Effect of company's constitution
Part 3 A 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.
(2)Money payable by a member to the company under its constitution is a debt due from him to the company.
In England and Wales and Northern Ireland it is of the nature of an ordinary contract debt.
“company” means a company formed and registered under this Act, that is—
a company so formed and registered after the commencement of this Part, or
a company that immediately before the commencement of this Part—
was formed and registered under the Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), or
was an existing company for the purposes of that Act or that Order,
(which is to be treated on commencement as if formed and registered under this Act).
(4) In this section and that Schedule “company” includes any body corporate.
Defined in s.1159(4) · see it in the full Act(2) In sub-paragraph (1) “member” has the same meaning as it has by virtue of section 7(1) of that Act .
Defined in Sch.2 Pt.1 · see it in the full ActA company’s constitution binds the company and its members as though they had covenanted to observe it. The provision formed part of the contract-and-statute framework tailoring a charitable member’s fiduciary duties. (see paras [73]; [92])
The court uses the provision to show that a company’s constitution binds the company and its members, while emphasising that its force derives from statute and the general law as well as agreement. (see para [37])
Confirms that money payable by a member to the company under its constitution is an ordinary contract debt. The provision does not prevent a separate analysis of when the contractual cause of action accrued. (see paras [22]; [29]; [34])
2 more judgments, and what each says about section 33, are in the case-law panel in the full Act.
108.Subsection (1) of this section replaces section 14(1) of the 1985 Act. Its effect is that the provisions of a company’s constitution constitute a special kind of contract, whose terms bind the company and its members from time to time. Like section 14(1), the provisions of this section are excepted from the general principle set out in section 1 of the Contracts (Rights of Third Parties) Act 1999, so that provisions of a company’s constitution will not confer any rights on persons other than the company and its members. Unlike section 14(1), section 34 refers to “a company’s constitution”, rather than its “memorandum and articles”. This reflects the new division of formation and constitutional information between the memorandum, articles and other constitutional documents noted above.
109.The language in subsection (1) has been updated but there is no change to the law (the provision continues to reflect what the law has always been: in particular a company’s constitution binds both the company and its members).
110.Subsection (2) replaces section 14(2) of the 1985 Act. It provides that amounts which a member of a company is obliged to pay to it under its constitution are debts due to the company. In England and Wales and Northern Ireland, such debts are ordinary contract debts.