Skip to content

ACCA Applied Skills · Corporate and Business Law (Global) · The formation and constitution of a company

Which statement about a company's articles of association as a contract is correct under general company law principles?

The articles bind the company and its members in their capacity as members. They act as a statutory contract governing membership rights, but they do not give outsiders such as suppliers contractual rights under them.

  1. AThey bind the company and its members in their capacity as membersCorrect
  2. BThey bind the company only to outsiders such as suppliers
  3. CThey have no contractual effect and are merely guidance
  4. DThey bind only the directors, not the shareholders

Explanation

The articles operate as a statutory contract between the company and its members, and between members, in respect of membership rights. They do not create contractual rights for outsiders in their capacity as outsiders. Option B is therefore wrong.

Did you get it right without looking?

One question tells you little. A timed set on The formation and constitution of a company shows your real accuracy, how long you take and where you lose marks.

Practise The formation and constitution of a companyFree diagnostic mock

More The formation and constitution of a company questions