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Mandatory provision in a company constitution, a presumptive provision in a company constitution and an optional provision in a company constitution. Essay Example

  • Category:
    Law
  • Document type:
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  • Level:
    Undergraduate
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Mandatory, a presumptive, and optional provisions in a company constitution
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Mandatory, presumptive, and optional provisions in a company constitution.

Lecturer

Mandatory, presumptive, and optional provisions in a company constitution

Mandatory provisions in a company constitution can be observed and they provide such people as the directors with certain duties, powers and rights that can enable them execute their key mandate of running the company. An example of these provisions is the one giving the directors the fundamental fiduciary obligation to execute their duties in good faith while avoiding the self-dealing which is undisclosed. Therefore, in this case, the articles in this mandatory provision bind the directors. This binding means that the directors may set up claims that relate to all matters affecting the company, so that the shareholders may bring actions against them. The shareholders are also bound in the same way as the directors, so that if need demands, the company will also bring some actions against the shareholders (West Publishing Company, 2002).

Presumptive provisions in the company on the other hand deal with the powers, privileges, and duties of directors, companies, and shareholders. Among the duties imposed to the directors by this provision is that of acting in good faith with for the good of the company, exercising power only for a purpose that is worthwhile and proper, the imposing of penalty or liability to the directors who compromised their duties and place the company at a great risk of incurring significant losses. The provision also give a chance for the shareholders to get involved in the company affairs through participating informally in decision making by consulting with the directors on particular issues, approving major decisions demanding their approval as stipulated by the Act and approving certain matters that ought to be determined by shareholders and not directors (Tax Management Inc, 2006).

The optional provisions on the other hand include those, which allow the company to insure or indemnify its directors. In the case of indemnity, the company can reimburse the directors for expenses they used in legal defense against their actions as directors. Insurance on the other hand, it is the duty of the company as per the constitution to offer insurance for the good of a director, to cover civil liability resulting from the actions done while executing the company’s obligations (Martindale-Hubbell, 1998).

Reference:

. Martindale-HubbellMartindale-Hubbell international law digestMartindale-Hubbell (1998).

. Tax Management Inc. Tax management portfoliosTax Management Inc (2006).

West Publishing Company, West Group (2002).West’s Pacific reporter West Pub. Co.