COMPANIES: THE MODEL ARTICLES
Study Unit
COMPANIES: THE MODEL ARTICLES ~19 min
Below is an extract from the model Articles of Association for private companies limited by shares, which are available to download from the Companies House website. The website states that:
“All limited companies must have Articles of Association. These set the rules company officers must follow when running their companies. ‘Model’ Articles of Association are the standard default articles a company can use. They are prescribed by The Companies (Model Articles) Regulations 2008.”
The following section is an edited version of Part 1 of the Articles, which sets out the definitions of specific words which will be used in the document.
(A) Part 1 INTERPRETATION AND LIMITATION OF LIABILITY 1. Defined terms 1.In the articles, unless the context requires otherwise — “articles” means the company’s Articles of Association;
“bankruptcy” includes individual insolvency (1) ….. in a jurisdiction other than England and Wales or Northern Ireland which have an (2) ….. similar to that of bankruptcy;
“Companies Acts” means the Companies Acts (as defined in section 2 of the Companies Act 2006), in so far as they (3) ….. to the company;
“director” means a director of the company, and includes any person (4) ….. the position of director, by (5) ….. name called;
“document” includes, unless otherwise specified, any document sent or supplied in (6) ….. form;
“fully paid” in relation to a share means that the (7) ….. value and any premium to be paid to the company in respect of that share have been paid to the company;
“holder” in relation to shares means the person whose name is entered in the register of (8) ….. as the holder of the shares;
“instrument” means a document in hard copy form;
“ordinary (9) …..” has the meaning given in section 282 of the Companies Act 2006;
“shares” means shares in the company;
“transmittee” means a person entitled to a share by reason of the death or bankruptcy of a shareholder or otherwise by (10) ….. of law; and “writing” means the representation or reproduction of words, (11) ….. 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 (12) ….. the same meaning as in the Companies Act 2006 as in (13) ….. on the date when these Articles become (14) ….. on the company.
2. Liability of members The liability of the members is limited to the amount, if any, (15) ….. on the shares held by them.
Complete the extract opposite from the model Articles of Association with a word from the list below.
(a) unpaid (d) occupying (g) apply (j) proceedings (m) whatever (b) nominal (e) operation (h) members (k) electronic (n) resolution (c) symbols (f) binding (i) bear (l) force (o) effect
Part 2 of the model Articles of Association deals with directors’ powers and responsibilities. Complete the following section of the Articles with a preposition from the box below.
(a) for (c) by (e) of (g) in (b) against (d) with (f) from (h) as Termination of director’s appointment 18. A person ceases to be a director as soon as — (a) that person ceases to be a director (1) ….. virtue of any provision of the Companies Act 2006 or is prohibited (2) ….. being a director by law; (b) a bankruptcy order is made (3) ….. that person; (c) a composition is made (4) ….. that person’s creditors generally in satisfaction (5) ….. 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 (6) ….. a director and may remain so (7) ….. 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 (8) ….. accordance with its terms.
Complete the following explanation of a director’s composition with creditors with a word from the box below.
(a) assent (c) partial (e) less (g) petition (b) opposed (d) owed (f) surrender (h) bound A director’s appointment can be terminated for several reasons, one of which is if he or she enters into “a composition with creditors”. This is a contract between a debtor and a group of two or more of his or her creditors. The purpose of the contract is for the creditors to accept (1) ….. than what each of them is (2) ….. on a pro rata basis. It is therefore an agreement not just between the debtor and the individual creditors but among the group of creditors themselves. There has to be what contract law terms ‘mutual (3) …..’ between the debtor and the creditors before a composition is created.
The process is for the creditors to make a formal offer of their acceptance of (4) ….. payment to the debtor. A debtor must then accept this offer in order for the composition to be binding. Not all of the creditors of a particular debtor have to agree to a composition and those who do not participate are not (5) ….. by it. Just like any other contract, a composition must contain an element of consideration in order for it to be enforceable. Each creditor’s promise to accept a pro rata share of the actual sum paid, as (6) ….. to full payment of what is owed, is seen as consideration for the other creditors in the group and for the debtor. The (7) ….. of debtor’s right to file a (8) ….. for bankruptcy is considered to be the consideration he or she provides to the creditors. This means that the creditors will at least receive part of what they are owed, as opposed to the risk of receiving nothing as creditors of a bankrupt.
DISCUSSION POINT • Directors can put a company into liquidation because it is insolvent and start a new company almost immediately. In light of this, do you think the law is too strict concerning directors who enter into a composition with their personal creditors?
Speaking & Writing for this topic
Two short tasks scored against TOEFL rubrics. The prompt is generated for this topic — use the vocabulary you have just studied.