BA204 -Chapter 3

Requirements for Constitutions: Understand the requirements for constitutions for companies registered under Companies Act 2016.
Memorandum & Articles of Association: Explain the position of the Memorandum of association and Articles of Association under previous laws.
Effects of Constitution: Discuss the effects of the constitution.
Alteration Procedures: Describe procedures and consequences for altering the constitution.
Transacting Outside Objects Clause: Discuss consequences if the company transacts outside its objects clause.

Constitution Definition: The constitution of a company includes the Memorandum of association and Articles of Association.
Terminology Under Law: Under the Companies Act 2016, the term "constitution" collectively refers to both documents.
Section 31(1) CA 2016: A company other than a company limited by guarantee may or may not have a constitution.

Memorandum of Association: Contains crucial information about the company.
Articles of Association: Details the internal rules for managing the company.
Section 31(3) CA 2016: Without a constitution, directors and members' rights and obligations are defined by the Companies Act 2016.

Section 31(2) CA 2016: If a company has a constitution, rights, powers, duties, and obligations are governed by it but cannot conflict with the Companies Act 2016.
Section 38(1) CA 2016: Companies limited by guarantee must have a constitution.
Section 35 CA 2016: Outlines the mandatory contents of a company’s constitution.

Binding Nature: The constitution binds the company and its members similarly to a signed contract.
Statutory Contract: Functions as a statutory contract under Section 38(6), CA 2016, asserting a legal relationship between the company and its members.

Section 33(1) CA 2016: Adoption of the constitution binds all parties involved.
Section 38(6) CA 2016: The lodged constitution is binding on both the company and its members.
Case Study: Hickman v Kent of Romney Marsh Sheep Breeders illustrates contractual obligations akin to the constitution.

Member Obligations: Each member is bound by the constitution as if they signed it.
Case Study: Wong Kim Fatt v Leong & Co Sdn Bhd emphasizes members' contractual obligations toward one another.

Privity Doctrine: Outsiders cannot enforce any clauses in the constitution.
Case Studies: Raffles Hotel Ltd v Malaysian Banking Bhd and Eley v Positive Assurance clarify the limitations of outsider rights related to the constitution.

Sections 36 & 37 CA 2016: Allow for amendments to the constitution through various procedures.
Procedure: Amended either by the company or through the court.

Section 36 CA 2016: A special resolution can alter the constitution, barring prohibitions within the constitution itself.
Section 37 CA 2016: Details the court's power to amend the company’s constitution following established procedures.
Case Study: Peter’s American Delicacy v Heath illustrates the court’s involvement in constitutional amendments.

Court-ordered Amendments: Applicable when amendments are impractical or restricted by current laws or the constitution.
Application for Amendment: Directors/members can petition the court, which will grant the request if feasible.

Post-amendment Notification: Companies must inform the Registrar of Companies (ROC) of any alterations.
Effective Date: Section 36(2) CA 2016 delineates that alterations become effective either when a resolution is passed or at a specified later date.
Court Ordered Changes: Under Section 37(2), amendments resulting from court orders must be submitted to ROC within 30 days.

Effective Date of Alteration: Takes effect on the resolution date according to Section 36(2), CA 2016.
Limiting Liability: Section 33(3) states that any increase in the liability of existing members must have their written consent.
Doctrine of Privity: The constitution does not bind third parties, preventing them from suing or being sued under it per Section 38(6) CA 2016.
Case Study: Southern Foundries v Shirlaw exemplifies this principle.

Mandatory Clause: The memorandum must specify the objects of every company, guided by Section 21(1) CA 2016.
Unlimited Capacity: Companies have the capacity to conduct any lawful business; restrictions are defined under Section 16(2).
Requirements for Companies Limited by Guarantee: Section 38(3) necessitates stating the objects in constitutions for companies limited by guarantee.

Valid Contracts: Contracts made without knowledge of the objects clause remain valid (Section 21(1) CA 2016).
Ultra vires Transactions: Third parties are not liable for ultra vires actions if they are unaware of the objects clause; enforcement depends on court discretion.

Constitutional Requirements: Section 31(1) CA 2016 states that having a constitution is optional for companies other than those limited by guarantee.
Business Capacity: Section 21(1) confirms a company’s extensive capacity to operate, but Section 35(2) restricts businesses outside the defined objectives.