What is the legal effect of a company's Articles of Association?

Answer options:

They form a binding contract between the company and third parties.

They form a binding contract between the company and its members, and between the members themselves.

They are merely guidelines with no legal force.

They bind the directors to the employees.

How to approach this question

Identify the parties bound by the statutory contract created by the Articles.

Full Answer

B.They form a binding contract between the company and its members, and between the members themselves.✓ Correct

Under s.33 of the Companies Act 2006, the provisions of a company's constitution bind the company and its members to the same extent as if there were covenants on the part of the company and of each member to observe those provisions.

Common mistakes

Assuming the Articles create a contract with outside third parties.

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Practice the full ACCA LW — Corporate and Business Law Practice Exam 1

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What is the legal effect of a company's Articles of Association?

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA LW — Corporate and Business Law Practice Exam 1

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