No subscriber of the memorandum is to take less than one share, and each subscriber is to write opposite his name the number of shares he takes.
These five matters the legislature has deemed of such intrinsic importance that it has required them to be set out in the company’s Memorandum of Association. They are the essential conditions of incorporation, and as such they must not only be stated, but the policy of the legislature has made them with certain exceptions unalterable.
The most important of these five conditions is the third, and its importance consists in this, that the objects defined in the memorandum circumscribe the sphere of the company’s activities. This principle, which is one of public policy and convenience, and is known as the “ultra vires doctrine,” carries with it important consequences, because every act done or contract made by a company ultra vires, i.e. in excess of its powers, is absolutely null and void. The policy, too, is a sound one. Shareholders contribute their money on the faith that it is to be employed in prosecuting certain objects, and it would be a violation of good faith if the company, i.e. the majority of shareholders, were to be allowed to divert it to something quite different. So strict is the rule that not even the consent of every individual shareholder can give validity to an ultra vires act.
The articles of association are the regulations for internal management of the company—the terms of the partnership agreed upon by the shareholders among themselves. A model or specimen set of articles known as Table A Articles of Association. was given by the Companies Act 1862, and is appended in a revised form to the Companies (Consolidation) Act 1908. When a company is to be registered the memorandum of association accompanied by a copy of the articles is taken to the office of the registrar of joint stock companies at Somerset House, together with the following documents:—
1. A list of persons who have consented to be directors of the company (fee stamp 5s.).
2. A statutory declaration by a solicitor of the High Court engaged in the formation of the company, or by a person named in the articles of association as a director or secretary of the company, that the requisitions of the act in respect of registration and of matters precedent and incidental thereto have been complied with (fee stamp 5s.).
3. A statement as to the nominal share capital (stamped with an ad valorem duty of 5s. per £100).
4. If no prospectus is to be issued, a company must now (Companies Act 1907, s. 1; Consolidation Act 1908, s. 82) in lieu thereof file with the registrar a statement, in the form prescribed by the 1st schedule to the act, of all the material facts relating to the company. Till this has been done the company cannot allot any shares or debentures.
If these documents are in order the registrar registers the company and issues a certificate of incorporation (see Companies (Consolidation) Act 1908, sect. 82); on registration, the memorandum and articles of association become public documents, and any person may inspect them on payment of a fee of one shilling. This has important consequences, because every person dealing with the company is presumed to be acquainted with its constitution, and to have read its memorandum and articles. The articles also, upon registration, bind the company and its members to the same extent as if each member had subscribed his name and affixed his seal to them.
The total cost of registering a company with a capital of £1000 is about £7; £10,000 about £34; £100,000 about £280.