PRIVATE COMPANIES

289
‘(c) prohibits any invitation to the public to subscribe

for any shares or debentures of the company.’

The provision as to excluding ex-employees from the
computation of the permitted fifty members was added by
the 1913 Act, but it does not appear that a company registered
before the 1913 Act came into force which has failed to alter
its articles so as to exclude ex-employees, as well as employees,
from the fifty, has ceased in consequence to be a private
company. The provisions as to the certificate mentioned
below, required in certain cases by s. 111 of the 1929 Act,
seem to support this view.

On the registration of a private company the memorandum
and the articles need only be subscribed by two persons [s. 1],
although there is no objection to a larger number of signa-
tories, subject, of course, to the limit of fifty members. A
private company may register as a company limited by shares,
or a company limited by guarantee with a share capital, or
an unlimited company with a share capital. It would seem
that it cannot register without a share capital, having regard
to the restrictions (a) and (c) (above), which must appear
in its articles.

On registration, care must be taken to ensure that the
articles contain the three necessary provisions set out above.
Further, the articles should contain no power to issue share
warrants to bearer, inasmuch as the Registrar not un-
naturally takes the view that their issue is inconsistent with
the status of a private company, since the transfer of the
shares specified in warrants could not be restricted.

As regards the restriction on transfers, the provision will
be complied with by an article, or set of articles, giving to
existing members the right of pre-emption. Such pro-
visions were common in the articles of the old private com-
panies. Or a provision will suffice and will be accepted at
Somerset House, which gives to the directors the right at
their absolute discretion to refuse to register any transfer of
shares. To this, however, it is as well to add words re-
quiring them to refuse any transfers, the registration of
which would cause the number of members to exceed fifty.
The Registrar requires the restrictions to apply to the transfer
of all the shares of the company.

As to the limit of members, the articles may contain words
excluding employees or ex-employees of the company from
the limit of fifty, or may limit the number of members to
fifty, in which case, if employees or ex-employees hold shares
they will count in the fifty. Joint holders rank as a single
member [s. 26 \7