The Constitution
The Companies Act 2014 introduced modernised company constitutions. For private limited companies (LTDs), the constitution is a single document, replacing the older separate memorandum and articles of association. LTD constitutions specify the company’s name, limited liability of members, and share capital structure. These companies have unlimited capacity to conduct business, with no “objects clause,” eliminating ultra vires restrictions. Amendments to constitutions require a special resolution and do not bind shareholders to additional liability unless agreed separately.
Other company types, such as designated activity companies (DACs), companies limited by guarantee (CLGs), and unlimited companies, retain traditional dual-document constitutions with tailored provisions. DACs are subject to “ultra vires” rules but can modify their articles for flexibility. CLGs rely on member guarantees for liabilities and often serve non-commercial purposes like charities. Unlimited companies’ members face full liability for the company’s obligations, but these entities enjoy lighter regulatory requirements.
The Companies Act includes default operational provisions, reducing the need for extensive supplemental regulations in constitutions. However, companies may customise their governance by altering these defaults. Share structures also offer flexibility, enabling tailored ownership and voting rights. The 2014 Act ensures consistency while allowing significant adaptability to meet diverse business needs.
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