247 / 294
(yet to be determined) will be obliged to file and publish
their audited balance sheets annually. Probably, most
Irish private companies will be exempt from this pro-
vision by virtue of the amount of their net assets not
exceeding the amount—still to be determined—which
will exempt them. (The second Directive will state the
relevant amount, and this part of the first Directive
does not become operative until then.)
Company notepaper and invoices are to mention : (i)
the registration number of the company and its country
of registration; (ii) the type of company it is; (iii) its
registered office; (iv) whether it is in liquidation. If the
amount of capital is mentioned, reference wil have to
be made to the subscribed and paid-up capital.
(2) Validity of transactions
It is noteworthy that the rule in
Kelner v Baxter
(1866) L.R. 2 C.P. is codified in Article 7 of the Direc-
tive : pre-incorporation agreements, while not binding
on the company subsequently incorporated, are binding
on the parties thereto. However, the Directive seems to
be neutral on the question of ratification.
Next, the rights of the third party are established in
answer to his questions, "Is the transaction within the
power of the company?" and, "Is it within the apparent
authority of the person I am dealing with?"
The
ultra vires
rule, prior to the 1963 Act in Ireland
and up to the enactment of the European Communities
Bill in Britain, may briefly be stated as rendering void
any transaction not covered by the objects clauses of
a company as set out in its Memorandum of Association.
In 1963, Section 8 of our Companies Act in fact
pre-
served
the rule, but modified i t: "Any act or thing
done by a company . . . shall be effective in favour of
any person relying on such act or thing who is not
shown to have been actually aware, at the time when
he so relied thereon, that such act or thing was not
within the powers of the company."
It is submitted that this already gives effect to the
result envisaged by Article 9 (1) of the EEC Directive,
which is worth setting out in full:
The company shall be liable to third parties in
respect of transactions carried out by its authorised
officers, even if such transactions are unconnected
with the objects of the company, unless the said
transactions exceed the powers that the law confers
or allows to be conferred on such authorised officers.
However, member States may provide that the
company shall not be liable when such transactions
are outside the objects of the company, if it proves
that the third party knew that the transaction went
beyond those objects or could not be unaware of it,
in view of the circumstances, except that for this
purpose publication of the objects clauses shall not
by itself be sufficient to consitute such prqof.
On the other hand, our statutory draughtsman may
deem it wiser, in the interests both of harmonisation of
laws and of clarity, to adopt the new British provision
(Section 9 (1) of the European Communities Bill):
In favour of a person dealing with a company in
good faith, any transaction decided on by the direc-
tors shall be deemed to be one which it is within the
DUBUN SOLICITORS' BAR ASSOCIATION
At a recent function held at the Ballymascanlon Hotel,
Co. Louth, the president of the Dublin Solicitors Bar
Association, Mr. Gordon A. Henderson, presented the
president of the Belfast Solicitors Association with a
presidential medallion for the Belfast Association. The
medallion, which is similar in style to that worn by the
capacity of the company to enter into, and the power
of the directors to bind the company shall be deemed
to be free of any limitation under the Memorandum
or Articles of Association; and a party to a trans-
action so decided on shall not be found to enquire
as to the capacity of the company to enter into it or
as to any such limitation on the powers of the direc-
tors, and shall be presumed to have acted in good
faith unless the contrary is proved.
One other provision crystallises the rights of third
parties.
Irregularities in the appointment of officers having
the power to bind the company cannot be pleaded
against third parties when such appointment has been
made public, unless the company can prove that the
third party had notice of the irregularity.
It follows that the difficulties created by
Royal British
Bank v Turquand
(1856) 6 E.&B. 327, are avoided by
the Directive. The essence of the rule in
Turquand's
case
is that a third party dealing with a company is not
bound to ensure that all the internal regulations of the
company have in fact been complied with as regards
the exercise and delegation of authority. Under the
Directive any limitation on the authority of the com-
pany's officers imposed by its Memorandum or Articles
of Association or by a resolution are without effect
against third parties even when made public, unless—
again—the company can prove that the third party had
notice of the irregularity : what matters is the ostensible
and not the actual authority.
The last part of the Directive deals with "invali-
dation" or "nullity", a phenomenon apparently pecu-
liar to French and Belgian company law. The grounds
for nullity include : absence of charter, illegal nature of
the company's objects, incapacity of all the founding
members of the company. Its effect on Irish (and U.K.)
company law will apparently be nil.
The other Directives will have to be dealt with, like
all EEC subsidiary legislation, as and when they become
effective. (It will be appreciated from the foregoing
discussion that the result of the first Directive is not to
transform our company law into some strange contin-
ental system, but merely to tie up some loose strings
which we probably would have done ultimately.
At present, company growth is frustrated by the vari-
ance of company laws and fiscal provisions of each
member State of the EEC in such a way as to maintain
a fragmented character of the Community. At the
moment, a company may not expand across its national
frontiers into the other member States without forming
a series of subsidiary companies. It is virtually impos-
sible for any company to move its seat from one country
to another, and it is impracticable for a company to
form a merger with another company from a different
member State.
In order to produce in the Common Market the
degree of concentration of companies which is desir-
able, it is necessary for them to break out of their
national confines. This will be achieved (a) by harmon-
isation of existing company laws by Directives, and (b)
by the new departure still to become effective, namely
the European Company.
president of the Dublin Association, has as its main
features the arms of the city of Belfast. The function
was attended by a number of officials of both Associa-
tions and it was generally agreed that the gesture was
a most timely one.
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