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Chapter 7
Legal effect of a company’s
constitutional documents
Contractual effect of a company’s constitution
The company and its members are bound by the articles as if they had signed and
sealed covenants to that effect: s.33 CA 2006.
The articles bind:
The company to its members
The members to the company, and
The members to one another.
They do not bind:
The company to non-members, or
The members in any other capacity, e.g. if a member is also a professional
adviser to the company, that relationship will not be governed by the
constitution.
Illustration 5 – Articles of association
Eley v Positive Government Security Life Assurance Co 1876
Facts:
The articles of association of the company stated that Eley was to be the only
solicitor of the company and could only be dismissed for gross misconduct. The
company employed another solicitor and Eley tried to sue for breach of the
articles.
Held:
Eley was trying to protect his rights as a supplier to the company not in his
capacity as a member. As such the articles were not enforceable.
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