Article Should Be Bound By An Outsiders Analysis

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An outsider should not be bound by any clause which will benefit himself, since the company’s objective of incorporation is money, avoiding any personal benefit. A company, after incorporation, becomes a separate legal entity. It is artificial without any physical presence, although it can be included in a variety of activities. However, as an artificial entity, the company is unable to do these activities itself, such us entering into contacts or take policy decisions. The company must appoint directors to ensure the job is done on behalf of the company, otherwise, the company cannot operate. To do that, the company should form a constitutional document which is called ‘article’. This essay will substantiate the view that, articles should …show more content…

These two bodies are acting under a statutory contract. For providing flexibility, different forms of articles came into existence for each type of company. Nonetheless, the memorandum which was joint with the article had been causing complexity, but a new single constitutional document was introduced and cease it. Memorandum will no longer have continuing relevance since the new article came into force. Articles can be amended by a special resolution (75%) and must re-registered in Companies House. However, the power of altering the article is used for the benefit of the company as a whole. This is the fundamental purpose of incorporation, however, if any absurd result happened the court will intervene and may insert new wording. Moreover, whether the company has started its management, with a registered article, problems can happen which can contradict company’s incentive. Reminding that company’s incentive is money, though company involves people, and usage of clauses for people’s benefit should not be permitted. For example, people can insert clauses into company’s article to ensure their position on a permanent basis. Since those ‘personal clauses’ are against company’s motive, outsiders, such as directors or solicitors, can sue on those articles and can enforce personal rights which will benefit their position. Unfortunately, these actions are disregarding Salomon principle, and allow outsiders to influence the company. As

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