The power thus given is frequently exercised, especially in cases of reconstruction or amalgamation. See "Reconstruction," infra. As to change of name, see note to Form 124, infra. As to omitting Change of the word limited, in some cases a company may be registered name. as a limited company without using the word "Limited " as part of its name. These cases are specified in Section 23 of the Companies Act, 1867, which is as follows : "Where any association is about to be formed under the Act of 1862, as a limited Section 23 of company, if it proves to the Board of Trade that it is formed solely for the purpose the Act of 1867. Omis of promoting commerce, art, science, religion, charity, or any other useful object, sion of word and that it is the intention of such association to apply the profits or other income "limited" of the association in promoting its objects, and to prohibit the payment of any in name." dividend to the members of the association, the Board of Trade may, by licence, under the hand of one of the secretaries, or assistant-secretaries, direct such association to be registered with limited liability, without the addition of the word limited to its name, and such association may be registered accordingly, and upon registration shall enjoy all the privileges and be subject to the obligations by this Act imposed on limited companies, with the exceptions that none of the provisions of this Act that require a limited company to use the word limited as any part of its name, or to publish its name, or to send a list of its members, directors, or managers, to the registrar, shall apply to an association so registered. The licence of the Board of Trade may be granted upon such conditions and subject to such regulations as the Board think fit to impose, and such conditions and regulations shall be binding on the association, and may, at the option of the Board, be inserted in the memorandum and articles of association, or in both or one of such documents." For form of licence, see infra, p. 64. For memorandum of association, containing conditions usually imposed by the Board of Trade, see infra, p. 62. of the Act sorted to. Section 23 has proved very useful, and a large number of associa- Section 23 tions have been registered under it, generally as companies limited by of 1867 freguarantee, e.g., law societies, chambers of commerce, trade protection quently resocieties, medical societies, agricultural associations, and charitable associations. Two well-known examples are, "The Corporation of Foreign Bond-holders," and "The Incorporated Council of Law Reporting for England and Wales." Many of these associations use the word "Incorporated" as part of their names, e.g., "The Incorporated Law Society of." See infra, p. 64, et seq., for particulars of associations recently formed under this section. As to the registered office of the company :— company. Clause 2 of every memorandum must state in which part of the Registered Kingdom the registered office is proposed to be situate. This deter- office of mines where the company is to be registered, and also the jurisdiction to which it will be subject. See Section 174, Sub-section 3, and Section 81 of the Act. As to the objects of the company :— Clause 3 of the memorandum is to state the objects for which the Objects of proposed company is to be established. It is now well settled that the company. objects of a company, as declared in the memorandum, are inalterable. E Any thing done beyond the objects so declared is ultra vires the company. The law on this point has been finally settled by the House of Ashbury, &c., Lords in the recent case of The Ashbury Railway Carriage Company v. Co. v. Riche. No ratification of act ultra vires the company. Objects ought to be fully stated. Riche, 7 L. R. H. L. 653. In that case the objects of the company were: "to make and sell, or lend on hire, railway carriages and waggons, and all kinds of railway plant, fittings, machinery, and rolling stock; to carry on the business of mechanical engineers and general contractors, to purchase, lease, work, and sell mines, minerals, land, and buildings; to purchase and sell as merchants timber, coal, metals, and other materials, and to buy and sell any such materials on commission or as agents. The directors agreed to purchase a concession for making a railway in a foreign country, and afterwards (on account of difficulties existing by the law of that country) agreed to assign the concession to a société anonyme formed in that country, which société was to supply the materials for the construction of the railway, and to receive periodical payments from the English company. It was held by the House of Lords that this contract was ultra vires the company, and therefore wholly null and void. And even though the members of the company, unanimously, authorise the directors to affix the seal of the company to a contract ultra vires the company, the contract is void. Neither can the members ex post facto sanction or ratify a contract by the directors which is ultra vires the company. The contract, being wholly void in its inception, is incapable of ratification. Ashbury, &c., Co. v. Riche, ubi supra. See also Lindley, 250. This being the state of the law, it is essential to specify the objects of the company in the memorandum with the greatest care, for it may entail serious inconvenience if, after commencing business, the company finds that its objects are too restricted. The following are a few recent cases in which companies have been unable to do what they wanted on the ground that it would have been ultra vires: A life assurance company wanted to carry on the business of fire insurance. A brewery company wanted to carry on the business of a malting company. A company formed to run steamers from A. to B. wanted to run a line from B. to D. A company formed to lend money on land in a colony wanted to lend on land in England. A colliery company wanted to work an adjacent mine in partnership with another company. A submarine cable company wanted to enter into an arrangement with another cable company for joint working. A steamship company running vessels between foreign ports wanted to sell some of its vessels to a foreign company which would have privi leges not accorded to an English company, and to accept payment in shares. A company formed to invest and lend money on land in a colony wanted to act as agent for lenders and to guarantee investments. A pier company wanted to establish an aquarium on some adjacent land. In several of these cases the company was reconstructed in order to acquire the necessary powers. See "Reconstruction," infra. It is therefore exceedingly desirable, not merely to state the main objects of the company, but also any ancillary objects which the company is intended to have, or may possibly require, and which are not necessarily implied from the statement of the main objects, or cannot with confidence be left to the operation of the general words with which every memorandum closes. Practice varies as to where to draw the line, but it has now become customary to set out the objects in considerable detail, and although this in many cases leads to the statement of unnecessary particulars, it is a fault on the right side. Indeed, it seems folly to leave in doubt that which can be rendered indisputable by the insertion of a few words. It was formerly not unusual to state the objects in the memorandum Old practice with the utmost conciseness, and then in the articles to elaborate them as to stating objects. -e.g., the objects as stated in the memorandum might be "The : working of coal mines and the doing of all such things as are conducive or incidental thereto." The articles would, inter alia, contain power for the directors to borrow, to mortgage, to issue negotiable instruments, to sell the undertaking of the company in consideration of cash or shares, to promote other companies, to purchase and hold shares in other companies, to purchase the business of any other company and undertake the liabilities thereof, and so forth. Where this plan was adopted there was great danger that some of the powers expressly conferred on the directors by the articles would be held ultra vires of the company. According to present practice the reverse of this plan is adopted. Present Thus in the above case the powers conferred by the articles on the practice. directors would be inserted as objects of the company in the memorandum, while the articles would empower the directors to exercise all the powers of the company not by statute required to be exercised in general meeting, subject, perhaps, to certain restrictions. objects clause. Effect of. The objects clause of the memorandum generally closes with the Use of general following words: "And to do all such other things as are incidental or words in conducive to the attainment of the above objects or any of them.” These words only authorise the doing something bonâ fide connected with the objects to be obtained, and in the ordinary course of business adapted to their attainment. Joint Stock Co. v. Brown, 3 Eq. 150. Thus, where a company was formed to work a colliery, it was held that these words authorised a purchase of it. In Re Baglan Hall Colliery Co., 5 Ch. 356. In that case Giffard, L. J., said: "It was urged that purchasing the colliery was not one of the objects; but the company As to general company power to do could not work the colliery without first acquiring some interest in it, and I think, therefore, that the purchase of it was an act conducive' to the attainment of the primary object." Even in the absence of these words it would seem that the necessary power might have been implied. See Leifchild's Case, 1 Eq. 235, where a company was formed for using patented machinery, and it was held that a purchase of the patent was intra vires. It occasionally happens that a memorandum declares (inter alia) that words giving the objects are: "To do all such other things as the company may think incidental or conducive to the attainment of the above objects," and it is objected that: "This attempt to bar the rights of the Courts to decide how far the objects of the company have been legally kept in view, is certainly inexpedient and probably useless." Lathom Brown, 343. Lord Cairns, however, does not appear to have considered the words objectionable or useless in the case Peruvian Railways Co. v. Thames, &c., Co., 2 Ch. 617. Joint Stock, &c., Co. v. Brown. Extensive general words often used.] Practice of office. Power to extend objects cannot be given. So, again, in Joint Stock Discount Co. v. Brown, where the words in the memorandum were: "and the doing of all such things as the directors shall consider incidental or conducive to the attainment of the above objects," no suggestion was made by Page-Wood, V.-C., that the use of such words was improper. Such general words have been used in a very large number of cases. See Stewart's Case, 1 Ch. 574; Zulueta's Claim, 5 Ch. 444; Marshall v. Glamorgan, &c., Co., 7 Eq. 129; Mills v. Northern, &c., Co., 5 C. H. 621; Peel's Case, 2 Ch. 675. Until recently it was the practice of the office of the Registrar of Joint Stock Companies to require general words to follow the statutory forms; but this practice has now, the writer understands, been abandoned, and general words may be made as extensive as desired. It is, however, generally considered better not to rely too much on the effect of general words, but to state the objects in sufficient detail, and conclude as in the statutory forms. Formerly, it was by no means uncommon to insert in the objects clause of the memorandum words to the following effect: "And also such additional or extended objects as the company may from time to time determine." Examples may be found in the following cases : Clinch v. Financial Corporation, 5 Eq. 452; Syers v. Brighton Brewery Co., 13 W. R. 221; compare with Ashbury Railway, &c., Co. v. Riche, L. R. 7 H. L. 653. It is conceived that such words ought never to be inserted, and that the Registrar might properly decline to register a memorandum containing them, on the ground that the objects of the company are not, in fact, stated. Barned's Banking Co., Peel's Case, 2 Ch. 675. If, nevertheless, he registers the company, the words, it would seem, must be treated as null and void, but the point has not actually been decided. In Ashbury, &c., Co. v. Riche, ubi supra, it was held that a power in the articles to extend the objects must be held void. The Court will put a fair and reasonable construction on the objects clause, and not attempt to cut it down unduly. Bath's Case, 8 Ch. Div. 334; Royal Bank of India's Case, 4 Ch. 252; International Contract Co.'s Case, W. N. 1869, 24; In re Peruvian Railways Co., 2 Ch. 623 ; Pulbrook v. New Civil Service Co-operation, 26 W. R. 11; New Sombrero Co. v. Erlanger, 5 Ch. Div. 73. Debenture It may here be mentioned that under the Mortgage Debenture Act, Mortgage 1865, 28 & 29 Vict. c. 78, s. 3, amended by 33 & 34 Vict. c. 20, com- Act. panies formed under the Act of 1862 to advance money on land, &c., may limit their objects by special resolution so as to obtain the benefit of the above Acts. This power, however, appears to apply only to companies" already constituted," i.e., in 1865. We have now considered the clauses of the memorandum as to the name, office, and objects of the company. These are the only clauses contained in the memorandum of an unlimited company. A company limited by shares has two more clauses, namely, as to the limited liability and as to the capital. Of these presently. guarantee. A company limited by guarantee has only one more clause, namely, Clause as to that referring to the guarantee. As to the form of this, see infra, p. 61. The amount of the guarantee will depend on the nature of the company. If the company requires extensive credit it will be well to make the amount of the guarantee considerable, e.g., 507. or 1007. per member. But the limitation of liability by guarantee is rarely adopted, except in Amount of the case of law societies, chambers of commerce, and other societies guarantee. of an analogous character (see infra, p. 64); and such societies do not require much credit. Accordingly the amount of the guarantee commonly runs from 1s. to 57. or 107. per member. The same kind of company is generally selected where the objects are mutual assurance; but mutual assurance societies do not require much credit as regards outsiders, and the amount of the guarantee has no bearing on the liability of members inter se, and a 51. guarantee is common enough. limit of With regard to a company limited by shares, the memorandum must Clause as to also contain a declaration that the liability is limited. This declaration liability. does not prevent the articles from extending the liability of the members inter se. Hill's Case, 20 Eq. 59; Peninsula Co. v. Fleming, 27 L. T. N. S. 93. The 5th clause of the memorandum of a company limited by shares Capital. must state the nominal capital and the number of shares into which it is divided, with the amount of each share. The capital so registered may be varied in the following particulars. It may be increased; it may be consolidated and divided into shares of larger amount than the existing shares; and paid-up shares may be converted into stock; the shares may be sub-divided; and the capital may, with the sanction of the Court be reduced. See further infra, Forms 103 et seq. |