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THE COMPANY’S CONSTITUTION
 Under the CA 1965, every company was required to have a memorandum and articles of
association.
 The memorandum and articles of association are now collectively known as the constitution,
and it is expressly stated in s31 and 38 CA 2016 that only a company limited by guarantee
shall have a constitution; other types of company may or may not have a constitution. It is
optional for them.
 If a company has no constitution, the company, each director and each member of the
company shall have the rights, powers, duties and obligations as set out in the Act.
 And ‘if the company has a constitution, the company, each director and each member of the
company shall also have the rights, powers, duties and obligations as set out in the Act,
except to the extent that such rights, powers, duties and obligations are permitted to be
modified in accordance with this Act, and are so modified by the constitution of the
company’ (s31(2) CA 2016).

 In other words, the rights, powers, duties and obligations of the company, director and member are
prescribed by the CA 2016 unless modified by the company’s constitution. The company’s constitution
can modify any of those rights, powers, duties and obligations only if the Act permits it.
 For companies which were registered prior to the coming into operation of the CA 2016, s619(3)
provides that the memorandum and articles of association of a company existing before the operation
of the Act shall have effect as if made or adopted under the Act unless otherwise resolved by the
company. Thus, a company’s existing memorandum and articles shall form the company’s constitution
until the company alters it by passing a special resolution.

 Significance of Memorandum
 Memorandum of Association is the supreme basic legal document for a company due to
the following re 1. It is the basis of incorporation and a company cannot be registered
without a Memorandum of Association.
 2. It contains the fundamental conditions upon which alone the company can be
incorporated.
 3. It is the charter of a company, which defines the objectives of the company’s
formation and the utmost possible scope of its operations beyond which its actions
cannot go.
 4. It determines the limits of a company’s activities.
 5. It informs the investors of the purpose for which their money will be utilized by the
company.
 6. It makes to known the shareholders the extent of their liability.
 7. It enables the outsiders to know whether the company is authorized to enter into a
particular transaction.

 Articles of Association
 The Articles of Association of a company and its bylaws are regulations, which govern the
management of its internal affairs and the conduct of its business. It defines the duties,
rights, powers, and authority of the management, and the Board of Directors in their
respective capacities and of the company, and the mode and form in which the business of
the company is to be carried-out. The Articles of Association must be printed, divided into
paragraph and numbered.

 A company is no longer required to have the Memorandum of
Association and Articles of Association for registration purposes. A
company can also operate without any constitution
 In place of Memorandum of Association and Articles of Association, a
company may choose to have a single document, to be referred to as
the company’s constitution.
 If the company chooses to have a constitution, the constitution shall
comprise a single document containing the basic information about the
company and any other matters regarding the company’s internal
management.
 A constitution is optional for companies limited by shares.

Constitution:
Constitution are constitutional documents of the company. It sets out the key characteristics of the
entity that has been created. It also sets out how the company is internally regulated.
S. 2(1) “constitution” means a document referred to in section 34.
➔ S. 34 Form of constitution –
(a) in the case of a company limited by shares incorporated under this Act, is a document
adopted as its constitution under section 32;
(b) in the case of a company limited by guarantee incorporated under this Act, is a
document lodged for registration of the company under section 38; or
(c) in the case of a company registered under the corresponding previous written law, is the
memorandum and articles of association as originally registered or as accordance with the corresponding
previous written law, and includes any alteration or amendment made under section 36 or 37, if any, as
the case may be

 Certain provisions of the Companies Act 2016 may be modified by a company by providing for
different rules in its constitution. However, any provision in the constitution that contravenes the
Companies Act 2016 is invalid.
 A company may adopt a constitution after its registration by passing a special resolution (s 32).
 For an existing company, the existing Memorandum of Association and Articles of Association
will become the company’s constitution unless the company resolves otherwise [s 619(3)]. An
ordinary resolution is required in this situation.

Company limited by shares may or may not have constitution – S. 31(1)
➔ If company has a constitution, the rights, powers, duties and obligations of the
company’s directors and members under the 2016 Act shall apply (i.e. governed by CA
2016) unless otherwise modified by the constitution.
➔ If a company does not have a constitution, it is governed by the Companies Act 2016.

 A company limited by guarantee must have a constitution. The constitution must
contain the following information (s 38):
 S. 35 Contents of a company’s constitution
 (1) Subject to the provisions of this Act, the constitution of a company may
contain provisions relating to –
 (a) that the company is a company limited by guarantee
 (b) the objects of the company
 (c) the capacity, rights, powers and privileges of the company
 (d) the number of members with which the company proposed to be incorporated
 (e) matters contemplated by this Act to be included in the constitution, and
 (f) any other matter that the company wishes to include in its constitution

 Section 21 CA 2016 provides that a company shall have the capacity to carry on or
undertake any business or activity.
 For the purposes of paragraph (1) (a), if the constitution sets out the objects of a
company –
(a) the company shall be restricted from carrying on any business or activity that is not
within those objects; and
(b) the company shall have full capacity and powers to achieve such objects, unless the
constitution provides otherwise.
.

Object Clause: defining corporate capacity of company. by specifying what the
company. can do
● Purpose – S. 35(2)(a)
● Company must act within its object clause.
➔ It serves as a restriction of the company’s capacity to carry on any business or
activity.
➔ The doctrine of “ultra vires” applies when company has acted beyonds its
object clause

Object clause
 Arab Malaysian Finance Bhd v Meridian International Credit Corp Ltd
London define object clause of a company is the company’s business
activities. Object clause also explains the transaction or activities or
business for exposing to public about company’s business.
 Section 14(3)(c) of Companies Act 2016 stated that in order for a company
to apply for incorporation, a company must have a statement about type of
business activity conducted.
 While Section 35(1)(a) stated that a constitution of a company must include
an object clause. Section 35(2) mention that the company shall be
restricted from carrying any business subject to object clause mention in
Section 35(1)(a).

Under Common Law:
● Ultra Vires- Ashbury Rly Carriage & Iron Co v Riche (1875)
Facts:
Objects of the company: make, and sell, and lend or hire, railway carriages and wagons, and all kinds
of railway plant, fittings, machinery, and rolling stock; to carry on the business of mechanical
engineers and general contractors’. D entered into a contract on behalf of the co for the purchase of a
concession to construct a railway.
Held:
Construction of railways was not within the objects of the company as stated in the memorandum.
Even if SH unanimously purported to extend the business of the company, this could not be done. As
the contract was ultra vires, it was void and the action against the co failed. The co was not liable for
breach of contract.

 CORPORATE CAPACITY AND THE OBJECTS CLAUSE
 Companies have the full capacity of a natural person under the
Companies Act 2016 [s 21(1)]. Thus, the objects clause will no longer be
required for companies limited by shares.
 The objects clause(s) sets out the purpose(s) for which a company is
incorporated. The clause typically deals with the kinds of business that the
company intends to conduct.
 Since companies have the full capacity of a natural person under the
Companies Act 2016, the doctrine of ultra vires is no longer relevant
 discussion as to the effect of an ultra vires transaction is still relevant for
companies that choose to have the objects clause, or for companies limited
by guarantee which must have the objects clause.

 CORPORATE CAPACITY AND THE OBJECTS CLAUSE
 For companies that choose to have the objects clause, or for companies
limited by guarantee that must have the objects clause, the Companies Act
2016 provides that the company shall be restricted from carrying on any
business or activity which is not within those objects
 Under s 20 of the Companies Act 2016, a transaction which falls outside the
objects clause is an ultra vires transaction but is not invalid merely because
of the company’s lack of capacity.

Under Companies Act:
● S. 21(1)(c) – to do any act which it may do or to enter into transactions.
● S. 21(2) – A company shall have the full rights, powers and privileges for the purposes
mentioned in the subsection 1.
➔ Read S. 21(1)(c) and S. 21(2) together, the company is as if it has unlimited capacity. That is,
it is capable of exercising all the functions of an incorporated company and have the full
capacity to carry on or undertake any business. Both provisions are merely general
provisions.
● S. 35(2)(a) – Company is restricted from acting beyond object.
➔ Thus, doctrine of ultra vires is applicable.
● S. 35(2)(b) – Company will have full capacity to achieve such objects unless constitution provides
otherwise.
… Under the old act, shareholders are protected whereas directors have to act carefully.
… Under the new law, shareholders are not protected, directors is less likely to be liable,
company will not wind up.

 LEGAL EFFECT OF THE CONSTITUTION
 Under the Companies Act 2016, the constitution which is adopted by a
company is binding on [s 32(3)]:
 the company
 its directors, and
 its members.
 This resolves the uncertainty as to whether these documents also
operate to bind the company and its officers and directors, which was
not clearly dealt with under the Companies Act 1965

Legal effect
 Document whereby it contains object clause, internal regulations about meetings.
 Document can be considered as a contract between company and members,
contract between members. Not a contract with outsiders. It binds only the
company and its members, not on the outsiders.
 S. 33(1) - the constitution shall bind the company and the members… contained
covenants and provisions which each member are bound to observe.
- If there is a breach by the company, members can take action.
- Or if members breach the constitution
- the company can take action
- Members can take action against other members on the ground that the members
had violated the company’s constitution.

Legal effect
 Contract between the company and its members (company & SH)
 The company and members can take action against one another when either of them
failed to comply with the Constitution.
 Hickman v Kent
- The AOA provides that any dispute should be referred to arbitration.
- Hickman brought an action to court complaining about some irregularities in the
company.
- - The defendant relied on the article (which any dispute must be referred to
arbitration, not to court) to prevent Hickman’s action.
- Held: - Hickman was bound by the article
- - However, a member acting in the capacity other than a member cannot enforce the
constitution.

Legal effect
 Refers to a situation when a member is also an employee of the company. If he wants to bring an ac
on the basis by referring to the constitution, only refers to his rights as a member not as an employe
- Member = SH.
- Refer to Eley v Positive Govt Life Assurance Co
Eley v Positive Govt Life Assurance Co
- In the AOA
- - E was the permanent solicitor and could be dismissed for misconduct. solicitor = employee.
- - Later he became a SH.
- - When the company terminated his employment, E sued the company for breach of contract on the
basis as stated in the constitution whereby he could be dismissed for misconduct.
- Held: - Action failed.
- - The article did not create any contract between E (as a solicitor or employee) and the company.
- - The article conferred no right on a member who seeks to enforce a right in a capacity other than a
member.
- -

Legal effect
 . Contract between members
- Members can bring action against another member for the enforcement of the
constitution.
Lim Beng Hin & Ors v Lim Beng Sung
- The MOA and AOA constitutes a contract between the members inter se
- - The contract is deemed to contain covenants that each member will observe all the
provisions of the memorandum and articles - s. 32(1)
- - Every member has a personal right to have the terms of the MOA and AOA
observed.
- - Action may be brought directly against the other members and the company does not
have to be joined as a party

Legal effect
 Rayfield v Hands
- The AOA provides that every member who intends to transfer shares shall inform
directors who will take the shares equally between them at a fair value.
- Directors refused to purchase the shares.
- R, the SH took action.
- In this case all directors were SH.
- Held: - Directors were ordered to purchase R’s shares as there was a contract
between R and directors constituted by the AOA.
- - There was an obligation imposed on the directors in their capacity as members (in
this case all directors were members)

Legal effect
 The Constitution is not a contract between the company and its outsiders.
Outsiders cannot enforce the provisions in the constitution.
Outsiders = non members, non SH, creditors, employee (although they involve in the
company’s business)
Browne v La Trinidad
Browne could not rely on the articles as the right to be a director was not given to him
in his capacity as a member.
Beattie v E & F Beattie Ltd
The dispute was not in his capacity as a member, thus the article cannot be enforced
by Beattie as he is an outsider.

Legal effect
 Raffles Hotel Ltd
- Plaintiff was a lessee - Defendant was a bank (lessor of the land.
- In P’s AOA it was stated that the lessor has power to appoint a director of the company.
- - Lessor appoint itself as the director
- - P claimed that the appointment was invalid.
- Held: - Appointment was invalid because the D was not a member
- - “There is nothing in the article which confers such right on the defendant since the
defendant was not a member of the company
- . - The Constitution says the lessor has power, lessor here is an outsider, therefore the lesso
cannot enforce this article.
- - The provision should not be there because it cannot be enforced as the constitution only
provides rights of the members and internal management, and can only be enforceable by th
members of the company. - If the constitution provides the right of the outsider , it will not

Legal effect
 Southern Foundries Ltd v Shirlaw
- There was a written agreement between the R and the company (SFL) whereby the Respon
was appointed as Managing Director by SFL for 10 years.
- - 3 years later, SFL was taken over by FFL and FFL had altered SFL articles which empow
FFL to remove any company director.
- - FFL removed R from the directorship.
- - R sued for breach of contract.
- Held: - The amendment of the provision will not justify the breach of contract by the comp
the contract entered before the alteration.
- - Therefore, Shirlaw was entitled for damages as there was a separate contract of employm
which was the written agreement
- - The contract of employment had been breached when they removed R.

 AMENDING THE CONSTITUTION
 A company may amend its constitution by passing a special resolution, unless
the constitution prohibits any amendment (s 36).
 The court is also able to make an order for the constitution to be amended
where the court is satisfied that it is not practicable to amend the constitution
following the procedure stated under the Companies Act 2016 or in the
constitution itself (s 37). The application for the order from the court may be
made by a director or any member of the company.

AMENDING THE CONSTITUTION
 Alteration of Constitution
To add, to delete, to modify of any [provision of the constitution Content:
❏ Procedure for alteration of constitution - by general meeting as stated in s. 36 and by
Court s. 37
❏ Restrictions on alteration
❏ Principles of alteration
 Procedure for alteration
S. 36 - A company may alter or amend the constitution. (alteration must be done in
accordance with this section)

 Procedure for alteration
 S. 36 - A company may alter or amend the constitution. (alteration must be done in accordance
with this section)
 (1) By special resolution unless prohibited by the constitution (entrench provision = a clause in
the constitution which says certain clause cannot be amended, prohibition of alteration in
certain clause of the constitution)
 (2) Any alteration or amendment shall bind to the company and members accordingly upon th
date the resolution was passed. (does not operate retrospectively - Swabey v Port Darwin)
 (3) Company must notify the Registrar of the alteration within 30 days from the date of
special resolution was passed. Written resolution - private companies Special resolution -
private and public companies
 Written resolution - private companies
 Special resolution - private and public companies

 S. 37 - Court may alter or amend the Constitution.
 Principle under this provision:
- The court may make an order to alter and amend the Constitution, on the application
of a director or member
- - The power is exercisable only when it is satisfied that it is not practicable to alter or
amend using procedure set out in the Ac or in the constitution itself.
- - Make an order to alter on such terms and conditions the court thinks fit.
 Special Resolution
S. 292 - approval obtained at the general meeting, which is a meeting of SH.
- must get ¾ or 75%, and
- - notice of the meeting must be given to the members not less than 21 days before
the meeting is conducted.

 Restriction on Alteration
● Private company - restrict the rights of members to transfer shares.
● Cannot require a shareholder to acquire additional shares unless he consents in
writing - s. 194
● Restrictions that stated in Constitution (entrenched provision)
 Principles of Alteration
Must be bona fide for the benefit of the company as a whole.
- The alteration is subject to the equitable limitation on the members’ exercise of
voting power.
- - Members must exercise their power to vote bona fide in the interest of the
company as a whole.

 Allen v Gold Reefs of West Africa
-The AOA contained a lien on all partly paid shares held by any member for any
debt owed to the company.
- - One of the members held some partly paid up shares and he also owned the only
fully paid-up shares issued by the company.
- - After his death, it was found out that his estate was insolvent so the company
could not recover the amount he owed.
- - The company altered its AOA by passing a special resolution to create a lien on
all fully paid up shares and his executor sued to recover the value of the fully paid
shares.
- Held: - the trial Court : the alteration was not bona fide in interest of the company.
- COA : “The statutory powers to amend the article must be exercised, not only in
the manner required by law, but also bona fide for the benefit of the company as a
whole”

 SideBottom v Kershaw Leese & Co
- The D company altered the AOA by introducing a provision (add) which
gives the directors power to buy out at a fair price the shareholding of
member who competed with the company’s business
- - P (minority) - who carried out competing business contested the validity of
such alteration. He alleges that the new provision is invalid.
- Held: the alteration was valid because it was made bona fide for the benefit
of the company. The reason behind the clause is that the members should not
engage in business that can compete with the company’s business

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