ARTICLES OF ASSOCIATION
Articles of association commonly contain many clauses
which simply reproduce statute law. Such clauses are of
course surplusage, although for the sake of completeness,
it is desirable to insert them.
For the Stock Exchange requirements as to articles of
association, see Appendix D.
It may be pointed out that the word ‘regulations,’ where it Nature of
occurs in the articles of a company, may or may not be Articles.
equivalent to ‘articles’ [Quin & Axtens v. Salmon (1909),
A.C. 442]. In other words, a company may have ‘regulations’
other than its articles; these may be constituted by minutes
of the board, or by resolutions carried in general meeting.
{t must, however, be borne in mind that the articles -can
only be altered by special resolution and a resolution of the
board, or an ordinary or extraordinary resolution of the
company in general meeting, if inconsistent with the articles,
would be ineffective. The articles form a code of regulations
for the internal management of the company, whilst the
memorandum is the charter of the company and defines its
powers. The respective functions of the two documents are
clearly described in the extract from the judgment of Lord
Cairns, in Ashbury Railway Carriage Company Vv. Riche
(1875, L.R. 7 H.L. 653), cited in Chapter III.
The provisions of the articles cannot, therefore, extend the
powers of the company. It is useless, for example, for an
article defining the powers of directors to clothe them with a
power which the company itself does not possess. Thus, to
take a simple instance, if a company, which, not being a
trading company, has no implied power to borrow money,
has not in its memorandum taken a power to borrow, it is
clear that an article giving the directors power to borrow
will be wholly inoperative. Again, if the memorandum of
a company defines the rights attaching to different classes
of shares, and itself contains no provisions for the alteration
of those rights, whether by reference to the articles of associa-
tion or otherwise, it is useless for the articles to provide that
those rights can be altered by special resolution, or by any
specified majority of the shareholders.
Neither can the articles deprive members of rights given
to them by statute, and therefore a provision in the articles
that, in case of a reconstruction, dissenting shareholders
shall not have the rights given them by s. 234 is invalid
[Payne v. Cork Co. (1900), 1 Ch. 308]. Similarly, share-
holders having in certain circumstances a statutory right
to present a winding-up petition, an article purporting to
