Business Law: Memorandum and Articles

The Companies Act provides that, as regards each of the various types of company, these documents shall be in the form specified by regulations made by the Secretary of State "or as near to that form as circumstances admit". This, however is treated with considerable latitude and so long as the documents submitted are in the same basic form as that specified and contain what the Act prescribes, the widest variations of content are permitted.

Thus, as we shall see, the practice has long been to produce memoranda much lengthier than the prescribed forms because of inflated objects clauses-a practice which conceivable may change as a result of the reforms of the ultra vires doctrine by the Act of 1989. The present Regulations contain five Tables of which Table A, prescribing model articles for a company (whether public or private) limited by shares, is the most important and differs in its effect from the others.

Such a company does not have to register articles (as opposed to the memorandum) and, if it does not, Table A (as in force if it does register articles, in so far as these do not exclude or modify Table A, its provisions will apply. Furthermore, it, and any other type of company (which will have to register articles) may, in them, adopt by reference any provisions of Table A.

In contrast, the model articles in Table C (relating to a company limited by guarantee and with a share capital) and Table E (relating to an unlimited company having a share capital) are merely models which cannot be adopted by reference and will not apply to fill lacunae in the registered articles. Tables C and D also include model forms of memoranda for the types of company to which they relate as does Table B (for a private company limited by shares) and Table F (for a public limited company).

Before preparing the memorandum and articles, the draftsmen will need to obtain, from the promoters, information on matters such as the following: The nature of the business. This will be required in connection with the objects clauses of the memorandum unless the promoters are content to adopt the general purpose formula in section 3A. The amount of nominal capital and the denomination of the shares into which it is to be divided (assuming, of course, that it is to have a share capital). These will need to be stated in both the memorandum and articles.

For the articles the draftsman will also require to know if the shares are to be all of one class and, if not, what special rights are to be attached to each class, as these should be set out in the articles, but preferably not in the memorandum. The capital of a public company will have to be not less than the authorized minimum. Any other special requirements which deviate from the normal as exemplified by the appropriate Table. The most likely matters are quorums, and the minimum and maximum numbers of directors.