Company Law – Articles of Association

Undertaking 5: ( a ) Explain demands of memoranda of association.

A memoranda is a simple papers which states that the endorsers wish to organize a company and become members of it.

The memoranda of association was an highly of import papers incorporating information refering the relationship between the company before the Companies Act 2006 and the outside universe ( e.g: its aims ) .

The intent of the memoranda is two crease.

1. The meaning portion holder who contemplates the investing of his capital shall cognize within what field it is to be put at hazard.

2. Anyone who shall cover with the company shall cognize without sensible uncertainty whether the contractual relation into which he contemplates come ining with the company is one relating to a affair within its corporate objects.

At least seven individuals in the instance of public company and at least two in the instance of a private company must subscribe to the memoranda. The memoranda shall be printed, divided into consecutively numbered paragraphs, and shall be signed by each endorser, with his reference, description and business added, the presence of at least one informant who will certify the same.

Harmonizing to subdivision 13, the memoranda of association of every company must incorporate the undermentioned clauses:

1. The name of the company with ‘limited’ as the last word of the name in the instance of a populace limited company and with ‘private limited’ as the last word in the instance of a private limited company.

2. The province in which the registered office of the company is to be situated.

3. The objects of the company to be classified as:

a ) . The chief objects of the company to be pursued by the company on its incorporation and objects incidental to the attainments of the chief objects, and

B ) . Other objects non included above

4. In the instance of companies with object non confined to one province, the provinces to whose districts the objects extend.

5. The liability of members is limited if the company is limited by portions or by warrant.

6. In the instance of a company holding a portion capital, the sum of portion capital with which the company proposes to be registered and its division into portions of a fixed sum.

An limitless company need non include points 5 and 6 in its memoranda.

In the instance of a company limited by warrant, its memoranda of association shall province that each member undertakes to lend to the assets of the company, in the event of its being wound up while he is a member or within or twelvemonth after wards for the payment of the debts and liabilities of the company.

( B ) Draw up a memoranda of association in given scenario 1.

James is sing puting up a house edifice concern as a private limited company. He decides to follow the theoretical account article as article of association of his company, so he need to pull up a memoranda of association. The following are certain commissariats of the memoranda of association of James’s company.

  1. The company’s name is ‘Great James Co. Ltd’ .
  2. The company is to be a private limited company.
  3. The company’s registered office to be situated at No. 50 Main Road of Yangon.
  4. The company ‘s aim is puting up a house edifice concern.
  5. The liability of the members is limited.
  6. The company’s portion capital is ? 30,000 divided into 30,000 portions of ?1 each.
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Undertaking 6: Draw up certain commissariats of article for Mick’s company using the facts given in scenario 2.

A company‘s fundamental law comprises the Articles of Association and any declaration and understandings it makes which affect the fundamental law.

Harmonizing to s 17 of the Companies Act 2006, the fundamental law of a company consists of:

  • The Article of Association
  • Resolutions and understandings that it makes that affects the fundamental law

The Article of Associationis a papers that specifies the ordinances for a company ‘s operations. The articles of association define the company ‘s intent and lays out how undertakings are to be accomplished within the organisation, including the procedure for naming managers and how fiscal records will be handled.

By using the facts given in scenario 2, the following are certain clauses of Article of Association of Mick’s company.

  1. The company issues merely ordinary portion. But other two types of portions can be issued if it thinks tantrum for the benefit of the company.
  2. The company prohibits from acknowledging the involvement of a 3rd party in portions registered in the name of member.
  3. The company prevents technicians employed from working in or puting up a similar concern.
  4. The company allows the change of article of association if it is approved by three quarters of member by written declaration.
  5. The company increases or reduces the figure of manager by go throughing ordinary declaration.

Undertaking 7: Measure the philosophy of extremist vires and its consequence.

The company’s objects are its purposes and intents. If a company enters into a contract which is outside its objects, that contract is said to be extremist vires. However the rights of 3rd parties to the contract are protected.

The object clause of the Memorandum of the company contains the object for which the company is formed. An act of the company must non be beyond the objects clause, otherwise it will be extremist vires and, hence, nothingness and can non be ratified even if all the members wish to sign it. This is called the philosophy of extremist vires, which has been steadfastly established in the instance ofAshtray Railway Carriage and Iron Company Ltd v. Riche.

In the instance ofAshbury Rainway Carriage & A ; Iron Co Ltd V Riche 1875, the company had an objects claue which stated that its objects were to do and sell, or impart on hire, railroad passenger car and waggons and all sorts of railroad works, adjustment, machinery and turn overing stock ; and to transport on concern as mechanical applied scientists. The company bought a grant to construct a railroad in Belgium, farm outing the work to the suspect. Later the company repudiated the contract.

It was held that building a railroad was non within the company ‘s objects so the company did non hold capacity to come in into either the grant contract or the sub-contract. The contract was nothingness for extremist vires and so the suspect had no right to amendss for breach. The members could non sign it and the company could neither implement the contract nor be forced into executing its duty. The look extremist vires means an act beyond the powers. Here the look extremist vires is used to bespeak an act of the company which is beyond the powers conferred on the company by the objects clause of its memoranda. An extremist vires act is null and can non be ratified even if all the managers wish to sign it. Sometimes the look extremist vires is used to depict the state of affairs when the managers of a company have exceeded the powers delegated to them. Where a company exceeds its power as conferred on it by the objects clause of its memoranda, it is non bound by it because it lacks legal capacity to incur duty for the action, but when the managers of a company have exceeded the powers delegated to them. This usage must be avoided for it is disposed to do confusion between two wholly distinguishable legal rules. Consequently, here we restrict the significance of extremist vires objects clause of the company’s memoranda.

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Basic rules included the followers: An extremist vires dealing can non be ratified by all the stockholders, even if they wish it to be ratified. The philosophy of estoppels normally precluded trust on the defence of extremist vires where the dealing was to the full performed by one party A fortiori, a dealing which was to the full performed by both parties could non be attacked. If the contract was to the full executory, the defence of extremist vires might be raised by either party. If the contract was partly performed, and the public presentation was held to be deficient to convey the philosophy of estoppels into drama, a suit for quasi contract for recovery of benefits conferred was available. If an agent of the corporation committed a civil wrong within the range of his or her employment, the corporation could non support on the land the act was extremist vires.

Undertaking 8: Explain the contents of a prospectus and listing specifics.

Aprospectusis a revelation papers that describes a fiscal security for possible purchasers. A prospectus must be published where certain types of securities either are offered to the populace or are requested for admittance on a regulated market.

A prospectus is an invitation to the populace to subscribe for, or to buy, portions or unsecured bonds in a company. A prospectus is required when a company is using for admittance to listing or, if it is already listed, wishes to publish extra or a new category of portions or unsecured bonds.

The permuting British enrollment puts any individual responsible for the prospectus who knows of the alteration under a responsibility to advise it to the company or the applier for admittance, if different. It is ill-defined whether this responsibility arises if the issuer is incognizant of the event and it can non be said that it should hold been. The traditional British prospectus has been a individual papers incorporating all the relevant information. Under the Directive it may dwell of two paperss and integrate some information by mention. Where there are two paperss, the prospectus will dwell of a “ enrollment statement ” and a “ securities note ” . The enrollment statement, incorporating information about the issuer, can be field with the relevant authorization and, if approved, be valid for 12 months. The securities note can so be produced subsequently and incorporate the information about the scampers on offer plus updated information, if any is needed, about the issuer.

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When a listed company proposes certain types of dealing it may be required by the Listing Rules to publish a round to its stockholders, to inform them of the proposal and, in some instances, to obtain their blessing. The public companies are permitted to offer their portions to the populace, but may non in fact have chosen to make so. Even if they have, those portions may or non may non be traded on a public portion exchange, such as the London Stock Exchange. Offering portions to the populace and set uping for those portions to be traded on a public market are two separate things, though the populace ‘s willingness to purchase the portions offered is likely to be increased if the portions will be traded on a public market. This is because a public portion market makes it much easier for a stockholder later to sell his or her portions to another investor, should he or she wish to make so. Consequently, public offerings of portions and the debut of those portions to trading on a public market frequently go together.

By and big, the companies statute law makes really few distinctions harmonizing to where a public company ‘s portions have really been offered to the populace or are in fact publically traded. This is that admittance to a public market may convey with it duties for the company of a recognizably “ company jurisprudence ” type, duties which could hold been included in the Act. A company seeking to hold its portions traded on the chief market of the London Stock Exchange must foremost hold them admitted to the “ Official List ” of securities. Such Listing regulations relate chiefly to the orderly behavior of the public portion market, but they besides contain regulations modulating the internal personal businesss of companies, which therefore supplement the commissariats of the Companies Act and the common jurisprudence of companies. In short, the fact of listing is being used to place a little group of really of import British companies to which extra company jurisprudence duties are attached.


  • Principle of Modern Company Law, Paul L. Davies, Q.C ( Hons ) , F.B.A, Edition- Eighth Edition, Published in 2008 by Sweet & A ; Maxwell Ltd.
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