ARTICLES OF ASSOCIATION

2T

The danger of hybrid articles, ¢.e. Table A with modifications,
is well illustrated by the cases of Fisher v. Black & White
Publishing Company (1901, I Ch. 174), and R. Paterson
and Sons v. Paterson (1916, W.N. 352).

[t may be found useful to notice some of the chief points
vhich require special attention in preparing the articles of
association.

The articles should provide for the purchase by the com-
pany of the business it is formed to acquire, whether by
entering into an agreement already prepared but not exe-
cuted, or by adopting an agreement already made between
the vendors and certain persons as trustees for the proposed
company. If any of the vendors are also directors, it. is
usual and advisable to insert a provision for their protection;
but the protection will not be effective unless it covers the
facts of the particular case and the extent of the protection
ls open to some doubt. [See Ommium Electric Palaces v.
Baines (1914) 1 Ch. 332 per Sargant J. at p. 347.1

Provision should be made for the payment of commissions
for underwriting.

A limit should as a rule be placed on the borrowing powers of
the company, e.g. that the amount borrowed must not exceed
the amount of the nominal capital, except with the sanction
of a general meeting. This limit is essential in the case
of a company requiring a quotation on the Stock Exchange
and is usual except in the case of private companies.

The length of notice required for a general meeting, the
quorum, and the conditions under which a poll may be
demanded, should be specified; and in framing these articles
the provisions of s. 117 (see infra p. 126) as to the length of
notice required for a special resolution must be borne in
mind. The voting powers of members, whether on a sliding
scale or otherwise, must be carefully arranged, so as to prevent
the control of the company falling into the wrong hands.
Provision should be made as to voting by proxy.

It is convenient to provide for class meetings of share-
holders, giving power for a special majority of a class to bind
the class, so that variations may, if necessary, be made in
the respective rights of the different classes.

Full provisions as to the number, appointment, qualifica-
tion, remuneration, disqualification, retirement, and removal
of directors should be made, and, if necessary, regulations
as to the appointment, etc., of one or more managing directors,
or of alternate directors. Where a director is to be appointed
by a general meeting, it should be provided that due notice

Contents of
Articles.