Articles state that the directors shall manage the business and
affairs of the Company and may exercise all the powers of the
Company. They also outline specific powers in relation to the
exercise of voting rights, the establishment of regional boards, the
appointment of agents, the granting of powers of attorney, and the
execution of cheques and related instruments by the Company.
The Articles include detailed provisions on the borrowing
powers of directors. In general terms, they require that the
aggregate principal amount outstanding does not exceed
a certain sum without the prior sanction of the Company by
ordinary resolution. Furthermore, the Articles include extensive
definitions of what is deemed to be included and excluded from the
definition of moneys borrowed.
• Power to Attach Rights
Subject to the provisions of the Act and to any rights attached to
any existing shares, any share may be issued with, or have
attached to it, such powers, designations, preferences and relative
participating, optional.
• Power to Differentiate
The board may make arrangements on the allotment or, subject to
the terms of the allotment, on the issue of shares for a difference
between the allottees or holders in the amounts or times of
payment of a call on their shares or both.
• Power of Sale
Where a power of sale is exercisable over a share the Company
may, at the same time, also sell any additional share issued in
right of such share or in right of such an additional share
previously so issued shall have been satisfied in relation to the
additional share.
• Power to Adjourn
The chairman or the holder or holders of shares representing the
majority of the voting rights present at any general meeting shall
have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting.
Without prejudice to any other power which he may have under the
provisions of the Articles or at common law, the chairman may
interrupt or adjourn a meeting from time to time and from place to
place or for an indefinite period if he decides that it has become
necessary to do so in order to:
(a) secure the proper and orderly conduct of the meeting;
(b) give all persons entitled to do so a reasonable opportunity of
speaking and voting at the meeting; or
(c) ensure that the business of the meeting is properly disposed
of.
• Exercise of Voting Powers
The board may exercise or cause to be exercised the voting
powers conferred by shares in the capital of another company held
or owned by the Company, or a power of appointment to be
exercised by the Company, in any manner it thinks fit (including the
exercise of the voting power or power of appointment in favour of
the appointment of a director as an officer or employee of that
company or in favour of the payment of remuneration to the
officers or employees of that company).
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