Company incorporation & constitution (articles, memorandum)

BLP.03 — Company Incorporation & Constitution

Incorporation (Companies Act 2006)

A company is formed by registration at Companies House. File with the Registrar:

• Form IN01 (proposed name, registered office, statement of capital/initial shareholdings, proposed officers, statement of compliance);
• Memorandum of association — now a short historic document; subscribers state they wish to form a company and agree to take at least one share each (s.8);
• Articles (or rely on the default Model Articles);
• the fee.

The Registrar issues a certificate of incorporation, which is conclusive evidence that registration requirements are met and that the company exists (s.15(4)). From incorporation the company is a separate legal person (Salomon v A Salomon & Co Ltd [1897]).

The Memorandum — key trap

Under the 2006 Act the memorandum is NOT part of the constitution and is largely vestigial. Old-style memoranda (e.g. with objects clauses) from CA 1985 companies are treated as provisions of the articles (s.28). Don't confuse the 2006 memorandum with the substantive 1985 document.

The Articles

The articles are the company's main constitutional document. If none registered, Model Articles apply by default (s.20); for companies registered under earlier Acts, Table A may apply.

Objects: unless restricted, a company's objects are unrestricted (s.31) — so the ultra vires problem is largely gone for third parties (ss.39–40).

Amendment: by special resolution (75%) (s.21). The change is void if it does not benefit the company as a whole / is not bona fide (Allen v Gold Reefs [1900]).

• Entrenchment (s.22): specified provisions can be made harder to change (e.g. unanimity), but cannot be made absolutely unamendable.
• A member cannot be bound to take more shares or increase liability without written consent (s.25).

Contractual effect — s.33

The constitution binds the company and its members as if covenanted by each — the statutory contract. Key limits:

• Enforceable only in respect of membership rights (Hickman v Kent [1915]);
• It does not confer enforceable rights on a person in an outsider capacity (e.g. as solicitor/director), even if named (Eley v Positive Government Security Life [1876]).

Common SQE traps

• Certificate of incorporation is conclusive of existence.
• Articles amended by special resolution; entrenchment ≠ unamendable.
• s.33 binds members in membership capacity only.
• Memorandum (2006) is not the constitution.