The

AoA , as a part of a company’s cons3tu3on , cons3tute a statutory contract between the

company and its member inter se as in S33 CA 2006 . Unlike an ordinary contract where the
consent of all par3es is required for its amendment , the ar3cles may be altered by a special
resolu3on as in S21 , which means a resolu3on passed by a majority of not less than 75% as in
S283 . It is argued that the power to alter the ar3cles is not en3rely unrestricted and some
limita3ons are imposed both at common law and by statutory provisions such as S22, S25 and
S630 .

At common law , the power to alter the ar3cles must be exercised bona fide for the benefit of the
company as a whole as in the case of [Allen v Gold Reefs of West Africa Ltd](1900) . Lindley MR
held that the power ‘must be exercised , not only in the manner required by law , but also bona
fide for the benefit of the company as a whole .An altera3on of ar3cles therefore can be
challenged for a lack of good faith or if it is not for the benefit of the company as a whole . The test
of ‘bona fide for the benefit of the company as a whole’ is cri3cised by Rixon(1986) as ‘almost
meaningful’ when adjus3ng shareholders’ conflic3ng interests . The judgement in [Allen] offers
li\le guidance as to the meaning and scope of the test , which is s3ll unclear despite the
interpreta3ons of the test by the Court of Appeal in [Shu\leworth v Cox Bros & Co ( Maidenhead )
Ltd (1927) and [Greenhalgh v Arderne Cinemas Ltd](1950) .

In [Shu\leworth] , the company’s ar3cles provided that the claimant and four other directors
would hold office unless they were disqualified on one of six specified grounds . The claimant
failed to account for company money and property . The ar3cles were altered to add a further
ground for disqualifica3ons that any directors should resign if requested in wri3ng by all his co-
directors . Aaer the altera3on , the claimant was asked to resign and unsuccessfully challenged the
validity of the altera3on . It was held that it was for the shareholders , and not for the court , to
decide whether an altera3on of ar3cles was for the benefit of the company , provided that it was
not of such a character as that no reasonable men could so regard it . Scru\on LJ stated that , ‘….
provided there are grounds on which reasonable men could come to the same decision , it does
not ma\er whether the court would or would not come to the same decision or a different
decision . It is not the business of the court to manage the affairs of the company .’ Both the
subjec3ve and objec3ve tests were adopted in this judgement . The subjec3ve test of bona fide
was followed where the court looked at whether the shareholders honestly believed that they
were ac3ng in there best interests of the company as a whole in altering the ar3cles . The objec3ve
test of ‘ reasonable men’ was also considered as that an altera3on would not stand if no
reasonable men could consider it to be for the benefit of the company .
In Greenhalgh , the company’s ar3cles stated that any shareholder who wished to sell their shares
should offer them first to exis3ng shareholders . A special resolu3on was passed for the altera3on
of the ar3cles so that the shares could be sold directly to an outsider with the approval of an
ordinary resolu3on . A minority shareholder challenged the validity of this altera3on . The Court of
Appeal rejected his claim and held that a vo3ng shareholder should ‘proceed on what , in his
honest opinion , is for the benefit of the company as a whole .’ The altera3on was merely a
relaxa3on of the stringent restric3ons on the transfer of shares and therefore it was bona fide for
the benefit of the company as a whole .

It should be noted that the courts are very reluctant to challenge a shareholder resolu3on for a
lack of bona fide because the passing of a shareholder resolu3on is generally viewed as upholding
the majority rule as established in [Foss v Harbo\le](1843) . In [Citco Banking Corp NV v Pusser’s
Ltd](2007) , the company’s ar3cle were altered to give the chairman a vo3ng control of the
company . The Privy Council followed [Shu\leworth] and held the altera3on valid . Lord Hoffman
confirmed that the test was whether reasonable shareholders could consider the altera3on to be
for the benefit of the company .

In addi3on to the common law restric3ons , some limita3ons are imposed by the Companies Act
2006 . A company’s ar3cles may contain provisions for the entrenchment so that the specified
provisions of the ar3cles may not be amended by a special majority , instead they can only bre
amended if condi3ons are met or procedures are complied with , by agreement of all the members
of the company or by a court order as in S22 . Such provisions may only be made in the company’s
ar3cles on forma3on or by an amendment of the company’s ar3cles agreed to by all the members
of the company .

Moreover , a member of a company is not bound by an altera3on to its ar3cles aaer the date on
which he became a member in either of the following situa3on in S25 . First , if it requires him to
take or subscribe for more shares than the number held by him at the date on which the altera3on
is made . Secondly , it is increases his liability as at that date to contribute to the company’s share
capital or otherwise to pay money to the company . These provisions do not apply where the
members agrees in wri3ng to be bound by the altera3on , either before or aaer the altera3on is
made . Where the altera3on of the ar3cles cons3tutes a varia3on or abroga3on or class rights , the
procedure in S630 must be followed .
Class right which are rights a\ached to a class of a company’s shares , can be altered in accordance
with the provisions in the company’s ar3cles , or where the company’s ar3cles contain no such
provision , the holders of at least three-quarter shares of that class consent to the varia3on in
wri3ng or by a special resolu3on at a separate class mee3ng as in S630 .

It is concluded that a company’s AoA can be altered subject to the common law test and the
statutory provisions . The interpreta3ons of the common law law of ‘bona fide for the benefit of
the company as a whole ‘ . However , need to be further clarified in order to provide more
guidance and achieve more certainty in this area of law .