Company law I 2008 2009 semester one lecture outline I an overview of our company Law Course


Ashbury Railway and Carriage and Iron Co. v. Riche



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Ashbury Railway and Carriage and Iron Co. v. Riche [1875] LR 7 HL 653.
Section 39 CA 2006:


 

A company's capacity
 

 

    (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 constitution.
 

 

    (2) This section has effect subject to section 42 (companies that are charities).


Section 42 CA 2006


42    

Constitutional limitations: companies that are charities
 

 

    (1) Sections 39 and 40 (company's capacity and power of directors to bind company) do not apply to the acts of a company that is a charity except in favour of a person who-
 

 

(a) does not know at the time the act is done that the company is a charity, or

 

(b) gives full consideration in money or money's worth in relation to the act in question and does not know (as the case may be)-

 

(i) that the act is not permitted by the company's constitution, or

 

(ii) that the act is beyond the powers of the directors.

 

    (2) Where a company that is a charity purports to transfer or grant an interest in property, the fact that (as the case may be)-
 

 

(a) the act was not permitted by the company's constitution, or

 

(b) 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) or (2) the burden of proving-
 

 

(a) that a person knew that the company was a charity, or

 

(b) that a person knew that an act was not permitted by the company's constitution or was beyond the powers of the directors,

 

lies on the person asserting that fact.
 

 

    (4) In the case of a company that is a charity the affirmation of a transaction to which section 41 applies (transactions with directors or their associates) is ineffective without the prior written consent of-



(b) This means:



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