Formation of a Company.

which the registered office of the Company is to be established."

At this stage, therefore, it is not necessary to determine more as to the locality of the Company than in which of the three kingdoms it is to be established. The actual site of the chief office need not be appointed until the Company proceeds to business.

3. It must state "the objects for which the proposed Company is to be established."

This will require some deliberation, and much care in the definition; for the Company will be incorporated for the purposes only that are stated in the Memorandum of Association. To those objects it will be strictly limited. To pursue any other objects than these will be illegal, and the managers certainly, and probably the Company, would lose all the protection of the act in respect of any transactions not properly within the purposes for which the Company is incorporated.

4. It must state whether the Liability is to be limited or unlimited.

So great are the advantages of Limited Liability, that there can be no hesitation in preferring it. No Company is now formed upon any other principle.

5. It must state the amount of the nominal capital of the proposed Company.

Observe, that it is the nominal capital only that is to be stated; that is to say, the capital which the promoters may consider as likely to be most attractive. As the act does not require any portion of that capital to be paid, and only seven shares to be taken in it, there is no reason

Formation of a Company.

for limiting its amount. It is as easy, and as lawful, to fix it at a million as at ten thousand pounds, and the larger the sum the more imposing the appearance of the Company in prospectuses and advertisements, and the more readily will it obtain credit and confidence. No possible evil or inconvenience can arise from appointing the nominal capital at a good round sum; for the liability is not, as is commonly supposed, limited to the nominal capital, but to the shares held by each shareholder. For instance: if a Company is formed with a nominal capital of 100,000., in 100,000 shares of 11. each, the liability doos not extend to 100,000l., but only to so many 17. shares as may be subscribed; and as only seven of these are necessary to the formation and incorporation of the Company, it results that a Company may announce a nominal capital of 100,000l. while having only 77. actually subscribed and paid, and its liability will be limited to 71.

This peculiarity of the new law should be borne in mind when forming a Limited Liability Company, for it affords a facility for beginning business without waiting for capital that was impracticable under the old law, which required a certain portion of the capital to be subscribed and paid before the Company could be formed.

6. It must state, also, "the number of shares into which such capital is to be divided, and the amount of each share."

The new law does not prescribe any limit of division of shares. Formerly the shares could not be less than 107. Now, they may be of any amount the promoters please. There are obvious advantages in making them of small amount.

Formation of a Company.

Foremost of these is the complete exemption from future liability, which may be thus secured. If the full amount of the shares be paid up, the shareholder becomes absolutely freed from any further claim or liability of any kind. He needs not to trouble himself again about the proceedings of the Company. He can allow the managers to speculate to any extent, inasmuch as he will share the profits of success without being liable for any of the loss attendant upon failure.

If you are a trader desirous of availing yourself of the privilege of Limited Liability, in the manner already described, it will be important for you to appoint the shares at a small sum, for the purpose of keeping the business substantially in your own hands. Shares of five or ten shillings would suffice in such case. But for a Joint Stock Company on a large scale it would not be prudent to appoint the shares at less than 57., because the cost of working the machine is so great.

It is presumed that the seven persons who sign the Memorandum of Association must be of full age, and not under incapacity to contract; they must not be children under twenty-one, nor married women, nor lunatics. Each must take one share at least, and the number of shares taken by each must be set against his name in the Memorandum of Association.

The Memorandum of Association may or may not have Articles of Association annexed thereto or endorsed thereon. When forming the Company, it will be necessary to determine what shall be done as to this.

A table appended to the act (B.) presents a series of regulations for the government of a

Formation of a Company.

Company. But these are not compulsory. It is enacted only, that if no other regulations are provided by the Articles of Association, and so far as the regulations in the table are not altered or repealed by the Articles of Association, they shall be taken to be the regulations of the Company: (sects. 9, 10.)

Hence, either of the following courses may be adopted :

1st. You may be content with the Memorandum of Association alone, in which case the regulations in the table will be the regulations of the Company. Or,

2nd. You may annex to the Memorandum of Association such Articles of Association as you may desire, in which case the articles, and such of the regulations in the table as are not repealed or altered by them, or are not inconsistent with them, will form together the regulations of the Company. Or,

3rd. You may annex to the Memorandum of Association Articles of Association embodying all such of the regulations in table B. as you do not desire to repeal or alter, adding such others as you may require, and thus the Company will possess a code of regulations complete in itself, without having to refer from the Articles of Association to the table to determine how they are affected by the Regulations of Table B and vice versa.

We would strongly recommend that this latter course be pursued in the formation of a Company. It will require some care, and the assistance of a lawyer should be engaged for the doing of it. But no deed of settlement will now be necessary.

Articles of Association.

A lawyer, who is a man of experience in the business of the world, whether solicitor or counsel, will be the best adviser in the preparation of Articles of Association, for they are to form the code by which the Company is to be governed.

It should be observed, also, that none of the restrictions of the old law with respect to the nature of the regulations are preserved in the present law. The promoters may make any regulations or any terms they please by the Articles of Association, and these will be absolutely binding upon the Company. They may put any price upon their own commodities, secure for themselves any amount of salary, make themselves managers, or fill their own pockets as full as they please, without the slightest restraint. The professed principle of the present law is absolute liberty for speculators, debtors, and swindlers.

Forms of Articles of Association to be used where the regulations of Table B are intended to be adopted as the code of the Company, are given in the schedule to the act; but we repeat our recommendation to frame a complete series of regulations, adapted to the requirements of the particular Company, expressly to exclude the table. The following is the form given by the act:→→

ARTICLES of ASSOCIATION to accompany MEMORANDUM of ASSOCIATION of a Company limited by Guarantee, and not having a Capital divided into Shares.

(1.) The Company, for the purpose of registration, is declared to consist of five hundred members.

(2.) The directors hereinafter mentioned may, whenever the business of the association requires it, register an increase of members.