The Practical Lawyer

There has been an important CA decision on the operation of the Commercial Agents Regs 1993. The court has said that the Regs will not apply if the agent contracts with customers in his own name (even if the contracts are, in fact, made on behalf of the principal).

How do you value an agency on its termination? The answer given by the HL in ?Lonsdale [2007] was that it should be valued by calculating the loss of the agency (ie the amount that a hypothetical purchaser would have been willing to pay for it as at the date of termination).

There are provisions in the Insolvency Act 1986 to deal with phoenix companies. They are largely intended to deal with the problem of directors who intentionally collapsed one company and then created another in order to defraud creditors. But, what is apparent is that the regime within the Act (ss216-217) goes beyond that narrow approach and creates a strict liability trap for the unwary.

The directors of a company may have a discretionary power to refuse to register transfers of shares. But, that is a power that must be exercised in accordance with the core duties of the directors: to exercise the power for a proper purpose and to act in good faith in what they consider would be most likely to promote the success of the company. Thus, if it can be shown that the directors have acted capriciously, or from an improper motive, or with a collateral purpose, in refusing to register a transfer, the court will order the transfer to be registered.

The old rule was that every company had to include in its memorandum of association a statement of its objects (‘the objects clause’). That obligation has been removed, from 1 October 2009, in favour of a default position whereby a company’s objects are not restricted.

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Several claims management companies have been farming cases on behalf of borrowers who want to argue that the loan documentation is defective (for failing to give the required ‘information’ under Consumer Credit Act 1974).

Under CA 1985, companies have been able to entrench parts of their constitution by including in the memorandum a statement that they cannot be altered. Note that this is no longer possible for companies incorporated on or after 1 October.

If a company is incorporated on or after 1 October, the memorandum of association becomes a single, simple, document which simply states the subscriber’s intention to form a company and to subscribe for at least one share in it.

This table sets out the steps a director or company secretary of a private company needs to take under the model articles (in force from 1 October).