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Under Section 13 (1) of the Companies Act a registered company has statutory power to alter add to its articles. Under Sec 13 (2) such alteration or addition is as valid as if originally contained in the articles and is alterable. It was so held in Walker v London Tramways Co.Ltd
i) However, this power is subject to both statutory and common law restrictions.
Statutory Restrictions
- Under Section 13 (1) of the Act an alteration of the articles must be authorized by a special resolution of members in general meeting.
- The alteration must not be inconsistent with any written law including the Companies Act.
- It must not exceed the conditions contained in the Memorandum of Association of the company.
- It must not increase the liability of members ore require them to take up more shares without written consent.
- It must not amend the provisions of Section 30 of the Companies Act if the company is to remain private.
- It must not be inconsistent with a court order made pursuant to Section 211 of the Companies Act for purposes of minority protection in cases of oppression.
- It must not be contrary to the rights of dis sentient shareholders affected by a variation of class rights pursuant to Section 74(1) of the Act, to apply to the court for the variation to be cancelled.
- Common law or judicial restriction
- The alteration must be bonafide for the benefit of the company as a whole i.e. regard must be had to existing and future shareholders of the company. As was the case in Side bottom v Kershaw Leese & Co.. where the articles was altered to enable the company get rid of competitors from among its members. However, in Brown v British Abrasive Wheel where the articles were altered to enable the majority acquire the shares of the minority it was held that the alteration was not bonafide.
marto answered the question on February 6, 2019 at 08:38
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