Articles of Association: Guidance and Precedents 9781526514325, 9781526514356, 9781526514349

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Articles of Association: Guidance and Precedents

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Articles of Association: Guidance and Precedents

Richard C. Bishop MA DipFA

BLOOMSBURY PROFESSIONAL Bloomsbury Publishing Plc 41–43 Boltro Road, Haywards Heath, RH16 1BJ, UK BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc First published in Great Britain 2020 Copyright © Bloomsbury Professional, 2020 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www.nationalarchives.gov.uk/ doc/open-government-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998–2020. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. ISBN:  PB: ePDF: ePub:

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Downloadable Precedents The precedents for this edition are available to download electronically from https://bloomsburyprofessionallaw.com/articlesoa. They are password-protected and the password is CJCWN3. They can be downloaded individually or in totality. If you have any problems downloading the precedents or have any questions, please contact Bloomsbury Professional customer services on 01444 416119 or by email at [email protected]. For a Licence agreement relating to the use of this Data, please see overleaf at p vi.

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Contents Downloadable Precedents  v Table of Statutes  ix Table of Statutory Instruments  xiii Table of Cases  xix Chapter 1: Introduction  1 Introduction 1 Drafting bespoke clauses  3 Restrictions on drafting rules  3 What are the companies’ constitutional documents? Pre-1 October 2009  4 Constitutional documents: Companies Act 2006  4 What is the memorandum? Pre-1 October 2009 incorporation  5 Table A: Model articles for companies incorporated before 1 October 2009  5 Post-1 October 2009 model articles – the position today  7 The legality of the articles of association  8 Enforcement of the covenants  8 Chapter 2: The New Model Articles  11 Companies Act 2006 – guide to the new model articles  11 Chapter 3: Case Law Review  19 Introduction 19 Overview – amending the articles of association  19 Pre-emption allotment of new shares  21 The legal principles of amendment of the articles  26 Signia Wealth Ltd v Vector Trustees Ltd – rights of pre-emption  31 Chapter 4: Enforcement of the Articles  39 Shareholders and members  39 Who has what rights under the articles of association?  39 The enforcement of covenants between members  40 The articles are not enforceable by third parties  40 Members and fiduciary duty  40 Members v members  41 Enforcing covenants against the directors  42 Entrenchment 43 Memorandum, entrenchment and amendment (companies incorporated before 1 October 2009)  45 Chapter 5: Articles That May Override the Companies Act 2006  47 Introduction 47 Where the Companies Act 2006 will override the articles of association  59

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Contents Chapter 6: Analysis of the Model Articles For Private Companies Limited by Shares  61 Introduction 61 Drafting assumptions  61 Model Articles for Private Companies Limited by Shares  62 Chapter 7: Analysis of the Model Articles for Private Companies Limited by Guarantee  135 Introduction 135 Model Articles for Private Companies Limited by Guarantee  137 Chapter 8: Analysis of the Model Articles for Public Companies   173 Introduction 173 Model Articles for Public Companies  174 Precedent 1: Family Business Articles of Association   261 Precedent 2: Sports Club Articles of Association  303 Precedent 3: Joint Venture Company Articles of Association  323 Precedent 4: Management Buyout Articles of Association  363 Appendix A: Tables of Derivations  401 Appendix B: Comparison of the Companies Act 1985 (1986 in Northern Ireland) Table A with the Companies Act 2006 Model Articles  409 Appendix C: Table A 1985  423 Appendix D: Table A 1948  447 Appendix E: Table A 1929  473 Appendix F: Table A 1908  491 Appendix G: Table A 1906  509 Appendix H: Table A 1862  528 Appendix I: Table B 1856  545

Index 561

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Table of Statutes [All references are to paragraph numbers] Companies Act 1929 – contd First Schedule – contd Table A – contd reg 61����������������������������������   6.47 reg 65����������������������������������   6.21 reg 67����������������������������������  6.5, 6.6 reg 70����������������������������������   6.17 reg 71����������������������������������   6.51 reg 72����������������������������������   6.20 regs 77, 78, 79����������������������   6.19 reg 81�����������������������������   6.9, 6.11, 6.15, 6.38 regs 82, 83����������������������������   6.13 reg 84����������������������������������   6.14 regs 85, 86, 87����������������������  6.7, 6.8 regs 89, 90, 92����������������������   6.32 regs 94, 95����������������������������   6.33 reg 96����������������������������������   6.34 reg 99����������������������������������   6.52 Companies Act 1948������������������������   5.44 First Schedule Table A������������������������������������   1.11 regs 2, 3��������������������������������   6.24 reg 7������������������������������������   6.25 reg 8������������������������������������   6.26 reg 9������������������������������������   6.27 regs 22, 23, 24, 25, 26, 27, 28����    6.28 reg 29����������������������������������   6.29 regs 30, 31����������������������������   6.30 reg 53����������������������������������   6.40 reg 54����������������������������������   6.43 regs 55, 56����������������������������   6.41 reg 57����������������������������������   6.43 reg 58����������������������������   6.44, 6.46 reg 59����������������������������������   6.46 reg 66����������������������������������   6.45 reg 68����������������������������������   6.47 reg 69����������������������������   6.47, 6.48 regs 70, 71����������������������������   6.47 reg 76����������������������������   6.21, 6.22 reg 80����������������������������������  6.5, 6.6 reg 81����������������������������������    6.7 reg 84����������������������������������   6.16 reg 86����������������������������������   6.17 reg 87����������������������������������   6.21 reg 88����������������������������������   6.20 regs 94, 95, 97����������������������   6.19 reg 98����������������������  6.9, 6.11, 6.15 regs 99, 100��������������������������   6.13 reg 101���������������������������������   6.14

C Charities Act 2011 s 6������������������������������������������������    7.1 ss 197, 198�����������������������������������   2.10 Companies Act 1862������������������������   1.11 First Schedule Table A��������������������������������  1.11, 6.1 reg 2������������������������������   6.26, 6.27 reg 3������������������������������������   6.27 regs 8, 9, 10, 11���������������������   6.28 reg 12����������������������������������   6.29 regs 13, 14����������������������������   6.30 reg 37����������������������������������   6.40 reg 38����������������������������������   6.43 regs 39, 40����������������������������   6.41 reg 41����������������������������������   6.43 reg 42����������������������������   6.44, 6.46 reg 43����������������������������������   6.46 reg 49����������������������������������   6.47 reg 50����������������������������   6.47, 6.48 reg 51����������������������������������   6.47 reg 54����������������������������������   6.21 reg 55����������������������������������  6.5, 6.6 reg 57����������������������������������   6.20 reg 61����������������������������������   6.17 regs 63, 64����������������������������   6.19 reg 66���������������������   6.9, 6.11, 6.13, 6.15, 6.33, 6.38 reg 67����������������������������������   6.14 regs 68, 69, 70����������������������  6.7, 6.8 reg 72����������������������������������   6.32 reg 76����������������������������������   6.35 reg 77����������������������������������   6.34 Companies Act 1929 First Schedule Table A������������������������������������   1.11 regs 2, 3��������������������������������   6.24 reg 4������������������������������������   6.26 reg 5������������������������������������   6.27 regs 17, 18, 19����������������������   6.28 reg 20����������������������������������   6.29 reg 21����������������������������������   6.30 reg 45����������������������������������   6.40 reg 46����������������������������������   6.43 regs 47, 48����������������������������   6.41 reg 49����������������������������������   6.43 reg 50����������������������������   6.44, 6.46 reg 51����������������������������������   6.46 reg 59����������������������������������   6.47 reg 60����������������������������   6.47, 6.48

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Table of Statutes Companies Act 1948 – contd First Schedule – contd Table A – contd regs 102, 103, 104�����������������  6.7, 6.8 reg 106���������������������������������   6.10 regs 107, 108������������������������   6.21 reg 109����������������������   6.7, 6.8, 6.21 reg 113���������������������������������   6.51 regs 114, 115, 118�����������������   6.32 reg 120���������������������������������   6.36 reg 121���������������������������������   6.33 reg 122���������������������������������   6.34 reg 125���������������������������������   6.52 regs 128, 129������������������������   6.38 reg 136���������������������������������   6.55 Companies Act 1967������������������������   1.11 Companies Act 1976������������������������   1.11 Companies Act 1980������������������������   1.11 Companies Act 1981������������������������   1.11 Companies Act 1985������������������   2.10, 5.44 s 8������������������������������������������������   1.11 s 80����������������������������������������������   5.24 Companies Act 2006��������   1.1, 1.2, 1.3, 1.6, 1.7, 1.9, 1.10, 1.12, 1.14, 2.1, 2.2, 2.4, 2.5, 2.8, 2.10, 2.11, 3.14, 3.16, 4.1, 4.5, 4.6, 4.7, 4.8, 4.9, 5.1, 5.3, 5.4, 5.9, 5.12, 5.18, 5.32, 5.46, 6.1, 6.2, 6.34, 6.35, 6.41, 6.52, 7.1, 7.5, 8.3 s 8������������������������������������������������   5.32 s 11����������������������������������������������    7.6 s 11(3)(a)��������������������������������������    7.6 s 17����������������������������������������������  1.3, 1.9 Pt 3 Ch 2 (ss 18–30)����������������  1.10, 5.4 s 18(1)�������������������������������������  1.7, 2.11 s 18(3)�����������������������������������������    2.7 s 21����������������������������������  2.10, 3.3, 5.9 s 21(1)������������������   2.7, 2.11, 3.16, 5.37 s 22����������������������������������  4.8, 4.9, 4.10 s 22(1)�������������������������������������  4.8, 4.10 s 22(2)�����������������������������������������   4.10 s 22(3)(a)��������������������������������������  4.8, 4.9 s 28���������������������������   1.10, 2.9, 4.8, 4.9 s 33������������������������������������������  1.13, 4.2 s 37����������������������������������������������   5.43 s 44����������������������������������������   6.26, 6.51 s 44(2)�����������������������������������   6.26, 6.51 s 45(1), (2)������������������������������������   6.51 s 63����������������������������������������������   5.44 s 63(4)(a), (b)��������������������������������   5.44 s 64����������������������������������������������   5.44 ss 77–78���������������������������������������    5.9 s 78����������������������������������������������    5.2 s 79����������������������������������������������    5.2

Companies Act 2006 – contd s 88����������������������������������������������    5.9 s 112��������������������������������������������    4.1 s 116��������������������������������������������   6.52 s 122��������������������������������������������    5.3 s 126��������������������������������������������   6.25 s 145������������������������������������   5.45, 6.25 s 145(2)����������������������������������������   5.45 s 145(4)(b)�����������������������������������   5.45 s 154������������������������������������   6.13, 6.19 s 154(2)����������������������������������������    8.9 s 168��������������������������������������������   5.46 s 168(1)����������������������������������������   5.46 Pt 10 Ch 2 (ss 170–181)��������������   4.7, 5.4, 6.5, 6.6 ss 170–177�����������������������������������    6.5 s 170��������������������������������������������  1.4, 4.7 ss 171–177�����������������������������������    5.4 s 171��������������������������������  1.5, 5.4, 6.18 s 172����������������������������������������  1.5, 6.53 s 173��������������������������������������������  1.5, 5.5 s 174��������������������������������������������    1.5 s 175����������������������������������������  1.5, 6.16 s 175(5)����������������������������������������   6.16 s 176��������������������������������������������    1.5 s 177����������������������������������������  1.5, 6.16 s 180��������������������������������������������    5.6 s 184��������������������������������������������   6.24 s 205(2)(a)������������������������������������   6.55 s 224��������������������������������������������     5.7 s 232(1), (2)����������������������������������   6.55 s 233��������������������������������������������   6.55 s 247��������������������������������������������    5.8 s 247(6)����������������������������������������   6.53 s 248��������������������������������������������   6.17 s 257��������������������������������������������    1.8 s 271��������������������������������������������   8.10 s 281��������������������������������������������    5.9 s 281(3)(b)�����������������������������������    5.9 s 282��������������������������������������������    6.9 s 283��������������������������������������������    3.4 s 284������������������������������  5.10, 6.24, 6.44 s 284(4)����������������������������������������   6.44 s 286��������������������������������������������   5.11 s 286(3)����������������������������������������   5.11 s 301��������������������������������������������   5.12 s 303��������������������������������������������   5.13 s 303(2)����������������������������������������   8.30 s 310������������������������������������   5.14, 5.16 s 311��������������������������������������������   5.15 s 311(1)(a)������������������������������������   5.15 s 311(2)����������������������������������������   6.49 s 311(3)����������������������������������������   5.15 s 312��������������������������������������������   5.16 s 313��������������������������������������������   5.17 s 318��������������������������������������   6.40, 6.43

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Table of Statutes Companies Act 2006 – contd s 318(1), (2)����������������������������������   6.40 s 319����������������������������  5.18, 5.21, 6.41 s 319(2)����������������������������������������   6.41 s 321��������������������������������������������   6.46 s 321(1)����������������������������������   6.46, 8.38 s 322��������������������������������������������   8.39 s 322A���������������������������������   5.19, 8.39 s 322A(3)(a)���������������������������������   5.19 s 323��������������������������������������������   6.40 ss 324–331�����������������������������������   6.47 s 324��������������������������������������������   5.20 s 328������������������������������������   5.18, 5.21 s 328(1), (2)����������������������������������   5.21 s 330��������������������������������������������   6.48 s 330(2), (4), (6)����������������������������   6.48 s 331��������������������������������������������   5.22 s 332��������������������������������������������   6.43 s 488��������������������������������������������   5.23 s 488(2)����������������������������������������   5.23 s 550��������������������������������  3.6, 3.7, 5.24 s 551������������������������������������   3.13, 5.25 s 551(8)����������������������������������������   5.25 s 553������������������������������������   5.26, 8.46 s 553(2)(a)������������������������������������   8.46 s 560��������������������������������������������    3.8 ss 561–563�����������������������������������    3.9 ss 561–576�������������������������������  3.8, 3.17 s 561���������������������������������  3.8, 3.9, 3.10, 3.11, 3.12 s 561(1)����������������������������������������   3.13 s 561(5)����������������������������������������    3.9 s 562����������������������������������������  3.9, 3.11 s 562(1)-(5)����������������������������������   3.13 ss 564–566�����������������������������������   3.10 ss 567–573�����������������������������������   5.27 s 567��������������������������������������������   3.11 ss 569–573�����������������������������������   3.12 s 569��������������������������������������������    5.9 s 571������������������������������������   3.12, 3.13 s 581��������������������������������������������   5.28 s 599��������������������������������������������   3.12 s 618��������������������������������������������   5.29 s 618(1)(a), (b)������������������������������   5.29 s 618(5)����������������������������������������   5.29 s 622������������������������������������   5.30, 5.31 s 622(7)����������������������������������������   5.30 s 624��������������������������������������������   5.31 s 629��������������������������������������������   5.32 ss 630–631�������������������������������������   5.9 s 630����������������������������  5.32, 5.33, 5.34 s 630(2)(a), (b)������������������������������   5.33 s 630(4)(b)�����������������������������������   5.33 s 630(7)����������������������������������������   5.33 s 631��������������������������������������������   5.34 s 641��������������������������������������������   5.35

Companies Act 2006 – contd s 641(1)(a), (b)������������������������������   5.35 s 641(6)����������������������������������������   5.35 s 642��������������������������������������������   5.35 Pt 18 Ch 3 (ss 684–689)���������������   6.24 s 684��������������������������������������������   5.36 s 684(2)����������������������������������   5.36, 6.24 s 684(3), (4)����������������������������������   6.24 s 685������������������������������  2.7, 5.37, 6.24 s 685(1)(a), (b)��������������������������  2.7, 5.37 s 685(2)������������������������������������  2.7, 5.37 s 690��������������������������������������������   5.38 s 690(1)(b)�����������������������������������   5.38 s 709��������������������������������������������   5.39 s 752(1)(a), (b)������������������������������   5.40 ss 768, 769�����������������������������������   6.26 s 771����������������������������������������  2.5, 8.65 s 771(1)(b)�����������������������������������    2.5 s 776��������������������������������������������   6.26 s 779��������������������������������������������   8.53 Pt 21 Ch 2 (ss 783–790)���������������   8.52 Pt 23 (ss 829–853)������������������   6.32, 6.36 s 830��������������������������������������������   6.32 s 831��������������������������������������������   5.41 s 831(4)����������������������������������������   5.41 s 831(4)(d)(ii)�������������������������������   5.41 s 845��������������������������������������������   6.36 s 848��������������������������������������������   5.42 s 848(1)����������������������������������������   5.42 s 994(1)����������������������������������������   3.15 ss 1134–1138�������������������������������   8.84 ss 1143–1148�������������������������������   6.50 s 1145(1)-(5)��������������������������������   6.50 s 1147������������������������������������������   6.50 s 1214������������������������������������������   6.21 Companies (Consolidation) Act 1908 First Schedule Table A������������������������������������   1.11 reg 6������������������������������������   6.26 reg 7������������������������������������   6.27 regs 18, 19, 20����������������������   6.28 reg 21����������������������������������   6.29 reg 22����������������������������������   6.30 reg 51����������������������������������   6.40 reg 52����������������������������������   6.43 regs 53, 54����������������������������   6.41 reg 55����������������������������������   6.43 reg 56����������������������������   6.44, 6.46 reg 57����������������������������������   6.46 reg 65����������������������������������   6.47 reg 66����������������������������   6.47, 6.48 reg 67����������������������������������   6.47 reg 69����������������������������������   6.21 reg 71����������������������������������  6.5, 6.6 reg 72����������������������������������   6.21 reg 75����������������������������������   6.17

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Table of Statutes Companies (Consolidation) Act 1908 – contd First Schedule – contd Table A – contd reg 77����������������������������������   6.20 regs 83, 84, 85����������������������   6.19 reg 87�����������   6.9, 6.11, 6.15, 6.38 regs 88, 89����������������������������   6.13 reg 90����������������������������������   6.14 regs 91, 92, 93����������������������  6.7, 6.8 regs 95, 96, 98����������������������   6.32 regs 100, 101������������������������   6.33 reg 102���������������������������������   6.34 Corporation Tax Act 2009���������������    2.1 Corporation Tax Act 2010 s 658��������������������������������������������    7.1

Joint Stock Companies Act 1856 – contd Table B – contd regs 33, 34��������������������������������   6.41 reg 35��������������������������������������   6.43 reg 36��������������������������������   6.44, 6.46 reg 37��������������������������������������   6.46 reg 42��������������������������������������   6.47 reg 43��������������������������������   6.47, 6.48 reg 46��������������������������������������  6.5, 6.6 reg 47��������������������������������������   6.20 regs 53, 54��������������������������������   6.19 reg 55�����������������������   6.9, 6.11, 6.13, 6.15, 6.38 reg 56��������������������������������������   6.14 regs 57, 58, 59��������������������������  6.7, 6.8 regs 63, 65��������������������������������   6.32 reg 67��������������������������������   6.33, 6.35 reg 68��������������������������������������   6.34

J Joint Stock Companies Act 1844������    1.1 Joint Stock Companies Act 1856������    1.1 Table B�����������������������������   1.1, 1.11, 6.1 reg 7����������������������������������������   6.28 reg 8����������������������������������   6.26, 6.27 reg 9����������������������������������������   6.27 reg 9a���������������������������������������   6.28 reg 10��������������������������������������   6.29 regs 11, 12, 13��������������������������   6.30 reg 14��������������������������������   6.28, 6.30 reg 27��������������������������������������   6.28 reg 31��������������������������������������   6.40 reg 32��������������������������������������   6.43

L Limitation Act 1980�������������������������   6.35 Limited Liability Act 1855���������������    1.1 M Mental Health (Discrimination) Act 2013����������������������������������������   6.20 S Stock Exchange (Completion of Bargains) Act 1976�������������������   1.11

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Table of Statutory Instruments [All references are to paragraph numbers] B Board of Trade Order 1906, SR & O 1906/596l.15 Table A����������������������������������������   1.11 reg 6����������������������������������������   6.26 reg 7����������������������������������������   6.27 regs 18, 19, 20��������������������������   6.28 reg 21��������������������������������������   6.29 reg 22��������������������������������������   6.30 reg 51��������������������������������������   6.40 reg 52��������������������������������������   6.43 regs 53, 54��������������������������������   6.41 reg 55��������������������������������������   6.43 reg 56��������������������������������   6.44, 6.46 reg 57��������������������������������������   6.46 reg 65��������������������������������������   6.47 reg 66��������������������������������   6.47, 6.48 reg 67��������������������������������������   6.47 reg 69��������������������������������������   6.21 reg 71����������������������������������  6.5, 6.6 reg 72��������������������������������������   6.21 reg 75��������������������������������������   6.17 reg 76��������������������������������������   6.33 reg 77��������������������������������������   6.20 regs 83, 84, 85��������������������������   6.19 reg 87���������������������������������   6.9, 6.11, 6.15, 6.38 reg 88��������������������������������������   6.13 reg 90������������������������������   6.13, 6.14 regs 91, 92, 93����������������������  6.7, 6.8 regs 95, 96, 98��������������������������   6.32 reg 102������������������������������������   6.34 C Community Interest Company Regulations 2005, SI 2005/ 1788����������������������������������������    7.3 Companies Act 1985 (Electronic Communications) Order 2000, SI 2000/3373���������������������������   1.11 Companies Act 2006 (Commencement No. 5, Transitional Provisions and Savings) Order 2007, SI 2007/3495 Sch 4 Pt 3 reg 47(1), (2)������������������������   6.16

Companies Act 2006 (Commencement No. 8, Transitional Provisions and Savings) Order 2008, SI 2008/2860���������������������������������   4.9 Sch 2 para 43���������������������������������������   3.7 para 43(3)�����������������������������������   3.7 Companies (Model Articles) Regulations 2008, SI 2008/ 3229����������������������������������������   1.12 Sch 1 Pt 1 (arts 1–2)����������������������������   6.2 art 1���������������������������������������   6.3 art 2���������������������������������������   6.4 Pt 2 (arts 3–20) art 3���������������������������������������   6.5 art 4���������������������������������������   6.6 art 4(1), (2)�����������������������������   6.6 art 5���������������������������������������   6.7 art 5(1)�����������������������������������   6.7 art 6���������������������������������������   6.8 art 7������������������������������   6.9, 6.13, 6.22 art 7(2)���������������������������   6.9, 6.13 art 8�������������������������������������   6.10 art 8(1)���������������������������������   6.10 art 9�����������������������������   6.11, 6.12 art 9(1)���������������������������������   6.11 art 9(2)(c)���������������������   6.11, 6.12 art 9(3)���������������������������������   6.11 art 10�����������������������������������   6.12 art 10(2)�������������������������������   6.12 art 11���������������������������   6.13, 6.40 art 11(2), (3)�������������������������   6.13 art 12�����������������������������������   6.14 art 13�����������������������������������   6.15 art 13(1)�������������������������������   6.15 art 14�����������������������������������   6.16 art 15�����������������������������������   6.17 art 16�����������������������������������   6.18 art 17�����������������������������������   6.19 art 18�����������������������������������   6.20 art 18(e)�������������������������������   6.20 art 19�����������������������������������   6.21 art 19(1)�������������������������������   6.21 art 20�����������������������������������   6.22

xiii

Table of Statutory Instruments Companies (Model Articles) Regulations 2008, SI 2008/3229 – contd Pt 3 (arts 21–36) art 21���������������������������   6.23, 6.26 art 22�����������������������������������   6.24 art 22(1)�������������������������������   6.24 art 23�����������������������������������   6.25 art 24�����������������������������������   6.26 art 24(1)�������������������������������   6.26 art 24(2)(c)���������������������������   6.26 art 24(5)�������������������������������   6.26 art 25���������������������������   6.27, 8.65 art 26�����������������������  2.4, 2.5, 6.28 art 26(5)���������������������������������   2.5 art 27�������������������  6.28, 6.29, 6.33 art 28�������������������  6.28, 6.30, 6.33 art 29�����������������������������������   6.31 art 30���������������������������   6.32, 6.35 art 30(1)�������������������������������   6.32 art 31�����������������������������������   6.33 art 31(1)(a), (b), (d)���������������   6.33 art 31(2)(c)���������������������������   6.33 art 32�����������������������������������   6.34 art 32(b)�������������������������������   6.34 art 33�����������������������������������   6.35 art 33(3)(a)���������������������������   6.35 art 34���������������������������   6.36, 8.78 art 35�����������������������������������   6.37 art 35(b)�������������������������������   6.37 art 36�����������������������������������   6.38 Pt 4 (arts 37–47) art 37�����������������������������������   6.39 art 37(3)�������������������������������   6.39 art 38�����������������������������������   6.40 art 39���������������������������   5.18, 6.41 art 40�����������������������������������   6.42 art 41�����������������������������������   6.43 art 41(1), (2)�����������������   6.43, 6.48 art 41(3), (4), (5)�������������������   6.43 art 42���������������������������   6.44, 6.46 art 43�����������������������������������   6.45 art 44�����������������������������������   6.46 art 45�����������������������������������   6.47 art 46�����������������������������������   6.48 art 47�����������������������������������   6.49 art 47(1)(b)���������������������������   6.49 art 47(3)�������������������������������   6.49 Pt 5 (arts 48–53) art 48�����������������������������������   6.50 art 48(1), (2), (3)�������������������   6.50 art 49���������������������������   6.51, 8.83 art 50�����������������������������������   6.52 art 51�����������������������������   5.8, 6.53 art 52���������������������  2.6, 6.54, 6.55 art 52(1)�������������������������������   6.55 art 53�������������������������������  2.6, 6.55

xiv

Companies (Model Articles) Regulations 2008, SI 2008/3229 – contd Sch 2 Pt 1 (arts 1–2) art 1�������������������������������������    7.5 art 2��������������������������   2.9, 7.1, 7.6 Pt 2 (arts 3–20) art 3�������������������������������������    7.7 art 4�������������������������������������    7.8 art 5�������������������������������������    7.9 art 6�������������������������������������   7.10 art 7�������������������������������������   7.11 art 8�������������������������������������   7.12 art 9�������������������������������������   7.13 art 10�����������������������������������   7.14 art 11�����������������������������������   7.15 art 12�����������������������������������   7.16 art 13�����������������������������������   7.17 art 14�����������������������������������   7.18 art 15�����������������������������������   7.19 art 16�����������������������������������   7.20 art 17�����������������������������������   7.21 art 18�����������������������������������   7.22 art 19�����������������������������������   7.23 art 20�����������������������������������   7.24 Pt 3 (arts 21–33) art 21�����������������������������������   7.25 art 22�����������������������������������   7.26 art 23�����������������������������������   7.27 art 24�����������������������������������   7.28 art 25�����������������������������������   7.29 art 26�����������������������������������   7.30 art 27�����������������������������������   7.31 art 28�����������������������������������   7.32 art 29�����������������������������������   7.33 art 30�����������������������������������   7.34 art 31�����������������������������������   7.35 art 32�����������������������������������   7.36 art 33�����������������������������������   7.37 Pt 4 (arts 34–39) art 34�����������������������������������   7.38 art 35�����������������������������������   7.39 art 36�����������������������������������   7.40 art 37�����������������������������������   7.41 art 38�����������������������������������   7.42 art 39�����������������������������������   7.43 Sch 3 Pt 1 (arts 1–2) art 1���������������������������������������   8.3 art 2���������������������������������������   8.4 Pt 2 (arts 3–27) art 3���������������������������������������   8.5 art 4���������������������������������������   8.6 art 5���������������������������������������   8.7 art 6���������������������������������������   8.8 art 7���������������������������������������   8.9

Table of Statutory Instruments Companies (Model Articles) Regulations 2008, SI 2008/3229 – contd Sch 3 – contd Pt 2 (arts 3–27) – contd art 8�������������������������������������   8.10 art 9�������������������������������������   8.11 art 10�����������������������������������   8.12 art 11�����������������������������������   8.13 art 12�����������������������������������   8.14 art 13�����������������������������������   8.15 art 14�����������������������������������   8.16 art 15�����������������������������������   8.17 art 16���������������������������   8.15, 8.18 art 17�����������������������������������   8.19 art 17(2)�������������������������������   8.19 art 18�����������������������������������   8.20 art 19�����������������������������������   8.21 art 20�����������������������������������   8.22 art 21�����������������������������������   8.23 art 22�����������������������������������   8.24 art 23�����������������������������������   8.25 art 24���������������������������   8.26, 8.48 art 25�����������������������������������  8.12, 8.17, 8.27 art 26���������������������������   8.17, 8.28 art 26(2)�������������������������������   8.28 art 27���������������������������   8.17, 8.29 art 27(b), (c)�������������������������   8.29 Pt 3 (arts 28–42) art 28�����������������������������������   8.30 art 29�����������������������������������   8.31 art 30�����������������������������������   8.32 art 31�����������������������������������   8.33 art 32�����������������������������������   8.34 art 33�����������������������������������   8.35 art 34�����������������������������������   8.36 art 35�����������������������������������   8.37 art 36�����������������������������������   8.38 art 37�����������������������������������   8.39 art 38�����������������������������������   8.40 art 39�����������������������������������   8.41 art 40�����������������������������������   8.42 art 41�����������������������������������   8.43 art 42�����������������������������������   8.44 Pt 4 (arts 43–78) art 43�����������������������������������   8.45 art 44���������������������������   1.12, 8.46 art 45�����������������������������������   8.47 art 46�����������������������������������   8.48 art 46(2)(a)���������������������������   8.48 art 47�����������������������������������   8.49 art 48�����������������������������������   8.50 art 48(4)�������������������������������   8.50 art 49�����������������������������������   8.51 art 50�����������������������������������   8.52 art 51�����������������������������������   8.53

Companies (Model Articles) Regulations 2008, SI 2008/3229 – contd Pt 4 (arts 43–78) – contd arts 52–62����������������������������   8.62 art 52�����������������������������������   8.54 art 52(2)(a), (b)���������������������   8.54 art 53�����������������������������������  8.54, 8.55 art 53(3)(a)���������������������������   8.55 art 54�����������������������������������   8.56 art 55�����������������������������������   8.57 art 55(2)�������������������������������   8.57 art 56�����������������������������������   8.58 art 57�����������������������������������   8.59 art 58�����������������������������������   8.60 art 59�����������������������������������   8.61 art 60�����������������������������������   8.62 art 60(2)(c)���������������������������   8.62 art 61�����������������������������������   8.63 art 61(1)�������������������������������   8.62 art 62�����������������������������������   8.64 art 63�����������������������������������   8.65 art 63(1)(b)���������������������������   8.65 art 63(5)(d)���������������������������   8.65 art 64�����������������������������������   8.66 art 65�����������������������������������   8.67 art 66�����������������������������������   8.68 art 67�����������������������������������   8.69 art 67(3)(a), (b)���������������������   8.69 art 68�����������������������������������   8.70 art 69�����������������������������������   8.71 art 70�����������������������������������   8.72 art 71�����������������������������������   8.73 art 72�����������������������������������   8.74 art 73�����������������������������������   8.75 art 74�����������������������������������   8.76 art 75�����������������������������������   8.77 art 76�����������������������������������   8.78 art 76(2)�������������������������������   8.78 art 77�����������������������������������   8.79 art 78�����������������������������������   8.80 Pt 5 (arts 79–86) art 79�����������������������������������   8.81 art 80�����������������������������������   8.82 art 81�����������������������������������   8.83 art 82�����������������������������������   8.84 art 83�����������������������������������   8.85 art 84�����������������������������������   8.86 art 85�����������������������������������   8.87 art 86�����������������������������������   8.88 Companies (Registration) Regulations 2008, SI 2008/3014�������������������    1.12 Companies (Shareholders’ Rights) Regulations 2009, SI 2009/ 1632����������������������������������������  5.19, 5.20

xv

Table of Statutory Instruments Companies (Tables A to F) Regulations 1985, SI 1985/ 805������������������������������������������   1.11 Table A����������������������������������   6.22, 6.23 reg 1����������������������������������������    7.5 reg 2����������������������������������������   6.24 reg 3����������������������������������   6.24, 7.25 reg 4��������������������������  7.26, 8.45, 8.46 reg 5����������������������������������   6.25, 8.47 reg 6���������������������������������   6.26, 8.48, 8.49, 8.50, 8.51 reg 7����������������������������������������   6.27 reg 8����������������������������������������   8.54 regs 9, 10, 11����������������������������   8.55 reg 12��������������������������������������   8.56 reg 14��������������������������������������   8.57 reg 15��������������������������������   8.57, 8.59 reg 16������������������������  8.56, 8.57, 8.58 reg 17��������������������������������������   8.57 reg 18��������������������������������������   8.60 reg 19��������������������������������������   8.61 regs 20, 21��������������������������������   8.62 reg 22��������������������������������������   8.63 regs 23–28�������������������������������   6.28 reg 23��������������������������������������   8.65 reg 24��������������������������������   8.65, 8.66 reg 24(c)����������������������������   8.65, 8.66 reg 27��������������������������������������   8.65 reg 28��������������������������������   8.65, 8.69 reg 29��������������������������������   6.29, 8.67 reg 30��������������������������������������   6.30, 8.68, 8.69 reg 31��������������������������������������   8.68 reg 33��������������������������������������   8.71 reg 37��������������������������������������   8.30 reg 40������������������������  6.40, 7.28, 8.32 reg 41������������������������  6.43, 7.31, 8.35 regs 42, 43������������������  6.41, 7.29, 8.33 reg 44������������������������  6.42, 7.30, 8.34 reg 45������������������������  6.43, 7.31, 8.35 reg 46�������������������������������   6.46, 7.32, 7.34, 8.36, 8.38 reg 47��������������������������������������   6.44 reg 48������������������������  6.46, 7.34, 8.38 reg 49������������������������  6.46, 7.34, 8.39 reg 51��������������������������������   7.34, 8.39 reg 52��������������������������������   8.39, 8.40 reg 57��������������������������������������   8.43 reg 58������������������������  6.45, 7.33, 8.37 regs 60, 61������������������  6.47, 7.35, 8.40 reg 62�������������������������������   6.47, 6.48, 7.36, 8.41 reg 63��������������������������������   7.36, 8.41 reg 65��������������������������������   8.27, 8.29

xvi

Companies (Tables A to F) Regulations 1985, SI 1985/805 – contd Table A – contd reg 66��������������������������������������   8.28 reg 67��������������������������������������   8.29 reg 68��������������������������������   8.27, 8.29 reg 69��������������������������������������   8.28 reg 70�����������������������������  6.5, 6.6, 7.7, 7.8, 8.5, 8.6 reg 71�����������������������������   6.7, 7.9, 8.7 reg 72�����������������������������  6.7, 6.8, 7.9, 7.10, 8.7, 8.8 regs 73–77���������������������������������   8.23 regs 78, 79������������������  6.19, 7.21, 8.22 reg 81������������������������  6.20, 7.22, 8.24 reg 82������������������������  6.21, 7.23, 8.25 reg 83������������������������  6.22, 7.24, 8.26 reg 84������������������������  6.21, 7.23, 8.25 reg 85��������������������������������������   8.25 reg 87������������������������  6.21, 7.23, 8.25 reg 88�����������������  6.9, 6.11, 6.12, 6.15, 7.11, 7.12, 7.13, 7.16, 7.17, 7.20, 8.9, 8.10, 8.15, 8.16, 8.17, 8.21 reg 89������������������������  6.13, 7.15, 8.12 reg 90������������������������  6.13, 7.15, 8.13 reg 91��������������������������������   6.14, 8.14 reg 93�������������������������������   6.10, 7.12, 8.18, 8.19, 8.20 reg 94��������������������������������������   7.18 regs 95, 96, 98��������������������   6.16, 7.18 reg 100����������������������  6.17, 7.19, 8.20 reg 101����������������������  6.51, 7.39, 8.83 regs 102, 103����������������������   6.32, 8.72 reg 104������������������������������   6.32, 8.73 reg 105������������������������������   6.36, 8.78 reg 106������������������������������   6.33, 8.74 reg 107������������������������������   6.34, 8.76 reg 108������������������������������   6.35, 8.77 reg 109����������������������  6.52, 7.40, 8.85 reg 110������������������������������   6.38, 8.80 regs 111, 112����������������������   7.38, 8.81 reg 114������������������������������������   8.70 reg 118����������������������  6.55, 7.42, 8.87 Table C - Articles of Association para 2���������������������������������������    7.5 para 3���������������������������������������   7.25 para 4���������������������������������������   7.26 para 6���������������������������������������   7.30 para 7���������������������������������   7.32, 7.34 para 9���������������������������������   7.24, 7.25 para 10�������������������������������������   7.18 para 11�������������������������������������   7.19 para 12�������������������������������������   7.38

Table of Statutory Instruments Companies (Tables A to F) (Amendment) Regulations 1985, SI 1985/1052���������������������������   1.11 Companies (Tables A to F) (Amendment) Regulations 2007, SI 2007/2541���������������������������   1.11 Companies (Tables A to F) (Amendment) (No. 2) Regulations 2007, SI 2007/2826������������������   1.11

R RTM Companies (Model Articles) (England) Regulations 2009, SI 2009/2767���������������������������������   7.4

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Table of Cases [All references are to paragraph numbers] A Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656�������������������������  3.14, 3.15, 3.16, 4.8 Assenagon Asset Management SA v Irish Bank Resolution Corp Ltd [2012] EWHC 2090 (Ch), [2013] 1 All ER 495, [2013] Bus LR 266������������������������������  3.15 B Betts & Co Ltd v Macnaghten [1910] 1 Ch 430����������������������������������������������������������  6.49 Boardman v Phipps [1967] 2 AC 46, [1966] 3 WLR 1009, [1966] 3 All ER 721, (1966) 110 SJ 853����������������������������������������������������������������������������������������������������������  6.16 Borland’s Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279�������������������������������������������  3.20 Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606, [1963] 2 WLR 529, [1963] 1 All ER 716, (1963) 107 SJ 133������������������  6.16 Brown v British Abrasive Wheel Co Ltd [1919] 1 Ch 290�������������������������������������������  3.16 Browne v La Trinidad (1887) 37 Ch D 1 (CA)������������������������������������������������������������  6.12 Buck v R & C Comrs [2009] STC (SCD) 6, [2009] WTLR 215��������������������������������  6.37 Bushell v Faith [1970] AC 1099, [1970] 2 WLR 272, [1970] 1 All ER 53, (1970) 114 SJ 54 (HL)��������������������������������������������������������������������������������������������������������������  6.24 Byng v London Life Association Ltd [1990] Ch 170, [1989] 2 WLR 738, [1989] 1 All ER 560, (1989) 5 BCC 227, [1989] BCLC 400, [1989] PCC 190, (1989) 86(16) LSG 35, (1989) 139 NLJ 75, (1989) 133 SJ 420���������������������������������������������������  6.43 C Cavendish Square Holdings BV v Makdessi [2015] UKSC 67, [2016] AC 1172, [2015] 3 WLR 1373, [2016] 2 All ER 519, [2016] 2 All ER (Comm) 1, [2016] 1 Lloyd’s Rep 55, [2015] 2 CLC 686, [2016] BLR 1, 162 Con LR 1����������������������������������  3.21 Charterhouse Capital Ltd, Re [2015] EWCA Civ 536, [2015] BCC 574, [2015] 2 BCLC 627�����������������������������������������������������������������������������   3.1, 3.15, 3.16 Citco Banking Corp NV v Pusser’s Ltd [2007] UKPC 13, [2007] Bus LR 960, [2007] BCC 205, [2007] 2 BCLC 483����������������������������������������������������������������������������  3.14 Clarke v Workman [1920] 1 IR 107���������������������������������������������������������������������   6.14, 6.41 Cosmetic Warriors Ltd v Gerrie [2017] EWCA Civ 324, [2017] 2 BCLC 456�������   3.1, 3.27 D Dafen Tinplate Co Ltd v Llanelly Steel Co (1907) Ltd [1920] 2 Ch 124���������������   3.14, 3.16 Dashfield v Davidson [2008] EWHC 486 (Ch), [2008] BCC 662, [2009] 1 BCLC 220�������������������������������������������������������������������������������������������������������    4.6 E Eley v Positive Government Security Life Assurance Co Ltd (1876) 1 Ex D 88�����������   4.4 Extrasure Travel Insurances Ltd v Scattergood [2003] 1 BCLC 598������������������������������   5.4 F Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200, [2007] Bus LR 1565, [2007] BCC 804, [2007] 2 BCLC 239, [2007] IRLR 425, [2007] 12 EG 154 (CS), (2007) 104(13) LSG 24���������������������������������������������������������������������������������������  6.16 Fulham Football Club Ltd v Cabra Estates plc [1992] BCC 863, [1994] 1 BCLC 363, (1993) 65 P & CR 284, [1993] 1 PLR 29������������������������������������������������������������   5.5

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Table of Cases G Greenhaigh v Arderne Cinemas Ltd [1951] Ch 286, [1950] 2 All ER 1120, (1950) 94 SJ 855�����������������������������������������������������������������������������������������������������������������  3.14 Guinness v Land Corp of Ireland (1822) 22 Ch D 349�����������������������������������������   1.8, 1.10 H Halton International Inc (Holdings) Sarl v Guernroy Ltd [2006] EWCA Civ 801, [2006] WTLR 1241, [2006] All ER (D) 302 (Jun)������������������������������������������������    4.5 Harold Holdsworth & Co (Wakefield) Ltd v Caddies [1955] 1 WLR 352, [1955] 1 All ER 725, 1955 SC (HL) 27, 1955 SLT 133, (1955) 99 SJ 234���������������������������������    6.7 Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549, [1967] 3 WLR 1408, [1967] 3 All ER 98, (1967) 111 SJ 830������������������������������������������������������������������������������������    6.5 Henderson v Bank of Australasia (1888) 40 Ch D 170�������������������������������������������������  6.49 Holmes v Keyes [1959] Ch 199, [1958] 2 WLR 772, [1958] 2 All ER 129, (1958) 102 SJ 32������������������������������������������������������������������������������������������������������������  1.14 Homer District Consolidated Gold Mines, Re (1888) 39 Ch D 546����������������������������  6.12 Howie v Crawford [1990] BCC 330, [1990] BCLC 686���������������������������������������������  3.27 J John v Rees [1970] Ch 345, [1969] 2 WLR 1294, [1969] 2 All ER 274, (1969) 113 SJ 487�����������������������������������������������������������������������������������������������������������������  6.43 N National Federation of Occupational Pensioners v R & C Comrs [2018] UKFTT 26 (TC), [2018] SFTD 691, [2018] STI 390���������������������������������������������������������������  4.6 North Eastern Insurance Co Ltd, Re [1919] 1 Ch 198������������������������������������������������  6.13 P Peters’ American Delicacy Co v Heath [1939] HCA 2, 61 CLR 457, 12 ALJR 403, [1939] ALR 124��������������������������������������������������������������������������������������������������  3.15 Postgate & Denby (Agencies), Re [1987] BCLC 8, [1987] PCC 1�������������������������������  1.14 Potel v IR Comrs [1971] 2 All ER 504, 46 TC 658, [1970] TR 325����������������������������  6.32 Punt v Symons & Co Ltd [1903] 2 Ch 506�������������������������������������������������������������������  4.8 R Rayfield v Hands [1960] Ch 1, [1958] 2 WLR 851, [1958] 2 All ER 194, (1958) 102 SJ 348�������������������������������������������������������������������������������������������������������������������  4.6 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, [1942] 1 All ER 378����������������   5.6, 6.16 Rights & Issues Investment Trust v Stylo Shoes Ltd [1965] Ch 250, [1964] 3 WLR 1077, [1964] 3 All ER 628, (1964) 108 SJ 839�����������������������������������������������������  3.14 Romer-Ormiston v Claygreen Ltd [2005] EWHC 2032 (Ch), [2006] BCC 440, [2006] 1 BCLC 715, (2005) 102(38) LSG 28������������������������������������������������������������������  3.17 Russell v Northern Bank Development Corp Ltd [1992] 1 WLR 588, [1992] 3 All ER 161, [1992] BCC 578, [1992] BCLC 1016, (1992) 89(27) LSG 33������������������������    4.8 S Shuttleworth v Cox Bros & Co (Maidenhead) Ltd [1927] 2 KB 9������������������������   3.15, 3.16 Sidebottom v Kershaw Leese & Co Ltd [1920] 1 Ch 154�������������������������������������   3.15, 3.16 Sierra Leone Telecommunications Co Ltd v Barclays Bank plc [1998] 2 All ER 821, [1998] CLC 501, (1998) 95(17) LSG 32���������������������������������������������������������������    6.19 Signia Wealth Ltd v Vector Trustees Ltd [2018] EWHC 1040 (Ch)����������������  3.1, 3.17–3.26 Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701, [1940] 2 All ER 445�������������  1.14 U Union Music Ltd v Watson [2003] EWCA Civ 180, [2004] BCC 37, [2003] 1 BCLC 453����������������������������������������������������������������������������������������������������������  5.32

xx

Table of Cases W Walker v London Tramways Co (1879) 12 Ch D 705��������������������������������������������������   4.8 Welton v Saffery [1897] AC 299, [1895-99] All ER Rep 567��������������������������������������   2.7 West Canadian Collieries Ltd, Re [1962] Ch 370, [1961] 3 WLR 1416, [1962] 1 All ER 26, (1961) 105 SJ 1126����������������������������������������������������������������������������������������  5.17 Wood v Odessa Waterworks Co (1889) 42 Ch D 636�����������������������������������������1.13, 4.6, 6.36

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Chapter 1  Introduction Introduction 1.1 The development of modern company law and the ability for ordinary people1 to incorporate a company was driven by the industrial revolution. The transformation began with the Joint Stock Companies Act 1844 which provided for a simple registration process of incorporation.2 This was later revised by the Joint Stock Companies Act 1856 which provided the precursor of today’s model articles of association and its predecessor, Table B and Table A (see 1.11 below). The Joint Stock Companies Act 1856 Table B Regulations for management of the company specified the rules on how a company ought to manage its shares, capital, meetings, directors, dividends and accounts. The latest versions of the articles of association for companies incorporated after 28 April 20133 under the Companies Act 2006 achieve the same objective as their predecessors – to set the rules company officers must follow when running their companies.

What are the company articles? 1.2 All companies formed in the past 150 years, under the various Companies Acts (Companies Act 2006 being the most recent) must have articles of association. The company articles of association are the internal policies, rules and procedures that the directors and shareholders must adhere to. Shareholders delegate all powers to the directors4 who in turn make decisions at board meetings. Shareholders will require assurance that any decision making by the directors follows a written procedure. The articles duly provide a detailed

1 Prior to the assent of the Joint Stock Companies Act 1844 incorporation was possible only by royal charter or private Act. 2 No limited liability for members. Limited liability was subsequently introduced by the Limited Liability Act 1855. 3 Companies Act 2006 provides three versions of the model articles: model articles for private ­companies limited by shares, model articles for private companies limited by guarantee, and model articles for public companies, available at www.gov.uk/guidance/model-articles-of-association-for-limited-companies. 4 Model articles, article 3 ‘Directors’ general authority’: ‘3.Subject to the articles, the directors are ­responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company.’

1

Chapter 1  Introduction

decision making and voting procedure together with rules on appointing directors, the distribution of profits and general administration. A more simplistic explanation is they provide an aide-memoire for the directors of the main statutory regulations imposed by the immense Companies Act 2006 legislation. The articles are in reality a summary of the main points of the Companies Act 2006 that a small limited company should be focused on.

Directors’ powers and duties 1.3 All directors are governed by case law, the Companies Act 2006 and the constitution of the company. For companies incorporated after 1 October 2009 the constitution of the company are the articles of association and any resolutions and agreements.5 The company constitution and the Companies Act 2006 guides the directors in managing the company without operating ultra vires6 for the benefit of themselves. The majority of private limited companies are small with a few directors who typically are also the main shareholders. A common practical issue is they perceive the company is their property to be run solely for their benefit. To offset this misconception the Companies Act 2006 provides clear and concise legal obligations which company directors must abide by.

General duties of directors 1.4 Section 170: Scope and nature of general duties.

The general duties 1.5 Section 171: Duty to act within powers. Section 172: Duty to promote the success of the company. Section 173: Duty to exercise independent judgment. Section 174: Duty to exercise reasonable care, skill and diligence. 5 Companies Act 2006, s 17 (A company’s constitution). 6 Acting beyond one’s legal power or authority.

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Chapter 1  Introduction

Section 175: Duty to avoid conflicts of interest. Section 176: Duty not to accept benefits from third parties. Section 177: Duty to declare interest in proposed transaction or arrangement.

Drafting bespoke clauses 1.6 Along with providing the rules on how a company is run and governed the company constitution binds contractually the company and its members, therefore the provisions should be discussed and agreed by all parties involved in the company. The articles are amendable and the company may use the prescribed articles under the act under which it was incorporated or it may draft its own. For example an article which allows the directors to refuse a share transfer which is supported by the Companies Act 2006 may be too restrictive for the shareholders. The members may with agreement amend the articles and draft a share transfer provision that suits all members. The ability to amend and draft articles is beneficial to preempt the occurrence of events that may preclude the company from operating efficiently and without disruption, in particular agreed pre-emption clauses that control shareholdings in the event of the death of shareholder, or a shareholder requiring to dispose of their holdings to prevent a company losing control of its shares. Generally a company will want to keep to control of its shares and who owns them. For the most part the articles will be restrictive on a range of matters that may interrupt the smooth running of the company.

Restrictions on drafting rules 1.7 Every company formed under the Companies Act 2006 and its predecessors is required to have articles of association.7 All articles of association are subject to the Companies Act 2006 under which they are formed, the company is in addition constricted by case law (rules made by judges’ decisions in court). Consequently, the articles may not contain provisions that are against the law, that said, the company has complete freedom to draft their company articles

7 Companies Act 2006, s 18 (Articles of association) ‘(1) A company must have articles of association prescribing regulations for the company.’

3

Chapter 1  Introduction

and develop rules to suit the individual company and the requirements of the members. In reality, as the Companies Act 2006 and the case law is arguably beyond the typical company director whose main focus is the running of the company and turning a profit, the majority of companies utilise the new model articles.8

What are the companies’ constitutional documents? Pre-1 October 2009 1.8 Companies incorporated before the 1 October 2009 constitutional documents are the memorandum of association and the articles of association. The memorandum of association sets out the company’s purpose and its objects, the articles of association detail the internal rules the directors and members must follow (Guinness v Land Corporation of Ireland9). It should be noted, constitutional documents and the company’s constitution, in terms of the Companies Act 2006, differ in as much the company constitution includes decisions and resolutions made by members.10

Constitutional documents: Companies Act 2006 1.9 As regards companies formed after 1 October 2009, the companies constitution excludes the memorandum, see section 17: ‘A company’s constitution Unless the context otherwise requires, references in the Companies Acts to a company’s constitution include— (a)

the company’s articles, and

(b)

any resolutions and agreements to which Chapter 3 applies (see section 29).’

The Companies Act 2006 still uses the term ‘memorandum of association’, the document is not constitutional and simply states the members wish to form 8

House of Commons: 2 million active limited companies in the UK (2019), circa 48% are single director companies without employees. 9 [1882 G. 2624.] Bowen L.J, ‘There is an essential difference between the memorandum and the articles. The memorandum contains the fundamental conditions upon which alone the company is allowed to be incorporated. The articles of association are the internal regulations of the company.’ 10 Companies Act 2006, s 257 (References to company’s constitution).

4

Chapter 1  Introduction

a company and agree to become members and in the case of companies with share capital the member agrees to take at least one share. The memorandum is still important as it forms part of the required registration process, as discussed, and by virtue of section17 it is not constitutional and the majority of the elements of the pre-1 October 2009 memorandum are dealt with in additional documents and the registration process.

What is the memorandum? Pre-1 October 2009 incorporation 1.10 Companies formed prior to 1 October 200911 are required to hold a memorandum of association and articles of association, the memorandum was an important constitutional document that stated the company name, powers, registered office, the company objects12 and its liability. The memorandum prevails over the articles under any circumstances of ambiguity between the two documents.13 Companies that have not updated their articles of association under the Companies Act 2006 must abide by the memorandum, however the provisions will be deemed to form part of the articles of association as legally they are now one document.14

Table A: Model articles for companies incorporated before 1 October 2009 1.11 Table A is the name given to the prescribed format for articles of association of a company limited by shares under the Companies Act 1985 and earlier legislation. When a company incorporates, it was not required to file bespoke articles, the relevant company legislation15 provided standard articles, often referred to as model articles.

11 Companies formed after 1 October 2006 will fall under the Companies Act 2006. See Companies Act 2006, Chapter 2 Articles of association. 12 Company objects state the purpose of the company, powers and the range of trading activities. The company is restricted to its powers and stated objects. 13 Guinness v Land Corporation of Ireland [1882 G. 2624.]. 14 Companies Act 2006, s 28 (Existing companies: provisions of memorandum treated as provisions of articles). 15 Articles were brought into force by statutory instrument.

5

Chapter 1  Introduction

The first prescribed format, made in the Joint Stock Companies Act 1856, was called ‘Table B’, because it was preceded by a form of memorandum of association called ‘Form A’. The articles were first called ‘Table A’ in the Companies Act 1862 and the naming convention continued for the acts which follow: Table A  provision 1856–2007 Table A versions Joint Stock Companies Act 1856 (Table B) Companies Act 1862 Board of Trade Order 1906 Companies Consolidation Act 1908 Companies Act 1929 Companies Act 1948 As amended by Companies Act 1967 As amended by Companies Act 1976 (three commencement dates) As amended by the Stock Exchange (Completion of Bargains) Act 1976 As amended by Companies Act 1980 As amended by Companies Act 1981

Effective date 14 July 1856 7 August 1862 1 October 1906 1 April 1909 1 November 1929 1 July 1948 27 January 1968 18 April 1977 1 June 1977 1 October 1977 2 February 1979 22 December 1980 3 December 1981

Companies (Tables A to F) Regulations 1985

1 July 1985

As amended by Companies (Tables A to F) (Amendment) Regulations 1985 As amended by Companies Act 1985 (Electronic Communications) Order 2000 As amended by Companies (Tables A to F) (Amendment) Regulations 2007 and The Companies (Tables A to F) (Amendment) (No. 2) Regulations 2007 for private companies limited by shares As amended by Companies (Tables A to F) (Amendment) Regulations 2007 and The Companies (Tables A to F) (Amendment) (No. 2) Regulations 2007 for public companies limited by shares

1 August 1985

6

22 December 2000 1 October 2007

1 October 2007

Chapter 1  Introduction

Post-1 October 2009 model articles – the position today 1.12 In terms of the company constitution today, the members only need to concern themselves with the articles of association, as discussed they have complete freedom to draft provisions to meet the requirements of the company on the basis they do not fetter Acts of Parliament or case law. It should be noted that the articles cannot compel members to commit unlawful acts. The memorandum of association is a non-constitutional document, its requirements under the Companies Act 2006 are defined by statutory instrument16 and are primarily used as part of the registration process.17 The company’s objects are not restricted (unless the members wish to restrict them), any provisions concerning objects would be drafted in the articles. The Companies (Model Articles) Regulations 2008 prescribe three types of model articles, private companies limited by shares, private companies limited by guarantee and public companies.18 The new model articles simplified and reduced the legalistic language of the previous articles and attempted to reflect the updated Companies Act 2006. The department for business innovation and skills19 at the time of drafting the new model articles focused on ‘think small first’, therefore the articles for private companies are designed for small companies. For any company formed after 1 October 2009 the new model articles will automatically apply by ‘default application’, unless the articles are clear that the default articles should not apply. For companies who follow the default application process, they are not required to register articles.The company may override the default application by three methods: totally exclude (stating the model articles do not apply), exclude provisions of the Companies Act 2006, or state the model articles apply with clearly drafted modifications. The ability to use these methods is useful for medium sized limited companies limited by shares who may wish to adopt the articles by default but include some of the provisions from the public limited default articles, for example AA limited could include article 44 (power to pay commissions), which broadly is unlikely to affect most small private limited companies. Overall this reduces the need to draft complete bespoke articles and therefore eradicates expensive legal advice.

16 The Companies (Registration) Regulations 2008, SI 2008/3014. 17 Form (1N01 Application to register a company) contains much of the information previously detailed in the pre-1 October 2009 memorandum. 18 The Companies (Model Articles) Regulations 2008, SI 2008/3229. 19 Replaced by the Department for Business, Energy and Industrial Strategy.

7

Chapter 1  Introduction

The legality of the articles of association 1.13 A fundamental principal of the articles of association rests on the common law doctrine that they constitute a contract between the shareholders and the company and between each individual shareholder and every other.20 The provisions of the company’s constitution are covenants which bind the company and its members.21

Enforcement of the covenants 1.14 It is good practice (along with the general rules) that the articles should detail member rights as shareholders and the prescribed particulars attached to the members’ shares, for example rights to dividends, voting and rights on liquidation. Pre-emption,22 the ability to transfer a shareholding to other family members or trust fund together with detailed agreements on the procedure on the death of the shareholder or a shareholding manager leaving on good terms or bad ought to be considered, agreed and detailed in the articles. If detailed in the articles of association, any rights or agreements are enforceable in law (Posgate & Denby Agencies Ltd).23 Before drafting detailed provisions and procedures care must be taken to ensure they are for the benefit of the company and referring back to the directors’ duties that they promote the success of the company. The courts’ overall view on the articles of association is they ought to produce unambiguous outcomes and reasonable business efficacy. In Holmes v Keyes24 per Jenkins LJ: ‘the articles of association of the company should be regarded as a business ­document and should be construed so as to give them reasonable business efficacy where a construction tending to that result is admissible on the language of the articles, in preference to a result which would or might prove unworkable.’

20 Wood v Odessa Waterworks Co (1889) 42 Ch D 636. 21 Companies Act 2006, s 33 (Effect of company’s constitution). 22 First option to purchase the shares by one person or party before the opportunity is offered to others (usually outside of the existing shareholders). 23 [1987] BCLC 8. 24 [1959] Ch 199.

8

Chapter 1  Introduction

Restrictive articles of association that may fetter the directors’ powers or conflict with the Companies Act 2006 could be deemed void and more often make running the company more problematic. It should be noted the articles of association cannot contain articles or provisions that prevent the company from changing its articles.25

25 Southern Foundries (1926) Ltd v Shirlaw [1940] 2 All ER 445.

9

10

Chapter 2  The New Model Articles Companies Act 2006 – guide to the new model articles 2.1 The Companies Act 2006 prescribes three types of model articles for companies incorporated on or after 28 April 2013. (1) Model articles for private companies limited by shares. (2) Model articles for private companies limited by guarantee. (3) Model articles for public companies. The articles of association for private limited companies are specifically drafted for small companies. Larger private companies may wish to use the model articles as a base then adapt and utilise parts of the model articles for public companies to meet their specific requirements. The model articles for private companies limited by guarantee with a few exceptions mirrors the limited by shares articles. Limited by guarantee companies are typically incorporated by charities, sports clubs and associations. Public companies model articles are a template, when drafting the government acknowledged that most public companies are complex and will require bespoke articles. In addition the requirements of the exchange may influence the provisions of the company constitution. Therefore the public models serve two purposes; a baseline for a public company and additional articles that may be included or adapted for larger private companies. The model articles are drafted with the minimum number of rules which directly correspond to the Companies Act 2006. The Act is 700 pages with 1,300 sections, which until the Corporation Tax Act 2009 had the legislative UK record for being the longest Act in the history of British Parliament. The model articles are a condensed synopsis covering the main legislation the members should consider when making decisions. Given the diversification of limited companies in the UK it is understandable the model articles will not be fit for purposes for many companies.

11

Chapter 2  The New Model Articles

The members should review the model articles and consider the main areas where contention may arise, for example loss of pre-emption rights, removal of directors and shareholders rights to dispose of their holdings on death and incorporating clear articles to provide business efficacy. Although the Companies Act has been in force for over a decade it is worthwhile covering the main areas that a company should consider when amending the new model articles or updating from when incorporated under previous Companies Acts. The new model articles can broadly be assigned under three sub-headings: (1) Articles amended by the removal of statutory duties. (2) Articles applied in conjunction with the Companies Act 2006. (3) Articles which provide guidance that allows for freedom to amend.

Articles that are amended by the removal of statutory duties Annual general meetings (AGM) 2.2 A private company limited by shares or guarantee is not required to hold an annual general meeting (AGM). Companies incorporated under previous Acts may have articles detailing the requirement for an AGM, therefore members will expect the company to hold one. The Companies Act 2006 does not override the articles of previous acts, therefore the members would be required to pass a special resolution to agree to remove the AGM article and update from Table A to the new model articles. Conversely if members of a company incorporated after 1 October 2009 require the company to hold an AGM the articles would require adaptation following a special resolution agreeing the amendment.

Company secretary 2.3 A private company is no longer required to have a company secretary, as with the new rules on AGMs, the existing articles should be reviewed and amendments made to suit the members’ requirements. If a company incorporated after 1 October 2009 requires a company secretary then the articles should be adapted to reflect this.

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Chapter 2  The New Model Articles

Articles which are applied in conjunction with the Companies Act 2006 2.4 Articles may be subject directly to the Companies Act 2006 or case law, in these cases care must be taken if adaptation is considered. An example for share transfers is provided below. It should be noted the occurrence of such articles is not limited to article 26.

Share transfers 2.5 Article 26 of the model articles for private company limited by shares outlines the rules for transferring shares. ‘26. Share transfers 26.—(1) Shares may be transferred by means of an instrument of transfer in any usual form or any other form approved by the directors, which is executed by or on behalf of the transferor. (2) No fee may be charged for registering any instrument of transfer or other document relating to or affecting the title to any share. (3)

The company may retain any instrument of transfer which is registered.

(4)

The transferor remains the holder of a share until the transferee’s name is entered in the register of members as holder of it.

(5) The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent.’

This type of article can appear to be misleading as it must be applied in conjunction with section 771 of the Companies Act 2006. For example, article 26(5) allows the directors to refuse a share transfer, however it is a requirement under section 771(1)(b) that a reason for refusal must be given. It is important when applying this type of article to a specific event that the relevant company and case law is considered. Editing such articles is fraught with considerable due-diligence, adding after the word ‘fraudulent’ in section 26(5) ‘and no reason is required to be given’ would be void on the basis of the Companies Act 2006. It should be noted that although the company is free to alter its articles it may not override company law and should not oppose case law.

13

Chapter 2  The New Model Articles

Articles which provide guidance with freedom to amend 2.6 Article 52 provides power to the company to provide company directors with insurance, the article is a new addition and did appear in the previous Table A. The insurance is optional, therefore the article could be removed completely, in doing so it would not upset any provisions in the Companies Act or case law. ‘53. Insurance (1)

The directors may decide to purchase and maintain insurance, at the expense of the company, for the benefit of any relevant director in respect of any relevant loss.

(2)

In this article— (a) a “relevant director” means any director or former director of the company or an associated company, (b) a “relevant loss” means any loss or liability which has been or may be incurred by a relevant director in connection with that director’s duties or powers in relation to the company, any associated company or any pension fund or employees’ share scheme of the company or associated company, and (c)

companies are associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate.’

Housekeeping on drafting bespoke articles 2.7 The following should be noted before attempting modification. The articles must be in a single document with consecutively numbered paragraphs.1 A special resolution is required to amend the articles2 with the exception of determining the terms and conditions of share redemptions where it is possible to amend the articles by ordinary resolution.3 Any article that conflicts with the memorandum or established law is void and unenforceable.4 In Welton v Saffery5 the articles contained an ultra vires provision authorising the company to issue shares at a discount.

1 Companies Act 2006, s 18(3). 2 Companies Act 2006, s 21(1). 3 Companies Act 2006, s 685 (Terms and manner of redemption) ‘(2) A resolution under subsection (1)(b) may be an ordinary resolution, even though it amends the company’s articles.’ 4 Welton v Saffery [1895–99] All ER Rep 567. Lord Macnaghten: ‘It is familiar law that no article can be valid or binding upon the shareholders, which is in conflict with the memorandum or with the general law.’ 5 Welton v Saffery [1897] AC 299.

14

Chapter 2  The New Model Articles

Key drafting points Companies Act 1985 updating to Companies Act 2006 2.8 A company incorporated prior to 1 October 2009 under any of the relevant Companies Acts is not required to update their constitutional documents to the requirements of the Companies Act 2006.

Memorandum of association 2.9 For companies incorporated before 1 October 2009, the memorandum remains an important constitutional document that is automatically deemed to now form part of the articles of association by section 28 of the Companies Act 2006: ‘Existing companies: provisions of memorandum treated as provisions of articles (1) Provisions that immediately before the commencement of this Part were contained in a company’s memorandum but are not provisions of the kind mentioned in section 8 (provisions of new-style memorandum) are to be treated after the commencement of this Part as provisions of the company’s articles. (2) This applies not only to substantive provisions but also to provision for entrenchment (as defined in section 22). (3) The provisions of this Part about provision for entrenchment apply to such provision as they apply to provision made on the company’s formation, except that the duty under section 23(1)(a) to give notice to the registrar does not apply.’

Incorporation of the memorandum requires no action from the company, for limited liability companies the liability of members is now covered in the articles of association, see Part 1 section 2. The objects clauses in the memorandum6 which may restrict the company’s powers can be removed by special resolution;7 updating the Table A articles may present an opportunity to lessen any restrictions on the company’s scope of activities or means of operation.

6 Objects clause describes the purpose of the company and the activities it may undertake or not ­undertake. A company acting outside their stated objects is ultra vires. 7 Special resolution requires at least 75% of the votes cast by shareholders.

15

Chapter 2  The New Model Articles

Updating the articles of association 2.10 When company law is amended by a new Act the company’s articles of association remain bound to the Companies Act under which the company was incorporated. If the members of the company wish to update the constitutional documents to fall under a prevailing Act, for example, a company incorporated in 1989 under the Companies Act 1985 to the Companies Act 2006, they must amend their articles. The amendment requires 75% of the eligible voting members to agree and pass a special resolution,8 charities are subject to the Charity Commission rules and in addition will be required to seek approval for any constitutional changes.9

Key points 2.11 ●●

A company must have articles of association.10

●●

The articles must contain a provision detailing the limits of any liability.

●●

Articles must be in a single document with numbered paragraphs.

●●

A company on formation will automatically adopt the model articles on formation, unless it decides otherwise.

●●

Companies incorporated using Table A will not automatically be upgraded to the new articles under the Companies Act 2006. The memorandum will be ‘automatically deemed’ to form part of the companies’ articles of association.

●●

The memorandum is still utilised as part of the registration process, it is not a constitutional document from companies incorporated after 1 October 2009.

●●

Companies incorporated under the Companies Act 2006 objects are unlimited and without restriction unless they choose to restrict them.

●●

Existing companies incorporated before 1 October 2009 can update to the new articles by passing a special resolution.11

8 Companies Act 2006, s 21 (Amendment of articles) ‘(1) A company may amend its articles by special resolution.’ 9 Charities Act 2011, ss 197 and 198. 10 Companies Act 2006, s 18(1). 11 Subject to additional Companies House/registrar filing requirements.

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Chapter 2  The New Model Articles

●●

Companies by special resolution are able to amend the articles of association.12

●●

When amending or adopting articles first consider company and case law. The article may be voidable.

●●

Articles cannot contain provisions that would cause the company or its directors to act outside of the law.

●●

Amending articles falls broadly into three categories: (a) Amended by changes in law. (b) Amended in conjunction with the Companies Act 2006. (c) Guidance only, that allow for freedom to amend.

12 Companies Act 2006, s 21(1).

17

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Chapter 3  Case Law Review Introduction 3.1 When drafting the company articles, the objective is to provide clear and concise guidance on how the company conducts its business together with procedures for common shareholder events. Provisions in the articles may provide control over its shareholdings so they may not pass to third parties, for example on the death of a shareholder or members attempting to sell their shares to individuals, the directors may not wish to be involved with the company. Generally court actions in terms of shareholder actions follow three themes where litigation is common: (1) Amending the company articles of association by the majority. (2) Pre-emption and fair price rights. (3) Ascertaining the ‘fair price’ of shareholdings. A full case law review is beyond the remit of this text, hence the following cases represent the foremost authorities in the scope of the defined areas described above. ●●

Re Charterhouse Capital Ltd:1 Amending the articles of association and drag along.

●●

Signia Wealth Ltd v Vector Trustees Ltd: Rights of pre-emption.

●●

Cosmetic Warriors Ltd v Gerrie: Share valuations and the prescribed price.2

Overview – amending the articles of association 3.2 In practice as private companies grow and mature they may require new investors or undertake joint ventures and ultimately implement their exit

1 [2015] EWCA Civ 536. 2 [2017] EWCA Civ 324.

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Chapter 3  Case Law Review

strategy and sell the company.To implement any major change in the company it is probable the articles of association will require amendment by the majority which the minority may perceive as detrimental.

Amendment of the articles 3.3 A company may amend its article by passing a special resolution.3 The articles cannot contain provisions which fetter this requirement by lessening the requirement to an ordinary resolution or, more importantly, attempting any entrenchment.4 The company and the directors must be free to amend the articles.

Special resolutions 3.4 To amend the articles of association a special resolution which is a statutory requirement under section 2835 is required which means it is passed by not less than 75% of the eligible members. It is not unconceivable for a minority shareholder (who wishes to hold their shareholding) to suggest a majority shareholder (who wishes to sell their shareholding) that passing a special resolution to amend the articles of association and insert a ‘drag along ‘ provision and instigating a full sale to a third party is not acting in good faith for the benefit of the whole company.

Case example – Alan Engineering Limited 3.5 Alan Engineering Limited has two shareholders: Mr Alan who holds 80% of the equity shares and Mr Albright his uncle who made a small investment 10 years ago for his shareholding of 20%. The company is now successful with 32 employees and a turnover approaching £2 million, however the company has large debts and Mr Alan is in poor health. Mr Alan has been approached by a competitor and an offer has been made to purchase all the companies’ shares. Mr Albright who is not involved with the running of the company and is not a director refuses to sell his holding which prevents the sale of the company. 3 Companies Act 2006, s 21 (Amendment of articles). (1) A company may amend its article by special resolution. 4 Attempt to restrict the alteration or removal of certain provisions after incorporation. 5 Companies Act 2006, s 283 (Special resolutions).

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Mr Alan passes a special resolution and amends the articles to include a ‘drag along’6 clause that compels Mr Albright to sell his shares. Mr Albright may feel aggrieved and may possibly consider legal action to contend the change of the articles is for the benefit of Mr Alan whose purpose is to execute his exit strategy and sell the business. The court would consider based on the evidence: are the changes to the articles for the benefit of the company? Mr Alan is in poor health, the company has debt and has no successor – it is perfectly feasible to suggest that if the sale is not executed the company may fall into liquidation. The prima facie case that Mr Alan has effected the amendment of the articles to benefit himself is coincidental to the change being bona fide for the benefit of the company – securing the long-term future of the company by paying off debt and getting an injection of capital from a prospective buyer thereby will secure the employment of 32 people.

Pre-emption allotment of new shares One class of shares 3.6 The directors of a private company with one class of shares may allot shares in the same class without shareholder consent unless they are prohibited from doing so by the company’s articles.7

One class of shares – transitional provisions 3.7 For companies incorporated before 1 October 2009, to utilise the powers conferred by section 550 the members will be required to pass an ordinary resolution8 to empower the directors to allot shares or grant rights to subscribe or convert any security into shares.9 6 Drag along provisions protect the majority shareholders and can be detrimental to minority ­shareholders who wish to hold their equity share. A drag along clause enables a majority shareholder to force a ­minority shareholder to sell his equity holding to a third party purchaser on the same terms and ­conditions as the majority shareholder. 7 Companies Act 2006, s 550 (Power of directors to allot shares etc: private company with only one class of shares). 8 A special resolution is required to change the articles of association. The Companies Act 2006 (Commencement No. 8, Transitional Provisions and Savings) Order 2008, SI 2008/2860, para 43(3) allows an ordinary resolution. 9 The Companies Act 2006 (Commencement No. 8, Transitional Provisions and Savings) Order 2008, SI 2008/2860, Sch 2, para 43.

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Companies Act 2006 – more than one class of shares 3.8 If a company with more than one share class allots new equity securities10 it is a requirement of the Companies Act11 that existing ordinary shareholders are offered on the same or more favourable terms the opportunity to take up the new allotment in proportion to the nominal value already held. If an ordinary shareholder holds 30% of the current shareholdings, by virtue of section 561 they are entitled to first refusal on 30% of the new allotment. Pre-emption rights are either statutory12 or specified in the articles of association.13

Existing shareholders’ right of pre-emption14 3.9 Pre-emption allows existing shareholders who take up their statutory pre-emption rights to preserve their shareholding, a company must not allot equity securities to any person on any terms unless it has made an offer to the existing ordinary shareholders, in comparable or improved terms.15 The company offer of pre-emption must communicate the offer of pre-emption to the shareholders allowing not less than 21 days to accept,16 if the shareholder fails to take up the new allotment, their percentage shareholding of the company will be diluted. The Companies Act 2006, sections 561–563 provides statutory rights of preemption, it should be noted section 561(5) allows for exceptions, exclusions and disapplication or pre-emption rights.

Exceptions to pre-emption right 3.10 Section 561 does not apply to bonus shares, an allotment for a non-cash consideration or employee share schemes.17 10 Companies Act 2006, s 560 (Meaning of ‘equity securities’ and related expressions). Equity securities means ordinary shares in the company, or rights to subscribe for, or to convert securities into, ordinary shares in the company. Ordinary shares means shares other than shares that as respects dividends and capital carry a right to participate only up to a specified amount in a distribution. 11 Companies Act 2006, s 561 (Existing shareholders’ right of pre-emption). 12 Companies Act 2006, ss 561–576. 13 Pre-emptive rights are often detailed in shareholder agreements if applicable. 14 Companies Act 2006, ss 561–563 (Existing shareholders’ right of pre-emption). 15 Companies Act 2006, s 561 (Existing shareholders’ right of pre-emption). 16 Companies Act 2006, s 562 (Communication of pre-emption offers to shareholders). 17 Companies Act 2006, ss 564–566 (Exceptions to right of pre-emption).

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Exclusion of rights of pre-emption by private companies 3.11 Section 567 allows the company by provisions contained in the articles of a private company to exclude section 561 or section 562.

Disapplication of pre-emption rights 3.12 Sections 569–573 allow a private company by special resolution18 or provisions in the articles to disapply section 561 on the basis the company has only issued one class of share.19

Pre-emption precedent (company with more than one share class) 3.13 The following precedent is an example of retaining control of pre-emption and allotment with detailed procedures and implementing shareholder authority. 1.

Pre-emption. Allotment of new shares or other securities. 1.1. Power of directors to allot shares 1.2. Directors are without conditions are ‘authorized’ by the company for the purpose of section 551 of the Companies Act 2006 subject to the provisions of this Article [#] to allot shares in the company, or to grant rights to subscribe for or to convert any security into shares in the company: 1.2.1. To any person. 1.2.2. subject to any terms and conditions the directors may agree provided that: 1.3. the maximum amount of shares that may be allotted is [£] 1.4. If ‘authorised’ the expiry must be not more than five years from: 1.4.1. The company’s date of incorporation;

18 The procedures for disapplication of pre-emption rights by special resolution are described in ­Companies Act 2006, s 571. 19 The Companies Act 2006 model articles were designed for the small company in mind, s 569 is a new provision, arguably introduced to allow single company directors with one class of shares to issue new shares without the need for the statutory procedures in s 561.

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1.4.2. Or the date on which the resolution is passed by virtue of which the authorisation is given. 1.5. An ordinary resolution of the company may vary, revoke or renew the ‘authorised’ directors. 2.

Allotment 2.1. Subject to section 571 of the Companies Act 2006 and the company passing a special resolution to make an offer otherwise on a pre-emptive basis. 2.2. New securities shall not be allotted to any person unless the Company has first offered them to: 2.3. [Share classes example Class A ordinary shares – Class B ordinary shares]

3.

Pre-Emption Offer 3.1. The offer of equity securities shall be in electronic form ‘offer notice’ to all shareholders of the company at that time. The ‘offer notice’ shall stipulate: 3.2. The proposed number of equity securities for allotment: ‘proposed securities’; 3.3. The ‘offer price’ per equity security; 3.4. The ‘offer period’ at least 14 days from the date of the ‘offer notice’. 3.5. The ‘proposed securities’ shall be offered on the same terms and the same ‘offer price’ being offered to other persons. 3.6. The ‘proposed securities’ shall be on a pari passu basis.

4.

Terms of Allotment 4.1. The company shall allot the ‘proposed securities’ in relevant proportions to the shareholders who have applied for them on a pro rata basis to the number of shares held by that person in the same share class. 4.2. Any ‘proposed securities’ not allotted ‘unallotted shares’ shall be disposed of as the directors see fit. 4.3. The disposable of any ‘unallotted shares’ shall not be on terms more favourable than that offered to the shareholders. 4.4. Sections 561(1) and 562(1) to (5) (inclusive) of the Act do not apply to an allotment of Equity Securities made by the Company.

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Chapter 3  Case Law Review

Case law – amendments 3.14 It is established case law that any amendment by the majority of members must be in the best interest of the company and not persecute the minority. The courts will not upset amendments to the articles by the majority even on the basis the amendment is a deliberate act that benefits the majority’s position (see case example), the courts will only interfere with the amendment on the basis it was not bona fide20 for the benefit of the company (Allen v Gold Reefs of West Africa Ltd). In Greenhaigh v Arderne Cinemas Ltd,21 Evershed MR said: ‘It is not necessary to require that persons voting for a special resolution should, so to speak, dissociate themselves altogether from their own prospects.’ Each case is assessed on its own merit, the case law provides unambiguous guidance, the majority22 may amend the articles and improve their own position without interference from the courts. The ‘bona fide for the benefit of the company as a whole’ was applied in Dafen Tinplate Co Ltd v Llanelly Steel Co,23 Dafen the defendants amended their articles of association passed in accordance with a special resolution to require a member to transfer their shareholding to a nominated third party at a fair price. Peterson J stated ‘the question was not whether the shareholders bona fide or honestly believed that the alteration was for the benefit of the company. It was whether, in fact the alteration is genuinely for the benefit of the company’. In Rights & Issues Investment Trust Ltd v Stylo Shoes Ltd24 another case where the company amended the articles to allow for a share issue and alteration of voting rights, the court was asked to consider if the majority acting against the minority was oppressive. The plaintiff accepted the company acted bona fide for the benefit of the company as a whole. Pennycuick J said ‘The question is whether this particular resolution represents an oppressive act on someone, and in particular, I suppose, the plaintiffs and any shareholders who did not vote in favour of the resolution’.The interlocutory injunction sought was duly rejected on the basis the company had followed the Companies Act 2006 and requirements of the articles of association. 20 21 22 23 24

Means; without intention to deceive. [1951] Ch 286, 291. For the purposes of the section. Majority means the ability to cast at least 75% of the votes. [1920] 2 Ch. 124. [1965] Ch. 250.

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In Citco Banking Corporation NV v Pusser’s Ltd,25 the articles were amended by special resolution to allot 200,000 Class B shares with enhanced voting rights. In addition the Chairman Charles Tobias who held Class A shares voted to convert his holdings to Class B shares. Lord Hoffmann made clear the courts view that ‘general principle that shareholders are free to exercise their votes in their own interests’.

The legal principles of amendment of the articles Re Charterhouse Capital Ltd 3.15 In Re Charterhouse Capital Ltd,26 the courts provided clear guidance on the principles of amending the articles of association after incorporation. The case concerned Charterhouse Development Capital Ltd (CDC), a subsidiary of Charterhouse Plc which was established in 1965. In July 2000 HSBC became the parent company of CDC. In 2001 a £9 million management buy-out was agreed with 16 investment managers (the founders). The assets were purchased by Charterhouse Capital Partners Ltd (CCP). It was envisaged by the founders after some consolidation and purchase of additional assets that they would complete an exit strategy in the future. The founders established a shareholder agreement (SHA) in June 2001 which contained agreed provisions between the founders binding the members to cooperate with selling their shareholdings within eight years. The SHA would in the event of any inconsistency prevail over the articles of association which were adopted at the same time the SHA was signed. The articles contained drag provisions – any seller with 50% or more voting rights who agreed to transfer their shareholding would duly drag the remaining shareholders into the purchase. In 2003 Charterhouse Capital Partners LLP was established and incorporated into the group, this lead to overly complex structure for remuneration and bonus payments between the founders and the investment companies. In 2007 Mr Arbuthnott who was the second largest shareholder and founder approached Mr Bonnyman a fellow founder CEO and the majority shareholder concerning his retirement. An oral agreement was reached to instruct an

25 [2007] UKPC 13. 26 [2015] 2 BCLC 627.

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independent valuer to access the fair value of Mr Arbuthnott’s shareholding which would be purchased by CDC. In 2008 Mr Arbuthnott retired from the LLP and resigned as director of CDC, but remained a founding shareholder with 900 A Shares. Over the proceeding two years, the majority of founders indicated they would retire and exit, including Mr Bonnyman. The retiring shareholders held more than 50% of the shares. Mr Giacomotto (who replaced Mr Bonnyman as CEO) had concerns about misalignment between the shareholders and the executives in the company. A management buy-out was negotiated with Mr Bonnyman, with an initial value of £15.15 million agreed. WSL, a subsidiary of Watling Street Capital Partners LLP, was established to buy the founding shareholdings. WSL formally offered to buy all the shareholdings with an immediate cash payment for 20% of the shares and four-year redeemable interest-bearing loan notes for the balance along with various provisions, including amendments to the articles. All the founders accepted the offer with the exception of Mr Arbuthnott. In December 2011 the articles by special resolution were amended, again Mr Arbuthnott declined to agree. The articles included a new drag provision and definition of ‘founder majority’. In January 2012 a meeting was formed between the WSL and the shareholders involved with the offer, Mr Arbuthnott did not attend and was represented by Herbert Smith. The meeting accepted the WSL offer, with only Mr Arbuthnott voting against the resolution. In January 2012 Mr Arbuthnott made a counter offer on the same terms as WSL, offering slightly more cash for the initial 20% purchase. Before any further negotiations took place in February 2012, the entire shareholdings were transferred to WSL including Mr Arbuthnott and the purchase concluded. Mr Arbuthnott brought a claim before the court under section 994(1),27 alleging breach of agreements and in particular: ‘(4) The WSL offer, the amendments of the Articles, which were a term of the WSL offer, and the manner in which the WSL offer was dealt with by the Company were carried out improperly in order to expropriate Mr Arbuthnott’s shares at a gross undervalue rather than for any genuine corporate purpose.’

27 Companies Act 2006, s 994 (Petition by company member). (1) A member of a company may apply to the court by petition for an order under this Part on the ground – (a) that the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself).

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On appeal, in terms of Mr Arbuthnott’s assertions concerning the articles the judge detailed seven applicable principles:28 ‘1.

The limitations on the exercise of the power to amend a company’s articles arise because, as in the case of all powers, the manner of their exercise is constrained by the purpose of the power and because the framers of the power of a majority to bind a minority will not, in the absence of clear words, have in-tended the power to be completely without limitation. These principles may be characterised as principles of law and equity or as implied terms. Cases cited: Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656 and Assenagon Asset Management SA v Irish Bank Resolution Corp Ltd [2012].

2.

A power to amend will be validly exercised if it is exercised in good faith in the interests of the company. Case cited: Sidebottom v Kershaw Leese and Co Ltd [1920] 1 Ch 154.

3.

It is for the shareholders, and not the court, to say whether an alteration of the articles is for the benefit of the company but it will not be for the benefit of the company if no reasonable person would consider it to be such. Case cited: Shuttleworth v Cox Bros & Co (Maidenhead) Ltd.29

4.

The view of shareholders acting in good faith that a proposed alteration of the articles is for the benefit of the company, and which cannot be said to be a view which no reasonable person could hold, is not impugned by the fact that one or more of the shareholders was actually acting under some mistake of fact or lack of knowledge or understanding: In other words, the court will not investigate the quality of the subjective views of such shareholders. Case cited: Peters’ American Delicacy Co (1939) 61 CLR 457 at 491.

5.

The mere fact that the amendment adversely affects, and even if it is intended adversely to affect, one or more minority shareholders and benefit others does not, of itself, invalidate the amendment if the amendment is made in good faith in the interests of the company: Cases cited: Sidebottom [1920] 1 Ch 154 at 161, 163–167, 170–173; Shuttleworth; Citco [2007] 2 BCLC 483 at 490, 493; Peters’ American Delicacy Co at 480, 486.

6.

A power to amend will also be validly exercised, even though the amendment is not for the benefit of the company because it relates to a matter in which the company as an entity has no interest but rather is only for the benefit of shareholders as such or some of them, provided that the amendment does not amount to oppression of the minority or is otherwise unjust or is outside the scope of the power. Cases cited: Peters’ American Delicacy Co (1939) 61 CLR 457 at 481, 504, 513, 515; Assenagon [2013] 1 All ER 495, [2013] Bus LR 266.

7.

The burden is on the person impugning the validity of the amendment of the articles to satisfy the court that there are grounds for doing so. Cases cited: Citco [2007] 2 BCLC 483 at 491; Peters’ American Delicacy Co (1939) 61 CLR 457 at 482.’

The court held on appeal the amendments to the articles and the inclusion of the drag provisions was lawful. 28 Paragraph 90. 29 [1927] 2 KB 9.

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Sir Terence Etherton stated: ‘The test is not whether all reasonable people would have agreed that the amendment was in the best interests of the company. It is sufficient that a reasonable person could have thought it was in the company’s best interests. It is for Mr Arbuthnott to satisfy the court that no reasonable person would have thought that.’

Re Charterhouse Capital Ltd: case law analysis and implications 3.16 The Companies Act 2006, section 21(1) allows a company to amend its articles by special resolution, the law is quite explicit, however the powers afforded by law to majorities to bind minorities arises from general principles of law and equity and implied terms. The excepted equitable principle is if the majority binds the minority it must be exercised as required by law and ‘bona fide for the benefit of the company as a whole’30 or what reasonable people would consider was in the best interest of the company. The courts will not accept amendments to the articles argued solely on the basis the Companies Act 2006 (or companies incorporated under previous acts) allows the company to modify its articles by special resolution. There must be mitigating circumstances that require the change (albeit authorised by the Act) to benefit the company, regardless of if the change appears to benefit the majority and suppress the minority. In Sidebottom v Kershaw Leese and Co Ltd the company passed a special resolution to amend its articles with the inclusion of a provision requiring any shareholders who competed with the company to transfer their shares at full value to the directors’ nominees. The plaintiffs who held a minority shareholding and did control a competing business argued the amendment was invalid. The court found the resolution was passed bona fide for the benefit of the company as a whole and was therefore valid and enforceable by the majority against the minority. One year earlier in Brown v British Abrasive Wheel Co,31 where the company had amended its articles to include provisions for compulsory purchase of minority shareholding, Astbury J said, ‘the proposed alteration was not for the benefit of the company as a whole, but only for the benefit of the majority shareholders’, and enforced an injunction. Lord Sterndale MR criticised Astbury J whose judgment focused on a dual approach of ‘are the principles of justice served and is it for the benefit of the

30 Lindley MR in Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656. 31 [1919] 1 Ch 290.

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company as a whole’. Lord Sterndale agreed with Lindley MR:32 ‘If they are altered bona fide for the benefit of the company’, and that the two things are not different things, but if they are bona fide for the benefit of the company they are consonant with the ordinary principles of justice. The majority may profit from amendments to the articles on the basis the company benefits. In Shuttleworth v Cox Bros & Co (Maidenhead) Ltd, the plaintiff was employed as the works manager and held a director’s position in the company. The articles were drafted to allow each director to hold the position for life, on the basis none of the following six clauses were initiated. ‘By No. 22 of the articles: “The office of a director shall be vacated: (a)

If he become bankrupt or insolvent or compound with his creditors;

(b)

if he become of unsound mind or be found a lunatic;

(c)

if he be convicted of an indictable offence;

(d)

if he cease to hold the necessary share qualification or do not obtain the same within one month from the date of his appointment;

(e)

if he absent himself from the meetings of directors for a period of six calendar months without special leave of absence from the other directors;

(f)

if he give the directors one calendar month’s notice in writing that he resigns his office.”’

Some years after his appointment the company found accounting irregularities and dismissed Mr Shuttleworth from his position as works manager. The company in addition sought his resignation as director of the company, he refused. The directors convened a meeting and by resolution amended the artifices by resolution to add the following provision to article 22. The company secretary informed Mr Shuttleworth of the company’s intention and he sought an injunction. The articles were not formally changed: ‘(g) If he be requested in writing by all the other directors to resign his office.’

On appeal the case was dismissed. The Shuttleworth case was an important shift from the courts deciding if the company acted in good faith to allowing the shareholders to make the judgement. Peterson J in Dafen Tinplate Co Ltd v Llanelly Steel Co (discussed above), objected to the definition of good faith being decided by the shareholders. Scrutton LJ said ‘to adopt that view would

32 Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656.

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be to make the Court the manager of the affairs of innumerable companies in-stead of the shareholders’. The question of oppression of a minority was addressed by Atkin LJ who said, ‘The alteration of art. 22 empowered the directors to act not only against one particular member of the board; all the directors were thereby exposed to the exercise of the new power.’ It should be noted when drafting or amending articles an article may appear quite draconian, the courts may only intervene if the article was individualistic and oppressed a singular shareholder.

Signia Wealth Ltd v Vector Trustees Ltd – rights of pre-emption What is pre-emption? 3.17 Pre-emption may arise when a member dies, becomes insolvent or decides to sell their shareholding by transferring shares to existing shareholders or a third party or when the company decides to allot new shares. Pre-emption rights are either statutory33 (new allotment) or specified in the articles of association (share transfers).34 The company will need to decide how each event is executed and specify the associated procedures and rules in the articles of association.35

Pre-emption share transfers 3.18 Small private companies will require the ability to retain control of the shareholdings. Both majority and minority shareholders would prefer that shareholdings remained with the exiting members. Allowing shares to pass to arms-length third parties would certainly disrupt the relationship of the members. For such an important issue it is surprising the model articles for a private company are silent on share transfers (other than that the company may refuse a transfer) and pre-emption rights, therefore it is paramount the shareholder agree a formal procedure. It should be noted the agreement is between the members, generally the directors will not be involved.

33 Companies Act 2006, ss 561–576. 34 Pre-emptive rights are often detailed in shareholder agreements if applicable. 35 Companies may use a shareholder agreement.

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The normal procedure for a member wanting to sell their equity holding is to notify the company via a transfer notice, which must specify the price or the fair price36 on which the member will sell. The determination of how the ‘fair price’ will be ascertained ought to be agreed and detailed in the articles.

Compulsory transfers – good leavers 3.19 A company may enforce compulsory transfers of shares usually termed ‘deemed transfer notice’ to the company on certain events, if the specified event occurs the shares are automatically transferred back to the company for an agreed or fair price. A shareholder on death or suffering mental or physical incapacity is normally termed an ‘incapacitated good leaver’, any person leaving employment or resigning as director not in breach of their terms of employment37 is termed a ‘good leaver’, and receives full value for their shares based on a fixed price or an agreed valuation exercise.

Transfer event – bankruptcy 3.20 The articles may provide for a ‘transfer event’38 on bankruptcy of any shareholder, the shareholder shall be deemed to have given a transfer notice. Care should be taken when drafting such provisions. In Borland’s Trustee v Steel Bros & Co Ltd,39 Mr Borland was declared bankrupt and initiated pre-emption rights detailed in the company’s articles of association which had the effect of transferring his shares in Steel Brothers & Co Ltd to a manager at fair value, the value being calculated in accordance with the articles. The trustee of Mr Borland’s bankruptcy claimed the transfer was invalid on the basis the manager would purchase the shares below their true value, thereby reducing assets available to Mr Borland’s creditors. The court rejected the assertions of the trustee, Farwell J said ‘with the principle that a simple stipulation that upon a man’s becoming bankrupt that which was his property up to the date of the bankruptcy should go over to someone else and be

36 Romer-Ormiston v Claygreen Ltd [2005] EWHC 2032 (Ch). 37 The definition of ‘good leaver’ is defined at the discretion of the other shareholders – any legal event may be included. Care should be taken with good leaver provisions based on retirement age as this would be discriminatory. 38 A transfer event may include other credit arrangements and attempting to dispose of shareholdings in contradiction to the article’s provisions, ‘drag or tag’ along provisions (if applicable) are executed by deemed transfer notice. 39 [1901] 1 Ch 279.

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taken away from his creditors, is void as being a violation of the policy of the bankrupt law’. The court’s view was the compulsory ‘fixed price’ share transfer provisions were a commercial arrangement between all shareholders, included bona fide in the articles for the good of the company. It should be noted if the provisions had detailed in the event of bankruptcy of a shareholder the shareholding must be sold far below the fixed price, then such a provision would be repugnant to the bankruptcy law.

Compulsory transfer – bad leavers 3.21 Bad leavers are defined as not an incapacitated good leaver or a good leaver. Bad leavers are not members they are typically directors and employees who hold shares. The shareholding is generally granted to incentivise performance, the problem for many companies arises when an employee is fraudulent, dismissed for misconduct or breaches the company’s constitution. The company is now in a position where the employee is estranged from the board but may hold substantial voting rights through their retained shareholding. The articles may include provisions that enable an automatic share transfer notice from the estranged employee on dismissal or resignation at a discounted value. The provisions specifying the discount and the reasoning must be commercially driven and negotiated by the members. The compulsory transfer of a bad leaver’s shareholdings at below the fair value is enforceable by the company, it should be noted the reduction does not impinge on the penalty doctrine.40

Case law – Signia Wealth Ltd v Vector Trustees Ltd 3.22 In Signia Wealth Ltd v Vector Trustees Ltd41 the claimant was a successful wealth management firm. Mr Caudwell owned 51% of the shares, the business was managed and run by Ms Dauriac who held the remaining 49%42 through a trust.43 In 2015 Ms Dauriac was suspended and then formally resigned over

40 For a full discussion of the doctrine of penalty, see Cavendish Square Holding BV v Makdessi [2015] UKSC 67. 41 Signia Wealth Ltd v Vector Trustees Ltd and another [2018] EWHC 1040 (Ch). 42 40,000 B ordinary shares and 156,000 C ordinary shares. 43 New Street Trust Limited.

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Chapter 3  Case Law Review

discrepancies with her expenses. The articles of association contained good leaver and bad leaver provisions, ‘If a bad leaver, Ms. Dauriac would be entitled to: (a)

The lower of fair value and issue price in the case of the B ordinary shares.

(b) 75% of the lower of fair value and exit value in the case of the C ordinary shares.’

Under pre-emption provisions the company bought the shareholding for the share issue price, which in the opinion of Ms Dauriac was substantially below the fair value. Court action ensued to settle a number of matters, including if the expenses were legitimate the claimant was a good leaver and would receive the fair price. It was deemed Ms Dauriac was a bad leaver and the value of her share would be valued based on the bad leaver provisions in the articles. The Signia case clarified a number of matters which are useful when drafting pre-emption good/bad leaver provisions as summarised below.

Penalty doctrine 3.23 It could be argued the reduction of the share value based on being a bad leaver is a penalty. Justice Smith said ‘I do not consider this to be a case where the penalty doctrine applies; and, even if it did, I do not consider the Leaver provisions in the Articles to be a penalty’.44

Failing to ascertain the fair price is negligent 3.24 The articles detailed that the prescribed price for any share sale would first be agreed between the seller and the directors, the sale was additionally consensual with the investors’ agreement. If no agreement was forthcoming then an independent valuer45 would be engaged to ascertain the value of the shareholding to be disposed of. The calculation of the fair price was not undertaken and the company simply offered the issue price as compensation. The judge found that failing to comply with the provisions of the articles constituted a breach of contract.46

44 Paragraph 653. 45 Usually referred to as ‘expert in the articles of association’. Typically a firm of chartered accountants. 46 Paragraph 753.

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Valuation 3.25 The denouement of the proceedings47 concerned the issue of how the fair value of the shareholdings would be calculated. Justice Smith, after much expert witness testimony on the application of different approaches, settled on the following calculation. ‘Fair Value = (N)EBITDA × M − D Where: (N)EBITDA is the normalized EBITDA, M equates to a multiplier, D is debt.The initial value centered on the fair value calculation above and then reduced in the basis of additional factors; the need for loan capital, liquidity, shareholder support, and implementation of exist strategies.’48

An in-depth analysis of EBITDA is beyond the scope of this text, however when drafting ‘fair price’ provisions it should be noted the courts will not allow for a reduction in value based on majority or minority holdings.49 The approach of the court is to value the company as a whole and then apply the percentage value of the shareholding.50

Conclusion 3.26 Ms Dauriac was judged a bad leaver, she held 40,000 B ordinary shares, which entitled her to the lower of fair value or issue price. The issue price was £40,000. The fair value of these shares was deemed to be £161,200. Ms Dauriac received £40,000. The claimant in addition held 156,000 C ordinary shares, again as a bad leaver, the claimant was entitled to 75% of the lower of fair value or exit value. The judge deemed the exit value incapable of determination, therefore Ms Dauriac received 75% of the fair value of these shares.The fair value of the shares is £628,680, 75% of that sum is £471,510.51

47 Mr Justice Marcus Smith prior to the issue of valuation had judged the claimant a bad leaver by virtue of the fact that the expanses claims that instigated the pre-emption were in breach of contact. 48 The additional factors may increase the initial valuation. In Signia the additional factors proved negative. 49 Paragraph 693 ‘Fair Value’ as defined in Article 6.24 requires the valuation not to take any account ‘of whether the Shares comprise a majority or a minority interest’ in Signia. 50 Paragraph 695 ‘As the [Dauriac Shares] represent 49% of Signia’s ordinary shares, the starting point for valuing them is to consider the Fair Value of all of Signia’s ordinary shares, and attribute a proportion of that to the Marlborough Shares.’ 51 Paragraph 752(3)(4)(5).

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Cosmetic Warriors Ltd v Gerrie52 – rights of pre-emption 3.27 The case concerned majority shareholders Andrew Gerrie and his wife Alison Hawksley in two companies which manufactured handmade cosmetics, both companies had identical articles of association which stipulated the process for transferring shares. Andrew Gerrie and his wife Alison Hawksley served a transfer notice, but they could not agree terms with Mark Constantine and his wife Margaret Constantine as to the fair price. The case focused on how the fair or prescribed price would be calculated: (a) a pro rata proportion of the value of the whole equity of each company; or (b) the price that might be achieved for the transfer shares as between a willing buyer and a willing seller of that block of shares, having regard in particular to its status as a minority shareholding. Following a valuation based on a pro rata proportion would provide a much higher valuation as opposed to a valuation allowing for a minority shareholding, selling a minority shareholding to a willing buyer that may result in the buyer becoming a majority shareholder would again affect the valuation.53 The articles of association as is the case with the majority of constitutional documents bestowed the nuances of obtaining a fair price to a chartered accountant. It is reasonable to assert, if the articles are silent on the exact formula of valuation to obtain the fair price, that conflict as in this case will ensue. The Cosmetic Warriors case provides concise guidance for valuing majority and minority shareholdings; the following assumptions based on the judge’s comments ought to be addressed when drafting articles of association that are non-specific on the matter of fair price: ‘(1) Private limited companies with few members where the relationship is one of quasi-partnership, common sense would indicate each shareholder would intend that the valuation should reflect the value of the selling member’s proportional stake in the business as a whole, regardless of the size of his shareholding.54 52 Cosmetic Warriors Ltd v Gerrie and another [2017] EWCA Civ 324. 53 Howie v Crawford [1990] BCC 330 – Vinelott J said: ‘The market price of an asset is the price which that asset will fetch in the open market between a willing vendor and a willing purchaser. If the asset is a holding of shares in a private company the market price will normally, if not invariably, depend upon the proportion of the shares of the company comprised in the holding and on any special rights or restrictions contained in the articles of association of the company as well as on the value of the net assets of the company and its profit and dividend record. The addition of the word “fair” adds nothing except to remind the valuer that the market value must be ascertained on the assumption that there is a ­willing vendor and a willing purchaser, that there is a fair market and that no one would be excluded from bidding in it.’ 54 Paragraph 43.

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Chapter 3  Case Law Review (2) Pro rata construction is more favourable as opposed to valuing the transfer shares as a block when it is not known who the ultimate purchaser will be, whether in order to bring their own holdings above a specified level or simply to prevent the risk of the transfer shares passing to an outside purchaser.55 (3)

Where the block of shares which a member wishes to sell initially represents (or appears to represent) a majority shareholding, the accountants will not know whether the block will subsequently be broken-up and sold off in lots of smaller sub-blocks.56

(4) If the block of shares is a minority shareholding, the accountants will not know by whom it will be purchased and whether, alone or in combination with other shareholdings, it could give the purchaser a controlling stake, or a 75% majority, in the relevant company.57 (5) The members are unlikely to have intended the accountants to apply a potentially substantial discount or premium, depending on the initial size of the block of the transfer shares, without regard to the sizes of the lots in which the shares may in fact end up being transferred, or to any special value they may have in the hands of any transferee.’58

55 56 57 58

Paragraph 45. Paragraph 46. Paragraph 46. Paragraph 47.

37

38

Chapter 4  Enforcement of the Articles Shareholders and members 4.1 The terms ‘shareholder’ and ‘member’ are interchangeable, any subscribers to the memorandum become members on registration of the company, even if the company fails to enter their names in the register of members.1 Not all companies issue shares, therefore the term ‘member’ is more appropriate. All companies with either shareholders or members are formed under the statutory regime of the Companies Act 2006 and subscribe to the memorandum and the articles of association.

Who has what rights under the articles of association? 4.2 The articles provide rights to members and rules by which the directors must run the company. A reasonable question arises of who may enforce the rights of the articles? The articles provide rights to a member of the company only in his or her capacity as a member. The Companies Act 2006 clarifies the company constitution, binds the company and its members, and allows enforcement of the covenants on the company and each other, see section 33: ‘Effect of company’s constitution (1)

The provisions of a company’s constitution bind the company and its members to the same extent as if there were covenants on the part of the company and of each member to observe those provisions.’

Broadly the following two legal relationships are created and the following chapter discusses each in detail: (1) The enforcement of covenants against the company. (2) The enforcement of covenants between members. 1 Companies Act 2006, s 112.

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Chapter 4  Enforcement of the Articles

The enforcement of covenants between members 4.3 The case law over the previous 150 years has developed the main principles on how the company constitutions binds the company and its members, generally the articles of association are a matter between the shareholders inter se, or the shareholders and the directors.

The articles are not enforceable by third parties 4.4 In Eley v Positive,2 Mr Eley, a shareholder, had written a clause into the company’s articles that employed himself as the company’s solicitor. The company over time dismissed Mr Eley and employed another solicitor firm to conduct its business. Mr Eley sued the company from his capacity as the firm’s solicitor (not as a shareholder) and the case was dismissed. The court held the articles of association were a matter between the shareholders inter se, or the shareholders and the directors, and did not create any contract between plaintiff and the company. The Eley decision makes it clear, the articles provide rights to a member of the company only in his capacity as a member.

Members and fiduciary duty 4.5 Members of the company in law have no fiduciary duty to each other,3 shareholder agreements may attempt to circumvent a member’s free right to vote in any manner they see fit. Generally a member may take any action or vote in any way for their own benefit without regard to other members on the stringent foundation they do not flout the rules in the articles or contravene any duties or provisions of the Companies Act 2006 under which the company was formed. Members are not bound to each other and have no duty of care imposed by either the articles of association or by the Companies Act 2006. External share agreements may impose a fiduciary duty, for example in Halton International Inc & Anor v Guernroy Ltd.4

2 Eley v Positive Government Security Life Assurance Co Ltd (1876) 1 Ex D 88. 3 Halton International Inc (Holdings) Sarl v Guernroy Ltd [2006] EWCA Civ 801. 4 [2006] All ER (D) 302 (Jun).

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Chapter 4  Enforcement of the Articles

Members v members 4.6 The Companies Act 2006 unambiguously states the company’s constitution binds the company and each member, the Act is silent on the articles of association forming covenants with each member. The question of ‘are members’ rights enforceable against other members’ was addressed in Rayfiled v Hands.5 Mr Rayfiled held 725 fully paid ordinary shares of £1.00 each in Field-Davis Ltd which operated as a building contractor, Gordon Hands and two other directors held 2,125 £1.00 ordinary shares.The articles of association contained several provisions restricting the transfer of shares in the company. ‘(6) No shares in the company shall be transferred to a person not a member of the company so long as any member of the company may be willing to purchase such shares at a fair value.’ ‘(9) The directors may at any time in their absolute discretion refuse to register any transfer of shares. (10) The number of directors of the company shall not be more than four. The following persons shall be the first directors of the company, namely: – [the defendant] Alfred William Scales and Alfred Frederick Scales both of 172, Burnt Ash Lane, Bromley, Kent, builders. (11) Every member who intends to transfer shares shall inform the directors who will take the said shares equally between them at a fair value, but subject to the above no person shall hold more than one thousand shares in the capital of the company. (12) In the event of death of any director his shares are to be taken up equally between the remaining directors who will pay a fair value therefor together with all moneys due to the deceased up to the time of his death.’

Some 14 years after incorporation Mr Rayfield informed the other members of his intention to invoke article 11 and transfer his shares to them.The members contended that article 11 did not create a binding contract, Vaisey J said that ‘while the word “shall” clearly imports compulsion and obligation, the word “will” indicates as it seems to me a resultant prospective eventuality, in which the member has to sell his shares and the directors have to buy them, each being under an obligation to bring that eventuality into effect’.6

5 Rayfield v Hands and Others [1958] 2 All ER 194. 6 When drafting provisions in the articles the words ‘will’ and ‘shall’ do not form an option. See Dashfield and another v Davidson and others [2009] 1 BCLC 220. Lewison J said ‘All this is, in my judgment, the language of obligation rather than the language of option. There is no relevant distinction to be drawn between the uses of “shall” and “will” for this purpose’.

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Chapter 4  Enforcement of the Articles

In the opinion of the judge the construction of article 11 and the words formed a contract or quasi-contract between members, and not between members and directors.7 The principal of a quasi-contract between members being formed by the articles of association extends to a company limited by guarantee,8 this may have repercussions for many sports clubs who may without any knowledge enter into contracts with other members.

Enforcing covenants against the directors 4.7 The Companies Act 2006 specifies the duties the directors owe the company and its members.9 Company directors now operate under statutory law, it should be noted they do not endeavour to replace the existing common law. In principle the general duties form a code of conduct to control behaviour as opposed to controlling decision making. The duties are fiduciary and aim to curtail directors placing their interests before the company and prevent negligence. The duties are derived from equitable and common law rules.10 The courts have enforced duties owed by directors to the company by common law and equity, the Companies Act 2006 and the implementation of the general duties of directors attempted to codify11 the existing judgments into legislative propositions. A full discussion of the case law is beyond this text,12 it should be noted the statutory duties owed by the directors are to the company only.13 There are limited cases where the directors owe common law duties to the members, in particular when dealing with their proprietary rights.

7 The Rayfield judgment builds on Wood v Odessa Waterworks Co (1889) 42 Ch D 636: ‘the articles constitute not merely a contract between the shareholders and the company, but between each individual shareholder and every other’. 8 National Federation of Occupational Pensioners v Revenue and Customs Commissioners [2018] UKFTT 26 (TC). 9 Companies Act 2006, Ch 2 (General duties of directors). 10 Companies Act 2006, Explanatory notes 299, The duties are derived from equitable and common law rules, and are not at the moment written down in statute. 11 Codification is not a matter of transposing wording taken from judgments into legislative propositions. 12 For an excellent discussion on case law relating to directors’ duties please refer to Andrew Charman and Johan Du Toit, Shareholder Actions, 2nd edn (Bloomsbury Professional, 2018). 13 Companies Act 2006, s 170 (Scope and nature of general duties). (1) The general duties specified in sections 171 to 177 are owed by a director of a company to the company.

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Chapter 4  Enforcement of the Articles

Entrenchment What is entrenchment? 4.8 The pre 1 October 2009 memorandum and articles of association may specify a provision can only be acted upon, amended or removed by means that are more restrictive than a special resolution. If the provision falls under this description it is deemed an ‘entrenched provision’ and falls under section 22 of the Companies Act 2006.14 The courts are opposed to entrenched provisions, the company by statue is free to change its articles, Jessel MR in Walker v London Tramways Company15 declared ‘every one of the articles should be deemed to be a regulation capable of alteration’. This approach was agreed by Lord Lindley MR who stated, ‘the company is empowered by the statute to alter the regulations contained in its articles from time to time by special resolutions – and any regulation or article purporting to deprive the company of this power is invalid’, see Allen v Gold reefs of West Africa Ltd.16 It should be noted a company and its members are curtailed from entering into extrinsic contracts preventing alteration of the articles, in Punt v Symons and Co Ltd17 the members entered into a private agreement that stated, ‘The company shall not at any time alter or attempt to alter the clauses of the articles of association relating to the appointment of the vendor as governing director as originally framed, or do or suffer anything to be done in contravention of the provisions contained in these clauses respectively.’ Bryne J proclaimed, ‘I am prepared to hold that in the circumstances of the present case the contract could not operate to prevent the article being altered.’ It is common practice today for members to draft extrinsic contracts by way of a ‘shareholder agreement’, in Russell v Northern Bank Development Corp Ltd18 it was held that a provision in a company’s articles of association which restricted its statutory power to alter those articles was invalid, but an agreement outside the articles between shareholders as to how they would exercise their voting

14 15 16 17 18

Companies Act 2006, s 22(1) (Entrenched provisions of the articles). (1879) 12 Ch D 705. [1900] 1 Ch 656. [1900–03] All ER Rep Ext 1040. [1992] 3 All ER 161.

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Chapter 4  Enforcement of the Articles

rights on a resolution to alter the articles was not necessarily invalid. The articles bind new members without alteration or amendment, a new investor taking shares in a private limited company would be deemed bound by the company’s existing articles. This principal differs with contractual, extrinsic agreements as new members or investors would not be party to any previous agreement. It is clear from the case law that the company is free to change its articles and is prevented from restricting changes through extrinsic member agreements based on contractual law. The courts allow some leeway for members to exercise shareholder agreements that specify how shareholders may exercise their votes in a particular way in relation to a specific action. Companies incorporated prior to 1 October 2009 attempted to entrench or bind future members by including provisions in the memorandum, this course of action for companies incorporated under the Companies Act 2006 would be futile as the importance of the memorandum is diminished as it no longer forms part of the constitution. The Company Law Review recommended that members should hold the option to entrench provisions, this was duly enshrined into the Companies Act 2006 in Chapter 2, alteration of articles, section 22. The definition of ‘entrenched’ is: ‘Entrenched provisions of the articles (1)

A company’s articles may contain provision (“provision for entrenchment”) to the effect that specified provisions of the articles may be amended or repealed only if conditions are met, or procedures are complied with, that are more restrictive than those applicable in the case of a special resolution.’

It would appear that absolute entrenchment is no longer available for companies incorporated after 1 October 2006. To interpret the legislation, a company’s articles may contain provision for entrenchment, only in terms that specified provisions may be amended or repealed only if they are more restrictive than passing a special resolution. Therefore an article requiring 80% of the eligible votes to pass would be described as entrenched, or alternatively ‘all members’ must agree. It was the intention of the Act to allow for ‘absolute entrenchment’ due to section 22(3)(a)19 being added at committee stage (and being at odds with absolute entrenchment), the original section, that specified articles could not be amended or repealed was removed.

19 Companies Act 2006, s 22(3). Provision for entrenchment does not prevent amendment of the company’s articles – (a) by agreement of all the members of the company.

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Chapter 4  Enforcement of the Articles

Memorandum, entrenchment and amendment (companies incorporated before 1 October 2009) Case example 4.9 In May 1987, the owner and engineer Mrs Singh of Widgets Limited incorporated had two sons who were directors and minority shareholders of the company. Mrs Singh was very proud of the patented products they manufactured and when eventually she transitioned her business to the family she did not want the company to diversify into new products (which her sons had pressured their mother to do). After taking legal advice on formation a clause in the company memorandum contained an ‘absolute entrenchment’ clause stating the memorandum (and therefore the company objects20) was irrevocable. In 2018 Mrs Singh died, the two sons were then the majority shareholders and wished to expand their business and amend the memorandum and update the articles of association to the new model articles under the Companies Act 2006.

The problem For companies who have entrenched provisions that form part of their memorandum, the provisions are now automatically deemed part of the articles of association.21 The Companies Act 2006, section 22(3)(a) allows amendment of the articles and the entrenched provision on the basis all the members of the company agree.22 Both sons agreed, however, that this did not solve the problem. The company was prevented from amending using section 22(3)(a) by statutory instrument.23 The two sons’ only course of action was to apply to the courts for an order to amend the memorandum.24

20 The company objects state the purpose, powers and range of activities for which the company may be involved. 21 Companies Act 2006, s 28 (Existing companies: provisions of memorandum treated as provisions of articles). 22 The legislation makes no mention that any unanimous agreement should be in writing or recorded in any specific fashion. 23 The Companies Act 2006 (Commencement No. 8, Transitional Provisions and Savings) Order 2008, SI 2008/2860. 24 Companies Act 2006, s 22 (Entrenched provisions of the articles). (3)(b) by order of a court or other authority having power to alter the company’s articles.

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Chapter 4  Enforcement of the Articles

Overview 4.10 It has been noted that the entrenchment provisions detailed in section 22 of the Companies Act 2006 are drafted with an element of flawed thinking,25 companies formed after 1 October 2009 are prevented from utilising absolute entrenched articles, the case law discussed prevents unalterable articles, the legislation provides a dumbed down version of entrenchment that merely requires provisions in the articles to be amended or repealed, if conditions or procedures are followed, that requires 75% or more of the votes cast by members to pass. The only recourse for small private companies incorporated before 1 October 2009 with irrevocable provisions in their memorandum is to seek an order of the courts. Section 28 is the root cause of the problem, by deemed incorporation of the memorandum for companies incorporated before 1 October 2009 into the articles, the absolute entrenchment is caught by the case law that allows complete freedom for a company to amend its articles. In January 2012 the memorandum to the business, innovation and skills select committee26 prevented section 22(2) (see below) being brought into force, the article limits when a company’s entrenchment provisions may be included: ‘Entrenched provisions of the articles (2)

Provision for entrenchment may only be made— (a)

in the company’s articles on formation, or

(b)

by an amendment of the company’s articles agreed to by all the members of the company.’

It was suggested the two methods of introducing entrenchment were limiting and together with section 22(1) may fetter rights attached to share classes and make changing such provisions difficult as it required unanimous consent. As of 2020 the position remains the same and no date has been suggested for the implementation of section 22(2).

25 John Birds, Annotated Companies Legislation (Oxford University Press, 2010), p 28. 26 Companies Act 2006: post-legislative assessment – memorandum to the Business, Innovation and Skills Select Committee (published 12 January 2012), available at www.gov.uk/government/publications/ companies-act-2006-post-legislative-assessment-memorandum-to-the-business-innovation-and-skillsselect-committee.

46

Chapter 5  Articles That May Override the Companies Act 2006 Introduction 5.1 Companies are free to change their articles. The majority of companies on formation will adopt the prescribed new model articles, however in time the members may wish to assess possible threats and preempt problems by way of alteration of the company’s constitution. The following provides where the Companies Act 2006 allows for flexibility in the articles to override the legislation.

Section 79 Change of name by means provided for in company’s articles 5.2 A special resolution must be passed by the members to agree a change to the company name,1 however the company may disregard section 78 if the articles specify an alternative method.2 It is possible for the name change to take effect by ordinary resolution, by a class of shareholders or by a group of members. The relevant procedures with the registrar cannot be overridden.

Section 122 Share warrants (public companies) 5.3 The bearer of a share warrant may be deemed a member of the company, the warrant holder’s rights as a member and in turn rights under the Companies Act 2006 are defined by the articles.

1 Companies Act 2006, s 78 (Change of name by special resolution). 2 Companies Act 2006, s 79 (Change of name by means provided for in company’s articles).

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Chapter 5  Articles That May Override the Companies Act 2006

Section 171 Duty to act within powers 5.4 The articles of association build on the provisions of the Companies Act 2006 and increase responsibility laid down in Chapter 2,3 any article in the constitution may not diminish any general duties.4 If drafting articles that confer specific powers, it should be noted the courts define directors acting on those powers as a fiduciary duty. A director could be negligent or incompetent and damage the company by their actions. If the director(s) is found to be honestly acting in the best interests of the company, they will for the purposes of the Companies Act 2006 have acted within their powers, incompetence is not a breach of a director’s fiduciary duty (see Extrasure Travel Insurances Ltd v Scattergood).5

Section 173 Duty to exercise independent judgment 5.5 A director must exercise independent judgment, directors are not permitted to delegate their powers unless the company constitution specifically allows. The articles may restrict the exercise of independent judgment or explicitly authorise a different course of action when the exercise of independent judgment may indeed be fettered. The opinion of the courts on this matter rests on if directors are acting bona fide in the interests of the company. They ought to have the option of contractually delegating their independent judgment, prevention from doing so may remove any valid commercial benefit (Fulham Football Club Ltd and others v Cabra Estates plc).6

Section 180 Consent, approval or authorisation by members 5.6 The ability for directors to breach their duty to the company if authorised by the members and the company’s constitution is established common law (Regal (Hastings) Ltd v Gulliver).7 Article 14 ‘Conflicts of interest’ in the new model articles of association allows directors under strict conditions to breach duties.

3 4 5 6 7

Companies Act 2006, Ch 2 (General duties of directors). Companies Act 2006, ss 171–177 (The general duties). [2003] 1 BCLC 598. [1994] 1 BCLC 363. [1942] UKHL 1.

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Chapter 5  Articles That May Override the Companies Act 2006

Section 224 Approval by written resolution: accidental failure to send memorandum 5.7 The articles may dictate the process for circulation of written resolutions and state that accidental failure to send the memorandum does not invalidate the resolution.

Section 247 Power to make provision for employees on cessation or transfer of business 5.8 Section 247 allows the articles to make provisions on liquidation or sale of the company, the powers must be sanctioned by a resolution of the company or its directors and authorised by the company’s articles.8

Section 281 Resolutions 5.9 Decisions taken by a company may be executed by ordinary resolution or a simple majority (more than 50% of the votes cast), this enables timely and effective decision making. The Companies Act 2006 specifies occasions when a special resolution is required (75% of the votes cast). The examples below pertain to most private limited companies limited by shares, the articles may not lessen the requirements of a special resolution by alteration in the articles: ●●

Alteration of the articles.9

●●

Changing the company name.10

●●

Change the registered office.11

●●

Removal of pre-emption rights.12

●●

Variation of share class rights.13

8 Model articles for private companies limited by shares, Article 51 ‘Provision for employees on cessation of business’. 9 Companies Act 2006, s 21. 10 Companies Act 2006, ss 77–78. 11 Companies Act 2006, s 88. 12 Companies Act 2006, s 569. 13 Companies Act 2006, ss 630–631.

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Chapter 5  Articles That May Override the Companies Act 2006

In section 281(3)(b) where a resolution is required but the type of resolution is not specified, the default will be an ordinary resolution unless the articles require a higher majority.

Section 284 Votes: general rules 5.10 The articles may vary the general rules on votes of members taken by written resolution, show of hands or a poll taken at a meeting.

Section 286 Votes of joint holders of shares 5.11 In terms of joint shareholders, the default statutory position is that the person whose vote counts is the ‘senior’ holder, defined by whose name appears on the register first. The articles may vary the general rule.14

Section 301 Resolutions at general meetings 5.12 Resolutions must be passed in accordance with the relevant procedures in the Companies Act 2006, in conjunction with any provisions in the articles. It should be noted that mandatory voting rights conferred by statute may not be restrained by alteration of the articles, for example proxies’ rights to vote.

Section 303 Members’ power to require directors to call general meeting 5.13 The articles may state that no resolution may properly be moved if its passing is inconsistent with the company’s constitution.

Section 310 Persons entitled to receive notice of meetings 5.14 The rules of entitlement to receive notices of meetings are amendable by the articles, for example notices will only be sent if the company holds a valid 14 Companies Act 2006, s 286 (Votes of joint holders of shares). ‘(3) Subsections (1) and (2) have effect subject to any provision of the company’s articles.’

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Chapter 5  Articles That May Override the Companies Act 2006

address for the member. The articles should state the method in which notices will be given.

Section 311 Contents of notices of meetings 5.15 The requirements for a traded company on notices are stricter than for private companies.15 The information required is stipulated in section 311(3) for traded companies, the articles for private companies may stipulate any information required, in addition to the statutory obligations specified in section 311(1).16

Section 312 Resolution requiring special notice 5.16 Where practicable, the company must give notice of any special notice at the same time and method as described in section 310. The company may give 14 days’ notice by advertisement in a newspaper or by any manner allowed by the articles.

Section 313 Accidental failure to give notice of resolution or meeting 5.17 The regulations in section 313 are founded on the case law,17 allowing the articles to stipulate the position if an accidental failure occurs to give notice. The articles may disregard any accidental failure to give notice to one or more persons for the purposes of determining if a notice or resolution was provided, or specify an alternative course of action.

Section 319 Chairman of meeting 5.18 The articles may permit or exclude any qualifying person from being elected chairman, this may include a proxy or corporate representative (see section 328 ‘Chairing meetings’).

15 Companies Act 2006, s 311(3) ‘Notice of a general meeting of a traded company’. 16 Companies Act 2006, s 311(1)(a) ‘the time and date of the meeting, and (b) the place of the meeting’. 17 West Canadian Collieries Ltd, Re [1962] Ch 370.

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Chapter 5  Articles That May Override the Companies Act 2006

The model articles, article 39 ‘Chairing general meetings’ provides the following guidance: ‘39. Chairing general meetings 39.—(1) If the directors have appointed a chairman, the chairman shall chair general meetings if present and willing to do so. (2) If the directors have not appointed a chairman, or if the chairman is unwilling to chair the meeting or is not present within ten minutes of the time at which a meeting was due to start— (a) the directors present, or (b) (if no directors are present), the meeting, must appoint a director or shareholder to chair the meeting, and the appointment of the chairman of the meeting must be the first business of the meeting. (3) The person chairing a meeting in accordance with this article is referred to as “the chairman of the meeting”.’

It should be noted adopting the model articles as prescribed by the Companies Act 2006 would exclude a proxy, corporate representative or a shareholder from being elected chairman.

Section 322A Voting on a poll: votes cast in advance 5.19 This section18 allows a company’s articles to include provisions for votes cast in advance, it should be noted they cannot lessen the time frames for receiving documents on the subject of casting votes in advance detailed in section 322A(3).19

Section 324 Rights to appoint proxies 5.20 This section of the Companies Act 2006 puts rights for proxies on a statutory footing, under the 1985 Act the rights were subject to the articles of association. The proxy will be able to attend, speak and vote at a meeting. Members of private and public companies will have the right to appoint more than one proxy.

18 Amended by The Companies (Shareholders’ Rights) Regulations 2009, SI 2009/1632. 19 Companies Act 2006, s 322A(3)(a) ‘in the case of a poll taken more than 48 hours after it was demanded, 24 hours before the time appointed for the taking of the poll; (b) in the case of any other poll, 48 hours before the time for holding the meeting or adjourned meeting.’

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Chapter 5  Articles That May Override the Companies Act 2006

As regards voting rights, on a vote on a resolution on a show of hands at a meeting, each member present in person has one vote,20 each proxy present has one vote per shareholder’s instruction. The articles may restrict the number of votes of the proxies, provided that they still have at least one vote between them.

Section 328 Chairing meetings 5.21 The default position of the law provides a proxy may be elected as chairman of a general meeting by resolution at the meeting, the articles may override section 328(1).21 See section 319 ‘Chairman of meeting’.

Section 331 Saving for more extensive rights conferred by articles 5.22 This section reiterates the articles of association may confer more extensive rights on members and their proxies. It should be noted the articles may not constrain the rights inferred by the Companies Act 2006.

Section 488 Prevention by members of deemed re-appointment of auditor 5.23 Members with 5% of the voting rights in a private company may prevent an auditor being automatically reappointed by giving notice to the company.22 The articles may specify a percentage less than 5%, they may not increase the percentage over 5%.

Section 550 Power of directors to allot shares etc: private company with only one class of shares 5.24 A new provision based on the recommendations of the Company Law Report23 which removed the requirements of section 80 of the 1985 Act. 20 The Companies (Shareholders’ Rights) Regulations 2009, SI 2009/1632. 21 Companies Act 2006, s 328(2) ‘Subsection (1) is subject to any provision of the company’s articles that states who may or who may not be chairman.’ 22 Companies Act 2006, s 488(2) ‘The “requisite percentage” is 5%, or such lower percentage as is specified for this purpose in the company’s articles.’ 23 Company Law Report: Final Report, para 4.5 ‘The provision does not reflect the current needs and practice of most private companies.’

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Chapter 5  Articles That May Override the Companies Act 2006

On the basis the company only has one class of shares the company may allot shares without the authority of the members, the articles may restrict or prohibit the statutory powers conferred by section 550.24

Section 551 Power of directors to allot shares etc: authorisation by company 5.25 Following on from section 550, this section applies to allotment of shares for public companies and private companies with more than one share class. Allotment is conditional on members passing an ordinary resolution, or the powers to allot being specified in the articles of association. It should be noted the ordinary resolution25 may in certain circumstances amend the articles, which requires a special resolution.

Section 553 Permitted commission 5.26 The articles may permit a company to pay commission in relation to a share issue, the payment must not exceed 10% of the price at which the shares are issued, or the amount or rate specified by the articles.

Sections 567–573 Exclusion of right of pre-emption 5.27 ●●

Section 567 Exclusion of requirements by private companies.

●●

Section 568 Exclusion of pre-emption right: articles conferring corresponding right.

●●

Sections 569, 570 and 573 Disapplication of pre-emption rights: ––

Section 569 Disapplication of pre-emption rights: private company with only one class of shares.

––

Section 570 Disapplication of pre-emption rights: directors acting under general authorisation.

––

Section 573 Disapplication of pre-emption rights: sale of treasury shares.

24 Companies Act 2006, s 550 ‘except to the extent that they are prohibited from doing so by the company’s articles’. 25 Companies Act 2006, s 551(8) ‘A resolution of a company to give, vary, revoke or renew authorisation under this section may be an ordinary resolution, even though it amends the company’s articles.’

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Chapter 5  Articles That May Override the Companies Act 2006

For a full discussion on pre-emption and the articles’ powers to supersede the Companies Act 2006, please see 3.6 et seq.

Section 581 Provision for different amounts to be paid on shares 5.28 The articles may make provision for different amounts to be paid on shares and allow dividends to be paid in proportion to the amount paid up on each share.

Section 618 Sub-division or consolidation of shares 5.29 Section 618 permits statutory rights for the company to sub-divide shares or divide all or any of its shares capital into shares of a larger nominal amount than its existing shares.26 The articles may exclude or restrict any powers conferred by section 618.27

Section 622 Redenomination of share capital 5.30 The company may redenominate its shares from one fixed nominal value in one currency to another.28 The company’s articles may prohibit or restrict the statutory provisions specified in section 622.29

Section 624 Effect of redenomination 5.31 In relation to section 622, the redenomination does not affect the rights to dividends, voting rights or any lability to amounts unpaid on shares. For example,

26 Companies Act 2006, s 618 (Sub-division or consolidation of shares) ‘(1) A limited company having a share capital may— (a) sub-divide its shares, or any of them, into shares of a smaller nominal amount than its existing shares, or (b) consolidate and divide all or any of its share capital into shares of a larger nominal amount than its existing shares.’ 27 Companies Act 2006, s 618(5) ‘The company’s articles may exclude or restrict the exercise of any power conferred by this section.’ 28 Companies Act 2006, s 622 (Redenomination of share capital). 29 Companies Act 2006, s 622(7) ‘A company’s articles may prohibit or restrict the exercise of the power conferred by this section.’

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Chapter 5  Articles That May Override the Companies Act 2006

a dividend of 50p declared on a £10.00 share prior to a redenomination of that share, is subsequently converted into a $15 share, the member who now owns a $15 share is entitled to a 50p dividend (albeit that the company and the member in question may agree that the 20p dividend can be paid in cents – or indeed in some other currency).

Section 630 Variation of class rights: companies having a share capital 5.32 This section outlines the procedures and rules on how the rights attaching to shares may be varied. Class rights30 are not defined by the Companies Act 2006 and are subject to common law,31 rights are typically defined as the rights to vote, dividend payments and rights to return of capital on liquidation. Companies with a single class of shares32 do not hold class rights, only shareholder rights. Rights will attach to a share class if the holder of the shares enjoys rights that are not enjoyed by the holders of another class of shares. The class rights for companies incorporated prior to 1 October 2009 were contained in the memorandum of association,33 for new companies incorporating today the memorandum is no longer a constitutional document and therefore would not contain details of any class rights.34

Variation of class rights 5.33 Rights attached to a class of shares may be varied by provisions in the articles of association, if the articles are silent then the variation is subject to the consent of the holders of the relevant share class35 by way of passing a special resolution at a separate general meeting.36 The articles may reduce the arduous requirements of a special resolution and deem an ordinary resolution sufficient to vary the class rights.

30 Companies Act 2006 Explanatory Notes, para 929, classes of shares are equally not defined by the Companies Act 2006. 31 Companies Act 2006 Explanatory Notes, para 934. Companies Act 2006, s 629 (Classes of Shares) – the Act does acknowledge class of shares in terms of uniform rights. 32 Union Music Limited and another v Watson and another [2003] EWCA Civ 180, para 39. 33 The class rights contained in the memorandum will now be contained in the articles of association. Companies Act 2006, s 28. 34 Companies Act 2006, s 8 (Memorandum of association). 35 Companies Act 2006, s 630(2)(a)(b). 36 Companies Act 2006, s 630(4)(b).

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Chapter 5  Articles That May Override the Companies Act 2006

The provisions applied in section 630 are without prejudice to any other restriction on the variation of rights,37 if the articles specify a higher percentage required, for example all members must agree to the variation, then the articles override company law and the company must comply with the articles. For companies incorporated under previous Companies Acts that allowed entrenchment they may not vary class rights by applying the provisions of section 630.

Section 631 Variation of class rights: companies without a share capital 5.34 Companies without share capital may allow different classes of members to hold special voting rights. The procedure for varying the members voting rights are as section 630 above.

Section 641 Circumstances in which a company may reduce its share capital 5.35 A company may reduce its share capital by special resolution38 and applying the requirements of section 642.39 The company may if authorised by the articles of association restrict or prohibit the reduction of the company’s share capital.40

Section 684 Power of limited company to issue redeemable shares 5.36 A private limited company if authorised by the articles of association41 may restrict or exclude the issue of redeemable shares.42

37 Companies Act 2006, s 630(3). 38 Companies Act 2006, s 641 (Circumstances in which a company may reduce its share capital) ‘(1) A limited company having a share capital may reduce its share capital. (a) in the case of a private company limited by shares, by special resolution supported by a solvency statement (see sections 642 to 644); (b) in any case, by special resolution confirmed by the court (see sections 645 to 651).’ 39 40 41 42

Companies Act 2006, s 642 (Reduction of capital supported by solvency statement). Companies Act 2006, s 641(6). Companies Act 2006, s 684(2). Redeemable shares allow the company at a future date to purchase the shares back, typically used with employee incentive schemes. The shares are purchased on the employee’s termination.

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Chapter 5  Articles That May Override the Companies Act 2006

Section 685 Terms and manner of redemption 5.37 Public and private companies may determine the terms and conditions of any share redemption. The authority is conferred either by the articles or by a resolution of the company.43 The resolution may be an ordinary resolution,44 this conflicts with section 21(1)45 which provides a company may only amend its articles by special resolution.

Section 690 Power of limited company to purchase own shares 5.38 This section diverges from previous Companies Acts with the removal of the requirement for the articles to authorise the purchase of a company’s own shares. The articles may restrict or prohibit the power of the company to purchase its own shares.46

Section 709 Power of private limited company to redeem or purchase own shares out of capital 5.39 The articles may restrict or prohibit a private limited company making a payment of any redemption of its own shares out of distributable profit47 or the proceeds of a fresh issue of shares.

Section 752 Power to re-issue redeemed debentures48 5.40 Subject to any express or implied terms in the articles or any company agreement to the contrary a company may re-issue the debentures, either by re-issuing the same debentures or by issuing new debentures in their place.

43 44 45 46 47 48

Companies Act 2006, s 685(1)(a)(b). Companies Act 2006, s 685(2). Companies Act 2006, s 21(1). Companies Act 2006, s 690(1)(b). Company profits over a set period that are available to pay dividends to shareholders. Companies Act 2006, s 752(1)(a)(b).

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Chapter 5  Articles That May Override the Companies Act 2006

Section 831 Net asset restriction on distributions by public companies 5.41 This section of the Companies Act 2006 restricts the distribution of certain reserves,49 other reserves of the company may be prohibited from distribution by provisions in the articles.50

Section 848 Saving for certain older provisions in articles 5.42 A company may apply its unrealised profits in paying up in full or in part unissued shares to be allotted to members of the company as fully or partly paid bonus shares.51 This requires authorisation in the memorandum or articles, for companies incorporated under pre-Companies Act 1980.52 If the memorandum or articles contain the appropriate permissions then the ability to pay up bonus shares remains effective.

Where the Companies Act 2006 will override the articles of association Section 37 Right to participate in profits otherwise than as member void 5.43 A company limited by guarantee, without share capital, may not by amending its articles or by any resolution give any person the right to participate in the divisible profits of the company.

Section 63 Exempt company: restriction on amendment of articles 5.44 Companies under the 1948 or 1985 Companies Acts in certain circumstances were allowed exemptions from the use of the word ‘limited’. Companies 49 50 51 52

Companies Act 2006, s 831(4). Companies Act 2006, s 831(4)(d)(ii). Companies Act 2006, s 848(1). Relevant date 22 December 1980.

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Chapter 5  Articles That May Override the Companies Act 2006

benefiting from an exemption were compelled to include a provision in the memorandum or articles preventing the company changing any of its constitutional documents without the consent of the Secretary of State.53 It is an offence to change the company’s articles in such a way that the company ceases to comply with the requirements of the exemption.54

Section 145 Effect of provisions of articles as to enjoyment or exercise of members’ rights 5.45 This section enables a member if so authorised by the articles to nominate another person to exercise all rights conferred in relation to the company. The articles may specify that this entitlement can apply only to certain rights or to all rights, except the right to transfer the shares.55 The nominated person or persons are non-members therefore have no enforceable rights against the company. The articles of association may not be amended to differentiate between the member and the nominee. The provisions in section 145(2) are clear that where a company makes relevant provision in its articles, all the relevant references in the Companies Acts to ‘member’ should be read as if the reference to member was a reference to the person or persons nominated by the member.56

Section 168 Resolution to remove director 5.46 This section allows a company to remove a director before the expiration of his period of office regardless of any other agreement.57 Although not specifically mentioned this includes the articles of association. Therefore the articles may not fetter the Companies Act 2006 and any director removed may not rely on any specific provisions drafted in relation to any rights conferred.58

53 Or its predecessor the Board of Trade. Companies Act 2006, s 63(4)(a)(b) removes this administrative requirement. 54 Companies Act 2006, s 64 (Power to direct change of name in case of company ceasing to be entitled to exemption) grants statutory powers to the Secretary of State to compel a company to change its name so it ends with ‘Limited’. 55 Companies Act 2006, s 145(4)(b) does not confer rights for an effective transfer of the member’s interest in the company. 56 Companies Act 2006 Explanatory Notes, para 261. 57 Companies Act 2006, s 168(1). 58 The articles of association may not exclude a statutory power.

60

Chapter 6  Analysis of the Model Articles For Private Companies Limited by Shares Introduction 6.1 The new model articles for the first time identifies as articles and not regulations. The historic naming convention in all previous model articles that employed the term ‘Table’ is dispensed with, moving to new model articles. Model articles first began with the Joint Stock Companies Act 1856 and used the term ‘Table B’ initially. Since the Companies Act 1862 all prescribed articles of association used the term ‘Table A’, until the introduction of the new model articles by the Companies Act 2006.

Drafting assumptions 6.2 Part 1 outlines the defined terms for the new model articles (NMA). When drafting the NMA the government’s policy focused on ‘thinking small first’, therefore the articles are drafted with small companies in mind. If adapting or editing the model articles to allow for specific company requirements, the following assumptions ought to be considered: ●●

No alternative directors are required.

●●

Broadly the company will hold one class of shares.

●●

The capital structure is simple.

●●

All shares are fully paid up.

●●

A general drafting assumption is there are two directors.

●●

Larger or more complex Limited companies would adapt the public company articles, rather than use the limited by shares articles.

●●

The articles do not vary any provisions of the Companies Act 2006.

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Chapter 6  Analysis of the Model Articles For Private Companies Limited by Shares

Model Articles for Private Companies Limited by Shares Part 1 Interpretation and limitation of liability Article 1 Defined terms 6.3 1. In the articles, unless the context requires otherwise— “articles” means the company’s articles of association; “bankruptcy” includes individual insolvency proceedings in a jurisdiction other than England and Wales or Northern Ireland which have an effect similar to that of bankruptcy; “chairman” has the meaning given in article 12; “chairman of the meeting” has the meaning given in article 39; “Companies Acts” means the Companies Acts (as defined in section 2 of the Companies Act 2006), in so far as they apply to the company; “director” means a director of the company, and includes any person occupying the position of director, by whatever name called; “distribution recipient” has the meaning given in article 31; “document” includes, unless otherwise specified, any document sent or supplied in electronic form; “electronic form” has the meaning given in section 1168 of the Companies Act 2006; “fully paid” in relation to a share, means that the nominal value and any premium to be paid to the company in respect of that share have been paid to the company; “hard copy form” has the meaning given in section 1168 of the Companies Act 2006; “holder” in relation to shares means the person whose name is entered in the register of members as the holder of the shares; “instrument” means a document in hard copy form; “ordinary resolution” has the meaning given in section 282 of the Companies Act 2006; “paid” means paid or credited as paid; “participate”, in relation to a directors’ meeting, has the meaning given in article 10; “proxy notice” has the meaning given in article 45; 62

Chapter 6  Analysis of the Model Articles For Private Companies Limited by Shares

“shareholder” means a person who is the holder of a share; “shares” means shares in the company; “special resolution” has the meaning given in section 283 of the Companies Act 2006; “subsidiary” has the meaning given in section 1159 of the Companies Act 2006; “transmittee” means a person entitled to a share by reason of the death or bankruptcy of a shareholder or otherwise by operation of law; and “writing” means the representation or reproduction of words, symbols or other information in a visible form by any method or combination of methods, whether sent or supplied in electronic form or otherwise. Unless the context otherwise requires, other words or expressions contained in these articles bear the same meaning as in the Companies Act 2006 as in force on the date when these articles become binding on the company.

Article 2 Liability of members 6.4 2. The liability of the members is limited to the amount, if any, unpaid on the shares held by them. Article 2 Analysis Article 2 previously appeared in the memorandum of association and defines the liability for the members. The provision must not be altered or omitted, its inclusion means once all shares are fully paid up, the shareholders have no further liability. Article 2 Previous provisions No previous provisions.

Part 2 Directors Article 3 Directors’ general authority 6.5 3. Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company. 63

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Article 3 Analysis Article 3 is a simplified version of regulation 70 and provides that all power lies with the board of directors, or more accurately the managing director powers are an implied delegation by the board.1 The term ‘all powers’ requires the directors to act within the confines of the company constitution and they may only be exercised for the purpose they are granted. The company’s articles may also restrict directors’ duties however they must not fetter the statutory obligations of the directors’ duties specified in sections 170 to 1772 of the Companies Act 2006. Article 3 Previous provisions Table A 1985: Regulation 70 70. Subject to the provisions of the Act, the memorandum and the articles and to any directions given by special resolution, the business of the company shall be managed by the directors who may exercise all the powers of the company. No alteration of the memorandum or articles and no such direction shall invalidate any prior act of the directors which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this regulation shall not be limited by any special power given to the directors by the articles and a meeting of directors at which a quorum is present may exercise all powers exercisable by the directors. Table A 1948: Regulation 80 Table A 1929: Regulation 67 Table A 1908: Regulation 71 Table A 1906: Regulation 71 Table A 1862: Regulation 55 Table B 1856: Regulation 46

Article 4 Shareholders’ reserve power 6.6 4. (1) The shareholders may, by special resolution, direct the directors to take, or refrain from taking, specified action. (2) No such special resolution invalidates anything which the directors have done before the passing of the resolution. 1 Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549. 2 Companies Act 2006, Ch 2 (General duties of directors).

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Article 4 Analysis Article (4)(1) gives an overriding power to the shareholders in a general meeting by special resolution, in principle the members hold a veto over the directors’ authority. In order for a company to operate successfully shareholders are obligated to delegate the responsibility of management to the directors. They may decide to reaffirm their authority in relation to a specific matter. It should be noted the shareholders cannot alter the directors’ powers in any way that is unlawful or in contradiction of the Companies Act 2006. The general duties of directors outlined in sections 170–1813 cannot be fettered by the powers provided in article 4(1). Article 4(2) is important for the continuity of decisions made by the directors as it preserves any contracts or commitments the directors have entered into on behalf of the company, prior to the passing of any special resolution. This does not however prevent directors from breaching any contract or the shareholders requesting them to do so. Article 4 Previous provisions Table A 1985: Regulation 70 70. Subject to the provisions of the Act, the memorandum and the articles and to any directions given by special resolution, the business of the company shall be managed by the directors who may exercise all the powers of the company. No alteration of the memorandum or articles and no such direction shall invalidate any prior act of the directors which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this regulation shall not be limited by any special power given to the directors by the articles and a meeting of directors at which a quorum is present may exercise all powers exercisable by the directors. Table A 1948: Regulation 80 Table A 1929: Regulation 67 Table A 1908: Regulation 71 Table A 1906: Regulation 71 Table A 1862: Regulation 55 Table B 1856: Regulation 46

3 Companies Act 2006, Ch 2 (General duties of directors).

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Article 5 Directors may delegate 6.7 5.—(1) Subject to the articles, the directors may delegate any of the powers which are conferred on them under the articles— (a) to such person or committee; (b) by such means (including by power of attorney); (c) to such an extent; (d) in relation to such matters or territories; and (e) on such terms and conditions; as they think fit. (2) If the directors so specify, any such delegation may authorise further delegation of the directors’ powers by any person to whom they are delegated. (3) The directors may revoke any delegation in whole or part, or alter its terms and conditions.

Article 5 Analysis Article 5 replaces regulations 71 and 72 of Table A 1985 and allows the board of directors to delegate their powers to subsequent directors or committees. The article reflects how modern companies are run, for example the board may delegate the company’s borrowing requirements to a finance committee, who in turn delegate the responsibility to the chief financial officer, who in turn delegates the key tasks to their staff. The 2007 consultation paper commented on the range of powers as the provision in article 5(1) provides a relatively free hand on the powers of delegation. It should be noted the scope of delegation is controlled by the powers in the articles, therefore those delegated to have no special authority unless provided by specific provisions in the articles (Harold Holdsworth & Co (Wakefield) Ltd v Caddies).4 Article 5 Previous provisions Table A 1985: Regulations 71, 72 71. The directors may, by power of attorney or otherwise, appoint any person to be the agent of the company for such purposes and on such conditions as they determine, including authority for the agent to delegate all or any of his powers. 4 [1955] 1 ALL ER 725.

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DELEGATION OF DIRECTORS’ POWERS 72. The directors may delegate any of their powers to any committee consisting of one or more directors. They may also delegate to any managing director or any director holding any other executive office such of their powers as they consider desirable to be exercised by him. Any such delegation may be made subject to any conditions the directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee with two or more members shall be governed by the articles regulating the proceedings of directors so far as they are capable of applying. Table A 1948: Regulations 81, 102, 103, 104, 109 Table A 1929: Regulations 68, 85, 86, 87 Table A 1908: Regulations 91, 92, 93 Table A 1906: Regulations 91, 92, 93 Table A 1862: Regulations 68, 69, 70 Table B 1856: Regulations 57, 58, 59

Article 6 Committees 6.8 6.—(1) Committees to which the directors delegate any of their powers must follow procedures which are based as far as they are applicable on those provisions of the articles which govern the taking of decisions by directors. (2) The directors may make rules of procedure for all or any committees, which prevail over rules derived from the articles if they are not consistent with them. Article 6 Analysis Previous versions of the articles have all included provisions on how committees operate. A committee can be a group or an individual. Article 6 does not specify how a committee may be formed, company boards may wish to only delegate to committees consisting of directors for certain matters or external members only for a particular issue. The directors can adapt the articles and make specific procedures for each committee.

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The board may specify the delegation of powers for a limited period of time or certain reporting procedures or rules to be followed before final implementation of any decision the committee makes. Article 6 Previous provisions Table A 1985: Regulation 72 DELEGATION OF DIRECTORS’ POWERS 72. The directors may delegate any of their powers to any committee consisting of one or more directors. They may also delegate to any managing director or any director holding any other executive office such of their powers as they consider desirable to be exercised by him. Any such delegation may be made subject to any conditions the directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee with two or more members shall be governed by the articles regulating the proceedings of directors so far as they are capable of applying. Table A 1948: Regulations 102, 103, 104, 109 Table A 1929: Regulations 68, 85, 86, 87 Table A 1908: Regulations 91, 92, 93 Table A 1906: Regulations 91, 92, 93 Table A 1862: Regulations 68, 69, 70 Table B 1856: Regulations 57, 58, 59

DECISION-MAKING BY DIRECTORS Article 7 Directors to take decisions collectively 6.9 7.—(1) The general rule about decision-making by directors is that any decision of the directors must be either a majority decision at a meeting or a decision taken in accordance with article 8. (2) If— (a) the company only has one director, and (b) no provision of the articles requires it to have more than one director,

the general rule does not apply, and the director may take decisions without regard to any of the provisions of the articles relating to directors’ decision-making. 68

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Article 7 Analysis Article 7 stipulates the general rule that decision making by directors must be passed by a majority decision.5 Article 7(2) provides an exclusion for companies with a single director. whereby the rules for decision making in the articles do not apply, therefore accordingly the sole director is free to make decisions as they see fit. Article 7 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote. Table A 1948: Regulation 98 Table A 1929: Regulation 81 Table A 1908: Regulation 87 Table A 1906: Regulation 87 Table A 1862: Regulation 66 Table B 1856: Regulation 55

Article 8 Unanimous decisions 6.10 8.—(1) A decision of the directors is taken in accordance with this article when all eligible directors indicate to each other by any means that they share a common view on a matter. (2) Such a decision may take the form of a resolution in writing, copies of which have been signed by each eligible director or to which each eligible director has otherwise indicated agreement in writing.

5 Companies Act 2006, s 282 (Ordinary resolutions) ‘(1). An ordinary resolution of the members (or of a class of members) of a company means a resolution that is passed by a simple majority.’

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(3) References in this article to eligible directors are to directors who would have been entitled to vote on the matter had it been proposed as a resolution at a directors’ meeting. (4) A decision may not be taken in accordance with this article if the eligible directors would not have formed a quorum at such a meeting. Article 8 Analysis Article 8 adds new additions to the new model articles which acknowledge the increased use of technology in decision making by directors.The ‘by any means’ described in article 8(1) may include: mobile telephone, text, email and teleconferencing, this allows a board of directors to make decisions without the need for written resolutions or calling a formal meeting. Care ought to taken with the phrase in article 8(1) ‘indicate to each other’ which implies that all directors have sight of the same information on which the decision is based. For example, the directors should read any email chain in full. In 2019 sharing technology is certainly fit for purpose in order to speed up decision making, especially in small companies with possibly two or three directors. Article 8 Previous provisions Table A 1985: Regulation 93 93. A resolution in writing signed by all the directors entitled to receive notice of a meeting of directors or of a committee of directors shall be as valid and effectual as it if had been passed at a meeting of directors or (as the case may be) a committee of directors duly convened and held and may consist of several documents in the like form each signed by one or more directors; but a resolution signed by an alternate director need not also be signed by his appointor and, if it is signed by a director who has appointed an alternate director, it need not be signed by the alternate director in that capacity. Table A 1948: Regulation 106

Article 9 Calling a directors’ meeting 6.11 9.—(1) Any director may call a directors’ meeting by giving notice of the meeting to the directors or by authorising the company secretary (if any) to give such notice.

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(2) Notice of any directors’ meeting must indicate— (a) its proposed date and time; (b) where it is to take place; and (c) if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting. (3) Notice of a directors’ meeting must be given to each director, but need not be in writing. (4) Notice of a directors’ meeting need not be given to directors who waive their entitlement to notice of that meeting, by giving notice to that effect to the company not more than 7 days after the date on which the meeting is held.Where such notice is given after the meeting has been held, that does not affect the validity of the meeting, or of any business conducted at it. Article 9 Analysis Article 9 modernises the previous regulation 88 of Table A 1985 which stipulated a director absent from the United Kingdom would not require notification of a meeting. The change reflects the advent of modern communication techniques where it is possible to hold a directors meeting remotely. If it is envisaged any directors may not attend personally article 9(2)(c) stipulates the method of communication (for example Skype) ought to be proposed and agreed. It is established common law that notices need not be in writing, article 9(3) reflects this position. If the company has not appointed a company secretary article 9(1) can be amended as below: 9.—(1) Any director may call a directors’ meeting by giving notice of the meeting to the directors. Article 9 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

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Table A 1948: Regulation 98 Table A 1929: Regulation 81 Table A 1908: Regulation 87 Table A 1906: Regulation 87 Table A 1862: Regulation 66 Table B 1856: Regulation 55

Article 10 Participation in directors’ meetings 6.12 10.—(1) Subject to the articles, directors participate in a directors’ meeting, or part of a directors’ meeting, when— (a) the meeting has been called and takes place in accordance with the articles, and (b) they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting. (2) In determining whether directors are participating in a directors’ meeting, it is irrelevant where any director is or how they communicate with each other. (3) If all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as taking place wherever any of them is. Article 10 Analysis Article 10, which is a new provision, is drafted to complement the intention of directors to facilitate the use of video-conference calls to facilitate decision making. Case law has established the main principles for calling a board meeting, in particular that a reasonable notice period for any proposed meeting ought to be given to directors (Browne v La Trinidad).6 The law fails to define what is considered as ‘reasonable’, the court has considered the manipulation of the company decision making process by calling meetings under short notice in the hope of excluding fellow directors (Homer District Consolidated Gold Mines, Re).7 6 (1887) 37 Ch D 1 (CA). 7 (1988) 39 Ch D 546.

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Article 10 is a new addition to the articles which expressly allows for meetings to be held with directors in different locations.8 It is important to consider article 9(2)(c) if a board meeting is to be called when it is known certain directors will not attend in person, the method of communication of the proposed meeting needs to be established and conveyed to each director prior to the meeting. As the intention of articles 9 and 10 is to allow directors to attend meetings from different locations in the world using technology, the previous provision under regulation 88 of Table A 1985 meant it was not necessary to notify any director of a proposed meeting if they were outside of the UK. Article 10 Previous provisions No previous provisions.

Article 11 Quorum for directors’ meetings 6.13 11.—(1) At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. (2) The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two. (3) If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision— (a) to appoint further directors, or (b) to call a general meeting so as to enable the shareholders to appoint further directors. Article 11 Analysis A quorum is the minimum number of directors required to vote at a meeting. Case law provides any decisions made at an inquorate board meeting are void (Re North Eastern Insurance Co Ltd).9

8 See article 10(2) ‘… it is irrelevant where any director is or how they communicate with each other.’ 9 [1919] 1 Ch 198.

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Article 11(3) provides for the appointment of further directors if a quorum cannot be formed. Article 11(2) fixes the minimum quorum at two and appears at odds with section 154 of the Companies Act 2006 which states a private company must have at least one director. By virtue of Article 7(2), sole directors may ignore the requirements for ‘directors to take decisions collectively’. It is obvious article 7 and article 11 are conflicted, the former acknowledging alignment with section 154 of the Companies Act 2006, conversely the latter appearing to insist a private company must have at least two directors to form a quorum. To provide clarity article 11 may be amended in two forms, precedent A1 allows the directors to adjourn a meeting if a quorum cannot be formed and the option to fix the quorum at more than two directors. Precedent A1 states the voting rights of the quorum clearly. Precedent A2 states clearly that sole directors will not be required to form a quorum and they alone will make all the decisions of the company, for an investor into a private company with a sole director is unambiguous concerning who will have decision making powers.

Precedent A1 The following precedent specifies a quorum for directors if more than two is required. 11.—(1) At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to [adjourn or] call another meeting. [If adjourned, the directors may agree in writing an alternative date, time and place] (2) The quorum for directors’ meetings may be fixed from time to time by a decision of the Directors. (3) The quorum for directors’ meetings is [specify the quorum if more than two]. (4) Subject to the other provisions of these articles, each director participating in a directors’ meeting has one vote on each proposed resolution. (3) If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision— (a) to appoint further directors, or (b) to call a general meeting so as to enable the shareholders to appoint further directors.

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Precedent A2 The following precedent specifies the quorum requirements for a company with a single director. 11.—(1) At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. (2) The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two, [except where the company has one single director in which case they shall constitute a quorum]. (3) If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision— (a) to appoint further directors, or (b) to call a general meeting so as to enable the shareholders to appoint further directors.

Article 11 Previous provisions Table A 1985: Regulations 89 and 90 89. The quorum for the transaction of the business of the directors may be fixed by the directors and unless so fixed at any other number shall be two. A person who holds office only as an alternate director shall, if his appointor is not present, be counted in the quorum. 90. The continuing directors or a sole continuing director may act notwithstanding any vacancies in their number, but, if the number of directors is less than the number fixed as the quorum, the continuing directors or director may act only for the purpose of filling vacancies or of calling a general meeting. Table A 1948: Regulations 99, 100 Table A 1929: Regulations 82, 83 Table A 1908: Regulations 88, 89 Table A 1906: Regulations 88, 90 Table A 1862: Regulation 66 Table B 1856: Regulation 55

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Article 12 Chairing of directors’ meetings 6.14 12.—(1) The directors may appoint a director to chair their meetings. (2) The person so appointed for the time being is known as the chairman. (3) The directors may terminate the chairman’s appointment at any time. (4) If the chairman is not participating in a directors’ meeting within ten minutes of the time at which it was to start, the participating directors must appoint one of themselves to chair it.

Article 12 Analysis The article allows the board of directors to appoint a chairman, this power is vested in the directors alone, the shareholders (or members) cannot interfere with the process (Clarke v Workman).10

Precedent A3 The following precedent removes the chairman’s casting vote. For 50/50 companies and joint ventures the disallowing of a chairman’s casting vote may be critical to retain the balance of voting rights. 12.—(1) The directors may appoint a director to chair their meetings. (2) The person so appointed for the time being is known as the chairman. (3) If the numbers of votes for and against a proposal at a meeting of directors are equal, the chainman or other director acting as chairman shall not have a casting vote. (4) The directors may terminate the chairman’s appointment at any time. (5) If the chairman is not participating in a directors’ meeting within ten minutes of the time at which it was to start, the participating directors must appoint one of themselves to chair it.

10 [1920] 1 IR 107.

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Article 12 Previous provisions Table A 1985: Regulation 91 91. The directors may appoint one of their number to be the chairman of the board of directors and may at any time remove him from that office. Unless he is unwilling to do so, the director so appointed shall preside at every meeting of directors at which he is present. But if there is no director holding that office, or if the director holding it is unwilling to preside or is not present within five minutes after the time appointed for the meeting, the directors present may appoint one of their number to be chairman of the meeting. Table A 1948: Regulation 101 Table A 1929: Regulation 84 Table A 1908: Regulation 90 Table A 1906: Regulation 90 Table A 1862: Regulation 67 Table B 1856: Regulation 56

Article 13 Casting vote 6.15 13.—(1) If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting vote. (2) But this does not apply if, in accordance with the articles, the chairman or other director is not to be counted as participating in the decision-making process for quorum or voting purposes. Article 13 Analysis The appointment of the chairman allows for a casting vote (article 13(1)) in directors meetings, the option is useful to prevent potential deadlocks. It should be noted the chairman appointed is free to act as they see fit with no requirement for impartiality. Article 13 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request

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of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote. Table A 1948: Regulation 98 Table A 1929: Regulation 81 Table A 1908: Regulation 87 Table A 1906: Regulation 87 Table A 1862: Regulation 66 Table B 1856: Regulation 55

Article 14 Conflicts of interest 6.16 14.—(1) If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decisionmaking process for quorum or voting purposes. (2) But if paragraph (3) applies, a director who is interested in an actual or proposed transaction or arrangement with the company is to be counted as participating in the decision-making process for quorum and voting purposes. (3) This paragraph applies when— (a) the company by ordinary resolution disapplies the provision of the articles which would otherwise prevent a director from being counted as participating in the decision-making process; (b) the director’s interest cannot reasonably be regarded as likely to give rise to a conflict of interest; or (c) the director’s conflict of interest arises from a permitted cause. (4) For the purposes of this article, the following are permitted causes— (a) a guarantee given, or to be given, by or to a director in respect of an obligation incurred by or on behalf of the company or any of its subsidiaries; 78

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(b) subscription, or an agreement to subscribe, for shares or other securities of the company or any of its subsidiaries, or to underwrite, sub-underwrite, or guarantee subscription for any such shares or securities; and (c) arrangements pursuant to which benefits are made available to employees and directors or former employees and directors of the company or any of its subsidiaries which do not provide special benefits for directors or former directors. (5) For the purposes of this article, references to proposed decisions and decision-making processes include any directors’ meeting or part of a directors’ meeting. (6) Subject to paragraph (7), if a question arises at a meeting of directors or of a committee of directors as to the right of a director to participate in the meeting (or part of the meeting) for voting or quorum purposes, the question may, before the conclusion of the meeting, be referred to the chairman whose ruling in relation to any director other than the chairman is to be final and conclusive. (7) If any question as to the right to participate in the meeting (or part of the meeting) should arise in respect of the chairman, the question is to be decided by a decision of the directors at that meeting, for which purpose the chairman is not to be counted as participating in the meeting (or that part of the meeting) for voting or quorum purposes.

Article 14 Analysis On 1 October 2008 a new duty was placed on company directors to avoid conflicts of interests in the company. Section 17511 of the Companies Act 2006 requires directors to avoid conflicts of interest, the provisions replaced the previous equitable obligations that any director must account for any profit made personally in conflict with their own duty to the company.12 As regards transactional conflicts of interest, section 17713 requires directors to disclose any interest in a proposed transaction or arrangement with the company which is a separate duty to disclosing any interest in an existing transaction or arrangement with the company.

11 Companies Act 2006, s 175 (Duty to avoid conflicts of interest) ‘(1) A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company.’ 12 The case Boardman v Phipps [1967] 2 AC 46 provides the court’s view on duty. 13 Companies Act 2006, s 177 (Duty to declare interest in proposed transaction or arrangement) ‘(1) If a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company, he must declare the nature and extent of that interest to the other ­directors.’

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The court’s view on the conflicts a director may encounter is first and foremost that the appointed director must demonstrate allegiance to the company. The principle does not concern itself with proving fraud or corruption. The basic premise in the words of Upjohn LJ, is the company is entitled ‘to the undivided loyalty of its directors’ (Boulting v Association of Cinematograph,Television and Allied Technicians).14 Situational or transactional conflicts do not depend on fraud, or absence of bona fides, (Regal (Hastings) Ltd v Gulliver),15 the majority of conflicts may arise through business opportunities or joint ventures. If any director were to enrich himself instead of the company he is liable for breach of duty, regardless of the fact that he acted in good faith. A common conflict concerns a business opportunity presented to the board of directors which is dismissed by the company, subsequently if any board member obtains the opportunity for himself he will be liable to the company. The fact the company rejected the opportunity is of no consequence (Foster Bryant Surveying Ltd v Bryant).16 Transitional rules on conflicts of interest For private companies incorporated before 1 October 2008 the board are required to pass an ordinary resolution to authorise any conflicts or they may amend the articles of association. The duties under section 17517 apply to conflicts of interest that arise after 1 October 2008, therefore as regards companies incorporated under previous Companies Acts the law which applied will continue to pertain to any situation concerning conflicts of interest.18 Article 14 of the model articles focuses on transactional conflicts only, companies formed after 1 October 2008 may rely on the statutory provisions in section 175.The directors may authorise the directors’ conflict of interest or the articles may amend or remove the statutory powers.19

14 15 16 17

[1963] 2 QB 606. [1967] 2 AC 134. [2007] EWCA Civ 200. The Companies Act 2006 (Commencement No. 5, Transitional Provisions and Savings) Order 2007, SI 2007/3495, Part 3, reg 47(1) ‘Section 175 of the Companies Act 2006 (duty to avoid conflicts of ­interest) applies where the situation described in subsection (1) of that section arises on or after 1st October 2008.’ 18 The Companies Act 2006 (Commencement No. 5, Transitional Provisions and Savings) Order 2007, SI 2007/3495, Part 3, reg 47(2) ‘The law that applied before that date continues to apply to such a situation that arose before that date.’ 19 Companies Act 2006, s 175(5) ‘Authorisation may be given by the directors – (a) where the company is a private company and nothing in the company’s constitution invalidates such authorisation, by the matter being proposed to and authorised by the directors’.

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Article 14 Previous provisions Table A 1985: Regulations 95, 96, 9820 95. A director shall not be counted in the quorum present at a meeting in relation to a resolution on which he is not entitled to vote. 96.The company may by ordinary resolution suspend or relax to any extent, either generally or in respect of any particular matter, any provision of the articles prohibiting a director from voting at a meeting of directors or of a committee of directors. 98. If a question arises at a meeting of directors or of a committee of directors as to the right of a director to vote, the question may, before the conclusion of the meeting, be referred to the chairman of the meeting and his ruling in relation to any director other than himself shall be final and conclusive. Table A 1948: Regulation 84

Article 15 Records of decisions to be kept 6.17 15. The directors must ensure that the company keeps a record, in writing, for at least 10 years from the date of the decision recorded, of every unanimous or majority decision taken by the directors.

Article 15 Analysis This article reinstates section 24821 that every company must keep all proceedings at meetings of the directors of the company for at least 10 years. Failure to adhere is punishable by a fine and the articles may not fetter the act. Article 15 Previous provisions Table A 1985: Regulation 100

20 Introduced in 1985. 21 Companies Act 2006, s 248 (Minutes of directors’ meetings) ‘(1) Every company must cause minutes of all proceedings at meetings of its directors to be recorded.’

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100. The directors shall cause minutes to be made in books kept for the purpose— (a) of all appointments of officers made by the directors; and (b) of all proceedings at meetings of the company, of the holders of any class of shares in the company, and of the directors, and of committees of directors, including the names of the directors present at each such meeting. Table A 1948: Regulation 86 Table A 1929: Regulation 70 Table A 1908: Regulation 75 Table A 1906: Regulation 75 Table A 1862: Regulation 61

Precedent A4 The following precedent states the rules for decisions taken by electronic means. 15. (1) The directors must ensure that the company keeps a record, in writing, for at least 10 years from the date of the decision recorded, of every unanimous or majority decision taken by the directors. (2) Where decisions of the directors are taken by electronic means, such decisions shall be recorded by the directors in permanent form, so that they may be read with the naked eye.

Article 16 Directors’ discretion to make further rules 6.18 16. Subject to the articles, the directors may make any rule which they think fit about how they take decisions, and about how such rules are to be recorded or communicated to directors. Article 16 Analysis Article 16 is a new provision intended to provide clear guidance that directors are able to adapt the articles of association for any particular circumstance. The provision expressly states ‘subject to the articles’, in principle the

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directors have no scope to cause conflicting rules or amendments. When considering further rules section 17122 affirms directors must act for the company with full consideration of its constitution. Article 16 Previous provisions No previous provisions.

Article 17 Methods of appointing directors 6.19 17.—(1) Any person who is willing to act as a director, and is permitted by law to do so, may be appointed to be a director— (a) by ordinary resolution, or (b) by a decision of the directors. (2) In any case where, as a result of death, the company has no shareholders and no directors, the personal representatives of the last shareholder to have died have the right, by notice in writing, to appoint a person to be a director. (3) For the purposes of paragraph (2), where 2 or more shareholders die in circumstances rendering it uncertain who was the last to die, a younger shareholder is deemed to have survived an older shareholder.

Article 17 Analysis The provision outlines the methods of appointing a director and combines regulations 78 and 79 of Table A. The previous requirements to fix a maximum number of directors and re-appointment or retire by rotation have been removed. Although not specified, ‘a person who is willing to act’ must have reached the age of 16 and not be an undischarged bankrupt. There is no maximum number of directors allowed for a company, section 15423 requires a minimum of one for a private company. In smaller limited companies, appointing directors without due process set out in article 17 may occur for reasons of expediency. The courts’ view is

22 Companies Act 2006. 23 Companies Act 2006, s 154 (Companies required to have directors) ‘(1) A private company must have at least one director. (2) A public company must have at least two directors.’

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any director not appointed in accordance with articles is considered invalid (Sierra Leone Telecommunications Co Ltd v Barclays Bank plc).24 Article 17 Previous provisions Table A 1985: Regulations 78, 79 78. The company may by ordinary resolution appoint a person who is willing to act to be a director either to fill a vacancy or as an additional director and may also determine the rotation in which any additional directors are to retire. 79.The directors may appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director, provided that the appointment does not cause the number of directors to exceed any number fixed by or in accordance with the articles as the maximum number of directors. Table A 1948: Regulations 94, 95, 97 Table A 1929: Regulations 77, 78, 79 Table A 1908: Regulations 83, 84, 85 Table A 1906: Regulations 83, 84, 85 Table A 1862: Regulations 63, 64 Table B 1856: Regulations 53, 54

Article 18 Termination of director’s appointment 6.20 18. A person ceases to be a director as soon as— (a) that person ceases to be a director by virtue of any provision of the Companies Act 2006 or is prohibited from being a director by law; (b) a bankruptcy order is made against that person; (c) a composition is made with that person’s creditors generally in satisfaction of that person’s debts; (d) a registered medical practitioner who is treating that person gives a written opinion to the company stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months; 24 [1998] 2 All ER 821.

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(e) [paragraph omitted pursuant to The Mental Health (Discrimination) Act 2013] (f) notification is received by the company from the director that the director is resigning from office, and such resignation has taken effect in accordance with its terms.

Article 18 Analysis Article 18 specifies the factors that would automatically terminate a director’s appointment. The main omission from the previous Table A (1985) is the failure to attend directors meetings for six consecutive months, resulting in termination. Article (18)(e) is now omitted with the introduction of The Mental Health (Discrimination) Act 2013. The Act’s main objective is to remove discrimination for mental health reasons and eradicate the stigma associated with mental illness. The Act resulted in company directors having increased safeguarding from being removed as a company director on the basis of mental health. Companies formed prior to 28 April 2013 (who have not updated their articles) ought to consider amending them to include the new legislation. Article 18 Previous provisions Table A 1985: Regulation 81 81. The office of a director shall be vacated if— (a) he ceases to be a director by virtue of any provision of the Act or he becomes prohibited by law from being a director; or (b) he becomes bankrupt or makes any arrangement or composition with his creditors generally; or (c) he is, or may be, suffering from mental disorder and either— (i) he is admitted to hospital in pursuance of an application for admission for treatment under the Mental Health Act 1983 or, in Scotland, an application for admission under the Mental Health (Scotland) Act 1960, or (ii) an order is made by a court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder for his detention or for the appointment of a receiver, curator bonis or other person to exercise powers with respect to his property or affairs; or

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(d) he resigns his office by notice to the company; or (e) he shall for more than six consecutive months have been absent without permission of the directors from meetings of directors held during that period and the directors resolve that his office be vacated. Table A 1948: Regulation 88 Table A 1929: Regulation 72 Table A 1908: Regulation 77 Table A 1906: Regulation 77 Table A 1862: Regulation 57 Table B 1856: Regulation 47

Article 19 Directors’ remuneration 6.21 19.—(1) Directors may undertake any services for the company that the directors decide. (2) Directors are entitled to such remuneration as the directors determine— (a) for their services to the company as directors, and (b) for any other service which they undertake for the company. (3) Subject to the articles, a director’s remuneration may— (a) take any form, and (b) include any arrangements in connection with the payment of a pension, allowance or gratuity, or any death, sickness or disability benefits, to or in respect of that director. (4) Unless the directors decide otherwise, directors’ remuneration accrues from day to day. (5) Unless the directors decide otherwise, directors are not accountable to the company for any remuneration which they receive as directors or other officers or employees of the company’s subsidiaries or of any other body corporate in which the company is interested.

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Article 19 Analysis The main change from the previous Table A is the directors are able to set their own renumeration without involvement from the shareholders and they can act (and be remunerated) as both employees and executives. It should be noted section 1214 of the Companies Act 200625 specifies an independence requirement for auditors, article (19)(1) allows ‘any services’, and officers and employees of the company are specifically barred from acting as auditors.26 Article 19 Previous provisions Table A 1985: Regulations 82, 84, 87 82. The directors shall be entitled to such remuneration as the company may by ordinary resolution determine and, unless the resolution provides otherwise, the remuneration shall be deemed to accrue from day to day. 84. Subject to the provisions of the Act, the directors may appoint one or more of their number to the office of managing director or to any other executive office under the company and may enter into an agreement or arrangement with any director for his employment by the company or for the provision by him of any services outside the scope of the ordinary duties of a director. Any such appointment, agreement or arrangement may be made upon such terms as the directors determine and they may remunerate any such director for his services as they think fit. Any appointment of a director to an executive office shall terminate if he ceases to be a director but without prejudice to any claim to damages for breach of the contract of service between the director and the company. A managing director and a director holding any other executive office shall not be subject to retirement by rotation. 87.The directors may provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for any director who has held but no longer holds any executive office or employment with the company or with any body corporate which is or has been a subsidiary of the company or a predecessor in business of the company or of any such subsidiary, and for any member of his family (including a spouse and a former spouse) or any person who is or was dependent on him, and may (as well before as after he ceases to hold such office or employment) contribute to any fund and pay premiums for the purchase or provision of any such benefit.

25 Companies Act 2006. 26 Companies Act 2006, s 1214 (Independence requirement) ‘(1) A person may not act as statutory auditor of an audited person if one or more of subsections (2), (3) and (4) apply to him.’

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Table A 1948: Regulations 76, 87, 107, 108, 109 Table A 1929: Regulations 65, 68 Table A 1908: Regulations 69, 72 Table A 1906: Regulations 69, 72 Table A 1862: Regulation 54

Article 20 Directors’ expenses 6.22 20. The company may pay any reasonable expenses which the directors properly incur in connection with their attendance at— (a) meetings of directors or committees of directors, (b) general meetings, or (c) separate meetings of the holders of any class of shares or of debentures of the company, or otherwise in connection with the exercise of their powers and the discharge of their responsibilities in relation to the company. Article 20 Analysis Article 20 takes a broad approach to the payment of expenses and improves upon the previous Table A (1985) regulations that allowed for travelling and other expenses only. The article is somewhat implicit stating ‘may pay’ and ‘reasonable expenses’, it must be assumed that which expenses will be paid and the definition of reasonable are matters are for the board of directors to decide. The provision is to some extent conflicted with article 7 that promoted the use of technology to attend meetings. A director who resides 200 miles from head office who wishes to attend in person for every meeting would incur reasonable expenses in doing so – in contrast with a director who may only attend by conference call would cost the company far less in expenses. It may be appropriate (as many companies do) to expand on this general article and detail directors expenses by employing internal procedures and documents. The articles of association are public documents, it could be expected companies would not want their directors’ expenses to be public knowledge, therefore, editing the article to include more detailed expense data ought to be avoided.

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Article 20 Previous provisions Table A 1985: Regulation 83 83. The directors may be paid all travelling, hotel, and other expenses properly incurred by them in connection with their attendance at meetings of directors or committees of directors or general meetings or separate meetings of the holders of any class of shares or of debentures of the company or otherwise in connection with the discharge of their duties Table A 1948: Regulation 76

Part 3 Shares and distributions Article 21 All shares to be fully paid up 6.23 21.—(1) No share is to be issued for less than the aggregate of its nominal value and any premium to be paid to the company in consideration for its issue. (2) This does not apply to shares taken on the formation of the company by the subscribers to the company’s memorandum. Article 21 Analysis The article was a new provision and did appear in the previous Table A, the majority of limited companies are predominately SMEs and therefore are unlikely to use share classes that are part or nil paid. Stating and implementing a strategy to only use fully paid up share classes removes the need for lengthy provisions on liens and forfeiture. The underlying concept for the current articles versus the previous Table A was simplification based on what transpires in companies on a day to day basis. In ought to be noted should a company wish to issue part or nil paid shares the articles of association would require amendment to reflect the new share classes issued by the company, with additional new provisions for liens and forfeiture. Article 21 Previous provisions No previous provisions.

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Article 22 Powers to issue different classes of share 6.24 22.—(1) Subject to the articles, but without prejudice to the rights attached to any existing share, the company may issue shares with such rights or restrictions as may be determined by ordinary resolution. (2) The company may issue shares which are to be redeemed, or are liable to be redeemed at the option of the company or the holder, and the directors may determine the terms, conditions and manner of redemption of any such shares. Article 22 Analysis Shares carry rights, on the basis the article permits, the company is free to define the rights attached to the share classes issued. The most common rights relate to: dividends, capital on winding up and voting. Redeemable shares are issued with rights to repurchase the shares back at a specified date in the future, or by agreement with the directors, they are primally used for outside investors and employee share schemes. Financing redemption, payment and cancellation of the shares is restricted by the Companies Act 2006,27 therefore care should be taken if adapting the article. The article aligns with section 68528 which permits the directors of a limited company to determine the terms, conditions and manner of redemption of shares if they are authorised by either the company’s articles or by a resolution of the company. The articles may restrict or exclude the issue of redeemable shares29 for private limited companies, it should be noted a company may not issue redeemable share classes without initially issuing non-redeemable shares.30 A public limited company may only issue redeemable shares if it is authorised to do so by its articles.31 Weighted voting rights The majority of shares issued by private companies are ordinary shares which carry a right to one vote per share. Investors may insist on adjusting the voting rights in the event the board attempts to remove an investor appointed director or take actions that may adversely affect their investment.

27 Companies Act 2006, Ch 3 (Redeemable shares). 28 Companies Act 2006, s 685 (Terms and manner of redemption). 29 Companies Act 2006, s 684(2) ‘The articles of a private limited company may exclude or restrict the issue of redeemable shares.’ 30 Companies Act 2006, s 684(4). 31 Companies Act 2006, s 684(3).

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In English law it is generally accepted (on the basis the articles provide permission) that the share classes issued by the company may enjoy enhanced or weighted voting rights. A company may issue Class A and Class B ordinary shares with equal rights to winding up and dividends, however on specific voting matters (such as removal of directors) the class A shares would hold three votes per share in order to defeat any resolution or poll. The Companies Act 2006 allows for weighted voting rights, care should be taken when applying the provisions of section 284.32 In a family business through succession planning and the generous benefit of gift hold over relief, founding members typically dispose of their shareholding to the next generation without an immediate capital gains on disposal. Using this strategy leaves the founding members with reduced voting rights and in the eventuality of a family feud the possibility of being removed as a director of the company.Weighted voting rights may have the desired effect of entrenching a director. Bushell v Faith In Bushell v Faith a family owned business Bush Court (Southgate) Ltd had issued capital of 300 paid-up shares registered to Mr Faith and his two sisters Mrs Bushell and Mrs Bayne equally. Mr Faith’s conduct caused his two sisters to convene a meeting on 22 November 1968 where an ordinary resolution was proposed in order to remove Mr Faith as director. On a show of hands the resolution was passed, whereupon Mr Faith demanded a poll. The two sisters resorted to legal proceedings, suggesting special article 9 (see below) frustrated section 18433 of the Companies Act 2006 and should be made void. The House of Lords rejected the application on the grounds that regulation 2 of Table A 1985 (now article 22(1)) was unambiguous in allowing weighted voting rights. The company articles include special article 9 which read: ‘In the event of a Resolution being proposed at any General Meeting of the Company for the removal from office of any Director, any shares held by that Director shall on a poll in respect of such Resolution carry the right to three votes per share and regulation 62 of Part 1 of Table A shall be construed ­accordingly.’

Lord Upjohn stated: ‘Parliament has never sought to fetter the right of the company to issue a share with such rights or restrictions as it may think fit.’

32 Companies Act 2006. 33 Companies Act 1985.

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Lord Donovan noted: ‘And there may be good reasons why Parliament should leave some companies with freedom of manoeuvre in this particular matter. There are many small companies which are conducted in practice as though they were little more than partnerships, particularly family companies running a family business; and it is, unfortunately, sometimes necessary to provide some safeguard against family quarrels having their repercussions in the boardroom.’

Article 22 Previous provisions Table A 1985: Regulations 2, 3 2. Subject to the provisions of the Act and without prejudice to any rights attached to any existing shares, any share may be issued with such rights or restrictions as the company may by ordinary resolution determine. 3. Subject to the provisions of the Act, shares may be issued which are to be redeemed or are to be liable to be redeemed at the option of the company or the holder on such terms and in such manner as may be provided by the articles. Table A 1948: Regulations 2, 3 Table A 1929: Regulations 2, 3

Article 23 Company not bound by less than absolute interests 6.25 23. Except as required by law, no person is to be recognised by the company as holding any share upon any trust, and except as otherwise required by law or the articles, the company is not in any way to be bound by or recognise any interest in a share other than the holder’s absolute ownership of it and all the rights attaching to it. Article 23 Analysis It is common for shares to held in trust funds (usually discretionary trusts), senior family members may wish to pass on shares to their issue and still retain a modicum of control over the shareholdings. Shares held on trust present the issue of who holds the rights in the shares? Article 23 enforces section 12634 which provides that any trust fund is not

34 Companies Act 2006, s 126 (Trusts not to be entered on register). ‘No notice of any trust, expressed, implied or constructive, shall be entered on the register of members of a company registered in England and Wales or Northern Ireland, or be receivable by the registrar.’

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recognised by virtue that it cannot register as members of a company in England, Wales or Northern Ireland. Thought needs to be given when settling shares into trusts as to whom will be the registered holders, if the trustees are registered, the beneficiaries will be excluded by the company and will only be required to deal with the trustees. It should be noted the company may take actions requested by the trustees (assuming they are the registered entity) that may breach the trust rules. The company cannot be held accountable for such infringements of trust law or rules, the prescribed particulars of the shares are not interchangeable between trustee and beneficiary, the rights attaching from the company perspective are provided to the registered entity. The beneficiaries cannot insist the company accepts their vote over the trustees if they are not registered, section 14535 allows a member to nominate another person to ‘enjoy or exercise all or any specified rights of the member in relation to the company’. If the company is aware that shareholdings are held in trust or by intermediaries the articles ought to be redrafted to specifically allow section 145 to be enforced, without the adapted article section 145 will not apply. Article 23 Previous provisions Table A 1985: Regulation 5 5. Except as required by law, no person shall be recognised by the company as holding any share upon any trust and (except as otherwise provided by the articles or by law) the company shall not be bound by or recognise any interest in any share except an absolute right to the entirety thereof in the holder. Table A 1948: Regulation 7

Article 24 Share certificates 6.26 24.—(1) The company must issue each shareholder, [within two months of transfer or allotment], free of charge, with one or more certificates in respect of the shares which that shareholder holds. (2) Every certificate must specify— (a) in respect of how many shares, of what class, it is issued; 35 Companies Act 2006, s 145 (Effect of provisions of articles as to enjoyment or exercise of members’ rights).

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(b) the nominal value of those shares; [(c) that the shares are fully paid]; and (d) any distinguishing numbers assigned to them. (3) No certificate may be issued in respect of shares of more than one class. (4) If more than one person holds a share, only one certificate may be issued in respect of it. (5) Certificates must— (a) have affixed to them the company’s common seal, or (b) be otherwise executed in accordance with the Companies Acts. Article 24 Analysis Article 24 outlines the company’s procedure when issuing share certificates by allotment or transfer, share certificates by virtue of section 76836 are still prima facie evidence of title to the shares. Article 24(5) asserts certificates must have affixed the company’s common seal, by virtue of section 4437 if the company will execute all share certificates by signature,38 then the provision may be removed or adapted (see precedent A5). Careful drafting may be required if article 21 is considered for amendment, (all shares to be fully paid up) to include part paid shares as article 24(2)(c) indicates, shares are fully paid up, article 21 and article 24(2)(c) would require deletion or amendment should anything other than fully paid up shares be issued by the company. Section 769 certificates on allotment and section 776 certificates on transfer both specify a time limit of two months, article 24(1) can be amended to include the time frame required by the Companies Act 2006 (see precedent A6)

36 Companies Act 2006, s 768 (Share certificate to be evidence of title). 37 Companies Act 2006, s 44 (Execution of documents). 38 Companies Act 2006, s 44(2) ‘A document is validly executed by a company if it is signed on behalf of the company – (a) by two authorised signatories, or (b) by a director of the company in the presence of a witness who attests the signature.’

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Precedent A5 The following precedent clarifies the execution of share certificates. Certificates must be executed in accordance with the Companies Acts. Precedent A6 The following precedent specifies the time frame on issuing share certificates. Share certificates 24.—(1) The company must issue each shareholder, within two months of transfer or allotment, free of charge, with one or more certificates in respect of the shares which that shareholder holds.

Article 24 Previous provisions Table A 1985: Regulation 6 6. Every member, upon becoming the holder of any shares, shall be entitled without payment to one certificate for all the shares of each class held by him (and, upon transferring a part of his holding of shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares upon payment for every certificate after the first of such reasonable sum as the directors may determine. Every certificate shall be sealed with the seal and shall specify the number, class and distinguishing numbers (if any) of the shares to which it relates and the amount or respective amounts paid up thereon.The company shall not be bound to issue more than one certificate for shares held jointly by several persons and delivery of a certificate to one joint holder shall be a sufficient delivery to all of them. Table A 1948: Regulation 8 Table A 1929: Regulation 4 Table A 1908: Regulation 6 Table A 1906: Regulation 6 Table A 1862: Regulation 2 Table B 1856: Regulation 8

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Article 25 Replacement share certificates 6.27 25.—(1) If a certificate issued in respect of a shareholder’s shares is— (a) damaged or defaced, or (b) said to be lost, stolen or destroyed, that shareholder is entitled to be issued with a replacement certificate in respect of the same shares. (2) A shareholder exercising the right to be issued with such a replacement certificate— (a) may at the same time exercise the right to be issued with a single certificate or separate certificates; (b) must return the certificate which is to be replaced to the company if it is damaged or defaced; and (c) must comply with such conditions as to evidence, indemnity and the payment of a reasonable fee as the directors decide. Article 25 Analysis Article 25 describes the company rules on issuing replacement share certificates. The typical procedure if a company is required to provide replacement certificates is for the member to return the damaged or defaced certificates and provide the company an indemnity, for example: ‘The original share certificate in respect of 100 Class A Ordinary shares in ABC Limited has been lost or destroyed.’

Article 25 Previous provisions Table A 1985: Regulation 7 7. If a share certificate is defaced, worn-out, lost or destroyed, it may be renewed on such terms (if any) as to evidence and indemnity and payment of the expenses reasonably incurred by the company in investigating evidence as the directors may determine but otherwise free of charge, and (in the case of defacement or wearing-out) on delivery up of the old certificate. Table A 1948: Regulation 9 Table A 1929: Regulation 5 Table A 1908: Regulation 7

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Table A 1906: Regulation 7 Table A 1862: Regulations 2, 3 Table B 1856: Regulations 8, 9

Article 26 Share transfers 6.28 26.—(1) Shares may be transferred by means of an instrument of transfer in any usual form or any other form approved by the directors, which is executed by or on behalf of the transferor. (2) No fee may be charged for registering any instrument of transfer or other document relating to or affecting the title to any share. (3) The company may retain any instrument of transfer which is registered. (4) The transferor remains the holder of a share until the transferee’s name is entered in the register of members as holder of it. (5) The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent. Article 26 Analysis A company will require control over its shares and to whom they can be transferred. A conventional procedure used regularly by companies is to offer shares on a pre-emptive basis.The member wishing to dispose of their shareholding offers first refusal to other members, this may include the company purchasing the shares, if the articles allow it. It is unlikely that any potential external purchaser would consider acquiring a minority shareholding, typically a sale of a company would involve all members and the purchaser buying the company outright on terms favourable to majority and minority shareholders. On the basis a minority shareholder prompted the company or its members to buy out the holding and employed the pre-emptive provisions (assuming they are drafted in the company’s constitution), funds may not be available to complete the transaction. A common occurrence where share buybacks and pre-emption rights cause difficulties for a company is on the death of a shareholder who has by will or

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intestacy allowed the shareholding to pass to his beneficiaries or executors. The following articles 27 and 28 provide guidance on transferring shares for a deceased member. It should be noted shareholders ought to agree on a rolling three-year basis the value of the members’ shares on the assumption any of them shall die in that period. Once a fixed price is agreed a cross-option agreement can be put in place with the option of a life insurance policy on each member’s life to cover the share purchase from the beneficiary. There are a number of common circumstances that company directors ought to plan for and draft suitable precedents in the articles of association to prevent expensive litigation. Broadly the following issues should be addressed on a regular basis and a suitable strategy implemented: ●●

The death of a member and cross options agreements.

●●

Deadlocked company.

●●

Permitted transfers to family members.

●●

Voluntary transfers.

●●

Mandatory transfer for good and bad leavers.

●●

Drag and tag along.

Please refer to the main Precedents section which provides a full discussion on the subject of avoiding litigation, share transfers and share sales. Article 26 Previous provisions Table A 1985: Regulations 23–28 23.The instrument of transfer of a share may be in any usual form or in any other form which the directors may approve and shall be executed by or on behalf of the transferor and, unless the share is fully paid, by or on behalf of the transferee. 24. The directors may refuse to register the transfer of a share which is not fully paid to a person of whom they do not approve and they may refuse to register the transfer of a share on which the company has a lien. They may also refuse to register a transfer unless— (a) it is lodged at the office or at such other place as the directors may appoint and is accompanied by the certificate for the shares to which it relates and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer; (b) it is in respect of only one class of shares; and (c) it is in favour of not more than four transferees.

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25. If the directors refuse to register a transfer of a share, they shall within two months after the date on which the transfer was lodged with the company send to the transferee notice of the refusal. 26.The registration of transfers of shares or of transfers of any class of shares may be suspended at such times and for such periods (not exceeding thirty days in any year) as the directors may determine. 27. No fee shall be charged for the registration of any instrument of transfer or other document relating to or affecting the title to any share. 28.The company shall be entitled to retain any instrument of transfer which is registered, but any instrument of transfer which the directors refuse to register shall be returned to the person lodging it when notice of the refusal is given Table A 1948: Regulations 22, 23, 24, 25, 26, 27, 28 Table A 1929: Regulations 17, 18, 19 Table A 1908: Regulations 18, 19, 20 Table A 1906: Regulations 18, 19, 20 Table A 1862: Regulations 8, 9, 10, 11 Table B 1856: Regulations 7, 9a, 14, 27

Article 27 Transmission of shares 6.29 27.—(1) If title to a share passes to a transmittee, the company may only recognise the transmittee as having any title to that share. (2) A transmittee who produces such evidence of entitlement to shares as the directors may properly require— (a) may, subject to the articles, choose either to become the holder of those shares or to have them transferred to another person, and (b) subject to the articles, and pending any transfer of the shares to another person, has the same rights as the holder had. (3) But transmittees do not have the right to attend or vote at a general meeting, or agree to a proposed written resolution, in respect of shares to which they are entitled, by reason of the holder’s death or bankruptcy or otherwise, unless they become the holders of those shares.

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Article 27 Analysis The transmission of shares is concerned with the procedure when a person becomes entitled to a shareholding by the operation of law. In the majority of cases transmission will occur on the death of the registered shareholder or if they become bankrupt. Transmission is the automatic transfer of a share for a particular legal reason. This will occur for example when a shareholder dies and leaves a will, their shares will be automatically transferred to the executor of the will. When a shareholder dies without leaving a will, their shares will be automatically transferred to their administrator when the court grants the letters of administration appointing the administrator as their personal representative. If a shareholder is declared bankrupt, their shares will be transferred to their personal representative. All transfers, or request for transfers, are subject to the articles of association and without express permission of the directors may be refused. Article 27 Previous provisions Table A 1985: Regulation 29 29. If a member dies the survivor or survivors where he was a joint holder, and his personal representatives where he was a sole holder or the only survivor of joint holders, shall be the only persons recognised by the company as having any title to his interest; but nothing herein contained shall release the estate of a deceased member from any liability in respect of any share which had been jointly held by him. Table A 1948: Regulation 29 Table A 1929: Regulation 20 Table A 1908: Regulation 21 Table A 1906: Regulation 21 Table A 1862: Regulation 12 Table B 1856: Regulation 10

Article 28 Exercise of transmittees’ rights 6.30 28.—(1) Transmittees who wish to become the holders of shares to which they have become entitled must notify the company in writing of that wish. (2) If the transmittee wishes to have a share transferred to another person, the transmittee must execute an instrument of transfer in respect of it. 100

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(3) Any transfer made or executed under this article is to be treated as if it were made or executed by the person from whom the transmittee has derived rights in respect of the share, and as if the event which gave rise to the transmission had not occurred. Article 28 Analysis The article allows the individual who becomes entitled to the shareholdings either by death or an act of law to elect to become a member himself or another entity by executing an instrument of transfer. Article 28 Previous provisions Table A 1985: Regulation 30 30. A person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as the directors may properly require, elect either to become the holder of the share or to have some person nominated by him registered as the transferee. If he elects to become the holder he shall give notice to the company to that effect. If he elects to have another person registered he shall execute an instrument of transfer of the share to that person. All the articles relating to the transfer of shares shall apply to the notice or instrument of transfer as if it were an instrument of transfer executed by the member and the death or bankruptcy of the member had not occurred. Table A 1948: Regulations 30, 31 Table A 1929: Regulation 21 Table A 1908: Regulation 22 Table A 1906: Regulation 22 Table A 1862: Regulations 13, 14 Table B 1856: Regulations 11, 12, 13, 14

Article 29 Transmittees bound by prior notices 6.31 29. If a notice is given to a shareholder in respect of shares and a transmittee is entitled to those shares, the transmittee is bound by the notice if it was given to the shareholder before the transmittee’s name has been entered in the register of members.

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Article 29 Analysis This is a new article, the purpose of which is to ensure the transfer provisions detailed in the articles of association are adhered to. Article 29 Previous provisions No previous provisions.

Article 30 Procedure for declaring dividends 6.32 30.—(1) The company may by ordinary resolution declare dividends, and the directors may decide to pay interim dividends. (2) A dividend must not be declared unless the directors have made a recommendation as to its amount. Such a dividend must not exceed the amount recommended by the directors. (3) No dividend may be declared or paid unless it is in accordance with shareholders’ respective rights. (4) Unless the shareholders’ resolution to declare or directors’ decision to pay a dividend, or the terms on which shares are issued, specify otherwise, it must be paid by reference to each shareholder’s holding of shares on the date of the resolution or decision to declare or pay it. (5) If the company’s share capital is divided into different classes, no interim dividend may be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrear. (6) The directors may pay at intervals any dividend payable at a fixed rate if it appears to them that the profits available for distribution justify the payment. (7) If the directors act in good faith, they do not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on shares with deferred or nonpreferred rights.

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Article 30 Analysis Part 23 of the Companies Act provides statutory obligations the company must adhere to when declaring dividends, in particular section 83039 which specifies dividends can only be paid from profits. Article 30(1) provides precise terminology for the declaration and payment of dividends. Final dividends are declared by the company’s board of directors based on the full year’s financial statements and cannot be revoked by shareholders, an interim dividend can be paid out of surplus profits from any previous financial year, if recommended by the board. The final dividend is debt of the company when declared, an interim dividend is a mere resolution to pay and does not create any obligation or debt, this allows the directors to revoke the interim dividends should they so wish (Potel v IRC).40 Article 30 Previous provisions Table A 1985: Regulations 102, 103, 104 102. Subject to the provisions of the Act, the company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the directors. 103. Subject to the provisions of the Act, the directors may pay interim dividends if it appears to them that they are justified by the profits of the company available for distribution. If the share capital is divided into different classes, the directors may pay interim dividends on shares which confer deferred or non-preferred rights with regard to dividend as well as on shares which confer preferential rights with regard to dividend, but no interim dividend shall be paid on shares carrying deferred or nonpreferred rights if, at the time of payment, any preferential dividend is in arrear. The directors may also pay at intervals settled by them any dividend payable at a fixed rate if it appears to them that the profits available for distribution justify the payment. Provided the directors act in good faith they shall not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on any shares having deferred or non-preferred rights. 104. Except as otherwise provided by the rights attached to shares, all dividends shall be declared and paid according to the amounts paid up on

39 Companies Act 2006, s 830 (Distributions to be made only out of profits available for the purpose). 40 [1971] 2 All ER 504.

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the shares on which the dividend is paid. All dividends shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid; but, if any share is issued on terms providing that it shall rank for dividend as from a particular date, that share shall rank for dividend accordingly. Table A 1948: Regulations 114, 115, 118 Table A 1929: Regulations 89, 90, 92 Table A 1908: Regulations 95, 96, 98 Table A 1906: Regulations 95, 96, 98 Table A 1862: Regulation 72 Table B 1856: Regulations 63, 65

Article 31 Payment of dividends and other distributions 6.33 31.—(1) Where a dividend or other sum which is a distribution is payable in respect of a share, it must be paid by one or more of the following means— (a) transfer to a bank or building society account specified by the distribution recipient either in writing or as the directors may otherwise decide; (b) sending a cheque made payable to the distribution recipient by post to the distribution recipient at the distribution recipient’s registered address (if the distribution recipient is a holder of the share), or (in any other case) to an address specified by the distribution recipient either in writing or as the directors may otherwise decide; (c) sending a cheque made payable to such person by post to such person at such address as the distribution recipient has specified either in writing or as the directors may otherwise decide; or (d) any other means of payment as the directors agree with the distribution recipient either in writing or by such other means as the directors decide. (2) In the articles, “the distribution recipient” means, in respect of a share in respect of which a dividend or other sum is payable— (a) the holder of the share; or (b) if the share has two or more joint holders, whichever of them is named first in the register of members; or (c) if the holder is no longer entitled to the share by reason of death or bankruptcy, or otherwise by operation of law, the transmittee. 104

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Article 31 Analysis The article outlines the company procedure for the physical payment of dividends. Article 31(1)(a) allows for electronic transfer of dividend payments, regulation 106 of Table A prescribed payment by cheque sent to the registered address of the person entitled to receive the payment. Article 31(1)(b) allows cheque payments to be sent to any address specified in writing, it is unlikely today a small company would issue dividend payments by cheque, it was somewhat fortuitous when the articles were drafted in 2005 that article 31(1)(d) allows any means of payments agreed between the directors and the recipient. The articles provide (without amendment) for payment using online money transfers or e-commerce payment systems such as Paypal or Google Wallet. Article 31(2)(c) relates to the previous articles 27 and 28 and affirms dividends will be paid to the personal representative in the case of a bankrupt or executor in the case of death, prior to any potential transfer. Article (31) Previous provisions Table A 1985: Regulation 106 106. Any dividend or other moneys payable in respect of a share may be paid by cheque sent by post to the registered address of the person entitled or, if two or more persons are the holders of the share or are jointly entitled to it by reason of the death or bankruptcy of the holder, to the registered address of that one of those persons who is first named in the register of members or to such person and to such address as the person or persons entitled may in writing direct. Every cheque shall be made payable to the order of the person or persons entitled or to such other person as the person or persons entitled may in writing direct and payment of the cheque shall be a good discharge to the company. Any joint holder or other person jointly entitled to a share as aforesaid may give receipts for any dividend or other moneys payable in respect of the share. Table A 1948: Regulation 121 Table A 1929: Regulations 94, 95 Table A 1908: Regulations 100, 101 Table A 1906: Regulation 76 Table A 1862: Regulation 66 Table B 1856: Regulation 67

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Article 32 No interest on distributions 6.34 32. The company may not pay interest on any dividend or other sum payable in respect of a share unless otherwise provided by— (a) the terms on which the share was issued, or (b) the provisions of another agreement between the holder of that share and the company.41 Article 32 Analysis The article states the common practice that interest is not payable on distributions. The Companies Act 2006 does not prevent interest being paid and the article could be amended accordingly to reflect any interest payments agreed between the company and the shareholder as per article 32(b). Article 32 Previous provisions Table A 1985: Regulation 107 107. No dividend or other moneys payable in respect of a share shall bear interest against the company unless otherwise provided by the rights attached to the share. Table A 1948: Regulation 122 Table A 1929: Regulation 96 Table A 1908: Regulation 102 Table A 1906: Regulation 102 Table A 1862: Regulation 77 Table B 1856: Regulation 68

Article 33 Unclaimed distributions 6.35 33.—(1) All dividends or other sums which are— (a) payable in respect of shares, and

41 Article 32(b) is a new regulation.

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(b) unclaimed after having been declared or become payable,

may be invested or otherwise made use of by the directors for the benefit of the company until claimed.

(2) The payment of any such dividend or other sum into a separate account does not make the company a trustee in respect of it. (3) If— (a) twelve years have passed from the date on which a dividend or other sum became due for payment, and (b) the distribution recipient has not claimed it,

the distribution recipient is no longer entitled to that dividend or other sum and it ceases to remain owing by the company. Article 33 Analysis The article provides clarity between the company and the shareholder if dividend payments are unclaimed, as discussed in article 30, final dividends are a debt to the company and unclaimed dividends would be reflected on the company’s balance sheet. Article 33(3)(a) allows the company after a period of 12 years to write off the debt. The Limitation Act 1980 provides that the time limit is generally six years, the sample model articles of association under the Companies Act 2006 state a 12-year period and most companies allow for 12 years. It is possible to reduce the period for unclaimed dividends (but not shares) down to six years by amending the company’s articles of association. Unpaid dividends by (UK) companies in 2018 are a staggering £100 billion.42 Public companies are keen to move the debt from its balance sheet; Rentokil Initial plc whose unpaid dividends amount to £1 million has instigated a novel strategy by adapting its articles of association and used unclaimed shares and unclaimed dividends to support good causes.43 Article 33 Previous provisions Table A 1985: Regulation 108 108. Any dividend which has remained unclaimed for twelve years from the date when it became due for payment shall, if the directors so resolve, be forfeited and cease to remain owing by the company. Table A 1862: Regulation 76 Table B 1856: Regulation 67

42 https://www.linkassetservices.com/. 43 https://www.rentokil-initial.com/media/news-releases/news-2019/new-approach-puts-unclaimeddividends-and-shares-to-good-use.aspx.

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Article 34 Non-cash distributions 6.36 34.—(1) Subject to the terms of issue of the share in question, the company may, by ordinary resolution on the recommendation of the directors, decide to pay all or part of a dividend or other distribution payable in respect of a share by transferring non-cash assets of equivalent value (including, without limitation, shares or other securities in any company). (2) For the purposes of paying a non-cash distribution, the directors may make whatever arrangements they think fit, including, where any difficulty arises regarding the distribution— (a) fixing the value of any assets; (b) paying cash to any distribution recipient on the basis of that value in order to adjust the rights of recipients; and (c) vesting any assets in trustees. Article 34 Analysis The article allows a distribution in specie, although a dividend ought to be paid in cash (Wood v Odessa Waterworks Co).44 Where a dividend is declared in cash, but satisfied by a transfer of assets, it is called ‘dividend in specie’. A distribution in specie occurs where a company makes a distribution of an identified non-cash asset, such as without first declaring an amount in cash. Distributions in specie are detailed under section 845 of the Companies Act 2006.45 Both dividend in specie and distribution in specie must be made in accordance with Part 23 of the Companies Act 2006.46 Article 34 Previous provisions Table A 1985: Regulation 105 105.A general meeting declaring a dividend may, upon the recommendation of the directors, direct that it shall be satisfied wholly or partly by the distribution of assets and, where any difficulty arises in regard to the distribution, the directors may settle the same and in particular may issue fractional certificates and fix the value for distribution of any assets and may

44 (1889) 42 Ch D 636. 45 Companies Act 2006, s 845 (Distributions in kind: determination of amount). 46 Part 23 Distributions.

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determine that cash shall be paid to any member upon the footing of the value so fixed in order to adjust the rights of members and may vest any assets in trustees. Table A 1948: Regulation 120

Article 35 Waiver of distributions 6.37 35. Distribution recipients may waive their entitlement to a dividend or other distribution payable in respect of a share by giving the company notice in writing to that effect, but if— (a) the share has more than one holder, or (b) more than one person is entitled to the share, whether by reason of the death or bankruptcy of one or more joint holders, or otherwise,

the notice is not effective unless it is expressed to be given, and signed, by all the holders or persons otherwise entitled to the share. Article 35 Analysis Article 35 is a new addition, with no previous regulation in Table A. Care ought to be taken in regards of wavier if the company has two or three directors and is a family concern. A strategy to avoid tax by allowing all the dividends to be paid to a spouse was explored in (Buck v Revenue and Customs Comrs),47 there must be a commercial reason for waving rights to dividends by a member. The ‘arm’s length’ test stipulates, would the member have waved his rights to dividends if they had been operating at arm’s length? Article 35(b) relates to previous articles on transmission, that if entitlement to dividends could be claimed by multiple individuals, then permission and signature must be sought from all those with a valid claim. It should be noted, tax advice should be sought before consideration of the wavier of distributions. Article 35 Previous provisions No previous provisions.

47 [2009] STC (SCD) 6.

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Article 36 Authority to capitalise and appropriation of capitalised sums 6.38 36.—(1) Subject to the articles, the directors may, if they are so authorised by an ordinary resolution— (a) decide to capitalise any profits of the company (whether or not they are available for distribution) which are not required for paying a preferential dividend, or any sum standing to the credit of the company’s share premium account or capital redemption reserve; and (b) appropriate any sum which they so decide to capitalise (a “capitalised sum”) to the persons who would have been entitled to it if it were distributed by way of dividend (the “persons entitled”) and in the same proportions. (2) Capitalised sums must be applied— (a) on behalf of the persons entitled, and (b) in the same proportions as a dividend would have been distributed to them. (3) Any capitalised sum may be applied in paying up new shares of a nominal amount equal to the capitalised sum which are then allotted credited as fully paid to the persons entitled or as they may direct. (4) A capitalised sum which was appropriated from profits available for distribution may be applied in paying up new debentures of the company which are then allotted credited as fully paid to the persons entitled or as they may direct. (5) Subject to the articles the directors may— (a) apply capitalised sums in accordance with paragraphs (3) and (4) partly in one way and partly in another; (b) make such arrangements as they think fit to deal with shares or debentures becoming distributable in fractions under this article (including the issuing of fractional certificates or the making of cash payments); and (c) authorise any person to enter into an agreement with the company on behalf of all the persons entitled which is binding on them in respect of the allotment of shares and debentures to them under this article.

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Article 36 Analysis The article and its provisions allow the company by ordinary resolution to capitalise on profits by converting the company’s retained earnings into capital stock. The capitalisation of profits process usually involves issuing bonus shares to existing shareholders. This allocation is achieved by issuing shares in proportion to the existing members’ share holdings. Article 36 Previous provisions Table A 1985: Regulation 110 110. The directors may with the authority of an ordinary resolution of the company— (a) subject as hereinafter provided, resolve to capitalise any undivided profits of the company not required for paying any preferential dividend (whether or not they are available for distribution) or any sum standing to the credit of the company’s share premium account or capital redemption reserve; (b) appropriate the sum resolved to be capitalised to the members who would have been entitled to it if it were distributed by way of dividend and in the same proportions and apply such sum on their behalf either in or towards paying up the amounts, if any, for the time being unpaid on any shares held by them respectively, or in paying up in full unissued shares or debentures of the company of a nominal amount equal to that sum, and allot the shares or debentures credited as fully paid to those members, or as they may direct, in those proportions, or partly in one way and partly in the other: but the share premium account, the capital redemption reserve, and any profits which are not available for distribution may, for the purposes of this regulation, only be applied in paying up unissued shares to be allotted to members credited as fully paid; (c) make such provision by the issue of fractional certificates or by payment in cash or otherwise as they determine in the case of shares or debentures becoming distributable under this regulation in fractions; and (d) authorise any person to enter on behalf of all the members concerned into an agreement with the company providing for the allotment to them respectively, credited as fully paid, of any shares or debentures to which they are entitled upon such capitalisation, any agreement made under such authority being binding on all such members.

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Table A 1948: Regulations 128, 129 Table A 1929: Regulation 81 Table A 1908: Regulation 87 Table A 1906: Regulation 87 Table A 1862: Regulation 66 Table B 1856: Regulation 55

Part 4 Decision-making by shareholders Article 37 Attendance and speaking at general meetings 6.39 37.—(1) A person is able to exercise the right to speak at a general meeting when that person is in a position to communicate to all those attending the meeting, during the meeting, any information or opinions which that person has on the business of the meeting. (2) A person is able to exercise the right to vote at a general meeting when— (a) that person is able to vote, during the meeting, on resolutions put to the vote at the meeting, and (b) that person’s vote can be taken into account in determining whether or not such resolutions are passed at the same time as the votes of all the other persons attending the meeting. (3) The directors may make whatever arrangements they consider appropriate to enable those attending a general meeting to exercise their rights to speak or vote at it. (4) In determining attendance at a general meeting, it is immaterial whether any two or more members attending it are in the same place as each other. (5) Two or more persons who are not in the same place as each other attend a general meeting if their circumstances are such that if they have (or were to have) rights to speak and vote at that meeting, they are (or would be) able to exercise them.

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Article 37 Analysis Article 37, a new provision, builds on the general assumption that modern companies require the board of directors to have flexibility in how they conduct meetings. Broadly, with the advent of technology it is envisaged that the board will not always be present in a room at the same location. Article 37(3) allows for directors who may have disabilities that may impede formal communication. Article 37 Previous provisions No previous provisions.

Article 38 Quorum for general meetings 6.40 38. No business other than the appointment of the chairman of the meeting is to be transacted at a general meeting if the persons attending it do not constitute a quorum. Article 38 Analysis Article 11 outlines the requirements for two directors to form a valid quorum, it should be noted the company may alter the provisions in the articles to specify how a quorum is to be formed. Section 318(2) of the Companies Act 2006 allows the articles to override this specific section of the act. The persons who constitute the quorum are not limited to its members. Section 318 of the Companies Act 2006 stipulates ‘qualifying person’ which means a member, a person appointed by proxy or a corporate representative (as defined in section 323 of the Companies Act 2006). If the meeting is inquorate it must be adjourned. If a company has only one member, then their attendance at a meeting is a quorum (Companies Act 2006, s 318(1)). Article 38 Previous provisions Table A 1985: Regulation 40 40. No business shall be transacted at any meeting unless a quorum is present. Save in the case of a company with a single member two persons entitled to vote upon the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation, shall be a quorum.

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Table A 1948: Regulation 53 Table A 1929: Regulation 45 Table A 1908: Regulation 51 Table A 1906: Regulation 51 Table A 1862: Regulation 37 Table B 1856: Regulation 31

Article 39 Chairing general meetings 6.41 39.—(1) If the directors have appointed a chairman, the chairman shall chair general meetings if present and willing to do so. (2) If the directors have not appointed a chairman, or if the chairman is unwilling to chair the meeting or is not present within ten minutes of the time at which a meeting was due to start— (a) the directors present, or (b) (if no directors are present), the meeting,

must appoint a director or shareholder to chair the meeting, and the appointment of the chairman of the meeting must be the first business of the meeting.

(3) The person chairing a meeting in accordance with this article is referred to as “the chairman of the meeting”. Article 39 Analysis Article 39 confers the provisions in the Companies Act48 which allow the company to appoint a chairman.49 It is allowable under the Act to draft provisions in the company constitution that state who may or may not be chairman.50

48 Companies Act 2006. 49 Companies Act 2006, s 319 (Chairman of meeting) ‘(1) A member may be elected to be the chairman of a general meeting by a resolution of the company passed at the meeting.’ 50 Companies Act, s 319(2) ‘Subsection (1) is subject to any provision of the company’s articles that states who may or may not be chairman.’

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The powers conferred by the constitution are vested in the directors alone, the shareholders (or members) cannot interfere with the process of appointing a chairman (Clarke v Workman).51 Article 39 Previous provisions Table A 1985: Regulations 42, 43 42. The chairman, if any, of the board of directors or in his absence some other director nominated by the directors shall preside as chairman of the meeting, but if neither the chairman nor such other director (if any) be present within fifteen minutes after the time appointed for holding the meeting and willing to act, the directors present shall elect one of their number to be chairman and, if there is only one director present and willing to act, he shall be chairman. 43. If no director is willing to act as chairman, or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present and entitled to vote shall choose one of their number to be chairman. Table A 1948: Regulations 55, 56 Table A 1929: Regulations 47, 48 Table A 1908: Regulations 53, 54 Table A 1906: Regulations 53, 54 Table A 1862: Regulations 39, 40 Table B 1856: Regulations 33, 34

Article 40 Attendance and speaking by directors and non-shareholders 6.42 40.—(1) Directors may attend and speak at general meetings, whether or not they are shareholders. (2) The chairman of the meeting may permit other persons who are not— (a) shareholders of the company, or (b) otherwise entitled to exercise the rights of shareholders in relation to general meetings, to attend and speak at a general meeting.

51 [1920] 1 IR 107.

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Article 40 Analysis The provision in article 40 allows for accountants, solicitors or other professionals to speak at general meetings. Article 40 Previous provisions Table A 1985: Regulation 44 44. A director shall, notwithstanding that he is not a member, be entitled to attend and speak at any general meeting and at any separate meeting of the holders of any class of shares in the company.52

Article 41 Adjournment 6.43 41.—(1) If the persons attending a general meeting within half an hour of the time at which the meeting was due to start do not constitute a quorum, or if during a meeting a quorum ceases to be present, the chairman of the meeting must adjourn it. (2) The chairman of the meeting may adjourn a general meeting at which a quorum is present if— (a) the meeting consents to an adjournment, or (b) it appears to the chairman of the meeting that an adjournment is necessary to protect the safety of any person attending the meeting or ensure that the business of the meeting is conducted in an orderly manner. (3) The chairman of the meeting must adjourn a general meeting if directed to do so by the meeting. (4) When adjourning a general meeting, the chairman of the meeting must— (a) either specify the time and place to which it is adjourned or state that it is to continue at a time and place to be fixed by the directors, and (b) have regard to any directions as to the time and place of any adjournment which have been given by the meeting.

52 Regulation 44 was first incorporated into Table A in 1985.

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(5) If the continuation of an adjourned meeting is to take place more than 14 days after it was adjourned, the company must give at least 7 clear days’ notice of it (that is, excluding the day of the adjourned meeting and the day on which the notice is given)— (a) to the same persons to whom notice of the company’s general meetings is required to be given, and (b) containing the same information which such notice is required to contain. (6) No business may be transacted at an adjourned general meeting which could not properly have been transacted at the meeting if the adjournment had not taken place.

Article 41 Analysis With the exception of section 332,53 the Companies Act 2006 says very little on the issue of adjournment of meetings, therefore, article 41 is based on common law principles. If considering an adjournment, the chairman ought not to act alone (even with powers conferred by the articles), instead he should gain consent or direction from the members present. The decision to adjourn ought to be decided on the facts at hand and the urgency of the matter (Byng v London Life Association Ltd).54 Article 41(1) allows for automatic adjournment in the event a meeting fails to form a quorum, the Companies Act 2006 requires two qualifying persons (unless the company has only one member).55 Disorderly meetings are addressed in article 41(2), the chairman has residual common law power of adjournment, generally the powers are vested in the meeting as per article 41(3). It should be noted if the chairman has instigated the disorder by his actions any adjournment is deemed invalid, concerning disorderly meetings (without violence) any adjournment ought to be short, with all efforts made to restore order (John v Rees and Others).56 Article 41(4)–41(5) outlines the requirement of seven days’ notice of the adjourned meeting which is to take place 14 days after the adjournment.

53 Companies Act 2006, s 332 (Resolution passed at adjourned meeting). ‘Where a resolution is passed at an adjourned meeting of a company, the resolution is for all purposes to be treated as having been passed on the date on which it was in fact passed, and is not to be deemed passed on any earlier date.’ 54 [1990] Ch 170. 55 Companies Act 2006, s 318 (Quorum at meeting). 56 [1969] 2 All ER 274.

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Article 41 Previous provisions Table A 1985: Regulations 41, 45 41. If such a quorum is not present within half an hour from the time appointed for the meeting, or if during a meeting such a quorum ceases to be present, the meeting shall stand adjourned to the same day in the next week at the same time and place or to such time and place as the directors may determine. 45. The chairman may, with the consent of a meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at an adjourned meeting other than business which might properly have been transacted at the meeting had the adjournment not taken place.When a meeting is adjourned for fourteen days or more, at least seven clear days’ notice shall be given specifying the time and place of the adjourned meeting and the general nature of the business to be transacted. Otherwise it shall not be necessary to give any such notice. Table A 1948: Regulations 54, 57 Table A 1929: Regulations 46, 49 Table A 1908: Regulations 52, 55 Table A 1906: Regulations 52, 55 Table A 1862: Regulations 38, 41 Table B 1856: Regulations 32, 35

Article 42 Voting: general 6.44 42. A resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is duly demanded in accordance with the articles. Article 42 Analysis The rules on voting is provided by section 28457 of the Companies Act 2006, which outlines that each member has one vote in the case of a written resolution, show of hands or poll. The company is free to assign voting rights58 as it sees fit to any share classes the company may have 57 Companies Act 2006, s 284 (Votes: general rules). 58 Companies Act 2006, s 284(4) ‘The provisions of this section have effect subject to any provision of the company’s articles.’

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created, article 42 would require adaptation if different share classes held unique voting rights. Article 42 Previous provisions Table A 1985: Regulation 47 47. Unless a poll is duly demanded a declaration by the chairman that a resolution has been carried or carried unanimously, or by a particular majority, or lost, or not carried by a particular majority and an entry to that effect in the minutes of the meeting shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution. Table A 1948: Regulation 58 Table A 1929: Regulation 50 Table A 1908: Regulation 56 Table A 1906: Regulation 56 Table A 1862: Regulation 42 Table B 1856: Regulation 36

Article 43 Errors and disputes 6.45 43.—(1) No objection may be raised to the qualification of any person voting at a general meeting except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting is valid. (2) Any such objection must be referred to the chairman of the meeting, whose decision is final. Article 43 Analysis Article 43 allows the chairman a decisive final decision on entitlement to vote at general meetings. Objections on the validity to vote must be raised at the meeting or adjourned meeting. Adapting the article may lead to disputes without the powers of a final decision vested in the chairman. Article 43 Previous provisions Table A 1985: Regulation 58

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58. No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting shall be valid. Any objection made in due time shall be referred to the chairman whose decision shall be final and conclusive. Table A 1948: Regulation 66

Article 44 Poll votes 6.46 44.—(1) A poll on a resolution may be demanded— (a) in advance of the general meeting where it is to be put to the vote, or (b) at a general meeting, either before a show of hands on that resolution or immediately after the result of a show of hands on that resolution is declared. (2) A poll may be demanded by— (a) the chairman of the meeting; (b) the directors; (c) two or more persons having the right to vote on the resolution; or (d) a person or persons representing not less than one tenth of the total voting rights of all the shareholders having the right to vote on the resolution. (3) A demand for a poll may be withdrawn if— (a) the poll has not yet been taken, and (b) the chairman of the meeting consents to the withdrawal. (4) Polls must be taken immediately and in such manner as the chairman of the meeting directs. Article 44 Analysis The general position outlined in article 42 is that votes at general meetings are decided on a show of hands. If the vote is unclear or possibly disputed, then a poll may be called. Article 44 summarises the rules and describes who has the right to demand a poll. The foundations of the provisions are founded on

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section 32159 and therefore members are provided statutory rights to call a poll, regardless of the company’s constitution. Any latitude for adapting the articles is somewhat curtailed by the provisions in the Act, which without ambiguity state that any provisions that exclude rights to demand a poll are void, with the exception of electing a chairman or adjournment of a meeting.60 Article 44 Previous provisions Table A 1985: Regulations 46, 48, 49 46. A resolution put to the vote of a meeting shall be decided on a show of hands unless before, or on the declaration of the result of, the show of hands a poll is duly demanded. Subject to the provisions of the Act, a poll may be demanded— (a) by the chairman; or (b) by at least two members having the right to vote at the meeting; or (c) by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or (d) by a member or members holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right; and a demand by a person as proxy for a member shall be the same as a demand by the member. 48. The demand for a poll may, before the poll is taken, be withdrawn but only with the consent of the chairman and a demand so withdrawn shall not be taken to have invalidated the result of a show of hands declared before the demand was made. 49. A poll shall be taken as the chairman directs and he may appoint scrutineers (who need not be members) and fix a time and place for declaring the result of the poll. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. Table A 1948: Regulations 58, 59 Table A 1929: Regulations 50, 51 Table A 1908: Regulations 56, 57 Table A 1906: Regulations 56, 57 Table A 1862: Regulations 42, 43 Table B 1856: Regulations 36, 37 59 Companies Act 2006, s 321 (Right to demand a poll). 60 Companies Act 2006, s 321(1).

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Article 45 Content of proxy notices 6.47 45.—(1) Proxies may only validly be appointed by a notice in writing (a “proxy notice”) which— (a) states the name and address of the shareholder appointing the proxy; (b) identifies the person appointed to be that shareholder’s proxy and the general meeting in relation to which that person is appointed; (c) is signed by or on behalf of the shareholder appointing the proxy, or is authenticated in such manner as the directors may determine; and (d) is delivered to the company in accordance with the articles and any instructions contained in the notice of the general meeting to which they relate. (2) The company may require proxy notices to be delivered in a particular form, and may specify different forms for different purposes. (3) Proxy notices may specify how the proxy appointed under them is to vote (or that the proxy is to abstain from voting) on one or more resolutions. (4) Unless a proxy notice indicates otherwise, it must be treated as— (a) allowing the person appointed under it as a proxy discretion as to how to vote on any ancillary or procedural resolutions put to the meeting, and (b) appointing that person as a proxy in relation to any adjournment of the general meeting to which it relates as well as the meeting itself. Article 45 Analysis A proxy may attend and vote at general meetings in place of a member of the company.The Companies Act 2006 provides statutory rights to appoint proxies by virtue of the provisions defined in sections 324–331. Article 45 Previous provisions Table A 1985: Regulations 60, 61, 62 60. The appointment of a proxy shall be executed by or on behalf of the appointor and shall be in the following form (or in a form as near thereto

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as circumstances allow or in any other form which is usual or which the directors may approve)— “ ………… PLC/Limited ………… I/We, …………, of …………, being a member/members of the above-named company, hereby appoint ………… of …………, or failing him, ………… of …………, as my/our proxy to vote in my/our name[s] and on my/our behalf at the general meeting of the company to be held on ………… 19 …………, and at any adjournment thereof. Signed on ………… 19 …………”.

61. Where it is desired to afford members an opportunity of instructing the proxy how he shall act the appointment of a proxy shall be in the following form (or in a form as near thereto as circumstances allow or in any other form which is usual or which the directors may approve)— “………… PLC/Limited ………… I/We, …………, of …………, being a member/members of the above-named company, hereby appoint ………… of …………, or failing him ………… of …………, as my/our proxy to vote in my/our name[s] and on my/our behalf at the general meeting of the company, to be held on ………… 19 …………, and at any adjournment thereof. This form is to be used in respect of the resolutions mentioned below as follows: Resolution No. 1 *for *against Resolution No. 2 *for *against. *Strike out whichever is not desired. Unless otherwise instructed, the proxy may vote as he thinks fit or abstain from voting. Signed this ………… day of ………… 19 ………….”.

62. The appointment of a proxy and any authority under which it is executed or a copy of such authority certified notarially or in some other way approved by the directors may – (a) in the case of an instrument in writing be deposited at the office or at such other place within the United kingdom as is specified in the notice convening the meeting or in any instrument of proxy sent out by the company in relation to the meeting not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote; or (aa) in the case of an appointment contained in an electronic communication, where an address has been specified for the purpose of receiving electronic communications – (ii) in the notice convening the meeting, or (iii) in any instrument of proxy sent out by the company in relation to the meeting, or (iv) in any invitation contained in an electronic communication to appoint a proxy issued by the company in relation to the meeting, be received at such address not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the appointment proposes to vote;

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(b) in the case of a poll taken more than 48 hours after it is demanded, be deposited or received as aforesaid after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll; or (c) where the poll is not taken forthwith but is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the poll was demanded to the chairman or to the secretary or to any director; and an appointment of proxy which is not deposited, delivered or received in a manner so permitted shall be invalid. In this regulation and the next, “address”, in relation to electronic communications, includes any number or address used for the purposes of such communications. Table A 1948: Regulations 68, 69, 70, 71 Table A 1929: Regulations 60, 59, 61 Table A 1908: Regulations 65, 66, 67 Table A 1906: Regulations 65, 66, 67 Table A 1862: Regulations 49, 50, 51 Table B 1856: Regulations 42, 43

Article 46 Delivery of proxy notices 6.48 46.—(1) A person who is entitled to attend, speak or vote (either on a show of hands or on a poll) at a general meeting remains so entitled in respect of that meeting or any adjournment of it, even though a valid proxy notice has been delivered to the company by or on behalf of that person. (2) An appointment under a proxy notice may be revoked by delivering to the company a notice in writing given by or on behalf of the person by whom or on whose behalf the proxy notice was given. (3) A notice revoking a proxy appointment only takes effect if it is delivered before the start of the meeting or adjourned meeting to which it relates. (4) If a proxy notice is not executed by the person appointing the proxy, it must be accompanied by written evidence of the authority of the person who executed it to execute it on the appointor’s behalf. Article 46 Analysis Article 46 is somewhat mistitled as it describes the revocation of proxy notices and the procedures thereof.

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Article 41(1) reiterates statutory rights under the Act.61 Article 41(2) again mirrors the Companies Act,62 requiring written submissions to enable revocation. It should be noted in accordance with section 330(6) the articles cannot be modified to reduce the timeframes for delivery of any notice of termination to below the statutory 48 hours for meetings.63 The articles may be adapted to nominate a specific person that notices ought to be given to,64 which replaces the relatively vague description of ‘company’ in the article above. Article 46 Previous provisions Table A 1985: Regulation 62 62. The appointment of a proxy and any authority under which it is executed or a copy of such authority certified notarially or in some other way approved by the directors may— (a) in the case of an instrument in writing be deposited at the office or at such other place within the United kingdom as is specified in the notice convening the meeting or in any instrument of proxy sent out by the company in relation to the meeting not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote; or (aa) in the case of an appointment contained in an electronic communication, where an address has been specified for the purpose of receiving electronic communications— (ii) in the notice convening the meeting, or (iii) in any instrument of proxy sent out by the company in relation to the meeting, or (iv) in any invitation contained in an electronic communication to appoint a proxy issued by the company in relation to the meeting,

61 Companies Act 2006, s 330(2). 62 Companies Act 2006, s 330 (Notice required of termination of proxy’s authority). ‘(A1) In the case of a traded company the termination of the authority of a person to act as proxy must be notified to the company in writing.’ 63 Companies Act 2006, s 330(6) ‘(2) Any provision of the company’s articles is void in so far as it would have the effect of requiring any such appointment or document to be received by the company or another person earlier than the following time— (a) (b)

in the case of a meeting or adjourned meeting, 48 hours before the time for holding the meeting or adjourned meeting; in the case of a poll taken more than 48 hours after it was demanded, 24 hours before the time appointed for the taking of the poll;’.

64 Companies Act 2006, s 330(4).

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be received at such address not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the appointment proposes to vote; (b) in the case of a poll taken more than 48 hours after it is demanded, be deposited or received as aforesaid after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll; or (c) where the poll is not taken forthwith but is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the poll was demanded to the chairman or to the secretary or to any director; and an appointment of proxy which is not deposited, delivered or received in a manner so permitted shall be invalid. In this regulation and the next, “address”, in relation to electronic communications, includes any number or address used for the purposes of such communications. Table A 1948: Regulation 69 Table A 1929: Regulation 60 Table A 1908: Regulation 66 Table A 1906: Regulation 66 Table A 1862: Regulation 50 Table B 1856: Regulation 43

Article 47 Amendments to resolutions 6.49 47.—(1) An ordinary resolution to be proposed at a general meeting may be amended by ordinary resolution if— (a) notice of the proposed amendment is given to the company in writing by a person entitled to vote at the general meeting at which it is to be proposed not less than 48 hours before the meeting is to take place (or such later time as the chairman of the meeting may determine), and (b) the proposed amendment does not, in the reasonable opinion of the chairman of the meeting, materially alter the scope of the resolution. (2) A special resolution to be proposed at a general meeting may be amended by ordinary resolution, if— (a) the chairman of the meeting proposes the amendment at the general meeting at which the resolution is to be proposed, and 126

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(b) the amendment does not go beyond what is necessary to correct a grammatical or other non-substantive error in the resolution. (3) If the chairman of the meeting, acting in good faith, wrongly decides that an amendment to a resolution is out of order, the chairman’s error does not invalidate the vote on that resolution. Article 47 Analysis Article 47 is governed by common law principles, which provide guidance for amending resolutions at general meetings. In Betts & Co Ltd v Macnaghten65 the court decided amendments can be made with some latitude to the original resolution proposed, as the notice must simply state the general nature of the business, this is reiterated in the Companies Act 2006.66 In addition, on the basis an amendment is within the scope of the notice of the meeting, substantive changes are allowable. For example: a notice to appoint one new director, John Smith, does not prevent an amendment to appoint Jane Smith in his place. Article 47(1)(b) aligns to the common law and provides direction to the chairman. Article 47(3) is drafted with the court’s decision in mind (Henderson v Bank of Australasia),67 any error in good faith does not invalidate the result of the vote on the resolution, however if the chairman acts improperly and refuses to accept an amendment the vote on the resolution is void. Article 47 Previous provisions No previous provisions.

Part 5 Administrative arrangements Article 48 Means of communication to be used 6.50 48.—(1) Subject to the articles, anything sent or supplied by or to the company under the articles may be sent or supplied in any way in which the Companies Act 2006 provides for documents or information which are authorised or required by any provision of that Act to be sent or supplied by or to the company.

65 [1910] 1 Ch 430. 66 Companies Act 2006, s 311(2) (Contents of notices of meetings). ‘(2) Notice of a general meeting of a company must state the general nature of the business to be dealt with at the meeting.’ 67 (1888) 40 Ch D 170.

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(2) Subject to the articles, any notice or document to be sent or supplied to a director in connection with the taking of decisions by directors may also be sent or supplied by the means by which that director has asked to be sent or supplied with such notices or documents for the time being. (3) A director may agree with the company that notices or documents sent to that director in a particular way are to be deemed to have been received within a specified time of their being sent, and for the specified time to be less than 48 hours.

Article 48 Analysis The Companies Act 2006 provides detailed provisions on the sending or supplying of documents or information.68 Article 48(1) allows for technological advancements and does not restrict the methods in which a company may send documents. It should be noted if documents are sent electronically, members are entitled to receive the same information in hard copy without charge,69 it is an offence if the company fails to comply with the member’s request. Article 48(2) allows the company to agree with directors the method of delivery in relation to documents and information when making decisions, this may encompass text messages,WhatsApp, or private messaging on social media. Article 48(3) allows the company to specify ‘deemed delivery’ time scales, section 114770 of the Companies Act 2006 specifies a standard 48 hours for electronic, post and website. The company may amend its articles to lessen the statutory 48 hours by virtue of section 1147.71 Article 48 Previous provisions No previous provisions.

Article 49 Company seals 6.51 49.—(1) Any common seal may only be used by the authority of the directors. (2) The directors may decide by what means and in what form any common seal is to be used. 68 69 70 71

Companies Act 2006, ss 1143–1148 (Sending or supplying documents or information). Companies Act 2006, s 1145(1–5). Companies Act 2006, s 1147 (Deemed delivery of documents and information). Companies Act 2006, s 1147. ‘(6)(a) in its application to documents or information sent or supplied by a company to its members, any contrary provision of the company’s articles;’.

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(3) Unless otherwise decided by the directors, if the company has a common seal and it is affixed to a document, the document must also be signed by at least one authorised person in the presence of a witness who attests the signature. (4) For the purposes of this article, an authorised person is— (a) any director of the company; (b) the company secretary (if any); or (c) any person authorised by the directors for the purpose of signing documents to which the common seal is applied. Article 49 Analysis The Companies Act 2006 provides provisions for the execution of documents72 which allows execution by affixing the company’s common seal. Companies tend to execute documents using authorised signatories.73 The Act allows, by virtue of section 45(2),74 that a company is not required to execute documents by common seal, for clarity the article should be removed if execution by signatory is the preferred method of the company. Article 49 Previous provisions Table A 1985: Regulation 101 101. The seal shall only be used by the authority of the directors or of a committee of directors authorised by the directors. The directors may determine who shall sign any instrument to which the seal is affixed and unless otherwise so determined it shall be signed by a director and by the secretary or by a second director. Table A 1948: Regulation 113 Table A 1929: Regulation 71

72 Companies Act 2006, s 44 (Execution of Documents). ‘(1) Under the law of England and Wales or Northern Ireland a document is executed by a company— (a) by the affixing of its common seal, or (b) by signature in accordance with the following provisions.’ 73 Companies Act 2006, s 44(2). 74 Companies Act 2006, s 45(1). A company may have a common seal, but need not have one.

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Article 50 No right to inspect accounts and other records 6.52 50. Except as provided by law or authorised by the directors or an ordinary resolution of the company, no person is entitled to inspect any of the company’s accounting or other records or documents merely by virtue of being a shareholder.

Article 50 Analysis Article 50 precludes members’ interference with the running of a company by requiring detailed accounting data or documents. Members hold certain rights conferred under the Companies Act 2006 to inspect and require copies of certain documents.75 Investors may require further provisions (by adapting or editing article 50) allowing access to detailed company or financial information, to which under the Companies Act 200676 they would have no entitlement. Generally, these issues are dealt with by employing a shareholder agreement, as the details remain private, unlike the articles which are public record. Companies house provides information freely to members for inspection and covers the majority of requirements under the Act. Article 50 Previous provisions Table A 1985: Regulation 109 109. No member shall (as such) have any right of inspecting any accounting records or other book or document of the company except as conferred by statute or authorised by the directors or by ordinary resolution of the company Table A 1948: Regulation 125 Table A 1929: Regulation 99

Article 51 Provision for employees on cessation of business 6.53 51. The directors may decide to make provision for the benefit of persons employed or formerly employed by the company or any of its subsidiaries

75 Companies Act 2006, s 116 (Rights to inspect and require copies). 76 Companies Act 2006.

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(other than a director or former director or shadow director) in connection with the cessation or transfer to any person of the whole or part of the undertaking of the company or that subsidiary. Article 51 Analysis This article aligns with section 247(6)77 of the Companies Act 2006 which provides powers to make provision for the benefit of existing or former employees on winding up or sale. The directors must abide by the general rule of promoting the success of the company when considering making any provisions for benefits.78 The article is subject to any further provisions detailed in the company’s constitution, these take precedent and must be complied with.79 Payments must be authorised by resolution and paid from profits before winding up. Directors, existing or former, do not qualify as ‘persons employed or formerly employed by the company’ as described in the article. Article 51 Previous provisions No previous provisions.

Article 52 Indemnity 6.54 52.—(1) Subject to paragraph (2), a relevant director of the company or an associated company may be indemnified out of the company’s assets against— (a) any liability incurred by that director in connection with any negligence, default, breach of duty or breach of trust in relation to the company or an associated company, (b) any liability incurred by that director in connection with the activities of the company or an associated company in its capacity as a trustee of an occupational pension scheme (as defined in section 235(6) of the Companies Act 2006), (c) any other liability incurred by that director as an officer of the company or an associated company. (2) This article does not authorise any indemnity which would be prohibited or rendered void by any provision of the Companies Acts or by any other provision of law. 77 Companies Act 2006. 78 Companies Act 2006, s 172. 79 Companies Act 2006, s 247(6).

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(3) In this article— (a) companies are associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate, and (b) a “relevant director” means any director or former director of the company or an associated company.

Article 53 Insurance 6.55 53.—(1) The directors may decide to purchase and maintain insurance, at the expense of the company, for the benefit of any relevant director in respect of any relevant loss. (2) In this article— (a) a “relevant director” means any director or former director of the company or an associated company, (b) a “relevant loss” means any loss or liability which has been or may be incurred by a relevant director in connection with that director’s duties or powers in relation to the company, any associated company or any pension fund or employees’ share scheme of the company or associated company, and (c) companies are associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate. Articles 52 and 53 Analysis Companies are able to provide indemnities for directors and adapt article 52 as they see fit. Article 52(1) outlines the company may pay for the insurance. English company law prohibits waivers or indemnification by contract or by means of the company’s constitution. Section 232(1) of the Companies Act 2006 affirms the rule of company law that introducing any provision that may waive liability, or indemnify any director into the company’s constitution, is void. In accordance with section 232(2) and section 233 and by contravention of any of the provisions, the company may indemnify the director for negligence, default, breach of duty or breach of trust. It ought to be noted that directors’ and officers’ liability insurers are unlikely to cover ‘negligence, default, breach of duty or breach of trust in relation to the company or an

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associated company’ as defined in the indemnity article if any dishonesty has taken place. It could be argued the article is improperly drafted, the government review initially omitted articles 52 and 53, stating the raft of variations concerning indemnification was too wide and companies ought to consider drafting special provisions to suit their circumstances. The latter approach would appear the better option. If the company fails to cover a director employing D&O insurance and subsequently they are required to defend themselves from any criminal or civil proceedings in connection with any alleged negligence, default, breach of duty or breach of trust, the company without shareholder consent may make funds available to cover any legal expenditure. The loan is repayable to the company if the director is convicted or any judgment is made against him.80 Article 52 Previous provisions Table A 1985: Regulation 118 118. Subject to the provisions of the Act but without prejudice to any indemnity to which a director may otherwise be entitled, every director or other officer or auditor of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application in which relief is granted to him by the court from liability for negligence, default, breach of duty or breach of trust in relation to the affairs of the company. Article 53 Previous provisions Table A 1948: Regulation 136

80 Companies Act 2006, s 205(2)(a).

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Chapter 7  Analysis of the Model Articles for Private Companies Limited by Guarantee Introduction 7.1 A company limited by guarantee is managed without shareholders, consequently, the company will not issue any class of shares. The liability of the company is met by members (as opposed to shareholders) who agree in the articles of association to fund a nominal amount if the company is wound up.1 Limited by guarantee companies are utilised by non-profit organisations whose members desire to limit their financial liability and are prohibited from registering as a charity,2 commonly this encompasses community amateur sports clubs and registered clubs.3 The Companies Act 2006 provided new model articles for a private company limited by guarantee which are discussed in this chapter together with alternative model articles for a sports club (see Precedents section). A comprehensive discussion on additional articles of association for charities and not for profits organisations is beyond the scope of this text, a summary of the main constitutional documents employed are discussed below.

Articles of association – charities and non-profit organisations Charitable Companies: Model Articles of Association (GD1) 7.2 All charities are required to register with the Charity Commission, and the trustees are required to prepare and submit constitutional documents for 1

Usually a nominal amount:The liability of each member is limited to £1. See model articles for private companies limited by guarantee, Article 2, Liability of members. 2 Charities Act 2011, s 6 (Registered sports clubs) ‘(1) A registered sports club established for charitable purposes is to be treated as not being so established, and accordingly cannot be a charity. (2) In subsection (1), “registered sports club” means a registered club within the meaning of Chapter 9 of Part 13 of the Corporation Tax Act 2010 (community amateur sports clubs).’ 3 Corporation Tax Act 2010, s 658 (Meaning of “community amateur sports club” and “registered club”).

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approval by the commission. The model articles for private companies limited by guarantee are not fit for purpose and will require adaptation. The Charity Commission does not provide model articles, which are easily adapted by a new charity, they only provide a guidance document which details the additional elements required to meet the commission’s obligations for successful registration (see GD1).4

Community interest companies 7.3 A community interest company (CIC) is a limited company whose primary objective is the use of their profits for the public good. A CIC cannot be a registered charity, and is generally employed by social and community enterprises, social firms, mutual organisations and cooperatives. The key advantage of a CIC is the articles of association lock the assets into the business ensuring they are managed for its social purpose. The Office of the Regulator of Community Interest Companies provides bespoke model constitutional documents when forming a CIC, including memorandum of association and articles of association templates5 which meet the requirements of the Community Interest Company Regulations 2005.6

Right to manage companies 7.4 The right to manage company (RTM) is formed generally by leaseholders in a block of flats to manage the building, without the landlord’s agreement. The RTM must be incorporated as a private company limited by guarantee, and the constitutional documents must specify that one of the objects, or the sole object, of the RTM company is the exercise of the right to manage the premises. The RTM Companies (Model Articles) (England) Regulations 2009 provides bespoke articles of association for use with RTM companies.7

4 5 6 7

Charitable Companies: Model Articles of Association (GD1). See https://www.gov.uk/government/publications/community-interest-companies-constitutions. SI 2005/1788. The RTM Companies (Model Articles) (England) Regulations 2009, SI 2009/2767, Articles of Association of a RTM Company, see http://www.legislation.gov.uk/uksi/2009/2767/schedule/made.

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Model Articles for Private Companies Limited by Guarantee Part 1 Interpretation and limitation of liability Article 1 Defined terms 7.5 1. In the articles, unless the context requires otherwise— “articles” means the company’s articles of association; “bankruptcy” includes individual insolvency proceedings in a jurisdiction other than England and Wales or Northern Ireland which have an effect similar to that of bankruptcy; “chairman” has the meaning given in article 12; “chairman of the meeting” has the meaning given in article 25; “Companies Acts” means the Companies Acts (as defined in section 2 of the Companies Act 2006), in so far as they apply to the company; “director” means a director of the company, and includes any person occupying the position of director, by whatever name called; “document” includes, unless otherwise specified, any document sent or supplied in electronic form; “electronic form” has the meaning given in section 1168 of the Companies Act 2006; “member” has the meaning given in section 112 of the Companies Act 2006; “ordinary resolution” has the meaning given in section 282 of the Companies Act 2006; “participate”, in relation to a directors’ meeting, has the meaning given in article 10; “proxy notice” has the meaning given in article 31; “special resolution” has the meaning given in section 283 of the Companies Act 2006; “subsidiary” has the meaning given in section 1159 of the Companies Act 2006; and “writing” means the representation or reproduction of words, symbols or other information in a visible form by any method or combination of methods, whether sent or supplied in electronic form or otherwise.

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Unless the context otherwise requires, other words or expressions contained in these articles bear the same meaning as in the Companies Act 2006 as in force on the date when these articles become binding on the company. Article 1 Previous provisions Table A 1985: Regulation 1 The definition of ‘the holder’8 is omitted from Table A 1985.

Article 2 Liability of members 7.6 2. The liability of each member is limited to £1, being the amount that each member undertakes to contribute to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member, for— (a) payment of the company’s debts and liabilities contracted before he ceases to be a member, (b) payment of the costs, charges and expenses of winding up, and (c) adjustment of the rights of the contributories among themselves. Article 2 Analysis Article 2 provides the statement of guarantee, the provisions text is derived from section 11 of the Companies Act 2006.9 Companies limited by guarantee must comply with the article as defined by the act. Removal, omission or adaption of article 2 would breach the Companies Act 2006, in contrast if article 2 for private companies limited by shares is omitted the result is only the loss of liability for the members. The amount of liability is a specified amount, detailed in the article. The Companies Act 2006 does not specify a minimum or maximum liability, therefore the directors are free to choose any amount they desire.10

8 The Companies (Tables A to F) Regulations 1985, SI 1985/805, Table C, A company limited by ­guarantee and not having a share capital, Articles of association, para 2. 9 Companies Act 2006, s 11 (Statement of guarantee). 10 Companies Act 2006, s 11(3)(a).

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Article 2 Previous provisions There is no corresponding provision in Table A 1985. The provisions previously appeared in the memorandum.

Part 2 Directors Article 3 Directors’ general authority 7.7 3.—Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company.

Article 3 Analysis See analysis of Article 3 in 6.5. Article 3 Previous provisions Table A 1985: Regulation 70 70. Subject to the provisions of the Act, the memorandum and the articles and to any directions given by special resolution, the business of the company shall be managed by the directors who may exercise all the powers of the company. No alteration of the memorandum or articles and no such direction shall invalidate any prior act of the directors which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this regulation shall not be limited by any special power given to the directors by the articles and a meeting of directors at which a quorum is present may exercise all powers exercisable by the directors.

Article 4 Members’ reserve power 7.8 4.—(1) The members may, by special resolution, direct the directors to take, or refrain from taking, specified action. (2) No such special resolution invalidates anything which the directors have done before the passing of the resolution.

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Article 4 Analysis See analysis of Article 4 in 6.6. Article 4 Previous provisions Table A 1985: Regulation 70 70. Subject to the provisions of the Act, the memorandum and the articles and to any directions given by special resolution, the business of the company shall be managed by the directors who may exercise all the powers of the company. No alteration of the memorandum or articles and no such direction shall invalidate any prior act of the directors which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this regulation shall not be limited by any special power given to the directors by the articles and a meeting of directors at which a quorum is present may exercise all powers exercisable by the directors.

Article 5 Directors may delegate 7.9 5.—(1) Subject to the articles, the directors may delegate any of the powers which are conferred on them under the articles— (a) to such person or committee; (b) by such means (including by power of attorney); (c) to such an extent; (d) in relation to such matters or territories; and (e) on such terms and conditions;

as they think fit.

(2) If the directors so specify, any such delegation may authorise further delegation of the directors’ powers by any person to whom they are delegated. (3) The directors may revoke any delegation in whole or part, or alter its terms and conditions. Article 5 Analysis See analysis of Article 5 in 6.7.

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Article 5 Previous provisions Table A 1985: Regulations 71 and 72 71. The directors may, by power of attorney or otherwise, appoint any person to be the agent of the company for such purposes and on such conditions as they determine, including authority for the agent to delegate all or any of his powers. 72. The directors may delegate any of their powers to any committee consisting of one or more directors. They may also delegate to any managing director or any director holding any other executive office such of their powers as they consider desirable to be exercised by him. Any such delegation may be made subject to any conditions the directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee with two or more members shall be governed by the articles regulating the proceedings of directors so far as they are capable of applying.

Article 6 Committees 7.10 6.—(1) Committees to which the directors delegate any of their powers must follow procedures which are based as far as they are applicable on those provisions of the articles which govern the taking of decisions by directors. (2) The directors may make rules of procedure for all or any committees, which prevail over rules derived from the articles if they are not consistent with them. Article 6 Analysis See analysis of Article 6 in 6.8. Article 6 Previous provisions Table A 1985: Regulation 72 72. The directors may delegate any of their powers to any committee consisting of one or more directors. They may also delegate to any managing director or any director holding any other executive office such of their powers as they consider desirable to be exercised by him. Any such delegation may be made subject to any conditions the directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee with two or more members shall be governed by the articles regulating the proceedings of directors so far as they are capable of applying. 141

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Article 7 Directors to take decisions collectively 7.11 7.—(1) The general rule about decision-making by directors is that any decision of the directors must be either a majority decision at a meeting or a decision taken in accordance with article 8. (2) If— (a) the company only has one director, and (b) no provision of the articles requires it to have more than one director,

the general rule does not apply, and the director may take decisions without regard to any of the provisions of the articles relating to directors’ decision-making. Article 7 Analysis See analysis of Article 7 in 6.9. Article 7 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

Article 8 Unanimous decisions 7.12 8.—(1) A decision of the directors is taken in accordance with this article when all eligible directors indicate to each other by any means that they share a common view on a matter. (2) Such a decision may take the form of a resolution in writing, copies of which have been signed by each eligible director or to which each eligible director has otherwise indicated agreement in writing. 142

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(3) References in this article to eligible directors are to directors who would have been entitled to vote on the matter had it been proposed as a resolution at a directors’ meeting. (4) A decision may not be taken in accordance with this article if the eligible directors would not have formed a quorum at such a meeting. Article 8 Analysis See analysis of Article 8 in 6.10. Article 8 Previous provisions Table A 1985: Regulation 88 and 93 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote. 93. A resolution in writing signed by all the directors entitled to receive notice of a meeting of directors or of a committee of directors shall be as valid and effectual as it if had been passed at a meeting of directors or (as the case may be) a committee of directors duly convened and held and may consist of several documents in the like form each signed by one or more directors; but a resolution signed by an alternate director need not also be signed by his appointor and, if it is signed by a director who has appointed an alternate director, it need not be signed by the alternate director in that capacity.

Article 9 Calling a directors’ meeting 7.13 9.—(1) Any director may call a directors’ meeting by giving notice of the meeting to the directors or by authorising the company secretary (if any) to give such notice. (2) Notice of any directors’ meeting must indicate— (a) its proposed date and time;

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(b) where it is to take place; and (c) if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting. (3) Notice of a directors’ meeting must be given to each director, but need not be in writing. (4) Notice of a directors’ meeting need not be given to directors who waive their entitlement to notice of that meeting, by giving notice to that effect to the company not more than 7 days after the date on which the meeting is held.Where such notice is given after the meeting has been held, that does not affect the validity of the meeting, or of any business conducted at it. Article 9 Analysis See analysis of Article 9 in 6.11. Article 9 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

Article 10 Participation in directors’ meetings 7.14 10.—(1) Subject to the articles, directors participate in a directors’ meeting, or part of a directors’ meeting, when— (a) the meeting has been called and takes place in accordance with the articles, and (b) they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting.

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(2) In determining whether directors are participating in a directors’ meeting, it is irrelevant where any director is or how they communicate with each other. (3) If all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as taking place wherever any of them is. Article 10 Analysis See analysis of Article 10 in 6.12. Article 10 Previous provisions There is no corresponding provision in Table A 1985.

Article 11 Quorum for directors’ meetings 7.15 11.—(1) At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. (2) The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two. (3) If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision— (a) to appoint further directors, or (b) to call a general meeting so as to enable the members to appoint further directors. Article 11 Analysis See analysis of Article 11 in 6.13. Article 11 Previous provisions Table A 1985: Regulation 89 and 90 89. The quorum for the transaction of the business of the directors may be fixed by the directors and unless so fixed at any other number shall be two. A person who holds office only as an alternate director shall, if his appointor is not present, be counted in the quorum. 145

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90. The continuing directors or a sole continuing director may act notwithstanding any vacancies in their number, but, if the number of directors is less than the number fixed as the quorum, the continuing directors or director may act only for the purpose of filling vacancies or of calling a general meeting.

Article 12 Chairing of directors’ meetings 7.16 12.—(1) The directors may appoint a director to chair their meetings. (2) The person so appointed for the time being is known as the chairman. (3) The directors may terminate the chairman’s appointment at any time. (4) If the chairman is not participating in a directors’ meeting within ten minutes of the time at which it was to start, the participating directors must appoint one of themselves to chair it. Article 12 Analysis See analysis of Article 12 in 6.14. Article 12 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

Article 13 Casting vote 7.17 13.—(1) If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting vote.

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(2) But this does not apply if, in accordance with the articles, the chairman or other director is not to be counted as participating in the decision-making process for quorum or voting purposes. Article 13 Analysis See analysis of Article 13 in 6.15. Article 13 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

Article 14 Conflicts of interest 7.18 14.—(1) If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decisionmaking process for quorum or voting purposes. (2) But if paragraph (3) applies, a director who is interested in an actual or proposed transaction or arrangement with the company is to be counted as participating in the decision-making process for quorum and voting purposes. (3) This paragraph applies when— (a) the company by ordinary resolution disapplies the provision of the articles which would otherwise prevent a director from being counted as participating in the decision-making process; (b) the director’s interest cannot reasonably be regarded as likely to give rise to a conflict of interest; or (c) the director’s conflict of interest arises from a permitted cause.

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(4) For the purposes of this article, the following are permitted causes— (a) a guarantee given, or to be given, by or to a director in respect of an obligation incurred by or on behalf of the company or any of its subsidiaries; (b) subscription, or an agreement to subscribe, for securities of the company or any of its subsidiaries, or to underwrite, sub-underwrite, or guarantee subscription for any such securities; and (c) arrangements pursuant to which benefits are made available to employees and directors or former employees and directors of the company or any of its subsidiaries which do not provide special benefits for directors or former directors. (5) For the purposes of this article, references to proposed decisions and decision-making processes include any directors’ meeting or part of a directors’ meeting. (6) Subject to paragraph (7), if a question arises at a meeting of directors or of a committee of directors as to the right of a director to participate in the meeting (or part of the meeting) for voting or quorum purposes, the question may, before the conclusion of the meeting, be referred to the chairman whose ruling in relation to any director other than the chairman is to be final and conclusive. (7) If any question as to the right to participate in the meeting (or part of the meeting) should arise in respect of the chairman, the question is to be decided by a decision of the directors at that meeting, for which purpose the chairman is not to be counted as participating in the meeting (or that part of the meeting) for voting or quorum purposes.

Article 14 Analysis See analysis of Article 14 in 6.16. Article 14 Previous provisions Table A 1985: Regulations 94, 95, 96 and 98 Table A is modified. In paragraph (c) of regulation 94 the words ‘shares, debentures, or other securities’ are replaced with ‘debentures’.11 94. Save as otherwise provided by the articles, a director shall not vote at a meeting of directors or of a committee of directors on any resolution

11 The Companies (Tables A to F) Regulations 1985, SI 1985/805, Table C, A company limited by ­guarantee and not having a share capital, Articles of association, para 10.

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concerning a matter in which he has, directly or indirectly, an interest or duty which is material and which conflicts or may conflict with the interests of the company unless his interest or duty arises only because the case falls within one or more of the following paragraphs— (a) the resolution relates to the giving to him of a guarantee, security, or indemnity in respect of money lent to, or an obligation incurred by him for the benefit of, the company or any of its subsidiaries; (b) the resolution relates to the giving to a third party of a guarantee, security, or indemnity in respect of an obligation of the company or any of its subsidiaries for which the director has assumed responsibility in whole or part and whether alone or jointly with others under a guarantee or indemnity or by the giving of security; (c) his interest arises by virtue of his subscribing or agreeing to subscribe for any debentures of the company or any of its subsidiaries, or by virtue of his being, or intending to become, a participant in the underwriting or sub-underwriting of an offer of any such debentures by the company or any of its subsidiaries for subscription, purchase or exchange; (d) the resolution relates in any way to a retirement benefits scheme which has been approved, or is conditional upon approval, by the Board of Inland Revenue for taxation purposes. For the purposes of this regulation, an interest of a person who is, for any purpose of the Act (excluding any statutory modification thereof not in force when this regulation becomes binding on the company), connected with a director shall be treated as an interest of the director and, in relation to an alternate director, an interest of his appointor shall be treated as an interest of the alternate director without prejudice to any interest which the alternate director has otherwise. 95. A director shall not be counted in the quorum present at a meeting in relation to a resolution on which he is not entitled to vote. 96.The company may by ordinary resolution suspend or relax to any extent, either generally or in respect of any particular matter, any provision of the articles prohibiting a director from voting at a meeting of directors or of a committee of directors. 98. If a question arises at a meeting of directors or of a committee of directors as to the right of a director to vote, the question may, before the conclusion of the meeting, be referred to the chairman of the meeting and his ruling in relation to any director other than himself shall be final and conclusive.

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Article 15 Records of decisions to be kept 7.19 15. The directors must ensure that the company keeps a record, in writing, for at least 10 years from the date of the decision recorded, of every unanimous or majority decision taken by the directors.

Article 15 Analysis See analysis of Article 15 in 6.17. Article 15 Previous provisions Table A 1985: Regulation 100 Table A is modified. In paragraph (b) of regulation 100 the words ‘of the holders of any class of shares in the company’12 are omitted. 100. The directors shall cause minutes to be made in books kept for the purpose— (a) of all appointments of officers made by the directors; and (b) of all proceedings at meetings of the company, and of the directors, and of committees of directors, including the names of the directors present at each such meeting

Article 16 Directors’ discretion to make further rules 7.20 16. Subject to the articles, the directors may make any rule which they think fit about how they take decisions, and about how such rules are to be recorded or communicated to directors. Article 16 Analysis See analysis of Article 16 in 6.18. Article 16 Previous provisions Table A 1985: Regulation 88 12 The Companies (Tables A to F) Regulations 1985, SI 1985/805, Table C, A company limited by ­guarantee and not having a share capital, Articles of association, para 11.

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88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

Article 17 Methods of appointing directors 7.21 17.—(1) Any person who is willing to act as a director, and is permitted by law to do so, may be appointed to be a director— (a) by ordinary resolution, or (b) by a decision of the directors. (2) In any case where, as a result of death, the company has no members and no directors, the personal representatives of the last member to have died have the right, by notice in writing, to appoint a person to be a director. (3) For the purposes of paragraph (2), where 2 or more members die in circumstances rendering it uncertain who was the last to die, a younger member is deemed to have survived an older member. Article 17 Analysis See analysis of Article 17 in 6.19. Article 17 Previous provisions Table A 1985: Regulations 78 and 79 78. Subject as aforesaid, the company may by ordinary resolution appoint a person who is willing to act to be a director either to fill a vacancy or as an additional director and may also determine the rotation in which any additional directors are to retire. 79. The directors may appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director, provided that the appointment

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does not cause the number of directors to exceed any number fixed by or in accordance with the articles as the maximum number of directors. A director so appointed shall hold office only until the next following annual general meeting and shall not be taken into account in determining the directors who are to retire by rotation at the meeting. If not reappointed at such annual general meeting, he shall vacate office at the conclusion thereof.

Article 18 Termination of director’s appointment 7.22 18. A person ceases to be a director as soon as— (a) that person ceases to be a director by virtue of any provision of the Companies Act 2006 or is prohibited from being a director by law; (b) a bankruptcy order is made against that person; (c) a composition is made with that person’s creditors generally in satisfaction of that person’s debts; (d) a registered medical practitioner who is treating that person gives a written opinion to the company stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months; (e) [paragraph omitted pursuant to The Mental Health (Discrimination) Act 2013] (f) notification is received by the company from the director that the director is resigning from office, and such resignation has taken effect in accordance with its terms.

Article 18 Analysis See analysis of Article 18 in 6.20. Article 18 Previous provisions Table A 1985: Regulation 81 81. The office of a director shall be vacated if— (a) he ceases to be a director by virtue of any provision of the Act or he becomes prohibited by law from being a director; or (b) he becomes bankrupt or makes any arrangement or composition with his creditors generally; or

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(c) he is, or may be, suffering from mental disorder and either— (i) he is admitted to hospital in pursuance of an application for admission for treatment under the Mental Health Act 1983 or, in Scotland, an application for admission under the Mental Health (Scotland) Act 1960, or (ii) an order is made by a court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder for his detention or for the appointment of a receiver, curator bonis or other person to exercise powers with respect to his property or affairs; or (d) he resigns his office by notice to the company; or (e) he shall for more than six consecutive months have been absent without permission of the directors from meetings of directors held during that period and the directors resolve that his office be vacated.

Article 19 Directors’ remuneration 7.23 19.—(1) Directors may undertake any services for the company that the directors decide. (2) Directors are entitled to such remuneration as the directors determine— (a) for their services to the company as directors, and (b) for any other service which they undertake for the company. (3) Subject to the articles, a director’s remuneration may— (a) take any form, and (b) include any arrangements in connection with the payment of a pension, allowance or gratuity, or any death, sickness or disability benefits, to or in respect of that director. (4) Unless the directors decide otherwise, directors’ remuneration accrues from day to day. (5) Unless the directors decide otherwise, directors are not accountable to the company for any remuneration which they receive as directors or other officers or employees of the company’s subsidiaries or of any other body corporate in which the company is interested.

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Article 19 Analysis See analysis of Article 19 in 6.21. Article 19 Previous provisions Table A 1985: Regulation 82, 84, 87 82. The directors shall be entitled to such remuneration as the company may by ordinary resolution determine and, unless the resolution provides otherwise, the remuneration shall be deemed to accrue from day to day. 84. Subject to the provisions of the Act, the directors may appoint one or more of their number to the office of managing director or to any other executive office under the company and may enter into an agreement or arrangement with any director for his employment by the company or for the provision by him of any services outside the scope of the ordinary duties of a director. Any such appointment, agreement or arrangement may be made upon such terms as the directors determine and they may remunerate any such director for his services as they think fit.Any appointment of a director to an executive office shall terminate if he ceases to be a director but without prejudice to any claim to damages for breach of the contract of service between the director and the company. A managing director and a director holding any other executive office shall not be subject to retirement by rotation. 87.The directors may provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for any director who has held but no longer holds any executive office or employment with the company or with any body corporate which is or has been a subsidiary of the company or a predecessor in business of the company or of any such subsidiary, and for any member of his family (including a spouse and a former spouse) or any person who is or was dependent on him, and may (as well before as after he ceases to hold such office or employment) contribute to any fund and pay premiums for the purchase or provision of any such benefit.

Article 20 Directors’ expenses 7.24 20. The company may pay any reasonable expenses which the directors properly incur in connection with their attendance at— (a) meetings of directors or committees of directors, (b) general meetings, or (c) separate meetings of the holders of debentures of the company,

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Article 20 Analysis See analysis of Article 20 in 6.22. Table A is modified. In regulation 83 the words ‘any class of shares’ are omitted.13 Article 20 Previous provisions Table A 1985: Regulation 83 83. The directors may be paid all travelling, hotel, and other expenses properly incurred by them in connection with their attendance at meetings of directors or committees of directors or general meetings or separate meetings of the holders of any class of shares or of debentures of the company or otherwise in connection with the discharge of their duties.

Part 3 Members Article 21 Applications for membership 7.25 21. No person shall become a member of the company unless— (a) that person has completed an application for membership in a form approved by the directors, and (b) the directors have approved the application.

Article 21 Analysis There is no corresponding article in the model articles for private companies limited by shares. Article 21 Previous provisions Table C 1985: Regulation 3 Table C is modified. Paragraph 3 is inserted.14

13 The Companies (Tables A to F) Regulations 1985, SI 1985/805, Table C, A company limited by guarantee and not having a share capital, Articles of association, para 9. 14 The Companies (Tables A to F) Regulations 1985, SI 1985/805, Table C, A company limited by guarantee and not having a share capital, Articles of Association, para 3, see https://www.legislation.gov. uk/uksi/1985/805/pdfs/uksi_19850805_en.pdf.

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3. The subscribers to the memorandum of association o the company and such other persons as are admitted to membership in accordance with the articles shall be members of the company. No person shall be admitted a member of the company unless he is approved by the directors. Every person who wishes to become a member shall deliver to the company an application for membership in such form as the directors require executed by him.

Article 22 Termination of membership 7.26 22.—(1) A member may withdraw from membership of the company by giving 7 days’ notice to the company in writing. (2) Membership is not transferable. (3) A person’s membership terminates when that person dies or ceases to exist. Article 22 Analysis There is no corresponding article in the model articles for private companies limited by shares. Article 22 Previous provisions Table C 1985: Regulation 4 Table C is modified. Paragraph 4 is inserted.15 4. A member may at any time withdraw from the company by giving at least seven clear days’ notice to the company. Membership shall not be transferable and shall cease on death.

Article 23 Attendance and speaking at general meetings 7.27 23.—(1) A person is able to exercise the right to speak at a general meeting when that person is in a position to communicate to all those attending the

15 The Companies (Tables A to F) Regulations 1985, SI 1985/805, Table C, A company limited by ­guarantee and not having a share capital, Articles of Association, para 4, see https://www.legislation.gov. uk/uksi/1985/805/pdfs/uksi_19850805_en.pdf.

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meeting, during the meeting, any information or opinions which that person has on the business of the meeting. (2) A person is able to exercise the right to vote at a general meeting when— (a) that person is able to vote, during the meeting, on resolutions put to the vote at the meeting, and (b) that person’s vote can be taken into account in determining whether or not such resolutions are passed at the same time as the votes of all the other persons attending the meeting. (3) The directors may make whatever arrangements they consider appropriate to enable those attending a general meeting to exercise their rights to speak or vote at it. (4) In determining attendance at a general meeting, it is immaterial whether any two or more members attending it are in the same place as each other. (5) Two or more persons who are not in the same place as each other attend a general meeting if their circumstances are such that if they have (or were to have) rights to speak and vote at that meeting, they are (or would be) able to exercise them. Article 23 Analysis See analysis of Article 37 in 6.39. Article 23 Previous provisions There is no corresponding provision in Table A 1985.

Article 24 Quorum for general meetings 7.28 24. No business other than the appointment of the chairman of the meeting is to be transacted at a general meeting if the persons attending it do not constitute a quorum. Article 24 Analysis See analysis of Article 38 in 6.40. Article 24 Previous provisions Table A 1985: Regulation 40 157

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40. No business shall be transacted at any meeting unless a quorum is present. Two persons entitled to vote upon the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation, shall be a quorum.

Article 25 Chairing general meetings 7.29 25.—(1) If the directors have appointed a chairman, the chairman shall chair general meetings if present and willing to do so. (2) If the directors have not appointed a chairman, or if the chairman is unwilling to chair the meeting or is not present within ten minutes of the time at which a meeting was due to start— (a) the directors present, or (b) (if no directors are present), the meeting,

must appoint a director or member to chair the meeting, and the appointment of the chairman of the meeting must be the first business of the meeting.

(3) The person chairing a meeting in accordance with this article is referred to as “the chairman of the meeting”. Article 25 Analysis See analysis of Article 39 in 6.41. Article 25 Previous provisions Table A 1985: Regulations 42, 43 42. The chairman, if any, of the board of directors or in his absence some other director nominated by the directors shall preside as chairman of the meeting, but if neither the chairman nor such other director (if any) be present within fifteen minutes after the time appointed for holding the meeting and willing to act, the directors present shall elect one of their number to be chairman and, if there is only one director present and willing to act, he shall be chairman. 43. If no director is willing to act as chairman, or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present and entitled to vote shall choose one of their number to be chairman.

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Article 26 Attendance and speaking by directors and non-members 7.30 26.—(1) Directors may attend and speak at general meetings, whether or not they are members. (2) The chairman of the meeting may permit other persons who are not members of the company to attend and speak at a general meeting. Article 26 Analysis See analysis of Article 40 in 6.42. Article 26 Previous provisions Table A 1985: Regulation 44 Table A is modified. The words ‘and at any separate meeting of the holders of any class of shares in the company’ are omitted from regulation 44.16 44. A director shall, notwithstanding that he is not a member, be entitled to attend and speak at any general meeting.

Article 27 Adjournment 7.31 27.—(1) If the persons attending a general meeting within half an hour of the time at which the meeting was due to start do not constitute a quorum, or if during a meeting a quorum ceases to be present, the chairman of the meeting must adjourn it. (2) The chairman of the meeting may adjourn a general meeting at which a quorum is present if— (a) the meeting consents to an adjournment, or (b) it appears to the chairman of the meeting that an adjournment is necessary to protect the safety of any person attending the meeting or ensure that the business of the meeting is conducted in an orderly manner. (3) The chairman of the meeting must adjourn a general meeting if directed to do so by the meeting. 16 The Companies (Tables A to F) Regulations 1985, SI 1985/805, Table C, A company limited by ­guarantee and not having a share capital, Articles of association, para 6.

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(4) When adjourning a general meeting, the chairman of the meeting must— (a) either specify the time and place to which it is adjourned or state that it is to continue at a time and place to be fixed by the directors, and (b) have regard to any directions as to the time and place of any adjournment which have been given by the meeting. (5) If the continuation of an adjourned meeting is to take place more than 14 days after it was adjourned, the company must give at least 7 clear days’ notice of it (that is, excluding the day of the adjourned meeting and the day on which the notice is given)— (a) to the same persons to whom notice of the company’s general meetings is required to be given, and (b) containing the same information which such notice is required to contain. (6) No business may be transacted at an adjourned general meeting which could not properly have been transacted at the meeting if the adjournment had not taken place. Article 27 Analysis See analysis of Article 41 in 6.43. Article 27 Previous provisions Table A 1985: Regulations 41, 45 41. If such a quorum is not present within half an hour from the time appointed for the meeting, or if during a meeting such a quorum ceases to be present, the meeting shall stand adjourned to the same day in the next week at the same time and place or to such time and place as the directors may determine. 45. The chairman may, with the consent of a meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at an adjourned meeting other than business which might properly have been transacted at the meeting had the adjournment not taken place.When a meeting is adjourned for fourteen days or more, at least seven clear days’ notice shall be given specifying the time and place of the adjourned meeting and the general nature of the business to be transacted. Otherwise it shall not be necessary to give any such notice.

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Article 28 Voting: general 7.32 28. A resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is duly demanded in accordance with the articles. Article 28 Analysis See analysis of Article 42 in 6.44. Article 28 Previous provisions Table A 1985: Regulation 46 Table A is modified. Paragraph (d) of regulation 46 is omitted: ‘by a member or members holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right’.17 46. A resolution put to the vote of a meeting shall be decided on a show of hands unless before, or on the declaration of the result of, the show of hands a poll is duly demanded. Subject to the provisions of the Act, a poll may be demanded— (a) by the chairman; or (b) by at least two members having the right to vote at the meeting; or (c) by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

and a demand by a person as proxy for a member shall be the same as a demand by the member.

Article 29 Errors and disputes 7.33 29.—(1) No objection may be raised to the qualification of any person voting at a general meeting except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting is valid. (2) Any such objection must be referred to the chairman of the meeting whose decision is final. 17 The Companies (Tables A to F) Regulations 1985, SI 1985/805, Table C, A company limited by ­guarantee and not having a share capital, Articles of association, para 7.

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Article 29 Analysis See analysis of Article 43 in 6.45. Article 29 Previous provisions Table A 1985: Regulation 58 58. No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting shall be valid. Any objection made in due time shall be referred to the chairman whose decision shall be final and conclusive.

Article 30 Poll votes 7.34 30.—(1) A poll on a resolution may be demanded— (a) in advance of the general meeting where it is to be put to the vote, or (b) at a general meeting, either before a show of hands on that resolution or immediately after the result of a show of hands on that resolution is declared. (2) A poll may be demanded by— (a) the chairman of the meeting; (b) the directors; (c) two or more persons having the right to vote on the resolution; or (d) a person or persons representing not less than one tenth of the total voting rights of all the members having the right to vote on the resolution. (3) A demand for a poll may be withdrawn if— (a) the poll has not yet been taken, and (b) the chairman of the meeting consents to the withdrawal. (4) Polls must be taken immediately and in such manner as the chairman of the meeting directs.

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Article 30 Analysis See analysis of Article 44 in 6.46. Article 30 Previous provisions Table A 1985: Regulations 46, 48, 49, 51 Table A is modified. Paragraph (d) of regulation 46 is omitted: ‘by a member or members holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right’.18 46. A resolution put to the vote of a meeting shall be decided on a show of hands unless before, or on the declaration of the result of, the show of hands a poll is duly demanded. Subject to the provisions of the Act, a poll may be demanded— (a) by the chairman; or (b) by at least two members having the right to vote at the meeting; or (c) by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

and a demand by a person as proxy for a member shall be the same as a demand by the member.

48. The demand for a poll may, before the poll is taken, be withdrawn but only with the consent of the chairman and a demand so withdrawn shall not be taken to have invalidated the result of a show of hands declared before the demand was made. 49. A poll shall be taken as the chairman directs and he may appoint scrutineers (who need not be members) and fix a time and place for declaring the result of the poll. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. 51. A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken either forthwith or at such time and place as the chairman directs not being more than thirty days after the poll is demanded. The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll was demanded. If a poll is demanded before the declaration of the result of a show of hands and the demand is duly withdrawn, the meeting shall continue as if the demand had not been made.

18 The Companies (Tables A to F) Regulations 1985, SI 1985/805, Table C, A company limited by guarantee and not having a share capital, Articles of association, para 7.

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Article 31 Content of proxy notices 7.35 31.—(1) Proxies may only validly be appointed by a notice in writing (a “proxy notice”) which— (a) states the name and address of the member appointing the proxy; (b) identifies the person appointed to be that member’s proxy and the general meeting in relation to which that person is appointed; (c) is signed by or on behalf of the member appointing the proxy, or is authenticated in such manner as the directors may determine; and (d) is delivered to the company in accordance with the articles and any instructions contained in the notice of the general meeting to which they relate. (2) The company may require proxy notices to be delivered in a particular form, and may specify different forms for different purposes. (3) Proxy notices may specify how the proxy appointed under them is to vote (or that the proxy is to abstain from voting) on one or more resolutions. (4) Unless a proxy notice indicates otherwise, it must be treated as— (a) allowing the person appointed under it as a proxy discretion as to how to vote on any ancillary or procedural resolutions put to the meeting, and (b) appointing that person as a proxy in relation to any adjournment of the general meeting to which it relates as well as the meeting itself.

Article 31 Analysis See analysis of Article 45 in 6.47. Article 31 Previous provisions Table A 1985: Regulations 60, 61 60. The appointment of a proxy shall be executed by or on behalf of the appointor and shall be in the following form (or in a form as near thereto as circumstances allow or in any other form which is usual or which the directors may approve)— “………… PLC/Limited ………… I/We, …………, of …………, being a member/members of the above-named company, hereby appoint ………… of …………, or failing him, ………… of …………, as my/our proxy to vote in my/our name[s] and on my/our behalf at the annual/any other general

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61. Where it is desired to afford members an opportunity of instructing the proxy how he shall act the appointment of a proxy shall be in the following form (or in a form as near thereto as circumstances allow or in any other form which is usual or which the directors may approve)— “…… …… PLC/Limited ………… I/We, …………, of …………, being a member/members of the above-named company, hereby appoint ………… of …………, or failing him ………… of …………, as my/our proxy to vote in my/our name[s] and on my/our behalf at the annual/any other general meeting of the company, to be held on ………… 19 …………, and at any ­adjournment thereof. This form is to be used in respect of the resolutions mentioned below as follows: Resolution No. 1 *for *against Resolution No. 2 *for *against. *Strike out whichever is not desired. Unless otherwise instructed, the proxy may vote as he thinks fit or abstain from voting. Signed this ………… day of …… 19 ………….”.

Article 32 Delivery of proxy notices 7.36 32.—(1) A person who is entitled to attend, speak or vote (either on a show of hands or on a poll) at a general meeting remains so entitled in respect of that meeting or any adjournment of it, even though a valid proxy notice has been delivered to the company by or on behalf of that person. (2) An appointment under a proxy notice may be revoked by delivering to the company a notice in writing given by or on behalf of the person by whom or on whose behalf the proxy notice was given. (3) A notice revoking a proxy appointment only takes effect if it is delivered before the start of the meeting or adjourned meeting to which it relates. (4) If a proxy notice is not executed by the person appointing the proxy, it must be accompanied by written evidence of the authority of the person who executed it to execute it on the appointor’s behalf. Article 32 Analysis See analysis of Article 46 in 6.48. Article 32 Previous provisions Table A 1985: Regulations 62, 63 165

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62. The appointment of a proxy and any authority under which it is executed or a copy of such authority certified notarially or in some other way approved by the directors may— (a) in the case of an instrument in writing be deposited at the office or at such other place within the United kingdom as is specified in the notice convening the meeting or in any instrument of proxy sent out by the company in relation to the meeting not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote; or (aa) in the case of an appointment contained in an electronic communication, where an address has been specified for the purpose of receiving electronic communications— (i)

in the notice convening the meeting, or

(ii) in any instrument of proxy sent out by the company in relation to the meeting, or (iii) in any invitation contained in an electronic communication to appoint a proxy issued by the company in relation to the meeting, be received at such address not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the appointment proposes to vote; (b) in the case of a poll taken more than 48 hours after it is demanded, be deposited or received as aforesaid after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll; or (c) where the poll is not taken forthwith but is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the poll was demanded to the chairman or to the secretary or to any director; and an appointment of proxy which is not deposited, delivered or received in a manner so permitted shall be invalid. In this regulation and the next, “address”, in relation to electronic communications, includes any number or address used for the purposes of such communications. 63. A vote given or poll demanded by proxy or by the duly authorised representative of a corporation shall be valid notwithstanding the previous determination of the authority of the person voting or demanding a poll unless notice of the determination was received by the company at the office or at such other place at which the instrument of proxy was duly deposited or, where the appointment of the proxy was contained in an electronic communication, at the address at which such appointment was duly received before the commencement of the meeting or adjourned meeting at which the vote is given or the poll demanded or (in the case of a poll taken otherwise than on the same day as the meeting or adjourned meeting) the time appointed for taking the poll. 166

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Article 33 Amendments to resolutions 7.37 33.—(1) An ordinary resolution to be proposed at a general meeting may be amended by ordinary resolution if— (a) notice of the proposed amendment is given to the company in writing by a person entitled to vote at the general meeting at which it is to be proposed not less than 48 hours before the meeting is to take place (or such later time as the chairman of the meeting may determine), and (b) the proposed amendment does not, in the reasonable opinion of the chairman of the meeting, materially alter the scope of the resolution. (2) A special resolution to be proposed at a general meeting may be amended by ordinary resolution, if— (a) the chairman of the meeting proposes the amendment at the general meeting at which the resolution is to be proposed, and (b) the amendment does not go beyond what is necessary to correct a grammatical or other non-substantive error in the resolution. (3) If the chairman of the meeting, acting in good faith, wrongly decides that an amendment to a resolution is out of order, the chairman’s error does not invalidate the vote on that resolution. Article 33 Analysis See analysis of Article 47 in 6.49. Article 33 Previous provisions There is no corresponding provision in Table A 1985.

Part 4 Administrative arrangements Article 34 Means of communication to be used 7.38 34.—(1) Subject to the articles, anything sent or supplied by or to the company under the articles may be sent or supplied in any way in which the Companies Act 2006 provides for documents or information which are authorised or required by any provision of that Act to be sent or supplied by or to the company. 167

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(2) Subject to the articles, any notice or document to be sent or supplied to a director in connection with the taking of decisions by directors may also be sent or supplied by the means by which that director has asked to be sent or supplied with such notices or documents for the time being. (3) A director may agree with the company that notices or documents sent to that director in a particular way are to be deemed to have been received within a specified time of their being sent, and for the specified time to be less than 48 hours. Article 34 Analysis See analysis of Article 48 in 6.50. Article 34 Previous provisions Table A 1985: Regulations 111, 112 Table A is modified. In regulation 112 the second sentence ‘In the case of joint holders of a share, all notices shall be given to the joint holder whose name stands first in the register of members in respect of the joint holding and notice so given shall be sufficient notice to all the joint holders.’ is omitted.19 111. Any notice to be given to or by any person pursuant to the articles (other than a notice calling a meeting of the directors) shall be in writing or shall be given using electronic communications to an address for the time being notified for that purpose to the person giving the notice. In this regulation,“address”, in relation to electronic communications, includes any number or address used for the purposes of such communications. 112. The company may give any notice to a member either personally or by sending it by post in a prepaid envelope addressed to the member at his registered address or by leaving it at that address or by giving it using electronic communications to an address for the time being notified to the company by the member. A member whose registered address is not within the United Kingdom and who gives to the company an address within the United Kingdom at which notices may be given to him, or an address to which notices may be sent using electronic communications, shall be entitled to have notices given to him at that address, but otherwise no such member shall be entitled to receive any notice from the company. In this regulation and the next, “address”, in relation to electronic communications, includes any number or address used for the purposes of such communications.

19 The Companies (Tables A to F) Regulations 1985, SI 1985/805, Table C, A company limited by ­guarantee and not having a share capital, Articles of association, para 12.

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Article 35 Company seals 7.39 35.—(1) Any common seal may only be used by the authority of the directors. (2) The directors may decide by what means and in what form any common seal is to be used. (3) Unless otherwise decided by the directors, if the company has a common seal and it is affixed to a document, the document must also be signed by at least one authorised person in the presence of a witness who attests the signature. (4) For the purposes of this article, an authorised person is— (a) any director of the company; (b) the company secretary (if any); or (c) any person authorised by the directors for the purpose of signing documents to which the common seal is applied. Article 35 Analysis See analysis of Article 49 in 6.51. Article 35 Previous provisions Table A 1985: Regulation 101 101. The seal shall only be used by the authority of the directors or of a committee of directors authorised by the directors. The directors may determine who shall sign any instrument to which the seal is affixed and unless otherwise so determined it shall be signed by a director and by the secretary or by a second director.

Article 36 No right to inspect accounts and other records 7.40 36. Except as provided by law or authorised by the directors or an ordinary resolution of the company, no person is entitled to inspect any of the company’s accounting or other records or documents merely by virtue of being a member.

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Article 36 Analysis See analysis of Article 50 in 6.52. Article 36 Previous provisions Table A 1985: Regulation 109 109. No member shall (as such) have any right of inspecting any accounting records or other book or document of the company except as conferred by statute or authorised by the directors or by ordinary resolution of the company.

Article 37 Provision for employees on cessation of business 7.41 37. The directors may decide to make provision for the benefit of persons employed or formerly employed by the company or any of its subsidiaries (other than a director or former director or shadow director) in connection with the cessation or transfer to any person of the whole or part of the undertaking of the company or that subsidiary. Article 37 Analysis See analysis of Article 51 in 6.53. Article 37 Previous provisions There is no corresponding provision in Table A 1985.

Article 38 Indemnity 7.42 38.—(1) Subject to paragraph (2), a relevant director of the company or an associated company may be indemnified out of the company’s assets against— (a) any liability incurred by that director in connection with any negligence, default, breach of duty or breach of trust in relation to the company or an associated company, (b) any liability incurred by that director in connection with the activities of the company or an associated company in its capacity as a trustee of an occupational pension scheme (as defined in section 235(6) of the Companies Act 2006),

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(c) any other liability incurred by that director as an officer of the company or an associated company. (2) This article does not authorise any indemnity which would be prohibited or rendered void by any provision of the Companies Acts or by any other provision of law. (3) In this article— (a) companies are associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate, and (b) a “relevant director” means any director or former director of the company or an associated company. Article 38 Analysis See analysis of Article 52 in 6.54. Article 38 Previous provisions Table A 1985: Regulation 118 118. Subject to the provisions of the Act but without prejudice to any indemnity to which a director may otherwise be entitled, every director or other officer or auditor of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application in which relief is granted to him by the court from liability for negligence, default, breach of duty or breach of trust in relation to the affairs of the company.

Article 39 Insurance 7.43 39.—(1) The directors may decide to purchase and maintain insurance, at the expense of the company, for the benefit of any relevant director in respect of any relevant loss. (2) In this article— (a) a “relevant director” means any director or former director of the company or an associated company,

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(b) a “relevant loss” means any loss or liability which has been or may be incurred by a relevant director in connection with that director’s duties or powers in relation to the company, any associated company or any pension fund or employees’ share scheme of the company or associated company, and (c) companies are associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate. Article 39 Analysis See analysis of Article 53 in 6.55. Article 39 Previous provisions There is no corresponding provision in Table A 1985.

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Chapter 8  Analysis of the Model Articles for Public Companies Introduction 8.1 The following model articles for a public limited company (Plc) ought to be considered a drafting resource and not a completed constitution for a Plc. The articles may also be of benefit for larger more complex private limited companies who may require provisions for alternative directors or more complex share structures. The model articles for a Plc mirror the 1985 Table A with exemptions where the old 1985 Companies Act provisions were made irrelevant or overridden by the new Companies Act 2006. Broadly the model articles drafting strategy of the government of the day was to transpose Table A provisions into the model articles for a Plc and to exclude anything not relevant to a small company to form the articles for a private limited company. Arguably the Plc model articles are ineffectual for most public companies as a key element of the articles (and the company constitution) will be the listing requirements and best practice constraints of the exchange the company may list on. The following chapter provides a condensed analysis of the Plc model articles. The majority of the provisions are a repetition of the model articles for a private company. Where a provision may be applicable to a larger private company this is indicated with a brief overview.

Key points 8.2 ●●

Public limited companies typically will have tailor made articles of association drafted with consideration of any stock exchange requirements.

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The model articles for a public company is a drafting resource which includes the types of provisions any bespoke articles ought to include. 173

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●●

The Plc articles and its provisions may be useful for inclusion by larger private companies.

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The majority of Plcs start life as private limited companies and reregister as public companies therefore it is unlikely any public company by default would utilise the model articles for a public company.

Model Articles for Public Companies Part 1 Interpretation and limitation of liability Article 1 Defined terms 8.3 1. In the articles, unless the context requires otherwise— “alternate” or “alternate director” has the meaning given in article 25; “appointor” has the meaning given in article 25; “articles” means the company’s articles of association; “bankruptcy” includes individual insolvency proceedings in a jurisdiction other than England and Wales or Northern Ireland which have an effect similar to that of bankruptcy; “call” has the meaning given in article 54; “call notice” has the meaning given in article 54; “certificate” means a paper certificate (other than a share warrant) evidencing a person’s title to specified shares or other securities; “certificated” in relation to a share, means that it is not an uncertificated share or a share in respect of which a share warrant has been issued and is current; “chairman” has the meaning given in article 12; “chairman of the meeting” has the meaning given in article 31; “Companies Acts” means the Companies Acts (as defined in section 2 of the Companies Act 2006), in so far as they apply to the company; “company’s lien” has the meaning given in article 52; “director” means a director of the company, and includes any person occupying the position of director, by whatever name called; “distribution recipient” has the meaning given in article 72; “document” includes, unless otherwise specified, any document sent or supplied in electronic form; 174

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“electronic form” has the meaning given in section 1168 of the Companies Act 2006; “fully paid” in relation to a share, means that the nominal value and any premium to be paid to the company in respect of that share have been paid to the company; “hard copy form” has the meaning given in section 1168 of the Companies Act 2006; “holder” in relation to shares means the person whose name is entered in the register of members as the holder of the shares, or, in the case of a share in respect of which a share warrant has been issued (and not cancelled), the person in possession of that warrant; “instrument” means a document in hard copy form; “lien enforcement notice” has the meaning given in article 53; “member” has the meaning given in section 112 of the Companies Act 2006; “ordinary resolution” has the meaning given in section 282 of the Companies Act 2006; “paid” means paid or credited as paid; “participate”, in relation to a directors’ meeting, has the meaning given in article 9; “partly paid” in relation to a share means that part of that share’s nominal value or any premium at which it was issued has not been paid to the company; “proxy notice” has the meaning given in article 38; “securities seal” has the meaning given in article 47; “shares” means shares in the company; “special resolution” has the meaning given in section 283 of the Companies Act 2006; “subsidiary” has the meaning given in section 1159 of the Companies Act 2006; “transmittee” means a person entitled to a share by reason of the death or bankruptcy of a shareholder or otherwise by operation of law; “uncertificated” in relation to a share means that, by virtue of legislation (other than section 778 of the Companies Act 2006) permitting title to shares to be evidenced and transferred without a certificatee, title to that share is evidenced and may be transferred without a certificate; and “writing” means the representation or reproduction of words, symbols or other information in a visible form by any method or combination of methods, whether sent or supplied in electronic form or otherwise. 175

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Unless the context otherwise requires, other words or expressions contained in these articles bear the same meaning as in the Companies Act 2006 as in force on the date when these articles become binding on the company.

Article 2 Liability of members 8.4 2. The liability of the members is limited to the amount, if any, unpaid on the shares held by them. Article 2 Analysis See analysis of Article 2 in 6.4. Article 2 Previous provisions This article appeared in the memorandum of association. There is no corresponding regulation in Table A 1985.

Part 2 Directors Article 3 Directors’ general authority 8.5 3. Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company. Article 3 Analysis See analysis of Article 3 in 6.5. Article 3 Previous provisions Table A 1985: Regulation 70. 70. Subject to the provisions of the Act, the memorandum and the articles and to any directions given by special resolution, the business of the company shall be managed by the directors who may exercise all the powers of the company. No alteration of the memorandum or articles and no such direction shall invalidate any prior act of the directors which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this regulation shall not be limited by any special power given to the directors by the articles and a meeting of directors at which a quorum is present may exercise all powers exercisable by the directors. 176

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Article 4 Members’ reserve power 8.6 4.—(1) The members may, by special resolution, direct the directors to take, or refrain from taking, specified action. (2) No such special resolution invalidates anything which the directors have done before the passing of the resolution. Article 4 Analysis See analysis of Article 4 in 6.6. Article 4 Previous provisions Table A 1985: Regulation 70 70. Subject to the provisions of the Act, the memorandum and the articles and to any directions given by special resolution, the business of the company shall be managed by the directors who may exercise all the powers of the company. No alteration of the memorandum or articles and no such direction shall invalidate any prior act of the directors which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this regulation shall not be limited by any special power given to the directors by the articles and a meeting of directors at which a quorum is present may exercise all powers exercisable by the directors.

Article 5 Directors may delegate 8.7 5.—(1) Subject to the articles, the directors may delegate any of the powers which are conferred on them under the articles— (a) to such person or committee; (b) by such means (including by power of attorney); (c) to such an extent; (d) in relation to such matters or territories; and (e) on such terms and conditions;

as they think fit.

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(2) If the directors so specify, any such delegation may authorise further delegation of the directors’ powers by any person to whom they are delegated. (3) The directors may revoke any delegation in whole or part, or alter its terms and conditions. Article 5 Analysis See analysis of Article 5 in 6.7. Article 5 Previous provisions Table A 1985: Regulations 71, 72 71. The directors may, by power of attorney or otherwise, appoint any person to be the agent of the company for such purposes and on such conditions as they determine, including authority for the agent to delegate all or any of his powers. DELEGATION OF DIRECTORS’ POWERS 72. The directors may delegate any of their powers to any committee consisting of one or more directors. They may also delegate to any managing director or any director holding any other executive office such of their powers as they consider desirable to be exercised by him. Any such delegation may be made subject to any conditions the directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee with two or more members shall be governed by the articles regulating the proceedings of directors so far as they are capable of applying.

Article 6 Committees 8.8 6.—(1) Committees to which the directors delegate any of their powers must follow procedures which are based as far as they are applicable on those provisions of the articles which govern the taking of decisions by directors. (2) The directors may make rules of procedure for all or any committees, which prevail over rules derived from the articles if they are not consistent with them.

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Article 6 Analysis See analysis of Article 6 in 6.8. Article 6 Previous provisions Table A 1985: Regulation 72 DELEGATION OF DIRECTORS’ POWERS 72. The directors may delegate any of their powers to any committee consisting of one or more directors. They may also delegate to any managing director or any director holding any other executive office such of their powers as they consider desirable to be exercised by him. Any such delegation may be made subject to any conditions the directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee with two or more members shall be governed by the articles regulating the proceedings of directors so far as they are capable of applying.

Article 7 Directors to take decisions collectively 8.9 7. Decisions of the directors may be taken— (a) at a directors’ meeting, or (b) in the form of a directors’ written resolution. Article 7 Analysis Article 7 in unambiguous terms sets out how collective decisions are made by the directors. The article differs from the Model articles for private companies limited by shares (PCLS) by omitting the option for companies with one director. Public companies must have at least two directors.1 Article 7 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request

1

Companies Act 2006, s 154 (Companies required to have directors) ‘(2) A public company must have at least two directors.’

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of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

Article 8 Calling a directors’ meeting 8.10 8.—(1) Any director may call a directors’ meeting. (2) The company secretary must call a directors’ meeting if a director so requests. (3) A directors’ meeting is called by giving notice of the meeting to the directors. (4) Notice of any directors’ meeting must indicate— (a) its proposed date and time; (b) where it is to take place; and (c) if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting. (5) Notice of a directors’ meeting must be given to each director, but need not be in writing. (6) Notice of a directors’ meeting need not be given to directors who waive their entitlement to notice of that meeting, by giving notice to that effect to the company not more than 7 days after the date on which the meeting is held.Where such notice is given after the meeting has been held, that does not affect the validity of the meeting, or of any business conducted at it. Article 8 Analysis The article is comparable with article 9 of the Model articles for private companies limited by shares, however the emphasis is also on the company secretary’s role in calling the meeting. Public limited companies must have

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a secretary,2 as opposed to the position of a private company where the appointment of a secretary is optional. Article 8 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

Article 9 Participation in directors’ meetings 8.11 9.—(1) Subject to the articles, directors participate in a directors’ meeting, or part of a directors’ meeting, when— (a) the meeting has been called and takes place in accordance with the articles, and (b) they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting. (2) In determining whether directors are participating in a directors’ meeting, it is irrelevant where any director is or how they communicate with each other. (3) If all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as taking place wherever any of them is. Article 9 Analysis See analysis of Article 10 in 6.12. Article 9 Previous provisions There is no corresponding regulation in Table A 1985. 2 Companies Act 2006, s 271 (Public company required to have secretary) ‘A public company must have a secretary.’

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Article 10 Quorum for directors’ meetings 8.12 10.—(1) At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. (2) The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two. Article 10 Analysis Article 10 differs from the model articles for a private company as the rule for a public limited company is a minimum of two directors must be appointed, this contrasts with a private company that may appoint a single director.The matter of appointing alternative directors is omitted in contrast to regulation 89 of Table A 1985. Article 25 allows for the appointment and removal of alternate directors. Article 10 Previous provisions Table A 1985: Regulation 89 89. The quorum for the transaction of the business of the directors may be fixed by the directors and unless so fixed at any other number shall be two. A person who holds office only as an alternate director shall, if his appointor is not present, be counted in the quorum.

Article 11 Meetings where total number of directors less than quorum 8.13 11.—(1) This article applies where the total number of directors for the time being is less than the quorum for directors’ meetings. (2) If there is only one director, that director may appoint sufficient directors to make up a quorum or call a general meeting to do so. (3) If there is more than one director— (a) a directors’ meeting may take place, if it is called in accordance with the articles and at least two directors participate in it, with a view to appointing sufficient directors to make up a quorum or calling a general meeting to do so, and

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(b) if a directors’ meeting is called but only one director attends at the appointed date and time to participate in it, that director may appoint sufficient directors to make up a quorum or call a general meeting to do so. Article 11 Analysis Article 11 replaces the more simplistic approach of the private company articles with a more detailed procedure (paragraph (3)(a)(b) is omitted). Article 11 Previous provisions Table A 1985: Regulation 90 90. The continuing directors or a sole continuing director may act notwithstanding any vacancies in their number, but, if the number of directors is less than the number fixed as the quorum, the continuing directors or director may act only for the purpose of filling vacancies or of calling a general meeting.

Article 12 Chairing directors’ meetings 8.14 12.—(1) The directors may appoint a director to chair their meetings. (2) The person so appointed for the time being is known as the chairman. (3) The directors may appoint other directors as deputy or assistant chairmen to chair directors’ meetings in the chairman’s absence. (4) The directors may terminate the appointment of the chairman, deputy or assistant chairman at any time. (5) If neither the chairman nor any director appointed generally to chair directors’ meetings in the chairman’s absence is participating in a meeting within ten minutes of the time at which it was to start, the participating directors must appoint one of themselves to chair it. Article 12 Analysis See analysis of Article 12 in 6.14. Article 12 includes paragraph 3 allowing for the appointment of deputies which is omitted in the private company articles.

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Article 12 Previous provisions Table A 1985: Regulation 91 91. The directors may appoint one of their number to be the chairman of the board of directors and may at any time remove him from that office. Unless he is unwilling to do so, the director so appointed shall preside at every meeting of directors at which he is present. But if there is no director holding that office, or if the director holding it is unwilling to preside or is not present within five minutes after the time appointed for the meeting, the directors present may appoint one of their number to be chairman of the meeting.

Article 13 Voting at directors’ meetings: general rules 8.15 13.—(1) Subject to the articles, a decision is taken at a directors’ meeting by a majority of the votes of the participating directors. (2) Subject to the articles, each director participating in a directors’ meeting has one vote. (3) Subject to the articles, if a director has an interest in an actual or proposed transaction or arrangement with the company— (a) that director and that director’s alternate may not vote on any proposal relating to it, but (b) this does not preclude the alternate from voting in relation to that transaction or arrangement on behalf of another appointor who does not have such an interest.

Article 13 Analysis Article 13 is absent from the PCLS articles. Paragraph (3)(a)(b) is concerned with transactional conflicts of interests which appear in article 16. Article 13 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the

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United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

Article 14 Chairman’s casting vote at directors’ meetings 8.16 14.—(1) If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting vote. (2) But this does not apply if, in accordance with the articles, the chairman or other director is not to be counted as participating in the decision-making process for quorum or voting purposes. Article 14 Analysis See analysis of Article 13 in 6.15. Article 14 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

Article 15 Alternates voting at directors’ meetings 8.17 15. A director who is also an alternate director has an additional vote on behalf of each appointor who is— (a) not participating in a directors’ meeting, and (b) would have been entitled to vote if they were participating in it. 185

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Article 15 Analysis This provision relates to articles 25, 26 and 27 and provides the procedure for voting if alternative directors have been appointed. Article 15 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

Article 16 Conflicts of interest 8.18 16.—(1) If a directors’ meeting, or part of a directors’ meeting, is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in that meeting, or part of a meeting, for quorum or voting purposes. (2) But if paragraph (3) applies, a director who is interested in an actual or proposed transaction or arrangement with the company is to be counted as participating in a decision at a directors’ meeting, or part of a directors’ meeting, relating to it for quorum and voting purposes. (3) This paragraph applies when— (a) the company by ordinary resolution disapplies the provision of the articles which would otherwise prevent a director from being counted as participating in, or voting at, a directors’ meeting; (b) the director’s interest cannot reasonably be regarded as likely to give rise to a conflict of interest; or (c) the director’s conflict of interest arises from a permitted cause. (4) For the purposes of this article, the following are permitted causes— (a) a guarantee given, or to be given, by or to a director in respect of an obligation incurred by or on behalf of the company or any of its subsidiaries; 186

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(b) subscription, or an agreement to subscribe, for shares or other securities of the company or any of its subsidiaries, or to underwrite, sub-underwrite, or guarantee subscription for any such shares or securities; and (c) arrangements pursuant to which benefits are made available to employees and directors or former employees and directors of the company or any of its subsidiaries which do not provide special benefits for directors or former directors. (5) Subject to paragraph (6), if a question arises at a meeting of directors or of a committee of directors as to the right of a director to participate in the meeting (or part of the meeting) for voting or quorum purposes, the question may, before the conclusion of the meeting, be referred to the chairman whose ruling in relation to any director other than the chairman is to be final and conclusive. (6) If any question as to the right to participate in the meeting (or part of the meeting) should arise in respect of the chairman, the question is to be decided by a decision of the directors at that meeting, for which purpose the chairman is not to be counted as participating in the meeting (or that part of the meeting) for voting or quorum purposes. Article 16 Analysis See analysis of Article 14 in 6.16. Article 16 Previous provisions Table A 1985: Regulation 93 93. A resolution in writing signed by all the directors entitled to receive notice of a meeting of directors or of a committee of directors shall be as valid and effectual as it if had been passed at a meeting of directors or (as the case may be) a committee of directors duly convened and held and may consist of several documents in the like form each signed by one or more directors; but a resolution signed by an alternate director need not also be signed by his appointor and, if it is signed by a director who has appointed an alternate director, it need not be signed by the alternate director in that capacity.

Article 17 Proposing directors’ written resolutions 8.19 17.—(1) Any director may propose a directors’ written resolution. (2) The company secretary must propose a directors’ written resolution if a director so requests. 187

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(3) A directors’ written resolution is proposed by giving notice of the proposed resolution to the directors. (4) Notice of a proposed directors’ written resolution must indicate— (a) the proposed resolution, and (b) the time by which it is proposed that the directors should adopt it. (5) Notice of a proposed directors’ written resolution must be given in writing to each director. (6) Any decision which a person giving notice of a proposed directors’ written resolution takes regarding the process of adopting that resolution must be taken reasonably in good faith. Article 17 Analysis The article outlines the procedure for directors’ written resolutions. Article 17(2) involves the company secretary which is a requirement of a public limited company. The article does not appear in the model articles for a private company. The article expands on 1985 Table A, Regulation 93. Article 17 Previous provisions Table A 1985: Regulation 93 93. A resolution in writing signed by all the directors entitled to receive notice of a meeting of directors or of a committee of directors shall be as valid and effectual as it if had been passed at a meeting of directors or (as the case may be) a committee of directors duly convened and held and may consist of several documents in the like form each signed by one or more directors; but a resolution signed by an alternate director need not also be signed by his appointor and, if it is signed by a director who has appointed an alternate director, it need not be signed by the alternate director in that capacity.

Article 18 Adoption of directors’ written resolutions 8.20 18.—(1) A proposed directors’ written resolution is adopted when all the directors who would have been entitled to vote on the resolution at a directors’ meeting have signed one or more copies of it, provided that those directors would have formed a quorum at such a meeting.

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(2) It is immaterial whether any director signs the resolution before or after the time by which the notice proposed that it should be adopted. (3) Once a directors’ written resolution has been adopted, it must be treated as if it had been a decision taken at a directors’ meeting in accordance with the articles. (4) The company secretary must ensure that the company keeps a record, in writing, of all directors’ written resolutions for at least ten years from the date of their adoption. Article 18 Analysis Article 18 adds additional requirements for the adoption of written resolutions. Paragraph (4) states the requirement that written resolutions must be retained for at least 10 years. This contrasts with the 1985 Table A regulation 100 that records be made in books. Article 18 Previous provisions Table A 1985: Regulation 93, 100 93. A resolution in writing signed by all the directors entitled to receive notice of a meeting of directors or of a committee of directors shall be as valid and effectual as it if had been passed at a meeting of directors or (as the case may be) a committee of directors duly convened and held and may consist of several documents in the like form each signed by one or more directors; but a resolution signed by an alternate director need not also be signed by his appointor and, if it is signed by a director who has appointed an alternate director, it need not be signed by the alternate director in that capacity. 100. The directors shall cause minutes to be made in books kept for the purpose— (a) of all appointments of officers made by the directors; and (b) of all proceedings at meetings of the company, of the holders of any class of shares in the company, and of the directors, and of committees of directors, including the names of the directors present at each such meeting.

Article 19 Directors’ discretion to make further rules 8.21 19. Subject to the articles, the directors may make any rule which they think fit about how they take decisions, and about how such rules are to be recorded or communicated to directors. 189

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Article 19 Analysis See analysis of Article 16 in 6.18. Article 19 Previous provisions Table A 1985: Regulation 88 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

Article 20 Methods of appointing directors 8.22 20. Any person who is willing to act as a director, and is permitted by law to do so, may be appointed to be a director— (a) by ordinary resolution, or (b) by a decision of the directors. Article 20 Analysis See analysis of Article 17 in 6.19. The Plc articles omits paragraph (2) and (3). Article 20 Previous provisions Table A 1985: Regulations 78, 79 78. The company may by ordinary resolution appoint a person who is willing to act to be a director either to fill a vacancy or as an additional director and may also determine the rotation in which any additional directors are to retire. 79. The directors may appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director, provided that the appointment does not cause the number of directors to exceed any number fixed by or in accordance with the articles as the maximum

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number of directors. A director so appointed shall hold office only until the next following annual general meeting and shall not be taken into account in determining the directors who are to retire by rotation at the meeting. If not reappointed at such annual general meeting, he shall vacate office at the conclusion thereof.

Article 21 Retirement of directors by rotation 8.23 21.—(1) At the first annual general meeting all the directors must retire from office. (2) At every subsequent annual general meeting any directors— (a) who have been appointed by the directors since the last annual general meeting, or (b) who were not appointed or reappointed at one of the preceding two annual general meetings, must retire from office and may offer themselves for reappointment by the members.

Article 21 Analysis Article 21 provides a simplification of Table A 1985 regulations 73 to 77, notably the automatic reappointment of directors (regulation 75) is omitted. Article 21 Previous provisions Table A 1985: Regulation 73 73. At the first annual general meeting all the directors shall retire from office, and at every subsequent annual general meeting one-third of the directors who are subject to retirement by rotation or, if their number is not three or a multiple of three, the number nearest to one-third shall retire from office; but, if there is only one director who is subject to retirement by rotation, he shall retire. 74. Subject to the provisions of the Act, the directors to retire by rotation shall be those who have been longest in office since their last appointment or reappointment, but as between persons who became or were last reappointed directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. 75. If the company, at the meeting at which a director retires by rotation, does not fill the vacancy the retiring director shall, if willing to act, be

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deemed to have been reappointed unless at the meeting it is resolved not to fill the vacancy or unless a resolution for the reappointment of the director is put to the meeting and lost. 76. No person other than a director retiring by rotation shall be appointed or reappointed a director at any general meeting unless— (a) he is recommended by the directors; or (b) not less than fourteen nor more than thirty-five clear days before the date appointed for the meeting, notice executed by a member qualified to vote at the meeting has been given to the company of the intention to propose that person for appointment or reappointment stating the particulars which would, if he were so appointed or reappointed, be required to be included in the company’s register of directors together with notice executed by that person of his willingness to be appointed or reappointed. 77. Not less than seven nor more than twenty-eight clear days before the date appointed for holding a general meeting notice shall be given to all who are entitled to receive notice of the meeting of any person (other than a director retiring by rotation at the meeting) who is recommended by the directors

Article 22 Termination of director’s appointment 8.24 22. A person ceases to be a director as soon as— (a) that person ceases to be a director by virtue of any provision of the Companies Act 2006 or is prohibited from being a director by law; (b) a bankruptcy order is made against that person; (c) a composition is made with that person’s creditors generally in satisfaction of that person’s debts; (d) a registered medical practitioner who is treating that person gives a written opinion to the company stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months; (e) [paragraph omitted pursuant to The Mental Health (Discrimination) Act 2013] (f)

notification is received by the company from the director that the director is resigning from office as director, and such resignation has taken effect in accordance with its terms. 192

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Article 22 Analysis See analysis of Article 18 in 6.20. Article 22 Previous provisions Table A 1985: Regulation 81 81. The office of a director shall be vacated if— (a) he ceases to be a director by virtue of any provision of the Act or he becomes prohibited by law from being a director; or (b) he becomes bankrupt or makes any arrangement or composition with his creditors generally; or (c) he is, or may be, suffering from mental disorder and either— (i) he is admitted to hospital in pursuance of an application for admission for treatment under the Mental Health Act 1983 or, in Scotland, an application for admission under the Mental Health (Scotland) Act 1960, or (ii) an order is made by a court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder for his detention or for the appointment of a receiver, curator bonis or other person to exercise powers with respect to his property or affairs; or (d) he resigns his office by notice to the company; or (e) he shall for more than six consecutive months have been absent without permission of the directors from meetings of directors held during that period and the directors resolve that his office be vacated.

Article 23 Directors’ remuneration 8.25 23.—(1) Directors may undertake any services for the company that the directors decide. (2) Directors are entitled to such remuneration as the directors determine— (a) for their services to the company as directors, and (b) for any other service which they undertake for the company. (3) Subject to the articles, a director’s remuneration may— (a) take any form, and 193

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(b) include any arrangements in connection with the payment of a pension, allowance or gratuity, or any death, sickness or disability benefits, to or in respect of that director. (4) Unless the directors decide otherwise, directors’ remuneration accrues from day to day. (5) Unless the directors decide otherwise, directors are not accountable to the company for any remuneration which they receive as directors or other officers or employees of the company’s subsidiaries or of any other body corporate in which the company is interested. Article 23 Analysis See analysis of Article 19 in 6.21. Article 23 Previous provisions Table A 1985: Regulations 82, 84, 85, 87 82. The directors shall be entitled to such remuneration as the company may by ordinary resolution determine and, unless the resolution provides otherwise, the remuneration shall be deemed to accrue from day to day. 84. Subject to the provisions of the Act, the directors may appoint one or more of their number to the office of managing director or to any other executive office under the company and may enter into an agreement or arrangement with any director for his employment by the company or for the provision by him of any services outside the scope of the ordinary duties of a director. Any such appointment, agreement or arrangement may be made upon such terms as the directors determine and they may remunerate any such director for his services as they think fit. Any appointment of a director to an executive office shall terminate if he ceases to be a director but without prejudice to any claim to damages for breach of the contract of service between the director and the company. A managing director and a director holding any other executive office shall not be subject to retirement by rotation. 85. Subject to the provisions of the Act, and provided that he has disclosed to the directors the nature and extent of any material interest of his, a director notwithstanding his office— (a) may be a party to, or otherwise interested in, any transaction or arrangement with the company or in which the company or in which the company is otherwise interested; (b) may be a director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by the company or in which the company is otherwise interested; and 194

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(c) shall not, by reason of his office, be accountable to the company for any benefit which he derives from any such office or employment or from any such transaction or arrangement or from any interest in any such body corporate and no such transaction or arrangement shall be liable to be avoided on the ground of any such interest or benefit. 87.The directors may provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for any director who has held but no longer holds any executive office or employment with the company or with any body corporate which is or has been a subsidiary of the company or a predecessor in business of the company or of any such subsidiary, and for any member of his family (including a spouse and a former spouse) or any person who is or was dependent on him, and may (as well before as after he ceases to hold such office or employment) contribute to any fund and pay premiums for the purchase or provision of any such benefit.

Article 24 Directors’ expenses 8.26 24. The company may pay any reasonable expenses which the directors properly incur in connection with their attendance at— (a) meetings of directors or committees of directors, (b) general meetings, or (c) separate meetings of the holders of any class of shares or of debentures of the company, or otherwise in connection with the exercise of their powers and the discharge of their responsibilities in relation to the company.

Article 24 Analysis See analysis of Article 20 in 6.22. Article 24 Previous provisions Table A 1985: Regulation 83 83. The directors may be paid all travelling, hotel, and other expenses properly incurred by them in connection with their attendance at meetings of directors or committees of directors or general meetings or separate meetings of the holders of any class of shares or of debentures of the company or otherwise in connection with the discharge of their duties.

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Article 25 Appointment and removal of alternates 8.27 25.—(1) Any director (the “appointor”) may appoint as an alternate any other director, or any other person approved by resolution of the directors, to— (a) exercise that director’s powers, and (b) carry out that director’s responsibilities,

in relation to the taking of decisions by the directors in the absence of the alternate’s appointor.

(2) Any appointment or removal of an alternate must be effected by notice in writing to the company signed by the appointor, or in any other manner approved by the directors. (3) The notice must— (a) identify the proposed alternate, and (b) in the case of a notice of appointment, contain a statement signed by the proposed alternate that the proposed alternate is willing to act as the alternate of the director giving the notice.

Article 25 Analysis Table A 1985 included provisions for the appointment of alternative directors. Article 25 replaces regulations 65 and 68 of Table A 1985. The provisions do not appear in the model articles for private companies limited by shares as it is unlikely the directors would appoint alternative directors, however the article may be replicated and drafted into the articles for larger private companies.The provisions for alternative directors are based on the assumption they ought to hold the same rights and responsibilities that their appointees hold as directors. The rights of alternate directors are described in article 26. Article 25 Previous provisions Table A 1985: Regulation 65, 68 65. Any director (other than an alternate director) may appoint any other director, or any other person approved by resolution of the directors and willing to act, to be an alternate director and may remove from office an alternate director so appointed by him.

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68. Any appointment or removal of an alternate director shall be by notice to the company signed by the director making or revoking the appointment or in any other manner approved by the directors.

Article 26 Rights and responsibilities of alternate directors 8.28 26.—(1) An alternate director has the same rights, in relation to any directors’ meeting or directors’ written resolution, as the alternate’s appointor. (2) Except as the articles specify otherwise, alternate directors— (a) are deemed for all purposes to be directors; (b) are liable for their own acts and omissions; (c) are subject to the same restrictions as their appointors; and (d) are not deemed to be agents of or for their appointors. (3) A person who is an alternate director but not a director— (a) may be counted as participating for the purposes of determining whether a quorum is participating (but only if that person’s appointor is not participating), and (b) may sign a written resolution (but only if it is not signed or to be signed by that person’s appointor). No alternate may be counted as more than one director for such purposes. (4) An alternate director is not entitled to receive any remuneration from the company for serving as an alternate director except such part of the alternate’s appointor’s remuneration as the appointor may direct by notice in writing made to the company.

Article 26 Analysis Article 26 affirms the alternate director is deemed to hold the same rights as the appointee director. It should be noted the rights are subject to article 26(2) and therefore the right to be counted in a quorum or the ability to sign written resolutions may be removed.

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Article 26 Previous provisions Table A 1985: Regulations 66, 69 66. An alternate director shall be entitled to receive notice of all meetings of directors and of all meetings of committees of directors of which his appointor is a member, to attend and vote at any such meeting at which the director appointing him is not personally present and generally to perform all the functions of his appointor as a director in his absence but shall not be entitled to receive any remuneration from the company for his services as an alternate director. But it shall not be necessary to give notice of such a meeting to an alternate director who is absent from the United Kingdom. 69. Save as otherwise provided in the articles, an alternate director shall be deemed for all purposes to be a director and shall alone be responsible for his own acts and defaults and he shall not be deemed to be the agent of the director appointing him.

Article 27 Termination of alternate directorship 8.29 27. An alternate director’s appointment as an alternate terminates— (a) when the alternate’s appointor revokes the appointment by notice to the company in writing specifying when it is to terminate; (b) on the occurrence in relation to the alternate of any event which, if it occurred in relation to the alternate’s appointor, would result in the termination of the appointor’s appointment as a director; (c) on the death of the alternate’s appointor; or (d) when the alternate’s appointor’s appointment as a director terminates, except that an alternate’s appointment as an alternate does not terminate when the appointor retires by rotation at a general meeting and is then re-appointed as a director at the same general meeting. Article 27 Analysis Article 27 consolidates Table A 1985 regulations 65, 67 and 68 and describes the procedure for terminating the appointment of an alternate director. The provisions regarding any event which would result in the appointee’s removal (article 27)(b)) and termination on death (article 27)(c)) are new additions to the articles and do not appear in Table A 1985.

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Article 27 Previous provisions Table A 1985: Regulations 65, 67, 68 65. Any director (other than an alternate director) may appoint any other director, or any other person approved by resolution of the directors and willing to act, to be an alternate director and may remove from office an alternate director so appointed by him. 67.An alternate director shall cease to be an alternate director if his appointor ceases to be a director; but, if a director retires by rotation or otherwise but is reappointed or deemed to have been reappointed at the meeting at which he retires, any appointment of an alternate director made by him which was in force immediately prior to his retirement shall continue after his reappointment. 68. Any appointment or removal of an alternate director shall be by notice to the company signed by the director making or revoking the appointment or in any other manner approved by the directors.

Part 3 Decision-making by members Article 28 Members can call general meeting if not enough directors 8.30 28. If— (a) the company has fewer than two directors, and (b) the director (if any) is unable or unwilling to appoint sufficient directors to make up a quorum or to call a general meeting to do so,

then two or more members may call a general meeting (or instruct the company secretary to do so) for the purpose of appointing one or more directors. Article 28 Analysis Article 28 is founded on Table A 1985 regulation 37. It provides a procedure for when a lone director is unwilling or unable to appoint another a director to form a quorum, a shareholder may then call a general meeting to appoint new directors. The articles here override section 303(2)3 of the Companies Act that requires members representing 5% of the voting rights to request a general meeting.

3 Companies Act 2006, s 303(2) (Members’ power to require directors to call general meeting).

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Article 28 Previous provisions Table A 1985: Regulation 37 37.The directors may call general meetings and, on the requisition of members pursuant to the provisions of the Act, shall forthwith proceed to convene a general meeting in accordance with the provisions of the Act. If there are not within the United Kingdom sufficient directors to call a general meeting, any director or any member of the company may call a general meeting.

Article 29 Attendance and speaking at general meetings 8.31 29.—(1) A person is able to exercise the right to speak at a general meeting when that person is in a position to communicate to all those attending the meeting, during the meeting, any information or opinions which that person has on the business of the meeting. (2) A person is able to exercise the right to vote at a general meeting when— (a) that person is able to vote, during the meeting, on resolutions put to the vote at the meeting, and (b) that person’s vote can be taken into account in determining whether or not such resolutions are passed at the same time as the votes of all the other persons attending the meeting. (3) The directors may make whatever arrangements they consider appropriate to enable those attending a general meeting to exercise their rights to speak or vote at it. (4) In determining attendance at a general meeting, it is immaterial whether any two or more members attending it are in the same place as each other. (5) Two or more persons who are not in the same place as each other attend a general meeting if their circumstances are such that if they have (or were to have) rights to speak and vote at that meeting, they are (or would be) able to exercise them. Article 29 Analysis See analysis of Article 37 in 6.39. Article 29 Previous provisions There is no corresponding provision in Table A 1985.

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Article 30 Quorum for general meetings 8.32 30. No business other than the appointment of the chairman of the meeting is to be transacted at a general meeting if the persons attending it do not constitute a quorum.

Article 30 Analysis See analysis of Article 38 in 6.40. Article 30 Previous provisions Table A 1985: Regulation 40 40. No business shall be transacted at any meeting unless a quorum is present. Two persons entitled to vote upon the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation, shall be a quorum. Tip: It is good practice for a responder to share as much information in the answers as they feel able to do since this can help a speedier resolution of the dispute, or prevent escalation into a formal complaint because the questioner has become frustrated.

Article 31 Chairing general meetings 8.33 31.—(1) If the directors have appointed a chairman, the chairman shall chair general meetings if present and willing to do so. (2) If the directors have not appointed a chairman, or if the chairman is unwilling to chair the meeting or is not present within ten minutes of the time at which a meeting was due to start— (a) the directors present, or (b) (if no directors are present), the meeting,

must appoint a director or member to chair the meeting, and the appointment of the chairman of the meeting must be the first business of the meeting.

(3) The person chairing a meeting in accordance with this article is referred to as “the chairman of the meeting”.

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Article 31 Analysis See analysis of Article 39 in 6.41. Article 31 Previous provisions Table A 1985: Regulation 42, 43 42. The chairman, if any, of the board of directors or in his absence some other director nominated by the directors shall preside as chairman of the meeting, but if neither the chairman nor such other director (if any) be present within fifteen minutes after the time appointed for holding the meeting and willing to act, the directors present shall elect one of their number to be chairman and, if there is only one director present and willing to act, he shall be chairman. 43. If no director is willing to act as chairman, or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present and entitled to vote shall choose one of their number to be chairman.

Article 32 Attendance and speaking by directors and non-members 8.34 32.—(1) Directors may attend and speak at general meetings, whether or not they are members. (2) The chairman of the meeting may permit other persons who are not— (a) members of the company, or (b) otherwise entitled to exercise the rights of members in relation to general meetings,

to attend and speak at a general meeting. Article 32 Analysis See analysis of Article 40 in 6.42. Article 32 Previous provisions Table A 1985: Regulation 44 44. A director shall, notwithstanding that he is not a member, be entitled to attend and speak at any general meeting and at any separate meeting of the holders of any class of shares in the company.

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Article 33 Adjournment 8.35 33.—(1) If the persons attending a general meeting within half an hour of the time at which the meeting was due to start do not constitute a quorum, or if during a meeting a quorum ceases to be present, the chairman of the meeting must adjourn it. (2) The chairman of the meeting may adjourn a general meeting at which a quorum is present if— (a) the meeting consents to an adjournment, or (b) it appears to the chairman of the meeting that an adjournment is necessary to protect the safety of any person attending the meeting or ensure that the business of the meeting is conducted in an orderly manner. (3) The chairman of the meeting must adjourn a general meeting if directed to do so by the meeting. (4) When adjourning a general meeting, the chairman of the meeting must— (a) either specify the time and place to which it is adjourned or state that it is to continue at a time and place to be fixed by the directors, and (b) have regard to any directions as to the time and place of any adjournment which have been given by the meeting. (5) If the continuation of an adjourned meeting is to take place more than 14 days after it was adjourned, the company must give at least 7 clear days’ notice of it (that is, excluding the day of the adjourned meeting and the day on which the notice is given)— (a) to the same persons to whom notice of the company’s general meetings is required to be given, and (b) containing the same information which such notice is required to contain. (6) No business may be transacted at an adjourned general meeting which could not properly have been transacted at the meeting if the adjournment had not taken place.

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Article 33 Analysis See analysis of Article 41 in 6.43. Article 33 Previous provisions Table A 1985: Regulations 41, 45 41. If such a quorum is not present within half an hour from the time appointed for the meeting, or if during a meeting such a quorum ceases to be present, the meeting shall stand adjourned to the same day in the next week at the same time and place or to such time and place as the directors may determine. 45. The chairman may, with the consent of a meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at an adjourned meeting other than business which might properly have been transacted at the meeting had the adjournment not taken place.When a meeting is adjourned for fourteen days or more, at least seven clear days’ notice shall be given specifying the time and place of the adjourned meeting and the general nature of the business to be transacted. Otherwise it shall not be necessary to give any such notice.

Article 34 Voting: general 8.36 34. A resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is duly demanded in accordance with the articles. Article 34 Analysis See analysis of Article 42 in 6.44. Article 34 Previous provisions Table A 1985: Regulation 46 46. A resolution put to the vote of a meeting shall be decided on a show of hands unless before or on the declaration of the result of, the show of hands a poll is duly demanded. Subject to the provisions of the Act, a poll may be demanded(a) by the chairman; or (b) by at least two members having the right to vote at the meeting; or

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(c) by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or (d) by a member or members holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right; and a demand by a person as proxy for a member shall be the same as a demand by the member.

Article 35 Errors and disputes 8.37 35.—(1) No objection may be raised to the qualification of any person voting at a general meeting except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting is valid. (2) Any such objection must be referred to the chairman of the meeting whose decision is final. Article 35 Analysis See analysis of Article 43 in 6.45. Article 35 Previous provisions Table A 1985: Regulation 58 58. No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting shall be valid. Any objection made in due time shall be referred to the chairman whose decision shall be final and conclusive.

Article 36 Demanding a poll 8.38 36.—(1) A poll on a resolution may be demanded— (a) in advance of the general meeting where it is to be put to the vote, or 205

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(b) at a general meeting, either before a show of hands on that resolution or immediately after the result of a show of hands on that resolution is declared. (2) A poll may be demanded by— (a) the chairman of the meeting; (b) the directors; (c) two or more persons having the right to vote on the resolution; or (d) a person or persons representing not less than one tenth of the total voting rights of all the members having the right to vote on the resolution. (3) A demand for a poll may be withdrawn if— (a) the poll has not yet been taken, and (b) the chairman of the meeting consents to the withdrawal.

Article 36 Analysis See analysis of Article 44 in 6.46. It should be noted the right to demand a poll4 cannot be fettered by the articles.5 Article 36 Previous provisions Table A 1985: Regulations 46, 48 46. A resolution put to the vote of a meeting shall be decided on a show of hands unless before, or on the declaration of the result of, the show of hands a poll is duly demanded. Subject to the provisions of the Act, a poll may be demanded— (a) by the chairman; or (b) by at least two members having the right to vote at the meeting; or (c) by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

4 A poll means: a procedure for a general meeting of a company where every ordinary shareholder present in person (or by his proxy) has one vote for every calls of share held. This procedure is typical when it is not possible to obtain a clear result by voting on a show of hands. 5 Companies Act 2006, s 321(1) (Right to demand a poll).

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(d) by a member or members holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right; and a demand by a person as proxy for a member shall be the same as a demand by the member. 48. The demand for a poll may, before the poll is taken, be withdrawn but only with the consent of the chairman and a demand so withdrawn shall not be taken to have invalidated the result of a show of hands declared before the demand was made.

Article 37 Procedure on a poll 8.39 37.—(1) Subject to the articles, polls at general meetings must be taken when, where and in such manner as the chairman of the meeting directs. (2) The chairman of the meeting may appoint scrutineers (who need not be members) and decide how and when the result of the poll is to be declared. (3) The result of a poll shall be the decision of the meeting in respect of the resolution on which the poll was demanded. (4) A poll on— (a) the election of the chairman of the meeting, or (b) a question of adjournment,

must be taken immediately.

(5) Other polls must be taken within 30 days of their being demanded. (6) A demand for a poll does not prevent a general meeting from continuing, except as regards the question on which the poll was demanded. (7) No notice need be given of a poll not taken immediately if the time and place at which it is to be taken are announced at the meeting at which it is demanded. (8) In any other case, at least 7 days’ notice must be given specifying the time and place at which the poll is to be taken.

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Article 37 Analysis Article 37 provides a procedure for a poll once demanded. In contrast to article 36, the provisions are subject to the articles.The Companies Act 2006 is silent on the procedural attributes of a poll: section 3226 and 322A7 provides statutory provisions on voting and voting in advance of a meeting. Article 37 Previous provisions Table A 1985: Regulations 49, 51, 52 49. A poll shall be taken as the chairman directs and he may appoint scrutineers (who need not be members) and fix a time and place for declaring the result of the poll. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. 51. A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken either forthwith or at such time and place as the chairman directs not being more than thirty days after the poll is demanded. The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll was demanded. If a poll is demanded before the declaration of the result of a show of hands and the demand is duly withdrawn, the meeting shall continue as if the demand had not been made. 52. No notice need be given of a poll not taken forthwith if the time and place at which it is to be taken are announced at the meeting at which it is demanded. In any other case at least seven clear days’ notice shall be given specifying the time and place at which the poll is to be taken.

Article 38 Content of proxy notices 8.40 38.—(1) Proxies may only validly be appointed by a notice in writing (a “proxy notice”) which— (a) states the name and address of the member appointing the proxy; (b) identifies the person appointed to be that member’s proxy and the general meeting in relation to which that person is appointed; (c) is signed by or on behalf of the member appointing the proxy, or is authenticated in such manner as the directors may determine; and

6 s.322 Voting on a poll. Companies Act 2006. 7 s.322A Voting on a poll: votes cast in advance. Companies Act 2006.

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(d) is delivered to the company in accordance with the articles and any instructions contained in the notice of the general meeting to which they relate. (2) The company may require proxy notices to be delivered in a particular form, and may specify different forms for different purposes. (3) Proxy notices may specify how the proxy appointed under them is to vote (or that the proxy is to abstain from voting) on one or more resolutions. (4) Unless a proxy notice indicates otherwise, it must be treated as— (a) allowing the person appointed under it as a proxy discretion as to how to vote on any ancillary or procedural resolutions put to the meeting, and (b) appointing that person as a proxy in relation to any adjournment of the general meeting to which it relates as well as the meeting itself. Article 38 Analysis See analysis of Article 45 in 6.47. Article 38 Previous provisions Table A 1985: Regulations 52, 60, 61 52. No notice need be given of a poll not taken forthwith if the time and place at which it is to be taken are announced at the meeting at which it is demanded. In any other case at least seven clear days’ notice shall be given specifying the time and place at which the poll is to be taken. 60. The appointment of a proxy shall be executed by or on behalf of the appointor and shall be in the following form (or in a form as near thereto as circumstances allow or in any other form which is usual or which the directors may approve)— “………… PLC/Limited ………… I/We, …………, of …………, being a member/members of the above-named company, hereby appoint ………… of …………, or failing him, ………… of …………, as my/our proxy to vote in my/our name[s] and on my/our behalf at the annual/any other general meeting of the company to be held on ………… 19 …………, and at any adjournment thereof. Signed on ………… 19 ………….”.

61. Where it is desired to afford members an opportunity of instructing the proxy how he shall act the appointment of a proxy shall be in the following form (or in a form as near thereto as circumstances allow or in any other form which is usual or which the directors may approve)— “………… PLC/Limited ………… I/We, …………, of …………, being a member/members of the above-named company, hereby appoint …………

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Article 39 Delivery of proxy notices 8.41 39.—(1) Any notice of a general meeting must specify the address or addresses (“proxy notification address”) at which the company or its agents will receive proxy notices relating to that meeting, or any adjournment of it, delivered in hard copy or electronic form. (2) A person who is entitled to attend, speak or vote (either on a show of hands or on a poll) at a general meeting remains so entitled in respect of that meeting or any adjournment of it, even though a valid proxy notice has been delivered to the company by or on behalf of that person. (3) Subject to paragraphs (4) and (5), a proxy notice must be delivered to a proxy notification address not less than 48 hours before the general meeting or adjourned meeting to which it relates. (4) In the case of a poll taken more than 48 hours after it is demanded, the notice must be delivered to a proxy notification address not less than 24 hours before the time appointed for the taking of the poll. (5) In the case of a poll not taken during the meeting but taken not more than 48 hours after it was demanded, the proxy notice must be delivered— (a) in accordance with paragraph (3), or (b) at the meeting at which the poll was demanded to the chairman, secretary or any director.

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(6) An appointment under a proxy notice may be revoked by delivering a notice in writing given by or on behalf of the person by whom or on whose behalf the proxy notice was given to a proxy notification address. (7) A notice revoking a proxy appointment only takes effect if it is delivered before— (a) the start of the meeting or adjourned meeting to which it relates, or (b) (in the case of a poll not taken on the same day as the meeting or adjourned meeting) the time appointed for taking the poll to which it relates. (8) If a proxy notice is not signed by the person appointing the proxy, it must be accompanied by written evidence of the authority of the person who executed it to execute it on the appointor’s behalf.

Article 39 Analysis See analysis of Article 46 at 6.48. Article 39 Previous provisions Table A 1985: Regulations 62, 63 62. The appointment of a proxy and any authority under which it is executed or a copy of such authority certified notarially or in some other way approved by the directors may— (a) in the case of an instrument in writing be deposited at the office or at such other place within the United kingdom as is specified in the notice convening the meeting or in any instrument of proxy sent out by the company in relation to the meeting not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote; or (aa) in the case of an appointment contained in an electronic communication, where an address has been specified for the purpose of receiving electronic communications— (i)

in the notice convening the meeting, or

(ii) in any instrument of proxy sent out by the company in relation to the meeting, or (iii) in any invitation contained in an electronic communication to appoint a proxy issued by the company in relation to the meeting,

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be received at such address not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the appointment proposes to vote;

(b) in the case of a poll taken more than 48 hours after it is demanded, be deposited or received as aforesaid after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll; or (c) where the poll is not taken forthwith but is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the poll was demanded to the chairman or to the secretary or to any director;

and an appointment of proxy which is not deposited, delivered or received in a manner so permitted shall be invalid.

In this regulation and the next, “address”, in relation to electronic communications, includes any number or address used for the purposes of such communications. 63. A vote given or poll demanded by proxy or by the duly authorised representative of a corporation shall be valid notwithstanding the previous determination of the authority of the person voting or demanding a poll unless notice of the determination was received by the company at the office or at such other place at which the instrument of proxy was duly deposited or, where the appointment of the proxy was contained in an electronic communication, at the address at which such appointment was duly received before the commencement of the meeting or adjourned meeting at which the vote is given or the poll demanded or (in the case of a poll taken otherwise than on the same day as the meeting or adjourned meeting) the time appointed for taking the poll.

Article 40 Amendments to resolutions 8.42 40.—(1) An ordinary resolution to be proposed at a general meeting may be amended by ordinary resolution if— (a) notice of the proposed amendment is given to the company secretary in writing by a person entitled to vote at the general meeting at which it is to be proposed not less than 48 hours before the meeting is to take place (or such later time as the chairman of the meeting may determine), and (b) the proposed amendment does not, in the reasonable opinion of the chairman of the meeting, materially alter the scope of the resolution.

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(2) A special resolution to be proposed at a general meeting may be amended by ordinary resolution, if— (a) the chairman of the meeting proposes the amendment at the general meeting at which the resolution is to be proposed, and (b) the amendment does not go beyond what is necessary to correct a grammatical or other non-substantive error in the resolution. (3) If the chairman of the meeting, acting in good faith, wrongly decides that an amendment to a resolution is out of order, the chairman’s error does not invalidate the vote on that resolution.

Article 40 Analysis See analysis of Article 47 at 6.49. Article 40 Previous provisions There is no corresponding provision in Table A 1985.

Article 41 No voting of shares on which money owed to company 8.43 41. No voting rights attached to a share may be exercised at any general meeting, at any adjournment of it, or on any poll called at or in relation to it, unless all amounts payable to the company in respect of that share have been paid. Article 41 Analysis Article 41 is pertinent to share classes which are not fully paid up as the articles for a private limited company assume all share classes are fully paid up. The article is therefore omitted. Article 41 Previous provisions Table A 1985: Regulation 57 57. No member shall vote at any general meeting or at any separate meeting of the holders of any class of shares in the company, either in person or by proxy, in respect of any share held by him unless all moneys presently payable by him in respect of that share have been paid.

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Article 42 Class meetings 8.44 42. The provisions of the articles relating to general meetings apply, with any necessary modifications, to meetings of the holders of any class of shares. Article 42 Analysis This is a new provision providing explicit guidance in relation to class meetings. As with article 41, the article is omitted from the private company model articles on the assumption the company only has one share class. Article 42 Previous provisions There is no corresponding provision in Table A 1985.

Part 4 Shares and distributions Article 43 Powers to issue different classes of share 8.45 43.—(1) Subject to the articles, but without prejudice to the rights attached to any existing share, the company may issue shares with such rights or restrictions as may be determined by ordinary resolution. (2) The company may issue shares which are to be redeemed, or are liable to be redeemed at the option of the company or the holder, and the directors may determine the terms, conditions and manner of redemption of any such shares.

Article 43 Analysis See analysis of Article 22 in 6.24. Article 43 Previous provisions Table A 1985: Regulation 4 4. The company may exercise the powers of paying commissions conferred by the Act. Subject to the provisions of the Act, any such commission may be satisfied by the payment of cash or by the allotment of fully or partly paid shares or partly in one way and partly in the other.

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Article 44 Payment of commissions on subscription for shares 8.46 44.—(1) The company may pay any person a commission in consideration for that person— (a) subscribing, or agreeing to subscribe, for shares, or (b) procuring, or agreeing to procure, subscriptions for shares. (2) Any such commission may be paid— (a) in cash, or in fully paid or partly paid shares or other securities, or partly in one way and partly in the other, and (b) in respect of a conditional or an absolute subscription. Article 44 Analysis Formerly Table A 1985 regulation 4, allowing under section 5538 of the Companies Act 2006 the payment of a commission which must be authorised by the company’s articles.9 Article 44 Previous provisions Table A 1985: Regulation 4 4. The company may exercise the powers of paying commissions conferred by the Act. Subject to the provisions of the Act, any such commission may be satisfied by the payment of cash or by the allotment of fully or partly paid shares or partly in one way and partly in the other.

Article 45 Company not bound by less than absolute interests 8.47 45. Except as required by law, no person is to be recognised by the company as holding any share upon any trust, and except as otherwise required by law or the articles, the company is not in any way to be bound by or recognise any interest in a share other than the holder’s absolute ownership of it and all the rights attaching to it.

8 Companies Act 2006, s 553 (Permitted commission). 9 Companies Act 2006, s 553(2)(a).

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Article 45 Analysis See analysis of Article 23 in 6.25. Article 45 Previous provisions Table A 1985: Regulation 5 5. Except as required by law, no person shall be recognised by the company as holding any share upon any trust and (except as otherwise provided by the articles or by law) the company shall not be bound by or recognise any interest in any share except an absolute right to the entirety thereof in the holder.

Article 46 Certificates to be issued except in certain cases 8.48 46.—(1) The company must issue each member with one or more certificates in respect of the shares which that member holds. (2) This article does not apply to— (a) uncertificated shares; (b) shares in respect of which a share warrant has been issued; or (c) shares in respect of which the Companies Acts permit the company not to issue a certificate. (3) Except as otherwise specified in the articles, all certificates must be issued free of charge. (4) No certificate may be issued in respect of shares of more than one class. (5) If more than one person holds a share, only one certificate may be issued in respect of it. Article 46 Analysis Article 46 extends the more simplistic approach of the private limited company articles (see article 24) to include exemptions for uncertificated shares (article 46)(2)(a)). See analysis of article 24 in 6.26. Article 46 Previous provisions Table A 1985: Regulation 6 6. Every member, upon becoming the holder of any shares, shall be entitled without payment to one certificate for all the shares of each class held by

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him (and, upon transferring a part of his holding of shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares upon payment for every certificate after the first of such reasonable sum as the directors may determine. Every certificate shall be sealed with the seal and shall specify the number, class and distinguishing numbers (if any) of the shares to which it relates and the amount or respective amounts paid up thereon.The company shall not be bound to issue more than one certificate for shares held jointly by several persons and delivery of a certificate to one joint holder shall be a sufficient delivery to all of them.

Article 47 Contents and execution of share certificates 8.49 47.—(1) Every certificate must specify— (a) in respect of how many shares, of what class, it is issued; (b) the nominal value of those shares; (c) the amount paid up on them; and (d) any distinguishing numbers assigned to them. (2) Certificates must— (a) have affixed to them the company’s common seal or an official seal which is a facsimile of the company’s common seal with the addition on its face of the word “Securities” (a “securities seal”), or (b) be otherwise executed in accordance with the Companies Acts. Article 47 Analysis See analysis of Article 24 in 6.26. Article 47 Previous provisions Table A 1985: Regulation 6 6. Every member, upon becoming the holder of any shares, shall be entitled without payment to one certificate for all the shares of each class held by him (and, upon transferring a part of his holding of shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares of any class, to a certificate for the balance

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of such holding) or several certificates each for one or more of his shares upon payment for every certificate after the first of such reasonable sum as the directors may determine. Every certificate shall be sealed with the seal and shall specify the number, class and distinguishing numbers (if any) of the shares to which it relates and the amount or respective amounts paid up thereon.The company shall not be bound to issue more than one certificate for shares held jointly by several persons and delivery of a certificate to one joint holder shall be a sufficient delivery to all of them.

Article 48 Consolidated share certificates 8.50 48.—(1) When a member’s holding of shares of a particular class increases, the company may issue that member with— (a) a single, consolidated certificate in respect of all the shares of a particular class which that member holds, or (b) a separate certificate in respect of only those shares by which that member’s holding has increased. (2) When a member’s holding of shares of a particular class is reduced, the company must ensure that the member is issued with one or more certificates in respect of the number of shares held by the member after that reduction. But the company need not (in the absence of a request from the member) issue any new certificate if— (a) all the shares which the member no longer holds as a result of the reduction, and (b) none of the shares which the member retains following the reduction,

were, immediately before the reduction, represented by the same certificate.

(3) A member may request the company, in writing, to replace— (a) the member’s separate certificates with a consolidated certificate, or (b) the member’s consolidated certificate with two or more separate certificates representing such proportion of the shares as the member may specify. (4) When the company complies with such a request it may charge such reasonable fee as the directors may decide for doing so. (5) A consolidated certificate must not be issued unless any certificates which it is to replace have first been returned to the company for cancellation. 218

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Article 48 Analysis Article 48 updates regulation 6 to allow for the issue of uncertified shares10 by removing the requirement for every certificate to be sealed. Paragraph 4 is a new addition allowing the company to charge a reasonable fee for replacement certificates decided by the directors. Article 48 Previous provisions Table A 1985: Regulation 6 6. Every member, upon becoming the holder of any shares, shall be entitled without payment to one certificate for all the shares of each class held by him (and, upon transferring a part of his holding of shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares upon payment for every certificate after the first of such reasonable sum as the directors may determine. Every certificate shall be sealed with the seal and shall specify the number, class and distinguishing numbers (if any) of the shares to which it relates and the amount or respective amounts paid up thereon.The company shall not be bound to issue more than one certificate for shares held jointly by several persons and delivery of a certificate to one joint holder shall be a sufficient delivery to all of them.

Article 49 Replacement share certificates 8.51 49.—(1) If a certificate issued in respect of a member’s shares is— (a) damaged or defaced, or (b) said to be lost, stolen or destroyed,

that member is entitled to be issued with a replacement certificate in respect of the same shares.

(2) A member exercising the right to be issued with such a replacement certificate— (a) may at the same time exercise the right to be issued with a single certificate or separate certificates;

10 Uncertificated shares are shares held by a central securities depository by an electronic ledger or bookkeeping system. The shareholdings are not represented by issued paper share certificates, shareholders normally receive statements which provide updated information on holdings.

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(b) must return the certificate which is to be replaced to the company if it is damaged or defaced; and (c) must comply with such conditions as to evidence, indemnity and the payment of a reasonable fee as the directors decide.

Article 49 Analysis See analysis of Article 25 in 6.27. Article 49 Previous provisions Table A 1985: Regulation 6 6. Every member, upon becoming the holder of any shares, shall be entitled without payment to one certificate for all the shares of each class held by him (and, upon transferring a part of his holding of shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares upon payment for every certificate after the first of such reasonable sum as the directors may determine. Every certificate shall be sealed with the seal and shall specify the number, class and distinguishing numbers (if any) of the shares to which it relates and the amount or respective amounts paid up thereon.The company shall not be bound to issue more than one certificate for shares held jointly by several persons and delivery of a certificate to one joint holder shall be a sufficient delivery to all of them.

Article 50 Uncertificated shares 8.52 50.—(1) In this article, “the relevant rules” means— (a) any applicable provision of the Companies Acts about the holding, evidencing of title to, or transfer of shares other than in certificated form, and (b) any applicable legislation, rules or other arrangements made under or by virtue of such provision. (2) The provisions of this article have effect subject to the relevant rules. (3) Any provision of the articles which is inconsistent with the relevant rules must be disregarded, to the extent that it is inconsistent, whenever the relevant rules apply.

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(4) Any share or class of shares of the company may be issued or held on such terms, or in such a way, that— (a) title to it or them is not, or must not be, evidenced by a certificate, or (b) it or they may or must be transferred wholly or partly without a certificate. (5) The directors have power to take such steps as they think fit in relation to— (a) the evidencing of and transfer of title to uncertificated shares (including in connection with the issue of such shares); (b) any records relating to the holding of uncertificated shares; (c) the conversion of certificated shares into uncertificated shares; or (d) the conversion of uncertificated shares into certificated shares. (6) The company may by notice to the holder of a share require that share— (a) if it is uncertificated, to be converted into certificated form, and (b) if it is certificated, to be converted into uncertificated form,

to enable it to be dealt with in accordance with the articles.

(7) If— (a) the articles give the directors power to take action, or require other persons to take action, in order to sell, transfer or otherwise dispose of shares, and (b) uncertificated shares are subject to that power, but the power is expressed in terms which assume the use of a certificate or other written instrument, the directors may take such action as is necessary or expedient to achieve the same results when exercising that power in relation to uncertificated shares. (8) In particular, the directors may take such action as they consider appropriate to achieve the sale, transfer, disposal, forfeiture, re-allotment or surrender of an uncertificated share or otherwise to enforce a lien in respect of it. (9) Unless the directors otherwise determine, shares which a member holds in uncertificated form must be treated as separate holdings from any shares which that member holds in certificated form. (10) A class of shares must not be treated as two classes simply because some shares of that class are held in certificated form and others are held in uncertificated form.

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Article 50 Analysis This is a new article outlining the relevant rules concerning uncertificated shares. Stock exchanges will have specified rules on dealing with uncertificated shares. The article endeavours to remind the company of its obligations. The Companies Act 2006 similarly provides statutory rules for the paperless transfer of shares.11 Article 50 Previous provisions There is no corresponding provision in Table A 1985.

Article 51 Share warrants 8.53 51.—(1) The directors may issue a share warrant in respect of any fully paid share. (2) Share warrants must be— (a) issued in such form, and (b) executed in such manner,

as the directors decide.

(3) A share represented by a share warrant may be transferred by delivery of the warrant representing it. (4) The directors may make provision for the payment of dividends in respect of any share represented by a share warrant. (5) Subject to the articles, the directors may decide the conditions on which any share warrant is issued. In particular, they may— (a) decide the conditions on which new warrants are to be issued in place of warrants which are damaged or defaced, or said to have been lost, stolen or destroyed; (b) decide the conditions on which bearers of warrants are entitled to attend and vote at general meetings; (c) decide the conditions subject to which bearers of warrants may surrender their warrant so as to hold their shares in certificated or uncertificated form instead; and 11 Companies Act 2006, Part 21, Chapter 2 (Evidencing and transfer of title to securities without written instrument).

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(d) vary the conditions of issue of any warrant from time to time,

and the bearer of a warrant is subject to the conditions and procedures in force in relation to it, whether or not they were decided or specified before the warrant was issued.

(6) Subject to the conditions on which the warrants are issued from time to time, bearers of share warrants have the same rights and privileges as they would if their names had been included in the register as holders of the shares represented by their warrants. (7) The company must not in any way be bound by or recognise any interest in a share represented by a share warrant other than the absolute right of the bearer of that warrant to that warrant. Article 51 Analysis A new article which provides authorisation concerning the prohibition on the issue of new share warrants12 and the effect of existing share warrants.13 Article 51 Previous provisions There is no corresponding provision in Table A 1985.

Article 52 Company’s lien over partly paid shares 8.54 52.—(1) The company has a lien (“the company’s lien”) over every share which is partly paid for any part of— (a) that share’s nominal value, and (b) any premium at which it was issued,

which has not been paid to the company, and which is payable immediately or at some time in the future, whether or not a call notice has been sent in respect of it.

(2) The company’s lien over a share— (a) takes priority over any third party’s interest in that share, and

12 A stock warrant allows (or gives the option to) the holder a right to purchase a company’s stock at a specific price and at a specific date in the future. 13 Companies Act 2006, s 779 (Prohibition on issue of new share warrants and effect of existing share warrants).

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(b) extends to any dividend or other money payable by the company in respect of that share and (if the lien is enforced and the share is sold by the company) the proceeds of sale of that share. (3) The directors may at any time decide that a share which is or would otherwise be subject to the company’s lien shall not be subject to it, either wholly or in part.

Article 52 Analysis Article 52 is omitted from the private limited company articles. If the company requires the ability to issue partly paid shares, this article may be inserted into the company articles. Partly paid shares typically are issued to employees as an incentive. The lien provisions extend to any beneficial ownership (article 2)(a)), or dividend payment or sale proceeds (article (2)(a)(b)). The following article (article 53) describes how the company may enforce its lien over the partly paid shares. Article 52 Previous provisions Table A 1985: Regulation 8 8. The company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) payable at a fixed time or called in respect of that share. The directors may at any time declare any share to be wholly or in part exempt from the provisions of this regulation. The company’s lien on a share shall extend to any amount payable in respect of it.

Article 53 Enforcement of the company’s lien 8.55 53.—(1) Subject to the provisions of this article, if— (a) a lien enforcement notice has been given in respect of a share, and (b) the person to whom the notice was given has failed to comply with it,

the company may sell that share in such manner as the directors decide.

(2) A lien enforcement notice— (a) may only be given in respect of a share which is subject to the company’s lien, in respect of which a sum is payable and the due date for payment of that sum has passed; (b) must specify the share concerned; 224

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(c) must require payment of the sum payable within 14 days of the notice; (d) must be addressed either to the holder of the share or to a person entitled to it by reason of the holder’s death, bankruptcy or otherwise; and (e) must state the company’s intention to sell the share if the notice is not complied with. (3) Where shares are sold under this article— (a) the directors may authorise any person to execute an instrument of transfer of the shares to the purchaser or a person nominated by the purchaser, and (b) the transferee is not bound to see to the application of the consideration, and the transferee’s title is not affected by any irregularity in or invalidity of the process leading to the sale. (4) The net proceeds of any such sale (after payment of the costs of sale and any other costs of enforcing the lien) must be applied— (a) first, in payment of so much of the sum for which the lien exists as was payable at the date of the lien enforcement notice, (b) second, to the person entitled to the shares at the date of the sale, but only after the certificate for the shares sold has been surrendered to the company for cancellation or a suitable indemnity has been given for any lost certificates, and subject to a lien equivalent to the company’s lien over the shares before the sale for any money payable in respect of the shares after the date of the lien enforcement notice. (5) A statutory declaration by a director or the company secretary that the declarant is a director or the company secretary and that a share has been sold to satisfy the company’s lien on a specified date— (a) is conclusive evidence of the facts stated in it as against all persons claiming to be entitled to the share, and (b) subject to compliance with any other formalities of transfer required by the articles or by law, constitutes a good title to the share.

Article 53 Analysis Article 53 provides a procedure for transferring shares from the holder back to the company (or a purchaser that the directors may decide) on the default of an executed lien notice. Paragraph (3)(a) which follows regulation 10 of Table A allows a director to authorise an instrument of transfer without the consent of the holder. 225

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Article 53 Previous provisions Table A 1985: Regulations 9, 10, 11 9. The company may sell in such manner as the directors determine any shares on which the company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within fourteen clear days after notice has been given to the holder of the share or to the person entitled to it in consequence of the death or bankruptcy of the holder, demanding payment and stating that if the notice is not complied with the shares may be sold. 10. To give effect to a sale the directors may authorise some person to execute an instrument of transfer of the shares sold to, or in accordance with the directions of, the purchaser.The title of the transferee to the shares shall not be affected by any irregularity in or invalidity of the proceedings in reference to the sale. 11. The net proceeds of the sale, after payment of the costs, shall be applied in payment of so much of the sum for which the lien exists as is presently payable, and any residue shall (upon surrender to the company for cancellation of the certificate for the shares sold and subject to a like lien for any moneys not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale.

Article 54 Call notices 8.56 54.—(1) Subject to the articles and the terms on which shares are allotted, the directors may send a notice (a “call notice”) to a member requiring the member to pay the company a specified sum of money (a “call”) which is payable in respect of shares which that member holds at the date when the directors decide to send the call notice. (2) A call notice— (a) may not require a member to pay a call which exceeds the total sum unpaid on that member’s shares (whether as to the share’s nominal value or any amount payable to the company by way of premium); (b) must state when and how any call to which it relates it is to be paid; and (c) may permit or require the call to be paid by instalments.

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(3) A member must comply with the requirements of a call notice, but no member is obliged to pay any call before 14 days have passed since the notice was sent. (4) Before the company has received any call due under a call notice the directors may— (a) revoke it wholly or in part, or (b) specify a later time for payment than is specified in the notice, by a further notice in writing to the member in respect of whose shares the call is made.

Article 54 Analysis Article 54 is an extension of the rights over unpaid or partly paid shares and allows the company to make a ‘call’ on any amounts outstanding which must be paid within 14 days of the date of the call notice. Call notices (and the procedures) are subject to the articles so may be redrafted. This allows the company more flexibility to implement initial payment of partly paid shares and the further payment by installments. It should be noted if the company articles are silent on the matter of calls then the default position is article 54. Article 54 Previous provisions Table A 1985: Regulations 12, 16 12. Subject to the terms of allotment, the directors may make calls upon the members in respect of any moneys unpaid on their shares (whether in respect of nominal value or premium) and each member shall (subject to receiving at least fourteen clear days’ notice specifying when and where payment is to be made) pay to the company as required by the notice the amount called on his shares. A call may be required to be paid by instalments. A call may, before receipt by the company of any sum due thereunder, be revoked in whole or part and payment of a call may be postponed in whole or part. A person upon whom a call is made shall remain liable for calls made upon him notwithstanding the subsequent transfer of the shares in respect whereof the call was made. 16. An amount payable in respect of a share on allotment or at any fixed date, whether in respect of nominal value or premium or as an instalment of a call, shall be deemed to be a call and if it is not paid the provisions of the articles shall apply as if that amount had become due and payable by virtue of a call.

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Article 55 Liability to pay calls 8.57 55.—(1) Liability to pay a call is not extinguished or transferred by transferring the shares in respect of which it is required to be paid. (2) Joint holders of a share are jointly and severally liable to pay all calls in respect of that share. (3) Subject to the terms on which shares are allotted, the directors may, when issuing shares, provide that call notices sent to the holders of those shares may require them— (a) to pay calls which are not the same, or (b) to pay calls at different times.

Article 55 Analysis Article 55 condenses regulations 14-17 of Table A and asserts if shares are transferred the liability is not transferred to the new shareholder. Article 55(2) enforces the common law position that joint holders are liable to pay eachother’s calls if either member defaults. Article 55 Previous provisions Table A 1985: Regulations 14, 15, 16, 17 14. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 15. If a call remains unpaid after it has become due and payable the person from whom it is due and payable shall pay interest on the amount unpaid from the day it became due and payable until it is paid at the rate fixed by the terms of allotment of the share or in the notice of the call or, if no rate is fixed, at the appropriate rate (as defined by the Act) but the directors may waive payment of the interest wholly or in part. 16. An amount payable in respect of a share on allotment or at any fixed date, whether in respect of nominal value or premium or as an instalment of a call, shall be deemed to be a call and if it is not paid the provisions of the articles shall apply as if that amount had become due and payable by virtue of a call. 17. Subject to the terms of allotment, the directors may make arrangements on the issue of shares for a difference between the holders in the amounts and times of payment of calls on their shares.

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Article 56 When call notice need not be issued 8.58 56.—(1) A call notice need not be issued in respect of sums which are specified, in the terms on which a share is issued, as being payable to the company in respect of that share (whether in respect of nominal value or premium)— (a) on allotment; (b) on the occurrence of a particular event; or (c) on a date fixed by or in accordance with the terms of issue. (2) But if the due date for payment of such a sum has passed and it has not been paid, the holder of the share concerned is treated in all respects as having failed to comply with a call notice in respect of that sum, and is liable to the same consequences as regards the payment of interest and forfeiture.

Article 56 Analysis Article 56 provides provisions for the non-issue of notices if the terms of the share issue specify otherwise. The article updates regulation 16 of Table A 1985 with more clarity. Article 56 Previous provisions Table A 1985: Regulation 16 16. An amount payable in respect of a share on allotment or at any fixed date, whether in respect of nominal value or premium or as an instalment of a call, shall be deemed to be a call and if it is not paid the provisions of the articles shall apply as if that amount had become due and payable by virtue of a call.

Article 57 Failure to comply with call notice: automatic consequences 8.59 57.—(1) If a person is liable to pay a call and fails to do so by the call payment date— (a) the directors may issue a notice of intended forfeiture to that person, and (b) until the call is paid, that person must pay the company interest on the call from the call payment date at the relevant rate.

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(2) For the purposes of this article— (a) the “call payment date” is the time when the call notice states that a call is payable, unless the directors give a notice specifying a later date, in which case the “call payment date” is that later date; (b) the “relevant rate” is— (i)

the rate fixed by the terms on which the share in respect of which the call is due was allotted;

(ii) such other rate as was fixed in the call notice which required payment of the call, or has otherwise been determined by the directors; or (iii) if no rate is fixed in either of these ways, 5 per cent per annum. (3) The relevant rate must not exceed by more than 5 percentage points the base lending rate most recently set by the Monetary Policy Committee of the Bank of England in connection with its responsibilities under Part 2 of the Bank of England Act 1998(a). (4) The directors may waive any obligation to pay interest on a call wholly or in part. Article 57 Analysis Article 57 updates regulation 15 of Table A 1985 allowing the company to charge interest on defaulted call notices. The maximum interest is now defined at 5% above the government base rate set by the monetary policy committee of the Bank of England. Article 57 Previous provisions Table A 1985: Regulation 15 15. If a call remains unpaid after it has become due and payable the person from whom it is due and payable shall pay interest on the amount unpaid from the day it became due and payable until it is paid at the rate fixed by the terms of allotment of the share or in the notice of the call or, if no rate is fixed, at the appropriate rate (as defined by the Act) but the directors may waive payment of the interest wholly or in part.

Article 58 Notice of intended forfeiture 8.60 58. A notice of intended forfeiture— (a) may be sent in respect of any share in respect of which a call has not been paid as required by a call notice; 230

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(b) must be sent to the holder of that share or to a person entitled to it by reason of the holder’s death, bankruptcy or otherwise; (c) must require payment of the call and any accrued interest by a date which is not less than 14 days after the date of the notice; (d) must state how the payment is to be made; and (e) must state that if the notice is not complied with, the shares in respect of which the call is payable will be liable to be forfeited.

Article 58 Analysis Article 58 modernises regulation 18 of Table A 1985 providing the procedure for sending notices of forfeiture. Article 58 Previous provisions Table A 1985: Regulation 18 18. If a call remains unpaid after it has become due and payable the directors may give to the person from whom it is due not less than fourteen clear days’ notice requiring payment of the amount unpaid together with any interest which may have accrued. The notice shall name the place where payment is to be made and shall state that if the notice is not complied with the shares in respect of which the call was made will be liable to be forfeited.

Article 59 Directors’ power to forfeit shares 8.61 59. If a notice of intended forfeiture is not complied with before the date by which payment of the call is required in the notice of intended forfeiture, the directors may decide that any share in respect of which it was given is forfeited, and the forfeiture is to include all dividends or other moneys payable in respect of the forfeited shares and not paid before the forfeiture.

Article 59 Analysis Article 59 modernises regulation 19 of Table A 1985 providing the procedure if the directors deem the shares are forfeited. This may include any dividends payable.

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Article 59 Previous provisions Table A 1985: Regulation 19 19. If the notice is not complied with any share in respect of which it was given may, before the payment required by the notice has been made, be forfeited by a resolution of the directors and the forfeiture shall include all dividends or other moneys payable in respect of the forfeited shares and not paid before the forfeiture.

Article 60 Effect of forfeiture 8.62 60.—(1) Subject to the articles, the forfeiture of a share extinguishes— (a) all interests in that share, and all claims and demands against the company in respect of it, and (b) all other rights and liabilities incidental to the share as between the person whose share it was prior to the forfeiture and the company. (2) Any share which is forfeited in accordance with the articles— (a) is deemed to have been forfeited when the directors decide that it is forfeited; (b) is deemed to be the property of the company; and (c) may be sold, re-allotted or otherwise disposed of as the directors think fit. (3) If a person’s shares have been forfeited— (a) the company must send that person notice that forfeiture has occurred and record it in the register of members; (b) that person ceases to be a member in respect of those shares; (c) that person must surrender the certificate for the shares forfeited to the company for cancellation; (d) that person remains liable to the company for all sums payable by that person under the articles at the date of forfeiture in respect of those shares, including any interest (whether accrued before or after the date of forfeiture); and (e) the directors may waive payment of such sums wholly or in part or enforce payment without any allowance for the value of the shares at the time of forfeiture or for any consideration received on their disposal.

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(4) At any time before the company disposes of a forfeited share, the directors may decide to cancel the forfeiture on payment of all calls and interest due in respect of it and on such other terms as they think fit.

Article 60 Analysis Article 60 modernises regulations 20 and 21 of Table A 1985 providing the procedure for the effect of forfeiture. The provisions are subject to the articles, therefore the company may redraft a more simple procedure on forfeiture. Any alteration is subject to any specific rules the relevant stock exchange may require. Article 61(1) of the public company articles allows for shares to be bought back by the company. If a private company limited by shares includes the partly paid shares articles (52-62) then it must include a provision allowing the company to purchase its own shares. The allotment provisions may require consideration (article 60(2)(c)) to ensure any pre-emption rights are maintained. Article 60 Previous provisions Table A 1985: Regulations 20, 21 20. Subject to the provisions of the Act, a forfeited share may be sold, re-allotted or otherwise disposed of on such terms and in such manner as the directors determine either to the person who was before the forfeiture the holder or to any other person and at any time before sale, re-allotment or other disposition, the forfeiture may be cancelled on such terms as the directors think fit. Where for the purposes of its disposal a forfeited share is to be transferred to any person the directors may authorise some person to execute an instrument of transfer of the share to that person. 21. A person any of whose shares have been forfeited shall cease to be a member in respect of them and shall surrender to the company for cancellation the certificate for the shares forfeited but shall remain liable to the company for all moneys which at the date of forfeiture were presently payable by him to the company in respect of those shares with interest at the rate at which interest was payable on those moneys before the forfeiture or, if no interest was so payable, at the appropriate rate (as defined in the Act) from the date of forfeiture until payment but the directors may waive payment wholly or in part or enforce payment without any allowance for the value of the shares at the time of forfeiture or for any consideration received on their disposal.

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Article 61 Procedure following forfeiture 8.63 61.—(1) If a forfeited share is to be disposed of by being transferred, the company may receive the consideration for the transfer and the directors may authorise any person to execute the instrument of transfer. (2) A statutory declaration by a director or the company secretary that the declarant is a director or the company secretary and that a share has been forfeited on a specified date— (a) is conclusive evidence of the facts stated in it as against all persons claiming to be entitled to the share, and (b) subject to compliance with any other formalities of transfer required by the articles or by law, constitutes a good title to the share. (3) A person to whom a forfeited share is transferred is not bound to see to the application of the consideration (if any) nor is that person’s title to the share affected by any irregularity in or invalidity of the process leading to the forfeiture or transfer of the share. (4) If the company sells a forfeited share, the person who held it prior to its forfeiture is entitled to receive from the company the proceeds of such sale, net of any commission, and excluding any amount which— (a) was, or would have become, payable, and (b) had not, when that share was forfeited, been paid by that person in respect of that share, but no interest is payable to such a person in respect of such proceeds and the company is not required to account for any money earned on them.

Article 61 Analysis Article 61 sets out the procedure following the forfeiture of shares and the rights of the forfeitee to any sums that may become payable on sale of any equity shares. Article 61 Previous provisions Table A 1985: Regulation 22

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22. A statutory declaration by a director or the secretary that a share has been forfeited on a specified date shall be conclusive evidence of the facts stated in it as against all persons claiming to be entitled to the share and the declaration shall (subject to the execution of an instrument of transfer if necessary) constitute a good title to the share and the person to whom the share is disposed of shall not be bound to see to the application of the consideration, if any, nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings in reference to the forfeiture or disposal of the share.

Article 62 Surrender of shares 8.64 62.—(1) A member may surrender any share— (a) in respect of which the directors may issue a notice of intended forfeiture; (b) which the directors may forfeit; or (c) which has been forfeited. (2) The directors may accept the surrender of any such share. (3) The effect of surrender on a share is the same as the effect of forfeiture on that share. (4) A share which has been surrendered may be dealt with in the same way as a share which has been forfeited.

Article 62 Analysis Article 62 is a new addition detailing with the surrender of shares. The provisions make it clear if a partly paid share is returned to the company the debt is still payable and the shareholder surrendering would follow the process of forfeiture. The effect of returning a shareholding is the same as if the shareholder defaulted by forfeiture. Article 62 Previous provisions There is no corresponding provision in Table A 1985.

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Article 63 Transfers of certificated shares 8.65 63.—(1) Certificated shares may be transferred by means of an instrument of transfer in any usual form or any other form approved by the directors, which is executed by or on behalf of— (a) the transferor, and (b) (if any of the shares is partly paid) the transferee. (2) No fee may be charged for registering any instrument of transfer or other document relating to or affecting the title to any share. (3) The company may retain any instrument of transfer which is registered. (4) The transferor remains the holder of a certificated share until the transferee’s name is entered in the register of members as holder of it. (5) The directors may refuse to register the transfer of a certificated share if— (a) the share is not fully paid; (b) the transfer is not lodged at the company’s registered office or such other place as the directors have appointed; (c) the transfer is not accompanied by the certificate for the shares to which it relates, or such other evidence as the directors may reasonably require to show the transferor’s right to make the transfer, or evidence of the right of someone other than the transferor to make the transfer on the transferor’s behalf; (d) the transfer is in respect of more than one class of share; or (e) the transfer is in favour of more than four transferees. (6) If the directors refuse to register the transfer of a share, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent.

Article 63 Analysis Article 63 encompasses aspects of article 25 (see the private companies limited by shares analysis in 6.27). Provisions are made for partly paid shares (article 63(1)(b)) and more than one share class (article 63(5)(d)) which are both omitted on the presumption a private limited company issues only one share class. The article allows the company to refuse a transfer of shares 236

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(equivalent to the model articles for a private company). It should be noted a reason for any refusal must be given within a two-month period.14 Article 63 Previous provisions Table A 1985: Regulations 23, 24, 27, 28 23.The instrument of transfer of a share may be in any usual form or in any other form which the directors may approve and shall be executed by or on behalf of the transferor and, unless the share is fully paid, by or on behalf of the transferee. 24. The directors may refuse to register the transfer of a share which is not fully paid to a person of whom they do not approve and they may refuse to register the transfer of a share on which the company has a lien. They may also refuse to register a transfer unless— (a) it is lodged at the office or at such other place as the directors may appoint and is accompanied by the certificate for the shares to which it relates and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer; (b) it is in respect of only one class of shares; and (c) it is in favour of not more than four transferees. 27. No fee shall be charged for the registration of any instrument of transfer or other document relating to or affecting the title to any share. 28.The company shall be entitled to retain any instrument of transfer which is registered, but any instrument of transfer which the directors refuse to register shall be returned to the person lodging it when notice of the refusal is given.

Article 64 Transfer of uncertificated shares 8.66 64. A transfer of an uncertificated share must not be registered if it is in favour of more than four transferees.

14 Companies Act 2006, s 771 (Procedure on transfer being lodged) ‘(1) When a transfer of shares in or debentures of a company has been lodged with the company, the company must either; (a) register the transfer, or (b) give the transferee notice of refusal to register the transfer, together with its reasons for the refusal, as soon as practicable and in any event within two months after the date on which the transfer is lodged with it.’

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Article 64 Analysis Article 64 updates regulation 24(c) of Table A 1985. Article 64 Previous provisions Table A 1985: Regulation 24. 24. The directors may refuse to register the transfer of a share which is not fully paid to a person of whom they do not approve and they may refuse to register the transfer of a share on which the company has a lien. They may also refuse to register a transfer unless; (a) it is lodged at the office or at such other place as the directors may appoint and is accompanied by the certificate for the shares to which it relates and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer; (b) it is in respect of only one class of shares; and (c) it is in favour of not more than four transferees.

Article 65 Transmission of shares 8.67 65.—(1) If title to a share passes to a transmittee, the company may only recognise the transmittee as having any title to that share. (2) Nothing in these articles releases the estate of a deceased member from any liability in respect of a share solely or jointly held by that member.

Article 65 Analysis See analysis of Article 27 in 6.29. Article 65 Previous provisions Table A 1985: Regulation 29 29. If a member dies the survivor or survivors where he was a joint holder, and his personal representatives where he was a sole holder or the only survivor of joint holders, shall be the only persons recognised by the company as having any title to his interest; but nothing herein contained shall release the estate of a deceased member from any liability in respect of any share which had been jointly held by him.

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Article 66 Transmittees’ rights 8.68 66.—(1) A transmittee who produces such evidence of entitlement to shares as the directors may properly require— (a) may, subject to the articles, choose either to become the holder of those shares or to have them transferred to another person, and (b) subject to the articles, and pending any transfer of the shares to another person, has the same rights as the holder had. (2) But transmittees do not have the right to attend or vote at a general meeting in respect of shares to which they are entitled, by reason of the holder’s death or bankruptcy or otherwise, unless they become the holders of those shares

Article 66 Analysis See analysis of Article 27 in 6.29. Article 66 Previous provisions Table A 1985: Regulations 30, 31 30. A person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as the directors may properly require, elect either to become the holder of the share or to have some person nominated by him registered as the transferee. If he elects to become the holder he shall give notice to the company to that effect. If he elects to have another person registered he shall execute an instrument of transfer of the share to that person. All the articles relating to the transfer of shares shall apply to the notice or instrument of transfer as if it were an instrument of transfer executed by the member and the death or bankruptcy of the member had not occurred. 31. A person becoming entitled to a share in consequence of the death or bankruptcy of a member shall have the rights to which he would be entitled if he were the holder of the share, except that he shall not, before being registered as the holder of the share, be entitled in respect of it to attend or vote at any meeting of the company or at any separate meeting of the holders of any class of shares in the company.

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Article 67 Exercise of transmittees’ rights 8.69 67.—(1) Transmittees who wish to become the holders of shares to which they have become entitled must notify the company in writing of that wish. (2) If the share is a certificated share and a transmittee wishes to have it transferred to another person, the transmittee must execute an instrument of transfer in respect of it. (3) If the share is an uncertificated share and the transmittee wishes to have it transferred to another person, the transmittee must— (a) procure that all appropriate instructions are given to effect the transfer, or (b) procure that the uncertificated share is changed into certificated form and then execute an instrument of transfer in respect of it. (4) Any transfer made or executed under this article is to be treated as if it were made or executed by the person from whom the transmittee has derived rights in respect of the share, and as if the event which gave rise to the transmission had not occurred.

Article 67 Analysis The provisions are based on regulation 28 of Table A 1985. See the private companies limited by shares analysis of article 28 in in 6.30. Article 67(3)(a)(b) allows for uncertificated shares which is omitted from the model articles for a private company. Article 67 Previous provisions Table A 1985: Regulation 30 30. A person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as the directors may properly require, elect either to become the holder of the share or to have some person nominated by him registered as the transferee. If he elects to become the holder he shall give notice to the company to that effect. If he elects to have another person registered he shall execute an instrument of transfer of the share to that person. All the articles relating to the transfer of shares shall apply to the notice or instrument of transfer as if it were an instrument of transfer executed by the member and the death or bankruptcy of the member had not occurred.

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Article 68 Transmittees bound by prior notices 8.70 68. If a notice is given to a member in respect of shares and a transmittee is entitled to those shares, the transmittee is bound by the notice if it was given to the member before the transmittee’s name has been entered in the register of members.

Article 68 Analysis See analysis of Article 29 in 6.31. Article 68 Previous provisions Table A 1985: Regulation 114 114. Every person who becomes entitled to a share shall be bound by any notice in respect of that share which, before his name is entered in the register of members, has been duly given to a person from whom he derives his title.

Article 69 Procedure for disposing of fractions of shares 8.71 69.—(1) This article applies where— (a) there has been a consolidation or division of shares, and (b) as a result, members are entitled to fractions of shares. (2) The directors may— (a) sell the shares representing the fractions to any person including the company for the best price reasonably obtainable; (b) in the case of a certificated share, authorise any person to execute an instrument of transfer of the shares to the purchaser or a person nominated by the purchaser; and (c) distribute the net proceeds of sale in due proportion among the holders of the shares. (3) Where any holder’s entitlement to a portion of the proceeds of sale amounts to less than a minimum figure determined by the directors, that

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member’s portion may be distributed to an organisation which is a charity for the purposes of the law of England and Wales, Scotland or Northern Ireland. (4) The person to whom the shares are transferred is not obliged to ensure that any purchase money is received by the person entitled to the relevant fractions. (5) The transferee’s title to the shares is not affected by any irregularity in or invalidity of the process leading to their sale.

Article 69 Analysis Article 69 replaces and updates regulation 33 of Table A 1985 and describes the rules concerning fractional shares which are typically created on a merger or where the company makes an acquisition. Article 69 Previous provisions Table A 1985: Regulation 33 33. Whenever as a result of a consolidation of shares any members would become entitled to fractions of a share, the directors may, on behalf of those members, sell the shares representing the fractions for the best price reasonably obtainable to any person (including, subject to the provisions of the Act, the company) and distribute the net proceeds of sale in due proportion among those members, and the directors may authorise some person to execute an instrument of transfer of the shares to, or in accordance with the directions of, the purchaser. The transferee shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity in or invalidity of the proceedings in reference to the sale.

Article 70 Procedure for declaring dividends 8.72 70.—(1) The company may by ordinary resolution declare dividends, and the directors may decide to pay interim dividends. (2) A dividend must not be declared unless the directors have made a recommendation as to its amount. Such a dividend must not exceed the amount recommended by the directors. (3) No dividend may be declared or paid unless it is in accordance with members’ respective rights.

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(4) Unless the members’ resolution to declare or directors’ decision to pay a dividend, or the terms on which shares are issued, specify otherwise, it must be paid by reference to each member’s holding of shares on the date of the resolution or decision to declare or pay it. (5) If the company’s share capital is divided into different classes, no interim dividend may be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrear. (6) The directors may pay at intervals any dividend payable at a fixed rate if it appears to them that the profits available for distribution justify the payment. (7) If the directors act in good faith, they do not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on shares with deferred or non-preferred rights.

Article 70 Analysis See analysis of Article 30 in 6.32. Article 70 Previous provisions Table A 1985: Regulations 102, 103 102. Subject to the provisions of the Act, the company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the directors. 103. Subject to the provisions of the Act, the directors may pay interim dividends if it appears to them that they are justified by the profits of the company available for distribution. If the share capital is divided into different classes, the directors may pay interim dividends on shares which confer deferred or non-preferred rights with regard to dividend as well as on shares which confer preferential rights with regard to dividend, but no interim dividend shall be paid on shares carrying deferred or nonpreferred rights if, at the time of payment, any preferential dividend is in arrear. The directors may also pay at intervals settled by them any dividend payable at a fixed rate if it appears to them that the profits available for distribution justify the payment. Provided the directors act in good faith they shall not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on any shares having deferred or non-preferred rights.

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Article 71 Calculation of dividends 8.73 71.—(1) Except as otherwise provided by the articles or the rights attached to shares, all dividends must be— (a) declared and paid according to the amounts paid up on the shares on which the dividend is paid, and (b) apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. (2) If any share is issued on terms providing that it ranks for dividend as from a particular date, that share ranks for dividend accordingly. (3) For the purposes of calculating dividends, no account is to be taken of any amount which has been paid up on a share in advance of the due date for payment of that amount.

Article 71 Analysis Article 71 replaces and updates regulation 104 of Table A 1985. Article 71 Previous provisions Table A 1985: Regulation 104 104. Except as otherwise provided by the rights attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid. All dividends shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid; but, if any share is issued on terms providing that it shall rank for dividend as from a particular date, that share shall rank for dividend accordingly.

Article 72 Payment of dividends and other distributions 8.74 72.—(1) Where a dividend or other sum which is a distribution is payable in respect of a share, it must be paid by one or more of the following means— (a) transfer to a bank or building society account specified by the distribution recipient either in writing or as the directors may otherwise decide; 244

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(b) sending a cheque made payable to the distribution recipient by post to the distribution recipient at the distribution recipient’s registered address (if the distribution recipient is a holder of the share), or (in any other case) to an address specified by the distribution recipient either in writing or as the directors may otherwise decide; (c) sending a cheque made payable to such person by post to such person at such address as the distribution recipient has specified either in writing or as the directors may otherwise decide; or (d) any other means of payment as the directors agree with the distribution recipient either in writing or by such other means as the directors decide. (2) In the articles, “the distribution recipient” means, in respect of a share in respect of which a dividend or other sum is payable— (a) the holder of the share; or (b) if the share has two or more joint holders, whichever of them is named first in the register of members; or (c) if the holder is no longer entitled to the share by reason of death or bankruptcy, or

otherwise by operation of law, the transmittee. Article 72 Analysis See analysis of Article 31 in 6.33. Article 72 Previous provisions Table A 1985: Regulation 106 106. Any dividend or other moneys payable in respect of a share may be paid by cheque sent by post to the registered address of the person entitled or, if two or more persons are the holders of the share or are jointly entitled to it by reason of the death or bankruptcy of the holder, to the registered address of that one of those persons who is first named in the register of members or to such person and to such address as the person or persons entitled may in writing direct. Every cheque shall be made payable to the order of the person or persons entitled or to such other person as the person or persons entitled may in writing direct and payment of the cheque shall be a good discharge to the company. Any joint holder or other person jointly entitled to a share as aforesaid may give receipts for any dividend or other moneys payable in respect of the share.

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Article 73 Deductions from distributions in respect of sums owed to the company 8.75 73.—(1) If— (a) a share is subject to the company’s lien, and (b) the directors are entitled to issue a lien enforcement notice in respect of it, they may, instead of issuing a lien enforcement notice, deduct from any dividend or other sum payable in respect of the share any sum of money which is payable to the company in respect of that share to the extent that they are entitled to require payment under a lien enforcement notice. (2) Money so deducted must be used to pay any of the sums payable in respect of that share. (3) The company must notify the distribution recipient in writing of— (a) the fact and amount of any such deduction; (b) any non-payment of a dividend or other sum payable in respect of a share resulting from any such deduction; and (c) how the money deducted has been applied. Article 73 Analysis A new article outlining the rules on deducting sums owed to the company (lien) by deducting the money from any dividend or other monies due.The article is not relevant to a private company on the assumption all shares in issue are fully paid up. Article 73 Previous provisions There is no corresponding provision in Table A 1985.

Article 74 No interest on distributions 8.76 74. The company may not pay interest on any dividend or other sum payable in respect of a share unless otherwise provided by— (a) the terms on which the share was issued, or (b) the provisions of another agreement between the holder of that share and the company. 246

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Article 74 Analysis See analysis of Article 32 in 6.34. Article 74 Previous provisions Table A 1985: Regulation 107 107. No dividend or other moneys payable in respect of a share shall bear interest against the company unless otherwise provided by the rights attached to the share.

Article 75 Unclaimed distributions 8.77 75.—(1) All dividends or other sums which are— (a) payable in respect of shares, and (b) unclaimed after having been declared or become payable,

may be invested or otherwise made use of by the directors for the benefit of the company until claimed.

(2) The payment of any such dividend or other sum into a separate account does not make the company a trustee in respect of it. (3) If— (a) twelve years have passed from the date on which a dividend or other sum became due for payment, and (b) the distribution recipient has not claimed it,

the distribution recipient is no longer entitled to that dividend or other sum and it ceases to remain owing by the company.

Article 75 Analysis See analysis of Article 33 in 6.35. Article 75 Previous provisions Table A 1985: Regulation 108 108. Any dividend which has remained unclaimed for twelve years from the date when it became due for payment shall, if the directors so resolve, be forfeited and cease to remain owing by the company.

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Article 76 Non-cash distributions 8.78 76.—(1) Subject to the terms of issue of the share in question, the company may, by ordinary resolution on the recommendation of the directors, decide to pay all or part of a dividend or other distribution payable in respect of a share by transferring non-cash assets of equivalent value (including, without limitation, shares or other securities in any company). (2) If the shares in respect of which such a non-cash distribution is paid are uncertificated, any shares in the company which are issued as a non-cash distribution in respect of them must be uncertificated. (3) For the purposes of paying a non-cash distribution, the directors may make whatever arrangements they think fit, including, where any difficulty arises regarding the distribution— (a) fixing the value of any assets; (b) paying cash to any distribution recipient on the basis of that value in order to adjust the rights of recipients; and (c) vesting any assets in trustees.

Article 76 Analysis Article 76 replicates Article 34 of the model articles of private companies limited by shares (see 6.36) with the exception of article 76(2) which includes provisions for uncertificated shares. Private limited companies are forbidden to trade their shares on an open exchange or market. Article 76 Previous provisions Table A 1985: Regulation 105 105.A general meeting declaring a dividend may, upon the recommendation of the directors, direct that it shall be satisfied wholly or partly by the distribution of assets and, where any difficulty arises in regard to the distribution, the directors may settle the same and in particular may issue fractional certificates and fix the value for distribution of any assets and may determine that cash shall be paid to any member upon the footing of the value so fixed in order to adjust the rights of members and may vest any assets in trustees.

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Article 77 Waiver of distributions 8.79 77. Distribution recipients may waive their entitlement to a dividend or other distribution payable in respect of a share by giving the company notice in writing to that effect, but if— (a) the share has more than one holder, or (b) more than one person is entitled to the share, whether by reason of the death or bankruptcy of one or more joint holders, or otherwise, the notice is not effective unless it is expressed to be given, and signed, by all the holders or persons otherwise entitled to the share. Article 77 Analysis See analysis of Article 35 in 6.37. Article 77 Previous provisions There is no corresponding provision in Table A 1985.

Article 78 Authority to capitalise and appropriation of capitalised sums 8.80 78.—(1) Subject to the articles, the directors may, if they are so authorised by an ordinary resolution— (a) decide to capitalise any profits of the company (whether or not they are available for distribution) which are not required for paying a preferential dividend, or any sum standing to the credit of the company’s share premium account or capital redemption reserve; and (b) appropriate any sum which they so decide to capitalise (a “capitalised sum”) to the persons who would have been entitled to it if it were distributed by way of dividend (the “persons entitled”) and in the same proportions. (2) Capitalised sums must be applied— (a) on behalf of the persons entitled, and (b) in the same proportions as a dividend would have been distributed to them. 249

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(3) Any capitalised sum may be applied in paying up new shares of a nominal amount equal to the capitalised sum which are then allotted credited as fully paid to the persons entitled or as they may direct. (4) A capitalised sum which was appropriated from profits available for distribution may be applied— (a) in or towards paying up any amounts unpaid on existing shares held by the persons entitled, or (b) in paying up new debentures of the company which are then allotted credited as fully paid to the persons entitled or as they may direct. (5) Subject to the articles the directors may— (a) apply capitalised sums in accordance with paragraphs (3) and (4) partly in one way and partly in another; (b) make such arrangements as they think fit to deal with shares or debentures becoming distributable in fractions under this article (including the issuing of fractional certificates or the making of cash payments); and (c) authorise any person to enter into an agreement with the company on behalf of all the persons entitled which is binding on them in respect of the allotment of shares and debentures to them under this article.

Article 78 Analysis See analysis of Article 36 in 6.38. Article 78 Previous provisions Table A 1985: Regulation 110 110. The directors may with the authority of an ordinary resolution of the company— (a) subject as hereinafter provided, resolve to capitalise any undivided profits of the company not required for paying any preferential dividend (whether or not they are available for distribution) or any sum standing to the credit of the company’s share premium account or capital redemption reserve; (b) appropriate the sum resolved to be capitalised to the members who would have been entitled to it if it were distributed by way of dividend and in the same proportions and apply such sum on their behalf either in or towards paying up the amounts, if any, for the time being

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unpaid on any shares held by them respectively, or in paying up in full unissued shares or debentures of the company of a nominal amount equal to that sum, and allot the shares or debentures credited as fully paid to those members, or as they may direct, in those proportions, or partly in one way and partly in the other: but the share premium account, the capital redemption reserve, and any profits which are not available for distribution may, for the purposes of this regulation, only be applied in paying up unissued shares to be allotted to members credited as fully paid; (c) make such provision by the issue of fractional certificates or by payment in cash or otherwise as they determine in the case of shares or debentures becoming distributable under this regulation in fractions; and (d) authorise any person to enter on behalf of all the members concerned into an agreement with the company providing for the allotment to them respectively, credited as fully paid, of any shares or debentures to which they are entitled upon such capitalisation, any agreement made under such authority being binding on all such members.

Part 5 Miscellaneous provisions Article 79 Means of communication to be used 8.81 79.—(1) Subject to the articles, anything sent or supplied by or to the company under the articles may be sent or supplied in any way in which the Companies Act 2006 provides for documents or information which are authorised or required by any provision of that Act to be sent or supplied by or to the company. (2) Subject to the articles, any notice or document to be sent or supplied to a director in connection with the taking of decisions by directors may also be sent or supplied by the means by which that director has asked to be sent or supplied with such notices or documents for the time being. (3) A director may agree with the company that notices or documents sent to that director in a particular way are to be deemed to have been received within a specified time of their being sent, and for the specified time to be less than 48 hours.

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Article 79 Analysis See analysis of Article 48 in 6.50. Article 79 Previous provisions Table A 1985: Regulations 111, 112 111. Any notice to be given to or by any person pursuant to the articles (other than a notice calling a meeting of the directors) shall be in writing or shall be given using electronic communications to an address for the time being notified for that purpose to the person giving the notice. In this regulation,“address”, in relation to electronic communications, includes any number or address used for the purposes of such communications. 112. The company may give any notice to a member either personally or by sending it by post in a prepaid envelope addressed to the member at his registered address or by leaving it at that address or by giving it using electronic communications to an address for the time being notified to the company by the member. In the case of joint holders of a share, all notices shall be given to the joint holder whose name stands first in the register of members in respect of the joint holding and notice so given shall be sufficient notice to all the joint holders. A member whose registered address is not within the United Kingdom and who gives to the company an address within the United Kingdom at which notices may be given to him, or an address to which notices may be sent using electronic communications, shall be entitled to have notices given to him at that address, but otherwise no such member shall be entitled to receive any notice from the company. In this regulation and the next, “address”, in relation to electronic communications, includes any number or address used for the purposes of such communications.

Article 80 Failure to notify contact details 8.82 80.—(1) If— (a) the company sends two consecutive documents to a member over a period of at least 12 months, and (b) each of those documents is returned undelivered, or the company receives notification that it has not been delivered,

that member ceases to be entitled to receive notices from the company.

(2) A member who has ceased to be entitled to receive notices from the company becomes entitled to receive such notices again by sending the company— (a) a new address to be recorded in the register of members, or 252

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(b) if the member has agreed that the company should use a means of communication other than sending things to such an address, the information that the company needs to use that means of communication effectively.

Article 80 Analysis Article 80 is a new addition outlining the rules the company should follow if a shareholder moves away without notification to the company. Article 80 Previous provisions There is no corresponding provision in Table A 1985.

Article 81 Company seals 8.83 81.—(1) Any common seal may only be used by the authority of the directors. (2) The directors may decide by what means and in what form any common seal or securities seal is to be used. (3) Unless otherwise decided by the directors, if the company has a common seal and it is affixed to a document, the document must also be signed by at least one authorised person in the presence of a witness who attests the signature. (4) For the purposes of this article, an authorised person is— (a) any director of the company; (b) the company secretary; or (c) any person authorised by the directors for the purpose of signing documents to which the common seal is applied. (5) If the company has an official seal for use abroad, it may only be affixed to a document if its use on that document, or documents of a class to which it belongs, has been authorised by a decision of the directors. (6) If the company has a securities seal, it may only be affixed to securities by the company secretary or a person authorised to apply it to securities by the company secretary.

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(7) For the purposes of the articles, references to the securities seal being affixed to any document include the reproduction of the image of that seal on or in a document by any mechanical or electronic means which has been approved by the directors in relation to that document or documents of a class to which it belongs. Article 81 Analysis See analysis of Article 49 in 6.51 – with the exception of paragraphs (5) which deals with matters of executing documents abroad, (6) which stipulates the company secretary or a person he appoints must affix the company seal, and (7) which details that any image on any securities seal must be approved by the directors.The latter three paragraphs would not be pertinent to a private limited company. Article 81 Previous provisions Table A 1985: Regulation 101 101. The seal shall only be used by the authority of the directors or of a committee of directors authorised by the directors. The directors may determine who shall sign any instrument to which the seal is affixed and unless otherwise so determined it shall be signed by a director and by the secretary or by a second director.

Article 82 Destruction of documents 8.84 82.—(1) The company is entitled to destroy— (a) all instruments of transfer of shares which have been registered, and all other documents on the basis of which any entries are made in the register of members, from six years after the date of registration; (b) all dividend mandates, variations or cancellations of dividend mandates, and notifications of change of address, from two years after they have been recorded; (c) all share certificates which have been cancelled from one year after the date of the cancellation; (d) all paid dividend warrants and cheques from one year after the date of actual payment; and (e) all proxy notices from one year after the end of the meeting to which the proxy notice relates.

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(2) If the company destroys a document in good faith, in accordance with the articles, and without notice of any claim to which that document may be relevant, it is conclusively presumed in favour of the company that— (a) entries in the register purporting to have been made on the basis of an instrument of transfer or other document so destroyed were duly and properly made; (b) any instrument of transfer so destroyed was a valid and effective instrument duly and properly registered; (c) any share certificate so destroyed was a valid and effective certificate duly and properly cancelled; and (d) any other document so destroyed was a valid and effective document in accordance with its recorded particulars in the books or records of the company. (3) This article does not impose on the company any liability which it would not otherwise have if it destroys any document before the time at which this article permits it to do so. (4) In this article, references to the destruction of any document include a reference to its being disposed of in any manner.

Article 82 Analysis The Companies Act 2006 ushered in new statutory provisions concerning company records.15 Article 82 is a new provision summarising the rules on which documents the company may destroy and the relevant time frame it must keep documents available for inspection. Article 82 Previous provisions There is no corresponding provision in Table A 1985.

Article 83 No right to inspect accounts and other records 8.85 83. Except as provided by law or authorised by the directors or an ordinary resolution of the company, no person is entitled to inspect any of the company’s accounting or other records or documents merely by virtue of being a member. 15 Companies Act 2006, ss 1134–1138 (Company records).

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Article 83 Analysis See analysis of Article 50 in 6.52. Article 83 Previous provisions Table A 1985: Regulation 109 109. No member shall (as such) have any right of inspecting any accounting records or other book or document of the company except as conferred by statute or authorised by the directors or by ordinary resolution of the company.

Article 84 Provision for employees on cessation of business 8.86 84. The directors may decide to make provision for the benefit of persons employed or formerly employed by the company or any of its subsidiaries (other than a director or former director or shadow director) in connection with the cessation or transfer to any person of the whole or part of the undertaking of the company or that subsidiary. Article 84 Analysis See analysis of Article 51 in 6.53. Article 84 Previous provisions There is no corresponding provision in Table A 1985.

Article 85 Indemnity 8.87 85.—(1) Subject to paragraph (2), a relevant director of the company or an associated company may be indemnified out of the company’s assets against— (a) any liability incurred by that director in connection with any negligence, default, breach of duty or breach of trust in relation to the company or an associated company, (b) any liability incurred by that director in connection with the activities of the company or an associated company in its capacity as a trustee of an occupational pension scheme (as defined in section 235(6) of the Companies Act 2006), 256

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(c) any other liability incurred by that director as an officer of the company or an associated company. (2) This article does not authorise any indemnity which would be prohibited or rendered void by any provision of the Companies Acts or by any other provision of law. (3) In this article— (a) companies are associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate, and (b) a “relevant director” means any director or former director of the company or an associated company. Article 85 Analysis See analysis of Article 52 in 6.54. Article 85 Previous provisions Table A 1985: Regulation 118 118. Subject to the provisions of the Act but without prejudice to any indemnity to which a director may otherwise be entitled, every director or other officer or auditor of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application in which relief is granted to him by the court from liability for negligence, default, breach of duty or breach of trust in relation to the affairs of the company.

Article 86 Insurance 8.88 86.—(1) The directors may decide to purchase and maintain insurance, at the expense of the company, for the benefit of any relevant director in respect of any relevant loss. (2) In this article— (a) a “relevant director” means any director or former director of the company or an associated company, (b) a “relevant loss” means any loss or liability which has been or may be incurred by a relevant director in connection with that director’s duties 257

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or powers in relation to the company, any associated company or any pension fund or employees’ share scheme of the company or associated company, and (c) companies are associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate. Article 86 Analysis See analysis of Article 53 in 6.55. Article 86 Previous provisions There is no corresponding provision in Table A 1985.

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Precedents

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Precedent 1: Family Business Articles of Association Introduction The family business model articles (FBMA) aim to expand on the model articles for a private limited company limited by shares under the Companies Act 2006 to include important provisions that help the company to avoid conflicts. The majority of family businesses generally consist of two or three generations with fragmented majority and minority share shareholdings with one class of ordinary shares. The ability to claim business property and holdover relief encourages the founding shareholders to pass on shares to the next generation in the belief it is a sound estate planning strategy. In the interest of fairness the shares are passed to all family members regardless of their commitment to the business or the effort they may exercise to ensure the success of the business over the long term. On a more positive note the family business and its members will require flexibility in share transfers to instigate both tax and estate planning over the medium to long term. Article 26(5) of the model articles for private companies limited by shares states the directors may refuse the transfer of a share.

Shareholder and investor consent The FBMA articles refer to consent which must be sought in certain circumstances. The level of consent will differ to meet the needs of the company and its voting rights structure.

Shareholder consent The term ‘shareholder consent’ is typically interpreted as meaning all the shareholders must agree.1 For the family business with one class of shares this may give undue power to the minority who are able to handcuff the majority and create deadlocks. Another approach if there are two share classes is ‘shareholder consent’ of the A Class ordinary shares and the B Class ordinary shares. 1 If the company has a large number of shareholders then majority consent may produce an unforeseen administrative burden on the company to implement the procedure.

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Shareholder majority allows the company to set a percentage of shareholders to agree the level of consent required to execute the relevant provision. The level of consent may differ throughout the articles, for example a simple majority consent2 is set to allow the company to execute a share transfer for a member to a family member; conversely a level exceeding a special resolution is set to waive pre-emption rights or allot new shares.

Investor consent The FBMA precedent assumes there are no investors in the business. In practice, typically the family business will not involve external investors, funding the business day-to-day and medium-term growth is usually funded by a bank. It is common for a family business to expand using a joint venture vehicle thereby allowing investors to have control of the new company without becoming embroiled with the potential family disputes of the holding company (see the joint venture precedent below). To clarify the terminology, investor consent is typically either an arm’s-length inventor who invests without any general input day-to-day but may require his consent for certain events. Investor directors are the opposite, who invest and are active directors. The following are representative precedents that may be inserted in the FBMA if the company includes investors. ●●

‘Investor Director Consent’ means the prior written consent of all the Investor Directors.

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‘Investor Director Consent’ means the prior written consent of at least 50% of the Investor Directors.

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‘Investor Majority’ means 75% of Series B Shares from time to time.

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‘Investor Majority Consent’ means the prior written consent of the Investor Majority.

Assumptions ●●

Shares are held by family members.

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All the shareholders in the company are family members with no external investors, holding companies or corporate entities holding shares.

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One class of shares which are all paid up.

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The shareholdings are held under one class of shares with the same rights attached.

2 More than 50% of the shareholder agree.

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●●

No deadlock provisions are required.

●●

It is assumed the family business is not a 50/50 company.3

Pre-emption rights The allotment of news shares4 for a family business would feasibly only occur if an external investor approached the business or the directors sought to raise new capital. In both scenarios restrictive and detailed pre-emption rights for existing shareholders can be counterproductive and potentially act negatively with regard to achieving the introduction of new capital. The model articles are silent on pre-emption rights as the majority of private companies will rely on the statutory rights conferred by sections 561 and 562 of the Companies Act 2006.5 As discussed previously the model articles were conceived for small businesses to reduce the administrative burden and cumbersome procedures. The Companies Act 2006 introduced a new section 5506 which for companies with one class of share disapplies the detailed pre-emption rights in Chapter 3 of Part 17 of the Act.7

3 50/50 Company means: two shareholders holding 50% of the shares equally. If this is the case then thought needs to be given for ‘deadlock’ provisions or anther suitable method of moving the company forward and avoiding liquidation. 4 After the normal share issue procedures are followed on incorporation. 5 Companies Act 2006, s 561 (Existing shareholders’ right of pre-emption). Companies Act 2006, s 562 (Communication of pre-emption offers to shareholders). 6 Companies Act 2006, s 550 (Power of directors to allot shares etc: private company with only one class of shares). 7 Companies Act 2006, Part 17, Chapter 3 (Allotment of equity securities: existing shareholders’ right of pre-emption).

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Articles of Association Company Number: [NUMBER] THE COMPANIES ACT 2006 PRIVATE COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATION OF [Family Business] Limited [(Adopted by Special Resolution passed on [DATE])]

Article 1 Defined terms 1.1. In the articles, unless the context requires otherwise— ‘articles’ means the company’s articles of association; ‘bankruptcy’ includes individual insolvency proceedings in a jurisdiction other than England and Wales or Northern Ireland which have an effect similar to that of bankruptcy; ‘chairman’ has the meaning given in article 12; ‘chairman of the meeting’ has the meaning given in article 39; ‘Companies Acts’ means the Companies Acts (as defined in section 2 of the Companies Act 2006), in so far as they apply to the company; ‘director’ means a director of the company, and includes any person occupying the position of director, by whatever name called; ‘distribution recipient’ has the meaning given in article 31; ‘document’ includes, unless otherwise specified, any document sent or supplied in electronic form; ‘electronic form’ has the meaning given in section 1168 of the Companies Act 2006; ‘fully paid’ in relation to a share, means that the nominal value and any premium to be paid to the company in respect of that share have been paid to the company; ‘hard copy form’ has the meaning given in section 1168 of the Companies Act 2006; ‘holder’ in relation to shares means the person whose name is entered in the register of members as the holder of the shares; ‘instrument’ means a document in hard copy form;

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‘ordinary resolution’ has the meaning given in section 282 of the Companies Act 2006; ‘paid’ means paid or credited as paid; ‘participate’, in relation to a directors’ meeting, has the meaning given in article 10; ‘proxy notice’ has the meaning given in article 45; ‘shareholder’ means a person who is the holder of a share; ‘shares’ means shares in the company; ‘special resolution’ has the meaning given in section 283 of the Companies Act 2006; ‘subsidiary’ has the meaning given in section 1159 of the Companies Act 2006; ‘transmittee’ means a person entitled to a share by reason of the death or bankruptcy of a shareholder or otherwise by operation of law; and ‘writing’ means the representation or reproduction of words, symbols or other information in a visible form by any method or combination of methods, whether sent or supplied in electronic form or otherwise. 1.2. Unless the context otherwise requires, other words or expressions contained in these articles bear the same meaning as in the Companies Act 2006 as in force on the date when these articles become binding on the company. 1.3. Model articles shall not apply. Neither the model articles for private companies limited by shares prescribed pursuant to the 2006 Act, nor any other articles of association (whether prescribed pursuant to the 2006 Act or set out in any other statute, statutory instrument or other subordinate legislation concerning companies) shall apply to the Company.1 1.4. [Alternative: (the ‘Model Articles’) shall apply to the Company, save insofar as they are varied or excluded by, or are inconsistent with, the following Articles.]

[Articles 3, 4 and 5 of the Model Articles shall not apply to the Company.]2

1.5. Except as provided by law or authorised by the directors or an ordinary resolution of the company, no person is entitled to inspect any of the company’s accounting or other records or documents merely by virtue of being a shareholder.3 1.6. [The directors may decide to make provision for the benefit of persons employed or formerly employed by the company or any of its subsidiaries (other than a director or former director or shadow director)

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in connection with the cessation or transfer to any person of the whole or part of the undertaking of the company or that subsidiary.]4 Commentary 1 1.3 excludes the model articles stating ‘they shall not apply’. These create one single document in ‘long form’. Another approach is to keep the model articles and make amendments with specific exclusions: ‘Model articles by reference’. 2 1.4 provides an alternative precedent for inclusion in the model articles with specific exclusions. 3 1.4 is adapted from article 50 of the model articles for private companies limited by shares. 4 1.6 is adapted from article 51 of the model articles for private companies limited by shares.

Article 2 Liability of members1 2.1. The liability of the members is limited to the amount, if any, unpaid on the shares held by them.2 Commentary 1

Articles 2, 3, 4 and 5 are adapted from the Schedule 1, Regulation 2 model articles for private companies limited by shares. 2 Article 2 is adapted from article 2 of the model articles for private companies limited by shares.

Article 3 Directors’ general authority 3.1. Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company.

Article 4 Shareholders’ reserve power 4.1. The shareholders may, by special resolution, direct the directors to take, or refrain from taking, specified action. 4.2. No such special resolution invalidates anything which the directors have done before the passing of the resolution.

Article 5 Directors may delegate 5.1. Subject to the articles, the directors may delegate any of the powers which are conferred on them under the articles: 1.

to such person or committee;

2.

by such means (including by power of attorney);

3.

to such an extent;

4.

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5.

and on such terms and conditions,

as they think fit. 5.2. If the directors so specify, any such delegation may authorise further delegation of the directors’ powers by any person to whom they are delegated. 5.3. The directors may revoke any delegation in whole or part, or alter its terms and conditions.

Article 6 Committees1 6.1. Committees to which the directors delegate any of their powers must follow procedures which are based as far as they are applicable on those provisions of the articles which govern the taking of decisions by directors. 6.2. The directors may make rules of procedure for all or any committees, which prevail over rules derived from the articles if they are not consistent with them. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 7 Directors to take decisions collectively1 7.1. The general rule about decision-making by directors is that any decision of the directors must be either a majority decision at a meeting or a decision taken in accordance with article 8. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares. ­Article 7.2 is removed (one director) which is not applicable in the majority of family businesses.

Article 8 Unanimous decisions1 8.1. A decision of the directors is taken in accordance with this article when all eligible directors indicate to each other by any means that they share a common view on a matter. 8.2. Such a decision may take the form of a resolution in writing, copies of which have been signed by each eligible director or to which each eligible director has otherwise indicated agreement in writing. 8.3. References in this article to eligible directors are to directors who would have been entitled to vote on the matter had it been proposed as a resolution at a directors’ meeting. 267

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8.4. A decision may not be taken in accordance with this article if the eligible directors would not have formed a quorum at such a meeting. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 9 Calling a directors’ meeting1 9.1. Any director may call a directors’ meeting by giving notice of the meeting to the directors. 9.2. Notice of any directors’ meeting must indicate: 1.

its proposed date and time;

2.

where it is to take place; and

3.

if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting.

9.3. Notice of a directors’ meeting must be given to each director, but need not be in writing. 9.4. Notice of a directors’ meeting need not be given to directors who waive their entitlement to notice of that meeting, by giving notice to that effect to the company not more than 7 days after the date on which the meeting is held. Where such notice is given after the meeting has been held, that does not affect the validity of the meeting, or of any business conducted at it. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares. Article 9.1 is modified to remove the reference to ‘company secretary’ – on the assumption a family business incorporated under the Companies Act 2006 would forgo the option of a company secretary.

Article 10 Participation in directors’ meetings1 10.1. Subject to the articles, directors participate in a directors’ meeting, or part of a directors’ meeting, when the meeting has been called and takes place in accordance with the articles, and they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting. 10.2. In determining whether directors are participating in a directors’ meeting, it is irrelevant where any director is or how they communicate with each other.

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10.3. If all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as taking place wherever any of them is. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 11 Quorum for directors’ meetings1 11.1. At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. 11.2. The quorum for directors’ meetings is [four]. 11.3. If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision: 1. to appoint further directors, or to call a general meeting so as to enable the shareholders to appoint further directors. 11.4. Subject to these articles each Director participating in a Directors’ meeting has [one] vote on each proposed resolution. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 12 Chairing of directors’ meetings1 12.1. The directors may appoint a director to chair their meetings: 1. The person so appointed for the time being is known as the chairman. 2. The directors may terminate the chairman’s appointment at any time. 12.2. If the chairman is not participating in a directors’ meeting within ten minutes of the time at which it was to start, the participating directors must appoint one of themselves to chair it. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 13 Chairman’s casting vote1 13.1. If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting vote. 13.2. But this does not apply if, in accordance with the articles, the chairman or other director is not to be counted as participating in the decisionmaking process for quorum or voting purposes. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares. The articles allow a chairman’s casting vote which is useful to prevent deadlocks. Alternatively the articles may not allow a chairman’s casting vote (see joint venture articles).

Article 14 Situational conflicts of interest1 14.1. A director of the company must avoid a situation in which he can have a direct or indirect interest that conflicts or possibly may conflict with the interests of the company. 14.2. Any director in breach of article 14.1 is deemed a ‘conflicted director’. 14.3. Subject to the provisions of section 175 of the Companies Act 2006 and the provisions of this article the Directors may authorise a ‘conflicted director’. 14.4. An ‘authorisation’ is effective only if: 1. any requirement as to the quorum at the meeting at which the matter is considered is met without counting the director in question or any other interested director, and 2. the matter was agreed to without their voting or would have been agreed to if their votes had not been counted. 14.5. In accordance with section 175(5)(a) of the Companies Act 2006 in respect to a ‘conflicted director’ who has proposed that the board of directors authorise his conflicted interest may for the avoidance of doubt: 1. apply such terms and conditions as they see fit to any authorisation; 2. vary or terminate any authorisation at any time by the directors or committee as they see fit from time to time. 14.6. ‘Shareholder authorisation’ means the Shareholders may also authorise a conflict by ordinary resolution. 14.7. The board of directors may for the avoidance of doubt: 1. apply such terms and conditions as they see fit to any ‘shareholder authorisation’; 270

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2. vary or terminate by ordinary resolution any ‘shareholder authorisation’ as they see fit from time to time. 14.8. If the ‘conflicted director’ receives ‘board authorisation’ or ‘shareholder authorisation’ they: 1. may take additional general or specific measures to manage the conflict of interest by adhering to any procedures specified in the ‘authorisation’; 2. may exclude themselves from general information or documents that specifically relates to matters pertaining to the ‘conflicted director’; 3. may absent themselves from any discussion in meetings or discussions where any matter relating to that conflict may be discussed or considered. 14.9. Subject to article 14.8 they are not required to disclose to the company any benefit he or any of his connected persons derive as a result of any ‘authorised conflict’. 14.10. If a ‘conflicted director’ receives information in respect of which he owes a duty of confidentiality to a person other than the company, he shall not be required: 1. to disclose any information to the company or to any director, or to any officer or employee of the company; 2. to use such confidential information for the purpose of or in connection with the performance of his duties as a director. Commentary 1 Article 14 of the Schedule 1 Regulation 2 model articles for private companies limited by shares specifies the procedures if a director is concerned with an actual or proposed transaction. The article is silent on the issue of conflicts of interest. Private companies formed after 1 October 2008 may authorise conflicted directors on the condition nothing in the company’s constitution invalidates such authorisation. Companies incorporated prior to 1 October 2008 may authorise by passing an ordinary resolution or amending the article by special resolution.

Article 15 Transactional conflicts of interest1 15.1. If a ‘conflicted director’ of the company is directly or indirectly interested in a proposed transaction ‘transaction’ or arrangement with the company he must declare the nature and extent of that interest to the other directors.

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15.2. Subject to the provisions of section 177 and section 182 of the Companies Act 2006: 1. If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decision-making process for quorum or voting purposes. 2. [If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decisionmaking process for quorum or voting purposes.] 15.3. The ‘conflicted director’ shall not be required to disclose to the company any benefit he or any of his connected persons derive as a result of any ‘authorised conflict’. Commentary 1



A practical issue arises if the company has two directors and the minimum quorum requirement is two. To authorise the conflicted director the quorum at the meeting must be two. If the article disallows the conflicted director in the decision making process (15.2.1) and may not count his vote – then the conflicted director may not be authorised as the company cannot (with one director) form a quorum. The article by virtue of 15.2 allows the option of the conflicted director to be counted in the quorum. Typically directors should not be sanctioned to vote in a quorum on any resolution in which they may be conflicted. The Companies Act 2006 outlines statutory provisions under section 175(5)(b) which allow the directors (once the conflicted director has disclosed in full his interest) to authorise a conflicted director so he may vote.

Article 16 Records of decisions to be kept1 16.1. The directors must ensure that the company keeps a record, in writing, for at least 10 years from the date of the decision recorded, of every unanimous or majority decision taken by the directors. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 17 Directors’ discretion to make further rules1 17.1. Subject to the articles, the directors may make any rule which they think fit about how they take decisions, and about how such rules are to be recorded or communicated to directors. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 18 Methods of appointing directors1 18.1. Any person who is willing to act as a director and is permitted by law to do so may be appointed to be a director: 1. by ordinary resolution; 2. by a decision of the directors. 18.2. In any case where as a result of death the company has no shareholders and no directors the personal representatives of the last shareholder to have died have the right, by notice in writing, to appoint a person to be a director. 18.3. For the purposes of article 18.2, where two or more shareholders die in circumstances rendering it uncertain who was the last to die, a younger shareholder is deemed to have survived an older shareholder. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 19 Termination of director’s appointment1 19.1. A person ceases to be a director as soon as: 1. that person ceases to be a director by virtue of any provision of the Companies Act 2006 or is prohibited from being a director by law; 2. a bankruptcy order is made against that person; 3. a composition is made with that person’s creditors generally in satisfaction of that person’s debts; 4. a registered medical practitioner who is treating that person gives a written opinion to the company stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months; 5. notification is received by the company from the director that the director is resigning from office, and such resignation has taken effect in accordance with its terms. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 20 Directors’ remuneration1 20.1. Directors may undertake any services for the company that the directors decide. 20.2. Directors are entitled to such remuneration as the directors determine: 1. for their services to the company as directors; and 2. for any other service which they undertake for the company. 20.3. Subject to the articles, a director’s remuneration may: 1. take any form; and 2. include any arrangements in connection with the payment of a pension, allowance or gratuity, or any death, sickness or disability benefits, to or in respect of that director. 20.4. Unless the directors decide otherwise, directors’ remuneration accrues from day to day. 20.5. Unless the directors decide otherwise, directors are not accountable to the company for any remuneration which they receive as directors or other officers or employees of the company’s subsidiaries or of any other body corporate in which the company is interested. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 21 Directors’ expenses1 21.1. The company may pay any reasonable expenses which the directors properly incur in connection with their attendance at: 1. meetings of directors or committees of directors; 2. general meetings; 3. separate meetings of the holders of any class of shares or of debentures of the company, or otherwise in connection with the exercise of their powers and the discharge of their responsibilities in relation to the company. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 22 Appointment and removal of alternates1 22.1. Any director (the ‘appointor’) may appoint as an alternate any other director, or any other person approved by resolution of the directors to: 1. exercise that director’s powers; 2. carry out that director’s responsibilities; 3. in relation to the taking of decisions by the directors in the absence of the alternate’s appointor. 22.2. Any appointment or removal of an alternate must be effected by notice in writing to the company signed by the appointor, or in any other manner approved by the directors. 22.3. The notice must: 1. identify the proposed alternate; and 2. in the case of a notice of appointment, contain a statement signed by the proposed alternate that the proposed alternate is willing to act as the alternate of the director giving the notice.

Article 23 Rights and responsibilities of alternate directors1 23.1. An alternate director has the same rights, in relation to any directors’ meeting or directors’ written resolution, as the alternate’s appointor. 23.2. Except as the articles specify otherwise, alternate directors: 1. are deemed for all purposes to be directors; 2. are liable for their own acts and omissions; 3. are subject to the same restrictions as their appointors; and 4. are not deemed to be agents of or for their appointors. 23.3. A person who is an alternate director but not a director may be counted as participating for the purposes of determining whether a quorum is participating (but only if that person’s appointor is not participating) and may sign a written resolution (but only if it is not signed or to be signed by that person’s appointor). 23.4. No alternate may be counted as more than one director for such purposes. 23.5. An alternate director is not entitled to receive any remuneration from the company for serving as an alternate director except such part of the alternate’s appointor’s remuneration as the appointor may direct by notice in writing made to the company. 275

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Article 24 Termination of alternate directorship1 24.1. An alternate director’s appointment as an alternate terminates when the alternate’s appointor revokes the appointment by notice to the company in writing specifying when it is to terminate: 1. on the occurrence in relation to the alternate of any event which, if it occurred in relation to the alternate’s appointor, would result in the termination of the appointor’s appointment as a director; 2. on the death of the alternate’s appointor; or 3. when the alternate’s appointor’s appointment as a director terminates, except that an alternate’s appointment as an alternate does not terminate when the appointor retires by rotation at a general meeting and is then re-appointed as a director at the same general meeting. Commentary 1

Articles 22, 23 and 24 are borrowed from Schedule 3 Regulation 4 model articles for public companies and are optional. The articles do not appear in Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 25 All shares to be fully paid up1 25.1. No share is to be issued for less than the aggregate of its nominal value and any premium to be paid to the company in consideration for its issue. 25.2. Article 25.1 does not apply to shares taken on the formation of the company by the subscribers to the company’s memorandum. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 26 Purchase of own shares1 26.1. Subject to the 2006 Act but without prejudice to any other provisions of these articles, the company may purchase its own shares out of capital up to any amount in a financial year not exceeding the lower of: 26.2. (a) £15,000; and 26.3. (b) the nominal value of 5% of the company’s fully paid share capital at the beginning of each financial year of the company. Commentary 1 Optional article that does not appear in the: Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 27 Powers to issue different classes of share1 27.1. Subject to the articles, but without prejudice to the rights attached to any existing share, the company may issue shares with such rights or restrictions as may be determined by ordinary resolution. 27.2. The company may issue shares which are to be redeemed, or are liable to be redeemed at the option of the company or the holder, and the directors may determine the terms, conditions and manner of redemption of any such shares. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 28 Company not bound by less than absolute interests1 28.1. Except as required by law, no person is to be recognised by the company as holding any share upon any trust, and except as otherwise required by law or the articles, the company is not in any way to be bound by or recognise any interest in a share other than the holder’s absolute ownership of it and all the rights attaching to it. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 29 Share certificates1 29.1. The company must issue each shareholder, free of charge, with one or more certificates in respect of the shares which that shareholder holds. 29.2. Every certificate must specify: 1. in respect of how many shares, of what class, it is issued; 2. the nominal value of those shares; 3. that the shares are fully paid; 4. any distinguishing numbers assigned to them. 29.3. No certificate may be issued in respect of shares of more than one class. 29.4. If more than one person holds a share, only one certificate may be issued in respect of it. 29.5. Certificates must: 1. have affixed to them the company’s common seal; 2. be otherwise executed in accordance with the Companies Acts. 277

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Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 30 Replacement share certificates1 30.1. If a certificate issued in respect of a shareholder’s shares is: 1. damaged; 2. defaced; 3. lost; 4. stolen or 5. destroyed. 30.2. The shareholder is entitled to be issued with a replacement certificate in respect of the same shares. 30.3. A shareholder exercising the right to be issued with a replacement certificate may at the same time exercise the right to be issued with a single certificate or separate certificates and: 1. must return the certificate which is to be replaced to the company if it is damaged or defaced; and 2. must comply with such conditions as to evidence, indemnity and the payment of a reasonable fee as the directors decide. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 31 Share transfers: general1 31.1. Any reference to ‘share transfer’ in these articles includes the transfer or assignment of any beneficial or other interest and the creation of a trust or encumbrance over a shareholding. 31.2. Shares shall be transferred by means of a transfer form. The company shall not charge a fee for registering any transfer form or associated documents. The company may at its discretion retain any transfer form which is registered. 31.3. No share may be transferred unless the transfer is made in accordance with these articles. 31.4. The directors shall refuse to register a ‘share transfer’ only if authorised by these articles.

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31.5. Any ‘share transfer’ will be deemed to include a warranty that the transferor sells with full title guarantee. 31.6. With the exception of [permitted, compulsory, drag along] no ‘ordinary shares’ shall be transferred without: 1. [‘shareholder consent’]; 2. [‘shareholder majority’]; 3. [‘investor consent’]; 4. [‘investor majority’]; 5. to any person not already a member or whom the directors shall not approve. Commentary 1 Article 31 replaces article 26 of the Schedule 1 Regulation 2 model articles for private companies limited by shares with a more complex set of share transfer procedures. Article 31 sets out the general parameters of share transfer including 31.6 which operates as a catch all provision that prevents any share transfer without shareholder consent or shareholder majority. Investor consent is applicable if the family business encompasses outside investors or investor directors. The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent.

Article 32 Obligation to refuse a share transfer1 32.1. The directors are authorised by these articles and shall refuse to register a transfer if the share transfer is to: 1. a bankrupt; 2. a minor; 3. a person of unsound mind. Commentary 1

Article 32 stipulates any person the company will not under any circumstances transfer shares to.The list is not limited to bankrupts, minors or persons who have lost capacity. Care must be taken not to include provisions in the articles that may refuse share transfers to any person or corporate body that may fetter their statutory rights.

Article 33 Family trusts1 33.1. For the purposes of this article ‘family trusts’ means trusts settled by [declaration of trust or other trust instrument] or under a testamentary disposition or on an intestacy.

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33.2. No ‘share transfer’ may be effected to trustees without ‘majority consent’. The directors shall at their discretion only agree a ‘share transfer’ on any terms they see fit and only if they are satisfied: 1. with the trust terms, conditions and restrictions; 2. with the identity of the proposed trustees; 3. that the proposed transfer will not result in 50% or more of the aggregate of the company’s equity share capital being held by trustees of that and any other trusts; 4. that no costs incurred in connection with the setting up or administration of the family trust in question are to be paid by the company. Commentary 1 The use of trust planning in family business has been curtailed recently with the introduction of draconian tax rates for trusts. It is feasible for estate planning purposes and if the settlement is able to claim business property relief and/or holdover relief that the family shareholder may wish to execute transfer of shares to trust settlements. Typically, modern wills for shareholding directors include a provision for a business property relief trust – any shares held by the deceased are held on trust with a spouse or civil partner as trustees. Without provisions in the articles companies will lose control of shareholdings into trusts by testamentary settlements. (For an alternative solution – see the joint venture articles for a discussion on cross-option agreements.) Article 33.2 prevents any settlement into trust without ‘majority consent’ which must be set at a level to ensure the provision works. The directors are able to set terms for any transfer into a trust and insist that not all shares are transferred (the percentage again would require consideration).

Article 34 Permitted transfers1 34.1. For the purpose of this article: 1. ‘Privileged relation’ means: a spouse, civil partner, [brother or sister] [half-blood brother or sister] full blood child or grandchild [including step or adopted or illegitimate child and their issue]. 2. ‘Original shareholder’ means any holder of any shares (Class A, Class B, founder shares, ordinary shares). 34.2. An ‘original shareholder’ may transfer his ‘shares’ to any ‘privileged relation’ without restriction (provided that no shareholder after the registration of a ‘share transfer’ would be left with no shares). 34.3. Any shares transferred by a ‘original shareholder’ to a ‘privileged relation’ in accordance with article 34.2 is entitled to transfer shares held by him in accordance with article 34.4. 34.4. In the event shares are transferred by an ‘original shareholder’ in accordance with article 34.2 to a ‘privileged relation’ then that ‘privileged relation’ in receipt of the share transfer shall be permitted

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to transfer to another ‘privileged relation’ of the ‘original shareholder’ without restriction. Article 34.2 shall not apply. 34.5. Termination of a ‘privileged relation’.2 34.6. If shares are transferred to a ‘privileged relation’ in accordance with article 34.2 or article 34.4 and he ceases to be a ‘privileged relation’ of the ‘original shareholder’ by divorce or otherwise then within 14 days of ceasing they shall: 1. notify the company in writing and execute and deliver to the company a ‘transfer notice’ of the shares held by him to: 2. the ‘original shareholder’; or the ‘privileged relation’ of the ‘original shareholder’ for such consideration as may be agreed between them or execute a ‘transfer notice’ in accordance with article 36 voluntary transfers. 34.7. if a ‘former privileged relation’ of an ‘original shareholder’ fails to comply he shall be deemed to have immediately given a transfer notice. 34.8. The directors at their discretion are authorised to appoint any person as agent to execute and deliver the required transfer form (or any other documents they see fit) on behalf of the ‘former privileged relation’. 34.9. The directors are authorised to take any action they deem appropriate at any time to execute the transfer of the shares held by the ‘former privileged relation’ in accordance with this article. Commentary 1 Article 34 sets out the procedure for permitted transfers to the direct descendants of the shareholder. Article 31.1.1 stipulates who is a privileged relation and includes or excludes half-blood children or illegitimate children.The article sets the meaning of ‘shareholder’ and allows a ‘privileged relation’ to then transfer to another ‘privileged relation’. For example: Mother, the original shareholder, transfers 30% of her shareholding to her daughter Alice aged 43 who has two full-blood children. Four years after receiving the shares from her mother Alice transfers the shares to Susan, her daughter. Article 30.6 would allow the transfers to be executed without any consent from the directors or otherwise. The freedom to transfer shareholding (when still alive) between direct dependents is part of estate planning this ought to be encouraged however some control is required if any ‘privileged relation’ ceases to be deemed privileged. 2 Article 34.5 requires any privileged relation who ceases to be privileged to notify the company and transfer his shares back to the original shareholder or another privileged relation in accordance with article 34.1.1. Failure to comply will activate paragraphs 34.7–34.9 instigating a deemed transfer notice. The article assumes as no cash value was attributed on the original transfer then any transfer back would also be without a cash value in accordance with article 34.6.2.

Article 35 Transfers to the company1 35.1. Any shareholder may at any time transfer any shares to the company in accordance with the 2006 Act and these articles. Commentary 1 Optional article included for completeness of all transfer options.

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Article 36 Voluntary transfers1 36.1. Leavers 36.2. If any share transfer is executed in accordance with article 37 ‘Mandatory transfers’ in respect of leavers, then this article 36 will apply except that: 1. the ‘seller’ shall be the ‘leaver’; 2. the ‘sale shares’ shall be the ‘leavers shares’; 3. the transfer notice date shall be the ‘leaving date’. 36.3. Any shareholder ‘seller’ who wishes to transfer any shares other than in accordance with article 34 ‘Permitted transfers’ shall give the company notice in writing (a ‘transfer notice’). 36.4. Unless the directors decide otherwise the ‘transfer notice’ shall be irrevocable. 36.5. The transfer notice shall indicate: 1. the number of shares the seller wishes to transfer (the ‘sale shares’); 2. the ‘cash price’ he requires to transfer the ‘sale shares’; 3. whether the ‘seller’ has received an offer from any third party if applicable, the price offered, and the identity of the third party; 4. if the ‘transfer notice’ is conditional on all or a specific percentage of shares being sold (a ‘minimum transfer condition’); 5. by providing the company with a written ‘transfer notice’ the seller agrees to appoint the company and its directors as his agent with the power to sell the ‘sale shares’ and any rights attaching to them in accordance with the provisions of these articles. 36.6. Fair price and appointment of an expert: 1. If the ‘cash price’ is not specified by the seller in the ‘transfer notice’ then the price at which the ‘sale shares’ are to be transferred shall be agreed by the directors with the seller (the ‘transfer price’). 2. If the ‘transfer price ‘cannot be agreed by the ‘seller ‘and the directors acting for the company then the transfer price will be deemed to be the ‘fair price’ of the ‘sale shares’. 3. If the parties fail to agree a ‘transfer price’ within 7 business days of the company receiving the transfer notice the company will immediately appoint the ‘expert’ to determine the fair price for the ‘sale shares’. 4. The expert will be a firm of chartered accountants nominated by the ‘seller’ and the company.

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5. The ‘expert’ shall certify the ‘fair price’ as soon as possible and it will without evidence of inaccuracy or fault be final and binding on the ‘seller’ and the company. 6. The cost of obtaining the ‘fair price’ will be divided equally by the ‘seller’ and the company unless the directors decide otherwise.2 36.7. Fair value assumptions: 1. The shares will be valued on an arm’s-length sale between a willing seller and a willing buyer. 2. The ‘sale shares’ can be transferred without any restriction and are not subject to any compulsory transfer requirements contained in these articles. 3. The ‘expert’ may take into account any factors they consider reasonable in determining the ‘fair price’. 4. The ‘expert’ shall not take into account in his valuation any reduction in value if the ‘sale shares’ represent a minority share capital of the company or represent a majority in the share capital. 5. The value of the shares shall be on a pro-rata basis. 6. The ‘expert’ shall resolve or interpret any assumptions in this article at their absolute discretion as they see fit. 7. The ‘expert’ will ascertain the ‘fair value’ within 21 days of appointment. 8. The cost of obtaining the ‘fair price’ will be divided equally by the ‘seller’ and the company. 36.8. Transfer offer notice3 1. On agreement between the ‘seller’ and the company of the ‘sale price’ the company shall give notice ‘transfer offer notice’ in writing to the ‘shareholders’ offering for sale the ‘sale shares’ at the ‘sale price’. 2. This article 36.8 is subject to the fulfilment of any minimum transfer condition that may apply. 3. The ‘shareholders’ shall be invited to apply in writing within the ‘offer period’ to indicate the total amount of ‘sale shares’ they would wish to purchase. 4. The transfer offer notice shall stipulate that each ‘shareholder’ is entitled to apply for all or a proportion of the ‘sale shares’. 5. The ‘offer period’ is 14 days from the date of the ‘transfer offer notice’. 36.9. Allocation4

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36.10. If the transfer notice is conditional on all or a specific number of the sale shares being sold to ‘eligible shareholders’ (the ‘minimum transfer condition’) and the subscription of shares is less than the minimum transfer condition the directors shall notify the seller indicating the minimum has not been met and the transfer notice has with immediate effect lapsed. 36.11. If article 36.10 shall not apply and on expiration of the ‘offer period’, the directors shall (fractional entitlements being rounded to the nearest whole number) allocate the ‘sale shares’ on the following terms: 36.12. If the sale shares applied for are equal to or less than the total number of sale shares, the company shall allocate to each eligible shareholder the number of sale shares he applied for or: 1. If the ‘sale shares’ applied for are ‘equal to or exceed’ the number of sale shares, the directors shall allocate the ‘sale shares’ to each ‘shareholder’ in the proportion of his existing holding. 2. Subject to article 36.12 the procedure shall be repeated until all ‘sale shares’ have been allocated. 36.13. No ‘shareholder’ shall receive more ‘sale shares’ than he applied for. 36.14. If, at the end of the offer period, the number of sale shares applied for is less than the number of sale shares, subject to the Companies Act 2006, the company may allocate any remaining sale shares to itself and be entitled to acquire them. 36.15. Completion5 36.16. On completion of the share allocation process in accordance with article 36.9 the directors shall give a written notice ‘allocation notice’ to the seller and each shareholder ‘applicant’ who in accordance with article 36.8 submitted a ‘transfer offer notice’ indicating the number of shares he is allocated and the date and time of completion of the share transfer. 36.17. If any of the sale shares are allocated by the company the ‘applicant’ shall be bound to acquire the ‘sale shares’ allocated to them. 36.18. Completion shall take place at the registered office of the company. 36.19. The ‘seller’ or his representative must be present at completion. 36.20. Each ‘allocated person’ shall pay the purchase price in regard of the applicable sale shares to the ‘seller’ at completion and the ‘seller’ shall transfer the ‘relevant sale shares’ to the relevant allocated person and deliver the relevant share certificates. 36.21. If the seller fails to transfer any sale shares to an allocated person then the company is authorised to appoint an agent of the ‘seller’ to execute a transfer form for those sale shares in the name, and on behalf of

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the seller, and transfer the relevant sale shares in accordance with the voluntary transfer procedures. 36.22. On completion, when the transfer form has been stamped, the company shall enter the name of that allocated person to become the holder of those sale shares. Where the allocated person is the company, the company shall cause those sale shares to be cancelled in accordance with the Companies Act 2006. Commentary 1

The articles thus far have allowed a settlement of shares into a family trust or a testamentary or statutory trust on death with some type of consent, and without consent (permitted transfers) the transfer of shares to privileged relations. Article 36 sets a procedure to buy shares from shareholders who wish to exit the company with pre-emption rights for the existing shareholders to purchase the shares at an agreed fair value. Case Example: Lucas Limited is a small IT company with 14 employees and turnover approaching £900,000 per annum. The company was established by two brothers and over time the shareholdings are now 35% held by each brother and 30% held by the brothers’ father Iain. The father now aged 81 would like to sell his shares and has been approached by a local competitor enquiring if he’d like to dispose of his shareholding. Iain would issue a transfer notice to his sons which is irrevocable, the notice would indicate the details of the proposed transfer in accordance with article 36.5. On the transfer notice Iain indicated the ‘transfer price’ (offered by the competitor) is £250,000. The question now for all parties is: is the transfer price fair? 2 The brothers agree with their father Iain the £250,000 is fair or they if they do not an expert would be appointed to ascertain the fair price in accordance with article 36.8–36.12. In our example the brothers agree £250,000 is the fair value. 3 Article 36.8 provides pre-emption provisions for the existing shareholders to purchase the shares at the fair value. In practice the seller will stipulate that all his shares most be bought for the sale to proceed (article 36.8.2).The transfer notice allows the two brothers to apply to purchase all the shares or in some proportion. The key here is that no sale shares go unallocated. 4 Article 36.9 confirms if any minimum transfer condition has been met. On the assumption it’s not applicable the sale shares are allocated in accordance (article 36.12). Article 36.14 provides a ‘catch all’ provision that if there are a small number of shares unallocated or for example one of the brothers died in the sale shares process the company could have the option to buy the shares to complete the sale. Private companies purchasing their own share is restricted by the Companies Act 2006. The brothers at this stage have now agreed to purchase 15% each of their father’s 30% stake at the fair price of £250,000. 5 Article 36.15 set out the completion procedure. Article 36.21 appoints an agent if the seller fails to transfer any shares. In our example if the father (or his representative) failed to attend the registered office in accordance with article 36.18 and 36.19 then the brother would arrange a share transfer and complete in his absence. On the assumption (which would happen in practice) it would be handshakes all round, the £250,000 would be transferred to the father’s nominated account and the transfer forms would be duly stamped and the share purchase in favour of the two brothers completed.

Article 37 Mandatory transfers in respect of leavers 37.1. Any shareholder who:1 1. dies; 2. has a bankruptcy order made against him;

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3. ceases to be an employee; or 4. the transmittee of any shareholder appointed

(together a ‘leaving event’),

37.2. shall be deemed a ‘good leaver’ unless the directors decide at their discretion otherwise. 37.3. Any ‘good leaver’ (or in the case of death his personal representatives or transmittee) shall notify the company directors in writing of the circumstances. 37.4. A ‘good leaver’ of the company shall be deemed to have served a transfer notice and his shareholding shall be dealt with (unless the directors resolve otherwise) in accordance of the provisions of article 36. 37.5. For the affordance of doubt his shareholding shall be valued at the fair price in accordance with the provisions of article 36.6. Commentary 1 Article 37 outlines when the company would pay the fair price for any shares on a ‘leaving event’. Typically when a shareholder dies his shares will devolve by his will or the rules of intestacy – section 771(1)(b) of the Companies Act 2006 allows the company notice of refusal to register a transfer, together with a reason for refusal. However section 771)(5)(b) stipulates that section 771 does not apply in relation to the transmission of shares by the operation of law. Case example: Conor Auto Ltd is owned by two directors with no employees – Peter and Ben – with an equal 50/50 shareholding. The company was incorporated in 2010 and adopted the model articles. In 2017 Peter died leaving a will (appointing his wife Janice as executor) which specified that his shares in Conor Auto Ltd valued at £450,000 should be settled into a business property relief trust for the benefit of his three children. As the quasi partnership did not plan for such an eventuality, Peter now finds himself with three new partners all aged under 18 whom have no interest in the business and will not contribute to the success of the company. They will still retain rights to vote, dividends and winding up. Peter’s option is to try and purchase the shares. As it is unlikely the company will have sufficient cash available, he may resort to borrowing if the company can sustain the repayments and the lender will lend. See Cross-Option Agreement in the joint venture articles for an explanation on overcoming the problem of raising capital to buy-back shareholding from deceased shareholders.

Article 38 Cross option agreement1 38.1. On the death of any shareholder who is party to any ‘cross option agreement’ his shares may be dealt with (if any party invokes their right to buy or sell) in accordance with that agreement and the provisions of articles 36 and 37 shall not apply. 38.2. Nothing in these articles shall form a binding contract for sale in accordance with section 113 of the Inheritance Tax Act 1984. 38.3. For the avoidance of doubt (on the death of shareholder subject to the ‘cross option agreement’) the provisions of this article (38) shall prevail over any contrary provisions of these articles.

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Commentary 1 Article 38 provisions stipulate if the shareholders have used an external cross-option agreement to purchase shareholding on death then that agreement will prevail over these articles.

Article 39 Bad leavers1 39.1. Any person who ceases to be an employee for reasons other than: 1. on his death; 2. bankruptcy; 3. wrongful dismissal; 4. permanent disability or incapacity through ill health; or 5. retirement at normal retirement age;

(shall be deemed a ‘bad leaver).

39.2. A ‘bad leaver’ of the company shall be deemed to have immediately served a transfer notice (a ‘mandatory transfer notice’) and his shareholding ‘leaver’s shares’ shall be dealt with (unless the directors resolve otherwise) in accordance with the following provisions. 39.3. The sale price for the leaver’s shares shall be: 1. the lower of the issue price and the fair price. 39.4. [If the parties agree the sale price shall be the issue price then paragraphs 39.5–39.8 shall not apply to these articles.] [The bad leaver and the company shall agree the issue price and fair price.] 39.5. If the parties fail to agree a ‘fair price’ within 7 business days of the company receiving the mandatory transfer notice the company will immediately appoint the ‘expert’ to determine the fair price for the ‘leaver’s shares’. 39.6. The expert will be a firm of chartered accountants nominated by the ‘leaver’ and the company. 39.7. The ‘expert’ shall certify the ‘fair price’ as soon as possible and will without evidence of inaccuracy or fault be final and binding on the ‘leaver’ and the company. 39.8. The cost of obtaining the ‘fair price’ will be divided equally by the ‘seller’ and the company unless the directors decide otherwise. Commentary 1 Article 39 outlines the sale price for the shares of a bad leaver. It should be noted the fair price must be calculated and agreed as failure to do so is a breach of contract. Paragraph 39.4 can be tailored to agree the sale price equates to the issue price, the relevant issue price should be included in the articles.

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Article 40 Drag along provisions1 40.1. If shareholders of [40%] of the ordinary shares (the ‘shareholder majority’) wish to transfer all interest in their shares to a third party purchaser (‘the purchaser’) at arm’s length they will have the option (‘drag option’) to require the remaining holders of any ordinary shares (the ‘dragged shareholders’) to transfer their shares to the ‘purchaser’ in accordance with this article. 40.2. The drag option shall be exercised by the shareholder majority by written notice (the ‘drag notice’). It shall specify the: 1. identity of the ‘purchaser’; 2. proposed date for completion (which shall not be less than 14 days after the drag notice); 3. price (‘drag price’) for any dragged shareholders’ ordinary shares. 4. dragged shareholders are required to transfer their ordinary shares in accordance with these articles. 40.3. The ‘drag notice’ shall be irrevocable but will lapse if there is not a sale by the shareholder majority within 90 days of the drag notice being issued. 40.4. The ‘shareholder majority’ shall be entitled to serve further drag notices in accordance with article 40.2. 40.5. Any routine transfer notice (that may have been served in accordance with these articles) in respect of any shares shall automatically be revoked by the service of a drag notice. 40.6. The ‘drag price’ shall be equal to the price per ordinary share (in cash or otherwise) receivable by the ‘shareholder majority’. For the avoidance of doubt if any disputes arise in the calculation of the drag price then: 40.7. the company will immediately appoint the ‘expert’ to determine the fair price for the ‘sale shares’. 40.8. The expert will be a firm of chartered accountants nominated by the ‘dragged shareholders’ and the company. 40.9. The ‘expert’ shall certify the ‘fair price’ as soon as possible and will without evidence of mistake or fault be final and binding on the ‘dragged shareholders’. 40.10. The cost of obtaining the ‘fair price’ (unless the directors decide otherwise) will be financed by the company. 40.11. Within five days of the ‘drag price’ being agreed in accordance with article 40.6 the company shall issue each dragged shareholder a

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‘dragged completion notice’ which specifies they shall deliver on the ‘drag completion date’: 1. executed stock transfer forms in favour of the purchaser; 2. share certificated or an indemnity for any lost or defaced share certificates; 3. any other executed agreement as specified by the company

(together the ‘drag documents’).

40.12. On the drag completion date: 1. Unless otherwise agreed by the directors the completion of the transfer of shares shall be at the company’s registered office. 2. Unless otherwise agreed, the transfer and payment of the shares held by the ‘shareholder majority’ and the ‘dragged shareholders’ shall take place on the same day. 3. If a ‘dragged shareholder’ fails to deliver any ‘drag document’ the company is authorised to appoint any person as an agent of that ‘dragged shareholder’ to execute any transfer forms (or any other dragged document) as necessary to execute the share transfer to the ‘purchaser’. 4. For the avoidance of doubt (and subject to any provisions in the Companies Act 2006) the provisions of this article 40 shall prevail over any conflicting provisions of these articles. Commentary 1 Article 40 provides the procedure to execute the drag along share purchase. The shareholder majority (article 40.1) would require careful consideration to ensure the percentage is set at the correct level to drag the minority along.

Article 41 Transmission of shares1 41.1. If title to a share passes to a transmittee, the company may only recognise the transmittee as having any title to that share. 41.2. Subject to other provisions of these articles and in accordance with article 41.1: 1. They may choose either to become the holder of those shares or to have them transferred to another person. 2. Subject to article 41.3 and pending any transfer of the shares to another person the transmittee may exercise any share rights as they see fit.

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41.3. The transmittees shall not have the right to: 1. attend or vote at a general meeting; or 2. agree to a proposed written resolution in respect of shares to which they are entitled by reason of the holder’s death or bankruptcy or otherwise unless they become the holders of those shares.

Article 42 Exercise of transmittees’ rights1 42.1. Transmittees who wish to become the holders of shares to which they have become entitled must notify the company in writing. 42.2. If the transmittee wishes to have a share transferred to another person, the transmittee must execute an instrument of transfer in respect of it. 42.3. Any transfer made or executed under this article is to be treated as if it were made or executed by the person from whom the transmittee has derived rights in respect of the share, and as if the event which gave rise to the transmission had not occurred.

Article 43 Transmittees bound by prior notices1 If a notice is given to a shareholder in respect of shares and a transmittee is entitled to those shares, the transmittee is bound by the notice if it was given to the shareholder before the transmittee’s name has been entered in the register of members. Commentary 1 Articles 41, 42 and 43 are adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares. Article 41 is drafted to include article 41.2 which for the transmittee would mean the company would pay the fair price for the deceased shares and not transfer them.

Article 44 Procedure for declaring dividends1 44.1. The company may by ordinary resolution declare dividends. 44.2. The directors may decide to pay interim dividends: 1. A dividend must not be declared unless the directors have made a recommendation to its amount. 2. Any dividend must not exceed the amount recommended by the directors in accordance with article 44.2.1. 3. No dividend may be declared or paid unless it is in accordance with shareholders’ respective rights. 290

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44.3. Unless the shareholders’ resolution to declare or directors’ decision to pay a dividend, or the terms on which shares are issued, specify otherwise, it must be paid by reference to each shareholder’s holding of shares on the date of the resolution or decision to declare or pay it. 44.4. If the company’s share capital is divided into different classes, no interim dividend may be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrear. 44.5. The directors may pay at intervals any dividend payable at a fixed rate if it appears to them that the profits available for distribution justify the payment. 44.6. If the directors act in good faith, they do not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on shares with deferred or non-preferred rights. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 45 Payment of dividends and other distributions1 45.1. Where a dividend or other sum which is a distribution is payable in respect of a share, it shall be paid by transfer to a bank or building society account specified by the relevant ‘distribution recipient’ or any other means of payment as the directors agree with the distribution recipient either in writing or by such other means as the directors decide. 45.2. In this article the ‘distribution recipient’ means, in respect of a share in respect of which a dividend or other sum is payable: 1. the holder of the share; 2. if the share has two or more joint holders, whichever of them is named first in the register of members; 3. if the holder is no longer entitled to the share by reason of death or bankruptcy, or otherwise by operation of law, the transmittee. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 46 No interest on distributions1 46.1. The company may not pay interest on any dividend or other sum payable in respect of a share unless otherwise provided by: 1. the terms on which the share was issued; or 291

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2. the provisions of another agreement between the holder of that share and the company. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 47 Unclaimed distributions1 47.1. All dividends or other sums which are payable in respect of shares, and unclaimed after having been declared or become payable: 1. may be invested or otherwise made use of by the directors for the benefit of the company until claimed. 47.2. The payment of any such dividend or other sum into a separate account does not make the company a trustee in respect of it. 47.3. If 12 years have passed from the date on which a dividend or other sum became due for payment, and the distribution recipient has not claimed it, the distribution recipient is no longer entitled to that dividend or other sum and it ceases to remain owing by the company. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 48 Non-cash distributions1 48.1. Subject to the terms of issue of the share in question, the company may, by ordinary resolution on the recommendation of the directors, decide to pay all or part of a dividend or other distribution payable in respect of a share by transferring non-cash assets of equivalent value (including, without limitation, shares or other securities in any company). 48.2. For the purposes of paying a non-cash distribution, the directors may make whatever arrangements they think fit, including, where any difficulty arises regarding the distribution: 1. fixing the value of any assets; 2. paying cash to any distribution recipient on the basis of that value in order to adjust the rights of recipients; and 3. vesting any assets in trustees. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 49 Waiver of distributions1 49.1. Distribution recipients may waive their entitlement to a dividend or other distribution payable in respect of a share by giving the company notice in writing to that effect. 49.2. If the share has more than one holder or more than one person is entitled to the share whether by reason of the death or bankruptcy of one or more joint holders or otherwise the notice is not effective unless it is expressed to be given, and signed by all the holders or persons otherwise entitled to the share. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 50 Authority to capitalise and appropriation of capitalised sums1 50.1. Subject to these articles, the directors may, if they are so authorised by an ordinary resolution: 1. decide to capitalise any profits of the company (whether or not they are available for distribution) which are not required for paying a preferential dividend, or any sum standing to the credit of the company’s share premium account or capital redemption reserve; and 2. appropriate any sum which they so decide to capitalise (a ‘capitalised sum’) to the persons who would have been entitled to it if it were distributed by way of dividend (the ‘persons entitled’) and in the same proportions. 50.2. Capitalised sums must be applied: 1. on behalf of the persons entitled; and 2. in the same proportions as a dividend would have been distributed to them. 50.3. Any capitalised sum may be applied in paying up new shares of a nominal amount equal to the capitalised sum which are then allotted as fully paid to the persons entitled or as they may direct. 50.4. A capitalised sum which was appropriated from profits available for distribution may be applied in paying up new debentures of the company which are then allotted as fully paid to the persons entitled or as they may direct.

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50.5. Subject to the articles the directors may: 1. apply capitalised sums in accordance with paragraphs 50.3 and 50.4 partly in one way and partly in another; 2. make such arrangements as they think fit to deal with shares or debentures becoming distributable in fractions under this article (including the issuing of fractional certificates or the making of cash payments); and 3. authorise any person to enter into an agreement with the company on behalf of all the persons entitled which is binding on them in respect of the allotment of shares and debentures to them under this article. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 51 Attendance and speaking at general meetings1 51.1. A person is able to exercise the right to speak at a general meeting when that person is in a position to communicate to all those attending the meeting, during the meeting, any information or opinions which that person has on the business of the meeting. 51.2. A person is able to exercise the right to vote at a general meeting when: 1. that person is able to vote, during the meeting, on resolutions put to the vote at the meeting; and 2. that person’s vote can be taken into account in determining whether or not such resolutions are passed at the same time as the votes of all the other persons attending the meeting. 51.3. The directors may make whatever arrangements they consider appropriate to enable those attending a general meeting to exercise their rights to speak or vote at it. 51.4. In determining attendance at a general meeting, it is immaterial whether any two or more members attending it are in the same place as each other. 51.5. Two or more persons who are not in the same place as each other attend a general meeting if their circumstances are such that if they have (or were to have) rights to speak and vote at that meeting, they are (or would be) able to exercise them. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 52 Quorum for general meetings1 52.1. No business other than the appointment of the chairman of the meeting is to be transacted at a general meeting if the persons attending it do not constitute a quorum. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 53 Chairing general meetings1 53.1. If the directors have appointed a chairman, the chairman shall chair general meetings if present and willing to do so. 53.2. If the directors have not appointed a chairman, or if the chairman is unwilling to chair the meeting or is not present within ten minutes of the time at which a meeting was due to start, the directors present, or (if no directors are present), the meeting: 1. must appoint a director or shareholder to chair the meeting, and the appointment of the chairman of the meeting must be the first business of the meeting. 53.3. The person chairing a meeting in accordance with this article is referred to as ‘the chairman of the meeting’. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 54 Attendance and speaking by directors and non-shareholders1 54.1. Directors may attend and speak at general meetings, whether or not they are shareholders. 54.2. The chairman of the meeting may permit other persons who are not shareholders of the company to exercise the rights of shareholders in relation to general meetings, to attend and speak at a general meeting. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 55 Adjournment1 55.1. If the persons attending a general meeting within half an hour of the time at which the meeting was due to start do not constitute a quorum, 295

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or if during a meeting a quorum ceases to be present, the chairman of the meeting must adjourn it. 55.2. The chairman of the meeting may adjourn a general meeting at which a quorum is present if: 1. the meeting consents to an adjournment; or 2. it appears to the chairman of the meeting that an adjournment is necessary to protect the safety of any person attending the meeting or ensure that the business of the meeting is conducted in an orderly manner. 55.3. The chairman of the meeting must adjourn a general meeting if directed to do so by the meeting. 55.4. When adjourning a general meeting, the chairman of the meeting must: 1. either specify the time and place to which it is adjourned or state that it is to continue at a time and place to be fixed by the directors; and 2. have regard to any directions as to the time and place of any adjournment which have been given by the meeting. 55.5. If the continuation of an adjourned meeting is to take place more than 14 days after it was adjourned, the company must give at least 7 clear days’ notice of it (that is, excluding the day of the adjourned meeting and the day on which the notice is given): 1. to the same persons to whom notice of the company’s general meetings is required to be given, and containing the same information which such notice is required to contain. 55.6. No business may be transacted at an adjourned general meeting which could not properly have been transacted at the meeting if the adjournment had not taken place. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 56 Voting: general1 56.1. A resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is duly demanded in accordance with the articles. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 57 Errors and disputes1 57.1. No objection may be raised to the qualification of any person voting at a general meeting except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting is valid. 57.2. Any such objection must be referred to the chairman of the meeting, whose decision is final. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 58 Poll votes1 58.1. A poll on a resolution may be demanded in advance of the general meeting where it is to be put to the vote, or at a general meeting, either before a show of hands on that resolution or immediately after the result of a show of hands on that resolution is declared. 58.2. A poll may be demanded by: 1. the chairman of the meeting; 2. the directors; 3. two or more persons having the right to vote on the resolution; or 4. a person or persons representing not less than one tenth of the total voting rights of all the shareholders having the right to vote on the resolution. 58.3. A demand for a poll may be withdrawn if: 1. the poll has not yet been taken; and 2. the chairman of the meeting consents to the withdrawal. 58.4. Polls must be taken immediately and in such manner as the chairman of the meeting directs. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 59 Content of proxy notices1 59.1. Proxies may only validly be appointed by a notice in writing (a ‘proxy notice’). The proxy notice shall: 1. state the name and address of the member appointing the proxy;

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2. identify the person appointed to be that member’s proxy; 3. state the general meeting in relation to which that person is appointed; 4. be signed by or on behalf of the member appointing the proxy, or be authenticated in such manner as the directors may determine; 5. be delivered to the company in accordance with the articles and any instructions contained in the notice of the general meeting to which they relate. 59.2. The company may require proxy notices to be delivered in a particular form, and may specify different forms for different purposes. 59.3. Proxy notices may specify how the proxy appointed under them is to vote (or that the proxy is to abstain from voting) on one or more resolutions. 59.4. Unless a proxy notice indicates otherwise it shall be treated as: 1. allowing the person appointed under it as a proxy discretion as to how to vote on any ancillary or procedural resolutions put to the meeting, and appointing that person as a proxy in relation to any adjournment of the general meeting to which it relates as well as the meeting itself. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 60 Delivery of proxy notices1 60.1. A person who is entitled to attend, speak or vote (either on a show of hands or on a poll) at a general meeting remains so entitled in respect of that meeting or any adjournment of it, even though a valid proxy notice has been delivered to the company by or on behalf of that person. 60.2. An appointment under a proxy notice may be revoked by delivering to the company a notice in writing given by or on behalf of the person by whom or on whose behalf the proxy notice was given. 60.3. A notice revoking a proxy appointment only takes effect if it is delivered before the start of the meeting or adjourned meeting to which it relates. 60.4. If a proxy notice is not executed by the person appointing the proxy, it must be accompanied by written evidence of the authority of the person who executed it to execute it on the appointor’s behalf. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 61 Amendments to resolutions1 61.1. An ordinary resolution to be proposed at a general meeting may be amended by ordinary resolution if: 1. notice of the proposed amendment is given to the company in writing by a person entitled to vote at the general meeting at which it is to be proposed not less than 48 hours before the meeting is to take place (or such later time as the chairman of the meeting may determine); 2. the proposed amendment does not, in the reasonable opinion of the chairman of the meeting, materially alter the scope of the resolution. 61.2. A special resolution to be proposed at a general meeting may be amended by ordinary resolution if: 1. the chairman of the meeting proposes the amendment at the general meeting at which the resolution is to be proposed; and 2. the amendment does not go beyond what is necessary to correct a grammatical or other non-substantive error in the resolution. 61.3. If the chairman of the meeting, acting in good faith, wrongly decides that an amendment to a resolution is out of order, the chairman’s error does not invalidate the vote on that resolution. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 62 Means of communication to be used1 62.1. Subject to the articles, anything sent or supplied by or to the company under the articles may be sent or supplied in any way in which the Companies Act 2006 provides for documents or information which are authorised or required by any provision of that Act to be sent or supplied by or to the company. 62.2. Subject to the articles, any notice or document to be sent or supplied to a director in connection with the taking of decisions by directors may also be sent or supplied by the means by which that director has asked to be sent or supplied with such notices or documents for the time being. 62.3. A director may agree with the company that notices or documents sent to that director in a particular way are to be deemed to have been received within a specified time of their being sent, and for the specified time to be less than 48 hours.

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Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 63 Company seals1 63.1. Any common seal may only be used by the authority of the directors. The directors may decide by what means and in what form any common seal is to be used. 63.2. Unless otherwise decided by the directors, if the company has a common seal and it is affixed to a document, the document must also be signed by at least one authorised person in the presence of a witness who attests the signature. 63.3. For the purposes of this article an authorised person is: 1. any director of the company; 2. any person authorised by the directors for the purpose of signing documents to which the common seal is applied. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 64 Indemnity1 64.1. Subject to paragraph 64.2 only in relation to the club any relevant director may be indemnified out of the club’s resources against any liability incurred by that director in connection with any: 1. negligence; 2. default; 3. breach of duty; 4. breach of trust 5. [liability incurred by that director in connection with the activities of the club in its capacity as a trustee of an occupational pension scheme (as defined in section 235(6) of the Companies Act 2006)]; 6. liability incurred by that director as an officer of the club. 64.2. This article does not authorise any indemnity which would be prohibited or rendered void by any provision of the Companies Acts or by any other provision of law. 64.3. The directors may decide to purchase and maintain insurance, at the expense of the company, for the benefit of any relevant director in respect of any relevant loss. 300

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64.4. In this article ‘relevant director’ means any director or former director of the club. A ‘relevant loss’ means any loss or liability which has been or may be incurred by a relevant director in connection with that director’s duties or powers in relation to the club or any pension fund or employees’ share scheme. Commentary 1 Adapted from the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Precedent 2: Sports Club Articles of Association The following precedent is designed around the Schedule 2 Regulation  3 model articles for private companies limited by guarantee. As the company has no shares the articles are shorter and more concise. It should be noted regulation 3 model articles are not suitable for charities.The charity commission provides its own criteria for articles of association. Limited guarantee companies are broadly: ●●

Charities.

●●

Associations.

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Membership organisations.

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Property companies (right to manage).

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Political organisations.

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Sports and social clubs.

●●

Non-profit organisations.

BUPA the health care company is one of the largest companies limited by guarantee. The precedent that follows is centred on a sport or membership club.

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Articles of Association Company Number: [NUMBER] THE COMPANIES ACT 2006 PRIVATE COMPANY LIMITED BY GAURANTEE ARTICLES OF ASSOCIATION OF [NAME] LIMITED [(Adopted by Special Resolution passed on [DATE])]

Article 1 Defined terms In the articles, unless the context requires otherwise— ‘articles’ means the company’s articles of association; ‘bankruptcy’ includes individual insolvency proceedings in a jurisdiction other than England and Wales or Northern Ireland which have an effect similar to that of bankruptcy; ‘chairman’ has the meaning given in article 12; ‘chairman of the meeting’ has the meaning given in article 25; ‘Companies Acts’ means the Companies Acts (as defined in section 2 of the Companies Act 2006), in so far as they apply to the company; ‘director’ means a director of the company, and includes any person occupying the position of director, by whatever name called; ‘document’ includes, unless otherwise specified, any document sent or supplied in electronic form; ‘electronic form’ has the meaning given in section 1168 of the Companies Act 2006; ‘member’ has the meaning given in section 112 of the Companies Act 2006; ‘ordinary resolution’ has the meaning given in section 282 of the Companies Act 2006; ‘participate’, in relation to a directors’ meeting, has the meaning given in article 10; ‘proxy notice’ has the meaning given in article 31; ‘special resolution’ has the meaning given in section 283 of the Companies Act 2006;

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‘subsidiary’ has the meaning given in section 1159 of the Companies Act 2006; and ‘writing’ means the representation or reproduction of words, symbols or other information in a visible form by any method or combination of methods, whether sent or supplied in electronic form or otherwise. 1.1. Unless the context otherwise requires, other words or expressions contained in these articles bear the same meaning as in the Companies Act 2006 as in force on the date when these articles become binding on the company. 1.2. Unless the context otherwise requires, other words or expressions contained in these articles bear the same meaning as in the 2006 Act. 1.3. Words importing the singular number shall include the plural number and vice versa. Words importing the masculine gender only shall include the feminine gender.Words importing persons shall include corporations. 1.4. Neither the model articles for private companies limited by shares prescribed pursuant to the 2006 Act, nor any other articles of association (whether prescribed pursuant to the 2006 Act or set out in any other statute, statutory instrument or other subordinate legislation concerning companies) shall apply to the Company.1 1.5. No right to inspect accounts and other records. Except as provided by law or authorised by the Board by ordinary resolution of no member of the club is entitled to request or inspect any: 1.

accounting records

2.

board documents

3.

membership information2

1.6 [The directors may decide to make provision for the benefit of persons employed or formerly employed by the club or any of its subsidiaries (other than a director or former director or shadow director) in connection with the cessation or transfer to any person of the whole or part of the undertaking of the company or that subsidiary.] Commentary 1 1.4 removes Schedule 2 Regulation 3 model articles for private companies limited by guarantee. 2 1.5 adapts article 36 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee to include membership information specifically.

Article 2 Objects1 2.1. To promote the sport of [cycling] in the local community.

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2.2. To develop and promote the benefits of [playing cricket or the charity aim]. 2.3. To develop and obtain funding for the club. 2.4. The charity’s objects (‘objects’) are specifically restricted to the following: 1.

To carry out the powers, obligations, duties and general objects of the present unincorporated association known as Bournemouth Rugby Football Club.

2.

To maintain the club premises at [address].

3.

[To comply with the rules and regulations of any affiliated body.]

4.

To support the [club] and do such things to help the interests of the [club].

Commentary 1

The objects clause in a company’s constitution outlines the purpose and range of activities the company is able to undertake. The articles for private companies limited by guarantee, incorporated under the Companies Act 2006 are not required to include objects, however it is good practice to include them and restrict the company to only furthering the objects agreed in article 2. The examples may be adapted to suit the requirements of the company.

Article 3 Powers1 3.1. The club shall have the power to: 1.

take any lawful action consistent with advancing the club’s objects;

2.

apply all profits, income and property towards the club’s objects;

3.

buy, lease or hire or acquire legally any property or equipment;

4.

dispose of assets of the club as it sees fit;

5.

borrow money on a commercial basis under a legal contract.

Commentary 1

The Schedule 2 Regulation 3 model articles for private companies limited by guarantee do not state the company’s power – again it is good practice and a useful reminder for the board and directors of their powers and any restrictions.

Article 4 Liability of members1 4.1. The liability of each member is limited to £1, being the amount that each member undertakes to contribute to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member, for: 1.

payment of the company’s debts and liabilities contracted before he ceases to be a member; 306

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2.

payment of the costs, charges and expenses of winding up, and adjustment of the rights of the contributories among themselves.

Commentary 1 Adapted from article 2 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 5 Directors’ general authority1 5.1. Subject to these articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company. Commentary 1 Adapted from article 3 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 6 Members’ reserve power1 6.1. The members may, by special resolution, direct the directors to take, or refrain from taking, specified action. 6.2. No such special resolution invalidates anything which the directors have done before the passing of the resolution. Commentary 1 Adapted from article 4 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 7 Directors may delegate1 7.1. Subject to the articles, the directors may delegate any of the powers which are conferred on them under the articles: 1.

to such person or committee;

2.

by such means (including by power of attorney);

3.

on such terms and conditions as they think fit.

7.2. If the directors so specify, any such delegation may authorise further delegation of the directors’ powers by any person to whom they are delegated. 7.3. The directors may revoke any delegation as they see fit at any time in whole or part, or alter its terms and conditions. Commentary 1 Adapted from article 5 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

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Article 8 Committees1 8.1. Committees to which the directors delegate any of their powers must follow procedures which are based as far as they are applicable on those provisions of the articles which govern the taking of decisions by directors. 8.2. The directors may make rules of procedure for all or any committees, which prevail over rules derived from the articles if they are not consistent with them. Commentary 1 Adapted from article 6 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 9 Directors to take decisions collectively1 9.1. The general rule about decision-making by directors is that any decision of the directors must be either a majority decision at a meeting or a unanimous decision taken in accordance with article 10. Commentary 1 Adapted from article 7 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 10 Unanimous decisions1 10.1. A decision of the directors is taken in accordance with this article when all eligible directors indicate to each other by any means that they share a common view on a matter. 10.2. Such a decision may take the form of a resolution in writing, copies of which have been signed by each eligible director or to which each eligible director has otherwise indicated agreement in writing. 10.3. References in this article to eligible directors are to directors who would have been entitled to vote on the matter had it been proposed as a resolution at a directors’ meeting. 10.4. A decision may not be taken in accordance with this article if the eligible directors would not have formed a quorum at such a meeting. Commentary 1 Adapted from article 8 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

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Article 11 Calling a directors’ meeting1 11.1. Any director may call a directors’ meeting by giving notice of the meeting to the directors. 11.2. Notice of any directors’ meeting must indicate: 1. its proposed date and time; 2. where it is to take place; 3. if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting. 11.3. Notice of a directors’ meeting must be given to each director, but need not be in writing. 11.4. Notice of a directors’ meeting need not be given to directors who waive their entitlement to notice of that meeting, by giving notice to that effect to the company not more than 7 days after the date on which the meeting is held. Where such notice is given after the meeting has been held, that does not affect the validity of the meeting, or of any business conducted at it. Commentary 1 Adapted from article 9 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 12 Participation in directors’ meetings1 12.1. Subject to the articles, directors participate in a directors’ meeting, or part of a directors’ meeting, when: 12.2. 1. the meeting has been called and takes place in accordance with the articles; and 2. they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting. 12.3. In determining whether directors are participating in a directors’ meeting, it is irrelevant where any director is or how they communicate with each other. 12.4. If all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as taking place wherever any of them is.

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Commentary 1 Adapted from article 10 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 13 Quorum for directors’ meetings1 13.1. At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. 13.2. The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two. 13.3. If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision to appoint further directors or to call a general meeting so as to enable the members to appoint further directors. Commentary 1 Adapted from article 11 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 14 Chairing of directors’ meetings1 14.1. The directors may appoint a director to chair their meetings. 14.2. The person so appointed for the time being is known as the chairman. 14.3. The directors may terminate the chairman’s appointment at any time. 14.4. If the chairman is not participating in a directors’ meeting within ten minutes of the time at which it was to start, the participating directors must appoint one of themselves to chair it. Commentary 1 Adapted from article 12 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 15 Casting vote1 15.1. If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting vote. 15.2. But this does not apply if, in accordance with the articles, the chairman or other director is not to be counted as participating in the decisionmaking process for quorum or voting purposes.

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15.3. [The chairman or other director chairing the meeting shall not hold a casting vote.] Commentary 1 Adapted from article 13 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee. The chairman’s casting vote may be removed (optional).

Article 16 Records of decisions to be kept1 16.1. The directors must ensure that the company keeps a record in writing for at least 10 years from the date of the decision recorded of every unanimous or majority decision taken by the directors. Commentary 1 Adapted from article 15 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 17 Directors’ discretion to make further rules1 17.1. Subject to the articles, the directors may make any rule which they think fit about: 1. how they take decisions; and 2. how such rules are to be recorded or communicated to directors. Commentary 1 Adapted from article 16 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 18 Methods of appointing directors1 18.1. Any person who is willing to act as a director, and is permitted by law to do so, may be appointed to be a director by ordinary resolution or by a decision of the directors. 18.2. In any case where, as a result of death, the company has no members and no directors, the personal representatives of the last member to have died have the right, by notice in writing, to appoint a person to be a director. 18.3. For the purposes of paragraph 18.2, where two or more members die in circumstances rendering it uncertain who was the last to die, a younger member is deemed to have survived an older member. Commentary 1 Adapted from article 17 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

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Article 19 Termination of director’s appointment1 19.1. A person ceases to be a director as soon as that person ceases to be a director by virtue of any provision of the Companies Act 2006 or is prohibited from being a director by law if: 1. a bankruptcy order is made against that person; 2. a composition is made with that person’s creditors generally in satisfaction of that person’s debts; 3. a registered medical practitioner who is treating that person gives a written opinion to the company stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months; 4. notification is received by the company from the director that the director is resigning from office, and such resignation has taken effect in accordance with its terms. Commentary 1 Adapted from article 18 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 20 Directors’ remuneration1 20.1. No director shall be entitled to be remunerated for any services as director or to the company. Commentary 1 Adapted from article 19 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee. Assumes any director will not be remunerated. If this is not the case article 19 should be reinstated.

Article 21 Directors’ expenses1 21.1. [The company shall not pay expenses to any director in connection with their attendance at: 1. meetings of directors; 2. committees of directors; 3. general meetings; or 4. otherwise in connection with the exercise of their powers and the discharge of their responsibilities in relation to the company.]

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21.2. The company may pay any reasonable expenses which the directors properly incur in connection with their attendance at: 21.3. 1. meetings of directors; 2. committees of directors; 3. general meetings; or 4. otherwise in connection with the exercise of their powers and the discharge of their responsibilities in relation to the company. Commentary 1 Paragraph 21.1 states that no director shall claim expenses for meetings (optional). Paragraph 21.1 is adapted from article 20 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee – and allows the payment of expenses.

Article 22 Chairman1 22.1. At the annual general meeting each year a chairman will be elected in accordance with article 23. The term of chairman shall be for [enter years] years ‘board term’. The chairman will have full voting rights subject to these articles. 22.2. A chairman shall not be eligible for reelection after the ‘board term’ for a period of [enter years] years. 22.3. The board, on the appointment of a chairman in accordance with article 23 shall, 14 days after the date of the AGM, appoint or revoke any ‘board position’ by ordinary resolution from time to time as they see fit. For the avoidance of doubt ‘board position’ means: 1. vice-chairman; 2. secretary; 3. treasurer. Commentary 1 Allows for nominations of a chairman who must have been a member for at least 5 years.

Article 23 Chairman elections1 23.1. A voting member of the club may nominate another member ‘nominee’ for any board position. 23.2. Nominations shall be made by the ‘nominee form’ authorised by the board from time to time.

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23.3. The board shall provide nominee forms to voting members at least [14] days prior to the agreed date of the annual general meeting. 23.4. Nominee forms shall be returned to the board [5] days prior to the ‘AGM’. 23.5. A nominee shall be a voting member of the club in good standing with a least [2] years continuous membership of the club. 23.6. If the board shall receive only one nomination then he shall be appointed without election or the matter shall be put to the board for election at the ‘AGM’ on terms the directors agree. Commentary 1 Article 23 provides a procedure for the election of a chairman.

Article 24 Membership1 24.1. No person shall become a member of the company unless: 1. that person has completed an application for membership in a form approved by the directors; and 2. the directors have approved the application. 24.2. The board may from time to time fix the levels of entrance fees and annual subscriptions to be paid by the different categories of members. 24.3. All members shall be subject to these articles and any other club rules authorised by the board. 24.4. Any member whose [annual fee – subscription] is [2] months in arrears shall be deemed to have resigned from the club. 24.5. Any person ceasing to be a member forfeits all rights in relation to and claims upon the club, its property and its funds and has no right to the return of any part of his subscription.

Article 25 Termination of membership1 25.1. A member may withdraw from membership of the company by giving 7 days’ notice to the company in writing. 25.2. Membership is not transferable. 25.3. A person’s membership terminates when that person dies or ceases to exist. 25.4. The board shall at their discretion request a member ‘leaver’ withdraw from membership immediately in writing ‘leaving notice’.

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25.5. The leaver shall within 14 days of the receiving the leaving notice inform the board in writing he requests a board or any committee to consider his position ‘leaver committee’. 25.6. The leaver may: 1. attend the club premises or any other venue the board sees fit on the date and time of the leaver committee; 2. not use any club facilities (other than disabled facilities) on the day of his attendance at the leaver committee without the express permission of a member of the leaver committee; 3. present his case in person or by written submission; 4. at the discretion of the board the leaver may be allowed to attend the meeting with a third party for the purpose of support only. 25.7. No third party present at the meeting may give verbal or written submission. 25.8. Any non-attendance at the leaver’s meeting without good reason will result in the leaver being deemed to have resigned from the club. 25.9. On the closing of the written or verbal submission the leaver committee shall vote on the matter: 1. if the vote is carried the leaver shall be deemed to have resigned from the club. 25.10. The leaver may within 14 days of the date of the leaver’s committee request in writing that an appeal be instigated and a full vote be put to a general meeting of the board. 25.11. For the avoidance of doubt the leaver shall have no rights to attend the general meeting or present any further written submissions. 25.12. The chairman or vice-chairman may prior to the general meeting request any further information he deems fit from the leaver or the leaving committee. Commentary 1 Articles 24 and 25 provide detailed procedures for members and the withdrawal of membership. This allows far more flexibility to the board to remove members who will then follow a procedure of appeals.

Article 26 Attendance and speaking at general meetings1 26.1. A person is able to exercise the right to speak at a general meeting when that person is in a position to communicate to all those attending the meeting, during the meeting, any information or opinions which that person has on the business of the meeting.

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26.2. A person is able to exercise the right to vote at a general meeting when: 1. that person is able to vote during the meeting, on resolutions put to the vote at the meeting, and 2. that person’s vote can be taken into account in determining whether or not such resolutions are passed at the same time as the votes of all the other persons attending the meeting. 26.3. The directors may make whatever arrangements they consider appropriate to enable those attending a general meeting to exercise their rights to speak or vote at it. 26.4. In determining attendance at a general meeting, it is immaterial whether any two or more members attending it are in the same place as each other. 26.5. Two or more persons who are not in the same place as each other attend a general meeting if their circumstances are such that if they have (or were to have) rights to speak and vote at that meeting, they are (or would be) able to exercise them. Commentary 1 Adapted from article 23 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 27 Quorum for general meetings1 27.1. No business other than the appointment of the chairman of the meeting is to be transacted at a general meeting if the persons attending it do not constitute a quorum. Commentary 1 Adapted from article 24 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 28 Chairing general meetings1 28.1. If the directors have appointed a chairman, the chairman shall chair general meetings if present and willing to do so. 28.2. If the directors have not appointed a chairman, or if the chairman is unwilling to chair the meeting or is not present within ten minutes of the time at which a meeting was due to start: 1. the directors present, or (if no directors are present), the meeting, must appoint a director or member to chair the meeting, and the appointment of the chairman of the meeting must be the first business of the meeting. 316

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28.3. The person chairing a meeting in accordance with this article is referred to as ‘the chairman of the meeting’. Commentary 1 Adapted from article 25 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 29 Attendance and speaking by directors and non-members1 29.1. Directors may attend and speak at general meetings, whether or not they are members. The chairman of the meeting may permit other persons who are not members of the company to attend and speak at a general meeting. Commentary 1 Adapted from article 26 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 30 Adjournment1 30.1. If the persons attending a general meeting within half an hour of the time at which the meeting was due to start do not constitute a quorum, or if during a meeting a quorum ceases to be present, the chairman of the meeting must adjourn it. 30.2. The chairman of the meeting may adjourn a general meeting at which a quorum is present if: 1. the meeting consents to an adjournment; or 2. it appears to the chairman of the meeting that an adjournment is necessary to protect the safety of any person attending the meeting or ensure that the business of the meeting is conducted in an orderly manner. 30.3. The chairman of the meeting must adjourn a general meeting if directed to do so by the meeting. 30.4. When adjourning a general meeting, the chairman of the meeting must: 1. either specify the time and place to which it is adjourned or state that it is to continue at a time and place to be fixed by the directors, and have regard to any directions as to the time and place of any adjournment which have been given by the meeting. 30.5. If the continuation of an adjourned meeting is to take place more than 14 days after it was adjourned, the company must give at least 7 clear days’ notice of it (that is, excluding the day of the adjourned meeting 317

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and the day on which the notice is given) to the same persons to whom notice of the company’s general meetings is required to be given and containing the same information which such notice is required to contain. 30.6. No business may be transacted at an adjourned general meeting which could not properly have been transacted at the meeting if the adjournment had not taken place. Commentary 1 Adapted from article 27 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 31 Voting: general1 31.1. A resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is duly demanded in accordance with the articles. Commentary 1 Adapted from article 28 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 32 Errors and disputes1 32.1. No objection may be raised to the qualification of any person voting at a general meeting except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting is valid. 32.2. Any such objection must be referred to the chairman of the meeting whose decision is final. Commentary 1 Adapted from article 29 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 33 Poll votes1 33.1. A poll on a resolution may be demanded: 1. in advance of the general meeting where it is to be put to the vote; or 2. at a general meeting, either before a show of hands on that resolution or immediately after the result of a show of hands on that resolution is declared. 318

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33.2. A poll may be demanded by: 1. the chairman of the meeting; 2. the directors; 3. two or more persons having the right to vote on the resolution; or 4. a person or persons representing not less than one tenth of the total voting rights of all the members having the right to vote on the resolution. 33.3. A demand for a poll may be withdrawn if: 1. the poll has not yet been taken; and 2. the chairman of the meeting consents to the withdrawal. 33.4. Polls must be taken immediately and in such manner as the chairman of the meeting directs. Commentary 1 Adapted from article 30 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 34 Content of proxy notices1 34.1. Proxies may only validly be appointed by a notice in writing (a ‘proxy notice’). The proxy notice shall: 1. state the name and address of the member appointing the proxy; 2. identify the person appointed to be that member’s proxy; 3. state the general meeting in relation to which that person is appointed; 4. be signed by or on behalf of the member appointing the proxy, or is authenticated in such manner as the directors may determine; 5. be delivered to the company in accordance with the articles and any instructions contained in the notice of the general meeting to which they relate. 34.2. The company may require proxy notices to be delivered in a particular form, and may specify different forms for different purposes. 34.3. Proxy notices may specify how the proxy appointed under them is to vote (or that the proxy is to abstain from voting) on one or more resolutions. 34.4. Unless a proxy notice indicates otherwise it shall be treated as: 1. allowing the person appointed under it as a proxy discretion as to how to vote on any ancillary or procedural resolutions put to the 319

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meeting, and appointing that person as a proxy in relation to any adjournment of the general meeting to which it relates as well as the meeting itself. Commentary 1 Adapted from article 31 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 35 Delivery of proxy notices1 35.1. A person who is entitled to attend, speak or vote (either on a show of hands or on a poll) at a general meeting remains so entitled in respect of that meeting or any adjournment of it, even though a valid proxy notice has been delivered to the company by or on behalf of that person. 35.2. An appointment under a proxy notice may be revoked by delivering to the company a notice in writing given by or on behalf of the person by whom or on whose behalf the proxy notice was given. 35.3. A notice revoking a proxy appointment only takes effect if it is delivered before the start of the meeting or adjourned meeting to which it relates. 35.4. If a proxy notice is not executed by the person appointing the proxy, it must be accompanied by written evidence of the authority of the person who executed it to execute it on the appointor’s behalf. Commentary 1 Adapted from article 32 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 36 Amendments to resolutions1 36.1. An ordinary resolution to be proposed at a general meeting may be amended by ordinary resolution if: 1. notice of the proposed amendment is given to the company in writing by a person entitled to vote at the general meeting at which it is to be proposed not less than 48 hours before the meeting is to take place (or such later time as the chairman of the meeting may determine); 2. the proposed amendment does not, in the reasonable opinion of the chairman of the meeting, materially alter the scope of the resolution. 36.2. A special resolution to be proposed at a general meeting may be amended by ordinary resolution if: 1. the chairman of the meeting proposes the amendment at the general meeting at which the resolution is to be proposed; and 320

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2. the amendment does not go beyond what is necessary to correct a grammatical or other non-substantive error in the resolution. 36.3. If the chairman of the meeting, acting in good faith, wrongly decides that an amendment to a resolution is out of order, the chairman’s error does not invalidate the vote on that resolution. Commentary 1 Adapted from article 33 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 37 Means of communication to be used1 37.1. Subject to the articles, anything sent or supplied by or to the company under the articles may be sent or supplied in any way in which the Companies Act 2006 provides for documents or information which are authorised or required by any provision of that Act to be sent or supplied by or to the company. 37.2. Subject to the articles, any notice or document to be sent or supplied to a director in connection with the taking of decisions by directors may also be sent or supplied by the means by which that director has asked to be sent or supplied with such notices or documents for the time being. 37.3. A director may agree with the company that notices or documents sent to that director in a particular way are to be deemed to have been received within a specified time of their being sent, and for the specified time to be less than 48 hours. Commentary 1 Adapted from article 34 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 38 Company seals1 38.1. Any common seal may only be used by the authority of the directors. The directors may decide by what means and in what form any common seal is to be used. 38.2. Unless otherwise decided by the directors, if the company has a common seal and it is affixed to a document, the document must also be signed by at least one authorised person in the presence of a witness who attests the signature. 38.3. For the purposes of this article an authorised person is: 1. any director of the company;

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2. any person authorised by the directors for the purpose of signing documents to which the common seal is applied. Commentary 1 Adapted from article 35 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

Article 39 Indemnity1 39.1. Subject to paragraph 39.2 only in relation to the club any relevant director may be indemnified out of the club’s resources against any liability incurred by that director in connection with any: 1. negligence; 2. default; 3. breach of duty; 4. breach of trust 5. [liability incurred by that director in connection with the activities of the club in its capacity as a trustee of an occupational pension scheme (as defined in section 235(6) of the Companies Act 2006)]; 6. liability incurred by that director as an officer of the club. 39.2. This article does not authorise any indemnity which would be prohibited or rendered void by any provision of the Companies Acts or by any other provision of law. 39.3. The directors may decide to purchase and maintain insurance, at the expense of the company, for the benefit of any relevant director in respect of any relevant loss. 39.4. In this article ‘relevant director’ means any director or former director of the club. A ‘relevant loss’ means any loss or liability which has been or may be incurred by a relevant director in connection with that director’s duties or powers in relation to the club or any pension fund or employees’ share scheme. Commentary 1 Adapted from articles 38 and 39 of the Schedule 2 Regulation 3 model articles for private companies limited by guarantee.

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Precedent 3: Joint Venture Company Articles of Association Typically limited companies that become successful may diversify their service or product range or form alliances with like-minded directors (in some cases competitors) of other companies (in some cases suppliers). Investing in a new venture with partners via the main holding company can be fraught especial if it is a family business. The directors involved may suggest using a new limited company with 50/50 share holdings to support the new venture. This precedent is broadly based on; precedent 1 ‘family business articles of association’ as the joint venture has two classes of shares. This creates a 50/50 company and the potential for deadlock. The joint venture articles include: ●●

A ‘deadlock precedent’ – as the company may at some point become deadlocked a precedent is included to allow the company to move forward without the possibility of liquidation.

●●

A ‘cross option precedent’ which provides cash (via a life policy) and a call and put option to buy-back shareholdings from a deceased personal representative. The precedent may be adapted for the family business precedent or any company articles of association. See Appendix for a full discussion on cross option agreements and a case study.

Assumptions ●●

The joint venture is 50/50.

●●

There are two classes of shares; A Class ordinary shares and B Class ordinary shares.

●●

Two (real people) who each hold the A and B Class shares (if the cross option agreement is included) in the precedent.

●●

The joint venture has no subsidiaries.

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Articles of Association Company Number: [NUMBER] THE COMPANIES ACT 2006 PRIVATE COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATION OF [NAME] LIMITED [(Adopted by Special Resolution passed on [DATE])]

Article 1 Defined terms 1.1. In the articles, unless the context requires otherwise— ‘articles’ means the company’s articles of association; ‘bankruptcy’ includes individual insolvency proceedings in a jurisdiction other than England and Wales or Northern Ireland which have an effect similar to that of bankruptcy; ‘chairman’ has the meaning given in article 12; ‘chairman of the meeting’ has the meaning given in article 39; ‘Companies Acts’ means the Companies Acts (as defined in section 2 of the Companies Act 2006), in so far as they apply to the company; ‘Class A’ is holders of Class A shares in the company; ‘Class B’ is holders of Class B shares in the company; ‘counter offer’ is a notice issued to the company accepting the deadlock option or offering to purchase the issuer’s shares at the stated fair value; ‘deadlock’ is where an ordinary or special resolution is proposed and not passed; ‘deal shares’ ‘deadlock option’ means a notice issued to the company to either sell or purchase shares at the ‘fair price’; ‘deadlock offer period’ is 7 days from issue of the deadlock option; ‘director’ means a director of the company, and includes any person occupying the position of director, by whatever name called; ‘discretionary trust deed’ means a trust deed executed on outset by the shareholder settlor in favour of the other shareholders;

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‘distribution recipient’ has the meaning given in article 31; ‘document’ includes, unless otherwise specified, any document sent or supplied in electronic form; ‘electronic form’ has the meaning given in section 1168 of the Companies Act 2006; ‘firm’ means [Company Limited] Company number [0000000]; ‘firm’s shareholders’ means all shareholders of the firm’ ‘fixed term’ means a term of years ending on the date of the shareholders state pension age; ‘fixed value’ means the fixed monetary value of the shareholders interest as agreed at the time this agreement is duly signed; ‘fully paid’ in relation to a share, means that the nominal value and any premium to be paid to the company in respect of that share have been paid to the company; ‘hard copy form’ has the meaning given in section 1168 of the Companies Act 2006; ‘holder’ in relation to shares means the person whose name is entered in the register of members as the holder of the shares; ‘instrument’ means a document in hard copy form; ‘option period ‘ means six months from the date of death; ‘ordinary resolution’ has the meaning given in section 282 of the Companies Act 2006; ‘paid’ means paid or credited as paid; ‘participate’, in relation to a directors’ meeting, has the meaning given in article 10; ‘plan’ means a life insurance policy underwritten by a provider; ‘provider’ means [Insurance Company]; ‘resolution time’ is 14 days from issue of the ‘deadlock option’; ‘proxy notice’ has the meaning given in article 45; ‘shareholder’ means a holder of Class A or Class B shares; ‘shares’ means share in the company’s share capital as defined by section 540 of the Companies Act 2006; ‘special resolution’ has the meaning given in section 283 of the Companies Act 2006;

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‘subsidiary’ has the meaning given in section 1159 of the Companies Act 2006; ‘sum assured’ means the amount payable on the occurrence of the insured event; ‘transmittee’ means a person entitled to a share by reason of the death or bankruptcy of a shareholder or otherwise by operation of law; and ‘writing’ means the representation or reproduction of words, symbols or other information in a visible form by any method or combination of methods, whether sent or supplied in electronic form or otherwise. 1.2. Unless the context otherwise requires, other words or expressions contained in these articles bear the same meaning as in the Companies Act 2006 as in force on the date when these articles become binding on the company. 1.3. Model articles shall not apply. Neither the model articles for private companies limited by shares prescribed pursuant to the 2006 Act, nor any other articles of association (whether prescribed pursuant to the 2006 Act or set out in any other statute, statutory instrument or other subordinate legislation concerning companies) shall apply to the Company. 1.4. Except as provided by law or authorised by the directors or an ordinary resolution of the company, no person is entitled to inspect any of the company’s accounting or other records or documents merely by virtue of being a shareholder. 1.5. [The directors may decide to make provision for the benefit of persons employed or formerly employed by the company or any of its subsidiaries (other than a director or former director or shadow director) in connection with the cessation or transfer to any person of the whole or part of the undertaking of the company or that subsidiary.]

Article 2 Liability of members1 2.1. The liability of the members is limited to the amount, if any, unpaid on the shares held by them. Commentary 1 Based on the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 3 Directors’ general authority1 3.1. Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company.

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Commentary 1 Based on the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 4 Shareholders’ reserve power1 4.1. The shareholders may, by special resolution, direct the directors to take, or refrain from taking, specified action. 4.2. No such special resolution invalidates anything which the directors have done before the passing of the resolution. Commentary 1 Based on the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 5 Directors may delegate1 5.1. Subject to the articles, the directors may delegate any of the powers which are conferred on them under the articles:



1.

to such person or committee;

2.

by such means (including by power of attorney);

3.

to such an extent;

4.

in relation to such matters or territories;

5.

and on such terms and conditions,

as they think fit.

5.2. If the directors so specify, any such delegation may authorise further delegation of the directors’ powers by any person to whom they are delegated. 5.3. The directors may revoke any delegation in whole or part, or alter its terms and conditions.

Article 6 Committees1 6.1. Committees to which the directors delegate any of their powers must follow procedures which are based as far as they are applicable on those provisions of the articles which govern the taking of decisions by directors. 6.2. The directors may make rules of procedure for all or any committees, which prevail over rules derived from the articles if they are not consistent with them.

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Article 7 Directors to take decisions collectively1 7.1. Any decision of the directors must be either a majority decision at a meeting or a unanimous decision in accordance with article 8. Commentary 1 See Articles 5–7 of Precedent 1: Family Business Articles of Association.

Article 8 Unanimous decisions1 8.1. A decision of the directors is taken in accordance with this article when all eligible directors indicate to each other by any means that they share a common view on a matter. 8.2. Such a decision may take the form of a resolution in writing, copies of which have been signed by each eligible director or to which each eligible director has otherwise indicated agreement in writing. 8.3. References in this article to eligible directors are to directors who would have been entitled to vote on the matter had it been proposed as a resolution at a directors’ meeting. 8.4. A decision may not be taken in accordance with this article if the eligible directors would not have formed a quorum at such a meeting. Commentary 1 Based on the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 9 The number of directors1 9.1. The number of directors appointed to the board shall be [four] on an equal basis: 1.

A Class shareholder may appoint two directors;

2.

B Class shareholders may appoint two directors.

Commentary 1 Article 9 specifies the number of directors each class of share may appoint, in this case four – two directors for each class of shares. Maintaining a balance in the company in terms of power is important for all the directors. The minimum number of directors is the statutory two.

Article 10 Calling a directors’ meeting 10.1. Any director may call a directors’ meeting by giving notice of the meeting to the directors or by authorising the company secretary (if any) to give such notice. 328

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10.2. Notice of any directors’ meeting must indicate: 1. its proposed date and time; 2. where it is to take place; and 3. if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting. 10.3. Notice of a directors’ meeting must be given to each director, but need not be in writing. 10.4. Notice of a directors’ meeting need not be given to directors who waive their entitlement to notice of that meeting, by giving notice to that effect to the company not more than 7 days after the date on which the meeting is held. Where such notice is given after the meeting has been held, that does not affect the validity of the meeting, or of any business conducted at it.

Article 11 Participation in directors’ meetings1 11.1. Subject to the articles, directors participate in a directors’ meeting, or part of a directors’ meeting, when the meeting has been called and takes place in accordance with the articles, and they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting. 11.2. In determining whether directors are participating in a directors’ meeting, it is irrelevant where any director is or how they communicate with each other. 11.3. If all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as taking place wherever any of them is. Commentary 1 Based on article 10 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 12 Quorum for directors’ meetings1 12.1. At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. 12.2. The quorum for directors’ meetings shall be fixed at four.

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12.3. If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision: 1. to appoint further directors, or to call a general meeting so as to enable the shareholders to appoint further directors. Commentary 1 Based on article 11 of the Schedule 1 Regulation 2 model articles for private companies limited by shares. Paragraph 12.2 sets the quorum at four which corresponds to article 9 and four directors

Article 13 Voting rights1 13.1. At Directors’ meetings held by the company from time to time on each proposed resolution: 1. the A Director shall have [Vote Number] votes; and 2. the B Director shall have [Vote Number] votes. Commentary 1

Article 13 does not appear in the Schedule 1 Regulation 2 model articles for private companies limited by shares. It specifies the vote number on any proposed resolution. Again the power of the two directors ought to be kept equal.

Article 14 Chairing of directors’ meetings1 14.1. The directors may appoint a director to chair their meetings: 1. The person so appointed for the time being is known as the chairman. 2. The directors may terminate the chairman’s appointment at any time. 14.2. If the chairman is not participating in a directors’ meeting within ten minutes of the time at which it was to start, the participating directors must appoint one of themselves to chair it. Commentary 1 Based on article 12 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 15 Chairman’s casting vote1 15.1. The chairman or other director is not to be counted as participating in the decision-making process for quorum or voting purposes.

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Commentary 1 Article 15 is based on article 13 of the Schedule 1 Regulation 2 model articles for private companies limited by shares which stipulates: ‘13.—(1) If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting vote.’ To maintain the balance of power the chairman’s casting vote is removed.

Article 16 Situational conflicts of interest1 16.1. A director of the company must avoid a situation in which he can have a direct or indirect interest that conflicts or possibly may conflict with the interests of the company. 16.2. Any director in breach of article 16.1 is deemed a ‘conflicted director’. 16.3. Subject to the provisions of section 175 of the Companies Act 2006 and the provisions of this article the directors may authorise a ‘conflicted director’. 16.4. An ‘authorisation’ is effective only if: 1. any requirement as to the quorum at the meeting at which the matter is considered is met without counting the director in question or any other interested director; and 2. the matter was agreed to without their voting or would have been agreed to if their votes had not been counted. 16.5. In accordance with section 175(5)(a) of the Companies Act 2006, in respect of a ‘conflicted director’ who has proposed that the board of directors authorise (‘board authorisation’) his conflicted interest, the board of directors may for the avoidance of doubt: 1. apply such terms and conditions as they see fit to any authorisation; 2. vary or terminate any authorisation at any time by the directors or committee as they see fit from time to time. 16.6. ‘Shareholder authorisation’ means the shareholders may also authorise a conflict by ordinary resolution. 16.7. In respect to a ‘conflicted director’ who has proposed that the shareholders authorise his conflicted interest, the shareholders may for the avoidance of doubt: 1. apply such terms and conditions as they see fit to any ‘shareholder authorisation’; 2. vary or terminate by ordinary resolution any ‘shareholder authorisation’ as they see fit from time to time.

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16.8. If the ‘conflicted director’ receives ‘board authorisation’ or ‘shareholder authorisation’ they: 1. may take additional general or specific measures to manage the conflict of interest by adhering to any procedures specified in the ‘authorisation’; 2. may exclude themselves from general information or documents that specifically relate to matters pertaining to the ‘conflicted director’; 3. may absent himself from any discussion in meetings or discussions where any matter relating to that conflict may be discussed or considered. 16.9. Subject to article 16.8 they are not required to disclose to the company any benefit he or any of his connected persons derive as a result of any ‘authorised conflict’. 16.10. If a ‘conflicted director’ receives information in respect of which he owes a duty of confidentiality to a person other than the company, he shall not be required: 1. to disclose any information to the company, or to any director, or to any officer or employee of the company; 2. to use such confidential information for the purpose of or in connection with the performance of his duties as a director. Commentary 1 Adapted from article 14 of the Schedule 1 Regulation 2 model articles for private companies limited by shares. The articles allow that a chairman’s casting vote is useful to prevent deadlocks. Alternatively the articles may not allow a chairman’s casting vote (see the alternative precedent in the joint venture articles). Article 14 of the Schedule 1 Regulation 2 model articles for private companies limited by shares specifies the procedures if a director is concerned with an actual or proposed transaction. The article is silent on the issue of conflicts of interest. Private companies formed after 1 October 2008 may authorise conflicted directors on the condition nothing in the company’s constitution invalidates such authorisation. Companies incorporated prior to 1 October 2008 may authorise by passing an ordinary resolution or amending the article by special resolution. Typically directors should not be sanctioned to vote in a quorum on any resolution in which they may be conflicted. The Companies Act 2006 outlines statutory provisions under section 175(5)(b) which allow the directors (once the conflicted director has disclosed in full his interest) to authorise a conflicted director so he may vote.

Article 17 Transactional conflicts of interest 17.1. If a ‘conflicted director’ of the company is directly or indirectly interested in a proposed transaction ‘transaction’ or arrangement with the company he must declare the nature and extent of that interest to the other directors.

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17.2. Subject to the provisions of sections 177 and 182 of the Companies Act 2006: 1. If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decision-making process for quorum or voting purposes. 2. [If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decision-making process for quorum or voting purposes.] 17.3. The ‘conflicted director’ shall not be required to disclose to the company any benefit he or any of his connected persons derive as a result of any ‘authorised conflict’.

Article 18 Records of decisions to be kept1 18.1. The directors must ensure that the company keeps a record, in writing, for at least 10 years from the date of the decision recorded, of every unanimous or majority decision taken by the directors. Commentary 1 Based on article 15 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 19 Directors’ discretion to make further rules1 19.1. Subject to the articles, the directors may make any rule which they think fit about how they take decisions, and about how such rules are to be recorded or communicated to directors. Commentary 1 Based on article 16 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 20 Methods of appointing directors1 20.1. The A shareholder ‘A shareholder’ and the B shareholder ‘B shareholder’ shall have the right to appoint [two] directors each to the board: 1. The A shareholders shall maintain at least one director in office at any time.

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2. The B shareholders shall maintain at least one director in office at any time. 20.2. The ‘A shareholders’ may at any time by notification to the company in writing: 1. Dismiss any director they may appoint. 2. Appoint a replacement director. 3. The A shareholder shall indemnify the company against any claim founded on the director’s removal. 20.3. The ‘B shareholders’ may at any time by notification to the company in writing: 1. Dismiss any director they may appoint. 2. Appoint a replacement director. 3. The B shareholder shall indemnify the company against any claim founded on the director’s removal. Commentary 1

Article 20 does not appear in the Schedule 1 Regulation 2 model articles for private companies limited by shares. Care ought to be taken to ensure the quorum and voting rights together with the method of appointing directors are concurrent with the outcome desired by both the A and B shareholders in terms of maintaining the balance of power.

Article 21 Termination of director’s appointment1 21.1. A person ceases to be a director as soon as: 1. that person ceases to be a director by virtue of any provision of the Companies Act 2006 or is prohibited from being a director by law; 2. a bankruptcy order is made against that person; 3. a composition is made with that person’s creditors generally in satisfaction of that person’s debts; 4. a registered medical practitioner who is treating that person gives a written opinion to the company stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months; 5. notification is received by the company from the director that the director is resigning from office, and such resignation has taken effect in accordance with its terms. Commentary 1 Based on article 18 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 22 Directors’ remuneration1 The A directors appointed and the B directors appointed shall not receive any remuneration in his capacity as director. Commentary 1 Based on article 19 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 23 Directors’ expenses1 23.1. The company may pay any reasonable expenses which the directors properly incur in connection with their attendance at: 1. meetings of directors or committees of directors; 2. general meetings; 3. separate meetings of the holders of any class of shares or of debentures of the company, or otherwise in connection with the exercise of their powers and the discharge of their responsibilities in relation to the company. Commentary 1 Based on article 20 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 24 Appointment and removal of alternates1 24.1. Any director (the ‘appointor’) may appoint as an alternate any other director, or any other person approved by resolution of the directors to: 1. exercise that director’s powers; 2. carry out that director’s responsibilities; 3. in relation to the taking of decisions by the directors in the absence of the alternate’s appointor. 24.2. Any appointment or removal of an alternate must be effected by notice in writing to the company signed by the appointor, or in any other manner approved by the directors. 24.3. The notice must: 1. identify the proposed alternate; and 2. in the case of a notice of appointment, contain a statement signed by the proposed alternate that the proposed alternate is willing to act as the alternate of the director giving the notice. 335

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Commentary 1 Adapted from Article 25 of the Schedule 3 Regulation 4 model articles for public companies.

Article 25 Rights and responsibilities of alternate directors 25.1. An alternate director has the same rights, in relation to any directors’ meeting or directors’ written resolution, as the alternate’s appointor. 25.2. Except as the articles specify otherwise, alternate directors: 1. are deemed for all purposes to be directors; 2. are liable for their own acts and omissions; 3. are subject to the same restrictions as their appointors; and 4. are not deemed to be agents of or for their appointors. 25.3. A person who is an alternate director but not a director may be counted as participating for the purposes of determining whether a quorum is participating (but only if that person’s appointor is not participating) and may sign a written resolution (but only if it is not signed or to be signed by that person’s appointor). 25.4. No alternate may be counted as more than one director for such purposes. 25.5. An alternate director is not entitled to receive any remuneration from the company for serving as an alternate director except such part of the alternate’s appointor’s remuneration as the appointor may direct by notice in writing made to the company.

Article 26 Termination of alternate directorship 26.1. An alternate director’s appointment as an alternate terminates when the alternate’s appointor revokes the appointment by notice to the company in writing specifying when it is to terminate: 1. on the occurrence in relation to the alternate of any event which, if it occurred in relation to the alternate’s appointor, would result in the termination of the appointor’s appointment as a director; 2. on the death of the alternate’s appointor; or 3. when the alternate’s appointor’s appointment as a director terminates, except that an alternate’s appointment as an alternate does not terminate when the appointor retires by rotation at a general meeting and is then re-appointed as a director at the same general meeting. 336

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Article 27 All shares to be fully paid up1 27.1. No share is to be issued for less than the aggregate of its nominal value and any premium to be paid to the company in consideration for its issue. Commentary 1 Based on article 21 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 28 Share capital and rights1 28.1. The share capital of the Company is comprised of A Shares and B Shares. The A Shares and the B Shares shall have the same rights (except as otherwise provided in these articles) but shall constitute separate classes of Shares. Commentary 1

Article 28 does not appear in the Schedule 1 Regulation 2 model articles for private companies limited by shares as they assume only one class of shares. The provision states unambiguously that the two share classes have the same rights unless varied by these articles.

Article 29 Authority to allot shares1 29.1. No shares may be allotted or issued to any person without: 1. [written consent of the two classes of ordinary shares]; 2. [majority shareholder consent]; 3. [shareholder consent]. 29.2. [Subject to article 29.1] The directors are authorised for the purposes of section 551 of the 2006 Act to allot shares: 1. (up to an aggregate nominal amount of £[NUMBER] (inclusive of the shares in issue at the adoption date)) at any time or times during the period of five years from the adoption date and the directors may, after that period, allot any shares under this authority in pursuance of an offer or agreement so to do made by the company within that period. 2. This authority may at any time (subject to section 551 of the 2006 Act) be renewed, revoked or varied by ordinary resolution.

The requirements of sections 561 and 562 of the 2006 Act shall not apply to any allotment of equity securities by the company.

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Commentary 1 There is no corresponding article in the Schedule 1 Regulation 2 model articles for private companies limited by shares (assumes one class of shares). The joint venture company has two classes of shares therefore the articles may authorise the directors to allot shares in the company. Paragraph 29.2 duly proves the authorisation. Consent to allot shares (if applicable) may be set in paragraph 29.1. Sections 561 (Existing shareholders’ right of pre-emption) and 562 (Communication of pre-emption offers to shareholders) of the Companies Act 2006 are excluded.

Article 30 Purchase of own shares1 30.1. Subject to the 2006 Act but without prejudice to any other provisions of these articles, the company may purchase its own shares out of capital up to any amount in a financial year not exceeding the lower of: 1. £15,000; and 2. the nominal value of 5% of the company’s fully paid share capital at the beginning of each financial year of the company. Commentary 1 Optional article; there is no corresponding article in the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 31 Powers to issue different classes of share 31.1. Subject to the articles, but without prejudice to the rights attached to any existing share, the company may issue shares with such rights or restrictions as may be determined by ordinary resolution.

Article 32 Company not bound by less than absolute interests 32.1. Except as required by law, no person is to be recognised by the company as holding any share upon any trust, and except as otherwise required by law or the articles, the company is not in any way to be bound by or recognise any interest in a share other than the holder’s absolute ownership of it and all the rights attaching to it.

Article 33 Share certificates 33.1. The company must issue each shareholder, free of charge, with one or more certificates in respect of the shares which that shareholder holds.

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33.2. Every certificate must specify: 1. in respect of how many shares, of what class, it is issued; 2. the nominal value of those shares; 3. that the shares are fully paid; 4. any distinguishing numbers assigned to them. 33.3. No certificate may be issued in respect of shares of more than one class. 33.4. If more than one person holds a share, only one certificate may be issued in respect of it. 33.5. Certificates must: 1. have affixed to them the company’s common seal; 2. be otherwise executed in accordance with the Companies Acts.

Article 34 Replacement share certificates 34.1. If a certificate issued in respect of a shareholder’s shares is: 1. damaged; 2. defaced; 3. lost; 4. stolen or 5. destroyed. 34.2. The shareholder is entitled to be issued with a replacement certificate in respect of the same shares. 34.3. A shareholder exercising the right to be issued with a replacement certificate may at the same time exercise the right to be issued with a single certificate or separate certificates: 1. must return the certificate which is to be replaced to the company if it is damaged or defaced; and 2. must comply with such conditions as to evidence, indemnity and the payment of a reasonable fee as the directors decide.

Article 35 Share transfers general1 35.1. Any reference to ‘share transfer’ in these articles includes the transfer or assignment of any beneficial or other interest and the creation of a trust or encumbrance over a shareholding.

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35.2. Shares shall be transferred by means of a transfer form. The company shall not charge a fee for registering any transfer form or associated documents. The company may and its discretion retain any transfer form which is registered. 35.3. Share may be transferred unless the transfer is made in accordance with these Articles. 35.4. Any ‘share transfer’ will be deemed to include a warranty that the transferor sells with full title guarantee. 35.5. Except for a ‘share transfer’ in accordance with [permitted, voluntary, mandatory leavers, drag along and tag along] no shares may be transferred without [‘shareholder consent’][‘shareholder majority’ of the A Class shareholders and the B Class shareholders]. Commentary 1 Article 35 replaces article 26 of the Schedule 1 Regulation 2 model articles for private companies limited by shares with a more complex set of share transfer procedures. This article sets out the general parameters of share transfer including paragraph 35.5 which operates as a catch all provision that prevents any share transfer without shareholder consent or shareholder majority which may include a majority from both share classes. The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent.

Article 36 Obligation to refuse a share transfer 36.1. With the exception of permitted or compulsory share transfers in accordance with these articles, no ‘Class A shares’ or ‘Class B shares’ shall be transferred without ‘majority consent’ to any person not already a member or whom the directors shall not approve. 36.2. The directors shall refuse to register a ‘share transfer’ only if authorised by these articles. 36.3. The directors are authorised by these articles and shall refuse to register a transfer if the share transfer is to: 1. a bankrupt; 2. a minor; 3. a person of unsound mind.

Article 37 Compulsory transfers deadlock 37.1. Where a ‘deadlock’1 arises, any holder of ‘Class A’ or ‘Class B’ shares may issue to the company within 21 days of the deadlock transpiring a ‘deadlock option’.2

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37.2. On receipt of the ‘deadlock option’ the respective chairman of the holding companies will attempt to resolve the deadlock within 14 business days ‘resolution time’.3 37.3. Within the ‘resolution time’, no shareholder may issue a ‘counter offer’.4 37.4. A ‘deadlock option’ may not be issued to the company for a period of three years from the date of these provisions being passed in the company articles of association by special resolution.5 37.5. A ‘deadlock option’ once issued is irrevocable.6 37.6. The recipient of the ‘deadlock option’ may serve a ‘counter offer’ to the company on expiration of the ‘resolution time’.7 37.7. Subject to provision (37.2), on expiration of the ‘resolution time’ the recipient of the ‘deadlock option’ will be deemed to have accepted the ‘deadlock option’.8 37.8. Subject to provision (37.2), on the occurrence the company receives a ‘deadlock option’ from both class of shareholder the highest price will override the lower price offered.9 Service of a counter offer: 37.9. The buyer and seller consent to any transfer of shares in accordance with the prevailing provisions. 37.10. The provisions forthwith shall bind the shareholders to buy and sell the ‘deal shares’ on the terms set out in the subsequent provisions.10 37.11. If provision 37.2 applies then the highest ‘fair price’ issued by the shareholder on another shareholder will prevail.11 37.12. The completion date must be no less than 21 days after the ‘resolution time’ or the date of the ‘counter offer’.12 37.13. The seller must complete the purchase of all shares of the buyer on the completion date. If the seller defaults on any share transfer a director of the company is authorised irrevocably without condition to execute a share transfer notice on behalf the seller.13 37.14. The completion of share transfers and payment will take place at the company’s registered office.14 On the completion day: 37.15. The buyer will arrange payment to the seller in full by means agreed by both parties. 37.16. The seller will furnish the buyer with any share certificates applicable to the sale or an indemnity for any lost or spoiled share certificates.

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37.17. Any directors appointed by the share class transferring shares to the buyer will furnish the company with written resignations and an indemnity against any legal redress against the company, pertaining to the sale and transfer of shares by the ‘Class A’ or ‘Class B’ shareholders.15 Commentary 1 The term deadlock here is kept brief and concise, if a properly proposed resolution is not passed as the two parties cannot agree. 2 If the parties are deadlocked and cannot agree the resolutions put to the board then any shareholder is able to issue a notice to the company offering to sell their shareholding or purchase a shareholding, the notice must indicate the price sought for sale or proposed for purchase. The deadlock notice must be issued within 21 days of the deadlock occurring. 3 Provision 37.2 allows the three respective chairmen 14 business days to endeavour to resolve the deadlock before the deadlock option is exercised. 4 To help the chairman negotiate within the 14 day resolution time, the party receiving the deadlock option is not permitted to issue a counter offer, however it is not inconceivable the company may have received a deadlock option from both the Class A and Class B shareholders by virtue of provision 37.3. 5 Provision 37.4 prevents the deadlock provision from being executed for a set period, in this case three years. 6 To prevent the deadlock provisions to be used as a negotiating tool without commitment, provision 37.5 stipulates once used the notice is irrevocable. 7 After the chairmen have endeavoured to resolve the deadlock without success the other class of shareholder may issue a counter offer to sell or purchase shares. 8 If the recipient of the deadlock notice takes no action after the 14 days, they are deemed to have accepted the offer. 9 On the occurrence of the two share classes of shareholders issuing a deadlock option within the 21 day period, then after the resolution period has expired the highest offer will prevail. 10 Provision 37.10 binds the two classes of shareholder to the provisions in article 37. 11 If one side has issued a deadlock option indicating a price to buy or sell and the other shareholder then issues a counter offer the highest price will succeed.The provision prevents a series of offers and counter offers and is final and binding. 12 Sets a time frame to execute the share sale and transfer. 13 If the seller fails to buy all the shares of the opposing share class, any director is empowered to transact the share transfer to ensure all the shares are purchased. 14 Agrees the venue for completion. 15 Agrees the payment will be made in full on the completion day and all shares will be purchased. The seller must provide the share certificates or an indemnity. The buyer will require any directors connected with the opposing share class to resign, the provisions request an indemnity and agreement from the departing directors to refrain from any legal action in connection with their loss of office.

Article 38.  Share transfer – cross option1 38.1. On the death of any leaver who is party to any agreement ‘cross option agreement’ his shares may be dealt (if the any party invokes their right to buy or sell) with in accordance with that agreement and the provisions of 38.2 shall not apply. For the avoidance of doubt the provisions of this article 38.3 shall prevail over any contrary provisions of these articles. 38.2. For the purpose of this article the shareholders ‘option shareholders’ shall mean: 1. A shareholder [full name]. 342

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2. B shareholder [full name]. (together the ‘option shareholders’). 38.3. Each ‘option shareholder’ hereby agrees to effect cover on their own life (‘life plan’) to support the payment of any fixed price. 38.4. The provider effected on outset will be selected by a FCA regulated adviser. 38.5. In accordance with article 38.11 the ‘sum assured’ effected must be at least equal to the ‘fixed value’. 38.6. The sum assured may be amended at intervals by agreement of the shareholders to allow for changes in the fixed value. 38.7. Any plan effected on outset of the plan by a shareholder will be subject to a discretionary trust deed: 1. The beneficiaries of the discretionary trust deed shall be the option shareholders of this agreement (other than the settlor). 38.8. The option shareholders agree while this agreement exists not to transfer any legal or beneficial interest without the consent and agreement of the other shareholders. 38.9. Each ‘plan’ is effected on a fixed term basis, this agreement will end on the following terms: 1. The fixed term period expires. 2. Where a shareholder ceases to hold shares in the firm. 3. Policy lapse, the shareholder defaults on maintaining the plan. 4. Default. In the event that a plan of a deceased shareholder does not become payable for any reason the surviving shareholders may terminate this agreement. 38.10. Fixed value. 38.11. The ‘shareholders’ agree to the following fixed values: 1. ‘A shareholder’  [£] 2. ‘B shareholder’  [£] 38.12. The ‘fixed value’ may be amended, at such intervals and to such extent as the shareholders agree, to take account of changes to the value of the shareholders’ interest in the firm. 38.13. The fixed value may not be amended during the first two years of this agreement. 38.14. The following provisions shall apply on the death of a shareholder a ‘deceased shareholder’ and subject to article 38.9 the sum assured becomes payable from the provider. 343

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38.15. The following option shall be exercisable in respect of the deceased’s interest in the firm. 38.16. Call option: 1. The surviving shareholders who are party to this arrangement shall have the option to purchase the deceased shareholder ‘shares’ in the firm from the deceased’s personal representatives. 38.17. Put option: 1. The personal representatives shall have the option to sell the deceased shareholder’s shares in the firm to the surviving shareholders. 38.18. Where on the death of any shareholder there is more than one surviving shareholder and the option conferred by article 38.2.2 the following provisions shall apply. 38.19. The ‘deceased shareholder’s’ shares shall be allocated in proportion to each surviving ‘firm shareholder’ interest (other than the spouse of any deceased shareholder). 38.20. By agreement with the ‘firm’s shareholders’ and subject to the Companies Act 2006, after purchasing the shares from the deceased shareholder’s personal representative the company may cancel the deceased shareholder’s shares. 38.21. The option may be exercised at any time from the date of death of the deceased shareholder. 38.22. The option shall lapse 6 months after the date of death ‘option period’, the option period may be varied by agreement of the surviving shareholders party to this agreement. 38.23. The value of the deceased shareholder’s interest in the firm will be notified to the trustees of the plan on the life of the shareholder as soon as the value is determined so that the trustees may apply the plan proceeds in an appropriate manner and may, where the trusts powers and provisions attaching to the plan so permit, pay a sum not exceeding the fixed value. 38.24. Any additional plan proceeds exceeding the fixed value will be paid to the deceased shareholder’s personal representatives. 38.25. Subject to provision 38.9 if the shareholders agree in the event that the sum assured payable under the plan of a deceased shareholder is less than the fixed value, the balance of the said value shall be paid in 24 equal monthly instalments. The instalments will not bear any interest. 38.26. On liquidation of the firm the balance will become payable in full. 38.27. Each shareholder agrees: 1. This agreement shall cease on the firm being dissolved or a resolution being passed – it shall be liquidated. 344

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2. This agreement will cease to apply to any shareholder who ceases to hold shares in the firm, as defined by section 540 of the Companies Act 2006. Commentary 1 See Appendix for a full discussion and case study on cross option agreements. Article 38 is a cross option agreement between the A shareholder and the B shareholder. If either shareholder dies a call and put option (see 38.16–38.17) clause allows either party to sell or buy. The advantage of the cross option is the addition of the life insurance policies effected with a provider that would create funds to purchase the shares. The A and B shareholder implement life cover at the ‘fixed value’ (see 38.10) (the policies are subject to underwriting so the cross option assumes both the A and B shareholder are in reasonably good health). Both classes of shareholder implement a personal life policy in their name in trust for the other shareholder. On death the policy is claimed by the surviving shareholder; the monies paid would be used to buy the shares back from the deceased’s personal representative.

Article 39 Procedure for declaring dividends1 39.1. The company may by ordinary resolution declare dividends. 39.2. The directors may decide to pay interim dividends. 39.3. A dividend must not be declared unless the directors have made a recommendation to its amount. 39.4. Any dividend must not exceed the amount recommended by the directors in accordance with article 39.3 39.5. No dividend may be declared or paid unless it is in accordance with shareholders’ respective rights. 39.6. Unless the shareholders’ resolution to declare or directors’ decision to pay a dividend, or the terms on which shares are issued, specify otherwise, it must be paid by reference to each shareholder’s holding of shares on the date of the resolution or decision to declare or pay it. 39.7. If the company’s share capital is divided into different classes, no interim dividend may be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrear. 39.8. The directors may pay at intervals any dividend payable at a fixed rate if it appears to them that the profits available for distribution justify the payment. 39.9. If the directors act in good faith, they do not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on shares with deferred or non-preferred rights. Commentary 1 Based on article 30 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 40 Payment of dividends and other distributions1 40.1. Where a dividend or other sum which is a distribution is payable in respect of a Share, it shall be paid by transfer to a bank or building society account specified by the relevant ‘Distribution Recipient’ or any other means of payment as the directors agree with the distribution recipient either in writing or by such other means as the directors decide. 40.2. In this article the ‘distribution recipient’ means, in respect of a share in respect of which a dividend or other sum is payable: 1. the holder of the share; 2. if the share has two or more joint holders, whichever of them is named first in the register of members; 3. if the holder is no longer entitled to the share by reason of death or bankruptcy, or otherwise by operation of law, the transmittee. Commentary 1 Based on article 31 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 41 No interest on distributions1 41.1. The company may not pay interest on any dividend or other sum payable in respect of a share unless otherwise provided by: 1. the terms on which the share was issued, or 2. the provisions of another agreement between the holder of that share and the company. Commentary 1 Based on article 32 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 42 Unclaimed distributions1 42.1. All dividends or other sums which are payable in respect of shares, and unclaimed after having been declared or become payable: 1. may be invested or otherwise made use of by the directors for the benefit of the company until claimed. 42.2. The payment of any such dividend or other sum into a separate account does not make the company a trustee in respect of it.

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42.3. If twelve years have passed from the date on which a dividend or other sum became due for payment, and the distribution recipient has not claimed it, the distribution recipient is no longer entitled to that dividend or other sum and it ceases to remain owing by the company. Commentary 1 Based on article 33 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 43 Non-cash distributions1 43.1. Subject to the terms of issue of the share in question, the company may, by ordinary resolution on the recommendation of the directors, decide to pay all or part of a dividend or other distribution payable in respect of a share by transferring non-cash assets of equivalent value (including, without limitation, shares or other securities in any company). 43.2. For the purposes of paying a non-cash distribution, the directors may make whatever arrangements they think fit, including, where any difficulty arises regarding the distribution: 1. fixing the value of any assets; 2. paying cash to any distribution recipient on the basis of that value in order to adjust the rights of recipients; 3. and vesting any assets in trustees. Commentary 1 Based on article 34 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 44 Waiver of distributions1 44.1. Distribution recipients may waive their entitlement to a dividend or other distribution payable in respect of a share by giving the company notice in writing to that effect. 44.2. If the share has more than one holder or more than one person is entitled to the share whether by reason of the death or bankruptcy of one or more joint holders or otherwise the notice is not effective unless it is expressed to be given, and signed by all the holders or persons otherwise entitled to the share. Commentary 1 Based on article 35 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 45 Attendance and speaking at general meetings1 45.1. A person is able to exercise the right to speak at a general meeting when that person is in a position to communicate to all those attending the meeting, during the meeting, any information or opinions which that person has on the business of the meeting. 45.2. A person is able to exercise the right to vote at a general meeting when: 1. that person is able to vote, during the meeting, on resolutions put to the vote at the meeting; and 2. that person’s vote can be taken into account in determining whether or not such resolutions are passed at the same time as the votes of all the other persons attending the meeting. 45.3. The directors may make whatever arrangements they consider appropriate to enable those attending a general meeting to exercise their rights to speak or vote at it. 45.4. In determining attendance at a general meeting, it is immaterial whether any two or more members attending it are in the same place as each other. 45.5. Two or more persons who are not in the same place as each other attend a general meeting if their circumstances are such that if they have (or were to have) rights to speak and vote at that meeting, they are (or would be) able to exercise them. Commentary 1 Based on article 37 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 46 Quorum for general meetings1 46.1. No business other than the appointment of the chairman of the meeting is to be transacted at a general meeting if the persons attending it do not constitute a quorum. 46.2. The quorum at general meetings is: 1. [one] A shareholder (or its qualifying representative); and 2. [one] B shareholder (or its qualifying representative). Commentary 1 Based on article 38 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 47 Chairing general meetings1 47.1. If the directors have appointed a chairman, the chairman shall chair general meetings if present and willing to do so. 47.2. If the directors have not appointed a chairman, or if the chairman is unwilling to chair the meeting or is not present within ten minutes of the time at which a meeting was due to start the directors present, or (if no directors are present), the meeting: 1. must appoint a director or shareholder to chair the meeting, and the appointment of the chairman of the meeting must be the first business of the meeting. 47.3. The person chairing a meeting in accordance with this article is referred to as ‘the chairman of the meeting’. Commentary 1 Based on article 39 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 48 Attendance and speaking by directors and non-shareholders1 48.1. Directors may attend and speak at general meetings, whether or not they are shareholders. 48.2. The chairman of the meeting may permit other persons who are not shareholders of the company to exercise the rights of shareholders in relation to general meetings, to attend and speak at a general meeting. Commentary 1 Based on article 40 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 49 Adjournment1 49.1. If the persons attending a general meeting within half an hour of the time at which the meeting was due to start do not constitute a quorum, or if during a meeting a quorum ceases to be present, the chairman of the meeting must adjourn it. 49.2. The chairman of the meeting may adjourn a general meeting at which a quorum is present if: 1. the meeting consents to an adjournment, or

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2. it appears to the chairman of the meeting that an adjournment is necessary to protect the safety of any person attending the meeting or ensure that the business of the meeting is conducted in an orderly manner. 49.3. The chairman of the meeting must adjourn a general meeting if directed to do so by the meeting. 49.4. When adjourning a general meeting, the chairman of the meeting must: 1. either specify the time and place to which it is adjourned or state that it is to continue at a time and place to be fixed by the directors, and 2. have regard to any directions as to the time and place of any adjournment which have been given by the meeting. 49.5. If the continuation of an adjourned meeting is to take place more than 14 days after it was adjourned, the company must give at least 7 clear days’ notice of it (that is, excluding the day of the adjourned meeting and the day on which the notice is given; 1. to the same persons to whom notice of the company’s general meetings is required to be given, and containing the same information which such notice is required to contain. 49.6. No business may be transacted at an adjourned general meeting which could not properly have been transacted at the meeting if the adjournment had not taken place. Commentary 1 Based on article 41 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 50 Voting: general1 50.1. A resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is duly demanded in accordance with the articles. 50.2. As regards any resolution which is proposed in accordance with article 50.1: 1. the A shareholder (or its qualifying representative); and 2. the B shareholder (or its qualifying representative) 3. shall each be entitled to such number of votes (whether on a show of hands, a poll or a written resolution) as is required to defeat that resolution.

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Commentary 1 Based on article 42 of the Schedule 1 Regulation 2 model articles for private companies limited by shares. Article 50.3 allows the option to override any resolution at a general meeting.

Article 51 Errors and disputes1 51.1. No objection may be raised to the qualification of any person voting at a general meeting except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting is valid. 51.2. Any such objection must be referred to the chairman of the meeting, whose decision is final. Commentary 1 Based on article 43 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 52 Poll votes1 52.1. A poll on a resolution may be demanded in advance of the general meeting where it is to be put to the vote, or at a general meeting, either before a show of hands on that resolution or immediately after the result of a show of hands on that resolution is declared. 52.2. A poll may be demanded by: 1. the chairman of the meeting; 2. the directors; 3. two or more persons having the right to vote on the resolution; or 4. a person or persons representing not less than one tenth of the total voting rights of all the shareholders having the right to vote on the resolution. 52.3. A demand for a poll may be withdrawn if: 1. the poll has not yet been taken, and 2. the chairman of the meeting consents to the withdrawal. 3. Polls must be taken immediately and in such manner as the chairman of the meeting directs. Commentary 1 Based on article 44 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Article 53 Content of proxy notices1 53.1. Proxies may only validly be appointed by a notice in writing (a ‘proxy notice’). The proxy notice shall: 1. state the name and address of the member appointing the proxy; 2. identify the person appointed to be that member’s proxy; 3. state the general meeting in relation to which that person is appointed; 4. be signed by or on behalf of the member appointing the proxy, or is authenticated in such manner as the directors may determine; 5. be delivered to the company in accordance with the articles and any instructions contained in the notice of the general meeting to which they relate. 53.2. The company may require proxy notices to be delivered in a particular form, and may specify different forms for different purposes. 53.3. Proxy notices may specify how the proxy appointed under them is to vote (or that the proxy is to abstain from voting) on one or more resolutions. 53.4. Unless a proxy notice indicates otherwise it shall be treated as; 1. allowing the person appointed under it as a proxy discretion as to how to vote on any ancillary or procedural resolutions put to the meeting, and appointing that person as a proxy in relation to any adjournment of the general meeting to which it relates as well as the meeting itself. Commentary 1 Based on article 45 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 54 Delivery of proxy notices1 54.1. A person who is entitled to attend, speak or vote (either on a show of hands or on a poll) at a general meeting remains so entitled in respect of that meeting or any adjournment of it, even though a valid proxy notice has been delivered to the company by or on behalf of that person. 54.2. An appointment under a proxy notice may be revoked by delivering to the company a notice in writing given by or on behalf of the person by whom or on whose behalf the proxy notice was given. 54.3. A notice revoking a proxy appointment only takes effect if it is delivered before the start of the meeting or adjourned meeting to which it relates.

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54.4. If a proxy notice is not executed by the person appointing the proxy, it must be accompanied by written evidence of the authority of the person who executed it to execute it on the appointor’s behalf. Commentary 1 Based on article 46 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 55 Amendments to resolutions1 55.1. An ordinary resolution to be proposed at a general meeting may be amended by ordinary resolution if; 55.2. notice of the proposed amendment is given to the company in writing by a person entitled to vote at the general meeting at which it is to be proposed not less than 48 hours before the meeting is to take place (or such later time as the chairman of the meeting may determine): 1. the proposed amendment does not, in the reasonable opinion of the chairman of the meeting, materially alter the scope of the resolution. 55.3. A special resolution to be proposed at a general meeting may be amended by ordinary resolution if: 1. the chairman of the meeting proposes the amendment at the general meeting at which the resolution is to be proposed, and 2. the amendment does not go beyond what is necessary to correct a grammatical or other non-substantive error in the resolution. 55.4. If the chairman of the meeting, acting in good faith, wrongly decides that an amendment to a resolution is out of order, the chairman’s error does not invalidate the vote on that resolution. Commentary 1 Based on article 47 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 56 Means of communication to be used1 56.1. Subject to the articles, anything sent or supplied by or to the company under the articles may be sent or supplied in any way in which the Companies Act 2006 provides for documents or information which are authorised or required by any provision of that Act to be sent or supplied by or to the company. 56.2. Subject to the articles, any notice or document to be sent or supplied to a director in connection with the taking of decisions by directors may 353

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also be sent or supplied by the means by which that director has asked to be sent or supplied with such notices or documents for the time being. 56.3. A director may agree with the company that notices or documents sent to that director in a particular way are to be deemed to have been received within a specified time of their being sent, and for the specified time to be less than 48 hours. Commentary 1 Based on article 48 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 57 Company seals1 57.1. Any common seal may only be used by the authority of the directors. The directors may decide by what means and in what form any common seal is to be used. 57.2. Unless otherwise decided by the directors, if the company has a common seal and it is affixed to a document, the document must also be signed by at least one authorised person in the presence of a witness who attests the signature. 57.3. For the purposes of this article an authorised person is: 1. any director of the company; 2. any person authorised by the directors for the purpose of signing documents to which the common seal is applied. Commentary 1 Based on article 49 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

Article 58 Indemnity and directors’ insurance1 58.1. Subject to paragraph 58.2 only in relation to the club any relevant director may be indemnified out of the club’s resources against any liability incurred by that director in connection with any: 1. negligence; 2. default; 3. breach of duty; 4. breach of trust

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5. [liability incurred by that director in connection with the activities of the club in its capacity as a trustee of an occupational pension scheme (as defined in section 235(6) of the Companies Act 2006)]; 6. liability incurred by that director as an officer of the club. 58.2. This article does not authorise any indemnity which would be prohibited or rendered void by any provision of the Companies Acts or by any other provision of law. 58.3. The directors may decide to purchase and maintain insurance, at the expense of the company, for the benefit of any relevant director in respect of any relevant loss. 58.4. In this article ‘relevant director’ means any director or former director of the club. A ‘relevant loss’ means any loss or liability which has been or may be incurred by a relevant director in connection with that director’s duties or powers in relation to the club or any pension fund or employees’ share scheme. Commentary 1

Based on articles 52 and 53 of the Schedule 1 Regulation 2 model articles for private companies limited by shares.

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Appendix Introduction Private limited companies with more than one shareholder must consider the implications if any members should die. The sudden loss of a principal shareholder may have a considerable impact on the company from an operational and constitutional standpoint.

Case study: what happens on the death of a shareholder? Hudson Vegan Foods Limited1 Alan Hudson and Peter Hudson are brothers and each hold a 50% shareholding in the company, which based on an independent valuation is worth around £1.5 million. Peter died suddenly in 2019, his will leaves his shareholding which qualifies for business property relief2 to his wife Zoe who is also the executor of his will and has never been involved in the business. After taking legal advice, Zoe submits a transfer notice to Hudson Vegan Foods Ltd requesting transfer of the 50% shareholding into her own name. Alan is disturbed on receiving the transfer notice, founded on the potential of having to operate the company with a new business partner. His options are: 1.

If the company has sufficient cash or is able to borrow the money he could raise the £750,000 and offer to buy the shareholding from Zoe,3 on the assumption Zoe agrees with the valuation and does not dispute the company’s worth or contest the validity of the independent valuer.

2.

Alan could maintain the status quo and work with Zoe.

3.

Alan could refuse the transfer under section 771(1) of the Companies Act 2006,4 however this is a common misconception as section 771(5)

1 The case study assumes the company on incorporation adopted the model articles and no special provisions where drafted. 2 IHTA 1984, Chapter I Business Property. 3 Well drafted articles of association include pre-emption clauses on death that stipulate the company or its directors have first refusal on the proposed sale of any shares. Care needs to be taken to include a clause on how the ‘fair valuation’ is to be calculated or the articles may include a ‘fixed price’ over a fixed term. 4 (1) When a transfer of shares in or debentures of a company has been lodged with the company, the company must either – (a) register the transfer, or (b) give the transferee notice of refusal to register the transfer, together with its reasons for the refusal, as soon as practicable and in any event within two months after the date on which the transfer is lodged with it.

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states that section 771 does not apply in relation to a transmission of shares by operation of the law, this would include where a bankrupt member’s trustee or a deceased member’s personal representative becomes entitled to the shareholding. 4.

Alan could take extreme measures and liquidate the company, threaten to resign or generally block any resolutions to effectively impede the company’s operations.

Overview Generally, banks are not keen to lend soon after the death of the shareholder, particularly if they are a key director responsible for a sizeable percentage of the company’s profits. Using the company’s cash to the buy the shareholding and therefore reducing the cash flow may place the company in a perilous position and lead to delayed supplier payments, defaults and late or deferred tax payments. Alan may be content to work with his deceased partner’s widow, but it is unlikely this will provide a long-term solution. Legally, Alan cannot refuse the transfer under the Companies Act 2006, nevertheless, he may resort to using the court’s general position that a refusal would be lawful if the decision was reached in good faith to promote the success of the company for the benefit of its members as a whole. The mitigating circumstances to prove the ‘good faith’ aspect would be particular to each company and circumstances and in reality this is not a constructive option.

Solution Article 38 of Precedent 3: Joint Venture Company endeavours to provide a cross option agreement within the articles of association to provide a funding solution on the death of a shareholder. In the case of Hudson Vegan Foods Limited the main problems stem from having no funds to purchase the shareholding, the possible contention over the valuation of the company and the lack of any formal agreement between the two shareholders. Section 38.3 agrees each shareholder will effect a life insurance policy to provide funds for the share purchase, and section 38.10 decides the fixed value a for deceased members shareholding which may be reviewed on an approved time scale. The cross option agreement is entirely flexible, article 38 provides a basis to build an agreement to suit the specific requirements of the directors and members. It should be noted care must be taken to ensure a binding contract

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is not drafted which may fall foul of section 1135 and result in the loss of any business property relief that may be relevant.

Tax considerations There are a number of issues that must be addressed from a tax perspective when drafting and implementing a cross option agreement which are beyond this text, specialist tax advice will certainly be required. Broadly, depending how the scheme is set up, a trust structure is typically used which may incur pre-owned asset tax. The tax implications of the company buying back the shares which may suffer corporation tax and capital gains tax must be addressed to ensure the scheme works to the benefit of both the members and directors. For clarity the following text provides the main company legislation and sections of the model articles that ought to be considered when drafting a cross option agreement.

Companies Act 2006 The relevant legislation for companies incorporated on or after 1 October 2009.

Section 771 Procedure on transfer being lodged (1) When a transfer of shares in or debentures of a company has been lodged with the company, the company must either— (a) register the transfer, or (b) give the transferee notice of refusal to register the transfer, together with its reasons for the refusal, as soon as practicable and in any event within two months after the date on which the transfer is lodged with it. (2) If the company refuses to register the transfer, it must provide the transferee with such further information about the reasons for the refusal as the transferee may reasonably request. This does not include copies of minutes of meetings of directors. (2A) If an election is in force under Chapter 2A of Part 8 in respect of the company, references in this section to registering the transfer are to be read as references to delivering particulars of the transfer to the registrar in accordance with that Chapter.

5 Inheritance Tax Act 1984, s 113 (Contracts for sale).

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(3) If a company fails to comply with this section, an offence is committed by— (a) the company, and (b) every officer of the company who is in default. (4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale. (5) This section does not apply— (a) in relation to a transfer of shares if the company has issued a share warrant in respect of the shares (see section 779); (b) in relation to the transmission of shares or debentures by operation of law.

Companies Act 1985 Legislation for companies incorporated prior to 1 October 2009. It should be noted the Company Law Report6 recommended section 771(2) ought to apply to all companies regardless of the company legislation they were incorporated under.

Section 183 Transfer and registration (1) It is not lawful for a company to register a transfer of shares in or debentures of the company unless a proper instrument of transfer has been delivered to it, or the transfer is an exempt transfer within the [1982 c. 41.] Stock Transfer Act 1982.This applies notwithstanding anything in the company’s articles. (2) Subsection (1) does not prejudice any power of the company to register as shareholder or debenture holder a person to whom the right to any shares in or debentures of the company has been transmitted by operation of law. (3) A transfer of the share or other interest of a deceased member of a company made by his personal representative, although’ the personal representative is not himself a member of the company, is as valid as if he had been such a member at the time of the execution of the instrument of transfer. (4) On the application of the transferor of any share or interest in a company, the company shall enter in its register of members the name of the 6

Company Law Review. Modern Company Law For a Competitive Economy Final Report, June 2001.

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transferee in the same manner and subject to the same conditions as if the application for the entry were made by the transferee. (5) If a company refuses to register a transfer of shares or debentures, the company shall, within 2 months after the date on which the transfer was lodged with it, send to the transferee notice of the refusal. (6) If default is made in complying with subsection (5), the company and every officer of it who is in default is liable to a fine and, for continued contravention, to a daily default fine.

New model articles of association for companies incorporated after 1 October 20097 They include the following provisions:

Share transfers 26.—(1) Shares may be transferred by means of an instrument of transfer in any usual form or any other form approved by the directors, which is executed by or on behalf of the transferor. (2) No fee may be charged for registering any instrument of transfer or other document relating to or affecting the title to any share. (3) The company may retain any instrument of transfer which is registered. (4) The transferor remains the holder of a share until the transferee’s name is entered in the register of members as holder of it. (5) The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent.

Transmission of shares 27.—(1) If title to a share passes to a transmittee, the company may only recognise the transmittee as having any title to that share. (2) A transmittee who produces such evidence of entitlement to shares as the directors may properly require— (a) may, subject to the articles, choose either to become the holder of those shares or to have them transferred to another person, and

7 Schedule 1, Regulation 2, Model articles for private companies limited by shares.

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(b) subject to the articles, and pending any transfer of the shares to another person, has the same rights as the holder had. (3) But transmittees do not have the right to attend or vote at a general meeting, or agree to a proposed written resolution, in respect of shares to which they are entitled, by reason of the holder’s death or bankruptcy or otherwise, unless they become the holders of those shares.

Exercise of transmittees’ rights 28.—(1) Transmittees who wish to become the holders of shares to which they have become entitled must notify the company in writing of that wish. (2) If the transmittee wishes to have a share transferred to another person, the transmittee must execute an instrument of transfer in respect of it. (3) Any transfer made or executed under this article is to be treated as if it were made or executed by the person from whom the transmittee has derived rights in respect of the share, and as if the event which gave rise to the transmission had not occurred.

Transmittees bound by prior notices 29. If a notice is given to a shareholder in respect of shares and a transmittee is entitled to those shares, the transmittee is bound by the notice if it was given to the shareholder before the transmittee’s name has been entered in the register of members.

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Precedent 4: Management Buyout Articles of Association The following precedent is a common transaction that most practitioners will encounter from time to time. The company is a family run business whose non-family management team wish to purchase the business from the founding family members who are retiring in the next five years using a management buyout (MBO): ●●

The founding members require a small proportion of the purchase price to be rolled back into the sale so they retain a minority shareholding in the new company. (Investors prefer some sort of transition period with the founders involved.)

●●

The management buyout is funded by a small boutique fund manager who will take a majority shareholding. The fund manager will appoint directors to maintain control but will not have a day-to-day role in running the company. The investors require control function incorporated into the articles to protect their investment.

●●

The non-family managers will hold a minority shareholding and no special investment vehicle is being used to fund the MBO, for example a venture capital trust.

●●

The company will issue two classes of shares together via a newly incorporated private company limited by shares. The investment company shall subscribe to the A Class ordinary shares, the managers and the family founders shall subscribe to the B Class ordinary shares.

A note on the commentary: several of the articles used in the MBO precedent correspond to the family business precedent so to avoid repeating the analysis commentary they appear only where the relevant MBO article is in addition to the family business precedent.

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Articles of Association Company Number: [NUMBER] THE COMPANIES ACT 2006 PRIVATE COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATION OF [NAME] LIMITED [(Adopted by Special Resolution passed on [DATE])]

Article 1 Defined terms 1.1. In the articles, unless the context requires otherwise: ‘articles’ means the company’s articles of association; ‘bankruptcy’ includes individual insolvency proceedings in a jurisdiction other than England and Wales or Northern Ireland which have an effect similar to that of bankruptcy; ‘chairman’ has the meaning given in article 12; ‘chairman of the meeting’ has the meaning given in article 39; ‘Companies Acts’ means the Companies Acts (as defined in section 2 of the Companies Act 2006), in so far as they apply to the company; ‘director’ means a director of the company, and includes any person occupying the position of director, by whatever name called; ‘distribution recipient’ has the meaning given in article 31; ‘document’ includes, unless otherwise specified, any document sent or supplied in electronic form; ‘electronic form’ has the meaning given in section 1168 of the Companies Act 2006; ‘fully paid’ in relation to a share, means that the nominal value and any premium to be paid to the company in respect of that share have been paid to the company; ‘hard copy form’ has the meaning given in section 1168 of the Companies Act 2006; ‘holder’ in relation to shares means the person whose name is entered in the register of members as the holder of the shares; ‘instrument’ means a document in hard copy form; ‘investor consent’ means the giving of a prior consent in writing by the investor majority;

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‘investor direction’ means the giving of a prior direction in writing by the investor majority; ‘investor majority’ means the shareholders who together, at the relevant time, are the holders of more than 50% in number of the A ordinary shares in issue at that time; ‘investor shares’ means the A ordinary shares; ‘ordinary resolution’ has the meaning given in section 282 of the Companies Act 2006; ‘paid’ means paid or credited as paid; ‘participate’, in relation to a directors’ meeting, has the meaning given in article 10; ‘proxy notice’ has the meaning given in article 45; ‘shareholder’ means a person who is the holder of a share; ‘shares’ means shares in the company; ‘special resolution’ has the meaning given in section 283 of the Companies Act 2006; ‘subsidiary’ has the meaning given in section 1159 of the Companies Act 2006; ‘transmittee’ means a person entitled to a share by reason of the death or bankruptcy of a shareholder or otherwise by operation of law; and ‘writing’ means the representation or reproduction of words, symbols or other information in a visible form by any method or combination of methods, whether sent or supplied in electronic form or otherwise. 1.2. Unless the context otherwise requires, other words or expressions contained in these articles bear the same meaning as in the Companies Act 2006 as in force on the date when these articles become binding on the company. 1.3. Model articles shall not apply. Neither the model articles for private companies limited by shares prescribed pursuant to the 2006 Act, nor any other articles of association (whether prescribed pursuant to the 2006 Act or set out in any other statute, statutory instrument or other subordinate legislation concerning companies) shall apply to the company. 1.4. Except as provided by law or authorised by the directors or an ordinary resolution of the company, no person is entitled to inspect any of the company’s accounting or other records or documents merely by virtue of being a shareholder. 1.5. [The directors may decide to make provision for the benefit of persons employed or formerly employed by the company or any of its subsidiaries (other than a director or former director or shadow director) 365

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in connection with the cessation or transfer to any person of the whole or part of the undertaking of the company or that subsidiary.]

Article 2 Investor provisions1 2.1. Subject to any other provisions of these articles the investor majority shall have the right to: 1.

appoint directors ‘investor director’;

2.

remove the appointed ‘investor directors’;

3.

replace any removed ‘investor directors’.

2.2. Subject to article 2.6 the investor majority shall have the right (in accordance with article 2.1 to appoint two directors at any time. 2.3. The investor majority shall give notice to the company of an appointment or removal of any investor directors. 2.4. The company will pay all expenses reasonably incurred by the investor directors in connection with their respective offices as directors of any group company. 2.5. Throughout any adverse event period if an adverse event notice has been exercised then the right to appoint directors in accordance with article 2.2 shall be any number of directors. 2.6. On any resolution to remove an investor director, the A ordinary shares shall carry at least one vote in excess of 75% of the votes exercisable at the general meeting at which that resolution is proposed. 2.7. The investor majority shall have the right to appoint one person to act as an observer to: 1.

Any board of directors meeting.

2.

Any committee of the board of directors.

3.

The observer shall be entitled to attend and speak at all such meetings and receive copies of all board papers as if he were a director.

4.

The observer shall not be entitled to vote on any resolutions proposed at a board meeting.

5.

The company shall pay reasonable expenses in connection with his attendance at directors meetings.

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Commentary 1 The MBO articles include provisions to enable the investors to hold control over certain aspects of the company. The term ‘investor majority’ typically means that 50% of the investor directors must agree for certain events or procedures to be executed, though the percentage may be changed to suit specific company requirements. Article 2.5 allows the investor directors to take control of the company by appointing unlimited directors to the board should an adverse event take place in addition to article 2.6 which provides weighted voting rights to vote down any proposal to remove an investor director. The main points for the investor here are the ability to appoint two directors, they cannot be removed by the managers and the investors can take control of the board if the company faces liquidation or adverse trading conditions to protect his investment.

Article 3 Company share capital1 3.1. The share capital of the company is comprised of equity shares: 1.

A ordinary shares ‘investor shares’

2.

B ordinary shares ‘management shares’

3.2. Except as otherwise provided in these articles, the equity shares shall rank pari passu in all respects but shall constitute separate classes of shares. 3.3. The company shall be entitled to retain any share certificate(s) relating to employee shares while any such shares remain unvested. 3.4. Subject to investor majority consent and the Companies Act 2006 the company may purchase its own shares. Commentary 1

Article 3 states the two share classes and who holds them. Article 3.2 states the share classes rank equally and are two separate share classes.

Article 4 Dividends1 4.1. Subject to any other provisions in these articles the board of directors shall (with investor consent) decide how any profits are distributed to the both holders of the investor and management shares. 4.2. In any financial year the company’s available profits shall be applied in accordance with this article (4). 4.3. All dividends shall: 1.

accrue on a daily basis assuming a 365-day year;

2.

be expressed net; and

3.

be paid in cash.

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Commentary 1 Article 4 introduces investor consent which allows the investor majority (50% of the shareholders) to provide written authorisation to issue a dividend. Dividends must be paid from the company’s profits (section 830 of the Companies Act 2006). The investors may defer paying dividends in the early years to build reserves. Article 4.1 allows such an eventuality.

Article 5 Liquidation1 5.1. If the company shall enter liquidation or a return of capital event occurs the surplus assets of the company (after the payment of any liabilities due) shall be paid: 1.

first to the A ordinary shareholders in priority to any other class of share an amount equal to the issue price for each A ordinary share held by them; next

2.

to the B ordinary shareholders a sum equal to the issue price for each B ordinary share held by them; and

3.

the balance of any surplus assets shall be distributed among the holders of the equity shares pro rata (as if all share classes represented a single class) to the number of equity shares held.

Commentary 1 The liquidation procedures detailed in article 5 provide protection for the investors in the event of the liquidation of the company or a return of capital. The A Class shares would receive any surpluses first assuming after the payment of debts. Care needs to be taken that the issue price of the shares reflects the intended return derailed in article 5.1.1.

Article 6 Voting general meetings and written resolutions1 6.1. The holder of the A Class ordinary shares shall have the right to: 1.

receive notice all general meetings and proposed written resolutions; and

2. attend; 3.

vote; and

4.

speak at same.

6.2. The holder of the B Class ordinary shares shall have the right to: 1.

receive notice all general meetings and proposed written resolutions; and

2. attend; 3.

vote; and

4.

speak at same. 368

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Article 7 Voting rights1 7.1.

For the purposes of this article an ‘adverse event’ means the: 1. investors acting in good faith and in the opinion of the investor majority deem the company’s trading prospects to have changed significantly; 2. company (or member) is potentially entering insolvency; 3. board is aware of any member(s) in breach of these articles or any other company agreement.

7.2. If the investor majority deem an adverse event has occurred they shall notify the company in writing ‘adverse event notice’. The notice shall specify: 1. the ‘adverse event period’ shall end when the investor majority notifies the company in writing; 2. the A ordinary shares voting rights shall be amended with immediate effect from the date of the adverse event notice; 3. that on a poll every A ordinary shareholder who is present in person (or by proxy) has [100] votes for every A ordinary share held by him. 7.3. A resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is duly demanded in accordance with the articles. 7.4. Subject to any special rights attached to the investor or management share classes or in accordance with any provisions of these articles each shareholder shall (at a general meeting) have one vote on: 1. a resolution on a poll; or 2. a written resolution. 7.5. For the avoidance of doubt; (subject to article 7.6) every shareholder shall have one vote for each equity share he holds subject to any special rights or restrictions attached to any share class or pursuant to these articles. 7.6.

At the discretion of the investor majority if a shareholding is subject to a transfer notice then his share shall not be counted in: 1. a general meeting; 2. any written ordinary resolution; 3. any written special resolution.

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7.7. Any manger subject to a transfer notice shall not confer the right to receive notice of, attend or vote at any general meeting of the company (or meeting of any class of shareholder) and that share shall not be counted: 1.

in determining the total number of votes which may be cast at that meeting;

2.

for the purposes of a written resolution; or

3.

for the purposes of a written consent of any shareholder or class of shareholders; or

4.

entitle the shareholder who holds that share to participate in any allotment of shares pursuant to article 9.

Commentary 1 Articles 6 and 7 describe the procedures and rights to receive information about proposed meetings and the voting rights at any meeting for the two classes of shareholders. The ‘step-in-rights’ outlined in article 7.1–7.2 allow the investors to step in if the company is becoming insolvent (the main concern for an investor in a small to medium sized company), article 7.5 reiterates the equal voting structure which is important to the managers. From the manager’s perspective if the investors are going to continually fetter their voting rights with draconian weighted voting rights and step-in-right clauses it may cause the decision-making process to become tainted. The investors will not want shareholding managers who are exiting the company to impede meetings by voting against resolutions or generally causing problems for the board. Articles 7.6 and 7.7 restrict a manager who has executed a share transfer notice from attending meetings.

Article 8 Variation of class rights1 8.1. Any special rights attached to any company shares class may only be varied or abrogated (either whilst the company is a going concern or during or in contemplation of a winding-up) in accordance with the following articles: 1.

The A Class ‘investor shares’ may only be varied or abrogated with investor majority consent.

2.

The B Class ‘manager shares’ may only be varied or abrogated with the agreement in writing of at least three quarters in nominal value of the issued shares of that class; or a special resolution passed at a separate general meeting.

8.2. The following events shall be deemed a variation of class rights and shall be subject to this article (8): 1.

[Event 1].

2.

[Event 2].

8.3. The creation of a new class of shares which has preferential rights to the existing company shares shall not constitute a variation of the rights of those existing classes of shares. 370

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Commentary 1





Variation of share rights is outlined in section 630 of the Companies Act 2006.The articles are permitted to make specific provisions under section 630(2)(b). If the articles are silent (and article 8 is omitted) then variations are dealt with in accordance with section 630(4) which requires a consent in writing from the holders of at least three-quarters in nominal value of the issued shares of that class or a special resolution passed at a general meeting. The investors may suggest an increase on the 75% threshold. It should be noted the percentage cannot be less than the statutory amount, therefore care should be taken when setting the level of investor majority consent. Article 8.1.2 includes the two options for the B Class shares for smaller companies. The onerous requirements for the agreement to be in writing or to hold a formal meeting could be removed. Which actions may deem a variation of class rights are unclear and are subject to common law. The Companies Act 2006 does not provide a definition of variation. Therefore article 8.2 may include company specific events that may occur where the investors would be assured the variation would follow the procedure outlined in article 8.1. Conversely article 8.3 states any events where an event is not a variation.

Article 9 Pre-emption: allotment of new shares or other securities1 9.1. Directors are without conditions ‘authorised’ by the company for the purpose of section 551 of the Companies Act 2006 subject to the provisions of this Article 9 to allot shares in the company, or to grant rights to subscribe to or to convert any security into shares in the company. To any person subject to any terms and conditions the directors may agree provided that: 1.

the maximum amount of shares that may be allotted is [£];

2.

if ‘authorised’ the expiry must be not more than five years from the company’s date of incorporation; or the date on which the resolution is passed by virtue of which the authorisation is given.

9.2. An ordinary resolution of the company may vary, revoke or renew the ‘authorised’ directors. 9.3. Subject to section 571 of the Companies Act 2006 and the company passing a special resolution to make an offer otherwise on a pre-emptive basis new securities shall not be allotted to any person unless the company has first offered them to: 1.

A Ordinary Shares ‘investor shares’; and

2.

B Ordinary Shares ‘management shares’.

9.4. The offer of equity securities shall be in electronic form ‘offer notice’ to all shareholders of the company at that time. The ‘offer notice’ shall stipulate the: 1. proposed number of equity securities for allotment ‘proposed securities’;

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2.

‘offer price’ per equity security;

3.

‘offer period’ at least 14 days from the date of the ‘offer notice’;

4.

‘proposed securities’ shall be offered on the same terms and the same ‘offer price’ being offered to other persons;

5.

‘proposed securities’ shall be on a pari passu basis.

9.5. The company shall allot the ‘proposed securities’ in relevant proportions to the shareholders who have applied for them on a pro rata basis to the number of shares held by that person in the same share class. 9.6. Any ‘proposed securities’ not allotted ‘unallotted shares’ shall be disposed of as the investor majority see fit. 9.7. The disposable of any ‘unallotted shares’ shall not be on terms more favourable than those offered to the shareholders. 9.8. Sections 561(1) and 562(1)–(5) (inclusive) of the Companies Act 2006 do not apply to an allotment of equity securities made by the company. Commentary 1 The Companies Act 2006 provides statutory pre-emption rights (section 561) and a procedure the company must follow to allot shares (section 562). It is standard practice to use (section 568) and disapply the statutory powers and allow the articles to confer any rights of pre-emption. Article 9 provides a mechanism of pre-emption for the shareholders to ensure that any allotment of new shares is first offered to both classes of shares. This ensures no shareholding is diluted. Sections 561–562 are disapplied and a less formal procedure for allotment is introduced. Article 9.1 details the statutory requirements of section 551 of the Companies Act 2006 and must not be omitted.

Article 10 Share transfers: general 10.1. Any reference to ‘share transfer’ in these articles includes the transfer or assignment of any beneficial or other interest and the creation of a trust or encumbrance over a shareholding. 10.2. Shares shall be transferred by means of a transfer form. The company shall not charge a fee for registering any transfer form or associated documents. The company may and its discretion retain any transfer form which is registered. 10.3. No share may be transferred unless the transfer is made in accordance with these articles. 10.4. The directors shall refuse to register a ‘share transfer’ only if authorised by these articles. 10.5. Any ‘share transfer’ will be deemed to include a warranty that the transferor sells with full title guarantee.

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10.6. With the exception of [permitted, compulsory, drag along] no ‘ordinary shares’ shall be transferred without: 1. [‘investor consent’]; 2. [‘investor majority’]; 3. to any person not already a member or whom the directors shall not approve.

Article 11 Permitted transfer managers1 11.1. For the purpose of this article ‘excluded person’ shall mean a person who is a leaver or an employee who has given or been given notice to terminate his contract of employment with any group company and following that termination will cease to be an employee. 11.2. Any manager may at any time transfer shares held by him to any family member ‘relevant family member’ provided that: 1. he is not an excluded person; 2. after registration of any share transfer (to a family member or trustee) the manager must hold at least 30% in his own name; 3. the share transfer is approved (in advance of any transfer) by the investor majority; 4. the terms of any transfer (on approval of the investor majority) are approved by the directors. 11.3. The relevant family member shall undertake to discharge any voting rights in accordance with directions from the manager: 1. In accordance with (drag along) the relevant family member agrees to provide unconditional and irrevocable authority to the manager to sell each share being transferred to him. 11.4. Any shares transferred by a ‘manager’ to a ‘relevant family member’ in accordance with article 11.2 is entitled to transfer shares held by him in accordance with article 11.5. 11.5. In the event shares are transferred by a ‘manager’ in accordance with article 11.2 to a ‘relevant family member’ then that ‘relevant family member’ in receipt of the share transfer shall be permitted to transfer to another ‘relevant family member’ of the ‘manager’ without restriction. The provisions of article 11.3 shall apply. Article 11.2 shall not apply.

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Commentary 1 Article 11 allows the manager to transfer his shares to a family member and for that family member to transfer to another family member. The ability to transfer shares is important for both tax and estate planning purposes. The investors must agree to the first transfer, however permission is not required for a secondary transfer to a family member. Article 11.3 ensures the manager who transfer his shares retains control over the voting rights of his shares.

Article 12 Permitted transfers: family members1 12.1. For the purpose of this article 12 Permitted transfers: family members: 1. ‘Privileged relation’ means: a spouse, civil partner, [brother or sister] [half-blood brother or sister] full blood child or grandchild [including step or adopted or illegitimate child and their issue]. 2. ‘Shareholder’ means any holder of any B Class shares. 12.2. A ‘shareholder’ may transfer his ‘shares’ to any ‘privileged relation’ without restriction. [provided that no shareholder after the registration of a ‘share transfer’ would be left with no shares]. 12.3. Any shares transferred by a ‘ shareholder’ to a ‘privileged relation’ in accordance with article 12.2 is entitled to transfer shares held by him in accordance with article 12.4. 12.4. In the event shares are transferred by a ‘shareholder’ in accordance with article 12.2 to a ‘privileged relation’ then that ‘privileged relation’ in receipt of the share transfer shall be permitted to transfer to another ‘privileged relation’ of the ‘original shareholder’ without restriction. Article 12.2 shall not apply. 12.5. Termination of a ‘privileged relation’. 12.6. If shares are transferred to a ‘privileged relation’ in accordance with article 12.2 or article 12.4 and he ceases to be a ‘privileged relation’ of the ‘original shareholder’ by divorce or otherwise then within 14 days of ceasing they shall: 1. notify the company in writing and execute and deliver to the company a ‘transfer notice’ of the shares held by him to: 2. the ‘original shareholder’; or the ‘privileged relation’ of the ‘original shareholder’ for such consideration as may be agreed between them or execute a ‘transfer notice’ in accordance with article 36 in Precedent 1 Voluntary transfers. 12.7. If a ‘former privileged relation’ of an ‘original shareholder’ fails to comply he shall be deemed to have immediately given a transfer notice. 12.8. The directors at their discretion are authorised to appoint any person as agent to execute and deliver the required transfer form (or any other documents they see fit) on behalf of the ‘former privileged relation’. 374

Precedent 4: Management Buyout Articles of Association

12.9. The directors are authorised to take any action they deem appropriate at any time to execute the transfer of the shares held by the ‘former privileged relation’ in accordance with this article. Commentary 1 Article 12 gives rights of shares transfers for any roll-over family members. For a full discussion see the family business precedent.

Article 13 Obligation to refuse a share transfer1 13.1. The directors are authorised by these articles and shall refuse to register a transfer if the share transfer is to: 1. a bankrupt; 2. a minor; 3. a person of unsound mind.

Article 14 Family trusts1 14.1. For the purpose of this article ‘family trusts’ means trusts a settlement by [declaration of trust or other trust Instrument] or under a testamentary disposition or on an intestacy. 14.2. Subject to article 16 no ‘share transfer’ may be effected to trustees without ‘investor consent’. The directors shall at their discretion only agree a ‘share transfer’ on any terms they see fit and only if they are satisfied: 1. with the trust terms, conditions and restrictions; 2. with the identity of the proposed trustees; 3. that the proposed transfer will not result in [50]% or more of the aggregate of the company’s equity share capital being held by trustees of that and any other trusts; 4. that no costs incurred in connection with the setting up or administration of the family trust in question are to be paid by the company.

Article 15 Transfers to the company1 15.1. Any shareholder may at any time transfer any shares to the company in accordance with the Companies Act 2006 and these articles.

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Commentary 1 Articles 13–15 are based on Precedent 1: Family Business Articles of Association.

Article 16 Permitted transfers by investors1 16.1. Subject to any other provision of these articles the following transfers of shares may be made by the investor directors without restriction or any authorisation: 16.2. [transfer to a holding company]; 16.3. [company investment trust]; 16.4. [trustee or trust]; 16.5. [company investment investor]; 16.6. [company investment house]; 16.7. [company fund manager]. Commentary 1

For the majority of small to medium sized private limited companies article 16 is unlikely to be utilised in the articles. If the investors have sought funding from private equity then the option to transfer shares to that entity may be required. Therefore the article is entirely optional and company specific.

Article 17 Mandatory transfers in respect of leavers1 17.1. From the relevant leaving date to the [enter years applicable] anniversary of that leaving date at the discretion of the board of directors they shall serve a written notice ‘transfer notice’ to the leaver stating with immediate effect the relevant leaver shall be deemed to have service a notice of transfer. 17.2. For the purposes of this article a good leaver shall mean any leaver who: 1. dies; 2. has a bankruptcy order made against him; 3. is the transmittee of any shareholder. 4. suffers permanent disability or incapacity through ill health; or 5. retires at normal retirement age. 17.3. A bad leaver means a leaver other than a good leaver or a very bad leaver who is: 1. wrongfully dismissed; or 2. unfairly dismissed; or

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3. in the reasonable opinion of the investor majority should be considered a bad leaver. 17.4. A very bad leaver is a leaver who leaves as a result of: 1. dismissal for gross misconduct; or 2. the submission of his resignation. 17.5. Subject to these articles or any other company agreement of the shareholders the ‘sale price’ shall be: 1. good leaver: the fair price; 2. bad leaver: the lower of the issue price and the fair price; 3. very bad leaver: the sum of [£10.00 or other value]. 17.6. The company shall in writhing within 14 days of the transfer notice inform the leaver of the ‘sale price’ of their shareholding; the ‘sale shares’. 17.7. If the parties fail to agree a ‘sale price’ within 7 business days the company will immediately appoint the ‘expert’ to determine the fair price for the ‘sale shares’. 17.8. The expert will be a firm of chartered accountants nominated by the company. 17.9. The ‘expert’ shall certify the ‘fair price’ as soon as possible and will without evidence of inaccuracy or fault be final and binding on the ‘seller’ and the company. 17.10. The cost of obtaining the ‘fair price’ will be paid by the company. 17.11. The expert shall consider in his determination the following assumptions: 1. that a willing seller and buyer exist; 2. that there is no reduction for a minority shareholding; 3. that the value of each shareholding should be valued pro rata based on the whole value of the company’s issued shares; 4. that any compulsory share transfer in accordance with these articles shall be ignored. 17.12. Sale shares pre-emption 17.13. The company shall offer the sale shares (with investor majority consent) at the sale price (in the following order) to any persons who: 1. may replace the leaver; or 2. hold the same class of shares as the leaver; or

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3. hold A Class ordinary shares

(together an ‘offeree’).

17.14. If an offeree applies for those sale shares the company shall (with investor consent) within 7 days after receipt of that application allocate to that offeree the number of sale shares applied for. 17.15. If none of the sale shares are allocated the sale shares shall be allocated as the board of directors (with investor consent) see fit. Commentary 1 The mandatory leavers provisions in the case of an MBO differs from the normal good leaver and bad leaver to include a very bad leaver. The purpose of this is to encourage the managers and any rolled over family members to keep their shares in the early years of the company. If the manager tenders his resignation he will receive a nominal £10.00 and certainly not receive back his initial investment. Article 17.1 allows a two-year period to execute the deemed transfer notice by the board which contrasts with the normal immediate transfer notice. This allows rolled over family members (who we may assume are nearing retirement age) who may exit the company to retain their shareholding without evoking the harsh sale price of a very bad leaver. Article 17.12 provides a simple pre-emption procedure, firstly offering the shares to a new manager who may replace the leaver, then offering them to other managers if all or some are unallocated. If the sale shares are unallocated article 17.15 allows the board to decide the allocation. The more complex allocation procedures detailed in the family business precedent could be adapted and inserted here if required.

Article 18 Drag along provisions 18.1. If the investor majority wish to transfer all interest in their shares to a third party purchaser (‘ the purchaser’) at arm’s length they will have the option (‘drag option’) to require the remaining holders of any ordinary shares (the ‘dragged shareholders’) to transfer their shares to the ‘purchaser’ in accordance with this article. 18.2. The drag option shall be exercised by the shareholder majority by written notice (the ‘drag notice’). It shall specify the: 1. identity of the ‘purchaser’; 2. proposed date for completion (which shall not be less than 14 days after the drag notice); 3. price (‘drag price’) for any ‘dragged shareholders’ ordinary shares; 4. dragged shareholders are required to transfer their ordinary shares in accordance with these articles. 18.3. The ‘drag notice’ shall be irrevocable but will lapse if there is not a sale by the shareholder majority within 90 days of the drag notice being issued. 18.4. The ‘shareholder majority’ shall be entitled to serve further drag notices in accordance with article 18.3. 378

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18.5. Any routine transfer notice (that may have been served in accordance with these articles) in respect of any shares shall automatically be revoked by the service of a drag notice. 18.6. The ‘drag price’ shall be equal to the price per ordinary share (in cash or otherwise) receivable by the ‘shareholder majority’. For the avoidance of doubt if any disputes arise in the calculation of the drag price then: 1. the company will immediately appoint the ‘expert’ to determine the fair price for the ‘sale shares’; 2. the expert will be a firm of chartered accountants nominated by the ‘dragged shareholders’ and the company; 3. the ‘expert’ shall certify the ‘fair price’ as soon as possible and it will without evidence of mistake or fault be final and binding on the ‘dragged shareholders’; 4. the cost of obtaining the ‘fair price’ (unless the directors decide otherwise) will be financed by the company. 18.7. Within 5 days of the ‘drag price’ being agreed in accordance with article 18.6 the company shall issue each dragged shareholder a ‘dragged completion notice’ which specifies they shall deliver on the ‘drag completion date’: 1. executed stock transfer forms in favour of the purchaser; 2. share certificates or an indemnity for any lost or defaced share certificates; 3. any other executed agreement as specified by the company

(together the ‘drag documents’).

18.8. On the drag completion date: 1. Unless otherwise agreed by the directors the completion of the transfer of shares shall be at the company’s registered office. 2. Unless agreed otherwise, the transfer and payment of the shares held by the ‘shareholder majority’ and the ‘dragged shareholders’ shall take place on the same day. 3. If a ‘dragged shareholder’ fails to deliver any ‘drag document’ the company is authorised to appoint any person as agent of that ‘dragged shareholder’ to execute any transfer forms (or any other dragged document) as necessary to execute the share transfer to the ‘purchaser’. 4. For the avoidance of doubt (and subject to any provisions in the Companies Act 2006) the provisions of this article 18 shall prevail over any conflicting provisions of these articles.

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Article 19 Liability of members 19.1. The liability of the members is limited to the amount, if any, unpaid on the shares held by them.

Article 20 Directors’ general authority 20.1. Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company.

Article 21 Shareholders’ reserve power1 21.1. The shareholders may (with investor consent) by special resolution, direct the directors to take, or refrain from taking, specified action. 21.2. No such special resolution invalidates anything which the directors have done before the passing of the resolution. Commentary 1 Article 21 is adapted from article 4 of the model articles for a private company limited by shares with the addition of requiring investor consent (article 21.1).

Article 22 Directors may delegate1 22.1. Subject to these articles and with investor consent, the directors may delegate any of the powers which are conferred on them under the articles: 1. to such person or committee; 2. by such means (including by power of attorney); 3. to such an extent; 4. in relation to such matters or territories; 5. and on such terms and conditions,

as they think fit.

22.2. If the directors so specify, any such delegation may authorise further delegation of the directors’ powers by any person to whom they are delegated.

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22.3. The directors may revoke any delegation in whole or part, or alter its terms and conditions. Commentary 1 Article 22 is adapted from article 5 of the model articles for a private company limited by shares with the addition of requiring investor consent (article 22.1).

Article 23 Committees1 23.1. Committees to which the directors delegate any of their powers must follow procedures which are based as far as they are applicable on those provisions of the articles which govern the taking of decisions by directors. 23.2. Subject to investor consent the directors may make rules of procedure for all or any committees, which prevail over rules derived from the articles if they are not consistent with them. Commentary 1 Article 23 is adapted from article 6 of the model articles for a private company limited by shares with the addition of requiring investor consent (article 23.2).

Article 24 Directors to take decisions collectively 24.1. The general rule about decision-making by directors is that any decision of the directors must be either a majority decision at a meeting or a decision taken in accordance with article 25.

Article 25 Unanimous decisions 25.1. A decision of the directors is taken in accordance with this article when all eligible directors indicate to each other by any means that they share a common view on a matter. 25.2. Such a decision may take the form of a resolution in writing, copies of which have been signed by each eligible director or to which each eligible director has otherwise indicated agreement in writing. 25.3. References in this article to eligible directors are to directors who would have been entitled to vote on the matter had it been proposed as a resolution at a directors’ meeting. 25.4. A decision may not be taken in accordance with this article if the eligible directors would not have formed a quorum at such a meeting.

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Article 26 Calling a directors’ meeting 26.1. Any director may call a directors’ meeting by giving notice of the meeting to the directors or by authorising the company secretary (if any) to give such notice. 26.2. Notice of any directors’ meeting must indicate: 1. its proposed date and time; 2. where it is to take place; and 3. if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting. 26.3. Notice of a directors’ meeting must be given to each director, but need not be in writing. 26.4. Notice of a directors’ meeting need not be given to directors who waive their entitlement to notice of that meeting, by giving notice to that effect to the company not more than 7 days after the date on which the meeting is held. Where such notice is given after the meeting has been held, that does not affect the validity of the meeting, or of any business conducted at it.

Article 27 Participation in directors’ meetings 27.1. Subject to the articles, directors participate in a directors’ meeting, or part of a directors’ meeting, when the meeting has been called and takes place in accordance with the articles, and they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting. 27.2. In determining whether directors are participating in a directors’ meeting, it is irrelevant where any director is or how they communicate with each other. 27.3. If all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as taking place wherever any of them is.

Article 28 Quorum for directors’ meetings1 28.1. At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. 28.2. The quorum for directors’ meetings is two and shall include one investor director or his alternative. 382

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28.3. If the total number of directors for the time being is less than the quorum required in accordance with article 28.2 then the meeting shall be adjoined and rescheduled for the following week at the same place and time or another date agreed by the board. The same directors shall attend. Commentary 1 Article 28 is adapted from article 11 of the model articles for a private company limited by shares with the addition of a requirement for the quorum to contain one investor director or his alternative (article 28.2). The model articles allow for directors to be appointed to form a quorum. On the basis a quorum cannot be formed article 28.3 simply adjourns the meeting.

Article 29 Chairing of directors’ meetings1 29.1. If the chairman is not participating in a directors’ meeting within ten minutes of the time at which it was to start, the participating directors may appoint an investor director to chair the meeting. Commentary 1 Article 29 is adapted from article 12 of the model articles for a private company limited by shares with the addition of requiring only an investor director to chair a meeting.

Article 30 Chairman’s casting vote 30.1. The chairman shall not have a casting vote.

Article 31 Situational conflicts of interest 31.1. A director of the company must avoid a situation in which he can have a direct or indirect interest that conflicts or possibly may conflict with the interests of the company. 31.2. Any director in breach of article 31.1 is deemed a ‘conflicted director’. 31.3. Subject to the provisions of section 175 of the Companies Act 2006 and the provisions of this article the directors may authorise a ‘conflicted director’. 31.4. An ‘authorisation’ is effective only if: 1. any requirement as to the quorum at the meeting at which the matter is considered is met without counting the director in question or any other interested director; and 2. the matter was agreed to without their voting or would have been agreed to if their votes had not been counted.

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31.5. In accordance with section 175(5)(a) of the Companies Act 2006 in respect to a ‘conflicted director’ who has proposed that the board of directors authorise (‘board authorisation’) his conflicted interest, the board of directors may: 1. apply such terms and conditions as they see fit to any authorisation; 2. vary or terminate any authorisation at any time by the directors or committee as they see fit from time to time. 31.6. ‘Shareholder authorisation’ means the shareholders may also authorise a conflict by ordinary resolution. 31.7. In respect to a ‘conflicted director’ who has proposed that the shareholders authorise his conflicted interest, the shareholders may for the avoidance of doubt: 1. apply such terms and conditions as they see fit to any ‘shareholder authorisation’; 2. vary or terminate by ordinary resolution any ‘shareholder authorisation’ as they see fit from time to time. 31.8. If the ‘conflicted director’ receives ‘board authorisation’ or ‘shareholder authorisation’ they: 1. may take additional general or specific measures to manage the conflict of interest by adhering to any procedures specified in the ‘authorisation’; 2. may exclude themselves from general information or documents that specifically relate to matters pertaining to the ‘conflicted director’; 3. may absent himself from any discussion in meetings or discussions where any matter relating to that conflict may be discussed or considered. 31.9. Subject to article 31.8 they are not required to disclose to the company any benefit he or any of his connected persons derive as a result of any ‘authorised conflict’. 31.10. If a ‘conflicted director’ receives information in respect of which he owes a duty of confidentiality to a person other than the company, he shall not be required: 1. to disclose any information to the company or to any director, or to any officer or employee of the company; 2. to use such confidential information for the purpose of or in connection with the performance of his duties as a director.

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Article 32 Transactional conflicts of interest 32.1. If a ‘conflicted director’ of the company is directly or indirectly interested in a proposed transaction ‘transaction’ or arrangement with the company he must declare the nature and extent of that interest to the other directors. 32.2. Subject to the provisions of section 177 and section 182 of the Companies Act 2006: 1. If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decision-making process for quorum or voting purposes. 2. [If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director may be counted as participating in the decision-making process for quorum or voting purposes.] 32.3. The ‘conflicted director’ shall not be required to disclose to the company any benefit he or any of his connected persons derive as a result of any ‘authorised conflict’.

Article 33 Records of decisions to be kept 33.1. The directors must ensure that the company keeps a record, in writing, for at least 10 years from the date of the decision recorded, of every unanimous or majority decision taken by the directors.

Article 34 Directors’ discretion to make further rules1 34.1. Subject to the articles, the directors (with investor consent) may make any rule which they think fit about how they take decisions, and about how such rules are to be recorded or communicated to directors. Commentary 1 Article 34 is adapted from article 16 of the model articles for a private company limited by shares with the addition of requiring investor consent (article 34.1).

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Article 35 Methods of appointing directors1 35.1. Subject to article 2.2 any person who is willing to act as a director and is permitted by law to do so may be appointed to be a director: 1. by ordinary resolution; 2. by a decision of the directors. Commentary 1 Article 35 is adapted from article 17 of the model articles for a private company limited by shares which is, subject to article 2.2, the right for the investor majority to appoint two directors. The last two paragraphs of the model articles provisions for providing for appointing a director (should there be none) and the ability for the transmittee to appoint a director are omitted.

Article 36 Termination of directors by the board1 In accordance with any other provisions in these articles the company may by ordinary resolution at a meeting remove a director before the expiration of his period of office subject to any other agreement between him and the company. Commentary 1 Article 36 does not appear in the model articles for a private company limited by shares and is added for clarity.

Article 37 Immediate termination of director’s appointment1 37.1. A person ceases to be a director as soon as: 1. that person ceases to be a director by virtue of any provision of the Companies Act 2006 or is prohibited from being a director by law; 2. a bankruptcy order is made against that person; 3. a composition is made with that person’s creditors generally in satisfaction of that person’s debts; 4. a registered medical practitioner who is treating that person gives a written opinion to the company stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months; 5. notification is received by the company from the director that the director is resigning from office, and such resignation has taken effect in accordance with its terms;

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6. he is convicted of a criminal offence that in the judgement of the board of directors is detrimental to the company. Commentary 1

Article 37 is adapted from the model articles for a private company limited by shares with the addition of article 37.1.6. The director would immediately vacate his directorship if convicted of a criminal offence deemed by the board to be detrimental to the company.

Article 38 Directors’ remuneration 38.1. Directors may undertake any services for the company that the directors decide. 38.2. Directors are entitled to such remuneration as the directors determine: 1. for their services to the company as directors, and 2. for any other service which they undertake for the company. 38.3. Subject to the articles, a director’s remuneration may: 1. take any form, and 2. include any arrangements in connection with the payment of a pension, allowance or gratuity, or any death, sickness or disability benefits, to or in respect of that director. 38.4. Unless the directors decide otherwise, directors’ remuneration accrues from day to day. 38.5. Unless the directors decide otherwise, directors are not accountable to the company for any remuneration which they receive as directors or other officers or employees of the company’s subsidiaries or of any other body corporate in which the company is interested.

Article 39 Directors’ expenses 39.1. The company may pay any reasonable expenses which the directors properly incur in connection with their attendance at: 1. meetings of directors or committees of directors; 2. general meetings; 3. separate meetings of the holders of any class of shares or of debentures of the company, or otherwise in connection with the exercise of their powers and the discharge of their responsibilities in relation to the company.

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Article 40 Appointment and removal of alternates 40.1. Any director (the ‘appointor’) may appoint as an alternate any other director, or any other person approved by resolution of the directors to: 1. exercise that director’s powers; 2. carry out that director’s responsibilities; 3. in relation to the taking of decisions by the directors in the absence of the alternate’s appointor. 40.2. Any appointment or removal of an alternate must be effected by notice in writing to the company signed by the appointor, or in any other manner approved by the directors. 40.3. The notice must: 1. identify the proposed alternate, and 2. in the case of a notice of appointment, contain a statement signed by the proposed alternate that the proposed alternate is willing to act as the alternate of the director giving the notice.

Article 41 Rights and responsibilities of alternate directors 41.1. An alternate director has the same rights, in relation to any directors’ meeting or directors’ written resolution, as the alternate’s appointor. 41.2. Except as the articles specify otherwise, alternate directors: 1. are deemed for all purposes to be directors; 2. are liable for their own acts and omissions; 3. are subject to the same restrictions as their appointors; and 4. are not deemed to be agents of or for their appointors. 41.3. A person who is an alternate director but not a director may be counted as participating for the purposes of determining whether a quorum is participating (but only if that person’s appointor is not participating) and may sign a written resolution (but only if it is not signed or to be signed by that person’s appointor). 41.4. No alternate may be counted as more than one director for such purposes. 41.5. An alternate director is not entitled to receive any remuneration from the company for serving as an alternate director except such part of the alternate’s appointor’s remuneration as the appointor may direct by notice in writing made to the company. 388

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Article 42 Termination of alternate directorship 42.1. An alternate director’s appointment as an alternate terminates when the alternate’s appointor revokes the appointment by notice to the company in writing specifying when it is to terminate: 1. on the occurrence in relation to the alternate of any event which, if it occurred in relation to the alternate’s appointor, would result in the termination of the appointor’s appointment as a director; 2. on the death of the alternate’s appointor; or 3. when the alternate’s appointor’s appointment as a director terminates, except that an alternate’s appointment as an alternate does not terminate when the appointor retires by rotation at a general meeting and is then re-appointed as a director at the same general meeting.

Article 43 All shares to be fully paid up 43.1. No share is to be issued for less than the aggregate of its nominal value and any premium to be paid to the company in consideration for its issue. 43.2. Article 43.1 does not apply to shares taken on the formation of the company by the subscribers to the company’s memorandum.

Article 44 Powers to issue different classes of share 44.1. Subject to the articles, but without prejudice to the rights attached to any existing share, the company may issue shares with such rights or restrictions as may be determined by ordinary resolution. 44.2. The company may issue shares which are to be redeemed, or are liable to be redeemed at the option of the company or the holder, and the directors may determine the terms, conditions and manner of redemption of any such shares.

Article 45 Company not bound by less than absolute interests 45.1. Except as required by law, no person is to be recognised by the company as holding any share upon any trust, and except as otherwise required by law or the articles, the company is not in any way to be bound by or recognise any interest in a share other than the holder’s absolute ownership of it and all the rights attaching to it. 389

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Article 46 Share certificates 46.1. The company must issue each shareholder, free of charge, with one or more certificates in respect of the shares which that shareholder holds. 46.2. Every certificate must specify: 1. in respect of how many shares, of what class, it is issued; 2. the nominal value of those shares; 3. that the shares are fully paid; 4. any distinguishing numbers assigned to them. 46.3. No certificate may be issued in respect of shares of more than one class. 46.4. If more than one person holds a share, only one certificate may be issued in respect of it. 46.5. Certificates must: 1. have affixed to them the company’s common seal; 2. be otherwise executed in accordance with the Companies Acts.

Article 47 Replacement share certificates 47.1. If a certificate issued in respect of a shareholder’s shares is: 1. damaged; 2. defaced; 3. lost; 4. stolen; or 5. destroyed. 47.2. The shareholder is entitled to be issued with a replacement certificate in respect of the same shares. 47.3. A shareholder exercising the right to be issued with a replacement certificate: 1. may at the same time exercise the right to be issued with a single certificate or separate certificates; 2. must return the certificate which is to be replaced to the company if it is damaged or defaced; and 3. must comply with such conditions as to evidence, indemnity and the payment of a reasonable fee as the directors decide.

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Article 48 Transmission of shares 48.1. If title to a share passes to a transmittee, the company may only recognise the transmittee as having any title to that share. 48.2. A transmittee who produces such evidence of entitlement to shares as the directors may properly require may, subject to the articles, choose either to become the holder of those shares or to have them transferred to another person, and subject to the articles, and pending any transfer of the shares to another person, has the same rights as the holder had. 48.3. But transmittees do not have the right to attend or vote at a general meeting, or agree to a proposed written resolution, in respect of shares to which they are entitled, by reason of the holder’s death or bankruptcy or otherwise, unless they become the holders of those shares.

Article 49 Exercise of transmittees’ rights 49.1. Transmittees who wish to become the holders of shares to which they have become entitled must notify the company in writing of that wish. 49.2. If the transmittee wishes to have a share transferred to another person, the transmittee must execute an instrument of transfer in respect of it. 49.3. Any transfer made or executed under this article is to be treated as if it were made or executed by the person from whom the transmittee has derived rights in respect of the share, and as if the event which gave rise to the transmission had not occurred.

Article 50 Transmittees bound by prior notices 50.1. If a notice is given to a shareholder in respect of shares and a transmittee is entitled to those shares, the transmittee is bound by the notice if it was given to the shareholder before the transmittee’s name has been entered in the register of members.

Article 51 Procedure for declaring dividends 51.1. Subject to investor consent and in accordance with article 4 of these articles the company may by ordinary resolution declare dividends. 51.2. The directors may decide to pay interim dividends: 1. A dividend must not be declared unless the directors have made a recommendation to its amount.

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2. Any dividend must not exceed the amount recommended by the directors in accordance with article 51.2.1. 3. No dividend may be declared or paid unless it is in accordance with shareholders’ respective rights. 51.3. Unless the shareholders’ resolution to declare or directors’ decision to pay a dividend, or the terms on which shares are issued, specify otherwise, it must be paid by reference to each shareholder’s holding of shares on the date of the resolution or decision to declare or pay it. 51.4. If the company’s share capital is divided into different classes, no interim dividend may be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrear. 51.5. The directors may pay at intervals any dividend payable at a fixed rate if it appears to them that the profits available for distribution justify the payment. 51.6. If the directors act in good faith, they do not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on shares with deferred or non-preferred rights.

Article 52 Payment of dividends and other distributions 52.1. Where a dividend or other sum which is a distribution is payable in respect of a share, it shall be paid by transfer to a bank or building society account specified by the relevant ‘distribution recipient’ or any other means of payment as the directors agree with the distribution recipient either in writing or by such other means as the directors decide. 52.2. In this article the ‘distribution recipient’ means, in respect of a share in respect of which a dividend or other sum is payable: 1. the holder of the share; 2. if the share has two or more joint holders, whichever of them is named first in the register of members; 3. if the holder is no longer entitled to the share by reason of death or bankruptcy, or otherwise by operation of law, the transmittee.

Article 53 No interest on distributions 53.1. The company may not pay interest on any dividend or other sum payable in respect of a share unless otherwise provided by: 1. the terms on which the share was issued; or 2. the provisions of another agreement between the holder of that share and the company. 392

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Article 54 Unclaimed distributions 54.1. All dividends or other sums which are payable in respect of shares, and unclaimed after having been declared or become payable: 1. may be invested or otherwise made use of by the directors for the benefit of the company until claimed. 54.2. The payment of any such dividend or other sum into a separate account does not make the company a trustee in respect of it. 54.3. If twelve years have passed from the date on which a dividend or other sum became due for payment, and the distribution recipient has not claimed it, the distribution recipient is no longer entitled to that dividend or other sum and it ceases to remain owing by the company.

Article 55 Non-cash distributions 55.1. Subject to the terms of issue of the share in question, the company may, by ordinary resolution on the recommendation of the directors, decide to pay all or part of a dividend or other distribution payable in respect of a share by transferring non-cash assets of equivalent value (including, without limitation, shares or other securities in any company). 55.2. For the purposes of paying a non-cash distribution, the directors may make whatever arrangements they think fit, including, where any difficulty arises regarding the distribution: 1. fixing the value of any assets; 2. paying cash to any distribution recipient on the basis of that value in order to adjust the rights of recipients; and 3. vesting any assets in trustees.

Article 56 Waiver of distributions 56.1. Distribution recipients may waive their entitlement to a dividend or other distribution payable in respect of a share by giving the company notice in writing to that effect. 56.2. If the share has more than one holder or more than one person is entitled to the share whether by reason of the death or bankruptcy of one or more joint holders or otherwise the notice is not effective unless it is expressed to be given, and signed by all the holders or persons otherwise entitled to the share.

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Article 57 Authority to capitalise and appropriation of capitalised sums 57.1. Subject to these articles, the directors may, if they are so authorised by an ordinary resolution: 1. decide to capitalise any profits of the company (whether or not they are available for distribution) which are not required for paying a preferential dividend, or any sum standing to the credit of the company’s share premium account or capital redemption reserve; and 2. appropriate any sum which they so decide to capitalise (a ‘capitalised sum’) to the persons who would have been entitled to it if it were distributed by way of dividend (the ‘persons entitled’) and in the same proportions. 57.2. Capitalised sums must be applied: 1. on behalf of the persons entitled; and 2. in the same proportions as a dividend would have been distributed to them. 57.3. Any capitalised sum may be applied in paying up new shares of a nominal amount equal to the capitalised sum which are then allotted credited as fully paid to the persons entitled or as they may direct. 57.4. A capitalised sum which was appropriated from profits available for distribution may be applied in paying up new debentures of the company which are then allotted credited as fully paid to the persons entitled or as they may direct. 57.5. Subject to the articles the directors may: 1. apply capitalised sums in accordance with paragraphs 57.3 and 57.4 partly in one way and partly in another; 2. make such arrangements as they think fit to deal with shares or debentures becoming distributable in fractions under this article (including the issuing of fractional certificates or the making of cash payments); and 3. authorise any person to enter into an agreement with the company on behalf of all the persons entitled which is binding on them in respect of the allotment of shares and debentures to them under this article.

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Article 58 Attendance and speaking at general meetings 58.1. A person is able to exercise the right to speak at a general meeting when that person is in a position to communicate to all those attending the meeting, during the meeting, any information or opinions which that person has on the business of the meeting. 58.2. A person is able to exercise the right to vote at a general meeting when: 1. that person is able to vote, during the meeting, on resolutions put to the vote at the meeting; and 2. that person’s vote can be taken into account in determining whether or not such resolutions are passed at the same time as the votes of all the other persons attending the meeting. 58.3. The directors may make whatever arrangements they consider appropriate to enable those attending a general meeting to exercise their rights to speak or vote at it. 58.4. In determining attendance at a general meeting, it is immaterial whether any two or more members attending it are in the same place as each other. 58.5. Two or more persons who are not in the same place as each other attend a general meeting if their circumstances are such that if they have (or were to have) rights to speak and vote at that meeting, they are (or would be) able to exercise them.

Article 59 Quorum for general meetings 59.1. No business other than the appointment of the chairman of the meeting is to be transacted at a general meeting if the persons attending it do not constitute a quorum.

Article 60 Chairing general meetings 60.1. If the directors have appointed a chairman, the chairman shall chair general meetings if present and willing to do so. 60.2. If the directors have not appointed a chairman, or if the chairman is unwilling to chair the meeting or is not present within ten minutes of the time at which a meeting was due to start the directors holding A Class ordinary shares: 1. must appoint a director or shareholder to chair the meeting, and the appointment of the chairman of the meeting must be the first business of the meeting.

395

Precedent 4: Management Buyout Articles of Association

60.3. The person chairing a meeting in accordance with this article is referred to as ‘the chairman of the meeting’.

Article 61 Attendance and speaking by directors and non-shareholders 61.1. Directors may attend and speak at general meetings, whether or not they are shareholders. 61.2. The chairman of the meeting may permit other persons who are not shareholders of the company to exercise the rights of shareholders in relation to general meetings, to attend and speak at a general meeting.

Article 62 Adjournment 62.1. If the persons attending a general meeting within half an hour of the time at which the meeting was due to start do not constitute a quorum, or if during a meeting a quorum ceases to be present, the chairman of the meeting must adjourn it. 62.2. The chairman of the meeting may adjourn a general meeting at which a quorum is present if: 1. the meeting consents to an adjournment; or 2. it appears to the chairman of the meeting that an adjournment is necessary to protect the safety of any person attending the meeting or ensure that the business of the meeting is conducted in an orderly manner. 62.3. The chairman of the meeting must adjourn a general meeting if directed to do so by the meeting. 62.4. When adjourning a general meeting, the chairman of the meeting must: 1. either specify the time and place to which it is adjourned or state that it is to continue at a time and place to be fixed by the directors; and 2. have regard to any directions as to the time and place of any adjournment which have been given by the meeting. 62.5. If the continuation of an adjourned meeting is to take place more than 14 days after it was adjourned, the company must give at least 7 clear days’ notice of it (that is, excluding the day of the adjourned meeting and the day on which the notice is given): 1. to the same persons to whom notice of the company’s general meetings is required to be given, and containing the same information which such notice is required to contain. 396

Precedent 4: Management Buyout Articles of Association

62.6. No business may be transacted at an adjourned general meeting which could not properly have been transacted at the meeting if the adjournment had not taken place.

Article 63 Voting: general 63.1. A resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is duly demanded in accordance with the articles.

Article 64 Errors and disputes 64.1. No objection may be raised to the qualification of any person voting at a general meeting except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting is valid. 64.2. Any such objection must be referred to the chairman of the meeting, whose decision is final.

Article 65 Poll votes 65.1. A poll on a resolution may be demanded in advance of the general meeting where it is to be put to the vote, or at a general meeting, either before a show of hands on that resolution or immediately after the result of a show of hands on that resolution is declared. 65.2. A poll may be demanded by: 1. the chairman of the meeting; 2. the directors; 3. two or more persons having the right to vote on the resolution; or 4. a person or persons representing not less than one tenth of the total voting rights of all the shareholders having the right to vote on the resolution. 65.3. A demand for a poll may be withdrawn if: 1. the poll has not yet been taken; and 2. the chairman of the meeting consents to the withdrawal. 65.4. Polls must be taken immediately and in such manner as the chairman of the meeting directs.

397

Precedent 4: Management Buyout Articles of Association

Article 66 Content of proxy notices 66.1. Proxies may only validly be appointed by a notice in writing (a ‘proxy notice’). The proxy notice shall: 1. state the name and address of the member appointing the proxy; 2. identify the person appointed to be that member’s proxy; 3. state the general meeting in relation to which that person is appointed; 4. be signed by or on behalf of the member appointing the proxy, or is authenticated in such manner as the directors may determine; 5. be delivered to the company in accordance with the articles and any instructions contained in the notice of the general meeting to which they relate. 66.2. The company may require proxy notices to be delivered in a particular form, and may specify different forms for different purposes. 66.3. Proxy notices may specify how the proxy appointed under them is to vote (or that the proxy is to abstain from voting) on one or more resolutions. 66.4. Unless a proxy notice indicates otherwise it shall be treated as: 1. allowing the person appointed under it as a proxy discretion as to how to vote on any ancillary or procedural resolutions put to the meeting, and appointing that person as a proxy in relation to any adjournment of the general meeting to which it relates as well as the meeting itself.

Article 67 Delivery of proxy notices 67.1. A person who is entitled to attend, speak or vote (either on a show of hands or on a poll) at a general meeting remains so entitled in respect of that meeting or any adjournment of it, even though a valid proxy notice has been delivered to the company by or on behalf of that person. 67.2. An appointment under a proxy notice may be revoked by delivering to the company a notice in writing given by or on behalf of the person by whom or on whose behalf the proxy notice was given. 67.3. A notice revoking a proxy appointment only takes effect if it is delivered before the start of the meeting or adjourned meeting to which it relates. 67.4. If a proxy notice is not executed by the person appointing the proxy, it must be accompanied by written evidence of the authority of the person who executed it to execute it on the appointor’s behalf.

398

Precedent 4: Management Buyout Articles of Association

Article 68 Amendments to resolutions 68.1. An ordinary resolution to be proposed at a general meeting may be amended by ordinary resolution if: 1. notice of the proposed amendment is given to the company in writing by a person entitled to vote at the general meeting at which it is to be proposed not less than 48 hours before the meeting is to take place (or such later time as the chairman of the meeting may determine); and 2. the proposed amendment does not, in the reasonable opinion of the chairman of the meeting, materially alter the scope of the resolution. 68.2. A special resolution to be proposed at a general meeting may be amended by ordinary resolution if: 1. the chairman of the meeting proposes the amendment at the general meeting at which the resolution is to be proposed, and 2. the amendment does not go beyond what is necessary to correct a grammatical or other non-substantive error in the resolution. 68.3. If the chairman of the meeting, acting in good faith, wrongly decides that an amendment to a resolution is out of order, the chairman’s error does not invalidate the vote on that resolution.

Article 69 Means of communication to be used 69.1. Subject to the articles, anything sent or supplied by or to the company under the articles may be sent or supplied in any way in which the Companies Act 2006 provides for documents or information which are authorised or required by any provision of that Act to be sent or supplied by or to the company. 69.2. Subject to the articles, any notice or document to be sent or supplied to a director in connection with the taking of decisions by directors may also be sent or supplied by the means by which that director has asked to be sent or supplied with such notices or documents for the time being. 69.3. A director may agree with the company that notices or documents sent to that director in a particular way are to be deemed to have been received within a specified time of their being sent, and for the specified time to be less than 48 hours.

399

Precedent 4: Management Buyout Articles of Association

Article 70 Company seals 70.1. Any common seal may only be used by the authority of the directors. The directors may decide by what means and in what form any common seal is to be used. 70.2. Unless otherwise decided by the directors, if the company has a common seal and it is affixed to a document, the document must also be signed by at least one authorised person in the presence of a witness who attests the signature. 70.3. For the purposes of this article an authorised person is: 1. any director of the company; 2. any person authorised by the directors for the purpose of signing documents to which the common seal is applied.

Article 71 Indemnity 71.1. Subject to paragraph 71.2 only in relation to the club any relevant director may be indemnified out of the club’s resources against any liability incurred by that director in connection with any: 1. negligence; 2. default; 3. breach of duty; 4. breach of trust; 5. [liability incurred by that director in connection with the activities of the club in its capacity as a trustee of an occupational pension scheme (as defined in section 235(6) of the Companies Act 2006)]; 6. liability incurred by that director as an officer of the club. 71.2. This article does not authorise any indemnity which would be prohibited or rendered void by any provision of the Companies Acts or by any other provision of law. 71.3. The directors may decide to purchase and maintain insurance, at the expense of the company, for the benefit of any relevant director in respect of any relevant loss. 71.4. In this article ‘relevant director’ means any director or former director of the club. A ‘relevant loss’ means any loss or liability which has been or may be incurred by a relevant director in connection with that director’s duties or powers in relation to the club or any pension fund or employees’ share scheme.

400

Appendix A  Tables of Derivations Table of Derivations 2006 Model Articles PCLS 2006 Model Articles PCLS 1. Defined Terms

1985 Table A Regulation 1. Regulations for Management of A (Private) Company Limited by Shares

2. Liability of Members

Memorandum of Association

3. Directors’ General Authority 4. Shareholders’ Reserve Power

70. Powers of Directors

5. Directors May Delegate

71. Powers of Directors 72. Delegation of Directors’ Powers 84. Directors’ Appointments and Interests 72. Delegation of Directors’ Powers

6. Committees 7. Directors to Take Decisions Collectively 8. Unanimous Decisions 9. Calling A Directors’ Meeting 10. Participation in Directors’ Meetings 11. Quorum for Directors’ Meetings 12. Chairing of Directors’ Meetings

Other Derivation

70. Powers of Directors

88. Proceedings of Directors 88, 93. Proceedings of Directors 88. Proceedings of Directors 88. Proceedings of Directors 89, 90. Proceedings of Directors 91. Proceedings of Directors

401

Appendix A

2006 Model Articles PCLS 13. Casting Vote

1985 Table A Regulation

15. Records of Decisions to Be Kept 16. Directors’ Discretion to Make Further Rules 17. Methods of Appointing Directors 18. Termination of Director’s Appointment 19. Directors’ Remuneration

100. Minutes

Other Derivation

50. Proceedings at General Meetings 88. Proceedings of Directors 14. Conflicts of Interest 94–98. Proceedings of Directors

88. Proceedings of Directors

78, 79. Appointment and Retirement of Directors 81. Disqualification and Removal of Directors 82. Remuneration of Directors 84. Directors’ Appointments and Interests 87. Directors’ Gratuities and Pensions 20. Directors’ Expenses 83. Directors’ Expenses 21. All Shares to Be Fully Paid Up 22. Powers to Issue 2, 3. Share Capital Different Classes of Share 23. Company Not 5. Share Capital Bound by Less Than Absolute Interests 24. Share Certificates 6. Share Certificates 25. Replacement Share 7. Share Certificates Certificates 26. Share Transfers 23–28. Transfer of Shares 27. Transmission of 29–31. Transmission of Shares Shares 28. Exercise of 31. Transmission of Shares Transmittees’ Rights 29. Transmittees Bound by Prior Notices

402

New

New

Appendix A

2006 Model Articles PCLS 30. Procedure for Declaring Dividends 31. Payment of Dividends and Other Distributions 32. No Interest on Distributions 33. Unclaimed Distributions 34. Non-Cash Distributions 35. Waiver of Distributions 36. Authority to Capitalize and Appropriation of Capitalized Sums 37. Attendance and Speaking at General Meetings 38. Quorum for General Meetings 39. Chairing General Meetings 40. Attendance and Speaking by Directors and Non-Shareholders 41. Adjournment

1985 Table A Regulation

Other Derivation

102, 103. Dividends 106. Dividends 107. Dividends 108. Dividends 105. Dividends New 110. Capitalisation of Profits

New 40. Proceedings at General Meetings 42, 43. Proceedings at General Meetings 44. Proceedings at General Meetings

41, 45. Proceedings at General Meetings 42.Voting: General 46. Proceedings at General Meetings 43. Errors and Disputes 58.Votes of Members 44. Poll Votes 46, 48–51. Proceedings at General Meetings 45. Content of Proxy 60, 61.Votes of Members Notices 46. Delivery of Proxy 62.Votes of Members Notices

403

Appendix A

2006 Model Articles PCLS 47. Amendments to Resolutions 48. Means of Communication to Be Used 49. Company Seals 50. No Right to Inspect Accounts and Other Records 51. Provision for Employees on Cessation of Business 52. Indemnity 53. Insurance

1985 Table A Regulation

Other Derivation New

112. Notices 101. The Seal 109. Accounts New 118. Indemnity New

Table of Derivations (2006) Private Companies Limited by Guarantee Article 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1985 Table A Regulation 1

Other Derivation

Memorandum of association 70 70 71, 72, 84 72 88 88, 93 88 88 89 50, 91 88 94, 95, 96, 98 100 88

404

Appendix A

Article 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

1985 Table A Regulation 78, 79 81 82, 84, 87 83

Other Derivation

1985 Table C, reg 3 1985 Table C, reg 4 NEW 40 42, 43 44 41, 45, 46 58 58 46, 48, 49, 51, 60, 61 62 62 112 NEW 101 109 NEW 118 NEW

Table of Derivations (2006) Private Companies Limited by PLC Article 1 2 3 4 5 6

1985 Table A Regulation 1

Other Derivation Memorandum of association

70 70 71, 72, 84 72

405

Appendix A

Article 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41

1985 Table A Regulation 88 88 88 89 90 91

Other Derivation

New 50, 88 88 94, 95, 96, 98 93 93, 100 88 78, 79 73, 74 81 82, 84, 87 83 65, 68 66, 69 68 New New 40 42, 43 44 41, 45 46 58 46, 48 49, 51, 52 60, 61 62 New 57

406

Appendix A

Article 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76

1985 Table A Regulation

Other Derivation New

2, 3 4 5 6 6 6 7 New New 8 9, 10, 11 12 14, 17 16 15 18 19 19, 20, 21 20, 22 New 23, 24, 27, 28 24 29 30 31 New 33 102, 103 104 106 New 107 108 105

407

Appendix A

Article 77 78 79 80 81 82 83

1985 Table A Regulation

Other Derivation New

110 112 New 101 New 109

408

Appendix B  Comparison of the Companies Act 1985 (1986 in Northern Ireland) Table A with the Companies Act 2006 Model Articles Note: this table indicates which provisions of each set of model articles correspond to each regulation of the 1985 (1986 in Northern Ireland) Table A. In some cases, the 2006 Act model articles provisions are not identical in substance with the Table A provisions to which they correspond. Key: ‘pcls’ = ‘private company limited by shares’, ‘plc’ = ‘public limited company’ and ‘clg’ = ‘private company limited by guarantee’ TABLE SUBJECT A REG MATTER INTERPRETATION 1 Definitions SHARE CAPITAL 2 Company may determine rights of shares 3 Power to issue redeemable shares 4 Power to pay commissions

5

PCLS PLC CLG COMMENTS MODEL MODEL MODEL ARTICLE ARTICLE ARTICLE 1

1

1

22(1)

43(1)

N/A

22(2)

43(2)

N/A

Omitted

44

N/A

45

N/A

46-48

N/A

Company not 23 to recognise holding of shares on trust etc SHARE CERTIFICATES 6 Issue of share 24 certificates

409

Unlikely to be relevant to most small private companies See also Companies Act 2006, s 126

Appendix B TABLE SUBJECT A REG MATTER 7 LIEN 8

9

10

11

Replacement of share certificates Company’s lien on partly paid shares Power to sell shares subject to lien Arrangements for sale of shares subject to lien Proceeds of sale of shares subject to lien

PCLS MODEL ARTICLE 25

PLC MODEL ARTICLE 49

CLG COMMENTS MODEL ARTICLE N/A

Omitted

52

N/A

Omitted

53(1), (2)

N/A

Omitted

53(3)

N/A

Omitted

53(4)

N/A

CALLS ON SHARES AND FORFEITURE 12 Power to make Omitted 54, 55(1) calls on partly paid shares 13 When call Omitted Omitted deemed to be made 14 Joint holders’ Omitted 55(2) liability to pay calls 15 Interest on Omitted 57 unpaid calls 16 Deemed calls Omitted 56 17 Differentiation Omitted 55(3) of shares as regards calls 18 Notice requiring Omitted 58 payment of unpaid call

410

N/A

N/A

N/A

N/A N/A N/A

N/A

pcls model articles have been drafted on the assumption that most small private companies will not wish to issue partly paid shares (other than to subscribers on formation) and will therefore not need to make provision for the company to have a lien on such shares. See article 21 pcls Pcls model articles have been drafted on the assumption that most small private companies will not wish to issue partly paid shares (other than to subscribers on formation) and will therefore not need to make provision for the company to make calls on and forfeit such shares.

Appendix B TABLE SUBJECT A REG MATTER 19

20

Power to forfeit shares where calls remain unpaid Dealing with forfeited shares

PCLS MODEL ARTICLE Omitted

PLC MODEL ARTICLE 59, 60(1)

Omitted

60(1), (4), 61(1) 60(3)

21

Effect of Omitted forfeiture 22 Title to forfeited Omitted shares TRANSFER OF SHARES 23 Form of 26(1) instrument of transfer of shares 24 Power of 26(5) directors to refuse to register transfer of shares

25

26

27

CLG COMMENTS MODEL ARTICLE N/A See article 21 pcls. Table A reg 13 omitted from plc model articles as unnecessary N/A N/A

61(2), (3)

N/A

63(1)

N/A

63(5)

N/A

Refusal to register transfer to be notified within two months Power to suspend registrations of transfers

Omitted

Omitted

N/A

N/A

N/A

N/A

No fee to be charged for registering transfer

26(2)

63(2)

N/A

411

pcls model articles do not specify grounds for directors to refuse to register transfers: more discretionary approach is in keeping with small company practice Provided for in Companies Act 2006, s 771

Companies Act 2006 does not provide for closure of register of members

Appendix B TABLE SUBJECT A REG MATTER 28

PCLS MODEL ARTICLE 26(3), (5)

PLC MODEL ARTICLE 63(3), (6)

Dealing with instrument of transfer after (non)-registration TRANSMISSION OF SHARES 29 Transmission 27(1) 65 of shares of deceased member 30 Registration of 27(2)(a), 66(1)(a), person entitled 28 67(1), (2), by death or (4) bankruptcy as member 31 Rights of person 27(2)(b), 66(1)(b), entitled by death (3) (2) or bankruptcy ALTERATION OF SHARE CAPITAL 32 Power to Omitted Omitted increase, consolidate etc share capital 33 Procedures Omitted 69 relating to consolidation 34 Power to reduce Omitted Omitted share capital etc

412

CLG COMMENTS MODEL ARTICLE N/A

N/A

N/A

N/A

N/A

N/A

N/A

Companies Act 2006 makes general provision for alteration of share capital (Chapter 8 of Part 17) and removes concept of authorised share capital. As to the capital redemption reserve see ss 733, 734 and 831. Consolidation procedural provision omitted from pcls model articles as unlikely to be required by most small private companies

Appendix B TABLE SUBJECT A REG MATTER

PCLS MODEL ARTICLE PURCHASE OF OWN SHARES 35 Power to Omitted purchase own shares

PLC CLG COMMENTS MODEL MODEL ARTICLE ARTICLE Omitted

N/A

See Companies Act 2006, Part 18, Chapter 4 for provisions governing purchase of own shares

GENERAL MEETINGS 36 Extraordinary N/A general meetings defined

N/A

N/A

37

Omitted

Omitted

Companies Act 2006 does not use the term ‘extraordinary general meeting’ See Companies Act 2006, ss 302-304 for directors’ power or, in some cases, duty to call general meeting

NOTICE OF GENERAL MEETINGS 38 Notice of Omitted Omitted general meetings

Omitted

39

Omitted

Directors’ power/duty to call general meetings

Accidental failure to give notice does not invalidate meeting

Omitted

Omitted

Omitted

PROCEEDINGS AT GENERAL MEETINGS 40 Quorum must 38 30 be present

413

24

See Companies Act 2006, ss 307 and 310 governing requirements for notices of general meetings See Companies Act 2006, s 313 (accidental failure to give notice of resolution or meeting) The quorum for general meetings is provided for in the Companies Act 2006, s 318

Appendix B TABLE SUBJECT A REG MATTER 41

42

43

44

45

46

47

48 49

Adjournment of meeting if quorum not present Chairman or another director to chair general meeting Chairman of general meeting when no director present Non-member directors may attend and speak Chairman’s power/duty to adjourn general meeting Voting methods; conditions for demanding a poll vote Chairman’s declaration of vote result

Withdrawing demand for poll Procedure for taking poll

PCLS MODEL ARTICLE 41(1), (4)

PLC MODEL ARTICLE 33(1), (4)

CLG COMMENTS MODEL ARTICLE 27(1), (4)

39

31

25

39

31

25

40(1)

32(1)

26(1)

41(2), (3), (5), (6)

33(2), (3), (5), -6

27(2), (3), (5), -6

42, 44(2)

34, 36(2)

28, 30(2)

Omitted

Omitted

Omitted

44(3)

36(3)

30(3)

44(4)

37(1), (2), (3)

30(4)

414

See Companies Act 2006, s 320 (declaration by chairman on a show of hands)

Pcls and clg poll provisions simplified because in a small company it should always be possible to take polls immediately

Appendix B TABLE SUBJECT A REG MATTER

PCLS MODEL ARTICLE Omitted

PLC MODEL ARTICLE Omitted

50

Chairman’s casting vote

51

When polls are to be taken

44(4)

37(2)-(6)

52

Notice of polls

Omitted

37(7), (8)

53

Members’ written resolution

Omitted

Omitted

VOTES OF MEMBERS 54 How many votes Omitted per member on show of hands and poll

55

Voting by joint holders

Omitted

CLG COMMENTS MODEL ARTICLE Omitted The effect of the Companies Act 2006 is to prohibit a chairman’s casting vote 30(4) See comment on reg 49; see also additional requirements for quoted companies concerning polls in Chapter 5 of Part 13 of the Companies Act 2006 Omitted See comment on reg 49 Omitted Written resolutions of private companies are provided for in Chapter 2 of Part 13 of the Companies Act 2006

Omitted

Omitted

Omitted

Omitted

415

See Companies Act 2006, ss 284 (votes: general rules), 285 (voting by proxy) and 323 (representation of corporations at meetings), as amended by SI 2009/1632 See Companies Act 2006, s 286 (votes of joint holders of shares)

Appendix B TABLE SUBJECT A REG MATTER 56

57

58 59

60

61

PCLS MODEL ARTICLE Voting on behalf Omitted of mentally incapacitated members Members Omitted who owe the company money in respect of their shares may not vote

PLC MODEL ARTICLE Omitted

Objections to votes Proxy/poll voting

43

35

CLG COMMENTS MODEL ARTICLE Omitted Model articles avoid repetition of general noncompany law N/A As set out above, pcls model articles have been drafted on the assumption that most small private companies will not issue partly paid shares, therefore no provision is needed 29

Omitted

Omitted

Omitted

38

31

38

31

Proxy 45 appointment form (if proxy has discretion as to how to vote) Proxy 45 appointment form (if proxy is to be instructed how to vote)

41

416

See Companies Act 2006, ss 284 (votes: general rules) and 324 (rights to appoint proxies) Model articles adopt an approach of requiring that certain information is included in proxy appointment forms and permitting the company to require use of a particular form, rather than prescribing the actual wording of forms as Table A does

Appendix B TABLE SUBJECT A REG MATTER

PCLS MODEL ARTICLE 46

62

Procedure for appointing proxies

63

Effect of Omitted termination of proxy’s authority

NUMBER OF DIRECTORS 64 Minimum Omitted number of directors

ALTERNATE DIRECTORS 65 Directors Omitted may appoint alternates 66 Alternates’ right Omitted to receive notice of meetings etc 67 Termination Omitted of alternate’s appointment 68 Notifying Omitted company of alternate’s appointment or removal of alternates 69 Legal status of Omitted alternates POWERS OF DIRECTORS 70 Directors’ 3, 4 functions

PLC MODEL ARTICLE 39

Omitted

CLG COMMENTS MODEL ARTICLE 32 See also Companies Act 2006, s 324 (rights to appoint proxies) Omitted See Companies Act 2006, s 330 (notice required of termination of proxy’s authority)

Omitted

Omitted

Model articles do not provide for minimum number of directors

25(1)

Omitted

26(1), (3)

Omitted

27

Omitted

24(2), (3), 27(a)

Omitted

Pcls and clg model articles assume that most small private companies will not want to give directors power to appoint alternates

26(2)

Omitted

3, 4

3, 4

417

See also Companies Act 2006, s 171 (director’s duty to act within powers)

Appendix B TABLE SUBJECT A REG MATTER

PCLS PLC CLG MODEL MODEL MODEL ARTICLE ARTICLE ARTICLE 71 Directors’ power 5 5 5 to appoint agents 72 Directors’ power 5, 6 5, 6 5, 6 to delegate APPOINTMENT AND RETIREMENT OF DIRECTORS 73 Directors’ Omitted 21 Omitted retirement by rotation

74

Which directors Omitted retire by rotation at each AGM

21

Omitted

75

Automatic re-appointment if vacancy not filled New appointments at AGM Notification of candidates for appointment/ re-appointment at AGM

Omitted

Omitted

Omitted

Omitted

Omitted

Omitted

Omitted

Omitted

Omitted

76

77

418

COMMENTS

Pcls and clg model articles do not provide for retirement by rotation, as this is assumed not to be required in most small private companies Plc model articles omit the more complex procedural aspects of Table A provision on appointment of directors at general meetings as unnecessary given the framework in Part 13 of the Companies Act 2006

Appendix B TABLE SUBJECT A REG MATTER 78

PCLS MODEL ARTICLE 17(1)

PLC MODEL ARTICLE 20

CLG COMMENTS MODEL ARTICLE 17(1)

Members’ right to appoint directors 79 Directors’ power 17(1) 20 17(1) to appoint directors 80 Re-appointment Omitted Omitted Omitted of retiring directors DISQUALIFICATION AND REMOVAL OF DIRECTORS 81 When directors’ 18 22 18 appointment terminates automatically REMUNERATION OF DIRECTORS 82 Directors’ 19 23 19 entitlement to remuneration as directors DIRECTORS’ EXPENSES 83 Company may 20 24 20 pay directors’ expenses DIRECTORS’ APPOINTMENTS AND INTERESTS 84 Managing 5, 19 5, 23 5, 19 and executive directors 85 Conflict of Omitted Omitted Omitted interests: exceptions 86 Notification Omitted Omitted Omitted of interests and interests to be disregarded DIRECTORS’ GRATUITIES AND PENSIONS 87 Directors’ 19(3) 23(3) 19(3) pensions etc PROCEEDINGS OF DIRECTORS 88 Directors’ 7-10, 13, 7-9, 14, 7-10, 13, meetings: 16 15, 16 general 19

419

Provisions set out in Chapter 3 of Part 10 of the Companies Act 2006

Appendix B TABLE SUBJECT A REG MATTER 89

Quorum at directors’ meetings 90 Where number of directors less than quorum 91 Chairman of board 92 Acts of persons not properly appointed as directors 93 Written resolutions of directors 94 Conflicted directors may not vote except in certain cases 95 Director not entitled to vote not to count in quorum 96 Suspension of prohibition against voting if conflicted 97 Composite resolutions 98 Resolving questions of entitlement to vote SECRETARY 99 Appointment of secretary

PCLS MODEL ARTICLE 11(1), (2)

PLC MODEL ARTICLE 10

CLG COMMENTS MODEL ARTICLE 11(1), (2)

11(3)

11

11(3)

12

12

12

Omitted

Omitted

Omitted

8(2)

17, 18

8(2)

14

16

14

14(1)

16(1)

14(1)

14(2), (3) (a)

16(2), (3) (a)

14(2), (3) (a)

Omitted

Omitted

Omitted

14(6), (7)

16(5), (6)

14(6), (7)

Omitted

Omitted

Omitted

420

See Companies Act 2006, s 161 (validity of acts of directors)

Unnecessary

Unnecessary for any company (whether or not it chooses to appoint a company secretary, or is obliged to do so under the Companies Act 2006)

Appendix B TABLE SUBJECT A REG MATTER

PCLS PLC CLG COMMENTS MODEL MODEL MODEL ARTICLE ARTICLE ARTICLE

MINUTES 100 Keeping of 15 minutes of directors’/ general meetings THE SEAL 101 Company seal 49 DIVIDENDS 102 Dividends: 30(1)-(3) general 103 Interim 30(1), dividends (4)-(7) 104 Calculation of Omitted dividends 105 Payment of 34 dividends by distribution of assets 106 Payment of 31 dividends 107 No interest on 32 dividends 108 Unclaimed 33 dividends ACCOUNTS 109 Members have 50 no right to inspect company books CAPITALISATION OF PROFITS 110 Capitalisation of 36 profits NOTICES 111 Notices to be in 48 writing

18(4)

15

81

35

70(1)-(3)

N/A

70(1), (4)-(7) 71

N/A

76

N/A

72

N/A

74

N/A

75

N/A

83

36

78

N/A

79, 80

34

421

See also Companies Act 2006, s 248 (minutes of directors’ meetings)

N/A

See also Companies Act 2006, ss 1139-1148 (service of documents; sending or supplying documents or information)

Appendix B TABLE SUBJECT A REG MATTER 112

Method of giving notices under articles

113

Deemed receipt of notices

114

PCLS PLC CLG COMMENTS MODEL MODEL MODEL ARTICLE ARTICLE ARTICLE See Companies Act, s 1147 (deemed delivery of documents and information) 29 68 N/A See Companies Omitted Act 2006, Schedule 5, para 17 (death or bankruptcy of holder of shares) Omitted Omitted

Persons entitled to shares bound by notices 115 Proof of delivery 116 Giving notices Omitted to persons entitled by death/ bankruptcy WINDING UP 117 Liquidator may Omitted divide assets among members in specie INDEMNITY 118 Indemnity for 52 directors in certain cases

Omitted Omitted

Omitted

Omitted

85

38

422

Appendix C Commencement 1st October 2007

COMPANIES (TABLES A TO F) REGULATIONS 1985 AS AMENDED BY SI 2007/2541 and SI 2007/2826 TABLE A Regulations for management of a (private) company limited by shares 1. In these regulations— “the Act” means the Companies Act 1985 including any statutory modification or re-enactment thereof for the time being in force and any provisions of the Companies Act 2006 for the time being in force; “the articles” means the articles of the company; “clear days” in relation to the period of a notice means that period excluding the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect; “communication” means the same as in the Electronic Communications Act 2000; “electronic communication” means the same as in the Electronic Communications Act 2000; “executed” includes any mode of execution; “office” means the registered office of the company; “the holder” in relation to shares means the member whose name is entered in the register of members as the holder of the shares; “the seal” means the common seal of the company; “secretary” means the secretary of the company or any other person appointed to perform the duties of the secretary of the company, including a joint, assistant or deputy secretary; “the United Kingdom” means Great Britain and Northern Ireland. Unless the context otherwise requires, words or expressions contained in these regulations bear the same meaning as in the Act but excluding any statutory

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modification thereof not in force when these regulations become binding on the company.

SHARE CAPITAL 2. Subject to the provisions of the Act and without prejudice to any rights attached to any existing shares, any share may be issued with such rights or restrictions as the company may by ordinary resolution determine. 3. Subject to the provisions of the Act, shares may be issued which are to be redeemed or are to be liable to be redeemed at the option of the company or the holder on such terms and in such manner as may be provided by the articles. 4. The company may exercise the powers of paying commissions conferred by the Act. Subject to the provisions of the Act, any such commission may be satisfied by the payment of cash or by the allotment of fully or partly paid shares or partly in one way and partly in the other. 5. Except as required by law, no person shall be recognised by the company as holding any share upon any trust and (except as otherwise provided by the articles or by law) the company shall not be bound by or recognise any interest in any share except an absolute right to the entirety thereof in the holder.

SHARE CERTIFICATES 6. Every member, upon becoming the holder of any shares, shall be entitled without payment to one certificate for all the shares of each class held by him (and, upon transferring a part of his holding of shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares of any class, to a certificate for the balance of such holding) or several certificates each for one or more of his shares upon payment for every certificate after the first of such reasonable sum as the directors may determine. Every certificate shall be sealed with the seal and shall specify the number, class and distinguishing numbers (if any) of the shares to which it relates and the amount or respective amounts paid up thereon. The company shall not be bound to issue more than one certificate for shares held jointly by several persons and delivery of a certificate to one joint holder shall be a sufficient delivery to all of them. 7. If a share certificate is defaced, worn-out, lost or destroyed, it may be renewed on such terms (if any) as to evidence and indemnity and payment of the expenses reasonably incurred by the company in investigating evidence as the directors may determine but otherwise free of charge, and (in the case of defacement or wearing-out) on delivery up of the old certificate. 424

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LIEN 8. The company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) payable at a fixed time or called in respect of that share. The directors may at any time declare any share to be wholly or in part exempt from the provisions of this regulation. The company’s lien on a share shall extend to any amount payable in respect of it. 9. The company may sell in such manner as the directors determine any shares on which the company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within fourteen clear days after notice has been given to the holder of the share or to the person entitled to it in consequence of the death or bankruptcy of the holder, demanding payment and stating that if the notice is not complied with the shares may be sold. 10. To give effect to a sale the directors may authorise some person to execute an instrument of transfer of the shares sold to, or in accordance with the directions of, the purchaser. The title of the transferee to the shares shall not be affected by any irregularity in or invalidity of the proceedings in reference to the sale. 11. The net proceeds of the sale, after payment of the costs, shall be applied in payment of so much of the sum for which the lien exists as is presently payable, and any residue shall (upon surrender to the company for cancellation of the certificate for the shares sold and subject to a like lien for any moneys not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale.

CALLS ON SHARES AND FORFEITURE 12. Subject to the terms of allotment, the directors may make calls upon the members in respect of any moneys unpaid on their shares (whether in respect of nominal value or premium) and each member shall (subject to receiving at least fourteen clear days’ notice specifying when and where payment is to be made) pay to the company as required by the notice the amount called on his shares. A call may be required to be paid by instalments. A call may, before receipt by the company of any sum due thereunder, be revoked in whole or part and payment of a call may be postponed in whole or part. A person upon whom a call is made shall remain liable for calls made upon him notwithstanding the subsequent transfer of the shares in respect whereof the call was made. 13. A call shall be deemed to have been made at the time when the resolution of the directors authorising the call was passed. 425

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14. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 15. If a call remains unpaid after it has become due and payable the person from whom it is due and payable shall pay interest on the amount unpaid from the day it became due and payable until it is paid at the rate fixed by the terms of allotment of the share or in the notice of the call or, if no rate is fixed, at the appropriate rate (as defined by the Act) but the directors may waive payment of the interest wholly or in part. 16. An amount payable in respect of a share on allotment or at any fixed date, whether in respect of nominal value or premium or as an instalment of a call, shall be deemed to be a call and if it is not paid the provisions of the articles shall apply as if that amount had become due and payable by virtue of a call. 17. Subject to the terms of allotment, the directors may make arrangements on the issue of shares for a difference between the holders in the amounts and times of payment of calls on their shares. 18. If a call remains unpaid after it has become due and payable the directors may give to the person from whom it is due not less than fourteen clear days’ notice requiring payment of the amount unpaid together with any interest which may have accrued. The notice shall name the place where payment is to be made and shall state that if the notice is not complied with the shares in respect of which the call was made will be liable to be forfeited. 19. If the notice is not complied with any share in respect of which it was given may, before the payment required by the notice has been made, be forfeited by a resolution of the directors and the forfeiture shall include all dividends or other moneys payable in respect of the forfeited shares and not paid before the forfeiture. 20. Subject to the provisions of the Act, a forfeited share may be sold, re-alloted or otherwise disposed of on such terms and in such manner as the directors determine either to the person who was before the forfeiture the holder or to any other person and at any time before sale, re-allotment or other disposition, the forfeiture may be cancelled on such terms as the directors think fit. Where for the purposes of its disposal a forfeited share is to be transferred to any person the directors may authorise some person to execute an instrument of transfer of the share to that person. 21. A person any of whose shares have been forfeited shall cease to be a member in respect of them and shall surrender to the company for cancellation the certificate for the shares forfeited but shall remain liable to the company for all moneys which at the date of forfeiture were presently payable by him to the company in respect of those shares with interest at the rate at 426

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which interest was payable on those moneys before the forfeiture or, if no interest was so payable, at the appropriate rate (as defined in the Act) from the date of forfeiture until payment but the directors may waive payment wholly or in part or enforce payment without any allowance for the value of the shares at the time of forfeiture or for any consideration received on their disposal. 22. A statutory declaration by a director or the secretary that a share has been forfeited on a specified date shall be conclusive evidence of the facts stated in it as against all persons claiming to be entitled to the share and the declaration shall (subject to the execution of an instrument of transfer if necessary) constitute a good title to the share and the person to whom the share is disposed of shall not be bound to see to the application of the consideration, if any, nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings in reference to the forfeiture or disposal of the share.

TRANSFER OF SHARES 23. The instrument of transfer of a share may be in any usual form or in any other form which the directors may approve and shall be executed by or on behalf of the transferor and, unless the share is fully paid, by or on behalf of the transferee. 24. The directors may refuse to register the transfer of a share which is not fully paid to a person of whom they do not approve and they may refuse to register the transfer of a share on which the company has a lien.They may also refuse to register a transfer unless— (a) it is lodged at the office or at such other place as the directors may appoint and is accompanied by the certificate for the shares to which it relates and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer; (b) it is in respect of only one class of shares; and (c) it is in favour of not more than four transferees. 25. If the directors refuse to register a transfer of a share, they shall within two months after the date on which the transfer was lodged with the company send to the transferee notice of the refusal. 26. The registration of transfers of shares or of transfers of any class of shares may be suspended at such times and for such periods (not exceeding thirty days in any year) as the directors may determine. 27. No fee shall be charged for the registration of any instrument of transfer or other document relating to or affecting the title to any share. 427

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28. The company shall be entitled to retain any instrument of transfer which is registered, but any instrument of transfer which the directors refuse to register shall be returned to the person lodging it when notice of the refusal is given.

TRANSMISSION OF SHARES 29. If a member dies the survivor or survivors where he was a joint holder, and his personal representatives where he was a sole holder or the only survivor of joint holders, shall be the only persons recognised by the company as having any title to his interest; but nothing herein contained shall release the estate of a deceased member from any liability in respect of any share which had been jointly held by him. 30. A person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as the directors may properly require, elect either to become the holder of the share or to have some person nominated by him registered as the transferee. If he elects to become the holder he shall give notice to the company to that effect. If he elects to have another person registered he shall execute an instrument of transfer of the share to that person. All the articles relating to the transfer of shares shall apply to the notice or instrument of transfer as if it were an instrument of transfer executed by the member and the death or bankruptcy of the member had not occurred. 31. A person becoming entitled to a share in consequence of the death or bankruptcy of a member shall have the rights to which he would be entitled if he were the holder of the share, except that he shall not, before being registered as the holder of the share, be entitled in respect of it to attend or vote at any meeting of the company or at any separate meeting of the holders of any class of shares in the company.

ALTERATION OF SHARE CAPITAL 32. The company may by ordinary resolution— (a) increase its share capital by new shares of such amount as the resolution prescribes; (b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (c) subject to the provisions of the Act, sub-divide its shares, or any of them, into shares of smaller amount and the resolution may determine that, as between the shares resulting from the sub-division, any of them may have any preference or advantage as compared with the others; and

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(d) cancel shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled. 33. Whenever as a result of a consolidation of shares any members would become entitled to fractions of a share, the directors may, on behalf of those members, sell the shares representing the fractions for the best price reasonably obtainable to any person (including, subject to the provisions of the Act, the company) and distribute the net proceeds of sale in due proportion among those members, and the directors may authorise some person to execute an instrument of transfer of the shares to, or in accordance with the directions of, the purchaser.The transferee shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity in or invalidity of the proceedings in reference to the sale. 34. Subject to the provisions of the Act, the company may by special resolution reduce its share capital, any capital redemption reserve and any share premium account in any way.

PURCHASE OF OWN SHARES 35. Subject to the provisions of the Act, the company may purchase its own shares (including any redeemable shares) and, if it is a private company, make a payment in respect of the redemption or purchase of its own shares otherwise than out of distributable profits of the company or the proceeds of a fresh issue of shares.

GENERAL MEETINGS 37. The directors may call general meetings and, on the requisition of members pursuant to the provisions of the Act, shall forthwith proceed to convene a general meeting in accordance with the provisions of the Act. If there are not within the United Kingdom sufficient directors to call a general meeting, any director or any member of the company may call a general meeting.

NOTICE OF GENERAL MEETINGS 38. General meetings shall be called by at least fourteen clear days’ notice but a general meeting may be called by shorter notice if is so agreed by a majority in number of the members having a right to attend and vote being a majority together holding not less than ninety per cent in nominal value of the shares giving that right.

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The notice shall specify the time and place of the meeting and the general nature of the business to be transacted. Subject to the provisions of the articles and to any restrictions imposed on any shares, the notice shall be given to all the members, to all persons entitled to a share in consequence of the death or bankruptcy of a member and to the directors and auditors. 39. The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting.

PROCEEDINGS AT GENERAL MEETINGS 40. No business shall be transacted at any meeting unless a quorum is present. Save in the case of a company with a single member two persons entitled to vote upon the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation, shall be a quorum. 41. If such a quorum is not present within half an hour from the time appointed for the meeting, or if during a meeting such a quorum ceases to be present, the meeting shall stand adjourned to the same day in the next week at the same time and place or to such time and place as the directors may determine. 42. The chairman, if any, of the board of directors or in his absence some other director nominated by the directors shall preside as chairman of the meeting, but if neither the chairman nor such other director (if any) be present within fifteen minutes after the time appointed for holding the meeting and willing to act, the directors present shall elect one of their number to be chairman and, if there is only one director present and willing to act, he shall be chairman. 43. If no director is willing to act as chairman, or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present and entitled to vote shall choose one of their number to be chairman. 44. A director shall, notwithstanding that he is not a member, be entitled to attend and speak at any general meeting and at any separate meeting of the holders of any class of shares in the company. 45. The chairman may, with the consent of a meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at an adjourned meeting other than business which might properly have been transacted at the meeting had the adjournment not taken place. When a 430

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meeting is adjourned for fourteen days or more, at least seven clear days’ notice shall be given specifying the time and place of the adjourned meeting and the general nature of the business to be transacted. Otherwise it shall not be necessary to give any such notice. 46. A resolution put to the vote of a meeting shall be decided on a show of hands unless before, or on the declaration of the result of, the show of hands a poll is duly demanded. Subject to the provisions of the Act, a poll may be demanded— (a) by the chairman; or (b) by at least two members having the right to vote at the meeting; or (c) by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or (d) by a member or members holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right, and a demand by a person as proxy for a member shall be the same as a demand by the member. 47. Unless a poll is duly demanded a declaration by the chairman that a resolution has been carried or carried unanimously, or by a particular majority, or lost, or not carried by a particular majority and an entry to that effect in the minutes of the meeting shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution. 48. The demand for a poll may, before the poll is taken, be withdrawn but only with the consent of the chairman and a demand so withdrawn shall not be taken to have invalidated the result of a show of hands declared before the demand was made. 49. A poll shall be taken as the chairman directs and he may appoint scrutineers (who need not be members) and fix a time and place for declaring the result of the poll. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. 51. A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken either forthwith or at such time and place as the chairman directs not being more than thirty days after the poll is demanded.The demand for a poll shall not prevent the continuance of a meeting for the transaction

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of any business other than the question on which the poll was demanded. If a poll is demanded before the declaration of the result of a show of hands and the demand is duly withdrawn, the meeting shall continue as if the demand had not been made. 52. No notice need be given of a poll not taken forthwith if the time and place at which it is to be taken are announced at the meeting at which it is demanded. In any other case at least seven clear days’ notice shall be given specifying the time and place at which the poll is to be taken.

VOTES OF MEMBERS 54. Subject to any rights or restrictions attached to any shares, on a show of hands every member who (being an individual) is present in person or by proxy or (being a corporation) is present by a duly authorised representative or by proxy, unless the proxy (in either case) or the representative is himself a member entitled to vote, shall have one vote and on a poll every member shall have one vote for every share of which he is the holder. 55. In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and seniority shall be determined by the order in which the names of the holders stand in the register of members. 56. A member in respect of whom an order has been made by any court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder may vote, whether on a show of hands or on a poll, by his receiver, curator bonis or other person authorised in that behalf appointed by that court, and any such receiver, curator bonis or other person may, on a poll, vote by proxy. Evidence to the satisfaction of the directors of the authority of the person claiming to exercise the right to vote shall be deposited at the office, or at such other place as is specified in accordance with the articles for the deposit of instruments of proxy, not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the right to vote is to be exercised and in default the right to vote shall not be exercisable. 57. No member shall vote at any general meeting or at any separate meeting of the holders of any class of shares in the company, either in person or by proxy, in respect of any share held by him unless all moneys presently payable by him in respect of that share have been paid. 58. No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting shall be valid. Any objection made in due time shall be referred to the chairman whose decision shall be final and conclusive. 432

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59. On a poll votes may be given either personally or by proxy. A member may appoint more than one proxy to attend on the same occasion. 60. The appointment of a proxy shall be executed by or on behalf of the appointor and shall be in the following form (or in a form as near thereto as circumstances allow or in any other form which is usual or which the directors may approve)— “……………PLC/Limited …………………………… I/We, ……………, of ……………., being a member/members of the above-named company, hereby appoint …………… of ……………, or failing him, …………… of ……………, as my/our proxy tovote in my/our name[s] and on my/our behalf at the general meeting of the company to be held on …………… 19 ……………, and at any adjournment thereof. Signed on …………… 19 ……………”.

61. Where it is desired to afford members an opportunity of instructing the proxy how he shall act the appointment of a proxy shall be in the following form (or in a form as near thereto as circumstances allow or in any other form which is usual or which the directors may approve)—

“……………PLC/Limited …………………………… I/We, ……………, of ……………, being a member/members of the above-named company, hereby appoint …………… of ……………, or failing him …………… of ……………, as my/our proxy to vote in my/our name[s] and on my/our behalf at the general meeting of the company, to be held on …………… 19 ……………, and at any adjournment thereof. This form is to be used in respect of the resolutions mentioned below as follows:   Resolution No. 1 *for *against   Resolution No. 2 *for *against. *Strike out whichever is not desired. Unless otherwise instructed, the proxy may vote as he thinks fit or abstain from voting. Signed this …………… day of …………… 19 ……………”.

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62. The appointment of a proxy and any authority under which it is executed or a copy of such authority certified notarially or in some other way approved by the directors may— (a) in the case of an instrument in writing be deposited at the office or at such other place within the United kingdom as is specified in the notice convening the meeting or in any instrument of proxy sent out by the company in relation to the meeting not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote; or (aa) in the case of an appointment contained in an electronic communication, where an address has been specified for the purpose of receiving electronic communications— (ii) in the notice convening the meeting, or (iii) in any instrument of proxy sent out by the company in relation to the meeting, or (iv) in any invitation contained in an electronic communication to appoint a proxy issued by the company in relation to the meeting,

be received at such address not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the appointment proposes to vote;

(b) in the case of a poll taken more than 48 hours after it is demanded, be deposited or received as aforesaid after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll; or (c) where the poll is not taken forthwith but is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the poll was demanded to the chairman or to the secretary or to any director, and an appointment of proxy which is not deposited, delivered or received in a manner so permitted shall be invalid. In this regulation and the next, “address”, in relation to electronic communications, includes any number or address used for the purposes of such communications. 63. A vote given or poll demanded by proxy or by the duly authorised representative of a corporation shall be valid notwithstanding the previous determination of the authority of the person voting or demanding a poll unless notice of the determination was received by the company at the office or at such other place at which the instrument of proxy was duly deposited or, where the appointment of the proxy was contained in an electronic

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communication, at the address at which such appointment was duly received before the commencement of the meeting or adjourned meeting at which the vote is given or the poll demanded or (in the case of a poll taken otherwise than on the same day as the meeting or adjourned meeting) the time appointed for taking the poll.

NUMBER OF DIRECTORS 64. Unless otherwise determined by ordinary resolution, the number of directors (other than alternate directors) shall not be subject to any maximum but shall be not less than two.

ALTERNATE DIRECTORS 65. Any director (other than an alternate director) may appoint any other director, or any other person approved by resolution of the directors and willing to act, to be an alternate director and may remove from office an alternate director so appointed by him. 66. An alternate director shall be entitled to receive notice of all meetings of directors and of all meetings of committees of directors of which his appointor is a member, to attend and vote at any such meeting at which the director appointing him is not personally present and generally to perform all the functions of his appointor as a director in his absence but shall not be entitled to receive any remuneration from the company for his services as an alternate director. But it shall not be necessary to give notice of such a meeting to an alternate director who is absent from the United Kingdom. 67. An alternate director shall cease to be an alternate director if his appointor ceases to be a director; but, if a director retires by rotation or otherwise but is reappointed or deemed to have been reappointed at the meeting at which he retires, any appointment of an alternate director made by him which was in force immediately prior to his retirement shall continue after his reappointment. 68. Any appointment or removal of an alternate director shall be by notice to the company signed by the director making or revoking the appointment or in any other manner approved by the directors. 69. Save as otherwise provided in the articles, an alternate director shall be deemed for all purposes to be a director and shall alone be responsible for his own acts and defaults and he shall not be deemed to be the agent of the director appointing him.

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POWERS OF DIRECTORS 70. Subject to the provisions of the Act, the memorandum and the articles and to any directions given by special resolution, the business of the company shall be managed by the directors who may exercise all the powers of the company. No alteration of the memorandum or articles and no such direction shall invalidate any prior act of the directors which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this regulation shall not be limited by any special power given to the directors by the articles and a meeting of directors at which a quorum is present may exercise all powers exercisable by the directors. 71. The directors may, by power of attorney or otherwise, appoint any person to be the agent of the company for such purposes and on such conditions as they determine, including authority for the agent to delegate all or any of his powers.

DELEGATION OF DIRECTORS’ POWERS 72. The directors may delegate any of their powers to any committee consisting of one or more directors. They may also delegate to any managing director or any director holding any other executive office such of their powers as they consider desirable to be exercised by him. Any such delegation may be made subject to any conditions the directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee with two or more members shall be governed by the articles regulating the proceedings of directors so far as they are capable of applying.

APPOINTMENT AND RETIREMENT OF DIRECTORS 76. No person shall be appointed or reappointed a director at any general meeting unless— (a) he is recommended by the directors; or (b) not less than fourteen nor more than thirty-five clear days before the date appointed for the meeting, notice executed by a member qualified to vote at the meeting has been given to the company of the intention to propose that person for appointment or reappointment stating the particulars which would, if he were so appointed or reappointed, be required to be included in the company’s register of directors together with notice executed by that person of his willingness to be appointed or reappointed. 436

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77. Not less than seven nor more than twenty-eight clear days before the date appointed for holding a general meeting notice shall be given to all who are entitled to receive notice of the meeting of any person who is recommended by the directors for appointment or reappointment as a director at the meeting or in respect of whom notice has been duly given to the company of the intention to propose him at the meeting for appointment or reappointment as a director. The notice shall give the particulars of that person which would, if he were so appointed or reappointed, be required to be included in the company’s register of directors. 78. The company may by ordinary resolution appoint a person who is willing to act to be a director either to fill a vacancy or as an additional director and may also determine the rotation in which any additional directors are to retire. 79. The directors may appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director, provided that the appointment does not cause the number of directors to exceed any number fixed by or in accordance with the articles as the maximum number of directors.

DISQUALIFICATION AND REMOVAL OF DIRECTORS 81. The office of a director shall be vacated if— (a) he ceases to be a director by virtue of any provision of the Act or he becomes prohibited by law from being a director; or (b) he becomes bankrupt or makes any arrangement or composition with his creditors generally; or (c) he is, or may be, suffering from mental disorder and either— (i) he is admitted to hospital in pursuance of an application for admission for treatment under the Mental Health Act 1983 or, in Scotland, an application for admission under the Mental Health (Scotland) Act 1960, or (ii) an order is made by a court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder for his detention or for the appointment of a receiver, curator bonis or other person to exercise powers with respect to his property or affairs; or (d) he resigns his office by notice to the company; or (e) he shall for more than six consecutive months have been absent without permission of the directors from meetings of directors held during that period and the directors resolve that his office be vacated.

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REMUNERATION OF DIRECTORS 82. The directors shall be entitled to such remuneration as the company may by ordinary resolution determine and, unless the resolution provides otherwise, the remuneration shall be deemed to accrue from day to day.

DIRECTORS’ EXPENSES 83. The directors may be paid all travelling, hotel, and other expenses properly incurred by them in connection with their attendance at meetings of directors or committees of directors or general meetings or separate meetings of the holders of any class of shares or of debentures of the company or otherwise in connection with the discharge of their duties.

DIRECTORS’ APPOINTMENTS AND INTERESTS 84. Subject to the provisions of the Act, the directors may appoint one or more of their number to the office of managing director or to any other executive office under the company and may enter into an agreement or arrangement with any director for his employment by the company or for the provision by him of any services outside the scope of the ordinary duties of a director. Any such appointment, agreement or arrangement may be made upon such terms as the directors determine and they may remunerate any such director for his services as they think fit. Any appointment of a director to an executive office shall terminate if he ceases to be a director but without prejudice to any claim to damages for breach of the contract of service between the director and the company. A managing director and a director holding any other executive office shall not be subject to retirement by rotation. 85. Subject to the provisions of the Act, and provided that he has disclosed to the directors the nature and extent of any material interest of his, a director notwithstanding his office— (a) may be a party to, or otherwise interested in, any transaction or arrangement with the company or in which the company or in which the company is otherwise interested; (b) may be a director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by the company or in which the company is otherwise interested; and (c) shall not, by reason of his office, be accountable to the company for any benefit which he derives from any such office or employment or from

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any such transaction or arrangement or from any interest in any such body corporate and no such transaction or arrangement shall be liable to be avoided on the ground of any such interest or benefit. 86. For the purposes of regulation 85— (a) a general notice given to the directors that a director is to be regarded as having an interest of the nature and extent specified in the notice in any transaction or arrangement in which a specified person or class of persons is interested shall be deemed to be a disclosure that the director has an interest in any such transaction of the nature and extent so specified; and (b) an interest of which a director has no knowledge and of which it is unreasonable to expect him to have knowledge shall not be treated as an interest of his.

DIRECTORS’ GRATUITIES AND PENSIONS 87. The directors may provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for any director who has held but no longer holds any executive office or employment with the company or with any body corporate which is or has been a subsidiary of the company or a predecessor in business of the company or of any such subsidiary, and for any member of his family (including a spouse and a former spouse) or any person who is or was dependent on him, and may (as well before as after he ceases to hold such office or employment) contribute to any fund and pay premiums for the purchase or provision of any such benefit.

PROCEEDINGS OF DIRECTORS 88. Subject to the provisions of the articles, the directors may regulate their proceedings as they think fit. A director may, and the secretary at the request of a director shall, call a meeting of the directors. It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom. Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A director who is also an alternate director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote. 89. The quorum for the transaction of the business of the directors may be fixed by the directors and unless so fixed at any other number shall be two. A person who holds office only as an alternate director shall, if his appointor is not present, be counted in the quorum.

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90. The continuing directors or a sole continuing director may act notwithstanding any vacancies in their number, but, if the number of directors is less than the number fixed as the quorum, the continuing directors or director may act only for the purpose of filling vacancies or of calling a general meeting. 91. The directors may appoint one of their number to be the chairman of the board of directors and may at any time remove him from that office. Unless he is unwilling to do so, the director so appointed shall preside at every meeting of directors at which he is present. But if there is no director holding that office, or if the director holding it is unwilling to preside or is not present within five minutes after the time appointed for the meeting, the directors present may appoint one of their number to be chairman of the meeting. 92. All acts done by a meeting of directors, or of a committee of directors, or by a person acting as a director shall, notwithstanding that it be afterwards discovered that there was a defect in the appointment of any director or that any of them were disqualified from holding office, or had vacated office, or were not entitled to vote, be as valid as if every such person had been duly appointed and was qualified and had continued to be a director and had been entitled to vote. 93. A resolution in writing signed by all the directors entitled to receive notice of a meeting of directors or of a committee of directors shall be as valid and effectual as it if had been passed at a meeting of directors or (as the case may be) a committee of directors duly convened and held and may consist of several documents in the like form each signed by one or more directors; but a resolution signed by an alternate director need not also be signed by his appointor and, if it is signed by a director who has appointed an alternate director, it need not be signed by the alternate director in that capacity. 94. Save as otherwise provided by the articles, a director shall not vote at a meeting of directors or of a committee of directors on any resolution concerning a matter in which he has, directly or indirectly, an interest or duty which is material and which conflicts or may conflict with the interests of the company unless his interest or duty arises only because the case falls within one or more of the following paragraphs— (a) the resolution relates to the giving to him of a guarantee, security, or indemnity in respect of money lent to, or an obligation incurred by him for the benefit of, the company or any of its subsidiaries; (b) the resolution relates to the giving to a third party of a guarantee, security, or indemnity in respect of an obligation of the company or any of its subsidiaries for which the director has assumed responsibility in whole or part and whether alone or jointly with others under a guarantee or indemnity or by the giving of security;

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(c) his interest arises by virtue of his subscribing or agreeing to subscribe for any shares, debentures, or other securities of the company or any of its subsidiaries, or by virtue of his being, or intending to become, a participant in the underwriting or sub-underwriting of an offer of any such shares, debentures, or other securities by the company or any of its subsidiaries for subscription, purchase or exchange; (d) the resolution relates in any way to a retirement benefits scheme which has been approved, or is conditional upon approval, by the Board of Inland Revenue for taxation purposes. For the purposes of this regulation, an interest of a person who is, for any purpose of the Act (excluding any statutory modification thereof not in force when this regulation becomes binding on the company), connected with a director shall be treated as an interest of the director and, in relation to an alternate director, an interest of his appointor shall be treated as an interest of the alternate director without prejudice to any interest which the alternate director has otherwise. 95. A director shall not be counted in the quorum present at a meeting in relation to a resolution on which he is not entitled to vote. 96. The company may by ordinary resolution suspend or relax to any extent, either generally or in respect of any particular matter, any provision of the articles prohibiting a director from voting at a meeting of directors or of a committee of directors. 97. Where proposals are under consideration concerning the appointment of two or more directors to offices or employments with the company or any body corporate in which the company is interested the proposals may be divided and considered in relation to each director separately and (provided he is not for another reason precluded from voting) each of the directors concerned shall be entitled to vote and be counted in the quorum in respect of each resolution except that concerning his own appointment. 98. If a question arises at a meeting of directors or of a committee of directors as to the right of a director to vote, the question may, before the conclusion of the meeting, be referred to the chairman of the meeting and his ruling in relation to any director other than himself shall be final and conclusive.

SECRETARY 99. Subject to the provisions of the Act, the secretary shall be appointed by the directors for such term, at such remuneration and upon such conditions as they may think fit; and any secretary so appointed may be removed by them.

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MINUTES 100. The directors shall cause minutes to be made in books kept for the purpose— (a) of all appointments of officers made by the directors; and (b) of all proceedings at meetings of the company, of the holders of any class of shares in the company, and of the directors, and of committees of directors, including the names of the directors present at each such meeting.

THE SEAL 101. The seal shall only be used by the authority of the directors or of a committee of directors authorised by the directors. The directors may determine who shall sign any instrument to which the seal is affixed and unless otherwise so determined it shall be signed by a director and by the secretary or by a second director.

DIVIDENDS 102. Subject to the provisions of the Act, the company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the directors. 103. Subject to the provisions of the Act, the directors may pay interim dividends if it appears to them that they are justified by the profits of the company available for distribution. If the share capital is divided into different classes, the directors may pay interim dividends on shares which confer deferred or non-preferred rights with regard to dividend as well as on shares which confer preferential rights with regard to dividend, but no interim dividend shall be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrear. The directors may also pay at intervals settled by them any dividend payable at a fixed rate if it appears to them that the profits available for distribution justify the payment. Provided the directors act in good faith they shall not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on any shares having deferred or non-preferred rights.

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104. Except as otherwise provided by the rights attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid. All dividends shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid; but, if any share is issued on terms providing that it shall rank for dividend as from a particular date, that share shall rank for dividend accordingly. 105. A general meeting declaring a dividend may, upon the recommendation of the directors, direct that it shall be satisfied wholly or partly by the distribution of assets and, where any difficulty arises in regard to the distribution, the directors may settle the same and in particular may issue fractional certificates and fix the value for distribution of any assets and may determine that cash shall be paid to any member upon the footing of the value so fixed in order to adjust the rights of members and may vest any assets in trustees. 106. Any dividend or other moneys payable in respect of a share may be paid by cheque sent by post to the registered address of the person entitled or, if two or more persons are the holders of the share or are jointly entitled to it by reason of the death or bankruptcy of the holder, to the registered address of that one of those persons who is first named in the register of members or to such person and to such address as the person or persons entitled may in writing direct. Every cheque shall be made payable to the order of the person or persons entitled or to such other person as the person or persons entitled may in writing direct and payment of the cheque shall be a good discharge to the company. Any joint holder or other person jointly entitled to a share as aforesaid may give receipts for any dividend or other moneys payable in respect of the share. 107. No dividend or other moneys payable in respect of a share shall bear interest against the company unless otherwise provided by the rights attached to the share. 108. Any dividend which has remained unclaimed for twelve years from the date when it became due for payment shall, if the directors so resolve, be forfeited and cease to remain owing by the company.

ACCOUNTS 109. No member shall (as such) have any right of inspecting any accounting records or other book or document of the company except as conferred by statute or authorised by the directors or by ordinary resolution of the company.

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CAPITALISATION OF PROFITS 110. The directors may with the authority of an ordinary resolution of the company— (a) subject as hereinafter provided, resolve to capitalise any undivided profits of the company not required for paying any preferential dividend (whether or not they are available for distribution) or any sum standing to the credit of the company’s share premium account or capital redemption reserve; (b) appropriate the sum resolved to be capitalised to the members who would have been entitled to it if it were distributed by way of dividend and in the same proportions and apply such sum on their behalf either in or towards paying up the amounts, if any, for the time being unpaid on any shares held by them respectively, or in paying up in full unissued shares or debentures of the company of a nominal amount equal to that sum, and allot the shares or debentures credited as fully paid to those members, or as they may direct, in those proportions, or partly in one way and partly in the other: but the share premium account, the capital redemption reserve, and any profits which are not available for distribution may, for the purposes of this regulation, only be applied in paying up unissued shares to be allotted to members credited as fully paid; (c) make such provision by the issue of fractional certificates or by payment in cash or otherwise as they determine in the case of shares or debentures becoming distributable under this regulation in fractions; and (d) authorise any person to enter on behalf of all the members concerned into an agreement with the company providing for the allotment to them respectively, credited as fully paid, of any shares or debentures to which they are entitled upon such capitalisation, any agreement made under such authority being binding on all such members.

NOTICES 111. Any notice to be given to or by any person pursuant to the articles (other than a notice calling a meeting of the directors) shall be in writing or shall be given using electronic communications to an address for the time being notified for that purpose to the person giving the notice. In this regulation, “address”, in relation to electronic communications, includes any number or address used for the purposes of such communications.

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112. The company may give any notice to a member either personally or by sending it by post in a prepaid envelope addressed to the member at his registered address or by leaving it at that address or by giving it using electronic communications to an address for the time being notified to the company by the member. In the case of joint holders of a share, all notices shall be given to the joint holder whose name stands first in the register of members in respect of the joint holding and notice so given shall be sufficient notice to all the joint holders. A member whose registered address is not within the United Kingdom and who gives to the company an address within the United Kingdom at which notices may be given to him, or an address to which notices may be sent using electronic communications, shall be entitled to have notices given to him at that address, but otherwise no such member shall be entitled to receive any notice from the company. In this regulation and the next, “address”, in relation to electronic communications, includes any number or address used for the purposes of such communications. 113. A member present, either in person or by proxy, at any meeting of the company or of the holders of any class of shares in the company shall be deemed to have received notice of the meeting and, where requisite, of the purposes for which it was called. 114. Every person who becomes entitled to a share shall be bound by any notice in respect of that share which, before his name is entered in the register of members, has been duly given to a person from whom he derives his title. 115. Proof that an envelope containing a notice was properly addressed, prepaid and posted shall be conclusive evidence that that the notice was given. Proof that a notice contained in an electronic communication was sent in accordance with guidance issued by the Institute of Chartered Secretaries and Administrators shall be conclusive evidence that the notice was given. A notice shall be deemed to be given at the expiration of 48 hours after the envelope containing it was posted or, in the case of a notice contained in an electronic communication, at the expiration of 48 hours after the time it was sent. 116. A notice may be given by the company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending or delivering it, in any manner authorised by the articles for the giving of notice to a member, addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt or by any like description at the address, if any, within the United Kingdom supplied for that purpose by the persons claiming to be so entitled. Until such an address has been supplied, a notice may be given in any manner in which it might have been given if the death or bankruptcy had not occurred.

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WINDING UP 117. If the company is wound up, the liquidator may, with the sanction of a special resolution of the company and any other sanction required by the Act, divide among the members in specie the whole or any part of the assets of the company and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members. The liquidator may, with the like sanction, vest the whole or any part of the assets in trustees upon such trusts for the benefit of the members as he with the like sanction determines, but no member shall be compelled to accept any assets upon which there is a liability.

INDEMNITY 118. Subject to the provisions of the Act but without prejudice to any indemnity to which a director may otherwise be entitled, every director or other officer or auditor of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application in which relief is granted to him by the court from liability for negligence, default, breach of duty or breach of trust in relation to the affairs of the company.

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COMPANIES ACT 1948 AS AMENDED BY COMPANIES ACT 1981 FIRST SCHEDULE TABLE A Regulations for Management of a Company Limited by Shares INTERPRETATION 1 In these regulations— “the Act” means the Companies Act, 1948. “the seal” means the common seal of the company. “secretary” means any person appointed to perform the duties of secretary of the company. “the United Kingdom” means Great Britain and Northern Ireland. Expressions referring to writing shall, unless the contrary intention appears, be construed, as including references to printing, lithography, photography, and other modes of representing or reproducing words in a visible form. Unless the context otherwise requires, words or expressions contained in these regulations shall bear the same meaning as in the Act or any statutory modification thereof in force at the date at which these regulations become binding on a company.

SHARE CAPITAL AND VARIATION OF RIGHTS 2 Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, any share in the company may be issued with such preferred, deferred, or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise as the company may from time to time by ordinary resolution determine.

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3 Subject to the provisions of Part III of the Companies Act 1981, any shares, may, with the sanction of an ordinary resolution, be issued on the terms that they are, or at the option of the company are liable, to be redeemed on such terms and in such manner as the company before the issue of the shares may by special resolution determine. 4 If at any time the share capital is divided into different classes of shares, the rights attached to any class may, whether or not the company is being wound up, be varied with the consent in writing of the holders of three-fourths of the issued shares of that class, or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of the shares of the class. 5 The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. 6 The company may exercise the powers of paying commissions conferred by section 53 of the Act, provided that the rate per cent. or the amount of the commission paid or agreed to be paid shall be disclosed in the manner required by the said section and the rate of the commission shall not exceed the rate of 10 per cent. of the price at which the shares in respect whereof the same is paid are issued or an amount equal to 10 per cent. of such price (as the case may be). Such commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares or partly in one way and partly in the other. The company may also on any issue of shares pay such brokerage as may be lawful. 7 Except as required by law, no person shall be recognised by the company as holding any share upon trust, and the company shall not be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only by these regulations or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder. 8 Every person whose name is entered as a member in the register of members shall be entitled without payment to receive within two months after allotment or lodgment of transfer (or within such other period as conditions of issue shall provide) one certificate for all his shares or several certificates each for one or more of his shares upon payment of 2s.6d for every certificate after the first or such less sum as the directors shall from time to time determine. Every certificate shall be under the seal or under the official seal kept by the company by virtue of section 2 of the Stock Exchange (Completion of Bargains) Act 1976 and shall specify the shares to which it relates and the amount paid thereon. Provided that in respect of a share or shares held jointly by several persons the company shall not be bound to issue more than one certificate, 448

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and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all holders. 9 If a share certificate be defaced, lost or destroyed, it may be renewed on payment of a fee of 2s. 6d or such less sum and on such terms (if any) as to evidence and indemnity and the payment of out-of-pocket expenses of the company of investigating evidence as the directors think fit. 10 Repealed

LIEN 11 The company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that share, but the directors may at any time declare any share to be wholly or in part exempt from the provisions of this regulation. The company’s lien, if any, on a share shall extend to all dividends payable thereon. 12 The company may sell, in such manner as the directors think fit, any shares on which the company has a lien, but no sale shall be made unless a sum in respect of which the lien exists is presently payable, nor until the expiration of fourteen days after a notice in writing, stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the share, or the person entitled thereto by reason of his death or bankruptcy. 13 To give effect to any such sale the directors may authorise some person to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares comprised in any such transfer, and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale. 14 The proceeds of the sale shall be received by the company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the shares before sale) be paid to the person entitled to the shares at the date of the sale.

CALLS ON SHARES 15 The directors may from time to time make calls upon the members in respect of any moneys unpaid on their shares (whether on account of the nominal value of the shares or by way of premium) and not by the conditions 449

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of allotment thereof made payable at fixed times, provided that no call shall exceed one-fourth of the nominal value of the share or be payable at less than one month from the date fixed for the payment of the last preceding call, and each member shall (subject to receiving at least fourteen days’ notice specifying the time or times and place of payment) pay to the company at the time or times and place so specified the amount called on his shares. A call may be revoked or postponed as the directors may determine. 16 A call shall be deemed to have been made at the time when the resolution of the directors authorising the call was passed and may be required to be paid by instalments. 17 The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 18 If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the sum from the day appointed for payment thereof to the time of actual payment at such rate not exceeding 5 per cent. per annum as the directors may determine, but the directors shall be at liberty to waive payment of such interest wholly or in part. 19 Any sum by which the terms of issue of a share becomes payable on allotment or at any fixed date, whether on account of the nominal value of the share or by way of premium, shall for the purpose of these regulations be deemed to be a call duly made and payable on the date on which by the terms of issue the same becomes payable, and in case of non-payment all the relevant provisions of these regulations as to payment of interest and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. 20 The directors may, on the issue of shares, differentiate between the holders as to the amount of calls to be paid and the times of payment. 21 The directors may, if they think fit, receive from any member willing to advance the same, all or any part of the moneys uncalled and unpaid upon any shares held by him, and upon all or any of the moneys so advanced may (until the same would, but for such advance, become payable) pay interest at such rate not exceeding (unless the company in general meeting shall otherwise direct) 5 per cent. per annum, as may be agreed upon between the directors and the member paying such sum in advance.

TRANSFER OF SHARES 22 The instrument of transfer of any share shall be executed by or on behalf of the transferor and transferee, and, the transferor shall be deemed to remain 450

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a holder of the share until the name of the transferee is entered in the register of members in respect thereof. 23 Subject to such of the restrictions of these regulations as may be applicable, any member may transfer all or any of his shares by instrument in writing in any usual or common form or any other form which the directors may approve. 24 The directors may decline to register the transfer of a share (not being a fully paid share) to a person of whom they shall not approve, and they may also decline to register the transfer of a share on which the company has a lien. 25 The directors may also decline to recognise any instrument of transfer unless— (a) a fee of 2s 6d or such lesser sum as the directors may from time to time require is paid to the company in respect thereof; (b) the instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer: and (c) the instrument of transfer is in respect of only one class of share. 26 If the directors refuse to register a transfer they shall within two months after the date on which the transfer was lodged with the company send to the transferee notice of the refusal. 27 The registration of transfers may be suspended at such times and for such periods as the directors may from time to time determine, provided always that such registration shall not be suspended for more than thirty days in the year. 28 The company shall be entitled to charge a fee not exceeding 2s 6d on the registration of every probate, letters of administration, certificate of death or marriage, power of attorney, notice in lieu of distringas, or other instrument.

TRANSMISSION OF SHARES 29 In case of the death of a member the survivor or survivors where the deceased was a joint holder, and the legal personal representatives of the deceased where he was the sole holder, shall be the only persons recognised by the company as having any title to his interest in the shares; but nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons. 30 Any person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as may from 451

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time to time properly be required by the directors and subject as hereinafter provided, elect either to be registered himself as a holder of the share or to have some person nominated by him registered as the transferee thereof, but the directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by that member before his death or bankruptcy, as the case may be. 31 If the person so becoming entitled shall elect to be registered himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects. If he shall elect to have another person registered he shall testify his election by executing to that person a transfer of the share. All the limitations, restrictions and provisions of these regulations relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or bankruptcy of the member had not occurred and the transfer were a transfer signed by that member. 32 A person becoming entitled to a share by the reason of death or bankruptcy of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the company: Provided always that the directors may at any time give notice requiring any such person to elect either to be registered himself or to transfer the share, and if the notice is not complied with within ninety days the directors may thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the share until the requirements of the notice have been complied with.

FORFEITURE OF SHARES 33 If a member fails to pay any call or instalment of a call on the day appointed for payment thereof, the directors may, at any time thereafter during such time as any part of the call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued. 34 The notice shall name a further day (not earlier than the expiration of fourteen days from the date of service of the notice) on or before which the payment required by the notice is to be made, and shall state that in the event of non-payment at or before the time appointed the shares in respect of which the call was made will be liable to be forfeited. 35 If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time 452

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thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the directors to that effect. 36 A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the directors think fit, and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the directors think fit. 37 A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares, but shall, notwithstanding, remain liable to pay to the company all moneys which, at the date of forfeiture, were payable by him to the company in respect of the shares, but his liability shall cease if and when the company shall have received payment in full of all such moneys in respect of the shares. 38 A statutory declaration in writing that the declarant is a director or the secretary of the company, and that a share in the company had been duly forfeited on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. The company may receive the consideration, if any, given for the share on any sale or disposition thereof and may execute a transfer of the share in favour of the person to whom the share is sold or disposed of and he shall thereupon be registered as the holder of the share, and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share. 39 The provision of these regulations as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium, as if the same had been payable by virtue of a call duly made and notified.

CONVERSION OF SHARES INTO STOCK 40 The company may by ordinary resolution convert any paid-up shares into stock, and reconvert any stock into paid-up shares of any denomination. 41 The holders of stock may transfer the same, or any part thereof, in the same manner, and subject to the same regulations, as and subject to which the shares from which the stock arose might previously to conversion have been transferred, or as near thereto as circumstances admit; and the directors may from time to time fix the minimum amount of stock transferable but so that such minimum shall not exceed the nominal amount of the shares from which the stock arose.

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42 The holders of the stock shall, according to the amount of stock held by them, have the same rights, privileges and advantages as regards dividends, voting at meetings of the company and other matters as if they held the shares from which the stock arose, but no such privilege or advantage (except participation in the dividends and profits of the company and in the assets on winding up) shall be conferred by an amount of stock which would not, if existing in shares, have conferred that privilege or advantage. 43 Such of the regulations of the company as are applicable to paid-up shares shall apply to stock, and the words “share” and “shareholder” therein shall include “stock” and “stockholder”.

ALTERATION OF CAPITAL 44 The company may from time to time by ordinary resolution increase the share capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe. 45 The company may by ordinary resolution— (a) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (b) sub-divide its existing shares, or any of them, into shares of smaller amount  than is fixed by the memorandum of association subject, nevertheless, to the provisions of section 61(1)(d) of the Act; (c) cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person. 46 The company may by special resolution reduce its share capital, any capital redemption reserve fund or any share premium account in any manner and with, and subject to, any incident authorised, and consent required, by law.

GENERAL MEETINGS 47 The company shall in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it; and not more than fifteen months shall elapse between the date of one annual general meeting and that of the next. Provided that so long as the company holds its first annual general meeting within eighteen months of its incorporation, it need not hold it in the year of

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its incorporation or in the following year. The annual general meeting shall be held at such a time and place as the directors shall appoint. 48 All general meetings other than annual meetings shall be called extraordinary general meetings. 49 The directors may, whenever they think fit, convene an extraordinary general meeting and extraordinary general meetings shall also be convened on such requisition, or, in default, may be convened by such requistionists, as provided by section 132 of the Act. If at any time there are not within the United Kingdom sufficient directors capable of acting to form a quorum, any director or any two members of the company may convene an extraordinary general meeting in the same manner as nearly as possible as that in which meetings may be convened by the directors.

NOTICE OF GENERAL MEETINGS 50 An annual general meeting and a meeting called for the passing of a special resolution shall be called by twenty-one days’ notice in writing at the least, and a meeting of the company other than an annual general meeting or a meeting for the passing of a special resolution shall be called by fourteen days’ notice in writing at the least. The notice shall be exclusive of the day for which it is served or deemed to be served and of the day for which it is given, and shall specify the place, the day and the hour of the meeting and, in case of special business, the general nature of that business, and shall be given, in manner hereinafter mentioned or in such other manner, if any, as may be prescribed by the company in general meeting, to such persons as are, under the regulations of the company, entitled to receive such notices from the company: Provided that a meeting of the company shall, notwithstanding that it is called by shorter notice than that specified in this regulation, be deemed to have been duly called if it so agreed— (a) in the case of a meeting called as the annual general meeting, by all the members entitled to attend and vote thereat; and (b) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95 per cent in nominal value of the shares giving that right. 51 The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting.

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PROCEEDINGS AT GENERAL MEETINGS 52 All business shall be deemed special that is transacted at an extraordinary general meeting, and also all that is transacted at an annual general meeting, with the exception of declaring a dividend, the consideration of accounts, balance sheets, and the reports of the directors and auditors, the election of directors in the place of those retiring and the appointment of, and fixing of the remuneration of, the auditors. 53 No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business; save as herein otherwise provided, two members present in person shall be a quorum. 54 If within half an hour from the time appointed for the meeting, a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the same day in the next week, at the same time and place or to such other day and at such time and place as the directors may determine. 55 The chairman, if any, of the board of directors shall preside as chairman at every general meeting of the company, or if there is no such chairman, or if he shall not be present within fifteen minutes after the time appointed for the holding of the meeting or is unwilling to act the directors present shall elect one of their number to be chairman of the meeting. 56 If at any meeting no director is willing to act as chairman or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present shall choose one of their number to be chairman of the meeting. 57 The chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting) adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 58 At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded— (a) by the chairman; or (b) by at least two members present in person or by proxy; or

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(c) by any member or members present in person or by proxy and representing not less than one-tenth of the total voting rights of all members having the right to vote at the meeting; or (d) by a member or members holding shares in the company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. Unless a poll be so demanded a declaration by the chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost and an entry to that effect in the book containing the minutes of the proceedings of the company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution. The demand for a poll may be withdrawn. 59 Except as provided in regulation 61, if a poll is duly demanded it shall be taken in such manner as the chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. 60 In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded, shall be entitled to a second or casting vote. 61 A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the chairman of the meeting directs, and any business other than that upon which a poll has been demanded may be proceeded with pending the taking of the poll.

VOTES OF MEMBERS 62 Subject to any rights or restrictions for the time being attached to any class or classes of shares, on a show of hands every member present in person shall have one vote, and on a poll every member shall have one vote for each share of which he is a holder. 63 In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and for this purpose seniority shall be determined by the order in which the names stand in the register of members. 64 A member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee, receiver, curator bonis, or other person in the nature of a committee, receiver or curator bonis appointed by that court,

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and any such committee, receiver, curator bonis or other person may, on a poll, vote by proxy. 65 No member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the company have been paid. 66 No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the chairman of the meeting, whose decision shall be final and conclusive. 67 On a poll votes may be given either personally or by proxy. 68 The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or, if the appointer is a corporation, either under seal, or under the hand of an officer or attorney duly authorised. A proxy need not be a member of the company. 69 The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the registered office of the company or at such other place within the United Kingdom as is specified for that purpose in the notice convening the meeting, not less than 48 hours before the time for holding the meeting or adjourned meeting, at which the person named in the instrument proposes to vote, or, in the case of a poll, not less than 24 hours before the time appointed for the taking of a poll, and in default the instrument of proxy shall not be treated as valid. 70 An instrument appointing a proxy shall be in the following form or a form as near thereto as circumstances admit – “…………… Limited I/We ……………, of ……………, in the county of …………………, being a member/members of the above named company, hereby appoint …………… of ……………, or failing him, …………… of ……………………, as my/our proxy to vote for me/us on my/our behalf at the [annual or extraordinary, as the case may be] general meeting of the company to be held on the …………… day of …………… 19 ……………, and at any adjournment thereof.   Signed this …………… day of …………… 19……………”

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71 Where it is desired to afford members an opportunity of voting for or against a resolution the instrument appointing a proxy shall be in the following form or a form as near thereto as circumstances admit—

“…………… Limited I/We ……………, of ……………, in the county of ……………, being a member/members of the above named company, hereby appoint …………… of ……………, or failing him, ……………, of ……………………, as my/our proxy to vote for me/us on my/our behalf at the [annual or extraordinary, as the case may be] general meeting of the company to be held on the ……………… day of …………… 19 ……………, and at any adjournment thereof.   Signed this …………… day of …………… 19. ……………” This form is to be used in *favour of/against the resolution. Unless otherwise instructed, the proxy will vote as he thinks fit.   *Strike out whichever is not desired.

72 The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. 73 A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the share in respect of which the proxy is given, provided that no intimation in writing of such death, insanity, revocation or transfer as aforesaid shall have been received by the company at the office before the commencement of the meeting or adjourned meeting at which the proxy is used. 73A Subject to the provisions of the Companies Act 1948 to 1981, a resolution in writing signed by all the members for the time being entitled to receive notice of and attend and vote at general meetings (or being corporations by their duly authorised representatives) shall be as valid and effective as if the same had been passed at a general meeting of the company duly convened and held.

CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS 74 Any corporation which is a member of the company may by resolution of its directors or other governing body authorise such person as it thinks fit 459

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to act as its representative at any meeting of the company or of any class of members of the company, and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member of the company.

DIRECTORS 75 The number of the directors and the names of the first directors shall be determined in writing by the subscribers of the memorandum of association or a majority of them. 76 The remuneration of the directors shall from time to time determined by the company in general meeting. Such remuneration shall be deemed to accrue from day to day. The directors may also be paid all travelling, hotel, and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the directors or general meetings of the company or in connection with the business of the company. 77 The shareholding qualification for directors may be fixed by the company in general meeting, and unless and until so fixed no qualification shall be required. 78 A director of the company may be or become a director or other officer of, or otherwise interested in, any company promoted by the company or in which the company may be interested as shareholder or otherwise, and no such director shall be accountable to the company for any remuneration or other benefits received by him as a director or officer of, or from his interest in, such other company unless the company otherwise direct.

BORROWING POWERS 79 The directors may exercise all the powers of the company to borrow money, and to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and subject to section 14 of the Companies Act 1980 to issue debentures, debenture stock, and other securities whether outright or as security for any debt, liability or obligation of the company or of any third party: Provided that the amount for the time being remaining undischarged of moneys borrowed or secured by the directors as aforesaid (apart from temporary loans obtained from the company’s bankers in the ordinary course of business) shall not at any time, without the previous sanction of the company in general meeting, exceed the nominal amount of the share capital of the company

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for the time being issued, but nevertheless no lender or other person dealing with the company shall be concerned to see or inquire whether this limit is observed. No debt incurred or security given in excess of such limit shall be invalid or ineffectual except in the case of express notice to the lender or the recipient of the security at the time when the debt was incurred or security given that the limit hereby imposed had been or was thereby exceeded.

POWERS AND DUTIES OF DIRECTORS 80 The business of the company shall be managed by the directors, who may pay all expenses incurred in promoting and registering the company, and may exercise all such powers of the company as are not, by the Companies Acts 1948 to 1981 or by these regulations, required to be exercised by the company in general meeting, subject, nevertheless, to any of these regulations, to the provisions of the Act and to such regulations, being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting; but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if that regulation had not been made. 81 The directors may from time to time and at any time by power of attorney appoint any company, firm or person or body of persons, whether nominated directly or indirectly by the directors, to be the attorney or attorneys of the company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these regulations) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the directors may think fit and may also authorise any such attorney to delegate all or any of the powers, authorities and discretions vested in him. 82 The company may exercise the powers conferred by section 35 of the Act with regard to having an official seal for use abroad, and such powers shall be vested in the directors. 83 The company may exercise the powers conferred upon the company by sections 119 to 123 (both inclusive) of the Act with regard to the keeping of a dominion register, and the directors may (subject to the provisions of those sections) make and vary such regulations as they may think fit respecting the keeping of any such register. 84 (1) A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company shall declare the nature of his interest at a meeting of the directors in accordance with section 199 of the Act.

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(2) A director shall not vote in respect of any contract or arrangement in which he is interested, and if he shall do so his vote shall not be counted, nor shall he be counted in the quorum present at the meeting, but neither of these prohibitions shall apply to— (a) any arrangement for giving any director any security or indemnity in respect of money lent by him to or obligations undertaken by him for the benefit of the company; or (b) to any arrangement for the giving by the company of any security to a third party in respect of a debt or obligation of the company for which the director himself has assumed responsibility in whole or in part under a guarantee or indemnity or by the deposit of a security; or (c) any contract by a director to subscribe for or underwrite shares or debentures of the company; or (d) any contract or arrangement with any other company in which he is interested only as an officer of the company or as holder of shares or other securities, and these prohibitions may at any time be suspended or relaxed to any extent, and either generally or in respect of any particular contract, arrangement or transaction, by the company in general meeting. (3) A director may hold any other office or place of profit under the company (other than the office of auditor) in conjunction with his office of director for such period and on such terms (as to remuneration and otherwise) as the directors may determine and no director or intending director shall be disqualified by his office from contracting with the company either with regard to his tenure of any such other office or place of profit or as vendor, purchaser or otherwise, nor shall any such contract, or any contract or arrangement entered into by or on behalf of the company in which any director is in any way interested, be liable to be avoided, nor shall any director so contracting or being so interested be liable to account to the company for any profit realised by any such contract or arrangement by reason of such director holding that office or of the fiduciary relation thereby established. (4) A director, notwithstanding his interest, may be counted in the quorum present at any meeting whereat he or any other director is appointed to hold any such office or place of profit under the company or whereat the terms of any such appointment are arranged, and he may vote on any such appointment or arrangement other than his own appointment or the arrangement of the terms thereof. (5) Any director may act by himself or his firm in a professional capacity for the company, and he or his firm shall be entitled to remuneration for professional

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services as if he were not a director; provided that nothing herein contained shall authorise a director or his firm to act as auditor to the company, 85 All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments, and all receipts for moneys paid to the company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as the case may be, in such manner as the directors shall from time to time by resolution determine. 86 The directors shall cause minutes to be made in books provided for the purpose— (a) of all appointments of officers made by the directors; (b) of the names of the directors present at each meeting of the directors and of any committee of the directors; (c) of all resolutions and proceedings at all meetings of the company, and of the directors, and of committees of directors, and every director present at any meeting of directors or committee of directors shall sign his name in a book to be kept for that purpose. 87 The directors on behalf of the company may pay a gratuity or pension or allowance on retirement to any director who has held any other salaried office or place of profit with the company or to his widow or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

DISQUALIFICATION OF DIRECTORS 88 The office of director shall be vacated if the director— (a) ceases to be a director by virtue of section 182 or 185 of the Act; or (b) becomes bankrupt or makes any arrangement or composition with his creditors generally; or (c) becomes prohibited from being a director by reason of any order made under section 188 of the Act; or (d) becomes of unsound mind; or (e) resigns his office by notice in writing to the company; or (f) shall for more than six months have been absent without permission of the directors from meetings of the directors held during that period.

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ROTATION OF DIRECTORS 89 At the first annual general meeting of the company all the directors shall retire from office, and at the annual general meeting in every subsequent year one-third of the directors for the time being, or, if their number is not three or a multiple of three, then the number nearest one-third, shall retire from office. 90 The directors to retire in every year shall be those who have been longest in office since their last election, but as between persons who became directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. 91 A retiring director shall be eligible for re-election. 92 The company at the meeting at which a director retires in manner aforesaid may fill the vacated office by electing a person thereto, and in default the retiring director shall if offering himself for re-election be deemed to have been re-elected, unless at such meeting it is expressly resolved not to fill such vacated office or unless a resolution for the re-election of such director shall have been put to the meeting and lost. 93 No person other than a director retiring at the meeting shall unless recommended by the directors be eligible for election to the office of director at any general meeting unless not less than three nor more than twenty-one days before the date appointed for the meeting there shall have been left at the registered office of the company notice in writing, signed by a member duly qualified to attend and vote at the meeting for which such notice is given, of his intention to propose such person for election, and also notice in writing signed by that person of his willingness to be elected. 94 The company may from time to time by ordinary resolution increase or reduce the number of directors, and may also determine in what rotation the increased or reduced number is to go out of office. 95 The directors shall have power at any time, and from time to time, to appoint any person to be a director, either to fill a casual vacancy or as an addition to the existing directors, but so that the total number of directors shall not at any time exceed the number fixed in accordance with these regulations. Any director so appointed shall hold office only until the next following annual general meeting, and shall then be eligible for re-election but shall not be taken into account in determining the directors who are to retire by rotation at such meeting. 96 The company may by ordinary resolution, of which special notice has been given in accordance with section 142 of the Act, remove any director before the expiration of his period of office notwithstanding anything in these regulations or in any agreement between the company and such director. 464

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Such removal shall be without prejudice to any claim such director may have for damages for breach of any contract of service between him and the company. 97 The company may by ordinary resolution appoint another person in place of a director removed from office under the immediately preceding regulation, and without prejudice to the powers of the directors under regulation 95 the company in general meeting may appoint any person to be a director either to fill a casual vacancy or as an additional director. A person appointed in place of a director so removed or to fill such a vacancy shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director.

PROCEEDINGS OF DIRECTORS 98 The directors may meet together for the despatch of business, adjourn, and otherwise regulate their meetings, as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes, the chairman shall have a second or casting vote. A director may, and the secretary on the requisition of a director shall, at any time summon a meeting of the directors. It shall not be necessary to give notice of a meeting of directors to any director for the time being absent from the United Kingdom. 99 The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed shall be two. 100 The continuing directors may act notwithstanding any vacancy in their body, but, if and so long as their number is reduced below the number fixed by or pursuant to the regulations of the company as the necessary quorum of directors, the continuing directors or director may act for the purpose of increasing the number of directors to that number, or of summoning a general meeting of the company, but for no other purpose. 101 The directors may elect a chairman of their meetings and determine the period for which he is to hold office; but if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the directors present may choose one of their number to be chairman of the meeting. 102 The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the directors. 103 A committee may elect a chairman of its meetings; if no such chairman is elected, or if at any meeting the chairman is not present within five minutes 465

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after the time appointed for holding the same, the members present may choose one of their number to be chairman of the meeting. 104 A committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members present, and in the case of an equality of votes the chairman shall have a second or casting vote. 105 All acts done by any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 106 A resolution in writing, signed by all the directors for the time being entitled to receive notice of a meeting of the directors, shall be as valid and effectual as if it had been passed at a meeting of the directors duly convened and held.

MANAGING DIRECTOR 107 The directors may from time to time appoint one or more of their body to the office of managing director for such period and on such terms as they think fit, and, subject to the terms of any agreement entered into in any particular case, may revoke such appointment. A director so appointed shall not, whilst holding that office, be subject to retirement by rotation or be taken into account in determining the rotation of retirement of directors, but his appointment shall be automatically determined if he cease from any cause to be a director. 108 A managing director shall receive such remuneration (whether by way of salary, commission or participation in profits, or partly in one way and partly in another) as the directors may determine. 109 The directors may entrust to and confer upon a managing director any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit, and either collaterally with or to the exclusion of their own powers and may from time to time revoke, withdraw, alter or vary all or any of such powers.

SECRETARY 110 Subject to section 21(5) of the Companies Act 1976 the secretary shall be appointed by the directors for such term, at such remuneration and upon 466

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such conditions as they may think fit; and any secretary so appointed may be removed by them. 111 No person shall be appointed or hold office as secretary who is— (a) the sole director of the company; or (b) a corporation the sole director of which is the sole director of the company; or (c) the sole director of a corporation which is the sole director of the company. 112 A provision of the Act or these regulations requiring or authorising a thing to be done by or to a director and the secretary shall not be satisfied by its being done by or to the same person acting both as director and as, or in place of, the secretary.

THE SEAL 113 The directors shall provide for the safe custody of the seal, which shall only be used by the authority of the directors or of a committee of the directors authorised by the directors in that behalf, and every instrument to which the seal shall be affixed shall be signed by a director and shall be countersigned by the secretary or by a second director or by some other person appointed by the directors for the purpose.

DIVIDENDS AND RESERVE 114 The company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the directors. 115 The directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the company. 116 No dividend or interim dividend shall be paid otherwise than in accordance with the provisions of Part III of the Companies Act 1980 which apply to the company. 117 The directors may, before recommending any dividend, set aside out of the profits of the company such sums as they think proper as a reserve or reserves which shall, at the discretion of the directors, be applicable for any purpose to which the profits of the company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the company or be invested in such investments (other than shares of the company) as the directors may from time to time think fit. The directors may 467

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also without placing the same to reserve carry forward any profits which they may think prudent not to divide. 118 Subject to the rights of persons, if any, entitled to shares with special rights as to dividend, all dividends shall be declared and paid according to the amounts paid or credited as paid on the shares in respect whereof the dividend is paid, but no amount paid or credited as paid on a share in advance of calls shall be treated for the purposes of this regulation as paid on the share. All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid; but if any share is issued on terms providing that it shall rank for dividend as from a particular date such share shall rank for dividend accordingly. 119 The directors may deduct from any dividend payable to any member all sums of money (if any) presently payable by him to the company on account of calls or otherwise in relation to the shares of the company. 120 Any general meeting declaring a dividend or bonus may direct payment of such dividend or bonus wholly or partly by the distribution of specific assets and in particular of paid up shares, debentures or debenture stock of any other company or in any one or more of such ways, and the directors shall give effect to such resolution, and where any difficulty arises in regard to such distribution, the directors may settle the same as they think expedient, and in particular may issue fractional certificates and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any members upon the footing of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to the directors. 121 Any dividend, interest or other moneys payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the registered address of that one of the joint holders who is first named on the register of members or to such person and to such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. Any one of two or more joint holders may give effectual receipts for any dividends, bonuses or other moneys payable in respect of the shares held by them as joint holders. 122 No dividend shall bear interest against the company.

ACCOUNTS 123 The directors shall cause accounting records to be kept in accordance with section 12 of the Companies Act 1976.

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124 The accounting records shall be kept at the registered office of the company or, subject to section 12(6) and (7) of the Companies Act 1976, at such other place or places as the directors think fit, and shall always be open to the inspection of the officers of the company. 125 The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the company or any of them shall be open to the inspection of members not being directors, and no member (not being a director) shall have any right of inspecting any account or book or document of the company except as conferred by statute or authorised by the directors or by the company in general meeting. 126 The directors shall from time to time, in accordance with sections 150 and 157 of the Act and sections 1, 6 and 7 of the Companies Act 1976, cause to be prepared and to be laid before the company in general meeting such profit and loss accounts, balance sheets, group accounts (if any) and reports as are referred to in those sections. 127 A copy of every balance sheet (including every document required by law to be annexed thereto) which is to be laid before the company in general meeting, together with a copy of the auditors’ report and directors’ report, shall not less than twenty-one days before the date of the meeting be sent to every member of, and every holder of debentures of, the company and to every person registered under regulation 31. Provided that this regulation shall not require a copy of those documents to be sent to any person of whose address the company is not aware or to more than one of the joint holders of any shares or debentures.

CAPITALISATION OF PROFITS 128 The company in general meeting may upon the recommendation of the directors resolve that it is desirable to capitalise any part of the amount for the time being standing to the credit of any of the company’s reserve accounts or to the credit of the profit and loss account or otherwise available for distribution, and accordingly that such sum be set free for distribution amongst the members who would have been entitled thereto if distributed by way of dividend and in the same proportions on condition that the same be not paid in cash but be applied either in or towards paying up any amounts for the time being unpaid on any shares held by such members respectively or paying up in full unissued shares or debentures of the company to be allotted and distributed credited as fully paid up to and amongst such members in the proportion aforesaid, or partly in the one way and partly in the other, and the directors shall give effect to such resolution: Provided that a share premium account and a capital redemption reserve fund may, for the purposes of this regulation, only be applied in the paying up of 469

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unissued shares to be allotted to members of the company as fully paid bonus shares. 128A The company in general meeting may on the recommendation of the directors resolve that it is desirable to capitalise any part of the amount for the time being standing to the credit of the company’s reserve accounts or to the credit of the profit and loss account which is not available for distribution by applying such sum in paying up in full unissued shares to be allotted as fully paid bonus shares to those members of the company who would have been entitled to that sum if it were distributed by way of dividend (and in the same proportions), and the directors shall give effect to such resolution. 129 Wherever a reduction is passed in pursuance of regulation 128 or 128A above the directors shall make all appropriations and applications of the undivided profits resolved to be capitalised thereby, and all allotments and issues of fully-paid shares or debentures, if any, and generally shall do all acts and things required to give effect thereto, with full power to the directors to make such provision by the issue of fractional certificates or by payment in cash or otherwise as they think fit for the case of shares or debentures becoming distributable in fractions, and also to authorise any person to enter on behalf of all the members entitled thereto into an agreement with the company providing for the allotment to them respectively, credited as fully paid up, of any further shares or debentures to which they may be entitled upon such capitalisation, or (as the case may require) for the payment up by the company on their behalf, by the application thereto of their respective proportions of the profits resolved to be capitalised, of the amounts or any part of the amounts remaining unpaid on their existing shares, and any agreement made under such authority shall be effective and binding on all such members.

AUDIT 130 Auditors shall be appointed and their duties regulated in accordance with 161 of the Act, section 14 and 23A of the Companies Act 1967 and sections 13 to 18 of the Companies Act 1976 and sections 7 to 12 of the Companies Act 1981.

NOTICES 131 A notice may be given by the company to any member either personally or by sending it by post to him or to his registered address, or (if he has no registered address within the United Kingdom) to the address, if any, within the United Kingdom supplied by him to the company for the giving of notice to him.Where a notice is sent by post, service of the notice shall be deemed to

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be effected by properly addressing, prepaying, and posting a letter containing the notice, and to have been effected in the case of a notice of a meeting at the expiration of 24 hours after the letter containing the same is posted, and in any other case at the time at which the letter would be delivered in the ordinary course of post. 132 A notice may be given by the company to the joint holders of a share by giving the notice to the joint holder first named in the register of members in respect of the share. 133 A notice may be given by the company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description, at the address, if any, within the United Kingdom supplied for the purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred. 134 Notice of every general meeting shall be given in any manner hereinbefore authorised to— (a) every member except those members who (having no registered address within the United Kingdom) have not supplied to the company an address within the United Kingdom for the giving of notices to them; (b) every person upon whom the ownership of a share devolves by reason of his being a legal personal representative or a trustee in bankruptcy of a member where the member but for his death or bankruptcy would be entitled to receive notice of the meeting; and (c) the auditor for the time being of the company. No other person shall be entitled to receive notices of general meetings.

WINDING UP 135 If the company shall be wound up the liquidator may, with the sanction of an extraordinary resolution of the company and any other sanction required by the Act, divide amongst the members in specie or kind the whole or any part of the assets of the company (whether they shall consist of property of the same kind or not) and may, for such purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members.The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the contributories

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as the liquidator, with the like sanction, shall think fit, but so that no member shall be compelled to accept any shares or other securities whereon there is any liability.

INDEMNITY 136 Every director, managing director, agent, auditor, secretary and other officer for the time being of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgement is given in his favour or in which he is acquitted or in connection with any application under section 448 of the Act in which relief is granted to him by the court.

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COMPANIES CONSOLIDATION ACT 1908 AS AMENDED BY COMPANIES ACT 1929 FIRST SCHEDULE TABLE A Regulations for management of a company limited by shares PRELIMINARY 1 In these regulations— “The Act” means the Companies Act, 1929. When any provision of the Act is referred to, the reference is to that provision as modified by any statute for the time being in force. Unless the context otherwise requires, expressions defined in the Act or any statutory modification thereof in force at the date at which these regulations become binding on the company, shall have the meanings so defined.

SHARES 2 Subject to the provisions, if any, in that behalf of the memorandum of association, and without prejudice to any special rights previously conferred on the holders of existing shares, any share may be issued with such preferred, deferred, or other special rights, or such restrictions, whether in regard to dividend, voting, return of share capital, or otherwise, as the company may from time to time by special resolution determine, and any preference share may, with the sanction of a special resolution, be issued on the terms that it is, or at the option of the company is liable, to be redeemed. 3 If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may be varied with the consent in writing of the holders of three-fourths of the issued shares of that class, or with the

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sanction of an extraordinary resolution passed at a separate general meeting of the holders of the shares of the class. To every such separate general meeting the provisions of these regulations relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be two persons at least holding or representing by proxy one-third of the issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a poll. 4 Every person whose name is entered as a member in the register of members shall, without payment, be entitled to a certificate under the seal of the company specifying the share or shares held by him and the amount paid up thereon, provided that in respect of a share or, shares held jointly by several persons the company shall not be bound to issue more than one certificate, and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all. 5 If a share certificate is defaced, lost, or destroyed, it may be renewed on payment of such fee, if any, not exceeding one shilling, and on such terms, if any, as to evidence and indemnity, as the directors think fit. 6 No part of the funds of the company shall directly or indirectly be employed in the purchase of, or in loans upon the security of, the company’s shares, but nothing in this regulation shall prohibit, transactions mentioned in the proviso to section 45 (1) of the Act.

LIEN 7 The company shall have a lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that share, and the company shall also have a lien on all shares (other than fully paid shares) standing registered in the name of a single person for all moneys presently payable by him or his estate to the company; but the directors may at anytime declare any share to be wholly or in part exempt from the provisions of this regulation. The company’s lien, if any, on a share shall extend to all dividends payable thereon. 8 The company may sell, in such manner as the directors think fit, any shares on which the company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable, nor until the expiration of fourteen days after a notice in writing, stating and demanding payment of such part of the amount in respect of which the lien, exists as is presently payable, has been given to the registered holder for the time being of the share, or the person entitled thereto by reason of his death or bankruptcy. 9 For giving effect to any such sale the directors may authorise some person to transfer the shares sold to the purchaser thereof. The purchaser shall be 474

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registered as the holder of the shares comprised in any such transfer and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale. 10 The proceeds of the sale shall be received by the company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue shall (subject to a. like lien for sums not presently payable as existed upon the shares prior to the sale) be paid to the person entitled to the shares at the date of the sale.

CALLS ON SHARES 11 The directors may from time to time make calls upon the members in respect of any moneys unpaid on their shares provided that no call shall exceed one-fourth of the nominal amount of the share, or be payable at less than one month from the last call; and each member shall (subject to receiving at least fourteen days’ notice specifying the time or times of payment) pay to the company at the time or times so specified the amount called on his shares. 12 The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 13 If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest upon the sum at the rate of five pounds per centum per annum from the day appointed for the payment thereof to the time of the actual payment, but the directors shall be at liberty to waive payment of that interest wholly or in part. 14 The provisions of these regulations as to the liability of joint holders and as to payment of interest shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the amount of the share, or by way of premium, as if the same had become payable by virtue of a call duly paid and notified. 15 The directors may make arrangements on the issue of shares for a difference between the holders in the amount of calls to be paid and in the times of payment. 16 The directors may, if they think fit, receive from any member willing to advance the same all or any part of the moneys uncalled and unpaid upon any shares held by him; and upon all or any of the moneys so advanced may (until the same would, but for such advance, become presently payable) pay interest at such rate (not exceeding, without the sanction of the company in general 475

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meeting, six per cent) as may be agreed upon between the member paying the sum in advance and the directors.

TRANSFER AND TRANSMISSION OF SHARES 17 The instrument of transfer of any share shall be executed by or on behalf of the transferor and transferee, and the transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the register of members in respect thereof. 18 Shares shall be transferred in the following form, or in any usual or common form which the directors shall approve: I, A.B., of ……………, in consideration of the sum of £ …………… paid to me by C.D. of …………… (herein-after called “the said transferee”) do hereby transfer to the said transferee the share [or shares] numbered …………… in the undertaking called the …………… Company, Limited, to hold unto the said transferee, subject to the several conditions on which I hold the same: and I, the said transferee, do hereby agree to take the said share [or shares] subject to the conditions aforesaid. As witness our hands the …………… day of ……………. Witness to the signatures of, …………… &c.

19 The directors may decline to register any transfer of shares, not being fully paid shares, to a person of whom they do not approve, and may also decline to register any transfer of shares on which the company has a lien. The directors may also suspend the registration of transfers during the fourteen days immediately preceding the ordinary general meeting in each year. The directors may decline to recognise any instrument of transfer unless – (a) a fee not exceeding two shillings and sixpence is paid to the company in respect thereof, and (b) the instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer. If the directors refuse to register a transfer of any shares, they shall within two months after the date on which the transfer was lodged with the company send to the transferee notice of the refusal. 20 The legal personal representatives of a deceased sole holder of a share shall be the only persons recognised by the company as having any title to the share. In the case of a share registered in the names of two or more holders,

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the survivors or survivor, or the legal personal representatives of the deceased survivor, shall be the only persons recognised by the company as having any title to the share. 21 Any person becoming entitled to a share in consequence of the death or bankruptcy of a member shall, upon such evidence being produced as may from time to time be properly required by the directors, have the right, either to be registered as a member in respect of the share or, instead of being registered himself, to make such transfer of the share as the deceased or bankrupt person could have made; but the directors shall in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by the deceased or bankrupt person before the death or bankruptcy. 22 A person becoming entitled to a share by reason of the death or bankruptcy of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it, to exercise any right conferred by membership in relation to meetings of the company.

FORFEITURE OF SHARES 23 If a member fails to pay any call or instalment of a call on the day appointed for payment thereof, the directors may, at any time thereafter during such time as any part of such call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued. 24 The notice shall name a further day (not earlier than the expiration of fourteen days from the date of the notice) on or before which the payment required by the notice is to be made, and shall state that in the event of nonpayment at or before the time appointed the shares in respect of which the call was made will be liable to be forfeited. 25 If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the directors to that effect. 26 A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the directors think fit, and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the directors think fit.

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27 A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares, but shall, notwithstanding, remain liable to pay to the company all moneys which, at the date of forfeiture, were presently payable by him to the company in respect of the shares, but his liability shall cease if and when the company receive payment in full of the nominal amount of the shares. 28 A statutory declaration in writing that the declarant is a director of the company, and that a share in the company has been duly forfeited on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. The company may receive the consideration, if any, given for the share on any sale or disposition thereof and may execute a transfer of the share in favour of the person to whom the share is sold or disposed of and he shall thereupon be registered as the holder of the share, and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share. 29 The provisions of these regulations as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the amount of the share, or by way of premium, as if the same had been payable by virtue of a call duly made and notified.

CONVERSION OF SHARES INTO STOCK 30 The company may by ordinary resolution convert any paid-up shares into stock, and reconvert any stock into paid-up shares of any denomination. 31 The holders of stock may transfer the same, or any part thereof, in the same manner, and subject to the same regulations, as, and subject to which, the shares from which the stock arose might previously to conversion have been transferred, or as near thereto as circumstances admit; but the directors may from time to time fix the minimum amount of stock transferable, and restrict or forbid the transfer of fractions of that minimum, but the minimum shall not exceed the nominal amount of the shares from which the stock arose. 32 The holders of stock shall, according to the amount of the stock held by them, have the same rights, privileges, and advantages as regards dividends, voting at meetings of the company, and other matters as if they held the shares from which the stock arose, but no such privilege or advantage (except participation in the dividends and profits of the company) shall be conferred by any such aliquot part of stock as would not, if existing in shares, have conferred that privilege or advantage.

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33 Such of the regulations of the company as are applicable to paid-up shares shall apply to stock, and the words “share” and “shareholder” therein shall include “stock” and “stockholder.”

ALTERATION OF CAPITAL 34 The company may from time to time by ordinary resolution increase the share capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe. 35 Subject to any direction to the contrary that may be given by the company in general meeting, all new shares shall, before Issue, be offered to such persons as at the date of the offer are entitled to receive notices from the company of general meetings in proportion, as nearly as the circumstances admit, to the amount of the existing shares to which they are entitled. The offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and after the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the directors may dispose of those shares in such manner as they think most beneficial to the company. The directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to the shares held by persons entitled to an offer of new shares) cannot, in the opinion of the directors, be conveniently offered under this article. 36 The new shares shall be subject to the same provisions with reference to the payment of calls, lien, transfer, transmission, forfeiture, and otherwise as the shares in the original share capital. 37 The company may by ordinary resolution – (a) Consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (b) Sub-divide its existing shares, or any of them, into shares of smaller amount than is fixed by the memorandum of association subject, nevertheless, to the provisions of section 50 (1) (d) of the Act; (c) Cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person. 38 The company may by special resolution reduce its share capital and any capital redemption reserve fund and with, and subject to, any incident authorised, and consent required, by law.

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GENERAL MEETINGS 39 A general meeting shall be held once in any calendar year at such time (not being more than fifteen months after the holding of the last preceding general meeting) and place as may be prescribed by the company in general meeting, or, in default, at such time in the third month following that in which the anniversary of the company’s incorporation occurs, and at such place, as the directors shall appoint. In default of a general meeting being so held, a general meeting shall be held in the month next following, and may be convened by any two members in the same manner as nearly as possible as that in which meetings are to be convened by directors. 40 The above-mentioned general meetings shall be called ordinary general meetings; all other general meetings shall be called extraordinary general meetings. 41 The directors may, whenever they think fit, convene an extraordinary general meeting, and extraordinary general meetings shall also be convened on such requisition, or, in default, may be convened by such requisitionists, as provided by section 114 of the Act. If at any time there are not within the United Kingdom sufficient directors capable of acting to form a quorum, any director or any two members of the company may convene an extraordinary general meeting in the same manner as nearly as possible as that in which meetings may be convened by the directors.

NOTICE OF GENERAL MEETINGS 42 Subject to the provisions of section 117 (2) of ’ the Act relating to special resolutions, seven days’ notice at the least (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which notice is given) specifying the place, the day, and the hour of meeting and, in case of special business, the general nature of that business shall be given in manner hereinafter mentioned, or in such other manner, if any, as may be prescribed by the company in general meeting, to such persons as are, under the regulations of the company, entitled to receive such notices from the company; but with the consent of all the members entitled to receive notice of some particular meeting, that meeting maybe convened by such shorter notice and in such manner as those members may think fit. 43 The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any member shall not invalidate the proceedings at any meeting.

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PROCEEDINGS AT GENERAL MEETING 44 All business shall be deemed special that is transacted at an extraordinary meeting, with and all that is transacted at an ordinary meeting, with the exception of sanctioning a dividend, the consideration of the accounts, balance sheets, and the ordinary report of the directors and auditors, the election of directors and other officers in the place of those retiring by rotation, and the fixing of the remuneration of the auditors. 45 No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business; save as herein otherwise provided, three members personally present shall be a quorum. 46 If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the same day in the next week, at the same time and place, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting the members present shall be a quorum. 47 The chairman, if any, of the board of directors shall preside as chairman at every general meeting of the company. 48 If there is no such chairman, or if at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting or is unwilling to act as chairman, the members present shall choose some one of their number to be chairman. 49 The chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting) adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for ten days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 50 At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of the show of hands), demanded by at least three members present in person or by proxy entitled to vote or by one member or two members so present and entitled, if that member or those two members together hold not

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less than 15 per cent, of the paid up capital of the company, and, unless a poll is so demanded, a declaration by the chairman that a resolution has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book of the proceedings of the company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against, that resolution. 51 If a poll is duly demanded, it shall be taken in such manner as the chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. 52 In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded, shall be entitled to a second or casting vote. 53 A poll demanded on the election of a chairman or on a question of adjournment, shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the chairman of the meeting directs.

VOTES OF MEMBERS 54 On a show of hands every member present in person shall have one vote. On a poll every member shall have one vote for each share of which he is the holder. 55 In the case of joint holders the vote of the senior who tenders a vote whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and for this purpose seniority shall be determined by the order in which the names stand in the register of members. 56 A member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee, curator bonis or other person in the nature of a committee or curator bonis appointed by that court, and any such committee, curator bonis, or other person may, on a poll, vote by proxy. 57 No member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the company have been paid. 58 On a poll votes may be given either personally or by proxy. 59 The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or, if the appointor is a corporation, either under seal, or under the hand of an officer or attorney duly authorised. A proxy need not be a member of the company. 482

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60 The instrument appointing a proxy and the power of attorney, or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the registered office of the company not less than forty-eight hours before the time for holding the meeting or adjourned meeting, at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid. 61 An instrument appointing a proxy may be in the following form, or any other form which the directors shall approve: “I, …………… Company Limited, in the county of ……………, being a member of the Company Limited, hereby appoint ……………, …………… of as my proxy, to vote for me and on my behalf at the [ordinary or extraordinary, as the case may be] general meeting of the company to be held on the ………………… day of …………… and at any adjournment thereof.”   Signed this …………… day of …………….

62 The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.

CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS 63 Any corporation which is a member of the company may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any meeting of the company or of any class of members of the company, and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member of the company.

DIRECTORS 64 The number of directors and the names of the first directors shall be determined in writing by a majority of the subscribers of the memorandum of association. 65 The remuneration of the directors shall from time to time be determined by the company in general meeting. 66 The qualification of a director shall be the holding of at least one share in the company.

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POWERS AND DUTIES OF DIRECTORS 67 The business of the company shall be managed by the directors, who may pay all expenses incurred in getting up registering the company, and may exercise all such powers of the company, as are not, by the Act, or by these articles, required to be exercised by the company in general meeting, subject, nevertheless, to any regulation of these articles, to the provisions of the Act, and to such regulations, being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting; but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if that regulation had not been made. 68 The directors may from time to time appoint one or more of their body to the office of managing director or manager for such term and at such remuneration (whether by way of salary, or commission, or participation in profits, or partly in one way and partly in another) as they think fit, and a director so appointed shall not, while holding that office, be subject to retirement by rotation, or taken into account in determining the rotation or retirement of directors; but his appointment shall be subject to determination ipso facto if he ceases from any cause to be a director or if the company in general meeting resolve that his tenure of the office of managing director or manager be determined. 69  The amount for the time being remaining undischarged of moneys borrowed or raised by the directors for the purpose of the company (otherwise than by the issue of share capital) shall not at any time exceed the issued share capital of the company without the sanction of the company in general meeting. 70 The directors shall cause minutes to be made in books provided for the purpose – (a) Of all appointments of officers made by the directors; (b) Of the names of the directors present at each meeting of the directors and of any committee of the directors; (c) Of all resolutions and proceedings at all meetings of the company, and of the directors, and of committees of directors, and every director present at any meeting of directors or committee of directors shall sign his name in a book to be kept for that purpose.

THE SEAL 71 The seal of the company shall not be affixed to any instrument except by the authority of a resolution of the board of directors, and in the presence of a 484

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director and of the secretary or such other person as the directors may appoint for the purpose; and that director and the secretary or other person as aforesaid shall sign every instrument to which the seal of the company is so affixed in their presence.

DISQUALIFICATION OF DIRECTORS 72 The office of director shall be vacated, if the director— (a) ceases to be a director by virtue of section 141 of the Act; or (b) without the consent of the company in general meeting holds any other office of profit under the company except that of managing director or manager; or (c) becomes bankrupt; or (d) becomes prohibited from being a director by reason of ant order made under sections 217 or 275 of the Act; or (e) is found lunatic or becomes of unsound mind; or (f)

resigns his office by notice in writing to the company; or

(g) is directly or indirectly interested in any contract with the company or participates in the profits of any contract with the company. Provided, however, that a director shall not vacate his office by reason of his being a member of any corporation which has entered into contracts with or done any work for the company if he shall have declared the nature of his interest in manner required by section 149 of the Act, but the director shall not vote in respect of any such contract or work or any matter arising thereout, and if he does so vote his vote shall not be counted.

ROTATION OF DIRECTORS 73 At the first ordinary general meeting of the company the whole of the directors shall retire from office, and at the ordinary general meeting in every subsequent year one-third of the directors for the time being, or, if their number is not three or a multiple of three, then the number nearest one-third, shall retire from office. 74 The directors to retire in every year shall be those who have been longest in office since their last election but as between persons who became directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. 75 A retiring director shall be eligible for re-election. 485

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76 The company at the general meeting at which a director retires in manner aforesaid may fill up the vacated office by electing a person thereto and in default the retiring director shall be deemed to have been re-elected unless at such meeting it is resolved not to fill up such vacated office. 77 The company may from time to time in general meeting increase or reduce the number of directors, and may also determine in what rotation the increased or reduced number is to go out of office. 78 Any casual vacancy occurring in the board of directors may be filled up by the directors, but the person so chosen shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director. 79 The directors shall have power at any time, and from time to time, to appoint a person as an additional director who shall retire from office at the next following ordinary general meeting, but shall be eligible for election by the company at that meeting as an additional director. 80 The company may by extraordinary resolution remove any director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead. The person so appointed shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director.

PROCEEDINGS OF DIRECTORS 81 The directors may meet together for the despatch of business, adjourn, and otherwise regulate their meetings, as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes the chairman shall have a second or casting vote. A director may, and the secretary on the requisition of a director shall, at any time summon a meeting of the directors. 82 The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed shall when the number of directors exceeds three be three, and when the number of directors does not exceed three, be two. 83 The continuing directors may act not withstanding any vacancy in their body, but, if, and so long as their number is reduced below the number fixed by or pursuant to the regulations of the company as the necessary quorum of directors, the continuing directors may act for the purpose of increasing the number of directors to that number, or of summoning a general meeting of the company, but for no other purpose.

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84 The directors may elect a chairman of their meetings and determine the period for whichhe is to hold office but if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the directors present may choose one of their number to be chairman of the meeting. 85 The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the directors. 86 A committee may elect a chairman of its meetings; if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the members present may choose one of their number to be chairman of the meeting. 87 A committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members present, and in case of an equality of votes the chairman shall have a second or casting vote. 88 All acts done by any meeting of the directors or of a committee of directors, or by or by any person acting as a director, shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such director or person acting as aforesaid, or that they or any part of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director.

DIVIDENDS AND RESERVE 89 The company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the directors. 90 The directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the company. 91 No dividend shall be paid otherwise than out of profits. 92 Subject to the rights of persons, if any, entitled to shares with special rights as to dividends, all dividends shall be declared and paid according to the amounts paid on the shares, but if and so long as nothing is paid up on any of the shares in the company dividends may be declared and paid according to the amounts of the shares. No amount paid on a share in advance of calls shall, while carrying interest, be treated for the purposes of this article as paid on the share.

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93 The directors may, before recommending any dividend set aside out of the profits of the company such sums as they think proper as a reserve or reserves which shall, at the discretion of the directors, be applicable for meeting contingencies, or for equalising dividends, or for any other purpose to which the profits of the company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the company or be invested in such investments (other than shares of the company) as the directors may from time to time think fit. 94 If several persons are registered as joint holders of any share, any one of them may give effectual receipts for any dividend or other moneys payable on or in respect of the share. 95 Any dividend may be paid by cheque or warrant sent through the post to the registered address of the member or person entitled thereto or in the case of joint holders to anyone of such joint holders at his registered address or to such person and such address as the member or person entitled or such joint holders as the case may be may direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent or to the order of such other person as the member or person entitled or such joint holders as the case may be may direct. 96 No dividend shall bear interest against the company.

ACCOUNTS 97 The directors shall cause proper books of account to be kept with respect to— All sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; All sales and purchases of goods by the company; and The assets and liabilities of the company.

98 The books of account shall be kept at the registered office of the company, or at such other place or places as the directors think fit, and shall always be open to the inspection of the directors. 99 The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the company or any of them shall be open to the inspection of members not being directors, and no member (not being a director) shall have any right of inspecting any account or book or document of the company except as conferred by statute or authorised by the directors or by the company in general meeting. 488

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100 The directors shall from time to time in accordance with section 123 of the Act, cause to be prepared and to be laid before the company in general meeting such profit and loss accounts, balance sheets and reports as are referred to in that section. 101 A copy of every balance sheet (including every document required by law to be annexed thereto) which is to be laid before the company in general meeting together with a copy of the Auditor’s report shall not less than seven days before the date of the meeting be sent to all persons entitled to receive notices of general meetings of the company.

AUDIT 102 Auditors shall be appointed and their duties regulated in accordance with sections 132, 133 and 134 of the Act.

NOTICES 103 A notice may be given by the company to any member either personally or by sending it by post to him to his registered address, or (if he has no registered address in the United Kingdom) to the address, if any, within the United Kingdom supplied by him to the company for the giving of notices to him. Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, prepaying, and posting a letter containing the notice, and to have been effected in the case of a notice of a meeting at the expiration of 24 hours after the letter containing the same is posted, and in any other case at the time at which the latter would be delivered in the ordinary course of the post. 104 If a member has no registered address within the United Kingdom and has not supplied to the company an address within the United Kingdom for the giving of notices to him, a notice addressed to him and advertised in a newspaper circulating the neighbourhood of the registered office of the company, shall be deemed to be duly given to him at noon on the day on which the advertisement appears. 105 A notice may be given by the company to the joint shareholders of a share by giving the notice to the joint holder named first in the register of members in respect of the share. 106 A notice may be given by the company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any 1ike description, at the address, if any, within the United Kingdom supplied for the 489

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purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred. 107 Notice of every general meeting shall be given in some manner hereinbefore authorised to (a) every member except those who (having no registered address within the United Kingdom) have not supplied to the company an address within the United Kingdom for the giving of notices to them, and also (b) every person entitled to a share in consequence of the death or bankruptcy of a member, who, but for his death or bankruptcy, would be entitled to receive notice of the meeting. No other persons shall be entitled to receive notices of general meetings.

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Appendix F Commencement 1st April 1909

COMPANIES (CONSOLIDATION) ACT 1908 FIRST SCHEDULE TABLE A Regulations for management of a company limited by shares PRELIMINARY 1 In these regulations, unless the context otherwise requires, expressions defined in the Companies (Consolidation) Act, 1908, or an statutory modification thereof in force at the date at which these regulations become binding on the company, shall have the meanings so defined; and words importing the singular shall include the plural, and vice versa, and words importing the masculine gender shall include females, and words importing persons shall include bodies corporate.

BUSINESS 2 The directors shall have regard to the restrictions on the commencement of business imposed by section eighty-seven of the Companies (Consolidation) Act 1908, if, and so far as, those restrictions are binding upon the company.

SHARES 3 Subject to the provisions, if any, in that behalf of the memorandum of association of the company, and without prejudice to any special rights previously conferred on the holders of existing shares in the company, any share in the company may be issued with such preferred, deferred, or other special rights, or such restrictions, whether in regard to dividend, voting, return of share capital, or otherwise, as the company may from time to time by special resolution determine. 4 If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue

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of the shares of that class) may be varied with the consent in writing of the holders of three-fourths of the issued shares of that class or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of the shares of the class.To every such separate general meeting the provisions of these regulations relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be two persons at least holding or representing by proxy one-third of the issued shares of the class. 5 No share shall be offered to the public for subscription except upon terms that the amount payable on application shall be at least five per cent. of the nominal amount of the share; and the directors shall, as regards any allotment of shares, duly comply with such provisions of sections eighty-five and eightyeight of the Companies (Consolidation) Act, 1908, as may be applicable thereto. 6 Every person whose name is entered as a member in the register of members shall, without payment, be entitled to a certificate under the common seal of the company specifying the share or shares held by him and the amount paid up thereon, provided that in respect of a share or shares held jointly by several persons the company shall not be bound to issue more than one certificate, and delivery of a certificate for a share to one of the several joint holders shall be sufficient delivery to all. 7 If a share certificate is defaced, lost, or destroyed, it may be renewed on payment of such fee, if any, not exceeding one shilling, and on such terms, if any, as to evidence and indemnity as the directors think fit. 8 No part of the funds of the company shall be employed in the purchase of, or in loans upon the security of, the company’s shares.

LIEN 9 The company shall have a lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that share, and the company shall also have a lien on all shares (other than fully paid shares) standing registered in the name of a single person, for all moneys presently payable by him or his estate to the company; but the directors may at any time declare any share to be wholly or in part exempt from the provisions of this clause. The company’s lien, if any, on a share shall extend to all dividends payable thereon. 10 The company may sell, in such a manner as the directors think fit, any shares on which the company has a lien, but no sale shall be made unless some sum in respect of which the lien exists, is presently payable, nor until the expiration of fourteen days after a notice in writing, stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, 492

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has been given to the registered holder for the time being of the share, or the person entitled by reason of his death or bankruptcy to the share. 11 The proceeds of the sale shall be applied in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue shall (subject to a like lien for sums not presently payable as existed upon the shares prior to the sale) be paid to the person entitled to the shares at the date of the sale.The purchaser shall be registered as the holder of the shares, and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

CALLS ON SHARES 12 The directors may from time to time make calls upon the members in respect of any moneys unpaid on their shares, provided that no call shall exceed one-fourth of the nominal amount of the share, or be payable at less than one month from the last call; and each member shall (subject to receiving at least fourteen days’ notice specifying the time or times of payment) pay to the company at the time or times specifies the amount called on his shares. 13 The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 14 If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest upon the sum at the rate of five pounds per cent. per annum from the day appointed for the payment thereof to the time of the actual payment, but the directors shall be at liberty to waive payment of that interest wholly or in part. 15 The provision of these regulations as to payment of interest shall apply in the case of nonpayment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the amount of the share, or by way of premium, as if the same had become payable by virtue of a call duly paid and notified. 16 The directors may make arrangements on the issue of shares for a difference between the holders in the amount of calls to be paid and in the times of payment. 17 The directors may, if they think fit, receive from any member willing to advance the same all or any part of the moneys uncalled and unpaid upon any shares held by him; and upon all or any of the moneys so advanced may (until the same would, but for such advance, become presently payable) pay interest 493

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at such rate (not exceeding, without the sanction of the company in general meeting, six per cent.) as may be agreed upon between the member paying the sum in advance and the directors.

TRANSFER AND TRANSMISSION OF SHARES 18 The instrument of transfer of any share in the company shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the register of members in respect thereof. 19 Shares in the company shall be transferred in the following form, or in any usual or common form which the directors shall approve:

I, A.B. of …………… in consideration of the sum of …………… £ paid to me by C.D. of …………… (hereinafter called “the said transferee) do hereby transfer to the said transferee the share [or shares] numbered …………… in the undertaking called the …………… Company, to hold unto the said transferee,. his executors, administrators, and assigns, subject to the several conditions on which I held the same at the time of the execution thereof: and I the said transferee, do hereby agree to take the said share [or shares] subject to the same conditions aforesaid. As witness our hands, the……… day of ……………. Witness to the signatures of, …………… &c.

20 The directors may decline to register any transfer of shares, not being fully-paid up shares, to a person of whom they do not approve, and may also decline to register any transfer of shares on which the company has a lien. The directors may also suspend the registration of transfers during the fourteen days immediately preceding the ordinary general meeting in each year. The directors may decline to recognise any instrument of transfer unless (a) a fee not exceeding two shillings and sixpence is paid to the company in respect thereof, and (b) the instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other evidence as the directors may require to show the right of the transferor to make the transfer. 21 The executors or administrators of a deceased sole holder of a share shall be the only persons recognised by the company as having any title to the share. In the case of a share registered in the names of two or more holders, the survivors or survivor, or the executors or administrators of the deceased survivor, shall be the only persons recognised by the company as having any title to the share. 494

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22 Any person becoming entitled to a share in consequence of the death or bankruptcy of a member shall, upon such evidence being produced as may from time to time be required by the directors, have the right, either to be registered as a member in respect of the share or, instead of being registered himself, to make such transfer of the share as the deceased or bankrupt person could have made; but the directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by the deceased or bankrupt person before the death or bankruptcy. 23 A person becoming entitled to a share by reason of the death or bankruptcy of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the company. 24 If a member fails to pay any call or instalment of a call on the day appointed for payment thereof, the directors may, at any time thereafter during such time as any part of such call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued. 25 The notice shall name a further day (not earlier than the expiration of fourteen days from the date of notice) on or before which the payment required by the notice is to be made, and shall state that in the event of nonpayment at or before the time appointed the shares in respect of which the call was made will be liable to be forfeited. 26 If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the directors to that effect. 27 A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the directors think fit, and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the directors think fit. 28 A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares, but shall, notwithstanding, remain liable to pay to the company all moneys which, at the date of forfeiture, were presently payable by him to the company in respect of the shares, but his liability shall cease if and when the company receive payment in full of the nominal amount of the shares. 29 A statutory declaration in writing that the declarant is a director of a company, and that a share in the company has been duly forfeited on a date 495

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stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share, and that declaration, and the receipt of the company for consideration, if any, given for the share on the sale or disposition thereof shall constitute a good title to the share, and the person to whom the share is sold or disposed of shall be registered as the holder of the share and shall not be bound to see to the application of the purchase of money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share. 30 The provisions of these regulations as to forfeiture shall apply in the case of nonpayment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the amount of the share, or by way of premium, as if the same had been payable by virtue of a call duly made and notified. 31 The directors may, with the sanction of the company previously given in the general meeting, convert any paid up shares into stock, and may with the like sanction reconvert any stock into paid-up shares of any denomination. 32 The holders of stock may transfer the same, or any part thereof, in the same manner, and subject to the same regulations, as, and subject to which, the shares from which the stock arose might previously to conversion have been transferred, or as near thereto as circumstances admit; but the directors may from time to time fix the minimum amount of stock transferable, and restrict or forbid the transfer of fractions of that minimum, but the minimum shall not exceed the nominal amount of the shares from which the stock arose. 33 The holders of stock shall, according to the amount of stock held by them, have the same rights, privileges, and advantages as regards dividends, voting at meetings of the company, and other matters as if they held the shares from which the stock arose, but no such privilege or advantage (except participation in the dividends and profits of the company) shall be conferred by any such aliquot part of stock as would not, if existing in shares, have conferred that privilege or advantage. 34 Such of the regulations of the company (other than those relating to share warrants) as are applicable to paid-up shares shall apply to stock, and the words “share” and “shareholder” therein shall include “stock” and “stock-holder.”

SHARE WARRANTS 35 The company may issue share warrants, and accordingly the directors may in their discretion, with respect to any share which is fully paid up, on application in writing signed by the person registered as holder of the share, and authenticated by such evidence, if any, as the directors may from time 496

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to time require as to the identity of the person signing the request, and on receiving the certificate, if any, of the share, and the amount of stamp duty on the warrant and such fee as the directors may from time to time require, issue under the company’s seal a warrant, duly stamped, stating that the bearer of the warrant is entitled to the shares therein specified, and may provide by coupons, or otherwise for the payment of dividends, or other moneys on the shares included in the warrant. 36 A share warrant shall entitle the bearer to the shares included in it, and the shares shall be transferred by the delivery of the share warrant, and the provisions of the regulations of the company with respect to transfer and transmission of shares shall not apply thereto. 37 The bearer of a share warrant shall, on surrender of the warrant to the company for cancellation, and on payment of such sum as the directors may from time to time prescribe, be entitled to have his name entered as a member in the register of members in respect of the shares included in the warrant. 38 The bearer of a share warrant may at any time deposit the warrant at the office of the company, and so long as the warrant remains so deposited with the depositor shall have the same right of signing a requisition for calling a meeting of the company, and of attending and voting and exercising the other privileges of a member at any meeting held after the expiration of two clear days from the time of deposit, as if his name were inserted in the register of members as the holder of the shares included in the deposit warrant. Not more than one person shall be recognised as depositor of the share warrant. The company shall, on two days’ written notice, return the deposited share warrant to the depositor. 39 Subject as herein otherwise expressly provided no person shall, as bearer of a share warrant, sign a requisition for calling a meeting of the company, or attend, or vote, or exercise any other privilege of a member at a meeting of the company, or be entitled to receive any notices from the company; but the bearer of a share warrant shall be entitled in all other respects to the same privileges and advantages as if he were named in the register of members as the holder of the shares included in the warrant, and he shall be a member of the company. 40 The directors may from time to time make rules as to the terms on which (if they shall think fit) a new share warrant or coupon may be issued by way of renewal in case of defacement, loss, or destruction.

ALTERATION OF CAPITAL 41 The directors may, with the sanction of an extraordinary resolution of the company, increase the share capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe. 497

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42 Subject to any direction to the contrary that may be given by the resolution sanctioning the increase of share capital, all new shares shall, before issue, be offered to such persons as at the date of the offer are entitled to receive notices from the company of general meetings in proportion, as nearly as the circumstances admit, to the amount of the existing shares to which they are entitled. The offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and, after the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the directors may dispose of the same in such manner as they think most beneficial to the company. The directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to shares held by persons entitled to an offer of new shares) cannot, in the opinion of the directors, be conveniently offered under this article. 43 The new shares shall be subject to the same provisions with reference to the payment of calls, lien, transfer, transmission, forfeiture, and otherwise as the shares in the original share capital. 44 The company may, by special resolution— (a) Consolidate and divide its share capital into shares of larger amount than its existing shares: (b) By subdivision of its existing shares, or any of them, divide the whole, or any part, of its share capital into shares of smaller amount than is fixed by the memorandum of association, subject, nevertheless, to the provisions of paragraph (d) of subsection (1) of section forty-one of the Companies (Consolidation) Act, 1908: (c) Cancel any shares which, at the date of passing of the resolution, have not been taken or agreed to be taken by any person: (d) Reduce its share capital in any manner and with, and subject to, any incident authorised, and consent required, by law. 45 The statutory general meeting of the company shall be held within the period required by section sixty-five of the Companies (Consolidation) Act 1908. 46 A general meeting shall be held once in every year at such time (not being more than fifteen months after the holding of the last preceding general meeting) and place as may be prescribed by the company in general meeting, or, in default, at such time in the month following that in which the anniversary of the company’s incorporation occurs, and at such place, as the directors shall appoint. In default of a general meeting being so held, a general meeting shall be held in the month next following, and may be convened by any two

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members in the same manner as nearly as possible as that in which meetings are to be convened by the directors. 47 The above-mentioned general meetings shall be called ordinary meetings; all other general meetings shall be called extraordinary. 48 The directors may, whenever they think fit, convene an extraordinary general meeting, and extraordinary general meetings shall also be convened on such requisition, or, in default, may be convened by such requisitionists, as provided by section sixty-six of the Companies (Consolidation) Act, 1908. If at any time there are not within the United Kingdom sufficient directors capable of acting to form a quorum, any director or any two members of the company may convene an extraordinary general meeting in the same manner as nearly as possible as that in which meetings may be convened by the directors.

PROCEEDINGS AT GENERAL MEETING 49 Seven days’ notice at the least (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which notice is given) specifying the place, the day, and the hour of the meeting and, in case of special business, the general nature of that business shall be given in manner hereinafter mentioned, or in such other manner, if any, as may be prescribed by the company in general meeting, to such persons as are, under the regulations of the company, entitled to receive such notices from the company; but the non-receipt of the notice by any member shall not invalidate the proceedings at any general meeting. 50 All business shall be deemed special that is transacted at an extraordinary meeting, and all that is transacted at an ordinary meeting, with exception of sanctioning a dividend, the consideration of the accounts, balance-sheets, and the ordinary report of the directors and auditors, the election of directors and other officers in the place of those retiring by rotation, and the fixing of remuneration of the auditors. 51 No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business; save as herein otherwise provided, three members personally present shall be a quorum. 52 Within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the same day in the next week, at the same time and place, and, if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting the members present shall be a quorum.

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53 The chairman, if any, of the board of directors shall preside as chairman at every general meeting of the company. 54 If there is no such chairman, or if at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting or is unwilling to act as chairman, the members present shall choose some one of their number to be chairman. 55 The chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for ten days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 56 At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of a show of hands) demanded by at least three members, and, unless a poll is so demanded, a declaration by the chairman that a resolution has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book of proceedings of the company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against, that resolution. 57 If a poll is duly demanded it shall be taken in such manner as the chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. 58 In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a second or casting vote. 59 A poll demanded on the election of a chairman, or on a question of adjournment, shall be taken forthwith. A poll demanded on any other question shall be taken as such time as the chairman of the meeting directs. 60 On a show of hands every member present in person shall have one vote. On a poll every member shall have one vote for each share of which he is a holder. 61 In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and for this purpose seniority shall be determined by the order in which the names stand in the register of members.

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62 A member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee, curator bonis, or other person in the nature of a committee or curator bonis appointed by that court, and any such committee, curator bonis, or other person may, on a poll, vote by proxy. 63 No member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the company have been paid. 64 On a poll votes may be given either personally or by proxy. 65 The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or, if the appointor is a corporation, either under the common seal, or under the hand of an officer or attorney so authorised. No person shall act as a proxy unless either he is entitled on his own behalf to be present and vote at the meeting at which he acts as proxy, or he has been appointed to act at that meeting as proxy for a corporation. 66 The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the registered office of the company not less than forty-eight hours before the time for holding the meeting at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid. 67 An instrument appointing a proxy may be in the following form, or in any other form which the directors shall approve: Company, Limited. “I …………… of …………… in the county of ………………… being a member of the …………… Company, Limited, hereby appoint ……………………… of …………… ……as my proxy to vote for me and on my behalf at the [ordinary or extraordinary, as the case may be] general meeting of the company to be held on the …………… day of …………… and at any adjournment thereof.” Signed this …………… day of …………….

DIRECTORS 68 The number of directors and the names of the first directors shall be determined in writing by a majority of the subscribers of the memorandum of association.

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69 The remuneration of the directors shall from time to time be determined by the company in general meeting. 70 The qualification of a director shall be the holding of at least one share in the company, and it shall be his duty to comply with the provisions of section seventy–three of the Companies (Consolidation) Act, 1908.

POWERS AND DUTIES OF DIRECTORS 71 The business of the company shall be managed by the directors, who may pay all expenses incurred in getting up and registering the company, and may exercise all such powers of the company as are not, by the Companies (Consolidation) Act, 1908, or any statutory modification thereof for the time being in force, or by these articles, required to be exercised by the company in general meeting, subject nevertheless to any regulation of these articles, to the provisions of the said Act, and to such regulations, being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting; but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if that regulation had not been made. 72 The directors may from time to time appoint one or more of their body to the office of managing director or manager for such term, and at such remuneration (whether by way of salary, or commission, or participation in profits, or partly in one way and partly in another) as they may think fit, and a director so appointed shall not, while holding that office, be subject to retirement by rotation, or taken into account in determining the rotation of retirement of directors; but his appointment shall be subject to determination ipso facto if he ceases from any cause to be a director, or if the company in general meeting resolve that his tenure of the office of managing director or manager be determined. 73  The amount for the time being remaining undischarged of moneys borrowed or raised by the directors for the purpose of the company (otherwise than by the issue of share capital) shall not at any time exceed the issued share capital of the company without the sanction of the company in general meeting. 74 The directors shall duly comply with the provisions of the Companies (Consolidation) Act, 1908, or any statutory modification thereof for the time being in force, and in particular with the provisions in regard to the registration of the particulars of mortgages and charges affecting the property of the company, or created by it, and to keeping a register of the directors, and to sending to the Registrar of Companies an annual list of members, and a summary of particulars relating thereto, and notice of any consolidation or increase in share capital, or conversion of shares into stock, and copies of 502

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special resolutions, and a copy of the register of directors and notifications of any changes therein. 75 The directors shall cause the minutes to be made in books provided for the purpose— (a) of all appointments of officers made by the directors; (b) of the names of the directors present at each meeting of the directors and of any committee of the directors; (c) of all resolutions and proceedings at all meetings of the company, and of the directors, and of committees of directors, and every director present at any meeting of directors or committee of directors shall sign his name in a book to be kept for that purpose.

THE SEAL 76 The seal of the company shall not be affixed to any instrument except by the authority of a resolution of the board of directors, and in the presence of at least two directors and of the secretary or such other person as the directors may appoint for the purpose; and those two directors and secretary or other person aforesaid shall sign every instrument to which the seal of the company is so affixed in their presence.

DISQUALIFICATION OF DIRECTORS 77 The office of director shall be vacated, if the director— (a) ceases to be a director by virtue of section seventy-three of the Companies (Consolidation) Act, 1908; or (b) holds any other office of profit under the company except that of managing director or manager; or (c) becomes bankrupt; or (d) is found lunatic or becomes of unsound mind; or (e) is concerned or participates in the profits of any contract with the company: Provided, however, that no director shall vacate his office by reason of his being a member of any company which has entered into contracts with or done any work for the company of which he is a director: but a director shall not vote

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in respect of any such contract or work, and if he does so vote his vote shall not be counted.

ROTATION OF DIRECTORS 78 At the first ordinary meeting of the company the whole of the directors shall retire from office, and at the ordinary meeting in every subsequent year one-third of the directors for the time being, or, if their number is not three or a multiple of three, then the number nearest to one-third, shall retire from office. 79 The directors to retire in every year shall be those who have been longest in office since their last election, but as between persons who became directors on the same day those to retire shall (unless they, otherwise agree among themselves) be determined by lot. 80 A retiring director shall be eligible for re-election. 81 The company at the general meeting at which a director retires in manner aforesaid may fill up the vacated office by electing a person thereto. 82 If at any meeting at which an election of directors ought to take place the places of the vacating directors are not filled up, the meeting shall stand adjourned till the same day in the next week at the same time and place, and, if at the adjourned meeting the places of the vacating directors are not filled up, the vacating directors, or such of them as have not had their places filled up, shall be deemed to have been re-elected at the adjourned meeting. 83 The company may from time to time in general meeting increase or reduce the number of directors, and may also determine in what rotation the increased or reduced number is to go out of office. 84 Any casual vacancy occurring in the board of directors may be filled up by the directors, but the person so chosen shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director. 85 The directors shall have power at any time, and from time to time, to appoint a person as an additional director who shall retire from office at the next following ordinary general meeting, but shall be eligible for election by the company at that meeting as an additional director. 86 The company may by extraordinary resolution remove any director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead; the person so appointed shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director. 504

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PROCEEDINGS OF DIRECTORS 87 The directors may meet together for the despatch of business, adjourn, and otherwise regulate their meetings, as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes the chairman shall have a second or casting vote. A director may, and the secretary on the requisition of a director shall, at any time summon a meeting of the directors. 88 The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed shall (when the number of directors exceeds three) be three. 89 The continuing directors may act notwithstanding any vacancy in their body, but, if and so long as their number is reduced below the number fixed by or pursuant to the regulations of the company as the necessary quorum of directors, the continuing directors may act for the purpose of increasing the number of directors to that number, or of summoning a general meeting of the company, but for no other purpose. 90 The directors may address a chairman of their meetings and determine the period for which he is to hold office; but, if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the directors present may choose one of their number to be chairman of the meeting. 91 The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the directors. 92 A committee may elect a chairman of their meetings: if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the members present may choose one of their number to be chairman of the meeting. 93 A committee may meet and adjourn as they think proper. Questions arising at any meeting shall be determined by a majority of votes of the members present, and in case of an equality of votes the chairman shall have the second or casting vote. 94 All acts done by any meeting of the directors or of a committee of directors, or by any person acting as a director, shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such directors or persons acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 505

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DIVIDENDS AND RESERVE 95 The company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the directors. 96 The directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the company. 97 No dividend shall be paid otherwise than out of profits. 98 Subject to the rights of persons, if any, entitled to shares with special rights as to dividends, all dividends shall be declared and paid according to the amounts paid on the shares, but if and so long as nothing is paid up on any of the shares in the company dividends may be declared and paid according to the amounts of the shares. No amount paid on a share in advance of calls shall, while carrying interest, be treated for the purposes of this article as paid on the share. 99 The directors may, before recommending any dividend, set aside out of the profits of the company such sums as they think proper as a reserve or reserves which shall, at the discretion of the directors, be applicable for meeting contingencies, or for equalising dividends, or for any other purpose to which the profits of the company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the company or be invested in such investments (other than shares of the company) as the directors may from time to time think fit. 100 If several persons are registered as joint holders of any share any one of them may give effectual receipts for any dividend payable on the share. 101 Notice of any dividend that may have been declared shall be given in manner hereinafter mentioned to the persons entitled to share therein. 102 No dividend shall bear interest against the company.

ACCOUNTS 103 The directors shall cause true accounts to be kept – Of the sums of money received and expended by the company and the matter in respect of which such receipt and expenditure takes place, and Of the assets and liabilities of the company.

104 The books of account shall be kept at the registered office of the company, or at such other place or places as the directors think fit, and shall always be open to the inspection of the directors. 506

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105 The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the company or any of them shall be open to the inspection of members not being directors, and no member (not being a director) shall have any right of inspecting any account or book or document of the company except as conferred by statute or authorised by the directors or by the company in general meeting. 106 Once at least in every year the directors shall lay before the company in general meeting a profit and loss account for the period since the preceding account or (in the case of the first account) since the incorporation of the company, made up to a date not more than six months before such meeting. 107 A balance sheet shall be made out in every year and laid before the company in general meeting made up to a date not more than six months before such meeting. The balance-sheet shall be accompanied by a report of the directors as to the state of the company’s affairs, and the amount which they recommend to be paid by way of dividend, and the amount, if any, which they propose to carry to a reserve fund. 108 A copy of the balance sheet and report shall, seven days previously to the meeting, be sent to the persons entitled to receive notices of general meetings in the manner in which notices are to be given hereunder.

AUDIT 109 Auditors shall be appointed and their duties regulated in accordance with sections one hundred and twelve and one hundred and thirteen of the Companies (Consolidation) Act, 1908, or any statutory modification thereof for the time being in force.

NOTICES 110 A notice may be given by the company to any member either personally or by sending it by post to him to his registered address, or (if he has no registered address in the United Kingdom) to the address, if any, within the United Kingdom supplied by him to the company for the giving of notices to him. Where a notice is sent by post, service of the notice shall be deemed to be affected by properly addressing, prepaying, and posting a letter containing the notice, and unless the contrary is proved to have been effected at the time at which the letter would be delivered in the ordinary course of post. 111 If a member has no registered address in the United Kingdom and has not supplied to the company an address within the United Kingdom for the giving 507

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of notices to him, a notice addressed to him and advertised in a newspaper circulating in the neighbourhood of the registered office of the company, shall be deemed to be duly given to him on the day on which the advertisement appears. 112 A notice may be given by the company to the joint holders of a share by giving the notice to the joint holder named first in the register in respect of the share. 113 A notice may be given by the company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description, at the address, if any, in the United Kingdom supplied for the purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred. 114 Notice of every general meeting shall be given in some manner hereinbefore authorised to (a) every member of the company (including bearers of share warrants) except those members who (having no registered address within the United Kingdom) have not supplied to the company an address within the United Kingdom for the giving of notices to them, and also to (b) every person entitled to a share in consequence of the death or bankruptcy of a member, who, but for his death or bankruptcy, would be entitled to receive notice of the meeting. No other persons shall be entitled to receive notices of general meetings.

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Appendix G Commencement 1st October 1906

ORDER OF THE BOARD OF TRADE, DATED JULY 30 1906 SUBSTITUTING A NEW TABLE A FOR THAT CONTAINED IN THE FIRST SCHEDULE TO THE COMPANIES ACT 1862. S.R. & O. 1906 NO. 596L.15 Whereas by the 71st section of the Companies Act, 1862, the Board of Trade are empowered to make such alterations in the Tables and Forms contained in the First Schedule to the said Act as they deem requisite. And whereas it is deemed desirable to substitute the Table hereafter set forth for the Table A contained in the said First Schedule. Now therefore the Board of Trade do hereby order and direct that the Table hereafter set forth shall from and after the 1st day of October, 1906, be substituted for the said Table A contained in the said First Schedule.

TABLE A (Revised)

Regulations for management of a company limited by shares PRELIMINARY 1 In these regulations, unless the context otherwise requires, expressions defined in the Companies Acts, 1862 to 1900, or any statutory modification thereof in force at the date at which these regulations become binding on the company, shall have the meanings so defined; and words importing the singular number only shall include the plural number, and vice versa, and words importing the masculine gender shall include the feminine, and words importing persons shall include corporations.

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BUSINESS 2 The directors shall have regard to the restrictions on the commencement of business imposed by section 6 of the Companies Act, 1900, if, and so far as, such restrictions shall be binding upon the company.

SHARES 3 Subject to the provisions, if any, in that behalf of the memorandum of association of the company, and without prejudice to any special rights previously conferred on the holders of existing shares in the company, any share in the company may be issued with such preferred, deferred, or other special rights, or such restrictions, whether in regard to dividend, voting, return of capital or otherwise, as the company may from time to time by special resolution determine. 4 If at any time the capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may be varied with the consent in writing of the holders of three-fourths of the issued shares of that class, or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of the shares of the class. To every such separate general meeting the provisions of these regulations relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be two persons at least holding or representing by proxy one-third of the issued shares of the class. 5 No share shall be offered to the public for subscription except upon the terms that the amount payable on application shall be at least 5 per cent. of the nominal amount of the share; and the directors shall, as regards any allotment of shares, duly comply with such of the provisions of the Companies Act, 1900, sections 4 and 7, as may be applicable thereto. 6 Every person whose name is entered as a member in the register of members shall, without payment, be entitled to a certificate under the common seal of the company specifying the share or shares held by him and the amount paid up thereon, provided that in respect of a share or shares held jointly by several persons the company shall not be bound to issue more than one certificate, and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all. 7 If a share certificate is defaced, lost, or destroyed, it may be renewed on payment of such fee, if any, not exceeding one shilling, and on such terms, if any, as to evidence and indemnity as the directors think fit. 8 No part of the funds of the company shall be employed in the purchase of, or in loans upon the security of, the Company’s shares. 510

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LIEN 9 The company shall have a lien on every share (not being a fully-paid share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of such share, and the company shall also have a lien on all shares (other than fully-paid shares) standing registered in the name of a single person, for all moneys presently payable by him or his estate to the company; but the directors may at any time declare any share to be wholly or in part exempt from the provisions of this clause.The company’s lien, if any, on a share shall extend to all dividends payable thereon. 10 The company may sell, in such manner as the directors think fit, any shares on which the company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable, nor until the expiration of fourteen days after a notice in writing, stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the share, or the person entitled by reason of his death or bankruptcy to the share. 11 The proceeds of the sale shall be applied in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue shall (subject to a like lien for sums not presently payable as existed upon the shares prior to the sale) be paid to the person entitled to the shares at the date of the sale.The purchaser shall be registered as the holder of the shares, and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

CALLS ON SHARES 12 The directors may from time to time make calls upon the members in respect of any moneys unpaid on their shares, provided that no call shall exceed one-fourth of the nominal amount of the share, or be payable at less than one month from the last call; and each member shall (subject to receiving at least fourteen days’ notice specifying the time or times of payment) pay to the company at the time or times so specified the amount called on his shares. 13 The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 14 If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest upon the sum at the rate of £5 per cent. per annum from the day appointed for the payment thereof to the time of the actual payment, but the directors shall be at liberty to waive payment of such interest wholly or in part. 511

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15 The provisions of these regulations as to payment of interest shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the amount of the share, or by way of premium, as if the same had become payable by virtue of a call duly made and notified. 16 The directors may make arrangements on the issue of shares for a difference between the holders in the amount of calls to be paid and in the times of payment. 17 The directors may, if they think fit, receive from any member willing to advance the same all or any part of the moneys uncalled and unpaid upon any shares held by him; and upon all or any of the moneys so advanced may (until the same would, but for such advance, become presently payable) pay interest at such rate (not exceeding, without the sanction of the company in general meeting, six per cent) as may be agreed upon between the member paying the sum in advance and the directors.

TRANSFER AND TRANSMISSION OF SHARES 18 The instrument of transfer of any share in the company shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the register of members in respect thereof. 19 Shares in the company shall be transferred in the following form, or in any usual or common form which the directors shall approve: I, A.B of …………… in consideration of the sum of £ …………… paid to me by C.D. …………… of …………… (hereinafter called ‘the said transferee’) do hereby transfer to the said transferee the share [or shares] numbered …………… in the undertaking called the …………… Company Limited, to hold unto the said transferee, his executors, administrators and assigns, subject to the several conditions on which I held the same at the time of the execution thereof: and I, the said transferee, do hereby agree to take the said share [or shares] subject to the conditions aforesaid.   As witness our hands the ……… day of ……………   Witness to the signatures of ……………, etc;”

20 The directors may decline to register any transfer of shares, not being fully-paid shares, to a person of whom they do not approve, and may also decline to register any transfer of shares on which the company has a lien.

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The directors may also suspend the registration of transfers during the fourteen days immediately preceding the ordinary general meeting in each year. The directors may decline to recognise any instrument of transfer unless (a) a fee not exceeding two shillings and six pence is paid to the company in respect thereof, and (b) the instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer. 21 The executors or administrators of a deceased sole holder of a share shall be the only persons recognised by the company as having any title to the share. In the case of a share registered in the names of two or more holders, the survivors or survivor, or the executors or administrators of the deceased survivor, shall be the only persons recognised by the company as having any title to the share. 22 Any person becoming entitled to a share in consequence of the death or bankruptcy of a member shall, upon such evidence being produced as may from time to time be required by the directors, have the right, either to be registered as a member in respect of the share, or, instead of being registered himself to make such transfer of the share as the deceased or bankrupt person could have made; but the directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by the deceased or bankrupt person before the death or bankruptcy. 23 A person becoming entitled to a share by reason of the death or bankruptcy of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the company.

FORFEITURE OF SHARES 24 If a member fails to pay any call or instalment of a call on the day appointed for payment thereof the directors may, at any time thereafter during such time as any part of such call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued. 25 The notice shall name a further day (not earlier than the expiration of fourteen days from the date of the notice) on or before which the payment required by the notice is to be made, and shall state that in the event of nonpayment at or before the time appointed the shares in respect of which the call was made will be liable to be forfeited.

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26 If the requisitions of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the directors to that effect. 27 A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the directors think fit, and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the directors think fit. 28 A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares, but shall, notwithstanding, remain liable to pay to the company all moneys which, at the date of forfeiture, were presently payable by him to the company in respect of the shares, but his liability shall cease if and when the company shall have received payment in full of the nominal amount of the shares. 29 A statutory declaration in writing that the declarant is a director of the company, and that a share in the company has been duly forfeited on a date stated in the declaration, shall \be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share, and such declaration, and the receipt of the company for the consideration, if any, given for the share on the sale or disposition thereof, shall constitute a good title to such share, and the person to whom the share is sold or disposed of shall be registered as the holder of the share and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale, or disposal of the share. 30 The provisions of these regulations as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the amount of the share, or by way of premium, as if the same had been payable by virtue of a call duly made and notified.

CONVERSION OF SHARES INTO STOCK 31 The directors may, with the sanction of the company previously given in general meeting, convert any paid-up shares into stock, and may with the like sanction reconvert any stock into paid-up shares of any denomination. 32 The holders of stock may transfer the same, or any part thereof, in the same manner, and subject to the same regulations as, and subject to which, the shares from which the stock arose might previously to conversion have been transferred, or as near thereto as circumstances admit; but the directors may from time to time fix the minimum amount of stock transferable, and restrict 514

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or forbid the transfer of fractions of such minimum, but the minimum shall not exceed the nominal amount of the shares from which the stock arose. 33 The holders of stock shall, according to the amount of the stock held by them, have the same rights, privileges, and advantages as regards dividends, voting at meetings of the company, and other matters as if they held the shares from which the stock arose, but no such privilege or advantage (except participation in the dividends and profits of the company) shall be conferred by any such aliquot part of stock as would not, if existing in shares, have conferred such privilege or advantage. 34 Such of the regulations of the company (other than those relating to share warrants) as are applicable to paid-up shares shall apply to stock, and the words ‘share’ and ‘shareholder’ therein shall include ‘stock’ and ‘stockholder.’

SHARE WARRANTS 35 The company may issue share warrants, and accordingly the directors may in their discretion, with respect to any share which is fully paid up, on application in writing signed by the person registered as holder of the share, and authenticated by such evidence, if any, as the directors may from time to time require as to the identity of the person signing the request, and on receiving the certificate, if any, of the share, and the amount of the stamp duty on the warrant and such fee as the directors may from time to time require, issue under the company’s seal a warrant, duly stamped, stating that the bearer of the warrant is entitled to the shares therein specified, and may provide by coupons, or otherwise, for the payment of dividends, or other moneys, on the shares included in the warrant. 36 A share warrant shall entitle the bearer to the shares included in it, and the shares shall be transferred by the delivery of the share warrant, and the provisions of the regulations of the company with respect to transfer and transmission of shares shall not apply thereto. 37 The bearer of a share warrant shall, on surrender of the warrant to the company for cancellation, and on payment of such sum as the directors may from time to time prescribe, be entitled to have his name entered as a member in the register of members in respect of the shares included in the warrant. 38 The bearer of a share warrant may at any time deposit the warrant at the office of the company, and so long as the warrant remains so deposited the depositor shall have the same right of signing a requisition for calling a meeting of the company, and of attending and voting and exercising the other privileges of a member at any meeting held after the expiration of two clear days from the time of deposit, as if his name were inserted in the register of members as the holder of the shares included in the deposited warrant. Not more than 515

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one person shall be recognised as depositor of the share warrant.The company shall on two days’ written notice return the deposited share warrant to the depositor. 39 Subject as herein otherwise expressly provided no person shall, as bearer of a share warrant, sign a requisition for calling a meeting of the company, or attend, or vote, or exercise any other privilege of a member at a meeting of the company, or be entitled to receive any notices from the company; but the bearer of a share warrant shall be entitled in all other respects to the same privileges and advantages as if he were named in the register of members as the holder of the shares included in the warrant, and he shall be a member of the company. 40 The directors may from time to time make rules as to the terms on which (if they shall think fit) a new share warrant or coupon may be issued by way of renewal in case of defacement, loss, or destruction.

ALTERATION OF CAPITAL 41 The directors may, with the sanction of an extraordinary resolution of the company, increase the capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe. 42 Subject to any direction to the contrary that may be given by the resolution sanctioning the increase of capital, all new shares shall, before issue, be offered to such persons as at the date of the offer are entitled to receive notices from the company of general meetings in proportion, as nearly as the circumstances admit, to the amount of the existing shares to which they are entitled. Such offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and after the expiration of such time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the directors may dispose of the same in such manner as they think most beneficial to the company. The directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to shares held by persons entitled to an offer of new shares) cannot, in the opinion of the directors, be conveniently offered under this article. 43 The new shares shall be subject to the same provisions with reference to the payment of calls, lien, transfer, transmission, forfeiture and otherwise as the shares in the original capital. 44 The company may, by special resolution— (a) Consolidate and divide its capital into shares of larger amount than its existing shares. 516

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(b) By sub-division of its existing shares, or any of them, divide the whole, or any part, of its capital into shares of smaller amount than is fixed by the memorandum of association, subject, nevertheless, to the proviso contained in the Companies Act, 1867, section 21. (c) Cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person. (d) Reduce its capital in any manner and with, and subject to, any incident authorized, and consent required, by law.

GENERAL MEETINGS 45 The statutory general meeting of the company shall be held within the period required by the Companies Act, 1900, section 12. 46 A general meeting shall be held once in every year at such time and place as may be prescribed by the company in general meeting, or, in default, at such time in the month following that in which the anniversary of the company’s incorporation occurs, and at such place, as the directors shall appoint. In default of a general meeting being so held, a general meeting shall be held in the month next following, and may be convened by any two members in the same manner as nearly as possible as that in which meetings are to be convened by the directors. 47 The above-mentioned general meetings shall be called ordinary meetings; all other general meetings shall be called extraordinary. 48 The directors may, whenever they think fit, convene an extraordinary general meeting, and extraordinary general meetings shall also be convened on such requisition, or, in default, may be convened by such requisitionists as provided by the Companies Act, 1900, section 13. If at any time there shall not be within the United Kingdom sufficient directors capable of acting to form a quorum, any director or any two members of the company may convene an extraordinary general meeting in the same manner as nearly as possible as that in which meetings may be convened by the directors.

PROCEEDINGS AT GENERAL MEETINGS 49 Seven days’ notice at the least (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which notice is given) specifying the place, the day, and the hour of meeting and, in case of special business, the general nature of such business shall be given in manner hereinafter mentioned, or in such other manner, if any, as may be prescribed by the company in general meeting, to such persons as are, under the regulations of the company, entitled to receive such notices from the company; but the 517

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non-receipt of such notice by any member shall not invalidate the proceedings at any general meeting. 50 All business shall be deemed special that is transacted at an extraordinary meeting, and all that is transacted at an ordinary meeting, with the exception of sanctioning a dividend, the consideration of the accounts, balance-sheets, and the ordinary report of the directors and auditors, the election of directors and other officers in the place of those retiring by rotation, and the fixing of the remuneration of the auditors. 51 No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business; save as herein otherwise provided, three members personally present shall be a quorum. 52 If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the same day in the next week, at the same time and place, and if at such adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the members present shall be a quorum. 53 The chairman, if any, of the board of directors shall preside as chairman at every general meeting of the company. 54 If there is no such chairman, or if at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting, or is unwilling to act as chairman, the members present shall choose some one of their number to be chairman. 55 The chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for ten days or more notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment, or of the business to be transacted at an adjourned meeting. 56 At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of the show of hands) demanded in case the resolution be proposed as a special or extraordinary resolution by at least five members or in any other case by at least two members, and, unless a poll is so demanded, a declaration by the chairman that a resolution has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that 518

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effect in the book of proceedings of the company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against, such resolution. 57 If a poll is duly demanded it shall be taken in such manner as the Chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. 58 In the case of an equality of votes, whether on a show of hands, or on a poll, the chairman of the meeting at which the show of hands takes place, or at which the poll is demanded, shall be entitled to a second or casting vote. 59 A poll demanded on the election of a chairman, or on a question of adjournment, shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the chairman of the meeting directs.

VOTES OF MEMBERS 60 On a show of hands every member present in person shall have one vote. On a poll every member shall have one vote for each share of which he is the holder. 61 In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and for this purpose seniority shall be determined by the order in which the names stand in the register of members. 62 A member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy may vote, whether on a show of hands or on a poll, by his committee, curator bonis or other person in the nature of a committee or curator bonis appointed by such court, and such committee, curator bonis or other person may, on a poll, vote by proxy. 63 No member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the company have been paid. 64 On a poll votes may be given either personally or by proxy. 65 The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorized in writing, or, if the appointor is a corporation, either under the common seal, or under the hand of an officer or attorney so authorized. No person shall act as a proxy unless either he is entitled on his own behalf to be present and vote at the meeting at which he acts as proxy, or he is appointed to act at that meeting as proxy for a corporation. 519

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66 The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power or authority shall be deposited at the registered office of the company not less than forty-eight hours before the time for holding the meeting at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid. 67 An instrument appointing a proxy may be in the following form, or in any other form which the directors shall approve: Company, Limited. ‘I …………… of …………… the County of …………… being a member of the …………… Company, Limited, hereby appoint …………… of …………… as my Proxy to vote for me and on my behalf at the [Ordinary or Extraordinary, as the case may be] general meeting of the Company to be held on the day of …………… and at …………… any adjournment thereof.   Signed this …………… day of ……………’

DIRECTORS 68 The number of the directors and the names of the first directors, shall be determined in writing by a majority of the subscribers of the memorandum of association. 69 The remuneration of the directors shall from time to time be determined by the company in general meeting. 70 The qualification of a director shall be the holding of at least one share in the company, and it shall be his duty to comply with the provisions of the Companies Act, 1900, section 3.

POWERS AND DUTIES OF DIRECTORS 71 The business of the company shall be managed by the directors, who may pay all expenses incurred in getting up and registering the company, and may exercise all such powers of the company as are not, by the Companies Acts, 1862 to 1900, or any statutory modification thereof for the time being in force, or by these articles, required to be exercised by the company in general meeting, subject nevertheless to any regulation of these articles, to the provisions of the said Acts, and to such regulations, being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting; but no regulations made by the company in general meeting shall 520

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invalidate any prior act of the directors which would have been valid if such regulation had not been made. 72 The directors may from time to time appoint one or more of their body to the office of managing director or manager for such term, and at such remuneration (whether by way of salary, or commission, or participation in profits, or partly in one way, and partly in another), as they may think fit, and a director so appointed shall not, while holding such office, be subject to retirement by rotation, or taken into account in determining the rotation of retirement of directors; but his appointment shall be subject to determination ipso facto if he shall cease from any cause to be a director, or if the company in general meeting shall resolve that his tenure of the office of managing director or manager be determined. 73 The amount for the time being remaining undischarged of moneys borrowed or raised by the directors for the purposes of the company (otherwise than by the issue of share capital) shall not at any time exceed the issued capital of the company without the sanction of the company in general meeting. 74 The directors shall duly comply with the provisions of the Companies Acts, 1862 to 1900, or any statutory modification thereof for the time being in force, and in particular the provisions in regard to the registration of mortgages and charges affecting the property of, or created by, the company, and to keeping a register of the directors, and in regard to sending to the Registrar of Joint Stock Companies an annual list of members, and a summary of particulars relating thereto, and notice of any consolidation or increase of capital, or conversion of shares into stock, and copies of special resolutions, and a copy of the register of directors, and notifications of any changes therein. 75 The directors shall cause minutes to be made in books provided for the purpose (a) Of all appointments of officers made by the directors; (b) Of the names of the directors present at each meeting of the directors and of any committee of the directors; (c) Of all resolution and proceedings at all meetings of the company, and of the directors, and of committees of directors, and every director present at any meeting of directors or committee of directors shall sign his name in a book to be kept for that purpose.

THE SEAL 76 The seal of the company shall not be affixed to any instrument except by the authority of a resolution of the board of directors, and in the presence of at least two directors, and of the secretary or such other person as the 521

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directors may appoint for the purpose; and those two directors and secretary or other person as aforesaid shall sign every instrument to which the seal of the company is so affixed in their presence.

DISQUALIFICATIONS OF DIRECTORS 77 The office of director shall be vacated: If he ceases to be a director by virtue of the Companies Act, 1900, Section 3. If he holds any other office of profit under the company except that of managing director or manager. If he becomes bankrupt. If he is found lunatic or becomes of unsound mind. If he is concerned or participates in the profits of any contract with the company.

But the above rules shall be subject to the following exceptions: - That no director shall vacate his office by reason of his being a member of any company which has entered into contracts with or done any work for the company of which he is director: nevertheless, he shall not vote in respect of such contract or work: and if he does so vote his vote shall not be counted.

ROTATION OF DIRECTORS 78 At the first ordinary meeting of the company the whole of the directors shall retire from office, and at the ordinary meeting in every subsequent year one-third of the directors for the time being, or if their number is not three or a multiple of three, then the number nearest to one-third, shall retire from office. 79 The directors to retire in every year shall be those who have been longest in office since their last election, but as between persons who became directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. 80 A retiring director shall be eligible for re-election. 81 The company at the general meeting at which a director retires in manner aforesaid may fill up the vacated office by electing a person thereto. 82 If at any meeting at which an election of directors ought to take place and places of the vacating directors are not filled up, the meeting shall stand adjourned till the same day in the next week at the same time and place, and if at such adjourned meeting the places of the vacating directors are not filled up, 522

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the vacating directors, or such of them as have not had their places filled up, shall be deemed to have been re-elected at such adjourned meeting. 83 The company may from time to time in general meeting increase or reduce the number of directors, and may also determine in what rotation such increased or reduced number is to go out of office. 84 Any casual vacancy occurring in the board of directors may be filled up by the directors, but the person so chosen shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director. 85 The directors shall have power at any time, and from time to time, to appoint a person as an additional director who shall retire from office at the next following ordinary general meeting, but shall be eligible for election by the company at that meeting as an additional director. 86 The company may by extraordinary resolution remove any director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead; the person so appointed shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director.

PROCEEDINGS OF DIRECTORS 87 The directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes the chairman shall have a second or casting vote. A director may and the secretary on the requisition of a director shall at any time summon a meeting of the directors. 88 The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed shall (when the number of directors exceeds three) be three. 89 The continuing directors may act notwithstanding any vacancy in their body, but, if and so long as their number is reduced below the number fixed by or pursuant to the regulations of the company as the necessary quorum of directors, the continuing directors may act for the purpose of increasing the number of directors to that number, or of summoning a general meeting of the company, but for no other purpose. 90 The directors may elect a chairman of their meetings and determine the period for which he is to hold office; but if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time 523

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appointed for holding the same, the directors present may choose one of their number to be chairman of the meeting. 91 The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the directors. 92 A committee may elect a chairman of their meetings: if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the members present may choose one of their number to be chairman of the meeting. 93 A committee may meet and adjourn as they think proper. Questions arising at any meeting shall be determined by a majority of votes of the members present, and in case of an equality of votes the chairman shall have a second or casting vote. 94 All acts done by any meeting of the directors or of a committee of directors, or by any person acting as a director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such directors or persons acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director.

DIVIDENDS AND RESERVE 95 The company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the directors. 96 The directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the company. 97 No dividend shall be paid otherwise than out of profits. 98 Subject to the rights of persons, if any, entitled to shares with special rights as to dividends, all dividends shall be declared and paid according to the amounts paid on the shares, but if and so long as nothing is paid up on any of the shares in the company dividends may be declared and paid according to the amounts of the shares. No amount paid on a share in advance of calls shall, while carrying interest, be treated for the purposes of this article as paid on the share. 99 The directors may, before recommending any dividend, set aside out of the profits of the company such sums as they think proper as a reserve or reserves which shall, at the discretion of the directors, be applicable for 524

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meeting contingencies, or for equalizing dividends, or for any other purpose to which the profits of the company may be properly applied, and pending such application may, at the like discretion, either by employed in the business of the company or be invested in such investments (other than shares of the company) as the directors may from time to time think fit. 100 If several persons are registered as joint holders of any share any one of them may give effectual receipts for any dividend payable on the share. 101 Notice of any dividend that may have been declared shall be given in manner hereinafter mentioned to the persons entitled to share therein. 102 No dividend shall bear interest against the company.

ACCOUNTS 103 The directors shall cause true accounts to be kept: Of the sums of money received and expended by the company and the matter in respect of which such receipt and expenditure takes place; and Of the assets and liabilities of the company.

104 The books of account shall be kept at the registered office of the company, or at such other place or places as the directors think fit, and shall always be open to the inspection of the directors. 105 The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the company or any of them shall be open to the inspection of members not being directors, and no member (not being a director) shall have any right of inspecting any account or book or document of the company except as conferred by statute or authorized by the directors or by the company in general meeting. 106 Once at least in every year the directors shall lay before the company in general meeting a profit and loss account for the period since the preceding account or (in the case of the first account) since the incorporation of the company, made up to date not more than six months before such meeting. 107 A balance sheet shall be made out in every year and laid before the company in general meeting made up to a date not more than six months before such meeting.The balance sheet shall be accompanied by a report of the directors as to the state of the company’s affairs, and the amount which they recommend to be paid by way of dividend, and the amount, if any, which they propose to carry to a reserve fund.

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108 A copy of such balance sheet and report shall, seven days previously to the meeting, be sent to the persons entitled to receive notices of general meetings in the manner in which notices are to be given hereunder.

AUDIT 109 Auditors shall be appointed and their duties regulated in accordance with the Companies Act, 1900, sections 21, 22, and 23, or any statutory modification thereof for the time being in force.

NOTICES 110 A notice may be given by the company to any member either personally, or by sending it through the post in a prepaid letter addressed to such member at his registered address, or (if he has no registered address in the United Kingdom) at the address, if any, within the United Kingdom supplied by him to the company for the giving of notices to him. 111 If a member has no registered address in the United Kingdom and has not supplied to the company an address within the United Kingdom for the giving of notices to him, a notice addressed to him, and advertised in a newspaper circulating in the neighbourhood of the registered office of the company, shall be deemed to be duly given to him on the day on which the advertisement appears. 112 A notice may be given by the company to the joint holders of a share by giving the notice to the joint holder named first in the register in respect of the share. 113 A notice may be given by the company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description, at the address, if any, in the United Kingdom supplied for the purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred. 114 Notice of every general meeting shall be given in some manner hereinbefore authorized to (a) every member of the company (including bearers of share warrants) except those members who (having no registered address within the United Kingdom) have not supplied to the company an address within the United Kingdom for the giving of notices to them, and also to (b) every person entitled to a share in consequence of the death or bankruptcy

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of a member, who, but for his death or bankruptcy, would be entitled to receive notice of the meeting. No other persons shall be entitled to receive notices of general meetings. 115 Any notice, if given by post, shall be deemed to have been served at the time when the letter containing the same is put into the Post Office, and in proving the giving of the notice it shall be sufficient to prove that the letter containing the notice was properly addressed and put into the Post Office.

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Appendix H Commencement 7th August 1862

COMPANIES ACT 1862 FIRST SCHEDULE TABLE A Regulations for management of a company limited by shares SHARES 1 If several persons are registered as joint holders of any share, any one of each persons may give effectual receipts for any dividend payable in respect of such share. 2 Every member shall, on payment of one shilling, or such less sum as the company in general meeting may prescribe, be entitled to a certificate, under the common seal of the company, specifying the share or shares held by him, and the amount paid up thereon. 3 If such certificate is worn out or lost, it may be renewed, on payment of one shilling, or such less sum as the company in general meeting may prescribe.

CALL ON SHARES 4 The directors may from time to time make such calls upon the members in respect of all monies unpaid on their shares as they think fit, provided that twenty-one days notice at least is given of each call, and each member shall be liable to pay the amount of calls so made to the persons and at the times and places appointed by the directors. 5 A call shall be deemed to have been made at the time when the resolution of the directors authorizing such call was passed. 6 If the call payable in respect of any share is not paid before or on the day appointed for payment thereof, the holder for the time being of such share shall be liable to pay interest for the same at the rate of five pounds per cent per annum from the day appointed for the payment thereof to the time of the actual payment.

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7 The directors may, if they think fit, receive from any member willing to advance the same all or any part of the monies due upon the shares held by him beyond the sums actually called for; and upon the monies so paid in advance, or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made, the company may pay interest at such rate as the member paying such sum in advance and the directors agree upon.

TRANSFERS OF SHARES 8 The instrument of transfer of any share in the company shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain a holder of such share until the name of the transferee is entered in the register book in respect thereof. 9 Shares in the company shall be transferred in the following form— “I A.B of …………… in consideration of the Sum of ………………… Pounds paid to me by C.D. of ………………… do hereby transfer to the said C.D. the share [or shares] numbered …………… standing in my Name in the Books of the Company, to hold unto the said C.D., his Executors, Administrators, and Assigns, subject to the several Conditions on which I held the same at the Time of the Execution hereof; and I the said C.D. do hereby agree to take the said Share [or Shares] subject to the same Conditions. As witness our Hands, the ……………… Day of …………….”

10 The company may decline to register any transfer of shares made by a member who is indebted to them. 11 The transfer books shall be closed during the fourteen days immediately preceding the ordinary general meeting in each year.

TRANSMISSION OF SHARES 12 The executors or administrators of a deceased member shall be the only persons recognized by the company as having any title to his share. 13 Any person becoming entitled to a share in consequence of the death, bankruptcy, or insolvency of any member, or in consequence of the marriage of any female member, may be registered as a member upon such evidence being produced as may from time to time be required by the company.

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14 Any person who has become entitled to a share in consequence of the death, bankruptcy, or insolvency of any member, or in consequence of the marriage of any female member, may, instead of being registered himself, elect to have some person to be named by him registered as a transferee of such share. 15 The person so becoming entitled shall testify such election by executing to his nominee an instrument of transfer of such share. 16 The instrument of transfer shall be presented to the company, accompanied with such evidence as the directors may require to prove the title of the transferor, and thereupon the company shall register the transferee as a member.

FORFEITURE OF SHARES 17 If any member fails to pay any call on the day appointed for payment thereof, the directors may, at any time thereafter, during such time as the call remains unpaid, serve a notice on him, requiring him to pay such call, together with interest and any expenses that may have accrued by reason of such nonpayment. 18 The notice shall name a further day, on or before which such call, and all interest and expenses that have accrued by reason of such nonpayment, are to be paid. It shall also name the place where payment is to be made (the place so named being either the registered office of the company or some other place at which calls of the company are usually made payable). The notice shall also state that in the event of nonpayment at or before the time and at the place appointed the shares in respect of which such call was made will be liable to be forfeited. 19 If the requisitions of any such notice as aforesaid are not complied with, any share in respect of which such notice has been given may at any time thereafter, before payment of all calls, interest, and expenses due in respect thereof has been made, be forfeited, by a resolution of the directors to that effect. 20 Any share so forfeited shall be deemed to be the property of the company, and may be disposed of in such manner as the company in general meeting thinks fit. 21 Any member whose shares have been forfeited shall notwithstanding be liable to pay to the company all calls owing upon such shares at the time of the forfeiture.

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22 A statutory declaration in writing, that the call in respect of a share was made and notice thereof given, and that default in payment of the call was made, and that the forfeiture of the share was made by a resolution of the directors to that effect, shall be sufficient evidence of the facts therein stated, as against all persons entitled to such share, and such declaration and the receipt of the company for the price of such share shall constitute a good title to such share, and a certificate of proprietorship shall be delivered to a purchaser, and thereupon he shall be deemed the holder of such share discharged from all calls due prior to such purchase, and he shall not be bound to see to the application of the purchase money, nor shall his title to such share be affected by any irregularity in the proceedings in reference to such sale.

CONVERSION OF SHARES INTO STOCK 23 The directors may, with the sanction of the company previously given in general meeting, convert any paid up shares into stock. 24 When any shares have been converted into stock, the several holders of such stock may thenceforth transfer their respective interests therein, or any part of such interests, in the same manner and subject to the same regulations as and subject to which any shares in the capital of the company may be transferred, or as near thereto as circumstances admit. 25 The several holders of stock shall be entitled to participate in the dividends and profits of the company according to the amount of their respective interests in such stock; and such interests shall, in proportion to the amount thereof, confer on the holders thereof respectively the same privileges and advantages for the purpose of voting at meetings of the company, and for other purposes, as would have been conferred by shares of equal amount in the capital of the company; but so that none of such privileges or advantages, except the participation in the dividends and profits of the company, shall be conferred by any such aliquot part of consolidated stock as would not, if existing in shares, have conferred such privileges or advantages.

INCREASE IN CAPITAL 26 The directors may, with the sanction of a special resolution of the company previously given in general meeting, increase its capital by the issue of new shares, such aggregate increase to be of such amount, and to be divided into shares of such respective amounts, as the company in general meeting directs, or, if no direction is given, as the directors think expedient. 27 Subject to any direction to the contrary that may be given by the meeting that sanctions the increase of capital, all new shares shall be offered to the

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members in proportion to the existing shares held by them, and such offer shall be made by notice specifying the number of shares to which the member is entitled, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and after the expiration of such time, or on the receipt of an intimation from the member to whom such notice is given that he declines to accept the shares offered, the directors may dispose of the same in such manner as they think most beneficial to the company. 28 Any capital raised by the creation of new shares shall be considered as part of the original capital, and shall be subject to the same provisions with reference to the payment of calls and the forfeiture of shares on nonpayment of calls, or otherwise, as if it had been part of the original capital.

GENERAL MEETINGS 29 The first general meeting shall be held at such time, not being more than six months after the registration of the company, and at such place, as the directors may determine. 30 Subsequent general meetings shall be held at such time and place as may be prescribed by the company in general meeting; and if no other time or place is prescribed, a general meeting shall be held on the first Monday in February in every year, at such place as may be determined by the directors. 31 The above-mentioned general meetings shall be called ordinary meetings; all other general meetings shall be called extraordinary. 32 The directors may, whenever they think fit, and they shall upon a requisition made in writing by not less than one fifth in number of the members of the company, convene an extraordinary general meeting. 33 Any requisition made by the members shall express the object of the meeting proposed to be called, and shall be left at the registered office of the company. 34 Upon the receipt of such requisition the directors shall forthwith proceed to convene an extraordinary general meeting. If they do not proceed to convene the same within twenty-one days from the date of the requisition, the requisitionists, or any other members amounting to the required number, may themselves convene an extraordinary general meeting.

PROCEEDINGS AT GENERAL MEETINGS 35 Seven days notice at the least, specifying the place, the day, and the hour of meeting, and in case of special business the general nature of such business,

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shall be given to the members in manner herein-after mentioned, or in such other manner, if any, as may be prescribed by the company in general meeting; but the non-receipt of such notice by any member shall not invalidate the proceedings at any general meeting. 36 All business shall be deemed special that is transacted at an extraordinary meeting, and all that is transacted at an ordinary meeting, with the exception of sanctioning a dividend and the consideration of the accounts, balance sheets, and the ordinary report of the directors. 37 No business shall be transacted at any general meeting, except the declaration of a dividend, unless a quorum of members is present at the time when the meeting proceeds to business; and such quorum shall be ascertained as follows; that is to say, if the persons who have taken shares in the company at the time of the meeting do not exceed ten in number, the quorum shall be five; if they exceed ten there shall be added to the above quorum one for every five additional members up to fifty, and one for every ten additional members after fifty, with this limitation, that no quorum shall in any case exceed twenty. 38 If within one hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved: in any other case it shall stand adjourned to the same day in the next week, at the same time and place; and if at such adjourned meeting a quorum is not present, it shall be adjourned sine die. 39 The chairman (if any) of the board of directors shall preside as chairman at every general meeting of the company. 40 If there is no such chairman, or if at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting, the members present shall choose some one of their number to be chairman. 41 The chairman may, with the consent of the meeting, adjourn any meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. 42 At any general meeting, unless a poll is demanded by at least five members, a declaration by the chairman that a resolution has been carried, and an entry to that effect in the book of proceedings of the company, shall be sufficient evidence of the fact, without proof of the number or proportion of the votes recorded in favour of or against such resolution.

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43 If a poll is demanded by five or more members it shall be taken in such manner as the chairman directs, and the result of such poll shall be deemed to be the resolution of the company in general meeting. In the case of an equality of votes at any general meeting the chairman shall be entitled to a second or casting vote.

VOTES OF MEMBERS 44 Every member shall have one vote for every share up to ten: he shall have an additional vote for every five shares beyond the first ten shares up to one hundred, and an additional vote for every ten shares beyond the first hundred shares. 45 If any member is a lunatic or idiot he may vote by his committee, curator bonis, or other legal curator. 46 If one or more persons are jointly entitled to a share or shares, the member whose name stands first in the register of members as one of the holders of such share or shares, and no other, shall be entitled to vote in respect of the same. 47 No member shall be entitled to vote at any general meeting unless all calls due from him have been paid, and no member shall be entitled to vote in respect of any share that he has acquired by transfer at any meeting held after the expiration of three months from the registration of the company, unless he has been possessed of the share in respect of which he claims to vote for at least three months previously to the time of holding the meeting at which he proposes to vote. 48 Votes may be given either personally or by proxy. 49 The instrument appointing a proxy shall be in writing, under the hand of the appointor, or if such appointor is a corporation, under their common seal, and shall be attested by one or more witness or witnesses: no person shall be appointed a proxy who is not a member of the company. 50 The instrument appointing a proxy shall be deposited at the registered office of the company not less than seventy-two hours before the time for holding the meeting at which the person named in such instrument proposes to vote, but no instrument appointing a proxy shall be valid after the expiration of twelve months from the date of its execution.

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51 Any instrument appointing a proxy shall be in the following form:“…………… Company Limited, I …………… of…………in the County of being a member of the …………… Company Limited, and entitled to …………… vote or …………… votes, hereby appoint …………… of …………… as my proxy, to vote for me and on my behalf at the [Ordinary or Extraordinary, as the case may be] general meeting of the company to be held on the …………… day of ……………, and at any adjournment thereof [or, at any meeting of the company that may be held in the year].   As witness my hand, this …………… day of …………….   Signed by the said in the presence of …………………….”

DIRECTORS 52 The number of the directors, and the names of the first directors, shall be determined by the subscribers of the memorandum of association. 53 Until directors are appointed the subscribers of the memorandum of association shall be deemed to be directors. 54 The future remuneration of the directors, and their remuneration for services performed previously to the first general meeting, shall be determined by the company in general meeting.

POWERS OF DIRECTORS 55 The business of the company shall be managed by the directors, who may pay all expenses incurred in getting up and registering the company, and may exercise all such powers of the company as are not by the foregoing Act, or by these articles, required to be exercised by the company in general meeting, subject nevertheless to any regulations of these articles, to the provisions of the foregoing Act, and to such regulations, being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting; but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if such regulation had not been made. 56 The continuing directors may act notwithstanding any vacancy in their body.

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DISQUALIFICATION OF DIRECTORS 57 The office of director shall be vacated, If he holds any other office or place of profit under the company; If he becomes bankrupt or insolvent; If he is concerned in or participates in the profits of any contract with the company:

But the above rules shall be subject to the following exceptions: That no director shall vacate his office by reason of his being a member of any company which has entered into contracts with or done any work for the company of which he is director; nevertheless he shall not vote in respect of such contract or work; and if he does so vote his vote shall not be counted.

ROTATION OF DIRECTOR 58 At the first ordinary meeting after the registration of the company the whole of the directors shall retire from office; and at the first ordinary meeting in every subsequent year one third of the directors for the time being, or if their number is not a multiple of three, then the number nearest to one third, shall retire from office. 59 The one third or other nearest number to retire during the first and second years ensuing the first ordinary meeting of the company shall, unless the directors agree among themselves, be determined by ballot: in every subsequent year the one third or other nearest number who have been longest in office shall retire. 60 A retiring director shall be re-eligible. 61 The company at the general meeting at which any directors retire in manner aforesaid shall fill up the vacated offices by electing a like number of persons. 62 If at any meeting at which an election of directors ought to take place the places of the vacating directors are not filled up, the meeting shall stand adjourned till the same day in the next week, at the same time and place; and if at such adjourned meeting the places of the vacating directors are not filled up, the vacating directors, or such of them as have not had their places filled up, shall continue in office until the ordinary meeting in the next year, and so on from time to time until their places are filled up.

536

Appendix H

63 The company may from time to time, in general meeting, increase or reduce the number of directors, and may also determine in what rotation such increased or reduced number is to go out of office. 64 Any casual vacancy occurring in the board of directors may be filled up by the directors, but any person so chosen shall retain his office so long only as the vacating director would have retained the same if no vacancy had occurred. 65 The company, in general meeting, may, by a special resolution, remove any director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead: the person so appointed shall hold office during such time only as the director in whose place he is appointed would have held the same if he had not been removed.

PROCEEDINGS OF DIRECTORS 66 The directors may meet together for the despatch of business, adjourn, and otherwise regulate their meetings as they think fit, and determine the quorum necessary for the transaction of business: questions arising at any meeting shall be decided by a majority of votes: in case of an equality of votes the chairman shall have a second or casting vote: a director may at any time summon a meeting of the directors. 67 The directors may elect a chairman of their meetings, and determine the period for which he is to hold office; but if no such chairman is elected, or if at any meeting the chairman is not present at the time appointed for holding the same, the directors present shall choose some one of their number to be chairman of such meeting. 68 The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit: any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on them by the directors. 69 A committee may elect a chairman of their meetings: if no such chairman is elected, or if he is not present at the time appointed for holding the same, the members present shall choose one of their number to be chairman of such meeting. 70 A committee may meet and adjourn as they think proper: questions arising at any meeting shall be determined by a majority of votes of the members present; and in case of an equality of votes the chairman shall have a second or casting vote. 71 All acts done by any meeting of the directors, or of a committee of directors, or by any person acting as a director, shall, notwithstanding that it be afterwards 537

Appendix H

discovered that there was some defect in the appointment of any such directors or persons acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director.

DIVIDENDS 72 The directors may, with the sanction of the company in general meeting, declare a dividend to be paid to the members in proportion to their shares. 73 No dividend shall be payable except out of the profits arising from the business of the company. 74 The directors may, before recommending any dividend, set aside out of the profits of the company such sum as they think proper as a reserved fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining the works connected with the business of the company, or any part thereof; and the directors may invest the sum so set apart as a reserved fund upon such securities as they may select. 75 The directors may deduct from the dividends payable to any member all such sums of money as may be due from him to the company on account of calls or otherwise. 76 Notice of any dividend that may have been declared shall be given to each member in manner herein-after mentioned; and all dividends unclaimed for three years, after having been declared, may be forfeited by the directors for the benefit of the company. 77 No dividend shall bear interest as against the company.

ACCOUNTS 78 The directors shall cause true accounts to be kept, Of the stock in trade of the company; Of the sums of money received and expended by the company, and the matter in respect of which such receipt and expenditure takes place; and, Of the credits and liabilities of the company:

The books of account shall be kept at the registered office of the company, and, subject to any reasonable restrictions as to the time and manner of inspecting the same that may be imposed by the company in general meeting, shall be open to the inspection of the members during the hours of business. 538

Appendix H

79 Once at the least in every year the directors shall lay before the company in general meeting a statement of the income and expenditure for the past year, made up to a date not more than three months before such meeting. 80 The statement so made shall show, arranged under the most convenient heads, the amount of gross income, distinguishing the several sources from which it has been derived, and the amount of gross expenditure, distinguishing the expense of the establishment, salaries, and other like matters: every item of expenditure fairly chargeable against the year’s income shall be brought into account, so that a just balance of profit and loss may be laid before the meeting; and in cases where any item of expenditure which may in fairness be distributed over several years has been incurred in any one year the whole amount of such item shall be stated, with the addition of the reasons why only a portion of such expenditure is charged against the income of the year. 81 A balance sheet shall be made out in every year, and laid before the company in general meeting, and such balance sheet shall contain a summary of the property and liabilities of the company arranged under the heads appearing in the form annexed to this Table, or as near thereto as circumstances admit. 82 A printed copy of such balance sheet shall, seven days previously to such meeting, be served on every member in the manner in which notices are herein-after directed to be served.

AUDIT 83 Once at the least in every year the accounts of the company shall be examined, and the correctness of the balance sheet ascertained, by one or more auditor or auditors. 84 The first auditors shall be appointed by the directors: subsequent auditors shall be appointed by the company in general meeting. 85 If one auditor only is appointed, all the provisions herein contained relating to auditors shall apply to him. 86 The auditors may be members of the company; but no person is eligible as an auditor who is interested otherwise than as a member in any transaction of the company; and no director or other officer of the company is eligible during his continuance in office. 87 The election of auditors shall be made by the company at their ordinary meeting in each year. 88 The remuneration of the first auditors shall be fixed by the directors; that of subsequent auditors shall be fixed by the company in general meeting. 539

Appendix H

89 Any auditor shall be re-eligible on his quitting office. 90 If any casual vacancy occurs in the office of any auditor appointed by the company, the directors shall forthwith call an extraordinary general meeting for the purpose of supplying the same. 91 If no election of auditors is made in manner aforesaid the Board of Trade may, on the application of not less than five members of the company, appoint an auditor for the current year and fix the remuneration to be paid to him by the company for his services. 92 Every auditor shall be supplied with a copy of the balance sheet, and it shall be his duty to examine the same, with the accounts and vouchers relating thereto. 93 Every auditor shall have a list delivered to him of all books kept by the company, and shall at all reasonable times have access to the books and accounts of the company: he may at the expense of the company, employ accountants or other persons to assist him in investigating such accounts, and he may in relation to such accounts examine the directors or any other officer of the company. 94 The auditors shall make a report to the members upon the balance sheet and accounts, and in every such report they shall state whether, in their opinion, the balance sheet is a full and fair balance sheet, containing the particulars required by these regulations, and properly drawn up so as to exhibit a true and correct view of the state of the company’s affairs, and in case they have called for explanations or information from the directors, whether such explanations or information have been given by the directors, and whether they have been satisfactory; and such report shall be read, together with the report of the directors, at the ordinary meeting.

NOTICES 95 A notice may be served by the company upon any member either personally, or by sending it through the post in a prepaid letter addressed to such member at his registered place of abode. 96 All notices directed to be given to the members shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the register of members; and notice so given shall be sufficient notice to all the holders of such share. 97 Any notice, if served by post, shall be deemed to have been served at the time when the letter containing the same would be delivered in the ordinary course of the post; and in proving such service it shall be sufficient to prove that the letter containing the notices was properly addressed and put into the Post Office. 540

Dr. I. Capital

541

BALANCE SHEET of the CAPITAL AND LIABILITIES Showing: £ s d. £ s 1 The number of shares 2 The amount paid per share. 3 If any arrears of calls, the nature of the arrear, and the names of the defaulters. 4 The particulars of any forfeited shares

Co. made up to    18 PROPERTY AND ASSETS d. III. Property Showing: £ s d. held by the 7 Immovable Company property, distinguishing(a) Freehold land (b) Freehold buildings (c) Leasehold buildings

Cr. £

s

d.

Movable Property, distinguishing(a) Stock in trade (b) Plant

Appendix H

II. Debts and Liabilities of the Company

542

BALANCE SHEET of the CAPITAL AND LIABILITIES Showing: 5 The amount of loans on mortgage or debenture bonds. 6 The amount of debts owing by the company, distinguishing(a) Debts for which acceptances have been given. (b) Debts to tradesmen for supplies of stock in trade or other articles. (c) Debts for law expenses.

Co. made up to    18 PROPERTY AND ASSETS 8 The cost to be stated with deductions for deterioration in value as charged to the reserve fund or profit and loss. IV. Debts owing to the 9 Company

Showing: Debts considered good for which the company hold bills or other securities.

Cr.

Appendix H

Dr.

VI. Reserve Fund 543

(d) Debts for interest on debentures or other loans. (e) Unclaimed dividends. (f) Debts not enumerated above. Showing: The Amount set aside from Profits to meet Contingencies.

10

Debts considered good for which the company hold no security. Debts considered doubtful and bad

11

V. Cash and Investments

12

Any debt due from a director or other officer of the company to be separately stated. Showing: The nature of the investment and rate of interest. Appendix H

VII. Profit and Loss

Contingent Liabilities

BALANCE SHEET of the CAPITAL AND LIABILITIES Showing: The disposable balance for payment of dividend &c.

544

Claims against the company not acknowledged as debts. Monies for which the company is contingently liable.

Co. made up to    18 PROPERTY AND ASSETS 13 The amount of cash, where lodged, and if bearing interest.

Cr.

Appendix H

Dr.

Appendix I Commencement 14th July 1856

JOINT STOCK COMPANIES ACT 1856 TABLE B Regulations for management of the company SHARES 1 No person shall be deemed to have accepted any share in the company unless he has testified his acceptance thereof by writing under his hand, in such form as the company from time to time directs. 2 The company may from time to time make such calls upon the shareholders in respect of all monies unpaid on their shares as they think fit, provided that twenty-one days’ notice at least is given of each call, and each shareholder shall be liable to pay the amount of calls so made to the persons and at the times and places appointed by the company. 3 A call shall be deemed to have been made at the time when the resolution authorising such call was passed. 4 If before or on the day appointed for payment any shareholder does not pay the amount of any call to which he is liable, then such shareholder shall be liable to pay interest for the same at the rate of five pounds per cent. per annum from the day appointed for the payment thereof to the time of the actual payment. 5 The company may, if they think fit, receive from any of the shareholders, willing to advance the same all or any part of the monies due upon their respective shares beyond the sums actually called for; and upon the monies so paid in advance, or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made, the company may pay interest at such rate as the shareholder paying such sum in advance and the company agree upon. 6 If several persons are registered as joint holders of any share, any one of such persons may give effectual receipts for any dividend payable in respect of such share.

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Appendix I

7 The company may decline to register any transfer of shares made by a shareholder who is indebted to them. 8 Every shareholder shall, on payment of such sum, not exceeding one shilling, as the company may prescribe, be entitled to a certificate, under the common seal of the company, specifying the share or shares held by him, and the amount paid up thereon. 9 If such certificate is worn out or lost, it may be renewed, on payment of such sum, not exceeding one shilling, as the company may prescribe. 9a The transfer books shall be closed during the fourteen days immediately preceding the ordinary general meeting in each year.

TRANSMISSION OF SHARES 10 The executors or administrators of a deceased shareholder shall be the only persons recognized by the company as having any title to his share. 11 Any person becoming entitled to a share in consequence of the death, bankruptcy, or insolvency of any shareholder, or in consequence of the marriage of any female shareholder, or in any way other than by transfer, may be registered as a shareholder upon such evidence being produced as may from time to time be required by the company. 12 Any person who has become entitled to a share in any way other than by transfer may, instead of being registered himself, elect to have some person to be named by him registered as a holder of such share. 13 The person so becoming entitled shall testify such election by executing to his nominee a deed of transfer of such share. 14 The deed of transfer shall be presented to the company accompanied with such evidence as they may require to prove the title of the transferror, and thereupon the company shall register the transferree as a shareholder.

FORFEITURE OF SHARES 15 If any shareholder fails to pay any call due on the appointed day, the company may, at any time thereafter, during such time as the call remains unpaid, serve a notice on him, requiring him to pay such call, together with any interest that may have accrued by reason of such nonpayment.

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Appendix I

16 The notice shall name a further day, and a place or places, being a place or places at which calls of the company are usually made payable, on and at which such call is to be paid: it shall also state that in the event of nonpayment at the time and place appointed the shares in respect of which such call was made will be liable to be forfeited. 17 If the requisitions of any such notice as aforesaid are not complied with, any share in respect of which such notice has been given may be forfeited by a resolution of the directors to that effect. 18 Any shares so forfeited shall be deemed to be the property of the company, and may be disposed of in such manner as the company thinks fit. 19 Any shareholder whose shares have been forfeited shall, notwithstanding, be liable to pay to the company all calls owing upon such shares at the time of the forfeiture.

INCREASE IN CAPITAL 20 The company may, with the sanction of the company previously given in general meeting, increase its capital. 21 Any capital raised by the creation of new shares shall be considered as part of the original capital, and shall be subject to the same provisions in all respects, whether with reference to the payment of calls, or the forfeiture of shares on nonpayment of calls, or otherwise, as if it had been part of the original capital.

GENERAL MEETINGS 22 The first general meeting shall be held at such time, not being more than twelve months after the incorporation of the company, and at such place, as the directors may determine. 23 Subsequent general meetings shall be held at such time and place as may be prescribed by the company in general meeting; and if no other time or place is prescribed, a general meeting shall be held on the first Monday in February in every year, at such place as may be determined by the directors. 24 The above-mentioned general meetings shall be called ordinary meetings; all other general meetings shall be called extraordinary. 25 The directors may, whenever they think fit, and they shall upon a requisition made in writing by any number of shareholders holding in the aggregate not

547

Appendix I

less than one fifth part of the shares of the company, convene an extraordinary general meeting. 26 Any requisition so made by the shareholders shall express the object of the meeting proposed to be called, and shall be left at the registered office of the company. 27 Upon the receipt of such requisition the directors shall forthwith proceed to convene a general meeting: if they do not proceed to convene the same within twenty-one days from the date of the requisition, the requisitionists, or any other shareholders holding the required number of shares, may themselves convene a meeting. 28 Seven days notice at the least, specifying the place, the time, the hour of meeting, and the purpose for which any general meeting is to be held, shall be given by advertisement, or in such other manner, if any, as may be prescribed by the company. 29 Any shareholder may, on giving not less than three days previous notice, submit any resolution to a meeting beyond the matters contained in the notice given of such meeting. 30 The notice required of a shareholder shall be given by leaving a copy of the resolution at the registered office of the company. 31 No business shall be transacted at any meeting except the declaration of a dividend, unless a quorum of shareholders is present at the commencement of such business; and such quorum shall be ascertained as follows; that is to say, if the shareholders belonging to the company at the time of the meeting do not exceed ten in number, the quorum shall be five; if they exceed ten there shall be added to the above quorum one for every five additional shareholders up to fifty, and one for every ten additional shareholders after fifty, with this limitation, that no quorum shall in any case exceed forty. 32 If within one hour from the time appointed for the meeting the required number of shareholders is not present, the meeting, if convened upon the requisition of the shareholders, shall be dissolved: in any other case it shall stand adjourned to the following day, at the same time and place; and if at such adjourned meeting the required number of shareholders is not present, it shall be adjourned sine die. 33 The chairman (if any) of the board of directors shall preside as chairman at every meeting of the company. 34 If there is no such chairman, or if at any meeting he is not present at the time of holding the same, the shareholders present shall choose some one of their number to be chairman of such meeting. 548

Appendix I

35 The chairman may, with the consent of the meeting, adjourn any meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. 36 At any general meeting, unless a poll is demanded by at least five shareholders, a declaration by the chairman that a resolution has been carried, and an entry to that effect in the book of proceedings of the company, shall be sufficient evidence of the fact, without proof of the number or proportion of the votes recorded in favour of or against such resolution. 37 If a poll is demanded in manner aforesaid the same shall be taken in such manner as the chairman directs, and the result of such poll shall be deemed to be the resolution of the company in general meeting.

VOTES OF SHAREHOLDERS 38 Every shareholder shall have one vote for every share up to ten; he shall have an additional vote for every five shares beyond the first ten shares up to one hundred, and an additional vote for every ten shares held by him beyond the first hundred shares. 39 If any shareholder is a lunatic or idiot he may vote by his committee, curator bonis, or other legal curator; and if any shareholder is a minor he may vote by his guardian, tutor, or curator, or any one of his guardians, tutors, or curators, if more than one. 40 If one or more persons are jointly entitled to a share or shares the person whose name stands first in the register of shareholders as one of the holders of such share or shares, and no other, shall be entitled to vote in respect of the same. 41 No shareholder shall be entitled to vote at any meeting unless all calls due from him have been paid, nor until he shall have been possessed of his shares three calendar months, unless such shares shall have been acquired or shall have come by bequest, or by marriage, or by succession to an intestate’s estate, or by the custom of the City of London, or by any deed of settlement after the death of any person who shall have been entitled for life to the dividends of such shares. 42 Votes may be given either personally or by proxies: a proxy shall be appointed in writing under the hand of the appointor, or if such appointor is a corporation, under their common seal. 43 No person shall be appointed a proxy who is not a shareholder, and the instrument or mandate appointing him shall be deposited at the registered 549

Appendix I

office of the company not less than forty-eight hours before the time of holding the meeting at which he proposes to vote; but no instrument or mandate appointing a proxy shall be valid after the expiration of one month from the date of its execution.

DIRECTORS 44 The number of the directors, and the names of the first directors, shall be determined by the subscribers of the memorandum of association. 45 Until directors are appointed, the subscribers of the memorandum of association shall for all the purposes of this act be deemed to be directors.

POWERS OF DIRECTORS 46 The business of the company shall be managed by the directors, who may exercise all such powers of the company as are not by this Act or by the articles of association, if any, declared to be exercisable by the company in general meeting, subject nevertheless to any regulations of the articles of association, to the provisions of this Act, and to such regulations, being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting; but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if such regulation had not been made.

DISQUALIFICATION OF DIRECTORS 47 The Office of Director shall be vacated— If he holds any other office or place of profit under the company; If he becomes bankrupt or insolvent; If he is concerned in or participates in the profits of any contract with the company; If he participates in the profits of any work done for the company:

But the above rules shall be subject to the following exceptions: that no director shall vacate his office by reason of his being a shareholder in any incorporated company which has entered into contracts with or done any work for the company of which he is director; nevertheless he shall not vote in respect of such contract or work; and if he does so vote his vote shall not be counted, and he shall incur a penalty not exceeding twenty pounds.

550

Appendix I

ROTATION OF DIRECTORS 48 At the first ordinary meeting after the incorporation of the company the whole of the directors shall retire from office; and at the first ordinary meeting in every subsequent year one third of the directors for the time being, or if their number is not a multiple of three, then the number nearest to one third, shall retire from office. 49 The one third or other nearest number to retire during the first and second years ensuing the incorporation of the company shall, unless the directors agree among themselves, be determined by ballot: in every subsequent year the one third or other nearest number who have been longest in office retire. 50 A retiring director shall be re eligible. 51 The company at the general meeting at which any directors retire in manner aforesaid shall fill up the vacated offices by electing a like number of persons. 52 If at any meeting at which an election of directors ought to take place no such election is made, the meeting shall stand adjourned till the next day, at the same time and place; and if at such adjourned meeting no election takes place, the former directors shall continue to act until new directors are appointed at the first ordinary meeting of the following year. 53 The company may from time to time, in general meeting, increase or reduce the number of directors, and may also determine in what rotation such increased or reduced number is to go out of office. 54 Any casual vacancy occurring in the board of directors may be filled up by the directors, but any person so chosen shall retain his office so long only as the vacating director would have retained the same if no vacancy had occurred.

PROCEEDINGS OF DIRECTORS 55 The directors may meet together for the despatch of business, adjourn, and otherwise regulate their meetings as they think fit, and determine the quorum necessary for the transaction of business: questions arising at any meeting shall be decided by a majority of votes: in case of an equality of votes the chairman, in addition to his original vote, shall have a casting vote: a director may at any time summon a meeting of the directors. 56 The directors may elect a chairman of their meetings, and determine the period for which he is to hold office; but if no such chairman is elected, or if at any meeting the chairman is not present at the time appointed for holding

551

Appendix I

the same, the directors present shall choose some one of their number to be chairman of such meeting. 57 The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit: any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on them by the directors. 58 A committee may elect a chairman of their meetings: if no such chairman is elected, or if he is not present at the time appointed for holding the same, the members present shall choose one of their number to be chairman of such meeting. 59 A committee may meet and adjourn as they think proper: questions at any meeting shall be determined by a majority of votes of the members present; and in case of an equal division of votes the chairman shall have a casting vote. 60 All acts done by any meeting of the directors, or of a committee of directors, or by any person acting as a director, shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such directors or persons acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 61 The directors shall cause minutes to be made in books provided for the purpose— (1) Of all appointments of officers made by the directors; (2) Of the names of the directors present at each meeting of the directors and committees of the directors; (3) Of all orders made by the directors and committees of the directors; and, (4) Of all resolutions and proceedings of meetings of the company, and of the directors and committees of the directors. And any such minute as aforesaid, if signed by any person purporting to be the chairman of any meeting of directors, or committee of directors, shall be receivable in evidence without any further proof. 62 The company, in general meeting, may, by a special resolution, remove any director before the expiration of his period of office, and appoint another qualified person in his stead: the person so appointed shall hold office during such time only as the director in whose place he is appointed would have held the same if he had not been removed.

552

Appendix I

DIVIDENDS 63 The directors may, with the sanction of the company in general meeting, declare a dividend to be paid to the shareholders in proportion to their shares. 64 No dividend shall be payable except out of the profits arising from the business of the company. 65 The directors may, before recommending any dividend, set aside out of the profits of the company such sum as they think proper as a reserved fund to meet contingencies, or for equalizing dividends, or for repairing, or maintaining, the works connected with the business of the company, or any part thereof; and the directors may invest the sum so set apart as a reserved fund upon such securities as they, with the sanction of the company, may select. 66 The directors may deduct from the dividends payable to any shareholder all such sums of money as may be due from him to the company on account of calls or otherwise. 67 Notice of any dividend that may have been declared shall be given to each shareholder, or sent by post or otherwise to his registered place of abode, and all dividends unclaimed for three years, after having been declared, may be forfeited by the directors for the benefit of the company. 68 No dividend shall bear interest as against the company.

ACCOUNTS 69 The directors shall cause true accounts to be kept— Of the stock in trade of the company; Of the sums of money received and expended by the company, and the matter in respect of which such receipt and expenditure takes place; and, Of the credits and liabilities of the company:

Such accounts shall be kept, upon the principle of double entry, in a cash book, journal, and ledger: the books of account shall be kept at the principal office of the company, and, subject to any reasonable restrictions as to the time and manner of inspecting the same that may be imposed by the company in general meeting, shall be open to the inspection of the shareholders during the hours of business.

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70 Once at the least in every year the directors shall lay before the company in general meeting a statement of the income and expenditure for the past year, made up to a date not more than three months before such meeting. 71 The statement so made shall show, arranged under the most convenient heads, the amount of gross income, distinguishing the severa1 sources from which it has been derived, and the amount of gross expenditure, distinguishing the expense of the establishment, salaries, and other like matters: every item of expenditure fairly chargeable against the year’s income shall be brought into account, so that a just balance of profit and loss may be laid before the meeting; and in cases where any item of expenditure which may in fairness be distributed over several years has been incurred in any one year the whole amount of such item shall be stated, with the addition of the reasons why only a portion of such expenditure is charged against the income of the year. 72 A balance sheet shall be made out in every year, and laid before the general meeting of the company, and such balance sheet shall contain a summary of the property and liabilities of the company arranged under the heads appearing in the Form annexed to this table, or as near thereto as circumstances admit. 73 A printed copy of such balance sheet shall, seven days previously to such meeting, be delivered at or sent by post to the registered address of every shareholder.

AUDIT 74 The accounts of the company shall be examined and the correctness of the balance sheet ascertained by one or more auditor or auditors to be elected by the company in general meeting. 75 If not more than one auditor is appointed, all the provisions herein contained relating to auditors shall apply to him. 76 The auditors need not be shareholders in the company: no person is eligible as an auditor who is interested otherwise than as a shareholder in any transaction of the company; and no director or other officer of the company is eligible during his continuance in office. 77 The election of auditors shall be made by the company at their ordinary meeting, or, if there are more than one, at their first ordinary meeting in each year. 78 The remuneration of the auditors shall be fixed by the company at the time of their election. 79 Any auditor shall be re-eligible on his quitting office. 554

Appendix I

80 If any casual vacancy occurs in the office of auditor, the directors shall forthwith call an extraordinary general meeting for the purpose of supplying the same. 81 If no election of auditors is made in manner aforesaid, the Board of Trade may, on the application of one fifth in number of the shareholders of the company, appoint an auditor for the current year, and fix the remuneration to be paid to him by the company for his services. 82 Every auditor shall be supplied with a copy of the balance sheet, and it shall be his duty to examine the same, with the accounts and vouchers relating thereto. 83 Every auditor shall have a list delivered to him of all books kept by the company, and he shall at all times have access to the books and accounts of the company: He may, at the expense of the company, employ accountants or other persons to assist him in investigating such accounts, and he may in relation to such accounts examine the directors or any other officer of the company. 84 The auditors shall make a report to the shareholders upon the balance sheet and accounts, and in every such report they shall state whether, in their opinion, the balance sheet is a full and fair balance sheet, containing the particulars required by these regulations, and properly drawn up so as to exhibit a true and correct view of the state of the company’s affairs, and in case they have called for explanations or information from the directors, whether such explanations or information have been given by the directors, and whether they have been satisfactory; and such report shall be read, together with the report of the directors, at the ordinary meeting.

NOTICES 85 Notices requiring to be served by the company upon the shareholders may be served either personally, or by leaving the same or sending them through the post in a letter addressed to the shareholders at their registered places of abode. 86 All notices directed to be given to the shareholders shall, with respect to any share to which persons are jointly entitled, be given to whichever of the said persons is named first in the register of shareholders; and notice so given shall be sufficient notice to all the proprietors of such share. 87 All notices required by this Act to be given by advertisement shall be advertised in a newspaper circulating in the district in which the registered office of the company is situate.

555

Dr. I. Capital

BALANCE SHEET of the CAPITAL AND LIABILITIES Showing: £ s 1 The total Amount received from the Shareholders; also; (a) The number of Shares

d. £ s

Co. made up to    18 PROPERTY AND ASSETS d. III. Property Showing: £ s held by the 4 Immovable Company property, distinguishing(a) Freehold Land

556

(b) The Amount paid per Share

(b) Freehold Buildings

(c) If any Arrears of Calls, the Nature of the Arrear, and the Names of the Defaulters. Any Arrears due from any Director or Officer of the Company to be separately stated.

(c) Leasehold Buildings Movable Property, distinguishing— (a) Stock in trade

5

(b) Plant

Appendix I

Form of Balance Sheet referred to in Table B. Cr. d. £ s

d.

(d) The Particulars of any forfeited Shares.s

II. Debts and Liabilities of the Company

2

3

Showing: The amount of loans on mortgage or debenture bonds.

557

The Amount of Debts owing by the Company, distinguishing(a) Debts for which acceptances have been given.

7

Appendix I

(b) Debts to tradesmen for supplies of stock in trade or other articles.

IV. Debts owing to the 6 Company

The cost to be stated with deductions for deterioration in value as charged to the reserve fund or profit and loss. Showing: Debts considered good for which the company hold bills or other securities. Debts considered good for which the company hold no security.

558

VI. Reserve Fund

BALANCE SHEET of the CAPITAL AND LIABILITIES (c) Debts for law expenses. (d) Debts for interest on debentures or other loans. (e) Unclaimed Dividends. (f) Debts not enumerated above. Showing: The Amount set aside from Profits to meet Contingencies.

Co. made up to    18 PROPERTY AND ASSETS

8

V. Cash and Investments

Debts considered doubtful and bad Any debt due from a director or other officer of the company to be separately stated.

Showing: 9 The nature of the investment and rate of interest. 10 The amount of cash, where lodged, and if bearing interest.

Cr.

Appendix I

Dr.

VII. Profit and Loss

Contingent Liabilities

Showing: The disposable balance for payment of dividend &c. Claims against the company not acknowledged as debts. Monies for which the company is contingently liable.

559 Appendix I

560

Index [All references are to paragraph numbers] A Accounts and other records no right to inspect private companies limited by guarantee  7.40 private companies limited by shares  6.52 public companies  8.85 Allotment of shares and securities see also Pre-emption allotment of new shares exclusion of right of pre-emption  5.27 permitted commission  5.26 power of directors to allot shares etc authorisation by company  5.25 private company with only one class of shares  5.24 Alternate directors see Public companies Annual general meetings (AGMs) articles amended by removal of statutory duties  2.2 Articles of association see also Constitutional documents amending  3.2, 3.3 case example  3.5 legal principles Re Charterhouse Capital Ltd  3.15 analysis and implications  3.16 special resolutions  3.3, 3.4 Companies Act 2006 overriding see Companies Act 2006 drafting bespoke clauses  1.6 housekeeping  2.7 restrictions  1.7 enforcement see Enforcement of articles entrenched provisions see Entrenchment flexibility to override Companies Act 2006 see Companies Act 2006 generally  1.2 legality  1.13 model articles see Model articles restrictive  1.14 updating  2.10 Auditors prevention by members of deemed re-appointment  5.23

B Bespoke clauses drafting  1.6 housekeeping  2.7 C Case law review amending articles of association  3.2, 3.3 case example  3.5 legal principles Re Charterhouse Capital Ltd  3.15 analysis and implications  3.16 special resolutions  3.3, 3.4 generally  3.1 pre-emption allotment of new shares amendments to articles, case law  3.14 Cosmetic Warriors Ltd v Gerrie  3.27 existing shareholders’ right of pre-emption  3.9 disapplication  3.12 exceptions  3.10 exclusion by private companies  3.11 more than one class of shares  3.8 pre-emption precedent  3.13 one class of shares  3.6 transitional provisions  3.7 Signia Wealth Ltd v Vector Trustees Ltd  3.22 compulsory transfers bad leavers  3.21 good leavers  3.19 conclusion  3.26 failing to ascertain fair price, negligence  3.24 penalty doctrine  3.23 pre-emption  3.17 share transfers  3.18 ‘transfer event’ on bankruptcy  3.20 valuation  3.25 Cessation or transfer of business provision for employees  5.8 private companies limited by guarantee  7.41 private companies limited by shares  6.53 public companies  8.86

561

Index Change of name means provided for in company’s articles  5.2 special resolution  5.2 Charities model articles see Private companies limited by guarantee Communication means of private companies limited by guarantee  7.38 private companies limited by shares  6.50 public companies  8.81 failure to notify contact details  8.82 Companies Act 2006 constitutional documents, s 17  1.9 flexibility in articles to override legislation  5.1 allotment of shares and securities exclusion of right of pre-emption, ss 567–573  5.27 permitted commission, s 553  5.26 power of directors to allot shares etc authorisation by company, s 551  5.25 private company with only one class of shares, s 550  5.24 change of name by means provided for in company’s articles, s 79  5.2 debentures, redeemed, power to re-issue, s 752  5.40 directors approval by written resolution: accidental failure to send memorandum, s 224  5.7 consent, approval or authorisation by members, s 180  5.6 duty to act within powers, s 171  5.4 duty to exercise independent judgment, s 173  5.5 power to make provision for employees on cessation or transfer of business, s 247  5.8 distributions net asset restriction by public companies, s 831  5.41 saving for certain older provisions in articles, s 848  5.42 power of limited company issue of redeemable shares, s 684  5.36 purchase of own shares, s 690  5.38 prevention by members of deemed re-appointment of auditor, s 488  5.23

Companies Act 2006 – contd flexibility in articles to override legislation – contd purchase of own shares power of limited company, s 690  5.38 power of private limited company to redeem or purchase own shares out of capital, s 709  5.39 redeemable shares power of limited company to issue, s 684  5.36 power of private limited company to redeem or purchase own shares out of capital, s 709  5.39 terms and manner of redemption, s 685  5.37 resolutions, s 281  5.9 votes general rules, s 284  5.10 joint holders of shares, s 286  5.11 resolutions at meetings accidental failure to give notice of resolution or meeting, s 313  5.17 chairing meetings, s 328  5.21 chairman of meeting, s 319  5.18 contents of notices of meetings, s 311  5.15 general meetings, s 301  5.12 members’ power to require directors to call general meeting, s 303  5.13 persons entitled to receive notice of meetings, s 310  5.14 resolution requiring special notice, s 312  5.16 rights to appoint proxies, s 324  5.20 saving for more extensive rights conferred by articles, s 331  5.22 voting on a poll: votes cast in advance, s 322A  5.19 share warrants (public companies)  5.3 shares and share capital allotment of shares  5.24–5.27 circumstances in which a company may reduce its share capital, s 641  5.35 provision for different amounts to be paid on shares, s 581  5.28 redenomination of share capital, s 622  5.30 effect of, s 624  5.31 sub-division or consolidation of shares, s 618  5.29

562

Index Companies Act 2006 – contd flexibility in articles to override legislation – contd shares and share capital – contd variation of class rights  5.33 companies having a share capital, s 630  5.32 companies without a share capital, s 631  5.34 guide to new model articles see New model articles overriding of articles effect of provisions of articles as to enjoyment or exercise of members’ rights, s 145  5.45 exempt company: restriction on amendment of articles, s 63  5.44 resolution to remove director, s 168  5.46 right to participate in profits otherwise than as member void, s 37  5.43 Companies’ constitutional documents see Constitutional documents Company articles see Articles of association Company law modern, development  1.1 Company name change of name means provided for in company’s articles  5.2 special resolution  5.2 exempt company: restriction on amendment of articles  5.44 Company seals private companies limited by guarantee  7.39 private companies limited by shares  6.51 public companies  8.83 Company secretary articles amended by removal of statutory duties  2.2 Conflicts of interest decision-making by directors private companies limited by guarantee  7.18 private companies limited by shares  6.16 public companies  8.18 Constitutional documents Companies Act 2006, s 17  1.9 pre-1 October 2009  1.8 updating to Companies Act 2006 requirements  2.8

Court actions shareholders see Case law review Covenants enforcement see Enforcement of articles D Debentures redeemed, power to re-issue  5.40 Directors alternate see Public companies approval by written resolution: accidental failure to send memorandum  5.7 duties see Directors’ powers and duties meetings see Directors’ meetings members’ power to require directors to call general meeting  5.13 model articles private companies limited by guarantee see Private companies limited by guarantee private companies limited by shares see Private companies limited by shares public companies see Public companies powers see Directors’ powers and duties resolution to remove  5.46 Directors’ meetings private companies limited by guarantee calling  7.13 casting vote  7.17 chairing  7.16 participation  7.14 quorum  7.15 private companies limited by shares calling  6.11 casting vote  6.15 chairing  6.14 participation  6.12 quorum  6.13 public companies calling  8.10 chairing  8.14 participation  8.11 quorum  8.12 total number of directors less than quorum  8.13 voting alternates  8.17 chairman’s casting vote  8.16 general rules  8.15 Directors’ powers and duties general duties  1.4 consent, approval or authorisation by members  5.6 duty to act within powers  5.4

563

Index Directors’ powers and duties – contd general duties – contd duty to exercise independent judgment  5.5 enforcing covenants against directors  4.7 generally  1.3 model articles private companies limited by guarantee see Private companies limited by guarantee private companies limited by shares see Private companies limited by shares public companies see Public companies power to allot shares etc authorisation by company  5.25 private company with only one class of shares  5.24 power to make provision for employees on cessation or transfer of business  5.8, 6.53, 7.41, 8.86 Directors’ written resolutions public companies adoption  8.20 proposed  8.19 Distributions model articles private companies limited by shares see Private companies limited by shares public companies see Public companies net asset restriction by public companies  5.41 saving for certain older provisions in articles  5.42 Dividends model articles private companies limited by shares see Private companies limited by shares public companies see Public companies Documents or information destruction, public companies  8.84 means of communication to be used private companies limited by guarantee  7.38 private companies limited by shares  6.50 public companies  8.81 failure to notify contact details  8.82 Drafting articles bespoke  1.6 housekeeping  2.7 restrictions  1.7

E Enforcement of articles articles not enforceable by third parties  4.4 enforcing covenants against directors  4.7 generally  1.14 members  4.1 enforcement of covenants between members  4.3 fiduciary duty  4.5 members v members  4.6 rights under articles of association  4.2 shareholders  4.1 Entrenchment generally  4.8 memorandum, entrenchment and amendment pre-1 October 2009 incorporation case example  4.9 overview  4.10 G General meetings members private companies limited by guarantee adjournment  7.31 attendance and speaking at meeting  7.27 directors and non-members  7.30 chairing  7.29 quorum  7.28 voting amendments to resolutions  7.37 errors and disputes  7.33 general  7.32 poll votes  7.34 proxy notices contents 7.35 delivery 7.36 public companies adjournment  8.35 attendance and speaking at meeting  8.31 directors and non-members  8.34 chairing  8.33 members can call if not enough directors  8.30 quorum  8.32 voting amendments to resolutions  8.42 errors and disputes  8.37 general  8.36

564

Index General meetings – contd members – contd public companies – contd voting – contd poll demanding 8.38 procedure 8.39 proxy notices content 8.40 delivery 8.41 resolutions  5.12 members’ power to require directors to call general meeting  5.13 shareholders adjournment  6.43 attendance and speaking at meeting  6.39 directors and non-shareholders  6.42 chairing  6.41 quorum  6.40 voting amendments to resolutions  6.49 errors and disputes  6.45 general  6.44 poll votes  6.46 proxy notices content  6.47 delivery  6.48 I Indemnity directors private companies limited by shares  6.54 private companies limited by guarantee  7.42 public companies  8.87 Insurance directors private companies limited by shares  6.55 private companies limited by guarantee  7.43 public companies  8.88 L Liability of members private companies limited by guarantee  7.6 private companies limited by shares  6.4 public companies  8.4

M Meetings see also Annual general meetings (AGMs); Directors’ meetings; General meetings resolutions accidental failure to give notice of resolution or meeting  5.17 chairing meetings  5.21 chairman of meeting  5.18 general meetings  5.12 members’ power to require directors to call  5.13 notices of meetings accidental failure to give notice  5.17 contents  5.15 persons entitled to receive  5.14 resolution requiring special notice  5.16 rights to appoint proxies  5.20 saving for more extensive rights conferred by articles  5.22 voting on a poll: votes cast in advance  5.19 Members applications for membership  7.25 enforcement of articles  4.1 enforcement of covenants between members  4.3 fiduciary duty  4.5 members v members  4.6 general meetings private companies limited by guarantee adjournment  7.31 attendance and speaking at meeting  7.27 directors and non-members  7.30 chairing  7.29 quorum  7.28 voting amendments to resolutions  7.37 errors and disputes  7.33 general  7.32 poll votes  7.34 proxy notices contents 7.35 delivery 7.36 public companies adjournment  8.35 attendance and speaking at meeting  8.31 directors and non-members  8.34 chairing  8.33 members can call if not enough directors  8.30 quorum  8.32

565

Index Members – contd general meetings – contd public companies – contd voting amendments to resolutions  8.42 errors and disputes  8.37 general  8.36 poll demanding 8.38 procedure 8.39 proxy notices content 8.40 delivery 8.41 liability private companies limited by guarantee  7.6 private companies limited by shares  6.4 public companies  8.4 reserve power private companies limited by guarantee  7.8 public companies  8.6 termination of membership  7.26 Members’ rights effect of provisions of articles as to enjoyment or exercise of  5.45 Memorandum of association see also Constitutional documents pre-1 October 2009 incorporation  1.10 articles providing guidance with freedom to amend  2.9 entrenched provisions see Entrenchment Model articles see also New model articles post-1 October 2009 position  1.12 private companies limited by guarantee see Private companies limited by guarantee private companies limited by shares see Private companies limited by shares public companies see Public companies Table A, companies incorporated pre-1 October 2009  1.11 Modern company law development  1.1

New model articles – contd Companies Act 2006 guide – contd articles applied in conjunction with Companies Act 2006  2.4 share transfers  2.5 articles providing guidance with freedom to amend  2.6 housekeeping on drafting bespoke articles  2.7 updating constitutional documents to Companies Act 2006 requirements  2.8 articles of association  2.10 memorandum of association  2.9 key points  2.11 Non-profit organisations model articles see Private companies limited by guarantee

N New model articles Companies Act 2006 guide  2.1 articles amended by removal of statutory duties annual general meetings (AGMs)  2.2 company secretary  2.3

P Pre-emption allotment of new shares amendments to articles, case law  3.14 Cosmetic Warriors Ltd v Gerrie  3.27 existing shareholders’ right of pre-emption  3.9 disapplication  3.12 exceptions  3.10 exclusion by private companies  3.11 more than one class of shares  3.8 pre-emption precedent  3.13 one class of shares  3.6 transitional provisions  3.7 Signia Wealth Ltd v Vector Trustees Ltd  3.22 compulsory transfers bad leavers  3.21 good leavers  3.19 conclusion  3.26 failing to ascertain fair price, negligence  3.24 penalty doctrine  3.23 pre-emption  3.17 share transfers  3.18 ‘transfer event’ on bankruptcy  3.20 valuation  3.25 Private companies limited by guarantee see also New model articles administrative arrangements company seals, art 35  7.39 means of communication to be used, art 34  7.38 no right to inspect accounts and other records, art 36  7.40 provision for employees on cessation of business, art 37  7.41

566

Index Private companies limited by guarantee see also New model articles – contd charities and non-profit organisations Charitable Companies: Model Articles of Association (GD1)  7.2 community interest companies ((CIC)  7.3 right to manage companies (RTM)  7.4 defined terms, art 1  7.5 directors appointment expenses, art 20  7.24 methods of appointing, art 17  7.21 remuneration, art 19  7.23 termination, art 18  7.22 decision-making conflicts of interest, art 14  7.18 directors’ discretion to make further rules, art 16  7.20 directors’ meeting calling, art 9  7.13 casting vote, art 13  7.17 chairing, art 12  7.16 participation, art 10  7.14 quorum, art 11  7.15 records of decisions to be kept, art 15  7.19 taking decisions collectively, art 7  7.11 unanimous decisions, art 8  7.12 indemnity, art 38  7.42 insurance, art 39  7.43 powers and responsibilities committees, art 6  7.10 delegation, art 5  7.9 general authority, art 3  7.7 members’ reserve power, art 4  7.8 generally  7.1 liability of members, art 2  7.6 members applications for membership, art 21  7.25 general meetings adjournment, art 27  7.31 attendance and speaking at, art 23  7.27 directors and non-members, art 26  7.30 chairing, art 25  7.29 quorum, art 24  7.28 voting amendments to resolutions, art 33  7.37 errors and disputes, art 29  7.33

Private companies limited by guarantee see also New model articles – contd members – contd general meetings – contd voting – contd general, art 28  7.32 poll votes, art 30  7.34 proxy notices contents, art 31  7.35 delivery, art 32  7.36 termination of membership, art 22  7.26 Private companies limited by shares see also New model articles administrative arrangements company seals, art 49  6.51 means of communication to be used, art 48  6.50 no right to inspect accounts and other records, art 50  6.52 provision for employees on cessation of business, art 51  6.53 decision-making by shareholders general meetings adjournment, art 41  6.43 attendance and speaking at, art 37  6.39 directors and non-shareholders, art 40  6.42 chairing, art 39  6.41 quorum, art 38  6.40 voting amendments to resolutions, art 47  6.49 errors and disputes, art 43  6.45 general, art 42  6.44 poll votes, art 44  6.46 proxy notices content, art 45  6.47 delivery, art 46  6.48 defined terms, art 1  6.3 directors appointment expenses, art 20  6.22 methods of appointing, art 17  6.19 remuneration, art 19  6.21 termination, art 18  6.20 decision-making conflicts of interest, art 14  6.16 directors’ discretion to make further rules, art 16  6.18 directors’ meeting calling, art 9  6.11 casting vote, art 13  6.15 chairing, art 12  6.14 participation, art 10  6.12 quorum, art 11  6.13

567

Index Private companies limited by shares see also New model articles – contd directors – contd decision-making – contd records of decisions to be kept, art 15  6.17 taking decisions collectively, art 7  6.9 unanimous decisions, art 8  6.10 indemnity, art 52  6.54 insurance, art 53  6.55 powers and responsibilities committees, art 6  6.8 delegation, art 5  6.7 general authority, art 3  6.5 shareholders’ reserve power, art 4  6.6 dividends and other distributions authority to capitalise and appropriation of capitalised sums, art 36  6.38 no interest on distributions, art 32  6.34 non-cash distributions, art 34  6.36 payment, art 31  6.33 procedure to declaring dividends, art 30  6.32 unclaimed distributions, art 33  6.35 waiver of distributions, art 35  6.37 drafting assumptions  6.2 generally  6.1 liability of members, art 2  6.4 shares all shares to be fully paid up, art 21  6.23 authority to capitalise and appropriation of capitalised sums, art 36  6.38 company not bound by less than absolute interests, art 23  6.25 powers to issue different classes of shares, art 22  6.24 share certificates, art 24  6.26 replacement, art 25  6.27 transfers, art 26  6.28 transmission, art 27  6.29 exercise of transmittees’ rights, art 28  6.30 transmittees bound by prior notices, art 29  6.31 Public companies see also New model articles administrative arrangements company seals, art 81  8.83 destruction of documents, art 82  8.84 no right to inspect accounts and other records, art 83  8.85 provision for employees on cessation of business, art 84  8.86

Public companies see also New model articles – contd communications failure to notify contact details, art 80  8.82 means to be used, art 79  8.81 decision-making by members class meetings, art 42  8.44 general meetings adjournment, art 33  8.35 attendance and speaking at, art 29  8.31 directors and non-members, art 32  8.34 chairing, art 31  8.33 members can call if not enough directors, art 28  8.30 quorum, art 30  8.32 voting amendments to resolutions, art 40  8.42 errors and disputes, art 35  8.37 general, art 34  8.36 poll demanding, art 36  8.38 procedure, art 37  8.39 proxy notices content, art 38  8.40 delivery, art 39  8.41 no voting of shares on which money owed to company, art 41  8.43 defined terms, art 1  8.3 directors alternate appointment, art 25  8.27 termination, art 27  8.29 removal, art 25  8.27 rights and responsibilities, art 26  8.28 appointment expenses, art 24  8.26 methods of appointing, art 20  8.22 remuneration, art 23  8.25 retirement by rotation, art 21  8.23 termination, art 22  8.24 decision-making conflicts of interest, art 16  8.18 directors’ discretion to make further rules, art 19  8.21 directors’ meeting calling, art 8  8.10 chairing, art 12  8.14 participation, art 9  8.11 quorum, art 10  8.12 total number of directors less than quorum, art 11  8.13

568

Index Public companies see also New model articles – contd directors – contd decision-making – contd directors’ meeting – contd voting alternates, art 15  8.17 chairman’s casting vote, art 14  8.16 general rules, art 13  8.15 taking decisions collectively, art 7  8.9 written resolutions adoption, art 18  8.20 proposed, art 17  8.19 indemnity, art 85  8.87 insurance, art 86  8.88 powers and responsibilities committees, art 6  8.8 delegation, art 5  8.7 general authority, art 3  8.5 members’ reserve power, art 4  8.6 distributions authority to capitalise and appropriation of capitalised sums, art 78  8.80 deductions in respect of sums owed to company, art 73  8.75 dividends calculation, art 71  8.73 payment, art 72  8.74 procedure to declaring, art 70  8.72 no interest on, art 74  8.76 non-cash, art 76  8.78 payment, art 72  8.74 unclaimed, art 75  8.77 waiver, art 77  8.79 generally  8.1 key points  8.2 liability of members, art 2  8.4 share warrants  5.3 relevant model article, art 51  8.53 shares certificates consolidated, art 48  8.50 contents and execution, art 47  8.49 issue except in certain cases, art 46  8.48 replacement, art 49  8.51 company not bound by less than absolute interests, art 45  8.47 different classes of, powers to issue, art 43  8.45 fractions of, procedure to disposing of, art 69  8.71

Public companies see also New model articles – contd shares – contd partly paid call notices, art 54  8.56 failure to comply with, automatic consequences, art 57  8.59 liability to, art 55  8.57 need not be issued, art 56  8.58 company’s lien over, art 52  8.54 enforcement, art 53  8.55 directors’ power to forfeit shares, art 59  8.61 effect of, art 60  8.62 procedure following, art 61  8.63 notice of intended forfeiture, art 58  8.60 surrender of shares, art 62  8.64 subscription for, payment of commissions on, art 44  8.46 transfer certificated shares, art 63  8.65 uncertificated shares, art 64  8.66 transmission, art 65  8.67 transmittees bound by prior notices, art 68  8.70 transmittees’ rights, art 66  8.68 exercise of, art 67  8.69 uncertificated, art 50  8.52 transfer, art 64  8.66 Purchase of own shares power of limited company  5.38 power of private limited company to redeem or purchase own shares out of capital  5.39 Q Quorum directors’ meetings private companies limited by guarantee  7.15 private companies limited by shares  6.13 public companies  8.12 total number of directors less than quorum  8.13 members’ general meetings private companies limited by guarantee  7.28 public companies  8.32 shareholders’ general meetings  6.40

569

Index R Redeemable shares power of limited company to issue  5.36 power of private limited company to redeem or purchase own shares out of capital  5.39 terms and manner of redemption  5.37 Resolutions generally  5.9 special amending articles of association  3.3, 3.4 change of name  5.2 votes general rules  5.10 joint holders of shares  5.11 written see Directors’ written resolutions Resolutions at meetings accidental failure to give notice of resolution or meeting  5.17 chairing meetings  5.21 chairman of meeting  5.18 general meetings  5.12 amendments to resolutions  6.49, 7.37, 8.42 members’ power to require directors to call  5.13 notices of meetings accidental failure to give notice  5.17 contents  5.15 persons entitled to receive  5.14 resolution requiring special notice  5.16 rights to appoint proxies  5.20 saving for more extensive rights conferred by articles  5.22 voting on a poll: votes cast in advance  5.19 S Share capital see Shares and securities Share transfers see also Pre-emption allotment of new shares articles applied in conjunction with Companies Act 2006  2.5 private companies limited by shares  6.28 public companies certificated shares  8.65 uncertificated shares  8.66 Share warrants public companies  5.3, 8.53 Shareholders actions see Case law review general meetings adjournment  6.43 attendance and speaking at  6.39 directors and non-shareholders  6.42

Shareholders – contd general meetings – contd chairing  6.41 quorum  6.40 voting amendments to resolutions  6.49 errors and disputes  6.45 general  6.44 poll votes  6.46 proxy notices content  6.47 delivery  6.48 reserve power  6.6 Shares and securities allotment see Allotment of shares and securities; Pre-emption allotment of new shares circumstances in which company may reduce its share capital  5.35 model articles see Private companies limited by shares; Public companies power of limited company issue of redeemable shares  5.36 purchase of own shares  5.38 provision for different amounts to be paid  5.28 purchase of own shares power of limited company  5.38 power of private limited company to redeem or purchase own shares out of capital  5.39 redeemable shares power of limited company to issue  5.36 power of private limited company to redeem or purchase own shares out of capital  5.39 terms and manner of redemption  5.37 redenomination of share capital  5.30 effect of  5.31 sub-division or consolidation  5.29 transfers see Share transfers variation of class rights  5.33 companies having a share capital  5.32 companies without a share capital  5.34 Special resolutions amending articles of association  3.3, 3.4 change of name  5.2 T Table A model articles for companies incorporated pre-1 October 2009  1.11 W Written resolutions see Directors’ written resolutions

570