222 14: Constitution of a company Part D The formation and constitution of business organisations
Chapter Roundup
The memorandum is a simple document which states that the subscribers wish to form a company and
become members of it.
A company's constitution comprises the Articles of Association and any resolutions and agreements it
makes which affect the constitution.
The articles may be altered by a special resolution. The basic test is whether the alteration is for the
benefit of the company as a whole. A company's objects are its aims and purposes. If a company enters into a contract which is outside its
objects, that contract is said to be ultra vires. However the rights of third parties to the contract are
protected.
Companies may only act in accordance with their objects. If the directors permit an act which is restricted
by the company's objects then the act is ultra vires.
The articles constitute a contract between:- Company and members
- Members and the company
- Members and members
The articles do not constitute a contract between the company and third parties, or members in a
capacity other than as members (the Eley case).
The constitution can be used to establish the terms of a contract existing elsewhere.
Shareholders' agreements sometimes supplement a company's constitution.
Except in certain circumstances a company's name must end with the words limited (Ltd), public limited
company (plc) or the Welsh equivalents.
No company may use a name which is:- The same as an existing company on the Registrar's index of company names
- A criminal offence, offensive or 'sensitive'
- Suggest a connection with the government or local authority (unless approved)