Office of Public Sector Information
(1) In Chapter III of Part I of the [1985 c. 6.] Companies Act 1985 (a company’s capacity; formalities of carrying on business), for section 35 substitute—
(1) The validity of an act done by a company shall not be called into question on the ground of lack of capacity by reason of anything in the company’s memorandum.
(2) A member of a company may bring proceedings to restrain the doing of an act which but for subsection (1) would be beyond the company’s capacity; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the company.
(3) It remains the duty of the directors to observe any limitations on their powers flowing from the company’s memorandum; and action by the directors which but for subsection (1) would be beyond the company’s capacity may only be ratified by the company by special resolution.
A resolution ratifying such action shall not affect any liability incurred by the directors or any other person; relief from any such liability must be agreed to separately by special resolution.
(4) The operation of this section is restricted by section 30B(1) of the [1960 c. 58.] Charities Act 1960 and section 112(3) of the Companies Act 1989 in relation to companies which are charities; and section 322A below (invalidity of certain transactions to which directors or their associates are parties) has effect notwithstanding this section.
(1) In favour of a person dealing with a company in good faith, the power of the board of directors to bind the company, or authorise others to do so, shall be deemed to be free of any limitation under the company’s constitution.
(2) For this purpose—
(a) a person “deals with” a company if he is a party to any transaction or other act to which the company is a party;
(b) a person shall not be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the directors under the company’s constitution; and
(c) a person shall be presumed to have acted in good faith unless the contrary is proved.
(3) The references above to limitations on the directors' powers under the company’s constitution include limitations deriving—
(a) from a resolution of the company in general meeting or a meeting of any class of shareholders, or
(b) from any agreement between the members of the company or of any class of shareholders.
(4) Subsection (1) does not affect any right of a member of the company to bring proceedings to restrain the doing of an act which is beyond the powers of the directors; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the company.
(5) Nor does that subsection affect any liability incurred by the directors, or any other person, by reason of the directors' exceeding their powers.
(6) The operation of this section is restricted by section 30B(1) of the [1960 c. 58.] Charities Act 1960 and section 112(3) of the Companies Act 1989 in relation to companies which are charities; and section 322A below (invalidity of certain transactions to which directors or their associates are parties) has effect notwithstanding this section.
A party to a transaction with a company is not bound to enquire as to whether it is permitted by the company’s memorandum or as to any limitation on the powers of the board of directors to bind the company or authorise others to do so.”.
(2) In Schedule 21 to the [1985 c. 6.] Companies Act 1985 (effect of registration of companies not formed under that Act), in paragraph 6 (general application of provisions of Act), after sub-paragraph (5) insert—
“(6) Where by virtue of sub-paragraph (4) or (5) a company does not have power to alter a provision, it does not have power to ratify acts of the directors in contravention of the provision.”.
(3) In Schedule 22 to the [1985 c. 6.] Companies Act 1985 (provisions applying to unregistered companies), in the entries relating to Part I, in the first column for “section 35” substitute “sections 35 to 35B”.
(1) In Part X of the [1985 c. 6.] Companies Act 1985 (enforcement of fair dealing by directors), after section 322 insert—
(1) This section applies where a company enters into a transaction to which the parties include—
(a) a director of the company or of its holding company, or
(b) a person connected with such a director or a company with whom such a director is associated,
and the board of directors, in connection with the transaction, exceed any limitation on their powers under the company’s constitution.
(2) The transaction is voidable at the instance of the company.
(3) Whether or not it is avoided, any such party to the transaction as is mentioned in subsection (1)(a) or (b), and any director of the company who authorised the transaction, is liable—
(a) to account to the company for any gain which he has made directly or indirectly by the transaction, and
(b) to indemnify the company for any loss or damage resulting from the transaction.
(4) Nothing in the above provisions shall be construed as excluding the operation of any other enactment or rule of law by virtue of which the transaction may be called in question or any liability to the company may arise.
(5) The transaction ceases to be voidable if—
(a) restitution of any money or other asset which was the subject-matter of the transaction is no longer possible, or
(b) the company is indemnified for any loss or damage resulting from the transaction, or
(c) rights acquired bona fide for value and without actual notice of the directors' exceeding their powers by a person who is not party to the transaction would be affected by the avoidance, or
(d) the transaction is ratified by the company in general meeting, by ordinary or special resolution or otherwise as the case may require.
(6) A person other than a director of the company is not liable under subsection (3) if he shows that at the time the transaction was entered into he did not know that the directors were exceeding their powers.
(7) This section does not affect the operation of section 35A in relation to any party to the transaction not within subsection (1)(a) or (b).
But where a transaction is voidable by virtue of this section and valid by virtue of that section in favour of such a person, the court may, on the application of that person or of the company, make such order affirming, severing or setting aside the transaction, on such terms, as appear to the court to be just.
(8) In this section “transaction” includes any act; and the reference in subsection (1) to limitations under the company’s constitution includes limitations deriving—
(a) from a resolution of the company in general meeting or a meeting of any class of shareholders, or
(b) from any agreement between the members of the company or of any class of shareholders.”.
(2) In Schedule 22 to the [1985 c. 6.] Companies Act 1985 (provisions applying to unregistered companies), in the entries relating to Part X, insert—
| “section 322A | Invalidity of certain transactions involving directors, etc. | Subject to section 718(3).” |
In Chapter I of Part I of the [1985 c. 6.] Companies Act 1985 (company formation), after section 3 (forms of memorandum) insert—
Where the company’s memorandum states that the object of the company is to carry on business as a general commercial company—
(a) the object of the company is to carry on any trade or business whatsoever, and
(b) the company has power to do all such things as are incidental or conducive to the carrying on of any trade or business by it.”.
(2) In the same Chapter, for section 4 (resolution to alter objects) substitute—
(1) A company may by special resolution alter its memorandum with respect to the statement of the company’s objects.
(2) If an application is made under the following section, an alteration does not have effect except in so far as it is confirmed by the court.”.
(1) In the [1960 c. 58.] Charities Act 1960, for section 30 (charitable companies) substitute—
Where a charity may be wound up by the High Court under the Insolvency Act 1986, a petition for it to be wound up under that Act by any court in England or Wales having jurisdiction may be presented by the Attorney General, as well as by any person authorised by that Act.
(1) Where a charity is a company or other body corporate having power to alter the instruments establishing or regulating it as a body corporate, no exercise of that power which has the effect of the body ceasing to be a charity shall be valid so as to affect the application of—
(a) any property acquired under any disposition or agreement previously made otherwise than for full consideration in money or money’s worth, or any property representing property so acquired,
(b) any property representing income which has accrued before the alteration is made, or
(c) the income from any such property as aforesaid.
(2) Where a charity is a company, any alteration by it of the objects clause in its memorandum of association is ineffective without the prior written consent of the Commissioners; and it shall deliver a copy of that consent to the registrar of companies under section 6(1)(a) or (b) of the [1985 c. 6.] Companies Act 1985 along with the printed copy of the memorandum as altered.
(3) Section 6(3) of that Act (offences) applies in relation to a default in complying with subsection (2) as regards the delivery of a copy of the Commissioners' consent.
(1) Sections 35 and 35A of the [1985 c. 6.] Companies Act 1985 (capacity of company not limited by its memorandum; power of directors to bind company) do not apply to the acts of a company which is a charity except in favour of a person who—
(a) gives full consideration in money or money’s worth in relation to the act in question, and
(b) does not know that the act is not permitted by the company’s memorandum or, as the case may be, is beyond the powers of the directors,
or who does not know at the time the act is done that the company is a charity.
(2) However, where such a company purports to transfer or grant an interest in property, the fact that the act was not permitted by the company’s memorandum or, as the case may be, that the directors in connection with the act exceeded any limitation on their powers under the company’s constitution, does not affect the title of a person who subsequently acquires the property or any interest in it for full consideration without actual notice of any such circumstances affecting the validity of the company’s act.
(3) In any proceedings arising out of subsection (1) the burden of proving—
(a) that a person knew that an act was not permitted by the company’s memorandum or was beyond the powers of the directors, or
(b) that a person knew that the company was a charity,
lies on the person making that allegation.
(4) Where a company is a charity, the ratification of an act under section 35(3) of the [1985 c. 6.] Companies Act 1985, or the ratification of a transaction to which section 322A of that Act applies (invalidity of certain transactions to which directors or their associates are parties), is ineffective without the prior written consent of the Commissioners.
(1) Where a company is a charity and its name does not include the word “charity” or the word “charitable”, the fact that the company is a charity shall be stated in English in legible characters—
(a) in all business letters of the company,
(b) in all its notices and other official publications,
(c) in all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed by or on behalf of the company,
(d) in all conveyances purporting to be executed by the company, and
(e) in all its bills of parcels, invoices, receipts and letters of credit.
(2) In subsection (1)(d) “conveyance” means any instrument creating, transferring, varying or extinguishing an interest in land.
(3) Section 349(2) to (4) of the [1985 c. 6.] Companies Act 1985 (offences in connection with failure to include required particulars in business letters, &c.) apply in relation to a contravention of subsection (1) above.”.
(2) In section 46 of the [1960 c. 58.] Charities Act 1960 (definitions), at the appropriate place insert—
““company” means a company formed and registered under the [1985 c. 6.] Companies Act 1985, or to which the provisions of that Act apply as they apply to such a company;.”
(1) In the following provisions (which extend to Scotland only)—
(a) “company” means a company formed and registered under the [1985 c. 6.] Companies Act 1985, or to which the provisions of that Act apply as they apply to such a company; and
(b) “charity” means a body established for charitable purposes only (that expression having the same meaning as in the Income Tax Acts).
(2) Where a charity is a company or other body corporate having power to alter the instruments establishing or regulating it as a body corporate, no exercise of that power which has the effect of the body ceasing to be a charity shall be valid so as to affect the application of—
(a) any property acquired by virtue of any transfer, contract or obligation previously effected otherwise than for full consideration in money or money’s worth, or any property representing property so acquired,
(b) any property representing income which has accrued before the alteration is made, or
(c) the income from any such property as aforesaid.
(3) Sections 35 and 35A of the [1985 c. 6.] Companies Act 1985 (capacity of company not limited by its memorandum; power of directors to bind company) do not apply to the acts of a company which is a charity except in favour of a person who—
(a) gives full consideration in money or money’s worth in relation to the act in question, and
(b) does not know that the act is not permitted by the company’s memorandum or, as the case may be, is beyond the powers of the directors,
or who does not know at the time the act is done that the company is a charity.
(4) However, where such a company purports to transfer or grant an interest in property, the fact that the act was not permitted by the company’s memorandum or, as the case may be, that the directors in connection with the act exceeded any limitation on their powers under the company’s constitution, does not affect the title of a person who subsequently acquires the property or any interest in it for full consideration without actual notice of any such circumstances affecting the validity of the company’s act.
(5) In any proceedings arising out of subsection (3) the burden of proving—
(a) that a person knew that an act was not permitted by the company’s memorandum or was beyond the powers of the directors, or
(b) that a person knew that the company was a charity,
lies on the person making that allegation.
(6) Where a company is a charity and its name does not include the word “charity” or the word “charitable”, the fact that the company is a charity shall be stated in English in legible characters—
(a) in all business letters of the company,
(b) in all its notices and other official publications,
(c) in all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed by or on behalf of the company,
(d) in all conveyances purporting to be executed by the company, and
(e) in all its bills of parcels, invoices, receipts and letters of credit.
(7) In subsection (6)(d) “conveyance” means any document for the creation, transfer, variation or extinction of an interest in land.
(8) Section 349(2) to (4) of the [1985 c. 6.] Companies Act 1985 (offences in connection with failure to include required particulars in business letters, &c.) apply in relation to a contravention of subsection (6) above.
(1) Chapter IV of Part XI of the [1985 c. 6.] Companies Act 1985 (meetings and resolutions) is amended as follows.
(2) After section 381 insert—
(1) Anything which in the case of a private company may be done—
(a) by resolution of the company in general meeting, or
(b) by resolution of a meeting of any class of members of the company,
may be done, without a meeting and without any previous notice being required, by resolution in writing signed by or on behalf of all the members of the company who at the date of the resolution would be entitled to attend and vote at such meeting.
(2) The signatures need not be on a single document provided each is on a document which accurately states the terms of the resolution.
(3) The date of the resolution means when the resolution is signed by or on behalf of the last member to sign.
(4) A resolution agreed to in accordance with this section has effect as if passed—
(a) by the company in general meeting, or
(b) by a meeting of the relevant class of members of the company,
as the case may be; and any reference in any enactment to a meeting at which a resolution is passed or to members voting in favour of a resolution shall be construed accordingly.
(5) Any reference in any enactment to the date of passing of a resolution is, in relation to a resolution agreed to in accordance with this section, a reference to the date of the resolution, unless section 381B(4) applies in which case it shall be construed as a reference to the date from which the resolution has effect.
(6) A resolution may be agreed to in accordance with this section which would otherwise be required to be passed as a special, extraordinary or elective resolution; and any reference in any enactment to a special, extraordinary or elective resolution includes such a resolution.
(7) This section has effect subject to the exceptions specified in Part I of Schedule 15A; and in relation to certain descriptions of resolution under this section the procedural requirements of this Act have effect with the adaptations specified in Part II of that Schedule.
(1) A copy of any written resolution proposed to be agreed to in accordance with section 381A shall be sent to the company’s auditors.
(2) If the resolution concerns the auditors as auditors, they may within seven days from the day on which they receive the copy give notice to the company stating their opinion that the resolution should be considered by the company in general meeting or, as the case may be, by a meeting of the relevant class of members of the company.
(3) A written resolution shall not have effect unless—
(a) the auditors notify the company that in their opinion the resolution—
(i) does not concern them as auditors, or
(ii) does so concern them but need not be considered by the company in general meeting or, as the case may be, by a meeting of the relevant class of members of the company, or
(b) the period for giving a notice under subsection (2) expires without any notice having been given in accordance with that subsection.
(4) A written resolution previously agreed to in accordance with section 381A shall not have effect until that notification is given or, as the case may be, that period expires.
(1) Sections 381A and 381B have effect notwithstanding any provision of the company’s memorandum or articles.
(2) Nothing in those sections affects any enactment or rule of law as to—
(a) things done otherwise than by passing a resolution, or
(b) cases in which a resolution is treated as having been passed, or a person is precluded from alleging that a resolution has not been duly passed.”.
(3) After section 382 insert—
(1) Where a written resolution is agreed to in accordance with section 381A which has effect as if agreed by the company in general meeting, the company shall cause a record of the resolution (and of the signatures) to be entered in a book in the same way as minutes of proceedings of a general meeting of the company.
(2) Any such record, if purporting to be signed by a director of the company or by the company secretary, is evidence of the proceedings in agreeing to the resolution; and where a record is made in accordance with this section, then, until the contrary is proved, the requirements of this Act with respect to those proceedings shall be deemed to be complied with.
(3) Section 382(5) (penalties) applies in relation to a failure to comply with subsection (1) above as it applies in relation to a failure to comply with subsection (1) of that section; and section 383 (inspection of minute books) applies in relation to a record made in accordance with this section as it applies in relation to the minutes of a general meeting.”.
(1) In the [1985 c. 6.] Companies Act 1985 the following Schedule is inserted after Schedule 15—
1 Section 381A does not apply to—
(a) a resolution under section 303 removing a director before the expiration of his period of office, or
(b) a resolution under section 391 removing an auditor before the expiration of his term of office.
2 (1) In this Part of this Schedule (which adapts certain requirements of this Act in relation to proceedings under section 381A)—
(a) a “written resolution” means a resolution agreed to, or proposed to be agreed to, in accordance with that section, and
(b) a “relevant member” means a member by whom, or on whose behalf, the resolution is required to be signed in accordance with that section.
(2) A written resolution is not effective if any of the requirements of this Part of this Schedule is not complied with.
3 (1) The following adaptations have effect in relation to a written resolution under section 95(2) (disapplication of pre-emption rights), or renewing a resolution under that provision.
(2) So much of section 95(5) as requires the circulation of a written statement by the directors with a notice of meeting does not apply, but such a statement must be supplied to each relevant member at or before the time at which the resolution is supplied to him for signature.
(3) Section 95(6) (offences) applies in relation to the inclusion in any such statement of matter which is misleading, false or deceptive in a material particular.
4 In relation to a written resolution giving approval under section 155(4) or (5) (financial assistance for purchase of company’s own shares or those of holding company), section 157(4)(a) (documents to be available at meeting) does not apply, but the documents referred to in that provision must be supplied to each relevant member at or before the time at which the resolution is supplied to him for signature.
5 (1) The following adaptations have effect in relation to a written resolution—
(a) conferring authority to make an off-market purchase of the company’s own shares under section 164(2),
(b) conferring authority to vary a contract for an off-market purchase of the company’s own shares under section 164(7), or
(c) varying, revoking or renewing any such authority under section 164(3).
(2) Section 164(5) (resolution ineffective if passed by exercise of voting rights by member holding shares to which the resolution relates) does not apply; but for the purposes of section 381A(1) a member holding shares to which the resolution relates shall not be regarded as a member who would be entitled to attend and vote.
(3) Section 164(6) (documents to be available at company’s registered office and at meeting) does not apply, but the documents referred to in that provision and, where that provision applies by virtue of section 164(7), the further documents referred to in that provision must be supplied to each relevant member at or before the time at which the resolution is supplied to him for signature.
(4) The above adaptations also have effect in relation to a written resolution in relation to which the provisions of section 164(3) to (7) apply by virtue of—
(a) section 165(2) (authority for contingent purchase contract), or
(b) section 167(2) (approval of release of rights under contract approved under section 164 or 165).
6 (1) The following adaptations have effect in relation to a written resolution giving approval under section 173(2) (redemption or purchase of company’s own shares out of capital).
(2) Section 174(2) (resolution ineffective if passed by exercise of voting rights by member holding shares to which the resolution relates) does not apply; but for the purposes of section 381A(1) a member holding shares to which the resolution relates shall not be regarded as a member who would be entitled to attend and vote.
(3) Section 174(4) (documents to be available at meeting) does not apply, but the documents referred to in that provision must be supplied to each relevant member at or before the time at which the resolution is supplied to him for signature.
7 In relation to a written resolution approving any such term as is mentioned in section 319(1) (director’s contract of employment for more than five years), section 319(5) (documents to be available at company’s registered office and at meeting) does not apply, but the documents referred to in that provision must be supplied to each relevant member at or before the time at which the resolution is supplied to him for signature.
8 In relation to a written resolution giving approval under section 337(3)(a) (funding a director’s expenditure in performing his duties), the requirement of that provision that certain matters be disclosed at the meeting at which the resolution is passed does not apply, but those matters must be disclosed to each relevant member at or before the time at which the resolution is supplied to him for signature.”.
(2) The Schedule inserted after Schedule 15 to the [1985 c. 6.] Companies Act 1985 by the [S.I. 1987/1991] Companies (Mergers and Divisions) Regulations 1987 is renumbered “15B”; and accordingly, in section 427A of that Act (also inserted by those regulations), in subsections (1) and (8) for “15A” substitute “15B”.
Companies Act 1989