(iii) Objects clause
This clause sets out the purposes for which the company was established and, strictly speaking, anyactivity beyond those stated objects is
and used to be void. The word ‘ultra vires” means“beyond the powers”
Case: Ashbury Railway Carriage v riche
Facts: The objects clause of the company set out the purpose of the company as the making andselling of railway carriages. The company entered a contract to purchase a concession forconstructing a railway.Held: The contract was “ultra Vires” and beyond the capacity of the company.However, as a consequence of the amendment to s. 35 of the CA 1985, introduced by the CA 1989,
has been reduced essentially to a matter of internal regulation and outsiders are notaffected by it. Companies can alter their objects clauses by passing a special resolution, and in anyevent can register as ‘general commercial companies’ which allows them to pursue any businessthey wish to.
(iv) Limited liability clause
This simply states, and makes outsiders aware of the fact, that the liability of the members of thecompany is limited.
(v) Authorized capital clause -
Statement of capital and initial shareholdings
This states the maximum amount of share capital that a company is authorized to issue. Theauthorized capital must be divided into shares of a fixed monetary value and it follows, therefore,that United Kingdom company law does not recognize no-fixed- value shares, as do other jurisdictions. As companies do not have to issue shares to the full extent of their authorized capital,it is imperative to distinguish authorized capital from issued capital, which is the amount of sharesactually issued. The current minimum value of issued capital in relation to a public limited companyis £50.000.
(vi) Association clause
This merely states that the subscribers wish to form a company. In addition the memorandums of public companies are required to state that they are public companies.
The impact of the Companies Act 2006 upon the Memorandum of Association forcompanies incorporated prior to 1 October 2009
With effect from 1 October 2009, the Memorandum of Association became a short document,essentially showing the intent to form a company, the identity of the initial subscribers, and therespective share capital subscribed by them. For companies incorporated prior to 1 October 2009,s28 of the Companies Act 2006 (CA 2006) operated to move the other provisions (including anyobjects clauses) from the Memorandum of Association into the Articles of Association (Articles). The objects clause moved to the Articles and s31 CA 2006 provides that unless a company’s Articlesexpressly restrict objects, a company’s objects are unrestricted. In respect of companiesincorporated before 1 October 2009, if they are to have unrestricted objects, company secretary’sshould consider proposing an amendment to the Articles (inclusive of objects as of 1 October 2009)to remove any restrictive objects clause.
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