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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 eustomary 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 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, to enter into partnership arrangements, to lend money, to guarantee contracts, 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.

words in

objects clause.

Effect of.

The objects clause of the memorandum generally closes with the fol- Use of general lowing words: "And to do all such other things as are incidental or 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 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. See Guiness v. Land Corporation of Ireland, 22 C. Div. 34, as to the limited operation of the words.

As to general
words giving

company
power to do
what it
"thinks"

conducive to

attainment of objects. Practice of office.

Power to

extend objects

cannot be

given.

Mortgage
Debenture
Act.

It occasionally happens that a memorandum declares (inter alia) that the objects are: "To do all such other things as the company may think incidental or conducive to the attainment of the above objects." Peruvian Railways Co. v. Thames, &c., Co., 2 Ch. 617; but it is conceived that this variation does not really extend the objects.

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. Peel's Case, 2 Ch. 675; but this practice has 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 registrar 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; International Contract Co., W. N. 1869, 24; 17 W. R. 454; Pulbrook v. New Civil Service Co-operation, 26 W. R. 11; New Sombrero Co. v. Erlanger, 5 Ch. Div. 73; Att.-Gen. v. Great Eastern, 5 App. Cas. 473.

But general words will, as a rule, be construed as merely ancillary to what appears to be the principal object of the company. German Date Coffee Co., 22 Ch. Div. 169; Haven Gold Co., Ibid. 151; Ashbury Co. v. Riche, L. R. 7 H. L. 653. Compare these with International Contract, ubi supra, and Phænix v. Bessemer, 34 L. J. Ch. 683, and see Addenda. It may here be mentioned that under the Mortgage Debenture Act, 1865, 28 & 29 Vict. c. 78, s. 3, amended by 33 & 34 Vict. c. 20, companies 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.

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. 76. guarantee. 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., 501. 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. 79); and such societies do not require much credit. Accordingly the amount of the guarantee commonly runs from 18. 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 subdivided; and the capital may, with the sanction of the Court, be reduced.

As the capital can be readily increased, there is no object in starting with a very large nominal capital; but no saving is effected by starting with less than 2,0007. capital.

The amount of the shares depends on several considerations. If the Amount of public are to be invited to apply for shares, the amount should be shares. moderate, for it is generally found that there is a better market for 51. or 107. shares than for larger ones. Indeed 17. shares are very popular. Moreover, it is generally expedient not to leave much, if any, liability on Objection to shares only in the shares issued. So long as shares are not fully paid up, their value, part paid up. unless in exceptional cases, is impaired by the existence of the liability; and if the company should experience reverses, its shares may become almost unmarketable. Of course, under the Act of 1867, the liability How to get may be reduced or extinguished; but the process is tedious and expen- liability. sive, and not unlikely to damage the credit of the company. However, so burdensome are shares subject to any considerable liability, that the

rid of further

Whether

power to issue preference shares to be inserted in

capital clause.

Association clause.

Memorandum may be in writing or printed. Witness.

Certificate evidence that requisitions of Act complied with.

Act of 1867 is not uncommonly resorted to to get rid of it. Or, what in many cases is much simpler, the company is re-constructed as a company with the same name and objects, but with reduced liability. See infra, "Reconstruction."

Of course, however, there may be cases in which the security afforded by the existence of a large amount of uncalled capital may be deemed requisite or expedient, e.g., in a banking, investment, or insurance company.

Some persons frame the capital clause of the memorandum of a company limited by shares as follows: "The capital of the company is 20,0007., divided into 2,000 shares of 107. each, with power to increase the capital and to issue any of the original shares or shares of increased capital as preferential or guaranteed or deferred shares." See also Form 32.

The object of so framing the clause is to secure the power to issue preference shares, for some doubt existed at one time as to whether a power in the articles alone was sufficient authority. This doubt no longer exists [see "Resolutions," infra], and there seems, therefore, no sufficient reason for so framing the capital clause, except where Table A. is adopted. Where, however, the original capital as stated in the memorandum is, ab initio, intended to be divided into shares of different classes, it is usual to state the fact in the memorandum, e.g., "The capital of the company is 100,0007., divided into 5,000 preference shares of 107. each, and 10,000 deferred shares of 51. each.”

On referring to the Forms of memoranda of association given below (p. 75 et seq.), it will be seen that each of them closes with a declaration that the subscribers desire to be formed into a company.

It will be observed that section 14 of the Act requires that, “in a company limited by guarantee or unlimited, and having a capital divided into shares, each subscriber shall take one share at the least, and shall write opposite his name in the memorandum of association the number of shares he takes." It is generally considered that the word "memorandum" in this paragraph is an error for "articles." See Buckley, p. 9. However, the practice of the registrar is to require the number of shares taken to be stated in the memorandum.

The memorandum may be in writing, but, where articles are registered, it is usually printed with them. If in writing, it is sometimes filled in upon a skeleton printed form. It must be signed by at least seven persons, in the presence of, and be attested by, one witness at least. It is very common, though not necessary, for the same witness to attest the signatures of all the subscribers.

The Act provides that a certificate of the incorporation of any company, given by the registrar, shall be conclusive evidence that all the requisitions of the Act in respect of registration have been complied with.

Thus in Peel's Case, 2 Ch. 674, the memorandum of a company when brought to the registrar was objected to by him as being too wide in its

terms, whereupon the bearer, then and there, without any communication with the persons who had signed it, made alterations to remove the objections of the registrar, who at once registered it in the altered form. It was held, nevertheless, that the certificate of registration having been issued, section 13 of the Act applied, and that no person could be allowed to go back and enter into an examination of the circumstances attending the original registration.

So, also, in the Nassau Phosphate Co., 2 Ch. Div. 610, an order Infant had been made to wind up the company, and it was subsequently dis- subscriber. covered that one of the seven subscribers to the memorandum was an infant. It was held, nevertheless, that the winding-up order was valid, since the certificate of registration which had been issued precluded any question.

As to how far the conditions contained in the memorandum of asso- Modification ciation of a company may be modified, see section 12 of the Act, and of conditions infra," Resolutions."

contained in memorandum.

As to the effect of subscribing the memorandum of association: By Effect of section 23 of the Act it is provided that :

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The subscribers of the memorandum of association of any company under this Act shall be deemed to have agreed to become members of the company whose memorandum they have subscribed, and upon the registration of the company shall be entered as members on the register of members hereinafter mentioned; and every other person who has agreed to become a member of a company under this Act, and whose name is on the register of members, shall be deemed to be a member of the company."

Hence a subscriber to the memorandum is indisputably a member of the company.

subscribing memorandum.

In a company limited by shares, no subscriber shall take less than one Subscription share, and each subscriber shall write opposite to his name the number an agreement of shares he takes. Section 8 of the Act.

The subscriber agrees to take from the company the shares set opposite to his name, and to pay for them in money or money's worth. Mignotti's Case, 4 Eq. 238. The fact that no shares have ever in fact been allotted to him, and that his name has never been put on the register, will not relieve him; Evan's Case, 2 Ch. 427, unless all the shares have been allotted to other persons. Mackley's Case, 1 Ch. Div. 247.

As to what is payment in money's worth, see Drummond's Case, 4 Ch. 772; Pell's Case, 8 Eq. 222, and 5 Ch. 11; Jones' Case, 6 Ch. 48 ; Baglan Hall Co., 5 Ch. 346.

Dent's

to take and pay for shares.

articles cannot relieve sub

A clause in the articles that shares subscribed for in the memo- Clause in randum shall be deemed to be fully paid up is ineffectual. Case, 8 Ch. 676; Crickmer's Case, 10 Ch. 614; Firmstone's

20 Eq. 525.

Case, scriber from liability.

The shares will be liable to payment in cash unless otherwise provided As to contract

by a contract in writing, filed pursuant to the 25th section of the Act of 1867. See supra, p. 11.

filed pursuant
to Section 25
of the Act
of 1867.

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