Why would a company wish to entrench some of its articles? The following provides an example of why a company founder may wish to do so.
A businessman, R Wong, sets up a company and wishes for it to remain family owned. The company's articles restrict members to only his children, their descendants, and the spouses of both these groups. Normally, the restrictive article can be amended by special resolution. Wong is worried that his children might get greedy and allow non-family members to buy shares. So he tells his lawyers to make the restrictive article amendable only if all members agree.
His lawyers warn Wong that his children or descendants might not be good at business. To deal with this event, the restrictive article allows amendment with special resolution if the company loses money for 3 consecutive years. This allows the members to bring in outsiders to inject capital and management expertise into the company.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment