T Se Price 36s. cloth. PAI Co Promot of Asso Certific Advanc VV THE LIBRARY OF THE UNIVERSITY OE CALIFORNIA LOS ANGELES SCHOOL OF LAW REGEDENTS cts, 1862 to 1890. — Memoranda and Articles . — Resolutions. — Notices. — ■ ature Stock. — Banking and Judgments and Orders. — ial Acts. ing Acts and Rules. iLMER, aw. Assisted by the Uox. (JiiAKLi±:S MACJM AtiHTElSr, Q.C, vfLhiq., Barrintcr-iit-Lnc, Assisted BY FRANK EVANS, of Lincoln'' s Inn, Esq., liarrlntcr-at-Lmr. OPINIONS OF THE FEESS. " It is quite a pleasure to pass from the eong'lomeration of cases, so often loosely strung tog-ether and called a book on legal topic, to such a work as this .... Mr. Palmer reads liis authorities, thinks them over, bring-s a ripe exjierience to bear upon his work, and masters his subject The result is a book of sterling worth Mr. Palmer's ' Company Precedents' is the book par excellence for practitioners. It is certain to be used alike by the Company draughtsmen, and by the habitue of the Coui-t There is nothing we can think of which should be within the covers which we do not find. It is needless to recommend Mr. Palmer's book to the profession, for it is already known and appreciated. We advise those who ha\'e any doubts to consult it, and they will be in agreement with us." — Law Journal. " We had occasion recently, on the publication of the first volume of tliis edition, to state our opinion of the services which Mr. Palmer had rendered to the profession by the careful and thorough manner in which he had undertaken the task of revision. The present volume calls for similar acknowledgment The book will continue to be a safe and necessarj- guide in winding-up practice." — Solicitors' Journal. " The business of winding-up companies has increased so rapidly, that the author is obliged to devote to it .a separate volume of about 900 pages, and containing- S44 forms. Not that the work is a mere collection of forms. It contains also valuable notes and oliservations, so that the practitioner gets both the forms and the practice together Mr. Palmer's new volume is one of which every one concerned in the winding-up of companies must have." — Latv 2'imes. "Not the least of Mr. Palmer's many merits is, that he is eminently practical and to the point. In his ' Company Precedents,' Part I., his aim is to see how what the commercial world wants can be done, to put it into legal shape, and render it impregnable against the insidious attacks of the Court. .... This excellent characteri.-tic of ijracticality is much in evidence in the present edition of Winding-up Forms It is a striking testimony to the value as well as the variety of the forms, that when the first edition appeared, about twenty years ago, it contained about fifty forms only ; to-day it contains considerably over SCO. The sapling has grown into a vigorous tree." — Law Quarterly Sevieiv. " It is simply invaluable not only to company lawyers, but to (<\cryone connected with companies." — Financial Xiws. STEVENS & SONS, Limited, n9 & 120, Chancery Lane London. W.C. ( 2 ) COMPANY PRECEDENTS SEVENTH EDITION, Part I. ,/ JUST PUBLISHED. Royal 8vo. 1898. Cloth, 12s. 6d. PALMER'S COMPANY LAW Based on Lectures delivered in the Inner Temple Hall at the request of the Council of Legal Education. With an Appendix containing ttie Companies Acts, 1862 to 1893, and Rules, dec. By FRANCIS BEAUFORT PALMER, OF THE IKN^ER TEMPLE, ESQ., BAKEISTER-AT-LAW, Author of " Company Precedents" &c. Accounts Adj ournment Amendments Articles of Association or Regulations Audit Bills of Exchange and Promissory Notes Borro-wing Powers Bribes Calls Capital Certificate of Incorpora- tion Certificates of Shares Common Seal, The Companies Limited by Guarantee Contracts Conveyances Corporate Existence and Powers PRINCIPAL TOPICS. I Debentures and Deben- ture Stock j Directors Dividends and Profits \ Floating- Charg-es I Forfeiture Illegal Associations I Leading Cases Lien on Shares Life Assurance Com- I panies Act Majority— Eights of Meetings Membership Memorandum of Associa- Minutes L^ion Name of Company Negligence Notices Poll Powers of Company Preference Shares Private Companies Promoters Prospectuses Proxies Qualification of Directors Quorum Registered Office Register of Members Registration under Part VII. of the Act Secretary Special Resolutions Transfer and Transmis- sion of Shares Trustees, Directors how Underwriting tiar Unlimited Companies Votes Winding-Up OPINIONS OF THE PRESS. " The work is a marvel— for cleamcss, fulness and accuracy nothing could be better. In every page the master-hand is discernible. Nothiug is shirked ; every difficulty is faced and met." — Law Notes. "Au}i;hing on Company Law which comes from Mr. Palmer comes with a stamp of authority upon it." — The Accountant. " A vc-rj' useful addition to works on Company Law, and of especi*l use to students and busiuess men who need a clear exposition bj' a master-hand." — Law Jvurind. " Tlie subject is dealt witli in a clear and comprehensive manner, and in such a way as to be intelligible not only to la^vyers but to others to whom a knowledge of Company Law may be essential." — Law SliulvHts' Journal. " From any bof)k on Company Law to which Mr. Palmer puts his name wo expect much, and we are not dis!ipi)ointed in his new work. . . . Like Mr. Palmer's other works, this book has the merit of giving practical suggestions and hints. It will bo of service not only to lawyers, ])ut to the large number of men of business who must often without professional as.sistance make important decisions as to companies." — The Times. " It WiU) aha])py thought which insjiired tlie author to reproduce his lectures in the shape of this l)ook. 'i'hcn; is no lack f ef)iiipani('H, and from this treasury of his experience he has drawn generously for Uie lK!nefit of his ruadors. The book is, wo fuel sure, predestined to popularity." — Law Quarlrrhj Reritw. STEVENS & SONS. Ltd., 119 & 120, Chancery Lane, London. \ COMPANY PEEOEDENTS FOR USE IN RELATION TO COMPANIES SUBJECT TO THE COMPANIES ACTS, 1862 TO 1890. PROMOTERS. PROSPECTUSES. UNDERWRITINa. AGREEMENTS. MEMORANDA & ARTICLES OF ASSOCIATION. PRIVATE COMPANIES. EMPLOYES' BENEFITS. ARRANGED AS FOLLOWS:— RESOLUTIONS. NOTICES. CERTIFICATES. POWERS OF ATTORNEY. DEBENTURES AND DE- BENTURE STOCK. BANKING & ADVANCE SECURITIES. PETITIONS. WRITS. PLEADINGS. JUDGMENTS AND ORDERS. RECONSTRUCTION. AMALGAMATION. SPECIAL ACTS. Myi\ C0^i0us "gait^, APPENDIX CONTAINING ACTS AND RULES. SEVENTH EDITION BY FRANCIS BEAUFORT PALMER, Of the Lnner Temple, Esq., Barrister-at-Law, ASSISTED BY The Hon. OHAELES MACNAaHTEN, Q.C., Of Lincoln'' s Inn, ARTHUR JOHN CHITTY, 0/ Lincoln's Inn, Esq., Barrister-at-Law. IN TWO PARTS. Part I. LONDON: STEVENS AND SONS, LIMITED, 119 & 120, CHANCERY LANE, Sato gublbSjcrji, 1898 BY THE SAME AUTHOR. Seventeenth Edition. Demyl2nno. 1897. Price 2s. 6d. net, Cloth. THE SH.iEEHOLDERS, DIEECTOES, AND VOLUNTAEY LIQUIDATORS' LEGAL COMPANION. A Manual of Every-day Law and Practice for Promoters, Shareholders, Directors, Secretaries, Creditors, Solicitors, and Voluntary Liquidators of Companies under the Companies Acts, 1862 to 1890, with Appendix of useful Forms. " Invaluable to shareholders, directors, secretaries and solicitors of companies— in fact, to all persona who have any oonnections or dealings with companies." — Financial News. Thirteenth Edition. Demy 12wio. 1897. Price Is. net. PEIYATE COMPANIES AND SYNDICATES: THEIR FORMATION AND ADVANTAGES. Being a Concise Popular Statement of the Mode of Converting a Business into a Private Company, and of establishing and working Private Companies and Syndicates for Miscellaneous Purposes. " Crammed from end to end with knowledge useful to the parties to whom it is Hpecially addressed." — Financial Times. STEVENS AND SONS, LIMITED, 11!» & 120, CHANCERY LANE, LONDON, W.C. T 1^7 ^^ PREFACE TO PAKT 1. OF SEVENTH EDITION. In submitting the Seventh Edition of this work to the Profession the Autlior again acknowledges with pride and satisfaction the many convincing, tokens and assurances he has received, and from day to day receives, that the work has been found practically useful to both branches of the Profession and to business men generally. To make it such has been his constant effort ; and the fact that many thousands of comj)anies now show in their constitution, regulations, contracts and securities, relationship to the work is a significant token that he has not laboured in vain. Since the First Edition of the work was published in 1877 there has been an enormous development in joint stock enterprise. Then the paid-up capital of companies under the Acts of 1862 and 1867 was not much in excess of 300,000,000/., now the paid-up capital of companies under the Acts of 1862 to 1893 exceeds 1,400,000,000/., to which may be added, say, 400,000,000/., represented by debentures and debenture stock, making an aggregate of, say, 1,800,000,000/. It is obvious, therefore, that the matters dealt with in the following pages concern the interests of an important section of the community, and deserve special attention. The Author has spared no pains to render the present Edition an efficient guide to the practitioner, and in particular to indicate how to utilise the great facilities for ?4e553 vi PREFACE TO PART I. OF SEVENTH EDITION. meeting business wants which our admirable system of company law a:ffords when properly understood and applied. The additional matter amounts to upwards of 200 pages, and includes some notes taken from the Author's recently published work intituled '' Company Law." The author trusts that the result of his labours will merit that kindly consideration which has been so liberally accorded to former Editions. The Author's cordial thanks are due to the Hon. Charles Macnaghten, Q.C, to Mr. Arthur John Chitty, to Mr. Frank Evans, and to Mr. Robert Morris, all of the Chancery Bar, for assistance in passing the work through the press and preliminary thereto, and to many members of both branches of the profession, as well at home as abroad, for valuable communications and suggestions. He only regrets that want of space has prevented him from adopting not a few of the suggestions so made by Colonial users of the work. F. B. P. 5, New Squake, Lincoln's Inn, May, 1898. TABLE OF FOEMS. Chap. I.— PRELIMINARY (pp. 1—53) [contai7is no Forms']. Chap. II.— PROMOTERS (pp. 54-87). Form PAGE 1. Promoters' agreement to pay preliminary expenses in conside- ration of vendors' shares ....... 75 2. Promoters' agreement to pay preliminary expenses in con- sideration of commissions . . . . . . . . 76 3. Agreement to sell concession to promoter who is to form com- pany 76 4. Agreement to contribute to preliminary expenses fund . . . 78 5. Syndicate agreement for purchase and re-sale of mines . . 79 6. Agreement for pooling shares, and sale by trustees . . . 82 7. Pooling agreement, each member fixing his minimum price . 85 8. PooHng agreement providing for transfer of shares . . . 87 Chap. III.— PROSPECTUSES (pp. 88—145). 9. Skeleton prospectus . . .' . . . . . . 140 10. Waiver clauses 141 11. Application for shares 142 12. Bankers' receipt 143 Chap. IV.— UNDERWRITING (pp. 146—174). 13. Underwriter's application 158 14. Underwriting letter with signed application and deposit . . 162 15. Underwriting letter where application not to be made till list closed 163 16. Underwriting contract with the company 165 17. Underwriting of debenture issue 166 18. Undei-writing clauses in memorandum of association . . . 167 19. Agreement by company to indemnify founders . . . .168 20. Agreement by promoter to pay company for underwi'iting shares in consideration of part of premiums on issue . . . 169 21. Underwriting contract before company formed . . . .170 22,23. Underwiiting debenture stock .... 172,173 Vlll TABLE OF FORMS. Chap. V.— AGREEMENTS (pp. 175—262). Form PAGE 24. Agreement to sell business to new company . . . .199 25. Guarantee of profits by vendor 211 26. 27. Vendors' shares deferred 212 28. Option to vendor to subscribe for shares at par . . . . 212 29. Exclusion of objectionable assets 213 30. Vendor may pay promoter-syndicate 213 31. Arbitration 213 32. Guarantee of certain assets . . . . . . . . 214 33. Liberty for vendors to remunerate promoters .... 214 34. Agi-eement with, agent or trustee for intended company . . 215 35. Adoption agreement (indorsed) . . . . . . .216 36. Agreement adopting contract with modifications . . . . 217 37. Agi-eement to sell undertaking under power in memorandum . 218 38. Ratification 220 39. Agreement to sell patents for cash and founders' shares . . 220 40. Agreement to sell foreign mines 223 41. Agreement to sell Australian mining claims ..... 225 42. Option to buy concession ........ 226 43. Agreement to sell ship to single-ship company . . . . 228 44. Agreement as to issue of paid-up shares, pursuant to unfiled contract ........... 229 45. Agreement to issue paid-up shares in satisfaction of debt due by company 230 46. Contract to file where non-compliance with sect. 25 of 1867 . 231 47. Agreement between two companies foi* grant of option to pro- spect and select blocks (Australia) for paid-up shares in new company .......... 232 48. Agi-eement to fund arrears of dividend on preference shares . 236 49. Funding certificate 238 60— 52. Agreementsby debenture holdersmodifyingtheir rights . 239 — 242 63. Agreement by shareholders for reconstruction, and for distri- bution of assets not in accordance with existing rights . . 245 64. Agreement by vendor of shares, guaranteeing dividends and reserving option to re-purchase . . . . . . 246 55. Agreement as to requisition and general meeting . . . 248 56. Requisition for meeting ........ 249 57. Agreement by American bondholders to deposit bonds, with a view to united action ........ 249 58. Agreement for appointment of a company's manager . . . 253 59. Agroomont for the ajipointment of a company's secretary . . 254 60. Commission on surplus profits 255 61. Commission on profits ........ 255 62. CommiHsion on dividends ........ 255 63. Agioeuient for service 255 64. Agiooinont as to agent examining title and character of mining property abroad ......... 256 66, 66. Agroemont to employ mining expert abroad . . . 258 TABLE OF FORMS. IX Chap. VI.— MEMORANDA OF ASSOCIATION (pp. 263-370). Form 67. 68. 69. 70. 71. 72. Memorandum of company limited, by eliares Memorandum of guarantee company .... Memorandum of guarantee company under sect. 23 of 1867 Licence of Board of Trade ....... Notice, application for Board of Trade licence Memorandum of unlimited company .... PAGE 292 293 291 297 298 300 Object Clauses Form PAGE 73. To acquii'e a business . 301 74. To acquire undertaking of another company . 301 75. To acquire and amalga- mate otber concerns . 301 76. To acquii-e mines . . 301 77. To acquire patents . . 301 78. To acquire concessions . 301 79. To acquii-e and amalga- mate otber concerns . 301 80. To enter into a contract . 302 Common Forms. 81. To carry on other busi- nesses .... 302 82. To purchase other busi- nesses . . . . 302 83. To purchase patents . 303 84. To enter into partnership, take shares, &c. . . 303 85. To take shares in other companies . . . 303 86. To make arrangements with authorities . . 303 87. To benefit employes, &c. 304 88. To promote companies . 304 89. To purchase property, &c. 304 90. To build, &c. . . . 304 91. To construct works . . 305 92. To invest . . .305 (pp. 301—357). Form PAGE 93. To receive money on de- posit, lend, and gua- rantee . . . . 305 94. To borrow and mort- gage, &c. . . . 305 95. To remunerate . . . 305 96. To accept bills, &c. . 306 97. To act as trustee . . 306 98. To sell undertaking . 306 99. To advertise products of company 100. To obtain Acts . . . 101. To register abroad 102. To sell, &c. . 103. To act as trustees, &c. . 104. General words . . . 105. Interpretation clause . Additional Object Clauses. 106. 107. To build on and improve land 108. Amalgamation . . 109. To divide assets in specie 110. To obtain Act of Incor- poration 111. To acquire the com- pany's own shares 112. Interest out of capital . 113. Special, for guarantee companies . 307 307 308 308 308 308 308 309 309 309 310 310 311 311 [Objects for Specific Companies.— Forms 114—192, pp. 312—357. See Alphabetical Index at p. 312.] Capital Clauses. 193. Life governor's share 194. Cumulative preference shares 195. Power to alter .....••••• 196. Non- cumulative preference shares 197. Preference shares, fixed dividend, and to participate pari passu in sru'plus ......•••• 198. Preference shares, fixed dividend, with half surplus profits 360 361 362 362 362 362 X TABLE OF FORMS. Form PAGE 199. Preference shares 363 200. Another 364 201—203. B. shares carrying special rights . . . 364, 365 204. Management shares ........ 365 205. Ordinary and deferred, fonner taking all profits until 100 p.c. paid ............ 365 206. Founders' shares 367 207. Special voting power to holders of founders' shares . . . 367 208. Eeserve cajjital 369 209. Statement of capital and shares where company formed to acqmre mining property in France (stamp duty lessened) . 369 Chap. VII.— AETICLES OF ASSOCIATION (pp. 371—545). 210. Articles of association ....... 211. Ai-ticles of association (Table A modified) . 212. Short form based on Table A (one director) 213. Guarantee company (capital not in shares) . 214. Guarantee company (shares of no fixed nominal amount) 381 471 474 474 476 Miscellaneous Clauses in Articles. 215, 216. Powers to acquire business 481 217. Capital in cumulative preference and ordinary shares . . 482 218. Non-cumulative preference shares . . . . . . 482 219. Preference (non-cumulative) and ordinary shares . . . 482 220. " A " and " B " shares, each with fixed dividend. Balance of profits pro rata. Priority of " A " shares as to capital . . 483 221. Preference shares with further rights 483 222. Guaranteed preference and ordinary shares . . . . 484 223—226. Provisions for appropriation of profits . . . 484,485 227. Special foi-m 485 228. Conversion of preference into ordinary shares .... 485 229. Power to holders of certain shares to convert others into preference shares ......... 486 230. 231. Conversion of preference and ordinary shares . . 486, 487 232, 233. Management of one company by another company . 488, 489 234, 235. Debenture directors 489, 490 236. Power for trustees of will to appoint permanent director . . 490 237. Alternate or substitute directors 491 238. Assistant directors 491 239. Share of surplus profits to directors 491 240. CominiHsion to directors ........ 491 241. l)iroctors to have poi'contago on profits 492 242. Managers 492 243. Appointment of first manager ....... 492 244. Couimon seal 492 245. C'usfody of socuritios 493 240. A])])oiiitini:iitH of sliips' husbands . . . ... 493 247. I'rovisions for managers and committoo ..... 494 248. ]']xocutivo committoo 496 TABLE OF FORMS. XI Form PAGE 249. Special provisions as to debontui'os 496 250. Eegvxlations for club 496 251. Eomuneration of promoter ....... 497 252. Members' inventions, &c. — company to have right of pre- emption .......... 497 253. Ascertaining profits — single accoimt ..... 498 254. Ascertaining profits — separate capital and revenue accounts to be kept and dividends payable out of latter . . . . 498 255. 256. How profits to be ascertained ..... 499 257. Differences referred to arbitration . . . . . . 500 258. "Winding-up — how surplus assets to be distributed . . . 500 259. Winding-up — preference to holders of " A " shares . . . 501 260. "Winding-up — founders' shares 501 261. "Winding-up— special 501 Chap. VIII.— PEIV ATE COMPANIES (pp. 646—613). 262. Agreement by partners to convert business into private com- pany (simple form) ........ 570 263. Agreement between brewery partners and retired partner (creditor) prescribing the terms of conversion . . . . 571 264. Agreement between partners and trustees of other persons interested and others for conversion of a business (subject to Court's sanction) ........ 573 265. Agreement for sale of business 575 266. 267. Eestrictions on allotment of shares . . . 576, 577 268. Deed of covenant to make certain clauses in articles unalter- able 578 269. Eestricted right of transfer 579 270. Company's power to declare fair value of shares . . . 581 271. Value otherwise estimated 582 272—275. Preferential offers of shares 582, 583 276. Personal representatives to transfer to approved nominees . 584 277, 278. Eetii-ement of dismissed employe 584 279, 280. Forfeitiu-e where member interested in competing concern 585 281, 282. Compulsory retirement 586 283. Option in founder or his directors to piu'chase outstanding shares . . . . 586 284. Option in siu'viving founder to buy shares of deceased founder 587 285. Forfeiture where interested in rival concern .... 588 286. Eetiring member not to compete 588 287. Over-riding powers of two-thirds majority .... 588 288. Conversion of ordinary into j)reference shares and vice versa . 589 289. Eestrictions on preference shares ...... 590 290. Governing dii-ector 590 291. "When governing directorship ceases, company to have power to appoint dii'ectors 592 292. Two governing dii-ectors 593 Xll TABLE OF FORMS. Form PAGE 293. Permanent dii'ectors ........ 593 294. Founders wHle specially qualified to be directors -with power to appoint new directors 593 295. Permanent governing dii'ector — power to resign and resume office 594 296. Power of governing directors to appoint successors . . . 596 297. Permanent directorship in right of shares field by anotfier party 597 298. Director to be appointed by trustees of will . . . . 597 299. Power for managers to act in own names .... 597 300. Power to appoint other directors 598 301. Directors' proxies 598 302. Power for meeting to appoint managing director . . . 598 303. Eemuneration of directors 598 304. Instruction of peimanent dii'ector's son ..... 599 305. What time directors to give ....... 599 306. Continuance of directors in office 599 307. Voting at directors' meetings 599 308. Chairman and deputy chaii-man 600 309. "Wfien chairman absent at meeting ...... 600 310. 311. How questions at board meetings decided . . . . 600 312. Interest on unpaid shares 601 313. Balance sheet 601 314. Audit 601 315. Minutes of first meeting 602 316. Minutes of second meeting 603 317. Power to trustees to convert testator's business into company. 606 318. Special clauses wfiere sanction of Court requisite . . . 607 319 — 321. Originating summonses for Coui't's sanction to conver- sion 607, 608 322. Order on originating summons ....... 609 323. Proposals for conversion of business into a private company . 610 324. Order on originating summons . . . . . .611 325. Order on petition for sanction to convei'sion . . . . 612 326. iVnother order on origiaating summons sanctioning conversion 612 CuAP. IX.— EMPLOYES' BENEFITS (pp. 614—642). 327. Employes' shares 621 328. Co-operative fund 622 329. I'rovisions as to deposits by employes with company . . 622 830. Acquisition of shares by employes out of savings . . . 624 331. Method of sharing profits ....... 625 832. Trust (hual as to accjuisition of shares by cmploj'es . . . 626 333. Trust deed constituting Hii])ei'annuation fund .... 633 334. Artiflfi.H a.s to qualification ........ 637 336. Trust (\<;<;<\ constituting pension fund 638 336. Trust dood constituting guarantee fund (banking company) . 639 TABLE OF FORMS. XIU Chap. X.— EESOLUTIONS (pp. 643—680). Form PAGE 337. Alteration of articles 649 338. New regulations 650 339. Modification of Table A 650 339a. Increase of capital 650 340. Increase of capital. Ordinary shares at a premium . . 651 341. New shares at par, and bonus to be paid 651 342. Contingent power to dii-ectors to increase .... 652 343—346. Preference shares 652 — 654 347. Preference shares, power to issue more 654 348. Second preference shares . 655 349. Conversion of preference into ordinary shares . . . . 656 350. Another (as soon as aggregate dividends amount to nominal value of preference shares) 656 351. Creation of debentiu-es and special preference shares . . 656 352. 353. Conversion of shares into stock 657 354. Consolidation of shares 657 355. Division 658 356. Subdivision and reduction 658 357. 358. Division of existing shares into classes (power in memorandum) 659 359. Conversion of shares into preferred and deferred stock . . 660 360. Subdivision into preference and ordinary shares . . . . 660 361. Simple sub-division 660 362. Sub-division, with direction as to portion unpaid , . . 660 Reduction of Capital. 363, 364. Eeduction of liability 660 365. Eeturn of capital 661 366. Eeturn, liable to recall 661 367. Cancelling lost capital 661 368. Eeducing ordinary shares exclusively 661 369. Eeduction of capital by paying off and extinguishing specified ordinary and founders' shares 662 370. Cancelling lost capital by extinguishing two classes of shares, and part of capital paid up on a third class. . . . 662 371. Cancelling purchased share 663 872. Cancellation of purchased shares 663 373. Confirming past returns, &c. ....... 663 374. Cancellation of unissued shares 664 375. Cancellation of shares and consolidating others . . . . 664 376. Eeduction by payment off of one or two classes . . . 664 377. Eeduction by paying off and issue of debentures . . . 664 378. Cancellation of issued shares 665 379. Cancellation of shares. ........ 665 380. Paying off capital out of profits 665 381. Eeserve liability 665 382. Chausre of name 666 383. Extension of directors' powers 666 XIV TABLE OF FORMS. Borrowing. Form 384. Eesolution as to issue of debentures .... 385, 386. Creation of debenture stock .... 387, 388. Creation of debentui-es to pay off old debentures . 389. Acquisition of a business 390. Division in specie in winding up 391. Eesolution of debenture holders sanctioning agreement modification of rights ...... for PAGE 666 666 667 667 668 668 Memorandum Act, 1890. 392. Eesolution of members for acquiring new memorandum and articles under Act of 1890 669 393, 394. Eesolutions for extension of objects under Act of 1890 . 669 Various Resolutions. Form 395. 396. 397, 399. 400. 401. 402. 403. 414. 415. 416. 417. 418. 419. 420. 421. 422. Eesolution appointing local board in Ireland To seal agreement. 398. ToaUot To allot paid-up shares To appoint solicitors To open banking ac count . To approve prospectus To adopt common seal PAGE Form Q. 404. . 670 405. . 671 . 671 406. . 671 407. . 671 408. - 409. . 672 410, . 672 412. . 672 413. To make call To give notice before forfeiture To forfeit shares . To appoint committee To make contract . To make offer 411. To seal agreement •To call meeting . 413. To pay interim dividend Eesolution of dii'ectors giving instructions to bankers as to mode of company's dealings with them Eesolutions as to conditions for issue of share warrants Adoption of Forged Transfers Acts .... Eegistration of existing company .... Application for registration with limited liability . Application for registration as an unlimited company . Statement of cajiital, &c. ..... Statutory declaration on registration . . Eesolution for registration with previous increase of capital PAGE 672 672 672 672 672 672 673 673 673 673 674 677 678 678 678 679 679 679 Chap. XI.— NOTICES (pp. 681—710). 423. AUotiaont letter 682 424,425. Instalment reminders 683,684 426. Tiotter of regret 684 427. Notice that certificate is ready 685 428 430. Notices of rail 685, 686 431. i;.;c.i'ii)t of call 686 432. Sli!iri;lioldor'H and his iioiiiiiicc'K applicntioii for now shares . 6S7 433. AUotinont 6S7 434. Acceptance 689 TABLE OF FORMS. XV Form PAGE 435. Another form of application • . . . . . . 690 436, 437. Applications for debeutiu-es 691,692 438. Another— Instalment 692 439. Bankers' receipts 694 440. Circular when misrepresentation discovered . . . . 694 441. Circular letter when contract not valid under sect. 25 of 1867 . 695 442. Notice with view to investigation 695 443. Receipt on deposit of transfer ...... 696 444. Notice of presentation of transfer ...... 696 445. Balance-sheet 697 446. Letter to shareholders' executors as to whether they desire registration, and reply 697 447. Letter to executors at time of registration of probate . . 698 448. Notice before forfeiture for non-payment of call . . . 699 449. Notice of ordinary general meeting ..... 700 450. 451. Notices of extraordinary general meeting . . . . 700 452. Notice of first general meeting to pass special resolution . 700 453. Notice of second meeting to confirm special resolution . . 702 454. Notice of ordinary and extraordinary general meetings to be held on same days 702 455. Notice of extraordinary general meetings for passing two special resolutions in three meetings ..... 702 456. Subsequent notice ......... 703 457. Eequisition of members for a general meeting . . . 703 458. Notice by members calling meeting 703 459 — 461. Notices of meetings of debenture holders . . 704, 705 462. Notice of situation of office 706 463. Notice of increase of capital ....... 706 464. Copy of special resolutions for Registrar 707 465—468. Notice of dividend and warrant .... 707, 708 469. Dividend notice and warrant ....... 708 470, 471. Directions by shareholder to pay dividends into a bank • 709 472. Authority to bank to pay dividends to a third party . . . 710 473. Power of attorney to receive dividend . . . . .710 474. Consent to new company using name of old . . . . 710 Chap. XIL— CERTIFICATES (pp. 711—720) 475. Ordinary share certificate .... 476. Certificate of preference shares . 477. 478. Provisional certificates .... 479. Certificate of stock ..... 480. Another form of certificate of preference shares 481. Form of share warrant .... 482. Coupon to share warrant .... 483. Voucher for fresh coupons .... 484. Letter of indemnity on issue of fresh certificate 485. Certificate of incorporation .... 486. Certificate on registration under Part VII. of Act of 1802 487. Certificate of shares held in trust by American corporation 714 714 715 716 717 717 718 718 718 718 719 719 XVI TABLE OF FORMS. Chap. XIII.— PO WEES OF ATTOENEY (pp. 721—745). Form PAGE 488. Power to manage property abroad 725 489. Power under Companies' Seals Act, 1864 726 490. Power in New Zealand 727 491. Power of attorney 731 492. Power from reconstructed English company to obtain incor- poration, &c., in South Africa 732 493. Power from an Englishman going abroad — an agreement to be carried out 734 494. Power by mine-owner going abroad to concur in converting partnership business into a company 735 495. Power to arrange contract to buy property abroad and take possession .......... 736 496. Power to act in Transvaal gold mining claims . . . 737 497. Power to prospect, &c. in Africa 738 498. Power from English company to execute debenture secTuity in Cape Colony 741 499. Power from mining owner abroad for promoting company in England to purchase the property 742 500. Power from shareholder for attorney to appoint proxies at meetings 744 501. Notary's certificate of execution 744 502. Notary's certificate of declaration 744 503. Declaration as to due execution 745 Chap. XIV.— DEBENTUEES AND DEBENTUEE STOCK (pp. 746—909). 504. Eegistered debenture 819 505. Conditions indorsed on registered debenture . . . .821 506. Transfer of registered debenture 827 507. Debenture to bearer, &c. 828 508. Coupon 828 509. Conditions on debentui'e to bearer 829 510. l\)wer to call for registered debenture instead of debenture to bearer 830 511. 512. Uncalled capital 830, 831 513. Voting 831 514, 515. Power to exchange for shares 831 516. Now debentures by way of sub-division or consolidation of present debentures . . , . . . . . . 831 517. T)ebonturo stock to bo issued in satisfaction of interest on (lobouturcs 832 518. Tnistoos' coi-tificate 832 610, 520. Power of majority 832 621. Iloforonco to articles 833 622. Dfsbontiiro to bearer capable of registration .... 833 523. I'l'domjition ])y drawings 834 524. I'orixjtuiil debentures ........ S;i(; 626. Profit or inconio dfljonturo -interest out of profits only . . 837 TABLE OF FORMS. XVll Form 526. Another, where principal and interest payable only out of jjrofits ........ 527. Debentures to bo paid up by instalments 528. Debenture to trustees for securing debenture stock 629. Guarantee of debentures ..... 530. Indorsement as to guarantee .... 531. Guarantee on debentures ..... 532. Indorsed agreement to extend time of redemption , V 533. Prospectus of debentures ^ 534. Letter of application . ... 535. Letter of allotment of debentures 536. Form of tender for debentures .... 537. Prosi^ectus of debenture stock .... 538. Prospectus of debenture stock (tender invited) 539. 540. Allotment letters of debenture stock . 541. Provisional certificate of title to debentures 542. Scrip to registered holders 543. Debenture stock certificate (registered holder) 544. Debenture stock certificate (bearer) 545. Trust deed to secure debenture stock (^Schedvles at p, 877.) PAGE . 837 . . 838 . 839 . . 840 . 841 . . 841 . 844 . . 844 . 845 . . 846 . 847 . . 847 . 848 849, 850 . 851 . . 852 . 853 . . 854 . 854 Miscellaneous Clauses in Trust Deeds (p. 886). 546. Limit of stock. Power to issue ixxxi'h.QV pari imssu stock 547. Stock limited to half paid-up capital .... 548. Limit of power to issue further stock to redeem prior deben- ture stock ......... 549. Limit of issue where prior debentures to be paid off and kept on foot ......... 550. Proceeds of issue to be applied in paying off mortgage and purchase-money ........ 551. Application of proceeds of issue in paying debts and purchasing propeity .......... 552. Application of stock proceeds in acquisition of assets to be vested in the trustees ....... 553. Company to vest hereditaments in trustees .... 554. Company to vest specified assets in the trustees in accordance with local laws ........ 555. Foreign assets may be vested in local trustees . 556. Prior debenture stock to be cleared off . 557. Company to create mortgage in foreign country . 558. 559. Mortgages of uncalled capital .... 894 560, 561. Redemption fund established by the trustees for deben- ture stock, with drawings ..... 896 562. Sinking fund and policy ........ 563. Cumulative sinking fund ........ 564. Stock-in-trade to be kept up 565. Trustees not to bo concerned with later security holders of 566. P. company . Advances to lessee 886 886 887 888 888 889 890 891 892 893 893 894 895 897 898 900 901 901 902 XVIU TABLE OF FORMS. Form PAGE 567. Special provisions as to foreign assets. Power of attorney . . 902 568. Meetings of trustees (large number) ..... 904 569. Trustees may take an office, with staff, &c. . . . . 905 570. Trust deed to secure debentures ...... 905 571. Trust deed to secure debentures of foreign railway con- struction fund and application thereof . . . . . 906 Chap. XV.-BANKING AND ADVANCE SECUEITIES (pp. 910—969). 572. Agreement for deposit subject to bank's usual clauses [appli- cable to land] 938 572a. Memorandum in shape of letter 940 573. Agreement for deposit applicable to registered shares, &c. . 940 Distringas Forms 942, 943 574. Proposal for deposit in order to obtain overdraft . . . 944 575. Power of attorney to execute mortgage 944 576. Agreement to deposit securities to bearer .... 944 576a. General dejDOsit secui'ity 945 577. Agreement to deposit goods warrants ..... 946 578. Agreement to deposit securities to secure loan of specified sum 946 579. Another 947 580. Advances on debentures payable on demand . . . . 949 581. Mortgage of uncalled capital to secure advance by bank . . 950 582. Security for loan on debentiu'es and charge on undertaking. Withdrawal of debentures up to SO per cent, of moneys for time being paid off ....... . 952 583. Security on bills and deposit of debentui'es in blank . . . 954 584. Specific mortgage of book debts ...... 956 585. Mortgage of securities for present and future advances . . 958 586. Agreement to sell some debenture stock, with special provi- sions as to re-sale ........ 959 587. Agreement for loans from bank by way of acceptance, &c. of bills, and to be secured by debentures with specific charge on uncalled capital 960 588. Joint and several guarantee (general clauses) . . . . 962 589. Charge by surety ......... 967 590. Deed of indemnity from company to dii'ectors, &c. for becoming sureties to bank 967 Cjiap. XVI.— PETITIONS (pp. 970-1015). 591. Petition to confirm reduction of capital under Act of 1867 [creditors affected] 977 592. Petition to confirm reduction under Acts of 1867 and 1877 [creditors not affected] 979 693. Order to place petition in paper, &c 979 594. Order diaponsing with " and i-oduced " 980 695. Order directing hearing and advertiHomonts .... 980 696. Order on special summons 980 TABLE OF FORMS. XIX Memo- Form PAGE 597. Advertisement 981 598. Affidavit in support of petition for reduction by cancelling lost capital ........... 981 599. 600. Causes of loss of cajiital 601. Loss by fire insurance company .... 602. Actuary's affidavit ....... 603. Accountant's affidavit in support 604. Affidavit of secretary as to meetings 605. Order confirming reduction by cancelling lost capital 606. Advertisement of order reducing capital . 607. Eeasons for reduction ...... 608. Order to discontinue use of " and reduced " . 609. Petition to confirm extension of objects 610. Another [power to acquire otlier business] 611. Petition to obtain memorandum and articles under randum Act, 1890 ...... 612. Summons for declaration as to creditors being unaffected by extension, and for fixing date of hearing i:»etition . . 1001 613. 614. Orders in chambers for petition to be heard and adver- tisement ........... 1001 615. Chief clerk's certificate as to creditors and notices . . . 1002 616. Advertisement notice as to presentation and intended hearing of petition .......... 1002 617. Another [debentui-e holders] 1003 618. Order on petition 1003 619. Advertisement of order on petition ...... 1004 620. Petition to confirm transfer of life assurance business . . 1007 621. Petition to stay winding-up and resume business . . . 1010 622. Order to staj^ proceedings in winding-up ..... 1013 623. Petition to restore to register under Act of 1880 . . .1013 624. Order on above petition . . . . . . ..1015 984 985 986 987 987 988 989 989 989 994 996 998 th- Chap. XVII.— WEITS of summons (pp. 1016—1031). 625. Common form writ ....... 626. Special, for call 627. Company's claim for calls and interest 628. Claim where shares forfeited ..... 629. Claim for call 629a. Notice by advertisement to defendant . 630. Claim to recover deposit where application for shares wi drawn before allotment ...... 631. Rescission of contract to take shares 632. Eescission and damages — fraud ..... .633. Damages for fraud 634. Compensation under Directors' Liability Act, 1890 635. Specific performance of agreement to allot shares . 636. Eescission of contract to sell mine to company . 637. Bribe to directors ....... 638. Promoter's secret profit 1016 1017 1018 1018 1019 1019 1020 1020 1021 1022 1022 1022 1023 1024 1024 b 2 XX TABLE OF FORMS. Form 639. 640. 641. 642. 643. 644. 645. 646. 647. 648. 649. Debentiire foreclosui-e .... Debenture trust deed .... Ultra vires agreement .... Ultra vires resolution .... Ultra vires business .... Dividend in prejudice of preference shares Dividend out of capital .... Eecovery of dividends improperly paid To enforce resolution of company . Exclusion of director .... To restrain de facto directors from acting 650. 651. 652. 653. 654. 655. 656. 657. 658. 659. 660, 661. 662. 663. 664. 665. 666. Chap. XVIII.— PLEADINGS (pp. 1032—1050) Statement of claim in action for calls .... Defence to same ...... Defence to action for calls (specially indorsed writ terclaim) ........ Another. Defence and counterclaim Claim to rescind for misstatements in share prospectus Defence to action for rescission Another claim for rescission Another, under sect. 38 of Act of 1867 . Defence to 657 Claim under Directors' Liability Act, 1890 Action to recover bribe to dii-ectsrs Defence to C60 Claim by debenture holders to enforce security Another, where trust deed .... Another form, where a dispute as to parties Ultra vires contract — injunction Defence to 665 and coun PAGE . 1024 . 1026 . 1026 . 1027 . 1027 . 1027 . 1027 . 1028 . 1028 . 1029 . 1029 1032 1033 1034 1035 1036 1037 1039 1040 1040 1041 1042 1043 1044 1046 1047 1049 1050 CiiAP. XIX.— JUDGMENTS AND OEDEES (pp. 1051— 1124^. 667. Usual order to rectify register . ...... 1053 668. Notice of motion to rectify . ....... 1053 669. Iioctification where invalid forfeiture ..... 1054 670. Motion to be placed in non-witness list ..... 1054 671. Where no contract filed under sect. 25 of 1867 . . . 1054 672. Another 1055 673. Eosci.s.sion of contract to take shares induced by misrepresen- tatiijji ........... 1055 674. S(;ttiiig aside sale of concession and ordoiiug repayment . . 1056 675. Contract for sale of mine sot aside ...... 1058 676. I Mn!ctor ordered to pay value of shares . . ... 1059 677 679. licHtraiiiing forfeiture of share .... 1059, 1060 680. Injunction to restrain exclusion of dirt'ctor . . . . 1001 681. Kestraiiiing directors from lioldiiig mooting at improj^cr period ........... 1061 TABLE OF FORMS. XXI Form 682. 683. 684. 685. 686. 687. Ecstraining directors from improperly rejecting votes . . llestraiuing confirmation of irregular resolution Amalgamation declared ultra vires and restrained . . . Sale of assets declared ultra vires and restrained Eestiaining issue of preferx3nco shares ..... Eiglits of preference stockholders declared and infringements restrained .......... 688, 689. Payments of dividend out of capital restrained . . . 690. Injunction refused 691. Eestraining company from purchasing its own shares 692. 693. Directors ordered to make good breaches of trust . 1065, 694. Eestraining presentation of -winding-up petition . . . 695. Eestraining bankruptcy proceedings against company inFrance 696. Eestraining improper use of name ...... 697. Plaintiff company to give secvuity for costs . . . . 698. Another— more modern ........ 699. Another. Fund to be paid into a bank ..... 700. Liberty to add " Limited " to old trade-mark .... 701. Ordinary judgment in debenture action (winding-up judge) . 701a. Ordinary judgment where trust deed ..... 702. Order in Chambers for inquiries ...... 703. Judgment declaring right of mortgage debenture-holders to first charge, with inquiries . . . . . . . 704. Declaration of charge, inquiry as to what property comprised, and liberty to apply as to sale .... 705. Accounts. Sale 706. Another. Order for accounts and inquiries . 707. Another. Special inquiries ..... 708. Declaration. A, and B. debentru-es 709. Liquidator to sell, liberty to debenture-holders to bid 710. Order adding plaintiffs ...... 711. Liberty to sue puisne incumbrancer on behalf of his clai 712. Appointment of defendant to represent . 713. Trust deed accounts ....... 714. Trust deed. Declaration of charge 715. Another 716. Trust deed, debenture stock 717. Another 718. Service of notice of judgment on debenture-holders dispensed with ......... 719. 720. Notices of judgment— Ord. XVI., r. 40 . . 1081, 721. Notice by advertisement of judgment 722. Notice of judgment or order ..... 723. Order binding stockholders not served with judgment 724. Order to add inquiry to judgment .... 725. Liberty to attend to debenture-holder 726. Advertisement for claims ...... 727. Advertisement to bearer, debenture-holders . 728. Advertisement as to order made for production of debentures and to prove .......... PAGE 1001 10G2 10G2 1003 10(33 1063 1064 1065 1065 1066 1067 1067 106S IOCS 106'J 1069 1069 1070 1071 1071 1072 1073 1074 1074 1075 1075 1076 1077 1077 1078 1078 1078 1079 1079 1080 1080 1082 1082 1083 1084 1085 1085 1085 1086 1087 XXU TABLE OF FORMS. Form PAGE 729. Auother. Advertisement (winding-up registrar) . . . 1088 730. Order appointing receiver and manager . .... 1089 731. Appointment of receiver and manager for six montlis, witli leave to borrow and charge in priority to debentures . . 1093 732. Another. Eeceiver and manager , . . . . . . 1094 733. Another 1094 734. Liquidator to be receiver 1095 735. Clerk of company to be receiver and manager without security 1096 736. Order for sale on motion ........ 1096 737. Sale as going concern ......... 1097 738. Sale of waterworks 1097 739. Sale of company's patent, liberty for debenture-holder to bid . 1097 740. Sale of tramway 1097 741. Order confirming sale of land and for payment into Court . . 1098 742. Certificate of result of sale by tender 1098 743. Approval of conditional contract for sale ..... 1099 744. Liberty to debentm-e-holder to bid and set off . . . 1099 745. Approval of contract for lease ....... 1099 746. Eeceiver to borrow 2,000/ 1100 747. Liberty to raise money to pay off prior incumbrances . . . 1100 748. Liberty to receiver and manager to borrow and create first charge 1100 749. Liberty to receiver to issue cei'tificates in respect of money raised 1101 750. Liberty to receiver to issue debentures in respect of money borrowed . . . . 1101 751. Liberty to receiver and manager to pay off first mortgage, and borrow for that purpose ........ 1102 752. Appointment of receiver, to act also as manager for eight weeks, with liberty to pay wages, &c 1102 753. Liberty to receiver to go to Constantinople and sell . . . 1102 753a. Liberty to receiver to compromise claims with vendor abroad 1103 753b. Liberty to promote Bill in Parliament, &c. . . . . 1103 754. Liberty to liquidator and receiver to intervene in foreign liquidation .......... 1104 755. Liberty to take proceedings in France 1104 756. Liberty to trustees to appeal . . . . . , .1104 756a. Liberty to unsecured creditors to defend debenture actions . 1104 766i5. Libortj' to liquidator to execute i30wcr of attorney to collect calls abroad and manage iii-opcrty ..... 1105 756f'. Tiiborty for debenture trustees to appoint agents to complete railway abroad and send them money . . . ..1105 757. liibcrty for receiver to appoint attorney 1105 768. Liberty to appoint attorney to carry on business in Eussia, &c. 1106 769. Liberty to send telegram 1106 760. Liberty to surrender lease 1106 761. Eeceiver in action to givo up possession to receiver of first mortgagee .......... 1106 762. Eeceiver to hand over articles to claimant 1106 TABLE OF FORMS. XXlll Form I'AGB 763. Liberty for debenture trustees to make payments and consign- ments 1107 764. Liberty to receiver and manager to close company's businesses 1107 765. Liberty to close public-houses 1108 766. Order to make calls wbicli are charged by debentures (after winding-up order) 1108 767. Another 1108 768. Another 1109 769. Order for liquidator to pay calls to debenture-holders' receiver 1110 769a. Order for liquidator to pay moneys to credit of action without prejudice to his remuneration, &c. . . . . .1110 .769b. Liberty to auctioneer to repay sums advanced to pay rates, &c. 1110 770. Liquidator to proceed for misfeasance with indemnity . .1111 771. Liberty to compromise misfeasance proceedings . . .1111 771a. Order on application to enforce proceedings for misfeasance . 1112 771b. Eeducing receiver's security 1112 771c. Order to discharge receiver and manager 1112 772. Order to commit liquidator for contempt 1113 773. Meeting of debenture-holders to be convened . . . . 1113 774 — 777. Advertisements convening meetings of debenture-holders 1114, 1115 778. Sanction of resolutions of debenture-holders . . . .1115 779. Certificate of amount due to debentui-e-holders . . . . 1115 780. Another form of certificate 1116 781. Certificate of chief clerk (now master) as to result of inquiries in debenture action . . . . . . . ..1117 782. Dividend to debenture -holders 1118 783. 784. Orders to pay off debentures . . . . 1118,1119 785,786. Orders to pay dividends to debenture-holders . . 1120 787. Fui'ther consideration in chambers 1120 788. Foreclosure .1121 789. Foreclosure order ......... 1123 790. Book debts taken in part satisfaction of amount due . . 1123 Chap. XX.— EECONSTEUCTION (pp. 1125—1154). 791. Agreement with a view to reconstruction 1137 792. Special provision as to distribution of shares . . . .1142 793. Power to rescind subject to a consideration 1144 794. Notice and resokitions prior to reconstruction . . . 1144 795. Circular 1145 796. 797. Schemes 1145, 1146 798. Supplemental agreement specifying shares 1146 799. Liquidator's direction to allot 1147 800. Cii-cular 1147 801. Notice of allotment 1148 802. Eeplytolast 1149 803. Fractional certificate 1149 804. Eequest for allotment of shares in exchange for fractional certificates 1150 XXIV TABLE OF FORMS. Form 805. Request for allotment to specified persons . 806. Resolution for sale of undertaking under Cotton clause 807. Notice of dissent pursuant to sect. 161 808. Agreement for exchange of shares .... 809. Circular as to distribution in specie .... PAGE 1150 1151 1151 1151 1153 Chap. XXI.— AMALGAMATION (pp. 1155—1166). 810. Agreement -with a view to amalgamation 1162 811. Resolution for amalgamation 1163 812. Resolution for amalgamation (two companies with a third) . 1163 813. Resolution for amalgamation (new company formed) . . 1164 Chap. XXII.— SPECIAL ACTS AND PROVISIONAL ORDERS (pp. 1167—1183). 814. Act extending objects of a company formed under the Act of 1862 1171 SUMMARIES OF OTHER SPECIAL ACTS . 1172 APPENDIX. — ♦ — (A) STATUTES 1187 (B) RULES AND ORDERS, &c 1296 INDEX 1309 TABLE OF CASES. A. A — Alb PAGE A Company, Re, (1894) 2 Ch. 3-49 - - - - - 1067 Aaron's Reefs v. Twiss, (1896) A. C. 273; 65 L. J. P. C. 54; 74 L. T. 794 - - 69, 93, 95, 101, 103, 114, 121, 136, 393, 1033 Abbott V. Stratten, 3 Jo. & Lat. 613 _ _ _ - 723 Aberaman Ironworks Co. v. Wickens, 4 Ch. 101 ; 20 L. T. 89 ; 17 W. E. 211 - - - - - - - - 1059 Aberdeen Rail. Co. v. Blaikie, 1 Macq. 461 ; 23 L. T. 315 ; 2 Eq. E. 1281 - - - - - - - 67, 436 Accidental Ins. Co. v. Davis, 15 L. T. 182 - - - - 389 Acland v. Lewis, 1 K. & G. 334; 30 L. J. C. P. 29 ; 9 C. B. N. S. 32 - 2 Adair v. Young, 12 C. D. 13 ; 41 L. T. 361 ; 28 W. R. So - - 223 Adams v. G. W. Rail. Co., 6 H. & N. 404 - - - - 41 Adams v. Newbigging, 13 App. Cas. 308 ; 57 L. J. Ch. 1066 ; 59 L. T. 267 ; 37 W. R. 97 - - - - - - - 1059 Adamson's Case, 18 Eq. 670 ; 44 L. J. Ch. 125 ; 22 W. R. 820 - 188, 436 Adcock V. Evans, In re Allen, (1896) 2 Ch. 345 ; 65 L. J. Ch. 760 ; 75 L. T. 136; 44W. R. 644 - - - - - - 964 Addie v. The Western Bank of Scotland, 1 H. L. Sc. 145 - - 11 Addinell's Case, 1 Eq. 225 ; 35 L. J. Ch. 75; 13 L. T. 456 ; 14 W. R. 72- - - - - - - --22 Addison r. Ness, 9 T. L. R. 607 - - - - - 212 Addlestone Linoleum Co., Re, 37 C. D. 191; 36W.R. 57-149, 182, 191, 283 Ador, Ex parte, (1891) 2 Q. B. 574 ; 61 L. J. Q. B. 15 ; 65 L. T. 485 ; 40 W. R. 71 (C. A.) - - - - - - 818 Agar V. Athenaeum Society, 3 C. B. N. S. 725 ; 27 L. J. C. P. 95 ; 4 Jur. N. S. 211 - - - - - - 37, 455 Aggs V. Nicholson, 1 H. & N. 165 ; 25 L. J. Ex. 348 - - 192 Agra Bank v. Barry, L. R. 7 H. L. 135 - - - - - 795 Agra Bank Claim, Re European Bank, 8 Ch. 41 ; 27 L. T. N. S. 732 ; 21 W. R. 45 - - - - - - 921,923 Agra and Masterman's Bank, lit re. Ex parte Asiatic Banking Cor- poration, 12 Eq. 409 : 2 Ch. 397 ; 36 L. J. Ch. 222 ; 16 L. T. 162 ; loW. R. 414- - - - - 763,765,766,1135 Airey, In re, Airey v. Stapleton, (1897) 1 Ch. 164 ; 66 L. J. Ch. 152 ; 76 L. T. 151 ; 45 W. R. 286 - - - - - 724 Albert Arbitration (Indemnity Case), Reilly, 17 - - - 1155 Albert Life Assui-ance Co., L. R. 6 Ch. 381 ; 40 L. J. Ch. 505 ; 24 L. T. N. S. 768 ; 19 W. R. 670 - - - - -1007 Albert Life Assurance Co., Re Tait's Claim, 16 Sol. J. 46 - - 261 Albion, &c. Co. v. Martin, 1 C. D. 580 ; 45 L. J. Ch. 173 ; 33 L. T. 660 ; 24 W. R. 134 - - - - - - 436 XXVI TABLE OF CASES. Ale — Ang PAGE Alcock, Be, Prescott v. Phipps, 23 C. D. 372 ; 49 L. T. 240 - - 922 Alderson v. Madclison, 5 Ex. D. 293 ; 8 App. Cas. 467 ; 52 L. J. Q. B. 737 ; 43 L. T. 249 ; 49 L. T. 303 ; 29 W. E. 105 - - 94, 767 Alexander v. Simpson, 43 C. D. 139; 59 L. J. Ch. 137; 61 L. T. 708; 38 W. E. 161; 1 Meg. 457 - - - 416,417,701 Alexander Mitchell's Case, 4 App. Cas. 567 ; 40 L. T. 758 ; 27 W. E. 873 __------ 397 Alexandi-a Palace Co., Limited, 21 C. D. 149; 30 W. E. 771; 46 L. T. 730 ; 51 L. J. Ch. 655 - - - 456, 516, 519, 520 Alexandria Co. v. Musgrove, 11 Q. B. D. 174 - - 46, 48 Alison, i?j re, 11 C. D. 284 . _ _ - -817,1026 AlkaHne Eeduction Syndicate, Be, 45 W. E. 10; 12 T. L. E. 534 - 182 Allen, In re, Adcock v. Evans, (189G) 2 Ch. 345; 65 L. J. Ch. 760 ; 75L. T, 136; 44W. E. 644 - - - - - - 964 Allen V. Flood, (1898) A. C. 1 ; 67 L. J. Q. B. 119; 77 L. T. 717 ; 46 W. E. 258 - - - - - - - 261 AUen V. Taylor, 19 W. E. 25 ; 24 L. T. 249 - - - - 207 Alliance Bank V. Broom, 34 L. J. Cli. 256 - - - - 911 Alliance Marine Ass. Co., (1892) 1 Ch. 300; 61 L. J. Ch. 176; 65 L. T. 554 ; 40 W. E. 329 - - - - - 992, 993 Alma Spinning Co., Be, 16 C. D. 681 ; 29 W. E. 133 ; 43 L. T. 620; 53 L. J. Ch. 167 - - - - - - 433, 442 Almada and Tirito Co., Be, 38 C. D. 415 ; 57 L. J. Ch. 706 ; 59 L. T. 159 ; 36 W. E. 593 ; 1 Meg. 28 - - 182, 274, 283, 285 Aluminium Co., W. N. (1894) 6 - - - - 973, 977 ^Amalgamated Syndicates, Be, (1897) 2 Ch. 600; 66 L. J. Ch. 783; 77 L. T. 431 ; 4 Manson, 308 - - - - - 271 Ambergate Eail. Co. v. Norcliffe, 6 Ex. 629 ; 20 L. J. Ex. 234 - - 389 Ambrose Lake Tin Co., 14 C. D. 390 ; 28 W. E. 783 ; 42 L. T. 604 ; 49 L. J. Ch. 457 - - - - - - - 66 American, &c. Co., North, J., 29th May, 1891, A. 806 - - - 1054 Ames V. Birkenhead Docks, 20 Beay. 332 - - - - 1092 Anderson's Case, 7 C. D. 75 ; 26 W. E. 442 ; 37 L. T, 560; 47 L. J. Ch. 273 - - - - 69, 136, 184, 185, 189, 273 Anderson's Case, 17 C. D. 372 ; 29 W. E. 372 ; 43 L. T. 723 ; 50 L. J. Ch. 269 - - - - - - - - 1052 Andress' Case, 8 C. D. 126 ; 26 W. E. 567 ; 38 L. T. 266 ; 47 L. J. Ch. 679 - - - - - - - - 188 Andrews v. Gas Meter Co., (1897) 1 Ch. 361 ; 66 L. J. Ch. 246 ; 76 L. T. 132 ; 45 W. E. 321 - - 273, 285, 286, 358 378, 379, 410, 480, 481, 649, 652 Andrews v. Mockford, (1896) 1 Q. B. 372; 65 L. J. Q. B. 302; 73 L. T. 726, 730 ; 12 T. L. E. 139, 175 - - 107, 108, 1022, 1037 Anglo-African Steamship Co., 32 C. D. 348 ; 54 L. T. 807 ; 55 L. J. Ch. 579 ------- - 467 Anglo-American, &c. Co., In re, (1898) 1 Ch. 100; 67 L.J. Ch. 45- 1013 Anglo- Australian v. British, &c. Co., 3 Giff. 521 ; 4 De G. F. & J. 341 ----_-_- 1155 Anglo-Austrian Printing Co. (Isaacs' Case), (1892) 2 Ch. 158; 61 L. J. Ch. 481 ; 66 L. T. 593 ; 40 W. E. 518 : affg. 66 L. T. 250 ; 40 W. E. 362 ----- 374, 376, 377, 433 Anglo-Colonial Syndicate, Limited, 65 L. T. 847 - - 189, 289 Anglo-Continontul, &c. Corpn., (1898) 1 Ch. 327; 78 L. T. 157 - 391, 468 TABLE OF CASES. XXVll Ang— Att TAGE Anglo-Damibian, &c. Co., In re, 20 Eq. 339 ; 23 W. R. 783 ; 33 L. T. 118 ; 44 L. J. Ch. 502 - - - 411, 413, 445, 771, 789, 807 Anglo-French Co-cperative Society, In re, 21 C. D. 492 ; 31 W. R. 177; 47 L. T. 038 - - - - - - - 427 Anglo-Italian Bank v. De Eosaz, L. E. 2 Q. B. 452- - - 1151 Angus V. Clifford, (1891) 2 Ch. 449 ; GO L. J. Ch. 443 ; 65 L. T. 274 ; 39 W. E. 498 (0. A.) : reversing 63 L. T. 684 ; 39 W. R. 252 - 99, 108 Anstocl V. Land Co. of Australasia, (1893) A. 267, Vaughan Williams, J., 21st March, 1894 - - - - -1073 Anthony v. Seger, 1 Hagg. Consist. 9 - - - - - 420 Appletreewick Lead Mining Co., 18 Eq. 95 ; 22 W. E. 678 ; 30 L. T. 287 ; 43 L. J. Ch. 793 - - - - - - 187 Appleyard's Case, 18 C. D. 587 ; 30 W. E. 147 ; 45 L. T. 552 ; 50 L. J. Ch. 554 - - - - - - 188, 191, 230 Archer's Case, In re North Australian Territory Co., (1892) 1 Ch. 322 ; 61 L. J. Ch. 129; 65 L. T. 800 ; 40 W. E. 212 (C. A.) - 429, 431 Argus Life Assurance Co., 39 C. D. 571 ; 58 L. J. Ch. 166 ; 59 L. T. 689; 37 W. E. 215 _ _ _ 307, 379, 649, 806, 1005 Argyle, &c. Co., Re, 54 L. T. 237 - - - - 20, 289 Arizona Copper Co. v. Smiles, 29 L. E. Sc. 134 - - - 46 Arkwright v. Newbold, 17 C. D. 322 ; 28 W. R. 829 ; 29 W. E. 455 ; 44 L. T. 393; 50 L. J". Ch. 372 - - - 96, 107, 124 Armitage v. Garnett, Re Armitage, (1893) 3 Ch. 337 ; 63 L. J. Ch. 110; 69 L. T. 619; 7 E. 290 - _ _ . 450,458 Army, &c. Soc. v. Craig, 8 T. L. R. 227 - - - - 124 Arnison v. Smith, 41 C. D. 348 ; 61 L. T. 63 ; 37 W. R. 739 ; 1 Meg. 388 - - - - - 97, 99, 100, 106, 108, 115, 139 Arnot's Case, 36 C. D. 702 ; 57 L. J. Ch. 195; 57 L. T. 353 - - 25 Art Union of London v. Savoy Overseers, (1894) 2 Q. B. 609; 63 L. J. M. C. 253 ; 71 L. T. 40 ; 42 W. R. 690 ; 59 J. P. 20 ; 9 R. 690 - 51 Ashbui^ner v. Sewell, (1891) 3 Ch. 405 ; 60 L. J. Ch. 784 ; 65 L. T. 524 ; 40 W. R. 169 - - - - - - 203 Ashbury v. Watson, 30 C. D. 376 ; 33 W. R. 882 ; 54 L. T. 27 ; 54 L. J. Ch. 985 - 34, 71, 285, 287, 358, 359, 368, 373, 378, 481, 649 Ashbiiry Railwav, &c. Co. v. Eiche, L. E. 7 H. L. 653 ; 33 L. T. 451 ; 44 L. J. Ex. 185 - 3, 4, 5, 12, 268, 269, 272, 274, 278, 308, 368, 373, 416, 649, 784 Ashby V. Costin, 59 L. T. 224 - - - - - 405 Ashley's Case, 9 Eq. 268 ; 18 W. E. 395 ; 22 L. T. 83 ; 39 L. J. Ch. 354 ------- - 102, 104 Ashton V. Corrigan, 13 Eq. 76 - - - - - 792 Ashton r. Dalton, 2 Coll. 568 - - - - - - 915 Ashiirst V. Mason, 20 Eq. 225 ; 23 W. E. 506 ; 44 L. J. Ch. 337 471, 1067 Askew's Case, 9 Ch. 664 ; 22 W. E. 833; 31 L. T. 55 ; 43 L. J. Ch. 633 --_-__._ 1052 Asphaltic Wood Co., Re, 26 C. D. 624 ; 32 W. E. 915 ; 51 L. T. 321 782 Athenreum Society v. Pooley, 3 De Gr. & J. 294 - - - - 762 Atkin V. Wardle, 5 T. L. E. 734 ; 61 L. T. 23 - - 306, 449 Att. -Gen. v. Cambridge Gas Consumers' Co., L. E. 4 Ch. 71 ; 38 L. J. Ch. 94 ; 17 W. R. 145 _ . _ . . -1182 Att.-Gen. v. Day. 2 Atk. 212 - - - - 32, 646 Att.-Gen. v. G. E. Rail. Co., 11 C. D. 449; 5 App. Cas. 473; 27 W. E. 759; 28 W. E. 769 ; 40 L. T. 265 ; 42 L. T. 810 ; 48 L. J. Ch. 429 ; 49 L. J. Ch. 545 - - - 269, 272, 273, 275, 786 PAGE - 274 - 876 - 1182 - 307 J. 12 , 407 0; 274 - 1182 XXVlll TABLE OF CASES. Att — Ban Att.-Gen. v. G. N. Eail. Co., 1 Dr. & Sm. 213 Att.-Gen. v. Lamploiigh, 3 Ex. D. 214 - Att.-Gen. v. Lonsdale, L. R. 7 Eq. 377 ; 38 L. J. Ch. 335 - Att.-Gen. v. Mayor of Brecon, 10 C. D. 204 - Att.-Gen. v. New York Breweries Co., (1898) 1 Q. B. 205 ; 67 L. Q. B. 86 ; 78 L. T. 61 ; 46 W. E. 193 Att.-Gen. v. North Metropolitan Tramways' Co., (1892) 3 Cli. 70; 61 L. J. Ch. 693 ; 72 L. T. 340 - ' - Att.-Gen. v. Eichards, Anstey, 603 - - - - Att.-Gen. r. Sheffield Gas Consumers' Co., 17 Jur. 677; 22 L. J. Ch. 811 ; 3 De G. M. & G. 309 - - - - - 1182 Att.-Gen. v. Terry, L. E. 9 Ch. 423 ; 30 L. T. 215 ; 22 W. E. 395 - 1182 Att.-Gen. v. Tomline, 14 C. D. 58; Kerr, 240; 49 L. J. Ch. 377; 42L. T. 880; 28 W. E. 870 ; 44 J. P. 617 - - - 1182 Attree v. Hawe, 9 C. D. 337 ; 47 L. J. Ch. 863 ; 38 L. J. 733 ; 26 W. E. 871 - - - - - - - - 751 Attwood V. Munnings, 7 B. & C. 278 ; 1 M. & G. 66 - - 723 Atwoolu. Merryweather, 5 Eq. 464, n. - - - - 379, 422 Australia, The, (1895) P. 212; 64 L. J. P. 74; 72 L. T. 203; 43 W. E. 670; 11 E. 757 ; 7 Asp. M. C. 605 - - - 964 Australian, &c. Co. v. Mounsey, 4 K. & J. 733 ; 6 W. E. 734 ; 31 L. T. 0. S. 246 - - - - 279, 305, 446, 783, 789 A. W. Hall & Co., 37 C. D. 712 189 B. Badische Anilin, &c. v. Schott, (1892) 3 Ch. 447; 61 L. J. Ch. 698 ; 67 L. T. 281 - - - - - - - - 207 Baglan Hall Colliery Co., In re, 5 Ch. 346 ; 18 W. E. 499 ; 23 L. T. 60; 39 L. J. Ch. 591 - - - 29, 183, 275, 277, 281 Baglehole, ^x^wri!?, 1 Eose, 432 - - • - - 916 Bagnall v. Carlton, 6 C. D. 371 ; 26 W. E. 243; 37 L. T. 481 ; 47 L. J. Ch. 30 - - - - - 55, 58, 63, 1059 Bahamas Plantations v. Griffin, 14 T. L. E. 139 - - 152, 156 Bahia, &c. Eail. Co., L. E. 3 Q. B. 595 ; 37 L. J. Q. B. 176 ; 18 L. T. 467 ; 16 W. E. 862 - 9, 12, 25, 387, 403, 711, 712, 766, 823, 1052 Bailey v. Barnes, (1894) 1 Ch. 25; 63 L. J. Ch. 73; 69 L. T. 542 ; 42 W. E. 66 ; 7 E. 9 - - - - - 794, 796, 801 Bailey v. Birkenhead Co., 12 Beav. 433 ; 19 L. J. Ch. 377 - - 389 Bailey v. Sweeting, 9 C. B. N. S. 843 - - - - - 194 Bainbridgo v. Smith, 41 C. D. 642 ; 60 L. T. 879 ; 37 W. E. 594 431, 439, 1061 Baines v. Goai-v, 35 C. D. 154 ; 56 L. J. Ch. 935 ; 56 L. T. 567 ; 36 W. E. 98 ; 51 J. P. 628 - - - - - - 206 Baines v. Swainson, 4 B. & S. 270 - - - - - 932 Baird's Case, 5 Ch. 725 ; 23 L. T. 424 ; 18 W. E. 1094 28, 406, 548, 549 Baker v. Hcdgccock, 39 C. D. 520 - - - - - 207 Balkifi Co., W. N. (1888) 3 ; 58 L. T. 300 ; 36 W. E. 392 - - 399 Balkis Co. v. Tomkinson, (1893) A. C. 396 ; 63 L. J. Q. B. 134 ; 69 L. T. 598 ; 42 W. E. 204 ; 1 E. 78 (H. L.) - - 190, 766, 823 Bangor, &c. Co., lu re, 20 Eq. 69 ; 32 L. T. 389 ; 23 W. E. 785 - 662 TABLE OF CASES. XXIX Ban— Bar page Bank of Africa r. Salisbury Gold Mining Co., (1892) A. C. 281 ; Gl L. J. P. C. 34; 66 L. T. 237 ; 41 W. K. 47 - - - - 396 Bank of Bengal v. Macleod, 7 Moo. P. C. 35, 74 - - - 723 Bank of England v. Vagliano, (1S91) A. C. 144 ; GO L. J. Q. B. 14.; , 64 L. T. 353 ; 39 W. E. 657 - - - - - - 931 Bank of Hindustan v. Alison, L. E. 6 C. P. 73; 19 W. E. 505 ; 23 L. T. 616; 40 L. J. C. P. 1 - - - - - 2 Bank of Ireland v. Evans' Trustees, 5 II. L. C. 389 - - 17, 18 Bank of London v. Tyrrell, 10 H. L. C. 26 ; 31 L. J. Cli. 369; 8 Jur. N. S. 849 - '- - - - - - - 66 Bank of South Anstralia, Ee, (1895) 1 CIi. 578; 64 L. J. Ch. 397 ; 72 L. T. 273; 43 W. E. 359; 12 E. 166 - •- - - 1130 Bank of South Australia v. Abrahams, 6 P. C. 265 ; 23 W. E. 668 ; 32 L. T. 277 - - - - - - - 790 Bank of Turkey v. Ottoman Co., 2 Eq. 369 ; 14 W. E. 819 ; 14 L. T. 545, 884 ------ - 135, 446 Bankart v. Bowers, L. E. 1 C. P. 485 - - - - 843 Bannatyne v. Direct Spanish Cable Co., 31 C. I). 287; 35 W. E. 125; 55 L. T. 716; 56 L. J. Ch. 107 - - - 525, 662, 974 Banner v. Berridge, 18 0. D. 251 ; 29 ^\. E. 844; 44 L. T. 680; 50 L. J. Ch. 630 ------- 08 Barangah Oil Co., Re, 36 C. I). 702 ; 57 L. T. 353 ; 57 L. J. Ch. 195 191 Barber's Case, 5 C. D. 963 ; 26 W. E. 3 - - - - - 439 Barkworth v. Young, 4 Drew. 1- - - - -915 Barned's Banking Co., 3 Ch. 105 ; 16 W. E. 193 ; 17 L. T. 269 ; 37 L. J. Ch. 81 - - - - - 9, 17, 26, 275, 303 Barnett, Hoares & Co. v. South London Tramways Co., 18 Q. B. D. 815 - - - - - - - - 12 Barnett v. South London Tramways Co., 18 Q. B. D. 815 ; 35 W. E. 640; 37L. T. 436; 56L. J. Q. B. 452 - - - - 262 Barney v. Joshua Stubbs & Co., (1891) 1 Ch. 482 ; 60 L. J. Ch. 190 ; 64 L. T. 306 ; 39 W. E. 617 (C. A.) - - - - 1091 Baroness Wenlock v. Eiver Dee (No. 1), 19 Q. B. D. 155 - 12, 412 Baroness Wenlock v. Eiver Dee (No. 2), 36 C. D. 681 - 4, 269, 305 Barrett's Case, 4 De G. J. & S. 416 ; 12 L. T. 193 ; 13 W. E. 559 - 21 Barrett's Bi'ewery Co. v. The Tivoli L. P., Chitty, J., at Chambers, 17th June, 1892, A. 883 - - - - 1080,1101,1107 Barrow's Case, 14 C. D. 433 ; 42 L. T. 991 ; 49 L. J. Ch. 498 ; 28 W. E. 341 - - - - - - - 188, 190 Barrow Hematite Co., 39 C. D. 582; 58 L. J. Ch. 148; 59 L. T. 500 ; 37 W. E. 249 - _ - - _ 379, 649, 662 Barrow-in-Furness Land Co., In re, 14 C. D. 400 ; 42 L. T. 888 - 188 Barrow v. Isaacs, (1891) 1 Q. B. 417; 60 L. J. Q. B. 179 ; 64 L. T. 686; 39 W. E. 338; 55 J. P. 517 (C. A.) - - - - 205 Barry I'. Croskey, 2 J. &H. 117 - - - - - 107 Barry (on behalf, &c.) v. San Pedro Brazil Gas Co., M. E., 2()th April, lb77, A. 855 ----- -1076,1105,1106 Bartholomay Brewery Co. v. Wyatt, (1893) 2 Q. B. 499 ; 62 L. J, Q. B. 525 ; 69 L. T. 561 ; 42 W. E. 173 ; 5 E. 564 - - 48 Bartlett r. Carlton Engineering Co., North, J., 11th April. 1891, A. 441 - - - - - - - - 1073 Bartlett v. Holmes, 13 C. B. 630 ; 22 L. J. C. P. 182 ; 17 Jur. 858; 1 C. L. E. 159 - - - - - - - 829 Bartlett v. Mayfaii- Property Co., 14 T. L. E. 336 ; 46 W. E. 19 - 787 XXX TABLE OF CASES. Bar— Ben page Bartlett v. Northumberland Avenue Hotel Co., 53 L. T. 611 - 1091 Bartlett v. West Metropolitan Tramways Co., (1893) 3 Ch. 437 ; 63 L. J. Cli. 208 ; 69 L. T. 560 - - - - - - 1090 Barton's Case, 5 C. D. 963 - - - - - - 431 Barton's Trusts, 5 Eq. 238 - - - - - - 458 Barton v. L. & N. W. Eail. Co., 24 Q. B. D. 83 ; 59 L. J. Q. B. 33 ; 62 L. T. 164 ; 38 W. E. 197 - - 25, 398, 403, 400, 712 Barton v. North Staffordshire EaU. Co., £8 C. D. 458; 57 L. J. Ch. 800 ; 58 L. T. 549 ; 36 ^Y. E. 754 - - - 403, 400, 459 Bai-wick v. English Joint Stock Banking Co., L. E. 2 Ex. 259 (Ex. Ch.) ; 36 L. J. Ex. 147 ----- 10,11 Bassett v. Duke of Bedford, 8 T. L. E. 602 - - - - 120 Batard v. Hawes, 2 E. & B. 287 ; 3 B. & K. 277 ; 22 L. J. Q. B. 443; 17 Jul-. 1154 ------- 72 Bateman v. Mid Wales Eail. Co., L. E. 1 C. P. 499 ; 14 W. E. 672 ; 35 L. J. C. P. 205 ; 12 Jur. N. S. 453 - - - - 306 Bath's Case, 8 C. D. 334 ; 26 W. E. 441 ; 38 L. T. 267 ; 47 L. J. Ch. 601 - - - - - 6, 191, 276, 278, 448 Batten v. Wedgwood Co., 28 C. D. 317 - - - - - 1093 Battison v. Hobson, (1896) 2 Ch. 403 ; 65 L. J. Ch. 695; 74 L. T. 689; 44 W. E. 615 - - - - - - 795 Batey I'. Whitehead, Times, 3rd May, 1895 - - - - 811 Bawden v. London, Edinburgh, and Glasgow Co., (1892) 2 Q. B. 534; 61 L. J. Q. B. 792; 57 J. P. 116 (C. A.) - - - 12 Baxter v. Browne, 7 M. & G. 210; 8 Sc. N. E. 1019 - . . 2 Bayly, Ex parte, In re Hart, 15 C. D. 223 - - - - 809 Beattie v. Lord Ebury, 7 Ch. 777 ; 20 W. E. 994 ; 27 L. T. 398 ; 41 L. J. Ch. 804 - - - - - - - 94 Beaufort (Duke of) v. Neeld (1845), 12 CI. & F. 248 - - 155 Beckett v. Addyman (1882), 9 Q. B. D. 783 - - - - 963 Beckfordr. Wade, 17 Ves. 97 - - - - - 68 Beckwith, Ex parte, (1898) 1 Ch. 324; 46 W. E. 376 - 260, 433, 440 Bedford v. Backhouse, 2 Eq. Cas. 615 - - - - 796 Beer v. London and Pans Hotel Co., 20 Eq. 412 ; 32 L. T. 715 - - 192 Beeston Pneumatic Tyre Co., 14 T. L. E. 378 - - - Add. Bell Brothers, Re, 65 L. T. 245 ; 7 T. L. E. 689 (Chitty, J.) - - 401 Bellairs v. Tucker, 13 Q. B. D. 562 - - - 94, 100, 106, 107 Bellamy v. Brickenden, 2 J. & H. 137 - - - - 938, 939 Benett v. Wyndham, 4 De G. F. & J. 259 - - - - 470 Bennett, In re, Masonic and General Life Assurance Co. v. Sharpe, (1892) 1 Ch. 154 ; 61 L. J. Ch. 193 ; 65 L. T. 806 ; 40 W. E. 241 (C. A.) ------ - 518, 519 Bennett v. Brumfit, L. E. 3 C. P. 28; 16 W. E. 131 ; 17 L. T. 213; 37 L. J. C. P. 35 ; 1 H. & P. 407 - - - - 466, 811 Bennett v. Cooper, 9 Beav. 252 ----- 773, 913 Bensusan v. Clarke, Times, 12th Nov., and 13th Dec, 1897 - - 129 Bcntham Mills Spinning Co., In re, 11 C. D. 900; 28 W. E. 26; 41 L. T. 10; 48 L. J. Ch. 671 - - - - - 401, 407 Bcntinck v. Fenn, 12 App. Cas. 652- - - - - 66 Bentinck v. London Joint Stock Bank, (1893) 2 Ch. 120; 62 L. J. Ch. 358 ; 68 L. T. 315 ; 42 W. E. 140 ; 3 E. 120 - 760, 797, 917 Bontley'H Case, 12 C. D. 851 ; 28 W. E. 165 ; 41 L. T. 500 ; 49 L. J. Ch. 240 - - - - - - - - 188 TABLE OF CASES. XXXI Ben — Bol page Bentley (Henry) & Co., Ex jmrte llarrison, O'J L. T. 20-i (C. A.) - 155 Bentley v. Black, 9 T. L. E. 580 - - - - 94, 100 Betts V. De Vitre, L. R. 5 U. L. 1 - - - - - 223 Betts V. Gibbius, 2 A. & E. 57 ; 4 N. & M. 6-4 - - - - 123 Beyfus v. Masters, 39 C. D. 110 - - - - - 203 Biclwcll Brothers, Limited, (1893) 1 Ch. 603; 62 L. J. Ch. 549; 68 L. T. 342; 41 W. R. 363 ; 3 E. 377 - - - - 419, 645 Bigg's Case, 1 Eq. 309; 14 W. E. 244 ; 13 L. T. 627 ; 35 L. J. Ch. 216 -------- 392 Biggerstaff v. Eowatt's Wharf, (1896) 2 Ch. 93 ; (jo L. J. Ch. 536; 74 L. T. 473 ; 44 W. E. 536 - - 30, 38, 412, 427, 440, 794 Binney v. Ince Hall Coal Co., 35 L. J. Ch. 363; 14 L. T. 392 380, 450, 823 Birch V. Cropper, 14 App. Cas. 545 - - 361, 369, 455, 482, 500, 1130 Bird ('. Bird's Patent Deodorising, &c. Co., 9 Ch. 358; 30 L. T. 281 ; 43L. J. Ch. 399 ----- 1063,1129 Birmingham Banking Co., 36 L. T. 150 - - - - 467 Birmingham Breweries v. Jameson, "W. N. (1898) 15 ; 46 "W. E. 375 - - - - - - - - - 207 Bii'mingham Canal Co. v. Cartwright, 11 C. D. 421 - - - 770 Bishop's Waltham Eail. Co., Ee, 2 Ch. 382 ; 15 W. E. 96 - - 1182 Bishop V. Balkis Co., 25 Q. B. D. 512 ; 59 L. J. Q. B. 565 ; 63 L. T. 601; 39 W. E. 99; 2 Meg. 292 - - _ - 404,405 Bishop V. Smyrna and Cassaba EaU. Co., (1895) 2 Ch. 265; 72 L. T. 773 - - - - - - - - - 468 Black V. Homersham, 4 Ex. D. 24 ; 48 L. J. Ex. 79 ; 39 L. T. 071 ; 27 W. E. 171 - - - - - - - 458 Black V. Mallaluo, 5 Jur. N. S. 1018; 7 W. E. 303; 33 L. T. 267 ------- - 412, 436 Black V. Williams, (1895) 1 Ch. 408- - - - - 795 Blackburn Building Soc. v. Cunliffe, Brooks & Co., 9 App. Cas. 857 ; 31 W. E. 98 ; 48 L. T. 33 ; 52 L. J. Ch. 92 ; 33 W. R. 309 - - 412 Blackburn v. Vigors, 12 App. Cas. 531 - - - - 800 Blackford v. Davis, 4 Ch. 304 - - - - - 938, 939 Blake's Case, 34 Beav. 639 - - - - - - 97 Blake v. White, 1 Y. & C. Exch. 620 - - - - - 964 Blakelv Ordnance Co., In re, 3 Ch. 159; 10 W. E. 533; 18 L. T. 132 ;" 37 L. J. Ch. 230 - - - 446, 761, 763, 764, 784 Blaker v. Herts and Essex Waterworks Co., 41 C. D. 399 ; 58 L. J. Ch. 497 ; 60 L. T. 776 ; 37 W. E. 601 ; 1 Meg. 217 - 826, 1092, 1182 Bland's Case (Westmoreland Green, &c. Co.), (1893) 2 Ch. 612; 62 L. J. Ch. 975 ; 66 L. T. 370 ; 67 L. T. 700; 2 E. 509 (C. A.) - 383 Blest V. Brown, 8 Jur. N. S. 602 ; 4 De G. F. & J. 367 - - 843 Bloomenthal v. Ford, (1897) A. C. 156 ; 66 L. J. Ch. 253; 76 L. T. 205; 45 W. R. 449 ; 4 Manson, 156 - - 12, 190, 283, 713 Bloxam, i?ic ^«?'ie, 33 Beav. 529a - - - - - 21 Blyth's Case, 4 C. D. 140 ; 25 W. R. 200 ; 30 L. T. 124 - - 189 Boden & Co. v. Overseers of Chard, and Gilford, Fox & Co. v. Same, 7 T. L. R. 431 (July, 1890) - - - - - 50 Bog Mining Co., L. J. N. 0. 1875, 48; 36 W. R. 347 - - - 1010 Bolton Partners v. Lambert, 41 C. D. 295 ; 58 L. J. Ch. 425 ; 60 L. T. 687 ; 37 W. R. 434 - - - - - 383, 441 Bolton V. Buckingham, (1891) 1 Q. B. 278; 00 L. J. Q. B. 261; 64 L. T. 278 ; 39 W. E. 293 (C. A.) - - - - - 964 - 964 - 939 - 120 - 962 - 935 - 275 T. 3(1 ,460 J. 311, 338 XXXll TABLE OF CASES. Bol— Bra page Bolton v. Natal, &c. Co., (1892) 2 Ch. 124; 61 L. J. Ch. 281 ; 65 L. T. 786 -------- 518 Bolton V. Salmon, (1891) 2 Ch. 48 ; 60 L. J. Ch. 239 ; 64 li. T. 222 39 W. E. 589 - Bompas v. King, 33 C. D. 279 _ _ _ _ Bonomi v. Backhouse, 9 H. L. C. 503 - - _ Bonser v. Cox, 4 Beav. 379 - - - - - Bonzi V. Stewart, 4 M. & G. 295 Booker, Ex parte, Re West of England Bank, 14 C. D. 327 - Boord V. African Consolidated, &c. Co., W. N. (1897) 174 ; 77 L. 553; 46 W. E. 150 - Borough Commercial and Building Soc, (1893) 2 Ch. 242 ; 62 L. Ch. 456; 69 L. T. 96; 41 W. E. 313 ; 3 E. 339 - -275, Borough of Portsmouth Tramways, (1892) 2 Ch. 362; 61 L. J. Ch. 462 ; 66 L. T. 671 ; 40 W. E. 553 - - - - 788, 817 Bos V. Helsham, L. E. 2 Ex. 72 ; 15 W. E. 259; 15 L. T. 481 ; 36 L. J. Ex. 20 ; 4 H. & C. 642 - - - - - 202 Bosanquet, &c. v. St. John Del Eey, 77 L. T. 207 -456, 519, 531, 538 Boston Deep Sea Co. v. Ansell, 39 C. D. 339 ; 59 L. T. 345 - 70, 217, 261, 431, 436 Bottomley's Case, Re Alma Spinning Co., 16 C. D. 681; 29 W. E. 133; 43 L. T. 620 ; 50 L. J. Ch. 167 - - - - 433, 442 Bouch V. Sproule, 12 App. Cas. 385 ; 33 W. E. 621 ; 57 L. T. 345 ; 56 L. J. Ch. 1037 - _ . _ - -450,457,458 Boulter v. Peplow, 9 C. B. 493 - - - - - - 72 Bound V. Lawrence, (1892) 1 Q. B. 226 ; 61 L. J. M. C. 21 ; 65 L. T. 844; 40 W. E. 1; 56 J. P. 118 (C. A.) - - - - 617 Boursot V. Savage, 2 Eq. 134 - .- - - - - 800 Bovill V. Endle, (1896) 1 Ch. 648 ; 65 L. J. Ch. 542 ; 44 W. E. 523 - 922 Bowen v. Hall, 6 Q. B. D. 339; 29 W. E. 367; 44 L. T. 75; 50 L. J. Q. B. 305 - - - - - - - 261 Bower v. Foreign and Colonial Gas Co., 13th Nov. 1877, A. 2064; W. N. (1877) 222 - - - - - - - 1076 Bower v. Harris, 1 Cr. & Ph. 351 - - - - - 921 Bowes, Re, 33 C. D. 586 - - - - - - 923 Bowker V. Burdekin, 11 M. & W. 128 - - - _ _ 18 Bowles V. Mayer, 19 C. B. N. S. 76 - - - - - 964 Bowyer v. Percy Supper Club, (1893) 2 Q. B. 154 ; 69 L. T. 447 ; 42 W'. E. 29 ; 57 J. P. 470 ; 5 E. 472 - - - - - 352 Boyco V. Bullard, 25th March, 1895, Eeg. Lib. A, 1365 - - 613 Boyle's Case, 33 W. E. 450 ; 52 L. T. 501 ; 54 L. J. Ch. 550 - 25, 143 Boyle V. Bettws Colliery Co., 2 C. D. 726 ; 34 L. T. 814 ; 45 L. J. Ch. 748 .-.----- 1092 BoythorpeCo., AV. N. (1890) 28 799 Brabourne v. Anglo- Austrian Co., (1895) 2 Ch. 891 - - 1093 Brace v. Duchess of Marlborough, 2 P. Wms. 490 - - - 794 Jiradlord Banking Co. v. Briggs, 12 App. Cas. 29; 35 W. E. 521 ; 56 L. T. 02 ; 56 L. J. Ch. 364 - - 373, 386, 394, 395, 797, 823 Bradford Navigation, Re, 10 Eq. 331 ; 5 Ch. 603; 18 W. E. 592 - 1182 Braiiiah v. Eoberts, 3 Bing. N. C. 963 ; 1 Scott, 350 ; 3 D. P. C. 392 306 Jirainpton and Longtown Eailway Co. Shaw's Claim, 10 Ch. App. 177 ; 44 L. J. Ch. 670 ; 33 L. T. 5 ; 23 W. E. 813 - 126, 130 Brundao v. Baruott, 12 CI. & Fin. 787 - - - 757, 922, 923 TABLE OF CASES. XXXIU Bra— Br page liray v. Yard, (1S9G) A. C. 44; GJ L. J. Q. B. 213; 73 L. T. GO!); 12T. L.E.I 19 ------ 295, 43G Brazilian Submariuo Tolegraph Co., Limited, Jn re, G3 L. T. 275 ; 39W.JI. 00 - - - - - - - - 723 Breay v. Roj^al British Nurses Ass., (1S97) 2 Ch. 272 ; GG L. J. Cb. 587 ; 76 L. T. 735 ; 46 W. R. 86 - - - - - 276 Bretfv. East India, &c. Co., 2 IL & M. 404 ; 12 W. R. 596 ; 10 L. T. 187 ; 3 N. R. 688 - - - - - - - 260 Brewery Assets Corjjoration (Truman's Case), (1894) 3 Ch. 272; 63 L. J. Ch. 635; 71 L. T. 328; 43 W. R. 73 ; 1 Manson, 359; 8 R. 508 - - - - -9,21,27,143,152,464,801 Brick and Stone Co., In re, W. N. (1878) 140 ; 22 S. J. 625 - 415, 429, 645 Brickwood v. Reynolds, (1898) 1 U. B. 95 ; 77 L. T. 456; 46 W. R. 130 -------- 46 Bridger's Case, L. R. 5 Ch. 305 ; 39 L. J. Ch. 478 ; 22 L. T. 737 ; 18 W. R. 412 - - - - - - - - 25 Bridgwater Navigation Co., Be, 14 App. Cas. 525 ; 39 Ch. D. 1 ; 57 L. J. Ch. 809 ; 36 W. R. 769; 58 L. T. 476 - 360, 361, 369, 451, 455, 468, 482 Bridport Brewery Co., lu re, 2 Ch. 191 ; 15 AV. R. 291 ; 15 L. T. 643 ------ - 416, 431, 646 Briggs, Ex parte, 1 Eq. 483 ; 14 L. T. 39 ; 35 L. J. Ch. 320 ; 12 Jur. 322 -------- 104 Briggs, Bradford Banking Co. v., 12 App. Cas. 29 -373, 383, 394, 395, 797, 823 Britannia Mills Co., iZe, W. N. (1888) 103 - - - - 975 British and American Trustee, &c. Co. v. Couper, (1894) A. C 399 ; 63 L. J. Ch. 425 ; 70 L. T. 882 ; 42 W. R. 652 ; 1 Manson, 256 ; 6 R. 652 (II. L.) - - - 3, 287, 310, 378, 448, 529, 970 British Burmah Co., W. N. (1887) 101; 56 L. T. 815; 4 T. L. R. 631 ------ 96, 100, 104, 105 British India Steam Co. u. Commissioners of Inland Revenue, 7 Q. B. D. 165 - - - - - 746, 747, 748, 749, 814 British Linen Co. v. South American, &c. Co., (1894) 1 Ch. 108 - 1090, 1091, 1092 British Mutual Co. v. Charnwood Forest Rail. Co., 18 Q. B. D. 714 ; 35 W. R. 590 ; 55 L. J. Q. B. 399 ; 56 L. J. Q. B. 449 - - 12 British National Life Assurance Association, Ex parte, 8 C. D. 679 ; 27 W. R. 88 ; 39 L. T. 136 ; 48 L. J. Ch. 118 - - 274, 303 British Seamless Paper Box Co., Re, 17 CD. 467 ; 29 W. R. 690 ; 44 L. T. 498 ; 50 L. J. Ch. 497 - - 64, 383, 546, 1043, 1066 British Share Co., iZe, 6 L.T. 215 - - - - - 421 British Wagon Co. v. Gray, (1896), 1 Q. B. 35 ; 65 L. J. Q. B. 75 ; 73 L. T. 498 ; 44 W. R. 118 ; 12 T. L. R. 64 - - 210, 467 Briton Medical, 37 W. R. 52 ; 39 C. D. 61 ; 57 L. J. Ch. 874 ; 59 L. T. 134 - - - - - - - - 414 Briton Medical Co. v. Jones, 61 L. T. 384 - - - 431, 443 Broad's Patent, (1893) 1 Ch. 724 - . - - - mo Broad Street Building Co., Re, W. N. (1887) 149 - -190, 1055 Broad r. Munton, 12 C. D. 131 - - - - 202, 203 Broderip v. Salomon, (1895) 2 Ch. 323; 43 W. R. 612 (C. A.) 1, oiYS, 565 Bromley v. Holland, 7 Ves. 28 - - - - - 723 Broughton Coal Co. v. Kirkpatiick, 14 (i. B. Y). 491 - - 4(), 48 Brown's Case, 9 Ch. 102 ; 22 W. R. 171 ; 29 L. T. 562 ; 43 L. J. Ch. 153 -------- 430 P. C XXXIV TABLE OF CASES. Br o— But fAOE BroTvn & Co. r. Brown, 35 L. T. 54 ; 36 L. T. 272 - - - 211 Brown v. Carr, 7 Biug. 508 - - - - - -843 Brown v. Cole, 14 Sim. 427 ; 14 L. J. Ch. 167 - - - - 829 Brown i'. L. & N. W. Eail. Co., 4 B. & S. 326 - - - 41 Brown, Shipley & Co. v. Commissioners of Inland Revenue, (1895) 2 Q. B. 598 ; 66 L. J. M. C. 241 ; 73 L. T. 377 ; 14 R. 661 - - 937 Browne v. La Trinidad Co., 37 C. D. 1 ; 36 W. E. 289 ; 57 L. J. Ch. 292 ; 58 L. T. 137 - - -70, 71, 260, 374, 376, 414, 441, 1061 Browne v. Lockhart, 10 Sim. 420 - - - - - 922 Bro^v-ning v. Great Central Mining Co., 5 H. & N. 856 ; 29 L. J. Ex. 399-------- 192, 260 Brownlie v. CamiDbell, 5 App. Cas. 950 _ - _ loi, 136 Bruce v. Hunter, 3 Camp. 467 - - - - - - 922 Brunswick, &c. Co. v. Muggeridge, 1 Dr. & Sm. 383 - - 92 Brunton's Claim, 19 Eq. 302 - - - - - - 810 Brunton v. Electrical, &c. Corporation, (1892) 1 Ch. 434 ; 61 L. J. Ch. 256 ; 65 L. T. 745 - - - - - - 776 Brussels Palace, &c. v. Prockter, 13 T. L. E. 72 - - - 155 Bryant v. Banque du Peuple, (1893) A. C. 170 ; 62 L. J. P. C. 68 ; 68 L. T. 546; 41 W. E. 600; 1 E. 336(H. L.) - - - 723 Bryn Alyn, &g. Co., M. E. 25 Jan. 1878. A. 186 - - - 1053 Brynmawr Coal Co., W. N. (1877)45 - - - - 645 Bryon v. Metropolitan, &c. Omnibus Co., 3 De G. & J. 123 - 279, 305, 783 Buchan's Case, 4 Aj^jd. Cas. 580 - _ _ _ _ 406 Buckham v. Trustees of Whitehaven, oo L. T. 694 - - - 1103 Buenos Ayres Co., W. N. (1875) 59- - - - - 181 Bulfontein Sun, &c. Mine, 12 T. L. E. 461 - - - 153, 155 Bull V. Hutchins, 32 Beav. 615 - - - - - 797 Bull V. Morrell, 12 Ad. & E. 745 - - - - - 306 Burgess's Case, 15 C. D. 507 ; 28 W. E. 792 ; 43 L. T. 45 ; 49 L. J. Ch. 541 - - - - - - - - 103 Burkinshaw v. Nicholls, 3 App. Cas. 1004 ; 26 W. E. 819 ; 39 L. T. 308; 48 L. J. Ch. 179- - - 12, 189, 190, 283, 713, 766 Burn V. London and S. Wales Coal Co., W. N. (1890) 209 ; 7 T. L. E. 118 .---_-_. 460 Burncs v. Pennell, 2 II. L. Cas. 497 ; 13 Jur. 897 -398, 456, 513, 520 Burnley Equitable Society w. Casson, (1891) 1 Q. B. 75; 60 L. J. M. C. 59 ; 63 L. T. 652 ; 39 W. E. 124 ; 55 J. P. 166 - - 8 Burt V. British Nation Life Association, 4 De G. & J. 158, 174 ; 7 W. E. 517 ; 33 L. T. 191 ; 5 Jur. N. S. 612 - - - 1025 Burt y. Bull, (1895) 1 (I B. 276; 64 L. J. Q. B. 232; 71 L. T. 810; 43 W. E. 180 - - - _ _ _ -826,1092 Burton V. Gray, 8 Ch. Ap. 932 - - - - - 916 Burton, &c. Co., Limited, (1894, B. 0136) - - - - 989 Bush's Case, 6 Ch. 246; 19 W. E. 393; 24 L. T. 1 ; 40 L. J. Ch. 205 - - - - - - - -401 Bush's Case, 9 Ch. 554 ; 22 W. E. 669 ; 30 L. T. 737 ; 43 L. J. Ch. 772 - - - - - - - - - 189 Bute's Case, 13 Etj. 566 - - - - - - 21 Butler V. Manchester and Sheffield Eail., 21 U. B. D. 207 - - 10 TABLE OF CASES. XXXV C. Cad— Car page Cadell V. Palmer, 1 CI. & F. 372 ; Tudor, L. C. on E. P. 429 - 770 Cadiz Waterworks Co. v. Barnett, 19 Eq. 182; 23 W. E. 408; 31 L.T. 640 ; 44 L. J. Ch. 529- - - - - - - 1067 Cadogan, &c. Co., W. N. (1886) 91 - - - - - 387 Caledonian Eailway Co. v. Sohvay Junction, 49 L. T. 526 ; 32 W. E. 164 ------ - 307, 1168 Callao Bis Co., In re, 42 C. Div. 169 ; 58 L. J. Ch. 826 ; 61 L. T. 534 ; 38 AV. E. 21 ; 1 Meg. 261 - - - - - - 1135 Callard v. Taylor, 3 T. L. E. 698 - - - - - 207 Caloric Engine Co., /« re, 52 L.T. 846 - - - - 419 Calton V. Bragg, 15 East, 223 - - - - - - 922 Cambrian Co., /?i re, 48 L. T. 114 - - - - -1136 Cambrian, &c., Co., W. N. (1875) 6; 31 L. T. 773 ; 23 W. E. 405 - 418, 426, 644 Cammcll, Ex j)arte (Printing Telegraph, &c. Co. of Agence Ilavas), (1894) 2 Ch. 392 ; 63 L. J. Ch. 536 ; 70 L. T. 705 ; 1 Manson, 274; 7 E. 191 (C. A.) - - - - - - - 430 Campbell's Case, 9 Ch. 1 ; 22 W. E. 113; 29 L. T. 519 ; 43 L. J. Ch. 1 36, 135, 416, 650, 651, 701 Campbell's Case, 4 C. D. 470 ; 25 W. E. 299 ; 35 L. T. 900 - 412, 771, 807 Campbell v. Compagnie Generale de Bellegarde, 2 C. D. 181 ; 24 W. E. 573 ; 34 L. T. 54 ; 45 L. J. Ch. 386 - - - 1091 Campbell v. Fleming, 1 A. & E. 40 - - - - - 105 CampbeU v. Maund, 5 A. & E. 865 ; 1 N. & P. 558 ; 2H. & W. 457- 420, 421 Cannon v. Trask, 20 Eq. 675; 44 L. J. Ch. 772 - - 397, 1061 Cape Breton Co., In re, 26 C. D. 221 ; 29 C. D. 795 ; 33 W. E. 788 ; 53 L. T. 181 ; 54 L. J. Ch. 822 - - - - - 66 Capel V. Butler, 2 S. & S. 457 - - - - - 964 Capel V. Sims' Ships' Composition Co., W. N. (1888) 97 ; 57 L. J. Ch. 713; 36 W. E. 689; 58 L.T. 807 - - - 77,92,98,124 Capital Fire Insurance Association, In re, 24 C. D. 408 ; 32 W. E. 200; 49L. T. 697; 53L. J. Ch. 71 - - - - 459 Capper's Case, 3 Ch. 458 - - - - - 26, 28 Garden v. Albert Palace, 55 L. T. 831 ; 56 L. J. Ch. 166 - - 1115 Cardiff Savings Bank (Marquis of Bute's Case), (1892) 2 Ch. 100 ; 61 L. J. Ch. 357 ; 66 L. T. 317 ; 40 W. E. 538 - - - - 428 Carez, In re, 6 Eep. Pat. Cas. 552 - - - - - 13 CargiU v. Bower, 10 C. D. 502 - - - - - 107, 471 CarliU V. Carbolic, &c. Co., (1893) 1 Q. B. 256 ; 62 L. J. Q. B. 257 ; ■^ 67 L. T. 837 ; 41 W. E. 210 ; 57 J. P. 325 ; 4 E. 176 - 22, 153, 196, 765, 913 CarHng's Case, 1 C. D. 124 ; 24 W. E. 165; 33 L. T. 645; 45 L. J. Ch. 5 - - - - 182, 185, 431, 436, 1024, 1135 Carling v. London and Leeds Bank, 56 L. J. Ch. 321 ; 56 L. T. 115 ; 35 W. E. 344 - - - - - - 97, 100, 104, 108 Carmichael. Ex parte, In re Hannan's Empress, &c. Co., (1896) 2 Ch. 643;'65L. J. Ch. 902; 75L. T. 45 - - 21,154,155,100 CarnforthCo., £'a;^x(r^e, 4 C. D. 108 - - - - - 792 Carr v. L. & N. W. Eail. Co., L. E. 10 C. P. 307 ; 44 L. J. C. P. 109; 31 L. T. 785 ; 23 W. E. 747 - - - - 766, 768 Carrick i'. Wigan Tramways Co., W. N. (1893) 98 - - - 1025 (•2 XXX VI TABLE OF CASES. Car— Cit page Carter v. Wake, 4 C. D. 605 - - - - - - 916 Carter v. White, 20 C. D. 228 ; 25 C. D. 666 - 154, 426, 723, 964 Cartmell's Case, 9 Ch. 691 - - - - - - 28 Carus-Wilson, In re, 18 Q. B. D. 7 ; 56 L. J. Q. B. 530 ; 55 L. T. 864 ; 35 W. E. 43 - - - - - - - 202 CasteU V. Brown, (1898) 1 Ch. 315; 78 L. T. 109 ; 46 W. R. 248 775, 795 CasteUainy. Preston, 11 Q. B.D. 380 - - - - 209 Catt V. Tourle, 4Ch. App. 655.; 38 L. J. Ch. 665 ; 21 L. T. 188 - 207, 261 Cave V. Cave, 15 C. D. 639 - - - - - - 800 Cawley & Co., Be, 42 C. D. 209 ; 58 L. J. Ch. 633 ; 61 L. T. 601 ; 37 W. E. 692 ; 1 Meg. 251 - - 389, 397, 398, 404, 431 Central Eail. Co. of Venezuela v. Kisch, L. E. 2 H. L. 99 ; 15 W. E. 821 ; 16 L. T. 500; 36 L. J. Ch. 849-31, 93, 97, 98, 99, 101, 102, 104, 135, 136 Cercle Eestaurant v. Lavery, 18 C. D. 557 ; 30 W. E. 283 ; 50 L. J. Ch. 837 - - - - - - - - 1067 Cesena Sulphur Co. v. Nicholson, 1 Ex. D. 428 (1876) - - - 47 Ceylon Land and Produce Co., 7 T. L. E. 692 - - - 401 Chalmers, Ex parte, 8 Ch. 289 - - - - - - 792 Chapel House Colliery Co., Re, 24 C. D. 259 ; 31 W. E. 933 ; 49 L. T. 575; 52 L. J. Ch. 934 - - - - - - 817 Chapleo v. Brunswick Bmlding Society, 6 Q. B. D. 715 ; 29 W. E. 529 ; 44 L. T. 449 ; 50 L. J. Q. B. 372 - - 412, 427, 926 Chapman's Case, 1 Eq. 346 ; 12 Jur. N. S. 44 - - - 261 Chapman's Case (Theatrical Trust), (1895) 1 Ch. 771; W. N. (1895) 60 - - - - - - - - - 183 Chapman and Barker's Case, 3 Eq. 361 ; 15 W. E. 334 ; 15 L. T. 528 - - - -' - - - - 387 Charles Denham & Co., 32 W. E. 920; 53 L. J. Ch. 1113; 51 L. T. 570- - - - - - - -- 1059 Chase v. Box, Freem. Eep. 261 - - - - - 919 Chase v. Westmore, 5 M. & S. 180; Tudor's L. C. Merc, 3rd ed. 356 - - - - - - - - - 797 Chesterfield and Boythorpe Co. v. Black, 26 W. E. 207 - 64, 65 Chesterfield v. Jansen, 2 Ves. 125 ; 1 Atk. 352 - - - - 785 Chigwell Steamship, Re, 4 T. L. E. 308 - - - 1012, 1013 Chile Gold Co., New, 68 L. T. 15 - - - - - 189 ChiUingtou Iron Co., Re, 29 C. D. 159 ; 33 W. E. 442 ; 52 L. T. 504 ; 54 L. J. Ch. 624 - - - - - - - 420 Christ Church Gas Co. v. Kelly, 3 T. L. E. 634 ; 51 J. P. 374 - - 112 Christy v. Van Tromp, W. N. (1886) 111 - - - - 1096 Citizens' Bank v. Bank of Now Orleans, L. E. H. L. 352, 360- 131, 767 Citizens' Bank v. First National Bank, L. E. II. L. 360 ; 43 L. J. Ch. 269 ; 22 W. E. 194 ------ 95 City and County Investment Co., In re, 13 Ch. D. 483; 28 W. E. 933 ; 42 L. T. 303 - - - - -1130,1133,1160 City Bank Case, 3 D. F. & J. 629 - - - - - 922 City Bank, Ex parte, 3 Ch. 758; 16 W. E. 919; 18 L. T. 457 - 305, 820 City Discount Co. v. McLean, L. E. 9 0. P. 692 - - 920, 921 City Lands Investment Corporation, W. N. (1897) 162 - - - 1013 City of London J5re\very y. Inland Eovonuc, (1898) 1 (i. B. 408; 78 L. T. 39 ------ - 814 City of London Brewery (!o. v. Pounant, 9 Ch. 212, 216 - - 5, 6 TABLE OF CASES. XXX Vll Cit — Col TAGE City of Moscow Gas Co. v. International Financial Society, 7 Ch. 225; 41 L. J. Ch. 350; 26 L. T. 377 ; 20 W. R. 394 - - 1068 Clack V. Imperial Gas, &c. Co., 4 B. & Ad. 313- - - - 17 Clark, Ex parte, 7 Eq. 550 ; 20 L. T. 774 ; 38 L. J. Ch. 562 - 261 Clarke's Case, 8 C. Div. 642 ; 26 W. E. 601 ; 38 L. T. 587 ; 47 L. J. Ch. 696 - - - - - - - - 189 Clarke and Ilolden's Case, 37 L. T. 222 - - - - 215 Clarke v. Birloy, 41 C. Div. 422 ; 58 L. J. Ch. 616; 60 L. T. 948 ; 37 W. E. 746 - - - - - - 842, 843 Clarke v. Henty, 3 Y. & C. (Ex.) 187 - - - - - 964 Clarke v. London and County Bank, (1897) 1 Q. B. 552; 66 L. J. Q. B. 354; 76L. T. 293; 45 W. E. 383 - - - - 921 Clay V. Crofts, 20 L. J. Ex. 361 - - - - - 196 Clay V. Eufford, 5 Do G. & S. 768 ; 8 Hare, 281 ; 19 L. J. (N. S.) Ch. 295; 14 Jm-. 803 - - - - - - - 307 Clayton's Case (Devaynes v. Noble), 1 Mer. 585; Tudor's L. C. Merc, 3rd ed. 1, 25 - - - - 798, 920, 921 Clegg V. Hands, 44 C. D. 503 - - - - - - 207 Clerical Medical, &c. Co. v. Carter, 22 Q. B. D. 444 - - 46 Cleveland Iron Co., 15 W. E. 95 - - - - - 104 Clinan v. Cook, 1 S. & L. 40 - - - - - 915 Clinch ('. Financial Corporation, 5 Eq. 450 ; 4 Ch. 117 ; 18 L. T. 197 ; 37 L. J. Ch. 281 - - - 278, 416, 701, 1030, 1063, 1129 Clough V. L. & N. W. EaUway, L. E. 7 Ex. 36 - - - 105 Coalport China Co., Re, (1895) 2 Ch. 404 - - - - 401 Coates' Case, 17 Eq. 169 ; 22 W. E. 228 ; 29 L. T. 636 ; 43 L. J. Ch. 538 -------- 189 Coates V. Coates, 33 Beav. 249 - - - - - - 964 Coates V. London, &c. Eail. Co., 41 L. T. 553 ; 44 J. P. 154 - 712 Coats, Limited v. Chadwick, Limited, (1894) 1 Ch. 347 ; 63 L. J. Ch. 328; 70L. T. 228; 42 W. E. 328; 8E. 159 - - - _ 13 Cochrane, £'a;_2Jorift', 20 Eq. 282 _ - - - -1092 Cocker's Case, 3 C. D. 11 ; 35 L. T. 290 ; 45 L. J. Ch. 822 - - 1005 Cockshott V. Dore Gallery, Limited, North, J., 9th May, 1891, A. 656- ._------ 1073 Coker, ^ajparfe, 10 Ch. 652- _ _ _ - 110,120 Colborne and Strawbridge, Ex jjarte, Be Imperial Land Co. of Mar- seHles, 11 Eq. 478; 19 W. E. 223; 24 L. T. 255; 40 L. J. Ch. 343 - - - - - 761, 763, 765, 768, 784 Cole V. North Western Bank, L. E. 10 C. P. 369 - - 932, 935 Coleman v. Bucks, &c. Bank, (1897) 2 Ch. 243 ; 66 L. J. Ch. 564 ; 76 L. T. 684; 45 W. E. 616 - - - - - - 921 Collie's Claim, 12 Eq. 258 ; 19 W. E. 1022; 25 L. T. 526 ; 40 L. J. Ch. 567 ------ - 307, 444 CoUingham v. Sloper, (1893) 2 Ch. 96; 62 L. J. Ch. 416; 69 L. T. 39; 41 W. E. 550; 3 E. 272 - - - - - 792 Collins V. Barker, (1893) 1 Ch. 578; 62 L. J. Ch. 316; 68 L. T. 572; 41 W. E. 442 ; 3 E. 237 - - - - - - 407 Collins V. Collins, 26 Beav. 306; 7 W. E. 115; 32 L. T. 233; 28 L. J. Ch. 184 ; 5 Jur. N. S. 30 - - - - - 201 Colman v. E. C. Eail. Co., 10 Beav. 1 ; 8 L. T. O. S. 530 ; 16 L. J. N. S. Ch. 73; 11 Jur. 74; 4 Ey. Cas. 513 - - - 269, 273 Colonial Bank v. Cady and "Williams, 15 App. Cas. 267 ; 63 L. T. 27; 39W.E. 17 400 XXXVIH TABLE OF CASSS. Col— Cor PAGE Colonial Bank 2'. Whinney, 11 App. Cas. 436; 34 W. E. 705; 55 L. T. 363 ; 56 L. J. Ch. 43; 3 M. B. E. 207 - 387, 713, 796, 808 Colonial Life Assurance Co. v. The Home and Colonial Assurance Co., Limited, 33 Beav. 548 ; 12 W. E. 783 ; 10 L. T. 448 ; 33 L. J. Ch. 741 - - - - - - - - 266 Colonial Mutual, Be, 30 W. E. 458 - - - - - 313 Colonial Trusts Corporation, In re, 15 C. D. 473 - 774, 777, 793, 818 Colquhoun v. Brooks (1889), 14 App. Cas. 493, 510 - - 47, 48 Coltman v. Coltman, 19 C. D. 65 - - - - - 272 Coltness Iron Co. v. Black, 6 App. Cas. 329 ; 29 W. E. 717 ; 45 L. T. 145 ; 46 J. P. 20 - - - - - - 46, 48, 527 Combe v. Woulfe, 1 M. & S. 241 ; 8 Bing. 156 - - - 964 Commercial Bank of Tasmania t\ Jones, (1893) A. C. 313 ; 62 L. J. P. C. 104; 68 L. T. 776; 57 J. P. 644; IE. 367- - - 964 Commissioners of Income Tax v. Pemsel, (1891) A. C. 531 ; 55 J. P. 805 ; 61 L. J. Q. B. 265 ; 65 L. T. 621 - - - - 46 Commissioners of Inland Eevenue v. Angus, 23 Q. B. D. 579 ; 38 W. E. 3 - - - - - - - 561,1141 Common Petroleum Engine Co., (1895) 2 Cli. 759 ; 65 L. J. Ch. 76 ; 73 L. T. 338; 2Manson, 598; 13E. 840 - - 181,182,1135 Condes Co. of CHle, 36 S. J. 593 - - - - - 1010 Conquest's Case, 1 C. Div. 334 ; 45 L. J. Ch. 336 ; 33 L. T. 762 - 307 Consort Deep Level Gold [Mines, (1897) 1 Ch. 575 ; 66 L. J. Ch. 122; 76 L. T. 300; 45 W. E. 227 - - 150, 152, 153, 155, 160, 1052 Continental Union Gas Co., 7 T. L. E. 496 - - - - 379 Contract Corporation, Ex imrte. In re Barned's Banking Co., 3 Ch. 105 ; 37 L. J. Ch. 81 ; 17 L. T. 269 ; 16 W. E. 193 - 9, 17, 26, 275, 303 Cook V. Fowler, L. E. 7 H. L. 27 " - - - - - 821 Cook V. North Metropolitan Co., 18 Q. B. D. 683 - - - 617 Cook V. Ward, 2 C. P. D. 255 - - - - - - 443 Cooke V. Welby, 25 C. D*769 - - - - - 724 Coolgardie, &c. lilines, 14 T. L. E. 278 - - - - 181, 188 Coombe, ^a'^9ar!!e, 17 Ves. 369 - - - - - 916 Coombes v. Mansfield, 3 Drew. 300 - - - - - 795 Cooper V. Griffin, (1892) 1 Q. B. 740; 61 L. J. Q. B. 563 ; 66 L. T. 660 ; 40 W. E. 420 (C. A.) ----- 431 Coote V. Jccks, 13 Eq. 597 ; 41 L. J. Ch. 599 - - - - 781 Copiapo Mining Co., 9 T. L. E. 615- - - - - 403 Copinv. Adamson, 1 Ex. D. 17 _ - - - 210,467 Cojipen V. Fernyhough, 2 Brown, C. C. 291- - - - 800 Copper Minos Tinplato Co., W. N. (1897) 20 - - - 992, 994 Coppinger v. Santa Fe Co. (1891), Chitty, J., 7th Nov. 1891 1105, 1107 Corbott V. General Steam Navigation Co., 4 H. & N. 482 - - 41 Cordova Union Gold Co., /jirp, (1891) 2 C. D. 580; 60 L. J. Ch. 701 ; 64 L. T. 722 ; 39 W. E. 536 - - - - - 385 Cork and Bandon Eail. Co. v. Goodo, 13 0. B. 826; 22 L. J. C. P. 198 ; 17 Jur. 555 - - - - - - - 385 Cork and Youghall Eail. Co., 4 Ch. 478- - - - - 279 Cornell v. Hay, L. E. 8 C. P. 328 ; 21 W. E. 580 ; 28 L. T. 475 ; 42 L. J. C. P. 136 - - - - - - 124, 128 Cornwall Minerals Co., (1897) 2 Ch. 74 ; m L. J. Ch. 561 ; 76 L. T. 832; 46 W. E. 459 TABLE OF CASES. XXXIX Cor— Cro page Cornwall Mining Co. v. Bennett, 5 li. & N. 423 ; 29 L. J. Ex. 157 ; G Jur. N. S. ,539 ------ 389, 391 Corporation of Portsmouth r. Smitli, 3 Q. B. D. 1S4 - - - 814 Corsellis, lie, Lawton v. Elwes, 34 C. D. 675 _ _ _ 873 Cory Brothers v. Owners of the SS. Mecca, (1897) A. 0. 280 ; 06 L. J. P. 86; 76 L. T. 579; 45 W. E. 607 - - 798, 919, 920, 921 Cottam V, Eastern Counties Eail. Co., 1 J. & II. 243 - - 712 Cotterell v. Stratton, 8 Ch. 295 - - - - 818, 938 Cotton V. Imperial, &c. Co., (1892) 3 Ch. 454 ; 01 L. J. Ch. 084 ; 67 L. T. 342 - - - - - - - 220, 307 Coulthard v. Clemontson, 5 Q. B. 42, 48 _ _ _ - 903 Council of Law Eeporting, Be, 22 Q. B. D. 279 - - - 48 Counsel v. Washington Co., Stirling, J., 21 Dec. 1891, A. 1730 - 1109, 1110 County Life Assurance Co., In re, 5 Ch. 288 ; 18 W. E. 390 ; 22 L. T. 537 ; 39 L. J. Ch. 471- - - - 36, 37, 38, 443, 454, 455 County of Gloucester Bank v. Eiidry, &c. Co., (1895) 1 Ch. 629 ; W. N. (1895) 45 - 17, 19, 36, 412, 427, 442, 454, 455, 492, 807, 1090, 1091 Coventry's Case (Britannia Fire Assoc, In re), (1891) 1 Ch. 202; 60 L. J. Ch. 186 - - - - - - - 22 Coventry, &g. Co. v. Great Eastern Eail. Co., 11 Q. B. D. 776 - - 12 Coventry and Dixon's Case, 14 C. D. 660 ; 28 W. E. 775; 42 L. T. 559 431 Cowdry v. Day, 1 GifE. 310 - - - - - - 770 Cowper V. Smith, 4 M. & W. 519 - - - - - 964 Cox and Neve's Case, (1891) 2 Ch. 109 ; 64 L. T. 733 ; 39 W. E. 412 202 Cox V. Bishop, 8 De G. M. & G. 815 ; 5 W. E. 437 ; 29 L. T. 44 ; 3 Jui\ N. S. 499 ; 26 L. J. Ch. 389 - - - - - 178 Coxon V. Gorst, (1891) 2 Ch. 73 ; 60 L. J. Ch. 502 ; 64 L. T. 444 ; 39 W. E. 600 - - - - - - - 39 Cradock v. Scottish Provincial, &c. Co., 69 L. T. 30 - - - 911 Cragoe v. Jones, L. E. 8 Ex. 81 - - - - - 964 Crawford v. Gamgee, &c.. Limited, (1892) C. 3091 - - - 1074 Crawley's Case, 4 Ch. 322 - - - - 23, 25, 27, 104, 152 Crawshay, Be, 60 L. T. 357 - - - - - - 606 Crears v. Hunter, 12 Q. B. D. 345 - - - - 842, 913 Credit Foncier, Be, 11 Eq. 356; 19 W. E. 405 ; 23 L. T. 801 ; 40 L. J. Ch. 187 - - - - - - - - 975 Creyke's Case, 5 Ch. 63 ; 18 W. E. 103 ; 21 L. T. 572 ; 39 L. J. Ch. 124 -------- 393 Crickmer's Case, 10 Ch. 614 ; 24 W. E. 219 ; 46 L. J. Ch. 870 - 181, 182, 187, 289 Croft V. Day, 7 Beav. 84 - - - - - 266, 267 Cronbach v. Uranium Mines, Limited, 27th February, 1891, A. 329- 1056 Crook V. Corporation of Seaford, 6 Ch. 551 ; 19 W. E. 938 ; 25 L. T. 1 - - - - - - - - 12 Croskey v. Bank of Wales, 4 Giff. 314; S L. T. 301 ; 9 Jur. N. S. 595 - - - - - - 389, 440, 447, 497 Cross, In re, 20 C. D. 109 ; 30 W. E. 376 ; 45 L. T. 777 ; 51 L. J. Ch. 645 - - - - - - - - 68 Cross V. Fisher, (1892) 1 Q. B. 467; 61 L. J. Q. B. 609; GO L. T. 448; 40W. E. 265; 56 J. P. 372 (C. A.)- - - - 927 Crosskill V. Bower, 32 Boav. 86 - - - - - - 922 Crossley (John) & Sons, Be, W. N. (1892) 55 - - - 703 Xl TABLE OP CASES. Cro— Dav page Crouch V. Credit Foncier of England, L. E. 8 Q. B. 374 ; 21 W. R. 9-iG ; 29 L. T. 259 ; 42 L. J. Q. B. 183 - 75G, 757, 7G0, 7G1, 764, 820 Crowley v. William Asliby & Son, Limited, Chitty, J., IGth June, 1892, A. 844 - - - - - - - - 1094 Crown Bank, Be, 44 C. D. 634 ; 59 L. J. Ch. 739 ; 62 L. T. 823 ; 38 W. E. 666- - - - - - - 271,308 Crown Lease Proprietary Co., 14 T. L. E. 47 - - - - 155 Crowther v. Thorley, 32 W. E. 330 ; 50 L. T. 43 - - - 53 Crum V. Oakbank Co., 8 App. Cas. 65; 48 L. T. 537 - - - 375 CrumHn Viaduct Co., 11 C. D. 755 ; 27 W. E. 722; 48 L. J. Ch. 537 782 Cullen, Ex parte, (1891) 2 Q. B. 151 ; 60 L. J. Q. B. 567 ; 64 L. T. 801; 39W. E. 543; 8 M. B. E. 174 - - - - 424 Cullen V. Thompson's Trustees, 4 Macq. 424 ; 6 L. T. 870 ; 9 Jur. N. S. 85 - - - - - - - - 319 Cullerne v. London and Suburban Soc, 25 Q. B. D. 485 - - 471 Cunliffe Brooks & Co. v. Blackburn Building Soc, 9 App. Cas. 857 - 925, 926, 927 Cunningham, E. N., Re, 58 L. T. 16 ; 36 C. D. 532 ; 57 L. J. Ch. 169 427 Currie V. Ivlisa, L. E. 10 Ex. 162 - - •- - - 911 Curry v. Edensor, 3 T. E. 524 - - - - - 936 Cutler V. Southern, 1 Wms. Saund. 115- - - - - 962 D. Dale V. Plant, 43 C. D. 255 ; 61 L. T. 209 ; 1 Meg. 338 - 70, 432, 440 Dalton V. Midland Eail. Co., 13 C. B. 478; Lindley, 437 - - 456 Dalton Time Lock Co. v. Dalton, 66 L. T. 704 (C. A.) - 189, 289 Danby r. Coutts, 29 C. D. 500; 54 L. J. Ch. 577; 52 L. T. 401; 33 W. E. 559 - - - - - - - - 723 Dane v. Mortgage Insurance Corporation, (1894) 1 Q. B. 54 ; 63 L. J. Q. B. 144 ; 70 L. T. 83 ; 42 W. E. 227 ; 9 E. 96 (C. A.) - - 843 D'Arcy v. The Tamar, &c. Eail. Co., L. E. 2 Ex. 158; 4 H. & C. 463 ; 36 L. J. Ex. 37 - - - - - - - 444 Darley Main Co. v. Mitchell, 11 App. Cas. 127 - - - 120 Darlington Eorgo Co., Be, 34 C. D. 522 ; 35 "W. E. 537 ; 56 L. T. 627; 56 L. J. Ch. 730- _ _ _ _ 190, 232, 1055 Davies ->: E. liolton & Co., (1894) 3 Ch. 678; 63 L. J. Ch. 743 ; 71 L. T. 336; 43 W. E. 171; 8 E. 685 - - 412,427,454,493 Davies v. Davies, 36 C. D. 359 ; 36 W. E. 86 ; oG L. T. 401 ; 56 L. J. Ch. 481 - - - - - - - - 206 Davies v. Davies, (1892) 3 Ch. 63; 61 L. J. Ch. 595; 67 L. T. 548; 41 W. E. 13 - - - - - - - 405, 407 Davies V. London (feProv. Co., 8 C. D. 475 - - - - 924 DavicH V. Vale of Evesham Preserves, W. N. (1S95) 105 - - 1073 Duvios, Turner & Co. v. Lowon, 64 L. T. 655 - - - 207 Davis ?;. Ashwin, 26 W. E. 139 - - - - - - 1096 Davis V. ]"\)reinan, 43 AV. 1{. 16S _ - _ _ _ 261 Davis V. IMarliii (/// rr (iuc< iislaiid Land, &c. Co.), (1S9I) 3 Ch. 181 ; 63 L. J. Cli. 810; 71 L.T. 115; 42W.E.6()(); 1 Manson, 355 ; H K. 476 .... i<)4, 195, 792, 799, 808, 955 TABLE OF CASES. xli Dav — Die PAGE Davison v. Duncan, 7 E. & B. 229 - - - - - 418 Davison v. Gillies, l(i C. D. 347, n. ; 44 L. T. 92, n. ; ')0 L. J. Ch. 192, n. _____ oir>, 520, 524, 10G4 Daw i;. Terrell, 33 Beav. 218 - - - - - 916 Dawes' Case, G Eq. 232 ; 37 L. J. Ch. 901 ; 16W. R. 995 - - 28 Dawkins v. Antrobns, 17 0. D. 615; 29 W. 11. 511 ; 44 L. T. 557 - 392 Dawson v. African Consolidated Co., (1898) 1 Ch. 6; 46 W. E. 132-434, 443 Dawson v. Owen, Malins, V.-C, 11th November, 1876, A. 1778 - 1073, 1075, 1113 Day, Be, 6 C. D. 699 - - - - - - 52 Day V. Brownrigg, 10 C. D. 304; 27 W. E. 217; 39 L. T. 553; 48 L. J. Ch. 173 - - - - - - - 267 Dearie v. Hall, 3 Euss. 1 - - - - - 387, 795, 796 De Bouchont v. Goldsmid, 5 Yes. 213 - - - - 723, 724 De Bussche v. Alt, 8 C. D. 300 - - - - 436, 440 Deffell V. White, L. E. 2 C. P. 144 - - - - - 782 De Hart v. Stevenson, 1 Q. B. D. 313 - - - - - 1068 Delhasse, Ex parte, 7 C. D. 511 ; 47 L. J. Ch. 65; 38 L. T. 106; 26 W. R. 338 - - - - - - - 769 Delta Syndicate, lie, 30 C. D. 153; 33 W. E. 839; 53 L. T. 559; 54 L. J. Ch. 724 - - - - - - - 181 De Mattos v. Gibson, 4 De G. & J. 276 - - - 237, 395, 823 Denham & Co., Charles, Re, 25 C. D. 752; 50 L. T. 523 ; 32 W. E. 487; 25 C. D. 766: 32 W. E. 920; 53 L. J. Ch. 1113; 51 L. T. 570 - - - - - - - 92, 520, 542 Dent V. London Tramways Co. (1880), 16 C. D. 344 - - 515, 525 Dent's Case, 8 Ch. 768 - - - - - - - 289 Denton Colliery Co., 18 Eq. 16 - - - - 190, 232 Denton v. Macneil, 2 Eq. 352, 356 ; 14 W. E. 813 ; 14 L. T. 721 - 96, 98 Denton v. Paddison, 68 L. T. 409 - - - - - 963 Denver Hotel Co., Be, (1893) 1 Ch. 495 ; 62 L. J. Ch. 450; 68 L. T. 8; 41 W. E. 339; 2 E. 330(C. A.) - - - - - 448 Denver United Breweries, W. N. (1890) 143 ; 63 L. T. 96 - - 1053 De Pass' Case, 4 De G. & J. 544 ; 7 W. E. 682 ; 28 L. J. Ch. 769 - 397 Derby Canal Co. v. Wilmot, 9 East, 359 - - - - 18 De Eosaz's Case, 21 L. T. 10 - - - - - - 22 De Eosaz v. Anglo-Italian Bank, 4 Q. B. 462 ; 17 W. E. 724 ; 38 L. J. Q. B. 161 - - - - - - - 1133, 1151 Derry v. Peek, 14 App. Cas. 337 ; 58 L. J. Ch. 864 ; 61 L. T. 265 ; 38 W. E. 33 ; 1 Meg. 292 - - - 93, 94, 98, 106, 108, 109 De Euvigne's Case, 5 C. D. 306 ; 25 W. E. 476 ; 36 L. T. 329 ; 46 L. J. Ch. 360 - - - - - 185, 429, 431, 1024 Devala Mining Co., In re, 22 C. D. 593 ; 31 W. E. 425 ; 48 L. T. 259 ; 52 L. J. Ch. 434 - - - - - - - 96 Devaynes v. Noble (Clayton's Case), 1 Mer. 585 ; Tudor's L. C. Merc, 3rded., 1, 25 _____ -798,920,921 Dicido Pier Co., (1891) 2 Ch. 354 ; 64 L. T. 695 ; 39 W. E. 486 - 450, 664 Dickenson v. Valpy, 10 B. & C. 128 ; 5 M. & E. 120 - - 306 Dicker v. Augerstein, 3 C. D. 600 - - - - - 869 Bickin, Ex parte, 20 1^(1. 161 . . . . - 921 Dickson v. Law, (1895) 2 Ch. 62; 64 L. J. Ch. 490; 72 L. T. 680; 43 W. E. 596; 13 E. 431 _____ _ 1017 Xlii TABLE OF CASES. Dim— Dun page Dimes v. Grand Junction, 3 H. L. C. 759 - - - - 435 Direct Spanish Telegraph Co., Be, 34 C. D. 307 ; 35 W. E. 209 ; 55 L. T. 804 ; 56 L. J. Ch. 353 - - - - - 002, 974 Ditcham v. Worrall, 5 C. P. D. 410; 29 W. E. 59 ; 43 L. T. 286 ; 49 L. J. C. P. 088 ; 44 J. P. 799 - - - - - 402 Dixon V. Muckleston, 8 Ch. 155 - - - - - 910 Dobsonv. Land, 8lla. 210 - - - - - - 939 Dodd V. Churton, (1897) 1 Q. B. 562 ; 60 L. J. Q. B. 477 ; 76 L. T. 438 ; 45 W. E. 490 - - - - - - - 207 Dodds, Re, Ex parte Brown & Coates, 04 L. T. 470 - - - 398 Doman's Case, 3 C D. 21 ; 34 L. T. 929; 45 L. J. Ch. 801 - 307, 379, 049, 800 Dombey v. Playfair Brothers, (1897) 1 Q. B. 368 ; 66 L. J. Q. B. 328 ; 75 L. T. 070 - - - - - - - 1018 Dominion Brewery Co. v. Foster, 77 L. T. 507 - - - - 1008 Dominion of Canada Freehold Estate, &c. Co., JRe, 55 L. T. 347 - 804 Domvnie v. Berrington, 2 Y. »& C. 723 - - - - - 1077 Donald v. Suckling, L. E. 1 Q. B. 585 - - - - 923 Dore Gallery, Be, W. N. (1890) 02 ; 02 L. T. 758; 38 W. E. 491 - 1052 Dougan's Case, 8 Ch. 545; 21 W. E. 495 ; 28 L. T. 649; 42 L. J. Ch. 400 - - - - - - 309,859,1155 D. Owen & Co. v. Cronk, (1895) 1 Q. B. 205; 04 L. J. Q. B. 288; 2 Manson, 115 ; 14 E. 229 - - - - - - 820 Downes v. Ship, L. E. 3 H. L. 359 ; 19 L. T. 741 ; 37 L. J. Ch. 642 _____ -23,91,101,137,143 Dowse's Case, 3 C. D. 384 ; 35 L. T. 053 ; 40 L. J. Ch. 402 - - 1005 Drant v. Brown, 3 B. & C. 066 - - - - - 190 Driffield Gas Light Co., (1898) 1 Ch. 451 ; 70 L. T. 162 - 391, 408 Driver v. Broad, (1893) 1 Q. B. 744 ; 63 L. J. Q. B. 12 ; 69 L. T. 169 ; 41 W. E. 483; 4E. 411 (C. A.) - - - - - 810 Drum Slate Co., Be, McLean's Case, 53 L. T. 250; 55 L. J. Ch. 36 - 68, 1059 Dry Docks Corporation, Li re, 39 C. D. 306 ; 58 L. J. Ch. 33 - 818 Duberley v. Gunning, 4 T. E. 657 - - - - - 131 Du Boulay v. Du Boulay, L. E. 2 P. C. 441 ; 17 W. E. 594 ; 38 L. J. C. P. 35 - - - - - - - - 267 Duckett V. Gover, 6 C. D. 82 ; 25 W. E, 554 ; 46 L. J. Ch. 407 - 32, 1030, 1031 Duffin V. Mexican, &c. Co., W. N. (1890) 116 - - - 1052 Duke's Case, 1 C. D. 620 - - - - - 285, 289 Duke of Beaufort v. Neeld (1845), 12 CI. & F. 248 - - - 155 Duncan, Fox & Co. v. North and South Wales Bank, App. Cas. 1 - 964 Duncan v. Patent Investment Sugar, &c. Co., Limited (1887), D. 48, Kay, J., 26th Jan. 1887 ------ 1095 Duncuft V. Albrecht, 12 Sim. 189 - - - - - 1023 Dunkloy's Case, 7 T. L. E. 234 - - - - - 102 Dunlop V. Dunlop, 21 0. D. 683 - - - - - 392 Dunlop V. Higgins, 1 II. L. 0. 381 - - - - - 21 Dunlop Pncmnatic Tyro Co. v. Dunlop Truffault, &o. Co., Chitty, J., 21.stiMiiy, 1S96 - - - - - - - 1068 Dunnov. English, 18 Eq. 524 ; 31 L. T. 75- - - - 430 Dunster'K Case ((ilory Paper Mills Co.), (IS!)!) 3 Cli. 473; 63 L. J. Ch. 885; 71 1j. T. 528; 43 W. E. 104; 1 Manson, 438; 7 E. 456 (C.A.) - 289 TABLE OF CASES. xliii Dun— Eic PAGE Dunston V. Imperial, &c. Co., .3 15. & Ad. 125 - - 3,433 Diu'hani County Society, 12 Eq. old - - - - - ;)2(J Dyett's Case, 43 L. T. 85 ----- 1131,1111 Dyko V. Elliott, L. R. 4 P. C. 184 - - - - - 814 E. Eagle Co., Ex parte, 4 K. & J. 549 ; 6 W. E. 779 - - 37, 455 Eaglesfield v. Marquis of Londonderry, 4 0. Div. G93 ; 25 W. R. 190; 35 L. T. 822 ----- 94,712,768 Bales V. Cumberland Blacklead Co., 6 H. &N. 481 ; 3 L. T. 681 - 262, 434 Earl of Lathom v. Greenwicli Ferry Co., 36 S. J. 189 - 816, 1092 Earl's Trust, 4 K. & J. 300 - - - - - - 723 East Anglian Rail. Co. v. Eastern Counties Rail. Co., 11 C. B. 775 ; 21 L. J. C. P. 23; 16 Jur. 249 - - _ - 269, 273 East Gloucester Railway v. Bartholomew, L. R. 3 Ex. 15 - - 851 East Pant., &c. Co. v. Merryweatlier, 2 H. & M. 354; 13 W. R. 216; 10 Jur. N. S. 1231 - - - - - - - 422 East Wheal, &c. Co., 33 Beav. 119 - - - - - 403 Eastern and Australian Steamship Co., Limited and Reduced, 68 L. T. 321 - - - - - 188, 450, 451, 458, 974 Eastern Comities Ry. v, Broome, 6 Ex. 314- - - -10 Easton v. London Joint Stock Bank, 34 C. D. 95 ; 13 Aj^p Cas. 333 (sub nom. Earl of Sheffield v. London Jt. St. Bank) - - - 767 Eatonv. Bell, 5B. & Al. 34- - - - - - 922 Ebbett's Case, 5 Ch. 302 - - - - - - 28 Ebbw Yale Co., In re, 4 C. D. 837 ; 36 L. T. 308 ; 46 L. J. Ch. 241 - - - - - - 282, 515, 528, 535, 971 Eberhardt Co., New, 43 C. D. 118 - - - 181, 229, 1135 Eddystone Marine Ins. Co., Limited, (1893) 3 Ch. 9 ; 61 L. J. Ch. 362, 423; 66 L. T. 370; 40 W. R. 441 - - 182, 274, 284 Eden v. Ridsdale's Co., 23 Q. B. D. 368 ; 58 L. J. Q. B. 579 ; 61 L. T. 444 ; 38 W. E. 55 - - - - - - 436,1024 Edger v. Knapp, 7 Jur. 583, C. P. ; 5 M. & G. 753 - - - 72 Edgington v. Fitzmauiice, 29 C. D. 459; 33 W. R. 911 ; 53 L. T. 369 ----- 95, 96, 100, 106, 108, 748 Edinburgh United Breweries v. MoUeson, (1894) A. C. 96; 58 J. P. 364 (H. L. Sc.) - - - - - - - 65 Edmunds v. Blaina Furnace Co., 36 C. D. 215; 35 W. R. 798; 57 L. T. 139; 56 L. J. Ch. 815 - - - - 747, 782 Edmunds v. Foster, 45 L. J. M. C. 41 ; 24 W. R. 368 ; 33 L. T. 690 414 Edwards v. Edwards, 2 C. D. 291 ; 24 W. R. 713; 34 L. T. 472 ; 45 L. J. Ch. 391 - - - - - - - - 1092 Edwards ;-. Midland Rail. Co., 6 Q. B. D. 287; 29 W. R. 609; 43 L. T. 694 ; 50 L. J. Q. B. 281 ; 45 J. P. 374 - - 10, 334 Edwards v. Morton, 25 L. J, Ch. 284 - - - - - 817 Edwards v. Standard Rolling Stock Syndicate, (1893) 1 Ch. 574; 62 L. J. Ch. 605 ; 68 L. T. 194, 633 ; 41 W. R. 343 ; 3 R. 226 - 815, 1090, 1092 Eichbaum v. City of Chicago Co., (1891) 3 Ch. 459 ; 61 L. J. Ch. 28 ; 40 W. R. 153 - - - - - - - 447, 448 xliv TABLE OF CASES. Eld — Eva PAGE Elder v. New Zealand Land Co., W. N. (1874) 85 ; 30 L. T. 285 - 384 Eley V. Positive Government, &c. Co., 1 Ex. Div. 20, 88 ; 24 W. R. 338 ; 34 L. T. 190 ; 45 L. J. Ex. 451 - 70, 71, 260, 374, 375, 376, 382, 446, 447, 453 Elias V. Continental Oxygen Co., (1897) 1 Ch. 511 ; 66 L. J. Ch. 273; 76 L. T. 229; 45 W. E. 313- - - 817,1025,1122 Elkington's Case, 2 Ch. 511 ; 15 W. E. 665 ; 16 L. T. 301 ; 36 L. J. Ch. 593 - - - - - - 25, 29, 142 Ellerby's Claim, 20 W. E. 855 - - - 792, 793, 852 EUesmere Brewery Co. v. Cooper, (1896) 1 Q. B. 75 - - - 962 Elliott V. Turquand, 7 App. Cas. 79 - - - - - 723 Ellis y. Dodson, 60L. J. Ch. 353; 7T. L. E. 318 - - - 223 Ellis V. Sheffield Gas Consumers' Co., 2 B. & E. 767 ; 23 L. J. Q. B. 42 ; 18 Jur. 146 - - - - - - - 1182 Ellis V. Wilmot, L. E. 10 Ex. 10 - - - - - 843 Ellison V. Wright, 3 Euss. 450 - - - - - 938 Elworthy v. BHling, 10 Sim. 98 - - - - - - 1077 Emma Silver Mining Co. v. Grant, 11 CD. 918; 40 L. T. 804; 17 C. D. 122 ; 29 W. E. 481 ; 50 L. J. Ch. 449 - 56, 58, 63, 67, 1059 Emma Silver Mining Co. v. Lewis, 4 C. P. D. 396 ; 27 W. E. 836 ; 40 L. T. 168 ; 48 L. J. C. P. 257 - - - 55, 57, 58, 63, 67 Emperor Life Assurance Society, Re, 31 C. D. 78; 34 W. E. 118; 55 L. J. Ch. 3 - - - - - - - 1005 Empress Engineering Co., Re, 16 C. D. 125 ; 29 W. E. 342 ; 43 L. T. 742 - - - - 71, 130, 175, 213, 217, 260, 382, 752 Englefield Colliery Co., 8 C. D. 388 ; 38 L. T. 112 - 431, 446, 447, 497 English and Foreign Credit Co., 1 Times L. E. p. 1 - - 309, 469 English and Scottish Merc. Invest. Trust- f. Brunton, (1892) 2 Q. B. 700; 62 L. J. Q. B. 136; 67 L. T. 406 ; 41 W. E. 133 ; 4 E. 58 (C. A.) - - - - - - - 794, 800 Englishman (The), (1895) P. 212 ; 64 L. J. P. 74 ; 72 L. T. 203 ; 43 W. E. 670; 11 E. 757 ; 7 Asp. M. C. 605 - - - - 964 Enthoven v. Hoyle, 13 C. B. 373; 21 L. J. C. P. 100; 16 Jur. 272 - 748, 815 Era Assurance Co.'s Case, 30 L. J. Ch. 137 ; 32 L. J. Ch. 207 ; 1 D. J. & S. 29 ; 11 W. E. 59 ; 7 L. T. 404 - - - 309, 1155 Erlanger v. New Sombrero Co., 5 C. D. 75 ; 3 App. Cas. 1218; 25 W. E. 436 ; 27 W. E. 65 ; 36 L. T. 222 ; 39 L. T. 269 ; 46 L. J. Ch.. 425; 48 L. J. Ch. 73 - 6, 12, 54, 01, 62, 64—66, 68, 135, 383 Ernest v. Loma Gold Mines, (1897) 1 Ch. 1 ; 66 L. J. Ch. 17 ; 75 L. T. 317 ; 45 W. E. 86 - - - 418, 419, 424, 426, 645 Ernest v. Nicholls, IL L. Cas. 401 ; 8 C. D. 679 ; 3 Jur. N. S. 919 ------ 36, 135, 274, 302, 427 Esdailc i\ La Nanzo, 1 Y. & C. 394 - - - - - 723 Esparto Co., In re, 12 C. D. 191; 28 W. E. 116; 48 L. J. Ch. 573 - - - - - - - - 20, 392 Estates Investment Co., /?i rf, 25 S. J. 585 - _ . _ ioi3 European I5ank, Re, 5 Ch. 35S - - - - - - 800 European ]3auk. Re, Agra ]5ank Claim, 8 Ch. 41 - - 921, 923 European Central Co., In re, 4 C. L. 33; 25 W. E. 92; 35 L. T. 583; 46 I.. J. Cli. 57 - - - - - - - 821 Eustace r. l)iil.liii, iVc. lliiil. Co., 6 l':(i. 1S2- - - - 851 Evans' Case, 2 Cli. ■120; 36 L. J. Ch. 501 ; 16 \,. T. 252; 15 W. E. 543 - - 20 I'AGE - 965 T. - 492 - lOGl - 12 - 'j-d:i G7 - 39G 8i)l , 168 TABLE OF CASES. xlv Eva— Fit Evans v. Bcattio, 5 Esj"). 2G - Evana v. Coventiy, 8 J)e G. M. & G. 835; 5 W. E. 43G ; 29 L. T. O. S. 118; 2GL. J. Ch. 400 ----- Evans v. Hearts of Oak Society, 12 Jur. N. S.'1G3 - Evans v. Smallcombo, L. R. 3 H. L. 249 Evans v. Truman, 1 Moo. & E. 10 - Everitt v. Automatic Weighing Machine Co., (1892) 3 Ch. 50G L. T. 349 ; G2 L. J. Oh. 241 - Exchange Drapery Co., 38 C. D. 171 - - - Exeter and Crediton Rail. Co. v. Buller, 5 Ry. Cas. 211; 11 Jur. 527 - - - - - - - - 32, 1031 Exhall Coal Co., 35 Boav. 449 - - - - 798, 818 F. Fail-bairn Engineering Co. {Ex parte Ladd), (1893) 3 Ch. 450; 63 L. J. Ch. 8 ; 69 L. T. 415; 8 R. 16 - - 389, 391, 392, 414 Fairbrother v. England, 40 W. R. 220 - - - - - 207 Fairfield, &c. Co. v. London and East Coast, &c. Steamship Co., W. N. (1895) 64 - - - - - 1026, 1045, 1077 Farrand v. Yorkshire Banking Co., 40 C. D. 182 - - - 795 Farrar v. Farrars, 40 C. D. 395; 58 L. J. Ch. 185 ; 60 L. T. 121 ; 37 W. R. 196 - - - - - - - 3 Farrer v. Lacy, Hartland & Co., 25 C. D. 636 - - - - 938 Faure Accumulator Co., 40 C. D. 141 ; 58 L. J. Ch. 48 ; 59 L. T. 918 ; 37 W. R. ] 16 ; 1 Meg. 99 - 3, 148, 149, 150, 274, 367, 401, 427, 428, 471 Faure Accumulator Co. v. Phillipart, 58 L. T. 525 - 393, 434, 441, 443 FeUx, Hadley & Co. v. Hadley, 77 L. T. 136 - - 12, 64, 184, 568 Fell V. Goslin, 7 Ex. 185 - - - - - - 962 Ferguson v. Wilson, 9 Ch. 89 ; 15 W. R. 27 - 3, 8, 28, 427, 432, 1023 Fernandez's Executors, 5 Ch. 314 ----- 407 Ferrao's Case, 9 Ch. 355 ; 22 W. R. 386 ; 30 L. T. 211 ; 43L. J. Ch. 482 - - - - - - - - - 188 Fewings, Ex parte, 25 C. I>. 338 ; 53 L. J. Ch. 545 ; 20 L. T. 109 ; 32 W. R. 352 - - - - - - - 821 Fielding and Rimington's Case, 2 Ch. 714 - - - 282, 658 Filby V. Hounsell, (1896) 2 Ch. 737 - - - - - 194 Financial Corporation, 27 S. J. 199 - - - - - 1013 Financial Corporation, In, re (Goodson's Claim), 28 W. R. 760 ; W. N. (1880) 88 - - - - 275, 303, 309, 470 Finlay v. Mexican Investment Corporation, (1897) 1 Q. B. 517; 66 L. J. Q. B. 151 ; 76 L. T. 257 - - - - - 843 Fii'bauks Executors v. Hvmiphreys, 18 Q. B. D. 54 ; 56 L. J. Q. B. 57; 56 L. T. 36; 35 W. R. 92 - - - 412,427,441,713 Firmstone's Case, 20 Eq. 524 ; 23 W. R. 867 ; 44 L. J. Ch. 617 - 187, 289 Fisher's Case, 31 C. D. 120; 55 L. J. Ch. 497, 597 ; 53 L. T. 832; 34 W. R. 49, 335 - - - - - - - 25 Fisher v. Hull and Barnsley Rail. Co., 25 S. J. 353 - - - 519 Fitzgerald's Trustee v. Mellersh, (1892) 1 Ch. 385; 61 L. J. Ch. 231; 66L. T. 178; 40W. R. 251 - - - - - - 922 xlvi TABLE OF CASES. Fit— Fre page Fitzroy Bessemer Co., Re, 32 W. E. 475 ; 33 W. E. 312 ; 50 L. T. 154 - - - - - - - 68, 69, 1059 Flavell V. Murray, 25 C. D. 89 ; 32 W. E. 102 ; 49 L. T. G90; 53 L. J. Cli. 185 - - - - - - - - 71 Fleetwood Estate Co., W. N. (1897) 20 - - - 992, 994 Flintshire Oil and Cannell Co., North, J., 14th May, 1887 - - 418 Flitcroft's Case, 21 C. D. 535; 31 W. E. 174 ; 48 L. T. 86 ; 52 L. J. Ch. 217 - - - 1, 3, 274, 427, 428, 456, 516, 519, 520 Floating Dock of St. Thomas, (1895) 1 Ch. 691 - - 369, 663, 970 Florence Land and Public Works Co. , Limited, 10 C. D. 530; 27 W. E. 236 ; 39 L. T. 589 ; 48 L. J. Ch. 137 - 753, 773, 774, 776, 778, 781, 793, 911 FoUit V. Eddystone Granite Quarries, (1892) 3 Ch. 75 ; 61 L. J. Ch. 567 ; 40 W. E. 667 - - - - - - - 805 Forbes' Case, 8 Ch. 768 ; 42 L. J. Ch. 857 (C. A.) - - 281, 431 Forbes and Judd's Case, Re Heyford Iron "Works Co., 5 Ch. 273 ; 39 L. J. Ch. 422 ; 22 L. T. N. S. 187 ; 18 W. E. 302 - - - 183 Forbes v. Jackson, 19 C. D. 615 ; 51 L. J. Ch. 690 ; 48 L. T. 722 ; 30 W. E. 652 - - - - - - - 964 Forder v. Handyside, 1 Ex. D. 233 ; 45 L. J. Ex. 809 ; 35 L. T. 62 ; 24 W. E. 764 - - - - - - - - 46 Fore Street Warehouse Co., W. N. (1888) 155; 59 L. T. 214; 1 Meg. 67 - . - - - - -661,974,977 Foreign American and Gen. Invest. Trust Co. v. Sloper, (1893) 2 Ch. 96 ; 62 L. J. Ch. 416 ; 69 L. T. 39 ; 41 W. E. 550 ; 3 E. 272 - 792 Foreign & Col. &c. Co., (1891) 2 Ch. 395 ; 65 L. T. 78; 39 W. E. 699 ------- - 992, 993 Forest of Dean, &c. Co., Limited, 10 C. D. 450; 27 W. E. 594; 40 L. T. 287 - - - - - - - 427, 471 Forrest v. Manchester Eail. Co., 30 Beav. 40 - - - - 276 Foss V. Harbottle, 2 Ha. 461 - - 33, 374, 1028, 1029, 1030 Foster v. Inland Eevcnue Commissioners, (1894) 1 Q. B. 516 ; 63 L. J. Q. B. 173 ; 69 L. T. 817 ; 42 W. E. 259 ; 58 J. P. 444 ; 9 E. 161 (C. A.) - 1, 3, 562, 575 Foster v. Pontoons and Dry Dock Co., 9 T. L. E. 450; 63 L. J. Q. B. 50 - - - - - - - - 403 FothcrgiU's Case, 8 Ch. 282 ; 21 W. E. 301 ; 27 L. T. 124 ; 42 L. J. Ch. 481 - 64, 189, 289 Foulkes V, Quartz Hill Co., 1 C. & E. 156; Em. Dig. 1884, p. 102 - 105 Fowler v. Broad's Patent, &c. Co., (1893) 1 Ch. 724; 62 L. J. Ch. 373 ; 68 L. T. 576 ; 41 W. E. 247 ; 3 E. 295 - 413, 1110, 1124 Fox's Case, 6 Ch. 176, 183 ; 24 L. T. 336; 40 L. J. Ch. 433 - 33, 469, 1027, 1132, 1134, 1135, 1159, 1161 Foxton V. Manchester, &c. Bank, 44 L. T. N. S. 406 - - 921 Frames v. ]',ultioutein Mining Co., (1891) 1 Ch. 140; 60 L. J. Ch. 99 ; 64 L. T. 12 ; 39 W. E. 134 ; 2 Meg. 374 - - 262, 432 Franco v. Clark, 26 C. D. 257; 32 W. E. 466; 50 L. T. 1 ; 53 L. J. Ch. 515 - - - - - - - 400, 426 Francis v. Harrison, 43 C. D. 183 - - - 1026, 1096 Frank Mills Mining Co., 23 C. D. 52, 50 - - - 34, 524 Fraser v. Cooper, Hall & Co., 21 CD. 718 ; 30 W. E. 654 ; 46 L. T. 371 ; 51 L. J. Ch. 575 _ - - - 1025, 1077 Frazcr v. Jordan, 26 L. J. Q. B. 288 ; 8 El. & Bl. 303 - - 964 Freehold Land Co. v, Spargo, W. N. (1868) 94 - - - - 1068 TABLE OF CASES. xlvii Pre— Grib page Freeman v. Applcyanl, 32 L. J. Cli. 175 ; 7 L. T. 282 ; 1 N. R. 30 - 932 Freeman v. Cooke, 2 Ex. 654 ; 6 D. & L. 187 ; 18 L. J. Ex. 114 - 712, 7G6 Friend v. Young, (1897) 2 Ch. 421 ; 66 L. J. Ch. 737 ; 77 L. T. 50; 46W. E. 139 - - - - - - - 919 Fuentes v. Montis, L. E. 4 C. T. 93 ; 38 L. J. C. P. 95 ; 19 L. T. 364; 17W. E. 208 - - - - - - - 935 Furness Eail. c. Commissioners, 33 L. J. Ex. 173 - - - 400 Furnival v. Coombes, 5 M. & Gr. 736 ; 6 Sc. N. E. 522 ; 12 L. J. C. P. 265; 7 Jur. 399 - - - - - - - 178 Furnivall r. Hudson, (1893) 1 Ch. 335; 62 L. J. Ch. 178 ; 68 L. T. 378; 41 W. E. 358; 3 E. 230 - - - - - 869 a. Gadd V. Houghton, 1 Ex. D. 357 ; 24 W. E. 875 ; 35 L. T. 222 ; 46 L. J. Ex. 71 - - - - - - - - 193 Gallinv. L. &N. W. Eail. Co., L. E. lOQ. B. 212- - - 126 Gallsworthy r. Selby Dam Commissioners, (1892) 1 Q. B. 348; 61 L. J. Q. B. 372 ; 66 L. T. 17 ; 8 T. L. E. 60 - - - - 9 Gandy v. Gandy, 30 C. D. 57 ; 33 W. E. 803 ; 53 L. T. 306 ; 54 L. J. Ch. 1154 - - - - - - 71, 130, 752 Gann v. Free Fisheries of Whitstable, 11 H. L. C. 192 ; 20 C. B. N. S. 1 ; 35 L. J. C. P. 29 ; 12 L. T. 150; 13 W. E. 589 - - 1182 Garden Gully, &c. Co. v. McLister, 1 Aiij). Cas. 39 ; 24 W. E. 744 ; 33 L. T. 408 - - - - - - 391, 438 Gardner v. L. C. & D. Co., 2 Ch. 201 ; 15 W. E. 325 ; 15 L. T. 494, 552 ; 36 L. J. Ch. 323 - 279, 350, 748, 751, 1090, 1092, 1182 Garnett v. M'Kewan, L. E. 8 Ex. 10 - - - 921, 923 Gartside v. Silkstone Co., 21 C. D. 762 ; 31 W. E. 36; 47 L. T. 76 ; 51 L. J. Ch. 828 - - - - - - 799, 822 Gatey v. Fry, 2 Ex. D. 265 - - - - - - 426 Gatling Gun Co., lie, 43 C. D. 628 ; 59 L. J. Ch. 279 ; 62 L. T. 312 ; 38W. E. 317; 2 Meg. 114 - - - - - - 662 Gaudet Freres, &c. Co., 12 C. D. 882 ; 48 L. J. Ch. 818 - - 818 Gaussen v. Morton, 10 B. & C. 731 - - - - - 154 Gelly Deg Colliery Co., 38 L. T. 440 - - - - 211 General Auction, &c. Co. v. Smith, (1891) 3 Ch. 432 - 275, 279, 305, 783 General Estates Co., In re, 3 Ch. 762 ; 16 W. E. 919 ; 18 L. T. 457 - 765 General Exchange Bank, Preston's Case, 4 Eq. 138; 37 L. J. Ch. 618 ; 16 W. E. 1097 ----- 68, 448 General Phosphate Co. v. Horrocks, 8 T. L. E. 350 - - - 369 General Property Co. v. Matheson's Trustees, 16 C. of S. Cas. 282 (Sc.)- 274 General South American Co., Limited, 2 C. D. 314; 24 W. E. 891 ; 34 L. T. 706 - - - - - - - 810, 818 George Newman & Co., (1895) 1 Ch. 685 ; 72 L. T. E. 697 - 2, 546, 605 German Date Co., Be, 20 C. D. 169 ; 30 W. E. 717 ; 46 L. T. 327 ; 51 L. J. Ch. 464 - - - - - - 270, 308 German Mining Co., 4 De G. M. & G. 19 - - - - 470 Gibb V. Great Southern Mysore Co., Ct. of App. 10th Feb. 1882 - 98 Gibbs V. Guild, 9 Q. B. D. 59 ; 51 L. J. Q. B. 313 ; 46 L. T. 248 ; 30 W. E. 591 109 Xlviii TABLE OF CASES. Gib— Gov PAGE Gibbs and West's Case, 10 Eq. 312; 18 W. R. 070; 23 L. T. 350; 39L. J. CliG67 - - - - - - - 411 Gibson v. Barton, L. E. 10 Q. B. 329 ; 23 W. E. 858 ; 32 L. T. 39G ; 44 L. J. M. C. 81 - - - - - - - 414 Gibson v. Holland, L. E. 1 C. P. 1 - - - 194, 195, 914 Gibson v. Jeyes, 6 Ves. 278 - - - - - - 60 Gifford, Fox & Co. v. Overseers of Chard, 63 L. T. 249 ; 7 T. L. E. 431 -------- 50 Gilbert's Case, 5 Ch. 559 ; 18 W. E. 938 ; 23 L. T. 311 ; 39 L. J. Cb. 837 - - - - - - - 389, 397 Gilbert v. Endean, 9 C. D. 266 ; 27 W. E. 252 ; 39 L. T. 404 - 96 Gilbertson v. Eichards, 4 H. & N. 277 - - - - 770 Giles V. Nutball {In re House Improvement Supply Ass.), W. N. (1885) 51 - - - - - - - - 1091 GUes V. Perkins, 9 East, 14 - - - - - - 923 Gill v. Downing, 17 Eq. 317 - - - - - - 938 GHlats and Watts v. Colqulioun, 33 W. E. 258 - - - 46 Glasier v. Eolls, 43 C. D. 436; 58 L. J. Ch. 820; 62 L. T. 133 ; 38 W. E. 113 - - - - - - 97, 106, 107 Glenton and Saunders, iZe, 53 L. T. 434 (C. A.) - - - 205 Glory Paper Mills Co. (Dunster's Case), (1894) 3 Ch. 473 ; 63 L. J. Ch. 885 ; 71 L. T. 528 ; 43 W. E. 164 ; 1 Mauson, 438 ; 7 E. 456 (C. A.) - - - - - - - - 431 Glover v. Giles, 18 C. D. 180; 50 L. J. Ch. 568; 45 L. T. 344; 29 W. E. 603 - - - - - - - 16 Glyn V. Bates, 13 East, 509 - - - - - - 760 Godfrey V. Watson, 3 Atk. 517 - - - - - 938 Gold Co., Be, 11 C. D. 719 - - - - - - 645 Gold Hill Co., 23 C. D. 210 ; 31 W. E. 853 ; 49 L. T. 66 - - 1067 Gold Ores Eeduction Co. v. Parr, (1892) 2 Q. B. 14 ; 61 L. J. Q. B. 522 ; 66 L. T. 687 ; 40 W. E. 526 _ _ - - -1017 Gold Eeefs of Western Australia v. Dawson, (1897) 1 Ch. 115 - 1031 Goldschmidt v. Jones, 22 L. T. 221 - - - - - 402 Gooch's Case, 8 Ch. 266 ; 21 W. E. 181 ; 28 L. T. 148 ; 42 L. J. Ch. aSl -------- 402 Goodchap V. Eoberts, 14 C. D. 49 - - - - - 821 Goodson's Claim, Jle Financial Corp., 28 W. E. 760 - - 275 Goodwin V. Eoberts, 10 Ex. 337 ; 1 App. Cas. 476 ; 24 W. E. 987 ; 35 L. T. 179 ; 44 L. J. Ex. 157 : 45 L. J. Ex. 748 - 756, 759, 766, 768, 793, 851 Gordon (on behalf, &c.) v. Cassel Tramways Co., Bacon, V.-C, 8th Jidy, 1879, A. 1486 - - - - - - 1100 Gorgier v. Mievillc, 3 B. & C. 45 - - - - - 757 Oorringo v. Irwcll India Eubber Works, 34 C. D. 128; 53 L. J. Ch. 85; 55L. T. 172; 35 W. E. 86 - - - - - 782 Goslings. Gaskell, (1897) A. C. 575 - - - 826,1092 Gould V. Oliver, 4 B. & C. 142 - - - - - 131 Ooultoii v. London Architectural Co., W. N. (1877) 141 - 391, 1060 Gourand /■. Edison, 59 L. T. 813; W. N. (1888) 194; 57 L. J. Ch. 4<)H _------- 4ji) Govely, AVy^a//', 4 De G. J. ^- S. 4 77 - - - - - 209 Govor'sCaso, 1 C. D. 182; 24 W. 1!. 125; 33 L. T. 619; 45 L. J. Ch. 83 - - - - - 62, 63, 68, 98, 124, 128 TAJ5LE OF CASES. xlix Gov— Gue PAGE Govoiument Stock Co., TIk; Queen ?-., .'i Q. B. D. 412 ; 47 L. J. Q. ?,. 478 ; 39 L. T. 230 - . . _ _ G4.j, lOGl Government Stock Investment Co. (No. 2), (1892) 1 Ch. .597 ; 61 1j. J. Ch. 381 ; 66 L. T. 608 ; 40 W. li. 387 - - - - 993 Government Stock, &c. Co. v. Manila EaiL, AV. N. (1890) 111 773, 774, 777, 778 Graff V. Evans, 8 Q. B. D. 373 ; -31 L. J. j\[. C. 2.5 ; 46 L. T. 347 ; 30 W. E. 380 ; 46 J. P. 2G2 - - - - . . ^3,51 Graham v. Graham, 1 Ves. Jun. 274 - - - - li) Graham v. Van DIeman's Land Co., 26 L. J. Ex. 73 - - 391, 416 Grant v. United Switchback Rail., 40 C. I). 135 ; 58 L. J. Ch. 211 ; 60 L. T. 525 ; 37 W. E. 318 ; 1 Meg. 117 - 9, 32, 307, 416, 436, 647 Gray v. Lewis, 8 Ch. 1050 ; 21 W. E. 923 ; 29 L. T. 12 ; 43 L. J. Ch. 281 -.--__ 3, 73, 1028, 1030 Gray v. Stone and Eunnell, 69 L. T. 282 ; W. N. (1893) 133; 3 E. 692 - - - - - - - - _ 39G Great Britain Mutual, 16 C. D. 246 ; 19 C. D. 39 ; 20 C. D. 351 ; 30 W. E. 145, 374; 45 L. T. 554; 46 L. T. 616; 51 L. J. Ch. 7, 506- 1006 Great Eastern Eail. Co. v. Turner, 8 Ch. 152 ; 21 W. R. 163 ; 27 L. T. 697 ; 42 L. J. Ch. 83 - - - - 1, 272, 427 Great Northern Salt Co., 44 C. D. 472 ; 59 L. J. Ch. 288 ; 62 L. T. 231 ; 2 Meg. 46 - - - 429, 437, 442, 443, 444, 445 Great AVestern Eail. Co. v. Inland Revenue Commissioners, (1891) 1 Q. B. 507 ; 63 L. J. Q. B. 405 ; 70 L. T. 86 ; 42 AV. E. 211 ; 58 J. P. 397; 9 R. 122 (C. A.) . _ _ _ -1155 Great AV^estern Rail v. Eushout, 5 De G. & S. 290 - - 307, 1 168 Great AA'heal Polgooth, Fw, 32 AV. R. 107 ; 49 L. T. 20 ; 53 L. J. Ch. 42 ; 47 J. P. 710 - - - - - - - 58 Green v. London General Omnibus Co., 7 C. B. N. S. 290 ; 29 L. J. C. P. 13; 1 H. & C. 526 - - - - . . U) Green v. AVright, 1 C. P. D. 592 - - - - - 262 Green v. AVynn, 4 Ch. 204 - - - - - - 964 Greenwood's Case, 3 De G. M. & G. 459 - - - - 548 Greenwood v. Algeciras (Gibraltar) Rail., (1894) 2 Ch. 205 ; 63 L. J. Ch. 670; 71 L. T. 133; 1 Manson, 455 ; 7 R. 620 (C. A.) -793, 1093, 1094, 1100 Gregson, In re, (1893) 3 Ch. 233; 62 L. J. Ch. 764; 69 L. T. 73; 41 AV. E. 641 (C. A.)- - - - - - - 398 Gresham Life, Be, 8 Ch. 449; 42 L. J. Ch. 183 ; 28 L. T. 150; 21 AV. R. 186 - - - - - - - 439, 446 Gresham Life Soc. v. Styles, (1892) A. C. 309 ; 62 L. J. Q. B. 41 ; 67 L. T. 479; 41 AV. R. 270; 56 J. P. 709 - - 45,46 Griffith V. The Earl of Dudley, 9 Q. B. D. 357 ; 51 L. J. Q. B. 543 ; 47 L. T. 10; 30 AV. R. 797; 46 J. P. 711 - - 126,127,618 Griffith V. Paget, 5 C. D. 894 ; 6 C. D. 515 ; 25 AV. R. 523 ; 37 L. T. 141 ; 46 L. J. Ch. 493 - 34, 36, 69, 135, 246, 470, 500, 530, I(i63, 1131, 1132, 11.36 Griffith V. Pound, 45 C. D. 553 - - - 1025, 1026, 1096 Grill V. General, &c. Co., L. R. 1 C. P. 603 ; affirmed L. R. 3 C. P. 476 - - - - - - - - - 428 Grissell's Case, 1 Ch. 528 ; 14 AV. R. 1015 ; 14 L. T. 843 ; 35 L. J. Ch. 752 - - - - - - - - 3 Guardian Fire & Life Assurance Co. v. Guardian & General Insurance Co., 43 L. T. 791 ; 50 L. J. Ch. 253 - - - - - 266 Guerreiro v. Serle, 3 B. & Ad. 616 - - - - - 723 P. d 1 TABLE OF CASES. Gui— Har i'age Guinness v. Land Corporation, 22 C. D. 377 ; 31 W. E. 341 ; 47 L. T. 517; 52 L. J. Ch. 117- 34, 150, 273, 274, 287, 373, 468, 510, 519, 520 Guinness & Co/s Trade Mark, 5 Eep. Pat. Cas. 316- - 200, 1070 Gunn's Case, 3 Ch. 40; 38 L. T. 139 - - - - 22, 23 Gunn V. Bolcliow, Vaughan & Co., 10 Ch. 492 - - - 932 Gustard's Case, 8 Eq. 438 ; 17 W. R. 875 ; 21 L. T. 196 ; 38 L. J. Ch. 610 - - - - - - - - 401 Guyot V. Thompson, (1894) 3 Ch. 388 ; 64 L. J. Ch. 32 ; 71 L. T. 416 -------- 223 H. Hadfield's Steel Co., Chitty, J., 3 June, 1892, A. 880 - - 1055 Haford Hotel, Re, W. N. (1868) 86; 18 L. T. 144 - - - 1135 Haggett V. Miff, 5 D. M. & G. 910 - - - - - 724 Hague v. Danderson, 2 Ex. 741 ; 17 L. J. Ex. 269 - - - 394 Haigh V. Eoyal Mail Co., 48 L. T. 267 ; 52 L. J. Q. B. 640 - 126 Halifax & Huddersfield Union Banking Co. v. Eadcliffe, Limited, W. N. (1885) 63 - - - - - - - 817 HaHfax Sugar Eefining Co. v. Franklyn, 62 L. T. N. S. 563 ; 59 L, J. Ch. 591 ; 2 Meg. 129 - - - - 435, 441, 464 Hall (A. W.) & Co., Limited, 37 C. D. 712; 57 L. J. Ch. 288; 58 L. T. 156 - - - - - - - - 189 Hall v. Goy, Limited, (1891) H. 3315 - - - - 1074 Hallows V. Eerme, 3 Ch. 475 ; 16 W. E. 873 ; 18 L. T. 340; 36 L. J. Ch. 267 - - - - 69, 94, 95, 97, 100, 136, 431 Hamilton v. Brogden, W. N. (1891) 36 ; 60 L. J. Ch. 88 - 433 Hamilton v. Vaughan, Sherrin, &c. Co., (1894) 3 Ch. 589; 63 L. J. Ch. 795 ; 71 L. T. 325 ; 43 W. E. 126 ; 8 E. 750 - - - 402 Hamilton v. Watson, 12 CI. & E. 109 - - - - - 925 Hamilton's Windsor Iron Works, Ex parte Pitman & Edwards, 12 C. D. 707 ; 27 W. E. 445 ; 40 L. T. 569 - - - - 773 Hamlyn v. Wood, (1891) 2 Q. B. 488 ; 60 L. J. Q. B. 734 ; 65 L. T. 286; 40 W. E. 24 - - - - - - - 261 Hammond, Be, 62 L. T. 808 - - - - - 202 Hampshire Land Co., (1896) 2 Ch. 743 ; 05 L. J. Ch. 860; 75 L. T. 181 ; 45 W. E. 136 - - - 68, 412, 416, 427, 800, 801 Hampson v. Price's Patent Candle Co., 34 L. T. 711 ; 45 L. J. Ch. 437 ; 24 W. E. 754 . - _ 275, 304, 446, 456, 620 Hanbury v. Cundy, 58 L. T. 155 - - - - - 207 Hannan's Empress, &c. Co., J'Jx parte Caimichacl, (1896) 2 Ch. 643; 05]i. J. Ch. 902; 75L. T. 45 - - - 21,154,155,160 Hannan's King, &c. Co., 14 T. L. E. 314 - - - - 401 llarisard Publi,shing Union, 8 T. L. E. 280 - - - - 792 Harbf:n v. Phillips, 23 C. D. 14 ; 31 W. E. 173 ; 48 L. T. 334, 741 ; 31 AV. E. 173 - 33, 424, 439, 444, 1028, 1029, 1030, 1031, 1001, 1062 Hare's Case, 4 Ch. 503 ; 17 W. E. 628 ; 20 L. T. 157 - - - 104 Hargi'ovo, Ex jmric, 10 C'li. 542; 23 W. E. 939; 32 L. T. 713; 44 ];. J. Ch. 569 - - - - - - 52, 314 Hiiilino V. Hull Street Trams. Co., Chitty, J., 2 May, 1892, A. 069- 1078 Hurnian'8 Case, 1 C. D. 320 ; 45 L. J. Ch. 332 ; 33 L. T. 760 - 307 TABLE OF CASES. 11 Har — Hen page Tlarpov v. Godsoll, o Q. B. 422 ; 39 L. J. Q. B. 185 ; 18 W. E. 954 - 723 Harper v. Paget, M. E. IG March, 1876, A. 599 ; 5 C. D. at p. 89G- 10G3 Harrington v. Victoria Dock, 3 Q. B. D. 549 - - - - 4S6 Harris' Case, 7 Ch. 587 ; 20 TV. E. 690; 20 L. T. 781 ; 41 L. J. Ch. G21 ---_-_ 23, 143, 440, 443 Harris v. Fawcett, 8 Cli. 86G - - - - - - 963 Harris v. North Devon Eail. Co., 20 Bcav. 384 - - - 392 Harrison, ^a; ^wrile, 26 C. D. 522 . _ . - 155,407 Harrison's Case, L. E. 3 Ch. 633 - - - - - 25 Harrison v. Mexican Eail. Co., 19 Eq. 358 ; 23 W. E. 403 ; 32 L. T. 82 ; 44 L. J. Ch. 403 - - - - 273, 28G, 378, 652 Harrison v. St. Etienne Co., W. N. (1893) 108 - - - 1110 Halt, Be, Baylj, Ex parte, 15 CD. 223 - - - - 809 Hart V. Clark, 6 H. L. Cas. 633 ; 32 L. T. (0. S) 380 ; 27 L. J. Ch. 615 . - - - _ - - _ 391 Hart V. Frontiuo Co., L. E. 5 Ex. Ill - - - 190, 403, 712 Hartley's Case, 10 Ch. 157 ; 23 W. E. 203; 32 L. T. 106 ; 44 L. J. Ch. 240 ------ 180,181,191,232 Harvey, Ex parte, 4 D. M. & G. 801 - - - - - 964 Harvey Lewis' Case, 26 L. T. 673 - - - - - 433 Harvev's Ovstcr Co. (Ormerod's Case), (1894) 2 Ch. 475 ; 63 L. J. Ch. 578 ; "70 L. T. 795 ; 42 W. E. 701 ; 1 Manson, 153 ; 8 E. 715 27, 152, 155 Hastings v. Pearson, (1893) 1 Q. B. 62; 62 L. J. Q. B. 75 ; 67 L. T. 553; 41 W. E. 127 - - - - - - - 931 Hatfield v. Phillips, 9 M. & W. 647 - - - - - 935 Hattersley V. Shelbru-ne, 10 W. E. 881 - - - - - 1030 Haven Gold Co., 20 C. D. 151; 30 W. E. 389; 46 L. T. 322; 51 L. J. Ch. 242 ----- •• 271, 420 Hawkes v. Eastern Counties Bail. Co., 5 H. L. C. 331 ; 3 W. E. 609 ; 24 L. J. Ch. 601 - - - - - - - 268 Hawkins v. Gathercole, 6 De G. M. & G. 1 - - - - 1182 Hawkins v. Eutt, Peake, 186 - - - - - - 458 Hawksley v. Outram, (1892) 3 Ch. 359 ; 62 L. J. Ch. 215 ; 67 L. T. 804 (C. A.), reversing 61 L. J. Ch. 429 ; 66 L. T. 765 - - 723 Hay's Case, 10 Ch. 593, 604 ; 33 L. T. 466 ; 44 L. J. Ch. 721 - - 431 Hay V. Swedish and Norwegian Co., W. N. (1889) 95; 5 T. L. E. 460; 36 S. J. 712 - - - - 806, 1073, 1093, 1101 Heap V. Hartley, 42 C. D. 461 ; 58 L. J. Ch. 790; 61 L. T. 538 ; 38 W. E. 136 - - - - - - - - 223 Hebb's Case, 4 Eq. 9 ; 36 L. J. Ch. 748 ; 16 L. T. N. S. 308; 15 W. E. 754- - - - - - - 21, 27, 152 Heffield v. Meadows, L. E. 4 C. P. 595 - - - - - 963 Helby's Case, 2 Eq. 175 ; 14 W. E. 417 ; 14 L. T. 47 - - 524 Helby r. Matthews, (1895) A. C. 471 ; 64 L. J. Q. B. 465 ; 72 L. T. 841 ; 43 W. E. 561 - - - - - - - 935 Hellard and Home, Re, 29 C. D. 736 - - - - 822 Helmore v. Smith (2), 35 C. D. 449 - - - - - 1092 Hemming v. Mad dick, 7 Ch. 395 - - - - - 387 Henderson v. Bank of Australasia (Pension Case), 40 C. D. 170 ; 58 L. J. Ch. 197 ; 59 L. T. 856 ; 37 W. E. 332 - - - 304, 620 Henderson v. Bank of Australia, 45 C. D. 330 ; 59 L. J. Ch. 794 ; 2 Meg. 301 - - - - - - - 41G, 417 (12 Hi TABLE OF CASES. Hen-Hob taoe Henderson v. Lacon, 5 Eq. 249 ; 16 W. R. 328 ; 17 L. T. 527 - 92, 97, 101, 107, 109, 115 Hendricks v. Montagu, 17 C. D. 638 ; 30 W. R. 160 ; 44 L. T. 879; 50 L. J. Ch. 456 ------ 266,267 Henniker v. Wigg, 4 Q. B. 792 - - - - - - 920 Henry Bentley & Co. [Ex parte Harrison), 69 L. T. 204 - 21, 155 Henry Clay and Bock & Co., In re, (1892) 3 Ch. 549 ; 67 L. T. 614 ; 62 L. J. Ch. 143; 3 E. 29 - - - - 200, 1070 Henry v. Great Northern Eail. Co., 1 De G. & J. 606 ; 30 L. T. 0. S. 141 ; 27 L. J. Ch. 1 ; 3 Jur. N. S. 1133 - - 359, 482, 1064 Henry Pound, Son & Hutchings, 42 C. Div. 402 - 816, 826, 1092 Henthorn v. Eraser, (1892) 2 Ch. 27 ; 61 L. J. Ch. 373 ; 66 L. T. 439 ; 40 W. E. 433 - - - - - - 23 Herbert!'. Salisbury, &c. Co., 2 Eq. 221 - - - - 947 Hercynia Copper Co. (Eichardson's Case), (1894) 2 Ch. 403 ; 63 L. J. Ch. 567 ; 70 L. T. 709 ; 42 W. E. 593 ; 1 Manson, 286; 7 E. 214 (C. A.) - - - - - - - - 430 Hereford, &c. Waggon Co., Re, 2 C. Div. 621; 24 W. E. 953; 35 L. T. 40 ; 45 L. J. Ch. 461 - - - - - - 71 Hereward (The), (1895) P. 284; 64 L. J. P. 87; 72 L. T. 903 - 229, 345 Heritage's Case, 9 Eq. 5 - - - - --28 Hermann v. Hodges, 16 Eq. 18 - - - - - 792 Hesketh v. Bray, 21 Q. B. D. 444 - - - - - 46 Hester & Co., Limited, 44 L. J. (N. S.) Ch. 757 -1129,1131,1134,1160 Hetling and Merton's Contract, (1893) 3 Ch. 269; 62 L. J. Ch. 783; 69 L. T. 266 ; 42 AV. E. 19 - - - - - - 204 Heward v. Heatley, 3 De G. M. & G. 628 - - - - 28 Hewitt V. Loosemore, Amb. 436 - - - - - 800 Hewlett V. Allen, (1894) A. 0. 383 ; 63 L. J. Q. B. 60S ; 71 L. T. 94 ; 42 W. E. 670; 58 J. P. 700; 6 E. 175 (H. L.) - - - 616 Hexham Mining Co., HaU, V.-C, 4th March, 1876, A. 624 - - 1054 Heyden, Von v. Neustadt, 14 C. D. 230 - - - - 223 Heyman v. European Central Co., 7 Eq. 154 - - - 93, 98 Hibblewhite v. McMorine, 6 M. & W. 200 - - - - 399 Hicks V. Billiter Street Offices Co., and In re S. 0., North, J., at Chambers, 18 June, 1892, A. 900 - - - - -1106 Higgs' Case, 2 H. & M. 657 ; 13 W. E. 937 ; 12 L. T. 669 - - 1132 Higgs V. Assam Tea Co., L. E. 4 Ex. 394 ; 17 W. E. 1125 ; 21 L. T. 336; 38 L. J. Ex. 233 - - _ - -764,810 Hill's Case, 20 Eq. 585 ; 23 W. E. 646 ; 32 L. T. 747 ; 44 L. J. Ch. 423 ------ 281, 385, 406 Hill & Co. V. Hill, oo L. T. 709 ; 35 W. E. 137 ; 51 J. P. 246 - - 207 Hill V. East and West India Dock Co., 9 App. Cas. 448 - - 129 Hill V. Manchester, &c. Co., 5 B. & Ad. 866 - - - - 17 Hill's Waterfall, &c. Co., (1S9G) 1 Ch. 947; 65 L. J. Ch. 476; 74 L. T. 341 - - - - - - - - 1130 Hindley's Case, (1896) 2 Cli. 121 ; (W) L. J. Ch. 591; 74 L. T. 627; 44 W. E. 630 - - - - - - 26, 152, 153 Hirsch & Co. v. Burns, 77 L. T. 377 - - 213, 223, 261 Hirschc v. Sims, (1894) A. C. 654 ; 64 L. J. P. C. 1 ; 71 L. T. 357 - 428 Hitchcock V. Iluinfrey, 5 M. & G. 599 - - - - 962 Hobroydv. Marshall, 10 H. L. C. 191 - - - - - 773 Hobson V. Bass, 6 Ch. 792; Seton, p. 1783 - - - - 965 TABLE OF CASES. liii Hod— Hoy PAGE Hodson V. The Tea Co., 14 C. D. 859; 49 L. J. Ch. 234; 28 W. R. 458 ------- - 817, 825 Hogg V. Smith, 2 Taunt. 347 - - - - - 723 Holland v. Bygrave, 6 M. & G. 653 - - - - - 923 Holland v. Dicksou, 37 C. D. 669 - - - - - 460 Holland v. Holland, 4 Ch. 449 - - - - - - 459 Hollinwood Estate Co., Limited, W. N. (1887) 17 ; 31 S. J. 125 - 1015 Holme V. Brunskill, 3 Q. B. D. 495 ; 47 L. J. Q. B. GIO; 38 L. T. 838 - - - - - - - _ _ 842 Holmes' Case, 2 Ch. 714 - - - - - - 658 Holmes v. Higgins, 1 B. & C. 74 - - _ _ 72 Holmes v. Newcastle, &c. Co., 1 C. D. 682 ; 24 W. E. 505 ; 45 L. J. Ch. 383 - - - - - - - 520, 1030 Holroyd v. Marshall, 10 H. L. C. 191 - - - - - 781 Hoist V. Sydney Co., 69 L. T. 132 - - - - - 220 Holthausen, Ex parte, 9 Ch. 722 ; 31 L. T. 13 ; 44 L. J. Ch. 20 - 781 Homer District, &c. Gold Mines Co., Be, 39 C. D. 546; 58 L. J. Ch. 134;60L. T. 97 - - - - - - 22,1052 Hoole V. G. W. Eail. Co., 3 Ch. 262; 16 W. E. 260; 17 L. T. 453 ------ - 310, 457 Hooper u. Western Counties, &c. Co., 41 W. E. 86 - - - 1155 Hope V. Croydon & Norwood Tramways Co., 34 C. D. 730 ; 56 L. J. Ch. 760 ; 56 L. T. 822 ; 35 W. E. 594 - - - 1025, 1045 Hope V. International Financial Society, 4 C. D. 327 ; 25 AV. E. 203 ; 35 L T. 924; 46 L. J. Ch. 200 - - - 448, 1030, 1065 Hopkinson v. Eolt, 9 H. L. C. 514 ; 34 L. J. Ch. 468 - - 394 Hopkins' Trusts, 18 Eq. 696 ; 43 L. J. Ch. 722 ; 30 L. T. 627 ; 22 W. E. 687 - - - - - - - - 458 Hopkins v. Worcester & Birmingham Canal, 6 Eq. 445 - - 769 Horbury Bridge, &c. Co., 11 C. D. 109 ; 27 W. E. 433 ; 40 L. T. 353; 48 L. J. Ch. 341- _ _ _ _ 420, 645, 646 Home and Hellard's Case, 29 C. D. 736 ; 53 L. T. 562 ; 54 L. J. Ch. 919- - ------ 822 Horner Co., Jie, 39 C. D. 546 - - - - - 441, 442 Hort's Case, 1 C. D. 307 ; 33 L. T. 766 ; 45 L. J. Ch. 321 - - 1005 Houldsworth v. City of Glasgow Bank, 5 App. Cas. 326 ; 28 W. E. 677 ; 42 L. T. 194 - ----- 11,34,107 House Improvement Supply Association (Giles v. Nuthall), W. N. (1885) 51- - - - - - - - 1091 Household Fire Insurance Co., Be, 4 Ex. D. 216; 27 W. E. 858; 41 L. T. 298 ; 48 L. J. Ex. 577 - - - - 23, 143 Howard's Case, 1 Ch. 561 ; 14 W. E. 942 ; 14 L. T. 747 ; 36 L. J. Ch. 42 - - - - - - - 389, 440 Howard v. Iron, &c. Co., Kekewich, J., 6th July, 1891, A. 685 - 1078 Howard v. Patent Ivoiy Co., 38 C. D. 156 ; 57 L. J. Ch. 878; 58 L. T. 395; 36 W. E. 801 - - - 39, 176, 447, 787, 790 Howard v. Sadler, (1893) 1 Q. B. 1 ; 68 L. T. 120 ; 41 W. E. 126 ; 5 E. 45 - - - - - - - - 431 Howbeach Coal Co. v. Teague, 5 H. & N. 151 ; 29 L. J". Ex. 137 ; 8 W. E. 264 ------ 388, 429 Hoy lake Eail. Co., Be, 9 Ch. 257 - - - - - 385 Hoyle r. Hoyle, Be Hoyle, (1893) 1 Ch. 84 ; 62 L. J. Ch. 182 ; 67 L. T. 674 ; 41 W. E. 81 ; 2 E. 145 (C. A.) - 193, 194, 195, 915 liv TABLE OF CASES. Hoy— Inl PAGE Hoyle and Jackson v. Oldham Union, (1894) 2 Q. B. 372 ; G3 L. J. M. C. 178 ; 70 L. T. 741 ; 58 J. P. 0(39 ; 9 E. 287 - - 51 Hubbuck V. Helms, 35 W. E. 574 ; 56 L. T, 232 ; 56 L. J. Cb. 536 - 773, 774, 778, 815, 822, 1092 Hiiggons V. Tweed, 10 0. D. 359 ;. 27 W. E. 495 ; 40 L. T. 284 - 1025 Hugbes V. Morris, 2 De G. M. & G. 356 - - - - 915 Huguenin v. Baseley, 14 Ves. 273- - - - - 66 Hume V. Bentley, 5 De G. & S. 520 - - - - - 202 Hunnings v. Williamson, 11 Q. B. D. 533 - - - - 433 Hunt's Claim, W. N. (1872) 53 ; 20 W. E. 435; 26 L. T. 384 - - 470 Hunt V. Himt, 31 L. J. Cb. 175 ; 10 W. E. 215 ; 5 L. T. 778 ; 8 Jur. N. S. 85 - - - - - - - - 126 Hutb V. Clarke, 63 L. T. 348 ; 25 Q. B. D. 391 ; 59 L. J. M. C. 120 ; 59 W. E. 655 - - - - - - - 443 Hutton V. Scarborougb Cliff Hotel Co., 2 Dr. & S. 514 ; 4 De G. J. & S. 672 ; 13 W. E. 1059 ; 13 L. T. 87 ; 34 L. J. Cb. 643 ; 11 Jur. N. S. 551 - - - - - 286, 287, 377, 378, 379 Hutton V. West Cork Eail. Co., 23 C. D. 654 ; 52 L. J. Cb. 689 ; 49 L. T. 420; 31 W. E. 827 - - - - 34, 275, 304, 619 Hyde V. New Asbestos Co., 8 T. L. E. 121 - - ~ - 98 Hyslop V. Morel, 7 T. L. E. 263 - - - - - 92 Ibbotson V. Ibbotson Brotbers, 14 T. L. E. 278 (C. A.) - 189, 191, 232 Imperial Assurance v. Coleman, 6 Cb..568 ; 19 W. E. 481 ; 24 L. T. 290 ; 40 L. J. Cb. 262 - - - - - - 436 Imperial Bank of Cbina, &c. v. Bank of Hindustan, &c., 6 Eq. 91 ; 35L. J. Cb. 445 _ _ - - - 701,1134,1159 Imperial Continental Gas Co. v. Nicbolson, 37 L. T. 717 - - 47 Imperial Hydropatbic Co. v. Hampson, 23 C. D. 1 ; 31 W. E. 330 ; 49 L. T. 147 - - - - - 417, 438, 650, 701 Imperial Institute v. St. Mary Abbotts, Times, 7tb Marcb, 1895 - 51 Imperial Land Comp. of Marseilles, Ex parte Colborne and Straw- bridge, 11 Eq. 487 ; 19 W. E. 223; 24 L. T. 255 ; 40 L. J. Cb. 343 - - - - - 761, 763, 765, 768, 784 Imperial Mercantile Credit Association, Limited, In re, 12 Eq. 504 ; 41 L. J. Cb. 116 - - - - 1131, 1136, 1151, 1160 Imperial Ottoman Bank v. Trustees, &c. Corporation, AV. N. (1895) 23; 13 E. 287 - - - - - - - 1026 Ince Hall Co., Re, 23 C. D. 545, n. - - - - - 283 Incbbaldv. The Western Noilgberry Co., 17 C. B. N. S. 733; 13 W. E. 95 ; 11 L. T. 345 ; 34 L. J. C. P. 15 - - - 261 Incbiquin's (Lord) Case, (1891) 3 Cb. 28 ; 60 L. J. Cb. 556; 64 L. T. 811 ; 39 W. E. 610 (C. A.) - - - - - - 430 Indemnity Case (Albert Arbitration), Eeilly, p. 17 - - - 1155 Indorwick v. Snell, 2 M. & G. 216; 2 II. & Tw. 412 ; 19 L. J. N. S. Cb. 542 ; 14 Jur. 727 - - - - - - - 439 Indian Mocbanical, &c. Co., (1S91) 3 Cb. 538; 61 L. J. Cb. 31 ; 40 W. E. 181 - - - - - - - 993 Indian Zocdoiie Co., Rr, 26 C. D. 70; 53 L. J. Cb. 46S; 50 L. T. 517; 32 W. E. '181 ----- 421,426,445 Inland Ilovonuo v. Forrest, 15 A. C. 334 - - - - 49 TABLE OF CASES. Iv Inn— Job PAGE Inns oi' Court Hotel Co., (J Eq. 82 - - - - - 447 International Cable Co., 66 L. T. 253 - - - 376, 432 International Contract Co.'s Case, W. N. (1869) 24 ; 17 W. E. 454 ; 20 L. T. 100 ------- 270, 275 Iron Ship, &c. Co. v. Blunt, 3 0. P. 484 ; 16 W. E. 868 ; 37 L. J. C. P. 273 - - - - - - - 262, 388, 434 Iron Shipbuilding Co., 7?(', 34 Beav. 597 - _ - -1052 Irrigation Co. of France, 6 Ch. 183; 24 L. T. 336; 40 L. J. Ch. 433 1129 Irvine v. Union Bank of Australia, 2 App. Cas. 366 ; 25 W. E. 682 ; 37 L. T. 176; 46 L. J. P. C. 87 - 39, 412, 427, 455, 787, 790, 807 Isaac's Case, In re Anglo-Austrian Printing Co., (1892) 2 Ch. 158; 61 L. J. Ch. 481 ; 66 L. T. 593 ; 40 AV. E. 518 ; affirming 66 L. T. 250; 40 W. E. 362 - - - _ 374,376,377,433 Isle of Wight Eail. v. Tahourclin, 25 C. D. 320; 32 W. E. 297; 50 L. T. 132 ; 53 L. J. Ch. 353 - - - - -414,416 IsUngton and General Electric Supply, W. N. (1892) 81 - - 972 Issue Co., (1895) 1 Ch. 226; 71 L. T. 667 - . - - - 430 J. Jackson, Ex parte, 14 C. D. 725 ; 43 L. T. 272 ; 29 W. E. 253 - 870 Jackson v. Eainford Coal Co., (1896) 2 Ch. 340; 65 L. J. Ch. 757 ; 44 W. E. 554 - - - - - - - 787 Jackson v. Tui-quand, L. E. 4 H. L. 305 - - - - 22 Jacobs, ^xjjarie, 10 Ch. 211 _ - _ - 843,964 Jacoby v. Whitmore, 49 L. T. 335; 32 W. E. IS; 48 J. P. 325 - 199, 206 Jaegen, &c. Co. v. Vallen, 77 L. T. 180 - - - - 464 James v. Buena Ventura, &c. Syndicate, (1896) 1 Ch. 456; 65 L. J. Ch. 284; 74L. T. 1; 44 W. E. 372 - - - - - 410 James v. Eve, L. E. 6 H. L. 189, 385 - - 429, 519, 1159 James v. May, L. E. 6 H. L. 328 - - - - - 470 James Colmer, Limited, (1897) 1 Ch. 524; 66 L. J. Ch. 326; 76 L. T. 323; 45 W. E. 343 - - - 379, 480, 481, 649, 661, 970 Jay, Ex f arte, In re Harrison, 14 C. D. 19; 28 AV. E. 449; 42 L. T. 600 __-__--_ 407 Jeffreyes v. Agra, &c. Bank, 2 Eq. 674 - - - - - 923 Jenner's Case, 7 C. D. 132; 26 W. E. 291 ; 37 L. T. 807; 47 L. J. Ch. 201 - - - - - - - - 431 Jennings v. Broughton, 5 D. M. & G. 126; 17 Beav. 234; 1 W. E. 441 ; 22 L. J. Ch. 585 _ . - - _ 100,105 Jennings v. Hummond, 9 Q. B. D. 225 ; 31 W. E. 40 ; 51 L. J. Q. B. 493 _-_----- 52 Jewan v. Whitworth, 2 Eq. 692 - - - - - - 935 Johannesburg Hotel Co., (1891) 1 Ch. 119 - - - 187,188 John Brinsmead & Son v, T. E. Brinsmead & Sons, Limited, 13 T. L. E. 3 - - - - - - - 266 John Brown & Co., Limited v. Keeble, Malins, V.-C, 13 Nov. 1879, A. 2119 ._--_--- 1067 John Crossley & Sons, Be, W. N. (1892) 55 _ _ - 703 John Morley Building Co. v. Barras, (1891) 2 Ch. 386; 60 L. J. Ch. 496; 64 L. T. 856; 39 W. E. 619 - - - 417, 429 Johns V. Balfour, 5 T. L. E. 389 - - - - - 275 Ivi , TABLE OF CASES. Job— Kha PAGE Jolmson V. Credit Lyonnais Co., 3 C. P. D. 32 - - - 032 Johnson v. Lyttle's Iron Agency, Limited, 5 C. D. 087 ; 2d W. E. 548; 36 L.'T. 528 ; 46 L. J. Ch. 786 - - 375, 389, 391, 444, 1060 Johnson v. Eenton, 9 Eq. 181 ; 18 W. E. 284 ; 22 L. T. 90; 39 L. J. Ch. 390 - - - - - - - - 712 Joint Stock Discount Co. v. Brown, 3 Eq. 150 ; 8 Eq. 381 ; 17 W. E. 1037 ; 15 L. T. 174 ; 20 L. T. 844 ; 8 Eq. 376 ; 20 L. T. 692 - - 274, 277, 427, 428, 449, 1067 Jones V. Cwmorthen Slate Co., 5 Ex. Div. 93 - - - - 48 Jones V. Gordon, 2 App. Cas. 616- - - - - 933 Jones V. Heavens, 4 C. D. 636 ; 25 W. E. 460 - - - - 207 Jones, Lloyd & Co., 41 C. D. 159 - - - - - 188 Jones V. Peppercorne, Johns. 430; 28 L. J. Ch. 150 - - - 923 Jones V. St. John's College, L. E. 6 Q. B. 127 ; 40 L. J. Q. B. 80; 23L. T. 803; 19 W. E. 276 - - - - - 806 Jones V. Scottish Accident Insurance Co. (1886), 17 Q. B. D. 421 - - 41 Jones V. Smith, 1 Ha. 43 - - - - - 800, 801 Jones V. Victoria Graving Dock Co., 2 Q. B. D. 314 ; 25 W. E. 348 ; 36L. T. 144; 46L. J. Q. B. 219 - - 194,195,260,915 Jones V. "Williams, 24 Beav. 47 - - - - - 132 Jorden v. Money, 5 H. L. C. 185 ; 23 L. J. Ch. 865 - - 95, 131 Joshua Stubbs, Limited, (1891) 1 Ch. 475 ; 60 L. J. Ch. 190 ; 64 L. T. 306; 39 W. E. 617 (C. A.) - - - - - 818 Joumenjoy v, Watson, 9 App. Cas. 561 - - - - - 723 K. Kallenbach v. Lewds, 10 App. Cas. 617 _ _ _ - 935 Karberg's Case, (1892) 3 Ch. 1 ; 64 L. T. 700 - 91, 92, 95, 97, 102, 137, 152 Kaye v. Croydon Tramways Co., (1898) 1 Ch. 358 ; 78 L. T. 237 - 1159 Kellock's Case, 3 Ch. 769; 16 W. E. 919 - - - - 818 Kellock V. Enthoven, L. E. 9 Q. B. 241 ; 22 W. E. 322 ; 43 L. J. Q. B. 90 - - - - - - - - 399 Kelner v. Baxter, L. E. 2 C. P. 174 ; 15 W. E. 278 ; 15 L. T. 313 ; 36 L. J. C. P. 94 - - - - - -175, 176, 177 Kemble v. Earron, 6 Bing. 1 - - - - - - 207 Kemp V. Ealk, 7 App. Cas. 585 - _ _ _ _ 932 Kemp V. Walbrook, 1 Ves. 278- - - - --923 Kennedy v. Green, 3 M. & K. 699 - - - - - 800 Kensington, Ex jiuiie, 2 Y. & B. 79 - - - - - 916 Kent's Case, 39 C. 1 ). 259 ; 57 L. J. ( 'li. 977 ; 36 W. E. 818 ; 59 L. T. 449; 19 Meg. 69 ----- -187,230,391 Kent Coalfields Syndicate, W. N. (1898) 31 ; 14 T. L. E. 305 - - 460 Kent V. Fi-eeliold Land Co., 4 Eq. 588; 3 Ch. 493; 17 L. T. 77 - 97, 98, 102, 104 KciilmeK: Sailing Slii]i, W. N. (IS97) 58 - - - 415,439 Kotthrwell r. AVatson, 21 C. 1). 695; 26 C. D. 501 - - - 797 Keynsliaiii ]*,luc LiasCo. 7'. ]5arker, 2 IL & C. 729, 733 - - 41 KharaskhomaSyndicat.', (1897) 2 Cli. 151 ; 66 L. J. Ch. 675 ; 77 L. T. H2; 46 W. E. 37 - - - ' - 181, 185, 186, 200, 230 TA15LE OF CASES. Ivii Kim— Lan pagk Ximbcrlcy Co., Re, JN L. T. ;50.j - - - - - 399 Kimbcrloy North Block Diaiuoiul Miiiin- Co. , W. N. ( 1 SSS) 1 2G, C. A. ; 59 L. T. 579 - - - - - - - - 1052 King V. Marshall, 33 Beav. 565; 12 W. R. 971 ; 10 L. T. 557 ; 4 N. E. 258 -------- 790 Kingdon r. Kirk, 37 C. D. 141 ----- -1017 Kingston, /(,'.(; /«n-/f, Oh. 632 - - _ . _ 923 Kingston Cotton Mills Co. (No. 2), (1S90) 2 Ch. 279; iib L. J. Ch. 673; 74 L. T. 568; 3 Manson, 171 - - - 462, 463, 520 Kinnaird (Lord) v. Lady Saltoun (1816), 1 Madd. 227 - - 724 Kinuairi v. Webster, 10 C. D. 139 - - - - - 920 Kintrea, Ex parte, 5 Ch. 95; 18 W. R. 197 ; 21 L. T. 688 ; 39 L. J. Ch. 193 - - - - - - - - 1052 Kirby v. Duke of Marlborough, 2 M. & S. 18 - - - 919, 963 Kirk V. Bell, 16 Q. B. 290 - - - - - 441 Knight's Case, 2 Ch. 321 ; 15 W. R. 294 ; 15 L. T. 546 ; 36 L. J. Ch. 317 - - - - - - - 392, 444 Knight V. Bulkeley, 33 L. T. 7 ; 3 Jur. N. S. 817 - - - 424 Knowles v. McAdam, 3 Ex. D. 23; 47 L.J. Ex. 139; 37 L. T. 795; 26 AV. E. 114 - - - - - - - - 526 Knowles v. Scott, (1891) 1 Ch. 717 ; 60 L. J. Ch. 284 ; 64 L. T. 135 ; 39 W. R. 523 - - - - - - - - 39 Knox V. Hayman, 67 L. T. 137 - - - S4, 98, 107, 108 Krasnapolski Restaurant Co., (1892) 3 Ch. 174 ; 61 L. J. Ch. 593; 67 L. T. 51 ; 40 W. R. 639 - - - - - 817, 818 Kyshe v. Alhusen, 36 W. R. 496 - - - - - 1061 L. Labouchere v. Dawson, 13 Eq. 322 ; 20 W. R. 309 ; 25 L. T. 894 ; 41 L. J. Ch. 427 - - - - - - - 206 La Compagnie de Mayville v. Whitley, (1896) 1 Ch. 788; 65 L. J. Ch. 729 ; 74 L. T. 441 ; 44 W. R. 568 - - 441, 1028, 1031 Lacon v. Allen, 3 Drew. 579 ----- 915^ yis Lady Thynne v. Earl of Glengall, 2 H. L. C. 158 - - - 915 Ladywell Mining Co. v. Brookes, 35 C. D. 400 ; 35 W. R. 785 ; 56 L. T. 677 ; 56 L. J. 684 - - - - - 62, m Laing v. Overseers of Bishop wearmouth, 3 Q. B. D. 299 - - 50 Lamb v. Great Northern Rail. Co., (1891) 2 Q. B. 281 ; 60 L. J. U. B. 489 ; 65 L. T. 225 ; 39 W. R. 475 ; 56 J. P. 22 - - 616 Lambert v. Northern, &c. Co., 18 W. R. 180 - - - 433 Lamson, &c. Co., Re, (1895) 2 Ch. 726; 64 L. J. Ch. 777 ; 73 L. T. 311 ; 44 W. R. 42 - - - - - - - 975 Lancashire Telephone Co. v. Overseers, 14 Q. B. D. 267 - - 51 Lancaster, Ez parte, 5 C. D. 911 ; 25 W. R. 669 ; 37 L. T. 674 ; 46 L. J. Bank, 90 _-._-- 424, 426 Lancaster Banking Co., W. N. (1897) 3 ; 75 L. T. 647 - 992, 994, 1004 Land Credit Co. of Ireland, Re, 4 Ch. 460 ; 17 W. R. 089; 20 L. T. 641 ; 39 L. J. Ch. 389 - - - -37, 192, 420, 442, 455 Laud Credit Co. v. Lord Fermoy, 8 Eq. 7 ; 5 Ch. 763 ; 17 W. R. 562 ; 18 W. R. 1089 ; 20 L. T. 293 ; 23 L. T. 439 - - 274, 1065 Iviii TABLE OF CASES. Lan— Lev page Lands Allotment Co., (1894) 1 Ch. 616 ; 63 L. J. Ch. 291 ; 10 L. T. 286; 42 W. E. 404; 1 Manson, 107 ; 7 E. 115 - 67, 428, 445, 518, 520, 1066 Lunger's Case, 37 L. J. Ch 292 ; 18 L. T. 67 ; W. N. (1868) 8 - 398 Laroqne v. Beaucliemin, (1897) A. C. 358 ; 66 L. J. P. C. 59 ; 76 L. T. 473; 45 W. E. 639 - _ _ - - 64,187 Last V. London Assurance Co., 10 App. Cas. 438 - - - 46 Latham v. Chartered Bank, 17 Eq. 205 . _ . - 964- Latham (Earl of) v. Greenwich Eerry Co., 36 S. J. 189 - - 816, 1092 Laughton v. Bishop of Sodor and Man, 4 P. 0. 495 - - - 418 Laurie v. Scholefield, L. E. 4 C. P. 622 - - - - - 963 Law Guarantee Society v. Bank of England, 24 Q. B. D. 408 ; 62 L. T. 496 ; 38 W. E. 493 ; 54 J. P. 582 - - - 402, 879 Law V. Local Board of Eedditch, (1892) 1 Q. B. 127 ; 61 L. J. Q. B. 172 ; 66 L. T. 76 ; 56 J. P. 292 (C. A.) - - - - 207 Lawe's Case, 1 De G. M. & G. 430 - - - - - 416 Lawrence's Case, 2 Ch. 412 ; 16 L. T. 222; 36 L. J. Ch. 490 - 30, 137, 143, 191 Lawrence v. Walmsley, 12 C. B. N. S. 799 - - - - 843 Lawrence v. Wynn, 5 M. & W. 355 - - - - - 389 Laxon and Co., Be (No. 2), (1892) 3 Ch. 555; 61 L. J. Ch. 667; 67 L. T. 85; 40 W. E. 621 - - - - - - 288 Laythorpe v. Bryant, 3 Scott, 250 - - - --911 Lee V. Bangor, &c. Co., 20 Eq. 59 - - - - - 360 Lee (on belialf, &c.) v. Bower, E., and lie Bishwell Collieries (1S77), L. 104; Malins, V.-C, 22nd Mar. 1878 - - 1099, 1100 Lee V. Butler, (1893) 2 Q. B. 318 - - - - - 935 Lee V. Haley, 5 Ch. 161 ; 18 W. E. 242-; 22 L. T. 251 ; 39 L. J. Ch. 284-------- 266, 267 Lee V. Jones, 14 C. B. N. S. 386 - - - - 924, 925 Lee V. Neuchatel Co., 57 L. J. Ch. 622 ; 58 L. T. 553 ; 41 C. Div. 1 ; 58 L. J. Ch. 408 ; 37 W. E. 321 - 456, 518, 521, 522, 526, 531, 533, 534, 536, 537, 538 Leo V. Wilson {In re Tillott), (1892) 1 Ch. 86; 61 L. J. Ch. 38; 65 L. T. 781 ; 40 W. E. 204 - - - - - - 459 Leeds and Ilanley Theatre of Varieties v. Broadbent, W. N. (1897) 175; W. N. (1898) 1 - - - - - - - 947 Leeds Banking Co., 2 Dr. & Sm. 415 ; 3 D. J. & S. 30 - -22, 26 Leeds Estate Building, &c. Co., Be, 36 C. D. 787 ; 57 L. J. Ch. 46 ; 57 L. T. 684 ; 36 W. E. 322 - 428, 433, 456, 462, 463, 517, 519, 543, 1028 Leese v. Martin, 17 Eq. 224 " - - - - - 922 Leicester Club Co., Br, 30 C. D. 629 ; oo L. J. Ch. 206 ; 34 W. E. 14; 53 L. T. 340 - - - - - • - - 432, 433 Leifchild's Case, 1 Eq. 231; 13 L. T. 267; 14 W. E. 22; 11 Jur. N. S. 941 - - - - - - - - 275 Lg Neve v. Lo Neve, Amb. 436 ; 2 Wh. & Tu. L. C. 4th cd. 35 - 795, 801 Leroux v. Brown (1852), 12 C. B. 801 - - - - 193 Lester v. Foxcroft, 1 Coll. P. C. 108 ; 1 Wh. & Tu. L. C. Eq. 768 - 915 Lovita's Case, L. E. 3 Ch. 36; 17 L. T. 337 ; KJ W. E. 95 - 21, 22 Lcvita's (G. IL) Case, L. E. 5 Ch. 489 - - - _ _ 21 Levy V. Abca'carrasSlatoCo., 37 C. ]). 260; 57 L. J. Ch. 202; 58 L. T. 218; 36 W. E. 'Ill _ . _ _ 747,748,749,782 Levy V. Walker, 10 C. Div. 436 ; 27 W. E. 370 ; 39 L. T. 654 ; 48 L. J. Ch. 273 266, 267 TABLE OF CASES. Hx Lew — Lon page Lewis, J It re, G Cli. 818; 19 W. R. 791 ; 24 L. T. 787 ; 40 L. J. Ch. 429 - 39G Liberian Govornment Concessions, 9 T. L. R. KJG - - 98, 101 Licensocl Victuallers' Association, fnre, 42 CD. 1 ; 58 L. J. Ch. 4G7; 60 L. T. G84 ; 37 W. R. G74 ; 1 Mog. 180 - 140, 148, 149, IGO Liglitbown v. M'Myn, In re M'Myn, 33 C. D. 57o - - _ ,^4;j Limmer Asplialte Co. v. Commissioners of Inland Rcvenuo, L. R. 7 Ex. 211 ; 41 L. J. Ex. lOG ; 2G L. T. G33; 20 W. R. GIO - - 223 Limjms V. London General Omnibus Co., 1 II. & C. 52G; 39 L. J. Ex. 34 - - - - - - - 10, 11 Lindsay Petroleum Co. v. Hurd, L. R. 5 P. C. 221 - - - (jG Lion Insurance Co. v. Tucker, 12 Q. B. D. 276 - _ _ 281 Liquidators of Imperial Mercantile Credit Assoc, v. Coleman, L. R. G H. L. 189 - - - - - - - _ 08 Lister v. H. Lister & Co., 41 W. R. 330 - - - - 799 Lister & Co. v. Stubbs, 45 C. D. 1 - - - _ _ 68 Liverpool, &c. Co. v. Hongliton, 23 W. R. 93 - - - 4G,j Liverpool Guarantee Co., 30 W. R. 378; 46 L. T. 54 - - - 391 Liverpool Ilouseliold Stores, 62 L. T. 876 ; 59 L. J. Ch. 616 ; 1 Meg. 83 ----- - 428, 440, 443, 471 Lloyd V. David Lloyd & Co., 6 C. D. 339 ; 25 W. R. 872 ; 37 L. T. 83 818 Lloyd's V. Harper, 16 C. D. 290, 309 . _ _ 130, 963 Llynvi, Tondu, &c. Co., 26 W. R. 55; 37 L. T. 373 - - 662, 665 Lock V. Queensland Investment Co., (1896) A. C. 461 ; 65 L. J. Ch. 798; 75L. T. 3; 45 W. R. 65 - - - -391,519 Lock V. Wrigley, 9 Q. B. D. 397 - - - - - 927 Lockhart v. Moldacott, 5 T. L. R. 307 - - - - - 444 Locking V. Parker, 8 Ch. 30 - - - - - 817, 1026 Lockwood V. Hop Bitters Co., 3 T. R. 698 - - - - 276 Lodwich V. Earl of Perth, 1 T. L. R. 76 - - - - 98 Logan, Ex parte, 9 Eq. 149 ; 18 W. R. 273 ; 21 L. T. 742 - - 261 Logan V. Courtown (Earl), 13 Beav. 22; 20 L. J. Ch. 347 - - 389 London and Brighton Stock Exchange Co., 4 T. L. R. 2 - - 468 London and Caledonian Co., 11 C. D. 140 ; 27 W. R. 713 ; 40 L. T. 666 ------- ^ 39 London and Canadian Loan, &c. Co. v. Duggan, (1893) A. C. 506; 63 L. J. P. C. 14 ; 1 R. 413 - - - - - - 400 London and Colonial Finance Corporation, 77 L. T. 146 ; 13 T. L. R. 576 ________ 3(3,tj London and County Banking Co. v. Goddard, (1897) 1 Ch. 642 ; 66 L. J. Ch. 261 ; 76 L. T. 277 ; 45 W. R. 310 - - - - 939 London and County Banking Co. v. Lewis, 21 C. D. 490 - - 919 London and County Banking Co. i'. Radcliffo, 6 App. Cas. 722 - - 395 London and General Bank (auditor an officer), (1895) 2 Ch. 166, 673; 63 L. J. Ch. 853; 43 W. R. 481 ; 72 L. T. 611 - 462, 463, 518 London and Joint Stock Bank v. Simmons, (1892) A. C. 201 ; 61 L. J. Ch. 723 ; 66 L. T. 625 ; 41 W. R. 108 ; 56 J. P. 644 - 759, 797, 917, 933, 934 London and Mashonaland Co. v. New Mashonaland Co., W. N. (1891) 165 _______ 437 London and Mercantile Discount Co., In re, 1 Eq. 277; 14 W. R. 219; 13 L. T. 665 - - - - - - - 422 London and Now York Investment Co., (1895) 2 Ch. 860 - 663, 970 London and North-Western Rail. Co. v. Price, 11 Q. B. D. 485 - 276 Ix TABLE OF CASES. Lon — liow PAGK London and Provincial Co., Re, 5 C. D. 525 ; 55 L. T. 670 - 20, 105, 289 London and Provincial Law Assurance Society v, T.jondon and Pro- vincial, &c. Co., 17 L. J. Ch. 37 - - - - 266 London and Soutliern Counties Land Co., 31 C. D. 223 ; 34 W. E. 163 ; 54 L. T. 44 ; 55 L. J. Ch. 224 - - - - 429 London and Southwark to London and Lancasliii'e, 28 W. E. 565 ; 42 L. T. 247 - - - - - - - - 1006 London and Staffordshire Fire Insurance Co., Re, 24 C. D. 149 ; 31 W. E. 781 ; 48 L. T. 955 ; 53 L. J. Ch. 78 - 96, 97, 103, 139, 1052 London and Westminster Bread Co., Re, W. N. (1890) 3 ; 59 L. J. Ch. 155 ; 62 L. T. 224 ; 38 W. E. 277 ; 2 Meg. 30 - - - 1132 London Assurance Corporation v. The London and AVestminster Assurance Corporation, Limited, 9 Jur. N. S. 843 - - 266 London Bank of Mexico v. Apthorpo, (1891) 2 Q. B. 378 ; 60 L. J. Q. B. 653 ; 65 L. T. 601 ; 39 W. E. 564 (C. A.) - - - 48 London Celluloid Co., 39 C. D. 190 ; 57 L. J. Ch. 843 ; 59 L. T. 109 ; 36 W. E. 673; 1 Meg. 45 - - - - 29, 179, 185, 189, 190 London Chartered Bank of Australia, (1893) 3 Ch. 540 ; 62 L. J. Ch. 841 ; 69 L. T. 593 ; 42 W. E. 14 ; 3 E. 696 - - - - 843 London Chartered Bank v. White, 4 App. Cas. 422 (J. C.) - 922, 923 London, Chatham and Dover Bail. Co.. Re, 5 Ch. 671 ; 17 W. E. 946 ; 20 L. T. 597, 718 - - - - - - - 1168 London County Council v. Churchwardens of Erith, (1893) A. C. 562 ; 42 W. E. 330 ; 57 J. P. 821 ; 6 E., Feb. 1st (H. L.) - - 51 London Financial Association v. Kelk, 26 C. D. 107 ; 50 L. T. 492 ; 53 L. J. Ch. 1025 - - .- - - 12, 273, 276, 303 London Founders' Association v. Clark, 20 Q. B. D. 576 ; 57 L. J. Q. B. 291 ; 59 L. T. 93 ; 36 W. E. 489 - - - - 398 London Freehold, &c. Co. v. Suffield, (1897) 2 Ch. 608; 66 L. J. Q. B. 790 ; 77 L. T. 445 ; 46 W. E. 102 - - - 18, 19 London India Eubber Co., In re, 5 Eq. 519 ; 16 W. E. 334 ; 17 L. T. 530 ; 37 L. J. Ch. 235 - - - - 360, 468, 482, 500 London Marine Association, Re, 8 Eq. 176 ; 20 L. T. 943 ; 17 W. E. 784 -------- 52 London (Mayor of) and Tubbs' Contract, (1894) 2 Ch. 524 ; 03 L. J. Ch. 580; 70L. T. 719 - - - - - - 204 London, Paris, &c. Association, Re, 13 T. L. E. 569 - - 146 London Steamboat Co., 31 W. E. 781 ; W. N. (1883) 123 - - 989 London Trust Co. v. Mackenzie, 68 L. T. 380 - - - 427 Lonergan, Re, Sheil, Ex parte, 4 C. D. 789 - .- - - 809 Lord Claude Hamilton's Case, 8 Ch. 548- - - -413 Lord Inchiquin's Case, (1891) 3 Ch. 28; 64 L. T. 841 ; 39 W. E. 610 - - - - - - - - - 430 Lord Kiiinaird v. Lady Saltoun (ISIO), 1 Madd. 227 - - 724 Loring v. Davis, 32 C. D. 625; Seton, 17(is - - - - 399 Lorraino'.s Case, 2 Ch. 27 - - - - - - 23 Los's Case, 12 L. T. 690 ; 34 L. J. Ch. 609 ; 11 Jur. N. S. 661 ; 13 W. E. 883 - - - - - - - - 1132 Louis /■. Smellii'.W. N. (1S95) 115 ----- 262 LouUi r. The Western of Canada Co., 17 ¥.([. 1 ; IMalins, V.-C, 3lHt July, 1873, B. 2, 170 ----- - 1091 TABLE OF CASES. Ixi Lub— M'N PAfiE Lubbock V. British Bauk of South America, (1892) 2 Ch. 198; (>l L. J. Ch. 498; 67 L. T. 74 ; 41 W. R. 103 - 518, 525, 531, 538, 1065 Lucas, Be, 17 Jur. 1186 - - - - - - 424 Lucas V. Beach, 1 Man. & Gv. 417 ; 4 Jur. 631 - - - - 72 Lucas V. Dicker, 5 C. P. D. 150 ; 6 Q. B. D. 84 (C. A.) - - 132 Lucas V. Dorrien, 7 Taunt. 278 - - - - - - 922 Luke v. South Kensington Hotel, 11 C. D. 126 _ _ . 876 Lumley y. Gye, 2 E. &B. 216 - - - - - - 261 Lumley v. Wagner, 1 D. M. & G. 604 - - - - 260 Lydney and Wigpool Iron Ore Co. v. Bird, 31 Ch. D. 328 ; 33 Ch. D. 85 ; 34 W. E. 437, 749 ; 54 L. T. 242 ; oo L. T. 558 ; 55 L. J. Ch. 383, 875 - - - 56, 58, 63, 67, 148, 149, 276, 1068 Lynde v. Anglo-Italian Hemp, &c. Co., (1896) 1 Ch. 178; 65 L. J. Ch. 96 ; 73 L. T. 502 - - - - - - 92 Lyster's Case, 4 Eq. 233 ; 15 W. E. 1007 ; 16 L. T. 824 ; 36 L. J. Ch. 616 - - - - - - - - - 443 M. Macdonald v. Law Union Insurance Co., L. E. 9 Q. B. 328 ; 22 W. E. 530 ; 30 L. T. 545 ; 43 L. J. Q. B. 131 - - - - 764 Macdonald, Sons & Co., (1894) 1 Ch. 89 ; 63 L. J. Q. B. 193 ; 69 L. T. 567; 1 Manson, 319; 7 E. 322 (C. A.) - - - 12,191 Macdougal v. Gardiner, 1 C. Div. 13; 24 W. E. 118; 45 L. J. Ch. 27 - - - - - 3, 33, 374, 379, 414, 421, 1029, 1030 Macdougal v. Jersey Imperial Hotel Co., 2 H. & AI. 528 - 384, 513, 520, 1030, 1064 MacDowall's Case, 32 C. D. 366 - - - - - 261 Mackay v. Commercial Bank, 5 P. C. 394; 22 W. E. 473; 30 L. T. 180; 43 L. J. P. C. 31 - - - - - - 11 Mackley's Case, 1 C. D. 247; 45 L. J. Ch. 158; 33 L. T. 460; 24 W. E. 92 - - - - - - - 20, 289 Maclure, Ex parte, 5 Ch. 736 ; 39 L. J. Ch. 685 ; 23 L. T. 685 ; 18 W. E. 1122 - - - - - - - - 261 Macmurdo, In re, Penfield v. Macmiu-do, W. N. (1892) 73 - - 396 MacNee V. Gorst, 4 Eq. 315 - - - - - - 935 McCalmont v. Eankin, 2 De G. M. & G. 403 - - - 795 McCawley v. The Furness Ey. Co., 8 Q. B. 57 ; 42 L. J. Q. B. 4 - - 126 McDougall V. Jersey Imperial Hotel Co., 2 H. & M. 528 ; 12 W. E. 1142; 10 L. T. 843; 34 L. J. Ch. 28 - 384, 513, 520, 1030, 1064 McEwen v. West London Wharves, &c. Co., 6 Ch. 655 - - - 851 McGregor v. McGregor, 21 Q. B. D. 424 - - - - 127 McKay's Case, 2 C. D. 1 ; 24 W. E. 490 ; 33 L. T. 517 ; 45 L. J. Ch. 148 - - - - - 67, 190, 404, 405, 713, 823, 1024 McKeown v. Boudard, Everard & Co., 65 L. J. Ch. 735; 74 L. T. 712; 45 W. E. 152 - - - - - - 93 McLean's Case (Drum Slate, &c. Co.), 55 L. J. Ch. 36; 53 L. T. 250 - - - - - - - - 68, 1059 McMahon v. North Kent Co., (1892) 2 Ch. 148 - - 815, 1092 M'Myn v. Lightbown, /« re M'Myn, 33 C. D. 575 ; 55 L. J. Ch. 845; 55L. T. 834; 35 W. E. 179 - - - - - - 843 M'Niell's Case, 10 Eq. 503; 18 W. E. 1102, 1126; 23 L. T. 297 ; 39 L. J. Ch. 822 - - - - - - - 104 Ixii TABLE OP CASES. Mad— Mar fAOK Maddison v. Alderson, 8 App. Cas. 467 ; 52 L. J. Q. B. 737 ; 49 L. T. 303 ; 31 W. E. 820 ; 47 J. P. 821 - - 94, 95, 131, 914, 915 Madeley v. Eoss, Sleeman & Co., (1S97) 1 Cli. 505 ; GO L. J. Ch. 233 ; 76 L. T. 321 - - - - - - 816, 1073 Madiid Bank, Be, Ex parte Williams, 2 Eq. 216 ; 14 W. E. 706 ; 14 L. T. 456; 35 L. J. Ch. 474 - - - - - 135, 384 Madrid Bank v. Pelly, 2 Eq. 216; 14 W. E. 706; 14 L. T. 456; 35 L. J. Ch. 474 _.__-. 497 Magee, In re, 15 Q. B. D. 332 - - - - - - 724 Magnolia Metal Co.'s Trade Marks, (1897) 2 Cli. 371 ; 66 L. J. Ch. 598; 76L. T. 672- - - - - - 199 Mahoney v. East Holyford Mining Co., L. E. 7 H. L. 869 ; 33 L. T. 383 - - - - 36, 37, 38, 427, 443, 449, 454, 807 Mair V. Himalaya Tea Co., 1 Eq. 411 ; 14 W. E. 165 ; 13 L. T. 586 ; 11 Jur. 1013 - - - - - - - 260 Makins V. Percy Ibotson &Co., (1891) 1 Ch. 133; 63 L. T. 515; 39 W. E. 73 - - - - - - - - 1090 Malaga Lead Co., 26 Eq. 524 - - - - - 284 Malam v. Hitchins, (1894) 3 Ch. 578; 63 L. J. Ch. 41; 69 L. T. 778 ; 58 J. P. 148 ; 17 Cox, C. 0. 704; 13 E. Jan. 178 - - 458 Malleson v. General Mineral Patent Syndicate, Ltd., (1894) 3 Ch. 538; 63 L. J. Ch. 868; 71 L. T. 476; 43 W. E. 41; 13 E. Jan. 296 -------- 480 Malleson v. National Insurance Co., (1894) 1 Ch. 200; 63 L. J. Ch. 286 ; 70 L. T. 157 ; 42 W. E. 249 ; 1 Manson, 249 ; 8 E. 91 - 377, 649 Manchester Corporation v. Williams, (1891) 1 Q. B. S4; 60 L. J. Q. B. 23; 63 L. T. 805; 39 W. E. 302; 54 J. P. 712 - - 6 Manchester & Milford Co., 14 C. D. 645; 49 L. J. Ch. 365; 42 L. T. 714- - - - - - - -- 1090 Manchesterand01dhamBank,W.N. (1885)169; 54 L. J. Ch. 926 - 1052 Manchester Trust v. Furness, (1895) 2 Q. B. 539 ; 64 L. J. Q. B. 766; 73L. T. 110; 44 W. E. 447 - - - - - . 934 Manchester Union Bank v. Beech, 34 L. J. Ex. 133 - - 964 Mangles v. Dixon, 3 H. L. 0. 702 - - - - - 762 Mann v. Edinburgh Northern Trams. Co., (1893) A. C. 69 ; 62 L. J. P. C. 74; 68L. T. 96; 57 J. P. 245; 1 E. 86(H. L. S.) - - 63 Manners v. Mew, 29 C. D. 725 - - - - - - 794 Mant V. Smith, 4 H. & N. 324 ; 32 L. T. 319 - - - 72 Maria Anna Co., 6 C. D. 447 - - - - - - 281 Marino Mansions Co., 4 Eq. 601 ; 37 L. J. Ch. 113 - 305, 782, 788, 818 Marine Mutual v. Young, 43 L. T. 443 - - - - - 313 Marino's Case, 2 Ch. 596 - - - - - - 398 Marquis of Bute's Case (Cardiff Savings Bank), (1892) 2 Ch. 100 ; 61 L. J. Ch. 357 ; 66 L. T. 317 ; 40 W. E. 538 - - - 428 Marriage, Noave & Co., (1896) 2 Ch. 663 - - 1092, 1093, 1094 Marsden v. Samson, 28 W. E. 954 - - - - - 204 Marseilles, &c. Co., 7 Ch. 161 - - - - 68, 464 Marsliall v. Eogors & Co., 14 T. L. E. 217 - - - - 794 Marshall v. South Staffordshire Tramways Co., (1895) 2 Ch. 36; 72 L. T, 542 - - - - 350, 1025, 1090, 1092 Martin's Case, 2 II. &M. 669 - - - - - - 1132 Martin v. Eeid, 1 1 C. 1',. N. S. 730 923 Martin v. Sedgwick, 9 Boay. 338 - - - - - 796 TABLE OP CASl^S. Ixlil Mar— Mer taoe Marwick v. Lord Tliuilow, (ISOj) 1 Ch. 77G ; 72 L. T. 10;] - 102.5, 1045, 1073, 1084 Marzetti's Case, 28 W. R. 541 ; 42 L. T. 20G ; W. N. (1880) 50. ..72, 428, 446, 447, 464 Maskelyne v. British Type Writer, Ltd., (1898) 1 Ch. 133 ; 46 W. II. 294 ------- - 1092 Mason v. Harris, 11 Ch. Div. 97; 27 W. R. 699 ; 40 L. T. 614 ; 40 L. J. Ch. 589 - - _ _ - 379, 422, 1030 Mason and Taylor, /» re, W. N. (1878) 245- - - - 798 Masonic & General Life Ass. Co. v. Sharpe {In re Bennett), (1892) 1 Ch. 154; 61 L. J. Ch. 193; Go L. T. 806; 40 W. R. 241 (C. A.) 518 Mathias v. Wilts & Berks Canal Co., W. N. (1876) 91 ; 34 L. T. 346 - 1168 Mathias v. Yetts, 46 L. T. 497 - - - 96, 100, 1022 Matlock Old Brewery, 29 L. T. 441 - - - - - 188 Matthews v. Great Northern Rail. Co., 28 L. J. Ch. 375 - - 482 Maude's Case, 6 Ch. 51 ; 19 W. R. 113 ; 23 L. T. 749 ; 40 L. J. Ch. 21 - - - - - - - 34, 391, 455, 468 Maund v. Monmouthshire Canal Co. , 4 M. & Gr. 452 ; 3 Ry. Cas. 159 ; Car. & M. 606 ; 2 D. N. S. 113 ; 5 Scott, N. R. 457 ; 6 Jur. 932 - 9 Maxim Nordenfeldt r. Nordenfeldt, (1894) A. C. 535 ; 63 L. J. Ch. 908; 71L. T. 489; 11 R. Jan. 1 (H. L.) - - - - 221 Maynard's Case, (1898) 1 Ch. 515; 46 W. R. 346; 77 L. T. 150... 187, 2J0 Mayor of London and Tubbs' Contract, (1894) 2 Ch. 524; 63 L. J. Ch. 580; 70L. T. 719 - - - - - - 204 Mayor of Salford v. Lever, (1891) 1 Q. B. 168 ; 60 L. J. Q. B. 39 ; 63 L. T. 658 ; 39 W. R. 85 ; 55 J. P. 244 (C. A.) - 63, 68, 436 Mayor of the Staple v. Bank of England, 21 Q. B. D. 160 - 17, 18, 442 Mecca (The), Cory Brothers v. Owners of the S.S. Mecca, (1897) A. C. 286; 66L. J. P. 86; 76 L. T. 579 ; 45 W. R. 667... 798, 919, 920, 921 Medewe's Trust, 26 Beav. 588 - - - - - - 920 Mege and Augier's Case, W. N. (1875) 208 - - - - 185 Megrath v. Gray, L. R. 9 C. P. 216 - - - - - 964 Melhado v. Hamilton, 29 L. T. N. S. 364 ; 21 W. R. 619 - - 652 MeUiado v. Porto Allegro Rail. Co., 9 C. P. 503 ; 23 W. R. 57 ; 31 L. T. 57 ; 43 L. J. C. P. 253 - - - - - 374, 446 Mellersh v. Brown, 45 C. D. 225 ; 60 L. J. Ch. 43 ; 63 L. T. 610 ; 38 W. R. 732 - - - - - - - 821 Melwood V. Thatcher (1892), 2 T. L. R. 81 - - - - 262 Menier v. Hooper's Telegraph Works, 9 Ch. 350 ; 22 W. R. 396 ; 30 L. T. 209 ; 43 L. J. Ch. 330 - - - 33, 379, 422, 1030 Menzies V. Lightfoot, 11 Eq. 459 - - - - - 902 Mercantile Bank of Sydney v. Taylor, (1893) A. C. 317; 57 J. P. 741 (P. C.) ---_-_ 9G2, 964 Mercantile Investment, &c. Co. v. International Co. of Mexico, (1893) 1 Ch. 484, n. ; 68 L. T. 603, n. - - - _ _ 805 Mercantile Investment Co. v. River Plate Trust, (1892) 2 Ch. 303; 61 L. J. Ch. 473 ; 66 L. T. 711 - - - 780, 792, 805 Merchant Banking Co. of London v. Merchants', &c. Bank, 9 C. D. 560 ; 26 W. R. 847 ; 47 L. J. Ch. 828 ... 266, 267 Merchants' Banking Co. v. Phoenix Bessemer Steel Co., 5 C. D. 216; 25 W. R. 457 ; 36 L. T. 395 ; 46 L. J. Ch. 418 - - 12, 13, 765 Merle, Ee, 31 L. T. 448 1132 Ixiv TABLE OF CASES. Mer— Moo i'agk Merryweather v. Moore, (1892) 2 Cli. 518 ; Gl L. J. Cli. oOo ; 0(J L. T. 719 ; 40 W. R. 540 - - - - - - 262 Mersey Docks v. Gibbs, L. E. 1 H. L. 93 ; 14 W. E. 872 ; 14 L. T. 677; 12 Jur. 571 - - - - - - 9, 12 Mersey Docks v. Lucas, 8 App. Cas. 891 - _ _ 46, 48 Mersina and Adana Co., Be, 5 T. L. E. 680 ; 1 Meg. 341 - 274, 519 Metcalfe's Case, 13 C. Div. 815 ; 49 L. J. Ch. 347 ; 42 L. T. 178 ; 28 W. E. 435 - - - - - - 07, 1024 Metropolitan Asylums Board v. Kingham, 6 T. L. E. 217 - - 442 Metropolitan, &c. Bank, Ex parte Davis, 16 W. E. 668 - - 460 Metropolitan Bank v. Heiron, 5 Ex. D. 319 ; 29 W. E. 370 ; 43 L. T. 676 - - - - - - - 12, 68, 69, 432 Metropolitan, &c. Association v. Scrimgour, W. N. (1895) 119 - - 149, 274, 276 Metropolitan Coal Consumers' Association, Karberg's Case, (1892) 3 Ch. 1 ; 61 L. J. Ch. 741 ; 64 L. T. 700 (C. A.); reversing 66 L. T. 184 - - - - - 91, 92, 96, 97, 102, 137, 152 Metropolitan Coal Consumers' Co., "Wainwright's Case, (1895) 2 Q. B. 729 - - - - - - - - - 1053 Metropolitan Saloon v. Hawkins, 4 H. & N. 90 - - - 6 Mexican Santa Barbara Co., Ex parte, Be Perkins, 24 Q. B. D. 613 ; 59 L. J. Q. B. 226 ; 38 W. E. 710 ; 2 Meg. 197 ; 7 M. B. E. 32 ------ - 386, 394, 395 MitUand Banking Co. v. Chambers, 4 Ch. 398 - - - 965 Midland & G. W. Eail. v. Gordon, 16 M. & W. 804 - - - 852 Midland Educational Co., Stirling, J., 30th April, 1892 - - 993 ^Midland Land and Investment Corporation, Be, 8 Nov. 1886 - 524, 542 Midland Eail. v. Silvester {Be SHvester), (1895) 1 Ch. 573 - - 963 Migotti's Case, 4 Eq. 238 ; 36 L. J. Ch. 531 ; 16 L. T. 271 ; 15 W. E. 731 - - - - - - - - 20, 289 Milan Tramway Co., Limited, 25 C. D. 587 ; 32 W. E. 601 ; 50 L. T. 545; 53 L. J. Ch. 1008 ----- 67,818 Miles, Ex parte, 1 De G. 623 - - - - - - 965 Miles V. New Zealand, &c. Co., 32 C. D. 263; 55 L. J. Ch. 801 ; 54 L. T. 582 ; 34 W. E. 669 - - - - - 386, 842 Miller's Case, 3 C. D. 661 - - - - - - 430 Mills V. Eowkcs, 5 Bing. N. C. 455 - - - - 919, 920 Mills V. The Northern Eail way of Buenos Ayres, 5 Ch. 621 ; 19 W. E. 171 ; 23 L. T. 719 - - - - - 514, 529 Milman v. Thatcher, 2 T. E. 81 - - - - - 434 Milnes V. Gery, 14 Ves. 400 ----- 201,202 ISlilward /•. Avill and Smart, W. N. (1897) 162 - - - 1094 Mining Shares Investment Co., (18i)3) 2 Ch. 660 ; 62 L. J. Ch. 434 ; 68 L. T. 578 ; 41 W. E. 376 ; 3 E. 480 - - - 972, 994 Mitchell's (Alex.) Case, 4 App. Cas. 567 - - - - 397 Mitchell V. Eeynolds, 1 Sm. L. C. 430 - - - - 206 Moonich v. Fcncstre, 67 L. T. 708 - - - - - 206 MofTat r. Farquhar, 7 C. D. 591 ; 26 W. E. 522; 38 L. T. 18; 47 L. J. Ch. 355 - - - - - - - - 397 Montaignac V. Shitta, 15 App. Ciis. 357 - - _ _ 724 Moiitefiore v. Brown, 7 II. L. C. 262 - - - - - 800 Montgomery /-. Lic^bentlial, 42 S. J. 232 ; KM L. T. 312 - - 467 Moor V. Anglo-Italian I5ank, 10 C. 1). 6K1 ; 40 ].. T. 620 ; 27 W. E. 652 788, 818 TABLE OF CASES. IxV Moo -Nan page Mooio V. North West Bank, (1S<)1) 2 Cli. 599 ; 60 L. J. Cli. G27 ; G4 L. T. 456 ; 40 W. E. 93 - - - - - 387, 797 Moore v. Voughton, Stark. 487 - - - - - - 922 Mordoy, Carney & Co., Limited and lleduced, lie, 53 L. T. 76 - 990 Morecock, Amb. 67cS - - - - - - - 796 Morgan v. Lond. Gen. Omnibus Co., 12 (i. B. D. 832 - - 617 Morison v. Thompson, L. B. 9 Q. 15. 480; 22 AV. B. 859; 30 L. T. 869; 43 L. J. U. B. 215 - - - - . - 436 Morrison v. Chicago and N. W. Granaries Co., W. N. (1897) 174 - 89(5 Morrison v. Skerne Ironworks Co., 60 L. T. 588 - - - 1092 Mortgage Insurance Co. v. Commissioners of Inland Eevenuo, 21 Q. B. D. 352 ; 57 L. J. Q. B. 630 ; 36 W. E. 833 - - - 842 Morvah Consols, &c. Co., 2 Ch. Div. 1 ; 24 W. E. 490 ; 33 L. T. 517; 45 L. J. Ch. 148 - - - - - - - 436 Moseley v. Cressey's London Co., 1 Eq. 405 ; 14 W. E. 246 - - 143 Moss, i^cc parite, 3 De G. & Sm. 599 - - - - - 916 Mouflet V. Cole, L. E. 8 Ex. 32 ; 21 W. E. 175 ; 27 L. T. 678 ; 42 L. J. Ex. 8 - - - - - - - 207 Mount Morgan, 56 L. T. 622 - - - - 97, 98, 105 Mountstephen v. Lakeman, L. E. 5 Q. B. 613 ; 7 II. L. 17 - - 965 Mowatt V. Castle Steel, &c. Co., 34 C. D. 58; 55L.T.645 - 19, 762, 1121 Mozley v. Alston, 1 Ph. 790 ; 16 L. J. Ch. 217 ; 11 Jur. 315 ; 4 Bail. Cas. 636 - - - - - - y, 33, 1029, 1030 Mudford's Case, Be, 14 C. D. 634; 28 W. E. 670; 42 L. T. 825; 49 L. J. Ch. 452 - - - - - - - - 191 Muir V. City of Glasgow Bank, 4 App. Cas. 337 ; 27 W. E. 603 ; 40 L. T. 339 - - - - - - - - 387 Municijaal Freehold, &c. Co. c. Pollington, 59 L. J. Ch. 734 ; 63 L. T. 238 ; 2 Meg. 307 - - " - - - 428, 432, 520 Munster v. CammeU Co., 21 C. D. 188 ; 30 W. E. 312 ; 47 L. T. 44 ; 51 L. J. Ch. 731 - - - - - 438, 439, 1029, 1061 Munt V. Shrewsbury and Chester Bail. Co., 13 Beav. 1 - - 273, 1160 Mure, ^ic^arte, 2 Cox, 67 ------ 424 Murietta v. Nevada Land Co., 93 L. T. N. (1893) 442 - - - 816 Murray v. Bush, 6 H. L. 53; 22 W. E. 280; 29 L. T. 217 ; 42 L. J. Ch. 586 - - - - - - 400,431,443,522 Murray v. FlaveU, 25 C. Div. 89 ; 53 L. J. Ch. 185 ; 49 L. T. 690 ; 32 W. E. 102 - - - - - - - - 130 Murray v. Scott, 9 App. Cas. 519 - - - - 925, 926 Mutter V. Eastern, &c. Co., 38 C. I). 92 - - - - - 4G0 Mutual Loan Society v. Ludlow, 5 C. B. N. S. 449 - - - 964 Mutual Eeserve Fire v. New York Life, 75 L. T. 528 - - - 260 Mycock V. Beatson, 13 C. D. 385 ; 28 W. E. 319; 42 L. T. 141 ; 49 L. J. Ch. 127 - - - - - - - 1059 Mysore West Gold Mining Co., Be, 42 C. D. 535 ; 58 L. J. Ch. 731 ; 61 L. T. 453 ; 37 W. E. 794; 1 Meg. 347 - - - - 1133 N. Nanney v. Morgan, 37 C. D. 346 - - - - - T97 Nant-v-Glo and Blaina Iron Works v. Grave, 12 C. D. 738 ; 26 W. E. 504-' 38 L. T. 345 - - - - o6, 67, 68, 1024, 1059 P. Ixvi TABLE OF CASES. Nas— New page Nasli V. Flyun, 1 Jo. & Lat. 162 - - - - - 19 Nassau Phospliate Co., 2 C. D. 210 - - - - - 288 Nassau Steam Press v. Tyler, 70 L. T. 376; 1 Manson, 459; 10 E. 582 ___----- 306 Natal Investment Co., 3 Ch. 361 ; 16 W. E. 637 ; 18 L. T. 171 ; 37 L. J. Ch. 362 - - - - - - - 763, 764 National Bank of Wales, (1897) 1 Ch. 298; 66 L. J.'Ch. 222; 76 L. T. 1 ; 45 W. E. 401 - - - - - - 398 National, &c. Bank v. Games, 31 C. D. 582 - - - - 938 National Boiler Insurance Co., (1892) 1 Ch. 306 ; 61 L. J. Ch. 501 ; 65 L. T. 849 - - - - - - - 992, 993 National BoHvian Navigation Co. v. Wilson (1879), 5 App. Cas. 176 792 National Coffee Palace, In re, 24 C. D. 367 ; 32 W. E. 236 ; 50 L. T. 38 ; 53 L. J. Ch. 57 _ . _ _ 143, 441 National Debenture Corporation, I?e, (1891) 2 Ch. 505; 60 L. J. Ch. 533; 64 L. T. 512; 30 W. E. 707 - - - - - 15 National Dwellings Society v. Sykes, (1894) 3 Ch. 139 ; 63 L. J. Ch. 906 ; 42 W. E. 696 ; 1 Manson, 457 ; W. N. (1894) 127 ; 8 E. 758 421 National Exchange Co. v. Drew, 2 Macq. 103 ; 25 L. T. 223 - 11 National Funds Assurance Co., 10 C. D. 118 ; 27 W. E. 302 ; 39 L. T. 420; 48 L. J. Ch. 163 _ _ - . 456, 515, 520 National Mercantile Bank v. Hampson, 5 Q. B. D. 177; 49 L. J. Q. B. 480; 28 W. E. 424 - - - - - - 778 National Provincial Bank, Ex imrte, Ec Eees, 17 C. D. 98 - - 965 National Provincial Bank, Ex parte, Re Sass, (1896) 2 Q. B. 12 - 965 National Provincial Bank of England v. Jackson, 33 C. D. 1 - 776, 795 National Provincial Bank and Marsh, (1895) 1 Ch. 190 - - 202 Navulshaw v. Bro^-nrigg, 2 De G. M: & S. 449 - - 933, 934 Neill's Case, 15 W. E. 894 - - - - - - 103 Neilsou V. Betts, L. E. 5 H. L. 1 - - - - - 223 Nell V. Atlanta, &c. Co., 11 T. L. E. 407 - - - 375, 433 Nelson v. Anglo-American Land Mortgage Agency Co., (1897) 1 Ch. 130 ; 66 L. J. Ch. 112 ; 75 L. T. 482 ; 45 W. B. 171 - 413, 460 Nelson Mitchell v. City of Glasgow Bank, 4 App. Cas. 624 - - 398 Nettlesliip, Ex parte, 2 M. D. & De G. 124 - - - - 916 Ncuchatcl Asphalte Co. v. Lee, 41C.D.1 - - - -1179 Nevil V. Fine Aits Insurance Co., Limited, (1895) 2 Q. B. 40; 72 L. T. 525 - - - - - - - - 10 New Brunswick v. Muggeridge, 1 Dr. & Sm. 383 - - - 28 New Brunswick Eail. Co. v. Conybeare, 9 II. L. C. 711 ; 10 W. E. 305; 6 L. T. 109; 31 L. J. Ch. 297 . - . n, 94 New Chile Co., 45 C. D. 598 ; 63 L. T. 341 ; 39 W. E. 59 -391, 393, 397 New Chile Gold Co., 68 L. T. 15 - - - - - 189 New Durham Salt Co., 2 Meg. C. E. 360 - - - - 792 New Eborhardt Co., 43 C. D. 118 ; 38 W. E. 97 - 181, 229, 1135 New Flagstaff Co., Ik, W. N. (1889) 123 - - 1134, 1135, 1141 New London and Brazilian Bank v. Brocklcbank, 21 C. D. 302; 30 W. E. 422 ; 47 L. T. 3 ; 51 L. J. Ch. 711 - - 380, 394, 396, 823 Now Mashonaland Co., (1892) 3 Ch. 577; 61 I^. J. Ch. 617; 67 L. T. 90; 41 W. E. 75 - - - - - - 428 New Ormonde Cycle Co., (1896) 2 Ch. 520; 65 L. J. Ch. 785; 75 L. T. 50 1070 TABLE OF CASES. Ixvil New — Nor page New Par Consols, 20 Nov. 1897, Wright and Kennedy, JJ., 42 Sol. J. 98 - - - - - - ' - - - 783 New Quebiada Co., Pontil'ex's Case, \o W. 11. 955; Pembcrton, 659 _-__---- I0o3 New Sombrero Phosphate Co. i\ Erlanger, 5 C. D. 73 ; 3 App. Cas. 1218 ; 25 W. P. 4;5() ; 27 W. E. 65 ; 36 L. T. 222 ; 39 L. T. 269 ; 46 L. J. Ch. 425 ; 48 L. J. Ch. 73 - 55, 67, 68, 69, 124, 136, 442, 1023, 1057 New Transvaal Co., (1896) 2 Ch. 750 - - - - 468 New University Club, 18 Q. B. D. 720 - - - - - 49 New York v. Styles, 14 App. Cas. 381 - - - - 46 New Zealand, &c. Co. v. Peacock, (1894) 1 Q. B. 622; 63 L. J. Q. B. 227 ; 70 L. T. 110 ; 9 E. 669 (C. A.) - 220, 270, 307, 389, 406, 466, 1130 New Zealand Kapanga, &c. Co., 18 Eq. 17, n. ; 21 W. E. 782; 42 L. J. Ch. 781 ------ - 190 New Zealand Trust and Loan Co., lie, (1893) 1 Ch. 403 ; 62 L. J. Ch. 202; 68L. T. 593; 41 AV. E. 457; 2E. 151 - - - - 398 Newbiggin Gas Co. v. Armstrong, 13 C. D. 310 _ _ - 1031 Newell V. Hemingway, 00 L. T. 544 - - - - - 351 Newhaven Local Board v. Newhaven School Board, 30 C. D. 303 - - - - - - - 39, 439, 443 Newling r. Dobell, 19 L. T. 408 ; 38 L. J. Ch. Ill - - - 207 Newman, In re, Ex parte Brooke, 3 C. D. 494 - - 110, 120 Newman (George) & Co., (1895) 1 Ch. 085; 04 L. J. Ch. 407 ; 72 L. T. 097; 43 W. E. 483; 72L. T. 097 - - - - 563 Newport Co., 42 L. T. 785 - - - - - - 188 Newton, ^a'iwHe, 16 C. D. 330- - - - - - 768 Newton v. Debenture Holders of the Anglo -Australian, &c. Co., (1895) A. C. 244 ; 72 L. T. 305 - - - - - 787 Nicholson v. Ehodesia Co., (1897) 1 Ch. 434; 06 L. J. Ch. 251 ; 76 L. T. 147 - - - - - - - - 456 Nicol's Case, 29 C. D. 421 ; 52 L. T. 933 - 12, 19, 20, 21, 24, 28, 289 Nieuman v. Nieuman, 62 L. T. 339 ----- 606 Niger Merchants v. Capper, 18 C. D. 557, n. ; 25 W. E. 365 - - 1007 Nitro-Phosphate Co., W. N. (1893) 41 - - - - 992 NLxon's Navigation Co., (1897) 1 Ch. 872 ; 00 L. J. Ch. 406 - 065, 974 Nizam Bail. Co. v. Wyatt, 24 Q. B. D. 548 - - - - 46 Nobel's Explosive Co. v. Jones, 8 App. Cas. 5 ; 31 W. E. 388 ; 48 L. T. 490 ; 52 L. J. Ch. 339 - - - - - - 223 Noel V. Eedruth Foundry Co., (1890) 1 Q. B. 453; 05 L. J. Q. B. 330; 74L. T. 196; 44'W. E. 407 - - - - - 019 Nordenfeldt (Maxim) v. Nordenieldt, (1894) A. C. 535; 03 L. J. Ch. 908; 71 L. T. 489; 11 E., Jan. 1 (H. L.) - - - 200,771 Norman v. Mitchell, 19 Beav. 278 ; 5 De G. M. & G. 048 ; 2 W. E. 247, 085 - - - - - - - - 389 North Australian Territory Co. (^Vi-cher's Case), (1892) 1 Ch. 322; 01 L. J. Ch. 129 ; 05 L. T. 800 ; 40 W. E. 212 (C. A.) - 429, 431 North Brazilian Sugar Factories Co., 37 C. Div. 87 ; 50 L. T. 229; W. N. (1887) 3 ----- - 460, 1141 North British, &c. Co. i\ Lloyd, 10 Ex. 523 - - - 924, 925 NorthCharterlandCo., 13T. L. E. 80 - - - - 153 North "West Transportation Co. v. Beatty, 12 App. Cas. 589; 56 L. J. P. C. 102 ; 57 L. T. 426 ; 36 W. E. 647 - - - 422, 436 c2 Ixviii TABLE OF CASES. Nor— Ort page Northampton Coal, &c. Co. v. Midland Wagon Co., 7 C. D. 500 ; 20 W. E. 485 ; 38 L. T. 82 - - - - - - 10G8 Northern Counties, &c. Co. v. Whipp, 26 C. D. 482 - - 77G, 794 Northumberland Avenue Hotel Co., Be, 33 C. D. 16 ; 54 L. T. 777 - 70, 176, 177, 178, 217, 374, 382 Norton v. Florence PubHc Works Co., 7 C. D. 332 - - - 820 Norwich Equitable, Be, 57 L. T. 241 - - - - - 276 Norwich Yarn Co., 22 Beav. 143 - - - - - 470 Nottv. Walter, 3 B. & Aid. 311 - - - - - - 131 Nottingham Brewery Co., 4 T. L. E. 429 - - 190, 974, 1055 NoweU V. Nowell, 7 Eq. 538 - - - - - - 530 Nye V. Macdonald, 3 P. C. 331 - - - - - 724 O. Oakbank OH Co. v. Crum, 8 App. Cas. 65 ; 48 L. T. 537 - 34, 36, 455, 468 Oakeley v. Pashaller, 4 CI. & F. 207; 10 Bli. N. S. 548 - - 842 Oakes v. Turquand, L. E. 2 H. L. 325 ; 16 L. T. 808 ; 36 L. J. Ch. 949 - 2, 15, 31, 34, 101, 102, 103, 104, 137, 139, 185, 191, 284, 1051 Ocean Accident, &c. Co., Chitty, J., July, 1893 - - - 993 Ocean Queen Steamship Co., (1893) 2 Ch. 666; 63 L. J. Ch. 193 ; 68 L. T. 828; 41 W. E. 573; 3E. 625 - - - - - 972 Odessa Trams Co. v. Mendel, 8 C. D. 246 ; 26 W. E. 887 ; 38 L. T. 731; 47 L. J. Ch. 505 - - . - - - 28,389 Odessa Waterworks, W. N. (1897) 166 - - - - 451, 468 Olathe Silver Mining Co., Be, 27 C. D. 278 ; 33 W. E. 12 - 762, 817 Oldershaw v. King, 2 H. & N. 399, 517 - - - - - 912 Oldi'ey V. Union Works, W. N. (1895) 77 - - 1026, 1122, 1123 Olympia, Limited, 78 L. T. 159; 14 T. L. E. 236 - - - 1097 Oman v. Homan, 4 H. L. C. 997 - - - - - 924 Omnium Investment Co., (1895) 2 Ch. 127 - - -982, 1001 Onslow's Case, 57 L. J. Ch. 338 - - - - - 430 Ooregum Co. v. Eopor, (1892) A. C. 125 ; 61 L. J. Ch. 337 ; 66 L. T. 427; 41 W. E. 90 (H. L.) - - 29, 148, 182, 183, 186, 274, 284 Opera, Limited, /// re, (1891) 3 Ch. 260; 60 L. J. Ch. 839; 65 L. T. 371 ; 39 W. E. 705 (C. A.) - _ . .773, 783, 793 Oriental Bank Coi-poration, 28 C. D. 643; 52 L. T. 170, 172; 54 L. J. Ch. 327 - - - - - - - - 723 Oriental Financial Corp. v. Overond, Gurney & Co., L. E. 7 Ch. 142 ; L. E. 7 II. L. 348 ; 25 L. T. N. S. 813 ; 41 L. J. Ch. 332 843, 964 Oriental Inland Steam Co. v. Briggs, 2 J. & H. 625 ; 4 De G. F. & J. 191 ; 31 L. J. Ch. 241 ; 10 W. E. 125 - - - - 28 Oriental Telephone Co., W. N. (1891) 153 - - - - 993 Ormorod's Case (Uarvey's Oyster Co.), (1894) 2 Ch. 475 ; 63 L. J. Ch. 578; 70 L. T. 795; 42 W. E. 701; 1 Manson, 153; 8 E. 715 ------ - 27, 152, 155 Ornaiiuintal Woodwork Co. v. Brown, 2 II. & C. 63 ; 11 W. E. 600; 9 Jur. N. S. 579 ; 8 L. T. 506 ; 32 L. J. Ex. 190 - - - 384 Orrott, /';x;«/r/r, 3 M. & A. 153- - - - - - 916 Ortigora v. Brown, 38 L. T. 845 - - - - - 399 TABLE OF CASES. Ixix Ort^Pat PAGE Oitoii V. Cleveland Firebrick Co., 3 H. & C. 868 ; 13 W. E. 869 ; 11 Jur. N. S. -531- _---_. 375,433 Osgood V. Nelson, L. E. 5 H. L. 636 - - - - 439 Ottoman Bank v. Farley, 17 W. E. 761 - - - - - 436 Ottos Kopje Diamond Mines, In re, (1893) 1 Ch. 618; 62 L. J. Ch. 166; 68 L. T. 138; 41 W. E. 258; 2 E. 257 (C.A.) ; Seton, 1918 ..-_-- -398,403,712 Overeud, Gurney & Co. v. Gibb, L. E. 5 II. L. 4S() ; 42 L. J. Cb. 67 69, 176, 302, 428, 446, 1066 Overend, Gurney & Co. v. Gurney, 4 Cb. 701 _ _ _ 481 Owen (D.) & Co. v. Cronk, (1895) 1 Q. B. 265 - - - - 826 Oxford Buildins? Society, Be, 35 C. D. 502; 56 L. J. Cb. 98; 55 L. T. 598; 35"W. E. 116 - - - - 433, 456, 517, 519 Padstow Total Loss Assurance Association, 20 C. Div. 137 ; 30 W. E. 326 ; 45 L. T. 774 ; 51 L. J. Cb. 344 - - - - - 52 Page V. International, &c. Co., 68 L. T. 435- - - - 787 Pagin and Gill's Case, 6 C. D. 681 ; 25 W. E. 905 ; 37 L. T. 89 ; 46 L. J. Cb. 779 - - - - - - - - 188 Paige's Case, 15 W. E. 892 - - - - - - 104 Paine v. Meller, 6 Ves. 349 - - - - - - 209 Palmer v. Jobnson, 13 Q. B. D. 351- - - - - 204 Palmer v. Mallett, 36 C. D. 411 ; 57 L. J. Cb. 226; 58 L. T. 64 ; 36 W. E. 460 - - - - - - - " 207 Palmer r. Wick Steamsbipping Co., (1894) A. C. 318 ; 71 L. T. 163 ; 6 E. 245 - - - - - - - - 471 Panama Co., Limited, 5 Cb. 318; 18 W. E. 441 ; 22 L. T. 424; 39 L. J. Cb. 482 - - - - 772, 773, 774, 776, 790, 793 Pandora Tbeatre, 28 S. J. 238 - - - - - 430 Parbury's Case, (1896) 1 Cb. 100; 65 L. J. Cb. 104; 73 L. T. 506; 44 W. E. 107 ------- 190, 713 Paris Skating Eink Co. v. Lord Monson, Bacon, V.-C, 21 June, 1877, B. 1110 .------- 1067 Parker, Ex parte, 2 Cb. 685 ; 15 W. E. 1217 - - - 1052 Parker v. Dunn, 8 Beav. 497 - - - - - - 1093 Parker v. Lewis, 8 Cb. 1035 ; 21 W. E. 928 ; 29 L. T. 199 - - 436 Parker v. McKenna, 10 Cb. Ap. 118 ; 23 W. E. 271 ; 31 L. T. 739 ; 44 L. J. Cb. 425 - - - - - - 67, 436 Parker v. Smitb, 16 East, 382 - - - - - 723 Parnaby ^'. Lancaster Canal, 11 Ad. & E. 223 - - - - 9 Parson's Case, 8 Eq. 656 ; 39 L. J. Cb. 64 - - - - 402 Partick, &c. Gas Co. v. Taylor, 18 C. of S. Cas. 1017 (Sc.) - - 451 Patent File Co., In re, 6 Cb. 83 ; 40 L. J. Cb. 190; 19 W. E. 193 - 275, 278, 279, 411, 445, 454, 783, 789, 917 Patent Invert Sugar Co., In. re, 31 C. Div. 166; 55 L. J. Cb. 924; 53 L. T. 698 ; 34 W. E. 169 ----- 050,971 Patent Ventilating Co., Re, 12 C. D. 254; 27 W. E. 836; 41 L. T. 82 ; 48 L. J. Cb. 728 ----- - 974 IxX TABLE OF CASES. Pat-Per p^g^ Paterson v. GasligM Co., (1896) 2 Ch. 476; 65 L. J. Ch. 709; 74 L. T. 640 ; 45 W. E. 39 _ - - - 1091,1093 Patman v. Harland, 17 C. D. 353 - - - - - 800 Pawle's Case, 4 Cli. 497 ; 17 W. E. 599 ; 20 L. T. 589 ; 38 L. J. Ch. 412-------- 103, 104 Paxton V. Baii-cl, (1893) 1 Q. B. 139; 62 L. J. Q. B. 176; 67 L. T. 623; 41 W. E. 88; 5 E. 129 . - - - -1017 Peabodyl^nmngCo., W.N. (1897) 170- - - - - 468 Pearce v. Foster, 17 Q. B. Div. 536; 55 L. J. Q. B. 306; 54 L. T. 664; 34 W. E. 602; 51 J. P. 213- - - - - 261 Pearl v. Deacon, 24 Beav. 186; 1 De G. & J. 461 - - - 921 Pearson's Case, 4 C. D. 222 ; 5 C. Div. 336 ; 25 W. E. 618 ; 46 L. J. Cli. 339 - - - - - - 67, 431, 436, 1024 Pearsons. Pearson, 27 C. Div. 145; 32 W. E. 1006; 51 L. T. 311; 54 L. J. Cli. 32 - - - - - - - 206 Peek V. Derry, 37 C. Div. 541 ; 57 L. J. Ch. 347 ; 59 L. T. 78; 36 W. E. 899; 14 App. Cas. 337 - 96, 107, 108, 117, 124, 136, 1022 Peek V. Gmney, L. E. 6 H. L. 401 ; 22 W. E. 29 ; 43 L. J. Ch. 19 - 92, 93, 95, 106, 107, 108, 109 Peek r. Trinsmaran Co., 2 C. D. 115 ; 24 W. E. 361 ; 45 L. J. Ch. 281 ------ 1090, 1091, 1094 Peel's Case, 2 Ch. 674; 15 W. E. 1100; 16 L. T. 780; 36 L. J. Ch. 757 - - - 14, 15, 29, 35, 101, 102, 135, 137, 190, 277, 284 Pegge V. Neath District Tramways Co., (1898) 1 Ch. 183 ; 46 W. E. 2-13 ------ 792, 799, 808, 955 Pell's Case, 5 Ch. 11 ; 39 L. J. Ch. 120 ; 21 L. T. 412 ; 18 W. E. 31 - 183, 184, 284, 568 Pellatt's Case, 2 Ch. 527 ; 15 W. E. 726 ; 16 L. T. 442 ; 36 L. J. Ch. 613 ------ 22, 29, 142, 143 Pemberton v. Topham, 1 Beav. 312 - - - - - 1025 Pender v. Lushington, 6 C. D. 70; 46 L. J. Ch. 317 - 397, 422, 1028, 1029, 1030, 1031, 1062 Peninsula Co. v. Fleming, 27 L. T. N. S. 93 - - - - 281 Penn v. Lord Baltimore, Tudor, L. C. Eq. 926 ; Westlake (1880), 183 780 Penney, Ex parte, 8 Ch. 452; 21 W. E. 186; 28 L. T. 150; 42 L. J. Ch. 183 - - 401, 1052 Penney v. Pick-wick, 10 Beav. 246 ----- 459 Pennington v. Bachr, 48 Cal. 465 - - - - - 811 Penrose v. Martyr, E. B. & E. 499; 28 L. J. Q. B. 28; 5 Jur. N. S. 362 - ' - - - - - - - 449 Perkins, Ite, Ex, parte Mexican Santa Barbara Mining Co., 24 Q. B. D. 613; 59 L. J. Q. B. 226; 38 W. E. 710; 2 Meg. 197; 7 M. B. E. 32 - - - - - - 386, 394, 395 Perls /'. Saalleld, (1892) 2 Ch. 149 ; 61 L. J. Ch. 409 ; 66 L. T. 666; 40 W. E. 548 (C. A.) - - - - - - 207 Perry's Case, 34 L. T. 717 - - - - - - 428 Perry v. Oriental Hotels Co., 5 Ch. -120; 18 W. E. 779; 23 L. T. 525 _..---- 1089, 1091 Perry-llomck v. Attwood, 2 Do C & J. 21 - - - - 776 Peruvian Guano Co., In re Kemp, (189-1) 3 Ch. 690; 63 L. J. Ch. HIH ; 71 L. T. 611 ; 43 W. E. 170; 1 Manson, 423; 8 E. 544 - 433, 485 Peruvian Eaihvays Co., lie, 2 Ch. 617; loW. E. 1002; 16 L. T. 644; 36 L. J. Ch. 864- - - - 275, 277, 302, 306, 446 TABLE OF CASES. IxXl Per — Por page Peruvian Eailways Co. v. Thames, &c. Co., Be Peruvian Eailways Co., 2 Ch. 617 ; 15 W. E. 1002 ; IG L. T. 644; 36 L. J. Ch. 864 - 275, 277, 302, 306, 446 Peters v. Anderson, 5 Taunt. 596 - - - - 919, 920 Peveril Gold Mines, (1898) 1 Ch. 223; 46 W. E. 198; 77 L. T. 505- 223, 373, 469 Pharmaceutical Society i'. London Supply Ass., 5 App. Cas. 802; 49 L. J. Q. B. 736; 43'L. T. 389; 28 W. E. 957 ; 45 J. P. 20 - 13, 113 Phillips V. Homfrav, 24 C. D. 439; 52 L. J. Ch. 833; 49 L. T. 5; 32 W. E. 6 " - - - - - - 109, 120 Phoenix Bessemer Co.'s Case, 44 L. J. Ch. 683; 32 L. T. 854 - 273, 276, 786, 787, 1109 Phoenix Electric Light and Power Co., Be, 48 L. T. 260; 31 W. E. 398 -------- 420 Phosphate of Lime Co. v. Green, L. E. 7 C. P. 43 - - - 12 Phosphate Sewage Co. v. Hartmont, 5 C. D. 394; 37 L. T. 9; 47 L. J. Ch. 661 - - - - - - 436, 1057 Photographic Co., Be, 23 C. D. 370; 31 W. E. 509; 48 L. T. 454; 52 L. J. Ch. 654 - - - - - - - 1068 Pickard v. Sears, 6 Ad. & E. 469; 2 N. & P. 488 - 131, 712, 766, 767 Picker v. London & County Banking Co., 18 Q. B. D. 518 - 759, 763 Pickering v. Stephenson, 14 Eq. 322 ; 20 W. E. 654 ; 26 L. T. 608 ; 41 L. J. Ch. 493 - - - - - - - 471 Pidcock V. Bishop, 3 B. & C. 005 - - - - - 924 Piercy, Ex parte. Be Piercy, 9 Ch. 33 ; 43 L. J. Bk. 9 ; 29 L. T. 559 ; 22 W. E. 65 - - 130 Piggot V. Cubley, 15 C. B. N. S. 701 - - - - - 923 Pilcher v. Eawlins, 7 Ch. 259 - - - - - 794 Pimlico, &c. Tramway Co. v. Assessment Committee of Greenwich Union, 9 Q. B, 9 - - - - - - - 50 Pinkett v. Wright, 2 Ha. 120; 12 CI. & Fin. 764; 12 L. J. Ch. 119; 6 Jur. 1102 - - - - - - - 394 Pinto SHver Mining Co., 8 C. D. 273 ; 26 W. E. 622 ; 38 L. T. 366 ; 47 L. J. Ch. 591 - - - - - - - 39 Pittsburg, &c. Co. v. Jacob Marx & Co., W. N. (1897) 36 - - 1017 Pledge V. Buss, Johns. 663 - - - - - - 964 Plympton Mining Co. v. Wilkins and Others, W. N. (1882) 66 - 1058 Poisson V. Thomas, North, J., 7th March, 1895- - - - 1062 PoUard, £"0; _par/e, 4 Deac. 27 - _ - - 780,916 Pontifex's Case (New Quebrada Co.), 15 W. E. 955 ; Pemberton, 659 - 1053 Pontifex v. Pontifex and Wood, Chitty, J., 3rdNov., 1888, P. 2632 - 1095, 1100 Pool's Case {Be Tunnel Mining Co.), 35 C. D. 579; 26 W. E. 823; 35 L. T. 659 ; 48 L. J. Ch. 48- - - - - - 189 Popham V. Peckham, 7 H. & N. 891 - - - - 416 Popple V. Sylvester, 22 C. D. 98; 52 L. J. Ch. 63; 31 W. E. 105; 47 L. T. 496 - - - - - - - - 821 Portal V. Emmens, 1 C. P. D. 201, 664 - - - - 288 Portalis v. Tetley, 5 Eq. 540 - - - - - - 932 Portsmouth (Borough of) Tramways, (1892) 2 Ch. 362 ; 61 L. J. Ch. 462 ; 66 L. T. 671 ; 40 W. E. oo3- - - - 788, 817 Portsmouth (Corporation of) v. Smith, 3 Q. B. D. 184 - - - 814 Ixxii TABLE OF CASES. Por— Q,ue page Portuguese Copper Mines Co., 42 C. Div. 161 ; 58 L. J. Ch. 813 ; 1 Meg. 246 ----- 22, 441, 442, 1052 Postage Stamp Automatic Delivery Co., (1892) 3 Ch. 566 ; 61 L. J. Ch. 597 ; 67 L. T. 88 ; 41 W. E. 29 - - 64, 210, 383, 431, 1024 Postlethwaite v. Port Philip Co., 43 C. D. 452 ; 59 L. J. Ch. 201 ; 62 L. T. 60; 38 W. E. 246; 2 Meg. 10 - - 1130, 1131, 1132 Pound (Henry) Son and Hutchins, 42 C. Div. 402 ; 58 L. J. Ch. 792 ; 38 W. E. 18 ; 1 Meg. 363 - - - 816, 826, 1092 PoxveU V. Lond. & Prov. Bank, (1893) 1 Ch. 610; (1893) 2 Ch. ooo ------ 387, 398, 399, 400 Power V. Hoey, 19 W. E. 916 - - - - - - 471 Power V. O'Connor, 19 W. E. 923 - - - - - 471 Pratt V. BuU, 1 D. J. & S. 141 ; 4 Giff. 117 - - - - 797 Premier Cycle Co. v. Premier Tube Co., 12 T. L. E. 481 - - 266 Prescott V. PHpps, In re Alcock, 23 C. D. 372 ; 49 L. T. 240 - - 922 Preservation Syndicate, (1895) 2 Ch. 768 ; 64 L. J. Ch. 723 ; 73 L. T. 393 ------ 190, 191, 1055 Preston's Case, 16 W. E. 668 - - - - - 66, 497 Price V. Anderson, 15 Sim. 473 - - - - - 458 Price V. Green, 16 M. & W. 346 ; 16 L. J. Ex. 108 ; 9 Jur. 880- - 207 Princess of Eeuss v. Bos, L. E. 5 H. L. 176; 40 L. J. Ch. 665 ; 24 L. T. 641 - - - - - - - 15, 16, 26 Printi]ig, &c. Co. v. Sampson, 19 Eq. 462; 23 W. E. 463; 32 L. T. 354; 44 L. J. Ch. 705- - - - - -127,221 Printing Telegraph, &c. Co. of Agence Havas, Ex parte Cammell, (1894) 2 Ch. 392; 63 L. J. Ch. 536 ; 70L. T. 705; 1 Manson, 274 ; 7 E. 191 (C. A.) - - - - - - - 430 Pritchard's Case, 8 Ch. 956 ; 29 L. T. 363 ; 42 L. J. Ch. 768 - 181, 187, 377 Prosser v. Eice, 28 Beav. 68, 74 - - - - - 132 Pryce, Re, Ex parte Eensburg, 4 C. D. 685 - - - - 916 Pryce v. Bury, 2 Drew. 42- - - - - -915 Puckle's Case, L. J. N. C. (1875) 19 - - - - - 401 Pugh and Sharman's Case, 13 Eq. 366; 41 L. J. Ch. 580; 26 L. T. 274 -------- 21 Pulbrook V. New Civil Service Co., 26 W. E. 11 - - 276, 309 Pulluook V. Eichmond Co., 9 C. D. 610 ; 27 W. E. 377 ; 48 L. J. Ch. 65 - - - - - - 427, 431, 1029, 1052, 1061 Punnott. Ex parte, 16 C. D. 226; 50 L. J. Ch. 212; 44 L. T. 226; 29 W. E. 129 - - - - - - - - 870 Pure Si)irit Co. v. Fowler, 25 Q. B. D. 235 ; 38 W. E. 686 ; 6 T. L. E. 390 -------- 1068 I'vlo Woiks, J!e, 44 C. Div. 434; 59 L. J. Ch. 489; 62 L. T. 887; 38 AV. E. 074 ; 2 Meg. 83 - - - - - 273, 787 Pyl(! Works (No. 2), (1891) 1 Ch. 184 ; 60 L. J. Ch. 114 ; 63 L. T. 62K ; :W ^\. E. 235 ; 2 Meg. 327 - - 412, 445, 446, 450, 470 Q. Quarf/ Tlill ('<.. /•. T'.n.ll, 20 C. D. 508; 30 W. E. 583 ; 46 L. T. 746; 51 ];. .1. 111. ST I - - - - - __6 (iu<0.iada J.und Co., 40 ('. 1 ). ;j(;3 ; 58 L. J. Cli. :j;{2 ; 60 D. T. 482; 1 Mfg. 122 - - - - - - - 062 TABLE OF CASES. 1 XXlll Que -Reg PAGE Queen v. Abnej' Park Cemetery Co., 8 Q. B. 515 - - - 49 Queen v. Aspinall, 2 Q. B. D. 48 ; 25 W. E. 283 ; 36 L. T. 297 ; 4(5 L. J. M. C. 145 - - - - - - - 144 Queen v. Government Stock Investment Co., 3 (I. B. D. 442; 39 L. T. 230; 47 L. J. Q. B. 478 - - - -645, lOGl Queen v. Gurney and others, Finlason's Eeport, 254 - - 135 Queen v. Morton, L. E. 2 C. C. E. 22 ; 21 W. E. 629 ; IS L. T. 452 ; 42L. J. M. C. 58 - - - - - -19,713 Queen v. Eeed (Sir Charles), 5 Q. B. D. 483; 2S W. E. 7S7 ; 42 L. T. 835 ; 49 L. J. Q. B. 600 ; 45 J. P. 633 - - - 279 Queen v. Wimbledon Local Board, 8 Q. B. D. 459; 30 W. E. 402; 46 L. T. 47 - - - - - - - 420, 421 (iueensland Land, &c. Co., In re Davis v. Martin, (1894) 3 Ch. 181 ; 63 L. J. Ch. 810; 71 L. T. 115; 42 W. E. 600; 1 Manson, 355 ; 8 E. 476 - - - - - 194, 195, 792, 799, 808, 955 E. Eailway and Electric Appliance Co., In re, 38 C. D. 597 ; 57 L. J. Ch. 1027; 59 L. T. 22; 36 W. E. 730 - - - - - 261 Eailway Sleepers Supply Co., 29 C. D. 204 - - 390, 466, 644, 702 Eailway Time Table Co., 42 C. I). 98 ; 58 L. J. Ch. 504 ; 61 L. T. 94; 37 W. E. 531 ; 1 Meg. 208 27, 31, 185, 232, 274, 283, 284, 808 Eaine's Case, 4 T. L. E. 303 ; 6 Ch. 104 - - - 274, 519 Eamsgate Hotel Co. v. Montefiore, L. E. 1 Ex. 109 - - - 25 Eamskell v. Edwards, 31 C. D. 100 ; 34 AV. E. 96 ; 53 L. T. 949 ; 55 L. J. Ch. 81 ----- -67,471,1067 Eance's Case, 6 Ch. 104 ; 19 W. E. 291 ; 23 L. T. 828; 40 L. J. Ch. 277 - - - - - - 457, 514, 523, 542 Eanelagh v. Hayes, 1 Ves. 189 - - . - - - 962 Eauger v. Great Western Eail. Co., 5 H. L. C. 86 - - - 10 Eaphael v. Bank of England, 17 C. B. 161 - - - - 917 Eawlins r. Wickhara, 3 D. & J. 304 ; 28 L. J. Ch. 188 ; 5 Jur. N. S. 278 - - - - - - - - - 100 Eayner r. Preston, 18 C. D. 1 - - - - - 209 Bead, Ex parte, Be Paine, (1897) 1 Q. B. 122 ; 66 L. J. Q. B. 71 ; 75L. T. 316; 45 W. E. 190 - - - - - - 925 Bead v. Brown, 22 Q. B. D. 128 - - - - - 120 Bead v. Joannon, 25 Q. B. D. 300 ; 49 L. J. Q. B. 544 ; 63 L. T. 387 ; 38 W. E. 734 ; 2 Meg. 275 - - - - - 782 Eeddaway v. Banham, (1896) A. C. 199 ; 65 L. J. Q. B. 381 ; 74 L. T. 289 ; 44 W. E. 638 - - - - - - 266 Eedgrave v. Hurd, 20 C. D. 23; 30 W. E. 251 ; 45 L. T. 485; 51 L. J. Ch. 113 - - - - - 69, 101, 136, 1022 Eees V. Berrington, 2 Yes. jun. 540 - - - - 842, 964 Eees V. Eichmond, 62 L. T. 427 - - - - 1026, 1097 Eeese Eiver Silver Mining Co. v. Smith, L. E. 4 H. L. 64 ; 39 L. J. Ch. 849 - - - - - 30, 31, 96, 97, 102, 103, 104 Eeeve v. Berridge, 20 Q. B. D. 523 - - - - - 205 Eegent's Canal Co., Be, W. N. (1867) 79 - - - - 443 Eegent's Canal Iron Works Co., In re, 3 C. D. 43; 24 W. E. 687 ; 35 L. T. 288 ; 45 L. J. Ch. 620 - - 412, 807, 808, 818 Ixxiv TABLE OF CASES. Reg— Rei page Eeg. V. Arnaud, 9 Q. B. 806; 16 L. J. Q. B. 50; 11 Jur. 279 - 2 Eeg. V. Aspinall, 2 Q. B. D. 48, 59 - - - - - 73 Eeg. V. Birmiagliam Eail. Co., 3 Q. B. 223 - - - - 12 Eeg. V. Bottomlej- and others - - - - - - 128 Eeg. V. Catholic Life, &c. Assurance Institution, 48 L. T. 075 ; 47 J. P. 503 - - - - - - - - 413 Eeg. V. Chester, 1 A. & E. 342 - - - - - - 421 Eeg. V. Commissioners of Income Tax, 21 Q. B. D. 313 - - 48 Eeg. V. D'Oyley, 12 A. & E. 139 - - - - 420, 421 Eeg. V. Esdaile, 1 F. & F. 213 - - - -456, 513, 520 Eeg. V. Government .Stock Co., 3 Q. B. D. 443 ; 47 L. J. Q. B. 478 ; 39 L. T. 230 - - - - - - 420, 645, 1061 Eeg. V. Graham, 9 W. E. 738 - - - - - 421 Eeg. V. Great North of England Eail. Co., 9 Q. B. 315 - - - 12 Eeg. V. Haslam, 17 Q. B. 220 - - - - - 50 Eeg. V. Hedges, 12 A. & E. 159 - - - - - - 420 Eeg. V. Judd, 37 W. E. 143 - - - - - - 334 Eeg. V. Lambeth, 8 A. & E. 356- - - - - - 421 Eeg. V. Langhorne, 6 N. & M. 203 - - - - - 416 Eeg. V. Lee Overseers, L. E. 1 Q. B. 241 - - - - 49 Eeg. V. Longton Gas Co., 29 L. J. M. C. 118; 2 L. T. 24 ; 6 Jur. N. S. 601 ; 8 Cox, C. C. 317 ; 2 El. & El. 651 - - - 1182 Eeg. V. Mariquita, &c. Co., 1 E. & E. 289 ; 28 L. J. Q. B. 67 ; 5 Jiu-. N, S. 725 - - - - - - - - 460 Eeg. V. Mayor of Liverpool, 3 East, 86 - - - - 12 Eeg. V. Mayor, &c. of London, 9 B. & C. 1 - - - - 421 Eeg. V. Mayor of Wigan, 14 Q. B. D. 908 - - - - 435 Eeg. V. Newton, 48 L. J. M. C. 77 - - - - - 414 Eeg. V. Eegistrars of Joint Stock Companies, (1891) 2 Q. B. 598 - 605 Eeg. i\ Eeed (Sir Charles), 5 Q. B. D. 483; 49 L. J. Q. B. 600; 42 L. T. 835 ; 28 W. E. 787 ; 45 J. P. 633 - - - 279, 784 Eeg. V. Saddlers' Co., 10 H. L. C. 404 - - - - 434 Eeg. V. St. Pancras, 11 A. & E. 15 - - - - - 421 Eeg. V. Tewkesbury, L. E. 3 Q. B. 635 ; 16 W. E. 1200 ; 9 B. & S. 683; 18L. T. 851; 37L. J. Q. B. 288 - - - - 438 Eeg. V. Tidy, 2 Q. B. 179 - - - - - - 262 Eeg. V. Train, 2 B. & S. 640; 9 Cox, C. C. 180; 31 L. J. M. C. 169; 10 W. E. 539; 3F. &F. 22 - - . . -1182 Eeg. V. Tyler, &c. Co., (1891) 2 Q. B. 588; 61 L. J. M. C. 38; 65 L. T. 662; 56 J. P. 118 (C. A.) - - - - 12, 414 Eeg. V. United Kingdom Telegraph Co., 2 B. & S. 647 - - 1182 Eeg. V. West Middlesex Water Works, 1 E. & E. 716 - - - 49 Eeg. V. Wimbledon Local Board, 8 Q. B. D. 459; 51 L. J. Q. B. 219; 30 W. E. 402; 46 L. T. 47 - - - - 420,421 Ecid's Brewery Co. v. Male, (1891) 2 Q. B. 1 ; 60 L. J. Q. B. 340; 64 L. T. 294 ; 39 W. E. 459; oo J. P. 210 - - 46, 329 Eeid V. Explosives Co., 19 (i. B. ]). 264; oG L. J. Q. B. 388; 57 L. T. 439; 35 W. E. 509 _ _ _ . 261,1090,1093 Eoid V. London and Staffordshire Co., 32 W. E. 94 ; 49 L. T. 468; 53 L. J. Ch. 361 ~ - - - - - - 104 Eeidputh'H CaBO, 11 Eq. 86 - - - - - - 23 TABLE OF CASES. Ixxv Rem— Rol page llemmin-ton v. Scholes, (1897) 2 Ch. 1 ; m L. J. Ch. .520 ; 76 L. T. ()(37 ; 45 W. R. 5S0 - - - - - - 10.30 Eensburg, Ex parte, BeVrjco, 4 C. D. 085 - - - - 808 Eeuss V. Picksloy, L. E. 1 Ex. 342 - - - - 194, 914 Eeversionary Interest Society, (1S92) 1 Ch. 015; 01 L. J. Ch. 379; 06L. T. 400; 40 W. E. 389 - - - - - - 993 Rex V. Brighton Gaslight Co., 5 B. & C. 400 - - - 49 Eex V. De Berenger, 3 M. & S. 67 " - - - - - 73 Eex V. London Assurance Co., 5 B. & Aid. 899 _ _ _ looi Eex V. Merchant Taylors Co., 2 B. & Ad. 115 - - - - 459 Rex V. Miller, Cowp. 019- - - - - -49 Rex V. Rochdale Waterworks, 1 M. & S. 034 - - - - 49 Eex V. Wilts and Berks Canal Co., 3 Ad. & El. 477 - - - 30 Ehodes v. Forwood, 1 App. Cas. 257 ; 24 W. E. 1078 ; 34 L. T. 890 ; 47 L. J. Ex. 390 - - - - - - - 201 Eice V. Eice, 2 Drew. 73 - - - - - - 794 Eichards v. Home Assui'ance Association, L. E. 6 C. P. 591 - - 23 Eichards v. Kidderminster Overseers, (1890) 2 Ch. 212 ; 05 L. J. Ch. 502 ; 74 L. T. 483; 44 W. E. 505- - 13, 749, 783, 1092, 1093 Eichardson's Case, 19 Eq. 588 - - - - - - 21 Eichardson v. Methlov School Board, (1893) 3 Ch. 510; 02 L. J. Ch. 943 ; 09 L. T. 308 ;' 42 W. R. 27 ; 3 R. 701 - - - 435 Richardson v. Smith, 5 Ch. 048 - - - - - - 202 Richardson v. Williamson, L. R. Q. B. 270; 40 L. J. Q. B. 145 - 441, 920 Riche V. Ashbury, L. R. 7 H. L. 071 - - - 33, 34, 480 Ridley v. Plymouth Co., 2 Ex. 711 ; 17 L. J. Ex. 252 ; 12 Jm-. 542 - 427 Rishton v. Grissell, 5 Eq. 320 - - - - - 202, 530 Ritso's Case, 4 C. D. 782 - - - - - - 21 R. N. Cunningham, 36 C. D. 552 ; 57 L. J. Ch. 109 ; 58 L. T. 16 - 427 Robb V. Green, (1895) 2 Q. B. 1 ; W. N. (1895) 115- - - 262 Roberts v. Brett, 11 H. L. C. 337 - - - - - 843 Roberts ?'. Bury Commissioners, L. R. 5 C. P. 320 ; 39 L. J. C. P. 129; 22 L. T. 132; 18 W. R. 702- - - - - 800 Roberts v. Croft, 24 Beav. 223; 2 De G. & J. 1 - - - - 910 Robinson's Case, 4 Ch. 330 ; 20 L. T. 90 ; 17 W. R. 454 - - 22 Robinson i'. Ashton, 20 Eq. 28 ; 23 W. R. 074 ; 33 L. T. 88 ; 44 L. J. Ch. 542 - - - - - - - - 524 Robinson v. Barton Local Board, 8 App. Cas. 798 - - - 814 Robinson v. Harkin, (1890) 2 Ch. 415; 05 L. J. Ch. 773; 74 L. T. 777 ; 44 W. R. 702 - - - - - - - 471 Robinson i-.' Montgomery Brewery Co., (1890) 2 Ch. 841 ; 05 L. J. Ch. 915; 3 Manson, 279 - - - 412, 807, 808, 818, 1111 Eobinson v. Eestill, 12 T. L. E. 174 - - - - - 933 Eobsonv. Cattell & Co., Chitty, J., at Chambers, 19th Jan., 1892, B. 211 - - - - - - - - 1107 Eobson i\ Smith, (1895) 2 Ch. 118 ; 43 W. E. 032; 72 L. T. 559 - 748, 773, 770, 777 Eogers' Case, 3 Ch. 033 - - - - - - 25 Eogers v. Challis, 27 Beav. 175 - - - - - - 792 Eogers v. Drury, 30 W. E. 496 ; 57 L. J. Ch. 504 - - - 207 EoUand v. Hart, 6 Ch. 078 - - - - - 795, 800 Ixxvi TABLE OF CASES. Bol— Sah PAGE Eolt V. Hopkinson, 3 De G. & J. 177 ; 9 H. L. Cas. 514 - - 797 Eomford Canal Co., In re, 24 C. D. 85; 49 L. T. 118; 52 L. J. Ch. 729 _----- -418, 767, 768 Eoney's Case, 4 D. J. & S. 426; 12 W. E. 815, 894; 10 L. T. 770; 33L. J. Ch. 731 _._--- 391,444 Eoots V. WiUiamson, 38 C. D. 485 ; 57 L. J. Cli. 995 ; 58 L. T. 802 ; 36W. E. 758 ----- -387,398,797 Eosenberg v. Nortliumberland Laml Building Society, 22 Q. B. D. 373; 60 L. T. 558; 37 W. E. 368 - - - - 379, 649 Eoss V. Army and Navy Hotel Co., 34 C. I). 43; 35 W. E. 40; 55 L. T. 472 - - - - - - - - 7S3 Eoss V. Estates Investment Co., 3 Eq. 134 ; 3 Ch. 689 ; 15 W. E. 104 ; 16 W. E. 1151 ; 15 L. T. 272 ; 19 L. T. 61 ; 36 L. J. Ch. 54 ; 37 L. J. Ch. 873 - - - - - - 77, 92, 97, 115 Eossiter v. Trafalgar Co., 27 Beav. 380 - - - - 440 Eotherham Chemical Co., Be, 25 C. D. 103; 32 W. E. 131 ; 50 L. T. 219; 53 L. J. Ch. 290- - - 71, 130, 213, 260, 374, 445 Eothschild v. Inland Eevenne Commissioners, (1894) 2 Q. B. 142; 70 L. T. 667 ; 42 W. E. 542 ; 58 J. P. 399 ; 10 E. 204 - - 815 Eoxmdwood Colliery Co., (1897) 1 Ch. 373; 66 L. J. Ch. 186; 75 L. T. 641 ; 45 W. E. 324 - - - - - - 794 Eouse V. Bradford Banking Co., (1894) A. C. 586; 63 L. J. Ch. 890; 71 L. T. 522; 43 W. E. 78; 6 E. 349 - - - - 966 Eowe r. Dawson, 1 Yes. 390 - - - - - - 773 Eowell r. Commissioners of I. E., (1897) 2 Q. B. 194 ; 66 L. J. Q. B. 528 ._---- -813, 820, 838 Eowland's Case, 42 L. T. 785 ; W. N. (1880) 80 - 188, 189, 713 Eoyal Bank of India's Case, 4 Ch. 252; 17 W. E. 359; 19 L. T. 805 - - - - - - -192,303,451 Eoyal Bank of Scotland v. Tottenham, (1894) 2 Q. B. 715; 64 L. J. Q. B. 99; 71 L. T. 168; 43 W. E. 22; 9E. 569(C. A.) - - 426 Eoval British Bank v. Turquand, 6 E. & B. 437 ; 24 L. J. Q. B. 327 ; 1 Jur. N. S. 1086 - 17, 22, 36, 37, 411, 427, 438, 454, 455, 790, 807 Eoyal Farmer.s, &c. Insurance Co., 25th February, 1888 1005, 1006 Eoyal Insurance Co. v. "Watson, (1897) A. C. 1 ; 75 L. T. 334 - - - - Eumball v. Metropolitan Bank, 2 Q. B. D. 194 - Eussel V. Eussel, 1 Bro. C. C. 269; 1 Wh. & Tu. Eussell V. East Asylum Eail. Co., 3 Mac. & G. Eussell V. Wakefield Waterworks, 20 Eq. 474 ; L. T. 685 ; 44 L. J. Ch. 496 - 3, 427, 520, 1026, 1028, 1030, 1066 Byall V. Eowles, 1 Ves. 348 - - - - - - 762 Eyan v. Mutual Tontine, &c. Assoc, (1893) 1 Ch. 116; 62 L. J. Ch. 252; 67 L. T. 820; 41 W. E. 146; 2 E. 156 - - - 260 Eyhopc Colliery Co. v. Foyer, 7 Q. B. D. 485 - - - - 3, 48 S. Sadler v. C. W. Eail. (V,., (1896) A. C. 150 - - - . 1022 Sadler v. Worloy, (1891) 2 Ch. 170 ; 63 ]>. J. Ch. 551 ; 70 L. T. 494 ; 42 W. E. 476; 8 E. 194 - - - 817,1025,1122,1123 Sahlgreen and Carrall's Case, 3 Ch. 323 ; 16 W. E. 497 - - 383, 451 66 L. J. Q. B. 1; - - - 46 758, 760: , 767, 793: , 851 L. C. 674 - - 915 - : 279, 1092 23 W. E. 887; 32 TABLE OF CASES. Ixxvil Sai— SCO PA«E Sailing Ship " Kentmero " Co., W. N. (1897) 58 - - 41.3, 139 St. Augustine's Mines, Limited, Vaughan Williams, J., 2.Jtli Apiil, 1895 --------- 1139 St. Lucia Sugar Co., 3 T. L. K. 523 - - - - - 979 St. Petersburg, &c. Co., lltk April, 1895, Chitty, J. - - - 981 St. Thomas's Dock Co., 2 C. D. 177 ; 45 L. J. Ch. 304 ; 31 L. T. 228; 24W. R. 544 - - - - - - - 817 St. Thomas (Floating Dock of), AV, (1895) 1 Ch. G91 ; 64 L. J. Ch. 361 ; 43 W. E. 344 - - - - - 369, m:i, 970 Sale Hotel, &c. Co., W. N. (1897) 174; 77 L. T. 681; 46 W. II. 314; W. N. (1898) 40 - - - - 67, 69, 136, 1066 Salford (Mayor of) v. Leon, (1891) 1 Q. B. 168 ; 60 L. J. Q. B. 39 ; 63 L. T. 658 ; 39 W. E. 85 ; 55 J. P. 244 - - 63, 68, 43G Salisbury, &c. Co. v. Hathorn, (1897) A. C. 268 ; 66 L. J. P. C. 62; 76L. T. 212; 45 W. E. 591 - - - - - 421 Salisbury- Jones and Dale's Case, In re Bolton & Co., (1894) 3 Ch. 356; 64 L.J. Ch. 27; 72 L. T. 171 - - - 27,374,430 Salle V. Field, 5 T. E. 215 723 Salomon v. Salomon & Co., (1897) A. C. 22 ; 66 L. J. Ch. 35; 75 L. T. 426; 45 W. E. 193 - 1, 2, 15, 16, 64, 65, 82, 383, 549, 554, 563, 810, 1058 Salomons v. Laing, 12 Beav. 339 - - - - - 269 Salter's Claim, Re Sovereign Life, 7 T. L. E. 602 - - - 261 Saltworksv. New Civil Service, 28 W. E. 11 - - - - 645 San Paulo (Brazilian) Eail. Co. v. Carter, (1895) 1 Q. B. 580; 72 L. T. 214 - - - - - - - - 47 Sandbach and Edmondson, Be, (1891) 1 Ch. 99; 60 L. J. Ch. 60; 63 L. T. 797; 39 W. E. 193 (C. A.) - - - - 203 Sangster i'. Setter, 9 T. L. E. 441 - - - - - 156 Sanitary Carbon Co., In re, W. N. (1880) 223 - - - 418 Sankey Brook Coal Co., 10 Eq. 381 - - - - - 790 Sargeant, £'.<;jjo?-^e, 1 Eoll. 153 - . _ - 923,1052 Sargent, Ex parte, 17 Eq. 273 ; 22 W. E. 815 ; 43 L. J. Ch. 425 - 399 Saunderson v. Bowes, 14 East, 508 - - - - - 827 Savin v. Hoylake Eail. Co., L. E. 1 Ex. 9 ; 35 L. J. Ex. 52; 11 Jur. N. S. 934 ; 13 L. T. 374; 11 W. E. 109 ; 4 H. & C. 67 - - 126 Saxlehner ;-•. Appolinaris Co., (1897) 1 Ch. 893; 66 L. J. Ch. 553; 76L. T. 617 - Scadding v. Lorant, 1 H. L. C. 418 - Scarf V. Jardine, 7 Aj^p. Cas. 345, 360 - - - Scholey v. Central Eail. Co., 9 Eq. 266 ; 39 L. J. Ch. 354 Sehomeld, Ex jMrte, 12 C.T>. 331 - . - Schweitzer v. Maj'hew, 31 Beav. 37 ; Seton, 1583 - Scott and Alvarez's Contract, (1895) 1 Ch. 596; 72 L. T. appeal, (1895) 2 Ch. 603 - - - - Scott V. Avery, 5 H. L. Cas. 811 - Scott V. Brown, (1892) 2 Q. B. 724; 61 L. J. Q. B. 738 ; 116 ; 67 L. T. 782 ; 57 J. P. 213 ; 4 E. 42 (C. A.) - Scott V. Corporation of Liverpool, 3 De G. & J. 360 ; 28 236 ; 5 Jur. N. S. 104 - Scott V. Franklin, 15 East, 428 - Scott V. Lord Ebury, L. E. 2 C. P. 255 ; 15 W. E. 517; 506; 36 L. J. C. P. 161 - - 266 - 416 - 105 -102, 104, , 139 - 923 817, 1026 . 455 ; on - 202 - 806 41 W. E. - 73 L. J. Ch. 208, , 806 - 923 15 L. T. - 177 Ixxviii TABLE OF CASES. Sco-Shi I'AOE Scott V. Lord Hastings, 4 K. & J. 633 - - - - - 794 Scott V. Snytler, &c. Co., 66 L. T. 283; affirmed 67 L. T. 104 (C. A.) - - - - - - - 97, 100 Scottisli Economic Life Assurance Society, Ex parte, 4o C. D. 220 ; 60 L. J. Ch. 14 ; 62 L. T. 926; 38 W. E. 684 _ _ - ;jl3 Scottisli Petroleum Co., In re, 23 C. D. 413 ; 31 W. E. 846 ; 49 L. T. 348 - - 21, 31, 97, 101, 102, 104, 284, 384, 433, 434, 441, 693 Searle v. Choat, 25 C. D. 723 - - - - - 1092 Securities, tfec. Corporation v. Brighton Alhambra, W. N. (1893) 15 - 1091 Self-acting Sewing Machine Co., 54 L. T. 676 ; 34 W. E. 758 - 430 Seligman v. Prince & Co., Limited, W T. L. E. 473 (26 June, 1895) - 383, 810 Selwyn v. Garfit, 38 C. D. 273 - - - - - 869 Severn and Wye, &c. Eail. Co., (1896) 1 Ch. 559 ; 65 L. J. Ch. 400 ; 74 L. T. 219 ; 44 W. E. 347 - - - - - 456, 459 Seward v. Vera Cruz, 10 App. Cas. 59; 54 L. J. P. 9 ; 52 L. T. 474 ; 33 W. E. 477 ; 49 J. P. 324 ; 5 Asp. M. C. 386 - - - 1182 Sewell's Case, 3 Ch. 131 ; 18 L. T. 2 ; 16 W. E. 381 - 31, 35, 281, 282, 658 Sewell, Re, 13 C. D. 266 ; 28 W. E. 286 ; 49 L. J. Bk. 15 ; 42 L. T. 3 - - - - - - - - 1067 Shackleford, Ford & Co. v. Dangerfield, L. E. 3 C. P. 407 ; 16 W. E. 675 ; 18 W. E. 289 ; 37 L. J. C. P. 157 - - - - 666 Shand v. Stansfield, Seton, 1702 - - - - - 916 Sharp V. Dawes, 2 Q. B. D. 26 ; 25 W. E. 66 ; 36 L. T. 188 ; 46 L. J. Q. B. 104 - - - - - - - 388, 418 Sharpe, Re, Masonic and General Life Ass. Co. v. Sharpe, (1892) 1 Ch. 154 - - - -. - - 68, 456, 520, 533 Sharpley v. Louth & East Coast Eail. Co., 2 C. D. 633 ; 35 L. T. 71 ; 46 L. J. Ch. 259 - - - - - 102, 104, 384 Shaw's Case, 34 L. T. 715 - - - - - 25 Shaw, Ex parte, 2 Q. B. D. 463 - - - - - - 1052 Shaw t'. Foster, L. E. 5 H. L. 321 - - - - - 916 Shaw V. Port Philip Gold Co., 13 Q. B. D. 103; 32 W. E. 771 ; 50 L. T. 685 ; 53 L. J. Q. B. 369 - - 12, 17, 442, 455, 712 Shaw V. Eowley, 16 M. & W. 810 ; 16 L. J. Ex. 180 ; 5 Ey. Cas. 47 ; llJur. 911 - - - - - - - 389 Shearman's Case, 75 L. T. 385 - - - - - - 104 Shears v. Jacob, L. E. 1 C. P. 513 - - - - - 782 Sheffield, &c. Soc. v. Aislewood, -14 C. D. 412 ; 59 L. J. Ch. 34 ; 62 L. T. 678 ----- - 276, 428, 471 Sheffield (Eail of) v. London Joint Stock Bank, 13 Ajip. Cas. 333; 57 L. J. Ch. 986 ; 58 L. T. 735 ; 37 W. E. 33 - - 724, 917, 934 Sheffield Nickel Co. 7'. Unwin, 2 (J. ]5. D. 211; 25 W. E. 493; 36 L. T. 246 ; 46 L. J. Q. B. 299- - - - - - 211 Sheffield & South Yorkshire I'eim. P.ldg. Soc., In re, T2 Q. B. D. 476; 58 L. J. (i. 15. 265 ; 60 L. T. 186; 53 J. P. 375 - - 1 Sheil, Ex parte, 4 C. I). 789 - - - - - 623, 809 Sh(.ppard v. Union Bank, 7 IL & W. 661 - - - - 932 Slieiinan, j^cc j;ar'cross V. Grant, 2 C. P. D. 469, 503 ; 25 W. E. 701 ; 34 L. T. 812 ; 46 L. J. C. P. 636 - - 54, 63, 72, 124, 431, 1022 Twycross v. Grant, 4 C. P. D. 40 ; 46 L. J. C. P. 636 ; 36 L. T. 812; 25W. E. 701- ----- 109,120 Tyno Boilor Co. v. Overseers of Longbonton, 18Q. B.D.81 - - 50 Tyno Mutual Steamship lusuranco Assoc, v. Brown, 74 L. T. 283 - 39, 438, 444 U. Udall v. Walton, 14 M. & W. 254 - - - - - 132 Uudorliill r. Jlopwood, 10 VoH. 226 - - - - - 962 Underwood v. Underwood, GO L. T. 384 ; 37 W. R. 428 - - 1073 TABLE OF CASES. ' IxxXV XJni— Wal page Union r,iink of Kingston-upon-IIuU, In r<; 13 (Jli. D. 808 ; 28 W. E. 808; 42 L. T. 390; 49 L.' J. Ch. 264 - - - 1132, 1133, 11.51 Union Hill Silver Co., 22 L. T. 400 - - - - - 464 Union Manufacturing Co., Jessel, M.R., 19th June, 1878, B. 1289 - lOoo Union Rolling Stock Co., Kekewich, J., January, 1894 - - 993 United Service Co., 7 Eq. 76 ; 5 Ch. 707 ; 18 W. R. 1050 ; 23 L. T. 331 ; 39 L. J. Ch. 730 - - - - - - - 9 United States Cable Co., Tn re, 48 L. J. Ch. 665 - - - 1133 United Telephone Co. r. Sharpies, 29 C. D. 104 ; 33 W. R. 444 ; 52 L. T. 384 ; 54 L. J. Ch. 633 - - - - - - 223 Unity, &G. Association v. King, 25 Beav. 72 - - - 916 Upward (on behalf, &c.) v. San Pedro Brazil Gas Co., M.R., 2()th April, 1877, A. 855 - - - - - - - 1076 Uruguay, &c. Rail. Co., 11 C. D. 372; 27 W. R. 571; 48 L. J. Ch. 540 ----_.- 284, 761 Vance v. East Lancashire Rail. Co., 3 K. & J. 50 - - - 1168 Venables v. Baring Brothers & Co., (1892) 3 Ch. 527 ; 61 L. J. Ch. 609; 67L. T. 110; 40 W. R. 699- - - -760,797,917 Venning v. Leckie, 13 East, 7 - - - - - - 936 Verner v. General and Commercial Co., (1894) 2 Ch. 239 ; 63 L. J. Ch. 456; 70L. T. 516; iManson, 136; 7 R. 170 (C. A.) - 456,499,512, 519, 521, 526, 531, 534, 537, 510, 541 Vernon v. Hallam, 34 C. D. 748; 35 W. R. 156; 55 L. T. 676; 56 L. J. Ch. 115 - - - - - - - - 207 Vickers v. Vickers, 4 Eq. 529 - - - - - 202 Victoria Steamboats Co., (1897) 1 Ch. 158 ; 66 L. J. Ch. 21 ; 75 L. T. 374; 45 W. R. 135 _ . . _ 815,1091,1092 Vining's Case, 6 Ch. 96 ; 19 W. R. 173 ; 40 L. J. Ch. 79 - - - 1 1 33 Vivian & Co., Be, 34 W. R. 411 ; W. N. (1886) 32 ; 54 L. T. 384 ; 55 L. J. Ch. 436 - - - - - 662, 665, 974, 979 Von Heyden v. Neustadt, 14 C. D. 230 ; 28 W. R. 496 ; 42 L. T. 300 - - - - - - - - - 223 Vron Slate Co., 20 Ch. D. 442 ; W. N. (1878) 70 - - - 990 Vulcan Ii'on Works, Be, W. N. (1885) 120 - - - 190, 712 w. Waddellf. Wolfe, L. R. 9 Q. B. 515 ; 23 W. R. 44 ; 43 L. J. Q. B. 138 - 202 Wainwright's Case, W. N. (1890) 3; 62 L. T. 30 ; 59 L. J. Ch. 281 ; 1 Meg. 463 - - - - - - - - 97 Waites (on behalf, &c.) v. Hemp Yarn, &c. Co., Vaughan Williams, J., 7th May, 1896 - _ _ _ _ - -1105 Wakefield Rolling Stock Co., In re, (1892) 3 Ch. 165; 61 L. J. Ch. 670; 67 L. T. 83; 40 W. R. 700 - - - - 391, 468 Walker v. Hackney, 57 L. T. 763 - - - - - 274 Walker v. Levy, 10 C. D. 436 ; 27 W. R. 370 ; 39 L. T. 654 ; 48 L. J. Ch. 273 - - - - - - - - 199 IxXXvi TABLE OF CASES. Wal — Wee page Walker v. London Tramways Co., 12 C. D. 705 ; 28 W. E. 1G3 ; 49 L. J. Ch. 23 - - - - - - 377, 450 Walker v. Mottram, 19 C. D. 355 - - - - - 199 Walker v. Eemmett, 15 L. J. Ch. 8, 174 - - - - 157 Walker i-. Ware, &c. EaU. Co., 35 Beav. 52 - - - 18, 19 Wallace v. Gibson, (1895) A. C. 354 - - - - - 924 Wallace v. Universal Automatic Co., (1894) 2 Ch. 547 ; G3 L. J. Ch. 598; 70 L. T. 852; 1 Manson, 315; 7 E. 316- - - 817, 825 Wallingford v. Mutual Society, 5 App. Cas. 685 ; 29 W. E. 81 ; 43 L. T. 258 ; 50 L. J. Q. B. 49 - - - - 825, 835 Wallis' Case, L. E. 4 Ch. 325, n. - - - - 22, 23 Wallis V. Smith, 21 C. D. 243 - - - - - 807 Wallwyn r. Shepheard, 4 Yes. 119 - - - - - 915 Walter r. Loch, 7 Q. B. D. 619 - - - - - 418 Walters v. Northern Canal Co., 5 De G. M. & G. 629 ; 4 W. E. 140 ; 26 L. T. 167 ; 2 Jur. N. S. 1 - - - - _ - 178 Walters v. Woodbridge, 7 C. D. 504 - - - - - 470 Walthamstow, &c. Council v. Henwood, (1897) 1 Ch. 41 ; 66 L. J. Ch. 31 ; 75 L. T. 375 ; 45 W. E. 124 - - - - -1017 Walton, £'x^«r^e, 17 C. D. 746 - - - - - 129 Wandsworth, &c. Co. v. Wright, 22 L. T. 404 - - - - 421 Ward and Buncombe, (1893) A. C. 369 ; 62 L. J. Ch. 881 ; 69 L. T. 121 ; 42 W. E. 59; 1 E. 224 (H. L.) - - - - 796 Ward and Henry's Case, 2 Ch. 431 ; 16 L. T. 254 ; 36 L. J. Ch. 462 - 1052 Ward V. Eoyal Exchange Shipping Co., 58 L. T. 174 ; 6 Asp. M. C. 239 -____--- 775 Ware v. The Grand Junction Waterworks Co., 2 E. & M. 470 - - 307 Ware v. Lord Egmont, 4 D. M. & G. 460 - - - 800, 801 Warrington v. Eurber, 8 East, 245 ; 6 Esp. 89 - - - - 936 Warwicke v. Noakes, Eeake, 67 - - - - - 458 Washington Diamond Mining Co., (1893) 3 Ch. 95; 62 L. J. Ch. 895 ; 69 L. T. 27 ; 41 W. E. 681 ; 2 E. 523 (C. A.) - - - 433 Watkins v. Nash, 20 Eq. 262 _ _ - _ - 19 Watkins r. Scottish Imperial Insurance Co. (1889), 23 Q. B. D. 285 - 41 Watney r. Musgrave, 5 Ex. D. 241 - - - - - 46 Watson, JE'a; ^3ar ■>• , -r required from case 01 a corporation, the affixing of the seal imports delivery. " JLe a corporation, f^it d'un corporation ne besoign ascun delivery mes I'apposition del common seale done perfection al ces sans ascun deliverie." Eol. Abr. 23 (1), 50; and see Comyn's Digest, Pact A (3), that "a common seal fixed to the deed of a corporation is tantamount to a delivery." Accordingly, whilst in the case of a private individual it is usual to add an attestation clause to the effect that the instrument was ' ' signed, sealed, and delivered " in the presence of the witness, in the case of a company the clause merely states that ' ' the common seal was affixed hereto in the presence of and ." Nevertheless, a corporation can execute a deed in escrow, i.e., can seal it subject to a condition suspending its efficacy. As Lord Cranworth said in 'Kenos v. Wickham, L. R. 2 H. L. 310 : " The efficacy of a deed depends on its being sealed and delivered by the maker of it, not on his ceasing to retain possession. This, as a general proposition of law, cannot be controverted. It is not affected by the circumstance that the maker may so deliver it as to suspend or qualify its binding effect. He may declare that it shall have no effect until a certain time has arrived, or until some condition has been performed ; but when the time has arrived, or the condition has been performed, the delivery becomes absolute, and the maker of the deed is absolutely bound by it, whether he has parted with the possession or not. Until the specified time has arrived, or the condition has been performed, the instrument is not a deed. It is a mere escrow I know of nothing intermediate between a deed and an escrow." Whether a document sealed by a company was or was not intended to operate as a complete and operative instrument, or as an escrow, depends on the intention of the parties as expressed or implied. See Derby Canal Co. v. Wilmot, 9 East, 359, 360, where the company's seal was affixed to a conveyance ; but the clerk was directed to retain it until certain accounts were adjusted. Lord EUenborough, C. J., and the rest of the Court, held that, ' ' in order to give the instrument effect, the affixing of the seal must be done with intent to pass the estate. Otherwise it operates no more than a feoffment would do without delivery of possession, whereas here, though the seal was directed to bo and was affixed to the instrument for form, yet it was with a reservation of any present effect to pass the title out of tho company, as they do not choose to deliver over tho possession of tho conveyance till tho accounts wore settled between them and the purchaser." But an express condition is not essential if the circum- Btances denote it. Bowker y, Bxirdekin, llM. &W. 128; Walker y. PRELIMTNARV. 19 IJ^'are, ^-c. Hail. Co., 35 Beav. 52. See, too, Mou-atl v. Castle Steel, Sfc. Co., 31 C. D. 58, in whicli the Court found as a fact that deben- tures to bearer sealed by the company had not in fact been delivered. But too niucli reliance must not be placed on this case. See the decision in County of Gloucester Bank v. liudry, (1895) 1 Ch. 629, which goes to show that where an instrument under the seal is taken in good faith the company would, as a general rule, be estopped from setting up non-dolivery. See, also, London Freehold, ^'c. Co. v. Suffield, (1897) 2 Ch. 608. Where an instrument is delivered as an escrow it will not take effect until the condition is fulfilled. Watldns v. Nash, 20 Eq. 2G2 ; Nash v. Flyn, 1 Jo. & Lat. 162 ; Whclan v. Palmer, 39 C. D. 648. But when the condition is fulfilled the law, it seems, takes effect from the original sealing and deKvery. Shep. Touch. 58 ; Graham v. Graham, 1 Ves. Jun. 274. A document to whieli the seal is affixed is not necessarily a deed ; Whether thus a certificate of title to shares is not a deed ( The Queen v. Morton, j^g^^. ^ ^qq^^ L. E. 2 C. C. E,. 22) ; but it would seem that every contract under the seal is a deed, save only that, by the Bills of Exchange Act, 1882, 8. 91, a corporation is empowered to seal, instead of signing, accept- ances, indorsements, and the like. Besides its common seal, a company may, under the Companies' Seals Comimnies' Act, 1864, obtain power to have an official seal for use abroad; and, 2^864. ' under sect. 55 of the Act of 1862, it can authorize any person, as the attorney of the company, to execute, under his seal, deeds outside the United Kingdom. Membership. It may be convenient here to collect some of the cases as to member- ship, more especially as regards companies limited by shares. Sect. 23 of the Act of 1862 provides as follows : — ' ' The subscribers of the memorandum of association of any company under this Wlio are Act shall be deemed to have agreed to become members of the company whoso members, memorandum they have subscribed, and upon the registration of the company shall be entered as members on the register of members hereinafter mentioned [sect. 25, see bifra, p. 29], and every other person who has agreed to become a member of a company imder this Act, and whose name is entered on the register of members, shall be deemed to be a member of the company." This section, it will be observed, deals with two classes. (1) Those persons who have subscribed the company's memorandum Subscribers. of association. (2) Those persons who have agreed to be members, and whose Others. names are entered in the register. These and these only can strictly be called members in the sense of having acquired the full status of membership. NicoVs case (1884), 29 Ch. D.421. c2 so PRELIMINARY. [ChAP. I. A person may, therefore, become a member or sbareliolder in any of tlie following ways : — (1) By subscribing- tbe memorandum of association before its regis- tration. (2) By agreeing with, the company to take a share or shares, and being placed on the register of members. (3) By taking a transfer of a share or shares, and being placed on the register. (4) By registration on succession to a deceased or bankrupt member. (5) By allowing his name to be on the register of members or otherwise holding himself out or allowing himself to be held out as a member. (See infra, p. 31.) Subscribers to the Memoi'andum. Subscribers to Every such subscriber becomes a shareholder ijjso facto on the in- memorandum. corporation of the company, and liable as the holder of whatever number of shares he has subscribed for. The 23rd section, as Bowen, L. J., pointed out {NicoVs case, 29 C. D. 444), defines the status of a subscriber of the memorandum of association in a different way to the position of other persons who agree to become members. "It is plain," said Lord Cairns in Evans'' case (1867), L. E. 2 Ch. 430, " that the original subscribers are by the Act of Parliament deemed to have taken the shares set opposite their names — the object being that the public might rest with confidence on the subscribers of the memorandum becoming members of the company." And see Migotti's case, 4 Eq. 238. In the case of the subscribers of the memorandum, therefore, no allotment is necessary {Re London and Provincial Co., 5 C. D. 525) ; no entry on the register of members is necessary. NicoVs case, supra. The subscriber is bound to take the shares from the company, and to pay for them. He cannot in satisfaction of this obligation take a transfer of fully-paid shares from another member ; the only way he can possibly escape liability is by showing that all the shares have been allotted to others. Macldey' s case, 1 Ch. D. 247 ; Evans' case, supra. See also Re Esparto Trading Co., 12 CD. 191, where a subscriber who had not been placed on the register was nevertheless held liable for the shares he had subscribed for after a lapse of nine years. In hi re Argyle, 8fc. Co., 54 L. T. 237, liability was enforced after a lapse of four years. (See also Dalton Time Lock Co. v. Dalton, 66 L. T. 704 ; Dunster's case, (1891) 3 Ch. 473. Other Members. Otlior To fomo next to the second class of persons dealt with by sect. 23 — iru-mbcr.'*. ovory other person who has agreed to become a member of a company under this Act and whoso name is entered on the register of members. Hero the section contemplates two things: — (1) An agreement; (2) entry on the register. An agreement alone does not create the status of membership. It is a condition precedent to acquii-ing PRELIMINARY. 21 such status of membership that the shareholder's name should he entered on the register. Per Fry, L. J., NicoVs case, 29 C. D, 447 ; see further, infra, p. 24. There is no difierence, as Chitty, J., said in NicoVs case, 29 C. D. Aj^rcementto 421, between a contract to take shares and any other contract. A formal agreement is not necessary. If, in substance, an agreement is made, the form is not material. Jiitso's case (1877), 4 Ch. D. 782. To constitute a binding contract to take shares in a company, when such contract is constituted, as it usually is, by application and allotment, there must be an application by the intending shareholder, an allotment by the directors of the company of the shares applied for, and a communication by the directors to the applicant of the fact of such allotment having been made. In re Scottish Petroleum Co., 23 C. D. 430. An application for shares is usually made in writing signed by the Application applicant, but an application by word of mouth is effective. Ex parte Bloxam, 33 Beav. 529a ; Levitas case, L. E. 3 Ch. 36. An application is an offer by the applicant and, like any other offer, it may be withdrawn at any time before acceptance is notified to the applicant, or, if the acceptance is by post, at any time before the letter of acceptance is posted {HehVs case, 4 Eq. 9; Dimlop v. Higgins, 1 H. L. C. 381), and such withdrawal may be by word of mouth. Trumaji's case, (1894) 3 Ch. 272. The general rule qui facit per alium facit per se applies to a conti'act Application to take shares, and, accordingly, A. can authorize B. to apply for ^ ''^^ent. shares on A.'s behalf, and, if shares are allotted to A., he becomes a member. Barretts case, 4 De G. J. & S. 416 ; Hannati's Empress, 8fc. Co., (1896) 2 Ch. 643. Nor is it essential that the agent should have actual authority : it is sufficient if he is held out as having authority. Thus, "where A. gives B. an open letter authorizing him to apply, and gives him private instructions limiting the authority. Here, if B. applies showing his authority but conceaKng the private instructions, A. is bound, though the application is in contravention of the private instructions. Henry Bentley ^- Co., 69 L. T. 204. If A. applies for shares in a fictitious name and is allotted some, he will be held liable as a member in respect thereof, and his real name may be entered on the register. Thus, where an application is sent in the name of another not sui juris {e.g., an infant son), it has been held that the case is the same as if the application were sent in in a false or fictitious name. The transaction is a fahula acta, and the applicant himself may be put on the list of contributories {Pugh and Sharnuui's case, 13 Eq. 566 ; Bichardson''s case, 19 Eq. 588 ; G. H. Levita^s case, L. E. 5 Ch. 489) ; but there must, to constitute liability in such a case, be a contract, and there can be no contract where there is no intention of contracting, as the Court of" 22 PKELIMINARY. [Chap. I. Allotment of sbares. Appeal pointed out in Coventry's case, In re Britannia Fire Association, (1891) 1 Oil. 202 (C. A.). Acceptance of an application for shares is ordinarily evidenced Ly what is termed allotment. Allotment moans the appropriation to an applicant by a resolution of the directors of a certain number of shares in response to an aj^plication. Shares so allotted are not, in general, specific shares identified by number : the numbering is left till later. To be effective an acceptance of an application for shares must be unconditional. If it introduces a new term {e.g., says that the shares must be paid up at once under penalty of forfeiture), it is not an effective acceptance, and is to be regarded as a new offer made by the company which will not result in a contract unless accepted by the applicant. Leeds Banking Co., 2 Dr. & Sm. 415; AddinelVs case, 1 Eq. 225 ; JacTison v. Turquand, L. E. 4 H. L. 305. So, too, a resolution for allotment to a person who has not applied, which is communicated to the allottee, is in point of law merely an offer by the company. To constitute a valid allotment there must prima facie be a duly constituted board of directors. In re Homer District Gold Mines, 39 C. D. 546. But the rule in Royal British Bank v. Turquand, infra, p. 37, may sometimes render an allotment by an irregular board effective. And an allotment by a board irregularly constituted may be subsequently ratified by a regular board. Portuguese Consolidated Copper, 42 C. D. 160. A director who has joined in an allotment to himself will be estopped from alleging the invalidity of the allotment. Yorl Tramways Co. v. Willoios (1882), 8 Q. B. D. 685. Notice of allotment. "I think," said Lord Cairns in Pellatfs case, L. E. 2 Ch. 527, " that where an individual applies for shares in a company, there being no obligation to let him have any, there must be a response by the company, otherwise there is no contract " ; and this statement of the law has always been accepted. The communication of the acceptance need not necessarily be in writing, but it must be communicated in some way, whether by writing or verbally, or by conduct. Gunii's case, L. E. 3 Ch. 40. Primd facie, notice of allotment must be given to the applicant or to his agent duly authorized to receive notice of allotment (Levita's case, 5 Ch. 489 ; De liosaz's case, 21 L. T. 10) ; for an agent to apply for shares has no implied authority to receive notice of allotment. Robinson'' s case, 4 Ch. 330 ; Wallis'' case, L. E. 4 Ch. 325, n. If, however, A., in applying, says. Give notice of allotment to B., and notice is so given, that is sufficient {De Rosaz's mse (1869), 21 L. T. 10), and so, too, an ai)plicant may waive notice of allotment. Carlill v. Carbolic, S^c. Co., (1893) 1 Q. B. 256. There are otiior cases also in which notice of allotment is not necessary to comiiloto tho contract; e.g., where, by virtue of somo PEELIMINAKY. agreement upon reconstruction or amalgamation, the company is under an obligation to allot the shares, and a person entitled to an allotment, in response to a cii-cular calling on him to come in, claims allotment of his shares. In such case notice of allotment is not necessary {Gwm's case, L. E. 3 Ch. 40) ; so, too, in any case in which the company, by letter or otherwise, in effect offers a specified number of shares to a person, and he writes back accepting them, no further notice of allotment is necessary. Allotment and notice after incorporation, in response to an applica- tion before incorporation, is sufEcient to constitute a complete contract {Doivnes V. Shij), L. E. 3 H. L. 343 ; Lawrence's case, 2 Ch. 412), for in such a case the appKcation operates as a continuing offer, and matures, on acceptance by the company after incorporation, into a contract. As a general rule, notice of allotment may be given by post {House- By post. hold Fire Lisurance Co. v. Grant, 4 Ex. D. 216 ; Henthorn v. Fraser, (1892) 2 Ch. 27), and in such case the contract is complete when the letter is posted, even though it is never received. Harris'' case, 7 Ch. 587. If notice of allotment is disputed, the onus is on the company to prove Proof of the notice {ReidpatJis case, 11 Eq. 86) ; but this onus it may discharge by proving acts on the part of the alleged member, going to show that he was aware of the allotment and assented to it {Craioley^ s case (1869), 4 Ch. 322), for formal notice is not necessary. Richards v. Home Assurance Association, L. E. 6 C. P. 591. Notice of allotment, if brought home to the allottee, not from the company but aliunde, will bind him. {Wains'" case, L. E. 4 Ch. 325, u.), e.g., if the allottee is present at a board meeting at which the allotment is resolved on. Ex parte Smedlexj and Fletcher, W. N. (1867) 259. In Crawley' s case, supra, C. had applied for shares that were not allotted to him for fourteen months, and accordingly he might have refused the allotment on the ground that it was not made within a reasonable time. No notice of the allotment was given to him, but some months afterwards, he, at the request of B., signed a blank transfer of the shares, and this was held sufficient to show that he must have known of, and assented to, the allotment. "I think, after that act," said Selwyn, L. J., p. 328, " he cannot be heard to say that he did not know of the allotment, or that it had not been communicated to him." A letter of allotment, or any other document having the effect of a letter of allotment, must be stamped with a penny stamp under a penalty on the person executing of 20/. (33 & 34 Vict. e. 97, s. 101, and Schedule) ; but an unstamped letter of allotment, if posted or delivered, is an effective acceptance of the application, lie Whitley Partners, 33 C. D. 337. Where membership is constituted otherwise than by subscribing the Eutry ou register 23 24 PRELIMINARY. [Chap. I. necessary to complete membership. Agreement without regiS' tration not sufBcient. memoranduiu of association, entry in the register of members is, by sect. 23, made a condition precedent to membership. The complete status of membership in such case is not acquired unless and until it can be predicated of the person that he is, within the words of the section, one " who has agreed to become a member of a company under this Act, and whose name is entered in the register." In this respect there is an essential difference between the requisites of membership as regards persons who subscribe the memorandum, and those who otherwise agree to become members. The former, as we have seen (p. 20), become ipso facto, on the registration of the company, members irrespective of entry in the register of members ; but the latter do not become members until agreement, plus entry in the register. This distinction is recognized ' in NicoVs case, 29 C. D. 421. In that case A. had agreed to take shares, and shares had been allotted to him ; but his name had not been entered in the register. After some years, the agreement for membership not having been acted on, a winding-up order was made, and it was sought to place A. on the list of contributories, on the ground that he was a member. The learned judges were all of opinion that he had never become a member; that he had only agreed to be a member. Cotton, L. J., said, that the question was, whether, under the circum- stances, A. had become an actual member or had only agreed to become a member, and stated that " there was in this case no actual membership, although it would have been possible, if proper proceed- ings had been taken, to render the membership complete"; and Bowen, L. J., said: "It appears to me that A. never acquired the status of a member of the company. I think that he remained with contractual obligations to the company, which the company had for a time a right to enforce against him. . . . According to the twenty- third section of the Act I think he had not become a corporate member"; and Fry, L. J., said that the section "makes the placing of the name of a shareholder on the register a condition precedent to membership." No doubt, where there is an agreement but no entry in the register, either party may be entitled to claim and insist on specific performance of the agreement (see p. 28) ; but that circumstance, as the above case clearly shows, is not equivalent to entry on the register. So, too, if B. takes a transfer of shares from A., and the company rightly or wrongly refuses to register such transfer, B. is not a member, although either A. or B. can enforce registration of the transfer under sect. 3o of the Act. Nor is the rule, that entry in the register is necessary to establish the status of momborship in any way at variance with the rule as to settling tlio list of contriljutorios in winding up, namely, that a person who has agreed to Income a member, and whose name is not, hut ou(jht to bf, on the register, is to bo included in such list, for in a winding-up PRELIMINARY. 25 tlie Court lias full power to rectify tlio register of members (sects. 35 and 98 of the Act of 18G2) ; but eveu in contributory cases the Court will not exercise this power unless the agreement relied on is one which, at the commencement of the winding-up, the company was entitled to have specifically enforced. Arnot's case, 3G C. D. 707. The above cases must also be distinguished from those in wliich a person who has acquired the full status of membership is afterwards wrongfully removed from the register, as, for example, in consequence of a forged transfer having been proved. In such a case the person remains a member ; he has acquired the full status, and the wrongful removal of his name does not affect his membership. Barton v. L. cj^ N. W. Rail. Co., 24 Q. B. D. 77 ; Re Balmi Co., L. R. 3 Q. B. 584. It is an implied term in an application for shares that the offer Delay in must be accepted within a reasonable time, and, if it is not, the ^ "^ ^^^ ' applicant is entitled to repudiate the allotment. See Craivletfs case, L. E. 4 Ch. 322, and Ramsgate Hotel v. Montefwre, L. R. 1 Ex. 109. What is a reasonable time must depend on circumstances ; but an allottee who receives notice of allotment, after a reasonable time has expired, must exercise his right of repudiation promptly. If he does not, he will be bound: A fortiori, if creditor's rights have intervened by a winding-up. Boyle's case, 33 W. E. 450 ; Craidetfs case, supra. Sometimes an application for shares is made subject to a condition Conditional precedent, e.g., A. writes to a hotel company, saying, If you will give applications, me an order for furniture, I will take up fifty shares in your capital, which please allot. In such case an allotment disregarding the con- dition may be repudiated by the allottee ; for where there is a con- ditional application for shares and an unconditional allotment there is no contract constituted. The parties are not ad idem. Rogers^ case, Harrison's case (1868), L. E. 3 Ch. 633 ; Wood's case, 3 De Gr. & J. 85; Shaw's case, 34 L. T. 715 ; Wood's case, 15 Eq. 236. The condition need not be contained in the letter of application. It is sufficient if the letter containing the condition reach the directors before allotment. Rogers' case, Harrison' s case, su^jra. But in such cases if, after notice of allotment before the condition is complied with, the allottee abstains from repudiating, he will be taken to have waived the condition and be bound. Wheatcrojt's case, 29 L. T. 324. A distinction of a very material kind exists between an application with a condition precedent annexed, and an application with a collateral agreement or a condition subsequent. In the latter case the applicant on allotment becomes a shareholder in jn-esenti absolutely, with only a right to enforce (if valid) the collateral agreement or condition sub- sequent against the company. Elki7ig ton's case (1867), L. E. 2 Ch. 511; Fisher's case and Sherington's case (1885), 31 Ch. D. 120; Bridger's case (1870), L. E. 5 Ch. 305; and Thomson's case (1865), 4 D. J, & S. 749, are good illustrations of the distinction. 26 PKELIMINARY. [Chap. I. Who may- take shares. As to the subscribers of tlio memorandum, see supra, p. 20. As to otlier persons, it is well settled tliat any person not under dis- ability may become a member ; a married woman may take shares (Tie Leeds Banking Co., 3 Eq. 781 ; Married Women's Property Act, 1893, s. 1); a foreigner may take shares {Princess of Reuss y. Bos, L. E. 5 H. L. 176); a company having power to take shares may become a member {Re BarnecVs Banking Co., 3 Ch. 112) ; and even an infant may become a member, subject, however, to the right to repu- diate the shares when he attains majority. Cajjjjer^s case, 3 Ch. 458 ; Ritgh and Sharman''s case, 13 Eq. 566. Examples of contracts to take shares. Typical Examples of Contracts to talce Shares. (a) A. applies to the company for an allotment of a specified number of shares, and agrees to accept the same or any less number that may be allotted to him. In response to this application, the directors resolve that a specified number of shares be allotted to him, and notice of such allotment is given to him. This constitutes the agree- ment, and his name should at once be entered in the register. (b) The company allots or offers to A. a specified number of shares, and A. notifies to the company his acceptance of the shares so offered. The agreement is complete, and A. should be entered in the register. (c) A. authorizes some agent to apply for shares on his behaK, and such agent apphes accordingly. The shares are allotted to A., and notice is given to him as above, "and he is duly registered. He is a member. (d) B. without authority ajoplies for shares on behalf of A., and the directors allot shares to A., and register him. Subsequently A. ratifies B.'s act, e.g., either expressly, or by doing something {e.g., signing a transfer, or taking a dividend) which shows that he assents to the allotment. A. is a member. IIindleg''s case, (1896) 2 Ch. 121. (e) A. being the holder of shares, transfers them by an instrument complying with the regulations of the company to B. ; B. takes the transfer to the company, and the company passes it and places B. on the register. In this case B. becomes a member in respect of the- shares comprised in the transfer, and his name should be entered in the register in the place of A.'s. (f) A. accepts office as a director of the company. The regulations of the company state that the qualification of a director is so many shares, and that unless he acquires such qualification within (say) a month after the incorporation of the company, he is to he deemed to liavo agreed to take the shares from the company, and is to be registered accordingly. A. does not take up the shares within the month, and shortly afterwards he is, by the officers of the company, placed on the rogistor as the holder of such shares. He thereby becomes a member in respect of sucih shares. By accepting the office ho is regarded as in effect agreeing to comply with the regulations, PRELIMINARY. 27 and by placing* Lini on the register tlio company accepts his offer. See pp. 430, 431. (g) A. accepts office as a director. The regulations state that the qualification of a director is the holding of so many shares. A. does not acquire his qualification within a reasonable time, and he is, at the expiration of that time, placed on the register of members in respect of his qualification. He is estopped from denying that he is a member in respect of the shares thus registered in his name, and should, there- fore, be treated as a member. Lord I)whiqui7i s case, (1891) 3 Ch. 28. (h) A. who has not applied for shares, is informed that he has been registered as a holder of a specified number of shares in a company. He signs a proxy paper in respect of such shares, or otherwise, in effect, acts as the owner of such shares. He is estopped from denying that he is the holder of such shares. Crawley's case, 4 Ch. 322. (i) A. applies for shares on the footing that he is not to be liable thereon for the full amount, and the company allots shares which involve the full liabiHty. A. nevertheless exercises acts of ownership, e.g., by selling some and obtaining proxies. A. is bound. Re Railway Time Tables, &,-c. Co., 42 C. D. 98. "If she assented to have these shares in her name, that is all that is required to make her liable as a member," said Cotton, L. J.; and Bowen, L. J., added, "From such assent to be on the register, and from such dealing with the shares which took place after she was on the register, there can be but one inference which the Court ought to draw, namely, that she agreed to be a member of the company, and her name being on the register, her liability to the company is complete." The cases under the last two heads come to this : that a person is to be regarded as a member if his name is on the register of members with his consent, or if he is estopped from denying that he is registered without consent. He may not have applied. The shares may have been placed there without his consent and contrary to his wishes, but if he assents to his name being on the register, he is to be considered a member of the company. Mere entry of a person's name on the company's register, ho^vever, without agreement or assent, is not enough. Thus, if a director resigns before the time for taking up his qualification shares has expired, and the company has, notwithstanding, entered his name on the register, without his assent, as the holder of the qualification shares, he may compel the company to take his name off the register. Salisbury- Jones's case, (1894) 3 Ch. 356. So, too, if a man's name is put on the register upon the api)lication of some person professing to act as his agent, but without any authority in fact, the company can be compelled to take the name off. OrmerocVs case, (1894) 2 Ch. 474. Or, again, where a man applies for shares, but withdraws his applica- tion before acceptance. If, nevertheless, the company allots and j)u.ts his name on the register, he may have it taken off. Ilehli's case, 4 Eq. 9; Truman's case, (1894) 3 Ch. 272. 28 PRELIMINARY. [Chap. I. A person improperly registered as a transferee of a share is not bound, and may have his name taken off the register. Heritage's case, 9 Eq. 5 ; CartmelVs case, 9 Ch. 691. As to rescinding the agreement, see infra, p. 91. The above are all cases of persons sui juris. In the case of persons not sui Juris, such as infants or lunatics, a contract to take shares is voidable. Copperas case, 3 Ch. 458 ; Yeoland Cotisols, 58 L. T. 922 ; Lumsdeii's case, 4 Ch. 31 ; Ehbetfs case, 5 Ch. 302 ; SymoHs' case, 5 Ch. 298. Specific per- formance of contract to. take shares. The Court has jurisdiction to specifically enforce a contract by a person to take, or by a company to allot, shares {N'ew Brunswick Co. V. MuggericJge, 1 Dr. & Sm. 363 ; Oriental Inland Steam Co. v. Briggs (1861), 31 L. J. Ch. 241 ; Odessa Tramways Co. v. Mendel (1878), 8 Ch. D. 235) ; but if before action brought all the shares have been allotted to other persons, the only remedy of a plaintiff claiming an allotment is an action for damages for breach of contract. Ferguson v. Wilson (1866), 2 Ch. 77. A company may, by deJaj', disentitle itself to enforce an agreement. NicoVs case, 29 Ch. D. 421. Cesser of member ship. Liability on shares. A person may cease to be a member of a company — (1.) By transferring his shares to another person. In such case, the transferor ceases to be a member so soon as, but not before, the transferee is registered; but the transferor is still liable to be placed, on the B. list of contributories as a past member, if the company is wound up within a year. Stanliope^s case, L. H. 1 Ch. 161 ; Heritage'' s case, 9 Eq. 5. (2.) By his shares being forfeited. Bawes' case, 6 Eq. 232. (3.) By his shares being sold by the company under some provision in its articles, e.g., for enforcing a lien, and upon the pur- chaser being registered as holder in his place. (4.) By death : but in such a case the deceased member's estate remains liable until the registration of some person entitled under a transfer from his executors or administrators. Reward v. Heathy, 3 De Gr. M. & Gr. 628; Baird's case, 5 Ch. 725. (5.) By a valid surrender. Trevor v. IFhit worth, 12 App. Cas. 409, (6.) By the trustee in bankruptcy of an insolvent member disclaim- ing his shares. See Bankruptcy Act, 1883, s. 55, and Bank- ruptcy Act, 1890, c. 71, s. 13. (7.) By rescission of the contract of membership on the ground of misrepresentation (p. 91) or mistake (p. 91). The terms of the Cfompanics Act, 1862, and in particular the provisions of sects. 7 and ;'i8, leave no doubt about the obligation of shareholders to pay to the coinpiiny tlio full amount of their shares. The words of sect. 7, limiting the liubiliiy of members to " the amount PRELIMINARY. 29 unpaid on thoir sliares," can only moan, as Lord Macnagliten pointed out in the Oorecjum case, (1892) A. C. 145, that the liability of the member continues so long as anything remains unpaid on his shares. Nothing but payment, and payment in full, can put an end to the liability. It is a corollary from this, and now recognized as a funda- mental principle of company law, that a limited company under the Act of 1862 cannot issue its shares at a discount, e.g., cannot issue for 8^. a 10^. share credited as fully paid up. Oorecjum Gold Mining Co. of India v. Roper, (1892) A. C. 125. But though the shares must, under the Act of 18G2, be paid for, and paid for in full, there was nothing under the Act to prevent the issue of such shares credited as paid up in consideration of property or services made over or rendered to the company — e.g., landed property {Baglan Hall Co., 5 Gh. 346 ; PelVs case, 5 Ch. 11) ; plate {ElJcingtoji's case, L. E,. 2 Ch. 511) ; glass and china (Pellaffs case, L. E. 2 Ch. 527). These decisions led to the passing of sect. 25 of the Companies Act, Filing of 1867. That section runs as follows : — " Every share in any company contracts •^ J I ./ under sect. 2o shall be deemed and taken to have been issued and to be held subject of Act, 1867. to the payment of the whole amount thereof in cash, unless the same shall have been otherwise determined by a contract duly made in writing and filed with the Registrar of Joint Stock Companies at or before the issue of such shares." The result is that, to use Bowen, L. J.,'s language in LoTidon Celluloid Co., 39 Ch. D. 204, " there is a statutory liability to pay the whole amount in cash, which can only be avoided under the statute in one way, namely, by a registered contract." See further, as to this section, in/ra, pp. 179, 229. Register of Members. Every company under the Act is to cause to be kept in one or more Register of books a register of its members. See sect. 25 of the Act of 1862. members. This register must contain : — Contents. (a) Names and addresses and the occupations (if any) of the members of the company. (b) A statement of the number of shares held by each shareholder, distinguishing each share by its number (sect. 22), and the amount paid or agreed to be considered as paid on each share. (c) The date at which the name of any person was entered in the register as a member. (d) The date at which any person ceased to be a member. In default the company and its directors are liable to heavy lienalties. Notice of any change of address is to be entered on the register. Sect. 30 of the Act of 1862. The register of members commencing from the date of the regis- Inspection, 30 PRELIMINAKY. [ClIAP. I. tration of the company is, by sect. 32, to be kept at the registered office of the compan3'(scct. 39, p. 40); and by sect. 32 such register is to be open for inspection by members gratis, and for inspection by any other person on payment of one shilling or such less sum as the company may prescribe for each inspection. A right is also given to require a copy of such register or any part thereof, and a penalty is imposed for refusal of inspection, and in addition to this penalt}^, a judge sitting in chambers may by order compel an immediate inspection of the register. The right of inspection impliedly gives a right to make extracts and take copies. Boord v. African Consolidated, &,-c. Co., W. N. (1897) 174; Nelson v. Anfjlo- American, ^-c. Co., (1897) 1 Ch. 130. Eefusal in this section means a distinct and definite refusal. Rex V. Wilts and Berks Canal Co., 3 Ad. & El. 477. See, too, 8 Ad. & El. 901. Closing of The company is empowered to close the register by advertisement, regih er. -^^^ ^^^ ^^^ more than thirty days in each year. See sect. 33. The register of members is to he prima facie evidence of any matters by the Act directed or otherwise to be inserted therein. Sect. 37 of the Act of 1862 is not conclusive. Eeese River, ^"c. Co. v. Smith, L. E. 4 H. L. 64, 80. Publicity of It is important to note the fact that the register of members is, by the Act, open to the public. In this respect the Act of 1862 diiiers from the Act of 1844, supra. By sect. 50 of the Act of 1844 every shareholder was to have liberty to search the register at all reasonable times, but nobody was to be at liberty to search it who was not a shareholder. There is a similar obligation in the Act of 1862 as to keeping a register ; but the Act introduces an important change in providing (sect. 32) that the register shall be open to the insxiection not only of shareholders, but, on payment of one shilling, of all other persons. This would, of course, include creditors and persons about to deal with the company, and the change indicates unmistakeably an intention on the part of the legislature that the creditors and persons who con- templated dealing in some way with the company were to be entitled to look at this document as showing them to what extent they might safely trust the company. AVliilc the liability of shareholders remained unlimited " such a power of inspection was not ne(!essary, or certainly, not at all so necessary. . . . But when the legislature enabled shareholders to limit their liability not merely to the amount of their shares, but to so much of that amount as remained unpaid, it is obvious that no creditor could safely trust the company without ascertaining first who the shareholders might bo, and, secondly, to what extent they would be liable. This is obviously the reason why the now statute opened the reofister PRELIMINARY. '31 register to the inspection of all the world. . . . The legislature toolc care Object of to provide the register as the means of enabling persons dealing with the ^^ ^^ ^' company to know to whom and to what they might trust. It intended to put the persons whose names are on it in the same position towards creditors (subject, of course, to the statutable restrictions) as persons engaged in an ordinary partnership, or persons trading formerly under the Act of 1844." Per Lord Cranworth, Oa/^es v. Tiirqucind, L. E. 2 H. L. 366. In the same case his lordship also said: "It is a fallacy to hold that the liability of the partners in these companies must rest entirely on the same principle of contract which was the foundation of the liability of the partners of any unincorporated companies prior to the institution of this class of associations. The question is not whether there was any privity of contract between the appellant and creditors of the company, but it is whether, under the constitution of these newly-created societies, there is a statutory liability imposed on persons in the position of the appellant. Secondly, it is an error to hold that creditors are not supposed to trust to the responsibility of the shareholders. The careful regulations as to the register of share- holders and the publicity to be given to them form a sufficient answer to that argument. Indeed, it is plain from the reason of the thing that no credit would otherwise be given to the abstraction of a company." On the same principle in SeiceWs case, L. E. 3 Ch. 138, where a Doctrine of registered shareholder wished to disclaim the ownership) of certain lioldmg out. shares, Lord Cairns, while assuming in the shareholder's favour that he might have had a right to disclaim, was of opinion that " not having done so, and being aware that he was held out to the public as the holder of the shares, it is too late for him, months or even years afterwards, to enter into that question." " It is impossible," the same learned jxidge remarked on another occasion, "to disembarrass these cases of the effect which a man's name being on the register has in inducing other persons to alter their position." Lawrence' s case (1867), L. E. 2 Ch. 417. The result of this doctrine of holding out is that if a person's name is on the register with his consent, and he claims a right to have it removed on some ground or other, he must exercise the right promptly, otherwise he forfeits it. See Scottish Petroleum Co., 23 C. D. 434, in which Baggallay, L. J., said : " The delay of a fortnight in repudiat- Delay. ing the shares makes it in my mind doubtful whether the repudiation in the case of a going concern would have been in time. No doubt where investigation is necessary some time must be allowed, as in Central Raihcay Company of Venezuela v. Kisch, L. E. 2 H. L. 99 ; but where, as in the present case, the shareholder is at once fully informed of the circumstances, he ought to lose no time in repudiating." Even where a name is, pursuant to a void contract, placed on the register, delay may be fatal, llailivay Time Tahles Co., 42 C. D. 98 ; supra, p. 27, Nevertheless the reliance to be placed on the register is qualified to Register not conclusive. 82 PRELIMINARY. [ChAP. I. this extent, that anj^one dealing with the company must be taken to know — (1) That shares may be transferred in accordance with the regula- tions, and thus an insolvent shareholder may be substituted for a solvent one. (2) That a member who has been induced to take shares by mis- re]3resentations or mistake, even though on the register for years, may, while the company is a going concern, repudiate his shares and get off the register. (3) That there may be persons on the register placed there without their consent who may subsequently enforce the removal of their names. See further, Reese River Co. v. Smiih, L. E. 4 H. L. 80. As to rectification of the register, see hifi-a, Chap. XIX. As to colonial registers, see infra, p. 452. Powers of Majority. It is a cardinal rule of the law, as applied to corporations, that primd facie the majority of its members are entitled to exercise its powers. " Where no special provision is made by the constitution of a corpora- tion, the whole are bound by the acts not only of the major part, but of the major part of those who are j^resent at a regular corporate meeting, whether the number present be a majority of the whole or not." Bacon, Abr. II. 269, citiAg 10 Mod. 75 ; 12 Mod. 232; Cowp. 249. "It cannot be disputed that wherever a certain number of persons are incorporated, a major part of them may do any corporate act ; so, if all be summoned, and part appear, a major part of those that appear may do a corporate act, though nothing be mentioned in the charter of the major x^art." Per Lord Hardwicke, C, Ait.- Gen. V. Davij, 2 Atk. 212. This rule is applicable to a company under the Act of 1862, save so far as its constitution, or regulations, or the Acts, exclude the rule ; and accordingly all the powers of the company are exerciseable by resolu- tion of a general meeting, e.(/., if there are no directors capable of acting in a particular transaction, and some of the directors do, or propose to do, something beyond their powers, but within the powers of the company, a general meeting can ratify what has been done, or authorize what is proposed to be done. Grant v. United Kingdom Siriichback Rail. Co., 40 C. D. 135. And if some person is acting as a director who has not boon duly appointed, or is not duly qualified, it is for the majority to object ; and if some shareholder brings an action in the name of the company, e.r/., to impeach the conduct of the directors in regard to a matter witliin tlio powers of the company, it is for a general mooting to decide whether the action shall proceed. Duckett V. Cover, 6 C. D. 82. As to further proceedings, see 25 W. E. 554 ; Exeter and Crediton Rail. Co. \. Buller, 5 Ey. Cas. 211, PRELIMINARY. ^^ The cases following illustrate the importance which the Courts, and especially courts of equity, attach to tho will of the majority : — In Foss V. JIarhottle, 2 Ha. 4G1, two members of an incorporated company filed a bill against the directors and others, praying that the defendants might be compelled to make good the losses sustained by the company by reason of the fraudulent acts of such directors ; but the Court, being of opinion that the acts of the defendants complained of were capable of confirmation by a majority of the members of the company, declined to interfere. See also Mozley v. Alsto7i, 1 Ph. 790. So, in MacBoucjall v. Gardiner, 1 C. Div. 13, where the plaintiff, a shareholder in a company under the Act of 1862, sued in respect of alleged misconduct of a director at a meeting of the company, it was held that he had no locus standi to complain ; that the wrong, if any, was a wrong to the company, and that the company in its corporate capacity could alone sue in respect thereof ; that if the majority sided with the plaintifi^, there was no difficulty in suing in the name of the company; and that if the majority were against the plaintiff, there was no use in litigating the matter, for the will of the majority was entitled to prevail. "In my opinion," said Mellish, L. J., in that case, "if the thing complained of is a thing which in substance the majority of the com- pany are entitled to do, or if something has been done irregularly which the majority of the company are entitled to do regularly, or if something has been done illegally which the majority of the company are entitled to do legally, there can be no use in having litigation about it, the ultimate end of which is only that a meeting has to be called, and then ultimately the majority gets its wishes." See also Ex parte Fox, 6 Ch. 17G ; and Harhen v. Phillips, 23 C. Div. 14. But the rule of the majority is subject to the provisions of the Acts and of the company's memorandum, and in some cases the articles of association. Thus, if the articles provide that the directors shall not borrow more than a specified sum, a special resolution is requisite to extend the limit. So, too, a special resolution is necessary where the Act requires such a resolution, e.g., to alter the regulations of the company, reduce its capital, or wind it up. And, lastly, the majority have no power to sanction that which is ultra vires the company {Riche v. Ashbury Co., L. E. 7 H. L. 694 ; Simpson v. JVestminster Palace Hotel Co., 8 H. L. C. 712; Hoole v. G. W. Rail. Co., 3 Ch. 262 ; Welton v. Saffery, (1897) A. C. 299) ; or is a fraud on. the minority {Menierv. Hooper's Telegraph Works, 9 Ch. 350). See further, note at end of Chap. XVII. Partnership Law. Incorporated joint stock companies differ essentially in many Analogy to respects from partnerships. It is true that the Courts, in determining partnerships. the law applicable to such companies, have frequently resorted for p. D 34 PRELIMINARY. [ChAP. I. guidance and suggestions to the principles of partnersliip law, on the ground that there is a close analogy between such companies and partnership's. Thus, in Simj)son v. Denison, 10 Ha. 54, an agreement between two incorporated joint stock companies was impeached, and Wood, V.-C, said: "The first question to be considered uj)on this motion is, what are the general principles which ought to be applied to cases of this nature ? and I take it to be well settled that tlie principles which are to govern such cases between the members of large com- panies are the same as those which regulate the rights in ordinary partnerships." So, too, in Oakes v. Turquand^ L. E,. 2 H. L. 325, Lord Colonsay said, that it was " a mistake to hold that these companies must, to all legal effects and consequences, be regarded as unqualified corporations and in no respect as partnerships ... I think it would be contrary to the tendency and scope of all the statutes to hold that these corpo- rations are stripped of all the characteristics of mercantile partnerships, and clothed with all the attributes of perfect corporations, without qualification." And in Griffith v. Paget, 6 C. D. 515, Jessel, M. E., said that he would "first of all consider the case on general principles, as applicable to other partnerships ; for, after all, these companies are commercial partnerships, and are, in the absence of express provisions, statutory or otherwise, subject to the same considerations." See also Weston'' s case, 4 Ch. 20"; Maude's case, 6 Ch. 51 ; Guinness V. Land Corp., 22 C. Div. 377 ; Houldsworth v. Glasgow Bank, 5 App. Cas. 317; Wilkinson y. Cummins, 11 Ha. 337. Nevertheless, as appears above (p. 1), an incorporated company is not a partnership, and partnership rules are for the most part wholly inapplicable to it. For instance, in the case of a partnership, the unanimous consent of the partners can extend the objects of the partnership, whereas the majority of the members of a company have no such power {liiche v. Ashhury, S^'c. Co., L. E. 7 H. L, 694 ; Hutton V. West Cork Rail. Co., 23 C. D. 654, 671), save as otherwise pro- vided by the Companies Memorandum of Association Act, 1890. So also the practice of the members of a partnership may override the provisions of the partnership deed ; whereas practice, in the case of a company, cannot alter or override the provisions of the memorandum and regulations of the company. Frank Mills Mining Co., 23 C. D. 52, 56 ; Ashhury v. Watson, 30 C. Div. 376 ; Oakhank Oil -Co. v. Crum, 8 Ai'p. Cas. 65. " Tlieso companies," says Lord Macnaghten in Welton v. Safficry, (1897) A. C. 324, "arc the creation of statute, and by the statute to which they owe their being they must bo bound in regard to share- holders as well as in regard to creditors in all matters coming within the conditions of tlio memorandum of association .... A limited company cannot, in matters coming within the conditions of its memo- PRELIMINARY. 35 randum, go on leading two lives, one strict, and precise, and regular, and the other a life of greater freedom and laxity, substituting the easier yoke of 'social con fracl' for the rigour of statutory directions. The confusion would be hopeless." Notice of Memorandum and Regulations. The shareholders of a company, and also strangers who have any Notice of dealings with the company, are fixed with notice of the memorandum memorandum and articles of association, and also of the Acts under which the company is constituted. "If the memorandum and articles of association are in existence when he [the member] applies for shares, and if he agrees to take his shares on the footing of the memorandum and articles of association (which would seem to be the case here), then I think that he ought to be held bound to look to the memorandum and articles of association before he applies for shares. But where the memorandum and articles of association are not in existence at the time of application, 1 think that, at the very latest, when he receives his allotment of shares, he ^ ought to satisfy himself that there is nothing in the memorandum or articles of association to which he desires to make any objection." Per Lord Cairns, PeeVs case, 2 Ch. 674. " The company was a company consisting of shareholders. It is impossible not to impute to every shareholder of the company the knowledge of what has been called the charter of documents under which the company was trading. The company was trading under the memorandum and articles of association as its principal document. I think every shareholder must be taken to have known the contents of the memorandum of association." Per Lord Cau-ns, SeiceWs case, 3 Ch. 140. "All the shareholders of the company must have imputed to them knowledge of the Act of Parliament and also of their own memo- randum and articles of association, and of the fact that the articles did not (as they stood before this resolution was passed) authorize the proposed increase of capital ; and from the notices which convened the two extraordinary meetings it must have been clearly understood that without the sanction of those meetings the proposed increase of capital could not be made." CamphelVs case, 9 Ch. 1, per Lord Selborne. " People who enter into these partnerships under articles of asso- ciation — that is, articles of partnership — must be taken to have read them, and must be taken to have understood them ; and if they are to be taken to have read them, and to have understood them, which they ought to do before entering into these contracts, they cannot complain if the contract is afterwards carried out. That appears to me a con- clusive answer to any notion of hardship. Whether it is conclusive in d2 86 PRELIMINARY. [ChAP. I. fact, or not, is a matter upon wliicli men who have experience in the world may have different opinions, but I must hold it to be conclusive in law." Per Jessel, M. E., Griffith v. Paget, 6 C. D. 517. " Each party must be taken to have made himself acquainted with the terms of the written contract contained in the articles of association, and the Acts of Parliament, so far as they are important. He must also in law be taken (though that is sometimes different from what the fact may be) to have understood the terms of the contract according to their proper meaning ; and, that being so, he must take the conse- quences, whatever they may be, of the contract which he has made." Per Lord Selborne, L. C, Oakbank Oil Co. v. Crum, 8 App. Cas. at p. 70. Creditors, &c. uj^ jg settled by a series of decisions, of which Ernest v. Nicholls, 6 H. L. C. 401, is one, and lior/al British Bank v. Turquand, 6 El. & Bl. 327, a later one, that those who deal with joint stock companies are bound to take notice of that which I call the external position of the company. Every joint stock company has its memorandum and articles of association ; every joint stock company, or nearly every one, I imagine (unless it adopts the form provided by the statute, and that comes to the same thing), has its partnership deed, under which it acts. Those articles of association and that partnership deed are oj)en to all who are minded to have any dealings whatsoever with the company, and those who so deal with them must be affected with notice of all that is contained in those two documents." Per Lord Hatherley, Mahoneij v. East Holyford Co., L. E. 7 H. L. 869. In Re County Life Assurance Co., 5 Ch., p. 293, Giffard, L. J., said : " In the first place, a stranger must be taken to have read the General Act under which the company is incorporated, and also to have read the articles of association, but he is not to be taken to have read anything more ; and if he knows nothing to the contrary, he has a right to assume, as against the company, that all matters of internal management have been duly complied with. The company is bound by what takes place in the usual course of business with a third party where that third party deals bond fide with persons who may be termed de facto directors, and who might, so far as he could tell, have been directors dejure^ In County of Gloucester Bank v. liudry Co., (1895) 1 Ch. 629, Lord Halsbury, L. C, said : " Persons dealing with joint stock companies are Ijound to look at what one may call the outside position of the company — that is to say, they must see that all the acts which the company is purporting to do, are acts within the general authority of the company ; and, if these public documents, which everyone has a right to refer to, disclose an infirmity in their action, they take the consoquoncos of dealing with a joint stock company which has ap- parently exceeded its authority." See also Biyycrstaff v. Roioatfs Wharf (189G) 2 Ch. 93. ConBcquenc€8. This rule of constructive notice entails important consequences, for PltJ<:LIMINARY. 37 inasmuch as every one dealing with a company is to be deemed to have notice of its memorandum and articles, it follows that he is fixed with notice of the extent not only of the company's powers, but of the directors' powers and of any limitations and restrictions thereon imj^osed by the articles or other regulations. Thus, if the regulations provide that a bill of exchange to be effective must be signed by two directors, an outsider or anyone dealing with the company must see that it is so signed, otherwise he cannot claim under it. So, too, if the regulations provide that the seal of the company is to be affixed in the presence of two directors, who are to sign their names, a person dealing with the company cannot safely rely on an instrument not so signed. See Eagle Co., 4 K. & J. 549 ; Agar v. Athenccum Soc, 3 C. B. N. S. 725. This is an onerous obliga- tion to impose on those who deal with a registered company, but the incidence of the obligation is to some extent lightened by what is known as the Rule in Royal British Bank v. Turquand (6 E. & B. 327). This rule is that where a company is regulated by an Act of Parlia- Presumption ment, general or special, or by a deed of settlement or memorandum ° and articles registered in some public office, persons dealing with the company are bound to read the Act and registered documents, and to see that the proposed dealing is not inconsistent therewith ; but they are not bound to do more ; they need not inquire into the regularity of the internal proceedings — what Lord Hatherley called "the indoor management." They are entitled to assume that all is being done regularly. See also Mahoney v. East Holyford Mining Co., L. E. 7 H. L. 869 ; In re Land Credit Co. of Ireland, L. E. 4 Ch. 469 ; In re County Assurance Co., L. E. 5 Ch. 288. This rule is based on the princijple of convenience, for business could not be carried on if a person dealing with the apparent agents of a company was compelled to call for evidence that all internal regulations had been duly observed. Thus where the articles give power to borrow with the sanction of a general meeting, a lender need not inquire whether such sanction has in fact been obtained. Royal British Bank v. Turqxiand, uhi supra. Ho may assume that it has, and if he is acting bona fide he will, even though the sanction has not been obtained, stand in as good a position as if it had been obtained. In another case the directors of a company had, under the articles, power to borrow and power to fix their own quorum, and they fixed three as the quorum. At a meeting of the directors at which two only were present, the secretary was authorized to affix the company's seal to a mortgage. This was accordingly done by the secretary in the presence of the same two directors, and the mortgage was handed over to the mortgagee. It was contended that the seal had not been duly affixed, since the two directors, not being a quorum, had no power to act, but 38 PRELIMINARY. [ChAP. I, it was held, that this was only an internal irregularity, and that the execution of the deed was therefore valid. "All the public docu- ments," said Lord Halsbury, "with which an outside person would be acquainted in dealing with the company would only show this, that by some regulation of their own — what Lord Hatherley described as their indoor management — they were capable, if they had thought right, of making any quorum they pleased ; and an outside person knowing that, and not knowing the internal regulations, when he found a document, sealed with the common seal of the company, and attested and signed by two of the directors and the secretary, was entitled to assume that that was the mode in which the company was authorized to execute an instrument of that description. It turns out that their own internal regulation was that the number of directors should exceed two. But that is a matter which was known to them and to them alone. The only external fact with respect to the management of the company of which an outside person would be cognisant, would be that they had power to make any quorum they pleased, and I think he would be entitled to assume that the proper quorum had been properly summoned and had attended to effect the completion of that instrument." And in the same case Lindley, L. J., said : "What is there to give them notice of anything irregular, if there was any- thing irregular ? If a person looked at the deed and looked at the articles, he would not see anything irregular at all. He would be at liberty to infer, and anyone in the ordinary course of business would infer, that, if the directors had appointed a quorum, they appointed the two who signed that deed. But supposing that three were wanted, he is not bound to go and look at the directors' minutes. He has no right to look at them, except as a matter of bargain. The directors' minutes, unless he knows what they are, do not aflfect him. There is nothing irregular on the face of the deed, even taken with the articles there is nothing illegal in it. As to a plea of non est factum, that could not be sustained for a moment ; and I have not the slightest doubt myself that that deed is as good as any deed that was ever sealed." So, if there be a managing director, and authority in the regulations for the directors to delegate to him, a person dealing with him is entitled to assume that he has power to do what he purports to do, provided that it is within the company's objects and apparently regular. All ho has to do is to see that the managing director might have power to do what he purports to do. That is enough for a person dealing with him bond Jide. Biygerstoff v. Roicatt's Wharf, (1896) 2 Ch. 93. So, also, a person dealing with a company is entitled to assume that the directors who carry on its business are directors dejure. It matters not to him that they have not been duly appointed — that is part of the indoor managonKsnt. Malmney v. Ka^t Holyfn-d Co., L. R. 7 H. L. 869 ; lie County Life, 5 Ch. 288. PRELIMINARY. 39 But a person dealing with a company who has notice of the iiTegii- Notice of larity cannot claim the benefit of this rule. Thus where directors had ^"^^^ ^' only power to horrow in excess of 1,000/. with the assent of a general meeting, and without such assent had issued dehentures for 2,500/. to themselves in respect of money lent, it was held, that as they must bo taken to have known that the internal regulations had not been com- plied with the debentures could only stand good for 1,000/. Howard V. Patent Ivory Co., 38 Ch. D. 156; Tyne Mutual v. Brotvn, 74 L. T. 283. A person dealing with a company must take the regulations to be such as appear at the office of the Registrar of Joint Stock Com- panies to be in force. If the directors propose to do something in excess of their powers thereunder, he is not entitled to assume that their powers have been extended by a special resolution (p. 707). Irvine v. U?uo7i Banh of Australia, 2 App. Cas. 366. Dissolution. A common law corporation was dissolved by loss of all its members. Dissolution. Grant on Corporations, p. 303. But it is apprehended that a company, under the Act of 1862, being a statutory corporation, is not so dissolved {Neiohaven Local Board v. Neichaven School Board, 30 0. D. 373), and that it subsists as a corporation until it is dissolved in the manner expressly provided for by the Act of 1862, viz., (a) by a compulsory winding-up, followed by an order of the Court for dissolution under fi. Ill of the Act ; (b) by a voluntary winding-up, followed by a general meeting and return to the registrar (ss. 142-3) ; (c) by striking the name of a company off the register under s. 7 of the Companies Act, 1880. The dissolution of a company under ss. Ill and 142-3 of the Act of 1862, precludes a subsequent winding-up order, or proceedings for recovery of any outstanding assets. Coxon v. Gorst, (1891) 2 Ch. 73 ; Pinto Silver Mining Co., 8 C. Div. 273 ; London and Caledonian Co., 11 C. Div. 140; Knoivles v. Scott, (1891) 1 Ch. 717. But where the dissolution has taken place under s. 7 of tlie Act of 1880 above referred to, the company may be revived by order of the Court as therein mentioned (sub-s. 5). See Part II. p. 603. Cases may occur in which, after an effective and irrevocable dissolu- tion, assets of the company may subsequently be discovered, or assets supposed to be valueless may be found to be of value. Such assets, as to real estate, revert to the donors or their heirs (Co. Litt. 13 b; Grant on Corporations, 303), and as to personal pro- perty vest in the Crown as bona vacantia (1 Bla. Com. 299 ; Grant, 304). It is apprehended that if occasion should require, creditors and others, in such a case, might apply to the Crown by petition for a grant of assets thus vested in the Crown, and that such a petition might be successful, having regard to the fact that where the goods of a bastard vest in the Crown, it is usual to grant tho same or part thereof to the natural next of kin of the deceased. 40 PRELIMINARY. [Chap. I. Registered office in the United King- dom (Act of 1862). Scotch or Irish com- panies, when suable in England. Residence and Domicile. Every company formed or registered under tlie Act of 1862 is obliged to have a registered office (s. 39 of 1862), which, must be in England, or Scotland, or Ireland (ss. 8, 9, 10 of 1862). The situation of the registered office is one of the conditions required to be stated in the memorandum of association (ss. 8, 9, 10 of 1862), But it is a sufficient compliance with the Act to state in the memorandum that the registered office will be situate in England, or Scotland, or Ireland, as the case may be. Having regard to ss. 12 and 211 of 1862, a company registered under the Act cannot now change the situation of its registered office from one country forming part of the United Kingdom to another, as to change is ultra vires, and by no professed change can the company escape from the jurisdiction of the Courts having jurisdiction in that country forming the part of the United Kingdom, in which, by its constitution, it is required to have its registered office, or from the provisions of ss. 62 and 63 of the Companies Act, 1862, which provide for the service of writs and notices at the registered office. But notice of the precise situation in the country named in the memorandum must be given to the Eegistrar of Joint Stock Companies. And, within that country, the company may from time to time change the situation of its registered office, though it must give notice of each change to the registrar (s. 40 of 1862, s. 32 (3) of 1890). Nevertheless, a company .registered in Scotland or Ireland may in certain cases be sued in England and served with a process of the English Coiu-ts, under E. S. C. Ord. XI. r. 1, which rule is as follows : — 1. Service out of the jurisdiction of a writ of summons or notice of a writ of Eumraons may be allowed by the Court or a judge whenever — (a) The whole subject-matter of the action is land situate within the jurisdic- tion (with or without rents or profits) ; or (b) Any act, deed, will, contract, obligation, or liability affecting land or here- ditaments situate within the jurisdiction, is sought to be construed, rectified, set aside, or enforced in the action ; or (c) Any relief is sought against any person domiciled or ordinarily resident within the jurisdiction; or (d) The action is for .... the execution (as to property situate within the jurisdiction) of the trusts of any written instrument, of which the person to be served is a trustee, which ought to be executed according to the law of England ; or (e) The action is founded on any breach or alleged breach within the jurisdiction of any contract wherever made, which, according to the terras thereof, ought to be perfonned within the jurisdiction, unless the defendant is domiciled or ordinarily resident in Scotland or Ireland ; or (f) Any injunction is sought as to anything to be done within the jurisdiction, or any nuisance within the jurisdiction is sought to be prevented or removed, whether damages arc or are not also sought in respect thereof ; or (g) Any person out of the jurisdiction is a necessary or proper party to an action properly brought against some other person duly served within the jurisdiction. In the above rulo "person" includes "corporation." (E. S. C. Ord. LXXI.r. 1.) PRELIMINARY. 41 On the construction of Ord. XI. r. 1, it was held, that a company Scotch com- which. had its registered office in Scotland, hut had agencies and a afreiTcies and chief office in England, was not " domiciled or ordinarily resident" chief office within the jurisdiction, and that leave to issue a writ of service out of o ' • the jurisdiction could not be granted. Jones v. Scottish Accident Insur- ance Co. (1886), 17 Q. B. D. 421. See also Watkinsw Scottish Imperial Insurance Co. (1889), 23 Q. B. D. 285. As to County Court process, as a general rule the district in which County Court actions and matters must be commenced is to be ascertained from •'""^ ^^ ^^^' s. 74 of the County Courts Act, 1888 (51 & 52 Yict. c. 42), that is to say, except where otherwise in the Act provided (see s. 59), in the Court "within the district of which the defendant or one of the defendants shall dwell or carry on his business at the time of com- mencing the action or matter." This is a re-enactment of old County Court legislation. The words "dwell or carry on business," occurred in 9 & 10 Vict. c. 95, s. 60, under which it was held in the case of railway and other carrying companies, that a corporation dwells where it carries on its business {Taylor v. Croicland Gas Co.^ 11 Ex. 6) ; and that ordinarily it carries on its business where its chief office is {Corhett V. General Steam Navigation Co., 4 H. & N. 482), or where its general as opposed to a part, or even a material part of its business is carried on [Adams v. G. W. Rail. Co., 6 H. & N. 404 ; Broivn v. L. Sf N. IF. Rail. Co., 4 B. & S. 326) ; which is generally, but not in all cases, its registered office in the case of a company registered under the Companies Acts. Keynsham Blue Lias Co. v. Barker, 2 H. & C. 729, 733. As regards the right of a company registered here to sue and be English corn- sued abroad, it is an established rule of private international law that P^'Y ^^^"^o °^ _ ' -t sued abroad. a corporation duly created according to the laws of one State may sue and be sued in its corporate name in the Courts of other States (Lindley 909), and accordingly, as a general rule, a company incor- porated here can sue and be sued in foreign Courts. Moreover, in a considerable number of cases, conventions have been concluded between this country and other countries recognizing the right of companies to sue and be sued. Income Tax. It would not be practicable here to deal fully with the subject of Income tax as income tax, but it may be useful to state some of the principal pro- *° compames. visions of the Income Tax Acts affecting companies under the Act of 1862 (especially in relation to property charged under Schedule D), and to refer to some of the leading cases which have been decided. By Schedule D to s. 2 of the Income Tax Act, 1853 (16 & 17 Vict. Schedule D c. 34), duties were granted to the Crown {iiiter alia) : — Incom°Tax " For and in respect of the annual profits or gains arising or accruing to any person ' residing in the United Kingdom from any kind of property -whatever, whether situate in the United Kingdom or eleewhere, and for and in respect of the annual 42 PRELIMINARY. [ChAP. I. profits or gains arising or accruing to any person residing in the United Kingdom from any profession, trade, employment, or vocation, whether the same shall be respectively carried on in the United Kingdom or elsewhere, and to be charged for every twenty shillings of the annual amount of such profits and gains : ' ' And for and in respect of the annual profits or gains arising or accruing to any person whatever, whether a subject of Her Majesty or not, although not resident within the United Kingdom, from any property whatever in the United Kingdom, or any profession, trade, employment or vocation exercised within the United Kingdom, and to be charged for every twenty shillings of the annual amount of such profits and gains." And by s. 5 the duties imposed by that Act are directed to be assessed under the regulations contained in the Income Tax Act, 1842, 5 & 6 Vict. c. 35, and the Acts therein mentioned or refen'ed to. By 5 & 6 Vict. c. 35, s. 40, it is enacted that "all ... . companies . . . . , ■whether corporate or not corporate, shall be chargeable with such and the like duties as any person," and certain officers thereof are required [s. 54] to make the requisite returns. By s. 41, and 16 & 17 Vict. c. 34, s. 5, any person not resident in [the United Kingdom], whether a subject of Her Majesty or not, shall be chargeable in the name of any trustee . . . . , or of any factor, agent, or receiver having the receipt of any profits or gains arising as herein mentioned and belonging to such person By s. 100 the duties granted by s. 1, Schedule D (corresponding with Sche- dule D above referred to) are directed to be assessed under certain rules, of which the following may be given : — Hides of Assessment. FiEST Case. — Duties to be charged in respect of any trade, manufacture, adven- ture, or concern in the nature of trade, not contained in any other Schedule of this Act. Rules. First. The duty to be charged in respect thereof shall be computed on a sum not less than the full amount of the balance of the profits or gains of such trade, manufacture, adventure, or concern upon a fair and just average of three years, ending on such day of the year immediately preceding the year of assessment on which the accounts of the said trade, manufacture, adventure or concern shall have been usually made up, or on the 5th day of April preceding the year of assessment, and shall be assessed, charged, and paid without other deduction than is hereinafter allowed : Provided always, that in cases where the trade, manufacture, adventure, or concern shall have been set up and commenced within the said period of three years, the computation shall be made for one year on the average of the balance of the profits and gains from the period of first setting up the same : Provided also, that in cases where the trade, manu- facture, adventure, or concern shall have been set up and commenced within the year of assessment, the computation shall be made according to the rule in the Sixth Case of this Schedule. Second. Tho said duty shall extend to every person, body politic or corporate, fraternity, fellowship, company, or society, and to every art, mystery, adventure, or concern cari'icd on by them respectively in Great Britain or elsewhere as afore- said, except always such adventures or concerns on or about lands, tenements, hereditaments, or heritages as are mentioned in Schedule A, and dii'ected to bo therein chargfid. Tliiid. In estimating tho balance of profits and gains chargeable under Sche- dule 1>, or for tho purpose of assessing tho duty thereon, no sum shall be set PRELIMINARY. 43 against, or deducted from, or allowed to be set against or deducted from such profits or gains on account of any sum expended for repairs of premises occupied for the purpose of such trade, manufacture, adventure, or concern, nor for any sum expended for the supply of repairs or alterations of any implements, utensils, or articles employed for the pui-pose of such trade, manufacture, adventure, or concern beyond the sum usually expended for such purposes according to an average of three years preceding the year in -which such assessment shall bo made ; nor on account of loss not connected with, or arising out of, such trade, manufacture, adventure or concern, nor on account of any capital withdrawn therefrom, nor for any sum employed, or intended to be employed, as capital in such trade, manufacture, adventure or concern, nor for any capital employed in improvement of premises occupied for the purposes of such trade, manufacture, adventure or concern, nor on account, nor under pretence of any interest which might have been made on such sums, if laid out at interest, nor for any debts except bad debts, proved to be such to the satisfaction of the commissioners respec- tively, nor for any average loss beyond the actual amount of loss after adjustment, nor for any smn recoverable under an insurance or contract of indemnity. (And see s. 159.) Fourth. In estimating the amount of the profits and gains arising as afore- said, no deduction shall be made on account of any annual interest, or any annuity or other annual payment payable out of such profits or gains. Second Case. — The duty to be charged in respect of professions, employments, or vocations not contained in any other Schedules of this Act [with special rules] . TniED Case. — The duty to be charged in respect of profits of an uncertain annual value not charged in Schedule A [with special rules]. FouETH Case. — The duty to be charged in respect of interest arising from securi- ties in Ireland, or in the British plantations in America, or in any other of her Majesty's dominions out of Great Britain and foreign securities — except such annuities, dividends, and shares as are directed to be charged under Schedule C of this Act. The duty to be charged in respect thereof shall be computed on a sum not less than the full amount of the sums (so far as the same can be computed) which have been or will be received in Great Britain in the current year — without any deduction or abatement. Fifth Case. — The duty to be charged in respect of possessions in Ireland or in the British plantations in America or in any other of her Majesty's dominions out of Great Britain and foreign possessions. The duty to be charged in respect thereof shall be computed on a sum not less than the full amount of the actual sums annually received in Great Britain, either for remittances from thence payable in Great Britain or from property imported from thence into Great Britain or from money or value received in Great Britain and arising from property which shall not have been imported into Great Britain or from money or value so received on credit or on account in respect of such re- mittances, property, money, or value brought or to be brought into Great Britain, computing the same on an average of the thi'ee preceding years as directed in the First Case, without other deduction or abatement than is hereinbefore allowed in such case. Sixth Case. — The duty to be charged in respect of any annual profits or gains not falling under any of the foregoing rules and not charged by virtue of any of the other Schedules contained in this Act [with special rules]. 44 PRELIMINARY. [ChAP. I. Sup2}lementary Provisions. The following rules which, appear in the same section may also be mentioned : — First. In estimating' the balance of the profits or gains to be charged according to either of the First or Second Cases, no sum shall be set against or deducted from or allowed to be set against or deducted from such profits or gains for any disbursements or expenses whatever, not being money wholly and exclusively laid out or expended for the purposes of such trade, manufacture, adventure, or concera, or of such profession, employment, or vocation, nor for any disbursements or expenses of maintenance of the parties, their families, or establishments, nor for the rent or value of any dwelling-house or domestic offices, or any part of such dwelling-house or domestic offices, except such part thereof as may be used for the purposes of such trade or concern not exceeding the proportion of the said rent or value hereinafter mentioned, nor for any sum expended in any other domestic or private purposes distinct from the purposes of such trade, manufacture, adventure, or concern, or of such profession, employment, or vocation. Second. The computation of the duty to be charged in respect of any trade, manufacture, adventure, or concern, or any profession, whether carried on by any person singly, or by one or more persons jointly, or by any corporation, company, fraternity, or society, shall be made exclusive of the profits or gains arising from lands, tenements, or hereditaments occupied for the purpose of such profession, trade, manufacture, adventure, or concern. In ascertaining profits, the value of all doubtful debts due or owing to the company to be charged may be estimated. Sect. 5 of the Income Tax Act, 1853. By s. 23 of the Customs and Inland Revenue Act, 1890 (53 Vict. c. 8), provision is made under which any company which sustains loss in any trade, manufacture, adventure, or concern, may, on giving notice within six months after the year of assessment, claim a readjustment subject to the provisions of this section. Foreign Investments. By 5 & 6 Vict. c. 80, s. 2, "All persons intrusted with the payment of annuities or any dividends or shares of annuities payable out of the revenue of any foreign state to any persons, corporations, companies or societies in Great Britain, or acting therein as agents, or in any other character," are to make a return of the same as therein mentioned, and are to pay the duty on such annmties, &c. , out of the moneys in their hands on behalf of the persons entitled to the same, and by 16 & 17 Vict. c. 34, s. 10, these provisions are extended to "all interest, dividends, or other annual payments payable out of or in respect of the stocks, funds, or shares of any foreign company, society, adventure, or concern," and intrusted to persons in the United Kingdom for payment. By 24 & 25 Vict. c. 91, s. 36, these provisions are extended to interest, dividends, and annual payments payable out of or in respect of stocks, funds, shares, and securities, of any colonial company, society, adventure, or concern, intrusted to any person in the United Kingdom for payment. And by s. 9 of 29 Vict, c 36, the above provisions are extended to dividends and interest when the title of the person to whom the same may be payable is shown by registration or entry of the name of such person in any book or list ordinarily kept in the United Kingdom. And liy 31 Vict. o. 28, s. 5, the provisions as to interest payable in the United Kingdom arising out of a foreign company or concern are extended to annuities, pensioiiH, and other annual kuiiih payable out of the funds of any institution in India, and intrusted to any person in the United Kingdom for payment. PRELIMINARY. 45 By 48 & 49 Vict. c. 51, s. 26, the person "mtnistod with payment" are to include (a) any banker ; (b) any person who obtains payment of dividends for another elsewhere than in the United Kingdom ; (c) any dealer in coupons payable out of the United Kingdom. Charges under Schedules A, B, and C. Schedules A, 13, and C, of tlio Incomo Tax Acts, 1842 and 18o0, Charges cbargG otlier subjects, and establish, special rules ; but it is under 'J , ""^ ?°^" Schedule D that companies pay the great mass of the income tax and 0. charged on them, and the rules in that Schedule have, by 29 & 30 Vict. c. 36, s. 8, been made apphcable so far as consistent with the special rules in Schedule A, to a number of concerns which were originally charged under the rules in Schedule A exclusively {e.g., quarries of stone, slate, limestone, or chalk, and mines of coal, tin, lead, copper, and other mines and ironworks, gas works, salt works, water works, docks, railways, and other concerns of a like nature). Schedule D. — Profits and Gains — how estimated. For the purposes of Schedule D, "profits and gains of a concern Estimation must be ascertained on ordinary principles of commercial trading." of profits . CI . ^ and gains. Per Lord Halsbury, L. C, Gresham Life Soc. v. Styles, (1892) A. C. at p. 316. Subject, however, to the special provisions of the Acts which expressly disallow certain deductions. "The Act plainly contemplates the preparation of a balance sheet in which proper trading disbursements and liabilities are to be set against trade assets, so that the surplus (if any) of the latter will represent the assessable profits or gains of the concern. . . . E,ule 3 of the last case (above) specifies certain items which a trader might naturally enough for his own private purposes insert in the debit side of the sheet ; and enacts that these shall not be allowed as deductions in estimating net profits for the purposes of income tax." Per Lord Watson, Ibid., p. 317. "Whether there be such a thing as profit or gain can only be ascertained by setting against the receipts the expenditure or obliga- tions to which they have given rise." Per Lord Herschell, Ibid., p. 323. Accordingly, it was held, in the case last referred to, that an insur- ance company which carried on the business of selling annuities, although bound to credit the account with its receipts in respect of the purchase-money of annuities sold during the three years, was entitled to debit the account with its payments in respect of annuities diuing the same period. It was urged that the payments in respect of the annuities were within the words of the Fourth Pule to the Pirst Case above, which provides that no deduction shall be made on account of any annual interest, or any annuity or other annual payment payable 46 PRELIMINARY. [Chap. I. Brewery company. Cases wliere deductions disallowed. CompanioH roffihtfTod under Act of 1802 carrying on buHincHS abroad. out of sucli profits or gains. But it was considered tliat the rule in question was designed to meet such a case as that in which a trader had contracted to make an annual payment out of his profits, as, for example, where he had agreed to make such a payment to a former partner, or to a person who had made a loan on the terms of receiving such payment, and other cases which it was not necessary to define (per Lord "Watson), and was not introduced to disallow a deduction in respect of the cost of obtaining the income. " You can no more refuse to take that cost into your consideration, when ascertaining the balance of profits and gains, than jou could the cost of the coals or the corn of the coal merchant and corn merchant in ascertaining what are the profits from his trade." Per Lord Halsbury, Ibid., p. 316. Accordingly, a brewery company which carries on the business of lending money to publicans and others is entitled to debit the account with bad debts made during the three years. ReicVs Brewery Co. v. Male, (1891) 2 Q. B. 1. And under 41 & 42 Yict. c. 15, s. 12, deductions are to be allowed for wear and tear during the year of any machinery and plant. As to deductions, see the Fourth Eule to First Case above. None can be allowed for money carried to reserve for contingencies {Forder V. Handyside, 1 Ex. D. 233) ; or for depreciation of leases ( Watney v. Mnsgrave, 5 Ex. D. 241) ; or for interest on borrowed capital {Alexan- dria Co. V. Musgrove, 11 Q. B. D. 174 ; see also Mersey Docks Y.Lucas, 8 App. Cas. 891); or for bonus on borrowed capital {Arizona Copper Co. v. Smiles, 29 L. E. Sc. 134) ; "for past losses or dead rent and royalties {Broughton, Sfc. Co. v. Kirhpatrick, 14 Q. B. D. 491) ; or, as a general rule, for sinking new pits {Coltness Iron Co. v. Black, 6 App. Cas. 315); or for balance of annuity paid to a sinking fund (iV«'~am Rail. Co. V. Wyatt, 24 Q. B. D. 548) ; for cost of embankments to improve the condition of land, and not merely to protect it from sea or tidal river {Hesketh v. Bray, 21 Q. B. Div. 444) ; or for jiremium paid for a lease {Gillats and Watts v. Colquhoun, 33 W. E. 258) ; or for a sum payable to a manager in commutation {Royal Insurance Co. v. Watson, (1897) A. C. 1) ; or for repairs of tied houses {Brickwood v. Reynolds, 14 T. L. E. 45 (C. A.) ). As to bonuses to policy-holders out of profits, Last v. London Assurance Co., 10 App. Cas. 438 ; New York v. Styles, 14 App. Cas. 381. As to income on investments, Clerical, Medical, ^-c. Co. v. Carter, 22 Q. B. D. 444. Where an allowance ought to bo granted but is refused, a mandamus lies to the commissioners commanding them to grant and certify the allowance. Commissioners of Income Tax v. Pcmsel, (1891) A. C. 531. As to companies registered under the Act of 18G2, but carrying on business abroad, the question sometimes arises whether they are chargeable under the First Case or the Fifth Case of Schedule D ; for in the one case the company is chargeable in respect of the jc/iole profits of the undertaking, and in the other only in respect of such PRELIMINARY. 47 part of tlioso profits as shall have been actually received in tlie United Kingdom. As to this, it was held, in Ccsena Sidj}/mr Co. v. NicJiohon, 1 Ex. Div. 428 (187G), that where the profit earning was carried on by agents abroad, but the board of directors and control were in England, the company was chargeable on its whole profits, including that portion retained abroad for foreign shareholders or otherwise. And see Imperial Continental Gas Co. v. Nicholson, 37 L. T. 717. New light, however, was supposed to be thrown on the matter by the decision in Colquhoun\. Brooks^ 14 Apji. Cas. 493, 510 (1889), in which it was held that a person resident here, who was a partner in a colonial business, was chargeable not on the whole amount of his share of the profits, but on the amount transmitted to England, on the ground that the Fifth Case applied, and that his share was a " foreign possession." In this case it was contended, and admitted, that the words of the Act of 1853, s. 2, "for and in respect of the annual profits ... of any trade, whether the same be respectively carried on in the United Kingdom or elsewhere," ^jrwzd facie imposed the duty on the whole of the appellant's share of the profits ; but after an exhaustive and masterly analysis of the provisions of the Acts, it was held that as the whole of the trade was carried on abroad, the appellant was chargeable under the Fifth Case, and therefore only on sums annually received in Great Britain. But it has now been determined, by the Hoxise of Lords, that where San Paulo the business of a company is carried on, either wholly in the United '£''."~^ {',""'> Kingdom or partly within and partly outside it, the profits are charge- Carter. able under the First Case, and accordingly, the duty is to be computed upon the full amount of the balance of the profits or gains of the business, and not only upon the actual sums annually received in the United Kingdom. San Paulo (Brazilian) Bail. Co. v. Carter, (1896) A. C. 31. In that case the company was registered in England, but its railway was in Brazil, and was worked there. The directors pur- chased and sent out to Brazil materials for the purposes of the railway, but the general control of the company was in England. " It seems to me," said Lord Halsbury, L. C. (at p. 38), "that, as was said by Cockburn, C. J., in the case of Sidle?/ v. Attoriiey- General, 5 H. & N. 711, ' it is probably a question of fact where the trade is carried on.' . . . In Brazil the payments are received, and in Brazil the pas- sengers and goods are carried, but the form of trading can make no difference . . . the person who governs the whole commercial adven- ture . . . The person who decides what shall be done in resj)ect of the adventure ; what capital shall be invested in the adventure ; on what terms the adventure shall be carried on : in short, the person who, in the strictest sense, makes the profits by his skill or industry, however distant may be the field of his adventure, is the person who is trading. That person appears to me, in this case, to be the ajipellant company. ... It appears to me that this appellant company is carrying on the 48 PEELIMINARY. [Chap. I. Case of local compaBy formed abroad whose shares held b J registered company in Engfland. Change of partnership. trade in London, from which it issues its orders, and so governs and directs the whole commercial adventure that is under its superin- tendence." And see London Bank of Mexico v. Aptho7'pe, (1891) 2 Q. B. 378. Where, however, the company, resident here, is a partner or a shareholder in a concern wholly carried on outside the United Kingdom, the profits of the company are chargeable under the Fifth. Case, and, accordingly, the company is only liable in respect of what it actually receives in the United Kingdom. See Colquhoun v. Brooks, 14 App. Cas. 493 (1889) ; and Bartholomay Brewing Co. v. Wyatt, (1893) 2 Q. B. 499. This being so it is not at all uncommon, where the undertaking of a company registered here is situate abroad, to vest the same in a local company in exchange for shares therein, and so to bring the matter within the Fifth Case. "Where this is done, profits made and retained abroad for reserve, or for improvement and capital expenditure, or for distribution among shareholders or creditors abroad, escape the tax. See Alexandria Water Co. v. Musgrove, 11 Q. B. Div. 174. As to the duties on mines, quarries, docks, waterworks, canals, &c., see 5 & 6 Vict. c. 35, s. GO, and Mersey Docks v. Lticas, 8 App. Cas. 891 ; RyJiope Colliery Co. v. Foyer, 7 Q. B. D. 485 ; Coltness Iron Co. V. Black, 6 App. Cas. 315 ; Broughton Coal Co. v. Kirkpatrick, 14 Q. B. D. 491 ; Jones v. Cwmorthen Slate Co., 5 Ex. Div. 93, As to the effect of a change in partnership, and conversion of concern into a company, see Ryhope Colliery Co. v. Foyer, 7 Q. B. D. 485. Overpaid income tax. Overpaid Income Tax. Overpaid income tax is recoverable under s. 133 of the Income Tax Act, 1842, provided that application is made in as short a time after the end of the year as with diligence is practicable, having regard to the particular circumstances of the case ; and if the commissioners will not grant the requisite certificate, a mandamus will be granted. Reg. V. Commissioners, 21 Q,. B. D. 313. Corporation duty under CiiHioms, &c. Act, 1885. Corporation Duty. By the Customs and Inland Eevenuo Act, 1885 (48 & 49 Vict. c. 51), S8. 11 to 20, certain duties were imposed in respect of property vested in bodies corporate or unincorporate. But among the exceptions is property belonging to a l)ody corporate established for any trade or business, and accordingly, trading companies under the Act of 1862 are exempt, even when registered without the word " limited," and on the footing that no dividends are to be paid. Re Council of Law Reporting, 22 Q. V>. D. 279. There is also an exception in respect of property which, or the income of wliioh, shall bo legally appropriated and applied for any purpose connected with any religious persuasion, or for any charitable PRELIMINARY. 49 purpose, or for tlie promotion of education, literature, science or the fine arts. See Inland Revenue v. Forrest, 15 A. C. 334, in which the Institution of Civil Engineers was held exempt. As to a club, see Ee New University Club, 18 Q. B. D. 720. Poor Rates. The Act of 43 Miz. c. 2, s. 1, enactri to the effect that competent Poor rates suras shall be levied in each parish for the relief of the poor, by "ii^cr43 Eli/, taxation of every inhabitant, parson, vicar, and " others," and of every occupier of lands, houses, tithes impro^^riate, projiriations of tithes, coal mines or saleable underwoods in the parish, to be gathered out of the parish according to its ability. The Parochial Assessment Act, 1836 (G & 7 AVill. IV. c. 96), s. 1, enacts — " That no rate for the relief of the poor in England and "Wales shall be allowed by any justices or be of any force which shall not be made upon an estimate of the net annual value of the several hereditaments related thereunto, that is to say, of the rent at which the same might reasonably be expected to let from year to year, free of all usual tenants' rates and taxes and tithe commutation rentcharge (if any), and deducting therefrom the probable annual average cost of the repairs, insurance, and other expenses (if any) necessary to maintain them in a state to command such rent ; provided always, that nothing herein contained shall be construed to alter or affect the principles or different relative liabilities (if any) according to which different kinds of hereditaments are now by law rateable." The Act of 3 & 4 Yict. c. 89, s. 1 (continued by divers Expiring Laws 3 & 4 vict. Continuance Acts), is as follows : — S9, s. 1. " That it shall not be lawful for the overseers of any parish, township, or village, to tax any inhabitant thereof as such inhabitant in respect of his ability derived from the profits of stock-in-trade, or any other property for or towards the relief of the poor ; provided always, that nothing in this Act contained shall in anywise affect the liability of any parson or vicar, or of any occupier of lands, houses, tithes impropriate, propriation of tithes, coal mines, or saleable underwoods to be taxed under the provisions of the said Acts, for and towards the relief of the i)oor." Cases of Rating. Waterworks and Gasworks. — See Rex v. Bric/hton Gaslight Co., 5 B. & C. 466 ; Rex v. Rochdale IVaterworks, 1 M. & S. 634 ; Rex v. Miller, Cowp. 619 ; Reg. v. West Middlesex Waterworks, 1 E. & E. 716 ; Reg. v. Lee Overseers, L. E. 1 Q. B. 241. Cemetery.— QM(?en v. Abney Park Cemetery Co., 8 Q. B. 515. The company purchased lands and laid them out for a cemetery, and received fees for interments, and convoyed plots for graves subject to r. E 50 PKELIMINARY. [ChAP. I. regulations : Held, that the company was rateable in respect of the plots sold. Tramways. — Pimlico, ^'c. Tramway Co. v. Assessment Committee of Greenivich Union, 9 Q. B. 9. The company was formed under the Tramways Act, 1870 (33 «& 34 Vict. c. 78), and laid down a tramway in a highway, the soil of which was vested in the district board : Held, that the company was rateable in respect of its occupation of the road by its tramway. Machinery. — Laing v. Overseers of Bishop Wearmouth, 3 Q. B. D. 299 : — Held, that in assessing shij)building premises to the poor rate the value of machinery attached to the premises was to be taken into consideration in ascertaining their rateable value where such machinery, though some of it might be cajiable of being removed without injury to itself or the freehold, was essentially necessary to the shipbuilding business to which the premises are devoted, and intended to remain permanently attached to them so long as they were applied to their present purpose. An elaborate descriptive list of various classes of the machinery is set out in the report. Tyne Boiler Co. v. Overseers of Loncjhenton, 18 Q. B. D. 81. The decision there was, that in estimating the rateable value of premises used as a manufactory, machinery and plant placed thereon for the purpose of making them fit as premises for such a manufactory are to be taken into account as enhancing the value of the hereditament, although such machinery and plant remains personal property, and are not phj'sically attached to the premises, and this notwithstanding the Act 3 & 4 Vict. c. 89, s. 1 [siqn-a), which exempts personal chattels from rating, whicli up to that Act had been rateable. Esher, M. E., said : "Nobody says that these machines are to be rated as personal chattels. The question is, whether they are to be taken into account in estimating the rateable value of the premises ; . . . . the statute (3 (S: 4 Viet. c. 89) makes no difference, and all the cases with regard to estimating the value of real property remain untouched by it." After citing with approval the cases cited in Laing v. Overseers of Bishop Wearmouth (siipra), and others, including lieg. v. Haslam, 17 Q. B. 220 (per Pattcson, J.), the Master of the Eolls continued: " Docs the Court there mean by the word ' attached ' that the thing must bo bolted or screwed to the premises ? ... I do not think so. I think that tliey could not liavo meant to differ from Patteson, J., when ho said tluit it was unnecessary to inquire whether the machinery was or was not annexed to the freehold." The above decision as to plant and machinery not attached to the rated premises being taken into account in estimating the rating value of the premises, was followed in Boden Sf Co. v. Overseers of Chard, and (Jifford, Fox 8f Co. v. Same, 7 T. L. E. 431 (July, 1890), where the Court of Appeal (Esher, M. E., and Lindley and Bowen, L.JJ.) PRELIMINARY. 51 affirmed (as to the second case) tlie decision of a Divisional Court (63 L. T. 249). It is not easy to reconcile these two decisions with the Act 3 & 4 Vict. c. 89, and in 1895 a bill was introduced into Parliament to exempt machinery as in Scotland and Ireland. Telephone AVires (overhead). — Lancashire Telephone Co. v. Over- seers, 14 Q. B. D. 267 : Company held ratoahle. The true test of beneficial occupation is not whether a profit can bo made, but whether the occupation is of value. London County Council V. Churchwardens of Erith^ (1893) A. C. 562. In that case the Council were held rateable in respect of sewage pumping station and works which they occupied and used to enable them to perform their statu- tory duties, and to be properly taken into account as the hypo- thetical tenant, although tliey had no power to take the premises. See also Imperial Institute v. ^'S'^. Mary Abbotts, Times, 7 March, 1895. The stoppage of works during a particular strike should not be taken Stoppage of into consideration in the assessment of rates, especially where no ^g'^taij^n^JQ evidence is produced that the Assessment Committee had disregarded account in the general contingency of strikes. This was so held in Hoyle and estimating *= ^ '^ '' rating value. Jaclson V. Oldham Union, (1894) 2 Q. B. 372, by the Court of Appeal. By 6 & 7 Vict. c. 36, s. 1, exemption from rates is allowed to What premises occupied by "any society instituted for purposes of science, iitej-ary and literature, or the fine arts exclusively ; provided that such society shall fine arts be supported wholly or in part by annual voluntary contributions, and exempted shall not, and by its by-laws may not, make any dividend, gift, division, or bonus in money unto or between any of its members." See Art Union of London v. Overseers, (1894) 2 Q. B. 609. Illegal Associations. The Act of 1862 affords great facilities for forming companies, but Illegal asso- before it introduces the machinery of formation, the Act, in sect. 4, ciations. first proceeds to clear the ground by declaring illegal all large un- registered companies or associations subsequently formed, and thus indirectly compelling associations to avail themselves of the provisions of the Act. Section 9, the section in question, provides, in effect, as follows : — (1) That after the commencement of the Act no company, associa- tion, or partnership consisting of more than ten members is to be formed for carrying on the business of banking unless registered under the Act or formed in pursuance of some other Act of Parliament or of letters patent : and (2) That no company, association, or partnership consisting of more than twenty persons shall be formed after the commencement of the Act for the purpose of carrying on any other business e2 PRELIMINARY. [Chap. I. Decided meaning of above provisions. {i.e., other than banking) that has for its object the acquisi- tion of gain by the company, association, or partnership, or by the individual members thereof , unless it is registered under the Act, or is formed in pursuance of some other Act, or of letters patent, or is a company engaged in working mines within the Stannaries [Devon and Cornwall]. The meaning of these prohibitions, as interpreted by the Courts, is that any company or association formed in violation of the section is an illegal association, and the policy of the enactment is well expounded by James, L. J., in Smith v. Anderson (1880), 15 C. D. at p. 273. " The object of the Act," says the Lord Justice, " was to prevent the mischief arising from large trading undertakings being carried on by large fluctuating bodies, so that persons so dealing with them did not know with whom they were contracting, and so might be put to great expense, which was a public mischief to be repressed." And this object the Act may be said effectually to have accomplished. Thus an association which is illegal cannot be wound up, under the Act of 1862, at the instance either of the association, of a creditor, or of a shareholder. Re South Wales Atlantic, ^'c. Co. (1875), 2 C. D. 763; lie Padstow Association (1882), 20 C. D. 137; Ex parte Hargrove (1875), L. E. 6 Ch. 542. So, too, an action by an illegal association, whether against a member or any other person, must fail if the illegality of the association is disclosed. Re Day (1876), 1 C. D. 699. If the association has lent money, f.or instance, and as security obtained a i^romissory note, it cannot sue thereon. Shaw v. Benson, II Q. B. D. 563. And, conversely, a member or outsider cannot sue such an association, for it can contract no debts (Tie London Marine Association (1869), 8 Eq. 176), and can enter into no contracts. Jennings v. Hammond (1882), 9 Q. B. D. 229. In a word, the association is a phantom. It has no legal existence. Many attempts have been made to escape from the provisions of the section, but seldom successfully ; the words are too wide. It was at one time thought, for example, that mutual assurance associations were not within the section — not "associations for gain"; but these doubts — or hopes — were dispelled by the decision in Re Padstoio Association (1882), 20 C. D. 137. In Re Thomas (188-1), 14 Q. B. D. 879, again, it was contended that an imrogistered loan society consisting of more than twenty members was not illegal, because in its inception it comprised less than twenty members, but this contention was overruled. "I cannot," said Cave, J., "assent to the doctrine tliat, because a society is projected by less than twenty people originally, and subsequently grows to more than twenty, it is outside the Act and does not require registration. This would bo making a hiugliing-stock of the Act." These cases must, however, bo road witli Smith v. Atiderson (1880), 15 C. I). 24 7, a decision of the Court of Ajipoal, in which it was held that an investment trust was not an illegal association although there PRELIMINARY. 53 were more than twenty beneficiaries entitled to tlie benefit of it, the ratio decidendi being that the business, if business it was, was carried on by the trustees who were less in number than twenty. IVigJield v. Potter (1881), 45 L. T. 612; Re SiddaJl (1885), 29 CD. 1 ; Croivthcr v. Thorleij^ 50 L. T. 43, are other cases in which unregistered land companies of more than twenty members have been held to be legal on the ground that they were formed merely for acquiring and dividing land between the members, and not for carrying on any business of land jobbing or trafficking in land. o4 [Chap. 11. PEOMOTEES. CHAPTER II. INTRODUCTORY NOTES. What is a TuE term "promoter" is familiar to the Law Courts ami to the promoter? general public, and is occasionally used by the Legislature (s. 38 of the Companies Act, 1867, and s. 3 of the Directors Liability Act, 1890), yet no satisfactory definition of the term is forthcoming; and accordingly such practical questions as these : — A. has done so and so, is he a promoter ? B. is about to do so and so, will he bo a promoter ? — are constantly being raised and discussed amidst more or less doubt and difference of opinion. To answer such questions correctly may be of the utmost importance — (1) because a promoter stands in a fiduciary position towards the company he promotes ; and is, therefore, imder certain obligations and disabilities; and (2) because sect. 38 of the Act of 1867 requires certain contracts with promoters to be specified in prospectuses. Eflanrjerv. In Erlanger v. New Sombrero, 3 App. Cas. 1268, Lord Blackburn stated that the term was " a short and convenient way of designating those who set in motion the machinery by which the Act of 1862 enables them to create an incorporated company " ; and this, so far as it goes, is accurate ; but it is not sufficiently wide, and is too meta- phorical. What was said by Bowen, L. J., in Whaley Bridge v. Green, 5 Q. B. D. 109, is more complete. " The term promoter is a term not of law but of business, usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence." But this statement is open to the objection that it at once raises the question, what aro those business operations ? ^Moreover, it stops short at the incorporation of the company, whereas the floating of the company is clearly within the scope of the promoter's functions. It is not, in fact, practicable to give an offoctivo definition of the term, l)ut its meaning is sufficiently apjiaront from some of the following decisions. TnycrosHy. In Tinjcross v. Grant, 2 C. V. Div. 169, the defendants had framed a scheme for the formation of the company, found the directors, quali- Ncw ISomhrero, Grant. INTRODUCTORY NOTES. 55 fied them, paid tlio preliminary expenses, and arranged the contracts, and were to receive largo remuneration from the vendors ; and it was held beyond doul)t that they wore promoters. In that case Cockhurn, 0. J., considered that the term "promoter" meant "one who under- takes to form a company with reference to a given project, and to set it going, and who takes the necessary steps to accomplish the purpose." So, in'JJaf/nall v. Carltoti, 6 0. Div. 371, the proprietors of the Bagnallx. concern entered into an agreement to sell for 290,370^. to Carlton's nominee, acting as trustee for the company, and entered into a separate agreement with Carlton to pay him a commission of 60,000/. for forming and floating the company, which ho undertook to do. Carlton entered into an agreement with Grant that the latter should carry the matter through and take the commission, less 20,000/. The solicitors of the proprietors were to have a commission from them of 1,500/. if the sale was effected, and the proprietors' solicitors and the proposed directors, Carlton and his associate Richardson, all took part in the formation of the company and the settlement of the prospectus. In this case Bacon, V.-C, said, " AVithout attempting to define the word promoter in any more certain manner than the occasion re- (juiros, it will be sufficient to consider whether what was undertaken and done by the several defendants can be referred to in any other character than that of promoter. It is a fact imdisputed that, from the very first suggestion of a sale of the business and property, the subject of this action, it was the conviction and intention of all the persons engaged or interested in the matter that they should be sold to a comj)any. It may be truly said that the sale and the formation of the company formed one complete idea. With this intention all the negotiations between the proprietors' solicitors, Grant, Richardson and Carlton, were carried on; the prospectus was prepared by the solicitors and submitted to Carlton, and by him to the proprietors, and known to and not disapproved by them, since one of them made pencil alterations in it. In the face of these plain facts I can find no room for doubting that the persons I have named, each and every one of them, must be taken to have been promoters of the company." In Emma Mining Co. v. Leiois, 40 L. T. 168; 4 C. P. D. 396, the Emmamning Go V JJ^H'is, defendants had assisted the owner of a mine in his endeavouj" to sell to a company to be formed to purchase it ; there was an under- standing or arrangement for their remuneration out of the shares to be received from the company ; the defendants left the getting up of the company to the owner ; allowed themselves to be referred to in the prospectus for information concerning the mine, and in pursuance of the understanding, received some paid-up shares. The jury found that they were promoters, and the Court refused to set aside the verdict. In Xew Sombrero Co. v. Erlanger, 5 C. Div. 73 ; 3 App. Cas. 1218, the Xeic Sombrero defendant and nine other persons formed a syndicate to buy the pro- ^' ' ""^^' ' 56 PROMOTERS. [CllAP. II. pei'ty witli a view to tlio re-salo thereof at a profit. Erlanger, acting on behalf of the syndicate, formed the company, procured the du-ec- tors, settled the contracts and prospectus, and advertised and circulated the same. It was held that all the members of the syndicate were promoters. Emma Mining Again, in Emma Milling Co. v. Grant, 11 C. D. 918, the defendant V. Grant, (jf^^j^^ obtained from the vendors an agreement that they should sell the mine to a company to be formed by him. He then formed a com- pany, procured the directors, agreed to sell the mine to a nominee of his own, purporting to act as agent for the company, and procured the adoption by the directors of that contract. Upon the trial of an issue whether Grant was a promoter, it was held that he was. Jessel, M. E., before whom the issue was tried, after referring to what the defendant had done, said (p. 936) : " Now it has been decided by a very great number of cases that a person in that position " "is a promoter. It is not necessary that he should have done all these things to make him a promoter — even some of them would be sufficient — but he is un- doubtedly a promoter." Li/dneij and In Lyclney and IViypool, Sfc. Co. v. Bird, 33 C. Div. 85, the defendant Co^^Y^^Bird ' l^ii'^j pursuant to an agreement with the owners of the property, and for a commission of 10,800^., procured the formation of the company, took an active part in the preparation of its prospectus and memorandum and articles of association, in the appointment of its first directors, and in the appointment of its secretary, fixed the purchase-money of the property at 100,000/., and stipulated for the payment of the 10,800/. commission to his own firm. Pearson, J., held that he was not a pro- moter, and acted merely as agent of the vendors ; but, on appeal, it was held that he was a promoter. Xant-y-GIo ^ Again, in Nant-y-Glo and Blaina Co. v. Grave, 12 C. D. 738, V. Grave. ' Richardson, the principal promoter, had written to the defendant a letter, in which ' ' he explained to him the operation which he then desired to effect for the promotion of the company, and suggested the desirability of having for directors persons of weight and consideration — persons whose names would be likely to inspire confidence in the public — and asked Mr. Grave to become a director. Mr. Grave agreed to become a director on the terms of receiving the remuneration which the articles provided, namely, 200/. a year, and a further proportionate division of profits, if there should be profits, and also that he should have fifty of the deferred shares which at that time had been parted with by the company, or agreed to be parted with by the company. "I do not think " (said Bacon, V.-C.) " that it Avould be forcing the law of this case in the slightest degree to say that from the time the letter was received and adopted and acted on, Mr. Grave became as much a promoter of this company as any other person engaged in it." Examj)lf;H of A person who originates the scheme for the formation of the promotiou. company, has tho memorandum and articles prepared, executed, and INTKODUCTORY NOTES. 57 registered, and finds the first directors, settles the terms of the pre- liminary contracts and prospectus (if any), and makes arrangements for advertising and circulating the prospectus and placing the capital, is emphatically a promoter, but a person who has done much less may 1)6 held liable as a promoter, and the term applies to a person who takes not nearly so prominent a part in the promotion as that which has been described. It is submitted, for instance, that the following persons are also promoters : — (1) A person who on his own account, or on account of himself and others, prepares or causes to be prepared a memorandum and articles of association of the proposed company, gets them subscribed, and causes them to be registered, even though he acts no further in the matter (e.y., leaves it for the directors to float the company). He has created a company. (2) A person who originates the scheme for the formation of the company, and arranges the terms of the j)reliminary contract {e.ij., for the sale to the company, or to a trustee for the com- pany, of the business the company is to bo formed to acquire), and is in a position to exercise dominion in the formation of the company. (3) One of several persons carrying on together the work of pro- motion, for in many cases the work of promotion is carried on by several persons in co-operation. Thus, one may provide the rec[uisite funds, another may provide the directors, or himself act as a director, another may arrange a contract with the vendor, and there may be others taking more or less part in the formation and floating of the company. The term "promoter" extends to each of the several persons so co- operating. Moreover, the following persons may be promoters : — (4) The vendor to a company frequently is a promoter or one of the promoters, and accordingly it is very common in a prosjoectus to find the words — " the vendor is the promoter of the com- pany, and he has fixed the price at £ " ; but, of course, there are many cases where the vendor is independent and has nothing to do with promotion. (5) A person who floats, or assists in floating, the company, although he has taken no part in its formation, may be a promoter. Emma Mining Co. v. Leivis, 4 C. P. D. 396, 407 ; see su2)ra^ p. 55. (6) In some cases a person who takes part in the formation of the company as agent or servant of another — as, for instance, when he is to share the promoters' remuneration, or have some voice or dominion in the floating of the company ; for "very little wlQ make people promoters of a company if it can be seen that they were really doing something in the 58 PKOMOTEKS. [Chap. II. Not promoter where mere agent or servant. Promotership a question of fact. Classes of promoters. Professional. ■vray of speculation for tlieir own interest, and not acting merely as agents for others." Per Pearson, J., Lychiey and Wigpool Co. V. Bird, 31 C. D. 328, 339. But a person wlio takes merely a subordinate part in the formation of the company as agent or servant of another is not a promoter — e.c/., the solicitor, the printer, the advertising agent. No doubt, in a sense, such persons might be said to promote the company, just as a man who carries about an advertising board in one sense promotes a com- pany. Nevertheless, they are not, in common parlance, termed, or in law regarded as, promoters. They are the agents or servants of the promoters. See Great Wheal Polcjooth, 49 L. T. 20. And the same may be said of brokers, bankers and solicitors, who, with their consent, ai'e named as such in the prospectus. Whether a person is, or is not, a promoter, is a question of fact, which must in each case be determined with due regard to all the circumstances. Bac/nall v. Carlton, 6 C. D. 371 ; Emma JSlining Co. v. Lewis, 40 L. T. 168 ; 4 C P. D. 396 ; Emma Alining Co. v. Grant, 11 C. D. 918. Usually there is very little diflB.culty in answering the question, for those who are interested in the formation or floating of the company rarely confine themselves to equivocal acts ; but this is not always so ; and where there are several persons engaged in the promotion of the company, who are obviously promoters, and such persons are assisted in the work, more or less, by others, the question whether the latter are, or are not, promoters may be one of great difficulty, and not the less so where, as not uncommonly happens, the latter are extremely anxious to disclaim the status and name of promoter. In determining whether certain acts have constituted, or will con- stitute the actor a promoter, it may in some cases be useful to consider whether the acts in question have placed or will place the actor in a fiduciary position towards the company, for if they have or would, the question whether the acts are or are not acts of promotion is not very material. See further infra, p. 61, as to the fiduciary position and its consequences. Promoters may bo classified as follows : — 1. Professional promoters. 2. Occasional promoters. 3. Promoters 2^ro hue vice. The professional promoter makes a business of the promotion of companies, and is always on tho look out for an opportunity of making money by forming and iloating a company. This lino of business is of modern growth, and has certainly led to tho launching of a number of undertakings of an unsatisfactory character ; and tho reason is not far to seek. The professional promoter too often considers tho question whotlior tho proposed company will float — not whether it will succeed — as tho question of primary importance. ^Moreover, although there may be somo professional promoters of position and integrity, there INTKODUCTOKY NOTES. 59 aro, beyond doubt, many who cannot be so described. Sometimes the professional promoter is a company with wide financial objects. Sec infra, Chap. VI., Forms 122—125. The occasional promoter is one who occasionally sees and takes an Occasional, opportunity for bringing out a company. A large majority of the best companies from time to time started are brought out by such. men. Some of them are persons of keen intellect and judgment, known to and trusted by a large circle of caj)italists and investors, able to secure the best directors and place the capital, satisfied with reasonable remuneration, and never taking up a scheme unless its bona fides and prospects are beyond question. The promoter ^j;'o liac vice is the promoter who enters upon the work I'lo hck vice of promotion in a particular case, and cannot be classed either as a prof essional promoter or an occasional promoter — e.g., (1) the proprietor of a business or patent who forms a company to acc[uire and work it, and that whether the cajjital is to be privately subscribed, or is to be offered to the public ; (2) a person who, having- a likely scheme or idea, forms a company with a view to carrj-ing it into efi'ect. The promoters of this class rarely take any remuneration qtid promoters. Sometimes the promoter pro hdc vice is a company formed to acquire some concern, and to promote a company for the purchase thereof at a profit. Functions of a Promoter. The functions of a promoter sufficiently appear from what has I'uuctious. already been stated ; and it is obvious that the efficient discharge of those functions may be of great advantage to the company and its shareholders ; provided, of course, that the undertaking to prosecute which the company is formed be one of a bond fide character, having at any rate the elements of success : For instance — (1) The lines on which the company is to come out are of primary importance, c.y., take the case of a going concern: Is the caj)ital to be large or small ? "What is to be offered to the public for subscription — ordinary shares, preference shares, debentures, or debenture stock, or some or all of these ? How is the vendor (if any) to be paid ? Is there to be an independent report as to the past profits of the concern, or any valuation of the property sold ? How are the directors to be remunerated ? How are the preliminary expenses to be satisfied ? The determination of these matters is material, not only as bearing on the future of the company, but as aft'ecting the terms of the prospectus. (2) The prospectus. — The successful preparation of this document is of the highest importance. A good scheme, if launched with an unskilfully prepared prospectus, will most likely repel investors ; and, on the other hand, a scheme which offers no great attraction in itself may, with the assistance of 60 pROMOTEES. [Chap. II. a well-framed prospectus, obtain ample support from the public. (3) The directors. — The selection of the directors is a matter of great importance. Are they to be competent business men, though imknown to fame ; are they to be ornamental directors with a title or reputation, and little else to recommend them ; are there to be some of both kinds ; or are they to be directors who are both competent business men and well known as persons of position and integrity ? Who are to be the soli- citors and auditors? There can be no question that the names of the directors, solicitors, and auditors largely influ- ence the public as to subscribing. It is assumed, and in most cases quite rightly, that a man of integrity and position will not lend his name unless he is satisfied as to the bona fides of the undertaking. (4) The terms of the memorandum and articles of association are very material, and must be made to accord with the pro- spectus, give practical effect to the scheme on which the company is to be formed, and contain all the requisite pro- visions for the protection of the parties interested, and nothing open to hostile criticism. (5) The preliminary contracts, e.y., for the acquisition of the business or property to acquire which the company is started, are of vital importance. On what basis is it to be acquired ? Is the price to be high or low ? Is it to be paid in cash, shares, debentures, or otherwise? Is the company to take over liabilities ? Have those liabilities been ascertained, or is the company to be asked to make a leap in the dark ? Is the vendor to be at liberty to compete with the company ? Is there to be power to rescind if the company does not float ? Is the company or the vendor to pay the preliminary expenses ? (6) Underwriting. — Is the capital to be underwritten before the company is brought out ? This may largely affect the floating of the company. See further, infra^ p. 1-16. Profit or Remuneration of Promoters. Rcinunera- The professional promoter and the occasional promoter always, and *'""• the promoter pro hac vice sometimes, expects to make or obtain some profit or advantage out of or in relation to the transaction, and no one can object to such profit or advantage where there is good faith and duo disclosure, and whore the company promoted derives benefit from the promotion ; for "the services of a promoter are very peculiar. Great skill, energy, and ingenuity may bo employed in constructing a plan and bringing it out to the best advantage." Per Lord Hatherley, L. C, Tonrhcy. Metropolitan, S,-c. Co., Ch. 071. Different The mode of securing the profit or advantage is usually settled by INTRODUCTORY NOTES. 61 the in-omoters themselves, and the following are some of the modes modes of re- 1 1,1 rauneration. commonly adopted : — (1) The promotei-s agree with the proprietor of some Lusiness con- cern or other asset that they will form and float a company to acquire the same, and the vendor in consideration thereof agrees to give them a commission, or a portion of the con- sideration for the sale when received. (2) The promoter, having purchased property before he becomes a promoter, subsequently forms a company and re-sells the property to the company at a profit, or sells the benefit of his contract to purchase the jiroperty. (0) The promoters agree to pay the preliminary expenses or place a certain number of shares, in consideration whereof the company allows them a commission on the shares placed or on the nominal amou.nt of the capital. (4) The capital consists in part of a small number of shares, e.g., 100 at \l. each. These shares are called (a) "deferred" or (b) "founders" shares, and a right to a certain share of the surplus profits is annexed thereto, e.g., one-third after paying a 6 per cent, dividend on the other shares. By agi-ee- ment between the company and the promoters these shares are sometimes issued as fully paid up, in consideration or part consideration of the promoters paying the preliminary expenses, or making over a contract or the benefit of negotia- tions. Sometimes the promoters subscribe the memorandum of association for the deferred or founders' shares, and pay for them in cash, so as to avoid the necessity for any other contract. (5) A contract is made under which the promoters receive a com- mission, provided a certain number of shares are taken up within a certain period. (6) The articles of association authorize or direct the directors to pay a specified sum to the promoters in respect of their services in promoting the company. As to the obligation to disclose, see hifra, p. 63. Fiduciary Position towards Company. The promoters of a company stand in a fiduciary position towards Fiduciarj- the company they promote. They stand, said Lord Cairns, in Erlangcr ^ v. New Sombrero Co., 3 App. Cas. 1236, "undoubtedly in a fiduciary position towards the company. They have in their hands the creation and moulding of the company : they have the power of defining how and when, and in what shape and under what supervision, it shall start into existence and begin to act as a trading corporation." And in the same case. Lord Blackburn (at p. 1268) said that the Act of 1862 "gives them an almost unlimited power to make the corporation subject to 62 PROMOTERS. [Chap. II. Commence- ment of fiduciary relation. Commence- ment of ])ro- motcrHhip. sucli regulations as they please, and for such purposes as they please, and to create it with a managing body whom they select, having such powers as they choose to give to those managers I think those who accept and use such extensive powers are not entitled to disregard the interests of that corporation altogether. They must make a reason- able use of the powers which they accept from the legislature .... and conseqiiently they do stand, with regard to that corporation, when formed, in what is commonly called a fiduciary relation to some extent." It is the possession and exercise of these j>owers, and the controlling influence they confer, which, in accordance with the well-settled principles of equitjT-, establishes the fiduciary relationship with its ancillary obligations. That such a relationship subsisted as between guardian and ward, parent and child, priest and penitent, solicitor and client, and in divers other cases where one person was trusted by or in a position to exercise influence over another, was long since decided ; but until Erlanger v. New Sombrero, ubi supra, the proposition that a fiduciary relation- ship existed between the company and the promoter, by reason of the power and influence possessed by the former for the latter, was not formulated. The fiduciary relationship commences when the party begins to pro- mote or to act on behalf of the company he is about to promote. Where a person buys property with the intention of selling it to a company, he does not ipso facto become a promoter. Thus, in Erlanger v. Neic Sombrero Co., 3 App. Cas. 1218, a syndicate of promoters entered into a contract to buy an island, and less than a month afterwards they agree to sell it to a trustee for the intended company, which they subsequently formed. Nevertheless, Lord Cairns said that it was " clear that the syndicate, in entering into this contract, acted on behalf of themselves alone, and did not at that time act in, or occupy, any fiduciary position whatever. It may be that the pre- vailing idea was, not to retain or work the island, but to sell it again at an increase of price, and very possibly to promote or get up a com- pany to purchase the island from them ; but they were, as it seems to me, after tlioir purchase was made, perfectly free to do with the island whatever they liked." Ibid. 1285. The fact that the formation of a company is within the contemplation of the parties, who afterwards promote that company, does not make them retrospectively promoters. Governs case, 1 C. Div. 182. Thus, in Ladyivell Co. v. llroohes, 35 C. Div. 400, A., B., and C. entered into an agreement to purchase certain mines, and it ajipeared, from the correspondence prior to the agreement, that they contemplated the formation of a company to acquire and work the mines ; nothing, however, had been done in the matter of the formation of any particular company before the agreement was made. Shortly afterwards the com- pany was formed by A., B., and C, and they re-sold the mines to the com- INTK'ODIIOTOKY N(JTE,S. 63 pany. It was held that at the date of the llrst agreement, A., B., andO. were not in a fiduciary relation to the company. And in Governs case, 1 C. Div. 182, A. entered into an agreement with B. to sell to him patents for 65,000/., payahlo partly in cash and partly in shares, in a company which B. agreed to form, and if he failed, the agreement was to be void. Afterwards B. entered into an agreement with a trustee for an intended company for re-salo. It was considered by James, JMellish, Bramwell, and Brett, L.JJ., that the first agreement did not constitute B. a promoter of the company or place him in a fiduciary position towards it. But from the time when the promoter proceeds to form the company — e. y., negotiates or acts on behalf of the company, or procures sub- scribers or directors — he assumes the status of a promoter. Probably the mere preparation of the memorandum and articles of association of the proposed company is not sufficient to clotlie a person with the status of a promoter. And the status of a promoter is not necessarily terminated by the Tei-minatiou formation of the company. " Of course, if a governing body, in the ^Yim. shape of directors, has once been formed, and they take, as I need not say they may, what remains to be done in forming the company into their own hands, the functions of the promoter are at an end. But so long as the promoters are permitted by the directors to carry on the work of formation, the latter remaining passive, so long, I think, would a jury be warranted in finding that what was done by them was done as promoters." Per Cockburn, C. J., Twi/cross v. Grant, 2 C. P. Div. 469, 541 ; and see Emma Minincj Co. v. Leicis, 4 C. P. D. 396. The existence of the fiduciary relationship has important conse- Consequen.os quences, of which the following are the most notable : — relitioiT^^^ (1) A promoter may not make (either directly or indirectly) any profit at the expense of the company he promotes without the knowledge and consent of the company ; and the company, on discovery, can compel him to surrender any profit made in violation of this rule. " The moment a man is in a fiduciary position, however-lhat fiduciary position may arise, he must, before he can retain a profit for liimself, deal with his principal on the footing of making a full and fair dis- closure of everything material to the dealing or transaction in which he acts in the fiduciary capacity." Per Jessel, M. P., Emma Mining Co. V. Grant, 11 C. D. 937; Bagnall v. Carlton, 6 C. Div. 371; Lxjdney ^ Wigpool Co. v. Bird, 33 C. Div. 85 ; Whale]) Bridge Co. v. Green, 5 Q. B. D. 109 ; Emma Mining Co. v. Lewis, 4 C. P. D. 396 ; Mann v. Edinburgh Northern Trams Co., (1893) A. 0. 69. For example, a promoter cannot retain any secret benefit received from a vendor to the company. See the above cases, and Mayor of Salford v. Lever, (1891) 1 Q. B. 168. If a promoter discloses the fact that ho is making a profit, it may be that he is not bound to disclose the amount ^4 PROMOTERS. [ClIAP. II. of his profit. See C'hesterjield c^- Boythorpe Co. v. Black, 26 AV. E, 207. (2) Prim A facie a promoter who proposes to make a sale on contract with the company he promotes, or to rely on disclosure to the directors as a justification for retaining a profit for what he as a promoter would otherwise he accountable, must provide the company with an independent executive able to protect the company and exercise on its behalf an independent and intelligent judgment. See per Lord Cairns, Erlanyar v. Neic Sombrero Co., 3 App. Cas. 1236. But it ajipears to be now settled that the rule does not apply in the case of a private company, infra, p. 546, where all the members are cognizant of the facts and where it is not intended to appeal to the public. Salomofi v. Salomon &, Co., (1897) A. C. 22; British Seamless Paper Bo.v Co., 17 C. D. 467; Postaye Stamp, §'c. Co., (1892) 3 Ch. 566 ; Felix Haclley, Ltd. v. Hadley, 77 L. T. 131. Nor, it would seem, to the case of a public company in which, by the articles and prospec- tus, full disclosure of the facts is made to all the members. " But, if eveiy member of the company, every shareholder, knows exactly what is the true state of the facts, which, for this purpose, must be assumed to be the • case here; Vaughan Williams', J., conclusion seems to me to be inevitable: that no case of fraud upon the company could be established." Per Lord Halsburv, Salomon v. Sahiiion (^- Co., (1897) A. C. 33; and see per Lord Watson to the same effect, p. 37. The following extracts bear on this point :— " It was urged that the price of the property was not fixed or considered by ail independent board of directors ; and that, in this respect, the transaction was improper nud fraudulent. This argument seems to be based on a misconception of the decision in Erlanger v. Neiv Sombrero, S;c. Co. (1878), 3 App. Cas. 1218; where the facts were very different. In the present case, it was not disputed that every single shareholder was perfectly aware of all the circumstances attending the formation of the company, and that nobody was or could have been deceived." Per Lord Macnaghtcn, Laroque v. Bcmicliemin, (1897) A. C. 364. " Of course, one can easily conceive that the thing might have been a mere sham, or evasion, or trick, to get rid of the effect of the Act of Parliament ; but any suggestion of sham, or fraud, or deceit, seems to be entirely out of the question in this case. Everyb(jdy in the company knew of the transaction ; every shareholder of the company was iircsent and was a party to the resohition. There was no deceit practised on any creditor, nor was there any registration of these shares, except as shares paid up. That seems to me to dispose of the case." Per James, L.J., Sj)arijo''n case, 8 Ch. 113. " One of the learned judges asserts, and I see no reason to question the accuracy f)f his stateiaent, that creditors never think of examining the register of debentures ; but the apathy of a creditor cannot justify an imputation of fraud against a company, or its membei-s, who have provided all the means of information whicli the Act of 18C2 requires; and, in my oinuion, a creditor who will not take the trouble to use the means which the statute provides for enabling him to protect liitnself, must bear the consequences of his own negligenoc." Per Lord Watson in Saloiiion V. Salomon, (1897) A. C. p. 40. ' ' Nor was tlic absence of any independent board material in a case like tlio INTRODUOTOIIY NOTES. preseut. I think it is an inevitable inference from the circunastances of the case that every member of the company a.ssented to the purchase ; and the company is bound, in a matter iiiira vires, by the unanimous agreement of its members. In fact, it is impossible to say who was defrauded." Per Lord Davey, Salomon v. Salomon ^ Co., (1897) A. C. 57. If the promoter who desires to soil provides the company with an independent executive, it is conceived that he is not bound to disclose the price at which ho bought, unless when he bought he was in a fiduciary position towards the company. See Chesterfield, Sfc. Co. v. Black, 26 AV. E. 207; Edinburgh United Breweries Y. Molleson, (1894) A. C. 96. If he is going to get a secret benefit from the vendors, the provision of an indej)endent executive will not relieve him from the obligation to disclose. What constitutes an independent executive has not been decided, but it is obvious that a director who is himself one of tlie promoters, or is under obligations to the promoters, or is to be remunerated by them, cannot be regarded as independent. Independence is a question of fact, and all the circumstances will be regarded. The mere fact that a person is requested by the promoters to become a director does not deprive him of the character of indepen- dence. The fact that a director puts his own money into the concern affords some indication of indei:)endence, but this may go for little if the remuneration attached to the office is relatively large. The conduct of the directors may throw light on the question. In acting on behalf of the company, have they taken any of the reasonable precautions which a prudent man takes with regard to his own affairs ? If not, it may not require much to prove their want of independence. " Apparently," said Lord O'Hagan in Erlanger v. Neic Sombrero Co., 3 App. Cas. 1256, "there was no inquiry as to the enormous advance in the price ... no consideration of the state of the property, and no intelligent estimate of its capabilities and prospects. If the directors had been nominated merely to ratify any terms the promoters might dictate, they discharged their function ; if it was their duty, as it certainly was, to protect the shareholders, they never seem to have thought of doing it. Their conduct was precisely that which might have been anticipated from the character of their selection, and taking that conduct and character together, I concur in, I believe, the unani- mous opinion of your lordships that such a transaction ought not to be allowed to stand." (3) Once the promoter has begun to promote or otherwise act on behalf of the company, he must give to the company the benefit of any negotiation or contracts secured whilst so act- ing ; e.g., if he enters into a contract to purchase property, he cannot properly seU to the company at a higher price than he gave, without due disclosure (not merely of the price he gave, but of the fact that the company is entitled to take the property at that price), and if he do, the company, on dis- p. 1' m 66 PROMOTERS. [Chap. II. covering its rights, may rescind the contract or compel the promoter to surrender his profit. And in such cases, the fact that it has become impossible to rescind does not affect the company's alternative right. See cases, siqn-a. There is nothing to prevent persons from buying property with a view to re-selling it to a company ; but if they once become promoters of a company, which is to be formed to acquire a particular property, they cannot afterwards acquire that property for themselves, and sell it to the company at a profit ; the company is entitled to say, " You were acting for us ; you were in a fiduciary position as regards this property, and now, therefore, as you have purported to sell this to us, we are entitled to take it at the price you originally gave for it." Per Cotton, L. J., Ladyivell Mining Co. v. Brookes, 35 C. Div. 400 ; and see l7i re Cape Breton Co., 29 C. Div. 795 ; Banh of London v. Tyrrell, 10 H. L. C. 26. And even where the fiduciary relationship cannot be carried back to the time when the contract was made, the company may be entitled to sue the promoter who fails to discharge the duties imposed on him by the fiduciary relationship). See Be7itinck v. Fenn, 12 App. Cas. 652, which goes far to negative the opposite view which has been expressed, by other judges; e.g., in In re Cape Breton Co., 29 C. Div. 795; Ladywell Co. v. Brookes, 35 C. Div. 400 ; Ambrose Lake Co., 14 C. Div. 390. (4) He must make a fair and reasonable use of his position, and must avoid anything like even the appearance of undue in- fluence or fraud. Gibson v. Jeyes, 6 Ves. 278 ; Huguenin v. Baseley, 14 Ves. 273 ; Erlanger v. Neio Sombrero Co., 3 App. Cas. 1218. (5) If a promoter proposes to sell his property to the company he promotes, or otherwise to obtain some advantage from the company, he ought not to put forward some nominee, or tool, as the owner or contractor, and thus conceal his interest. Erlanger v. New Sombrero Co., 3 App. Cas. 1218, 1236; Preston's case, 16 W. R. 668 ; Lindsay Petroleum Co. v. Hurd, L. E. 5 P. C. 221 ; Bentinck v. Fenn, 12 App. Cas. 671. Por the disability to secure secret benefits at the expense of the company, which attaches to a promoter, is a personal dis- ability, arising from the fiduciary relationship which subsists between him and the company. (6) A promoter who is not a real co-owner may not concur as an ostensible vendor in a sale to the company. In re West- moreland Green, ^'c. Slate Co., (1893) 2 Ch. 612. Whore a ])orson standing in a fiduciary relation obtains a secret benefit, the Court docs not outer into the question whether the i)arty at whose expense the benefit was obtained has, or has not, lost. All that the Court has to do, is to examine whotlior a secret profit has, in fact, been made, and, if it has, that profit must be accounted for. See INTRODUCTORY NOTES. 67 Parser v. McKenim, 10 Cli. Ap. 118; Aberdeen Co. v. Blaclde, 1 McQ. 461 ; and Evinia M'mbuj Co. v. Grant., 11 CD. 938. In ascertaining tlie profit for which a promoter is to be made Allowances accountable, his disbursements in relation to the compaAy may in some ™"p *^° V^^' cases be allowed. Thus, in Emma Mining Co. v. Grant, 11 0. D. 918, Jessel, M. E., said, " It seems to me that in estimating his [the defen- dant's] profit, I ouglit to find out his real profit, that is, the real result of the transaction which was loft to him. ... I think, therefore, we ought to ascertain the net profit, simply on the principle of deducting from all the receipts all the payments." But a promoter will not be allowed to bring into account payments which would have been tiltra vires the company. Lydney and Wigpool Co. v. Bird, 33 0. Div. 95. Where the profit of a promoter consists of shares, he may, at the option of the company, be compelled to give up the shares or to account for the proceeds of sale if sold, or for the value. New Sombrero Co. v. Krlanger, 5 C. Div. 75 ; 3 App. Cas. 1218 ; Emyna Mining Co. v. Lewis, 4 C. P. D. 396 ; McKay's case, 2 C. Div. 1 ; Pearson's case, 4 C. D. 222; 5 C. Div. 336; Nant-y-Glo Co. v. Grave, 12 CD. 738; Alet- calfe's case, 13 C Div. 169, and Chap. XIX., infra. In most cases the reception by a promoter of illegitimate gains Bankruptcy amounts to a " fraud or fraudulent breach of trust " within sect. 30 of ° P^^mo er. the Bankruptcy Act, 1883. See Emma Milling Co. v. Grant, 17 C D. 122 ; Ramsliill v. Edwards, 31 C D. 100 ; Milan Tramways, 25 C Div. 587. But it does not follow that non-payment of compensation for the fraud or breach of trust will amount to " default by a trustee or person acting in a fiduciary capacity, and ordered to pay, by a Court of Equity, any sum in his possession or imder his control," within s. 4 of the Debtors Act, 1869 (32 & 33 Yict. c. 62). Metcalfe's case, 13 C D. 815. As to the period of limitation. A promoter is usually held liable Limitation, as a constructive trustee, and upon the footing that he has been guilty of fraud. Accordingly, he cannot rely on the provisions of s. 8 of the Trustee Act, 1888 (51 k b'l Vict. c. 59) ; for the six years' limitation which in certain cases that statute establishes in favour of trustees (including constructive trustees) is not available, as its operation is excluded "where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof still retained by the trustee, or previously received by the trustee and converted to his use." See Re Sale Hotel, ^'c. Co., W. N. (1897) 174. That the Act of 1888 applies both to express trustees and to constructive trustees, see In re Lands Allotment Co., (1894) 1 Ch. 616. But apart from this statute, a claim against a promoter may be barred by lapse of time, for it was well settled before the statute that a claim against a promoter, as a constructive trustee, in respect of a mere obligation to pay, as distinguished from an actual misapplication of trust money, was barred by six years' delay after discovery by the r2 68 PROMOTERS. [Chap. II. company of the facts. MetrnjjoUtan Bank v. Heiron, 5 Ex. Div. 319; and see Beckford v. Wade, 17 Ves. 97; Re Cross, 20 C. Div. 109; Banner v. Berridge, 18 C. D. 254 ; In re Sharps, (1892) 1 Ch. 154, 167. As to the recovery of bribes paid to agents of companies, see Lister Sf Co. V. Stuhbs, 45 C. Div. 1 ; Mayor of Sal/ord v. Lever, (1891) 1 Q. B. 168. Primd facie, communication of the facts to the board of directors is notice to the company. Metropolitan Bank v. Heiron, ubi supra ; Re General Exchange Bank, Prestoti's case, 16 W. E. 1097. But where the directors are tools or nominees of the promoter, it does not follow that notice to the directors is to be deemed notice to the company. Re Fitzroy Bessemer Co., 32 W. E. 475 ; 33 W. E. 312 ; Erlanger v. Neio Sombrero Co., 3 App. Cas. 1218. And notice to one director is not notice to the company, unless he, in fact, brings the matter to the notice of the board. In re Marseilles, Sfc. Co., 7 Ch. 161 ; Governs case, 1 C. Div. 182; General Exchange Bank, 16 W. E. 1097; Hampshire Land Co., (1896) 2 Ch. 743. As to notice to all the shareholders being notice to the company, see supra, p. 64. As to Interest. Interest. Where a jierson in a fiduciary position is ordered to account for moneys or moneys' worth improperly received by him, he may be ordered to pay interest as from the time he received the same. Nant- y-Glo Co. V. Grave, 12 C. Div. 738; Liquidators of Imperial Mercantile Credit Assoc, v. Coleman, L. E. 6 H. L. 189; Re Drum Slate Co., 53 L. T. 250. The interest is usually computed in these cases at the rate of Al. per cent, per anmim. In a Court of Equity interest at 51. per cent, per annum is only exacted where a trustee has been chargeable with misuse or misappropriation of trust money, or where he has been guilty of wilful misfeasance or fraud (per Lord Cairns, in Liquidators of Imperial Mercantile Credit Assoc, v. Coleman, L. E. 6 H. L. 189, at p. 209) ; and, as a rule, promoters making an improper profit do not appear to have been treated as coming within the rule. IIuw diK- <;lo.suro to be made. As to Disclosure. How, then, is a promoter, who desires to make a legitimate profit, effectively to bring it to the knowledge and obtain the consent of the company ? In order to answer this question we have to boar in mind : — (1) That the company is, at any rate in some cases, to be deemed to have notice of the facts stated in its prospectus. Per Lord Cairns, L. C, Erlanger v. Netv Sombrero Co,, 3 App. Cas. 1239. (2) That, in tho absence of fraud, every member of the company, and accordingly the company itself, is deemed to have notice INTEODUOTORY NOTES. of the company's memorandum and articles of association, and of every contract therein sot out or referred to. iSee Griffith V. Paget, 6 C. D. 517, and other cases cited supra, pp. 35, 36. (3) That, in the absence of fraud or misrepresentation (Aarotis Reefs, Lim. V. Tiviss, (1896) A. C. 273), every member who subscribes on the footing of a prospectus must be deemed to have notice of the contents of any contracts thereby oflfered for inspection. See cases cited mfra, p. 136. Thus, where the prospectus offered a contract for inspection, Jessel, M. R., said, "If the shareholders had gone to see it (and, I think, in a court of justice they cannot complain that they did not see it, but must be treated as having notice of its contents) they would have found," &c. Neto Sombrero Co. v. Erlanger, 5 C. D. 111. And in the House of Lords in the same ease, Lord Blackburn said, " I think that each allottee was fixed with the knowledge he would have had if he had read it." See, also, Anderson's case, 7 C. D. 75, 102, and Hallows v. Fernie, 3 Ch. 477 ; Redgrave v. Hurd, 20 C. D. 14. On the other hand, in a recent case, Re Sale Hotel, i^'c Co., W. N. (1897), 174, AVright, J., appears to have departed from the rule thus laid down, and to have treated the offer of a contract for inspection as ineffective, on the ground that it was notorious that shareholders seldom took the trouble to look at the contracts so offered. The cases above referred to were not, however, cited, and it may be doubted whether the ground assigned affords a sufficient reason for rejecting the principle of con- structive notice recognized by Jessel, M. R., and Lord Blackburn as above, and generally acted on during the last twenty years. However, it is to be noted that the learned lords who took part in the decision in Aarons Reefs v. Tiviss, (1896) A. C. 273, apj)arently recognized the rule as sound, for whilst holding disclosure in a prospectus of the date and parties to a contract insufficient notice of its contents, they did so upon the ground that the prospectus contained a misrepresenta- tion, and therefore relieved an applicant from inspecting the contract. (4) That notice to the directors of the company, if they are an independent executive, is equivalent to notice to the company. Metropolitan Bank v. Heiron, 5 Ex. Div. 319; Re Fitzroy Bessemer Co., 32 W. E. 475 ; 33 W. E. 312. (5) That the memorandum and articles of association are, by sect. 16 of the Act of 1862, made binding on the comjiany and the members thereof, and accordingly the company must be treated as consenting to what is done in pursuance thereof. Overend, Gurney S,' Co. v. Gibb, L. E. 5 H. L. 480 ; In re Westmoreland, ^^-c. Co., (1893) 2 Ch. 612. And by bearing in mind these facts the promoter can fairly dis- charge his obligation ; e.g., suppose that A., the owner of property, desires to have a company formed to purchase and work the proj)erty, and that B. agrees to promote the company in consideration of a share of the purchase-money. In such case the contract for sale to the 60 70 PROMOTERS. [Chap. II. company will disclose B.'s interest; the memorandum and articles will refer to that contract, and authorize the directors to carry it out, and will perhaps state that B. is not, by reason of his fiduciary relation- ship, to be precluded from accepting the remuneration mentioned in the contract ; the prospectus must refer to the contract and offer it for inspection, and will disclose the fact that B. is being remunerated; and the company will be formed with an independent executive, who wiU in due course adopt the contract. Cases, however, sometimes arise in which there is an insuperable difficulty in complying with the rules above referred to ; e.^., in the case of a private company, formed to purchase and work the business of a firm the members of which are to be the only directors, and to hold practically all the shares. In such a case there is no independent executive ; and if the rule laid down by Lord Cairns in Erlanger v. Neio Somhrero Co. were applicable, the parties could not effectively carry out a transaction which is perfectly legitimate. But in such case an independent executive is not essential. See supra^ p. 64. Liability on prospectus. Liability in respect of Prospectus. Not only are promoters under the obligations above referred to, but they may incur liability in respect of misstatements in the prosj)ectus, where they take any part in its preparation, or authorize its issue. As to this, see further, infra, pp. 106, 133. TJnder- ■writinar. Underwriting. Of late it has become very common to get the capital of a company, or a substantial part thereof, underwritten before the prospectus of the company is published. The underwriting is generally arranged by the promoters of the company. See fui'ther, infra, p. 146. Preliminary contracts. Preliminary Contracts. Promoters sometimes desire to bring the company into existence tied and bound by some particular contract, e.g., to purchase property at a specified price, or to pay a specified sum as preliminary expenses. It is, however, difficult, if not impossible, to do this. As appears below, p. 175, a contract made on behalf of a company before its incorporation is not binding on the company, and a provision in the articles of association that the company shall adopt and be bound by Buch a contract or shall enter into a particular contract, still leaves the company free, unless and until after its incorporation it binds itself by contract. In re Nor tlmmhcr land Avenue Hotel Co., 33 C. Div. 16; Elr.y v. Positive Government Co., 1 Ex. Div. 88; Browne v. La Trinidad Co., 37 C. Div. 1 ; Boston Deep Sea Co. v. Anscll, 39 C. Div. 339 ; Dale v. Plant, 61 L. T. 206. INTRODUCTORY NOTES. 71 No doubt the contract miglit be embodied in tlie articles of associa- tion and the vendor or promoter might subscribe the same and then rely on sect. 16 of the Act of 1862, which provides that the articles " shall bind the company and the members thereof to the same extent as if each member had subscribed his name and affixed his seal thereto, and there were in such articles contained a covenant on the part of himself, his heirs, executors, and administrators, to conform to all the regulations contained in such articles, subject to the provisions of the Act." But the decisions in Eley v. Positive Govf.rnment Co., 1 Ex. Div. 88, and Broiimer. La Trinidad Co., 37 C. Div. 1, throw doubt on the efficacy of such a plan, and in the result it is not usual to proceed thus. The usual and most effective mode of binding a company is to insert in the memorandum and articles proper clauses referring to the pro- posed agreements, and directing or empowering the directors to execute and carry the same into effect. The proposed directors usually examine and consider the agreements before the formation of the company, and the subsequent adoption thereof is in most cases a foregone conclusion. It is far better in the interest of all parties to leave the directors free to adopt or not, as they think fit, the preliminary contracts, and not to attempt to bind the company nolens volens. Occasionally, however, in reliance on Ashhury v. Watson, 30 C. Div. 376, the memorandum of association refers to a particular contract, and states that it shall bo executed and carried into effect. Nevertheless a promoter may, even in the absence of any express Remuneration contract, be entitled, as against the company, to compensation for ^l^^^^^^^ services rendered before the formation of the company, provided that company, the company can properly be considered to have adopted and derived benefit from those services. In re Hereford, Sfc. Wagon Co., 2 C. Div. 621 ; Terrell v. Button, 4 H. L. C. 1093. See, however. In re Rother- ham Alum, &,'c. Co., 25 C. Div. 103, Whether a solicitor has or has not a right as against the company may depend on whether he has agreed to look to the company for payment or has been retained by, and agreed to look to, the promoter for payment. Li re Tilleard, 3 D. J. & S. 519. And even when the company agrees with the promoter to pay the solicitor, the latter does not thereby acquire any right as against the company {In re Empress Engineering Co., 16 C. Div. 125 ; In re Rotherham Alum, ^'c, Co., 25 C. Div. 103), unless it can be made out that there is a trust for the solicitor. See the above cases, and Gandy v. Gandy, 30 C. Div. 57 ; Murray v. Flavell, 25 C. Div. 89 ; Toiiche v. Metrojmlitan, &,'c. Co., 6 Ch. 671. As a general rule, "the promoters of companies are not partners." Promoters (Lindley on Companies, 143.) Nevertheless there are many cases in g°pii^^^^ " which the arrangement between the promoters does, beyond question, partners, constitute them partners, qua the particular adventure, with the con- 72 PROMOTERS. [Chap. II. sequent riglit {inter alia) to each promoter to contract on behalf of the partnership ; but where there is no partnership, one co-promoter has no implied authority as such to bind the promoters collectively. Each is only liable on contracts made by himself or with his authority, and if he is sued on a contract made by another, that authority must be shown. Whether promoters are or are not in any particular case partners, there is not, in the absence of contract, any implied right in one of them, as against the others, to remuneration for services ren- dered by him for the joint benefit of himself and them. Holmes v. Higgins, 1 B. & C. 74 ; Lucas v. Beach, 1 Man. & Gr. 417 ; Lindley on Comjianies, 606. But, of course, there is nothing to prevent promoters from jointly contracting with, and becoming liable to, a third party, e.g., if they jointly retain a solicitor, they are jointly liable to him {Mant v. Smith, 4 H. & N. 324), and anyone is entitled to have the bill taxed. Re Stephen, 2 Ph. 562. And where promoters have become jointly liable to a third party, and by virtue of that liability some are compelled to pay, they may have a right as against the others to enforce contribution. Lindley on Companies, 606. Boulter v. Peplow, 9 C. B. 493 ; Batard v, Haices, 2 E. & B. 287 ; Edgar v. Knajjp, 7 Jur. 583, C. P. Occasionally, in the case of professional promoters, the solicitor employed agrees to look to the company for payment, or to make no claim except for "out of pocket" expenses, unless the company floats. Danger of Promoters should be careful lest in their desire to float the company market. they overstep the line of what is legitimate and permissible. For example, any attempt to " make a market " for the shares by buying, or pretending to bu}', at a premium, or by "rigging the market," must be avoided as dangerous and illegitimate. This operation was referred to fey Jessel, M. P., in Marzetti's case, 28 "W. P. 541, as follows : " I do not know the technical term for the thing, but it is to raise the value, or apparent value, of the shares on the Stock Exchange, by buying up the few that are issued at a premium, so as to induce the public to come in and subscribe for the shares in the company, under the notion that there is a hand fide premium to be obtained by sub- scribing. Whether one ought to call that a conspiracy or not does not much matter, but I suppose both in law and morality it is a consjiiracy to defraud the public and nothing else." And in Ticycross v. Grant, 2 C. P. Div. 469, 495, Bramwell, L. J., said that the defendant "went into the market and bought a large number of shares, and various newspapers were induced, by jiayments to subordinate jjorsons, to write favourably of the company. The shares rose to a premium ; tlie public were attracted, and subscribed for the capital, or a largo part of it, both shares and debentures. The defendant attempted to justify giving this false appearance of value to the shares by sayiug that it continually happens that shares are made INTRODUCTORY NOTES. 73 to appear worth, less than their real value by people selling them when they have not got them. There are two answers to this : first, there is no reason to suppose that any such practice was apprehended by the company ; next, that it cannot be right to counteract such a proceeding in the way here adopted ; and indeed, further, if it is believed that a scheme is a good one, and people try to depreciate by selling its shares, they should be countermined honestly, and not by a trick, by those who think well of it buying the shares so sold." And again, in Scott v. Brown, (1892) 2 Q. B. 724, it was held that an agreement between two or more to purchase shares in a company in order to induce persons who might thereafter 2:)urchase shares in such company to believe, contrary to the fact, that there was a bond fide market for its shares, and that the shares were at a real premium, was an illegal transaction, and might be made the subject of an indict- ment for conspiracy. This decision was based on Rex v. De Berenger^ 3 M. & S. 67, in which it was held that it was a criminal conspiracy to agree to endeavour to raise the price of the public funds on a particular day by false rumours, and " this was not because it is an injury to the public to raise the value of the public funds ; but because it is fraudulent against those who purchase a vendible commodity to raise the price of it at the time they purchase it by fraudulent false- hoods, on which they are intended to act. The conspiracy was held to be criminal, not because the article to be dealt in was the j)ublic funds, but because the public funds were a vendible commodity. And it was held that the offence was complete the moment the agreement was made." Per Brett, L. J., Reg. v. Aspiiiall, 2 Q. B. Div. 48, 59. "The crime lies in the act of conspiracy, and combination to effect that pur- pose, and would have been complete although it had not been pursued to its consequences, or the parties had not been able to carry it into effect." Per Lord Ellenborough, Rex v. De Berenger, ubi supra. Again, any attempt to obtain a quotation of the shares on the London Stock Exchange by illegitimate means should be avoided. For the result of quotation is to induce the public to believe that the rules of the Stock Exchange have been complied with, and to deal in the shares on that footing. Any scheme, therefore, to deceive the com- mittee may amount to a conspiracy to cheat and defraud those j^ersons who might by reason of the quotation be induced to deal in the shares. See Reg. v. Aspinall, 2 Q. B. Div. 48. In that case the defendants, the promoters of a company, were convicted of a criminal conspiracy to defraud. They had obtained a quotation by falsely representing that more than two-thirds of the capital had been subscribed by the public, and that the aj)plication money of IO5. per share had been paid up thereon ; whereas, in fact, the shares were applied for by dummies, the promoters paying the application moneys out of borrowed funds, which as soon as paid in were drawn out and applied to the payment of the application moneys on further shares, and so manipu- lated that the aggregate amount paid in appeared to be upwards of 17,000/. See also Gray v. Lricis, 8 Ch. 10;5.5, 1054. ^4 PROMOTERS. [Chap. II. Recommendations to Intending Promoters. Eecommenda- Jq conclusion, it may be useful to submit the following recommen- tions to J ^. ' -^ ° promoters. dations to promoters : — (1) Where it is intended to purchase property and resell to a com- pany, be careful not to take any steps towards the promotion of the company, or procure directors or subscribers, until you have a valid contract with the vendors. (2) Eemember that excessive remuneration leads to danger and failure. (3) See that the company is provided with an independent board of directors, and that due disclosure is made to them and to the company. (4) See that the memorandum and articles contain all requisite pro- visions for the protection of the promoters, and do not contain anything open to hostile comment, or anything unfair to the company or the subscribers. (5) See that the prospectus, especially if the promoters have any jDart in its preparation or issue, is fairly and honestly framed. Infra, pp. 106, 123 et seq. (6) See that, where there is or may be any doubt as to the indepen- dence of the executive, full disclosure is made to all the members of matters which prima facie ought to be disclosed to an independent executive. See p. 64, supra. 75 PROMOTERS. Agreement by Pkomoters to Pay Prclwiinary Expenses in con- sideration of Vendor's Shares. AN AGEEEMT made the day of , between A. of , of Form 1. tlie one part, and B. of , of the other part. Parties. Whereas the sd A. has entered into an agreemt (hnfter called Recitals. the scheduled contract) with the Limtd (hnfter called the coy), for the sale of certain patents and other ppty to the coy in conson of 20,000^., whereof 15,000/. is to be satisfied by the allotment to the sd A. of 1,500 fully paid-up 10/. shares in the capital of the coy: And whereas by the scheduled contract it is among other things provided that the sd A. shall pay all the preliminary expenses, that is to say, &c., down to the first allotment of shares : And whereas the prospectus, a copy of which is hereunto annexed, has been approved by the board of directors of the coy, and the sd A. has obtained their authority to advertise the same at his own expense. Now therefore it is agreed as follows : What B. 1. The sd B. shall advertise and circulate the said prospectus in a '^ °' sufficient and effective manner \^or in accordance with the scheme set forth in the schedule hereto], and shall use his best endeavours to induce persons to apply for shares in the coy. 2. The sd B. shall pay all the preliminary expenses of the coy. Further, specified in the scheduled contract, and shall indemnify the sd A. against all proceedings, claims and demands in respect thereof. 3. If the sd B. shall duly perform his obligations under clauses 1 Considera- and 2 hereof, he shall be entld to of the sd 1,500 fully paid-up *^°^" shares, and the sd A. will procure the coy to allot the same to him accordingly. 4. Unless before the day of next shares at the least Conditions. in the capital of the coy shall have been taken up, the sd. B. shall forfeit all claim to the sd fully paid-up shares, and save as hinbefore expressly provided, the sd B. shall not be entld to any remuneration for his services in respect of the premises. In witness, &c. [^Schedule. ^ 76 PEOMOTERS. [Chap. II. Form 2. Parties. Recital. A. to pay the preliminary expenses. Considera • tion. Agreement to Pay Preliminary Expenses in consideration 0/ Commissions. AN AGEEEMT made, &c., between the called the coy), of the one part, and A. of — Coy, Limtd (hnfter -, of the other part. Whereas a prospectus of the coy (whereof a copy is hereunto an- nexed) is about to be published and circulated. Now THEREFORE IT IS AGREED as followS : — 1. The sd A. shall pay all the preliminary expenses of the coy, that is to say, all the costs, charges, and expenses of and incidental to the preparation of the sd prospectus and the publication and circulation thereof, and of and incident to the preparation, execution, and regis- tration of the coy's memdm and arts of asson, and of these presents, and all other expenses of and incident to the establishment of the coy down to the first allotment of shares therein, or if the directors of the coy shall, within the period of weeks from the date hereof, resolve not to proceed to allotment, then down to the date of such resolution : And the sd A. shall indemnify the coy and the directors thereof from and against all proceedings, claims and demands in respect of the sd preliminary expenses. 2. In conson of the premises the coy shall, within 14 days after the first allotment of shares, pay to the sd A. a commission at the rate of [1] p.c. on the nominal capital of the coy, viz., 1., but in the event of such resolution as afsd being passed, the sd A. shall not be entld to any remuneration in respect of the premises. [Such commission shall be payable exclusively out of the premiums received under the sd prospectus.] In witness, &c. Form 3. Parties. Sale. Option to pay in Bhures. Agreement for Sale of Concession to Promoter, tcJio is to form Company. Parties : A., 1 ; and B., 2. 1. The sd A. shall sell, and the sd B. shall purchase, the concession specified in the schedule hereto, and the full benefit thereof at the price of .50,000/., whereof 1, shall forthwith be pd to the sd A. by way of deposit. 2. If before the day of [the time for completion] the sd B. shall have resold the sd concession to a coy duly formed under the Cos Acts, 18G2 to 1890, for the purpose, inter alia, of acquiring and carrying out the sd concession, and with a nominal capital of 200,000/., divided into 20,000 shares of 10/. each [and with a worldng capital of /. at the least], and })ound by agreomt with the sd B. to jnir- chaso from him the ed concession, the sd B. shaU have the option of FORMS. 77 satisfying any part of the balance of the purchase-money not exceed- Form 3. ing 40,000^., by procuring the allotment or transfer to the sd A. of fully jxl-up shares in such coy to bo treated as of par value. 3. The sd A. shall show a good title to the sd concession in himself Title. or some other person willing and bound to convey by his direction, and shall prove that the concession is valid and in full force, and shall duly transfer the same to the sd B. or his nominee at or before the time for completion hnfter fixed. 4. The purchase shall be completed on the day of next, at Completion. , or at such other place in the City of London as the sd B. shaU fix, and thereupon the purchase-money shall be pd or satisfied as hinbefore provided. 5. The sd B. shall before the time hinbefore fixed for completion Koport of appoint some competent agent in to examine and report on the ° title to the sd concession, and to certify the transfer thereof, and a telegram from such agent stating that the title is satisfactory and that the transfer is complete shall be sufficient evidence of the facts. 6. The sd B. may at any time before the day of next, by Rescission. notice in writing to the sd A., annul the sale, and if the sd jDurchase- money shall not be pd or satisfied at the time and in manner afsd, then and in such case the sd A. may at any time afterwards by notice in writing to the sd B. annul the sale. 7. If the sale is annulled under Clause 6 hereof the deposit shall be Forfeiture of forfeited to the sd A., and neither party shall have any claim against ^^°'^^ ' the other for expenses, damages, or otherwise. In witness, &c. [7%e Schedule containing particulars of co7icession.~\ Not uncommonly an agreement as above is made without any provision for a deposit, so that practically it imposes no liability on the purchaser, but in that case B. (see Clause 6 above) ought not to have power to annul the sale. The promoter, having secured the agreement, forms his company, and enters into an agreement with the company for the sale of the concession at an advance in price. There is no objection to such an arrangement, provided that due disclosure is made to the company. But great care must be taken in framing the prospectus. Boss V. Estates Investtnent Co., 3 Ch. G82, 689 ; Capel v. Sims, 36 W. R. 689. 78 rKOMOTERS. [Chap. II. Form 4. Parties. Recitals. Agreement to roNTiiiBUTE io a Pkeliminary Expenses Fund. Fund. Application. Committee. Proceedings. Calls. I)ffaultH. AN AGEEEMT made the day of between A. of (hnfter called "the tree "), of the one part, and B. of , and the several other persons who shall sign their names and affix their seals hereto (hnfter called "the subscribers"), of the other part: Whereas it is proposed very shortly to register under the Cos Acts, 1862 to 1890, a coy to be called the Coy, Limtd " (hnfter referred to as "the coy"), with a memdm and arts of asson which have already been prepared and approved by the parties hereto : And "WHEREAS it is desired to provide a fund in the manner and for the purposes hnfter set forth. Now THEREFORE each of the subscribers hby agrees with the sd A., as tree for the subscribers, as follows : — 1. A fund shall be established to consist of the contributions of the subscribers j)ursuant to this agreemt. 2. The fund shall be placed in the hands of the tree and he shall apply the same under the direction of the committee in paying the costs of obtaining the engineer's report, which is to be sent out with the prosi^ectus of the coy, and in paying the expenses of the experi- ments referred to in the Schedule hereto, and in paying the general expenses of forming and promoting the coy, and any other expenses which the sd tree, with the sanction of the committee, shall think it expedient to pay. 3. There shall be a committee of "subscribers for the purpose of this agreemt, and the first members of such committee shall be C, D., and E. 4. The committee may fill up any vacancy in their body which shall arise from death, resignation, or otherwise, and the members, for the time being, of the committee may act notwithstanding any vacancies in their body. The decision of the majority of the members of the committee for the time being, shall be regarded as the decision of the committee. 5. The tree may, from time to time, with the sanction of the com- mittee, make such calls on the subscribers as he shall think fit; but every such call shall be made on the subscribers pari passu, and three days' notice at least of every such call shall be given to the subscribers, and no subscriber shall be liable to pay, in the aggregate, more than 150^. under this agreemt. 6. If any sul)scriber makes default in payment of a call made on him hereunder he shall pay interest at the rate of 10 p.c. on the amount in arrear until actual payment ; and if the default continues for more than 7 days the tree may draw a bill of exchange on the defaulting subscriber for the amount, and may autliorizo any persons to accept the sums on behalf of such defaulting subscriber, and such accej)tance shall be efl'octive, and such bill of exchange may be made payable on demand. FORMS. 79 7. The troe and the committee are to subscribe the memclm of asson Form 4. of the coy for the whole of the founders' shares on the coy's capital, jOounders^ and are, in due course, to distribute the same amongst the subscribers shares, rateably in proportion to their contributions hereunder. 8. Any notices for the purposes hereof may be given to any subscriber Notice of by sending the same through the post, addressed to such subscriber at ''°^^^'^*^- his address below mentd ; and any notice so sent shall be deemed to be served at the exinration of two days after it is posted. 9. If any subscriber makes default in payment of any call made Forfeiture, pursuant hto, the tree may, with the sanction of the committee, declare the interest of such subscriber under this agreemt to be forfeited ; and thereupon such subscriber shall cease to have any rights under this agreemt, and any contribution pd by him shall be considered forfeited for the benefit of the other subscribers hto. 10. The majority of the subscribers hto may, at any time, by writing New trustees. under their hands remove the tree for the time being hereof and appoint another tree or trees in his place ; and they may also appoint a new tree or trees to fill up any vacancies in the trusteeship howsoever caused. As WITNESS the hands and seals of the parties hto. Signed, sealed, and delivered by, &c. Syndicate Agreement /or purchase and re-sale o/ Mines. Form 5. Heads of Agreeme7it. 1 . A syndicate is hby estabhshed for the purpose of acquiring the Syndicate mines situate at , and known as the mines, and of disposing ^^ ^ '^ ^ ' of the same at a profit. The capital of the syndicate shall be 1. Capital. and shall be considered to be divided into shares of 1, each. The holders for the time being of the shares shall be members of the Members, syndicate. Each of the subscribers is to be entld to the number of shares set opposite his signature. The shares are to be transferable, but not divisible. A transfer must be registered. 2. In entering into the contract dated for the acquisition of Preliminary the sd mines. A., one of the subscribers hto, shall be deemed to have ^°^"''^^*^- been acting on behalf of the syndicate, and the syndicate shall forthwith repay him the deposit, and shall indemnify him against his liabilities under the contract. 3. A. and B. shall be managers of the syndicate. Managers. 4. 1, per share shall be pd to the managers forthwith, and they Calls. may from time to time make calls on the members in proportion to their shares, but no member is to be liable to pay more than the amount of his shares. 80 PROMOTERS. [Chap. TI. Form 5. Application of funds. Conduct of business. Express powers of managers. Meetings. Division of proceeds. Notices. 5. All moneys pd to tlie managers in respect of calls or otherwise shall be applied for the purposes of the syndicate. 6. The managers shall have the entire control of the affairs of the syndicate, and may conduct the same in such manner as they tliink best. 7. It is expressly declared that the managers, if they think fit, («) may sell the mines to a person, or firm, or coy ; (b) may form and float, or procure the formation and floating, of a coy to purchase the mines ; (c) may fix the price and agree to accept any pt of it in fully pd-up shares, debentures, or otherwise; (r/) may keep the mines going until disposed of. 8. The managers may convene meetings of the syndicate to deli- berate and decide on any of the affairs of the syndicate : every share to confer one vote : majority to decide : votes may be given in person or by proxy. Three days' notice of each meeting to be given. 9. The conson for sale or disposition of the mines shall be applied, fii'st, in paying all debts and liabilities of the syndicate : secondly, in repaying any capital contributed by the members in respect of their shares : thirdly, the surplus shall be divided amongst the members in proportion to their shares. And for the purposes of this clause the managers may convert into money any shares, debentures, or other specific assets, and may divide any such assets in specie, and make such other arrangements for adjusting the rights of the members as they think fit. 10. Notices to each subscriber may be given by post, addressed to him at his address below mentd. Notice so given to be deemed served twelve hours after posting. Dated the day of . Syndicates. Syndicates are sometimes formed under an agreement as above, but the agreement constitutes a mere partnership, and the members are, therefore, individually respon- sible for what the managers do, without any real limit of liability ; and if the number of members, by oversight or otherwise, exceeds twenty, the syndicate becomes an illegal association. These objections to a syndicate agreement now very commonly induce the formation of an incorporated syndicate. The following are a few examples of the cases in which syndicates are commonly formed : — 1. A. has a patent for an invention, but no capital. The utility of the in- vention is fairly obvious ; but it requires to be more thoroughly tested, and expense must bo incurred in so testing it, and also in obtaining foreign patents, and perhaps in floating a company to purchase the patent rights. B., C, and 1). agree to form a syndicate which shall find the requisite funds. The patent rights are made over to the syndicate, on the footing that A. shall have, say, oue-tliird of the shares in the syndicate free, and that the other subscribers shall pay up their shares in cash. The capital of the syndicate is fixed accordingly, say, at 3,000/., in 100/. shares. The invention is tested, and, if found satis- factory, foreign patents are obtained, and the i)ublic company is formed and floated. Tlie patents are re-sold to that company at a profit, and the net FORM.S. 81 proceeds of sale are divided rateably anioiig-st the members ui the syndicate, Form 5. which is then dissolved. 2. C. has obtained in America or in one of the Colonies an option or contract to purchase some mining property. Monej- is wanted to send out an independent expert, and, perhaps, to work the property to a limited extent, and thus prove its capabilities. C. places his option or contract and knowledge at the disposal of the syndicate in consideration of shares in the syndicate. The syndicate then obtains the necessary reports, Avorks the property more or less, and re-sells it at a profit, either to some company formed for the purpose of acquiring it or to anyone who is willing to buy it on satisfactory tonus. 3. A. has a going business which requires immediate financial assistance. For certain reasons it is not practicable to convert the business at once into a company, and go to the public, and, accordingly, a syndicate is formed to find the requisite funds in consideration of a share in the business and the power to dispose of it. The syndicate takes over the business, sets the concern on its legs, and then, on a favourable oi^portunity, disposes of it on the best terms obtainable. 4. The prospects of some company arc likely to be damaged by hostile attacks and fictitious sales of its shares. A., B., and C. and others who are interested in the company, and desire to resist these attacks, form a syndicate to buy up all shares offered for sale and to hold the same for a limited period, and then re-sell on the best terms obtainable. 6. Some mercantile commodity is likely to rise in value. A syndicate ia formed to acquire and hold a large stock of it and to re-sell when the rise has taken place. 6. A company is about to be brought out, but considerable preliminary expenses will have to be incurred in advertising-, legal charges, fees to brokers, solicitors, and otherwise. A syndicate is formed to find the requisite funds, the vendor agreeing to repay them with a bonus out of the purchase considera- tion which he is to obtain from the company. The company is then floated, and in due course the vendor pays off the syndicate's advance and bonus. 7. It is desired by certain parties to apply to some government or authority for a concession, charter, or other special privilege. In order to obtain this expense must be incurred, and the requisite funds can only be found by co-operation. Accordingly A., B., and C. and others form a syndicate. In order to form an incorporated syndicate it is necessary to prepare a suitable memorandum and short articles of association. The name of the company not uncommonly includes the word " syndicate," e.ff., The Syndicate, Limited. The objects must be made wide enough to cover what is wanted, and usually it is considered expedient to express them in terms so general as not to disclose the particular scheme the parties have in view, e. ff., if the real object is to acquire a particular concession for which A. has been negotiating, the objects will be to acquire any concessions, and to work and dispose of them, and to form any company, and to raise money, &c. See Form 122. The capital will be fixed at such a figure as may suffice to cover the probable outlay. The articles of association will probably adopt Table A. with modifications. See Form 211. In due course the syndicate will enter into an agreement with A. to acquire the benefit of his negotiations and services in consideration of some paid-up shares, say, one-thu-d of the capital. The rest of the capital of the syndicate will then be subscribed, and steps will be taken to obtain the concern. When the concession has been acquired, it will be sold to a company promoted by the syndicate, and the proceeds will be distributed and the syndicate dissolved. There is great advantage in an incorporated syndicate, for it is a separate entity recognized by the law and not a mere partnership, and, accordingly, in all cfmtracts P. G 8'^ rJlOMOTKR.S. [Chap. II. Form 5. its corporate name is used and the members have limited UabiUty, and the directors or managers are not the agents of the members individually but of the body corporate. It is often found that capitalists and others who would not care to become members of an unincorporated syndicate are ready enough to join an incoi-porated syndicate in their own names or through nominees. As to syndicates limited by guarantee, see infra, pp. 479, 562. The doubts as to the regularity and safety of incorporated syndicates consisting of a very few substantial persons, which were caused by a decision of the Court of Appeal, have been completely dispelled by the reversal of that decision in the House of Lords. Snhmon v. Salomon &; Co., (1897) A. C. 22. See p. 563, i)ifra. Form 6. Pooling atrreenienf Recitals. Agreement hy Shareholders to Pool tlieir Shares (ukJ han them Sold htj Trustees. Pool. Shares in pool. Sale. AN AGEEEMT made, «S:c., between A. B., of and the several other persons named in the first schedule hto, of the first or one part, and The Trust Coy, Limtd (hnfter called " the trustees"), of the other or second part : Wuereas the several persons named in the first schedide hto are collectively entitled to 20,000 fully pd-ux> shares of 10/. each in the capital of The^ Coy, Limtd (numbered to inclusive), and the number held by each of them is set opposite his name in the fourth column of the sd schedule : Avd whereas the sd several persons have lately transferred their respective shares af sd into the names of divers other persons as nominees of the trustees : Now THESE PRESENTS WITNESS AND DECLARE that it is hby agreed as follows : — 1. The sd shares (hnfter called "the pooled shares") and the proceeds of sale thereof, and all income therefrom, shall constitute a joint stock fund (hnfter called "the pool "), to be dealt with as hnfter provided. 2. The pool shall be deemed to be divided into shares, and each of the parties hto of the first part shall be entld to the number of shares in tlio pool set opposite his name in the fifth colimin of the schedule hto — that is to say, at the rate of one share in the pool for each ten of the pooled shares to which he is cntld as afsd. 3. The trustees shall hold tlie pooled shares upon trust to sell the same as and when they, in their absolute discretion, think fit, and upon such terms and in such manner as they in their absolute discretion may consider expedient, with full power to pay commissions to any persons for placing, or assisting to place, any of the sd shares ; and to give to any persons who shall buy or place any of the sd shares the call of further of the sd shares for a limtd period and at a specified price, and the trustees shall receive any dividends payable in respect of sucli of the sd shares as shall for the time being remain unsold. Sometimes a minimum price is specified, and very commonly a scale is given pro- FORMS. 83 Viding that tiie first 1,()00 shall not be sohl for loss than iior share, the second Form 6. 1,000 at not less than per share, and so on. 4. The trustees shall apply all moneys received by them under these Distribution presents in or towards paying all costs, charges, and expenses incurred by them in relation to the trusts hereof, and shall from time to time, as and whenever the surplus in hand is sufficient to pay a dividend of at least 1., apply such surplus in paying to the holders of shares in the pool a rateable dividend. 5. The shares in the pool shall be numbered to inclusive, Certificates. and each holder of any share in the pool shall bo entld to a certificate of title to his share or shares therein framed, in accordance with the form set forth in the second schedule hto. Such certificate shall be under the seal of the trust. 6. The trustees shall keep at their registered office a register of the Re^ster. shares in the pool, and the registered holder of shares in the pool shall be at liberty at all reasonable times to inspect the sd register. 7. Every holder of a share in the pool may transfer the same hy Transfer, instrument in writing in the usual common form, which shall be signed both by the transferor and by the transferee. Until the registration of the transfer the transferor shall be deemed to remain the holder of the share. The instrument of transfer must be delivered to the trustees, accompanied by the certificate relating to the shares comprised therein, and such other evidence as the trustees may require to prove the title of the transferor ; and the trustees may charge a fee of 25. 6rf. for each transfer registered. It is not common to make shares in a pool transferable. 8. The registered holder of any share in the pool shall be recognised Equities dis- and treated as the absolute owner thof, and in the case of the death regarded. of any one of two or more joint registered holders, the coy will only recognise the survivor or survivors as the absolute owner or owners thof, and the receipt of any such person or persons so recognised as absolute owner or owners afsd in respect of any moneys payable by the trees in respect of such share shall be a good discharge to the trees, notwithstanding any notice, express or otherwise, they may have as to claims under any trust or otherwise. 9. All dividends on shares in the pool may be pd by cheque sent Dividends through the post to the registered address of the holder, or in case of 1'°'^ ^^ " joint holders, to the registered address of that one of them who is first named on the register in respect of such shares. 10. The pool shall be closed at the expiration of one year from the Closing pool. date hereof, but the holders of two-thirds of the shares in the pool may at any time previously, by notice in writing to the trees, close the pool, and the same shall be closed accordingly. 11. When the pool is closed as afsd such of the pooled shares as Distribution have not been sold, and also any cash in the hands of the trees and , pooled •' sliares. available for distribution, shall be distributed among the holders of g2 84 PROMOTERS. [CflAP, IJ Form 6. Surrender of certificates. Guarantee. Remunera- tion. Iniemnitv. IModification of rights liereunder. Notices. shares in tlie pool as nearly as may be rateably iu pro^jortiou to tlie shares in the pool held l)y them resply. 12. Before making any such final distribution as afsd the trees may require all or any of the certificates afsd relating to shares in the pool to be given up to be cancelled, and the same shall be given up accordingly. 13. The trees guarantee that their nominees afsd shall duly hold and dispose of the sd 20,000 shares in accordance with these presents. 14. The trees shall be entitled (as remuneration) for their trouble in executing the trusts hereof to be remunerated at the rate of the sum of /. per annum. 15. The trees shall be indemnified out of the trust premiums against all expenses and liabilities incurred in relation hto, and they shall have a lien for such indemnity on the pooled shares and all moneys arising therefrom. 16. The holders of three-fourths of the shares in the pool may, by writing under their hands, assent to any modifications of the rights hby conferred on the holders of shares in the pool, and such assent shall be binding on all the holders of shares in the pool, and they shall all be bound to give effect thereto. 17. A notice under these presents may be served by the trees upon any registered holder of any share in the pool, either personally or by sending it through the post in a registered prepaid envelope or wrapper to his or their registered place of address, and any notice so served by post shall be deemed to be served at the expiration of forty-eight hours after it is posted. First Schedule. \In five columns — (1) Jiames, (2) addresses, (3) descripti07is, (4) par- ticulars of pooled shares, {5) j)artictilars of shares in pool.'] The Second Schedule. \_Forni of Certificate.] Pool of 20,000 10/. shares in The Coy, Limtd. Certificate No. ■ . For shares in the pool. Tins IS TO cEUTirY that , of , is the registered holder of shares, numbered to - inclusive, in the pool constituted by a trust deed, dated the day of , 1890, and made between A. B., C. D., and others, of the one part, and The Trust Coy, Limtd, of the other part. Given, &c. It is not (it uU uiiooinmon to establish a pool so that ii number of shareholders may bcucfit pari passu. FORMS. 85 Sometimes a pool is established where a number of underwriters have been stuck Form 6. with large blocks of shares, and wish to dispose of their shares g-rudually, so as not to run the prices down by overloading the market. In such cases, the members of the pool are generally prohibited from transferring. In other cases, the object of the pool is to create a voting trust which will be worked for the benefit and protection of the members of the pool. Sometimes a pool is established for the purpose of splitting up a series of founders' shares into fractions, e.r/., 100 founders' shares maybe represented by, say, 10,000 shares in the pool. Sometimes the terra "trust" or "syndicate" can be used iustead_|of " pool." Form 7. Pooling Agreement ichcrc each Member fixes his own Minimum Price. AN AGEEEMT made the day of between the a^^e^ent Syndicate, Limtd (hnfter called "The Syndicate"), and the several ° other persons and cos named in tlie first schedule hto of the one part, and A., B., and C. (hnfter called "the committee") of the other part. Whereas the several persons and cos named in the first schedule Recitals, hto are entld to the niimber of fully pd-up shares of 1/. each in the capital of the P. Q. Coy, Limtd, set opposite to their respective names in the third column of the first schedule. And ■whereas the sd several persons and cos have determined to pool the sd shares in manner hnfter provided. Now THEREFORE IT IS AGREED aS folloWS : 1 . The sd several persons and cos shall, on the execution of these Provision for presents, execute transfers of their respective shares afsd into the po^^o- names of the sd A., B., and C, and shall deliver to them such transfers and the certificates relating to the sd shares, and the sd shares shall be held in trust and dealt with as hnfter provided. 2. The committee shall sell the pooled shares as and when they in Tower to sell. their absolute discretion think fit, upon such terms and in such manner as they in their absolute discretion may consider expedient, but not at less prices respectively than those specified in the respective columns of the sd third schedule hto, such prices having been fixed by the several persons and cos as those at which they are willing to sell the same. 3. The committee shall have fidl power to pay commissions to any Commissions, persons for placing or assisting to place any of the sd shares and to give to any person the call of any of the pooled shares, but such com- missions shall only be payable out of any excess prices obtained beyond tlie minimum prices of shares sold as mentd in the sd third schedule hto. 4. The committee shall receive all di\ddends, bonuses, and other Dividends, moneys or interests which may be pd or arise in respect of the pooled shares or such of the same as shall for the time being remain unsold. 86 I'KOMOTEKS. [Chap. 11. Form 7. Employment of solicitors, &c. Accounts. Di-scretion as to what shares to be sold. Prices. Term. Ivc-ti'aiisfer. J>istrihution after closing. Vmjating (iflicc. 5. The committee shall have full power from time to time in relation to the pool, to employ solicitors, brokers, experts, and agents on such terms as to remuneration as they may think proper, and to take the advice of any such persons and to act thereon or abstain from acting thereon as they think fit, and the committee shall, out of the moneys received by them under these presents, defray all costs, charges, and expenses inciirred by them in relation to the trusts hereof and shall apportion the residue amongst the several persons and cos afsd in such proportions as the committee think equitable. 6. The committee shall keep proper and sufficient accounts of all sales of shares under these presents, and in the event of sales having been made the committee shall, subject as afsd and at least once in every calendar month pay to the persons and cos whose shares may have been sold the net purchase moneys thof. 7. The committee shall have the fullest and most absolute discretion as to which of the pooled shares shall, on each occasion, be sold, and shall not be under any obligation to the several persons and cos named in the sd first and second schedules, or to any of them, in con- sequence of some of the pooled shares having been sold prematurely or in wrong order or on any other ground whatsoever. 8. The prices stated in the respective columns of the said three schedules hto are those which the several persons and cos are willing to accept, and that the committee are not in any way bound to see that such prices are realised, . but are only to use their best endeavours to carry out the wishes and intentions of the several persons and cos as afsd in this respect ; nevertheless, as far as prac- ticable, the committee are to take the shares in each case sold /;«;•/ passu from the lowest priced shares of the several persons and cos afsd in proportion to the number held. 9. The pooling arrangements herein contained shall continue until the 1st day of Dec, 1897, and upon that day at the latest the pool shall be considered as closed. 10. AVhen the pool is closed such of the pooled shares as shall not have been sold shall be retransferred and the certificates thof shall be handed over to the several persons and cos who are entld to them vcsply, and any cash in the hands of the committee, together with bonuses and other interest shall be distributed amongst the then holders of shares in the pool as nearly as may be ratcably in the proportions in which they are entld to the same. 11. The committee shall have full power to distribute shares,- bonuses, and interest under this agreemt and to determine all dif- ferences, questions, and doubts arising hereunder, and every such determination, whether made uj)on a qiiestion actually raised or implied in the acts or proceedings of the committee shall be conclusive and shall bind all persons interested under those presents., 12. A member of the committee shall vacate office if, by notice in FORMS. 87 writing-, lio resigns liis office or if he is called on by the holders of Form 7. three-fourths of the shares for the time being in the pool to resign. 13. The committee shall forthwith fill up any vacancy in the Filling up ,, . ,p .^ • ,^ in,i vacancics. committee oy tJio appointment or another person m the place ot the vacating member, but the committee may act notwitlistanding any vacancy. 14. The committee shall be entitled to receive as their remuneration Remuneration one-half of one p. c. of the proceeds of all sales hereunder, and such remuneration shall be divided amongst the members thereof ecj^ually, and they shall be entitled to the fullest indemnity. Pooling Agreement trith Provision /or Transfer of Shares. Form 8. AN AGEEEMT made, &c. between A. B. of (linftor called Another " the trustee"), of the one part, and the several other persons who agreement shall subscribe there names hto, of the other or second part. AVhereas the several persons parties hto have as underwriters been Recitals, allotted shares in the B. Coy, Limtd (hnfter called "the Coy"), and the number allotted to and held by each of them set opposite his signature hto : And whereas it is considered desirable to pool the sd shares in the, &c. 1. The sd shares (hnfter called " the pooled shares"), &c. Pool. 2. The pool shall be deemed to bo divided into as many shares as Shares in the pooled shares, and each of the parties hto shall be entitled to the P'^°^- same number^of shares in the pool as the number of shares set opposite his signature hto. 3. The trees shall hold, &c. 4. It shall rest with the tree to determine which of the pooled shares Transfers, shall on each occasion be sold or dealt with, and for the purpose of giving effect to any sale or disposition of any of the pooled shares, the registered holders of the pooled shares shall resply, upon the request of the trees, sign all transfers thereof which the trees shall require, and if any holder makes default in complying with any such request, the tree may sign any such transfer for the defaulting shareholder, and the tree's certificate in writing that the member has made such default, shall, as regards any purchaser or transferee and the coy, bo conclusive. 5. The shares in the pool shall bo numbered 1 and onwards, in Numbers of arithmetical progression, and each holder of any share in the pool s^^''^'^*''''- shall be entitled to a certificate of title to his share or shares therein signed by the trees. 6—13. See 9 to 17 of Form 6. 88 [Chap. III. PROSPECTUSES. CHAPTER III. INTEODUCTORY NOTES, When pro- spectus to be issued. How pre- pared and published. Torm. Skill required and rcHpon- Hibility involved. Whei;e it is intended to appeal to tlie public for the capital required to work a comiiany, the usual course is to issue a prospectus inviting applications for shares or debentures or both. Formerly a prospectus was almost always issued before the formation of a company ; but since the Act of 1862, which has rendered the formation of a company so inexjDensive and simple a matter, it has become the general practice to issue the prospectus after the formation {i.e., the registration) of the company. And it is desirable to continue this practice, since it pre- vents many disjjutes and difficulties which used to arise under the old practice. In most cases the prospectus is prepared by or under the direction of the promoters before the company is formed, and after its formation the prospectus is submitted to the directors of the company, who pass a resolution approving of it, with or without modification, and directing it to be issued. The mode in which the prospectus is brought to the notice of the public varies considerably. In some cases the parties rely almost entirely on the circulation, by post or otherwise, of printed copies of the prospectus, but generally the document, or an abridg- ment thereof, is advertised in the newspapers. A prospectus is usually headed with the name of the company, and generally states the nominal capital, the number and description of the shares or debentures or debenture stock offered, the terms of issue, the names of the directors, bankers, solicitors, brokers, auditors, and secretary, or some of them, the objects and prospects of the company, how applications are to be made, what contracts have been entered into, and where copies of the prospectus, of the memorandum and articles of association, and of the contracts can bo seen. 'I'lio preparation of a prospectus requires both skill and judgment, and involves great responsibility ; for not only does the success of the company's appeal to th(! pu])lic depend to a considerable extent on the attractiveness of the document, but, if it is improperly framed, loss may INTRODUCTORY NOTES. 89 be occasioned to those who rely on the statements contained in it, and the company, its directors and promoters, may be exposed to litigation and liabilities of the most harassing and serious character. As already mentioned, the prospectus is usually prepared by or under Practice. the direction of the promoters, and with the privity of the directors. Very commonly, legal advice is taken on the draft ; for ignorance of law, or want of judgment on the part of those who issue a prospectus may lead to the most unfortunate and even ruinous consequences. Bona fides and honesty are absolutely essential, but standing alone they are not a sufficient protection. A person may be fully aware that he is bound to state all material facts ; but from his position, perhaps deluded by his sanguine expectations, he may be unable to form an impartial judgment as to what facts are material. He may know well enough that he must abstain from misrepresentation ; but be totally unable to see that an ingeniously-framed statement, which he or some other person desires to insert, is misleading. He may believe a statement to be true, but be forgetful or ignorant of the danger he incurs in stating as a fact tliat which he only knows by hearsay. He may think that as documents are offered for inspection, applicants will be fixed with knowledge of their contents, and may not notice in the prospectus a misrepresentation as to their terms which renders the offer nugatory. He may imagine that this or that is only a small matter, and may be surprised a few months later to find that his want of judgment has led to his being made a defendant in seventj- or eighty actions. The memorandum and articles of association and any preliminary contracts are generally settled at the same time, for these documents are very commonly framed in contemplation of the prospectus, and with reference to what it is desired to say or not to say therein. The prospectus should not be finally settled until after the formation of the company. In settling a prospectus it is necessary to bear in mind — Important A. That the prospectus should be made attractive, and should points to bo ,,.,... , observed lu not be open to hostile criticism on the ground of significant settling a omissions therefrom, or vague statements therein, as re- prospectus. gards crucial points. B. That it should be framed so as to comply with the law, and so as not to give rise to any charge of unfairness or deception. As to A. No rules can be given as to making a pros];)ectus attractive. Attractive- The process must depend essentially on the subject-matter and on the "^®^" condition of the market. "Where a company is formed to take over some well-known and profitable business concern, a very bald state- ment of the facts may be enough to induce the public to rush in and subscribe for three times the number of shares offered. And where, as so often happens, the public is for the time being specially enamoured of one class of investment (e.y., gold, electric light, cycles, breweries. 90 PKOSPECTUSES. [CllAl'. III. No siguificant omissions or vagueness. Where a going con- cern. I'jffect on public of lijimes of directors, brokers, audi- tors, and solicitors and promoters. J.( gal rc- quiroracnts. nitrate, trusts, or industrial concerns), a very feeble prosiDectus may suffice. But there are many schemes which, though perfectly sound and hondjide, may yet have little or no chance of floating without the assistance of a prospectus framed with great skill and judgment ; in fact, a scheme may be good in itself, but, unless the public can be made to see its excellence, the capital will not be forthcoming. As to significant omissions and vague statements — Take the case of a going concern : the following questions may arise on the prospectus : — (1) If this is such a very profitable concern, why does the vendor part with it — or part with it on such moderate terms ? (2) What have the average profits been during the last few years ? Have they been rising or falling ? (3) Has any independent person or firm examined the books and certified as to the profits ? (4) Does the vendor take any substantial proportion of the purchase consideration in shares, or does he retire altogether ? (5) Has any and what independent valuation been made of the assets to be taken over, and how much is to be given for goodwill ? (6) Have the vendors agreed not to compete with the company ? (7) Is the real proprietor selling to the company, or is there an inter- mediate vendor, and is he making a profit on the transaction ? (8) Are the vendors paying any promotion money and how much ? It need scarcely be said that the names of the directors, brokers, auditors, and solicitors are regarded by the public and their advisers as affording some criterion of the character of the scheme put forward ; for it is assumed that persons of credit and position who thus officially connect themselves with a new venture, have at any rate satisfied themselves as to the bona fides of the undertaking, and think suffi- ciently well of its prospects to lend their names ; whereas, if the directors and others are unknown, or in bad odour, the public and their advisers may feel distrust, and may hesitate and think it better to abstain from subscription. So, too, the fact that a company is launched by professional promoters may affect the public subscription. The above are matters more for the consideration of the promoter and financier than of the lawyer; at the same time, when a prospectus is sul^mitted to a lawyer for settlement, it would be an error of judg- ment were he to confine himself to the merely legal aspects of the case, and not to point out practical defects which strike him as likely to be prejudicial to an appeal to the public. As to the legal requirements of the prospectus : In framing a prospectus the following rules should be borne in mind : — (1) The prospectus should not contain a misrepresentation of any material fact, or any deceptive or misleading statement, or any ambiguous statement, which is not true in every sense in which it niiglit bo understood. INTEODUCTORY NOTES. 91 (2) It should disclose every material fact subject to the quulitications below mentioned. (3) The prospectus, if it offers shares for subscription, should comply Avith s. 38 of the Companies Act, 1867. See infra, p. 123. (4) The provisions of the Directors' Liability Act, 1890 (p. 110), sliould be borne in mind, and the precautions below suggested (p. 120) should be taken. The non-observance of these rules may give the allottee of shares — Effect of uon- (a) The right to repudiate the allotment and rescind the contract ; (b) The right to sue, for damages or compensation, those who issue the prospectus, and others who are by statute responsible. And, first, as to the cases in which the allottee, induced by the pros- Ropudiution pectus to subscribe, is entitled to rescind on the ground of misrepre- lor misrepre- sentation or non- disclosure. or non- In order to establish this right, the allottee must prove — disclosure. (1) That the prospectus was issued by the company or by some director, promoter, or other person whose acts the company has adopted. (2) That the prospectus misrepresented some material fact, or omitted to disclose some material fact. (3) That he was induced to subscribe by such misrepresentation or non-clisclosure. As to (1), there is rarely any difficulty in proving this. In most Proof of cases the prospectus is issued after the incorporation of the company, ^^^^^® ^ ^ ^ . . . ■*■ . i vf 7 company or and with the sanction of its directors. Clearly, in such cases the directors or prospectus is the representation of the company. In other cases the Promoters, prospectus is issued by the promoters on the formation of the comjoany, and the directors allot with knowledge that the shares are subscribed on the basis of the prospectus. Here again the company, in effect, adopts the prospectus. Occasionally a prospectus is issued by the promoters before the company's incorporation, and applicatious are made on the basis of that prospectus and handed in after incorporation. In such cases, also, the company in allotting the shares in effect adopts the pros- pectus. Karhcrg' s case, (1892) 3 Ch. 13. " Speaking generaU}', there is," said Lindley, L. J., in that case, " no doubt that a misrejDresenta- tion, in order to vitiate a contract, must be made by a party to it, or by his agent. But this rule is not without exception. Steivart's case, 1 Ch. 574, and Downes v. Ship, L. Ii. 3 II. L. 343, warrant the proposi- tion that an application to a company, when formed, for shares based upon a prospectus issued by the promoters of the company before its formation, cannot be dissevered by the company from such prospectus." In Karherg' s case, siij)?-a, the application was made before incorpora- tion. It was addressed to one of the i^romoters, and stated that the applicant desired to subscribe for 200 shares in the proposed company, and requested the promoter, ''on the formation thereof, to obtain the allotment of such shares to me " ; but it did not refer to the prospectus. 92 PROSPECTUSES. [ChAP. III. After its incorporation, the company allotted tlie sliares so applied for, and it was held that the allottee was entitled, as against the company, to rescission of the contract for misrepresentation in the prospectus. This case is the more important because the directors, in allotting, ■were not aware that the application was made on the basis of the prospectus. This was found as a fact by Kekewich, J. (p. 6) : " The company received from Mr. Karberg an application for shares indepen- dently of any prospectus ; it is not shown that they ever knew that ho made the application on the faith of the prospectus, nor even that he had received any prospectus at all from any one." This appears to have been overlooked in Lynde v. A7iglo- Italian Hemp, &,'c. Co. (189G) 1 Ch. 178, for in that case Eomer, J., treats Karberys case as an instance of an allotment where "the directors of a company know, when allotting, that an application for shares is based on the state- ments contained in a prospectus." For other cases in which a company has been held responsible for a prospectus, see Henderson v. Lacon, 5 Eq. 249 ; lioss v. Estates In- vestment Co., 3 Ch. 682 ; Peek v. Gurney, L. E. 6 H. L. 377 ; Re Denham, 25 C. D. 752 ; Tamplin' s case, W. N. (1892) 94, 146. And where the prospectus is improperly framed the company cannot escape the consequence by throwing the blame on its directors, and saying that it did not authorize them to make any misrejjresenta- tion ; for "the cases clearly show this — that any misrepresentations made by the agents of a company .which form the foundation of a contract between that companj^ and a third person — those misrepre- sentations lying at the root of the contract — will entitle the other party to avoid the contract, and the companj' must in that sense take upon themselves the consequences of the misrepresentations of their agents." Per Page-Wood, V.-C., Henderson v. Lacon, 5 Eq. 249, 261. On the other hand, where A. takes shares as agent for B., but without disclosing to the company the agency, B. cannot claim relief unless A. was deceived. Capel v. Sims, 58 L. T. 807 ; IlysJop v. Morel, 7 T. L. E. 263. The golden As to (2) the obligation of those who issue prospectuses inviting rule as to application for shares was long since laid down l>y Vice-Chancellor prosnoctuscs. Kiudersley in Brunswick, c\r. Co. v. Muygeridye (1861), 1 Dr. & Sm. 383, in words wliich Page-Wood, V.-C, described as a " golden legacy." Henderson v. Lacon (1867), 5 Eq. 362. "Those," said the Vico-Chancellor, "who issue a prospectus, liolding out to the public the great advantages which will accrue to persons who will take shares in a proposed undertaking, and inviting them to take shares on tho faith oi tho roi»rescntations therein contained, are bound to state everything with strict and scrupulous accuracy, and not only to abstain from stating as fact that which is not so, but to omit no one fact within tlieir knowledge tho existence of which might in any degree affect tho nature, or extent, or quality, of tlie privileges and advantages which the prospectus holds out as inducements to take shares." And in Ccn- INTKODUCTORY NOTES. 9U tral llalhruy of ]'cncr.uela v. Kiscli, L. li. 2 H. L. 1 1;3, Lord Chelmsford said that ikj misstatement or concealment of any inaterial facts or circumstances ought to be permitted ; that the ijublic who were invited by a prospectus to join in any new venture ought to have the same opportunity of judging of everything which has a material bearing on the true character of the adventure, as the promoters themselves possessed, and that the utmost candour ought to characterise their public statements ; and his Lordship referred with approval to tiie rule laid down by Kindersley, V.-C, as above mentioned. Nevertheless, this "golden rule" is, perhajDs, somewhat of a " counsel of perfection " ; at all events, it has been qualified by sub- sequent decision. Thus, in Peck v. Gurney^ L. E. 6 H. L. 403, it was held that, to support an action of deceit, there must be some active misstatement of fact, or, at all events, such a partial or fragmentary statement of fact as that the withholding of that which is not stated makes that -which is stated absolutely false. This, it will be observed, Avas said in regard to an action of deceit, in whieli fraud is of the essence of the action, and -which differs essentially from one brought to obtain rescission on the ground of misrepresentation of a material fact. Per Herschell, L.C., Dernj v. Peek (1889), 14 App. Cas. 359. But in McKeown v. BoudanI, .\-c. Co. (1896), 74 L. T. 712, it was held that even in an action for rescission, mere non-disclosure of material facts is not sufficient to vitiate the contract. " I think," said Eigby, L. J., in that case, " the law is this, that if you rely as a ground for the rescis- sion of a contract on the omission of a statement, you must show that the omission of that statement makes -what is stated misleading. It is not that the omission of material facts is an independent ground for rescission, but the omission must be of such a nature as to make the statement actually made misleading. In other words . . . suppression of the truth may contain a suggestion of falsity." So, also, in Aaron's Reefs v. Twiss, (1896) A. C. 273, Lord Watson said : " The duty of disclosure is not the same in a prospectus inviting- share subscriptions as in the case of a proposal for marine insurance. In an honest prospectus many facts and circumstances may be carefully omitted, altliough some subscribers might be of opinion that these would have been of materiality as influencing the exercise of their judgment. But the statement of a portion of the truth, accompanied by suggestions and inferences which would be possible and credible if it contained the whole truth, but becomes neither possible nor credible whenever the -n'hole truth is divulged, is, to my mind, neither more nor less than a false statement." See, also, Hcymann v. European Central Rail. Co., 7 Eq. 154. In Aaron s Reefs case the prospectus standing alone did not contain any misrepresentation of facts, but read in conjunction with certain contracts offered thereby for inspection, it was false and misleading, and relief -was granted accordingly ; and the following words of Lord Halsbury are specially deserving of attention : '"It is said that there 94 PROSPECTUSES. [ChAP. III. is no specitic allegation of fact whicli is proved to be false. Again, I protest, as I have said, against that being the true test. I should say, taking the whole thing together, was this a misrepresenta- tion ? I do not care by what means it is conveyed — by what trick, or device, or ambiguous language : all these are expedients by whicli fraudulent people seem to think they can escape from the real con- ditions of the transaction. If, by a number of statements, you inten- tionally give a false impression, and induce a person to act upon it, it is not the less false ; although, if one takes each statement by itself, there may be a difficulty in showing that any specific statement is untrue." See, further, sujira, p. 89. Law or fact. A misrepresentation of law is not a misrepresentation of fact. Beattie v. Lord Eho-y, 7 Ch. 777. But a statement of something as a fact is not the less a representation of fact because it involves a representation of law. West London Commercial Bank v. Kifso7i, 13 Q. B. Div. 360 ; Dcrry v. Peek, 14 App. Cas. 337 ; New Briinstvick Co. v. Conyheare, 9 H. L. C 711 ; EagUsfield V. Londonderry, 4 C. Div. 693, 702, In the case last mentioned, Jessel, M. R., stated that, " A misrepresentation of law is this : When you state the facts, and state a conclusion of law, so as to distinguish between facts and law. The man who knows the facts is taken to know the law ; but when you state that as a fact which no doubt involves, as most facts do, a conclusion of law, that is still a statement of fact and not a statement of law." Accordingly, in Derry v. Peek, nbi si/j)., it was not disputed that a statement that a company had by special Act of Parliament certain powers was a statement of fact. A representation that something will or should be done or come to pass is not necessarily a representation of fact; e.g., the company "will construct," or "will acquire further concessions," or "on these figures the profits should be very large." The authorities establish that a mere representation that something "will" be done is not a representation of fact ; for "there is a clear difference between a mis- representation in point of fact, a representation that something exists at the moment which does not exist, and a representation that some- thing will be done in the future. Of course, a representation that something will be done in the future cannot either be true or false at the moment it is made, and although you may call it a representation, if it is anything, it is a contract or promise." Per Mellish, L. J., Beattie v. Lord Ebury, 7 Ch. 804. And see Alderson v. Maddison, 5 Ex. D. 293, and {sub nam. Aladdison v. Alderson) 8 App. Cas. 467 ; ILallows V. Fernie, 3 Ch. 467; Bellairs v. Tucker, 13 Q. B. D. 562; Knor V. Ilayman, 67 L. T. 137. And a calculation as to future profits is not a statement of fact. Bentley v. Black, 9 T. L. R. 580. B<,-li.;f, A representation of belief, opinion, expectation, or intention is a "I'll""". renresontation of fact. " There must be a misstatement of an existing intention. fact ; but the state of a man's mind is as much a fact as the state of his digestion. It is true that it is very dilJicult to prove what is the INTU<)DU(frOHY NOTES. 95 state of a man's miud at a particular time, but if it can be ascertained, it is as much a fact as anything else. A misrepresentation as to the state of a man's mind is, therefore, a misstatement of fact." Per Bowen, L. J., EdgiJigton v. Fitzmaurice, 29 C. Div. 459, 483. See also Peek V. Gurney, L. E. 6 II. L. 377, 404, where Lord Cairns appears to have considered that a statement as to the opinion of the directors might, if false, have amounted to a misrepresentation of fact. And see Karhenfs case, (1892) 3 Ch. 1, 11. " But .... I do not think any particular form of words is neces- sary to convey a false impression. Supposing a person goes to a bank where the people are foolish enough to believe his words, and says, ' I want a mortgage upon my house, and my hoixse is not completed, but in the course of next week I expect to have it fully completed.' Sup- pose there was not a house upon his land at all, and no possibility, therefore, that it could be fully completed, can anybody say that that was not an affirmative representation that there was a house which was so near to completion that it only required another week's work upon it to complete it ? .... So here, when I look at the language in which this prospectus is couched, and see that it speaks of a pro- perty which requires only the erection of machinery to be either at once or shortly in a condition to do work, so as to obtain all this valuable metal from the mine, it seems to me that, although it is put in ambidextrous language, it means as plainly as can be that this is now the condition of the mine : that such and such additions to it will enable it shortly to produce all those great results, and that there is a representation of an actually existing fact If you are looking to the language, as onli/ the language of hope, expectation, and belief, that is one thing ; but .... you may use language in such a way as, although i?i the form of hope and expectation, it may become a repre- sentation as to existing facts ; and if so, and if it is brought to j^our knowledge that these facts are false, it is a fraud." Per Lord Hals- bury, L. C, in Aaron's Reefs v. Twiss, (1896) A. C. 273, 284. It is conceived that there is nothing inconsistent with these views iu Jordan v. Money, 5 H. L. C. 185 ; Citizens' Bank v. First National Bank, L. E. 6 H. L. 352, 360 ; and Maddison v. Alderson, 8 App. Cas. 467. A man who truly states his intention is not estopped from changing that intention. The expression of intention may, in some circumstances, amount to a contract, but it does not give rise to an estoppel. As to liability in case of careless language and ambiguous state- Careless ments : The representation relied on need not be clear and unam- fv**^® biguous, if it is reasonably capable of bearing the meaning which the statements, allottee attributed to it ; for " if persons publishing a prospectus use such careless language that their statements, literally read, are untrue, although this literal sense is different from what they intended, this amounts to a misrepresentation." Per Lord Chelmsford, Hallows v. Fer7iie, 3 Ch. 476. _, 96 PROSPECTUSES. [Chap. III. Single misre- presentation or suppression sufficient. Belief of directors in trutli of state- ment. If a man makes a statement, which, according to its ordinary meaning bears a particular construction, he, in my opinion, is liable to those who reading it and construing it reasonably do put upon it the primary meaning and the fair construction of the words used. Per Cotton, J., Peek v. Derry, 37 C. D. o41. And in the case of an ambiguous statement, it is immaterial that the words are intended by those who issue the prospectus to be understood in a sense in which they are true, if they are reasonably capable of being understood in a sense in which they are false, and the allottee shows that he understood them in that sense. Smith v. CJiadwich, '■10 C. Div. 27, 45; 9 App. Cas. 187. But a reasonable construction must be j)ut on a prospectus, and an allottee is not permitted to say that he understood the words in a sense they do not fairly bear. "It is true that a person "\^ho issues a state- ment is not only answerable for what he in his own mind intended to represent, but he is answerable for what anyone might reasonably suppose to be the meaning of the words he has used." Per Cotton, L. J., Arhcright v. Newbold, 17 C. Div. 322. And see Edgington\. Fitz- mani-ice, 29 C. Div. 459, where it was held that the plaintiff had no right to assume that "debentures" imported any charge on the company's property. A single misrepresentation or (in the case of shares) suppression of a material fact may be sufficient to entitle the allottee to rescission. Re London and Staffordshire Co., 24 C. D. 149 ; Denton v. 3Iocneil, 2 Eq. 352, 355. And where a representation as to a material fact in a prospectus is untrue, in point of fact it is no defence, where rescission of contract is sought, that the directors when they made it believed it to be true. See judgment of Lord Cairns in SmitKs case, 2 Ch. 604, 615; and in Reese River Co. v. Smith, L. E. 4 H. L. 79 ; Mathias v. Yetts, 46 L. T. 502 (Ct. of Ap.). Evidence of misreprcsci.- tiition .'trid iion-di.' - closure. As to evidence of misrepresentation and non-disclosure — The shareholder, whether he seeks to rescind his contract or sue for damages, must, of course, prove the facts he relies on, and evidence of information and belief is not admissible in such cases, for the proceed- ing is not interlocutory in character. Gilbert v. Endean, 9 C. Div. 200. The shareholder may, of course, rely on the admissions of the defen- dants. But, if an admission of the company is relied on, it must be shown that it was made in such circumstances as to bind the company. For example, in British Burmah Co., 50 L. T. 815, the company had directed an expert to report on the value of the mine, and his report, to the effect that it was worthless, though read at a general meeting of the company and circulated among the shareholders, was not allowed to be taken as an admission by the company. See also Re Devala Provident Co., 22 C. D. 593. INTRODUCTORY NOTES. 97 The following are examples of material misrepresentations and Examples of 1 . 1 material mis- non- disclosure : — (1) Where the comijany was formed to construct and work a railway, and it was — (1) untruly stated that the contract for the execution of the works had been entered into with a responsible contractor ; (2) untruly stated that the contract price was considerably within the available capital ; (3) not men- tioned that the concessions which the company was fonned to carry out had been purchased from the original g'rantees at a cost of -50,000^. See Central Eij. Co. of Voiezxda v. Kisch, L. R. 2 H. L. 99. (2) Where it was untruly stated that "more than liaK the first issue of shares has been already subscribed for," and that '• upwards of 70,000/. has already been expended on the estate by the vendor in buildings and improvements, in addition to the purchase-money paid by him for the land." See Ross v. Estates Investment Co., 3 Eq. 122 ; 3 Ch. 682. (3) Where it was stated that "one-half the required capital has been subscribed by the directors and their friends," whereas not one-fourth had been sub- scribed. Kent v. Freehold Land Co., 4 Eq. 588 ; 3 Ch. 493. And see HendersoHY. Lacon, 5 Eq. 249, and Arnison v. Smith, 41 C. Div. 348. (4) Where it was stated that a particular mine "containing very valuable claims, some of which are in fuU operation, and make large daily returns, " had been contracted to be purchased, whereas the mine was, in fact, worthless, and there were no claims in operation. Eeese River Co. v. Smith, L. R. 4 H. L. 64. (5) Where, in the case of a banking company, it was untruly stated (a) that the bank had arranged to take over several successful banking institutions of old standing ; and (b) that the directors had had an offer of support as to capital and business from a large and powerful bank in Paris. See Carting V. London and Leeds Bank, 56 L. T. 115. (6) Where it was stated that " the surplus assets, as appear by the last balance- sheet, amount to upwards of 10,000/.," whereas, in fact, there was a deficit. See Re London and Staffordshire Co., 24 C. D. 149. In this case it was admitted that the misrepresentation was made bond fide in consequence of a mistake of fact, but relief by rescission was granted. (7) Where some of the directors named in the i)rospectus had not accepted office. Blake's case, 34 Beav. 639 ; compare Scottish Petroleum Co., 23 C. Div. 413 ; and JBTa/foecA- V. Fernie, 3 Ch. 407: and where some of the members of the council of administration had not consented to act. IVaimvriglif s ea.ie, 62 L. T. 30 ; 63 L. T. 429 ; Karberg's case, (1892) 3 Ch. 1. (8) Wliere the company was formed to acquire a business, and it was stated that the profits of the business had, during a specified period, amounted to or averaged so much, whereas in fact they were much less. (9) Where the company was formed to work a mine, and it was untruly stated that a particular reef or bed had been found on the property, and that the mine was similar in character to some other mine. See Re Mount Morgan Co., 56 L. T. 022. (10) Where it was stated untruly that the profits had amounted to 17 percent. on the capital employed. Glasier v. Rolls, 42 C. Div. 430. (11) "WTiere it was stated that the company had an agreement to acquire part of a well-known mine, whereas it was an entirely different property. (12) Where it was stated that the promoters had expended a large specified simi in opening up or testing the property, whereas the statement was wholly, or to a considerable extent, untrvie. (13) Where the prospectus stated in effect that the company was formed to acquire an existing patent, whereas only provisional protection had been obtained. Scott v. Snyder, i?c. Co., 66 L. T. 278. P. H representa- tions. 98 PKOSPFXTlfSES. [(^ITAP. TIT. (11) Wliere the company was formed to work a patented invention, and it was stated that it had obtained an exclusive licence to work such invention in a particular district, whereas the licence was not exclusive. (16) Where it was stated that no promotion money was to be paid, whereas there was an agreement to pay large sums. Lodwick v. Earl of Perth, 1 T. L. R. 76. (16) Where it was stated that the company held the property under lease at a small ground rent, whereas there was a considerable royalty in addition. (17) Where it was stated that a specified sum was to be paid for the property, whereas the sum included a large sum for promotion money. Kent v. Freehold Land Co., 4 Eq. 588 ; Gibb v. Great Southern Mijsore Co., Ct. of App. 10 Feb. 1882 ; Capel\. Shns, 53 L. T. 807. (18) Where the company was formed to buy a mine, and extracts from the report of an expert were set forth which gave a misleading impression of the report, and induced the beUef that the mine was similar to a rich adjacent mine. Jie Mount Morgan Co., 56 L. T. 622. (10) Where the company was formed to work an invention, and it was untruly stated that a contract had been made for the purchase from the company of 50,000 of the patented machines. Snook v. Sdf-Acting Co., 3 T. L. R. 612. (20) Where in the case of a tramway company it was stated that the company had by the special Act the right to use steam, whereas it only had that right with the sanction of the Board of Trade. Berry v, Feek, 14 App. Cas. 337. (21) Where it was untruly stated that the guaranteed dividend was secured by deposit with trustees of a sufficient amount of Government securities. Eno.v V. Hayman, 67 L. T. 137. (22) Where a promoter, who was to get part of the purchase-money, was untruly put forward as one of the vendors. Capel v. Sims, 58 L. T. 807. (23) WTiere it was untruly stated that the vendor was to pay all the preliminary expenses. Re Libcrian Government Concessions, 9 T. L. R. 136. (24) W^here it was untruly stated that the company were the sole manufacturers of asbestos in France, and had a practical monopoly. Hyde v. Xew Asbestos Co., 8 T. L. R. 121. (26) '^Vhere it was untruly stated that the company's process was a commercial success. Stirling v. Fasshurg Grains, 8 T. L. R. 71. Examples of cases where the misrepre- sentation or non-disclosure was insuffi- cient. The following are instances in which the misrepresentation or non- disclosure relied on was held to be insufficient : — (1) Where it was stated that an invention to be acquired by the company had been tested, and that according to the experiments the material could be produced at a specified cost, but that it was intended to test the invention further, and it in fact turned out worthless. Denton v. Maencil, 2 Eq. 352. (2) Where the prospectus mentioned ' ' a guaranteed dividend of not less than 1 5 per cent, for the first five years," whereas there was only some unrecorded understanding with the vendor that he was to give such guarantee. Kent v. Freehold Land Co., 4 Eq. 588. Hero it was considered that there was enough to put the plaintiff on inquiry. (3) Where the prospectus did not disclose an arrangement between promoter and director for the qualification of the latter. Ucymann v. European Central Rail. Co., 7 Eq. 154 ; and see Gover''s case, 1 C. Div. 182. (4) Where the prospectus omitted to state that the company would have to make a deposit of 20,000/. by way of guarantee, with liability to forfeiture. Central INTRODUCTORY NOTES. 99 Hail. Co. V. Kisch, L. E. 2 H. L. 99 ; and see Smith v. f'hada-klc, 9 App. Cas. 187. (5) Where it was stated that the company was to have "a free grant of 30,000 acres in the provinces through which the railway is to pass," whereas the 30,000 acres were to be granted only out of the provinces benefited by the railway, and private property in those provinces was excepted. Central Mail. Co. V. Eish, L. R. '2 H. L. at p. llo. (G) Where a government guarantee of 9 per cent, per annum on the capital was mentioned, without reference to the fact that it was to last so long only as the capital did not produce 9 per cent, for a reason not imputable to the company. (7) Where it was stated that certain reports on the property had been prepared ' ' for the directors, ' ' though really made for the promoters. But in this case there was no finding of fraud. Angus v. Clifford, (1891) 2 Oh. 449. As to (3), supra, p. 96. The allottee is not entitled to rescission unless lie was induced to No rescission enter into the contract by the representation or suppression which he ^^^ induced establishes. by the repre- It is not an inference of law that a party who takes shares on a ^^ contract to' prospectus containing a misrepresentation was induced to subscribe by take the that misrepresentation. Per Lord Blackburn, in Smith v. Chaclwic/i, 9 App. Cas. 187. It is a question of fact to be determined with due regard to all the circumstances. But "if it is proved that the defen- dants, with a view to induce the plaintiff to enter into a contract, made a statement to the plaintiff of such a nature as would be likely to induce a person to enter into a contract, and it is proved that the plaintiff did enter into the contract, it is a fair inference of fact that he was induced to do so by the statement." Per Lord Blackburn, ibid., p. 196. And the following passage from the judgment of Lord Halsbury, L.C., in Aniisoti v. Smith, 41 CD. 369, points in the same direction. " It is," said his Lordship, " an old expedient, and seldom successful, to cross-examine a person who has read a prospectus, and ask him as to each particular statement what influence it had on his mind, and how far it determined him to enter into the contract. This is quite fallacious ; it assumes that a person who reads a prospectus and deter- mines to take shares on the faith of it, can appropriate among the different parts of it, the effect produced by the whole. This can rarely be done even at the time, and for a shareholder thus to analyse his mental impressions after an interval of several years, so as to say which representation in particular induced him to take shares, is a thing all but impossible. A person reading the prospectus looks at it as a whole, he thinks the undertaking is a fine commercial speculation, he sees good names attached to it, he observes other points which he thinks favourable, and on the whole he forms his conclusion. You cannot weigh the elements by ounces. It was said, and I think justly, by Sir G. Jessel, in Smith v. Chadivich, that if the Court sees on the face of the statement that it is of such a nature as would induce a person to enter into the contract, or would tend to induce him to do so, or that it would be a part of the inducement to enter into the contract, h2 100 PROSPECTUSES. [Chap. III. Usual stated o-rounds for relief. Onus of proof ; liow dis- charged. the inference is, if he entered into the contract, that he acted on the inducement so held out, unless it is shown that he knew the facts, or that he avowedly did not rely on the statement whether he knew the facts or not. I think, therefore, that the second proposition is proved • — that the plaintiffs were induced to take stock by the misrepresen- tation." But this inference does not arise when the statement, being ambiguous, is only false in one sense ; in such a case it rests with the allottee to show that he understood the words in that sense, and was thereby induced to subscribe. Smith v. Chadwick, 9 App. Cas. 187. However, in most cases the allottee swears that he was induced by the particular misrepresentation or suppression to take the shares, or that he subscribed on the faith of the prospectus, and that he would not have subscribed had he known the facts. And where thus or otherwise a j^rimd facie case for rescission has been established, the onus of proving that the allottee was not so induced is cast on the company. The onus may be discharged in various ways, e.g., by showing — (1) That the allottee subscribed before he saw the prospectus. Smithv. Chadivick, 20 C. D. 68. (2) That he was really induced to subscribe by arrangement with promoters. (3) That he was really induced to subscribe by representations made by parties for whom the company was not responsible. (4) That he did not rely on the statements, but investigated the matter himself. Jennbigs v. Broughton, 5 D. M. & G. 126 ; 17 Beav. 238 ; and see Mathias V. Yetts, 46 L. T. 497. (o) That the prospectus itself showed that the statements were based on hearsay, and were to be verified subsequently. Re British Btirmah Co., 56 L. T. 815. (6) That the allottee is a person of such experience and character that it is not credible that he was misled by the statement relied on.* But an allottee will not lose the right to rescission by reason of the particular misrepresentation complained of not having been the only thing which induced him to subscribe. Edgington v. Fitzmaiirice, 29 C. Div. 459 ; Carling v. London and Leeds Bank, 56 L. T. 115 ; Arnison V. Smith, 41 C. Div. 348 ; Scott v. Snyder, ^-c. Co., 66 L. T. 283 ; S.C., 67 L. T. 104. Where the prospectus merely states that A. B. reports so and so, the applicant is not, as between him and the company, entitled to assume that those who issue the prospectus guarantee the truth or accuracy of A. B.'s report. «S'miV/t's case, 2 Ch. 604 ; Rawlins v. Wickham, 3 D. & J. 304 ; lie British Btirmah Co., 56 L. T. 815 ; Bentley v. Black, 9 T. L. R. 580. In the case last mentioned the prospectus set out a report by an accountant, and the Court of Appeal held that there was no representation by the directors that the report was correct. " It was * " It is important to sec whether the plaintiff was a person likely through inexperience to bo misled by a prospectus, or to place implicit reliance on all that it contains." Per Lord Chelmsford, Ilallows v. Fcrnie, 3 Ch. 467 ; and sec Bellairs v. Tucker, 13 Q. B. D. 677 ; Smith v. Char! ir Irk, 9 App. Cas. p. 191. INTRODUCTOKY NOTES. 101 true that Mr. L. was a chartered accountant, and that ho had made a particular rej)ort, and that was all that the directors said in tlie prospectus." Per Lord Esher, M. E. But if the prospectus misrepre- sents the contents of a report or other document, or states its contents in a deceptive manner, the subscriber is not bound to look at the document to see whether it bears out what is stated. "The applicant is entitled to say: you at least, who have stated what is untrue, cannot accuse me of want of caution, because I relied on your fairness and honest}'." Per Lord Chelmsford, Central Rail. Co. of Venezuela v. Kisch, L. E. 2 H. L. 99. " The representation once made releases the party from an investi- gation, even if the opportunity is afforded." Per Cotton, L. J., Red- grave V. Hurd, 20 C. D. 23 ; Re Liherian Government Concessions, 9 T. L. E. 136 ; Aaron's Reefs v. Twiss, (1896) A. C. 273. Formerly it was customary to issue the prospectus before the incor- Issue of pio- poration of the company, and in such case it was held that any sub- ^P^*^*^^ bdore . . ^ . "^ incorporatou. stantial variance between the objects of the company, as stated in the prospectus, and in the subsequently registered memorandum of asso- ciation, entitled the allottee to repudiate his shares. Ship's case, 2 De Gr. J. & S. 544 ; Webster's case, 2 Eq. 741 ; Steivart's case, 1 Ch. 574. But this course is now rarely adopted. Moreover, in Peel's case, Eeference to 2 Ch. 674, Lord Cairns laid down rules, in regard to reHef in such ^^arTicfes™ cases, which have practically put an end to further claims on the ground of variance, thus: "If the memorandum and articles are in existence when he (the applicant) applies for shares, and if he agrees to take his shares on the footing of the memorandum and articles, then I think that he ought to be held bound to look at them before he applies for shares. But where the memorandum and articles are not in existence at the time of application, I think that, at the very latest, when he receives his allotment of shares, he ought to satisfy himself that there is nothing in the memorandum and articles to which he desires to make any objection." This was approved in Oakes v. Turquand, L. E. 2 H. L. 352 ; and see Downes v. Ship, L. E. 3 H. L. 359. Sometimes a representation which was true when the prospectus Where repre- was issued becomes false before the allotment is made. In such case ^^'^*^*';°J? °" 7 true at time. the fact ought to be communicated to the applicant. Re Scottish Petroleum, 23 C. Div. 438 ; Henderson v. Lacon, 5 Eq. 249 ; and per Lord Blackburn, Brownlie v. Campbell, 5 App. Cas. 950. A contract to take shares, debentiu'es, or debenture stock, which has In every case been induced by misrepresentation or suppression of material facts, yo^^^ahle^^not'' is voidable, not void ; that is to say, the shareholder has the option to void, affirm or avoid the contract, and it remains good xmtil the shareholder elects to avoid it. Oahes v. Turquand, L. E. 2 H. L. 325. But the right to avoid the contract is qualified, that is to say. Prompt action (1) it must be exercised, if at all, promptly on discovering the facts, ^n(jin°!^up 102 PROSPECTUSES. [Chap. III. Laches. ]\roro rumour "r Huspicion. and (2) the right, in the case of shares, will be lost, if a winding-up commences before the contract is effectually avoided. "If a man claims to rescind his conti-act to take shares in a company, on the ground that he has been induced to enter into it by misrej)resentation, he must rescind it as soon as he learns the facts, or else he forfeits all claim to relief." Per James, L. J., SJunyley v. Louthi &;c. Rail. Co., 2 C. Div. 663, 685 ; and see Ashley's case, 9 Eq. 263, For his name being on the register, he is held out to the public as a member, and persons may be induced to act accordingly. Oakes v. Turquand, L. E. 2 H. L. 325. Hence, Lord Cairns, L. C, said in Scholey v. Central Rail. Co. of Venezuela, 9 Eq. 267, n., that: "He certainly thought the Court would be most careful to see, in the case of a company going on and trading, in which the rights of the shareholders and others varied from day to day, that a person coming to complain of misrepresentations, and coming to avoid a voidable contract, came within the shortest limit of time which was fairly possible in such a case." A short delay may be sufficient to deprive him of the right to rescind. Thus in Taife^s case, 3 Eq. 795, a delay of^a month after the shareholder had given notice of repudiation, which the directors declined to permit, was deemed fatal. And in PeeVs case, 2 Ch. 674, Lord Cairns was of opinion that a delay of two months might be fatal. It may be that a delay of fourteen days is fatal. See Re Scottish Petroleum Co., 23 C. Div. 413, 434 (-^here, however, the point was not necessary to the decision of the case) ; and Sheltoti^s case, 68 L. T. 210. See further, Kent v. Freehold Land Co., 3 Ch. 493 ; Reese River Co. v. Smith, L. E. 4 H. L. 64 ; and Central Rail. Co. of Venezuela v. Kisch, L. E. 2 H. L. 99. And although time does not run till discovery of the facts giving the right to rescind, a shareholder is not entitled to shut his eyes and ears. Thus, if the directors send him a report showing that there have been misrepresentations, and he admits its receipt, he must be taken to have read it, and time will run accordingly. Scholey v. Central Rail. Co., 9 Eq. 266, n. ; DunJdey's case, 7 T. L. E. 234. See however Karhery's case, (1892) 3 Ch. 1 ; 66 L. T. 184. And ho is not at liberty to " stand by when a great number of people tell him that misrepresentations have been made by which shareholders have boon induced to take shares, and wait xmtil it is decided by a court of justice that there has been a misrepresentation ; on the contrary, it is his duty in such a case to go and ascertain for himself whether there is a misrepresentation or not." Per Eomilly, M. E., Ashley s case, 9 Eq. 269. Nevertheless, more rumour that the company is a swindle, or suspicion, is not enough. Thus, in Central Rail. Co. of Venezuela v. Kisch, L. E. 2 11. L. 99, the allotment was on July l.Otli, and the allottoo admitted having heard adverse rumours soon after the allotment, but he did not actually discover the facts till INTRODUCTORY NOTES. 103 22nd November, and it was considered that he was not barred by this delay. Lord Chelmsford, L. C, said "that although the respondent might have heard unfavourable rumours, and conceived suspicions of the company at an early period after he obtained his shares, yet that he received no certain information upon which he could act until the month of November, and he did nothing between that day and the 28th of January, 1865 (when he filed his bill), which amounted to acquies- cence." And see Reese River Co. v. Smith, L. E. 4 H. L. 64, and Aaron's Reefs v. Tzciss, (1896) A. C. 273, 293. And it' has been held that when a company relies for defence on non-repudiation within a reasonable time after receipt of a circular disclosing facts giving a right to repudiate, it is for the company to prove the receipt of the circular. Re London and Staff. Co., 24 C. D. 149. A limited delay may be excused where it has resulted from hondjide Reasonable negotiations between the repudiating shareholder and the company. ^ ^^' NeilVs case, 15 W. E. 894 ; Paicles case, 4 Ch. 497. If the company forfeits the shares and give notice of the forfeiture Effect of for- te the shareholder, and the respondent had not lost his right to repudiate *|^^|^^q°^ at the date of the notice, the relation of company and shareholder is repudiate severed, and the latter becomes a mere debtor to the company for calls, ^^^^^^s. and if he has not done any act to repudiate the contract, he is not then bound to take any step for the mere purpose of getting rid of his liability to pay the calls, but to an action to recover them may set up the misrepresentation as a defence. Aaron's Reefs v. Ttviss, (1896) A. C. 273, 295. As to the effect of winding-up on a claim to rescind for misrepre- Effect of sentation : It is now settled that the right to rescind cannot be exercised ■"'^ mg-up after the commencement of a winding-up ; that is to say, where the winding-up is by the Court, after the presentation of the petition on which the order is made, and where the winding-up is voluntary (with or without the supervision of the Court), after the resolution for winding-up is passed. Oakes v. Turquand, L. E. 2 H. L. 325 ; Stone v. City and County BanJi, 3 C. P. Div. 282. And whether the company is solvent or not makes no difference. Burgesses case, 15 C. D. 507. The ground of the decision in OaJces v. Turquand, uli supra, was that the contract was voidable, not void, that a voidable contract could not be avoided after the rights of third parties had supervened, and that by the winding-up the rights of the company's creditors had supervened, and that there was a statutable liability to contribute. What is an effectual repudiation : — Effectual repudiatiou. (1) It is sufficient if the shareholder, without undue delay, gives notice to the company that he repudiates, and the directors thereupon bona fide assent to the rescission of the contract before a winding-up commences. An order of the Court is not necessary in such a case. Wrif/ht's case, 7 Ch. 55 ; H/iese River Co. v. Smith, 4 H. L. 64, 74. And this may be sufficient even where the directors do not in fact remove the name of the repudiating shareholder from the register of members. 104 PROSPECTUSES. [ClIAP. III. And it may be sufficient, although the ground put forward by the share- holder for rescission is not sufficient, provided the directors know that there are in fact valid grounds on which rescission might be claimed. Wrlghfs case, 7 Ch. 55. (2) It is sufficient if the shareholder, without undue delay, and before a winding- up commences, takes legal proceedings to enforce rescission, even thougli the winding-up commences before the order for rescission is obtained. Mcese River Co. v. Smith, L. R. 4 H. L. 64. But it may be too late if the proceedings are not taken until after the company has become publicly insolvent. Tennerit v. Cit>j of Glasgoiv Banlc, 4 App. Cas. 615 ; Carling v. London and Leeds Bank, 56 L. T. 115. (3) It is sufficient if the shareholder gives notice of rescission, and, although the directors do not assent to rescission, it is agreed that the matter shall abide the result of some pending legal proceeding against the company at the suit of a shareholder claiming relief on similar grounds. Lawless caw, 4 Ch. 497. But in the absence of such an agreement the mere fact that proceedings are pending is not enough to excuse delay. McNciWs case, 10 Eq. 503 ; Ashleifs case, 9 Eq. 263. Insufficiency. But it is not sufficient — (1) If the shareholder gives notice of repudiation, but the directors decline to assent to rescission, and the shareholder does not promptly take legal proceedings. Hare's case, 4 Ch. 503 ; Re Scottish Petroleain Co., 23 C. Div. 413. (2) If the shareholder takes proceedings, but abandons them. Reid v. London and Staffordshire Co., 32 W. R. 94 ; 49 L. T. 468. (3) If the shareholder gives notice of repudiation, and before the directors assent to rescission, or legal proceedings are taken, a winding-up commences. Oahes V. Turqaand, L. R. 2 H. L. 325; Reese River Co. v. Smith, L. R. 4 H. L. 64. (4) If the shareholder to an action for calls pleaded that he was induced to take the shares by fravid, and obtained a verdict, but took no further action to have the contract rescinded before a winding-up. Cleveland Lron Co., 15 W. R. 95. Conduct of shareholder apparently affirming contract. The rig-lit to rescind may be lost not only by delay or a winding-up, but also by conduct which, shows an intention on the part of the shareholder to affirm the contract. Thus, if the shareholder, after discovery of the facts giving him a right to rescind, treats the contract as subsisting, e.g., by endeavouring to sell the shares {Ex parte Briggs, 1 Eq. 483), by executing a transfer of the shares ^Crawley' s case, 4 Ch. 322), by paying calls or instalments or receiving dividends {Scholey v. Central Rail. Co., 9 Eq. 266, n. ; Ketit V. Freehold Land Co., 4 Eq. 588 ; Shcarman^s case, 75 L. T. 385), or by attending and voting at a general meeting in person or by proxy, fiharpley v. Lotith, ^'c. Co., 2 C. Div. 663. And so, too, he may be bound, if he takes a transfer of other shares. Paige's case, 15 "W. E. 892. ]>ut he is allowed a reasonable time to obtain evidence. Central Jlail. Co. of Venezuela v. Kisch, 2 II. L. 99 ; and Re British Burmah Co., Kay, J., 21 Juno, 1888. But a transfer of part of tho shares before dih*covery does not INTRODUCTORY NOTES. 105 preclude relief as to the rest. Re Mount Moryan and West, 56 L. T. 622. And it is conceived that acting as a member will not operate to affirm the contract, if, before so acting, the shareholder has definitively elected to avoid the contract, e.g., by issuing his writ. For "if a man once determines his election it shall be determined for ever." Com. Dig. "Election" (C. 2). Quod semel placuit in electionibus ampUus dispUcere non potest. Co. Litt. 146 a; dough v. L. ^' N. W. Rail., L. E. 7 Ex. 26. See also Sccn-f v. Jardine, 7 App. Cas. 345, 360, in which Lord Blackburn, referring to the above maxim, said : "That is Coke ujion Littleton, and I do not doubt that there are many older authorities to the same effect, but that rule has been uniformly acted upon from that time at least down to the present. When once there has been an election to do one of two things, you cannot retract it and do the other thing ; the election once made is finally made." This rule was recognized by the Court of Appeal in Foulkes v. Quartz Hill Co. (1884), 1 C. & E. 156 ; in that case it was held that the issue of a writ claiming rescission of a contract was a definitive election by the plaintifit to avoid the contract, and accordingly that in subsequently voting at a meeting of the company he did not prejudice his j)osition. The case is not reported on appeal, but the following note appears in the report above referred to : " The Court of Appeal reversed the above decision, holding that the issue of the writ was a definitive election to rescind, and that this election was not affected by the subsequent voting at the meeting." This seems clear enough, and the rule was recently acted on by Wright, J., in Toman's case, (1898) 1 Ch. 104 ; but the learned judge appears to have doubted " whether the Coui-t meant to lay down the rule so absolutely as is stated in the note to the report." It is, however, difficult to see how such a well-settled rule could be laid down otherwise than absolutel3^ A shareholder who, after discovering that he has a right to rescind. Subsequent elects to affirm the contract, may afterwards be entitled to rescind ^^ounds for T T , . rescission, m respect oi some subsequently discovered misrepresentation. Per Chitty, J., Re Lond. and Prov. Co., 55 L. T. 670 ; Re British Burmah Co., Kay, J., 21 June, 1888. See, however, Campbell \. Fleming, 1 A. & E. 40 ; and as to variance in objects, Whitehouse s case, 3 Eq. 790. If the shareholder elects in due time and in proper form to avoid Effect of the contract, it is avoided altogether, and the case stands as if it *'*'°i*^°o- had never been made ; accordingly, he cannot be placed on the list of contributories, even as a past member, for the contract is avoided ah initio. Wright's case, 12 Eq. 331 ; 7 Ch. 55. In legal proceedings Interest. by a shareholder to have his contract rescinded and his money returned, he will be given interest thereon, although no case of fraud be established. Karhergh case, (1892) 3 Ch. 17. Finally, what Lord Justice Turner said in Jen^iings v. Broughton, 106 PROSPECTUSES. [Chap. III. 5 D. M. & G. 126, 140, should be borne in mind. " Although it is the undoubted duty of this Court to relieve persons who have been deceived by false representations, it is equally the duty of the Court to be careful that, in its anxiety to correct frauds, it does not enable persons who have joined others in speculations to convert their speculations into certainties at the expense of those with whom they have joined." Action of deceit, or pro- ceedings under Directors' Liability Act, 1S90. Rules as to action for deceit. What to prove. Action of Deceit or other Remedy. A person who has been induced by fraudulent misrepresentation to subscribe for shares, debentures, or debenture stock, may, as an additional or alternative remedy, be enabled to bring an action of deceit against those who have deceived him, or to take proceedings against them under the Directors' Liability Act, 1890. Where that Act applies, it gives to the subscriber a more efficient remedy than an action of deceit, and has, to that extent, displaced the remedy obtain- able in such an action ; but there are still several cases {infra, pp. Ill, 112) in which the new remedy is not available, and in all such cases the old remedy by action of deceit subsists. It will, there- fore, be convenient to state here concisely some of the principal rules applicable in the case of an action of deceit. The law as to such an action may be expressed thus : — Where a prospectus or notice invites persons to subscribe for or buy shares, debentures, or debenture stock of a company, and such pro- spectus or notice contains any misrepresentation, whosoever issues, or authorizes the issue of, such prospectus or notice, is liable to pay compensation to every person who, induced by such misrepresentation, and in response to such prospectus or notice, subscribes for or buys any such shares, debentures, or debenture stock, for any damage sustained by him in consequence of such subscription or purchase, pro- vided that the plaintiff proves : — (a) That the defendant issued, or authorized the issue of, the pro- spectus or notice, or sanctioned its issue, or that the misrepre- sentation relied on was made by the defendant to those who issued the prospectus with the intention that it should be used for the purposes of the prospectus. (b) That the prospectus or notice contained a misrepresentation of fact. (c) That the fact misrepresented was a material fact. (d) That the plaintiff was induced by such misrepresentation to sub- scribe or buy. (e) That the defendant made the misrepresentation fraudulently. (f) That the plaintiff has sustained damage. See tlie following cases : — l^cc/c v. G'urnn/, L. E. 6 H. L. 377 ; Smith v. Chadwick, 9 App. Cas. 187; Bdlairs v. Tucker, 13 Q. B. D. 562; Edijinyton v. Juizmaurice, 29 C. Div. 459; Derry v. Peek, 14 App. Cas. 337 ; Arnison v. Smith, 41 C. D. 348 ; Glasier v. Rolls, 42 0. Div. 436 ; INTKODUCTORY NOTES. 107 Arkic)-!,jht V. Neirhuhl, 17 C. D. 301; Knox v. Hay man, 67 L. T. 137. As to (a), it is a (j^uestiou of fact. Where a man applies for shares issue on in response to a prospectus purporting to be issued by the company, l^ehalf of and has shares allotted to him by the directors, there is usually but little difficulty in proving that the directors issued, or authorized the issue of, the prospectus. They can be interrogated, and are rarely in a position to deny. Even if a director denies the fact, evidence is generally forthcoming {e. y., that he distributed prospectuses or con- curred in the allotment) which may countervail such denial. See Peek v. Derry, 37 C. Div. 541 ; Glasier v. Rolls, 42 C. Div. 43G ; Bellairs v. Tucker, 13 Q. B. D. 562; Ship v. Crosskill, 10 Eq. 73; Henderson v. Lacon, 5 Eq. 249. But he is not liable in the absence of some such evidence. Watts v. Atkinson, 8 T. L. ~R. 235. As to the cases in which a director may be held responsible for a fraud committed by his co-directors, see Cargill v. Bower, 10 C. D. 502 ; Weir v. Bell, 3 Ex. D. 238, 249. And so where, as occasionally happens, the prospectus is issued not Issue on on behalf of the company, but by some firm or company as the owners, "'^'^^" °^ or on behalf of the owners, of the shares, debentures, or debenture shares, de- stock offered for subscription or sale, there is rarely any difficulty in ^^entures, &c. proving the issue by the firm or company. And where a prospectus is issued on behalf of a company with the Company authority of the directors, the company is, in point of law, deemed to l^'^'^le tor have authorized the issue, and may be held liable on that footing (see directors. supra, pp. 8, 9) ; unless, indeed, the prospectus invited subscriptions for shares in the capital of the company, and the plaintiff, by reason of the winding-up of the company, or otherwise, has lost his right to repudiate his shares ; for it is now settled that an allottee of shares cannot keep the shares and also claim damages as against the company. Houldsworth v. City of Glasgow Bank, 5 App. Cas. 317. Where A. {e.g., a promoter of a company) makes false representa- Promoters tions to B. and C. (e. y., directors of a company), with the intention i^srepre- that such representations shall be embodied m a prospectus of the company inviting public subscription, A. may be held liable, in an action of deceit by an allottee, as having authorized the making of such false representations to the allottee. Barry v. Croskey, 2 J. & H. 1 ; approved in Peek v. Gumey, L. R. 6 H. L. 413 ; and see Andrews v. Mockford, (1896) 1 Q. B. 372, 378. But it must be borne in mind that prima facie the representations Office of contained in a prospectus are made with a view of inducing persons to P^"^?'^'' ^• apply for and take from the company the shares or securities thereby offered for subscription, and accordingly that those only who so apply and take up the same are entitled to rely on the statements, and can complain if they are incorrect. Hence a person who, reading the pro- spectus, bought shares in the market is not prima facie entitled to complain. Peek v. Gumey, L. K. 6 H. L. 413. 108 PROSPECTUSES. [Chap. III. Misrepre- sentation as to existing fact. Material fact. Subscriber influenced by statement. Damage shown. t Fraud. Where, however, it is proved that the prosj)ectus was, in fact, intended to induce people to buy in the market, then those who issued it may be held responsible to those who act on it. Andreivs v. JSIocli- ford, (1896) 1 Q. B. 372. As to (b), the misrepresentation relied on must be a misrepresenta- tion of some existing fact. See as to this, supra^ p. 94. In the case of an action for rescission, the non-disclosure of a material fact may be sufficient to entitle the plaintiff to relief ; but in the case of an action of deceit, non-disclosure is not enough, unless it renders what is stated false. " Mere non-disclosure of material facts, however morally censurable, however that non-disclosure might be a ground in a proper proceeding, at a proper time, for sotting aside an allotment or purchase of shares, would, in my opinion, form no ground for an action in the nature of an action for misrepresentation. There must, in my opinion, be some active misstatement of fact, or, at all events, such a partial and fragmentary statement of fact as that the withholding of that which is not stated makes that which is stated absolutely false." Per Lord Cairns, Peeh V. Gtirney, L. E. 6 H. L. 403. As to (c), it must be shown that the misrepresentation is material. It is not every misrepresentation that gives a right of action. For misrepresentations which have been held material, see supra, pp. 97, 98. As to (d), it must be shown that the plaintiff was induced by such misrepresentations to subscribe or buy. Generally, the plaintiff swears to the fact, and when the misrepresentation is material, and it is shown that the plaintiff took shares in response to the prospectus, it is a fair inference of fact that he was induced by the prospectus to subscribe. Smith V. Chadii'ick, 9 App. Cas. 187. As to what is sufficient to prove or negative reliance on the misrepresentation, see supra, p. 99. A plaintiff may succeed even where the misrepresentation relied on was not the sole inducement to subscription. Edgingtoti v. Fitzmaiirice, 2& C Div. 459 ; Carling v. London mid Leeds Bank, 56 L. T. 115 ; Peek v. Derry, 37 C. Div. 541 ; Amison v. Smith, 41 CD. 348. As to (e): — Unless damage is shown, the plaintiff has no right to complain. As to (f) : — Fraud by the defendant must be established. And it is established when it is shown (1) that the representation relied on was false to the knowledge of the defendant, or (2) that it was made by the defendant recklessly, without caring whether it was true or false, or (3) that the defendant did not, in fact, believe it to be true. Derry v. Peek, 14 App. Cas. 337. The last alternative, in fact, covers both the others, and, accordingly, in an action of deceit, the least that must be proved, in order to establish that a false statement was fraudulently made, is that the defendant did not, in fact, believe that the statement was true. Knox v. Hayman, 67 L. T. 137. And a false statement allowed to pass by culpable carelessness, but without fraud, is not enough. Angus v. Clifford, (1891) 2 Ch. 449; Watts v. Atkinson, 8 INTRODUCTORY NOTES. 100 T. L. R. 235. Observe the difference in this respect between an action of deceit and an action for rescission. If, on the other hand, in an action of deceit, the defendant can prove Defendant that ho did believe the statement to be true, the plaintiff must fail, j ™ • j ' ^ ' deceived. even though he shows that the grounds on which that belief was founded were unreasonable. This was decided by the House of Lords in Derry v. Peeh, 14 App. Cas. 337, reversing the decision of the Court of Appeal. Nevertheless, "A consideration of the grounds of belief is no doubt an important aid in ascertaining whether the belief was really entertained. A man's mere assertion that he believed the state- ment he made is not to be accepted as conclusive proof that he did so. There may be such an absence of reasonable ground for his belief as, in spite of his assertion, to carry conviction to the mind that he had not really the belief he alleged." Per Lord Herschell, Ih. p. 369. Fraud may be established when the representation was made in the hona fide belief that it was true, and before allotment the party who made it finds out that it was untrue and remains silent. Per Lord Blackburn, 5 App. Cas. 9o0. In such case the directors ought to say, " We cannot contract with the gentleman. The application was based on a misstatement authorized by us. The only thing wo have now to do is to tell him that the prospectus is erroneous, aud that we cannot accept his application. We must not deceive ; we must return his money." Per Page Wood, Y.-C, Henderson v. Lacon, 5 Eq. 249. As to the period of limitation in an action of deceit. — Having regard Limitation of to 21 Jac. 1, c. 16, an action of deceit is prima facie barred, unless it *^.^ **^^ is brought within six years from the time when the cause of action accrued. But when the plaintiff shows that he did not discover, and had not reasonable means of discovering, the fraud until within six years before the action, and that the existence of such fraud was fraudulently concealed by the defendant until within the six years, time will not run till such discovery. Gihhs v. Guild, 9 Q. B. D. 59. On the death or bankruptcy of a person in whom there is vested a Death or right of action for fraudulent misrepresentation, whereby he has lost ^^^^^^uptcy money, the right of action passes to his legal personal representatives defrauded, or trustee in bankruptcy, as the case may be. Twycross v. Grant, 4 C. P. Div. 40. As to death. — The general ride, "actio personalis moritur cum Death or persona,''^ applies to a claim for damages in respect of fraudulent of ctsoh*^^ misrepresentation. Peek v. Gurney, L. E. 6 H. L. 377. But the liable, executors or administrators of a director or other person who made the misrepresentation may be liable to the extent to which the estate of the deceased benefited by the misrepresentation. Phillips v. Homfray, 24 C. D. 439; 11 A. C. 466. As to bankruptcy. — Demands in the nature of unliquidated damages. Proof in arising otherwise than by reason of a contract, promise, or breach of ^^^^Ptej- trust, are not provable in bankruptcy. Sect. 37 (1) of the Bankruptcy 110 PROSPECT ['SES. [( ^IIAP. III. Act, 1883. Hence, damages for fraudulent misrepresentation by a director are not provable in his bankruptcy, unless judgment is obtained before the receiving order. In re Newman., 3 C. D. 494. Moreover, the discharge of the bankrupt only releases him from debts provable in the bankruptcy (sect. 30 (2) of the Bankruptcy Act, 1883) ; and the Bankruptcy Court will not restrain an action against the bankrupt. Ex parte Colder ^ 10 Ch. 652. Directors' Liability- Act, 1890. Short title. Construction. Liability for statements in prospectus. The Directors' Liability Act, 1890 (53 & 54 Vict. c. 64). A.n Act to amend the Law relatmg to the Liability of Directors and others for State- ments in Prospectuses and other Documents solicitinr/ applications for shares or dehentures. [18 August, 1890.] Be it enacted, &c., as follows : — ■ 1. This Act may be cited as the Directors' Liability Act, 1890. 2. This Act shall be construed as one with the Companies Acts, 1862 to 1890. 3. — (1.) Where after the passing of this Act a prospectus or notice invites persons to subscribe for shares in or debentures or debenture stock of a company, every person who is a director of the company at the time of the issue of the prospectus or notice, and every person who ha^-ing authorized such naming of him is named in the prospectus or notice as a dii-ector of the company, or as having agreed to become a director of the company, cither immediately or after an interval of time, and every promoter of the company, and every person who has authorized the issue of the prospectus or notice, shall be liable to pay compensation to all persons who shall subscribe for any shares, debentures, or debenture stock on the faith of such prospectus or notice, for the loss or damage they may have sustained by reason of any untrue statement in the prospectus or notice, or in any report or memorandum appearing on the face thereof, or by reference incorpo- rated therein or issued therewith, imless it is proved — (a) With respect to every such untrue statement, not purporting" to be made on the authority of an expert, or of a public official document or statement, that he had reasonable groirnd to believe, and did up to the time of the allotment of the shares, debentures, or debenture stock, as the case may be, believe, that the statement was true ; and, (b) With respect to every such untrue statement purporting to be a statement by or contained in what purports to be a copy of or extract from a report or valuation of an engineer, valuer, accountant, or other expert, that it fairly represented the statement made by such engineer, valuer, accountant, or other expert, or was a correct and fair copy of or extract from the report or valuation. Provided always, that notwithstanding that such untrue statement fairly represented the statement made by such engineer, valuer, accountant, or other expert, or was a correct and fair copy of an \_sic, query or] extract from the report or valuation, such dii-ector, person named, pro- moter, or other pei'son, who authorized the issue of the prospectus or notice as aforesaid, shall be liable to pay compensation as aforesaid if it be proved that ho had no reasonable ground to believe that the person making the statement, report, or valuation was competent to make it ; and, (c) With respect to every such untrue statement pui-porting to be a statement made by an official person or contained in wliat purports to be a copy of or extract from a public official document, that it was a correct and fair representation of such statement, or copy of or extract from such document, or tmlosa it is proved that, liaving conaented to become a director of the company, INTRODUCTORY NOTES. Ill he withdrew his consent before the issue of the prospectus or notice, and that the prospectus or notice was issued without his authority or consent, or that the pro- spectus or notice was issued without his knowledge or consent, and that, on becom- ing aware of its issue, he forthwith gave reasonable public notice that it was so issued without his knowledge or consent, or that after the issue of such prospectus or notice, and before allotment thereunder, he, on becoming aware of any untrue statement therein, withdrew his consent thereto, and caused reasonable public notice of such withdrawal, and of the reason therefor, to be given. (2.) A promoter in this section means a promoter who was a party to the pre- paration of the prospectus or notice, or of the portion thereof containing such untrue statement, but shall not include any person by reason of his acting in a professional capacity for persons engaged in procuring the formation of the company. (3.) Where any company existing at the passing of this Act, which has issued shares or debentures, shall be desirous of obtaining further capital by subscriptions for shares or debentures, and for that pui-pose shall issue a prospectus or notice, no director of such company shall be liable in respect of any statement therein, unless he shall have authorized the issue of such prospectus or notice, or have adopted or ratified the same. (4.) In this section the word "expert" includes any person whose profession gives authority to a statement made by him. 4 . Where any such prospectus or notice as aforesaid contains the name of a person Indemnity as a director of the company, or as having agreed to become a director thereof, and "^"^re name such person has not consented to become a dii-ector, or has withdi'awn his consent ij^s been before the issue of such prospectus or notice, and has not authorized or consented to improperly the issue thereof, the directors of the company, except any without whose know- inserted as a ledge or consent the prospectus or notice was issued, and any other person who director, authorized the issue of such prospectus or notice shall be liable to indemnify the person named as a director of the company, or as having agreed to become a director thereof as aforesaid, against all damages, costs, charges and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or notice, or in defending himself against any action or legal proceedings brought against him in respect thereof. 5. Every person who by reason of his being a director, or named as a director, or Contribution as having agreed to become a director, or of his having authorized the issue of the ^1°°^ ^^' prospectus or notice, has become liable to make any payment under the provisions of > • this Act, shall be entitled to recover contribution, as in cases of contract, from any other person who, if sued separately, would have been liable to make the same payment. Looking to tlie terms of s. 2 and to the preamble, it would seem that -^ct only the Act is only to apply to prospectuses and notices inviting subscrip- companies tions for shares, debentures, or debenture stock of companies under under Com- the Companies Acts, 1862 to 1890. No doubt the words of s. 3 are i862^to 1890. quite general, " shares in or debentures or debenture stock of a com- pany," and in terms extend to all companies. But by s. 2 the Act is to be construed as one with the Companies Acts, 1862 to 1890, and in the Act of 1807 similar general words have been treated as applying exclusively to companies under those Acts. Thus, s. 25 of the Com- panies Act, 1867, enacts, " That every share in any company shall be deemed," &c. ; but everyone has acted on the footing that this section only applies to companies under the Act of 1862. Accordingly, the section has been entirely disregarded by companies not under the Act 112 PROSPECTUSES. [Chap. III. of 1862. This construction has been adopted by Mathew, J., in Christ Church Gas Co. v. Kelly (1887), 3 T. L. E. 634, and in Lindley on Companies, p. 783. Sect. 38 of the same Act enacts that " every prospectus of a com- pany" shall specify certain contracts; but notwithstanding these general words, it has always been considered that the operation of this section is confined to companies under the Act of 1862. And see Lindley on Companies, p. 91. It would seem that the construction placed on the general words of the Act of 1867 should be applied to similar expressions in the Act under consideration, more especially as it is difficult to understand what is the object of s. 2 of the Act unless it is to limit the operation of the general words. It may be assumed, therefore, that the Act of 1890 does not apply to railway, gas, water, tram- way, or other parliamentary comj^anies, or to foreign or colonial companies, or to companies incorporated by royal charter, or to com- panies constituted by deed of settlement and not registered under the Act of 1862. Sect. 3 gives new remedy. Action of debt not tort. Questions under sect. 3. Sect. 3*' fundamentally alters the law as to the consequences of mis- representation in prospectuses and notices inviting subscriptions for shares, debentures, or debenture stock. The Act does not purport or attempt to alter or extend the remedy afforded by the action of deceit. It establishes a new and much more eft'ectual remedy. An action of deceit is an action "of tort, but an action under the Directors' Liability Act, 1890, is an action of debt — a statutory debt. This distinction, as appears below (p. 120), is very material. As regards the right of action conferred by sect. 3, it will be con- venient to consider, seriatim, the following questions : — A. Who may be sued as a defendant ? B. "What is a " statement " within the section ? C. Who may bring an action under the section ? D. What must tlie plaintiff prove in order to establish a jyrimdfacie case ? E. What is the liability imposed by the section ? F. AVhat must the defendant prove in order to escape liability for an untrue statement ? G. What are " reasonable grounds" within the section? H. Who is an " expert" within the section? I. What is the period of limitation ? J. What effect have death and bankruptcy ? K. What precautions directors and others should take? * The section only applies to prospectuses issued after 18tb Aug., 1890, and pro- bably (see p. 83) only to prospectuses and notices issued by or on behalf of the com- pany. For example, if the owners of, say, 100,000 shares in a company offer such shares for public su])scrii)tion, it would seem that the Act would not apply, and sub- scribers must rely on tlie general law. INTRODUCTOKY NOTES. 113 As to A. JJ7io may be sued as a defendant ? Who may be ( 1 ) Every persou who is a director of tlie company at the time of the issue of the prospectus or notice ; and (2) Every person ^vho, having authorized such naming of him, is Person named named in the prospectus or notice as a director of the company, or as having- agreed to become a director of the company, either immediately or after an interval of time. (3) Every promoter who was a party to the preparation of the pros- Promoter, pectus or notice, or of any portion thereof containing any untrue statement. (4) Every person who has authorized the issue of the prospectus or notice. As to (3)— The question whether a body corporate is a person or promoter Corporation within this Act and capable of being sued accordingly, is one of some „„ ' difficulty. By sect. 19 of the Interpretation Act, 1889, 52 & 53 Yict. c. 63, the Avord " person," unless the contrary intention appears, is to include any body of persons, corporate or unincorporate. Now the Act of 1890 makes the person or promoter liable to pay compensation, unless, amongst other alternatives, it is proved that he believed the untrue statement and had reasona^ble grounds for such belief ; but it may be said that a body corporate is incapable of belief, and accord- ingly would not be able to prove the facts requisite for its defence. See Pharmaceutical Society v. London and Provificial Supply Assoc, 5 App. Cas. p. 862, where Lord Selborne stated his opinion, " that if a statute provides that no person shall do a particular act except on a particular condition, it is, prima facie, natural and reasonable (unless there be something in the sub-context, or in the manifest object of the statute, or in the nature of the subject-matter, to exclude that con- struction) to understand the legislature as intending such persons as, by the use of proper means, may be able to fulfil the condition ; and not those who, though called ' persons ' in law, have no capacity to do so at any time, by any means, or under any circumstances whatsoever." This view, it may be contended, is equally applicable to the case of a statute, like that now under consideration, which provides that a person shall do a particular act, namely, pay compensation unless he complies with a particular condition, namely, proves belief. On the other hand, it may be argued, and it would seem, that corporations are within the mischief intended to be remedied by the Act, and that the words are sufficiently wide, and should, if possible, be held to cover such bodies, and that there would be no real difficulty in establishing a defence since, in the case of a corporation, the belief of its agents acting in the matter must be imputed to the corporation. In an action of deceit against a corporation, proof of its agents' belief would relieve the corporation. See supra, pp. 8 — 12. As to (4)— Person _ The words "has authorized" are extravagantly wide. In terms issue of P. I 114 PROSPECTUSES. [Chap. III. prospectus or notice. ■\;\Tiat is a statement "within sect. 3 ? Statements outside pro.spontus or notice. Ileport (jr inernorundum noticed in prospectus, they are wide enough to include a broker, banker, advertising agent, or shopkeeper who authorizes his clerks or servants to hand copies of the prospectus or notice to customers or others, and even the raanager of a newspaper who authorizes the publication of the prospectus therein. But it would be absurd to place such a construction on the words. Nor can they reasonably be held to apply to bankers, brokers, accountants, solicitors, and engineers who merely consent to their names appearing as such in the prospectus. Sir E. "Webster, when Attorney-General, and Lord Davey, when at the bar, so advised ; and the Act itself distinguishes between authority to name and authority to issue. It is conceived that a person is not one who " has authorized the issue " within the meaning of the section, unless in common par- lance he would be so described, and that the issue means the initial putting forth, and not subsequent distribution. B. What is "a stafeineni " ivitJim the section? An ordinary statement of fact, e.g., that " 10,000 shares have been already subscribed," or that ''the profits of the business during the last five years have averaged 20,000^. per annum," is obviously a state- ment within the section, in respect of which, if untrue, a defendant may be held liable. Nor is there any reason to doubt that statements to the effect that the directors or others " believe," " anticipate," "hope," or "intend " so and so, or are of this or that " opinion," are statements within the section. There is, however, an important distinction be- tween such statements and ordinary statements of fact, for, as regards the latter, the plaintiff has merely to prove that the fact was not as stated, and then it is for the defendant to show that he had reasonable grounds to believe and did believe what was stated ; whereas in the case of a statement as to belief, anticipation, hope, intention, or opinion, the onus is on the plaintift' to prove that the defendant did not believe, anticipate, hope, or intend as the case may be. Hence, as regards this class of statements, the plaintiff is in sub- stantially the same position as he was before the Act. Nevertheless, it must not be supposed that directors and others may safely indulge in reckless statements as to belief, anticipation, hope, intention, or opinion, for the absence of reasonable grounds for stating that a man believes, anticipates, or ho^^es may, with other circum- stances, lead to the conclusion that tlie statement was not in fact true. See Aaroyi's Reefs v. Twiss, (189G) A. C. 273, and supra, p. 108. Further, it is to be observed that liability may be incurred under the Act not only in respect of statements in the prospectus or notice itself, but also in respect of the following, namely : — (1) Any untrue statement in any report or memorandum appearing on tlio face of the prospectus or notice, or by reference incorporated tliorein or issued tlierewith, but not made by or contained in what purports to bo a copy of, or extract from, a report or valuation of an engineer, valuer, accountant, or other expert. INTRODUCTORY NOTES. 115 (2) Any xiutrue statement in any sucli report or memorandum pur- Refereacc to porting to be a statement by or contained in what purports to be a extracts'" cojiy of or extract from a report or valuation of an engineer, valuer, accountant or other export, whore it is proved that the director, per- son named, promoter, or other person who authorized the issue of the prospectus or notice, had no reasonable ground to believe that the person making the statement, report, or valuation, was competent to make it. C. JVhn may hring an action under the section ? Wlio may sue "All persons who shall subscribe for any shares, debentures or g i ■■, ' debenture stock on the faith of such prospectus or notice." on faith of These words, no doubt, give a right of action to every such person. P™-'*?'^^*"^? It is presumed that the word "subscribe" means "apply to, and accept ^yho are? any allotment from the company." This is the usual sense in which the word "subscribe " is used. Ross v. Estates Investment Co., 3 Ch. G82 ; Henderson v. Lacon, 5 Eq. 258 ; Arnison v. Stnit/i, 41 C Div. 348. And this construction is supported by the fact that the section assumes that there will be an "allotment" under the prospectus, and by the preamble, which refers to statements in prospectuses and other docu- ments soliciting applications for shares and debentures. The words, however, are susceptible of a wider construction. They might be held to extend to a subscrij)tion or taking up of shares, debentures, or debenture stock offered for subscription, not by or on behalf of the company, but by or on behalf of some person, firm, or company who, or which, had previously become owners thereof, whether by allotment or purchase; e.g., suppose that a company is formed to acquire a business, and that the consideration for tho acquisition of such business includes 100,000/. of debentures, and that tho vendor, after holding these debentures for a time, sells them to a trust company or bank, which offers them for public subscription or sale. Is the Act to apply to such a case ? For the reason already stated it is submitted that it is not. And, as additional evidence that the Act cannot be intended to apply to such a case, it may be pointed out that if it is to apply, it follows that directors and others who have nothing whatever to do with the issue of a prospectus will be liable under the Act for certain statements therein, unless they are able to prove one of the three alternatives contained in the latter part of sect. 3 of the Act ; and it may not be possible to prove any of those alternatives. T>. What must the plaiiitiff prove in order to establish a prima facie What to a prove for case r ^ . . „ The plaintiff must prove : 1. That the defendant — («) Was a director ; or, prima facie case. ^^^ PROSPECTUSES. [ChAP. III. (b) That with his authority he was named in the prospectus or notice as a director, or as having agreed to become a director : If a person so named subsequently acted as a director, that would be considered prima facie evidence of authority ; and if he knew he was so named and did not disclaim, and perhaps took shares, these facts would afford some evidence of authority. (c) Or that the defendant was a promoter of the company, and was a party to the preparation of the prospectus or notice, or of the portion thereof containing the untrue statement. It is not every promoter who is to be liable, but only those who meddle with the prospectus. See s. 8, sub-s 2. {d) Or that the defendant authorized the issue of the prospectus or notice. 2. That there was an untrue statement — (a) In the prospectus or notice ; (h) Or in some report or memorandum ajipearing on the face thereof, or by reference incorporated therein or issued therewith. Where the statement is that the person making the statement believed, anticipated, hoped or intended so and so, or was of this or that opinion, it is not enough for the plaintifp to prove that the belief, &c., was not well founded : he must prove that the belief did not exist. 3. That the plaintiff subscribed for shares, debentures, or debenture stock on the faith of the prospectus or notice. See as to this, supra, pp. 99, 108. 4. That the plaintiff has sustained loss or damage by reason of the untrue statement. This no doubt imports that the statement must be material, for otherwise the plaintiff cannot show loss or damage by reason of the untruth of that statement. As to what statements may be material, see supra, p. 97. The expression " by reason of the untrue statement," appears to mean by reason of the plaintiff having boon induced to part with his money on the faith of such untrue statement. Wliut is the E. JJ7ia( is (he liahility imposed by the section ? liability J r j under eect. 3 ? The liability is to pay compensation to all persons who shall sub- scribe for any shares, debentures, or debenture stock on the faith of Buch prospectus or notice, for the loss or damage they may have sustained " by roascm of the untrue statomont." This prol)ably means by reason of tlio plaintili' Imviug been induced by the untrue statement to subscribe. It is i>resumod that the amount of the compensation is the same as that in an action of deceit, namely: — the difference INTRODUCTORY NOTES. 117 between the amount paid by the plaintiff and the real value of the shares, debentures, or debenture stock. See Peck v. Berry, 37 C. D. 591. F. What must the defendant prove in order to escape liahility for an What defen , , , , o (laiit should untrue statement " prove (1.) In the case of an untrue statement not purporting to bo made on the authority of an expert or of a public official document or statement, he must prove that he had reasonable ground to believe, and did up to the time of the allotment of the shares, debentures, or debenture stock (as the case may be) believe that the statement was true. (2.) In the case of an untrue statement purporting to be a statement by or contained in what purports to be a copy of, or extract from, a report or valuation of an engineer, valuer, accountant, or other expert, i.e., any person whose profession gives authority to a statement made by him, he must prove that it fairly represented the statement made by the engineer, valuer, accountant, or other expert, or was a correct and fair copy of, or extract from, the report or valuation. But this defence is not sufficient if the plaintiff can prove affirma- tively that, notwithstanding such untrue statement fairly represented the statement made by the expert, or was a correct and fair copy of, or an extract from, the report or valuation, such director, person named, promoter, or other person who authorized the issue of the prospectus or notice, as aforesaid, had no reasonable ground to believe that the expert was competent to make the statement, report, or valuation. (3.) In the case of every such untrue statement, purporting to be a statement made by an official person, or contained in what purports to be a copy of, or extract from, a j)ublic official document, he must prove that it was a correct and fair representation or copy of, or extract from, such document. (4.) But in each of the above cases the following further defences will be open : — (a) In the case of a director, and of a person named as having agreed to become a director, such person has a good defence if he can prove that, having consented to become a director of the company, he withdrew his consent before the issue of a prospectus or notice, and that the prospectus or notice was issued without his authority or consent. (b) Any defendant, whether a director or otherwise, has a good defence if he can prove that the prospectus or notice was issued without his knowledge or consent, and that on becoming aware of its issue, he forthwith gave reasonable 118 PROSPECTUSES. [Chap. TIT. public notice that it was issued witliGut his knowledge or consent. Wliat is reasonable public notice? Probably notice advertised in some of tbe principal newspapers in which, the prospectus was advertised is sufficient. (c) Any defendant, whether a director or otherwise, has also a good defence if he can prove that, after the issue of the prospectus or notice and before allotment thereunder, he, on becoming aware of any untrue statement therein, withdrew his consent thereto, and caused reasonable [see above] public notice of such withdrawal, and of the reason therefor, to be given. Moreover, the defendant might, no doubt, set up a release, or contract not to sue, or an estoppel, as against the plaintiff. Eeasonable grounds of defendant's belief. Examples. G. What are '■^ reasonable grounds^^ for helieving a statement to he true? A director or other person who may be held responsible under the section must bear in mind that, if at some future time a statement turns out to be untrue, he may be called on to prove that he had reasonable grounds for believing the statement to be true, and that it will be for a jury or judge to decide, not whether the director considered the grounds reasonable, but whether such jury or judge consider that they were reasonable. Accordingly, each statement should be considered in this view, and the following questions should be put, namely : — What are my grounds for believing the statement to be true ? Do they seem to me reasonable ? "Would they be likely to seem reasonable to a jury or judge ? What evidence can I preserve to satisfy judge or jury? It may be well to give two or three examples — 1. Suppose that the prospectus states that the company is formed to acquire a business, and that "the average annual profits of the business during the last five years have been 10,000^." The mere statement of the vendor that this was the average could scarcely be considered reasonable grounds for believing the statement in the prospectus to be true. In order to justify the statement, special steps should be taken to test its truth, e.g., by the employment of a firm of chartered accountants to investigate the books and report in writing thereon. 2. Again : Supj)Oso it is stated that the business to be acquired is a paper mill, and that there is a plentiful supply of water. This is a statement which, in the absence of personal knowledge, should not be made witliout independent export evidence. 3. HuppoRo a fact is stated wliich is true to the knowledge of only one or two of the directors, it would seem that this might be held to afFord roasoiiaT)lo ground on which tlio otlicrs might concur with them in making the statement. 119 INTRODUCTORY NOTES. What are reasonable grounds for believing that an engineer, valuer, accountant, or other expert is competent {i.e., qualified or fit) to make a statement, report, or valuation ? This must depend on the circum- stances of the case. There are some men whose competency is notorious, men who are at the head or in the front rank of their profession ; but where a man is not in this position, it may be necessary to obtain some collateral evidence of his competency. Thus it may be necessary to obtain references to some leading member or members of the profession to which the expert belongs, or to some persons of position who have employed him and can speak as to his competency. Where the expert is a foreigner, and there is no time to communicate, otherwise than by telegraph, with persons in the locality to which he belongs, it will be proper to communicate, by telegraph, with some banker or other person who can be trusted in the locality, and such person should be requested to inquire as to the competency of the expert, and if he reports by telegram favourably in regard thereto, it is conceived that such inquiry and report would be held to afPord reasonable grounds for believing that the expert was competent. The necessity of obtaining and preserving written evidence that reasonable grounds existed cannot be too strongly impressed on those who may be called on to defend the prospectus or notice. H. Who is an expert ? Who is an expert ? Paragraph (a) of s. 3 of the Act uses the expression "expert," and paragraph (b) the expression " engineer, valuer, accountant or other expert " ; and sub-s. (4) says that : "In this section the word * expert ' includes any person whose profession gives authority to a statement made by him." It is to be observed that the word used is ^^ profession,'" not "busi- ness," and although the meaning of the word is stated in Johnson and elsewhere to be " vocation, known employment," it may be doubted whether it will be given by the Court so wide a construction. However, upon any construction it must include surveyors, architects, lawyers, and doctors, but it is not easy to draw the line accurately. Surely, however, in banking matters a banker is to be considered an expert within the definition, and a brewer in brewing matters, and a general manager of a railway in railway matters, and a lawyer when stating his opinion on a title. I. What is the jyeriod of limitation? Period of limitation. This appears to be governed by s. 3 of 3 & 4 Will. IV. c. 42, and as the action would fall within the words " actions for penalties, damages, or sums of money given to the party aggrieved by any statute now in force or hereafter to be in force," the action is barred unless brought within two years after the cause of action arises. 120 PliOSPECTUSES. [Chap. III. And it would seem that the cause of action arises when the plaintiff sustains damage. Bononii v. Backhouse, 9 H. L. C. 503 ; Darley Main Co. V. Mitchell, 11 App. Cas. 127 ; Ready. Brown, 22 Q. B. D. 128. Effect of death or bankruptcy. J. What effect have death and hanhruptcy ? If a person entitled under the Act to compensation dies or becomes bankrupt, the right of action will pass to his legal personal represen- tative or trustee in bankruptcy, as the case may be. If a person liable under the Act to pay comj)ensation dies, his heirs, executors, or administrators will be liable to the extent of the estate of the deceased in the due course of administration. As the action is not one of tort, the maxim. Actio personalis moritur cum persond, would not seem to apply. Twycross v. Grant, 4 C. P. Div. 40 ; Phillips V. Homfray, 24 C. D. 439. And apparently a liability under this Act may be proved in bankruptcy, unless incurred by fraud, in which case s. 37 (1) of the Bankruptcy Act, 1883 {supra, p. 109), might be held to exclude it from proof. The discharge of the bankrupt seems to relieve him from the liability, {query) unless it was incurred by fraud. See supra, pj). 67, 1 10, as to the Bankruptcy Act ; and In re Newman, 3 C. D. 494; and Ex parte Coker, 10 Ch. 652. "WTiat pre- cautions directors, promoters, &c. to take. K. What precautions directors, promoters, and others should take. 1. As regards any statement — (1) In the prosj^ectus ; (2) In any report or memorandum appearing on the face thereof ; (3) In any rej)ort or memorandum referred to therein ; (4) In any report or memorandum issued therewith ; and not purporting to be made on the authority of an expert, or by a public official document or statement, take care that the statement is not made imless each director has reasonable ground to believe, and docs believe, that the statement is true. The following are examj)les of statements purporting to be made on the authority of an expert : — (a) Mr. A., or an engineer, has examined the reef, and states that it is rich in gold. (b) Mr. A. has made the following report. \_Set it out.'] (o) The following extracts from the report which has been made by Mr. A. show the value of the property. [/SVV thein out.~\ (d) The statements in paragraphs of this prospectus are made on tlie autliority of Messrs. , the well- known accountants, who have examined the books. (e) According to the report of her Majesty's Consul of , published in the Board of Trade Journal of the • of , the exports from, &c. INTRODUCTORY NOTES. 121 2. As regards every statement purporting to be a statement by or contained in what purports to be a copy of or extract from a report or valuation of an engineer, valuer, accountant, or other export, take care (a) that it fairly represents the statement made by such engineer, valuer, accountant, or other expert, or is a correct and fair copy of, or extract from, the report or valuation ; (b) that there is evidence that the person making the statement, report, or valuation was competent to make it. 3. As regards every statement purporting to be a statement made by an official person, or contained in what purports to be a co]}j of or extract from a public official document, take care that it is a correct and fair representation of such statement, copy of or extract from such document. 4. Avoid as much as possible matters of fact which tlie directors do not know to be true. Where it is desirable to state facts which the directors do not know to be true, let them be embodied in a report by some competent expert, and then set out that report, or extracts fi-om it, in the prospectus. 5. When a report of an expert cannot be obtained, let the statement be qualified, e. (/., from inquiries which the directors have made, they believe that so and so. 6. If it is desired to make use of a statement made by some person who is not an expert, e.cf., by a vendor, let it be stated thus : — " The vendor states that the supply of water is ample." This is less dangerous than to state that "the supply of water is amjDle." 7. Bear in mind that expressions such as that " the directors hope, anticiiDate, propose, or intend," are statements within the Act, and that if they are made when the directors do not hope, anticijmte, j^ro- pose, or intend, the directors will be in danger. But a statement in this form is much less dangerous than an ordinary statement of fact. For example, if the statement is that the property is rich in gold, and it turns out not to be true, the directors, if sued, will have to prove that they believed, and had reasonable grounds to believe, the state- ment to be true ; whereas, if the statement is that the directors believe that the property is rich in gold, it will be for the plaintiff to jDrove that they did not believe. Of course, however, an honest man will not say that he believes unless he has grounds for that belief. 14 App. Cas. 375 ; and see Aaron\^ Reefs v. Tioiss, (1896) A. C. 273. 8. Looking to the stringent provisions of the Act, it would seem As to record- expedient that any director, or other person who may be held respon- ^°» g-rounds sible under the Act for untrue statements, should make a written record — (1) Of the fact that he believed the statements to be true when the prosj)ectus was issued and up to allotment ; (2) Of the grounds of his belief ; 122 PEOSPECTUSES. [CflAP. III. (3) Of the grounds on wliicli lie Lelieves in tlie competency of any- expert who made any report or memorandum sot out or referred to in, or issued with the prospectus or notice. As to (3), the onus will be on the plaintiff in an action to prove that the defendant had not reasonable grounds to believe in the com- petency. Still, it seems wiser to preserve the evidence, for the plaintiff will be entitled to ask the defendant, " "What were your grounds of belief ? " and if the defendant could not remember, this, with other circumstances, might enable the plaintiff to discharge that onus. The object of the record is that the person who makes it may, if the occasion arise, be able to refresh his memory in the witness box by referring to such record. In the absence of such record, it may (after a lapse, perhaps, of years) be a matter of great difficulty for a director, or other person sued, to prove not only his belief, but his grounds of belief. The rules as to refreshing memory by referring to such a record are stated in Stephen's Law of Evidence, p. 79, as follows : — "A witness may, while under examination, refresh his memory by referring to any writing made by himself at the time of the transaction concerning which he is questioned, or so soon afterwards that the judge considers it likely that the transaction was at that time fresh in his memory. " The witness may also refer to any such writing made by any other person, and read by the witness within the time aforesaid, if when he read it he knew it to be correct." A delay of some weeks in writing or reading the record might render it inadmissible. See Taylor on Evidence, § 1406. One mode of making the record will be for the director to take a copy of the prospectus, and himself make the record thereon, or on a sheet of paper annexed thereto, and place such copy and record in safe custody. Another mode will be to consider the prospectus and other docu- ments at a board meeting, before they are issued, and to take the statements seriatim, and as to each state the ground of belief and the fact that all the directors believe, and let the minutes made by the secretary record all this in detail, and within the next few days let the formal minutes bo read and initialled by all the directors, and let a copy be furnished to each of the directors, and let each forthwith compare his copy with the original, and make and initial and date a memorandum thereunder to the effect that: "I compared this copy with the original minutes, and found it correct." Thus, the formal miniites may be referred to, and if they should be lost, the director will probably be allowed to refer to the copy. Taylor, § 1408. 9. Lastly, it is lawful for a subscriber to contract himself out of some of tlio rights secured to him by the new Act ; and there may be cases in which it will be desirable, under proi)er advice, to arrange for such a contract or waiver. See infra, pp. 125, 133. INTEODUCTORY NOTES. 123 As to s. 4 of the Act. — Sect. 4 of the Act is not of mucli importance. Sect. 4 of tho It gives to parties sued a right to indemnity against damages, costs, ^ ' charges and expenses in certain oases, but only where there is defendants. no cause of action under the Act against the j)arty claiming tho indemnity. Persons entitled to such indemnity are the following : — (1) A person who has been named as a director in a prospectus without his consent, and without his having authorized tho issue of the prospectus. (2) A director of the company who withdraws his consent to be a director before the issue of the prospectus or notice, and has not authorized or consented to the issue thereof.- (3) A person who is named as having agreed to become a director, and has withdrawn his consent before the issue of the pro- spectus or notice, and has not authorized or consented to the issue thereof. Each of these persons would have a good defence to an action under sect. 3 of this Act, but even if he succeeded in defending himself, he might not recover all his costs from the defeated plaintiff, and, accord- ingly, s. 4 enables him to claim indemnity elsewhere. It would seem that a director who without fraud or negligence Indemnity incurs liability under the Act, is entitled to indemnity as against the company ; for he is an agent, and an agent is entitled to indemnity in the absence of fraud or misconduct. Story on Agency, § 339 ; Betts V. GihUns, 2 A. & E. 57. against company. As to sect. 5 of the Act. — Sect. 5 of the Act gives a right of contribu- Sect. 5 of Act. »n to a director or person named as a director. It woulc e right extends even to cases of fraud where compensatio: under the Act. This is an important alteration of the law. tion to a director or person named as a director. It would seem that Right of the right extends even to cases of fraud where compensation is claimed Sect. 38 of the Companies Act, 1867. The section is as follows : — Every prosisectus of a company, and every notice inviting persons to subscribe for Sect. 38 of the shares in any joint stock company, shall specify the dates and the names of the parties Act of 1867. to any contract entered into by the company, or the promoters, directors, or trustees thereof, before the issue of such jirospectus or notice, whether subject to adoption by the directors or the company, or otherwise ; and any prospectus or notice not specifying the same shall be deemed fraudulent on the part of the promoters, directors and officers of the company knowingly issuing the same, as regards any person taking shares in the company on the faith of such prospectus, unless he shall have had notice of such contract. Much difference of opinion exists as to what contracts, regard being Construction. had to this enactment, must be specified in the prosjjectus ; but the balance of authority is in favour of a construction which would render it necessary to specify every contract by a promoter, director, or trustee, 124 PROSPECTUSES. [Chap. III. Eemedj of party- deceived. Aj^plication of sections. Knowingly Sect. 38 only applies to Bhureholders. Abridged jjrospectus. wticli might reasonably be expected to influence persons reading tlie prospectus in making up their minds whether or not they will apply for shares, whether the contracts were made before or after the person became a promoter, director, or trustee, and whether they relate directly or indirectly to the aflFairs of the company, or to the affairs of the pro- moters, directors, vendors or trustees. The remedy of a person who has taken shares on the faith of a pro- spectus offending against this section is to sue the promoters, directors, or officers issuing the same for the damages he has sustained. Governs case, 1 C. Div. 182 ; Twycross v. Grant, 2 C. P. Div. 469, 503; Sullivan V. Mitcalfe, 5 C. P. Div. 455. Accordingly, in preparing a prospectus it is essential to bear this section in mind, and to ascertain what contracts have been made, and to consider carefully which of them ought to be specified. In many cases there is little or no difficulty in deciding the matter, but occasion- ally questions of great nicety arise. A verbal contract is within the section. Capel v. Sims^ Ships^ Composition Co., 36 W. P. 689 ; 58 L. T. 807 ; Arkicright v. Newhold, 17 C. Div. 301 ; 28 W. E. 829. As to the meaning of the word " promoter," see supra, pp. 54 et seq. The words " knowingly issue," in s. 38, mean neither more nor less than issuing with a knowledge of the existence of contracts within the section, and the intentional omission of them from the prospectus. Per Cockburn, C. J., Twycross v. Grant, 2 C. P. Div. 542. This being so, a grave resjDonsibility is cast on those who have to advise on the section. The measure of damages may be the full amount of the shares when they turn out to be worthless, even though they had a market value when they were taken up. See Twycross v. Grant, ubi stijora ; Arhvright v. Neivhold, ubi supra ; Peek v. Derry, 37 C. Div. 541. It should be borne in mind that s. 38 is applicable for the protection of shareholders only. Accordingly, it is not applicable in the case of a bondholder. Cornell v. Hay, L. E. 8 C. P. 328. Nor does it enable the company to sue. New Sombrero Co. v. Erlanger, 3 App. Cas. 1218. Nor does it confer on a shareholder the right to repudiate his shares. Cover'' s case, 1 C. Div. 182. The section applies to an abridged prospectus, even though such prospectus states where full prospectuses may be obtained. White v. Hayman, 1 Cab. & Ellis, 101 ; Army, ^c. Soc. v. Craiy, 8 T. L. E. 227. The fact that s. 38 does not apply to bondholders and the like sometimes induces the promoters of a company — where it is desired to apply to the public for capital, but difficulties arc apprehended in regard to s. 38 — to raise the capital on debentures or debenture stock. But there can be no doubt that a prospectus inviting subscriptions for debentures on the footing tliat each allottee is to have the right to cliiiiu iui allotment of shares, e.g., one founder's share for every 100^. debenture, is within the section. INTRODUCTORY NOTES. 125 Waiver Clauses. In settling prospectuses it is often very material to consider Waiver whether the operation of soot. 38 of the Companies Act, 1867, and of Causes, the Directors' Liability Act, 1890, can be excluded or qualified by means of a waiver clause or otherwise. It is sometimes extremely difficult, if not impossible, to say which of the contracts that have been made are contracts within sect. 88 of the Act of 1867. As we have seen, the cases go to show that all contracts with certain parties must be specified which may reasonably be expected to influence persons reading the prospectus in making up their minds whether or not they will apply (p. 124, supra) ; and opinions may, and often do, differ materially as to whether a particular contract or class of contracts may reasonably be expected so to influence persons. Moreover, the number of the contracts possibly within the section may be so great that it is impracticable to set them out. In such cases it would be very desirable, if possible, to cjualify the operation of the section. Again, under the Directors' Liability Act, 1890, as we have seen, a director may be held liable in respect of a statement in a prospectus which turns out to be incorrect, but was made by the director on grounds which appeared to him perfectly satisfactory and was honestly believed by him to be true ; and it may, if practicable, be expedient in some cases to endeavour to protect the directors from liability in such circumstances. As to waiving s. 88 of (he Coi7ipanies Act, 1867. — Waiver clauses in relation to s. 38 of the Companies Act, 1867, have been in use now for twenty years and upwards, yet, strange to say, it has not yet been judicially decided what their precise efi^ect is ; and it still remains a matter of doubt whether, by any provision in the pro- spectus or in the form of application, it is possible to deprive an allottee of the rights given to him by the section. It is apprehended that if the operation of s. 38 is to be excluded, it must be (1) by contract, or (2) by estoppel, or (3) upon the footing of the maxim J^olenti non Jit injuria, or (4) by notice under the con- cluding words of the section. First, as to contract : 1 . Bv con- The section imposes on the directors and others a statutory duty, and tract, vests in the subscriber a corresponding right. Can the subscriber relieve the directors and others from the performance of that duty or exonerate them from any claim for non-performance of it ? There is much to be said in favour of the validity of a waiver by contract. The law allows the utmost freedom of contract — Modus et conventio vincunt legem — and the proposition that this freedom of contract clearly includes power to give up rights conferred by law, whether statute or 126 PROSPECTUSES. [Chap. III. Statutory rights may be waived. Common law rights may- be waived. commou law, is crystallised in the maxim (lu'dihet potest nmunciure juri pro se introducto. No doubt, this freedom of contract ia controlled, to some extent, by considerations of public policy ; for, as Lord Westbury pointed out in Htint V. Hunt, 31 L. J. Ch. 161, 175, see infra, "no man can renounce a right which the claims of society forbid the renunciation of." But the Courts are extremely reluctant to hold a contract invalid on the ground of public policy. Thus, it has been held again and again that a right conferred by statute can, by contract, be waived or abandoned. Savin v. Hoylake Rail. Co., L. E,. 1 Ex. 9 ; Brampiton, ^c. Co., 10 Ch. 177 (I'ight to costs waived) ; Bassett v. Diihe of Bedford, 8 T. L. H. 602 (right to party- wall expenses waived) ; In re Thompson and Holt, 44 C. D. 492 (right to notice waived) ; Haigk v. Royal Mail, ^c. Co., 48 L. T. 267. In the case last mentioned S. had taken a passage in the defendants' ship on the footing that defendants were not to be liable for any loss or damage arising from negligence or default of the pilot, master, or mariners. The ship was sunk in a collision, and S. lost his life ; and it was held that his executors had no right of action, because S. had exonerated the defendants from liability for negligence. So, also, Griffiths v. Earl of Dudley, 9 Q. B. D. 357, decided that a workman was entitled to contract himself out of the rights given him by the Employers' Liability Act, 1880. Indeed, where Parliament intends to prohibit or place restrictions on contracting out of an Act, it makes express provision accordingly, as in s. 103 of the Income Tax Act, 1842 ; s. 3 of the Ground Game Act, 1880 ; and s. 3 of the "Workmen's Compensation Act, 1897. It is equally clear that a right conferred by the common law can by contract be waived and abandoned ; for example : — A railway i^assenger, irrespective of contract {Foulkcs v. Metrop. Co., 5 G. P. D. 157), has a right to claim damages if he is injured by the negligence of the railway com^iany's servants ; nevertheless, he is at liberty by contract to waive or abandon this right. McCaivley v. Furness Rail. Co., L. E. 8 Q. B. 57 ; Gallin v. L. ^- N. W. Rail. Co., L. E. 10 Q. B. 212. Again the law imposes on married persons the duty of cohabitation, the performance of which may be enforced, siih modo, in an action for restitu- tion of conjugal rights; but it was held by the House of Lords in Wilsofi V. Wilson, 1 H. L. 0. 538 ; and 5 II. L. C. 40, that an agreement for voluntary separation was valid ; and subsequently in Hunt v. Hunt, 31 L. J. Ch. 161, it was held that a covenant in such a deed not to sue for restitution of conjugal rights was valid and effective, and that the Court would enforce it by injunction. In that case Lord Westbury, after referring to IFilson v. Wilson as necessarily involving the princij)le that a covenant not to sue for restitution was not contrary to public policy, said that the Court would enforce such a covenant by injunction, and expressed his opinion that voluntary separations, being no offence at common law, the right to sue for restitution was a right in which the INTRODUCTORY NOTES. 127 public wero not interostod, and accordingly that it was a right which could be waived by the individual. "If it is not to bo regarded as a civil offence, or an offence against society, then the power to institute a suit for the restitution of conjugal rights is nothing in the world more than a private remedy and a private right belonging to the husband. The general maxim applies, Quilibet poUst renunciure juri pro se introducto. I beg attention to the words '/j>'o se,' because they have been introduced into the maxim to show that no man can renounce a right which his duty to the public, which the claims of society forbid the renunciation of ; but if this voluntary separation is a state of things which at the consent of the parties may be created, and created without offence, then it falls within the scope and ambit of the ordinary power of contracting, and there can be no difficulty, upon principle or upon the ground of the policy of the law, as to the validity of such a contract." And see McGregor v. McGregor, 21 Q,. B. D. 424. These cases are based on the general princijile of English law, — that Freedom of there is to be the utmost freedom of contract, and that this freedom of '^ "^ ^^^ ' contract is not to be unduly fettered by notions as to public policy. As was said by Jessel, M. E., in Printing, &,'c. Co. v. Sampson, 19 Eq. 465. " It must uot be forgotten that you are not to extend arbitrarily those rules which say that a given contract is void as being against public policy, because if there is one thing more than another public policy requii-es, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts, ■when entered into freely and voluntarily, shall be held sacred and shall be enforced by Courts of Justice. Therefore, you have this paramount public policy to consider — that you are not lightly to interfere with this freedom of contract. Now, there is no doubt public policy may say that a contract to commit a crime, or a contract to give a reward to another to commit a crime, is necessarily void. The decisions have gone further, and contracts to commit an immoral offence, or to give money or reward to another to commit an immoral offence, or to induce another to do something against the general rules of morality, though far more indefinite than the previous class, have always been held to be void. I should be sorry to extend the doctrine much further. I do not say there are no other cases to which it does apply, but I should be sorry to extend it much further." Approved by Chitty, J., in Tullis v. Jacson, (1892) 3 Ch. 444. And see Tailhy v. Official Receiver, 13 App. Cas. 545, per Lord Macnaghten. In like manner in Griffiths v. Ea7'l of Dudley, uhi supra, it was con- tended that it was contrary to public jiohcy to " allow a workman to contract himself out of the Employers' Liability Act, 1880, but the Court held otherwise. In that case, Field, J., said (9 Q. B. D. 302): — " There is no suggestion that the contract was induced by fraud, or by force, or made under duress, and it was not a naked bargain made ^vithout consideration, for the defendant contributed an amount to the club equal to the whole amount of contri- butions from the workmen. I am unable to concur in the view taken bj- the learned County Court judge of these facts, and of the statute. He held that the contract was against public policy. It is at least doubtful whether, where a contract is said to be void as against public policy, some public policy which affects all society is not meant. Here the interest of the employed only would be affected. It is said that the intention of the legislature to protect workmen against imprudent bargains 'irill be frustrated if 128 PROSPECTUSES. [Chap. III. Whether ■waiver contrary to public policy. contracts Hke this one are allowed to stand. I should say that workmen, as a rule, were perfectly competent to make reasonable bargains for themselves." And Cave, J., said (p. 364) : — "I am of the same opinion. The main question is, whether or not a workman can contract himself or his representatives out of the benefit of the Employers' Liability Act. The plnintiff's husband did so contract himself ; it is said that the contract was against public policy. No authority has been cited in support of that proposition, and I can see no reason why such a contract should be against public policy. I should not hold it to be so, and thus interfere with freedom of contract, imless the case were clearly brought within the principle of the decisions as to the contracts which are against pubUc policy." As, tlien, it is not contrary to public j^olicy for a man to contract that, if injury to himself or his death results from a breach of duty by the other party to the contract, he or his executors shall make no claim for compensation, can it be contrary to public policy for a man to contract that, if he sustains a loss by taking shares offered for sub- scription by a prospectus which he is informed does not comply with the statute, he will make no claim in respect of that loss ? Is com- pliance with the section a matter of public interest, or was the section passed for the benefit only of particular subscribers ? The Courts have answered this question. In Cornell v. Hay, L. E. 8 C. P. 328, it was contended that the earlier part of s. 38 imposed a statutory duty in favour of the public, but the Court decided against that contention, and held that the section was intended for the exclusive benefit of the subscribers for shares. And in Reg. v. Isaacs, Bottomley and others, tried before Mr. Justice Hawkins in 1893, a count in the indictment charging the defendants with unlawfully and fraudulently conspiring to contravene the provi- sions of the section was withdrawn by the Solicitor- General upon the learned judge saying that it was novel, and that the section pointed out the consequences of a breach, viz., that the prospectus " shall be deemed fraudulent not generally but on the part of the promoters, directors and others issuing the same as regards not all the general public, but any person taking shares," &c. Tlie object of the section was considered carefully by the Court in Governs case, 1 C. D. 182, in which it was held that the opera- tion of the words is to bo limited. "The Act says that an omission shall be deemed fraudulcut. It provides that some- thing which under the general law would not be fraudulent shall be deemed fraudulent ; and we are dealing with a case of that kind. Wliere the Legislature provides that Homothiiig is to be deemed other than it is, we must be careful to see within what bounds and for what purpose it is to be so deemed. Now the Act does not say that the prospectus shall be deemed fraudulent simpliciler, but that it sliall be deemed fraudu- lent on the part of the person wilfully making omission as against a shareholder having no notice of tlic matter omitted ; and I am of opinion that tlio true intent and meaning of tliat provision is to give a personal remedy against the ivroiigdoer in favour of the shareholder.''^ Per James, L. J. These decisions appear to negative altogether the notion that the INTRODUCTORY NOTES. 129 public are Interested in the section being complied with, and to show that the enactment is " one of those which do not create an imperative and positive duty to the public, but which only impose, as tlie result of non-compliance with the directions of the statute, a pecimiary loss on the individual who does not so comply. In such cases, it is not the intention of the legislature to make disobedience of the law a mis- demeanoiir." Per Bowen, L. J., Reg. v. Tylor, (1891) 2 Q. B. 594. But, then, it may be said that, admitting that the section imposes a "Whetlier the duty only towards the subscribers, it also says that the prospectus J^liu^ullnr^ is to be deemed frmidule id as against the offending director, and it is affect the contrary to public policy to allow a man to contract with another, or ™^ ^'^• with a trustee for another, that he will make no claim if he be defrauded by that other. Ttdlis v. Jacson, (1892) 3 Ch. 444. The answer to this may be that, as pointed out by James, L. J., above, the section does not declare the prospectus to be fraudulent, but that it is to be deemed fraudident, that is to say : — A statutory fiction is set up for the purposes of the section, and, in such cases, "the Court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to." Per James, L. J., Ex parte Walton, 17 C. D. 746 ; Hill v. East and West India Dock Co., 9 App. Cas. 448. And the cases above referred to point to the con- clusion that the purpose of the enactment was to give the subscriber a right of action against the wrongdoer. Is there any reason for carrying the operation of the words any further ? Are we to suppose that the legislature intended not merely to give the subscriber a right of action but to preclude him from waiving that right and thus protect him against himself ? Surely, the object of the statute was to protect those who are deceived, not those who, before subscribing, are informed that there are other contracts not specified, and yet, with this information, agree to take shares and waive all claims. Lastly, as these pages are passing through the press, Channel, J., in Disclosure of Bensiisan v. Clarke, Times, Nov. 12, and Dec. 13, 1897, expresses the contracts ° opinion that a waiver clause is effective where the prospectus indicates waived, the character of the contracts waived. Clarke (1897). Assuming, then, that a valid contract can be made to waive any jjow contract claims in respect of the breach of the statutory duty imposed by this of waiver to section, are the plans usually adopted for the purpose of securing such waiver effective ? Now, it is not uncommon to insert in the prosj)ectus a clause specifying some contracts and stating that there are others, but that applicants will be deemed to waive further compliance with sect. 38 of the Companies Act, 1867. See specimens, infra, p. 141. And where any such clause is inserted, the form of application very commonly states that the application is made " on the terms of the prospectus of the company, dated the day of ," and concludes with the words, "And I waive [or I agree to waive] any fui-ther p. K 130 PROSPECTUSES. [Chap. III. Resulting contract. Whether directors can rely thereon. Afl to making company truHtee for directorB. complianco with sect. 38 of the Companies Act, 18G7, than that effected Tby such prospectus," or, "And I waive the specification of the dates and names of the parties to any contracts other than those specified in the prospectus." Whether the form of application does or does not contain these additional words as to waiver, it seems clear that when shares are allotted, in response to such an application, the allottee must be regarded as having- contracted himself jjro tanto out of the section : the waiver is one of the terms on which he gets the shares. Then, is this a contract on which the promoters, directors and officers of the company can rely ? If the allottee subsequently sues them under the section, can they say by way of defence, '' You agreed to waive any right you had against us under the section " ? Apparently the answer must be in the negative, for the contract is not made with them. No doubt the form of application is usually addressed, "To the directors of the above-named company," but when an allotment is made in respect thereof the contract is with the com- pany, not the directors. Now where A. contracts with B. to pay C. a sum of money, or do some other thing which may be beneficial to C, C. cannot sue on the contract, unless it can be made out that B. is trustee for him. Re Empress Engineering Co., 16 C. Div. 125; He Rotherham Alum and Chemical Co., 25 0. Div. 103; Gandy v. Gandy, 30 C. Div. 57, 65; Ex parte Piercy, 9 Ch. 33 ; Re Brampton and Longtoivn Rail. Co., 10 Ch. 177 ; Lloyd's v. Harper, 16 C. D. 290, 309. In such cases the plea res inter alios acta is available. C. is a stranger to the contract. Can it then be made out that the allottee has contracted with the company as trustee for the directors and other persons liable under the section ? The mere fact that the directors would obtain benefit if the contract were observed, is not enough to show that the company is their trustee. See the above cases. And though there are cases in which the Court is disposed to spell out a trust {Murray v. Flavell, 25 C. Div. 89 ; Gandy v. Gandy, uhi sttpra), it seems unlikely that the Court would make much effort to save a defendant from the consequences of non- compliance with sect. 38. In order to avoid this danger, it has now become very common to provide expressly in the waiver clause, or in the form of application, that the company is to be a trustee of the benefit of the waiver for the directors and other persons liable. See specimens, infra, p. 141. AVith regard to such a provision, it may bo said, " What power has tho company to undertake such a trust?" but the answer is that tho transaction is intended to protect tho company's agents against appre- hended danger, and is thoroforo incidental to the company's objects ; and there is no difficulty in converting a company into a trustee for its own or some of its own shareholders. See South Llanharran Co., 12 C. D. 503, whoro a company was hold to be trustee of a guarantee INTRODUCTORY NOTES. 131 of (lividonds for its own sliarcliolclers. It must, however, Le borne in mind that if the shares are taken up in response to a prospectus which contains any material misrepresentation, a director, or other person wlio was a party to the misrepresentation, might not he allowed to rely on a contract to waive which was induced by such prospectus. 2. Asfocstojjpel. — It is sometimes contended that a person who chooses 2. By estop- to apply for and take shares, on the footing that ho is to be deemed to ^^ ' waive the requirements of sect. 38, is estopped from subsequently insisting on that section, but it seems more than doubtful whether that is 80. In order to establish the estoppel, it must appear that tho subscriber has made to the directors a representation of an existing fact, with the intention that they should act on it. Pickcvrd v. Scars, G Ad. & Ellis, 469. A representation of the subscriber's intention cannot create an estoppel, though it may amount to a contract. Mad- diso7i V. Ahlerson, 8 App. Cas. 467 ; Jorden v. Moneij, 5 H. L. C. 185 ; Citizens' Bank v. Bank of Neiv Orleans, L. E. 6 H. L. 352, 360. The prospectus is obviously the representation of the directors, not of the subscribers, and accordingly, the prospectus cannot estop a subscriber. Again, a form of application containing an agreement to waive, or declaring an intention to waive, cannot create an estoppel. It is an offer, not a representation of an existing fact, and even w^here tho application states that the applicant is to be deemed to waive, the statement appears only to be a term of the agreement, and not a state- ment of an existing fact. And so, too, where the prospectus states that applicants will be deemed to have notice of the omitted contracts, it would seem that an application on that footing does not operate by way of estoppel. 3. Whether the maxim Volejiii non Jit injtiria is applicable has not 3. yolenti non been settled. It is no doubt a general rule of the English law that no ^' "''^'" ^"' one can maintain an action for a wrong where he has consented to the act which occasions him loss. Per Tindal, C. J., Gould v. Oliver, 4 B. & C. 142. "The maxim is founded on good sense and justice. One who has invited or assented to an act being done towards him cannot, when he suffers, complain of it as a wrong." Per Lord Herschell, Smith v. Baker, (1891) A. C. p. 360. Thus, in an action for criminal conversation before 20 & 21 Vict. c. 85, the husband's consent to his wife's adultery was a bar to his action. Duhcrley v. Gunning, 4 T. E. 657, So also, if a person says, " There are spring guns in this wood," and another goes into the wood knowing that he is in hazard of meeting with the injury the gims are calculated to produce, he does so at his own peril. Nott v. Walter, 3 B. & Aid. 311. It is not easy to see why this maxim should not apply to tho case of an applicant who, knowing that the requirements of s. 38 of the Companies Act, 1867, have not been complied with, voluntarily K 2 132 PROSPECTUSES. [Chap. III. As to notice of the con- tracts. Course to bo adopted. requests an allotment. Except for the allotment he would suffer no damage, but with knowledge of the risk he voluntarily requests and consents to an allotment. Is he to be at liberty to claim damages ? In some cases the answer may be that he had not any effective know- ledge of the risk, for the words of the waiver clause led him to suppose that the contracts not specified were not really material, and that he cannot be said to have voluntarily undertaken a risk which he did not appreciate. See Smith v. Baker ^ Sons, (1891) A. C. 325 ; Thomas v. Qnartermame, 18 Q. B. D. 685 ; Yarmouth v. France, 19 Q,. B. D. C47. 4. As to notice under the concluding words of the section. — The section concludes with the words "shall be deemed fraudulent on the part of the promoters, directors, and officers of the company knowingly issuing the same as regards any person taking shares in the company on the faith of such prospectus unless he shall have had notice of such contract^ Accordingly, if the subscriber can be fixed with notice of the omitted contract or contracts he has no grievance under the section, and its o^Deration is excluded without resort to any contract to waive. As regards similar expressions in other Acts of Parliament, it has been held that " notice " to be effective need not be specific, it may be general, and that it need not be actual, it may be constructive. Thus, a man was held to have " notice of an act of bankruptcy" where the debtor informed him that " he had committed several acts of bank- ruptcy." Udall V. Walton, 14 M. & W. 254. And notice of the presen- tation of a petition for adjudication is ."notice " of an act of bankruptcy ; for, though not in itself an act of bankruptcy, it is sufiicient to put the party on inquiry. " I think that notice of a petition is notice of an act of bankruptcy, and that we shall not press the doctrine of constructive notice too far if we so hold." Lindley, J., Lucas v. Dicker, 5 C. P. D. 150 ; affirmed on appeal, 6 Q. B. D. 84 (C. A.). Constructive notice is imputed to a man who has notice of something sufficient to put him upon further inquiry. Thus, in Jones v. Williams, 24 Beav. 47, where a mortgage of property was taken " subject to all charges affecting it," the mortgagee was held bound to make inquiry as to the charges, and in default was treated as having constructive notice thereof. " Ho is not entitled to claim to be a purchaser without notice of those charges, because he believes that the two of which he is cognizant are all the charges upon it. He is, in my opinion, bound to inquire whether these are all the charges, and whether there are any otliors." Per Eomilly, M. P., p. 58. In like manner where a prospectus states plainly that there are other contracts not specified which are or may be within the section, it would seem tliat an a2)plicant who abstains from inquiry should bo held to have constructive notice thereof. Constructive notice is as effective as actual notice. Prosser v. Rice, 28 Beav. 68, 74. In the circumstances there appears to be reason to think that the operation of tlio section may be excluded by contract or otlierwise. Where practicable, it is obviously desirable to comply fully with the INTRODUCTORY NOTES. 133 requirements of the section, and thus preclude doubt and danger ; but it is sometimes impracticable to comply tberewith (e. y., whore the contracts are very numerous), and in such cases it is desirable to exclude, or make an effort to exclude, the section. One j)lan commonly adopted is to insert in the prospectus words referring to the existence of other contracts of a specified character, and stating that " applicants will be deemed to have notice thereof and will be required to waive any claims they may have by reason of the prospectus not more fully complying with the requirements of s. 38 of the Companies Act, 1867," and to insert in the form of application words to the effect following : — And I agree with the company (as trustee for the directors and other persons liable) to waive any claim I may have against them for not more fully complying in the said prospectus with the requirements of s. 38 of the Companies Act, 1867. An alternative plan is to insert in the prospectus a paragraph referring to other contracts, and to add the words "applicants will be deemed to have notice of such contracts, and to have agreed with the company, as trustee for the directors and other persons liable, to waive any claim against them such applicants may have for not more fully complying," &c. And if this be done, the form of application need not contain any such words. Both these plans, since the writer suggested them, have been adopted in many cases, including cases concerning companies of the best character, and they both appear to constitute an effective trust in favour of the directors and others, and therefore to preclude the objec- tion that the contract is res inter alios. See specimens, infra, p. 141. As to whether that contract is valid in point of law, see supra, p. 125. Moreover, the statement that there are other contracts, especially where they are described, and it appears that they are within the section, may go far to fix applicants with notice thereof, and thus to exclude the operation of the section. And to offer such contracts for inspection will carry the matter still further. As to ivaiving the Directors' Liability Act, 1890. — The Act merely Waiver of imposes on the directors and others a statutory obligation to pay com- 5p."'f?*°^^ . pensation to the injured subscribers, and this obligation is obviously i890. inserted for their benefit. Looking to the cases above referred to, it is apprehended that, beyond all doubt, the maxim is applicable, and that a subscriber may legally contract himself out of s. 3 of the Act. It would not, however, be proper, or indeed practicable, to make a contract to the effect that the subscriber shall not sue for compensation in respect of a, fraudulent misrepresentation ; but there would seem to be no impropriety in a contract to the effect that the subscriber will not sue in respect of a misstatement innocently made, and that such a misstatement should not invalidate or render voidable the contract. Such a contract might be made by deed of covenant with the By what directors, but such a mode will rarely be practicable ; and if there is i^t^'i^ent. 13^ PEOSPECTUSES. [ChA1\ III. to be such a contract it must, no doubt, be embodied in the prospectus or form of application. But a contract so embodied will, as between the subscriber and the directors, be open to the objection that it is res inter alios acta {stijira, p. 130), unless it is made with the company as trustee : e. g., And I agree with the company (as trustee for the dii-ectors and other persons liable) that I will not make any claim, or take any proceedings, under the Directors' Liability Act, 1890, for compensation in resj)ect of any misstatoraeut in the said prospectus, made by the directors in the belief that it was true, and that my contract shall not bo invalidated by reason of any such misstatement. Or the prospectus may state that : — "The statements hereiu set forth are based on information furnished by the vendor [or by A. B.], but appUcants will be deemed to agree with the company (as trustee for the du-ectors) that they will not make any claim imder the Directors' Liability Act, 1890, on account of any iucoiTCct statement in the said prospectus made by any director in the belief that it was correct, or claim to repudiate theii' coutaracts on that account." Sometimes a waiver under s. 38 of the Companies Act, 1867, is amalgamated with one under the Act of 1890. Criminal Liability. Criminal Sect. 84 of the Larceny Act, 1861 (24 & 25 Vict. c. 96), provides liability. ^^^^ ._ "Whosoever being a director, manager, or public officer of any body corporate or public company, shall make, circulate, or pubUsh, or concur in making, cii'culating, or publishing, ««// ivritten statement or accoimt which he shall know to be false in any material particular, with intent to deceive or defraud any member, shareholder, or creditor of such body corporate or public company, or icUh intent to induce any person to become a shareholder or partner therein, or to intrust or advance any property to such body coi-porate or j)ublic company, or to enter into any security for the benefit thereof, shall be guilty of a misdemeanour, and, being con\acted thereof, shall be liable, at the discretion of the Court, to any of the punishments which the Court may award, as hereinbefore last mentioned." The punishments referred to were :— " to be kept in penal servitude for any term not exceeding seven years and not less than three years, — or to be imprisoned for any term not exceeding two years, with or without hard labour, and with or without solitary confinement." Ibid. 8. 75; and see Chitty's Statutes, 5th ed. vol. 3, pp. 221, 248, in tit. "Criminal Law." A prospectus is a " written statement " within the meaning of this enactment, and accordingly if a prospectus is issued containing fraudu- lent misrepresentations, the directors issuing it will be liable to prose- cution under the Act ; they may also bo prosecuted for conspiracy to commit the statutory oirunce. Moreover, any person, whether a director or not, who issues or takes part in the issue of a prospectus containing fraudulent misrepresentations, may bo prosecuted for con- INTRODUCTORY N0TE8. 135 splracy to defraud. But of course such persons cannot be convicted, unless it can bo proved that they know the representations to be false, and, acting upon that knowledge and with the intention to deceive and defraud, issued the prospectus. It should, however, be borne in mind, that if a prospectus containing misrepresentations is issued, it may not be difficult to make out a ^j?'/w(i facie case against those who issued it ; for " every man must be taken jor/mrf.y«cie, at least, to have intended what are the natural and necessary consequences of his acts ; and if you find that there was misrepresentation, and that it has ended in defrauding the parties to whom it was addressed, the fair and legitimate inference is, that the intention was that the act done should carry with it the consequences that have followed." Per Cockburn, C. J., in The Queen v. Gurney and others^ Finlason's Eeport, p. 254. The presumption may be rebutted, as it was in the case last men- tioned, but it is desirable that the prospectus should bo so framed that there may not be any room whatever for even commencing criminal proceedings. How Disclosures should be made. The mode in which disclosure should be made by promoters, directors. How dis- and others, to the company and to applicants for shares therein, must gjioi^i^j^^Q of course depend on the circumstances of the case, but it will be borne made. in mind : — 1. That the prospectus, though purporting to be issued by the com- pany, may, it apjpears, be regarded as a notice to the company of any- thing stated in it. "The prospectus conveyed to those who became shareholders in the company, and conveyed therefore to the company, notice of some facts with regard to this contract which appear to me to be of great importance. The company was informed " Per Lord Cairns, L. 0., Erlanger v. Neiv Sombrero Co., 3 App. Cas. 1218, 1239. 2. That every member of a company is deemed to have notice of the contents of the memorandum and articles of association, and of any contracts therein set out. Central Rail. Co. of Venezuela V. Kisch, L. E. 2 H. L. 99, 123 ; Ernest v. Nicholls, 6 H. L. Cas. 401 ; Ex parte Williams, 2 Eq. 218; Banl of Turkeij y. Ottoman Co., 2 Eq. 369; FeePs case, 2 Ch. 674; Grijith v. Papet, 6 C. D. 511, 517. "All the shareholders of the company must have imputed to them knowledge of the Acts of Parliament, and also of their own memoran- dum and articles of association." Per Lord Selborne, L. C, CampbeWs case, 9 Ch. 1, 22. But this rule clearly does not apply where there is fraud, for " the statute only meant to bind those who had actually become members. Any one who had without fraud taken shares could not allege ignorance of anything contained in the memorandum of association or in the articles of association, merely because ho had not signed or sealed them; 136 PROSPECTUSES. [Chap. III. but if lie never actually signed or sealed tliem, nor had notice of what they contained, the statute cannot be taken to impute to him knowledge of their contents, so as to protect those who, by a fraud, had induced him to do that which, in the absence of fraud, would have precluded him from saying he was ignorant of their contents." Per Lord Cranworth, Central Rail. Co. of Venezuela v. Kisch, L. E,. 2 H. L. 123. In that case \_su20rn, p. 97] the prospectus contained misrepresentations; but it must not therefore be assumed that the rule will always apply in the absence of misrepresentation, for where there is a duty to dis- close, it would seem that non-disclosure may be deemed fraud. See Lord Blackburn's judgment in Brou-nlie v. Campbell, 5 App. Cas. 950, and Peek v. Den-y, 37 C. D. 541. And see Aaron'' s Reefs v. Tiviss, (1896) A. C. 273. And the rule would not be applied where the Court or jury was satisfied that the intention was fraudulent. 3. That every person who takes shares on the footing of a particular j)rospectus is deemed to have notice of the contents of any contract or other document thereby offered for inspection — at any rate so far as the same are not inconsistent with the facts stated or implied by the prospectus. New Somhrero Phosphate Co. v. Erlanyer, 5 C. Div. 73, 111; S. C. 3 App. Cas. 1262; Anderson's case, 7 C. Div. 75, 102; and see Aaron's Reefs v. Tiviss, (1896) A. C. 273. Thus, where the prospectus offered a contract for inspection, Jessel, M. E., said : " If the shareholders had gone to see it (and I think in a Court of Justice they cannot complain that they did not see it, but must be treated as having notice of its contents) they would have found a recital of the contract from C. to E. omitting the price. . . ." New Sombrero Co. v. Erlanger, 5 C. Div. 111. And in the House of Lords, in the same case (3 App. Cas. 1280), Lord Blackburn said, " I think each allottee was fixed with the know- ledge, which he would have had if he had read it, that E. had pur- chased from C. so recently as 30th August, not quite three weeks before he sold to the company." Apparently, however, "Wright, J., is not disposed to recognise this well-settled rule. See Re Sale Hotel, ^^c. Co., W. N. (1897) 174. And when there is misrepresentation, this rule does not apply ; " for when men issue a prospectus in which they make false statements of the contracts made before the formation of a company, and then say that the contracts themselves may be inspected at the offices of the solicitors, it has always been held that those who accepted those false statements as true were not deprived of their remedy merely because they neglected to go and look at the contracts." Per Jessel, M. P., Redgravex. Ilurd, 20 C. Div. 14. And, d fortiori, where fraudulent intent is established, coupled with actual misrepresentation, offering a contract for inspection docs not amount to notice. Aaroti's Reefs v. Twiss, siqira. Procedure. Accordingly, when promoters intend to obtain a profit, or there are other facts which ought to be disclosed, it is expedient to disclose them by the prospectus and also by the articles. If it is impossible to state INTRODUCTORY NOTES. 137 them fully in tlie prospectus, tliey should be disclosed in tlie articles, or at any rate in some contract therein referred to and offered by the prospectus for inspection. And it may also be expedient, both in the prospectus and articles, to state that applicants are to be deemed to have notice of the contents of the contract. But each case must be separately considered, and, regard being had to the manifold dangers of non-disclosure, it is well to be on the safe side. AVhat has been said is sufficient to show the extreme importance Care requisite of framing the prospectus with the utmost care. Some little colouring l^ospectuf. may, perhaps, be used without danger ; but if a scheme or under- taking is promising, a moderate tone is generally found to be the most attractive. Where the prosj^ectus is issued before the company has been regis- Statement of tered, great care should be taken in stating the objects of the projiosed •' company; for if the objects of the company when registered exceed or differ materially from those stated in the prospectus, applicants may be able to refuse an allotment, or to repudiate their shares after allot- ment, provided they are not guilty of undue delay. Doivnes v. Ship, L. E. 3 H. L. 343 ; PecVs case, 2 Ch. 674, 684 ; Lawrence' s case, 2 Ch. 412 ; Karberg's case, (1892) 3 Ch. 1. In order to avoid any risk of this, the objects should be finally settled before the prospectus is issued, and applicants should be given an opportunity of inspecting the draft memorandum and articles of association. But, as already mentioned [^supra, p. 88], the present practice is to issue the prospectus after the formation of the com- pany. Where the prospectus is not issued until after the formation of the company, the risk above mentioned does not exist, for appKcants are bound to look at the memorandum and articles of the company before applying for shares. PeeVs case, 2 Ch. 674, approved in Oakes v. Turquand, L. E. 2 H. L. 325, 352. The prospectus should state where copies of the memorandum and inspection of articles of association, and of any contracts and other documents \_supra, documeuts. p. 69] mentioned in the prospectus, can be inspected. Where it is intended to apply to the Stock Exchange for a settle- As to Stock ment and quotation of the shares offered for subscription in the ^ ^^°^ prospectus, it is necessary to include in the prospectus a copy of the memorandum of association of the company exclusive of the signatures. It is usually printed within the fold of the prospectus, but without the association clause or the names of the subscribers. But when there are founders' shares taken up by the memorandum of associa- tion, it may be well to print the whole document. For extract from the Eules of the Stock Exchange, see iyifra, p. 144. In considering a prospectus which it is proposed to issue, a director Revie-n' by a whose name is to appear therein should have before him the following ^^^^^^^^ questions : — prospectus. (1) Are all the statements in the prospectus true to your own 138 PROSPECTUSES. [ClIAP. III. knowledge ? Have you seen the mine or property ? Have you examined the books, &c. ? (2) As regards those statements which are not true to your own knowledge, what evidence do you rely on as justifying the statements ? Do you believe the statements to be true, and what are the grounds of your belief ? Are they reasonable ? (3) If you rely on some third party, are you satisfied to take the risk of adopting his statements and making them your own ? Would it not be wiser to avoid this responsibility ? See supra, p. 96. (4) If the prospectus contains extracts from any reports or other documents, are they correct ? and is there anything in the context which ought in fairness to be stated ? Sometimes an extract without the context is misleading. (5) Does the prospectus state that so much is to be paid for the property, when (to your knowledge) a large part of the price is going to the promoters ? If so, the statement may amount to a misrepresentation. (6) Are any of the directors interested as vendors, or as having any agreement with the vendors or promoters or otherwise, and does the prospectus disclose the fact ? (7) Are there any contracts, not specified, the knowledge of which would be likely to influence an investor as to whether he should or should not apply ? (8) Have you any such contract-? Do you draw a distinction between a binding contract and a mere understanding which you could not enforce, but have no doubt will be carried into effect ? The Courts are not always prepared to draw such fine distinctions. (9) Is there any fact or circumstance within your knowledge which you think it essential to keep out of the prospectus as likely to cool the ardour of investors ? If so, you may be in danger. (10) Do you understand that if there is any untrue statement in the prospectus, or in any report or memorandum embodied therein or issued therewith, you may hereafter be sued in respect thereof, and may bo held liable unless you can establish one of the defences above referred to (p. 117) ? (11) Have you made a record of your grounds of belief of any statements, as suggested at p. 121, supra? If not, will you be able, (say) five years hence, to remember your grounds of beUof? Circular disclosing Misrepresentation. Circular Bcnt Lastly, whore, as occasionally happens, a prospectus has been issued prospcctuH "\vhich is open to objection on the ground of misrepresentation, or INTRODUCTORY NOTES. otlierwise, and the facts are not discovered until after allotment, it may, in tlie interest of all parties, bo desirable to bring the matter to the notice of the shareholders with all convenient speed. The object of such a disclosure is to do what is fair and honest, and at the same time to limit the time within which tlie allottees can repudiate their shares ; for, as we have seen, an allottee who has a right to rescind must rescind promptly on becoming cognisant of the facts, otherwise he loses the right to rescind. Supra, p. 102. If, therefore, after receipt of such a circular, the recipient abstains, even for a limited time, from rescinding, he will be bound irrevocably. And it may be the more easy to do this without detriment where the prospects of the company are good and the misrepresentation or sup- pression not very serious. The requisite disclosure may be made by means of a circular stating the facts, and either pointing out the right to rescind or leaving it to shareholders to find that out for themselves. In order that the circular may afford a defence to an action of deceit, or to an action for compensation under the Directors' Liability Act, 1890, it seems necessary that it should not merely state the facts, and point out that there has been a misrepresentation, but should also contain an offer to refund. Artiison v. Smith, 41 C. Div. 348. It is of great importance in all such cases to obtain some acknow- ledgment on the part of the shareholder, for, in order to bind him, knowledge of the facts must be brought home to him. If, however, it can be proved by his admission or otherwise that the circular reached him, he will be presumed to have read it. Scholey v. Central Rail, of Venezuela, 9 Eq. 266, n. But it was held by Pearson, J., in Re London and Staffordshire Co., 24 0. D. 149, that it is not enough to prove that the document dis- closing the facts was posted, and then to rely on the provision in the articles that it is to be deemed to have been served in due course : actual receipt must be proved. It is difficult to reconcile this decision with the law settled in Oalies v. Turquand, that a contract induced by misrepresentation is voidable, not void : that is to say, is valid until rescinded. However, assuming this case to have been well decided, it shows the great importance of procuring evidence of the receipt by the shareholder of the notice. This may often be effected by sending with the circular some form (referring to the circular) to be signed and returned. When an inaccuracy in the prospectus is discovered before allotment, the allotment letters should contain a statement correcting it. By this means notice is certainly established as against the allottee who pays his allotment money, and, unless the error is very serious, the number of allottees who will repudiate may be small. 139 140 PROSPECTUSES. [Chap. III. PROSPECTUSES. \^Names a7id addresses.^ The following is the outline of a share prospectus : — Form 9. The Coy, Limtd. Skeleton Incorporated under the Companies Acts, 1862 to 1883 [whereby the liability of a prospectus. shareholder is limited to the amount of his shares]. The words in brackets are very commonly inserted. Capital 100,000^., divided into 10,000 shares of 10^. each. Payable as follows : 11. on applicon, 21. on allotment, and 21. on the of , and the balance when called for. Directors. [^Names, addresses, and descriptions.^ Bankers. Solicitors. Auditors. Secretary. Office. ' This coy has been formed for the purpose, &c. \^Here will follow a statement of the objects and prospects of the com- pany.'] Applicons for shares should be made upon the accompanying form, and forwarded to the bankers of the coy, together with the amount payable on applicon. If no allotment is made, the deposit will be returned without deduction, and where the number of shares allotted is less than the number applied for, the surplus will be credited in reduction of the amount payable on allotment. The following contracts have been made, namely : — (1.) A contract, dated between A. B. and the coy. (2.) A contract, &c. [_Waiver clause? See infra, pp. 141, 1-12.] Prospectuses and forms of applicon for shares may be obtained from the coy's secretary and bankers. Copies of the memdm and arts of asson of the coy, and of the contracts and reports above mentd, may be inspected at the office of the coy's solors. I)ate4 of . Whore a Stock Exchange quotation is intended, it is essential (see Rule 136, infra, p. 1 14), and in other cases it is usual, to set out a copy of the memorandum of association at the back of the prospectus. FORMS. 141 Specimens of Waiver Clauses, ^ee supra, p. 125. 1. During the negotiations for the purchase of the ppty and the Form 10. formation of the coy, the vendor has entered into contracts with third Specimens parties with reference to the formation and promotion of the coy, and *^, "waiver the subscription of its capital, to none of which the coy is a party. Such contracts are or may be contracts within the meaning of the 38th section of the Cos Act, 1867 ; and, accordingly, applicants for shares are to be deemed to have notice of the sd contracts, and to have agreed with the coy (as tree for the directors and other persons liable) to waive all claims, if any, against them for not more fully complying with the requirements of the sd section, and allotments will only be made upon this express condition. 2. The business will be taken over subject to all existing contracts. These are of the ordinary trade character, but including, as they do, numerous contracts with employees, customers, and others, cannot be specified. Technically, such contracts are or may be contracts within sect. 38 of the Cos Act, 1867 ; but subscribers will be held to have had notice, and to have waived their right to be supplied with par- ticulars of such contracts. In tliis case the form of application concluded with the words ' ' and I agree with the company as trustee, &c.," as above. 3. Besides the above-mentd purchase agreemt, there are other agreemts (to which the coy is not a party) made by or on behalf of the vendors and others with reference to the acquisition of the above ppties, leases, and options, the formation of this coy, and subscriptions to its capital, which agreemts are or may be contracts within the meaning of the 38th section of the Cos Act, 1867. Applicants who desire can have further information as to these agreemts, but in any case they are considered to have had for all purposes full notice of every agreemt above referred to, and will be required to waive any claims under the sd section. 4. The vendor will provide all the preliminary expenses of the formation and bringing out of the coy and the placing of its capital, and he has reserved to himself the right to enter into, and has entered into, contracts and arrangements with third parties for this purpose and for payment to them out of the purchase-money. There are also various trade-contracts and also other arrangements between part owners and parties interested in the ppty and purchase-money, to none of which the coy is party. As these contracts and arrangements may technically be contracts within the meaning of s. 38 of the Cos Act, 1867, applicants for shares shall accept the above as notice thereof, and waive any fuller comj)liance with such section with reference thereto. 5. The business will be taken over subject to all existing contracts. These are of the ordinary trade character and necessary for the work- 142 PROSPECTUSES. [ClIAP. III. Form 10. ing of tlie concern, but including as they do numerous contracts with. employees, customers, manufacturers, and others, they cannot be specified. There are also other contracts which may technically fall within s. 38 of the Cos Act, 1867. Subscribers will be held to have had notice of all the above contracts, and to have waived all rights to be supplied with particulars of such contracts, and to have agreed with the coy as tree for the directors and other persons liable, not to make any claim whatsoever, or to take any proceedings under the sd section or under the Directors' Liability Act, 1890, in respect of any non- compliance with the sd section or any misstatement in the prospectus made by the directors in the bond fide belief that it is true. 6. The above agreement recites and refers to various other contracts, but the coy is not a i^arty to any of these contracts ; but as such contracts are or maybe contracts within s. 38 of the Cos Act, 1867, applicants are to be deemed to have full notice thereof, and will be required to waive, &c. Form 11. Application for shares. The form of application for shares is usually annexed to the prospectus, be as follows : — For.M OF Applicatio:^ foe Shakes. It may To the Directors of The Coy, Limtd. Gentlemen, Having pd to the coy's bankers, Messrs. , the sum of £ , being a deposit of £ x^er share on shares in the above-named coy, I request you to allot me that number of shares upon the terms of the coy's prospectus, dated the of , and I hby agree to accept the same or any smaller number that may be allotted to me, and to pay the balance of £ per share on allotment, as provided by the sd prospectus ; and I authorise you to register me as the holder of the sd shares. [And I agree with the coy, as tree for the directors and other persons liable, to waive any claims I may have against them for not more fully complying, in the sd prospectus, with the require- ments of s. 38 of the Cos Act, 1867. See pp. 125, 133, 141, supra.'] Name in full. Address. Description. Date. Signature. Ah to conditional applications, mc Fdlcivr/ tori's case, 2 C'li. 511 ; PiUatCscase, 2 Ch. 627 ; Simpson'' s cane, 4 Ch. 184. Asto waiver clause in regard to sect. 38 of the Act of 18C7, see supra, pp. 125, 133. Bankers' receipt. FORMS. 143 Annoxed to tlio form of aiiplication will Lo a form of rnooipt, aa follows : — The Coy, Limtd. Form 12. Bankers' Receipt {to he retained by the applicant). Received this day of of Mr, , the sum of £ , being a deposit of £ per share upon shares in the above-named coy. For the Bank. [ To he siyned hxj the hankers or secretary, and retained hy the applicant. '\ An applicant for shares is bound from, the time when notice of allotment is given or posted. Household Fire, ^-c. Co. v. Grant, 4 Ex. Div. 216. Until notice of allotment is given or posted there is no contract, and the applicant may withdraw. TellaWs case, 2 Ch. 527. The withdrawal may be oral. Trummi's case, (1894) 3 Ch. 272. But an unstamped allotment letter may be sufficient. I)i re U'liUley Tartners, SteeVs case, 49 L. J. Ch. 17G ; 42 L. T. 11. And if the withdi-awal of his application does not reach the company until after the notice of allotment has been posted, it is ineffectual. Harris's case, 7 Ch. 587 ; Stevenson v. McLean, 5 Q. B. D. 34 G. Where notice of allotment is duly posted, the applicant is bound, even though the notice never reaches him. Household Fire, ^-c. Co. v. Grant, uhi supra. If no allotment is made the company is bound to repay the deposit, but the deposit is not a trust fund. Moseley v. Cresset/ s Co., 1 Eq. 405 ; 14 W. R. 246. Where A. applies on behalf of B., but without authority, and B. repudiates the allotment, A. is liable in damages to the company, and the measure may be the par value of the shares. National Coffee Palace Co., 24 C. D. 367. For letters of allotment, see infra, Chap. XI. An application addressed to a company not yet registered is effective, and if an allotment is made within a reasonable time, and before withdrawal, the allottee is bound. Downes v. Ship, L. R. 3 H. L. 343 ; Lawrence's case, 2 Ch. 412 ; Boyle's case, 33 W. R. 450. See further as to membership, supra, p. 19. 144 [Chap. III. RULES OF LONDON STOCK EXCHANGE. A company desiring a special settling day and quotation of its shares in the official list must bear in mind the following rules of the committee of the London Stock Exchange : — Special 133. The secretary of the share and loan department shall give three days' public settling days, notice of any application for a special settling day in the shares or other securities of a new company, previously to such application being submitted to the committee, who will appoint a special settling day provided that sufficient scrip or shares are ready for delivery, and that no impediment exists to the settlement of the accoiint. Quotations of 136. The committee may order the quotation of a new company in the official list, shares of a provided that the company is of sufficient magnitude and importance ; and that P ^* the application, of which three days' public ilotice must be given, is accompanied by the following documents : — The prospectus, the Act of Parliament, the articles of association, or a certificate that the company is constituted upon the cost-book system, under the Stannary Laws ; original applications for shares, the allotment-book, signed by the chairman and secretary to the company, and a certificate verified by the statutory declaration of the chairman and the secretary, stating the number of shares applied for and unconditionally allotted to the public, the amount of dejDOsits paid thereon, and that such deposits are absolutely free from any lien, the bankers' pass-book, and a certificate from the bankers, stating the amount of deposits received. It is further required that the prospectus shall have been publicly advertised, and that it agrees substantially with the Act of Parliament, or the articles of association, and in the case of limited companies contains the memorandum of association ; that it provides for the issue of not less than one-half of the nominal capital, and for the payment of 10 per cent, upon the amount sub- scribed, and sets forth the arrangements for raising the capital, whether by shares fully or partly paid up, with the amounts of each respectively, and also states the amount paid or to be paid, in money or otherwise, to concessionaires, owners of property, or others, on the formation of the company, or to contractors for works to be executed, and the number of shares (if any) proposed to be con- ditionally allotted ; that two thirds of the whole nominal capital proposed to be issued have been applied for and unconditionally allotted to the public (shares reserved or granted in lieu of money payments to concessionaires, owners of property, or others, not being considered to form part of sucli public allotment) ; RULES OF LONDON STOCK EXCHANGE. Ho that the articles of association restrain the directors from employing the funds of the company in the purchase of its own shares, and that a member of the Stock Exchange is authorised by the company to give full information as to the formation of the undertaking, and be able to funiish the committee with all particulars they may recpiire. In cases where fully paid shares have been granted in lieu of money payments, an official certificate will be requu"ed that the contract pi'ovidiug for the issue of such shai'es has been filed with the registrar of joint- stock companies, as prescribed by the 2oth section of the Companies Act, 1867. 138. When a company has been formed to cany on an existing business, the committee may order the quotation of any of the classes of capital as well as of its debentures or debenture stock, provided that at least two-thirds of the nominal amount of such class, or classes, have been unconditionally allotted to the public. l.'!9. A company issuing, or promising to issue, new shares within twelvemonths -»^ssue oi new after the first settling-day appointed by the committee, uidess under special +Trreiy^eYvionths circumstances, shall be liable to exclusion from the official list. of special settling. 146 [Chap. IV. UNDERWRITINa CHAPTER IV. INTRODUCTORY NOTES, What IS Ix Jias for some years jjast been a common jpractice to have shares MTitiD"-? 01' debentures or debenture stock underwritten, before offering them for public subscription. The term "underwriting" has its origin, no doubt, in the somewhat analogous contract with reference to marine insurance. To "underwrite," as the expression is used in company matters, is a well-known business term which signifies the entering into a contract by which a person (in common parlance called "the underwriter") agrees (usually for a commission) that if the shares, debentures, or debenture stock about to be offered for subscription, or some specified parts thereof, are not within a specified time taken up by the public, he will himself take them up and pay for them. lie Licensed Jlcttiallers^ Assocn., 42 C. D. 1 ; He Lotidon Paris, Sj'c. Assocn., 13 T. L. E. 569. Sometimes the contract is varied so as to bind the underwriter either to take them up, or to find responsible persons to do so. Occasionally one person, or firm, or company, underwrites the whole issue, but more commonly the underwriting is done by a number of persons, each or whom underwrites a specific amoimt, and stipulates that the public subscriptions are to go in relief of all the underwriters from liability rateably in proportion to the amounts underwritten by them respectively. When the underwriting is done by one person, firm, or company, the underwriter usually makes sub-underwriting contracts so as to minimise the risk. Underwriting of this kind is not confined to professional underwriters. Great numbers of business men and investors are content to " take a lino " in the underwriting of a promising issue, and if the thing " goes," tlicy take their commission and stand free, whereas if they are " landed," the commission goes in reduction of the cost price, and, if needs bo, they can "pool" what they are landed with, and gradually dispose of it to the general public. See Forms 6, 7, and 8. E.xpfdiency liy having a proposed issue effectually underwritten before the of |in(lor- prospectus is published, the placing of the issue is assured, and the iNTRODtrCTOlJY NOTES. 147 company and others interested are relieved from tlie damage and issue of inconvenience which might ensue if the public should not be disposed to subscribe. Thus, — (a) Suppose A., 13., and C. are converting their business into a company which is to offer its preference shares and deben- tures for public subscription. The business is well known and successful, but a large portion of the capital employed represents loans, deposits, and other capital left in the concern by a deceased partner ; and the proceeds of the proposed issue are intended to clear off all these liabilities. In the circumstances it is essential, in the interests of A., B., and C, that the issue should be placed without fail ; if they go to the public without any underwriting, there will be risk of failure by reason of some unforeseen contingency, f'.rj., the contemporaneous production of some other and more attractive scheme, the appearance of a hostile letter in a newspaper, or some bankruptcy, or disturbance of the money market. Accordingly, A., B., and C. are advised and determine to have the issue underwritten, and they pay the commission for the same out of the purchase-money to be paid to them by the company. (b) A going company may desire to raise fiu'ther funds by the issue of additional shares, or debentures, or debenture stock. To offer the same without success would involve risk, inasmuch as failure to obtain a subscription might be disastrous to the company. Nevertheless the company's advisers are of opinion that in the state of the market, or in the special circumstances of the case, the success of the issue is pro- blematical. Accordingly, underwriting is almost a necessity. (c) A financial or other company has become possessed of shares, stock, or securities issued by some other concern, and desires to dispose thereof to the public, and, in order to ensure the success of the issue and avoid the serious detriment which non-success woidd involve, underwriting is resorted to. Sometimes it is considered sufficient to have only a portion of a Underwriting proposed issue underwritten, e.r/., in the case of a new company, ^^ f^gue. " "^ sufficient to provide the necessary working capital, and so much cash as the vendor absolutely requires ; and where a going company wants further funds, it may be thought sufficient to have only a part of the proposed issue underwritten. Whenever underwriting is considered desirable, it becomes necessary ^\Tiptlier a to consider from what source the funds to pay the commission are p.ijjy may to come, for, except where the underwriters get founders' shares pay commis- (see Form 18), a commission is the usual consideration for imder- xmdorwritiu". writing. In the case of debentures and debenture stock, the company itself can usually, without infringing any rule of law, pay a reasonal^ile l2 148 UNDERWRITING. [Ojiap. IV Tie Faure Accumulator Co. Decision in Ite Licensed VictKaUers' Asxocif'lio)/. commission for underwriting the same, just as it can, if needs he, issue these securities — as distinguished from its own shares — at a discount. So, too, where a company is entitled to shares, stock, debentures, debenture stock, bonds or other securities issued by any other company, concern, government, or body, and desires to dispose thereof, there is (usually) no legal objection to its paying a reasonable commission for underwriting. (And, of course, a vendor or promoter interested in the placing of an issue may, out of his oicn pocket, pay a commission for underwriting.) And where a company proposes to issue shares in its own capital at a premium, it can usually pay com- mission for underwriting out of such premium, and in some cases it may pay such commission out of a reserve fund of accumulated profits. But for some years past it has been generally considered that a com- pany cannot legally make payment out of capital for the underwriting of shares in its own capital. It is well settled that to issue shares at a discount {e.g., to issue a 10/'. share, credited as fully paid up, for 9/. cash) is ultra vires a company limited by shares. Ooregum Co. v. Roper, (1892) A. C. 125 ; Welton v. Saffery, (1897) A. C. 299. And the following cases have been relied on as authorities for the proposition that to pay a commission or brokerage for placing shares is iiltra vires, as amounting in substance to an issue of the shares at a discount. Re Faure Accumulator Co., 40 0. D. 141 (Kay, J.) ; West of England Co. V. Gilbert, (1892) 61 L. J. Ch. 92 ; and Lydney and Wigpool Co. v. Bird, 33 C Div. 85, where Lindley, L. J., delivering the judgment of the Court said (at p. 95): "It appears to me wholly wrong to make the company pay for the issue of its own shares. No part of the capital could be so applied." But the Court of Appeal in Re Licensed Victuallers^ Association, 42 C. Div. 1, appears to have considered that an underwriting agreement as to shares was intra vires notwithstanding that it provided for pay- ment of a commission by the company out of its capital. In that case the appellant had agreed with the company to " underwrite " 10,000/. "A" shares at a commission of 15 percent. The shares had been allotted to him and his name had been placed on the register, and, the company having gone into liquidation, his name was placed on the list of contributories. Ho applied for the removal of his name, and con- tended that the agreement to underwrite only imported an agreement to "place" the shares, and accordingly that they ought not to have been allotted to him ; and further, that the contract was ultra vires, as being in substance a contract to issue shares at a discount. The Court refused to remove the appellant's name, and held that the agreement to underwrite was a conditional agreement to take, and not merely to place, and was not ultra vires. Lindley, L. J., said that he could see nothing in the contract "to bind the compan}', if they could be bound, to issue shares at a discount, and to do that which is wholly idtra vires. The true moaning is that in consideration of receiving 15 per cent., the appellant will underwrite so many shares. That makes the agreement INTRODUCTORY NOTES. 149 perfectly consistent and businesslike, and in accordance with the intentions of both parties." In the case last cited the learned counsel engaged did not bring the decision in Re Fnure Accumulator Co. {uhi supra) to the attention of the Court, and the point actually decided was that the underwriter to whom the shares had been allotted, and whose name was on the register when the winding-up commenced, was a contributory. And it would seem that the Court would liave arrived at the same con- clusion, even if the agreement to pay the underwriting commission had been held to be ultra vires as amounting to a contract to issue at a discount. Re Addlestone Linoleum Co., 37 C. D. 191 ; Wclton v. Saffery, uhi supra. Accordingly, the decision in The Licensed Victuallers' Association (p. 148) has not been accepted as an authority for the payment of underwriting commission out of capital. However, in the Metropolitan, d^-c. Association v. Scrimgcour, (1895) Decision in 2 Q. B. 604, the question whether a company can legally pay a broker- ^c.^Associati'on age or commission to a broker for placing shares came before the v. Scrimgeovr. Court of Appeal. The action was by the liquidator of the plaintiff company for the recovery of a commission of 2h per cent, paid to the defendants, who were brokers, for procuring persons to take shares, and it was contended that the payment was tdtra vires. But the Court held it to be ititra vires, and Lindley, L. J., said that there was nothing wrong or ultra vires in what had been done. AVhile adhering to what he said in Lydnerj, &:c. Co. v. Bird, his Lordship distinguished that case as one, not of money being paid by a company for placing shares, but of secret profit made by a promoter at the expense of the company. And he distinguished Re Faure Electric Accumulator Co. as a decision that the commissions there paid were not " ordinary commissions of a reasonable amount, payable in the ordinary course of business," but "improper payments rather in the shape of bribes." And Lopes, L. J. (at p. 609), said : — " In any case where it is made out that the services of the broker are reasonably necessary, that the brokers are properly employed in the issue of the capital of the company, and that the payment of a commission of so much per share is a fair and just payment for services rendered, there is no ground, either of reason, of justice or of principle, why the pay- ment should not be held to be intra vires and unimpeachable." And Eigby, L. J. (p. 610), said : — " I confess I am not prepared to hold that any expenditure of a company with a view of having its capital placed is necessarily wrong. If you can place the capital by way of advertise- ment, I do not see why you cannot incur, in the regular way of expen- diture, any brokerage to brokers to procure the application." It is to be observed, that this was not a case of underwriting, and that the parties to whom the commission had been paid were brokers ; but, assuming the case to be correctly decided, it would seem that the payment by a company of a moderate commission to underwriters, who were not brokers, should be intra vires, for, if services are rendered, 150 UNDERWRITING. [Chap. IV. Power in raomoranduDi of association. Kxpcdioiit til at a com- pany nhoiild have pcjwer to pay com- iriiwHionH, as othorwiHO HiiHoliiof re- Bults UHtially. KxaniplcH of mischief. it surely cannot, in substance, matter who renders them. It is to be hoped that it will be so held, but it is well known that some of the most eminent lawyers at the Chancery Bar, including one who is now a Lord of Appeal, have repeatedly advised that a commission could not be paid out of capital for placing or underwriting shares. And the following observations, made so recently as March G, 1897, show that this opinion is still entertained by, at least, one eminent judge. *' We are dealing with a case of a class which appears to be increasing in number, and in which, I think, it is not unfair to say that promoters of companies are doing their best to nullify these pro- visions of the Companies Act which forbid companies to issue shares at a discount. They, in effect, do this by providing for the payment of commissions, larger or smaller, to persons who will subscribe for shares. In the present case, we find instances of a commission of 15 per cent, being paid. The commission is, indeed, not paid by the company ; but it is substantially the same thing as issuing the shares at a discount. Promoters are not philanthropic individuals who pay money out of their own pockets for nothing ; they are speculators who will get from the company in another way quite as much as they pay in this way." Per Eigby, L. J., lie Consort, S^-c. 3Iines, (1897) 1 Ch. .575, 598. In lie Faure Accumulator Co. {uhi supra), Kay, J., in deciding against the validity of payments of brokerage out of capital, laid some stress on the fact that there was no power in the memorandum of association to pay brokerage or commissions ; but it does not follow that the presence of the power (see Form 95, infra) would make the payment intra vires. In like manner, in Guinness v. Land Corporation of Ireland, 22 C. Div. 349, the absence of any clause in the memorandum purporting to authorize dividends to be paid out of capital was regarded as a material circumstance, although it is now abundantly clear that the presence of such a clause would have been of no avail. Trevor v. Whitirorth, 12 App. Cas. 409 ; and iifra, p. 310. Kay, J., also regarded the payment of commission in that particular case as objectionable, as being in the nature of a bribe. It is difficult to see the difference in principle between an underwriting commission and any other commission, e.y., one for selling a property or obtaining a loan, and the law does not regard tlio payment of any such commission as a bribe where the payee is not in a fiduciary or (/ iias i-G.d\xciavy position. It is to be regretted that doubt should exist whether a company may pay a reasonable commission for underwriting its capital. Not to be able to pay some commission has led to much mischief : — (a) It has frequently prevented a perfectly sound concern from raising the capital it wants in the manner most advantageous to it, namely, by shares, and compelled it to raise the funds })y debentures or debenture stock. (b) It lias afforded to promoters and vendors an excuse for excessive kNJKODUC'TOKY NOTES. 151 prices, so as to cover tho risks and expenses of underwriting, •which is necessary, but may be impeached. (c) Tt has compelled excessive and often abortive expenditure in advertising- and circulating" prospectuses. (d) It has compelled promoters to resort to founders' shares. There is nothing per se immoral in paying an underwriting com- mission out of capital. Tho only objection to it is the technical one that it amounts to a reduction of the capital; but so does an expenditure on advertisements. It certainly seems very singular that, whilst an outlay of 10,000^. on advertising and circulating a prospectus may be a perfectly legal expenditure in the course of finding the required legal capital, it should not be legal to pay, say, .5,000^., to A. B. and others to underwrite the whole issue, although the advertising expenses are thereby reduced to a minimum. The objections which have been raised to payment of underwriting Indirect commission out of capital are not confined to a payment by the com- P^^ ^/capital pan}- directly. They equally apply to an indirect payment. If A. sells his property to a company for, say, 100,000/., through an independent board which knows nothing about the underwriting, and then he chooses to apply part of his purchase-money in payment of under- writing commission, it is apprehended that there is no objection. But if the board is not independent, and knows that the purchase-money has been fixed so as to enable A, to expend, say, 20,000/. in payment of underwriting commission, it may be and is often contended, and there appears good reason to apprehend, that the directors and A., in carrying out the transaction, are parties to a scheme for enabling the company indirectly to pay commissions out of its capital. And even if the board is independent, doubt exists whether directors can safely pass a contract for purchase if they know that a portion of the consideration, and perhaps a large portion, is going to underwriters. Suppose that the consideration is 200,000/., and that the directors know that 70,000/. is going to underwriters, can they safely make the contract ? The answer to this question turns on the question of their lona fides. If they are satisfied that the property is worth 200,000/., and that the vendor will not take less, it would seem difficult to make them responsible ; but their hona fides is a question of fact, and even if they testified on oath that they considered the property worth the 200,000/., it is possible that the Court or a jury might not believe them in view of the fact that they knew the vendor was only to get 130,000/. out of the 200,000/. If a company cannot pay underwriting out of capital, it cannot Paid-up issue paid-up shares as a commission for underwriting, for that would ^'y^^*?^ "7 ^^1 ^ ^ _ _ °' 01 commis- involve an application of capital to ultra vires purposes. sion. In framing underwriting contracts the greatest care is requisite. Framing of inasmuch as astute underwriters, when called on to perform tlieir underwriting . . .,,,.. , .,, , T contracts, obugations, raise every possible objection, and an ill-drawn under- writing contract affords many convenient loop-holes for escape. Thus, the underwriter may say: "I agreed to underwrite on the 152 UNDERWRITING. [ChAP. IV. footing of a particular prospectus, and that Las l)een altered without my consent. Therefore, I refuse to apply." Again, an underwriter may object: " I find that the prospectus on the faith of which I agreed to underwi'ite contains a misrepresentation ; therefore, I refuse to apply" {Karberg''s case, (1892) 3 Ch. 1); or he may omit to apply, and, when sued for damages, may say: "I only undertook to apply if called on, and you never called on me to apply." OrmerocVs case, (1894) 2 Ch. 475. Or, if the shares have been allotted to him, he may repudiate the allotment on the ground that A., who made the application on his behalf, had no authority, since he had not called on him to apply, and the authority was only to arise if he failed when called on to apply. See Re Consort Deep Level Gold Mines, (1897) 1 Ch. 575. Again, where the underwriter has actually applied pursuant to the contract, he sometimes, before allotment, serves the company with a notice that he withdraws his apj)lication, and, after allotment, he sometimes repudiates on the ground that he was misled by something said by those with whom he contracted, or by something stated in the prospectus ; and it must be borne in mind that an underwriter who subscribes on the footing of a prospectus containing untrue statements maybe entitled to repudiate an allotment, even though, at the time he sub- scribed, thecompanywasnotin existence. Karberg''s case, (1892) 3 Ch. 1. Occasionally, an underwriter, seeing that an issue has not gone well, refuses to apply, and says, "Bring your action; I shall defend it, and you will suffer by the delay and publicity, so you had better com- promise " ; or he may, in the case of debentures, say to the company : " I decline to take up the debentures underwritten by me. Bring your action, if you like ; but you cannot get specific performance of an agreement for a loan, or any substantial damages." Western Wayon Co. v. West, (1892) 1 Ch. 271 ; South African Territoriesv. Wallington, (1897) 1 Q. B. 692, affirmed in D. P., 18th March, 1898 ; Bahamas Plantations v. Griffin, 14 T. L. E. 139. These are only a few of the difficulties that may arise, and it follows that the underwriting contract should be framed so as specially to provide for tlio circumstances of the case, and, as far as practicable, to meet the dangers that maj' bo apprehended. Underwriting An underwriting letter generally operates as an offer, and the mere letter /vnwrJ fact that the underwriter thereby purports to "agree" to do certain Jacie an offer. . . . . things makes no difference ; but, of course, it might be framed as an acceptance, e.g., "I accept your offer to allow me to underwrite sliares on the tornis following, viz., &c." ^^■illldrawal. When the letter operates as an offer the usual rules apply. Accordingly the offer can be withdrawn at any time before acceptance. llehU's case, 4 Eq. 9. The withdrawal may be by word of mouth. Trununi's case, (1894) 3 Ch. 272. The offer must be accepted, if at all, within tlio time specified in it, or if no time is specified, then within a reasonable time. Crairleg^s case, 4 Ch. 323 ; Hindley''s case, (1896) 2 Ch. 121, 134, and until accepted and notice of acceptance given there is no contraft. He Consort, \-c. Mines, (1897) 1 Ch. •")7."). An INTEODUCTOKY NOTES. 153 oral acceptance is of course sufRciont. North Charterland Co.., 13 T. L. R. 80. In one case it was held that notice of the acceptance of the offer contained in an underwriting letter might be inferred from the mere fact of the retention of the letter by the person to whom it was addressed {Re Bultfontcin Sun, lVc. Mine, 12 T. L. E. 461) ; but, in the absence of express words in the letter waiving notice of acceptance (sec ('arlill v. Carbolic, cVc. Co., (ISQiJ) 1 Q. B. 2.JG), it is difficult to see how this decision can be supported. An underwriting letter is nothing more than an offer, and an offer, e. y., to sell land or to marry, is not regarded as accepted merely because it is retained unanswered. See the observations of Lindley, M. E., in Coiisort, c\t. 2Iines, (1897) 1 Ch. 593. In Hindlei/scase, (1896) 2 Ch. 121, Vaughan Williams, J., held that UbuUet/s ca.--J cation and allotment," or "framed in accordance with the draft as ultimately Form 13. settled and approved by Messrs. , the company's solicitors, but so that tho amounts per share payable on application and allotment respectively shall not exceed 1, and /." It is generally desirable to leave scope for alterations in the jirospectus, for it veiy commonly happens that some alteration becomes necessary at the last moment, and, in the absence of authority to alter, it would be necessaiy to ask all the under- writers to consent. Occasionally, a provision is added as to advertising, e.g., "and such prospectus is to be advertised and circulated to such extent as the company's brokers shall advise ; " but it would not be safe to saj' that it should bo "duly" or "fairly" or "widely" advertised, for then it would be open to each underwriter to object that the advertisement was not sufficient. Sometimes it is provided that the prospectus must specify the day for opening and closing the list of subscriptions. 2. Before three o'clock on the day on which the prospectus relating to the above issue is first advertised in the newspapers [or on which the list of subscription is opened, as specified in the prospectus when published] an underwriter is to apply for the number of the shares underwritten by him, and every such applicon must be accompanied by a cheque in favour of the bankers of the coy for the required deposit on such shares. It is a common plan to require the application to be made on the day on which the list is opened. Sometimes the condition is varied so as to provide for delivery of the application to the vendors or promoters, and in such case the words "to the intent that the same may be passed on to tho company " can be added. Sometimes the form runs, "signed by the underwriter or his nominee or nominees (approved by the vendors)," or " signed by the underwriter or some other respon- sible person or persons approved by the vendor." Underwriters do not generally make any objection to signing an ordinary form of application, although such application is only intended to be an underwriting application. In the result, if the character of the application is not communicated to the company, the directors might allot to the ajDplicant as one of the public, and it would be difficult, if not impracticable, for him to repudiate such allotment. In this view a cautious underwriter sometimes adds a note to his application as follows : — "N.H. — I make this application as an underwriter, and on the footing that the public subscriptions are to go in relief, ^jro raid, of the under^\a-iter8' subscriptions." Sometimes an underwriter guards against the danger by writing to the company a separate letter, referring to his apj)hcatiou and informing the company that it is an underwriting application, and that it is made on the footing, &c. Sometimes the underwriters are not required to subscribe imtil the closing of the lists. In such case substitute condition 3 for 2, and let the following clause be condition 3 : — [" 3. If upon the closing of the list of subscriptions the whole of the shares offered shall not have been subscribed for by the public, each underwriter, upon the request of the vendor, is to apply, in accordance with the prospectus, for his proportion of the shares not subscribed by the public."] Where such a condition is used, it is necessary to give to the underwriter notice 1(50 UNDERWRITING. [ChAP. IV. Form 13. stating how many shares he must apply for, and until that notice is given and " default made by him he does not " fail " to apply within condition 4. Contort, y an indenture framed in accordance with the terms of the draft which has already been prepared, and for the purposes of identification subscribed by D., a solor of the Supreme Court : And whereas the coy is desirous of insuring the placing of the sd debenture stock : Now THEREFORE it is agreed as follows : — 1 . The coy is to offer for public subscription the sd 1, debenture stock. 2. Such offer is to be made by a prospectus framed in accordance with the terms of the draft prospectus annexed hto, but with fidl power for the company, prior to the publication of such prospectus, to modify the same in such manner as the coy shall think fit, provided that such modifications shall be approved by the sd D. 3. Mr. N. shall take up and pay for at par the whole of the debenture stock afsd which shall not have been taken up and allotted to other persons within ten days after the first publication of the sd prospectus, and that in consideration of the obligation so imposed on him he shall be entitled to , or to p.c. of the premiums on the said 1, stock which shall be received by the coy upon the issue of that portion which shall be subscribed for and allotted to persons other than the sd Mr. N. 4. Mr. N. shall pay up the full nominal value of the debenture stock taken up by him as afsd by the instalments and at the times specified in the prospectus afsd, less, however, the amount of the premium according to the terms of the prospectus as issued payable in respect thereof. 5. It shall rest with Mr. N. to fix the premium on which the sd debenture stock shall be offered for subscription by the sd j^rospectus, and if he shall not within twenty-four hours after notice in writing from the coy requiring him to specify the same comply with such request, then it shall rest with the new coy to fix the premium. If Mr. N. shall make default in paying any instalment payable in respect of any debenture stock allotted to him in pursuance of such contract, the coy shall be at liberty to draw bills of exchange on him payable on demand for the amount of every such instalment, and to authorize any officer of the company to accept the same on Mr. N.'s behalf and as his agent, and such acceptances shall be effected. 6. If at any time between the date hereof and the publication of the prospectus owing to grave political or financial disturbances the price of 2^ p.c. British Consols shall fall to or below 100/., Mr. N. is to be at liberty by notice in writing to the coy to rescind this agreemt. 7. Any notice to Mr. N. may bo given by sending the same through the post addressed to him at his above-mentioned address, and a notice BO sent shall bo deemed to bo served at the expiration of twelve hours after it is posted. 175 AaREEMENTS. CHAPTER V. INTRODUCTORY NOTES. Bei-oee commencing business, a company, in most cases, adopts or Preliminary enters into a "preliminary contract" for the purchase of a specific contract property, e.g., a mine, a patent, a business, a concession, or an estate, and several of the following forms of agreement are precedents of such contracts. Where there is to be a preliminary contract, one or other of the following plans is usually adopted : — Plan 1. — Before the incorporation of the company, the promoters Plan 1. procure the owner of the property to enter into an agreement with Agreement some person, as trustee or agent for the intended company, for the sale or ao-ent for of the property to the company upon certain terms and conditions, intended com- The memorandum and articles of association of the company are settled, j^y supple- with the concurrence of the vendor and of the promoters, contempo- mental raneously with this agreement. In the articles is inserted a clause ao-reement referring to the agreement [see infra, p. 382, clause in note], and authorizing the company to adopt and carry it into effect. The memo- randum and articles are then registered, and the registrar issues his certificate, whereupon the company becomes incorporated. Shortly after the incorporation the directors hold a meeting at which the pre- liminary agreement is taken into consideration, and a resolution is passed for its adoption. Notice of the adoption is subsequently given to the vendor, and in due course the adoption is effected by means of a brief supplemental agreement, to which the vendor, the agent, or trustee, and the company are parties, whereby the comj^any is boimd to perform the preliminary agreement in the place of the agent or trustee. [Seeybrwi of such agreement, infra, p. 216.] The supplemental agreement is necessary where the preliminary agreement is made with an "agent," because it has been held that there can be no effectual ratification in such a case, inasmuch as the company was not in existence when the preliminary agreement was made. Kelner v. Baxter, L. E. 2 C. P. 174; Empress Engineering Co., 16 C. Div. 125. And the sup- 176 AGREEMENTS. TChAP. V. plemental agreement is necessary where the preliminary agreement is with a "trustee," because adoption of such an agreement will not hind the company to perform this agreement, but merely signifies that it accepts the position of cestui que trust. Re Northumberland Avenue Hotel Co., 33 C. Div. 16, Nevertheless, if the agreement is carried into effect as if the company were bound, the transaction will not be opened. Hotcard \. Patent Ivory Co., 38 C. D. 150. Plau 2. Plax 2. — The agTeement is prepared before the incorporation of the Agreement company, and is expressed to be made between the vendor and some company sub- P^^'^on purporting to act as agent for the comjiany. The memorandum sequently and articles refer to the agreement as a contract already prepared and seal of ' ^^^ ^^ intended to be signed immediately after the incorj)oration of the corn- company, pany, and authorise the directors to ratify and adopt the same [see Form 73]. The company is then registered, and immediately after- wards the parties to the agreement, viz., the vendor and the agent, sign the same. Subsequently, a meeting of the directors is held, and a resolution is passed to the eflPect that the agreement be ratified and adopted, and that the seal be affixed in token thereof. The seal is then affixed to a memorandum, on or below the agreement, in these terms: "The above [or within-written] agreement is hereby ratified and adopted by the company, limited. As witness the common seal of the said company this day of ." Henceforth, the company is effectually bound by the agreement ; for the technical rule established in Kelner v. Baxter does not apply, since the agreement was signed after incorporation, and is therefore capable of ratification. Plan 3. Plan 3.— Before the incorporation of the company an agreement, Agreement expressed to be made between the vendor and the company itself, for iTself^w^tii^^^ the sale of the property to the company is, with the privity of the power in vendor and the promoters, prepared. The memorandum and articles execute ^ ^^^ ^^ ^^® same time prepared and settled with the like privity. In the articles is inserted a clause [see Porm 210, Clause 3, infra, p. 382] referring to the agreement and authorising or requiring the directors forthwith to affix the seal of the company thereto, or declaring that the company shall forthwith execute the agreement. The memorandum and articles are then registered, and the registrar issues his certificate. At tlie first meeting of the directors the agreement is taken into con- sideration, and a resolution passed for its adoption. The vendor is informed of the resolution, and a day appointed for completion, when the agprcement is executed, being afterwards in due course carried into .,, effect. j.^l ', Plan 4. — This plan only differs from Plau 3 in one respect, namely, ] lower in that the articles do not expressly refer to the agreement, but authorise nrticlcH to ^j^p directors to purchase the property on such terms and conditions as piiroliase thoy think fit. These general powers are quite as effectual as an witliout authority to adopt or enter into a specific agreement. Overendf Gurney specific agree- ^ Co, v. Cihh, L. E. 5 H. L. 180. But the other plans are generally mont. INTRODUCTORY NOTES. 177 adopted. And one of those plans is prefoi-iible wlien tlio directors or some of them are vendors. Plan 1 is sometimes preferred, because : («) Before going to the Reasons why expense of forming the company, the promoters may desire to have J^^^} P^®" the vendor bound to sell on specified terms. This reason does not apply where the vendor is the promoter, or where the promoters are in a position to dictate to him. {b) The promoters may desire abso- lutely to bind the company to acquire the property upon the terms arranged by them before its incorporation. With a view thereto, the terms are embodied in a contract as in Plan 1, and in the articles a clause is inserted directing the directors to carry the contract into effect. Promoters sometimes think, and perhaps rightly, that if the contract has already been executed and only waits for adoption, the directors will be less likely to raise questions as to the terms fixed than would otherwise be the case. But it must not be supposed that any such clause can bind the directors, or that it releases them from the obligation to consider whether or no the adoption of the contract is for the company's benefit. Plan 2 is sometimes adojDted because it avoids the necessity for the supplemental agreement required by Plan 1, and at the same time enables the prospectus to be issued immediately after the incor- poration and before any resolution for the adoption of the agreement has been submitted to the board. Moreover, promoters sometimes prefer to submit an agreement for adoption rather than a new agree- ment for execution as in Plans 1, 3, 4. When Plan 2 is adopted, the directors should bear in mind that if they act on the contract, or otherwise show their adoption thereof, the company may be bound by implied ratification. Whenever there is no particular reason for adopting Plan 1, it is Best course, expedient to adopt Plans 2, 3, or 4 ; for, by the adoption of either of those plans, the company becomes bound in due course without any appearance of the contract having been forced on it, and without the necessity for any supplemental contract. See the notes to Form 210, clause 3, infra. Where, as in Plan 1, a person purports to contract as agent for a Personal company not yet formed, he is personally liable on the contract, person ^on- Kelner v. Baxter, L. E. 2 C. P. 174. So, also, a person contracting as tracting on "trustee" is personally liable. Re Northumberland Avenue Co., 33 company not C. Div. 16. yet formed. And where a person has so contracted as "agent," the fact that the company after its incorporation acts on, or purports to ratify or adopt the contract, will not relieve the agent from his personal liability {Scott V. Lord Ebury, L. E. 2 C. P. 255), unless the transaction amounts to a new contract, e.g., as in Form 35, mfra. So, too, where the contract is made with a "trustee" for a company, the trustee will not be released by reason of the company purporting to adopt or acting on the footing that it is entitled to the benefit of the con- r. N 178 AGREEMENTS. [Chap. V. C. Div. 16 ; JValters v. Cox V. B!shop, 8 De Gr. tract. He Northumberland Avenue Co., 33 Northern Coal Co., 5 De G". M. & Gr. 029 ; M. & G. 815. In the fii-st of these three cases the articles purported to adopt the contract and the company acted as if bound by it and entered into possession and expended large sums in preparing for building, but it was held not bound on the ground that there was a contract with the trustees still subsisting. Agreement It is, however, seldom or never the intention of the parties that the framed so that ^g^nt or trustee should be so liable, and accordingly the agreement is his liability- should be merely nominal. Proviso limit- ing liability of agent valid ; secus, if pur- porting to relieve him from all liability. Provisions of articles. Power to rescind. Points on agreements for Bale. so framed that his liability will be merely nominal. This is effected as follows : The agent agrees that the company shall purchase the property ; a future day is fixed for the completion of the purchase ; it is provided \_infra, p. 215] that upon the adoption of the agreement by the company, in such manner as to become bound to carry it into effect, the liability of the agent or trustee shall cease, and that if the company does not adopt the agreement before a certain day (prior to the day fixed for completion), the agent or trustee may at any time afterwards rescind it. The effect of these provisions is, that if the comj)any adopts the agreement, the agent or trustee is freed from liability ; and if the company does not adopt it in due course, the agent or trustee, before the time fixed for completion, rescinds the agree- ment, and thereby terminates his liability before he has had to do anything under the agreement. A proviso thus limiting the liability of the so-called agent or trustee is valid ; but, not uncommonly, it is provided that he shall incur no personal responsibility whatever. Such a proviso is treated as repug- nant and void, the result being that the agent or trustee is personally bound to perform the contract. Furnivall v. Coombes, 5 M. & Grr. 736 ; Williams v. Hathaway, 6 C. D. 544. See, however. Smith v. Broion, infra, p. 180. As to the operation of clauses in the Articles of Association providing for the adoption of an agreement, see infra, p. 382. When a company is started to acquire a specific property, and the capital is to be raised by public subscrij)tion, it is not unusual so to frame the agreement for the purchase of the property that if within a fixed period a certain number of shares are not taken, the company can rescind. The object, of course, is, that if the company should fail in raising the funds necessary to enable it to commence business it may be able to got rid of the agreement. Sometimes a similar power is given to the vendor, for he may not be willing to sell to a company which has not the means to develop a property for which he is probably to be paid partly in shares ; or his own right to soil may be contingent on a certain numljor of shares being taheii up. In preparing an agreement for sale, the following are some of the points which arise : — (a) On the sale of a business — Are the book debts to be included ? INTRODUCTORY NOTES. 179 Are any of thorn bad ? Is allowance to be made for bad debts ? AVill the vendor guarantee the book debts ? If they are to be excluded from the sale, is the company to collect them ? Is the stock-in-trade to bo included at a fixed figure, or to be taken over at a valuation ? Is the sale to take effect from the date of the agreement, or from the time fixed for completion, or from some past date ? Is the vendor to bo precluded from competing with the company ? Is the business to be carried on till completion on behalf of the vendor, or on the company's behalf ? (b) On the sale of a patent — Are improvements to be included in the sale ? Arc further inventions which would not properly be described as mere improvements to be included ? Are foreign patent rights to be included ? Is the vendor to be bound to give information as to improvements ? Is the patent valid ? Is the purchaser to be at liberty to take any opinion as to its validity before completion, and to rescind if the patent be })ronounced invalid ? (c) On the sale of a mine — Is it to be examined by an independent expert before completion? Is there a good title? If the property is abroad, can the company hold it, and is the purchase to be completed abroad or in England ? If abroad, is the purchase-money to l)e sent abroad, or is it to be paid here to trustees pending information as to the title and transfer having been completed ? (d) On the sale of a concession — Is it valid ? Can it be vested in the company with or without consent ; and, in the former case, what is to be done if the consent cannot be obtained ? (e) On any sale, is there to be power to rescind if the comjoany does not float, and who is to pay the preliminary expenses ? As to Sect. 25 of the Companies Act, 1867. Agreements for sale commonly provide for the issue of paid-up Filing con- shares, and accordingly sect. 25 of the Act of 1867 must be borne in tracts as to • 1 mi . . - p n issue 01 paid- mmd. That section is as follows : — up shares. Every share in any Company shall be deemed to have been issued, and to be held, subject to the payment of the Tvhole amount thereof in cash, unless the same shall have been otherwise determined by a contract duly made in writing and j&led with the Registrar of Joint Stock Companies at or before the issue of such shares. Hence, whenever an agreement provides for the issue of paid-up or partly paid-up shares as the consideration or part of the considera- tion for property or rights sold or services rendered to the company, the agreement should be duly filed pursuant to the above section before the shares are allotted, otherwise the allottee will be liable to pay the nominal amount thereof in cash. " Nothing can be clearer than this, there is a statutory liability to pay up the whole amount in cash, which can only be avoided imder the statute in one way — by a registered contract." See Bowen, L. J., London Celluloid Co.^ 39 C. D. 204, or by estoppel, see ??«//•«, p. 190. n2 180 AGREEMENTS. [ChAP. V. The following points may be noticed in reference to this section : — ■ Parties. (1) As to the parties to the contract. — If the company is in existence it should be made a party thereto, or the contract should be made by some person pui-porting to act on behalf of the company. But it has been held that an agreement made between a vendor and some person purporting to act as trustee or agent for an intended company is sufficient, if duly filed and acted on by the company. Hartley'' s case, 10 Ch. 157. In that case the agreement was so made; it was acted on by the company and shares were issued under it and the Court of Appeal held it effectual to protect such shares. "It is hardly necessary," said Lord Cairns, L.C., "to advert to the argument that the 240 shares ought not to be taken as paid-up shares, because the agreement for the sale of the land was not with the company, but with a trustee and before the company was formed. The Act of Parliament does not require the agreement to be with the company, and, as a matter of fact, such agreements very seldom are or can be made with the company itself." Mellish, L. J., concurred. It is not easy to reconcile this case with Smith v. Brown, (1896) A. C. 614 (P. C). In that case there was an agreement between the owner of some property with a trustee for a projected comj)any, and provision was made thereby for the issue of paid-up shares, and it was evidently contemplated that the agreement should be adopted by the company. This agreement was filed with the Registrar pursuant to s. 57 of the Companies Act, 1874, of the colony of New South Wales, which corresponds to s. 25 of the Companies Act, 1867. The Supreme Court of the colony held it sufficient to protect the shares, but the Privy Council reversed the decision. In doing so Hartley'' s case was apparently recognised as good law, but it was distinguished on the ground that in that case there was "a genuine sale and a genuine purchase, and a genuine bargain to pay the price by paid-up shares issued to the vendor, who could enforce the bargain under peril of annulling the sale." Whereas, in the case under appeal, the document filed was, in the opinion of their lordships, "not a contract in any proper sense of the word. ... It does not create, nor was it intended to create any legal riglits, duties, or obligation as between the persons expressed to be parties to it. It was a contract in form only." Upon what evidence their lordships arrived at this startling conclusion does not clearly appear. It may be that the decision was based on clause 8 of the agreement, which provided that the trustee for the intended company should incur no personal liability, and thus in terms nega- tived any binding agreement; but, if so, the decisions, supra, p. 178, to the elFoct that such a proviso is repugnant and void, seem to have been overlooked. In tlio result it appears to be inexpedient to rely for the future on the filing of a contract with a trustee or agent of a new company ; the usual adoption contract (Form 36) should also be fdod before tlio shares are allotted. In lie Staffordshire Gas Co., 66 L. T. 414, it was hold that where INTRODUCTORY NOTES. l^i shares had been allotted pursuant to a contract which though filed was not made with the authority of a duly constituted board, they could not be treated as unpaid shares. And see Common Petroleum Engine Co., (1895) 2 Ch., 759. AVhero, however, a document was filed which was only executed by the company, and had not before it was filed been assented to by the other parties, it was held that it was only an offer, not a contract, and, therefore, not sufficient. New Eherhardt Co., 43 C. Div. 118. And it may bo that in all cases the contract must be signed by or on behalf of both parties. Nor is it clear that where the contract when filed is signed by A. on behalf of B. a subsequent ratifi- cation by B. will suffice, although liartlexf s case, uhi supra, goes to show that such ratification should suffice. (2) As to the aggregate number of shares being stated. — It has not As to stating been settled whether the contract must state how many shares are to g^^'^gg^^'^ ° be issued under it as paid-up. Before the Act of 1867 there was no need in a contract for the issue of paid-up shares to state the number, and it may be contended that sect. 25 was not intended to interfere ■with such contracts, but merely to require them to be in writing and filed. On the other hand, it may be said that the object of the Legislature was to protect the public — to enable a person about to deal with a company to ascertain its position — and accordingly that the Act ought so to be construed as best to effectuate that intention. See Re Kharaskhoma Syndicate, (1897) 2 Ch. 451. Now, if the filed contract need not show the number of shares to be issued under it, a person examining the returns at the registration office may not be able to obtain any insight into the company's position, e.g., he may see that 1,000 shares have been issued, and that there is a contract under which some of them may have been issued as paid-up. Is this enough to satisfy the section ? Until the point has been settled, it seems advisable that the contract filed should state the number of shares, and accordingly, where the main contract does not state the same, a supplemental contract should be filed before the shares are issued. See Coolgardie, ^'c. Mi^ies, 14 T. L. E. 277, in which Wright, J., held that where the filed contract gave an option to satisfy by allotting paid-up shares it was not sufficient to protect the shares. (3) As to the deyiot inn numbers of the shares. — The contract appa- As to denot- ifiiiiv, iJ^T numbers rently need not specify the denotmg numbers of the shares to be ^^f shares. issued. A doubt on this point was expressed by Mellish, L. J., in Pritchard's case, 8 Ch. 956 ; but in The Buenos Ay res Co., W. N. 1875, p. 59, the Master of the Eolls said, "He could see no foundation for the doubt." And Pearson, J., followed this decision in lie Delta Syndicate, 30 C. D. 153; and Eomer, J., in Common Petroleum Engine Co., (1895) 2 Ch. 759. While, however, it would not seem necessary, it is very commonly deemed expedient to preserve evidence in the Eegistrar's office as to the numbers of the shares issued as paid-up. Accordingly, it is well to give the numbers of the shares iu 182 AGREEMENTS. [Chap. V. Issue to nominees of vendor. Whether con- sideration essential. the contract when possible, or at any rate before they are actually issued to file a supplemental agreement giving the numbers, and the London Stock Exchange always requires this before granting a quota- tion. And if the denoting numbers are not stated, the onus lies on the allottee to show that his shares are within the registered contract, Common Peti'oleum Engine Co., supra. (4) As to issuing to nominees. — Where by a contract duly made in writing and filed provision is made for the issue of paid-up or partly paid-up shares to A., it is generally considered that such shares may be issued to A. or to his nominees, and that the allottees will be pro- tected by such contract. Carling^s case, 1 C. Div. 115. But in that case the contract provided that the shares should be allotted to A., or his nominees, and accordingly it is not a direct authority that the nominees would have been protected in the absence of those words. This case was followed by Eomer, J., in Common Petroleum Co., (1895) 2 Ch. 759 ; but there also the words " or their nominees" occurred. To preclude doubt the words are sometimes supplied by supplemental agreement duly filed before the allotment. (5) As to consideration. — In Crichner^ s case, 10 Ch. 614, James, L. J., said that the contract " must be a contract which shows what shares are to be issued fully paid-up, and for ivhat consideration they are to be issued." As to what is a sufficient consideration. Formerly, the notion very generally prevailed that s. 25 of the Act of 1867 in effect legalised the issue of paid-up or partly paid-up shares gratis or for less than the amount credited, provided only that the arrangement was embodied in a filed contract. But this notion is now disj)laced, and it is settled that in reading the section we are to lay stress on the word cash, and not on the words " the ivhole.''^ Ooregum Co. v. Roper, (1892) A. C. 125. The whole amount has to be paid up or satisfied, pursuant to the Act of 1862. And s. 25 of the Act of 1867 merely provides that it must be paid in cash, unless some other mode of payment is determined by contract duly filed : payment there must be, somehow, whether in cash, or property, or services, or otherwise. Accordingly, where bonus shares credited as fully paid-up had, without consideration, been issued pursuant to a filed contract, it was hold that the allottees were liable to pay up the full amount of the shares. Eddy stone Marine hisurance Co., Limited, (1892) 2 Ch. 423 ; Re Alkaline Syndicate, 45 AV. R. 10. In the former case the contract was expressed to bo made in consideration of services rendered, but it was hold that tiiis was only an ostensible or pretended consideration. So, too, a contract providing for the issue of fully paid-up shares at a discount, i. e., for a sum of casli loss than tho nominal amount of such shares, or for property whicli, on tho face of tho contract, is valued at less than par, does not, oven though filed, protect such shares. Ahnada and Tirito case, 38 0. Div. 423 ; Addlestone Linoleum, 37 INTRODUCTORY NOTES. 183 0. Div. 191; Ooregum Co. v. Roper, (1892) A. C. 125; Welton v. Saffery, (1897) A. C. 299. But it was held, nearly thirty years since, that where shares have As to what is been issued as paid-up shares, upon the footing that certain specified ponJi^i^atioii property shall be accepted by the company as the consideration for such issue, the Court will not, whilst the contract stands, inquire as to the value of the consideration, even at the instance of a liquidator. PelVs case (1869), 5 Ch. 11 ; 7?e Baglan Hall Co., 5 Ch. 346. And see Ooregum Co. v. Roper, uhi supra; Re Theatrical Trust, (1895) 1 Ch. 771. Pell's case was decided in 1 869. Pell had agreed to sell to a company the goodwill and stock-in-trade of his business, in consideration of 1,500 20/. shares in the company fully paid up. In a winding-up, Lord Romilly, M. E., directed an inquiry as to the value of the pro- perty handed over by Pell to the company under his agreement aforesaid, and declared that Pell was entitled to be allowed only the amount of that value. This decision was reversed on appeal ; Giffard, L. J., holding that, as the agreement was not impeached, the Court had no ground for going behind such agreement, and that the shares must be treated as fully paid up. In the next year (1870) Lord Hatherley, L. C, in Forbes' and JudcVs case, 5 Ch. 273, clearly ap- proved of Pell's case, and in Baglan Hall Colliery Co., Griffard, L. J., soon afterwards again laid down what he had stated in Pell's case. In Ooregum Gold Mining Co. v. Roper, (1892) A. C. 125, Lord Watson said, "A company is free to contract with the applicant for its shares ; and when he pays in cash the nominal amount of the shares allotted to him, the company may at once return the money in satisfaction of its legal indebtedness for goods supplied or services rendered by him. That circuitous process is not essential. It has been decided that under the Act of 1862, shares maybe lawfully issued as fully paid up, for considerations which the company has agreed to accept as representing in money's worth the nominal value of the shares. I do not think any other decision could have been given in the case of a genuine transaction of that nature, where the consideration was the substantial equivalent of full payment of the shares in cash. The possible objection to such an arrangement is that the company'- may over-estimate the value of the consideration, and therefore receive less than the nominal value of its shares. The Court would doubtless refuse effect to a colourable transaction, entered into for the purpose, or with the obvious result, of enabling the company to issue its shares at a discount; but it has been ruled that so long as the company honestly regards the consideration given as fairly representing the nomiyial value of the shares in cash, its estimate ought not to be critically examined." In the same case, Lord Herschell said that ' ' not only may a share be allotted as fully paid up in respect of property, goods, or services un- received by the company, but the Courts will not inquire into the adequacy of the consideration, and certainly have not required it to be 184 AGKEEMENTS. [ChAP. V. proved that tlie consideration given was equivalent in cash, value to the nominal amount of the shares" ; and Lord Macnaghten said, " It seems to me that all that has been determined so far is that the Court will decline to rip up a transaction not impeached as dishonest, and not proved to be such, merely because the company may have paid an extravagant price for their property." The principles laid down and recognized in the case last mentioned have been treated for nearly thirty years as sound law, and acted on in thousands of cases ; nevertheless a strenuous effort was recently made in Tie Wragg, (1897) 1 Ch. 796, to overturn this principle, and thus to introduce endless confusion. In that case the agreement for sale had apportioned the consideration between the various items of property comprised in it. It was in a winding-up alleged by the liquidator that the consideration apportioned to one item was excessive, and that on this ground the paid-up shares issued to the vendor ought to be treated as unpaid; but the Court considered itself bound by the decision in Pell's case, supra, and declined to intervene. " It has," said Lindley, L. J., in that case, " never yet been decided that a limited company cannot buy property or pay for services at any price it thinks proper and pay for them in fully paid up shares. Provided a limited company does so honestly and not colourably, and provided that it has not been so imposed upon as to be entitled to be relieved from its bargain, it appears to be settled by PelVs case, 5 Ch. 11, and the others to which I have referred, of which Anderson'' s case, 7 C. D. 75, is the most striking, that agreements by limited companies to pay for property or services in paid-up shares are valid and binding on the companies and their creditors. . . . Value paid to the company is measured by the price at which the company agrees to buy what it thinks it worth its while to acquire. Whilst the transaction is unimpeached this is the only value to be considered. "If, however," said A. L. Smith, L. J., in the same case, "the consideration which the company has agreed to accept as representing in money's worth the nominal value of the shares be a consideration not clearly colourable nor illusory, then, in my judgment, the adequacy of the consideration cannot be impeached by a liquidator unless the contract can also be impeached, and I take it to be the law that it is not open to a liquidator, unless he is able to impeach the agreement, to go into the adequacy of the consideration to show that the company have agreed to give an excessive value for what they have purchased." See also Felix Hadley and Co. y. Iladley, (1897) 77 L. T. 131, in which case the company, as a going concern, sought to make the defendant, from whom it had bought property, responsible in damages for having sold, as it was alleged, at an excessive price, but Byrne, J., not being satisfied that the price was excessive, dismissed the action. See further, infra. As to tho kind of consideration. It is well settled that if a contract is duly filed the consideration may consist of property or services, or INTKODUCTORY NOTES. 185 any other benefits or advantages which the company has power to expend capital on. Where paid-up shares are issued under a contract duly filed, it has Failure of been held that the failure of the consideration for whicli thoy were ^consideration, issued does not entitle the company to treat the shares as unpaid. Thus, in Meye and Angier^ s case, W. N. (1875) 208, the vendors agreed to assign certain patents to the company in consideration of the issue to them of paid-up shares. The contract was filed and the shares were issued, but the vendors failed to assign the patents. It was held, _ nevertheless, by Jessel, M. E., that the vendors could not be put on the list of contributories. See also Carting'' s case, 1 C. Div. 115. So, Ultra vires too, where paid-up shares are issued under an ultra vires, but duly contract, filed, contract, such shares, it has been held, cannot be treated by the company or its liquidator as unpaid. De Huvigne's case, 5 C. Div. 306. The company must, it is said, either approbate or reprobate the contract (see Anderson'' s case, per Jessel, M. E., 7 C. D. 75) ; but this seems inconsistent with the word contract being used in its technical sense. Suppose, before the Act of 1867, a man got paid-up shares under an uttra vires contract, and was placed on the register, and thereby held himself out to creditors as a member {Oakes v. Turquand, L. E. 2 H. L. 325), could he have relied on such a doctrine? It is conceived that he could not. How, then, can s. 25 of the Act of 1867 protect him ? On the contrary, that section imposes on him a statutory liability to pay in cash. Railioay Time Tabtes Co., 42 C. Div. 98; London Cetluloid Co., 39 C. Div. 190. (6) As to fiting suh-contract. — In the 6th edition of this work, p. 133, Wliether there is the following passage : — "Where an agreement in writing is sufficient to made for the issue of paid-up shares, it sometimes happens that the contract, parties desire to avoid filing it, either on account of its being very long or because it contains matter which it is inexpedient to expose to public inspection. In such case it is not uncommon for the parties to execute and file a separate contract, reciting the princij)al contract and providing for the issue of the paid-up shares. See examj)le, infra, Form [44]. This plan has been largely acted on of late years, and where the filed contract discloses all the material provisions of the principal contract it is generally considered that the Act has been complied with. But some persons, desiring to disclose as little as possible, have merely filed a contract reciting that under the principal contract the company is bound, 'for the considerations therein mentioned,' to issue to A. (say) 1,000 fully paid-up shares, and then providing that the company shall forthwith issue such shares, and they shall for the considerations aforesaid be deemed fully paid up. It is conceived that this is not enough." The preceding paragraph in inverted commas was referred to by Vaughan Williams, J., in Re Kharaskhoma, 6fc. Syndicate, (1897) 2 Ch. 451, 456. In that case there were two agreements as to allotting shares as fully paid. The first, dated August 17th, 1892, stated fully 186 AGREEMENTS. [ChAP. V. the consideration for the shares, but this agreement was not filed. The second, dated August 31st, 1892, did not show what the con- sideration was, but it recited that by the former agreement "it was agreed for the consideration therein mentioned" that the fully-paid shares should be allotted, and it then provided for the allotment thereof. This contract was duly filed. Vaughan "Williams, J., held that as the consideration was "sufficiently identified," though not stated, in the second, the filed contract, the section had been complied with. But this decision was reversed on appeal. Lindley, L. J., said : " Is there a contract in writing registered ? It appears to me there is not. What is registered is a document which is not a contract, but only part of a contract, for it does not state what the consideration is." {Ibid., p. 464.) And Chitty, L. J., said: "The consideration forms part of the contract, and therefore must be on the face of the contract itself. . . . Here the contract is made up of the two instruments, and therefore, to comply with the 25th section, the two instruments ought to have heen put upon the register." {Ibid., p. 467.) See also Oore- giim Co. V. Roper, (1892) A. C. 137, in which Lord Watson said: " The obvious purpose of the enactment is to enable persons dealing with the company to judge for themselves what may be the value of the consideration given as representing capital." Statement of ' ' What is meant by ' a contract in writing ' ? I take it that consideration, nothing, whether it is under seal or not, answers that description which does not show the consideration in writing." Per Lindley, L.J., in Re Kharaskhoma, Sfc. St,-ndicate,' {1897) 2 Ch. at p. 464. "A contract in writing must express as part of the contract the consider- ation." Per Chitty, L. J., Ibid., p. 467. The Court, in the case last cited, whilst holding that the filed contract was not sufiiciently explicit, did not determine with what degree of particularity the consideration must be stated. (See p. 469.) But some guide is given by the judgments. Lopes, L. J., says (p. 466), "I do not mean that it would be necessary to go into the value of it . . . Supposing the consideration was goods purchased and sold, it may be that it would be sufficient to state that ; if it were money lent, it may be that that would be sufficient ; or money received, it may be that that would be sufficient. AVhat I mean is, that the kind of consideration ought to be disclosed, so as to give proper information to those concerned." And Chitty, L. J., says (p. 468), "If the con- sideration is, for instance, a concession in South Africa, the person who reads the registered document will see that it is a concession in South Africa, and will form his own opinion about it. So, if it is fur- niture supplied to an hotel company, he may be able to go at once and see wliat that furniture is, or he may not, because after a lapse of time the furniture may bo worn out. Again, if it is the sale of a goodwill and stock-in-trade, the consideration stated being the goodwill and the stock-in-trade, ho sees the natui'o of the consideration, and he sees it stated." INTRODUCTORY NOTES. 187 There can be no question that this decision affects a very large number of cases, but it does not appear to decide that the filing of a supplemental contract, fairly disclosing the consideration, is insuf- ficient, and that in every case it is necessary to file the principal contract. The section onl}' requires the filing of " a " contract. See Maynard's case, W. N. (1898) 22, in which Kekewich, J., was of opinion that filing a properly-framed supplemental agreement should suffice. (7) Articles not a contract in loriting. — As a general rule the articles Articles not of association cannot be deemed a contract in writing within the '^itMn^° meaning of s. 2o of the Act of 1867. Firmstone's case, 20 Eq. 524; sect. 25. Crickme/s case, 10 Ch. 614 ; Pritcharcfs case, 8 Ch. 960. Accordingly, where the articles provide for the issue to a vendor, promoter, or other person of paid-up shares, a separate contract in writing must bo executed and filed before the issue of the shares. And see Welton V. Saffery, (1897) A. C. 299, 306, 321. It may be that the articles can be so framed as to operate as a contract within s. 25 ; and in The AppletreewicTi Lead Mining Co., 18 Eq. 95, it was held by Malins, V.-C, that a contract contained in the articles in that case was suf- ficient ; but as it is not desirable to run risk in such matters it is expedient, if not necessary, to file a separate agreement. (8) As to the meaning of the loord '■'■cash'''' in s. 25. — Shares are to Meanino- of " be deemed to have been issued and to be held subject to the payment '^ovd "cash " of the whole amount thereof in cash,'^ unless a contract is filed. The word cash here does not mean current coin or bank notes merely : any transaction which, in an action at law for calls on the shares, would have supported a plea of payment will be deemed to be payment in cash. Thus if a company is indebted to A. in a sum presently payable, and A. is the holder of shares unpaid or only in part paid up, an agreement between A. and the company that the amount shall be credited as paid-up on the share (if followed up by proper entries in the books, Kent's case, 39 C. Div. 259) is equivalent to payment in cash, and the contract need not be in writing or filed. Spargo''s case, 8 Ch. 407 ; Larocque v. Beauchcmin, cited below. But " in order to prove a plea of payment, when there has been no payment in money, you must bring the transaction within these two propositions. There must be money due from the one to the other on both sides, and the parties must agree to set one demand of money against the other demand of money." Per Brett, L. J., White's case, 12 C. Div. 517. It is too late now to overrule Spargo's case, which has been largely acted on, but Lord Halsbury has more than once expressed disapproval of the decision. Johanneshurg Hotel Co., (1891) 1 Ch. 119; Ooregum Co. V. Roper, (1892) A. C. 125. And Spargo's case has recently been described as " a decision of the highest authority " by a tribunal composed of Lords HerscheU, Watson, Macnaghten, and Shand. Larocque v. Beauchemin, (1897) A. C. 358, 365. 188 AGREEMENTS. [Chap. V. Meaning? of the word " isHuo "in BCCt. 2o. In considering wlietlier there is a debt due to the company, it appears that the amount due on a share, even though not actually called up, may be treated as a debt presently due. Spargo's case, 8 Ch. 407 ; Whitens case, ubi supra ; Bentleif s case, 12 C. D. 8.50. Moreover, it may be that the shares need not have been allotted prior to the agreement to set off ; for where a company is indebted to A. in cash, and A. agrees to accept payment in fully paid-up shares, that, it seems, amounts to payment for the shares in cash. In re Barrow-in-Furness, 14 C. Div. 400. But see Rowland'' s case, 42 L. T. 785, and Johannesburg Hotel Co., (1891) 1 Ch. 119. And where a person has a bond fide claim (even though unliquidated) against a company, and by way of compromise it is arranged that in satisfaction, or part satisfaction, the company shall credit a sum as paid up on the share of the claimant, or of some other person, that, it has been held, is equivalent to cash. Ferrao' s case, 9 Ch. 355 ; Adam- son'' s case, 18 Eq. 670 ; Bentley'' s case, 12 CD. 850 ; Be Jones, Lloyd &^ Co., 41 C. D. 159 ; Matlock Old Brewery, 29 L. T. 441. But where a company agrees to issue paid-up shares in consideration of property sold, or services rendered, it is impossible to treat the transaction as a cash payment, because the company never owed, and never intended to owe, any cash. Andress^ case, 8 C. Div. 126; see also Pagin and GilVs case, 6 C. Div. 681. And the fact that the transaction is treated in the books of the company as a cash payment does not affect the matter. Andress^ case, ubi supra ; White'' s case, 12 C. D. 511 ; Neioport Co., 42 L. T. 785. And where the sale is for cash, with merely an option to satisfy in shares, if the option is exercised the shares cannot be regarded as paid in cash. Barroiv's case, 14 C. Div. 432; Coolgardie, ^-c. Mines, 14 T. L. R. 278. So, too, a surrender of a debenture not due cannot be treated as a payment in cash. Appleyard^s case, 18 C. D. 587. And where a company has a reserve fund of accumulated profits which it desires to capitalise by issuing paid-up shares to its share- holders, a resolution to allot paid-up shares accordingly cannot be regarded as a cash transaction. Eastern and Australian Steamship Co., 68 L. T. 321. It must be borne in mind that, in order that a transaction may be treated as payment in cash, there must bo bona fides. If the transac- tion is designed with a view to evade the Act it will fail. Spargo^s case, ubi supra. Accordingly, it is not imcommon, in testimony of bona fides, to file a contract, even when a transaction would clearly amount to payment in cash. (9) As to meaning of issue. — As the contract must be filed "at or before the issue " of the sliares, it is of course, important to ascertain tlio moaning of the word issue in s. 25. It is now settled that the issue is s(jmothing different from tlio allotment of tlio share or the issue of tlio certificates of title tlua-eto. A share is issued wlien the holder has acquired an absolute right thereto. It cannot be considered issued INTRODUCTORY NOTES. 189 before allotment, but it may be considered issued, although the certi- ficate of title has not been issued, and it seems that allotment followed by entry in the register of members amounts to an issue. See Bush's case, 9 Ch. 554 ; Bli/th's case, 4 C. Div. 140 ; Clarke's case, 8 C. Div. 642. In Ee The Tunnel Mining Co., Poofs case, 35 C. D. 579, North, J., and in 77ie Amjlo- Colonial Syndicate, Limited, 65 L. T. 847, Kelcewich, J., held that some force must be given to the word " at," and that the filing of the contract the day after the allotment and issue of certificate satisfied the words of the section. There were, however, some special circumstances in those cases, and in order to avoid danger it is best not to allot till the contract has been filed, and contracts should be framed accordingly. (10) As to subscribiny the memorandum. — "Where it is desired pur- suant to a preliminary agreement to issue paid-up shares to the vendors they should not subscribe the memorandum of association for such shares, for notwithstanding certain dicta, in FothergilV s case, 8 Ch. 282, and Anderson'' s case, 7 C. Div. 75, it seems that shares subscribed for are " issued " when the company is registered, and accordingly that no subsequently filed contract can relieve the holders from their liability to pay in cash. Dalton Timelock Co. v. Dalton, 6G L. T. 704 (C. A.). In that case the subscriber was held liable, although a contract intended to be adopted by the company was filed when the company was registered. Perhaps, however, a binding contract with the com- pany, made and filed the day of incorporation, would suffice. See infra, p. 289. If the vendor subscribes the memorandum for the shares the contract for sale should be for cash, and then the cash when payable can be applied in paying up the shares by set-off or otherwise. See Spargo's case above; and Ihbotson v. Ibbotson Brothers, 14 T. L, E. 279 (C. A.). (11) Result of not filing contract. — If default is made in the filing of Result of not a contract in writing as to the issue of paid-up shares for a considera- ^^'^'^E con- tract. tion other than cash, the persons to whom shares are issued under it will be liable to pay up the shares in cash. It was at one time thought that the company could not make calls in respect of shares so issued : Spargo's case, 8 Ch. 407 ; but in the subsequent case of Bnrkinshaw V. Nicolls, 3 App. Cas. 1016, Earl Cairns, L. C, was of opinion that the shareholder would have no answer to an action for such calls. The liability attaches not only to the original holder, but to transferees who have notice actual or constructive that no contract has been filed. Blgth's case, 4 C. D. 140 ; Roivland's case, 42 L. T. 785 ; London Celluloid Co., 39 C. D. 190; A. W. Hall Sf Co., Limited, 37 C. D. 712; New Chile Gold Co., 68 L. T. 15, where the nature of constructive notice is considered. It was, however, held, long ago, that where shares subject to such a liability were transferred to a bond fide purchaser, without notice of the liability, who accepted the shares in reliance on a certificate of title issued to the prior holder and describing the shares 190 AGREEMENTS. [Chap. V. Eeraedy Tvhere con- tract not filed. as fully paid-up, sucli purchaser was not under liability, but held the shares as paid up ; for the compan}', having made a representation with the intention that it should be acted on, was estoi)ped from deny- ing the truth of the representation as against the purchaser who acted thereon. Burkinshaio v. Nicolls, 3 App. Cas. 1004. But there is no estoppel unless the allottee, or purchaser or his agent in fact relied on the certificate. Re Vxilcan Iron Woi-Jcs, W. N. 1885, 120; Simm\. Anglo-American Co., 5 Q. B. Div. 188 ; London Celluloid Co., 39 C. D. 190. And the allottee or purchaser of a share cannot in general rely on a certificate issued to himself as an estoppel, unless he can show that he has acted on it in some way. See Balkis, &;c. Co. v. Tom/ii?ison, (1893) A. C. 396; Bloomenthal \. Ford, (1897) A. C. 156; Parbunfs case, (1896) 1 Ch. 100; McKay's case, (1896) 2 Ch. 757; Hart v. Frontino, L. E. 5 Ex. 111. Where an estoppel has arisen as between the company and a bond fide purchaser without notice, any person claiming under that purchaser can take advantage of the estoppel, and that notwithstanding that the person so claiming has notice that the contract was not filed. Barroio's case, 14 C. Div. 432. This has been doubted {^London Celluloid Co., supra), and a person who has obtained the shares by fraud on the company, or breach of trust, will not be so protected, *S'. C. (12) It was held in Neiv Zeahmd Kapanga Co., 18 Eq. 17, n., and Denton Colliery Co., 18 Eq. 16, that where by mistake shares had been issued without the filing of a proper C9ntract, the Court had jurisdic- tion on the application of the allottee to rectify the register by striking off his name, and these cases have frequently been followed. But evidence is always required that the allottees were ignorant of the omission to file ; and very commonly evidence is required of the solvency of the company, and sometimes the payment off of all the existing debts is required as a condition of the order. There was full evidence of solvency in Re Denton Colliery Co., uhi supra. See Re Darlington Forge Co., 34 C. D. 522; Re Broad Street Co., AV. N. 1887, 149 ; Re Nottingham Brewery Co., 4 T. L. E. 429. But the mistake cannot be corrected to the prejudice of any rights which have accrued in the interval, whether those who have the rights relied on the mistake in the registration or not. Preservation Syndicate, (1895) 2 Ch. 708, 773. In that case a winding-up order was made after notice of motion to rectify was given, but before the motion was heard, and rectification was only ordered on the terms that provision should bo made for all debts and liabilities of the company accrued between the dates of issuing the shares and giving the notice of motion. It would seem that the applicant must be prompt in applying for relief, for it is within his power to ascertain whether the contract has in fact been filed ; and if ho delays, and thus allow persons to deal with the company on the faith of his name being on the register, ho may be held bound. See the principles laid down in Peel's case, INTRODUCTORY NOTES. I'Jl 2 Ch. G71; and Lawrence^ s case, lb. 412; Oakes v. Turqnand, L. li. 2 H. L. 32o ; and Trevor v. Whificorth, 12 App. Cas. 409. (13) ^s ^0 the partij hound to file. — Unless otherwise arranged Who is bound between the parties, it seems that where a company agrees to issue ^jj^^J^ *^ paid-up shares for a consideration other than cash, the obligation is on the company to file a proper contract, lie Barangah Oil Co., 30 C. Div. 702. And if the company omits to perform this obligation, the allottee may repudiate the shares allotted to him in purported compliance with the contract, but ho cannot keep them and sue for damages, lie Acldlestone Linoleum Co., 37 C. V>. 191, overruling Miicl/ord's case, 14 C. D. 634 ; Applcyard's case, 18 C. D. 587. Instead of applying to the Court, the allottee may apply to the com- pany, and the directors may be justified in cancelling the allotment, and removing the allottee's name from the register, and, after the con- tract has been filed, re-issuing the shares to the parties entitled thereto {Hartletfis case, 10 Ch. 157) ; for the company is not bound to litigate every dispute. Bath's case, 8 0. Div. 334 ; Wright's case, 7 Ch. 55 ; 12 Eq. 335, n. But query the directors ought to satisfy themselves that the Court would in the circumstances grant relief ; for the transaction amounts to a reduction of the capital, and if not justified, may involve all parties in serious liabilities. See Ihhotson v. Ihhotson Brothers, 14 T. L. E. 278 (C. A.) for a case in which a slip was corrected by turning a share contract into a cash contract. (14) As to relief in loinding up. — It seems that it may be possible Relief in for the aUottee to escape liability in the winding-up where his name ^™ ?,^""1'' has not been placed on the register and he has done nothing showing- assent to the appropriation to himself of the particular shares, or his recognition of those shares as his property. Be Barangah Oil Co., 36 C. Div. 702; Macdonald, Sons ^^ Co., Limited, (1894) 1 Ch. 89. But where it is shown that the allottee's name was with his consent on the register at the commencement of the winding-up, it is too late for him to repudiate {Oakes v. Turquand, L. E. 2 H. L. 325); and in such case he must pay any calls made on him, and is x^recluded from proving for damages. Re Addlestone Co., 37 C. Div. 191 ; JVelton v. Safferg, (1897) A. C. 299. See, however, Perseverance Syndicate, (1895) 2 Ch. 768. As to Contracts under Seal— in Writing — by Parol. By sect. 37 of the Companies Act, 1867, it is provided as Sect. 27 of n n Act of 1867 follows :— as to con- Contracts on behalf of any company under the principal Act may be made as tracts, follows : that is to say — (1.) Any contract which, if made between private persons, would be by law required to be in writing-, and if made according to English law to be under seal, may be made on behalf of the company in writing under the common seal of the company, and such contract may be in the same manner varied or discharged : 192 AGREEMENTS. [Chap. V. (2.) Any contract which, if made between private persons, would be by law required to be in writing and signed by the parties to be charged therewith, may be made on behalf of the company in writing, signed by any person acting under the express or implied authority of the company, and such contract may in the same manner be varied or discharged : (3.) Any contract which, if made between private persons, would by law be valid although made by parol only, and not reduced into writing, may be made by parol on behalf of the company, by any person acting under the exjiress or implied authority of the company, and such contract may in the same way be varied or discharged : Ajid all contracts made according to the provisions herein contained shall be effectual in law, and shall be binding upon the company, and their successors, and all other parties thereto, their heirs, executors, or administrators, as the case may be. Effect. Construction of sect. 37. Authority of agent. Contracts without seal. Contract on behalf of company. This statutory power, it will be observed, applies to all companies registered under the Act of 1862, and by virtue of it all such com- panies may, excej)t as regards the contracts specified in sub-section (1), contract without seal. The power may, of course, be qualified by the articles of association. As to who is a " person acting under the express or implied autho- rity of the company," under sub-sections (2) and (3) of the above section : — This will depend on the regulations of the company. Generally speaking the directors have express or implied authority to enter into all contracts necessary for carrying the objects of the company into effect, and, of course, a board meeting can exercise the authority. If the board approves of a contract the directors assembled thereat can sign the contract on behalf of the comjpany, pursuant to sub-section (2). In most companies the directors can delegate their powers, or any of them, to committees, consisting of such member or members of their body as they think fit ; and where this is the case, the power to enter into a specific contract, or into contracts generally, can be vested in the committee, and a contract signed by the committee will be binding. So, too, where there is power to appoint agents, »S:c., or to delegate to a manager or other person. See further as to who is a duly authorized person, Beer v. London and Paris Hotel Co., 20 Eq. 412 ; Broivning v. Great Central Mining Co., 5 H. & N. 856 ; Royal Bank of Indians case, 4 Ch. 252 ; Re Land Credit Co., 4 Ch. 460. As to what contracts a trading company may make without seal apart from the above enact- ment, see South of Ireland CoUicrij Co. v. ITaddle, L. E. 3 C. P. 469. As to the form wliich a contract to be signed on behalf of a company should take : — Sujjposo it to be a contract between A. B. and the com- pany. It may be expressed to be made (a) " between A. B. of the one part, and the company of the other part," or {b) "between A. B. of the one part, and C. D. \_the person or perso?is authorized to enter into it'], on behalf of tlio company, of the other part." The former is generally considered the best plan, but tlioy are equally effectual. ylggs V. Nicholson, 111. & N. 1G5. INTRODUCTORY NOTES. 103 Where Plan (a) is adopted, the testimonium clause will run thus : " As witness the hands of the said A. B. and of C. I). [E. F. and G. II.], on behalf of the company," or "In witness whereof the said A. B. and two of the directors of the company on its behalf have hereunto set their hands." Of course no testimonium clause is necessary, and it will be sufficient if the contract is signed thus : A. B., 0. D., for the Company. If the agent is made party to the contract, as in Plan {b), the testi- monium clause, if used, will run : "As witness the hands of the said parties hereto the day, &c. ; " and the agent can, if he thinks it expedient, ex ahimdanti cauteld, qualify his signature by prefixing or adding words showing his agency. However, it is now settled that Apent not where an agent enters into a contract on behalf of another, it is not ^ ^' essential, in order that he may avoid personal responsibility, to add any qualifying -words to his signature, e.g., " as agent for A. B.," or " on behalf of A. B.," or "on account of A. B.," or " for A. B." Primd facie, if he signs without qualification, he is personally liable, but it is a question of intention, and if in the body of the agreement he purport to contract " as agent," or " on account of," or " on behalf of," or " for " another, he will escape liability. See Gaddy. Houghton, 1 Ex. Div. 357. As TO Oral Agreements. As appears from para. (3) of s. 37 of the Act of 1867, these can be Oral contract, made by any person acting under the express or implied authority of the company, and, of course, innumerable contracts are so made. In this connection, it should be borne in mind, that although s. 4 of the As to Statute Statute of Frauds provides that, as regards certain agreements, and ^" Frauds, in particular — (a) any special promise to answer for the debt, default, or mis- carriage of another person ; (b) any contract or sale of lands, tenements, or hereditaments, or any interest in or concerning the same ; (c) any agreement that is not to be performed within the space of one year from the making thereof ; no action shall be brought thereon " unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorized," this section does not invalidate the agreement. " The statute, in this part of it, does not say that unless those requisites are complied with the contract shall be void, but merely that no action shall be brought upon it." Per Jervis, C. J., Leroux v. Broicn (1852), 12 C. B. 801 ; Hoyley. Iloyle, (1893) 1 Ch. 84. Accordingly, a company can make r. o 194 AGREEMENTS. [ClIAP. V. Parol con- tract -within statute, when enforceable. How to com- ply with nrjuiroments of Mtatuto an regards parol agreement. a parol agreement in relation to any such matters, and the agreement can be enforced if care is taken to obtain the evidence required by the statute. Now, the words of the statute, " some memorandum or note thereof," have been construed with great liberality ; they have been held to include any written memorandum or admission of the terms of the contract whether made before or after the contract, provided that it is made before action brought. Thus a proposal in writing accepted orally is a sufficient memorandum as against the proposer. Eetiss v. PicJcsly, L. E. 1 Ex. 342. Again, a letter from the party to be charged to an agent or fi'iend, mentioning the terms of the agreement made with some third party, is sufficient. Gibson v. Holland, L. E. 1 C. P. 1 ; Filhj V. Hoxnisell, (1896) 2 Ch. 737. The question is not one of intention, but simply of evidence. " The Court is not in C[uest of the intention of the parties, but only of evidence under the hand of one of the parties to the contract that he has entered into it. Any document signed by him [or his agent], and containing the terms of the contract, is sufficient for the purpose. In Bailey v. Sweeting, 9 C. B. N. 8., 843, a letter to an agent of the person sought to be charged was held sufficient, and whether it is a letter to an agent or to a friend is immaterial." Per Bowen, L. J., Hoyle v. Hoyle, (1893) 1 Ch. 99. So also in Jozies v. Mctoria Graving Dock, 2 Q. B. D. 314, where an agreement was orally made between the plaintiff and the company in the terms of a certain draft, it was held that a minute of the board of directors signed by the chairman and referring to such draft, and resolving that it be engrossed and signed, was a sufficient memorandum within the statute. It was contended in this case that the signature of the chairman to the minutes was put in order to verify the proceedings of the board in obedience to the Companies Act, 1862, and not in order to attest or verify the contract, and that as the signature was put alio intuitu it could not be available for the purpose of satisfying the Statute of Frauds. But the Court held that there was no foundation for this contention. "What," said Mellish, L. J., who delivered judgment, " is this but an assertion under the hand of the company's agent that the company had entered into the agreement which was contained in the draft referred to ? . . . . the question is not what its object was, but whether it is a written and signed statement of the contract." See also Queensland, 6,-c. Co., (1894) 3 Ch. 181. Thus, suppose that a company desires to purchase some land, and that for some reason it is expedient to carry the transaction through by parol agreement, it can be done thus : — Let the vendor make a proposal in writing, addressed to the company, and let the directors pass a resolution authorizing one of their body to accept such proposal on behalf oi the company, and let him accept the same orally, and let him subsequently report in writing to the company the fact that he has orally accepted tlio proposal as authorized, and let such report bo read at a board meeting and bo entered in the minutes. In the result INTRODUCTORY NOTES. 1^5 there is a valid contract, and either party could, if necessary, comply with the requirements of the Statute of Frauds, for the proposal thus orally accepted is a suflicient memorandum as against the vendor [Reuss V. ricksly, supra) ; and as against the company the minutes show the authority of the agent, and his letter is a sufficient memorandum signed by the company's agent. Gibson v. Holland, L. E. 1 C. P. 1 ; Jones V. Victoria Graving Dock, 2 Q. B. D. o23 ; Iloyle v. Jloyle, (1893) 1 Ch. 84; Queensland Land, ^'c. Co., (1894) 3 Ch. 181. And it is to be noted that a proposal thus orally accepted requires no stamp. 8ee infra, p. 190. As to Stamps. Stamps. Not xmder Seal. Except wliere otlierwi.?e provided by the Stamp Act, 1891 (54 & 55 Agreement Yict. c. 39), an agreement in writing 7iot under seal entered into by or ^^^^ on behalf of a company generally comes under the following heading in the schedule to the Stamp Act, 1891 : "Agreement, or any memorandum of an agreement, made in England or Ireland under hand only, or made in Scotland, without any clause of registration, and not other- wise specifically charged with any duty, whether the same be only evidence of a contract, or obligatory upon the parties from its being a written instrument," and accordingly requires a Qd. agreement stamp. By s. 22 of the same Act, it is provided that the duty of Qd. upon Adhesive an agreement ma}' be denoted by an adhesive stamp, which is to be stamps, cancelled by the person by whom the agreement is first executed. The mode of cancelling is prescribed by s. 8 of the Act, How to be namely :— canceUed. (1) An instrument the duty upon which is required or permitted by law to bo denoted by an adhesive stamp is not to be deemed duly stamped with an adhesive stamp, unless tiie person required by law to cancel the ^adhesive stamp cancels the same by writing on or across the stamp his name or initials, or the name or initials of his firm, together with the true date of his so writing ; or otherwise effectually cancels the stamp and renders the same incapable of being used for any other instrument, or for any postal purpose, or unless it is otherwise proved that the stamp appearing on the instrument was aflixed thereto at tlie proper time. (2) "Where two or more adhesive stamps arc used to denote the stamp duty upon an instrument, each or every stamp is to be cancelled in the manner afore- said. (3) Every person who, being required by law to cancel an adhesive stamp, neglects or refuses duly and effectually to do so in the manner aforesaid, shall incur a fine of ten pounds. Under Seal. A contract under seal, except where otherwise provided by the Atrreement Stamp Act, 1891, is usually liable to duty under that Act, as a " deed ^ler seal. o2 196 AGREEMENTS. [Chap. V. Oral agree- ment. of any kind whatsoever not described in the schedule," i.e., it requires a IO5. stamp. Oral. An oral agreement, of course, requires no stamp ; nor does a mere proposal in writing, orally accepted [see supra], for such a proposal is not " an agreement or memorandum of an agreement, whether the same be only evidence of a contract or obligatory upon the parties from its being a written instument." Brant v. Brown, 3 B. & C. 666, in which Holroyd, J., said, "This was a mere proposal; if it had been accepted by writing, it must have been stamped ; but being accepted by parol, the agreement was in law a parol agreement." And see per Hawkins, J., in Carlilly. Carbolic Smoke Ball Co., (1892) 2 Q. B. 493. So in Clay v. Crofts, 20 L. J. Ex. 361, where a schoolmaster em- bodied his terms in a prospectus and a verbal contract was made thereon, it was held that the prospectus was a proposal and not an agreement, and that no stamp was necessary. "The defendant, by adopting the proposal and sending his sons to the school, makes it a contract. . . . A memorandum does not require a stamp where, being a mere proposal in the first instance, it afterwards becomes binding by subsequent matter." Per Parke, B. Sect. 18 of Customs, &c. Act, 1889. Sect. 59 of Stamp Act, 1891. Agreements for Sale of Property. By s. 18 of the Customs and Inland Eevenue Act, 1889 (52 & 53 Yict. c. 7), ad valorem duty was imposed on all agreements for the sale " of any property, save such as passes by delivery, or must be conveyed by deed ; " but this enactment was found intolerable, and by s. 59 of the Stamp Act, 1891 (54 & 55 Vict. c. 39), it was enacted as follows : — (1) Any*contract or agreement made in England or Ireland under seal, or under hand only, or made in Scotland, with or without any clavise of registration, for the sale of any equitable estate or interest in any property whatsoever, or for the sale of any estate or interest in any property except lands, tene- ments, liereditaments, or heritages, or property locally situate out of the United Kingdom, or goods, wares, or merchandise, or stock, or marketable securities, or any ship or vessel, or part interest, share, or property of or in any ship or vessel, shall be charged with the same ad valorem duty, to be paid by the purchaser, as if it were an actual conveyance on sale of the estate, interest, or property contracted or agreed to be sold. (2) Wlioro the purchaser has paid the said ad valorem duty, and before having obtained a conveyance or transfer of the property, enters into a contract or agreement for the sale of the same, the contract or agreement shall be charged, if the consideration for that sale is in excess of the consideration for tlie original sale, witli the ad vahirem duty payable in respect of such excess coiisidLration, and in any other case with the fixed duty of ten shillings, or of sixpence, as the case may require. INTRODUCTOEY NOTES. 1^7 (3) Whore duty has been duly paid in conformity with the foregoing- provisioun, the conveyance or transfer made to the purchaser or sub-purchaser, or any other person on his behalf or by his direction, shall not be chargeable with any duty, and the Commissioners, upon application, either shall denote the payment of the ad valorem duty upon the conveyance or transfer, or shall transfer the ad valorem duty thereto upon production of the contract or agreement, or contracts or agreements, duly stamped. (4) Provided that where any such contract or agreement is stamped with the fixed duty of ten shillings or of sixpence, as the case may require, the con- tract or agreement shall bo regarded as duly stamped for the mere purpose of proceedings to enforce specific performance, or recover damages for the breach thereof. (5) Provided also that where any such contract or agreement is stamped with the said fixed duty, and a conveyance or transfer made in conformity with the contract or agreement is presented to the commissioners for stamping with the ad valorem duty chargeable thereon within the period of six months after the first execution of the contract or agreement, or within such longer period as the commissioners may think reasonable in the circumstances of the case, the conveyance or transfer shall be stamped accordingly, and the same and the said contract or agreement shall be deemed to bo duly stamped. Nothing in this proviso shall alter or affect the provisions as to the stamp- ing of a conveyance or transfer after the execution thereof. (6) Provided also, that the ad valorem duty paid upon any such contract or agree- ment shall be returned by the commissioners in case the contract or agree- ment be afterwards rescinded or annulled, or for any other reason be not substantially performed or carried into effect so as to operate as, or be followed by, a conveyance or transfer. Having regard to the aLove section, a written agreement for sale, Construction in so far as it relates to the sale — o sec . ■ . (a) Of lauds, tenements, hereditaments, or heritages ; (b) Of property locally situate out of the United Kingdom ; (c) Of goods, wares, or merchandise ; (d) Of stock and marketable securities [as defined by sect. 82 of the Stamp Act, 1891]; (e) Of any ship or vessel, or part interest, share, or property of or in any ship or vessel — is not to be liable to ad valorem duty. But in so far as a written agreement for sale relates — To the sale of any estate or interest in property not comprised in the above exceptions — e. ff., goodwill, patents, book debts, trade- marks, licences, policies, cliarters, contracts, concessions, and the like- it is liable to ad valorem duty. The Commissioners of Inland Revenue contend that upon the true "Whether construction of the section the words of exception in paragraj^h (1) do ^haro-ed not extend to all the preceding words — viz., "any equitable estate or interest in any property whatsoever or for the sale of [any estate or interest in any property] " — but merely to the words in brackets, and, 198 AGREEMENTS. [ChAP. V. accordingly, that an agreement for the sale of an equity of redemption is liable to the ad valorem duty. It is, however, submitted that this is not the true construction, and that the exception extends to all the preceding words, including equitable estates and interests. The argument on the part of the com- missioners is, that unless the exception is thus restricted the earlier words, "for the sale of any equitable estate or interest in any property," would have no effect, seeing that the subsequent words, "or for the sale of any estate or interest in any property," would have been sufficient to cover an equitable interest ; but this does not appear to be so, for the earlier words are c|uite clear, and must have full effect, and the subsequent words can also be given effect, for they can be treated as referring to all other estates and interests, and especially legal estates and interests. Such a construction is in accordance with the well-settled rule that when two words or expressions are coupled together, one of which generically includes the other, the more general term is to be regarded as being used in a meaning excluding the specific one. See cases collected in Maxwell, 397. Moreover, as there are two constructions open, it is permissible to consider the conse- quences which would result from the adoption of such constructions respectively ; and the commissioners' construction involves several anomalies and inconsistencies, whereas the other construction is reasonable. 199 AGREEMENTS. Agreement to sell Business to new Company. Form 24. Parcels. This is an example of the form of agreement commonly adopted in Plan 3, siqmi, General form. p. 176. It can readily be altered to suit the case of one vendor. AN AG-EEEMT made the day of , between A., of , Parties. B., of , and C, of (hnfter called " the vendors "), of the one Recitals. part, and The Coy, Limtd (hnfter called "the coy "), of the other part : Whereas the vendors have for some time past carried on business as , at and elsewhere, under the style or firm of " M. & Co." : And whereas the coy has been formed under the Cos Acts, 1862 to 1890, with a nominal capital of /., divided into shares of 1, each, with a view, amongst other things, to the acqui- sition of the sd business : And whereas by Clause 3 of the arts of asson of the coy it is provided that the coy shall enter into the agreemt therein referred to, being this agreemt. Now it is hby agreed as follows : — 1 . The vendor shall sell, and the coy shall purchase— Agreement lor SHIP First, the goodwill of the sd business [with the exclusive right to use the name of M. & Co. as part of the name of the coy, and represent the coy as carrying on such business in continuation of the vendors' firm, and in succession thereto, and the right to use the words "late M. & Co.," or any other words indicating that the business is carried on in continuation of or succession to the sd firm], and all trade marks connected therewith. The words in brackets are probably implied in the word " goodwill." Walhcr v. Levy, IOC. Div. 436. But an assignment of a goodwill does not authorize the use of the trade name in such a way as to expose the vendor to liability. Thynne v. Shove, 45 C. D. 577. As to the right of a vendee to restrain a vendor from soliciting his old customers, and otherwise interfering with the goodwill, see note, infra, p. 206. A conveyance of the goodwill may carry the benefit of covenants not to compete by employes of the vendor. Jacohy v. TFhitmore, 49 L. T. 335. The sale of a goodwill by a trustee in bankruptcy carries no implied restriction as against the bankrupt. Walker v. Ilottram, 19 C. Div. 355. Under sect. 70 of the Patents, Designs and Trade Marks Act, 1883 (46 & 47 Vict. c. 57), a trade mark when registered is only assignable in connection with the good- will of the business. See MagnoUa 3Ieial ComjMiu/s Trade Mark.s, (1897) 2 Ch. 371. An assignment in gross is invalid, Thorneloe v. EiU, (1894) 1 Ch. 569. 200 AGREEMENTS. [Chap. V. Form 24. Wliere a company purchases an old trade mark, wliieli consists of or iucludes the name of the proprietor of the husiness, and the company has taken that name with the word "limited" added thereto, leave will be given, under sect. 92 of the Patents, Designs and Trade Marks Act, 1883, to add the word " limited" to the trade mark. In re Guinness ^' Co.^s Trade Mark, 5 E,ep. Pat. Cas. 316, since followed in several cases ; and see Henry Clay, ^c. Co., (1892) 3 Ch. 553. Secondly, all the freehold, copyhold, and leasehold hereditaments resply specified in the first, second, and third schedules hto. Sometimes it is considered undesirable to show in the filed agreement the full particulars of the property, and in such cases the description can run— " All the freehold, copyhold and leasehold property belonging to the vendors in connection with the said business." There would not seem to be anything in Kharashhoma Syndicate, (1897) 2 Ch. 451, to the contrary; and see May?iard^s, Limited, W. N. (1898) 22. Thirdly, all the plant, machinery, office furniture, patents, licences, horses, waggons, carts, stock-in-trade, implements and utensils to which the vendors are entld in connection with the sd business. Fourthly, all the book and other debts due to the vendors in con- nection with the sd business, and the full benefit of all securities for such debts. Fifthly, the full benefit of all pending contracts and engagements to which the vendors are or may be entld in connection with the sd business. Sixthly, all cash in hand and at the bank, and all bills and notes of the vendors in connection with the sd business. Seventhly, all other ppty to which the vendors are entld in connec- tion with the sd business. The above specification of the premises sold is given in considerable detail. If desired, it can be expressed more concisely, e.g., " The goodwill of the said business and all the assets of the vendors in connection with such business ; ' ' but it is generally considered preferable to give some details. And see Kharaskhoma, ^-c. Syndicate, (1897) 2 Ch. 451. In the above clause, all the assets of the vendors in connection with the business are included, but sometimes a sale only comprises certain specified assets, e.g., goodwill, freehold and leasehold hereditaments, plant, stock-in-trade, contracts and engagements, thus leaving the vendors the cash, bills, notes, book debts, &c. Sometimes everything is sold, "except the book debts, belonging to the vendor, in connection with the said business, on the day of ," and in such case it is not uncommon to insert a clause providing that, as regards the excepted book debts, the company shall use its best endeavours to collect the same. See Clause 12e, infra. Consideration in cash and shans [and dcboritiin-H or dr'licnturc Btock]. 2. [Part of] the conson for tlio sd sale shall bo the sum of 1., which shall be pd and satisfied as follows, viz. : As to the sum of /. in cash, and as to the sum of /. by tho allotment to the vendors or their nominees of the coy of /. each - fully paid-up shares in the caj)ital of to bo numbered to inclusive [and as to tho sum of 1, by tho allotment to tho vendors or their nominees FORMS. ^01 of 4. debeafcuros [or debeiituro stock] of the coy, carrying interest Form 24. at the rate of — -. — p.c.p.a. as from the day of ]. ""^ The consideration is sometimes wliolly cash, and sometimes wholly paid-up, or partly paid-up shares [e.g., shares in the company of 10/. each, numbered, &c., with the sum of 11. per share credited as paid up thereon), and sometimes wholly debentures or debenture stock, and sometimes part of the consideration is of each kind. As to giving the denoting numbers of the shares, see supra, p. 181. When part of the consideration is to be satisfied by debentures or debenture stock, the agreement should contain elsewhere a clause, as follows :—" The debentures aforesaid are to be framed in accordance with the forms set forth in the schedule hereto ; " or " The debentm-es aforesaid, and the trust deed securing the same, to be framed in accordance with the forms which, for the purpose of identification, have been subscribed by N. , a solicitor of the Supreme Court ; " or " The debenture stock aforesaid is to be constituted and secured by a trust deed framed in accordance, &c." Not uncommonly the consideration is a specified sum, " whereof 1, is to be paid in cash and the balance, 1., may be satisfied, at the option of the company, either in cash or as to the whole or any part [or parts] thereof by the allotment to the vendors or their nominees of fully paid-up shares in [or debentures of] the company, to be treated [respectively] as of par value." If the option is exercised in favour of an allotment of shares, it is desirable to file a supplemental contract, showing how many shares are thus to be issued, so that the filed contract may show the aggregate and denoting numbers of the paid-up shares. See supra, p. 181. [2b. The conson for the sd stock-in-trade shall be such a sum as Consideration shaU be certified by Messrs. of to be the fair value thereof, ?'"-f*°^V''" '' ...... trade to be or if any difficulty shall arise in obtaining their certificate, then a sum ascertained by equal to the fair value of such ppty ; and so that any difference in ^'aluation. regard thereto shall be referred to the decision of two competent valuers, one to be appointed by the vendor and the other by the coy [or by Messrs. of ], and the submission may be made an order of the High Court. The conson moneys mentd in this clause are hnfter referred to as the valuation moneys.] Sometimes the consideration for the stock-in-trade is dealt with separately, as above. Where a purchase at a valuation of any considerable subject-matter is intended, it is desirable so to frame the contract tliat the valuation shall be a submission to arbitration within the Arbitration Act, 1889, otherwise serious loss and inconvenience may ensue. An agreement to sell at a price to be fixed by valuers is not a submission to arbitration within the meaning of the Act, for there is no " difference " between the parties, and the Act only applies where the parties have agreed to submit present or future differences to arbitration. CoUins v. Collins, 26 Beav. 306. Accordingly in that case the Court refused to appoint an umpire on the valuers' default. And where the Act does not apply the Coiu't has no power to appoint a valuer in the place of one who dies, or refuses to act, or to I'emit the valuation where a mistake has been made. Where, however, the agreement is framed as above, these difficulties are avoided, for if the certificate of the named referee is not obtainable, the alternative provision arises, and any difference goes to arbitration. It is the more important to see that the Act will apply, because until the valuation has been effected the Court cannot enforce specific performance. Jlilius v. Gorij, 202 AGREEMENTS. [Chap. V. Form 24. 14 Ves. 400 ; VicJccrs v. Viclccrs, 4Eq. 529 ; Tillett v. Charing, S^c. Co., 26 Beav. 419. — - Sometimes the contract provides that the difference ' ' shall be referred to arbitration as hereinafter provided," and contains the usual arbitration clause. Infra, p. 213. See also Bos v. HeWiam, L. E,. 2 Ex. 79 ; Richardson v. Smith, 5 Ch. 648 ; Smith v. Feters, 20 Eq. 511 ; Re Carus Wilson, 18 Q. B. Div. 7 ; Tie Eammond, 62 L. T. 808. As residue of consideration, company to undertake vendor's liabilities. Commence- ment of title. 3. As tlie residue of the conson for the sd sale, the coy shall under- take to pay, satisfy, discharge, and fulfil all the debts, liabilities, con- tracts and engagements of the vendors in relation to the sd business, and shall indemnify them against all proceedings, claims and demands in respect thereof. Very commonly a clause as above is inserted, and the price is fixed accordingly, e.g., assets worth 130,000Z., and debts 30,000?., therefore price 100,000?. But some- times the full consideration is given for the assets, and the vendors clear off the debts and liabilities. Sometimes it is provided that the debts and liabilities aforesaid shall be deemed to include any moneys owing to the vendors in respect of their private accounts with the firm. 4. The title to the sd hereditaments shall commence — (a) As to the sd freehold hereditaments, with an indenture dated, &c., being a conveyance on sale to M. ; (b) As to the sd several leasehold hereditaments, with the indentures of lease under which the same are held by the vendors ; (c) As to the sd copyhold hereditaments, with a covenant to surrender on sale, and a surrender and admittance accordingly in the year . And the coy shall not investigate or make any requisition or objec- tion in respect of the prior title. In an agreement for sale to a company of a going business, the title is generally looked into beforehand, and in such case a clause ( 7c, infra) is commonly inserted that the title shall be accepted, but occasionally special conditions as to the title are made ; their nature must depend on the circumstances. The Vendor and Purchaser Act, 1874, and the Conveyancing and Law of Property Act, 1881, must be borne in mind. Section 3 of the last mentioned Act does not, it seems, prevent a purchaser from raising an objection to the earlier title if it can be shown aliunde to be defective. Waddell v. Wolfe, L. E,. 9 Q. B. 516 ; Broad v. Munton, 12 C. D. 131 ; Cox and Neve'' s case, (1891) 2 Ch. 109 : but a condition that the purchaser shall not investigate the prior title as above is effective, and precludes such an objection. Hume v. Bcntltj, 5 De G. & S. 520; Nat. Frov. Batik and Mar.sh, (1895) 1 Ch. 190. It does not, however, preclude objection in respect of a defect disclosed by the vendor. Smith v. R.Mnson, 13 C. D. 148. And if the purchaser proves that the title is bad, specific performance wiU not be ordered. In re Scott and Alvarez's Contract, (1895) 1 Ch. 596 ; 2 Ch. 603. Special con- dirions of, Bale. r4a. It shall be assumed [^Jiere state any required assttmjitions^, e. (/., that A. 13., a former owner of the freehold, died intestate, and without issue.] A vendor is not entitled to rely on such a condition when ho knows that the FORMS. 203 assumption is contrary to the fact {Broad v. Munton, 12 C. D. 131); but if he Form 24. believes the assumption to be correct, he is entitled to rely on the provision. Re Sandbach and Edmondson, (1891) 1 Ch. 99. 5. The sd premises are sold free from all incumbrances [except tlie Whatincum- mortgages specified or referred to in the schedule hto], but as regards the freeholds, subject to all quit, chief and other rents affect- ing the same, and as regards the leaseholds, the rents and covenants contained in the leases or agreemts for leases under which the same are held, and as regards the copyholds subject to the customs of the several manors under which they are held, and as regards all such hereditaments to all rights of way, light, and other easements, if any, affecting the same resply, and to all existing leases and tenancies, and agreemts therefor. 6. No further or other evidence shall be required of the identity of Identity of any of the sd hereditaments with the property to which title is shown by the abstract besides such evidence, if any, as may be gathered from the descriptions in the documents abstracted. This may require to be supplemented in some cases, e.g., by provision for a statutory declaration, and in others it may be omitted altogether. 7. The description of the sd several hereditaments is believed, and Description should be correct ; but if any error should be found therein, the same, if capable of compensation, shall not annul the sale, but a fair com- pensation shall be allowed by the vendors in respect thereof. Description here means description of the corporeal property not of the title. Beyfus v. Masters, 39 0. D. 110. It can of coui'se be extended to the title. Such a provision does not prevent the vendors from avoiding payment by annulling the contract under a clause like 7b. Ashburner v. Sewcll, (1891) 3 Ch. 405. Under such a clause compensation may be enforced after conveyance as "well as before {Palmer v. Johnson, 13 Q. B. D. 351) ; but the words "provided the same is claimed before conveyance," can be added. [7a. The coy shall make its objections and requisitions, if any, in Requisition respect of the vendor's title to any of the sd hereditaments, and all ^ ' ' matters appearing in any abstract or muniment of title, or this agreemt, and send the same to Messrs. , the vendor's solicitors, at No. , Street, &c., within days from the delivery of the abstracts, and in default of such objections and requisitions, if none, and subject to such, if any, shall be deemed to have accepted the title.] Very commonly upon a sale to a company, the agreement does not contain any provision as to requisitions or objections ; and 'where the title is accepted (as in clause 7c, vifra), this clause will be omitted. [7b. If the coy shall make [or shall insist] on any requisition or Power of objection as to title, conveyance, or otherwise, which the vendors shall '^"^re'^om- "be unable, or on the ground of expense, delay, or otherwise, shall pauy persists be unwilling to comply with, the vendors may, notwithstanding any "^ ° jections. previous negotiation or litigation, by notice in writing determine this 204 AGREEMENTS. rciiAP. V. Form 24. Unreserved acceptance of title. agreemt [except as to clause 13a hereof], witliout giving rise to any claim for expense or otherwise.] In the case of a sale to a company, the agreement very commonly contains no provision or clause as above mentioned, for the title in many cases is investigated beforehand, and even when this is not done this clause is commonly omitted, especially where the company is at once going to the public for subscriptions, for it would be highly inconvenient if, after floating the company, the vendor was in a position to rescind. As to the operation of the clause, it is well settled that it is effective, and that a vendor is not bound to assign any reason for rescission. Re Olcnton and Saunders, 53 L. T. 434 (C. A.). There is a difference between "making" and "insisting" in such a clause. In the one case, the vendor may rescind on delivery of the requisi- tions {Starr Bowlcett, 42 C. D. 375), but in the other case the power to rescind does not arise until the purchaser not only makes, but insists. See Re Glenton atid Saunders, ttbi supra. A power to rescind must be exercised within a reasonable time and in good faith. Smith V. WaUacc, (1895) 1 Ch. 385 ; Marsden v. Samson, 28 W. R. 954. [7c. The coy shall, without [further] investigation, objection, or requisition, accept such title as the vendors have to the sd premises hby agreed to be sold.] Where the title has been already investigated, a clause as above is very common, and in the case of a private company it is generally used. Completion of purchase. Interest on cash con- sideration if puri:hase not ompletcd on fixed day. day of , at the , the vendor's 8. The purchase shall be completed on the office, No. , Street, Londoil, of Messrs. solicitors, when possession of the premises shall, as far as practicable, be given to the coy, and the conson afsd in cash and shares [and deben- tures] shall bepd and satisfied subject to the provisions of this agreemt, and thereupon the vendors and all other necessary parties, if any, shall at the expense of the coy execute and do all assurances and things for vesting the sd premises in the coy, and giving to it the full benefit of this agreemt as shall be reasonably required. 9. If from any cause whatever other than the wilful default of the vendors the purchase shall not bo completed on the sd day of , the coy shall pay interest on the said sum of 1, cash at the rate of p.c.p.a. until the purchase shall be completed. Where completion was delayed by the vendor going abroad, it was held to be wilful default on his part. Re Young and ILirston^s contract, 31 C. D. 168. Delibe- rate neglect by vendor may amount to wilful default [IVihon ^' Stevens'' contract, (1894) 3 Ch. 546), the vendor's inability to procure concurrence of necessary parties may be wilful default [llctling % Merton's contract, (1893) 3 Ch. 269 ; Earl of Strulj'ord v. Maples, (1896) 1 Ch. 235) ; but interest will run if the real cause of delay is the purchaser's inability to pay. London {Mayor) and Tul/bs, (1894) 2 Ch. 524. Consents of jQ. Divers of the leaseholds specified in the schedule hto are aisi'li'on't* ^'^ only a88igna})lo with the consent of the landlords from whom tho same of ir.fiHfholds, vesply are lield. Tlio vendors shall use their best endeavours to or in default FORMS. 205 obtain the requisite consents for the assignment thereof to the coy, Form 24. and in any case where such consents cannot conveniently be obtained ^g^i^^ration of the vendors shall at the option of the coy execute a declaration of trust for trust of the premises in favour of the coy, or otherwise deal with the company, same as the coy shall direct. Where the sale comprises leaseholds, the terms of the leases must be carefully considered, and the agreement must be framed accordingly. If the covenant is merely against assignment, a demise for the whole term (less one day) is allowable ; and if there is a covenant against assignment and sub-demise, a declaration of trust may be available. But if there is a covenant also against parting with posses- sion, very special expedients are required. The Court has no power, under s. 14 of the Conveyancing Act, 1881, to relieve against forfeiture for breach of covenant not to assign. Nor can the Court relieve on the ground of mistake, even when an assignment is made in forgetfulness of the covenant. Barrow v. Isaacs, (1891) 1 Q. B. 417. [The leases under which the leasehold portions of the premises are held have already been submitted for the inspection of the coy, and accordingly the coy is to be deemed to have notice of the contents thereof.] Unless otherwise provided, a purchaser of leaseholds is not, prior to completion, fixed with constructive notice of unusual and onerous provisions in the lease.. Sceve V. Berridge, 20 Q. B. D. 523 ; White cj' Sinith''s Contract, (1896) 1 Ch. 637. [10a. As regards any of the premises subject to mortgages which As to cannot be pd off until after the time for completion, the vendors mortgages, shall, if so required by the coy, convey the same to the coy subject to the mortgages affecting the same resply, and the coy shall be at liberty to retain out of the cash portion of the sd conson a sum sufficient to pay off and satisfy in full all claims under such mort- gages.] This clause will, of course, only be required if the vendors purport to sell free from the mortgages, and arrangements in such case are generally made for clearing off the mortgages without delay. [10b. Save as hnbefore provided, the vendors shall pay, satisfy, Vendor to and discharge all their debts and liabilities in connection with the sd ,^^'^,^'?J?^^8''^ , „ 1 1 n • 1 -D 1 liabilities not business as on the day oi , and shall indemnity the coy undertaken against all proceedings, claims, and demands in respect thereof.] ^ly company. The insertion of this clause depends, of course, on whether the company is or is not to undertake all debts and liabilities. 11. The possession of the sd premises shall be retained by the Possession to vendors up to the sd day of , and in the meantime they ^^ retained 1 , 1 . . 1 ^ hv vendors shall carry on the sd business m the same manner as heretoiore, so uutu comple- as to maintain the same as a going concern, and they shall from the tion, and they n r- o 1 10 TIT in to carry on date hereof [or as from the day of J be deemed to [have business, &c. been and to] be carrying on such business on behalf of the coy, and for company. shall account and be entitled to be indemnified accordingly. Where a business is purchased it is very common to make the purchase from a 206 AGREEMENTS. [ClTAP. V. Form 24 V^st date [«.<7., the date of the Last balance-sheet, made, perhaps, some montha - pi'eviously] ; the desire beiug that the company shall take the profits as from that date, and be able to declare dividends as if it had carried on business from that date. As to capital- There is, however, serious difficulty in giving effect to such desire, for the interim ising interim profits, when acquired, represent so much capital expended by the company, and pronts. therefore constitute part of the capital assets of the company, and to apply the same in paying dividend would be to pay a dividend out of capital. Sometimes the interim profits are excepted, e.(/., by inserting a clause expressly providing" that there shall be excepted from the sale the profits of the business made between the 30th August last and the date hereof, and the profits of the business for the year ending the 30th August next shall be ascertained in due course, and the vendors shall in satisfaction of the said excepted profits accept a sum bearing . the same ratio to the year's profits as the period aforesaid bears to the year. Of course, there is nothing to prevent the vendor, when profits are so excepted, from (subsequently to the agreement) assigning the same to the company by way of donation, on the footing that they are to be placed to the credit of the first year's profit and loss account, or to reserve. And this has sometimes been done. Vendor not to 12. The vendor shall covenant with the coy that he will not at any carry on time hereafter, either solely or iointly with, or as manager or ag^ent similar busi- ' J J J ' » o ness. for, any other person or persons, or coy, directly or indirectly, carry on, or be engaged, or concerned, or interested in the business of a . , or permit or suffer his name to be used or emploj-ed in carrying on or in connection with the sd business, within 100 miles of the sd leasehold premises, save so far as the vendor shall as a member of the coy be interested, or as an officer or servant Liquidated ^^' ^g^nt of the coy be employed, in ■the business of the coy : [And in damages. case the vendor shall commit any breach of the foregoing stipulation, he shall pay to the coy [immediately on every such breach] the sum of L, as liquidated damages in respect thereof.] In the absence of a stipulation to the contrary, the vendor of the goodwill of a business may set up a similar business, either in the same neighbourhood or else- where ; but he may not solicit the customers of the old business. See Tret/o v. Hunt, (1896) A. C. 7, which overruled Pearson v. Fear son, 27 C. D. 145, and restored Labouchere v. Dawson, 13 Eq. 322. This, however, is not in general sufficient protection ; hence the need for a clause as above. The benefit of such a provision is assignable with the business {Baines v. Geary, 35 C. D. 154 ; Wright v. Chappcll, 17 W. R. 055), and may pass with the goodwill {Jacohij v. Whitmore, 32 W. E.. 18), unless the covenant appears to be merely personal. Daries v. Davies, 36 W. E.. 388. Although a general covenant not to carry on business in competition with the pur- chaser would be invalid (see (1896) A. C. at p. 27), yet an agreement by the vendor of a business not to carry on a similar business is valid, provided that it does not go beyond what is reasonably necessary for the protection of the purchaser {Mitchell v. Itcynolds, 1 Sm. L. C. 391 ; Nordeufclt v. Maxim Nordnifelt Co., (1894) A. C. 535), and is to be construed according to the intention. Mociiich v. Fcnrstre, 67 L. T. 70S. The old rule that a restraint unlimited in space was void has been relaxed, and the restraint may be world wide if the circumstances justify so wide a restraint. See Nordenfelt v. Maxim Nordenfell Co., ubi nupra. A covenant not to carry on within (say) the United Kingdom is not divisible, that is to say : if it is too wide a restraint it is void altogether, although if confined to L(nidun or some other specified district it would have been valid. But a covenant may be framed so us to be divisible, c.ff., " Not to carry on in London or within 100 FORMS. 207 miles or witliin 300 or -wifhin 500, or within the ITnited Kingdom." If the Form 24. reasonableness of .such restraint ia called in question the Court niaj^ hold it valiil in part and void as to the rest, e.g., valid as to London and 100, and void as to the rest, for it is divisible. See Price v. Green, 16 M. k W. 316 ; Beaks, Turner S; Co. v. Lowen, 64 L. T. 655 ; Bddische AnUin, ^-c. v. Schott, (1892) 3 C. D. 447. But unless the provision is thus alternatively expressed it may be impossible to divide the good from the bad. Baker v. Hedgecock, 39 C. D. 520. Each case is to be separately considered with due regard to its circumstances, and accordingly the greatest care must he taken not to make the restraint too wide, as otherwise it may be totally ineffective. Thus a restraint is unreasonable and void if it goes beyond what is required, e.g., if the business is that of a brewer and the vendor is restrained not only from carrying on such business, but any other business. Fcrls V. Saal/ehi, (1892) 2 Ch. 149, C. A. A contract, though wide as regards space, may be held valid if it only prohibits the use of the old name. Vernon v. Hallam, iihi supra. A contract ' ' not to carry on ' ' does not, in all cases, prevent the vendor from acting merely as manager or agent for another. Allen v. Taylor, 19 W. R. 35 ; 24 L. T. 249. But see Palmer v. Mallett, 36 C. Div. 411. The words "permit or suffer" import knowledge. Somirset v. Wade (1894), 42 W. E,. 399. ' ' Not to be interested ' ' imports a pecuniary interest and does not touch the case of a vendor's wife or relations setting up and carrying on business. I[anbt' intended Form 34. Company jo/vbr to its formation. Agreement with agent or This is an example of a form of an agreement commonly adopted in plan 1 , trustee for supra, p. 175. intended company. AN AGEEEMT made the day of , between A., of, &c. Parties. (hnfter called the vendor), of the one part, and B., of, &c., on behalf of the coy below mentd (which coy is hnfter referred to as the coy), of the other part. Sometimes it is preferred to make the agreement with B. "as trustee for the company below," &c., but the adoption of that course has occasionally led to diffi- ciilty where modifications were subsequently desired, for though an intended company when registered cannot claim any right under an agreement made with a person purporting to act before its incorporation as its agent, it may be that it can claim the benefit of an agreement made with a trustee on its behalf before its incorporation, and therefore that the trustee is not entitled to modify. Whereas the vendor has for some time past carried on business as, Recitals. &c., upon the hereditaments hnfter described. And whereas the coy, to be called The Coy, Limtd, is about to be formed under the Cos Acts, 1862 to 1890, having for its objects, among other things, the acquisition and working of the sd business. And whereas the memdn and arts of asson of the coy have with the privity of the vendor been already prepared. And whereas the nominal capital of the coy is to be 80,000^., divided into 10,000 shares of 8/. each. And whereas by the said arts of asson it is provided that the coy shall immediately after the incorporation thereof adopt the agreemt therein referred to, being these presents : Now it is hereby agreed as follows : — Sometimes the memorandum and articles have not been prepared when the agree- ment is executed, and in such case the third and fifth recitals should be omitted. The vendor shall sell and the coy when incorporated shall purchase. Agreement \_Here shoidd folloio such of the clauses in Form 24, supra, as mcoy be ^^ ^®^- required, e.g. 1 ^o 13 and 15.] 15. Upon the adoption of this agreemt by the coy in such manner Discharge as to render the same binding on the coy, the said B. shall bo o^ ^• discharged from all liability in respect thereof. As to this clause, see supra, pp. 177 seq. 216 AGREEMENTS. [Chap. V. Form 34. 16. Unless before tlie day of next at least shares iu PoAveTto *^® coy's capital shall have been taken up and a deposit of 1, per rescind shares share pd up thereon, either of the parties hto may, by notice in writing no su - ^Q ^i^g other, determine this agreemt, and after adopting this agreemt the coy shall stand in the place of the sd B. for the jmrpose of this clause. scribed. Po\rer to rescind if not adopted. No claim for damages. Agreement to be filed. 17. If this agreemt shall not be adopted by the coy in manner afsd before the day of next, either of the parties hto may, by notice in writing to the other, determine the same. See supra, p. 178. 18. The determination of this agreemt under clause 16 or 17 hereof shall not give rise to any claim for compensation, expenses, or other- wise. 19. The coy shall cause this agreemt or some other sufficient contract to be filed with the Registrar of Joint Stock Companies before any of the sd shares are allotted. See supra, p. 179. As WITNESS the hands of the parties hto the day and year first above written. The Schedule above referred to. Form 35. Agreement bi/ Company adopting Contract made on its BEHALF before ITS INCORPORATION. For iudorsonent on Original Contract. Parties. Recitals. Adoption. 1j. discharged. AN AGEEEMT made this day of -, between A., of, «S:c., of the first part, B., of, &c., of the second part, and The C03', Limtd (hnfter called the coy), of the third part. Whereas, since the execution of the within-written agreemt, the coy has been incorpo- rated in accordance with the intention in that behalf referred to in such agreemt : Now IT IS HEREBY MUTUALLY AGREED US folloWS : 1. The within- written agreemt is hby adopted by the C03', and shall b<' binding on the sd A. and on the coy in the same manner, and take effect in all respects as if the coy had been in existence at the date thereof, and had by these; presents rutiiied the same. 2. The sd B. shall from henceforth be discharged from all liability under or in resjiect of the sd agreemt. In witness, «S:c. Whore a contract is made on bolialf of au intended company [as above, pp. 215 ct i^eq."], it is requisite to take steps to bind the companj.- when it comes into existence. FORMS. 217 It used to be thought that a company could ratify such a contract, but it is now Form 35. settled that it cannot. Empress E)igincerbi' ^.s/j^a^^c Co. V. Commissioi/ers of Inland Revenue, L. R. 7 Ex. 211, it would seem that a premium payable for the grant of a licence is not liable to ad valorem duty as consideration for a sale. A licence granted for value G&nnot jirimd facie be revoked by the grantor for breach by the grantee of the contract. Guyot v. Thomson, supra. Where a royalty is made payable, the question sometimes arises whether a company is impliedly bound not to wind up during the currency of the patent. It is very difficult to imply such a covenant. Ellis v. Badson, 60 L. J. Ch. 353 ; 7 T. L. R. 318 ; Hirsch v. Burne % Co., 77 L. T. 377 (H. L.). And if implied it is submitted that it would be ultra vires. Re Peveril Gold Mines, (1898) 1 Ch. 122. By proper provisions, specified obligations can be attached to run with the patent so as to bind the owners for the time being. Wcrdcrmann v. Societc Gimro.le, 19 C. Div. 246. Form 39. Agreement foy Sale to Company o/" Foreign Mines. AN AGEEEMT made the day of , between A., of - the Eepublic of (hnfter called the vendor), by B., his attorney, 1^ Form 40. of the one pt, and The Coy, Limtd (hnfter called the coy), Parties. of the other pt : Whereby it is agreed as follows : — 1. The vendor shall sell, and the coy shall purchase, the mines, Ao-reeme-t mining rights, mills, stamps, orehouses, plant, machinery plant, stock, for sale. ore, and other ppty and rights specified in the first schedule hto, and hnfter called the scheduled premises. [2. The coy shall, with all reasonable dispatch, direct "W., or some inspection. other competent person, to inspect and report upon the value of the scheduled premises, and unless the report of such person shall be deemed satisfactory by the coy, the coy shall be at liberty, by notice in writing to the sd B., to rescind this agreemt, provided such notice be given before the day of .] 3. The vendor shall make out to the satisfaction of the coy a good Title, title to the scheduled premises, according to the laws in force in the sd Republic, free from all incumbrances, except any royalties imposed by the Mining Code of the sd Eepublic. 4. The conson for the sd sale shall be 100,000/., whereof 20,000/. Considera- shall be pd in cash, and the balance shall be satisfied by the issue to *^°^" the vendor or his nominees of debentures for securing oO,000/., and 224 AGREEMENTS. [Chap. V. Form 40. 5,000 lOl. shares of the coy, to be numbered to inclusive, Completion. Transmission of oertificates and deben- tures. Affent. Deposit. Possession. Vendor to pay preliminary expenses. and to be considered for all purposes as fully pd up. 5. The sale shall be completed at L., in the sd Republic, on the day of , when the vendor shall duly transfer the scheduled pre- mises to the coy or its nominees, and the certificates of title to the sd 5,000 shares, and the sd debentures shall be handed over to the vendor. 6. The coy shall, before the time for completion, execute the sd cer- tificates and debentures, and transmit the same to L., there to be ready for issue at the time for completion. Each of the sd certificates shall comprise shares, and the sd debentures shall be in the form set forth in the second schedule hto. 7. The coy shall also appoint some person in L. to be its attorney or agent, with full powers in relation to the completion of the sale, and shall notify such appointment to the vendor not less than days before the time for completion. The coy shall cause such attorney or agent to transmit to it telegraphic information of the completion of the sd transfer. 8. Not less than days before the time for completion the coy shall pay the sd sum of 20,000/. cash to J. & D. upon trust to place the same on deposit in their joint names at the Bank, in the Cit}^ of London, and to keep the same there deposited until they shall be satisfied that the scheduled premises have been duly transferred in accordance with clause 5 hereof, and thereupon to withdraw the sd deposit and any interest, and pay th"e same to , the vendor's agent in London, or as he shall direct. If this agreemt shall be rescinded under clauses 2 or 11 hereof, the sd deposit and interest shall be forth- with withdrawn and pd over to the coy. 9. Possession of the scheduled premises shall be given to the coy at the time for completion, and the vendor shall in the meantime keep the same in good repair and condition, and shall work the mines and mills in as full and effectual a manner as the same have hitherto been worked. As from the day of the vendor shall be deemed to have been carrying on the said mines and mills for the benefit of the coy ; and ho shall account to the coy for all moneys and other benefits received, and shall be indemnified by the coy against all expenses whilst so carrying on the same. 10. The vendor shall pay all the costs of and incidental to the pre- paration and execution of this agreemt, and of the memdm and articles of asson of the coy, and of the registration thereof, and of all stamps, fees, and legal expenses incident to the formation of the coy, and generally of all preliminary expenses whatever incurred in relation to the coy up to the incorporation thereof ; and, if the result of the inspection to bo made pursuant to clause 2 hereof shall be un- satisfactory to the coy, or if the vendor shall fail to show a good title to the sd promises, the vendor shall also pay the costs, charges, and expenses incurred by the coy in relation to such inspection, but so that FORMS. 225 such last-mentioned costs, charges, and expenses shall not exceed Form 40. -I. 11. Unless before, &c. \^Fortn 24, clause 14]. Eescission. 12. For the purposes of this agreemt any notice may bo given to Notices. the vendor by leaving the same for him at the Bank in L., or (at the option of the coy) by leaving the same at No. — , Street, in the City of London ; and any notice so left shall be deemed to have reached the vendor at the expiration of forty-eight hours after it is so left. In witness, &c. \_A(ld schedules — (1) containing particulars of mines, ^c, and {2) form of dehenturo.^ AN AGREEMT made the day of , between, &c. [as in Form 41. J* Agreement 1 . The vendor shall sell, and the purchaser shall purchase, all those joining three mineral leases or claims numbered resply , and called resply claims in , situate at Hannans, in the colony of West Australia, and contain- ing in the whole seventy-two acres or thereabouts. 2. The conson for the sd sale shall be the sum of 60,000^., whereof Considera- the sum of 5,000/. is to be paid to the vendor on the execution thereof, **°^- and the balance of which said sum of 60,000/., being the sum of 55,000/., shall be paid and discharged as follows: that is to say, as to 15,000/., part thereof in cash on or before the day of next, as to the remaining /., by the allotment and issue of 40,000 shares of 1/. each in the capital of the intended coy, hnfter mentd and referred to as the sd intended coy, such shares to be allotted and issued to the vendor, his nominees or nominee, as fully paid up, and to be numbered to inclusive, such shares to be allotted in manner hnfter appearing. 3. The said sum of 10,000/. shall be paid by the purchaser to the Payment. Bank of , in London, to hold the same in the joint names of A. B. and the purchaser, and to pay the same over to the sd A. B. upon delivery to the manager of the branch of the said bank at Kalgoorlie, by or on behalf of the vendor, of proper certificates of title of the sd mining claims from the "Warden, and transfer in blank of such claims, such transfer to be delivered in escrow pending pay- ment of the balance of the purchase price. Upon such delivery, and upon the title to the premises being made out to the satisfaction of the coy, the said 10,000/. is to be freed absolutely in favour of the sd A. B., and be paid over to him. A cablegram from the agent at Kal- goorlie of the Bank of to the Bank of in London that such delivery has been made shall be sufficient evidence of such delivery, r. Q 226 AGREEMENTS. [Chap. V. Form 41. Title. Conveyance. Balance. Filinc 4. The vendor shall make out and show to the purchaser a good, valid and marketable title to the sd three mineral leases or claims free from incumbrances, save as to the conditions on which the sd mining leases have been granted, and shall for all such purposes furnish and produce to the legal advisers or agents of the purchaser in Western Australia all such documents and evidence as may reasonably be required in accordance with the law and practice in Western Australia. 5. The vendor shall cause all such assurances and things as may be reasonably required for carrying the sale into effect to be executed and done to the satisfaction of the legal adviser or agents of the purchaser in Western Australia, of which a cablegram from the colonial agent of the Bank of to the Bank of in London, stating that the certificate of title and the transfer thereof, duly executed in favour of the purchaser or his nominees, have been deposited with the colonial agents of the Bank of , shall be accepted as satisfactory. 6. The sd 40,000^., being the balance of the sd sum of 65,000/. to be pd or satisfied by the allotment of 40,000 fully paid-up shares of the sd intended coy, shall be paid and satisfied by such 40,000 fully-paid shares being allotted and issued to the vendor or his nominees on or before the day of , 1897, and the certificate or certificates in respect of such shares shall be deposited with and , who shall hold the same pending the receipt of the cablegram mentd in Clause 5 hereof. Upon receipt of such cablegram the sd and shall hand over to the vendor the sd certificate or certificates for the sd shares. 7 — 10. [Other provisions.] 11. Before any shares are issued as fully paid in accordance with the terms hereof some sufficient contract shall be filed with the Registrar of Joint Stock Companies. Ix WITNESS, &:c. Form 42. Option to buy conceHsion. Option. Wlion to 1)0 exorci-cd. AN AGREEMT made the day of 1895, between The Syndicate, Lmtd (hnfter called " the Syndicate "), of the one pt, and A., of , and B., of (hnfter called " the purchasers,"), of the other pt : Whereby it is agreed as follows : — 1. The purchasers or their assigns shall have the option of pur- chasing the concession, a translation whereof is set forth in the schedule hto, and all the interests of the syndicate therein. 2. The sd option sliall be oxercisoable either by the purchasers or their assigns, by notice in writing to the syndicate at any time within three calendar months from the date hereof, and if the pxir- chasors or their assigns shall exercise the sd ojition the syndicate sliall Sf41, and the purchasers or their assigns shall purchase, the sd FORMS. 227 premises on the terms hnfter expressed; and if tlie sd option is exercised Form 42. by the assigns of the purchasers, then and in such case the purchasers shall not be in any way liable hereunder. 3. The conson for tlie sd sale shall })o the sum of 50,000/. Coneidera- 4. Should the purchasers or their assigns exercise the sd optioii, the Jf^' syndicate will, if required by the purchasers or their assigns, accept pd-up shares in a coy (hnfter called " the new coy"), forming 20 p.c. of its capital, and not by less than 50,000/., in satisfaction of the sd sum of 50,000/., provided — (a) That the new coy is registered under the Cos Acts, 1862 to 1890, as a coy limtd by shares. (b) That the registered capital of the coy does not exceed 250,000/. (c) That the new coy has a working capital of 50,000/. (d) That the purchasers shall have exercised the ojDtion given them by clause 1 of this agreemt, and shall have re-sold the con- cession of the new coy, or in the alternative that the new coy, as the assigns of the purchasers, shall have exercised the sd option. 5. Until the time for completion hnftr mentd, or up to the expiration Conditions. of the sd period of three calendar months, in case the sd option shall have been previously exercised, the syndicate shall comply with all the terms of the sd concession, and keep the same from becoming forfeited or void. 6. If the purchasers or their assigns should exercise the sd option, CompletioD. the purchase shall be completed with all convenient speed thereafter, and before the day of , 1896, when possession of the land comprised in the sd concession shall be given to the purchasers or their assigns, as the case may be, and the syndicate shall execute and do all assurances and things for vesting the sd concession and all its interests therein in the purchasers or their assigns, and thereupon the sd conson shall be pd or satisfied, and possession shall, as soon as conveniently may be, be given to the purchasers or their assigns. 7. Should the sd option be exercised, the purchasers or their assigns Agent, shall, before the time hnbefore fixed for completion, appoint some competent agent in East Africa, or send out such person there, to examine and report on the title to the sd concession, and to certify the transfer thereof ; and a telegram from such agent, stating that the title is satisfactory and that the transfer is complete, shall bo sufiicient evidence of the facts. 8. The conson for the sd option shall be the sum of 500/. cash, to be Payment, pd by the purchasers immediately on the execution hereof, and the sd sum shall be retained by the syndicate whether the sd option shall or shall not be exercised, and shall not in any case be treated as pd on account of the sd purchase conson. 9. Should the sd agent not report as to the title to the sd concession Title. to the satisfaction of the purchasers or their assigns before the day of , 189 — , the purchasers or thdr assigns may, at any time q2 228 AGREEMENTS. [Chap. V. Form 42. thereafter before the completion of the sd purchase, by notice in -writing to the syndicate, annul the sale ; and if the sd purchase conson shall not be pd or satisfied at the time and in the manner afsd, then and in any such case the syndicate may at any time afterwards, by notice in writing to the purchasers or the new coy, as the case may require, annul the sale. Repayment. 10. If the sale is annulled under clause 9 hereof by the purchasers or their assigns, the syndicate shall repay to the purchasers the sd sum of 500/. ; but if such annulment is made by the syndicate, neither party shall have any claim against the other for expenses, damages, or otherwise. Notice, 11. A notice hereunder may be served on each of the purchasers by sending the same through the post, addressed to him at his address above mentd, and shall be deemed to be served at the expiration of twenty- four hours after the same is posted in London. In witness, &c. The Schedule above referred to [cojyy translation of concession']. Form 43. Parties. Sale. Considera- tion. Agreement/o>' Sale o/Ship to Single Ship Company. Parties: A., B., and C, "the vendors" (1), and "the com- pany" (2). 1. The vendors shall sell, and the coy shall purchase, the steamship specified in the schedule hto, together with all the gear, stores, and other efiPects, and the benefit of all contracts and engagements therein mentd. 2. The conson for the sd sale shall be 32,000/., which shall be satisfied as to 3,000/. by crediting as pd up the eight shares which, by the coy's memdm of asson, the subscribers thereto (including the vendors) have agreed to take uj) ; and as to the balance (29,000/.) by the allotment to the vendors, in the proportion specified in the second schedule hto, of the remaining fifty-six shares in the coy's capital : such shares to be deemed for all purposes fully pd. Sometimes the vendors and their friends subscribe the memorandum for all the shares. Completion. 3. The purchase shall be completed on the day of , and thereupon the vendors shall transfer the sd steamship and premises to the coy, free from ijicumbrancos. No duty \H ])!iyablo on the sale, tranflfor, or other disposition of any ship or vessel, or interest or property therein. Sec Schedule to Stamp Act, 1891. FORMS. 229 4. This agreemt shall forthwith be filed with the Registrar of Joint Form 43. Stock Companies. In witness, &c. \_Schedules — (I) (jiviny particulars of shi}}, Sfc. ; (2) showing hoiv shares to he apportioned. ~\ Sometimea the agreement for sale provides for the appointment of some of the vendors as managers at specified remuneration ; but it seems better not to disclose this in an agreement which must be filed. As to sale of ship at instance of Bhare- owner where majority sell to a company, see lie Mereward, (1895) P. 284. Agreement as to Issue of Paid-up Shares pursuant to another Form 44. Contract not filed. AN AGREEMT made the day of , between, kc. [as in Parties. Form 18]. WuEREAs, by an agreemt dated, &c., and made between the vendor, Recitals, of the one part, and A. B., on behalf of the coy (then in course of formation), of the other part, it was agreed that the vendor should sell [here set out all material jirovisions, and in particular the considerations^ : Now THESE PEESENTs WITNESS that it is hby agreed as follows : — 1 . The coy shall forthwith cause this agreemt to be filed with the FUing Registrar of Joint Stock Companies. agreement. 2. The sd agreemt [as in cl. 1 of Form 35]. Adoption. 3. On the day of next, the coy shall allot to the vendor or Allotment of to his nominees fully paid-up shares in the coy. shares. 4. The sd shares shall be numbered, &c., and shall be accepted by Numbers, &c, the vendor in full satisfaction of that portion of the purchase-money which, under the sd agreemt, was to be satisfied by the allotment of paid-up shares. In WITNESS, &c. Where a contract provides for the allotment of paid-up or partly paid-up shares for a consideration other than cash, the question sometimes arises whether it is essential to file that contract, or whether sect. 25 of the Companies Act, 1867, cannot be satisfied by the filing of some shorter contract dealing merely with the issue of the shares. The words of the section are " unless otherwise provided by a con- tract in writing duly filed," and the cases show that the words "unless otherwise provided" mean " unless some other mode of payment is provided " [supra, p. 179). If, then, the instrument actually filed is a "contract," and does provide for the allotment of fully or partly paid-up shares for a consideration duly expressed, it would seem to comply with the requirements of the section. Where, however, it is under hand only, and merely provides that the parties shall do that which they are already bound by contract to do, it will not, for lack of consideration, be a contract in point of law ; but if it is under seal, or there is some new consideration, this objection is removed. So also where it is only signed by one of the parties to it, it may not be a contract in writing. Nexv EberJiardt Co., 43 C. Div. 118. It may be 230 AGREEMEXTS. [Chap. V. Form 44. contended that the object of the section was to secui'e disclosure of the considera- tion, and that the principal contract ought, therefore, to be filed ; but this may, it is conceived, be met by fuUy and fairly disclosing in the filed contract the con- sideration for the issue of the shares, and Lord Davey, when at the bar, advised that such disclosure was expedient. According to the decision in Kharaakhonid Syndicate, (1897) 2 Ch. 451, this disclosure is essential. See fui'ther, nupra, p. 185. Form 45. Eecitals. The A. Com- pany to allot 1,000 shares; to be deemed fully paid up ; and to be accepted by the C. C'om- l)any instead of cash. Agreement io Issue Paid-up Shares hi Satisfaction of Debt DUE hy Company. AN AGEEEMT made the day of , between The A. M. B. Coy, Limtd (hnftr called the A. Coy), of the one part, and the C. D. and E. Coy, Limtd (hnftr called the C. Coy), of the other part. Whekeas by an agreemt, dated the day of , and made between the C. Coy, of the one part, and the A. Coy, of the other part (being the agreemt No. 1 referred to in the introduction to the arts of asson of the A. Coy), the A. Coy agreed to pay the C. Coy for the works and matters undertaken by the C. Coy in connection with making and constructing a dock at the sum of 225,000^., whereof the sum of 75,000/. is payable by instalments in manner therein mentd : A^^D WHEREAS an instalment of 10,000/., part of the sd last-mentd sum, will become payable to the C. Coy on the day of next : Now IT IS HBY AGREED aS follow& : — 1. The A. Coy shall, before the day of next, procure this agreemt to be filed with the Registrar of Joint Stock Companies. 2. The A. Coy shall, on or before the day of next, allot to the C. Coy or its nominees 1,000 shares of 10/. each in the A. Coy, which shares shall be deemed, for all purposes, to be fully pd up, and shall be numbered in the books of the A. Coy with the numbers to inclusive. ;>. The C. Coy shall accept the sd shares in full satisfaction and discharge of the sd instalment of 10,000/., and of all claims and demands in respect thereof («). In witness, &c. (a) As this instabnent is not presently payable, this agreement requires to be filed under sect. 25 of the Act of 18G7. If the instalment were presently payable, the transaction would amount to a payment for the shares in cash, and it would not bo necessary to file the agreement. See mpra, p. 187. But even then it would be expedlrnt to file it for the benefit of transferees, who would thereby secure the preservation of evidence that the shares were in fact paid up in cash. See supra, p. 188. Where paid-up shares are to be issued in satisfaction of a debenture not yet due, a contract should be filed. yij)plei/ard\s case, IS C. D. 587 ; Junfs case, 39 C, Div. 250. FORMS. 231 Form 46. (JoNTRACT to File u-Jiere Paid-up Shares issued williout compliance with Sect. 25 of the Act o/'1867. AN AGEEEMT made the day of between (hnftr Parties. called the Coy), of the 1st pt ; of (hnfter called the vendor), of the 2nd pt ; and A. on behalf of , the several persons specified in the second schedule hto (hnfter called the shareholders), of the 3rd pt: Whereas on or about the day of the Eecitals. vendor and the coy entered into the agreemt (hnftr called the pre- liminary contract), a copy whereof is set forth in the first schedule hto : [And whereas shortly afterwards that agreemt was duly filed with the Registrar of Joint Stock Companies :] Axd whereas each of the shareholders is the registered holder of the shares of which the particulars are set opposite his or her name in the second column of the second schedule hto : Axd whereas the sd shares were all allotted pursuant to the preliminary contract and by the direction of the vendor, and upon the footing that they were to be deemed fully pd : And whereas doubts have arisen whether the preliminary contract is a sufficient contract in writing within the meaning of sect. 25 of the Cos Act, 1867, and it is desired to preclude any further question in regard thereto \_or, And whereas by mistake the preliminary con- tract was not filed with the Registrar of Joint Stock Companies before the issue of the sd shares, and the parties hto were at the time of such issue, and until recently, wholly ignorant of the omission to file the same, and they have required the coy to rectify such mistake] : And WHEREAS the sd A. has been duly authorised to enter into this agreemt on behalf of each of the shareholders. Now THEREFORE IT IS AGREED aS followS : 1. This agreemt shall forthwith be filed with the Registrar of Joint File contract. Stock Companies. 2. The coy shall forthwith cancel the respective allotments made as Cancel allot- afsd, and shall remove the name of each of the shareholders from the ments. register of members in respect of such shares, and the certificate of title, if any, which has been issued to or is held by each of the share- holders shall be forthwith given up to the coy to be cancelled. 3. Subsequently, with all convenient speed, the coy shall in lieu of Ee-allotment. each of the shares now held as afsd allot and issue to the present holder thereof a 1/. share in the coy's capital, and every share so allotted shall be deemed for all purposes to be fully pd up. And the shares so to be allotted shall be numbered in the manner specified in the fourth column of the same schedule. 4. The shares allotted pursuant to the last preceding clause hereof Considera- shall be deemed to be part of the shares to the issue whereof the *^'^°' vendor became entld under the preliminary contract. As WITNESS, &c. 232 Form 46. AGREEMENTS. FiEST Schedule. ^Copy prelimmary contract.~\ [Chap. V. Second Schedule. First Column. Second Column. Third Column. Fourth Column. * e.g., five \l. shares, num- bered — to — inclusive. Names and Addresses of Parties of 3rd part. Particulars of Shares now held. No. of Shares to be AUotted. Denoting Nos. of Shares. * From To Where shares have been issued credited as paid-up for a consideration other than cash, and by mistake a proper contract has not been filed, it may be possible to rectify the mistake without going to the- Court, especially where no return has been made to the Registrar. See Hartlei/s case, 10 Ch. 157. But the question of lona fides is very material. And, looking to Trevor y. Whitworth, 12 App. Cas. 409, and Railaan Time Tables Co., 42 C. Div. 104, it must not be assumed that tliis course can safely be adopted in all cases. Where the shares have been issued without the execution of any contract, as in Denton ColUery Co., 18 Eq. 17, the contract should recite the facts and provide for the issue of the shares and their acceptance in satis- faction. For a case in which a conversion of a share contract into a cash contract was supported, see Ihbotson v. Ibbotson Brothers % Co., 14 T. L. R. 278. Form 47. Option to prospect and eclect. Parties. lU-citale. Agreement heticcen Two Companies for Grant of Option to Prospect in Western Australia, and Select Blocks. Consideration in Paid-up Shares of a New Company io he formed. AN AOEEEMT mado tlie day of between The Estate, Limtd (incorporated in 1894, and hnfter called "the vendor Coy"), of the one pt, and The Association, Limtd (Imfter called " the Association "), of the other ]»t. AViiEREAS the vendor coy is entld to a froeludd estate in Western FORMS. 233 Australia, known as the Exmouth Estate, and comprising 300,000 acres Form 47. or thereabouts : Axd whereas the vendor coy has entered into the three several agreemts, dated resply, &c., with N., the particulars whereof are set forth in the schedule hto, and by the assignment of day of , 1893, referred to in the same schedule, the rights of the sd N. under the sd several agreemts were assigned to The Syndicate, Limtd (hnfter called "the Syndicate"): And whereas the parties hto have determined to enter into the agreemt hnfter expressed. Now THEREFORE IT IS AGREED as followS : 1. The asson or its transferee shall have the option (hnfter Option given. called "the ppal option") of purchasing from the vendor coy the unencumbered fee simple of and in all that block of land known as Block D,, situate in Western Australia, and forming pt of the Exmouth Estate afsd, and containing 50,000 acres or thereabouts, subject nevertheless as hnfter provided. 2. Having regard to the sd agreemts referred to in the schedule Special pro- nientd, the following provisions shall have effect (that is to say) : — visions. (1.) At any time before the ppal option shall have been exer- cised by the asson or its transferee the asson or its transferee shall be at liberty to notify in writing to the vendor coy any particular block or blocks of land forming pt of the sd Block D., and to require the vendor coy, in exercise of the right reserved to it by clause of the sd agreemt of, &c., to select for itself such block or blocks, and the vendor coy shall thereupon forthwith select for itself such block or blocks accordingly to the intent that the syndicate shall not thereafter be able to exercise any right of selection in respect of such block or blocks. (2.) Save as afsd, this agreemt up to the time when the ppal option is exercised shall not interfere with the exercise by the syndicate of the right of selection, pegging out blocks, and other rights vested in it by the agreemts and assign- ment specified in the schedule hto, and accordingly up to that time the syndicate is to be at liberty to exercise such rights as freely as if this agreemt had not been executed. (3.) If the syndicate shall, in exercise of its rights as afsd, select and peg out as afsd any block or blocks forming pt of the sd Block D. prior to the exercise of the ppal option, then and in such case the asson or its transferee shall, in relation to the block or blocks so selected, succeed to all the rights, powers, and discretions of the vendor coy under the agreemts specified in the schedule hto as successors in title to the Corporation, and in particular the right as against the syndicate to enforce in relation to such block or blocks the provisions of the sd agreemts and the right to participate 234 AGREEMENTS. [Ciur. V. Form 47. When option exerciseable. Prospecting. Fiicilities. f'lm.sidera- tion. in the animal profits of working sucL. block or blocks, and in the purchase-money or consou derived from the Hale of any such block or blocks as provided by clause of the sd agreemt of the day of , and the benefit of clause of such agreemt. (4.) If any block or blocks shall be selected as afsd by the syndi- cate before the asson or its transferee exercise the ppal option, then in the event of such option being exercised the asson or its transferee shall take the sd Block D., sub- ject to the incidental rights conferred by the sd agreemts with reference to the block or blocks so selected, and in particular the right to construct dams amd sink wells, sub- ject nevertheless to the qualifying provisions of the sd agreemt. 3. The ppal option shall be exerciseable by notice in vn.'itiug to the vendor coy at any time within four months from the date hereof, and such notice to be effective must be under the seal of the asson or its transferee. 4. The asson or its transferee shall be at liberty at any time, and from time to time prior to exercising the ppal option, to pros- pect any of the lands comprised in the sd Block D., and not for the time being selected and pegged out by the syndicate, and the vendor coy shall allow all facilities for such prospecting. 5. In order to facilitate the prompt selection of blocks pursuant to any notification given in accordance with paragraph 1 of clause 2 hereof, the vendor coy shall place at the disposal of the asson or its transferee some agent of the vendor coy in AVestern Australia, who shall, if required, accompany the prospecting party of the asson or its transferee, and shall be empowered to accept any notification pursuant to paragraph 1 of clause 2 hereof, and shall be directed at once to act thereon by making the requisite selection on behalf of the vendor coy, and if the vendor coy makes default in complying with this provision, the asson or its transferee may appoint some person in Western Australia to accept notification as afsd on behalf of the vendor coy, and to select the block or blocks referred to in such notification on behalf of the vendor coy, and such appointment shall have full effect, and is hby authorised by tlio vendor coy, and notice of such selection shall subsequently be given to the vendor coy. 6. Should the ppal option be exercised by the asson or its transferee as afsd, the vendor coy shall thereupon become bound to sell, and the asson or its transferee shall thereupon become bound to purchase the sd Block D., subject nevertheless to the foregoing pro- visions, and the conson for the sd sale shall be the sum of 200,000/. to bo satisfied by tlie allotment to the vendor coy or its nominees of 200,000 fully pd up 1/. shares in the capital of a coy (hnfter called " the new coy "), to be established as hnfter mentd. FORMS. 235 7. The new coy is to be a coy constituted and established in accord- Form 47. ance with the conditions following, that is to sav : — r]i '^ " . JSew com- (1) It is to be registered under the Cos Acts, 1862 to 1890, with a pany. nominal capital of 350,000^., divided into 350,000 ordinary shares of which 50,000 at least are to be reserved for future issue. (2) The objects of the new coy are to include the acquisition of the sd Block D. (3) The arts of asson of the new coy must vest in the vendor coy the right to nominate two directors to act on the directorate of the new coy, and such articles must also provide that at least 150,000 of the shares to be allotted to the vendor coy shall not be transferable for one year after the incorporation of the new coy. (4) The new coy must have entered into a binding agreemt to pur- chase the sd Block D. from the asson or its transferee. (5) The new coy must have issued at least 60,000/. of its shares on the footing of a cash subscription for the same, and must have at least /. pd up capital, free for use as working capital, and also the difference between that and 60,000/. capable of being called up> or actually made payable by instalments. (6) The agreemt afsd must provide that the asson or its trans- feree shall pay all the costs, charges, and expenses of and incident to the formation and registration of the new coy, and the placing it in the position contemplated by this clause. 8. The asson or its transferee shall in the event of the ppal Registratiou option beine- exercised as afsd, procure the establishment of the new °®^ ^ , ^ . ' •'^ company. coy in accordance with clause 7 hereof. 9. Should the ppal option be exercised as afsd, the purchase of Completion. the ppty shall be completed at the expiration of weeks after the exercise of such option, and such completion shall take place at the office of Messrs. & , the vendor coy's solicitors, at, &c., London, and at the time so fixed for completion the vendor coy shall satisfy the asson or its transferee that the ppty agreed to be sold has been duly transferred to and vested in the asson or its transferee in accordance with the local laws affecting the same, subject never- theless as hnbefore mentd, and thereupon the asson or its transferee shall procure the new coy to allot and issue to the vendor coy or its nominees the sd 200,000/. fully pd up shares, and the vendor coy shall from time to time and at all times thereafter execute and do all such assurances and things as the asson or its transferee may reason- ably require for carrying the sd sale into effect, and vesting or more effectually vesting the sd premises hby agreed to be sold and made over to the asson or its transferee, or the new coy as the asson or its transferee shall require. 236 AGREEMENTS. [Chap. V. Form 47. Transfer of option. Title. 10. The asson is to be at liberty at anytime before exercising the ppal option to transfer by deed to the D. Corporation, Limtd, the rights and liabilities of the asson hereunder, and upon the production and delivery to the vendor coy of one pt of such transfer duly executed by the asson and by such transferee (the vendor coy being made a party thereto), the asson shall stand freed and discharged from all liabilities hereunder, and the vendor coy shall accept such transferee in substitution for the asson, and shall execute and deliver to the asson a deed recording such transfer, and releasing the asson absolutely. 1 1 . Before the time for completion af sd the vendor coy shall show to the asson or its transferee a good title to the sd Block D., free from incumbrances except the agreemts specified in the schedule hto. In -witxess, &c. TnE Schedule above referred to, Form 48. Parties. Recitals. Agreement for Funding Arreaus of Dividend on Preference Shares. {No clause in Articles of Association for modifjiiuj rights ofani/ class of shareholders.) AN AGEEEMT made on the day of 1894, Between A.B., on behalf of all the holders of preference shares in the B. Coy, Limtd (hnfter referred to as "the Coy"), of the first pt, C. D., on behalf of all the holders of ordinary shares in the coy of the second pt, and the B. Coy, Limtd, afsd, of the third pt. "VVhereas the capital of the coy is 150,000^., divided into 30,000 shares of bl. each. Ant) wheheas 15,000 of the sd shares and no more have been issued, namely, 7,500 preference shares and 7,500 ordinary shares. And whereas the sd preference shares entitle the holders to receive a dividend at the rate of 6 p.c.p.a. on the amount for the time being pd up thereon, such dividend being cumulative, so that the deficiency of one year shall be made good out of the profits of any subsequent year, and to a preferential right to repayment of cajjital out of the surplus assets of the coy available for distribution among the share- holders in a winding-uj), and the ordinary shares entitle the holders to receive dividend out of tlie surplus profits after payment of the preference dividend, subject nevertheless to the provisions in the arts of asson ccmcf^rning a reserve fund. And wjikueas owing to various causes the coy has foi" several years had no profit with which to pay dividends to its shareholders, and in the result the dividend on its preference shares afsd has fallen largely into arrear, so much so that the arrears now due in respect of such preference dividend amount to FORMS. 237 22,500^., whicli sum is hnfter referred to as " the arrear of 22,500/." Form 48. And "WHEREAS tlie existence of these large arrears of prefereuco dividend has and must have a detrimental effect on the credit of the coy and on the value of its shares, and is found to interfere seriously with the carrying on of the coy's business to the best advantage. And "WHEREAS in the circumstances it is desired to fund the sd arrears as hnfter provided. Now THEREFORE IT IS AGREED as folloWS : 1. The coy shall, when this agreemt becomes absolute as hnfter Issue of provided, issue to each holder of preference shares who shall have g^atesf ^^^ ratified this agreemt a funding certificate for so much of the arrear of 22,500/. afsd as shall be owing in resijoct of the preference shares held by him or at his option, several funding certificates each for a portion of such amount afsd, and every such funding certificate shall be framed in the terms set forth in the schedule hto, and the principal sums specified in every such certificate shall be a sum equal to the amount of the arrear afsd in respect of which such certificate is issued, and such holder shall accept such certificate or certificates in full satis- faction and discharge of the arrear of dividend on his preference .shares up to the 30th of September, 1894, subject nevertheless as hnfter provided. 2. The principal sum specified in each such certificate shall carry Interest. interest at the rate of J3 p.c.p.a., but such interest, as regards each year, shall be payable exclusively out of the surplus profits of the coy of that year which shall remain after paying the dividend on the preference shares in the coy to the close of such year, and shall not be cumulative. 3. In the event of a winding-up of the coy, the principal sums mentd Rights in in the sd certificates shall be pd off out of the surplus assets of the ^^ &""P- English coy, which shall remain after paying off the capital pd up on the preference shares in the original capital, and shall rank for pay- ment in priority to any return of capital on the ordinary shares. 4. This agreemt is intended to bind all the shareholders in the Who to be B. coy who ratify the same, and their shares in the coy, and also ' their respective successors in title, owners for the time being of their shares ; and accordingly every certificate of title in respect of any shares belonging to a shareholder who ratifies this agreemt, shall be given up to the coy in order that a reference to this agreemt may be placed thereon, and every certificate issued after this agreemt becomes abso- lute, in respect of any such shares, shall bear a reference hto ; and, further, every transfer of any such shares, made whilst any of the sd certificates are outstanding, shall contain words to the effect that the transferee takes the shares subject to the provisions of this agreemt. In equity, the transferee of personal property, who takes the same "with notice of some qualification or burden attached thereto by a prior owner, is bound thereby. Werdermann v. Societe General, 19 C. D. 246 ; Be Mattos x. Gibson, i De G. &S. 276. The object of clauses 4 and 5 is to ensure, as far as possible, that a transferee shall have notice. 238 AfJREEMENTS. [Chap. V. Form 48. Special reso- lutions. Custody of aprreement. When agree- ment absolute. Provision as to outstanding holders. When void. 5. The ratifying shareholders shall take steps to procure the passing of a special resolution of the coy referring to this agreemt, and making the necessary alterations in the arts of asson of the coy so as to give effect to the provisions hereof so far as practicable. 6. The coy shall have the custody of this agreemt, and of all ratifi- cations thereof, and shall cause a note to be endorsed on or subjoined to this agi'eemt, specifying the shares held by each of the ratifying shareholders. 7. This agreemt will become absolute if, before the 1st day of January, 1895, it is ratified in writing by the holders of preference shares and ordinary shares in the coy, holding between them not less than 10,000 preference shares and 10,000 ordinary shares resply in the coy. 8. In the event of this agreemt becoming absolute, the outstanding shareholders shall be in no way prejudiced by this agreemt, nor shall they be in a better position as regards dividend than if they had ratified this agreemt ; and accordingly as against them the arrear of 22,500/. shall not be considered to have been satisfied by the issue of the sd certificates. They may, however, at any time afterwards, with the consent of the coy, ratify this agreemt, and shall thereupon become entld to the benefit thereof. 9. If this agreemt shall not become absolute before the day of , it shall thereupon become void. As WITNESS, &:C. Schedule. Form 49. Funding certificate. The Coy, Limtd. Funding Certificate. Issue of funding certificates not exceeding 22,500/., carrying interest at 3 p.c.p.a., subject as below mentd. Funding certificate for the principal sum of 1. 1 . This certificate is issued in respect of the preference shares in the coy, numbered to inclusive, and represents an arrear of dividend thereon up to the 30th of September, 1894. 2. The ed principal sum above mentd carries interest at the rate of 3 p.c.p.a., payable half yearly on the day of , and the day of , out of the surplus profits of the coy of each year which shall remain, after paying or providing for the payment of the dividend on the preference shares, in the coy at the close of such year, and such interest is not to bo cumulative. 3. In the event of the winding-up of the coy, the principal sum FOKMS. ^39 mentd in tliis certificate will be pd off, Sec, as in clause 3 of this Form 49. agreemt. 4. This certificate is issued to , of , and ho, or other the registered holder for the time being hereof, Avill be entld to the benefit thereof. 5. This certificate is issued subject to the conditions indorsed hereon, which shall be deemed part of it. Given, &c. i The conditions within referred to : — [Here provide for a register of tlie certificate holders, and as to forms of transfer, majority, &c., somewhat on the lines of a registered debenture.] In the above case there was no clause in the articles enabling a majority of the preference shareholders to modify the rights of the class, and accordingly it was necessary to get the holders individually to assent. Almost every shareholder ratified the agreement, and a quotation was granted for the shares of the assenting holders in lieu of the original quotation. Agreement for mtisfying Preference Dividends for a Term hy p^j^ 59. the issue of Debenture Stock vhere a Majority Clause is in Articles. AN AGEEEMT, made the 30th day of July, 1894, between A. B., Parties. of, &c., on behalf of the holders of the preference shares in the coy below mentd of the first part, the sd A. B. on behalf of the holders of the ordinary shares in the sd coy of the second part, and The Coy, Limtd (hnfter called "the coy") of the third part. Whereas Hecitals. the capital of the coy is 500,000/., divided into 25,000 preference shares of 10/. each, and 25,000 ordinary shares of 10/. each: And whereas all the sd shares have been issued and are fully pd up : A^T) whereas by paragraph (c) of Article 110 of the arts of asson of the coy, the directors thereof have power, before recommending any dividends, to set aside, out of the profits of the coy, such sum as they think proper as a reserve fund for the purposes therein mentd, and such reserve fund may, with the sanction of the coy in general meeting, be in whole or in part distributed by way of bonus among tbe members in such manner as such general meeting shall determine : Ajnd whereas by Ai-ticle 113 of the sd arts of asson, the net profits of the coy in each year shall be applicable, first, in payment of a cumulative preferential dividend of 6 p.c.p.a. upon the amount credited or pd up on the pre- ference shares of the coy, and subject thereto, shall be applicable in payment of dividends upon the amount credited as pd up on the ordinary shares of the coy : And whereas hj Article 72 of the sd arts of asson, it is provided that if at any time, by the issue of preference 240 AGREEMENTS. [ChAP. V. Form 50. shares or otherwise, the capital is divided into shares of different classes, all or any of the rights and privileges belonging to any class may be affected, altered, modified, or dealt with in any manner with the sanction of an extraordinary resolution (as defined by sect. 129 of the Cos Act, 1862) passed at a separate general meeting of the members of that class, and that to any such general meeting all the provisions of the sd articles shall mutatis mutandis apply, but so that the necessary quorum shall be one-tenth in number of the members of the class holding or representing by proxy one-tenth of the capital pd or credited as pd on the issued shares of the class : And whereas the sd cumulative preferential dividend in respect of the sd preference shares has been pd up to the 10th day of January, 1894: And whereas the sd cumulative preferential dividend is payable in equal half-yearly instalments on the 10th day of January and 10th day of July in each year : And whereas the coy has been so far successful in its business as to have pd out of its profits, in addition to the above dividend, in respect of the sd preference shares, an average dividend per year since its incorporation in , 18 — , of more than 8 p.c. on the capital pd up on its ordinary shares : And whereas it has become the practice in the district in which the coy carries on business for brewer}^ cos to make advances to saloon keepers and others with a view to obtaining or keeping their custom, and the coy has been compelled to adopt this custom, and has found the adoption thereof advantageous to its business : And whereas it is necessary to continue this practice, and for the purpose the coy requires further working capital : And whereas in present circumstances it is not practicable to raise such further working capital from outside sources except on onerous terms : And whereas it is considered that the most economical mode of providing the amount required is to retain in hand a sufiicient part of the coy's accruing income, which would otherwise be available for dividend : And whereas in the circumstances it is considered that it is desirable to make provision for funding for a limtd period the accruing dividends on the preference shares afsd. Now therefore it is agreed as follows : — Next dividend 1. The coy shall satisfy the dividend on the preference shares afsd, S ^^Tdebcn- ^lii^^h will become payable on the 10th July, 1894, by, as, and when tiue stock. declared, issuing to each of the holders of preference shares 5 p.c. debenture stock of the coy to the amount of such dividend, and so that any fraction of a shilling shall bo pd in cash. Next dividend 2. The coy shall as regards each of the five next following half- jii ly b(^ H;iti.s- ygaj.iy dividends on the sd preference shares, if the directors of the ficd iiH to *' •' . . -^ . . Hn>)MC(iuent coy or tlio majority of them shall in the interests of the coy consider it dividfiidH. expedient, bo at liberty to satisfy such dividend, as and when declared, in like manner. Hum of ;}. Tlio debenture stock afsd sliall bo part of the 100,000/. 5 p.c. stock! ^ ^ debenture stock of the coy whicli is forthwith to be constituted and FOEMS. 241 secured by deed poll framed in accordance with the agroemt which has Form 50. already been approved by the parties hto. ^ 4. Whenever the coy pursuant to this agreemt satisfies any half No dividend year's dividend on the preference shares afsd by the issue of debenture yi,y^j.es. ^ stock as afsd, it shall be precluded from paying any dividend for such half year on its ordinary shares. 5. This agreemt is intended to bind all the shareholders in the coy "Who to bind, and their shares in the ca})ital of the coy, and also their respective successors in title, owners for the time being of their shares. 6. The coy shall have the custody of this agreemt and shall, as soon Custody. as the same becomes absolute, cause a note to be indorsed thereon of the fact of the same having become absolute. 7. This agreemt will become absolute — (1.) If before the 31st day of October, 1894, separate general When agree- meetings of the holders of the sd preference shares and the sd ordinary shares shall sanction the same by extraordinary resolution in accordance with clause 69 of the sd arts of asson. (2.) If before the 31st day of October, 1894, afsd, a special resolution of the coy shall have been passed sanctioning this agreemt. In witness whereof the sd A. B. has hereunto set his hand, and the coy has caused its common seal to be affixed the day and year first above written. Agreement hy Debenture holders to extend iiwr for yaym.e.^t. Form 51. AN AGEEEMT made the day of , between The Coy, Parties. Limtd (hnfter called "the Coy"), of the one pt, A. B. on behalf of the holders of the debentures of the coy for 20,000^. now outstanding of the other pt. Whereby it is agreed as follows : ] . The time for payment of the ppal moneys secured by the sd Time outstanding debentures of the coy shall be extended to the day of , 1920, and all the sd debentures shall from henceforth be read and construed and take effect as if that date were substituted therein for the 20th December, 1898, being the date originally fixed therein for payment. 2. The coy shall use its best endeavours to procure all the holders of Katification. the sd debentures to ratify this agreemt. 3. Unless within days from the date hereof the holders of nine- Avoidance. tenths in value of the sd debentures shall ratify this agreemt it shall thereupon become void. 4. Each debenture holder afsd who ratifies this agreemt must forth- pebentm-es to ° be endorsed. P. R 242 AGREEMENTS. [Chap. V. Form 51. with, give up his debenture to the coy in order that a memdin referring hto may be endorsed thereon. As WITNESS the common seal of the coy and the hand of the sd A. B. the day and year, &c. An agreement as above having been sealed by tbe company and signed by A. B. (not sealed by bim) printed copies can be sent out to the debenture holders, and they can be asked to sign at the foot a note as follows : — Ratification. "I, of numbered copy." , being a holder of debentures of the coy for 1., do hereby ratify the agreemt of which the above is a Each debenture holder should then send in his debenture to be endorsed, and a memorandum should be put thereon as follows : — "Memorandum. — That by an agreement dated the day of , and made between the above company of the one part, and A. B., on behalf of all the then holders of debentures of the company for 20,000?. (including the then holder of this debenture) , of the other part, it was agreed that the time for payment of the said debentures of the company, including the within debenture, should be extended to the day of , 1920, and that the said debenture should be read and con- strued and take effect as if that date had been substituted for the 20th December, 1898, originally therein fixed as the time for payment, and such agreement was duly ratified by the then holder of the within debenture." Form 52. Parties. Recitals. Agreement by Debenture Holders aUoiving creation of Prior Lien Debentures and maJcing Interest on existing Deben- tures ixujable for Five Years out of Profits only {inajority clause). AN AGEEEMT made the day of 1893, between A. B. on behalf of the holders of the original debentures hnfter mentd, of the one pt, and The Coy, Limtd (hnfter called "the coy"), of the other pt. Whereas the coy was incorporated in the year 18 — , and has a nominal capital of 500,000^., divided into 50,000 shares of 10/. each, all of which shares have been allotted and are fully pd up. And whekeas the coy has issued 270,000/. of debentures hnfter referred to as the original debentures, and such debentures are secured by an indenture, hnfter referred to as the existing trust deed, dated the day of , 1890, and made between the coy of the one pt, and C. and D. of the other pt : And whereas the sd debentures carry interest at the rate of 5 p.c.p.a. payable half yearly on the day of , and day of : And whereas the business of the coy lias not l)een successful, and the not revenue from such business is wholly inadet^uato to pay the interest on the sd existing debentures, FORMS. 243 moreover, the coy has lost a considerable portion of its pd-up capital Form 52. and it is taking steps to cancel the same : And wheueas the coy is in urgent need of further funds, to the extent of 50,000^. or thereabouts, for carrying on its business, and unless such further funds can be raised the coy will have to stop, and stoppage would, it is ai:)prehended, disastrously affect the security of the holders of the existing deben- tures : And whereas it is considered impossible to raise such further funds except upon the security of debentures ranking in point of security in priority to the existing idebentures, and upon the footing that the rights of the holders of the existing debentures shall be modified as hnftor provided, so that the coy may have an opportunity of working and developing its business and bringing ic into a paying condition without depleting its resources by paying the interest on the existing debentures out of capital. Now THEREFORE IT IS AGREED as folloWS : 1 . The coy shall, as soon as this agreemt shall become absolute, as Prior lien hnfter provided, be at liberty to issue further debentures to the ^fj^'^^"''^^ aggregate amount of 50,000/., carrying interest at such rate, not created, exceeding 5 p.c.p.a., as the coy may fix, and having priority in point of charge on the undertaking and assets of the coy over the sd existing debentures of the aggregate amount of 270,000/. and the securities for the same. Each of the sd further debentures shall be framed in accordance with the form set forth in the schedule hto. 2. The sd further debentures shall be secured by a trust deed How secured, (hnfter called " the new deed "), framed in accordance with the di'aft which is already prepared and approved of by the parties hto, and expressed to be made between the coy, of the first pt, the sd C. and D., of the second pt, and E. and F., of the third pt, and the trees of the existing deed shall concur in and execute such new deed. 3. The interest on the existing debentures due the 1st of July, 1893, Interest when shall be released, and the holders of the existing debentures shall P^J^^^^- resply surrender to the coy to be cancelled the coupons referring to such interest. 4. For the term of five years, as from the 1st July, 1890, the Out of profits, interest payable on the sd existing debentures shall be payable exclusively out of the profits of the coy as follows, that is to say, the net profits of the coy for the half year ending the 31st of Dec. next, and for such succeeding half year, shall be ascertained by a profit and loss account, which shall be made out as soon as practicable after the close of each half year, and in ascertaining such net profits the account shall be credited with the gross profit, and shall be debited with all outgoings for rates, taxes, wages, and other outgoings necessary or properly incurred in carrying on the business, and with a reasonable deduction for depreciation of plant, machinery, and patents, and with the interest on the new debentures, and with any other current interest except the interest on the existing debentures, and the credit balance, if any, shall be regarded as the net profit of the half year for pui'poses r2 244 AGREEMENTS. [Chap. V. Form 52. Accounts. Indorsement. Operation. Extraordin- ary resolu- tion. Considera- tion. hereof. And such credit balance shall be applied in or towards the payment of the interest on the existing debentures for the half year comprised in such account, and if such credit balance shall be insuffi- cient to pay such interest in full, the interest for the half year shall be reduced accordingly ; and if there shall be no credit balance for such half year there shall be no interest on the debentures for that half year. 5. The coy shall, with all convenient speed after the close of such half year afsd, furnish the trees or tree of the existing trust deed with a full and correct profit and loss account, showing the amount of net profit for such half year ascertained as afsd, and shall procure such account to be certified as correct by the auditors of the coy, and such certificate shall be conclusive. 6. If this agreemt becomes absolute, notice thereof shall, as soon as such extraordinary resolution as is hnfter mentd shall have been passed, and the new deed shall have been executed, be indorsed on each of the sd existing debentures, and the holders thereof shall deliver the same to the coy for the purpose of such indorsement being made accordingly. 7. If this agreemt becomes absolute, it shall take effect and operate by way of modification of the rights of the holders of the existing debentures, and of the provisions contained in the existing trust deed. 8. This agreemt shall become absolute so soon as it shall be sanc- tioned by an extraordinary resolution, as defined in the third schedule to the ppal indenture, passed at" a meeting of the holders of the existing debentures, as therein provided, and if it does not become absolute within days from the date hereof, this agreemt shall thereupon become void. 9. In conson of the premises the coy shall use its best endeavours to procure the passing of the sd extraordinary resolution, and the placing of the sd 50,000/. new debentures. As WITNESS the common seal of the coy, and the hand of the sd A. B., the day, &c. The Schedules above referred to. The above is a specimen of an agreement made with a view to binding debenture holders by majority provisions in the trust deed securing the same. See infra, p. 801. As a general rule it is convenient and desh-able to deal with such matters by provisional agreement, and then to pass an extraordinary resolution ratifying the agreement. See Form 391, infra. Tlio agreement affords an opportunity of placing on record the circumstances on which the resolution is passed. The validity of the resolution may depend on the circumstances, and on the matters brought to the attention of the meeting, and if these have to bo made out from circulars and minutes, and affidavits of what passed, serious difficulties may arise. Lord Davey, when at the bar, on more than one occasion advised, in con- sultation with the writer, the execution of such an agreement as a valuable measure of precaution. Another equally effective i)lan is to take a resolution approving of a draft supplemental trust deed containing full recitals. FORMS. 246 An Agreement by Members of a Company for Reconstruction Form 53. on Lines o/" Scheme which involves a Distribution o/" Assets ~ ' otherwise than in accordance u-ith Existing Rights. AN AGREEMT, made the day of , "between A., on behalf Reconstruc of all the members of the • Corporation, Limtd (hnfter called " the special lines. existing coy"), of the one pt, and B., C, and D., directors of the Parties, existing coy, of the other or second pt : "Whereas it is desirable to Recitals, reconstruct the existing coy in accordance with the following scheme, that is to say : — (a) A new coy, bearing the same name as the existing coy or some other name, to be registered under the Cos Acts, 18G2 to 1890, with a memdm and arts of asson in the terms of the drafts which have already been prepared and approved by the directors of the existing coy. (b) The undertaking of the existing coy to be made over to the new coy upon the terms of the reconstruction agreemt, which has already been prepared and approved by the directors of the existing coy ; and the directors of the existing coy to be the first directors of the new coy. (c) The preferred stock and the deferred stock, and the founders' shares receivable under the reconstruction agreemt, to be distributed among the members of the existing coy, so that as nearly as may be every member shall receive — For every 1/. of preferred stock in the existing coy, 1/. of preferred stock in the new coy. For every 11. of deferred stock in the existing coy, \l. of deferred stock in the new coy. For every founder's share in the existing coy, one founder's share in the new coy. (d) The assets of the existing coy, excepted by the reconstruction agreemt, are to be dealt with thus : — (1.) The sum of 1, cash is to be applied in paying to the holders of the preferred stock in the existing coy a dividend thereon for the half-year ending the 28th February, 189 — , at the rate of 5 p.c.p.a. (2.) The liqrs are to be at liberty to make over the excepted net revenue of the existing coy since 28th February, 189 — , upon condition that the same is treated as net revenue of the new coy, applicable to the payment of dividend. (e) The reconstruction to be carried out under sect. 161 of the Cos Act, 18G2, subject to the provisions of the arts of asson of the existing coy, and accordingly the existing coy to go into voluntary liquidation, and to authorise the liqrs to carry out the reconstruction immediately, so that there may be no interruption of the business. 246 AGREEMENTS. rciiAP. V. Form 53. Reconstnic- tion as per scheme. Special resolutions. Considera- tion. When abso- lute. "When void. (f) Witli all convenient speed tlie existing coy to be dissolved. Now THEREFORE IT IS AGREED aS followS : 1 . The existing coy shall be reconstructed in accordance with the sd scheme. 2. Each member of the existing coy who is a party to or ratifies this agreemt shall concur in passing the requisite resolutions to effectuate such reconstruction, and shall accept the preferred stock and cash, and the deferred stock and the founder's shares, as the case may be, coming to him under the sd scheme as afsd in full satisfaction and discharge of all his interests as a member of the existing coy in the assets thereof. 3. The sd B., C, and D. shall use their best endeavours to procure the reconstruction of the existing coy in accordance with the sd scheme. 4. This agreemt is to become absolute — (1.) If and when it is ratified in writing by all the members of the existing coy who are not parties to it, or (2.) If and when the directors of the existing coy shall certify hereon in writing that in their opinion the proportion of the members who have ratified this agreemt is so large that the non- concurrence of the outstanding members should be disre- garded, and in such case this agreemt shall be binding on those who are parties to it and on those who have ratified it, and shall be carried into effect as nearly as may be on the lines afsd. 5. If this agreemt does not become absolute within six calendar months from the date hereof, it shall thereupon become void. As WITNESS, &c. Having regard to the decisions in Griffith v. Paget, 5 C. D. 894, and Simpson v. Palace Co., 69 L. T. 72 (see infra, Chap. XX.), it is sometimes necessary to get all the shareholders to assent beforehand to the particular scheme proposed. An agreement in the above form vras used in a case where a winding-up would have abrogated all distinction between the several classes, and it was desired to reconstruct on the footing that the shareholders should all stand in the new com- pany as they stood in the old company. The form has since been made use of (with requisite modifications) in a number of important cases involving many millions of money and thousands of shareholders. Form 54. AN AGREEMT under seal, made the day of , between ~ 77" A. , of (huftcr called " Mr. A.") of the one pt, and B. Agrf-omont by ,i ^ ^ vi-iidor of (hnftcr called "Mr. B. ) of the other pt: AViieueas Mr. A. carries HhariH guii- Q^ business as, &c. : And whereas, by an agreemt of even date hcro- dividuud'a and with, and made between Mr. A., of the one pt, and Mr. B,, of the FORMS. 247 other pt, Mr. A. lias agreed to sell and Mr. B. has agreed to purchase Form 54. the sd business and assets for the sum of 100,000/., which is to be regervinff satisfied as to 20,000/. in cash, and as to 80,000/. by transfer by Mr. B. option to to Mr. A. of fully i)d-up ordinary shares of /. each in the '^'^P^'^ ^^^' capital of A., B. & Co. : And whereas thesd agreemt was entered into on the footing that Mr. A. should guarantee a dividend of 5 p.c.p.a on the sd shares for ten years from the day of , and that Mr. A. should have such oj)tion to repurchase the sd shares as linfter provided. Now IT IS HEREBY AGREED aS folloWS : 1 . As regards the year ending the day of , and each of the Guarantee. nine succeeding years, if the dividend or dividends in respect of such year pd on the sd shares shall not amount to 5 p.c. on the nominal amount of such shares, the vendor shall, within three calendar months after the expiration of such year, pay to Mr. A. a sum equal to 5 p.c. on the nominal amount of such shares, less the amount of the dividend or dividends, if any, actually pd in respect of such year ; but any further dividend in respect of the same year subsequently pd on the sd shares shall, so far as necessarj^, go to recoup what shall have been pd in respect of that year by Mr. B. pursuant to this clause. 2. Mr. B. shall have the option from time to time during the sd Option to period of ten years of purchasing at par from Mr. A. such of the sd ^ shares as Mr. A. shall be willing to sell, and the following provisions with regard to each such option shall have effect, that is to say — (a) If and whenever during the sd period of ten years Mr. A. shall desire to sell or transfer any of the sd shares, he must give notice in writing thereof to Mr. B., and the notice must specify the shares which it is desired to sell or transfer. (b) The option shall in each case be exerciseable by notice in writing signed by Mr. B., and served on Mr. A., within the period of two calendar months from the service of the notice referred to in paragraph (a) of this clause. (c) Whilst the sd option subsists as regards any of the sd shares, Mr. A. shall not transfer such shares otherwise than to the guarantor. (d) Whenever the option af sd is exercised as to any of the sd shares, the sale thereof shall be completed at the expiration of seven days from the notice exercising option being posted, and the completion shall take place at the office of the coy, at such time as may be agreed on, or in default of agreemt at o'clock in the forenoon ; and at the time so fixed for completion the purchase-money shall be duly pd, and the shares so purchased shall be transferred to the guarantor or his nominees. 3. For the purposes hereof any notice may be served on either of Xotice. the parties hto, his executors or administrators, either personally or by sending the same through the post in a registered letter, addressed to such party or to the executors or administrators of such jjarty at the addi-ess of such party above specified, or at his last known place of 248 AGREEMENTS. [Chap. V. Form 54. abode ; and any notice so served Ly post shall be deemed to have reached the person or persons to whom it is addressed on the day following that on which it is posted ; and a notice to the executors or administrators as afsd need not name them. As WITNESS, &c. Form 55. Agreement as to requisition and general meeting. AN AOEEEMT made the day of between A. B., on behalf of all the shareholders in the above named coy (hnfter called " the coy"), except the present directors thereof, and C D., E. F. and G. H., hnfter mentd of the one pt, and C. D. of , E. F. of , and G. H. of of the other or second pt. Whereby it is agreed as follows : — 1. The sd C. D., E. F., and G. H., are to use their best endeavours to procure the signature by the requisite number and proportion of shareholders in the coy of the requisition for a general meeting, framed in accordance with the form set forth in the schedule hto which is now in course of signature, and shall, when such requisition has been so signed, leave the same at the registered office of the coy. 2. If the board of directors of the coy shall not within the prescribed period convene the meeting in accordance with the sd re- quisition, the sd C. D., E. F., and G. H. are to convene the same, and the sd C. D., or failing him the sd E. F., or failing him the sd G. H. is to be considered to be appointed by the requisitionists for the purpose of signing the requisite notice convening such meeting. 3. Should any resolutions be passed at the meeting afsd, whether con- vened by the board of directors or by the requisitionists, which in order to have effect require to be confirmed as special resolutions, the sd C. D., E. F., and G. H. shall be at liberty to sign on behalf of the share- holders who have ratified this agrecmt a proper and sufficient requisi- tion in writing requiring the directors of the coy to convene a further extraordinary general meeting for the purpose of confirming as special resolutions the resolutions so requiring confirmation, and such requisi- tion shall be left at the registered office of the coy. If the directors shall not within the prescribed period convene the meeting in accord- ance with such last mentd requisition, then and in such case the sd C. D., E. F., and G. H. shall convene the same, and for that purpose the sd C. D., or failing him the sd E. F., or failinghim the sd G. H. is to be considered to be authorised to sign the requisite notice. As WITNESS the hands of the parties hto this day of . The Schedule above referred to FORMS. 240 TuE Coy, Limited. Form 56. To tlie Directors of tho above named coy. Schedule to r orm Ol). We, the undersigned shareholders in tho above named coy, holding in the aggregate not less tlian one-third of the issued capital for the time being of the sd coy do hby require you to convene an extraordinary general meeting of the above-named coy for the purposes following, that is to say : — (1.) To pass a resolution to the effect that the meeting is dissatisfied with the conduct of the directors and calls on them to retire, and determines that it is inexpedient that they should be allowed to act any further as directors of the coy. (2.) To pass a resolution to the effect that no sale of the coy's patents is to be made without the sanction of a general meeting, and in j)arti- cular that the proposed sale to Mr. L F , a shareholder in the coy, is not to be made without such sanction. (3.) To select certain shareholders in the coy to act as a protective committee and to pass a resolution aj)pointing such persons to be a a committee and vesting in them such powers as may seem to the meeting expedient in the interests of the coy. (4.) To pass a resolution or resolutions pursuant to clause of the arts of asson removing all or such one or more of the directors now in office as to the meeting may seem expedient. (5.) To appoint such person or persons as the meeting may think fit to be directors of the coy. (6.) To pass a resolution altering clause 90 of the arts of asson by substituting the word " seven " for the word '' five " therein. Agreement ht/ Bondholders in American Railway Co. to "Form 57. Deposit their Bonds with a view to united action. AN AGEEEMT made this day of , between A. B., of , Bond deposit on behalf of himself and others, the other holders of bonds of The agreement. Coy. (a coy constituted in, &c., and hnfter called "the American Coy "), of the one pt, and The Corjin (hnfter called "the Corpn"), of the other pt : Whereas the American coy issued a series of first Recitals, mortgage bonds for $1,000,000, and such bonds are still outstanding unredeemed : And whereas the American coy has become involved in financial difliculties, and has made default in payment of the interest on the sd bonds ; and its undertaking is now in the hands of a recr, appointed in an action of, &c. : And whereas the bulk of the ed bonds 250 AGREEMENTS. [Chap. V. Form 57. Interpreta- tion. Deposit. EfPcct of deposit. are, it is believeJ, lield by persons residing in the United Kingdom : And whereas it is necessary to take steps to protect the interests of the holders of the sd bonds, and with a view that it is desirable to procure the co-operation of the bondholders or the bulk of them : And WHEREAS the corpn is willing to act as tree for the purposes thereof. Now THEREFORE IT IS AGREED aS followS : 1 . In these presents — " The bonds " means the bonds afsd : " Bondholder " means a holder of any of the bonds : "The certificates " means the certificates issued under clause 4 hereof and for the time being outstanding : " The certificate holders " means the holders for the time being of the certificate. 2. Each bondholder who ratifies this agreemt is forthwith to deposit his bonds with the corpn u^Don the footing of this agreemt, and is to receive in return a certificate as hnfter provided. 3. The object of the deposit and registration of the bonds of the within-mentd series is to invest, and a party depositing and regis- tering the same is to be regarded as thereby investing the corpn with the following powers, that is to say : — (a) To act as if it were the absolute owners thereof, and to exercise all rights and powers extending to the ownership of such bonds. (b) In particular, without derogating from the generality of the foregoing power, to advance and support claims and enforce the rights of the bondholders ; to negotiate, conclude, and carry out any compromise with the American coy ; to prose- cute, defend, intervene in, and compromise legal or other proceedings in relation to the bonds ; to concur in referring any question to arbitration, and to carry out any awards ; to bid at any sale or sales of the mortgaged ppty, and in the event of the corpn becoming a purchaser, to manage, work, and re-organise the same ; to lodge the bonds deposited with any banker, broker, lawyer, or safe deposit coy or agent in the United Kingdom or America ; to sell or exchange the bonds deposited for cash or for shares, bonds, debentures, or other securities ; to seU, lease, or concur in any sale or lease of the ppty mortgaged ; to release, postpone, or modify the mortgage or charge securing the bonds ; to concur in any re- orgauiaation, re-construction, or arrangement; to appoint and employ agents, legal and other advisers, and assistance, and, if thought fit, to adopt and act on their advice ; to apply to any municipalities, authorities, or governments for any rights, powers, interests, or privileges, and for any legislative or governmental decrees ; and to receive and give discharges for any money or securities receivable in respect of the sd bonds, whether according to the tenor thereof or according to any such arrangement or compromise as afsd or otherwise, and to FORMS. 251 apply and dispute any sucli moneys or securities according to Form 57. the rights of the bondholders ; and generally to act in all things as the coy may think expedient in the interests of the holders of certificates (hnfter called " the certificate holders "). (c) To delegate any of the sd powers and authorities and discretions to any person or persons, or coy or cos, and on such terms and in such manner as to the coy may from time to time seem expedient. 4. The corpn is to issue to each depositor a certificate representing Certificate. each bond deposited by him, and entitling the bearer to the rights arising from the deposit, subject to these conditions ; and each cer- tificate holder shall be bound at any time, and from time to time, on notice from the coy, to execute such power of attorney and other authorities in favour of the coy, or any nominee or nominees of the coy, as the coy may require. 5. In order to provide the necessary funds for the purposes of the Contribution, coy, a cash contribution, equal to 1 p.c. of the nominal amount of the bonds deposited, must be pd by each depositor upon making the deposit ; and if the corpn shall at any time, by writing under its seal, certify that more funds are required for the purposes of the coy, then the corpn may raise such further funds on the security of the bonds, at such rate of interest, not exceeding 5 p.c, as the corpn may arrange; and the coy may pay off such advances out of any moneys arising from the bonds ; and before any bond can be withdrawn by the holder of the certificate representing the same, he must, if so required, pay to the coy a proportionate pt of such further assessment. 6. The contributions and advances af sd shall be applied by the corpn Apj^lication of in manner following, that is to say :— contribution. (1.) To the payment of the past and future expenditure of the corpn, of and incidental to, or connected with, the deposit of the bonds, and of the doing of all such things as the coy may think it expedient to do in the interests of the certificate holders. (2.) To the payment of the remuneration of the corpn. (3.) Any surplus shall, when the labours of the coy in relation to the bonds shall have been completed, be divided amongst the certificate holders in proportion to the amount of the bonds represented by certificates held by the subscribers. 7. The corpn shall be entld to such remuneration for its services Remmiera- in relation to these presents as it shall determine, not exceeding one- ^°^' half p.c. of the nominal value of the bonds deposited. 8. The corpn may at any time convene a meeting of the certificate Meeting, holders. At least seven days' notice by advertisement in three London daily newspapers shall be given of such meeting. A quorum of any such meeting shall be at least ten persons holding certificates for at least $ of the bonds deposited. 9. At every such meeting the bearers of the certificates afsd shall ^52 AGREEMENTS. [ChAP. V. Form 57. be regarded as exclusively entld to vote in respect of the bond or bonds represented thereby, and upon the voting for every ,$100 of ppal owing in respect of any such bond or bonds shall confer one vote on the corresponding certificate holder. Power of 10. A general meeting of certificate holders convened as afsd shall majority. tave full power by resolution passed by a majority of the votes given upon the question to sanction and approve any course of action which the committee may recommend. Poll. 11. If a poll is demanded, it shall be taken in such manner and at such time and place as the chairman of the meeting directs, and either at once or after an interval or adjournment or otherwise, and the result of the poll shall be deemed to be the resolution of the meeting at which such poll was demanded. Adjournment. 12. The chairman of any such meeting may, with the consent of the meeting, adjourn the same from time to time and from place to place, but no business shall be transacted at an adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When no poll. 13. Any poll duly demanded on the election of a chairman of a meet- ing or on any question of adjournment shall be taken at the meeting without adjournment. Notice. 14. Notice to the certificate holders or any of them may be given by advertising the same in three London daily newspapers, and shall be deemed to be served on the day following that on which the last of such advertisement shall be published. ITinutes. 15. Minutes of all resolutions and proceedings at any meeting of the coy, or of the bondholders, shall be made and duly entered in books to be provided by the coy, and any such minutes, if purporting to be signed by the chairman of the meeting at which such resolutions were passed or proceedings had, shall be conclusive evidence of the matters therein stated ; and until the contrary is proved, every such meeting in respect of the proceedings of which minutes have been made, shall be deemed to have been duly held and convened, and all resolutions passed thereat, or proceedings had, to have been didy passed and had. No guarantee. 16. The corpn does not guarantee the genuineness of the bonds in respect of which the certificates are issued, and it reserves to itself the right to call in any certificate upon returning to the holder of such certificate the bond or bonds deposited with it, and the corpn shall not be bound to assign any reason for exercising the power so reserved. Nogotialnlity 17. The certificate in each case is to bo regarded for all purposes as of certilicatea. j^ negotiable instrument and as conclusively evidencing the title of the bearer for the time being and from time to time to the bond or bonds tlierein mentd and all persons are invited by the coy and the owners thereof to act on that footing, and neither the coy nor any holder or depositor shall bo affected by any notice to the contrary and no • depositor or holder .shall bo required or liable to deliver up or other- wise deal with such bond or bonds except upon the terms of the coy FORMS. 253 and tlie certificate holder is not to bo at liberty to withdraw' liis bund Form 57. or bonds until tlie coy shall have certified in writing under its seal that its relations to the bonds are complete. 18. This agreomt is conditional, on its being ratified in writing b}' Condition, the holders of all the bonds or by the holders of such proportion, being not less than one-fourth in value thereof, as the corpn may consider sufficient, and if this agreemt does not become absolute before the of , it shall on that day become void, and the deposited bonds shall be returned to the certificate holders on demand. 19. [Indemnity to company, &c.] Agreement for the Appointment of a Manager hij a Company. Form 58. Remuneration, Sakiri/, and Share of Profits. Compensation in Case of Dismissal. AN AGEEEMT, &c. Parties : (1) the coy ; (2) B. Parties. Whereby it is agreed as follows : — 1. The sd A. shall be the first general manager of the coy, and as Appointment such general manager shall perform the duties and exercise the powers ° "^ ^^' which from time to time may be assigned to or vested in him by the directors of the coy. 2. The sd A, shall hold the sd office, subject as hnfter provided, for Term, the tenn of ■ • years from the date hereof. 3. The sd A., unless prevented by ill-health, shall, during the sd A. to perform term, devote the whole of his time, attention, and abilities to the busi- " ^'^*' ness of the coy, and shall obey the orders from time to time of the board of directors of the coy, and in all respects conform to and comjily ■■ with the directions and regulations given and made by them, and shall well and faithfully serve the coy and use his utmost endeavours to promote the interests thereof. 4. There shall be pd to the sd A., as such general manager, a Salary, salary which shall be as follows, namely : The sum of 300/. for the fiLrst year, the sum of 400/. for the second year, and the sum of 500/. for each succeeding year. 5. The sd salary shall commence from the date hereof, and shall be When to be pd quarterly on the day of , «S:c., the first quarterly payment ^^'''' ' to be made on the day of next. 6. In addition to his afsd salary, the sd A. shall, during his tenure Besides share of office afsd, be entld to the share in the profits of the coy which, °^' P™5^^ *^ ' 1 J ' per articles. under the arts of asson thereof, is payable to the general manager for the time being of the coy. 7. The sd A. shall be at liberty to resign the sd office at any time A. may upon giving to the coy three calendar months' notice of his desire so i"e&igTi. to do. !o4 AGREEMENTS. [Chap. V. to A. in case of Avinding up, &c. Form 58. 8. [If, Lefore tlie expiration of years from the date hereof, the 7, ^Tt^~ coy is wound up, or by any other means, except the death or resigna- ' ■ tion of the sd A., his tenure of the sd office shall be determined, the coy shall pay to the sd A. the sum of 2,000^. as liquidated damages for his loss of office.] In witness, &c. (a). Sometimes a clause is inserted iu an agreement with an employee to the effect that all inventions in relation to the manufacture of made by such employee vested in the employment of the company, and the benefit of all patents, whether at home or abroad, obtainable in respect thereof shall belong to the company ; and such employee shall, upon the request and at the expense of the company, do whatever the company may reasonably require for giving to the company the full benefit of the provision. Form 59. Parties. Recitals. Agreement /or the Appointment of a Secketary hi/ a Company. Leave of Absence. Power to Rescind. THIS AGEEEMT, &c. the capital of the coy is Appointment. Salary. B. entitled to leave of absence. Parties : (1) the coy ; and (2) B. "Whereas — I., divided into shares of 1, each : And wiiekeas the directors of the coy are, by the arts of asson thereof, empowered to appoint a secretary of the coy, either for a fixed term or otherwise as therein mentd, and to fix and determine his remunera- tion, which may be by way of salary or otherwise, as in the sd articles mentd : Now IT IS HBY AGREED aS followS : 1. The sd B. shall be secretary of the coy for a term of years, to be computed from the date hereof. 2. There shall be pd by the coy to the sd B., as such secretary as afsd, a salary at the rate of /. per annum. Such salary shall com- mence from the date hereof, and shall be paj'able quarterly on every day of , day of , day of , and day of ; the first of such quarterly payments to be made on the day of next. 3. The sd B. shall, unless prevented [supra, p. 253, cl. 3]. 4. The sd B. shall, during his tenure of the sd office, l)e entld to leave of absence for a period in each year not oxeoeding ■ weeks, and, unless otherwise arranged between the board of directors of the coy and the sd B., such leave of absence shall be granted in each year as follows, namely, from the day of to the day of , &c., &c. Tlie afsd salary of the sd B. shall continue notwithstanding such leave of absence. («) Sec infra, p. 2G0, aa to nppoiulmcnt of officers. FORMS. 255 5. In conson of tlie premises, the coy shall forthwith allot and issue Form 59. to the sd B. ten of its shares, which shall bo numbered in the books of gj^ij-es to l« the coy to both inclusive, and shall bo deemed for all pur- allotted to 13. poses fully pd up. 6. Either of the parties hto may at any time after the day Power to of determine the agroemt by giving to the other not loss than calendar months' notice in writing, and upon the expiration of the period specified in such notice the sd B. shall cease to be secretary of the coy. In witness, &c. The following clauses are occasionally used : — Whenever the profits of the company made during the financial year or other Form 60. period comprised in the accounts submitted to the ordinary general meeting in each Z '. '. _ . ^ T , . ° • 1 J. 1 Commission year are more than sufficient to pay a dividend on the paid-up capital of the com- q^ surplus pany for such period at the rate of 5 per cent, per annum, the said , in addi- profits. tion to liis salary aforesaid, shall be paid a sum equal to 25 per cent, of the excess. In addition to his salary aforesaid, the said shall be entitled to a commission rOrm 61. of 10 per cent, on the profits made during the financial year or other ijeriod com- I '. '. . ■, . ■, . ■■ -IT 1 , . P 1 Commission prised in the accounts submitted to each ordinary general meeting oi the company. ^^ profits Whenever a dividend is declared by the company in general meeting, and such Form 62. dividend, together with the dividend or dividends, if any, pi'eviously paid, amounts 7! ". '. ' ° ' / \ . ■, . Commission to more than 5 per cent, per annum on the capital oi the company for the time qj^ dividends. being paid up as from the incorporation of the company to the time of the declara- tion of such dividend, then and in such case the said shall, in addition to his aforesaid salary, be entitled to a commission equal to 10 per cent, of the excess, such commission to be paid when the dividend becomes payable. Agreement /or Service. Form 63. AN AGEEEMT made the day of between and Coy, Parties. Limtd (hnfter called "the Coy"), of the one pt, and A. B. (hnfter called the employed), of the other pt : Whereby it is agreed as follows : — 1 . The employed shall well and truly serve the coy as , and the A, B. to be coy shall employ him in that capacity at the N. Mills, , in the employed by •^ 1 v" L J T 1 company, county of . 2. Whilst employed under this agreemt the employed shall faith- A. B. to serve fully and diligently, and according to the best of his skill and ability, '^^ ^ ^' employ himself in the conduct and transaction of all business and matters and things connected with the sd employment which shall fall within his duties, as the same may be from time to time defined by the coy. 3. Whilst the employed continues in such employment he shall not x^^ interested 256 AGREEMENTS. [ClIAP. V. Form 63. in any other business. Power for company to discharge A. B. A. B. to retain his shares in the company. Remunera- tion. Restrictions on leaving service. be interested in or connected with any business other than that of the coy, and he shall not divulge or communicate to any person or persons any information which he may receive or obtain in relation to the coy's affairs or to the working of any process or invention which is carried on or used in the coy's mills. 4. If by reason of ill-health, accident or otherwise the employed shall be incapacitated from attending to business for calendar months, or if at any time the manager of the department in which the employed shall be employed shall certify that the employed is not competent to discharge the duties incident to his employment, the coy shall be at liberty to discharge the employed. 5. Whilst the employment of the employed hereunder continues the employed shall not be at liberty to transfer or pt with any of the shares in the capital of the coy which are about to be given to him by N., the founder of the coy. 6. The employed shall be entld to a salary at the rate of 1., payable, &c. 7. The employed shall, for the period of years from the time when his employment hereunder ceases, be subject to the following restrictions : that is to say — (a) He shall not accept any employment with any other person carrying on any silk business in the United Kingdom, nor be interested in any such business ; and (b) He shall not accept any employment with any person carrying on any silk business within 500 miles of afsd ; and (c) He shall not accept any employment with any person carrying on any silk business in America. And for the purpose of this clause the word "person" shall be deemed to include any body of persons, whether incorporated or not incorporated, and " silk business " shall be deemed to include any business having to do with the manufacture of silk yarn, velvets, plush and velveteens. Form 64. Agreement to cmploii Agent to go abroad and examine Title and Character o/ Mining Property. Parties. AN AGEEEMT, &c., between A. B., of the one pt, and , Limtd (hnfter called " the syndicate"), of the other pt. Whereas it has been represented that there exists in the empire of C, about 1,200 miles N.N.W. of 1^. and about .'3,000 feet above sea level, an area of over nine square miles containing a virgin matrix of diamonds of the finest quality, yielding an average of one carat to the cubic metre of the ground, and lying at about fifty to seventy feet below the surface, and tliat the present owner or owners of this ppty is or are willing to treat FORMS. 557 for tliG sale thereof, and it has boon arranged that tho sd A. B. shall Form 64. proceed to T). with a view to inquiring- into the matter, and if possible ' obtaining on behalf of the syndicate an option for the purchase of the sd ppty or some interest therein : And wheeeas it has been further arranged that the parties hto shall enter into the agreemt hnfter contained in relation to the premises : Now THESE PRESENTS WITNESS AND IT IS HBY AGREED aS folloWS : — 1. The sd A. B. shall proceed to D. by the outgoing mail steamer A. B. to g-o starting on the day of , 1897, and shall on his arrival in D., ^ ^°^ ' in the first place, after ascertaining that the owner or owners of the ppty is or are willing to treat for the sale thereof or for some interest therein, procure an investigation into the title of the present owner or owners of the ppty above referred to by one or more competent D. lawyers, who are to report in writing thereon. If he shall consider such reports unsatisfactory or that the business does not warrant him in incurring further expense, he shall forthwith communicate such news to the syndicate, and shall, unless he shall receive other instruc- tions by letter or cable from the syndicate, forthwith return to London. 2. If the sd A. B. shall consider such reports as satisfactory, or if To prospect. he shall not so consider, but the syndicate shall by letter or cable require him so to do, he shall immediately proceed to make personal insj)ection and examination of the ppty, and shall cause the same to be fully prospected and shall make inquiries and obtain reports as to the truth of the above-recited representations as to the ppty, and shall, if he consider that the results of such inquiries justify him in so doing, or if he shall not so consider but the syndicate shall by letter or cable require him so to do, use his best endeavours to obtain from the owner or owners of the sd ppty a contract giving the syndicate the option of acquiring the same or some interest therein on the most favourable terms that he can arrange, and shall thereupon return forthwith to London. 3. The sd A. B. shall, whilst in C, acquire all such information as Gather iDfor- he can with regard to the l^pty in question, its surroundings, and matiou. geographical and other characteristics, and the means of access thereto, and as to the mining and other laws of C. so far as they shall affect the working and development of the ppty in question, and the winning and exporting of diamonds therefrom, and generally all such informa- tion in relation to the premises as he may think advantageous or useful to the syndicate. 4. All reports and information, and all contracts, agreemts, and Eig],ts of arrangements which the sd A. B. may make or obtain in relation to syndicate. the premises shall be on behalf of and for the benefit of the syndicate alone, and shall at all times be their absolute ppty, and shall be communicated by the sd A. B. to the syndicate at the earliest oppor- tunities, and the sd A. B. shaU not disclose such information, reports, contracts, agreemts or arrangements to any person other than the members, officers and servants for the time being of the syndicate. p. s 258 ACiREEMENTW. [(Jhap. V. Form 64. Advances to A. B. Furtlier advances. A. B. to account. Remunera- tion of A. B. 5. The syndicate shall, prior to the departure of the sd A. B., place to his credit with a bank or mercantile house in London the sum of 6001., which is to be drawn on by him as he shall require for the purposes of defraying his necessary and proper disbursements contem- plated in clause 1 hereof. 6. If the sd A. B. and the syndicate shall consider that the inquiries, investigations and reports under clause 2 are satisfactory, the syndi- cate shall place at his request to his credit with a bank or mercantile house in England a further sum of 1,400/., to be drawn on as the sd A. B. shall require for the purpose of defraying his necessary and proper disbursements in connection with the further investigations and business contemplated under clause 2 hereof. 7. The sd A. B. shall account to the syndicate for all monej-s drawn by him on the sd credits, and shall keep full and true accounts of all his drawings on the sd credits, and of his expenditure thereof, under clauses 5 and 6 hereof, and shall, if and when required by the syndi- cate, duly vouch such accounts, and the syndicate shall not be under any obligation to advance to him for the purposes of such clauses or otherwise any moneys in excess of the sums of 600/. and 1,400/. therein resply named. 8. If the sd A. B. shall obtain from the owner or owners of the sd ppty a contract which shall be accepted by the sj'udicate, giving the syndicate the option of acquiring the sd ppty or some interest therein, then the sd A. B. shall be pd for his services in connection with this business a sum of 1,000/., but if no such option shall be obtained and accepted by the syndicate, the sd A. B. shall not be entld to claim from the syndicate any remuneration whatever. In witness, &c. Form 65. Parties. Employment. Agreement to employ Expert abroad to Explore, ^c, Mines and Lands of tJie Company, ami furnish Diary and Re- ports, Sfc. AN AGREEMT made the day of between The Coy, Limtd (hnfter called "the Coy"), of the one part, and H., of, &c., of the other part. Wuereas the coy is the owner of certain exploring and mining rights over and in respect of an extensive tract of country in . And wjiekeas the coy is desirous of engaging II. for the purposes hnfter appearing : Now IT IS iiBY agkeed as follows : — 1. II. shall place his services exclusively at the disposal of the coy for one year from the • day of , but with power for the coy, on giving him not less than three calendar months' previous notice in writing, to exloud the said period until the day of . FORMS. 259 2. H. shall proceed to by the outgoing mail steamer, starting Form 60. on, &c. 3. H. shall after his arrival in investigate and examine the sd Dutiea. tract of country generally in relation to the sd exploring and mining rights, and in particular as to its geological and agricultural advan- tages, and shall report to the coy thereon and as to the value of the sd rights and the prospects of the coy in turning them to profitahle account, and shall consider and report on the most likely methods of obtaining such a result. 4. The coy shall, prior to the departure of H. from England as afsd. Expenses, provide him with money sufficient to pay his travelling and other reasonaltle expenses to , and his maintenance during such period, and while in that country, including the sum of 1, for his personal outfit, and for the purchase by him of all instruments, apparatus, and appliances which ho may think necessary to take with him and use in the coy's service, and such apparatus and appliances shall be and remain the ppty of the coy, and be handed over to the coy at the expiration of the period afsd. 5. In conson of his services afsd, the coy shall pay to H. a salary, at Salary. the rate of 1, per annum for the first year, by twelve equal monthly instalments of 1, each, and at the rate of 1, per annum for the next year, if he shall be engaged by the coy for that period, by twelve equal monthly instalments of 1, each, and such salary shall, until H. shall otherwise direct the coy in writing, be paid to A., the wife of H., or as she shall from time to time in writing direct. 6. H. shall while in keep an accurate and complete account, in Account. the nature of a diary, of the disposition of his time in the coy's service, and of all necessary particulars as to the natui-e of the work done, or services rendered, by him on behalf of the coy, including dates, localities, and names of persons, and also descriptions of locaHties and their inhabitants, and of their geological and agricultural character- istics, so as to enable the coy fully to estimate the nature, extent, and quality of his work and services, and of the sd properties and rights, and shall, at the end of every calendar month, forward to the coy tlie account and diary afsd for that period. 7. H. shall from time to time transmit to the coy at the earliest Reports, opportunities all information obtained or discoveries made by him in relation to the coy, or its ppty or rights, which he may think likely to be of importance or interest to the coy ; but he shall not, under any circumstances, give or transmit any report, or give any information or express any opinion in respect of any mines, minerals, mineral deposit, lands, forests, waterways, or other ppty or rights in which the coy is, or is likely to become, interested to any person or persons, or coy, or syndicate, or otherwise than to the coy, or to the directors thereof, or to any persons authorized by them in writing to receive any such report, information, or opinion. s 2 260 AGREEMENTS. rciiAP. Y. Form 65. Rescission. Furtlierpower to rescind. 8. Should H. not start for by the sd day of the coy may, by notice in writing served on him, rescind this agreemt, and immediately on such rescission he shall repay to the coy all moneys (if any) pd by the coy to or on account of him as afsd, and give up to the coy all such instruments, apparatus, appliances (if any) as afsd, which he may have in his possession. 9. If H. shall, after starting for as afsd, unnecessarily stop on the journey, or cease to complete the same, or shall make unnecessary delay in reaching the scene of the ppty and rights of the coy in , or shall commit a breach of any of the provisions in clause 6 or clause 7 hereof in any important particular, or shall work against or neglect the interests of the coy, or refuse or wilfully omit to carry out any request of the coy in relation to his services afsd, then and in any such case the coy may, by notice in writing served on H., rescind this agreemt ; but such rescission shall ox^erate without prejudice to the right of the coy to obtain from H. damages or compensation in respect of the act, omission, or breach afsd on his part on account of which such notice of rescission was given. In witness, &c. Appointment of officers by articles of association. An agreement should be executed. Specific performance. Iiijiiiiction. Appointment of Officers and Agents. The articles of a company often purport to make appointments of managers, secretaries, agents, solicitors, and others ; but it is generally expedient, after the incorporation, for persons so appointed to- enter into an agreement in -writing with the company defining the terms and conditions of the appointment. It has been settled that at any rate a person not a party to the articles cannot rely on a stipu- lation contained therein as an agreement by the company with him. Elcy v. Positive Government, ^-c. Co., 1 Ex. Div. 88; Eotherham Co., 25 C. Div. 103; Empress Engineering Co., 16 0. Div. 125 ; Browne v. La Trinidad, 37 C. D. 1. But see Ex parte Beckivith, (1898) 1 Ch. 324, and infra, p. 373. As to what is evidence of an appointment of an officer by the company, see Broioiing v. Great Central Mining Co., 5 H. & N. 856 ; 29 L. J. Ex. 399. Moreover, if the agreement is not to be performed within a year, it is necessary to have an agreement in writing, by reason of sect. 4 of the Statute of Frauds. Eley v. Positive Government, %c. Co., 1 Ex. Div. 20 ; S. C. 88. However, the signature of the secretary of a company to a minute recording a resolution for his appointment may be sufficient. Junes v. Victoria Graving Dock Co., 2 Q. B. Div. 314. Specific performance of a contract for personal services will not be ordered. Htochcr v. Broehelhunlc, 3 M. & G. 250 ; Brett v. East India, S;c. Co., 2 H. & M. 404 ; Mair v. Himalaya Tea Co., 1 Eq. 411. Nor a contract to procure the performance of services. Ryan v. Mutual Tontine Assoc., (1893) 1 Ch. 116. But where there is a negative stipulation that the employe will not engage elsewhere, the Court will grant an injunction to restrain a breach thereof. Luniley v. Wagner, 1 D. M. & G. 004. In that case A. had agreed to sing at B.'s theatre for a certain period, and not to sing elsewhere without his consent in writing. At the instance of B. an injunction was granted restraining A. from singing elsewhere. But it seems that, in order to obtain such an injunction, it is necessary to put in the contract a clear negative covenant, or words amounting thereto [Vhitwood Chemical Co. v. Hardman, (1891) 2 Cli. 410), and that even the words " act exclusively for" are not sufficient {Mutual Itcscrve Fire v. New York Life, ^c. Co., 75 L. T. 528 (C. A.) ), but words FORMS. 261 thouprh positive in terms, may in substance be negative. Catt v. Tourh, 4 Cli. G.)4. Form 65. But doubt has been expressed whether an injunction will be granted where tliere is ■ — — only an implied negative. Davis v. Foreman, 43 W. R. 168. See, however, what was said in Wolv. ^-c. Rij. Co. v. L. ^. N. TF., 16 Eq. 433. A resolution or order for winding-up is equivalent to a dismissal of a company's Resolution or servants. Chapman' s case, 1 Eq. 346; Shirrcff^s case, 14 Eq. 417; MacDoicalVs case, order to wind 32 C. D. 366. As to servants being discharged by the Court appointing a receiver ^P ^'^'•''- and manager, see Reid v. Explosives Co., 19 Q. B. D. 261. Any fraud or other gross misconduct justifies dismissal without notice. Boston Deep Sea Co., 39 C. Div. 339 ; Pvarcc v. Foster, 17 Q. B. Div. 536. And if an agent or servant has been appointed for a term at a salary, he will, As to proof subject to deductions, bo entitled to prove in the winding-up for the value of his ^ winding- salary for the unexpired residue of the terra. YeUantVs case, 4 Eq. 350 ; Fx parte ^P' CUirh, 7 Eq. 550. But when, in addition to his salary, an agent is to have a com- ^"^c'^(^ * case. mission on business done, he is not, upon a winding-up, entitled to prove for what Agent cannot he might have otherwise earned. Ex jyarte Maclurc, 5 Ch. 737. This was a case P^^^'^ *'^^ of a voluntary winding-up, and the same rule must a fortiori apply in a compulsory mission winding-up. See Sovereign Life, Salter's claim, 7 T. L. E.. 602. In a reported case before the House of Lords, it appeared that an agreement had Rhodes v. been made between A. and B. that B. should be sole agent at Liverpool for the Foricood, H.L. sale of A.'s coal during a term of years, at a certain commission ; A. to have the control of the prices, with power for him to rescind if B. did not sell a certain minimum, and power for B. to rescind if A. could not supply a certain minimum. A. sold his colliery before the expiration of the term, and it was held that an action by B. against A. for damages for breach of the agreement occasioned thereby would not lie, for that the agreement did not bind A. to keep his colliery, or to send any coal to Liverpool. Rhodes v. Forwood, 1 App. Cas. 256. And see llirsch ^-Co. V. Burns, 77 L. T. 377. But where a business was sold to a company on the terms that the purchase- money should be paid to A. out of the profits of the business, and before payment the company resold the business to the exclusion of A., it was held that he was entitled to damages. Telegraph Despatch Co. v. McLean, 8 Ch. 658. Compare Inchhald v. The Western Neilgherry Co., 17 0. B. N. S. 733 ; and Re Railway and Electric Co., 38 C. D. 597 ; Hamlyn v. Wood, (1891) 2 Q. B. 488 ; and Hirsch S; Co. V. Burns, supra, which all illustrate the difficulty of reading in implied restrictions ; and see Turnery. Goldsmith, (1891) 1 Q. B. 544. It is very common expressly to fix by agreement the compensation to be payable Agreement to to the agent in case his agency shall be terminated by the company. Thus, in P'l.V speeific Logan^s case, 9 Eq. 149, L. was by the articles appointed managing director of a ^^ ™J°^" ''^ company, at 800^. per annum and a commission on profits. It was also provided ^ , that : "In the event of the said L. being at any time deprived of or removed from his office for any other cause than gross misconduct, the directors shall pay to him as compensation for loss of office a sum equal to three years' salary . . . ." The company was ordered to be wound up, and L. was held entitled to prove for three years' salary. See also Shirreff^s ease, 14 Eq. 417. But where an order had been made to wind up a company of which T. was an officer, one of the terms of his engagement being, that, " 5,000^. be paid to him if the company discontinue to employ him," it was held by Lord Cairns that " T. was not entitled to prove for the 5,000^., as there was no voluntary, active, and intelli- gent discontinuance by the company of the employment of T." Re Albert Life Ass. Co., Taifs claim, 16 Sol. J. 46. Where A. is entitled to the exclusive services of B., and C. induces B. to break the contract, A. may be entitled to sue C. for damages. Lumley v. Gye, 2 E. & B. 216; Boiven v. Hall, 6 Q. B. Div. 339 ; Tcmperton v. Russell, (1893) 1 Q. B. 715. Nor does Allen v. Flood, (1898) A. C 1, negative this proposition. 262 AOlJEExMEXTS. [Chap. V Form 65. Share of profits. Nofce tefore dismissal. lucompatible offices. Trade secrets. Primd facie the representations of a secretary are not binding on the company. BarnettY. South London Tramways Co., 18 Q. B. Div. 815. Sometimes an agent is given as part of his remuneration a commission on profits. Such arrangements should be carefully expressed, and it is generally desirable to make the auditor's certificate conclusive. Rishton v. Grissell, 5 Eq. 326 ; and Frames Y. Bultfontein Co., (1891) 1 Ch. 140. In the absence of express provision an employe is entitled to reasonable notice of dismissal or compensation. Crccn v. IFrif/ht, 1 C. P. D. 592. Prima facie an officer who accepts an incompatible ofiice vacates his original ofiBce. Bales V. Cumberland Lead Co., 6 H. & N. 481 ; Iron Ship Co. v. Blunt, L. R. 3 C. P. 484 ; Melwoody. Thatcher, (1892) 2 T. R. 81 ; lieff. v. Tidi/, 2 Q. B. 179. Aji employe or ex-employe may generally be restrained by injunction from revealing trade secrets. Merri/tceather v. Ifoore, (1892) 2 Ch. 518 ; Jtobb v. Green, (1895) 2 Q. B. 1 ; affirmed on ajipeal, (1895) 2 Q. B. 315. See also Louis v. Smellic. W. N. (1895) 115. 263 MEMOIUNM OF ASSOCIATION. CHAPTER VI. INTEODUCTOEY NOTES. Section 6 of the Act of 1862 provides that : — 6. Any seven or more persons associated for any lawful purpose may, by sub- Mode of scribing their names to a memorandum of association, and otherwise complying forming ■with the requisitions of this Act in respect of registration, form an incorporated company company, ivith or without limited liability. unlimitod'l And s. 7 provides as follows : — The liability of the members of a company formed under this Act may, according Mode of limit- to the memorandum of association, be limited either to the amount, if any, unpaid i°i? liability on the shares respectively held by them, or to such amount as the members may ° memoers. respectively undertake by the memorandum of association to contribute to the assets of the company in the event of its being wound up. As to the memorandum of a company limited by shares, s. 8 provides that :— Where a company is formed on the principle of having the liability of its members Memorandum limited to the amount unpaid on their shares, hereinafter referred to as a company °^ association limited by shares, the memorandum of association shall contain the following -i- u j v ^ things ; (that is to say,) shares. (I .) The name of the proposed company, with the addition of the word "limited " as the last word in such name : (2.) The part of the United Kingdom, whether England, Scotland, or Ireland, in which the registered office of the company is proposed to be situate : (3.) The objects for which the proposed company is to be established : (4.) A declaration that the liability of the members is limited : (5.) The amount of capital with which the company proposes to be registered divided into shares of a certain fixed amount : Subject to the following regulations : (1.) That no subscriber shall take less than one share : (2.) That each siibscriber of the memorandum of association shall write opposite to his name the number of shares he takes. For form of such a memorandum, see infra, p. 292. As to when the word " limited" may be omitted, see Form 69. ^64 MEMORANDA OF ASSOCIATION. [ChAP. VI. Memorandum of association of a company limited by ffuarantee. As to the memorandum of a company limited by guarantee, ts. 9 of 1862 is as follows : — Where a company is formed on the principle of having the liability of its members limited to such amount as the members respectively undertake to contribute to the assets of the company, in the event of the same being wound up, hereinafter referred to as a company limited by guarantee, the memorandum of association shall contain the following things ; (that is to say,) (2.) > Name, registered office, and objects as in s. 8. (3.) ) (4.) A declaration that each member undertakes to contribute to the assets of the company, in the event of the same being wound up during the time that he is a member, or within one year afterwards, for payment of the debts and liabilities of the company conti-acted before the time at which he ceases to be a member, and of the costs, charges, and expenses of winding up the company, and for the adjustment of the rights of the contributories amongst themselves, such amount as may be required, not exceeding a specified amount. Memorandum of assoc'ation of an un- limited company. For form of such a memorandum, see infra, p. 293. As to omission of word Limited, see Form 69. And s. 14 of this Act requires that where a guarantee company has a capital divided into shares, each subscriber must take one share at least, and is to write opposite his name on the memorandum of associa- tion the number of shares he takes. As to this, see further, infra, p. 289. As to the memorandum of an unlimited company, s. 1 of this Act provides as follows : — Where a company is formed on the principle of having no limit placed on the liability of its members, hereinafter referred to as an unlimited company, the memorandum of association shall contain the following things ; (that is to say,) ( 1 . ) The name of the proposed company : (2.) ) (3.) i Registered office and objects as in s. 8. Itigihtration of irumoran- dum and articles of association. As to the signature and stamping of the memorandum, see s. 11, infra. For form, see infra, p. 300. With regard to the registration of the memorandum of association, it is provided by s. 17 of this Act that : — The memorandum of association, and the articles of association, if any, shall be delivered to the Registrar of Joint Stock Companies hereinafter mentioned, who shall retain and register the same : There shall be paid to the Registrar by a com- pany having a capital divided into shares, in respect of the several matters men- tioned in the table marked B. in the first sclicdule hereto, the several fees therein specified, or such smaller fees as the Board of Trade may from time to time direct; and by a comjiany not liaviiig a capital divided into sliarcs, in respect of the several matters mentioned in the table marked C. in the first schedule hereto, the several fees therein specified, or sufh smiillcr fees as the Board of Trade may from time to INTRODUCTORY NOTES. 265 time direct : All fees paid to the said EogiKtrar in puryuanco of this Act shall be paid into the receipt of Her Majesty's Exchequer, and be carried to the account of the consolidated fund of the United Kingdom of Great Britain and Ireland. Copies of Tables 13. and C. will be found infra, p. 290. As to the effect of registration, s. 18 of this Act provides that : — Upon the registration of the memorandum of association, and of the articles of Effect of association in cases where articles of association are required by this Act, or by the registration, desire of the parties to be registered, the Registrar shall certify under his hand that the company is incorporated, and in the case of a limited company that the company is limited : The subscribers of the memorandum of association, together with such other persons as may from time to time become members of the company, shall thereupon be a body corporate by the name contained in the memorandum of association, capable forthwith of exercising all the functions of an incoii^orated company, and having perpetual succession and a common seal, with power to hold lands, but with such liability on the part of the members to contribute to the assets of the company in the event of the same being wound up as is hereinafter men- tioned ; A certificate of the incorporation of any company given by the Registrar shall be conclusive evidence that all the requisitions of this Act in respect of regis- tration have been complied with . And see supra, p. 14. As to the stamp, signature, and effect of memorandum, sect. 1 1 of this Act pro\ades as follows : — The memorandum of association shall bear the same stamp as if it were a deed, Stamp, and shall be signed by each subscriber in the presence of, and be attested by one signature, witness at the least, and that attestation shall be a sufficient attestation in Scotland jnemorandum as well as in England and Ireland : It shall, when registered, bind the company Qf association, and the members thereof to the same extent as if each member had subscribed his name, and affixed his seal thereto, and there were in the memorandum contained, on the part of himself, his heii's, executors, and administrators, a covenant to observe all the conditions of such memorandum subject to the provisions of this Act. With regard to the several clauses contained in the memorandum of association : As to the name : — This clause is required in every memorandum. The choice of the Name of name rests with the subscribers of the memorandum. They are, company, subject to sect. 20 of the Act, free to select any name they like, so, nevertheless, that the word "limited" shall, in case of a company limited by shares or by guarantee, form the last word of the name. [See, however, infra, p. 267,] Sect. 20 provides that :— S. 20. No company shall be registered under a name identical with that by which a subsisting company is already registered, or so nearlj-- resembling the same as to be calculated to deceive, except in a case where such subsisting company is in the course of being dissolved, and testifies its consent in such manner as the registrar requires ; and if any company, through inadvertence or otherwise, is without such consent as aforesaid, I'egistered by a name identical [#c-, provision for change of name] . 266 MEMORANDA OF ASSOCIATION. [CllAP. VI. Improper use of name. Principle for intervention of Court. Fraudulent intention or not. Name de- f-criptive of Luainess. Merc Bimi- larity of name. The registration of a company Ly a name which is calculated to deceive, by reason of its identity with or resemblance to the name used by some unregistered company, partnership, or person, will not prevent the Courts from intervening, in a proper case, by injunction, to protect the rights of such last-mentioned company, partnership, or person. The principle on which the Court interferes in such cases is, that one person is not to be permitted to represent the business which is carried on by another as carried on by him {Levy v. Walker, 10 C. Div. 436) or to represent his goods as being the goods of another man or to enable his customers to make a false representation to some one who is the alternative purchaser. Reddaivay y. Banham, (1896) A. C. 199 ; Croft v. Day, 7 Beav. 84. It is not necessary to prove any fraudulent intention on the part of the defendants : it is sufficient if in the circumstances of the particular case the name adopted by them will be likely to mislead. Singer Machine \. Wilson, 3 App. Cas. 376 ; Merchant Banking Co. of London, Limited^. Merchants^ Joint Stock Bank, Limited, 9 C. D. 560 ; Guardian Fire and Life Assura7ice Co, v. Gnardiati a7id General Insurance Co., 43 L. T. 791 ; Hendriks v. Montagu, 17 C. Div. 638 ; Tussaud v. Tussaud, 44 C. D. 678. See also Premier Cycle Co. v. Premier Tube Co., 12 T. L. E. 481 ; and see John Brinsmead and Sons v. T. E. Brinsmead and ^Sons, Limited, 13 T. L. E. 3, where an injunction was granted restraining the use of the name of Thomas Edward Brinsmead and Sons, Limited, or the word "Brinsmead" by the defendants in con- nection with the manufacture, sale," or hire of pianos without adding thereto an express statement that the company was distinct from, and had no connection with, the old firm of John Brinsmead and Sons. See (1897) 1 Ch. 49; see also Saxlehner v. Apollinaris Co., (1897) 1 Ch. 893; and p. 1068, infra. The fact, however, that the defendants have not only adopted a name resembling that of the plaintiff, but have set up, or propose to set up, business in the same street, or have issued deceptive circulars, goes far to show a fraudulent intention. See Lee v. Haley, 5 Ch. 161 ; Merchant Baulking Co. v. Merchants' , ^'c, Bank, uhi supra. The Court has great difficulty in interfering where the name adopted is merely descriptive of the character of the defendant's business, and accordingly, in each of the three following cases, an injunction was refused : — London and Provincial Law Assurance Society v. London and Provincial Joint Stock Life Assurance Co., 17 L. J. Ch. 37 ; Colonial Life Assurance Co. v. Home and Colonial Assurance Co., Limited, 33 Beav. 548 ; The London Assurance Corporation v. llie London and Westminster Assurance Corporation, Limited, 9 Jur. N. S. 843. But see now lleddaway v. Banham, (1896) A. C. 199. Moreover, mere siiailarity of name is not in itself enough to give a riglit to an injunction ; for there is no right of property in the name. " In this country we do not recognise the absolute right of a person to a particular name to the extent of entitling him to prevent the assump- INTRODUCTORY NOTES. . 267 tiou of the name by a stranger." Dti Boulay v. Du Boiilay, L. E. 2 P. 0. 441. Hence, if persons choose to carry on business, say as iron- mongers, under the name of Day and Martin, the well-known blacking makers could not restrain them. The plaintills must show that they have carried on some trade or business under the particular name, and that the defendant's conduct may lead to their securing by deception part of the plaintiff's business. If, then, the defendants are carrying on, or propose to carry on, a Where Lii,>si- different kind of business, there can be no danger of deception, and ^^^^ ^l^ therefore no legal inj\uy. See Day v. Broivnrigg, 10 C. Div. 304. And even where the business is of the same character, and the name WLero um adopted very similar to that of the plaintiff's, the circumstances may bo ^J^""^'"; "^ , 111 -n • P 1 deception, such as to show that there will not m fact be any danger of deception ; e.g., when the defendants propose to carry on business in a different district or place. Merchant Bunkiny Co.y. Merchants' Joint Stock Bank, '.) C. D. 560 ; Lee v. Haley, 5 Ch. 155 ; Turton v. Turton, 42 C. Div. 128. Not only may a registered company be restrained from carrying on business as above, but promoters may be restrained from registering a company with a name calculated to deceive. Thus, in Hendricks v. Montagu (17 C. D. 638), the registration of a company as " The Uni- verse Life Assurance Association, Limited," was restrained at the instance of an xmregistered company known as the " Universal Life Assurance Society." Where a company purchases the goodwill of an existing business, it Company has, in the absence of agreement to the contrary, a right to carry on P"''^hasuig business under the trade name previously used in connection with such business ; for the goodwill includes the right to use the name {Levy v. Walker, 10 C. D. 436) ; and the fact that no one bearing the name is connected with the company, docs not affect its right to protection. Croft V. Day, 7 Beav. 84. And see supra, pp. 199, 206. It is expedient here to draw attention to a rule made some years As to the word ago by the Board of Trade, viz., that the registrar shall not register "J^oyal." any memorandum of association for the incorporation of a comj^any by a name of which the word "Eoyal" forms part, unless there be special circumstances for relaxing the rule, e.g., where the word "Eoyal" has been used in connection with property which the com- pany is to accjuire, or where permission to use the word has been granted by the Home Office. This rule has been rigorously enforced, and accordingly there are comparatively few companies on the register having names which include the word referred to. In some cases it may, in order to avoid delay, be desirable to apply to the Home Office for liberty to use the word " Eoyal." Before finally settling on a name and getting docimients printed, it is generally desirable to ascertain from the Eegistrar of Joint Stock Companies that no objection exists to the proposed name. Sect. 20, as above mentioned, p. 265, prohibits the registration of a ^^J^^ *^"^^2o" 268 MEMORANDA OF ASSOCIATION. [ClIAP. VI. Change of name. Omission of word "limited." Registered office of company. Object clatise in memoran- dum deter- mines the extent of the company's powers. Anhbtiry Co. V. Richc (in support of view). second company with the same name as a subsisting company, "except in any case where such subsisting company is in course of being dis- solved, and testifies its consent in such manner as the registrar requires." The power thus given is frequently exercised, especially in cases of reconstruction or amalgamation. See Chap. XX., infra. As to change of name, see Chap. X., infra. As to omitting the ivord ^'Limited." In some cases a company may be registered as a limited company without using the word " Limited " as part of its name. These cases are specified in s. 23 of the Companies Act, 1867. See infra, p. 296. As to the registered office of the company : — Clause 2 of every memorandum must state in which part of the Kingdom the registered office is proposed to be situate. This deter- mines where the company is to be registered, and also the jurisdiction to which it will be subject. See s. 174, sub-s. 3, and s. 81 of the Act of 1862 ; and ss. 1 and 32 of the Companies (Winding Up) Act, 1890. As to the objects of the company : — Clause 3 of the memorandum is to state the objects for which the proposed company is established, and that clause must be framed with great care, for the powers of the company when incorporated depend on the terms of this clause. The company will have power to carry its specified objects into effect, and all powers reasonably incidental thereto, but it will have no other powers ; and accordingly it will not be at liberty to apply its funds otherwise than in furtherance of its objects. This limitation of powers" is a characteristic which distin- guishes all statutory companies incorporated for specified purposes ; there is no need to seek for and find in the act or constitution any words prohibiting the company from transgressing its specified objects, for it is now settled that the powers are limited as above. There is a difference of opinion as to whether this limitation of the powers of such companies exists (1) because they are to be regarded as being incorporated only for the specified objects, or (2) because they are to be regarded as being expressly or impliedly prohibited from trans- gressing those objects. But in Ashhiry Co. v. Riche, L. R. 7 H. L. 693, Lord Selborne said: "I only repeat what Lord Cranworth, in Hawkesw. Eastern Counties Hail. Co., 5 H. L. C. 331, when moving the judgment of this ITouso, stated to be settled law, when I say that a statutory corporation, created by Act of Parliament for a particular purpose, is limited, as to all its powers, by the purposes of its incor- poration as defined in that act. The present and all other companies incorporated by virtue of the Companies Act of 1862, appear to me to bo statutory corporations within this principle. The memorandum of association is, under the act, their fundamental and (except in certain specified particulars) their unalterabkii law ; and they are incorporated only for the objects and purpose expressed in that memorandum. . . . And it seems to me far mf)re accurate to say tliat the inability of such companies to make such contracts (?'.itriictors, and to purchase mines and lands, and to buy and sell timber and coals, and other specified objects. Held, that the words " general contractors" must be read as referring to such contracts, and to such contracts only, as were incidental to the business of a mechanical engineer. Ashbury Co. v. Riche, L. R. 7 H. L. 665. Where the funds of the company had been applied in paying the costs of a prosecution against a person who had libelled the company's directors, the libel not applying to the company itself. Studdert v. Grosvenor, 33 C. D. 528. Where the funds of the company had been applied in jiaying the costs of sending out proxy papers with the names of the directors inserted as proxies. Studdert v. Grosrcnor, 33 C. D. 528. " Is it," said Kay, J., in that case, '' ultra vins to use the funds of the companj- to induce shareholders to appoint the directors their proxies ?. . . .Such a proceeding as that, I do not hesitate to say, is a :nisapplication of the funds beyond the power of a general meeting to sanction." Wlici'e commission had been paid for placing shares. Re Faure Electric Accumu- lator Co., 40 C. Div. 141. But see Metropolitan, SfC. Assoc, v. Scrimgeour, (1895) 2 Q. B. 601. For action against tramway for manufacturing rolling stock, sec Att.-Gen. v. North Metrop. Tram Co., (1892) 3 Ch. 70. TNTRODTTOTOTfY NOTF.Si. 275 Oases of Intiia Viuks. On tho otlior hand, tlio following arc oases in which transactions Cases of I 1 1 1 1 -J.! • J.1 £ bifrii vires. Jiave been held -within tiie powers oi a company : — Where an insurance company had paid losses not strictly covcro^e) ^[i:moranda of association. [Cifap. VI. Memorandum silent, but power in ori- ginal articles. Wliei'e meroo- randum and articles are both silent as to classes of shares. Views till recently prevailing. The law as now settled. preferential, special, qualified, or deferred rights, privileges, or con- ditions attached thereto," and, in such case, it is clear that the regu- lations for the time being may authorize the division of the shares into classes and attach thereto preferential and other special rights. In other cases, now less common than formerly, the memorandum is totally silent as to the issue of special classes of shares ; but fven in such cases it was long since held that the articles, as originally framed and registered, could effectually divide, or give power to divide, the capital into different classes of shares with preferential and other rights attached. Harrison v. Mexican Rail. Co., 19 Eq. 358 ; Re South Durham Brewery Co., 31 C. D. 261, This conclusion was not arrived at without difficulty, for the decision in Hutton v. Scarborough Cliff, Sfc. Co. ((1865) 4 De G. J. & S. 672; and (No. 2) 2 Dr. & Sm. 521), both appeared to point to the conclusion that, where the memorandum, of association was silent as to classes, there was an implied condition of equality, and, if so, it was not easy to see how (looking to sect. 12 of the Act) the articles of association could effectually modify this condition. However, Jessel, M. IJ., in Harrison v. Me.rican Rail. Co. (19 Eq. 358), held that the articles could, in effect, negative or qualify this impHed condition, and, although Kay, J., subsequently decided the contrary in Re South Durham Brewery Co. [srqna), that decision was reversed on appeal. It is, however, not uncommon to find that neither the memorandum nor the articles, as originally framed, give power to issue preference and other special classes of shares; and, where both are silent, the following questions sometimes arise : — (1) Can the company issue part of the shares in its original capital with preferential or special rights attached? (2) Can the company issue new shares created upon an increase of capital with preferential or special rights attached ? Until recently it was generally considered that both these questions must be answered in the negative. As to the first question, it was decided by Lord Westbiuy, L. C, that when both the memorandum and articles were silent as to pre- ference shares, a company could not issue shares in its original capital as preference shares, at any rate, without altering its articles ; and, further, his lordship expressed doubt whether even by altering its articles the power could be obtained {Hutton v. Scarborough Cliff, ^-c. Co., 4 Do G. J. & S. 672) ; and the decision of Kindersley, Y.-C, in Hutto)t v. Scarborough Cliff, ^'c. Co. (No. 2), 2 Dr. & Sm. 5, 221, went far to confirm this doubt. And as to the second question, it was answered in the negative by the decision of Kindersley, V.-C, in the case last mentioned. But this decision has now been overruled by the Court of Aj)peal in Andreivs v. Gas Meter Co., (1896) 1 Ch. 361. In that case there was no power in the original memorandum or articles to issue preference shares, but power was taken by special resolution and acted on. The Court of Appeal held that the preference shares were validly created, on the iXTi?or)UfTr>KV notes. -^^ ground that, althougli by sect. 8 of the Act the memorandum of associa- tion is to state tho amount of the original capital, ,Yet in other respects the rights of the shareholders in respect of their shares and the terms on which an}'' additional capital may be raised, are matters to be regulated by the articles of association rather than by the memorandum, and are therefore matters which (unless provided for by the memo- randum, as in Ashhury v. Watson, 30 C. D. 376) may be determined by the company from time to time by special resolution, pursuant to sect. 50 of the Act. This view, however, clearly negatives the doctrine that there is a condition in the memorandum of association that all shareholders are to be on an equality unless the memorandum itself shows the contrary. See Lindley, L. J. Accordingly, the correct answer to the second question is " Yes, by altering its regulations so as to take the requisite power." ]\roreover, tho grounds of this decision go far to show that tiie same answer should be given to the first question ; for it is now abundantly clear that silence in the memorandum does not amount to an implied condition of equality as between the shares in the capital. Cotton, L. J., in Guinitess v. Land Corporation of Ireland^ 22 C. D. 349, 377, said : "In reality it is not by implication from the construc- tion of the memorandum that the equality of the shareholders as regards dividend arises, but by the implication which the law raises as between partners, unless their contract has provided to the contrary." And in a later case {British Co. v. Couper, (1894) A. C. 399), Lord Macnaghten said: "I agree that the ecj^uality of shareholders as regards dividend is not an implied condition of the memorandum ; but I doubt whether it is necessary to have recourse to the doctrine of partnership. It seems to me that if the sum of the interests of persons concerned in a joint venture is divided into shares of equal amount distinguished by numbers for the purpose of identification, but with no other distinction between them, expressed or implied, it foUows as a self-evident proposition that the interests of the shareholders in respect of their shares, as regards dividends and ever3'thing else, must be equal." There being, then, no implied condition of equality, it appears to follow that silence in the memorandum does not preclude the issue of preference shares, but that the regulations as originally passed or as altered can give the requisite power to issue part of the original shares as preference shares. This conclusion is not at variance with the decision in Hutton v. Scarborough Cliff Co. (4 De Gr. J. & S., No. 1, supra), for in that case the company was seeking to issue preference shares, although neither its memorandum or regulations gave power to issue the same, and although its regulations expressly, in effect, provided that all dividends were to be paid pari jjassu. It is only contrary to the doubt expressed by Lord Westbury — a doubt which was only a dictum. As to altering the rights attached to classes of shares, see infra, p. 3.58. 288 MEMORANDA OF ASSOCIATION. [ChAP. VI. Subscribers' On referring to the forms of memoranda of association given below declaratiou. (^^^^ 292, 294, 29G, 300), it will be seen that each of them closes with a declaration that the subscribers desire to be formed into a company. It will be observed that sect. 14 of the Act requires that, "in a company limited by guarantee or unlimited, and having a capital divided into shares, each subscriber shall take one share at the least, and shall write opposite his name in the memorandum of association the number of shares he takes." It has been considered that the word " memorandum" in this paragraph is an error for "articles," but the practice of the Registrar is to require the number of shares taken to be stated in the memorandum. Memorandum 'py^g memorandum may be in writing, but where articles are registered wi-Ltino- or it is usually printed with them. If in writing, it is sometimes filled printed. [^ xipon a skeleton printed form. It must be signed by at least seven "Witness. persons, in the presence of, and be attested by, one witness at least. It is very common, though not necessary, for the same witness to attest the signatures of all the subscribers. Certificate The Act provides (sect. 13) that a certificate of the incorporation of evidence that j^j^y company, ffiven by the Registrar, shall be conclusive evidence that requi^itious oi ,/ , ^ . .,. „ ,, . f . , » • . ,- , , Act complied all the requisitions oi the Act m respect ot registration have been ■""i^^^- complied with. See supra as to the operation of this provision. The Registrar makes no objection to registering a memorandum subscribed by a married woman. No doubt he would refuse if he knew that one of the subscribers was an infant, but if the memorandum so subscribed is registered, it is conceived that the infant is bound. See Be Nassau P/iospha/e Co., 2 Ch. D. 610; Re Laxon cV Co. (2), (1892) 3 Ch. 555. Effect of As to the effect of subscribing the memorandum of association : By subscribing g_ 23 of the Act it is provided that : — memorandum. " Tbe subscribers of the memorandum of association of any company under this Act, shall be deemed to have agreed to become members of the company -whose memorandum they have subscribed, and upon the registration of the company shall be entered as members on the register of members hereinafter mentioned ; and every other person who has agreed to become a member of a company under this Act, and whose name is on the register of members, shall be deemed to be a member of the company." Hence a subscriber to the memorandum is indisputably a member of the company. Subscrii)tion In a company limited by shares, " no subscriber shall take less than uu agrcr rnont q^o share," and each subscriber " shall write opposite to his name the payV!r^" number of shares he takes." S. 8 of the Act. It is conceived that Mhores. whore a subscriber, in the case of a company limited by shares, does not set any number of shares opposite his signature, he is liable for one. See Portal v. Emmeiis, 1 C. P. I). 201 and G64, A subscriber may sign the memorandum by an agent. Re Whitley J'artnn-s, 32 O. Div. 337. In that case the agent had signed in the iNTRODUCroK'V NOTKS. 289 name of tho principal, and tho principal was held hound ; but it may be that the Registrar of Joint Stock Companies can require evidence of the agency if a signature purports to be signed by an agent. In practice he does not require such evidence where there are seven persons who subscribe personally. The subscriber agrees to take from the company tho shares set opposite to his name, and to pay for them. Migotti's case, 4 Eq. 238 ; FothergilVs case, 8 Ch. 270; NicoPs case, 29 C. Div. 421. The fact that no shares have ever in fact been allotted to him, and that his name has never been put on the register, will not relieve him {Evans' case, 2 Ch. 427 ; Re Argyle Co., 54 L. T. 233), unless all the shares have been allotted to other persons. Mac]dey''s case, 1 C. Div. 247. A clause in the articles that shares subscribed for in the memo- shares sub- randum shall be deemed to be fixlly paid up is ineffectual. Dent's case, «cribed in 8 Ch. 768; Crichner^s case, 10 Ch. 614; Firmsf one's case, 20 Eq. 524. must be paid The shares subscribed for in the memorandum must be paid up in for in cash, 7 1 i.j.-u'T ii, 1 -T p notwithstand- cash, unless a contract bmdmg on the company, and providing for j^jo- a filed payment otherwise than in cash, is filed before the issue thereof. More- contract. over, it is difficult to see how a contract can be so filed before the issue, for the Court of Appeal has held that in the case of a share subscribed in the memorandum of association, the share is "issued" eo tnstanti u-pon the registration of the company. Dalfon Time Lock Co. v. Dalton, 66 L. T. 704. Looking, however, to the decisions in the Ttmnel Mining Co., 35 C. D. 579; and the Anglo- Colonial Syndicate, 65 L. T. 547, supra, p. 189, it may, perhaps, be that a contract binding on the company, filed the day on which the company is registered, would sufiice as being filed " at or before the issue." As to what is payment in cash, see stqjra, p. 187. The memorandum irrevocably binds a subscriber thereof to take the number of shares set opposite his name from the company; but if he subscribes for preference shares, he may subsequently agree with the company to take ordinary shares instead : for as regards matters not required by the Act to be stated in the memorandum, the contract con- tained in it is revocable. Diike^s case, 1 C. D. 623. Where a person subscribes the memorandum for shares, no allotment is required to render him liable [In re London ^' Provincial, Sfc. Co., 5 C. D. 525) ; and he should not sign any further application for such shares, though if he do sign such application, merely intending to apply for the shares he has already subscribed for, he may escape further liability. Oilman's case, 31 C. D. 420; Dtmster's case, C. A. (1894) 3 Ch. 473. By virtue of the subscription he is entitled to the shares. By s. 19 of the Act it is provided as follows : — "A copy of the memorandmn of association, having annexed thereto the articles of Jtlember association, if any, shall be forwarded to any member at his request, on papnent of the entitled to sum of one shilling or such less sum as may be prescribed by the company for each copy of copy ; and if any company makes default in forwarding a copy of the memorandum of ^n^cmoranaum association and articles of association, if any, to a member in pursuance of this section, the company so making default shall for each offence inciu- a penalty not exceeding 1/." 1". r 290 MEMORANDA OF ASSOCIATION. [ClIAP. VJ. As to stamping the memorandum of association : Stamps and By s. 11 of the Act, the memorandum is required to bear the same ^^^' stamp as if it were a deed, i.e., a 10s. stamp. In addition to this, it must before registration be stamped with companies' fee stamps in respect of the fees payable under s. 17 of the Act. See sujira, p. 2G4. The tables of fees referred to in s. 17 are as follow : — TABLE B. Table of Fees to be paid to the Eegisteae of Joint Stock Companies by a company having a capital divided into shares. .£ s. d. For registration of a companv whose nominal capital does not exceed 2,000/., a fee of . . . .' 2 For registration of a company whose nominal capital exceeds 2,000?., the above fee of 2/., with the following additional fees, regulated according to the amount of nominal capital (that is to say) : — £ s. (I. For every 1,000/. of nominal capital, or part of 1,000/., after the first 2,000/., up to 5,000/ 10 For every 1,000/. of nominal capital, or part of 1,000/., after the first 5,000/., up to 100,000/ 5 For every 1,000/. of nominal capital, or part of 1,000/., after the first 100,000/ 10 For registration of any increase of capital made after the first registration of the company, the same fees \yex 1,000/., or part of 1,000/., as would have been payable if such increased capital had fonned part of the origmal capital at the time of registration. Provided that no company shall be liable to pay in resiaect of nominal capital on registration, or afterwards, any greatej- amount of fees than 50/. , taking into account in the case of fees payable on an increase of capital after regis- tration the fees paid on registration. For registration of any existing company, except such companies as are by this Act exempted from payment of fees in respect of registration under this Act, the same fee as is charged for registering a new company. For registering any document hereby required or authorised to be registered, other than the memorandum of association . . . . . . .050 For making a record of any fact hereby authorised or required to be recorded by the Registrar of Companies, a fee of 5 TABLE C. Table of Fees to be paid to the Registrar of Joint Stock Companies by a company not having a capital divided into shares. £ s. (1. For registration of a company whose number of members, as stated in the articles of association, docs not exceed 20 2 For registration of a comjiany whose number of members, as stated in the articles of association, exceeds 20, but does not exceed 100 . . . .500 For registration of a comjiany whose number of members, as stated in the articles of association, exceeds 100, but is not stated to bo imlimitcd, the above fee of 5/., with an additional 5.!>. for every 50 members or less mmiber than 50 members after the first 100. For registration of a company in which tlio niunbcr of members is stated in the articles of association to be unlimited, a fee of 20 For registration of any increase on the number of members made after the registration of the company in respect of every 50 members, or less than 50 members, of Huch increase 5 INTRODUCTORY NOTES. 201 Provided that no one company shall be liable to pay on the whole a greater £ ». d. fee than 201. in respect of its number of members, taking into account the fee paid on the first registration of the company. For registration of any existing company, except such comi)anies as are by tliis Act exempted from payment of fees in respect of registration under this Act, the same fee as is charged for registering a new company. For registering any document hereby required or authorised to be registered, other than the memorandum of association . . . . . . . .5 For making a record of any fact hereby authorised or required to be recorded by the Registrar of Companies, a fee of 5 By s. 112 of the Stamp Act, 1891 (54 & 55 Vict. c. 39), additional duty is imposed thus : — " A statement of the amount which is to form the nominal share capital of any com- pany to be registered with limited liability shall be delivered to the Registrar of Joint Stock Companies in England, Scotland, or Ireland, and a statement of the amount of any increase of registered capital of any company now registered or to be registered with limited liability shall be delivered to the said registrar, and every such statement shall be charged with an fff/ valnrem stamp duty of 2s. for every 100/., and any fraction of 100/. over any multiple of 100/. of tlie amount of such capital, or increase of capital, as the case may be." The following are a few examples of the amount payable in respect of the memo- randum of a company limited by shares : — Nominal Capital. Amoimt Payable. & £ s. d. 1,000 3 10 5,000 10 10 10,000 16 15 20,000 29 5 30,000 41 15 50,000 66 15 80,000 104 5 100,000 129 5 200,000 234 5 500,000 549 5 1,000,000 1,050 10 tj2 292 MEMORANDA OF ASSOCIATION. rCHAP. VI. ME310RANDA OF ASSOCIATION. Form 67. Memorandum of a company limited by shares. TuE Companies Acts, 1862 to 1893. Coy Limtcl by Shares. Memdm of Asson of The (-'^y^ Limtd, 1. The name of the coy is " The Coy, Limtd." See supra, p. 265. 2. The registered office of the coy "will be situate in England [or Scotland, or Ireland, as the case may be]. See supra, p. 268. 3. The objects for which the coy is established are : — See supra, p. 268. (1.) To acquire, &c., e.c/., Form 73. (2.) To carry on, &c., e.ff., Form 138. (3.) Add general clauses from Forms 81 to 105. 4. The liability of the members is limtd. See SKpra, pp. 263, 281. 5. of the coy is 1., divided into shares of /. each, with power to divide the shares in the capital for the time being into several classes, and to attach thereto resply any preferential, deferred, qualified, or special rights, privileges, or conditions. As to the capital, see supra, p. 282, and infra, pp. 358 ei seq. As to reserve cajjital, which is only to be called for in a winding-up, see Fonn 208, infra. As to taking express power in the memorandum to issue preference shares, see supra, p. 28.5. As to defining in the memorandum the riglits of the several classes of shares, see infra, pp. 358 et seq. We, the several persons whoso names and addresses are subscribed, are desirous of being formed into a coy, in pursuance of this memdm FOKMS. 203 of asson, and we resply agree to take the niim)jer of shares in the Form 67. capital of the coy set opposite our respective names. Names, Addresses, and Descriptions of Subscribers. Number of Sliares taken by each Subscriber. 1. John Jones, of, &c., Merchant. 2. John Smith, of, &c.. Landed Proprietor. 3. Thomas Green, of, &c.. Grocer. 4. Heney Thompson, of, &c.. Commission Agent. 0. Charles Evans, of, &c., no occuiiation. 6. William Day, of, &c., Surgeon. 7. Alfred Jones, of, &c., Wine Merchant. Total Shares taken One One One One One One One Seven Dated the 22nd day of Jan., 1898. Particular care should be taken to give the names, addresses and descriptions of the subscribers fully and correctly and clearly ; otherwise delay is almost certain to occur. Witness to the above signatures, Samuel Wellek, 10, North Street, "Westminster. Or, Witness to the above signatures of John Jones, John Smith, William Day, and Alfred Jones, Samuel Wellee, &c. Witness to the above signatures of Thomas Green, Henry Thompson, and Charles Evans, Martin Clarke, &c. Or, Witness to the above signatures other than that of Thomas Green, Samxjel Wellee, &c. Witness to the above signature of Thomas Green, Martin Clarke, &c. The Companies Acts, 1862 to 1893. Coy Limtd by Guarantee. Memdm of Asson of The. Coy, Limtd. 1. The name of the coy is " The Coy, Limtd." See supra, p. 265. 2. The registered office of the coy -will be situate in England \or Scotland, or Ireland]. %eejupra, p. 268. Form 68. Memorandum of a company limited by guarantee. 294 MEMOEANDA OF A.SSOCIATIOX. [ChAP. VI. Form 68. 3. The objects for which, the coy is established are : — (1.) To, &c. ; see supra, pp. 268 ef seq. 4. Every member of the coy undertakes to contribute to the assets of the coy in the event of the same being wound up during the time that he is a member, or within one year afterwards, for payment of the debts and liabilities of the coy contracted before the time at which ho ceases to be a member, and the costs, charges, and expenses of winding- ixp the same, and for the adjustment of the rights of the contributories amongst themselves, such amount as may be required, not exceeding 10/. [See si/j)ra, p. 281.] The amount of the guarantee varies according to the circumstances of the company. Sometimes it is fixed at 100^., but generally it is fixed at 10/., or bl., ovlL, and occasionally at OS. The guarantee is usually of the same amount for each member, but occasionally the amount is made to vary with the extent of his interest, as in the case of The Shipping Federation, Limited (1890), where the amount was "not exceeding 3,5. per gross regis- tered ton in respect of steam tonnage, or Is. per gross registered ton in respect of sailing tonnage, respectively entered by such member with the company at the date of the order or resolution to wind up the comj)any, or at the date of nis ceasing to be a member, whichever date shall be the earlier." We, the several persons whose names and addresses are subscribed, are desirous of being formed into a coy, in pursuance of this meradni of asson. See supra, p. 288. Names, addresses, and descriptibns of subscribers. I't supra, p. 293. And if there is a share capital, state the number of shares taken by each subscriber. See as to this, siqn-a, p. 288. Dated the day of -, 18—. AViTXESs, S:c. : see supra. Form 69. ]\[pmorandum of association of a company limited by Kiiaranteo and v«';,'iKtcred pursuant to H. 23 of the Act of 18G7. The iNcorvroiiATEu Law Society. Menidm of Asson. ■Incorporated Law Society" ''The Medical Listi- 1 . The name of the society is "The ■ for, "The Chamber of Commerce, tute"]. Sec supra, pp. 26.'5 et seq. 2. The registered office of the society \_supra, p. 208]. .'». The objects for which the society \_or, chamber, or, institute, «S:c.] is established are : — [See pp. 268 et seq.'\ 4. Tlio income and ppty of the society, whencesocvcr derived, shall bo ap[)liod solely towards the promotion of the objects of the society, as set forth in this memdm of asson, and no portion thereof shall be FORMS. 295 pd or transferred, directly or indirectly, by way of dividend, Ijonus, Form 69. or otherwise howsoever by way of profit, to tlio members of the society. Provided that nothing herein contained shall prevent the payment, in good faith, of remuneration to any officers or servants of the society, or to any member thereof, or other person, in return for any services actually rendered to the society. It has not been settled whether this clause prevents the payment of interest on money borrowed from a member. The lirst paragraph of the clause might reasonably be held to prohibit only a payment to a member qua member, but this construction would render the proviso superfluous. In order to obviate doubt the proviso has, in several cases, with the sanction of the Board of Trade, been modified; e.g., by the addition of the words " nor prevent the payment of interest at a rate not exceeding o iJ.c.p.a. on money borrowed from any member of the society," or words to that effect {Banff Toioi and County Cluh, and Worcester Law Socicti/, 1882 ; Ilaclcney Stud Book Soc, 1884) ; or, ' ' but it shall nevertheless be competent to the corj^oration to repay the contributions of the permanent members, with interest at 5 p.c.p.a., and also to remunerate" {Corpora- tion of Foreign Bondholders) ; " nor be deemed to exclude any member of the association from the benefit of any grant made in furtherance of any of the objects of the associa- tion" {Incorporated Free and Open Church Assoc, 1882) ; "nor the gratuitous distribu- tion among, or sale at a discount to, subscribers to the funds of the society of any books or otlier publications, whether published by the society or otherwise, relating to all or any of its objects as above set forth " {Palestine F.ip!o7-ation Fund, 1879) ; " nor shall prevent the bond fide relieving or assisting pursuant to clause (h) of the preceding paragraph of persons or the wives, widows, families or relations of persons who, having been members of the association, have ceased to be so, and have become poor and necessitous, or are deceased, or prevent the imymeut in good faith of remuneration to any officers or servants, &c., or prevent the payment of interest at a rate not ex- ceeding 5 jj.c.p.a. on auy money borrowed from any member for any of the jjiu-poses of the association" {Petroleum Association, 1885), " nor prevent payment of interest, iJcc, nor be deemed to exclude any member of the society from the benefit of any grant made in furtherance of auy of the objects of the society " {Church Army, 1892). In Bray v. Ford, (1896) A. C. 50, it was held that the above proviso does not relax the rule that a director or olficer is not allowed to make any profit out of his position except as authorized by the regulations. 5. The fourth paragraph of this memorandum is a condition on which a licence is granted by the Board of Trade to the society, in pursuance of s. 23 of the Companies Act, 1867. G. If any member of the society pays or receives any dividend, bonus, or other profit in contravention of the fourth paragraph of this memorandum, his liability shall be unlimited. 7. Every member of the society undertakes to contribute to the assets of the society, in the event of the same being wound up during the time that he is a member, or within one year afterwards, for pay- ment of the debts and liabilities of the society contracted before the time at which he ceases to be a member, and of the costs, charges, and expenses of winding up the same, and for the adjustment of the rights of the contributories amongst themselves, such amount as may be required, not exceeding five pounds \_or ten shillings, or whatever the amount fixed on may be~\, or, in case of hie liability becoming unlimited, 296 MEMORANDA OF ASSOCIATION. [ChAP. VI . Form 69. such other amount as may be required iu pursuance of the last pre- ceding paragraph of this memorandum. 8. If upon the winding-up or dissolution of the society there remains, after the satisfaction of all its debts and liabihties, any ppty whatso- ever, the same shall not be paid to or distributed among the members of the society, but shall be given or transferred to some other insti- tution or institutions having objects similar to the objects of the ■society, to be determined by the members of the association at or before the time of dissolution, and in default thereof by such judge of the High Court of Justice as may have or acquire jurisdiction in the matter. 9. True accounts shall be kept of the sums of money received and expended by the association, and the matter in respect of which such receipt and expenditure takes place, and of the ppty, credits, and liabilities of the association ; and, subject to any reasonable restric- tions as to the time and manner of insj^ecting the same that may bo imposed in accordance with the regulations of the association for the time being, shall be open to the inspection of the members. Once at least in every year the accounts of the association shall be examined, and the correctness of the balance sheet ascertained by one or more properly qualified auditor or auditors. Sect. 23 of Companies Act, 1867. 'I'lio section froqnontly re«ortcd to. AVe, the several persons whose names and addresses are subscribed, are desirous of being formed into a society in pursuance of this memdm of asson. Names, addresses, and descriptions of subscribers. Date, &c., as in Form 67 (omitting shares). Sect. 2'S of the Act of 1867 provides : — " Where any association is about to be formed under the Act of 1862 as a limited company, if it proves to the Board of Trade that it is formed solely for the purpose of promoting commerce, art, science, religion, charity, or any other useful object, and that it is the intention of such association to apply the profits or other income of the associa- tion iu i^romoting its objects, and to prohibit the payment of any dividend to the members of the association, the Board of Trade may, by licence under the hand of one of the secretaries, or assistant secretaries, dii-ect such association to be registered vrith limited liability, without the addition of the word ' limited ' to its name, and such association may be registered accordingly, and upon registration shall enjoy all the privileges and be subject to the obligations by this Act imposed on limited comijanies, with the exceptions that none of the ])ro visions of tliis Act that require a limited com- pany to use tlie word ' limited ' as any i^art of its name, or to publish its name, or to send a list of its members, directors, or managers, to the registrar, shall apply to an association so registei'ed. The licence of the Board of Trade may be granted upon such conditions and subject to such regulations as the Board think fit to impose, and such conditions and regulations shall be binding on the association, and may, at the option of tlio Board, l)e inserted in the memorandum and articles of association, or in both or one of such documents." Sect. 23 has proved very useful, and a largo number of associations liave been registered under it, generally as companies limited by guarantee, e.ff., law societies. FORMS. 297 cliambers of commerce, trade protectiou societies, medical societies, agricultural asso- ciations, and charitable associations. For a list of some of the associations so registered, see iiifra. An association desiring to be incorporated with Hmited liability, but witliout the word '• limited " as part of the name, and for that purpose to oT)taiu a licence from the Board of Trade jiursuant to sect. '23 of the Act, should, according to the rules now in force, make a written apijlication to the Board for a licence, and together with sucli applica- tion should transmit for their consideration a draft, in duplicate, of the proposed memo- randum and articles of association. The drafts and any subsequent revisions that may bo requii-ed should, wliethor in print or manuscript, be on foolscap-sized paper. If the Board of Trade are satistied that the application should be entertained they will fmuiish a notice of such application, to be inserted in a local newspaper for the information of the public, and if after the exiiiration of a limited time there apj^ears to be no sufficient reason why the licence should not be granted, the Board of Trade will apf)rove the memorandum and articles of association, with or without amendment, and grant a licence. The Board of Trade will require to have the memorandum and articles of association settled on their behalf by their counsel, at the expense of the applicants, for which jiurjiose a fee of five guineas must accompany the api^lication. A cheque for the amount should be made payable to an assistant secretary of the Board of Trade. The Board of Trade will not be responsible for the memorandum and articles being projjerly framed as regards the interests of the association. .The Board is always willing to sanction the omission of the word " company " in the memorandum and articles, and the substitution of the word chamber, society, corporation, or the like. The names of the subscribers to the memorandum should be in full, the addresses should be definite, giving, where practicable, the name of the street and the number of the house. Form 69. The following is a specimen of the licence issued by the Board : — WnEEEAS it has been proved to the Board of Trade that The Chamber of CoMMEECE, which is about to be registered under the Companies Act, 1862, and the Companies Act, 1867, as an association Umited by guarantee, is formed for the purjjose of promoting objects of the nature contemplated by the 23rd section of the last- mentioned Act, and that it is the intention of the said chamber that the income and property of the association, whencesoever derived, shall be applied solely towards the promotion of the objects of the association, as set forth in the memorandirm of associa- tion of the said chamber, and that no portion thereof shall be paid or transferred, directly or indirectly, by way of dividend or bonus, or otherwise howsoever, by way of profit to the persons who at any time are, or have been, members of the said association, or to any of them, or to any person claiming through any of tliem. Now, therefore, the Board of Trade, in pursuance of the powers in them vested, and in consideration of the provisions and subject to the conditions contained in the memo- randum of association of the said chamber, as subscribed by eleven members thereof on the -Ith day of June, 1875, do by this their licence direct The Chamber of Commerce to be registered with limited liability, without the addition of the word ' ' limited ' ' to its name. Signed by order of the Board of Trade, this day of . Form 70. Licence of Board of Trade. An Assistant Secretanj of the Board of Trade. The following are some of the resulting advantages : The association becomes a permanent legal entity, and thereby gains stability and credit ; the property can be vested in and held by the association in its own name and corporate capacity, and thereby dealings with such property are much facilitated, and expense as to trustees 298 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 70. avoided ; the association can conti'act, sue, and be sued in its own name ; the oflficers can act without incurring any personal liability. Incorporation under this section has almost entirely displaced incorporation hy Royal Charter or Letters Patent, when the intended operations are to be within the United Kingdom. For specimens of objects, see Forms 184 et seq., infra. The notice which the Board of Trade requires to be advertised is generally in the following form :— Form 71. Notice of Board of Trade. Application for a Licence of the Boaeb of Trade. Notice is hereby given that in pursuance of the 23rd section of the Comjianies Act, 1867, application has been made to the Board of Trade for a licence, du-ecting an asso- ciation, about to be formed under the name of The • ■, to be registered with limited liability without the addition of the word "limited " to its name. The objects for which the association is established are : \^Hcrc they are stated.] Notice is hereby fiu'ther given that any person, corapanj^, or coi-poration objecting to this application may bring such objection before the Board of Trade, on or before the day of next [about a nwnth], by a letter addressed to the Assistant Secretary, Railway Department, Board of Trade, Whitehall, London, S.W. Dated this day of . Certain com- panies not to hold more than two ficres without licence. S. 21 of the Act of 1862 provides that : "No company foi-med for the purpose of promoting art, science, religion, charity, or any other like object, not involving the acquisition of gain by the company or by the individual members thereof, shall, without the sanction of the Board of Trade, hold more than two acres of land ; but the Board of Trade may, by licence under the hand of one of their i^rincipal secretaries or assistant secretaries, empower any such company to hold lands in such quantity and subject to such conditions as they think fit." And the notion appears to prevail that all companies registered under s. 23 of the Act of 1867 are within this enactment, and therefore unable to hold more than two acres without a licence. But looking to the decisions (supra, p. 52) as to the meaning of the words "involving the acquisition of gain," in s. 4 of the Act of 18G2, this notion does not appear to be well founded. In many cases the objects of the association do involve the acquisition of gain by the association if not by the members. See Incorpd. Council of Laiv Beporting, 22 Q. B. D. 279. In order to preclude doubt, the Board of Trade sometimes has required the insertion of qualifying words in the objects. (See infra, Form 183, clause 9.) Moreover, of late the Board of Trade have in several cases requii-ed the insertion in the memorandum of association of a proviso as follows : — "Provided that in case the society shall take or hold any property subject to the jurisdiction of the Charity Commissioners for England and Wales the society shall, if required by the Charity Commissioners, vest the same in special trustees thereof, and provided that as regards any such property the society shall not sell, mortgage, charge, or lease the same without such consent as may be required by law, and as regards any such property the council or trustees of the society shall bo chargeable for such property as may come into their hands, and shall be answerable and accountable for their own acts, receipts, neglects, and defaults, and for the duo administration of such property in the same manner and to the same extent as they would as such council or trustees have been if no incorporation had been effected, and the incorporation of the society shall not diminish or impair any control or authority exerciscable by the Chancery Division or the Charity Conmiissioners over such comicil or trustees, but they shall, as regards any Huch property, be subject jointly and separately to such control and authority as if the Bociety were not incoi-porated." It is said that the Charity Commissioners press for the insertion of this oppressive and objectionable proviso. FORMS. 299 Tlie following are a few of the companies word limited : — Benevolent. Birmiugliam Hospital Saturday Fuud 1892 Clergy Pensions Institution 1893 Irisli Industries Association 1893 Provident Clerks' Benevolent Fund 1885 ^V"orkin^ Ladies' Guild 1893 which have been registered wthout the ForiIl71 Chambers of Commerce. Ijondou Chamber of Commerce .... 1881 Associated Chambers of Commerce 1875 Clubs. Iluddersficld Carlton Club 1875 Mauningham Football Club 188G Newcastle Junior Liberal Club .... 1880 ,St. Pancras Reform Club 1887 Incorporated West Herts Golf Club 1891 Colleges. Cheltenham Ladies' College 1880 Ne^vnham College 1880 University College, Bristol 187G Yorkshire College 1878 City and Guilds of London Institute for the advancement of Technical Education 1880 Exchanges. Birmingham Exchange 1880 Manchester Coal Exchange 1882 Hospitals. Dalrymple Home for Inebriates . . 1882 llampstead Home Hospital and Nursing Institute 1882 Home Hospitals Association for paying patients 1878 Laav Socteties. [A great many.] MlSCELLAI^ EOUS. Incorporated Council of Law Ke- porting 1870 Incorporated Free and Open Church A.ssociation 1882 Manchester Incorjiorated Law Library Society 1884 Meteorological Council 1892 National Smoke Abatement Institu- tion 1882 Palestine Exploration Fuud 1879 Poyal School of Ai-t Needlework . . 1878 Society for Promoting the Emploj'- ment of Women 1879 Musical. Sacred HaiTQOiiic Society. Professional. Auctioneers' Institute 1890 Birmhigham Medical Institute 1874 British Dental Association 1880 College of Organists 1877 College of State Medicine 1887 Incoi-porated Society of Medical Officers of Health 1893 Incorporated Society of Musicians 1893 Institute of British Carriage Manu- facturers 1883 Institute of Chemistry of Great Britain and Ireland 1877 Institute of Marine Engineers 1890 Institute of Shorthand Writers prac- tising in the Supreme Court of Judicature 1887 Institution of Mechanical Engineers 1878 National Association of Colliery Managers 1890 Sanitary Inspectors' Association. . . . 1892 Sheffield Incorjiorated Society of Chartered Accomitants 1882 Society of Telegrajih Engineers and Electricians 1883 Protection.* Corporation of Foreign BontUiolders 1873 Halifax Creditors' Association .... 1882 Incorporated Publishers' Association 1893 Petroleum Association 1885 Religious. Church Ai-my 1893 Mission to Deep Sea Fishermen. . . . 1887 Salisburj' Diocesan Board of Finance 1882 Society of Biblical Archeology 1893 Southwell Diocesan Finance Asso- ciation 1892 Scientific. Durham, &c., Botanical and Horti- cultural Society Philological Society Philosophical Society of Glasgow . . Physical Society of London Royal Archfeological Society of Great Britain and Ireland Tyneside Geographical Society (In- corporated) Schools. Clifton High School for Girls Glasgow School of Art Herkomer School Manchester Giiis' High School Trust 1881 1879 1878 1878 1884 1892 1877 1893 1887 1877 [* Of late the Board of Trade have objected to granting a licence to trade protection societies.] 300 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 72. Memorandmn of unlimited company. The Companies Acts, 1862 a^v 1893. Memorandum of Association of The C'ni/. 1. The name of the coy is " The Coy." 2. The registered office \^snj}ra, p. 268]. 3. The objects for which the coy is established are : — We, the several persons whose names and addresses are subscribed, are desirous of being formed into a coy in pursuance of this memdm of asson. Names, addresses, and descriptions of subscribers. Dated the day of . Witness \_supra, p. 293]. FORMS. 301 OBJECT CLAUSES. ACQUISITION OF EXISTING CONCERN. Very many, perhaps the majority, of companies are formed nowadays to work existing businesses. Some or other of the following seven forms (73 to 79) are applicable in such cases, and such clauses are generally set out first as describing the most prominent of the company's objects. To acquire and take over as a going concern the business now carried Form 73. on at , in the county of , under the style or firm of , and To acauire a all or any of the assets and liabilities of the proprietor[s] of that busi- bu.siness. ness in connection therewith, and with a view thereto to enter into the agreemt referred to in clause 3 of the coy's arts of asson, and to carry the same into effect with or without modification. Where a company is formed to acquire an existing business, the acquisition thereof is usually made the leading object, as above. Wliere the agreement is with a trustee or agent, the clause can use the expression "adopt" instead of "enter into," unless clause 3 of the articles refers to the adoptive contract. Where the company is formed to acquire a business belonging to another company, or to amalgamate several businesses, the clause will be varied, e.g. : — To acquire and take over as a going concern the undertaking, and Form 74. all or anv of the assets and liabilities of the Coy, Limtd, incor- ;;; : •^ . •" ' To acquire porated in 18[90], and with a view thereto to, &c. undertaking of another company. To acquire, take over, and amalgamate the undertakings of the Form 75, Coy, Limtd, and of the Coy, Limtd, and with a view to enter into ,, , „ To acquire the agreemts, &C. and amal^a- mate other concerns. To acquire certain mines and mining claims in known as, &c., Form 76. and with a view thereto, &c. Z '. ' lo acquire mines. To acquire certain patents for inventions in relation to, &c., and Form 77. with a view thereto, &C. To acquire patents. To acquire a concession granted by, &c., and with a view, &c. Form 78. To acquire concession. To adopt and carry into effect, with or without modification, an -pi -q agreemt which has already been prepared and is expressed to be made between A. of the one pt, and B. on behalf of the coy of the other ^'^'1'^^ . 302 jik:\ioi?anda of association. fr^RAP. VT. Form 79. mate other concerns. -pt, and is to bo signed immediately after the incorporation of fhe co}'', and a copy whereof has for the purpose of identification been sub- scribed by , a solicitor of the Supreme Court. See Plan II., siipra, p. 17G. Form 80. To enter into a contract. < To enter into and carry into effect (either with or without modifica- tion) an agreemt which has already been prepared, and is expressed to be made between [the sd] A. of the one pt, and the coy of the other pt, a copy whereof has for the purpose of identification been endorsed with the signatures [of B., C, and D., three] of the subscribers hto [_or a copy whereof is set forth in the schedule to the arts of asson of the coy]. Wliere it is desired to mention any preliminary agreement in the memorandum, this or other of the above Forms will be used, according as Plan I., or II., or III., supra, pp. 175, 176, is adopted. COMMON POEMS. These common form clauses are intended for use in connection with the rarious object clauses set forth or mentioned above, and in Forms 114 to 192, infra. As a general rule. Forms 81, 82, 84, 86 to 98, 100 to 105, may be used, but regard must, of course, be had to the special clauses and to the circumstances of the case. In some cases some of the other common forms, or some of the Forms 106 to 113, may have to be added. Form 81. To carry on ftther busi- nesses. To carry on any other business [whether manufacturing or other- wise] which may seem to the coy capable of being conveniently carried on in connection with the above or calculated directly or indirectly to enhance the value of or render profitable any of the coy's ppty or rights. The above is frequently adopted, and has sometimes been found very useful. Such words must have effect. See JRc Peruvian Mail. Co., 2 Ch. 617 ; supra, p. 277. Form 82. To purchase other busi- nesses. To acquire and undertake the whole or any pt of the business, ppty, and liabilities of any person or coy carrying on any business which this coy is authorized to carry on, or possessed of ppty suitable for the purposes of this coy. The above ought to bo specified among the objects, if the company is intended to have the power. Ernest v. NichoUx, 6 II. L. 401. Express mention should be made of liabilities. But sec Ovcrcnd, Gurncy % Co. v. Glhhx, L. R. 5 H. L. 480, as to what is sufficient. Many companies formed without this object have by Aft of Parliament, and by proceedings under the Companies (Memorandum of Association) Act, 1890, extended their objects so as to obtain the requisite power. To apply for, purchase, or otherwise acquire, any patents, hrcvets Form 83. d'invention, licences, concessions, and the like, conferrino: any exclusive Z, ^, or non-exclusive or Inntd right to use, or any secret or other mforma- patents, tion as to any invention which may seem capable of being used for any of the purposes of the coy, or the acquisition of which may seem calculated directly or indirectly to benefit this coy, and to use, exercise, develop, or grant licences in respect of, or otherwise turn to account the ppty, rights or information so acquired. A good many coinpanics insert tlie above, especially niannfariurinf^- companies. To enter into [partnership or into] any arrangement for sharing Form 84. profits, union of interests, co-operation, joint adventure, reciprocal con- Z, r~7^~, cession, or otherwise, with any person or coy carrying on or engaged partnership, in, or about to carry on or engage in, any business or transaction which ^^® shares, this coy is authorized to carry on or engage in, or any business or trans- action capable of being conducted so as directly or indirectly to benefit this coy. And [to lend money to, guarantee the contracts of, or other- wise assist, any such person or coy, and] to take or otherwise acquire shares and securities of any such coy, and to sell, hold, re-issue, with or without guarantee, or otherwise deal with the same. Very clear powers are necessary to enable a company to enter into partnership with any other company or person, or to take shares in any company. Kv parte British Nation Life Assurance Assoc, 8 Ch. Div. 704. The powers should be expressly conferred by the memorandum of association, though the power to acquire and hold shares may be implied from the nature of the company's business. See Royal Bank of India'' s case, 4 Ch. 252 ; and London Financial Assoc, v. Kelk, 26 0. D. 107. It was at one time contended that it was illegal for one company to take shares in another, but the contrary is now well settled, provided the memo- randum gives the power. Barned^s Banking Co., 3 Ch. 105 ; International Contract Co.'s case, 17 W. U. 459; In re Financial Corporation, 28 W. R. 760; W. N. (1880) 88. If Form 93, infra, is used, the words in brackets will be omitted ; and if Form 85 is also used, the latter part of the above clause can be omitted. To take, or otherwise acquire, and hold shares in any other coy Ynrrn 85 having objects altogether or in part similar to those of this coy, or carrying on any business capable of being conducted so as directly or shares in indirectly to benefit this coy. other com- panies. See note to Form 84. This form is sometimes used in conjunction with that Form. To enter into any arrangements with any [governments or] autho- Form 86. rities [supreme], municipal, local, or otherwise, that vnny seem con- Xo mik ^ ~ ducive to the coy's objects, or any of them, and to obtain from any arrango- such [government or] authority, any rights, privileges, and concessions ^*i^ ^ ^-^^ 304 MEMORANDA OF ASSOCIATION. [ClIAP. VI. Form 86. which the coy may think it desirable to obtain, and to carry out, exer- cise, and comply with any such arrangements, rights, jDrivileges, and concessions. This clause is frequently used, witt more or less modification. Form 87. To benefit employe-t, &o. To establish and support or aid in the establishment and support of associations, institutions, funds, trusts, and conveniences calculated to benefit employes or ex-employes of the coy [or its predecessors in business] or the dependents or connections of such persons, and to grant pensions and allowances, and to make payments towards insur- ance, and to subscribe or guarantee money for charitable or bene- volent objects, or for any exhibition, or for any public, general, or useful object. A gratuity to employes may be supported without express power. Hampson v. Price's Patent Candle Co., 45 L. J. Ch. 437 ; Eutton v. West Cork Rail. Co., 23 C. D. 654. And so may a pension. Henderson v. Bank of Australasia, 40 C D. 170. But to justify a subscription for outside piirposes, express authority is necessary. Tomkinson v. ocrliouBO koepors, restaurant keepers, lodging-liouse keepers, ice manufacturers and moi'chants, tobacconists, farmers, dair^'men, yeast dealers, grain sellers and dryers, timber merchants, brick makers, finings manufacturers, and isinglass morcliants. (4) 'I'o l)uy, sell, manipulate, and doal bolh wholesale and retail in FORMS. 329 commodities, articles and things of all kinds which can conveniently Form 134. be dealt in by the coy in connection with any of its objects. (5) To lend or advance money to such parties, and on such terms as may seem expedient, and in particular to customers of, and persons having dealings with the coy, and to give any guarantee or indemnity that may seem expedient, and to discount bills, and to receive money on deposit at interest or otherwise, or valuables, and to transact any of the business of a banker which may seem to the coy expedient. (6) To carry on any other business, whether manufacturing or otherwise, which may seem to the coy capable of being conveniently carried on in connection with any of the above businesses or objects, or calculated directly or indirectly to enhance the value of or render profitable any of the coy's property or rights for the time being. [^Add selection of common forms, Forms 81 et seqj] As to the importance of clause 5, see ReicVs Brewery Co. v. Male, (1891), 2 Q. B. 1. (1) \_If necessary, insert one of Forms 73 to 78.] Form 135. (2) To carry on all or any of the businesses following : namely, Cotton ~ cotton spinners and doublers, flax, hemp, and jute spinners, linen Spinners, manufacturers, flax, hemp, jute, and wool merchants, wool combers, worsted sj)inners, woollen spinners, yarn merchants, worsted stuff manufacturers, bleachers and dyers, and makers of vitriol, bleaching, and djing materials, and to purchase, comb, prepare, spin, dye, and deal in flax, hemp, jute, wool, cotton, silk, and other fibrous substances, and to weave or otherwise manufacture, buy and sell and deal in linen, cloth, and other goods and fabrics, whether textile, frebled, netted, or looped, and to supply power. \_Add selection of common forms, Forms 81 et seq.~\ (1) \_If necessary, insert one of Forms 73 to 78.] Form 136. (2) To carry on the business of a telephone, telegraph, and electric ;jrj — T light, heat, and power supply coy, and in particular to establish, work, company, manage, control, and regulate telephone exchanges and works for the supply of electric light, heat, and motive power, and to transmit and facilitate the transmission of telephonic and telegrajAic communica- tions and messages, and to undertake the lighting of towns, streets, buildings, and other places, and the sujiply of electric heat, and motive power for public or private purposes. (3) To carry on any other businesses directly or indirectly connected with the supply or employment of electricity, or capable of being conveniently carried on in connection with any of these objects, or calculated directly or indirectly to render profitable any of the ppty or rights of the coy. (4) To construct; maintain, lay down, carry out, work, sell, let ou 330 MEMORANDA OF ASSOCIATION. [( ^IIAP. VI. Form 136. hire, and deal in telephones and all kinds of works, machinery, apparatus, conveniences, and things capable of being used in con- nection with any of these objects, and in particular any cables, wires, lines, stations, exchanges, reservoirs, accumidators, lamps, meters, and engines. [^Add selection of common forms, Forms 81 et sey.] Form 137. (1) [//" necessary, insert one of Forms 73 to 78.] Drapers C^) ^*^ carry on the business of drapers and furnishing and general Tvarehouse- warehousemen in all its branches. nishers and ('^) "^^ carry on all or any of the businesses of silk mercers, silk outfitters, weavers, cotton spinners, cloth manufacturers, furriers, haberdashers, keepers &c. hosiers, manufacturers, importers, and wholesale and retail dealers of (vmiyersal and in textile fabrics of all kinds, milliners, dressmakers, tailors, j)rovi j. liatters, clothiers, outfitters, glovers, lace manufacturers, feather dressers, boot and shoe makers, manufacturers and importers, and wholesale and retail dealers of and in leather goods, household furniture, ironmongery, turnery, and other household fittings and utensils, ornaments, stationery, and fancy goods, dealers in provisions, drugs, chemicals, and other articles and commodities of personal and household use and consumption, and generally of and in all manu- factured goods, materials, provisions, and produce. (4) To carry on all or any of the- businesses of undertakers, coach and carriage builders, saddlers, house decorators, sanitary engineers, electrical engineers, and contractors in all their branches, gas fitters, land, estate, and house agents, builders, contractors, auctioneers, cabinet makers, upholsterers, furniture removers, owners of deposi- tories, warehousemen, carriers, storekeepers, warehouse keepers, manufacturers of and dealers in hardware, jewellery, plated goods, perfumery, soap, and articles required for ornament, recreation, or amusement ; gold and silversmiths, booksellers, dealers in musical instruments, maniifacturers of and dealers in bicycles, tricycles, and motor carriages ; and also refreshment contractors, restaurant keepers, hotel, boarding and lodging house keepers, letters of furnished or unfurnished houses, flats or apartments, with or without servants or other accessories or conveniences, licensed victuallers, wine and spirit merchants, tobacconists, and dealers in mineral, aerated, and other liquors ; farmers, dairymen, market gardeners, nurserymen, and florists. (5) To buy, sell, manufacture, repair, alter and exchange, let on hire, export, and deal in all kinds of articles and things which may be required for the purposes of any of the sd businesses, or commonly supplied or dealt in by persons engaged in any such businesses, or wliich may seem capable of being profitably dealt with in connection with any of the sd >)usines80s. FORMS. 331 (6) To receive mouey, valuables, aud goods and materials of all Form 137. kinds on deposit or for safe custod}'. (7) To provide and conduct refreshment rooms, newspaper rooms, reading and writing rooms, dressing rooms, telephones, and other conveniences for the use of customers and others. (8) To grant to ticket-holders and others any special privileges and advantages, and to make arrangements with persons engaged in any ti-ade, business, or profession for the concession to the coy's members, ticket-holders, and their friends, of any special privileges or ad- vantages. (9) To carry on the business of a co-operative store and general supply society in all its branches, and to transact all kinds of agency business. (10) To carry on any other business (manufacturing or otherwise), except the issuing of policies of assurance on human life, which may seem to the coy capable of being conveniently carried on in connection with any of the above specified businesses, or calculated directly or indirectly to enhance the value of or render profitable any of the cov's ppty or rights. \_Add selection of common forms, Forms 81 et seq.~\ 1. \_If necessary, insert one of Forms 73 to 78.] 2. To carry on the biisiness of iron-founders, mechanical engineers, and manufacturers of agricultural implements and other machinery, tool-makers, brass-founders, metal-workers, boiler-makers, millwrights, machinists, iron and steel converters, smiths, wood-workers, builders, painters, metallurgists, electrical engineers, water supply engineers, gas-makers, farmers, printers, carriers, and merchants, and to buy, sell, manufacture, repair, convert, alter, let on hire, and deal in machinery, implements, rolling-stock, and hardware of all kinds, and to carry on any other business (manufacturing or otherwise) which may seem to the coy capable of being conveniently carried on in con- nection with the above, or otherwise calculated, directty or indirectly, to enhance the value of any of the coy's ppty and rights for the time being. 3. To carry on any business relating to the winning and working of minerals, the production and working of metals, and the production, manufacture, and preparation of any other materials which may be usefully or conveniently combined with the engineering or manufac- turing business of the coy, or any contracts undertaken by the coy, and either for the purpose only of such contracts or as an indej)endent business. 4. To undertake and execute any contracts for works involving the supply or use of any machinery, and to carry out any ancillary or other works comprised in such contracts. \_Add selection of common forms, Forms 81 et seq.~\ Form 138. Mechauical ena'iiieer, kc. 332 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 139. " Special patents ' ' company. (1) To purchase or otherwise acquire any interests in any patents brevets d^im-enfioti, licences, concessions and the like conferring an exclusive or non-exclusive or limited right to use, or any secret or other information as to any invention in relation to [e.^., the pro- duction, treatment, storage, application, distribution and use of electricity, and of any apparatus therefor], or generally any invention which may seem to the coy capable of being profitably dealt with, and in particular to acquire from A. B., of, &c., the benefit of certain existing inventions in relation to, &c., and with a view thereto to enter into and carry into effect the agreemt referred to in clause 3 of the arts of asson of this coy with such modifications (if any) as may seem expedient. (2) To use, exercise, develop, grant licences in respect of, or other- wise to turn to account any such patents, brevets iVmvcyitioyi, licences, concessions, and the like, and information afsd. (3) To carry on business as \_here insert specification of business con- nected ivith such inveniion\ (4) To carry on \subsidiary business^ \_Add selection of common forms, Forms ^\ et sey.J Form 140. Cycle manu- facturers. ( 1 ) To acf[uire and take over as a going concern the undertaking of the Coy, Limtd (incorj)orated in ), and all or any of the assets and liabilities of that coy, and with a view thereto to enter into an agreemt in the terms of the draft referred to in clause 3 of the coy's arts of asson, and to carry the same into effect with or without modification. (2) To carry on the business of manufacturers of cycles, bicycles, tricycles, velocipedes, and carriages of all kinds, and of all articles and things used in the manufacture, maintenance, and working thereof, and also all apparatus and implements and things for use in sports or games. (3) To carry on the business of mechanical engineers, machinists, fitters, millwrights, founders, wire drawers, tube makers, metallurgists, saddlers, galvanizers, japanners, annealers, enamellers, electro platers, painters, and packing case makers. (4) To buy, sell, repair, alter, and deal in ajiparatus, machinery, materials, and articles of all kinds which shall bo capable of being used for the purposes of any business herein raentd or likely to be required by customers of any such business. [^Add selection of common forms , Forms 81 et scq.\ Form 141. (1) To provide a cricket ground at or near , in the county of r;rickot club » fi^^^ to ^^y o^t ^'^^ prepare such ground for cricket and other FORMS. '^'33 purposes of the coy, and to provide pavilions, lavatories, refresliment Form 141. rooms, and other conveniences in connection therewith. \^Add if ~ suitable, "and with a view thereto to enter into [o/- adopt] an agree- ment, (S:c." [latter part of Form 78].] (2) To promote the game of cricket and other athletic .sports and pastimes. (3) To hold or arrange cricket and other matches and competitions, and offer and grant, or contribute towards the provision of prizes, awards, and distinctions. (4) To subscribe to, become a member of, and co-operate with any other association, whether incorporated or not, whose objects are altogether or in part similar to those of this coy. (5) To buy, sell, and deal in all kinds of apparatus aud all kinds of provisions, liquid and solid, required by persons frequenting the coy's cricket grounds. ("6) To purchase, take on lease, or otherwise acquire any lands, buildings, easements, or ppty, real and personal, which may be requisite for the purposes of, or capable of being conveniently used in con- nection with, any of the objects of the coy. (7) To raise money by subscriptions, and to grant any rights and privileges to subscribers. [Add selection of common forms, Forms 81 et seg.^ [If necessari/, insert one of Forms 73 to 78.] Form 142. Laundry. To carry on at , in the county of , and elsewhere, the business of a steam and general laundry, and to wash, clean, purify, scour, bleach, wring, dry, iron, colour, dye, disinfect, renovate, and prepare for use all articles of wearing apparel, household, domestic and other linen, and cotton and woollen goods and clothing, and fabrics of all kinds, and to buy, sell, hire, manufacture, repair, let on hire, alter, improve, treat and deal in all apparatus, machines, materials, and articles of all kinds, which are capable of being used for any such purposes. To carry on business as proprietors of swimming and other baths, wash-houses, and mechanical engineers, and to carry on any other business, /., G Q. B. D. 287, 703. As to proceedings against the directors of a company, see Eeff. v. Judd, 37 W. R. 143. Form 147. (1) [^If necessary, ifisert one of Forms 73 to 78.] ^^ (2') To carry on business as proprietors and publishers of news- Is cwspaper ^' '' 11 TIT and mugazino papers, journals, magazines, books, and other literary works and proprietorH. undertakings. (3) To carry on all or any of the businesses of printers, stationers, Form 147. lithographers, typefounders, stereotypers, electrotypers, photographic ~~ ' pi'inters, photo-litliographers, chromo-lithographers, engravers, die- sinkers, bookbinders, designers, draughtsmen, paper and ink manu- facturers, booksellers, publishers, advertising agents, engineers, and dealers in or manufacturers of any other articles or things of a character similar or analogous to the foregoing or any of them or connected therewith. (4) To establish competitions in respect of contributions or informa- tion suitable for insertion in any publication of the coy, or otherwise, for any of the purposes of the coy, and to offer and grant prizes, rewards, and premiums of such character and on such terms as may seem expedient. (5) To undertake and transact all kinds of agency or business which an ordinary individual may legally undertake. (6) To provide for and furnish or secure to any members of the coy, or customers of, or to any subscribers to or purchasers or possessors of, any publication of the coy, or of any coupon or ticket issued with any publication of the coy, any chattels, conveniences, advantages, benefits, or special privileges which may seem expedient, and either gratuitously or otherwise. \_Ad(l selection of common forms ^ Forms 81 e^ seq.\ (1.) \_If necessary, insert one nf Forms 73 to 78.] Form 148. (2.) To establish at coffee taverns, and to carry on there the ^7^ business of refreshment-house keepers, upon the principle that no taverns, intoxicating liquors shall be sold by the coy, and to provide and work, upon the same principle, refreshment-stalls, carts, and barrows. (3.) To establish libraries, reading-rooms, and other conveniences, and to provide for the recreation and instruction of the coy's customers and their friends. \_Add selection of commoti forms, Forms 81 et seq.^ (1) \_If necessarij, insert one of Forms 73 to 78.] Form 149. (2) To carry on the business of [temperance] refreshment rooms Refreshment proprietors and refi'eshment caterers and contractors in all its respective rooms, branches. (3) To carry on business as bakers, confectioners, butchers, milk- sellers, butter-sellers, dair;^Tnen, grocers, poulterers, greengrocers, farmers, and ice merchants. (4) To manufacture, buy, sell, refine, prepare, grow, import, export, and deal in provisions of all kinds, both wholesale and retail, and ■whether solid or liquid. 336 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 149. (5) To establish and provide all kinds of conveniences and attrac- tions for customers and others, and in particular reading, writing, and smoking rooms, lockers, and safe deposits, telephones, telegraphs, clubs, stores, shops, lodgings, and lavatories. \^Add selectio7i of common forms. Forms 81 et seq.^ Form 150. 1. To provide at a hall and other suitable rooms, buildings. Public hall. and places, and to permit the same or any part thereof to be used on such terms as the coy shall think fit, for any purposes, public or private, and in particular for public meetings, exhibitions, concerts, lectures, dinners, theatrical performances, and other entertainments, and for reading, writing, and newspaper rooms, libraries, baths, laundries, refreshment rooms, dressing rooms, shops, business offices, and residences. \^Add, if necessary, a reference to some agreement in the articles as in Form 78.] 2. To furnish the coy's ppty with such furniture, implements, machinery, and conveniences as may be thought desirable with a view to the sale, letting, or user thereof. 3. To provide gardens, greenhou.ses, and grounds for recreation and amuse- ment. 4. To carry on the business of an hotel and restaurant proprietor and wine merchant. 5. To provide amusement, entertain- ment, and instruction for shareholders of the coy and others. \^Add selection of common forms. Forms 81 et seq.'] Form 151. Race-course. (1) To purchase, take on lease, or otherwise acquire, the land and hereditaments, known as the estate, situate, &c. \_Add, ifnecessari/, a reference to some agreement in the articles as in Form 73.] (2) To carry on the business of a race-course coy in all its branches, and in particular to lay out and prepare any lands for the running of horse races, steeplechases, or races of any other kind, and for the drilling or reviewing of troops, and for any kind of athletic sports, and for playing thereon games of cricket, bowls, golf, curling, lawn tennis, polo, or any other kind of amusement, recreation, sport, or entertain- ment, and to construct grand or other stands, booths, stabling for horses, paddocks, refreshment rooms, and other erections, buildings, and conveniences, whether of a permanent or temporary nature, which may seem directly or indirectly conducive to the coy's objects, and to conduct, hold, and promote race meetings and athletic sports, polo, lawn tennis, and other matches, agricultural, horse, flower, and other shows and exhibitions, and otherwise utilize the coy's ppty and rights, and to give and contribute towards prizes, cups, stakes, and other rewards. (3) To establish any clul)s, hotels or other conveniences in connection with the coy's ppty. (4) To carry on the business of hotel keepers, tavern keepers, licensed victuallers, refreshment purveyors, and market gardeners, «S:c. \_Add selection of common forms, Forms 81 et scq.j FOEMS. 337 1. \_Jf necessary, insert one of Forms 7.3 to 78.] Form 152. 2. To carry ou the business of a storelcocpor in all its branches, 77 ' ~- _ -^ J- _ ' Oo-operative and in particular to buy, sell, manufacture, and deal in goods, stores, store, consumable articles, chattels and effects of all kinds, both wholesale and retail, and to transact every kind of agency business, and generally to engage in any business or transaction which may seem to the coy directly or indirectly conducive to the interests or convenience of the coy's members or ticket-holders or their friends, or any section thereof. 3. To make arrangements with persons engaged in any trade, business, or profession, for the concession to the coy's members, ticket- holders, and their friends, of any special rights, privileges, and advantages, and in particular in regard to the supply of goods. \_Add selection of common forms, Fortyis 81 et seq.^ (1) \_If necessary , insert one of Forms 73 to 78.] Form 153. (2) To carry on the business of hotel, restaurant, cafe, tavern, -rr . i \ beer-house, refreshment-room, and lodging-house keepers, licensed panj. victuallers, wine, beer, and spirit merchants, brewers, maltsters, dis- tillers, imjoorters and manufacturers of aerated, mineral, and artificial waters and other di-inks, purveyors, caterers for public amusements generally, coach, cab, and carriage proprietors, livery stable keepers, jobmasters, farmers, dairymen, ice merchants, importers and brokers of food, live and dead stock, and colonial and foreign produce of all descriptions, hairdressers, perfumers, chemists, proprietors of clubs, baths, dressing-rooms, laundries, reading, writing, and newspaper rooms, libraries, grounds, and places of amusement, recreation, sport, entertainment, and instruction of all kinds, tobacco and cigar merchants, agents for railway and shipping cos and carriers, theatrical and opera box office proprietors, entrepreneurs and general agents, and any other business which can be conveniently carried on in connection therewith. \_Add selection of common forms , Forms 81 et seq."] (1) To establish and maintain in the city of and elsewhere. Form 154. circulating libraries, and also reading and writing rooms, and a ^-i . reference library, and to furnish the same resply with books, reviews, magazines, newspapers and other publications, including instrumental and vocal music. \_Add, if necessary, a reference to some ayreemcnt in the articles, as in Form 73.] (2) To carry on the business of book- sellers, stationers, publishers, and restaurant proprietors, and to carry on the business of booking seats at theatres and other places of enter- tainment. \_Add selection of common forms. Forms %\ et seq.~\ P. z 338 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 155. School or colleore. (1) To establish and carry ou at a school \_or, college] where students may obtain on moderate terms a sound [religious], classical, mathematical, and general education of the highest order, [7/ neces- sary, add a reference to some agreement m the articles, as in Form 73.] (2) To provide for the delivery and holding of lectures, exhibitions, public meetings, classes, and conferences calculated directly or indirectly to advance the cause of education, whether general, professional, or technical. \_Add selection of common forms, Forms 81 et seq.~\ A considerable number of school and college companies haYe been incorporated. Sometimes they obtain a licence from the Board of Trade to register without the word " Limited." (See supra, pp. 296 et seq.) Foi-m 156. Loan club. (1) ^If necessary, insert one of Forms 73 to 78.] (2) The accumu- lation of capital by means of monthly subscriptions or otherwise from members, and also by borrowing money from members or any other persons on such security and on such terms as may from time to time be arranged. (3) To advance or lend any of the afsd capital or other moneys of the coy for the time being on the security of freeholds, leaseholds, bills of exchange, promissory notes, bonds, stock-in-trade, chattels, and other ppty, real or personal. (4) To acquire any real and personal ppty which the coy may think it desirable to acquire by way of investment, or with a view to re-sale or otherwise, and in particular any freeholds, leaseholds, mortgages, shares, and securities. \_Add selection of common forms, Forms %\ et sey.] A great many loan clubs have been formed within the last year or two. In Notting- ham there seems to bo a mania for them. In most cases they are formed as unlimited comiiauies with a share capital not of any fixed amoimt, divided into shares of, say, 100/., to be paid by monthly instalments. The regulations generally authorize the directors to make general rules as to the payment of enti'ance fees, loans, repayments, fines, &c., and declare that they are to be binding. The common plan is to have a monthly meeting for payment of subscri])tions, and advances are made in accordance with lots drawn, provided sufficient secmity is found. Many of these clubs are held at inns or taverns, and arc named accordingly, e.g., "The Unicorn Inn Thii'd Thursday Mutual Loan Club." See Borough Commercial Soc., (1893) 2 Ch. 2-12. Form 157. I'uildiiig' estate. ( 1 ) To purchase, take on lease or in exchange, or otherwise acquire any lands and buildings in the county of or elsewhere, and any estate or interest in, and any rights connected with, any such lands and buildings [and in particular to acquire a certain piece or parcel of land and buildings .situate, &c., and with a view thereto to enter into the agroemt, &c., as in Form 73]. (2) To develop and turn to account any land acquired by or in which the coy is interested, and in partictilar by laying out and preparing the same for building purposes, con- structing, altering, pulling down, decorating, maintaining, furnishing, littiiig up, and improving buildings, and by planting, paving, draining, FORMS. 339 farming', cultivating-, letting on building lease or building agrocmt, Form 157. and by advancing money to and entering into contracts and arrange- ments of all kinds witli builders, tenants, and others. (3) To con- struct, maintain, improve, develop, work, control, and manage any waterworks, gasworks, reservoirs, roads, tramways, electric power, beat and light supply works, telephone works, hotels, clubs, restaurants, baths, places of worship, places of amusement, pleasure grounds, parks, gardens, reading rooms, stores, shops, dairies, and other works, and conveniences which the coy may think directly or indirectly con- ducive to these objects, and to contribute or otherwise assist or take part in the construction, maintenance, develoj)ment, working, control, and management thereof. (4) To carry on all or any of the following businesses, namely, builders and contractors, decorators, merchants, and dealers in stone, sand, lime, bricks, timber, hardware, and other building requisites, brick and tile and terra-cotta makers, jobmasters, carriers, licensed victuallers, and house agents. (5) To lend money, either with or without security, and generally to such persons and upon such terms and conditions as the coy may think fit, and in particular to persons undertaking to build on or improve any px^ty in which the coy is interested, and to tenants, builders, and contractors. (6) \^For7n 91.] (7) To undertake and execute any trusts the under- taking of which may seem to the coy desirable. l^Add selection of common forms ^ Forms 81 et seq.~\ (1) To purchase for investment or resale, and to traffic in land and Form 158. house and other ppty of any tenure and any interest therein, and to Land and create, sell and deal in freehold and leasehold ground rents, and to l^^ultling make advances upon the security of land or house or other ppty, or any interest therein, and generally to deal in, traffic by way of sale, lease, exchange, or otherwise with land and house ppty and any other ppty whether real or personal. \_Add selection of common forms , Forms 81 e^ seq.~\ 1. To acquire by purchase, lease, exchange, or otherwise, land, Form 159. buildings, and hereditaments of any tenure or description situate in p., , .,, the City of and its neighbourhood, and any estate or interest ings. therein, and any rights over or connected with land so situate, and to turn the same to account as may seem expedient, and in particular by preparing building sites, and by constructing, reconstructing, altering, improving, decorating, furnishing, and maintaining offices, flats, houses, factories, warehouses, shops, wharves, buildings, works and conveniences of all kinds, and by consohdating, or connecting, or sub- dividing properties, and by leasing and disposing of the same. \_Add, if sicitable, a reference to some ayreement in the articles, as in Form 73.] 2. To manage land, buildings, and other ppty situate as afsd, z2 340 MEMOEANDA OF ASSOCIATION. [ChAP. VI. Form 159. whether belonging to the coy or not, and to collect rents and income, and to suj)ply to tenants and occupiers, and others, refreshments, attendance, messengers, light, waiting rooms, reading rooms, meeting rooms, lavatories, laundry conveniences, electric conveniences, stables, and other advantages. 3. To acquire and take over any business or undertaking carried on, upon, or in connection with, any land or building which the coy may desire to acquire as afsd, or become interested in, and the whole or any of the assets and liabilities of such business or undertaking, and to carry on the same, or to dispose of, remove, or put an end thereto, or otherwise deal with the same as may seem expedient. 4. To establish and carry on, and to promote the establishment and carrjdng on, upon any ppty in which the coy is interested, of any business which may be conveniently carried on upon or in connection with such ppty, and the establishment of which may seem calculated to enhance the value of the coy's interest in such ppty, or to facihtate the disposal thereof. 5. To advance and lend money to builders, tenants, and others Ayho may be willing to build on or improve any land or buildings in which the coy is interested, and generally to advance money to such persons and on such terms as may be arranged. \_Add selection of common forms., Forms 81 et seq.~\ Form 160. Colonization and land. (1) To purchase or otherwise acquire any landed ppty in the State of in the United States of America, and in particular an estate known as, &c. (2) To develop the resources of and turn to account the lands, buildings, and rights for the time being of the coy in such manner as the coy may think fit, and in particular by clearing, draining, fencing, planting, building, improving, farming, grazing, mining, and by promoting immigration, establishing towns, villages, and settlements. (3) To carry on the business of farmers, graziers, meat and fruit preservers, brewers, planters, miners, metallurgists, quarry owners, brickmakcrs, builders, contractors for the construction of works, both public and private, merchants, importers and exporters, printers, publishers, bankers, ship builders, ship owners, brokers, and any other businesses which may seem calculated, directly or indirectly, to develop the coy's ppty. (4) To construct, carry out, support, main- tain, improve, manage, work, operate, control, and superintend rail- ways, tramways, &c. [see Fo7'm 126, cl. 2], hotels, exchanges, churches, chapels, parks, schools, museums, places of recreation, racecourses, batlis, washliouses, and any otlier works and conveniences which may seem directly or indirectly conducive to any of these objects, and to contribute to or otherwise aid or take part in the construction, carry- ing out, support, maintenance, improvement, management, working, operating, coutrolJing, and superintending tlie same, (o) To lend money and other i)pty, to guarantee the performance of contracts and FORMS. 341 obligations of all kinds, to act as agents in tlie management, sale, and Form 160. purchase of ppty, and generally to transact business as capitalists, bankers, and financiers. (6) To carry on and transact any other busi- nesses and operations, manufacturing, commercial, or otherwise, except the issuing of policies of assurance on human life, which the coy may think directly or indirectly conducive to any of its objects, or capable of being conveniently carried on in connection therewith. [^Add selection of common forms, Forms 81 et sey.] 1. To acquire the concessions granted to by , King of the Form 161. nation, and, with a view thereto, to enter into the agreemt African referred to in clause 3 of this coy's arts of asson, and to carry the same concessions. into effect with or without modification. 2. To acquire from any other sovereign, state, or authorities in Africa or elsewhere any concessions, grants, decrees, rights, powers and privileges whatsoever, which may seem to the coy capable of being turned to account, and to work, develop, carry out, exercise and turn to account the same. 3. To prosjiect, examine, and explore any territories and places in Africa and elsewhere, and to employ and equip expeditions, commis- sions, experts and other agents. 4. To develop the resources of and turn to account any lands and any rights over or connected with land belonging to or in which the coy is interested, and in particular by clearing, draining, fencing, planting, cultivating, building, improving, farming, irrigating, grazing, and by promoting immigrations and emigration and the establishment of towns, \T.llages, and settlements. 5. To carry out, establish, construct, maintain, improve, manage, work, control, and superintend any roads, ways, tramways, railways, bridges, harbours, reservoirs, watercourses, wharves, embankments, fortifications, hydraulic works, telegraphs, telephones, saw-mills, smelting works, furnaces, factories, warehouses, hotels, viaducts, exchanges, mints, transport and postal arrangements, stores, shops, cliurches, chaj)els, stations, and other works and conveniences, and to contribute to, or assist in the carrying out, estabb'shment, construction, maintenance, improvement, management, working, control, or super- intendence of the same. 6. To govern any territories in Africa, and to make and enforce such laws and ordinances as may seem expedient, and to provide for the administration of justice, and for the establishment and maintenance of good order, and for the welfare of the inhabitants, and for the advancement of trade and commerce, and for the protection of such territories from invasion or attack. 7. To promote the abolition of slavery, and the advance of civili- zation. 8. To negotiate, arrange, and effect treaties and arrangements with 342 MEMOEANDA OF ASSOCIATION. [ClTAP. VI. Form 161. any chiefs, rulers, or authorities, supreme, local, or otherwise, in Africa and elsewhere, and to subsidise any such chiefs, rulers, or authorities. 9. To grant monopolies, patents, and other special rights and privi- leges, whether as regards the carrying on of any particular trade or business, or the use of any invention or process, or the growth, pre- paration, or manufacture or sale of any particular article, or as regards any of these operations or matters, and to grant the same for a term of years, or in perpetuity or otherwise. 10. To buy, sell, import, export, manipulate, prepare for market, and deal in merchandise of all kinds, and generally to carry on business as merchants, importers, and exporters. 11. To carry on business as miners, store-keepers, farmers, cattle breeders, stockmen, carriers, provision preservers, mechanical engineers, builders, and contractors. 12. To promote the establishment, carrying on, and development of trades and businesses of all kinds within any territories in which the coy is interested, and to subsidise, grant special rights to, or otherwise assist, support, protect, and encoiu'age all persons and cos engaged or proposing to engage therein. 13. To undertake, transact, and execute all kinds of agency business, and also trusts of all kinds. 14. To carry on and undertake all kinds of guarantee and insurance business (excejat life assurance), and all kinds of banking and financial business and operations. 15. To form, constitute, and promote cos, syndicates, associations, and undertakings of all kinds. 16. To enter into partnership or into any arrangements for sharing profits, union of interests, reciprocal concessions, or co-operation with any partnership, person, or coy, and either in perpetuity or otherwise. 17. To lend or advance money, and to issue or place any stocks, bonds, shares, or securities of any government, sovereign, state, or coy. 18. To make donations to such persons and in such cases as may seem expedient, and to subscribe for any purposes, whether charitable or benevolent, or for any public, general, or useful object. 19. Generally to undertake and carry out any operations or trans- actions whatsoever (except the issuing of policies of assurance on human life) which may lawfully be undertaken and carried out by capitalists, and which the coy may think it expedient to undertake and carry out. \_Add selection of common forms, Forms 81 c^ seq.'] Form 162. (0 To purchase, take on lease, or otherwise acquire, any mines, •^^j /~ ■ milling rights, and motallif(;rou.s land 'm tlin county of [o;-, tho kingdom of ], or olsewlioro, and any iutorost thoroin, and to oxj)loro, FOEMS. 343 work, exercise, develop, and turn to account the same. [^Add, {f suit- Form 162. able, o, reference to some agreement in the articles^ as in Form 7.'3.] (2) To crush, win, get, quarry, smelt, calcine, refine, dress, amalgamate, manipulate, and prepare for market, ore, metal, and mineral substances of all kinds, and to carry on any other metallurgical operations which may seem conducive to any of the coy's objects. (3) To buy, sell, manufacture, and deal in minerals, plant, machinery, implements, conveniences, provisions, and things capable of being used in con- nection with metallurgical operations, or required by workmen and others employed by the coy. (4) To construct, carry out, maintain, improve, manage, work, control, and superintend any roads, ways, tramways, railways, bridges, reservoirs, watercourses, aqueducts, wharves, furnaces, saw-mills, crushing works, hydraulic works, elec- trical works, factories, warehouses, ships, and other works and con- veniences which may seem diroctl}' or indirectly conducive to any of the objects of the coy, and to contribute to, subsidise, or otherwise aid or take part in any such operations. \yidd selection of common forms, Forms %\ et seq.~\ (1) To acquire gold mines, mining rights and auriferous land [in Form 163, Western Australia, or elsewhere in Australasia], and any interest f^.^y^ T ninin "^ therein, and in particular to acquire the mines known as, &c., situate, &c., and with a view to the acquisition of such last-mentd mines, to adopt and carry into effect, with or without modification, the agreemt referred to in clause 3 of the coy's arts of asson. (2) To search for, win, get, quarry, reduce, amalgamate, dress, refine and prepare for market, auriferous quartz and ore, and other mineral substances (whether auriferous or not) and precious stones, and generally to carry on any metallurgical operations which may seem conducive to any of the coy's objects. (3) To buy, sell, refine and deal in bullion, specie, coin and precious metals. \_Add selection of common forms, Forms 81 et seq.~\ In the case of mimiig companies it is very common to take still wider power and to insert paragraphs 2, 4, 5, 10, 11, 13 of Form 161. (1) \_If necessary, insert one of Forms 73 to 78.] Form 164. (2) To carry on the trades or businesses of iron masters, steel q^^^^ ^^.^^^^ makers, steel converters, colliery proprietors, coke manufacturers, and steel. miners, smelters, engineers, tin-j)late makers and iron founders, in all their respective branches. (3) To search for, get, work, raise, make merchantable, sell and deal in iron, coal, ironstone, brick-earth, bricks, and other metals, minerals find substances, and to manufacture and sell patent fuel, 344 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 164. (4) To carry on business as manufacturers of cliemicals and manures, distillers, dye makers, gas makers, metallurgists, and mechanical engineers, and to carry on, &c. \^Form 81]. \_Acld selection of common forms, Forms 82 et seq.'] Form 165. (i) ]^jf necessary, insert one of Forms 73 to 78.] (2) To purchase, Sliipowners. charter, hire, build or otherwise acquire, steam, and other ships or vessels, with all equipments and furniture, and to employ the same in the conveyance of passengers, mails, troops, munitions of war, live stock, meat, corn and other produce, and of treasure and merchandise of all kinds, between such ports in any part of the world as may seem expedient, and to acquire any postal subsidies. (3) To buy, sell, prepare for market, and deal in coal, timber, live stock, meat, and other merchandise or produce. (4) To carry on the business of merchants, carriers by land and water, shipowners, warehousemen, wharfingers, barge owners, lightermen, forwarding agents, under- writers and insurers of ships, goods and other ppty, and ice merchants and refrigerating store keepers. [Add selection of common forms , Forms 81 et seq.~\ Form 166. Single steamship. (1) To pui'chase or otherwise acquire the [steam] ship "Strand" [or a steamship now in course of construction at and intended to be called], together with all requisite equipment for the same [and with a view to enter into the agreemt, &g. Form 73.] (2) In the event of the loss or sale of the sd vessel or any substituted vessel to build, purchase, contract for, or otherwise acquire from time to time one or more other vessels or shares therein, but so that the coy shall not work, trade with, or carry on the business of a shii^owner with more than one vessel at one time, and in any such case the objects herein mentd shall apply to any vessel from time to time so purchased or acquired. (3) To charter, hire, equip, load on commission, or otherwise use, repair, let out on hire, and trade with the sd vessel or substituted vessel, (4) To purchase goods, produce, cattle and other live stock, and any other merchandise whatsoever, for the purpose of freighting the sd vessel or substituted vessel, and to dispose of the same by sale or otherwise. {Ji) To carry on the business of a shipowner in all its branches with respect to the sd vessel or substituted vessel only. (G) To employ as ship's husband and managing agent of and for the sd vessel or substituted vessel any person, firm, or coy, whether limtd or not, and that altliough ho or they may not be entld to any share or interest in the vessel in question, or in the coy. (7) To effect all such insurances in relation to the carrying on of the FORMS. 345 coy's busiucss aud any risks incidental thereto as may seem, expedient, Form 166. and, if thought lit, to join or become a member of any mutual insurance coy. (8) To subscribe to any asson, institution, or coy calculated to benefit the coy, or persons employed by the coy, or persons having dealings with the coy. \_Add selection of common forms, Forms 81 et seq.'] The formation of " single ship " companies has made extensive progi'css at the chief ports. A well-known Livcqiool firm were among the first to set the example. In the month of May, 1880, they transferred eighteen vessels to as many private companies, and since then large numbers of other firms aud individuals have followed this example. Very commonly the company is formed for the purpose of buying a ship which is in course of construction. In some cases the capital is divided into sixty-four shares, but 10/. shares are frequently adopted, and are found more convenient. All the shares, excGj)t, ijerhaps, a few for extra subscribers, are issued to the owner or owners as the consideration for the transfer or sale of the shif). The owner or owners are generally appointed manager or managers, and the control of the company is vested in them subject to general meetings of the members. Sometimes directors are appointed. The name is usually framed thus, "The Egeria Steamship Company, Limited," or "The Ship Carmen, Limited." (See supra, p. 266.) It seems probable that these private companies for working single ships will bo generally adopted. Their advantages are obvious, inasmuch as they invest the members with the clearly- defined powers and privileges of members of a statutory company, and relieve them from the difficulties and uncertainties incident to the OAvnership in common of a ship. Moreover, they relieve the members from many onerous liabilities in which they might be involved by the negligence, misconduct, or improvidence of their servants. Inconvenience has in some cases been caused by the objects being too limited, e.g., after conversion of several shi^js, it was found that the funds of one company could not, as desii'ed, be lent to another. No ad valorem duty is payable on the conveyance of the ship to the company. As to minority of holders of shares in a ship obtaining an order for sale where the majority are about to assign theii' shares to a limited company, see The Hercivard, (1895) P. 284. (1) To purchase, take in exchange, or otherwise acquire and hold Form 167. ships and vessels, or any shares or interests in ships or vessels, and ,:; r~ 11 1 -, . . „ , ' General ship - also shares, stocks, and securities of any coys possessed or, or owners. interested in, any ships or vessels, and to maintain, repair, improve, alter, sell, exchange, or let out to hire or charter, or otherwise deal with and dispose of any ships, vessels, or shares, or securities as afsd. (2) To carry on all or any of the businesses of shipowners, ship- brokers, insurance brokers, managers of shipping ppty, freight contractors, carriers by land and sea, barge owners, lightermen, forwarding agents, ice merchants, refrigerating storekeepers, ware- housemen, wharfingers, and general traders. (3) To insure with any other coy or person against losses, damages, risks, and liabilities of all kinds which may affect this coy, and also to carry on the business of marine insurance and marine accidental insurance in all its respective branches, and to effect re-insurance and counter-insurance. \ Add selection of common forms, Forms 81 et seq.~\ 346 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 168. Carriers. (1) \_If necessary, insert one of Forms 73 to 78.] (2) To carry on all or any of the following businesses, that is to say, general carriers, railway and forwarding agents, warehousemen, bonded carmen, and common carmen, and any other businesses which can conveniently be carried on in connection with the above. \^Add selection of common forms, Forms %\ et seqJ] Meat and cattle impor ters. Form 169. (a) To acquire and amalgamate the undertakings of, &c., and with a view thereto to adopt, &c. \_Form 75]. (b) To carry on the business of importers of meat, live cattle, and sheep, and also that of dealers in cattle and sheep generally, and in all branches of such respective trades or businesses. (c) To buy and sell by wholesale or retail in the United Kingdom, the Empire of , or elsewhere all kinds of meat, and generally to carry on the trade or business of a meat salesman in all its branches. (d) To acquire by purchase or otherwise estancias, ranches, and sheep farms, and to carry on the trades or businesses of cattle rearers and sheep farmers, fellmongering, tanning, and warehousing gene- rally, preserved meat manufacturers, dealers in hides, fat, tallow, grease, offal, and other animal products. (e) To erect and build abattoirs, freezing-houses, warehouses, sheds, and other buildings necessary or expedient for the purposes of the coy. (f ) To purchase, charter, hire, build, or otherwise acquire, steam and other ships or vessels, and to employ the same in the conveyance of passengers, mails, and merchandise of all kinds, and to carry on the business of ship owners, barge owners, and lightermen in all its branches. [^Add selection of common forms, Forms 81 et seq.^ Form 170. Colonial importers. \_If necessary, iiisert 07ie of Forms 73 to 78.] To carry on all or any of the businesses of importers, exporters, refrigerators, shipowners, shipbuilders, charterers of ships or other vessels, warehousemen, merchants, ship and insurance brokers, carriers, forwarding agents, wharfingers, sheep farmers, stock owners and breeders, pasturers, graziers, manufacturers of extract of meat, pre- servers and packers of provisions of all kinds, brewers, metallurgists, quarry owners, brickmakers, wool washers, tallow melters, tanners, artificial manure makers, coopers, carpenters, and mechanical en- gineers. [Add selection of common forms, Forms 81 c^ seq.~\ Form 171. (1) [Jf necessary, insert one of Forms 73 to 78.] -- -.^ , C2') To carry on tlio business of manufacturers of and dealei*s in inatrumeut anatomical, orthopfodic, and surgical appliances of all kinds, makers, FORMS. 347 (3) To carry on the businesses of bootmakers, staymakers, corset Form 171. makers, artificial eye and limb makers, bandage makers, crutch, chair, " and stretcher makers, carriage makers, ambulance makers, chemists and druggists, and providers of all requisites for hospitals, patients, and invalids. \_Add selection of common forms, Forms 81 et seq.~\ (1) \If necessary , insert one of Forms 73 to 78.] Form 172. (2) To carry on the businesses of chemists, druggists, drysalters, Chemists. oil and colour men, importers and manufacturers of and dealers in pharmaceutical, medicinal, chemical, industrial, and other preparations and articles, compounds, cements, oils, paints, pigments and varnishes, drug, dyeware, paint and colour grinders, makers and dealers in proprietary articles of all kinds, and of electrical, chemical, photo- graphical, surgical, and scientific apparatus and materials. (3) To buy, sell, manufacture, refine, manipulate, import, export, and deal in all substances, apparatus, and things capable of being used in any such business as afsd, or required by any customers of or persons having dealings with the coy, either by wholesale or retail. \_Acld selection of common forms, Forms 81 e^ 5ey.] 1. \_If necessary, insert one of Forms 73 to 78.] Form 17*? 2. To carry on the business of jobmasters, omnibus, cab, fly and -_ other public or private conveyance proprietors, livery-stable keepers, prietors &c. " horse, omnibus, carriage, cab, fly and cart dealers, omnibus, coach, carriage, cab, fly, cart or other vehicle manufacturers and repairers, coach-house and stable builders and horse breeders and dealers, farmers, graziers, dealers in corn, straw, fodder of all kinds, carriers and saddlery and harness makers in all their respective branches. 3. To manufacture, buy, sell, exchange, alter or improve and deal in vehicles of any kind so constructed as to progress by means of automatic power, whether by means of electricity, steam, gas, oil, or otherwise. 4. To manufacture, buy, sell, exchange, alter, improve, manipulate, prepare for market, and otherwise deal in all kinds of plant, machinery, apparatus, tools, utensils, substances, materials, and things necessary or convenient for carrying on any of the above specified businesses or proceedings, or usually dealt in by persons engaged in the like. (1) To acquire and take over as a going concern the undertaking Form 174. of , and all or any of its assets and liabilities, and in particular patent the recipes and full information as to the processes of manufacturing, medicines, and the right to manufacture and deal in certain medicinal jn'cpara- tions known as, &c., and with a view thereto, &c. 348 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 174. (2) To carry on the manufacture and sale of the said medicines and preparations, and generally to carry on the business of manufacturers, buyers, and sellers of and dealers in all kinds of medicines and medical preparations and drugs whatsoever. (3) To carry on all or any of the businesses of chemists, druggists, chemical manufacturers, and dealers, drysalters, importers, and manu- facturers of and dealers in pharmaceutical medicinal preparations. (4) To manufacture, buy, sell, and deal in mineral waters, wines, cordials, liqueurs, soups, broths, and other restoratives or food, specially suitable or deemed to be suitable for invalids and convalescents. (5) To assist, promote, establish, and contribute to, manage, con- trol, or support sick funds, and any associations or institutions for providing, upon any terms or conditions, medicines, drugs, medical and surgical preparations and apparatus, and restoratives or food aforesaid during sickness or illness. (6) To adopt such means of making known the products of the coy as may seem expedient, and in particular by advertising in the Press, by circulars, by purchase and exhibition of works of art or interest, by publication of books and periodicals, and by granting prizes, rewards, and donations. (7) To construct, maintain, and alter any building or works neces- sary or convenient for the purposes of the coy. \_A(ld selection of common forms, Forms 81 et seq.~\ Form 175. Tea, &c. Planters. 1. \J[f necessary , insert one of Forms 73 to 78.] 2. To cultivate tea, coffee, cinchona and other produce, and to carry on the business of tea planters in all its branches, to carry on and work the business of cultivators, winners and buyers of every kind of vegetable, mineral or other produce of the soil, to prepare, manu- facture and render marketable any such produce, and to sell, dispose of and deal in any such produce, either in its prepared, manufactured or raw state, and either by wholesale or retail. 3. To acquire the business and all or any part of the assets and ppty of any other coy. [Add selection of common forms , Forms 81 ct scq.~\ Form 176. Saw milla. \^If necessary, insert o?ie of Forms 73 to 78.] To carry on business as timber merchants, saw-mill proprietors, and timber growers, and to buy, sell, grow, prepare for market, manipu- late, import, export, and deal in timber and wood of all kinds, and to manufacture and deal in articles of all kinds in the manufacture of wliich timber or wood is used, and to carry on business as shipowners fuid carriers by land and sea, and, so far as may be deemed expedient, tlie business of general merchants, and to buy, clear, plant, and work timber estates, and to carry on any other businesses which may seem FORMS. 349 to the coy capaLle of Leing convenientlj can-led on In connection with Form 176. any of the above, or calculated directly or indirectly to render profit- able or enhance the value of the coy's ppty or rights for the time being. \_Add selection of common foi'ms, Forms ii\ et seq.^ (1) To purchase or otherwise acquire the whole or any of the ppty Form 177. and rights formerly possessed by the N. Railroad Coy, but recently sold . . — under certain decrees and orders of the Circuit Court of the United railroad. States, for in a suit, &c., and with a view thereto to enter into an agreenit \_Form 80]. (2) To equip, work, maintain, improve, and operate the sd railroad and any other railroads and tramways which the coy may be jDOssessed of or interested in, or over which it may have running powers. (3) To construct, purchase, take on lease, or other- wise acquire, any railways or tramways, which may seem capable of being worked in connection with any of the coy's lines for the time being, or calculated directly or indirectly to benefit the coy, and to acquire rights over or in connection with any such railways or tram- ways. (4) To carry on the business of a telegraph and telephone coy in their respective branches. (5) To caxxj on the business of rolling stock manufacturers, mechanical engineers, shipowners, shipbuilders, carriers by land or water, warehousemen, forwarding agents, and insurance agents against loss or damage to goods by accident or otherwise. (6) [_Acld, if desired, the clauses 1, 2, and 3, oj" Form 161, atid some of the clauses of Form 126.] (7) To improve, work, and facilitate the navigation of any rivers, lakes, canals, and other waters. \_Add selection of common forms, Forms 81 e^ seq.^ When a foreign company gets into difficulties, it is not at all uncommon to form an English company to acquii'e and work the undertaking. In some cases where this has been done the line has been bought up in the first instance by a financier, who subse- quently has sold his bargain to the comiaany in consideration of deferred shares. Occasionally it is found desirable to form a local comj)any to work the line, all the shares being held by nominees of the English company. Sometimes the English com- pany is formed in the first place to acquire certain securities of the foreign company, and then to acquire the line by foreclosure. The above Form can readily be adapted to a company formed to acquire a concession, e.g., " To acquire and undertake a concession granted by the Kepublic of for the construction of a railway from to , and with a view, &c., and to carry out and ijerform the works and obligations specified in the said concession, with or without modification." (1) To construct, purchase, lease, or otherwise acquire any tramway Form 178. or tramways in the town of , in the county of , and in the ^ ... . . . "^ iramways. vicinity thereof, and in particular to enter into and carry into effect the agreemt referred to in clause 3 of the coy's arts of asson. (2) To equip and to maintain and work by electricity, steam, horse, or other mechanical power all tramways belonging to the coy, or in which the coy may be interested. 350 MEMOEANDA OF ASSOCIATION. [ChAP. VI. Form 178. (3) To carry on tlie business of tramway, railway, omnibus, and van proprietors and carriers of passengers and goods, and of manu- facturers of and dealers in tramways, carriages, trucks, locomotives, accumulators, dynamos, and other chattels and effects, and conveniences required for making, maintaining, equipping, and working tramways. (4) To carry on either in the town of afsd, and in the vicinity thereof, the business of suppliers of electricity, whether for the purpose of light, heat, motive power, telephonic, telegraphic, industrial, or other purposes, and generally to provide, work, maintain and carry out all necessary cables, wires, accumulators, lamps, exchanges, telephones, and apparatus connected with the generation and distribution, supply- ing, accumulation and employment of electricity. (5) To carry on any other business, manufacturing or otherwise (except the issuing of policies of assurance on human life), which may seem to the coy capable of being conveniently, &c. (6) To enter into contracts with any other coy or persons as to interchange of traffic, running powers, or otherwise, which the coy may think expedient. \_Add selection of common forms, Forms 81 et seq.~\ Under the Tramways Act, 1870 (33 & 3i Vict. c. 78), the Board of Trade can make provisioual orders in certain cases authorising the construction of tramways. One of the rules of the Board provides that if the promoters require incorporation, they must register themselves under the Companies Act, 1862, and many companies have been registered under this rule. The rules can he obtained from the publishers of this work, and Forms of provisional orders will be found in the schedule to the Confirmatory Acts passed each year. Tramway undertakings can be sold v/ith the sanction of the Board of Trade. Sects. 43 and 44 of the Act of 1870. But it has now been held, by the Court of Appeal over- ruling a series of decisions, that a tramway company cannot delegate its power of sale to its debeutui-e holders. Marshall y. Soitih Staffordshire Tramways Co., (1895) 2 Ch. 30. And accordingly there is no power to appoint a receiver and manager, for the rule established in Gardner v. London, Chatham and Dover Co., 2 Ch. 202, applies. See further, Part II., p. 410. Gasworks company. Form 179. (1) \_Insert, if tieccssary , one of Forms 73 to 78.] (2) To manufacture, sell, and supply light in the town of , and elsewhere in the parishes of, &c., in the county of , and to carry on the business of a gasworks coy in all its branches. (3) To deal with, manufacture, and render saleable, coke, coal-tar, pitch, asphaltum, ammoniacal liquor, and other residual products obtained in the manufacture of gas. (4) To construct, manufacture, and maintain works for holding, receiving, and purifying gas, and all other buildings and works, meters, pipes, fittings, machinery, apparatus, and a^jpliances conve- nient or necessary for the purposes of the coy. (5) To manufacture, buy, sell, lot on liiro, and deal in, stoves, engines, and other apparatus and conveniences which may seem calculated, directly or indirectly, to promote the consumption of gas. [Add selection of common forms, Forms 81 et seq.'] The Gas and Water Work« PaciJitics Act, 1870, enables the Board of Trudo in certain FORMS. 351 cases to malce provisional orders, authorising the eoustructlon of gas and water worlcs Form 179. and the acquisition of laud, &c. Oue of the rules of the Boai'd is, that if the ijrouioters desire iucorporatiou, they must register themselves under the Comjianies Act, 1802, and a considerable number of companies have been formed in compliance with this rule. Copies of the rules can be obtained from the publishers of this work, and forms of orders can be found in the schedules to the Confii-matory Acts passed each year. See, also, the Gas and Water Works Facilities Act, 1870, Ameudmcut Act, 187;i (3G & 37 Vict. c. 89). It is now generally thought desirable to take powers to supply electric light as well as gas. See Form 131. (1) To provide, regulate, and maintain a suitable buildiug, room, or Form 180. rooms, for a [ ] exchange, in the city of [and with a view ^r~T thereto to enter into the agreomt, &c.. Form 73] ; to adjust contro- versies between its members; to establish just and equitable principles in the trade (hnfter called the trade) ; to maintain uniformity in rules, regulations, and usages of the trade ; to adopt standards of classification in the trade ; to acquire, preserve, and disseminate useful information connected with the trade throughout all markets ; to decrease the local risks attendant upon the business, and generally to promote the trade of the city of , increase its amount, and aiigment the facilities with which it may be conducted. (2) To com- municate with chambers of commerce, and other mercantile and public bodies throughout the world, and concert and promote measures for the protection of the trade and persons engaged therein. (3) To subscribe to, become a member of, subsidise, and co-operate with, any other association, whether incorporated or not, whose objects are alto- gether, or in part, similar to those o,f this coy, and to procure from, and communicate to, any such association such information as may be likely to forward the objects of the society. \_Add selection of common forms ^ Forms 81 et seq.'\ To establish, maintain, and conduct a club [of a non-j)olitical Form 181. character] for the accommodation of members of the coy and their friends, and to provide a club-house and other conveniences, and generally to afford to members and their friends all the usual privi- leges, advantages, convenience, and accommodation of a club. \_Add reference to an agreement, if necessary., as in Form 73.] \_Add selection of common forms. Forms 81 e^ seq.^ Club. A club can be formed as a company limited by shares or by guarantee. TIio latter is the more convenient, and the necessary capital can be jjrovided out of entrance fees or by way of loan. In Graff v. Evans, 8 Q. B. D. 373, it was held that a bond fide unincorporated members' club is not bound to take out a licence for the sale of intoxicating liquors, on the ground that the members are joint owners of the property, and that where a member takes and pays for goods, the transaction is not a sale, as he is himself part owner of the goods. The members of an incorporated club are not joint owners ; but even in such a case it has been held that the Acts do not apply. NewdlY. UcmUigivaij, 60 L. T. 544. 352 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 181. ^^ t^^ case, however, of a proprietary club, a licence is requisite. Boivyer v. Percy Supper Club, (1803) 2 Q. B. 154. It is, therefore, necessary to make every member of the club a member of the company, and to confine membership of the company to members of the club. ' Form 182. Club-house. To provide a club-liouse aud other conveniences for the use of the members of the club [now in course of formation, aud of any club established in succession thereto], and to furnish and maintain the same, and to permit the same to be used by the members of the sd club and their friends, either gratuitously, or uj)on such terms as shall be agreed on, and, if thought fit, to manage the affairs of the club, or any of them, and generally to do whatever may seem best calculated to promote the interests of the club, and in particular to lend money to or subsidise the club. \_Adcl, if necessary, reference to some agree- ment, as in Form 73.] \_Acld selection of common forms, Forms 81 e^ seqJ] Form 183. Club (political). (1) To afford to its members all the usual privileges, advantages, conveniences, and accommodation of a club. (2) To take over the effects and liabilities of the present unincorporated association, known as the [Liberal] Club. \_Refer to an agreement, if necessary, Form 73.] (3) To promote the cause of [Liberalism], and to provide means of social intercourse between persons professing [Liberal] principles. (4) To consider and discuss all questions affecting the interests of the community, or the alteration or administration of the law. (5) To procure the delivery of lectures on political and other subjects. (6) To form and maintain a library of political, historical, and other literature in . (7) To render voluntary aid to [Liberal] candidates in the parliamentary, municipal, and other elections in the boroughs of and tlie counties of . (8) To petition Parliament. (9) To purchase, hire, or otherwise acquire, for the purposes of the club, any real or personal ppty, and in particular any lands, buildings, furniture, club and household effects, utensils, books, newspapers, periodicals, musical instruments, fittings, apparatus, appliances, con- veniences, aud accommodation, and, so far as the law or the licence of the Board of Trade may from time to time allow, to sell, demise, let, mortgage, or dispose of the same. (10) To erect, maintain, improve, or alter any buildings for the purposes of the club. (11) To borrow or raise money by the issue of or upon bonds, debentures, biUs of exchange, promissory notes, or otlier obligations or securities of the club, or by mortgage or charge of all or any part of the ppty of the club. (12) To do, &c. \A(ld selection of common forms, Forms 81 r/ seq.'] The above is taken from the menionuiduni of u Liberal club which was registered by licence of the Board of Trade without the word "limited." FORMS. 353 (1) To support and protect the cliaractor, status, and interest of the Form 184. legal profession generally, and particularly of eolors practising within £7 .• , a circuit having a radius of twenty-five miles from the Guildhall of the city of . (2) To promote honourable practice, to repress malpractice, to settle disputed points of practice, and to decide all questions of professional usage or courtesy between or amongst solors. (3) To consider all questions affecting the interests of the profession, and to initiate and watch over, and, if necessary, to peton Parliament or promote deputations in relation to general measures affecting the profession, and to procure changes of law or practice, and the promotion of improvements in the principles and administra- tion of the law. (4) To acquire by purchase, donation, or otherwise, the library now belonging to the society known as the Law Society, and to maintain, extend, and improve such library. (5) To • provide rooms and other facilities for the holding and conducting of sales of ppty, meetings of creditors, arbitration meetings, and other like matters. (6) To acquire by purchase, taking on lease, or other- wise, lands and buildings, and all other ppty, real and personal, which the society, for the purposes thereof, may from time to time think proper to acquire, and which may lawfully be held by them, and to re-sell, under-lease, or sub-let, surrender, turn to account, or dispose of, such ppty, or any part thereof, and to erect upon any such land any building for the pui'poses of the society, and to alter or add to any building erected upon any such land. (7) To borrow [&c.]. (8) To encourage the study of law by articled clerks of solors, and for that purpose the donation, on such terms and conditions as may from to time be prescribed, of a prize or prizes, or other rewards or distinctions. (9) To promote information on legal subjects by lectures, discussions, books, correspondence with public bodies and individuals, or otherwise. (10) [_Add selection of common forms, Forms 81 e^ sey.]. Taken from a form recently passed by the Board of Trade. This form, with slight variation, has also been adopted in the case of societies of local accountants. 1. To protect the members of the society against persons whose Form 185. character or circumstances render them unworthy of mercantile credit, 7^^^ and to facilitate the prompt and economical realisation of the estates protection, of bankrupts and persons making or seeking to make arrangements or compositions with their creditors. 2. To diffuse information as to sound principles of trading, and to impress upon the mercantile community the necessity of maintaining an intimate knowledge of the state of their affairs by periodical in- vestigations, and by keeping correct sets of business books. 3. To procure information for members as to the standing and responsibility of parties with whom they propose to transact business. T> A A 854 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 185. 4. To collect debts for members upon sucb terms as may be deter- mined. 5. To communicate with chambers of commerce, and other mercan- tile and public bodies throughout the United Kingdom, and concert and promote measures for the protection of trade and traders. 6. To consider, originate, and support improvements in the com- mercial laws. 7. To subscribe to, become a member of, and co-operate with any- other association, whether incorporated or not, whose objects are, altogether or in part, similar to those of this society, and to procure from and communicate to any such association such information as may be likely to forward the objects of this society. \^A(ld selectioti of common forms, Forms 81 ei seq.^ Taken from a form which has been approved by the Board of Trade on several occasions. Form 186. Chamber of commerce. (1) To promote and protect the home, colonial, and foreign trade and commerce, and the manufactures of the United Engdom, and in particular the trade, commerce, and manufactures of the [borough] of . (2) To consider all questions connected with such trade, com- merce, and manufactures. (3) To promote or oppose legislative and other measures affecting such trade, commerce, and manufactures. (4) To collect and circulate statistics, and other information, relating to such trade, commerce and manufactures. (5) To act as arbitrator in the settlement of disputes arising out of commercial transactions. (6) To borrow any moneys required for the purposes of the chamber upon such securities as may be determined. [_Add selection of common forms, Forms 81 et seq.~\ Taken from a form passed by the Board of Trade on several occasions. Form 187. Builders' institute. 1 . To take over the whole or any of the assets and liabilities of the unincorporated association known as the Builders' Society, established 1834, and with a view thereto to enter into an agreemt, &.c. \_F0r7y1 73.] 2. To promote the conson and discussion of all questions affecting the building trade (which expression in this memorandum includes the trade of builders and of contractors for the execution of public and private works, and all ancillary and allied trades, and every branch of any such trade), and generally to watch over and protect the interests of persons engaged in the building trade. 3. To give the Legislature and public bodies and others facilities of conferring with and ascertaining the views of persons engaged in the building trade as regards matters directly or indirectly affecting that trade. FORMS. 355 4. To confer with tlio Eoyal Institute of Brltlsli Architects, the Form 187. County Councils, Local lioards, and any other public bodies, in regard ~ " to all matters affecting- the building trade. 5. To originate and promote improvements in the law, and to support or oppose alterations therein, and to effect improvements in administration, and, for the purposes afsd, to petition Parliament, and take such other steps and proceedings as may be deemed expedient. G. To diffuse among its members information on all matters affecting the building trade, and to print, publish, issue, and circulate such papers, periodicals, books, circulars, and other literary undertakings as may seem conducive to any of these objects. 7. To improve and elevate the technical and general knowledge of persons engaged in, or about to engage in, the building trade, or in any employment, manual or otherwise, in connection therewith, and with a view thereto to provide for the delivery of lectures and the holding of classes, and to test by examination or otherwise the com- petence of such persons, and to award certificates and distinctions, and to institute and establish scholarships, grants, rewards, and other benefactions. 8. To promote excellence in the construction of buildings, and just and honourable practice in the conduct of business, and to suppress malpractice. 9. To establish, form, and maintain a library and collection of models, designs, drawings, and other articles of interest in connection with the building trade. 10. To arrange and promote the adoption of equitable forms of contracts and other documents used in the building trade, and to encourage the settlement of disputes by arbitration, and to act as or nominate arbitrators and umpires on such terms and in such cases as may seem expedient. 11. To encourage the discovery of and investigate and make known the nature and merits of inventions which may seem capable of being used by persons engaged in the building trade, and to acquire any patents or licences relating to any such inventions with a view to the user thereof by the members of the institute and others, either gratui- tously or upon such terms as may seem expedient. 12. To establish, subsidise, promote, co-operate with, receive into union, become a member of, act as or appoint trustees, agents, or delegates for, control, manage, superintend, lend monetary assistance to, or otherwise assist any associations and institutions, incorporated or not incorporated, with objects altogether or in pt similar to those of the institute and not being a trades union. 13. To establish, undertake, superintend, administer, and contribute to any charitable or benevolent fund from whence ma}^ be made dona- tions or advances to deserving persons who may be or have been engaged in the building trade, or connected with any person engaged A A 2 3o6 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 187. therein, and to contribute to or otherwise assist any charitable or '■ benevolent institutions or undertakings. 14. To undertake and execute any trusts which may seem to the institute conducive to any of its objects. 15. To provide facilities for social intercourse between the members of the institute and their friends, and, if thought fit, to afford them all or any of the usual privileges, advantages, conveniences, and accom- modation of a club. 16. To admit any persons (whether eligible or not eligible for membership) to be associates or honorary members of the institute on such terms, and to confer on them such rights and privileges as may seem expedient. 17. To borrow any moneys required for the purposes of the institute upon such terms and on such securities as may be determined. 18. Subject to the provisions of the 21st section of the Cos Act, 1862, to purchase, take, lease, exchange, hire, or otherwise acquire any real and personal ppty and any rights or privileges necessary or convenient for the purposes of the institute. To construct, alter, and maintain any buildings required for the purposes of the institute. 19. To obtain an Act of Parliament for the dissolution of the insti- tute and the re-incorporation of its members for any of these objects, and any other Act which may seem conducive to any of these objects. 20. To sell, improve, manage, develop, lease, mortgage, dispose of, turn to account, or otherwise deal with all or any pt of the ppty of the institute. 21. To invest the moneys of the institute not immediately required upon such securities or otherwise in such manner as may from time to time be determined. 22. To do all such other lawful things as are incidental or conducive to the attainment of the above objects or any of them. Provided that the institute shall not impose on its members or support with its funds any regulation which, if an object of the institute, would make it a trade union. \^Adcl selections from common forms, Forms 81 et seq.~\ Form 188. So ip inanu- fiioturerH. (1) To acquire and take over, &c. [Form 73]. (2) To carry on the business of soap manufacturers. (3) To buy, sell, manufacture, refine, prepare, and deal in all kinds of oils and oleaginous and saponaceous substances, and all kinds of imguents and ingredients. (4) To carry on business ns pharmaceutical, manufacturing, and general chemists and druggists, and manufacturers of, and dealers in all kinds of toilet requisites, and manufacturers of all kinds of boxes and cases wholly of card, wood, metal or otherwise, and printers, colour printers, publishers, stationers, candles makers, manufacturers of perfumes, collectors of flowers, and perfume-producing vegetation. \^Add selections from common forms, Forms %\ et seq.~\ FORMS. 357 (1) To promote, encourage, and facilitate tlio construction, extension Form 189. and working of tramways and liglit railways, and the development of Tramways electric and other modes of mechanical traction. association. (2) To promote the conson and discussion of all questions affecting, directly or indirectly, the construction, extension, and working of tramways and light railways. (3) To give to the Legislature and to public bodies and others facilities for conferring with and ascertaining the views of persons engaged or interested in the construction, working, and development of tramways and light railways. \_Add, mutatis mutandis, paragraphs 5, 6, 11, 14 to 22 of Form 187.] To oppose and resist any proceedings in parliament or elsewhere Form 190. which may seem calculated to deprive the inhabitants of of their protection of accustomed rights over the open sj^ace, known as the Common, common and to watch over and protect those rights, &c. "° ^" \_Add selections /rom common forms, Forms 81 e^ *^y-] To promote the study, practice and knowledge of music in the town Form 191. of , and the neighbourhood, and to give or arrange concerts and ^ '. , musical entertainments, and to employ writers and composers, and to society. piu'chase copyrights, and to give prizes and awards, &c. \_Add selections from common forms, Forms %\ et seq.~\ To acquire the buildings and grounds known as , formerly Form 192. belonging to the poet , and to maintain and preserve the same, jj^emorial to and to collect and preserve memorials of the said poet, and to open poet, the same for public inspection on such terms as may seem expedient, and to promote the study of the works of the sd poet, both at home and abroad, &c. \_Add selections from common forms, Forms 81 e^ seg'.] 358 MEMORANDA OF ASSOCIATION. [ChAP. VI. CAPITAL CLAUSES. In the skeleton fonnof a memorandum of association, given above [Form 67], the clause as to capital states that ' ' The capital of the company is 1, divided into shares of 1, each, with poiver to divide the shares in the capital for the time being into several classes, and to attach thereto respectively any preferential, deferred, qualified, or special rights, privileges, or conditions.'" The words in italics, or some such words, have for many years past been inserted in the memorandum of association in order to negative the supposed implication of- equality arising from silence in the memorandum as to classes of shares (see supra, p. 286) ; but since the welcome decision of the Court of Appeal in Andrctvs v. Gas Meter Co., (1897) 1 Ch. 361, it appears clear that the words might be safely omitted. However, it is probable that they will still be used in order to preclude doubt and discussion as to how far that decision goes. Where it is intended to divide the initial capital into several classes of shares, e.g., preference and ordinary, or preference, ordinary and founders', or deferred shares, the question arises whether the division should be made in the memorandum of association, or in the articles of association. If the division is made by the articles, it is, having regard to Andi-eivs v. Gas Meter Co., supra, doubtful whether the rights attached to the several classes can be effectually protected from altera- tion. Infra, p. 378. And accordingly it is very commonly considered desirable, in the interests of the holders of preference or founders' shares, or other shares having special rights, to set out the rights to be attached to such shares in the memorandum, for it is well settled that rights attached to a class by the memorandum cannot be altered by the articles or by special resolution. Ashbury v. Watson, 30 C. D. 376, recognized in Andrews v. Gas Meter Co., supra, and see p. 378, ante. Where rights are attached to a class of shares by the memorandum, it is some- times desired to insert a power to alter the rights so attached, for circumstances may, and not uncommonly do, arise in which a power of alteration may be useful, e.g., if the dividend on the preference shares gets into arrear, and it is desired to make some special arrangement as to waiver or commutation of the arrears (see Forms 195), or to reduce the rate, or'in the case of founders' shares to cut down or commute their rights. In all such cases it may be desirable that a large majority, say three fourths of the class, should have power to assent to an alteration in the right of the whole class. Whether a power in the memorandum to alter rights thereby attached is effective has not yet been settled. It may be contended that inasmuch as the specification of the right in the memorandum is a " condition ' ' of the memorandum, as held in Ashbury v. Watson, supra, sect. 12 of the Act prohibits any alteration of that condition [supra, p. 285), and, therefore, that an express power to alter the memorandum is ultra vires and inoperative, nor is it easy to dispose of this contention. No doubt it may bo argued that the power to alter, whore specified in the memorandum, is one of the rights attached to the shares, and, therefore, that it cannot be ultra vires to exercise that right, and there seems much force in this argument; but it must be borne in mind that sect. 12 and the sub- sequent Acts specifying the alterations wliich may be made in the conditions pro- hibit all others, and it seems difficult, in the face of this prohibition, to hold that it is open to the parties to take an additional power to alter. Another view which might be taken is that the presence of tho power to alter shows clearly that tho specification of rights was not intended to operate as a " coTiditioii," that the statutory conditions must no doubt necessarily operate as Bucli, but that whore provisions arc inserted which tho statute docs not require, FORMS. the question whether they are or are not to be treated as conditions ought to be answered according to the evident intentions of the parties, and this appears to have been the basis of the decision in Ashhnry v. Watson, supra. Suppose, then, that the memorandum, whilst specifying the rights attached to a class of shares, declares that " This provision is not intended to operate as one of the conditions of this memorandum," it would seem that such a declaration should have effect ; and, if so, the question is whether the presence of the power to alter does not in effect declare the like intention. Assuming that such a declaration of intention, express or implied, is effective, the further question arises whether, in the result, the benefit of the decision in Ashbury v. Watson is not lost, for if the specification of rights i8 not a condition it is not by sect. 12 made unalterable. Moreover, it is to be noted that the covenant implied by sect. 11 of the Act is only to observe "the conditions of such memorandum subject to the provisions of this Act," so that if the specifi- cation of rights is removed from the category of conditions, no covenant to observe it would arise under sect. 11, and it would be necessary to repeat the specification in the regulations, and they are alterable by special resolution. It is sometimes suggested that it is sufficient to insert in the articles the specifi- cation of the rights, and by way of protection to insert in the memorandum a provision that no alteration of those rights shall be effected otherwise than in a specified manner, e.g., by special resolution passed with the consent in writing of the holders of two-thirds of the class, but it is far from clear that this is effective, for the covenant implied by sect. 11 is to observe the conditions in the memorandum subject to the provisions of the Act. If, then, the rights are not attached by condition but by the regulations, those regulations are by the Act alterable, and qu. therefore whether the power of alteration can be nullified even by provision in the memorandum. If a power in the memorandum to alter rights thereby attached to a class of shares is contrary to the Act it no doubt falls to the ground, for an ultra vires provision, even though inserted in the memorandum of associa- tion, must necessarily be void [Trevor v. Whittvorth, 12 App. Cas. 409), and, if so, the rights attached to the class stand unalterable. The practical conclusion to be drawn from the cases is, that it is very doubtful whether it is possible effectually to protect and fortify the rights attached to a class of shares by specifying such rights in the memorandum, and at the same time to reserve power to alter such rights, and that the taking of a power to alter, if effective, may in a great measure destroy the desked protection. In settling the capital clause, where there are to be several classes of shares, the following points, as well as those above referred to, must be borne in mind : — 1. As to Preference Shares. (a) Are they to confer a right to a cumulative dividend, i.e., a dividend which, if the profits of one year are not sufficient to pay it, will accumulate as a charge against subsequent profits ; or non-cumulative, i.<;., payable as to each year only if and so far as the profits of that year go. Frimd facie where the definition of the preferential rights declares that the preference shares are to be entitled to a preferential dividend at a specified rate per cent., the dividend is cumulative. See Henry v. Tfie Great Korthern Co. (1 De G. & J. 606) ; Webb v. Earle (20 Eq. 556) ; but for clearness in the definition of rights the word "cumulative" is sometimes inserted, e.g., a fixed cumidative preferential dividend, &c. This prevents any mistake. If the dividend is to be non-cumulative, the clause must be carefully framed accordingly, e.g., it should say that " the preference shares are to confer the right to receive out of the profits of each year a preferential dividend for such year ' ' at the specified rate per cent., or the definition may declare that the profits of each year available for dividend are to be applied first to the payment of a dividend for 36a 360 MEMORANDA OF ASSOCIATION. [ClIAP. VI. such year on the preference shares at the specified rate, and that the sm-plus shall be applicable to dividend on the other shares. All that is necessary is that it should appear with sufficient clearness that the preferential dividend for each year is to come only out of the profits of that particular year. If this intention is plain, the Court will give effect to it even though imperfectly expressed. Staples v. Eastman Photographic Materials Co., (1896) 2 Ch. 303. In addition to a fixed preferential dividend, preference shares are given the right to participate in surplus profits. These are only some of the special rights and privUegea attached to preference shares. The right of a preference shareholder is prima facie confined to a preferential dividend. He is not entitled to have his capital on a winding-up paid off in priority to the other shareholders {London India Ruhbei- Co., 5 Eq. 519) ; but pre- ferential rights as to capital may be and often are attached. Then the clause runs that the preference shareholders are to be entitled not only to a preferential divi- dend, but to priority as regards capital in the winding-up. If so, the capital paid up on the preference shares in accordance with the clause must, in a winding-up, be paid off out of the surplus assets before the ordinary shareholder can get any- thing. See Bangor, ^-c. Co., 20 Eq. 59. The ordinary shareholders are then repaid, and any surplus primd facie is distributable among all the members in pro- portion to the shares. Ee Bridgwater Navigation Co., 14 App. Cas. 525. But very commonly the preference shareholders are precluded from sharing in such surplus. (b) Are they to confer the right to participate in surplus profits, e.g., after a like dividend in each year has been paid on the ordinary shares. (c) Are they to confer the right in a winding-np to priority in return of capital. (d) Are they in a winding-up to confer a right to participate in the surplus after paying off the whole of the paid-up capital. (e) Are they to have any special or to be deprived of all voting rights. 2. As to Founders' Shares. (a) Are they to confer a right to a percentage of the divisible profits of each year or of the surplus profits after paying specified dividends on the other shares. (b) What rights are they to confer in a winding-up. (c) Are they to confer any special voting rights. Life governor's share. Form 193. 1- The capital of the coy is /. divided into shares. One of these shares, namely, that for which A.B. subscribes the memo- randum, shall be numbered 1, and shall, whilst held by him, be called the Life Governor's share. 2. The Life Governor's share, whilst the sd A.B. holds such share and also at least p.c. of the issued capital for the time being of the coy, shall confer on the holder the rights and privileges following, that is to say : — (a) The right to p.c. of the surplus profits of the coy of each year which shall remain after a dividend for such year at the rate of 10 p.c. shall have been pd on the other shares in the capital. (1)) The right to p.c. of tlio surplus assets of the coy wliich shall in a winding-up remain after payment off of the whole of the pd-up capital. FORMS. 361 (c) The right at any time by notice in writing to the coy to talce office as a director and to hold such office as long as he chooses, and at any time by notice in writing to the coy to resign, and at any time to take office again as afsd. (d) The right from time to time and at any time by notice in writing to the coy to appoint any other persons to be directors of the coy, and by notice in writing to the coy to remove any director so appointed, but so that not more than four directors shall at any time be in office by virtue of such appointment. (e) The right at every general meeting to one-third of the votes in the coy, that is to say, to one vote as against every two votes conferred by all the other outstanding shares for the time being in the capital of the coy. (f) The right whether the holder is or is not a director to attend and vote either in person or by proxy at all meetings of the directors of the coy, and to have due notice of all such meetings, but any proxy must be appointed by writing under the hand of the appointor. (g) The right when such share ceases to be held by the sd A.B. to rank as an ordinary share. 3. Upon any increase of capital any new shares may be issued with any preferential or special rights or conditions attached thereto, but so that the rights hto attached to the Life Governor's share shall not be altered or modified without the consent in writing of the holder thereof. Form 193. The capital is 400,000/., divided into 20,000 preference shares of Form 194. 10/. each, and 20,000 ordinary shares of 10/. each; and such prefer- ^ ^ ; ence shares shall confer the right to a fixed cumulative preferential preference dividend at the rate of 5 p.c.p.a. on the capital pd up thereon, and shares, shall rank both as regards dividends and capital in priority to the ordinary shares [but shall not confer the right to any fui'ther partici- pation in profits or assets]. And upon any increase of capital the coy is to be at liberty to issue any new shares with any preferential, deferred, qualified, or special rights, privileges or conditions attached thereto. It will be observed tbat this Form does not preclude the issue of prepreference shares ; but, if desired, it can be altered by adding "but not so as to prejudice the preferential rights hereby attached to the preference shares in the initial capital." In framing such a clause it must be considered whether the dividend is or is not to be cumulative (see infra, p. 482), and whether in a winding-up the preference shares are to confer a right to participate in surplus assets after paying off the whole of the paid-up capital. Prima fa^cic they are entitled so to participate. Birch V. Cropper, 14 A. C. 525. If it is desired that they should so participate, omit the words in brackets. 362 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 195. Power to alter. The rights liby attached to the preference [and founders'] shares [resply] may be altered by special resolution passed with the approval in writing of the holders of two-thirds of the issued shares of such class, but not otherwise. See also paragraph (f) of Form 199. supra, p. 358. Whether power to alter is operative, see Form 196. Non-cumula- tive prefer- ence shares. - preference shares of 1. -I. each. The sd preference The capital is /. divided into each, and ordinary shares of shares shall confer on the holder the right to be pd out of the profits of each year a fixed dividend for such year at the rate of 5 p.c.p.a. on the capital for the time being pd up thereon, and such shares shall rank, &c., as above. Another mode of expressing this is to say, " the right to a fixed preferential dividend at the rate of 5 p.c.p.a. on the capital paid up thereon, such dividend to be paid, as regards each year, out of the profits of such year, and to be non-cumulative." Form 197. Preference shares fixed dividend and to participate pari passu, in surplus. The capital of the coy is 100,000^. divided into 125,000 preference shares of lO*. each, and 75,000 ordinary shares of lO*. each. The sd preference shares shall be entitled to be pd out of the profits of each year a fixed dividend for that year, at the rate of 8 p.c.p.a. on the capital paid up thereon, and shall be entitled to participate jtjartjoassr^ with the ordinary shares in the surplus profits of each year which shall remain after paying the fixed dividend afsd for such year on the sd preference shares, and a like dividend for such year on the capital pd up on the ordinary shares, and such preference shares shall be entld in a winding-up to have the capital pd up thereon to be pd off in priority to the other shares. Dividends may be pd in cash or by the distribution of specific assets. Form 198. Preference shares fixed divi- dend and half BUr])luH prohts. Subject as hnfter provided the rights following shall be attached to the preference shares afsd. (1) The holders of the sd preference shares shall be entld to a fixed cumulative preferential dividend at the rate of 7 p.c.p.a. on the capital for the time being pd up on the sd preference shares resply, and to lialf the surplus profits Avhich, in respect of each year it shall from time to time be determined to distribute, remaining after paying or providing for the payment of a dividend for such year at the rate of 10 p.c.p.a. on the capital for the time being pd up on the ordinary shares. (2) The holders of the sd preference shares shall have priority as to FORMS. 363 return of capital in the winding-up over all other shares in the Form 198. capital for the time being of the coy, but shall not have any further right to participate in profits or assets. (3) The rights hereby attached to the said preference shares may be raodified in accordance with clause of the accompanying arts of asson, but not otherwise, and that clause and also clauses and of the sd articles shall be deemed to be incorporated herein and have effect accordingly. The rights following shall be attached to the shares afsd inter se Form 199. subject as hnfter provided, that is to say : — Preference (a) The sd preference shares shall confer the right to a fixed cumulative preferential dividend at the rate of 5 p.c.p.a. on the capital for the time being pd up thereon resply, and shall rank both as regards such dividend and as to capital in priority to all other shares in the original capital, but shall not confer any further right to participate in profits or assets. (b) Subject as afsd, the ordinary shares shall confer on the holders the right to a fixed cumulative dividend at the rate of 7 p.c.p.a. on the capital for the time being pd up thereon resply, and shall rank both as regards such dividend and as to capital next after the sd preference shares. (c) Subject as afsd, the sd deferred shares shall confer the right to a fixed cumulative dividend at the rate of 7 p.c.p.a. on the capital for the time being pd up thereon resply, and shall rank both as regards such dividend and capital next after the ordinary shares. (d) Subject as afsd, any profits which it may at any time be deter- mined to distribute amongst the members, and in a winding-up any surplus assets, after repayment of capital, shall be divided - as to one-half between the holders of the ordinary shares afsd in proportion to the ordinary shares held by them resply, and as to the other half among the holders of the deferred shares afsd in proportion to the deferred shares held by them resply. (e) Any shares issued as fully-paid pursuant to the agreemt referred to in clause 3 of the accompanying arts of asson shall for the purposes of dividend be treated as having been pd up at the date of the incorporation of the coy. (f) The rights for the time being attached to the sd several classes of shares resply may be modified or dealt with in the manner mentioned in clause 52 of the accompanying arts of asson, but not otherwise, and that clause and also clauses 157 and 159 of the sd articles shall be deemed to be incorporated herein and have effect accordingly. Upon any increase of capital, &c. 364 Form 200. Preference shares. MEMORANDA OF ASSOCIATION. [ChAP. VI. The capital of the coy is 500,000^., divided into 50,000 shares of 10^. each, to he converted as and when paid up into equal moieties of pre- ferred stock and deferred stock, the preferred stock to bear a fixed cumulative preferential dividend at the rate of 6 p.c.p.a., and is to rank, both as regards dividend and capital, in priority to the ordinary stock. Form 201. The capital of the coy is 22,000/., divided into 20,000 ordinary B shares shares of 1/. each, and 2,000 B. shares of \l. each, and each of the sd conferring B. shares shall rank for dividend and in a winding-up and for voting specia rig . p^ppQggg ^g jf j^ were five ordinary shares of II. each fully paid up. Sometimes a vendor instead of taking a mass of paper capital takes B. shares as above. Form 202. The capital of the coy is 2,000,000^, divided into 200,000 shares of _^Q^jjgj._ lOL, whereof 199,800 shall be called ordinary shares, and 200 (to be numbered 1 to 200 inclusive) are to be called founders' shares, and are to confer on the holders thereof rateably and in proportion to the number of the founders' shares held by them resply the rights following, that is to say — (1) The right to half the surplus profits of the coy of each year which shall remain after paying or providing for the payment out of such profits of a dividend to the close of such year at the rate of 10 p.c.p.a. on the capital paid up on the ordinary shares, and of a dividend to the close of such year at such rate (not exceeding the sd rate) as may be attached to any further shares, whether in the original or any increased capital hereafter issued, and after making due provision for the reserve fund in accordance with Clause 96 of the coy's arts of asson registered herewith. (2) The right to one-half of any part of the reserve fund afsd, or the income thereof, which it may at any time be determined to divide among the members. (3) The right to one-half the surplus assets which in the winding-up of the coy shall remain, after paying off the whole of the paid-up capital, including that paid up on the founders' shares. Any of the shares in the capital, original or increased, may be issued with any preferential, special, or qualified rights or conditions as regards dividends, capital, voting, or other^dso attached thereto, but so that the rights hby attached to the founders' shares shall not be infringed. Dividends may be pd in cash or by the distribution of specific assets or otherwise as provided by the regulations of the coy. FORMS. 365 The holders of the founders' shares shall he entld rateably in pro- Form 203. portion to the founders' shares held by them resply (a) to 5 p.c. of the ^^^^.j^^^. profits which in each year it shall be determined to distribute by way of dividend, and (b) to 5 p.c. of the surplus assets of the coy which, in a winding-up, shall remain after paying off the whole of the paid-up capital, including that paid up on the founders' shares. lu the case of founders' and deferred shares, the terms of issue very commonly lead to difficulty and dispute as regards the determination of the amount of the profits to be tlistributed. The holders of the founders' shares may complain that too much is carried to reserve, that the profits are ascertained on too conservative a basis, that the directors unduly favour the other shareholders. On the other hand, if dividends are paid on the founders' shares, the other shareholders commonly complain that the founders get too much, that the directors unduly favour them, and that the desire to jtay a dividend to the founders leads to speculative business and a disiuclination to make duo provision for reserve. These difficulties can, to a great extent, be met by giving to the founders' shares, as in the above form, a fLsed aliquot share in the profits which it shall be deter- mined to distribute, and not merely in the surplus profits themselves. The capital of the coy is 330,000/., divided into 22,000 cumulative Form 204. preference shares of 51. each, entitled to the preferential payment of ~ ,..,, , p ., . i-i (. . , Management dividend and return oi capital, mentioned in the arts of asson registered shares. herewith, and 215,000 ordinary shares and 5,000 management shares of 11. each, which management shares are to confer on the holders thereof, rateably and in proportion to the number of such shares held by them respectively, the rights following, that is to say — (1) The right to half the profits or other moneys of the coy avail- able for dividend which it shall from time to time to be de- termined to distribute, and which shall remain in each year after paying or providing for the payment out of such profits (a) of a cumulative preferential dividend at the rate of 5|- p.c. per annum on the caj)ital paid up on the sd preference shares ; (b) of a dividend for such year at the rate of 7 p.c. per annum on the capital paid up on the sd ordinary shares ; (c) of the remuneration payable to the directors for that year under the regulations of the coy for the time being ; and (d) of a divi- dend for such year at such rate (not exceeding 7 p.c. per annum) as may be attached to any further shares whether in the original or any increased capital hereafter issued. (2) The right to one half of the surplus assets which in the winding up of the coy shall remain after paying off the whole of the coy's paid-up capital. 1. The holders of the ordinary shares for the time being issued shall Form 205. be exclusively entld to participate in the profits of the coy until the Ordinary and dividends actually declared on the 250,000 ordinary shares forming the deferred: the first issue shall in the aggregate amount to a sum eq_ual to the capital allprofitetiU 366 MEMORANDA OF ASSOCIATION. [ChAP. VI. Form 205. paid up thereon, and that whether such dividends are paid or satisfied 77n 7~ or to be paid or satisfied in cash or other assets, and whether at the 100 per cent. ^ ' paid. time when such event happens the whole or part only of the ordinary shares shall have been issued, and whether the whole or only part of the amount thereof shall have been called or paid up. 2. After the happening of the event aforesaid and from thenceforth the profits of the coy, which it shall from time to time be determined to distribute, shall be applied as to one-half in paying dividends on the shares other than the deferred shares afsd, and as to the other half in paying dividends on the deferred sheires part passu. 3. In case of a winding-up of the coy before the happening of the event afsd, the assets available for distribution among the members shall be applied, first, in paying off the capital paid up on the shares other than the deferred shares afsd ; secondly, in paying to the holders of the first issue of 250,000 ordinary shares afsd such a sum as, with the dividends then already paid thereon, shall be equal to a dividend of 200 p.c. on the capital paid up thereon at the commencement of the winding-up ; and, thirdl}', the balance (if any) shall be divided, as to one-half among the holders of the shares other than the deferred shares afsd, rateably in proportion to the number held, and as to the other half among the holders of the deferred shares afsd rateably in proportion to the number held. 4. In case of a winding-up of the company after the happening of the event afsd, the assets afsd shall be divided as to one-haK among the holders of the shares other than- the deferred shares rateably in proportion to the number held, and the other half shall be divided among the holders of the deferred shares rateably in proportion to the number held. 5. The deferred shares afsd shall also confer on the holders rateably in proportion to the number of the deferred shares held by them respectively the right to subscribe for at par and take up one-half of the shares in the capital not subscribed in the memdm of asson which it shall from time to time bo determined to issue, and each holder of the deferred share or shares afsd shall in the manner provided in the arts of asson be given notice of every such determination, and shall have not less than fourteen days within which to subscribe for his proportion or any less amount. G. The deferred shares afsd shall confer on the holders present in person or by proxy at any general meeting of the coy the right to as many votes as the number of votes conferred by all the other shares for the time being issued, and each holder of deferred shares afsd present in person or by proxy at any such meeting shall be entitled to such proportion of tlio votes conferred by the deferred shares collec- tively as the number of his deferred shares bears to the full number of the deferred shares. 7. The shares in the initial capital of the coy not subscribed for in this momdm of asson and any shares created by increase of capital FORMS. 367 may be divided into several classes, and may be issued with any Form 205. preferential, special or qualified rights, privileges and conditions attached thereto, but so that the rights hby attached to tlio deferred shares shall not be altered or infringed except as above mentd. The capital of the coy is /., divided into ordinary shares of Form 206. -/. each, and founders' shares of 1, each, and there shall Xnothen be attached to the sd ordinary shares and founders' shares resply the rights, privileges, and conditions in that behalf specified in the arts of asson or for the time being. The above clause is framed so as to mention the two classes in the memorandum, and thus to secure their position, and at the same time to allow of modifications of their position under powers in the articles. Wliether effective, see supra, p. 358. The holders of the founders' shares shall, in respect thereof, be col- Form 207. lectively entld to as many votes as the holders of all the other shares ^ H ~ •'__'' _ bpecial voting for the time being issued shall be entld to, in respect of such other power to shares, and each of the founders' shares shall confer on the holder a t^°^'^^''^ "^f ' , founders rateable proportion of such votes. shares. Founders' Shares. Founders' shares are by no means a new invention. As appears from the first edition of this work, prepared in 1877, they were then well known, and to the writer's know- ledge companies, with founders' shares, were registered under the Act of 1862 as early as the year 1873. But founders' shares have during the last few years been much more frequently adopted than formerly. They are generally few in number and of small nominal value. Thus, vrith a capital of hundreds of thousands of pounds, or perhaps millions, the founders' shares may be 200 of 10/. each or of \l. each. Founders' shares are generally created for and appropriated to the remuneration of the founders or pro- moters of the company, they undertaking to pay the preliminary expenses and guarantee the placing of the shares which are to bo offered for pubUc subscription or part thereof. But occasionally the vendor stipulates that as part of the consideration for the sale to the company of his mine, business, concession, or other property, he shall have some founders' shares ; and sometimes the founders' shares are offered as a bait to subscribers for the ordinary shares— that is to say, the prospectus states that for every 1,000/. of ordinary shares subscribed the subscriber will be entitled to call for an allotment of one founders' share. One reason why founders' shares have been more frequently adopted of late, is to be found in the phenomenal prices to which the founders' shares in several well known companies have risen. In some cases 10/. foimders' shares have risen to 6,000/., 8,000/., and 10,000/. each, and a rise to 200/., 300/., or 500/. has been considered quite disap- pointiug. Another reason for the more extensive adoption of founders' shares was the decision of Kay, J., in Re Faure Electric Accumulator Co. (40 C. Div. 141, November, 1888), to the effect that a company could not legally pay commission for placing its capital. Prior to this decision it was common enough for a company to pay a moderate commission to those who underwTote or agreed to place its capital, but that decision rendered it doubtful whether such payments could be supported, and accordingly, in many cases, the expedient was adopted of having founders' shares imposing on the subscribers the obligation to pay preliminary expenses, and to guarantee the placing of the ordinary shares, e.g., 1,000/. ordinary for each founders' share subscribed for. By this means it became practicable without infringing the principles laid down in the case referred to, to get the capital effectually and legitimately underwiitteu, for in the 368 MEMORANDA OF ASSOCIATION. [CliAP. VI. Form 207. ^^^^ °^ ^ promising undertaking a man may be ready to underwrite 1,000/. of ordinary shares, provided he gets at par a 10?. founders' share, which may rise in value to 500/. or for that matter to 5,000/. Where it is proposed to issue the founders' shares for the purpose of getting the capital underwritten, it is desirable to insert in the memorandum clauses binding the subscribers for the founders' shares to pay the preliminary expenses, and to underwrite the ordinary shares, and then to get the underwriters to subscribe the memorandum of association for the founders' shares which they respectively take. The advantage of this plan is that each underwriter becomes entitled, by the constitution of the company, to his founders' shares, and that ^vithout imposing on the directors the responsibility of making an agreement on behalf of the company for the issue of the founders' shares, and without any danger of the contract being set aside as having been improvidently made by the directors. Moreover, it enables directors, trustees, and others to obtain founders' shares fairly and openly who otherwise might have some diihculty in accepting an allotment thereof, seeing that they might afterwards be accused of taking undue advantage of their position. However, it must not be supposed that it is essential to have the founders' shares subscribed for by the memorandum of association ; for where the subscription of the founders' shares imposes onerous liabilities, e.ff., to pay expenses and underwrite, and they are of purely speculative value, it would seem that the directors may, imder a general power to allot (Form 210, clause 6), allot such founders' shares at par to any bondjide and responsible subscribers, including themselves. But, of course, in such cases as this they have a discretion, and are not bound to allot. What they do will be open to observation, e.g., if they allot to themselves or their relations an undue proportion ; and it may, of course, be contended that as the directors are trustees of their powers for the company, they ought not to allot at par if the shares are worth much more, though 2>ri>». 37G), may be determinod by tlie company from time to timo by special resolutiou pursuant to sect. 50 of the Act. " Wo are of Jfniton v. opinion," said Lindley, L. J., delivering the judgment of the Court, 'co'r^o'o) " that the second decision in Hutton v. Scarborough Cliff Hotel Co. overruled. \_supra] was wrong and ought not to be followed, and that the decision appealed from must be reversed, and the resolutions thereby declared to be ultra vires must be declared intra vires and valid. If, by declining to follow the second decision in the case referred to, we were disturbing titles or embarrassing trade or commerce, we should treat it as one of those decisions which, though wrong, it would be mischievous to overrule. But such is not the case, and it is desir- able from all points of view to remove from companies a fetter which ouglit never to have been imposed upon them." This decision has been very welcome, not merely because it removes Results. a fetter on the issue of preference shares, but also because it disposes of the notion that the power to alter the regulations given by sect. 50 is not to have full effect. The decision is in accordance with the principles of the construction applied in Rosenberg v. Northumberland Building Socy., 22 Q. B. 373 ; Re Barrow Hematite Co., 39 C. D. 582 ; Boman's case, 3 C. D. 21 ; Re Argus Co., 39 C. D. 571. In the case last mentioned it was con- sidered that a power in the deed of settlement of a company (not under the Act of 1862) to alter such deed of settlement was to have full effect, and included even power to insert, by alteration, a clause providing for the sale of the whole undertaking. See also Re James Colmer, Ltd., (1897) 1 Ch. 524, which shows the far-reaching operation of the decision in Andrews v. Gas Meter Co., supra. In Continental Union Gas Co. (1893), 7 T. L. E. 496, it had been held in effect that voting rights were constitutional and could not be altered ; but in Re James Calmer, Ltd., Homer, J., held that, LIutton v. Scarborough Cliff Co., %ibi supra, having been overruled, there was no objection to an alteration of voting rights. Nevertheless, it is apprehended that some limit must be placed on Limits to the general words contained in sect. 50 ; the section cannot be used to ^ ^'^'^ ^°'^' place a minority of shareholders at the mercy of the majority. And it is clear from the authorities that any such abuse of the statutory power will be restrained. A majority, for instance, will not be permitted by the Court, under colour of the section, to commit a fraud on the minority. Menier v. Hooper'' s Telegraph Co., L. E. 9 Ch. 350. And see Gray v. Lewis, L. R. 8 Ch. 1051 ; Atwool v. Merry weather, 5 Eq. 404, n. ; Mason v. Harris, 11 Ch. D. 97 ; and Macclougall v. Gardiner, 1 Ch. D. 13. But query whether, short of fraud or oppression on the part of the majority, the statutory power of alteration is limited. The principal matters dealt with in the articles of association of a Principal compan}' limited by shares are the following : — artidea "^ (1) The exclusion, or partial exclusion, of Table A., supra, p. 372, and infra, p. 471. 380 ARTICLES OF ASSOCIATION. [CuAP. VII. Members entitled to copy of articles. Copies of special reso- lutions. Penalty. Stamps. (2) The adoption of preliminary agreements, supra, pp. 175, 216, and infra, p. 382. (3) The allotment of shares, infra, p. 384. (4) Calls and forfeiture, infra, pp. 388, 391 et seq. (5) Transfer and transmission of shares, infra, p. 397. (6) Increase of capital, infra, p. 409. (7) Reduction of capital, infra, p. 410. (8) Borrowing, infra, p. 411. (9) General meetings, iifra, p. 413. (10) Directors, infra, p. 427. (11) Dividends, ijifra, p. 455. (12) Accounts and audit, infra, pp. 459, 461. (13) Notices, p. 463. (14) Special provisions for winding-up, infra, p. 467. (15) Special jDrovisions in the case of private companies. Chap. VIII. As to each member being entitled to a copy of the memorandum and articles, see supra, p. 289. Where articles of association have been registered, a copy of every special resolution for the time being in force is to be annexed to or embodied in every copy of the articles of association that may be issued after the passing of such special resolution. Sect. 54 of the Act. Where no articles of association have been registered, a copy of any special resolution is to be forwarded, in print, to any member request- ing the same, on payment of one shilling, or such less sum as the company may direct. Ibid. If any company makes default in complying with the provisions of the above section, it incurs a penalty not exceeding 1/. for each copy in respect of which such default is made ; and every director or manager of the company who knowingly and wilfully authorizes or permits such default incurs a like penalty. Ibid. Before registration, the articles must be stamped with a 10s. deed stamp and with a 5*. companies' registration stamp. See supra, p. 371. 381 ARTICLES OF ASSOCIATION. The Companies Acts, 1862 to 1890. Form 210. Articles of Association of The Coy, Limtd. This form of articles, with suitable modifications, has been used in thousands of Articles of a cases. It includes most of the clauses usually inserted, and it will be found that it v -p ■, t . . hmited by- can with little difficulty be so altered as to suit the circumstances of the g'reat shares. majority of the companies from time to time in course of formation. Various special clauses will be found, infra, Torms 215 et seq., some of which may be occa- sionally required. Prelimikary. Some persons insert the words " It is agreed as follows " at the beginning of the articles, but the words are superfluous. By s. 16 of thj Act {supra, p. 371), each member is bound by an implied covenant to conform to the regulations. 1 . [The marginal notes lito shall not affect the construction hereof, Interpreta- and] in these jDresents, unless there be something in the subject or context inconsistent therewith, — "Special resolution" and "extraordinary resolution" have the meanings assigned thereto resply by the Companies Act, 1862 (ss. 51 and 129). " The directors " means the directors for the time being. " The office" means the registered office for the time being of the coy. " The register " means the register of members to be kept pursuant to sect. 25 of the Companies Act, 1862. "Month" means calendar month. "In writing" and "written" include printing, lithography, and other modes of representing or reproducing words in a visible form. Words importing the singular number only include the plural number, and vice versd. "Words importing the masculine gender only include the feminine gender. "Words importing persons include corporations. Some persons insert a long list of words and expressions in the interpretation clause, but the practice is not to be commended. Probably several of the above might be omitted, «. ^., " special " and "extraordinary" resolutions, but they are retained because directors and members are not always very familiar with the Act, and it may therefore be convenient to refer thereto. But there seems little use ia 382 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. saying that "the directors" means the "directors for the time being," that ■ " member" means member of the company, and so forth. However, occasionally additional definitions may be convenient, e.g., where there is to be reserve capital, under the Act of 1879. Thus — "reserve capital" means that portion of the capital which is not capable of being called up except in the event and for the purposes of the company being wound up. Table A. not to apply. Seal to be affixed to agreement. 2. The regulations contained in Table A. [in tlie first schedule to the Companies Act, 1862] shall not apply to the coy. See supra, p. 371, sect. 15 of the Act. 3. The coy shall forthwith enter into an agreemt with in the terms of the draft, a copy whereof has, for the purpose of identifica- tion, been subscribed by A. B., a solicitor of the Supreme Court, and the directors shall carry the sd agreemt into effect, with full power, nevertheless, from time to time to agree to any modification of the terms of such agreemt, either before or after the execution thereof. The above form will be used where Plan III., supra, p. 176, is adopted, and the agreement is not mentioned in the memorandum of association. Where it is so mentioned, the clause will run thus : — " The directors shall forthwith affix the seal to the agreement mentioned in paragraph of clause 3 of the company's memo- randum of association, and shall carry, &c." Where the agreement is made (Plan I., supra, p. 175) with a trustee or agent for the company before its incorporation, the clause will run thus : — ' ' The company shall [or may] forthwith adopt an agreement dated the day of , and made between of the one part, and on behalf of this company of the other part, and the directors shall [or may] carry the same into effect, with full power, nevertheless, at any time, and from time to time, either before or after the adoption thereof, to agree to any modification thereof." Or, if preferred, clause 3 in the text can be used in Plan I., but in such case the draft referred to will be the draft adojHion contract. Sometimes the words, " a copy whereof is set forth in the schedule hereto," are introduced ; but it is not generally advisable to set out the agreement in the schedule. The object of setting out the agreement in a schedule is, to give the members the fullest notice of its contents, for every member is taken to know the articles of asso- ciation ; supra, p. 35. It used formerly to be the custom to insert in the articles a clause declaring that " the company hereby ratifies and adopts the agreement, &c." But such a clause is now rarely inserted, for it is misleading, since it does not really operate to effect a ratification, and yet leads the parties to suppose that it does so operate. It pro- bably does no more than authorise the directors to carry out the agreement. Eley V. I'ositivc Gov. Co., 1 Ex. Div. 88, supra, p. 376. It certainly does not operate as a ratification of the agreement, "Because it has been decided, and, as it appears to me, well decided, that there cannot in law be an effective ratification of a contract which could not have been binding on the ratifier at the time it was made, because the ratifier was not then in existence. It docs not follow from that that acts may not bo done by the company after its formation which make a new contract to the aamo effect as the old one, but that stands on a different principle." Per Jessel, M. R., J'Jmpress Engvwcring Co., 16 C. Div. 125; and sec supra, p. 175. It is obvioufily undesirable to leave matters on such a footing ; for it is difficult to say ut what stage a company becomes bound by acting on the agreement. Thus, in Re Northumberland Avenue Hotel Co., 33 C. Div. 16, it was held that the company i FORMS. 383 Tvas not bound, although it had taken possession and expended large sums on the Form 210. premises agreed to be leased. There the agreement was with a trustee for the ^ -~ company, and was adopted by the articles. Accordingly an adoption contract is desirable. See Forms 35 and 36. But no separate adoption contract is necessary where the preliminary contract made with an agent for the company is signed after the incorporation of the com- pany ; such a contract is capable of ratification. See supra, p. 17G, Plan III. Moreover, it has been held that it may be ratified even after the other party has purported to repudiate it. Jlolton Partners v. Lambert, 41 C. Div. 295 ; see infra, p. 441. Where the directors are not independent of the vendors, e.g., where the vendors are themselves the directors or some of the directors, or where the directors or some of them are interested as promoters, or where it is intended that the directors shall be excused from taking the usual precautions, and the company is not a purely private company, it is sometimes deemed expedient to add additional words to the above Clause 3, as below in itaUca. The precise operation and effect of such pro- visions has not yet been ascertained by decision. It may be that the vendors could not claim by way of contract {supra, p. 374) the benefit of such provisions, but at any rate they go far to fix the company and its members with notice of the position of affairs, and to deprive those who join the company or deal with it of cause for complaint {Postage Stamp Co., (1892) 3 Ch. 566; Seligman v. Prince S; Co., (1895) 2 Ch. 617) ; and further, they would seem to go far to bind by laches those who object to the agreement, and yet abstain from promptly taking steps to repudiate it or get it set aside. Erianger v. Xeiv Sombrero Co., 3 App. Cas. 1218. On the other hand, such provisions to be effective must meet the very case, otherwise they are futile. Thus, in Bland'' f. case, (1893) 2 Ch. 612, where there was a provision on the lines of Clause A., below, it was held, that it did not protect a director who had played the part of a co-vendor, not having any real interest in the property. The most eminent counsel, now in high judicial of&ce, have advised that such special provisions are in some cases expedient. As to the provision that every member is to be deemed to have notice, &c., this is by no means a new pro\ision. SaJiIgreen and CarraWs ease, 3 Ch. 323. As to purely private companies not being within the Erianger rule, see, British Seamless Paper Box Co., 17 C. D. 467 ; Salomon v. Salomon ^- Co., (1897) A. C. 22, and i^^jra, p. 64. The following words, with more or less modification, are sometimes added to Clause 3 : — A. — The basis on which the company is established is, that the company shall acquire the property comprised in the said agreement on the terms therein set forth, subject to any such modifications {if any) as aforenaid, and that the vendors therein named are to be the first directors of the company, and accordingly it shall be no objection to the said agree- ment that the vendors as promoters and directors stand in a fiduciary position toicards the company, or that they do not in the circumstances constitute an itidependcnt board, and every member of the company present and future is to he deemed to join the company on this basis. It is advisable in some cases to insert a similar statement in any prospectus inviting application for shares. The following words furnish another example : — B. — And it is hereby declared that the purchase consideration thereby agreed to be given by the company has been fixed by the vendors as the amount they are willing to take, having regard to the fact that the value of the mining claims and properties thereby respectively agreed to be sold has not yet been ascertained ; and inasmuch as the said claims and properties are situate in British South Africa, and a8i ARTICLES OF ASSOCIATION. [OlIAP. Vll. Form 210. the value tliercof is siieculative aud uncertain, and can only be ascertained by local operations, which would be expensive and involve delay, and, if successful, would enhance the price asked, it is expressly declared that the directors are not, before executing such agreements on behalf of the company, to take any steps to ascertain the value of the said claims and properties, whether by local operations, indepen- dent inquiry, or by any other means, and are hereby absolved from all further responsibility in regard thereto, and every member of the company, present and future, hereby signifies his assent to this provision, aud it shall be no objection to the said agreement that the vendors therein named, or some or one of them, or some nominee of such vendors, are or is directors or a director of the company, provided that before the execution of such agreement he shall have disclosed his interest to the other directors. Company's 4. None of the funds of the coy shall be employed in the purchase feTur^baS. ^f, or lent on, shares of the coy. Where a company desires to obtain the quotation of its shares in the official list of the London Stock Exchange, such a clause as above should be inserted in order to comply with the rules. See supi-a, p. 145, for extracts from rules. AVhenbusi- 5. The business of the coy may be commenced as soon after the cornmenced*^ incorporation of the coy as the directors shall think fit, and notwith- standing that part only of the shares may have been allotted. This clause is often inserted, but is not necessary, for a company may unques- tionably commence business, and the directors may make calls, before the whole capital has been issued. McDoug((ll v. Jersey Imperial Hotel Co., 2 H. & M. 528; Ornamental Woodwork Co. v. Brotcn, 2 H. *& C. 63. But the directors are bound to exercise their discretion bona fide [Be Madrid Banh, Ex parte Williams, 2 Eq. 216), otherwise they may be held guilty of misfeasance. Re Liverpool Household Stores, 62 L. T. 876. The above clause may prevent misunderstanding. The terms of the prospectus may, however, give a member an equity to restrain the company from commencing business with a totally insufficient capital. Elder v. New Zealand Land Co., W. N. (1874) 85 ; 30 L. T. 285 ; Sharpletj v. Louth and East Co. Rail. Co., 2 C. Div. 663. But see Re Scottish Petroleum Co., 23 C. Div. 413. Allotment of shares. 6. The shares shall be under the control of the directors, who may allot or otherwise dispose of the same to such persons, on such terms and conditions, and at such times, as the directors think fit [subject, nevertheless, to the stipulations contained in the sd agreemt with reference to the shares to be allotted in pursuance thereof]. The words in brackets will bo omitted if no agreement is referred to in the articles. Sect. 25 of the Act of 1867 must be borne in mind. Sec supra, pp. 179 ct seq. As to shares issued at a discount, see supra, p. 283 ; as to bonus shares, supra, p. 284. Sometimes the words, " and cither at a premium or otherwise," are inserted ; but no special authority is required to issue shares at a premium. Sometimes the words, "with the sanction of a general meeting, shares in the initial capital may bo issued with any preferential rights attached thereto," are added. Shares may bo issued 7. Tlio coy may make arrangements on the issue of shares for a rOKM.S. •""'^•5 difference between the lioklers of such shares in the amount of calls to Form 210. be pd and the time of payment of such calls. subjecrto different con- Sect. 24 of the Act of 1867 provides that nothing in the Act of 1862 shall be ditions as to deemed to ^^revent any comjiany under that Act, i/" authorised by its regulations, as calls, &c. originally framed, or as altered by special resolution, from doing, inter alia, the above. It seems, therefore, expedient to take the power. 8. If, by the conditions of allotment of any share, the whole or part Instalments of the amount or issue price thereof shall be payable by instalments, ^^ ^^-^ ' ^^^ every such instalment shall, when due, be paid to the coy by the person who for the time being shall be the registered holder of the share. It is very common now to issue shares on terms that fixed sums shall be paid on application and allotment, and the balance, or a considerable part thereof, by instal- ments at short intervals. It is therefore expedient to insert such a clause as above. By the joint effect of the above clause and of sect. 16 of the Act each instalment will be a debt due to the company. Supra, p. 371. In England and Ireland it will be a specialty, and therefore recoverable within twenty years. 3 & 4 Will. IV. c. 42, s. 3. Compare Cork ^- Bandoii Bail. Co., 13 C. B. 826. See supra, p. 5 ; and see, as to sect. 70 of the Act of 1862, i)ifra, p. 1033. Unless such a clause is inserted, the instalments do not constitute a statutory debt, and if a transfer is passed whilst an instalment is due, a serious question arises as to whether the transferee is liable to pay such instalment. Re Hoijlake Rail. Co., 9 Ch. 257. The transferor remains liable, but it may be that a fresh call could be made on the transferee. Care should be taken that the forfeiture clauses extend to unpaid instalments. See clause 21, infra. Where shares are payable by instalments, and the company is ordered to be wound up before the final instalments are due, the liquidator can call up the full amount w"ithout waiting till the instalments fall due. In re Cordova Union Gold Co., (1891) 2 C. D. 580. As to the words " or issue price thereof," these are to provide for shares issued at a premium, and thus to render the forfeiture clauses applicable in the event of non-payment of premium. 9. The joint holders of a share shall be severally as well as jointly Liability of liable for the payment of all instalments and calls due in respect of ^^y^li ^ol'^^ra ^ '' ^ cf^hare. such share. This clause is not uncommon. It appears to be very reasonable, and affords an additional security to the company. It extends only to instalments payable and calls made during the joint lives. In the absence of such a clause the liability is joint only. MiWs case, 20 Eq. 585. 10. Save as herein otherwise provided the coy shall be entld to treat Trusts not the registered holder of any share as the absolute owner thof, and ^ecogmsed. accordingly shall not, except as ordered by a Court of competent juris- diction, or as by statute required, be bound to recognise any equitable or other claim to or interest in such share on the part of any other person. The obvious intention and purpose of the above clause is to enable the company P. C C 386 ARTICLES OF ASSOCIATION. [ClIAP. VII. Form 210. to look to the registered holder and deal with him exclusively as the owner of the ■ shares without regard to any notice that may be given to the company of any equitable or other claims on the part of outsiders, unless those claims are recognised by the regulations, as in the case of executors or administrators, or in the case of transferees entitled to registration, or unless the Court intervenes. The clause goes further than sect. 30 of the Act of 18G2. That section provides that "no notice of any trust expressed, implied, or constructive, shall be entered in the register or be receivable by the registrar in the case of companies under this Act and registered in England or Ireland." On the construction of that section it was held in Bradford Banking Co. v. Briggs (1887), 12 App. Cas. 29, that in case of a company subject to the Act, but not having an exemption clause as above in its regulations, the section, though it relieves the company from taking notice of trusts, did not relieve the company from the obligation to take notice of an equitable mortgage made by the shareholder. The exemption clause, however, framed as above, appears to relieve the company from this obligation — thus, in Socivte GenSralcY. Walker (1886), 11 App. Cas. 20, 30, where there was an exemption clause in the articles. Lord Selborne said that he thought that " upon the true and proper constmction of the Companies Act, 1862, and of the articles of this company, there was no obligation upon this company to accept or to preserve any record of notices of equitable interests or trusts if actually given or tendered to them, and that any such notice, if given, would be absolutely inoperative. ' ' It is true that this passage was thought by the learned lords who took part in the decision in Bradford Co. v. Briggs, supra, to go too far, but apparently attention was not called to the fact that in the case last mentioned there was no exemption clause, whereas in the case Lord Selborne was dealing with there was a very full exemption clause. It was settled long since that the presence of an exemption clause does not prevent a person equitably interested in shares from procuring the intervention of the Court to protect his rights. Binney v. Ince Sail Coal Co., 35 L. J. Ch. 363 ; Taylor v. Midland Rail. Co., 8 W. R. 401. And now it is not imcommon, as in the above clause, to insert words showing that the clause is not to interfere with the jurisdiction of the Court. This removes a difficulty in construction referred to by Lord Halsbury in Bradford Banking Co. v. Briggs. Tlie following are additional cases in which the exemption clause was present, and the company was held entitled to disregard notice of equities : — Kew London and Brazilian Bank v. Brocklcbank (1882), 21 C. D. 302 ; Miles v. mw Zealand, ^-c. Co. (1896), 32 C. D. 263; Re Perkins, 24 Q. B. D. 613. In the case last mentioned Lord Coleridge, sitting in the Court of Appeal, pointed out the importance of relieving companies from the obligation to recognise equities. ' ' It seems to me, said his lordship, extremely important not to throw any doubt on the principle, the companies have nothing whatever to do with the relations between trustees and their cestuis que trusts in respect of the shares of the company. If a trustee is on the company's register as a holder of shares, the relations wliich he may have with some other person in respect of the shares are matters with which the company have nothing whatever to do, they could only look to the man whose name is upon the register. It seems to me that if we were to throw any doubt upon that rule we shoidd make the carrying on of the business of joint stock companies extremely difficult and might involve those companies in very serious questions, and the ultimate result would bo anything but beneficial to the holders of shares in such companies thcmHelvcs." It is, and has for long been, a general practice with companies — at any rate, those having an exemption clause in their regulations — to decline to receive notice of equities, and to inform a person who gives notice that the company does not recognise notice of equities, and that if the party who is giving the notice desires, he must take steps to obtain an injunction, and tliis is all that a comjjany can in rt'uson bo expected to do. Take the cuso of a company with a thousand share- FORMS. 387 liolclers, a not uncommon number, it would be intolerable if tlio company was Form 210. obliged to take notice of all the various claims that miglit be sent in to it by outsiders, who claim to be interested in shares and yet abstain from taking the requisite legal proceedings, either in an action or under 1 & 2 Vict. c. 110, sect. 14 ; 3 & 4 Vict. c. 82, sect. 1, or R. S. C. Order XLV. (1), rule 1. See infra, p. 941. Sliarcs appear to be " choses in action" within sect. 44 of the Bankruptcy Act, 1883, and therefore exempt from the order and disposition provisions of that section. Colonial Bank Y. Whinncij, 11 App. Gas. 436. But the doctrine of Dearie v. llall, 3 Russ. 1, does «o< apply to shares, and accordingly an acquitable assignee of a share who does not give notice thereof to the company wall not be postponed to a subseqiient equitable assignee who does give notice. Societc Gin.y. Walker, 11 App. Gas. 30. Hence, where the holder executes a transfer of shares to A. and sub- sequently another transfer of the same shares to B., the maxim qui prior est tempore potior est jure applies, and A. is entitled to registration to the exclusion of B. But if B. is a purchaser for value without notice of the prior transfer to A., and gets on to the register before A., he thereby gains pi-iority over A. And he may, perhaps, g"ain priority without actual registration, if he becomes unconditionally entitled to registration. See infra, p. 398. It must be borne in mind that where a transfer by deed is required a blank transfer filled up after delivery does not pass the legal title, and is, therefore, in- effective as against a prior equity. Tuwell v. Trov. Bank of England, (1892) 2 Ch. 555. Where a regular transfer is presented but the comjjany has received notice not to register it, it should, unless it is prepared to run the risk, inform the jierson who gave the notice that unless he within (say) three days obtain an injunction, the transfer will be registered, and notice should also be given to the transferee. Sec Tahiti Cotton Co., Ex parte Sargent, 17 Eq. 280; Re Cadogan, ^-c. Co., W. N. (1876) 91. But where the company has notice of an equitable title it is not bound to register a transfer which would be a fraud on the owner of such equitable title. Roots V. Williamson, 38 C. D. 485 ; Moore v. Mrth- Western Bank, ubi supra. The company need not register a person as a member under a transfer of shares of which they have any doubt, but can leave the transferee to come to the Goui't and make out his title. Per Mellor, J., BaJiia # San Francisco Rail., L. R. 3 Q. B. 597. Under sect. 30 of the Act, a trustee who is the registered holder of shares is per- sonally liable. Chapman and Barker'' s case, 3 Eq. 361 ; Hemming v. Maddick, 7 Ch. 395. And the same rule applies to Scotch companies even where the trustees arc registered "as trustees." Iluir v. City of Glasgow Bank, 4 App. Gas. 337. But a trustee is entitled to be indemnified by his cestui que trust. Hemming v. Maddick, ubi supra. A company is by statute bound to attend to a distringas notice. See p. 941, infra. Preference Shares. 10«. Of the stares in the initial capital [10,000] shall be preference Preference shares, &c. (See Forms 217 et seq., infra.) &\i&ve». Where the initial capital is divided into classes it is convenient here to set forth the particulars, unless the matter is fully dealt watli in the memorandum of associa- tion. See Forms 217 et seq., and supra, p. 358. Certificates. 1 1 . The certificates of title to shares shall be issued under the seal Certificates ; of the coy, and signed by two directors, and countersigned by the secretary or some other person appointed by the directors. As to the serious responsibility incurred by a company in issuing certificates, see infra, Chap. XII., where also will be found forms of certificates, cc2 388 ARTICLES OF ASSOCIATION. [CllAP. VII. Form 210. members' rifflit to. As to issue of new certificate in place of one defaced, lost, or destroyed. Fee. 12. Every member sliall he entld to one certificate for all the shares registered ia his name, or to several certificates, each for one or more of such shares. Every certificate of shares shall specify the number and denoting numbers of the shares in respect of which it is issued and the amount paid up thereon. 13. If any certificate be worn out or defaced, then, upon production thereof to the directors, they may order the same to be cancelled, and may issue a new certificate in lieu thereof ; and if any certificate be lost or destroyed, then, upon proof thereof to the satisfaction of the directors, and on such indemnity as the directors deem adequate being given, a new certificate in lieu thereof shall be given to the party entld to such lost or destroyed certificate. The company incurs a serious responsibility by issuing a new certificate, unless the old one is cancelled ; and it ought not to be done except on very satisfactory proof of loss or destruction, or on a satisfactory indemnity being given. See further, infra, p. 403, and Chap. XII., infra, p. 711. 14. For every certificate issued under the last preceding clause there shall be paid to the coy the sum of Is., or such smaller sum as the directors may determine. The Stock Exchange Committee will not allow a fee to be charged for the first certificate. To which of joint-holders certificate to be issued. Calls. 15. The certificates of shares registered in the names of two or more persons shall be delivered to the person first named on the register. Calls. 16. The directors may, from time to time, make such calls as they think fit upon the members in respect of all moneys unpaid on the shares held by them resply, and not by the conditions of allotment thereof made payable at fixed times, and each member shall pay the amount of every call so made on him to the persons and at the times and places appointed by the directors. A call may be made payable by instalments. Every call or instalment under the above clause becomes a debt, for which the company can sue. See supra, note to clause 8. As to an action against a member for calls or other money, see infra, note to clause 19«. It is, perhaps, needless to say that a call made by persons not duly appointed directors is void. Uowheach Coal Co. v. Teague, 5 H. & N. 151. So, too, it will be a valid defence, in an action for calls, that the directors who purported to make the call were not duly qualified. Iron Ship, cjc. Co. v. Blunt, L. R. 3 C. P. 484. See also fiharp v. Datvcs, 2 Q. B. Div. 2G. But HO'jt. 67 of the Act, and a clause like 111, infra, may make an act of directors done before discovery of undue appointment or di.squalification valid. In making a call cure should be taken to make it pjiyablc at a time Buflicieutly diHtaiit to allow the requisite notice to bo given. Under clause 109 the power to FOKM.S. 380 make a call may be delegated to a committee, but the power cannot be delegated Form 210. without some fiuch authority. IFoicard's case, 1 Ch. 561. — The power to make calls in in the nature of a trust to be exercised for the general benefit of the company. Gilbert's ca.ie, 5 Ch. 559. The onus of proving mala fides is on the party alleging it. Odessa Trams. Co. v. Mendel, 8 C. Div. 246. It is not easy to obtain an injunction restraining a call. Norman v. Mitchell, 19 Beav. 278 ; 5 De G. M. & G-. 648 ; Logan v. Courtown, 13 Beav. 22 ; Bailey v. Birhenhead Co., 12 Beav. 433. It may be proper to make a call in order to prevent threatened transfers. Gilbert's case, uhi supra. A minute of the resolution making a call ought to be made, for there is some question whether the call can otherwise be proved. Cornwall Mining Co. v. Bennett, 5 H. & N. 423 ; 29 L. J. Ex. 157. And the resolution should specify the amount of the call, and when, where, and to whom the call is to be paid. lie Cawley 4'- Co., 42 C. Div. 209. Compare Johnson v. Lyttle s Iron Agency, 5 C. Div. 687. It would seem that even without express authority a call may certainly be made payable by instalments. Anibergatc Rail. Co. v. Xorcliffe, 6 Ex. 629 ; Lawrence v. Wynn, 5 M. & W. 355. Although calls are to be made on the members (as in Table A, cl. 4), a deceased member, whilst his name remains on the register, must, it would seem, be treated as a continuing member so far as may be necessary to render his estate liable. Neiv Zealand, S^c. Co. v. Peacock, (1894) 1 Q. B. 622. If desired the words, "In this clause member includes the legal personal representatives of a member" may be inserted. See sect. 21 of the Companies Clauses Consolidation Act, 1845. As to directors making calls after volimtary liquidation has conmienced, see Re Fairbairn Engineering Co., (1893) 3 Ch. 450. 17. A call shall be deemed to have been made at the time -when the When call resolution of the directors authorising such call was passed. have been made. This clause, which appears in Table A., is inserted in order to get rid of any doubt as to whether the call is " made" when the resolution is passed, or when notice of it is given to the members. Shaiv v. Rowley, 16 M. & W. 810. See clauses 27 and 33, infra, in connection with which the question is sometimes material. [17a. No call shall exceed one-fourth of the nominal amount of a Restrictions share, or be made payable within two months after the last preceding °^nkeTaUs° call was payable.] The above clause is sometimes used, but, except where quotation is required, it is generally considered better to leave the directors free to exercise their discretion. The prospectus not uncommonly states that it is not intended to make calls beyond a certain amount, but such a statement of intention is not binding on the company ; and it was held in one case that an action would lie, though the shares were applied for on the faith of a prospectus which stated that " No further calls are contem- plated." Accidental Insurance Co. v. Davis, 15 L. T. 182. Prima facie a payment to be made on the allotment of a share is not a call. Croskey v. Bank of Wales, 4 Gi£f. 314. The Stock Exchange Committee generally require a clause as above, and will not allow the word "fifth " to be substituted for " fourth." An "instal- ment" under clause 8 is not a "call" within this clause. 18. Fourteen days' notice of any call shall be given specifying the Notice of call. time and place of payment, and to whom such call shall be paid. It is always expedient to allow a reasonable time for payment of a call. If 390 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. money is urgently required, the directors should raise it temporarily on debentures or mortgage or otherwise, so as to allow sufficient time for the members to i^ay up. Where so many " clear days' notice " or " at least ' ' is to be given, the day of giving the notice and the day on which the call is to be paid should not be counted. Watson V. JSales, 23 Beav. 294 ; Railivay Sleepers Co., 29 C. D. 204. If a call is made payable by instalments, the notice ought, it would seem, to be given the prescribed number of days before the time fixed for the payment of the first instal- ment. Notice must be given in accordance with the regulations of the company. Watson V. Bales, ubi supra. And ses cl. 19, infra. When interest on call, or instalment, payable. 19. If the Slim payable in respect of any call or instalment be not pd on or before the day appointed for payment thereof, the holder for the time being of the share in respect of which the call shall have been made, or the instalment shall be due, shall pay interest for the same at the rate of 5/. p.c.p.a. from the day appointed for the payment thereof to the time of the actual payment, or at such other rate as the directors may determine. What the rate of interest should be is a matter for consideration. Sometimes 10 per cent, is specified. See Stocken^s case, 3 Ch. 412. Such a clause does not apply to calls made by the liquidators of a company. In re Welsh Flannel and Tweed Co., 20 Eq. 367. The duty of the directors, when a call is made, is to compel every shareholder to pay to the company the amoimt due from him in respect of that call ; and they are guilty of a breach of their duty if they do not take all reasonable means for enforcing that payment. Spachman v. Evans, L. E.. 3 H. L. 186. Evidence in action for call. [19rt. On the trial or hearing of any action for the recovery of any money due for any call, it shall be sufficient to prove that the name of the member sued is entered in the register of members of the coy as the holder, or one of the holders, of the shares in respect of which such debt accrued ; that the resolution making the call is duly recorded in the minute book ; and that notice of such call was duly given to the member sued, in pursuance of these presents; and it shall not be necessary to prove the appointment of the directors who made such call, nor any other matters whatsoever, but the proof of the matters afsd shall be conclusive evidence of the debt.] This clause is sometimes inserted ; it is not contained in Table A. The pro\dsions of the Act arc generally deemed sufficient. They are as follows : S. 70 provides that " In any action or suit brought by the company against any member to recover any call or other moneys due from such member in his character of member, it shall not be necessary to set forth the special matter ; but it shall be sufficient to allege that the defendant is a member of the company, and is indebted to the company in respect of a call made or other moneys due, whereby an action or suit hath accrued to the company." Under s. 37, the production of the register is sufficient prima facie evidence of membership ; and a minute of the resolution making the call, signed as required by s. 07 of the Act, is sufficient primd facie evidence of the call having been duly made, and the meeting duly held, and of the duo appointment of tho directors. NotwithHtiiiidiiig tlio terms of the above cIuuho, there is no doubt that the defendant woTild bo oiitit,l(;d to show that he was not a member. It would, however, seem that a» against a member the clause would render tho duly recorded resolution of a call FORMS. 391 conclusive. See and consider Cornwall, S;c. Co. v. Benneit, 5 H. & N. 423 ; and Form 210. Honey'' s case, 4 D. J. & S. 420. ■ "" 20. The directors may, if tlioy think fit, receive from any member Payn^ent of ■willing to advance the same all or any part of the money due upon advance, the shares held by him beyond the sums actually called for ; and upon the money so pd in advance, or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made, the coy may pay interest at such rate as the member paying such sum in advance and the directors agree uj)on. The power to receive in advance is in the nature of a trust for the benefit of the company. Hence, where directors paid up in advance their own shares, and on the same day appropriated the amount in payment of their fees, for which there were, at the time, as they knew, no other available assets, it was held that, the transaction not being bondjide, the directors remained liable on their shares. Sykes' case, 13 Eq. 255. See also Gilberts case, 5 Ch. 559 ; In re Winchani Shipbuilding Co., 9 C. Div. 322 ; and compare with Liverpool Guarantee Co., 30 W. R. 378 ; KenVs case, 39 C. Div. 266. And see Anglo- Continental, ^-c. Corporation, (1898} 1 Ch. 327, 335; Driffield Gas Light Co., (1898) 1 Ch. 451. It has now been held, by the House of Lords, that such a clause justifies the payment of the agreed interest as a debt payable therefor, not merely out of profits, but, if needs be, out of capital, provided that the power to receive in advance has been exercised bona fide. Of course, it may be arranged that the interest is only to be paid out of profits, and that payment up in advance is not to give any preference, in winding-up, as to capital. LockY. Queensland Investment Co., (1896) A. C. 4G1. See further, infra, p. 519. In a winding-up, capital paid up in advance of Q.a]l& primd facie ranks for payment next after outside debts, and the costs of winding up (see Maude's case, 6 Ch. 51, and the cases following), and arrears of interest thereon, rank in like manner. Ex- change Drapery, 38 C. D. 174 ; Wakefield, ^-c. Co., (1892) 3 Ch. 165. FOEFEITURE AND LlEN. 21. If any member fail to pay any call or instalment on or before if call or in- the day appointed for the payment of the same, the directors may at stalment not • V P ■,•!.• .1 1, . 1 . paid, notice any time thereafter, during such time as the call or instalment remains may be o-iven. unpaid, serve a notice on such member requiring him to pay the same, together with any interest that may have accrued, and all expenses that may have been incurred by the coy by reason of such non- payment. The power of forfeiture is a most valuable one for enforcing the payment of calls and instalments. But it is to be treated as strictissimi juris, and accordingly any irregularity in the procedure will invalidate the forfeiture. Hart v. Clark, 6 H. L. Cas. 633 ; The Garden Gully, ^-c. Co. v. McLister, 1 App. Cas. 39; Johnson v. Lyttle^s Iron Agency, 5 C. Div. 687 ; Goullon v. London Areliilcctural Co., W. N. (1877) 141 ; Stubhs v. Lister, 1 Y. & C. C. C. 81. Where the shareholder is bankrupt, the notice may still be given to him {Grak'im V. Van Dieman''s Land Co., 26 L. J. Ex. 73), but it is well to give notice to the trustee also. The members whose shares have been wrungly forfeited are entitled to prove in 392 ARTICLES OF ASSOCIATION. [CliAl*. Vll. Form 210. tte winding-up of the company in competition witli other creditors [In re New ' Chile Co., 45 C. D. 598), but if the procedure has been regular, the Court will not give relief against the forfeitui-e. Hparks v. Liverpool Waterworks, 13 Ves. 428. It has been decided that the power of forfeiture may be exercised by the directors with the sanction mentioned in sect. 133 (5) of the Act of 1862, even after the commencement of a voluntary winding-up. In re Fairhairn Engineering Co., (1893) 3 Ch. 450. A power to forfeit may, it would seem, be introduced by special resolution. Dawkins v. Antrobus, 17 C. Div. 634. The power creates a trust to be exercised for the benefit of the company, and, if it is used for the purpose of enabling members to escape from their liabilities, the transaction cannot stand. In re Esparto Trading Co., 12 C. D. 191 ; Harris v. North Devon Sail. Co., 20 Beav. 384 ; Spackman v. Evans, L. R. 3 H. L. 186. Sometimes it is considered desirable to make the power of forfeiture exerciseable for non-payment of debts generally, and not merely calls and instalments. Bunlop V, Dunhp, 21 C. D. 583. Form of notice. If notice not complied with, shares may be for- feited. 22. The notice shall name a day (not being less than fourteen days from the date of the notice), and a place or places, on and at which such call or instalment and such interest and expenses as afsd are to be pd. The notice shall also state that in the event of non-payment at or before the time and at the place appointed, the shares in respect of which the call was made or instalment is payable will be liable to be forfeited. Sometimes the above clause is omitted, and the preceding clause (21) altered by inserting the words "within 21 days from the date thereof" before the word " together," and by adding at the end of the clause the words, " Such notice shall contain a copy of the next following clause." 23. If the requisitions of any such notice as afsd are not complied with, any shares in respect of which such notice has been given may, at any time thereafter, before payment of all calls or instalments, interest and expenses, due in respect thereof, be forfeited by a resolu- tion of the directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares, and not actually pd before the forfeiture. The forfeiture may bo held valid although this clause has not been strictly observed. JFoolaston^s case, 4 De G. & J. 437 ; Knight^s case, 2 Ch. 321. Of course the directors are not bound to exercise the power of forfeiture. Bigg's case, 1 Eq. 309. Notice after forfeiture. [23a. When any share shall have been so forfeited, notice of the resolution shall bo given to the member in whoso name it stood imme- diately prior to the forfeiture, and an entry of the forfeiture, with the date thereof, shall forthwith bo made in the register.] This clatiso is sometimes iiisortcd, and it scorns roasonablo iu order that tlie FOKMS. 39a member may liave an opportunity of getting the forfeiture annullod under Form 210. Clause 25. It does not follow that the failure to give the notice invalidates the forfeiture. Webster's case, 32 L. J. Ch. ISf) ; 7 L. T. G18. 24. Any share eo forfeited sliall be deemed to be the ppty of the Forfeited coy, and the directors may sell, re-allot, and otherwise dispose of the ^ ^'^^^ '^ same in such manner as they think fit. perty of company. This clause is ahnost always inserted. 25. The directors may, at any time before any share so forfeited Power to shall have been sold, re-allotted, or otherwise disposed of, annul the fgi^ypg forfeiture thereof upon such conditions as they think fit. 26. Any member whose shares have been forfeited shall, notwith- Arrears to be standing, bo liable to pay, and shall forthwith pay to the coy, all calls, Btandrno-^or-' instalments, interest and expenses, owing upon or in respect of such feituxe. shares at the time of the forfeiture, together with interest thereon, from the time of forfeiture until payment, at [5] p.c.p.a., and the directors may enforce the payment thereof if they think fit. In the absence of such a clause as above, it appears that the forfeiture would be taken to preclude the company from suing for calls. Stocken's case, 3 Ch. 412. From the same case it appears that the liability under this clause must be treated as a new one, binding under s. 16 of the Act (see supra, note to Clause 8), and not as a preservation of the liability existing at the time of forfeiture. It is necessary, therefore, to prescribe the rate of interest, since the provision in Clause 19 will not apply. Stockoi's case, 3 Ch. 412. Where a person has been induced by misrepresentation to become a member, forfeiture places him in a position, if sued by the company, to set up the misrepre- sentation by way of defence, even in a winding-vip. Aaron's Reefs v. Ttviss, (1897) A. C. 273. A call may be "owing" within the meaning of this clavise although it has not become payable when the forfeiture takes place. Faure v. Fhillipart, 58 L. T. 525. [26ff. The forfeiture of a share shall involve the extinction of all Effect of interest in, and also of all claims and demands against the coy in *o"^"^^- respect of the share, and all other rights incident to the share, except only such of those rights as by these articles are expressly saved.] Although the above clause is sometimes inserted, it appears to be of little or no value. In substance it merely provides for that which is otherwise provided for, namely, that a forfeited share shall be deemed to be the property of the company. If strictly construed, it would deprive a future holder of the share of the right of voting and of receiving dividends, «fcc. See Stocken's case, 3 Ch. 412. In Crey'ke's case, 5 Ch. 63, it was contended that the forfeiture of shares in a com- pany whose articles contained such a clause freed the forfeiting member from liability even as a past member ; but it was held that this was not so. As to proving for damages where forfeiture irregular, see J^ew Vnle Co., 4j C. D. 598. 394 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. [27. The coy shall have a first and paramount lien upon all the 7i ~, shares [other than fully paid-up shares : 07ni( these icords if quotation Company s ^ . . lien on shares, not required'] registered in the name of each member (whether solely or jointly with others), for his debts, liabilities, and engagements, solely or jointly with any other person, to or with the coy, whether the period for the payment, fulfilment, or discharge thereof shall have actually arrived or not, and no equitable interest in any share shall be created except upon the footing and condition that Clause 1 hereof is to have full effect. And such lien shall extend to all divi- dends from time to time declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of the coy's lien, if any, on such shares.] It has been usual expressly to give a company a lien as above. It is possible that a lien might be implied though not expressly given (Lindley on Companies, 456) ; but this possibility is not relied on in practice. See Finkett v. Wright, 2 Ha. 120 ; 12 CI. & Fin. 764. Probably a lien on the shares gives a lien on the dividends ■without express mention. Sague v. Dayidcrson, 2 Ex. 741. The Stock Exchange Committee require the insertion of the words " other than fully paid-up shares " in the above clause, so that a fully paid-up share may be freely transferable. It is well settled that the clause gives an effective charge on the shares. Bradford Bank v. Briggs (1887), 12 App. Cas. 29. And if shares are standing in the names of trustees, and the articles exclude the recognition of equities (Clause 10, supra), the company, by virtue of the clause, have, as was laid down in Kew London ($• Brazilian Bank v. Brocklehank, 21 C. Div. 302, a lien which prevails over the title of the cestuis que trust ; and even though the company have notice of the equitable interest, the company's rights are unaffected. See also Re Perkins, 24 Q. B. Div. 613 ; and supra, p. 386. Difficult questions, however, sometimes arise as to the company's position after notice of a subsequent mortgage. In Bradford Banking Co. v. Briggs (1887), 12 App. Cas. 29, it was decided by the House of Lords that the principle of Sopkinson v. RoH, 9 H. L. C. 514, applies to a lien clause in articles of association ; and, accordingly, that when the company has notice of an equitable mortgage made by a shareholder it cannot, by virtue of the lien clause, obtain priority for any advance made by it to or for any sums becoming due to it from the shareholder after notice of such subsequent mortgage. In that case the Hen clause was that— "The company shall have a first and permanent lien and charge upon every share of every person who is the holder, or one of several joint holders, thereof, for all debts due from him either alone or jointly \\ath any other person, whether a shareholder or not in the company." The articles contained no exemption clause. Supra, p. 285. The company's principal contentions in this case were — (1) that on the true construction of the lien clause (103) in its articles the shareholder had agreed that the company should have a lien ranking in priority to all other charges with or without notice, and that the second mortgagee with notice of this bargain could not establish any claim in violation of it ; and (2) that the company was, imdcr sect. 30 of the Act of 1862, entitled to disregard the notice as notice of a trust, and, on that ground, entitled to priority. As to the first of these contentions, the House of Lords held that this was not the meaning of the clause. "I cannot agree," said Lord Blackburn, "that such is the true construction of Art. 103." And Lord Fitzgerald said, that "the principle of Jldpkiiison. V. RoU governs the present case loikss there is something in Art. 103 ■which prevents its application. The articles provide for the transfer of shares ; . . . FORMS. 395 but there is no limit to the right of the sharoiioldcr to pledge, or raise money on, his Form 210. shares unless it is to be found in Art. 103," and he considered tliat " full effect may be given to its terms, and yet the lien confen-ed by it be Hmited as to liabilities of the shareholder contracted up to the time at which the company shall have had notice that he has ceased to be the beneficial holder of the shares. " As to the second contention, the Law Lords held that this went too far, and that notice of the mortgage was not notice of a trust within the meaning of the section. The principle of this decision seems equally applicable in similar circumstances to Subsequent an absolute disposition by a shareholder of his interest in his shares. See London and purchasers. County Banking Co. v. Radcliffe, 6 App. Cas. 722. If this be so, sect. 30 of the Act of 1862 is to a great extent nullified, for in relation to the lien clause the company must take notice of trusts. That section provides that "No notice of any trust, expressed, implied, or Object of constructive, shall be entered on the register or be receivable by the registrar in sect. 30 of the case of companies under this Act and registered in England or Ireland" : and the importance of thus relieving the company from an obHgation to recognize •, ^fl^^ . equities is well pointed out by Lord Coleridge, C. J., sitting in the Court of Appeal tered holder, in Ee Perkins, 24 Q. B. D. 613. See extract set out supra, p. 386. Lord Esher and Fry, L. J., concurred. It therefore becomes important to consider how far the decision in Bradford How far Banking Co. v. Briggs, supra, goes. Bradford Now, in limine, it is material to note that this case was decided on the construe- -J''! "'^ '^' ^' tion of the articles and of sect. 30 of the Act of 1862. It did not decide that there ' was any inexorable rule of equity, making it impossible for a mortgagor and first mortgagee of shares to attach to the shares a condition which a subsequent mortgagee, taking with notice, cannot override. Any such rule would have been contrary to the settled principles of equity. See Ttdk v. Moxhay (1848), 2 Ph. 772, which was decided by Lord Chancellor Cottenham on the principle that "if an equity is attached to the property by the owner, no one purchasing with notice of that equity can stand in a different situation from the party from whom he purchased." This was a case as to user of land, but the same principle is applicable to a chattel, e.g., a ship. See Be Mattos v. Gibson (1858), 4 De G. & J. 276, in which Knight-Bruce and Turner, L.JJ., both considered that, when there was a contract between A. and B. as to the employment of a chattel the Court of Chancery had power to restrain C, claiming through B. with notice, from doing anything in contravention of the contract. "A system of law," said Knight- Bruce, L. J., "in which such a power does not exist must surely be very defective. I repeat that in my opinion the power does exist here." See also Werdermayi v. Socicti Genirale (1881), 19 C. D. 246, in which a contract in regard to a patent was held in equity to run with the patent into the hands of any person taking with notice. Accordingly, it appears to follow that the rule in Hopkinson v. RoU, and in Bradford Banking Co. v. Briggs, may be modified by the regulations, provided that the subsequent mortgagee or claimant is to be treated as having notice of such regulations ; and it is clear that he is to be so treated. " The Master of the EoUs says that the plaintiff [the second mortgagee], when the shares were deposited with him, knew, or at least ought to have known, what the articles were, and I so far agree with him." Per Lord Blackburn, Bradford Banking Co. v. Briggs, supra, at p. 37. What, then, is sufficient in the regulations to negative the rule in Bradford WTiat suffi- Banking Co. v. Briggs ? Occasionally the Hen clause contains express words to the cient to over- effect that the lien is to be for all debts and liabilities, " whether incurred before or ^ ^^ case. after notice of any equitable interest in any person other than the registered holder," and these words certainly go far to make the intention clear; but more commonly the clause is framed as above in order to introduce a negative which some of the cases in equity, supra, p. 395, treat as material. Where there is such a provision it seems reasonably clear that a person claiming under the registered 396 ARTICLES OF ASSOCIATION. [CllAI'. VII. Form 210. holder could not disregard it, and that the company's lien would he paramount. See. farther, supra, p. 386, as to the operation of the " exemption clause." When the holder of shares, subject to a lien on the part of the company, sells some of them, the purchaser is entitled to marshal as against an execution creditor of the vendor, and to throw the lien in the first instance ujion the shares remaining unsold. Gray v. Stone and Fanncll, 69 L. T. 282 ; W. N. (1893) 133. As to the rights of a purchaser of shares against the vendor where the company exercises its right of lien subsequent to the purchase, see In re Macmurdo, Penjield v. Macmurdo, W. N. (1892) 73. The right of lien may be discharged by an arrangement between the shareholder and the company, but to effect this the terms must be incompatible with the reten- tion of the lien, or the arrangement must indicate the intention of the parties that the right shall no longer be enforced. Bank of Africa v. Salisbury Gold Mining Co., (1892) A. C. 281. - A lien under a clause of this description is a charge upon the shares within the meaning of s. 2, sub-s. vi. of the Conveyancing Act, 1881, and consequently s. 15 applies and entitles the shareholder to require the company, on payment of the sum due, to assign the debt and their lien on the shares to his nominee. Everitt v. Automatic Weighing Machine Co., (1892) 3 Ch. 506. As to effect of reconstruction, see Re Lewis, 6 Ch. 818. As to en- forcing lien by sale. [28. For the purpose of enforcing such lien, the directors may sell the shares subject thereto in such manner as they think fit; but no sale shall be made until such period as afsd shall have arrived, and until notice in writing of the intention to sell shall have been served on such member, his executors or administrators, and default shall have been made by him or them in the payment, fulfilment, or dis- charge of such debts, liabilities, or engagements for seven days after Buch notice.] . The lien is of much greater value if it can be enforced in a summary manner by sale of the share subject to it. Table A (Clause 10) does not confer on the company a power of sale. The restriction contained in the latter part of the above clause has only recently come into use, but it seems only fair and equitable. See observations of Jessel, M. R., in/« re Stockton Malleable Iron Co., 2 C. D. 101. "Default," means " non-payment." Williams v. Stern, 5 Q. B. D. 409. Where there is a lien, but no power of sale, it was considered necessary to bring an action to enforce a sale. mtv London # Brazilian Bank v. Brocklebank, 21 C. Div. 302 ; 30 W. E,. 422, 737. But as the Conveyancing Act applies (see Everitt v. Automatic, ^c. Co., supra), it would seem that under s. 19 of this Act a sale might be effected by the company as mortgagee. Application [29. The net proceeds of any such sale shall be ajiplied in or of proceed.s of towards satisfaction of the debts, liabilities, or engagements, and the residue (if any) pd to such member, his executors, administrators, or assigns.] 30. Upon any sale after forfeiture or for enforcing a lien in pur- ported exercise of the powers hnbefore given, the directors may cause the purchaser's name to bo entered in the register in respect of the Bharos sold, and the purchaser shall not bo bound to see to the regu- larity of the proceedings, or to the applicon of the purchase-money, and after his name han boon entered in the register in respect of sucli Validity of Bales under clausfs 24 and 28. FORMS. 397 shares, tlio validity of tlie sale shall not be impeached by any person, Form 210. and the remedy of any person aggrieved by the sale shall be in damages only and against the coy exclusively. Compare this clause with Clause 22 of Table A., wliicli, however, only applies to a sale on forfeiture. The presence of this clause renders it expedient to apply for an injunction before the sale is effected ; for after sale it will be difficult, if not impossible, to recover the shares. As to the rights of a member whose shares have been wron^uUy forfeited to damages ii^the winding-up of the company, see In re New Chile Co., 45 Ch. D. 598. Transfer akd Transmission. By sect. 22 of the Act of 1862, shares are to be " capable of being transferred in manner provided by the regulations of the company." Hence, it is necessary to provide for transfers ; but it is well settled that, save so far as restricted by the articles, the right of transfer is absolute. It would not be within the province of this work to enter into a consideration of the numerous cases relating to transfer, but the following may be mentioned : Weston'' s case, 4 Ch. 20 ; Gilberfs case, 5 Ch. 559. According to the principles laid down in these cases, the articles are not to be Weston's case. looked at to see whether they give a right to transfer, for the statute gives that, but whether they restrict the right. Even a transfer (if out-and-out and bona fide) to escape liability is valid: Be Fuss's case, 4 D. G. & J. 544 ; Ee Cawlcy <^- Co., 42 C. Div. 209 ; and see Slater'' s case, 35 Beav. 391, where the transferee was paid to take the transfer. Moreover, if the articles restrict the right in a specified case, then the maxim " Expressio unius est exclusio alterius " applies. Weston'' s case, tcbi supra. So where there was power to decline to register a transfer made by a member indebted to the company, or, in case of shares not fully paid up, to a transferee of whom the directors did not approve, it was held that a holder of fully paid-up shares, not indebted to the company, might distribute his shares among a number of nominees, although his object was to secure to himself the maximum of voting power at a pending meeting of the company, contrary to the spirit of the regulations of the company. In re Stranton Steel and Iron Co., 16 Eq. 559 ; and Pender v. lushington, 6 C. D. 70. See also Cannon v. Trask, 20 Eq. 669, 675. And, in Stockton Malleable Iron Co., 2 Ch. Div. 101, there was power to decline to register any transfer of shares whilst the member making the transfer was indebted to the company on any account whatever. The company were indorsees of a bill accepted by a member, but not yet payable. On the construction of the articles, it was held that indebted meant indebted in respect of a debt due and paijable, and consequently that the member had a right to transfer, notwithstanding that the company held his acceptance. See also Moffatt v. Farquhar, 7 C. D. 591 ; and Re Cawley ^ Co., 42 C. Div. 209. A director who is a shareholder has as free a right of transfer as a member who is not a director. Re Cawley S,- Co., 42 C. Div. 209. And it is submitted that he is not even bound to keep his qualification shares. The decision in Re South London Fish Market Co., 39 C. Div. 324, was based on the terms of the special Act, and there appears to be no foundation for the doubt expressed in Gilberts case, ubi supra. "Where a company is threatened with insolvency, it may be the duty of the executive to refuse to register transfers. Alex. MitchelVs case, 4 App. Cas. 567; Nelson Mitchell v. City of Glasgow Bank, 4 App. Cas. 624. But see contra, Re Taurine Co., 25 C. Div. 118. :J98 AirnCLRS OF ASSOCIATION. [CuAP. Vll. Form 210. -A^^ agreement for the sale of a share does not bind the vendor to procure the registration of the transfer. His duty is performed when he hands over to the transferee a duly executed transfer. Skinner v. Cifi/ of London, S,-c. Co., 14 Q,. B. Div. 882 ; London Founders' Assoc, v. Clarke, 20 Q. B. Div. 576. The complete legal title is not obtaLaed by the transferee until the transfer is registered. Soc. Gen. v. Walker, 11 App. Caa. 20 ; Shropshire Union Co. v. The Queen, L. R. 7 H. L. 496 ; Pioots v. Williamson, 38 Ch. D. 485 ; Fowell v. London and Provincial Bank, (1893) 1 Ch. 610. Hence the importance of securing registra- tion. If the company improperly refuses registration, it will be liable to an action for damages. SkUincr v. City of London, tjr. Co., nhi supra ; Ln re Ottos Kopje Diamond Mines, (1893) 1 Ch. 618. Moreover, proceedings can be taken by the transferor or transferee for rectification of the register and damages under sect. 35 of the Act of 1862 ; but unless an order is made for rectification of the register the Court would appear to have no jurisdiction under this section, except by consent, to direct a company to pay damages. A company is not bound to register at once. It may inquire, e.f/., as to the authenticity of the transfer. Soc. Gen. v. Walker, 11 App. Cas. 41 ; Ln re Olfos Kopje Diamond Mines, nhi supra. Nevertheless, where there is power to reject a transfer, and the transferor is indebted to the company in respect of calls or otherwise, the transfer must bo registered, unless the indebtedness exists when the transfer is left for registration. Me Cawlcy ^- Co., 42 C. Div. 209. Great care should be taken in regard to transfers, for if the company passes a forged transfer, or a transfer executed under a forged power of attorney, it may bo held liable. See infra, p. 403. Where there are joint registered holders, a transfer, to be effective, must be executed by all, and if the signature of any one be forged the transfer will be void. Barton v. L. # N. W. Rail., 24 Q. B. D. 77. As to vesting orders, see the Trustee Act, 1893. Re New Zealand, ^-c. Co., (1893) 1 Ch. 403 ; Re Gregson, (1893) 3 Ch. 233. In a voluntary winding-up a transfer may be made with the consent of the liquidator under s. 131 of the Act of 1862. See National Bank of Wales, (1897) I Ch. 298, Execufon of ^^- ^^® Instrument of transfer of any share shall be signed both by transfer, &c. the transferor and transferee, and the transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the register in respect thereof. See Table A (Clause 8). The object of requiring the transferee to execute the transfer is to fix him with an agreement to take the shares, and thereby secui-e him as a member ; for by s. 23 of the Act, an agreement to become a member constitutes membership. Sec LMuger's case, 37 L. J. Ch. 292 ; W. N. (1868) 8 ; and Burnes v. Tennell, 2 H. L. Cas. 497 ; Re Taurine Co., 25 C. D. 118. The instrument of transfer is not complete until it is signed by both parties {Marino's case, 2 Ch. 596), and accordingly registration cannot be enforced as a"aiuHt the company until it is so signed, but the company may waive the trans- feree's signature. See the above case. A transfer may be good as against the transferor, even though not executed by the transferee. Re Dodds, lix parte Brown and Cuales, 64 L. T. 476. Tlie main object of the latter i)art of the clause is to give effect to the provisions as to calls, so that a member, upon whom a call has been made, shall not be able to avoid fiirf(.ituro by a transfer. FORMS. 399 As between transferor and transferee, there is an implied contract by tlio latter Form 210. to indemnify the former against all liability in re>x)ect of the shares during the ■ time that the transferee holds them. Kdlock v. Enthoven, L. R. 9 Q. B. 211 ; Loring v. Davis, 32 C. D. 625 ; Scton, 1968. A transfer on sale, whether by deed or otherwise, must bo stamped with the Stamj). proper ad valorem duty, in accordance with the Stamp Act, 1891 ; and under a. 17 of that Act any person whose oflBce it is to register a transfer is liable to a penalty of 10/. if he registers a transfer not duly stamped. But where a transfer appears, having regard to its contents, to be duly stamped, it is not the duty of the secretary to cross-examine the depositor in order to ascer- tain whether the consideration is truly stated : omnia pivcstimiinlur rite esse acta. Thus, if the consider-ation expressed is 5s., and the stamp lOs., there is no need to go further. Where the regulations merely require the transfer to be in writing, it will not be the less effective because it is under seal. Ortigora v. Brown, 38 L. T. 84o. But where a deed is necessary, it must be duly signed, sealed, and delivered. Towell V. Lond. % Frov. Bank, (1893) 2 Ch. 555. And a printed circle, with the words, " Place for seal," is not equivalent to a seal. Balkis Co., 36 W. R. 392. As to composition for stamp duties on transfer, see Stamp Act, 1891, s. 114. 32. The instrument of transfer of any share shall be in writing in Form of the [usual common form or in the] following form, or as near thereto ^^°^ ^^' as circumstances will admit : — The Stock Exchange Committee requii-e the .words in brackets, so that the ordinary form of transfer sold by stationers and others may suiiice. I, A. B., of , in conson of the sum of pounds paid to me by C. D., of , hnfter called the sd transferee, do hby transfer to the sd transferee share [or shares] numbered , in the under- taking called The Coy, Limtd, to hold unto the sd transferee, his executors, administrators and assigns, subject to the several conditions on which [I] held the same immediately before the execution hereof ; and I the sd transferee do hby agree to take the sd [share or shares] subject to the conditions afsd. As witness our hands, the day of . Witness to the signatures of, &c. It is generally expedient to use this form. It differs slightly from the form given in Table A. ; but it is in general use, and can be purchased at stationers and elsewhere. Sometimes the articles require a transfer to be by deed ; but this requisition causes inconveniences and secures no benefit. Wliere the transfer may be by instrument in writing as above, the shareholder ihay sign a blank transfer, and hand it over to a purchaser or mortgagee, with authority to the holder of it for the time being to fill in the name of a transferee ; and such a transfer when filled up can be sent in for registration, and no objection can be raised by the company to its validity. Ex parte Sargent, 17 Eq. 273 ; Tees Bottle Co., 33 L. T, 834 ; Re Kimberley Co., 58 L. T. 305. But where a deed is required, this con- venient plan is not properly available ; for a deed executed in blank is inoperative as a legal transfer. Ribblciohite v. McMorine, 6 M. & W. 200 ; Powell v. Lond. | Prov. Bank, (1893) 2 Ch. 555. Nevertheless, such are the exigencies of business, that even where a deed is required the plan is frequently adopted, in the expecta- 400 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. tion that the company will not notice or take advantage of the irregularity. It seems, however, desirable to make the regulations accord with the general practice. It appears from the decision of the Court of Appeal in France v. Clark, 2G C. Div. 257, that though the delivery to a mortgagee of a certificate of title and blank transfer may give him an implied right, where a deed is not required, to insert his own name, the right does not pass to his assigns. In some cases the delivery of blank transfers may establish an estoppel as against the transferor. Colonial Bank v. Williams, 15 App. Cas. 267. But there is no presumption of re-delivery of a blank transfer. See Powell v. Lond. ^c. Bank, uhi supra ; and see Chap. XIII., infra. When a deed is necessary, the directors have no power to dispense with it. Murray \. Bush, L. R. 6 H. L. 50. "Subject to the several conditions on which I hold." Do these words in the transfer subject the transferee to a lien existing as against the transferor? It is generally assumed that they do not ; but in order to preclude doubt, the concluding words of Clause 27 are sometimes added. They do not affect the transferee with notice of facts known to the transferor. Jf'estmoreland Green, ifr. Co., (1893) 2 Ch. 612. As to the effect of executing a transfer with the words "in trust" added, see London and Canadian Loan, %c. Co. v. Duggan, (1893) A. C. 306 (P. C). A transfer ought to state the consideration truly (s. 5 of Stamp Act, 1891), but if the full duty is paid, the penalty will not be enforced. Furness Rail. v. Commis- sioners, 33 L. J. Ex. 173. And the non-statement does not affect the validity of the transfer. Fowell v. Lond. ^ Prov. Bank, (1893) 2 Ch. 555. A transfer of a bankrupt's share may be as follows : — " Whereas at the date of the order hereinafter mentioned, A. B., of , was registered in the books of The Company, Limited (hereinafter called the company), as the proprietor of ten shares, numbered , in the said company, of 10^. each. And whereas an order of adjudication of bankruptcy was on the 1st day of June, 1889, made against the said A. B., and on the day of , I was duly appointed trustee of the property of the said A. B., and such appoint- ment was certified by the Board of Trade on, &c. ; [or, but no trustee has ever been appointed of the property of the said A. B., and I, as chief official receiver, am trustee thereof]. Now I, S., of , in consideration, &c., do hereby, as trustee of the estate of the said A. B., transfer unto the said transferee the said shares, numbered , in the undertaking called, &c. To hold unto the said C. D., his executors, administrators, and assigns, subject to all the several con- ditions on which the said A. B. held the same at the date of the said order of adjudication. And I, the said transferee, do hereby agree to take the said shares, subject to the same conditions." In what cases 33. The directors may decline to register any transfer of shares [or directors stock, to be omitted if quotation required'] ui^on which the coy has a to register lien ; and in the case of shares not fully pd up, may refuse to register transfer. ^ transfer [to a transferee of whom they do not approve]. Or the last words in brackets may be omitted, and the following substituted : " Without being bound to give any reason for such refusal." But where a quota- tion on the London Stock Exchange is desired the clause should not be ho altered. From what has been said in the note preceding Clause 31, it appears that if the right of transfer is to be restricted, express provisions must be inserted in the articles for the purpose. It is not found in practice that a clause as above affects the marketable value of the shares ; for it is always assumed that the transfer will be passed, and, of course. FORMS. 401 it generally is. If, however, the company has a lien, the clause enables it to Fomi 210. preserve the same ; and this is often a matter of importance. It is expedient, as ~ " above, to make the clause apply to any case where the company has a lien, and not merely, as is often done, to the case of a member who is ' • indebted ' ' to the company. See Stockton Malleable Iron Co., 2 C. Div. 101 ; and see also supra, note to Clause 27. As to Clause 10 of Table A., see Ex parte Stringer, 9 Q. B. D. 436. It is generally thought sufficient, in addition to providing for the preservation of the lien, to give the directors power to decline to register a transfer of shares, not fully paid up, to a transferee of whom they do not approve. If the company gets into difficulties, this will enable the directors to prevent the introduction of insolvent members. Where such a discretion is given, the directors will not, if acting bond fide, be compelled to give their reasons for refusing to register a transfer, and no xmfavourable inference can be drawn from their declining to give any reason. Bell Brothers, 65 L. T. 245 ; 7 T. L. R. 689 (Chitty, J.). If they exercise their power capriciously or wantonly, it must be alleged and proved ; the Court will then interfere, but not otherwise. Ex parte Penney, 8 Ch. 452. ''I cannot," said James, L. J., in this case, "conceive that any director would choose to accept office, or exercise the power entrusted to him, if he were liable to be called upon to say what the particular reasons were, or the particular motive was, which influenced him iu coming to the conclusion that any person was not eligible as a shareholder .... I am of opinion that we cannot sit as a Court of Appeal from the conclusion which the directors have arrived at, if we are .satisfied that the directors have done that which alone they could be compelled by mandamus to do, to take the matter into their consideration." See also Coalport China Co., (1895) 2 Ch. 404 ; and Hannan's King, ^c. Co., Times, Mar. 24, 1898, to the like effect. And in Fuckle^s ease, Jessel, M. R., said that where the articles authorised the directors to refuse to register a transfer, ' ' if they were of opinion that the transferee was not a responsible person," there was no appeal from their decision. L. J. Notes of Cases, 1875, 19. But if the directors' reason is disclosed, and is a bad one, or if it is proved that they are acting otherwise than bona fide in the interests of the company, the Court will intervene, and order rectification of the register. Bell Brothers, 65 L. T. 245 ; 7 T. L. R. 689 ; Ceylon Zand and Produce Co., 7 T. L. R. 692 ; cf. Sun Fire Office v. Hart, 14 App. Cas. 98. If the directors refuse, they are not under any obligation to send notice of their refusal to the transferor. Gustard's case, 8 Eq. 438. Wlierc the du-ectors have a discretion, and exercise it bona fide, they are not liable for loss occurring to the company by reason of the transferee proving insolvent. Faure Electric Accumulator Co., 40 C. D. 141 ; 37 W. R. IIG. Restrictions on transfer are strictly construed. Bentham Mills Spinning Co., 11 C. D. 900. The discretion under this clause may, by virtue of Clause 109, be delegated to a single director. Taurine Co., 25 C. Div. 142. A director may take part in approving of a transfer to himself. Bush\i case, 6 Ch. 262. [33f?. No transfer shall be made to an infant or person of unsound No transfer to mind.] infant, &c. The above is sometimes inserted. Even apart from such a clause, a company cannot be compelled to accept an inf.int transferee ; and, if shares be transferred to an infant, the company may, on discovering the infancy, decline to confirm the transfer, and, upon motion under s. 35 of the Act, can procure the rectification of the register by restoring the name of the transferor. Symons' case, 5 Ch. 301 . The P. U D 402^ AK'PICI.KS OF ASSOCIATION. [( 'ifAP. \'II. Form 210. Forged Transfers Acts. principle is that a man who executes a transfer remains liable, unless and until there is on the list a transferee who is legally liable to the company. But an infant allottee or transferee is clearly not liable in respect of shares standing in his name ; for he cannot effectually contract to take shares ; and by reason of s. 2 of the Infants" Relief Act, 1874 (37 & 38 Vict. c. 62), no action can be brought to charge the infant on any ratification after full age. To charge him there must be evidence of a new promise, but acting as a member after full age may afford evidence of a new promise. Bitcham v. Worrall, 5 C. P. Div. 410. If, however, the company has knowingly acquiesced, it will be bound. Parsons'' case, 8 Eq. 656. And so also if it has allowed the infant to transfer his shares. Goocli's case, 8 Ch. 266. If shares are allotted to an infant, and repudiated when he comes of age, he may be able to recover what he paid the company in respect thereof. Hamilton v. Vavghan Sherrbi Co., (1894) 3 Ch. 589. In the case of shares which are only iu part paid up, the company may refuse to pass a transfer to a person residing abroad. And a vendor of such shares on the London Stock Exchange may decline to transfer to a person so residing. (roM- schmidt V. Jones, 22 L. T. 221. A company cannot be compelled to register a transfer to a corporation and an ordinary individual jointly. Laiu Guarantee, ^-c. Soc, 24 Q. B. D. 406. As to married women, see the Married Women's Property Act, 1882 (4-5 & 46 Vict. c. 75), and the Act of 1893 (56 & 57 Vict. c. 63). This Act places a married woman transferee in the same position as if she were sole. But, unless satisfactory evidence of separate estate is produced, the directors might properly (where they have a discretion) refuse to register a transfer to a married woman of shares involving any liability. See proviso at end of s. 7 of the Act. [33ff. The company adopts the Forged Transfers Acts, 1891 and 1892, and the directors shall have full power to give effect thereto.] A clause as above is occasionally inserted, but it is superfluous, for, notwithstand- ing its omission, the Acts wUl apply. The Forged Transfers Act, 1891, as amended by the Forged Transfers Act, 1892, provides that where a company issue or have issued shares, stock, or securities transferable by instrument in writing, or by an entry in any books or register kept by or on behalf of the company, they shall have power to make compensation, by a cash payment out of their funds, for any loss arising from a transfer of any such share, stock, or securities in pursuance of a forged transfer or of a transfer under a forged power of attorney, whether such loss arises and whether the transfer or power of attorney was forged before or after the passing of this Act, and whether the person receiving- such compensation, or any person through whom he claims, has or has not paid any fee, or otherwise contributed to any fimd out of which the compensation is to be paid. Tlio Acts empower the company, by fees or otherwise, to provide a fund to meet claims for compensation, and to raise the amount by mortgages, and to impose such reasonable restrictions on the transfer of shares, stocks, or securities, or with respect to powers of attorney for the transfer thereof, as they may consider requisite for guarding against losses arising from forgery. These Acts, it is to be observed, do not impose on the company any obligation to pay. They only give power to make compensation, i.e., if the company chooses. Hence there is no objection to adopting the Acts by the regulations or to passing (as many comx)anies have) a resolution adopting the Acts, for iu neither case is the company bound to pay any particular claim unless it thinks fit so to do. The Acts were no doubt intended for the benefit of a pmchaser who, having iu good faith paid for and been registered as the hukler of shares, stock, or securities, is subsequently deprived thereof in consequence of its being proved that the ti-ansfcr to him was forged or was executed under a forged power of attorney, and although Foinis. -103 the wording is not very clear, it is submitted that it is capable of this construction. Form 210. True the loss in such a case is not one "arising from a transfer," for there is no ~ — valid transfer, and the loss arises from the fraud of the forger ; but to make sense of the enactment it may be allowable to read in the words "the invalidity of" after the word "from." 34. Every instrument of transfer sliall bo left at the office for rcg-is- Transfer to br tration, accompanied by the certificate of the shares to be transferred, and 'evidence and such other evidence as the coy may require to prove the title of of title given, the transferor, or his right to transfer the shares. This clause is expedient by reason of the liabilities which the company incurs if it issues a certificate of shares in pursuance of a forged transfer. See further, infra, Chap. XII. The utmost caution ought to be used in regard to registration of transfers. As against the real owner, a forged transfer is not effective, and accordingly the real owner can compel the company to re-register him as the holder of the shares, and to pay him all dividends which have been declared on the shares whilst his name was oii the register. Barton v. North Sfofforrlshire Roil. Co.. 38 C. J). 4.'JS ; Barton v. L. ^- X. W. Rail. Co., 21 Q. B. Div. 83. Moreover, if a company has issued to the supposed transferee claiming under the forged transfer a certificate of title to the shares, the company will be liable to pay damages to any third person who acts on the faith that such certificate is regular, e.g., by buying or lending money on the shares. Bahia, ^c, Co., L. R. 3 Q. B. 584 ; Ottos Kopje Diamond Mines, Limited, (1893) 1 Ch. 618. And the company is under the same hability even to the supposed transferee, where he acts on the faith of the certificate, e.g., by entering into a contract to sell the shares {Tompkinson v. Balkls Co., (1893) A. C. 396 ; Bart v. Frontino, L. R. 5 Ex. Ill), or by paying a call. As to the measure of damages, see Ottos Kopje, Ar., Limited, supra. Where a company pays di^'idends to a transferee under a forged transfer, it is not estopped from denying the transferee's title, and can recover the dividends. Foster v. Pontoons and Dry Dock Co., 9 T. L. E. 450. As to proving the forgery, see Copiapo Jfininff Co., 9 T. L. R. 615. It is usual to give notice to the shareholder before registering a transfer, e.ff., " Sir, — A transfer of shares of 1, each in the above company, purporting to be executed by you, has been lodged for registration, and unless I hear from you to the contrary within days the same will be registered. For the company, , Secretary." The company is under no obligation to give that notice. Simm V. Anglo- Amer. Co., 5 Q. B. Div. 205. And a shareholder who does not answer the letter is not thereby estopped from impeaching a forged transfer. Barton v. L. S; N. JF. Rail. Co., 24 Q. B. Div. 77. A clause is occasionally to be found in articles, providing, inter alia, that the directors shall not be hound to inquire into the authenticity of any transfer ; but such a clause seems inexpedient ; and where a quotation on the Stock Exchange is desii-ed, the Committee of the London Stock Exchange always require the clause, if contained in the articles, to be struck out by the special resolution. Even without the words in Clause 31 as to the certificate, the concluding words would justify the directors in calling for a deposit of the certificate for examination. Re Fast Wheal, ^-c., Co., 33 Beav. 119. Where the dii-ectors have a discretion as to registering a transfer, from a member who is indebted to the company, the time when the instrument is left at the ofBce, 404 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. not the time when the directors consider the matter, is the critical period. Cawky ^- Co., 12 C. Div. 209. Ceetificatiox of Shakes. In order to obtain registration of a transfer, the certificate has to be handed over to the company. If it only rehites to the shares comprised in the transfer it can be handed to the transferee, who will be able to hand it on to the company, but if it comprises other shares besides those transferred a different course is adopted. In such a case the transferor usually lodges his certificate with the company, and then at his request, or at the request of his broker, the secretary certifies the transfers (before they are handed over to the transferees) by stamping in the margin the form of certification, and signing the same. The following forms are used : — A. Certificate lodged. For the Company, Limited. , Secretary. B. Certificate for shares has been lodged at the Company's office. Date , . Secretary. Form B. is preferable. Where it is used, the full number of shares in the transfer will be inserted in the blank. So, too, if A. transfers to B. fifty shares, and the transfer so certified is accom- panied by a certificate in A.'s name, and afterwards, before the transfer is regis- tered, B. transfers to C, then, according to the practice of some companies, the secretary, at the request of B., will certify his transfer to C, provided the transfer to B. has been lodged for registration, and any receipt therefor given up. The certification is regarded as a representation by the secretary on behalf of the company that the transferor has produced such documents as, on the face of them, show a prima facie title in the transferor, e.g., a certificate of title that the trans- feror is the registered holder of the shares comprised in the transfer, or else a certi- ficate that some other jjerson is the registered holder, together with proper transfers from that person to the transferor. In giving such certifications the secretary is not supposed to do more than look at the documents produced. If they appear to be in order, he certifies ; if they are not, he refuses to certify ; but he is not bound to inquire whether the documents produced to him are genuine or not, or whether the various transfers are valid or invalid in point of law He does not warrant the title of the transferor, nor the validity, in point of law, of the various documents which, together [purport to], establish his title. Per Lindley, L. J., mshop V. Balkis Co., 25 Q. B. D. 512. But it has been held that if a transfer for value purports to relate to fully paid shares, the certification thereon is equivalent to a statement that a certificate of fully paid shares has been lodged, and estops the company from denying that the shares are fully paid, although no certificate has been lodged, or the certificate lodged does not say fully paid. McKay^s case, (1896) 2 Ch. 757. A transfer certified as above is by the rules of the London Stock Exchange accepted as good delivery of the shares to a purchaser, and, apart from those rules a purdiaeer requires the certificate or a certified transfer, seeing that the regula- tions generally provide for the production of the certificate before a transfer will be registered. A record of certifications should be kept. Hometimes a secretary is called on to certify a transfer where the transferor has not, as yet obtained any certificate of title, e.g., where he is the original FORMS. 405 allottee, but has not taken out a ceitifioate. There seems no objection to certifyin<^ Form 210. the transfer in such a case, provided that the transferor is absolutely entitled to call for a certificate, and that he gives up or allows a note to be placed on his allotment letter ; but see McKaifs case, supra. Where the certificate is lodged with a view to the transfer of part only of the shares coiujirised therein, the company in due course issues to the transferor a fresh certificate for the balance ; or, according to the practice of some companies, indorses on the deposited certificate particulars of the shares transferred, and then returns the certificate to the depositor. Sometimes on the deposit, and before the issue of a fresh certificate, the depositor is given a balance ticket. Certification is intra vires a trading company. Bishop v. Balkis Co., supra. [84rt. All instruments of transfer wliich shall be registered shall be ^vvhen trans- retained by the coy, but any instrument of transfer which the directors fcrs to bo may decline to register shall be returned to the person depositing the same.] The above is sometimes used. 35. A fee not exceeding 2s. 6d. may be charged for each transfer, Fee on and shall, if required by the directors, be pd before the registration transfer, thereof. 36. The transfer books and register of members may be closed When ti-ans- duriner such time as the directors think fit, not exceeding in the whole *'-''' books and ° ° register mav thirty days in each year. be closed. Table A., in lieu of the above, provides (Clause 11) : — " The transfer books shall be closed during the fourteen days immediately pre- ceding the ordinary general meeting in each year." By 8. 33 of the Act of 1862, it is provided that any company may, upon giving notice by advertisement in some newspaper circulating in the district in which the registered office of the company is situated, close the register of members for any time or times not exceeding in the whole thii'ty days in each year. 37. The executors or administrators of a deceased member (not Transmission being one of several joint holders) shall be the only persons recog- °^ registered nized by the coy as having any title to the shares registered in the ^^ ^^ g^j,_ name of such member, and in case of the death of any one or more of vivorship. the joint holders of any registered shares, the survivors shall be the only persons recognized by the coy as having any title to or interest in such shares. The first paragraph of this clause is generally inserted in order that the company may not be involved in questions of administration, but may look to the legal personal representatives only. If desired, provision can be made to the effect that, on the death of a shareholder the shares shall, if not disposed of specifically by will, pass to some specified person, or be dealt with in a specified manner to the exclusion of the legal personal representatives. As to the validity of such provisions, see Ashlii/ v. Costiii, 59 L. T. 224 ; Davies v. Davies, (1892) 3 Ch. 63. A deceased member of a limited company remains a member for the pm-poses 406 ARTICLES OF ASSOCIATION. [rilAP. YIl. Form. 210. of the articles of associatiou so long as his name remains on the register without ' notice to the company of his death. Per Davey, L. J., New Zealand Gold Extraction Co. V. Feacocl; (1894) 1 Q. B. 622, 633 (C. A.). As to survivorship, see HiWs case, 20 Eq. 595, in vrhich it was held that even without express provision there is a right of survivorship as between joint holders. To preclude disputes, words are sometimes added to the above clauses to the effect that " Before recognizing any executor or administrator, the directors may require him to take out probate or letters of administration in England." But sec note to Clause 38. As to transfer 38. Any person becoming entitled to shares in consequence of the deceased or tleath or bankruptcy of any member, upon producing sucb evidence bankrupt that he sustains the character in respect of which he proi)ose8 to act members. ^ under this clause, or of his title, as the directors think sufficient, may, cLause^)"^^^^^ with the consent of the directors (which they shall not be under any obligation to give), be registered as a member in respect of such shares, or may, subject to the regulations as to transfers hnbefore contained, transfer such shares. This clause is hnfter referred to as "the trans- mission clause." This clause, with more or less variation, is a common one. It is generally expedient, if possible, to secure a living responsible member in the place of a deceased member or one under disability. Of course, if any person, under this clause, becomes a member, he is personally liable on the shares , but this does not affect the equities subsisting between him and the infant, lunatic, or other member in whose place he stands. Even apart from this clause, the personal representatives of a deceased member can transfer ; for sect. 24 of the Act of 1862 provides that any transfer of the share or other interest of a deceased member made by his personal representative shall, notwithstanding such personal representative may not himself be a member, be of the same validity as if he had been a member at the time of the execution of the instrument of transfer. Until transfer under this power, or until the personal representative personally accepts the shares, the estate of the deceased member is alone liable. Sec Haird'a case, 5 Ch. 725. The question sometimes arises whether a transfer by one of several executors is effective. According to the general law, each of several executors can sell and transfer the personalty of the testator, but the terms of the company's regulations must be considered, and where they are framed as above, or as in Table A., it would seem that a transfer must be signed by all. One of two executors registered as shareholders cannot transfer. Barton v. North Staffordshire Rail., 38 C. Div. 458 ; Barton v. L. ^ N. W. Rail. Co., 24 Q. B. Div. 77. See supra. And when the personal representatives have been registered, they must all concur in a transfer. Barton v. L. S; N. W. Rail. Co., 24 Q. B. D. 77. So long as the share of a deceased member remains standing in his name, his representatives do not become members of the company in respect thereof, but when the representatives are registered, they become personally liable, and the company has notliing more to do with the deceased member. Some companies have been in the habit, on production of probate or letters of administration, of regis- tering the representatives as the holders of the shares, but this is not regular as regards companies imdor the Act of 1862, in the absence of a "distinct and intelli- gent request on the part of the executors." Per Lord Cairns, L. C, Bnchan^s case, 4 App. Cas. 588. See Formg 44C ct seq., infra, p. 697. FORMS. 407 As regards a, testator domioiled abroad, the company, before recognising his ^ OVVd *1U. executor or administrator, should require probate or letters of administration to be obtained in England. This is the evidence on which alone the Com't will act, and there seems no good reason why the company should incur the risk of accepting less conclusive evidence. Fernandez's Exors., 5 Ch. 314; Attorney-General \. New York Breweries Co., (1898) 1 Q. B. 205. As to colonial pi-obate, see Colonial Probates Act, 1892, 5.5 Vict. c. G. As to shares in a colonial register under the Companies (Colonial Registers) Act, 1883, see sect. 3 of that Act as amended by 52 & 53 Vict. c. 18. By 8. 50 (3) of the Bankruptcy Act, 1883 (46 & 47 Vict. c. 52), when any part of the property of the bankrupt consists of shares transferable in the books of any company, the trustee may exercise the right to transfer the property to the same extent as the bankrupt might have exercised it if he had not become bankrupt. Accordingly the trustee's right of transfer cannot be fettered to a greater extent than that of the bankrupt. This is not always borne in mind. Of course, provisions forfeiting the shares of a bankrupt member, or permitting the company to dispose of them compulsorily, cannot be relied on. Ex parte Jay, In re Harrison, 14 C. Div. 19 ; CvUins v. Barker, (1893) 1 Ch. 578. Sometimes the clause commences with the words ' ' or any guardian of an infant member or committee of a lunatic member," but there is some doubt whether they are efPective. See Bentham Mills Spinning Co., 11 C. Div. 900, as to effect of Clauses 10 and 13 of Table A. Under the last-mentioned clause the trustee of a bankrupt can insist on being registei'ed, although the bankrupt is indebted to the company ; not so under Clause 38 of this Form. See, however, E.c parte Harrison, 26 C. D. 522. where Bacon, V.-C, considered that the trustee, when registex'ed, would be subject to the company's equities. By apt words in the regulations it would appear possible to provide for the direct devolution of shares to a specified person on the holder's death. Bavivs v. Bavies, (1892) 3 Ch. 63. In Tidicorin Co. (1894), 43 W. R. 190, it was held that where the estate of a shareholder was sequestrated in Scotland, and afterwards the shareholder died, the sequestrator was entitled to rank for dividend in the winding-up in the place of the deceased. Share Wakkajnis. ."39, The coy, with respect to fully paid-up shares, may issue war- Power to rants (hnfter called share warrants), stating that the bearer is entld to the shares therein specified, and may provide by coupons or other- wise for the payment of future dividends on the shares included in such warrants. The Companies Act, 1867, ss. 27 et siq., empowers a company limited by shares, if authorized so to do by its regulations as originally framed, or as altered by special resolution, to issue share warrants. The share warrants must be under the seal of the company, and will entitle the hearer to the shares or stock therein specified ; and such shares or stock will be transferable by delivery of the share warrant. See form of share warrant, infra, Chap. XII. 40. The directors may determine, and from time to time vary, As to con- the conditions upon which share warrants shall be issued, and, in -n-hich share particular, npon which a new share warrant or coupon will be issued """arrants shall be issued, issue share warrants. 408 ARTICLES OP^ ASSOCIATION. [ChAP. VII. Form 210. in the iDlace of one worn out, defaced, lost, or destroyed ; upon which the bearer of a share warrant shall bo entld to attend and vote at general meetings ; and upon which a share warrant may be sur- rendered and the name of the holder entered in the register in respect of the shares therein specified. Subject to such conditions, and to these presents, the bearer of a share warrant shall be a member to the full extent. The holder of a share warrant shall be subject to the conditions for the time being in force, whether made before or after the issue of such warrant. Sometimes all the matters referred to in the above clause are expressly provided for by the articles, but it is generally thought better not to incumber the articles -with such matters of detail, since, in the great majority of companies, share •warrants are never issued. But where the immediate issue of share warrants is in contemplation, it may be desirable to set the conditions out in detail. In such case add to the above clause the words "until otherwise determined, the conditions following shall have effect as if made by the directors under this clause," and then set out the conditions in such paragraphs ; or omit the above clause and insert a new clause, thus : — "The following provisions shall have effect," and then set out the conditions, inserting preceding them the words of the above clause commencing with " Subject to such conditions." For form of conditions, see infra, at end of Chap. X. The bearer of a share warrant may, if desired, be deprived of the right of voting, but this is seldom done. It will be borne in mind that the bearer of a share warrant is not thereby qualified for office when a share qualification is required: s. 30 of the Act of 1867. Conversion shares into stock. CONVERSIOX OF ShAHES INTO StOCK. of 41. The coy [in general meeting] may convert any paid-up shares into stock. Any company limited by shares, if authorised by its regulations as originally framed, or as altered by special resolution, may convert its paid-up shares into stock. S. 12 of the Act. See Chap. X., infra. The power is not often exercised, and the clauses relating to it might, if brevity be desired, be omitted. They can at any time be supplied by special resolution. If the words in brackets are omitted, the directors will be able to exercise their general powers, infra. See further as to conversion of shares into stock. Chap. X., infra. If desired, the clause may run thus: "The company may by special resolution convert," &c. Transfer of htock and rights of holders. 42. When any shares have been converted into stock, the several holders of sucli stock may, thenceforth, transfer their resjDective in- terests therein, or any part of such interests, in the same manner and subject to tlie same regulations as and subject to which shares in the coy's capital may bo transferred, or as near thereto as circumstances will admit. ]Jut the directors may from time to time, if they think fit, fix the minimum amount of stock transferable, and direct that fractions of a pound shall not bo dealt witli, with power, nevertheless, at their discretion to waive such rules in any p;trtirular case. FORMS. 409 43. The stock shall confer on the liolders thereof resply the same Form 210. privileges and advantages, as regards participation in profits and voting Ri.rhts of at meetings of the coy, and for other purposes, as would have been con- stockliolders. ferred by shares of equal amount in the capital of the coy, but so that none of such privileges or advantages, except the participation in profits of the coy, shall be conferred by any such aliquot part of con- solidated stock as would not, if existing in shares, have conferred such privileges or advantages. And, save as afsd, all the provisions herein contained shall, so far as circumstances will admit, apply to stock as well as to shares. No such conversion shall affect or prejudice any preference or other special privilege. Increase and Reduction of Capital. 44. The coy [in general meeting] may, from time to time, increase Power to the capital by the creation of new shares of such amount as may be g^pitai deemed expedient. Any company limited by shares, if authorized to do so by its regulations as originally framed, or as altered by special resolution, may increase its capital. Sect. 12 of the Act of 1862. Under the above clause the increase can be effected by a simple resolution passed at an extraordinary meeting. Not uncommonly it is thought better to require the sanction of a special resolution to an increase. Thus : " 44a. The company may, from time to time, by special resolution, increase," &c. ; or, the words in brackets can be omitted, and in such case the directors will be able to increase the capital at their discretion. 45. The new shares shall be issued upon such terms and conditions, On what con- and with such rights and privileges annexed thereto [as the general } ^'^^^ "^^ , meeting, resolving upon the creation thereof, shall direct, and if no issued. direction be given], as the directors shall determine ; and in particular As to prefer- GUCGS SzC such shares may be issued with a preferential or qualified right to ' dividends, and in the distribution of assets of the coy, and with a special or without any right of voting. As to the issue of preference and other special class of shares, sec supn/, pp. 285, 358, and infra, p. 481. If Clause 44a is used, then omit the words within brackets in the above clause and substitute these : " as by the special resolution creating the same shall be directed, and if no direction be given," &c. See further as to increase of capital, infra, where forms of resolutions, notices, &c. , will be found. 46. The coy [in general meeting] may, before the issue of any new When to be shares, determine that the same, or any of them, shall be offered in existing the first instance to all the then members, in proportion to the amount members, of the capital held by them, or make any other provisions as to the issue and allotment of the new shares : but, in default of any such determination, or so far as the same shall not extend, the new shares UO ARTICLES OF ASSOCIATION. [rilAI*. VII. Form 210. may be dealt with as if they formed part of the shares in the original ordinary capital. In lieu of the above clause, ■whicli is very commonly used, the following, which is similar to the Clause 27 in Table A, may, if preferred, be substituted : " Subject to auy direction to the contrary that may be given by the meeting that sanctions the increase of capital, all new shares shall be offered to the members in proportion to the existing shares held by them, and such offer shall be made by notice speci- fying the number of shares to which the member is entitled, and limiting a time ■within which the offer, if not accepted, will be deemed to be declined ; and after the expiration of such time, or on the receipt of an intimation from the member to ■whom such notice is given, that he declines to accept the shares offered, the directors may dispose of the same in such manner as they think most beneficial to the company." Where a deceased member's name is still on the register, his executors or administrators are, for the purpose of such a clause, entitled to stand in his place. James v. Exnia Venture, iS,-c. Co., (1896) 1 Ch. 456. See also Chap. VIII., infra, p. 550. How farnew 47. Except so far as other-wise provided by the conditions of issue, shares to rank ^^ -^^ these presents, any capital raised by the creation of ne-w shares in original shall be considered part of the original ordinary capital, and shall be capital. subject to the provisions herein contained with reference to the pay- ment of calls and instalments, transfer and transmission, forfeiture, lien, and otherwise. Keduction of 48. The coy may, from time to time, by special resolution, reduce capita , -c. £^g capital by paying off capital or cancelling capital which has been lost or is unrepresented by available assets, or reducing the liability on the shares, or otherwise, as may seem expedient, and capital may be paid off upon the footing that it may be called up again or other- wise. And the coy may also, by special resolution, subdivide or, by ordinary resolution, consolidate its shares or any of them. As to reduction of capital, see Uifra, p. 970 ; and as to " Consolidation and Sub-di^vision," see infra, Chap. X. Siibdiviflion [48a. The special resolution whereby any share is subdivided may into preferred determine that, as between the holders of the shares resulting from such subdivision, one or more of such shares shall have some preference or special advantage as regards dividend, capital, voting, or otherwise over or as compared with the others or other.] The above power is sometimes found useful. It has been doubted whether it could be taken by special resolution, and in several cases private Acts have been obtained to effect such a division. But the decision in Andrews v. Gat Meter Co., aupra, p. 358, appears to dispose of those doubts. Modification of Eights. Power to [48i. Whenever the capital, by reason of the issue of preference irifMifyrightfl. f^},n,.<^s q^ otherwise, is divided into different classes of shares, all FORMS. 411 or any of tlie rights aud privileges attached to each class may Le Form 210. modified by agreemt between the coy and any person purporting to contract on behalf of that class, provided such agreemt is ratified in writing by the holders of at least three-fourths of the issued shares of the class, or is confirmed by an extraordinar}' resolution passed at a separate general meeting of the holders of shares of that class, and all the provisions hnfter contained as to general meetings shall, mutatis mutandis, apply to everj'- such meeting, but so that the quorum thereof sliall be members holding, or representing by proxy, three-fourths of the nominal amount of the issued shares of the class.] Where there are different chisses of shares, great inconvenieueo is sometimes caused by there being no power for the majority of the members of a class to bind the minority, and accordingly the insertion of a clause as above is desirable. Where the rights attached to different classes of shares are defined by the memo- randum of association, those rights cannot, it is conceived, be modified under the above clause, unless, perhaps, where the memorandum is qualified. See supra, p. 358. The clause does not justify any payment out of the company's capital as a consideration for the modification. Modification does not include abrogation, and accordingly it is sometimes thought well to use the words " modified, commuted, affected, or abrogated." BoiuiowiNG Powers. 49. The directors may, from time to time, at their discretion, raise Power to or borrow, or secure the payment of, any sum or sums of monej' for "o^"™""'' the purposes of the coy [but so that the amount at any one time owing in respect of moneys so raised, borrowed, or secured shall not, without the sanction of a general meeting, exceed the nominal amount of the capital. Nevertheless, no lender or other person dealing with the coy shall be concerned to see or inquire whether this limit is observed]. An express or implied power to borrow must be given in the memorandum ; but if the company have power to boi-row, the Act imposes no limit on that power, except that money can only be boiTowed for the purposes of the company. Never- theless, the Stock Exchange Committee requke some limitation, and it is not unusual to insert in the articles a limit as above, or to make the limit " the amount of the subscribed capital for the time being of the company," or " the amount of the paid-up capital," or a specified sum. Where the company has power to borrow and mortgage (as to which, see supra, Form 94), there is no need expressly to delegate the power to the directors, provided that the articles contain a general delegation (Clause 113) to them of the powers of the company, as infra. Patent File Co., 6 Ch. 83 ; Gibbs and Wesf s case, 10 Eq. 312 ; Anglo-. Danubian, i;c. Co., 20 Eq. 339. Nevertheless, it is usual to give the directors express power. How far the power should be fettered or limited is a matter of arrangement. It is by no means uncommon to vest the power in the directors absolutely. If tliis is to be done, omit from " but so that" to end of clause. In small companies it is not unusual to require the sanction of a special resolution. As to the validity of securities given for money borrowed beyond the limit, see the rule in Royal British Bank v. Turquand, 6 E. & B. 327 {supra, p. 37), from which it appears that if there is power to borrow, with the sanction of a general meeting, a 412 ARTICLES OF ASSOCIATION. [ChAP. VII. X Orm 210. lender may assume that the requisite sanction has been obtained. See also Hampshire Land Co., (1896) 2 Ch. 743, in which case the meeting which purports to give this sanction was irregular. But it would seem that the passing of a special resolution must not be assumed. Irvine v. Union Bank of Au.stralia, 2 App. Cas. 379. For other cases in which irregularities have been held not to invalidate the security, see Biggerstaff v. Motcatt's Wharf, (189G) 2 Ch. 93 (powers of managing director) ; Davies v. £. Bolton ^- Co., (189i) 3 Ch. 678 (quorum) ; Robinson v. Mont- gomeryshire Brewery Co., (1896) 2 Ch. 841 (authority of agent) ; County of Ghntcestcr Bankv. Budry, (1895) 1 Ch. 629 (quorum). Overdrawing a banking account is in effect a borrowing. Blackburn BIdg. Soc. v. Cunliffe, 22 C. Div. 61 ; PyJc Works, No. 2, (1891) 1 Ch. 173. As to the claim a lender may in such cases have against the assets of the company, see Baroness Wenlock v. River Dee, 19 Q. B. D. 15.5, and eases there cited. Even where direc- tors have an unrestricted power to borrow, they not uncommonly seek the sanction of a general meeting before exercising the power. Sometimes a clause is inserted to the effect that it is intended that the company shall forthwith create and issue a specified amount of first mortgage debentures, or debenture stock, secured in a specified manner, and that whilst the same remains outstanding, the company is not to be at liberty to create any mortgage or charge on its property or uncalled capital [or as the case may require'], ranking, or which by any means may be made to rank, in priority to or pari passu with such first mort- gage debentures or debenture stock. The object is to fortify the security by giving notice to all the world. Supra, p. 35. There is not in general anything to prevent the directors from raising money by depositing debentures with the lender. Strand Music HaU, 3 De G. J. & S. 147 ; Regenfs Canal Ironworks, 3 C. Div. 43. As to loans to the company by directors, see CampbelV s case, 4 C. D. 470 ; Black v. Mallalue, 5 Jur. N. S. 1018. It would seem that they may lend to the company upon the same terms as the public are asked to lend ; but when it is proposed to borrow from the directors exclusively, and at "a high rate of interest and upon mort- gage, the transaction must be carefully safeguarded, and the clauses as to directors' contracts should be considered [e.g., CI. 93, p. 435], and a resolution of a general meeting may in some cases be desirable. As to personal liability of directors to lenders, where the borrowing powers are exceeded, see Weeks v. Propert, L. E. 8 C. P. 427; Chapleo v. Brunswick Soc, 6 Q. B. Div. 715 ; Firbank's Executors v. Humphreys, 18 Q. B. D. 54. Conditions on which money may be borrowed. 50. The directors may raise or secure the payment or repayment of such moneys in such manner and upon such terms and conditions in all respects as they think fit, and, in particular, by the issue of deben- tures or debenture stock of the coy charged upon all or any part of the ppty of the coy (both present and future), including its uncalled capital for the time being. As to debentures, sec infra. Chap. XIV. Securities may be assign able free from ec^uitics. 51. Debentures, debonture stock, and other secui'ities may be made assignaldo free from any equities between the coy and the person to whom the same may Ije issued, Tliis clause is sometimes inserted. As to its object, sec infra, introductory notes to Chap. XIV. Where a comjiany has power to issue negotiable instruments, the above clause is probably not necessary. FORMS. 413 52. Any debentures, debenture stocks, bonds, or otlier securities, Form 210. may be issued at a discount, i:)remium, or otherwise, and with any ii^gueatdis~ special privileges as to redemption, surrender, drawings, allotment of count, &c., or shares, attending and voting at general meetings of the coy, appoint- priviWes^*^ ment of directors, and otherwise. This clause is sometimes inserted, but the power to "raise" money given by- Clause 50, and the general powers given nifra, are probably sufficient. Anglo- I^anubian Steam, cfr. Co., 20 Eq. 341. 53. The directors shall cause a proper register to be kept, in ac- Register of cordance with s. 43 of the Companies Act, 1862, of all mortgages and mortgages to charges specifically affecting the ppty of the coy. This clause is only by way of reminder. The omi.ssion to register a mortgage docs not invalidate it. JFright v. Horton, 12 App. Cas. 371. The right of inspection given by the section includes by implication a right to make extracts and notes. Nelson v. Anglo-American, ijr. Co., (1897) 1 Ch. 130. But the right to inspect without an order ceases on winding-up. Somerset v. Land Secin-iticfi Co., W. N. (1897) 29. 54. [If any uncalled capital of the coy is included in or charged by Mortgage of any mortgage or other security, the directors ma}", by instrument under uncalled the coy's seal, authorise the person in whose favour such mortgage or security is executed, or any other person in trust for him, to make calls on the members in respect of 'such uncalled capital, and the pro- visions hinbefore contained in regard to calls shall, mutatis mutandis, apply to calls made under such authority, and such authority may be made exerciseable either conditionally or unconditionally, and either presently or contingently, and either to the exclusion of the directors' power or otherwise, and shall be assignable if expressed so to be.] The above is sometimes used. See further as to mortgages of uncalled capital, infra, Chap. XIV. But the Stock Exchange Committee sometimes object to the clause. Sometimes it is considered expedient to insert a clause as follows : — " oia. Where any uncalled capital of the company is charged, all persons taking any subsequent charge thereon shall take the same subject to such prior charge, and shall not be entitled, by notice to the shareholders or otherwise, to obtain priority over such prior charge." As to getting in calls for debenture-holders after a winding-up order, see Fouler V. Broad's, 4-e. Co., (1893) 1 Ch. 777 ; and Part II. pp. 436, 437. General Meetings. 55. The first general meeting shall be held at such time (not being "Wlien first more than four months after the registration of the memdum of asson ^^°^ral meet- ° ingtobeheld. of the coy) and at such place as the directors may determine. The Companies Act, 1867, requires every company to hold a first meeting within four mouths after the registration of its memorandum of association. An extra- ordinary meeting is a sufficient compliance with this provision. Lord Claude Hamilton's case, 8 Ch. 548. 4f4 Ali'JTOLES OF ASSOCIATION. fClIAP. VII. 56. Subsequent general meetings shall be held once in the year — , and in every subsequent year, at such time and place as may be Form 210. When subse- quent general prescribed by the coy in general meeting, and if no other time or be hel(f. place is prescribed [in the month of in every such year] at such time and place as may be determined by the directors. The Act of 1862 provides (s. 49) that "A general meeting of every company under this Act shall be held once at least in every year." In this section " year" means calendar year, i.e., the period of time commencing on the 1st of January, and ending on the 31st of December, and not the period of twelve months ending upon the anniversary of the registration. Gibson v. Barton, L. R. 10 Q. B. 329. But it seems that a meeting need not be held in the first year if less than four months of that year remain when the company is registered. Gibson v. Barton, L. R. 10 Q. B. 329. See s. 26 of the Act as to the return of a list of "all persons who, on the fourteenth day succeeding the day on which the ordinary meeting is held, are members of the company." Default in forwarding the list renders the company and its directors and managers liable [s. 27] to penalties. See the case last mentioned, and Udnnmds y. Forster, 45 L. J. M. C. 41; Beff. y. Newton, 48 L. J. M. C. 77 ; and Sep. v. Ti/ler, (1891) 2 Q. B. 588. The company's penalty ia 51. per day. Beff. v. Catholic, S;c. Co., 48 L. T. 675. Proceedings to enforce the penalty are taken before a magistrate, who may inquire into the sufficiency and accuracy of the return. Briton Medical, 37 W. R. 52. To comply with s. 26 the meeting must be held at latest on 17th December. Sometimes provision is made for half-yearly meetings. Sect. 131 of the Act of 1862 preserves, in a voluntary winding-up, the corporate powers, and they can be exercised accordingly, at any rate, to some extent. Be Fairbairn, <^e. Co.. (1893) 3 Ch. 450. Distinction between ordinary and extraordinary meetings. When extra- ordinary meetir'jr to be called. 57. The above-mentd general meetings shall be called ordinary meetings ; all other meetings of the coy shall be called extraordinary meetings. 58. The directors may, whenever they think fit, and they shall, upon a requisition made in writing by members holding in the aggregate [one-tenth of the issued capital], convene an extraordinary meeting. " WTienever they think fit," in the above clause, means prima facie when at a board meeting they so determine. Browne v. Za Trinidad Co., 37 C. Div. 1. But as appears from that case, and from Southern Counties, ^-c. v. Bider, 73 L. T. 374, it does not follow that a meeting irregularly convened is in all cases impotent. This is a very usual clause. Sometimes it is thought better to prescribe a fixed number of shares. In such case, omit the words in brackets, and substitute, " not less than [///y] shares." Or the clause may run — "the directors, &c., ujjon a requisition made in writing by not less than one-fifth in number of the members, convene, &c." Sometimes the two are combined, e.r/., " upon a requisition in writing, made by any five or more members holding, &c." If the power is to be given, it is as well not to fetter the exercise by conditions which are difficult to comply with. The fact that some of the proposed resolutions could not bo put to the meeting- does not render the requisition inoperative. Isle of ll'iijht Bail. Co. v. Tahourdin, 25 C. Div. 320. The Court will not compel directors to convene a general meeting pursuant to a requisition — at any rate where the articles enable the requisitionists to call the meeting. Macdouyall v. Gardiner, 10 Ch. 006. But it might, perhaps, itself convene a meeting, if there were no directors, and no other mode of procedure. Per Mellish, L. J., 6'. C. And for an example, see Trade Auxiliary Co., 21 W. R. 336, where, I'ORMS. tl- there being no proper board, a receiver was appointed until a meeting could be held, x Orm ^10. Where there is a doadlook, s. 52 of the Act may apply. Brick and Stone Co., W. N. ' (1878) 140. Vaughan Williams, J., once held that a complete deadlock was a good ground for making a winding-up order. Sailhifi Ship ^'■Kentmere^'' Co., W. N. (1897) 58. 59. Any such requisition shall specify the object of the meeting Form of required, and shall be signed by the members making the same, and f^^ meetiu"-. shall be deposited at the office. It may consist of several documents in like form, each signed by one or more of the roquisitionists. The meeting must be convened for the purposes specifiod in the requisi- tions, and if convened otherwise than by the directors, for those purposes only. Doubts are sometimes raised whether the requisition must not be a single docu- ment, but it is conceived that it need not. However, it is usual now to preclude doubt by providing as above. Sometimes, where the number of members is large, the words " together with the sum of 5^. in cash for every 1,000 members of the company, and so in proportion for any fraction of this niunber," are inserted after the word '' ofSce." 60. In case the directors for fourteen daj^s after such deposit fail to When requi- convene an extraordinary meeting to be held within twenty-one days cW°meetintr' after such deposit, the requisitionists [or any other members holding the like proportion of the capital] may themselves convene a meeting to be held within six weeks after such deposit. This clause must be modified if Clause 58 is altered (see note to that clause) ; e.g., by omitting the words in brackets, and inserting these : "or any members holding not less than fifty shares ; " or the following : "or any membei's not being less than one-fifth in number of the members ; " or, " or any five or more members holding the like proportion of the capital." In the interests of members it is desirable to enable the requisitionists to act after a fourteen days' default (instead of twenty-one or twenty-eight days, as sometimes worded) ; otherwise, if it become desirable to pass a special resolution against the wish of the dii'ectors, great difficulty may be experienced. Sometimes the words following are added : " Where at a meeting held pursuant to such requisition a resolution has been passed which it is desired to confirm as a special resolution, the meeting may, without notice in that behalf having been given, determine when and where the confirmatory meeting shall be held, and by whom and in what manner such meeting shall be convened." 61. Seven clear days' notice specifying the place, day, and hour of Notice of meeting, and, in case of special business, the general nature of such ^^^ti"-"'- business, shall be given [either by advertisement or] by notice sent by post, or otherwise served as hnfter provided, and with the consent in •writing of all the members, a meeting may be convened by a shorter notice, and in any manner they think lit. Where it is proposed to pass a special resolution, the two meetings may be convened by one and the same notice, and it is to be no objection to such notice that it 416 ARTICLES OF ASSOCIATION. [CiTAP. VII. Form 210. only convenes the second meeting contingently on the resolution being l^assed by the requisite majority at the first meeting. As to notices, see further, infra, and Chap. XI. As appears from the above clause and Clause 63, an ordinary meeting may deal ■with special business if the notice specifies it. And see Graham v. Van Diemans Land Co., 26 L. J. Ch. 73. An adjourned meeting is considered, for some purposes, a continuation of tlio original meeting. See Scaddbig v. Lorant, 3 H. L. Cas. 418. In the absence of special provision, notice of an adjourned meeting need not Ije sent to the members. Wills v. Murray, 4 Ex. 843. Sometimes it is provided that a member holding less than [20^.] of the capital, or the holders of preference shares, shall not be entitled to any notice of a general meeting. A notice which is to state the general nature of the business or the object of the meeting must give members fair notice of the matters to be dealt -with. Bridport Breicery Co., 2 Ch. 191 ; Wright's case, 12 Eq. 345 ; Lawes' case, 1 De G. M. & G. 430. And any resolution beyond the notice is invalid. JIampshire Zand Co., (1896) 2 Ch. 747. But notices are not to be construed with excessive strictness. Per Selwyn, L. J., Wright's case, 12 Eq. 345 ; Henderson v. Bank of Australia, 45 C. Div. 330. They are to be read and construed as an ordinary business man would read and construe them. Alexander v. Simpson, 43 C. D. 147 ; and see Young v. South African, #c. Syndicate, (1896) 2 Ch. 268. Thus, where a meeting is convened to remove "any" of the directors, it may remove " all." Isle of Wight Rail. Co. v. Tahourdin, 25 C. Div. 332. It is, however, wiser to say " all or any." A notice convening a meeting to consider and determine as to the appointment of a committee to inquire into the working and general management of the company would not justify a resolution requiring the directors to carry into effect the recom- mendations of the committee. Per Cotton, L.- J., Isle of Wight Bail. Co. v. Tahour- din, 25 C. D. 330. An insufficient or misleading notice invalidates the resolution, even though no proxies are used, " for how is it possible for the Court to know how many share- holders abstained from attending the meeting, being satisfied that the arrangement as it was proposed was advantageous to them, and being quite content to exercise no voice about it?" Per Page-Wood, V.-C, Clinch v. Financial Corp., 5 Eq. 481. "There is no obligation upon any shareholder receiving such notices either to attend the meetings or to make inquiries as to what is proposed to be done at them, in order to protect himself from being bound by acts or contracts ultra vires of any general meeting. He will, of course, be bound by all that the general meetings can do, as to the matters mentioned in the notices, within their powers ; but he cannot, in his absence and without his knowledge, bo taken to consent that they shall bind him by any resolutions or acts in excess of those powers, whether such acts or reso- lutions do or do not relate to the particular business for the transaction of which those meetings were called together." Per Lord Selbornc, Ashhury v. Biche, L. Tv. 7 H. L. 693. In construing a notice it is to be borne in mind that all the shareholders of the company must have imputed to them knowledge of the Act of Parliament, and also of their own memorandum and articles of association. Per Lord Selbornc, CanipbcU's ease, 9 Ch. 22. Where a meeting is convened to adopt a spccifiod agreement, and authorise the directors to carry it into effect, it is not necessary to state the circum.stances which render the resolution requisite, e.g., because the directors are interested. Grant v. United Siv itch back, 40 C. Div. 137. See, however, Kaye v. Croydon Tramicays Co., W. N. (180K) 20. As to amendments. No amendment can bo moved which goes beyond the notice FORMS. 417 convening the meeting or, in tlie case of an ordinary meeting, beyond the scope of Forin 210. the ordinary LuHiness which by the rogulationn may be transacted thereat without epccial notice. Thus, in the case of an ordinary meeting, where a motion is sub- mitted that the report and accounts be received and adopted, an amendment tliat the directors be removed from office, or that the articles be altered, would be irregular ; but an amendment to the effect that the accounts and balance-sheet be received, but not adopted, and that a committee of shareholders be appointed to look into them and report, would be competent. So, too, if the meeting be convened to pass a resoluticm for increasing the capital, an amendment that the directors be authorised to borrow, or that a dividend be declared, would be irregular, for any such amendment is not within the notice. Nevertheless, an amendment fairly relevant and within the notice may generally be moved. Tlius, where a meeting is convened to consider, and if thought fit to ratify, a particular agreement, it would seem to be permissible to ratify the agreement sub- ject to modifications or conditions, provided that they do not make the agreement more onerous as regards the company. " An absent shareholder can hardly be allowed to say : ' I was invited to consider the agreement simpliciter as it stood.' I quite understand his not being bound by a resolution that made the agreement more onerous, but .... nobody wovild think of arguing that because there is not an express invitation to consider all possible modifications that might take place for the benejit of the company, therefore the meeting proceeded on that which was ultr,i vires incoming to any siich modified resolution." Per Page- Wood, L. J., JF/i<^ht's case, 12 Eq. 335, 341, n. So, too, if the notice is to consider a resolution for increasing the capital to 10,000/., an amendment to substitute 5,000^. for 10,000/. is allowable, but such a notice would not, it is conceived, justify an amendment to substitute 10,000/. or 1.30,000/. for 10,000/. Where, however, the notice was in general terms, such an amendment would be allowable. So, too, where the notice was of a meeting to pass a resolution altering the scale of voting by giving to every qualified proprietor one vote for every share held by him, and a resolution was proposed with additional words l_qu. irregular], making the right of voting conditional on a member having held his shares for a specified period, it was held that an amendment to omit the additional words was regular. Henderson v. Hank of Australia, 45 C. D. 330. The object of the concluding paragraph of the above clause is to save the expense of the double notice, which in a large company may be considerable. In the absence of such words, the second meeting cannot be thus convened. Alexander v. Simpson, 43 C. D. 139 ; and infra, p. 701. Occasionally the articles contain a clause providing that any member may, on giving not less than three days' notice to the company, submit any resolution to the meeting beyond the matters contained in the notice convening such meeting ; but such a clause is dangerous if it means what it apparently says, and the Court therefore treats it as referring only to something covered by the principal notice. Imperial Hydro., d^c. Co. v. Uampson, 23 C. Div. 9. Clause 61, supra, does not apply to a meeting of the subscribers. A reasonable notice only is necessary to convene the subscribers, and a two days' notice has been held reasonable and sufficient under the circumstances. Jofm Morley BinbUny Co. v. JBarras, (1891) 2 Ch. 386. 62. The accidental omission to give any such, notice to any of the As to omission members shall not invalidate any resolution passed at any such *° ^^*^ notice, meeting. Sometimes this clause runs: "Tlie non-receipt of such notice by any member shall not, &c." This is the form in Table A. P. E 15 41S AKTICLKS OF ASSOCIATION. [(JhAP. VII. Form 210. lu one form or tlie other the olauwo m ubuo«t always iuserteJ. ~- In the absence of such a provision a meeting is irregular if all are not duly summoned. Smi/th v. Darley, 2 H. L. C. 789 ; Reg. v. Lcmghorne, 6 N. & M. 203. A report in the public press of the proceedings of a general meeting, if containing libellous matter, is not privileged. Popham v. Peclchum, 7 H. & N. 891 ; Bnvisoti v. Dtoican, 7 E. & B. 229. But a report sent to the members is j^fimd fucic privileged. Laughton v. Bishop of Sodor and Man, 4 P. C. 495 ; WaUer v. Loch, 7 Q. B. D. 619. Business of ordinary meeting. Special business. Peoceedings at Geneeal Meetings. 63. The business of an ordinary meeting other than the first one shall be to receive and consider the profit and loss account, the balance- sheet, and the reports of the directors and of the auditors, to elect directors and other ofiicers in the place of those retiring by rotation, to declare dividends, and to transact any other business which, under these presents, ought to be transacted at an ordinary meeting. All other business transacted at an ordinary meeting, and all business transacted at an extraordinary meeting, shall be deemed special. The last paragraph of this clause refers to Clause 57. Sometimes it is provided that all special business shall be transacted at an extraordinary meeting ; but as this precludes the transaction of special business at an ordinary meeting, even after notice, it may be found inconvenient. Of course an extraordinary meeting can be convened to be held at the close of the ordinary ; but if proxies are wanted, there must be a separate proxy paper for each. Infra, Clause 80. Where the clause is framed as above, special business can be dealt with at an ordinary meeting if the notice specifies it. Quorum. 64. Three members personally present shall be a quorum for a general meeting for the choice of a chairman, the declaration of a dividend, and the adjournment of the meeting. For all other purposes the quorum for a general meeting shall be members personally present, not being l-ess than [5] in number, and holding, or representing by proxy, not l«ss than one-tenth part of the issued capital of the coy. No business shall be transacted at any general meeting unless the 'quorum requisite be present at the commencement of the business. 'Even where tifce articles do not say personally present the word is implied. Per iforth, J., FUxtxhire Oil and Cannel Co., 14th May, 1887, in which it was held, two .■years after date, that the winding-up resolution was invalid, on the ground that at 'one'of the meetings there was no quorum personally present. And see Cambrian, 'Stc 'Co., 23 W. R. 405 ; Erm^i v. Loma Gold Mines, (1897) 1 Ch. 1. 'Of course, a resolution jiaesed at a meeting at which a quorum is not present is VOTd [Romfonl Canal Co., 24 v three. 65. The chairman of the directors shall be entld to take the chair at Chairman of every general meeting, or, if there bo no chairman, or, if at any fneetin"-. meeting he shall not be present within fifteen minutes after the time appointed for holding such meeting, the members present shall choose another director as chairman, and, if no director be present, or, if all the directors present decline to take the chair, then the members present shall choose one of their number to be chairman. Sometimes provision is made for a deputy chairman. 66. If within half an hour from the time appointed for the meeting "When, if a quorum is not present, the meeting, if convened upon such requisi- quorum not tion as afsd, shall l)e dissolved ; but in any other case it shall stand meeting to adiourned to the same day in the next week, at the same time and ^" dissolved, 1 . P and when to place, and if at such adjourned meeting a quorum is not present |_ those be adjourned, members who are present shall be a quorum, and may transact the business for which the meeting was called]. Or the words in brackets may be omitted, and the following inserted : "it shall be adjourned shje die.^' This is the form in Table A., but the above is now frequently used, for it is found that members are often so supine that it is almost impossible to get together a quorum, although the business may be pressing. 67. Every question submitted to a meeting shall be decided, in the How ques- first instance, by a show of hands, and in the case of an equality of ^g'^j^g^ ^t votes the chairman shall, both on show of hands and at the poU, have meetings. a casting vote in addition to the vote or votes to which he may be Casting vote, entld as a member. A show of hands is the common law mode of ascertaining the- sense of a meeting", and should be taken even where the articles do not expressly so provide. Horbunj Bridi/e Co., 11 C. Div. 109. If the number of votes at a general meeting is equal, the chairman has no casting vote by common right. In Bidwell Brothers, (1893) 1 Ch. 603, Vaughan Williams, J., dissenting from the decision of Kay, J., in Caloric Engine, i-c. Co., 52 L. T. 846, held that upon a resolution to take effect under sect. 51 of the Companies Act, 1862, a member present only by proxy had a right to vote upon a show of hands, and that the chaii-man was bound to ascertain as best he could the way such a member voted. This was contrary to common practice, and the decision has since been overruled by Ernest v. Zoma Gold Mines, (1897) 1 Ch. 1, in whigh the Court of E j; 2 420 ' ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. Appeal held that where proxy voting is allowed the chairman, in ascertaining the ■ number of votes on a show of hands, must count the hands only. This, too, is the common law rule. What is to be 68. At any general meeting, unless a poll is demanded by [the evidence of chairman or byl at least ffivel members, or by a member or members the passing of _ . . a resolution holding or representing by proxy or entld to vote in respect of at least where poU not one-tenth part of the capital represented at the meeting, a declaration by the chairman that a resolution has been carried, or carried by a particular majority, or lost, or not carried by a particular majority, and an entry to that effect in the book of proceedings of the coy, shall be conclusive evidence of the fact without proof of the number or pro- portion of the votes recorded in favour of or against such resolution. There is a common law right to demand a poll, but the regulations may exclude or restrict it. He//, v. The Wimbledon Local Board, 8 Q. B. Div. 459 ; better reported in 30 W. E. 402, and 46 L. T. 47 ; Campbell v. Matmd, 5 A. & E. 865. Unless the regulations otherwise provide, a proxy appointed to vote at a general meeting is not entitled to demand a poU (per Bacon, V.-C, Haven Gold Co., 20 C. D. 151) ; and where the regulations require the demand to be made by several holders of shares, a proxy is not a holder within the words. Reg. v. Government Stock Co., 3 Q. B. D. 443. A poll need not be demanded publicly ; it is sufficient if the chairman acts on a private demand. Phoenix Co., 48 L. T. 260. The chairman's declaration is not *' conclusive " where there is no quorum. Poll. 69. If a poll is demanded as afsd, it shall be taken in such manner and at such time and place as the chairman of the meeting directs [and either at once, or after an interval or adjournment, or otherwise], and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. [The demand of a poll may be withdrawn.] A poll is an appeal to the whole constituency, and " is taken in order to ascertain the sense of the general body of persons qualified to vote, and to give others beside those who are present when the poll is demanded power to come in and exercise their right of voting, and in order to ascertain whether the voters have the qualifi- cation which is required in order to entitle them to exercise the privilege of voting." Pfr Cotton, L. .T., Meg. v. Wimbledon, 46 L. T. 47. A poll should be demanded after the show of hands. Campbell v. Maund, tibi supra. AVhen a poll is duly demanded the show of hands goes for nothing", and the decision of the meeting depends on the result of the poll {Anthony v. Seger, 1 Hagg. Cas. Consis. 913) ; and in contemplation of law the meeting continues until the poll has been taken, lleg. v. Wimbledon, ubi supra. Hence, in the absence of express provision as above, a poll once demanded cannot be withdrawn. In the absence of regulations to the contrary, the chairman is the person to grant the poll. lieg. v. Hedges, 12 A. & E. 169. A poll may, it seems, without sjiecial provision in that behalf as above, be taken at the meeting at which it is demanded. Per Kay, J., in Chillinglon Iron Co., 29 C. D. l.')9, following a dictum of Douman, C. J., in Reg. v. D'Ogleg, 12 Ad. & El. 139. See dicta to the contrary in Horbury Jiridge Co., II C. Div. 109, FORMS. 421 If the regulations show that a poll is not to be taken at once, they must, of Form 210. course, be observed. Re Briiith Share Co., L. T. 215. A voter may vote at the poll oven though not present when the poll was demanded. Ca)iipbeU x. Maund, uhi supra. To shut out and exclude a voter may invalidate the poll. Reg. v. LambHh, 8 Ad. & El. 356. If the poll is not completed on the day on which it is commenced it must be con- tinued subsequently, for the chairman is not entitled to close the poll whilst voters are coming in {Reg. v. St. Pancras, 11 Ad. &: E. 15 ; Reg. v. Graham, 9 "W. K. 738) ; but the chairman is not bound to wait for hours to see whether voters will come in. Reg. V. Lambeth, tibi supra. Nevertheless, the chairman may direct the continuance of the poll at a subsequent period in order to give an opportunity to other voters to come in. The poll is to be regarded as part of the proceedings of the meeting. Reg. v. | ' Wimbledon, ubi supra. To appoint a subsequent day for the taking or completion of the poll is not an adjournment of the meeting, although it in eflPect continues the meeting [Reg. v. Chester, 1 Ad. & E. 3-12 ; Reg. v. Wimbledon, ubi supra) ; but it is usual to adjourn the meeting to hear the result. Sometimes there is no formal adjournment, but it is arranged that notice of the result shall be given, and to this there would seem to be no legal objection. As to a scrutiny : It is usual to appoint scrutineers to compute the votes at a poll Scrutiny, and report to the chairman, but the regulations rarely provide for a scrutiny. The meeting can appoint scrutineers. Wandsworth Co. v. Wright, 22 L. T. 404. Very commonly they are appointed by the chairman with the assent of the meeting. Sometimes the chairman acts as scrutineer. It is for the chairman to decide as to the validity of the proxies, and his decision will stand urdess it is proved to the Court to be wrong. Indian Zoedone, 26 C. D. 70. I 70. The chairman of a general meeting may, with the consent of Power to ad- the meeting, adjourn the same from time to time and from place to Journ general place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. At common law it seems that the power to adjourn rests with the chuu-man. Reg. V. D'Ogleg, 12 Ad. & E. 158. See note to Clause 64. If the chairman improperly purports to adjourn or stop the meeting, and leave the chair, the meeting can elect some other chairman and proceed. I'he National Dwellings Society \. Sijkes, (1894) 3 Ch. 159. The chairman is by such a clause given a discretion, and he is not bound to adjourn the meeting. Salisbury, ^r. Co. v. Hathorn, (1897) A. C. 268. It would seem that a meeting may be adjourned to a day to be fixed by subse- quent notice, Reg. v. Mayor, S;c. of London, 9 B. & C. 1. That no notice of an adjourned meeting is necessary, see supra, Clause 61. 7 1 . Any poll duly demanded on the election of a chairman of a In what cases meeting, or on any question of adjournment, shall be taken at the P°i^'^\^°^ meeting, and without adjournment. jounmieut. It has been questioned whether, in the absence of express power, a poll can be demanded on a question of adjournment. Macdougall v. Gardiner, 1 C. Div. 13. 422 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. However, u clause as above is frequently inserted, aud seems expedient. Not uncommonly it is provided that no poll shall be demanded in such cases, but no good reason can be suggested why proxies should be deprived of the power to vote on these matters. If a poll cannot be demanded, a few members who happen to be personally present may be able to effect an adjournment, say, for three months, though at a poll there would be a vast majority against adjournment. Besides, in the case of a meeting to confirm a special resolution very serious difficulties might arise. Business may 72. The demaud of a poll sliall not prevent the continuance of a proceed not- meetinar for the transaction of any business other than tlie fuiestiou withstandmg o ./ j demand of on which a poll has been demanded, poll. Votes of members. N'oTJts 01' Members. 7o. On a show of hands every member present in person shall have one vote, and upon a poll every member present in person or by proxy shall have one vote for every share held by him. [Where a corporation being a member is present by a proxy who is not a member, such proxy shall be entitled to vote for such corporation on a show of hands.] The right of voting requires careful consideration. Sometimes a scale is adopted, r. //., by adding in the above clause the words "up to ten, and to an additional vote for every ten shares beyond the first ten up to one hundred, and to an additional vote for every one hundred shares beyond the first hundred." Sometimes one class of shares is given.no vote, e.g. : "Every member holding ordinary shares shall have one vote for every ordinary share, &c. The preference shares shall not confer on the holder the right to attend or to vote at any general meetuig, or to receive any notice thereof." The following is another form sometimes used : — " But the said preference shares shall not confer on the holders the right to attend or vote, cither in person or by proxy, at any general meeting, or to have notice of such meeting, unless the meeting is convened for reducing the capital, or winding up or sanctioning a sale of the undertaking, or altering the regulations of the company, or where the proposition to be submitted to the meeting directly affects the rights and privileges of the holders, or the dividend thereon is, and so long as it is, in arrear for more than three months." And see Form 289, \njra. Sometimes it is declared that no member holding less than [100/.] capital shall have a vote. And where a large proportion of the capital is to be issued to a vendor, his rights of voting in respect thereof are sometimes limited. These are matters for the consideration of the pi-omoters. The right to vote is determined by the register of members. I'lnchr v. Lushivg- ton, G C. D. 80. Although a member is entitled to vote as ho likes {East Fani, ^-c. Co. v. Mirnj- vcathn; 2 H. & M. 254 ; London ij- Merc. Disc. Co., 1 Eq. 277 ; Pender v. Liishhii/ton, (J. D. 70), a majority will not bo allowed to obtain for themselves an unfair advantage at the expense of the minority. Mcnicr v. Hooper'' s Telegraph Works, 9 Ch. 350; see also Aiwool v. Merryweathcr, 5 Eq. 464, n. ; Mason v. Harris, 11 C. Div. 97 ; compare N. W. Transportation Co. v. Beatty, 12 App. Cas. 589. A member is entitled to transfer his shares to nominees, so as to secure to himseK the iiiaximuTu of voting power, and the directors must register the transfers, unless the articles give tliem a power to decline, which is applicable in such case. Stranton Iron Co., IG Eq. 5.i9 : sec further, supra, p. 307. FORMS. 423 However, it is seldom deemed necossaiy exprcsisly to restrict the right of transfer Form 210. in this respect. Clause 81«, uifra, is, however, sometimes inserted, and in all ordinary cases prevents what was done in the case above mentioned. But though Clause 8 la may be found useful in this respect, it is open to objection on the score of incovenience and on other grounds. 74. Any person eutld uuder the transmission clause \_su2)ra, Votes in Clause 38] to transfer any shares may vote at any general meeting ^aspect of in respect thof in the same manner as if he were the registered deceased and holder of such shares, provided that forty-eight hours at least before L)'"'k™pt ' ^ . . . nienibers. the time of holding the meeting or adjourned meeting, as the case may ■ he, at which he proposes to vote he shall satisfy the directors of his right to transfer such shares, or the directors shall have previously admitted his right to vote at such meeting in respect thof. 75. Where there are joint registered holders of any share or stock, Joint holders. any one of such persons may vote at any meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto ; and if more than one of such joint holders be present at any meeting, personally or by proxy, that one of the sd persons so present whose name stands first on the register in respect of such share, shall alone be entld to vote in respect thof \or, those so present shall respectively be entld to an equal part of the votes conferred by the joint holders]. Several executors or administrators of a deceased member in whose name any share stands shall for the purposes of this clause be deemed joint holders thof. The above clause is common, but the following is, perhaps, commoner: — 15a. If there be joint registered holders of any shares, the member whose name stands first ou the register, and no other, shall be entitled to vote in respect of such shares, but the other or others of the joint holders shall be entitled to be present at the general meeting. Sometimes the words following are inserted in Clause 75 before the word "several": "upon a show of hands; but upon a poll each of them shall be entitled, as nearly as may be, to a rateable proportion of the total number of votes conferred by the joint holding." 76. Votes may be given either personally or by proxy. Proxies _, , . , permitted. Ihere appears to be no right at common law to vote by proxy (see Grant on Corporations, 256) ; hence it must be expressly given. As to proxies voting on a show of hands, see Clause 67, supra. 77. The instrument appointing a proxy shall be in writing, under Instrument the hand of the appointor or of his attorney, or, if such appointor is a ^rox"^to°be corporation, under its common seal [and shall be attested by one or in writing ; more Avitnesses]. No person shall be appointed a proxy who is not a member of the coy and qualified to vote, save that a corporation being a member of the coy may appoint as its proxy one of its officers, though not a member of the coy. Suppose the woi-ds '• or hif* attorney " are added, must the proxy paper be under 424 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. the appointor's own hand? It would seem that it must. Wilson v. Wallani, 5 Ex. D. 155. The words in brackets are sometimes omitted, for attestation may be forgotten, and in that case the instrument is not available. Harden v. Phillips, 23 C. Div. 14. There would not appear to be any legal objection to a proxy in blank. Ujc parte Lancaster, 5 C. Div. 911. And see Ernest v. Loma Gold Mines, (1897) 1 Ch. 1. The appointor carmot attest the appointee's signature. Ex parte C'ulleii, (1891) 2 Q. B. 151. Where A. appoints B. hia proxy for a particular meeting, and afterwards appoints 0. for the same meeting, does the second revoke the first ? It would seem that it does. Ex parte Mure, 2 Cox, 67 ; Ee Lucas, 17 Jur. 1186. Suppose the appointor is himself present at a meeting, it would seem that his presence does not avoid the instrument of proxy, but if he votes before his proxy has voted for him, it is clear that he has impliedly revoked the proxy. Knight v. Bulkelcy, 5 J\rc. (N. S.) 817 ; 33 L. T, 7 ; Story on Agency, s. 475. and tj be deposited at office. 78. The instrument appointing a proxy [and the power of attorney, if any, under which it is signed] shall be deposited at the registered office of the coy not less than forty- eight hours before the time for holding the meeting or adjourned meeting, as the case may be, at which the person named in such instrument proposes to vote [but no instrument appointing a proxy shall be valid after the expiration of twelve months from the date of its execution]. Sometimes the words within brackets in the above clause are omitted, and the following substituted: "and no proxy shall be entitled to vote except at the particular meeting mentioned in the instrument, or any adjoui'nment thereof, and upon every poll that may take place at or in consequence of any such meeting or adjournment." But there seems no sufficient reason why a member should not be enabled to appoint a proxy for a specified pei-iod, c.(/., where he is going abroad. It was very proper to insert such a provision when the law would not permit the appointment of a proxy, except in regard to a specified meeting. See infra, note to Clause 80. Very commonly such a clause does not contain the words ' ' or adjourned meeting as the case may be," and the question sometimes arises whether in the absence of those words a proxy is incapable of use at an adjourned meeting unless it was deposited forty- eight hours before the original meeting. The words ai'e capable of that construction ; for an adjourned meeting is to be considered at any rate for some purposes a continuation of the original meeting [^supra, note to Clause 61] ; but it is also capable of the construc-tiun that a proxy deposited forty-eight hours before the adjourned meeting is available thereat. Now the object of the clause is to give forty-eight hours for the examination of the proxy papers, and that object as regards an adjourned meeting would be attained by admitting proxies filed forty hours before such adjourned meeting. Why should a man who attundw in person at the original meeting be unable to attend by proxy at the adjourned meeting? Is such a man to be disfranchised neeing that the words are capable of another and more reasonable construction ? It is conceived that the inclination of the Court would bo io construe the clause s- bhall be eligible as a director] who is not a holder of a specified qualification. In BXicb Cftue the possoasion of the qualificatiou is a condition precedent to a valid FOKMS. 4;-! election ; and an election witliout qualification is void. Barton'' s case, ,3 C. D. 963 ; Form 210. _Jenner''s case, 7 C Div. 10-'. - Acting as a director without qualification is not a mi.sfeasance. Coventry and Dixon's case, 14 C. Div. GGO, C. A. Unless the regulatiun.s otherwise provide, it would seem that a director may transfer his qualification shares as freely as if he were not a director. Cawlcy ^- Co., 42 C. Div. 209. The decision in Soath London Fhh Market, 39 C. Div. 324, was based on the terms of the special Act. If the articles pi'ovido that the office of a director shall be vacated if he cease to hold his qualification, this does not apply to a director appointed by the articles. Forbes' case, 8 Ch. 768. It was held in Olori/ Paper Mills Co., (1894) 3 Ch. 473, C. A., that a dii'cctor who held the specified qualification jointly with other persons was duly qualified. Having regard to the object of the qualification this seems a surprising decision. If good law, it follows that where the qualification is £100 of shares, ten directors who are jointly holders of £100 of shares are duly qualified. Whether the acts of a director who has not been duly appointed, or who is dis- qualified, are void, must depend on the circumstances of the case. See Clause 111, infra, and s. 67 of the Act (see infra, p. 443) will apply in most cases, but only as to acts done before the defect or disqualification is shown. Hallowes v. Fernie, 3 Ch. 467; Murray v. Bash, L. R. 6 H. L. 53; Bridport, ^c. Co., 2 Ch. 191; Britou 3fedical and Jones, 61 L. T. 381. And not, it would seem, in favour of any person at the time of the act done having notice of the defect or disqualification. Stafford- shire Gas Co., 66L. T. 413. A director who accepts his qualification shares as a secret gift from the promoters or vendors is guilty of a gross breach of trust. May's case, 10 Ch. 593, 604 ; Enyk- field Co., 8 C. Div. 383 ; Carling's case, 1 C. Div. 115 ; Twycross v. Grant, 2 C. P. Div. 493 ; Le Jiaviyne's case, 5 C. Div. 306; Pearson's case, 5 C. Div. 33ff; Boston Shipping Co., 39 C. Div. 339. And he is liable to give up the shares or, at the option of the company, to account for their value. S. C. ; Hay's case, 10 Ch. 593 ; JFeston's case, 10 C. Div. 579 ; Postage Stamp, df-c. Co., (1892) 3 Ch. 566. And where he buj's his qualification from a promoter who agrees to indemnify him, he is accountable to the company. Archer's case, (1892) 1 Ch. 322, C. A. Sometimes in the qualification clause the words in his otrn right are inserted after the word "holding ; " but they are not desirable, for they do not mean, as might be supposed, as beneficial owner. Jessel, M. E.., thought that they referred to shares held by a man as his own property, whether as trustee or otherwise, as dis- tinguished from shares held as legal personal representative, or as a trustee in bankruptcy. Palhrook v. Richmond Mining Co., 9 C. D. 610. In Bainbridge v. Smith, 41 C. Div. 642, Cotton, L. J., expressed an opinion that the words "in his own right" imported a beneficial ownership. But Liudley, L. J., on the other hand, considered that the words had acquired, in consequence of the decision of Jessel, M. R., a conventional meaning, which had been accepted and acted on, and should not now be departed from. And in Cooper v. Griffin, (1892} 1 Q. B. 740, C. A., where Palbroolc v. Richmond Mining Co. was discussed, Herschell, L. C agreed with Lindley, L. J. See, also, Howard v. Sadler, (1893) 1 Q. B. 1. [89. A director may retire from his office upou giving one month's Power for notice in writing to the coy of his intention so ta do, and such resigna- ^'^ector to . . . . . retire. tion shall take effect upon the expiration of such notice or its earlier acceptance.] More commonly a paragraph : " If by notice in writing to the company he resign his office," is added to Clause 92, and this seems the best plan; for a director cannot be compelled to act. 432 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. Even in the absence of any express power to resign, it is submitted tliat, unless — the regulations are specially framed, a director may, by notice to the company, resign his directorship. Directors " are merely agents of the company " (per Lord Cairns, Ferguson v. Wilson, 2 Ch. 89), and an agent may determine his agency. And it is conceived that the requisite notice should be served on the company in the manner provided for by s. 62 of the Act, viz., by leaving it at the registered office of the company, and that a notice so served is effective. In Municipal Free- hold Zand Co. v. PoUingto)i, 63 L. T. 238, it was held that, under Table A., a director might resign, but that he must resign " into the hands of the company," and that a notice read at a board meeting (and, therefore, no doubt served on the company in accordance with s. 62 of the Act), was not an effective notice to the company for such a purpose; and, apparently, that the resignation, to be effective, must be given to all the members. This decision appears to disregard the fact that the company is a separate jDe>-s(/«« (pp. 1 & 8), and that the Act has provided by s. 62 special means of giving notice to that persona. Why are the plain terms of s. 62 not to have full effect P In Metropolian Bank v. Heiron, 5 Ex. Div. 319, Cotton, L. J., said that "it wa-s made known in the only way in which the company can know anything, by a com- munication made to the directors at a regular board meeting." It may be observed that Table A. contains no clause as to resignation. In practice it is always assumed that a director can retire mero matu, and the object of a clause is to fix the length of notice, or to restrict the right. Remuneration 90- The directors sliall be pd out of the funds of the coy by way of of directors. remuneration for their serrices the sum of /. p. a., and such further sums as the coy in general meeting may from time to time determine, and such remuneration shall be divided among them in such propor- tions and manner as the directors may determine. This is a very common clause. Sometimes these words are added): " And in default of such determination, among them in proportion to their respective attendances at board meetings." The directors may vote themselves a sum om account of fixed' remuneration even ■where the articles provide for remuneration by way of annual salary. Wood Ships, ic, Co., 62 L. T. 760. Where a director is entitled to act before qualifying, he is entitled to remuneration under the clause. See In re International Cable Co., 66 L. T. 253. A director's remuneration is a return for his services, and, accordingly, a director entitled to a percentage of the "profits" of a company as remuneration is not entitled to a percentage on the proceeds of sale of assets sold in a winding-up, imless the contrary be clearly expressed. Frames v. Bultfontein Mining Co., (1891) 1 Ch. 140. Until Leicester Club Co. (1885), 30 C. D. 629, it was always supposed that a director could prove in the winding-up for arrears of remuneration and take dividend thereon pari passu with outside creditors, and that whether the articles required him to hold a qualification in shares or not. But in the case referred to it was held that ■where a qualification is rcifluired, the remuneration is a sum due to the director "in his character of a member by way of dividends, profit, or otherwise," -within para. 7 of fi. 38 of the Act of 1862, and ranks for payment after all other creditors. Query, however, whether the words *' or otherwise " do not mean something in the nature of dividends or profits, and whether the remuneration of a director is not paid to him in the character of an agent. In Re llalc and Flant, 43 C. D. 255, it was held by Kay, J., that the salary of a managing director was not within the words, and FORMS. 4o3 the ratio decidendi renders it doubtful whether the decision in Leicester Club Co. Form 210. can be supported. And see Ex parte Beckwith, (1898) 1 Ch. 324. If the articles contain provision for remuneration, a promise by a director to give his services gratis is a nudum pactum in the absence of some valid consideration, and therefore not binding [Lambert v. Northern, <^-c. Co., 18 "W. E,. 180) ; at any rate, as regards the persons who were members of the company at the time of the promise. A director who is a member can sue the company for his remuneration. Orton v. Cleveland, #c. Co., 3 H. & C. 868 ; Nell v. Atlanta, S;c. Co., 11 T. L. R. 407. Sect. IG of the Act makes the articles binding on the company. See supra, p. 37o. Unless the articles provide that the fees shall be paid out of the profits only, there is nothing to prevent their being paid out of capital. JIarvey Lewis^ case, 26 L. T. 673. But if the articles provide that directors' fees are to be paid out of profits only, or that the directors are not to be entitled to remuneration until certain profits have been realized, the directors will be liable to refund any sums received by them in contravention of these regulations. Oxford Benefit, tf-c. Society, 35 C. D. 502 ; Leeds, S;c. Society y. Shepherd, 36 C. D. 787. In some cases the clause runs : " Such sums as the company in general meeting may from time to time determine, and such sums shall, &c." But see Ex parte Beckivith, supra. The following is another form sometimes adopted : — ■ " The remuneration of each director for his services shall be the sum of 1, per annum ;" o>- " The remuneration of the directors shall be the sum of /. apiece for each attendance at a meeting of the directors." In addition to fixed remuneration as above, the du'ectors are not uncommonly given a share in, or commission on, the profits. See infra, Forms 226, 239. But in such case the Stock Exchange require a limit. Directors are not entitled to remuneration, except by virtue of the regulations of the company. D/tnstan v. Imperial, ^c. Co., 3 B. & Ad. 125. But where the articles fix remuneration as above, a director, who is a member, has a right of action against the company for his remuneration. Orton v. Cleveland, ^-c. Co., 3 H. & C. 868. If he is not a member, the articles ai'e to be regarded as an offer made by the company ; and if he acts, he and the company are to be treated as having agreed by parol that he shall be employed on the terms specified. Isaacs' case, (1892) 2 Ch. 158 ; He Peruvian Co., (1894) 3 Ch. 690. A set-ofp, within three months of a winding-up, of calls payable by directors against their remuneration, was held a fraudulent preference, even though the directors had reasonable ground for supposing the company would not have to pay the original debt shown to have been existing at the time. In re Washington Diamond Mining Co., (1893) 3 Ch. 95. The taking of remuneration beyond that fixed is a misfeasance. Be Whitehall Court, 56 L. T. 280. The proper way 6f taking in execution overdue directors' fees is attachment of the debt. A receiver of directors' fees was refused altogether in Hamilton v. Brogden, W. N. (1891)36. 91. The continuing directors may act notwithstanding any vacancy Directors may in their body ; [but so that if the number falls below the minimum gtandino- above fixed the directors shall not, except for the purpose of filling vacancy, vacancies, act so long as the number is below the minimum]. Where a maximum and minimum number are fixed as above [Clause 83], the directors cannot act if the number falls below the minimum [Alma Spinning Co., 16 C. D. 681), unless there is power to act notwithstanding vacancies. Scottish P. F F 434 ARTICLES OP ASSOCIATION. [ChAP. VII. Form 210. When office of director to be vacated. Petroleum Co., 23 C. Div. 431 ; Fauye v. Tldllipart, 58 L. T. 527. The words in brackets are sometimes inserted: and occasionally the words "so long as the minimum number exists" are used instead. But they may cause inconvenience. Sometimes the words, "But this provision shall be deemed directory only," are added to Clause 83, i.e., directory as distinguished from imperative (Lindley, 172) ; but the words are not intelligible to an average director. 92. The office of a director sliall ipso facto be vacated : — As to the words ipso facto, they may be inserted to meet the decision of Keke- wich, J., in Turnbull v. West Riding, i^-c. Co., 70 L. T. 92. In that case a director had become interested in a contract, and, although the articles provided that the office of a director should be vacated if he should be concerned in a contract without declaring his interest at the meeting at which the contract was determined on, the learned judge held that he did not vacate office ipso facto, and that the proper course was to give notice to the director of a second meeting specially summoned for the pui-pose of considering his position. On the other hand, in Mimnings v. Williamson, 11 Q. B. D. 533, it was held that where a disqualified person was elected to office, he eo instanti vacated office. "A person interested in a contract ceases to be a member the moment after he is elected." Per Brett, M. R. (rt.) If he accepts or holds any other office under the coy [except that of managing director]. The words in brackets will be inserted where the articles provide for the appoint- ment of a managing director. Fri»i4 facie a du-ector who accepts another office under the company vacates his directorship. Milman v. Thatcher, 2 T. R. 81 ; Bales \. Cumberland Lead Co., 6 H. & N. 481 ; 3 L. T. 681 ; Iron Ship, cj-(?. Co. v. Blunt, L. R. 3 C. P. 484. In the last-mentioned case the articles contained a provision as above («). A. had been appointed secretary at a salary, and, whilst secretary, was elected a director, and acted as such, still, however, continuing to perform the duties of the secretary. It was held that the acceptance of the office of director vacated the office of secretary, and that the subsequent performance of the duties of the latter office did not dis- qualify him under {a). Sometimes this sub-clause is omitted, and a clause inserted that " A dii-ector may hold any other office under the company in conjunction with the office of director, and on such terms as to remuneration and otherwise as the directors may arrange." (h.) If he becomes bankrupt, or suspends payment, or compounds with his creditors. Sometimes the word "insolvent" is inserted. Reg. V. Saddlers' Co., 10 H. L. C. 404. This means publicly insolvent. (c.) If he is found lunatic or becomes of unsound mind. ((/.) If he ceases to hold the required amount of shares or stock to qualify him for office, [or do not acquire the same within [one] months after election or appointment]. The London Stock Exchange object to the words in brackets. As regards first directors they arc plainly unnecessary if Clause 88J, supra, is inserted. When a director ceased for a few days to hold his qualification, and so vacated office, but shortly afterwards acquired the same, and was treated as a director by the continuing directors, who had power to fill up casual vacancies, it was held that in effect they had re-appointed him. Dawson v. African Consolidated Co. (1897), 40 W. R. 132. FORMS. 435 {c.) If lie absents himself from the meetings of tlie directors during Form 210. a period of three calendar months without special leave of ' absence from the directors. This sub-clause is sometimes inserted. As to the validity of acts done by a disqualified director, see infra, Clause 111, p. 443, and supra, p. 431. See also Halifax S/ii/ar Itcfning Co. v. Frunklyn, G2 L. T. N. S. 563. "Where an office was to be vacated ' ' if he absents himself during sLx; months, except from temporary illness or otlfcr cause approved by the board," it was hold that the officer was entitled to an opportunity of explaining his absence, liichardson V. Methlej School Board, (1893) 3 Ch. 510. [(/.) If he is concerned or interested in or participates in the profits of any contract with or work done for the coy ; hut no director shall vacate his office by reason of his being a member of any coy which has entered into contracts with or done any work for this coy, or which is concerned in or participates in the profits of any contract with the coy. Nevertheless he shall not vote in respect of any contract in which he is so interested.] Where this is used, Clause 93, infra, will be omitted. A man who is a share- holder in another company which contracts with the company is "interested" in the contract. Todd v. Eobinson, 14 Q. B. Div. 739 ; Dimes v. Grand Junction, 3 H. L. C. 759 ; and see Whitektj v. Barky, 21 Q. B. Div. 154. {g.) If by notice in writing to the coy he resign his office. A valid resignation cannot be withdrawn. Reg. v. Mayor of Wigaii, 14 Q. B. D. 908. Sometimes a further paragraph is added : " {h.) If he is requested in writing by all his CO -directors to resign." 93. No director shall be disqualified by his office from contracting Directors may with the coy either as vendor, purchaser, or otherwise, nor shall any contract with ^ •' ' ^ n • T company, such contract, or any contract or arrangement entered into by or on behalf of the coy in which any director shall be in any way inte- rested, be avoided, nor shall any director so contracting or being so interested be liable to account to the coy for any profit realized by any such contract or arrangement by reason of such director holding that office or of the fiduciary relation thby established, but it is declared that the nature of his interest must be disclosed by him at the meeting of the directors at which the contract or arrangement is determined on, if his interest then exists, or in any other case at the first meeting of the directors after the acquisition of his interest, and that no director shall as a director vote in respect of any contract or arrangement in which he is so interested as aforesaid ; and if he do so vote his vote shall not be counted [but this prohibition shall not apply to the agreemt mentd in Clause 3 thereof or to any matters arising thereout, or to any contract by or on behalf of the coy to give to the directors FF 2 436 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. or anj of them any security by way of indemnity, and it may at any time or times be suspended or relaxed to any extent by a general meeting]. Sometimes the words are added : "A general notice that a director is a member of any specified firm or company, and is to be regarded as interested in any transaction with such firm or company, shall be sufficient disclosure under this clause, and after such general notice it shall not be necessary to give any special notice relating to any particular transaction." The reference to the preliminary agreement is only required where a director is inte- rested in that agreement as a vendor or otherwise. As a director stands in a fiduciary relation towards the company, he cannot, unless the articles otherwise provide, contract with the company. Albion, ^c. Co. v. Martin, 1 C. Div. 580. Nor does it make any difference that the contract is open and above board as between the contracting director and his co-directors. Ibid. For the company is entitled to the collective wisdom of its directors. Imperial, ^-c. Association v. Coleman, 6 Ch. 558. And a director is not "allowed to enter into engagements conflicting, or which may possibly conflict, with the interests of those whom he is bound to protect. So strictly is this principle adhered to that no question is allowed to be raised as to the fairness or unfairness of a contract so entered into." Aberdeen Co. v. Blackie, 1 Macq. 461; Parker v. McEenna, 10 Ch. 118. But a company may unquestionably waive the benefit of the rule. Imperial, ^-c. Association v. Coleman, 6 Ch. 568; L. R. 6 H. L. 190; Southall v. British Mutual, ^-c. Society, 6 Ch. 619 ; Black v. Mallalue, 7 W. R. 303 ; Adamson's case, 18 Eq. 670. And it has now become very common to do so, and to insert clauses to the effect of the above. Moreover the company in general meeting can sanction a contract in which a director is interested. Grant v. United Switchback Co., 40 C. Div. 135. It may be convenient here to refer to the well-settled rule, that an agent cannot, without the knowledge and consent of his principal, be allowed to make any profit out of the matter of his agency beyond his proper remuneration. This rule applies with peculiar stringency to the directors of joint-stock companies. This rule is ' ' not a technical or arbitrary rule. It is a rule founded upon the highest and truest principles of morality. No man can, in this Court, acting as an agent, be allowed to put himself into a position in which his interest and duty will conflict." Per Lord Cairns, L. C, Parker v. McKenna, 10 Ch. 96,118. Lord Herschell has put the proposition somewhat differently, thus: — "It is an inflexible rule of a Court of Equity that a i^erson in a fiduciary position such as the respondent's is not, unless otherwise expressly provided, entitled to make a profit ; he is not allowed to put himself in a position where his interest and duty confiict. It does not appear to mo that this rule is, as has been said, founded upon principles of morality. I regard it rather as based on the consideration that, human nature being what it is, there is danger in such circumstances of the person holding a fiduciary position being swayed by ijitcrest rather than by duty, and thus prejudicing those whom he was bound to protect. It has, therefore, been deemed exijedieut to lay down this positive rule. But I am satisfied that it might be departed from in many cases without any breach of morality, without any wrong being inflicted, and without any consciousness of wrong- doing. Indeed, it is obvious that it might sometimes be to the advantage of the beneficiaries that their trustee should act for them professionally rather than a stranger, even though the trustee were paid for his services." Bray v. Ford, (1896) A. C. 44, 51, See the above cases and the following : — Parker v. Lewis, 8 Ch. 1035; Ottoman Bank v. Farley, 17 W. R. 761 ; Carlincfs case, 1 C. Div. 123; Morvah, Consols, S;c. Co., 2 C. Div. 1; Morison v. Thompson, L. R. 9 Q. B. 480 ; Pearson's case, 5 C. Div. 336 ; Phosphate Co. v. Ilartmont, ibid. 394 ; Bumie v. Fmjlish, 18 Eq. 524; Pe Bussche v. Alt, 8 C. Div. 300; Fden v. liidsdale's Co., 23 Q. B. I). 308 ; Boston Deep Sea ('o. v. Anscll, 39 C. Div. 339. A director cannot sue for a bribe. Ilarrinyton v. Victoria Pock, 3 Q. B. D. 549. The company can sue the briber for the amount. Mayor of Salford v. Lever, (1891) 1 Q. B. 188 ; Whaley Bridge Co. v. Green, 5 Q. B. D. 109. FORMS. 437 Sometimes the voting is permitted ; and it would appear tliat even when the party ForiU 210. interested may not vote as a director he may vote as a shareholder in the event of the " matter being referred to a general meeting. N. W. Transportation Co. v. licattrj, 12 App. Cas. 589. Sometimes a clause as follows is inserted : — " 93ff. A director of this company may be, or become, a director of any company pro- moted by this company, or in which it may be interested as a vendor, shareholder, or otherwise, and no such director shall be accountable for any benefits received as director or member of such company." Such a clause is occasionally inserted where the formation of other companies is in view. rrimd facie a director may act as a director of even a rival company. London, 4'C. Co. v. Mw Mashonaland Co., W. N. (1891) 165. EoTATioN OF Directors. 94. At the ordinary general meeting to Le held in the year , Rotation and and at every succeeding ordinary general meeting, one-third of the retirement of directors, or, if their number is not a multiple of three, then the number nearest to, but not exceeding one-third, shall retire from office. [A retiring director shall retain office until the dissolution of the meeting at which his successor is elected.] The above is a clause which is in very general use. Sometimes it is provided in the case of a small number of dii'ectors, e.g., five or less, that " two [or one] of the dii-ectors shall retire." Sometimes the clause is framed like Clause 62 of Table A. , and provides that the meeting is to stand adjourned for a week ; and that if at the adjourned meeting then- places are not filled up the directors shall continue in office. It has been held that in such case, even if the adjourned meeting is not iu fact held, the directors will continue in ofiice. lie Great Northern Salt, 44 C. D. 472. Table A. provides that : — " At the first ordinary meeting after the registration of the company, the whole of the dii-ectors shall retu-e from office ; and at the first ordinary meeting in every subse- quent year one-third of the directors for the time being, or, if their number is not a multiple of three, then the number nearest to one-third shall retire from office." But that clause is seldom adoi)ted in its integrity. The promoters generally nominate the first directors, and it is considered only fail- that they should have a reasonable time to try their policy. Of course, if the company chooses, it can at any time remove them under Clause 99. 95. The one-third, or other nearest number, to retire at the ordinary "WTiich direc- meeting to be held in the year , shall, unless the directors agree ^^^^ *^ retire. among themselves, be determined by lot ; in every subsequent year the one-third, or other nearest number, who have been longest in office shall retire. As between two or more who have been in office an equal length of time the director to retire shaU in default of agreemt between them be determined by lot. The length of time a director has been in office shall be computed from his last election or appointment where he has previously vacated office. A retiring director shall be eligible for re-election. 438 ARTICLES OP ASSOCIATION. [ChAP. VII. Form 210. 96. The coy at any general meeting at which any directors retire in Meet' o- to fill i^^^^^i" ^■fsd shall fill up the vacated offices by electing a like number up vacancies, of persons to be directors [and without notice in that behalf may fill up any other vacancies]. The words in brackets are very commonly absent, and in such case it is by no means clear that the meeting could, without notice, fill up a vacancy, unless it was caused by retirement "in manner aforesaid." But see Miaistcr v. CammcU Co., 21 C. D. 188, and ' compare with Imperial Hydropathic Co. v. Hampson, 23 C. Div. 1. Votes given in favour of a disqualified person may be thrown away where notice of the disqualification is brought home to the voters. Eeg. v. Tewkesbury, L. R. 3 Q. B. 635. And in the result the candidate who stands next may be entitled to office. Retiring' directors to remain in office till successors appointed. 97. If, at any general meeting at which an election of directors ought to take place, the places of the retiring directors are not filled uj), the retiring directors, or such of them as have not had their places filled up, shall, if willing, continue in ofiice until the dissolution of the ordinary meeting in the next year, and so on from year to year until their places are filled up, unless it shall be determined at such meeting to reduce the number of directors. If by reason of the refusal of a director to continue there remains a vacancy, it can be filled up as a casual vacancy. See Munster v. Cammell Co., ubi supra. But for this clause the acts of a director who, after his office was vacated, under Clause 95, continued to act, would, subject to s. 67 of the Act {infra, p. 443, note to Clause 111), be void as against the members. Garden Gully, ^-c. Co. v. McLisier, 1 App. Cas. 39. Apart from such a clause, a director whose term of office is up vacates office, and if he continues to act is merely a de facto dii-ector. See Tyne Steamship Instirance Association v. Brown, 74 L. T. 283. Of course, as regards sti-angers, the principle of the Royal British Bank v. Turqiiand, 6 E. & B. 327, would apply. See infra, Clause 111. Power for general meeting to increase or reduce number of directors. 98. The coy in general meeting may from time to time increase or reduce the number of directors, and may [alter their qualification and may] also determine in what rotation such increased or reduced number is to go out of ofiice. The words in brackets are sometimes found useful. resolution. Power to 99. The coy may by extraordinary resolution remove any director directrrbv before the expiration of his period of ofiice, and appoint another extraordinary [qualified] person in his stead : the person so appointed shall hold ofiice during such time only as the director in whose place he is appointed would have held the same if he had not been removed. As to meaning of extraordinary resolution, see s. 129 of the Act of 1862, and Chap. X., infra. Table A. provides for removal by special resolution. Sometimes the clause is framed as follows : " The company in general meeting may," &c. Unless the regulations give the requisite authority, a director cannot be removed even by special resolution. Imperial Hydropathic Co. v. Hampson, 23 C. Div. 1. If there is no power the articles must first be altered, and then the power exercised. However, if in any case where there is no power it is desired to act promptly, a special resolution can be jiasscd giving power to a general meeting to remove, and the notice convening tlic confirmatory meeting can state that if the resolution is coufii'med a FORMS. 439 further resolution ■will be proposed removing Mr. A. from office. Sometimes the Form 210. majority is not sufficiently powerful to pass a special resolution for removal. In such - case it may be expedient to pass a resolution ajiproving of his exclusion, for where the majority is against a dii'ector, the Court will not force him on the corajjany by injunc- tion. Ilarbcn v. Fhillips, 23 C. Div. 14 ; liainbridge v. fimith, 41 C. Div. 462. Sometimes where paragraph (/;) of Clause 92 is not inserted, it is considered expedient to insert a clause to the effect that ' ' the directors may, at a meeting specially convened for the purpose by a resolution of a three-fourths majority of the directors present thereat, suspend any director, and at the expiration of fourteen days a director so suspended shall vacate office, unless he, within that period, gives notice to the company that he appeals to a general meeting ; and if he so appeals the directors shall, with all convenient speed, convene a general meeting to consider such appeal, and such meeting may annul the suspension or may affirm it and remove the director." Where the power to remove is only for reasonable cause, it is for the meeting to decide what is reasonable cause, and the Court will not interfere with their decision. Indcriviclc v. Snell, 2 M. & G. 216 ; and see Re Gresham Life, 8 Ch. 449 ; Osgood v. ]S!elso)i, L. E. 5 H. L. 636. It may be that where the director cannot be removed, and the result is a deadlock, a winding-up order may be obtained. Sailing Ship Kentmere, W. N. (1897) 58. [100. Any casual vacancy occurring among the directors may be Directors filled up by the directors ; but any person so chosen shall retain his ^^^^^ "^ office so long only as the vacating director would have retained the vacancies, same if no vacancy had occurred.] This clause is usually inserted where Clause 85 is not used. It would be extremely inconvenient in most cases if a general meeting of the company had to be called to fill up a casual vacancy. A casual vacancy means any vacancy arising otherwise than by retirement under Clause 94 {Munster v. Cammell Co., 21 C. D. 183), e.g., any vacancy occurring by death, resignation, or bankruptcy. York Tramivaijs v. Willoivs, 8 Q. B. Div. 694. The Court will not interfere with the exercise of a discretion. To fill up a vacancy there must be a quorum. Newhaven v. Keivhavoi, 30 C. D. 380. Where the directors are given a general power [supra, note to Clause 85] to appoint additional directors, tliis clause will be omitted. 100«, No person, not being a retiring director, shall, unless recom- When candi- mended by the directors for election, be eligible for election to the ^^ director office of director at any general meeting, unless he, or some other must give member intending to propose him, has, at least seven clear days before the meeting, left at the office of the coy a notice in writing duly signed, signifying his candidature for the office, or the intention of such member to propose him. This clause is found convenient and for the benefit of a company. It enables inquiries to be made as to a candidate's antecedents, &c., &c. See Barbefs case, 5 C. Div. 9G3. Managing Director. 101. The directors may, from time to time, appoint one or more of Power to their body to be managing director or managing directors of the coy, ^!J^!j"iQ„ either for a fixed term or without any limitation as to the period for director. 440 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. which he or they is or are to hold such office, and may from time to ' time remove or dismiss him or them from office and appoint another or others in his or their place or places. The above and the following are the usual clauses as to a managing director. It seems expedient in most cases to insert them in order to avoid the necessity of having to alter the articles. Of course the exercise of the powers contained in these clauses is optional. Not uncommonly the first managing director is appointed by the articles. See Forms infra, " Miscellaneous Clatises," p. 491. What provi- sions he will be subject to. Remuneration of managing director. 102. A managing director shall not, while he continues to hold that office, be subject to retirement by rotation, and he shall not be taken into account in determining the rotation of retirement of directors, but he shall, subject to the provisions of any contract between him and the coy, be subject to the same provisions as to resignation and removal as the other directors of the coy, and if he cease to hold the offi.ce of director from any cause, he shall, ipso facto and immediately, cease to be a managing director. 103. The remuneration of a managing director shall from time to time be fixed by the directors, and may be by way of salary, or com- mission, or participation in profits, or by any or all of those modes. Sometimes the articles give him a commission on the profits, or on the sui-plus profits, or on the dividend paid. A managing director may be entitled in a windmg-up to prove for arrears of salary in competition with outside creditors. Re Dale and Plant, 43 C. D. 255. And see Ex parte Beckicith, (1898) 1 Ch. 324. But a managing director whose salary has not been duly assigned to him may have to account for it. Liverpool Household Stores, 62 L. T. 878. Powers and duties of managing director. 104. The directors may from time to time entrust to and confer upon a managing director for the time being such of the powers exercise- able under these presents by the directors as they may think fit, and may confer such powers for such time, and to be exercised for such objects and purposes, and upon such terms and conditions, and with such restrictions, as they think expedient ; and they may confer such powers, either collaterally with, or to the exclusion of, and in substi- tution for, all or any of the powers of the directors in that behalf ; and may from time to time revoke, withdraw, alter, or vary all or any of such powers. These powers will be conferred by resolution of the directors. In the absence of express power to delegate, the maxim " delegatus non potest delegare,'''' applies to directors. ]Ioward\'i case, 1 Ch. 561 ; Harrises case, 7 Ch. 587. In the latter case, there being a power to delegate, it was held that an allotment made by a committee, instead of by the board of directors, was valid. See also Laud Credit Co., 4 Ch. 400. See the general power of delegation, infra, CI. 109. For exceptions to rule, see Be Bussche v. Alt, 8 C. Div. 300; and Jtossitcr y. 'Trafalgar Co., 27 Bcav. 380. Persons dealing bond fide with a, managing director are entitled to assume that he has all such powers as he jmrports to exercise, if they arc powers wliich, according to the constitution of tlie company, a managing director can have. Biggerstaff v. liowatVs Wharf, (189G) 2 Ch. 93. FORMS. 441 ^ Form 210. laiOCEEDINGS OF DlKEOTORS. 105. The directors may meet together for the dispatcli of business, Meetings of adjourn, and otherwise regulate their meetings and proceedings, as ^mop^^*'' ^^ they think fit, and may determine the quorum necessary for the r\j^ notice transaction of business. Until otlierwise determined, two directors to directors shall be a quorum. [It shall not be necessary to give notice of a "^^ -J meeting of the directors to a director who is not within the United Kingdom.] As to whether a meeting is essential to the transaction of business, see infra, Clause 108, and note to Clause 112. Where, as above (Clause 83), it is provided that there shall be a certain minimum number of directors, and the articles fix the quorum, it seems that if by vacancies the number be reduced to less than the minimum, in the absence of a clause similar to 91, nothing can be done until the minimum number is made up. Kirk V. Bell, 16 Q. B. 290; Scottish Fetroleum Co., 23 C. Div. 413 ; Faure v. Fhillipart, 58 L. T. 527 ; though it may be that in such cases the remaining directors could exercise power to fill up the vacancy. York Tramways Co. v. Willoivs, 8 Q. B. Div. 685. Where no quorum is fixed by the articles, and no power to fix a quorum is given, the directors must act on the footing that, to constitute a valid meetiug, all the directors must be summoned, and a majority must be present. York Tramwai/s Co. v. Willows, ubi supra. And where the articles give power to appoint a quorum, and do not provide as above for an interim quorum, there must be a majority of the directors present at a duly convened meeting in order effectually to exercise the power. Fortuguese Copper Mines Co., 42 C. Div. 161. Moreover, a meetiug of the directors to be effective must be duly convened by proper notice to each director. Browne v. La Trinidad, 37 C. Div. 1 ; Be Homer Co., 39 C. D. 546. But there may be cases in which, even in the absence of a provision to the contrary as above, notice need not be given to a director who is abroad {Re Halifax Sugar Co., 62 L. T. 564) ; unless, jjerhaps, he is within easy reach. Fortuguese Copper Mines Co., 42 C. Div. 167. Eeasonable notice should be given ; but where very short notice is given to a director, and he does not at once object, he may be taken to waive any objection. Broivne v. La Trinidad, 37 C. Div. 1. Unless otherwise provided by the regulations of the company, or of the directors, the notice convening a meeting of the directors need not sj^ecify the business. La Compagnie de Magville v. If'hitley, (1896) 1 Ch. 788. Very commonly the directors determine to hold ordinary board meetings on a specified day or days in each week or month, and at a specified place and hour, and of course notice of such determination renders it unnecessary to give fui'ther notice of each such meeting. If the du-ectors act at an irregular board meeting, what they do may be void {Re Homer Co., 39 C. D. 546), and the comjjauy may be involved in serious consequent diffi- cidties. But it is usually open to a subsequent regular board meeting to ratify what has been done by an irregidar board. Fortuguese Copper Mines Co., 45 C. Div. 26. In tills case there was an allotment of shares to A. made by an u-regular board. Some time afterwards, A. not having repudiated the allotment, it was ratified by a regular board, and it was held that A. was bound. The decision of the Court of Ajjpeal in Bolton Farti/ers v. Lambert, 41 C. Div. 295, goes much further. In that case it was held that a contract made by A., puri^ortiug to act on behalf of a company (but in fact without authority), could be ratified by the com- pany notwithstanding that the other party to such contract had repudiated before the ratification. This is a very startling doctrine, and grave doubts are entertained whether it is good law. It is to be observed that the cases Re National Coffee Falace, 24 C. Div. 374; Richardson v. Williamson, L. R 6 Q. B. 276; Firbank v. Humphreys, 18 Q. B. Div. 54, which show that where one person j)uiiiorts to act as agent for another, he is to be regarded as representing that he is autliorized by that other, were not cited ; and, having regard to these cases, it may be that, if the agent is in fact unauthorized, the other party may, on the ground of misrepresentation, repudiate the contract 442 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. tefore it has been ratified. In any case ratification must be within a reasonable time. Fortiigucse Copper Mines Co., 45 C. Div. 30; Metropolitan Asylums Board v. King ham, 6T. L. E. 217. And a formal resolution is not in all cases necessary to show that directors have sanctioned a particular transaction. "I have no hesitation in saying that it was not necessary for the directors to pass any resolution in order to make the acceptance of bills binding on the company, or in saying that if the directors met together, and the chairman, with their knowledge, accepted a bill of exchange, that would bind the company. In the same way, if a bill of exchange had been accepted by the chaiiTuan, without due authority, and the directors afterwards, at a meeting, knowing that the acceptance had been given and dealt with, acted on the footing that the bill had been properly accepted, I should not have the least hesitation in saying that the acceptance would bind the company." Per Giffard, L. J., Land Credit Co., 4 Ch. 460, 473. Director may summon meeting. How ques- tions to be decided. Chairman. 106. A director may at any time [and the secretary, upon the re- quest of a director, shall] convene a meeting of the directors. Ques- tions arising at any meeting shall be decided by a majority of votes, and in case of an equality of votes, the chairman shall have a second or casting vote. But a person dealing with the company is not bound to ascertain that the seal has been aifixed by the authority of a duly constituted board. County of Gloucester Bank v. Rudry Co., (1895) 1 Ch. 629 ; Shaw v. Port Philip Co., 13 Q. B. D. 103 ; conf. Mayor of Staple V. Bank of England, 21 Q. B. D. 161. Where, as in Table A., the power to appoint the first directors is vested in the sub- scribers they need not hold a meeting in order to make a valid appointment. Great Northern Salt, ^-c. Co., 44 C. D. 472. Sometimes proxies are allowed, as thus : — " A director may attend and vote by proxy at any meeting of the directors, provided such proxy is a member and has been approved of as such by the unanimous vote of the directors, and has been appointed by writing under the hand of the appointor. The appointment may be general or for any particular meeting or meetings. The appointee may be another director of the company." 107. The directors may elect a chairman of their meetings, and determine the period for which he is to hold office ; but if no such chairman is elected, or if at any meeting the chairman is not present at the time appointed for holding the same, the directors present shall choose some one of their number to be chairman of such meeting. Sometimes the first chairman is specified so as to avoid discussion. Powers of 108. A meeting of the directors for the time being at which a quorum quorum. jg present shall be competent to exercise all or any of the authorities, powers, and discretions by or under tlio regulations of the coy for the time being vested in or exerciseable by the directors generally. This clause merely expresses that which has hitherto been generally assumed, but as some doubt has been raised whether the ordinary clause (105) as to a quorum enables a board meeting to act in regard to important matters, it seems desirable to provide as above. See Nciv Sombrero Co. v. Erlanger, 5 C. Div. 73 ; 3 App. Cas. 1218 ; Alma Spinning Co., 10 C. D. 081 ; York Travnvays v. Willous, 8 Q. B. Div. 097. A director who is dis((ualificd cannot be counted in a quorum. Ibid. But it must not be forgotten that, nlthongh a (juorum may, in fact, be ])r(;sent, if they have not been duly summoned, thoy do not fonn a ])rojif;rly constituted meeting capable of transacting business. Homer DiDlricl Co., 39 C. D. 516. FORMS. 443 109. The directors may delegate any of their powers to committees Form 210. consisting of such member or members of their body as they think fit. ^ 7 Any committee so formed shall, in the exorcise of the powers so dele- appoint com- gated, conform to any regulations that may from time to time be y'^tl^es and imposed upon it by the directors. This clause is generally inserted, and is of great practical convenience. Sec Taurine Co., 25 C. D. 118 ; Harris's case, 7 Ch. 587. It will be observed that the committee may consist of one member only. For a general delegation, see Ziver^jool Household Stores, 62 L. T. 876. Where the directors have authority to delegate their powers to committees, such dele- gation may be presumed if one or two directoi's act for the company in a matter which might have been delegated to them. Tutterdell v. Fareham Brick Co., L. R. 1 C. P. 674; RegenVs Canal Co., W. N. (1867) 79; Lyster's case, 4 Eq. 238; 3Iaho>wij v. East Holi/ford Co., L. R. 7 H. L. 869. Delegation does not prevent the directors from acting in regard to the matter delegated. Huth v. Clarke, 25 Q. B. D. 391. 110. The meetings and proceedings of any such committee, consist- Proceedings ing of two or more members, shall be governed by the provisions committee, herein contained for regulating the meetings and proceedings of the directors, so far as the same are applicable thereto, and are not super- seded by any regulations made by the directors under the last preceding clause. It is conceived that the clause gives power to a committee of several to ajDpoint a quorum. But, prima facie, a committee cannot apx^oint a quorum, or sub-delegate or act unless all the members are present. Liverpool Household Stores, ubi supra ; Cook v. Ward, 2 C. P. D. 255. 111. All acts done by any meeting of the directors, or by a com- When acts of mittee of directors, or by any person acting as a director, shall, not- ^^^^^^^^^ or withstanding that it shall afterwards be discovered that there was valid, not- some defect in the appointment of such directors or persons actins: as withstanding ^ ^ . . ° detective aforesaid, or that they or any of them were disqualified, be as valid as appointment, if every such person had been duly appointed and was quahfied to be '^°- a director. It is to be observed that this clause, unlike sect. 67 of the Act, is not qualified by the words, "until the contrary is proved." The clause is effective not only in favour of the members, but of outsiders. Thus, in Mahoney v. East Holy ford Co., L. R. 7 H. L. 887, the de facto directors had not been duly a^jpointed, but the company was held bound by their acts as regards an outsider. The articles contained a clause (85) as above, and Lord Cairns said : — " It appears to me that this is exactly such a case as the 85th section of the articles is meant to meet. There is no regular appointment of directors, and the persons so acting may, perha^js, have been disqualified ; but the acts done by them are to be taken as being as valid as if they had been duly appointed and qualified." See also Kewharen v. Neivhavcn, 30 C. D. 363 ; and Briton Medical Co. v. Jones, 61 L. T. 384, in which it was held that under sect. 67 a call made by directors who had not been duly appointed was valid ; and Dawson v. African Consolidated, tjr. Co., 46 W. R. 132, to the same effect. See also County life Ass. Co., 5 Ch. 288; Great Xorthern Salt Co., 44 C. D. 472; Murray v. Bush, L. R. 6 H. L. 37. A director who takes part in ii-regular proceedings maybe estopped from setting up the irregidarity. Faurc v, Thillipart, 58 L. T. 527; York Tramways v. Willotvs, 8 Q. B. Div. 685. 444 ARTICLES OF ASSOCIATION. [OhAP. VIL Form 210 The clause may not protect a person who knows of the defect. Staffordshire Gas^ '_ 65 L. T. 414; Tijne, <^-c. Co. v. Brown, 75 L. T. 483; and see Ilurbenv. Fhillips, 23 C. D. 34 as to invalidity of a directors' meeting where some directors not summoned. Resolution without board meeting valid. Remuneration for extra service. [112. A resolution in writing, signed by all the directors, shall be as valid and effectual as if it had been passed at a meeting of the directors duly called and constituted.] It must however, be borne in mind that the London Stock Exchange Committee object to the clause, and accordingly, where quotation is desired, it should be omitted. In other respects it may be found convenient. Whether in the absence of such a clause directors can act without a board meeting has not been finally decided, but it would seem that they can. Collie's claim, 12 Eq. 258; but see B'Arcy v. The Tamar, ^-c. Co., L. K. 2 Ex. 158. 112a. If any director, being willing, shall be called upon to perform extra services, or to mate any special exertions in going or residing abroad, or otherwise for any of the purposes of the coy, the coy shall remunerate the director so doing, either by a fixed sum or by a per- centage of profits, or otherwise as may be determined by the directors, and such remuneration may be either in addition to or in substitution for his or their share in the remuneration above provided. This clause is commonly inserted, extra. Lockhart v. Moldacott, 5 T, It must be clearly made out that the services are L. R. 307. Minutes to be made. Minutes. [11 2i. The directors shall cause minutes to be dulj' entered in books provided for the purpose — (a) Of all appointments of officers. {b) Of the names of the directors present at each meeting of the directors and of any committee of directors. (c) Of all orders made by the directors and committees of directors. (d) Of all resolutions and proceedings of general meetings and of meetings of the directors and committees. And any such minutes of any meeting of the directors, or of any committee, or of the coy, if purporting to be signed by the chairman of such meeting, or by the chairman of the next succeeding meeting, shall be receivable eia])rimd facte evidence of the matters stated in such minutes.] The above clause is sometimes inserted, and may possibly be useful as a reminder) but if brevity is desired it can be omitted ; for s. G7 of the Act sufiiciently pro-vides for these matters. Even apart from the Act, the clause would appear to be effectual as against any member of the company, although, of course, not against strangers. Sec Eonci/s case 12 W. K. HIG, 994 ; 4 D. J. & S. 420. Entries in tlie company's books, which would be irregular unless based on resolutions of the board, afford primd facie evidence of the resolutions, even though no minute thereof is forthcoming, lie Knight, 2 Ch. 321 ; Great Northern Salt, 44 C. D. 483. And HO, too, a letter written by the secretary will be assumed, priwd facie, to have been written with the authority of the dii-ectors. Johnson v. Lyttlc's Iron Agency, 6 C. Div. 687. FORMS. 445 The minutes may be contradicted by evidence {TothilVs case, 1 Ch. 85; and see Form 210. 16 W. R. 1192), but if signed by the chairman are to be taken primd facie as correct. Indian Zoedone Co., 2G C. D. 70. 'A bargain may be made out, even though not recorded in the book {Re Pijle Works (No. 2), (1891) 1 Ch. 181), aud a man may be held to be a member, although no allot- ment is'entered in the minutes. Great Northern Salt Co., 44 C. D. 472. But absence of any minute of an alleged transaction is material where the party alleging the trans- action was a director. Rotherham Co., (1884) 25 C. D. 109. A director who is present at a meeting of the board at which the minutes of proceed- ings at a prior board are confirmed, is not thereby made responsible for what was done at the prior board. Lands Allotment Co., (1894) 1 Ch. 616. Powers of Directors. 113. The management of the business of the coy shall be vested in General the directors, who, in addition to the powers and authorities by these P^^p^^^ presents or otherwise expressly conferred upon them, may exercise all vested in such powers and do all such acts and things as may be exercised or done by the coy and are not hby or by statute expressly directed or required to be exercised or done by the coy in general meeting, but subject nevertheless to the provisions of the statutes, and of these presents, and to any regulations from time to time made by the coy in general meeting : provided that no regulation so made shall invalidate any prior act of the directors which would have been valid if such regulation had not been made. The above clause is usual. If it is desired to limit the authority of the directors, express provision is accordingly made, but subject thereto, the general powers of the company are almost always given to the directors. See aud compare Clause 55 of Table A. And such a general delegation is valid aud effectual. Thus in Patent File Co., 6 Ch. 13, the articles authorised the borrowing of money with the sanction of an extra- ordinary meeting of the company ; they also contained a clause substantially the same as above. The directors overdrew the com^^any's banking account, and beiug required by the bank to give security, deposited title-deeds of property belonging to the company. It was held in the winding-up of the company that the mortgage was valid. James, L. J., said {inter alia) that it was " plain that, under these articles, the directors can do anything which the company could do, unless it is an act which they are specially pro- hibited from doing. I can find nothing in the memorandum or articles to prevent the directors from making the best terms they can with a creditor of the company by selling or pledging part of the property of the company." And Mellish, L. J., said {inter alia), " The articles give to the directors the whole powers of the company, subject to the pro- visions of the articles and of the Companies Act, 1862, aud I cannot find anj-thing either in the Act or the articles to prohibit their making a mortgage by deposit There beiug nothing in the articles to prohibit the giving of such security, I am of opinion that the company can give it as well for a past debt as a future one." See also Anglo-Danubian Co., 20 Eq. 339. There the articles contained express power to borrow (Clause 29), aud also (Clause 66) a general delegation of powers as above. The question was, whether the directors had power to issue debentures at a discount. Jessel, M. R., held that they could : "There is nothing iu these articles to limit the amount of interest ; the directors might give 10 per cent., 20 per cent., or 30 per cent., and they might give that interest by way of discount. If, therefore, I went on the mere words of the 29th clause, I should hold this was ^vithin their powers. But, looking to the 66th clause, I cannot have any possible doubt. The directors can do 446 ARTICLES OP ASSOCIATION. [CllAP. VII. Form 210. anytliiu<^ the company cau do ; aud as there are no regulations prescribed by the articles ■ — or the company under the 66th clause, they may borrow on any terms they think fit." See also Australian Co. v. Bfounscy, 4 K. & J. 733; Peruvinn Rail. Co., 2 Ch. 617; Sampson v. Price's Patent Candle Co., 4.5 L. J. Ch. 437; Pyle Works (No. 2), (1891) 1 Ch. 173. And where the directors act bona fide in exercise of a discretion vested in them by the regulations, the Coxu't will not interfere with the exercise of such discretion. Gresham Life, 8 Ch. 449. Where the directors propose to enter into some contract, or do something of which the majority disapprove, it may sometimes be practicable to make a regulation under the above clause ; and if the directors threaten to disobey, an action can be brought in the name of the company to restrain them. Specific 114. Without prejudice to the general powers conferred by the last powers given preceding clause, and the other powers conferred by these presents, it is hby expressly declared that the directors shall have the following powers ; that is to say, power — From what is said in the note to Clause 113, it seems that many of the sub-sections of this clause might without danger be omitted. Nevertheless, it is usual expressly to confer all, or some of the powers contained in them, and reasons for doing so are not wanting, e. g., 1. Directors like, as far as possible, to have express authority, for where express authority is given by the articles, the company cannot complain that an act of the directors pursuant thereto is xdtra vires. Thus, where the articles authorised the directors to pay 6,000/. to the promoters of the company, it was held, on demurrer, that payment without taxation was not improper. Croskei/ v. Bank of Wales, 4 Giff. 314. But express authority is no protection unless the du-ectors act bond fide, and are not guiltjT of negligence or fraud. Englefield Co., 8 C. Div. 388; MarzettVs case, 28 W. R. 541. So where the articles authorised the dii'ectors to acquire a specific business ' ' upon such terms and under such stipulations as to guarantee or otherwise as may be agreed uj)on," it was held that they were under no obligation to consult the company in general meeting before making the purchase, although the business was insolvent, and the purchase would involve undertaking vast liabilities. Over end S; Gurney Co. v. Gibb, L. R. 5 H. L. 480. See also Blakely Ordnance Co., 3.Ch. 159 ; Bank of Turkey v. Ottoman Bank, 14 W. R. 819; Eley v. Positive, ^-c. Soc, I Ex. Div. 88. 2. The insertion of express powers relieves the directors from responsibility, for, in the absence of fraud or gross negligence, they will not be under any personal liability to the company, even though, in the exercise of the powers entrusted to them, they are guilty of imprudence and want of judgment, which result in a great loss to the company. Ovcrend (f- Gurney Co. v. Gibb, ubi supra. 3. Mortgagees, vendors, and other persons dealing with a company like to see the powers of the directors in black and white. To carry agreement into effect. (1.) To take such steps as they think fit to carry into effect the sd agreemt of the day of . If Clause 3, supra, is inserted, this should be omitted. To pay j)reliminary expenBcs. (2.) To pay the costs, charges, and expenses preliminary and incidental to the promotion, formation, establishment, and registration of tlio coy. Such a jiower will not give a promoter a right of action, in respect of preliminary cxjx^nscH, against the coiiii)aiiy {Mclhado v. I'orlo Alley re Itail. Co., L. R. 9 C. P. 503) ttt any rate, if ho is not u i)arty to the articles. Eley v. Positive, ^-c. Soc, 1 Ex. D, 88. FOKMS. 447 See also Croskey v. Bank of Wales, 1 GilV. 318, cited supra, ami In re Eu(jh[f!eld Colliery 'VQ-r-rn 210 Co., 8 C. Div. 388, where directors were held liable for moneys paid without vouchers . or inquiry. See also MarzettVs case, 28 W. II. 511. The clause does not give jjower to pay that which it would be ultra vires the company to pay. (3.) To purchase or otherwise acquire for the coy any ppty, rights, To acquire or privileges, which the coy is authorised to acquire, at such P ^ ^' price, and generally on such terms and conditions as they think fit. (4.) At their discretion, to pa}"- for any ]}]}ty, rights, or privileges To pay for acquired by, or services rendered to, the coy, either wholly or P^P^^ty m . . . debeutures, partially in cash or in shares, bonds, debentures, or other &c. securities of the coy, and any such shares may be issued either as fully pd up or with such amount credited as pd up thereon as may be agreed upon ; and any such bonds, deben- tures, or other securities may be either specifically charged upon all or any part of the ppty of the coy and its uncalled capital, or not so charged. Debentui'es issued by a company under a general power of borrowing in part discharge of existing liabilities are valid. Inns of Court Hotel Co., (5 Eq. 82. See also Eoward v. Fateni Ivory Co., 38 C. D. 166. If paid-up shares are issued under the above power, a contract in relation thereto may be necessary xuider sect. 25 of the Act of 18G7. See further, supra, pj). 187 et seq. (5.) To secure the fulfilment of any contracts or engagements To secure entered into by the coy, by mortgage or charare of all or any contracts by J J 1 ./ o n ^ o J mortgage. of the ppty of the coy and its unpaid capital for the time being, or in such other manner as they may think fit. (6.) To appoint, and at their discretion remove or suspend, such To appoint managers, secretaries, officers, clerks, agents, and servants °™<^®^®j ^^' for permanent, temporary, or special services, as they may from time to time think fit, and to determine theii' powers and duties, and fix their salaries or emoluments, and to require security in such instances and to such amount as they think fit. (7.) To accept from any member, on such terms and conditions as To accept shall be agreed, a surrender of his shares or stock or any part surrender '^ -^ -"^ of shares, thereof. A power to accept surrenders is valid, but having regard to the decision in Trevor v. Whifworth, 12 App. Cas. 409, it seems doubtful whether, in the case of a company limited by shares, it can be exercised unless it is sanctioned by the Coirrt as a reduction of capital (p. 282, supra), or unless the company is in a position to forfeit the shares and hona fide arranges a surrender as a short cut and without payment. Possibly a surrender of paid-up shares by way of donation to the company may bo free from objection. In Eichhaum v. City of Chicago Co., (1891) 3 Ch. 459, Stirling, J., held that a surrender in exchange for other shares was valid. In coming to this decision he did not act on his own judgment, but on what he took to be the decision in TeasdaWs case, 9 Ch. 54 ; but the decision in that case was only that Teasdale, having more than six years before the -448 ARTICLES OF ASSOCIATION. [C HAP VII. Form 210. ■winding up suirendered his shares in exchange for others, was not to be put on the list of contributories in respect of the surrendered shares : there are no decisions that the shares given by the company in exchange were validly credited as paid up ; no doubt there are in the judgments dicta which go far beyond the jjoint decided, but they are associated with other dicta which have since been displaced by the decisions in Trevor V. WJi'iticorth, 12 App. Cas. 409, and other cases. The following are some of the objections to surrenders in exchange : — According to the law as now settled, shares cannot be issued as paid up unless they are paid up in cash or its equivalent. They have to be paid uj) somehow. But if shares credited as fully paid uj) are to be issued in exchange for paid-up shares, the amount of the shares so issued is not thereby paid up either in cash or in kind, for the comijany gets nothing. The share (say 10^.) is one which the company could issue for cash, and instead of doing this it issues it credited as paid up without any equivalent addition to its capital assets. The 10/. already paid on the surrendered shares already belongs to the company absolutely : how then can the shareholder effectively pay up the share which is to be issued to him by agreeing that the company shall keep 10/. of its own money in payment and satisfaction of the 10/. which he is by the Acts bound to pay up in cash or in kind ? Again, the share to be issued in exchange is part of the capital of the company, and how can the company properly give any part of its cajiital as the consideration for the suiTender to it of shares in its own capital ? Surely this is a purchase of the company's own shares. " A surrender of shares in consideration of a payment in money or money's worth by the company, is a piu'chase by it of its own shares, and is ultra vires, as pointed out by Lord Macnaghten in Trevor v. Whitivorth" per Lindley, L. J. Re Denver Hotel, (1893) 1 Ch. 504; British, ^-c. Co. v. Couper, (1894) A. C. 399. Again, it may be said, that to issue shares in exchange for other shares is in. effect to traffic iu the company's own shares, especially where it is part of a scheme, as in Hope v. International Co., 4 C. D. 327. It is not a single transaction, but a whole series of like transactions, and where is the company's power to traffic in its own shares ? Does not the dilemma presented in that case arise ? That is to say, either it is intended not to re-issue the siirrendered shares, in which case there is a reduction of capital, or it is intended to issue them, in which case the scheme iavolves trafficking in the company's own shares ? See the observations on that case in Trevor v. TThittvortk, 12 App. Cas. 425. It is well known that Rigby, L. J., when at the bar advised, on the above grounds, that a proposed scheme of exchange would be ultra vires, and that the decision of Stirling, J., in Eicltbaum v. City of Chicago Co. {supra), could not be relied on, as it was based on a misaijprehension of the point actually decided in TeasdaWs case, supra. Upon the whole it is conceived that an exchange of shares is dangerous, and that allottees of such shares, even though apparently protected by a filed contract, may be held liable to pay up their shares in cash. To appoint tru.stec8. To bring and defend action.H, &c. (8.) To appoint any person or persons (whether incorporated or not) to accept and hold in trust for the coy any ppty belonging to the coy, or in which it is interested, or for any other purposes, and to execute and do all such deeds and things as may be requisite in relation to any such trust, and to provide for the remuneration of such trustee or trustees. (9.) To institute, conduct, defend, compound, or abandon any legal proceedings by and against the coy, or its officers, or other- wise concerning the affairs of the coy, and also to compound and allow time for payment or satisfaction of any debts due, and of any claims or demands by or against the coy. Every comicmy has an iiiiitlu.'d jiowur to (•onii)roniise disputes {Halh^s case, 8 C. Div. .'J.'M), and directors may 1)0 al)le to compromise a claim by or against the company, even whore some of the directors arc iutcrested. General Exchamje Bank, 16 W. E. FORMS. 449 109G. SuL'h a clause does not authorise directors to pay costs of petition to wind up the Form 210. comi)aLiy presented by themselves. Smith v. I)ukc of ZlunchcatiV, 24 C. D. Gil ; 32 — W. R. 83. There is no need to say anything about proving in bankruptcy, for by sect. 148 of the Bankruptcy Act, 1883, it is provided that, " For all or any of the purposes of this Act a corporation may act by any of its oiHcers authorised in that behalf under the seal of the corjjoration." (10.) To refer any claims or demands by or against the coy to To refer to arbitration, and observe and perform the awards. arbitration. As to arbitration, see sect. 72 of the Act of 18(52. (11.) To make and give receipts, releases, and other discharges, for To give money payable to the coy, and for the claims and demands of receipts, the coy. And such receipts may be effectual, even though the acting directors are not dii'ectors dejure. Mahoney v. East Kohjfonl Mininj Co., L. R. 7 H. L. 869. (12.) To determine who shall be entitled to sign on the coy's behalf To authorize bills, notes, receijits, acceptances, indorsements, cheques, ^^ceptance, releases, contracts, and documents on behalf of the coy. It must be borne in mind that dii-ectors and other persons who on behalf of a comjDany sign any bill of exchange, note, indorsement, cheque, &c., may be subject to penalties and personally liable on the contract unless the name of the company is correctly set forth. See sect. 42 of the Act of 1862. Atkin v. JVardle, 61 L. T. 23. The omission of the word "limited" makes the name incorrect {Penrose v. Martyr, E. B. & E. 499), and so does the omission of the words " and reduced" where, under sect. 10 of the Act of 1867, they are part of the name. (13.) From time to time, to provide for the management of the To appoint affairs of the coy abroad in such manner as they think fit, attorneys. and in particular to appoint any persons to be the attorneys or agents of the coy with such powers (including power to sub-delegate) and upon such terms as may be thought fit. The above should be inserted where the company is likely to carry on business abroad, unless Clause 114rt, infra, is inserted. As to sub -delegation, see supra, Clause 109. (14.) To invest and deal with any of the moneys of the coy not To invest immediately required for the purposes thereof, upon such ™o^eys. securities and in such manner as they may think fit, and from time to time to vary or realise such investments. A power to invest in securities does not warrant an application for a number of shares in a proposed company with a view to promoting it. Joint-Stock Discount Co. v. Brown, 3Ec[. 139; 8 Eq. 381. [(15.) To execute in the name and on behalf of the coy in favour of To give secu- any director or other person who may incur or be about to "*^7 ^J "^^J . -^ >■ '' of indemnity, incur any personal liability for the benefit of the coy, such P. G G 450 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. To give percentage to director, &c. mortgages of the coy's property (present and future) as they think fit, and any such mortgage may contain a power of sale and such other powers, covenants, and provisions, as shall be agreed on.] Such a provision is very desirable, for in its absence difficult questions arise as to the powers of the directors in this behalf. See Southampton Co. v. I'innock, 12 W. R. 30. That a security may be given, see Fijle TJ'orks, (1891) 1 Ch. 173, No. 2. The Stock Exchange objects to this clause. (16.) To give to any officer, or other person employed by the coy, a commission on the profits of any particular business or transaction, or a share in the general profits of the coy, and such commission, or share of profits, shall be treated as j^art of the working expenses of the coy. An interest in profits is often found to render the services of an agent more beneficial to his employer. Apart from a sjiecial power, a person standing in a fiduciary relation to the comisany could not be given such an interest by the board. To establish reserve fund. (17.) Before recommending any dividend, to set aside, out of the profits of the coy, such sums as they think proper as a reserve fund to meet contingencies, or for special dividends, or for repairing, improving, and maintaining any of the ppty of the coy, and for such other purposes as the directors shall in their absolute discretion think conducive to the interests of the coy ; and to invest the" several sums so set aside upon such investments (other than shares of the coy) as the}' may think fit, and, from time to time, to deal with and vary such investments, and dispose of all or any part thereof for the benefit of the coy, and to divide the reserve fund into such special funds as they think fit [with full jjower to employ the assets constituting the reserve fund in the business of the coy, and that without being bound to keep the same separate from the other assets]. Where the regulations do not provide for the retention of any part of the profits by way of reserve, the articles can no doubt be altered so as to give the power. Binnci/ v. Ince Hall Co., 3o L. J. Ch. 363. And prima facie there is nothing to compel a company to divide the whole of its profits, though the regulations might be so framed. Stringer'' s case, 4 Ch. 494. Where the regulations appropriate the reserve fund to specific purposes, they can be altered. Walker v. London Tranncai/s Co., 12 C. D. 705. And they must be altered before the reserve fund is applied in a way inconsistent with them. Jie The Eastern and Australian Steamship Co., Limited and Reduced, G8 L. T. 321. The words in brackets are desirable, seeing that reserve funds are very commonly so employed. A reserve fund accumulated out of profits preserves its character of undivided profits unless and until something is done effectually to convert it into capital. Bonch v. Sproulc, 12 App. Cas. 3«;J ; Sugden v. Alsbunj, W, N. (1890) 112; 45 C. D. 237 ; In re Armilage, (189.3) 3 Ch. 337; In re Lecido Her Co., (1891) 2 Ch. 351. And can be applied, where the mcnioruiidiim and articles authorize such a proceeding, in jjayiug off prefereuco eharcholdora, but the eanctiou of the Court is rccjuircd. FORMS. 451 As to issuing p;iid-up sluires iu respect of the reserve, sec Eastern and Aus. Co., ubi Form 210 supra. ■ As to the rights of ckisses of shareholders ou the distribuliou of a reserve fund, see In re Brichjowaler Navigation Co., before North, J., (1891) 1 Ch. 155 ; (1891) 2 Ch. 317 ; 64 L. T. 57G, C. A. ; Odessa Waterivorks Co., W. N. (1897) 1G6 ; Fartic/c, ^-c. Gas Co. v. Tai/lur, 18 C. of S. Cus. 1017, Sc. (18.) From time to time to make, vary, and repeal byo-laws for the May make regulation of the business of the coy, its officers and servants, "yt^-^'i-^^^- or the members of the coy, or any section thereof. Persons dealing with a compauy are deemed to have notice of the memorandum and articles of association {supra, p. 35), but not of bye-laws made by the directors. Royal Bank of India'' s case, 4 Ch. 252. (19.) To enter into all such negotiations and contracts, and rescind May make and vary all such contracts, and execute and do all such acts, '^"ii'^i"'''Cts, &c. deeds, and things in the name and on behalf of the coy as they may consider expedient for or in relation to any of the matters afsd, or otherwise for the purposes of the coy. There can be little doubt that such a clause as above is a sufficient authority to the directors to vary contracts expressly adopted by the articles. See and consider Sahlgreen and CarralPs case, 3 Ch. 323, 329. Local Management. Where the company is going to cany on business abroad, the following clauses should be inserted ; they have been found extremely useful. The following provisions shall have effect : — [114«. (1) The directors may, from time to time, provide for the Local management of the affairs of the coy abroad [or in any special locality rn^inagement. in the United Kingdom] in such manner as they shall think fit, and the provisions contained in the five next following paras, shall be without prejudice to the general powers conferred by this clause. (2) The directors from time to time, and at any time, may establish Local board. any local boards or agencies for managing any of the affairs of the coy abroad [or in any specified locality in the United Ivjngdom], and may appoint any persons to be members of such local board, or any managers or agents, and may fix their remuneration. (3) The directors from time to time, and at any time, may delegate Delegation, to any person so appointed any of the powers, authorities, and discre- tions for the time being vested in the directors, and may authorize the members for the time being of any such local board or any of them to fill up any vacancies therein, and to act notwithstanding vacancies, and any such appointment or delegation may be made on such terms and subject to such conditions as the directors may think fit, and the CxG 2 452 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. Powers of attorney. directors may at any time remove any person so appointed, and may annul or vary any such delegation. (4) The directors may at any time, and from time to time, by power of attorney under the seal, appoint any persons to be the attorneys of the coy for such purposes and with such powers, authorities, and dis- cretions (not exceeding those vested in or exerciseable by the directors under these presents), and for such period and subject to such condi- tions as the directors may from time to time think fit, and any such appointment may (if the directors think fit) be made in favour of the members or any of the members of any local board established as afsd, or in favour of any coy, or of the members, directors, nominees, or managers of any coy or firm, or otherwise in favour of any fluc- tuating body of persons, whether nominated directly or indirectly by the directors, and any such power of attorney may contain such pro- visions for the protection or convenience of persons deahng with such attorneys as the directors think fit. In carrying on business abroad it is generally found that a wide power of attorney under the company's conunoD seal is requisite, and hence the importance of providing accordingly. The same instrument can authorize the attorneys to exercise the powers of the Acts below mentioned, and to exercise any other powers which it may seem desirable to delegate to them. See sect. 55 of the Act of 1862, and sect. 8 of the Conv. Act, 1882 (45 & 46 Vict. c. 39). See Chap. XIII., infra, p. 721. Sub- delegation. Seals Act. (5) Any such delegates or attorneys as afsd may be authorized by the directors to sub-delegate all or any of the powers, authorities, and discretions for the time being vested in them. (6) The coy may exercise the powers conferred by the Companies Seals Act, 1864, and such powers shall accordingly be vested in the directors. And the coy may cause to be kept in any colony in which it transacts business a branch register of members resident in such colony, and the word " colony " in this clause shall have the meaning assigned thereto by the Companies (Colonial Registers) Act, 1883 ; and the directors may from time to time make such provisions as they may tliink fit respecting the keeping of any such branch register. See the Act of 1883 in Appendix. The following is a more elaborate form than (6) : — 1. The company may cause to be kept in Queensland, or in any other colony iu Australasia in which it transacts business, a branch register or registers of members resident in Queensland, or in such other colony as the case may be. And the dii-ectors may from time to time appoint an authority in Queensland, or in any other colony iu whicli a branch register is kept, to approve of or reject transfers, and to direct the registration of approved transfers in the branch register of such colouy ; and every such authority may, in respect of transfers or other entries proposed to be registered m the branch register for which such authoritj' is appointed, exercise all the powers of the directors in the same manner and to the same extent and effect as if tlie directors them- selves were actually present in the colony and exercised the same. 2. Subjpct to the provisions of tlie Companies (Colonial Registers) Act, 1883, and to the foregoing provisions, the directors may, from time to time, make such provisions as they may think fit respecting the keeping of such branch regi.ster or registers. FORMS. 453 (7) The directors may comply with the requirements of any local Form 210. law which in their opinion it shall in the interests of the coy be £7 TT ' necessary or expedient to comply with. See infra, p. 7'29. Sometimes the regulations contain special provisions pointing to some particular colonial Act, f.ff. : " The company shall duly comply with the requii'ements of the New Zealand Act, known as the Mining Act Amendment Act (Xo. 60 of ISO")), and the directors may do all such acts and things and execute all such powers of attorney and instruments as they may deem necessary or proper in order to carry into effect, provide, perform, and observe the provisions of the Mining Act, 1891, the Mining Act Amend- ment Act, 1894, the said Act of 1895, and any other Acts of the New Zealand Legis- lature. A certificate issued in respect of shares in any register kept pursuant to either of the two ijreceding clauses shall be under the oflicial seal of the company, and any transfer of shares in either of the said registers may be dejiosited at the office where such registers are kept in New Zealand, and in ajiplyiug clauses 11 and 12, and 32 to 38 inclusive, to shares on either of the said local registers, such clauses shall be read as if they were modified as follows, that is to say :^ " (a) In clause 11 the words ' New Zealand' shall be deemed to be inserted before the word ' seal.' " (b) In clause 3-t the words ' New Zealand ' shall be deemed to be inserted before the word ' office.' " (c) Throughout the clauses the words 'New Zealand authority' shall be deemed to substituted for the word 'directors.' " Solicitors. [1145. Messrs. , of , shall be solicitors of the coy.] First solicitor. The articles of a company provided that, " Mr. A. B., of , shall be the solicitor of the company, and shall transact all the legal business of the company, includiug parlia- mentary business, for the usual and accustomed fees and charges, and shall not be removed from his office unless for misconduct." Mr. A. B. was employed by the company after its incorporation, but there was no evidence of any agreement to employ him on the terms mentioned in the articles. He was not a subscriber to the articles, but he was a member of the company. It was held that the articles did not constitute a contract between the company and Mr. A. B., and that he could not sue the company for refusal to employ him. H/ei/ v. Fositire Ass. Soc, 1 Ex. Div. 20 ; S. C. on App. 88. See supra, p. 374. Where a solicitor is to be a director, say : " Messrs. A. and B. shall be the solicitors of the company, and shall be entitled to remuneration notwithstanding that a member of the firm is a director of the company. Secretary. [114e. Mr. , of , shall be secretary to the coy.] First [114r/. The directors may appoint a temporary substitute for the secretary, secretary, who shall, for the purposes of these presents, be deemed to be the secretary.] The Seal. [115. The directors shall provide for the safe custody of the seal, Custody of and the seal shall never be used except by the authority of the directors, ^^^^" or a committee of the directors, previously given and in the presence 454 AETICLES OF ASSOCIATION. [ChAP. VII. Form 210. of two directors at the least, who shall sign every instrumeiit to which the seal is affixed, and every such instrument shall bo countersigned hy the secretary or some other person appointed by the directors.] A clause as above is sometimes inserted, and when there is such a provision everyone dealing with the company is deemed to have notice of it, but such a person is not bound to ascertain that de facto directors have been duly appointed. In re County Life Assur- ance Co., 5 Ch. 288 ; Mahoney v. East Hohjford Mining Co., L. R. 7 H. L. 869. Or that the seal has been affixed vdth the authority of a meeting duly constituted. County of Gloucester Bank \. Rudry, ^-c. Co., (1895) I Ch. 629. BiUs. Authentication of Deeds and Documents. 115a. The following provisions shall have effect : — Deeds. 1. All deeds executed on behalf of the coy may be in such form, and contain such powers, provisoes, conditions, covenants, clauses and agreemts, as the directors shall think fit, and, in addition to being sealed with the seal of the coy, shall be signed by two directors, and countersigned by the secretary or such other officer as the directors from time to time ajopoint. 2. All bills of exchange, promissory notes, or other negotiable instruments shall be accepted, made, drawn or indorsed for and on behalf of the coy by two directors, and countersigned by the secretary or such other officer as afsd, and all cheques or orders for payment shall be signed by two directors, and countersigned by the secretary or such other officer as afsd. Cheques. 3. Cheques or other negotiable " instruments paid to the coy's banker for collection, and requiring the indorsement of the coy, may be indorsed on its behalf by the secretary or such other officer as afsd. All moneys belonging to the coy shall be paid to such bankers as the Receipts. directors shall from time to time think fit ; and all receipts for money paid to the coy shall be signed by the secretary or such other officer as afsd ; and such receipt shall be an effectual discharge for the money therein stated to be received. The above clauses are occasionally inserted, but there is no need for them, see note to the following clause. Wliat secu- rities under Heal to be deemed valid. 1 1 5i. Any instrument bearing the common seal of the coy and issued for valuable conson, shall be binding on the coy, notwithstanding any irregularity touching the authority of the directors to issue the same. The above clause is occasionally inserted. Patent File Co., 6 Ch. 85 ; Davies v. J{. Jiolton ^ Co., (1894) 3 Ch. 678. But it would seem to bo merely the expression of the rule settled in a scries of cases, of which Royal British Bank v. Turquand, 6 E. ic B. 248, is a leading one. The rule is, that where a company is regulated by an Act of Parliament, general or special, or by deed of settlement, or memorandum and articles of association, registered in some public office, persons dealing with the directors arc bound to road the Act and registered documents (supra, p. 35), and to sen that the proposed dealing is not inconsistent therewith, but that is all : they need not in(juirc into the regularity of the internal proceedings. They may assume that all is being done regularly. Thus, where the ai-ticlos give power to borroiy FORMS. 4o.5 with the sanction of a general meeting, a lender need not inquire whether the Form 210. resolution has been passed, liotjal British Bank v. Turquand, uhl aupra ; Agar v. AthetKeiim Society, 3 C. B. N. S. 725. And see Ex parte Eagle Co., 4 K. & J. 549, as to execution of policies. In Land Credit of Ireland, 4 Ch. 460, it was held that as the company had power to accept bills, certain accej)tances could not be impeached on the ground that they were irregularly issued. So, also, it has been held that the public is entitled to assume that a person acting de facto as the company's agent or director has been duly appointed. Smith v. Hull Glass Co., 11 C. B. 897; County Life, 5 Ch. 288; Ma honey v. East Holy ford Co., L. R. 7 H. L. 869. And that it may assume that an instrument bearing the seal of the company was sealed pursuant to a resolution of a board meeting. Shaw v. Fort Philip, ^-c. Co., 13 Q. B. D. 103; County of Gloucester Bank v. Mudry, ^-c. Co., (1895) 1 Ch. 629 ; see also supra, p. 443. But it would seem that a person is not entitled to assume that a special resolution has been passed. Irvine v. Union Bank, 2 App. Cas. 379. Occasionally express jirovisions as to the execution of documents are inserted ; but a« a general rule it is better not to insert such provisions. Dividends. 116. Subject as afsd, the profits of tlie coy shall be divisible among Dividends on the members holding: ordinary shares in proportion to the capital ordinary o J i. r i shares. amounts pd up on the ordinary shares held by them resply. 116a. "Where capital is pd up in advance of calls upon the footing Capital paid that the same shall carry interest, such capital shall not, whilst carrying ^P ^'^ advance, interest, confer a right to participate in profits. The words "subject as aforesaid" are intended to refer to the clauses as to preference shares, and reserve fund. Table A. provides that dividends are to be paid to the members "in proj)ortion to their shares." This means in proportion to the nominal amount of the caj)ital held by each, not to the amount paid up. Oakbank Oil Co. v. Cruni, 8 App. Cas. 65. Accordingly, a 10^. share with \l. paid up will take as much as a 10^. fully paid-up share. But many persons consider such a mode of division inequitable, and insist on a provision as above [Clause 116]. This clause, however, does not apjjear altogether fair, for it must be borne in mind that the company trades to some extent on the credit of its uncalled capital, and why should the shareholders who supply that credit get no reward — especially as, in the event of the company being wound up, they will, unless the regulations otherwise provide, be liable to contribute to the losses in proportion to the nominal amount of the shares held by them ? Maude'' s case, 6 Ch. 51 ; and see the judgments in Oakbank Oil Co. v. Crum, 7ibi supra. Accordingly, it is occasionally provided that " the profits of the company in each year shall be applicable to the payment of dividend at the rate of 5 per cent, per annum on the paid-up capital, and the surplus shall be divided among the members in proportion to their shares." The regulations of some companies make no provision as to the proportions in which members are to participate in dividends. In these cases it would seem that they are entitled to participate in proportion to the nominal amount of their shares. Wilkinson V. Cuinmings, 11 Hare, 37; Birch v. Cropper, 14 App. Cas. 525. Where there are different classes of shares in the original capital the clause will be modified accordingly. See Forms 217 to 227 (inclusive), infra. 117. The coy in general meeting may declare a dividend to be paid Declaration of to the members according to their rights and interests in the profits, "ii^'idends. and may fix the time for payment. Very commonly it is provided that " the directors may, with the sanction of the 456 ARTICLES OF ASSOCIATION. [ClIAP. VII. xOrm 210. company iu general meeting," declare dividends, but the general practice is for the ~" """■ meeting to declare the dividend, and it therefore seems better to frame the clause as above. The declaration of a dividend vests in the shareholders a right of action. Ev Severn Hail. Co., (1896) 1 Ch. 559. The declaration of a dividend gives to each shareholder the right to sue the company for the amount. Dalton v. Midland Bail. Co., 13 C. B. 478 ; Lindley, 437. Under such a clause, read in conjunction vpith Clauses 57, 63, North, J., held that a company could only declare a dividend at the ordinary general meeting. Nicholson v. Rhodesia Co., (1897) 1 Ch. 434. This decision can, if desired, be overridden by intro- ducing the words "ordinary or extraordinary" after the word " meeting," but it is scarcely worth noting this alteration, for there is nothing to prevent the directors from calling an extraordinary general meeting to consider and, if thought fit, to approve of the payment by the directors (under Clause 42) of an interim dividend, and then let the directors declare such dividend. See Tlampmn v. Price'')! Patent Co., 45 L. J. Ch. 437, that directors may properly, if they think fit, consult a general meeting as to the exercise of their powers. [118. No larger dividend shall be declared than is recommended Restriction on dividend. ^J ^^® directors (but the coy in general meeting may declare a smaller dividend).] The above clause is coromonly used, sometimes with, sometimes \Arithout, the words in brackets. Dividend out of profits only, and not carry interest. Points to be observ'cd in declaring dividends. Profits, not c;ij)ital, available. Ultra vires if payment out of capital. Even if authorized by memorandum or articles. Or by general meeting. Criminal liability of directors as to payment out of capitul. Modern decided cases militating against above rule. 119. No dividend shall be payable except out of the profits of the coy, and no dividend shall carry interest as against the coy. As to what are profits, see infra, pp. 510, 521. In declaring dividends certain important points have to be borne in mind, viz. : — 1. Dividends are only to be paid out of profits, not out of capital. /« re Oxford Benefit JBuilding Society, 35 C. D. 502; In re National Funds Assurance Co., 10 C. D. 126; Flitcroffs case, 21 C. D. 519; Alexandra Palace Co., 21 C. D. 149; Leeds Estate v. Shepherd, 36 C. D. 807; Re Sharpe, (1892) 1 Ch. 154. 2. Payment out of capital is ultra vires, for it amounts to a reduction of the paid-up capital, and no such reduction is allowable, unless sanctioned by the Court under the Comimnies Acts, 1867 or 1877. 3. Even if such payment is expressly authorized by the memorandum of association, or by the articles of association, or by special resolution, it is equally ultra vires, for these documents cannot repeal the Act. Trevor v. Whitxvorth, 12 App. Cas. 409. 4. Much less can the sanction of a general meeting justify it. Flitcroft''s case, 21 C. D. 519. 5. Directors who are parties to the payment of a fictitious dividend in order to raise the price of the company's shares, may be criminally liable for a conspiracy. See per Lord Campbell, L. C, liurnes v. Pennell (1849), 2 H. L. C. 525, and Regina v. Esdaile (1858), 1 F. & F. 213. Tliis fundamental rule prohibiting paj'ment of dividend out of cajiital as not only contrary to the Act, but commercially unsound, has been, to a large extent, relaxed or explained away by certain recent decisions, of which the following are the most noteworthy r — f.^r v. Ncuchalcl Co., 41 C. D. 1 ; Verner-v. General Commercial Trust, (1801) 2 Ch. 2G8; Wtlmrr v. Macnanwra, (1895) 2 Ch. 245 ; Bosanquet, S;c. v. St. John del Ilr,, (1897), 77 L. T. 207. See further infra, pp. 513 c< scq. FORMS. ' 457 [120. The declaration of tlio directors as to the amount of tlio not Form 210. profits of tlie coy shall be conclusive.] What to be deemed net This clause is common, and is found useful ; it does not enable the directors to declare profits. profits where in reality there are none. 121. The directors may from time to time pay to the members such Interim interim dividends as in their judgment the position of the coy justifies. The above clause is very commonly inserted. Before declaring an interim dividend, the directors must satisfy themselves that there are profits to divide. Sometimes the clause says, " An interim dividend on account of the next final dividend," or some such words, but such provisions often lead to dispute— <■..')'., where further shares are issued between the interim dividend and the declaration of the final dividend. In such a case are the holders of these shares, on the final dividend being declared, entitled to insist on the other shareholders bringing the interim dividend into account ? In some cases it would seem that they are, but the point can be provided for in the terms of allotment of the interim issue. 122. The directors may retain any dividends on which the coy has a Debts may bo lien, and may apjjly the same in or towards satisfaction of the debts, liabilities, or engagements in respect of which the lien exists. [123. Any general meeting declaring a dividend may make a call on Dividend and the members of such amount as the meeting fixes, but so that the call " on each member shall not exceed the dividend payable to him, and so allowed, that the call be made payable at the same time as the dividend, and the dividend may, if so arranged between the coy and the member, be set off against the call. The making of a call under this clause shall be deemed ordinary business of an ordinary general meeting which declares a dividend.] A clause as above is not iincommouly inserted. But the Loudon Stock Exchange object to it. It is clear that, in the absence of such a clause, a shareholder may authorise a company to retain any money due to him for dividends or otherwise, and to pay up his shares therewith, and that sucli payment would be equivalent to cash. See Rancc^s case, 6 Ch. 104, where a dividend paid by crediting the amount on the shares was treated as equivalent to cash ; and see Boitch v. Spronle, 12 App. Cas. 385. And sometimes the following clause is also used : — 123a. Any general meeting declaring a dividend may direct payment of such dividend wholly or in part by the distribution of specific assets, and in particular of paid-uj) shares, debentures, or debenture stock of the company, or paid-up shares, debentures, or debenture stock of any other comj^auy, or in any one or more of such ways, and the directors shall give effect to such resolution ; and, where any difficulty arises in regard to the distribution, they may settle the same as they think expedient, and in particular may issue fractional certificates, and may fix the value for distribution of such specific assets, or any part thereof, and may determuie that cash i:iaymeuts shall be made to any members uj)on the footing of the value so fixed, in order to adjust the rights of all parties, and may vest any such specific assets in trustees upon such trusts for the persons entitled to the dividend as may seem expedient to the directors. Where requisite, a proper contract shall be filed in accordance with sect. 25 of the Companies Act, 1867, and the directors may appoint any person to sign such contract on behalf of the persons entitled to the dividend, and such appointment will be eft'ectivc. In the absence of express authority, dividends can only be paid in cash. JFood v. Odessa Waterworks Co., 42 C. D. 645 ; Hooh v. Gt. TF. Bail. Co., 3 Ch. 262. 458 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 210. As to the allotment of paid-up shares in respect of reserve and the danger, see Easfern ■ 4- Aus. Co., 41 W. E. 373. Effect of transfer. 124. A transfer of shares or stock shall not pass the right to any dividend declared thereon before the registration of the transfer. This is implied : the declaration vests a right of action. As to apportionment : as between a vendor and purchaser, the latter is entitled to all dividends declared after his contract, unless otherwise agreed. Black v. Hoinersham, 4 Ex. D. 24. As between tenant for life and remainderman, the tenant for life takes all dividends and bonuses declared in his lifetime {Price v. Anderson, 15 Sim. 473 ; Hopkins'' Trusts, 18 Eq. 696 ; Armitage v. Garnett, (1893) 3 Ch. 337; Malajn v. Hitchim, (1894) 3 Ch. 578) ; and the Apportionment Act, 1870 (33 & 34 Vict. c. 35), may give his representatives a further right. But where dividend is paid in shares it may be regarded as being capitalised, in which case the tenant for life cannot claim it as income. Barton'' s Trusts, 5 Eq. 238 ; Boueh v. Sproule, 12 App. Cas. 385. Retention in certain cases. Dividend to joint holders. Payment by post. Notice of dividend. 125. The directors may retain the dividends payable upon shares or stock in respect of which any person is under the transmission clause [Clause 38] entld to become a member, or which any person under that clause is entld to transfer, until such person shall become a member in respect thereof or shall duly transfer the same. 126. In case several persons are registered as the joint holders of any share or stock, any one of such persons may give effectual receipts for all dividends and payments on account of dividends in respect of such share or stock. 127. Unless otherwise directed any dividend may be paid by cheque or warrant sent through the post to the registered address of the member entld, or, in the case of joint holders, to the registered addi'ess of that one whose name stands first on the register in respect of the joint holding ; and every cheque so sent shall be made payable to the order of the person to whom it is sent. The above clause is commonly inserted, and expressly sanctions what is the ordinary practice, namely, to pay dividends by cheque or warrant sent through the post. It allows the shareholder to give special directions, e.g., to pay all dividends to his bankers, viz. : To the Company, Limited. I direct that until further notice all dividends from time to time becoming payable on any shares in [or stock of] the above-named company for the time being standing in my name be paid to Messrs. , of [for my account], and theLr receipt shall be a good discharge. Date. Signature. Address. Or, I direct tluit all warrants for dividends at any time hereafter becoming payable on any shares in the above-named company for the time being standing in my name, be sent by post to , of , at my risk. Date. Signature. Address. Such directions are not liable to stamp duty. See Stamp Act, 1891, Schedule, under Letter of attorney, exemptions (3) . Where, jiursuant to the articles or at the request or with the consent of the shareholder, a cheque or dividend is sent through the post, it is at his risk. Warwicke v. Noakes, Peake, 67; Hawkins v. Eutt, ibid. 186; Leake, 897. Tlie following clause is occasionally used : — Vila. Notice of the declaration of any dividend, whether interim or otherwise, shall be given [by advertisement, and also] to the holders of registered shares and registered stock in manner licroinafter provided, and no dividend shall bear interest as against tho pompany. FORMS. 459 [128. All dividends unclaimed for one year after having been Form 210. declared may be invested or otherwise made use of by the directors for Unclaimed the benefit of the coy until claimed, and all dividends unclaimed for dividends, five years after having been declared may be forfeited by the directors for the benefit of the coy.] The Committee of the Stock Exchange object to the above clause in so far as it jirovides for the forfeiture of dividends unclaimed for five years, and accordingly, if a quotation is desired, it should be modified or omitted. It has not yet been settled when dividends are barred by lapse of time. In Barton V. North Staff. Hail. Co., 38 Ch. D. 4G3, Kay, J., appeared to consider that a share- holder might be regarded as a partner, and would not lose his rights by non-claim whilst the partnership continued. See Fenmj v. PicJavick, 16 Beav. 246. But query whether partnership rules should be imported ':■ The company is a separate body, and ujjon the declaration of the dividend the shareholder has a right of action (supra, p. 456), and if this is not upon a specialty it would be barred by non-claim for six years, under 21 Jac. 1, c. 16. Severn, ^-c. Co., (1896) 1 Ch. 534. If upon a specialty, no doubt it would require twenty years to bar the claim. Jle Cornwall Minerals Co., (1897) 2 Ch. 74 ; 3 & 4 Will. 4, c. 27, s. 3. Perhaps when the memorandum or articles expressly provide for payment of a dividend, e.(/., by stating that the profits shall be apjdied as follows, it might be held that the dividend was payable under a specialty, for all the members are, by sect. 16 of the Act, bound by the memorandum and articles as if they had sealed them. See supra, p. 371. As to specialty debts, see Holland v. Holland, 4 Ch. 449 ; Talbot v. £arl of Shreivsbury, 16 Eq. 28. Accounts. 129. The directors shall cause true accounts to be kept of the sums Accounts to of money received and expended by the coy, and the matters in respect ^^ ^^P*- of which such receipt and expenditure takes place, and of the assets, credits, and liabilities of the coy. 130. The books of account shall be kept at the registered office of Where to bo the coy, or at such other place or places as the directors think fit. ^^P*- A clause in the articles providing that the books shall be kept at a particular place may prevent the creation of a lien on the books. Capital Fire Association, 24 C. Div. 408 ; 49 L. T. 697 ; 32 W. E. 260. 131. The directors shall from time to time determine whether and to Inspection by what extent, and at what times and places, and under what conditions "^^™ ^^^' or regulations, the accounts and books of the coy, or any of them, shall be open to the inspection of the members ; and no member shall have any right of inspecting any account or book or document of the coy, except as conferred by statute or authorised by the directors, or by a resolution of the coy in general meeting. The above clause is not uncommonly used. Few companies allow members free access to the books. As to the common law right to inspect, see Hex v. Merchant Taylors^ Co., 2 B. & Ad. 115. As to a partner's right, see Trego v. Hunt, (1895) 1 Ch. 462; and as to a cestui que trusts right to information, see Ec Tillott, (1892) 1 Ch. 86. In an action by a shareholder against the company, the company may, notwithstand- ing the clause, be ordered to produce letters between the directors and their legal advisers before action brought. Gourand v. Edison, 59 L. T. 813 ; W. N. (1888) 194, 460 ARTICLES OF ASSOCIATION. [ChAP. VII. X Orm 210, where a right of insjiection is giveu as regards " the books wherein the proceedings of the company are recorded," a member has uo right to inspect the minute book of proceedings of directors. Reg. v. Mariquita, ^-c. Co., 1 E. & E. 289. Aud it is not advisable to allow it, for it may be used for all sorts of purposes hostile to the company. See Burn v. London # S. Wales Coal Co., W. N. (1890) 209 ; 7 T. L. R. 118. A right to inspect usually gives a right to take copies {Mutter v. Eastern, ^-c. Co., 38 C. D. 92), so held in regard to the register of mortgages {Nelson v. Anglo-American Land Mortgage Agency Co., (1897) 1 Ch. 130), without being required to give any reason {Holland v. iJickson, 37 C. D. 669) ; and in regard to the registry of members. Board V. African Consolidated Co., W. X. (1897) 174. See also Metropolitan, S;c. Bank, Ex parte Davis, 16 W. R. 668. A right of inspection given by the articles ceases when the voluntary winding-up begins. Yorkshire, ^-c. Co., 9 Eq. 650 ; 18 W. R. 541. Where the company is in liquidation, s. 156 of the Act applies, under which the Court has express power to permit inspection by creditors or contributories (see North Brazilian Sugar, 37 C. Div. 83) ; and on such an order being made the power to order inspection, under s. 32 or s. 43, ceases. Kent Coalfields Syndicate, W. N. (1898) 31 ; Somerset v. Land Securities Co., W. N". (1897) 29. Table A. provides as follows : — "The books of account shall be kept at the registered office of the company, aud, subject to any reasonable restrictions as to time and manner of inspecting the same that may be imposed by the company in general meeting, shall be open to the inspec- tion of the members during the hom-s of business." See also Table A., Clause 78, infra. Annual 132. At the ordinary meeting in every year, Lut not at the first balance-sheet, general meeting, the directors shall lay before the coy a profit and loss account, and a balance-sheet, containing a summary of the ppty and liabilities of the coy, made up to a date not more than four months before the meeting, from the time when the last preceding account and balance-sheet were made up, or, in the case of the first account and balance-sheet, from the incorporation of the coy. Annual report 133. Every such balance-sheet shall be accompanied by a report of the directors as to the state and condition of the coy, and as to the amount which they recommend to be paid out of the profits by way of dividend or bonus to the members, and the amount (if any) which they propose to carry to the reserve fund, according to the provisions in that behalf hinbefore contained ; and the account, report, and balance-sheet shall be signed by two directors and countersigned by the secretary. By 24 & 2.5 Vict. c. 96, s. 84, directors keeping fraudulent accounts, or publishing fraudulent statements, are guilty of a misdemeanor. Copy to be 1.3 1. A printed copy of such account, balance-sheet, and report shall, m"m>jcrs seven days previously to the meeting, bo served on the registered hold<3rs of shares, in the manner in which notices are hnfter directed to 1)0 served, [and two copies of these documents shall at the same time bo forwarded to the secretary of the Share and Loan Department, Stock Exchange, London]. Sometimes it i.s provided, instead of this, that the balance-sheet shall lie for iuspection at the oflRcc. In i)rivate compaTiics this clause is commouly omitted. FORMS. 461 Where the number of members is very large, us in a co-operative store, it is some- Form 2X0. times provided that a copy of the bahiuce-sheet shall only be sent to those members " ' who hold more than a specified mimber of shares, l)ut that " any other member shall be entitled to a copy on application at the office within such seven days, and during the same period a cojiy thereof shall lie for inspection by members at the office." Where quotation on the Loudon Stock Exchange is wanted the words in brackets must be used. Audit. 135. Once at least in every year [except tlie year ] the accounts Accounts to of the coy shall be examined, and the correctness of the in'ofit and loss audited *' ' _ i annually. account and balance-sheet ascertained by one or more auditor or auditors. The auditors are agents of the company, but constructive notice of facts coming to their knowledge is not imputed to the shareholders. Spac/cnian v. Evans, L. li. 3 H. L. 171, 19G, 236. In the case of a banking company it will be advisable to insert, as nearly as possible as they stand, the audit clauses in the Act of 1879, Ai^pendix. 136. The first auditor or auditors shall be appointed by the directors ; Appointment subsequent auditors shall be appointed by the coy at the ordinary ^°4 remune- meeting in each year. The remuneration of the first auditors shall auditors. be fixed by the directors, but of subsequent auditors by the coy in general meeting. Any auditor quitting ofiice shall be eligible for re-election. Sometimes the first auditors are appointed by the articles. 137. If one auditor only is appointed, all the provisions herein con- Provision for tained relating to auditors shall apply to him. case of single 138. The auditors may be members of the coy, but no person shall "vyho in- be eligible as an auditor who is interested, otherwise than as a member eligible as of the coy, in any transaction thereof, and no director or other officer ^^ ^ °^^' shall be eligible during his continuance in ofiice. 139. If any casual vacancy occurs in the office of auditor, the Casual directors shall forthwith fill up the same. vacancy. This is the usual clause. Compare with Table A., Clauses 90 and 91, infra. [139c5. If no election of auditors is made in manner afsd, the Board Appointment bv Boa Trade. of Trade may, on the application of not less than five members of the Board of coy, appoint an auditor for the current year, and fix the remuneration to be paid to him for his services.] This is in the tei-ms of Clause 91 of Table A. The London Stock Exchange sometimes requires it where quotation is wanted. 140. The auditors shall be supplied with copies of the profit and Auditors to loss account and balance-sheet intended to be laid before the coy in account and general meeting seven days at least before the meeting to which the balance-sheet. same are to be submitted, and it shaU be their duty to examine the 4f)2 ARTICLKS OF ASSOCIATION. [ClIAP. VI I. Form 210. same with tlie accouuts and voucliers relating thereto, and to report thereon. The above is a common provision, and leaves the auditors to settle the nature of their report. Sometimes the form prescribed for banks by the Companies Act, 1879, is adopted, viz., " We have examined the above account, and certify that in our opinion it is a full and fair balance-sheet properly drawn uj), so as to exhibit a true and correct view of the state of the company's affairs as shown by the books of the company." Sometimes, as in Clause 94 of Table A., the auditors are required in their report to "state whether in their opinion the balance-sheet is a full and fair balance-sheet, containing the particulars required by these regulations, and jjroperly drawn up so as to exhibit a true and correct view of the state of the company's affairs," and a certificate so framed is of much greater value ; but even where it is so provided the auditor usually qualifies his opinion by reference to the books or otherwise. An auditor who accepts office pirrsuant to the regulations of a company is bound to conform to the terms of these regulations. "Auditors," said Lindley, L. J., in Kingston Cotton Co. (No. 2), (1896; 2 Ch. 284 (C. A.), "are, in my opinion, bound to see what exceptional duties, if any, are cast ujjon them by the articles of the comjiany whose accounts they are called upon to audit. Ignorance of the articles and of exceptional duties imposed by them would not afford any legal justification for not observing them." "It is no part of an auditor's duty," as Lindley, L. J., said in another leading case on the subject, In re London and General Bank, (1895) 2 Ch. 673, "to give advice either to directors or shareholders as to what they ought to do. " An auditor has nothing to do with the prudence or imprudence of making loans with or without security. It is nothing to him whether the business of a company is being conducted prudently or imprudently, profitably or improfitably. It is nothing to him whether dividends are properly or improperly declared, provided he discharges his own duty to the shareholders. His business is to ascertain and state the true financial position of the company at the time of the audit, and his duty is confined to that. But then comes the question : How is he to ascertain that position ? The answer is : By examining the books of the company. But he does not discharge his duty by doing this without inquiry and without taking any trouble to see that the books themselves show the company's true position. He must take reasonable care to ascertain that they do so. Unless he does this, his audit would be worse than idle farce. Assuming the books to be so kept as to show the true position of a company, the auditor has to frame a balance-sheet showing that position according to the books, and to certify that the balance-sheet presented is correct in that sense. But his first duty is to examine the books not merely for the purpose of ascertaining what they do show, but also for the purj)ose of satisfying himself that they show the true financial position of the com- pany. This is quite in accordance with the decision of Stirling, J., in Leeds Estate Building and Investment Co. v. Shepherd (36 Ch. D. 787) : An auditor, however, is not bound to do more than exercise reasonable care and skill in making inquiries and investigations. He is not an insurer ; he does not guarantee that the books do correctly show the true position of the company's affairs ; he does not even guarantee that his balance-sheet is accurate according to the books of the company. If he did, he would be responsible for an error on his part, even if he were himself deceived without any want of reasonable care on his part — say, by tlie fraudulent concealment of a book from him. His obligation is not so onerous as this. Such I take to be the duty of the auditor: he must bo honest— t.^., he must not certify what he does not believe to be true, and ho must take reasonable care and skill before he believes that what he certifies is true. What is reasonable care in any i)articular case must depend upon the circum- stances of that case. Where there is nothing to excite suspicion, very little inquiry will be reasoualdy sufHcient, and, in practice, I believe, business men select a few cases at haphazard, sec that they arc right, and assume that others like them are correct also. W'here HU8i)icion is aroused, more care is obviously necessary ; but, still, an auditor is not bound to exercise more than reasonable care and skill even in a case of suspicion, and he is perfectly justified in acting on the oi)iniou of an expert where special know- ledge is required. liut an auditor is not bound to be suspicious as distinguished from FORMS. 463 reasonably careful." And Lopes, L. J., in In re Kingnton Cotton Mills Co. (Xo. 2), Form 210. supra, p. 462, added : " Auditors must not be made liable for not tracking out ingenious and carefully-laid schemes of fraud when there is nothing to arouse their suspicion, and when those frauds are perpetrated by tried servants of the company and are undetected for years by the directors. So to hold, would make the position of an auditor intoler- able. The appeal will be allowed." In accordance with these principles, it was held in the above case, that auditors who, without any ground for susj)icion, had accepted and acted on the certificate of the manager of the company as to the amount and value of the company's stock, such manager having been long in the service of the company, and being a man of high character and unquestioned competence and trusted by every- one who knew him, was not under any liability, though the valuation proved to have been false to the knowledge of the manager. ''The question," said Lindley, L. J., p. 287, "is whether, no suspicion of anything wrong being entertained, there was a want of reasonable care on the part of the auditors in relying on the returns made Ijy a competent and trusted expert relating to matters on which information from such a person was essential. I cannot think there was. The manager had no apparent conflict between his interest and his duty. His position was not similar to that of a cashier who has to account for the cash which he receives, and whose own account of his receipts and payments could not reasonably be taken by an auditor without further inquiry." The duties of an auditor of a banking company under the Act of 1879 appear to be more onerous than those of an auditor of an ordinary trading company. Although it is not the duty of the former to consider whether the business is prudently or im- prudently conducted, he must consider and report to the shareholders whether the balance-sheet exhibits a correct view of the state of the company's affairs and its true financial position at the date of the audit — this must be ascertained by examining the books — and, as a rule, the necessary information as to the financial position, and not merely the means of acquiring it, must be placed before the shareholders. London and General Bank (No. 3), (1895) 2 Ch. 673. An auditor who commits a breach of his duty may be sued by the company in an action {Leeds Estate, %c, Co. v. Shepherd, 36 Ch. D. 787), or may be proceeded against in a winding-up for misfeasance under sect. 10 of the Winding-up Act, 1890. In re London and General Bank, (1895) 2 Ch. 166 (C. A.) ; Kingston Cotton Mills Co. (No. 2), (1896) 2 Ch. 279 (C. A.). But to be open to attack under sect. 10 an auditor must be an officer of the company. An accountant who is merely called in to audit the accoimts pro hac vice is not an officer. Western Counties Steam Bakeries, (1897) 1 Ch. 617 (C. A.). An auditor may set up the Statute of Limitations. Leeds Estate Building Co. v. Shepherd, supra. 141. The auditors shall at all reasonable times have access to the Inspection of books and accounts of the coy, and they may in relation thereto °^-ft,j.,^ examine the directors or other officers of the coy. 142. Every account of the directors, when audited and approved by When a general meeting, shall be conclusive, except as regards any error dis- ^°*^j"'^ "^^ ? covered therein within three months next after the approval thereof, finally settled. AVhenever any such error is discovered within that period, the account shall forthwith be corrected, and thenceforth shall be conclusive. Notices. 143. A notice may be served by the coy upon any member, either How notices personally or by sending it through the post in a prepaid envelope or *° ^® served wrapper, addressed to such member at his registered place of address. The register of members, to be kept jiursuant to s. 25 of the Act, is to contain {inter alia) the addresses of the members. 464 ARTICLES OF ASSOCIATION. [ClIAP. VII. Form 210. How notices to be given to company. Authentica- tion of notices by company. As to notices to the company, the Act provides : Sect. 62. — Any summons, notice, order, or other document, required to be served upon the companj'^, may be served by leaving the same, or sending it through the post in a prepaid letter, addressed to the company, at their registered office. Sect. 63. — Any document to be served by fiost on the company shall be posted iu such time as to admit of its being delivered in the due course of delivery, wthin the period (if any) prescribed for the service thereof : and in proving service of such document, it shall be sufficient to prove that such document was properly directed, and that it was put as a prepaid letter into the post-office. This includes a writ of summons. White v. Land, i^-c. Co., W. N. (1883) 174 ; Sup. Ct. Rules, Order IX., r. 8, An. Pr. Sect. 64. — Any summons, notice, order, or proceeding, requiring authentication by the comjiany, may be signed by any director, secretary, or other authorised officer of the company, and need not be under the common seal of the company, and the same may be in writing or ia print, or partly in wi-iting and partly in j^rint. See also s. 41 of the Act. The above ss. 62—64, so far as they relate to notices, are sometimes inserted as clauses in the articles. A verbal notice given in the absence of the secretary to a clerk of the company at the company's office during office hours, has been held to be a notice to the company under certain circiunstances. TrHiiian''s case, (1894) 3 Ch. 272. Notice to a managing director, iu that character, on a matter affecting the business of the company under his management, is notice to the company. Jaegen, ^c. Co. v. Yallen, 77 L. T. R. 180. Knowledge of a fact by a single director is not necessarily notice to the company. Hampshire Land Co., (1896) 2 Ch. 743 ; Marseilles, S;c. Co., L. E. 7 Ch. 161. Members resident abroad. 144. Each, holder of registered shares, whose registered place of address is not in the United Kingdom, may from time to time notify in writing to the coy an address in the" United Kingdom, which shall be deemed his registered place of address within the meaning of the last preceding clause. It is generally deemed expedient to make special provision for the service of notices on members resident abroad. It does not follow that they are, in the absence of such a provision, entitled to notice. Table A. makes no express provision as to a shareholder who is resident abroad. If, then, it becomes necessary to serve a shareholder resident, say, in the South Sea Islands, it might, according to the words of Table A., be requisite to give several months' notice of a general meeting. This, of course, would be intolerable, and might paralyse the company's proceedings, but it was long since held by MaUns, V.-C, in Union Jlill Silver Co., 22 L. T. 400, that it is not necessary to serve notice on shareholders who have chosen to reside outside the United Kingdom. And this rule, being entirely consistent with common sense and common convenience, has been acted on ever since. See also II(difax. Sugar Co., 62 L. T. 664. In the many cases, however, in which the regulations provide as below — that the notice is to be deemed to be served on the day following that on which it is posted — the difficulty is entirely removed. Notices where 145. As regards those members who have no registered place of no address. address in the United Kingdom, a notice posted up in the office shall bo deemed to be well served on them at the expiration of twenty-four hours after it is so posted up. Sometimes it is provided that in such case a member shall not bo entitled to any notice. FORMS. 465 146. The holder of a share warrant shall not, unless otherwise Foriii 210. expressed therein, be entld in respect thereof to notice of any general ^o notice to meeting of the coj-. holders of share war- The holder of a sliare wan-aut is geuerally deprived of the riglit to notice of general '''" '*' meetings. Sometimes he is permitted to appoint an address for service, hut the ohjec- tion is, that the company will have no means of ascertaining when the share warrant has been parted with, and may, unknowingly, continue to send notices to a person who has ceased to be a member. If the holder of a share warrant is to he entitled to notice, the usual plan is to provide that it shall be given liy advertisement. In such case, tlie following clause will be inserted instead of the above : — " Any notice required to be given by the company to the holder of share warrants shall be given by advertishig the same once in a London daily newspaper." The objection which prevents the general adoption of the plan is the publicity ; com- panies do not like to publish notice of their private affairs. The following clause is sometimes adopted, and is not open to the same objection : — "The holder of a share warrant may from time to time notify in writing to the companj' some place in England to be called his address for service, and notice of any general meeting convened within the six months next following such notification shall (unless the meeting is convened by advertisement) be served on the holder of such share warrant by senduig it through the post in a prepaid letter addressed to him at his address for service. But save as aforesaid, the holder of a share warrant shall not be entitled to notice of any general meeting." 147. Any notice required to be given by the coy to the members, or When notice any of them, and not expressly provided for by these presents, shall be JJ^'^^-,^^ given sufl&ciently given if given by advertisement. ment. 148. Any notice required to be, or which may be given by advertise- How to be ment, shall be advertised once in two [London] daily newspapers. ^ ^^^ '^^ ■ 149. All notices shall, with respect to any registered shares to which Notice to persons are jointly' entld, be given to whichever of such persons is ^'^^^^ holders. named first in the register, and notice so given shall be sufficient notice to all the holders of such shares. 150. Any notice sent by post shall be deemed to have been served ^Vhen notice on the day following that on which the envelope or wrapper containing (jeemed to be the same is posted, and in proving such service it shall be sufficient to served, prove that the envelope or wrapper containing the notice was properly addressed and put into the post-office. It is not necessary to follow literally the address on the register, provided that a substantially accurate designation of the place of abode is given. Liverpool, ^-c, Co. v. Haughton, 23 W. R. 93. [loOrt. Every person who, by operation of law, transfer, or other Transferees, means whatsoever, shall become entld to any share, shall be bound ^'^r ^0^°"^ ^J . . ' . . prior notices. by every notice in respect of such share or stock which, previously to his name and address being entered on the register, shall be dulj^ given to the person from whom he derives his title to such share or stock.] The above clause is not uncommon, but it is not by any means essential, and may be omitted if brevity is desired. It does not appear in Table A., or in the Companies Clauses Consolidation Act, 184u. P. H H 466 AKTICLES OF ASSOCIATION. [ChAP. Vll. Form 210. Notice valid, though mem- ber deceased. [150 J. Any notice or document delivered, or sent by post to or left at the registered address of any member in pursuance of these presents, shall, notwithstanding such member be then deceased, and ivhether or not the coy have notice of his decease^ be deemed to have been duly served in respect of any registered shares, whether held solely or jointly with other persons by such member, until some other person be registered in his stead as the holder or joint holder thereof, and such service shall for all purposes of these presents be deemed a sufficient service of such notice or document on his or her heirs, executors, or administrators, and all persons, if any, jointly interested with him or her in any such share.] Where the articles contained no provision as to notice to deceased memhers, it was held that a notice of a call by letter to the registered addi-ess of a deceased member was vaUd, the company not having notice of his death. Xew Zealand Gold Extraciioii Co., (1894) 1 Q. B. 622, C. A. The above clause carries the matter further, and is very generally used. How notice to be signed. [150(?. The signature to any notice to be given by the coy may be written or printed.] The above is occasionally inserted. A person may sign by stamping a fac- simile of his autograph. L. R. 3 C. P. 28. Bennett v. Brumfit, How time to be counted. 150(/. Where a given number of days' notice, or notice extending over any other period, is required ta be given, the day of service shall, unless it is otherwise provided, be counted in such number of days or other period. Apart from this provision, a given number of days' notice woidd presumably mean a given number of clear days' notice, and woidd not include the day of service. See In re RaUwaij Sleepers Supply Co., 29 C. D. 204, and supra, p. 416. Service of process. loOe. In the event of a winding-up of the coy in England every member of the coy who is not for the time being in England shall be bound, within fourteen days after the passing of an effective resolution, to wind up the coy voluntarily, and after the making of an order for the winding-up of the coy, to serve notice in writing on the coy appointing some householder in London upon whom all summonses, notices, process, orders, and judgments in relation to or xmder the winding-up of the coy may be served, and in default of such nomina- tion the liqr of the coy shall be at liberty on behalf of such member to appoint some such person, and service upon any such appointee, wheth(!r appointed by the member or the liqr, shall be deemed to be good personal service on such member for all purposes, and, where tlio liqr makes any such appointment, he shall with all convenient speed give notice thereof to such member by advertisement in the Times newspaper, or by a registered letter sent through the post, and addrosBod to such member at his address a« mentioned in the register FORMS, 467 of membors of the coy, and sucli notico shall Lo deemed to be sei-ved Form 210. on the day following tliat on which the advertisement appears or the ' ' letter is posted. In an action, service out of the j lu-isdictiou may in certain cases be ordered under R. S. C. Ord. XI., tiupro, p. 40 ; but the Court lias a discretion, and it lias been laid down that the power is only given by statute so as to be binding on British subjects, and not on others. Per Lindley, L. J., Anglo- African Co., 32 C. D. 350. Accordingly, it is desirable to m.ake provision for the matter in the regulations. Such a provision does not provide for service out of the jurisdiction, but for service within, upon an agent of the shareholders. This is valid. C'ppin \. Adamson, 1 Ex. Div. 17; Tharsis Sidphur Co. v. Soc'u'tv dcs Metaux, 38 W. R. 78 ; Montgomery v. lAehcnthal, 42 S. J. 232 ; 104 L. T. 342. To provide for service out of the jurisdiction, in cases not covered by Ord. XI., may be ineffective. British JFagon Co. v. Grat/, (1896) 1 Q. B. 3.0. Secrecy Clauses. [151. Every director, manager, auditor, tree, member of a com- Secrec7 mittee, officer, servant, agent, accountant, or other person employed ^1^^^°- in the business of the coy, shall, before entering upon his duties, sign a declaration, pledging himself to observe a strict secrecy respecting all transactions of the coy with the customers and the state of accounts with individuals, and in matters relating thereto, and shall by such declaration pledge himself not to reveal any of the matters which may come to his knowledge in the discharge of his duties, except when re- quired so to do by the directors or by any meeting, or by a court of law, or by the person to whom such matters relate, and, except so far as may be necessary, in order to comply with any of the provisions in these presents contained.] The above is usuallj- inserted in the case of a bank. As to the effect of a winding-up on such a clause, see Birmingham Banking Co., 36 L. J. Ch. 150. [151a. No member shall be entitled to require discovery of or any Membernot information respecting any detail of the coy's trading, or any matter fQtitled to which is or may be in the nature of a trade secret, mystery of trade, or secret process which may relate to the conduct of the business of the coy, and which, in the opinion of the directors, it will be inexpe- dient in the interest of the members of the coy to communicate to the public] The above clause is sometimes inserted in the case of a manufacturing company, but an individual member has not in fact any right to infonnation, or to inspect. The dii-ectors are the servants of the body corporate, not of the shareholders, and if in their discretion they think fit to refuse to give to an individual member information as to the company's business, he has no cause for complaint. WiNDING-Ur. [152. If the coy shall be wound up, and the assets available for Distribution distribution among the members as such shall be insufficient to rejjay o^ assets. the whole of the pd up capital, such surplus assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members H H 2 468 ARTICLES OF ASSOCIATION. [ChAP. VIT. Form 210. in proportion to the capital pd up, or whicli ought to have been pd up at the commencement of the winding-up, on the shares held by them resply. But this clause is to be without prejudice to the rights of the holders of shares issued upon special conditions.] Surplus assets. It is expedient to provide expressly for the distribution of surplus assets in winding- up. In the absence of special provision, the assets available for distribution among the members, including capital uncalled at the commencement of the winding-up i^Birch V. Cropper, 14 App. Cas. .525; Welton v. Saffery, (1897) A. C. 299), are dis- tributable so as to throw any loss of cajiital on the members in proportion to the nominal amount of the capital held by them. Thus, suppose 10,000/. of paid-up 10/. shares are issued in consideration of a patent, and 10,000/. of shares are taken up by the public and paid up to the extent of bl. per share = .5, 000/., and that this sum is lost in experiments, and that the company is wound up and the patent sold for 100/., and that, after paying off the debts, nothing remains but the 5,000/. uncalled capital. Of that sum of 5,000/., 2,500/., being 2/. 10s. per share, must be called up and handed over to the holders of the vendors' shares, so that the loss :^ 7/. 10«. per share, may be borne in the proper proportions. Maude's case, 6 Ch. 51 ; Wakefield Rolling Stock Co., (1892) 3 Ch. 165 ; Exchange Brapvnj Co., 38 C. D. 171. This, however, is not always considered expedient, especially when the profits are made distributable in proportion to the capital paid up. See jj. 455, supra. Accordingly, it is not unusual to qualify, as in Clause 152, the rule laid down in Maude'' s case. The effect of that clause is that capital called up in the grinding -up will be paid off before capital previously paid up. Where the initial capital is divided into j)reference and ordinary shares, it is not unusual in the memorandum or articles to assign a preferential right in winding-up to the preference shares. See Forms 193, 197, 198, 217 et seq., 258 et seq. In the absence of some such provision, preference shares do not confer a preferential right to return of capital in a winding-up. Re London India Rubber Co., 5 Eq. 519. If in a winding-up the surplus is sufficient to pay off all the paid-up capital, it must, in the absence of express or implied provision to the contrary, be applied first in paying off the paid-up capital, and the residue (if any), namely, the profit, must be distributed among the members in proportion to the nominal amomit of the capital held by them respectively. Birch v. Cropper {The Bridgeivater Narigation Co. ''s case), 14 App. Cas. 525, reversing the decision of the Court of Appeal, which was commented on in the fourth edition of this book. Re London and Brighton Stock Exchange, 4 T. L. R. 2. For in the absence of special agreement, the members of a joint stock company, having a nominal capital divided into shares, are interested in the company in proportion to their shares. Wilkinson v. Cummins, 11 Ha. 337 ; Guinness v. Land Corp., 22 C. D. 349 ; Oakhank Co. v. Cricm, 8 App. Cas. 65 ; Maude^s case, tibi supra ; Bridgcwater Navigation Co., ubi supra. Undivided profits may have to be differently dealt with. Re Bridgcwater Co., (1891) 2 Ch. 317, in whicli the orilinary shareholders were held entitled to undivided profits standing to the credit of reserve ; and Bishop v. Smgrna Rail. Co., (1895) 2 Ch. 265, in which undivided profits were held applicable to the payment of aiTears of dividend on preference shares entitled by the memorandum to a preferential dividend ; and Odessa Waterworks Co., W. N. (1897), 1C6 where prefei'cnce shares were hold not so entitled, their right to division dei)ending on declaration. The clauses as to winding-up, instead of using the expression " assets available among the members," sometimes use the expression " surjjlus assets." This expression is not a technical one, and it may mean the surplus after paying off debts and Uabilities and tlie costs of winding-up, or suq)Ius after paying off tho.se items and repaying the paid-up capital. 7'rJWir?/«cu' the fonner is the meaning of the ex^jrossion, but in special cir- cumstances it has been held to have the latter meaning. See A^Jf Transvaal Co., (1896) 2 Ch. 750 ; Peahodg Mining Co., W. N. (1897), 170. And see Jnglo-Cnntinental Corp., (1898) 1 Ch. 327 : Drijiield (las Light Co., (1898) 1 Ch. 151. Distribution of assets in specie. 1.0.'}. If the coy sliall bo wound up, whether voluntarily or otherwise, the liqrs may, witli tlio sanction of an extraordinary resolution, divide FORMS. 469 among the contributorieB, in specie, any part of the assets of the coy, Form 210. and may, with the like sanction, vest any part of the assets of the coy in trustees upon such trusts for the benefit of the contributories as the liqrs, with the like sanction, shall think fit, and if thought expedient any such division may be otherwise than in accordance with the legal rights of the members of the coy (except where defined by the memdm of asson), and in particular any class may be given preferential or special rights, or may be excluded altogether or in part ; but in case any division otherwise than in accordance with the legal rights of the contributories shall be determined on, any contributory wlio would be prejudiced thereby shall have a right to dissent and ancillary rights as if such determination were a special resolution passed pursuant to sect. 161 of the Companies Act, 1862. Sometimes power is giveu to distribute assets iu specie, and where the biisiuess of a company includes the acquisition of shares, bonds, or securities of other companies, such a power may be useful ; for the Liquidation Act, 1868 (31 & 32 Vict. c. 08), which autho- rises a division in specie, only applied to liquidations pending in 1868. It seems, how- ever, that the Court can, in a special case, authorise a distribution in specie. See English and Foreign Credit Co., 1 T. L. R. 1. 154. If at any time the liqrs of the coy shall make any sale, or enter Sale under into any arrangement pursuant to s. 161 of the Cos Act, 1862, a dis- Companies sentient member, within the meaning of that section, shall not have Act, 1862. the rights thereby given to him ; but instead thereof he may, by notice in writing addressed to the Kqrs, and left at the office not later than fourteen days after the date of the meeting at which the special reso- lution authorising such sale or arrangement was passed, require them to sell the shares, stock, or other ppty, option or privilege to which, under the arrangement, he would otherwise have become entld, and to pay the net proceeds over to him ; and such sale and payment shall be made accordingly. Such last-mentd sale may be made in such manner as the liqrs think fit. The above clause, or one of a similar character, has been largely used during the last twenty years, and enables a comi^any much more effectually to take advantage of s. 101 of the Act, for the purpose of effecting a reconstruction or amalgamation. According to the Act, dissenting members are entitled to be paid the value of theii- interests in the selling company as ascertained, in case of dispute, by arbitration. Under the above clause they are only entitled to the selling value of the shares in the purchasing company which would otherwise have been allotted to them. There is no injustice in this, for it may reasonably be assumed that a sale which is sanc- tioned by special resolution is fair, and at the same time it facilitates matters considerably. Sometimes tliat part of the clause which follows 1862 is omitted, and the words follow- ing are substituted : — " The purchase -money to be paid for the interest of any dissentient member shall be such sum as the liquidators shall obtain by selling the shares, &c., to which such member would have been entitled to had he not dissented." Whether the clause is valid has not yet been settled, but lie Feveril Gold Mines, (1898) 1 Ch. 122 (C. A.), to say the least, throws grave doubt on its validity. In Fox^s case, 6 Ch. 176, it was held that siioh n clause could not be inserted in immediate contemplation of winding-up. 470 ARTICLES OF ASSOCIATION. [ClIAP. VII. Form 210. 155. Any such sale or arrangement, or the special resolution con- g j^j firming the same, may provide for the distribution or appropriation provisions. of the shares, cash, or other benefits to be received in compensation, otherwise than in accordance with the legal rights of the contributories of the coy, and, in particular, any class may be given preferential or special rights, or may be excluded altogether or in part ; but, in case any such provision shall be made, the last preceding clause shall not apply, to the intent that a dissentient member in such case may have the rights conferred on him by s. 161 of the Companies Act, 1862. This clause is frequently iiisei-ted iu order to meet the iucouvenience which has resulted from the decision in Griffith v. Faget, 5 0. D. 894 ; 6 C. D. 514 ; viz., that upon a sale under s. 161 of the Act, the special resolution cannot define the mode in which the shares are to he appropriated, c.ff., two shares in the new company for every pre- ference share in the old, and one share in the new for every ordinary share in the old, or preference for preference, and ordinary for ordinary. This decision was followed in Simpson v. Fahrcc Theatre (1893), 69 L. T. 70, C. A. If clause 154 is invalid, this clause falls to the ground as merely ancillary. Indemnity. Indemnity. 156. Every director, manager, secretary, and other ofiicer or servant of the coy, shall be indemnified by the coy against, and it shall be the duty of the directors out of the funds of the coy to -paj all costs, losses, and expenses which any such ofiicer or servant may incur or become liable to by reason of any contract entered into, or act or thing done by him as such officer or servant, or in any way in the discharge of his duties, including travelling expenses : [and the amount for which such indemnity is provided shall immediately attach as a lien on the ppty of the coy, and have priority as between the members over all other claims]. The ahove clause is occasionally inserted. See as to the right to indemnity of directors and other agents, German Mining Co., 4 De G. M. & G. 19; Noricich Yarn Co., 22 Beav. 143 ; James v. May, L. R. 6 H. L. 328 ; Benett v. Wyndham, 4 De G. F. & J. 259; Walters v. Woodbridge, 7 C. D. 504; Umifs claim, W. N. (1872), .'53; Financial Corporation, 28 W. R. 760; W. N. (1880), 88; Wilson v. Lord Bury, 5 Q. B. D. 518; Smith V. Buke of Manchester, 24 C. D. 611 ; 32 W. R. 83 ; Seton, 994. There can be no right to indemnity in respect of an ultra vires or fraudulent transaction. The words in brackets are sometimes objected to by the London Stock Exchange where a quotation is wanted. As to giving security to the directors, see Fyh H^orls (2), (1891) 1 Oh. 184. Individual rcHponHibility of directors. 157. No director or other officer of the coy shall be liable for the acts, receipts, neglects, or defaults of any other director or officer, or for joining in any receipt or other act for conformity, or for any loss or expense happening to the coy, through the insufficiency or deficiency of title to any ppty acfjuircd by order of the directors for or on behalf of the coy, or ff)r the iusufiicioncy or deficiency of any secui-ity in or upon which any of the moneys of the coy shall be invested, or for any loss or damage arising from the bankruptcy, insolvency, or tortious FORMS. 471 act of any person with wliom any moneys, securities, or effects sliall Form. 210. be deposited, or for any loss occasioned by any error of judgment or oversight on liis part, or for any other loss, damage, or misfortune whatever which shall happen in the execution of the duties of his office or in relation thereto, unless the same happen through his own dishonesty. The above clause is sometimes inserted. As to liability of directors for acts of each other, Cargill v. Botver, 10 C. D. 502. See IFcir v. Hill, 3 Ex. Div. 238 ; Cullerne v. London and Suburban Soc, 25 Q. B. D. 485. As to the right to contribution, see Lindley, 378 et scq. ; and Ashurst v. Mason, 20 Eq. 225. In the case last mentioned, shares of a company had (pursuant to an ultra vires resolution of the board) been purchased and transferred into the name of A., a director, in trust for the company. It was held that A. was entitled to contribution from the directors who concun-ed in the transaction for calls he had paid. See also Power v. Hoey, 19 W. R. 916; Poiver v. 0^ Connor, ibid. 923; and Eamskill v. Edivards, 31 C. D. 100; Falmer v. Wick, S;c. Co., (1894) A. C. 318; Robinson v. Harkin, (1896) 2 Ch. 415. As to omitting to sue, see Forest of Bean, 10 C. D. 452; Wedgwood Co., 47 L. T. 612 ; Liverpool Household Stores, 62 L. T. 873; Faure Accumulator Co., 40 C. D. 150; Sheffield, ^-c. Society v. Aizlewood, 44 C. D. 412. As to general position as fiduciary agents, see Pickering v. Stephenson, 14 Eq. 322 ; Marzctti's case, 28 W. R. 641 ; Wilson V. Lord Bimj, 5 Q. B. Div. 519. Supra, p. 431. [The Scuedule above referred to.] Sometimes a schedule is added containing a copy or draft of an agreement. See supra, p. 382. If no schedule, strike out the title. NAMES, ADDRESSES AND DESCRIPTIONS OF SUBSCRIBERS. \_SpacefQr Names.^ See supra, p. 293, omitting column of shares. Dated the day of . Witness to the above signatures. Articles of Association, adopting in part Table A. In the case of a company limited by shares it is not absolutely necessary to register Articles articles along vriih. the memorandum of association. If articles are not registered partly Table A. will apply and constitute the regulations of the company, and many companies ^'^'^?*^^ have accordingly been registered without articles. But in many cases, when with a view to saving expense the adoption of Table A. is in contemplation, the parties avail them- selves of the powers given by ss. 14 and 15 of the Act of registering special articles, as in the Form below, modifj-ing Table A. in a few particulars, and in the result Table A. as so modified will apply. This plan has its advantages, but if the modifica- tions are extensive the saving of expense is trifling, whilst the inconvenience of being obliged to refer to two documents (the one modifying the other) as containing the regu- lations of the company, is considerable. ITnless the preliminary expenses have to be 472 ARTICLES OF ASSOCIATION. [ChAI'. VII. Form 211. Articles of association iu pirt ad op ting Table A. Preliminary agreement. Allotment of shares. Instalments. Transfers. Fee. Quorum. Increase of capital. Reduction, consolidation, and sub- division. Short notice of meeting. iVIodifi cation of fl. 42. Poll. kept at a very low point, the possession of a simple code of regulations is well worth thi;! expenditure of a few pounds. At the same time, if Table A. is to be adopted, some few modifications may be essential. 1. Subject as hnfter provided, the regulations contained in tlie Table marked A. in the first schedule to the Companies Act, 1862 (hnfter called Table A.), shall apply to this coy. This clause is conmionly inserted by way of reminder, but it is not, in the case of a company Umited by shares, necessary ; for, so far as not excluded. Table A. applies. See supra, p. 371. \_The clauses of Form 210 are hereinafter referred toJ\ 2. The directors may enter into [Clause 3]. 3. The shares shall be under, &c. [Clause 6]. 4. If by the conditions of allotment, &c. [Clause 8] ; and the word "call," where used in Clauses 6, 7, 18, and 19 of Table A. shall be deemed to include an instalment. 5. The directors may decline to register, &c. [Clause 33]. 6. A fee not exceeding 2s. 6c?. may be charged for each transfer. 7. The quorum of a general meeting shall be three members per- sonally present, and Clause 37 of Table A. shall be modified accord- ingly. 8. The coy may by resolution of a general meeting from time to time increase its capital, and Clause 26 of Table A. shall be treated as modified accordingly, and the words "Except as otherwise provided by the terms of issue " shall be deemed to be inserted at the com- mencement of Clause 28 of Table A. 9. The coy may from time to time reduce its capital in any manner permitted by law, and may consolidate or sub-divide its shares, and capital may be pd off on the footing that the amount may be called up again in the same manner as if it had never been pd up. 10. With the consent in writing of all the members for the time being, a general meeting may be convened on a shorter notice than seven days, and in any manner they think fit, and Clause 35 of Table A. shall be modified accordingly. 11. The words "or carried by a particular majority, or lost," shall be inserted in Clause 42 of Table A. after the word "carried;" and the word "conclusive" shall be substituted for the word "sufficient" in the same clause. 12. The words " by at least live members " in Clause 42 of Table A., and the words " by five or more members " in Clause 43 of Table A., sliall bo doomed to be cancelled ; and the words " and either at once or after an interval or adjournment " shall bo deemed to be inserted in the same Clause 43 after the word " manner." FORMS. 473 13. Every share shall confer one vote, and Clause 44 of Table A. Form 211. shall not apply. i~~~. ' ^^ -^ _ Voting. 14. An instrument appointing a proxy need not be signed in the Proxies, presence of a witness, and may appoint several persons in the alterna- tive, and Clause 51 of Table A. shall bo modified accordingly. 15. The number of the directors shall not be loss than nor Number of .i directors, more than . _ <^"ci.tu « 16. The following persons, &c. [Clause 84]. First directors. 17. The directors, &c. [Clause 85J. Additional 18. The directors shaU be pd, &c. [Clause 90]. directors. Remuneration, 19. The qualification, &c. [Clause 88]. Qualification. 20. The words "at the second" shall be substituted for the words Rotation of " at the first " in Clause 58 of Table A. where those words first occur; ^^i^<^cto''«- and the words "on the first occasion" shall be siibstituted for the words " during the first and second years ensuing the first ordinary meeting of the company " in Clause 59 of Table A. 21. A meeting of directors at which a quorum, &c. [Clause 1081. Power of ° J- ' u J board meeting. 22. A resolution in writing, &c. [Clause 112]. Resolution in writing. 23. No director, &c. [Clause 93]. Director's n !• r/-,"i . . -, contracts. 24. The office of a director, &c. [Clause 92, omitting (f)], and Disqualifica- Clause 57 of Table A. shall not apply. tion. 25. Subject to Clause 74 of Table A. as to a reserved fund, and to Dividends the rights of holders of shares issued upon special conditions, the shares. profits, &c. [Clause 116]. 26. [Clause 116a.] Capital paid in advance. 27. The coy in general meeting, &c. [Clause 117]. Dividends. 28. The directors, &c. [Clause 121]. Interim di\'idends. 29. If any casual vacancy occurs in the office of auditor, the directors Auditor. may fill it up. 30. Every member whose registered place of address is not in the Address for United Kingdom may from time to time notify in writing to the coy '^^^^^*^^' some place in England which shall be regarded as his place of abode for the purjioses of Clause 95 of Table A. 31. Any notice if served by post shall be deemed to be served on Sernce by the day following that on which it is posted, and Clause 97 of Table A. po^*- shall be modified accordingly. 32. If the coy shaU, &c. [Clause 152]. Distribution of assets. 33. The directors shall be indemnified by the coy against, and it j ^ -^ shall be the duty of the directors out of the funds of the coy to pay and satisfy, all costs, losses, expenses, and liabilities incurred by any such directors in the course of the coy's business. The directors may 474 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 211. execute in the name and on behalf of the coy, in favour of any director ~ or other person who may incur or be about to incur any personal liability for the benefit of the coy, such mortgages of the coy's ppty (present and future) as they think fit, and any such mortgage may contain a power of sale, and such other powers, covenants, and provi- sions as shall be agreed on. NAMES, ADDEESSES, AND DESCRIPTIONS OF SUBSCRIBERS. \^Space/o)' signatures, ^'c] Form 212. Short form based on Table A., where only one director. Dated, &c. Witness to the above signatures. In some cases it may be expetlient to insert from Fonn 210 clauses as to lien, clauses 27 — 30 ; share wan-ants, clauses 39, 40 ; managing dii-ector, clauses 101 — 104 ; local management, clause 114a ; winding-up, clauses lo2 — 15o. 1. The coy shall forthwith enter into an agreemt with W. in the terms of the draft, which has for the purpose of identification been subscribed by the three first subscribers hto. 2. The sd W. shall be the "first director, and shall be entld to hold office as such so long as he remains entld to shares in the coy's capital, and so long as he holds office under this clause he may at any time, and from time to time, appoint any other persons to be directors, and may at any time, and from time to time, remove any director of the coy from office, but every such appointment and removal must be in writing under the hand of the sd W. 3. Whilst at any time the sd W. is the sole director of the coy he may exercise all the powers and discretions which by virtue of Table A. are expressed to be vested in the directors of the coy. 4. Subject to the foregoing provisions Table A. shall apply. Form 213. CoMrANY Limited hy Guarantee and not having a Capital Company limited by ffuarantec (no bhare capital). Number of members. DIVIDED INTO ShARES. Articles of Associatio7i of the Syndicate, Limited. Membership. 1 . For the purpose of registration the number of members of the coy is declared to be twenty, but the directors may register an increase in the number of members whenever they think fit. See Table C. in firnt srlicdule to Act of \W-,2, nnpra, p. 290. as to registration fees. FOKMS. '^^5 2. The subscribers hto shall be the first members, and it shall For m 213. rest with the directors to determine the terms and conditions on which Membership;" subsequent members shall from time to time be admitted. Transfek. 3. Any member may transfer his interest in the coy by instrument Transfer of in writing, signed both by the transferor and transferee and duly registered with the coy. General Meetings. 4. Clauses 29 to 36 and 38 to 43 of Table A. shall apply, subject J^^^'g^^'Tiuel'. to the modifications following (that is to say) : — modified). (a) With the consent in writing of all members, a general meeting may be convened on shorter notice than seven days, and in any manner which such members think fit. (b) The words " by at least five members " in Clause 42 of Table A. shall be deemed to be expunged. (c) The words " by five or more members " in Clause 43 of Table A. shall be deemed to be expunged. Quorum. 5. The quorum of a general meeting shall be three members present Quoriun, in person. Votes. 6. Until otherwise determined by special resolution, every member One vote per , „ , , member. snail have one vote. 7. Clauses 48, 49 and 51 of Table A. shall apply. visions. ' ^^^' Directors. 8. It shall rest with the signatories hto, or the majority of them, Fii-st dii-cc- by writing under their hands, to appoint the first directors, and until the first directors are so appointed, the sd signatories shall be regarded as the directors. 9. A resolution signed by all the directors shall be as valid and Signed resolu- efiectual as if it had been passed at a general meeting of the directors ^^ectors duly called and constituted. equivalent to 10. Clause 54 of Table A. shall apply. ^^"^^ °'®^*- Cl! oi of Powers of Directors. Table A. 11. Clauses 55 and 56 of Table A. shall apply. directors. Vacating Office. 12. Clause 57 of Table A. shall apply, and in addition thereto a Vacating director shall vacate oflfice if and when he is rec^uested by the coy in °™*^- general meeting to resign. 476 ARTICLES OF ASSOCIATION. [ChAP. VIT. Form 213. Rotation of Directors. Rotation. 13. Clauses 58 to 65 of Table A. shall apply. Proceedings of Directors. 14. Clauses 66 to 71 of Table A. shall apply, but it shall not bo necessary to give notice of a meeting of the directors to a director who is not within the United Kingdom. Dividends. 15. Clauses 72, 73, 74, 76 and 77 of Table A. shall apply, save that the last five words of Clause 72 shall be deemed to be struck out. Accounts and Audit. 16. Clauses 78 to 94 of Table A. shall apply. Notices. Notices. 17. Clauses 95 and 97 of Table A. shall apply. Names, Addresses and Descriptions of Subscribers. \Space for Signatures.~\ Dated the day of 189 Witness to aU the signatures above given, The above is a specimen of the regulations of a syndicate limited by guarantee. Many such have been registered, and, if desired subsequently, a special resolution can be passed adopting fresh regulations as in the next following fonn. It has been decided that such fresh regulations are valid. See infra, p. 480. Form 214. Another (diviwon of nndf-Ttakin^f into a fixed immbfT of sharf'H of intf'Teste of no fixed nominal value). Interpreta- btion. Table A. not t^) apply. Number of members. Eegulations of Company Limited by G-uaraktee and not HAVING A Capital divided into Shares (to be adopted by Special Resolution after incor|-)oration). 1. [Interpretation clause.~\ 2. [Table A. not to apply.'] .3. For the purpose of registration the number of members of the coy was and is declared to bo twenty, but the directors may register an increase in the number of members whenever they think fit. FORMP. 477 4. In order to determine the proportions in which the members for Form 214. the time being of the coy are interested in the coy, the undertaking of Division of the coy shall be deemed to be divided into a specified number of undertaking shares or interests, and tlio members shall be deemed to be interested number of in the coy in proportion to the number of such shares or interests for shares or the time being registered in their respective names as hnfter provided, and until otherwise determined by special resolution the undertaking of the coy shall be deemed to be divided into 1,400 shares or interests, numbered 1 to 1,400 inclusive. 5. The members of the coy, at the time when these regulations Present mem - come into operation, shall be deemed to be entld to the sd 1,400 shares to^(^ifguoif or interests in equal proportions. shares or 6. The number of shares or interests into which the coy is to be "^ '^^^^ ^\ deemed to be divided may at any time by special resolution be said number increased to such extent as may seem expedient, and any additional ?f shares or shares or interests resulting from such increase may be appropriated and dealt with in such manner as the directors think expedient. Any preferential, qualifi.ed, or special rights, privileges, or conditions, may be attached to any such additional shares or interests. The additional shares shall be numbered 1,401 and onwards. 7. Persons may become members of the coy by original subscription Modes of or by admission or transfer, or by succession. The subscribers to the hecommg •^ 'J • 1 -I • • A members or coy's memdm of asson are members by original subscription. Any increasing person who hereafter desires to become a member by admission, or holdings, to increase his holding in the coy, must apply in writing to the coy for admission to membership or for an increased holding, and must state in such application the number of shares or interests, or additional shares or interests, in respect of which he desires to become a member ; and if there are any unappropriated shares or interests, it shall be for the directors to accept or reject such application, and in the former case to determine the number of shares or interests in respect of which such applicant shall be admitted to membership or permitted to increase his holding, and the applicant shall become a member interested or additionally interested in accordance with such deter- mination. 8. The register of members of the coy to be kept pursuant to Register of sect. 25 of the Companies Act, 1862, shall, in addition to stating the members, names, addresses, and occupations (if any) of the members of the coy, state the number of shares or interests in the coy constituting the interests of such members resply and the distinguishing numbers of such shares or interests resply. 9. Any member may be admitted to membership or be permitted to Payments and increase his holding on the footing that he is to pay to the coy in ^^^^ ^f respect of the shares or interests constituting his interest, or any of shares or them, a specified sum per share or interest either by instalments or i^^terests. when called for by the directors or otherwise, and the registered holder for the time being of any shares or interests in respect of which 478 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 214. Forfeitiu'C. Certificates. Lien of compaDy. Transfers. Closing of books. Transmission . General meetings. Directors. Local . management. Dividends. Payment in cash or in specie. any money is so made payable shall pay the same as and when the same shall become due ; but save as afsd, and save as provided b}' the mendm of asson, membership shall not impose on the member any liability to pay any calls or contributions. 10. If any member fails to pay any instalment, call, or other moneys due from him, the directors may serve him with a peremptory notice to pay referring to this clause, and if he fails for fourteen days to comply with such notice the directors may by notice in writing to such member declare his shares or interests to be forfeited to the coy, and the same shall be forfeited accoixlingly, and such member shall there- upon cease to be a member. 1 1 . Every member shall be entld to a certificate of membership in respect of his shares or interests in the coy, and such certificate shall be under the common seal of the coy. 12. The coy shall have a lien on the shares or interests of each member for the debts and liabilities of such member to the coy, whether alone or jointly with others, and in default of pajanent or satisfaction thereof may sell such shares or interests, and apply the proceeds in or towards such payment or satisfaction. 13. The shares or interests of any member in the undertaking of the coy or any part thereof may be transferred by instrument in writing in a form approved by the directors and signed by both the transferor and transferee, and the transferor shall be deemed to remain the holder of the shares or interests transferred until the name of the transferee is entered in the j-egister in respect thereof. The directors may decline to register any transfer of any.shares or interests in the coy upon which the coy has a lien or to a transferee of whom they do not approve. 14. The transfer books and register of members may be closed during such time as the directors think fit, not exceeding in the whole thirty days in each year. 15. The executors or administrators of a deceased member (not being one of several joint holders) shall be the only persons recog- nized by the coy as having any title to the shares or interests registered in the name of such member. 16 — 67. \_Clau■ •/ business, sd busmess. In nine cases out of ten, where the acquisition of a specified business or propei-ty is in contemplation, the ai-ticles refer to a particular agreement instead of containing a general power as above. Classes of Shares. Sometimes the rights attached to the different classes of shares are set out in the memorandum of association (see Forms 19-iei seq.) ; but this may cause inconvenience by rendering these provisions immutable. See As/iburi/ v. Watson, 30 C. Div. 376. The decisions, however, in Andrexvs v. Gas Meter Co., (1897) 1 Ch. 361, and /(?;«<>« Cohn-r, ibid. 524, go to show that rights only attached by the articles may be altered by special resolutions {supra, p. 378), and accordingly it is very commonly thought better to take power by the memorandum to div-ide the shares into different classes {supra, p. 292), and then by proper clauses in the articles to declare the rights of each class. These clauses, which come into Form 210 at (about) Clause 10, are usually intituled *' Preference and Ordinary Shares," or " Preferred and Deferred Shares," or as the case may be, and generally commence with a statement as to the capital, e.g., " Of the capital mentioned in the memorandum of association, 10,000 shares shall be called preference shares, and 10,000 shall be called deferred shariis," and then proceed to define the rights of the holders. But where the division is effected by the memorandum of association, the clauses defining the rights of the shareholders can be intituled " Appropriation of Profits," and inserted near the beginning of the articles or just before the dividend clauses. As to the form of the dividend clause where there are preference shares, &c. , see supra, p. 445, note to Clause 116rt. In defining the rights of the holders of i^reference shares in regard to dividends, it is necessary to ascertain whether the dividend payable to them is to be non-cumulative, i.e., contingent on the profits of each year being sufficient, or cumulative, i.e., so that the deficiency of any one year is to be made up oiit of the profits of subsequent yeai-s. P. I I 4S-2 ARTICLES 'OF ASSOCIATION. [ChAP. VII. Form 216. Frimd facte, where one class of shares is to caiTy a dividend at a fixed rate in prefer- ence to another class, the dividend will be cumulative, and therefore payable out of the profits whenever accruing. Thus in Webb v. Earle, 20 Eq. 557, preference shares had been created with a preferential dividend of 10/. per cent, per annum, payable half- yearly, and it was held that if the profits on any year were insufficient to pay the dividend in full to the preference shareholders, the deficiency ought to be made good out of subsequent profits. See also Henry v. Great Northern Hail. Co., 1 De G. & J. 606 ; Matthews v. Great Northern Rail. Co., 28 L. J. Ch. 375 ; and Form 220, infra. Sometimes the word '• cumulative " is used as above ; and there can be Uttle doubt that the addition of that word precludes any question as to the right of the holders of preference shares to be paid arrears of dividends out of profits whenever accruing. See Webb v. Earle, ubi supra. Occasionally, where a dividend is intended to be cumulative, it is expressly pro- vided that the holders of the shares shall have " a right to resort to the profits of subse- quent years to make up any deficiency in the dividend of preceding years." If the dividend is intended to be non-cumulative, the clause must either be so framed that there is no room to contend that it is cumulative {infra, Fonn 218), or it may be expressly provided that there shall be no right, in case of deficiency, to resort to subse- quent profits. But where the Court can gather the intention, it will give effect to it, although imperfectly expressed. Staples v. Eastman^s, ^-c. Co., (1896) 2 Ch. 303. As to giving a preference in the distribution of assets, see Form 258. Unless otherwise provided, that is, by giving a preference in respect of capital as well as dividend, preference shares do not confer any priority in winding-uj) (London India-Ruhber Co., 5 Eq. 519), and, after all the paid-up capital has been paid off, rank pari passu with ordinary shares for participation in the surplus. Birch v. Cropper, 14 App. Cas. 525. Form 217. Capital divided into cumidative preference shares and ordinary shares. (Simple form.) The initial capital shall be divided into — /. eacli and ordinary stares of • - preference shares of -I. each, and the said preference shares shall confer the right to a fixed cumulative pre- ferential dividend at the rate of p.c.p.a., and the right in a winding-up to repayment of capital in priority to all other shares [or to the ordinary shares], but shall not confer any further right to participate in profits or assets. In the above case the dividend is cumulative, and there is nothing to exclude the holder's right to participate in any surplus assets which, in a winding-up, may remain after paying off the whole of the paid-up capital ; but, if desired, the words following can be added, namely, " but they shall not confer a right to any further participation in profits or assets." In the two next following forms the preference is non-cumulative. Form 218. (Another, non-cumula- tive prefer- ence shares.) Form 219. Preference and ordinary Hhare.s. (Non- cumulativo prcforenco shares.) The preference shares shall confer the right to a fixed pre- ferential dividend at the rate of p.c.p.a., payable as to each year out of the profits of that year. 1. Of the shares mentd in the mendm of asson of the coy, 10,000 shall bo called preference shares and 10,000 shall be called ordinary sliaros. 2. Tlio lioldor.s of tlio preference shares shall bo ontld to receive out of tho profits of each year a i)roferontial dividend for such year at FORMS. 483 the rate of G p.c.p.a. on tlio capital for the time being paid np on the Form 219. preference shares lu'hl by thorn rcsply. 3. The surphis profits in each year shall be applicable to the pay- ment of dividends to the holders of the ordinary shares in proportion to the capital paid up thereon. Sometimes, where preference shares are to cany a uon-cumulative dividend, it is thought better to frame the clause as above rather than expressly to provide that there shall be no claim for arrears in case of deficiency in the profits of any one year. (a) Of the 60,000 shares of 25/. each in the original capital, 30,000 Form 220. shall be "A" shares and 30,000 shall be " B " shares. "A" and (b) As between the holders of the "A" shares and of the "B" "B" shares. shares, the profits which it shall at any time and from time to time be ^^Ch with determined to distribute by way of dividend shall be applied as dend balance follows : — of profits pro raid. First, to the payment of a fixed cumulative preferential dividend at Priority of the rate of 5 p.c.p.a. upon the capital paid up on the "A" as to capital shares to the close of the last financial year or half-year, as the case may be. Secondly, to the payment of a dividend at the rate of 5 p.c.p.a. for such year or half-year, as the case may be, on the capital paid up on the " B " shares. Thirdly, the surplus shall be applicable to the payment of a further dividend to the holders of the "A" shares and of the "B" shares, in proportion to the capital paid up thereon. (c) The "A" shares shall also rank, as regards capital, in j)riority to the " B " shares, and shall accordingly, in the event of winding-up, be entld to have the surplus assets available for distribution amongst the members applied in the first place in paying off the capital paid up on the " A " shares. Of the 50,000 shares of bl. each in the initial capital of the coy, Form 221. 20,000 shall be preference shares and 30,000 shall be ordinary shares, preference The said preference shares shall confer the right to a fixed cumulative shares with preference dividend at the rate of 7 p.c.p.a. on the capital paid up j-jo-hts thereon, and the right to participate in the surplus profits of each year rateably with the holders of ordinary shares in proportion to the capital paid up on such shares, whether preference or ordinary, and [the right, in a winding-up, to repajmient of capital and any an-ears of dividend in priority to the ordinary shares, and to participate in any surplus assets which may remain after paying off the remainder of the capital pari passu with the ordinary shares, in proportion to tho amount held]. II 2 484 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 222. Guaranteed jireference and ordinary shares. Contingent termination (if preference. 1 . The holders of the guaranteed preference shares shall be entld to a cumulative preferential dividend of 8 p.c.p.a. on the nominal amount of the preference shares held by them resply. 2. Subject to the rights of the holders of the guaranteed preference shares, the holders of the ordinary shares shall be entld to be pd out of the surplus profits in each year a dividend at the rate of 10 p.c.p.a. for that year on the amount credited as pd up on the ordinary shares held by them resply. 3. The residue of the surplus profits in each year shall belong to and be divided among the members in proportion to the shares held by them resply. 4. If at any time before the day of , 18 — , the dividends pd to the holders of the guaranteed preference shares in respect thereof shall amount in the aggregate to 80 p.c. on the nominal amount thereof, then and in such ease the preference hnbefore given to such shares shall cease to exist, and thenceforth the guaranteed preference and ordinary shares shall rarik. pa?-t passu for dividend. It is by no means uncommon to insert such a clause as above. As already mentioned {supra, p. 481), the provisions as to payment of , preferential dividends are sometimes inserted in a clause introduced in that part of the articles vrhich relates to the payment of dividends. Such provisions are also desirable where the memorandum sets out the rights attached to one or more classes, but the provisions must accord with the memorandum. Form 223. 1- The profits of the coy made during the financial year, or other ^, ~ period comprised in the accounts submitted to the ordinary general Clause pro- . . . . . . viding for meeting in each year, shall be applicable in order of priority and appropriation manner following :— of profits. First. To the payment of a cumulative preferential dividend at the rate of 6 p.c.p.a. on the capital pd up on the A. shares to the close of such period. Secondly. To the payment of a dividend for such period at the like rate on the capital pd up on the B. shares. Thirdly. The residue shall be applicable to the payment of a further dividend on the pd-up capital, or may be carried to reserve, or other- wise dealt with as the coy in general meeting determines. Form 224. Another form. First. To the payment of a dividend at the rate of 6 p.c.p.a. for such period on tlie capital pd up on the preference shares. Secondly. Of tlie surplus, such ])t (not exceeding 10 p.c.) as tlie directors determine may bo carried to the reserve fund to be estabhshed pursuant to clause hereof. Tliirdly. The balance, or a competent pt thereof, shall be appli- cable to the payment of a dividend for such period on the capital pd up on tlio deferred shares at the rate of 5 p.c.p.a. Fourthly. What remains shall bo applicable [as in Form ICOj. FORMS. '485 First. To the ioayment of a preferential dividend for sucli period at Form 225. the rate of 10 p.c.p.a. on the capital pd up on the shares (other than Another the founders' shares). Secondly. Of the surplus, four-fiftlis shall be applicable to the pay- ment of a further dividend on such pd-up capital. Thirdly. The residue shall be divided ratcably among the holders of the founders' shares. First and secondly, as in Form 223. Form 226. Thirdly. Of the surplus, 10 p.c. shall be pd to the directors as Percentage to further remuneration for their services; 20 p.c. shall be carried to the flirectors, &c. redemption fund to be established as afsd ; and 70 p.c. [as in Form 160 et seq^. See Peruvian Co., (1894) 'A Cli. 690, where directors were lield entitled to their percentage on the profits which liad been reasonably and bona fide ascertained, although the assets representing the same had subsequently become depreciated. The profits, &c., as in Form 223. Form 227. 1. In paying to the members a dividend for such year or other period Special fonn. at the rate of 6 p.c.ji.a. on the pd-up capital. 2. Of the residue, three-fourths shall be divided among such of the members holding not less than five shares each as shall have contri- buted to the coy's business during such year or other period rateably in proportion to the amount of the freight contributed by them resply. 3. "What remains shall be divided among the members in proportion to the nominal amount of the shares held by them resply. Occasionally profits are divided so as to give members an inducement to deal with the company. This plan has sometimes been adopted with great success. Any registered holder of preference shares afsd may, subject to the Form 228. approval of the directors, elect to have his preference shares, or any of Conversion of them, converted into ordinary shares ranking in all respects pari passu preference "with the 10,000 original ordinary shares afsd. Such election shall be glares. declared by notice in writing to the coy, signed by such holder and accompanied by the certificate relating to the shares to be converted, and if the directors approve of such conversion they shall resolve that such conversion be approved and have effect, and the same shall have effect accordingly, and thereupon the certificate afsd shall be cancelled, and the requisite alterations shall be made in the coy's register of members. In the above case the directors are given a discretion, but sometimes the shareholder is empowered to convert, and it is provided that upon service of the notice the share shall ipso facto be converted. 486 ARTICLES OF ASSOCIATION. [ClIAP. VII. Form 229. If the holders of two-thirds of the shares numbered 2,001 to 3,000 Power to inclusive in the original capital (linfter referred to as " the irredeem- holders of able shares ") at any time within five years from the date of incorpora- to convert ^^*^°^ ^^ ^^® ^^^J notify in writing to the coy their desire that the shares, others into numbered 1 to 2,000 inclusive in the coy's capital (hnfter referred to shares*^^^'^'^ as "the redeemable shares"), shall be converted into preference shares, then and in that case such shares shall thereupon ipso facto be converted into preference shares with the following special rights attached thereto, that is to say, the sd preference shares shall carry a fixed cumulative preferential dividend at the rate of 5 p.c.p.a. on the capital for the time being pd up thereon resply, but no further dividend, and shall rank, both as regards capital and dividend, in priority to the irredeemable shares, and notice of such conversion shall be given to the holders thereof, and they shall be bound to give up their certificates for indorsement or in exchange for fresh certifi- cates, and until this has been done shall not be entld to receive any of the rights of membership incident to such shares. The sd shares after conversion shall continue to bear the same numbers as before. Fcrm 230. (1) Any holder of preference shares for the time being in the initial ;; : ; capital may convert his preference shares, or any of them, into ordi- Conversion of ■■■ -^ , Ti r> t ■ ^ • • • i • ^ preference nary shares, and any holder of ordinary shares m the initial capital and ordinary may convert his ordinary shares, or any of them, into preference shares, and the following provisions shall apply to such conversion, that is to say : — (a) The holder who desires so to convert must give to the coy notice in writing of his desire, and such notice must specify by number the shares he desires to convert, and must be accom- panied by the certificate relating thereto. (b) Upon the receipt of such notice and certificate, the coy shall record the conversion in its register of members, and there- 1. . ' upon the conversion shall take effect, and a fresh certificate - or certificates shall be issued in respect of such of the shares so converted. (c) Preference shares resulting from such conversion shall rank in all respects as preference shares in the initial capital. (2) The holders for the time being of two-thirds of the preference shares for the time being in the capital of the coy may, at any time, notify in writing to the coy their desire that all the preference shares in the coy's capital shall be converted into ordinary shares, and upon the receipt of such notice the coy shall record the same in its register of members, and thereupon all the preference shares shall, ipso facto, become ordinary shares, and the liolders of certificates relating to the preference shares so converted shall forthwith surrender to the coy the certificates relating thereto, and in place thereof the coy shall issue FORMS. 487 freeli certificates, and after a general conversion under this clause tlie Form 230 provisions of the last preceding clause hereof shall cease to operate, and thenceforth all the shares in the initial capital shall be ordinary shares. A preferential rights redemption fund is to bo established, and out Form 231. of the profits of each year the percentage afsd is to be carried thereto, Another form. and whenever such fund amounts to 1, or upwards it shall be applied in redeeming the preferential rights attached to a correspond- ing amount of the preference shares afsd by paying to the holders a bonus of 4/. per share, and, until so applied, the sd fund may be invested in such manner as the directors think fit, and the income derived from the investments shall be added to the fund ; or the fund, or any part thereof, may be employed in the business of the coy, and in that case the fund shall be credited with interest at the rate of 5 j).c.p.a. whilst so employed ; and the following provisions shall have effect as regards such redemption, that is to say : — 1. The particular preference shares the rights attached to which shall be redeemed on each occasion, shall be determined by a diawing or drawings, which the directors shall cause to be made at the registered office of the coy, in the presence of a notary public of London, and any member of the coy may attend any such drawing. 2. Whenever any of the preference shares are represented by share warrants to bearer, the amount to be applied in redemption shall be divided into two parts, proportioned to the number of preference shares so represented and to the number of regis- tered preference shares ; and the first part shall be appro- priated to the redemption of the preference shares so repre- sented, and the other part to the redemption of the registered preference shares. 3. If and whenever the share warrants to bearer outstanding are for diflterent numbers of shares {e.g., some for one, some for five, some for ten, and so on), the warrants which each comprise the same number of shares shall (for the purpose of drawing) be treated as constituting a separate class ; and the sum to be applied for redemption of shares represented by share warrants to bearer shall be divided and appropriated, so that to each separate class afsd there shall be appropriated an amount bear- ing the same ratio to the sum afsd as the number of shares represented by the warrants comprised in such class bears to the whole number of preference shares comprised in such war- rants ; and the amount appropriated to each class shall bo applied in redeeming a corresponding amount of the preference shares comprised in that class. 4. As regards each class afsd of share warrants, the warrants cum- 488 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 231. prised therein shall be divided into batches, each comprising as nearly as may be such number of preference shares as, taken at 41. per share, would absorb the amount appropriated for redemption of such class ; and to each batch afsd a number shall be attached, and the drawing shall be with reference to such numbers, and the class the number whereof is drawn shall be exclusively entld to redemption on such occasion. 5. Where any preference shares are drawn for redemption as afsd, notice thereof shall forthwith be advertised in the Times and in two other London and Paris daily newspapers, and the notice shall state the numbers of the shares drawn for redemption, and the time and place for redemption, and a similar notice shall be given to the Secretary of the Share and Loan Depart- ment of the Stock Exchange, London. 6. The numbers of the shares drawn for redemj)tion on each occa- sion shall be recorded in a book to be kept by the coy, and to be open for the inspection of the members of the coy. 7. Where any share has been drawn for redemption as afsd the coy shall, at the time and place fixed by paragraph 5 of this clause, pay to the holder the bonus afsd, and thereupon the holder shall surrender his certificate or warrant to the coy in order that a special memdm of the redemption may be stamped on the face thereof. 8. A share drawn as afsd shall, ipso facto ^ become an ordinary share, and shall thenceforth- be entld to rank for dividend and in the distribution of assets, and for all other purposes, as if it were one of the original ordinary shares. Form 232. Remunera- tion. rrocccdings. Management of one Company by another Company. Clauses to this effect are sometimes substituted for the director clauses, alternative in Form 233. See an 1. The A. Coy Limtd (hnfter called the A. Coy), shall be the first managers of the coy. 2. When the A. Coy cease to be managers, this coy in general meeting may appoint any other persons or coy to be managers, and a general meeting shall forthwith be convened for the purpose by the A. Coy, or if that coy does not convene the same within seven days after they cease to be managers, then the meeting shall be convened bv the holders of more than half of the issued capital for the time being of this coy." .'5. The managers shall 1)0 entld to charge and retain out of the assets of tlie coy the sum of 1, per annum as remuneration, and shall, in addition, out of the assets of the coy pay all outgoings for clerks, agents, offices, travelling and other expenses in relation to the Itusiness of the coy. •1, The managers may regulate and conduct their proceedings as managers. FORMS. 489' such in such manner as they may from time to time determine, and Form 232. may delegate all or any of their powers, authorities, and discretions as ~~~ managers, to such persons, and on such terms and conditions, as they think fit, and may revoke or vary any such delegation, and until otherwise determined by the managers they shall be deemed to have delegated aU the powers, authorities, and discretions vested in them by the regulations for the time being of this coy to the directors for the time being of the A. Coy, who shall accordingly be deemed deputy managers of this coy. 5. Inasmuch as this coy may have dealings with the A. Coy, it is Contracts expressly declared that this coy may make any contract with that coy which may seem expedient on such terms as the deputy managers may from time to time consider expedient, and that the A. Coy shall be in nowise liable to account for any profits realized by any such contract. 1. Until otherwise determined by the coy in general meeting in Form 233. accordance with clause hereof, the directors for the time being ^^^^j^^^ and from time to time of the A. B. Syndicate, Limtd, shall be the directors of this coy, and such determination is hnfter referred to as the termination of the interim management. 2. The coy, by resolution passed at an ordinary general meeting held in the year 1897, or in any subsequent year, may determine that the management provided for in clause shall cease, but such determination shall not come into operation until a board of at least three directors shall have been duly elected, and with a view to such election the meeting at which such resolution is passed shall stand adjourned for three weeks to be held at the same time and place, and notice of the resolution shall be given to the members, and at the adjourned meeting it shall be allowable to elect directors. A resolu- tion for such determination as afsd shall be valid, whether the notice convening the meeting at which it was passed did or did not specify the intention to propose such resolution. 3. After the termination of the interim management, the number of the directors shall, unless the coy in general meeting otherwise determine, be not less than three nor more than seven. 4. After the termination of the interim management, the directors shall have power, &c. In the clause providing as to notice of general meeting it was mentioned that amongst the ordinary business was the determination of the interim management. The said A., B., C, and D. [_i.e., four of the directors named in the Form 234. articles'] shall be deemed to have been appointed by the trees of jTT 7 the trust deed constituting the first debenture stock of the coy, and directors. they, and their successors in ofl&ce appointed under this clause, shall 490 ARTICLES OF ASSOCIATION. [ChAP. VII. Form 234. be called tlie "debenture directors." The debenture directors shall be entld to hold office until requested to retire by the trees or tree for the time being of the sd trust deed, and accordingly they shall not be bound to retire by rotation or be subject to clauses or hereof. As and whenever a debenture director vacates office, whether upon request as afsd or by death or otherwise, the trees or tree afsd may appoint another director in his place. A debenture director shall not require any qualification. A debenture director may at any time, by notice in writing to the coy, resign his office. Form 235. Another. The holders of the debentures of the coy known as "prior lien bonds " shall be entld to have one nominee on the directorate of the coy, and the holders of the debenture stock of the coy shall be entld to have two nominees on the directorate of the coy. The nominee or nominees of each class so entld shall be appointed by a meeting of such class, convened and constituted as hnfter provided, and may be removed at any time by a like meeting of the same class. A meeting of each class afsd may be convened by the coy whenever any nominee for the time being of such class vacates office, and a meeting of either class shall be convened by the coy whenever it is served with a requi- sition in writing, specifying the purpose for which the meeting is required, and signed, where the meeting is for the removal of a nominee, by the holders of at least one-half in value of the class, or in any other case by the holders of at least one-tenth in value of the class ; and if the coy fails for seven days, after being so served, to convene the meeting to be held within twenty-one days of such service, the requisitionists, or the majority in value of them, may themselves convene the meeting. Not less than ten days' notice must be given of every such meeting ; but where it is convened by requisitionists, the notice maybe given by advertising the same twice in the "Times" newspaper. At any such meeting the holders of one-fifth in value of the class shall constitute a quorum, and the meeting may appoint a chairman. But, subject as afsd, all the provisions hereof as to extra- ordinary general meetings of the coy, including votes, adjournment notices, minutes, and otherwise, shall apply as nearly as may be to such mooting. Notice in writing of any such appointment or removal shall forthwith bo given to the coy by such person as the meeting making the same shall authorise in that behalf. Form 236. Power for truHtccH of a will of u fonrier owner of tlio buhi- 11088 taken over by The trees or tree for the time being of the wiU of A. B., deceased, may at any time appoint the said N. B. to bo a permanent director of the coy, and in that case ho shall be entld to hold office as a permanent director until tho dotornii nation of tho trusts of the will of the said A. B., or until tlio said N. B. resigns or dies, which- ever event first happens, and if tho said N. B., or any successor FOKMS. 491 appointed undor tliis clause, resigns or dies before the determination Form 236. of sucli trusts, tlie said trees or tree may appoint any person to be a 7 director in the place of the said N. B. or any such successor, and any appoint a and every such appointment shall be effective. permanent A director who is abroad or about to go abroad may, with the Form 237. approval of the directors, appoint any person to be an alternate [or Alternate or substitute] director during his absence abroad, and such appointment sulistitute shall have effect, and such ajipointeo whilst he holds office as an * ' alternate director shall be entitled to notice of meetings of the direc- tors, and to attend and vote thereat accordingly, but he shall not require any qualification, and he shall, ipso facto, vacate office if and when the appointor returns to the United Kingdom, or vacates office as a director, or removes the appointee from office, and any appoint- ment and removal vmder this clause shall be effected by notice in writing under the hand of the director making the same. Such a provision is occasionally used, but the London Stock Exchangee generally object to it. The directors from time to time and at any time may appoint Form 238. any other persons to be assistant directors of the coy, and may define, . . , 7 limit and restrict their powers, authorities, and discretions, and may directors. fix and determine their remuneration, duties, immunities, and qualifi- cations, and may remove any director so appointed. Unless otherwise determined by the directors, the qualification of an assistant director shall be the holding of shares or stock of the nominal value of 1,000/. An assistant director may act before acquiring his qualification. There shall be paid to the directors as remuneration for their Form 239. services the sum of 1, p. a., and also the share of surplus profits r^^ ~ ' specified in clause hereof. [See Form 226.] Such remuneration plus profits to shall be divided among them in such manner as the directors may „nH. Unless the regulations otherwise provide, a poU may be demanded on any (juostion put to the meeting, but the chairman is not bound to MISCELLANEOUS NOTES. grant a poll unless it is demanded in strict accordance with the regula- tions. E.g., if the}^ require the demand to bo in writing, it must be made in writing ; and so, if the persons demanding the poll are required to hold a certain number of shares, the chairman before granting the poll should see that they are duly qualified. In any case it is expedient to make the demand in writing, and it should be handed in as soon as the chairman has taken the sense of the meeting on a show of hands. The demand will bo as follows : — The Company, Limited. We, the undersigned members of the above-named company [holding upwards of shares in the capital], do hereby demand a poll upon the (question now before this meeting. Dated this day of . It having been ascertained that the jiersons demanding the poll are duly cj^ualified, the chairman will read out the demand, and will state that he grants the same, and will fix the time when and the x:)lace where the poll will be taken, and if necessary the meeting will be adjourned. When a poll is duly demanded the show of hands goes for nothing, and the poll must be taken. The question sometimes arises whether a poll can be taken at once, i. e., without any adjournment. This depends on the regulations : if they give express authority, as well-framed regulations commonly do, to take the poll " either at once or after an adjournment," the poll can be taken accordingly ; and even if there is no such authority, e.g., if the poll as in Table A. {infra, Appx.) is to be taken "in such manner as the chairman directs," it seems that where voting by proxy is allowed the poll may be taken at once. 8ee p. 420, .supra. The deci- sion is convenient. If the company has many shareholders it is not unusual to aj^point a scrutineer or two to take the poll, and some articles of association expressly require such appointment. In a small company the poll is often taken by the chairman. In taking the poll it is usual to cause a list of members to be taade out from the register, with six columns headed thus — (1) Names of Voters, (2) Number of Shares, (3) Number of Votes, (4) Observations, (5) Votes given: For — Against. At the time appointed for taking the poll, the members who vote personally will come up to the voting table and write their names down on sheets of paper headed " For " or " Against " the motion, as the case may be. A member voting as proxy for another will write down his own name and also that of the person whose proxy he is, e.g., " John Smith, by AV. Jones, his proxy." Howevei', sometimes it is arranged that a member signing his own name shall be deemed to vote for himself and for all those whose proxy he is. The votes having been taken, the chairman or scrutineers will enter them in the list of votes, in the column '' For" and "Against," as the -.507 508 ARTICLES OF ASSOCIATION. [ChAP. VII. Scrutineers report. case may be. If, on reference to the books or othern-ise, a vote tendered is for any reason found to be invalid, e.g., because the voter is in arrear of calls, or because the instrument of proxy is not duly stamped, or was not deposited in time, the chairman or scrutineer will reject the same and put a note in the column of observations stating the reason for rejection. The poll having been closed, the numbers will be added up and the result ascertained. "Where scrutineers have been appointed, they will make a report in writing of the result to the chairman. Thus : — The Company, Limited. We the undersigfned, being the scrutineers appointed at the general meeting of the above-named company, held at , on the th of , on the motion, " That the report and accounts of the directors be adopted," and having taken a poll at the company's office on Monday, the th inst., hereby report to you, as the chairman of the said meeting, that the result of such poll was as follows : — Number of Votes. In favour of the motion ....... 700 Against the motion 327 To Majority in favour of the motion Dated this th of . Esquii-e, Chairman of the above-mentioned meeting. 373 ) Scrutineers. If desired, the report may show- the " number of personal votes in favour of the motion" and against, and number of votes of members voting by proxy in favour of or against. The chairman will then state the result to the meeting or adjoui-ned meeting, as the case may be, and declare that the motion has been carried or negatived. Proxies. -A- few words as to proxies. Where a member proposes to vote on a poll as proxy for another, it should be ascertained — 1. That the shareholder appointing him is entitled to vote, e.g., the regulations sometimes provide that a member in arrear of calls shall not vote, or that new members shall not vote for thi'ee months. 2. That the proxy is competent to act as proxy, e.g., the regulations sometimes provide that a shareholder in arrear of calls shall not vote as proxy for another, or that only a shareholder shall be a proxy. 3. That the instrument appointing the proxy has been deposited in due time. It would seem that under clause 50 of Table A. a proxy may vote at an adjourned meeting provided the instrument bo deposited seventy-two hours before such adjourned meeting; but sometimes the regulations require the deposit to be made before the original meet- ing. See furtlior, p. 42'1. 4. That the instrument is in proper form and is duly attested where the regulations require attestation. 509 MISCELLANEOUS NOTES. 5. That the instrument is duly stamped. 6. That notice of revocation has not been given. As to 1, 2, 3, 4 and G, there will bo little difficulty, but questions of some nicety arise as to 5. Hee supra, p. 425. Unless the regulations otherwise provide, a shareholder who is present at a meeting, but abstains from voting on a question put to the meeting, ought not, it would seem, to be counted as voting either way. But he must be counted at meetings to pass a special or extra- ordinary resolution (pp. 644 — 646). Votes and Proxies. The number of votes which a member is entitled to depends on the Votes ar.d regulations of the company. In the absence of anything to the con- P^<^^^^'^- trary, he is entitled only to one vote. But generally it is provided that a member shall have one vote for each share, or, at any rate, a number of votes varying with the number of his shares. Very com- monly it is provided that no member shall have more than a certain number of votes, e.g., fifty. "Where this is so, a member may dis- tribute some of his shares among his friends as trustees for him, and thus increase his voting power. Very commonly (as in CI. 47 of Table A.) a member cannot vote unless he has been possessed (i.e., registered in respect) of the shares for three months before the meeting at which he proposes to vote. Unless otherwise provided, it woidd seem that this does not prevent voting at an adjourned meeting held after, though the original meeting was held within the three months. See p. 511, infra. Unless the regulations authorize voting by proxy, votes must be given personally. For usual form of instrument appointing a proxy, see infra, Table A., CI. 51. The Stamp Act, 1891, charges every instrument of proxy, " For the Stamp duty sole purpose of appointing or authorizing a proxy to vote at any one pap^^?^^ meeting at which votes may be given by proxy, whether the number of persons named in such instrument be one or more," with the duty of Id. And see important sections set out at p. 425, supra. Most proxy instruments appoint a proxy for one meeting only, and accordingly require a Id. stamp. In any other case, e.g., when the proxy is appointed for more than one meeting or for a year, a 10*. stamp must be impressed. As a proxy paper bearing a Id. stamp is available for one meeting only, it follows that if there be two meetings held on the same day (see Form 702) there must be two instruments of proxy. "Where an adhesive stamp is used, the common postage and inland revenue stamp is of the right description. An impressed stamp is much to be preferred to an adhesive stamp ; for if the former is used, the document has merely to be signed, but if an adhesive stamp is used, there is considerable danger that it will be improperly cancelled, •510 ARTICLES OF ASSOCIATION. [ChAP. VII. and in sueli ease the instrument is void, and any person attempting to vote under it is liable to a heavy penalty. In order to cancel the adhesive stamp, the person signing the instru- ment should write his name or initials on or across the stamp^ and ptit the true date of signature 07i the stamp. The stamp will not avail unless he does this, "or otherwise effectively cancels the stamp, and renders the same incapable of being used for any other instrument or for any postal purpose." It is safer to put the initials and date. A mere cross or mark would not render the stamp incapable of being used, e.g., for a receipt. In many cases the instrument concludes : "As witness my hand this day jof ," and the stamp is fixed below and the signature written across it. It is generally considered that this is an effective cancellation. See s. 8 of the Stamp Act, 1891. Upon important occasions the directors or some of the members sometimes send out stamped proxy papers to the shareholders for signature. In such case the documents ought to be stamped with impressed stamps if possible, otherwise adhesive stamps should be affixed and precise directions as to the mode of signing the paper and cancelling the stamp should be printed in the margin, e.g., " Please sign your name at the foot of the i^roxy, and also put your initials and the date on the stamp." The propriety of paying out of the company's funds for stamping and issuing such proxies has been questioned. A shareholder may appoint several persons alternatively as his proxy, e.g., '' A., and failing him B., and failing him C." All proxy papers ought to be preserved by the directors by being pasted in a book with a proper index. Unless otherwise provided, a shareholder may vote personally at a poll, though he was not present at the meeting at which the poll was demanded. If a shareholder votes personally on any question, any subsequent vote on that question by a proxy is void. A shareholder may revoke the appointment of a proxy at any time ; but a vote given by the proxy before the revocation reaches the company or the proxy will be valid. In case of revocation, the shareholder ought before the meeting to write to the company giving notice that he has revoked the appointment. If he attends personally at a meeting, he can hand in notice of the revocation to the chairman. Sometimes the instrument ia so framed that personal attendance by the appointor invalidates it, e.g., where it says " in my absence to attend and vote," i&c. To appoint a second proxy would seem to be an implied revocation of the first. Stipra, p. 424. Adjournment. Adjournment. The regulations generally empower the chairman to adjourn a general meeting with the sanction thereof, and very commonly provide that no poll shall bo demanded upon a question of adjournment, or MTSCELT.ANEOIIS NOTES. -'^11 that if a poll is demanded upon any question of adjournment, it shall be taken at the meeting and without adjournment. In the absence of any such provision it would seem that a poll may be demanded on the question, and should be taken then and there (29 C. D. 159). See p. 420. Unless the regulations otherwise provide, no notice need be given of an adjourned meeting, for as regards notice it is a continuation of the original meeting ; but no business can be transacted thereat other than the business for which the original meeting was convened. See p. 41 G. Where a meeting is adjourned, and at the adjourned meeting a poll is demanded, the question sometimes arises whether a clause requiring the deposit of the instrument of proxy before the meeting (see cl. 50 of Table A.) is satisfied by the deposit being made before the adjourned meeting. It would seem that it is so satisfied unless the clause is otherwise clearly expressed. See p. 424. Profits and Dividends. The Companies Act, 1862, did not make any express pi'ovision in The Act regard to the payment of dividends. It did not require that the power to pay dividend should be specified in the memorandum or in the articles of association, nor did the specimen forms of memorandum of association scheduled to the Act mention the payment of dividend as one of the objects. But the Act distinctly contemplated the pay- ment of dividends ; for s. 38 made special provision in regard to paj'- ment in a winding-up of any " sum due to a member of a company in his character of a member by way of dividend^ profits or otherwise." Moreover the regulations in Table A., which were made prima facie applicable to all companies limited by shares, expressly provided for the payment of dividends, thus showing that payment of dividends was regarded by the Legislature as a matter of course. Whilst, however, the power to pay dividends is thus treated by the The power to Legislature as implied, there is no express jDrovision as to what assets ^^■^ ^™^ '^*" ' may be applied to the payment thereof. It was, however, assumed from the first that dividends must be paid exclusively out of profits, Out of profits, not out of capital. This assumption was not an unreasonable one to ^^ capita . make, looking to the scheme of the Act and to the opinion exj^ressed by Lord Campbell, L. C, in Burncs v. Pennell, 2 H. L. C. 497, 525 (1849), to the effect that dividends are supposed to be paid out of profits only (Case 1, infira), and to the prosecution and conviction, in 1856, of the directors of the Eoyal British Bank for conspiracy to defraud by false representations as to solvency, made, inter alia, by paying dividends otherwise than out of profits. Lindley, M.B-., has indeed objected to the proposition that dividends may not be paid out of capital, and to the proposition that dividends may be paid only out of profits. Thus in Lee v. Neuchatel Co., 41 C. D. 24, his Lordship said that "the proposition that it is ultra vires to pay dividend out of capital is very apt to mislead. If you treat it 512 ARTICLES OF ASSOCIATION. [ChAP. VII. as an abstract proposition tliat no dividend can be paid out of moneys arising from tbe sale of property bought with capital, you find yourself landed in consequences which the common-sense of mankind would shrink from accepting." On the other hand, in Verner v. General and Com. Co., (1894) 2 Ch. 266, the same learned judge said, "the law is much more accurately expressed by saying that dividends cannot be paid out of capital than by saying that they can only be paid out of profits," and he exjilains that in this proposition " 'capital' means the money subscribed pursuant to the memorandum of association, or what is represented by that money." It is, however, submitted that to hold that the only implied limitation on the power to pay dividends is the rule that they^shall not be paid out of capital, would deprive creditors of much of the protection which it has hitherto been suj^posed that the Act afforded them. Such a rule (below referred to as the emasculated rule) might work well enough if all companies under the Act necessarily, or as a matter of course, kept their capital invested as a separate fund or represented by sTDecific assets {e.g., a railway or a tramway), which could be identi- fied as the capital, or representative of the capital. But the Act makes no provision, expressed or implied, to this effect, and it cannot be supposed that the Legislature, in allowing companies of every sort and kind to register, intended that they should, contrary to the ordinary practice of business men, keep their capital earmarked and separate from their other assets. In most business concerns the capital is merged in the general assets of the concern, and is indistinguishable therefrom. A company may have a paid-up capital of, say, 50,000^., and it may have assets amounting to 3, 4, 5 or 10 times that amount. Part of the assets may arise from borrowing; part may be assets bought on credit, and part acquired from other sources, and it may not be i^ossible to say of any particular assets, "that is part of the capital, this is not." Suppose, however, that in such a case we set aside 50,000/. of the assets for the capital, it would follow, if the emasculated rule were the sole limitation, that all the rest of the assets would bo free for dividends ; but this obviously cannot be right, for there may be creditors for, say, 140,000/., and to sui)pose that the company is at liberty to borrow or incur debts, and then divide the assets obtained thereby, is absurd, and shows conclusively that the emasculated rule does not go far enough. Again, suppose that the paid-up capital of the company is 10,000/., and that it invests the full^amount in consols, and then issues policies of assurance for 500,000/., in respect of which it receives a premium income of 15,000/. per annum. Now this is not capital within the emasculated rule, yet surely it cannot be maintained that these moneys can bo distributed by way of dividend. Accordingly, it is obvious that tlio emusculutod rule cannot bo relied on ; and Lindley, L. J., is himself obliged to admit this, for ho says in Vcrncr v. General and Commercial Trust, (1894) 2 Ch. 260, that "it docs not follow that the NOTE ON PROFITS A^D DIVIDENDS. 513 dividends may lawfully bo paid out of other assets [/.e., otlier tlian cajiital], regardless of the debts and liabilities of the company. A dividend pre.sitjjposes a profit in some shape, and to divide as dividend the receipts, say for a year, without deducting the expenses incurred in that year in producing the receipts, would be as unjustifiable in point of law as it would be reckless and blameworthy in the eyes of business men. The same observation applies to payment of dividends out of borrowed money." But these admissions show that the emascu- lated rule is insufficient, and that it is necessary to supplement the rule ; and if so, why not adhere to the old and well-settled rule that dividends may only be paid out of profits — not capital ? The following are the principal cases which bear on the matter of Leading dividends:- "^'"'• (1) Burnes v. Pennell, 2 H. L. C. 525 (1849). Dictum by Lord Campbell, L. C, that dividends are supposed to be paid out of profits only, and where directors order a dividend to any given amount, without expressly saying so, that impliedly declares to the world that the company has made profits which justify such a dividend. If no such profits have been made, and the dividend is to be paid out of the capital of the concern, a gross fraud has been practised, and the directors are not only civilly liable to those whom they have deceived and injured, but, in my ojiinion, they are guilty of a conspiracy for which they are liable to be jirosecuted and punished. (2) Regina v. Esdaile and others, 1 F. & F. 213 (1858). In this case criminal proceedings were taken against the directors of the Royal British Bank, for conspiracy to defraud by false representations of solvency. It was held, that the declaration of a dividend out of pretended profits was fraudulent, and that if the defendants knew that debts hopelessly bad were included in the balance- sheet as assets, without any corresponding reserve, this would be evidence that the. balance-sheet was fraudulent. Held, also, that evidence that the defendants knew the true state of affairs would suffice to show that the books, representing otherwise, were false to their knowledge ; and that, in that case, though the balance-sheet truly rejire- sented the books it would be fraudulent. All the defendants were found guiltj', and sentenced. (3) Macdougall v. Jersey Imperial Hotel Co., 2 H. & M. 528 (1864), in which Page- Wood, V.-C, said : — " The Bill avers that there are no profits, and that interest has been paid, or is about to be paid, out of capital ; that the shareholders have paid 4/. per share, and are dis- charged to that extent, and that they are now about to take back sums equal to 5/. per cent, of that very capital in the shape of interest. On grounds of public policy, and on every principle not only of honesty as regards the public generally, but of the interests of this company itself, I feel bound to prevent this proceeding. This is not in accord- ance with the contract entered into with the Legislature on behalf of the jjublic, whereby it was determined that the shareholders should be liable to a certain defined amount, P. L L 514 ARTICLES OF ASSOCIATION. [ClIAr. VII. and no more, to the creditors of the company, and not in accordance with the contract between the parties whereby each shareholder was protected against creditors to the extent of the contiibutive liability of all the others." (4) stringer's case, 4 Ch. 475 (1869). In this case the company was engaged in hazardous trade, namely, for running the blockade during the civil war in America. A balance-sheet and profit- and-loss account Avere made out and a dividend paid on the basis of the profits disclosed thereby. It was held that the balance-sheet was not to be regarded as delusive and fraudulent merely because an estimated value was put upon the assets, which were then in jeopardy and were subsequently lost, provided that the facts fairly appeared on the balance-sheet and that the balance-sheet fairly represented profits. " I quite agree," said Selwyn, L. J., in that case, " with the argument which has been addressed to us by the official liquidator to this extent, that the Act which confers on these companies the privilege of limited liability, imposes upon them at the same time certain conditions which they are bound to observe, and which may be considered as the iDrice of that privilege, and if it is made to appear that for the purposes of fraud or for any other improper motive a company has declared and paid a wholly delusive and improper dividend and has thereby, in effect, taken away from its creditors a portion of the capital. which was available for the debts of those creditors, I entertain no doubt that the Court would have full jurisdic- tion and would exercise it by ordering the repayment of the money so improperly paid." (5) Mills V. Northern Railway of Buenos Ayres Company, 5 Ch. 621 (1870). In this case it was held that a simple contract creditor of a company was not entitled to restrain the company from dealing with their assets as they pleased, on the ground that they were diminishing the funds for payment of his debt. (6) Ranee's case, 6 Ch. 104 (1871). In this case the directors of a marine insurance company declared a bonus of \0s. per share which was agreed to at a general meeting and paid. The dii'ectors in declaring this bonus prepared no profit-and-loss account, but only an account of receij>ts and payments of the comj^any, wliich made no allowance for the risks to which the company was liable. A director who was party to this transaction was held liable to repay the bonus paid to him. James, L. J., in this case said : " Was there any attempt to make a balance-sheet or any profit-and-loss account in such a way as any mercantile body and certainly any insurance company ought to have done ? To take the money which the company had received to answer risks and to treat it as money capable of being divided as profits without making any estimate of what the risks were in respect of which the money was paid seems to me to be the most extravagant jjroceeding that I ever heard of. The directors simply had before them the cash balance of the receipts and payments, and without making the slightest provision in that account for anything whatever, they proceed out of that balance to declare this bonus. I quite agree tliat it would have been different if there had been, as there ought to have been in the ordinary course of business, a balance-sheet bona fide made out with jiroper assistance, so as to ascertain the true state of tlie company. If the directors had followed the directions of the 1 r2th article of their own deed, and if at the first ordinary general meeting they had laiil before tlie company a report comprising a balance-sheet showing as accurately as circumstances would pei-mit the financial position of the company up to that date ; if that had been done, I am of opinion that it would not be right for tliis Court to sit as a Court of Appeal to decide \\\vm such a state of facts so made out. If the directors, by placing unfounded reliance iii)ou the re]>reseutation3 of their servants or actuaries, had an-ived at the conclusion tliat they had made a divisible profit, this Coiu-t ought not, I Bay, to sit aa a Court of Appeal from tliat conclusion, although it might afterwards be NOTE ON PROFITS AND DIVIDENDS. 515 satisfactorily proved that there were very groat errors in the accounts wliich would not have occurred if they had been made out with greater strictness or with more scrutinising care. But no such account at all was made out. A mere cash account or balance-sheet in such a comijany as this, presented in order to determine whether there had been a profit made and for the purjiose of declaring a bonus thereon, is to my mind, within the meaning of Stringer's case, (4) a fraudulent and delusive balance-sheet. It purported to show something, as was said in that case, wliich any man who applied his mind to the subject would say, afforded no clue whatever to the profit which had beea made." (7) The Ebbw Vale Co., 4 C. D. 827 (1787). In this case the property of the company consisted of numerous iron and coal mines. The property had been largely depreciated througli the great fall which had taken place in the value of iron and coal, and Fry, Q.C. (afterwards L. J.), having advised that the company could not pay any further dividends without writing off the loss, a special resolution was passed reducing the capital by writing down the shares from '62/ . to 23/., and thus cancelling 9/. per share paid-up capital. Jessel, M. R., held, that he had no power under the Companies Act, 1867, to sanction the reduction. Accordingly appli- cation was made to Parliament to confer the requisite power, and in due course the Companies Act, 1877, was passed, and shortly afterwards, the company having passed the requisite special resolution, the" proposed reduction was again submitted to Jessel, M. R., who made an order, saying, " That this was a matter which was now very pro- perly left in the discretion of the company which might desire to reduce its capital by writing oif losses. The power was extremely beneficial, inasmuch as it enabled the company to declare dividends where, but for the power, no dividend "would be possible." Times, 20th Jan. 1878. (8) Re National Funds Assurance Co., 10 C. D. 118 (1878). The articles provided that the directors, with the sanction of a general meeting, might pay interest at the rate of 5 per cent, per annum on the paid-up capital of the company, but that no dividend should be paid except out of profits. The company issued share warrants pui-porting to confer on the holders the right to interest at 5 per cent, per annum. The company never made any profits, and the interest on the wan-ants was from time to time paid out of capital, with the sanction of general meetings. Held, that the directors were jointly and severally liable to make good the amount. Jessel, M. R., said, that a limited company trades upon the representation of its being a limited company, with a paid-up capital to meet its liabilities. It is wholly inconsistent with that representation that the company, having its capital paid up, should pay it back to its shareholders and give its creditors nothing at all. See (18). (9) Davison v. Gillies, 16 C. D. 347, n. (1880). This was a case of a tramway company. The articles jirovided that no dividend should be paid except out of profits of the company. The company had allowed its lines to get out of repair-, so that it would require 80,000/. to put them in repair. The company declared a dividend, but it was held by Jessel, M. R., that the dividend was ultra vires, inasmuch as there could be no profits imtil proper provision had been made for the repairs. (10) Dent V. London Tramways Co., 16 C. D. 344 (1880). This case related to the same company. The company had issued preference shares entitled to dividend out of the profits of each year. It was supposed that the last- mentioned decision precluded it from paying the dividend thereon untiT'the depreciation X L 2 516 ARTICLES OF ASSOCIATION. [ChAP. Vll. was made good; but Jessel, M.R., held, that inasmuch as the holders were entitled to be paid their dividend out of the iirofits of each year, they were entitled to be paid without regard to past depreciation. (11) Alexandra Palace Co., 21 C. D. 159 (1882). In this case dividends on preference shares had been paid during construction, it was contended " that the dividends were not paid out of cajiital ; and it is quite jiroper to debit to capital account the interest on capital expended on works, such as buildings, so long as they are unproductive during the period of construction." But Fiy, J., referring to this contention, said that counsel " has very ingeniously argued that this was really a payment out of profits (so, at least, I understood his argument), because, he says, you are entitled to compute interest on the money you lay out before it becomes remunerative, and to treat that interest as profit, and divide it accordingly among the shareholders. I cannot yield to that argument." And accordingly the directors were held jointly and severally liable to make good the amount. Fry, J., referring to the passage from the judgment of Page-Wood, above (3), said : " In my view, that lays down the law with perfect precision, and I think no subterfuge by which it is attempted to return capital to shareholders, and thereby to diminish their liability, ought to be countenanced for one moment by this Court. I confess it was with some surprise that I heard the argument addressed to me at the bar that the dii-ectors were at liberty to pay this money out of capital, because otherwise they could not cany on their undertaking." (12) Flitcroft's case, 21 C. D. 519 (July, 1882). In this case the directors of the company for several years presented to general meetings of shareholders rej)orts and balance-sheets, in which vai-ious debts known by the directors to be bad were entered as assets, so that an apparent profit was shown, though in fact there was none. The shareholders, relying on these documents, passed resolutions declaring dividends, which the directors accordingly paid. Held, in the winding-up, that the directors who paid the dividends were jointly and severally liable for the amount. "A limited company, by its memorandum of association, declares that its capital is to be applied for the purposes of the business. It cannot reduce its capital except in the manner and with the safeguards provided by statute, and, looking at the Act, 40 & 41 Vict. c. 26 [the Companies Act, 1877], it clearly is against the intention of the Legislature that any portion of the capital should be returned to the shareholders u-ithout Jessel M R. the statutory conditions being complied with. A limited company cannot, in any other way, make a return of capital : the sanction of a general meeting can give no validity to such a proceeding, and even the sanction of every shareholder cannot bring witliin the powers of a company an act which is not within its powers. If, therefore, the shareholders had all been present at the meetings, and had known all the facts, and had all concurred in declaring the dividends, the jmyment of the dividends would not be effectually sanctioned." (13) Guinness v. Land Corporation of Ireland, 22 C. D. 349 (November, 1882). The articles of association provided that a portion of the capital should be applied in paying dividend on one class of sliares. Held, that this was ultra vires. Chitty, J., in that case said, " The conditions of the memorandum are not mere paper conditions. They are intended to be operative, and it would be a most remarkable thing if the Act of Parliament which allows members to limit their liability by paying a sum of money to form the capital, should allow those same persons the next day to receive back their capital in any shape .... it would be a strange construction of the Act of Parliament if liy any of the internal regulations of the company it would be competent NOTE ON PROFITS AND DIVIDENDS. 517 to the company to return any part of the capital to the shareholders ; because the Act of 18*17 contains elaborate and carefully-framed provisions under which the capital may be reduced, and it seems to mo an extravagant proposition to say that that relates only to the nominal capital, and not to the actually subscribed capital." The decision was affirmed by the Court of Appeal, Cotton, L. J., saying :—" That Cotton, L.J. which is described in the memorandum as the capital cannot be diverted from the objects of the society. It is, of course, liable to be spent or lost in carrying on the business of the company, hut no part of it mn be rctHrned to a member, so as to take away from the fund to u-hicli the creditors have a riglit to look as that out of which they are to he paid.'''' (14) The Oxford Building Society, 35 C. D. 582 (1886). This concern advanced money to builders on mortgages, payable by instalments, and the dii-ectors treated as part of the profits available for dividend the value for the time being, upon estimate made by their surveyor, who was also their secretary, of the instalments of principal and interest, and upon this footing the directors paid dividend for several years. The articles provided that no dividend should be payable except out of realized profits. Held, that realized profits meant profits tangible for the pur-poses of division as contrasted with estimated profits, and the directors were jointly and severally liable to make good the ainounts accordingly. (15) Trevor v. Whitworth, 12 App. Cas. 409. The articles contained exjiress power for the company to purchase its own shares. Held, by the Court of Appeal to be a valid power free from all objections. Held, by the House of Lords to be ultra vires. " Persons dealing with the company have a right to rely, and were intended by the Lord Her- Legislature to have a right to rely, on the capital remaining, undiminished by any schell, L. C. expenditure outside these limits, or by the return of any part of it to the shareholders. Experience appears to have shown that circumstances might occur in which a reduction would be expedient. Accordingly, by the Act of 1867, provision was made enabling a company, under strictly- defined conditions, to reduce its capital. Nothing can be stronger than these carefully- worded ^jro visions to show how inconsistent wath the very constitution of a joint-stock company, with limited liability, the right to reduce its capital was considered to be." Per Lord Herschell. "The Act of .1877, upon the preamble that doubts have been entertained whether Lord Watson, the power of reduction given by the preceding Act extended to paid-up capital, enacts (sect. 3) that the word ' capital' as used in that Act shall include paid-ujD capital. That declaration clearly expresses the will of the Legislature, that neither the paid-up nor the nominal capital shall be reduced otherwise than in the manner pennitted by the statutes. . . . Persons who deal with and give credit to a limited company naturally rely upon the fact that the company is trading with a certain amount of capital akeady paid, as well as upon the responsibility of its members, for the capital remaining at call, and they are entitled to assume that no part of the capital which has been paid into the coffers of the company has been subsequently paid out except in the legitimate course of its business." Per Lord Watson. " Payment of capital to any one shareholder is just as much a reduction of capital, Lord Mac- and just as detrimental to the interests of creditors, as the payment of the same amount naghten. among all the shareholders. It is none the less a payment off of capital within the meaning of the Act of 1867, as explained by the Act of 1877." Per Lord Macuagliten. (16) Leeds Estate, &c. v. Shepherd, 36 C. D. 787 (1887). The articles provided that no dividends should be payable, except out of profits arising from the business of the company. No profits were ever made, but dividends were paid for many years at the rate of five per cent. The balance-sheets on which diAidends were declared were prepared, not by 518' . ARTICLES OF ASSOCIATION. [ClIAP. VII. the directors but by the manager. They were delusive, and over-estimated the assets, and were framed with a view of showing a profit available for dividend. The auditor never looked at the articles, but accepted the statement of the manager, and certified from time to time the accounts were true copies of those sliown in the books. The . ', ■ , directors did not know the true state of affairs, or that the balance-sheets were delusive ; they never exercised any judgment with reference to the accounts, but relied on the manager and auditor. Held, that the directors were jointly and severally liable. Held, also, that the duty of the auditor, after auditing the accounts, was not merely to verify the arithmetical acciu-acy of the balance-sheet, but to inquire into its substantial accuracy, and to ascertain that it contained the particulars specified in the articles and was properly drawn up, so as to contain a true and correct representation of the state of the company's affairs, and that he therefore had been guilty of misfeasance and was liable accordingly. (17) Lee v. Neuchatel Asphalte Co., 41 0. D. 1 (1889). See infra, p. 531. The company had a mining concession which was wearing out. Held, that it was at liberty to divide the income, and under no obligation to make provision for depreciation. (18) In re Bennett, Masonic and General Life Assurance Co. v. Sharp, (1892) 1 Ch. 154. In this case the articles pirovided that interest should be paid half-yearly on all the moneys paid on the shares until otherwise determined by the directors, but that no dividends or bonus should be payable except out of profits. No regidar profit and loss account was ever made up, and the company never earned any profits. Interest, however, was continuously paid on the paid-up capital. Held, that the directors were jointly and severally liable ; and that as the action commenced before the 1st January, 1890, they could not plead the Statute of Limitations. See (8). (19) Bolton V. Natal, &c. Co., (1892) 2 Ch. 124. The principal objects of the company were to buy, let, and sell land, and to make advances. Held, that having regard to Lee v. Neuchatel, nbi supra, it was not bound to debit the profit and loss account with depreciations. (20) Lubbock v. British Bank of South America, (1892) 2 Ch. 198. A banking company, with a i^aid-up capital of 500,000^., sold part of its undertaking for 875, OOC/. After deducting the paid-up capital and the debts and liabilities, there remained a net balance of 20.5,000^. Held, that this was profit, and might be divided. Sec further as to this case, uifra, p. 525. (21) Lands Allotment Co., (1894) 1 Ch. 616. In this case the directors li;id applied, but without fraud, moneys of the company to an ultra vires purpose. Held, that more than six years having elapsed, the claim against them was baiTcd by s. 3 of the Trustee Act, 1888. (22) London and General Bank, Ld. (No. 2), (1895) 2 Ch. 673. rjirectors and auditor IjoUI liable for paying dividends out of capital, it being found in fact that thoy had not a('ted bon&fidv. NOTE ON PROFITS AND DIVIDENDS. 519 (23) Wilmer v. M'Namara & Co,, Ld., Stirling, J., (1895) 2 Ch. 245. Held, iu accordance with l^enier v. Goieral, ^r. Trmt, (1892) 2 Ch. 239, that good- will aud leases of a trading company were fixed cajntal, and accordingly that it was not '*!.X necessary to make good any dnjireciation in ascertaining profits. "^'^ (24) Bosanquet v. St. John del Rey Co., North, J. (1897), 77 L. T. 207. In this case the company's mine fell in, and, to restore it to working order, money had to be raised by the issue of debentures ; and, there being no profits, the interest thereon was paid out of capital. The mine having been restored to a profit-producing condition, it was held that it could pay dividends without making good to capital what had been so expended in interest. " The contention is that . . . the accounts ought to be kept so as to keep the claim iu respect of interest alive, or, at any rate, that the profits ought to be dealt with on the footing that such UabOity existed. I see nothing, either iu the articles of the company or iu the general law, to require that, before dividends are paid, the profits must be ajjplied in paying off a charge properly incurred in previous years. Having regard to recent authorities, I come to the conclusion that there is no reason why the proposed dividend should not be paid." (25) Kingston Cotton Mill Co. (No. 2), (1896) 2 Ch. 279. Auditors who had relied on certificates of manager who grossly over-stated the value of the stock-in-trade, held not liable for dividends paid out of capital on the faith of such certificates. Further Observations. Even express power in the memorandimi cannot justify the payment of dividend out Power in of capital, for such a payment would be a reduction of capital, requiring, under the memorandum Acts of 1867 and 1877, the sanction of the Court, and the memorandum cannot dispense as to. with the sanction, which, for the protection of the public, the Acts require. Trevor v. Whitivorth, 12 App. Cas. 409 ; Rainc's case, 4 T. L. E. 303 (Kekewich, J.) ; Mersina andAclana Co., 5 T. L. R. 680 (Stirling, J.), &c. And, a fortiori, nothing in the articles can justify the payment of dividend or interest (except on capital paid in advance of calls: Loch v. Queensland, ^c. Co., (1896) A. C. 461) out of capital {Trevor v. Whitivorth, ubi supra ; Guinness v. land Corporation of Ireland, 22 C. Div. 375 ; In re Bennett, (1892) 1 Ch. 154) ; but the articles may, of course, restrict the meaning of the word " profit," and declare that dividends shall only be payable out of profit in that restricted sense. See Oxford Building Society, 35 C. D. 502, where the tenn " realized profits " was regarded as meaning " profits tangible for the purposes of division," as distinguished from estimated profits. Some persons, whilst admitting that dividends cannot be paid out of capital, contend <« During con- that where a company engages in the construction of works, interest maybe paid on struction." capital dui-ing construction. See Alexandra Palace Co., 21 C. Div. 149, above. But the priucii^les laid down in Trevor v. Whitivorth, 12 App. Cas. 409, are wholly incon- sistent with the legality of paying dividends out of capital during construction or otherwise. And the Indian Railways Act, 1894 (57 Vict. c. 12), is, in effect, a Parliamentary recognition that dividends may not, even during construction, be paid oxit of capital without statutory powers. As a company may 'not pay dividends directly out of capital, it may not do so Through indirectly, e.g., by entering into a contract with another company or person, one of the contractors, terms of which is that the latter shall pay interest on the capital of the former. James v. Eve, L. R. 6 H. L. 385. "There is no doubt that if it cannot be done directly, it cannot be done indirectly." Per Lord Chelmsford, L. C. And in Fisher v. Hull ^- Barnsleij By. Co., 4 Mar. 1881 (25 S. J. 353), whore the 520 ARTICLES OF ASSOCIATION. [ChAP. VII. Liability of directors. Limitation. Criminal. in junction to it'Mtrain. contractors had agreed to pay interest during construction, Jessel, M. R., granted an injunction restraining the j>ayment, and the company in two subsequent sessions endeavoured, but without success, to obtain legislative authority. See also JFye Valley Rl/. Co. V. Halves, IG C. Div. 489. The payment of dividends out of capital is regarded as a breach of trust on the part of the directors, and accordingly they are jointly and severally liable to make good the amount with interest at 5 per cent, per annum. FlitcroJVs case, 21 C. Div. 520 ; lie Alexandra Palace, ibid. 160 ; Oxford, ^c. Society, 35 0. D. .502 ; Leeds, S;c. Co., 36 C. D. 787 ; Municipal Freehold Land Co. v. Pollington, 63 L. T. 238 ; LmuIoh Sj General Jiank (No. 2), (1895) 2 Oh. 673. And they are liable not only for what they pay themselves, but for the whole amount. " I do not see how to make any distinction between what the directors retained and what they paid to other shareholders." Per Cotton, L. J., FlitcroJVs case, 21 C. Div. 536. It is true that a member who receives a dividend knowing that it is paid out of capital maybe liable to make good the amount; for "the money of a company is a trust fund, because it is applicable only to the special purposes of the company in the hands of the agents [/. e., the directors] of the company, and it is in that sense a trust fund applicable by them to those special purposes ; and a person taking it from them, with notice that it is being applied to other purposes, cannot, in this Court, say that he is not a constructive trustee." Per Jessel, M. K., Russell v. Wakefield Waterworks, 20 Eq. 479 ; Holmes v. Neiccastle Co., 1 C. D. 682. But even in such cases the directors will be primarily ordered to make good the amount, and ^vill be left to recover from the other members if they can. Alexandra Falacc Co. 20 C. D. 149 ; National Funds, 10 C. D. 118. And a member who takes a dividend in good faith, not knowing that it is paid out of capital, is not liable to return the same. FlitcrofVs case, 21 C. Div. 519 ; Re Benham ^• Co., 25 C. D. 752 ; Wye Valley Ry. Co. v. Hawes, 16 C. Div. 489. This is a common case ; for where dividends are paid out of capital the members can in most cases show that thej^ were deluded by fraudulent accounts. And where the directors represent that profit has been made, members are not bound to investigate. ' ' The directors made an express representation to the shareholders that profits had been made, and the effect of that representation cannot be taken away by showing that documents were laid before the shareholders, a thorough investigation of which would have shown that the representation was initrue, unless it is also shown that they did investigate them and discover the untruth." Per Jessel, M. R., FlitcrofVs case, 21 C. Div. 532. In some cases a claim against the dii-ectors may be barred by s. 8 of the Trustee Act, 1888 (51 & 52 Vict. c. 59). Lands Allotment Co., (1894) 1 Ch. 617. Cf. In re Sharpe, (1892) 1 Ch. 154. Not only are directors who pay dividend out of capital civilly liable, but they may, at any rate in some cases, be prosecuted for conspiracy. Burnes v. Pennell, 2 H. L. Cas. 497 ; Reqina v. Esdaile, 1 F. & F. 213. In the case last mentioned, the directors of the Royal British Bank were convicted of conspiracy to defraud. They had issued false balance-sheets, and, in particular, had included therein, among the assets of the com- pany, debts which they knew to be bad. See supra, p. 513. Moreover, a director or manager who makes, circulates or publishes, or concurs in making, circulating or publishing, any written statement [e.g., a report] or account \_e.g., a balance-sheet] which lie knows to be false in any material jiarticular, may be liable to punisliniont under sect. 84 of the Larceny Act, 1861 (24 & 25 Vict. c. 96). See supra, p. 134. The Court will, at the instance of a single shareholder, interfere by injunction to restrain the i)ayment of dividend out of capital {Macdonyall v. Jersey Imperial Hotel Co. 2 11. & M. 528 ; Guinne.is v. Land Corporation of Ireland, 22 C. Div. 349; Davison V. Gillies, 10 C. I). 347) ; but not at the suit of a mere simple contract creditor. Mills V. Northern Co., 5 Ch. 621. Nevertheless, it would seem that there may be cases in which a creditor would have a locus .itandi {FlitcrofVs case, 21 C. Div. 533) ; and if ho is not paid in due course bo can have the company wound up and make the directors personally liable for the breach of trust. Re Sharpe, (1892) 1 Cli. 154. HOW PROFITS ARE 'JO BE ASCERTAINED. S21 HOW PEOFITS AEE TO BE ASCERTAINED. In regard to this, o[)inion8 differ, and there are several systoms which Three systems are adopted or have been suggested. Of these, the following may bo c un . mentioned : — (1) What is called the " single account " system, that is, the ordinary Single ac- system adopted by business men, according to which profits ^'^^^^ system. are to be ascertained by a balance sheet, including by refer- ence a profit and loss account. (2) The double account system for many years advocated by an Double ac- eminent legal writer, according to which all companies under '^'^^^ ^^^ ®"' the Act are to be assumed to keep a capital account and a revenue account, and those accounts are to be regarded as distinct accounts, and, for the purpose of determining profits, accretions to or diminutions of capital are to be disregarded, but loss on revenue account is to be made good out of subse- quent revenue. (3) The system propounded by the Court of Appeal in Lee v. I-ce v. Neu- Neuchatel Co., 41 CD. 1 ; according to which, whenever the '^^"'^ ' ordinary revenue of the company for any sj^ecified period exceeds the ordinary outgoings of the company for such period, the excess is to be regarded as profit available for dividend, even though the revenue be derived from a wasting property which, in the course of a few years, will be ex- hausted, and even though the company has lost capital during the same period. (4) The system propounded by the Court of Appeal in Verncr v. Vemer y. General and Commercial Trust, (1894) 2 Ch. 239; according 'IZlmenlai to which the net revenue of any specified period is to be Trust. regarded as profit available for dividend, subject to the important qualification that, whilst loss or depreciation of " fixed " capital {infra, p. 538) need not be taken into account, loss or depreciation of "circulating" capital must be taken into account, and debited to profit and loss account in ascer- taining profits. 1. — J'he Single Account System. According to this system, the profits for any particular period are i. As to single account system. to be ascertained by a profit and loss account and a balance-sheet ''^ccount showing the true financial position of the company and the result, whether in the shape of profit or loss, of its transactions during such period. The balance, whether to the debit or the credit of profit and loss account, appears as an item in the balance-sheet ; and the balance- sheet is not a capital account showing, as a matter of history, how the capital contributed has been applied in the past, but a living account showing the true financial position of the company at that date, and 523 , ARTICLES OF ASSOCIATION. [ClIAP. VII. the difference in amount between tlie assets ou tlie one hand and the _. .. ^-.,.. ...... - debts and paid-up capital on the other hand. .-.l:.-: Everything depends, as in an ordinary partnership, on how the baLance-sheet works out. The mere fact that the profit and loss account (disregarding losses and depreciation) shows a credit balance is not treated as establishing the fact that the company has made a profit during the period, since that balance may, in the balance-sheet, be counterbalanced by an equivalent or greater loss of capital sustained during the year [or previously, unless, indeed, the previous loss shall have been written off]. In this system paid-up capital is treated as a liability ; not that the company is really a debtor to its shareholders in respect of capital, any more than a firm is to its members, but because " if you want to find out how you stand, whether you have lost your money or not, you must bring jouv capital into account somehow or other." Per Lindley, L. J., Zee v. Neuchaiel Aaphalte Co., 41 C. D. p. 23. According to this system, if a leasehold colliery, or a patent or other wasting property is acquired, it appears as an asset in the balance- sheet at cost price, and as and when any depreciation takes place, it is written down, or, what comes to the same thing, a depreciation fund is established, and the amount thereof is placed on the other side of the balance-sheet. And if the company sustains a loss in any other way, e.g., by the loss of one of several vessels representing a part of its assets, the item " by value of vessels " in the- balance-sheet will be written down accordingly, or the amount can be written off reserve. On the other hand, if the value of the company's property goes up, and the company is satisfied that the increase in value is to be regarded as a permanent increase, the property may apj)ear on the balance-sheet as an asset valued at the increased figure. Nevertheless^ it would be entirely contrary to practice to write up or down the value of a permanent instrument of profit, e.g., a tramway, or factory, or building, merely because the value of labour and materials has gone up, or because the business has been more or less successful, or to write up or down any assets in sympathy with what are or may be mere temporary fluctuations in market prices or values. So, also, if the company by its expenditure creates a new asset, e.g., a patent or a concession, that asset may be brought into the balance- sheet at some figure not exceeding its estimated value. And oven goodwill, whether bought or created, may be an asset to be reckoned in order to determine the true financial position of the company. Thus, in Murray v. Jhish, L. Jl. G 11. L. 37, the deed of settlement of an insurance company provided that the company should be dissolved, if the losses absorbed the reserve fund and 80 p.c. of the paid-up capital, and the question arose whether the contingency had happened. Lord Cairns considered that the goodwill which had HOW PROFITS ARE TO BE ASCERTAINED. 523 been created by the company ought to bo brought into account ; '-' and whether that goodwill should be estimated, as it is stated to have been estimated by a valuator, as of the value of three years of their annual premiums, or at a smaller, or at a larger sum, I need not stop to inquire. It is abundantly evident that the goodwill of the concern as a going concern was worth some substantial sum." This is the system adopted, with more or less modification, by all the banks and all the insurance companies, and also, in fact or osten- sibly, by almost all the companies under the Act of 1862. There is a considerable body of legal authority in favour of the Lcg;il 1 . . authority single account system. ^ ^ ^ in support. It seems to be the system which, in Stringer^ s ease, 4 Ch. p. 475, was treated as the proper system of ascertaining profits. In that case Lord Justice Selwyn considered that the company — " would have been justified in declaring a dividend, provided they had put a fair, and no more than a fair, value wpon the ships and other assets which they actually had. Taking it one step further, and assuming the case that several of the ships had been lost, that the company was bound to jjut down, as they did put down, their proportion of that loss as being a loss upon this balance-sheet, the other two-thirds of the loss were to be covered by the responsibility and guarantee of the Confederate government, and according to the view of the learned Vice- Chancellor, inasmuch as until the end of the war the value of that guarantee could not be ascertained, no dividend could be declared. I confess I am unable to agree with that view. I think that under those circumstances the company was fully justified in putting a value on the ships and on the Confederate debt. ... I think the company was justified in doing that which, in truth, is done in almost every business, namely, taking the facts as they actually stood, and forming an estimate of their assets as they actually existed, and then drawing a balance so as to ascertain the result in the shape of profit or of loss." If, as suggested by the advocates of the other systems, profits are to be ascertained without regard to loss or depreciation of capital or. fixed capital, what could the learned judge have meant by these words ? He was dealing with a case in which there was evidently a balance-sheet of assets and liabilities, and he considered that this was- a proper mode of ascertaining ' ' the result in the shape of profit or loss," and he incidentally recognises the fact that in thus ascertaining profits the company was doing " that which in truth is done in almost every business." So, in Ranee's case, 6 Ch. 104, James, L. J., said that the company had only been in existence for eight months when a bonus was declared — " a bonus which, of course, could only be lawfully made out of moneys which had been earned, or believed to have been earned, in the way of profit. . . . How was this done ? Was there any attempt to make a balance-sheet or profit and loss account in such a way as any mercantile body, and certainly any insurance company, ought to havo done ? . . . The dii-ectors simply had before them the cash balance of the receipts and payments, and without making the slightest provision on that account for anything whatever, they proceed out of the balance to declare this bonus. I quite agi'ee that it would have been different if there had been, as there oicght to have been, in the orilinary course of business, a balance-sheet bond fide made out with proper assistance, so as to ascertain the true state of the company." 524 ARTICLES OF ASSOCIATION. [ChAP. VII. Here, again, we have an eminent judge, well versed in business matters, declaring that " there ought to have been a balance-sheet bond jide made out with proper assistance so as to ascertain the true state of the company.'''' If the proper mode of ascertaining profits was to dis- regard loss of fixed capital, what could the learned judge have meant by requiring a balance-sheet in order to ascertain profits ? Can it be that both these learned judges were under a misapprehension as to tho law? So also in Helbyh case, 2 Eq. 175, Kindersley, V.-C, said — " A balance-sheet or summary of accounts would show, on the one hand, all the assets, and, on the other hand, all the liabilities of the company, atid it was otihj oh this sort of statement that any safe conclusion could he drawn as to the qucstiojt whether there had been any profit for the half-year or not, and whether any and what dividend should be declared." Chitty, J., in The Midland Land and Investment Corporation, 8 Nov. 1886, said— " In declaiing a dividend, in my opinion, in trading concerns, the directors are entitled to put an estimate on the value of their assets from time to time, in order to ascertain whether there is or is not a surplus remaining after providing for liabilities [including, of course, paid-up capital], and where they make those valuations from time to time on a just and fair basis, and take all the precautions which ordinary prudent men of busi- ness engaged in a similar business would do, they are entitled to treat the surplus thus ascertained as profit." See further extract, infra, p. 542. So, also, in Robinson v. Ashton, 20 Eq. 28, Jessel, M. R., said that " in the absence of special agreement, the rise and fall in the value of fixed plant or real estate belonging to a partnership was as much profit or loss of the partnership as anything else." No balance-sheet can be made out for any useful piu-pose without distinguishing good, bad, and doubtful debts. Per Jessel, M. E., Jie Frank Mills, 23 C. D. 57. There is good reason to believe that Jessel, M. E,., considered that the single account system was the proper system, and accordingly that in ascertaining profits a company was bound to take into account and make good loss or depreciation of capital. Thus, in Davison v. Gillies, 16 C. D. 347, that learned judge held that there could be no profit until proper provision had been made for depreciation. That was the case of a tramway, and his lordship considered that in each year pro- vision should be made for depreciation. And said, " Take the case of a warehouse : supposing a warehouse-keeper should find, at the end of the first year, that ho had no occasion to expend money in repairs, but thouglit that, by reason of the usual wear and tear of the warehouse, it was 1,000/. worse than it was at tho beginning of the year, he would set aside 1,000/. for a repair, or renewal, or depreciation fund before he estimated any profits ; bocauso, although that sum is not required to bo paid that year, still it is a sum which is lost, so to say, out of capital, and must be replaced." HOW PROFITS ARE TO BE ASCERTAINED. 525 In Dent v. London Tramiomjs^ 16 C. D. 344, the same learned judge said — "Profits of the year of course ineaus the surplus ou receipts after paying expenses and restoring the capital to the position it was in on the 1st Januar}' in that j-ear." Again, iu Bannalync v. Direct Spanish Telegraph Co., 34 C. Div. 287, Ba>i>iati/ne v. the company, having lost a considerable portion of its capital by the Tdearavlt^Cn ' destruction of one of its cables, was advised b}' counsel of great eminence (Lord (then Sir Horace) Davey) that they could not properly pay a dividend on any of the shares until they had put the original cable into a proper state of repair and working order, or made adecjuate provision for that purpose, or reduced the capital under the Companies Act, 1877. Accordingly, special resolutions were passed for cancelling the lost capital, and these resolutions were confirmed by the Court, although the cancellation undoubtedly involved a hardship to the holders of the preference shares ; and yet no one ventured to contend that the company could be placed in a dividend-paying condition other- wise than by cancelling the lost capital. In Lubbock v. British Bank of South America, (1892) 2 Ch. 198, the Lubbock v. question arose whether certain assets of a company were profits, and Chitty, J., said — " This is a trading company, and I have before me a balance-sheet of 1891, to which I refer by way of illustration to show how the accounts of such a banking company are kept, ernd propcrh/ kept, in my opii/io/i. I have before me the defendant company's accounts up to December, 1890. They put down on the one side their liabilities, treating properly the 500,000/. which has been subscribed by the shareholders as a liability for the purposes of bringing it into account, as against the assets which they put down on the other side. Then, on the same liability side, they properly put their cmrent liabilities, and certain other liabilities and reserve fund, which the company according to its constitution is justified in making, and they add up the total amount of those liabili- ties. On the other side they put down their assets, and for the purpose of giving infor- mation to the shareholders they divide the assets into certain heads — ' Cash at Bank,' ' Bank premises and managers' residences in Brazil and River Plate ' — and then they add up the total on that side. They of coiu'se— because there is not a suggestion that these accoimts are not kept with perfect propriety and perfect honesty— therefore put dovni on the assets side the money value of their assets, some being in money itself, and some not. Then when the two sides of this account are compared, there is a surplus of 44,000/. shown, which goes, according to the accountant's regular method of keeping accounts, to the liability side, and represents the balance of assets over liabilities. Xow what is the result of keeping an account in this form •' The capital of the bank is intact, and the account shows it, and after providing for the capital, there remains a surplus which rightly goes to the profit and loss account. All that the company is required to do by force of the Companies Act of 1862 is to keep its capital intact, and not to pay dividends out of its own capital ; in other words, to keep that capital for its creditors and any others who may be concerned therein. That mode of keeping the accoimt is an excellent illustration of the right way to divide jjrofit and loss. Taking the figures on this account, this sum of 44,000/. is profit made and profit available within the Act of 1862 for division among the shareholders, unless there is something in the articles which would prevent the directors and prevent the company from dividing the sum which thus stands to their credit. " I say I have great difficulty in foUo^ving the first portion of the argument for the plaintiff, because it was said that what was sold was part of the capital of the company, and that what came in over and above the 500,000/. was an accretion to capital, 526 ARTICLES OF ASSOCIATION. [ChAP. VII. therefore it must be kept intact as part of the capital. That has — with great respect to the counsel who put forward this argument — nothing to do with the matter. The sale being an authorized sale, it is immaterial what is the thing sold. I put, during the argument, a humble illustration. A man's business is to make boots and shoes. He has 10,000^., which he takes into that business as his capital. He makes boots and shoes, and spends the whole of his 10,000?. in doing it, and he sells and gets back from his customers a certain sum on the sale. He compares then, assuming he has sold all, what he has got back with his expenditure in ijroducing the boots and shoes and putting them on the market, and if he finds he has his 10,000?. (I am treating it apart from any question of debts outstanding, supposing it is a good solid sale), then his capital is intact, and the rest — if there is a rest remaining in his hands — is profit. On the other hand, if he has only 9,000/., his capital is not intact, and he has lost. It is exactly the same principle that has to be applied to a trading company under the Companies Act, and the capital that has to be regarded for the purpose of the Act of Parliament is the capital according to the Act, and not the things, whether houses, goods, boots and shoes, or hats, or whatever it may be for the time being representing the capital, in the sense of being things in which the capital has been laid out. Where the company is fomied to work a wasting property, such as a mine or a patent, different considerations may apply, as was decided in Lee v. Neuchatel AsphaUe Co. I am not dealing with any such special case." Kay, L. J., in Vei'uer v. General and Commercial Trust, (1894) 2 Ch. 268, said— "I should be sorry if it were held that a joint-stock trading company can properly estimate their profits in any way differing from that in which an individual, or partner- ship of individuals caiTyiug on a similar business, would do. An ordinary trader takes a yearly account of all the capital employed in his business, allows for any loss or depreciation in value, and can-ies the balance to the profit and loss account, from which he makes out the profit or loss of the year. In this mode a loss or depreciation of such capital affects directly the profit of the year, which is thereby diminished. But if upon the whole cajjital account there is a gain, this goes to swell the year's profits. In my opinion a joint-stock trading company should do the same." See further, infra, p. 634. In the decisions relating to income tax, various expressions occur •wliieh tend to support the single account system. Thus in Knowles v. McAdam, 3 Ex. Div. 23, Kelly, 0. B., in the course of his judgment, said — " What is tlio balance of the profit or gains V Take the simplest case. A man buys a bale of cotton for 20/., and sells it again for 25/., no expenses being incurred except the price of the bale. His balance of profit is 5/., which remains to him after having repaid liimself everything he paid to obtain the bale. . . . Suppose a merchant dies and bequeaths to his son a warehouse containing 20,000 bales of cotton ; the son carries on the trade, and sells 1,000 of those bales. Is his profit what he receives for those bales without any deduction 'i No ; his profit is the j)rice at which he sells, less the price he has paid for what he sells, or, if he has not bought it, less what he would have had to pay if ho liad bought it. Ajjply this principle to the case of a coal mine. Suppose a man pays 1,000/. for a lease of a mine for one year only. At the end of that year he has got all the coal in the mine, and sold it for 1,200/., the expenses of labour and materials being 100/. Is his profit 1,100/. 'i It would be an abuse of language to say BO. His profit is wli.at remauis in his pocket after deducting the expenses, namely, 1,000/. for the liberty to get the coal, and 100/. for the cost of getting it. That is, his profit is 100/. only. Now if that bo true in the case of a lease for one year, it must be true in the ijrcscnt case, where the leases have an average of thirty-two years to run, and where the lessees get a portion of the coal year by year. There can be no difference in principle." now PROFITS AUH TO BE ASCERTAINED. 527 No doubt it now appears tliat this mode of ascertaining annual profits or gains, though, in strict accordance with the practice of busi-' ness men, is not in accordance with the peculiar rules laid down in the Income Tax Acts (C'olfness Iron Co. v. Black, G Ap. Cas. 329, supra, p. 45) ; but that docs not derogate from the value of the above passage as indicating the view of the learned judge in regard to the ascertain- ment of profit fur other purj)oses. Nor is it surprising to find that this single account system closely Views of] accords with the rules laid down or recognized by economists. economists. Thus McCulloch, in a passage approved by Lord Blackburn in McCullooh. Coltness Iron Co. v. Black, uhi supra, says — " Profits must not be confounded with the produce of industry primarily received by the capitalist. They really consist of the produce or its value remaining to those who employ their capital in an industrial undertaking after all their necessary payments have been deducted, and after the capiital wasted and used in the undertaking has been replaced. If the produce derived from an undertaking, after defrayuig the necessary outlay, be insufficient to replace the capital exhausted, a loss has been incuiTed ; if the capital is merely suihcient to replace the capital exhausted, there is no sm'plus — there is no loss ; but there is no annual profit, and the gi-eater the sui-plus is, the gi-eater the profit." John Stuart Mill says : — Mill. " The capitalist, then, may be assumed to make all the advances, and receive all the produce. His ^^xo^i consiais oi the excess of the produce ahoce the advances; his rate of profit is the rate which that excess bears to the amount advanced." Bonamy Price says (Practical Political Economy) : — Bonamy ■ Price. *' The capital engaged in the business must be replaced in full by the products; for no business goes on permanently at a loss. We have seen that capital is consumed in producing ; caj^ital is wealth ; and there must be restoration of such wealth as is destroyed not by enjojTnent, but in creating other wealth. If that new wealth were not forthcoming there could be no motive to apply any wealth to capital. Projit, which is reward, cannot begin till the replacement of the things consumed has been comi^leted. . . . Endless unforeseen causes may convert hope of profit into loss. In some operations, especially in farming, the product may not appear at all after all the outlay for pro- curing it has been inciuTcd. Now all such risks for the restoration of the caj)ital con- sumed must be met by an adequate insurance embodied in an increase of price. By some writers this insm-ance is regarded as a deduction from profit ; but the more correct way of viewing it is to consider it as an item in the cost of production, as an expense included in it." Sidgwick (in his Princix)les of Political Economy) points out that, in Sidgwick. - j; order to understand what is profit, it is necessary to form an exact notion of capital, i.*., of wealth, employed to bring a surplus or profit. " To attain this result, let us begin by asking what is exactly meant from the point of view of the individual capitalist by 'wealth employed to bring a profit.' It does not mean that the wealth is necessarily in the form of instruments or materials for making new wealth, or in the form of food, clothing, &c. for the labourers who are using the instruments or materials ; for, as we have seen, it does not matter to the individual whether bis wealth is used productively or unproductively so long as he gets his profit. It merely means that the individual is using his wealth — either personally or by lending it to others — in such a way that he continually finds himself possessed of the EQUItalext 528 ARTICLES OF ASSOCIATION. [ChAP. VII. Economists do not disregard depreciation or treat money ex- pended in fixed capital as lost. Sidgwick. Act of 1877. £bbtc Vale Co of what was originally devoted to such use, together with some additional wealth, this additional ivealth being what is called 2)rofit ' ' We have, therefore, first to ascertain what portion of a man's wealth is being employed with the aim of making its owner continually bichee, and then to distinguish the capital from the profit. In the case of wealth that has been lent to some one else there is of course no difficulty, as the sum which the debtor pays for the use of the wealth is clearly profit, and the simi which he is bound to replace clearly capital. And the line drawn in this case can be ideally extended to include the case where the wealth has been spent in purchasing a pei-petual annuity, for though here there is no one under legal obligation to pay at any fixed time an equivalent for the principal, still actually the annuity can be at any time sold at its market value, so that we may regard this possible price as the capital. In this case, however, the price at any time may be less or more than the sum originally spent, and, therefore, in calculating profit, we have to subtract from or add to the sums annually received a sum sufficient to compensate for the difference." It has, indeed, been suggested in the Courts that economists consider that loss or depreciation of fixed capital should not be taken into account in ascertaining profits, but, as appears above, this is not the case. See also infra, p. 534. Again, it has been suggested that economists consider that funds expended in the acquisition of fixed capital are to be treated as sunk and gone, so that anything recovered in the way of income is so much profit ; but this is not so, for the economist, hke the business man, treats the capital sunk as represented by and reappearing in the assets, whether goodwill, or connection, or undertaking, which the expenditure has brought into existence or developed. Thus, Sidgwick says (Principles of Political Economy) : — "This leads me to consider a source of profit noticed in a preceding chapter, which exhibits the immaterial results of labour and expenditure as still more clearly separate from any material capital than in the cases just discussed — I mean, the saleable article called ' goodwill ' or ' business connection.' Let us take, for example, the business of publishing a newspaper. The sale of a newspaper when it first starts is ordinarily so limited that its proceeds do not repay the current expenses of production, so that the business has to be carried on for some time at a loss. Hence, in order that the under- taking should be on the whole a profitable one, it is necessary that the proceeds of the sale should ultimately be sufficient to pay profit not only on the material capital actually employed in production, but upon all the wealth and labour that has been spent without return in the earlier years of the undertaking. The business may be regarded as having capital sunk in it which woidd be recovered in its price if it came to be sold, though it is actually represented merely by a certain habit of purchasing the newspaper that exists in the community at large. This potential price isproperly recTconed as part of the wealth and capital of the individual owning the business." Lastly, it is a matter of notoriety that the Companies Act, 1877, whereby power was given with the sanction of the Court to cancel capital "which has been lost or is unrepresented by available assets," was passed to remedy tlio particular grievance which was supposed to exist, namely, that after a loss of capital by depreciation a limited company could not pay dividends unless the loss was made good, and could not, like a partnership, Avrite off the amount and resume payment of dividends. Tlie existence of this grievance had been accentuated by the decision of Jessel, M. P., in T/te Ebbiv ]''ale Co., 4 C. Div. 827. HOW PROFITS ARE TO BE ASCERTAINED. 529 The Bill for the Act of 1877 was referred to a Select Committee of the House of Commons, and from the evidence before that Committee it is clear that every one supposed that the grievance which the Bill was to remedy was, that where there was a loss of capital, a company could not pay dividends without making good the loss out of subse- quent income or writing down the capital, and that, according to the decision of Jessel, M. E., a company so placed had no power to write down its capital, and was therefore prejudiced. There were many who thought (and it seems rightly : see British, Sfc. Co. V. Couper, (1894) A. C. 399) that this decision was incorrect, but no one disputed or threw any doubt on the proposition that the loss, till written off, precluded dividend. Perhaps, however, that too was incorrect. See infra, p. 536. And certainly it is not easy to see why, apart from the Act, a company which has lost capital should not, without the assistance of the Court, rectify its balance-sheet so as to make it accord with the facts, and then pay dividends out of subsequent profits. So to rectify the balance-sheet would involve the writing down on the one side of the assets to their real value, and the alteration of the item paid-up capital on the other side, e.g., Paid-up capital (less amount written off as lost), 120,000^. It is sometimes objected to the single account system that it involves Objections, periodical re-valuations which may be difficult and, perhaps, imprac- ticable. As to this, it is generally considered that there need be no re-valuation of assets of a permanent character so long as there is no reason to suppose that they have diminished in value ; and that what are bond fide regarded as casual and temporary fluctuations in the value of such permanent assets should be disregarded. Moreover, in determining the value where there is to be a valuation, it is generally considered that it is not necessary or proper to regard merely selling value. It may be that the asset could not be sold, and yet, as part of a going concern, may be worth its cost. But suppose that a company gives 20,000^. in cash or paid-up shares for a patent which is held void, it is generally considered that such a loss cannot be disregarded, unless, indeed, it can be set off against some increase in the value of another asset. Another objection which the advocates of the double account s^'stem sometimes raise, is that the single account system sanctions the writing up of the value of permanent assets so as to accord with their estimated value for the time being, and that this might lead to payment of dividend out of profits which only exist by way of estimate. But, after all, profit must in any case be a matter of estimate, for whatever system be ado^^ted the existence or non-existence of profit generally turns on estimates of value, e.g., of book debts, stock in trade, contracts, &c. And there can be no question that writing up the value of permanent assets, and carrying the increase to i^rofit and loss, is a departure from ordinary practice. It maybe justified in special cases, P. M M 530 ARTICLES OF ASSOCIATION. [ChAP. VII. and great numbers of concerns, includiug many banks, insurance companies, and trading companies, do, as a matter of fact, write up some classes of assets from time to time, e.g., when they act on the rule of taking them at market prices of the day ; and it is clear that there is no law against that process. Moreover, there is no obligation to write uj) permanent assets, and even if they are written up it does not follow that the increase in value will be divided. There is no obligation to divide, although there is an obligation not to pay dividends otherwise than out of profits. The single account system follows the practice adopted in an ordinary partnership. In such a partnership there are no profits available for division till loss has been made good, and it matters not whether loss is incurred on capital account or revenue account, for it is a question not of revenue, but of profit. No doubt, with the consent of all the . partners, the revenue, or, for that matter, the capital, can be divided without making good the loss; hut primd facie a loss has to be made good out of subsequent earnings or fresh contributions, or must be written off, before divisible profits can be made. So, also, upon a dis- solution of an ordinary partnership nothing can be taken by way of profit until lost capital has been made good. See the Partnership Act, 1890 (53 & 54 Vict. c. 39) ; Nowell v. Nowell, 7 Eq. 538. And in Rishton v. Grissell, 5 Eq. 326, where an agreement had been made that the plaintiff, as manager, should-have a percentage on the profits of the defendant's business, it was held by Page -Wood, V.-C, that the defendant was entitled to charge the profit and loss account in every year with sums representing the depreciation arising from the running out of the lease and the waste of plant and machinery. It is, therefore, not surprising that the single account system should have been so generally adopted by companies, " for, after all, these companies are commercial partnerships, and are, in the absence of express provisions, statutory or otherwise, subject to the same con- siderations." Per Jessel, M. E., Griffith v. Paget, 6 C. D. 515. And see cases siqrra, pp. 513 <^; seq. 2. Double " 2. — 2'he Double Account System. account syetem. According to this system, the profits of an undertaking are the excess of revenue receii)ts over expenses properly chargeable to revenue account ; the capital account and revenue account are to be kept distinct, and for the purposes of determining the profits, we are to disregard accretions to or diminutions of capital ; and, accordingly, loss on capital account 7iec(l not, whereas loss on revenue account must, 1)0 made good out of subsequent revenue or otherwise. The principal objections to this system are — 1 . That it draws a distinction between loss on capital account and loss on revenue account, which appears to have no foundation in principle. now PROFITS ARE TO BR ASCERTAINED. 531 Wh}^ should it be necessary, in determining" profits, to make good out of revenue a loss of capital on revenue account if it is not necessary to make good a loss on capital account ? Why should it be necessary to make good gradual loss, and yet not necessary to make good a sudden or extraordinary loss ? The result of the loss in either case is exactly the same, namely, that the paid-up capital is j^ro tanto "diminished. On what principle, then, is the distinction between gradual and sudden loss to be supported? It is not supported by the cases. The views expressed by the Lords Justices, in Lee v. Neuchatel Co., and Verner v. General and Commercial., 6:c. Trust, infra, and in Bosariquet v. St. John Del liey Co. (1897), 77 L. T. 207, are opposed to any such distinction. 2. Another objection to this system is, that it lays down as an arbitrary rule that "accretions to capital " are to be disregarded in determining profits ; but there is no authority for such a proposition, and the every-day practice of the commercial world negatives the existence of such a rule ; and now the Courts have held that there is no such rule. Lubbock v. British Bank of South America, (1892) 2 Ch. 198; Verner v. General and Commercial, &,'c. 'Trust, (1894) 2 Ch. 239. 3. Another objection is, that it does not even require loss of cii-cu- lating capital to be made good, whereas, at any rate to this extent, the Court of Appeal considers that loss must be taken into account. See the case last mentioned, and infra, p. 536. 4. A further objection is, that it assumes that every compan}- has a capital account and a revenue account, whereas such a mode of ascer- taining profits is only adopted by a comparatively few concerns, such as tramways, trust investments, and other companies of a special character. 3. — The system approved by the Court of Appeal inljQQ r. Neuchatel Co., 3. Double 41 C. Div. 1. account system ^Ooiirt In that case the company had a nominal capital of 1,000,000/. in 10/. ^^ Appeal). shares, and had issued the whole of these shares as fully paid up, as the ^^^ J/j„^^; q^ consideration for the transfer to it of an asphalte concession, and other assets. It was alleged by the plaintiff, but not proved, that the con- cession and assets had become depreciated, and that a large part of the capital had been lost, and that the company ought to be restrained from paying a dividend (which it proposed to pay out of its revenue) until the loss, or depreciation had been made good. It was, however, held by the Court of Appeal, affirming the decision of Stirling, J. — (1) that there was not sufficient evidence of dej^reciation or loss ; (2) that if the property of the company was not sufficient to make good its share capital, there was no obligation to make it good out of revenue ; and (3) that although the property was a wasting property, there was no obligation to make any provision for depreciation. Cotton, L. J., it is true, treated the case as special. " Of course the present case is very M M 2 532 . ARTICLES OF ASSOCIATION. [ChAP. VII. different from that of a company where money has been paid on all the shares. That case is open to different constructions. All that was taken by the company from the first were the assets." But his Lordship agreed that there was no obligation, under the Act of 1862, to make good lost capital out of revenue. And Lindley, L. J., considered that it was wholly immaterial whether there had or had not been a loss or depreciation of capital, inasmuch as a company may apply its net revenue to payment of dividends, even if it has lost the whole of its capital ; and Lopes, L. J., concurred, being of opinion that cajiital and revenue accounts are distinct, and that for the purpose of determining profits, accretions to and diminu- tions of capital are to be disregarded. In the above case Lord Justice Lindley put the case of a company which had sunk 250,000/. in acquiring a property "which, if put up for sale, would, perha^DS, not yield 10,000/.," and said that in such case — " So long as they pay their creditors there is no reason why they should not go on and divide profits, so far as I can see, although every shilling of the capital may be lost." And again his Lordship said — " If a company is formed to acquire and work a property of a wasting nature — for example, a mine, a quarry, or a patent — the capital expended in acquu-ing the proi^erty may be regarded as sunk and gone, if the company retain assets sufficient to pay its debts. It appears to me there is nothing whatever in the Act to prevent any excess of money obtained by working the property over the cost of working it from being divided among the shareholders, and this, in my opinion, is true, although some portion of the projjerty itself is sold, and in some sense the capital is thereby diminished. If it is said that such a course involves payment of dividend out of capital, the answer is that the Act nowhere forbids such a payment as is here supposed. . . . But it is, I think, a misapprehension to say that dividing the surplus, after payment of expenses of the produce of your wasting property, is a retui'u of capital in any such sense as is forbidden by the Act." According to this system, no balance-sheet is necessary in order to ascertain profits ; all that you want is an account of income and ex- penditure. And, although a company may not directly pay dividends out of capital, there is not the slightest objection, in point of law, to its doing so indirectly, for there is nothing in the Act to prevent that. If a company with a paid-up capital of 100,000/. likes to buy, say, ten acres of coal for 100,000/., and works one acre per annum, and, after paying expenses of raising the coal and of management, has, say, lo,000/. per annum in hand, that sum is profit available for dividend, and tliorc is no obligation on the company to treat any part of it as capital, and when at the end of ten years the 100,000/. has disappeared and the capital has become reduced to nil, we are not to regard this as a reduction of capital proliibited by the Act ! Yet it is obvious that each year's income includes a return to the company of part of its capital outlay, and tliorefore that the company each year j)ays dividend out of capital. HOW PROFITS ARE TO BE ASCERTAINED. 533 Lord Justice Linclley's great oniiuenco as an export in tlio law relating to partnerships and companies compels attention to the views expressed by liis lordship as above. But there can be no doubt that the views so expressed came as a surprise both to lawyers and to accountants, and to business men generally ; for tlie impression had very generally prevailed that lost or depreciated capital must, unless written off, be made good before income could be treated as profit. It must be admitted that the sj-stem propounded by the Court of Appeal is not unlikely to mislead the public, and especially those who deal with a company in reliance on its having its paid-up capital available, undiminished by dividend amongst its shareholders. Tt goes far to render the protection supposed to be afforded by the Act a delusion and a trap, for by investing in a wasting security and dividing the whole returns, it can, more or less, speedily divide its assets amongst its shareholders ; thus, in effect, withdrawing it from the limited fund to which the creditors have a right to look : and it may do this without the sanction of the Court, and without any of the formalities prescribed by the Companies Acts, 1867 and 1877, and without any notice to the creditors or the public. According to the views expressed in Lee v. Neuchatcl Co., 41 C. Div. 1, the mode in which profit is to be ascertained is by tlie law left to the particular company, and there is no objection to a clause in the articles of association to the effect that a company shall not be bound to make good wasting property, or that the net revenue shall be avail- able for dividend, notwithstanding loss of capital. It is clear, however, that the articles cannot effectually authorize that which would amount to a reduction of capital. Trevor \. Whitioorth, 12 App. Cas. 409 ; lie Sharpe, (1892) 1 Ch. 154. And this being so, it is not easy to conceive that they can effectually sanction that which is only an indirect mode of authorizing the return of capital. It must, however, be borne in mind that Lindley, L. J., appears subsequently to have modified to some extent the views above referred to, and it has become abundantly clear that those views are not shared by some other learned judges, and that they do not commend them- selves to the common-sense of accountants, economists, or business men in general. Thus we find Chitty, J., adopting an entirely different rule as to the proper mode of ascertaining profits (p. 525) ; we find Stirling, J., following Lee v. Neiichatel with hesitation (p. 535), and evidently against his own judgment ; we find Kay, J., in effect (p. 526), disclaiming the doctrine laid down by Lindley, L. J. ; and we note much unfavourable comment from accountants and others ; and every one knows that Eigby, L. J., whilst at the Bar, advised, on more than one occasion, that income was not profit when it was counter- balanced by loss or depreciation. 534 . ARTICLES OF ASSOCIATION. [CllAr. VII. Palgrave. The following observations in Palgrave's Dictionary of Political Economy, sub-tit. " Capital," are in point : — " Legal riiliug tliat capital need not be rei^laced from jirofits.— A trader's assets are in most cases wholly or partly of a perishable nature. Before ascertaining the profits derived from such assets in a given year, provision ought to be made for the depreciation estimated to have taken place during that year. If, for instance, a person vfIio invested 1,000^. in the purchase of a patent having five years to run, and jiroducing an annual profit of 500/., treats the whole of the annual 500/. as the profit of the respective year, he will find at the end of the five years that his source of income has disappeared. If, on the other hand, at the end of each year a sum of 200/. is carried to the credit of a sinking fund, and the remaining 300/. only are treated as income, the ovnier of the patent will, at the end of the five j^ears, be able to invest his original 1,000/. in some other profitable manner. Where the facts are so very plain this seems almost a truism, but in many cases it is more difficult to distinguish between income in the proper sense and repaj-ment of capital. The inquiry ouglit, however, always to be made and acted on. The importance of taking the depreciation of property into account in ascertaining the profits of a given year is even more obvious in the case of a comjiany than in the case of a private individual. The gradual disappearance of wasting property must, in the end, materially damnify preference shareholders, debenture holders, and ordinary creditors, and must also cause great injustice as between the persons entitled to the income of shares for limited periods and the persons ultimately entitled to the property of the shares. It seems strange that, although the integrity of the capital of limited companies is in other directions most jealously watched by our Courts, the greatest laxity is allowed with reference to the valuation. of assets of a wasting nature. In the leading case of Lee v. Xcuchatcl Aspludte Co., 41 C. D. 1, it was held by the Coiu't of Appeal that ' there is nothing in the Companies Acts to prohibit a company formed to work a wasting property, as, e.ff., a mine or a patent, from distributing as dividend the excess of the proceeds of working above the expenses of working, nor to impose on the company any obligation to set apart a sinking fund to meet the dejire- ciation in the value of the wasting property.' " The following observations of Lord Justice Lopes deserve special notice : — " It is said by the api^ellant that a company is not at liberty to pay a dividend imless they can show that their available firoperty, at the time of declaring the dividend, is equivalent to their nominal or share capital. In my opinion such a contention is untenable. Where nominal or share capital is dimin- ished in value, not by means of any improper dealing with it by the company, but by reason of causes over which the company has no control, or by reason of its inherent nature, that diminution need not, in my opinion, be made good out of revenue. The result of the doctrine so laid down may be illustrated by an examjile. A company having invested the whole of its capital in licensed premises, at a price securing an excellent return during the continuance of the licence, divides the whole of the net revenue in each year among its shareholders. The licence is withdrawn before the dividend for the last year has been declared. This is a diminution of the value of the company's i)roperty " by reason of causes over which the company has no control" ; and the company may divide the whole of the last year's profit among the shareholders, although the value of the laud and buildings, since tlie withdrawal of the licence, is far below the amount of the debts owing by the comjiany. We are bound to bow to the ruling of the Court of Appeal, and must therefore assume that tliis result is in accord- ance with the Companies Acts, but economically it cannot be considered sound ; while from the point of view of persons having dealings with limited companies, and relying on the correctness of their annual balance-sheets, it is highlj' inconvenient ; and further, it contradicts every smmd princii)le of business aTul book-keeping." See also the article on " Depreciation" : ibid. Venicrv. 4. — The System approved hj the Court of Appeal in Vernor v. General General )lo business dies. There are comjietent managers, but tlie owner's sons are not inclined to devote themselves to the concorn, or to incur tlio unlimited liability involved in carrying INTKODUCTORY NOTES. rp^7 it on through, managers. Accordingly they convert it into a private company. 6. Another example is given by a very great lawyer (Sir G. Jessel)."* "A man dies, leaving his property to three or four sons. He is the senior partner in a concern. If the capital were taken out the concern would be ruined. The junior partners cannot go on ; they say to the children who are not in the business, and who have suc- ceeded to large fortunes, ' If you shut up the business you will lose a great deal ; let us form it into a limited company, which will enable you gradually to draw out of the concern, and, in the meantime, it can go on as usual.' I have known that done with great success." 7. A capitalist is willing to supply a person or a firm engaged in trade with additional capital in consideration of a share of the profits, but does not wish to incur the liabilities of partnership. He therefore stipulates that the business shall be converted into a company. He will then bring in the additional capital by taking shares in the com- pany to the amount agreed on, and paying for the same in cash. In such a case the capitalist very commonly stipulates that he or his nominee shall be one of the directors for a term of years, and some- times that the shares shall be preference shares. 8. A., B., and C. are trading in partnership as shipowners, and are entitled to several steamships or other vessels. By the negligence, misconduct, or imprudence of their servants, they may be involved in litigation and personal responsibilities of the most onerous character, e.g., in respect of loss of life, of damage to other ships or to mer- chandise, caused by collision or otherwise. They desire to get rid of all personal liability, and to throw upon each vessel the liabilities incurred by or in respect thereof. Accordingly, each ship, with the business connected therewith, is converted into a private company, and the members of the firm become managers of the company. Henceforth the assets of the company must bear the liabilities. Great numbers of such single-ship companies have been formed during the last twelve years. 9. A., B., and C. are entitled to a valuable business. By reason of a temporary lock-up of funds or otherwise, they find it necessary to consult their principal creditors. Bankruptcy, with its expensive machinery and discredit, would be disastrous to all concerned, and more especially to the creditors. Accordingly the concern is converted into a company, the smaller creditors are paid off in full, and the principal creditors all take debentures for their debts, and are given paramount control in the management of the company. The concern is thus placed on its legs, and as and when practicable the debentures are cleared off, and meantime the creditors have the fullest security * Select Committee (1877) of House of Commons on the Companies Acts, 1862 and 1867. Mins. of Ev., Answers 2307, 2309. 558 PRIVATE COMPANIES. [ClIAP. VIII. tliat it is possible to give them, and are able in fact to manage their own affairs and protect their own interests. 10. A. and B. have for many years had the exclusive sale in England of a commodity manufactured abroad by C. and D. Each firm has made large profits, and they are disposed to combine their interests. Accordingly, they convert the two concerns into a company, and get shares in the company in proportion to their average profits during the last five years. 11. A builder has taken land and erected large numbers of houses. Of these he has sold some, but the bulk he has let and then mort- gaged. After paying the ground rents and interest on the mortgages, the property returns a considerable margin of income; but the builder's interest is not easily dealt with, and his profit, represented by the equities of redemption, is in fact locked up. He wishes to facilitate the realization of his interest, and to get some easily dealt with repre- sentative thereof. Accordingly, he vests the property in a private company, and receives in exchange debentures and paid-up shares. These he sells or pledges as he may think fit, and they, of course, are much more readily dealt with than equities of redemption. The above are all cases of conversion, but great numbers of private companies are formed to establish some new business or carry out some special operation, or transaction, or adventure. - The following are examples : — 12. A., B., and C. desire to start a newspaper, or to supply a village or town with waterworks, or to build a theatre or a town hall, or to acquire and work a building estate, or to provide a race-course or a cricket ground or swimming baths, or to erect some flats or workmen's dwellings ; but they do not wish to incur unlimited liability. Accord- ingly they register a private company and take up shares thereof to the extent of the capital which they are disposed to embark, and each of the subscribers becomes a director, and further funds, if wanted, are raised by the issue of further shares or of debentures. 13. A., B., and C. desire to purchase and work a shij), and place it under the management of a particular firm in whom they have con- fidence ; but they are not prepared to incur the serious responsibility attached to the ownership of a sliip by individuals. Accordingly they form a private company, in which they take up shares so far as may be necessary to provide the purchase-money for the ship. The com- pany then acquires the ship, and the firm are appointed to be agents for the working of the business. 14. A., B., and C. desire to establish a manufacturing or commercial business. Each has some capital, but one of them does not relish the notion of unlimited lia])ility. Accordingly it is agreed that instead of going into jjartnorship they shall form a private company and carry on the business on that footing, each contributing his portion of the capital, and taking part in the management. INTRODUCTORY NOTES. o59 15. A. is a public contractor with great resources and reputation. B. and C. are competent and trustwortliy contractors, but with limited means. They are anxious to undertake some contract, and apply to A. for assistance, offering him a large share in the profits if he wiU contribute a certain portion of the needed capital, and give his advice and assistance. A. is not prepared to go into partnership with those gentlemen, and thus i:)lace his great fortune at their mercy, and accordingly ho stipulates for the formation of a private company to carry through the transaction, and offers to subscribe for shares therein, B. and C. undertaking the whole management of the business. 16. A. and B. have carried on business for many years in South America as agents and consignees for a large number of English manufacturers. A. and B. have stopped payment and become insol- vent, and their affairs are in confusion. They are largely indebted to the English manufacturers, and hold goods belonging to them which have been consigned for sale. A. and B. are also largely indebted to local creditors who claim priority, and who have attached not only the goods of A. and B., but also the goods consigned. The English manufacturers determine to co-operate for mutual protection and benefit. Accordingly they form a private company, make over their claims to such company, and receive in exchange shares and deben- tures, or a common stock of nominal amount, constituted by a trust deed, which pools all the claims and securities. The company then apj)oints a competent agent to i)rotect and enforce the interests of all the English creditors, or of the company as their transferee, and to enforce their rights ; and, further, to estabhsh and work an agency for the further sale of goods to be consigned by the EngHsh manu- facturers. 17. The members of a club wish to provide the club with suitable buildings. Accordingly a private company is formed, and the requi- site funds are raised by the issue of shares and debentures, and the club pays a rent for the use of the buildings. 18. A foreign firm sells large quantities of its products in the United Kingdom. It desires to establish an agency here without incurring more than a limited liability. Accordingly it forms a private company here, and appoints its agents to be directors thereof. In the case of a syndicate, it commonly happens that the parties, &c. who form it desire not to disclose at first its main iiur2)ose. Thus, suppose A., B., and C. wish to form a syndicate to send out an agent to acquire a concession for the construction of a particular railway, or for the purchase of mines in a particular district. If the objects of the company expressly include this object, the result may be to raise up rivals, and to prematurely disclose the scheme. The danger or inconvenience can, however, be readily avoided by exj)ressing the objects of the syndicate in general terms, e.g., to acquire any conces- sions for the construction of railways, tramways, docks, or harbours, &c. 560 PRIVATE COMPANIES. [ChAP. VIII. Moreover, if desired, the capitalists who are finding the requisite funds can be kept in the background, as the shares can be held by their trustees or nominees. Various other cases for syndicates are mentioned above, p. 80. Procedure. Where the ad valorem stamp duty would be heavy a special course of procedure may be necessary to avoid or minimise it ; but we shall now proceed to describe the ordinary procedure to be adopted in the establishment of private companies, whether of Class A. or Class B. {supra, p. 547). First as to Class A. : — 1. Let us take a case of conversion. Where it is desired to convert a going business into a private company the first step is to ascertain the value of the business. To arrive at this a valuation will be made of the assets of the firm, including the goodwill, the stock-in-trade, business premises, moneys, bills, notes, and book and other debts due to the firm ; and an account will be taken of the debts and liabilities of the fii'm. The valuation and account are sometimes made and taken by the owner or owners, and sometimes by some person appointed by him or them. Very commonly the valuation and account are not made or taken in a detailed manner, but the position is fairly estimated, regard being had to the last balance-sheet. In the present case we will suppose that the partners come to the conclusion that the assets are worth 200,000/., and that the debts and liabilities amount to 42,000/., so that the net value of the business is 158,000/. The next point is to settle the limit of liability which the partners desire to fix, for on this depends the most important term of the agree- ment. In many cases of conversion the owners of business concerns, whether sole or in partnership, desire to incur no personal liability to the creditors of the company ; they are willing to hand over the busi- ness with its assets and liabilities to the company, but desire, if the company should turn out to be unsuccessful, not to be under any personal liability to pay its debts ; they wish the remedy of the creditors of the company to be exclusively against the assets of the company. Where this is the desire of the parties, the conversion must be effected on the footing that the owner or owners shall receive the value of the business in fully paid-up shares. Upon such shares there is no personal liability. They entitle the holder to votes and dividends, but no call can be made on him. Sometimes, however, a person may be willing, besides making over his business or a share of a business to a company, to incur a personal liability to a limited extent, e.g., suppose a man desires to convert his business, valued at 10,000/., into a company, and is willing to incur a liability to supply 2,000/. addi- tional working capital if required ; in such case the conversion will be effected on the footing that he shall receive 2,000 shares of 6/. each, with 5/. per share credited as paid up : ho will thus be liable to pay up tlio balance of 1/. per share, viz., 2,000/., when required, but will be under no further lialjilitv. INTRODUCTORY NOTES. ''j<>l 2. When the company is formed to take over and complete a single • transaction, the preliminary steps are of a similar character. Then suppose that the transaction is a contract to erect an exhibition ; the value of the contract will bo ascertained, and the owners will receive paid-up or partly paid-up shares of equal value. Secondly, as to private companies of Class B. {supra, p. 547), i.e., to establish or undertake some new business, transaction, or operation. In such cases the persons interested fix the amount of the capital of the company, and the amount to be contributed by them respectively, and whether they are to pay up at once, or by instalments, and what property (if any) they are to make over to the company, and for what consideration, and what will be their duties ; and having settled these matters, they proceed to form the company accordingly. The preliminaries having been settled, the further course of procedure will be as follows : — 1. Settle and sign a preliminary agreement defining the terms of conversion, if such agreement is considered expedient. (See Form 262.) 2. Settle and sign the memorandum and articles of association and the agreement for transfer to the company. (See pp. 576 to 601, itifra.) 3. Eegister the company, and then let it enter into an agreement with the vendors, and let that agreement be carried into effect. (See p. 575, infra.) Conversion commonly involves some ad valorem duty, but this may, Stamp duty. in some cases, be avoided or minimised. And it is well settled that persons are perfectly free, provided they comply with the law, to adopt that course which will best enable them to avoid or minimise the duty. " It is no fraud on the Crown ; it is a thing which they are perfectly entitled to do." Per Lord Esher, M. R., Commissioners of Inland Revenue v. Atigus, 23 Q. B. Div. 579. It must, however, be left to the practitioner to point out the various expedients open ; for to specify them here would be to invite further unjustifiable intervention. Where a business is converted into a company it is usual to send Notice of out a notice to customers — and, in the case of an important concern, to ^°^^^''^°°- procure the insertion of a paragraph in the money article of some of the leading newspapers — stating that the business has been converted into a company, with a capital of so much, and that the shares have all been taken up by the partners and their relations, or as the case may be. The following is a specimen of a circular : — Form of circular. A., B. and C, Limited. Sib, — We beg to inform you that we have converted our business into a limited company bearing the above name. The object of the conversion is to secure the many advantages incident to incorporation, and more especially to avoid the dislocations and inconveniences ivhich the death or retirement of any partner might cause. P. O O 562 PRIVATE COMPANIES. [ChAP. VIII. Companies limited hj guarantee. The capital of the company has been fixed at 600,000/., divided into GO, 000 shares of 10/. each, the whole of which are appropriated to ourselves as fully paid up in substi- tution for our interests in the business. The directors of the company are A., B., C. and D., and D. has been appointed to the office of managing director. All debts and liabilities of the firm are undertaken by the company, and all debts due to the film are to be paid to the comjoany. The conversion mil not affect the general conduct of the business, which will be carried on as heretofore, and we trust that the satisfactory relations which have here- tofore subsisted between you and the firm will continue to subsist between you and the company. We have the honour to remain, Yours faithfvdly, A., B., C. & Co. Companies Limited by Guarantee. When a private company or syndicate is to be formed for some temporary purpose, e. g., to acquire patent rights and test the inven- tion, and to sell and divide the proceeds, it is now not uncommon to register the concern as a company limited by guarantee, and without a share capital. This is a mode of formation much more elastic than the ordinary mode. Though there is no capital divided into shares, it is easy to place the members in as good and convenient a position as if they held shares in a capital. The guarantee is no hindrance. It may be made merely nominal, e.g., a liability on each member in the event of a winding-up to pay, say II. Where this mode of incorporation is adopted, it is possible to enable the company to divide any of its assets (whether in the nature of capital or pro- fits) by way of dividend, and to do a variety of other things which, in the case of a company formed in the ordinary way, are not permissible. See further, supra, pp. 293, 474 — 480. Cases. Trevor v. Whitworth. (Reduction of capital by company purchaHing shares. ) Foster v. C'ommisnioners. (Stamp duty on Hale agree- ment.) Cases as to Private Companies. The following cases as to private companies may be mentioned : — Trevor Y. Whitworth, 12 App. Cas. 409, in which the articles of association of a private company, limited by shares, contained power to purchase its own shares. Acting on this power the directors bought up the shares of one of the members, bo7id fide thinking that it was to the interest of the company so to do. Held, that the purchase in- volved, in effect, a reduction of the capital of the company, and was therefore ultra vires and illegal. In that case Lord Macnaghten said : — " It is said that the company was a family company, but a family company, whatever the expression means, does not limit its trading to the family circle. If it takes the benefit of the Act, it is bound by the Act as much as any other company. It can have no special privilege or immunity. It was said that the board did not want Wlutworth's shares to be sold to outsiders or put on the market. Unfortunately there was nothing apecial in that." Foster V. Commissioners, (1894) 1 Q. B. 516. In this case it was held that an agreement in writing to transfer a business to a company in consideration of shares was, in effect, an agreement for sale within the INTRODUCTORY NOTES. 563 Stamp Act, 1801. It was contended that in substance the vendors sold to themselves, hut the Court held that the company being a separate entity was the purchaser, and that it was not possible to disregard the fact and treat the members as the company without disregarding the settled legal distinction between the members and the company of which they are corporators. In re Newman &,• Co., (1895) 1 Ch. 685. In this case one Newman In re Newman had converted his business into a private company, and had applied (Pplgnt t funds of the company to ultra vires purposes. This was done with the director ti'ird privity and consent of the other members, and it was contended that ^"**-) as it was a private company no objection should be made to such transactions, but it was held otherwise. The following extracts from the judgment of Lindley, L. J., are in point : — " It is true that this company was a small one, and is what is called a private company, hut its corporate capacity cannot he ignored. Those who form such companies obtain special advantages, hut accompanied by some disadvantages. A registered company cannot do anything which all its members think expedient, and which, ajjart from the law relating to incoi-porated companies, they might lawfully do as incorporated. A com- pany's assets are its property, and not the property of the shareholders for the time being ; . . . Mr. G. Newman and his co-directors evidently ignored their legal position entirely. They regarded Mr. G. Newman as the company, and it never seems to have occurred to them that he and his brothers could not do as they liked with what they regarded as their own property, or, rather, as his, for he and his children held the bulk of the shares. If this view were correct in point of law — if the body corporate could be disregarded — it would follow that Mr. G. Newman and his brothers would be liable without limit for the debts which were contracted in the name of the company. This would be a just and proper result to arrive at, but the Court is precluded by the terms of the Companies Act, 1862, ss. 191, 192, from adopting it. The Court is bound to recognize the company as incorporated, and to give effect to all the consequences of such incorporation." Salomon v. Salomo7i &,- Co., (1897) A. C. 22. One-man and other Salomon x. small companies. In common parlance, a "one-man company" is a '^^ ''"'^" y' ^''• company in which all, or practically all, the shares belong to one man, company e.ff., where the capital is divided into 100,000 shares, and 99,994 of ^^S^^-^l them are held by one man, whilst the remaining six belong to other persons more or less subject to his influence, as his clerks or relatives. A "two-man company" has a corresponding meaning. Thousands of private companies have been formed within the last quarter of a century having the great bulk of their share capital in the names of one, two, three, four, or five principal shareholders ; the other members holding only one share apiece, and being mere nominees of the principal shareholders or shareholder; and until the year 1894 no doubt was openly expressed as to the regularity of the constitution of such companies. In that year, however, in the case of Broderip v. Salomon, (1895) 2 Ch. 323, the regularity of constitution of a so-called " one-man company" was impeached in the High Court of Justice. The facts of that case, shortly stated, were as follows : Salomon, a solvent leather merchant, owned a profitable business, and in order to o 2 564 PRIVATE COMPANIES. [ChAP. VIlI. obtain the advantages of limited liability {supra, p. 547 et seq.), he determined to convert his business into a private company. Of the shares in the capital he took 20,000, and his wife and sons and daughter each took one. No one else ever had a share in the company. He also received mortgage debentures for 10,000^., as part of the consideration payable to him for the transfer of the business. These debentures he mortgaged to one Broderip as security for a loan. The boot trade later on became unexpectedly depressed, and at the end of the year the com- pany got into difficulties. Broderip then brought an action to enforce the debentures, and a winding-up order was shortly afterwards made against the company on another creditor's petition. There were unsecured creditors to the extent of several thousands of pounds. The learned judge before whom the action came conceived the singular notion that the company, although duly incorporated, was a sham, and that, although it was a distinct entity, it was a mere alias of Salomon, and he decided in effect that, in the circumstances, Salomon was bound to pay the unsecured creditors out of his own pocket, although his shares had already been paid up in full. The case then went to the Court of Appeal, and was re-heard by the Lords Justices Lindley, Lopes, and Kay, who, strange to say, affirmed the decision, and in doing so expressed views of a still more remarkable character. Lindley, L. J., said: "The legislature never contemplated an extension of limited liability to sole traders or to a fewer number than seven Although in the present case there were, and are, seven mefabers, yet it is manifest that six of them are members simply in order to enable the seventh himself to carry on business with limited liability. The object of the whole arrangement is to do the very thing which the legislature intended not to be done." And Lopes, L. J., said : "It was never intended that the company to be constituted should consist of one substantial person and six mere dummies, nominees of that person without any real interest in the company. The Act contemplated the incorporation of seven indepen- dent bond fide members who had a mind and will of their own, and were not the mere puppets of an individual who, adopting the ma- chinery of the Act, carried on his whole business in the same way as before, when he was a sole trader." And Kay, L. J., said : "The statutes were intended to allow seven or more persons, hond fide associated for the purposes of trade, to limit their liability under certain conditions and become a corporation, but they were not intended to legalize a pretended association for the purpose of enabling an individual to carry on his own business with limit<'d liability in the name of a joint stock company." The views thus cxjtrosscd created great anxiety and doubt, and some consternation, in tlu" iniuds of those who were interested in private companies. ITowover, company lawyers soon arrived at the conclusion that the INTRODUCTORY NOTES. 565 decisions of both Courts were erroneous, and that the views expressed by them were unsound, and in the next edition of his work "Private Companies " the author ventured to make the following observations : " Grave doubts exist whether the views exiircsscd iu these dicta are well founded. It is pointed out, that there is not a syllable in the Act to show that it was intended to enact that limited liability should be conditional on there being, and continuing to be, seven members ' beneficially ' or ' substantially ' interested in the company ; and it is argued, with some reason, that if the Legislature had intended to impose such a con- dition it would have said so in i^Iain terms. Again, it is said that, if this was the intention, it is very singular that s. 48 of the Act says not a word on the subject. That section provides that if any company under the Act carries on business when the number of its members is less than seven, for a period of sis months after the number has been so reduced, any pei'son who is a member of such company during the time that it so carries on business after such period of six months, and is cognizant of the fact that it is so carrjang on business with fewer that seven members, shall be severally liable for the payment of the whole of the debts of the company contracted during such time. *' If the intention was as suggested, it would have been easy to deal with the matter in this section, and use the phrase, 'members beneficially and substantially interested,' with a proper definition of the word ' substantially,' but the section observes a signifi- cant silence. " Further, it is said that if the law be as suggested, the Legislature has, in effect, laid a trap for the unwary, for it offers limited liability conditionally on there being seven members, without a word as to ' beneficial ' or ' substantial ' holding ; and j-et, if the dicta be good law, a shareholder may find that he is under unlimited liability, because his interest, compared with that of the other members, is too large. " Again, it is said that it is a well-settled rule in the interpretation of Acts of Par- liament that what an Act does not prohibit may be done, or, rather, that a thing is either prohibited by the Act or is not prohibited, and that, in the latter case, there is no obligation not to do what the Legislature has not really prohibited (6 H. L. C. 338 ; L. E. 8 C. P. 64) ; and that it is the duty of the judges to interpret, and not to legislate or to provide for cases which the Legislatui-e has not thought fit to i^rovide for (1 C. D. 161) ; and it is said, that the dicta iu Broderip v. Salomon in effect go beyond the Act, and depart from this rule, and are therefore to be disregarded. " Nor is it easy to answer these objections and arguments." The event has justified the author's remarks, for the House of Lords, in November, 1896, reversed the decision of the Court of Appeal, and determined that the views expressed by the learned judges there were entirely erroneous and unsound. The noble and learned lords who heard the case were the Lord Chancellor, Lord Watson, Lord Herschell, Lord Macnaghten, Lord Morris, and Lord Davey, and they were unanimously of opinion that a one-man com- pany was not an abuse of the Act, and, d fortiori, that two-men, three- men, or four-men companies were not open to objection. The House of Lords insisted on following the well-settled rule of the common law, that the intention of Parliament is to be sought for in the words of the enactment. "I can only," said the Lord Chan- cellor, "find the true intent and meaning of the Act from the Act itself." "In a Court of Law or Equity," said Lord Watson, " what the Legislature intended to be done or not to be done can only be legally ascertained from that which it has chosen to enact either in express words, or by reasonable and necessary implication." 566 PRIVATE COMPANIES. [ChAP. VIII. '*I know," said Lord Herscliell, "of no means of ascertaining wliat is tte intent and meaning of the Companies Act, except by examining its provisions and finding what regulations it has imposed as a con- dition of trading with limited liabihty." And applying this elementary and time-honoured rule, the Lords held that all the Act required was that there should be seven members, each of whom should hold one share at least ; that this was the con- dition imposed by the statute, and that there was no foundation for the suggestion that such a company was irregular because some or one of the seven members happened to hold a relatively small or a relatively large number of shares, or held them in trust for the other member or members. "The statute," said the Lord Chancellor, " enacts nothing as to the extent or degree of interest which may be held by each of the seven, or as to the proportion of interest or influence possessed by one or the majority of the shareholders over the others. One share is enough, .... If they are shareholders, they are shareholders for all purposes, and even if the statute was silent as to the recogni- tion of trusts, I should be prepared to hold that if six of the seven were cestuis que trust of the seventh, whatever might be their rights hit 67- s€, the statute would have made them shareholders to all intents and purposes with their resj)ective rights and liabilities." As to the objection that the formation of the company was a mere scheme to enable the founder to carry on business in the name of the company, the Lord Chancellor said: " I am wholly unable to follow the proposition that this was contrary to the true intent and mean- ing of the Companies Act. I can only find the true intent and meaning of the Act from the Act itself, and the Act appears to me to give the company a legal existence, whatever may have been the ideas or schemes of those who brought it into existence " ; and as to the suggestion that the whole arrangement was, in the words of Lindley, L.J., "to do the very thing which the Legislature intended not to be done," the Lord Chancellor said : " It is obvious to inquire ' Where is that intention of the Legislature manifested in the statute ? ' It is, of course, easy to say that it was contrary to the intention of the Legisla- ture — a proposition which, by means of its generality, it is difficult to bring to the test If the Legislature intended to prohibit some- thing, you ought to know what that something is. All it has said is that one share is sufficient to constitute a shareholder, although the shares may bo one hundred thousand in number. Where am I to get from the statute itself a limitation of that provision, that the share- holder must be an independent and beneficially interested person ? ... I must decline to insert in the Act of Parliament limitations which are not to bo found there." Lord Herschell said : "It was said that in the present case the six sliaToholders other than the appellant wore mere dumiiiics, his nominees, uud held shares in trust for him. I will assume that this was so. lu INTRODUCTORY NOTES. 567 my opinion it makes no difference. The statute forbids entiy in the register of any trust, and it certainly contains no enactment that each of the seven persons subscribing the memorandum must be beneficially entitled to the share or shares for which he subscribes. . . . We have to interpret the law, not to make it, and it must be remembered that no one need trust a limited company unless he so pleases, and that before he does so he can ascertain, if he so please, what is the capital of the company and how it is held . . . Many industrial and banking companies of the highest standing and credit have in recent years been, to use a common expression, ' converted ' into joint stock companies, and often into what are called private companies, where the whole of the shares are held by the former partners. It appears to me that all these might be pronounced schemes to enable them ' to carry on business in the name of the company and with limited liability ' in the very sense in which these words are used in the judgment of the Court of Appeal. The profits of the concern carried on by the company will go to the persons whose business it was before the transfer, and in the same proportions as before, the only difference being that the liability of those who take the profits will no longer be unlimited. The very object of the creation of the company and the transfer to it of the business is that whereas the liability of the partners for debts incurred was without limit, the liability of the members for the debts incurred by the company shall be limited. ... It is said that the respondent company is a ' one-man company,' and that in this respect it differs from such comj^anies as those to which I have alluded ; but it has often happened that a business transferred to a joint stock company has been the property of three or four persons only, and that the other subscribers of the memorandum have been clerks or other persons who possessed little or no interest in the concern. I am unable to see how it can be lawful for three or four or six to form a company for the purpose of employing their capital in trading with the benefit of limited liability, and not for one person to do so, provided in each case the requirements of the statute have been complied with, and the company has been validly constituted." Lord Macnaghten was equally clear, and said: "There is nothing in the Act requiring that the subscribers to the memorandum should be independent or unconnected, or that they or any of them should take a substantial interest in the undertaking, or that they should have a mind and will of their own, as one of the learned judges seems to think (Kay, L. J.), or that there should be anything like a balance of power in the constitution of the company. In almost every company that is formed the statutory number is eked out by clerks or friends, who sign their names at the request of the promoter or promoters, without intending to take any further part or interest in the matter." And with reference to the suggestion that the promotion of the company, with a view to obtaining limited liability and to the issue of debentures, was objectionable, his Lordship expressed his dissent, and 568 PRIVATE COMPANIES. [ChAP. VIII. said tliat " Among the principal reasons which induce persons to form private companies, as is stated very clearly by Mr. Palmer, in his treatise on the subject, are the desire to avoid the risk of bankruptcy and the increased facility afforded for borrowing money. By means of a private company, as Mr. Palmer observes, a trade can be carried on with limited liability, and without exposing the persons interested in it, in the event of failure, to the harsh j^ro visions of the bankruptcy law. A company, too, can raise money on debentures which an ordinary trader cannot do. Any member of a company acting in good faith is as much entitled to take and hold the company's debentures as any outside creditor. Every creditor is entitled to get and hold the best security the law allows him to take." Thus, the Supreme Court of Appeal has happily removed what threatened to be a serious obstacle to the formation and working of private companies, and a danger to existing private companies, and has once for all disposed of the erroneous views enunciated in the Courts below. He ITragg. Wragg, Limited, 1897, 1 Ch. 796, in which it was held that, where a private company without any independent executive had been formed to acquire a particular business on the terms of a specilied agreement, and had acquired the same in part consideration of shares credited as fully paid up, such shares were to be treated as fully paid up accordingly, "provided," said Lord Justice Lindley, " in that case a limited company does so honestly and not colorably, and provided that it has not been so imposed upon as to be entitled to be relieved from its bargain. It appears to be settled by PelVs case, 5 Ch. 1 1 , and the others to which I have referred, .... that agreements by limited companies to pay for property or services in paid-up shares are valid and binding on the companies and their creditors. . . , Value paid to the company is measured by the price at which the company agrees to buy what it thinks it worth its while to acquire. Whilst the transaction is unimpeached, this is the only value to be considered." And Eigby, L. J., says (at p. 841) in the same case, "I think that the series of authorities cited by Lindley, L. J., beginning with PelVs case, see supra, p. 18:3, have made it impossible, in such a case as above indicated, to inquire effectually into the value of the property taken in exchange for shares where tiie contract itself is not impeached. If those authorities are to be overruled that must bo done by the House of Lords." v'!nadk!/y ^"^^^ Hadley &^' Co. v. Hadley, 77 L. T. 131. In this case the defendant had converted his business into a private company. He hold tlie bulk of the shares. Later on ho parted with some of the shares to friends and others, and lie gradually reduced his hold until finally only 200 shares stood in liis name ; the management fell into other hands, and later on the action was brought against the defendant claiming damage for excessive price paid for goodwill and repayment INTRODUCTORY NOTES. 569 of sums taken by way of remuneration, &c. The action was heard hy Byrne, J., and that learned judge held that as the conversion was honestly effected there was no foundation for the action, which accord- ingly he dismissed with costs. It was contended that the price paid for the goodwill was excessive, and that as the vendor stood in a fiduciary position to the company he must be considered as having acted recklessly and improvidently in allowing the company to pur- chase at a price ascertained upon the footing of there being any value in goodwill, but the learned judge was not satisfied that an excessive price was paid for the goodwill, and observed that " goodwill is a property as to the value of which opinions may materially and honestly differ. It is worth more, if the old management is to be kept up, if the old servants are to be retained — assuming that the business has been well managed and well served — than if the old management is to be new, and untried men are to be employed. But it is material to the value if the old manager and servants retain a substantial interest in the concern, and especially if the expenses of the management are to depend upon the wiU of the purchaser. It depends upon the nature of the business, the expenditure already made in advertisement and establishing the business, the reputation existing, and the probabilities of the market. It depends upon one hundred circumstances. It is worth more to one man than to another. As a matter of fact, in the present case, I am not satisfied that too large a value was put upon it." 570 PRIVATE COMPANIES. [ChAP. VIII. PRIVATE COMPANIES. Agreement by Partners to convert their Business into a Private Company {simple form) . Form 262. AN AGREEMT, &c., between A., of , B., of , and C, of . Wheeeas the sd A., B., and C. have, for many years past, carried on business in partnership together at , under the firm or style of . Ajvd whereas the sd A., B., and C. are desirous of converting their sd business into a coy, and with a view thereto have determined to enter into this agreemt. Now therefore it is declared as follows : — 1. A coy shall forthwith be formed under the Cos Acts, 1862 to 1890, for the acquisition and carrying on of the sd business. 2. The memdm of asson of the coy shall fix the capital at 1., divided into shares of 1, each, and each of the parties hto shall subscribe the sd memdm for one such share, and four other subscribers, who shall each subscribe for one such share, shall be selected by the parties hto. 3. By the arts of asson of the coy (1) the sd A., B., and C. shall be appointed permanent directors, &c., &c. (here insert any other desired special provisions). 4. The parties hto shall enter into an agreemt (hnfter called " the sale agreemt ") with the coy for the sale and transfer to the coy of the business afsd, and all the assets thereof, as from the day of , in conson of fully paid up 1, shares in the capital of the coy, and of the coy undertaking to pay and satisfy all the debts and liabilities of the parties hto in connection with the sd business, and such shares shall be allotted to the parties hto as follows, viz., to the sd A. shares, to the sd B. shares, and to the sd C. shares. 5. The expenses of and incident to this agreemt, and the formation of the coy and the conversion of the sd business, shall be borne by the parties hto in proportion to the shares to which they are to be entld as afsd. 6. The sale agreemt and the sd memdm and arts shall be prepared by Messrs. E. & Co., of, &c., solicitors, on behaK of the parties hto, and if any of the parties hto shall liavo any diflorenco as to the terms of tlio sale agroomt and iriomdm and arts afsd, such difference shall be referred to the arbitration of li. M., of, &c. (barrister-at-law). As witness, &c, FOEMS. 571 Agreement between Brewery Partners and Retired Partner (creditor) prescribing the Terms of Conversion of their Busi- ness into a Company {sanction of Court not required). AN AGEEEMT made the day of , between A., B., and C, Form 263. all of The Brewery, &c. (hnfter referred to as " the proprietors ") ' of the one part, and D., of, &c., of the other part. Whereas the proprietors carry on business as brewers and maltsters Recitals, and otherwise at the Brewery afsd and elsewhere, and in connec- tion with such business are entld to assets of great value : And WHEREAS the sd business was formerly carried on in partnership by the sd D., A., and B. and one E., and upon the occasion of the retirement of the sd D. from such partnership, the sd A., B., and E., by an inden- ture dated, &c., covenanted with the sd D. for the payment to him of the sum of /. at the time and in the manner therein mentd, and for the payment of interest thereon in the meantime at the rate of /. p.c.p.a., and that the sd D. should be supplied with beer during his life free of cost, but not exceeding in value, according to the usual charges, 1, in any one year : And whereas all interest on the sd sum of 1, has been pd up to the day of , and all such beer has been supplied to the sd D. in each year ending the day of , and has since been and is now being supplied in accordance with the sd covenant in this behalf, as the sd D. doth hby admit : And whereas it is desirable to convert the sd business into a coy, and with a view thereto the parties hto have determined to enter into this agreemt. Now therefore it is agreed and declared as follows : — 1. The sd business shall be converted into a coy, and with a view Co. to be thereto the proprietors shall, within weeks from the date hereof, i^^^^ ^ a procure the registration of a coy to be called " L. & Co., Limtd," or Arts, already by some other name selected by the proprietors, and with a memdm Prepared. and arts of asson framed in accordance with the drafts which have already been prepared and approved by the parties hto. 2. The capital of the sd intended coy (hnfter referred to as "the Capital and Coy") shall, as provided by the said memdm and arts of asson, be sliares. 1, divided into preference shares of 1, each, pre- ferred ordinary shares of 1, each, and deferred ordinary shares of /. each. 3. The proprietors shall procure the coy to constitute and secure a Debenture debenture stock of 1., carrying interest at the rate of p.c.p.a., ^toc^ Jo be by a trust deed in the terms of the draft which has already been pre- pared and approved by the parties hto. 4. The proprietors shall forthwith, after the incorporation of the Proprietors coy, enter into an agreemt with the coy in the terms of the afsd ^^^ company 572 PRIVATE COMPANIE.S. [ChAP. VIII. ^orm 263. agreemt, which has already been prepared and approved by the parties to enter into hto, and is referred to in clause 3 of the arts of asson of the coy. ^^^^ o ' 5. The proprietors shall be the first directors of the coy as provided First direc- ^J ^^^ ^^^^ ^^ asson of the coy. tors. 6. Forthwith after the incorporation of the coy a prospectus shall be Prospectus of issued by the coy offering for subscription two-thirds of the sd pre- ture stock. ference shares, and 1, of the sd debenture stock, and such pro- spectus shall be framed in accordance with the terms of the draft, which has already been prepared and approved by the parties hto. Cash shares 7. The proprietors shall (1) procure the allotment to the sd D. of stock toTe^""^ ^' ^^ *^® debenture stock afsd, and of the sd preference shares allotted. of 1. each, credited as fully pd up ; (2) procure the allotment to him jointly with themselves of 1, of the sd debenture stock, and of the sd preference shares of 1, each, to be held in trust as hnfter mentd ; and (3) pay to the sd D. the sum of 1, in cash. Moreover, the sd D. shall have the option, exerciseable at any time within weeks from the incorporation of the coy, of calling on the proprietors to satisfy the sd sum of 1., or any specified portion thereof, by procuring the allotment or transfer to the sd D. of an equivalent amount of preference shares for every 100/. of such cash. Part of stock 8. The sd debenture stock and preference shares to be to be in trust ^Hotted to the sd D., and the proprietors iointly as afsd, shall be held for ex-partner ^ _ ^ j j ' for life, re- by them upon trust to j^ay the income thereof to the sd D. during his mamder to j-f^ ^^^ from and after his death to hold the same, as to both capital proprietors. . . p ■, - . . and income, in trust for the proprietors m equal shares as tenants in common. Cash payment 9. The proprietors shall, out of the cash portion of the i^urchase- *° j^f°*^^ex- ™o^6y payable by the coy, pay to Mrs. E. of, &c., the widow of the partner's sd E., the sum of /., now owing by the proprietors, with all interest, widow) with ^^^ gjjQ -g ^Q have the option mentd in clause of the agreemt option tor her ^ ^ to acquire referred to in clause 4 hereof, in which clause the word " de- interest m positor" means the sd Mrs. E., and if she exercises such option the company -^ in . . , , . instead. proprietors shall procure the coy to enter into an agreemt with her in accordance with clause of such agreemt. Continuation 10. The proprietors shall procure the coy to enter into a binding of supply of agreemt with the sd D. with regard to the supply of beer in accord- partner, ance with the sd covenant in that behalf. Ex -partner to 11. When and so soon as the proprietors shall have performed all releuHo pro- ^j^g obligations imposed on them by the foregoing clauses, the sd D. liis claims. sliall execute a proper release of all his claims under the sd indenture of the of . Power to 12. Unless within weeks from the date hereof the proprietors doteniime this fj}^all have performed their obligations afsd, the sd D. shall be at agreement. ... .. , . , .,. liberty, by notice in writing to the proprietors, to determine this agreemt, and thereupon the same sliall bo at an end, and all parties shall bo remitted to the rights they had previous to this agreemt. FORMS. 573 13. All costs, charges, and expenses in relation to the formation and Form 263. establishment of the coy are to be pd by the proprietors as provided Costs of c by the sd agreemt referred to in clause 3 hereof. vemon tc 14. [Service of notices as in clause 15 of Form 24, sttpra.~\ prietors. As WITNESS the hands of the sd parties hto. Notices. on- Agreement heticeoi rART>fERS (Old Trustees of other persoiis interoi^tcd and otIierHfor Conversion of a Business {subject to sanction of the Court). AN AGEEEMT, made, &c., between A. B., of, &c., of the first part; Form 264. B. C, of, &c., of the second part; C. 1)., of, &c., of the third part; K. L , of, &c., widow, M., the wife of X. Y., of, &c., E. E., of, &c., G. H., of, &c., and M. N., of, &c., spinster, of the fourth part ; and the sd X. Y. of the fifth part. Whereas the sd A. B. and B. C, together with D. E., late of, &c., brewer, &c., deceased, formerly carried on in co-partnership under the style of, &c., the business of brewers and otherwise at afsd and elsewhere pursuant to arts of partnership dated, &c. : And whereas the sd D. E., by his will dated, &c., disposed of his share and interest in the sd premises to the sd C. D. upon the trusts therein mentd : And WHEREAS the sd testator died on, &c., and his sd will, unrevoked and unaltered, was duly proved, &c., and shortly afterwards the sd 0. D. was admitted into the partnership as the legatee in trust of the share of the sd D. E. : And whereas the parties hto of the fourth jiart are beneficiaries under the sd will in respect of the share and interest of the sd testator in the sd business : And whereas jiursuant to the sd arts of partnership the sd A. B., B. C, and C. D. have, since the death of the sd testator, carried on and are carrying on the sd business in co-partnership : And whereas it is expedient to convert the sd business into a coy limtd by shares, and registered under the Cos Acts, 1862 to 1890 : And whereas it is contemplated that after such conver- sion has been effected the sd C. D. shall be relieved of the trusteeship of the sd will, and that the sd X. Y. and N. 0. of, &c., and one other person to be nominated under the sanction of the sd X. Y. and N. 0. "hy the sd G. H., videlicet, P. Q. of, &c., shall be appointed trees thereof : And whereas the sd X. Y. has agreed to act as the repre- sentative of the parties hto of the fourth part for the purposes thereof. Now IT IS HBY agreed as follows : — 1. The sd business shall with all convenient sj^eed be converted into conversion. a coy, which shall be registered as a coy limtd by shares under the Cos Acts, 1862 to 1890, and the parties hto of the first three pts, in conjunction with the sd X. Y. as such representative as afsd, may in due course take steps to register the same accordingly. 574 PRIVATE COMPANIES. [CllAP. VIII. Form 264. Capital of company. Special pro- ■vnsions in articles of association. General' framing of memorandum and articles. Business to be valued. Agreement to be entered into with trustee of company. Consideration for sale to company. Fully paid-up shares to partners. Other paid-up sharea to bo held on trusts of the will. 2. The capital of the coy shall be of such amount as shall be fixed by the parties hto of the first three jits in conjunction with the sd X. T. as such representative as afsd. 3. The arts of asson of the coy shall contain piovisions (amonget others) to the following effect : — (1) For the acquisition of the business afsd on the lines of the agreemt hnfter mentd. (2) et seq. {^Set out other special i^rovisions.) 4. Subject to the foregoing provisions the memdm and arts of asson of the coy shall be in suitable form, to be approved by the parties hto of the first three parts, and the sd X. Y., as such representative, as afsd ; and in determining what is suitable form the sd several persons shall have the fullest and widest discretion. 5. The parties hto of the first three parts, and the sd X. Y., as such representative afsd, shall forthwith, at the expense of the business, procure the sd business to be valued as a going concern by some eminent firm or firms of valuers, approved by the parties hto of the first three parts, and the sd X. Y., as such representative as afsd ; such valuation shall include the goodwill, and shall be arrived at by ascertaining the gross value of the assets and the amount of the debts and liabilities of the business, and deducting the latter from the former so as to obtain the net value. G. When and so soon as the sd valuation has been obtained, the parties hto of the first three parts shall enter into an agreemt with some person, to be selected by them, as tree for the new coy, pro- viding for the transfer of the business, and the assets and liabilities thereof, to the new coy when incorporated. 7. The conson, to be specified in the sd agreemt, shall be (1) a specified sum, being a sum equal to the amount of the net valuation afsd ; and (2) the undertaking by the coy of all the debts and liabilities of the business, and such debts and liabilities shall be deemed to include the debts and liabilities of the firm to each of the partners in respect of profits made but not drawn at the date of such agreemt. 8. The sd agreemt shall provide that the sd specified sum, being the amount of the valuation afsd, shall bo satisfied by the allotment of fully paid-up ordinary shares in the coy taken at par value, and that such shares shall be allotted as follows, that is to say, one third pt to the sd A. B., one third pt to the sd B. C, and one third pt to the sd C. D. 9. The sd agreemt shall also provide that the sd shares to be allotted to the sd C. D. shall be held by him, or other the trees for the time l)eing of the will of the sd testator, on the trusts as nearly as may be by the sd will declared of and concerning his share in the sd business, and shall empower the sd C. D. to retire from the trustee- ship when the conversion has boon carried into effect. FORMS. ' 575 10. The sd agreemt shall coutain a provision declaring that it is Form 264 . conditional on its being sanctioned by the High Court of Justice, AffreemeTit to Chancery Division ; and accordingly when signed the parties of tlie be conditional first three parts shall forthwith take, at the expense of the business, QQ■^^J.^^ the necessary steps to obtain such sanction. 11. Subject as afsd, the sd agreemt shall be framed in such terms General as the parties hto of the first three parts, and the sd X. Y., as such J^^° "5 representative as afsd, shall approve. As WITNESS, &c. Sale Agreement. AN AGREEMT made the day of , between A., B., and C, Porm 265. all of (hnfter called " the vendors "), of the one pt, and A., B. & Coy, Limtd (hnfter called " the Coy "), of the other pt : for sTlTof Whereas the vendors have for some time past carried on the busi- business. ness of , at , in the county of : And whereas the vendors recently determined to transfer the sd business to a coy, and with a view thereto they have caused the coy to be registered. And whereas the capital of the coy is 100,000/., divided into 10,000 shares of 10/. each. Now THESE PRESENTS WITNESS and declare as follows : 1. The vendors shall sell and the coy shall purchase : — g^2g The goodwill of the sd business heretofore carried on by the vendors at the and elsewhere. All and singular the freehold and leasehold hereds, trade marks, licences, copyright, plant, machinery, stock-in-trade, furniture, imple- ments, utensils, bills, notes, books of account, and fire insurance policies, to which the vendors are entld in connection with the sd business. All debts owing to the vendors in connection with the sd business, and the full benefit of all securities for the same. The full benefit of all contracts and engagements in connection with the sd business. All other ppty whatsoever and wheresoever to which the vendors are entld in connection with the sd business. The above-mentd assets are now particularly specified in the state- ment thereof, which has been entered in a book marked "A," and for the purpose of identification subscribed by the parties hto of the first and second pts resply. [_For the rest, Form 24 ca7i be adopted with suitable modiJicaiionsJ] As to stamp duty, s. 59 of the Stamp Act, 1891, applies. See supra, p. 196; John Foster t. Inland Revenue, (1894) 1 Q. B. 516. 576 PRIVATE COMPANIES, [ChAP. VIII. Form 265. Memorandum of association. The Memorandum of Association. See supra, pp. 292 et seq. The memdm of asson of a private coy does not differ from that of a public coy, but where the coy is to be formed for the purpose of con- verting an existing business, the acquisition of that business is usually specified as the first object. See supra, Form 73. Articles of Association. Framing of In the case of a private coy, Form 210 will generally serve as a association hasis for the arts of asson, and the following clauses wiU afford some indication of the modifications commonly required. Introductory note to. Introductory Note. Where an established business is converted into a private coy the founders sometimes desire the insertion of a brief introductory note stating the circumstances under which the coy is formed, e. g. : — " The business which the above-named company is formed to take over was established by B. in the year 1850. On his death, in the year 1875, the business passed to his two sons, B. and C, and was carried on by them in partnership until the. year 1885, when D. and E. were admitted to the partnership. Since then B., C, D. and E. have carried on the business, and having regard to its present magnitude, they have determined to convert it into a private company, and these regulations have been prepared with a view thereto." Form 266. Restriction on issue of shares. Bestrictions on allotment of Shares. 1 . The shares taken by the subscribers to the memdm of asson, and those to be allotted pursuant to the preliminary agreemt, shall be duly issued by the directors, but no further shares shall be issued without the authority of the coy in general meeting. 2. Subject to any direction to the contrary that may be given by the meeting that authorises the issue of further shares, all further shares authorised to be issued shall be offered to the members in proportion to the existing shares held by them, and such offer shall be made by notice specifying the number of the shares to which the member is entld, and limiting a time within wliich the offer if not accepted will be deemed to be declined, and after the expiration of such time, or on the receipt of an intimation from the member to whom such notice is given that he declines to accept the shares offered, the directors may allot or otlierwiso dispose of the same to such persons and upon such terms as they think fit. A clause as above, or like the following, is not uncommonly inserted, in order to give the existing menibera the option of taking uj) tlie shures. It will be seen that the above clause does, but tin; fullowiiig (lues not, coiiliiie the oi)tion to a member's proportion. FORMS. '577 Sometimes the option is only given to the principal sliareholders, e.g., those holding more than 500/. capital. Not uncommonly the following clause is preferred : — After tlie issue of sliares in the coy's capital, any further issue Form 267. of shares shall be made on such terms and conditions, and either at a Another form, premium, or otherwise as shall be determined by extraordinary resolu- tion, and unless otherwise determined by extraordinary resolution, all further shares authorised to be issued must in the first instance be offered to all the existing members for the time being. Such offer shall be made by notice specifying the number of shares authorised to be issued, and the terms of issue, and stating that the members are at liberty to tender for the same during a period to be specified in the notice, and not being less than seven days from the date thereof. Each member shall be at liberty to make a tender in writing, delivered at the office within the period af sd, for such shares or any of them on the terms sjjecified, and the directors shall allot the shares to the members who so tender ; and in the event of more shares being tendered for than are authorised to be issued, the shares shall (as nearly as may) be allotted to the tendering members in proportion to the capital already held by them resply. The directors shall decide by lot or otherwise any diflB.culty as to such allotment. Classes of Shares. Sometimes the capital of a private coy is divided into several classes Claases of of shares. See forms stipra, p. 481, and in/ra, p. 652. ^ ^^^^' Conversion of Shares into Stock. These clauses are commonly omitted ; in the case of a private coy they are of little practical use. Increase and Reduction of Capital. See Form 210, cl. 44 et seq. Where the issue of shares is restricted, as in Forms 266, 267, supra, the new shares are usually made subject to the like restrictions. Proceedings at General Meetings. Sometimes it is provided that a poll may be demanded by any member, and that every poll shall be taken at the meeting without adjournment, and occasionally that the chaii'man shall not have a casting vote. Usually the quorum is small. 578 PRIVATE COMPANIES. [OhAP. VIII. Form 268. Deed of covenant to make certain clauses in articles unalterable. Deed of Covenant, The subscribers hto shall forthwith execute an indenture, which has already been prepared, and is expressed to be made between the coy of the one pt, and the sd subscribers and the several other persons who shall hereafter sign their names and affix their seals thereto of the other pt, and no person shall at any time hereafter be registered as a member of the coy unless and until he shall have executed the sd indenture, and if at any time hereafter, by oversight or otherwise, any person shall be permitted to become a member before executing the sd indenture, such person shall be deemed to have agreed to execute such indenture forthwith, and unless he executes the same within seven days after he is registered as a member the coy shall be at liberty to authorise its secretary, or any other officer, to execute such indenture in the name and on behalf and as the attorney of such person, and execution by the person so authorised shall be effective for all purposes. Sometimes it is desired to make certain arrangements between the shareholders which it is not necessary or expedient to set forth in the articles, e.g., options to purchase shares ; restrictions on power to alter regulations without Sf)ecified covenants. In such cases a deed of covenant may be desirable as above. Form 269. Restricted right of transfer. Notice. Transfer and Transmission. Occasionally the right of transfer is left unfettered, but in most cases it is considered desirable to insert special provisions so as to prevent the introduction of objectionable members, and to secure to existing members a right of pre-emption when a member desires to retire, e. g. : — 1 . A share may be transferred by a member or other person entld to transfer to any member selected by the transferor ; but save as afsd, and save as provided by Clause 8 hereof, no share shall be transferred to a person who is not a member so long as any member [or any person selected by the directors as one whom it is desirable in the interests of the coy to admit to membershij)] is willing to purchase the same at the fair value. Sometimes it is provided that these restrictive clauses shall not apply to certain share- holders, i.g.., the founders of the concern, or to part only of the shares held by them, or only to a certain class of shares, e.g., those wliich are to be issued to the employes. 2. Except where the transfer is made jmrsuant to Clauses 1 or 8 hereof the person proposing to transfer any shares (hnfter called the proposing transferor) shall give notice in writing (hnfter called the transfer notice) to the coy that he desires to transfer the same. Such notice shall specify tlie sum he fixes as the fair value, and shall con- stitute the coy liis agent for tlie sale of the share to any member of the coy [or person selected as afsd] at the price so fixed, or at the option of tlie purchaser at the fair value to be fixed by the auditor in accordance wiili tlieso articles. The transfer notice ma}' include several ehares, and iu such cuso shall operate as if it were a separate notice in FOliiMS. •■>7!) respect of each. The transfer notice shall not be revocable except Form 269. with the sanction of the directors. ' The words "proposing transferor" cover tlio shareholders and also executors and other jjersous taking by transmission and having power to transfer. Sometimes, instead of providing as above, it is provided tliat a member who desires to transfer to a stranger must send in the name and address of the proposed transferee, and that the directors may approve or disapprove ; and, if they disa])provo, the member may require them to find a purchaser, and if they do not, he is to be free to transfer. 3. If the coy shall, withiu the space of twenty-eight days after being Comptuiy's served with such notice, find a member [or person selected as afsdj P°'^^'^'- willing to purchase the share (hnfter called the purchasing member), and shall give notice thereof to the proposing transferor, he shall be boimd, upon j)ayment of the fair value, to transfer the share to the purchasing member. Sometimes it is desired to jirovide that the conipuinj shrill iiurchase tlu; sliarc, but in the case of a company limited by shares this is not allowable. Trevor v. WhitwortJi, 12 App. Cas. 409. See supra, p. 562. Sometimes the foregoing provisions are modified, thus : — " A person, whether a member of the company or not (hereinafter called the proposing transferor), who desires to transfer any share to a person who is not a member of the company, must serve the company with notice in writing (hereinafter called the transfer notice) that he desires to make such transfer. The transfer notice must specify the name and addi'ess of the projiosed transferee, and the sum at which the pro230sing trans- feror fixes the fair value of the shares, and withiu fourteen days after the service of such notice the directors shall give the i^roposing transferor notice of theii- approval or disapproval of the transfer, and if they approve, the proposed transfer may be forthwith carried out (subject only to clauses hereof). Bu^t if they disapprove, the transfer notice shall be deemed to constitute the company the agent of the proposing transferor for the sale of the share to any member of the company, at the fair value, and such authority shall not be revocable, and if the company shall, within the space of twenty- eight days," &e. 4. In case any diiference arises between the proposing transferor Arbitration. and the purchasing member as to the fair value of a share, the auditor shall, on the applicon of either j)arty, certify in writing the sum which, in his opinion, is the fair value, and such sum shall be deemed to be the fair value, and in so certifying the auditor shall be considered to be acting as an expert, and not as an arbitrator ; and accordingly the Arbitration Act, 1889, shall not apply. Sometimes it is provided that " the fair value," or " the cuiTent transfer price," shall be a smn equal to the amount jjaid up on the share, or a sum to be fixed at the ordinary general meeting in each year, e.g. :— " At the ordinary general meeting iu each year the company shall, by resolution, declare what is the fair value of a share, and upon any sale pursuant to CI. hereof, the amount so declared, with the addition thereto of five per cent, j^er anniun from the date of the meeting to the date of the completion of such sale (less any dividend in the meantime paid) shall be deemed to be the fair value for the purpose of CI. hereof." Another form is to strike out of the above clause the words "the auditor," and all subsequent words, and to substitute for the same the words, " the difference shall be referred to two arbitrators, one to be appointed by each of the parties in difference." But there is certainly some objection to involving the parties in an arbitration which may involve full discovery of all books and documents and considerable worry and inconvenience. r r2 580 PKIVATE COMPANIES. [Chap. VIII. Form 269. Sometimes the clauses are framed so that a membtr must offer at a price to he fixed ■ hy him, with a provision that, if the price is not agreed to, he shall not sell to any one at a lower price. If this is desired, alter CI. 1 by substituting for " at the fair value " the words "at a price to be fixed as hereinafter provided;" and in CI. 2 substitute " price he fixes " for " fair value ;" and in CI. 3 " piice so fixed " for " fair value," and omit CI. 4 ; and in CI. 6 for the last four words substitute the words " but so that the price paid shall not be less than the price fixed by the retiring member in his notice to the company under CI. 2 hereof. Before passing any transfer' under this clause, the directors may require the transferor and the transferee respectively to make declara- tions pursuant to the Statutory Declarations Act, 1835, that the consideration men- tioned in the transfer is the true consideration paid by the transferee for the transfer of the share, and is not subject to any deduction or rebate. "When the retiring member cannot find a purchaser at the i^rice so fixed, he may give a fresh notice under CI. 2 hereof." This alternative form has already been published elsewhere, but the writer makes no apology for inserting it in this work, as he drafted both the original and the alternative form. For other alternative forms as to fair value, see Forms 270 and 271, infra. Default by proposing transferor. Default by company. How shares to be offered to members. Tii-,4it to transfer to son, &c. 5. If in any case the proposing transferor, after having become bound as afsd, makes default in transferring the share, the coy may receive the jourchase-money, and shall thereupon cause the name of the purchasing member to be entered in the register as the holder of the share, and shall hold the purchase-money in trust for the proposing transferor. The receipt of the coy for the purchase-money shall be a good discharge to the purchasing member, and after his name has been entered in the register in purported exercise of the afsd power, the validity of the proceedings shall not be questioned by any person. 6. If the coy shall not, within the sjpace of twenty-eight days after being served with the transfer notice, find a member willing to pur- chase the shares, and give notice in manner afsd, the proposing trans- feror shall at any time within three calendar months afterwards be at liberty, subject to Clause 9 hereof, to sell and transfer the shares (or those not placed) to any person and at any price. 7. The coy in general meeting may make and from time to time vary rules as to the mode in which any shares sj)ecified in any notice served on the coy jiursuant to Clause 2 hereof shall be offered to the members, and as to their rights in regard to the purchase thereof, and in particular may give any member or class of members a preferential light to purchase the same. Until otherwise determined every such share shall be offered to the members in such order as shall be deter- mined by lots drawn in regard thereto, and the lots shall be drawn in such manner as the directors think fit. Sometimes it is provided that the shares shall be offered, (a) as iu Form 267, or, (b) to the shareholders successively, according to the number of shares held by them, or, (c) to some particular sharolioldcr, e.g., the founder, or, (d) to the members whose names are entered in a register of applicants in rotation. See for example Forms 272 to 27''), infra. 8. Any sliuro ni;iy bo transferred by a member to any other member, or to any 8(jii, daiiglitei", grandson, granddaughter, or other issue, son-in-law, daughter-in-law, father, mother, brother, sister, nephew, FORMS. 08 1 niece, wife, or husband of member, and any share of a deceased J orm 2 bd. member may be transferred by liis executors or administrators to any son, daughter, grandson, granddaughter, or otlier issue, nephew, niece, son-in-law, daughter-in-law, father, mother, brother, brother-in-law, widow, or widower of such deceased member [to whom such deceased member may have specifically bequeathed the same], and shares standing in the name of the trees of the will of any deceased member may be transferred upon any change of trees to the trees for the time being of such will, and Clause 1 hereof shall not apply to any transfer authorized by this clause. Sometimes jiower is also givou to transfer, with the approval of the hoard, to the trustees of any settlement made by a member, or to any person who has been appointed or elected a director. 9. The directors may refuse to register any transfer of a share, General (a) where the coy has a lien on the share ; (b) where it is not proved fu^^transfer. to their satisfaction that the proposed transferee is a responsible person ; (c) where the directors are of an opinion that the proposed transferee [not being already a member] is not a desirable person to admit to membership. But paragraphs (5) and (c) of this clause shall not appl}' [where the proposed transferee is already a member [holding more than shares], nor] to a transfer made pursuant to Clause 8 thereof. Sometimes the words in brackets are inserted so as to exclude small shareholders from the benefit of the exception. The fair value afsd shall be ascertained as follows : — Form 270. (a) The coy in general meeting may from time to time, by resolution Fair value of passed by a majority of not less than three-fourths of the ^g^[^re(j°|jJ^ holders of ordinary shares, declare the fair value of ordinary general shares to be thereafter dealt with in accordance with ^^^etrngs. Clause 31 hereof. (b) Such resolution shall remain in force until the expiration of one year after the passing thereof, or for such less period as shall be specified therein, or until by simple resolution of a general meeting it shall be annulled. (c) If at the time when a transfer notice is given as afsd, any such resolution fixing the fair value is in force, the fair value fixed thereby shall be deemed to be the fair value of the shares comprised in such transfer notice. (d) If at the time when a transfer notice is given as afsd, no such resolution is in force, it shall rest with the proposing transferor and the purchasing member to fix by agrcemt the fair value of the shares comprised in a transfer notice, and 582 PKIVATE COMPANIES. [ChAP. VI 11. Form 270. any difference in regard thereto shall be referred to two arbitrators, one to be appointed by each of the parties in difference, and the Arbitration Act, 1889, shall apply. See Clause 4 of Form 269, supra, p. 579, and notes thereon. Form 271. Fair value of share esti- mated by reference to amount paid up and to past dividends. The following- is another foi'm : — ( 1 ) For the purposes of these clauses the fair value of a share shall be the amount for the time being pd up thereon plus a premium (if any) regulated as follows : — i.e., if the dividend and bonus for the financial year immediately preceding shall not exceed 1h p-c.p.a., the shares shall be offered at the amount for the time being pd up thereon, if such dividend and bonus shall exceed Ih p.c.p.a., but not exceed 10 p. c. p. a., the premium shall be 10 p.c. on the amount pd up, and if such dividend and bonus shall exceed 10 p.c.p.a., but not exceed 15 p.c.p.a., a premium of 20 p.c. on the amount pd up, and if such dividend and bonus shall exceed 15 p.c.p.a., &c., &c. See Clause 4 of Fonn 269, supra, p. 579, and notes thereon. Form 272. Preferential offer of shares to directors and then to other members. All shares comprised in a transfer notice shall, unless the directors think fit to offer them to any person selected as afsd, be first offered by the coy to the directors themselves, and so that in case of any difference between them as to the disposal or distribution of a share or shares, the mode of disposal or distribution shall be determined by lot, and any shares not taken by the directors, or some or one of them, shall then be offered to the other members in such order as shall be determined by lot. And in each case the person to whom the offer is made (whether a director or not) shall have the option of buying at the price fixed in the transfer notice, or, at his option, at the fair value, to be fixed by the auditors as afsd, such option to be declared in accept- ing the offer. Where the shares comprised in a transfer notice stand in the name of a deceased member, the directors shall have three calendar months from the service of the transfer notice within which to determine whether they will themselves purchase them or not. Sometimes provision is made for placing the shares with the highest bidders. Thus : — *' Where the company is served with a transfer notice as aforesaid, the company shall forthwith {five notice thereof to all the members (other than the party giving the tninafcr notice), and the notice sliall specify the price fixed by the intending transferor, and each member shnll be at liberty, within fonrtocn days from tlie time such notice is served on him, to deliver to tlio company an offer in writing bidding for all or some of the shares comprised in the transfer notice, and agreeing to take, at the jirice he bids, the whole or any of the shares ho l)ids for ; and as between those who so bid the highest l)i(l- the permanent director] shall *^orm 303. from time to time determine. The provisions as to remimeration of directors vary considerably. In some cases the principal dii'ectors take no remuneration, but have i^ower to remunerate the ordinary directors. In others they take a fixed salary as above. Sometimes it is desired to provide, as in an ordinary partnership, that a member shall be at liberty to draw out a fixed allowance, with the obligation to recoup, if at the end of the year it appears that his share of profits docs not amount to what he has drawn, but in a company there is grave difficulty in making any such provision, inasmuch as dividends can only be paid out of profits. However, the difficulty is sometimes met, where the member is a director, by giving him the fixed allowance as remuneration for his services as director with liability to recoup as aforesaid. Each of them, the sd A., B., and C, whilst he remains a permanent Form 304. director, shall be entld, without charge, to have his son, or any one of instruction of his sons, instructed at the coy's works in the business or businesses son. for the time being carried on by the coy. This clause varies a good deal in form. Sometimes power is given to nominate by will a son for instruction. Sometimes any holder of a specified number of the shares is given the power. Attention. Each of the ordinary directors shall devote the whole of his time and Form 305. attention to the business of the coy, but the sd A. and B. shall not be What time bound to de^•ote more time and attention to the coy than they resply electors to may think fit. Some such provision as above is not uncommon. give. Rotation. Until otherwise determined by extraordinary resolution, the directors Form 306. for the time beins: shall continue to hold office, subiect only to clauses 7^ 7^ ^ . . . ^ J J Oontmuance [as to disqualification and poioer to remove^ hereof. of directors T . J , . "1 office. In a private company a clause as above is very common, the intention being that the directors shall not retire by rotation, but shall remain in office until they become dis- qualified by bankruptcy, &c., or are removed. When such a clause is inserted, the usual rotation clause will be omitted. When rotation clauses are inserted, it is usually provided that they shall not ajjply to the governing directors. Proceedings of Directors. It is sometimes provided that (as in an ordinary partnership) each director may do various things without a board meeting, and not uncommonly it is provided as follows: — At any meeting of the directors a director shall have one vote for Form 307. every share held by him, and votes may be given either personally or by proxy, but a proxy must be one of the directors, and must be directors' appointed in writing under the hand of the appointor. meetings. Sometimes it is provided that no resolution shall be valid if a particular du'ector dissents, or that certain business shall only be transacted with the concurrence of a particular director. 600 PRIVATE COMPANIES. [ChAP. VIII. Form 308. Chairman and deputy chairman. The sd A. B. shall be chairman of the board so long as he remains a director and is willing to act, and the sd C. D. shall be deputy chairman. When the sd A. B. ceases to be chairman, the sd C. D. shall, if then a director, become chairman, and shall be entld to retain the office so long as he remains a director, and is willing to act. Subject as afsd the board may appoint a chairman and deputy chair- man of their meetings, and determine the period for which they resply retain office. Form 309. All meetings of the board shall be presided over by the chairman if present, and, in his absence, by tlie deputy chairman, and if at any meeting of the board neither of the sd persons shall be present at the time appointed for holding the same, the directors present may choose one of their number to preside at the meeting. AVhen chair- man absent at meetin":. Form 310. Any question which shall arise at any meeting of the board shall be ^ decided by the votes of the directors present, but each of them, the ilow ques- •' ^ tions at board sd A. B. and C. D., shall be at liberty, so long as he shall be a meetings director, by writing under his hand to authorize any other member of the board to vote for him at any meeting or meetings of the board, and such authority may be general or may be linitd to any one or more meetings, or to any specified question or questions, and must, if required, be produced at any meetings at which the holder proposes to vote. No resolution of the board shall be binding if two or more directors, either in person or by proxy, at the meeting at which such resolution is proposed, or at the next subsequent meeting, dissent therefrom in writing. Form 311. IIow ques- tions to be decided at board meet- ing. Questions arising at any meeting shall, subject as herein otherwise provided, be decided by a majority of votes, and in case of an equality of votes, the chairman shall have a second or casting vote, but each of them, the sd A. B. and 0. D., shall bo at liberty, so long as he shall bo a director, by writing under his hand, to authorize any other director to vote for him at any meeting or meetings of the board. Such authority may bo general or may bo limtd to any one or more meetings, or to any specified question or questions. No resolution of a meeting of the directors shall be binding if the sd A. B. and C. D., whilst directors, either in person or by proxy, at the meeting at which such resolution is proposed, dissent therefrom in writing ; and if at any time any director hold not loss than two -fifths of the nominal amount of the issued capital, no resolution of the directors shall be valid uulcHB it is passed witli his concurrence ; but if no director hold two-fifths of the nominal amount of the issued capital, and two of the directors collectively hold three-fifths of the nominal amount of the FORMS. 601 issued capital, no resolution of the directors shall be valid unless it is Form 311. passed with the concurrenco of both of such directors. Power of Directors. Sometimes the powers of directors are limited as regards certain things, e.g., borrowing money, entering into contracts beyond a certain value, increasing capital, &c. Dividends. See Form 210, cl. 116, Occasionally it is provided that profits shall be applied as in Form 223. Where there are preference shares, provision will be made accordingly. See Forms 217 et seq. So long as any [C] share is not fully pd up, the holder shaU only be Form 312. pd out of the dividends from time to time declared thereon such a sum ^^ I as, with the amount (if anything) previously pd to the holder of such unpaid shares. share pursuant to this clause, shall be equal to interest at the rate of 5 p.c.p.a. on the capital pd up thereon, computed from the time when such capital was pd up, and the excess shall be retained by the directors and applied in paying up such share. Not uncommonly it is confined to shares issued to employes. Sometimes the retention is only to operate imtil the share is paid up to the extent of 80 per cent. Accounts. These are generally in common fonn. See Form 210, cl. 129 et seq. But sometimes a clause as follows is inserted : — A copy of such account, balance-sheet and report shall, for seven days Form 313. previously to the meeting, be kept at the office open for the inspec- Z", " tion of members, but the same shall not be circulated, and no copy of, sheet. or extract from, the same shall be taken or made. The object in some cases is to avoid the expense, and in others to avoid disclosure of facts which might lead to the establishment of rival undertakings. Audit. The accounts relating to the coy's affairs shall be audited in such Form 314 manner as the coy in general meeting shall from time to time deter- mine. The above is sometimes inserted instead of the usual provision. Minutes of Meetings of Directors. The Act (s. 67) requires every company to cause minutes of all resolutions and pro- ceedings of meetings of the company, and of the directors or managers of the company, in cases where there are directors or managers, to be duly entered in books to be from time to time provided for the purpose. Accordingly, books must be provided by the directors, and minutes entered. The following will give some idea of the mode in which minutes are entered : — G02 PRIVATE COMPANIES. [ChAF. VIII. Form 315. Coy, Llmtd, held at Minutes of first meeting. Meeting- of the directors of the - the day of . Present: — A., B., C, and D., directors, and E., the solicitor. Mr. A. took the chair, pursuant to the arts of asson. The solicitor reported that the coy had been duly incorporated ; and he produced the certificate of incorporation, and a print of the memdm and arts of asson as registered. It was resolved that Mr. Gr. be appointed secretary of the coy at a salary of /. p. a. [or, at a salary to be hereafter determined]. It was resolved that Messrs. be appointed bankers of the coy, and be requested to open an account in the name of the coy, and to honour cheques drawn on that account signed by any two of the directors ; and that the bank be furnished with specimens of the signatures of the directors. It was resolved that Mr. be appointed solicitor to the coy. It was resolved that the registered office of the coy be at , and that the secretary do give to the Registrar of Joint Stock Companies the requisite notice. A seal for the coy ordered by the chairman on its behalf was pro- duced and approved, and it was resolved that such seal be adopted as the common seal of the coy. The chairman stated that he had, on behalf of the coy, ordered certain books for the purposes of the coy, and the order was approved and ratified. The draft agreemt referred to in Clause 3 of the arts of asson of the coy was read and considered, and it was resolved that the coy do enter into an agreemt with A. and B. in the terms of the sd draft. The solicitor having produced an engrossment of the sd draft, such engrossment was sealed with the common seal of the coy, and was signed by the said A. and B., and the solicitor was instructed to have it stamped and duly filed with the Eegistrar of Joint Stock Companies. It was resolved that the solicitor do prepare the requisite convey- ances for vesting in the coy the freehold and leasehold ppty agreed to be sold to the coy b}^ the above -mentd agreemt, and that he be re- quested to advise what stops should be taken to carry such agi*eemt into effect. It was resolved that the subscribers to the coy's memdm of asson be registered. It was resolved that Mr. bo appointed manager of the coy's works upon the terms of an agreemt submitted to the meeting, and such agreemt was thereupon executed in duplicate. It was resolved tliat the quorum for a meeting of the directors should bo two, and that until otherwise determined a meeting of the directors should bo held at the registered office every Tuesday at o'clock in the forenoon. FORMS. 60r{ It was resolved that the common seal of the coy he not afRxed to Form 315. any document, except in the presence of two of the directors and of the secretary, who are to attest the sealing. It was resolved that Mr. • he appointed a committee with full power to negotiate with ISIr. as to the terms on which he will supply the coy with, &c., and to make a contract with him accordingly. A letter from was read containing an offer to, &c. ; and it was resolved, that the offer contained in that letter be accepted, and that the secretary do write to the said accordingly. Meeting of the directors of the Coy, Limtd, held at on the Form 316. — day of , 189—. " mg. Present : — A., B., C, and D., directors, and E., the solicitor. The minutes of the hoard meeting held on day of were Minutes of T T j:. T second meet- read and coniirmea. The solor reported that the agreemt between the coy and Messrs. A. and B., executed at the last board meeting, had been duly filed with the Eegistrar of Joint Stock Companies. A letter was also read from the solor, dated, &c., and advising as to the steps to be taken to carry the sd agreemt into effect. The solor produced the requisite conveyances for carrying the agreemt into eft'ect, as advised in such letter, and it was resolved, that those conveyances should be executed and the seal should be affixed thereto ; and thereupon such conveyances were sealed with the common seal, and were executed by the vendors, Messrs. A. and B. Messrs. A. and B. stated that the coy had been placed in possession of the works and of all the ppty capable of manual delivery, and that the bank balance had been transferred to the coy's account. It was resolved, that in accordance with the agreemt of the day of , shares in the capital of the coy of 1, each, num- bered to inclusive, be allotted as follows : that is to say, to Mr. A. of such shares, numbered to inclusive, and to Mr. B. of such shares, numbered to inclusive ; and that such shares be credited as fully pd up in accordance with the sd agreemt ; and that the names of the allottees be entered in the register of members accordingly, and that certificates be issued to them pursuant to the arts of asson. The certificates of title to the above-mentd shares were thereupon sealed and handed over to Messrs. A. and B. Applicons for shares by the under-mentd persons were then handed in by Mr. A., and at his request it was resolved, that shares be allotted in response to such applicons, that is to say, to 100 shares, to 100 shares, and to 100 shares, and that the secretary do give notice of allotment to such persons accordingly, and 604 Form 316. PRIVATE COMPANIES. [Chap. VIII. do request them fortliwith to pay into the coy's account at its bankers, the full nominal amount of the shares allotted to them resply. It was resolved, that the secretary do forthwith issue to customers of the coy a circular-letter stating the conversion of the business into a coy, and that he do take the necessary steps to procure the insertion in the following newspapers of a statement that such conversion has been effected, and that none of the shares are to be issued to the public : — "The Times," &c. The bankers' pass-book was produced, and it appeared that the balance to the credit of the coy was 1., being the amount trans- ferred from the vendors' account to the coy's account pursuant to the agreemt for sale. The following cheques were drawn, that is to say, in favour of for 1., in favour of for 1, and in favour of for 1. DEEDS OF SETTLEMENT. Registration under Pt. VII. of C. A. 1862, of newly- formed companies. Some years since a very convenient mode of converting a business into a company was devised by the writer. It involved the execution of a deed called "Articles of Association," which embodied the pro- visions as well of a memorandum as of articles of association, and constituted a common law joint stock company, consisting of not less than seven nor more than twenty members. This company then passed a resolution for registration, under Part VII. of the Act of 1862, as a company limited by shares, and in due course a certificate of incorpo- ration was issued, and in the result the company obtained incorporation in a simple and satisfactory manner, free from some of the eompKcations attendant on conversion in the ordinary way by sale and transfer. This mode of conversion was largely approved bj"- business men, for it dispensed with what appears to them the ridiculous formality of an agreement by the partners to sell to the company, consisting of them- selves, and enables them so to frame their partnership deed that, on passing a resolution to register, and taking in a copy of the deed, registration would follow as of course, without any need for sales or conveyances, and without any breach in the continuity of the concern. Accordingly, a considerable number of companies, including many of the leading brewery companies, were so registered ; but unfortunately those who adopted this procedure thereby avoided the ad valorem duty on sales which attached when conversion was effected in the oi'dinary way. In con8e(j[uenco, the liovouuo authorities became greatly incensed, and at their instance the registrar was directed to refuse to register FORMS. 605 any further companies so constituted. It is believed that the registrar had been advised that this mode of constitution was perfectly regular, and the most eminent lawyer of the Chancery Bar, now a Lord of Appeal, had rejjeatedly so advised. However, tlie refusal was persisted in, and no one was found ready to engage in litigation with the Crown in order to test the question, until, in 1894, when an application for a mandamus was made by some persons who desired to register what they represented to be a company constituted in accordance with this scheme. The so-called company was, however, formed not to carry on a business, but to wind up ; it was a burlesque of the scheme, and the attempt to enforce its registration an absurdity, if it was in fact seriously contemplated. It is therefore not surprising that the Court of Appeal, reversing the decision of the Court below, held that there was no right in that case to a mandamus. Reg. v. Begistrar of Joint Stock Companies, (1891) 2 Q. B. 598. There are, in the judgments, some doubts expressed as to whether any company formed by deed after the commencement of the Act of 1862 is a company "duly constituted bylaw," and so entitled to register in accordance with this scheme ; but against these dicta may be placed the fact that Lord repeatedly advised that a company so constituted was entitled to registration, and in the recent case of George Nezvman ^' Co., supra, p. 563, where the company was formed and registered in this way, the Court of Appeal recognised it as duly incorporated. However, in the circumstances, the writer has not, in the present edition, set out the requisite forms, as the Board of Trade have not yet withdrawn their instructions to the reg'istrar. Powers in Wills for Conversion by Trustees of Businesses into Companies. It has now become usual for persons who are possessed of concerns, or shares in p„_.p-a :„ concerns, which businesses they desire to have carried on after their deaths, to make -y^jUs for con- proxision in their wills for the conversion of the concerns into private companies. Some- version. times ijersons who are solicited to act as trustees of an intended will, or settlement, urge the insertion of such a i^rovision in the will or settlement. In other cases, the testator or settlor is advised to convert, or concur in converting, his business into a private com- pany before his death, and prefers to leave power in his will. Prima facie trustees or executors have no power to convert, or concur in converting, a concern into a company. But sometimes a conversion may be sujiported as a com- promise under s. 37 of the Conveyancing Act, 1881 (or the Trustee Act, 1893). See West of England Bank v. Mnrc/i, 23 C. D. 138, where a sale of a testator's share in a business, in consideration of cash and of shares and debentures in a company, was held valid, on the ground that the vendor who was the executrix, was enabled thereby to make an arrangement with the testator's creditors, and, accoi'dingly, that the transaction amounted to a compromise witliin the meaning of s. 30 of 23 & 24 Vict. c. 145. The next following form is a specimen of a power in a will for enabling conversion. 006 PRIVATE COMPANIES. [ChAP. VIII. Form 317. j authorise my trustees or trustee at any time witliin [twelve Power for calendar months] after my death, to convert my business into a coy, trustees of limtd b}^ shares, upon such terms and in such manner as my trustees vert testator's ^r trustee, in their or his uncontrolled discretion, shall think fit ; and business into without limiting such general authority, I expressly declare that my trustees or trustee — {a) may accept fully or partially paid-up shares or debentures, or any other interests in or securities of any such coy as the conson or part of the conson for the transfer of the sd business ; (b) may settle the terms of any memdm and arts of asson, deed of settlement, or other documents for use in relation to such conversion, and may sign or execute the same ; (c) may act as directors or director of such coy, and either alone or in conjunction with others, without being accountable for any remuneration payable to them as such ; (d) may procure the appointment of any other persons to be directors, either alone or otherwise ; (e) for the purpose of forming or preserving the limtd liability of the members after registration, my trustees or trustee may vest any of the shares in the sd coy, constituting part of my estate, in such persons and upon such trusts as they or he think fit ; {/) may lend money forming part of my residuary estate to any such coy upon such terms as they or he may think fit, and may concur in winding up, reconstructing, and amalgamating any such coy, or in the modification of any of the regulations thereof, and may exercise any powers which by the regulations of such coy shall be vested in my trustees as members or directors thereof, or otherwise, and generally may act in relation to any such coy in such manner as they think best calculated to benefit my estate : And I declare that all shares, deben- tures, or other interests in or securities of any such coy acquired by my trustees or trustee shall be deemed to be authorised as investments by clause hereof, and to have been purchased by my trustees out of moneys arising from a sale under clause hereof : And I declare that for the purpose of this clause the expression, "my business," shaU be deemed to include the goodwill of the business of a carried on by me at , and the whole of my ppty and rights in connection with such business. Application to Court where Will defective. Where the trustees of the will have not the requisite power to convert the testator's Imsiuess into a company, it may ncverthcloss ho practicable to obtain the sanction of the Chancery Division, or of a Chancery Palatine Court, to the conversion. There appears to be no dou1)t that the Chancery Division has jurisdiction to give the requisite sanction in a large niimbor of cases. As the circimistances of each case differ, it would be useless here to attuni])t to specify the cases in which tlie jurisdiction of the Court may be invoked with a fair prospect of success. It is suflicient that jurisdiction has been repeatedly exercised by Chitty, Stirling, and Kekewich, JJ., and by Sir George Jessel, M. R. North, J., in Jie Crmvshay, GO L. T. 3.57, in the circumstances of that particular case, considered tliat he had not jurisdiction. See also Nicutnann v. Nienmann, G2 L. T. 339. FORMS. 607 Where the sanction of the Coui't is required for the conversion of a business into a comijany, a provisional agreement should be made between the trustees and some person as trustee or agent on behalf of the company for sale of the business, subject to the sanction of the Court being obtained. Form 34, supra, can be utilized with the following special clauses in modification thereof. Another mode is shown in Forms 321, 323, infra. The agreement will provide — 1. If this agreemt is not adopted by the coy in manner afsd within Form 318. calendar months after the same shall have been sanctioned by gpgcial the Court as hnfter provided, any of the parties hto may, by notice in clauses, where writing to the others or other of them, determine this agreemt. Coiirt^^ ^ 2. This agreemt is conditional on the same being sanctioned in the requisite. Chancery Division of the High Court of Justice, and unless an order shall be made within calendar months from the date hereof sanctioning the same and authorizing [_the vendors] to carry the same into effect, then this agreemt may at any time after the expiration of such period and before such sanction is obtained, be determined by notice in writing given by any party or parties to the other or others of them. In the High Court the requisite sanction is usually obtained by originating summons Practice by under R. S. C, Ord. LV. r. 3. See infra. originating summons. In the High Court of Justice. Form 319. Chancery Division. Originating ~ Mr. Justice . summons to obtain sanc- tion of Court In the Matter of the estate of A. B., deceased. to conversion. Between J. P Plaintiff and J. G. (widow) ^ M. M. (a married woman), and . ( Defendants. A., B., and C. (infants) . . . ) Let \_names and addresses of defendants], all of them persons claiming to be beneficially interested under the will of the above-named A. B., within eight days after service of this summons upon them, exclusive of the day of such service, cause, an appearance to be entered for them to this summons, which is issued upon the applicon of J. P., of L., in the county of , chemical manufacturer, who claims to be the legatee in trust of the share of the sd A. B. in the business of chemical manufacturers carried on under the style of at L. afsd, under the will of the sd A. B., for the determination of the following questions or matters, namely : — 1 . Whether the plaintiff may concur with X. and Y. in selling the 608 PRIVATE COMPANIES. [ChAP. VIII. Form 319. sd business upon the terms of a provisional agreemt, dated, &c., and made between, &:c., or with any and what modification thereof. 2. If and so far as may be necessary, that the trusts of the will of the said A. B. may be administered by the Court. 3. That the costs of this applicon may be provided for. Dated, &c. This summons was taken out by, &c. The following is an outline of a case in which the Court sanctioned the sale of land by trustees for shares in a company to be formed, although the trust deed gave no power to invest in shares : — By the trust deed the trustees were to hold a certain building estate, thereby conveyed to them, upon the trusts declared by an indenture of even date, namely, to manage the same, and sell it for cash or perpetual chief rent, or partly in each mode. Afterwards a conditional agreement was entered into by the trustees with a person on behalf of the proposed company for the sale of the land to the company for paid-up shares, with an option for the trustees to take shares or debentures of the company, and by the agree- ment the trustees were to pay the costs of registering and floating the company. The agreement was conditional on the sanction of the Court being obtained and on a certain minimum amount of debentures being subscribed. The trustees then took out an origi- nating sunmions under R. S. C, Ord. LV. r. 3, which was in the following form : — Form 320. Form of originating summons to obtain sanc- tion of Court to conversion. That the following questions or matters arising in the administration of the trusts of such indenture may be determined under the Rules of the Supreme Court, Ord. LV. r. 3, and relief given in respect thereof without the administration of the trusts of such indenture, that is to say— 1. That a provisional agreemt, dated, &c., and made between the plaintiffs of the one part and A. M. of the other part, for the sale of the sd estate, may be approved, and that the plaintiffs may be at liberty to carry the same into effect. 2. That in the event of the proposed sale not being carried to com- pletion, the plaintiffs may be at liberty to raise and pay out of their trust estate so much of such costs and expenses under clause of the sd agreemt referred to as shall have been paid or incurred by them. 3. That the costs of this applicon may be provided for. Dated, &c. This summons was taken out by, &c. Another. Form 321. That directions may be given with respect to the whole disposal or winding up of tlio business of liat manufacturers carried on under the firm of J. K. & Co., with the freehold and leasehold hereds used in connection tlierowith, and the trade-marks used therein, forming pt of the residuary estate of the above-named testator K., and in particular that the pits may be at liberty, if so advised, to bring proposals into FOEMS. 609 cliambers for the conversiou of the sd business into a coy limtd Ly Form 321. shares, and that in the meantime the pits may bo authorized to carry ~ on the sd business, or permit the same to be carried on, and that the sd S., or some other proper person, may be appointed receiver and manager of the sd business and premises, that all necessary and proper directions in that behalf, and if and so far as may be necessary for the purposes afsd that the trusts remaining unperformed on the will of the sd K., may be carried into execution, and that all necessary and proper accounts may be taken, inquiries made, and directions given, and that, if necessary, pursuant to Ord. LV. r. 6, such other persons, if any, may be directed to bo served with this summons as the judge may think fit, and that such further or other order may be made in the premises as the judge shall seem meet. Dated, &c. This summons was taken out by , of , solor for the above- named pits. The dfts may appear, &c. iNVe.— If the dfts, &c. Upon applicon by originating summons, dated, &c., of A. B., of. Form 322. &:c., and upon hearing counsel for pits and dfts, and upon reading an ^^~Y affidavit of L., filed, &c., and the exhibits therein referred to, it is ordered that the pits be at liberty to carry on the business of J. K. & Co. until the 31st of January, 1897, subject to the appointment of receiver and manager hnfter mentioned, and the judge having ajiproved of N. as a fit and proper person to be appointed receiver and manager as hnfter mentioned, and the sd N. having given security as such receiver and manager by entering into his recognizance on the 8th of August, 1896, and by entering into a bond of even date, together with the Guarantee Asson, Limtd, as his sureties, which sd recognizance and bond having been approved by the judge and duly enrolled, the judge doth hereby appoint the sd N., as and from the 27tli of January, 1896, to collect, get in, and receive the debts now due and outstanding, and other assets, ppty, and effects belonging to the business of manufacturers, carried on under the style of J. K. & Co., and also to receive the rents and profits of the freehold and leasehold hereds used in connection therewith forming part of tlie residuary estate of the testator J. K. deceased, and out of the first moneys to be received to pay the debts due from the sd business, and to manage the same, but the sd N. is not to act as such manager beyond the 31st of January, 1897, without the further leave of the judge, and it is ordered that the remuneration of the sd L. as such receiver and manager be one-fourth of the profits of the said business ; R K business. 610 PRIVATE COMPANIES. [CliAP. VIII. Form 322. and it is ordered that the sd L. do, on the 10th of Augufit, 1897, and the same do in each succeeding year, leave in the chambers of the judge his accounts as such receiver and manager, and do, within fourteen days after the allowance of each such account, pay the balance that shall be certified to be due from him as the judge shall direct, and it is ordered that the rest of the sd applicon do stand over. (Chitty, J., Re J. K. Sf Co., 4th August, 1896.) Form 323. TJ^e proposal taken into chambers was headed in the action : — Proposal "Proposals for conversion of the business of J. K. & Co. into a Chambers for Private coy to be incorporated under the Cos Acts, 1862 to 1893." conversion of For some years prior to the death of Mrs. K., the widow of the above testator, the business of manufacturers carried on by J. K. & Co. was carried on by her in partnership with the pits K. and S. under the terms of certain articles of partnership, dated, &c. But on Mrs. K.'s death on the of , the partnership was determined, the pit K. and one S. were interested solely in profits of the business — the whole of the capital employed therein belonging to the testator's estate. The capital employed in the business at the date of Mrs. K.'s death was /. The returns of the business from the year 1891 to the 25th of January, 1897, were as follows : — [Put above statement in columns headed, year, sales, gross profits, net profits.] The trees have carefully considered the best course of disposing of the business in pursuance of the trusts of the testator's will, and although the business has been and continues to be profitable, yet looking to the gradual diminution in the annual returns at the end of 1896, they have come to the conclusion that it would be impossible to find a purchaser at an adequate price, and that to attempt to effect a sale to a public joint stock coy would result in failure and occasion considerable damage to the business. The trees therefore submit the following proposal for conversion of the business into a private joint stock coy : (a) The coy to be formed to acquire the goodwill and assets of the business, together with, &c., subject to the debts and liabilities thereof as from the 25th January, 1897, with a nominal capital of 100,000/., divided into 10,000 shares of 10/. each. (b) The purchase price to be 73,500/. to bo wholly satisfied by the allotment to the trees or their nominees of fully pd-up shares in the coy. The whole share capital will then be held by the trees, with the exception of the shares to which the trees of the will of tho sd K. the younger will be entld as pt of the investments of the trust funds subject to the testator's will. PoijMS. on (c) The board of tlio proposed coy to cousltst of tliree directors, Form 323. namely, &c., the latter being appointed manager for a term of seven years from tlie 2Gtli January, 1897, and the re- muneration of Messrs. to be such sum as may bp fixed by the judge in chambers, and that of S. to be the sum of 1,000^. p. a. with a commission of 10 p.c. upon the profits. (d) That each of the directors other than the first directors should hold as his qualification so many shares. (e) That the articles shall provide that the directors shall be entld to refuse registration of shares to any person they do not . approve as transferee without being called upon to assign any reason for such refusal. The draft agreemt for sale and the memdm and arts of asson of the proposed coy to be settled by the judge in chambers. There was affidavit evidence iu support, and an order was made by the learned judge sanctioning the conversion. Upon the applicon by originating summons, dated, Sec, and upon Form 324. hearing counsel for the applicants and for the defendants, and upon Order on reading, &c., it is ordered that the conditional agreemt dated, &c., above origina- and made between, &c., for the sale to the coy of the hereditaments mon/™^" and premises therein described at the sum of 1., be varied in the Form 320. manner following, viz. : — (1) That the option given to the vendors by clause 2 to take a further part, not exceeding 1., of the purchase-money in shares or debentures of the coy, be confined to fully pd-up shares or debentures, and that such oj)tion be not exercised without the leave of the Court ; and (2) That the sum of /. be substituted for the sum of 1, mentd in clause . And the judge doth approve of the sd agreemt as so varied, and doth order that the plaintiffs be at liberty to carry the same into efitect ; and it is ordered that it be referred to the taxing-master to tax, as between solicitor and client, the costs of the plaintiffs and defendants of this applicon and incidental thereto, including therein the costs of the sd affidavits hnbefore read ; and it is ordered that the plaintiffs, as trees of the above-mentd indenture, dated , 1886, do pay and satisfy such costs, when taxed, out of the estate of the sd testators, and any parties are to be at liberty to apply as to exercising the before-mentd option, or otherwise as they may be advised. Stirling, J., Lordy. Seddon, 4th August, 1890. Kekewich, J., in sanctioning a conversion where infants are interested, requires pro- vision to be made which shall prevent tlie infant's whole fortune being in one company. 612 PKIVATE COMPANIES. [Chap. VIII. Order on petition for the sanction of a conver- sion. Form 325. Upon the petition of the plaintiff on the day of preferred unto this Court, which, upon hearing counsel for the plaintiff and for the defendants on the day of , was adjourned for further consideration in chambers, and upon hearing counsel for the plaintiff and for the defendants in chambers, and upon reading the sd petition, the probate of the will of the above-named testator, A. B., deceased, granted by the District Eegistry, on the day of , to , an aflB.davit of, &c,, &c., all filed the day of , and the exhibits therein resply referred to, and an affidavit of the defendant, X., filed the day of : And this Court being of opinion that the terms of compromise in the petition mentd are for the benefit of those parties who are not sutjtiris, doth order that the defendants, X., Y., and Z., the trees of the testa- tor's will, be at liberty to accept and retain, in lieu of the several legacies intended for their several cestuis que trustent, debentures and shares in the coy in the petition referred to when formed, and to join in making over the real and personal estate of the sd testator (other than the landed ppty at, &c., and the shares in local cos, and the debt owing by the defendant, Z., forming part of such estate) to such coy when formed in accordance with the schedule in the petition mentd, and all parties interested are to be at liberty to apply in chambers with respect thereto as they shall be advised. Re Sir Titus Salt, Bart., deceased, Salt v. Wright, Jessel, M.E., 27th July, 1881. Form 326. Upon the applicon of the plaintiff, H. A., of, &:c., who claims to be A TT 7~ the legatee in trust of the share of the above-mentd testator, A. B., in Another order " . _ ' ' on originating the business of, &c., carried on under the style of, &c., at &c., and summons upon hearing counsel for the applicant and for the defendants, and sanctiomug j. o j. j. i conversion. upon readmg, &c., &c. And the judge being of opinion that it is for the benefit of the infant defendants that the said business should be sold to a coy as hnfter provided. It is ordered that the plaintiff be at liberty to execute the draft deed of dissolution, being the exhibit to the affidavit of, &c., filed on, &c., and to assist in the promotion of a coy to be formed to take over the sd business, with a memdm and arts of asson in the form of the exhibit to such affidavit, and subject to the whole of the preference shares being subscribed for at par, or allotted to creditors of the existing firm at par, in discharge of their debts, to join in selling the sd business to such coy when formed, on the terms of the draft contracts, being the exhibits and to such affidavit, and to carry out such contracts and give effect to such sale, and to rotiiin any sliares in \\\g yuid proposed coy to be allotted to him FORMS. 613 as the tree of tlio will of tlio sd A. B. for a period of two years, or Form 326. until further order. And it is ordered, that the costs of the plaintiff and defendants of this action be taxed by the taxing master as between solicitor and client. And it is ordered, that the plaintiff be at liberty to pay and retain such costs when taxed out of the estate of the sd A. B., except so far as the same may be pd by the sd proposed coy. And any of the parties are to be at liberty to apply as they may be advised. Boyce v. Bullard, Stirling, J., 25th March, 1895, Eeg. Lib. A. 1365. 614 [Chap. IX. EMPLOYES' BENEFITS. CHAPTER IX. INTRODUCTORY NOTES. Special Where companies employ much, labour, it is often thouglit expedient to employes, to provide for the employes certain benefits and advantages beyond their ordinary wages, so that they may have special inducements to use their best energies and abilities in the company's service, and abstain from strikes and agitation, "^hem s ^ -^^^ following are some of the various schemes which have, from time to time, been adopted. Profit Sharing Schemes. Profit Various schemes which may thus be described have been devised ^' and adopted, e.g. : — (a) One scheme is for the company to make regulations declaring that a certain portion of its annual profits shall be divided amongst its employes, or selected employes, in proportion to their wages, or in some other proportion. (b) Another scheme is to create an issue of a special class of employes' shares, and to allow emploj^es to take them up. (c) Another scheme is to establish a fund, which is placed in the hands of trustees, who are empowered to invest the same in shares of the company, to be sold on easy terms to employes, all dividends going in part payment of the purchase-money until, by means thereof, the whole price of the shares has been paid. Thus an employe, in eifect, saves up his share of profits until ho obtains witli the amount a share in the com- pany. (d) Another scheme sometimes adopted is for the principal share- holders to make over to a trustee a specified number of paid-up shares in the company, on the footing that certificates, confer- ring a right to the dividend declared on such shares, shall be issued to selected employos, such certificates to be retained so long as thoy remain in the company's emj)loyment. This scheme possesses many advantages, for whilst giving a share in the profits, it docs not render the employes members of the company. INTRODUCTORY NOTES. 615 Superannuation and Pension Funds. Such funds are very attractive to employes where the business of the Superannua- compauy is well established and likely to be permanent, and, as the " ?" i- '' . pensioa benefits are usually confined to employes dying or becoming incapaci- funds, tated by ill-health whilst in the employment of the company, the scheme affords an inducement to employes to continue in the service of the company. Such schemes generally vest a discretion in the adminis- trators of the fund as to the amount of the allowance or pension, and this enables the most deserving cases to be specially dealt with. The provisions of such a scheme are generally more liberal than those afforded by insurance companies, mainly because the company itself largely contributes to the fund, either by donations out of profits or otherwise. In such cases the emploj'os are sometimes required to contribute to the fund, but as a rule it is better not to require such contributions. Life Assurance Schemes. Occasionally a company adopts a scheme of life assurance for the Life assurance benefit of its employes. Unless the company be a life assurance com- ^° emes. pany, it cannot itself insure its employes, but it is easy to find an insurance company ready to give effect to any such scheme, and as a general rule the company itself may pay or contribute towards the premiums payable under any such scheme. If desired, a life assurance scheme can be effectuated by means of an industrial and provident society under the Acts of 1893 to 1895, to be formed and worked by the company's employes with or without supervision ; and this is sometimes preferred, inasmuch as the persons interested are those enabled to frame the scheme as they choose, and to work it without reference to any outside body. Sick and Accident Fund Schemes. Such funds are very common. They can be worked by a committee Sick and appointed, or in part appointed, by the emploj'es, or by means of a ^ccident friendly society registered under the Friendly Societies Act. In either case the company wholly contributes to the fund, and in most cases the employes also contribute a small sum weekly. But it seems prob- able that in cases in which the AVorkmen's Compensation Act, 1897, applies, accident funds will rarely be adopted. Guarantee Fund Schemes. Where the employes of a company, or a considerable number of Guaiauteo them, are required to give security, it is not unusual to establish a ^^^'' ' a guarantee fund to which employes and employers contribute, and thus the contributing employers and employed in effect insure each other's 616 employes' benefits. [Chap. IX. interests. In sucli cases the rules sometimes provide that the surplus from time to time shall be carried over to the provident fund. Encourage- ment of employes to save by de- positing -with company. Deposit Scheme. Occasionally a scheme is established for encouraging emploj'es to save a proportion of their wages by depositing the same with the company, or with trustees, the company allowing interest at a higher rate than can be obtained elsewhere, and the riglit to withdraw the deposits being more or less fettered. The Truck Acts, Truck Acts. In framing and working any scheme which involves contribution by employes the Truck Acts (1831 to 189C) must be borne in mind, namely, 1 & 2 WiU. 4, c. 37 (Truck Act, 1831) ; 50 & 51 Yict. c. 46 (Truck Amendment Act, 1887); and 59 & 60 Vict. c. 44 (Truck Act, 1896). The main object of these Acts is to prevent employers from paying wages in goods, or orders for goods, or insisting on workmen applying their wages, or part thereof, in purchasing goods at stores kept by employers or their agents, or in which employers were interested. The operation of the Acts of 1831 and 1887 was considered by the House of Lords in Heivlett v. Allen, (1894) A. C. 383. In that case, A., the appellant, upon entering the firm's service, signed an agree- ment whereby she agi-eed to conform to all the rules of the firm's works, one of which provided that aU firm's servants should become members of a sick and accident club, to the funds of which weekly subscriptions were payable. A deduction was made each week by the firm from the appellant's wages, with her consent, and paid to the club. The appellant brought an action to recover this deduction, relpng on the Truck Acts, but it was held that the payments so made were not deductions within the meaning of the Act, and therefore could not be recovered. Lord Herschell, L.C., in that case, after referring to ss. 3 and 4 of the Act of 1831, said: " The contrast in those sections is between payment in current coin of the realm and payment in some other fashion ; and I can myself entertain no doubt that a payment made by an employer at the instance of a person employed to discharge some obligation of the person employed, or to place the money in the hands of some person in whose hands the person employed desires it to be placed, is in the sense and meaning of those sections a payment to the person employed as mucli as if the current coin of the realm had })Oon placed in his or lior liands." In the case last cited the contract did not provide that the employe should pay the contributions out of her wages, and the majority of the learned hjrd.s laid stress ou tliis fact. See also Lamb v. Great Northern Jtailway Co., (1891) 2 Q. B. 281. INTRODUCTORY NOTES. 617 With regard to those Acts the following observations occur : — (1) Bys, 1 of the Act of 1887, the Acts of 1831 and 1887 only extended to workmen as defmed by the Employers and Workmen Act, 1875, 38 & 39 Vict. c. 90, s. 10, that is to say — "The expression ' workman ' does not include a domestic or menial servant, but save as aforesaid means any person who, being a labourer, servant in husbandry, journeyman artificer, handicraftsman, miner, or otherwise engaged in manual laboui", whether under the age of twenty-one years, or above that age, has entered into or works under a con- tract with an employer, whether the contract be made before or after the passing of this Act, be express or implied, oral or in writing, and be a contract of service or a contract per- sonally to execute any work or labour." Therefore the Acts of 1831 and 1887 were held not to apply to clerks or shop salesmen, overseers, or drivers of omnibuses and other vehicles. Morgan v. London General Omnibus Co., 13 Q. B. D. 832; Cook v. North Metropolitan, Sfc. Co., 18 Q. B. D. 683; Bound y. Laivrence, (1892) 1 Q. B. 226. (2) They did not prevent an employer from insisting on his employes making contributions to any fund for the benefit of the employes, provided the employer was not to benefit thereby, (3) It is desirable to avoid providing for deduction from wages. The Truck Act, 1896, does not make lawful any contract or payment Act of 1896. which was illegal under the previous Act, or certain other Acts referred to which relate to particular indentures (sect. 9). And the Secretary of State may grant exemptions from its provisions in certain areas, &c., when they are found to be unnecessary (sect. 10). Certain exemptions under this section have lately been made. See London Gazette, March 9th, 1897, p. 1,398 ; June 18th, 1897, p. 3,379. On the other hand, contracts for the payment or deduction of fines are invalidated unless made under the conditions specified in the Act (sect. 1), and this provision applies both to workmen and to " shop assistants." The Act also places restrictions on contracting with reference to deductions or payments in respect of («) damaged goods (sect. 2), {b) the use or supply of materials, &c., in relation to the work or labour of the workman (sect. 3). These provisions, however, are not in terms applied to "shop assistants," and apparently only apply in the case of workmen. Workmen's Compensation Act, 1897. This important statute, 60 & 61 Vict. c. 37, which comes into opera- tion on July 1st, 1898, must not be forgotten, especially as the term 618 employes' benefits. [Chap. IX. "employer "as used in its clauses expressly *' includes any body of persons corporate or unincorporate " (see sect. 7). That it was competent for a workman to contract with his employer not to claim compensation for personal injuries under the Employers' Liability Act, 1880 (43 & 44 Vict. c. 42), was decided in Griffiths v. Earl of Dudley (9 Q. B. D. 357), but contracts entered into on the faith of that decision should be carefully examined with reference to the provisions of the Act of 1897, for by s. 9 of that Act "any con- tract existing at the commencement of this Act, whereby a workman relinquished any right to compensation from the employer for personal injury arising out of and in the course of his employment, shall not, for the purposes of this Act, be deemed to continue after the time at which the workman's contract of service would determine if notice of the determination thereof were given at the commencement of this Act." Sect. 1 renders the employer liable to pay compensation, in accord- ance with the first schedule to the Act, where "personal injury by accident arising out of and in the course of the employment is caused to a workman." And the power of contracting out is very consider- ably modified. The Act is to " apply notwithstanding any contract to the contrary made after the commencement of this Act," subject to this that "if the Registrar of Friendly Societies, after taking steps to ascertain the views of the employer and workman, certifies that any scheme of compensation, benefit, or insurance for the workmen of an employer in any employment, whether or not such scheme includes other employers and their workmen, is on the whole not less favour- . able to the general body of workmen and their dependants than the provisions of this Act, the employer may, until the certificate is revoked, contract with any of those workmen that the provisions of the scheme shall be substituted for the provisions of this Act, and thereupon the employer shall be liable only in accordance with the scheme" (sect. 3, sub-sect. 1). But no scheme is to be certified "which contains an obligation upon the workmen to join the scheme as a condition of their hiring " (sect. 3, sub-sect. 3). The same section provides for limiting the duration of certificates, for revoking them, and for the distribution of funds on such revocation or expiration. Sect. 5 gives workmen entitled to compensation a first charge upon insurance funds to which the employer would be entitled in respect of the liability, when the employer becomes bankrupt, or, if a company, goes into liquidation. Sect. 7 points out the employments to which the Act is to apply, namely: "employment by the undertakers as hereinafter defined on or in or about a railway, factory, mine, quarry, or engineering works," and employment upon certain building operations; and the section specially defines " railway," " factory," " mine," " quarry," " engineer- ing works," " undertakers," "workman," and other expressions. Tlio term " Avorkman" is to include " every person Avho is engaged in an employment to which this Act applies, Mhethcr by way of INTRODUCTORY NOTES. 619 manual labour or otherwise, and whether his agreement is one of service or apprenticeship or otherwise, and is expressed or implied, is oral or in writing," and " any reference to a workman who has been injured shall, where the workman is dead, include a reference to his legal personal representative or to his dependants " — (as defined by s. 7) — " or other person to whom compensation is payable." As to compensation in case of an apprentice, see Noel v. Redruth Foundry Co., (1896) 1 Q. B. 453. As to the Powers of the Company in regard to Employes' Benefits. In framing, for the benefit of employes, any scheme for establishing How far funds to which the company is to contribute, it is necessary to consider companies ., . . , . nave power whether such contributions are withm the powers of the company, to carry out Very commonly the memorandum of association contains express schemes, powers to make such contributions as in Form 87, supra, p. 304 ; but even without any such express powers a company employing labour may do whatever is reasonably needful to encourage its employes to use their best endeavours on its behalf. Thus a company may grant to its employes out of profits a pension, for this is likely to incite them to special exertions. So, too, it may give them an excursion or enter- tainment, and it may deal liberally with incapacitated employes, and with persons dependent on deceased employes. In all these cases the important point is hona fides. Is the scheme devised bond fide with a view to benefiting the com- pany by enabling it to obtain the best services from its employes ? As was said by Bowen, L.J., in Hutton v. West Cork R. Co., 23 C. D. 672 — "You cannot say the company has only got power to spend the money which it is bound to pay according to law, otherwise the wheels of business would stop ; nor can you say that directors who have got all the powers of the company given to them are always to be limited to the strictest possible view of what the obliga- tions of the company are. They are not to keep their pockets buttoned up unless they are liable in a way which could be enforced at law or in equity. Most businesses require liberal dealings. The test there, again, is not whether it is bo7id fide, but whether, as well as being bond fide, it is done within the ordinary scope of the company's business, and whether it is reasonably incidental to the carrying on of the company's business for the company's benefit. Take this sort of instance. A railway company, or the directors of the comj)any, might send down all the porters at a railway station to have tea in the country at the expense of the company. Why should they not ? It is for the direc- tors to judge, provided it is a matter which is reasonably incidental to the carrying on of the business of the company, and a company which always treated its employes with Draconian severity, and never allowed them a single inch more than the strict letter of the bond, would soon find itself deserted — at all events, unless labour was very much more 620 employes' benefits. [Chap. IX. easy to obtain in tlie martet than it often is. The law does not say that there are to be no cakes and ale, but there are to be no cakes and ale except such as are required for the benefit of the company." In Hampson v. Price's Patent Candle Company, 24 W. E. 754, Sir George Jessel, M. E., held that the company might lawfully expend a week's wages as gratuities for their servants, because that sort of liberal dealing with servants eases the relation between masters and servants, and is in the end a benefit to the company. And in Hendcrson.y. Bank of Australasia, 40 C. D. 170, it was held to be within the power of a company to grant to the family of a deceased officer a pension of 1,500/. a year for a period of five years. North, J., referred to the two last-mentioned cases, and said, — "I do not fail to notice that the sums which were the subject of discussion in the two last cases were considerably less than the sum which is the subject of the present application, but that is a matter with which I conceive I have nothing to do. It is not for a judge to express any opinion upon such matters as whether the amount is too large or too small. In the first place he has no means of forming any opinion about that." 621 EMPLOYES' BENEFITS. Clauses in Articles of Association as to Employes' Shares. The following provisions shall have effect : — Form 327 1. the 1,000 shares of \l. each mentd in the coy's memdm of asson :;:; , , , ' ^ '' Employea shall be called " employes' shares." shares. 2. The directors may allot the employes' shares, or any of them, from time to time, to such employes of the coy as they think fit. Before the allotment of an employes' share is made, the full nominal amount thereof must be paid up to the coy in cash. 3. Each of the employes' shares shall, whilst it is held by an employe of the coy, rank for dividend as if it were an ordinary share of 10^. fully paid up ; and whilst not held by an employe of the coy it shall not carry the right to any dividend. An employes' share shall not confer the right to vote, or to attend at general meetings. 4. An employes' share shall not be transferable excej)t as provided by para. 5 of this clause. 5. Whenever an employes' share is allotted, or, pursuant to this clause, is transferred to any employe of the coy, such emj)loye shall be entld to retain and hold the same so long as he remains an employe of the coy ; and if by death, resignation, withdrawal, dismissal, or otherwise, he cease to be an employe of the coy, he or his executors or administrators shall be bound, upon the request in writing of the directors, to trans- fer such share to such person as the directors may nominate ; and, if such person is not an employe of the coy, such person shall at any time, on the request of the directors, transfer such share to any employe of the coy. 6. If any person who ought, in conformity with the last preceding para, of this clause, to transfer any shares, makes default in transferring the same, the directors may, by writing under the common seal, appoint any person to make the transfer on behalf of the person in default, and a transfer by such ap- pointee shall be as effective as if it were duly executed by 6'22 Form 327. employes' benefits. rciiAP. IX. the person so in default. A certificate under tlie common seal that such power of a})pointment has arisen shall he con- clusive for all purposes. 7. In this clause employe of the coy means and includes any manager, departmental ma.nager, foreman, clerk, or work- man, but the term does not include directors or auditors. Form 328. Co-operative fund. Subject as afsd the profits of each year available for division shall be applied as follows : — (a) Such part not exceeding one-half thereof as shall be determined by the co-operative scheme hnfter mentd shall be set aside and applied to the purposes of the co-operative fund as hnfter mentd. (b) The remainder thereof shall be paid as dividends to the holder of ordinary shares rateably and /^a?-/ passu on the amounts pd thereon resply. The co-operative fund shall be paid and distributed among all the directors, servants, and workpeople of the coy for the time being, in such proportions and generally in such manner as shall be determined by a scheme to be made for that purpose, called, " The Co-operative Scheme," and such payments may either be in addition to or substi- tution for the other remuneration, salary, or wages of the recipient, or partly one or partly the other, as shall be determined by the co- operative scheme. The co-operative scheme shall also determine the proportion of the divisible fund (within the limits afsd) of which the co-operative fund shall consist. No co-operative scheme shall come into force until it has been previously approved by a resolution of the coy in general meeting, and when once in force shall not be repealed or altered save by such a resolution. Form 329. ProvisionH as to depoHitH made by craploycH •with the company. Clduscx ill Articles as to Deposits. 1. Any employe of tlie coy may, with the consent of the coy, open a deposit account witli tlie coy, and, until the same is closed, may from time to time pay into such account such sum as such depositor may tliink fit ; and, subject as hnfter provided, may withdraw all or any of the moneys from time to time standing to the credit of such account. 2. Every pajTuont in to a deposit account opened as afsd, must be made to tlio deposit treasurer of the coy, or his deputy, at such place as shall from time to time be fixed by notice posted up in the coy's rogi stored office. FORMS. 623 3. Each depositor will be furnished witli a deposit account hoolc, Porm 329 and such book must be produced wlienever any sum is deposited or "withdrawn, and every deposit or witiidrawal, and all interest allowed, shall from time to time be entered in such book by the deposit treasurer afsd ; and every such pass-book must be left at the office of the deposit treasurer, to be made up, when required. 4. When a depositor desires to make a withdrawal, he must give at least one calendar month's notice in writing to the deposit treasurer, specifying the amount he desires to withdraw and the day he fixes for withdrawal ; but the deposit treasurer may, if ho thinks fit, in any particular case, abridge or waive this notice. 5. The day fixed for withdrawal of any sums must be an ordinary working day, and at any time during business hours on that day the depositor, on applicon to the deposit treasurer, will be entld to be pd the amount specified in his withdrawal notice afsd, and if on the day so fixed he omits to make such withdrawal, or withdraws less than the sum specified, his withdrawal notice shall be deemed to be cancelled, wholly or partially, accordingly. 6. Interest will be allowed by the coy upon the amounts from time to time standing to the credit in such deposit account at the rate of 5 p.c.p.a., and such interest will be credited on the usual quarter days. Sometimes the rate is made to vary with the rate of profits, but this in effect places the depositor in a position, as regards recovery of his loan, inferior to the ordinary creditors of the company. See s. 3 of the Partnership Act, 1S90. A good security for the loan may, however, be made by debenture or otherwise. Ex parte Shell, 4 C. Div. 7S9. 6a. No sum shall be deposited with the coy unless it is the ppty of the depositor and is free from any trust, and a depositor shall not borrow for the purpose of maldng any deposit, or in any way assign or create any mortgage or charge on the amounts standing to the credit of his deposit account. 7. The coy may at any time, by notice in writing to the depositor, close his deposit account ; and in such case the amounts standing to the credit of such deposit account shall become payable at the expira- tion of seven days from such notice being given, and payment thereof shall be made at the office of the deposit treasurer. As from the closing of a deposit account as afsd, the amount to the credit thereof will cease to carry interest. 8. Upon the closing of a deposit account, whether by withdrawal of the full amount thereof or pursuant to the last preceding clause, the depositor's book must be given up to the coy to be cancelled. 9. The deposit treasurer will keep a register of the depositors' addresses, and any notice to a depositor may be given by deliverino- the same to him personally, or by sending the same through the post, addressed to him at his registered address afsd ; and every notice so 624 employes' benefits. [Chap. IX. Form 329. sent by post shall be deemed to be served on the day following that on which it is placed in the post office. 10. In these conditions the deposit treasurer means such officer of the coy as shall from time to time be appointed by the coy to discharge the duties of deposit treasurer. Form 330. Acquisition of shares hy employes out of savings. Acquisition of Shares bi/ Employes. (1) The directors may at any time require any employe of the coy to leave undrawn any part of the emoluments payable by the coy to such employe, and the moneys so left undrawn shall be placed to the credit of such employe in an account to be opened in the books of the coy, and until payment out or investment in preference shares such moneys shall carry interest at the rate of six p.c.p.a., and such interest shall be credited accordingly. (2) "Whenever the directors consider it expedient, they may deter- mine to invest all or any of the moneys standing to the credit of such account in the purchase on behalf of such employe of preference shares in the coy, and thereupon the directors shall give notice to the ppal holders of preference shares, calling on them, in proportion as nearly as may be to the preference shares held by them, to transfer for the consideration below mentioned the required number of prefe- rence shares to such employe, and to deliver such transfer to the coy to be registered. (3) Upon the receipt of each such transfer duly executed, the coy shall out of the moneys afsd pay to the transferor the conson calculated at par ; that is to say, at the sum equal to the capital pd upon the shares sold. (4) If any preference shareholder makes default in executing and delivering such transfer, the coy may authorize the secretary to execute the same in his name and on his behalf, and such execution shall have full effect, and the purchase-money, on execution thereof, become payable to the member who made such default. (5) When any employe has moneys amounting to 100/. or upwards available for investment under this clause, he may at any time require the directors to invest the same as aforesaid, and if the directors do not comply with such request within eight weeks after the same is made, ho may withdraw such moneys. (G) In this clause, until otherwise determined by a general meeting, "the ppal shareholders" means exclusively those holders of preference shares who for the time being hold resply more than twenty preference shares, and no preforcnco share once taken under this clause can again bo taken. (7) Any difficulty as to the i^roportions in wliicli the preference FORMS. 625 shares should be provided as afsd shall be determined by the directors, Form 330. and their determination shall be conclusive. ' (8) Any shares transferred to any employe under this clause shall ipso facto become ordinary shares, and tlie certificate of title issued to him shall be framed accordingly. Profit-sharing Scheme. (1) From and after the 1st of January, 1896, the surplus (if any) of Form 331. the clear profits of the coy's business beyond such definite sum as Method of is for the time being reserved to the coy for its own benefit (hnfter sharing, referred to as the "reserved limit") shall be divided into two equal parts, whereof one is to be distributed gratuitously as a bonus among the employes in the manner defined by these rules, and the other to be retained by the coy. (2) The present reserved limit has been communicated confidentially What is the to , chartered accountant, and will not be altered for the first |^^^*^^^®'^ three years if the scheme so long subsists. Thereafter it may be raised or reduced by the firm, but (unless altered during some month of January) not so as to affect the distribution of profits for the financial year current at the time of alteration. Notice of any alteration will be given to the employes in such manner as to let them know how far such alteration would have affected the last preceding distribution had it then been in force. (3) The accounts of the business will be audited each year by a Accountant's chartered accountant, who will certify the bonus (if any) to which the ^^^ ^' employes are entitled. (4) The employes entitled to share in the profits for any financial Qualifications year are to be such only as were employed at the commencement of gj^^^arino- such year, and have furnished a request to be entered on the list of profit- sharers. The acceptance of the terms herein offered is not to be in any way a condition of employment or of promotion. Profit- sharers will be free to become or remain members of any trade or friendly society. (5) The scheme is to continue in force only until the firm give notice Duration of to the employes putting an end thereto, but such notice, unless given scheme. during some month of January, will not take effect until the end of the financial year current at the time it is given. (G) The employes' share of profits accruing in each financial year is Slethod of (subject as after mentd) to be distributed among them in proportion to "" " ^ ^^^' their respective salaries or wages at the commencement of such year, taken for one week, exclusive of premiums, overtime, or other variable allowances. In making any year's distribution, it shall be permissible p. s s 626 employes' benefits. [Chap. IX. Form 331. Payment of bonus. Employes leaving. Proviso in event of damasre. Partnership not conferred. Alteration of rules. Definitions. to the coy to carry forward undivided to the credit of the following year's employes share of profits any sum which, if divided, would have given to them less than one week's wages calculated as afsd. (7) Each employe's bonus shall, within two months of the end of the financial year, be pd into his account at some savings bank, and will then become his absolute property. (8) An employe whose service ends by notice given on either side by illness, or by death, will have a right to bonus for the financial year in which his service ends in proportion to the portion of the year elapsed to the end of the month preceding the end of his service. Any employe leaving under circumstances other than before mentd shall lose such right. Any sum lost to an employe under this rule does not accrue to the coy, but goes wholly to increase the distribution to the other employes. (9) If an employe ceases to be in the service of the firm by reason of any wilful act or default on his part causing loss or damage to the coy, or is at the time indebted to the firm, his bonus shall be applied to making good such loss or damage, or to payment of such debt. (10) The employes are not to have either the rights or be under the liabilities of partners, and accordingly they are not to intermeddle in the management, or be entitled to investigate or discovery of the accounts of the business. (11) Alterations or modifications of these rules which experience may suggest as desirable may from time to time be made by the coy, but such changes, unless made during some month of January, are not to take efltect until the end of the financial year current at the time they are made. (12) In these rules words importing — The masculine gender include also females. " The company " means the above-named coy. " Financial year " means the year from the 1st of January to the Ist of January. Trust Deed lo facilitate Acquisition by Employes o/" Shares in the Company. Form 332. Trust deed ti) fjioilitato acquisition of ^^^^^,^ ^rt shares by ■■■ employes. THIS INDENTURE made the day of , 189 , between P. & Co. Limtd (hnftor called "the coy") of the one part, and A. B., of , and C. D., of (hnfter called "the present trees") of the WnEUKAS pursuant to the regulations of the coy, and to a resolution of the board of directors of the coy, certain moneys have been taken FORMS. 627 out of the reserve fund of tlie coy and pd over to tke present trees, t(j Form 332. tlie intent that the same may be held on the trusts hby declared. The articles of association in this case expressly authorized the api)lication of any of the reserve fund to the constitution of any trust for the benefit of employes, with or without an vdtimatc trust for the members for the time being of the company. Sometimes the fund is constituted by the vendors making over a sum or a block of shares to the trustees. Now THESE PRESENTS WITNESS AND DECLARE aS foUoWS : — 1. In the interpretation of these presents the expressions following Interpreta- shall have the meanings hnfter attached thereto resply, that is to ^°"" say :— " The trees" means the trees or tree for the time being hereof. "The trust shares" means the shares in the coy for the time being subject to the trusts hereof. "The trust funds" means all the monies, shares, investments, and other funds, options, and rights for the time being held on the trusts hereof, including the trust shares. "Certificate holder" means the holder of the participation certi- ficate issued as hnfter mentd. Words importing the singular number include the plural, and vice versd. 2. The monies which have been taken out of the reserve fund of Monies from the coy, and pd over to the present trees to be held on the trusts ^^:^^ ^^ hereof, shall be held on trust, as and when opportunity shall occur, trustees to to acquire shares in the capital of the coy to be held on the trusts s^^res^ hereof. 3. The trees or tree shall from time to time, whenever required Participation by the directors of the coy, issue to any employe of the coy a °^r*^^-hedul'e*' participation certificate, framed in accordance with the form set forth in the second schedule hto, with such (if any) modifications therein as the directors may from time to time, with the approval of the trees or tree, prescribe. 4. Each participation certificate shall specify the number of the Denoting trust shares in respect of which it is issued. Such certificate must Xires^and also state the name and address of the person in whose favour it is name, &c. of issued, and the amount at which it is charged against him. b^Tnserted in 5. No participation certificate shall be issued to a person who is not certificate. an employe of the coy, and each participation certificate must be signed Only em- V ii- X j_ ployes en- by the trees or tree. titled to 6. Where a participation certificate has been issued in respect of certificates. one of the trust shares, no further certificate shall be issued in respect ^°i7„°'^f , ' .... certificate at of the same share unless and until the prior particijiation certificate a time in re- has been cancelled or become void. ^P'^''* «* ^'^"^ . . . share. 7. Whenever a participation certificate is issued as afsd, an account jjq^ p^^. shall be opened between the certificate holder and the trees or tree, ments for and the certificate holder shall be debited in such account with the provided ' sum of 50^., or such other sum as the participation certificate specifies. Accounts be- ss2 628 employes' benefits. [Chap. IX. Form 332. tweeu trustees and holders. as the sum cliarged. in respect of the share, and shall also be debited each half-year with interest on the sum so charged, or so much thereof as for the time being remains unpaid or unsatisfied, at the rate of 5 p.c.p.a., and shall be credited in such account with all dividends (if any) on the sd share when and as declared and pd, and with any further sums pd by the coy to the credit of such account, and shall also be credited on the day of and ■ day of in each year with interest at the rate of 5 p.c.p.a. on the amount for the time being and from time to time standing to his credit in such account during the preceding half-year ; and when the sums so credited in such account amount to a sum equal to the aggregate of the sums debited in such account, the account shall be closed, and the partici- pation certificate shall become a free participation certificate. 8. Every such account as afsd shall be copied into a book to be provided by the trees or tree at the expense of the trust, and the certificate holder shall be provided by the trees or tree with a corre- sponding pass book, which shall from time to time, on the request of the certificate holder, and on production to the trees or tree, be made up to date and initialled by the trees or tree, or one of them. 9. Where a participation certificate has become a free participation certificate, all dividends from time to time declared and pd on the trust share specified in such certificate shall, as and when received by the trees or tree, be pd over to the certificate holder. 10. The holder of a participation certificate shall not do or suffer anything wliereby his rights under his participation certificate shall, or but for this provision would, become vested in any other members except the trees, and any certificate holder who acts in contravention to this clause shall be liable to have his participation certificate and his rights therein forfeited. 11. If at any time, either before or after a participation certificate has become a free participation certificate, tlie holder thereof shall pany without leave the service of the coy without the consent in writing of the consent. directors of the coy, or shall be dismissed for any irregularity or mis- conduct, his participation certificate shall become liable to forfeiture. 12. If at anytime before a participation certificate has become a free participation certificate the certificate holder shall, with the consent in writing of the directors of the coy, leave the service of the coy, or if he shall die whilst in the service of the coy, his participation certificate shall become null and void, and shall be given up to the coy to be cancelled. Nevertheless, the trees or tree shall, out of the trust funds, pay to such certificate holder, his executors or administrators, upon delivery up of tlio certificate for cancellation, («) the sum then standing to his credit in liis account witli the trees or tree, plus a ])r(;miinn equal to threo-liftlis of the aggregate amount of the divi- dends on tlio shares comprised in such certificate during the preceding fivo years, or, at llie option of the trees, (/>) a sum equal to the market l^rice of the shares comprised in the certificate. Entry of accounts. Pass books. Dividends paid when certificate is paid up. Forfeiture on attempted assignment, &-C. Forfeiture on leaving ser- vice of com- Where con- sent given, company shall redeem the certificate. FORMS. 620 13. Nevertheless, if, at any time before a participation certificate Form 332. has become a free participation certificate, the certificate bolder shall ^ Tr~Z die whilst in tlio service of the coy, and there shall not, at the exjii- holder, ration of six calendar months from the death of such certificate holder, be a duly constituted log-al personal representative of such certificate holder, the riglits of the legal jiersonal representative of the deceased under the last preceding clause shall lapse, and the trees may pay the sum which such legal personal representative would have been entld to claim unto such relative or relatives, or connection or connections, or dependent or dependents, of the deceased, as the trees may think fit, and the receipt of such person or persons shall be a good dis- charge. 14. Where a certificate holder, by reason of illness or misfortune, Trustee may- requires the amount standing to his credit in respect of his particij)a- ^^ emergency tion certificate or any part thereof, he may represent the facts to the funds stand- trees or tree in writing, and, if they are of opinion that it is just and i°o^to "'•'^i'^ equitable that he should be at liberty to withdraw the whole or any him. part of the amount standing to his credit as afsd, the trees or tree shall, out of the trust funds, pay off the same, and reduce the amount standing to the credit of such certificate holder's account accordingly. 15. At anytime after a participation certificate has become a free Trustees may participation certificate, the trees may give notice to the certificate ^'^^^*^^™ ^^^^i- holder of their intention to redeem such certificate, and thereupon such certificate shall become null and void, and shall be given up to the trees to be cancelled ; and upon delivery thereof the trees shall, out of the trust funds, pay to the certificate holder — (a) a sum equal to the amount pd vip on the shares comprised in the certificate, pins a premium equal to three-fifths of the aggregate amount of the dividends of such shares during the preceding five years, or, at the option of the trees ; {b) the market price of the shares. 16. The certificate holder shall not be deemed to be the owner of Certificate the share or shares specified in his participation certificate, and, having ^j j"i°*^i ^ , regard to the fact that the rights conferred on him by the certificate of any share are gratuitously conferred, he shall not be entld to any account against ^'^Peoined m the coy, or to question the propriety of any dividends declared by the coy, or to inquire into the calculation of the coy's profits, or to investi- gate any of the books or documents of the coy, or to any discovery or inspection in any legal proceedings in relation to his rights as a certifi- cate holder ; nor shall the trees or tree be bound to question or inquire as afsd. 17. All payments' of dividends by the trees or tree may be made by How divi- cheque, and if the trees or tree shall think fit, they or he may direct ^*^°^?? °^ the coy to pay the dividends payable in respect of any free participa- paid, tion certificate direct to the holder of such certificate, and the coy shall comply with such direction. 18. Where a participation certificate becomes liable to forfeiture, the Hp-w for- trees or tree may if they or he think fit, and they or he shall upon 630 EMPLOYES' BENEFITS. [Chap. IX. Form 332. Raising monies from trust funds. Investments by trustees. No payment for a certifi- cate otherwise than by dividends being retained and applied by trustees. Trusts of the appropriated Bharcs. Modification of prf>visiouH herein. the directions of the directors for the time being of the coy, declare in writing that such certificate is forfeited ; and thereupon the same shall become null and void, and shall be given up to the trees or tree to be cancelled. 19. For the purpose of raising any monies from time to time pay- able by the trees or tree out of the trust funds, or otherwise in connec- tion with the trust hereof, the trees or tree may at any time sell and convert any of the trust funds, other than shares in respect of which participation certificates shall for the time being be outstanding and in full force. Nevertheless, as far as practicable, the trees or tree are to sell and convert for such purpose those parts of the trust funds which do not consist of trust shares before resorting to the trust shares. 20. All monies received from time to time by the ti-ees or tree here- under, other than the monies received by way of dividend in respect of shares comprised in any free participation certificate, may bo invested by the trees or tree in the purchase of fully pd-up shares in the capital of the coy, or in the purchase of debentures, debenture stock, and other securities of the coy, or upon any investments for the time being by law authorised as investments for trees ; or, at the abso- lute discretion of the trees or tree, such monies or any part thereof may be pd over by them or him to the coy by way of loan, upon the footing that the amount thereof shall be repayable on demand in writing, and shall in the meantime carry interest at such rate as may be arranged between the trees or tree and the coy ; or the trees or tree may place any such monies on deposit with any bank or banks. And the trees or tree may at any time vary such investments as they or he may think fit, and may realise or get in any such monies or investments, and apply the proceeds, as also any monies arising under clause 20 hereof, to the payment of any monies from time to time becoming payable by the trees or tree hereunder; and the trees may take an assignment of or otherwise acquire any options or rights in relation to the purchase of shares in the coy which they may be able to obtain, and on such terms as they may think expedient. 21. The certificate holder is not to be liable or permitted to make any payment in respect of the sum charged against liim as mentd iu his participation certificate, the intention being that the rights conferred by a participation certificate shall be granted by way of bonus. 22. Subject to tho foregoing provisions the tre(>s or tree shall hold the trust shares and tho trust funds generally, in trust for the members of the coy for the time being, and from time to time, in proportion to the shares in the coy held by them resplj', and to bo dealt with in such manner as by resolution in writing signed by tho holders of at least throe-fourths tlio nominal value of tho issued shares in the coy shall from time to time be determined. 2.'3. Tho trees or tree may, from time to time and at any time, with the Hand ion of Uio directors for the time being of tho coy, mako any modification iu tho trusts and provisions heroin contained which they FORMS. 631 or lie shall think expedient in the interests of the coy ; and a memdm Form 332. of every such modification shall be indorsed hereon and signed by the trees or tree, and shall have full offoet. 24. In each of the following cases, viz. : — Winding-up of trusts. ^ii) If the trees or tree shall at any time, with the approval of the directors, certify in writing that in their or his opinion the trust should be wound up ; or (b) If an order shall be made, or an effective resolution shall be passed for the winding-up of the coy, the trust funds shall be converted into money, and the net proceeds shaU be applied iirst in paying to the certificate holders the full amount standing to their credit resply, and the balance shall be divided among the members of the coy in accordance with clause 23 hereof. 25. A notice may be served by the trees or tree on any certificate Service of holder, either personally or by sending it through the post in a prepaid holders."^ envelope or wrapper addressed to such certificate holder, at the place of address furnished by him from time to time to the trees or tree, and entered by them or him on the books as afsd, and if sent by post shall be deemed to have been served on the day following that on which the envelope or wrapper containing the same was posted ; and in proving such notice it shall be sufficient to prove that the envelope or wrapper containing the notice was properly addressed and put into the post office. 26. Any notice by the trees or tree to any certificate holder which Advertise- cannot be served as afsd, shall be sufficiently given if given by adver- ^^t^^gg tisement once in one London daily newspaper, and once in [_local^ newspaper. 27. The statutory power of appointing any new trees or tree hereof ^^^^ trustees. shall be vested in the directors of the coy. 28. Any power or discretion hby vested in the directors of the coy How directors may be exercised by resolution passed at a meeting of the directors at which a quorum in accordance with the coy's regulations for the time being is present. 29. A certificate in writing, signed by any two directors of the coy. Evidence of stating that any particular resolution has been passed at any specified dii-ectors meeting of the directors, shall be conclusive evidence in favour of the trees or tree that such resolution was duly passed, and that such meeting was duly held. 30. The trees or tree shall have absolute and uncontrolled authority Full discre- in regard to the exercise of every power, authority or discretion hby ^^°^ *° *^^^' vested in them or him. 31. If any doubt or question shall arise as to any provision herein Dii'ectors to contained, or as to the rights, powers, and duties of the trees, or of any tions. certificate holder, or of any person claiming from a certificate holder, it shall rest with the directors of the coy, or the majority of them, to determine the matter as they think fit, and their certificate of such 632 employes' benefits. [Chap. IX. Form 332. determination shall be conclusive and final ; and in giving such cer- tificate they shall not bo considered to be acting as arbitrators. In witness, &c. The First Schedule above referred to. Form of participation certificate. The Second Schedule above referred to. P. and Coy Ltd. This is to certif}', that a share of 50^. in the capital of the above- named coy, numbered , has been appropriated for - of in accordance with the provisions of the trust deed, dated the day of , and made between of of the one part, and and , the trees, of the other part, and that the sums charged against the sd in respect of such share is 1. This certificate is issued subject to the provisions of the sd trust deed. Extracts therefrom are endorsed hereon. Dated this day of (Signatures.) Trustees. To be Endorsed. Extracts from Trust Deed. The within-mentd trust deed contains, among other things, the following provisions : — Whorovor a participation certificate is issued an account shall be opened between the certificate holder and the trees or tree (which expressions mean the trees or tree for the time being of the sd trust deed) and the certificate holder shall be debited {set out rest of I, and divers of the other provisions). FORMS. 633 Trust Deed constituting Superannuation Fund. THIS INDENTUEE made tho clay of , 189—, lietwoon Form 333. (hnfter called "The Coy ") of tho one part, and of , a Trust deed director of the coy, , of , a director of the coy, , of , constituting secretary of the same coy, and (hnfter called "the present trees") of tionfimd.' the other part. Whereas the coy is desirous of establishing a superannuation fund for the benefit of its male employe's in London and Birmingham. Now THESE PRESENTS WITNESS AND DECLARE AS FOLLOWS : 1. In these presents, unless excluded by the subject or context, "the luteqircta- trees " means and includes the present trees, or other the trees or tree '^^ for the time being hereof. "The fund" means the superannuation fund to be constituted as hnfter provided. 2. A fund to be called the superannuation fund shall be constituted The fund and established, and such fund shall be vested in and held by the established. trees. 3. Such fund shall consist, in the first instance, of the several invest- To consist of ments specified in the schedule hto, and there shall be added to the investments fund all contributions and additions which are to be carried to it as aiiisso]ution and distribu- tion. 6. If any subscriber makes default for more than seven days in paying any contribution due from him as afsd, the bank may, by notice in writing, exclude such subscriber from the benefit of the fund, and thenceforth he shall forfeit all interest in the fund ; but the bank, in its discretion, may annul any such forfeiture on such terms and conditions as it may think expedient. 7. The fund shall be regarded as a security to the bank against all defalcations and misfeasances by the subscribers thereto for the time being, but, as regards each subscriber, such security shall be limited to the amount in respect of which he has been a subscriber. 8. "Whenever the bank certifies under its seal that any subscriber to the fund has been guilty of any defalcation or misfeasance, and the amount necessary to compensate the bank therefor, then and in any and every such case the bank may withdraw from the fund and appro- priate a sum equal to the amount so certified, but not exceeding the amount of the security in respect of which such employe has been contributing. 9. In the event of any subscriber to the fund voluntarily retiring from the service of the bank, or dying, such subscriber, or his legal personal representatives, as the case may be, shall, provided such subscriber has not been guilty at any time of any defalcation or misfeasance in relation to the bank, be entld to payment out of the fund of a sum equal to one-half the amount of the premiums pd by him to the fund. 1 0. A subscriber to the fund who is dismissed by the bank from its service for any cause whatsoever shall forfeit all interest in the fund. 11. All contributions to the fund shall be pd to the bank, and the bank shall keep a proper account thereof ; but it shall not be bound to kocp such contributions separate from the general assets of the bank, or bo regarded as a tree of such fund. 12. Tlio bank may at anytime by deed dissolve the fund, and in that cas>J ] be issued by the company without the conseut in writing of the liolJers of two- Form 347. thirds of the A shares for the time being outstanding." "" 4. That the A shares shall not confer any right of voting at any general meeting of the coy, nor shall they qualify any person to be a director of the coy. 5. That in the event of the coy being wound up, the surplus assets thereof shall be applied in the first place in repaying to the holders of the sd preference shares, and of any other shares entld to rank pari passu with them, the full amount pd up thereon, and that, subject as afsd, such surplus assets shall belong to and be divided among the other members of the coy. 6. That the directors be and they are hby authorized to issue the sd shares to such persons, and to be pd for by such instalments or otherwise as they think fit, and without being bound to offer the same or any of them to existing members of the coy. Or shall be offered in the first instance to the existing shareholders as nearly as may be in proportion to the capital held by them respectively. Such offer to be made in such manner as the directors may determine. That the capital of the coy be increased to /. by the creation of Form 348. 75,000 new shares, to be called "A" cumulative preference shares, gggu^ed and that the provisions following in regard thereto shall have effect, preference that is to say : — 1. The said new shares shall carry a fixed cumulative preferential dividend at the rate of 5 p.c.p.a. on the capital for the time being pd up thereon, and such dividend shall be pd as nearly as may be half-yearly, on the 7th April and the 7th October in each year. 2. The said new preference shares shall rank for dividend next after the 80,000 existing preference shares, and in priority to the ordinary shares for the time being of the coy, whether preferred ordinary or deferred ordinary. 3. The said new preference shares shall in winding-up be entld to rank as regards repayment of caj)ital next after the 80,000 existing preference shares, and in priority to the ordinary shares, whether preferred ordinary or deferred ordinary, but the said new preference shares shall not be entled to any further participation in such surplus assets. 4. The said new preference shares shall only confer on the holders the right to attend and vote at general meetings on any question directly affecting any of the rights or privileges attached to such shares, and one vote per share. 5. The coy shall be entld to create further new "A" cumulative preference shares ranking in all respects pari passu with the said 75,000 new shares, not exceeding, however [state limit']. shares. 656 RESOLUTIONS. [Chap. X. Form 349. Sometimes a power to convert preference into ordinary shares is given. Thus : - Converson of preference into ordinary- shares. Any holder of such shares may give the coy six calendar months' notice in writing of his desire to convert the preference shares held by him, or any part thereof, into ordinary shares, and upon the expiration of such notice the same shall be deemed to be converted accordingly, and shall thenceforth confer the same rights and privi- leges as the other ordinary shares in the coy's capital. Such a conversion as above would not be effective when the rights of the preference shares were declared by the memorandum of association. Form 350. 1. That the capital of the coy be increased to 125,000/. by the T T ', ' creation of 100,000 new shares of 10s. each. soon as ag-gre- 2. That the new shares be called preference shares, and that the gate dividends }iolders thereof shall be entld pari passu to receive the whole of the amount to ■' ■' nominal value net profits of the coy until an aggregate amount of IO5. shall be pd ^■t P^®**^^®^°® out of such profits in resj)ect of each of the sd preference shares. 3. That when and as soon as an aggregate amount of 10s. shall have been pd out of the net profits of the coy in respect of each of the sd preference shares, the same shares shall cease to have any prefer- ence or priority, and to be called preference shares, and the sd profits shall thenceforth be divided among all the members of the coy pari passu, in proportion to the respective amounts pd up or deemed to be pd up upon the shares held by them resply. 4. That in case the coy shall be wound uj) before an aggregate amount of 10s. shall have been pd out of the net profits of the coy on each of the new shares to be issued as afsd, the surplus assets (if any) of the coy shall be applied, in the first place, in paying to the holder of each such share such a sum as shall, together with the aggregate amount of net profits (if any) received in respect of such share, make up the sum of 10s., and the residue (if any) of the sd surplus assets shall bo divided among all the members, in proportion to the nominal amount of capital held by them resply. But in case the coy shall be wound up after an aggregate amount of 10s. shall have been pd out of the sd profits on each of the sd new shares, the holders thereof shall not be entld to any preference or priority in the distribution of the surplus assets (if any) of the coy. Form 351. Creation of debentures and Hpooial preferonco HharcH. Dobonturos offered to 1. That without prejudice to the powers vested in the directors by the regulations of the coy, the directors bo and they are hby autho- rized to create and issue 10,000 further debentures of 10/. each, carrying interest at f) p.c.p.a., and to be secured by charge upon the wliolo undertaking of tin' coy, 8u])ject to any existing mortgages and charges. 2. That tlio ciipital of the coy be increased by the creation of 10,000 FORMS. 657 new shares of 10s. each, to bo called special preference shares, and Form 351. that there be attached to the sd shares the rights following, viz. : — membors at (1) The holders of the sd shares, or of such of them as shall for the discoimt, sub- timo being be issued, shall be entld rateably, in proportion g^jjacribins^ to the numbers held by them resply, to nine-tenths of the new shares, profits of the coy which it shall from time to time be deter- mined to divide, and to nine-tenths of the assets which in a winding-up shall be available for distribution among the members. (2) Each of the sd shares shall confer on the holdor the right to 20 votes. 3. That the sd debentures be offered for subscription to the existing shareholders in the coy at the price of 9/. 10s. per 101. debenture, to be pd by such instahnents as the directors determine, and upon the terms that each subscriber for any of the sd debentures shall, in respect of every debenture subscribed for by him, be entld to an allotment of one of the sd special preference shares upon payment of par value, and that if the sd debentures shall be over subscribed by the shareholders, the subscribers shall be entld to rank for allotment as nearly as may be in proportion to the shares now held by them, and that any of the debentures and shares not taken up by the shareholders may be disposed of on such terms and in such manner as the directors think fit. Conversion of Shares into Stock. That the 10,000 shares in the capital of the coy which have been Form 352. issued and fully pd up be converted into stock. Conversion of By s. 12 of the Act of 1862, any company limited by shares may so far modify the ^"^res into conditions contained in its memorandum of association, if authorized so to do by its regulations as originally framed or as altered by special resolution, as (h/fe)- alia) to convert its paid-up shares into stock. The articles generally empovrer a company to convert any of its paid-up shares into stock. Sometimes the sanction of the company in general meeting or by special or extraordinary resolution is required, but vrhere this is not the case the directors can generally exercise the power under such a clause as 113 of Form 210. As to notice of conversion to be given to Registrar of Joint- Stock Companies, see infrrr. That the whole of the preference shares in the capital of the coy be Form 353. converted into stock, to be called preference stock. Another, Consolidation of Shares. 1. That the shares in the capital of the coy be consoKdated in such Form 354. manner that every five of the existing shares shall constitute one 51. Consolidation share, upon which the sum of 5/. shall be credited as having been ^^ sh&Tes. pd up. P. U U 658 RESOLUTIONS. [Chap. X. Form 354. 2. That the existing certificates of shares he called in by the directors and cancelled, and that new certificates be issued, subject to the provi- sions contained in clauses of the arts of asson. Sect. 12 of the Act of 1862 permits any company limited by shares so far to modify the conditions contained in its memorandum of association, if authorized to do so by its regulations as originally framed, or as altered by special resolution in manner hereinafter mentioned, as to {iiittr alia) consolidate and divide its capital into shares of larger amount than its existing sliares. It is usual to insert the necessary authority in the articles (see supra, Form 210, cl. 48), although it is but seldom exercised. Even though not inserted, a single special resolution is sufficient. Division of Shares. Form 355. That each of the existing 10/. shares be divided into two 51. shares, upon each of which the sum of 41. shall be credited as pd up. Division. See ss. 21 and 22 of the Act of 1867. Before this enactment it was illegal to subdivide shares. Holmes' case, 2 Ch. 714 ; Fielding and Ri)nington''s case, ibid. See also SeiveWs case, 3 Ch. 131. For clause to be inserted in articles giving the requisite power, see supra, p. 410. The power is to be exercised by special resolution ; hence if the articles do not contain the necessary authority, two special resolutions are necessary, as in the case of a reduc- tion of capital. Notice of a special resolution subdividing the shares must be given to the Registrar of Joint-Stock Companies. See infra, p. 7^7. Form 356. Subdivision and reduction. Kenumbering and further division into preferred and deferred ehareB. (1) That each of the 50/. ordinary shares in the coy's capital be divided into two shares of 2.5/. each, and that the capital of the coy be reduced from 250,000/. to 200,000/., by cancelling pd up capital to the extent of 5/. per share in respect of each of the 10,000 shares of 25/. each, resulting from such division, and reducing the nominal amount of such shares resply j^ro tanto. (2) That the shares resulting from the division of each of the exist- ing 50/. shares be re-numbered, so that the shares representing that now numbered 1 be resply numbered 1 and 5,001, and those represent- ing that now numbered 2 be resply numbered 2 and 5,002, and so on, and that the shares so to be numbered 1 to 5,000 be called preferred shares, and those to be numbered 5,001 to 10,000 be called deferred shares, and that as between such preferred shares and such deferred shares such preferred shares shall confer a right to a fixed cumulative preferential dividend at 5 p.c.p.a. on the capital pd up thereon and no more than such dividend, and that the arts of asson of the coy be modified accordingly. If the memorandum and artich>s give power to divide the capital into different classes, a rosolution as above may be cifcctivc, but it is desirable to find express power as above, ]). 1 10. In several cases companies have obtained the requisite power from Parliament. Seep. 1177. FORMS. 6D9 That in accordance with the request in writing, signed by all the Form 357. members of the coy and submitted to this meeting, and in exercise of DiyisioiTof the power conferred by clause 5 of the coy's memdm of asson, the existing existing capital of the coy be divided into two classes of shares, cij^sgeg ^p^^er namely, 15,000 preference shares of 10/. each, and 15,000 ordinary in memoran- shares of 10/. each, and that the provisions following in regard thereto ^^"^)- have effect, that is to say : — (a) The 15,000 preference shares afsd shall l)e those shares which Preference , , . , . . , . snares free are numbered to inclusive, to inclusive, fj-om restric- to inclusive, and to inclusive, and such tions in arti- preference shares shall be from henceforth numbered 1 to transfer. 15,000 inclusive. (b) The sd preference shares shall carry a fixed cumulative pre- ferential dividend at the rate of 5 p.c.p.a. on the capital pd up thereon, and such dividend shall run as from the 1st day of October, 1897, and shall be paid as nearly as may be half- yearly, on the day of and day of , the first payment to be made on the day of next. (c) Such preference shares shall be transferable and transmissible free from the restrictions imposed by clause 32 of the coy's arts of asson, and such shares shall only confer a right to vote at general meetings of the coy upon any proposition for the sale of the coy's undertaking, or for altering the regula- tions of the coy, so as directly to interfere with the rights and privileges of the holders, and shall only confer a right to notice of and to attend at general meetings of the coy where some such proposition is to be submitted. (d) Such preference shares in a winding-up shall rank for re-pay- ment of capital in priority to all the other shares. (e) The residue of the existing shares shall be numbered 15,001 to 30,000 inclusive, and shall be called ordinary shares, and, subject as afsd, such ordinary shares shall confer a right to the surplus profits of the coy which it shall from time to time be determined to distribute by way of dividend, and in a winding-up shall rank for re-payment of capital after the payment off of the capital pd up on the preference shares afsd. (f) These provisions, so far as necessary, shall take effect by way of alteration of the arts of asson of the coy. In the above case there was power in the memorandum of association to ilivicle the shares into several classes, &c. That each of the existing 2,400 100/. shares in the coy be divided Form 358. into five preference shares of 10/. each and five ordinary shares of 10/. ^^^^^^ each, and that there be attached to such preference shares a right to a fixed cumulative preferential dividend at the rate of p.c.p.a. as u u 2 660 Form 358. from tte RESOLUTIONS. [Chap. X. day of and a right in a winding-up to repayment of capital in priority to the other shares for the time being outstand- ing, but such preference shares are not to confer any further right to participate in profits or assets. Form 359. That in accordance with the provisions of the coy's memdm and arts Conversion of °^ asson, the whole of the pd-up shares in the capital of the coy of shares into 10/. each be converted into preferred and deferred stock, upon the preterred an footing that each holding of such shares shall be converted into stock, stock. whereof 60 p.c. shall be preferred stock and 40 p.c. shall be deferred stock, and that such conversion be and the same is hby sanctioned. The resolution is to give effect to a provision as in Foi-m 200. Form 360. Subdivision into prefer- ence and ordinary shares. That each of the existing shares of the coy be divided into two shares of ol. each, one of which shall be called a preference share, and the other an ordinary share ; and that the holders of the sd preference shares shall be entld to be pd out of the profits of each jQax a pre- ferential dividend at the rate of 5 p.c. for such year, and that the surplus profits of each year shall be applied in payment of dividends on the sd ordinary shares. Form 361. Simple sub- division. That each of the existing 50/. shares be divided into five fully pd-up 10/. shares. Form 362. That each of the existing 10/. shares be divided into ten 1/. shares, Sub-division ^^^ ^° that, as regards those shares which are not fully pd up, the with direction proportion between the amount (if any) which is pd and the amount (if tmpaid"'^ '"^ ^^j) """liich is unpd on each share of reduced amount shall be the same as it was in the case of the existing share or shares from which the share of reduced amount is derived. Reduction of Capital. See further, infra, p. 970. Form 363. That the capital of the coy be reduced from 100,000/. divided into :„ :;"~:~ 7 10,000 sliares of 10/. each, with 7/. 10s. per share pd up, to 75,000/., Keduction of i liability. divided into 10,000 fully pd-up shares of 11. \0s. each. Form 364. (1) That tliu capital of the coy be reduced from 100,000/. (divided Another. ^^*^ 5,000 preference shares of 10/. each and 5,000/. ordinary shares of FORMS. 661 10/. each) to 90,000/. divided into 5,000 preference shares of 10/. each Form 364. and 500 ordinary shares of 8/. each, and that such reduction bo effected by reducing tiio nominal amount of the ordinary shares from 10/. to 8/. each, and extinguishing the liability in respect of uncalled capital on the ordinary shares to the extent of 21. per share. (2) That the arts of asson of the coy be altered by substituting for the word "share" in Article 53 the words one pound of the issued capital of the coy for the time being issued be, and the same were thereby confirmed. Confirmed by Romer, J., Re James Cobncr, Limited, (1897) 1 Ch. 524. That the capital of the coy be reduced from 50,000/. divided into Form 365. 5,000 shares of 10/. each, to 30,000/., divided into 5,000 shares of 6/. ^^j.m,f each, and that such reduction be effected by returning to the holders capital, of the 4,200 shares that have been issued pd up capital to the extent of 21. per share, and by reducing the nominal amount of all the shares from 5/. to 3/. That in respect of each share in the coy's capital, upon which the Form 366. sum of 4/. \0s. has been pd up, capital be pd off to the extent of 1/. Return liable" upon the footing that the amount returned, or any part thereof, may to recall. be called up again. Northmoor Co., confinned 9th Feb. 1883, Kay, J. In the above case, Kay, J., decided that there was jurisdiction to sanction a return of capital on this footing, and that decision has frequently been followed during the last few years. See also Cold/iurst Co., Hall, V.-C, Jan. 1882 ; E.vplosives Co., Chitty, J., in 1885 and 1886 ; Fore Street Warehouse Co., Kay, J., W. N. (1888) 155 ; 59 L. T. 214. Capital cannot be returned or paid off except with the sanction of the Court. Trevor V. Whiticorth, 12 App. Cas. 409. See supra, p. 282. That the capital of the coy be reduced from 500,000/., divided into Form 367. 500,000 shares of 1/. each, to 125,000/., divided into 500,000 shares of " 5s. each, and that such reduction be effected by cancelling capital lost capital, which has been lost, or is unrepresented by available assets, to the extent of 15s. per share upon each of the 253,727 shares which have been issued, and are now outstanding, and by reducing the nominal amount of all the shares in the coy's capital from 1 /. to 5s. per share. In cancelling capital which has been "lost or is iinrepresented by available assets," it is usual to use those words in the resolution, but they may be omitted, if desired, and the words "paid-up capital" can be substituted. That the capital of the coy be reduced from 180,000/. (divided into Form 368. 7,000 shares of 20/. each, in this resolution called ordinary shares, and jjeducing 8,000 preference shares of 5/. each) to 110,000/. divided into 7,000 ordinary 662 RESOLUTIONS. [Chap. X. shares ex clusively. Form 368. shares of 10/. eacli, and 8,000 preference stares of bl. each, and that such reduction be effected by cancelling pd up capital which has been lost or is unrepresented by available assets to the extent of hi. per share on each of the ordinary shares, and by extinguishing the liabihty in respect of uncalled capital to the extent of 5/. per share on each of the ordinary shares, and by reducing the nominal amount of the ordinary shares from 20/. to 10/. each. Reduction confinued by Chitty, J., 12 May, 1888 ; Ee Madulneeina Coffee ami Cinchona Co., Limited. t. Where by the memoraudum or articles, or terms of issue, the preference shares are I made preferential, not only as regards dividend, but as regards capital, a cancellation of I lost capital should, prima facie, as in the above resolution, be thrown on the ordinary shares exclusively. But in the absence of such special circumstances the cancellation ought to be made pari passu on all classes, as in Bayinattjne v. Direct Spanish Telegraph Co., 34 C. Div. 287; Direct Spanish Cable Co., 34 C. Div. 307; Barroio Hamatite Co., 39 C. D. 582. It was, however, held by North, J., in Ee Quebrada Land Co., 40 C. D. 363, that even when the preference shares are given no preference as regards capital, it is competent to the company, by special resolution, to throw the loss exclusively on the ordinary shares ; and that this view is correct has now been decided by the House of Lords. British and American Corporation v. Couper, (1894) A. C. 399. The Court, however, has a discretion, and will not confirm a reduction which would operate inequitably. There is, of course, no objection to thi-owing a loss on certain shares if the holders assent thereto. It has often been done, e.g., Vivian ^- Co., W. N. (1886) 32 ; Lhjnvi Co., 26 W. R. 55; and Gatling Gun Co., 43 C. D. 628. Such a reduction hurts no one, and when confirmed and the minute registered, it is unimpeachable. Form 369. Reduction of capital by paying off and extin- guishing specified ordinary and f(niiiders' shares. That the capital of the coy be reduced to 1,691,737/., divided into 160,767 ordinary shares of 10/. each, and 84,067 general founders' shares of 1/. each, and that the remainder of the capital, namely, the 27,833 ordinary shares, numbered, &c., and the 29,933 general founders' shares, numbered, &c., be pdoff (the capital represented thereby being in excess of the wants of the coy), and that such last mentd ordinary and general founders' shares resply, and all liability thereon, be wholly extinguished. The above resolution was confirmed by the House of Lords. British and American, S;c. Corporation v. Couper, (1894) A. C. 399. The company was possessed of assets in America and in England, and the object of the resolution was to pay oif the American shareholders out of the American assets. It was held that this was in effect a piirchase by the company of its own shares, but that the Court had, under the Companies Act, 1867 and 1877, jurisdiction to sanction such a reduction of capital, or any other kind of reduction. Form 370. That the capital of the coy be reduced from 163,618/. to 50,700/. T. and that such reduction bo effected by cancelling capital which has Cancelling . ,, •iii .i , , p loHt capital by been lost, or is unrepresented by available assets to the extent oi, extinguishing f^j,f| |,y ^j^f, cancellation of the whole of the 5,943 ordinary shares sharcB and "f 3/. lo.v. each, and the whole of the 20,521 second preference shares FORMS. 663 of 3/. 10s. each, and the sum of 11. per share upon each of the 20,284 Form 370. first preference shares of 3/. 10s. each, and by reducing the nominal part ol capital amount of the sd first preference shares from 3/. 10s. to 21. 10s. paid up on a each. third class. The above resolution was coniirmed by Chitty, J., 13 Feb., 1895. See Floating Dock of St. Thomas, (1891) 1 Ch. 691. The first preference shares were, by the regulations, given a preference both as regards capital and dividend, and it being proved that the assets were worth less than the capital paid ujj on the jireference shares, the order was made. The case was followed by Stirling, J., in London and Kcw York Investment Co., (1895) 2 Ch. 860. That the capital of this coy be reduced by the cancellation or extin- Form 371. guishment of 1,482 shares, purchased in pursuance of the special 7, JT^~ resolution passed at an extraordinary general meeting of the coy, held purchased on the 4th day of February, 1882, and confirmed at a subsequent '*^^^®- extraordinary general meeting, held on the 25th day of February, 1882. Re Albert New Mills Co., Limited and Reduced, confirmed by Kay, J., July 30, 1887. An effort was made to get this reduction through, on the footing that creditors were not interested, but the learned judge held that they were, and required the usual pro- ceedings. That the 265 fully pd-up shares already purchased by the directors Form 372. out of the reserve fund be cancelled, and that the capital of the coy Cancellation be reduced by the sum of 2,650/., being the nominal amount of such of purchased shares. '^^'''' Mottle's Fatent Co., confii-med Ith May, 1883. That the capital of the coy be reduced from 400,000/., divided into Form 373. 4,000 shares of 100/. each, of which 1,500 are preference shares and c^Tifirminc^ 2,500 are ordinary shares, to 250,000/., divided into 2,500 ordinary past returns, shares of 100/. each ; and that such reduction be effected by cancelling ^' so many of the sd preference shares as have not been taken or agreed to be taken by any person, and by paying off as cajoital in excess of the wants of the coy the capital paid up and not yet repaid, on so many of the sd preference shares as have been taken, and by confirming, and the coy does hby confirm, the repayment of the capital on so many of the sd preference shares as have already been pd off, and that the preference shares upon which the capital pd up has been, or shall be repaid as afsd, be cancelled. Fope andFearson, Limited, confii-med 24th December, 1881, by the High Court. Where capital has been improperly returned, it is desirable to get the sanction of the Court as above, so as to get rid of the Uabdity on the part of the directors for the breach of trust. There have been several subsequent cases in which his has been done, but the creditors are, of course, interested. 664 RESOLUTIONS. [Chap. X. Form 374. That the capital be reduced from, &c., to &c., by cancelling 10,000 of the existing preference shares which have not been taken or agreed to be taken by any person. Cancellation of unissued shares. Under s. 5 of the Companies Act, 1877, a special resolution as above operates without the sanction of the Court. And where the regulations give the requisite power {c.ff., by resolution of a general meeting), a special resolution is not requisite. Form 375. 1. That the capital of the coy be reduced by cancelling the 100 Cancellation Sunders' shares of U. each. of shares and 2. That the ordinary shares in the capital of the coy be consolidated in such manner that every five thereof shall constitute one 51. share. consolidatin others. The above resolution for reduction was confinned by Chitty, J., in lie Islington, dj-f. Co., 10th May, 1892. The founders' shares had been surrendered. rorm 376. Reduction by payment off of one of two classes. That the capital of the coy be reduced from 30,000/., divided into 460 ordinary and 140 preference shares, all of 50/. each, to 23,000/., divided into 460 ordinary shares of 50/. each, and that such reduction be effected by returning to the holders of the 140 preference shares that have been pd up, capital to the extent of 50/. per share out of the net profits of the coy set apart under clause 146 of the arts of asson of the coy, and by cancelling the capital represented by the sd preference shares. The above resolution was confirmed by Chitty, J. See Dlcido Fiir Co., (1891) 2 Ch. 354. The articles provided for setting aside a portion of the profits as a sinking fund to redeem the preference shares. Held, that the Court could sanction the reduction. Form 377. Reduction by paying' off and issue of debentures. 1 . That the capital of the coy be reduced from 780,000/., divided into 7,800 shares of 100/. each, with 87/. I65. paid thereon and 12/. 4s. uncalled, to 546,000/., divided into 7,800 shares of 70/. each, with 65/. 16.9. paid up thereon and 4/. 4s. uncalled, and that such reduction be effected. (a) By extinguishing the liability in respect of the uncalled capital to the extent of 8/. per share on each of the shares of the coy. (b) By returning to the shareholders paid-up capital to the extent of 22/. per share. 2. That the sd 7,800 shares of 70/. each, with 65/. 16s. pd thereon, bo subdivided into 54,600 shares of 10/. each, with 9/. 8s. pd up on each share. 3. That the directors be and they are hereby authorized to create an issue of debentures for a total sum not exceeding 139,000/. [^subject in certain sprri/iefl provisions^. FORMS. 665 4. That the directors be and they are thereby authorized to issue Form 377. the debentures to such of the shareholders as shall consent to accept ' the same at par, in part satisfaction of the cash to be repd to them on their shares as hereinbefore provided, but so that the amount per share to be so satisfied should not exceed 18^., and that as regarded any debentures which shall not be so accepted by the shareholders, the directors shall be authorized to dispose of them to such persons, whether shareholders or not, and upon such terms as they think fit. Confirmed by Stirling, J., Me Nixon's Navigation Co., (1897) 1 Ch. 872. That the capital be reduced, «&c. by cancelling the pd-up shares Form 378. numbered , as provided by the provisional agreemt, &c. Cancellation of issued In such a case the sanction of the Court must be obtained, but if the shares are fully shares, paid up and nothing has been paid for the surrender, the consent of creditors may not be requisite. See s. 4 of the Companies Act, 1877, and IJijnri Co., 26 W. R. 55 ; 37 L. T. 373 ; Vivian ^ Co., 34 W. R. 411 ; W. N. (1886) 32. But having regard to Trevor V. Whitworth, 12 App. Cas. 409, it would seem that such a transaction ought not to be carried out without the prior sanction of the Court, and the same observation applies to Form 379. In Vivian ^- Co. there was a provisional agreement that the company should be at liberty to cancel some of the vendor's shares by special resolution sanctioned by the Court. That the capital of the coy be reduced to 58,520^., divided into 2,926 Form 379. shares of 20/. each, and that such reduction be effected by cancelling Cancellation all the unissued shares, and also the 640 shares which from time to of shares, time have been surrendered to or for the benefit of the coy, and that the conditions contained in the coy's memdm of asson be modified accordingly. Mediterranean Hotel Co., Pearson, J., 3rd August, 1885. In this case, also, the shares had been purchased out of the reserve fund. See, also, York Glass Co., Limited, 60 L. T. 744. That out of the accumulated profits of the coy there be returned to Form 380. each member a sum equal to 10 p.c. on the capital pd up on the Payino- off shares held by him in reduction of such capital, and to the intent that capital out of the unpaid capital may be increased by a similar amount. See es. 3, 5, 6 of the Act of 1880, infra, Appx. Reserve Capital. That capital of the coy to the extent of 10/. in respect of each of the Form 381. issued shares shall not be capable of being called up except in the Reserve event of and for the purpose of the coy being wound up. liability. See, as to such a resolution, s. 5 of the Companies Act, 1879 ; and infra, p. 787. 666 RESOLUTIONS. [Chap. X. Form 382. Change of name. Change of Name. That the name of tlie coy be changed to The Coy, Limtd. As to change of name, see s. 13 of the Act of 1862. The proper course is to pass a special resolution as above, and then apply to the Board of Trade for liberty to make the change. Liberty is readily granted. The change is not complete until the new certificate of incorporation for which the section provides is issued. Shackleford, Ford ^- Co. V. Bangerfield, L. R. 3 C. P. 407. Form 383. Extension of directors' power. Borrowing and Debenture Stock. That the directors' power to borrow conferred by clause 49 of the arts of asson be extended, so that the amount at any one time owing in respect of moneys so borrowed or raised shall not, without the sanction of a general meeting, exceed 1. See p. 411, supra. Form 384. Resolution as to issue of debentures. That the directors be and they are hby authorized to create and issue debentures providing for the payment of principal sums not exceeding 50,000^., with interest at the rate of 5 p.c.p.a., such deben- tures to be in such form, and to be secured in such manner, and to be issued to such persons and on such terms as the directors think expedient. When debentures are to be issued, the sanction of a general meeting may by the regulations be necessary ; and even when it is not, directors sometimes think it expedient to ask for the sanction. Form 385. Creation of debenture stock. That the directors be and they are hby authorized to create and issue a debenture stock of the nominal amount of 100,000/., such stock to be called 4 p.c. debenture stock, and to be constituted and secured by trust deed and debentures framed in accordance with the drafts which have been already approved by the directors, and that the directors be and they are hby authorized to dispose of such stock, &c. to such persons and on such terras and conditions as they think fit. See infra, Form 505. Form 386. Another. That debenture stock of the coy limtd to the amount of the sub- scribed share capital for the time being of the coy be constituted and secured by trust deed, in the terms of the draft submitted to this meeting, and that such draft bo forthwith engrossed in triplicate, and that the seal of the coy bo afRxod to the engrossments, and that the first issuo of the Htock do consist of 1,000,000/., carrying interest at the rate of Al. p.c.p.a. payable on 15th May and 15th November in each year, and redeemable at the option of the coy at 104, on and FORMS. 667 after 15th Ma}-, 1915, or by purchase, and that such first issue be Form 386. offered for subscriptiou on the terms set forth in the prospectus submitted to this meeting. That the diroetors be and they are hby autliorized, in addition to Form 387. any sums already borrowed for the purposes of the coy, to borrow to Creation of an amount not exceeding in the aggregate 10,000/., by the issue of debentures to 200 debentures of 50/. each, redeemable on the 1st January, 1892, debentures such debentures to bear interest at the rate of 10 p.c.p.a. payable half-yearly, and to be in the form of the draft a print whereof has been produced to this meeting and identified by the signature of the secretary of the coy. That the repayment of the moneys payable according to the tenor of the sd debentures bo secured by a trust deed in the form of the draft submitted to this meeting and identified by the signature of the secretary of the coy, expressed to be made between the coy of the one part, and of the other part, and 'that the directors be and they are hby authorized to execute, under the seal of the coy, a deed in the terms of the sd draft. That the directors be and they are hby authorized to borrow the Form 388. sum of 10,000/. for the purpose of paying off the debentures of the 7 77 coy which fall due on the 1st January, 1890, and that such sum be raised by the issue of new debentures payable on 1st January, 1895, and bearing interest at the reduced rate of 4 p.c.p.a., such debentures to be secured by trust deed, and that the new debentures and trust deed afsd be framed in accordance with the forms submitted to this meeting, and identified by the signature of the coy's secretary ; and that the directors be and they are hby authorized to issue any of the sd new debentures in exchange, at par, for any of the existing debentui'es the holders of which may desu-e to renew, and that, pending the placing of the new debentures, the directors be and they are hby authorized to borrow from the coy's bankers or otherwise, on such -terms as they think fit, any moneys required to pay off any of the existing debentures which fall due. Acquisition of a Business. That it is expedient to acquire and take over by way of amalgama- Form 389. tion the undertaking of the Coy, Limtd, and that the provisional Authority to agreemt for the purpose submitted to this meeting be and the same is directors to hby approved ; and that the directors of this coy be and they are hby amalo-aina- authorized to adopt and ratify the sd agreemt and to carry the same tion another into effect and to affix the seal of this coy thereto, with full power to sanction of 668 RESOLUTIONS. [Chap. X, Form 389. assent to any modifications in the agreemt wliich they think expedient in the interests of this coy, either before or after the adoption thereof ; and that if the sd agreemt becomes absohite the directors be and they capital. pro\nsional agreement, Litter'absolute ^^® ^^^ empowered to increase the capital of the coy to 1,500,000/., by to increase the creation of 33,800 new shares of 201. each ; and that the directors be and they are hby authorized to deal with any portion of the shares so created in accordance with the sd agreemt in so far as the same shall be required for the purposes of such agreemt, and to deal with any surplus as the directors may think expedient in the interests of the coy, and without being under anj' obligation to offer the same in accordance with clause 25 of the arts of asson of this coy. Form 390. Winding-up in view of provisional agreement having been sanctioned for sale of under- taking to another company. Distribution in specie of sale consider- ation and sale by liquidator of unclaimed assets (shares of other com- pany). Division in Specie in a Winding-up. 1. That, having regard to the provisional agreemt of the day -, entered into by A. on behalf of this coy for the sale of the of undertaking of this coy to the N. Coy, Limtd, which agreemt was ratified by the general meeting of the coy held on this day of , it is desirable to wind up this coy, and accordingly that this coy be wound up voluntarily, and that B. and C, directors of this coy, be and they are hby appointed the liquidators for the purpose of such winding-up. 2. That the sd liqrs be and they are hby authorized (when and so soon as the debts and liabilities of this coy shall have been pd and satisfied or duly provided for) to distribute in specie or kind amongst the contributories of this coy in accordance with their respective rights and interests therein, the 50,000 ordinary shares of 5/. each in the capital of the N. Coy, Limtd (credited as fully pd up), which form part of the consideration for the sd sale, and so that each contributory shall be entld to have his or her proportion thereof allotted to himself or herself, or to his or her nominee or nominees, such election to be declared by notice in writing to the sd liqrs within twenty-one days after the passing of the resolution. 3. That the sd liquidators do sell the shares not so allotted, and do pay the net proceeds of sale to the contributories who would have been entld to the shares sold, rateably in proportion to the number of the shares sold that they would have been entld to call for. Debenture-holders Resolutions. Form 391. Tliat this meeting of tlie holders of the debentures of the Co., Limtd, secured by trust deed dated, &c., and made, &c., hby sanctions the provisional agreemt submitted to this meeting, wliich agreemt is dated the day of , and made between the sd coy of the one part, and A. B., purporting to contract on behalf of all the holders of the sd debentures, of the other part, and assents to the modifications of Resolution of debenture holders sanctioning agToemont for modification of rights. FORMS. 669 the rights of the debenture holders and of the provisions of the sd trust Form 391. deed to be effected by the sd agreomt [or hereby assents to the pro- posed modifications of the sd trust deed, and authorizes the trustees thereof to concur with the coy in executing a supplemental trust deed in the terms of the draft submitted to this meeting for effecting such modifications]. This ia a specimen of a resolution where a majority of a class of debenture holders have power to assent to a modification of the rights of the class. See infra, p. 801. The Companies (Memorandum of Association) Act, 1890. Form 392. That the memdm and arts of asson submitted to this meotin^- be and Resolution of V) f the same are hby approved, and that, pursuant to the provisions of the "i^^p^rs^ior Cos (Memdm of Asson) Act, 1890, the form of the coy's constitution memorandum be altered by substituting such memdm of asson with extended objects and articles as therein set forth, and such arts of asson, for the coy's deed of settle- panics (Me- ment dated, &c., and for all regulations of the coy subsequently made ™orandum of ' ' ° _ J L J Association) and now in force ; and that the directors be authorized to apply to the Act, 1890. Court to confirm this resolution under the sd Act. That the objects of the society be extended by the addition to Form 393. Clause 1 of the laws of the society of the words following, that is to ^ TT 7~ say : — extension of "The society may also, from time to time, and at any time, take objects under over, on such terms and conditions as may be arranged, the whole or (Memoran- any part of the business assets and undertaking and liabilities of any ."^ . a T" other coy, society or institution carrying on any assurance business 1890, which this society is authorized to carry on ; and the terms and con- ditions afsd may include provision for payment by the society of all or part of the expenses of and incident to the winding up and dissolu- tion of the transferring coy, society, or institution, and may provide for the concession to the ijolicy holders, annuitants, creditors, directors, employes, and members of the transferring coy, society, or institution of any special rights, privileges, and advantages, and may include any other provisions which the directors of this society may think expe- dient, and the agreemt containing such terms and conditions shall, when sanctioned (if requisite) by the High Court of Justice, be effective for all purposes." Another. That Clause 3 of the society's deed of settlement be altered by Form 394. inserting therein, immediately after the words " and to advance money by way of loan on any security whatsoever such as they can and law- fully may," the words " and to borrower raise money for the purposes of the society by the issue of debentures or debenture stock, and to frame, constitute, and secure the sd debentures or debenture stock as may seem expedient, with full power to make the same either perpetual or terminable and either redeemable or otherwise, and to charge or 670 RESOLUTIONS. [Chap. X. Form 394. secure the same on the undertaking of the society, in such manner as may seem expedient," and that the objects of the society be extended accordingly. Form 395. Resolutions appointing a local board in Ireland. Local Board. 1. That a local board (in this resolution called "the local board") be made for the management and carrying on of the business of the coy in Ireland, and the same is hby constituted, and that and be, and they are hby appointed to be, the first members of such local board, and that the regulations following in regard to such local board have effect, that is to say : — (1) Until otherwise determined by the directors of the co}'', the number of members of the local board shall not be less than two or more than five. (2) The local board shall at all times conform to the regulations and directions, whether general or special, which may be imposed on or given to it by the directors. (3) The local board shall have such powers, authorities and dis- cretions as the directors may think expedient to invest it with, by power of attorney or otherwise. (4) The local board shall hold its meetings at or at its office in Ireland for the time being of the coy. (5) Mr. shall be the first secretary of the local board and shall be entitled if the local board shall so long subsist to hold office up to the day of , and afterwards for so long a period, &c. (6) The local board may meet together for the dispatch of busi- ness, &c. (7) It shall not be necessary to give notice of a meeting of a local board to a member thereof who is not for the time being in Ireland, and where the local board determines that meetings shall, until further notice, be held on specified days in the week or month, notice of such determination shall be a sufficient notice of such meeting. (8) A member of the local board may at any time or the secretary of tho local board on the request, &c., questions arising, &c. (9) The local board may elect a chairman, &c. (10) A resolution in writing, &c. (11) A meeting, &c. (12) The minutes, &c. (13) A member of the local board may at anytime by notice in writing to tho local board resign his membership thereto, the local board shall bo at liberty to supply any vacancies in its body. And that tho power of attorney for investing the local board in Ireland with certain powers, authorities and discretions submitted to FORMS. 671 this meeting same as hby approved, and that the common seal thereby Form 395. affixed thereto, and that the same when sealed be delivered to the sd and . That the seal of the coy be affixed to the agreemt submitted to Form 396. this meeting:, and expressed to be made between of the one pt, zz . „,, ,., ,, „ , Various reso- and the coy of the other pt, which agreemt has been framed in lutious. accordance with the draft referred to in clause of the coys arts To seal of asson and has already been executed by the sd , and that the fi-^eement. solor be directed to file the sd agreemt with the registrar of joint stock companies. That shares in the capital of the coy of 1. be alloted as Form 397. follows (then state names of allottees and number of shares to be rp iw allotted to each, e.y., To of , shares, and so on, or set them out in tabular form). And that the secretary do give notice of allotment to the above- named persons resply. That shares in the capital of the coy of 1, each be allotted Form 398. to the several persons in that behalf named in the applicon, and Another allotment sheets submitted to this meeting and for the purpose of identification subscribed by the chairman thereof, and so that each allottee shall receive an allotment of the number of shares set opposite his name in the column of the sheet in which his name appears, and that notice of such allotment be given to the resj)ective allottees, and that in each case where in the column of the sd sheets the words ''no allotment " are inserted the deposit pd by the correspond- ing applicant be returned, and that where the applicon money pd by an allottee exceeds the amount payable on applicon and allotment in respect of the shares allotted to him, the excess be returned to such applicant. It appearing that the agreemt of the day of between Form 399. of the one pt, and the coy of the other pt, has been duly filed with the ~ j7~ 77 registrar of joint stock companies resolved that the fully pd-up shares up shares. to be issued pursuant to clause of the sd contract be allotted to the sd , and that notice of such allotment be given to him. That hereon be and they are hby appointed to be solors of the Form 400. coy. To appoint Bolicitors. 672 RESOLUTIONS. [Chap. X. Form 401, To open bank- inpr account. That an account be opened with the Bank, Limtd, in the name of the coy, and that the of the sd bank be authorised to pay cheques signed by any two directors of the coy and countersigned by the secretary, and that the signatures of the directors and secretary be furnished to the bank. Form 402. That the prospectus of the coy offering shares for subscription as now finally settled at this meeting and signed by the chairman thereof be and the same is hby approved, and that such prospectus be published and circulated in accordance with the scheme which has been prepared by Messrs. . To approve prospectus. I Form 403. To adopt common seal. Form 404. To make call. That the proposed common seal submitted to this meeting be and the same is hhy adopted as the common seal of the coy, and that the three keys of the box in which such seal is contained be placed as to one in the custody of the secretary, as to another in the custody of the chairman, and as to the third in the custody of the vice-chairman. That a call of 1, per share be and the same is hby made on the members, and that such call be made payable on the day of to the Bank, Limtd, at No. , Lombard Street, in the City of London. i Form 405. That notice be given in accordance with the clause of the arts of To e-ive notice ^^^'^^ ^^ ^he coy to those members who have made default for more before for- feiture. than days in payment of the call payable on the day of Form 406. That the undermentioned shares be and they are hby forfeited, q, , , ., that is to say, shares numbered to standing in the shares. name of , and so on. Form 407. ^^^* Messrs To appoint committee. — and be and they are hby appointed a com- mittee with power to arrange with Mr. the terms on which he shall supply, &c., and made a contract with him accordingly. Form 408. To bind contract. That Mr. 's offer to supply the coy with, &c., be and the same is hby accepted, and that the secretary do give Mr. notice of this resolution. Form 409. To offer. That an offer be made to Mr. on behalf of the coy to, &c. FORMS. 673 That tlie seal of the coy be affixed to tlio proposed agreemt witli Form 410. A. B. providing for, «S:c. To seal agree- ment. That the draft agreemt with Messrs. for the sale of bo, Form 411. and the same is hby apj)roved, and that such agroemt 1)o engrossed in Another duplicate and that the seal of the coy be affixed thereto, and that one pt of such agreemt be handed over to Messrs. upon their executing the other pt. That an extraordinary general meeting of the coy be convened for Form 412. the day of for the purposes following (set them out) and -jT^^Jj^^j that the notice convening the same submitted to this meeting be, and meeting. the same is hereby approved. That an interim dividend of per share be paid on the day Form 413. of , to the members who are on the register on the day of Z, . . . . . '^ ±0 pay and that with a view to making out the requisite cheques the interim transfer books be closed from the day of to the day "'^'i^end. of . 1. That Messrs. & Coy be instructed to pay and honour all Form 414. cheques expressed to be drawn on behalf of this coy upon the banking ^ TT 7 account or accounts kept, or to be kept, in the name of this coy with directors the sd bank, at anytime or times, whether the banking account or P'^^o , . instructions accounts of this coy are overdrawn by the payment thereof or arc in to bankers as credit or otherwise, provided they are signed by two directors and *° mode of '■ ^ . . company s countersigned by the secretary for the time being. dealings with 2. That the sd bank be instructed to pay and honour all bills and t^em. promissory notes payable at the sd bank, and expressed to be accepted or made on behalf of this coy, at any time or times, whether the banking account or accounts of this coy are overdrawn by the payment thereof or are in credit or otherwise, provided they are signed by two directors, and countersigned by the secretary for the time being. 3. That as regards bills and promissory notes expressed to be made, drawn, endorsed, or accepted on behalf of this coy, the sd bank be instructed to treat such bills and promissory notes as having been duly made, drawn, endorsed, or accepted, as the case may be, on behalf of this coy, and to discount or otherwise deal with the same accordingly, provided they are signed by two directors, and countersigned by the secretary for the time being. 4. That the sd bank be instructed to treat all cheques, drafts, and orders expressed to be endorsed on behalf of this coy as having been duly endorsed on behalf of this coy, provided they are signed by one director and the secretary for the time being. 674 RESOLUTIONS. [Chap. X. Form 414. 5. That the sd bank be furnished with a list of the names of the directors, secretary, and other officers of this coy, and that they be from time to time informed in writing, signed by the chairman and secretary of this coy, of any change which may take place in them. 6. That these resolutions be communicated to the sd bank and remain in force untU notice in writing to the contrary, signed by the chair- man and secretary of this coy, for the time being, be given to the sd bank. Share Warrants. Form 415. Eesolutions declaring the conditions on which share-warrants will Resolutions as ^6 issued :— to conditions . , -r, for issue of The following are conditions suitable to be made by the directors under Form 210, share- Clause 40, supra, p. 407. If the words within brackets in that clause are not struck out warrants. \\^q conditions must be submitted to the company in general meeting for its approval. issued. Upon whose That the following conditions as to the issue of share-warrants be warrant to be ^^^^^ pursuant to clause of the arts of asson of the coy. 1 . No share-warrant shall be issued except upon a request in writing by the person for the time being upon the register of members as the holder of the share or stock in respect of which the share-warrant is to be issued. For form of share-wan-ant, see bifra, Chaji. XII. There can be no doubt that if the company issue a share-warrant to a person who is not entitled it will be estopped from denying the right of any pm'chaser from him. See further, iutroductoiy notes to Chap. XII. The utmost care ought therefore to be used. Sometimes these clauses are embodied in the articles of association. Regulations as to rc-quest. Certificates to be sur- rf-nderod. Stamp duty. 2. The request shall be in such form, and authenticated by such statutory declaration or other evidence as to the identity of the person making the same, and of his right or title to the share or stock, as the directors shall from time to time require, and shall be lodged at the office of the coy. 3. Before the issue of a share-warrant the certificate (if any) then outstanding in respect of the shares or stock intended to be included in it shall be delivered up to the directors, unless they dispense with this condition. If the certificate is left outstanding it will be more or less a risk of the company, and the directors may reasonably require an indemnity. 4. Any person applying to have a share- warrant issued shall at the time of applicon pay to the directors tlie stamp duty payable in respect thereof, and also such fee, not oxcoodiug \s. for each share-warrant, as the directors shall from time to time fix. By virtue of the Companies Act, 18G7, s. 3.'i, " There shall be charged on evei-y share- FORMS. 675 warrant a stamp duty of an amount equal to three times the amount of the ad valorem Form 415. stamp duty which would be chargeable on a deed transferring the share or shares or ' — ~~~ stock specified in the warrant, if the consideration for the transfer were the nominal value of such share or shares or stock." By the Stamp Act, 1891: — "If a share-warrant is issued without being duly stamped, the company issuing the same, and also every person who at the time when it is issued is the managing director, or secretary, or other principal officer of the company, shall forfeit the sum of 50/." Under s. 115 of the Stamp Act, 1891, a composition in respect of this duty may be made in some cases. 5. Share- warrants shall be issued under the seal and be signed by Execution, one director and countersigned by the secretary or some other officer in the place of the secretary appointed by the board for that purpose. G. Each share- warrant shall contain such number of shares or Number, amount of stock, and be in such language and form as the directors shall think fit. The number originally attached to each share shall be stated in the share- warrant. 7. Coupons payable to bearer of such number as the directors shall Coupons, think fit, shall be attached to share-warrants providing for the pay- ment of the dividends or interest upon and in respect of the shares or stock included therein, and the directors shall provide as they shall from time to time think fit for the issue of fresh coupons to the bearers for the time being of share-warrants when the coupons attached thereto shall be exhausted. 8. Each coupon shall be distinguished by the number of the share- Number of warrant to which it belongs, and b}' a number showing the place it coupons, holds in the series of coupons belonging to the warrant. The coupons shall not be expressed to be payable at any particular period, nor shall they contain any statement as to the amount which shall bo payable. 9. Upon any dividend or interest being declared to be payable upon Payment of the shares or stock specified in any share-warrant, the directors shall mate ") V (Usual signature.) To the Secretary of the Coy, Limtd. This form, when signed by both parties, to be sent to the Bank, — - Street, E.G. The CoMPAKY, Limited. Form 433. bl. Preference Shares, 1894. Allotment. Entld to a preferential dividend at the rate of 5 p.c.p.a. [Date.] SiK, — ^I beg to hand you an allotment letter for the number of the New bl. Preference Shares to which you are entld in right of the Ordinary Shares held by you in this coy as shown by the Register of Members on the instant, being one new share for every 100/. of stock in accordance with, and subject to the terms of the resolution passed at the Extraordinary General Meeting of the coy held on the of . The first payment or deposit of 21. per share wiU be due on the next, and unless the same be pd on or before that date the_ allotment will be forfeited. It is not proposed to take payment in anticipation of calls. You are at liberty to renounce this allotment in favour of any other l)erson, provided you fill up and sign the Form of Eenunciation (No. 2), and that the person in whose favour you renoimce signs the Form of Acceptance (No. 1). In case you wish to renounce a portion only of the shares offered, 688 NOTICES. [Chap. XI. Form 433. divided allotment letters will be gi-anted on or before the of next ; the present allotment letter to be returned to me with the applicon. The dividends on the shares wUl be pd at the same time as the dividends on the Ordinary Stock of the coy, each half year. Secretary. %••' If you do not accept or transfer the allotment you will oblige by returning the form to me. The Company, Limited. Form of Acceptance {No. 1.) bl. Preference Shares. 1894. Entld to a preference dividend at the rate of 5 p.c. on the amount called up from time to time. Index No. . Deposit, 11. per share on shares, payable the day of , /. Name Allotment of shares under the resolution of the Extraordinary General Meeting of coy, held on the day of . I (or we) hby accept the above mentd shares, and request the directors to cause them to be registered as under : — Acceptor of shares to sign Name, Address and Description in full. {Id. stamp.) Date . Bankers : — Messrs. &c. %*• It is essential that the member should preserve this receipt, and return it to the coy when applied for. The Company, Limited. Index No. . bl. Preference Shares. 1894. Entld to dividend at the rate of 5 p.c. on the amount called up from time to time. Deposit 21. per share on shares, payable the of , 1. Bankers' Receipt. Received from the sum of pounds for the credit of the — Coy, Limtd. For {Id. stamp). Date . (^ This sheet must be presented to the bankers intact. FORMS. 680 The Company, Limited. Form of Renunciatioji (No. 2). 51. Preferenco Shares. 1894. I (or we) hby renounce right to shares allotted to in favour of the person accepting the same. Name and address oj" the member renowicmg the shares. (Id. stamp.) Note. — Renunciations must be signed by the members to whom the shares are allotted, and, in cases of joint accounts, all the persons named in such accounts must sign the renunciation. A penny stamp must be affixed where indicated before the renuncia- tion is signed. The Company, Limited. Form 434. Issue of 50,000 " S Shares, 1895," of 101. each. Acceptance. To the Coy, Limtd. No. . Having pd to yoiu' bankers, Messrs. , the sum of 1., as a first instalment of 3^. per share upon (a) " S Shares, 1895," in your capital, being {b) the shares offered to me by the secre- tary's letter of the 22nd May, 1895, I hby accept the sd shares, upon the terms of the sd letter, the sj^ecial resolution of the coy of the of , the resolutions of the coy and the board of the of , and the regulations of the coy. (Signature of present shareholder.) (Address.) Dated the day of , 1895. ^.v."^' Acceptances on joint accounts may be signed by the first name only. Note. — Shareholders wishing to accept a j^art and renounce a part of this allotment, must have the letter split up, as acceptances and renunciations cannot be received on the same form. To the Company, Limited. I hby renounce to, and in favour of (c) " S Shares, 1895," in your coy, being (rf) the shares offered to me by the secretarj^'s letter of the 22nd May, 1895. (Signature of present shareholder.) Dated the day of ■, 1895. {Id. stamp.) To the Company, Limited. Having pd to your bankers, Messrs. , the sum of 1., being the first instalment of 3/. per share upon the above mentd " S P. Y Y 690 NOTICES. [Chap. XI. Form 434. Shares, 1895," renounced in my favour, I liby accept tlie sd sliares upon the terms of tlie secretary's letter of the of , offering the same, the special resolution, &e. (Signature of person in whose favour the shares are renounced.) Dated the day of , 1895. %i,^- Renunciations on joint accounts must be signed by all the holders. The Company, Limited. Issue of 50,000 "S Shares, 1895," of 10/. each. No. . BcmJccrs' Eeceipf /o?- First InstalmenL Received from the sum of /., being the first instalment of 3/. per share in respect of shares of the above issue. For , Cashier. Dated the • -, 1895. ^^^ This receipt must be retained by the person paying the money, to be exchanged for the share certificate at the coy's office. No., &c., after the of . This sheet, with the annexed forms properly filled up^ must he forwarded entire to the coy^s banhers, together ivith a remittance for the amount, payahle on or before the 1895. (a) Insert tlie number of shares accepted. {b) Insert the words " part of " if you do not accept the whole number offered, (c) Here insert names in full, address, and occupation of person in whose favour you renounce, and the number of shares renounced. {d) Insert the words " part of " if you do not renounce the whole number offered. Form 435. Aiiotlirrform of appli- cation. The Company, Limited. 5 per Cent. Preference Shares of 10/. each. The directors are prepared to receive offers for 10,000 of the above shares whicli remain unissued, and will allot the shares to the proprie- tors who offer the highest premium, which must not be less than 21. per share. The first instalment of 21. per share, with the premium, to bo pd to the coy's bankers not later than 3rd January next ; interest to commence from Ist January next. It is intended that a further call of 21. per share shall be payable on the 1 st February next. Prepayment of this call and of the remaining (jI. per share will bo accepted, at tlie o^jtion of the allottee, with the instalment — interest upon such prepayment being allowed at the rate of ;> p.c. until eacli call becomes due. The shares will be registered free of cost. FORMS. 6ni A form on -wliicli the offer should Le mado is annexed, and the offer Form 435. must Lo in the hands of the undersigned not later than the morning' I__ _ . of , the proximo. , Secretary. Form of Offer. To the Directors of the Coy, Limtd. I beg to apply for 5 p.e. preference shares of 10^. each, for which I am willing to pay a premium of per share, and will pay 21. per share and the premium to one of the coy's hankers not later than the next. Interest to commence from , . (Name) — (Address) Eegister No. (Date) [N.B. — Allotments will be made to shareholders only.] %* Please indorse the envelope, " Offer for shares." The Company, Limited. No. Issue of /. mortgage debentures, part of a total issue of /. Eate of interest on the present issue of /. p.e. p. a. To the Directors of the above-named Society. Gentlemen, I [or We] beg to apply for'^' 1, debentures, being my \_or our] proportion of the above issue, viz., 1, debentures, and 1. debentures. t Enclosed is a cheque for 1, p.e. payable on applicon. Be so good as to make the allotment to me \_or us] and I [or We] will pay the balance on allotment. I [or We] renounce the allotment in favour of of .f (Signature of stockholder.) (Date) . Form 436. Application for deben- tures. X I agree to accept the above debentures^ and I enclose a cheque for /. p.e. payable on applicon, and will pay the balance on allot- ment. (Signature of nominee.) (Address.) (Description.)"! * If you desire less than this amount, alter the amount, t Strike out these words if you renounce in favour of a nominee. + Strike these words out if you do not renounce in favour of a nominee. Y Y 2 692 NOTICES. [Chap. XL Form 437. Another. The Company, Limited. No. Issue of 1, mortgage debentures, part of a total issue of /. Rate of interest on present issue of L 4 p.c.p.a. To tlie directors of the above-named society. Excess Application. Gentlemen, I [or We] beg to apply for /. debentures of tbe above issue beyond my [or our] proportion, viz., /. debentures, and 1. debentm'es. Enclosed is a cheque for 1, p.c. payable on allotment. Be so good as to make the allotment to me [or us]. I [or We] agree to accept the sd debentures or any less amount you may allot to me \_07- us], and to pay the balance on allotment. (Signature of stockholder.) (Date) . Form 438. Another. Instalment. Sir, — I beg, &c., and it was declared that such call should be pd by two instalments of 2s. Qxl. each, payable respectively on the of and of to the coy's bankers, the Coy, Limtd, at No. — , Lombard Street, London, E.C. You are the registered holder of 600 ordinary shares, and I have to request that you will pay the following amounts to the coy's bankers as above on the dates mentd below : — 1st November, 1897 75/. 1st January, 1898 75/. When each instalment is due, this letter should be sent entire, together with cheque for the amount, payable to the bankers of the coy, who will return it receipted. When the two instalments have been pd, this letter should be sent to the office of the coy, together with share certificate relating to your shares, in order that a note of payment of the call may be indorsed on tlio latter. Should it be dosirtid to transfer any of the above shares, the two instalments must Ijc pd, whicli may bo done at any time before the due dates. By order of the Board, , Secretary. FORMS. 693 ■r . . , Form 438. The Company, Limited. No. . Ord'mnnj S/iares. Bankers' receipt for payment of first instalment of first call. Eeceived this day of , 1897, of , the sum of 1., being the first instalment of a call of iis. per share, payable Ist Novem- ber, 1897, on ordinary shares in the above coy. For the Bank, Limtd. The Company, Limited. No. . Urdinary Shares. Bankers' receipt for payment of second instalment of first call. Eeceived this day of , 1897, of , the sum of L, being the second instalment of a call of 5*. per share, payable Ist January, 1898, on ordinary shares in the above coy. For the Bank, Limtd. The Company, Limited. No. . Ordinary Shares. First Call. First instalment of 2s. Qd. per share due 1st November, 1897. To be retained by the Bankers. The Company, Limited. No. . Ordinary Shares. First Call. Second instalment of 25. &d. per share due 1st January, 1898. 1. To be retained by the Bankers. Sometimes the allotment letter contains at foot blank receipts for payment of the amounts payable on allotment, and in respect of the next instalment, or of several instalments, with a memorandum in each case to be detached by the bankers, thus : — Eeceived the of , 1., Eeceived the of , being the sum payable on the — -/., Form 439. being the sum payable on above Bankers' allotment. day of . receipts. The Coy, Limtd. The Coy, Limtd. Memorandum. Memorandum. [To be detached by Bankers.] [To be detached by Bankers ] Allotment letter No. . Allotment letter No. . Mr. has paid 1, allot- Mr. has paid /. allot- ment moneys. ment moneys. Date . Date 694 NOTICES. [Chap. XI. Misrepresentations — Circular Correcting. Sometimes before allotment tlie directors discover that some material statement in the prospectus is not correct. The discovery ought to be communicated to appli- cants. Scottish Petroleum, 23 C. Div. 413. And it may be necessary, in order to protect the directors, to offer the allottee his money back, or to make the allotment in some way conditional, on his signifying that he desires to renew his application. So far as the company is concerned, it might suffice to give notice in the letter of allotment of the discoveiy, for if the allottee i^ays the allotment money after such a notice, he in effect elects to affirm the contract, and could not subsequently re- pudiate it ; but directors do not stand in so favourable a position, and in order to protect them it may be necessary to inform the applicant of the discovery, and that the directors withdraw the original prospectus and offer him his money back, and ask him if he v, ishes to have the shares, or fill up a fresh application on the footing of a corrected prospectus, copy enclosed. See supra, p. 138. Form 440. The Company, Limited. Circular Sir [or Madam], — With, reference to your applicon for an allotment representation ^^ shares in the above coy, I am instructed by the directors to discovered. inform you that since the publication of the prospectus it has been discovered that one of the statements in that prospectus is incorrect and cannot be justified. The statement in question is that \_state tohat]. This statement was based on the report of Mr. , in which the following" passage occurred [_set it out]. But from a further report of Mr. , received since the publica- tion of the prospectus, it appeals that [ei'c.]. Accordingly, in the result, the statement in the prospectus above referred to was and is incorrect. The directors therefore, who desire to act in perfect fairness, with- draw the original prospectus, and must abstain from making any allotment thereon. They do not, however, consider that in the circumstances the pro- spects of the coy are in any way prejudiced by the fact that \_etc.'] ; and accordingly they have prepared a corrected prospectus, a copy of which is enclosed, and you will be at liberty to renew your applicon on the footing of that prospectus. In the circumstances I have to request that you will be so good as to sign in the place indicated, and send to mo, as soon as you conveniently can, one or other of the forms subjoined, in order that the directors may give effect to your wishes as therein expressed. Yours faithfully, , Secretary. To the Directors of tho Company, Limited. Gentlemen, — I bog to withdraw my applicon, and request you to repay mo tho deposit on applicon which has been paid by mo. Date . Signature . FORMS. 695 To the Directors of the Company, Limited. Form 440. Gentlemen, — With reference to tlio circular letter of the day of , and to the corrected prospectus enclosed therein, I -wish to renew my applicon, dated the day of , for an allotment of shares on the terms that such applicon is to ho treated as referring to the corrected prospectus of the day of , instead of to the original prospectus of the of , which is withdrawn by the directors. Date . Signature . Sir, or Madam, — A question has been raised whether certain shares Form 441. in the coy, which were issued as pd-up shares in professed compliance ~ ' ~~ with the contract of the of , 1896, under which this coy when contract acquired its mining ppty from the Corporation, Limtd, are not valid effectually protected as pd-up shares. You hold of these shares g. 25 of Act numbered to inclusive. There is no doubt of the intention o* 1867. that these shares should only be issued as pd-up shares, but it appears, to say the least, doubtful whether the contract, which has been filed, really and legally effectuates this intention. In the circumstances I am directed to bring this matter to your notice, and to state that if you desire to preclude all danger you should sign the enclosed, and return it to me, together with your certificate, at once, in order that the slip may be rectified. To the Company, Limited. Gentlemen, — I request you at once to cancel the allotment, and remove my name from, the register of members, in respect of, the shares numbered to inclusive in your capital, and I enclose my share certificate for cancellation, and direct you to return the shares to me when and so soon as the requisite supplemental contract has been filed. Sir, or Madam, — At a meeting of a considerable number of the ppal Form 442. shareholders in this coy, held on the of , the position of the ZTT- T7~~ coy was considered, and it was resolved : — a \-ie-w to 1. That having regard to [^sfate tvhat^, it is necessary to take prompt action to protect the interests of the shareholders ; and Messrs. should be, and they were thereby appointed, a provisional investisration. committee for the purpose of, &:c. That the shareholders be requested to sign a requisition for a general meeting. 696 NOTICES. [Chap. XL Form 442. At the same meeting au agreemt dated tlie day of , providing for the requisite further steps was apj)roved, it was resolved that the shareholders be requested to ratify the same. I now enclose prints, 1. Of the proposed requisition in the form recommended Ly the committee; and 2. A print of the agreemt above referred to, and shall be obliged by your signing your name at the foot of both in the place indicated, and sending the same to me by return of post. See Form 457, &c. Form 443. The Coy, Limtd. Receipt on deposit of Eeceived from of transfer. ^-^j^ g^ view to registration : — No. the undermentd transfer and certificate Transferor. Transferee. No. of Shares. Distinguishing Numbers, both inclusive. From. To. - and registration fee shillings. -, Secretary. The receipt must be given up in exchange for new certificate should the transfer be registered. [Receipts as above require no stamp unless the fee is over 21. They should be printed and bound up in books with corresponding counter- foils.] Form 444. Notice of presentation of transfer. The Coy, Limtd. Notice of rresentation of Transfer. To of (Address.) (Date.) I have to inform you that the undermentd transfer purporting to be signed by you has been prosontod for rc^gistration, and that the same will be registered unless I hear from you to the contrary at once. Your obedient servant. Sec supra, p. 403, as to such a notice. FORMS. 697 The Company, Limited. Counterfoil. No. [Date.] No. of certificate Balance Ticket. No. Form 445. Balance ticket. No. of shares in Certificate No. of shares in Certified transfers Shares in Balance ticket Nos. to inclusive In name of Deposited by [Date.] Issued in respect of shares in the above-named coy, standing in the name of , and num- bered to inclusive, the certificate for which has been de- posited in the coy's office. , Secretary. Note. — This ticket must be sur- rendered before any fresh certifi- cate for the above shares will be issued. The CoiiPANY, Limited. Ee deceased. SiE, — I am desired to inquire whether the executors [or adminis- trators] of the above deceased desire, in accordance with the coy's arts of asson, to be registered as members in resjDect of the shares of the deceased, or whether they merely desire to transfer the same. If registration is desired the coy will require the production of a request in writing, as below, signed by the executors [or administrators] in the presence of a credible witness. I am, &c., To Secretary. By order of the Board. Form 446. Notices where shareholder dead. To Company, Limited. Gentlemen, — The undersigned being the legal personal repre- sentative[s] of of deceased, desire to be registered in the books of the coy as the holder[s] of the shares standing in the name of the sd deceased, and request that such registration may be made accordingly. Signatures, duly witnessed. As to this, see supra, p. 406. 698 NOTICES. [Chap. XI. Form 447. Form A. Other General form of letter to be sent to executors at the time of regis- shareholder tration of probate or letters of administration. To the executors of the will [or the administrators of the estate and effects] of deceased. Gentlemen, — I beg to acknowledge on behalf of B. V. & Co., Limtd, the receipt of the probate of the above will \or letters of administration granted to you of the estate and effects of the sd deceased], which has \or have] been forwarded to the coy by . I am instructed by the directors to state that before registering you as members of the coy in respect of the sd shares, you must be so good as to fill up, sign, and return to me, the enclosed form. I am, dear Sirs, Yours faithfully, Form B. [Form to accompany general letter to executors.] To B. y. & Co., Limtd. We the undersigned of and of , being the executors of the will [or administrators of the estate and effects] of deceased, of which probate was [or under letters of administra- tion] duly granted to us ou the -: day of , hby request you to register us as members of the coy in respect of the shares in your coy numbered to inclusive, now standing in the name of the sd deceased in the register of members of your coy, and we request you to place our names as joint holders of such shares on the sd register. We also request that you will pay, until further orders, all divi- dends or interest now due, or which may from time to time become due, upon the sd shares, and on any other shares which may hereafter be placed in omx joint names in the books of the coy, to , whose receipt shall be a full and sufficient discharge for the same. Dated the day of , 189 . (Signed). Form C. Notice of Election by Executors. [To accompany general letter (Form A) to executors.] To B. V. & Co., Limtd. We the undersigned of and of , being the execu- tors of the will of deceased, of which probate was [_or adminis- trators of the estate and effects of deceased under letters of admon] duly grantod to us on the day of , hby elect, in pursuance FORMS. 699 of tlio regulations of the coy, to have the j)ersous named in the Form 447. schedule hto, if approved by the directors of the coy, to be registered as the holders of the shares in the coy bearing the respective numbers set opposite to the names of the sd persons, the shares being those now standing in the name of the said , deceased, in the register of members of the coy, and we herewith forward you the proper form of transfer, duly executed by ourselves as transferors, and the sd respective persons as transferees of the sd shares, together with the relative share certificates, and the sum of 1., being 2s. Qcl. for each transfer, as the proper transfer fee. Upon registration by the coy of the sd transfers, or such of them as the directors shall approve, we request the coy to send to the respective transferees, to the addresses mentd in the schedule, the certificates of the shares so transferred to them. Dated. (Signed.) The Schedule above referred to. No. of Shares transferred. Name of Transferee. Address of Transferee. Denoting Numbers of Shares. The Company, Limited. No. — , Street, «fec. I gave you notice that at a Sir, In my letter of the day of — meeting, &c. I am now instructed to inform you that the directors require you on or before the day of to pay the sd sum of 1., together Form 448. Notice before forfeiture for non-payment of call. with interest thereon, at the rate of - of , up to the day of payment, — p.c.p.a. from the sd day and that in the event of non- payment of the sd call and interest, on or before the sd day of , at the place afsd, the shares in respect of which such call was made, will bo liable to be forfeited. I am, &c.. To &c. Secretary. 700 NOTICES. [Chap. XI. Form 449. Notice of ordinary general meetiDo:. The Company, Limited. Notice is hby given that the fourth ordinary general meeting of The Coy, Limtd, will be held at the Hotel, Street, London, E.C., on Monday, the day of , 1888, at o'clock in the afternoon [for the i:)urposes following, namely, to receive and consider the annual statement of accounts and balance sheet, and the reports of the directors and auditors thereon, to elect directors and other officers in the place of those retiring by rotation, to sanction the declaration of a dividend, and] to transact the [other] ordinary business of the coy. The transfer books and register of members of the coy will be closed from day the th to -. day the th, both days inclusive. Dated, &c. By order. No. — , Street, &c. A. B., Secretary. If the articles only requii'e the objects of au extraordinary meeting to be specified in notices calling general meetings, the words in brackets can be omitted. Form 450. The Company, Limited. Notice is hby given, that an extraordinary general meeting of The — Coy, Limtd, will be held at, &c., on, &c., at o'clock in the Notice of ex- traordinary general meeting. afternoon, when the subjoined resolution will be proposed That, &c. \^set it out.] No. — , Street, &c. [Office of Coy.] Resolutio7i. By order, A. B., Secretary. Form 45L The Company, Limited. Anotherfonn. Notice is hby given that an extraordinary meeting of the above- named coy will bo held at, &c., on, &c., at o'clock in the afternoon, for the purpose of considering, and, if thought fit, passing a resolution \or, when a resolution will bo proposed] authorising the directors [e.g., "to raise the sum of 1, by the issue of mortgage debentures or otherwise."] Dated, &c. By order. No., &c. A. B., Secretary. Form 452. Notion of ex- traordinary general meet- ing for pass- ing Hpecial resolution. The Company, Liimited. Notice is hby given that an extraordinary general meeting of The Coy, Limtd, will bo held at \_e.g., " Tho Terminus Hotel, Cannon Street, in the City of London," or "the registered office of the coy, I FORMS. 701 No." &c.], on the day of , 1890, at o'clock in tlio after- Form 452. noon, when the subjoined resolution will bo proposed. Should the resolution be passed by the required majority, it will be submitted for confirmation as a special resolution to a second extra- ordinary meeting which will be subsequently convened. \_Here net out the resolution.'] Dated . By order of the board, No. — , Street, . A. B., Secretary. Where it is intended to pass a special resolution, the notice of the iirst meeting ought to iufomi members expressly or impliedly of the fact. But some resolutions imply the intention, e.g., a resolution purporting to alter the articles, or a resolution which can only take effect on an alteration of the memorandum or articles. See Campbell's case, 9 Ch. 1. It has not been settled whether the exact terms of the proposed resolution must be set out in this notice. S. 51 of the Act says, "of which notice specifying the intention to propose such resolution has been duly given" {supra, p. 6i4) ; but it is conceived that this will not be strictly construed, and that provided fair notice of the subject-matter of the pi'oposed resolution is given it is suiScient. See Imperial Bank v. Batik of Hind., 6 Eq. 91. And where the notice is framed in general terms it woidd seem that an amendment might properly be proposed, provided that the amended reso- lution falls within the notice. See Imperial Hyclropathic v. Ilamp)son, 23 C. Div. p. 9 ; and supra, pp. 416, 417. But it is desirable where possible to comply strictly with the terms of s. 51, and accordingly to set out the resolution in the notice. It would seem that a resolution cannot be confirmed so as to become a special reso- lution, unless the notice of the first meeting gave direct or indirect notice that it was intended to proceed by special resolution. An imperfect notice cannot be aided by disclosure at the meeting, for the rights of absentees must be regarded. Clinch v. Financial Corporation, 5 Eq. 481 ; supra, p. 416. Sometimes it is desired to convene the two meetings by one and the same notice. It was, however, held in Alexander v. Simpson, 43 C. Div. 139, that a notice stating that " should such resolutions be duly passed, the same will be submitted for confirmation as special resolutions to a subsequent extraordinary general meeting of the company, which will be held on the '29th of July, 1889, at the same time and j^lace," was no suSicient notice of the second meeting, inasmuch as it was conditional, and left the shareholder in doubt whether the second meeting would or would not be held. " He would only know that it would be held in a particular contingency — that of the resolu- tions being passed." Per Bowen, L. J., p. 148. It may, however, be that the difficulty can be met by framing the notice thus : "And notice is hereby also given that a further extraordinary general meeting of the comijauy will be held on the • of , at the same time and place, for the piu'pose of receiving a report of the proceedings at the above-mentioned meeting, and of confinning (if thought fit) as a special resolution the subjoined resolution." But of course if the fii'st meeting is adjourned so that there would not be fourteen clear days between the two meetings, a fresh notice may be requisite. And occasionally the regulations provide that " not less than seven days', and not more than twenty-one days' notice shall be given ; " this may interfere with a single notice. Sometimes the articles expressly provide that, " where it is proposed to pass a special resolution, the two meetings may be convened by one and the same notice, and it shall be no objection that such notice only convenes the second meeting contingently on the resolution being passed by the requisite majority at the fiist meeting." Supra, p. 41.5. This, of course, is effective, and overrides the decision above referred to. 702 NOTICES. [Chap. XL Form 453. Notice of meeting to confirm special resolution. The Company, Limited. Notice is liby given, that an extraordinary general meeting of the Coy, Limtd, will be held at, &c., on the 1 0th February, 1 890, when the subjoined resolution, which was passed at the extraordinary general meeting of the coy held on the th of January, 1890, will be sub- mitted for confirmation as a special resolution. That, &G. [_Set out resohction as j}assed.~\ Dated, &c. By order. No. — , Street, &c. * A. B., Secretary. It seems clear that no modification of the resolution can be permitted at the con- firmatory meeting. It must either be passed or rejected. There must be an interval of fom-teen clear days between the two meetings. See s. 51, siqjra, p. G44. Railway Sleepers Co., 29 C. D. 204. Form 454. Notice of ordinary and extraordinary general meet- ings to be held on same day. The Company, Limited. Notice is hby given, that an extraordinary general meeting of the — Coy, Limtd, will be held at, &c., on, &c., at o'clock in the afternoon, when the subjoined resolution, which was passed at the extraordinary meeting of the coy, held on, &c., will be submitted for confirmation as a special resolution. And notice is hby also given that at the same place, and on the same day, at o'clock in the afternoon, or so soon afterwards as the extraordinary general meeting shall be concluded, the fourth ordinary general meeting of the coy will be held for the purpose of [see supra, p. 700] transacting the ordinary business of the coy. Dated, &c. By order. No. — , Street, &c. A. B., Secretary. Sometimes it is found convenient to convene an extraordinaiy meeting for the same day as the ordinary meeting, but it must be borne in mind that a separate proxy is requisite for each of two meetings though held the same day : supra, p. 509. Where two successive special resolutions have to be passed, it is not unusual to pass them in three meetings, or to hold the two central meetings on the same day, as follows. See Fonn 455, infra. It seems better to adojit the course last-mentioned, for it might be contended that a special resolution does not become effective mitil the close of the meeting. Form 455. Notice of ex- traordinary general moot- ingH for pass- ing two special reso- lutions in three meet- ings. The Company, Limited. Notice of Meeting. Notice is hby given, that an extraordinary general meeting, &c., when tlio suljjoiuod resolution will be proposed. SJifjuld tlio sd resolution bo passed by the required majority, it wiU bo submitted for confirmation as a special resolution to a second extra- ordinary meeting to be subsequently convened. FORMS. 703 7, , ,. Form 455. That tlie arts of asson of the coy be altered Ly tlio insertion therein immediately after Article 1 of the following Article, namely : — lOfl. The coy may from time to time reduce the capital. The CosrpAKY, Limited. Form 456. Notice is hby given, that an extraordinary general meeting of The Subsequent Coy, Limtd, will be held, &c., when the resolution, That [«s 'lotice. above] which was passed at the extraordinary meeting of the coy held on the inst., will be submitted for confirmation as a special reso- lution. Should such resolution be duly confirmed, the following reso- lution will be proposed at the same meeting, and, if passed by the requisite majority, will be submitted for confirmation as a special resolution to a subsequent extraordinary general meeting, which will be subsequently convened. Resolution. That the capital of the coy be reduced from /. divided into shares of 1, each, to 1. divided into shares of /. each. Dated, &c. By order, No. — , &c. A. B., Secretary. It has been decided by Chitty, J., that this course of procedure is regular : Joh>i CrossUy ij- ISons, W. N. (1892) p. 55. To the Directors of the Coy, Limtd. Form 457. We, the undersigned members of the above-named coy, holding in Kequisition the aggregate shares and upwards in the capital thereof, do hby, °^ members in pursuance of the provisions in this behalf contained in the arts meeting. of asson of the coy, require you to convene an extraordinary general meeting of the coy, to be held on Monday, the th day of June, 1890, at six o'clock in the afternoon, for the purpose of considering, and, if thought fit, passing the subjoined resolution. Resolution. That, &c. [set it out']. Dated, &c. See supra, p. 415, CI. 59. Notice [_as in Form 452 adding :] Form 458. This notice is given by the undersigned members of the coy [or by Notice by the direction of the members of the coy specified in the schedule hto members call- and] holding in the aggregate upwards of one fifth of the capital in ° 704 NOTICES. [Chap. XI. Form 458. exercise of the power conferred by article of the coy's arts of asson, the directors having failed for days after the deposit of a requisition in accordance with such arts of asson to convene a meeting for the purposes above mentd. Dated, &c. \_Names of conveners.^ If the words in brackets are used, a schedule of names will be added, and the notice ■will be signed by some person on behalf of the conveners. In either case printed signa- tures would probably suffice. Form 459. To the Debenture-holders of the Coy, Limtd. Notice of meeting of debenture- holders. Notice is hby given, that a meeting of the holders of the debentures issued by the above-named coy, and secured by an indenture dated the day of , 18 — , and made between the sd coy of the one part, and and (the trees) of the other part, will be held at , in the City of London, on , the day of , 1895, at 12 o'clock noon, for the purpose of receiving and considering a report by the trees in regard to the position of the coy and of the debenture-holders thereof, and the steps (if any) to be taken, following upon a notice served by the trees upon the coy on the day of , 18 — , and also for the purpose of considering, and, if thought fit, passing a resolution sanctioning and confirming (with or without modi- fication) a provisional agreemt, dated the day of , 1895, and made between purporting to contract on behalf of all the holders of the debentures of the sd coy secured by the sd indenture, of the one part, and the sd coy of the other part, being an agreemt for effecting certain modifications of the rights of the holders of the sd debentures against the coy and against the property of the coy, pursuant to the power in that behalf contained in Clause 14 of the fifth schedule to the sd indentui'e. Dated this No. — day of , 1895. For the above-named coy, , Director. Street, London. Note. — Holders of unregistered debentures are reminded that they must produce their debentures at the meeting in order to entitle them to attend and vote. This and tlie two following forms are exiimi)les of notices convening meetings of deben- ture liolders. Sec supra, p. 239, for specimen agreement, and Fonn 391 for specimen resolution, and infra, p. 801, as to the operation of majority clauses. 'J'hoae notices B])ccify in some detail tlio objects of the meeting, and this is very com- monly considered desii-ablc, even wliere the deed expressly provides that the notice need not specify the nature of the business. FORMS. 705 The Company, LnriTEc. Form 460. Notice is hby given, that a meeting of the holders of debentures of A-iothcr. Series A of the above-named coy for 250,000/. secured by a trust deed, dated the day of , 1893, and made between the sd coy of the one part, and and of the other part, will be held at the offices of the coy, No. — , Lane, London, on , the day of , 1895, at 4 p.m., for the purpose of considering and, if thought fit, approving of certain modifications of the sd trust deed which have been proposed by the coy and recommended by tlie trees and of autho- rising the trees to concur with the coy in executing a supplemental trust deed for effectuating such modifications. This notice is given pursuant to the provisions contained in the second schedule to the sd trust deed. By order of the directors, , Secretary. No. — , Lane, London, E.G. The CoMPAKY, Limited. Form 461. Notice is hby given, that a meeting of the holders of debentures of Another. the above-named coy for 200,000/., secured by trust deed, dated the day of , 1890, and made between the coy of the one part, and and of the other part, will be held at, &c., London, E.G., on , the day , 1895, at 11 o'clock in the forenoon, for the purpose of considering, and if thought fit sanctioning by extra- ordinary resolution, a provisional agreemt, dated the day of , 1895, and made between on behalf of the holders of the sd debentures of the one part, and the coy of the other part, which will be submitted to the meeting, and which, if sanctioned, is to take effect and operate by way of modification of the rights of the holders of the sd debentures and of the provisions of the sd trust deed. The sd agreemt empowers the coy to raise further funds by the issue of a new series of debentures ranking in point of security in priority to the existing debentures, and the securities for the same, and for the release of the half-year's interest on the existing deben- tures due the of , 1895, and for the payment of the interest on the existing debentures for 5 J years from 1st July, 1896, exclu- sively out of half-yearly profits of the coy as therein defined, and for other ancillary matters. This notice is given pui'suant to the provisions contained in the third schedule to the sd trust deed. Dated the day of , 1895. By order of the Trustees, and , Solicitors to the Trustees. P. Z 7. 706 NOTICES. [Chap. XI. Notices to the Registrar of Joint-Stock Companies. The Act requires a considerable number of notices to be given to the registrar. Every such notice requires a .'js. stamp. See Table B. in the first schedule to the Act of 1862, and sxpra, p. 290. The notices are, in many cases, made out on skeleton forms supplied by the registration agents. The follomug are some of the cases in which a notice must be given : — Notice as to Office. See S3. 39 and 40 of the Act of 1862, infra. Form 462. Notice of situation of office. The Coy, Limtd. To the Registrar of Joint Stock Cos : — The • Coy, Limtd, hby give yoii notice, in accordance with the Cos Act, 1862, that the registered office of the coy is situated at, &c. Dated, &.Q. A. B., Secretary. The notice on change of office is the same as above, only that the word " now " is inserted before the word " situated." Notice of Consolidation of Shares' and Conversion of Shares into Stock. See s. 28 of the Act of 1862, infra. Notice of Increase of Capital or in Nimher of Memhers. See s. 34 of the Act of 1862, infra. Tlio usual form of notice is as follows : — Form 463. Notico of incroaf'e of capital. The Coy, Limtd. To the Registrar of Joint Stock Cos : — Tlio Coy, Limtd, hby give you notice that by a resolution of tlio coy in general meeting, passed the day of [the form must he varied if the increase is ejected by special resolution, or hy resolution of the directors'], the nominal capital of the coy has been increased by the addition tliereto of the sum of 1., divided into shares of 1, each boyond tlio registered capital of 1. Dated, &c. A. B., Secretary. In addition to a f)s. registration stamp, a notice of increase of capital or in number of members must bo stamped, as above mentioned, p. 290. And the duty of 2s. per 100/., payable under s. 112 of the Stamp Act, 1891, must be paid. See p. 291. FORMS. 707 Notice of Special Resolution. See s. 53 of the Act of 1862, infra. The followmg is the fomi usetl : {Copy.) The Coy, Ltmtd. Passed — th Special Resolutions. -, 1890. Confirmed— th -, 1890. Form 464. Copy of special resolutions. At an extraordinaiy general meeting of The Coy, Limtd, duly convened and held at, &c., on the — th day of , 1890, the subjoined special resolution was duly passed, and at a subsequent extraordinary general meeting of the said coy, also duly convened and held at the same place on the — th day of , 1890, the subjoined special resolu- tion was duly confirmed. " That," &c. , Secretary. A special or extraordinary resolution need not he advertised in the Gazette unless it is for winding-up. No. The Coy, Limtd. 24, Street, S.W. 8th August, 1890. To Form 465. Notice of dividend and warrant. The directors, by virtue of the powers given to them by clause — of the articles of association, having determined to pay an interim divi- dend of — p.c. [free of income-tax] upon the ordinary shares [or the paid-up capital], I beg to hand you herewith a warrant [_or draft] for /., the amount of such dividend in respect of 10/. shares [upon which the sum of 1, has been paid]. This half-sheet is to be retained by the shareholder, who must sign the warrant at the foot hereof, and pass that only through a banker for payment. The Coy, Limtd. To the - Pay to or order the sum of hiterim Dividend, 1890. - Bank, Limtd. 3rd August, 1890. -/. Dividend warrant. For the above-named coy, Signature of Shareholder, -, Directors. -, Secretary. zz2 708 NOTICES. [Chap. XI. Form 466. Herewith I beg to hand you a warrant for the dividend at the rate of — p.c, upon shares in respect of which the sum of 1, has notice. been paid, making, with the interim dividend of — p.c. paid on the last, the dividend of 8 p.c.p.a. for the year ending , 1890. Form 467. Another. The Coy, Limtd. Twe7ity -third Dividend. No.—. Dividend for the half-year ending June, 1 89 — , at the rate of eight pounds [8^.] p.c.p.a., payable on and after th August, 189 — , at the Bank, Street, E.C. £ s. d. Six months on [10] fully pd up 10^. shares, each at 9s. per share ....... Less income tax at the rate of — d. in the £ The above shares stand in the name of This portion to be retained by the shareholder. The warrant to be torn off, and presented at the bankers after being signed at the foot. / hhy certify that I have deducted for income tax the amount set forth in the above statement, and that the amount so deducted will be pd by me to the proper officer for the receipt of taxes. , Secretary. N.B. — Persons claiming repaj^ment of income tax are informed that the Commissioners of Inland Eevenue will receive this statement as a voucher in claiming taxes. Another. Form 468. This is to certif}' that the coy having been assessed under the Income Tax Acts in respect of the whole of its profits and gains, the dividend set forth herein is a portion of such profits and gains in respect of which income tax has been or will be pd over to the proper officer for the receipt of taxes. Note. — Persons claiming repajTnent of income tax are informed that the Commissioners of Inland Revenue will accept this portion of the warrant as a certificate showing the assessment to income tax upon the profits of the coy. Form 469. Dividend notice and No. — warrant. The Coy, Limtd. No. — , Street, London, E.C. Siu, — I beg to liund you licrowith an order on Messieurs for — /., being u di\idond of per cent, (free of income tax) for the FORMS. 709 ordinary shares Form 469. half-year oudod the 31st of December, 1891, on - in the capital of the coy standing in your name. I hby certify that this coy having been assessed under income-tax laws in respect of the whole of its profits and gains, the dividend set forth herein is a portion of such profit and gain in I'espect of which income-tax has been or will bo paid over to the proper officer for the receipt of taxes. Your obedient servant. To . , Secretary. N.B. — Proprietors entld to exemption from income-tax are informed that the Commissioners of Inland Revenue will receive this statement as a voucher in claimine- a return of the same. The Coy, Limtd. Warrant for dividend for half-year ended — To Bank, Limtd, No. — , Street, London, E.C. Pay or order the sum of /. For the above-named coy. -/. -, Dii'ectors. -, Secretary, Payee's signature . This draft must be signed by the payee, and presented within three months from date. To THE Coy. Limtd. Form 470. I direct that until further notice all dividends from time to time Direction bj- becoming payable on any shares or any stock of the above-named coy pay^dividends for the time being outstanding in my name be paid to Messrs. , into a bank. of , for my account, and their receipt shall be a good discharge. Date. Signature. Address. Under the Stamp Act, 1891, a notice framed as above, or in the form following, is exempt fi*om stamp diity. To THE Coy, Limtd. Form 471. I direct that warrants for dividends at any time hereafter becoming Another, payable on any shares in the above-named coy for the time being standing in my name be sent by post to , of , at my risk. Date. Signature. Address. 710 NOTICES. [Chap. XL Form 472. Authority to bank to pay dividends to a third party. The Bank, Limited. This order must be signed by all the parties iu whose names the shares are registered, and their address must be added. To the Secretary of the L. & W. Bank, Limtd. The bank is hby authorized and required to pay to until this authority is revoked iu writing all dividends and bonuses now or hereafter payable on all shares iu the bank for the time being standing in the name of the undersigned . Dated the day of . Usual signature. Name in full. Address. Form 473. I, A., of , do hby appoint B., of , to be my attorney in my name and on my behalf to receive all dividends from time to time x>ay- able on my shares in the Coy, Limtd [and I declare that this power of attorney shall be irrevocable for one year from the date hereof]. As witness my hand and seal this day of . [Signature and seal of A.] Signed, sealed, and delivered by the sd A. in the presence of , of . A power of attorney, as ahove, requLfes "a os. stamp ; but where the authority is for the receipt of one payment only, the stamp is Is. —Schedule to Stamp Act, 1891. 3pr of old. Form 474. To the Eegistrar of Joint Stock Companies. Consent to I, the undersigned, being the liqr of the A. Coy, Limtd, give you !!!;^,f^™^^"^ notice that the sd coy is in course of being dissolved, and I hby, under usinpr name -^ & > j 7 the provisions of the Cos Act, 1862, s. 20, and on behalf of the coy, testify its consent to the registration of a new coy, by the name of the A. Coy, Limtd. C. D., Secretary. A. B., Liquidator. Dated, &c. The above is the ordinary form. The registrar requires it to be signed by the liqui- dator, or by two of the directors, or by tlie wliolc of the members, wlien the subscribers to the memorandum of association are tlie only members, or by any other person duly autliorizcd at a general meeting, the date of which should be given ; and to be counter- signed by the secretary (if any). See further, infra, introductory notes to Chapters XX. and XXI. For other notices, see Index. 711 CEETIFICATES. CHAPTER XII. INTRODUCTORY NOTES. By s. 31 of the Act of 1862, a certificate under the common seal of the Certificates company, specifying any share or shares or stock held by any member evidenceTf of a company, shall be prima facie evidence of the title of the member to title ; the share or shares or stock therein specified ; and s. 32 provides for the object of. keeping of a register of members. " This power of granting certificates is to give shareholders the opportunity of more easily dealing with their shares in the market, and to afford facilities to them of selling their shares by at once showing a marketable title ; and the effect of this facilit}^ is to make the shares of greater value. The power of giving certificates is, therefore, for the benefit of the company in general ; and it is a declaration by the company to all the world that the person in whose name the certificate is made out, and to whom it is given, is a shareholder in the company, and it is given by the company with the intention that it shoiJd be so used by the person to whom it is given, and acted upon in the sale and transfer of shares." Per' Cockburn, C. J., Bahia, Sfc. Ry. Co., L. E. 3 Q. B. 595 ; Smith's L. C, Vol. II., 874. "A certificate" is, however, "merely a solemn affirmation under the seal of the company that a certain amount of shares or stock stands in the name of the individual mentioned in the certificate." Per Lord Cairns, L. C, in Shropshire Union., ^c. Co. v. The Queen, L. P. 7 H. L. 496, 509. And Lord Hatherley (p. 512) says : — "The certificate does not tell 3'^ou anything more than the register itself told you. The register told you that he was owner, and the certificate tells you he is owner. The certificate tells you that he is on the register, and that he is on the register for a certain nimiber of shares ; that is apparent upon the face of the register itself." The certificates "in companies of this kind are the proper (and indeed the only) documentary evidence of title in the possession of a share- holder." Per Lord Selborne, Societe, Gemrale de Paris v. Walker, 11 App. Cas. 20, 29. 712 CERTIFICATED. [Chap. XII. Responsi- bilities in issuing. Forged transfer. Liability of company. And in tlie same case (p. 44) Lord Fitzgerald says : — " The statute and the articles must be taken together. The former shows that the certificates are to be jori'md yaci'e evidence of the title to the shares; and the latter that the certificates are the only instruments and evidence of title which the member is entitled to have delivered to him." While, however, the benefit is as above stated, it behoves the directors to use the vitmost care in issuing certificates ; for on the principle illustrated by Pickard v. Sears, 6 Ad. & E. 469, and Free- man V. Cooke, 2 Ex. 654, the company is estopped from denying the truth of the representation contained in the certificate as regards any person dealing with the shares in reliance thereon. Thus in Bahia, &.-c. Rij. Co., nhi sujyra, the comj)any, acting upon a forged transfer, issued a certificate to the transferee. A., in reliance on this certificate, purchased and paid for the shares specified in it, and they were duly transferred into his name. The forgery was subsequently discovered, and the company was, under s. 35 of the Act, ordered to restore the name of the real owner to the register. It was held, in an action by A. against the company, that he was entitled to recover as damages for the loss of the shares the value of the shares at the time the company first refused to recognize him as a member, with interest at 4 per cent, from that time. And as to compelling the company to re- transfer to the true owner stock included in a forged transfer, see Barton v. L. ^- N. W. Rail. Co., 38 C. D. 144. See also Hart v. Frontino, L. R. 5 Ex. Ill ; Euyhsjield y . Marquis of Londonderry, 4 Ch. Div. 693; Cottam v. Eastern Counties Rail. Co., 1 J. & H. 243 ; Johnston v. Renton, 9 Eq. 181 ; Shato v. Port Philip Co., 13 Q. B. D. 103 (where the secretary had improperly issued the certificate); Ottos Kopje Diamond Mines, (1893) 1 Ch. 618; Seton, 1918. In the case last mentioned A. bought shares on the faith of a certifi- cate that B. was the holder, and took a transfer from B. accordingly. The company had issued the certificate in pursuance of a forged transfer, and refused to register the transfer to A. It was held that A. was entitled to damages, and that the measure was the value of the shares at the time of the refusal to register. The rule, however, does not apply where the person to whom the certificates are issued is a trustee for the company, for the certificate does not say that the company has no equitable interest. In such a case the company may refuse to register the transfer. Shropshire Union, Sfc. Co. v. The Queen, L. E. 7 II. L. 496. And it must bo shown that the party acted on the certificate ; for if he merely relies on a forged transfer, and is registered and receives a certificate of title, the company is not estojjped as against him, unless he acts on the certificate. Simm v. Anylo-American Tclcyraph Co., 5 Q,. B. Div. 188; Coatcs v. L. &; S. IV. Rail. Co., 4 1 L. T. 553 ; J 'ulcan Ironworks Co., AV. N. (1885) 120. See, on the other hand, J/art v. Frontino Co., INTRODUCTORY NOTES. 713 L. R. 5 Ex. Ill, where plaintiff obtained from the company a certifi- cate of his title, and paid a call in reliance thereon, and the company was held estopped thereby. And whore the plaintiff, claiming under a forged transfer, received a certificate from the company and bond fide acted thereon by selling the shares, he was held by the House of Lords entitled to recover damages from the company. Tompk'mson v. Balkis, (1893) A. C. 396. So, too, where B. advanced money to a company upon the footing that he was to have as security 10,000A of paid-up shares, and the company issued to him a certificate that he was entitled to 10,000/. of paid-up shares, it was held that, although these shares were not in fact paid up, the company was estopped by its certificate on what B. had advanced bond fide in the belief that it was true. Bloomenthal v. Ford, (1896) A. C. 156. See also Parbunfs case, (1896) 1 Ch. 100, in which the company was held estopped in favour of an original allottee who had acted on the certificate issued to him. But, of course, there is no estoppel if the certificate holder knows that the certificate is imtrue before he acts on it. Where a certificate has been issued describing a share as fully paid up or partly paid up, a j)urchaser of the share acting on the faith of the certificate is entitled to hold the share as paid up, or partly paid up, as the case may be. Burkinshaiv v. Nicolls, 3 App. Cas. 1004. But where A., being entitled to an allotment of paid-up shares under a contract which required filing but was not filed, procured an allotment to B., who received a certificate accordingly, the company was held not to be estopped as against B. Eoicland's case, "W. N. (1880) 80. Where directors issue a certificate of title to shares or stock which do not in fact exist, or which the company has no power to issue, they may be held personally liable in damages to any person who acts on such certificate. Firbank v. Humphretjs, 18 Q. B. Div. 54, and cases there cited. A certificate that a person is the holder of shares or stock in a Stamp, company does not require any stamp. It is not a deed. The Queen v. Morton, L. R. 2 C. C. R. 22. But a scrip certificate or Scrip certi- other document entitling any person to become the proprietor of any ^°^*6' share of any company or proposed company, requires a IJ. stamp ; and any person who executes, grants, issues, or delivers out any such document before the same is stamped, is liable to a penalty of 20/. IStamp Act, 1891, s. 79. See clauses as to certificates, supra, p. 387. As to the effect of depositing share certificates as security for an advance, see Colonial Bank v. Whmney, 11 App. Cas. 426, on^ post, p. 916. As to estoppel by " certification," see sujjra, p. 404. McKay's case, (1896) 2 Ch. 747. a4 CERTIFICATES. [Chap. XII. CERTIFICATES. Form 475. Ordinary certificate. The Coy, Limtd. Incorporated under the Cos Acts, 1862 and 1890. Capital 100,000/., divided into 5,000 shares of 20/. each. No. . 20/. shares. This is to certify that A. B., of , is the registered holder of — — shares, numhered to inclusive, in the above-named coy, subject to the memdm and arts of asson thereof, and that the sum of /. has been pd up upon each of the sd shares. Given under the common seal of the sd coy, this day of — — . The common seal of the said coy was hereunto affixed in the presence of — , Dii-ector. , Secretary. (Seal of the coy.) Note. — No transfer of any portion of the shares comprised in this certificate can be registered unless accompanied by this certificate. A company cannot safely disregard such a rule. Socieie Ghu'rale v. Walker, 11 App. Cas. 20 ; Colonial Bank v. Whinney, ibid. 441. Form 476. Certificate of preference bhares. The Coy, Limtd. No. Capital 100,000/., divided into 5,000 preference shares of 10/. each, and 5,000 ordinary shares of 10/. each. This is to certify that A. B., of , is the holder of of the above-mentd preference shares, numbered, &c., in the Coy, Limtd, subject to the memdm and arts of asson thereof, and that upon each of the sd shares the full amount of 10/. has been pd up. Given, &c. Note, &c. [as above]. In the case of preference shares, tlie certificate sonietiines states the rate of ilivideud. and whetlicr cumulative or not. FORMS. 715 TltE No. Coy, Limtd. No. of shares Issue of 150,000^. in 15,000 ordinary shares of 10/. each. Form 477. Provisional certificate. Provisional Certijicatc. Tins IS TO CERTIFY that is the holder of ordinary shares - to inclusive, in the Coy, Limtd, of 1 0/. each, numbered upon which the sum of II. per share has been pd. The remaining instalments arc due as foUows : — 3/. on the 1st October, 1889. 3/. on the 1st December, 1889. \M. on the 1st February, 1890. Given under the common seal of the coy this day of -, 1889. -, Director. -, Secretary. B(mk(;rs^ lieccipt. Received the sum of /., being the instalment due in respect of the above shares on 1st October, 1895. For the Bank, Limtd. {\d. stamp.) \_Two more receipts for subsequent instalments.^ N.B. — This provisional certificate must be produced to the bankers of the coy upon payment of each instalment, and will be returned receipted. It is sometimes tliought conveiiieut to issue provisional certificates as above. As to scrip cei-tificates to bearer, see infra, p. 852. Scrip certificates for debentures and debenture stock, see infra, jip. 850 ct m'q. The Coy, LiMTi). Provisional Certificate. Issued in respect of Allotment Letter, No. — . Preference Shares, part of the 100,000/. bl. per cent, cumulative Preference Shares offered for sale by prospectus, dated 22nd Aj)ril, 1895. This is to certify that Messrs. A, & Co., of B., bankers, have received from , of , hnfter called the allottee, the sum of /., viz., 3/. per share on of the sd preference shares allotted to him, and that on payment of the remaining- instalments as below mentd, the allottee will be entld to a transfer of such shares. Form 478. Another. 716 Form 478. CERTIFICATES. [Chap. XII. The remaining instalments are to be pd to Messrs. A. & Co., of B., as follows : — On 1st June, 1894, 3/. 1.5a'. per share. 1st July, 1894, 41. Failure to pay any instalment when clue will render the allotment liable to cancellation, and the deposit to forfeiture. The remaining instalments may be pd in advance. For the Vendors, A. & Co. Note. — When the above payments have been completed, Messrs. A. & Co. will, on presentation and delivery of this certificate, procure the transfer to the allottee of the shares, and the issue to him of a defi- nitive certificate of title. Bankers' Receipts. Received from the allottee above named the sum"of 1., being the amount of the instalment due 1st June, 1894. For Messrs. A. &. Co. Date . Memorandum. [To be detached by Bankers.] The Coy, Limtd. Allotment No. . Amount payable on allotment, Date . Eeceived from the allottee above named the sum of /., being the amount of the instalment due 1st July, 1894. For Messrs. A. & Co. Date . Memorandum. [To be detached by Bankers.] The Coy, Limtd. Allotment No. . Amount payable on allotment, /. Date . This is a specimen of a provisional certificate issued by a bank or company which buys an issue and offers same to the public. Form 479. Certificate of stock. The Coy, Limtd. No. Capital 100,000/. stock. 7. This is to certiey that A. B. of , is the holder of the sum of — I. stock of the above-named coy, subject to the memdm and arts of asson thereof. Given, &c. Note. — No transfer of any part of the stock comprised in this certi- ficate will bo registered until this certificate is delivered up at the coy's office. FORMS. 717 The Coy, Limtd. Form 480. No. . Another form Capital 50,000/., divided into 4,000 ordinary shares of 10/. each, and of certificate 1,000 10 p.c. preference shares of 10/. each, which preference shares "f preference were created by the special resolution of the above-named coy, passed the day of , a copy of which is indorsed thereon. This is to certify that A. B., of, &c., is the holder of of tlie sd preference shares, numbered to inclusive, in the above- named coy, siibject to the arts of assou thereof, and that the sum of /. has been pd up upon each of the sd shares. Given, &c. The Coy, Limtd. Form 481. n -J. 1 p Form of share Capital, &C. warrant. No. . Share Warrant. /. shares. This is to certify that the bearer of this warrant is entld to fully pd-up shares of /. each, in the above-named coy, subject to the regulations of the coy, and to the conditions indorsed hereon. [See supra, p. 407.] , Given, &c. As to share warrants, see supra, p. 674. By s. 33 of the Act of 1867 : " There shall be charged on every share warrant a stamp duty equal to three times the amount of the ad valorem duty which would be chargeable on a deed transferring the share or shares or stock specified in the warrant, if the con- sideration for the transfer were the nominal value of such share or shares or stock." For the ad valorem duty on transfers, see the schedule to the Stamp Act, 1891, under " Conveyance or Transfer on Sale." It is as follows : — £ s. d. Where the amount or value of the consideration for the sale does not exceed £5006 Exceeds £5 and does not exceed £10 010 10 15 20 25 50 75 100 15 16 20 2 25 2 6 50 5 75 7 6 100 10 125 12 6 And so forth. So that the proper stamp for a share Avarrant issued in respect of one 10/. share will be3». Sect. 107 of the Stamp Act, 1891, provides that.": — "If a"sharejWarrant is issued without being duly stamped, the company issiuug the same, and also every person who at the time when it is issued is the managing director orsecretary, or other principal officer of the company, shall incur a fine of 50/." But the duty may be commuted under s. 11.5 of the Stamp Act, 1891. 718 CERTIFICATES. [Chap. XII. Form 482. Coupon to share war- rant . TnE Coy, Limtd. Dividend Coupon, No. . On shares included in the share warrant numbered as below. Payable at the coy's office at a time to be fixed by advertisement. No. . , Secretary. It is not uncommon to annex to a share warrant a series of coupons numbered con- secutively. When they are exhausted fresh coupons are issued. They require no stamp. Where such coupons are issued it is desirable ui the conditions {supra, p. C7o) to pro- vide that the delivery of a coupon shall be a good discharge to the company for the coiTesponding dividend. Sometimes a note is added to the coupons stating that, " This coupon must be brought to the company's office upon the dividend being declared, in order that it may be examuied and vouched." Form 483. After all the attached dividend coupons have been pd or advertised ~ — r — ~f — ■ for payment the coy will on presentation of this warrant and surrender fresh coupons, of the voucher issue to the bearer a new sheet of coupons to be attached to this warrant with a similar voucher. The voucher will be so printed that, after all the coupons have been used, such voucher may be detached and handed to the company in exchange for fresh coupons and voucher. Where share warrants are likely to be dealt in abroad they are generally printed in two or more languages side by side. Form 484. Letter of indemnity in issue of fresh certificate. Form 485. Certificate of incorjioration. To the Coy, Limtd, and A., B., and C, the directors thereof. Gentlemen, I have lost the certificate of title dated the day of relating to the shares of each, numbered to inclusive, in the above-named coy, of which I am the proprietor, and I request 3^ou to issue to me a fresh certificate of title to such shares, and in con- sideration thereof I undertake to indemnify you against all actions, proceedings, claims, and demands which may be brought or made against you or any of you in consequence of your having issued such fresh certificate, or in consequence of your permitting at any time hereafter a transfer of the above shares, or any of them, without the production of the original certificate above referred to. And I, , of , concur in the above request, and guarantee the performance by the sd of the above undertaking. (Signature.) Dated the day of . (Jd. stamp if under hand, or if under seal lO.v. I iiEUKiiY CEiiTiiY tJiat the Coy, Limtd, is this day incorporated under tlio Cos Acts, 18C2 to 1890, and that tliis coy is limtd. Given under my liand this day of . Sect. 18 of tlie Act of 18G2 makos the registrar's certiiicato of the incoiiwration con- clusive evidence tliat all tlic roquisitious of the Act in respect of registration have been complied with. Sec «?f/?r«, p. 14. ■ FORMS. "^^^^ I HEREBY CERTIFY tliut A. B. & Co., Liintd (wliich was constituted Form 486. bj' arts of asson dated — — ), is tliis day incorporated under the Cos Certificate ou Acts, 1802 to 1890, and that this coy is limtd. Ser'^''*''''" Given under my liand at London this day of • Part VII. of Act of 1862. See s. 192 of the Act as to conclusive character of certificates. When the deed is called a " deed of settlement," the certificate is framed accordingly. The Brewery Coy, Limtd. Form 487. Incorporated under British statutes known as the Cos Acts, 1862 to Certificate of ■^ shares held m 1890. trust by Capital 1,000,000^., divided into Ordinary Shares of /. each, corporation. and Preference Shares of 1, each. This is to certify that the bearer is entld to 10^. shares in the above-named coy, hnfter called the Coy, which shares are numbered to inclusive. The sd shares form part of the 20,000 ordinary shares in the coy comprised in the trust deed dated the day of , and made be- tween A. B. and others of the one part, and the Trust Coy of Boston (hnfter called the trust coy) of the other part, and this certificate is issued subject to the provisions of the sd deed. Dividends from time to time payable in respect of the sd shares will be pd on presentation to the said trust coy of the appropriate coupons. "With this certificate there are issued [20] coupons, together with a voucher for further coupons ; and as and when the coupons for the time being belonging to this certificate are exhausted, further coupons with a further voucher will, on presentation of this certificate, be issued to the bearer in exchange for the voucher. The delivery to the sd trust coy of each coupon shall be a good discharge for the dividend therein referred to. This certificate is transferable by delivery, and the sd trust coy are to be entld to regard the bearer hereof for the time being as the absolute owner thereof. If at any time the bearer hereof desires to have several certificates for the same shares instead of one, the sd trust coy will, on presen- tation and surrender of this certificate and all coupons, issue to him further certificates and coupons, but the sd trust coy shall be entld to charge a fee of for each certificate issued. In accordance with the provisions of the sd trust deed, the trust coy will at any time, on the request of the bearer thereof, and on the surrender of this certificate to be cancelled, transfer to such bearer or his nominee the shares comprised in this certificate by instrument of transfer framed in accordance with the regulations of tlie coy, to the intent that by registration of such transfer in the books of the coy, the legal title in the share shall become vested in the transferee named in such certificate. 720 • CERTIFICATES. [ChAP. XII. Form 487. Notice of any dividend from time to time payable in respect of the ' sd shares comprised in this certificate will be advertised in the newspapers. Given under the common seal of the Trust Coy this day of . Where au English company acquires tlie undertaking of an American company, or all the shares in an American companj', and a considerable part of tlie jirice consists of shares in the English company, the vendor may want to sell such shares in America. In some cases, to facilitate this, the vendor has obtained share warrants to bearer at great expense (30s. per cent.), but has foimd that such wan-ants, bearing a British i-evenue stamp are not hked, and are found inconvenient, as they cannot be split. Accordingly, in other cases, the vendor has vested the shares in an American trust company, and obtained certificates on the lines of the above. Such certificates can be freely sold and dealt with in America, and they want no stamp there, nor does the transfer from the vendor to the trustee want more than a 10s. stamp. ^21 POWEllS OF ATTORNEY. CHAPTER XIII. INTRODUCTORY NOTES. Powers of attorney are frequently required in connection with com- Power for panies. Prima facie any company can appoint an attorney to act on appoint its behalf, for the attorney is an agent, and, as a company can only act by agents, it has an implied power to appoint such agents (supt-a, p. 8). Whether, however, in any particular case the directors of a company have power to execute a power of attorney on the company's behalf depends on the regulations. When they have wide general powers (see svpra, p. 445) they are usually in a position to create such a power; otherwise the sanction of a general meeting must be obtained. See supra, pp. 445, 451. Sect. 55 of the Act of 1862 gives express power to any company to appoint an attorney to execute deeds abroad. See also the Companies' Seals Act, 1864, infra. The following extracts from the Conveyancing Acts, 1881 and 1882, should be borne in mind : — I. Conveyancing, &c. Act, 1881. 46.— (1) The donee of a power of attorney may, if he thinks fit, execute and do any Execution assui-ance, instrument, or thing in and with his own name and siguatiu-e and his own luider power seal, where sealing is requii-ed, by the authority of the donor of the power ; and every of attorney, assurance, instrument, and thing so executed and done shall be as effectual in law, to all intents, as if it had been executed or done by the donee of the power in the name and with the signature and seal of the donor thereof. (2) This section applies to powers of attorney created by instruments executed either before or after the commencement of this Act. 47. — (1) Any person making or doing any payment or act, in good faith, in pursuance Payment by of a power of attorney, shall not be liable in respect of the payment or act by reason attorney that before the payment or act the donor of the power had died, or become lunatic, of "V^, P , . ' , J T 1 1 without notice unsound mmd, or bankrupt, or had revoked the power, if the fact of death, lunacy, ^j death &c. luisoundness of mind, bankrui^tcy, or revocation, was not at the time of the pajTuent or o-ood. act known to the person making or doing the same. (2) But this section shall not affect any right against the payee of any person interested in any money so paid ; and that ^lerson shall have the like remedy against the payee as he would have had against the payer if the pajTuent had not been made fey him. (3) This section apijlies only to payments and acts made and done after the com- mencement of this Aot. P. 3 A TOO POWERS OF ATTORNEY. [ChAP. XIII. Deposit of original instruments creating powers of attorney. 48. — (1) An instrument creating a power of attorney, its execution being veiitied liy affidavit, statutory declaration, or other sufficient evidence, may, with the affidavit or declaration, if any, be deposited in the Central Office of the Supreme Court of Judicature. (2) A separate file of instruments so deposited shall be kept, and any person may search that file, and inspect every instrument so deposited, and an office copy thereof shall be delivered out to him on request. (3) A copy of an instrument so deposited may be loresented at the office, and may be stamped or marked as an office copy, and when so stamped or marked shall become and be an office copy. (4) An office copy of an instrument so deposited shall, without further proof, be sufficient evidence of the contents of the instrument and of the deposit thereof in the Central Office. (5) General rides may be made for purposes of this section, regulating the practice of the Central Office, and prescribing, with the concurrence of the Commissioners of her Majesty's Treasury, the fees to be taken therein. [See Annual Peactice.] (6) This section applies to instruments creating powers of attorney executed either before or after the commencement of this Act. EflPect of power of attorney, for value, made absolutely irrevocable. Effect of power of attorney for value or not, made inx-voc- able for fixed time. II. Conveyancing Act, 1882. 8. — (1) If a power of attorney, given for vahiable consideration, is in the instrument creating the power expressed to be irrevocable, then, in favour of a purchaser — ■ (i) The power shall not be revoked at any time, either by anything done by the donor of the power without the concurrence of the donee of the power, or by the death, marriage, lunacy, imsoimdness of mind or bankruptcy, of the donor of the power ; and (ii) Any act done at any time by the donee of the power, in pursuance of the power, shall be as valid as if anything done by the donor of the power without the con- currence of the donee of the power, or of the death, marriage, lunacy, unsound- ness of mind, or bankruptcy of tlie donor of the power, had not been done or happened ; and (iii) Neither the donee of the power nor the purchaser shall at any time be prejudicially affected by notice of anything done by the donor of the power, without the con- currence of the donee of the jjower, or of the death, marriage, lunacy, unsound- ness of mind, or bankruptcy of the donor of the power. (2) This section applies only to powers of attornej' created by instruments executed after the commencement of this Act. 9. — (1) If a power of attorney, whether given for valuable consideration or not, is in the instrument creating the power expressed to be u-revocable for a fixed tune therein specified, not exceeding one year from the date of the instrument, then, in favom- of a jiurchascr — (i) The power sliall not be revoked for and during that fixed time, either by anything done by the donor of the power ■v\'ithout the concurrence of the donee of the power, or by the death, marriage, lunacy, unsoundness of mind, or bankruptcy of the donor of the power ; anil, (ii) Any act done within that fixed time, by the donee of the power, in pursuance of the power, shall be as valid as if anything done by the donor of the power, with- out the concurrence of the donee of the power, or the death, marriage, lunacy, unsoundness of mhul, or bankruptcy of the donor of the power, had not been done or hapijencd ; and (iii) Neither the donee of the power, nor the purchaser, shall at any time be prejudi- cially affected by notice either during or after that fixed time of anything done by the donor of the power during that iixcd time, without the concurrence of the donee of the power, or of the deatli, marriage, lunacy, unsoundness of mind, or bankruptcy of the donor of the power witliin that fixed time. {'J.) This Hoction applies only to powers of attorney created by instruments executed after the coinmoncemont of t)iis Act. INTRODUCTORY NOTES. 723 As to the Construction of a Porcer of Attorney. Sucli au instrument is strictly construed. Its operation may be Construction, limited by a recital, e.g., where the instrument recites that the appointor is going abroad and desires to appoint an attorney to act during his absence, the power, however wide, may be held ineffective after the appointor's return, and therefore evidence of his non-return may have to be produced. See Danhy v. Contts, 29 0. Div. 500. Moreover, where the instrument gives authority to do certain speci- fied things, or appears to have been intended to be used for certain specified pixrposes, any general words contained in it may be cut down in their operation, and held only to authorize the doing of what is incidental to that which is specifically mentioned. Attwood v. Mun- nings, 7 B. & C. 278 ; Esdaile v. La Nauze, 1 Y. & C. Ex. 394 ; Hariier V. Godsell, 5 Q. B. 422 ; Jonmenjoy v. Watson, 9 App. Cas. 561 ; Bryant v. Banque du Peuple, (1893) App. Cas. 170. Thus, under a power to sell, assign, or transfer certain shares or securities, the attorney cannot pledge them {De Bouchont v. Goldsmid, uhi supra; Jonmenjoy v. Watson, 9 App. Gas. 561); or barter them {Guerreiro v. Serle, 3 B. & Ad. 616) ; or sell them on credit ( Wiltshire V. Sims, 1 Camp. 258). And a power to receive all salaries and money belonging to the principal does not enable the attorney to negotiate or indorse a bill. Hogg v. Smith, 2 Taunt. 347. It was held, however, in Bank of Bengal v. Macleod, 7 Moo. P. 0. 35, 74, that a power to sell, indorse, and assign, is a power to sell, a power to indorse, and a power to assign. And it seems that a power to sell a business as a going concern probably gives power to insert a clause in the contract restraining the vendor from competing within a certain distance. Per Lindley, L. J., Haxcksley v. Outram, (1892) 3 Ch. 359. Prima facie, the death of the principal ipso facto revokes the power. Watson V. King, 4 Camp. 272. So also the bankruptcy of the principal is, prima facie, a revocation. Parker v. Smith, 16 East, 382 ; Elliott v. Turquand, 7 App. Cas. 79. In equity, however, apart from the above Acts, a power of attorney for valuable consideration cannot be revoked. Bromley v. Holland, 7 Yes. 28; Abbott v. Straiten, 3 Jo. & Lat. 613; Carter v. White, 20 C. D. 228. As to validity of acts done before notice of revocation, see Salle v. Field, 5 T. E. 215 ; Elliott v. Turquand, 7 App. Cas. 79 : Oriental Bank, 28 C. D. 634. A power of attorney executed in one country with a view to its use in another country is prima facie to be construed in accordance with the law of the country where it is used. Brazilian Submarine Tele- graph Co., Limited, 63 L. T. 275 ; 39 W. E. 65. The Court will not take judicial cognizance of the notarial seal of a notary public of a foreign country. EarVs IVust, 4 K. & J. 300. There must be an affidavit verifying the attestation, or a certificate, 3 A 2 724 POWERS OF ATTORNEY. [ChAP. XIII. e.g., by the British Consul. Haygetl v. Miff, 5 D. M. & Gr. 910 ; Cooke V. Welby, 25 C. D. 7C9 ; In re Magee, 15 Q. B. D. 332. In Lord Kinnaird v. Lady Saltoun (181G), 1 Madd. 227, a power of attorney executed in Paris in the presence of two witnesses, and authenticated by a notary public there, was ordered to be acted on in England on an affidavit being forthcoming that the notary was such. According to the law of England, the mere production of the certifi- cate of a notary public, stating that a deed had been executed before him, would not in any way dispense with the proper evidence of the execution of the deed. Per Lord Cairns, L. C, Nye v. Macdonald, L. E. 3 P. C. 331. Prima facie those who deal with a person acting under, or purporting to act under, a power of attorney, are bound to inquire into the authen- ticity of the power, De Bouchont v. Goldsniid, 5 Ves. 213, per Lord Eldon ; Sheffield v. Joint Stock Bank, 13 App. Cas. 333 ; and see s. 25 of Bills of Exchange Act, 1882, as to bills and notes. Although the execution of a deed by an attorney may be presumed from the antiquity of the deed, there is no presumj)tion, if the power of attorney is not produced, that the attorney was duly authorized. Re Airey, (1897) 1 Ch. 164. But where the agent has powers exereiseable in special circum- stances, it seems that a person dealing with him bond fide need not inquire whether those special circumstances have arisen. Montaignac V. Shitta, 15 App. Cas. 357. Powers of attorney, whether executed here for use abroad, or executed abroad for use here, are usually executed in the presence of a notary public, who certifies the execution. If executed abroad, a further certificate should be obtained from the British consul identi- fying and certifying as to the status of the notary ; and a power of attorney executed here may be fortified by the certificate of the consul or agent-general of the foreign country or colony where it is to be used. The great point is to afitord those who deal with the attorney the fullest assurance that the instrument is authentic. Under the .Stamp Act, 1891, a power of attorney generally requires a 10s. stamp. FORMS. 725 POWERS OF ATTORNEY. Power to Manage Property Abroad, To ALL TO WHOM THESE PRESENTS SHALL COME, the Coy, Limtd, Form 488. having its registered offices at, Sec, and hnfter called " the Coy," sends greeting : Whereas the coy on, &c., Avas incorporated under the Cos Acts, Recitals. 1862 to , as a coy limtd by shares : And 'whereas the coy is desirous of making such appointment as is hnfter contained. Now THESE presents WITNESS, that tho coy doth hhy appoint A. B., of, &c.. Testatum. C. D., of, &c., and E. F., of, &c., and any two of them, the attorneys General of the coy in the name and on behalf of the coy to do all such acts and powers, things, and to execute all such deeds and instruments, as in the oiDinion of such attorneys, or any two of them, may be necessary or convenient for carrying on and transacting the business of the coy in . And Special IT IS HBY EXPRESSLY DECLARED, that without jorejudice to the general P^^'^^''^- powers hnbefore conferred, the sd attorneys, or any two of them, shall have power in the name and on behalf of the coy to do all or any of the following things : — 1. To purchase or otherwise acquire any real or personal ppty in Buy property. for the purposes of the coy. 2. To work, manage and develop the ppty of the coy for the time Work and being in in such manner as they may think fit. manage . property. 3. To let on lease, mortgage, charge, exchange, improve, or other- t g , ' ^ wise deal with the ppty of the coy for the time being in , to gage, &c. borrow money, and to draw, accept and indorse bills of exchange, promissory notes, and other negotiable instruments. 4. To appoint any managers, inspectors, workmen and agents on Appoint such terms as may seem expedient, and to remove or dismiss any ^o^^ts. person so appointed. 5. To collect rents, royalties, and other moneys due to the coy, and Collect rents to distrain for rents or royalties in arrear. ^^^ moneys. 6. To commence and prosecute, and to defend, compound and Commence abandon all actions, suits, claims, demands, and proceedings in ^^^4 avi\ s pro- become entld as afsd. perty. 3. To procure the record in the local register of deeds, or otherwise. Local regis- as may be necessary, of the trust deed, for securing the debentures debenture issued, or about to be issued, by the new coy. trust deed. 4. To procure the release of the old coy's ppty from the trust deed Procure affecting the same, which was registered on or about the day of I't^'lease of the ° ' " "^ proijerty trom , in such local register. old debenture 0. To purchase and sell goods, wares, merchandise, effects, and *^^^* *^'^^'^- things necessary or convenient for carrying on the business of the new o-oods for coy in South Africa. company. C. To appoint, and at his discretion to remove or suspend, such Appoint managers, secretaries, clerks, servants, and other employes of the new "^^^"^f*'' coy for permanent, temporary, or special services, as such attorney may and confer from time to time think fit, and to vest in them, and direct to them, po'^^^s on such of the powers hby conferred on the sd attorney as he may think expedient, and from time to time to determine their duties, and fix their salaries or emoluments. 7. To pay into and draw upon any bank or banks, individual or Pay moneys individuals, all moneys for the time being standing to the credit of the 7*° ^^^ ^^^ , ° . draw same, new coy, or which the new coy may be entld to receive and to hold, and use the same for the purposes of the new coy. 8. To draw, subscribe, indorse, and negotiate all cheques, bills of Draw, exchange, promissory notes, bills of lading, and other negotiable and i^{i°^'*£' '' merchantable instruments payable or receivable by or for the purposes of the new coy. 9. To demand and receive all and every sum and sums of money, Demand and goods, chattels, and efl'ects due and owing or belonging to the new coy receive in , and upon receipt thereof to give and execute effectual releases goods, and and discharges for the same. P"^^ receipts m 1 11 ^^^ same. 10. To commence and prosecute, and to defend, compound, and Commence abandon all actions, suits, claims, demands, and proceedings in relation and defend to the ppty of the new coy for the time being, or otherwise, in relation ^^ ^°^' °' to the affairs of the new co}' in . 11. To adjust, settle, compromise, and submit to arbitration all Compromise, accounts, deeds, claims, disputes, and matters which may subsist or '^*^;' ^J^^iona arise between the new coy and any person or persons in . 734 TOWERS OF ATTORNEY. Chap. XIII. Form 492. Carry into effect agree- ments of company. Use com- pany's seal. Enter into and execute agreements, deeds, iSrc. Conform to directions of company. 12. To carry into effect any agreemts under the sale, or otherwise binding on the new coy, whether made by the sd attorney on the new coy's behalf or otherwise. 13. To affix the official seal of the now coy for to any deed, con- tracts, or other instruments to which it may be, in the opinion of such attorney, desirable to affix such seal in . The impression of the sd seal is in the margin hereof. 14. To enter into, make, sign, and do all such contracts, agreemts, receipts, payments, assignments, transfers, conveyances, mortgages, releases, assurances, instruments, notices, and things as may, La the opinion of the sd attorney, be necessary or convenient for carrying on the business of the new coy in . AlST) IT IS HBY DECLARED that, &C. \_Declaration and proviso as in Form 490, supra.'\ In "WITNESS, &C. Power //-ow an Englishman going Abroad ; an Agreement to he carried out. of send Form 493. ^^ ^^^ to whom these presents shall come, I, - greeting : Whereas [recital of agreemt] : And "whereas I am about to proceed to S., as provided by the sd agreemt as afsd, and am desirous of appointing an attorney in manner hnfter appearing. No'w THESE PRESENTS "WITNESS that I, the sd A., do hby appoint B., of , to be my attorney, in my name and on my behalf to manage my affairs in so far as the same are or may be directly or indirectly connected "with or arising out of my connection with the sd coy, and for that purpose to do all such things as my sd attorney shall in his absolute discretion think expedient in my interest ; and without pre- judice to the general powers hnbefore conferred, I expressly declare that m^' sd attorney shall have power to do any of the following things, that is to say : — 1 . To act on my behalf in relation to the sd agreemt, dated the day of , and to enforce the carrying into effect by the coy of its obligations thereunder. 2. To accept the allotment of shares in the capital of the coy as provided by the sd agreemt, and to receive all dividends payable in respect thereof, and to give valid receijits for the same. 3. To sell or otherwise dispose of and deal with all or any of the sd shares for any kind of conson, and upon any terms whatsoever, and to give valid and effectual receipts for any moneys or other conson payable or receiva))lo in resi)ect thereof. 4. To bring, prosecute, conduct, compromise, or abandon any actions or proceedings. FORMS. 735 5. To make any compromises or arrangements.^' 6. To vary such agreemt, or to make any further or supplemental or substituted agreemt or agreemts. 7. To execute and sign all deeds, notices, protests, and documents. 8. To invest and deal with any moneys belonging to me. And it is iiby declared that these presents shall be irrevocable for the period of twelve calendar months from the date hereof, and thereafter the same shall remain in force until duly revoked, and that the sd attorney in exercising any of the sd powers conferred on him shall, &c. See Form 490. Form 493. Power by Mine Owner going Abroad to concur in convert iny Partnership Business into a Company. of To ALL TO WHOM THESE PRESENTS SHALL COME, A., greeting : Whereas the sd A. is carrying on business in partner- ship with B. and C. at and elsewhere, under the style or firm of A., B., C, and Co. : And whereas the business of the sd partnership firm is that of colliery owners : And whereas it is proposed that the sd partnership undertaking, and the assets and liabilities thereof, shall be transferred to a joint stock coy to be registered with limtd liability under the Cos Acts, 1862 to 1890 : And whereas the sd A. is about to go abroad, and desires to make the appointment hnfter expressed. Now these presents witness that the sd A. doth hby appoint N., of , to be the attorney of the sd A., in his name and on his behalf to concur with the sd B. and C. in arranging the terms and conditions on which, and the manner in which, the sd undertaking shall be transferred to such coy, and to carrj^ out the arrangement so made in such manner as to the sd attorney in his absolute discretion shall seem expedient. And it is hby expressly declared that without prejudice to the general powers hnbefore conferred on the sd attorney, such attorney shall have power in the name and on behalf of the sd A. to do all or any of the following things, that is to say : — 1. To arrange the terms of the memdm and arts of asson of such coy. 2. To arrange what assets and liabilities of the sd partnership undertaking shall be made over to the sd coy, and whether the lease- holds or any part thereof shall be made over by assignment or by way of sub-demise, or how otherwise, and the terms and consons of all conveyances, assignments, sub-demises, and other instruments. 3. To arrange the conson for the transfer, and whether the same shall consist of cash, shares, debenture stock, debentures, or other sends Form 494. 736 POWERS OF ATTORNEY. [ChAP. XIII. Form 494. conson, and when the transfer shall be completed, and when possession shall be given, and either with or without power of rescission, and whether the sd shares shall be freely transferable, or subject to any restrictive conditions. 4. To arrange how the sd persons shall be secured and indemnified against their liabilities under or in respect of any leases, agreemts, and contracts in relation to the sd partnership undertaking. 5. To borrow or raise money on the security of the sd premises to be applied for any of the purposes hereof. 6. To give complete receipts and discharges for all moneys, shares, debentures, debenture stock, or other conson for any such transfer. 7. To arrange as to the distribution amongst the partners of all moneys, shares, debentures, debenture stock, and other conson for the transfer. 8. To arrange with all landlords and others for their consent to the assignment or sub-demise of any leasehold premises, part of the assets of the sd partnershij) undertaking. 9. To arrange the terms for the dissolution of the sd partnership undertaking, and for the winding-up of the affairs thereof. 10. To assent from time to time to any modifications of any agreemts or contracts, or transfers, and in the exercise of any power of rescission contained therein to rescind the same. 11. To obtain legal advice, and to act thereon or not as may seem expedient. 12. Grenerally to do all such acts and things not specifically mentd as in the opinion of the sd attorney may be necessary or convenient for any of the purposes afsd. And it is hby declaeed that this power of attorney shall be irrevo- cable for the period of one year from the date hereof, and, &c. See Form 490. Power fo (nrancje Confmd to huy Property abroad, and take Possession. Form 495 ^° ^^'^ '^° wuom these miesents shall come, The Coy, Limtd, whose registered office is at , in the City of London, sends greet- ing : AVhekeas the sd coy (hnfter called the coy) was incorporated under tlio British statutes known as the Cos Acts, 1862 to 1886, as a cov limtd by shares. And whereas the coy is desirous of making the appointment hnfter contained. Now these presents witness that the coy doth hby appoint of , in the colony of New Zealand, to bo the attorney of the coy, in the nanio and on behalf of the coy to do all or any of the things following, tliat is to say : — 1 . To enter into a contract in writing with and , all of FORMS. 737 , in tlio sd colony (linfter called tlie vendors), for the pnrcliase Form 495. from the vendors of the following ppty, that is to say \^particulars~\. 2. To make such contract on the terms, so far as the same are defined, of the contract set forth in the schedule hto, and in so far as those terms are not defined, to settle and arrange the terms, and in particular to arrange that a greater proportion, or, if thought fit, the whole of the purchase-money shall be satisfied by the allotment of pd-up shares. 3. To do whatsoever may, in the opinion of the sd attorney, be requisite for the purpose of carrying out the sd contract and obtaining the title to the ppty thereby agreed to be sold, and the possession of such ppty for the coy, and in particular to sign on behalf of the coy, and issue to the vendors provisional certificates in the terms set forth in the schedule hto, and to take possession of the sd ppty. 4. To commence and prosecute, and to defend, compound, and abandon all actions and proceedings which the sd attorney may think expedient in relation to the completion of the sd contract, «S:e. \_Other Clauses.^ Power to act in tJie Transvaal Gtoi.u Mining Claims. Know all mex by these presents that I, the vmdersigned , Form 496. of , being a person of the male sex, of full age, do hby nominate and appoint , of Pretoria, in the South African Republic, to be my attorney and lawful agent, for me and in my name to apply for prospecting and diggers' licences to any government ofiicial competent under the laws of the South African Eepublic to grant the same, and for me, under such licences, to peg off and hold prospecting and diggers' claims, and amalgamated blocks of claims, water rights, and generally of mining rights and privileges, and further to apply for the amalgamation of blocks of claims, peg off in my name for me, and on my behalf to take all necessary steps to secure the amalgamation thereof under the gold law. Also to apply to the competent govern- ment authorities for the special registration of the sd claims when the time for so doing shall have arrived, and generally for any and all of the purposes afsd, to do or cause to be done all that may be necessary to secui-e and protect my interest, and to sign all applicons, petitions, letters, and documents requisite thereto as fully and effectually as I might or could do if personally present, and acting herein, and I hby promise and engage to allow, ratify, and confirm all that my sd attorney and agent may do or cause to be done under this power of attorney : In witness whereof I have hereunto set my hand and seal p. ,'3 r, 738 Form 496. this — - day of POWKTJ.S OP ATTORNEY. [ChAP. XII 1. -, in the presence of the undersigned witnesses. [By special statute there must be two witnesses.] Signed, sealed, &c. See certificate of notary public, hifm. A power of attorney as above was executed by divers shareholders of an English Gold Company at the time when it was apprehended that their property would be declared a pubUc gold field by the South African Eepublic, and the object was to secure for the company as many claims as possible, and the following declaration of trust was executed : — This Indenture made the , between the Gold Mining Company, Limited (hereinafter called "the com^jany "), of the one part, and the several members of that company who shall sign their names and aifis their seals hereto (hereinafter called "the shareholders "), of the other part : Whebeas the company is entitled to certain property in the South African Republic, known as ■ : And wheeeas it is apprehended that the said property will before long be declared a public gold field by the government of the said republic : And whereas at the request and in the interests of the company, each of the shareholders has executed in the favour of the nominee of the company a j)ower of attorney to the effect set forth in the first schedule hereto, with a view to seciuing to the benefit of the company as many claims in the said gold field as may seem practicable : And whereas the said powers of attorney were executed on the footing that these presents should also be executed. Now therefore it is hereby declared as follows : — 1. Each of the shareholders shall stand and be possessed of all claims, rights, privi- leges, and property obtained on his behalf imder the power of attorney given by him as aforesaid, in trust for the company, and shall, from time to time, and at all times, execute and do all such instruments and things as the company may require for vesting the said claims, rights, privileges, and property in the company or its nominees, and giving to the company the full benefit thereof. 2. In consideration of the premises the company shall indemnify the shareholders against all actions, proceedings, costs, charges, expenses, and liabilities whatsoever, which shall result from the execution of the said power of attorney or otherwise hov?- soever in relation to the premises. As witness, &c. Form 497. Power to act for company in South Africa. To ALL TO WHOM THESE PRESENTS SHALL COME, The A. B. Coy, Limtd (hnfter called the coy), having its registered office at , in the Citj' of London, sends greeting : Whereas the coy is a coy incorporated in the United Kingdom under the Cos Acts, 1862 to 1890, and its objects are (amongst others) to search, prospect, examine, and exj)lore coun- tries, districts, and places in South Africa and elsewhere, and more especially with a view to the discovery of openings for the profitable employment of capital, and to acc^uire concessions, grants, and con- tracts in relation to mines, minerals, chemicals, and other deposits. And whereas a copy of the coy's momdm and arts of asson is annexed hto. Anij whereas in the month of IVlarch last the coy arranged for the dispatch of an expedition, under the leadership of J. K., for the pur- pose of exploring and prospecting mines, minerals, chemicals, and other deposits in land, in South Africa, and of obtaining grants or concessions from th(* native kings or chiefs in relation thereto, and FORMS. 739 for other purposes, on behalf of the coy. And whereas the sd Form 497. expedition is now being proceeded with. And whereas the coy is desirous of making such appointment as hnf ter contained. Now these PRESENTS WITNESS that tho coy doth liby appoint C. I), of , to be the attorney of the coy, and in tho name and on belialf of tlie coy to do all such afts and things, and to execute and sign all such deeds and documents as may, in the opinion of the sd attorney, be necessary or convenient for carrying on tlie business of the coy in any part of Africa, to the intent that the sd attorney may have all such powers and discretions for exercise in any pt of Africa in relation to the sd business there as are now vested in the directors of the coy, and to represent tho coy in that respect accordingly. And it is hereby expressly declared that without prejudice to the general powers hnbefore conferred on the said attorney, such attorney shall have power in the name and on behalf of the coy to do all or any of the following things : — 1. To assume the leadership and undertake the control and manage- ment of the sd expedition, and to dispatch, control and manage any other expedition in any pt of Africa, and also in and , and if the sd attorney shall think fit to revoke the power of attorney dated the day of granted by the coy to the sd J. K. 2. To appoint any j)ersons to act as leaders, managers, secretaries, clerks, servants and emj)loyes of the coy for permanent, temporary, or special services in any pt of Africa, and to invest any such persons with such of the powers hby conferred on the sd attorney as he may think expedient, and from time to time to determine their duties, and fix their salaries or emoluments, and to remove, suspend or dismiss any person appointed under this clause, or appointed by the sd J. K. acting as such leader as afsd, or otherwise appointed. 3. To explore and search for land in any of the countries last afsd containing gold, silver, copper, or other metals or precious stones, coal, chemical deposits, pasture and farm land, or any other ppties which the coy has power to acquire therein, and to obtain any grants, concessions, or other rights or privileges, from native chiefs or kings in whose territories the sd lands or i;)pties are situate, or from any other persons, cos, states, governments or authorities, in order to enable the coy to acquire any such lands or ppties afsd, and to work, develop the same, and derive profit therefrom. 4. To purchase or otherwise acquire any real or personal ppty in the sd countries, or any of them, for the purposes of the coy, and to work, manage, exercise and develop the same, or any existing ppty or right of the coy therein, in such manner as the sd attorney shall tliink fit. To enter into agreemts for and on behalf of the coy with any native kings or chiefs for the allotment to them of fully pd-up shares of the coy in part payment of the conson or purchase-money for any 3 B 2 740 POWERS OF ATTORNEY. [ChAP. XIII. Form 497. grant, concession, rights or privileges to be obtained or acquired from any kings or chiefs in any of the countries afsd. 5. To let on lease, mortgage, charge, exchange, improve, or other- wise deal with any of the ppty afsd of the coy, and to borrow money, and to draw, accept, indorse and negotiate bills of exchange, pro- missory notes, bills of lading and other negotiable instruments. 6. To collect rents, royalties and other moneys due to the coy, and to distrain for rents and royalties in arrear. 7. To commence and prosecute, and to defend, compound and abandon all actions, suits, claims, demands and proceedings in regard to any of the ppty for the time being in any of the sd countries, or otherwise in relation to the affairs of the coy therein. 8. To adjust, settle, compromise, or submit to arbitration, all accounts, debts, claims, demands, disputes, and matters which may subsist or arise between the coy, or the sd attorney or his substitute or substitutes hereafter mentd, and any managers, secretaries, clerks, servants, or other employes of the coy in any pt of the countries afsd. 9. To carry into effect any agreemts or contracts under the seal of or otherwise binding on the coy in relation to any of the matters afsd, in exercise of any of the powers hby conferred. 10. To pay into and draw upon any bank or banks in any of the countries afsd, or any individual or individuals, firms or cos therefor, all moneys for the time being standing to the credit of the coy, or which the coy may be entld to receive, and to hold and to use the same for the purpose of the coy. 11. To contract for the sale or lease, on tribute, royalty, licence, or otherwise, of all or any of the ppty of the coy in any of the countries afsd, and to make any such sale or lease, either on conditions or unconditionally, to any person, partnership, or asson, or coy, whether incorporated or not, and to arrange the terms of sale and the price or conson, and when the purchase shall be completed, and when the ppty shall be conveyed, and either with or without power of rescission, and to convey, assign, or transfer the ppty so sold or leased. 12. To assent to any modification of any agreemt or contract for sale afsd, and in the exercise of any power of rescission contained therein, to rescind the same and resell the ppty comprised therein. 13. To retain and employ solicitors and counsel and to obtain legal advice and assistance in relation to any act, proceeding, ppty, matter, or thing to which any of the powers hby conferred shall relate. 14. To register in any land registry, or other jipty office, any con- veyances, transfers, vesting orders, or other documents, for conveying or transferring any ppty afsd to the coy, and to do all other acts and things which may be necessary or suitable for vesting any such ppty in the coy. 15. For any of the purposes afsd, to enter into, make, sign, and do all such contracts, agreemts, receipts, payments, instruments, and FORMS. 741 things as may in the opinion of the sd attorney be necessary or con- Form 497. venient. 16. Generally to do all such acts and things not specially mentd herein as may in the judgment of the sd attorney be necessary or con- venient for any of the purposes afsd. Power _/)-o^;/ English Company to cxccHti- Debenture Seen n't >/ in Cape Colony. Know all men by these presents that we, The Coy, Limtd, Form 498 of , do hby nominate and appoint , of , and of , jointly, or either of them singly, with power of substitu- tion, to be our true and lawful attorneys or attorney, in our name, place, and stead, to appear at the oiRce of the registrar of deeds of the colony of the Cape of Good Hojie, in Capetown, in the said colony, and then and there as our act and deed to declare as follows, namely : — That whereas we the sd coy have, under the powers conferred by our memdm and arts of asson, borrowed a sum of 1, on debentures issued in accordance with the law of England, under seal of the sd coy. And whereas to secure the due repayment of such sum of /., we, on the day of , have entered into an indenture or deed of trust with the in their capacity of trees for the debenture-holders, by which deed of trust it is stipulated, inter alia, that we will, with all convenient speed, and to the satisfaction of the trees afsd, give further effect to the provisions of the same by doing all such assurances and things according to the laws of the colony of the Cape of Good Hope as may be required by the trees, to vest in them the powers and autho- rities expressed by the sd trust deed to be vested in them : And whereas to carry out such stipulation we have agreed to pass a mortgage bond to be executed in accordance with the powers and authorities hby given : Our sd attorneys, or attorney, shall therefore further declare under renunciation of the benefits, non causa debitt and }io7i numeratce pecunia;, the force and effect of which renunciation we are aware of, that we the sd coy are truly and lawfully indebted to the sd , as trees for debenture-holders in our coy, and the trees or tree for the time being, in the sum of 1, sterling, arising from and being for so much money duly lent and advanced to our coy on the conditions and subject to the terms and provisions of the afsd deed of trust, dated the day of , in the year of our Lord , a copy whereof is hereunto annexed and marked A., the terms and provisions of which deed of trust shall be considered and taken to be inserted in the said mortgage bond, and our said attorney, or attorneys shall further declare that in the event of the sd trees or tree, for the 742 rowEKS of attokney. [Chap. XIII. Farm 498. thne being, under the sd deed of trust so desiring, they shall be ' entld, in lieu of and in addition to the remedies and rights given to them by the sd deed of trust, to take action in any court of law of competent jurisdiction, either in England or in this colony, or in both, to recover the sd sum of 1, sterling, or the balance thereof, and all interest due at such time upon the happening of any event which under the sd deed of trust would entitle the trees, or tree, for the time being to enter upon and take possession of the mortgaged premises, and to sell, collect, and convert into money, the same, or any pt thereof, and for the security of the afsd sum of /., and interest thereon ; and for the course of recovering the same, we, the sd coy, empower our attorneys, or attorney, to mortgage and hypothecate, and further to appoint generally all the ppty of us the sd coy such as we are already, or may at any time or times hereafter become, possessed of, moveable and immoveable, personal and real, without exception, and submit them all and the choice thereof to constraint and execution as the law directs. The above is based ou a form settled by the Attoiuey- General of the colouy not long since. Vov/En/roiii Mining Owner abroad, fur prvmotuKj Company 111^: 'Ei'ts shall come, A. B. of, &c., sends ' greeting: Whereas A. B. is the registered proprietor in of certain mining claims, whereof the following are the particulars, namely : The exclusive right to, &e., &c., granted by, &c, [Instru- ment or licence giving the concession.] And whereas G. D. of, &c., is about to proceed to England, and A. B. has determined to appoint him to be his attorney for the purposes and in manner hnfter appear- ing. Now THESE tresents WITNESS that A. B. doth hby appoint C. D. to be tlie attorney of A. B., in his name and on his behalf to do all or any of the things following, that is to say : — 1 . To contract for the sale of the sd mining claims on such terms as 0. 1-). may think lit. 2. To make any such sale, cither on conditions or unconditionally, to any person, or partnership, or asson, or coy, whether incorporated or not. .'i. To arrange tlio terms of sale, and, in particular, the imao or conson, and whether the same shall consist of cash, shares, debentures, debenture fltoek, or other conson, and when the purchase shall be .1^^.- .i/.T-iOl roKMS. 74.'i comi')leted, and wheu the ppty shall be couveyed, and oitlicr with or Form 499. without power of rescission. ~ -4; To execute all conveyances, transfers, and other assurances for carrying the sale into effect. 5. To promote any coy for the purpose of its acquiring the sd ppty, and, in particular, to subscribe for any shares or securities of any such coy, and to pay, or contract to pay, the whole or any part of the expense of forming and floating any such coy, and of placing the capital thereof, and to grant, or agree to grant, to any promoter any remuneration whether in cash, shares, or otherwise, for services ren- dered, or to be rendered, in relation to any such co}', and to give any guarantee as to the placing or subscription of any such coy's capital or securities. 6. To borrow or raise money on the security of the sd premises, to be applied for any of the purposes afsd. 7. To give complete receipts and discharges for all moneys, shares, debentures, or other conson for any such sale, or borrowed or raised as afsd. •' 8. To assent to any modification of any agreemt or contract for sale, and, in the exercise of any power of rescission contained therein, to rescind the same, and to resell the premises. 9. To take proceedings to enforce or rescind, or obtain damages for the breach of any such agreemt or contract, and to compromise, settle, :"10:t. discontinue, or abandon any such proceedings. 10. To do all such other things as may seem expedient in the exercise of any of the above powers. ■ And it is hereby declared, that the sd attorney shall be at liberty, iii 'cdntracting for the sale^of the sd mining claims, or in promoting any coy for the purpose of its acquiring the same, to make stipulations for his own remuneration out of the conson for such sale or acquisition, whether such conson shall be in cash, shares, debentures, debenture stock, or otherwise, and either directly with such coy, or with any person, persons, syndicate, or other coy, which may promote such coy, but so nevertheless that such remuneration shall not exceed p.c. of the principal sum or nominal value of the shares, debentures, ... or other conson receivable by the sd A. B. or his assigns in respect of such sale : And also, that the sd attorney may accept office as a - director of any such coy, at such remuneration for his services, and on such terms as he may arrange : And it is hereby also declared, &c. [as in Form 488, supra, p. 726]. In witness, &c. If the c'lttoruey is to be at liberty to obtain remuneration as above, express power must be given, for, being an agent, he cauuot otherwise make any such bargain. See supra, p. 436. Sometimes the power of attorney fixes a reserve price, and says that the attoi-ney may get anything he can beyond that. See also the next following form. 744 POWERS OF ATTORNEY. [ChAP. XIII. Power from Shareholder for Attorney to appoint Proxies at Meetings. The Coy, Limtd. Form 500. Know all men by these presents, that I, A. B. of, &c., a share- holder in the above-named coy, do hby appoint C. D. of, &c. to be my attorney, and in my name and on my behalf to appoint any person or persons to act as my proxy at any general meeting of the above- named coy which may be held before the day of , 18 — , and at which I shall not be present in person or by a proxy appointed under my own hand ; and I authorize my sd attorney, at his discre- tion, to revoke any appointment made by him under these presents ; and I declare that this power of attorney shall be operative only up to and including the sd day of , 18 — . In witness, «S;c. Special power must, it is conceived, be found in the articles to authorize such an appointment. Form 501. To all to whom these presents shall come, I of the City of Notary's certificate of execution. London, notary public, duly admitted and sworn, do hby certify that the foregoing power of attorney, was signed and sealed, and in due form of law delivered, on the day of the date hereof, by the constituent therein named and described, before me the sd notary, and in the presence of , of , and , of , subscribing witnesses thereof, in faith and testimony thereof I have hereunto set my hand and seal. Dated in London this day of , and in the year of our Lord 1890. Form 502. To all to whom these presents shall come, I, A. B., notary public, ^ , ; duly authorized, admitted and sworn, residing and practising in the certificate of city of , in the county of , in the United Kingdom of Great declaration. Britain and Ireland, do hby certify that C. D., the person named in the paper, writing or declaration hereunto annexed, did duly and solemnly declare to the truth thereof before mo on the day of the date tlioreof, and that the name C. D. thereto subscribed is of the proper handwriting of the sd C. D. In testimony whereof I have hereunto subscribed my name, and affixed my seal of office, this day of , in the year of our ]jord . (Heal) A. B., Notary Public. FORMS. 745 This is the paper, writing or declaration referred to iu my certificate Form 502. hereunto annexed. A. B., Notary Public. I, A. B., of, &c., manager of the N. Mining Coy, Limtd, do solemnly Form 503. and sincerely declare that I was present and did see the common seal — — ] — of the sd N. Mining Coy affixed to the paper, writing or power of as to due attorney hereunto annexed in the presence of , four of the direc- execution. tors of the sd co}" and me, this declarant, by order of the directors of the sd coy, and that the names and thereto subscribed as the witnesses thereto are of the proper handwriting of this declarant, and of the sd resply, And I make this solemn declaration conscien- tiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1835. Declaked, &c. 746- [Chap. XIV. DEBENTURES & DEBENTURE STOCK. CHAPTEE XIV. INTRODUCTORY NOTES. Names. No. of Page. Bearer Debentures 755, 768, 784 Bills of Sale Act| 749, 782 Bonus Shares 808 Borrowing Powers 783, 788 Certificates 768 Contract to take, Specific Performance 791 Coupons 755, 81 1 Debentures (Kinds of) 753 Debenture Stock (Creation of) . . 751, 786 Debenture Stock (Kinds of) 753 Directors' Powers to Borrow 788 Directors (Subscribers for Debentures) 810 Discount (Issue at) 807 Drawings 769, 772 Floating Charge Ti'^, 776. Irregular Issues 790, 792, 807 Majorities (Powers of) 801 Meetings of Holders 801 Mortgage Debentures 769 Naked Debentures and Debenture Stock 793, 815 Negotiability 755 Perpetual 769, 784 Names. No. of Page. Power of Directors 788 Power to Issue 783 Premiums on Redemption 771 Priorities 793 Proving in Winding-up 761, 793, 818 Receiver 815, 816, 826 Registered Debentures (Object of) . . 754 Registered Debentures with Coupon to Bearer 755 Remedies of Holders, &c 815 Reserve Capital (whether chargeable) 787 Resolutions as to Issue 789 Scrip Certificates 758, 760, 792 Specific Performance 791 Stamp Duties 812 Statute of Frauds 810 Terminable Debenture Stock 769 Time for Payment of Debentures 769, 785 Transfer of Debentures and Deben- ture Stock 809 Trust Deeds 769, 776, 778 Uncalled Capital 786, 796 What is a dobentur*. The torm used in England ooiituries ago in Parliament rolltt and Acts. Debentures. What is a debenture ? The word "debenture," -wliich. has somehow crept into the EngUsh language, does not appear to admit of any accurate definition. Per Grove, J., British India, Sfc. Co. v. Commissioners of Inland Mevemie, 7 Q. B. D. 168 (1881). Tlie torm debenture is by no moans a new one. It appears to have been in common use in England more than five centuries ago. Thus the Parliament Rolls of 3 Hen. V. (1415) mention a petition by a citizen of London praying that he might be paid for certain goods supplied to Henry IV., and alleging tliat the commission appointed to investigate claims and provide for payment of that king's debts, " «<; voUlent paicr la nommc sitis (lit a (lit suppliant dtic, a cause t/il ne dcmonstrc pas bilks dc Debcntur, desouth la seal du clerk (hi -ipiccre (In dil nadgairs Roy [i.e., IIoi. i/'.], lesmoiffnautitz la dctic suit dit.^' The word is used m the Pastou Letters, 1455: — " By a debentur made to the said Falstolf with him remaining." INTKODUCTUliV: NOTES. ; 747 So also iu au Act of 12 & 13 Edw. IV. (1472) in relatiou to the Staple of Calais, it was amongst other things enacted, " that every persone havyng Debentours under the Seal of the said Staple" should hring them iu ; and iu an Act of Edw. IV. (1175) it was recited that " grete multitude of assignraentes as well by letties Patentes of the Kyng, Tailles, Debentours, and other billes levyed and rered at the receijit of his [the King's] Exchequer or otherwise ... as well for the Kyng's household and warderobe as for many and dyvers sommes of money have been made." In 9 Anne, c. 23 (171*0, provision is made for the issue of debentures to bo signed by certain Commissioners, and to bear interest at six per cent, per annum. And see subsequent uses of the term mentioned iu Zcty v. Abcrcorris Co., 37 C. D. 264, n. ** What the ooiTect uieauiug- uf debenture is I do not kiKjw. I do uot Correct mean- find anywhere any precise definition of it. AVe know that there are [°^ °* *^® various kinds of instruments commonly called debentures. You may have mortgage debentures, which are charges of some kind on pro- perty. You may have debentures which are bonds . . . you may have a debenture which is nothing more than an acknowledgment of indebtedness. And you may have a thing like this which is some- thing more ; it is a statement by two directors that the company will pay a certain sum of money on a given day, and will also pay interest half-yearly at certain times, and at a certain place upon the production of certain coupons by the holder. I think any of these things which I have referred to may be debentures within the Act " [Stamp Act, 1-870]. Per Lindley, J., British India, ^'c. Co. v. Commissioners" of Inland Revenue, 7 Q. B. D. 172. "The term itself imports a debt — an acknowledgment of a debt — and speaking of the numerous and various forms of instrumehts which have been called debentures, without anyone being able to say that the term is incorrectly used, I find that generally — if not always — the instrument impoi-ts an obKgation or covenant to pay. This obligation or covenant is, in most cases at the present day, accompanied by some charge or secm-ity." Per Chitty, J., Edmo7ids v. Blaina Co., 36 C. D. 219 (1887). "I cannot find any precise legal definition of the term; it is not, either in law or commerce, a strictly technical terai, or what is called a term of art." Per Chitty, J., Levy v. Ahercorris Co., 37 C. D. 264 (1887). It has been said that any document which creates a debt, or acknow- ledges it, is a debenture (37 C. D. 264) ; but obviously this definition is too wide, seeing that it woidd include bills of exchange and pro- missory notes of all kinds, and deeds of covenant, and many other documents which no one would think of calling debentui'es. No doubt et}-mologically the term might property be applied to such instruments, but etjTnological propriety is no sure giude in interpretation ; as the term debenture is not a technical one, it is to be understood iu its- popular sense, and in that sense it does not include every document which creates or acknowledg-es a debt. 748 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Conflict of The elastic cliaiacter of the term " debenture " in coiniuou parlance definitions. „ ,i n n • appears ironi the loUowmg : — (a) As a general rule, the teiiu is not applied to an instrument unless it purports to be a debenture, but this rule is frequently dis- regarded, e. g., see Gardner v. London^ Chatham and Dover Ry. Co., 2 Ch. 201 ; Enthoven v. Hoyle, 21 L. J. C. P. 100 (1852) ; and it has been held that an instrument may be a debenture within the meaning of s. 17 of the Bills of Sale Act, 1882,. although it does not purport to be a debenture. Levy V. Abercorris Slate Co., 37 C. D. 360. (b) As a general rule, a debenture is one of a series, but this rule is not without many exceptions, and a single debenture is not altogether uncommon. Levy v. Abercorris Slate Co., supra; Rnbson V. Smith, (1895) 2 Ch. 118. (c) The term debenture is not confined to instruments issued by companies ; e. g., clubs issue debentures, and even individuals have done so, e.g., the Tichborne debentures. (d) In the case of a company a debenture is usually under seal, but not always. See British India, ^c. Co. v. Commissioners of Inland Revenue (7 Q. B. D. 165), in which case the debenture was signed by two directors on behaK of the company ; and club debentures are very commonly under hand only. (e) A debenture usually provides for the pajTuent of a specific prin- cipal sum at a specified date, but there are millions of pounds of what are called perpetual or permanent debentiu'es, viz., debentures payable not at any fixed date, but in the event of a winding-up, or of notice b}^ the company of its intention to pay off the amount secured. (f ) A debenture usually provides for the pajinent of interest at a specified rate, but sometimes it carries no interest, or the amount of interest payable varies with the profits. (g) Generally the interest is payable unconditionally, but sometimes it is only payable out of profits, or subject to conditions. (h) A debenture generally contains a charge on the undertaking of the company or some part of its property, but large amounts of debentures, especially in Scotland, have been issued without any such charge. Edgington v. Fitzmaurice, 29 C. D. 459. (i) Very commonly debentures are secured by trust deed vesting property in trustees upon trust if the company makes default to sell and pay off the debentures, but vast sums have been lent on debentures not so secured. The term " de})enture " is used in several Acts of Parliament, e.g., in the Stamp Acts, 1870 and 1891. On these Acts it has been held that an instrument purporting to be a debenture is to be charged as Buch, although it might often have been classed as a promissoiy note. INTRODUCTORY NOTES. 749 British India, ^c. Co. v. Commissioners of Inland Revemte, 7 Q. B. D. 165. The word "debenture" has also received legislative recognition in s. 17 of the Bills of Sale Act, 1882, and it has been held that an instru- ment not purporting to be a debenture may be a debenture within the section. Levy v. Ahercorris Co., 37 CD. 260 ; Richards v. Overseers of Kidderminster, (1896) 2 Ch. 212. The word also appears in the Directors' Liability Act, 1890, and in other statutes and in Eules of Court: see Companies (Wiudiug-Up) Act, 1890, s. 4, sub-s. 6; Com- panies Winding-Up Rides, 1890, Form 33 ; Preferential Payments in Bankruptcy Amendment Act, 1897. Accordingly, it is frequently necessary to determine whether a parti- cular instrument is a debenture within the meaning of a statute or legal document, but this is a much easier task than to define the meaning of " debenture." Debenture Stock.* The question "What is the difference between debentures and de- Difference benture stock?" is one of frequent occurrence. The difference is ^^t^'^f^ •^ debentures that — and debenture (1) "Debenture" is the name given to a contract, usuall}' imder ^tock. (2) Debenture stock is the name given to a debt or obligation of a special character. Hence the two things cannot be compared ; they differ as much, inter se, as a mortgage deed and a mortgage debt. But if the question be asked "What is the difference between the position of a debenture Difference ii holder and that of a debenture stock-holder ? " the answer is that the position of 1io1q.6ps terms "debenture holders" and "debenture stock-holders" do not necessarily import any substantial difference of position. Thus — {\) As to time for payment. — Money secured by debentui'es is generally made payable at a fixed date, say five, ten, or twenty years, and although so-called perpetual debentures are some- times issued, they are exceptional. On the other hand, de- benture stock, though sometimes made payable at a fixed date, is more commonly made payable only in the event of a winding up, or of default by the company in paying the interest for, say six months, but with power for the company to redeem after a term, say of ten or twenty years, on giving six months' notice of its intention to redeem. * When the first edition of this work was published in 1877, the issue of debenture stock by companies incorporated under the Act of 1862 was almost unknown, but in that edition and the subsequent editions the requisite forms for the constitution of debenture stock by such companies were given, and now the issue of debenture stock has, with these companies, become the favoxirite mode of raising money. 750 DEBENTURES ANt) DEBENTURE STOCK. [ChAP. XIV. Debenture Htock under Companies ClauHCH Act, 18C3. (2) As to jmyment of interest. — There is no practical difference. In each case the interest is usually paid by warrant or on presentation of coupons issued with the debentures or with the stock certificates. (3) As to security. — In most cases the secui'ity is practically the same in substance, but the form slightly differs. Debentures are very commonly secured by a charge, the creation of which appears in the debentures themselves, and sometimes by trust deed, and frequently by both ; whereas de])enture stock is almost always secured by a trust deed, which is also the very instrument which constitutes the stock. (4) The mode of transfer of both is substantially the same — if to bearer, by delivery, and if to registered holder, by instrument •- in writing. But in the case of registered debentures the transferee keeps the original debenture ; whereas in the case of registered debentiu-e stock the transferor's certificate of title is given up to the company to be cancelled, and a new certificate is issued to the transferee just as in the case of a transfer of shares. (5) A debenture is always for a fixed simi, say 100^., of which the total amount to be secured b}" the series is a multiple and the fixed simi is generally (but see p. 821, note) indivisible, whereas debenture stock, unless the regulations othei'wise provide, can be transferred in any amounts, e.g., 5501. or 711. or 131. 10s., and several small holdings can be consolidated into one large holding, a single certificate being obtained for the aggregate amount. But very commonly the regulations provide that a fraction of 5/. or 10/. shall not be transferable. See p. 879, infra. Investors very commonl}^ prefer a single certificate of title to a heavy bundle of debentures. No doubt it is possible so to frame a debenture that a fraction of the amount thereby secured shall be transferable, and so that several debentures may be consolidated into one ; but in such cases it is necessary for the company to issue new debentures or a new debenture, and this involves the jiayment of special stamp duty, whereas a debentui-e stock certificate is exempt from stamp duty, at any rate if framed in the ordinary way. Debenture stock of a comi^any under the Companies Act, 1862, is essentially different from debenture stock issued by railway and otlier companies under the Companies Clauses Act, 1863. Debenture stock issued under the Act of 1863 is a security of an anomahnis character, and partakes more of the character of preference stock, with a right to a receiver in certain events, than of that of a mortgage debt. It is irredeemable unless Parliament otherwise enacts, the interest being payalde only out of profits ; and though the deben- ture stockholders can obtain tlie appointment of a receiver if the interest gets into arrear, they cannot realise their security by fore- INTRODUCTORY NOTES. Vol closure or sale. Nevertheless, they rank before all ordinary creditors as against the undertaking and the income thereof. Attree v. Ilatve, . 9 C. Div. 337 ; Gardner v. L. C. Sf D. Ry. Co., 2 Ch. 201. Debenture stock issued by companies under the Act of 1862 differs Debenture from the above in various respects, and in particular the security ^^J' f?o^^ therefor is in most cases more effectually cf)nstituted. The usual mode m * d d of constituting- and securing the debenture stock is by a trust deed as belovr, whereby the company ( 1 ) covenants with trustees that, in certain events, the company will pay certain principal sums, called the deben- ture stock, to the registered holders, and will pay interest thereon in the meantime ; (2) convej-s property to the trustees upon trust, in case the company make default, to realise and pay off the debenture stock and interest. And the deed provides for the issue of certificates of title to the persons who become beneficially entitled to the stock, for tl:vp keeping of a register of their names and of all transfers, and, some- times, for the issue of certificates to bearer. When debenture stock is issued on the lines above indicated, the How security stockholders obtain a security which can, if necessary, be effectually ^^^forced. enforced by the appointment of a receiver and manager, by judgment for pajonent of the principal, and by realisation of the securities and distribution of the proceeds. Debenture stock is usually made payable as follows : — When made 1. At the end of a fixed term of years, sa}', five, ten, twenty, thirty ^^^^ ^' or fifty years, coupled with a provision accelerating the time for pajinent in the event of a winding-up, or of the security becoming enforceable [infra, p. 877]. And where the term is not very short it is not uncommon to reserve to the company power to redeem at any time during the term at a premium, say on six months' notice to any stockholder, or 2. In the event of a winding-up or of the security becoming enforce- able but with power for the company after a term of, say, ten or twenty years, to redeem at a jiremium on six months' notice either in accordance with drawings or otherwise. The foregoing descriptions are called terminable debenture stock. 3. In the event of a winding-up or of the security becoming en- forceable, but not otherwise. This is commonly called perpetual stock. As to the redemption price, stock is generally made payable at par. Redemption but if the company is given power to redeem on notice, this redemp- P"<^*^- tion price generally includes a premium, e.g., 105/. or 1107. jier cent. Moreover, it is not uncommon to provide that if the stock becomes payable b}' reason of a resolution for a voluntary winding-up being- passed, the stock shall be paid off' at a premiimi ; and the London Stock Exchange authorities sometimes insist on such a pro\'ision to protect the stockholders by securing to them some compensation if prematurely paid off. The stockholders have not, in general, any direct contract with the Debenture 752 DEBENTURES AND DEBENTURE STOCK. [ClIAP. XIV. stock oertifi- oates. Transfer. Irregularly eonatituted debenture stock. company ; the contract is between the company and the trustees, but the stockholders are the persons beneficially entitled to the benefit of that contract, and their title is evidenced by certificates under the company's common seal. Of course, a court of Equity recognizes their equitable rights, and at their instance enforces the obligations imposed on the company by the deed. Empress Engineering Co., 16 C. Div. 125; Gandy v. Gaiidy, 30 C. Div. 57. Forms 716, 717. The stockholders' rights are usually made transferable by instrument in writing, registered with the company, and sometimes provision is made for the issue of stock certificates to bearer. As to debenture stock created under resolution or articles of associa- tion — As already mentioned, the usual mode of constituting and securing (^benture stock in the case of companies under the Act of 1862 is by deed ; but a few companies, in order to avoid the trifling stamp duty which attaches to a covenant or charge (2s. Qd. per cent.), have pur- ported to create debenture stock by resolution, and have then offered it for subscription and issued unstamped certificates to the allottees without the execution of any trust deed or contract constituting a stock. In most of these cases a copy of the resolution is endorsed on the certificate, and the certificate states that the person named therein is entitled to so much stock and to the benefit of the resolution, and that the company will duly observe the same. Now, such a resolution does not, in fact, create anything. It is not like a resolution creating debenture stock under the Companies Clauses Act, 1863, or like a resolution creating shares, which by virtue of the statutes brings the stock or shares into existence — in^ contemplation of law. A resolution in the case of a company under the Act of 1862 pur- jiorting to create debenture stock and declaring that it is to rank as a charge on the undertaking, and is to be issued subject to specified regulations as to transfer redemption, &c., merely operates as an authority to the directors to constitute the stock, and that authority they should exercise by constituting the stock by trust deed. If instead of so constituting the stock the directors offer the so-called stock for subscription and issue to the allottees certificates stating that they are respectively entitled to so much thereof, and declaring that the stock is issued on the terms of the resolution, it is apprehended that the certificate is in effect a debenture or mortgage, and liable to ad valorem duty accordingly, and that each siibsequent certificate in respect of the same stock is liable to ad valorem duty as a substituted security. The mere fact that the temis of a contract or debenture are expressed in the fonu of a certificate cauum, and thus simjilifying the title to the debentures and relieving the company from trouble and disputes. (3) The advantage of having a record of the names and addresses of the holders for the time being of the debentures, and of thus being able to communicate with them if it bo necessary to redeem, or pay off, or otherwise d(^al Avitli the dc'bentures. (4) The advantage of being able to deal with the registered holders as the owners of the debentures, without going into their title on each occasion. (5) The advantage of being able to issue a security charged on the assets of the company, and at the same time involving the least possible interference with the company's business. The fomi of registered debenture now generally used was drafted by the writer for the third edition of this work (1884). Registered Debentures with Coupons to Bearer. Sometimes debentures are so framed tlmt the princijDal moneys are Registered payable to the registered holder, whilst the interest is payable to the ^th'^coupons bearer of coupons annexed. See Form 504, note to clause 2. The chief reason for using this form is, that many persons who are unwilling to invest in a security payable to bearer have no objection to, or prefer the interest being made payable by coupon to bearer. Such an arrangement facilitates the payment and collection of the interest, and at the same time does not expose the debenture holder to any material risk. Debentures to Bearer. In framing a debentui-e to bearer the object of the draftsman is, as To bearer, far as possible, to endow it with the characteristics of a negotiable instrument, and in particidar — 1. To make it transferable, free from equities between the company and the person to whom it is issued. 2. To avoid the necessity for any written transfer. 3. To render the delivery of the debenture and any interest coupon a good discharge to the company. 4. To enable the bearer to sue the comjmny in his own name. 5. To ensure a good title to any person who acquires the debenture bond fide for valuable consideration, notwithstanding any defect in the title of the person from whom he acquires it. Where a debenture to bearer, or to the order of a specified person, falls within the definition of a promissory note in s. 83 of the Bills of Exchange Act, 1882, it may, though under seal (s. 91 (2)), operate as a promissory note, and be negotiable accordingly. But in most cases debentiu-es contain pro\dsions which prevent their operation as promis- sory notes. If, however, debentures to bearer were held to be npgotiabh' l)y 3 c2 '56- DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Are deben- tures to bearer nego- tiable by the law merchant ? Views of Blackburn, J. Contrary view of Exchequer Chamber and House of Lords. the law merchant, the draftsman's task would be simple enough ; he would only have to make the instrument in terms payable to bearer, and the characteristics above referred to would be annexed by imph- cation of law. And from inquiries which the writer has made he has reason to beHeve that there is now a general custom to treat such instruments as negotiable, and that they pass from hand to hand accordingly ; and he is jiermitted to state that the following bankers consider that this custom exists, and act on it : — Messrs. N. M. Roths- child and Sons ; Messrs. J. H. Schroder and Co. ; Messrs. Glyn, Mills, Currie and Co. ; London and Westminster Bank, Limited ; London and County Bank, Limited ; National Provincial Bank of England, Limited ; Union Bank of London, Limited ; London Joint Stock Bank, Limited; Lloyd's Bank, Limited; Parr's Bank, Limited; and the Capital and Counties Bank, Limited. As to the operation of the law merchant, it is a well-established common law riile that when a general custom is proved to exist as a fact, it is adopted by the common law and becomes part of it. The negotiability of bills of exchange, of bank notes, of cheques, of circular notes, of exchequer bills, and of foreign bonds to bearer, has been established in this way ; but up to the present time there has been no judicial decision recognising a similar negotiability in the case of debentures to bearer. The contrary was indeed held in Crouch v. Credit Fonder (1873), L. E. 8 Q. B. 374. In that case the debenture in question had been stolen, and the plaintiff derived title from the thief ; he was therefore not entitled to recover vmless the debenture was negotiable. It was tacitly admitted at the trial that such instru- ments were treated as negotiable, and it was pi-oved that the plaintiff gave value for the debenture without notice, and the'jur}' found a verdict in his favour. The Court, Blackburn, Quain, and Archibald, JJ., set aside this verdict, and entered a verdict for the defendants on the ground, amongst others, that as the debenture was an English instrument made in England, it coiild not be rendered negotiable by custom ; "for as the instruments themselves," said the Court, " are of recent introduction, it can be no part of the law mer- chant, that is to sa}^, of the ancient law merchant which forms jiart of the laAV, and of which the law takes notice." Per Blackburn, J., Avho delivered the judguumt of the Court. Tliis view of the law was manifestly unsound, and it was not long (1875) >)ofore it was emphatically disclaimed in the Exchequer Chamber {Goodwin V. Robarts, L. P. 10 Ex. 337), the Court consisting of Cock- buiTi, C. J., Mellor, Lush, Brett, and Lindley, JJ. In that case, the instrument \inder consideration was scrip to bearer for a foreign government bond. It was proved that it was by custom treated as negotiable, })ut it was argued, on the authoi-ity of the last-mentioned case, that, as the custom was modern, it could not have effect. The Court, however, held thai the custoiii, thougli modern, was effective, ami tlio scrip nogotiable ; and tlio following luminous passage from INTRODUCTORY NOTES. 757 tlie judg-mont delivered I)}' Cockliuiii, C J., deals with, and effectually discloses of, the argument advanced by Blackburn, J., in Crouch v. Credit Fonder, siij))-a. " Having," said the Chief Justice, "given the fullest consideration to this argument, Ave are of opinitm that it cannot prevail. It is f(junded on the view that the law mercliant thus referred to is fixed and stereotj-ped, and incapable of being expanded and enlarged, so as to meet the wants and requirements of trade in the varying circumstances of commerce. It is true that the law merchant is sometimes spoken of as a fixed body of law forming part of the common law and, as it were, coeval with it. But, as a matter of legal history, this view is altogether incorrect. The law merchant thus spoken of with reference to bills of exchange and other negotiable securities, though forming part of the lex mercoforia, is of comparatively recent origin. It is neither more nor less than the usages of merchants and traders in the different departments of trade, ratified by the decisions of courts of law, which, upon such usages being proved before them, have adopted them as settled law with a view to the interests of trade and the public convenience, the Court proceeding herein on the well-known principle of law that, with reference to transactions in the different departments of trade, courts of law, in giving effect to the contracts and dealings of the parties, will assume that the latter have dealt with one another on the footing of any custom or usage prevailing generally in the particidar department. By this process, what before was usage only, unsanctioned b}' legal decision, has become engrafted upon or incorporated into the common law, and may thus be said to form part of it." " When a general usage has been judicially ascer- tained and established," says Lord Campbell, in Brandao v. Barnett, 12 CI. & Fin. 787, "it becomes a part of the law merchant which courts of justice are boimd to know and recognize While we cpiite agree that the greater or less time during which a custom has existed may be material in determining how far it has generally pre- vailed, we cannot think that if a usage is once shown to be universal it is the less entitled to prevail because it may not have foi-med part of the law merchant as previously recognized and adopted by the Courts. It is obvious that such reasoning would have been fatal to the negotia- bility of foreign bonds which are of comparatively modern origin, and yet, according to Gorgier v. Mieville, are to be treated as negotiable. We think the judgment in Crouch v. The Credit Fancier {supra) may weU be supported on the ground that in that case there was substan- tially no proof whatever of general usage. We cannot concur in thinking that if proof of general usage had been established it would have been a sufficient ground for refusing to give effect to it that it did not form part of what is called 'the ancient law merchant.' " This decision was affirmed by the House of Lords (1 Ajip. Cas. 476), partly on the ground that negotiability was established, and partly on the ground of estoppel. Lord Caijus thought that the doctrine of estoppel was applicable, as 758 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. The retro- grade view. Rumball v. Metropolitan Bank. the instrument in effect rexn-esonted that it was negotiable — a repre- sentation which the holder was to he taken to have adopted ; hut his lordship said, ' ' I have no hesitation in saying that I also concur in what I understand to have been the ratio decidendi of the Coui-ts helow in this case itself." The ratio decidendi of the Courts helow was that the custom of merchants in England is still competent to add further instruments, whether English or foreign, and whether of recent introduction or not, to the list of instruments negotiable by the law merchant and to be recognized as such by the common law. Nevertheless, there are still some persons who cling to the view emmciated by Blackburn, J., viz., that an English instrument cannot become negotiable by modern mercantile custom. The proposition which commends itself to these persons is that the custom of merchants has by some imexplained means now become incompetent to add any further English instruments to the list of negotiable securities, although it remains competent to add further foreign instruments to the list. It seems sufficient to state the proposition to show its xmsoundness. Upon what ground is such an irrational distinction to be supported and the growth of the law arrested ? Why shoidd it be held that the law merchant, which for centuries has been competent to add from tune to time Enghsh instruments to the list (e.y., bills of exchange, bank notes, cheques, excheqiier bills, &c.), has lost its power in this respect. As Cockburn, C. J., said^in the case referred to : " Why is it to be said that a new usage, which has sprung up under altered circumstances, is to be less admissible than the ustiges of past times ? Why is the door to be now shut to the admission and adoption of usage on a matter altogether of cognate character, as though the law had been finally stereotyped and settled by some positive and peremptory enactment?" There has been no such enactment, and there is no answer to this question ; and this being the case, there can, it is submitted, be no doubt that the law merchant, as part of the common law, is at liberty now, no less than in the past, to enrich itself by impressing with the qualities of negotiability, where the convenience of commerce requires it, not only foreign instruments but also English instruments. The deci- sion in Rumball v. Metropolitan Bank (1877), 2 Q. B. D. 194, is a clear authority that the list of English negotiable instruments is not closed. In tliat case the question arose as to the negotiability of scrip- certificates to bearer issued in England, and certifying that the bearer thereof woidd bo entitled to be registered as the holder of shares in an English limited company on payment of certain instalments. Tlio certificates had come into the hands of the defen- dants as holders for value, but through a fraud of the plaintiff's agent, the defendants, however, not being aware of this fraud. It was proved that tlie usage amongst ))ankers, discounters, money- dealers, and on tlie Slock Exchange, liad been for some thirty-fivo years, or less, to, treat such scrip-cei'tificatea as negotiable instru- It has now been decided (as contended in the text) — (I) That the list of English negotiable instruments is not closed ; and (2) That the debentures to bearer of a limited company are in fact negotiable by mercantile custom. Bechuanalavd Exploration Co. v. London Trading Bank, Aug. 10, 1898, 14 T. L. E. 587, Kennedy, J. To face p. 759 of '■^ Company Precedentu,'''' Part /.] INTRODUCTORY NOTES. 759 ments transferable "by mere delivery ; aud it was hold that, })y reason of this usage, the certificates had become negotiable instruments, and that the defendant was accordingly entitled to retain them, and also on the ground of estoppel. Mellor, J., who delivered the judgment of the Court, said that the first question Avas whether the case fell within the principle of the decision in Goodwin v. lioharts. "We think it does ; both with reference to the usage of the monetary world in respect of such certificates, which brings the case within the princijde of the decision of the Court of Exchequer Chamber, which principle was confirmed by the Lord Chancellor in the House of Lords, and also on the other ground on which the decision of the House of Lords proceeded — estoppel." And when next the question arises as to whether debentures of English companies are within that charmed circle of negotiability by custom, it will assuredly not be possible to answer that the custom is to have no effect because it is of modern origin, and not part of the ancient law merchant of England. In determining whether an instrument is or is not negotiable by Cases as to custom, the material question is whether it is treated in this coimtry ^^°° ^^ ^' as negotiable, not whether it is treated abroad as negotiable. "To prove that an instriunent is negotiable in the sense required, there must be something to make it so by English law." Per Lord Esher, M. E., Picker V. London and County Banking Co., 18 Q. B. D. 518. See also Goodwin v. Rolarts, per Coekburn, J., L. E. 10 Ex. 345. In order to establish that debentures to bearer are negotiable by the law merchant, all that is required is to adduce the e\-idence of some competent witness or witnesses who can state that such instruments pass from hand to hand -^vithout investigation of title, and are treated as negotiable instruments. Thus, in London Joint Stock Bank v. Simmons, (1892) A. C. 201, the House of Lords considered that the fact that Ai-gentine Cedulas were negotiable, was sufficiently proved by such evidence. " It seems to me here it is impossible to dispute that the bonds in question were negotiable instruments." Per Lord Halsbuiy, L. C. Lord Watson considered that their negotiability was established, sajdng (at p. 212), " Each bond, according to its tenor, appears to me to represent that the document will pass from hand to hand, and that any bond fide holder will be entitled to claim fulfilment of its terms from the Buenos Ayres Bank, by whom it was issued. Then, there is direct testimony to the effect that on the London Stock Exchange the bonds do pass from hand to hand by delivery only, and are treated as negotiable securities, and no attempt was made to shake that testimony either b}- cross- examination, or by adducing OAidence to the contrary." Lord Her- schell said (p. 216) that he entertained no doubt that the bonds were negotiable instruments within the purview of the decision in Goodivin V. Robarts, 1 App. Cas. 476 (1875). Lord Macnaghten said (p. 224) : " The Cedillas in question are foreign })onds with coupons attached, 760 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. l")ayable to bearer. Admittedly they pass from hand to hand on the Stock Exchange, and according to tlio e\ddence of the hank manager, who was not cross-examined on the point, they are dealt with as nego- tiable instruments. I do not see on what ground they are to be denied the quality of complete negotiability. In a matter of this sort it is not, I think, desirable to set up refined distinctions which are not understood, or are unifornjly and persistently ignored in the daily practice of the Stock Exchange." And in Venables x. Barinr/ Brothers Sf Co., (1892) 3 Ch. 527, 539, American railway bonds to bearer were held to bo negotiable on the evidence of business men that such bonds were always treated as nego- tiable. "The only question I Imve to consider is whether they are negotiable according to the law merchant, as j)ai-t of the common law of England. On this point I have had the evidence of several gentle- men competent to sj^eak, and they say they have no doubt about the matter at all." Per Kekewich, J. See also Bentinck v. London Joitit Stock Bank, (1893) 2 Ch. 120. Nor is it necessary to show a custom in relation to the securities of the particular company. It is sufficient to show that instrimients of a like character issued by other companies are treated as negotiable. Venables v. Baring Brothers Sf Co., uhi supra. And it is unnecessary to show that the instrument fidfils the condi- tions of a promissory note. The c[uestion is whether it is a negotiable instrument by the law merchant, and many instrimients are negotiable which are in no sense promissory notes. For instance, in Rumball v. Metropolitan Raihcay, 2 Q. B. D. 194, scrip certificates for shares were held to be negotiable by the law merchant, although in no sense promissory notes. So, too, bonds of foreign governments are nego- tiable, although they do not even give a right of action. Nor does there appear to be any substantial foundation for the notion that an instrument ixnder seal could not, by the law merchant, acquire the character of negotiability. No doubt, in Crouch v. Credit Fonder, L. E. 8 Q. B. 374, the Court regarded Glyn v. Bates, 13 East, 509, as a strong authority that one kind of negotiable instrument, nameh', a promissory note, could not be under seal, but in that case no eiddence of negotiability by custom was adduced, and in Venables, v. Baring Brothers Sf Co., (1892) 3 Ch. 527, where such evidence was adduced, tlio instruments were held to be negotiable, though imder seal. Bpociul Until, liowevi'T, tlio negotiability of debentures to bearer has been required. ^'i^l^' I'ecognisod liy jmlicial decision, it seems expedient to frame such instrumc'nts on the assumption tliat the desired chai-acteristics must, as far as practicable, bo secured by special i)rovision. The i)resence of such provisions cannot prejudice the negotiability ; for expressio eorum (jtue tacite insvnt nihil opcrutur. Although it may seem a siiii]ili' iiiatfiT to make such provision, the difiiculti's, !it aiiv latc in llicoi'v, arc cousidci-able. INTRODUCTORY NOTES. 761 In the first place, accorrling' to the common law, a contract cannot At common bo attached to a particular instrument (not being' T\y law negotiable) j^"^ bearer of so as to enable tlio holder for the time being of the instrument to sue cannot be em- thereon. The issue by a company of an instrument (not by law PO'«'ered to . , 1 , . . . , , -V. , sue as such, negotiable) containing a promise to pay to the l)earer may artord evidence of the terms of the contract between the company and the person to whom it is issued. Thus in Crouch v. Credit Fonder, L. R. 8 Q. B. 374, where such an instrument had been issued, Blackbui*n, J. (delivering the judgment of the Exchequer Chamber), said: "We think that the form of the instrument shows that the defendants did contract with Machen, to whom they originally issued this instrument, to pay the money to the bearer of this instrument." But, according to the common law, the transfer of an instriuuent so framed does not, unless it is negotiable, pass to the transfei-ee the right to sue on the contract contained therein or e\'idenced thereby. In equity, however, a different rule seems to prevail, and the trans- How regarded feree may sue on the contract in his own name if that appears to have in equity. been the intention of the parties ; for that "is the governing rule in deciding questions of equitable debt." Per Jessel, M. E., Uruguay Central Jit/., 11 C. D. 372. See also Blakely Ordnance Co., 3 Ch. 154, where the Blakely Company had issued debentiu-es, under seal, to bearer, and the bearer for the time being sought to prove thereon in his own name in the winding-up of the comj^any. Holt, L. J., said (p. 159): "They are payable to bearer, and the object and intention of the parties in making them so payable was, no doubt, to give to any person taking them the right of resorting for payment directly to the obligors [the company] without regard to any equities that might exist between them and the original obligees ... Is there any reason why, if these are all the facts, the obligation should not be literally performed ? I think not. It may be doubted whether at law a valid legal obligation was created between the Blakely Company and the bearer ; whether there was any legal privity of contract except between the Blakel}' Company and Messrs. Blakely and Dent (to whom it [the debentui-e] was issued) ; or, indeed, whether qua bond or debentiu-e the instrument was not wholly void at law. But I think it unnecessary to detennine these questions. Assume the debentures to have been of no avail qua debenture at law at all, or of no avail except as between the Blakely Company and Messrs. Blakely and Dent, still it is evidence in equity of the terms on which the money became due from the Blakely Company to Blakely and Dent. The right to this money was assignable in equity. I am of opinion that there is nothing inequitable in allowing the debtor in an obligation to contract with his creditor that he will pay the amount due on the obligation to the assignee of the creditor (whether he be such assignee by instrument in writing or by mere delivery of the obligation) without regard to any such equities ; and I have already said that in my opinion in this case the Blakely Company have so contracted. The debt to be proved is the money due on this contract, and not the amount due on an instrument piu-porting to be a promissory note and it would, I thuik, be inequitable to deny the assignee of the creditor the full benefit of the contract entered into between the original and contracting parties." And in Re Imperial Land Co. of Marseilles, Ex parte Colborne and Proof by Straicbridge, 11 Eq. 478 (1871), it was decided that a debentm-e to bearer in bearer under seal was in equity valid and effective, and that a person 8^'^P- '62 DEBENTUEES AND DEBENTURE STOCK. fCnAP. XIV. Petition by bearer for Avinding-up. Certain set- tled points as to rights of bearer. who had bought such a debenture at a public auctiou was cntithjd to prove iu the ^yindiug-up of the company, in his own name, for the amoimt expressed to be secured by the debenture. The learned judge considered that the instruments were promissory notes. "But," said he, "suppose the instrument not to be a promissory note, but a bond, or debenture, or an;)i;liing else, it is equally binding on the company, because it is a representation by the company to all the world that they will, at the expiration of six years, pay the sum for which it is given to the holder, together with interest half-yearly in the mean- time." These decisions have, never been impeached or questioned, and have been largely acted on by business men. See also Olathe Silver Mining Co., 27 C. D. 278, in which it was held by Pearson, J., that the depositee by way of mortgage of debentures to bearer was entitled to petition in his own name for the winding-up of the company ; and nimierous cases might be cited in which the rights of the bearers of debentures payable to bearer have been recognized by the High Court. See also Moivatt v. Castle Steel, ^'c. Co., 34 C. Div. 58. It appears, then, that according to the principles of equity the right to sue on a contract evidenced by an instrimient so framed will pass with the instrimient, and accordingly that the bearer will, at any rate in equity, be entitled to the benefit of the several terms of the contract so far as they are valid. As to this the following points are well settled : — Law as to equities. (a) A stipulation that a debenture shall be transferable free from equities is valid. The importance of such a provision is obvious, for prima facie a debenture, being a chose in action, is only assignable subject to all equities between the company and the original subscribers. Mangles V. Dixon, 3 H. L. C. 702 ; Ryall v. Roivles (1748), 1 Ves. 348 ; Judica- ture Act, 1873, sect. 25 (6). Tluis, in Athenmim, &;c. Soc. v. Pooley (1858), 3 De G. & J. 294, debentures had been issued to A. as part of the consideration for property sold by him to the company. The price was excessive, and A. had bribed the company's manager who arranged the sale. A. afterwards transferred the debenture to B., who sold in the market to C, who bought without any notice of the circumstances relating to their issue. 0. subsequently sought to enforce them as against the comj)any, but it was held that though a purchaser bondjide without notice, yet being only a purchaser of a chose in action he could stand in no ])otter position than A., and therefore that his claim failed. "Mr. 0. appears to have bought these debentures innocently, })ut very ijiipruchaitly, in the belief, probably, that they wore good securities, and without notice of anytbiug to the contrary. Unfortu- nately, however, he T)ought wliat the English law calls a chose in action, and it is too clearly settled to admit of question or argument INTRODUCTORY NOTES. "63 that a person "buying- a chose in action, which can only be put in suit in the name of tlie original holder, cannot in genoral stand in a better position than the original holder." Per Knight -Bruce, L. J., at p. 298. In the absence then of a stipulation as above a purchaser in the market of a debenture might, when he sought to enforce the debenture, find that tlie company had a sot-off or defence available against the original holder, and tliereforo against himself. Such a risk is destruc- tive of marketability. But it can be precluded : — " I am of opinion that there is nothing ineqidtable in allowing the debtor in an o1)ligation to contract witli his creditor that he will not avail himself of such equities." Per Eolt, L. J., BlahJy Ordnance Co., 3 Ch. 159. And again: — "Generally speaking, a chose in action assignable only in equity must be assigned subject to the equities existing between the original parties to the contract ; but this is a rule which must yield when it appears from the nature or terms of the contract that it must have been intended to be assignable free from and unaffected by such equities." Per Cairns, L. J., lie Agra and Mastcrtnan''s Bank, Ex parte Asiatic BanJdny Corj)oration, 2 Ch. 397. And it is now a matter of course to insert such a provision in a debenture unless the circvimstances are very special ; for investors long- since discovered the extreme inconvenience of dealing with a security which was liable to be defeated or depreciated by the unexpected intervention of some latent equity. And such a stipulation will probably be implied from the mere fact that the debenture is "to bearer." See Blahely Ordnance Co., ubi supra, and Natal Investment Co., 3 Ch. 361. But in such case the debenture shoidd be simply "to bearer," not "to A., his executors, administrators, or assigns, or to the bearer;" for the additional words may be held to neutralize the force of the words "to bearer." Natal Investment Co., 3 Ch. 35.5. See Imperial land Co. of Mar- seilles, Ex parte Colborne and Strawbridge, 11 Eq. 487. (b) A stipulation that the company will jDay the bearer withoxit requiring him to produce any assignment in writing is valid. As to (b). "The broad principle of law is that no person can acquire a title to a personal chattel from a person who is not the owner .... At common law in general a chose in action is not transferable. There- fore the right of action can only pass by delivery of the instrument when the insti-ument is negotiable, or clothed by statute with the attribiites of a negotiable instrument." Per Bowen, L. J., Picker v. London Sf Countg Banking Co., 18 Q. B. D. 515, 519. "I am of opinion that there is nothing inequitable in allowing the debtor, in an obligation, to contract with his creditor that he will .... pay the amount due on the obligation to the assignee of the creditor 764 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. (whether he be such assignee by Instrument in writing or })y mere dehvery of the obligation) . . . ." Per Rolt, L. J., Blakely Ord- nance Co., 3 Ch. 159. And see Natal Investment Co., 3 Ch. 355. Lord Cairns said : " As I understand these words [' or to the holder, for the time being, of this debenture '], they do nothing more than this : in order to save the trouble and expense of assignments by deed, they provide that the company will recognize any person who holds the debenture to be in as good a position as if he had become the assignee by deed, and will not insist upon his proving his title by producing a formal assignment, «S:c." See also Crouch v. Credit Fancier, L. E. 8 Q. B. 374 ; and Higgs v. Northern Assam Tea Co., L. E. 4 Ex. 387, 394. (c) A stipulation that the delivery of the debenture or any interest coupon shall be a good discharge to the company is valid. Crouch V. Credit Fonder, L. E. 8 Q. B. 385 ; Natal Invest- ment Co., 3 Ch. 355. The maxim " Qui sentit commodum sentire debet et onus " applies. Macdonald v. Laiv Union Co., L. E. 9 Q. B. 328. It must, however, be borne in mind ihat prima facie such a stipulation "is not a proviso for the benefit of either the assignee or the holder of the debenture : it is a proviso for the benefit of the company itself, in order to absolve the company from the burden of having to look into the title of any person who might present the debenture to it for payment. It does not oblige the company to pay to the person who presents the debenture ; it merely absolves it from subsequent liability if it does, in point of fact, pay to the person who presents the debenture." Per Lord Cairns, L. C, Natal Investmeiit Co., ubi supra. (d) A stipulation that the company shall recognize the bearer of a coupon as entitled to the interest therein specified is valid. See (c) supra. (e) Generally a debentm-e may contain any stipulations which are not contrary to law. (f) It has been held that it is not competent to the parties to the original contract by any stipulation between them therein to ensure the title of a bond fide holder for value wlio claims through a person whoso title is defective. Crouch v. Credit Fonder, L. E. 8 Q. B. 375. Nevertheless, something closely resembling, in effect, this important and valuable characteristic of a negotiable instrument may, it seems, be attached to a debenture to bearer by special provision in the Iii(l<;pf,-n(lent document ; for not only may the transferee of a debenture to bearer foiitract. acquii-e rights as assignee in equity of the original contract, but the terms of the debenture nuiy be such as to give him independent con- tractual rights against the company. As to this, it has been held that when a debenture is framed in such terms as to nmoimt to a reprcsontiition })y the company to all the woi-ld that the company will do certain things, thn company may bo held bound by an independent contract in favour of one who acts on the faith of that representation. INTRODUCTORY NOTES. 765 Agra and 3fasterman^s Baiik, 2 Ch. 397 ; Imperial Land Co. of Marseilles, 11 Eq. 487 ; General Estates Co., 3 Ch. 762; Merchants^ Baiikiny Co., 5 C. D. 216. And tlioso cases show that a dobenturo expressed to bo payable to bearer probably amounts to such a representation, and affords evidence of the company's intention that the representation or offer sliall bo acted on. However, where it is desired to make use of this principle in framing a debenture, it seems expedient, and is usual in order to preclude doubt, to insert some further words in a debenture expressly addressed to all the world ; e.g., "all persons are invited by the company and tlie holder hereof to act accordingly." See infra. Form 509, clause 8. As to the addition of these words, see Agra and Masterman' s Bank, ubi supra, where [A.] had addressed a letter of credit to [B.j, which contained the words, "parties negotiating bills under it are requested to indorse particiilars on the back hereof ; " and it was con- sidered that these words were obviously addressed to the persons negotiating bills, that they were "intended by tlie writers to be used as an inducement to make persons take those bills," that it amounted to "a general invitation by [A.] to all persons to whom the letter may be shown to take bills drawn by [B.] or [A.] with reference to the letter, and to alter their position by jDaying for such bills, with an assurance that if they or any of them will do so, [A.] will accept such bills on presentation. If it be necessary' to determine the question of the legal liability of [A.], I [Cairns, L. J.] am of opinion that upon the offer in this letter being accepted and acted upon by [C], there was constituted a valid and binding legal contract against [A.] in favour of [C.]. The cases as to the offer of rewards, of which the case of Williams v. Carioardine, 4 B. & Ad. 621, is an example .... appear to me to be sufficient authority to show that there may be privity of contract in such case." The authority of Williams v. Carioardine was recentty recognized by Carlill v. the Court of Appeal in Carlill \. Carbolic Smoke Ball Co., (1893) 1 (^^^^'>^^o Smoke Q.. B. 256. The defendants, by advertisement, had offered to j)ay 100^. to any person who contracted influenza after having used one of their smoke balls in a specified manner, and the plaintiff having so used the ball, and contracted influenza, sued for the 100^., and was held entitled to recover. It was objected that the offer was not made to any one in particular, and therefore was not binding ; but Lindley, L. J., said (p. 262) : — " In point of law this advertisement is an offer to pay 100/. to anybody who will perform these conditions, and the performance of the conditions is the acceptance of the offer. That rests upon a string of authorities, the earliest of which is Williams v. Carwardine, which has been followed by many other decisions upon advertisements offering rewards." And A. L. Smith, L. J., said (p. 274): — "It was then said there was no jierson named in the advertisement with whom any contract was made. That, I suppose, has taken place in every case in which actions on advertisements have been maintained, from 766 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Estoppel. Goodwin V. Robarts. Jud^^ent of Lord CuirDH. the time of Williams v. Cartvardine, and before that, down to the present day. I have nothing to add to what has been said on the subject, except that a person becomes a jjersona designata, and able to siie when he performs the conditions mentioned in the advertisement." It was also argued that there was no contract, seeing that acceptance of the offer had not been notified to the defendants ; but it was held that the defendants had impliedly waived notice of acceptance, and that "if the person raahing the offer expressly or impliedly intimates, in his offer, that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the con- dition is a sufficient acceptance without notification." Per Bowen, L. J. (p. 269). Of course, if an independent contract exists, the bearer is entitled to the fidl benefit thereof ; and it appears from the extract from Lord Cairns' judgment, in Goodwin v. Robarts, given below, that his title may be good, even against a former holder from whom the instrument has been stolen. Estoppel. It is well settled that a person (whether corporate or not) making a representation of fact with the intention that it shall be acted upon is estopped from denying its truth as against any person acting on it. The leading cases in point are Pickard v. Sears, 6 Adol. & El. 469 ; Freeman v. Cooke, 2 Ex. 654 ; Bahia and San Francisco Rail. Co., L. E. 3 Q. B. 584 ; Webb v. Heme Bay Corns., L. E. 5 Q. B. 642 ; Agra and Masterman's Bank, 2 Ch. 391 ; Carr \. L. Sf N. W. Raihvay, L. E. 10 C. P. 307 ; Goodivin v. Robarts, 1 App. Cas. 476; Bnrkinshaiv v. Nicolls', 3 App. Cas. 1004; Balkis Co. v. Tomkinson, (1893) A. C. 396. In Goodivin v. Robarts, scrip of a Eussian loan had been purchased hj the plaintiff, and left in the hands of his broker, who had wrong- fidly pledged the same to the defendants. The defendants had sold it, and the plaintiff brought his action for the proceeds. The scrip was, so far as material, as follows : "Eeceived the sum of 20^., being the first instalment of 20 per cent, upon 100^. stock, and on jiayment of the remaining instalments the bearer will be entitled to receive a definitive bond for 100^." The defence was that the scrip was nego- tiable by mercantile usage, and that the defendants had taken it bond fide for valuable consideration. Judgment was given for the defendants in the Exchequer Chamber, L. E. 10 Ex. 337 (affirming the judgment of the Court of Exchequer), on the ground that the scrip had in fact become negotiable by mercantile usage and custom ; and the House of Lords affirmed this decision. Lord Cairns' judgment in the House of Lords contained the follo^ving passage : — " 'J'ho question argued iii the Courts below was the negotiability of the scrip of a foreign loan, like that in the present case ; but there appears to mo to bo a prior con- Hideration as to the title of the jilaintiff which would alouo be sufficient to dispose of his claim. The jilaiutiff bought in the market scri]), which, from the form in which it was l)roi)ared, virtually represented that the jjaper would pass from hand to hand by delivery only, and that any ouo who became bond fide the holder might claim for his own benefit INTRODUCTORY NOTES. T67 the fulfilment of its terms from the foreign government. Tlie appellant might have kept this scrip in his own possession, and if lie had done so no question like the present could have arisen. He jn'eferred, however, to place it in the possession and under the control of his broker or agent, and although it is stated that it remained in the agent's hands for disposal, or to he exchanged for bonds when issued, as the appellant should direct, those into whose hands the scrip would come would know nothing of the title of the appellant, or of any private instructions he might have given to his agent. The scrip itself would be a representation to any one taking it— a representation which the appellant must be taken to have made, or to have been a party to — that, if this scrip itself were taken in good faith, and for value, the person taking it would stand to all intents and purposes in the place of the previous holder. Let it be assumed for the moment that the instrument was not negotiable, that no right of action was transferred by the delivery, and that no legal claim could be made by the taker in his own name against the foreign government ; still the appellant is in the position of a person who had made a representation on the face of his scrip, that it would pass with a good title to any one taking it in good faith and for value, and who had put it in the power of his agent to hand over the scrip with this representation to those who are induced to alter their position on the faith of the representations so made. My lords, I am of opinion that, on doctrines well established, of which Fickard v. Scars, 6 Ad. & E. 469, p. 471, might be taken as an example, the appellant cannot be allowed to defeat the title which the respondents have thus acquired " This case is especially important, as showing that the owners for The holder the time beino; of an instrument which represents that it is neg-otiable, a ^tc Another questioa sometimes discussed is whether the rule of equity, that in tlie case^ of a mortgage any attempt to clog the equity of re- demi)tion is in-eJPeetual, enables a company in the case of so-called perpetual debentures or debenture stock to redeem before maturity. Tlie rule against clogging the equity of redemption is verj' stringent ; but it has neyev been held to apply in such circumstances, and it would cei-tainly h'e most unfortunate if the Court felt itself bound to disregard the plain tenns of the. contract, and defeat the intention of the parties, Tlio. right of redemption may, in the case of a mortgage, be post- ponei]. during a certain period (Fisher on Mortgages, 3rd ed., p. 347) ; and^*' arrangements of this nature, jiostjjouing the remedies both of tho mortgagor and mortgagee, are of common occurrence, and are uBuaUy limited to i)eriods of live or seven years, and they are sup- ported on the ground that llic conli-act is valuable to both parties; the luortgagoo, on the one liand, being sure of a continuing security for his money, and the mortgagor ])eing freed from the expense and INTRODUCTORY NOTES. 771 trouble of seeting now londors." Ffslior, 3rfl od., p. 720; 5tli o(\., p. 668. Periods of redemption fixed at thirty and twenty years were respectively held to be uureasonaT)]o. 8ee Talbot v. Braddill, 1 Yern. 183; Coivdryv. Day, 1 Gif. 316. But in both these cases the other circumstances were special ; in the latter case the mortgagee was tlu^ mortgagor's solicitor. One argu- ment strongly relied on was that such periods were unusual. Now, however, long j)eriods for, and indefinite^ ]K)stponement of the right of, redemption are by no means unusual in ilic case of debentures and debenture stock. The rules of equity are not rigid {KnntchhuU \. JIdllett, 13 C I). 690) any more than the rules of common la\\' ( Nordenfcldt v. Maxim Nordenfeldt Co., (1894) A. C. 535); and the tendency of the Court now is not to interfere between mortgagor and mortgagee " if both parties know precisely what they are doing, and this is voluntarity done in pursuance of a deliberate bargain." See Mainlaiid v. Upjohn, 41 C. D. p. 144. Moreover, it must be borne in mind that so-called perpetual debentures and perpetual debenture stock differ essentially (if the intention of the parties is to prevail) from an ordinary mortgage, and resemble much more closely a rent-charge security. Both parties stipulate for the advantage of a permanent security. And it would, indeed, be a strange thing if equity allowed a com- pany, which had obtained money by the issue of perpetual deben- ture stock, to turn round on the subscribers, after a few years, and insist that the stock was redeemable at any time on six months' notice, or if it allowed a debenture stockholder to call for redemption on six months' notice when he had deliberately agreed to jDOstpone redemp- tion until the winding-up of the company. Upon the whole, it is submitted that perpetual debentures and debenture stock are not within the mischief of the ride. As already mentioned, it is common enough to make debentures and Premium on debenture stock redeemable at a premium at or before maturity. If tth *''',{? ^^^' there is a fixed time for papnent of redemption, say twenty, thirty or valid, fifty years, and power to redeem previously at a premium, there can be no doubt that this is not a clog on the ec[uity of redemption; it is merely compensation for premature redemption. So, too, if the deben- tures or debenture stock are issued at a premium, and made payable or redeemable at a like premium, that cannot be regarded as a clog. But suppose they are issued at par, or at a premium, and made payable at maturity at a premium or higher premium, is that provision for this premium or excess premium to be regarded as a clog ? It is submitted that such provisions are not to be regarded as clogs on the equity, but as, in substance, a deferred bonus for the advance. It has been held, that debentures may be issued at a discount. Campbell's case, 4 C. I). 470; Anglo-Danubian Co., 20 Eq. 339. Debenture stock issiied at par, Init made payable at a premium, seems to stand on the same 3d2 772 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Redemption by drawings. Specific per- formance of contracts to create charsres. Validity and nature of floating charge. footing. PajTnent of the j)remiuin at a later date than when the debenture or stock is issued, is an advantage to the borrower. See Mainland v. Upjohn, 41 C. D. 126 ; Wehh v. Shropshire Rail. Co., (1893) 3 Ch. 307. Drawings. Pro"vasion is very commonly made for the redemption of debenture or debenture stock pursuant to drawings. See Forms 523, 560, 561. It has not yet been settled whether a com2:)any can be compelled to make drawings pursuant to its contract, but it is conceived that it can, in ec|uity, be so compelled. The usual mode of securing the due perfoi-mance of such provisions is by enabling the debenture holders, or debenture stockholders, to call in their money or enforce their security if the company makes defaidt. Floating Charge or Security. The validity and effect of what is noio called a "floating charge" on the property, both present and future, of a company was first recognized in Panama, &,-c. Co. (1870), L. E. 5 Ch. 318, by Giffard, L. J. In that case the company had issued debentures, and thereby charged its "undertaking" with the jiayment thereof. It was held that the word "undertaking" meant all the projierty, present and future, of the company, and that the charge thereon was effective and was to operate by way of floating secm-ity. Giffard, L. J., said: "I take the object and meaning of the debenture to be this, that the word ' undertaking ' necessarily infers the company will go on, and that a debenture holder could not interfere until either the interest which was due was unpaid, or until the period had arrived for the payment of his principal and that priucii:)al was unpaid. I think the meaning and object of the security was this, that the company might go on during that intei'val, and, furthermore, that during the interval the debenture holder would not be entitled to any account of mesne profits or of any dealing with the property of the company in the ordinary course of their business. I see no difficidty or inconvenience in giving that effect to this instrument, but the moment the company comes to be wound uj:* and the pi-operty has to be realized, that moment the rights of these pai'ties beyond all question attach. My opinion is that, even if the company had not stopj^ed, the debenture holders might have filed a bill to realise their security. I hold that under these debentures they have a charge upon all property of the company, past and future, by the t(>rm 'undertaking,' and that they stand in a position superior to tliat of the general creditors who can attach nothing until they are paid." This decision was of the utmost importance, not merely because it ])ut this construction on tlio word "undertaking" — a word which had been hii'gcly used iu dcbenlurcs — })ut because it recognized clearly the validity of a general charge on all the i)roporty of a company, both INTRODUCTORY NOTES. 773 ]-)rosont and future, by way of floating- socurity. Long previously it Jiad been decided, no doubt, that in equity future property, or even possibilities, could bo eifectually charged. Roice v. Dawson, (1749), 1 Yes. 390; Toivnshimd y. Wijndham (I7o0), 2 Ves. 1 ; Bennett \. Cooj^cr (1845), 9 Beav. 252. Ami Ilulroijd v. Marshall {\%G'l), 10 H. L. C. 191, was sufficient to show that a charge on all the property, j)resent and future, of a company was not too indefinite to take effect, and these principles being established there was, of course, no difficulty in holding that such a charge — provided the intention was sufficiently expressed — could be made subject to the company's power to deal with the property notwithstanding the charge. Nevertheless the decision was one of the greatest jiractical importance, as it expressly sanctioned a form of security which has since been recognized b}^ the commercial community and by the investing public as of an eminentlv convenient t>qie. The nature of a floating charge has been elucidated still further in Some suUse- subsequent cases, and the following points have been settled :— quent cases. (1) A floating charge operates as an immediate and continuing charge on the property charged subject only to the company's powers to deal with the property in the ordinary course of its business or as provided by the contract. Florence Land Co., 10 C. D. 541 ; Standard Manufacturing Co., (1891) 1 Ch. 640 ; Willmott V. London Celluloid Co., 34 C. D. 150; Hubbuch v. Helms, 56 L. T. 232. (2) Unless otherwise agreed, a floating charge leaves the company at liberty to create specific mortgages ranking in priority to the floating charge. Wheatley v. Silkstotie Coal Co. (1885), 29 C. D. 715 ; Government Stoc/c, S^'c. Co. v. Manila Rail. Co., (1897) A. C. 81. (3) Notice of the floating charge does not postpone the subsequent specific moi-tgages. Re Hamilton'' s Windsor Lronivorks, 12 C. D. 712. (4) But a floating charge is valid as against execution creditors. In re Opera, (1891) 3 Ch. (C. A.) 260; Taunton v. Sheriff of Warwickshire, (1895) 2 Ch. 319 ; Re Statidard Manufacturing Co., (1891) 1 Ch. 627. But see Robson v. Smith, (1895) 2 Ch. 118, as to garnishee order. (5) It is also valid as against the general creditors, whether in a winding-up or otherwise. Paiiama, ^t. Co., supra. (6) Unless otherwise agreed, a floating charge retains its floating character until a receiver is appointed or a -n-inding-uj) com- mences (7?e Florence Land Co., supra ; Government Stock, &,-(;. Co., supra), or the company stops business. Robson v. Smith, (1895) 2 Ch. 118. (7) See also the Preferential PajTuents in Bankruptcy Act, 1897, in Appendix. "A floating security," said Lord Macnaghten in Government Stock 774 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Subsequent dealings by company with property subject to floating charge. Dealings in ordinary course of business. Co. V. Manila Hail. Co., (1897) A. C. at p. 8G, " ih au equitable charge ou the assets for the time being- of a going concern ; it attaches to the subject charged in the varj-ing condition it happens to be from time to time. It is of the essence of such a charge that it remains dormant until the undertaking charged ceases to be a going concern, or until the person in ^y]lose favour the charge is created intervenes. His right to intervene may of course be suspended by agreement. But if there is no agreement for suspension, he may exercise his right whenever he pleases after default." Pending any such intervention, the company has a free hand U) deal ■with and dispose of the property charged in the ortliuary course of the company's business. What, then, is in the "ordinary course of business?" The answer to this depends on the nature of the particular company's business ; but as a general rule the words include sales, leases, mortgages, charges, pa^onent of debts, discharge of liabihties, and other transactions with a view to carrying on the concern. Nevertheless, it has been held that a floating charge, unless the contract is otherwise expressed, does not import any power for the company to sell the whole of its under- taking. Such a sale is not to be treated as iu the " ordinary course of business." Htibbuck v. Helms, 56 L. T. 232. As to Specific Mortg-ages. - This power to create a specific mortgage ranking on the property charged in priority to the debepture charge, was not at first recog- nized ; for Giffard, L. J., in Panama, Sfc. Co., supra, in stating that the company might, notwithstanding the charge, deal with its property, said : " I do not refer to such things as sales or mortgages of propert3\" But the law of debentures, like all branches of a living law, is con- stantly growing; and it was held in Florence Land Co. (1878), 10 Ch. D. 530, and in Colonial Trusts Corporadon (1880), 15 Ch. D. 465, that the floating charge left the company at liberty to create specific mortgages or charges in priority to such floating charge. In the latter case it was laid down (at p. 472) that it would be a monstrous thing to hold that a floating security prevented the making of specific charges, or specific alienations of property, because it would destroy the very object for which the money was borrowed — the carrying ou i]\c >)usiness of the company. In a subsequent case it was urged that wlicre the subsequently- created charge was only an equitable security, it ought not to havo ]iriority over the oquitabh^ charge of the dobouture holder ; but this, too, was overruled. 8ee Wheatley\. Silkstone Co. (1885), 29 Ch. D. 715, ill wliicli tlic company, after creating a floating charge on its under- laking, liad created a subsequent equitable charge in favour of its liaiikers by deposit oi' title deeds, and in that case North, J., after refcrriui; to the aiitlioiities, said: " Tlioso authorities furnish a verv INTRODUCTORY NOTES. 775 clear and intelKgiblo principlo to be fuilowed iu this case. I liud that the debentiu'o is intended to be a general floating security over all the property of the company as it exists at the time when it is to he put in force ; hut it is not intended to prevent, and has not the effect of iu any way preventing, tlie carrying on (jf the business in all or any of the ways in which it is carried on in the ordinary course, and inas- much as I lind that in the ordinary course of business, and for the purpose of the business, this mortgage was made, it is a good mort- gage upon, and a good charge upon, the property comprised in it, and is not subject to the claim created by the debentures." This decision is a specially strong one, because the debentures in question were expressed to be by way of first charge on the under- taking ; but in regard to this the learned judge said: "I find also that the ' first charge ' referred to in the debentures is fully satisfied by being the first charge against the general jDroperty of the company at the time when the claim imder the debentures arises, and can have effect given to it. There will be a declaration, therefore, that the charge of the plaintiff is prior to the debentures." See also Ward v. Royal Exchange Shipping Co., 58 L. T. 174. As to the Clause qualifying the Floating Charge. The extreme elasticity of a floating charge, and the wide powers Prior mort- whieh it allows to the company, are in some cases considered excessive. F?.?°?' P^°' 1 ,.,.., , . ., ' mbition of, and, accordingly, it is not uncommon to insert m the instrument creating it words to the effect that the floating charge is not to authorize the company to create any mortgage or charge ranking in priority to or pari passu with the debentures. Such a clause is not a very new expedient ; it was introduced by way of suggestion in the fii-st edition of this work (1877), and has gradually come into use. It is to some extent effective. Thus, if the company creates a mortgage in favour of any person who has notice of the floating charge and qualification, such person ranks after the floating charge. But a person who obtains a legal mortgage, and makes out (a) that he was not aware of the existence of the floating charge ; or (b) that though he was aware of the charge he was not aware of the qualification, is entitled to priority by virtue of the legal estate. Scottish, ii|-c. Co. v. Brunton, (1892) 2 Q. B. 700. And it has recently been held that in some cases a subsec|uent sj^ecific mortgagee, who takes merely an equitable charge, may obtain priority over the antecedent floating charge. See Re Castell and Broicn, (1898) 1 Ch. 315. In that case the comjoany had issued mortgage debentures containing a floating charge qualified as above, but had retained the title deeds to landed property thereby charged. It subsequently de- posited such title deeds with A. byway of security for an advance. A., when he made his advance, had no notice of the debentures, and it was held by Romer, J., that A. was entitled to rank before the debenture 776 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. charge, on the groiiud that he had the better equit}' — either hy reason of the debenture holder's negligence in not obtaining custody of the deeds, or by estoppel. As to negligence, it seems doubtful whether in such circumstances the debenture holders are chargeable therewith. See Northern Counties, ^c. Co. V. JJlupp, 26 C. D. 482, 494; National Provincial Bank of England v. Jac/cso)i, 33 C. D. 1 (C. A.). As to estoppel, the learned judge based his decision on the principle exemplified in Perry-Herrick v. Atttvood, 2 De Gr. «S: J. 21, viz., that if a mortgagee lends the deeds to the mortgagor for a limited purpose, he is estopi^ed from dispiiting the mortgagor's acts, though in excess of the authority. Nor is it easy to show that this principle is not applicable. It is not the practice for debenture holders or their trustees to obtain the custody of title deeds to property on which they have merely a floating security, and accordingly thej^ must take the additional risk which the decision attaches to their security. If this is objected to, there should be a trust deed, and the trustees should hold the deeds ; or, in the alternative, let a clause be inserted in the articles providing in effect that no mortgage or charge shall be created in priority to the debentures, and in the debentures insert a provision enabling the holders to call in their money if the company alters, or attempts to alter, the clause. Outsiders dealing with the company are fixed with notice of the clause, and thus the position of the debenture holders is fortified to a considerable extent. "Where there is a floating charge qualified by the prohibitory clause above mentioned, it has been held that the qualification is to be strictly construed. See Brunto7i v. Electrical, ^'c. Corporation, (1892) 1 Ch. 434, in which case it was held that the qualification did not prevent the company's solicitor from acquiring a lien in priority to the deben- tures ; and see Robson v. /Smith, (1895) 2 Ch. 118, in which it was held that the qualification did not prevent a creditor of the company, who had obtained a garnishee order, attaching a debt due from a debtor to the company, and obtaining payment thereof. The use of Usually a debenture or debenture stock deed which charges "the ^"•'^char ^^'' ^iiiflertaking and property, present and futui-e," or charges "the pro- and cxplana- perty and assets for the time being," expressly declares that the charge ory words. ^^ ^^ y^^ ^ "floating security," and this is convenient now that the character of a floating security' or chai-ge has been so clearly esta- blished ; but the presence of the words is not essential, for where there is a charge on "the undertaking," that charge operates as a flfiiilliig charge (Panama, S,-c. Co., 5 Ch. 318); and where there is a gciici-al charge on th(> property the Court will, if practicable, construe 1lic cliarge as a floating security. Tlius, in Florence Land Co., 10 C. Div. .530, where Hie (Iclicutui-cs purported to "bind the company and all their estate, property, and effects," it was held that these words created a floating security on the assets for the time being. INTRODUCTORY NOTES. 777 And the like construction was placed on dehpnturcs purporting: to " bind or charge the company and their real and personal estate." Colonial Trusts Corporation^ 15 C. Div. 465. Even when the words " floating- charge " are used, it is not uncommon to add explanatory words, e.g., " such charge is to be a floating charge, and accordingly is in nowise to hinder or prevent the company from selling, leasing, exchanging, charging, or otherwise dealing with its property for the time being in the ordinary course of its business." "When the nature of a floating charge was not settled it was desirable to use some such words, and even now there may be cases in which it is desirable thus to emphasize its character, but it is not necessary. In Gover7ifnent, Sj'c. Stock Co. v. Manila Rail. Co., (1896) A. C. 81, the debenture charge was expressed to be by way of " floating secu- rity," but the words as to dealing were not in common form, but as follows : — " Notwithstanding the said charge the company shall be at Uberty in the course of, and for the purpose of, its business to use, employ, sell, lease, exchange or otherwise deal Mith any part of its property, until default shall be made in pajTnent of any interest merely secured for the period of three calendar months after the same shall have become due, or until an oilier of some Court of competent jurisdiction shall have been made, or a special or extraordinary reso- lution shall have been duly passed, for the winding-up of the said compam^" These words were taken from the first edition of this book (p. 435), but the next following clause in the book providing that, on the hap- pening of the events specified, the company's authority to deal with the assets should cease was, whether by design or accident, omitted from the document under consideration by the House of Lords. The question arose whether such a pro\'ision coidd be implied, and it was held by the House of Lords that it coidd not ; and that, consequently, the charge retained its floating character, notwithstanding default by the company for more than three months in pajnnent of interest. Lord Macnaghten said, (1897) A. C. 86, "In the present case, it was in- tended that the right of intervention on the part of the debenture holders should be suspended for a term after defaidt. That is what the second condition points to ... . During the period of grace, or until there is a winding-up, the company are to be free to carry on their business ; they are to carry it on as of right. When that period comes to an end the charge will have its ordinary effect. Thenceforward, so long as the defaidt lasts, the business will be carried on, not as of right, but by the sufferance of the debenture holders, and at their mercy." If the omitted clause had been inserted the decision would have been different. Although a floating charge does not generally attach until a winding Floating up or an appointment of a receiver, or stoppage of biisiness ( Robson v. charges con- Smith, (1895) 2 Ch. 118), this only means that until then the company sent charge can deal with the property in the ordinary course of its business, but it *"* '«<"^''- 778 DEBENTURES AND DEBENTUEE ttTOCK. [ChAF. XIV. Trust deeds. Advantages of. does nut mean that there is no charge until then. A debenture usually purports to give a present charge, e.y., "the company hereby charges its undertaking and all its property present and futui-e ;" and though it is necessary, in order not to paralyse the business, to construe such a charge as giving the comj)any an implied power or licence to deal with the property charged in the ordinary course of its business, there is no necessity or reason for holding that the charge is not to take effect at once, subject to that power. Thus, in Florence Land Co., 10 C. Div. 530, Jessel, M. E., considered that the debenture charging the estate, property and effects ought to be read as making "a secui'ity on the property of the company as a going concern, subject to the powers of the directors to dispose of the pro- pei-ty of the company, whilst carrjdng on the business in the ordinary course." And James, L. J., stated that he read it as "a charge upon the assets for the time being of the company that would not in the slightest degree interfere with the company carrpng on the business." So, also, in Hubbuck v. Helms, 56 L. T. 234, Stirling, J., stated that a charge upon the undertaking is a cliarge upon the assets for the time being. The charge is operative though dormant. Government Stock v. Manila Rail. Co., supra. This construction is in accordance with the decisions in National Mercantile Bank v. Hampson, 5 Q,. B. D. 177, and Taylor v. M^Kea7id, 5 C. P. D. 360, in which it was held that where there is a mortgage of a going concern by an ordinary individual, the mortgagor has an implied licence to carry on the business, and sell the assets in the ordinary' course. Trust Deeds. A trust or covering deed to secure debentures or debentui-e stock usually conve^'s, or pro\'ides for the conveyance, to trustees of property of the company, or charges property of the company in favour of the trustees, by way of security for the payment of the debentures or debenture stock, and the interest thereon ; and the trust deed usually contains a niunber of ancillary provisions for the benefit of the com- pany and the holders of the debentures or debenture stock. See Forms 545 ct seq., 570, infra. Trust deeds afford considerable advantages to debenture holders. For example : — (1) If the company makes defaidt, there are the trustees ready to protect the interests of the debenture holders, Avhereas in the absence of trustees some debenture holder or debenture holders must take action. (2) By means of a trust deed the debenture holders, through their trustees, can be enii)owered to enter and sell, and tlius realise the property without the assistance of the Court ; whereas if the cliarge is merely contained in the debentures these advan- tages cannot be so readily obtained. See, however, p. 826 as to receiver. INTRODUCTOlii^ NOTES. 779 (S) Tlio legal estate in tlio proi)erty cliargcd cau t^e vested in the trustees, and thus the debenture Judders may be secured against having their title postponed to lliat ol' some other subsequent incmnbrancer. See p. 79-1. (4) The debenture holders cau obtain sjiecial powers of control over the trustees. (5) The trustees can be enabled to do a variety of tilings at the request and with the concurrence of the compau}', e.ff., to effect interim sales, exchanges, and leases, and thus the security can be made effective without interfering with the business. (()) The com2:)any can be brought, under covenant, to do many things which, in the interests of the debenture holders, are necessary — e.(/., to insure, to repair, to j^rotect, &c. — and in defaidt the trustees can be given power to do these things at the expense of the company. Wliether, in the case of debentures, there should or should not be a trust deed must depend on the circimistances. Sometimes a conij)any proposing to raise money on debentures stands in so strong a financial position that there is no need to offer subscribers the additional secu- rity of a trust deed. Sometimes the company, though not so situate, prefers, if possible, to avoid the fetters, however light, which a trust deed imposes, and therefore offers its debentures without any trust deed, believing that the public will subscribe without any very critical examination of the form of the security. Of late, however, the public has become much more alive than of old to the importance of examining the securities offered, and the precarious nature of a mere floating charge. Again, sometimes debentures are only to be issued for a temporary purpose — e.g., to bankers as security for an overdraft, or to capitalists as security for a short loan — or are to be taken up by the directors and their friends who have perfect confidence that the board will not do anything to endanger the priority of the debentures ; and there is no doubt that vast sums of money are owing on debentures containing a charge, but not secured by any trust deed. Nevertheless, the practice of securing and fortifying debentiu-es and debenture stock by the mortgage to trustees, which is generally effected by a trust deed, is now very general, and the following are some of the reasons which lead to such security : — (a) Because companies are advised to make the securities offered by them as sound and attractive as possible. (b) Because brokers, trust companies, bankers, financiers, under- writers, lawyers, and others, commonly advise or insist on a trust deed. Even companies which might raise money on debentures without a trust deed often consider it expedient, as a matter of credit and of sound business, to give their debenture holders the best possible secu- rity, including a trust deed, so that if, as occasionally happens, the character of the security is brought under discussion, e.ff., in the T80 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. financial press, or in controversial circulars, it may not he possi})le to accuse the company of having issued imperfectly secured dehentures, and traded on the credulity of those who trusted that they would be given a fair security. In many cases debentures are issued pursuant to some agreement — e. g., an agreement for sale of property — or pursuant to some scheme of arrangement or reconstruction, and in such cases it is usually provided that there shall be a trust deed in a specified form. In short, whatever may be the causes, there is no doubt that the practice of fortifying the debenture holders' or debenture stock holders' security by a trust deed is largely on the increase. Very commonly the trust deed contains or provides for a legal mortgage of the principal projierties {e.g., in the case of a brewery, the brewery and tied houses), and a general charge, by way of floating security, on the rest of the undertaking. But cases occur in which a legal mortgage or transfer would be prejudicial, e.g., in the case of a foreign con- cession ; or it may be that the duties on the transfer of property are, by the local law, so high as to be prohibitive. In such cases, how- ever, the trust deed generally contains a specific charge on the landed and fixed property, and a floating charge on the rest of the property, fortified by special pro\4sions for the security of the debenture holders ; and such a security will be effective as against English creditors even as regards land. For although the right to the possession of land must be determined by the lex situs, land situate abroad can in most cases be effectually charged in equity by a comj)any resident here. However, land situated abroad, but belonging to a company registered here, can in most cases be effectually charged in favour of debentui-e holders or theii- trustees, without regard to the formalities required by the local law in relation to transfers or mortgages. For it was settled long since that the Court of Chancery, by A'irtue of its jurisdiction in personam, would, as between persons resident here, enforce equities in regard to foreign land. Penn v. Lord Baltimore, Tudor, L. C. Eq. 926 ; Westlake (1880), 183; MercantUc S;c. Co. Y. River Plate, (|-c. Co., (1892) 2 C. D. 303. Moreover, in determining whether there was an cquit}' subsisting between the jjarties, the Court regarded English law exclusively ; and if according to that law there was an equity, the Court would enforce it, although the equity was not recognized by the lex Hittis. Thus in Ex parte Pollard, 4 Deac. 27, a contract for security on laud in Scotland, in terms which, according to English law, created an equitable charge thereon, was enforced here as against the debtor's assignees in bankruptcy, as representing his person, although by Scotch law the contract created no lien or charge on the land. In that case Lord Cottenham, C, said: — "If, indeed, the law of the country where the land is situate should not permit, or not enable the defendant to do what the Court here might think it ought to decree, it would be useless and unjust to direct him to do the act ; but when there is no such impediment the Courts of this country, in the exercise of their jurisdiction over contracts made here, or in administering equities between parties residing here, act upon their own rules, and arc not influenced by any consideration of what the effects of such contracts might be in the country whore the lands are situate, or of the manner in which the Courts of such countries might deal with such equities." See also Jix parte llolthauneii, 9 Ch. 722 ; and tlio cases cited in Westlake (1880), p. 183 ; and Conte V. Jcckn, 13 Eq. .')97, as to chattels. The jurisdiction of the Court of Chancery being now vested in the High Court, it seems clear that if a company registered here covenants or purports to convey foreign INTRODUCTORY NOTES. 781 land to trustees for dcbcntui-c holders, or purjiorts to charge it by the debentures or otherwise, or covenants that it shall stand charged in favour of debenture holders, the Court will, if occasion arises, enforce the equity just as if the land were in England ; and consequently, unless the local law forbids, will compel the comijany to convey the laud so as to give effect to the relief decreed. See llolrnijd v. Marshall, 10 H. L. C. 191. And ill accordance with the principles above referred to, relief has ui many cases been granted here to the holders of debentures charged on foreign land. See "Orders," infra. It must, however, be borne in mind, that if land situate abroad is charged with deben- tures otherwise than in accordance with the lex situs, the debenture holders may find their charge postponed or ousted by a purchaser or mortgagee who has comjjlied with the lex situs. Florence Laud Co., 10 C. Div. 530. But this is a risk which in many cases the parties are content to run ; the principal object being to give the debenture holders a preference over the general creditors of the company, and not to fetter the company in dealing with its property. Sometimes, e.g., in the case of companies proposing to acquire a ])iisiuess abroad, it is considered necessary to vest the business in a local company, and to take security from that company to trustees for the debenture holders. Occasionally, however, the security is effectu- ated by vesting the property in a local company, all the shares in which are vested in the English comj)any, which then mortgages the same to trustees to secure its debentures. One good reason why a trust deed is frequently executed is, that so much can be expressed and provided for in a trust deed that cannot be satisfactorily dealt with in a debenture — for example, by provisions for meetings of debenture holders (p. 882) ; for realizing the security ; for business and rejiairs ; for carrying on the business after default, and for consenting to various acts which the company may deem necessary. A trust deed usually contains a clause specifying the various events on the happening of which the security is to become enforceable. As a general rule the events specified in such a clause are — (1) default in pa3'ment of princij^al or interest, (2) winding-up, (3) breach of covenant, and (4) appointment of a receiver; and in cases (1) and (3) the deed usually allows the company further time to make good the default or breach. But sometimes the list of events is considerably increased — e.g., see p. 859. In some cases very stringent provisions may, in the intei-ests of the debenture holders, be necessary and reasonable, e.g., if the debenture holders of a liquidating concern agree to reconstruction, and to take fresh debentures, it may be fair enough to provide for en- forcing the fresh debentures, if the trustees of the deed securing the same certify that, in their opinion, the business cannot bo carried on profitably. And if a company is in low water, those who lend money on debentures are fully entitled to insist on siich terms as they think necessary for their protection. Section 10 of the Judicature Act, 1875, has not rendered the bank- Bankruptcy ruptcy law, as to order and disposition, applicable to companies wind- y, ^ "^^ *° , ing up, and accordingl}^ if a company goes into liquidation, property disposition" in its order and disposition will not be withdrawn thereby from the ?°^ applicable ■^ *^ to a company. 782 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. debenture charge. i?e Crumlin Viaduct Works Co., 11 C. T). 755; Gorringe v. Irwell Indiaruhher Works, 34 C. D. 128. Bills of Sale Acts, whether applicable. Bills of sale. Until Standard Manufacturing Co., (1891) 1 Ch. 627, was decided, it was generally supposed that debentures and debenture trust deeds, in so far as they charged personal chattels, were bills of sale within the meaning of the Bills of Sale Acts, and that debentures were only exemjited from the operation of the Act of 1882 by s. 17 of that Act, which provides that : " Nothing in this Act shall apply to any deben- tures issued b}^ any mortgage, loan, or other incorporated company, and secured upon the capital stock or goods, chattels, and effects of such company." Bills of Sale It \yas always assumed that debentures were within the Bills of Sale ml\ Ind^' Af^» 1854. Shears v. Jacob, L. E. 1 C. P. 513 ; Deffell v. White, L. E. I882! 2 C. P. 144 ; Re Mari?ie Mansions, 4 Eq. 60 1 ; and Re Asphaltic Wood Co., 49 L. T. 159. Numbers of trust deeds and debentures were registered accordingly under the Act of 1854 and that of 1878. And after the Act of 1878 the Courts, in many cases, acted on the footing that the Bills of Sale Acts applied to companies, and accordingly treated the question whether a given instrument coTild be brought within s. 17 of the Act of 1882 as material. Edmonds v. Blaimi Co., 36 C. D. 215 ; Levy V. Abercorris Co., 37 C. D. 260 ; Topham v. Greenside Co., 37 C. D. 281 ; Read v. Joanno7i, 25 Q. B. D. 300. Acts of 1878 At length, however, in Standard Manufacturing Co., (1891) 1 Ch. and 1882 held ggy the question was raised whether the Acts of 1878 and 1882 ai>plied not applicable ' -■■ '- '■ to debentures, at all to companies under the Act of 1862. In that case the company {Re Standard j^^,^ issued debentures charging, by wav of floating secui-ity, all its Mannjactunng oo'.' .. o "^ Co.) property, present and future, and further secured by trust deed. The securities were not registered as bills of sale. A jiulgment creditor of the company having levied execution on part of the chattels charged, the question whether the securities were not void as against him for non- registration was raised, and the Court of Appeal, Lord Halsbury, L. C, Bo wen and Fry, L. JJ., answered this question in the negative. Bowen, L. J., delivered the judgment of the Court, and said (p. 645) " tliat the debentures were expressly excejited from the operation of the Act of 1882. The next question to be solved is, whether these debentures, or either of them, are biUs of sale, and bills of sale to which the BiUs of Sale Act, 1878, applies. That these debentures are 'agreements by which a right in equity to a (;hargo or security on personal chattels is conferred,' appears to be clear. But we are of opinion, nevertlieless, that on the true construction of the Act of 1878, the mortgages or cluirgos of any incoi'porated company for the registration of which a statutory provision had already been made by the Companies Clauses Act, 1845, or the Companies Act, 1862, are not bills of sale within the scope of the Bills of Sale Act, 1878. . . . "We think that this appeal INTJJODTTCTORY NOTES. ~''^'3 should therefore be allowed ... on the ground that the mortgages or charges of any incorpoi-atod couipany for tlie registration of which other provisions have heen made hy the Companies Clauses Act, 1845, or the Companies Act, 1862, are not within the Bills of Sale Act, 1878." This de(;ision has heen largely acted on, and was followed and The decision .>xphuned ])y North, J., in Richards v. Kidderminster Overseers, (1896) tS^^^deedT **^ 2 Ch. 212, and tlierefore, whether it was rightly or wrongly decided, sembh. it would seem now to be too late to question it. Looking to the ratio decidendi it does not seem possible to confine it to the case of deben- tures. As pointed out in previous editions of this work, if the ratio decidendi is good as to debentures, it is equally good as to trust deeds for securing debentures and debenture stock, and North, J., has expressed the ojiinion, although he did not decide, that it applies to a trust deed for securing debentures. Richards v. Kidderminster Overseers, ubi supra. No doubt in Ross v. Army and Navy Hotel Co., 34 C. D. 43, it was assumed that a trust deed required registration, but there was no actual decision to that effect. Standard Manuf act uring Co. was followed in Opera, Limited, (1891) 3 Cli. 260. Registration in Middlesex, Yorkshire, and in the Stannaries. As to Middlesex and Yorkshire see i^ifra, p. 795. As to the Stannaries, see Stannaries Act, 1887 (50 & 51 Vict. c. 43), s. 17 ; New Par Consols, 26th Nov. 1897, Wright and Kennedy, JJ., 42 S. J. 98. Power to Issue Debentures and Debenture Stock. The power of a company to issue debentures and debenture stock Tlie eom- depends on. its memorandum of association. Usually the power is P'^^y •'' P'''"'*^^- given in the memorandum by a clause in these terms : — "To borrow or raise or secure the papnent of money in such manner as the company shall tliink lit, and in particular by the issue of deben- tures, or debentui*e stock, perpetual or otherwise, charged ujDon all or any of the company's property (both present and future), including its tmcalled capital, and to redeem or pay off any such securities." Where the j)ower is expressly given by the memorandum, it is beyond question effective ; but an implied power to issue debentures or deben- ture stock is equally effective. Thus, if the memorandum merel}- gives power "to borrow," that includes power to borrow by the issue of debentures or debenture stock payable at a fixed date. And the same rule applies where the memorandum only gives an implied power to borrow. And where there is a poAver, whether express or implied, to borrow, a company has by implication power to seeiu-e by mortgage or charge the repayment of the moneys borrowed. Australian, ^c. Co. v. Mounsey, 4 K. & J. 733 ; Bryon v. Metropolitan, S^'c. Co., 3 De G. it J. 123; General Auctio7i, S(c. Co. v. Smith, (1891) 3 Ch. 432; Patent File Co.. 6 Ch. 83. According to the last case, a body corporate, as such, has 784 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. an imjilied power to deal with its property. In that case James, L. J., said : " The company is a body corporate, and by the laws of England a body corporate can hold property and disjjose of it as freely as an indi\ddual, unless it is specially prohibited from so doing. In the memorandum of this company, I can find nothing to prevent the company qud company from jjledging part of its property for payment of a debt incurred in the course of its business." And Mellish, L. J., said : "It was urged that no company can mortgage unless expressly authorized to do so. Now, the company has projDerty which it is authorized to deal with, and I should say that the true rule is just the contrary, namely, that the company can mortgage unless expressly prohibited from doing so." But too much reliance must not be placed on these dicta, for the company was a trading company, formed to acquire and work certain patented inventions, and "for the doing of all such other things (including the purchasing, leasing, or otherwise acquiring, holding, and disposing of lands and build- ings) as are incidental or conducive to the attainment of the above objects, or any of them." The cj[uestion for decision was whether the company had power to mortgage its property to secure a debt owing to its bankers, and the mortgage might very well have been treated as covered by the general words in the memorandum, or as justified by reason of the company being a trading company. More- over, the dicta seem scarcely consistent with the principle settled in Ashbury, ^'c. Co. v. Riche, L. E. 7 H. L. 653, which was decided five years later. See also Reg. v. Sir Charles Reed, 5 Q. B. D. 483, in which Cotton, L. J., said : "It was said that every corj)oration, unless restricted by its act of incorj)oration, has the same power as an individual to enter into contracts, including that of borrowing money. In our opinion, this contention .... cannot be maintained. The power of a corporation estabhshed for certain specific purposes must depend on what those purposes are, and, excej)t so far as it has express power given to it, it will have such powers only as are necessary for the purposes of enabling it in a reasonable and proj)er way to discharge the duties or fulfil the purposes for which it was constituted. . . . A trading coi-poration stands as regards an implied j^ower of borrowing in a very different position." Debentures to Where it is proposed to issue debentui-es to bearer, it must be bearer. ascertained that the company has j)ower to issue debentures to bearer. Sometimes tliis power is found in the memorandum of association, but it is generally considered that if the company has power to borrow, the issue of debentures to bearer may be deemed reasonably incident to that power. Blahchj Ordnance Co., 3 Ch. 154 ; Imperial Land Co. of Marseilles, 11 Yai- 478. Terpetual And it would s('(']ii, tliat where the company lias jjower to borrow debentures. . i .i • x' i i i ji • •,. or raise moufy by tlie issue ot debentures or otherwise, it may raise it by tlie issue of so-callcil pci-p(;tual del)entures, i.e., debentures payable only in the event i)i \\ iudiug-up, or after six mouths' default INTRODUCTORY NOTES. 785 in pajonent of intorost ; and it may 1)C tliat power "to raise money by the issue of debontures " is sufficient to justify the issue of perpetual debentures. No doubt a debenture imports a debt, and pro- bably an instrument under whicli tli<' principal was never to be repaid is not a debenture; but so-called perpetual debentures always do fix a contingency in which the holder will be entitled to payment, and very commonly reserve power to the company to rerloem at a premium on giving six months' notice. A debt is not the less a debt because it is only to become payubl(> in certain contingencies. It is still '■^ dehihim in prcesenti solvendum in futuro.'''' Even if debentures so framed are to be deemed to create only contingent debts, they are still properly called debentures, for a con- tingent debt is well known to the law. The bankruj)tcy laws make provision for the proof of contingent debts, and so does the Companies Act, 1862. This matter is dealt with by Lord Chancellor Hardwicke, in his celebrated judgment in Chesterfield v. Jansen, 2 Ves. 125, where his lordship said that "though money is to be advanced upon a risk, which upon a contingency may be totally lost, it is still a loan of money ; and all the books treating of bottomry call it money lent on bottomry. [Although money so lent is only contingently paj-able."] Besides, this is plain from the express words of the statute 1 1 Hen. 7, c. 8, which shows they understood that an adventure might be inserted in a contract of loan ; and it is observable that this, if real or fair, exempted it from the laws of usury, though at that time aU kinds of usury or taking interest were unlawful. By the law of England, therefore, the insertion of a contingency will not of itself prevent the contract from being a loan." And, of course, where there is a loan repayable on a contingency, it cannot be disputed that the obligation to repay is a debt — a contingent debt ; for every loan imports the relation of borrower and lender, and of debtor and creditor. It would, indeed, be a singular application of the doctrine of ultra Bargain as to vires to hold that a company which has power to borrow, and make pj.™^^^^g, itself unconditionally liable to repay, coidd not borrow on the footing time of that it was only to be contingently liable to repay the loan. Suppose that repayment. a company raises money on debentures, which is payable on demand, and that subsequently the holders by deed indorsed thereon covenant with the company not to call in the money so long as the interest is punctually paid, is there any vahd objection to this ? Surely not ; and if so, is there any objection to embodying such a bargain in the debenture when issued ? It may be contended that the power to borrow implies a right in the company to pay off, and that to raise money on the footing that the company is not to be at Hberty to pay off before a winding-up takes place, is not a borrowing in the ordinary sense of the word, but more in the nature of the creation of a peri:)etual annuity : and there seems some foundation for the contention. But it is gene- rally considered that it may be disposed of by making the del>eutures, P. ' 3 E 786 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Debentui'e stock. or debenture stock, redeemable by tbe company after a tenn of years, either at a premium, or otberwise. The doctrine of ultra vires is to be applied reasonably. Alt.-Gen. V. Great Eastern Rail. Co., 5 App. Cas. 473. Clearly a power to borrow on debentures will authorize the issue of debentures repayable on six months' notice on either side, at any time after (say) twenty years ; and to hold it to be ultra vires for a company to issue them on the footing that it alone is to have power to give the notice, would seem to be preposterous ; for ob\'iously the bargain as thus made is far less onerous to the comj)any. As to debenture stock. This, as we have seen, is in substance the same thing as a loan seciu'ed by debentiu'es. If the company has, by its memorandum, power to borrow or raise money by the issue of debentui'e stock, its power is placed beyond question ; but, even where there is no such power, it is conceived that a power in the memo- randum "to borrow or raise money by the issue of debentures or otherwise," or even a narrower borrowing power, will justify raising- money by the issue of debenture stock, although it may, in some cases, be deemed expedient to reserve to the company power to redeem at a specified period. There woidd clearly be no objection in such a case to borrowing, say 100,000/., from A. B., on a covenant to repay the amount, say fifty years after date, with or without power reserved to the company to pay off sooner. If so, what objection can there be to borrowing the amount from say a hundi'ed people, and covenanting with A. B., as trustee, to pay them off fifty years after date, whether power is or is not reserved to the company to pay them off sooner ? But this is exactly how debentvu-e stock is constituted. And can the validity of the transaction be affected by the name which the parties choose to ajiply to the loan? They might very properly call it a debenture loan, but they think fit to call it debenture stock, and the commercial world has sanctioned and approved the adoption of that name, and the public has taken up enoi-mous quantities of what has been so named. "Debenture stock is merely borrowed capital consolidated into one mass for the sake of convenience. Instead of each lender ha\'ing a separate bond or mortgage, he has a certificate entitling him to a certain sum, being a portion of one large loan." Lindley, Company Law, p. 195. Uucallod capital, mort- gage of. Mortgaging" uncalled Capital. At one time it was thought that uucallod capital could not be mortgaged {Staiiley's case, 4 IJ. J. & S. 407); but in 1875, Jessel, M. E., decided that a mortgage of imcallod capital was allowable where the company's articles of association gave the power, and there was nothing in the memorandum of association to the contrary {Phainix Besseyncr Co., 44 L. J. Cli. G83 ; 32 L. T. 854) ; and accordingly, in the first edition of the author's work on Company Precedents, published in INTRODUCTORY NOTES. 767 1877, and in all subsoquont oditious, tli(3 author, after referring to this docision, gave forms of debentures charging the company's under- taking and its uncalled capital for the time being. Doubts having been raised as to the validity of such a mortgage, the matter was considered in the Court of Appeal in Pyle Works, 44 C D. 434, and it was held that Phoenix Bessemer Co. was well decided. Subse- Validity quently the same question came before the Judicial Committee of the established. Privy Coimcil, and it was again held that if there is power in the memorandum or jjower in the articles, and nothing in the memorandum to tlie contrary, uncalled capital can be effectually charged. Newton v. Anglo-Australian, &,'c. Co., (1895) A. C. 244. "If the memorandum, when authorizing certain charges, has omitted to authorize a charge on uncalled capital, the omission may imply a prohibition." Per Lord Macnaghten, S. C, p. 249. And it is not essential that such a power to mortgage uncalled What words capital or future calls should be given in terms by the articles ; some- sPj™cient to thing less may be sufficient ; thus a power in the memorandum to ^-ac^ power mortgage the property and rights of the company is sufficient. Iloivard may also be v. Patent Ivory Co., 38 C. D. 156. So, too, a power to mortgage the t^e'raemo- company's "assets" appears to be sufficient {Page v. International, ^-c. randum. Co., 68 Law Times, 435) ; or to raise money in various modes, or " in such other manner as the company may determine" {Jackson \. Rainford, (1896) 2 Ch. 340); or to raise money on "any security of the company." Newton v. A?iglo-Australian, ^c. Co., siqrra. But a l^ower to borrow on the property of the company will not authorize a charge on the company's uncalled capital, for uncalled capital is only "property " potentially, that is to say, when called up {Irvine v. Union Bank of Australia, 2 App. Cas. 366) ; and even the words " proj)ei-ty both present and future" are insiifficient. Streatham Estates Co., (1897) 1 Ch. 15. Can capital which, under the Companies Act, 1879, is "not capable Reserve of being called up except in the event and for the purposes of the ^ company being wound up," be charged by the company under a power in its memorandum or articles to charge its uncalled capital ? The Court of Appeal has recently answered this cj^uestion in the negative. Bartlctt v. Mayfair Property Co., 14 T. L. E. 336 (April, 1898). Lindley, L.J., in his judgment in that case, said it was plain that sect. 5 of the Act (see Appendix) was framed inter alia "to preserve for the general creditors of the company" the reserve capital, and the learned Judge considered that any mortgage of such reserve capital woidd defeat this object, and that to apply any part of the reserve capital to xmying off such a mortgage "is not to apply the reserve capital for the purposes of the company being 's\'ound up within the true meaning of that expression as used in sect. 5, but to prevent such application." The question is, whether the words of the Act justify the conclusion 3e2 788 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. thus arrived at, for it is abundantly clear that the intention of Parlia- ment is to he gathered from the words it has used in the Act. "I can only find the true intent and meaning of the Act from the Act itself." Per Lord Halsbur}^ L.C., Salomon v. Salomon Sf Co.^ (1897) A. 0. 31, supra, p. 560. Now, looking to the words of the Act, it is to be observed that whilst the company is prohibited from calling up the reserved capital there are no words jirohibiting a mortgage or charge. If it had been intended by the Legislature to prohibit any mortgage or charge it would have been easy to say so ; but the Act observes a significant silence. Why, then, depart from the well-settled rule of construction by reading into the enactment words not contained in it, and thus deprive a company of the power of utilising its reserve capital in times of special pressure ? Take, for instance, the case of a bank with reserve caj)ital, and suppose some sudden financial pressure caused by another crisis or panic. Is the bank deprived by the Act of the power to obtain temporarily, on the security of its reserve capital, funds sufficient to enable it to tide over the crisis, or must it succumb simply because, with ample resources, it cannot at the critical moment make use of them ? Such a conclusion would be most imfortunate. Lindley, L.J., bases his judgment to a great extent on the fact that reserve capital created upon the re-registration, under the Act, of an unlimimited company represents a liability which before such re-regis- tration could not have been mortgaged ; and from this he infers that, in the absence of express authority to mortgage, it cannot have been intended to remove this disability ; but surely the answer is that the Act renders the reserve capital part of the capital of the company — though it is to remain uncalled ; that uncalled capital is prima facie capable of being mortgaged ; that this had been decided (see supra) in 1875 ; that the legislature must be taken to have known the law and to have intended the logical consequences of its enactment save so far as a contrary intention is expressed ; and that it must be taken, there- fore, to have known that the reserve capital would, prima facie, be caj)able of being mortgaged, and yet it only thought fit to provide that it should not be called up. The learned Judge referred to Heydon's case, 3 Co. 7, but the cardinal rule of interj)retation laid down in that case is that the Court is to consider what remedy Parliament has appointed, and the decision in Salomo7i v. Salo^nori &,- Co., (1897) A. C. 20, shows (dearly that it is not for the Court to supplement the remedy so appointed. As to the argument that the pajnnent of secured creditors is not one of "the purposes of the winding-up," tliis, it is submitted, is unsound. The puyiiKJut off of secured creditors is one of tlie purposes of the Act of 18G2, and tlie Act of 1879 is to be construed with it. Sect. 3. A secured creditor can petition for a winding-up ( JF(?.s/er?j o/ Canada Co., 17 Eq. 1 ; Moor v. Anylo-Ilalian Bank, 10 C. D. 689; Borough powers. INTRODUCTORY NOTES. 789 of Portsmouth Tramways, (1892) 2 Ch. 362), and can apply in a winding-up to have his security realized {Marme Mansions Co., 4 Eq. GOl ; Fowler V. Broad's Patent, ^'c. Co., (1893) 1 Ch. 724), and hp can prove in a winding-uj), altliough, if the company he insolvent, he must, if he proves, eitlier value his security or give it up. Lastly, see Netvton V. Anglo- Australian, &:c. Co., (1895) A. C. 244, and in particular what Lord Macnaghten said at p. 520. The decision supports the view that to prohibit the calling-up of capital does not impliedly prohibit a mort- gage thereof. Upon the whole, it is submitted that there is nothing sufficient in the Act of 1879 to show that it was intended to negative the company's power to mortgage or charge the reserve capital. Assuming the comjjany to possess the requisite power, the next Directors' question is as to the powers of the directors to exercise the company's power to issue debentures or debenture stock. This of course depends on the regulations, or, in other words, 'the articles of association. Usually the articles contain express power, as in the clauses fol- lowing : — The directors may, from time to time, at their discretion, raise or borrow, or secure the payment of, any sum or sums of money for the purposes of the company [but so that the amount at any one time owing in respect of moneys so raised or boiTOwed shall not, without the sanction of a general meeting, exceed the nominal amount of the capital. Nevertheless, no lender or other person dealing with the company shall be concerned to see or inquire whether this limit is observed] . The directors may raise or secure the repayment of such moneys in such manner and upon such terms and conditions in all respects as they think fit, and, in particular, by the issue of debentures or debenture stock of the company charged upon all or any part of the property of the company (both present and future) , including its uncalled capital for the time being. See furtlier, supra, p. 412. The presence of such clauses, of course, precludes any question as to the directors' powers. In other cases there is no express power in the articles, but there is a clause similar to clause 55 of Table A., or to Clause 113 of Form 210, empowering the directors to exercise all such powers of the company as are not, by the Act or by the articles, required to be exercised by the company in general meeting. It is well settled that such a general clause is effective, and invests the directors with the company's power to borrow on debentures or other- wise. Patent File Co., 6 Ch. 88 ; Anglo- Danubian Co., 20 Eq. 339 ; Australian Co. v. Mounsey, 4 K. & J. 733. If the company has the requisite powers, but the regiilations do not vest those powers in the directors, it may be necessary to obtain autho- rity from a general meeting, or, in some cases, to pass a special resolu- tion altering the regulations, and vesting the necessary powers in the directors, either absolutely or subject to the control of general meetings. When it is necessary to insert borrowing powers in the articles, they may be in the terms of the clauses set forth above, p. 789. Sometimes it is only necessary to alter a figure in the articles of capital. 790 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. associatiou, e.^., " That the articles of association be altered by substi- tuting- the figure 100,000/. for the figure 50,000/. in clause thereof." A power to raise money upon all or any part of the property of the comj)any or upon debentures, notwithstanding- the alternative fomi, warrants the issue of mortgage debentures. Panama, ^'c. Co., 5 Ch. 318, 322. In some cases the directors only have power to issue debentures or debenture stock with the sanction of the company in general meeting ; and in such cases the necessary sanction ought of course to be obtained, but it does not follow that debentures or debenture stock irregularly issued will be void. Royal British Bank v. Turquand, 6 E. & B. 327; Irvine v. Union Bank of Australia, 2 Ajip. Cas. 366; supra, p. 411. As to charg- If mortgage debentures or debenture stock are to be charged upon uncalled ^-^^ xmcalled capital of the company, it must be seen that the directors have power to do this. Generally speaking, calls are to be made at the discretion of the directors ; and unless they are expressly \^supra, p. 787], or by necessary implication, empowered to mortgage the future calls, it will be ultra vires the directors to do so. A power to directors to borrow on the security of the ' ' funds or pro- perty " of the company is not sufficient. Stanley'' s case, 4 De Gr. J. & S. 407. Nor is a power "to pledge, mortgage, or charge the works, hereditaments, plant, property, and effects of the company " {Sankey Brook Coal Co. (No. 2), 10 Eq. 381); nor a power "to mortgage or charge the property of the company." Bank of South Australia v. Abrahams, L. E. 6 P. C 265. See also King v. Marshall, 33 Beav. 565. But where the company has the requisite power in its memorandum of association, and the directors have by the articles the general powers of the companj^ (see supra, p. 789), that is enough, unless by some clause in the regulations the general powers are expressly or impliedly made inapplicable to a mortgage of uncalled capital. The directors' borrowing powers are very commonly limited as above (p. 788). Sometimes the limit is to a specified sum. See Hoivard v. Patent Ivory Co., 38 C. D. 156. In most cases the regulation is so framed as to allow a general meeting to extend this limit, and this is desirable, for if the company wants to pass beyond the limit, it may be very inconvenient to be compelled to pass a special resolution. Occasionally there is a clause to the effect, that no debentures or debenture stock shall be issued without the sanction of a separate meeting of the preference shareholders. Such a clause is open to very grave objection. It may at the critical moment paral^^ze the company, or compel the directors to raise money by selling bills of exchange at a heavy discount. . .£10 ax il Baxui.)ojxco8 t INTRODUCTORY NOTES. 791 Contract to take and issue Debentures and Debenture Stock — how made, and Remedies for Breach. The contract to take up debentures or debenture stock is usually Contract to made by application followed by allotment. In such caso, as in the J^^^^ ^^ l^' case of shares, the application cau, by notice to the company, be benture stock, withdrawn before it is accepted by the company. The posting of a ^^'^ made. letter of allotment is an effective acceptance. Allotment followed by acceptance would, however, suffice, and sometimes the contract to take and issue is combined in one docimient, e.(/., Avhen a vendor agrees to seU for debentures. See p. 143. When a subscriber for debentures makes default in pajdng up any Specific por- iustalmcnts thereon, he cannot be compelled specifically to perfonn subscTriber or the contract by paying up the instalments, for the Court will not grant damages, or specific performance in such a case. Western Wagon Co. v. West, pa^id^j^tal- (1892) 1 Ch. 271; South African Territories v. Wallington, (1897) ments. 1 a B. 692; affirmed in H. L., AV. N. (1898) 28. The company's remedy is to sue for damages, and it may not be easy to prove them, for on a contract to make a loan of money the measure of damage is the loss sustained by the breach, and the damages may be merely nominal. ''For instance, if A. agrees to lend B. 100/. at interest for a week and makes default, and B. within a few minutes after the time at which the lOOZ. ought to have been lent obtains from his bankers a loan of 100/. at the same rate of interest and for the same period of time, the damages would be merely nominal. Damages recovered are not recovered by wa}^ of loan ; the plaintiff puts them in his pocket and keeps them." Per Chitty, J., Western Wagon Co. v. West, (1892) 1 Ch. 277. The contract on the part of a company, moreover, being a contract to borrow money, cannot, apparently, be specifically enforced. "It is immaterial whether the loan is to be on security, or without security, or whether the loan is to be for a fixed period, and it can make no difference whether the loan-is to be made in one sum or by instalments." Per Chitty, L. J., South African Territories v. Wallington, supra. The best security for the performance by the allottee of his contract is, to take care that the amounts payable on application and allotment are considerable. If he fails to perform his bargain, the comjoany, after due notice, can forfeit their payment. However, in the case of perpetual debentures or debenture stock, it may be that the Coui-t would grant sj)ecific performance of the contract, seeing that it is something more than an ordinary loan transaction. As to enforcing the Contract against the Company. It seems that the contract can be enforced specifically where the As to en- debentures are to be secured on real estate, and are not payable off on conh^ t ° short notice. against com- Where the contract is not capable of being specifically enforced, it P'^°5'' would be very difficult to make out a case for damages. 792 DEBENTUKEti AND DEBENTURE STOCK. [ChAP. XIV. Undue instal- ments not payable in winding-up. If the money has not been advanced the Court will not compel the company to borrow it. Rogers v. Challis, 27 Beav. 175. But where money has actually been advanced on the terms that it is to be secured by mortgage, the Court will sijecifically enforce the execution of the mortgage. Ashton v. Corrigan, 13 Eq. 7G ; Hermann V. Hodges, 16 Eq. 18. Where a company offers debentures or del)enturo stock for subscrip- tion and states the security offered, and any debentures or debenture stock are taken up on the faith of the j^rospectus, the subscribers stand in equity in the same position as if the securities had been actually granted; for equity treats that as done which ought to have been done. Strand Music Hall, 3 D. J. & S. 147 ; Neiu Durham Salt Co., 2 Meg. C. E. 360 ; Mercantile Investment Co. v. liiver Plate Trust, (1892) 2 Ch. 303 ; Hansard Publishing Union, 8 T. L. R. 280. But in order to obtain the benefit of this ecj^uity it must appear, by the prospectus, what is the property which is to be the security. If the prospectus states that it is to be all the property, well and good ; but if it states that it is to be "certain parts of the pi'operty," that woidd not suflB.ce. And even where debentures are void as such, e.g., by being issued in blank, the holders are given ec[ual rights with other debenture holders under the trusts of a covering deed. Queensland, Sfc. Co. v. Davis, (1894) 3 Ch. 181. And where, under a contract, a person who has lent money to the company has an option to have debentures issued to him, he may exercise the oj)tion even after judgment in an action commenced by debenture holders. Pcgge v. Neath and District Tramwags Co., (1898) 1 Ch. 183. When a company goes into liquidation while instalments are still due from a subscriber for debentures, he is not bound to pay up such instalments {Ellerby''s claim, 20 W. E. 855) ; for the winding-up gives him a right to treat the contract as at an end, especially if the company is insolvent, because in that case the mutual credit clause applies. If a company become insolvent before a subscriber for debentui'es has paid up his instalments in full, he is entitled to withhold payment, for no man is bound to advance money after notice of insolvency. Ex parte Chalmers, 8 Ch. 289; Ex parte Carnforth Co., 4 C. D. 108. Moreover, where debentures are subscribed on the footing of a particular scheme — e.g., the making of a railway — which becomes impracticable, the subscribers or debenture holders are entitled to have their money back. Collingham v. Sloper, (1893) 2 Ch. 96 ; Wilson v. Church (1879), 13 CD. 1 ; National Bolivian Navigation Co. v. Wilson (1879), 5 App. Cas. 176. Scrip cciiifi- cates to bearer. Scrip Certificates to Bearer. The allottee of d(j])enturcs or do])enturo stock is very commonly given a scrip certificate to bearer, when he has paid up the amount INTRODUCTORY NOTES. "93 payable on allotment. See Forms 541, 542. These certificates are, by the law merchant, negotiable. Jtumball v. Metropolitan Bank, 2 Q. B. D. 194 ; Goodivi7iy. Roharts, 1 App. Cas. 476. If the company goes into liquidation before the instalments are all paid, the holder need not pay the balance. Ellerbys claim, 20 "\V. R. 855. Priorities. Debentui-es and debenture stock are subject to the ordinary rules as Priorities, to priorities applicable to the securities given by natural persons, and the following is a short statement of the most material of these rules in their relation to debentures and debenture stock : — I. As to Naked Debentures and Debenture Stock. Debentures and debenture stock which are not seciu-ed b}' any mort- !• Where no gage or charge, do not confer on the holders any priority over other ^g^enture ^ unsecured creditors. Hence, if the company goes into liquidation, the holders, &c. remedy of the holders is to prove in the winding-up and take their ^^ ^^ , dividend (if there be one) pari passu with the otlier unsecured creditors, creditors. Moreover, the issue of such debentures or debenture stock in no way prevents the company from mortgaging or charging, or otherwise deal- ing with its property ; and mortgages and charges so created all take prioi'ity over the naked debentures or debenture stock, subject (of course) to s. 164 of the Companies Act, 1862, as to fraudident prefe- rence. And a creditor who obtains judgment against the company can take in execution any property of the company, and may thus obtain priority over naked debentures or debenture stock. II. As to Mortgage Debentures and Debenture Stock. Debentures and debenture stock which are secured by mortgage or II. Where charge stand, in respect of the property on which the same are secured, ™o"^^&e on in a very different position from naked debentures or debenture stock. Thus— (1) In the case of a winding-up they rank, subject to the jirovisious accorded by the Preferential Papnents in Bankruptcy Amend- ment Act, 1897, in j)riority to the unsecured debts and liabili- ties of the company. Panama Co., 5 Ch. 318 ; Florence Land Co., 10 C. D. 530; Colonial Trusts Corporation, 15 C. D. 465. Even whilst the company is a going concern, the holders of secured debentures or debenture stock rank in priority to execution creditors, at any rate until the property has been sold by the sheriff and the proceeds handed over to the execu- tion creditor. Stajidard Manufacturing Co., (1891) 1 Ch. 627 (C. A.); Opera, Limited, (1891) 3 Ch. 260; S. J., 1894, p. 522 ; Taunton v. Sheriff of Warwickshire, (1895) 2 Ch. 319 ; "94 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Scott V. Lord Hastings, 4 K. & J. 633 ; Alurshall v. liof/ers ^' Co., 14 T. L. Ii. 217. In Tauntonv. Sheriff of Warwickshire a receiver had been appointed, at the instance of the debenture holders, before the sheriff could sell. " The debentures must be regarded as incomplete assignments, which do not complete until the time when the receiver is a2:)pointed." Per Kay, L. J., in Bigger staff \. Eoivatt's Wharf, (1896) 2 Ch. 93, 106. And the debenture holders have no priority over a person having a right of set-off, or a landlord who has levied a dis- tress, before in either case a receiver has been "effectually appointed." Rotmdwood Colliery Co., (1897) 1 Ch. 373, 393. (2) Debentures and debenture stock secured by legal mortgage or charge rank in priority to all previously-created equitable interests, unless on the issue of such debentures or debenture stock the subscribers had notice {infra, p. 800) of such pre- viously-created estates or interests ; for the rule in such a case is, that when equities are equal the legal estate prevails. Pilcher v. Raivlins, 7 Ch. 259. And equality here does not mean or refer to equahty in point of time. Bailey v. Barnes, (1894) 1 Ch. 25. And the legal estate is most potent in protection, and the holder thereof will not be postponed to a subsequent equity, unless fraud, or negligence amounting to fraud, is established. Northern Counties, ^c. Co. v. Whipp, 26 C. D. 482 ; Manners v. Mew, 29 C. D. 725 ; Brace v. Duchess of Marlborough, 2 P. Wms. 490. (3) Debentures and debentm-e stock seciu-ed by equitable charge rank, subject to what is hereafter stated, after all previously- created estates and interests ; for the rule of equity is, that, as between persons having only equitable interests, if those equities are, in all other respects, equal. Qui prior est in tempore, potior est injure. Rice v. Rice, 2 Drew. 73. (4) The holders of debentiu'es and debentui-e stock secured originally by mere equitable charge, and therefore ranking after pre- viously-created equitable estates and interests, may, if when they advance their money they had no notice of such pre- viously-created estates and interests, gain priority over the same by subsequently obtaining the legal estate, e.g., from some prior incumbrancer. Willoughby v. Willoughby, 1 T. E. 767 ; Taylor v. Russell, (1892) A. 0. 244 ; Bailey v. Barnes, (1894) 1 Ch. 25; Brace v. Duchess of Marlborough, 2 P. Wms. at p. 491. (5) On tlie other hand, the holders of debentures and debenture stock, secured by equitable charge, may lose their priority by the creation of a subsequent legal mortgage in favour of persons who take for value without notice of the charge for securing tlie dc^ljontures or debenture stock. English, ^c. Co. V. Brunton, (1892) 2 Q. B. 1 ; Bailey v. Barnes, (1894) 1 INTRODUCTORY NOTES. 795 Ch. 25 ; or by a subsequent equitable uiortg-ageo getting in the legal estate as in (4). (6) Debentures and cle})enture stock, secured by equitable charge, may also lose their priority, as against subsequent equities, by reason of fraud or negligence on the part of the holder, or by estoppel. National Provincial Batik of Emjland v. Jackson, 33 C. D. 1 (0. A.) ; Fai-randv. Yorkshire Banking Co., 40 C. D. 182; and see Castell v. Brown, supra, j). 775. (7) As to lands in "register" counties: Priority of registration, subject to various exceptions and qualifications, gives priority of title, unless the party registering had, as to Middlesex, actual or constructive notice of a prior ecj[uity (Ze Neve v. Le Neve, Amb. 430 ; 2 W. & T. L. C. 4th ed. 35 ; Rolland v. Hart, 6 Ch. 678) ; or as to Yorkshire registry, was guilty of actual fraud {Battison v. Hobson, (1896) 2 Ch. 403) ; notice in the absence of fraud not being material. See Middlesex Registry Act, 1708, and Yorkshire Registry Acts, 1884 and 1885 ; Dart's V. & P. 775. As to Irish Registry Acts, see Ayra Bank v. Barry, L. E. 7 H. L. 135. (8) As to land in foreign countries : A mortgage or charge thereon will rank after any rights which affect the land under local laws ; unless, indeed, the mortgagee is here, and an equity can be established as against him, supra, p. 780. (9) As to ships subject to the Merchant Shipping Act, 1894, or the enactments for which that Act was substituted : The incumbrancer, legal or ecj^uitable, who, though not first in date, has (and that, too, notwithstanding any express, implied, or constructive notice) fu'st registered his security, takes priority. See sect. 33 of the Act ; Coomhes v. Mansfield, 3 Drew. 200; McCalmontx. Rankin, 2 De Gr. M. & Gr. 403; Blacky. Williams, (1895) 1 Ch. 408. (10) As to patents: See the Patents, Designs, and Trade Marks Act, 1883, s. 87. (11) As to choses in action (not including shares in companies), the ordinary rule established in Dearie v. Hall, 3 Euss. 1, applies; and, accordingly, where debentures or debentui-e stock are secured on any choses in action, e.g., book debts, contracts, bonds, policies, &c., the holders may, if notice of the security is not at once given to the debtor or trustee, be deprived of their priority by some other incimibrancer or purchaser who gives the necessary notice of his incxmibrance, unless such person, when he advanced his money, had notice of the charge created by the debentures or debentui'e stock. The rule is applicable to all choses in action as distinguished from choses in possession (save where, as in the case of shares in a company under the Act of 1862, the ride is, in effect, ex- 796 DEBENTURES AND DEBENTURE STOCK. |"ChAP. XIV. eluded by statute. Colonial Dank v. Whinncy, 1 1 App. Cas. 426). The rule is not confiued to debts, much less to debts presently pajable. On the contrary, it has been held to apply to current policies of assurance (Thompson v. Spiers, 13 Sim. 469), and to shares in an unincorporated joint stock company (Martin v. Sedgwick, 9 Beav. 338), and to interests in a trust fund, absolute or contingent. Further, " the rule in Z)eflr/e V. Hall is independent of any consideration of the conduct of the competing assignees, where the assignee, second in date, has no notice of the earlier assignment. Priority, in such case, depends simply and solely on priority of notice." Per Lord Macnaghten, Ward and Duncomb, (1893) A. C. 391. (12) As to uncalled capital : This is no do\ibt a chose in action, for the shareholders are under a statutory liabilit}', in the nature of a covenant, to pay the uncalled capital when recjuired (s. 16 of Act of 1862). The cases show that such a habihty is within the rule in Dearie v. Hall, tibi supra. Accordingly, debentui-e and debenture stock holders who take even a specific charge on uncalled capital, may, if notice thereof be not given to the shareholders, find themselves post^ioned to some subsequent mortgagee who takes a charge without notice of the debenture charge, and gives notice of his charge before the debenture charge is notified. It has been contended that if the debenture holders' secm-ity is entered in the comj)any's register of mortgages under s. 43 of the Companies Act, 1862 (Appendix), that will protect them b}^ giving to subsequent mortgagees constructive notice of their charge ; but this con- tention appears to be without foundation, for the rules as to constructive notice are not to be extended. Sect. 3 of Con- veyancing Act, 1882; Bailey \. Barnes, (1894) 1 Ch. 25. And the register of mortgages under s. 43 is not a public register ; it is only open to the inspection of members and creditors. Wright V. Horton, 12 Ajjj). Cas. 371 . As a public register {e.g., Middlesex) is not constructive notice to a mortgagee or pur- chaser of what is registered therein {Bedford v. Backhouse, 2 Eq. Cas. 615 ; Morecock, Amb. 678), it would indeed be sur- prising if it were held that the register imder s. 43 is to have a greater oj^u-ation. Certainly, in the past, it has never been held or supposed that any one dealing with a company {e. g., as a purchaser of land) was affected by constructive notice of the contents of its register of mortgages. But to send out a notice to shareholders is not generally convenient, and accordingly it is not uncommon, when it is desired to fortify the security, to pass a special resolution referring to the mortgago or charge, aiid ex])rossly declaring that no charge in priority thereto shall be created. This is effective as against aU persons dealing with the company. INTRODUCTORY NOTES. 797 Anotlicr plan is to insert in the regulations a clause as follows : — " Where any uncalled or unpaid capital of the company is charged or mortgaged, a memorandum stating the date of the charge or mortgage, and the amount or extent thereof, shall be filed with the Registrar of Joint Stock Companies, and entered in the company's register of mortgages, and all persons taking any subsequent mortgage or charge thereon shall be deemed to take the same with notice of the mortgage or charge referred to in any memorandum so filed or entered, and a mortgage or charge whereof a memorandum has been so filed or entered shall, unless otherwise provided therein, rank before all mortgages or charges of the same subject-matter referred to in any memorandum, subsequently so filed or entered as aforesaid, and before all mortgages or charges of the same subject-matter whereof no such memorandum has been so filed or entered." 13) As to shares in registered companies : — The legal title thereto secures jjriority in the absence of notice of prior equitable rights, and such legal title is obtainable by registration, or its equivalent. Boots v. Williamson, 38 C. D. 485 ; Nanney V. Morgan, 37 C. D. 346; Moore v. North Western Bank, (1891) 2 Ch. 599. Notice, however, to a company of an equit- able right is not altogether ineffective, and may serve to pre- vent the acquisition of a legal title in derogation of the rights of the person who gave the notice. See Roots v. Williamso7i, supra ; Bradford Banking Co. v. Briggs, 12 Ap. Cas. 29, supra, p. 386. 14) As to negotiable securities, see supra, p. 755, and London and Joint Stock Bank v. Simnwnds, (1892) A. C. 201, and Ven- ahles V. Baring Brothers ^^ Co., (1892) 3 Ch. 527 ; Bentinck v. London J. S. Bank, (1893) 2 Ch. 120. In the case of negotiable instruments, the dehvery for value of the instrument confers a good title, unless the person to whom it is delivered is guilty of fraud, or of gross negligence amounting to fraud. (15) As a general rule, debentures and debenture stock charged on property rank after a vendor's lien for unj)aid purchase-money thereof, though, where the debenture holder had the benefit of a legal estate without notice, this woTild not be the case. Wrout V. Dmces, 4 Jur. N. S. 395 ; 25 Beav. 369 ; Kettlewell v. Watson, 21 CD. 695 ; 26 C. D. 501. The doctrines as to the vendor's lien are applicable not only to land, but also to per- sonal property, when the vendor has not parted with posses- sion. As to vendor's lien on chattels, see Chase v. Westmore, 5 M. & S. 180; Tudor's L. C. Merc, 3rd ed., 356, 369. (16) As to a lis pendens, persons deahng with the company are pre- sumed to have notice of any claim as against land duly registered as a lis pendens property, see 2 & 3 Vict. c. 11. Bull V. Hutchins, 32 Beav. 615 ; Pratt v. Bull, 1 D. J. & S. 141 ; 4 Giff. 117. But the registration of an action as a lis pendens does not affect personal property, e.g., book debts. Wigram v. Buckley, (1894) 3 Ch. 483. (17) The rule in Rolt v. Hopkinson, 3 De G. & J. 177 ; 9 H. L. Cas. 798 DEBENTUKES AND DEBENTURE STOCK. [ChAP. XIV. 514, applies, aud accordingly after the creation of debentures or debenture stock, and notice thereof to a prior incumbrancer [e.g.^ a banker), he cannot make further advances uj)on the footing that they are to rank in priority to debentures or debenture stock. See, however, (19) below. (18) The rule in Clayton's case, 1 Meriv. 572 ; Tudor's L. C. Merc. 1, must be borne in mind, and accordingly, if debentures are issued subject to a prior incumbrance in favour of a creditor with whom there is an account current {The Mecca, (1897) A. C. 286) {e.g., to a banker), after notice of the debentures or debenture stock, all payments subsequently made to the bank will go in satisfaction of the balance due when the notice was given, and all subsequent advances will rank after the debentures or debentui'e stock ; but this may be avoided by special arrangement between the company and the bankers. (19) Debentures and debenture stock secured whether by legal or equitable charge may be postponed to any estates or interests created in priority thereto, under or in accordance wdth the terms of the securities given for such debentures or debenture stock ; for instance, if the security in favour of the debentures or debenture stock is a floating charge, that, as appears above (p. 773), does not prevent the company creating any prior mortgage or charge unless the securities otherwise provide ; and even where there is a specific mortgage to secure the debentures or debenture stock it is not uncommon to find express provision in the securities empowering the company or the trustees to create prior securities to a limited extent or generally. (20) Debentui'es and debenture stock secured by charge or mortgage to trustees rank after the lien which the trustees have for all expenses and liabilities in relation to the trust {Exhall Coal Co., 35 Beav. 449), and after all moneys properly ad- vanced or raised by any receiver in an action for enforcing the securities {Greenivood \, Algesiras {Gibraltar) Co., (1894) 2 Cli. 205), and after the receiver's and manager's right to indemnity. StrappY. Bull, Sons &,• Co., (1895) 2 Ch. 1. (21) Where there is a trust deed to secure debentures, the company's solicitor very commonly acts for the trustees as well as the eom])au3^, and in such a case the solicitor is to be ti\k.en primd facie to waive liis lion on any deeds in his possession relating to the mortgaged property, unless it is expressly reserved. Re Snell, 6 C. I>. 105; Re Mason ^- Taylor, W. N. (1878) 245 ; Smith v. Pontypridd, 8fc. Co., 96 L. T. E. 89 ; Douglas, Norman ^- Co., W. N. (1897) 171. (22) Debentures of a series containing a charge on property jarmd facie rank in order of date of issue, or agreement to issue ; INTRODUCTORY NOTES. 799 but they usually coutain a pari passu clause declaring that they are all to rank equally, and thus they are all placed on a level. (23) Whore a company issues a series of debentures or debenture stock charging property, it cannot issue further debentures ranking pari passu therewith, or in priority thereto, unless otherwise provided in such first-mentioned debentures, or in the securities for the same, expressly or by iraphcation. And see Smith v. Eiiglish, ^'c. Investment Trust, W. N. (1896) 86. (24) Wliere a company issues more than one series of doT)ontures, and each series is expressed to rank jjari passu, inter se, the eaiiier series primd facie ranks before the later series. Boy- thorpe Co., W. N. (1890) 28. (25) Where two series are issued on the same day, it is a question of intention whether they are all to rank pari passu, or one after the other; and if it appears from the terms of the earlier issue, or the circumstances, that they are intended to rank after the other, even though they were in point of fact issued before the other, that intention must have effect. Gartside V. Silkstone Co., 21 C. D. 762. Wliere a company issued part of a specified series, and then issued a new series, and subsequently issued further debentures of the first series, it was held, that the intention was that the second series should rank after the whole of the first series whenever issued ; and effect was given to such intention accordingly [Lister v. He7iry Lister ^' Son, 41 W. R. 330, in which the construction put by the learned judge on the words "debentures ali-eady issued" differs somewhat from the ordinarily accepted meaning of the words. In fact, this case cannot be relied on as an authorit}^, as the facts originally agreed on were subsequently re-stated). Sometimes a pari passu clause is modified, so that the company may have power to issue f lu-ther debentui'es ranking pari passu with the original issue, in which case it is com- monly provided that all the debentures already issued by the company, and all those of the present issue, shall rank pari passu in point of charge. (26) Where a company has agreed for value to issue debentures or debenture stock secured on its property, or any specified part thereof, the persons entitled under such agreement to the issue thereof are, in point of security, in the same position as if the debentures or debenture stock had been issued in the manner agreed upon. In re Queensland, Sfc. Co., (1894) 3 Ch. 181 ; Pegge v. Neath and District Tramicays Co., (1898) 1 Ch. 183. (27) As to notice : As appears above, cj^uestions of priority often turn upon the question of notice. 800 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Notices as affecting order of charges. Actual. Notice, as affecting priorities, may either be actual or constructive : A. — Actual notice means, in its narrower sense, notice })roug]it to the actual personal knowledge of the party ; but it is sometimes used in a wider sense, so as to include one species of constructive notice, ■s-iz., the notice imputed to a principal of what is brought to the actual notice of his agent. " It has been held over and over again that notice to a solicitor of a transaction, and about a matter as to which it is part of his duty to inform himself, is actual notice to the client." Per Lord Hatherley, L. C, Rolland v. Hart, 6 Ch. 678, 681. See, however, Blackburn v. Vigors, 12 Apj). Cas., 531, 543, where such notice was referred to as constructive notice. Constructive. B. — Constructive notice means notice which, though not actual, is, in a Court of Law or Equity, imputed to the party — To agent. ( 1 ) Thus, if a person employs an agent in any particular transaction, e.g,, a solicitor or broker, notice to the agent is treated in point of law as notice to the principal. Rolland v. Hart, 6 Ch. 681 ; Boursot v. Savage, 2 Eq. 134, p. 142 ; but see also Blackburn v. Vigors, 12 App. Cas. 531, and see p. 543. But this is based on a presumption of commimication, and accord- ingly, where the agent is guilty of fraud, there is no j)resump- tion that he will communicate the fact to his principal. Cave V. Cave, 15 C. D. 639; Kennedy y. Green, 3 M. & K. 699; Re European Bank, 5 Ch. 358. "It must be made out that distinct fraud was intended in the very transaction, so as to make it necessary for the solicitor to conceal the facts from his client in order to defraud him." Rolland v. Hart, 6 Ch. at p. 682. And see Hampshire Land Co., (1896) 2 Ch. 743. Where notice (2) Where a person has notice of a fact which in common prudence should have led him to make further inquiries, e.g. : (a) Notice to a person that the property was encumbered, fixes him with constructive notice of facts and instru- ments, to a knowledge of which he would have been led by further inquiry. Jones v. Smith, 1 Ha. 43, at p. 55 ; Ware v. Lord Egmont, 4 D. M. & G. 460 ; 9 Ha. 449 ; Hewitt v. Loosemore, Amb. 436 ; Montejiore v. Broivn, 7 H. L. C. 2G2. (b) Notice of an instrument affecting the title is notice of any other instrument which would be discovered by an examination thereof. Coppen v. Fernyhough, 2 Brown, C. C. 291. But notice of a deed that may, but does not necessarily, all'ect the title, is not notice of the contents thereof. English and Scottish, Sfc. Co. v. Brunton, (1892) 2 Q. B. 1 ; J'atman v. Harlaiid, 17 Ch. D. 353. (c) Again, wlioi'o a party wilfully shuts his eyoa and ab- stains from making inquiry, notice of what he would of a fact putting a party on inquiry. INTRODUCTORY NOTES. 801 have ascertained, if tlio inquiry liad been made, is imputed to him. Jones v. Smith, 1 Hare, 55 ; Ware v. Lord Egmont, 4 De G. M. & Gf. 460, 473. (d) Constructive notice may also nriso hy record, e.g., a public Act of Parliament. (e) See further as to notice, s. 3 of the Conveyancing- Act, 1882; Seton, p. 1750; Le Nece v. Le Neve, 2 W. & T. L. C. 26 ; and Baileij v. Barnes, (1894) 1 Ch. 25. (f) Actual notice to the directors of a company, or, in some cases, even to a clerk in the otfice {Truman's case, (1894) 3 Ch. 272) Avould ajipear to be actual notice to the company, using the words in their wider sense. As to notice where directors or others are com^non officers of two companies dealing together, see Hamp- shire Land Co., (1896) 2 Oh. 743. Power to Majorities of Debenture and Debenture Stock Holders. It is now a common practice, in the case of debentures and debenture Powers of stock, to give power to a specified majority of the holders thereof to ™fiJ?rities sanction certain modifications of the rights of the holders as a body, iniuorities. Usually this power is made exercisable by resolution passed at a meeting Resolutions of the holders, but sometimes it is provided that if a provisional agree- op sanctiou ment for modification, made on behalf of all, is sanctioned in writing ii writing- of by a specified majority, it shall bind all. ao-reemeiits. The object of confei'ring this power on the majority is to ^u'otect it Protection against unreasonable conduct on the part of the uiiuoritv, and to pre- "^ ,2:i'C";it . ' i. niaiority vent a deadlock happening when unanimity cannot be obtained. Unless ag-ainst the majority is thus enabled, in .special circumstances, to determine mmority. what is to be done on behalf of the whole body, the minority is j)laced in a position to dictate to the majority, and the whole of the majority, however large, may be placed in peril by the stupidity, fraud, or greed of an insignificant minority, or by the delay which would restilt if it were necessary to obtain the consent of every debentiu'e or stock holder. For example, the time for payment may be approaching, and it may Examples of be desirable to give further time, or the rate of interest mav be too cases of _ T . . . ."' modincation high, and it may be necessary to reduce it temporarily, or, it may be of rio-hts. necessary to allow the company to raise further funds in priority to the debentures or debenture stock, or to raise it pari jjassa. Ultimately it may be necessary to cancel arrears of interest, or procure the security holders to take shares in satisfaction of their securities, or it may be necessary to suspend a sinking fund for redemption of the securities, or that the secui'ity holders should concur with the company in making- over the whole undertaking to a new company, and that they should accept securities or shares of that company in satisfaction of their debentures or debenture stock. P. 3 F 802 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Consequences of no powers of modifica- tion being conferred on. a majority. If special powers for onaMiug a large majority of security holders to make any sucli modifications have not })eon conferred by any instru- ment comprised in the securities, such modifications cannot be carried out as against any holder who objects. He may insist on strict adherence to the original bargain, and may thus imperil the interests of those who have a vastly preponderating interest. Ha-ving had some experience of the dangers to which majorities were exposed, the writer, in drafting in 1879, a trust deed to secure the debentures of the New Zealand Agricultural Co., Limited, inserted clauses intended to avert these dangers, and in the second edition of this work (published in 1881) the writer made these clauses public, with an explanatoiy note, which was as follows : — [It is by no means uncommon now to insert provisions (as above) in a debenture trust deed, enabling the majority to bind the minority ia respect of various matters. The Joint Stock Companies Arrangement Act, 1870, gives such a power, but it only applies when the company is in liquidation. Now it sometimes happens that a company, wliich has raised a large sum on debentures, falls into temporary difficulties, and though a large majority of its debenture holders may be willing to give time or make some reasonable arrangement, a minority decline to concur, and in the result the company is forced into liquidation. The insertion of such provisions as above meets this incon- venience, and may save the majority from the tyranny of the minority.] The limits of the power to modify as set out (at p. 172) in the second edition of this work, were stated thus : — 14. A general meeting of the debenture holders shall, in addition to the power herein- before given, have the following powers, exercisable by special resolution, namely: — (1) Power to sanction the release of any of the mortgaged premises. (2) Power to sanction any modification or compromise of the rights of the debenture holders against the company or against its property, whether such rights shall arise under the debentures, or under these presents, or otherwise. (3) Power to agi'ee to accept any other property or securities instead of the debentures, and in particular any debentures or debenture stock of the company. Cases on majority clau.'-os. Tud V. Xew Ztahnid AyricuUuval. Majority provisions have now been adopted in hunda-eds of cases and their expediency is generally acknowledged ; indeed, the drafts- man who omits to insert some such provision rims the risk of being accused of neglecting the best interests of the debenture or debenture stock holders. The Court has in many cases approved the insertion of majority provisions in deeds settled pursuant to schemes of arrangement and otherwise. So far as the writer knows, the first case in which the validity of such provisions caino in question was Tod v. Neio Zealand Agricultural Co., decided in June, 1 886. In that case it appeared that the company had issued debentures for upwards of 500,000/. payable at diffe- rent tinuis, biit all ranking pari passu in point of charge. The trust deed for securing the debentures contained majority clauses as above men- tioned. In 1885 a meeting of the debenture holders was held, at whifsh it was resolved that the time for payment of all the outstanding dcbf'Titnres slioiild bo extended for five years, and that in the meantime cacli of tlio (]n])cntures Hhould continue to carry interest at the existing rate. The plaintiff's debentures shortly afterwards fell due and he INTRODUCTORY NOTES. 803 sued for the amount, alleging- that the resolutions were not effective. A special case was stated in the action, and, at the liearing' thereof, it ^yas held by the Queen's Bench Di\'ision (Day and Wills, JJ.) that the resolution was Lindiug, and accordingly the action was dismissed. Day, J., in giving judgment, said "The present action is brought by the holder of a debenture issued upon special tenns — a debentm'e which contains a provision that the holder shall allow his ordinary rights as a debenture holder to be controlled for the common good of his fellow debentiu'e holders. The contract which is entered into is one, in substance, not only with the company, but it is also, in point of substance, a contract with all other persons who may take debentures of this company, whereby he agrees that for the common benefit of all tlie debenture holders he should submit the control of his own private rights in common with the private rights of other debenture holders to the control, in certain particulars at any rate, of a certain majority of the whole body of debenture holders. ... A resolution of this sort must be read as affecting all, or affecting all as far as may be, evenly and alike. It must not be a resolution by a majority to deprive A., B. and C. of his rights in any shape or way. It cannot be supposed that a debentui'e holder ever intended to confer on the majority of a meeting the right to say that he should be mulcted in 50 per cent., or even 1 per cent, of his debentm-es, unless everybody else was mulcted in a similar proportion. It does seem to me, for the reason which I have just given, that this postponement of the time of redemption for this limited period is within the scope of the power which the debenture holder has, by the very tei-ms of his debenture, conferred on the general body to exercise- for the common good and advantage." And although the deed pro- vided that the resolution was to be passed by a three-fourths majority of the persons " entitled under these presents to vote thereat," which words, it was argued, pointed to all the holders, the learned judge considered that the words were controlled by another clause, which provided that the respective bearers of the debentures should be recognized and treated as the legal holders thereof . " The bearer of a debenture is a person distinguished from the registered holder of a debentui-e. The bearer of a debenture is the person who actually comes into the room with a debenture. . . . Now who is entitled to vote thereat where the title consists in being present at the meeting, with one or more debentures ? It must mean — present at the meeting. But when present ? Does it mean present at any moment ? I think that is unreasonable. It cannot be the meaning, that because a person has come to the meeting, and stopped there for five minutes, therefore he is to be counted amongst those entitled to vote thereat. Therefore what time are we to look at ? In my judgment it must mean those ■who as debenture holders are present at the time the voting takes place. . . . The chairman, according to the minutes, said that the reso- lution was carried by a majority of not less than three-fourths of the persons entitled to vote, and one of the special conditions which are 3f2 804 DEBENTURES AND DEBENTURE STOCK. [OhAP. XIV: J)nni)iio?i of Cain da, ^-c, Limited. incorporated with the debentures provides, that whatever is found in the ordinary course of business entered in the minutes is to be taken to be correct, until the contrary is shown, and therefore that must be taken to be true. . . . I do not see that the contrary is shown. . . . I must hold that the resolution was carried by a majority of not less than three-fourths of the persons entitled to vote at that meeting, and in my view the defendants are entitled to judgment." Shortly afterwards, the operation of majority clauses was raised before Chitty, J., in Dominion of Canada^ Sfc. Co., 55 L. T. 347. The comjjany had issued deljentures secured by a trust deed which contained majority provisions, and enabled a meeting, by the speci- fied majority, to assent to any modifications of the deed. In the year 1884 it became necessary to raise further funds for the purposes of the company, and it was impossible to raise the same except by means of a charge or security to take priority over the debentures. Accordingly, a provisional agreement was, in 1884, made between H., purporting to act on behalf of the holders of the debentures, and the comj)any, whereby the company was empowered to create such prior charge. That agreement was sub- mitted to a meeting of the debenture holders, and sanctioned by the requisite majority. The prior charge was subsequently created and made a security for the issue of certain rent-charge securities. In 1886 the company went into liquidation. A scheme of arrangement between the rent-charge holders and the debenture holders and the company having been proj^osed, the c^uestion whether the creation of the prior charge was valid- arose. Chitty, J., held that it was vaKd. "The material words," said his lordship, "are 'assent to an}' modification.' Now, the modification that was assented to by the reso- lutions, carried by the requisite majority, was a modification which let in, in priority to the debentures, persons who were willing to subscribe money for which they were to receive the security of the rent-charge. I tliink that such a resolution was authorised by the deed, because one of the difficulties that there always are in dealing with matters of this kind when the company gets into difficulty and when more money is required, is to deal with the debenture holders as a class. That is a difficulty which tlie Legislature itself folt when it passed the Act of 1870, allowing a majority, and a sufficient majority — that is to say, not a mere absolute majority, but a majority much larger than that — to bind the minority. Tlien it was known that before the legislation of 1870, any particular individual could hold out against a scheme, however meritorious and however beneficial it might be, in order that lif might get, generally speaking, some special advantage for himself, or ])('causc lie was a person who did not even take a fair \'iew of the advantages to be gained. It was for the purpose of preventing that f)})struction that tlu^ Legislature passed the Joint Stock Comjianies Arrangouieiit Act, 1870, and it was, in my judgment, for a similar pui-pose that the parties lo tin's deed provided that the prescribed INTRODUCTORY NOTES. 80o majority might bind tlio uiinunt^>-, and I tliink tli(j wcjrds are large enough. Ilindng regard also to the subject-matter and the nature of the questions which are likely to arise, I think that the deed did in faet authorize the debenture holders themselves by the required majo- rity to resolve to postpone their security to a new security to be created for the common benefit of them all." The next rejn-esentative case is Follit \. Eddy stone Granite Quarries, FolUt v. (1892) 3 Ch. 7o. In this case the company had issued debentm-es GmSj^'^^c. secured by a trust deed containing majority clauses giving a meeting powers (1) and (2) as above, and (3) "power to assent to any modifi- cation of the provisions contained in these presents which shall be pro- posed by the company." The company having got into difficulties a resolution was passed authorizing the creation of a prior mortgage. Stirling, J., held the resolution effective, following the decision of Chitty, J., above referred to. In Mercantile Investment, ^'c, Co. v. International Co. of Mexico, Mercantile (1893) 1 Ch. 484, note, the defendants, an American company, had issued ^c!co!^y. ' debentures secured by a trust deed containing maioritv iH'ovisions. The International defendants had sold their undertaking to an English company, and a "* "-^ resolution had been passed at a meeting of the debenture holders for the exchange of the debentures for preference shares in the new com- pany. The power of the meeting was as set out at p. 802, sxvpra, omitting paragraph (3). There was no evidence that there was any difficulty in enforcing the rights of the debentm-e holders, or of any special circiunstances to justify the scheme. The plaintiff brought an action to impeach the resolution, and it was held by the Coiu-t of Appeal to be invalid on the ground that it was not a modification of rights, but an extinction thereof, and that it was not a compromise as there was no dispute or difficidty. Lindley, L.J., considered that the resolution did not, in the circumstances, fall within the wording of the clauses. "The 'power to release the mortgaged premises ' does not include a power to release the defendant company. The power to modify the rights of the deben- ture holders against the company does not include a power to relinquish all their rights. A power to compromise their rights presupposes some dispute about them, or difficidties in enforcing them, and does not include a power to exchange their debentures for shares in another company where there is no such dispute or difficulty " (p. 489), and Fry, L.J., said (p. 490), "In my opinion, the transaction embodied in the resolution is not a modification of the rights of the debenture holders against the company or their property ; it is the extinction of all their rights against the company or its property"; and he con- sidered that it was not a compromise, there being no controversy or difficulty. Subsequently, however, that very case was re-opened in Mercantile, Same^. River &,-c. Co. V. River Plate, Sfc. Co., (1894) 1 Ch. 578, and it being proved "'*' ^'^' that there was, when the resolution was passed, a difficidty in enforcing 806 DEBENTURES AND DEBENTURE STOCK. [CliAP. XIV. Sneath v. Valley Gold. Validity of majority pro- visions firmly established. Hat/ W.Swedish Rail. Co. Wiiore terms clear, Court gives effect. in Mexico the rights of the deLenture holders, it was held by Eoiner, J., that the resolution was effective. " What I have to consider," said the learned judge (p. 596), " is not whether, if the debenture holders did not accept the resolution, they would altogether lose their security or all chance of being paid ; but whether there were not difficulties in the way of enforcing their rights of so substantial a character that the majority of the debenture holders might bond Jide come to the conclusion that it ■was desirable, in face of those difficulties, to compromise those rights on the terms of the resolution ; and, on the facts established before me, I think there were such difficidties." In deciding that a difficulty brought the power to comjDromise into play, Eomer, J., was assisted by the decision of the Court of Appeal in the case next following. In Sneath v. Valley Gold, Limited, (1893) 1 Ch. 477, the debenture trust deed contained similar provisions as at p. 802, supra, omitting para. (3). The company had got into difficulties and a scheme pro- posed for the transfer of the undertaking to a new company, the debenture holders to receive paid-up shares in satisfaction of their debentures, was approved by a resolution of the debenture holders. It was held by the Court of Appeal that the resolution was vaKd on the ground that there "was a difficulty, and that this brought into operation the power to compromise. "Here," said Lindle}^, L. J., (p. 494) "it is true that there is no pending litigation, but that is not necessary; all that is required is a difficulty which cannot be got over -without some arrangement." And Kay, L. J., said "The clause does not say that the meeting is to have power to compromise litigation, or to com- promise disputes, but to compromise rights.'''' Thus the vaKdity of majority provisions is firmly established, and all that is necessary is to frame the desired power in clear and explicit terms. The importance of this is emphasised by Hay v. Swedish Rail. Co., 5 T. L. E. 460 (1889). There the trust deed contained elaborate provision for meetings of debenture holders, and declared that a reso- lution passed by the requisite majority should be binding on all the debenture holders ; but unfortunately the draftsman had omitted to insert any detailed clauses as at p. 802, supra, and in the residt the Court held that the majority had no power to sanction any departure from the trusts of the deed, or any modification of the rights of the debenture holders. Whoro the terms of the power are clear, the Court will and must give fidl effect to it. It is not a question whctlier the contract is or is not prudent, unusual, or unwise. Roberts V. Rury Commissioners, L. R. 5 C. P. 310, 326; Jones v. St. Joint's Collcye, L.E. G Q. B. 115, 127 ; Scott v. Acery, .5 H. L. C. 811 ; Wilson v. 3Iiles riattiiig Co., 22 Q. B. Div. 381 ; JJoinan'a case, 3 C. Div. 21 ; Re Argus Co., 39 C. Div. 571. Of that the contracting parties are the best judges. The Court has merely to ascertain the meaning of the document. "To construe is nothing more than to aiTive at the meaning of the parties to the agreement." Per Lord Chelmsford, Scott v. Corporation of Liver- 2)ool, 3 De O. & J. 300. " It is of the utmost importance, as regards contracts between adults — persons not INTRODUCTORY NOTES. 307. under disability and at arm's length— that Courts of law should maintain the perform- ance of the contracts according with the intention of the parties ; that they should not overrule any clearly- expressed intention on the ground that judges know the business of the pooi)le better than the people know it themselves." Per Jessel, M. R., Wallis v. Smith, 21 C. Div. 243, 266 ; and see supra, p. 127. Irregular Issues. It is well settled tliat persons dealing with a conxpuny under the Act Constructive of 1862, are to be considered to have notice of the powers of the com- ^°^^^^ °*^ pany and of its directors. See pp. 35 et seq. Accordingly, those who company and subscribe for debentui'es or debenture stock must see that the issue is . 136) of their contents, unless, indeed, the pro- spectus misrepresents the contents or is fraudulent ; and considering the special, and sometimes elaborate, and comphcated provisions in the instriunents, it is of importance thus to give an oj^portunityto subscribers of ascertaining what their position is to be, especially as regards a trust deed, if any. Moreover, where there is a trust deed it is desirable to have it executed before the prospectus is published, so that the sub- 812 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. scribere may at once have the protection of duly constituted ti-ustees with clearly defined duties. It is, however, not uncommon merely to offer a draft of the trust deed for inspection and to let the execution of the deed stand over. In the result the execution sometimes stands over for months, and when executed the deed sometimes does not altogether accord with the draft thus referred to. The reason in some cases put forward for not executing the deed before the prospectus goes out is that the company has not yet completed the purchase of or paid off the mortgages on the property which is to be dealt with by the deed. But this is not a valid reason, for the deed can readily be framed as a covenant by the company with the trustees to comjDlete the purchase and to vest the property free from incumbrances in the trustees -o-ith proper provisions for securing the apjilication of the moneys subscribed to the payment of the purchase-money and clearing- off the mortgages. Upon the whole, it is submitted that the proper course is to execute a trust deed before the prospectus goes out and thus to duly constitute the trust for the protection of the subscribers. Stamps. Debenture. Marketable security . Stamps. The Stamp Act, 1891, as amended by the Customs and Inland Eevenue Act, 1893 (see Schedule), imj)oses the following duties on a mortgage, bond, debenture, or covenant (except a marketable security otherwise specially charged with duty) : — (1) Being the only, or principal, or primary security for the payment or re- £ s. d. payment of money not exceeding 10/ 3 Exceeding 10/. but not exceeding 25/ 008 „ 25/. ,, 50/ 13 50/. „ 100/ 2 6 „ 100/. „ 150/ 3 9 160/. „ 200/ 5 200/. ,, 250/ 063 250/. „ 300/ 7 6 300/. For every 100/., and also any fractional part of 100/. of such amount . ..026 (2) Being a collateral, or auxiliaiy, or additional, or substituted security (other than an equitable security), or by way of further assurance for the above-mentioned purpose where the principal or primary security is duly stamped : For every 100/., and also for any fractional part of 100/. of the amount secured 006 A marketable security is charged thus : — Makketable becueity [and foreign or colonial share ce\±\ficsitii—licpefdcd hy 56 Vict, c. 7, s. 4] :— (1) Marketable security, (a) being a colonial government security; or £ s. d. (b) being a security not transferable by delivery ; or (c) being a security transferable by delivery and bearing date, or signed, or offered for subscription before or on the sixth day of August, one thousand eight hundred and eighty-five : — !The same ad valorem duty ^IThesL'^urityruS ' a mortgage. INTRODUCTORY NOTES. 813 2) Transfer, assignment, disposition, or assignation of a marketable security £ ». d. of any description : — Upon a sale thereof. See " Conveyance or Transfer on Sale." Upon a mortgage thereof. See " Mortgage of Stock or Marketable Security." In any other case than a sale or mortgage 10 (51 & 52 Vict. 0. 8, 8. 13.) (3) Marketable security (except a colonial government security), being a security transferable by deliverj\ and bearing date, or signed, or offered for subscrijition after the sixth day of August, one thousand eight hundred and eighty-five : — For every 10^., and also for any fractional part of 10/., of the money thereby secured . . . . . . . . . .020 (48 & 49 Vict. c. 51, s. 21.) (4) Marketable security (except a colonial government security) , being such security as last aforesaid, given in substitution for a like security, duly stamped in conformity with the law in force at the time when it became subject to duty : — ■ For every 20/., and also for any fractional part of 20/., of the money thereby secured 006 Exemption. Any security duly stamped with the duty of one shilling for every ten pounds, and also for any fractional part of ten potmds, of the money thereby secured, or duly stamped as a substituted security for any security so stamped, where such substituted security bears an impressed stamp denoting that the security for which it was substituted was so duly stamped. The teiin " marketable security " is defined by es. 82 and 83, and Definition of means a security issued by or on behalf of a company of such a "marketable , , , . . 1 v' security." description as to be capable of being sold in any stock market in the United Kingdom. The true test is not whether the security is current, but whether it is a securitj^ of such a description as to be capable, according to the use and practice of stock markets, of being there sold and bought. Per Lord Shand, I'exas, Sfc. Co. v. In. Rev. Commissioners, 26 Sc. L. E. p. 51. Where a debenture is to be paid off at a premium, the stamp must extend both to the principal moneys and premium (see Rowell V. Inland Revenue, (1897) 2 Q. B. 194), for the premiimi is part of the " money thereb}^ secured." As a general rule, therefore, deben- tures are marketable securities, and chargeable accordingly. And the revenue authorities hold a debenture trust deed to be chargeable with a IO5. duty as a deed. As to debenture stock, the trust deed for securing it is chargeable Trust deed of as a covenant or mortgage, viz., with duty at 2s. %d. j)er cent. ; but the ^^^t^^ certificates to registered holders, where there is a trust deed, require no stamp. Where there is not a trust deed {supra, p. 778) the certificates would seem chargeable under the title ' ' bond, covenant, or instrument ^ whatever, being the only, or princij)al, or primary security for any annuity," ^^z., 2s. 60?. for everj'- hi. of the annuity. Debenture stock certificates to boaror woidd seem to be chargeable Certificates to imder the heading "share warrant and stock certificate to bearer," Nearer (deben- . . „ ture stock) . i.e., 30s. per cent. The expression "stock certificate to bearer" is not 814 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. a teclinical term, and it is not defined by tlie Act; and tlioiigli 8. 108 states that the expression is to "include" certain instiniments there specified, the word "include" is not restrictive. Corporation of Ports- mouth V. Smith, 3 Q. B. D. 184, 195; Dyke v. Elliott, L. E. 4 P. C. 184 ; Robinson v. Barton Local Board, 8 App. Cas. 798. It seems, how- ever, very absurd that a debenture to bearer should only require a 10s. per cent, stamp, whilst a debenture stock certificate to bearer requires a 30s. per cent, stamp. An instrument which is called a debenture will be chargeable as such, although it may operate as a promissory note. British India Steam Co. v. In. Rev. Commrs., 7 Q. B. D. 165. Debenture stock deeds very commonly provide for an issue of stock of limited amount, say 500,000/., and subject to certain conditions precedent for the creation and issue of fiu'ther pari passu stock, say 300,000?. Of late the Revenue authorities have contended that the deed must be stamped with the ad valorem duty on the fidl amount, and it must be admitted that the words of sect. 86 of the Stamp Act, 1891, afford some foundation for this claim. But in a recent case where the further stock was to be issued exclusively in satisfaction for existing debentures it was held that the trust deed qiid the further stock only required duty at the rate of 6s. per cent, as a substituted security. City of London Brewery Co. v. Com. Inl. Rev., (1898) 1 Q. B. 408. The parties usually wish not to pay the duty on the further stock until it is created, if ever, and this end can be arrived at by the insertion of a few words in the deed, for, although sect. 88 of the Act charges money to be lent "where the total amount secured or to be ultimately recoverable, is in any way limited, with the same duty as a security for the amount so limited," the same section provides that, "where such total amount is unlimited, the security is to be available for such an amount only as the said ad valorem duty impressed thereon extends to cover, but where any advance or loan is made in excess of the amount covered by that duty the security shall for the purpose of stamp duty be deemed to be a new and sepai-ate instrument bearing date on the day on which the advance or loan is made." Hence, if the trust deed contains words to the effect that it is also to stand as a security for all further advances from time to time made by the trustees out of moneys provided by the debenture holders, such further advances to rank in point of security after the other moneys thereby secured, the deed can be stamped uj) to the original issue in the first instance, and the further stamp can be put on it prior to tlio further issue of stock. Coupons. " A coupon or warrant for interest attached to or issued with any security, or with any agreement or memorandum for the renewal or extension of tinu* for payment of a security," is exempted from duty by the Stamp Act, 1891, wliicli re-enacts the repealed provision to the same effect in the Stamp Act, 1870 (Schedvde), and the Eovenue Act, 1889 Ts. 16). S(30 Schedule to Act of 1891 (54 & 55 Vict. c. 39), under title " Jiiila of Exchange," Exemption 11. INTRODUCTORY NOTES. ^15 By the rinance Act, 1894, s. 40, it is provided that "a coupon for interest on a marketable security, as defined by the Stamp Act, 1891, being one of a set of coupons, -svliether issued with the security, or subsequently issued in a sheet, shall not be chargeable with any stamp duty." This section was passed with reference to Rothschild v. Commrs, I. R., (1894) 2 Q. B. 142, in which a new set of coupons not attached to the security, but issued subsequently, M-ere held to bo bills of exchange, and liable to stamp duty. In this case Enthoven v. Hoyle, 13 C. B. 37.3, in which it was held that a coupon being a mere token required no duty, was not cited. Under the Stamp Act, 1891, transfers of debenture stock are charge- able with the 10*. per cent, duty as above. Under s. 86 of the Stamp Act, 1891 (substituted for the repealed s. 14 of the Act of 1888, above nentioned), a mortgage by deed of any stock or marketable security, is liable to duty like any other mortgage, viz., 2s. 6d. per cent, (see table above), but by s. 23, a charge under hand only, on debentures or debenture stock, to bearer, is only chargeable with the duty charged on an agreement. See further, {7ifra, p, 936. Semedies of Debenture Holders. Where a company makes default in paying any principal or interest Naked due to the holder of a naked debenture (?". e., one containing no charge, 'lebentures. so that he is only an unsecured creditor), he can bring an action for the amount, or lie can present a petition for the winding up of the company, or if there be a winding-up in progress he can prove in such winding-up ; but having no security he is not entitled to have a receiver appointed, and unless he levies execution before the commencement of the winding-up he has no priority over the other unsecured creditors of the companj'. The holders of unsecured debenture stock stand in no better a position. As to mortgage debe?ittires and mortgage debenture stock. — Tlie remedies Secured open necessarily depend on the tei-ms of the seciu-ities, and they must ^nd delT'^t be scrutinized accordingly. stock. As to oppoi7it7ne7it of receiver by Court before default, — Where the Before security is in danger, a debenture or debenture stock holder can bring ^ ^^^ an action against the company and obtain the appointment of a receiver, or, if necessary, of a receiver and manager, to pi-otect his interests. Thus where a company has become insolvent and either closed its works or has a winding-up petition pending against it, a receiver is appointed. McMahon v. North Kent Iromvorks, (1891) 2 Ch. 148; Victoria Steamboats Co., (1897) 1 Ch. 158. So where a company was disposing of its imdertaking in prejudice of the security. Hubbuck v. Helms, 56 L. T. 232. So, too, where there were judgments against the company. Edu-ards v. Standard Rolling Stock Syndicate, (1893) 1 Ch. 816 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. 574. See also Murrietta v. Nevada Land, Sfc. Co. (1893), 93 L. T. N. 442 ; Wildy v. Mid Hants Ry. Co., 16 W. E. 409 ; Thorn v. Nine Reefs, 67 L. T. 93; Earl of Lathom v. Greenwich Ferry Co., 36 S. J. 189. After default. As to proceedings after the company is in default as regards principal or interest. — In such cases the debenture oi' debenture stock holder can — (a) Appoint or procure the appointment of a receiver where the securities give the requisite power. (b) Bring an action against the comjianyfor payment and to enforce his securities. (c) Petition the Court for a winding-up order. (d) Prove in the winding up of the company. Receiver under power. Action. As to appointment of receiver by a security holder. — Debentures and trust deeds now very commonly contain power for the debentiu'O holders, or a specified majority, or for the trustees, to appoint a receiver with certain sjoecified powers, and where such powers are conferred they can be exercised in accordance with the tenns of the documents ; and the Court will not interfere with a receiver so ap- pointed, and will, if necessary, direct the official receiver to give up to a receiver so appointed possession of the i:)remises. Pound, Son, and Hutchins, 42 C. D. 402. See further, infra, p. 826. The Court will interfere to prevent an appointment which is not made in the interest of the debenture holders. Stuart v. Maskelyne British Typewriter, (1898) 1 Ch. 133. As to an action. — The debenture holder or debentiu-e stock holder should sue as plaintiff, and where he claims as one of a class of holders entitled pari passu, he should sue on behalf of himself and the other members of the class. See Form 639, infra, p. 1024. "Where it is jjossible to select a plaintiff from among several deben- ture holders, one who is not indebted to the company should be chosen. See Madeley v. Ross, Sleeman, ^* Co., (1897) 1 Ch. 505. The comj)any should be made defendant. Where there is a trust deed, the trustees thereof should also be made defendants. "WHiere there are subsequent incumbrancers on the property, they should be made defendants ; but where any of them form a class and are numerous, it would be sufficient to make some or one of them defendants, and to obtain a rejiresentation order. See infra, j). 1025. "Where there is no trust deed, the writ in the action should claim a declaration and pa;yTnent, and foreclosure or sale, and a receiver and manager. See Form 639, and infra, p. 1025. "Where there is a trust deed, the writ should claim a declaration of cliargo and its enforcement, and to liavo the trusts of a deed carried into execution, and a receiver and manager. See Form 640. Where there is a geiu'i-fil cliargo in the d<'l)enturos, and a specific INTRODUCTORY NOTES. 817 cliargp in the trust deed, tlie writ will Lo modified accordingly. See Form 705. One of the first steps usually taken in such an action is to apply for Rtceiver in the appointment of a receiver of the premises comprised in the security, ^'^"O^- and where the same includes a l)usiness it is desirable to carry on, then for the appointment of a receiver and manager, and there is rarely much difficulty in obtaining such appointment. See further, infra, p. 1089. In sucli an action the Court has jurisdiction to authorise the receiver Borrowing hj to borrow money in priority to the debentures or debenture stock, e.g.^ receiver m for the purpose of carrjang on the business or preserving the assets ; this is a matter of importance. See further, infra., p. 1100. The Court has also jurisdiction to order a sale in such action of tlie Sale by him. mortgaged premises, and such sale may be made in Court or out of Court, as may seem expedient. See infra., p. 1096. Where a company has only made default in pajiaent of interest and Principal not the principal is not yet payable, it seems that payment of the princijial payable where cannot be enforced [Edwards v. Morton, 25 L. J. Ch. 284) unless a default in winding-up is in progress; but where there is a winding-up the security can be enforced, both for principal and interest. Hodson v. The Tea Co., 14 C. D. 859; IFallis v. Universal Co., (1894) 2 Ch. 547. Foreclosure is generally available in the case of mortgage deben- Foreclosure, tures not secured by trust deed. Sadler v. Worlcy, (1894) 2 Ch. 170. See Form 788, infra. But an order for foreclosure cannot always be made in absence of any one debenture holder {Elias v. Continental Oxygen Co., (1897) 1 Ch. 511), and apparently cannot be made in chambers. Halifax, S;-c. Co. v. Radclijf, Limited, W. N. (1895) 63. And in the case of debentures and debenture stock secured by trust deed, the remedy of foreclosure is not generally available. Schiveitzer v. Mayhew, 31 Beav. 37; Seton, 1583; Locking v. Parker, 8 Ch. 30. In re Alison, 11 C. Div. 284. As to a loinding-np petition — A debenture holder or a debenture Winding-up stock holder to whom the comi:)any is indebted in a sum presently duo P'^wtion. can demand pa^Taent, and if defavilt be made can present a petition for the winding up of the company, and this whether he be the regis- tered holder or the holder of a debenture to bearer {Re Olathe Silver Co., 27 C. D. 278) ; and the mere fact that a receiver has been appointed does not preclude him from applying for a winding-up order {Borough of Portsmouth Tramways, (1892) 2 Ch. 362), and as against the com- pany he is entitled to a winding-up order, but not so as against the wishes of the majority of the creditors. Western of Canada Co., 17 Eq. 1; St. Thomas's Dock Co., 2 C. D. 177; West Hartlepool Iron- works Co., 10 Ch. 618; Chapel House Colliery Co., 24 C. D. 259. These four last-mentioned cases were, however, decided under the old practice ; and according to the present practice the Court jDays less regard to the wishes of the parties interested, and will sometimes make an order where investigation is thought expedient. Krasnapolsky p. 3 G 818 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Restaurant Co., (1892) 3 Ch. 174. And see Part II. p. 40. The holder of a mortgage debenture can apply for and obtain a winding- up order without giving up or a:ffecting his security. Moor v. Anglo- Italian Bank, 10 C. D. 681. Proceedings As to proceeding in a xoinding-up. — A debenture holder is in no way ^p °* bound to come in and enforce his rights in a winding-up. Gaudet Freres, 12 C. D. 882; Dry Docks Corporation, 39 C. D. 315; Joshua Stiibbs, Limited, (1891) 1 Ch. 475. He may rely on his secuiities, and take steps to exercise the powers which they confer, but he may come in and claim if he chooses. Formerly it was not uncommon for deben- ture holders in a winding-up to take out a summons for declaration of their charge and for realization of their security (see General South American Co., 2 C. D. 337 ; Colo7iial Trust Corporation, 15 CD. 465) j but this process is now rarely adopted, and a debenture holder usually proceeds to enforce his rights by an action. Where the winding-up is by or under the supervision of the Court, it is necessary to obtain liberty to bring or proceed with such an action, but the Court gives liberty to bring or proceed with the action almost as a matter of course. Lloyd v. David Lloyd ^ Co., 6 C. D. 339. In the case of a solvent company, a debenture or debenture stock holder can prove for principal and interest, and is not bound to value his security before thus proving (Kellock^s case, 3 Ch. 769) ; but if the company is insolvent (and pj-imd facie the company in winding up is considered insolvent, Milan Tramioays, 25 C. D. 587), s. 10 of the Judica- ture Act, 1875, applies, and the holders of secured debentures can rely on their securities, and not prove, or may give up their securities and prove, for the whole debt, or may value their securities and prove for the balance, or may realise their securities and then prove for the balance, if an}'. However, as debentures and debenture stock usually cover all the pro- perty and uncalled capital of the company, there are many cases in which nothing is gained by proving. Even in the case of an insolvent company, debenture holders and debenture stock holders are entitled, as against their securities, to take princijjal, interest, and costs {Cotterell V. Stratton, 8 Ch. 302 ; In re Talbot, 39 C. D. 567) ; and even if the lic[uidator realises the securities he can only claim the costs of realisa- tion {Re Marine Mansions Co., 4 Eq. 611 ; Regents Canal Ironworks, 3 C. D. 41 1). Trustees for debenture holders or debenture stock holders have a lien on the mortgaged premises which ranks before the liqui- dator. Exhall Co., 35 Beav. 449. Where a debenture is not payable when a winding-up commences the holder can nevertheless prove for the full amount of the principal where, by the teims of the instrument, such principal carries interest to maturity. Ex parte Ador, (1891) 2 Q. B. 574. As to proving for the whole nominal amount where the debenture or stock was issued at a discount, see Robinson v. Montgomeryshire Brewery Co., (1896) 2 Ch. 841. FOKMS. 819 DEBENTURES AND DEBENTURE STOCK. TABLE OF FORMS. Form Registered Debenture 504 Transfer of Registered Debenture . . 506 Debenture to Bearer 507 — 509 Miscellaneous Clauses in Debentures 516 —521 Debentui-e to Bearer capable of Re- gistration 522 Perpetual Debenture 524 Profit or Income Debentures . . 525, 520 Debenture Payable by Instalments 527 Debenture to Trustees of Stock Deed 528 Guarantees 529 — 531 Agreement Extending Time 532 Prospectus of Debentures 533 Application for Debentures 534 Allotment Letter of Debentures .... 535 Tender for Debentures 536 Debenture Stock Prospectus 537, 538 Allotment Letter: Debenture Stock 539,540 Form Provisional Scrip Debentures .. 541,542 Debenture Stock Certificate .... 543, 544 Trust Deed constituting Debenture Stock 545 Miscellaneous Clauses in Trust Deeds 546 et seq. Limits of Debenture Issue 548, 549 Application of Proceeds of Deben- tures and Debenture Stock . . 550 — 552 Vesting of Property in Trustees 553 — 555 Clearing off Prior Securities. . . . 556, 557 Mortgaging Uncalled Capital . . 558, 559 Sinking Fund : Redemption Fund, ProA'isional 560 — 564 Subsequent Security, Provisions . . 565 Foreign Assets : Powers of Attorney 567 Debenture Trust Deed 570 Railway Construction Fund 571 [This delDenture is issued under the authority of clause of the arts Form 504. of asson of the cov, and of a resolution of the directors dated Registered ., 1 J? " -1 debenture, the day oi .J The London Stock Exchange very commonly requires, where quotation is wanted, that the debentures shall on the face of them show the authority under which they are issued, e.g., as above, and shall state the number as below. The Coy, Li.mtd. Issue of 2,500 debentures of 100^. each, cari-jang interest at [4] p.c.p.a. [all ranking pari passu, and numbered to inclusive]. The above heading will be varied when necessary, e.g., where the debentures maj- vary in amount : " Issue of 1, debentures carrying interest, &c." ; or " Issue of /. debentures, divided as follows: of 1,000^. each, of 500?. each, and of 100?. each"; or "Issue of 1, second mortgage B. debentures, &c." Sometimes the date of incorporation and other particulars are stated. No. Debetiture. -I. I. The Coy, Limtd (hnftr called the coy), will, on the day [or on such earlier day as the principal moneys hby secuxed of become payable in accordance with the conditions indorsed hereon], 3 G 2 820 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 504. pay to of or other the registered liolder \_supra, p. 754] for the time being hereof, the sum of 1. Sometunes the words followiug are added : "with a bonus of /." In buch case the debenture must be stamped extra in respect of the bonus. Howell v. Inland Revenue, (1897) 2 Q. B. 194. 2. The coy will, in the meantime [or during the continuance of this security], pay to such registered holder interest thereon at the rate of p.c.p.a., by half-j^early pa^^llents on the day of , and day of , in each year, the first of such half-yearly pay- ments to be made on the day of next. Sometimes words are added to the clause : " and to be calculated as from the date hereof [or, as from the day of ]." If there are to be interest coupons, add the words : "in accordance with the coupons annexed hereto," and add form of coupon, &c., as in Form 508, and vary the conditions accordingly. 3. [//" there is to be a charge, say : — ] The coy hereby charges with such pajTuents its undertaking and all its property, present and future [including its uncalled capital]. Omit the words in brackets if there is not to be a charge on uncalled capital. 4. This debenture is issued subject to, and with the benefit of, the con- ditions indorsed hereon, which are to be deemed part of it. Given under the common seal of the coy this day of . The common seal of the coy was affixed hto in the presence of ) n- 1 (Common Seal.) \ Directors. ^ ' Consideration. — It is not essential to express the consideration in a debenture, but there may be an advantage in framing the instrument so that it shall carry on the face of it a representation that it was issued for value ; and if in any case it is deemed desirable so to frame the instrument, it will commence as follows : — " For value already received ; " or " In consideration of the sum of 100/. to the above-named company {or to The Company, Limited), paid by , of , the said company will, &c. ;" or " The Company, Limited, in consideration of 1, paid to it by , of , will, &c.," or " For valuable consideration already received. The Company will, &c." Will Pay. — Instead of "will pay," the words "undertakes," "promises," or "covenants," or "binds itself" to pay are sometimes used. Ex parte City Bank, 3 Ch. 758 ; Crouch v. Cridit Fonder, L. R. 8 Q. B. 374 ; Norton v. Floretice Public Works Co., 7 C. Div. 332. Time for Payment. — Sometimes the time for payment is fixed by reference to the conditions, thus : " Will as and when the principal moneys hereby secured become payable in accordance, &c." Interest. — It has not been settled whether the words " in the meantime" mean until the day fixed for payment, or until actual payment. The latter construction FORMS. 821 would seem to accord best witli the iutention, anl as the words are ambiguous, should be preferred. If the former construction be adopted, subsequent interest could only be recovered by way of damages. Goodchap v. lioberla, li C. Div. 49 ; Cook V. Fowler, L. R. 7 H. L. 27. If the holder should obtain judgment on the debenture, the interest would thenceforth cease to be payable under the debenture, for tlie contract would merge in the judgment [lie JE'iropean Central Jtdilivai/ Co., 4 C. Div. 33 ; £.v parte Fewi)iys, 2.3 0. Div. 338) ; but this might be prevented by making the contract to pay interest run thus: "The company will during the continuance of this security." See Popple v. Sylcester, 22 C. D. 98, and the obser- vations thereon in the case last mentioned. And it seems that, whatever the construction, the company will not be allowed to redeem without paying interest at the agreed rate until payment. Mellersh v. Brown, 45 C. D, 22o. If the holder obtained judgment, the interest would thenceforth bo at the rate of 4 per cent, per annum. Re European Central Co., 4 C. Div. 33. Stamps. — See supra, p. 812. Charge. — Some persons pi'efer to enumerate some of the items charged, e.i. V. IFalker, 11 App. Cas. 20; Neiv Londoi, S;c. Bank \. Broeklebanlc, 21 C. D. 302 ; Be Mattos v. Gibson, 4 D. & J. 276 ; Werdermann v. Soc. Gen., 19 C. D. 246. In Bradford Bank v. Briggs, 12 C. D. 29, there was no clause excluding equities. 4. Every transfer of this debenture must be in writing under the hand of the registered holder or his legal personal representatives. The transfer must be delivered at the registered office of the coy with a fee of 2s. Qd., and such evidence of identity or title as the coy may reasonably require, and thereupon the transfer will be registered, and a note of such registration will be indorsed hereon. The coy shall be entitled to retain the transfer. The object of this clause is to simplify the title to the debenture by providing for the deUvery of the instrument of transfer to the company. In the absence of some such provision the company would only receive notice of a transfer having been made. In practice the condition is found effective and useful. The note of regis- tration usually runs thus : — A. B. of was this day registered as the holder of this debenture. Date . Secretaiy. As to bankniptcy, s. 50 of the Bankniptcy Act, 1883, gives the trustee in bank- ruptcy power to transfer. The question sometimes arises whether, in the absence of the concluding words the company is entitled to retain a transfer sent in for registration. It would seem that the question should be answered in the affirmative, for the instrument is to be delivered to the company, and nothing is said about retaining it, and the company is to alter the register which may work an estoppel, and if the company does not retain the transfer, how can it prove, if necessary, that the transfer was authentic ? Under the Forged Transfers Acts, 1891 and 1892 (54 & 55 Vict. c. 43 ; 55 & 56 Vict. c. 36), a company may pay compensation for loss arising from the transfer of securities in pursuance of a forged transfer, or of a transfer under a forged power of attorney. But it is under no obligation to make such compensation, unless apart from these Acts it would be under such obligation, e.g., where it is bound by estoppel. Bahia and San Francisco Rail. Co., L. R. 3 Q. B. 584 ; Balkis Con- solidated Co. V. Tomkinson, (1893) A. C. 396 ; McKay's vase, (1896) 2 Ch. 757. 824 DEBENTURES AND DEBENTUEE STOCK. [ChaI". XIV. Form 505. 5- ^^ the case of joint registered holders, the principal moneys and interest hby secured shall he deemed to be owing to them upon a joint account. Having regard to s. 61 of the Conveyancing and Law of Property Act, 1881, this clause is probably unnecessary. 6. No transfer will be registered during the seven days immediately preceding the days by this debenture fixed for pajTnent of interest. 7. In respect of each half-year's interest on this debenture, a war- rant on the coy's bankers, payable to the order of the registered holder hereof, or in case of joint holders to the order of that one whose name stands tii-st in the register as one of such joint holders, will bo sent by post to the registered address of such registered holder, and the coy shall not be responsible for any loss in transmission, and the pay- ment of the warrant, if purporting to be duly indorsed, shall be a good discharge to the coy. 8. The principal moneys and interest hby secured will be pd with- out regard to any equities between the coy and the original or any intermediate holder hereof, and the receipt of the registered holder for such principal moneys and interest shall be a good discharge to the coy for the same. 9. The coy may at any time give notice in writing to the registered holder hereof, his executors or administrators, of its intention to pay off this debenture, and upon the expiration of six calendar months from such notice being given the principal moneys hby secured shall become payable. If thought desirable, this can be omitted, or the following substituted : — " At any time after the day of next, (1) the registered holder of this debenture may give the company notice, in writing, to pay off the principal moneys hereby secured ; and (2) the company may give the registered holder thereof notice, in writing, of its intention to pay off such principal moneys. And at [or on the day of , which shall first happen after] the expiration of six calendar months from any such notice being given, the principal moneys hereby secured shall become payable." Sometimes it is desii'ed to give the debenture holder power to call in the moneys at stated intervals, thus :— " The registered holder for the time being hereof may, upon giving not less than six calendar months' previous notice, in writing, to the company, require payment of the principal moneys hereby secured on the 1st day of July in any of the following years, namely, 1900, 1905, and 1910, and such principal moneys shall become payable accordingly." 10. The principal moneys hby secured shall immediately become payable : — (a) If the coy makes default fur a period of six calendar months in the payment of any interest hby secured, and the registered holder hereof before such interest is pd, by notice in writing to the coy, calls in such principal moneys ; or FORMS. 825 (b) If an order is made or an effective resolution is passed for the Form 505. winding- up of the coy. It ia uow usual to jirovide that if di-fault in made in paying the interest for, say, six months, the principal moneys shall become due, or may (as above) be called in by the debenture holder, and the propriety of inserting some such provision is obvious. There seems no reason why the holder of a debenture, especially if it is not secured by mortgage or charge, should be placed in a wor.-o position than an ordinary mortgagee who has agreed not to call in his loan for a definite period, in which case the agreement is always made conditional on the punctual payment of the interest. The above form is better than making the principal payable on default, because it allows the debenture holder, if he thinks fit, to give the company further time. Sometimes less than six months is specified. As regards making the principal payable in the event of a winding-up, such a provision is now very common, and, while it can do the company no harm, may prevent disputes as to the rights of the debenture holder. However, it was long since settled that where a winding-up ensues, the debenture holder is entitled to enforce his charge and obtain payment, even though his deben- ture has not matured. Hodson v. The Tea Co., 14 C. D. 859, recently approved and followed by the Court of Appeal in Wallace v. Universal Automatic Machine Co., (1894) 2Ch. 547. It may here be mentioned that a provision for accelerating the time for payment of the principal moneys is not a penalty against which equity can relieve. Thompson V. Hudson, L. R. 4 H. L. 1 ; WalUngford v. Mutual Society, 5 App. Cas. 685. Sometimes other contingencies are added, e.ff., " or (c) if the uncalled capital of the company at any time ceases to exceed the amount of the principal moneys secured by the debentures of the company." See p. 859 for othei's. As to default, see note to Clause 28, supra, p. 396. 11. At any time after the principal moneys hby secured become payable [_o}- after the security constituted by the indenture below mentd becomes enforceable], the registered holder of this debenture may, with the consent in writing of the holders of the majority in value of the outstanding debentures of the same issue, aj^point, by writing, any person or persons [approved by the trees of the sd indenture] to be a receiver or receivers of the ppty charged by the debentures [and not comprised in such indenture], and such appoint- ment shall be as effective as if all the holders of debentures of the same issue had concurred in such appointment. And a receiver so appointed shall have j)Ower — (1) To take possession of the ppty charged by the debentures. (2) To carry on or concur in carrjdng on the business of the coy. (3) To sell or concur in selling any of the ppty charged by the debentures. (4) To make any arrangement or compromise which he or they shall think expedient in the interests of the debenture holders. And all moneys received by such receiver or receivers shall, after providing for the matters specified in the first three paragi'aphs of clause 8 of s. 24 of the Conveyancing and Law of Property Act, 1881, be applied in or towards satisfaction pari passti of the debentures \^or 82() DEBENTUKES AND DEBENTURE STOCK. [OhAP. XIV. Form 505. if there is a trust deed say, '' paid over to the trees or tree of the sd " indenture to be held on the trusts by that indenture declared of and concerning the moneys to arise from the execution of the primary trust for conversion as therein defined"]. And the foregoing pro- visions in this condition shall take effect as and by way of variation and extension of the provisions of ss. 19 — 24 of the said Act [which provisions, so varied and extended, shall be regarded as incorporated herein]. A clause as above is commonly inserted in debentures where there is a trust deed, and it is sometimes inserted where there is not a trust deed. In the former case it may be very desirable, but in the latter it should not be inserted without careful consideration ; for, of course, if there is no trust deed, the reference to the trustees must be struck out, and in the result a majority of the debenture holders obtain an imcontroUed power to appoint their own nominee to be receiver, and to exercise very wide powers. That a provision for the appointment of a receiver is effective even as against an official liquidator, see Henry Pound, Son S; Hiitchings, 42 C. Div. 402, where, not- withstanding the opposition of the official liquidator, the receiver appointed by the debenture holders was held entitled to possession. The words in brackets at the end of the clause are inserted in order to preclude any questions whether the relevant provisions of the Conveyancing and Law of Property Act, 1881 (44 & 45 Vict. c. 41), are applicable to a debenture charging the undertaking of the company. In Blaker v. Herts and Essex TFatencorks Co., 41 C. D. 399, Kay, J., was of opinion that they were not applicable in the case of a series of debentures ranking ji;ari passu, but it was not necessary to decide the point. It is, however, submitted that they are applicable. Suppose that there is only one debenture charging the undertaking, it falls within the definition of a mortgage contained in the Act ("mortgage includes any charge on any property for securing money or money's worth ") ; and there would seem to be no sufficient ground for cutting down the plain words of the Act so as to exclude a charge merely because it is contained in an instrument called a debenture. So, too, if there are two, three, or four debentures, why should the mere fact that there are several persons interested exclude them from the benefits which the Act in plain terms purports to confer on mortgagees ? And if they are not to be excluded, why should the fact that there are one hundred debenture holders make any difEerence ? The number may make it difficult to exercise the powers, but that is not a siifficient reason for cutting down the operation of the Act. No one can doubt that a contributory mortgage is within the Act, and that the contributors together constitute a mortgagee within the Act, and there seems no difference in substance between such a mortgage and a charge created by a series of debentures. Wlicro the above clause is inserted in a debenture to bearer, the words "registered holder " must be omitted, and the words following substituted : " The bearer of the debenture may, with the consent in writing notarially certified of, &c." Sometimes it is considered desirable to require the concurrence of a small pro- portion, e.r/., " with the consent in writing of the holders of not less than one-fifth in value of the outstanding debentures." Where there is a trust deed comprising the whole undertaking, the above clause is usually omitted. Tlie debenture holders are not, as a rule, responsible for goods ordered by the receiver in the course of carrying on the company's business. Goslhir/ v. Gas/cell, (1807) A. C. ^7o. Nor is the receiver himself personally responsible. I>. Owen ^- Co. V. Crunk, (1805) 1 Q. B. 265. As to the liability of a receiver and manager appointed by the Court, seo Burt v. Bull, (1805) 1 Q. B. 276. FORMS. 827 11a. Jf a majority clause is required, insert here Fonn 519 or 520. Form 505. [Such a clause is uot wautod where provisions arc made in the trust deed for meetings of debenture holders. See })p. 801, 882.] If there is to he a trust deed, add : — 12. The holders of tlie debentures of the above issue are and will be ciitld pari pass7( to the benefit of and subject to the jirovisions contained in an indenture dated the day of , and made between the coy of the one part, and A., B., and C of the other part [whereby certain ppty of the coy was vested in trustees for securing the pajTnent of the princij)al moneys and interest payable in respect of the sd deben- tures]. See supra, p. 778, as to trust deeds. The words in brackets will be varied according to circumstances. Sometimes they are omitted altogether. Sometimes the nature of the property is stated. 13. The principal money's and interest hby secured will bo paid at the Bank, Limtd, No. — , Street, London, or at the registered office of the coy. Where a person contracts generally to pay a sum of money, he is liable to the creditor everywhere ; but where a person binds himself, even by a bond, to pay at a par- ticular place, then he is not liable at any other place, and the demand must be made upon him there. Per Bayley, J., Saundcrson v. Boici's, 14 East, 508. 14. A notice may be served by the coy upon the holder of this debenture by sending it through the post in a j^'epaid letter addressed to such person at his registered address. 15. Any notice served b}- post shall be deemed to have been served at the expiration of twenty-four hours after it is posted, and in proving such service it shall be sufficient to prove that the letter containing the notice was properly addressed and put into the j)ost office. Since the heavy duty of lOs. per cent, was imposed on debentures to bearer, registered debentures have been extensively adopted. Debentures to bearer only constitute a small percentage of the debentures issued during the last few years. I, A. B., of, (fcc, in conson of the sum of pd to me by C. D. of, Form 506. &c.. Do hereby transfer to the sd 0. D. (hnfter called "the transferee") ~ ;; — X orm of the under-mentd debentures issued by The Coy, Limtd, that is to transfer of rearistered say :— [^Here state date, character, amoimt and numbers, e.g., Jive first mortgage debentures q/100^. each, numbered to inclusive :^ and the fidl benefit thereof. To HOLD the same unto the transferee subject to the several condi- tions on which I held the same immediately before the execution hereof, debenture. 828 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 506. autl I the transferee do hhy agree to take tlie sd debentures subject to ^ ' tlie same conditions. As "WITNESS our hands [and seals] this day of . Signed, [sealed and delivered] by the above-named A. B. in the presence of : — Witness's Signature, Address, ; and Profession. * There is no need to make the transfer by instrument under seal, unless the regula- tions so require. The Coy, Limtd. Form 507. [As to heading generally, see supra, p. 819.] Debenture to Issue of 2,000 Debentures of 100/. each, carrying interest at the rate bearer, &c. of g p.c.p.a. As to the validity of debentures to bearer, see supra, p. 755. For debenture to bearer capable of registration, see Form 522. Language. — Where a company is likely to find a foreign market for its debentures, or a vendor so stipulates, the debentures are printed in several languages on the same sheet. No. . Debenture. lOOl. 1. The Coy, Limtd (hnfter called the coy), will on the day of [or on such earlier day as the principal moneys hby secured become payable in accordance with the conditions indorsed hereon], pay to the bearer on presentation of this debenture the sum of 100/. 2. The coy will in the meantime (see supra, p. 820) pay interest there- on at the rate of p.c.p.a. by equal half-yearly pa^Tnents on every day of and day of , in accordance with the coujions annexed hto ; [ ?/ the debenture is to contain a charge, add : 3. The coy hb}' charges with such pa^^uents its undertaking, and all its ppty, whatsoever and wheresoever, both present and future] \_add, if so intended : including its uncalled capital for the time being]. 4. This debenture is issued subject to and with the benefit of the conditions indorsed hereon, which are to be deemed part of it. [See Form 504.] Given, &c. The Coy, Limtd. Form 508. Debenture No. . Interest coupon No. . Coupon. For three pounds. Half-year's interest due the day of , and payable at the Bank [^address'], or at the registered office of the coy (less income tax). 3/. , Secretary. Afl to exemptions of coupons from stamp duty, see p. 814. FORMS. 829 The conditions within referred to : — Form 509. 1. This debenture is one of a series, &c. [see Form 505, clause 1]. Conditious 2. Annexed to this debenture are coupons, each providing for {jg^rerl^^*^ ^^ the j)ayment of a half-year's interest, and such interest •will be payable only on presentation [and delivery] of the coupon referring thereto. As to coupons, see supra, p. 811. Presentation includes delivery. Bartlelt v. Ifolnws, i:? C. B. G30 ; 22 L. J. C. P. 182. 3. The principal moneys and interest hby secured will be pd without regard to any ec^uities between the coy and the original or any inter- mediate holder hereof. This condition is valid, supra, p. 762, and is probably implied by tlie debenture being " to bearer " {supra, p. 763), and is sometimes omitted in the case of a deben- ture to bearer. 4. If the principal moneys hby secured shall become payable before the day of , the person presenting this debenture for pay- ment must surrender therewith the coupons representing subsequent interest ; the coy, nevertheless, jjaying the interest for the fraction of the current half-year. 5. The delivery to the coy of this debenture and of each of the sd coupons shall be a good discharge for the principal moneys and interest therein resply specitied [and the coy shall not be bound to inquire into the title of the respective bearers of such instruments, or to take notice of any trust affecting such moneys, or be affected by express notice of the right, title, or claim of any other person to such moneys or instruments]. It is more convenient to make the delivery of the instrument, rather than the receipt of the bearer, a good discharge. Such a condition is unquestionably valid. See sujn-a, p. 764. The words in brackets are sometimes omitted. 6. The coy may at any time [after the day of ] give notice by advertisement in the Times and one other London daily newsj)aper, of its intention to pay off this debenture, and upon the expiration of six calendar months from such notice being given, the princij)al moneys hby secured shall become payable. If desired, the words " day of , or day of •, which shall next happen after the " can be inserted before the word " expu-ation," so that the prin- cipal moneys may become payable on one of the days fixed for payment of interest. In the absence of express power, a mortgagee cannot be compelled to accept pay- ment before maturity. Browne v. Cole, 14 Sim. 427. 7. The principal moneys hby secured shall immediately become payable — (a) if the co}- makes default for a j^^i'iod of six calendar months in the payment of any interest hby secured, and the bearer 830 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 509. hereof, before sucli interest is paid, by notice in writing to tlie coy, calls in such principal moneys; or (b) if an order is made, or an effective resolution is passed, for the winding-up of the coy. See note to clause 10 of Form 505. 8. This debenture is to be treated as negotiable, and all persons are invited by the coy and the owner for the time being hereof to act accordingly [but the bearer may at any time write his name and address across the face of the debenture, and thereujDon it shall cease to be negotiable, and shall be payable to the person whose name is so inscribed]. A condition as above is very commonly inserted in order to obtain if possible the benefit of the decisions above referred to, pj). 765 ct seq. 8a. \_If there is to be a receiver clause, insert clause 1 1 of Form 505, modified as in the note indicated.^ 9. The principal moneys and interest hby secured will be pd at the Bank, Limtd, No. — , Street, London, or at the registered office of the coy. Where there is a condition Uke this there is no default in payment within the meaning of condition 7, until after demand. Thorn v. City Rice Mills, 40 C. D. 357. If there is to be a trust deed, add : — 10. ["The holders, «&c." See Form 505, clause 12.] Form 510. Power to call for registered debenture instead of debenture to bearer. Upon the request in writing "of the bearer hereof the coy will issue to him a debenture in either of the forms set forth in the second and third schedules to the indenture below mentd. Such debenture shall provide for the pajouent of the principal moneys and interest hby secured and then remaining unpaid, at the times hby fixed for the pay- ment thereof resply. Upon or before such issue this debenture, and the coupons thereto relating to subsequent interest, must be surrendered to the coy, and the person making such request must pay the expense of stamping the new debenture, and such sum, not exceeding ten shil- lings, for the expense of issuing the same as the coy shall prescribe. It is not at all uncommon now, where debentures are secured by a trust deed, besides giving subscribers the option of taking their debentures in one of several forms [^siipra, p. 768], to set out the forms in schedules to the trust deed, and insert on each debenture a clause as above. That clause is intended for use where three forms are given. Form 511. Uncalled capital. Tlie uncalled capital hby charged shall be deemed to be exclusively applicable to the redemption of the dobontures of the above issue, and whenever .any part thereof shall bo called and pd up the same shall be carried to the credit of the redemption fund and applied in redeeming debentures as hnfter provided. Another. FORMS. '"^^l If at any time the unpaid capital of the coy, wliether called or un- Form 512. called, is loss than the principal moneys for the time being owing on the debentures of this series, such unpaid capital shall be deemed to be specifically charged with the pajnnent of the debentures of this series, and if subso(j^uently pd up shall be pd to trees to be nominated by the coy to be liold in trust accordingly. Tliis debenture confers on the registered holder thereof the right to Form 613. attend and vote at general meetings of the coy and to receive notice of y , . such general meetings [as provided by the arts of asson]. Special powers must be given in the articles to justify such a condition. See supra, p. 413. The bearer or registered holder hereof may at any time before the Form 514. principal moneys hby secured have been pd off direct the coj' to issue Po-wer to to him fully jid up shares in the capital of the coy equal in nominal exchange amount to such principal monej'S, and in satisfaction and discharge °^ ^ ^^^^" thereof, and the coy shall, upon the surrender of this debenture, comply with such direction. A contract must be filed. See supra, pp. 187, 230. At any time before the day of (if and so long as a suffi- Form 515. cient number of the preference shares of the coy remain unissued) the j^other coy will, upon the request in writing of the registered holder hereof, and iipon the surrender of this debenture, issue to him of the sd preference shares credited as fidly pd up, and will pay to him the Interest for the fraction (if any) of the current half-year up to the day of surrender. Sometimes it is desired to give debenture holders power to convert their debentures into shares as above. On conversion, a contract would have to be registered under s. 25 of the Act of 1867. See stipra, pp. 187, 230 et seq. Upon the request in writing of the bearer of any debenture of this Form 516. series, and upon the surrender of his debenture for division, the coy ~ ~ . ' New deben- "will issue in substitution therefor several debentures, each for a fraction tures by way of the principal moneys secured by the surrendered debenture (every of sub-divi- such fraction to be for 10^. or a mxdtiple thereof); and upon the like solidation of request, and upon the surrender of several debentures for consolidation, present the coy will issue in substitution therefor one debenture for the principal moneys secured by the surrendered debentures or several each for a portion of stich moneys. The debenture holder surrendering as afsd must in each case pay all expenses of and incident to the issue and stamping of the substituted debentures, and such fee to the coy as may reasonably be required, and the surrendered debentures shall be can- celled bv the cov. 832 DEBENTURES AND DEBENTURE STOCK. [ClIAP, XIV. Form 517. As regards each half-year's interest on this debenture up to and D bent e including- the half-year ending on the of , the 003' is to be at stock to be liberty to satisfy the same by the allotment to the registered holder of issued m ^j^|g debenture of B debenture stock of this coy equal in nominal some interest amount to such half-year's interest, as provided by the indenture below on the de- mentioned, bentures. Form 518. Trustees' certificate. Form 519. Power of majority. This is to certify that the above debenture is one of the 3,000 like debentures numbered to inclusive, secured by the indenture therein referred to. I Trustees. Occasionally where there is a trust deed the trustees indorse a certificate on the debentures as above, but this practice is more common in America than here. See the Railway Companies' Securities Act, 1866. The holders of three-fourths in value of the debentures of this series for the time being outstanding may, by vrriting under their hands, sanction any modification of the rights of the debenture holders of this series which shall be proposed by the coy, and any compromise or arrangement proposed to be made between the coy and the holders of the debentures of this series, pro^dded that it is one which the court woidd have jurisdiction to sanction under the Joint Stock Cos Arrange- ment Act, 1870, or any statutory modification thereof, if the coy were being wound up, and the requisite majority at a meeting of the debenture holders summoned pursuant to that Act, or any modification thereof, had agreed thereto, and any modification, comj)romise, or arrangement so sanctioned shall be binding on all the holders of debentures of this series, and notice thereof shall be given to them accordingly, and each holder shall be bound thereupon to produce his debentures to the coy and to permit a note of such modification to be placed thereon. Such a clause is occasionally inserted in registered debentures, but it is usually considered preferable to have a trust deed setting out the full clauses, as at p. 882, infra, or else to indorse those clauses on the debentures with requisite modifications. And see p. 801. Form 520. Another. Tlie holders of three-fourths in value of the outstanding debentures of this series may sanction any agrecmt with the coy for any modifica- tion or alteration of the rights of the holders of debentures of this series as a class, including any release of any ppty charged thereby, and any postponement of the time for pajaiient of any moneys secured thereby, and any increase or reduction of the rate of interest ; and an agrecmt so sanctioned shall bo binding on all the holders of debentures of this series, and notice thereof shall be given to each debenture holder, and each dol>cii1in-o bolder shall bcluuiiid thcreupcm to produce FORMS. 833 his debentures to the coy, and to permit a note of such agreemt and Form 520. the sanction thereof afsd to be placed thereon. The jn-ovisions set fortli in the scheduk' to the coy's arts of assou Form 521. shall have effect as if the same were incorporated herein, but so that ReferencfTto the words "the debentures" therein appearing shall bo considered to articles, refer exclusively to the debentures of this series, and the tenn "deben- ture holder" therein shall have a corresjionding meaning. Sometimes, where there is no trust deed, full clauses giving the company power to call meetings of the debenture holders, as at p. 882, are set forth in a schedule to the company's articles of association, and incorporated by reference in the deben- tui"es as above. As in Form 507, but in para. 1 insert after the rvorcl " bearer," the Form 522. ivords, " or when registered to the registered holder hereof." ' Debenture to The indorsed conditions will be found as follows : — of reffisto,- 1 . This debenture is one of a series, &c. [as in Condition 1 of *^°^' Form 506]. 2. Annexed, &c. \_as in Condition 2 of Form 509]. 3. The principal moneys, &c. [«s in Condition 3 of Form 509]. 4. If the principal moneys, &c. \_as in Condition 4 of Form 509]. 5. The delivery, &c. \as in Condition 5 of Form 509, adding at the end the xvords, "nevertheless, when registered, the receipt of the registered holder, or his legal personal representatives, shall alone be a good discharge to the coy for such principal moneys "]. 6. Whenever this debenture is unregistered it is to be regarded as negotiable, and all persons are inAdted by the coy and the owner for the time being to act accordingly, but the coy will at any time, upon the request of the bearer (whilst unregistered), register him or his nominee in the register below mentd as the holder of this debenture, and indorse a note of such registration hereon ; and the coy will also at any time, upon the request of the registered holder, or his legal personal representatives, cancel the registration and the note thereof indorsed hereon, and thereupon this debenture will again become transferable by delivery. A fee of Is. 6d. shall be paid to the coy upon every such registration or cancellation. 7. A register of the debentures for the time being registered as aforesaid will be kept at the coy's registered office wherein, &c. [as in Condition 2 of Form 505]. 8. Whilst registered, the registered holder will be regarded as exclusively entld to the benefit of this debenture, and, &c. [as in Condition 3 of Form 505]. 9. Every transfer of this debenture when registered must be in ■WTiting, «&c. [jCt'S in Condition 4 of Form, 505]. P. 3h 834 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 522. 10- Iii tlio case of joint registered holders, «fec. [as in Condition 5 o/ Form 505]. 1 1 . The coy may at any time after the day of give notice of its intention to pay ofif, &c. \_as in Condition 6 of Form 509, but toithout stating hoto notice is to be given. See Condition 17 of this Form]. 12. The principal moneys hby secured shall immediately become payable, (a) if the coy makes default for a period of six calendar months in the payment of any interest hby secured, and the bearer or registered holder hereof before such interest is pd, by notice in writing to the coy, calls in such principal moneys ; or (b) if an order is made or an effective resolution is passed for the winding up of the coy. 13. At anytime after the principal moneys hby secured have become payable the holder of this debenture may, with the consent in writing of 1, in value of the holders of debentiu'es of this series, such consent as regards debentures to bearer to be notarially certified, appoint, &c. \_as in Co7iditio7i 11 of Form 505]. 14. The holders of thi'ee-fourths [see Forms 519 or 520, adding, "such assent [or sanction] as regards debentures to bearer to be notarially certified"]. 15. The holders of the debentures [Condition 12 of Form 505 as to trust deed^. 16. The principal moneys hby secured will be payable at The Bank, Limtd, No. — , Street, London, or at the registered office of the coy. 17. Any notice may be served by the coy upon the holder of this debenture, whilst unregistered, by advertising the same in the Times newspaper, and whilst registered by sending it through the post in a prepaid letter addi'essed to such person at his registered address, and any notice so advertised or served by post shall be deemed to have been served at the expiration of twenty-four hours after it is advertised or posted, as the case may be, and in proving such service it shall be sufficient to prove that the letter containing the notice was so adver- tised, or was properly addressed and put into the post office. Debentures so framed are not as common as they ■were before the 10s. per cent, duty was imposed ou bearer securities ; still they are very generally used, especially where there is likely to be any foreign market for them. Foi'iu 523. 1- One hundred of the sd debentures will be redeemed by the sd Redemption coy on the day of , 18 — , and on each succeeding day by drawings, of , and day of , until the whole of the sd debentures have been redeemed or pd off. The days fixed for redemption are usually the same as those fixed for payment of interest. Sometimes part of the profits or the proceeds of sale of specific assets arc to be carried to a redemption fund, tlius : "A redemption [or sinking] fund shall be esta- FORMS. 835 blished, and to the credit thereof the company shall carry fifty per cent, of the net Form 523. proceeds arising- from the sale of the company's freehold hereditaments at [or ' the share of surplus profits in that behalf mentioned in clause of the company's articles of association], and as and whenever such fund shall amount to 1, it Bhall be applied in redeeming at par an equivalent amount of the debentures of this series." This condition would be substituted for the above. Sometimes a cumulative sinking fund is established as follows : " The company shall in each rear apjjly the sum of 10,000/. first, to the payment of the interest on the debentures of this series ; and secondly, as regards the surplus, to the redemption, at par, of debentures of this series " ; so that tho funds applicable to redemption will be augmented each year as the interest is diminished. When there is a trust deed the fund is sometimes made payable to the trustees. 2. The particiilar debentures to be redeemed on each occasion will be determined by half-yearly drawings, which the sd coy will cause to be made at its registered ofSce for the time being. 3. Such drawings will be made in the presence of a notary public of London not less than twenty-one or more than sixty days before the respective half-yearly days on which the debentures are to be redeemed. And the principal moneys hby secured shall become payable [on the day of , or day of , which shall first happen after this debenture shall have been drawn for redemjrtion]. 4. Public notice of the day and time fixed for each drawing will bo given by the coy at least ten days previously, by advertisement in a London daily newspaper, and the bearer of this debenture will bo entld to attend at any such drawing. 5. Forthwith after each drawing, notice will be given by advertise- ment in a London daily newspaper of the numbers of the debentures drawn for redemption. 6. The numbers of the debentures from time to time drawn will be recorded in a book to be kept for that pui'pose by the coy, and to bo open for the inspection of the bearer of this debenture. 7. If the bearer of this debenture shall so rec^uire, the notary public present at any such drawing as afsd shall make a statutory declaration as to tho result thereof. Having regard to the observations of the Master of the Rolls in Sijkes v. Beadon 11 C. D. 170, doubts were felt whether such a scheme of redemption was not open to objection as amounting to a lottery. But the general opinion appears to be that it is not, even where the debentures are issued at a discount and made redeemable at par ; and accordingly the practice of providing for redemption in accordance with the result of periodical drawings continues. And see the observations in IFalling- ford v. Mutual Society, 5 Ajip. Cas. 658. However, it may be that a scheme of redemption which provides for the payment of a premium to the holders of drawn debentures is open to objection, although even in that case it might be contended that the premium was only a fair compensation for the prospective loss of interest at a high rate. If it is desired in any case to make the redemption of debentures contingent on the profits of the company, the following clauses can be introduced into the con- ditions, which will require to be slightly modified. 1. The said company will, on the 1st day of November, 1884, and on every 3r2 836 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 523. succeeding 1st day of November, until the whole of the said debentures shall have been redeemed or paid ofF, apply a sum equal to one moiety of the net profits of the said company, for the year ending on the 30th day of June, immediately preceding such Ist day of November, in the redemption at par of so many of the said deben- tures as such sum shall be sufficient to redeem. 2. Nevertheless, if, in any such year, the net profits shall be less than 1. there shall not be any drawing or redemption in respect of such year. 3. The certificate in writing of the auditor or auditors for the time being of the company shall as against the bearer hereof be conclusive evidence as to the amount of the net profits of the company in any year, or of there being none. Form 524. Perpetual debentures. The Coy, Limtd. No. Perpetual Debenture. -I. 1. The - Coy, Limtd (hnftr called the coy), will, as and when the principal moneys hby secured become payable, in accordance with the conditions indorsed hereon, pay to the registered holder of this debenture the sum of 1. Another form sometimes used is : — " The Company, Limited, being indebted to the person to whom this debenture is issued in the sum of 1., upon the terms that such sum is to bo repayable only in the events and subject as hereinafter expressed, will when, &c." 2. The coy \jnterest as in Form 509, addhig the words : and any further coupons issued in respect of such interest]. 3. The coy hby charges [Form 504]. 4. This debenture is issued [Form 504]. Given, &c. \_Add coupo?is and conditions as folloivs~\ : — 1 . This debenture is one of a series of debentures, all bearing even date. The debentures of the sd series, and the debentures of any subsequent series containing a similar charge, are all to rankjoari passu in point of charge as a floating security on the ppty charged thereby \jf any limit, provide accordingly, supra, note to Condition 1 of Form 505]. 2. Annexed to this debenture are cou^wns, each providing for a half-year's interest [and if so, and also a voucher for fresh coupons], and such interest will be payable only on jiresentation of the coupon referring thereto. After the day of [10 years after date~\, and at the expiration of each succeeding period of 10 years, the registered holder, on production of this debenture for indorsement, [or, tlio bearer of the appropriate voucher on presentation thereof,] will bo ciitld to the issue of fresh coupons for a further period of 10 years. The voucher will be as follows : — " The Company, Limited. Debenture No. . Voucher for fresh coupons to be prcKcnted at tlio office of the company on or lit any time after the day of ," and it will bo printed so that it can bo detached immediately after the last coupon of the series. FORMS. 837 3. Tho princiiial moneys hhy sccurod will only hoconie payahlo [as Form 524. 1)1 Form 509, C'undiiioti 7]. [Add Clauses from Form 509.] Companies frequently experience inconvenience in providing for the renewal of terminable debentures, e.g., the money market or the affairs of the company may happen to be temporarily depressed just when a loan to pay off debentures is re- quired. Moreover, a large class of investors require a permanent security, and for that reason dislike terminable debentures. Accordingly a considerable number of companies in good credit have taken to issuing (so called) perpetual debentures [and perpetual debenture stock, infra, p. 769], and the public have invested largely therein. Although called " perpetual," the debentures are made payable in certain events (see Condition 3), but the meaning is, that they may happen to continue for an un- limited period. Some companies which issue perpetual debentures modify Condi- tion 3 by adding the words " or (pty charged by such debentures, and any such receiver or receivers shall have power, &c. See Form 505, p. 825. The holders of the debentures of this series may appoint one or more of themselves to be such receiver or receivers, or may aj)point a stranger. 7. The debentures afsd are issued pursuant to an indenture dated, &c., and made between the coy of the one part, and A. B., &c., as trees, of the other part, being an indenture for secui-ing debenture stock of the nominal value of 100,000^. about to be issued by the coy. Given under the common seal of the coy this day of . The above is a specimen of the form of debenture to be issued pursuant to a debenture stock trust deed. See infra, Form 545, clause 9a. Form 529. Guarantee of debt. Tlie society hby covenants with the trees that if the coy make default in the payment of any principal moneys or interest secured by these debentures, or any of thorn, the society will pay such principal moneys jiiid intorest • and this covenant shall enure for the benefit of tlio holders for 1lif time being and from time to time of these debentures, so that cver\^ sucli holder may enforce the same in his own name by direct pro- ceedings against the coy. The above is a specimen of covenant by way of guarantee inserted in a trust deed, but more commonly the guarantee is indorsed on the debenture. FORMS. 841 The payment of the principal monoys and interest hby secured is Form 530. nnconditionally ^-uarantood hy tlio Society, Limtd, as appears hy indorsement tho trust deed within iiicntd. as to guarantee. Such an indorsement is sometimes placed on a debenture where tho trust deed contains a guarantee. The Society, Limtd (hnfter called "the society"), acknowledges Form 531. that the within debenture was subscribed for on the condition and in Guarantee on part conson that the society woiud give the guarantee following, and debentures. accordingly the society hby guarantees to the registered holder of tho within debenture (wliich expression in this guarantee means the person or persons within named or other the registered holder or holders for the time being of the within debenture) the pa}anent of the principal moneys and intei-est to become due under the sd debenture in manner following, that is to say : — 1 . Should the coy make default for more than thirty days in the payment of any principal moneys or interest due under the debenture, the society will pay the same, as to principal moneys at the expiration of three calendar months, and as to interest at the expiration of fourteen days, after the debenture holder shall have demanded pajTnent thereof from the society. Another form sometimes used is as follows : — 1. As to the interest. If and whenever the coy makes default in the payment of any interest for more than thirty days, the society will pay such interest on demand. 2. As to principal. If the coy makes default in the payment of the principal moneys, or any part thereof, the society will pay the amount upon whichever of the following days shall first happen — (a) on the day of , 189 — , within mentd ; or (b) on the day on which the securities i^rovided by the within mentd indenture for the debenture holders shall have been enforced and completely realized and distributed. 3. If the coy makes default for more than thirty days in the payment of any principal moneys or interest secured by the within debenture, the debenture holder must give notice in writing of such default to the society ; and if such notice is not given, as to interest within six calendar months after the default, and as to principal within twelve calendar months after the default, the society shall not be liable to pay such interest or principal. 2. The society is not to be liable to pay any such interest as afsd unless it is demanded from the society within two calendar months after it becomes payable by the coy, and the society is not to be liable to pay any such principal moneys unless the same shall be demanded within six months after the same shall become payable by the coy. 3. The debenture holder, without exonerating the society, may grant time or any other indulgence to the coy, and may assent to any modification of his rights, and may accept or make any comjiosition or arrangement with the coy, and may realize his secmities as and when he thinks fit. 842 DEBENTUEES AND DEBENTURE STOCK. [ClIAP. XIV. Form 531. 4. Under no circumstances sliall it be necessary for any debenture ' holder, who has ■ given notice in accordance with clause 2, to take any steps or proceedings for enforcing his rights against the coy, or for preserving the securities for the debenture ; but the debenture holder shall be bound to give to the society, on its request, all reasonable facilities therefor. 5. Any demand under this guarantee must be made by writing, signed by the debenture holder, and served at the registered office of the society, and the debenture holder must, if required by the society, produce this debenture at or before the time for payment. In witness whereof the society has caused this guarantee to be signed by two of its directors this day of . An instrument as above, being under hand only, requires only a 6d. stamp {Mortgage Insurance Corp. v. Commissioners of Inland Mcvenite, 21 Q. B. D. 352) ; if under seal, it would require a lO*. stamp as a deed. Being under hand only, it is desirable to show, in the instrument, that the consideration moved from the deben- ture holder, for otherwise the party suing would have to prove that there was consideration for the guarantee moving from the original debenture holder. 3Iiles V. New Zealand Alford Estate Co., 32 C. Div. 265 ; Creass v. Suuter, 19 Q. B. D. 341. Occasionally debentures and debenture stock of one company are guaranteed by another company. A guarantee by some well-known company may be very desirable when the company proposing to issue the debentures or debenture stock is in the nature of a private concern, or is not well known to the public as a suc- cessful concern, or where the security unguaranteed does not look very attractive, even though it may be in reality amply suificient. The guarantee is usually given in consideration of an annual premium, either with or without a lump sum down, and the guaranteeing company investigates the security and satisfies itself that there is a sufficient margin. The mo"de of giving the guarantee varies and must depend on the circumstances. Sometimes the guarantee is, by a separate instru- ment, indorsed on each debenture and signed on behalf of the guaranteeing company. Sometimes it is effected by a contract of guarantee made between the guar- anteeing company and trustees for the debenture or debenture stock holders, and in such cases a memorandum of the guarantee, or a copy thereof, can be endorsed on the debentures or debenture stock certificates. In most cases this is the best plan to adopt. Where, as occasionally happens, the guaranteeing company itself undertakes to act as trustee for the debenture or debenture stock holders {i.e., of property vested in or charged in its favour), it is best to place the guarantee on the debentures, or to have a separate contract of guarantee made with trustees. In the interest of the company and the debenture holders, it is desirable to see that the formal guarantee is reasonably calculated to protect the debenture or debenture stock holders. Too often the forms used are so simple, or so complicated, that the debenture holder is not unlikely to find that he has lost the benefit of the guarantee by over- sight or error of judgment. Unless otherwise provided in a guarantee or other contract of suretyship, the surety is discharged by any material variation made without the surety's consent in the terms of tlio contract between the principal debtor and the creditor, e.g., the giving of time or the release of any security. liecs v. Berrington, 2 Vcs. jun. 540 ; Tudor, L. C, Vol. II. ; Holme v. Brun.slcill, 3 Q. B. Div. 495 ; Clarke v. Birlcy, 41 C. Div. 422. More neglect to sue the principal does not discharge : to have this effect, there must be a binding agreement. Oalccleg v. rnshaller, 4 CI. & F. 207 ; FORMS. 843 Oriental Financial Corp. v. Ovcrcnd, Giirney (^- Co., L. R. 7 Cli. 142. An agreement Form 531. with a stranger to give tlio principal time is not enough. Clarke v. Birlcy, 41 C. Div. 422. The contract of suretyship is strictly construed, and the surety will only be Ijound in accordance with the terms of the contract. Stamford Banking Co. v. Ball, 4 Do G. F. & J. 310 ; Blest v. Brown, 8 Jur. N. S. 602. And if it contains some special stipulation which the creditor does not observe, the surety is discliarged. Lawrence V. JFalmslei/, 12 C. B. N. S. 799. " The principle is not that the liability of the surety depends on the value of the performance of the act for which he has stipulated, but that the creditor, not having performed the act stipulated for, is deprived of his remedy against the surety." Per Erie, C. J., in the case last mentioned. Accordingly, a guarantee sometimes provides that the surety shall not be released by time being given to the priucipal debtor or by any other dealing between the creditor and the principal debtor, which might, but for this provision, release the surety. See infra. Form 588, clause 4. Under sect. 5 of the Mercantile Law Amendment Act, 1S56 (19 & 20 Vict. c. 97), a surety, on payment of the debt or performance of tlie duty guaranteed, "is entitled to have assigned to him, or to a trustee for him, every judgment, specialty, or other security which shall be held by the creditor in respect of such debt or duty, whether such judgment, specialty, or other security shall, or shall not, be deemed at law to be satisfied by the payment of the debt or performance of the duty, and such person shall be entitled to stand in the place of the creditor and use all the remedies, and, if need be and upon a proper indemnity, to use the name of the creditor in any action or other proceeding at law or in equity in order to obtain payment from the principal debtor," &c. And looking to the words "entitled to stand in the place of a creditor," it has been held that the surety who pays a debt is entitled to sue for the amount without obtaining any assignment of the debt. See In re M'Jfi/n, Lightboicn v. M'Myn, 33 C. Div. 575. In Dane v. Mortgage Insurance Corp., (1894) 1 Q. B. 54, it was held that the de- fendant company was not discharged by a scheme of arrangement under which the assured' s rights were modified. This was in accordance with the decisions in Browne v. Can; 7 Bing. 508 ; Ellis v. Wilmot, L. E,. 10 Ex. 10 ; Ex parte Jacobs, 10 Ch. 211. See also Re London Chartered Bank of Australia, (1893) 3 Ch. 540. But if by operation of law the assured is pre- vented from performing a condition, whether precedent or concurrent, the assurers may escape. Worshy v. Wood, 6 T. R. 710 ; Bankart v. Bowers, L. R. 1 0. P. 485 ; Bwhcrts V. Brett, 11 H. L. C. 337. Where the holder of a debenture which matured for payment on November 4, 1895, effected a policy of insurance with a corporation which, after reciting that the debenture matured on that day and that the assured had paid a premium for insur- ance until that date, guaranteed to him the due payment of the principal money secui'ed by the debenture, if the debtors should make default for more than three calendar months in payment of any principal money due "under the debenture," and subsequently, by a special resolution of the debenture holders, which was neither assented to nor dissented from by the holder, the date for payment of the debentures of the company was postjjoned ; and the debenture was not paid off on November 4, 1895, nor in three calendar months after that date, it was held, that, assuming the special resolution to be valid, the contract was nevertheless one of insurance against the default of the company to pay the amoimt of the debenture on the original date ; that there had been a default by the company to pay money due under the deben- ture within the meaning of the policy ; and that the holder was therefore entitled to recover the amount of the policy from the corporation, who were entitled on payment to be subrogated to his rights as modified by the special resolution. Finlay v. Mexican Investment Corporation, (1897) 1 Q. B. 517. 814 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 532. Indorsed agreement to extend time of redemption. Memorandum that it is liby agreed and declared between the within- named debenture holder and the coy, that the time for the pajinent of the principal moneys within mentd sliall be extended to the day of , and that the within debentui'e shaU. have effect as if that date for payment had originally been fixed thby, and that the rate of interest on the sd principal moneys shall, as from the date hereof, be 6 p.c.p.a. in lieu of 5 p.c.p.a., and the sd debenture shall be read and construed accordingly. As "WITNESS the hand of me, the sd debenture holder, and of one of the coy's directors, on its behalf, this day of . {6d. stamp.) When there are a number of debenture holders, it is sometimes desired to make the contract under hand only as above, so that a 6d. stamp may suffice. Now, a contract under hand only is not binding, unless there is a reciprocal consideration. Clearly, the debenture holder, who by such a contract agrees to give time for pay- ment, gives a valuable consideration ; and the company, in raising the rate of interest, gives a valuable consideration. But even when the rate is not raised, it ■would seem that the contract by the company not to pay off till a specified period, is a valuable consideration, seeing that it precludes the company from redeeming till the expiration of such period ; and any actual or possible detriment or incon- venience undertaken by one party at the request of the other is a sufficient con- sideration. Sometimes it is preferred to make the contract by a separate instrument {supra, Form 51) and not by indorsement. In such a case a note of the extension should be indorsed. Where there are coupons, the agreement may provide for the issue of a fresh sheet. Form 633. Prospectus of debentures. The following prospectus may be found of some use by way of reminder :- The Coy, Limtd. Capital /., divided, &c. Issue of 100,000^. 4h p.c. debentures of 100/. each, payable 1st July, 1905. Trustees of the Debenture Holders : A., of , and B., of . Directors : [Names and addresses.^ Bankers . Solicitors . Secretary . Registered offices . Subscriptions are invited for the above debentures at par, payable as follows : — 10/. p.c. on application. 30/. p.c. on allotment. 60/. p.c. on the of . 100/. FORMS. 845 These debentures are issued In order, &c. Form 533. The coy \^posi(io?i and prospects^. The debentures will be made payable to the registered holder, and will be secured, &c. \^sfaie hoiv^ ; or, The debentures wiU be to bearer, witli power to tlio liolder at any time to register his title in the books of the coy ; or, the debentures Avill be registered on issue, but may be exchanged on application of the holder for debentures to bearer ; or, the debenture will be to bearer or registered holder as subscriber may prefer. The interest on the debentures Avill be payable half-yearly on the of and of , at the bankers of the coy [upon pre- sentation of the coupons annexed to the debentures]. Provisional certificates will be issued on pa^yTiient of the amount due on allotment, and exchanged for definitive debentiu'es on completion of the payments. ^Forjorm oj" certificate, see above.^ Instalments may be paid in advance on allotment, or on any of the above dates, under discount at the rate of p.c.p.a. Where no allotment is made, the dejiosit will be returned in full, and in case a less number of debentures is allotted than is applied for, the excess of the deposit will be applied in or towards pajTuent of the amount payable on allotment, and the balance, if any, will be returned. Failure to pay any instalment when due will render the allotment hable to cancellation, and the previous pajmients to forfeiture. Applicons in the annexed form shoiild be fiUed up and sent to the coy's bankers, Messrs. , accompanied by a deposit of 10/. upon each debenture aj^plied for. The trust deed and form of debenture can be seen at the office of the coy. By order of the board of directors. Secretary. No. — , Street, London, E.G., January 1st, 18 [Form of letters of application to be subjoined to prospectus.] Form 534. No. . TuE A. Coy, Limtd. Letter of Issue of 10,000/. 6 p.c. debentures. application. To the Directors of the A. Coy, Limtd. Gentlemen, I beg to apply for debentures of the above issue in the terms of the prospectus issued by you, dated, &c., on which I have paid the required deposit of 10/. per debenture; and I undertake to accept the same or any less niunber you may allot to me, and to make the 846 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 534. remaining payments In respect thereof"^' at the dates specified in the sd prospectus. Your obedient servant, Names . Address . Occupation . Date . * If you desire to pay in full on allotment, the words " the dates specified in the said prospectus" should be struck out, and the words "on allotment under discount" substituted. ISee supra, p. 125, as to tvaiver clauses.'] Form 535. Letter of allotment of debentures. The Coy, Limtd. Issue of, &c. Allotment Letter. Sir, In response to your applicon, the directors of the above-named coy have allotted to you debentures of 100/. each. The amount payable on applicon is . . . . £ And the amount payable on allotment is . . . £ Making together £ Deducting from this the amount already pd by you, viz. £ There remains a balance due fi'om you of . . . £ You will be so good as to pay this sum to the coy's bankers, Messrs. , No. — , Street, E.G., on or before the of . The remaining instalments will be payable as follows : — £ on the of . £ on the of . £ on the of . This letter must be produced at the bank on payment of each instal- ment, and the proper receipt taken. Failure to pay any instahnents when due will render previous pajTiients liable to forfeitiu-e. The debentures, when ready, of which due notice will be given, wiU be delivered in exchange for this letter of allotment duly signed by you, and the bankers' receipts for the amounts pd thereon. Your obedient servant. To . , Secretary. %* This letter should be carefully preserved. Received the within mentd debentures. Date . Signature — If scrip certificatoB to bearer are to bo allotted, this fact should be stated. FORMS. 847 Form of Tender for Four per Cent. Debentures. Form 536. Tenders at different prices must he on separate forms. jorni oi To the directors of the Coy, Linitd, Street, London, E.G. debentures. hereby tender for 1, of the Four p.c. debentures of the Coy, Linitd, according to the prospectus dated the day of , and agree to pay the sum of 1, for every 100/. debenture, and to accept that amount or any less amount that may be allotted to , and to pay the same in conformity with the tenns of the sd prospectus. herewith enclose the required deposit, viz., 200/., being 10/. p.c. on the nominal amount of debentures tendered for. Si^'nature . Name in full . Date . Address . Sometimes the prospectus states that the company "invites tenders" for the debentures, and that ' ' The debentures will be allotted to the highest bidders. No tender will be accepted for less than 100^., or a multiple of 100?., and no tender will be received after o'clock on the day of . No tender wiU be received unless on the printed form accompanying the prospectus, &c." In such case the allotment letter will state that, " in response to your tender for debentures of the above issue, the directors have allotted to you debentures, at the price of 1, per debenture, making a total of 1. The amount payable on allotment (less the sum of 1, already paid by you) is /. You will be so good, &c." See Form 535. The Coy, Limtd. Form 537. Issue of 500,000/. 4 p.c. debenture stock, redeemable at the option Prospectus of of the coy on or at any time after the 1st January, 1920, at 110/. debeiture Subscriptions are invited for 500,000/. 4 p.c. debenture stock of the above-named coy at par. Payable 5/. p.c. on application. ,, 20/. p.c. on allotment. ,, 75/. p.c. on the of . 100/. Payment may be made in full on allotment, under discount at 3 p.c.p.a. Directors: [iVames.] Trustees for debenture stock holders : \_NamesJ\ Bankers, Brokers, Office, Secretary. Prospectus. The old established business of \^particulars of business andcoy'\. The debenture stock is secured by specific mortgage to trustees of the coy's land, buildings, and works at , and by a floating charge on undertaking of the coy. 848 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 537. The interest will be payable half-yearly on the of , the first payment to be made on the - of and of next. In cases where no allotment is made, the deposit will be returned in full, and whe^^-e the amount allotted is less than that applied for, the balance of the deposit will be applied towards the payment due on allotment. Failure to pay any instalment will render the previous payments liable to forfeiture. A quotation in the Official List of the London Stock Exchange will be applied for in due course. . Copies of the memdm and arts of asson, and of the trust deed, dated, &c., and made, &c., may be inspected at the offices of Messrs. , solicitors to the coy. Forms of applicon can be obtained from the bankers' solicitors, or brokers, or at the office of the coy, January, 1895. Form 538. Pospectus of debenture stock (tenders invited) . The Coy, Limtd. Four per Cent. Mortgage Debentiu'e Stock. The directors invite tenders for the unissued balance, about 1., of the coy's debenture stock. This stock bears interest at the rate of p.c.p.a., payable half-yearly on the of , and of in each year. The purchase-money for the stock will be payable on the of , 1890, and the interest will commence on the of . The stock \_show position and security^. The stock will be allotted in amounts of not less than 100?. to the highest bidders (but no less price than 961. for each 100/. stock will be accepted), and the stock will be registered in the names of the applicants or their nominees free of expense. Tenders sealed up and marked " Tender for Debenture Stock " must be sent to the undersigned at this office not later than 10 a.m. on the of , and may be made in the following fonn, or if desired, printed forms of tender may be obtained on applicon. I hby tender for Fo7'tn of Tender. -I. four p.c. debenture stock of the coy, at the price of — /. for each lOOZ. stock, and I undertake to accept the sd stock or any less amount that may be allotted to me, and to pay the purchase-money to the coy's bankers on or before the day of next. (Name, address, and description in full.) jVo^e. — Letters of allotment of stock will be sent by post on or before ^ the of , to applicants whose offers are accepted. By order, , Secretary. Secretar)''s Offices, , . 1895. FORMS. A. B. & Coy, Limtd. 849 Form 539. debenture IVo. . Alloftncfit Letter Sir, — I am directod to infonu you tliat, iu accordance with your api^lication, you liavo beeu allottod 1. 4A i)er cent. First Mortgage Debenture Stock of A. B. & Coy, Limtd. The sum of /., the amount due on allotment, should l)e pd to the Bank, Limtd, No. — , Street, London, E.C., on or before the of . Scrip certificates to bearer will be delivered by the coy in exchange for this letter of allotment and receipt on and after the of . The request printed below must be signed by the allottee, and this allotment letter, request, and receipt must be forwarded to the coy before the exchange can be made. I am. Sir, Yours faithfully, , Secretary. Memo. : — Total sum payable on ap- \ plicon and allotment ) Less amount pd on appHcon Amount due on allotment To . Request. To A. B. & Coy, Limtd. I hby request you to *hand to the bearer hereof,*' send by regis- tered letter at my risk to of , a scrip certificate to bearer for the stock represented by this allotment letter. * Strike out these words if not required. Receipt. {Id. stamp.) Eeceived on behalf of A. B. & Coy, Limtd, the sum of 1, due on the above allotment. For The Bank, Limtd, /. 1895. %* To be retained by the Bank, Limtd. A. B. & Coy, Limtd. Issue of 4^ per Cent. First Mortgage Debenture Stock. Name . Allotment No. . Date . 1. Q:^ This sheet must be presented entire on pa}Taent of the amount to the Bank, Limtd, No. — , Street, E.C. P. 3 1 / stock. 850 Form 540. Another. DEBENTURES AND DEBENTURE STOCK. [OhAP. XIV. The Coy, Limtd. Issue of 500,000/. 4 per cent. Mortgage Debenture Stock at 105/. per Cent. Eedeemable at Coy's option after 1st January, 1915, at 110/. per cent. No. . ■ Street, B.C. Sir, — The directors of the Coy, Limtd, having received your applicon for /. of 4 per cent. Debenture Stock, have allotted you /. stock. Be good enough to pay to the Bank, Ltd, No. — , Street, E.C., on or before the inst., the balance payable on allotment, viz. : — Amount payable on /. stock allotted Less amount already pd on apj)licon Balance to be pd by you on or before the inst The first instalment /. is payable on the of , and the final instalment of /. on the of . Your obedient Servant, To . Secretary. Received the day of the sum of , being the balance as above payable on allotment. /. Eeceived the day of the sum of , being the fii-st instalment as above. /. Eeceived the day of , &:c., being the final instalment as above. %*■ This letter of allotment, duly indorsed, and banker's receipt for the deposit, will be exchanged for a stock certificate as soon as the same is ready. Form 541. Provisional certificate of title to debentures. The Coy, Limtd. Capital /. Bankers Offices Issue of 100,000/. 4/. 10*. p.c. Debenture Stock, constituted and secured by Trust Deed, dated, &c., and made, &c. No. Provisional Certijicate to Bearer. Issued in respect of allotment letter. No. - For /. Debenture Stock. This is to certify that the above-named coy has ab*eady received the sum of /. in respect of an allotment of /. of the above debenture stock, and that on payment of the remaining instalments as })olow meutd, tlio bearer will bo entld to bo registered as the proprietor of /. of the sd debenture stock. FORMS. 851 The issue price at par [o?-, 1, p.c], and the remaining instalments, Form 541. are to bo j^aid to the hankers of the coy as follows : — On the — th June next 10^. p.c, viz., 1. On the — til July next 20^. p.c, viz., 1. On the — th August next 50^. jlc, viz., 1. Failure to pay any instalment when dur- will render the previous payments liable to forfeiture without further notice. The remaining instalments may be paid in advance under discount at the rate of p.c. p. a. on any day on which an instalment falls due. Fractional certificates will be issued where desired. This provisional certificate must be produced to [the coy's bankers], upon pa}Tuent of each instalment, and will be returned receipted. It must be lodged, together with such receipt, with the coy, on or after the day of , in order that it may be exchanged for a definitive certificate. The provisional certificate and receipt must be left three clear days for examination. For the Coy, Limtd. Date Director. Secretary'. [If/, stamp.] Received, the sum of /., Received the sum of /., being the instalment payable on being the instalment payable on the above stock on the 1st of the above stock on the 1st of July, August, 1895. 1895. For . For . The Bank, Limtd. The Bank, Limtd. [To hr, detached by hanker s.~\ [7b he detached hy hankers.~\ The Coy, Limtd. The Coy, Limtd. 1. Four per Cent. Perpetual 1. Four per Cent. Perpetual Debenture Stock. Debenture Stock. Amount payable, 1st August, Amount payable, 1st Jidy, 1895, 1895, in respect of 1. Deben- in respect of Debenture Stock, ture Stock, sj)ecified in the Pro- specified in the Provisional Certi- visional Certificate to bearer. ficate to bearer. No. No. . 1, paid the day of 1, paid the day of 1895. 1895. Scrip certificates to bearer, issued in respect of debentures, debenture stock, bonds, and foreign loans, have long been in use, and are negotiable. Goodwin v. Soharts, 1 App. Cas. 476 ; Rumhall v. The Metropolitan Bank, 2 Q. B. D. 194. In the 3l2 8S2 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 541. case of companies under the Act of 1862, it is not usual to issue such scrip to bearer in respect of shares, but the case last mentioned goes to show that there is no legal objection to such issue. See also Midland and G. W. Jiailway v. Gordon, 16 M. & W. 804 ; East Gloucester Railway v. Bartholomew, L. R. 3 Ex. 15; McEwen v. West London Wharves, ^c. Co., 6 Ch. 655. These cases show that until registration of the scrip holder, the original allottee is to be regarded as the shareholder. See also Eustace v. Dublin, ^-c. Raihcai/ Co., 6 Eq. 182, in which case the company offered scrip certificates to bearer for public subscription, and it was held that the allottee was under no obligation to be registered. However, the London Stock Exchange object to the issue of such scrip to bearer in respect of shares, and accordingly, where quotation is required, such issue must be avoided. The stamp duty on scrip to bearer is \d. See Stamp Act, 1891, under Letters of Allotment, Scrip Certificates, &c. Where a scrip certificate as above is issued in respect of debentures or debenture stock, and before full payment of the instalments the company goes into liquidation, the holder is not bound to go on paying the instalments, even where there is a for- feiture clause. Ellerb>/s Claim, 20 W. R. 855. Where a quotation on the London Stock Exchange is wanted, it should be borne in mind that the committee now commonly require the certificate to be headed with a reference to the authority under which the stock is issued, e.g., "Issued pursuant to clause — of the company's articles of association, and to resolution of the direc- tors passed the of ." As to the specification in the heading of the time for and terms of redemption and the indorsement of a copy of the conditions as to transfer, &c., see Schedule 1 to Form 545, infra, p. 878. Accordingly, it is well to submit the form for approval before issue. Form 542. Scrip to registered holders. Transfer's of this Scrip are liable to Stamp Duty. 500,000/. 4 per cent. First Mortgage Debenture Stock. of . I. K. & Coy, Limtd. 1,000/. Scrip. No. — . For 1,000 pounds on whicli 50 p.c. has been paid. This is to certify that A. B. of , W.C, or other the i-egistered holder for the time being hereof will, on pa;yTaent to The Bank, Limtd, or any of their Branches, of the final instalment of 50/. p.c. on of , 1898, and lodgment of this scrip certificate, become entld to be registered as the holder of one thousand pounds of the above-mentd debenture stock. If the above-mentd final instalment is not duly pd, the sum pre- viously pd on applicon and allotment and on this certificate will be liable to forfeiture without previous notice. Dated this day of , 1 8 — . For I. K. & Coy, Limtd, Secretar3\ Transfers of this scrip must bo in writing in the usual common form, or as near thereto as circumstances will admit, and must bo signed by FORMS. 853 the transferor and transferee, and must bo left at the coy's office, Form 542. No. — , Street, London, E.G., for registration, accompanied by this certificate, and every such transfer when registered will be retained by the coy, and a note or momdm thereof shall bo indorsed hereon. A fee of 2*. 6d. will be charged for the registration of each transfer, and must be j)d to the coy before registration. Fractional certificates, not involving fractions of one pound, will be issued where desired to the registered holder hereof in exchange for the present certificate, on pa\Tnent of the stamp duty thereon. Final instalment duo July, 1898. Eeceived the day of July, 1898, the sum of 500/. For The Bank, Limtd. Cashier. The Coy, Limtd. No. 100,000/. Mortgage Debenture Stock, 1895. Bearing interest at the rate of p.c.p.a., payable every [January] and [July]. [The stock is redeemable at /. p.c. at any time after the day of , on six calendar months' notice from the coy.] This is to certify that of is the registered holder of - Form 543. Debenture stock certi- ficate (registered holder). -/. of the above-mentd stock, which stock is constituted and secured by trust deed dated the day of , and made between the coy of the one part, and and (trees) of the other part, and is issued subject to the provisions contained in that deed. Given under the common seal of the coy this day of . Note. — This certificate must be surrendered before any transfer of the whole or any part of the stock comprised in it can be registered, and no fraction of [one] pound can be transferred. Since the first edition of this work, giving the requisite forms, was published, a large and increasing number of companies, registered under the Act of 1862, have raised money by the issue of debenture stock. The stock is sometimes issued on the terms that it is to be redeemed at a fixed date, but is more commonly [supra, p. 784] made and called "perpetual." It is usually secured by a trust-deed, whereby the company covenants to redeem the stock in due course, and to pay the interest, and generally to observe the conditions on which the stock is issued. And in most cases the deed makes the company's property, or some part of it, a security for the payment of the stock. See infra, Form 545. 854 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 544. Debenture stock certi- ficate (bearer). Form of coupon. The Coy, Ltmtd. No, 100,000^. Mortgage Debenture Stock, 1895. Bearing interest at the rate of p.c.p.a., payable ever}^ [January] and [July]. [The stock is redeemable at, &c.'\ This is to certify that the bearer is the proprietor of -/. of the above-nientd debenture stock, which stock is constituted and secured by trust deed dated the day of , and made between the coy of the one part, and and (trees) of the other part, and is issued subject to the provisions contained in that deed. Given under the common seal of the coy this day of . [Form of Interest Coupon.) The Coy, Limtd. No. . Six months' interest on Debenture Stock, 1895. Certificate to bearer. No. . Payable at , less income tax /. Secretarv. See notes to Form 543, supra. Form 545. Trust deed to secure debenture stock. Interpre- tation. Trust Deed constituting and securing Debenture Stock. The draftsman can readily expunge the clauses in the following form not required in any particular case. See extra Clauses, p. 88G ct seq., infra. Very commonly, debenture stock is issued before the company has actually acquired the property intended to be made a security ; in such cases the deed "will contain a covenant by the company to convey or procure the conveyance to the trustees of the specified property. See Form 553. THIS INDENTUEE, made the day of , between the , Limtd (hnfter called "the coy"), of the one part, and of and of (hnfter called "the present trees ") of the other part. Whereas the coy has determined to issue debenture stock to be constituted and secured in manner hnfter provided. Now THIS INDENTURE WITNESSETH AND DECLARES aS folloWS : — Tlie marginal notes hereto shall not affect the construction hereof and in these presents, unless there bo something in the subject or context inconsistent therewith, the expressions following shall have the meanings hnfter montd, that is to say: — "The trees or tree" means the present trees or the survivors or sui-vivor of them, or other the trees or tree for the time being thereof. "The stock" moans tlio amount of the coy's indebtedness to the trees or tree under Clause 2 hereof [and any further indebtedness to the trees or tree under Clause hereof. See Fonti 546]. FORMS. 855 "The stockholders" means [as regards registered stock] the several Form 545. persons for the time being entered in the register hnftor mentd as holders of the stock [and, as regards stock represented by certificates to bearer, the bearers for the time being of such certificates]. • If there are not to be certificates to bearer, omit the above words in brackets. "The issue of the stock" means, as regards each share therein, the entry in such register of the name of the first holder thereof. "The registered stock" means so much of the issued stock as shall not for the time being be represented by certificates to bearer. If there are not to be certificates to bearer, omit the words in brackets above and the last definition. "The specifically moi-tgaged premises " means the freehold and leasehold hereditaments by Clauses 7 and 8 hereof expressed to be assured and all other property hereby made a specific security for the payment of the moneys for the time being owing and intended to be secured hereunder. "The general assets" means the assets comprised in the charge created by Clause 9 hereof, and does not include the specifically mortgaged premises. "The mortgaged premises" means and includes the specifically mortgaged premises and the general assets collectively. 2. The coy hby acknowledges that it is indebted to the present trees Constitution in the sum of [500,000?.], carrying interest at the rate of p.c.p.a., ° ^ ^'^ • payable half yearly on the day of and day of , the first payment to be made on the day of , 18 — . And the pajiuent to the stockholders of interest for each half year or other period on the stock held by them respectively shall operate in satisfac- tion of the interest for such half year or other period payable to the trees or tree under this clause. 3. The stockholders are to be regarded as the beneficial owners of Beneficial their respective shares of the stock, and the coy is to be regarded as ^'"^^'^^'"P- the beneficial owner of the unissued stock for the time being. 4. The stock may be issued to such persons, and on such terms, and Terms of either at par or at a discount, or at a premium, as the coy shall ^^^'^^ °^ stock, detennine, and is to rank as a charge on the coy's ujidertaking. 4a. The stock is limited to [500,000/.] Ljnut. The deed very commonly contains a clause as above, but in many cases the limit is qualified so as to allow the company to issue further stock. See Forms 54G, 547, and 548. As to stamp duty where there is provision for further stock, see sttpra, p. 814. 856 DEBENTURES AND DEBENTURE 8T0CK. [ChAI'. XIV. Form 545. Payments to be made to stockholders. Conditions on which stock held. Grant of freeholds. Demise of leaseholds. 5. As and when the stock or any part thereof ought to be redeemed or pd off in accordance with the provisions hereof, the coy will pay to the stockholders, or those whose stock ought to be redeemed or pd off, the full nominal amount of the stock held by them resply, with such premiums, if any, as shall be paj'able in respect thereof, and such pa^Txient shall operate in satisfaction of the amount of the stock so redeemed or pd off, and in the meantime, until the stock is redeemed or pd off, the coy shall pay to the stockholders interest on the stock held by them resply at the rate of p.c.p.a., and such stock shall be pd by equal half yearly payments on every day of and day of . 6. The stock shall be held subject to the conditions set forth in the first schedule hereto, and such conditions shall be binding on the coy and the stockholders, and all persons claiming through them resply. 7. The coy, as beneficial owner, hby grants unto the present trees all and singular the freehold hereditaments resply specified or refen-ed to in the first part of the second schedule hto. To hold the same unto and to the use of the present trees, their heirs and assigns. 8. The coy, as beneficial owner, hereby demises unto the present trees all and singular the leasehold hereditaments resply specified or referred to in the second part of the second schedule hto. To hold the same unto the present trees for all the respective residues now unexpired of the several terms for which the same premises were resply granted by the several indentures of lease mentd in the second part of the same schedule, except the last day of each of the said terms. The coy shall, with regard to the sd leasehold hereditaments, stand possessed during the continuance of this security of the last [three] day[s] of each of the terms of years granted therein resply by the leases specified or referred to in such second part of the same schedule upon trust for the trees or tree for the purposes of these presents, and to assign and dispose thereof as they or he shall for such purposes direct, but subject nevertheless to the provision for reconveyance and release hereinafter contained. And upon any sale or sales of any of such leasehold here- ditaments the trees or tree shall for the purposes of vesting the afsd residues of the said terms in any purchaser or purchasers be entitled by deed to appoint such purchaser or purchasers, or any other person or persons, a new tree or new trees of the aforesaid residues in the place of the coy, and to vest such residues accordingly in the new tree or trees so appointed, freed and discharged from any obligation to reconvey the same. Sometimes there are agreements for leases to be assigned, and in such cases the following clauses may be required : — AsHigumcnt [8rt. The coy, as beneficial owner, hby assigns unto the j)resent of agreements tl.^fJtt'f•s, All and singiilar the full benefits and advantages of the for leases. -r. ^ c ij-ji ji-t itii several agrccmts specified or referred to m the third schedule hereto, and nil and singidar the rights, easements, liberties, and privileges Trusts of nominal re- versions of leaseholds. FORMS. 857 thereby resply conferrod or ngrood to })0 grunted : To hold the same Form 545. unto the present trees, subject to the terms and conditions contained — — ■ in the sd several agreemts.] [8b. The coy shall forthwith, at its own cost, do and perform all acts Company to and things which may be necessary to entitle it lo hnxo granted to it "^^'^^^ leases, the respective leases for which it has entered into the several agreemts specified or referred to in the third schedule hereto, of the premises therein comprised resply, and will, at its own cost, procure such respective leases to be granted accordingly, and if, when the sd leases shall have been resply granted, any principal money or interest shall remain on the security of the debentures or of these presents, shall, if necessary, use its best endeavours to obtain, at its own cost, proper licenses for the purpose, and shall immediately after such licenses resply, if necessary, shall have been obtained, or if such licenses resply shall be unnecessary, then immediately after the sd intended leases resply shall have been granted, at its own cost, well and effectually assign or demise, or procure to be assigned or demised, the premises to be comprised in such leases resply unto the trees or tree, for the whole, or, at the option of the trees or tree, any part of the then respective residues of the terms of years to be granted by the sd intended leases resply, and with such covenants for title and otherwise as are usual in moi-tgages by assignment or demise, as the case may be, as may be reasonably recj^uired, and upon the trusts and for the purposes hnfter expressed concerning the same.] [8c. The coy as beneficial owner hby grants unto the present trees all Equitable and singular the copyhold hereds specified or referred to in the third ^pyholds part of the second schedule hto, to hold the same unto and to the use and covenant of the present trees their heirs and assigns subject to the incumbrances surren er. (where any) affecting the same premises resply as appearing in the third part of the same schedule to the intent that the monej's for the time being owing on the security of these pi-esents may rank as a charge on the same hereds. And the coy hb}- covenants with the present trees that the coy will forthwith cause to be surrendered with the respective hands of the lords of the manors of which the same parcels resply the sd copyhold hereds to the use of the present trees their heirs and assigns according to the customs of the said manors resply by and under the rents, fines, suits, and services therefor due and of right accustomed subject to a condition in each case for making void the surrender on the provisions as to reconveyance and release in Clause 48 hereof coming into operation.] 9. The coy hby charges in favour of the trees or tree its other Floating assets for the time being, both present and future, including its uncalled charge ou capital, with the pajmient of all moneys for the time being owing on assets, the security of these presents, and such charge shall rank as a floating- charge, and shall accordingly in no way hinder or prevent the coy from selling, alienating, mortgaging, charging, leasing, paying dividends out of profits, or otherwise disposing of or dealing with such assets in 858 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Debentures to be issued to trustees. Form 545. the ordinary course of its business, and for the purpose of carr^dng on the same, and any mortgage or charge so created may be specific or floating, and may be made to rank in priority to or pari passu with or after the security hby constituted. A general charge as above is now commonly given in debenture stock trust deeds, on the assumption that, as laid down in lie Standard Manufacturing Co., (1891) 1 Ch. 627, the Bills of Sale Acts do not apply to companies registered under the Act of 1862. See supra, p. 782. Sometimes, however, where chattels in England form an important part of the security, it is considered desirable to fortify the seourity by issuing debentures to the trustees pursuant to a clause as follows : — [9a. The coy shall forthwith execute and dehver to the trees or tree [10] debentures of the coy each for securing the principal sum of 50,000/. and interest, [and before issuing any of the stock in excess of 500,000/., the coy shall execute and dehver to the trees or tree further debentures in like form for securing principal sums equal to the excess] and such debentures shall be framed in accordance with the form set out in the schedule hto [see Form 528, supra'], and shall be held by the trees or tree as a collateral security for the pajTuent of the stock and the interest thereon, and the trees or tree shall, as and when the security hby constituted shall become enforceable as hnfter provided, be at liberty to deal with and enforce the sd debentures in such manner as they or he think expedient.] Omit the words in brackets as to further debentures where inapplicable. They are appropriate {e.g.) in the case of the issue of further stock on new property being brought in as a specific security (see Form 546), or where some stock is only to be issued when further moneys are required by the company. 10. The trees or tree shall pei-mit the coy to hold and enjoy all the mortgaged premises, and to carry on therein and therevrith the busi- ness, or any of the businesses mentioned in the memdm of asson of the coy, until the security hby constituted shall become enforceable, as hnfter provided, and then the trees or tree may, in their or his discretion, without any such request as next hnfter mentioned, and shall, upon the request in writing of the holder or holders of one half of the stock (but in either case without any further consent on the part of the coy or its assigns), enter upon or take possession of the mortgaged premises, or any of them, and may on the like dis- cretion, and shall upon the like request, sell, call in, collect, and convert into money the same, or any part thereof [with full power to sell any of the same premises either together or in parcels, and either by public auction or private contract [and either for a lump sum or for a sum payable by instalments, or for a simi on account and a mortgage or charge for the balance], and with full power upon every such sale to make any special or other stipulations as to title or evi- dence, or commencement of title or otherwise, which the trees or tree shall deem proper, and witli full power to buy in, or rescind, or vary any contract for sale of the said premises, or any part thereof, and to resell the same without being responsible for any loss which may be Trusts of mortgaged premises. When sale, &c., to be made, and how. FORMS. 859 occasioned tlierel)y, and with full power to compromise and effect com- Form 545. positions, and for the purposi's afsd, or any of them, to execute and do ~ ' all such assurances and things as they or he shall think fit]. If debt.s and other personal i^roperty arc not to be included, the words " CAiL in, collect" will be iinnecessaiy in the above clause, and generally throughout the form. The words in brackets can generally bo omitted in reliance on ss. 35 and 37 of the Convej^ancing and Law of Property Act, 1881, but if the company's undertaking is abroad they should remain. Sometimes a power to sell for shares is added, e.g., " And it is hereby expressly declared that any such sale as aforesaid may be made wholly or in part for shares, debentures, debenture stock, or other securities of any company [having objects altogether or in part similar to those of the company], and tliat the provisions hereof shall extend to such shares, debentures, debenture stock, or other securities, as if the same constituted part of the mortgaged premises, to the intent that the same may be sold and dealt with accordingly." But it must be seen that the directors can confer the power to sell for shares. See I)ouga)i's case, 8 Ch. D. 545, as to a power merely " to sell " not conferring a power to sell for shares. Sometimes the clause following is inserted, i.e., " The trustees or trustee shall be at liberty to form and promote, or take part in the formation and promotion, of any company or companies constituted, or to be constituted, for the purpose of pur- chasing or otherwise acquiring from the trustees or trustee the mortgaged premises, or any part thereof," but it must be seen that the directors can give this power. 11. The security hby constituted shall (subject to clause 12 hereof) When become enforceable in each and every of the events following (that is be^eSOTce- ° to say) : — able. (1) If the coy shall make default in the pajonent of any principal moneys or interest which ought to be pd in accordance with these presents. (2) If an order shall be made or an effective resolution passed for the winding up of the coy. (3) If a receiver of the coy's undertaking or any part thereof shall be appointed, and such appointment shall, in the opinion of the trees or tree, be prejudicial to the security hby constituted. (4) If a distress or execution be levied or enforced upon or against any of the chattels or ppty of the coy. (5) If any execution, extent or other process of any Court or autho- rity is sued out against the mortgaged premises, or any part thereof, for any sum whatever. L(6) If the balance-sheet of the coy shall not be duly made out in accordance with the coy's arts of asson, and cei-tified by the auditors of the coy, and a copy thereof and of the auditors' certificate presented to the trees or tree on or before the 31st of December in each year.] [(7) If at any time it appears from the balance-sheet of the co}^, or the trees or tree shall certify in writing, that in theii- or his opinion the liabilities of the coy exceed its assets, including uncalled capital, or that the coy is carr_\dng on business at a 860 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 545. What notice to be given before realisa- tion. Trustee' H receipt. loss, or tliat the coy's book debts, stock-in-trade and cash ai-e together of less value than /., or that the further prose- cution by the coy of its business will endanger the security of the stockholders.] [(8) If the coy shall without the consent of the trees or tree make, or attempt to make, any alteration in the jirovisions of its memdm or arts of asson which might, in the opinion of the trees or tree, detrimentally affect the interest of the stock- holders.] [(9) If the coy shall, without the consent of the stockholders to be obtained in accordance with the provisions contained in the [third] schedule hto, create, or purport or attempt to create, any charge or mortgage ranking, or which by any means may be made to rank, on the mortgaged premises, other than the general assets, pari passu with or in priority to the security hby constituted.] (10) If defaidt shall be made by the coy in the performance or observance of any covenant, condition or obligation binding on the coy under these presents. (11) If the coy shall stoj) pajanent, or shall without the assent in writing of the trees or tree cease to cany on its business, or threaten to cease to carry on the same. The paragraphs in brackets are special. 12. Section 20 of the Conveyancing and Law of Ppty Act, 1881, shall not apply hto, but before making any such entr}', or taking possession as afsd, or any sale, calling in, collection or conversion under the afsd trust in that behalf (hnfter referred to as "the primary trust for con- version "), the trees or tree shall, except when they or he shall certify that in their or his opinion further delay would imperil the interests of the stockholders, and except in the case of such order or resolution as afsd having been made or passed, give written notice of their or his intention to the coy, and shall not enter upon the mortgaged premises, or execute the primaiy trust for conversion, if in the case of such trust arising by reason of any default in payment of any principal moneys or interest, the directors shall prove to the trees or tree pajTuent of the principal or interest so in arrear within three calendar months next after such notice shall have been given to the coy, or if in the case of such trust arising by reason of any breach of obligation as afsd, the coy shall forthwith, upon such notice as afsd })eing given, fully perform or make good the breach thereof to the satisfaction of the trees or tree. 13. UpoTi any such sale, calling in, collection or conversion as afsd, the rc'cei})t of the trees or tree for the purchase-money of the premises sold, and for any other moneys pd to them or him, shall effectually di8(;hargo the purchaser or purchasers, or other person or persons paj-ing the same therefrom, and from being concerned to see to the applicon, or ] icing answerable for the loss or misapplicon thereof. FORMS. 861 14. The trees or tree shall hold tlio moneys to arise from any sale, Form 545. calling in, collection or conversion, under the primary trust for conver- ^^i^^T^Jf sion, upon trust that they or he shall thereout in the lirst place pay or proceeds, retain the costs and expenses incurred in or about the execution of the primary trust for conversion or otherwise in relation to tliese jiresents, and shall aj^pl}' the residue of such moneys, first in or towards pajTnent to the stockholders pari passu in propoi'tion to the amount due to them resply of all arrears of interest remaining unpaid on the stock lield by them resply ; secondly, in or towards payment to the stockholders pari passu in proportion to the stock held by them resply, and without any preference or priority of issue or otherwise howsoever of all prin- cipal moneys duo in respect of the stock held })y them resply, and that whether the same principal moneys shall or shall not tJien be payable ; thirdly, shall pay the surplus (if any) of such moneys to the coy or its assigns. 15. Provided always, that if the amount of the moneys at any time Power to apportionable under the last preceding clause liereof shall be less than ^g^t'^ tU^^" 10 p.c. on the stock, the trees or tree may at their or his discretion sufficient to invest such moneys upon some or one of the investments hnfter autho- P^^, ^^^ rised, with power from time to time at the like discretion to vary such investments, and such investments with the resulting income thereof may be accumulated until the accumulations, together wdth any other funds for the time being under the control of the trees or tree, and applicable for the purpose, shall amount to a sum sufficient to pay 10 p.c. upon such of the stock as shall be outstanding, and then such accumulations and funds shall be applied in manner afsd. 16. The trees or tree shall give not less than seven days' notice, by Notice of advertisement in the 2'imes and at least one other daily Loudon ^f-^L f°°^e newspaper, of the day fixed for any pajanent to the stockholders under given, clause 14 or 15 hereof, and after the day so fixed and advertised the holder of the stock shall be entld to interest on the balance only (if any) of the principal moneys due on such stock after deducting the amount (if any) payable in resjiect thereof on the day so fixed. 17. The receipt of each stockholder for the principal monej's and Receipt of interest payable by the trees or tree to him in respect of such stock stockholder, shall be a good discharge to the trees or tree. 18. Upon any payment under clause 14 or 15 hereof to the stock- Indorsement holders on account of the principal moneys or interest hby secured, the certifioitea stock certificates must be produced to the trees or tree, who shall cause upon part a memdm of the amount and date of pajonent to be indorsed thereon, P^^™^^ • but the trees or tree may in any particular case dis^iense with the production and indorsement of a stock certificate upon such indemnity being given as they or he shall deem sufiicient. Strange to say, the late secretary of the Share and Loan Department of the London Stock Exchange during the last two years has objected to this most reasonable and proper clause. 862 DEBENTURES AND DEBENTUEE STOCK. [ChAP. XIV. Form 545. 19. At any time before tlie security li})y constituted hecouies enforce- ^ Z able tbe trees or tree may, upon the applicon and at the expense of the trustees to coy \_if London Stock Exchange quotation tvanted, say., but only if and so concur with £^^. ^^g j^ their or his opinion the interests of the stockliolders shall not be the company -'■ in specified prejudiced thereby], do or concur in doing all or any of the things fol- dealings with lowing, in respect of the specifically mortgaged premises, that is to say — mortgaged ( 1 ) May sell, call in, collect, and convert all or any of the specifically premises. mortgaged premises on such tenns as to them or him may seem expedient, with full power to make any such sale for a lump sura, or for a sum payable by instalments, or for a sum on account and a mortgage or security for the balance, or for a rent-charge. (2) May let on lease any part of the specifically mortgaged premises on such terms as may seem expedient, whether for a rent fixed, fluctuating, or contingent, and with or without premium, and whether with or without providing moneys for building, mining, draining, or improving the same, or otherwise, and ■with or without powers to purchase the reversion. (3) May acquire a new lease of any leasehold hereds for the time being forming part of the specifically mortgaged premises for such term not being less than the then residue of the then existing term therein, and at such rent and subject to such covenants and conditions as may seem expedient, and for that purpose, if thought fit, surrender the then existing lease of such hereditaments and the then existing term therein. (4) May exchange any part or parts of the specifically mortgaged premises for any other pi^ty suitable for the purposes of the coy, and upon such terms as may seem expedient, and either without or with payment or reception of money for equality of exchange or otherwise. (5) May permit any transfer or removal of the licences attached to any of the specifically mortgaged premises to any other of the specifically mortgaged premises. (6) May set out, appropriate, grant, or dedicate land forming part of the specifically mortgaged premises for the purposes of roads, ways, canals, watercourses, gardens, places of amusement, places of recreation, sites for chapels, schools, churches, and other purposes, public or private, which may seem exj)edient. (7) May assent to the modification of any contracts or arrangements which may be subsisting in respect of any of the specifically mortgaged premises, and in particular the terms of any leases or covenants. (8) May, with moneys fonning part of the specifically mortgaged jire- mises, purchase or otherwise acquire any freehold, leasehold, or copyhold ppty witli or without goodwill, licences, fixtures, and trademarks, wliichmay seomsuitablofor the purpososof the coy. (9) May, out of moneys forming part of the specifically mortgaged FORMS. 863 premises, make advances on the security of any ppty of the Form 545. last mentd kind whether by way of first charge or otherwise, or may with any such moneys acquire by transfer or otherwise any luortgages or charges affecting any such ppty. (10) May call in and enforce payment by foi'cclosuro or otherwise of the securities forming part of the specifically mortgaged premises. (11) May make any sale, lease, or other dealing under this clause in conson, or part conson, that tlie purchaser, lessee, or other party shall be bound for a term or othei'\\ise to buy from the coy or its nominees all or any of the litpior i-equired for the purposes of the premises so dealt witli. (12) May release any of the specifically mortgaged premises which, in the opinion of the trees or tree, are improfitable or a source of loss or danger to the coy. (13) May settle, adjust, refer to arbitration, compromise, and arrange all accounts, reckonings, controversies, questions, claims, and demands whatsoever, open, unsettled, or pending with any person or persons in relation to any of the specifically mort- gaged premises. (14) May enter into, make, execute, sign, and do all such conti'acts, agreemts, receipts, payments, assignments, transfers, convey- ances, assurances, instruments, and things, and bring, prosecute, enforce, defend, and abandon all such actions, suits and proceedings in relation to any of the specifically mort- gaged premises as may seera expedient. (15) May apply any net capital moneys arising from any sale, lease, or other dealing with the specifically mortgaged premises under this clause in developing, improving, protecting or preserving any of the specifically mortgaged premises, or in erecting or constructing any buildings, wells, or works, or in preventing or endeavoui'ing to prevent loss or apprehended loss thereof or detriment to any of the specifically mortgaged premises. (16) Generally may act in relation to the specifically moi-tgaged premises in such manner and on such tenns as they or he may deem expedient in the interest of the stockholders. 20. All net capital moneys arising under the] last preceding clause. Application and all assets acquired pursuant to this clause, shall become part of the ° P^^^^^ ^• specifically mortgaged premises and shall be vested in the trees or tree accordingly. 21. Subject as afsd, the trees or tree shall invest the net capital Interim moneys referred to in the last preceding clause hereof upon some or ii^^cstmeiits. one of the investments hnfter authorized, with power from time to time at their or his discretion to vary such investments, and with power (until the primary trust for conversion shall arise) to resort to any such last-mentioned investments for any of the purposes for which such proceeds are under the last preceding clauses hereof authorized to be expended ; and subject as afsd, the trees or tree shall stand 864 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 545. Leasing and other powers by mortgagor under s. 18 of Conveyancing Act. Power for trustees after entry, &c., to carry on business, and oxerciHC powers under clause 19. How returns under last clause to bo applied. possessed of the sd investments upon trust, until the primary trust for conversion shall arise, to pay the income thereof, and any net moneys in the nature of income arising under such clause to the coy or its assigns, and after the primary trust for conversion shall have arisen, shall hold the said investments and the income thereof resply, and net moneys in the nature of income, upon and for the trusts and purposes hinbefore expressed concerning the moneys to arise from any sale, calling in, collection, and conversion under the primarj- trust for conversion : Provided always, that in default of such trust for conversion arising, and after payment and satisfaction of all moneys intended to be secured by these presents, the sd investments and the income thereof and net moneys last afsd shall be held in trust for the coy or its assigns. [21«. The coy may, during the continuance of this security and at any time and from time to time before the same becomes enforceable, exercise over or in relation to any of the specifically mortgaged premises, without the consent or concurrence of the trees or tree, any of the powers of leasing and ancillary powers contained in or given by sect. 18 of the Conveyancing and Law of Property Act, 1881, to a mortgagor in possession.] Sometimes mucli more extensive leasing powers are given to the company. 22. After the trees or tree shall have made such entry or taken possession as afsd, and until the whole of the mortgaged premises shall be sold, called in, collected, and converted under the primary trust for conversion, the trees or tree may, if they or he shall think fit, but not otherwise, carry on the business of the coy in and with the mortgaged premises, or any of them, and may manage and conduct the same as they or he shall, in their or his discretion, think fit, and for the purposes of the said business may employ such agents, managers, receivers, accountants, servants, and workmen upon such terms as to remuneration and otherwise as they or he think proper, and may renew such of the plant, machinery, and effects of the coy as shall be worn out or lost or otherwise become unserviceable, and generally may do or cause to be done all such acts and things, and may enter into such arrangements respecting the said premises, or the working of the same or any part thereof, as they or he could do if they or he were absolutely entitled thereto, and without being respon- sible for any loss or damage which may be occasioned thereby. And may also, at their or his discretion, without the concurrence or request of the coy, exercise aU or any of the powers and discretions vested in them or him by clause 19 hereof as if the word "specifically" were omitted throughout that clause. 23. The trees or tree shall, out of the rents and profits and income of the mortgaged premises and the moneys to be made by them or him in carrying on the said business, pay and discharge the expenses FORMS. SG'J incurred in and about carrying on and management of the said Form 545. business, or in the exercise of any of the powers under the last preceding clause hereof or otherwise in respect of the premises, and all outgoings which thoy or he shall think fit to pay, and shall pay and apply the residue of the said rents, profits, and moneys in the same manner as is hinbeforo provided with respect to the moneys to arise from any sale, calling in, collection, and conversion under the primary trust for conversion. 24. Any moneys which, under the trusts herein contained, ought to Investment be invested may be invested in the names or name, or under the legal ^^^'^"®' control of the trees or tree, in any of the public stocks or funds or Government securities of the United Kingdom, or in the stock of the Bank of England, or in any other stocks, funds, or securities by law authorized for the investment of trust moneys, or may be placed on deposit in the names or name of the trees or tree in such bank or banks as they or he may think fit. 25. The trees or tree may, by writing, a];)point a receiver of the Receiver, mortgaged premises, or any part thereof, and remove any receiver so appointed, and appoint another in his stead, and the following pi-o- visions shall have effect : — (a) Such appointment may be made either before or after the ti'ees or tree shall have entered into or taken possession of the mortgaged premises, or any jiart thereof. (b) Such receiver or receivers may be invested by the trees or tree, pursuant to clause 45 hereof, with such powers and dis- cretions as the trees or tree may think expedient. (c) Unless otherwise directed by the trees or tree, such receiver or receivers may exercise all the powers and authorities vested in the trees or tree by clause 22 hereof. (d) Such receiver or receivers shall, in the exercise of his or their powers, authorities and discretions, conform to the regula- tions and directions from time to time made and given by the trees or tree. (e) The trees or tree may, from time to time, fix the remuneration of such receiver or receivers, and direct pa}-ment thereof out of the mortgaged premises. (f) The trees or tree may, from time to time, and at any time, require any such receiver or receivers to give security for the due performance of his or their duties as such receiver or receivers, and may fix the nature of the amount of the secu- rity to be so given, but the trees or tree shall not be bound in any case to require any such security. (g) Save so far as otherwise directed by the trees or tree, all monej-s fi'om time to time received by such receiver or receivers shall be pd over to the trees or tree to be held by them on the trusts declared by clause 23 hereof of and concerning the moneys to arise under clause 22 hereof. p. 3 K 866 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 545. Powers for trustees to raise moneys for paying costs or piior incumbrances- (li) The trees or tree may pay over to such, receiver or receivers any moneys constituting part of the moi-tgaged premises, to the intent that the same may be applied for the pui-poses hereof bj'^ such receiver or receivers, and the trees or tree may from time to time determine what funds the receiver or receivers shall be at liberty to keep in hand with a view to the per- formance of his or their duties as such receiver or receivers. The provisions contained in this clause are intended to take effect by way of variation and extension of the provisions of ss. 19 and 24 of the Conveyancing and Law of Pj^ty Act, 1881, and such provisions so varied and extended shall be regarded as incorjjorated herein. [26. The trees or tree may raise and borrow money on the security of the specifically mortgaged premises, or aay part thereof, for the purpose, but for the purpose only, of paying off or discharging any mortgage or charge for the time being charged on the specifically mortgaged premises or any part thereof in priority to these presents, or for the purpose of defrapng any costs, charges, losses, and expenses which shall be incurred by the trees or tree, or any of them, in relation to these presents : And the trees or tree may raise and bori'ow such moneys as afsd at such rate of interest, and generally on such terms and conditions, as the trees or tree shall think fit, and may secure the repayment of the moneys so raised or borrowed, with interest for the same, by mortgaging or otherwise charging the specifically mortgaged premises or any part thereof, in such manner and fonn as the trees or tree shall think fit. The trees or tree may also concur in the transfer of any mortgage or charge for the time being charged on the specifically mortgaged premises, or any part thereof, in priority to these presents, and may redeem or concur in redeeming the specifically mortgaged premises, or any part thereof, from any such mortgage or charge, and for the purposes afsd may execute and do all such assurances and things as they or he shall think fit.] The above clause will only be inserted in cases where the circumstances re- quire it. Covenants by company : To carry on business. To keep ac- counts and let them bo open for iu- ftpection. 27. The coy hby covenants with the present trees that the coy will at all times during the continuance of this security — (1) Carry on and conduct the business of the coy in a proper and efficient manner ; and (2) Keep proper books of account and therein make true and perfect entries of all dealings and transactions of and in relation to the sd business, and keep the sd books of account, and all other documents relating to the affairs of the coy, at its registered office, or other jjlaco or places where the sd books of account and documents of a similar nature have heretofore been kept, and procure that the same shall at aU reasonable times bo open for the inspection of the trees or FOKMS. 867 tree, and such person or persons as they or lie shall from Form 545. time to time in writing for that jmrpose appoint ; and ~ (3) Give to the trees or tree, or to such person or persons as afsd, To g-ivo such iufonnation as they or he or any of them shall require i"f""nation 1 . / ^ tu trustees. as to all matters rolatmg to the sd husmess, or any after- acquired ppty of the coy, or otliorwiso rolatin<^ to the affairs thereof; and (4) Not pull down or remove any dwelling--houscs [storehouses, Not to pull stations, engine-houses], buildings, erections [furnaces, forges, ^"^n build - foundries, gins, railways, tramways, or wharves], being part aud to renew of the siDecihcally mortgaged premises, or the [fixed engines, machinery, steam engines,] plant, machinery, fixtures and fittings annexed to the same resply, or any of them, without the previous consent in writing of the trees or tree, except in any case where such pulling down or removal shall in the opinion of the coy be rendered necessary by any of such premises being worn out or injured, and in such case replace the premises so worn out or injured by others of a similar natiire, and of at least equal value, and when necessary renew and replace all moveable engines, plant, machinery, tools, implements, utensils, and other effects of a like nature, now used or hereafter to be used for the purpose of or in connection with the business of the coy when and as the same shall be worn out or destroyed ; and (5) Keep aU hereditaments, forming part of the specifically mort- To keep gaged premises, and all plant, machinery, work, fixtures, premises in fittings, imj)lements, utensils, and other effects therein and upon the same resply, and used for the purpose of or in connection with the sd business and every part thereof, in a good state of repair and in perfect working order .and con- dition ; and (6) Permit the trees or tree, and such persons as they or he shall To permit from time to time in writing for that purpose appoint, to trustees to enter into and upon the same hereditaments resply to \dew the state and condition thereof, and of all plant, machinery, works, fixtures, fittings, implements, utensils, and other effects therein or upon the same resply, and used for the purpose of or in connection with the sd business ; and (7) Insure and keej) insured such of the specifically mortgaged To insure premises as are of an insurable nature against loss or damage premises, or ■»• _ . _ <= * in default to by fire in their full value in such office as the trees or tree permit trus- shaU for that purpose appoint, and duly pay the premiums *®^^ *° ^^ ^'^• and other sums of money paj-able for that purpose, and immediately after every such payment deliver (if required) to the trees or tree the receipt for the same, and appl}- all moneys to be received by virtue of any such policy in making- good any loss or damage which may so arise to the same 3k2 868 DEBENTUEES AND DEBENTURE STOCK. [ChAP. XIV. Form 545. premises or any of them, and if default shall be made in keeping the same premises in a good state of repair and in perfect working order and condition, and so insured as afsd, or in delivering any such receipt as afsd, the trees or tree may repair the same premises or such of them as shall in their or his opinion require reparation, and may insure and keep insured the same premises, or such of them as they or he may deem fit ; and the coy will, on demand, repay to the trees or tree every sum of money expended for the above purposes, or any of them, by them or him, with interest at the rate of 5 p.c.p.a. from the time of the same resply having been ex- pended, and until such pajonent the same shall be a charge upon the mortgaged premises. Sometimes provision is made for insuring licenses thus : — [7fl. Insure and keep insxu'ed against loss or forfeiture the licenses attached to the specifically mortgaged premises in their full value and duly pay the premiums and other sums of money payable for that purpose and immediately after each such pa;yTnent deliver (if required) to the trees or tree the receipt for the same and shall pay over to the trees or tree all moneys to be received by virtue of any policy effected pursuant to this covenant to the intent that the same may become part of the specifically mortgaged premises and if default shall be made in insuring or keeping insured the said licenses or in delivering any such rec.eipt if required as aforesaid the trees or tree may insure and keep insured the said licenses and the coy will on demand repay to the trees or tree every sum of money expended for this jDurpose with interest at the rate of bl. j).c.p.a. from the time of the same resj)ly having been expended and until such payment the same shall be a charge upon the mortgaged premises.] Sometimes a covenant not to endanger licenses is'inserted. Sometimes a covenant as follows is inserted : — [At the expiration of the year and of each succeeding year furnish to the trees or tree a report by some competent expert approved by the trees or tree stating whether in his opinion there has been any and what depreciation during the past year in the leaseholds foniiing jiart of the specifically mortgaged premises occasioned by the wearing out of the leases or any of them, and shall forthwith pay over to the trees or tree a sum equal to the amount of the depreciation so certifif'd and the sum so paid shall become part of the specifically mortgaged ju-emises and bo dealt with accordingly.] 28. No purchaser, mortgagor, mortgagee, or other person or coy df'dling with the trees or tree, or any receiver or receivers appointed })y tlicm or him, or with their or his attorneys or agents shall 1)6 con- cm-TU'd l(t iM{|uii'(' wIu'IIkt llio power oxercisod, or purported to be Leasehold depreciation. Protection of purchasers, &c. FORMS. _. 86!> exercised, lias become exerciseaLle, or whether auy money remains due Form 545. on the security of these presents, or as to the necessity or expediency of the stipulations and conditions subject to which any sale shall have been made, or otherwise as to the propriety or regularity of such sale, calling in, collection or conversion, or to see to the api^licon of any money pd to the trees or tree, or such receiver or receivers, and in the absence of mala fides on the part of such purchaser, mortgagor, mort- gagee, or other person or coy, such dealing shall be deemed, so far as regards the safety and protection of such purchaser, mortgagor, mort- gagee, person or coy, to be within the powers hby conferred, and to be valid and effectual accordingly, and the remedy of the coy and its assigns in respect of any impropriety or irregularity whatsoever in the execution of such trusts shall be in damages only. Such a proviso does not protect a purchaser who knows of an irregularity which cannot have been waived {Selwijn v. Garjit, 38 C. D. 273) ; seem, if he is ignorant of the irregularity [Dicker v. Angerstein, 3 C. D. 600) ; as to waiver by company, see Re Thompson and IIoU, 44 C. D. 492. 29. After the security hby constituted has become enforceable the Further coy shall from time to time, and at all times, execute and do all such assurances and things as the trees or tree may reasonably require for facilitating the realisation of the mortgaged premises, and for exer- cising all the powers, authorities, and discretions hby conferred on the trees or tree, and in particular the coy — (a) Shall execute all transfers, conveyances, assignments, and assur- ances of the mortgaged premises, whether to the trees or tree, or to their or his nominees. (b) ShaU give all notices and orders and directions which the trees or tree may think expedient. For the purposes of this clause a certificate in writing, signed by the trees or tree for the time being, [o?- the majority of them as the case may be,'\ to the effect that any particular assurance or thing required by them or him is reasonably required by them or him, shaU be conclusive evidence of the fact. 30. The coy hby irrevocably appoints the trees or tree to be the Attorneys, attorneys or attorney of the coy, and in the name and on behalf of the coy to execute and do any assurances and things which the coy ought to execute and do under the covenants herein contained, and generally to use the name of the coy in the exercise of all or any of the powers hby conferred on the trees or tree, or any receiver appointed by them or him. There is no objection to appointing the covenantee attorney. Furnvvall v. Hudson, (1893) 1 Ch. 335. 31. The trees or tree shall not, nor shall any receiver or receivers as Protection of afsd by reason of the trees or tree, or such receiver or receivers entering t^^^^tees and ■^ . ' _ . " receivers. into possession of the mortgaged premises, or any part thereof, be liable 870 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 545. Accounts and access. to account as mortgagees or mortgagee iu possession, or for anything except actual receipts, or Ije liable for any loss upon realisation, or for any default or omission for wliicli a mortgagee in possession might he liable, and every receiver duly appointed under these presents shall be deemed, as regards responsibility for loss or misconduct, to be the agent of the coy. [32. During the continuance of this security the coy shall allow the trees or tree, or their nominees, at all times to have full access to all books, accounts, and documents of the coy of every kind and whereso- ever, and shall furnish to the trees or tree or their nominee a copy of every balance sheet, trade account, and profit and loss account jjrepared by the coy within ten days after its preparation, or such other infoi-ma- tion (if any) with reference to the affairs and business of the coy as the trees or their nominee shall from time to time require, and the trees or tree and their nominees shall be entld, if they or he think fit, from time to time to nominate an accountant or agent to examine the books, accounts, documents, and ppty of the coy, or any part thereof, and to investigate the affairs thereof, and the coy shall alloAv any such accountant or agent to make such examination and investigation, and shall furnish him with all such infonnation as he may require, and shall pay all the costs, charges, and expenses of and incident to such examination and investigation.] A clause as above is not uncommonly inserted, but in most cases paragraph (2) of clause 27 is considered sufficient. It was formerly not unusual to insert an attornment clause, but it may be that the attornment renders the mortgagee liable for wilful default in respect of the rent. Ex parte Funnett, 16 C. D. 226 ; Re Stockton Iron Co., 10 C. D. 335 ; Ex parte Jackson, 14 C. D. 725. See contra, Stanley v. Grundy, 22 C. D. 478. Financial contracts. Application to the Court. 33. The trees shall not by reason of their fiduciary position be in any wise precluded from making any contracts or entering into any transactions with the coy in the ordinary course of the trees' business, and without prejudice to the generality of these provisions it is expressly declared that such contracts and transactions include any contract or transaction in relation to the placing of the stock, shares, debenture stock, debentures, or other securities of the coy, or in which the coy is interested. 34. The trees or tree may at any time after the security hby consti- tuted becomes enforceable, apply to the Court for an order that the trusts hereof be carried into execution under the direction of the Court, and for the appointment of a receiver or receiver and manager of the mortgaged premises, or any of them, and for any other order in rela- tion to the administration of the trusts hereof as they or he shall deem expedient, aiid they or he may assent to or approve of any applicon to the Court made at the instance of any of the stockholders, and shall be FORMS. «71 indemnifiod by tho coy against all tho costs and expenses incurred by Form 545. and in relation to any such applicon or proceedings. ~~~ — — This clause, though commonly inserted, appears only to express what would otherwise be implied. It may, however, preclude captious objections to the trustees' conduct. 35. The coy shall in each and every year during tho continuance of Salary to this security, pay to each of tho trees for the time being of those '-'"'^'^tccs, presents, as and by way of remuneration for his services as tree, the sum of 1, by equal half-yearly payments, on the day of and the day of in each such year, in addition to all travel- ling and other costs, charges, and expenses which he may incur in relation to the execution of the trusts hby in him reposed, and the first of such half-yearly payments shall be made on the day of next. The trustees being- in a fiduciary position cannot take any salary or remunera- tion from the company without express authority, supra, p. 436. Sometimes it is jirovided that the said yearly sum of 1, should be increased to 1, as from the time when the security hereby constituted becomes enforceable until the trusts hereof shall have been fully executed ; and the appointment of a receiver shall not a£fect or prejudice the trustees' right to remuneration as aforesaid. "Where quotation is required on the London Stock Exchange, the words and para- graphs in brackets are to be omitted in the following clause : — 36. By way of supplement to the Trustee Act, 1893, it is expressly Provisions declared as follows (that is to say) :— to T^ru^ef"^ (1) That the trees or tree may, in relation to these presents, act on Act, 1893, in the opinion or advice of any lawyer, valuer, surveyor, broker, ^^^°^ auctioneer, or other expert, [whether] obtained by the trees or tree [or by the coy or otherwise], and shall not be responsible for any loss occasioned by so acting. (2) That any such advice or opinion may be sent or obtained by letter, telegram, or cablegram, and that the trees or tree shall not be liable for acting on any advice or information purport- ing to be conveyed by any such letter, telegram, or cablegram, although the same shall contain some error, or shall not be authentic. (3) That the trees or tree shall be at liberty to accept a certificate, signed by the chairman of the coy and any two directors of the coy, to the effect that any particular dealing or transac- tion, or step or thing, is, in the opinion of the persons so certifying, expedient, as sufficient evidence that it is expe- dient, and the trees or tree shall be in nowise bound to call for further evidence, or be responsible for any loss that may be occasioned thereon. [(4) That the trees or tree shall not be responsible for the conse- quences of any mistake or oversight, or error of judgment or forgetf ulness, or want of prudence on the part of the trees or 872 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 545. tree or any attorney, receiver, agent, or other person appointed " by them or him hereunder.] [(5) That the trees or tree shall not be responsible for any miscon- duct on the part of any attorney, receiver, agent, or other person appointed by them or him hereunder, or bound to supervise the proceedings of any such appointee.] Where quotation on London Stock Exchange is required, insert the following paragraph (4) in the place of paragraphs (4) and (5) above. (4) That no trustee hereof shall be liable for anything whatever, except a breach of trust knowingly and intentionally com- mitted by him. (6) That the trees or tree shall not be bound to give notice to any person or persons of the execution hereof, [or to see to the performance or observance of any of the obligations hby imposed on the coy,] or in any way to interfere with the conduct of the coy's business, unless and until the security hereby constituted shall have become enforceable and the trees or tree shall have determined to enforce the same. (7) That the trees or tree shall, as regards all the trusts, powers, authorities, and discretions hby vested in them or him, have absolute and uncontrolled discretion as to the exercise thereof, whether in relation to the manner or as to the mode of and time for the exercise thereof, and in the absence of fraud they or he shall be in nowise responsible for any loss, costs, damages, or inconvenience that may result from the exer- cise or non-exercise thereof. (8) That the trees or tree are to be at Kberty to place all deeds and other documents certifying, representing, or constituting the title to any of the mortgaged premises, and to any other assets for the time being in their or his hands, in any safe or receptacle selected by them or him, or with any banker or banking coy, or solicitor or firm of good repute, [whether at home or abroad,] and the trees or tree shall not be respon- sible for any loss incurred in connection with any such deposit, and the trees or tree may pay all sums required to be pd on account of or in respect of any such deposit. (9) That with a view to facilitate sales, leases, and other dealings under clauses 19, 22, and 25 hereof the trees or tree shall have full power prospectively to consent to any specified transactions conditionally, on the same conforming to speci- fied conditions approved by the trees or tree, and in particular any sale of ppty at or above a specified jn-ice, and any lease of ppty at or above a specified rent, and any purchase of ppty at or below a specified price. (10) That the trees or tree shall have power to determine all ques- tions and doubts arising in relation to any of the provisions FORMS. . i^'^ hereof, and every sncli determination, wlietlier made upon a Form 545. question actually raised or implied in the acts or proceedings of the trees or tree shall be conclusive, and shall bind all persons interested under these presents. 37. Any tree hereof may, in the conduct of the trust business, Trustees may instead of acting personally, employ and pay an agent, whether being '^^' "J , a solicitor or other person, to transact, or concur in transacting, all act and business, and to do, or concur in doing, all acts required to be done in ^"'^'^oC pro- the trust, including the receipt and payment of money, and any tree, being a solicitor, broker, or other person engaged in any profession or business, shall be entitled to be paid all usual professional charges for business transacted and acts done by him or any partner of his in connection with the trusts hereof, [including acts which a tree not being in any profession or business could have done personally]. Omit words in brackets if quotation on London Stock Exchange is required. See now the Mortgagees' Legal Costs Act, 1895 (58 & 59 Vict. c. 25). But this Act does not appear to touch a solicitor who is trustee of the mortgage. He may, however, be entitled to charge profit costs where he is acting in litigation on behalf of himself and his co-trustees. He Corsellis, 34 C. D. 675. 38. The trees or tree, and every receiver, attorney, manager, agent. Indemnity of or other person appointed by the trees or tree hereunder, shall be trustees, and entitled to be indemnified out of the mortgaged premises in respect of ceivers, all liabilities and expenses incurred by them or him in the execution, attorneys, and t 1 I. (. other agents. or purported execution, of the trusts hereof, or of any powers, autho- rities, or discretions vested in them or him pursuant to these presents, [including liabilities and expenses consequent on any mistake, over- sight, error of judgment, forgetfulness, or want of prudence on the part of the trees or tree, or any such appointee,] and against all actions, proceedings, costs, claims, and demands in respect of any matter or thing done or omitted in anywise relating to the premises, and the trees or tree may retain and pay out of any moneys in their or his hands from the trusts of these presents the amount of any such moneys, and also the remuneration of the trees or tree as hnbefore provided. Omit words in brackets if quotation on Loudon Stock Exchange is desired. 39. The coy shall, on demand by the trees or tree, or any receiver, Payment by attorney, manager, agent, or other person appointed by the trees company on or tree pursuant hereto, out of the general assets, pay every sum of moneys to money which shall from time to time be payable to any such person t'^steea, '' _ _ _ _ -^ -^ _ / ^ receivers, &o. under any provision herein contained, together with interest at the rate of five per cent, per annum as from the date when the same shall have been advanced or paid or become payable or due; and as regards liabilities the coy will on demand pay and satisfy or obtain the release of such person from such liabilities, and if any sum or sums payable under this clause shall be pd by the trees or tree out of the specifically 874 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Trustees may arrange as to application of stock pro- ceeds. Form 645. mortgaged premises, the coy shall forthwith on demand recoup the same to the specifically mortgaged premises. [40. The trees or tree may, if they or he think fit, make any arrangement, whether with the coy or with any other person, for ensuring the applicon of the issue price of the stock or any part thereof to the payment off of any sums which it shall be necessary or expedient to pay in order to facilitate the performance by the coy of any of its obligations under clause hereof, and the trees or tree may from time to time assent to any modification or alteration of any such arrangements, or to the abrogation thereof, wholly or in part, and may waive compliance with such arrangements or any part thereof, and may release or suspend any of the terms thereof.] Such a clause is sometimes required, e.g., where Form 553 is used. Power for company to withdraw property. 41. The coy shall be at liberty at any time or times during the con- tinuance of this security, with the permission of the trees or tree, to withdraw any of the specifically mortgaged premises from such of the trusts hereof as exclusively relate to the specifically mortgaged premises upon substituting other ppty, whether of the same or a different tenure or kind, but of a value equal to or greater than the value of the ppty proposed to be withdrawn ; but before the trees or tree permit the coy to withdraw any ppty under this clause, the coy must prove to the satisfaction of the trees or tree that the ppty pro- posed to be substituted for the same is of a value equal to or greater than the ppty proposed to be withdrawn, and that such ppty is suitable for the purposes of the coy, and must convey such ppty to the trees or tree in such manner as they or he shall direct upon the trusts hereof relating to the specifically mortgaged premises, and thereupon the trees or tree shall be at liberty to convey to the coy, or as the coy may direct, the ppty proposed to be withdrawn, to hold the same free from such of the trusts hereof as exclusively relate to the specifically mortgaged premises, and a declaration in writing, signed by the trees or tree, that the proof afsd has been furnished to their or his satisfac- tion shall be conclusive evidence thereof in favour of the trees or tree, and the following provisions shall have effect ; that is to say : — fa) The trees or tree may accept a certificate, signed by two-thirds of the directors of the coy, to the effect that any such ppty proposed to be constituted is, in their or his opinion, suitable for the purposes of the coy's business as [sufficient] evidence of the fact, (b) The trees or tree shall be at liberty to accept the fact that the coy has given a specified price for any such ppty proposed to bo substituted as [sufficient] evidence that the same is worth such price ; but they or he [may] require a written report of a valuer of good repute as to such value, and such ppty shall not bo treated as of greater value than the price paid by the coy for the Bame, plus, in the case of land, any expenditiu-e by FORMS. 875 the coy in or in relation to the construction or reparation of Form 545. buildings with their accessories or conveniences thereon. ^ (c) The trees or tree shall be in nowise responsible for any error in any such certificate or valuation, or for any loss that may be occasioned by acting thereon, and shall be at liberty to accept such title to such hereditaments as the coy shall obtain, pro- vided that the trees or tree shall be advised that the title so obtained is one which is a reasonably good holding title or a title not likely to be disturbed. (d) The ppty withdrawn shall, so far as the coy shall be or remain interested therein, be and be deemed part of the general assets and be subject to the floating charge created by clause 9 hereof, and otherwise to the trusts and provisions herein declared and contained of and concerning the general assets. Where quotation on the LoTidon Stock Exchange is desired the words in brackets above must be omitted, and in such ca.'-c in paragraph (b) the word " shall " should be substituted for " may." The duty on the conveyance to the trustees is, it would seem, 10s., as the equitable title is already in them under clause 9. 42. Any notice may be given by the coy or by the trees or tree to Notices to any holder of stock by sending the same through the post in a prepaid stockholders letter addressed to such holder at his registered place of address, and any notice so given shall be deemed to have reached the holder on the day following that on "which it is posted. When the trees or tree consider it expedient, any notice, instead of being served as afsd, may be given by them or him to the stockholders or any of them by adver- tising the same in the Times and one other London daily newspaper, and a notice so advertised shall be deemed to be served on the stock- holders on the day following that on which it is advertised. The above is for use where the stock is all payable to the registered holder. Where there is provision for the issue of certificates to bearer the following clause should be substituted. Any notice may be given by the coy or by the trees or tree to any holder of stock as to registered stock by sending the same through the post in a prepaid letter addressed to such holder at his registered place of address, and as regards stock represented by certificates to bearer, by advertising the same, and any notice so given shall be deemed to have reached the holder on the day following that on which it is posted or advertised, and any advertisement afsd shall be published at least once in the Times and one other London daily newspaper, and whenever the trees or tree think fit, a notice by them or him may be given to the stockholders, whether registered or otherwise, by advertising the same as afsd. 43. The provisions contained in the third schedule hto shall have full Meetings of effect in the same manner as if such provisions were herein set forth. stockholders. It is now well settled that this reference to the schedule eflEectually incorporates it 876 DEBENTUKES AND DEBENTURE STOCK. [OnAl'. XIV, Form 545. witli the trust deed : verba relata in esse vldentur. Sncath v. Valky Gold, (1893) ^^ 1 Ch. 477. Whether part of a document is set out in a schedule is a mere matter of drafting. Att-Gen. v. Lamplough, 3 Ex. Div. 214. Waiver. 44. The trees or tree may from time to time and at any time [when- ever they think it expedient in the interests of the stockholders] waive, on such terms and conditions as to them or him shall seem exj)edient, any breach hy the coy of any of the covenants in these presents contained. The words in brackets are required by the London Stock Exchange. Deieo'ation. 45. The trees or tree may [whenever they tliink it expedient in the interests of the stockholders] delegate to any person or persons all or any of the trusts, powers, and discretions vested in them or him by these presents, and any such delegation may be made upon such terms and conditions, and subject to such regulations (including power to sub-delegate), as the trees or tree may [in the interests of the stock- holders] think fit, and the trees or tree shall not be in anywise respon- sible for any loss incurred by any misconduct or default on the part of any such delegate or sub-delegate. The words in brackets are requii'ed by the London Stock Exchange. Power of 46. "Whenever there shall be more than two trees hereof, the majority. majority of such trees shall be competent to execute and exercise all the trusts, powers and discretions hby vested in the trees generally. In the absence of express power, the majority has no power to bind the minority. Luke V. South Kensington Hotel, 11 C. D. 126. Power to 47. The trees or tree may concur with the coy in making any modifi- modify trusts, (.^tions in these presents which, in the oj)inion of the trees or tree, it shall be expedient to make with a view to obtaining a quotation on the London Stock Exchange for the debenture stock, provided that the trees or tree shall be of opinion that such modifications will not be prejudicial to the interests of the stockholders. 48. Upon proof being given to the reasonable satisfaction of the trees or tree that the holders of all the stock entitled to the benefit of the trusts herein contained, and for the time being issued, have been pd off or satisfied, and upon pa^Tuent of all costs, charges and expenses incurred by the trees or tree in relation to these presents, the trees or tree shall, at the recjuost of the coy, re-convey or re-assign to the coy the mortgaged promises, or such part thereof as may remain vested in them or him, freed and discharged from the trusts herein contained, or othei'wise release the mortgaged premises from this security. Where debonturcs arc issued, as in Clause 9a above, add to the above Clause 48, tlie words " and HuiTCiiidor to tlio company the said debentures, or such of the same ns .shall thon 1)0 outstanding and vested in the trustees or trustee." Reconveyance and release. FOKM.S. 877 49. Tho statutory power of appointing new trees shall apply to these Form 545. presents and be vested in the coy [but a tree so appointed must, in the gt^j^y^^ ^ first place, be approved by a resolution of the stockholders passed in power to the manner specified in the tliird schodido hto]. A corporation or xF'^?\'^ °^^ company limited or unlimited may be ajipointed to be a trustee of these presents. The London Stock Exchange authorities have of late required the insertion of the words in brackets. 50. The coy hby covenants with the present trees that the coy will General duly perform and observe the obligations hby imposed on it. company ^ In witness, &c. THE SCHEDULES above referred to. First Schedui^. Conditions as to Issue of Debenture Stock. The following' are the conditions upon which the debenture stock of the nominal amount of /. is to be raised by The Company, Limited : — 1. At any time after the 1st day of January, 1910, the company may give to the Redemption, stockholders, or any of them, not less than six calendar mouths' notice of its inten- tion to redeem the stock held by them, and at the expiration of the notice such stock will be redeemed accordingly. Any of the stock not pi-eviously redeemed will be redeemed on the 1st day of January, 1920, or so soon as the security hereby constituted becomes enforceable, and as and when any stock ought to be redeemed in accordance with these presents the company will, subject to these conditions, pay to the several holders of the stock the redemption moneys therefor, calculated at 110^. per 100?. of stock as regards any redemption before the 1st day of January, 1920 [or in the event of the stock becoming redeemable by reason of an effective resolution for a voluntary winding-up of the company being passed], and in any other case at 100/. per 100/. of stock. Such payments will be made at the registered office of the company. For the purpose of this 'clause any notice may be given to any stockholders, in manner provided by clause 42 of the above indenture, and as from the time when any stock ought to be redeemed as aforesaid it shall cease to carry interest. The Stock Exchange authorities commonly require the words in brackets or some such words. [In the case of so-called perpetual stock the clause sometimes runs thus :— As and when the security hereby constituted becomes enforceable, and not before the company shall pay to the stockholders the value of the stock held by them respectively, calculated in the event of the security becoming enforceable by reason of a voluntary winding-up of the company at 110/. per 100/. of stock, and in any other case at par. Such payments, &c. Sometimes the following clause is adopted : — 1 . The stock hereby constituted will be paid off when and so soon as the security Redemption, hereby constituted becomes enforceable, and thereupon the company will, .'■ubject to these conditions, pay to the several holders of the stock the nominal value of the 878 DEBENTUKES AND DEBENTURE STOCK. [ChAP. XIV. Form 545. Interest. Ordinary certificates. stock held by them respeclively, but so that if this stock shall become payable owiug to the voluntary windiug-up of the company, the redemption value shall be calculated according to the average mean market value in London of the stock during the three years immediately preceding the date when the security aforesaid became enforceable : but in any event the value shall not be less than 110?. per lOO;. of the stock. And if any difference shall arise as to the mean average value afore- said, the ditfereuce shall be referred to a competent London stockbroker as arbitrator, -who shall be appointed by the trustees or trustee. Such payments will be made at the registered office of the company. For the purposes of this clause any notice niay be given to any holder of stock in accordance with clause 42 above, and when any stock ought to be redeemed as aforesaid it shall cease to carry interest.] 2. The stock shall carry interest at the rate of per cent, per annum, and the company will pay to the stockholders interest on their respective shares therein at the rate of per cent, per annum. Such interest will be paid half-yearly, on the day of , and day of , 18 — . 3. Every holder of a share in the stock will be entitled to a certificate under the seal of the company stating the amount of the stock held by him, and every such certificate shall refer to these presents [and be in the form or to the effect follow- ing [but in the case of stock of a special issue with such variations and additions, if any, as may be necessary] : — Form (registered owner). The Company, Limited. Registered holder to bo deemed absfdute No. - Issue of -/. /. Debenture Stock, 1895, made pursuant to clause — of the company's articles, and to a resolution of the board dated . Bearing interest at the rate of per cent, per annum, payable January and July. [The stock is redeemable at 1, per cent, at any time after the day of on six calendar months' notice from the company. See notes to Form 541, stqjra.'^ This is to certify that , of , is the registered holder of I. of the above stock, which stock is constituted and secured by trust deed dated the day of and made between the company of the one part and of the other [and secured by debentures issued to the trustees pursuant to that deed], and is issued subject to the provisions contained in that deed. Given under the common seal of the company this day of . Note. — The company will not register a transfer of any stock without the pro- duction of the certificate relating to such stock, which certificate must be surrendered before any transfer, whether of the whole or any portion thereof, can be registered, or a new certificate can be issued in exchange. The company will not recognize any fraction of bl. of stock. A fee not exceeding 2s. 6(/. will be charged on the registration of any transfer.] Where quotation is required it is better to omit the Form and stop at at the word " presents." 4. The company will recognize the registered holder of any share of registered stock as the absolute owner thereof, and shall not be bound to take notice or see to the execution of any trust, whether express, implied, or constructive, to which any such stock may be subject, and the receipt of such person for the interest from time to time accruing duo in respect thereof, and for any moneys payable upon the redemption of the same, shall be a good discliargo to the company, notwithstanding any notice it may have, whether express or otherwise, of the right, title, interest, or claim ^ x5earers of ficates, and no other person or persons, shall be recognized and treated as the legal gtock certi- holders of the stock therein mentioned, whether such bearers are or are not, in fact, ficates only the owners thereof ; and such bearers shall accordingly be exclusively entitled to recognized. vote in respect thereof. [In the case of a meeting of debentui e holders the above clause should be in the following modified form : — At any such meeting as aforesaid the respective bearers of the debentures, and no other person or persons, shall be recognized and treated as the legal holders thereof, whether the same be payable to bearer or to the registered holder, and whether such bearers are or are not in fact the owners thereof, and such bearers shall accordingly be exclusively entitled to vote in respect thereof. The above provision is very commonly used, and in effect it enables the holder of a registered stock certificate [o;- registered debenture] to vote by proxy if he desires so to do, for he merely hands over his certificate [or debenture] to a friend who, as bearer thereof, can vote. Sometimes words are added to the effect following : — " But for the purposes of this clause, the bearer of a certificate in writing under the seal of the trustees or trustee [o>' issued by any bank approved by the trustees 3l2 884 DEBENTURES AND DEBENTURE STOCK. [ChA.P. XIV. Form 545. Votes. When trus- tees may give up possession. Powers by extraordinary resolution. or trustee] stating that the bearer of the certificate is entitled to a registered stock certificate [or a debenture of this series], and specifying the same by number, shall be recognized as the bearer of the stock certificate [or debenture] specified in such certificate." Occasionally, however, and especially when the certificates or debentures are all to registered holder, it is desired to provide for voting by the registered holder or his proxy appointed in writing. In such case the above clause should be struck out, and the following clause be inserted after clause 12 : — The bearer of a stock certificate l_or debenture] payable to bearer shall be exclusively entitled to vote in respect thereof ; and as regards a registered stock certificate [or debenture] the registered holder thereof, or in the case of joint holders, that one whose name stands first on the register as one of the holders thereof, shall be entitled to vote in respect of such certificate \_or debenture] either in person or by proxy, but every instrument appointing a proxy must be in writing under the hand of the appointor, or in case of a corporation under its common seal, and must be delivered to the chairman of the meeting, and every such proxy must be in the terms or to the effect following, that is to say, "I , of , a debenture stock [_or debenture] holder of the Company, Limited, hereby appoint , of , or failing him , of , to the vote on my behalf at the meeting of the debenture stock [_or debenture] holders of the said company, which is to be held on the day of . As witness my hand " ; and no person shall be appointed a proxy unless he is a debenture stock [or debenture] holder or one of the trustees. Where such a clause is inserted the other clauses will be modified accordingly, e.ff., so that a quorum may be "persons at least five in number, holding or representing by proxy at least one-third of the stock l_or debentures]." The objection to such provisions is that the trustees, if they call the meeting, are obliged to go to the company, and inspect and copy the register of debenture stock {^or debenture] holders, and to see that the circulars are properly sent out, and to verify the proxies, whereas by making the bearers of the stock certificates l_or debentures] the voters they are relieved from all this trouble and risk]. 13. At every such meeting each voter shall, on a show of hands, be entitled to one vote only, but at a poU be entitled to one vote in respect of every principal sum of [50/.] secured by the stock certificate or stock certificates in respect of which he is entitled to vote. 14. When the trustees or trustee shall have made such entry or taken possession under the powers above conferred, they or he, with the authority of an extra- ordinary resohition of the stockliolders, may at any time afterwards give up possession of the mortgaged premises or any part thereof to the company, either unconditionally or upon any conditions that may be arranged between the company and the trustees or trustee. 15. A general meeting of the stockholders shall, in addition to the powers here- inbefore given, have the following powers exercisable by extraordinary resolution, namely : — (1.) Power to sanction the surrender or release of any of the mortgaged premises [which in the opinion of the trustees or trustee are unprofitable or a 80\irce of loss or danger to the company]. (2.) Power to sanction any compromise or arrangement proposed to be made between the company and the stockholders, provided that it is one which the Court would have jurisdiction to sanction under the Joint Stock Com- panies Arrangement Act, 1(S70, or any statutory modification thereof for the time being subsisting, if the company were being wound \ip, and the requisite majority at a meeting of the stockholders summoned pursuant to that Act, or modification thereof aforesaid, had agreed thereto. FOKMS. ^85 (3.) Generally power to sauction any modification orcompromi.se of the rights of Form 545. the stockholders against the company or against its property, whether such rights shall ai-ise under these presents or otherwise. (4.) Power to assent to any modification of the provisions contained in these presents which shall be proposed by the company and assented to by tlie trustees or trustee. [(o.) Power to approve of an appointment of a new trustee under clause of the trust deed.] The above clause is expressed widely, so as to meet the decisions referred to at pp. 802—806. 16. An extraordinary resolution passed at a general meeting of the stockholders Eitra- duly convened and held in accordance with these presents shall be binding upon all ordinary the stockholders, whether pre.sent or not present at such meeting, and each of the F^'"',.^ ^°^ stockholders shall be bound to give effect thereto accordingly, and the passing of any such resolution shall be conclusive evidence that the circumstances justify the passing thereof, the intention being that it shall rest with the meeting to determine without appeal whether or not the circumstances justify the passing of such resolution. See p. 806. 17. The expression "extraordinary resolution," when used in this schedule. Definition means a resolution passed at a meeting of the stockholders duly convened and held "^^ extra- in accordance with the provisions herein contained, [by a majority consisting of not resolution " less than three-fourths of the persons voting thereat upon a show of hands, or, if a poll is duly demanded, then by a majority consisting of not less than three-fourths of the votes given on such poll.] [For Stock Exchange purposes substitute the following for the words in brackets : at which an absolute majority in value of the whole body of stockliolders shall be present in person or by proxy by a majority consisting of not less than three- fourths in value of such clear majority upon a show of hands, or if a poll be duly demanded, then by a like majority at the poll.] 18. Minutes of all resolutions and proceedings at every such meeting as aforesaid Minutes, shall be made and duly entered in books to be from time to time provided for that pirrpose by the trustees or trustee at the expense of the company, and any such minutes as aforesaid, if purporting to be signed by the chairman of the meeting at which such resolutions were passed or proceedings had, or by the chairman of the next succeeding meeting of the stockholders, shall be conclusive evidence of the matters therein contained, and, until the contrary is proved, every such meeting in respect of the proceedings of which minutes have been made shall be deemed to have been duly held and convened, and all resolutions passed thereat, or proceedings had, to have been duly passed and had. DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. MISCELLANEOUS CLAUSES IN TRUST DEEDS. Limits of Issue. Form 546. The stock to be issued is limited in the first instance to 500,000^., Limit of ^^^ ^^^ ^°y ^^ ^° ^® ^^ liberty to issue further stock ranking in point stock, power of security pari passu with the first issue, subject to the following to issue . . XI, J. • 4.„ „„^, . further pari pi'ovisions, that IS to say :— _ passu stock. (a) Whenever the coy determines to issue such further stock, it must give notice in writing to the trees or tree stating its intention to issue the same, and must execute and deliver to the trees or tree an acknowledgment of indebtedness under the common seal of the coy duly stamped for the amount of the further proposed issue, framed in accordance with clause [2] hereof, and must make arrangements satisfactory to the trees or tree for vesting in the trees or tree, as part of the specifically mortgaged premises, property suitable for the purposes of the coy which, with the properties already in tliis secui-ity, shall together, in the opinion of the trees, be worth at least 25 p.c. more than the stock then already issued and the fui'ther stock proposed to be issued. (b) Such further property may be freehold, leasehold, or copyhold, and may consist in part of licences, goodwill, trade marks, and fijstiu'es, and it shall rest with the trees or tree to deter- mine how such property shall be vested, whether by convey- ance, demise, sub-demise, assignment, or otherwise, and they or he may accept such title to such ppty as they or he may think sufiicient, whether perfect or not. (c) The trees or tree shall be at liberty to accept the figures standing in the coy's books showing the amounts pd for any such ppty, or a certificate by any survej-or or valuer whom the trees or tree believe to be comj)etent to the effect that the ppty already vested, and to be vested is suitable for the purposes of the co}^, and that the value or values of such ppty and the ppties already vested in the trees exceeds a specified sum or sums as sufficient evidence thereof. (d) Such further stock shall not bo issued or offered for subscription unless and until tlio trees or tree shaU have certified hereon that the foregoing conditions have been complied with, and that the coy is ontld to issue the fui'ther stock. Form 547. The stock is limited in the first instance to 200,000/., being an \ — ; amouiit equal to luilf the present paid-up capital of the coy, and the to half tho <'<'y i^ to bo at liberty from timo to time and at any time to issue paid-uj) further stock niukm^ pari passu with the sd 200,000/. stock, and entld capital. FORMS. 887 to participato therewith in the benefit hereof, subject to the following Form 547. provisions, that is to say : — (a) The total amount of the stock for the time being ranking pari passu and entld to participate in the benefit hereof shall not at any time exceed one half of the paid-up capital for the time being of the coy. (b) When it is proposed to issue any portion of the sd further stock the coy must give to the trees or tree notice of its intentions to issue the same, and must satisfy the trees or tree as to the amount of the coy's paid-up capital, and must state the amount of the proposed further issue, aud must execute and deliver to the trees or tree an acknowledgment of indebtedness, &c. [see last Form]. The stock is limited in the first instance to 300,000/., but the coy Form 548. is to be at liberty to issue further irredeemable 3J p.c. debenture stock T- ., entld pari passu to the benefit hereof, subject to the following pro- power to visions, that is to say :— issue further SuOcic lor (a) Such further irredeemable 3^ p.c. debenture stock shall not redeeming . prior dGbGu- exceed 540,000/. m amount, making with 300,000/. stock ture stock. above-mentd a total of 840,000/. (b) Such further stock shall only be issued for the purj)ose of redeeming or paying off the 4 p.c. debenture stock of 500,000/. (c) Whenever it is proposed to issue any of the sd further irre- deemable 3^ p.c. debenture stock, the coy must notifj^ in writing to the trees or tree the amount of the proposed further issue, and must satisfy the trees or tree that by arrangement with the holders of a corresponding amount of the 4 p.c. debenture stock, or by reason of notice of redemp- tion having been given, the coy is in a position to pay off or redeem a corresponding amount of the 4 p.c. debenture stock, and must provide to the satisfaction of the trees or tree for the applicon of such further debenture stock, or of the pro- ceeds thereof, to such redemption or pajTnent, and for the transfer of the 4 p.c. debenture stock to be redeemed or j)d off and the securities for the same to the trees or tree hereof ; and for the piirposes of this clause the corresponding amount afsd is to be calculated on the basis that not more than 108/. of the further irredeemable 3|- p.c. debenture stock is to be issued in respect of every 100/. of the 4 p.c. debenture stock redeemed or pd off. (d) The coy must, before any of the sd further debenture stock is issued or offered for subscription, execute and deliver to the 888 DEBENTUKES AND DEBENTURE STOCK. [CHAr. XIV. Form 548. trees o^- tree an ackuowledgment of indebtedness for the amount of the further proposed issue, &c. [see Form 546]. (e) No such further stock shall be issued or offered, &c. [see Form 546, clause (d)]. Form 549. The stock is to be limtd in amount to 550,000/. Limit of issue Each of the holders of the outstanding debentures may at any time where prior \)q given the option of converting the same into stock, and, if he elects which*aJrto ^o to convert, he must transfer the outstanding debentures held by him be paid o£E and to the trees or tree to be held on the trusts hereof, and the coy shall kept on foot. ^1-^gj^.g^^pQ^ igg^^e to him a like amount of the stock. Moreover, the coy may at any time procure the transfer to the trees or tree on the trusts hereof of any of the outstanding debentures, and thereupon stock to a like amount may be issued to the transferors of such debentures. The coy may issue the stock or any part or parts thereof to such persons and on such terms and at such time or times and in such manner as the coy may think fit, and all moneys payable by the allottees of such stock shall be made payable to and be received by the trees or tree or by bankers approved by the trees or tree ; and all moneys so pd shall, subject as hnfter pro^dded, be deemed to belong to the trees or tree and shall be carried to the credit of the trees or tree, and such bankers shall be instructed to carry the same to such credit accordingly, and all such moneys shall be at the risk of the coy, and shall be appKed in paying off outstanding debentures or in recouping the coy any sums not exceeding par expended by the coy in redeeming or paying off any of the outstanding debentures ; and the coy shall procure the holders thereof to transfer the same to the trees or tree to be held on the trusts hereof, the intention being that the stockholders shall not only have the benefit of the specific security hby created but also the benefit of the first general charge created by the security debentiu-es and may thus be placed on an equality in point of security with the holders of the outstanding debentures. If and when all the outstanding debentures shall have been pd, redeemed, or paid off, the balance of any moneys remaining in the hands of the trees or tree shall be pd by them to the coy. All interest on moneys for the time being in the hands of the trees or tree shall be paid over to the coy. Form 550. Proceeds of iflsuf; to bo applied in paying off mortgage and purchase- money. Application of Proceeds of Issue. All moneys payable in respect of the present issue of the stock of the nominal value of 100,000/. shall be made payable to and received })y bankers appointed })y the coy and approved by the trees, and all moneys pd in respect of such first issue shall be carried to the credit of an account to be opened in the name of the trees, and such bankers shall be instructed to carry the same to such credit accordingly, and FOUMS. 889 such moneys shall bo at the risk of the coy, and shall be applied from Form 550. time to time as and when required by the coy in clearing ofi the incum- brances now affecting each of the ppties hby covenanted to be conveyed or demised and in paying the purchase-money for the same ; and when and so soon as the whole of such incumbrances shall have been cleared off and purchase-money paid, and the ppty shall have been vested in the trees in accordance with clauses 10 and 11 hereof, the balance of the moneys then in the hands of the trees shall be pd over to the coy ; and it is exj)ressly declared that the trees are from time to time to facilitate in every way the clearing off of such incumbrances and the payment of such purchase-money and the vesting of the ppties as aforesaid, and shall be at liberty to accept a certificate under the hand of the coy's solicitor to the effect that the title to any particular ppty has been investigated by him on behalf of the coy and found satis- factory as sufficient evidence thereof. All moneys payable in respect of the first issue of 100,000/, of the Form 551. stock, including any premiums, shall be made payable to and be . y 7^ ' received by bankers, &c. [see Form 550], and shall be dealt with as of the pro- foUows, that is to say :— 9^^^^ °* ^^^"P ' '' in paying on (1.) The trees or tree shall, out of such moneys, pay to the coy all debts and moneys representing premiums on the issue of the stock, and P'^rchasmg •^ ^ ^ ^ _ ' property, shall pay to the coy's bankers a sum sufficient to pay off a loan of 1, or thereabouts now owing by the coy to them, and a sum or simis sufficient to pay off the whole of the existing mortgages amounting to 1, or thereabouts on certain properties of the coy specified in the second schedule hereto, and shall in due coiu'se aj)j)ly such monej^s in pacing off such mortgages, and the coy shall procure the release of such mortgages. (2.) The siu-plus moneys shall, from time to time at the request in writing of the coy, be applied by the trees or tree in or towards the purchase of any licensed or other ppties suitable for the purposes of the coy, which the coy, with the approval of the trees or tree, may from time to time determine to acquire. (3.) Such jipties may be freehold, leasehold, or copyhold, with or without goodwill, licences, or fixtures, and it shall rest with the trees or tree to determine how any of such ppties shall be vested in them or him, whether by conveyance, demise, sub-demise, assignment, charge, or otherwise, and the coy shall vest the same or procure the same to be vested in the trees or tree accordingly. (4.) Such further ppties shall become part of the specifically mort- gaged premises in priority to the A. stock and the securities for the same. 890 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 551. (5.) The trees or tree may accept such title to any such ppty as they " or he may tliinlc sulRcient, whether perfect or not. (6.) The price to be pd for any such ppty must be a fair one. (7.) The trees or tree .shall be at libeiiy to accept a certificate by any surveyor or valuer whom the trees or tree may believe to be competent to the effect that the ppty to be purchased is suitable for the purposes of the coy, and that the price is a fair one as sufficient evidence thereof. a-v^sv::^- (8.) Pending the applicon and payment of any of the sd moneys as afsd the trees or tree may invest or deal with the same in accordance .with clause — hereof [see clause 24 of Form 545], and as occasion requires may realise and convert the securities for the time being representing the same. j . Form 552. Application of stock pro- ceeds in acquisition of assets to be vested in the trustees. All moneys, &c. [see Form 550J shall be dealt with as follows, that is to say : — (1.) The said moneys shall, from time to time upon the request in writing of the coy, be applied : — (a) Wholly or in part to the payment of the purchase- money or part of the purchase-money of ppty suitable for the purposes of and contracted to be purchased by the coy or already purchased by the coy ; or (b) Wholly or in part in making advances upon mortgage of ppty or in acquiring any mortgage of ppty, whether vested in the coy or others, where such advance or acquisition shall seem desirable in the interests of the coy. (2.) Every such request must be accompanied by particulars of the proposed applicon, and in particular — (a) In the case of ppty proposed to be purchased, the tenure and natiu'e of such ppty and the price pd or to be pd for it ; and (b) In the case of a proposed advance, the tenure and nature of the ppty on which the advance is proposed to be made ; and (c) In the case of the proposed acquisition of a mortgage, the tenure and nature of the mortgaged premises. (3.) Evoiy such request must also bo accompanied by a certificate signed by at least two directors of the coy, certifying that in their opinion the proposed application is desirable in the interests of the coy. (4.) Pending the applicon of the moneys afsd in manner hinbefore provided, tlie trees or tree may invest the same under clause 27 hereof, and may, as and when occasion shall require, call in and realize such moneys and deal with the same under this clause. .'.-^^^ ;^j_ . ^ FORMS. 891 (5.) All the ppty and moi-tgagos acquired pursuant to the laf5t Form 552. preceding clause Khali bo vested in tlie trees or tree, subject nevertheless to the A. stock, and the securities for the same shall become part of tlio specifically mortgaged premises, &c. Property to be Conveyed. The coy shall cause the assets specified in the schedule hto to Form, 553. be forthwith vested in the trees or tree upon the trusts hereof free ri I ■■• Company to from incumbrances (otlior than the chief and other rents mentd in such vest herodita- schedulo and incidents of tenure, if any), and for that ])urpose the coy ™*^^*^ ^ shall forthwith execute and do, or cause to bo executed and done, all such assurances and things as the trees or tree may reasonably require, and it is expressly declared as follows (that is to say) : — (1) The freeholds specified in the first and fourth parts of the sd schedule are to be conveyed to the trees or tree in fee simple. (2) The leaseholds specified in the second and fourth parts of the sd schedule are (unless the trees or tree require the same to be assigned) to be demised to the trees or tree for the residue of the terms for which the same are respectively held except the last three days of each of the same terms respectively. The trees or tree may, if they or he deem it expedient so to do, require all or any of such leaseholds to be assigned to the trees or tree. (3) The leaseholds or other property or rights specified in the third part of the said schedule are to be assigned or, at the option of the trees or tree, demised to them or him. (4) The copyholds specified in the fiith part of the said schedule are to be surrendered to the use of the trees or tree or their or his nominees in fee simple according to the customs of the several manors of which the same respectively are held. (5) The coy is to make out to the reasonable satisfaction of tlie trees or tree a good title to the said freehold, leasehold, and copy- hold premises, but the trees or tree may accept such title and such evidence of title to the said premises respectively as they or he may think sufficient, with full power to accept any certificate or report or opinion as siifficient notwithstanding that the same may not constitute legal evidence. (6) The several conveyances and assurances aforesaid are to be expressed to be made by the coy as beneficial owner, and are to contain all such covenants by the coy for the pajonent of all rents and otherwise as the trees or tree may reasonably require. (7) If the coy shall be imable to comply with paragraph (5) liereof as regards any particular ppty, the coy shall pay to the trees or tree such a sum in cash as shall be certified by Messrs. 892 DEBENTUKES AND DEBENTURE STOCK. [ChAP. XIV. Form 553. of , surveyors, to be in their opinion the fair value of such ppty with a good title, and in that case such ppty shall be excluded from the operation of this clause, but the said sum of cash shall become and be part of the appropriated assets as above defined. Where it is desired to constitute aud issue the stock before the property can be transferred the trust deed should contain a covenant to convey, e.g., as above. In such case the trust deed very commonly requires the proceeds of the issue to be paid to the trustees as in Form 550. Form 554. Company to vest specified assets in the trustees in accordance with local laws. The coy shall cause the assets specified in the first schedule hto to be forthwith vested in the trees or tree upon the trusts hereof, free from incumbrances, and for that purpose the coy shall forthwith execute and do or cause to be executed and done all such assurances and things as the trees or tree may reasonably rec^uire for the purpose of effectually vesting the said appropriated assets in the trees or tree in accordance with the local laws relating thereto, and it is expressly declared as follows (that is to say) : — (1) The ppties specified in the first part of the sd schedule shall, whether freehold or leasehold, be vested in the trees or tree, by conveyance or demise, as the case may be, free from incumbrances, and accordingly the coy shall pay oif or satisfy all mortgages or charges now affecting the same, and when any equity of redemption is outstanding shall buy up or foreclose or procure the release thereof. (2) The trees or tree shall have full discretion as to what they or he shall require the coy to do or cause to be done under this clause. (3) The trees or tree may in any case in which they consider it expedient direct that the vesting aforesaid shall be effected by the creation in favour of the trees or tree of a mortgage or charge of or on the particular asset instead of by an absolute conveyance or assignment. (4) As regards any mortgages which may now rank as first mort- gages on the pj)tie8 specified in the first part of the sd schedule, or any of them, the trees or tree may, in any case in which they think it expedient, direct that any such mort- gages shall, in lieu of being absolutely paid oif and extin- guished, be kept alive and transferred to the trees or tree as part of the appropriated assets, and the same shall become part of the appropriated assets accordingly. (5) The trees or tree may accept such title and such evidence of title to the said premises respectively as the trees or tree may think sufficient. FORMS. 893 (6) A coi-tificato in writing hy the trees or tree to the effect that the Form 554. coy has in their or his opinion duly complied with the jirovi- sions of this clause, or has duly complied with the same to any specified extent, shall be conclusive evidence in favour of the trees or tree that the trees or tree have made all reason- able requisitions on the coy under this clause, and that the coy has complied with the same fully or to such specified extent, but such certilicato shall not preclude the trees or tree from subsequent!}^ requiring the coy to do anything further under this clause if the trees or tree think it expedient to make such further requisition. Inasmuch as it may in the interests of the stockholders be expedient Form 555. from time to time to vest some part or parts of the appropriated Foreiini assets in local trees, whether with a view to facilitating realization assets may or disposal thei-eof , or to avoid expense, outgoings, or imposts which ,^® vested in loc^l trustees can thus be avoided, or for any other reason which the trees or tree may think sufficient, it is expressly declared that whenever the trees or tree think such vesting expedient they or he may effectuate the same in such manner as they or he think fit, and may declare the trusts on which such local trees are to hold the premises vested in them, and may provide for the remuneration and indemnity of such local trees, and may invest them with such powers, authorities, discre- tions, and duties as to the trees or tree may seem expedient, and the trees or tree shall be in no way responsible for any misconduct on the part of any such local trees. The trees or tree shall not act under this clause without the approval of the coy, unless and until the security hby constituted becomes enforceable. Clearing off Prior Securities. The coy having already given to the holders of the prior debenture Porm 556 stock notice of its intention to redeem the prior debenture stock held — ; by them resply on the day of next shall on that day or tare^sto^ck to within ten days afterwards or before that day duly redeem the same be cleared off. either by payment of the cash payable for redemption or by issuing debenture stock hby secured or otherwise as may be arranged, and shall before or within twenty-eight days after the sd day of prove to the satisfaction of the trees or tree that the whole of the sd prior debenture stock has been satisfied and that the premises thereby charged are freed from such charge and from all claims in respect of the prior debenture stock, and when such proof has been given the trees or tree shall certify hereon that such proof has been given to them or him, and such certificate shall be conclusive and shall absolve the trees or tree from any further obligations in the matter. 894 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 557. Company to create mort- gage in a foreign country. The coy hby covenants with the present trees that the coy will forthwith effect or cause to be effected in favour of the tree or trees an effectual mortgage or effectual mortgages of the hereds specified in the second schedule hto in accordance with French law for securing the payment of the sd sum of /. and interest, and it is expressly declared that the trees or tree shall have an absolute and uncontrolled discretion as to what they or he shall require the coy to do or cause to be done under this clause, and that they or he shall be at liberty to take steps through any bank or fiiTQ, or ofiicial, to obtain the advice of any local lawyer or other person who may be recommended by such bank, firm, or official, as competent to advise in regard to the premises, and that the trees or tree may act on the advice given by any such person wholly or in pt, and that the trees or tree shall be in no way responsible for any loss that may be incurred by reason of their or his acting on such advice or of their or his requirements under this clause not having been as extensive as might be or by reason of any such requirements not being the most suitable for effectually creating the sd mortgage or mortgages, and a certificate in writing signed by the trees or tree to the effect that the coy has in their or his opinion duly complied with the provisions of this clause shall be conclusive evidence in favour of the trees or tree that the trees or tree have made all reasonable requisitions on the coy under this clause, and that the coy has complied with the same, but such certificate shall not preclude the trees or tree from subsequently requiring the tree to do anything further under this clause if they or he think expedient so to do. And, in the meantime, until the sd local- mortgage or mortgages shall have been so effected the sd hereds shall stand and be charged in favour of the trees or tree with the payment of all moneys intended to be hby secured. Form 558. Mortgage of uncalled capital. Mortgages of Uncalled Capital. The coy, as beneficial owner, hby assigns unto the present trees all that portion of the capital of the coy which at present is xmcalled, namely, the sum of 3^. in respect of each of the shares in the capital of the coy which have been issued and are outstanding, and all calls and sums hereafter made or received in respect thereof. To hold the same unto the present trees, their executors, administrators, and assigns absolutely to the intent that the same may be held as a specific and not a floating security for the payment of the moneys intended to be hby secured. As regards the uncalled capital afsd, assigned by the last preceding clause hereof, the following provisions shall have effect : — (1) The trees or tree may at any time hereafter permit the coy to call up such capital, or to receive the same or any part thereof in advance of calls : FORMS. 895 (2) Sucli permission niay bo g-Ivou ou siicli terms and conditions as Form 558. tlio trees or tree may tkink expedient : (3) All such moneys, if and when pdup, shall 1ielon _ _ <^ later security any second or other debenture stock or other securities which the coy holders of the may issue or create, and such second or other debenture stock or other company, securities shall be so constituted and created that, notwithstanding the provisions of the trust deed or other instrument constituting or creating the same, the trees or tree shall be able to exercise all their or his powers, authorities, and discretions hereunder without in any way consulting or giving notice to or procuring the consent of the trees or tree for the holders of such second or other debenture stock, or of the owners of any other securities as afsd, and may treat the coy as the 902 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 565. owner of tlie mortgaged premises, subject only to the stock hby constituted. Where the trust deed securing the first debentures or debenture stock contains elaborate provisions as to interim dealings with the mortgaged premises at the request and with the concurrence of the company, and it is proposed to issue second debentures or debenture stock, a clause as above is requisite, as otherwise the trustees could not, after notice of the second issue, act at the request or by the direction of the company. The provision in the second trust deed may run thus : — "Notwithstanding the provisions herein contained, the trees or tree of the first trust deed shall be at liberty to exercise all their or his powers, authorities, and discretions imder that deed without in any way consulting or giving notice to or procuring the consent of the trees or tree for the holders of the second debenture stock hereby secured, and may treat the company as the o%vner of the mortgaged premises, subject only to the first debenture stock and the securities for the same." That such a provision is valid, see Menzies v. Lightfoot, 11 Eq. 459. Advances to Lessees. Form 566. Where any lease is granted, or agreed to be granted, at a premium pursuant to clause hereof, the coy may arrange with the lessee, Advances to lessees. or intended lessee, that the whole or some part of the premium shall be advanced to the lessee on the security of a mortgage or charge on his interest under the lease, or that the whole or some part of such premium shall without payment be secured by such mortgage or charge, and the trees or tree shall have power to give effect to such arrangement, and shall have full discretion as to the terms of the mortgage or charge to be given as afsd ; but so that if rec[uired by the coy such mortgage or charge shall contain such provisions as the coy may require for secxu'ing to the coy as far as may be the exclusive or especial right in regard to the supply of malt liquor, spirits and other goods to the premises comprised in the mortgage or charge. All mortgages and securities so acquired shall become and be part of the appropriated assets. In the case of a brewery company, a clause, as above, is sometimes inserted. Form 567. Special pro- visions as to foreign asHcts. Foreign Assets : Powers of Attorney. Inasmuch as the mortgaged hereditaments are and will be wholly or for the most part situate in the colony of , whilst the trees or tree will be resident in the United Kingdom, and it is necessary to make special provision suitable to such circumstances, it is therefore expressly provided and declared as follows : — ( 1 ) The trees or tree may from time to time execute such powers of attorney as may seem to them or him best calculated to enable the trees or tree, promptly and from time to time as occasion may require, and more particularly in and FORMS. 903 elsewhere abroad, to execute and perform all or any of tlie Form 667. powers, authorities, and discretions hhy vested in or imposed on the trees or tree. (2) In selecting any such attorney, the trees or tree may act on their own judgment, or may take and act on the oiiinion or recommendation of any person or persons, or coy, or firm in or in the United Kingdom, and that whether such oi)inion or recommendation is or is not based on personal knowledge, and any such appointment may be made in favour of any coy, or of the directors, nominees, or managers of any coy or firm, or in favour of any fluctuating body of persons, whether nominated directly or indirectly by the trees or tree. (3) It shall be no objection to any such attorney that he is in the emplo}Tnent of the coy, or is interested directly or indirectly, or under the influence, direct or indirect, of the coy, or that he is interested in any of the stocks, shares, or securities of the coy. (4) The trees or tree may require any such attorney to give security for the due performance of his duties, but shall be under no obligation to require security. (5) Any such attorney may be invested by the trees or tree with power to exercise and perform all or any of the powers, authorities, duties, and discretions hby, or by law, or by contract, or otherwise, from time to time vested in the trees or tree, and as fully as the trees or tree coidd exercise or perform 'the same if present, and with all incidental powers, including power to receive on behalf of the trees or tree any notices, orders, judgments, requests, accounts, and the like. (6) The trees or tree may fi:x the remuneration of any such attorney, either directly or through some attorney or nominee of the coy, in , and may out of the mortgaged premises pay or satisfy all costs, charges, and expenses of any such attorney, and may authorize him to take the same out of any moneys or assets coming to his hands as such attorney. (7) Any such power of attorney may contain such, if any, restric- tions or qualifications as the trees or tree may think fit, and may be expressed to be made subject to any further restric- tions or qualifications which the trees or tree may fi'om time to time make. (8) Any such power of attorney may contain such provisions in favour of purchasers, lessees, mortgagees, and other persons dealing with the attorney or attorneys as the trees or tree may think fit. (9) Any such power of attorney may empower the attorney or attorneys to appoint any substitute or substitutes, and to revoke any such appointment. 904 DEBENTURES AND DEBENTURE STOCK. [ChAP. XIV. Form 567. (lo) Any such power of attorney may contain such other provisions as the trees or tree shall tliink fit. (11) The trees or tree shall not be chargeable with breach of trust on the ground that any such power of attorney was in its teiTHs too wide or general or unfettered, or that the trees or tree did not sufficiently or at all supervise the proceedings of any such attoi'ney. (12) The trees or tree shall not be responsible for any loss sustained by the coy in consequence of any acts or defaults on the part of any such attorney. A clause as above is sometimes required when the ppty is abroad. Meetings of Trustees. Form 568. Inasmuch as it may be impracticable or inconvenient for all the trees Meetins-8 of ^^ concur in the execution and exercise from time to time of the trusts, of trustees jDowers, and discretions hby vested in them, the following provisions numberl shall have effect, that is to say : — (1) The trees may meet together for dispatch of business, and other- wise regulate their meetings and proceedings as they think fit, and may determine the quorum for the transaction of business, and, until otherwise determined by the trees, two trees shall form a quorum. (2) It shall not be necessary to give notice of a meeting of the trees to a tree who is not for_ the time being within the United Kingdom. (3) A tree may at any time, and the secretary of the trees on the request of any tree shall at any time, convene a meeting of the trees. Meetings, unless otherwise determined by the trees, shall be held at the office of the trees in London. Questions arising at any meeting of the trees shall be decided by a majority of votes. (4) The trees may elect a chairman of their meetings and determine the period for which he is to hold office; but if no such chairman is elected, or if at any time the chainnan is not present at the time appointed for liolding the same, the trees present shall choose some one of their number to bo chairman of such meeting. (5) A resolution in writing, signed by all the trees, shall be as valid and effectual as if it had been passed at a meeting of the trees duly called and constituted. (6) A meeting of the trees for the time being at which a quorum is jjresont, shall bo conipotent to exercise all or any of the authorities, powers, and discretions for the time being vested in or oxorciseablo by the trees generally. The trees may delegate any of their powers to committees consisting of such FORMS. 905 member or members of tlieir bodies as they think fit, and any Form 568. committee so formed sliall, in tlie exercise of tlio powers so delegated, conform to any rej^ulations that from time to time may be imposed on it l)y the trees. (7) Minutes of proceeding's of the trees shall be ihdy entered in books to be provided for the jiurpose by the trees. Such minutes of any meeting of the trees or of anj^ committee, if purporting to be signed by the chairman of such meeting, or by the chairman of the next succeeding meeting, shall be receivable as prima facie evidence of the matter set forth in such minutes. A clause as above is sometimes requii-ed. In order to facilitate the performance by the trees hereof of the Form 569. trusts and powers hby vested in them, the trees shall be at liberty to ~ 7 take a suitable office m London, and to provide therein a safe, or, if take an office the trees or tree think fit, to rent a safe elsewhere, and the trees or with staff, A: c. tree may employ a secretary and such bankers, accountants, brokers, experts, and agents as they may from time to time think exj)edient with a view to obtaining the best advice and assistance in carrying out the trusts hereof ; and it shall rest with the trees or tree to fix the remuneration of such persons, and all expenses incurred hereunder shall be paid by the coy. Trust Deed for securing Debentures issued by a Coy. Form 570. Debenture stock is now so much more commonly issued than debentures, that the Trust deed to writer has thought it convenient to give a debenture stock deed in full, and to give a secure de- debenture trust deed by reference. bentures. THIS INDENTURE, made the of , between The Coy, Parties. Limtd (hnfter called the coy), of the one part, and A., of , and B., of (hnfter called the present trees), of the other part. \_Somctimes [jreliminary recitals of title to property are inserted.^ Wheeeas the coy has determined to raise money by the issue of Recitals, debentures framed in accordance with the form in that behalf set forth in the first schedule hto, and further to secure such debentures in manner hnfter appearing. Now TUESE PRESENTS WITNESS AND DECLARE aS followS : — 1. The marginal notes hto shall not affect the construction hereof, Interpreta- and in these presents, unless excluded by the subject or context, *^°°- " the trees" means and includes the present trees or the survivors or 906 DEBENTURES AND DEBENTURE STOCK. [CflAP. XIV. Form 570. Burvivor of tliem, or other tlio trees or tree for the time being hereof. " The dobentxiros " means the debentures of the coy for the time being outstanding and entld to the benefit of these presents. ' ' The debenture holders " means the holders for the time being of the debentures. 2 and 3. [ Conveyance of freeholds and leaseholds, or covenants to convey r\ 4. The trees shall permit, &c., upon the request of the holder or holders of one-half of the debentures, or of at least of the deben- tures (but in either case, &c.). 5. The security hby constituted, &c. The deed will follow the terms of Form 545, with such modifications as may bo necessary, and in particular substituting " debentm-e holders" for "stock holders." Omit clauses 2, 3, 6, 6, and the first schedule, and insert the following clauses just before clause 43 : — Payment. Debentures to be a first charge, and to rank pari passu. Register kept, &c. Power to mature the debentures. The coy shall pay the principal moneys and interest secured by the debentures in accordance with the tenor thereof resply, and will observe and perform the several conditions indorsed thereon resply. The principal moneys and interest intended to be secured by the debentures shall be a first charge on the mortgaged premises, and as between the several holders thereof (except as herein otherwise pro- vided) the debentures shall rank pari passu without any preference or priority by reason of date of issue or otherwise. The coy shall at all times keep an accurate register of the deben- tures showing the number and amount of each debenture and the date of issue ; and the trees or tree and the holders of the debentures, or any of them, shall be at liberty at all reasonable times to inspect the sd register, and to take copies of, or extracts from the same, or any part thereof. At any time after the security hby constituted has become enforce- able, and the trees shall have determined or become bound to enforce the same, they or he may, by notice in writing to the coy, declare that the debentures are payable, and the principal moneys thereby secured shall thereupon become payable accordingly. In Witness, &c. The Schedule above referred to — [The first schedule will contain the form of debenture, the second the particulars of the hereditaments specifically mortgaged, and the third the provisions as to meetings.] Form 571. tTIIS INDENTUEE made the day of -, between the B. Trust deed to secure debentures on foreign railway, con- Btruction fund and applica- tion thereof. Eailwfiy Company, Limited (Imftor called the "coy") of the one part, ayid and of the other part : Wiiereas the coy proposes to construct a railway from to , and intends to construct such railway in sections, and intends fortliwith to undertake and complete the construction and equipment of the first section of such railway. FORMS. 907 wliicli will bo about miles in longth, and will commence at Form 571. and end at . And whkreas it is proposed to raise the funds for the construction and equipment of such railway by the creation and issue of debentures, and it is intended that the funds for tlie con- struction and equipment of the first section of such railway shall bo provided by the creation and issue of /. of debentures of the coy framed in accordance with the form set forth in the first scliedule here- to. And whereas the coy has determined to secure such debentures in manner hnfter appearing. Now these presents witness and DECLARE AS FOLLOWS : 1. In these presents, unless there be something in the subject or Interpretation context inconsistent therewith — clause. " The debentures " means the /. debentures above referred to or such of the same as shall for the time being be outstanding. *' The debenture holders " means the registered holders for the time being of such debentures. " The trustees " means the said and , or other the trustees or trustee for the time being hereof. " The mortgaged premises" means the property charged by clause 3 hereof. "Extraordinary resolution" has the meaning assigned thereto by clause 16 of the second schedule hto. 2. The /. debentures afsd shall be framed in accordance with How deben- the form set forth in the first schedule hereto. *"^^' *° ^« iramed. 3. The coy hby specifically charges the first section of the railway gpecigg afsd, namel}', the section of about miles, commencing at and charges. ending at , and also all the stations, lands, sidings, warehouses, buildings, reservoirs, rolling stock, telegraphs, telephones, tools, rights and effects, both present and future, belonging to the coy in connection with such section Avith the pajanent of the ppal moneys and interest intended to be secured by the debentures, and of all other moneys payable hereunder. 4. The debentui'es shall be offered for public subscription forthwith. Construction and all moneys received by the coy in respect of such debentures shall be placed in the Bank to an account to be opened there in the name of the trees, and the trees shall invest such moneys or place the same on deposit as hnfter provided, and shall hold such moneys and ' the investments thereof and the income thereof (hnfter collectively referred to as "the construction fund") upon trust to apply the sd fund in paying the costs of and incident to the construction and equip- ment of the first section afsd ; and, secondly, any surplus which shall remain after the construction and ec^uipment of such section shaU be handed over to the coy. 5. For the purpose of supervising the expenditure of the construe- Supervision of tion fund, the trees shall from time to time appoint an engineer Avho ^^P^ntiiture. shall be instructed from time to time to certify in writing to the trees what sums, having regard to the work done towards the constructioji 908 DEBENTURES AKD DEBENTURE STOCK. [ChAP. XIV. Form 571. Trustees may ixae balance. Consolidation of debeuturea on all scction.s of railway bein^ com- pleted. and equipment of llio railway, ouglit to be paid over to the coy, and in so certifying, the sd engineer shall take into account the length of the line, the works carried out and to be carried out, and the total sum of 1, afsd ; and such engineer, in giving his certificate, shall be at liberty to act on such evidence of the expenditure as he may in his absolute discretion think proper, and without being bound to proceed to the site of the railwa}^, or otherwise of his own knowledge to investigate the condition of affairs, and the trees shall be at libeiiy to act on the certificates of such engineer without being in any way bound to go behind such certificates, or to investigate the evidence on which the certificates were given, and shall be in no wise responsible for an)- losses occasioned by acting on any certificate improperly given. 6. If the security hby constituted shall become enforceable as hnfter provided, and the trees shall determine to enforce the same, then and in that case so much of the construction fund as shall not previously have been pd out shall be freed from the foregoing provisions, and shall be applicable by the trees or tree in such manner as they shall think fit towards the completion and equipment of the sd section, but if and so far as they shall determine not to expend the same in that way, such construction fund shall be held as if the same rej)resented moneys arising from the sale of a portion of the section, and shall be dealt with in accordance with clause — hereof. 7. If the trees enter into possession of the mortgaged premises, or any part thereof, before the completion and equipment of the sd section, the trees may complete the construction and equipment of the sd section in such manner as they- think fit, and for that purpose may use the construction fund, or so much thereof as shall then remain unapplied, and for the purposes of such construction and ec[uipment may employ contractors, engineers, sui-veyors and others, and make all such contracts and arrangements as the trees may think fit. 8. If the trees enter into possession or remain in possession after the completion and equipment of the section, they may thenceforth carry on the working of the section in such manner as they think fit, and for that purpose may enter into all such contracts and arrange- ments as they think expedient, and shall apply aU moneys received by them from the working of the section, first in payment of the cost of and incident to the working, secondl}^, the surphis shall be held by thorn on the trusts by clause hereof declared of and concerning the moneys therein mentioned. 9. When the whole of the sd railway shall have been completed and equipped, the coy may, by notice in writing to the trees hereof, and to the trees of any further deed or deeds executed pursuant to clauses and hereof, declare that aU the debentures entld to the benefit of these presents and to the benefit of such further deed or deeds, shall Ihenc eforth bo consolidated as regards security, and there- upon and thenceforth aU such debentures shall rank j)ari passu in point of charge, and the several specific charges on the several sections FORMS. 909 of the railway, and the several lloatiug charges created as security for Form 571. each scries shall collectively operate and enure for the equal benelit of all the debentures, and the provisions contained in the second schedule hto shall apjily to all the debentures, and the coy and the several trees shall concur in executing all such instruments and things as shall be necessary or expedient for the purpose of effectuating such consolida- tion and amalgamation of securities; and incase any difference shall arise in regard thereto, such difference shall be referred to the senior conveyancing counsel of the Cliancery Division of the High Court of Justice, whose decision shall be final. The general provisions of the deed should follow Form 545, with suitable modifi- cations, including the insertion of Form 567. 910 [Chap. XV. BANKING AND ADVANCE SECURITIES. CHAPTER XV. INTRODUCTORY NOTES. Advance business. Legal mortgages. Equitable mortgages. How created. An enormous and continually increasing mass of business in the way of temj)orary advances is done eveiy year — to a very large extent by banks and finance and other comj)anies registered under the Act of 1862 — and a very large proportion of the loans are made to companies so registered. The securities for such advances vary with the circumstances. Where the borrower does not object to give a legal mortgage, the lender is not likely to refuse to make the advance on what his lawyer will tell him is the safest kind of security ; but where the loan is only required for a short time, the borrower very commonly objects to the exj)ense and delay incident to a legal mortgage, especially of land ; and in these days of low rates of interest and competition, people with capital lying idle are often not inclined to impose onerous conditions on a borrower lest they should drive good business elsewhere. Accordingly, to the mutual satisfaction of lenders and borrowers, temporary advances are to a large extent, secured by equitable mortgages or charges. No doubt the security of an equitable mortgage or charge is not as effective as that of a legal mortgage, but experience has shown that dishonesty is exceptional, and that where advances are made with discrimination equitable securities, though occasionally displaced and nullified by fraud, can generally be relied on as a convenient and effective mode of affording to lenders an adequate assurance for the repayment of their advances. How then may an equitable mortgage or charge be created ? Subject to the subordinate rules below mentioned, it may be stated that a vahd equitable mortgage or charge on property can in England be created by contract in writing, or even by verbal contract. All that is required, according to the princijilcs of equity, is that there shall bo a binding contract charging the property, and that the pro- perty charged shall be capable of identification (either at the time ■when the charge is created, or, in the case of future property, at the INTEODUCTORY NOTES. 911 time wheu it comes iuto existence) as tliat which it was intended to cliargo. If tlicso two conditions are fulfilled the property is bound in equity. Nor is equity particular as to the words used. Thus, if A. says to B., " lend me 100^. and you shall have a charge on my shares in the Company, Limited" [or, ''on my share in the partnership business of "], and B. advances the amount, he has in equity a valid charge. But the charge would in equity have been just as valid if A. had said, "you shaU. have as security my shares," or " I will give you a mortgage on my shares," or " consider my shares as a security for the amount," or "I make over to you as security my shares," or "I bind my shares with the payment," or "I charge my shares with the payment " {Florence Land Co., 10 C. Div. 530, 546) ; for equity looks to the intention and not to the particular form of words used. Strand Music Hall, 3 D. J. & S. 447, supra, p. 808. And if the intention to charge is sufficiently clear the absence of words of charge will not defeat the intention. Cradock v. Scottish Prov. Co., 69 L. T. 30; and see infra, p. 915. Where a charge is created by deed no consideration is requisite to Considera- support the deed ; but, where the charge is created by contract not under seal {i.e., by what is called a simple contract), whether in writing or oral, a valuable consideration for the charge must be proved ; for consideration is an essential feature in a simple contract. Consideration here means some consideration which, in a legal sense, is of value. "A valuable consideration, in the sense of the law, may consist, either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibiHty given, suffered or undertaken by the other." Currie v. Misa, L. E. 10 Ex. p. 162. "Any act of the plaintiff from which the defendant derives a benefit or advantage, or any labour, detriment or inconvenience sus- tained by the plaintiff, provided such act is perfoi-med or such incon- venience suffered by the plaintiff with the consent, either express or implied, of the defendant, is a consideration in point of law." Per Tindal, C. J., Laythorpe v. Bryant, 3 Scott, 250. Hence if A. is indebted to a bank, and the bank requests him to give security, and he complies with this request by writing to the bank a letter sajdng that it shall have a charge for the amount on a specified property, the Court will treat the transaction as importing a contract that A. shall give the security, and that in consideration thereof the bank shaR forbear for a time to enforce pajnuent, and inasmuch as this giving of time or forbearance is an inconvenience sustained by the bank at the imphed request of the debtor, it affords a sufficient consideration for the contract. Thus, in Alliance Bank v. Broom, 34 L. J. Ch. 256, a banker had required security from his customer for an overdrawn account. The customer, by letter, promised to hypothecate certain goods. Upon 912 BANKING AND ADVANCE SECURITIES. [ChAP. XV. proceedings by the bank to enforce this promise, it was objected that there was no consideration for it, since the bank did not in tenns agree to give time ; but it was held that the circumstances implied an understanding that there should be some forbearance, and that this was sufficient to prevent the promise to hypothecate from being void as a nudum, pactum. Kiuflorsley, V.-C, said: "The ground of the demurrer to this bill is, that the contract said to have been contained in the letter of the 19th of September was nudum pactum, and one which the Court could not therefore enforce, and it was contended that the promise to hypothecate the goods was without consideration, and there was no promise on the part of the plaintiffs that they would abstain even for a single day from bringing their action against the defendants for the money owing to them and which they might no doubt have brought. It is true there is nothing beyond the demand for payment and the promise to give security, but the question is, whether there must be a promise on the part of the plaintiffs to abstain from bringing an action in order to constitute a valid consideration. According to the statements in the bill it appears that there was a demand by the creditors for payment and a promise by the debtors that they would hypothecate certain goods, and upon being asked for the documents necessary for constituting a valid security the debtors made an excuse on the ground of their not being able at that time to obtain the papers. Now what is the effect of the letter written by the defendants ? It appears to me that when a creditor demands payment of a debt, and the debtor in consequence of that application agrees to give a certain security, although there is no promise by the creditor to abstain from suing for any given time, yet the effect is that the creditor does in fact give or must be assumed to give, and the debtor receives or must be assumed to receive the benefit of some degree of forbearance, although for no definite or fixed period. If the debtor had refused to give any security at all, the creditor might, of course, have taken immediate steps to enforce payment, but in consequence of the promise to hypothecate the debtor does receive Bome degree of forbearance. It is true that at any time notwithstanding the promise the creditor might insist upon immediate payment, and bring an action, even after the security given, but still the circumstances necessarily imply or involve the attainment on the part of the debtor of a certain amount of forbearance which he would not otherwise receive ; and that, in my opinion, prevents this transaction from being a nudum pactum. On these grounds the demurrer must be overruled." And in Oldershaiv v. Kirig, 2 H. & N. 399, 517, Erie, J., said : *' Looking at the whole letter and the circumstances under which it was written, and considering the importance of further advances, I come to the conclusion that the consideration contemplated was that further advances should be made, and time given by the creditor before he would press for payment of the existing debt. Though the contract did not bind the creditor to make further advances or to give time, unless he chose to do so, it is clear that, if he did make the advances and did give time, that which was contingent at the time when the instrument was written became an absolute and binding contract." And if A., not being indebted to B., writes a letter to B., stating that he sends B. certain title-deeds in order that B. may have a security for any advance he may make to A., B. on making any advance obtains a charge on the property comprised in the deeds, for the letter is regarded as a continuing oifcr which, when accepted by INTRODUCTORY NOTES. 913 the making- of an advance, matures into a contract. See Carlill v. Carbolic, Sfc. Co., (1893) 1 Q. B. 270. Again, if A. is indebted to B., and C. ro(}uosts B. to forbear from suing A., and offers to give B. a security, and B., altliough ho does not at tlie time })ind himself not to sue, does in fact afterwards forbear to sue A. for a time, there is a good consideration for tho contract. Per Lord Esher, M. E., Crears v. Hunter, 19 Q. B. D. 341, 344. This case shows that the request, compliance with which affords a sufficient consideration to support the contract, may be either express or implied. "If a request is to bo implied from the circumstances, it is the same as if there were an express request." Per Lord Esher, M. E., Crears v. Hunter, 19 Q. B. D. p. 345. As to the j)roperty to be charged, equity allows the utmost freedom What pro- as to this. It matters not whether the property be real or personal ; g;^^ro-ed whether it be j)i'esent, future or contingent ; whether it be situate in England or abroad. Whatever tho property may be, it can, as a general rule, be bound in equity by a conti'act of charge made in England. Thus, if the property be land, or some interest in land, or chattels, or stock-in-trade, or ships, patents, copyrights, book debts, j)oHcies, salaries, shares, stocks, securities, or reversions, it can, as a general rule, be charged in equity. But equity goes still further, for it allows a charge on future property, or on an expectancy or a possibility. Hence, a valid charge in equity may be given by A. on any legacy that may be left him by a specified li\'ing person, or, for that matter, on any legacies whatsoever that may be left him. Bemiett v. Cooper, 9 Beav. 252 ; Tailby v. Official Receiver, 13 App. Cas. 523. So, a charge can be created on future property, as in the every- day case of a debenture issued by a company charging all its property present and future for the repa^-ment of an advance. See p. 773, supra. And a charge may be given on uncalled capital, although the uncalled capital is in some sense not property of a company. See p. 786, supra. And, as we have seen above, there is no difficulty in equity in creating a charge on property situate abroad, even though according to the local laws the charge would be ineffective. See p. 780, supra. The creation, however, of an equitable charge on property is subject Subordinate to certain subordinate rules, for the most part established by statute. eq^f^aUQ^ Of these rules the following may be specified as those which are most charges, frequently applicable : — 1. In the case of personal chattels within the Bills of Sale Acts, Bills of Salo 1878 and 1882, the charge, if in writing, will be ineffective unless the requirements of these Acts, where applicable, are satisfied. But as to companies, see p. 782. 2. The rides as to fraudulent or undue preference of creditors within Fraudulent three months of a bankruptcy or winding-up, as established by the ^^^ erence. Bankruptcy Act, 1883, and the Companies Act, 1862, s. 164, must be borne in mind. p. 3 N 914 BANKING AND ADVANCE yECURITIES. [ChAP. XV. Statute of Frauds. Other special statutory provisions. 3. As to a cliargG on land, or any interest in land, the provisions of tlie Statute of Frauds, s. 4, must bo borne in mind. See further as to this, infra. 4. As to various classes of property, it must be borne in mind that unless the charge is made effective according to the special statutory jirovisions it AviU be liable to be displaced ; — e.g., in the case of a charge on landed property in a register county which is not duly registered {supra, p. 795) ; a charge on ships which is not in the statutory form, and didy registered under the Merchant Shi2:)j)iug Act, 1894 ; a charge on a patent which is not didy registered as required by the Patents Act, 1883; a charge on shares in any company which is not made effective by transfer or by notices when notices are receiv- able ; a charge on a chose in action which is not perfected by notice to the trustee or debtor ; or a charge on property abroad which is not didy registered or j)6i'fected in accordance with the local laws. See p. 780. Statute of Frauds as to land. As to the Statute of Frauds in relation to Equitable Charges. Sect. 4 of this Act (29 Car. 2, c. 3) j^rovides {inter alia) that no action shall be brought upon any contract or sale of any lands, tenements, or hereditaments, or any interest in or concerning them, unless the agree- ment upon which such action shall be brought or some memorandum or note thereof shall be in writing, and signed by the party to be charged therewith, or some other -person thereunto by him lawfully authorized. With reference to the construction and application of this section to ec^uitable mortgages, the following projiositions are established : — (1) The section appKes, subject as below mentioned, to a contract by way of equitable mortgage of land, or of any interest in land. (2) The section does not make a contract which is within its pro- visions void if not in writing ; it only requires that if one party sues another on the contract, the plaintiff must, if recj[uirod, (a) prove that tlio contract was in writing signed by the defendant or his didy autho- rized agent, or (b) must show that by some memorandimi in writing so signed the parties to and terms of the contract have been admitted. See supra, p. 194, and Maddison v. Alderson, 8 App. Cas. 474. Ilenco, a proposal in writing signed by one party and accepted orally by the other party is a sufficient memorandum within the statute, lieuss v. Picksley, L. E. 1 Ex. 342. The memorandum need not 1)0 contomporannous with the agreement; all that is wanted is evidence under tlic liand of the party sued, or his agent duly autho- rized, that ho entered into the agreement. For instance, a letter by the defendant, before action brought, to a third person admitting or casually mentioning the terms of the agreement is sufficient. Gibson V. Holland, L. E. 1 C. V. 1. And so is u minute of a resolution of the INTRODUCTORY NOTES. 91'^ directors of a coiupany luciitlouiug tlio terms of the agrGcmoiit. Jones V. Victoria Bock Co., 2 Q. B. D. 314. An acknowledgiueut in the will of the party to Ijo charged will suffice, lie Hoyle, (1893) 1 Ch. 84. An acknowledgiueut in an affidavit or pleading in proceedings against some third party will 1)0 sufficient. Barkworth v. Young, 4 Drew. 1. "And I should say that an entry in a man's own diary, if it were signed by him, and the c(mtents were sufficient, wiU do." Per A. L. Smith, L. J., Re Iloijlc, uhi supra, p. 194. Equity has, l^y certain important decisions (iualilied and relaxed the operation of the section, and enabled parties in some cases to sue on agreements without complying with the recj[uirement3 of the statute. Thus :— (a) It is well settled that a parol agreement may be sometimes enforced when the plaintiff shows that he has partly performed his obligations under the contract. Lester v. Foxcroft, 1 Coll. P. C. 108 ; 1 AVhite & Tudor, L. C. Eq. 768. But it is not every act of part performance which will suffice to take a contract out of the statute. For example, paj-ment by the plaintiff of part of the consideration is not stifficient. Clinan v. Cooke, 1 S. & L. 40 ; Hughes v. Morris, 2 De G. M. & G. 356. The acts relied on mtist be unerpiivocably, and in their own nature, referable to some such agreement as that alleged (per Lord Selborne, L. C, Maddison v. Alderson, 8 App. Cas. 467, 479), e.g., when the plaintiff has been admitted into possession pursuant to the contract the statute does not apph^, and A fortiori where he has, pursuant to the contract, laid out money or built on the premises. Lester v. Foxcroft, ubi supra. But part performance, to take a case out of the statute, ahvays supposes a complete agreement. There can be no part performance where there is no complete agreement in existence. Thynne v. Earl of Glengall, 2 H. L. C. 158. Companies are equally bound with individuals by acts of part performance. Wilson v. West Hartlepool Rail. Co., 2 De G. J. & S. 475. (b) It is also well settled that a contract for an equitable mortgage of land, evidenced by the deposit of title deeds, can be enforced by the depositee without compliance with the requirements of the Statute of Frauds. Russel v. Russel, 1 Bro. C. C. 269 ; 1 White & Tudor, L. C. 674. And it must be borne in mind that a deposit of deeds to seciu-e money inx^oxi^ prima facie a contract that the depositor's interest shall be liable to the debt and that he will perfect the security. Pryce v. Bury, 2 Drew. 42 ; Ashton v. Dalton, 2 Coll. 568 ; Wallwyn v. She2)- heard, 4 Yes. 119. Equitable Mortgages by Deposit generally. A valid equitable mortgage by deposit may bo created, though some Equitable only of the documents necessary to prove the title be deposited {Lacon jj^^^jf ^Q^^f 3x2 ycepo.1. 916 BANKING AND ADVANCE SECURITIES. [ChAP. XV. V. Allen, 3 Drew. 579 ; Daw v. Terrell, 33 Beav. 218) ; and a deposit of documents of earlier date will give a good charge, even though those of later date be not deposited. Dixon v. MucUesion, 8 Ch. 155 ; and see Roberts v. Croft, 24 Beav. 223 ; 2 Do G. & J. 1, in which the conveyance to the depositor was not deposited. The deposit of deeds with A., as trustee for B., who advances the money, will create a valid security in favour of B. Ex parte Whithread, 19 Yes. 209. Equitable mortgages by deposit are not confined to title deeds relating to land. An equitable mortgage of stock, shares, debentures, debenture stock, policies, bonds, and other securities may, without writing, be created by depositing the certificates or instruments relating thereto. Ex parte Moss, 3 De Gr. & Sm. 599 (shares) ; Carter V. Wake, 4 Ch. D. 605 (railway bonds); Re Prtjce, 4 C. D. 685 (debentures); Shandy. Stansjield, Seton, 1702 (x^olicy of assurance). If, however, the deposit is made without any written memorandum or agreement as to its object, there is ample room for dispute in the future, and accordingly the depositee shoidd take care to get an agree- ment or memorandum specifying the terms of deposit duly signed by the depositor. "Where there is such a contract or memorandum it governs and defines the arrangement. Shaio v. Foster, L. E. 5 H. L. 321 ; Burton v. Gray, 8 Ch. Ap. 932. And parol evidence is not admissible to contradict it {Ex parte Coombe, 17 Ves. 369) ; but such evidence is admissible to extend the security, e. g., to further advances. Ex parte Kensington, 2 V. & B. 79 ; Ex parte Nettleship, 2 M. D. & De G. 124. "Where the memorandum stated that the deeds relating to freehold and leaseholds were deposited, both properties were held charged, though only the deeds relating to the leaseholds were in fact deposited. It is a question of intention, and where the memorandum only related to one set of deeds, whereas all the deeds were deposited, the charge was held to extend to the one set only. Wylde v. Radford, 9 Jur. N. S. 1169. But a good equitable security may be created by a written agree- ment to deposit, e.g,, an agreement to deposit a lease when granted {Ex parte Orrett, 3 M. & A. 153); or by deposit of an agreement for a lease. Unity, ^'c. Assoc, v. King, 25 Beav. 72. A deposit of a lease containing a proviso against assignment is effective as againfit the depositor and does not avoid the lease. Ex parte Baglehole, 1 Hose, 432; Ex jyarte Sherman, Buch. 462. Whore deeds are dej)osited to secure the payment of accommodation bills, and the bills are renewed at the request of the depositor, the security will extend to the fresh bills. Ex parte Skinner, 1 D. & C. 403. A inoi-tgago by deposit may be created in the case of lands abroad when the depositor is hero. Ex parte Pollard, 4 Dcac. 27. As regards a mortgage by deposit of negotiable instruments, the rule is that the title of the mortgagee, if he takes in good faith and INTRODUCTORY NOTES. ^17 foi' valuo, is iinimpGacliaT)lo. London Joint Stock Bcnik v. Simmons, (1892) A. C. 201; Vcnahles v. B(iri7ig Bros., (1892) 3 Ch. 527; Bentincic V. London Joint Stock Bank, (1893) 2 Ch. 120. Nor is noglif^enco or forgetfulness sufficient to affect ]us title. Rajihael v. Bank of Ertgland, 17 C. B. 161. "Wlioro a person, wliose lioncsty tlicro is no reason to douLt, offers negotiable securities to a bank or any otlier person, the only question likely to engage his attention is whether the security is sufficient to justify the advance required. And I do not think that the law lays upon him the obligation of making any inquiry into the title of the person he finds in possession of them ; of course, if there is anything to arouse suspicion, to lead to a doubt whether the person purporting to transfer them is justified in entering into the contemplated trans- action, the case would be different." Per Lord Herschell, Loyidon Joint Stock Bank v. Simmons, ubi supra. And see Sheffield v. London Joint Stock Bank, 13 App. Cas. 333, where a bank, knowing that they were dealing with an agent ha\ang limited authority, were held bound to inquire into the extent of his authority. Equitable Mortgages by Registered Companies and Societies. In making advances to statutory companies and societies, including Deposits by those registered under the Act of 1862, it must be borne in mind that ^°°^P^^^^' the lender is fixed with notice of the contents of the company's memo- randum and articles, or rules or Act of Parliament, and accordingly it is necessary to see — (1) That the company has by its constitution the necessary powers (see supra, pp. 783 et seq.) ; and (2) That the directors are in a position to exercise the company's powers (see supra, pp. 788 et seq.). Usually the company has express or implied power {supra, p. 783), and the directors have specific or general powers (see supra, pp. 788 et seq.) without any limit, and such general powers justify an equitable mortgage, whether by deposit or otherwise. Patent File Co., 16 Ch. 13. Sometimes, however, the company has the requisite powers, but the directors' power to borrow or mortgage is limited by the regulations, so that the power cannot be extended except by special resolution. In such case the lender should rec[uire the passing of a special resolution for extension. More commonly the directors' powers are limited in a qualified manner, e.g., they may borrow and give security, but so that the amount owing shall not, tcithout the sanction of a general meeting, exceed a specified amount. In such case the lender is not bound to ascertain whether the proposed loan is within the limit, for he is entitled to assume that if it is beyond the limit the requisite authority has been obtained (see supra, p, 412) ; but if he has notice that the loan will be beyond the limit, and that n,o resolution of a general 918 BANKING AND ADVANCE SECURITIES. [ChAP. XV. meetino- has been passed, ho cannot hold the company to the contract ; and this being so, there are cases in whicli it is considered desirable to inquire and ascertain whether the loan is within or beyond the pre- scribed limit, and in the latter case whether the requisite resolution has been passed. Where there is by the regulations a fixed limit to the directors' borrowing powers {i.e., not capable of extension by resolution of a general meeting), a bank or individual who takes a mortgage to secure a current account or future advances must be extremely careful. In strictness the bank or other lender should, whenever making a further advance, ascertain that it is within the limit. Otherwise it may find that although originally its advance was fully secured, yet by subsequent events its fm-ther advances are not secured. For instance, suppose the directors' j)owers are limited to 100,000?., and they borrow from the bank by way of overdraft 100,000?., and after- wards by payment into their general account the balance is reduced to 50,000?., and subsequently the directors, without the knowledge of the bank, raise 50,000/. elsewhere, and afterwards the bank allows further overdrafts up to 100,000?., in such case the loan of the last 50,000?., being in excess of the limit, will be ultra vires the directors, and the bank will have no claim for it as against the company. That, however, which has been done by the directors in excess of their powers is capable of ratification by the company, e.g., by special resolution or by resolution of a single meeting (see sup7-a, p. 33) ; but that wbich bas been done ultra vires the company cannot be ratified. See siqyra, p. 33. There may, however, in the latter case, be a remedy against the directors (see sttpra, p. 412), and the lender may have a right to stand in the place of creditors of the company or society to wliom the money lent has been validly paid. See supra, p. 412. Investigation of title. Investigation of Title. Whore temporary advances are made on the security of deposited title deeds or other documents, it is not usual to investigate the title, as in the case of a legal mortgage. Nevertheless, lenders' legal ad\'isors generally look through the documents and satisfy themselves that the title appears ^jr/m^jyoe/e good. Fortification of equitable eccuriticu. Fortification of Equitahle Securities. An equitable security may bo fortified in various ways, for example : — 1. Whore it is not in writing, by getting a memorandum of the tonns of the contract signed })y tlio mortgagor. 2. By obtaining possession of the title deeds or other documents relating to tlio property mortgaged, or by having an indorse- nient made thereon. INTRODUCTORY NOTES. 9i9 3. By giving notices to prior mortgagees (if any). 4. In case of any charge on clioses in action, by giving prompt notice of the charge to the trustees or debtors. See supra, p. 793. 5. By giving notice, in the case of shares or stock, to the company. See supra, p. 387. 6. By distringas proceedings in the case of shares and securities. See supra, ji. 387, and infra, p. 941. 7. In the case of bills and other securities to order, deposited without indorsement, by procuring the depositor to indorse the same. 8. In the case of a company, by getting the company to pass a special resolution referring to the charge, and declaring that no mortgage or charge in priority thereto shall be created. This in effect gives notice to all persons dealing with the company. See supra, pp. 37, 796. 9. In the case of patents, or land in a register county, by registering the security at the patent office or in the proper register. 10. B}' getting the mortgagor to convert the security into a legal mortgage, or by taking a transfer from some other mortgagee who has got the legal estate. 11. By issuing a writ and registering the action as a lis pendens pursuant to 2 & 3 Yict. c. 11, s. 7. A purchaser or mortgagee is treated as having notice of a duly registered lis pendens so far as regards the land, but not as regards personal property. Wigram v. BticUey, (1894) 3 Ch. 483. 12. By bringing an action for sale or foreclosure, and obtaining an injunction restraining the mortgagor from parting with the legal estate pendente lite. London and County Banking Co. v. Lewis, 21 0. D. 490. Such an injunction should be ol)tained where there is danger that the mortgagee will part with the legal title. Appropriation of Payments. In relation to banking and other seciu-ities, ivhere there is an account Appropriation current betiveen the parties {Cory Bros. Sf Co. v. Mecca Oivners, (1897) of pa^y^ients. A. C. 286, 295), it is necessary to bear in mind the rules as to appro- priation of pajnnents made by a debtor to his creditor, as follows : — (a) The debtor in making payment can direct its appropriation as he 'chooses, e.g., to a debt not guaranteed in preference to one that is guaranteed {Kirhy v. Diihe of Marlborough, 2 M. & S. \%; Re Sherry, 25 0. D. 692); to a debt bearing interest in preference to one that does not ( Chase v. Box, Freem. Eep. 261) ; to a new instead of to an old debt {Peter i V. A^iderson, 5 Taunt. 596) ; to a debt barred by statute in lieu of one not so barred {Mills v. Foivkes, 5 Bing. N. 0. 455); but as to appropriation by the creditor to statute-barred items, see Friend v. Young, (1897) 2 Ch. 421 ; to a secured debt 920 BANKING AND ADVANCE SECURITIES. [ChAP. XV. instead of to au unsecured debt. Peters v. Anderson^ 5 Taunt. 59C. (b) If the debtor makes no apjoropriation, express or implied, tlio creditor may at any time before action, or "by bringing an action, or by any other way that makes bis intention plain," appropriate as be thinks fit {Mills v. Foivkes, 5 Bing. N. C. 455 ; Coty Bros. ^- Co. v. Mecca Oivriers, supra, at p. 294) ; but the appropriation once made by him and communicated to the debtor is final. Ibid. Entries made by a man in books which he keeps for his own private purposes are not con- clusive on him until he has made a communication on the subject of those entries to the opposite party {e.g., by sending him a pass book or account showing the appropriation), and until that time he continues to have the option of altering the apj)ropriation. jSimso7i v. Jiigham, 2 B. & C. 65. Even the accounts rendered are only evidetice of the appropriation to the earlier items, which may be rebutted by evidence to the contrary. {He?iniker v. Wiyg, 4 Q. B. 792; City Discount Co. V. McLean, L. E. 9 C. P. 692 ; Cory Bros. ^- Co. v. 3Iecca Oioners, at p. 295.) How the money is to be api^Hed is governed by the intentio7i of the creditor, expressed, implied, or presumed. Cory^s case, supra. (c) When neither party makes an appropriation, the English law will appropriate the pajonent to the earlier, and not, as the Eoman law, to the most burdensome, debt. Clayton^ s case {Devaynes v. Nolle), 1 Mer. 585 ; Tudor's L. C. Merc. 3rd ed. 1, 25. In '' the case of a banking account ... all the sums paid in form one blended fund, the parts of which have no longer any distinct existence. Neither banker nor customer ever thinks of saying ' This draft is to be placed to the account of the 500Z. paid in on Monday, and this other to the account of the 500/. paid in^ou Tuesday.' There is a fund of 1,000/. to draw upon, and that is enough. In such a case, there is no room for any other appropriation than that which arises from the order in which the receij^ts and paj-ments take place, and are carried into the account. Presumably, it is the sum first paid in that is first drawn out. It is the first item on the debit side of the account that is discharged or reduced by the first item on the credit side. The appropriation is made by the very act of setting the two items against each other. Upon that principle all accounts current are settled, and particularly cash accounts." Per Sir AVilliam Grant, M. P., Clayton'' s case, 1 Tud. L. C. Merc. 15. Clai/tou's case. The rido in Clayton's case is very material, especially whore the bank holds a security from the customer or from a surety. For, if the debt secured is brought into the account, pa^-ments in v^iW pri7nd facie go in satisfaction thereof, and in ilie result the security will be dis- charged. Kintiairdy. Webster, 10 0. D. 139 ; Medewe's Trust, 26 Beav. INTEODUCTORY NOTES. , 921 588. But tlio rule in Clayton's case is based on tlie presumed intention of the parties, and accordingly it may bo excluded or modified by arrangement or by evidence of intention, express or implied. City Discount Co. V. McLean, L. R. 9 C. P. G92 ; Re Sherry, 25 C. D. 692 ; Cory Bros. c*i" Co. v. Mecca Oicncrs, snjira. The intention to appropvialo to a later rather than lo an earlier item may bo inferred from the course of business between the parties ( Taylor V. Kymer, 3 B. & Ad. 333), or from the fact that tlic earlier item -was secured and intended to be kept separate. City Discount Co. v. McLean, L. R. 9 C. P. 692. Unless some other apin'Ojiriation is made or arranged, pa^Tucnts by Order of the debtor will be taken to be appropriated as follows : — appropriation (a) To pa}Tnent of interest before princijial. Bower v. Marris, 1 tion not Cr. &Ph. 351, eliown. (b) The earlier items of one entire account before the later items. Clayton^ s case, 1 Mer. 585. (c) Money from realization of a particular security will be taken to be appropriated to the payment of the amount thereby secured {Pearl v. Deacon, 24 Beav. 186 ; 1 De G. & J. 461 ; Young v. English, 7 Beav. 10) ; but where there is one security for several debts, the creditor can appropriate. Ex parte Dickin, 20 Eq. 767. The rule in Clayton's case only applies to an entire unbroken account, and not to several accounts. Re Sherry, 25 C. D. 702 ; Cory^s case, supra. And the way to avoid the application of the rule is to break the account and open a new and distinct account. This, in the absence of contract with the surety to the contrary, may be done. Re Sherry, uhi siqna. And there is nothing to prevent the apjjropriation of subse- quent pa_)7uents to the new account, thus stopping the flow of pay- ments into the guaranteed account in relief of the surety and of the security. "Where a customer has several accoimts at a bank, the bank may at Combinino- any time combine them, so as to apply the credit balance on one to the ^'^^ °^ movQ SfCcouui^s satisfaction of the debit balance on the other. Garnett v. M'Kewan, L. R. 8 Ex. 10 ; European Bank, Agra Bank claim, 8 Ch. 41. But not where the bank knows that one of the accounts is a trust account. Eoxton v. Manchester, Sfc. Banking Co., 44 L. T. N. S. 406, 408 ; Coleman v. Bucks, Sfc. Bank, (1897) 2 Ch. 253. Sect. 82 of the Bills of Exchange Act, 1882, protects from liability Crossed a banker who in good faith and without negligence receives pajTuent cheques to "for a customer" of a cheque crossed generally or specially to himself, customer not although the customer has no title or a defective title thereto ; and the entitled, banker does not lose this protection because the customer's account is overdrawn at the time, even when the cheque is applied in reduction of the overdraft. Clarke v. London and County Bank, (1897) 1 Q. B. 552. 922 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Compound interest. Compound Interest. In order to justify a claim for compound interest a contract must be shown. Nor is a customer bound or affected by liis bankers charging interest upon interest, by making periodical rests, unless it be proved that he was aware that this was their custom. Moore v. Voughton^ Stark. 487. Where the account of a customer is kept at compound interest, and the customer dies or closes the account, the final balance only carries simple interest, unless otherwise agreed. CrossMIl v. Bower,' 32 Beav. 86 ; Williamson v. Williamso7i, 7 Ec|. 542, 545. Hence it seems wise to provide expressly for half-yearly rests. It appears, too, that the debt does not carry interest at all from the time of the death of the debtor, unless there is a special contract to that effect. But an agree- ment for payment may be inferred from the course of dealing, e.g., if it has been frequently charged and paid without objection in former and similar accoimts. Calton v. Brogg, 15 East, 223 ; Bruce y. Hunter, 3 Camp. 467 ; Eaton v. Bell, 5 B. & Al. 34. As to Notice before Calling In or Paying OflF. In the case of a mortgage with a regular proviso for redemption, the mortgagee, after default, is entitled to six months' notice before he is bound to accept payment, or to six months' interest in lieu of notice {Browne v. Lockhart, 10 Sim. 420) ; but this is not so in the case of an equitable mortgage by deposit {Fitzgerald''s Trustee v. Mellersh, (1892) 1 Ch. 385) ; or where the mortgagee takes proceedings to enforce 2Da;^Tnent {Re Alcock, 23 C. D. 372) ; or where the mortgagee has entered into j)ossession. Bovill v. Endle, (1896) 1 Ch. 648. And the ride as to not being entitled to notice applies whether the time fixed for pajTnent in the proviso for redemption has expired or not. Ih, Bankers' Lien. Bankers' lien. In framing bankers' securities, the fact must be remembered that " bankers most undoubtedly have a general lien on all securities deposited with them, as bankers, by a customer, unless there be an express contract, or circumstances that show an implied contract, inconsistent with the lien." Brandao v. Barnett, 12 CI. & Fin. 787; Lccse V. Martin, 17 Eq. 224 ; City Ba7ik case, 3 D. F. &- J. 629 ; London Chartered Bank v. White, 4 App. Cas. 422 (J. C). The implied lien is excluded where the securities are deposited for a sj)0cific purpose {Brandao v. Barnett, ubi supra), e.g., for safe custody {Leese v. Martin, uhi supra), or were left casually or by mistake. Lxicas V. JJorrien, 7 Taunt. 278. But even where the securities are deposited by way of specific security the lion will, it seems, attach for any balance due after the specific security is satisfied, unless the deposit was for a purpose inconsistent INTRODUCTORY NOTES. 923 with such lion. Young v. Bank of Bengal, 1 Dea. 622, G77 ; Jones v. Peppercorne, Johns. 4.30, 4.38 ; Re Exiropean Bank, 8 Ch. 4] ; London Chartered Bank of Australia v. White, 4 App. Cas. 41.3 ; Re Botces, 33 C. D. 586. In the case Lnst mentioned, it was hold that a deposit with a "banter of securities, accompanied hy a memorandum to the effect that tliey wore dej)osited to secure money advanced or to be advanced, not exceed- ing a specified amount, excluded ])y implication the bankers' general lien, i.e., disabled the banters from claiming a lien on the deeds in respect of any sum beyond the specified limit. Sometimes such a construction is precluded by the insertion of a special j^rovision in the security, e.g., that the security is not by implication or otherwise to exclude or cut down the general lien of the bank. The lien arises where the customer is in debt to the bank, even though the indebtedness is only made out 1)}^ aggregating several accounts of the customer. Re European Bank, 8 Ch. 44 ; Garnett v. ^PKcwan, L. E. 8 Ex. 80. But a banker has no lien upon a trust account (known to be such) for the debt due on an overdrawn private account. Ex parte Kingston, 6 Ch. 632. The lien extends to promissory notes, bills of exchange (indorsed in blank and jDayable to bearer), and exchequer bills {Brandao v. Barnett, nhi supra), coupons, bonds of foreign governments (Jones v. Pepper- corne, 28 L. J. Ch. 150), cheques (Scotf v. Franklin, 15 East, 428), and marginal receipt notes. Jeffreyes v. Agra, ^'c. Bank, 2 Eq. 674. The lien is not a mere right to retain possession ; it more resembles the right of a pawnee {Donald v. Suckling, L. E. 1 Q. B. 585), for the banker may realize the security, and may sue on it. Holland v. Bygrave, 6 M. & Gr. 653; Scott v. Franklin, 15 East, 428. And it seems that he may sell the security when the customer makes defaidt in pajinent after notice. Kemp v. Walbrook, 1 Ves. 278 ; Martin v. Reid, 11 C. B. N. S. 730 ; Piggott v. Cuhley, 15 C. B. N. S. 701. As regards bills of exchange, the c[uestion whether there is a lien or not is only material when the bills are the property of the customer. As to this, bills paid into a bank before maturity ViXQ prima facie the property of the customer. Giles v. Perkins, 9 East, 14. But if indorsed to the bank the property in the bill primd facie passes to the bank. Ex parte Schofield, 12 C. D. 337. It is for the banker to make out the intention with which a bill was paid in {Ex parte Sargeant, 1 Eoll. 153) ; and enti-ies in his books may afford evidence against him, though such entries, if not communicated to the customer, cannot be evidence in the banker's favour. Guarantees. In many cases temporary advances to a borrower are further secured Guarantees, by guarantees, sometimes given by one, and sometimes by several 924 BANKING AND ADVANCE SECURITIES. [ChAP. XV. persons. Occasionally, the guarantors give the lender security hy equitable mortgage, or otlierwise, for the due payment of the debt guaranteed. See Form 589, infra. Sect. 4 of the Statute of Frauds requires that an agreement to answer for the debt of another person, or some memorandum or note thereof, shall be in writing, signed by the person to be charged there- with, or some other person thereunto by him lawfully authorized. See supra, p. 914. But the consideration for the promise need not aj^pear in writing, or by necessary infei-ence from a written document. 19 & 20 Vict. c. 97, s. 3, As to the Scotch law, see Mercantile Law (Scotland) Amendment Act, 1856, s. 6, and Wallace v. Gibson, (1895) A. C. 354. Unless, however, the guarantee is under seal, valuable consideration must be shown. See supra, p. 911. In framing a guarantee by a firm it is necessary to bear in mind sect. 4 of 19 & 20 Vict. c. 97, which is as follows :— "No promise to answer for the debt, default or miscarriage of another made to a finn consisting of two or more persons, or to a single person trading under the name of a firm, and no promise to answer for the debt, default or miscarriage of a firm consisting of two or more persons, or of a single person trading under the name of a firm, shall be binding on the person making such promise in respect of am-thing done or omitted to be done after a change shall have taken place in any one or more of the persons constituting the fii'm, or in the person trading under the name of a firm, unless the intention of the parties that such promise shall continue to bo binding notwithstanding such change shall appear either by express stipidation or by necessary implication from the nature of the firm or otherwise." Hence, in the case of a fii-m, it is desirable to add the words, "the guarantee is to continue, notwithstanding any change in the constitution of the firm, whether by retirement or admission of partners." In the case of a guarantee for advances, the lender is not bound to make full disclosure of all material facts to the proposed surety. Davies v. London and Provincial Co., 8 C. D. 475. But any misrepre- sentation, or any concealment of some matorial part of the principal's coTitract, at any rate if it amounts to fraud, will avoid the guarantee. Pidcock V. Bishop, 3 B. & C. C05 ; Lee v. Jones, 17 C. B. N. S. 482. Thus the guarantee was avoided when the surety was informed, contrary to the fact, that the borrower was not at the time indebted to the lender. Stone v. Compton, 5 Bing. N. C. 142. But merely omitting, without fraud, to disclose matters, wiU not avoid tlio guarantee. North B. In. Co. v. Lloyd, 10 Ex. 528. A guarantee cannot, however, stand whore the lender stands by and allows a fraud to ])o practisod on tlio projiosod guarantor. Omaii v. IIu7nan, 4 11. L. C. 997. And where there was a continuing guarantee by A. for the liabilities INTRODUCTORY NOTES. 925 of B., and the fact that B. was already largely indebted was concealed, and the documents wore misleading and showed a studied effort to conceal the truth, it was held that the guarantee was void. Lee v. Jones, 17 C. B. N. S. 482. It is not necessary, unless questions are asked, for bankers who are about to be guaranteed to inform the guarantor how the account of the customer has been kept, or whether the debtor was in the habit of over-drawing, whether he was punctual in his dealings, &c. Hamilton V. Watson, 12 01. & F. 109, 119. In tliis case the guarantee was for a cash account, and the amount was applied in paying off an old debt to the bank, and it was held by the House of Lords that there Avas no obligation on the bank to disclose the information to tho proposed surety. Nor is the person guaranteed bound to inform the proposed guarantor that the guaranty is to be substituted for a previous one given by another person. North British, Sfc. Co. v. Lloyd, 10 Ex. 523. Pay- ment to a surety, before he has been called upon to pay as such, may be a fraudulent preference. Ex parte Read, Re Paine, (1897) 1 Q. B. 122. See further as to guarantees, infra, pp. 9G2 et seq. Building Societies. The following are some of the precautions to be observed in making advances to such societies : — 1. As to those certified under the Act of 1836 (6 & 7 Will. 4, c. 32), As to societies and not subsequently re-registered under the Building Societies Act, ^n' comprise Form 573. amongst others] the shares specified in the notice hereto annexed. " • Sworn by the deponent A. B. [state ivhcrc and before tvlwm, e.ff.'] at my office, No. , Now Square, Lincoln's Inn, in the County of Middlesex, befoi'e me R. D., A Commissioner to administer Oaths in the Supreme Court of Judicature in England. Note. — This affidavit is filed on behalf of A. B., whose address is \_here state address for service']. N.B. — The above note must be bidorsed on the affidavit. See Ordor 3S, r. 10. FOKM B. DISTEINQAS NOTICE TO BE ANNEXED TO AFFIDAVIT. {2'ifle as ill preceding Form.) To the Co., Limited. Take notice that the shares comjjrised in and now subject to the indenture of mortgage referred to in the affidavit to which this notice is annexed consist of the following particulars, that is to say, shares of 1. each in the capital of the Co., Limited [numbered to inclusive], standing in the name of . This notice is intended to stop the transfer of the said shares only, and not the receipt of dividends [or the receipt of dividends on the shares as well as the transfer of the shares]. (Signed) N.B. — This notice must be signed by the deponent to the affidavit to which it is annexed. FoEM C. NOTICE AS TO ADDEESS. {Title as in Form A.) To the Co., Limited. I beg to give you notice that my address, or the address of A. B., is now at , instead of at , as mentioned in the affidavit and notice filed by me [or on my behalf, or by or on behalf of the said A. B.] on the day of . (Signed) [Here state the name and address of the person (jivinc/ the notice, or of his solicitor.'] Order 46, r. 7, allows alteration of address. FOEM D, WITHDEAWAL NOTICE. {Title as in Form A.) To the Co., Limited. I beg to give you notice that I hereby withdraw the notice given by me, or on my behaH, on or about the day of , which notice restrained the transfer of shares of 1, each standing in the name of [Rere add the names of the persons in whose names the shares are standing, and if the notice applied to the divi- dends aha, and the dividends due and to accrue due thereon.] Dated this day of . (Signed) A. B. of . Witness to the signature of A. B. 944 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Form 574. Proposal for deposit in order to obtain over- draft. To THE Bank, Limtd. \^Conditions as in Form 572, or Form 573, as suitable.^ Gentlemen, We, the Coy, Limtd, beg to make to you the proposal following, that is to say : — 1 . That we shall deposit with you, by way of security, on the footing of the above general deposit conditions, the documents specified in the schedule hereto. 2. That you shall thereupon allow us an overdraft, not exceeding at any one time /. 3. That we shall forthwith, after your acceptance of this proposal, execute such powers of attorney as you may require for enabling you to transfer the mortgaged ppty to any purchaser or purchasers. 4. That we shall also furnish you with an approved guarantee for 1. Be so good as to notify to us your acceptance of this proposal. For the Coy, Limtd. , Secretary. Sometimes a transaction is impeded by the expense of stamping the securities ; maybe, it is only a loan for a short time, and that to expend 2s. Qd. per cent, on Btamj) duty, or even \s. per cent., is more than it is possible to afford. Moreover, it may not be practicable to bring the securities within the \s. per cent, duty, e.g., where it is desired that there should be a power of sale. In such cases it is not uncommon to deal with the matter by way of written proposal, as above, to be accepted orally by the bank. The proposalin such case requires no stamp, for the agreement is an oral one. See supra, p. 914. Nevertheless, the proposal is an efficient memorandum of the arrangement when orally accepted, and in effect invests the bank with the desired securities and powers. Where a security by way of deposit is given by deed, the following clause can be inserted in the letter : — Form 575. Power of attorney to execute mortgage. " And we hereby irrevocably appoint you to be our attorneys to convey the legal estate in the mortgaged premises or any part thereof, to any purchaser or purchasers thereof, upon any sale under the statu- tory power, and to execute and do all deeds, instruments, and. things requisite for that purpose ; and sect. 20 of the Conveyancing Act, 1881, is not to apply." Form 576. Agreement for deposit of seciurities to bearer. The Coy, Limtd. General Deposit Clauses. beaker securities. 1 . Where any securities to bearer are deposited with the bank by way of security they are (unless otherwise arranged) to stand as a continuing security, &c. [Clause 1 of Form 572.] 2. All moneys, &c. [ClauKO 2 of Form 572.] FORMS. 945 3. If at any time the value, &c. [Clause 3 of Form 573.] Form 576. 4. Tlie bank is to have a power to soil, &c. [Clause 4 of Form 573.] 5. Any notice, &c. [Clause 1 of Form 572.] 6. In the above clauses words importing the plural include the singular, and vice versa, and the expression " securities" includes any shares or stock warrants to bearer, debentures to bearer, and any bonds, certificates, and other instruments passing title by delivery, whether negotiable or not. [^Add form of letter as in Form 573, icith schedide (f securities. 1 As to deposit by way of security of bonrer securities, see supra, p. 910. The Bank, Limtd. Form 576a. All stock and shares comprised in any certificates and all securities, General de- 1 . n 1 -n p 1 • posit security, marketable or otherwise, as well as bills of exchange, promissory notes, bills of lading, dock warrants, delivery orders, and cash now already, or which may at any time hereafter be, lodged with or held by you on account, whether deposited or paid to you for safe custody, collec- tion, or other specific purpose, or generally, and whether they or any of them shall be transferred to you or your nominees or not shall be and remain a continuing security for the due payment and satisfaction of all liabilities whatsoever for the time being and from time to time, whether matured or not, and whether incurred by alone or jointly with others, and whether as ppal or surety, including liabilities in respect of advances, whether on account current or otherwise, and in respect of bills, notes, and other negotiable or non-negotiable instruments drawn, accepted, indorsed, signed, or guaranteed by , which you may have discounted, taken up, made advances on, or become interested in, together with interest, commission, banking charges, law and other costs, charges, and expenses. And if make default in payment to you of any moneys secured hb,y for days after payment in writing, you shall have power to sell the premises hby charged in the terms of paragraph 1 of sect. 1 9 of the Conveyancing and Law of Property Act, 1881, and sects. 21 and 22 of the sd Act shall apply as if the power of sale hby conferred were conferred by the sd Act, and a certificate by any one of your managers that such power of sale has arisen shall be conclusive in favour of any purchaser. undertake from time to time to execute and sign all transfers, powers of attorney, and other documents which you may require for perfecting your title, and for vesting or enabling you to vest the ppty in any purchaser or nominee. In the event of the premises being considered by you at any time an insufficient security, undertake on your request to furnish such further securities as you may require. p. 3 p 946 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Form 576a. Any notice by way of request or otherwise may be served by you on ~ me in the manner provided in sect. 67 of the sd Act. The above form is sometimes used, but the Revenue authorities (see p. 93G} object to the power of sale. The form can readily be converted into a proposal. See Form 574. Form 577. Agreement for deposit of goods war- rants. The Bank, Limtd. General Deposit Clauses. GOODS WARRANTS. 1 . Where warrants for goods are deposited with the bank by way of security the same are (unless otherwise arranged) to stand, &c. [Clause 1 of Form 572.] 2. All moneys, &c. [Clause 2 of Form 572.] 3. If at any time the value, &c. [Clause 3 of Form 573.] 4. The bank is to have power to sell the goods in the terms, &c. [Clause 4 of Form 572.] 5. The bank is to be at liberty to sample all or any of the goods, and to insure the goods against fire, loss and damage, and to debit the depositors with the premiums, or to repay the same out of the proceeds of the goods. 6. Notice [Clause 4 of Form 572]. 7. Interpretation [Clause 15 of Form 572]. To the above named bank : — Gentlemen, I have deposited with you, by way of security, the warrants specified in the schedule hereto, and upon the footing of the above general deposit clauses. The present market value of the goods is as stated below. Yours, &c., Schedule. Form 578. Agreement for deposit of BGCuritios to Bocure loan of Bpecified sum. To THE Coy, Limtd. In conson of the sum of 1, this day lent by you to us, The Corporation, Limtd, we have deposited wdth you the securities specified in the schedule hto. The following are the terms on which the loan and deposit are made : — 1. We are forthwith to pay to you a commission of 1, as a premium for the loan. 2. Tlio loan is to be repaid by \is on the day of . 3. The loan is to carry iutoi-est at the rate of 7 p.c.p.a., but if the loan is repaid on the above date, witli interest at the rate of 5 p.c.p.a., you arc to accept the lower rate of interest in lieu of the first-montd rate. FORMS. 947 4. If the loan is not repaid on the sd day of , it ^hall Form 578. theneefortli carry interest at the rate of 10 p.c.p.a., payable quarterly on the usual quarter days. Such a provisiou for raising the rate of interest after the time passed for repay- ment of the loan is valid. It is not a penalty against which ciiuity will grant relief. Herbert v. Salishury, <^-c. Co., 2 Eq. 221. As to the meaning of "punctually" with reference to payments under mortgages, see Leeds and llanley Theatre of Varietien v. Broadbcnt, (1898) I Ch. 343; reversing Kekewich, J. 5. The deposited securities are to bo held by you as a security for the repayment of the loan and the interest thereon. 6. If at any time the value of the securities for the time being deposited with you on the footing of this memdm. taken at the lowest market price of the day as certified by a stockbroker employed by you, shall not exceed the amount due to you on the security thereof by a margin of at least p.c, you are to be at liberty to notify to us the fact, and we will, within twenty-four hours afterwards, deposit with you additional securities to your satisfaction to make up the required margin, and in default you may, by a further notice to us, call in the loan, and the same shall thereupon immediately become payable. 7. On our failing to repay the loan with interest on its becoming repayable, you are to have power to sell the deposited securities in the terms of paragraph 1 of section 19 of the Conveyancing and Law of Property Act, 1881, and sections 21 and 22 of the sd Act are to be applicable as if the power of sale were conferred by the sd Act, but such power is not to be exercised unless and until depositors have made default in the payment of money hby secured or in the per- formance of their obligations to the bank. 8. Upon any sale, &c. [Clause 5 of Form 573]. In witness whereof we have caused this memdm to be signed by our managing director on our behalf this day of . AN AGREEMT, &c.— The Coy, Limtd (hnfter called "the Form 579. coy"), of the one part, and Bank, Limtd (hnfter called "the ^^o^her! bank "), of the other part. Whereas, the coy is the owner, free from incumbrances, of the several stocks, shares, and securities, the short particulars of which are set forth in the schedule hto, and which stocks, shares, and securities are hnfter referred to as " the scheduled investments." And whereas, the coy has applied to the bank to make an advance to the coy of the sum of 12,000^., which the bank has consented to do upon the terms hnfter set forth. 3p2 948 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Form 579. Now thekefore it is agreed as follows : — 1 . The bank shall, on the signature hereof, advance to the coy the sum of 12,000/. 2. The coy shall, on the day of , repay to the bank the sd sum of 12,000/. 3. The sd sum of 12,000/., or so much thereof as shall for the time being remain due, shall carry interest at the rate of 4 p.c.p.a., or at the Bank of England rate if more than 4 p.c, up to the sd day of from the date hereof, and such interest is to be pd on the sd of . 4. The coy is to be at liberty to pay off the whole or any part of the sd sum of 12,000/., at any time or times before the sd day of , without being required to give any previous notice of its intention so to do, and as and whenever any such payment is made the bank shall, subject as hnfter provided, re-transfer to the coy a proportionate part of each of the scheduled investments. 5. If the coy shall, on the sd day of , make default in payment of the sd sum of 12,000/., or so much thereof as shall then be due, the coy shall pay interest on such sum, or so much thereof as shall then be due, at the rate of 4 p.c.p.a. from that day, or at the Bank of England rate if more than 4 p.c, until full payment of the sd sum of 12,000/. has been made. 6. The coy shall forthwith transfer to the bank the scheduled investments, and shall, save as regards those (if any) transferable by delivery, forthwith procure the bank to be registered as the holders thereof, and the bank shall hold the scheduled investments as security for the payment of all moneys payable to the bank hereunder, and if the coy do not duly comply with this clause the bank may at any time call in the sd sum of 12,000/., and the same shall thereupon become payable. 7. If the sd sum of 12,000/. is not fully pd off on or before the day of , the statutory power of sale hnfter mentd shall immediately become exercisable by the bank as regards the scheduled investments, or such part thereof as shall not previously have been transferred under Clause 4 hereof. 8. All moneys received by the bank in respect of any sale or enforcement or otherwise under this security, whether the same shall have been received before or after the sd day of , shall be applied — first, in payment of all costs and expenses of and incident to any such sale or enfor(!ement, or getting in of such moneys ; and, secondly, in or towards satisfaction of the principal moneys and interest owing hereunder, and the surplus (if any) shall be pd to the coy. 9. If, before the sd sum of 12, ()()()/. is fully pd, the debentures of The Coy, Limtd, referred to in the schedule hto, shall become enforceable by reason of any dfsfuult or otherwise on tlie part of such coy, the coy shall forthwith, at the request of the bank, take such FORMS. ^49 steps in rep^ard to the enforcement thereof for the benefit of the hank Form 579. as the hank may think expedient and roqnire. 10. All dividends and interest from time to time received by the bank in respect of the scheduled investments shall be dealt Nvith in accordance with Clause 8 hereof. 11. The statutory power of sale conferred by the Conveyancing and Law of Property Act, 1881, is to be applicable hto, but section 20 of the sd Act is not to apply hto. 12. When and so soon as all principal and other moneys and inte- rest owing on the security hereof shall have been satisfied, the bank shall re-transfer to the coy, or, as it may direct, the scheduled invest- ments, or such part thereof as shall not previously have been sold or re-transferred. As WIT^'ESS, &c. The Schedule above referred to. AN AGREEMT made, &c., between The Coy, Limtd (hnfter Form 580. called "the coy") of the one part, and The Bank, Limtd Advances on (hnfter called " the bank ") of the other part. debentures payable on Whereby it is agreed as follows : — demand. 1. The bank is forthwith to make to the coy a loan of 10,000^., and as security for the payment thereof, with interest, the coy is to issue to the bank ten debentures of the coy each for the sum of 1,000/., framed in accordance with the form which has already been approved by the parties hereto. l^See Form in note heloiv.'] 2. If the coy duly pays the interest on the sd debentures on the days thereby fixed for the payment of the same, or within fourteen days after each of the sd days resply, and duly pays the principal moneys secured by such of the sd debentures as shall for the time being be payable, or within fourteen days after the same shall become payable, then the bank shall not demand payment of the sd debentures otherwise than as follows, that is to say : — One of the sd debentures may be called in at any time after tlie day of . Two of the sd debentures may be called in at any time after the day of , &c., &c. 3. The provisions of the last preceding clause shall cease to operate if an order shall be made, or an effective resolution shall be passed, for the winding up of the co}'. 4. As and when each debentui-e is pd off the bank shall, on the request of the coy, deliver up the same to the coy to be cancelled. As WITNESS, &C. U')0 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Form 580. The debenture referred to will be in the terms following : — The Coy, Limtd. Nos. Issue of ten debentures of £1,000 each, all ranking ^xo-i passu. Debenture. £1,000. 1. The Coy, Limtd (hnfter called "the coy"), will on demand pay to the Bank, Limtd (hnfter called "the bank "), the sum of £1,000. 2. The coy will in the meantime, until such payment, pay to the bank interest thereon at the rate of p.c.p.a. by equal half-yearly payments on every day of and day of in each such year, the first of such half-yearly payments to be made on the day of next. 3. The coy hby charges with such payments its undertaking and all its ppty whatsoever and wheresoever, both present and future, including its uncalled capital for the time being. 4. This debenture is one of a series of ten debentures each for securing the prin- cipal sum of 1,000^. The debentures of the sd series are all to rank pari pansu in point of charge on the ppty hby charged without any pi'eference or priority one over another, and such charge as regards the coy's land, goodwill, and uncalled capital is to be a specific charge, and as regards the coy's other assets is to be a floating security, but so that the coy is not to be at liberty to create any mortgage or charge in priority to the sd debentures. 5. The coy may at any time give notice in writing to the bank of its intention to pay off this debenture, and ujDon the ex2:)iration of one calendar month from such notice being given, the principal moneys hby secured shall become payable. 6. None of the now uncalled capital of the coy shall, whilst this debenture is out- standing, be called up or received in advance of calls without the consent in writing of the bank, and if the same is called up with or without such consent, the amoimt shall le made payable to the bank and to no other person or persons, and shall be applicable in or towards payment of the moneys owing from the coy to the bank. 7. The principal moneys hby secured shall immediately become payable if an order is made, or an efEective resolution is passed for the winding up of the coy. 8. At any time after the principal moneys hby secured become payable the bank may, by instrument in writing, appoint any person or persons, whether an officer of the coy or not, to be a receiver or receivers of the premises hby charged, and a receiver so appointed shall have power, &c. \_As in Form at p. 825.] 9. The debentures of this series are issued to the bank pursuant to an agreemt dated the day of , and made between the coy and the bank, and subject to the provisions thereof. Given, &c. Form 581. AN AGEEEMT made the day of 1891, between the Mortgage of uncalled capital to bccuro a sura advanced by bank. Coy, Limtd (hnfter called "the coy") of the one part, and the Cor[)oration, Limtd (hnfter called " the hank") of the other part. AViiKRKAS the coy was incorporated in 1890 with a nominal capital of 100,000/., divided into 10,000 shares of 10/. each. And whereas 9,000 only of the sd shares have been issued, and the sum of Al. per share has been pd up thereon, and the sd shares are numbered to inclusive and are still outstanding. And wiFEitEAs the coy has applied to the bank for an advance of 2.'),00{)/., which the bank have agreed to make on the terms hnfter oxprossod. FOJi.MS. 951 Now THESE PKKSENTS WITNESS AND DEOLAKE aS followS : — Form 581. 1. The bank shall, immediately after the execution hereof, advance " to the coy the sura of 25, ()()()/. 2. The coy shall repay the sd sum of 25,000/. to the Lank on the day of . 3. The coy shall forthwith pay to tlio l)ank tlie sum of 1., being interest on the sd sum of 25,000/. at the rate of p.c.p.a., as from the date hereof up to the sd day of , and also a commission at the rate of 2 p.c. on the sd sum of 25,000/., making together the sum of /. 4. If the sd sum of 25,000/. is not pd on or before the day of , such sum, or so much thereof as shall for the time being remain unpaid, shall carry interest at the rate of p.c.p.a. until the actual payment thereof. 5. The coy hby charges with the payment of the sd principal moneys and interest the whole of the capital, namely, 6/. per share now uncalled upon the sd 9,000 shares in the coy's capital which have been issued. 6. The sd capital shall not, during the continuance of this security, be called up or received in advance of calls without the consent in writing of the bank first had and obtained. 7. If during the continuance of this security the sd capital hby charged, or any part thereof, shall "with the consent of the bank or otherwise be called up or in any way got in, the amount shall be pd over to the bank as security for the advance, with full power to the bank to apply a competent part thereof in or towards satisfaction of the advance and the interest thereon (if any) unpaid. 8. The coy shall not at any time during the continuance of this security create any charge on the sd capital hby charged without first giving notice to the person or persons in whose favour such charge is created of the existence of this security. 9. During the continuance of this security the coy shall forthwith, after the presentation of any transfer of ordinary shares in the capital of the coy, furnish the bank with full particulars thereof, and no person shall be registered until forty-eight hours after such notice shall have been given, and no transfer shall be registered otherwise than in favour of a solvent transferee. 10. [General charge on undertaking of coy. See Form 582.] 11. In each of the events following, namely: — (1) If a petition shall be presented, or an effective resolution shall be passed, or an order be made for the winding up of the coy; or (2) If judgment shall be obtained against the coy for upwards of /. and shall remain unsatisfied for days ; or (3) If a distress or execution shall be levied or enforced against any of the ppty of the coy ; or (4) If the coy shall make default in the payment of any moneys 952 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Form 581. due and owing hereunder by it at the time hinbefore provided for payment thereof ; or ( o) If the coy shall commit any breach of any of the provisions herein contained, and that whether the bank shall or shall not have waived any prior breach ; the bank may, by notice in writing to the coy, call in the principal moneys secured, and such principal moneys shall become payable immediately on the service of such notice. 12. If the i^rincipal moneys hby secured shall not be duly pd as and when the same shall be payable, the coy shall, upon the request of the bank, procure the sd capital hby charged to be called uj) by such instalments and payable at such times as the bank shall in writing request. 13. The bank may, at any time after the principal moneys hby secured shall have become payable, appoint a receiver of the capital hby charged, and of all calls made in respect thereof, and also of the undertaking and ppty of the coy hby charged, and sects. 19 and 20 of the Conveyancing and Law of Property Act, 1881, shall be modified accordingly. 14. The coy hby covenants with the bank that the sd capital hby charged has not been called up or incumbered in any way, and tliat the contracts under which the sd shares were allotted are not in any way void or voidable. [14a. The coy shall forthwith give notice in writing to each of its shareholders of this charge on uncalled capital. See p. 796.] 15. The coy shall procure each of its directors for the time being to covenant with the bank that whilst he is a director of the coy he will not be party to anj-thing in breach of the obligations hby imposed on the coy, and that he will give to the bank immediate notice of any such breach, and also of any threat to commit any such breach, which shall come to his knowledge, and such covenant shall be executed, as regards the j)resent directors, immediately after the execution hereof, and as regards each future director, immediately after his appointment. See p. 796. Ix WITNESS, &c. Form 582. Security for loan on do- bentureH and f-h(ir;ro on uiidortakinfj. Witli'lrawal of debontures up to 80 pcT cent. f)f moticyH for tiniri Ijoiu;^ paid off. AN AGEEEMT, made between L. & A., Limtd (hnfter called "the coy"), of the one part, and The Banking Coy, Limtd (hnfter called " the bank ") of the other part. WiiEUiCAS tlio coy has issued, or are about to issue, debentures to the total nominal amount of 100,000/. in 1,000 debentures of 100/. ea<'h, secured by a trust deed, dated, &c., and made between, &c. : And WHKUKAS the sd debentures are all to be framed in accordance with the form, a print wliereof is annexed hto : And whereas the coy has nqucsted the bank to advance to it the sum of 30,000/. upon the security of 300 (l(;bonturcs of 100/. cacli, numbered to inclu- FORMS. 953 Bive, part of the sd issue of 100,000^. debentures, whicTi 300 deben- Form 582. turcs are linftor referred to as "the security debentures " : And wincREAs the bank has agreed to make such advance on the terms hnfter appearing. Now THESE PKESENTS WIXI^ESS, AND IT IS UEEEBY AGREED ES folloWS : — 1. In conson of the sum of 30,000/. now advanced and pd by the bank to the coy, the receipt of which is hby acknowledged, the coy shall pay to the bank on the day of , or on such earlier day as the same may become payable in accordance with the provisions hnfter contained, the principal sum of 30,000/., and in the meantime until payment of such principal moneys, shall pay to the corporation interest upon the sd sum of 30,000/., or such part thereof as shall for the time being remain unpaid, at the rate of 6/. p.c.p.a. as from the day of , by half-yearly payments on, &c., in each year. 2. The coy shall on the execution hereof pay to tlie bank the sum of -/. by way of bonus or commission for the sd advance. 3. If the coy shall on the execution hereof pay the sum mentd in the last preceding clause, and shall also pay interest upon the sd principal sum of 30,000/., or upon so much thereof as shall for the time being remain unpaid, at the rate of /. p.c.p.a., upon or before, or within ten days after, each of the half-yearly days afsd, up to and including the sd day of , in accordance with Clause 1 hereof, and shall duly observe all the other provisions of this agreemt, then the bank will accept interest at that rate in lieu of interest at the rate of /. p.c.p.a. for each half-year in respect of which the same shall be so pd ; but no claim for reduction of interest under this provision shall be made in respect of any liaK-yearly payment not made within the time afsd, and no claim for reduction of interest payable after the sd day of , shall in any case be made. 4. The coy shall forthwith issue to and into the name of the bank the security debentures, and the same shall constitute a collateral security for the principal moneys and interest hby secured, and shall stand charged accordingly. 5. So long as the coy shall didy pay interest on the sd sum of 30,000/., or so much thereof as shall for the time being remain unpaid, at the rate of and payable in accordance with the provisions hereof, the bank will accept each half-year's interest so pd in satisfaction of the corresponding half-year's interest on the security debentures. 6. The coy may at any time before the day of give notice in writing to the bank of its intention to repay the whole or any part of the sd sum of 30,000/., such part not being less at any one time than 500/., and being a multiple of 100/., and at the expiration of one calendar month from such notice being given, the principal moneys therein specified shall be payable, and the coy shall forthwith pay the same accordingly, and upon payment thereof being made in accord- ance with this clause the bank shall allow or pay to the coy a rebate calculated at the rate of 1 p.c.p.a. on the amount then repaid for the 954 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Form 582. time remaining unexpired, between the date of such redemption and the sd day of . 7. Ui^on any repayment being made by the coy to the bank with interest in pursuance of the last preceding clause hereof, the bank shall transfer or give up to the coy security debentures equal in face or nominal value to 80 p.c. (or as near thereto as the debentures will permit) of the amount of the principal moneys repaid. 8. If the coy shall commit any breach of any of the obligations imposed on it by these presents or by the sd trust deed or the debentures secured thereby, or if the sd debentures or any of them shall become payable, or if the security constituted by the sd trust deed shall become enforceable, or if the coy shall stop payment or cease to carry on business, or if any of the events specified in Clause — of the said trust deed shall happen, then, and in any and every such case, the bank may, by twenty-four hours' notice in writing to the coy, call in the principal moneys hby secured, and thereupon the whole of the principal moneys hby secured and then remaining unpaid shall immediately become payable without any right to rebate on the part of the coy, and the bank shall forthwith pay the same accord- ingly. 9. As further security, and without prejudice to the charge created by the sd trust deed and debentures, the coy hby charges its under- taking and all its assets present and future with the payment of the principal moneys, and interest hby secured, and all costs, charges, and expenses incident thereto, and it is hby expressly declared that the power to appoint a receiver conferred on the bank as mortgagees by the Conveyancing and Law of Property Act, 1881, shall extend to the appointment of a receiver of the sd undertaking and assets and not merely the income thereof, and that such receiver may carry on or concur in carrying on the business of the coy, and sell or concur in selling any of the assets or ppty thereof, but all moneys received by such receiver shall, after providing for the matters specified in the first three paragrajAs of Clause 8 of section 24 of the sd Act, be pd over to the bank on account of the principal moneys and interest hby secured. 10. Sections 17 and 20 of the sd Act shall not apply hto. In witness, &c. Form 583. Security of hank on bilLs and by deposit of dobonturcH in blank. — Coy, Limtd (hnfter Bank, Limtd (hnfter THIS INDENTURE, made, &c., between the called " the coy "), of the one part, and The - called " the bank "), of the other part. Whereas the coy is indebted to the bank in the sum of /. And W1IKKEA3 it luiH been arranged that 1 ho sd sum of /?. shall bo repaid by instalments at various dates, and tliat such instalments elmll bo secured by bills of exchange to bo drawn by the bank upon, iOKMS. 955 and accepted by, tlie coy, and tlie particulars of sucli bills are set forth Form 583. iu tlie schedule hto. And "WHEREAS it is one of the terms of the sd arrangement that such bills shall be further secured as hnftor provided. Now THESE piiESENTs WITNESS, aud it is hby agreed and declared, as follows : — 1. The coy shall forthwith accept the sd bills and hand them over to the bank. 2. The payment of the sd bills to the holders for the time being thereof shall be secured by the issue to the bank as trees of 1. debentures of the coy, part of the series of debentures secured or to be secured b}' an indenture, dated &c., and made, &c. 3. With a view to such issue, /. debentures of the coy, framed in accordance with the form sot forth in the schedule to the sd indenture, with blanks left nevertheless in the first paragraph of each of the sd debentures for the name and address of the payee, shall forthwith be sealed with the common seal of the coy, and handed over to the bank upon the footing that the bank is to be at liberty at any time to fill up the sd blanks as hnfter provided, and that in the mean- time the bank is to stand in the same position in regard to security as if the name of the bank were inserted in each and every of the sd debentures as the name of the payee thereof. 4. The coy hby empowers the bank, as and when the bank shall think fit, to fill in the name of the bank as the payee of the sd deben- tures, and to deliver the debentures so from time to time completed as the deed of the coy, and the coy hby irrevocably appoints the bank to be the attorney of the coy for the purposes afsd. 5. The sd debentures when issued, aud the bank's title in the mean- time to stand in the position afsd as regards security, shall be held in trust to secure the payment to the holders for the time being, and from time to time, of the bills of exchange afsd of the principal moneys and interest payable in respect of such bills. Re Queensland, #r. Co., (1894) 3 Ch. 181 ; Peggc v. Keath, ^-c. Co., (1897) 1 Ch. 183. 6. The coy shall not, whilst any of the sd bills are outstanding, issue, or attempt to issue, any debentures entld to the benefit of the sd trust deed other than the debentures for 1, afsd. 7. In each and every of the events following the security hby con- stituted shall immediately become enforceable.; that is to say : — (1) If the coy makes default in payment of any such bill as afsd at maturity. (2) If an order shall be made, or an effectual resolution shall be passed, for the winding up of the coy. (8) If any of the sd bills shall be dishonoured. (4) If the bank shall be of opinion that the coy is iu tinaucial difficulties. 956 BANKING AND ADVANCE SECURITIES. [ClIAP. XV Form 583. (5) If the coy shall commit any breach of any of the provisions of this agreemt. (6) If the coy shall not procure every director of the coy to deliver to the bank a covenant with the bank that he will not, whilst he is a director, be a party to anything in breach of clause 6 hereof, such covenant to be delivered, as regards each of the present directors of the coy, immediately after the execution hereof, and as regards each future director, immediately after his appointment to be a director. 8. If and when the security hby constituted becomes enforceable, the bank may sell the sd debentures, or any of them, or the bank may bring any action or take any proceedings to enforce the same or any of the rights hby given to the coy, and generally may take such steps with a view to enforcing and realising the security as the bank shall think expedient, and with a view thereto the bank may fill up the blanks in the sd debentures as afsd. 9. All moneys arising under the last preceding clause shall be applicable by the bank, first, in paying all expenses incurred by the bank as tree hereof, and, secondly, in paying off the sd bills of exchange pari passu, and so that, if any of the sd bills shall not then have matured, a sufficient portion of such surplus proceeds shall be set apart to meet such bills. 10. The coy may at any time pay off any of the sd bills at or before or after the time fixed for payment thereof, and upon production thereof to the bank duly cancelled, the bank shall give up to the coy a due proportion of the debentures afsd. 1 1 . The issue of the sd debentures is not in any way to operate as a merger of the debt owing by the coy on the sd bills of exchange resply. Ix WITNESS, &c. The Schedule above referred to. \_Partictilars of Bills. ~\ Form 584. Specific mortgage of bofik debts. Charge. AN AGEEE:MT made the Coy, Linitd (hnftor called Bank of - day of 1897, between The the coy"), of the one part, and The Limtd (hnfter called "the bank") of the other part. Wheueas the coy is indebted to the bank in considerable sums on its current account with tlio liank. And whereas the bank has required the coy to give such security in respect of the sd current account and otherwise as is hnfter expressed. Now it is iihy agreed as follows: — 1. Th(! coy hby charges all its present and future book debts with the payment Id iJic Itaiik of all moneys for the time being owing to the bank by tlio coy on the sd current account or otherwise, whether the liability in respect of such moneys shall have been incurred by the FORMS. 957 coy before or after the date hereof, and wliethor matured or not, and Form 584. whether incurred by the coy alone or jointly with others, &c., as in Form 572, Clause 7. 2. The sd charge shall be a specific charge, and not a floating Specific charge. 3. The interest mentd in Clause 1 hereof shall bo at the rate of Interest. p.c.p.a. with half-yearly rests. 4. The coy shall as far as practicable cause all moneys from time to Collection of time payable to it in respect of the premises hby charged to be paid ^^^^ debts, to the bank, and if any moneys or cheques or bills or notes shall from time to time be received by the coy in resj)ect of the premises, the coy shall hold the same in trust for the bank, and shall pay the same into the bank forthwith. 5. The coy shall from time to time, and at all times during the Information, continuance of this security, at the request of the bank, furnish to the bank all such particulars of the book debts hby charged as the bank shall require. 6. The bank itself may at any time in the name and on behalf of Legal the coy assign to the bank absolutely all or any of the premises hby assignment, charged, and the coy hby appoints the bank its attorney for such purpose. 7. All moneys received by the bank under clause 4 hereof, or under Application any assignment afsd, shall so far as requisite be applied in or °* money, towards satisfaction of the moneys for the time being due and owing on the security hereof. 8. The statutory power of sale shall be exerciseable at any time Sale, after the coy shall for seven days after demand have made default in payment of any money for the time being owing on the security hereof. 9. A certificate in writing of the manager of the bank to the efPect Certificates, that such default has been made shall be conclusive, and sects. 19 and 20 of the Conveyancing and Law of Property Act, 1881, shall be regarded as modified accordingly. 10. At any time after the coy shall have made such default as last Receiver, afsd, the bank may, by writing, appoint any person or persons to be a recr or recrs of the sd premises or any pt or pts thof, and such recr or recrs shall have power to call in, collect, or enforce payment of all moneys for the time due to the coy or the bank in respect of the sd premises ; and all moneys received by him or them shall, after pro- viding for the matters specified in the first three paragraphs of Clause 8 of sect. 24 of the Conveyancing and Law of Property Act, 1881, be applied as far as requisite in or towards satisfaction of all moneys for the time being due, and owing on the security hereof, and the fore- going pi'ovisions in this clause shall take effect as and by way of variation of the provisions of sects. 19 and 24 of the sd Act, which provisions shall be regarded as incorporated herein. As WITNESS, &c. 958 BANKING AND ADVANCE SECURITIES. [ClIAP. XV. Form 585. AN AGEEEMT made tlae day of , between the Coy, Mortgage of securities for present and future advances. Present advance. Further advances. Interest. Repayment. Interest after date for payment. Security. Further securities. Approval. Legal mortgage. Limtd (hnfter called "the coy"), of the one part, and the Bank, Limtd (hnfter called "the hank"), of the other part, whereby it is agreed as follows : — 1. The bank is forthwith to advance to the coy on the footing of this agreemt the sum of 100,000(?. 2. The bank is to make further advances from time to time on the request of the coy on the footing of this agreemt, but so that the total amount of the ppal moneys to be hby secured shall not exceed at any one time 150,000^. 3. The advances afsd are to carry interest as follows, namely — As to the sd 100,000/. at the rate of 3^ p.c.p.a., up to the day of next, or at such higher rate as shall for the time being and from time to time be the minimum rate of the Bank of England, and as to the balance at the minimum rate for the time being and from time to time of the Bank of England, but not less than 3 p.c.p.a. 4. The advances afsd are to be repaid by the coy to the bank on the 30th June, 1899, unless on or before the 31st March, 1899, an arrange- ment at the request of the coy is made for extending the time for payment. 5. As from the time when the said advances become repayable until the actual payment thof, the same shall carry interest at the rate of 10 p.c.p.a., unless a lower rate shall be agreed on. 6. As security for the repayment of the sd advances and interest thereon, the coy is forthwith to execute in favour of the bank a mort- gage of the freehold ground-rents specified in the schedule hto, such mortgage to be in the terms of the draft already approved by the parties hto. 7. As further security for the repayment of the sd advances and interest, the coy will from time to time vest in the bank further securities of a value not less than 30 p.c. beyond the advances in excess of 100,000/. from time to time owing on the security hereof. 8. The further securities afsd shall in every case be subject to the approval of the bank, and shall not be regarded as further securities for the jrarposes of this agreemt until the same have been so approved, and the value of such further securities must be made out to the satisfaction of the bank, and shall not be deemed to have been so made out until the bank shall have certified that it is so satisfied, and such further seeuritios shall be vested in the bank in such manner as the bank sliall dirc(;t, and whether by deposit of deeds or by legal mortgage, or by equitable mortgage or otherwise, and in every case the short particulars of the further Rccuritics shall be entered in the annex(Ml schedule. 9. When any such further security is vested in the bank by deposit of deeds, the coy sliall at any time or times on the request of the bank execute un effectual mortgage of the premises comprised in the deposit FORMS. 959 deeds, sucli mortgage to bo de(;lared hy the hank's solors at the Form, 585. exjjense of the coy, and to bo in such form and to contain such pro- ' ' visions, including full power of sale, as the said solors in the bank's interest may deem expedient. 10. If at anytime the value of the mortgaged premises according Value to be to a valuation to be made by some expert approved by the bank shall ^^^* "P" not exceed the amount of the coy's liabilities in respect of the advances made on the footing thereof by a margin of at least 30 p.c, the bank is to be at liberty to notify the fact to the coy, and the coy is within days afterwards to vest in the bank further securities approved by the bank to make up the required margin, or the alternative is to pay to the bank so much cash as shall restore the required margin. 1 1 . The bank is to have a power to sell the mortgaged premises in Sale, the terms of para. 1 of s. 19 of the Conveyancing and Law of Property Act, 1881, and ss. 21 and 22 of the said Act are to be applicable as if the power of sale were conferred by the said Act ; but such power is not to be exercised unless and until the coy shall have made default for more than seven days in the payment of some money hby secured or in the performance of some obligation hby imposed on the coy. 12. Upon any sale under the power afsd, a statutory declaration Declaration made by a director, manager, or cashier of the bank that the coy has evidence of made default as afsd, and that the power of sale is exerciseable, shall be conclusive evidence in favour of any purchaser or other person deriving title to the premises under such sale. 13. The coy is from time to time to execute and sign all transfers, Transfers, powers of attorney, and other documents which the bank may require ^°. ? for perfecting the bank's title to the mortgaged premises, or vesting the same or any covenant with an}' purchaser. 14. With the consent of the bank the coy is to be at liberty from "Withdrawal, time to time to withdraw any of the further securities afsd vested in the bank pursuant to this agreemt by the vesting in the bank other securities in accordance with the foregoing provisions. As "WITNESS, &e. AN AGEEEMT made the day of , 1897, between the Form 586. Coy, Limtd (hnfter called "the coy "), of the one part, and the - Bank, Limtd (hnfter called " the bank "), of the other part : toTSl^^^^ "Whereas by an indenture dated, &c., and made, &c., 500,000/. some deben- debenture stock of the coy has been constituted and secured, but only ^uh ^special pt thof has been issued : And whereas the coy is desirous of placing, provisions as and the bank is willing to take up, 30,000/. of the sd debenture stock ° '^^^^^®- on the terms hnfter appearing. Now it is hereby agreed as follows : — 1. The coy shall forthwith issue to the bank, and the bank shall Issue of forthwith accept, an allotment of 30,000/. of the sd debenture stock. =^0-000/. 960 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Form 586. Price. Retention. Company may sell. Notice of .«ale. Application of proceeds. 2. The price for the said 30,000^. debenture stock shall be the sum of 36,000/., being at the rate of 120/. per 100/. of stock, and the bank shall forthwith j)ay or place to the credit of the coy on its books the sd sum of 36,000/. 3. The bank shall (subject as hnfter provided) retain the sd 30,000/. debenture stock until the end of the year 1898. 4. The coy shall be at liberty at any time before the end of the year 1898 to sell the sd 30,000/. debenture stock, either in one lot or from time to time in several lots, but so that the price on each sale afsd shall be at the least sufficient to pay to the bank the sum to be retained by it or him as hnfter provided. 5. Whenever any such sale is made the coy shall in writing notify the fact to the bank, and the bank shall, at the request of the coy, and upon payment to it of the purchase-money for the stock sold, transfer the stock sold to the purchaser thof. 6. Out of the purchase-money afsd on each occasion pd to the bank, the bank shall be entitled to retain for its own benefit a sum equal to 122/. for each 100/. of the stock so sold and transferred, plus a sum equal to interest on the stock so sold and transferred at the rate of 4/. 10*. p.c.p.a. as from the 1st of January or 1st of July which shall last precede the sale up to the time when the pxrrchase-money is pd to the bank, and the balance of such purchase-money shall belong to the coy, and shall be placed by the bank to the credit of the coy accordingly. As WITNESS, &c. Form 587. AN AGEEEMT made the day of between the Agreement for loans from 1 aiik by way of acceptance, &c., of bills, and to be secured by debentures of borrowing company with specific charge on uncalled capital. Bank, - Coy, Limtd (hnfter called " the bank "), of the one part, and the - Limtd (hnftfr called "the coy"), of the other part: whereby it is AGIIEED AS FOLLOWS, that is to Say : — 1. Subject as hnfter provided, the bank shall, in manner hnfter specified, give the coy a credit up to 50,000/. for a period of one year from the date hereof. 2. Such credit shall, at the option of the coy, be given as to the wliole or any part or parts thereof — (a) By the bank accepting bills of exchange drawn by the manager of the N. branch of the coy on the bank ; or (b) By the bank endorsing bills of exchange drawn by the coy on its N. branch, and disposing thereof on the best terms obtain- able in London, and accounting to the coy for the net proceeds thereof. 3. Such credit shall be a continuing credit, but so that the liability of the })ank at any one time und(;r acceptances and endorsements as afsd shall n(jt exceed 50,000/., and so that the bank shall not be under any obligation to accept or endorse any bill not maturing within three FOKMS. 9G1 calendar months from tlio date thereof, or any bill not maturing Form 587. within the year afsd. 4. Whenever the bank makes itself liable in respect of any such bill as afsd the coy shall, at least two days before maturity of the bill, furnish the bank, as regards bills accepted by the bank, with the funds to meet the same, and notify tlio fact to the bank, and such pro- vision shall be made, where the bank is liable as acceptor, by placing the funds in the hands of the bank, and, where the bank is liable as endorser, by placing the funds at the N. branch, and notifying the fact to the bank's agent in N. 5. The coy shall pay at maturity every bill accepted or endorsed by the bank imder this agreemt, and shall indemnify the bank against all proceedings, costs, charges, expenses, damages, claims and demands in respect thereof. 6. The coy shall pay the bank a commission of i of \l. p.c. on each 100^. for which the bank shall give credit, whether by acceptance or endorsement as afsd, such commission to be pd immediately after acceptance or endorsement as afsd. 7. As security for the performance of the coy's obligations here- under, the coy shall deposit with the bank debentures of the coy for L, framed in accordance with the form already approved by the parties hereto. 8. Whilst the bank holds the sd debentures the charge upon the uncalled capital therein contained shall, notwithstanding the terms of such debenture, take effect as a specific and not merely as a floating charge and security, and shall attach as a specific charge not only to the capital now uncalled, but on such capital when called or pd up, and the following provisions shall have effect in regard thereto, that is to say : — (a) [Capital not to be called up witliout consent. Clause 6 of Form 581.] (b) [If called up to be pd to bank. Clause 7 of Form 581.] (c) [Coy not to create any charge without first giving notice of debentures and this agreemt. Clause 8 of Form 581.] (d) The coy shall procure each of its directors for the time being to covenant, &c. [Clause 16 of Form 581.] 9. In each of the events following, that is to say — (1) If a petition, &c. [Clause 11 of Form 581]; (2) If judgment, &c. [Clause 11 of Form 581]; (3) If the coy shall dishonour any bill or note on which it is liable, or shall suspend payment, or (4) If a distress, &c. [Clause 11 of Form 581] ; (5) If the coy shall commit, &c. [Clause 11 of Form 581] ; the bank may, by notice in writing to the coy, decline to give to the coy further credit hereunder, and may call on the coy to pay to the bank a sum sufficient to pay off on maturity all the bills in respect of whicli the bank shall have become liable liereunder, and tlie coy shall, witliin p. 3q 962 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Form 587. seven days, make payment to the bank accordingly, and if sucli pay- ment is not made within such seven days the bank shall be at liberty, ■without further notice, to exercise, as regards the sd deposited debentures, the power of sale conferred on mortgagees by the Con- veyancing and Law of Property Act, 1881, and the net proceeds of sale shall be applicable in or towards payment of such sum. 10. If the coy shall at any time make default in paying any moneys owing by it to the bank hereunder, such moneys shall, until payment, carry interest at 7 p.c.p.a., and such interest shall be pd by the coy to the bank accordingly. 1 1 . The coy shall pay all the expenses of and incident to the pre- paration and execution hereof, and incident thereto. As WITNESS, &c. Form 588. The Bank, Limtd. Joint and General Clauses (Joint and Several G^iarantee). several guar- antee (general j ^ Unless otherwise expressed, the guarantee is to be considered ClallScS ) • , , _ ]omt and several. See note on guarantees, supra, p. 923. Frimd facie, a guarantee by several is to be regarded as a joint contract, but it is a question of intention ; and even where the word " severally " is not used, it may appear that a joint and several liability was intended. See Fell v. Gosliii, 7 Ex. 185, where the words were "we undertake and guarantee ... in the proportion of 200^. each," which words were held to mean that the guarantors were not jointly liable for the whole amount. When the guaran£ee is expressed to be joint and several, A., who signs on the understanding that B. is also to sign, will not be bound if B. does not in fact sign {Underhill v. Hopwood, 10 Ves. 226; Bmiser v. Cox, 4 Beav. 379) ; or if B. qualifies his signature. Ellesmere Brewery Co. v. Cooper, (1896) 1 Q. B. 75. The release of one guarantor prima facie operates as the release of all, even though the guarantee is expressed to be joint and several. Mercantile Bank of Sydney v. Taylor, (1893) A. C. 317. Sometimes it is provided that " It is not to be incumbent on the bank to call upon the principals to pay before requiring the guarantors to pay the amount guaran- teed." But it is unnecessary, for it only expresses what the law implies. Ranelagh V. Hayes, 1 "Ves. 189. Some guarantees also provide that — -"The amount guaranteed is (unless other- wise provided) to be due and payable at the expiration of fourteen days after notice requiring payment shall have been served on the guarantors." This is a concession to the guarantor, for prima facie the creditor can sue the surety without any pre- vious notice or demand. Hitchcock v. Mumfrey, 5 M. & G. 559 ; Cutler v. Southern, 1 Wms. Saund. 115, Sometimes it is provided that — " As from the time when the bank requires pay- ment of any moneys from the guarantors, such moneys are, until payment, to carry interest at the rate of 5 per cent, per annum." Where two or more sureties for a common priucipal bind themselves in different amounts, in the event of the principal being in default they are liable to contribute to tVic KatisfHf:tion of the creditor's claim in proportion to the limits of their respective liabilities, and not in equal amounts. Ellesmere Brewery Co. v. Cooper, (1890) 1 Q. B. 75. FORMS. 963 2. Unless otherwise provided, tlie guarantee is to be considered a Form 588. continuing guarantee for the purpose of securing (subject to any limit specified therein) the general balance due, or that may be due, from time to time, and at any time, from the principals to the bank, notwith- standing any payments from time to time made to the bank, or any settlement of account, or any other thing whatsoever. And the guarantor's liability to pay is to arise first when notice in writing is given to him requiring him to pay. If A. guarantees the payment to B. of all sums to become owing to him by C. up to a specified sum, the question arises whether the guarantee attaches merely on the debts incurred up to the sj^ecified sum, so that when they are cleared off the guarantee will be at an end, or whether it is a continuing guarantee as above exjiressed. To avoid doubt the matter should be dealt with in clear terms. Laurie v. ScJwlcficld, L. R. 4 C, P. 622 ; lleffwld v. Meadows, ibid., 595 ; K'vrhy v. BuU of Marlborough, 2M. &S. 18. It may be desirable to state when first the liability to pay is to arise, so that the statute may not run till then. Benton v. Faddhon, G8 L. T. R. 409. 3. The guarantee (unless otherwise arranged) is to remain in force • as to each of the guarantors until the expiration of fourteen days after a notice in writing to discontinue the same shall be given to the bank by such guarantor or his legal personal representative, and notwith- standing the discontinuance as to one or more of the guarantors, the guarantee is to remain a continuing security as to the other or others. The death of a surety will detei-mine his guarantee if he could by notice have determined the same in his life [Coulthart v. Clemcntson, 5 Q. B. D. 42 ; Ilarriss v. Fatceett, 8 Ch. 8G6 ; Re Sherry, 25 C. D. G92, 705) ; but in the case of a joint and several continuing guarantee the death of one does not, ipso facto, determine the continuing operation of the guarantee as to the survivors [Beckett v. Addi/inan (1882), 9 Q.B. Div. 783) ; and if the contracting parties desire that on the death of a guarantor a special notice shall be necessary to determine the guarantee, they can so provide, and the provision binds the estate of the guarantor. Coulthart v. Clementson, 5 Q. B. 42, 48 ; Fn re Silvester, (1895) 1 Ch. 573. Where the consideration for a guarantee is given once for all, the guarantee can- not be determined in the absence of express provisions {Lloyd's v. Harper, 16 C. Div. 290) ; but where the consideration is to consist of separate advances and credits, to be from time to time made and given, it is considered that a surety may determine his liability by notice as regards future advances. It is therefore wise to make the matter clear by express provision. Sometimes a much longer period than foiu'teen days is fixed, e.g., one month, three months, or six months. 4. The bank, without exonerating the guarantors, may grant time or other indulgence to the principals, or any other person or persons liable to the bank on or in respect of any bills, notes, guarantees, or undertakings, and give up, or modify or abstain from perfecting or taking advantage of any securities or contracts, and discharge any party or parties, and accept or make any composition or arrangement, and realise any securities when and in such manner as the bank may think expedient. PnOTrf/ffcie the surety has an interest "in every transaction with the principal 3q2 964 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Form 588. debtor. You caunot keep him bound and transact his affairs (for they are as much his as your own) without consulting him." Per Lord Loughboi'ough, in Rees v. Berrington, 2 Ves. jim. 540 ; and see Bolton v. Salmon, (1891) 2 Ch. 48. Giving time and forbearance. If the creditor agrees with the principal debtor to give him time, the surety, unless the contract otherwise provides, is discharged. Combe \. TToitlfe, 1 M. & S. 241; 8 Bing. 166; Oriental Financial Corporation y. Overend, 7 Ch. 142, 150: aft'd. L. R. 7 H. L. 348 ; Bolton v. Buckingham, (1891) 1 Q. B. 278. But to have this effect the agreement must be of a binding character {Blake V. White, 1 T. & C. (Exch.) 620) ; and the giving of time without any binding agreement does not discharge the surety ; nor will the surety be discharged if the agreement is not with the debtor, but with some third party. Frazer v. Jordan, 26 L. J. Q. B. 288 ; 8 El. & Bl. 303. A release of the principal operates primd facie as a discharge of the surety. Ex parte Harvey, 4 D. M. & G. 801 ; Cragoe v. Jones, L. R. 8 Ex. 81 ; Wilson v. Lloyd, 16 Eq. 60 (compobitiou). Not so if the guarantee contains provisions to the con- trary. Manchester Union Bank v. Beech, 34 L. J. Ex. 133 ; Cowper v. Smith, 4 M. & W. 519. And a release by the creditor of one of the sureties o])n'd.ies primd facie as a release of all. Mercantile Bank y. Taylor, (1893) A. C. 317. Not so where the release of the debtor is by operation of law. Ex parte Jacobs, 10 Ch. 211 ; Megrath V. Gray, L. R. 9 C. P. 216. And the surety is not released where the release of the principal only amounts to a covenant not to sue, with a reservation of the rights and remedies against the surety {Green v. Wynn, 4 Ch. 204) ; but where the principal is really released, there can be no such reservation. Commercial Bank of Tasmania v. Jones, (1893) A. C. 313. As to securities. A surety is primd facie entitled to the benefit of all securities — ■ ■whether known to the surety or not — ^which the creditor holds, as against the principal debtor {Duncan, Fox % Co. v. North and South Wales Bank, 6 App. Cas. 1) ; even though obtained after the contract of suretyship. Forbes v. Jackson, 19 C. D. 615 ; and see Mercantile Law Amendment Act (19 & 20 Vict. c. 97, s. 5) ; and The Englishman and The Australia, (1895) P. 212. Hence, in the absence of express provision, a surety is released by the creditor taking a new, or different, security in lieu of the original security. Clarke v. Ilcnty, 3 Y. & C. (Ex.) 187 ; Bou-les v. Mayer, 19 C. B. N. S. 76. As to the right of retainer by a surety who takes out administration, and the deceased principal debtor, see Be Allen, Adcock v. Evans, (1896) 2 Ch. 345. Where through the fault of the creditor any security for the debt is lost, the surety is primd facie discharged pro tanfo. Jf'iiljfy. Jay, L. R. 7 Q. B. 756 (bill of sale not registered) ; Fledge v. Buss, Johns. 663 ; Coates v. Coatcs, 33 Beav. 249 ; Strange v. Fooks, 4 Giff. 408 (not giving notice of assignment of cho.se in action) ; Capel V. Butler, 2 S. & S. 457 (omission to register transfer of books) ; Mutual Loan Society v. Sudlotv, 5 C. B. N. S. 449 (neglecting to restore collateral security) ; Latham v. Chartered Bank, 17 Eq. 205 (not presenting bill at maturity). But the surety is not released by the creditor realizing the secui-ity in exercise of the powers conferred on him. I'aylor v. Bank of New South Wales, 11 App. Cas. 586 ; and see Carter v. White, 25 C. D. 670, as to negligence not discharging surety. Accordingly it is sometimes provided that the guarantors are not to make any claim against the bank, on the ground that, by negligence or otherwise, the bank has lost the benefit of any security or guarantee which, if enforced, or preserved, would or miglit have afforded funds in relief of the guarantors. 5. All dividonds, compositions and payments received from any Buch porsou or persons are to be treated us payments in gross, and tlio guarant(u-.s are not to liave any riglit to participate except to tlie FORMS. 965 extent of the surplus remaining after satisfaction of the ultimate Form 588. balance due to the bank. Pfinul facie, where the guarantee is a liiriited one, and the debt exceeds the sum guaranteed, and the creditor receives a dividend from the estate of the bankrupt or deceased debtor, tlie surety is entitled to treat a proportionate part of the dividend as paid in reduction of the guarantee, and to insist that the whole shall not be applied in reduction of the unguaranteed portion of the debt. Thornton v. M''Kcwan, 1 n. & M. 525 ; HobsoH v. lia.ss, 6 Ch. 792 ; Seton, p. 1783. But the i-ights of the surety may be waived or modified as above. Exp. National rroiincial Bank, Re Jiecs, 17 C. D. 98 ; Midland Banking Co. v. Chamkrs, 4 Ch. 398 ; Exp. Miles, 1 De G. 623. Where, however, the tvliolc debt is guaranteed with a proviso limiting the guarantor's liability, the above stipulation is unnecessary. See E.vp. National Provincial Bank, lie Sass, (1896) 2 Q. B. 12. [5 A. Where the principals are a corporation or society the bank is not to be concerned to see or inquire into the powers of the principals, or their dii-ectors or other agents acting, or purporting to act, on their behalf, and moneys in fact borrowed from the bank in professed exercise of such powers shall be deemed to form part of the moneys guaranteed, even though the borrowing or obtaining of such moneys be in excess of the powers of the principals, or of the directors or other agents afsd, or shall be in any way irregular or defective, or informal.] PrimA facie the surety is not liable, unless there is a principal debtor liable ; for the essence of the contract of suretyship is, that the surety is only secondarily liable. Mountstephen v. Lakeman, L. R. 5 Q. B. 613 ; 7 H. L. 17. Where, however, directors of a company guaranteed the repayment of a loan borrowed tdtra vires of the company, they were held liable on their guarantee. Yorkshire Railway Waggon Co. V. Maclure, 19 C. D. 478. But on appeal (21 Ch. D. 309), it was held that the transaction in question was not ultra vires, and accordingly the decision below cannot be relied on, and it is desirable expressly to deal with the matter. Some banks, to preclude question, use a clause as above. [5b. Any accounts settled or stated by or between the bank and the principals, or admitted by them or on their behalf, may be adduced by the bank, and shall, in that case, be accepted by the guarantors, and each of them and their respective representatives, as conclusive evidence that the balance or amount thereby appearing is due from the principals to the bank.] Such a clause is sometimes used. In the absence of some such provision, the principal debtor's admission as to the amount owing is not available as against the surety. Evans v. Beattie, 5 Esp. 26. Even a judgment against the principal debtor is not evidence against the surety in an action in which he is sued by the creditor {Ex parte Young, 17 C. D. 668) ; unless, indeed, the surety was made a party to the fonner action, or was served with a third party notice. [5c. A certificate in writing under the common seal of the bank stating the amount at any particular time due and payable to it under the guarantee shall be conclusive evidence as against the guarantors, and each of them, and their respective legal personal representatives.] Such a provision is^^occasionally used. 966 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Form 588. g, ^g to each, of the guarantors any notice may be served on him, or his legal personal representatives, either personally or by sending the same through the post in an envelope addressed to the last known place of address of the person to be served, and a notice so sent shall be deemed to be served on the day following that on which it is posted. 7. In the above clauses the singular includes the plural, and vice versd. Where several covenant as principal debtors,' and it is subsequently arranged between tbem that one shall be liable as a surety only, and the creditor has notice, he may do nothing to prejudice the surety without in effect releasing him. Rouse v. Bradford Banking Co., (1894) A. C. 586. To THE Bank, Limtd. Gentlemen, In conson of your making advances or otherwise giving credit or accommodation to The Coy, Limtd (hnfter called "the prin- cipals"), we, the undersigned, on the footing of the above general clauses, guarantee the due payment and discharge of all the principals' liabilities to you, whether incurred before or after the date hereof, and whether incurred by the principals alone or jointly with others, and whether as principals or sureties, and whether such liabilities are matured or not, and whether absolute or contingent, including liabili- ties in respect of advances and in respect of cheques, bills, notes, and other negotiable or non-negotiable instruments drawn, accepted, in- dorsed, or guaranteed by the principals ; and in respect of interest with half-yearly rests, commission, and other usual banking charges [and in respect of all costs, charges, and expenses which you may incur in paying any rent, rates, taxes, calls, instalments, or other out- goings in respect of the mortgaged j)pty, or in insuring, repairing, maintaining, managing, or realising any of the mortgaged ppty, or in investigating the title thereto] : — [If so, say: And this guarantee is to extend to the person or persons for the time being and from time to time carrying on the business now carried on b}' the principals.] \_If so, add: We are not to bo called on under this guarantee to pay more than /.] Dated this day of . If one of joint guarantors is sued on the guaranty itself, and judgment is recovered the otlior one cannot bo sued ; but it is otherwise when the first one is eucd on his chc(|uc. Sec H'cyij-rrosucr \. Evans, (1895) 1 Q. B. 108, 112, 113. FORMS. 967 1, Where documents of title are dopositccl with the banlc by Avay of Form 689. guarantee for the due discharge of the liabilities of a third person (in Charge by these conditions referred to as the party guaranteed to the bank), they surety, are, unless otherwise arranged, to stand as a continuing security for the due satisfaction of the liabilities of the party guaranteed to the bank, whether incurred before, &c. [as in clause 1 of Form 572]. 2. All moneys, &c. [as in clause 2 of Form 572]. 8. The depositors, &c. [as in clause 3 of Form 572]. 4. The bank, without exonerating, &c. [as in clause 4 of Form 588]. 5. All dividends, &c. [as in clause 5 of Form 588]. 6. Any notice, &c. [as in clause 6 of Form 588]. 7. In the above clauses, words importing, »S:c. [as in clause 5 of Form 572]. To THE Bank, Limtd. Gentlemen, I have deposited with you, by way of guarantee for the due discharge of the liabilities of A. B., of , to you, and upon the footing of the above general clauses, but so that the security is not to be available for more than /. Yours, &c. . THIS INDENTUEE, made, &c. between The Coy, Limtd Form 690. (hnfter called "the coy"), of the one part, and A. B., of, &c., -^ . .. . C. D., of, &c., E. F., of, &c., and Q. H., of, &c. (hnfter called "the demnity from guarantors "), of the other part. company to o ^' ■■• _ _ directors and Whereas, the coy recently obtained from The Bank, Limtd another for (hnfter called " the bank "), an advance of 6,000^. becoming ^ ^' ' _ sureties for A^^D WHEREAS the sd advance was made on the security of an company to indenture, dated, &c., and made between the coy of the fii'st part, the "^^- guarantors of the second part, and the bank of the third part, and by that indenture the coy and the guarantors, jointly and severally, covenanted with the bank to pay to the bank on the day of the sum of 6,000/., with interest thereon at the rate of 5 p.c.p.a., com- puted from the date thereof, and also so long after that day as any moneys remained due on the security thereof, to pay to the bank interest thereon after the same rate, by equal half-yearly payments on the day of and the day of in each year ; and by the sd indentiu-e the coy assigned to the bank certain patents and patent rights specified or set out in the second and third schedules to a certain agreemt of the day of , which agreemt was framed in accordance with the draft thereof set forth in the first schedule to the coy's arts of asson, and is hnfter referred to as "the scheduled agreemt," to hold the same unto the bank, subject to the proviso therein contained for the redemption of the same premises on payment 968 BANKING AND ADVANCE SECURITIES. [ChAP. XV. Form 590. on the sd day of ty the coy to the bank of the said snm of 6,000^., with interest thereon in the meantime at the rate afsd, and the said indenture contained a proviso to the effect that, although, as between the roy and the guarantors resply, the guarantors were only sureties for the coy as between the guarantors and the bank, they, the guarantors, were to be considered as joint and several prin- cipal debtors for all the principal moneys and interest intended to be secured by the indenture now in recital, so that the guarantors, their heirs, executors, or administrators, should not be released or exonerated by time being given to the coy, or by any other dealing between the bank and the coy, or by any act or omission of the bank, or by any other matter or thing whatsoever, whereby the guarantors, their heirs, executors, or administrators, or any of them, as a surety or as sureties only for the coy, would be released or exonerated. And whereas the guarantors, other than the said Gr. H., are directors of the coy. And whereas the directors of the coy are empowered by the arts of asson of the coy, amongst other things, to execute in the name and on behalf of the coy, in favour of any director or other person who may incur, or be about to incur, any personal liability for the benefit of the coy, such mortgages of the coy's ppty, present and future, as they think fit, and any such mortgage may contain a power of sale, and such other powers, covenants, and provisions as shall be agreed on ; and by clause — of the sd arts of asson it is pro\dded, amongst other things, that no director shall be disqualified by his oflS.ce from contracting with the coy or from voting in regard to any contract by or on behalf of the coy, to give to any director any security by way of indemnity. And whereas it was one of the terms on which the guarantors agreed to execute the sd indenture that the coy should forthwith execute in their favour a security in the terms hereof. Now THESE PRESENTS WITNESS AND DECLARE aS followS : — 1. The coy shall indemnify the guarantors, and each of them, and their and each of their heirs, executors, and administrators, against all actions, proceedings, claims, and demands in respect of the sd indenture of the day of . 2. The coy shall, upon the request in writing of the guarantors, or of any one of the guarantors, or of the legal personal representatives of any one of the guarantors, pay off the principal moneys and interest secured by the sd indenture, and procure the release of the guarantors, and their respective heirs, executors, and administrators, from all claims under or in respect of the sd indenture. 3. The coy hby charges in favour of the trees or tree the under- taking and ppty of the coy whatsoever and wheresoever, both present and future, with the payment of all moneys which shall from time to time become payable under Clause 1 hereof, and as a security for the FORMS. 0G9 due performance by the coy of all the ohligations imposed on the coy -corm O iJU. by that clauso. 4. The sd charge shall operate as a fixed charge, so far as concerns the sd patents and patent rights, and as regards the residue of the premises hby charged shall operate as a floating security. Never- theless, each of the guarantors, or his legal personal representative for the time being, shall be at liberty at any time, by notice in writing to the coy, to determine the floating character of the charge afsd as regards any parlar asset specified in such notice, and thereupon the charge, as regards such asset, shall become and operate as a fixed charge, and shall cease to be a floating charge. 5. The statutory power of sale conferred on mortgagees by sect. 19 of the Conveyancing and Law of Ppty Act, 1881, shall be exercisable without further notice by the trees or tree at any time after the coy shall have committed any breach of any of the obligations hby imposed on it, and clauses 19 and 20 of the sd Act shall be regarded as modified accordingly. 6. The coy irrevocably appoints the trees or tree to be the attorneys or attorney of the coy, in the name and on behalf of the coy or other- wise to execute and do any such assignments, conveyances, assurances, and things as the trees or tree may find it necessary to execute and do for the purpose of carrjdng any such sale as afsd into effect. 7. The trees or tree may, at any time after the power of sale afsd has become exercisable, appoint any person or jiersons to be a receiver or receivers of the ppty hby charged, and a receiver so appointed shall have power to take j)Ossession of the sd ppty charged, to carry on, or concur in carrying on, the business of the coy, and to sell, or concur in selling, any of such ppty ; and all moneys received by such receiver or receivers shall, after providing for the matters specified in the first three paragraphs of Clause 8 of sect. 24 of the sd Act, be applied in paying off all moneys which the guarantors shall then be liable to under the said indenture of the day of , and in making good to them all moneys they may previously have pd, and generally in effectuating the complete indemnity of the guarantors and their respective heirs, executors, and administrators, in accordance with Clause 1 hereof, and any surplus shall be pd to the coy. 8. The coy hby covenants with the guarantors, and as a separate covenant with each of them, that the co}^ will duly observe and per- form all the obligations hby imposed on it. 9. In these presents the expression "the trees or tree" means the guarantors or the survivors or survivor of them, or other the trees or tree for the time being hereof. 10. The statutory power of appointing a new tree or new trees, con- ferred by sect. 10 of the Trustee Act, 1893, shall be applicable hereto. In witness, »S:c. 970 [Chap. XVI. PETITIONS. CHAPTER XVI. Reduction of Capital. WhereCourt s Except so far as the capital may be reduced by forfeiture or surrender of shares {supra, pp. 391 et scq.), or by cancellation, under sect. 5 of the Act of 1877, of shares required. Ordinary mode of reduction. Act of 18C2 and Tabic A. do not refer to reduction. "which " have not been taken or agreed to be taken," no reduction of capital can be legally effected without a special resolution, confirmed by the Court in accordance ■with the Acts of 1867 and 1877. Trevory. WMticorth, 12 App. Cas. 409. 1 But it has now been settled by the House of Lords that the Court has under those Acts jurisdiction to confirm any kind of reduction. British and American, ^-c. Corporatim v. Couper, (1894) A. C. 399. Tor instance, it may sanction the cancellation of the whole of one or more class, e.ff., preference or founders' shares, out of a greater number of classes. Floating Dock Co. of St. Thomas, (1895) 1 Ch. 691 ; London and Knv York Investment Corpora- tion, (1895) 2 Ch. 860. And a reduction may be sanctioned although an alteration of the voting power possessed by different classes is involved. James Cohncr, Ltd., (1897) 1 Ch. 524. The following are some of the more ordinary modes of reduction : — 1. Reducing the liabilities of shareholders, e.g., where the shares are 10?. each, with bl. paid up, reducing them to 5?. fully paid-up shares. Form 364. 2. Paying off capital not wanted, e.g., where the shares are \Ql. fully paid, reduce them to bl., and pay back bl. per share. See the Act of 1877. Form 365. 3. Paying off capital upon the footing that it may be called up again. See Act of 1877. Form 366. 4. Cancelling shares unissued or surrendered or the holders of which consent to cancellation. Shares which have not been taken, or agreed to be taken, can be cancelled by special resolution under sect. 5 of the Act of 1877, but the sanction of the Coirrt is requisite to the cancellation of surrendered shares. See Forms 371 et seq. 5. Cancelling capital which has been lost or is unrepresented by available assets. Forms 367 ct seq. This last is effected under the Act of 1877, and the object of such a reduction is to enable the company to pay dividends ; for where capital has been lost, it is d oubtful w hether dividend can be paid until the loss has been made good or cancelled. "Supra, pp. 521 ct seq. 0. Purchasing shares in the company's own capital. Form 369. 7. Paying off or redeeming sliares out of accumulated profits. For resolutions for reduction of capital, see supra, pp. 600 et seq. SometimoH a Kcliemcof reduction involves several of the above operations. The Act of 1802 was silent as to reduction of capital ; the power was given by the Act of 1807 and supplemented by the Acts of 1877 and 1880. Where the regiJations contain a power for tlic company to reduce its capital, the >- INTRODUCTORY NOTES. 971 first step with a view to reduction is to pass a special resolution to reduce. But if the regulations do not contain the necessary power, a special resolution must first be passed altering them by introducing a clause that ' ' the company may from time to time reduce its capital ; " and subsequently a second special resolution will be passed to effect the reduction. These special resolutions cannot be passed con- currently. See sect. 9 of the Act of 1867, and He West India Co., 9 Ch. 11, n. ; Re Patent Invert Sugar Co., 31 C. Div. 16G. The power to reduce must be in the regulations as originally framed or as altered by special resolution (sect. 9 of the Act of 1867) ; and, accordingly, power in the memorandum of association is ineffective. The Act of 1867 was held by Jessel, M. R., to apply only to the reduction of liability on the shares. Ebhv Vale Co., 4 C. D. 837. Sect. 3 of the Act of 1877, however, provided as follows : — "The word ' capital ' as used in the Companies Act, 1867, shall include paid-up capital ; and the power to reduce capital conferred by that Act shall include a power to cancel any lost capital, or any capital unrepresented by available assets, or to pay oj' any capital which may be in excess of the wants of the company; and paid-up capital may be reduced either with or without extinguishing or reducing the liability (if any) remaining on the shares of the company, and to the extent to which such liability is not extinguished or reduced it shall be deemed to be preserved, notwithstanding anything contained in the Companies Act, 1867." At the same time the reduction of unissued capital was placed upon an altogether different footing, for, by sect. 5 of the Act of 1877, " any company limited by shares may so far modify the conditions contained in its memorandum of associa- tion, if avithorized so to do by its regulations as originally framed or as altered by special resolution, as to reduce its capital by cancelling any shares which, at the date of the passing of such resolution, have not been taken or agreed to be taken by any person ; and the provisions of the Companies Act, 1867, shall not apply to any reduction of capital made in pursuance of this section." No confirmation by the Court is required under this section. For the clause in articles of association authorizing a reduction of caj^ital, see Form 210, cl. 48, p. 410. As to special resolutions generally, see sects. 51 and 52 of 1862, and supra, pp. 643 et seq. For notices of meetings to pass such resolutions, see Forms 452 and 453, and notes thereto. For forms of resolution as to altering the articles (where required), see Forms 337 ct seq. ; for resolutions as to reduction itself, see Foims 363 et seq., infra. The procedure, subsequent to the passing of the special resolutions for reduction, differs, when the Court's sanction is required, according to the nature of the reduction : 1. Sect. 4 of the Act of 1877 provides " that where the reduction does not involve either the diminution of any liability in respect of unpaid capital, or the payment to any shareholder of any paid-up capital {e.g., where it merely provides for the cancellation of lost capital, or of surrendered shares), (i.) The creditors of the company shall not, unless the Court otherwise directs, be entitled to object, or requu-ed to consent to the reduction ; and (ii.) It shall not be necessary before the presentation of the petition to add, and the Court may 3i^ense altogether with the addition of the words ' and reduced,' as required by sect. 10 of the Act of 1867." But "in any case that the Court thinks fit so to do, it may require the company to publish in such manner as it thinks fit the reasons for the reduction of its capital, or such other information in regard to the reduction of its capital as the Court may think expedient with a view to give proper information to the public in relation to the reduction of its capital by a company, and, if the Court tliinks fit, the causes which led to such reduction." Sect. 4 of 1877. Extension of term "capital." Reduction of unissued capital with- out Court's sanction. Clauses in articles of association. Special resolutions and notices of meetings. Divergence of practice after special resolution. 1. Lost capital or surrendered shares. Dispensing with inqiiiry for creditors and ' ' and reduced." 972 PETITIONS. [Chap. XVT. Where use of words imperative. Cases within s. 4 of 1877. Advertise- ment of petition. Petition. "WTiere petition presented. Any application under sect. 4 of 1877 to dispense with the words " and re- duced," until after the hearing of the prtition, will be made after its presentation. See infra. In cases not within sect. 4 of 1877, the company must, ' ' after the date of the passing oj any special resolution for reducing its capital, add to its name, until such date as the Court may fix, the words ' and reduced,' as the last words in its name, and those words shall, until such date, be deemed to be part of the name of the company within the meaning of the principal Act." Sect. 10 of 1867. The cases usually brought within this section are cases of cancellation of ' ' capital which has been lost or is unrepresented by available assets," and cases of cancella- tion of fully paid-up shares which have been forfeited or agreed to be surrendered. Prior to the decision in iile Tamhrachtrry Co., 29 C. Div. 683, it was the practice, when sect. 4 appeared to apply, to place the petition in the paper as of course on the petition day next following its presentation, and without any advertisement, and on an ex parte motion to dispense with the use of the words "and reduced" until the hearing and the order, and the Court usually dispensed altogether with the use of the words " and reduced," and with any notice or advertisement of the day for hearing. But in Ee Tamhracherry Co., 29 C. Div. 683, Bacon, V.-C, refused to hear a petition for cancelling lost capital without previous advertisement, and that decision was supported in the Court of Appeal on the ground that the judge had a discretion with which the Court of Appeal would not interfere. Cotton, L.J., after considering the Acts and Rules, said: — "According to my view, the rule requiring an advertisement applies, but subject to be dispensed with in a case where the Court thinks that it is impossible that creditors can be inter- fered with or prejudiced, and therefore does not think that they ought to object. But certainly there was a discretion in the judge, and as he said that he would not hear the petition without its being advertised, in my opinion the Court of Appeal ought not to interfere with that discretion, although, in my opinion, petitions taking advantage of the Act of 1867, with the provisions introduced by the Act of 1877, are prima facie to be advertised for the purpose of enabling the parties to come before the Court and object that this may interfere with the due recognition of their claims." And Boweu and Fry, L.JJ., concurred. Whether the case is within sect. 4 of 1877 or not, the application for the Court's confirmation of the resolution is by petition. Sect. 11 of 1867. In Islington and General Electric Supply, W. N. (1892) 81, it was held that, notwithstanding the Companies (Winding Up) Act, 1890, and the orders made thereunder, the jurisdiction to confirm a reduction of capital was, and is stUl, exerciseable by the ordinary judges of the Chancery Division. The decision in this case was arrived at by Chitty, J., after consultation with North, Stirling, and Kekewich, JJ., and his lordship stated that similar reasoning might be applied to applications under the Companies (Memorandum of Association) Act, 1890. Accordingly, many orders iinder the Act last mentioned, and also in reductions of capital cases, have been made by the learned judges above mentioned, and by Romer, J. It was also held by Vaughan Williams, J. , and it appears to be clear, that the jurisdiction under both statutes is also exerciseable by the judge to whom, under sect. 2 of the Companies (Winding Up) Act, 1890, the general jurLsdiction to wind up companies is assigned. Mining Shares Investment Co., (1893) 2 Ch. 660 (Exten- sion of Objects) ; Ocean Queen Steamship Co., ib. 666 (Reduction of Capital) ; and Vaughan Williams, J., the late winding-up judge, afterwards made many orders in similar cases. Other orders have been made by Romer and Byrne, JJ., when acting for tlio winding-up judge, and by Wright, J., the present winding-up judge It follows from these decisions that the jurisdiction is also exerciseable by the other Courts having, under the Companies (Winding Up) Act, 1890, jurisdiction in England and Wales to wind up companies, namely, the Chancery Courts of the '\ INTRODUCTORY NOTES. 973 Counties Palatine of Lancaster and Durham, and certain of the County Courts, subject to the conditions imposed hy sect. 1 of the Companies (Winding Up) Act, 1890. Hence the first inquiry to he made in ascertaining- what Court is to be petitioned is, "What Court, having regard to tlie situation of the registered office and the amount of ca2)ital paid up, or credited as paid up, would have jurisdiction and wind up the company 'f" Acting on the decisions above referred to, large numbers of orders have been made by the several judges of the Chancery Division, including the winding-up judge for the time being (now Wright, J.), as an additional judge thereof, and by the Chancery Courts of the Counties Palatine of Lancaster and Durham, and in a few cases, orders have been made by County Court judges. A petition for reduction or extension, to be heard before Wright, J., need not be intituled, like a winding-up petition, " In the matter of the Companies (Winding L^p) Act, 1890." AluminiiiDi Co., W. N. (1894) 6. In cases within sect. 4 of 1877, Form 592 may be found useful ; in other cases, the Variation in lines of Form 591 must be followed, acd, after presentation of the petition, the subsequent i practice depends on whether the case is or is not within sect. 4 of 1877. practice. | When the ease is within sect. 4 of 1877, the petition, framed in accordance with Form 592, should be presented, and the directors should consider whether it is or is j not very important to avoid the use of the words "and reduced" between the 1 presentation and hearing of the petition, and not to advertise the presentation of the petition. In considering this question, it should be borne in mind that the Court almost invariably requires the use of the words for a month after the hearing, and that the interval between the presentation and the hearing is likely to be short, and that the advertisement rarely, if ever, evokes opposition on the part of any creditor. If the directors think that it is not important to obtain dispensation, a summons should, immediately after the presentation, be taken out "that a day may be fi.xed for the hearing of the petition for the reduction of the company's cajjital, and that directions may be given as to the advertisements which are to be published, and that the certificate of creditors may be dispensed with." On this I summons evidence should be forthcoming as to the nature of the reduction, and as to 1 the creditors, and what newspapers will reach them ; and an order will in general j be made directing that the petition be placed in the paper for the hearing after a '. short interval, say fourteen days, without any certificate of creditors, but directing advertisement. But in some cases it is considered very important to avoid the use of the words Application " and reduced " until after the hearing, and to avoid advertisement. In such cases, to dispense after the presentation of the petition, application will be made for an order dis- "^th "and pensing with the use of the words " and reduced " until the hearing of the petition, ^^^^^^'^ and that the petition may be placed in the paper by a short day, without advertise- hearing, ment, and without any certificate of creditors. The application may be made by motion ex parte (but this is now rarely done), or by summons in chambers. It should, however, be borne in mind that according to present practice the use of the J words " and reduced" is only dispensed with in very exceptional cases, and that | some form of advertisement is almost always required. If no dispensation as to the use of the words "and reduced" is required, a summons (see supra) is taken out to fix the day of hearing. For directions as to advertisements, and to dispense with the certificate of creditors, see sect. 4 of 1877. For orders on such ) ) siunmonses, see Forms 595, 596. As to the exact form of advertisement required, ^ see Form 597. However the petition is brought on, it must, at the hearing, be supported bv proper evidence of the facts stated, e.//., see Form 598, infra. ■' ^V^len the order is made without previous advertisement, it will contain pre- liminary words to the effect that " the Court not requiring any notice to creditors or advertisement of any notice that the petition was appointed to be heard that 974 PETITIONS. [Chap. XVI. Cases whore croditorH may object. day." That was the usual form ; see last three editions of this work ; but according to the practice since Tamhrachcrrij Co., 29 C. Div. 683, advertisement has rarely, if ever, been dispensed with. Under sect. 4 of the Act of 1877, the Court may require the company to publish the reasons for reduction, but hitherto this power has rarely been exercised. See Form 607 for an instance. The Court cannot dispense with notice of the registration of the order and minutes, for sect. 15 of the Act of 1867 requires the publication thereof ; accordingly the Court must be asked to specify the newspaper or newspapers. When the presenta- tion of the petition has been advertised, the Court usually specifies the same news- papers, otherwise it is desirable to have evidence ready showing what newspaper will come to the notice of creditors. Sometimes the Court has considered advertise- ment in the Gazette enough. "Where the capital is divided into preference shares and ordinary shares, and it is proposed to cancel lost capital, the shares should all be reduced pari passtt, unless the preference shares are entitled to a preference not only as regards dividends but as regards capital. See Bannatyne v. Lirect Spanish Cable Co., 34 C. Div. 287 ; and Me Direct Spanish Cable Co., 34 C. D. 307. See further, supra, p. 662. It used formerly to be supposed that a company could, with the authority of a special resolution, and without the sanction of the Court, return capital, upon the footing that it might be called up again ; but in Be Northmoor Spinning Co., Kay, J. (9 Feb. 1883, supra, p. 661), held that this was not so, and that the sanction of the Coiu't was necessary ; and Trevor v. Whiticorth, 12 App. Cas. 409, conclusively supports this decision. Many such orders have since been made, including two of Chitty, J., in Be Channel Tunnel Co., Limited and Bcduccd, 1885 and 1886, for a return of 3/. and 1/. per share on that footing. In such cases sect. 4 of the Act of 1877 has no application, and the usual proceedings under the Act of 1867 must be followed. It is no objection to a petition in such cases that a part of the capital to be returned is immediately to be borrowed by the company on debentures. Nixon's Navigation Co., (1897) 1 Ch. 872. And see Be Fore Street Warehouse Co., 59 L. T. 214 (Kay, J.). In Be Vivian S; Co., TV. N. (1886) 32 ; 54 L. T. 384, a company having bought several properties from V., and one of them having proved worthless, V. agreed that the company should be at liberty, by special resolution, to cancel an equivalent amount of the paid-up shares, which had been issued to him, and the Court con- firmed the reduction. In Be Albert Mills Co., the company with the sanction of a special resolution, had bought up some shares, and asked the Court to cancel the amoimt as not represented by available assets, and so within sect. 4 of the Act of 1877 ; but Kay, J., 30 July, 1887, said the matter clearly affected the creditors, and must proceed under the Act of 1867. In such cases, the proper course is to have a provisional agreement allowing the cancellation to become absolute only on the confirmation by special resolution and by the Court. In cases of cancellation of lost capital, care should be taken to ascertain that the cajjital proposed to be cancelled has been effectually paid up. In a recent case it was proposed to cancel some paid-up capital, and in preparing the conditions it was discovered that the agreement under which tlic shares were issued as paid-up had not been filed. The petition accordingly stood over, pending a motion to rectify the register, and this liaving been done, the petition was amended, and the order for reduction was made. See Be Nottingham, ^-c. Co., 4 T. L. R. 429 ; Be Eastern, ^c. Co., 68 L. T. 312 ; see also Nixon Navigation Co., (1897) 1 Ch. 872 ; and supra, pp. 188, 231. 2. In all other cases, immediately after the passing of the special resolution, the words "and reduced" must bo added to the company's name. Sees. 10 of the Act of 1807. A petition should then be presented as in Form 691, and the subse- quent procedure will bo found set out in great detaU in rr. 4 — 19 of the Order of INTRODUCTORY NOTES. 975 Court of 21 Marcli, 1868 (Appendix). In these cases it generally takes several months to obtain the sanction of the Court to complete the reduction. When the order is made confirming the reduction, it almost invariably provides that the company shall continue the words " and reduced " for a month. The Court cannot, where the diminution of Hability on unpaid capital, or the return of i^aid-up capital, is involved, dispense with settling the list of creditors under s. 13 of 18G7, although there is evidence that the company has no unsatisfied debts. Lamson, S;c. Co., (1895) 2 Ch. 726. Every creditor must consent or be secured. In Cridit Fonder, 11 Eq. 356, it was held that creditors who did not dissent must be deemed to assent ; but in Fa tent Ventilating Co., 12 C. D. 254, Fry, J., declined to follow that case; and Kay, J., repeatedly declined to follow it. Sect. 1 1 makes evidence of the consent, security, or discharge of every creditor a condition precedent. In such cases the petition should be supported by an affidavit (usually made by the chairman of the directors) , proving the facts stated. A copy of the memorandum and articles, and the minute book of the proceedings of general meetings, should be made exhibits. See Form 598. Minutes. Sect. 15 of the Act of 1867 provides for the delivery to the Registrar of Joint Approval by Stock Companies of a copy of the order confirming the reduction and " of a minute Court, approved by the Court, showing with respect to the capital of the company, as altered by the order, the amount of such capital, the number of shares in which it is to be divided, and the amount of each share" ; and s. -i of the Act of 1877 requires that the minute shall also state "the amount (if any) at the date of the registration of the minute j)roposed to be deemed to have been paid up on each share. ''^ The following is the simplest form of minute, and the one which until recently was exclusively used : — - "The capital of the company, limited [and reduced], is 70,000/., divided Form of into 10,000 shares of 11. each. At the time of the registration of this minute the niinutes. sum of 11. has been and is to be deemed to be paid up on each of the said shares." But some judges require the minute to state what the capital prior to the reduction was, thus : — "The capital of the company, limited [and reduced], henceforth, is 70,000/., divided into 10,000 shares of 11. each, instead of the original capital of 100,000/. of 10/. each. At the time of the registration of this minute the sum of 11. has been and is to be deemed paid up on each of the said shares." This form of minute was first adopted by the direction of Kay, J., in West Cumberland, S;c. Co., W. N. (1888) 5-1; 58 L. T. 152 ; and in Britannia Mills Co., North, J., approved of the form and stated that he should in future require its adoption, and the learned judge has acted accordingly. Chitty, J., did not require the adoption of this form {Solwai/ Steamship Co., 61 L. T. 659), but had no objection to it ; and as it is not now possible to foretell what judge of the High Court a petition may come before, unless the jDetition is assigned to Wright, J., it is wiser to frame the minute on the later fonn. A minute so framed is obviously not required by the Act, but it has the advan- tage of giving, at a glance, to a person attending at the office of the registrar of joint stock companies, information which would otherwise involve the perusal of other documents, and in this view it may be convenient. The minute is to state the amount to be deemed paid up o)i each share. Where all the shares have been issued and are paid up to the same extent, it is easy enough to say that so much is to be deemed to be paid up on each share, and this 976 PETITIONS. [Chap. XVI. statement strictly complies with the requirement of this section. But cases fre- quently occur in which (a) only part of the shares are issued ; or (b) the shares issued have diifereut amounts paid up. In such cases the usual practice has been to state in case (a) the aggregate number of the shares issued and the amount per share paid up ; and in case (b) the aggregate number of each class, and the amount per share paid up on each class, but it has not been usual to state the denoting number of the shares referred to, e.g. : "The capital of the Madulseema CofPee and Cinchona Company, Limited, is 110,000/., divided into 7,000 shares of 10/. each, and 8,000 preference shares of 5/. each. At the time of the registration of this minute 7,000 of the said 10/. shares and 5,740 of the said 5/. preference shares have been issued, and have been and are to be deemed paid up as follows, that is to say : — 6,018 of the said 10/. shares to the extent of 10/. per share, and of the i-emaining 982 of the said 10/. shares 250 to the extent of 11. 16s. per .share, and 532 of the said 10/. shares to the extent of 12/. ISi-. 9rf. per share, and the remaining 200 of the said 10/. shares to the extent of 11. per share, and on each of the said 5,740 preference shares the sum of 1/. has been and is to be deemed paid up, and on the residue of the said preference shares nothing has been or is to be deemed paid up. The said 200 shares have been forfeited and have not been re-issued." Hundreds of minutes framed on these lines have been approved, and it appears to have been generally considered that a minute so framed sufficiently states the amount deemed to be paid up ou each share, although it is not possible without reference to the register to identify the particular share. As to o'ivincr However, occasionally the minute points out the particular shares by numbers, numbers in e.cj.., "The capital of the Livingstone Spinning Comjmny, Limited, is 48,000/., mmute. divided into 12,000 shares of 4/. each. At the time of the registration of this minute the sum of 1/. has been and is to be deemed to be paid on each of the 222 shares standing in the company's share register under the register numbers 356, 824, 867, 926, and 968 ; the sum of 1/. 10s. on each of the 38 shares standing in the said register under the register numbers 58 and 190 ; the sum of 1/. 12s. %d. on each of the 425 shares standing in the said register under the register numbers 30, 154, 253, 301, 309, 317, 426, 440, 606, 621, 663, 684, 706, 1006, 1021, and 1026 ; the sum of 1/. 15s. on each of the 20 shares standing in the said register under the reo-ister number 566 ; and the sum of 1/. 17*. M. on the remaining 11,295 shares, and such order and minute have been duly registered by the said registrar of joint stock companies." Chitty, J., 28th December, 1889. " The capital of the International Conversion Trust, Limited, is 40,500/., divided into 20,000 ordinary shares of 2/. each, and 100 founders' shares of 5/. each, reduced from 100,500/., divided into 20,000 ordinary shares of 5/. each and 100 founders' shares of 5/. each. At the time of the registration of this minute 2,407 of the said ordinary shares of 2/. each, numbered 101 to 2,507 inclusive, are issued and are fully paid up, except that upon the shares numbered 101 to 106 inclusive, 508 to 607 inclusive, and 1,208 to 1,307 inclusive, there are the foUowrng arrears of calls : — Denoting Numbers of Shares. 101 to 106 inclusive 508 to 607 1,208 to 1,307 Amount of Call in arrear. 2/. per Share. 1 '• 11 ) » 2/ "And of the said founders' shares of 5/. each 74 shares numbered 1 to 74 inclusive are issued, of which 50 shares numbered 1 to 50 inclusive are fully paid up, and on the remaining 24 shares numbered 51 to 74 inclu.sive the sum of 11. per share has been paid up. At the time of the registration of this minute the residue of the said ordinary fihares, nainoly, 17,593, numbered 2,508 to 20,000 inclusive, and the residue of tlie said fouiidcis' shares, namely 26, numbered 75 to 100 inclusive, are unissued." 29th Juno, 1892. memorandum of association. FORMS. 977 "The capital of the Fore Street Warehouse Company, Limited, is 480,000/., Minute where divided iuto 30,000 shares of 16/. each. At the time of the registration of this capital liable minute the whole of the said 30,000 shares have been issued and allotted, upon ^° "'^ recalled, each of which the sum of 14/. has been*[and is to be deemed to be paid up, but in respect of each of the said shares the company is empowered to pay off or return 3/. of the amount so paid up upon the footing that the amount jiaid off or returned, or any part thereof, may be called up again." Kay, J., 23rd June, 1888. And see Craven Lime Co., LUnilcd, where a similar minute was approved by North, J., 21st April, 1888. Ey sect. 15 of 1867, " The registrar of joint stock companies, upon production to Registration him of the order [that is to say, an office copy thereof] of the Court, confirming the of order and reduction, and the delivery to him of [the office] copy of the order, and of the ^i^^^®- minute (approved by the Court), is to register the order and minute, and, on the registration, the special resolution confirmed by the order so registered takes effect." The same section requires notice of such registration to be published in such manner as the Court may direct, and provides as follows : — ' ' The registrar shall certify under his hand the registration of the order and Certificate of minute, and his certificate shall be conclusive evidence that all the requisitions of registration, this Act with respect to the reduction of capital have been complied with, and that the capital of the company is such as is stated in the minute." By sect. 16 of 1867, "The minute, when registei'ed, shall be deemed to be Minute to substituted for the corresponding part of the memorandum of association of the he part of company, and shall be of the same validity and subject to the same alterations, as if it had been originally contained in the memorandum of association ; and, subject as in this Act mentioned, no member of the company, whether past or present, shall be liable in respect of any share to any call or contribution exceeding in amount the difference (if any) between the amount which has been paid on such share, and the amount of the share as fixed by the minute." In the High Court of Justice, Form 591. Chancery Division. ~~. T f Petition to Mr. J UStlce confirm re- in the matter of the Coy, Limtd and Reduced. capital under And in the matter of the Companies Act, 1867. [where creditors The above heading is right even when the petition is filed at the office of the affected]. Registrar in Companies Winding-up, Bankruptcy Buildings. Aluminium Co., W. N. (1894) 6. To Her lilajesty's High Court of Justice : The humhle petition of the Coy, Limtd and Reduced : Showeth as follows : 1. Your petitioner, the above-named coy (hnfter called the coy), •was incorporated in the year , under the Companies Acts, 1862 and 1867 [or 1862 to 1890], as a coy limtd by shares. 2. The registered ofl&ce of the coy is situated at . 3. The objects for which the coy was established are [the working of coal mines] and other objects set forth in the memorandum of association thereof. p. 3r 978 PETITIONS. [Chap. XVI. Form 591. 4. The capital of the coy is 100,000/., divided into 5,000 shares of ~" 201. each. 5. Shortly after the incorporation of the coy it commenced and has since carried on business. 6. The coy has issued 4,200 of its shares, and no more, and the sum of 10/. per share has been paid up thereon. 7. By clause 37 of the articles of association of the coy it is provided that the coy may from time to time by special resolution reduce its capital. If reqtiisite, say : — "The articles of association of the company as originally framed did not contain power to reduce the capital, but by special resolution of the company duly passed, iSrc, it was resolved that the following words should be added to clause 37 of the articles of association, viz. : * the company may at any time by special resolution reduce its capital in any manner permitted by law.' " See supra, p. 409. 8. By a special resolution of the coy duly passed and confirmed, in accordance with s. 51 of the Companies Act, 1S62, at extraordinary general meetings of the coy held resply on the day of and day of , it was resolved as follows, namely: "That the capital of the coy be reduced from 100,000/., divided into 5,000 shares of 20/. each, to 75,000/., divided into 5,000 shares of 15/. each, by reducing the liability on each share to the extent of 5/." For other forms of resolution, see supra, p. 660. 9. The form of minute proposed to be registered is as follows : — \_Here set out the minute. See forms, supra, p. 975.] It is convenient to state the proposed minute in the petition, especially where it is a long one. Counsel can thus, in indorsing his brief, refer to the minute in the petition, instead of setting it out, or referring to a separate document.. Your petitioner the coy therefore humbly prays : (1) That the reduction of capital to be effected by the special resolu- tion mentd in paragraph 8 of the petition may be confirmed, and that the above-mentd minute may be approved by the Court. Under s. 11 of the Companies Act, 1867, the power of the Courtis to confirm the reduction, not the irsohttioii, and although the orders used generally to confirm the resolution, the modem form is differently expressed. See Form 605, infra. (2) That to this end all inquiries and directions necessary and proper may be made and given, and that a day may be fixed on and after which the coy shall bo at liberty to discontinue the addition to its name of the words " and reduced." • (3) Or tliat such other order may be made in the premises as to the Court Bliall seem meet. And your petitioner will over pray, &c. Note. — It is not intended to servo this petition upon any person. FORMS. 979 In the High Court of Justice, Chancery Division. \_Name of Judged] In the matter of the Coy, Limtd and Reduced. And in the matter of the Companies Act, 1867. And in the matter of the Companies Act, 1877. As to the title, see note to Form 435. Form 592. Petition to confirm re- duction of capital under Acts of 1867 and 1877 [where creditors not affected]. Coy, Limtd and Reduced To Her Majesty's High Court of Justice The humble petition of the — Showeth as follows : 1 to 7. \_As in Form 591.] 8. By special resolution, &c., it was resolved : " That the capital of the coy, which now consists of 10,000/., divided into 1,000 shares of 10/. each fully paid up, be reduced to 5,000/., divided into 1,000 shares of 5/. each, and that such reduction be effected by cancelling paid-up capital [which has been lost or is unrepresented by available assets] to the extent of 5/. per share." For other forms of resolution, see supra, p. 660. 9. Previously to the passing of such special resolution, paid-up capital of the coy to the extent of 5,000/. and upwards had been lost. 10. The reduction of capital afsd does not involve either the diminu- tion of any liability in respect of unpaid capital or the payment to any shareholder of any paid-up capital. 11. The form of the minute proposed to be registered is as follows : \_Here set out minute. See Forms, supra, p. 975.] Your petitioner the coy therefore humbly prays : (1) That the sd reduction, &c. [os above^. (2) That the addition of the words "and reduced" to the coy's name may be dispensed with altogether. (3) Or that [as in Form 591]. And your petitioners will ever pray, &c. Note. — [As i?i Form 591.] Upon motion, &c., let the petition be placed in the pajier for hearing Form 593. on Saturday, the 3rd of March, 1888, without any advertisement or r~J ' ^~ notice, and without any certificate of creditors. He West Cumberland, petition in Sfc. Co., Kay, J., 21 Feb. 1888. P^P^^' •^°- This order was made on an ex parte motion, it being alleged by counsel, and it appearing from the petition, that the case was a cancellation of lost capital, falling, therefore, if proved, w-ithin sect. 4 of the Act of 1877. Such orders used frequently to be made, e.ff., Si. Lucia Sugar Co., North, J., 26 Mar., 1887 (T. L. R. iii. 523) ; Torr Mills, Kay, J., Feb., 1887 ; Vivian ^- Co., Pearson, J., W. N. (1886) 32 ; 54 L. T. 384. But, as mentioned above, p. 973, the application is now usually 3r2 980 PETITIONS. [Chap. XVI. Form 593. made by summons in Chambers on proper affidavit evidence. See Form 442. Occa- sionally the order dispenses with the words " and reduced," thus :— Form 594. Order dis- pensing with " and re- duced." Form 595. Order direct- ing hearing and adver- tisements. / Upon motion this day made unto tliis Court by counsel for the Orion Diamond Mining Coy, Limtd, the petitioners named in a petition preferred in the ahove matters on the 10th day of June, 1887, and upon reading the sd petition : This Court doth order that the sd petition be placed in the paper for hearing on the 18th day of June, 1887. And the Court dispenses with the publication of notice of the pre- sentation of the petition, with any advertisement of the day appointed for the hearing of the sd petition, the settlement of a list of persons who are creditors of the sd coy, and, until the hearing of the sd petition, with the words ''and reduced" in the title of the sd coy. Re Orion Diamond Mi7iing Co., Stirling, J., 10 June, 1887. In Mr. Justice Chitty's chambers advertisement of the day for hearing of a petition for cancelling lost capital was rarely or never dispensed with, but on the summons to proceed, and on proper evidence, an order as follows was placed on the petition : — The judge being of opinion that the proposed reduction does not involve either the diminution of any liability in respect of unpaid capital, or the payment to any shareholder of any pd up capital, hby directs that the within petition be set down to be heard before his lordship, Mr. Justice Chitty, on the day of , 189 — , when any creditor who desires to object may attend and be heard, and that notice of the presentation of the petition and of the sd day fixed for the hearing thereof be inserted on or before the day of , 189 — , the following times in the following newspapers , Chief Clerk. But the more general practice is to take a formal order as follows : — Order on special summons Form 596. Upon the applicon of the City of London, &c. Coy, Limtd and Beduced, the petitioners named in the petition presented in the above matters, by summons dated the 18th day of July, 1890, and upon hearing the solor for the applicants, and upon reading the sd petition presented on the 18th day of July, 1890, and the affidavits of ; Sir H E K and E C S , both filed the 22nd day of July, 1890, and the several exhibits therein referred to, and the judge being of opinion that the proposed reduction of the capital of the sd coy does not involve either the diminution of any liability in respect of unpaid capital or the payment to any shareholder of any pd up capital. It is oiideued that the list of creditors of the sd coy, and tlio oflico copy affidavit verifying such list mentd or referred to in the general order of this Court, of the 2l8t day of March, 1868, and thereby directed to bo left in the chambers of the judge, bo dis- l>ouBod with. FORMS. 981 Ant) it is ordered that the sd petition bo set down to be heard before his lordship, Mr. Justice Chitty, on Saturday, the 2nd day of August, 1890, when any creditor or shareholder who desires to object may attend and be heard. And it is ordered that notice of the presentation of the sd petition and of the sd day fixed for the hearing thereof be inserted on or before the 30th day of July, 1890, at the following times in the following newspapers, that is to say, in the London Gazette of the 25th day of July, 1890 ; in the T'mics newspaper of the 24th and 29th days of July, 1890 ; in the Standard newspaper of the 24th and 29th days of July, 1890 ; and in the Baihj Neivs of the 24th and 29th days of July, 1890. Re City of London Fire Lnsur. Co. The like, Re New Automatic, Sfc. Co., Chitty, J., 7th March, 1892; the like, Re Queensland, ^^c. Co., Vaughan Williams, J., 7th January, 1895; the like. Re St. Peters- burg, Sfc. Co., Chitty, J., 11th April, 1895. Form 596. In the High Ct of Justice (Chancery Division). Mr. Justice . Form 597. In the matter of the Coy, Limtd [and Reduced], and in the Z^ . , matter of the Cos Act, 1867, and of the Cos Act, 1877. Notice is hby vertisement. given that a petition presented to the High Ct of Justice, Chancery Division, on the day of , 188 — , for confirming a special resolution reducing the caj)ital of the above-mentd coy from 1, to - day of 1, is directed to be heard before his lordship on the - , 1888. Any creditor or shareholder of the coy desiring to oppose the making of an order for the reduction of the capital of the sd coy under the above Acts should appear at the time of hearing by himself or his counsel for that purpose. And a copy of the petition will be furnished to any creditor or shareholder of the coy requiring the same by the undersigned on payment of the regulated charges for the same. Dated this day of , 188 — , A. and B., solors to the above-named coy. , Chief Clerk. , solors for the coy. This is the form of advertisement generally adopted. Sometimes the words ' ' by cancellrDg capital which has been lost or is unrepre- sented by available assets" are inserted. In the High Ct of Justice, Chancery Division. Mr. Justice . In the matter of the Companies Act, 18G7, and In the matter of the Companies Act, 1877, and In the matter of the S. Coy, Limtd and Eeduced. I, A. B., of, &c., make oath and say as follows : — 1. I am, and have for upwards of eleven years past been, a director, Form 598. Affidavit in support of petition for reduction by cancelling' lost capital. 982 PETITIONS. [Chap. XVI. Form 598. and for upwards of tlirea years past the cliairman of the above-named coy, hnfter called the coy, and am intimately acquainted with the affairs of the coy. 2. I have read the petition in this matter now exhibited to me and marked A. B. 1, and I believe that all the statements contained in that petition are true, and that belief is grounded on the knowledge I have obtained as such director and chairman of the coy as afsd. 3. The document now exhibited to me marked A. B. 2 is the certifi- cate of incorporation of the coy. The registered office of the coy is now situate at, &c. 4. The document now exhibited to me marked A. B. 3 is a printed copy of the memdm and arts of asson of the coy, and also contains copies of all sj)ecial resolutions which have been passed and con- firmed [except the special resolution referred to in the sd petition]. If no special resolutions have been passed except the one for reduction, -write : ' ' No alterations have been made in such memorandum or articles save so far as the same are affected by the special resolution referred to in the said petition." 5. The document now exhibited to me marked A. B. 4 is a dupli- cate of the agreemt mentd in paragraph 4 of the sd petition. That agreemt was duly filed with the Registrar of Joint Stock Companies before any of the shares therein mentd were allotted. Except those shares, all the capital credited as pd up on the outstanding shares of the coy has been pd up in cash. 6. The statements contained in par-agraph 5 of the petition are correct. 7. The general meetings mentd in paragraph 7 of the petition were resply convened by notices in the terms of the two documents now exhibited to me, and resply marked A. B. 5 and A. B. 6. These notices were duly sent out to the shareholders in accordance with the arts of asson of the coy. I was present at the meetings at which the special resolution referred to in such paragraph was passed, and I say that the same was duly passed and confirmed in accordance with s. 51 of the Cos Act, 1862. Chitty, J., has repeatedly held that in cases of reduction the fact that the meetings for passing the special resolution were duly convened and held should be proved by affidavit [see Form 604], and not merely by production of the minute book which, under sect. G7 of the Act of 1862, is prima facie evidence. And Vaughan Williams, J., adopted this rule both in reduction and extension cases. Ee Omnium Investment Cu., (1895) 2 Ch. 127, which also see as to exhibiting the memorandum and articles. Presumably the ground for requiring something more than primd facie evidence is, that the creditors, present and futiire, and the public, are interested, and though existing creditors are invited to attend they rarely do in fact attend, and in the result the application to the Court is heard ex parte, and the Court therefore acts, and, it is submitted, should act, with greater strict- ness than in a contested case, whore the evidence adduced by one party is likely FORMS. 983 to be tested by the other party. And it must be borne in mind that fraud in such Form 598. cases is possible, and this danger is mininuscd if the prima facie evidence has to be confirmed by affidavit. Acting on the same principle, the Court does not treat the entry on the register that certain shares are paid up as sufficient where the shares have been issued for a consideration other than cash. In some cases the Court requires evidence of the filing of the requisite contract, pursuant to s. 25 of the Companies Act, 1862. See cases supra, p. 179. 8. The book now exhibited to me marked A. B. 7 is the minute book of the coy, containing minutes of the proceedings had at the general meetings of the coy. 9. At the time when the sd special resolution was passed, capital of the coy to the extent of at least /. had been lost or was unre- presented by available assets. This fact is made out as follows : — The assets of the coy consist of the following particulars, and are of the value set opposite the same resply, that is to say : Set out short particulars of the assets, and set opposite the same the values, and add up the amounts — say 150,000^. The liabilities of the coy are as follows : Set out the general values of the liabihties, and opposite each the amount, and add up— say 100,000^. 10. Deducting the amount of the liabilities afsd, namely L, from the amount of the assets afsd, it appears that the surplus amounts to , or thereabouts, but the paid-up capital of the coy is L, and accordingly paid-up capital to the extent of 1, and upwards has been lost or is unrepresented by available assets. 11. The loss afsd is attributable to the following circumstances: [State the circumstances, and use Form 599 or 600 if applicable.] 12. It was for some time hoped that the value of the ppty of the coy might be regarded as only temporarily affected, but the directors and shareholders are now fully satisfied that the assets of the coy, less its liabilities, cannot in any sense be regarded as equivalent to the amount of its paid-up capital, and that the deficiency, namely, L or upwards, must be regarded as a permanent deficiency, and ought to be written off and cancelled. Sworn, Sj^c. This affidavit is merely given as an example of the kind of evidence which the Court looks for ia such cases. Usually the loss is f ui'ther supported by the affidavit of some expert (p. 987) ; for since Ec Tambrachcrrij, supra, p. 972, the Court looks very carefully into the evidence in support of alleged losses. It is not intended to encourage people to swear by the card. 984 PETITIONS. [Chap. XVI. The following forms will show how losses have in some cases heeu exjilained iu affidavits: — Form 599. rj^-j^Q jQgg ^fsd is attributable to tbe following circumstances, that is Causes of lose to say :— of capital. Under an indenture, dated, &c., and made between, &c., the coy became lessees of extensive collieries situate at, &c., for a term of twenty-one years, commencing on, &c., with power for the coy to determine the sublease at the end of the seventh or fourteenth years of the term, on giving one year and one week's notice. The coy acquired these collieries when the coal trade was in a very flourishing condition, and when consequently colliery concerns were regarded as of very great value, and the coy therefore agreed to pay the lessor very large rents and royalties. The coy also expended very large sums of money in developing and improving the collieries. Subse- quently, however, the demand for coal went down and prices fell, and it then became impossible for the coy to work the collieries at a profit. The coy therefore gave notice of its intention to determine the lease at the end of the fourteenth year of the term, and its occupation of the collieries accordingly determined on the day of , 1 8 — . The net result of the working of the collieries by the coy has been ascer- tained to be a loss to the coy of upwards of /. Moreover, the coy has from time to time expended large sums, amounting altogether to 1., or thereabouts, on machinery and plant at its iron and steel works. The works being originally laid out, as to part thereof, for the manufacture of iron, became old-fashioned and obsolete, and had to be remodelled for the manufacture of steel. The result from this outlay has been a loss to the coy of ~l. and upwards. Other examples are given below, but the circumstances differ so widely that forms can only be useful as indicative of what is required. rorm 6G0. The loss of capital above mentd has been occasioned as follows, that Another. is to say : (1) From various causes, including of late years the extraordinary depression of the sugar trade, the business of the coy has been carried on at a loss, and no dividends have ever been paid by the coy. The balance of profit or loss each year has been carried to the profit and loss account, and on the day of , 1886, the accumulated balance to the debit of that account was 1. (2) The coy in 1878 erected and constructed extensive works, ma- f;]unory, and buildings liable to depreciation and diminution in value from wear and tear and otherwise, at a cost of L and upwards, and although such works, machinery, and buildings have become depreciated, and have steadily dimi- FORMS. 985 nishod in value, no part of sucli depreciation or diminution in Form 600. value has ever been written off by the coy, inasmuch as it was not considered material to alter the figures when the coy was not paying dividends. At the time when the sd special resolution was passed, capital of the Form 601. coy to the extent of at least 100,000/. had been lost or was unrepre- Loss by firo sented by available assets. This fact is made out as follows ; that is insurance company, to say : — ^ •' The assets of the coy as at .Slst March, 1890, were as follows : — Investments £197,580 6 5 Cash 6,772 15 8 Bills receivable 2,071 5 10 Branch and agents' balances 78,939 6 1 Interest accrued 2,472 2 4 Furniture and fittings at head offices and branches 1,652 9 £289,488 5 4 The liabilities of the coy as at 31st March, 1890, were as follows: — Estimated liability on outstanding policies, at least £127,976 5 5 Outstanding fii-e losses 53,41 1 19 9 Sundry creditors 2,260 15 4 Temporary loans 5,500 Bills payable 200 Unclaimed dividends 139 4 10 £189,488 5 4 Deducting the amount of the liabilities afsd, namely, 189,488/. 5s. 4d., from the amount of the assets afsd, it appears that the surplus amounts to 100,000/. or thereabouts, but the paid-up capital of the coy is 200,000/., and accordingly paid-up capital to the extent of 100,000/. and upwards had, up to the 31st March, 1890, been lost or was unrepresented by available assets, and there has not since been any material altera- tion in the coy's position. The document now exhibited to me, and marked "H. E. K. 8," is a co-pj of the directors' report and balance- sheet which was submitted to and adopted by the ordinary general meeting of the coy held on the day of , 1 8 — . The loss afsd is attributable to the following circumstances: — (1.) The occurrence of exceptional fires and conflagrations, by which the coy had to pay during the last two years losses much in excess of the average. (2.) The payment during the last year of losses upon classes of risks which the coy has ceased to insm-e owing to their unprofitable character. 986 PETITIONS. [Chap. XVI. Form 601. Form 602. Actuary's affidavit. Insurance office. (3.) The coy's inability to reserve from premiums received in respect of policies issued prior to the 31st March, 1890, a proportion to meet the losses which will accrue on such policies. In the circumstances af sd, I say that the reduction of capital proposed to be effected does not involve either the diminution of any liability in respect of unpaid capital or the payment to any shareholder of any paid-up capital. The following is a specimen of an affidavit by an actuary in support of the reduction referred to in the foregoing form : — 1 . I am the general manager of the Fire Insurance Coy. I have held that office for upwards of years, and similar engage- ments with other cos for — years previously, and I have conse- quently great experience relative to the business of fire insurance. 2. I have read the petition in the above matters now exhibited to me and marked "A," and also a copy of the affidavit of , the chairman of The A. B. Insurance Coy, Limtd (hnfter called "the coy"), filed in support of the sd petition. 3. I have lately, at the request of the coy, examined the books, documents, accounts, and papers of the sd coy, for the purpose of ascertaining what loss of pd-up capital the sd coy has incurred, and say that, as the result of such examination, I believe the statements in the sd petition and affidavit as to the sd coy's financial position to be correct. 4. Having regard to the total amount of the coy's liabilities in respect of outstanding policies granted by it, the coy ought, at the very least, in my opinion, to have a reserve fund to answer such liabilities of 127,976/. 5s. 5f/., whereas the coy only has a reserve fund to answer such liabilities of 27,976/. 5s. bd. This opinion is based on the following estimate, which is founded on the established practice of fire insurance cos, and which experience has substantiated. I arrive at this estimate in the following manner: — The premiums received dui'ing the twelve months ending 31st day of March, 1890, were 298,095/. The annual rate of fire loss incurred by the coy since its commencement is 70'75 p.c. It is found, by actual analysis, that one-half of the risks com- prised in an ordinary year's income are, at its close, still unexpired. This, upon an annual income of 298,095/., would represent 149,047/., and the expected losses thereupon, at the rate of 70-75 p.c, would require £105,451 To this sum I add the special provision for losses which will occur under policies included in the year for various terms exceeding one year. From an examination of the coy's business and my know- ledge of its transactions, I estimate this to be not loss than £22,525 £127,976 FORMS. 987 1 . In my opinion tlie pd up Ccapital is at tho present time unre- Form 603. presented by available assets to the extent of at least 70,000^., being Accountant's the equivalent to 11. per share. affidavit in 2. I have arrived at the above conclusion from the following con- ^"PP^^ • siderations : — By the concession granted by tho municipality of, &c., the munici- pality had an option, which they have exercised, of taking over the undertaking in conson of an annuity of roubles p. a., which is payable half-yearly up to the 31st May, 19 — . The value of this annuity on the 12th January, 1895, calculated upon a 5 p.c. basis with half-yearly payments, is the sum of roubles, which, reckoning the exchange at roubles to the pound, amounts to 1. I regard roubles to the pound as a fair rate to take for the purpose of the above calculation, regard being had to the average rate of exchange during the last three years. In addition to the value of the annuity the coy has assets, consisting of, &c., to the value of 1, or thereabouts, so that the total assets do not exceed a calculated value of 232,500/. After deducting the debentures, debenture stock, and other liabilities, either actual or contingent (the whole of which indebtedness together amounts to between 103,000/. and 104,000/.), there remain available for the shareholders assets which cannot be calculated at more than 130,000/., being the equiva- lent of 13/. per share on the 10,000 shares constituting the share caj)ital : in other words, there is, as stated above, a sum of at least 11. per share unrepresented by available assets. 1. The register now produced and shown to me marked A. B. (1), Form 604. did, on the day of , contain the name and last-known 7^7 ., - address of every person who on that day was a member of the above- secretary named coy. proving due •' calling of 2. I did, on the sd day of , serve a true copy of the meetings. notice now produced and shown to me marked A. B. (2), upon every member of the sd coy whose name appeared in the sd register as a member of the coy on that day. 3. I served the sd respective copies of the sd notice by putting such copies resply into envelopes duly addressed to such persons resply, according to their respective names and addresses appearing in the sd register, and with proper postage stamps affixed thereto as prepaid letters, and by posting the same at the Post Office receiving house. No. Street, in the City of London, between the hours of and of the clock in the afternoon of the sd day of . 988 Form 605. Order con- firming re- duction by cancelling lost capital. PETITIONS. Upon the petition of the City of - the 8th day of April, 1895, preferred imto this [Chap. XVI. Coy, Limtd and Eeduced, on Court, and upon hearing counsel for the petitioners, and upon reading the sd petition, an order dated the 11th day of April, 1895, dispensing with a list of creditors, the London Gazette oi the 16th day of April, 1895, the Times newspaper of the 17th and 19th days of April, 1895, the Standard newspaper, of the 19th, and the Daily News newspaper of the 19th April, 1895, each containing a notice that the sd petition was appointed to be heard on the 8th of April, 1895, pursuant to the sd order, an affidavit of , filed the 10th April, 1895, an affidavit of , filed the 26th April, 1895, and the exhibits therein referred to, and an affidavit of filed the of : This Court doth order that the reduction of capital provided or effected by the special resolution passed at an extraordinary general meeting of the petitioners, the City of Coy, Limtd and Eeduced, held on the 5th day of March, 1895, and confirmed at an extraordinary general meeting of the sd coy on the 26th day of March, 1895, and which resolution was in the words and figures following ; that is to say : — " That the capital of the coy be reduced from 200,000/., divided into 10,000 shares of 20/. each, to 130,000/., divided into 10,000 shares of 13/. each, and that such reduction be effected by cancelling capital which has been lost or is unrepresented by available assets to the extent of 7/. per share upon each of the 10,000 shares which have been issued and are now outstanding, and by reducing the nominal amount of all the shares in the coy's capital from 20/. to 13/. per share," be, and the same is hby, confirmed. And it is ordered that this order be produced to the Registrar of Joint Stock Cos, and an office copy of this order be delivered to him, together with a minute in the words or to the effect set forth in the schedule hto. And it is ordered that notice of the registration of this order and of the sd minute be pub- lished as follows ; that is to say, once in the London Gazette, twice in the Times, and once in the Standard and Daily News newspapers. And it is ordered that the addition of the words " and reduced " be con- tinued for one month from the date of this order. Minute appeoved by the Court. <'The capital of the City of Coy, Limtd, is 130,000/., divided into 10,000 shares of 13/. each, instead of the original capital of 200,000/., divided into 10,000 shares of 20/. each. At the time of the registration of this minute, the full sum of 13/. per share has been and is to be deemed pd up on each of the sd 10,000 shares of 13/. each." Re City of Waterivorks Co., Chitty, J., 30 April, 1895. For similar order, aeeEe Queensland, Sfc. Co., Romer, J., 29 January, 1895. It will be observed that the order, according to the present practice, confirms the reduction, not the resolution. See note, mpra, p. 978. FORMS. 989 In tho matter of the Coy, Tiimtd [and Boduced], and in tho Form 606. matter of the Companies Acts, 18G7 and 1877. Notice is hby given ^,i7ertise- that the order of the High Court of Justice (Chancery Division) dated, ment of order &c., confirming the reduction of the capital of the above-named coy ^^ "^f^ from /. to 1., and the minute (approved by tho Court) showing with respect to the capital of the coy as altered the several particulars required by the above statutes, were registered by the Registrar of Joint Stock Cos, on the day of . And further take notice that the sd minute is in the words and figures following : " The capital, &c." Dated the day of . of , Solicitors for the Coy. Sect. 15 of the Act of 1867 provides for the registration of the order and minute with the Registrar of Joint Stock Companies, and requires notice of such registra- tion to be published in such manner as the Court may direct. The Court cannot dispense with this publication (per Chitty, J., Ee London Steamboat Co., 31 W. R. 781 ; W. N. (1883) 123) ; for Parliament has enacted that there shall be such publication. The terms of sect. 15 should be borne in mind. In some cases a copy of the order has been advertised in the notion that the section was thereby complied with ; but that is not what the section requires. The Coui't has, under s. 2 of the Act of 1877, power to direct publication of the reasons for reduction, but this is rarely done. Where it is done, the reasons are inserted just before the words " and further." The following is one of the few available examples, as approved by Stirling, J., May, 1895. £e Burton, ^-c. Co., Limited (1894, B. 0136) :— "The reason for the reduction of the capital of the coy is on Form 607. account of the loss of 31,691/. 3s. 4d. of the capital of the coy, arising Reasons for from payments of part of the debenture interest out of capital, the reduction, pulling down of certain malthouses, cottages, and timber stores, the depreciation in the value of the goodwill of the coy from the amount at which it was originally taken over, and a depreciation in value of five public houses to the extent of 1,000/. in the whole, the loss of certain fixed plant, buildings and machinery upon the termination of a lease, and the deterioration in the casks, and also in the value of stock of ale at Burton and the agencies of the coy. And further take notice that the said minute is in the words and figures following." Upon motion this day made unto this Court by counsel for the above- Form 608. named coy, being a renewal of the applicon on the 21st November, TT^ ,. _ 1885, refused by the Vice-Chancellor Bacon, the time for making such continue use motion having been enlarged by the Court, and upon reading an afii- °.^ " ^^f ^^' davit of Thomas Jones, filed the 12th August, 1885, and the sd coy by their counsel alleging that the petition on the 30th day of July, 1885, preferred unto this Court by them for the confixmation of the resolu- 990 PETITIONS. [Chap. XVI. Form 608. tions for reduction of capital in the sd affidavit referred to tas been withdrawn, and that it has been determined not to proceed with such reduction : This Court doth order that the sd coy be at liberty forthwith to discontinue the addition to its name of the words " and reduced." Re Mordey, Carney ^- Co., Limited and Reduced, Court of Appeal, 11th January, 1886, 53 L. T. 736. The like order was made by Malins, V.-C, in Re Vron Co., 25th May, 1880, B. 1653. Where it is found that a proposed reduction cannot be carried into effect, e.g., because too many creditors declare that they •will oppose, application can be made for leave to withdraw the petition and to drop the words " and reduced." Companies (Memo- randum of Association) Act, 1890, 53 & 54 Vict. 0. 62. Act confer- ring power for company to alter objects, or form of constitution, subject to confirmation by Court. Extension of Objects. The Companies (Memorandum of Association) Act, 1890, is in the terms following : — An Act to give further Foivers to Companies tvith rcxpcct to certain Instruments under ichich they may he constituted or regulated. [18th August, 1890.] Be it enacted by the Queen's Most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parlia- ment assembled, and by the authority of the same, as follows : — 1. — (1.) Subject to the provisions of this Act, a company registered under the Companies Acts, 1862 to 1886, may, by special resolution, alter the provisions of its memorandum of association or deed of settlement with respect to the objects of the company, so far as may be required for any of the purposes hereinafter specified, or alter the form of its constitution, by substituting a memorandum and articles of association for a deed of settlement, either with or without any such alteration as aforesaid with respect to the objects of the company, but in no case shall any such alteration take effect until confirmed on petition by the Court which has jurisdiction to make an order for winding up the company. (2.) Before confinning any such alteration the Court miist be satisfied — (a) That sufficient notice has been given to every holder of debentures or debenture stock of the company, and any persons, or class of persons, whose interests will, in the opinion of the Court, be affected by the alteration ; and (b) That, with respect to every creditor who, in the opinion of the Court, is entitled to object, and who signifies his objection in manner directed by the Court, either his consent to the alteration has been obtained, or his debt or claim has been discharged or has determined, or has been secured to the satisfaction of the Court. Provided that the Court may, in the case of any person or class of persons, for special reasons, dispense with the notice required by this section. (3.) An order confirming any such alteration may be made on such terms, and subject to such conditions as to the Court seems fit, and the Court may make such orders as to costs as it deems proper. (4.) The Court shall, in exercising its discretion under this Act, have regard to the rights and interests of the members of the company, or of any class of those members, as well as to the rights and interests of the creditors, and may, if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the Batisfacfcion of the Court for the purchase of the interests of dissentient members ; and the Court may give such directions and make such orders as it may think expedient for the purpose of facilitating any such aiTangement or carrying the same into effect. Provided always, that it shall not be lawful to expend any part of the capiU*! of the company in any such purchase. FORMS. 991 (5.) The Court may confirm, either wholly or in part, any such alteration as aforesaid with respect to the oLjeots of the company if it appears that the alteration is required in order to enable the company — (a) To carry on its business more economically or more efficiently ; or (b) To attain its main purpose by new or improved means ; or (c) To enlarge or change the local area of its operations ; or (d) To carry on some business or businesses which, under existing circumstances, may conveniently or advantageously be combined with the business of the company ; or (e) To restrict or abandon any of the objects specified in the memorandum of association or deed of settlement. 2. — (1.) Where a company has altered the provisions of its memorandum of Registration association or deed of settlement with respect to the objects of the comijany, or has ^ order, altered the form of its constitution, by substituting a memorandum and articles of memorandum association for a deed of settlement, and such alteration has been confirmed by the as altered or Court, an office copy of the order confirming such alteration, together with a printed sub^^titiited copy of the memorandum of association or deed of settlement so altered, or together ^cnoranuum with a printed copy of the substituted memorandum and articles of association (as ^^j (.q^j. the case may be), shall be delivered by the company to the registrar of joint stock sequences companies within fifteen days from the date of the order, and the registrar shall thereof, register the same, and shall certify imder his hand the registration thereof, and his certificate shall be conclusive evidence that all the reqiiisitions of this Act witli respect to such alteration, and the confirmation thereof, have been complied with, and thenceforth (but subject to the provisions of this Act) the memorandum or deed of settlement so altered shall be the memorandum of association or deed of settle- ment of the company, or, as the case may be, such substituted memorandum and articles of association shall apply to the company in the same manner as if the company were a company registered under Part I. of the Companies Act, 1862, with such memorandum and articles of association, and the company's deed of settlement shall cease to apply to the company. (2.) If a company makes default in delivering to the registrar any dociunent required by this Act to be delivered to him, the company shall be liable to a penalty not exceeding ten pounds for every day during which it is in default. 3. — (1.) This Act may be cited as the Companies (Memorandum of Association) Shorttitleand Act, 1890. construction. (2.) This Act and the Companies Acts, 1862 to 1886, shall be construed as one Act, and may be cited collectively as the Companies Acts, 1862 to 1890. (3.) In this Act, the expression " deed of settlement" includes any contract of copartnery or other instrument constituting or regulating the company, and not being an Act of Parliament, a royal charter, or letters patent. Prior to 1888 it had been the common practice for companies under the Act of History of 1862, as and when occasion required, to promote a Bill in Parliament exteuding legislation, their objects, and a considerable number of such Bills passed into law. But in the year 1888 the late Duke of Buckingham (then Chairman of Committees of the House of Lords) raised objection to several Bills of this character then pending, and the promoters were too faint-hearted to proceed in the face of objections from such a quarter. However, in 1889, a Bill was introduced to extend the objects of the Belgrano (Buenos Ayres) Gas Company, Limited, so as to enable that company to supply electric light as well as gas. This Bill was objected to by the Duke, but the promoters brought the matter before the House of Lords, and in the result the whole question was referred to a joint select committee of the House of Lords and 992 PETITIONS. [Chap. XVI. Scope of Act, Alteration of objects. Conditions. of the House of Commons, which recommended general legislation, with a view to enabling alterations or extensions by special resolution of the memorandum of association to be made, subject to certain conditions, and to the sanction of the High Court of Justice in England or Ireland, and the Court of Session in Scotland. The committee reported that, inasmuch as a considerable interval might elapse before such general law passed, it would not be right in the meantime to place an absolute barrier in the way of obtaining an alteration in the memorandum of asso- ciation of the company, and accordingly the bill of the Belgrano (Buenos Ayres) Gas Company, Limited, and other pending bills, were allowed to pass. In 1890 the Government introduced in the House of Commons a Bill to give effect to the report of the committee. In accordance with the present system of Parlia- mentary drafting the Bill was only an outline, and it remained for Parliament to convert it into a working measure. This was done in the House of Lords, and on the 18th day of August, 1890, the Bill passed into law as 53 & 54 Vict. c. 62. The scope of the Act, which will be found set out above, is limited. It only deals with the following : — (1) Alteration of objects. (2) Substitution of memorandum and articles for deed of settlement. As to alteration of objects. — The Court has only jurisdiction to confirm the alteration in some or one of the cases set forth in paragraph 5 of sect. 1 of the Act. Accordingly there remain a good many cases not within the Act ; for example, there is no power to confirm an alteration of the rights inter se of the holders of different classes of shares, e.g., by converting several classes into one uniform class ; nor is there any power to confirm a resolution dividing the capital into preferred and deferred stock or shares ; nor to confirm a resolution providing for the issue of shares in satisfaction of arrears of dividend on preference shares ; nor is there power to confirm a resolution empowering the company to dispose of its undertaking or to lease the same ; nor is there power to sanction the removal of the registered office from one part of the kingdom to another ; nor to sanction the introduction of any object which, if originally inserted, would have been illegal. In order to obtain the benefit of the Act it must be shown that the petitioning company is registered under the Act of 1862, and accordingly in several cases companies have registered in order to obtain an order, e.g., the Norwich Union Insurance Co., which was constituted by Act of Parliament. A company registered under the Companies Act, 1856, is to be regarded as registered under the Act of 1862. See s. 176 of that Act. Nitro Phosphate Co., W. N. (1893) 41. The Court has a discretion under s. 1 of the Act, and the order may be made on such terms and conditions as to the Court seem fit. Accordingly the Court some- times requires an advertisement of the order, and has occasionally required an alteration of the name where the extension of objects has rendered the name inappropriate. Foreign and Col., ^-c. Co., (1891) 2 Ch. 395 ; AUiancc Insurance, (1892) 1 Ch. 300. And see Copper Mines Tinplate Co., W. N. (1897) 20, infra ; but, as a general rule, this is not required. Lancaster Banking Co., W. N. (1897) 3. In National Boiler Insurance Co., (1882) 1 Ch. 311, Kekewich, J., being prepared to confirm the resolutions with modifications, required a further special resolution approving of the modifications, but the learned judge, in several subsequent cases, held that he had jurisdiction to sanction the modified resolutions without further special resolution ; Re Law Union, %c. Co., 16th January, 1892, where the proposed extension was cut down to some extent ; Law Union and Crown, in which the same judge confirmed a resolution adopting a memorandum and articles in which he required certain modifications. And the Court has on several occasions added words so as to limit the extent of the alteration. Spiers ^- Bond, W. N. (1895) 135; Fleetwood Estate Co., W. N. (1897) 20. The Act has been found extremely useful, and from time to time orders have I FORMS. 993 boon mado under it, and the following instances will afford some indication of the extent to which it has been utilised : — Telci^hone company w^^s empowered to m.uiufuoturo electrical apparatus. Re Oriental Telephone Co., W. N. (1891) 153. Several insurance companies have been allowed to extend their objects so as to include cognate businesses, e.g.. Employers' Liability Co., Chitty, J., 29th June, 1891; marine insurance extension. Re Alliance Marine, (1892) 1 Ch. 300; boiler insurance extension. National Boiler, (1892) 1 Ch. 306 ; guarantee company exten- sion to indemnity, burglary and other special kinds of insurance, Law Guarantee, May, 1895 ; British Empire, S^-c., Co., 1897 ; Equity and Law Life, 1897. Trust investment companies have been allowed to extend their objects. Re Foreign and Colonial Trust Co., (1891) 2 Ch. 395; Government Slock, (f-c. Co., (1892) 1 Ch. 597. Several banks have largely extended their objects or the expression thereof. London and Midland Bunki)iii Co., 1891; Manchester and Liverpool District Ba)iking Co., 1895 ; York City and County Banking Co., 189G; London and Westminster Bank, 1897 (North, J.). A considerable number of companies have been empowered to raise money by debentures and perpetual debenture stock. Reversionary Lntercst Society, (1892) 1 Ch. 615; Law Reversionary Lnierest Society, May, 1893, North, J. ; R. Phipps^ Northampton and Towcester Breweries, 1897; Re Empire Trust. Restriction on bor- rowing removed. Midland Educational Co., Stii-ling, J., 30 April, 1892. Borrowing powers extended. The like in Union, Rolling Stock Co., Kekewich, J., Jan. 189-i. The area of the company's opei'ations has been enlarged in several cases. Lndian Mechanical, i^r. Co., (1891) 3 Ch. 538 ; London Joint Stock Bank, Chitty, J., Nov. 1892. R. Bell ^- Co., matchmakers, were given power to carry on business abroad. See also Crompton S; Sons, Vaughan Williams, J. In several cases objects have been extended so as to enable a company to accpiire other business concerns of a like nature. London Joint Stock Bank, Chitty, J., Nov. 1892 ; Norwich Union, Kekewich, J., 1893 ; York City and County Banking Co., North, J., Nov. 1894 ; Leicestershire Banking Co., North, J., June, 1895. In some cases objects have been extended so as to allow the promotion of and holding shares in foreign companies. Ocean Accident, ^-c. Co., Chitty, J., July, 1893 ; Crompton ^- Sons, Vaughan Williams, J. Extension has also been allowed so as to enable the company to enter into paitnershij) and arrangements for joint working, &c. Tower Co. [Ltd.), Stirling, J., Jan. 1895. There have been several cases in which companies con- stituted by deed of settlement have adopted a memorandum and articles of asso- ciation in lieu of the deed of settlement. Birmingham and Midland Bank, Henn Collins, J., August, 1891 ; L.aw Union, Kekewich, J., 1892. As to adopting a memorandum and articles of association for a deed of settle- ment. — Where a company is registered under the Act of 1862 with a deed of settlement, although it thereby obtains the benefit of sect. 50 of the Act enabling it to alter its regulations, yet, by paragraph 6 of sect. 196 of the Act, it is not permitted to alter any such provisions in its deed of settlement as would, if the company had been originally formed under the Act, have been contained in the memorandum of association, and are not authorized to be altered by the Act. Accordingly, before the new Act, it was always necessary, in the case of a deed of settlement company, to leave part of the deed of settlement in operation. More- over, in the case of old-fashioned deeds of settlement, it is sometimes extremely difficult to say positively what clauses and what powers in the deed of settlement are in the nature of objects of the company or provisions which would have been contained in the memorandiun of association. Such matters may be scattered up and doM'n thirty or forty clauses in the deed, and many objects and powers of the company may exist only by reason of the directors being invested by the deed with such powers, from which it is to be inferred that the company has such powers ; P. 3 s 994 PETITIONS. [Chap. XVI. but now tlie Act enables the company to abrogate altogether the deed o£ settle- ment, and adopt a inemoranduni and articles instead thereof, subject, however, to the sanction of the Court as above. Special reso- lutions and notices of meetings. Confirmation by the Court. "What com- panies. The Court. Petition. Summons and evidence. Debenture holders and creditors. Advertise- ment of petition. Order on petition. Advertise- ment. Practice under Act of 1890. As to special resolutions generally, see sects. 51 and 52 of 1862, and supra, pp. 644 et seq. For notices of the meetings to pass such resolutions, see Fonns. 452 and 453, and notes thereto. ISJo preliminary alteration of articles is necessary. For resolutions under the Act of 1890, see Forms 392—394, siipra. "In no case shall any such alteration take effect imtil confirmed on petition by the Court which has jurisdiction to make an order for winding up the Company." Sect. 1, siib-sect. 2. As to the history of the legislation on this subject, see supra, pp. 991, 992. As to the companies which may take advantage of the Act, and its scope as defined by the Courts, see supra, pp. 992, 993. As to the Courts and judges which have jurisdiction under the Act, see Mining Shares Investment Co., (1893) 2 Ch. 660, and the notes, supra, p. 972. Sect. 1, sub-sect. 2 shows that the_ application for confirmation must be by peti- tion. For examples of petitions, see Forms 609 — 611, infra. As to the summons with reference to creditors and fixing date of hearing of petitions, and as to the evidence, see Form 612, infra, and notes. The order made in chambers, or in the alternative the certificate as to creditors will follow Form 613, or Form 615, infra. The Court must, before confirming any alteration, be satisfied as to notices to debenture holders, &c. Sect. 1, sub-sect. 2, contemplates notices being given by advertisement before the petition is heard. Directions as to this advertisement are given in the above- mentioned summons. For examples of advfertisements, see infra, Forms 616, 617. See sect. 1 of the Act, supra. The Court may add words to the resolution so as to limit the extended objects. Spiers ^ Pond, W. N. (1895) 135; Fleetwood Estate Co., W. N. (1897) 20. For example of an order on petition, see Form 618, infra. Advertisement of the order is sometimes required as a condition. See p. 990. There is jurisdiction to require it, but as a general rule it will not be required, per Stirling, J., Lancaster Banking Co.fW. N". (1897) 3; in one case, Kekewich, J., directed the order to be advertised in the same way as the petition was advertised. Copper 3fines Tij/plate Co., W. N. (1897) 20. For form of advertisement of order, see infra, Form 619. Form 609. ^^ ^^^^ Higli Ct of Justice, Chancery Division. Mr. Justice . Petition to confirm ex- tension of objects. In tlie matter of Tlie .Coy, Limtd, and In the matter of tlio Cos (Memdm of Assou) Act, 1890. To Her Majesty's High Court of Justice : The humble petition of The Coy, Limtd, tSiiEWETii as follows : — 1. Your petitioner, tlie above-named coy (hnfter called " the coy"), FORMS. 995 was incorporated in tlie year 1888, unfler tlio Companies Acts, 18G2 to Form 609. 188G, as a coy linitd l)y sliai-es. 2. The registered olFice of the coy is situate at, &c. 3. The capital of the coy is 1,000,000/., divided into 100,000 shares of 10/. each, in respect whereof the sum of o/. per share constitutes a reserved liability, and is not capable of being called up except in the event of and for the purpose of the coy being wound up. All the sd shares have been issued and are pd up to the extent of 1/. per share. 4. The objects for which the coy was established are set forth in clause 3 of its memdm of asson as follows : — \Here set out the object s.~\ 5. Shortly after its incorjioration the coy commenced, and has con- tinued ever since, to carry on business, and has carried on the same with considerable success. 6. By special resolution of the coy, duly passed and confirmed in accordance with sect. 51 of the Companies Act, 1862, at extraordinary general meetings of the coy, held resply on, &c., it was resolved as follows, that is to say : — "That the provisions of the memdm of asson of the coy with respect to the coy's objects be altered by adding to paragraph 6 of clause 3 of such memdm of asson the words following, that is to say," &c., &c. 7. The proposed extension of the objects of tlie coy is required to enable the coy to carry on its business more efficient^, and also to carry on certain businesses and classes of business which, under existing circumstances, may conveniently and advantageously be com- bined with the business of the coy. 8. The coy commenced business shortly after its incorporation, and has ever since carried on business, and in the course of siich business it has accumulated a reserve fund of upwards of 44,000/. besides its original capital of 100,000/., which includes 76,209/. 14s. Or/, vested in trustees. It has now a large and continually extending connection, and it has extensive opportunities of doing business of the character authorised by the proposed extension of objects, and experience has shown that its objects as they stand are inconveniently restricted, and that its existing business is detrimentally affected by the absence of the powers which would be conferred by the objects set forth in the resolution. Those additional objects are required in order to enable the coy to meet the wants of its customers, and to take full advantage of the opportunities which it has for doing business. 9. It is apprehended that on the true construction of the coy's memdm of asson the existing objects of the coy comprise some of the objects set forth in the sd special resolution, and in particidar indemnity business would appear to fall within the existing objects of the coy, and some of the other objects set forth in the resolution would seem to fall within the words of paragraph 12 of clause 3 of the sd 3s2 996 PETITIONS. [CiiAP. XVI. Form 609. memdm of asson, which empower the coy "to carry on any other business which may seem to the coy capable of being conveniently carried on in connection with the above," but in order to facilitate the business of the coy it is desirable to preclude any question or doubt in the matter. 10. The coy has no debenture debt whatever, but is usually indebted to general creditors for wages and salaries, and otherwise to the extent of about 300^. a week, and this indebtedness varies from week to week as the accounts come in and are paid off. 11. The coy has issued in the course of its business a large number of policies of guarantee and other obligations which are now current. 12. The coy has ample working capital, and its assets are far more than sufficient to pay all its debts and to make good the whole of its paid-up capital, and, moreover, has plenty of capital to work its business and the proj)osed additional business. 13. No one will be prejudiced by the proposed extension of the coy's objects, and it is just and equitable that the said special resolution for the proposed extension of such objects should be con- firmed. Your petitioner therefore humbly prays as follows: — (1.) That the alteration of the coy's objects proposed to be effected by the sd special resolution set forth in paragraph 6 of this petition may be confirmed by the Court pursuant to the Cos (Memdm of Asson) Act, 1890; (2.) Or that such other order may be made in the premises as to this Honourable Court may-seem meet. And your petitioner will ever pray, &c. Note. — It is not intended to serve this petition on any person. An order in accordance ■with the prayer of the above petition was made in 1895 by North, J. Porm 610. Another. [Power to acquire other buainess.] The following clauses are taken from a petition on which an order was made by North, J., in 1895:— 8. By special resolution of the coy duly passed and confirmed at general meetings of the coy, held resply on, &c., it was resolved as follows, that is to say : — "That article 9 of the deed of settlement of the coy, dated, &c., be altered by inserting therein, immediately before the words ' but of no other adventure ' the words ' including the acquisi- tion and taking over of the goodwill of any other banking business, and the whole or any part of the assets and liabilities of the proprietors thereof in connection therewith.' " 9. The proposed extension of the objects of the coy as afsd is required to enaT)le the coy to carry on its business more economically and 7noro profitably than heretofore, and to attain its main purpose by now or improved moans, and also to enlarge the local area of its FORMS. 997 operations, and, further, to enaLlo it to carry on some business or Form 610. businesses wliich under existing circumstances may conveniently or ' ~ advantageously be combined with the business of the coy. 10. In particular, if the sd extension of o])jocts is sanctioned, the coy will be in a position to adopt and carry out the provisional arrange- ments which have already been made for the acquisition by the coy on favourable terms of another important and profitable banking business, and the acquisition of that business would enable the coy to carry on its business more economically and more profitably, for it would extend the bulk of the coy's business and profits without involving a proportionate increase in management expenses. Unless the coy's objects are extended as afsd, it cannot acquire this business. 11. There is now great competition in banking business, and that kind of business is not so profitable as it was. The larger a banking business is the more economically and profitably it can be carried on, and the best and cheapest way of adding to the extent of the bank's business is to acquire and absorb other businesses of a sound and profitable character, but by reason of the limtd scope of its objects this course is not at present open to the coy. 12. The financial business of the coy is good. At the date of the last balance-sheet issued by the clii-ectors, that is to say, that of the 31st day of December, 1894, the financial position was shown to be and was as follows : — Assets other than uncalled capital £ Debts and liabilities £ Surplus £ To which must be added : — 1 . Capital uncalled, but capable of being called up on the present issued 40,000 shares at 5Z. per share £ 2. Reserve capital onlj- capable of being called up in the event of winding up on the present issued 40,000 shares, that is to say, at 10/. per share £ Total assets over liabilities £ The coy has, moreover, unissued 4,000 shares of 25/. each, or 100,000/. of capital. The position of the coy since the date of the sd balance- sheet has not materially altered. 13. The ]irofits of the coy for the year ending the 31st day of December, 1894, were upwards of /. 998 Form 610. PETITIONS. [Chap. XVI. 14. The market value of the coy's shares with 10^. per share pd up is 241. per share or thereabouts. 15. No one, &c. [^Fi7iish as in Form G09.] Form 611. Petition for obtaining memorandum and articles under the Companies Act, 1890. [^Heading as in Form 609.] 1. Your petitioner, the above-named coy (hnfter called "the coy"), Tvas established by deed of settlement, dated the 31st day of March, 1854, and was comj^letel}' registered under the Act of the 7th & 8th Vict. c. 110, under the name of " The L. Fire and Life Insurance Coy," and was registered in the year 1862 under the Cos Act, 1862, as an unlimited coy, under the same name. The said deed of settlement has from time to time been altered by resolution of the members of the coy, passed and confirmed in conformity with the sd Acts resply. 2. In the year the business of the C. Life Assurance Coy was, with the sanction of the Chancery Division of Her Majesty's High Court of Justice, amalgamated with that of the coy, and the name of the coy was then altered to its present name, that is to say, The L. and C. Fire and Life Insurance Coy. 3. The registered office of the coy is situate at . 4. The cai)ital of the coy is 2,000,000/., divided into 200,000 shares of 10/. each, 143,120 of which have been issued, and are j)aid up to the extent of 12s. per share, and no more. 5. The main objects of the coy were originally set forth in Clause 1 of the said deed of settlement, but in the month of Dec., 1891, that clause was modified by special resolution, so as to extend the coy's objects, and such special resolution was, in the month of January, 1892, sanctioned by this Honourable Court under the Cos (Memdm of Asson) Act, 1890. The sd clause, as thus modified, states, in effect, that the shareholders are associated as a coy " for effecting in- surances," &c., &c. 6. Shortly after its incorporation the coy commenced business, and has ever since continued to carry on the same with considerable success. 7. The form of the coy's constitution having been found inconvenient, and the deed of settlement afsd having been found cumbersome, it became desirable to alter the form of the coy's constitution, and accord- ingly a memdm and arts of asson were prepared, under the supervision of the directors of the coy, and were recommended by them for adoption, and with reference thereto the special resolution hnfter mentd was passed. 8. By special resolution, «S:c. (as in clause 6 of Form 609), it was resolved as follows, tliat is to say : — See Form 392, supra, p. 609. 9. The following is a copy of the sd proposed memdm of asson, that is to say, &c. FORMS. !J99 10. Clause 3 of the srl memdm of asson, in accorclanco with tlio Form 611. modern practice, specifies tlie objects of the coy in considerable detail, ' but not so as to alter or extend the leadinj^ and principal objects of the coy. The adoption, however, of this clause involves a limited extension of objects, in order to invest the coy with ancillary powers which it desires to possess, and which are conveniently vested in other like COS. The proposed arts of asson contain a code of regulations suitable for the purposes of the coy. 11. The alteration in the form of the coy's constitution by sub- stituting a memdm and arts of asson as afsd for a deed of settle- ment, is expedient, for the following among other reasons, that is to say : — (].) Because, having regard to the terms of s. 19G of the Cos Act, 1862, which is applicable to the coy, doubts may be raised as to which clauses of the deed of settlement of the coy must be regarded as conditions, and which must be regarded as regulations of the coy within the meaning of that section, and accordingly it is practically impossible without thus altering the form of the constitution to simplify the provisions of the deed of settlement as desired. (2.) Because it is desirable, in accordance with modern practice, to express the objects of the coy in greater detail so as to avoid and preclude, so far as may be, all doubts as to the coy's powers within the oi'dinary scope of its business. (3.) Because a constitution by memdm and arts of asson is now so well understood both at home and abroad that the possession of such a constitution facilitates business, and precludes questions as to how far a coy constituted by deed of settlement, though registered, stands in a like position. (4.) Because in order to meet the existing demands and prospective development of business and the growing competition, it is necessary to secure some extension of the objects of the coy. 12. All the objects of the coy set forth in clause 3 of the proposed memdm of asson are necessary for the due working and development of the coy's business, in accordance with the j)ractice of assurance companies of the kind as now prevailing in England, and so far as the adoption of such objects involves an extension of the present objects, such extension is required to enable the coy to carry on its business more economically and more efficiently than heretofore, and to attain its main purpose by new or improved means, and also to enlarge the local area of its operations, and further to enable it to carry on some business or businesses which under existing circimistances may con- veniently or advantageously be combined Avith the business of the coy. 13. With the exception of the obligations of the coy in respect 1000 PETITIONS. [Chap. XVI. Form 611. of policies and annuities, and of tlie current expenses for the manage- ment and conduct of its affairs, and of the sum of /. and current interest owing in respect of debenture stock of that amount, issued as hnfter mentioned, the coy is not indebted to any persons or companies whatsoever. 14. The sd sum of 1, debenture stock was issued by the coy in the year 1892, as authorized by clause 7 of the sd deed of settlement, as amended by special resolution in the year 1871. Such clause as amended provides, amongst other things, that in the event of the business of the C. Life Assurance Coy being taken over as afsd, the directors of your petitioner might constitute a debenture stock not exceeding 1., to be called 4 p.e. L. & C. Debenture Stock, the principal of such debenture stock to be made payable on the 31st day of December, 1942, and that such debenture stock should carry interest at the rate of 4 p.e. p. a., and that such interest should be secured as a first charge on the annual profits of the coy applicable to the payment of dividends, and in priority to all such dividends, and that the deed constituting such stock should be in the terms of the draft therein mentd, and that the sd directors might issue such stock in accordance with the agreemt for the acquisition of the business of the C. Life Assurance Coy as sanctioned by the Court as afsd. 15. The sd debenture stock was, in pursuance of such agreemt, issued to the shareholders of the sd C. Life Assurance Coy, or their nominees, as fully pd up, and as part of the conson for the sd amal- gamation, or otherwise dealt with as provided for by such agreemt. 16. The financial position of the coy is extremely good. At the date of the last balance-sheet (31st December, 1892), the position was as follows : — Assets other than uncalled capital , £ Debts and liabilities \_here give part{culars'\ £ Surplus £ To whicli must be added capital uncalled, but capable of being called up £ Total surplus of assets over liabilities £ The i)Osition of the coy since the date of the sd balance-sheet has been strengthened financially and otherwise. 17. The profits for the thirteen months ending 31st December, 1892, in respect of the coy were upwards of /. 18. No one will bo prejudiced by the proposed alteration in the form of the constitution of the C03', or by any extension of the coy's objects involved therein ; and it is just and equitable that the sd FORMS. 1001 special resolution for substituting tlio sd memrlm and arts of asson Form 611. for tlie sd deed of settlement should bo confirmed. Your petitioner, &c. [^Finish as in Form 609.] [^Title as in Form 009. j Let, &c. on the heai-ing of an applicon on the part of the Limtd, Form 612. that it may bo declared that the extension of obiects proposed by the ::; ;; • 1 i! -11 ^ 1 Summons for petition presented herein on the day of , will not affect the declaration as creditors of the coy. And that a day may be fixed for hearing the sd to creditors , ,. . . p 1 .. ■ ' f ^ beiny un- petition, and directions given lor advertising the presentation oi the affected by sd petition. extension, and for fixing JJated, &C. _ _ datcofhear- \_Signature of judge.'] ing petition. Immediately after the presentation of a petition under the Companies (Memo- randum of Association) Act, 1890, a summons should be taken out. The summons may be in the above terms, or it may be an ordinary summons to proceed. It should be supported by afiidavit evidence verifying the petition, and stating in what newspapers the advertisements should be inserted ia order to bring the matter to the notice of creditors. A copy of the memorandum and articles of association and the original minute book of the proceedings of general meetings should be made exhibits. Omnium Investment Co., (1895) 2 Ch. 127. In due course, the Chief Clerk, or, if the case is to be heard by Vaughan Williams, J., the Registrar, will give the requisite directions, and either sign a certificate witliin the fold of the petition as in Form 615, or make an order as in Form 613. It appearing that there are no debenture-holders or creditors whose Form 613. interests are affected by the proposed alteration and extension of Order in objects, the judge directs that this petition is to be placed in the chambers for paper for hearing before his lordship on day, the day of petition to be , and that the sd petition, and the sd day appointed for the advertise- hearing thereof, be advertised once each in the London Gazette, the ment. 2\'mes, the Standard, the Daihj Telegraph, the Daily Neivs, and the Morning Post newspajiers. The insertion of the last of such adver- tisements to be at least ten days before the sd day of . , Chief Clerk. Upon the applicon by summons, dated the 16th December, 1897, of Form 614 the above-named coy, the petitioners named in the petition preferred unto this Court on the 14th December, 1897, and upon hearing solors for the applicants, and upon reading the sd petition and an afft of E., filed, &c., and the exhibits therein referred to, and it apjjearing that there are no debenture holders of the above-named coy, and the Court being of opinion that the advertisements hnfter directed will be sulfi- 1002 PETITIONS. [Chap. XVI. Form 614. cient notice to all persons whose interests will be affected by the pro- posed alteration and extension of objects of the above-named co}', it is ordered that the said petition be placed in the paper for hearing before his lordship, Mr. Justice Wright, on Wednesday, the 12th day of January, 1898, and that the presentation of the sd petition and the sd day appointed for the hearing thof be advertised on or before the 31st December, 1897, once each in the London Gazette and in the Times newspaper. Wright, J., 21st December, 1897. Form 615. Chief clerk's, certificate as to creditors and notices. The following' was the certificate in an important case in 1892 : — [_Title.'\ I certify — (a) That there are no holders of debentures or debenture-stock of the coy. Sufficient notice has been given to all persons, or class of persons, whose interests will be affected by the alterations in the deed of settlement mentd in this petition. (b) There are no creditors of the coy entld to object to the alterations except the policy holders and annuitants, and they have had sufficient notice. The only other debts of the coy are current office expenses. The shareholders also have had sufficient notice. , Chief Clerk. Form 616. Advertise- ment notice as to presen- tation and intended hearing of petition. The following is the usual form of advertisement : — Notice is liby given that a petition was on the day of 1895, presented to Her Majesty's High Court of Justice by the above-named coy to confirm a special resolution of the coy [unani- mously] passed at an extraordinary general meeting of the sd coy held on the day of , 1895, and subsequently unanimously confirmed at an extraordinary general meeting of the sd coy held on the day of , 1895, and which resolution runs as follows : — \_Set it oiitr\ And notice is further given that the sd petition is directed to be heard before the Honourable Mr. Justice North on Saturday, the (jr^y of ^ 1895, and any person interested in the sd coy, whether as creditor, policy holder, or otherwise, desirous to oppose the making of an order for the confirmation of the sd resolution under the above Act, should appear at the time of hearing, by himself or his counsel, for the purpose, and a copy of the sd petition will be furnished to any such person requiring the same by the coy's solors, Messrs. , of No. , ]5edford liow, London, W.C, on payment of the regulated charge for the same. Dated the day of , 1895. -, Solors for the coy. FORMS. 1003 Notice is hby given that a petition was presented to tlie High Court Form 617. of Justice, Chancery Division, on the day of , for confirming ^^^^j^^^ special resolutions passed on the day of , and confii-med on (debenturo the day of , to the effect following, namely :— holders). [*S'e^ it out.~\ And further take notice, that such petition is directed to bo heard before his lordshij), Mr. Justice North, on the day of . Any person, being a debenture-holder of the society, desiring to oppose the making of an order for so altering the provisions of the deed of settlement of the sd society under the above Act is required, within three weeks from the service by post of this notice, to send notice of such desire, with the grounds of his or her objections, to the secretary of the sd society, Mr. A. B., at the registered office of the society, No. , London, AV.C, and a copy of the petition will be furnished to any person being a debenture-holder of the sd society requiring the same, by the undersigned, the solors of the sd society, on payment of the regulated charges for the same. And further take notice, that any such debenture-holder who has given such notice may, if so advised, attend in Court on hearing of the sd petition and be heard thereon. Dated this day of . , Solors of the sd society. The above form of circular to debentui'e -holders was approved by Mr. Justice North in a case before hiin. Upon the petition of the Society, Limtd, on, &c., jn-eferred Form 618. unto this Court, and upon hearing counsel for the petitioners, and q , , upon reading the sd petition, signed by Mr. , the general petition. manager and secretary of the sd society, and and , two of the directors of the sd society, and having the seal of the sd society affixed thereto, the three following affidavits, all filed the of , on namely, (1) an affidavit of the sd and the exhibits therein referred to ; (2) an affidavit of ■ ; (3) an affidavit of and the exhibits therein referred to, and the London Gazette, the Times, the Morning Post, the Daily Telegraph, the Daily Neivs, and the Standard news- papers, all dated the day of , and each containing an adver- tisement of the presentation of the sd jietition : This Court doth order that the special resolution of the sd society, passed and confirmed in accordance with sect. 51 of the Cos Act, 1862, at extraordinary general meetings of the coy, held resply on, &c., altering the memdm of asson of the sd society, as in the schedule hto set forth, be confirmed, in pursuance of the provisions of the Cos (Memdm of Asson) Act, 1890. And it is ordered that an office copy of this order, together with a printed copy of the memdm of asson, altered in accordance with the 1004 PETITIONS. [Chap. XVI. Form 618. stl resolution, Le delivered to the Registrar of Joint Stock Cos within ~~ ~~ fifteen days from the date of this order. law, #f. Soc, Nortli, J., 27th April, 1895. Form 619. Advertise- ment of order made on petition. Occasionally the order for confirmation directs that the reg-istratiou of the order shall be advertised once in certain newspapers, e.(/., the Timrs, Sfaiidard, Baihj News, and Morning Post, and the following is a specimen of the form of advertisement. In the High Court of Justice, Chancery Division. In the matter of the Coy, Limtd, and in the matter of the Cos (Memdm of Asson) Act, 1890. Notice is hby given, that by an order of the Chancery Division of the High Court of Justice, made on, &c. by his lordship, Mr. Justice , the alteration of the provisions of the memdm of asson of the above-named coy, made by the special resolution passed at an extraordinary general meeting of the said coy, held on, &c., and subsequently confirmed at an extraordinary general meeting of the sd coy held on, &c., was approved by the sd Court, and an office copy of the sd order, together with a printed copy of the memdm of asson, as so altered, were on, &c., duly filed by the sd coy with the Registrar of Joint Stock Cos. Dated this day of . S. & Co., Street, London, W.C, agents for & Co., of , Solicitors for the Coy. There is no rule that the order must be advertised as above [Lancashire Banlcing Co., "W. N. (1897) 3) ; and the ordinary practice is not to advertise. Life Assurance Companies. The Life Assurance Companies Act, 1870, provides, by sect. 14, as follows : — ' ' Where it is intended to amalgamate two or more companies, or to transfer the life assurance business of one company to another, the directors of any one or more of such companies may apply to the Court, by petition, to sanction the proposed arrangement, notice of such application being published in the Gazette, and the Court, after hearing the directors and other persons whom it considers entitled to be heard upon the petition, may confirm the same if it is satisfied that no sufficient objection to the arrangement has been established. " Before any such application is made to the Court, a statement of the nature of the amalgamation or transfer, as the case may be, together with an abstract con- taimng the material facts embodied in the agreement or deed under which such amalgamation or transfer is proposed to be effected, and copies of the actuarial or other reports upon which such agreement or deed is founded, shall be forwarded to each policy-holder of both companies in case of amalgamation, or to each policy- holder of the transferred company in case of transfer, by the same being trans- mitted in manner provided by sect. 13C of 'The Companies Clauses Consolidation Act, 1845,' for the transmission to shareholders of notices not requiring to be served personally ; and the agreement or deed under which such amalgamation or transfer is ofl'ectcd shall be open for the inspection of the policy-holders and shareholders at tlie f)fti<'0 or offices of the company or coinpauics for a period of fifteen days after the issuing of the absti'act herein provided. " The (Joiirt sliiill not sanction any airiulgamation or transfer in any case in whi(!li it ajpfiirH to the Court that policy-holders representing one-tenth or more of the FORMS. 1005 total amount assured in any company whicli it is proposed to amalgamate, or in any company the business of which it is proijosed to transfer, dissent from such amulya- matiou or transfer. "No company shall amalgamate with another, or transfer its business to anotlier, unless such amalgamation or transfer is confirm(;d by the Court in accordance witli this section. "Provided, always, that this section shall not apply in any case in ■which the business of any company which is sought to be amalgamated or transferred does not comprise the business of life assurance." It was held by Mr. Justice Chitty in Royal Farmers', ^-c. Insurance Co., 2.5 Feb., 1888, that this section does not confer on a life assurance company power to ti'ansfer its business, it merely restricts the company's power, and the Court has no juris- diction to confirm the transfer, unless it api^ears that, apart from this Act, the transaction is within the powers of the company. See also his lordship's decision to the same effect in Sovereign Life Assurance Co., 42 C. D. 510. Moreover, wlicn the constitutiou of the company does not confer the requisite power it can pass a resolution to wind iip voluntarily, and authorizing a transfer under sect. 161 of the Companies Act, 1802, and ask the Court to coufii-m that. Southallx. British Mulital, 6 Ch. 614. This course has been adopted in several recent cases. And a company not under the Act of 1862 may, in exercise of a power to alter its regulations, obtain power to transfer. Argus Life Assurance Co., 39 C. D. 571. See also the new Act, supra, p. 990. And in a compulsory winding-up the liquidator can, with the sanction of the Court, sell the undertaking under sect. 95. There is nothing in this section to bind a policy-holder to accept a policy of the company to which the transfer is made in lieu of his old policy, or to novate, or to release the old comjjany. But there may of course be provisions in the constitution of the company sufficient to bind the policy-holders and relieve the transferring company. See Ilorfs ra.sr, 1 C. Div. 307 ; Bowsii's case, 3 C. Div. 384 ; Cocker's case. Ibid. 1. It is to be observed that policy-holdei'S will include annuitants. See Sovereign Life {uhi supra). In the absence of such provisions, the only way to bind the dissentients to nova- tion or release is by proceeding under the Companies Arrangement Act, 1870. A policy-holder who is not by the last-mentioned Act, or otherwise, bound to go over to the purchasing company may say, ' ' I look to the old company and to the assets obtained by that company as the consideration for the transfer," and if the old company is in liquidation he can go in and prove, and the sliareholders can get nothing till he is paid. In one case where a life assurance company was being w'ound up voluntarily under supervision, a scheme of arrangement between the company and its current policy-holders was sanctioned, under which the proportion of the assets of such policy-holders was made over to another company in consideration of new policies of that company being given to such policy-holders. Emperor Life Assurance Society, Bacon, V.-C, March, 1886. In this ease the scheme was not put forward under sect. 14 of the Life Assurance Act, 1870, but under the Joint Stock Companies AiTangement Act, 1870. After- wards, one of the policy-holders belonging to the class intended to be bound by the scheme sought to prove in the winding-up of the transferring company, but it was held by Kay, J., that he was bound by the scheme, and the Court of Appeal affirmed that decision. As to notice to policy-holders, under the Life Assurance Companies Act, 1870, sect. 14 refers to sect. 136 of the Companies Chuises Consolidation Act, 1845, which is as follows : — " Notices requiring to be served by the company upon the shareholders may, 1006 PETITIONS. [CriAP. XVI. unless expressly required to be served personally, be served by the same being trans- mitted tlirou2:h the post directed accoixling- to the registered address or other known address of the shareholder, within such period as to admit of its being delivered in the due course of delivery within the period (if any) prescribed for the giving of such notice ; and in proving such service it shall be sufficient to prove that such notice was properly directed, and that it was so put into the post office." And the Act of 1870 also provides in sect. 23 that — " Any notice which is by this Act required to be sent to any policy-holder may be addressed and sent to the person to whom notices respecting such policy are usually sent, and any notice so addressed and sent shall be deemed and taken to be notice to the holder of such policy." Sect. 14 of the Life Assurance Act, 1870, requires certain documents to be sent to policy-holders and others before the application to the Court. Frimd facie the ■words would seem to mean before the jjresodation of the petition, and it is prudent to act on that footing ; but it may be that the words might be treated as pointing to the hearing, and accordingly that transmission after the presentation but before the hearing was sufficient. As to notice to policy-holders abroad, see Briton, ^-c. Co., 35 W. P. 803. There have been very few proceedings for amalgamation or transfer since the Act of 1870. The following are some of the principal instances : — Citizen Assurance to Frovidcnf, 1874 ; London and SouthivarJc to London and Lancashire, 1880 (see 28 W. R. 565 ; 42 L. T. 247) ; Colonial Assurance to London, Edinburgh, and Glasgow, 1881 ; Great Britain Mutual to National, 1882 ; Hoyal Farmers to Alliance, 1888 ; Argus Life to Lmpcrial, 1888 ; Provincial to Alliance, 1890 ; Britain Medical to Sun, 1892 ; Bel iance to Norwich Union, 1893; Fositive to British Empire Mutual, in 1890. Sometimes an amalgamation or transfer is carried out by special Act of Parlia- ment. Heducfion of Contracts. The Life Assurance Companies Act, 1870, sect. 22, empowers the Court, in the case of an insolvent company, to reduce the amount of its contracts in the place of making a winding-up order. This power has only been exercised in one case — Great Britain 3futual Society. There a winding-up order was made by Hall, V.-C, but the Court of Aj)peal (November, 1880) discharged it, and directed a meeting of policy-holders to be held for the purpose of ascertaining whether they desired the contracts to be reduced : 16 C. D. 246. Hall, V.-C, then referred it to an eminent accountant " to inquire and report upon what terms, and subject to what conditions, the contracts of the society should be reduced in place of making a winding-up order, and to settle a scheme for reducing such contracts for the approval of the Court." Questions of importance having arisen, the referee stated a special case, and the opinion of the Court was taken thereon. Great Britain Mutual, 19 C. D. 39 ; 20 C. D. 351. The Coiu-t held, (1) that the date of the presentation of the petition was the one at which the calculation should be made for settling the scheme ; (2) that the claims of policy-holders and annuitants which had matured before the date of the presentation of the petition must bo paid in full ; (3) that annuities payable after that date must be reduced ; (4) that participating and non-participating policy- holders current must be reduced pari jjossu ; (5) that all payments in arrear of premiums, including half premiums left as a charge on the policies, must be paid in fuJl. nir; scheme was then settled, and in due course it was confirmed by the Court, Gth May, 1882. Shortly afterwards, an agreement was made with another com- pany, under which that company undertook to receive the premiums, and, in FORMS. 1007 fionsiileration of a commission, apply them in paying the claims as thoy maturod, and this agreement was sanctioned by the Court. The above case shows that the power to reduce contracts, conferred by the Act of 1870, is defective, inasmuch as it leaves untouched claims which happen to have matured before the presentation of the petition. Where such claims amount to a considerable sum it would seem better to take a winding-up order, and then adopt a scheme imder the Joint Stock Companies Arrangement Act, 1870, either by sale to a new company, or by a subsequent stay of proceedings. This can cither provide for a reconstruction by transfer to a new company, in consideration of policies of reduced amounts, or it may provide for a reduction of policies, and then a stay of aU further proceedings in the winding-up. The difficulty which arose in regard to a scheme in Albert Zife Assurance Oompnny, 6 Ch. 381, would seem no longer to exist, since the mode of valuing policies and annuities has been settled by the Life Assurance Act, 1872. Upon such a scheme, the matured claims would nul be entitled to preferential payment. In the High Court of Justice, Chancery Division. Mr. Justice Chitty. In the matter of the Life Assurance Companies Acts, 1870 and 1872, and In the matter of the B. Insurance Company. To Her Majesty's High Court of Justice. The humble petition of, &c., the directors of the above-named company, sheweth as follows :— 1. The object of this petition is to obtain the sanction of the Court, as required by sect. 14 of the Life Assurance Companies Act, 1870, to the transfer of the business of the above-named company (hereinafter called " the B. Company ") to the A. Company (hereinafter called " the A. Company"). 2. The B. Company is a company which was originally constituted by deed of settlement, dated the day of -, and has been registered under the Com- panies Act, 1862. The said deed of settlement provided amongst other things that the style or firm of that company should be the B. Company. And that the objects and business thereof should, amongst others, be to grant or effect insurances on a life or lives, and survivorships on the joint continuance of two or more lives, or for any term or terms of years to be absolutely or contingently determinable on a life or lives ; and also to grant and to pui-chase and sell endowments, annuities, life, reversionary, and other estates and interests personal, and to advance money by way of loan on personal security ; and also to grant assurances against fire upon dwelling-houses, warehouses, houses of business, farm buildings, fanning stock, and crops, and all other property whatsoever, the risk of which was ascertainable by way of average ; and also the goods and general outfit of passengers, in steam or sailing vessels, against fire or loss at sea. 3. Clause 131 of the deed of settlement is as follows :— "That an extraordinary board of directors specially called for that pm-pose may come to a resolution, either to sell or transfer the business of the company to any other society or company of a similar nature, or to purchase or accei^t a transfer from such other society or company as last aforesaid of their businesses, and upon such tei-ms and conditions and stipulations and agreements as the said board shall think fit ; and if such resolution shall be adopted and confirmed by a majority of at least three-fourths of the proprietors present, either personally or by proxy, to be given in such manner as is hereinbefore in that behalf mentioned at an extra- ordinary general meeting specially called for that purpose, but not otherwise, then Form 620. Petition to confirm transfer of life assurance business. 1008 ^ PETITIONS. [Chap. XVI. Form 620. such sale or transfer or acceptance of purchase or transfer, as the case may be, shall be effected or take place." 4. The origiual capital of the B. Company was 100,000/., divided into 10,000 shares of 10/. each, which in September, 1853, was duly increased to 200,000/., divided into 20,000 shares of 10/. each, all of which shares have been issued, and the sum of 1/. 5.v. per share paid up thereon. 5. The B. Company commenced business as a fire insurance office only in the year 1852, shortly after its formation, and in September, 1853, took up the business of life assurance also, and made fair progress in both departments down to the year 1864, in which year and several succeeding years considerable losses occurred in its fire department, and owing to these circumstances the B. Company accepted an offer from the A. Company to purchase all the business of the said fire department, and such purchase was duly carried into effect in the year 1874. 6. Since the sale of the business of the said fire department the B. Company has continued to carry on the business of a life assurance office, and other businesses authorized by the said deed of settlement, except those of a fire insurance office, and has met with considerable success and profit thereb}'. 7. In the month of December, 1889, the A. Company proposed to the B. Company to take a transfer of the business of the latter company on the terms and conditions contained in the conditional agreement next hereinafter stated, and accordingly that agreement was entered into. 8. The said conditional agreement is in the terms following : — [set oiit^. 9. The said agreement was executed by your petitioner R. V. K., the first-named party thereto under the authority conferred by the resolution of the board of directors next hereinafter stated. 10. At an extraordinary board of directors of the B. Company, specially called for the purpose, and held on the said r2th day of February, 1890, before the execution of the said conditional agreement, a resolution was passed unanimously to the effect that the chairman of the board (being your said petitioner R. V. K.) should be, and he was thereby, authorized and requested to sign the said agreement on behalf of the B. Company, and at the Same meeting it was further resolved unanimously as follows : — " That the business and undertaking of this company be sold and transferred to the A. Company on the terms and conditions set out in the conditional agreement dated the 12th day of February, 1890, and made between R. V. K., of , chair- man of this company, for and on behalf of this company, of the one part, and the A. Company, by their chairman, The , of the other part." 11. At an extraordinary general meeting of the proprietors of the B. Company, specially called for the purpose, and held on the 27th day of February, 1890, the following resolution was passed unanimously, that is to say ; — "That the following resolution passed by an extraordinary board of directors, held on the Tith day of February instant, be adopted and confirmed : — ' That the business and undertaking of this company be sold and transferred to the A. Company on the terms and conditions set out in the conditional agreement dated the rith day of February, 1890, and made between R. V. K., of , in the county of , chairman of this company, for and on behalf of this company, of the one part, and the A. Company, by their chairman, , of the other part.' " 12. On the 5th day of March, 1890, the B. Company forwarded to each policy holder, by the same being transmitted la manner provided by sect. 136 of the Com- panies Clauses Consolidation Act, 1845, for the transmission to shareholders of notices not requiring to be served personally, a statement of the nature of the said jiroposed transfer, togc^ther with an abstract containing the material facts embodied in the said conditional agreement, and also copies of the actuarial reports upon which such agreement was founded. 13. The said ccmditional agreement will, on the 20th day of March, 1890, have remained open for the inspection of the policy holders and shareholders of the B, FORMS. 1009 Company at the office of that company for a period of fifteen days from the issue of Form 620. the before -mentioned abstract. 14. The A. Company is a company constituted by the A. Company Act, 1886, and was originally formed in the year 1821 by deed of settlement dated the 4th day of August in that year, with a capital of 5,000,000/. divided into 250,000 shares of 20/. each, all of which have been issued, and the sum of 2/. 4.v. ]}ev share has been paid up thereon. 16. The A. Company cames on a largo and successful business, and the present market value of its shares is from 10/. to 11/. per share, and its present invested funds amount to veiy nearly 3,000,000/., and its premium and other income amounts to upwax'ds of 025,000/. per annum, and it is one of the most important of the principal life assurance companies in the United Kingdom. 16. By the regulations of the A. Company it is, among other things, provided and declared as follows : — " The company may from time to time, and at any time, with the sanction of an extraordinary general Court, acquire, sell, or transfer, on such terms and conditions as may be arranged, the whole or any part of the business, assets, undertaking and liabilities of any other company carrying on any assurance business, which this company is authorized to carry on, and the terms and conditions aforesaid may include provision for payment by the company of the expenses of and incident to the winding up and dissolution of the selling company, and provision for satisfaction of any part of the price or consideration by the issue of shares in the company credited as partly paid up, and may provide for the concession to the policy holders, annuitants, creditors, directors, employees, and members of the selling company, of any special rights, privileges, and advantages, and may include any other provisions which the directors may think expedient ; and the agreement containing such terms and conditions shall, when sanctioned by an extraordinary general Coiu't and con- firmed by the High Court of Justice (when requisite), be effective, notwithstanding any inconsistency between the provisions thereof and the provisions of the company's laws and reg^ations." 17. The conditional agreement aforesaid was submitted to an extraordinary general Court of the A. Company, didy convened and held on the 26th day of February, 1890, and at that meeting the resolution following was unanimously passed : — " That it is expedient to acquire and take over the business, assets, and under- taking of the B. Company, and that with a view thereto the conditional agreement in that behalf submitted to this Court, dated the Tith day of February, 1890, be, and the same is hereby sanctioned and approved, and that the directors be and they are hereby authorized to apply to the High Court of Justice to confii-m such agree- ment, and when confirmed to carry the same into effect." 18. The arrangement intended to be effected by the said conditional agreement is an equitable arrangement, and it is expedient, and it will be for the mutual benefit of the proprietors and policy holders of the B. Company and the A. Company that the said agreement should be confirmed and cai-ried into effect. Tour petitioners therefore humbly pray— 1. That the said conditional agreement dated the 12th day of February, 1890, and the transfer intended to be effected thereby, may be sanctioned and confirmed by this honourable Court and carried into effect, and that your petitioners, the directors of the B. Com- pany, may be at liberty to execute and do all assurances and things which shall be necessary for that purpose. 2. That such further or other order may be made in the premises as to the Court shall seem fit. And your petitioners will ever jjray, &c. Note.— It is intended to serve this petition on the A. Company. Chitty, J., in 1890, made an order on the above petition confirming the transfer. P. 3 T 1010 PETITIONS. [Chap. XVI. Winding-up. As to petitions to wind up companies, see Part II. Sect. 89 of the Act of 1862 provides as follows : — Stayino- " The Court may at any time after an order has hecn made for winding-up a winding-up. company, upon the application by motion of any creditor or contrihutory of the company, and upon proof to the satisfaction of the Court that all proceedings in relation to such winding-up ought to be stayed, make an order staying the same, either altogether or for a limited time, on such terms and subject to such conditions as it deems fit." The power given by this section has been exercised in a considerable number of cases. In the South Barrule Co., 8 Eq. 688, a supervision order had been made, and all the debts having been paid, and there being a balance in the liquidator's hands sufficient to meet arrears of current expenses, the great majority of the members were desirous that an arrangement should be sanctioned for the resumption of business by the company, and that the winding-up should be stayed. A petition was thereupon presented to the Court praying for an order to stay further proceed- ings. It was opposed by one shareholder only, and under the circumstances, James, V.-C, made the order, the value of the dissentient's interest to be ascer- tained and paid to him. Sect. 89 only applies to a winding-up by or under the supervision of the Court, but by the joint effect of sect. 138, infra, and that section, an order to stay can be made in a voluntary winding-up. The power to stay in a voluntary winding-up was exercised by Hall, V.-C, in the Bog Mining Co., L. J. Notes of Cases, 1875, 48 ; and by Malins, V.-C, in the case of the Woollen Trade Association, 12 Nov., 1875. The application has sometimes been made on petition. South Barrule Slate Quarry Co., 8 Eq. 688. And Form 621 is retained as showing the line of evidence to be adduced in support of applications for a stay ; but orders have been made on motion [Gondes Co. of Chili, 36 S. J. 693; Great Southern of Spain Co., 00250 of 1894, 15 June, 1896), and on originating -summons [Coruna, ^-c. Hail. Co., 0215 of 1893 (Reg.) 1 Aug., 1893.) Except in "retained" case (as to which see Part II.) the application must be made to the vrinding-up judge. As to staying the winding-up, where the petitioner's debt is disputed, or pending an appeal from a winding-up order, see Part II. Form 621. Iii the High Court of Justice, Chancery Division. Mr. Justice . Petition to stay winding- up and resume business. In the Matter of the Cos Acts, 1862 to 1880, and In the Matter of the Steamship " T." Coy, Limtd. To Her Majesty's High Court of Justice. The humhle petition of A. B., the manager and the liqr and a con- tributory of the above-named coy. Shewoth as follows : — 1. The above-named coy (hnfter called the coy) was duly formed and registered in the month of , 188 — , as a coy limtd by shares under tlio Cos Acts, IH(V2 to 1880. 2. By the coy's uiomdm of asson it was declared that the registered FORMS. 1011 office of tho coy should Lo situated in England, and that tho olijoots Form 621. for wliich the coy was established were the following-, that is to say : — ' Tho purchasing- and working of the steamship "T.," of tho Port of London, or of any shares therein, and for such pui-pose, &c., &c. 3. Tho coy's memdni and arts of asson were registered on the day of , and your petitioner craves leave to refer thereto. 4. Tho capital of the coy was fixed at 13,500/., divided into 270 shares of 50/. each, of which sd shares 219, part thereof, have been duly issued, while fifty-one others, part thereof, have not been issued. All the shares so issued are fully paid up. 5. Shortly after its incorporation the coy acquired the steamship " T." in conson of the issue of 50/. shares in the capital credited as fully paid up, and for some years the coy carried on business with that vessel. 6. At an extraordinary general meeting of the coy, held on the day of at the office of the coy, special resolutions were duly passed for the winding-up of the coy voluntarily, and your petitioner was thereby appointed liqr for the purpose of such winding-up. The sd resolutions were duly confirmed as special resolutions at a subsequent meeting of the sd coy held at the coy's office on the day of . 7. The circumstances which led to the passing of such resolutions were as follows: — A coy, to be named the D. Coy, Limtd., was being formed for the purpose of carrying on and developing the carriage and storage of petroleum in bulk, and such coy proposed to acquire a number of steamers specially fitted for the carriage of petroleum in bulk. It was considered that the sd steamship was suitable for tho purpose, and that the incorporation of such coy offered a favourable opportunity of disposing of the sd steamship, and the voluntary winding-up was determined on with a view to such sale. 8. Tho sd D. Coy, Limtd, was duly incorporated, but your petitioner, as the liqr of the coy, was unable to arrange the sale of the sd steamer to the sd D. Coy, Limtd, on satisfactory terms, and all chance of such sale is now past. 9. It is not practicable to sell the sd steamship except on terms which would involve a ruinous sacrifice of the ppty. The only other assets to which the coy is entld are certain stores, policies of insurance, and book debts of the aggregate estimated value of 2,000/., or there- abouts. 10. A. "W., G-. W., and J. G. P., trading as, &c., are creditors of the sd coy in the total sum of 3,500/., and they wish all further pro- ceedings in the winding-up to be stayed. Your petitioner is a creditor of the coy in the total sum of 11,000/. The coy hold a sum of 133/. 4s. 4f/., balance of salvage awarded to members of the crew of the steamship " T." in the year 1884. The whereabouts of these persons who have not received their proportion of the salvage, and on whose behalf this sum of 133/. \s. id. is held, cannot be ascertained. There are no other creditors of the sd coy. 3t2 1012 PETITIONS. [Chap. XVI. Form 621. H- An extraordinary general meeting of the sd coy was duly con- vened, and lield at the London Tavern, .53, Fenchurch Street, in the City of London, on the day of , 1887. The notice convening such meeting stated that it would be held " To consider a proposal or proposals for the continuance of the sd coy and the resumption of its business, and, in the event of such proposal or proposals being approved, to authorise applicon being made to the Court for an order that all jiroceedings in relation to the winding-up of the sd coy be stayed." At such meeting the following resolution was passed unani- mously : — " That this meeting, having heard the liqr's report as to the position of the voluntary winding-up, and the impossibility of effecting a sale of the steamship ' T.' under such winding-up, hby determines that the working of the sd steamship shall be continued by the coy as heretofore, and authorizes the liqr to make aj)plicon forthwith to the Court for an order that all proceedings in relation to the voluntary winding-up of the coy be stayed." 12. If the further proceedings in the winding-up are stayed the business can be carried on at a profit, and the sale of the sd steamship at a sacrifice will be avoided. The sd steamship has been converted and specially fitted for the carriage of oil in bulk at an expenditure of over 6,000^. She has been from the 20th of June last employed in voyages between Batoum, Antwerp, and Dunkirk, under a charter with Messrs. , of Paris, which charter has still one and a-half years to run. The net profit per voyage amounts to between 250/. and 300/., and the vessel makes seven voyages in the year. If the coy is continued it is most probable that the market value of the sd steamship will increase, and that the renewal of the charter will be secured with continuous and remunerative employment. 13. The staying of the winding-up and the resumption of business by the coy is essential to the interests of the contributories. Your petitioner therefore humbly prays — 1. That pursuant to and by virtue of the powers conferred upon the Court by ss. 89 and 138 of the Cos Act, 1862, and of all other powers hereunto enabling, all further proceedings in relation to the sd winding-up may be ordered to be stayed. 2. That the sd liqr may be directed or ordered, out of the assets of the coy in his possession or power, to pay the costs of this petition, and to pay and transfer to your petitioner, as the manager of the sd coy, all moneys, ppty, and effects of the sd coy in their possession or power. 3. Or that such other order may bo made in the premises as to this Honourable Court may seem meet. And your petitioner will ever jiray, &c. Note. — It is not intended to servo this petition on any person. Chitfy, .7., made un order on this petition (see Tiliidi Co., 3G W. R. 347) ; and about the Hinao time Stirlinf^, J., made an order on a very similar petition in Ulcumship Chiyivell, 4 Times L. K. 308. See next form. FORMS. 1013 Upon the petition of S., the voluntary liquidator and a contributor of the com- Form 622. pany on 14tli January, 1888, preferred, &c. — — The Court doth order that all further procoedini/( company, or on the part of the majority of the company, so that they are not fit persons to determine it ; but that every litigation must be in the name of the company, if the company really desire it." Per James, L. J., MacdoKf/all v. Gardiner, I C Div. 13. Accordingly, the Court refused to interfere at the suit of a shareholder suing on behalf of himself and others in Foaa v. Harhottle, nhi supra, to compel directors to make good funds of company improperly expended. Mozleij V. Alston, t;bi supra, and Hatterslcy v. Shelhurne, 10 "W. R. 881, where directors were acting who had not been duly appointed. Gray v. Lewis, ubi supra, to recover property alleged to belong to the company. See also Russell v. Walefeld Waterworks, 20 Eq. 474. Macdougall v. Gardiner, 1 C. Div. 13, where it was alleged that chairman had improperly refused to take a poll. Southern Counties Deposit Bank v. lUder, 73 L. T. 374, C. A., where winding-up resolution passed at meeting convened by order of an irregular board. LJuckett V. Gover, 6 C. Div. 82. Action against company's solicitor and vendor to set aside an agreement alleg'ed to have been a fraud on the company, and to recover money of the company. For further proceedings in this case, 25 W. R. 554. The only exceptions to the rule are the follo'wing : — (a) Where the act complained of is ultra vires the company. Simpson v. West- minster Palace Hotel Co., 8 H. L. Cas. 712. (b) Where the act complained of is a fraud on the minority. (c) Where there is an absolute necessity to waive the rule in order that justice may be done. See observations of M. R. in Fender v. Lushinyton, 6 C. Div. 70 ; Ilnssell v. Wakefield Waterworks, 20 Eq. 474 ; Harbcn v. FhilUps, 23 C. Div. 14. Accordingly, the Court has interfered at the suit of one or more suing as above, in Clinch v. Financial Corporation, 5 Eq. 450 ; 4 Ch. 117. Ultra vires agreement. See Form 684, ififra. Holmes v. Newcastle Co., 1 C. Div. 682. Ultra vires return of capital. Hope V. International Financial Society, 4 C. Div. 327. Ultra circs purchase of shares. See Form 530, supra. Macdoiiyall v. Jersey Hotel Co., 2 H. & M. 528. Payment of dividends out of capital. See Forms 688 and 689, infra. Menier v. Hooper'' s Teleyraiih Works, 9 Ch. 350. Majority proposing to benefit themselves at the expen.se of the minority. Mason V. Harris, 11 C. Div. 97. Action to set aside fraudulent sale to company, the vendor holding tlie majority of the shares. Where a shareholder desires to complain of a wrong done to the company, and the case does not fall within the above exceptions, and the directors decline to proceed, the shareholder can sue in the company's name. But if it is shown that th coy. The plaintiff claims : — (1) To have the contract to take the shares afsd rescinded, and to have his name removed from the register oi members of the coy. (2) Ee-payment of the amount pd hy him to the coy with interest at 5 p.c.p.a. (3) An injunction to restrain the coy from taking any proceedings against him in respect of the 5s. per share still remaining unj)aid. (4) Further or other relief and the costs of the action. The commencement of an action claiming rescission above is a final election, and is not avoided by the acts which before such action would have destroyed the right to rescind. TomVui's case, (1898) 1 Ch. 104. In cases of rescission the main points to be borne in mind arc that it must be alleged and proved that the representations on which the action is based were made by or on behalf of the company ; that they M'ere as to material facts ; that they were incorrect ; that they were made with the object of inducing the plaintiff to take shares ; and that he took shares relying on them, and that he sought his remedy with all due promptitude, the latter point being of the greatest importance. See si/pra, p. 102. As to actions for damages on pui-chasing shares in the market on the faith of fraudulent statements in prospectuses, see Andrews v. Moclcford, (1896) 1 Q. B. 372. \_Partics as Above. ^ Defence. Delivered, &c. Form 655. 1. The defendant coy (hnfter called the coj) does not admit any of jT^ 7 the allegations in para. 2 of the statement of claim, and in particular action for does not admit that the plaintiff applied for an allotment of the sd ''•^'^^ission. shares in response to the prospectus published by the coy, or in reliance on the truth of the representations contained therein ; and the coy denies that the sd prospectus contained divers or any false representations of material facts, or any false representation whatever. 2. The coy does not admit that the sd alleged statements in the sd prospectus are accurately set out in para. 2 of the statement of claim, but if and so far as that para, does accurately set out such statements, the same are all true, and, in particular, it is the fact that the owners of the mining rights mentd therein had paid 10,000^., or thereabouts, for the right to mine upon the N. territory therein mentd; and it is the fact that the gutter referred to in sub-sect, (b) of the sd para, had been reached ; and it is the fact that the mining rights of the coy are held on lease from the Government for fifty years from the Ist Feb- ruary, 1889, at 6(1. per acre. This, of course, is the line of defence if the company can substantiate the state- 1038 PLEADINGS. [Chap. XVIU. form 655. ments in the prospectus, but presumably they cannot, and then, of course, the line ~ of defence must entirely depend on the peculiar facts. The followiug is an instance : — 2. If, wliich the coy does not admit, the sd prospectus contains any such statement as is alleged in sub-sect, (a) of para. 2 of the state- ment of claim, such statement is in fact correct. The owners therein referred to did, in consideration of the right to mine therein mentd, hand over property which had been valued at 10,000/., and which has since been sold for more than 10,000/. 2a. If, which the coy does not admit, the sd prospectus contains any such statement as is alleged in sub-sect, (b) of para. 2 of the statement of claim, such statement is substantially true, for even if, which the coy does not admit, the gutter struck was not the gutter in the sd sub sect, referred to, such gutter was even richer, and capable of producing a still larger percentage of gold. 2b. If, which the coy does not admit, the sd prospectus contained any such statement as is alleged in sub-sect, (c) of para. 2 of the state- ment of claim, such statement was substantially accurate at the time it was made. Although no lease had actually been granted, the Government of the 8tate of had agreed to grant a lease on the terms in the sd sub-sect, mentioned, and the lease was subsequently granted upon terms substantially as favourable. 3. If, which the coy denies, any of the sd representations were in fact false, the coy does not admit that the plaintiff first had reason to believe that they were false towards the end of April, 1895. Some months prior to the month of April, 1-895, the plaintiff was well aware of the true facts of the case, and with such knowledge he abstained from repudiating his sd contract to take the sd 200 shares. Moreover, at a general meeting of the coy, held in the month of May, 1895, the plaintiff, with such knowledge, voted as a member of the coy in respect of the sd shares. Accordingly, if such contract was originally voidable, the defendant has affirmed it, and is estopped by laches and acquiescence from now avoiding it. 4. If, wdiich the coy denies, any of the sd representations were in fact false, the coy does not admit that the same or any of them were representations of material facts, and the coy denies that the plaintiff relied on any of the sd representations when he applied for his sd shares, or that he would not have applied for the same had he know'n the true facts. There will then follow a counter-claim for tlio balance of 5s. a share, whicirwill be in the Form G50, with the necessary modifications. The plaintiff's defence to the counter-claim will practically bo a repetition of the material allegations in the statement of claim. The above defence may also, in a proper case, contain an allegation that the plaintiff made indejiendent inquiries with a view to showing that he did not rely wholly or at all on the prospectus, but unless there is some substantial ground for such a case it is not much use putting in general allegations of this kind, as i)articidars will have to be given. lOKMS, 1039 [A. 13., plaintiiT ; The S. Coj, Limtd, defendant^.] Form 656. 1. The defoudaiit coy (hnfter called "the coy"), was iucorporated Action for on, &c., 1887, under the Companies Acts, 18G2 to 186G, as a coy limtd rescission. by shares, and having a nominal capital of 100,000^., divided into 20,000 shares of 5/. One of the objects for which the coy was esta- blished was, as stated by its menidni of asson, to purchase, &c. 2. On the day of , 1887, the coy issued a prospectus to the public inviting applicons for the shares in the capital of the coy, on each of which 10.s. was to be pd on applicon, and ll. 10s. on the allotment thereof. The sd prospectus contained misrepresentations, of which the following are the particulars : — 3. [State them.] 4. The sd prospectus omitted to state the following material facts, &c. '). The plaintiff received a copy of the sd prospectus, and on the faith thereof, and induced by and relying on the statements and repre- sentations therein contained, and misled and induced by the omission to state the material facts afsd, subscribed for sixtj' shares in the coy of 51. each, which shares were allotted to him, and in respect of which he has pd to the coy 120/. 6. The plaintiff had no reason to doubt the accuracy and fairness of the sd prospectus until the day of , 1888, when he read an article in the G C , stating, in effect, that, &c. Upon reading that article the plaintiff immediately made inquiries througli his solor, and on or about the day of discovered the misrepresentations afsd. 7. Immediately after such discovery the plaintiff's solor, acting by his directions, gave notice to the coy repudiating the shares afsd, and demanding repayment of the sd money's. The coy declined to comply with this demand, and denied the plaintiff's right to rejiudiate. The plaintiff claims : — 1 . A declaration that he was induced to apply for and take the sd sixty shares of ol. each in the capital of the coy by misrepre- sentation and non-disclosure of material facts. 2. Rescission of the contract by the plaintiff with the coy to take the sd sixty shares, and the rectification of its register of members by the removal of the name of the plaintiff therefrom. 3. Eepayment to the plaintiff' by the coy of the sd sum of 120/. pd by him in respect of the sd shares, and also interest thereon, as to the sums of 30/. and 90/. forming the same, at the rate of ol. p.c.p.a. from the respective times when the sd sums were pd by the plaintiff. 4. An injunction to restrain the coy from, making or attempting to enforce, by action or otherwise, any call in respect of the sd 100 shares or any of them. The defence to this will he very much on the lines of the last defence, except that the material facts alleged to have been omitted will be dealt with, and their materiality deuied. 1040 PLEADINGS. [Chap. XVIII. Form 657. Between A. B. . . . . . . . Plaintiff, Another, and g 38 of Xet^^ ^^^ ^^y^ Limtd, A., B., and C. . Defendants. of 1SC7. 1. The defendant coy (hnfter called "the coy") was incorporated in the year 18 — , under the Cos Acts, 1862 to 1890, for the purpose of, &c. 2. The defendants. A., B., and C, were, at the dates of the pre- paration and issue of the prospectus hnfter mentd, and are, the directors of the coy. 3. In the month of October, 18 — , the defendants. A., B., and C, advertised and issued to the public a prospectus relating to the coy, and inviting persons to subscribe for shares therein. 4. The sd prospectus contained several untrue statements, of which the following are the particulars : — (a) The sd prospectus stated, &c., whereas it was the fact that, &c. (b) The sd prospectus stated, &c., whereas, &:c. (c), (d), &c., &c. 5. Prior to the issue of the sd prospectus, a contract in writing, dated the day of , was made between P. and Q. The sd contract provided, &c. 6. The sd P. was, when the sd prospectus was issued, a promoter of the coy, and the sd contract was material to persons who con- templated subscribing for shares in the coy. The sd prospectus did not specify the date of and parties to the sd contract, and the plaintiff had no notice thereof. 7. The untrue statements afsd were made by the defendants A., B., and C, fraudulently, and the sd defendants issued the sd prospectus with knowledge of the sd contract. 8. The plaintiff received a copy of the sd prospectus, and on the faith thereof, and induced by and relying on the statements and representations therein contained as afsd, and misled and induced by the omission to specify therein the date of and parties to the sd contract, he subscribed for 1,000 shares of 1/. each in the capital of the coy, which shares were allotted to him, and he has pd to the coy 500^. in respect of such shares. 9. The shares in the defendant coy are not, and never were, of any value. Form 658. Defence Defence to of the Defendants A., B., and C. 057. 1. These defendants do not admit any of the allegations in para- graph 3 of the statement of claim. 2. (See paragraph 2 of Form CJ.O.) 3. If, which the defendants do not admit, any such contract as is alleged in paragraph 5 of the statement of claim was ever made, FORMS. 1041 these defendants do not admit that the same is sufficiently or accurately Form 658. set out in paragraph 5 of tlie statement of claim, 4. These defendants do not admit any of the allegations in para- graph G of the statement of claim, and in particular they do not admit that the sd P. was, -when the sd prospectus was issued, or over, a promoter of the defendant coy, or tliat the sd alleged contract was material to persons who contemplated subscribing for its shares in the coy. At the time when the plaintiff applied for his sd shares, he was well aware of the sd alleged contract, and of the particulars thereof. 5. If, which these defendants do not admit, any of the sd statements in the sd prosjDectus were untrue, such statements were not made by them fraudulently, but were made by them in good faith, and after the most careful investigation, and in the full belief that they were perfectly true and accurate. These defendants do not admit that at the date of the issue of the sd prospectus they were aware of the sd contract. 6. (Deny paragraph 8.) 7. The shares in the defendant coy are, and always have been, of their full nominal value, and particularly in the month of , after the plaintiff had ascertained the true facts of the case, and become aware of the existence of the sd contract, he could have disposed of his shares at a premium. One or more of the directors may, of course, have some special defence, as that their names were improperly inserted in the prospectus, or that they were not respon- sible for its issue ; and if there was more than one prospectus, and one had a reference to the contract, it may be showii that the plaintiii applied on such one. [Plaintiff, A. B. Defendants, A., B., C, D., and E.] Form 659. 1. The Coy, Limtd (hnfter called "the coy"), was incorporated Directors' in the year for the purpose of, &c. Liability Act, 2. The defendants, A., B., and C, were, when the prospectus hnfter mentd was issued, directors of the coy. 3. In the month of , 18 — , the defendants issued a prospectus inviting persons to subscribe for shares in the caj)ital of the coy. The sd prospectus contained untrue statements, of which the following are the particulars : — \_Set them oiit.^ 4. Each of the sd statements was a material statement. 5. The plaintiff received a copy of the sd prospectus, and he sub- scribed for shares in the coy on the faith of that prospectus, and he has pd to the coy 1, in respect of such shares. 6. On the day of an order was made by this Honourable Coxirt that the coy should be wound up under the provisions of the Companies Acts, 1862 to 1890. 7. Subsequently to such order the plaintiff, for the first time, dis- covered the untruth of the statements afsd. 8. The defendant, D., was, at the time when the sd prospectus was P 3 X 1042 PLEADINGS. [Chap. XVIII. Form 659. issued, a promoter of the coy, and ho took part in tho preparation of ■ such prospectus. 9. The defendant, E., authorized tho issue of the sd prospectus. 10. The shares in the coy are not, and never were, of any vahie, and the plaintiff has sustained damage by reason of the sd untrue state- ments. The plaintiff claims : — (1.) A declaration that the defendants are liable to pay to the plaintiff compensation for the loss sustained by him by reason of the untrue statements afsd. (2.) Judgment against the defendants, severally, for the payment of such compensation. (3.) Further or other relief, and the costs of the action. The defence to such au action will no doubt deny or not admit the facts alleged, and further, will allege that, if the statements were made, they were made by the defendants in the belief that they were true, and that they had reasonable grounds for such belief. See further, as to the various defences open, supra, pp. 106 and 117. Form 660. Action to recover bribe given to directors. [The Coy f. A., B., and C] 1 . The plaintiff coy (hnfter called ' ' the shares incorporated, on the day of - Acts, 1862 to 1890, and the defendants day of coy"), is a coy limtd by — , under the Comj)anies were, from the date of such — , 18—, directors thereof. of the coy, which was then incorporation down to the - 2. Shortly before the incorporation being promoted by D. and E. for the purpose of taking over from them certain mills and other ppty at , the sd D. and E. requested the defendants to become directors of the coy, and promised to transfer to each of them 100 fully paid-up 10^. shares therein if they consented to do so. 3. The defendants accepted this offer, and were, accordingly, by the arts of asson of the coy, appointed to be the three first directors of the coy. 4. Shortly after the formation of the coy the defendants, acting as the directors thereof, entered into an agreemt with tho sd D. and E. for the purchase of the sd mills and other ppty on behalf of the coy. The conson for the sale was to be 1, in cash, and paid-up shares in the coy of 1, each. The sd sale was carried into effect on or about the day of , when the sd cash was pd, and of tho sd shares were allotted. The residue of the sd shares, namely, shares, wore, by tho direction of the sd D. and E., and in pursuance of their promise afsd, allotted to the defen- dants equally between them. 5. Tlie defendants obtained their shares without the knowledge or consent of tho coy, and in obtaining them they committed a breach of tru.st. FORMS. 1043 The plaintiff claims : — Form 660. (1.) A dcolaration that the defondants are jointly and severally liable to pay to the plaintiff coy the maximum value, with interest, of the sd 200 shares in the capital of the coy. (2.) Judgment against the defendants, jointly and severally, for the payment of such maximum value, with interest. (3.) Costs. [_Parti(;s as al)ove.~\ Defence Form 661. of A., B., and C. Defence to G60. 1 . The defendants do not admit any of the allegations in paragraph 2 of the statement of claim, and in particular the defendants do not admit that the coy was promoted L}' D. and E., and they deny that shortly before the incorporation of the coy, or ever, the sd D. and E., or either of them, requested the defendants, or any of them, to become directors of the coy, or promised to transfer to each of them 1 00 or any fully paid-up 10^. shares therein if they consented to do so. 2. The defendants were, by the arts of asson of the coy, appointed to be the three first directors thereof, but, save as afsd, they deny each of the allegations in paragraph 3 of the statement of claim. They never received or accepted any such offer as is in the statement of claim alleged, nor were they appointed directors in consequence of any such offer and acceptance. 3. The defendants deny that the residue of the shares which were to be allotted to D. and E. under the contract of the , namely shares, were by the direction of the sd D. and E., and in pur- suance of any such promise as is alleged, allotted to the defendants equally between them, or at all. The defendants have purchased and acquired certain shares from the sd D. and E., but they pd the full market price for them. The agreemt for the sd purchase was made in the month of , 1 8 — , and there was not any prior agreemt or understanding to the effect that any such shares should be sold to the defendants. 4. The defendants acquired their shares under the circumstances above mentd, and they deny that in obtaining them they committed a breach of trust. Of course, if the directors did receive the shares by way of gift, the defence may be open that the articles authorized the transaction, or that a general meeting has sanctioned it, or that an indei^endcnt board, or all the members, had knowledge of the facts more than six years before action brought. See British Seamless Faper Box Co., 17 0. D. 467, and other cases cited, supra, j). 64. 3x2 1044 PLEADINGS. [Chap. XVIII. Form 662. In the High Court of Justice. Chancery Division. Mr. Justice . Action by debenture holders to enforce security. In the Matter of A., B., and Coy, Limtd. Between E. C. B. (on behalf of himself and all other holders of mortgage debentujres in the defendant coy) : Plaintiff, and A., B., and Coy, Limtd Defendants. 1. The defendant coy (hnfter called "the coy") was incorporated in April, 1891, under the Companies Acts, 1862 to 1890, for the pur- poses, among other objects, of acquiring and working the business of the firm of A., B., and Coy, of , in the county of , slate merchants, slaters, manufacturers, builders and contractors. 2. The memdm of asson of the coy gave power to borrow money, and issue transferable or other bonds, mortgage debentures, or any other security founded or based upon all or any of the ppty and rights of the coy. 3. In the month of February, 1894, the coy borrowed and raised for the purposes of the coy a sum of 25,000^. by the issue of a series of mortgage debentures for that amount. 4. The sd mortgage debentures were all in the same form for 100^. each, and by each such debenture the coy agreed to pay to the regis- tered holder of the debenture the principal thereby secured on the 1st February, 1897, and in the meantime to pay interest thereon at the rate of 6 p.c.p.a. by equal half-yearly payments, and the coy thereby charged with the payment of such principal and interest its under- taking, and all its ppty, both present and future, and each debenture was described as one of a series of debentures for securing the principal sum of 25,000^., and was stated to be issued upon and subject to the conditions indorsed thereon. 5. By the conditions indorsed on each of the sd mortgage debentures it was, among other things, provided that the sd debentures should rank /j«r» jiussu in point of charge on the ppty therein within nientd, and that the charge created by the debentures should be a floating security. G. By one of the sd indorsed conditions, it was also provided that if the coy should make default for six calendar months in the payment of any interest thereby secured, the registered holder of such debenture mi gilt, at any time thereafter, before such interest was paid, by notice in writing to the coy, call in the principal moneys thereby secured, and tliat sucli principal moneys should immediately become payable. 7. Tlio pluintiff is (and lias for upwards of months been) the register*!'! lioldor of fifteen of the sd debentures, all dated the day FORMS. 1045 of , for securing principal sums amounting in the aggregate to Form 662. 1,500^. 8. The coy made default in payment of the half-year's interest due to the plaintiff on his sd debentures on the of , and on the of , and tlie plaintiff on the of duly served, at the registered oiPice of the coy, a notice calling in the principal money secured by the sd fifteen debentures. The plaintiff subsequently demanded payment of such principal money, but Avithout success. 9. The whole of the sd principal money, together with interest thereon from the — th of , is still unpaid and owing to the plaintiff. 10. The coy is carrying on the business of , and it is necessary for the protection of the plaintiff and the other debenture-holders that a receiver and manager of the property and assets of the coy should be ajopointed. The plaintiff claims : ( 1 . ) A declaration that the sd mortgage debentures constitute a [first] charge ujDon all the undertaking and ppty of the coy. (2.) An account of what is due to the plaintiff and the other holders of the sd mortgage debentures for principal, interest and costs. (3.) That the sd mortgage debentures may be enforced by foreclosure or sale. There are cases in which it may be well to claim judgment or payment as in Hope V. Croijdon Tramways, 34 C. D. 730. As to declaring a charge, see Marwick v. Lord TJiurlow, (1895) 1 Ch. 776. It is uniisual now to ask for a declaration of Jirst charge unless there is some dispute as to priorities. It is safer to ask in the writ and statement of claim for a declaration of a ^^ first charged This will entitle the plaintiff, as between himself and other defendants having charges, who do not appear to a declaration, that his charge has priority to theirs. Such defendants are often added by amendment after settling claim, and the matter may then be overlooked . (4.) A receiver and manager of the ppty and business of the coy. To such an action as this a defence is rarely put in. If the debentures are to be disputed, the line of defence must depend on the special facts. It may be that the debentures were issued in excess of the borrowing powers, or that they were obtained by fraud, or that they do not charge all the property, or there may be subsequent incumbrancers who ought to be made defendants. If the company is in process of being compulsorily wound up in the High Court the action must be assigned to the winding-up judge. See note to Form 639. As to special words on the record, when a debenture-holder is authorized to defend in a representative capacity, see Fairfield, ^c. Co. v. London, S;c. Steamship Co., W. N. (1895) 64. 1046 PLEADINGS. [Chap. XVill. Form 663. Another. Action to enforce de- bentures where trust deed. In the Matter of the Coy, Linitd. Between A. B. (on behalf of, &c., as in last form) . Plaintiff, and The Coy, and C. D., and E. F. . . Defendants. 1 . The plaintiff is, and has since the day of , 1 8 — , been the registered holder of, and beneficially entld to, debentures under the common seal of the defendant coy (hnfter called ''the coy"), for securing- the payment of the principal sum of 1, [advanced by the plaintiff to the coy], and forming part of a debenture loan borrowed by the coy in the year . 2. By each of the sd debentures it was declared that the coy [Jiere set out the material provisions]. 3. Upon each of the sd debentures there were indorsed divers con- ditions, and amongst others the following \Jiere set out such of the conditions as may he material, including the reference to the trust deed], 4. The following are the short particulars of the indentures referred to in the debentures : — 5. By the sd indenture, &e. [^set out the trust deed so far as may be necessary]. 6. The sd indenture was duly executed by the parties, and the defendants, C. D. and E. F., still are the trees of such indenture. 7. On the day of , an extraordinary resolution of the coy was passed to the effect that it had been proved to the satisfaction of the coy that the coy could not, by reason of its liabilities, continue its business, and that it was advisable to wind up the same, and accordingly that the coy should be wound up voluntarily, and N. was thereupon duly appointed liqr of the coy for the purposes of such wdnding-up. 8. By an order in this action, made the of , the sd N. was appointed the receiver and manager of the undertaking and ppty of the coy. 9. Besides the debentures issued to the pit as afsd divers other debentures, forming pt of the sd loan, have been issued by the coy, and the holders of such debentures are numerous. 10. The pit sues on behalf of himself and all others holders of the debentures issued by the coy. The plaintiff claims : — (1.) A declaration that the plaintiff and the other holders of deben- tures of the coy are entld to a [first] charge on all the ppty to which the coy was entld at the commencement of the winding-up thereof, for securing the principal and interest in the de})enturos mentd. (2.) That the trusts of tlin sd indenture may be carried into execu- tion under tlio order and direction of the Court. (.3.) That an account may bo taken of what is due to the plaintiff and the other holders of the sd debentures in respect thereof. FORMS. 1047 (4.) To liavo tlie charge contained in the dobentui'os enforced by sale Form 663. or foreclosure. (5.) That the sd may be continued as receiver and manager of the profits and undertaking of the coy. As to defences, see note to Form 662. It may bo that tho trust deed in effect qualifies or suspends the plaintiff's right to sue, or that a meeting of debenture holders has been held pursuant to the provisions of tho deed and has deprived tlio plaintiff of his cause of action. Tlio trustees usually submit to act as the Court may direct. They may, however, submit that no action is necessary, and that aU that is required could have been obtained by an originating summons. l^Ttile as in Form 663, the action being assigned to the toinding-tq) judge,~\ 1 . The above-named defendant, the Coy, Limtd (hnf ter referred Form 664. to as "the coy"), is a coy limtd by shares, and duly registered under Another form the provisions of the Cos Acts, 1862 to 1886. where a dis- T)iitG ns to 2. On the 9th December, 1892, the coy, under tho power in that parties, behalf contained in its arts of asson, duly issued to the defendant H., in part payment for certain ppty sold by him to the coy, 50 deben- tures of the coy of 100/. each, making together the sum of 5,000/. 3. Each of the sd debentures was dated, &c., and was imder the seal of and duly executed by the coy, and was in the following form, namely, &c., &c. 4. The sd debentures were numbered consecutively 1 to 50. No other debentures have been issued by the coy. 5. By way of further security for the sd 50 sums of 100/. each secured by the sd debentures, and the interest thereon, an indenture dated the same 9th December, 1892, was duly made and executed by and between the defendant H. of the first part, the coy of the second part, and the defendants J. and M. of the third part, whereby certain freehold hereditaments, &c. were conveyed unto and to the use of the defendants J. and M. in fee simple, upon trust to secure the due payment of the sd 50 several sums of 100/. each and interest secured by the sd debentures, and subject thereto upon trust for the coy. 6. The royalties and premises comprised in the sd indenture were not comprised in the mortgage to E. W. in the sd debentures hnfter referred to. 7. The coy was on the same 9th December," 1892, entld to con- siderable real and personal ppty, including certain ironworks, col- lieries, and mines, and the machinery and plant therein. The greater portion of the sd ppty still belongs to the coy. 8. The coy has also, since the sd 9th December, 1892, acquired other considerable real and personal ppty, and it is now entld thereto. 9. The mortgage to E. W. referred to in the sd debentures is still subsisting. It only affects a portion of the ppty to which tho coy was entld at the date of tho issue of the sd debentures. 10. The defendants other than the coy and defendant M. were at 1048 PLEADINGS. [ClIAP. XVIII. Form 684. the time of the issue of the sd dehentnres, and had been for some " time previousl}' thereto, the directors of the coy, and the defendants and , &c., are now still its directors. The defendant J. was also at the time of the issue of the sd debentures, and had been for some time previously thereto, the solor of the coy. 11 . At the time and previously to the issue of the sd debentures the coy, and also the defendant directors, represented to the defendant H. that the sd mortgage to the sd E. W. was the only incumbrance so charged upon the coy's ppty, and it was on the footing of this repre- sentation that the defendant H. accej)ted the sd debentures as the conson for his ppty. The defendant directors, however, now allege that previously to the issue of the sd debentures the coy had mortgaged its ppty to the defendant directors or to a tree or trees for their benefit for considerable amounts. The plaintiff does not admit that any such mortgage was ever executed, but even if it was so executed the same ought to be postponed to the sd debentures and to the principal and interest thereby secured, inasmuch as the defendant directors concealed the existence thereof from the defendant H. and induced him to believe that no such mortgage or mortgages had been executed. 12. [Transfer of some of H.'s debentures to plaintiff.] 13. The defendant H. has assigned to several other persons others of the sd debentures, but is himself still entld to a portion thereof. 14. On the — th , 18 — , it was ordered that the coy should be wound up by the Court under the provisions of the Cos Acts, 1862 to 1890, and C. D. has since been diily appointed liqr thereof. Leave to bring this action has been duly obtained in the matter of the sd winding up. 15. No interest has been pd on the sd debentures issued by the coy as afsd since the day of . The whole of the interest since that date on the sd debentures, numbered 41 to 50 inclusive, as well as the principal sums thereby secured, is now due and owing to the plaintiff. 16. The plaintiff submits that the sd debentures and the principal and interest thereby secured constitutes a first charge on all the real and personal ppty of the coy, whether the same belonged to the coy on the sd 'Jth December, 1892, or has been acquired by the coy since that date subject only as to such part thereof as is affected thereby to the sd mortgage to the sd E. W., dated, &c., and in priority to any alleged mortgage or mortgages executed by the coy in favour of the defendant directors, and that a receiver of such real and per- sonal ppty ought to be appointed, and that the trusts of the sd indenture of tlio 9th December, 1892, ought to be carried into execution. The plaintiff claims : — (1.) To have a declaration that the sd 50 debentures of the 9th December, 1892, constitute a first charge upon all the real FOUMS. 1049 and personal ppty of tho coy, subject only as to such part Form 664. tliereof as is comprised therein to the sd mortgage, dated, &c., ' to the sd E. W., and that the sd debentures are entld to priority over any mortgage or mortgages whether prior or not to the 9th December, 1892, executed or alleged to have been executed in favour of the defendant directors, or any of them. (2.) To have an account taken of what is due and owing to the plain- tiff, and to the other holders of the sd debentures, for principal, interest and costs, including the costs of this action. (3.) To have the trusts of the sd indenture of the 9th December, 1892, carried into execution under the direction of the Court. (1.) That the coy may be ordered to pay to the plaintiff and to the other holders and persons entld to the sd debentures by a short date the amount found due to them resply on taking the sd account, and that in default of such payment the coy may be foreclosed of and from all equity of redemption in the sd premises comprised in the sd debentures, or in the sd indenture of the 9th December, 1892, or that the sd premises may be sold and the proceeds thereof applied in payment of the sd account. (.5.) To have a receiver ajipoiuted of the real and personal ppty of the coy, and a manager of its business. (6.) [Further and other relief.] [Plaintiff, A. B. (on behalf of himself and all other the holders of Form 665. shares in the B. Coj', Limtd) ; defendants. A., B., and C, and The B. T^, '. Coy, Limtd, and The L. P. and D. Coy, Limtd.] contract: 1. The B. Coy, Limtd (hnfter called "The B. Coy "), is a coy incor- iiij^nction. porated under the Cos Acts, 1862 to 1890. It was registei-ed in the year . 2. The defendants, A., B., and C. were, at the date of the contract hnfter mentd, and now are, the directors of The B. Coy. 3. The objects for which The B. Coy was established are set forth in its memdm of asson as follows, &c. 4. On the day of , the defendants. A., B., and C, jiurport- ing to act as directors of The B. Coy, and in its name, and on its behalf, entered into a contract in writing, bearing date the day of , with The L. P. and D. Coy, Limtd (hnfter called "The L. Coy"). The sd contract provided, &c. And the defendants, A., B., and C, affixed the common seal of The B. Coy to one part of such con- tract, and handed over the same to The L. Coy. 5. Pursuant to the sd contract the sd A., B., and C. have already pd to The L. Coy the sum of 1, out of the moneys of The B. Coy. 6. The sd contract was, and is, beyond the powers of The B. Coy, 1050 PLEADINGS. [Chap. XVIII. Form 665. and was made in violation of the conditions contained in that coy's menidm of asson. 7. The defendants, A., B., and C, and The L. Coy, threaten, and intend, to carry the sd contract into effect. 8. The plaintiff is the registered holder of shares in the capital of The B. Coy of 1, each. There are numerous other holders of shares in The B. Coy. The plaintiff claims : — (1.) For a declaration that the sd contract is beyond the powers of The B. Coy, and void, and to have the same delivered up to be cancelled. (2.) For an injunction to restrain the defendants. A., B., and C, and The L. Coy, from carrying the sd contract into effect, or further acting thereon. (3.) Judgment against the defendants, A., B., and C, and The L. Coy, for the repayment to The B. Coy of the monej-s of that coy already pd to The L. Coy, pursuant to the sd contract, with interest. (4.) Other relief and costs. Form 666. Defence to 665. \_Parties as alove.~\ DErENCE of A., B., and C, and The B. Coy. 1. These defendants do not admit that the memdm of asson of The B. Coy is sufl&ciently or accurately set out in paragraph 3 of the statement of claim, and refer to the same when produced. 2. These defendants do not admit any of the allegations in para- graph 4 of the statement of claim. The contract in the sd paragraph referred to is not therein sufficiently or accurately set out, and these defendants refer to the same when produced. 3. These defendants do not admit any of the allegations in para- graph 5 of the statement of claim. 4. These defendants do not admit that the sd contract was, or is, beyond the powers of The B. Coy, or that it was made in violation of the conditions contained in tliat coy's memdm of asson. Such contract is a proper and beneficial contract for the sd coy to enter into, and is authorized by the terms of its memdm of asson. Such contract was approved by a general meeting of The B. Coy, at which the plaintiff was present, and at that time the plaintiff raised no objection thereto. 1051 JUDGMENTS AND ORDEKS. CHAPTER XIX. Rectification of Register, p. 105. Setting aside Sales to Company, p. 1056. Presents, &c. to Directors, p. 1059. Forfeiture of Shares, p. 1059. Injunctions against Directors (Improper Exclusion, &c.), p. lOGl. Ultra vires Acts (Preference Shares, Dividends out of Capital, &c.), j). 1062. Directors' Breaches of Trust, p. 1065. Restraining "Winding-up and Bankruptcy Proceedings, p. 1007. Restraining Improper Use of Name, p. 1068. Security for Costs, p. 1068. Trade Marks, p. 1069. Debenture Actions, p. 1070. Receiver, p. 1089. Rectification of Register of Members. The summary jurisdiction on motion or summons is conferred by sect. 35 of the Act of 1862, and is exerciseable in two cases : 1 . When the name of a person is without sufficient cause entered in or omitted from the register. 2. Where default is made, or unnecessary delay takes place, in entering in the register the fact of any person having ceased to be a member of the company. The jurisdiction ^to "^rectify is exercisable as well after as before winding up, although after a winding-up order a person whoso name is on the register cannot obtain relief on the ground that the contract under which he took the shares was voidable by him. The option to avoid the contract must in such a case be exercised before a winding-up has supervened. See Oakcs v. Turqiiand, L. R. 2 H. L. 325. After a winding-vip order the Court, on settling the list of contributories, was, by sect. 98 of 1862, given power to rectify the register, but the liquidator cannot rectify without the special leave of the Court. Sect. 13 of the Act of 1890. In a voluntary winding-up the liquidator may alter the register on sanctioning transfers of shares made after the commencement of the winding-up. Sect. 133 (7) of 1862 ; Taylor, Phillips % Richard's case, (1897) 1 Ch. 298. 1052 JUDGMENTS AND ORDERS. [ChAP. XIX. The folloTving are some of the cases in which orders have been made: — 1. "Where the applicant was induced to take the shares by misrepresentation in the prospectus. Stewards case, 1 Ch. 574; Smith'' s case, 2 Ch. G04. See also Ex parte Kintrea, 5 Ch. 95 ; London and Staffordshire Co., 24 C. D. 149 ; Anderson' s case, 17 C. D. 373. 2. "Where the company improperly neglected or refused to register a transfer, Stranton Iron Co., 16 Eq. 559. See supra, p. 397. 3. "Where shares had been issued under a contract to issue fully jxaid-up shares, and the contract had not been filed. See siq^ra, p. 190, and Forms 671 and 672, infra. 4. "Where shares have been improperly forfeited (see Form 669), or where the register has been improperly altered with a view to asserting the company's lien. Ystahjfera Gas Co., "W. N. (1887) 30. 5. "Where a transfer in favour of a mortgagee has been registered by nustake (see Fiilbrook v. Richmond Co., 9 C. D. 610) ; or where the company have omitted to register a transfer. Manchester and Oldham Bank, 54 L. J. C. 926. 6. Where the company, acting on a forged transfer, removed a name. Bahia and San Francisco Railway Co., L. R. 3 Q. B. 584. 7. "Where there was a dispute between a vendor and purchaser of shares. Ex parte Shaw, 2 Q. B. Div. 463. 8. "Where the applicant was registered as the holder of shares which had been irregularly allotted to him. Homer District Gold Mines, 39 C. D. 546 ; Portuguese Consolidated Copper Mines, 42 C. Div. 160. 9. "When the signatory of an underwriting letter not constituting a contract had been placed on the register. Consort, ^c. Co., (1897) 1 Ch. 575. There is a difference of opinion as to the extent of the jurisdiction conferred by sect. 35. See Ex parte Sargent, 17 Eq. 273; and Ex parte Shaw, ubi supra. But the true view apparently is, that the jurisdiction is unlimited, with a discretion in the Court in the circumstances of each case. Kimberley North Block Diamond Mining Co., "W. N. (1888) p. 126, C. A.; 59 L. T. 579. See, too, Ward and Henry's case, 2 Ch. 431 ; Askew' s case, 9 Ch. 664; Stewart's case, 1 Ch. 575. However, as between a member and the company, the Court will not readily decline to act under the section. Ex parte Parker, 2 Ch. 685; Ex parte Penney, 8 Ch. 446; Stranton Iron Co., 16 Eq. 559. It should be observed, too, that this power is only to be exercised by the Court " if satisfied of the justice of the case." See the observations of Lord Macnaghten in Trevor v. Whitworth, 12 App. Cas. 409, 440. "^'hether in any particular case it is desirable to apply under this section, or to bring an action, must depend on the circumstances. In a simple case, where an immediate rectification is essential, it may be desirable to apply under the section ; but if the case is at all complicated, and a little delay will not much matter, an action is preferable. In any case, it is not the practice to take such applications on ordinary motion days. They are commonly placed in the list of non- witness actions : see Form 070. Under the present practice, a question can be tried in a much more satisfactory manner in an action than upon a motion or summons. An application under 8. 35 should bo intituled In the Matter of the Act of 1862 and of the conqiany. It should be made by motion. DuJ/in v. Mexican, ^r. Co., "W. N. (1890) 116. The register should V)o rectified, in the case of a removal, by striking through the name with pen and ink, and adding, "By order of the High Court of Justice, dated, &c., this name has been erased." Iron Shipbuilding Co., 34 Beav. 597. Upon an examination of witnesses for the purposes of a motion under the above sectioD, the applicant's witnesses are first to bo cross-examined. Dore Gallery, W. N. (1890), p. 62. FORMS. 1053 Upon motion, &c. for L., &c., let the register of shareholders of the Form 667. coy be rectified by striking out the name of the sd L. as a shareholder Usual order ~ of the coy ; and let the coy pay to the sd L. his costs of this applicon, to to rectify, be taxed by tlie taxing master ; and let notice of this order be given to the Eegistrar of Joint Stock Cos by serving a copy of this order upon the sd registrar, or leaving the same with a clerk at the office of the sd registrar, and at the same time producing this order duly passed and entered. Bryn Ah/n, Sj-c. Co., M. E., 25 Jan. 1878, A. 186. The following is an example of a notice of motion : — In the High Court of Justice, Form 668. Chancery Division. Notice of Mr. Justice . motion to rectify In the Matter of the Companies Acts, 1862 to 1890, register, and In the Matter of the Company, Limited. Take notice that this Honorable Court wiU be moved before his Lordship Mr. Justice , on day next, the day of , 1892, or so soon there- after as counsel can be heard, by counsel on behalf of N. of , that the register of members, of the above-named company may be rectified by removing the name of the applicant therefrom as the holder of 2,000 shares therein [on the ground of misrepresentations in and suppression of material facts from the prospectus of the said company], and that the said company may be ordered to repay to the applicant the sum of 700^., the amount paid by him in respect of the said shares, with interest thereon at 5 per cent, per annum from the date of payment, and also the costs of and occasioned by this ajiplication, or that such other order may be made as to the Court may seem just. Dated this day of Yours, &c.. To the Company, ) Solicitors for the Applicant. Limited. j This notice must be actually served on the company, in accordance with sect. 62 of the Act of 1862: supra, p. 464. Notice on the company's solicitors, where the company does not appear, is not sufdcieut. Denver United Breweries, W. N. (1890) 143 ; 63 L. T. 96. For order to rectify register; notice to be given to registrar; company to pay costs of application; inquiry to be made what damages the applicant has incurred by reason of his name having been put upon such register beyond the costs before directed to be taxed ; company to pay to applicant what shall be certified to be due ia respect of such damages, see Xcw Qucbrada Co., Tontifexh case, 15 W. R. 955; Pemberton, 659. And see, as to notice to registrar, sect. 36 of the Companies Act, 1862. Interest on any sums that have been paid in respect of the shares will be allowed at 4 per cent, per annum. Metropolitan Coal Consumers'' Co., WaineivrighVs ease, W. N. (1890), p. 3. 1054 JUDGMENTS AND ORDERS. [ClIAP. XIX. Form 669. Upon the applicon of E., H., E., and S., shareholders of coj', which, Z ~ 7. &c. [adjDurnment into Court], and upon hoarinff, &€•., and reading, &c., EcctlflLatlOU L./ -IX ■ n -I T ■ • ^ where invalid let the register of niemoers oi sd coy be rectified by inserting- the forfeiture. names of the applicants as shareholders in the sd coy for the number of shares, and with the several amounts pd up thereon, specified in the schedule hereto, such shares having been wrongfully dealt with by the sd coy as having been forfeited ; and let coy j)ay to the appli- cants the costs of this ajjplicon and consec^uent thereon, to be taxed, &c. ; and let notice of this order be given to the Registrar of Joint Stock Cos. THE SCHEDULE ABOVE REEERRED TO. 1. E., as the holder of twenty shares, eight of which are fully paid up, and the remaining twelve of which, numbered to inclusive, are paid up to the extent of 17s. &d. per share. 2. H., as the holder of five shares, numbered, &c., paid up to the extent of Is. Qd. per share. 3. E., as, «S:c. 4. S., as, &c. Hexham Mining Co., Hall, V.-C, 4 March, 1876, A. 624. Form 670. Motion to be placed in non-witness list. Upon motion this day made unto this Court by counsel for "W., of , that the register of members of the above-named coy might be rectified, &c., and upon reading an affidavit, &c., order that the sd motion be placed in the list of non-witness actions for hearing, and order that it be referred to one of the examiners of the Court to take the cross-examination of witnesses who have made or shall make affida\4ts in this matter. And the sd W. is to be at liberty to file another affidavit in reply, and the sd coy, if advised, is to be at liberty to file another affidavit in answer. North, J., 29th May, 1891, American, ^'c. Co., A. 806. Form 671. Upon motion, &c., for A., B., and C, declare that the names of the sd A., B., and C. were improperly entered on the register of members tract no£ filed of the sd coy in respect of 3,300 shares in the coy, Nos. 1 to 3,300, under sect. 2.') before any sufficient agreemt in respect of such shares was filed with the Registrar of Joint Stock Cos, pursuant to sect. 25 of the Cos Act, 1867. And let, &c. And it is ordered that the register be rectified by striking out such names as holders of the following shares in the coy, that is to say, the sd A., in respect of 2,800 shares, Nos. 1 to 2,800, &c. And order that after the agreemt of the 27th April, 1888 (being the sd exhibit marked D., adopting agrcenits under which the sd shares wore agreed to lie issued), lias been filed with the E-egistrar of Joint Stock Cos, the sd coy do allot or issue to the sd A., B., and C. resply, FORMS. 1055 fully paid-up shares of the same nominal value and numher as they Form 671. now rosply liold as afsd in oxchanj^o foi* the certificates of tlie like shares now hold liy tlieni. IhidJUhh Hleel Co., Cliitty, J., ."ird June, 1892, A. 880. See order of Malins, V.-C, to the same effect, Ahcrdare, ^^c. Co., 27th May, 1875, A. 819 (Form 401 of 5th edition of this AVork). When paid-up shares have been agreed to be issued for a consideration other than cash, and by mistake the agreement has not been filed in accordance with sect. 2.0 of 18G7, the Court will in some cases rectify the register to the intent that the agree- ment may be filed, and the shares re-issued. Sec further, supra, p. 190. Although the above and the following forms actually order the agreement to be filed, it would seem that there is not in fact any jurisdiction to make such an order except by consent. The jurisdiction is merely to rectify the register, and give damages. Since the decision in Trevor v. Whitivorth, 12 App. Cas. 409, it seems doubtf id how far any relief ought to be granted in such cases ; and, at any rate, if there has been any considerable lapse of time, it will be proper to provide for the payment of creditors, who may possibly have given credit to the company on the faith of the shares in question having been issued on the footing that they shall be paid up in cash. See Darlington Forge Co., 34 C. D. 522 ; Broad Street Bldgs. Co., W. N. (1887) 149 ; Nottingham Brewery Co., 4 T. L. R. 429. In the case last mentioned, North, J., made the order on the terms that, before it was passed, evidence should be produced that all creditors for 300/. or upwards had been paid. And where notice of motion was served and, before the hearing, a winding-up order was made on a petition presented after service of this notice, Vaughan Williams, J., only made the order to rectify on the terms that due provision should be made for all debts incui-red between the dates of the issue of shares and the notice of motion. Preservation Syndicate, (1895) 2 Ch. 768. Upon motion, &c., for M., of , and W., the tree in liquidation Form 672. of M., &c. [^rectifying register hy cancelling JI.^s na)ne~\. And let an T T, ~ agreemt be forthwith drawn up and executed, embodying the agreemt in relation to the purchase of the business of sd M. contained in the original resolutions dated 31st October, 1872, in accordance with which the sd coy was formed ; and let the agreemt when so executed be forth- with filed with the Registrar of Joint Stock Cos ; and let new [_sic'\ shares of the sd coy be then forthwith issued in the name of the sd M. by the sd coy in pursuance of the sd agreemt, and delivered [_sic'] to the sd W. Give notice to registrar. No order as to costs. Union Manufacturing Co., Jessel, M. E., 19th June, 1878, B. 1289. See supra, p. 231. This action coming on for trial on the 23rd, 24th, 25th and 26th Form 673. February, 1891, and this day before this Court in the presence of ^ T7: 7" counsel for the plaintiff and for the defendants, and upon hearing the contract to pleadings in this action read and four leases, dated 31st December, t'l^e shares . induced by 1888, and assignments thereof resply, dated 30th November, 1889, misrepresen- to the defendants, produced by L. on his subpoena, and the evidence t^^iou. of the several persons named in the schedule hereto on their exami- 1056 JUDGMENTS AND ORDERS. [ChAP. XIX. Form 673. nations taken orally before this Court on the days set opposite their names in the second column, and upon the production to them of the exhibits specified in the third column of the sd schedule, and what was alleged by counsel on both sides : Declare that the plaintiff is entld to have the contract entered into by him to take 400 shares in the defendants' capital in the pleadings mentd set aside in respect of the misrepresentations contained in the prospectus of the sd coy, and doth order and adjudge the same accordingly and [rectify register] and order defendants to pay to the plaintiff the sum of 150^. (being the total of 7s. Qd. per share pd on the sd shares), together with interest thereon at the rate of 5^. p.c.p.a. by plaintiff's consent from the 13th November, 1889 (the date of the writ which was subsequent to the date when such amount was pd), until paj-ment. Tax plaintiff's costs of this action and also tax the defendants their costs of the orders dated resply 26th February, 1 890, and 6th November, 1890, and the taxing-master is to set off or deduct the defendants' sd costs and also the sum of \l., being the costs of the plaintiff's summons dated 13th January, 1890, which were to be the defendants' costs in any event from the amount of the plaintiff's taxed costs, and certify the balance due to the sd plaintiff. And order the defendants to pay to the sd plaintiff the balance certified by the taxing-master to be due to him as afsd. Eomer, J., Cronhach v. Uranium Mines, Limtd, 27th Februar}', 1891, A. 329. Setting aside Sales to Company. Form 674. Declare that the sale to the plaintiff coy of the concession of 8 May, J . 77 1869, in the pleadings mentd, was fraudulent, and ought to be set Betting aside aside, and order and decree the same accordingly. Declare that H. sale oi con- ^^^ ^j^^ estates in liquidation and sequestration of the defendants B, cession and ^ ^ ^ ordering' and P. L. & Son, as a coy, and C. L., &c., the only partners of the sd repayment. ^^^^ ^^ individuals in the pleadings mentd, are jointly and severally liable to make good to the plaintiff coy the sum of 65,000/., so pd for the purchase of the sd concession, together with interest thereon at the rate of 4 p.c.p.a from 31 May, 1871, and the costs of this suit. Declare that the defendants E. and K. are jointly and severally liable to make good to the plaintiff coy the said purchase-money to the extent of 15,000/., improperly pd to the sd defendants as in the pleadings mentd, together with interest on the said sum of 15,000/. at rate afsd from 31 !May, 1871, and tlie costs of this suit. And defendant H. not electing to take an account of the profits (if any) made by the plaintiff coy from the workiug of the Island of A. V. since 31 May, 1871 ; let defendant 11., on or before 1 June, 1876, pay to the l)laintiff coy 05,000/., together with interest at 4 p.c.p.a. from 31 May, 1871, to the time of payment. ]jiberty for coy to prove against estates of tlio doi'ondaut 15. under the liquidation proceedings initiated by FORiMS. 1057 him, and also under the sequestrated estates of P. L. & Son, as a coy, Form 674. and C. L., «S:c., as individuals, for the said 05,000/. and interest at ~ 4 p.c.p.a. from 31 l^faj, 1871, up to the dates of the liquidation and sequestration resply, and for the costs of this suit. And let defen- dants E. and K., on or before 1 June, 1876, pay to the plaintiff coy sd sum of 15,000/., with interest, &c., to the day of payment. Declare that the persons paying the sd 05,000/., and interest and plaintiff's costs of suit, as afsd, shall bo entld to the benefit of the letters patent granted, &c., and of the document or concession, &c. And plaintiff coy shall, at the expense of such persons paying as afsd, deal Avith sd letters patent and concession as sd person shall reasonably require, or, in ease of difference, as the Court shall direct. And declare that any sum which shall be paid to the plaintiff coy by the defendants E. and K., or either of them, on account of the 15,000/., and interest, shall be taken in satisfaction joro fanto of the 65,000/., and interest, payable by the defendant H., and provable, &c., and that any sum or sums over and above 50,000/., with interest, &c., which shall be pd to plaintiff coy by defendant H., and the estates of, &'c., shall be taken in satis- faction pj-o tanto of the 15,000/. and interest. Defendants to pay costs of suit. Dismiss bill as against L. without costs. And plaintiff coy having arranged to pay the defendant E. 150/. for the costs of suit, dismiss bill as against him. Liberty to apply. Phosphate Sewage Co. V. Hartmont, Malins, Y.-C, 22 Mar. 1870, B. 481. la the above case, the promoters had formed the compauy, and sold to it a con- cession which they knew was voidable ; the real ownership was concealed ; the persons who agreed to buy on the company's behalf received a secret bonus of 15,000?. ; the directors were nominees of the promoters, and the prospectus con- tained serious misrepresentations. Upon discovery of the facts, a bill -was filed by the company against the promoters, including the owners of the concession, the members of a provisional conunittee, the solicitors, secretary, and others, and a decree was made as above and was affirmed on appeal. See report in 5 C Div. 394. In Neiv Sombrero Phosphate Co. v. Erlanger (5 C. Div. 73 ; 3 App. Cas. 1218) the promoters sold a property to the company -without disclosing the fact that they were getting double what they had paid, and without disclosing the real ownership ; the directors were nominees of the promoters, aud the prospectus contained misrepre- sentations. Upon discovering the facts, a bill was filed, and, on appeal, a decree was made as below mentioned. An appeal to the House of Lords was dismissed with costs. The decree of the Court of Appeal declared that the contract ought to be set aside, and decreed the same ; declared that the defendants were liable to repay the purchase-money, and were liable for the shares issued in part payment ; ordered them to pay the purchase-money, with interest ; gave liberty to prove for amount against estates of bankrupt defendants ; directed inquiries as to which of the shares still belonged to defendants, and of proceeds of sale of those sold ; directed a transfer of the foiTner, and payment of such proceeds ; gave liberty to prove against estates of bankrupt defendants for such proceeds ; declared that company entitled to bo paid the purchase-money and said proceeds out of estate of deceased defendant ; declared defendants and estates of banki'upt and deceased liable for c^sts of suit, and directed payment, &c. ; directed accounts of profits, if any, made by company in working the island ; ordered company, upon naymcnt of the piirchase-money. Sec, P. 3 Y 1058 JUDGMENTS AND ORDERS. [CuAP. XIX. Form 674. to deliver up island, and pay over such iiiofits, if any ; directed inquiries as to estate ■ of deceased defendant ; adjourned further consideration ; dismissed bill, with costs, as against D. & AV. Setou, p. 1937, where the decree will be found more fully set out. The case was explained and distinguished in Salomon v. fialommi &; Co., (1897) A. C. 22, the case of a private company. Form 675. Contract for sale of mine set aside. This action coming on for trial against tlie defendants W. M. and ]\[. on the 25th and 26th April, 1882, &c., and counsel for the plaintiffs this day also moving for judgment on the default of the defendants S. and G. in delivering a defence, and upon hearing the pleadings, &c., order that the contract dated 2nd April, 187'J, in the pleadings mentd, be set aside, and declare that all shares received by any of the defendants, other than the defen- dant S. as part of the couson for the sale agreed upon by the sd contract which have not been sold, but have been retained by them or any of them, or by any persons in trust for them or any of them, ought to be surrendered to the coy, and order and adjudge the same accordingly. And declare that the defendants, other than the defen- dant S. are jointly and severally liable to pay to the plaintiff coy the amount of the purchase-money pd by them under the contract, together with interest at the rate of 4 p.c.p.a. from the date of the respective payments, and also to pay to the plaintiffs the nominal value of all shares which were allotted to the sd defendants or any of them under the sd contract, and which they have sold, together with interest thereon at 4 p.c.p.a. from the dates when such shares were sold. And let an account be taken of what is due from the defendants, other than the defendant S., to the plaintiffs, having regard to the afsd declarations. And order the defendants W. M., G. and M., within one month after the date of the chief clerk's certificate, to pay to the plaintiff coy what shall be certified to be due to them on such account. And order them to pay to the plaintiff coy their costs of this action to be taxed. And declare that plaintiff coy are entld to a lien on all the interest of the defendants in the i:)pty comprised in such contract for the principal mone3's and interest payable under this judgment and order, and for the costs of this action. Liberty to plaintiffs to apply to enforce such lien as they may be advised. Plympton Mining Co. v. Wilkim and others, Kay, J., 27 April, 1882, B. 942. In the above case a mine had been purchased from the liquidator of a company for 1,000/., and resold shortly afterwards to a new company, promoted by the purchasers, for 4,000/., payable part in cash and part in shares. Duo disclosure was not made, and the directors were not independent. Kay, J., was of opinion that the defcn- dants, except S., the nominal purchaser, against whom no relief was claimed, were promoters and partners in carrying out an inequitable, and therefore fraudulent, scheme ; that the directors, who were mere nominees of the defendants, had no opportunity of forming a separate judgment as to the propriety of carrying out the coninict entcTcd into by tlie defendants ; that the defendants, as promoters, stood in a iidu'i.'ny jiosition to the company ; that the inci'cased price Avas exorbitant; FORM!?. 1059 that tlio plaintiff company was'not disentitled on the ground of delay, because the Form 675. knowledge of the transaction complained of was improperly kept back ; and accord- - ^ ing-ly, judgment as above was entered. See W. N. (1882) C6. As to lien where contract rescinded, ace Abcraman Ironworks v. Widens, 4 Ch. 101 ; Mycock V. Beatson, 13 C. D. 385 ; Adam v. Mewbi(j(jbi(j, 13 App. Gas. 308. For orders in llaf/iu/U v. Car/ton, see 6 C. D. 371, and 4th edit, of this work, pp. ;)31, 532 ; Reg. Lib. (25th April, 1877) A. 869, and (8th August, 1877) A. 2742. See also lymimt Co. v. Grnnf, 11 C. D. 941 : 17 C. D. 122 ; A. 921 (2Gth February. 1879). Presents, &c. to Directors. ]\Iiimte of judG,-meiit : This Court dotli order and adjudge tliat the Form 676. defendant G. do, within one calendar month after service of this order, j^j^ector pay to the phiintiffs, the Nant-y-Glo, &c. Coy, the sum of 4,000/., ordered to being 80/. per share on each of the fifty shares so transferred to him ^-^^^.q^ as in the pleadings mentd, together with interest thereon at the rateof 4p.c.p.a. from 8 Sept., 1871, the date of such transfer. Defendant G. to pay the costs of the action. Nant-y- Glo and Blaina Iromvorks Co. V. Grave, Bacon, V.-C, 19 March, 1878 ; Eeg. Lib. 1878, B. 573. SeeEeport, 12 C. D. 738. In this case the defendant G. became a director at the request of the promoters, and ho accepted from them a present of fifty fully paid-up shares of 100/. each. It was admitted that at the time they were transferred to him, or shortly afterwards, they were worth 80/. per share. They subsequently fell to 1/. per share. The company claimed a declaration that G-. was a trustee for the company of the shares, or of the value thereof, at the election of the company, and judgment was given as above. See also the somewhat similar case of Brum Slate Qifarry Co., McLean^ s case, 55 L. J. Ch. 3G, in which McLean, who had during the whole of its existence been a director of the Drum Slate Quarry Company, which was then in liquidation, and had received from the promoters a present of 1,000/. to buy shares, was, on the application of the liquidator imder sect. 165 of the Companies Act of 1862, ordered to account for the shares at the value at which they were when he received the present, with interest at 5 per cent. In the case of Fitzroy Bessemer Steel, cj-c. Co., 50 L. T. 144, before Kay, J., where no dividends had ever been received, a promoter and director who obtained shares improperly, though ordered to account for the value of the shares, was not, under the circumstances, ordered to pay interest. See also order's in Part II. against du-ectors under sect. 1 65 of the Companies Act of 1862, now repealed, and the substituted sect. 10 of the Companies (AVinding-up) Act, 1890. As to an application by liquidator that the Court would direct a prosecution of a director under sect. 167 of the Companies Act, 1862, and order the costs to be paid out of the assets granted, see C/irtfc/es i>«2Aam i^' f'o., 32 W. E. 920; 53 L. J. Ch. 1113 : 51 L. T. 570. Forfeiture of Shares. Upon motion for plaintiff and upon hearing counsel for the defen- Form 677. dants, and upon reading, &c. And the plaintiff by his counsel under- Restrain in o- takine; to abide by any order this Court mav think fit to make as to threatened damages in case this Court shall hereafter be of opinion that the ^^ ^^ ^^^^' 3 y2 1060 JUDGMENTS AND ORDERS. [ChAP. XIX. Form 677. defendants shall have sustained any, by reason of this order, which ~~~ the plaintiff ought to pay. Order that the defendants, the Yuruari Coy, Limtd, H. W., H. N., and H. S., and their agents, be restrained until judgment in this action, or further order,.froni taking proceedings as against the plaintiff under the notice of 5th February, 1891, to enforce the call of 6r/. per share, of which the defendants required payment on the 5th March, 1891, and from forfeiting the plaintiff's 4,600 shares for nonpayment of such call until due notice has been given of such call, and until such notices shall have expired, and from acting as against the plaintiff in any way upon the notices, bearing date the 5th day of February, 1891, and the 6th day of March, 1891, signed respectively by order of the Board : , secretary. Brunker v. Yuruari Co. and others. North, J., 13 March, 1891, A. 430. Injunction restraining forfeiture of shares. Form 678. Undertaking as to damages. Let an injunction be awarded to restrain defendant coy and the defendants C. M., and J., the directors thereof, from striking out or erasing the name of the plaintiff from the register of the members of the defendant coy, and from selling, re-allotting or otherwise disposing of the plaintiff's shares therein, numbered, kc. inclusive, which by a resolution of the directors of the defendant coy of the day of , are purported to be forfeited, or any of them, or otherwise acting upon the afsd resolution until judgment in this action, or until further order. Goulton v. London., ^•c. Co., Malins, V.-C, 7th June, 1877, A. 1180; Seton, 1656. See report of case, W. N. (1880) 141. See also Johnson v. Lyttle's Iron Agency, 28th March, 1877, A. 691 ; 5 C. Div. 687. Form 67P. Upon motion for judgment, kc. by counsel for the plaintiff for such :r~ order as upon the admissions of fact in the statement of defence he is grauting- per- entld to, and upon hearing counsel for the defendants, and upon read- petual injunc- ijjg ^j^e pleadings in this action. Declare that the resolution of the forfeiture. board of directors of the defendant coy of the 26th February, 1877, in the statement of claim particularly mentd, which declares or pur- ports to declare the share of the plaintiff in the sd coy to be forfeited, is invalid and void.- And let a perpetual injunction be awarded against the defendant coy, restraining the sd coy, and the directors, and ofhcors, and agents thereof, fi'om removing the name of the plaintiff from the register of members of the defendant coy, and from selliiig, re-allotting, or otherwise disposing of the sd shares which the sd resolution purports to forfeit as afsd, or any of them, or otherwise acting upon the sd resolution. Let defendant coy j^ay to plaintilf his costs of the action, to be taxed, &c., in case the j)arties differ : and the Court not requiring any trial of this action other than the sd motion. Liberty to ap])ly. Goulton v. London ^trcliitcctural Brick Co., and C. N. k J., 1877, a. 89; Malins, V.-C, 5th July, 1877, A. 1361. FORMS. 1061 Injunctions against Directors (Improper Exclusion, &c.). Form 680 . Upon motion for an injunction, &c. This Court dotli order and to restrain adjudge that a perpetual injunction be awarded against the defendants, exclusion of except the defendant coy and E. P., to restrain them from restraining or in any wa}' interfering with the plaintiff acting or attending as a director of the defendant coy ; and let the defendants M. and S. pay to the plaintiff his costs of this action, including his costs of this motion, such costs to be taxed, &c. ; and let all further proceedings in this action, except for the purpose of carrying out this order, bo stayed. Pulbrook V. Richmond, • .- -ir. 1 1 X7 of windin,'ht to iudomnity. "Court" means the Court having jurisdiction to wind up the company. Sect. '61 (2) of 1890. But where the judge disregards the plain rights of the debenture holders the Coirrt of Appeal will overrule his decision. Thus, where a receiver had been appointed in a debenture holder's action, and afterwards a winding-up order was made, and the official receiver having become liquidator, the judge had discharged the receiver, thus in effect placing the liquidator in possession, the Court of Appeal reversed the order, on the ground that it disregarded the debenture holders' rights, more especially as the amount owing on the debentures exceeded the value of the assets charged thereby, and as the liquidator admitted that he wanted the assets in order to see whether he might not question the validity of the debentures. Strong v. Carlyle Fress, (1893) 1 Ch. 268. (As to which, however, see observations of V. Williams, J., in British Linen Co. v. South American, ^c. Co., (1891) 1 Ch. 108.) When the winding-up is voluntary, the liquidator, not being an officer of the Court, has no locus standi to disjplace the receiver appointed in a debenture holder's action. Boyle v. Beftirs Llantivit Co., 2 C. D. 726. And the liquidator has no title to displace a receiver appointed by the debenture holders or their trustees. In such case, unless the security is impeached, the Court will not attempt to interfere with that security, or to force the liquidator on parties who prefer to employ a stranger ; and further, even if the assets are in the hands of a liquidator appointed by the Court, the Court will, on proper application, order him to give up possession to the receiver. Re Henry Found, Son ^ Hutchim, 42 C. Div. 402. But the power in the security is a fiduciary one, and if not exercised bond fide the Court will appoint its own receiver. Mashelyne v. British Typewriter, Ltd., (1898) I Ch. 133. Where the undertaking charged in favour of the debenture is in the nature of a public undertaking, e.g., waterworks, gasworks, piers or harbours, and there is no person to sell siich undertaking, the principles of the decision in Gardner v. L. C. % D. Rail. Co. (2 Ch. 201) apply, and the Court has no jurisdiction to appoint a receiver or manager, though it may appoint a receiver. Blaker v. Herts and Essex Watertvorlcs Co., 41 C. D. 399; Marshall y. South Staffordshire Tramways Co., (1895) 2 Ch. 36. But if the company is in liquidation, the Court can authorize the liqui- dator to carry on the business, or a special manager can be appointed. The Court occasionally appoints a receiver at the instance of a debenture holder, although neither principal nor interest is in arrear, e.g., where the security is in danger. Wildey v. Mid-Hants Rail. Co., 16 W. R. 409 ; 18 L. T. 73; Hubbuck v. Helms, 56 L. T. 232 ; Thorn v. A^'ine Reefs, 67 L. T. 93 ; McMahon v. North Kent Co., (1892) 2 Ch. 148 ; Earl of Lathom v. Greenwich Ferry Co., 36 S. J. 189 ; Edwards v. Standard Rolling Stock, (1893) 1 Ch. 574 ; Victoria Steamboats, (1897) 1 Ch. 158. A receiver appointed unconditionally is at once deemed to be in possession as against execution cjreditors. Morrison v. Skerne Ironworks Co., 60 L. T. 588. Not so where he is appointed upon giving security. Edwards v. Edwards, 2 Ch. 291. A receiver appointed by the Court is an officer of the Court, and any interference •with his possession, even by a person claiming under title paramount, is a con- tempt of Court. Ames v. Birkenhead Bocks, 20 Beav. 332 ; Russell v. East Anglian Rail. Co., 3 Mac. & G. 117 ; Helmore v. Smith (2), 35 C. D. 449 ; Ex parte Cochrane, 20 Eq. 282 ; Searlew. Choat, 25 C. D. 723 ; Oswald on Contempt, 66. Those who claim a right to interfere should apply to the Court for liberty. Richards v. Mayor of Kidderminster, (1896) 2 Ch. 212 ; ILarriagc, Ncave ^- Co., (1896) 2 Ch. 663 ; Kerr on Receivers, 129 ; Scton, 656. When the receiver and manager is appointed by the Court ho " accepts the appointment on the terms that he will bo personally responsible to the creditors of the biisiuesfl, whil.'-t he will be indemnified out of the estate." Per Rigby, L. J., J). Owen ($• Co. v. Cronck, supra; Hurt v. Hull, (1895) 1 Q. B. 276 ; compare this with Gonling v. Gaskcll, (1897) A. C. 575, where receiver appointed by trustees of deben- ture trust d'cd. FORMS. 1093 See, further, as to receiver's personal liability and riglit to indemnity, Strapp v. Bull, (1895) 2 Ch. 1 ; Hay v. Swedish, ^-c. Co., 36 S. J. 712. As to servants being discharged by the Court appointing a receiver and manager. Discharge of see Reid v. Explosives Co., 19 Q. B. D. 264. servants. As to a distress for rates where a receiver has been appointed, see Richards v. Mayor of Kidderiinnster, (1896) 2 Ch. 212 ; Marriage, Ncave ^- Co., (1896) 2 Ch. 663; Raterson v. Oas Light Co., (1896) 2-Ch. 476. As a general rule the receiver or receiver and manager should not apply to the Directions. Court for directions, but should get the plaintiff or a defendant to ap2)lJ^ Rarker v. Bunti, 8 Beav. 497 ; Setou, 676. Borrowing by receiver upon prior lien securities Borrowing is frequently authorized by the Court. See Form 731, infra. It is well settled with prior that the Court has jurisdiction to authorize this. Greenwood v. Algesiras Co., (1891) 2 Ch. 205. Where a receiver and manager is appointed, it is the usual practice now to h'mit his appointment as manager. Chitty, J., first established this practice many years ago, and the other judges, including the winding up judge, follow that practice. As to priority of receiver's remuneration expenses over costs, see Batten v. TFedg- Priorities. wood Co., 28 C. D. 317; Brabourncx. Anglo- Austrian Co., (1895) 2 Ch. 891. As to priority of expenses over seciu-ities given by the receiver and manager, see Strapp V. Bull, (1895) 2 Ch. 1. Upon motion this day made unto this Court by counsel for the Form 731. plaintiff, and upon hearing counsel for the defendants, and upon Appointment reading the writ of summons issued in this action on the 16th day of of receiver June, 1892, and an affidavit, &c., and the exhibit W.l therein referred "l"^^ ^^'^^°^^ to, being a debenture dated the 1st July, 1887, under seal of the months, with defendant coy, and the defendants by their counsel submitting to the -^^^^ ° ^ following order, and the plaintiff by his counsel undertaking to be charge responsible for anything to be received by the receiver next hnftr ^^o*^.^^ "^ ■•• _ . . . priority to appointed pursuant to this order, until he shall have given security as debentures. hnftr provided, this Court doth hereby appoint Mr. E. S., of, &c., accountant, receiver and manager on behalf of the plaintiff and other debenture holders of the defendant coy, of all real and personal ppty now or at any time hereafter belonging to the said defendant coy com2:)rised in or subject to the security and cliarge created by the sd debenture dated the 1st July, 1887, being the sd exhibit marked "W.l. And it is ordered that the sd E,. S. do on or before the 8th day of July, 1892, give security as such receiver and manager to the satisfac- tion of the judge in chambers. And it is ordered that the appointment of the sd E. 8. as manager as afsd shall not extend beyond six mouths from the date of this order without leave of the judge at chambers being first obtained. And it is ordered that the sd E. S. be at [liberty to borrow] in the whole 350^. at the rate of bl. p.c.p.a. by way of charge on the real and personal property of the defendant coy, to have priority over the debentures issued by the defendant coy. And it is ordered that the sd E. S. do from time to time pass his accounts and pay the balance which shall be certified to be due from him as the judge shall direct. And it is ordered that the defendants {name of coy) do deliver over to the said E. S. as such receiver and manager, all 1094 JUDGMENTS AND ORDERS. [OhAP. XIX. Form 731. Looks, leases, deeds, papers, and documents relating to the sd real and personal ppty comprised in the sd debenture. Crotvley v. William Ashhj c^' Son, Limtd., Chitty, J., 16th June, 1892, A. 844. It may now be considered settled law that, where requisite, the Court will autho- rize a receiver to give a charge in priority to the debentures. Greenwood v. Ahje- Sims EaUwaij, (1894) 2 Ch. 205. As to when the power is exhausted, see Milivard v. Avill and Si)iart, W. N. (1897) 162. As to limiting the time for which a manager is appointed, see Form 730. As to specially directing possession to be taken, see Marriage, Neave % Co., (1896) 2 Ch. 663. For order to continue manager, see Part. II., Form 469. Form 732. Another. Receiver and manager. Upon motion, &c. Order that a proper person be appointed receiver and manager on behalf of the plaintiff and the other above-named debenture holders, until judgment in this action, or until further order, of all the ppty and assets of the defendant coy comjDrised in or subject to the securities or charges created by the mortgage debentures issued by the defendant coy to the plaintiff and the sd other debenture holders, and also to manage and work the mines, and generally to carry on the business of the coy comprised in the sd securities. And let such receiver and manager, from time to time, pass his account as such receiver, and pay the balances which shall be certified to be due from him, or so much thereof as shall be certified to be proper to be so paid into Court to the credit of this action. Stathan v. London and Jagersfontein Diamond Mining Co., Limtd., 1883, S. 2604. Chitty, J., 2 June, 1883. In this case the mines were situate in South Africa. Form 733. Upon motion, &c. Order that a proper person be, upon his giving Another security, appointed to receive the rents and profits of the defendants' real estate (include leaseholds), and to manage the defendants' colliery business, and get in the outstanding debts and effects belonging to the defendants. And let the defendants deliver over to such receiver all the stock, plant, machinery, and effects of the defendants, and all securities in their hands for such outstanding debts and effects, with all books and papers relating thereto, and in case it shall be necessary to put any of the debts in suit for the recovery thof, the same to be done with the approval of the judge, and the person so to be appointed is to bo at liberty to make use of the names of the plaintiffs, and defendants, who are to be indemnified therein out of the premises comprised in the security of the plaintiffs in the sd affidavit mentd, and out of the sd stock, plant, machinery, and effects. Pass his accounts, and after retaining in his hands such sums as shall bo deemed sufficient to carry on the sd collieries, pay the balances which shall bo certified to be due from him in Court to the credit of this cause, of, «S:c., and \invcst and accumulate^' Peek v. Trinsmaran Co, FORMS. 1095 M. E., 10 Feh., 1876, B. 216; 2 C. Div. 115. For the subsequent Form 733. order, see B. 670. For order by consent appoiutiug receivers and managers without security, plain- tiffs undertaking- to supply funds not exceeding 15,000?. to caixy on the business, Bee liodcwiild V. If'ai/nv'f:, ifr. Iron Jf^orks, Malins, V.-C, 2o May, 187G, B. 1524. Tlie following order was made by Cliitty, J., in Fontlfex v. Tontifex and Wood, Limited, 3 Nov., 1888, P. 2G32. For order ai^pointing receiver and manager, "subject and without prejudice to the rights of any prior incumbrancers (if any), and also to manage and work the business of the defendant company," &c., see order of Chitty, J., Pontifex v. Wood, 30 Oct., 1888. Upon motion, on the Hth January, 1887, by counsel for plaintiffs. Form 734. and upon reading an affidavit of the plaintiff, 0. M., filed 12th January, Liquidator to 1887, and an affidavit of , and an affidavit of , both filed the be receiver. 13th January, 1887, as to fitness: And J. F. having given security as receiver, by entering into a re- cognizance with and , as his securities, dated, &c., which has been approved of by the judge and duly enrolled, This Court doth hereby appoint J. F. of , the sole voluntary liqr of the defendant coy, receiver of the whole of the ppty of the defendant coy. And it is ordered that the leasehold hereds, sugar refinery, distillery, ware- houses, buildings and premises, and all machinery, plant, fixtures and fittings upon or about the same, and the stock-in-trade and other real and personal property, including patents, belonging to the defendant coy in connection with such coy's business, and the goodwill of such business, be sold out of Court by the said J. F. as such receiver, and either together or in lots as may seem expedient. And let the said J. F. pay the net moneys to arise by such sale after payment of rents and expenses of sale into Court as in the lodgment schedule mentd. And \_accounts and payment of balances^. Lodgment Scheditle. Particulars of Funds to be lodged. Person to make the lodgment. Amount. Money. Securities. Net proceeds of sale of lease- holds and premises as in order mentioned, to be verified by affidavit. Balances to be from time to time certified on passing the receiver's accounts, or so much thereof as shall be certified to be payable. Invest in Consols and accximu- late the amounts paid in. J. F. (receiver). £ *. d. £ s. d. Dimcan v. Patent, ^c. Sugar, c^c. Co., Limited, 1887, D. 48, Kay, J., 26 Jan., 1887. 1C96 JUDGMENTS AND ORDERS. [CllAP. XIX. C'leik of com- pany to be receiver and manager ■without security. Form 735. Upon motion, &c. : Appoint H., of , the managing clerk of the defendant coy without liis being required to give security, and at his present salary of 21. 5s. per week to manage the real and personal pjity and business of the defendant coy comprised in the indenture dated, &c., in the writ in this action mentd, and to receive the rents and pro- fits and produce of the sd ppty and business until further order of this Court : And order that the defendants The Coy, T. and Gr., deliver over to the sd H., as such receiver, all securities in the hands of them or any of them, together with all books and papers relating to the real and personal ppty and business of the coy. \_Acxounts. Payment. Investment. Accumulatio7i.'] Perry \_on behalf of , 8fc.'\ v. Glutton Hall Coal Co., Malins, V.-C, 22 June, 1876, B. 1698. See Form 705. Form 736. Sale on motion. Upon motion, &c. : Let all the hereds and premises comprised in the indenture dated, &c., and all the chattels and things upon or connected with such hereds and premises, and contained in the sd indenture, be sold, with the approbation of the judge: And let the proceeds of such sale be pd into Court to the credit of this action, &c., or otherwise as the judge shall direct : And the 2:)laintiff by his counsel adopting the agreemt hnfter mentd, Let the agreemt dated 31 Oct., 1877, and made, &c., for the sale of the sd hereds known as the Cwm Estate, at the price of 16,000/., be carried into effect; and Let the moneys to arise from the sale of the last-mentd hereds be paid into Court to the credit of this action, &c., or otherwise as the judge shall direct. Davis v. Ashwiyi, HaJl, V.-C, 27 Nov., 1877, A. 3552. See also the report in 26 W. E. 139. The above order was made under the old practice, but now by s. 25 of the Con- veyancing and Law of Property Act, 1881, property can be sold in a foreclosure action upon an interlocutory application, as in Form 736 (see Woolley v. Colman, 21 C. D. 173; ChrlsUj v. Van Tromp, W. N. (1886) 111); and by rule 1 B of R. S. C, Ord. LI. (Nov. 1, 1893), "In debenture holders' actions, where the debenture holders are entitled to a charge by virtue of the debentures, or of a trust deed, or otherwise, and the plaintiff is suing on behalf of himself and other debenture holders, and where the judge in person is of opinion that there must eventually be a sale, ho may in his discretion direct a sale before judgment, and also after judgment, before all the j ersons interested are ascci'taincd, whether served or not." This rule to a great extent meets the difficulty raised bj' tlie decision in Griffith V. I'ljioid, 4.5 C. D. 553. In that case, Stirling, J., held that on a foreclosure summons all persons interested in the equity of redemption must be served, for all Buch persons would have to be made parties to an action for foreclosure ; and that some out of a number of debenture holders did not represent all the debenture liolders for the purposes of a foreclosure judgment. See Francis v. Harrison, 43 C. D. 183, that trustees do not represent cestuis que trustcnt for this purpose. Very commonly the judgment gives lilierty to apjily in chambers as to sale. Will n there is a debenture trust deed the conduct of the sale is to be given to the trustees, unless the Court otlierwisc directs. R. S. C, OrJ. L. r. 10 ; Lnnn v. Alcrnf;/ Ruhhrr Co., Romer, .T., at Chambers, 1896. FORMS. 1097 Where a debenture holder has been authorized to defend on behalf of a class he Form 736. i.s not entitled to consent to judgment, but he may submit to judijmc.it. /iVm v. Rkhmoud, G2 L. T. 127. Upon motion this day made, &c., and upon hearing, &;e., and upon Form 737. reading order dated 23rd June, 1896, &c. Order that the undertaking 7 ~^ of the defendant coy and all tlie jtpty whatsoever and wheresoever order for sale comi)rised in the ahove-mentd debentures be sold as a i^roina: concern, ^'^ ^■""^g' ^ _ _ _ » o ) concern. with the approbation of the judj^'e in chambers, and that the moneys to arise by such sale 1)0 pd into Court to the credit of this action. Costs of motion to be costs in action. Liberty to apply as to such sale. Re Olympia, Limtd., Peacock v. OJympia, Limfd., subject to further order. Vaughan Williams, J., 3rd July, 1896. For order for accounts and sale as going concern, see sitpra, Form 705. Upon the application, &c., it is ordered that J. S., the liqr of the Form 738. defendant coy, be at liberty to put up the land and buildings, fixed q^. ■. ^ ^^ plant, machinery and works thereon at Barton-upon-Humber belong- of water- ing to the sd coy for sale by public auction, subject to reserve price ""^°^''^'^- being fixed by the judge to sell the same by private contract subject to the approval of the judge ; and it is ordered that the said J. S. have the conduct of such sale with liberty to any of the debenture holders of the sd coy to bid at the sd sale or to purchase the sd ppty. Buttonshaic, on behalf v. Bartun-upon-Humber District ]Vatcr Co., North, J., 6 Ap., 1892. Upon the applicon of the plaintiff and hearing the respective solors Form 739. for the sd plaintiff and the defendants, and upon reading the judgment W^ f T" dated the 9th day of April, 1886, and the order dated the 25th day of of company's May, 1886, appointing H. F. K. receiver herein: patent. It is ordered that the English and foreign letters patent belonging ^g^^^ t'^ ^^^ to the defendant coy be sold by tender with the approbation of the holder to bid. judge, such tender or tenders to be sent in to the chief clerk. And by consent it is ordered that the plaintiff and Frederick William Varley, a debenture holder, be at liberty to tender for and become the purchaser or purchasers of the said letters patent. And it is ordered that the money to arise from such sale be jDaid into Court to the credit of this action. Beale v. Varley, 1886, B. 1548. Bacon, V.-C, 22 Jan., 1886. Upon the applicon of the pit, and upon the hearing the solors for Form 740 the applicant for the [off] liqr of the deft coy for the following parties having liberty to attend, namely, S., K., T., and G., and upon reading S'^tram^ay.^^ an order for sale dated 25th March, 1891, two affts, &c. It is ordered that the sd agreement, dated the 2oth July, 1891, made 1098 JUDGMENTS AND ORDERS. [ClIAP. XIX. Form 740. between the recr and manager of the undertaking of the deft coy and the pit of the one part, and the Coy of the other part, for the sale and purchase of the deft coy's undertaking, dated the 25th July, 1891, as modified by the supplemental agreement dated the 28th July, 1891, be carried into effect. Loive v. North London^ ^'c. Co. ; hi re same Co., North, J., at Chambers, 31st July, 1891. B. 1130, Form 741. Order con- firming sale of land and for payment into Court. Upon the ajoplicon of pit, &c., and upon, &c., order that a condi- tional agreemt dated 12th May, 1896, and made between the L. Co., Limtd., of the one part, and K. and T. of the other part, for the sale to the sd K. and T. at the sum of 1, of certain freehold land situate at , upon the terms and conditions referred to in the sd contract, be carried into effect, and the sd K. and T., by their solors declaring themselves content with the title to the said freehold land already purchased by them, order that the sd W. (the receiver and liqr) and the sd K. and T. do, on or before the 30th Aug., 1896, make the respive lodgments in Court as directed in the lodgment schedule hereto, and that upon such payments being made the sd K. and T. be let into possession of the sd freehold land, and order that all proper parties are to join in and execute a proper conveyance of the sd freehold land to the sd K. and T., or as they may direct, such convey- ance to be settled by the Court in case the parties differ, and order that the sd W. be at liberty to pay the sum of 1., to Messrs. , as commission for negotiating the sd sale. [The lodgment schedule provided for lodgment of " deposit on sale of freehold land at , to K. and T., under agreemt dated th'e 12th of May, 1896, by W.," and also for lodgment of " balance of 1, purchase-money under the sd agreemt by K. and T." "The above funds not to be transferred or otherwise dealt with without notice to K. and T., the purchasers."] Somerset V. Land Securities Co., Limtd., Vaughan AVilliams, J,, 3rd June, 1896. Form 742. Certificate as to result of sale by tender. \_Title, Sfc.'] In pursuance of the directions given to me by Mr. Justice Chitty, I hby certify that the result of the sale which has been made in pursuance of the order made in this action, dated the 1st day of December, 1893, is as follows: — The plaintiff and defendants and H., the purchaser hnfter named, have attended by their respective solors. All the undertaking and property of the defendant coy by the sd order directed to be sold, have been offered for sale in one lot by scaled tender Avitli the approbation of the sd judge, and according to certain particulars and conditions of sale, and the tender of H., of , has been accepted by the sd judge, and the sd H. has been allowed to bo the purchaser of the sd undertaking and ppty upon the terms FORMS. 1099 and conditions set forth in his sd tender : such tender is in the words Form 742. following, that is to say : — \_II('rc follows ten(ler.~\ The particulars of the sd undertaking and pi)ty comprised in the sd sale are set forth in the particulars and conditions of sale endorsed with my signature, and which particulars and conditions of sale are to be filed with this certificate. Dated this day of , 1894. , Chief Clerk. Upon the applicon of the plaintiff, &c. : Let the conditional contract Form 743. dated 2nd March, 1878, made between the defendant coy, of the first " part, E. (the receiver and manager of the ppty of the sd coy), of the conditional second part, and the defendants, Gr. B. and J. E., of the third part, contract for and the Bishwell Coal & Coke Co., Limtd, of the fourth part, for the sale to the last-mentd coy, at the sum of 15,000/., of the premises therein described, being the leasehold collieries of the defendant coy, together with the fixtures, fittings and plant, machinery and imple- ments, and effects used in connection with the sd colliery directed to be sold by the judgment dated loth June, 1877, be carried into effect, such sum of 15,000/. to be pd and satisfied in the manner set forth in the sd contract. Lee [_07i behalf, Sfc.'] v. Bower, E., and the Bishwell Collieries, Limtd, 1877, L. 104, Malins, V.-C, 22nd March, 1878, B. 615. Upon the appHcon of C. and other members of a purchasing com- Form 744. mittee of debenture holders for the reoi-ganisation of the coy, order ~: that the applicants and any other holders of debentures of the defen- debenture dant coy, other than the plaintiff, be at liberty to bid at the sale of holder to bid clU(J. iSPI", — ott the sd canal and other ppty ordered to be sold by the sd order of 10th March, 1883, and to become the purchasers thereof, and to set off against so much of the purchase-money as may be in excess of the sum of 2,000/., the estimated costs of this action, such a proportion of the nominal amount of the sd debentures held by the persons so pur- chasing the sd canal and other ppty as the purchase-money, in excess of 2,000/., may bear to the nominal amount of the debentures of the defendant coy outstanding, and costs of all parties to be costs in action. Douglas [o/i hchalf ^'c] v. Surrey a7ul Llampshire Canal Coy, Limtd, Chitty, J., 13th July, 1883. A. 1302. Upon the applicon of K. and B., the trustees for the mortgage Form 745. debenture holders of the above-named coy, and upon hearing the solors for the applicants, and for the official liquidator of the sd coy, contract^ for and upon reading an order dated 2Gth June, 1875 \_ivinding-up'\, an lease, affidavit, &c. : Let the applicants be at liberty to carry out the con- 1100 JUDGMENTS AND ORDERS. [ClIAP. XIX. Form 745. ditional contract dated the 8tli May, 187C, made between tlio applicants, " of the one part, and the S. Coy of the other part, for the lease to tho sd S. Coy of the premises therein mentd and comprised. And let tho official liquidator have fourteen days from the date of this order to remove all ppty from the premises belonging to the above-named coy not comprised in the mortgage by the sd coy to the applicants. The Globe New Patent, S^'c. Co., 24 March, 1876. Form 746. Upon the aj)plicon of the plaintiff, and upon hearing the solors for : the applicant and for the defendants, and upon reading orders of 17th Receiver to . . borrow 2 000/. May, 1877, and of 18th May, 1877 \_si(pervision order~\. Order that the receivers and managers of the colliery and effects of the defendant coy be at liberty to borrow a sum of money not exceeding 2,000^. at interest, at a rate not exceeding 8 p.c.p.a., to be repayable within six years, as a first charge, out of the moneys to be realized by sale of the ppty of the sd coy, pursuant to the sd order dated loth June, 1877, and meantime to be a first charge on the sd ppty and effects of the defendant coy. Lee v. Boiver, Malins, V.-C, 5th July, 1877, B. 1280. The jui-isdiction to authorize the receiver to borrow in priority to the debenture holders is clear. Greenwood v. Alr/eciras {Gibraltar) Rij., (1894) 2 Ch. 205. Form 747. Liberty to raise money to pay off prior incum- brances. Upon the applicon of the plaintiff, *S:c. Let D., the receiver and manager, be at liberty to raise a sum not exceeding 6,000^ upon the security of the ppty and undertaking of the coy, for the purpose of paying off the preferential claims of creditors in Germany, and of discharging the claims of creditors who have obtained orders of sequestration of the ppty of the sd coy, but the interest to be paid on the sum borrowed is not to exceed 7 p.c.p.a. Gordon \on behalf, ^'c] V. Cassel Tramways Co., Bacon, V.-C, 8th July, 1879, A. 1486. Form 748. Liberty to rerroiver and iriiuiajrcr to borrow Hnd create first charge. Upon the applicon of the plaintiffs, &c. It is ordered thatY., the recr and manager appointed by the sd order dated the 21st day of Nov. 1890, be at liberty (for the purpose of carrying on the business of the sd Tivoli, Limited, pursuant to the sd order dated the 26th Jan. 1891) to raise on mortgage of the assets of the sd coy, and all other the property and effects included in the debentures issued by the sd coy, a further sum not exceeding 2,000/. at interest at a rate not exceeding 11. p.c.p.a. from the date of the advance until repayment. And it is ordered that such money, when raised, and interest be a first charge upon tho assets of the sd coy, and all other the property and effects iTi(;lud('d in the sd debentures subject only to the mortgage of 70,000/., and interest at 4 A p.c.p.a. in favour of tho defts, C. II. and II. H., and to tlie mortgage thereon not exceeding 3,000/. and interest, authorized FORMS. llul to be raised by the sd order dated the 2Gtli Jan. 1891. Barrrll's Form 748. Bretvery, ^c. Co. v. The Tivoli, Limtd, Chitty, J., at Cliaiuberri, 26th March, 1891, A. 418. Upon the applicon, &c. It is ordered tliat tlie receiver and manager Form 749. appointed in this action be at liberty to give a receipt or certificate (in Lj^ertv to ' the form set forth in the scliedule hereto) for the sums to be raised by receiver to him pursuant to the order dated the 17th day of May, 1889. Hay v. jf^at^J^j^^' Swedish and Norwegian Rail. Co., Limtd, 1889, H. 821, Stirling, J., respect of 6 June, 1889. money raised. Receivers' certificates are a well-known security in America. See Article on American Securities, by F. Evans, in Encyclopiedia of English Law, Vol. I. Here they are scarcely ever used. Nevertheless, it is not uncommon, where an advance is authorized, for some one person or company to make the advance and take the security, and then declare a trust in favour of the holdei's of certificates issued by such company or person. In some eases the i-eceiver and manager is empowered to issue debentures in respect of an advance. Upon the applicon of the plaintiff, &c. Order that S., as receiver Form 750. and manager, and also as liqr of the defendant coy (hnfter called the 77,^ ' coy), be at liberty to issue, in the name and on behalf of the coy and receiver to imder the coy's seal, such debentures as he shall tliink fit to the ^'^'^^^^ deben- Corporatiou, Limtd, or as they shall direct, for sums together amounting respect of to 20,000,?. in respect of sums of 11,000^. and 9,000/. borrowed by him money from them under the authority of the sd orders of 3 Nov. and 1 3 Dec. 1888, and interest on the sd sum of 20,000/. at a rate not exceeding 5 p.c.p.a., and be at liberty to execute any mortgage, or security, or trust deed which he shall think fit of all or any part of the coy's undertaking and real and personal estate and assets {excepting certain hook debts) for further securing the sd sum of 20,000/. and the interest thereon subject as to the ppty comprised therein to the mortgage of 17 Dec. 1880, for 45,000/. and interest, the debentures to be issued as afsd, being framed so as to be redeemable on payment of the jDrincipal and interest at a day not later than three calendar months from the 11th May, 1889, the date of this order. Liberty to S. to arrange for limtd renewal at commission not exceeding 1 p.c. Direction to S. to pay the sd corporation 1 p.c. commission for renewing the loan of 20,000/. for three months. Declaration that the securities for the 20,000/. and interest shall have j)riority over the debentures of several series and various securities vested in parties to action ; and S., as receiver, to pay out of the assets of coy costs, in accordance with Schedule 2 of the Rules under the Solicitors' Remuneration Act, 1881, to the sd corporation of and" incident to the loans and the securities therefor, and to obtaining sanction of judge, such costs to be taxed. Pontifcx V. Pontifcx and Wood, Limtd, Chitty, J., 11 May, 1889. 1102 JUDGMENTS AND ORDERS. [ChAP. XIX. Form 751. Libertj' to receiver and manager to pay off first mortgage, Upon tlie applicon of the pit, and upon hearing the solors for the applicant and the defts, B. and H., and for the liqr of the deft coy, and upon reading, &c., It is ordered that B. and H., the recrs and managers appointed in this action, be at liberty to pay off or take a transfer of the mortgages for G,000^., held by • , full particulars of and to borrow -^i^iidi are set out in the third part of the first schedule to the trust tor that pur- r ^ i • i • i pose. deed of the 25th March, 1891, mentd m the judgment of the 23rd Jan. 1892, and for that purpose, if necessary, to borrow any sums of money, not exceeding 6,000^. at interest ; And it is ordered that the principal moneys so borrowed and interest be charged upon the whole under- taking, property, and assets of the deft coy, comprised in the security created by the debentures and trust deed in the sd judgment mentd, and be a first charge (subject to the mortgage of M.) upon the assets of the deft coy ; And it is ordered that the said B. and H., as such recrs and managers, be at liberty to execute a proper instrument or instruments for perfecting such charge ; And it is ordered that the costs of this applicon, and of carrying out the said loan, be pd out of the assets of the deft coy. Hution v. Souihampton Naval Works, Kekewich, J., at Chambers, 28th April, 1892. A. 700. Form 752. Aj^pointment of receiver, to act also as manager for eight weeks, ■with liberty to pay wages, &c. Upon the applicon of the pits, &c., order that the sd B., as such recr and manager, be at liberty to carry on the sd business for eight weeks as from the 30th day of Nov. 1891, and that the sd recr and manager be at liberty, out of the cash in his hands, to pay out the distress put in by the landlord of the coy upon the coy's premises at Maidstone, and that the sd recr and manager be also at liberty to pay the wages and travellers' commission now overdue or to become due during the sd period of eight weeks. Game, Harrison and Lamer v. Hop Tea Co., Kekewich, J. (for North, J.), 4th Dec. 1891. A. 1679. Form 753. Upon the applicon of the pit, and upon hearing counsel for the Libertv to applicant, and the solors for the dfts and for the debenture holders of receiver to go the above coy other than the pit, and upon reading, &c., and all the nonleand^ell debenture holders of the dft coy by their solors consenting, It is ordered that the recr appointed in this action be at libert}' to proceed to Constantinople, in the Empire of Turkey, with a view to efi^ecting a sale of the shares in the Coy, held by the dft coy, and of entering into a conditional contract for that purpose. And it is ordered that the sd recr do look after the ppty of the dft coy, situate at Constanti- nople afsd, and report to the judge what should be done herewith. Johns v. Imperial Ottoman Ice Co., Stirling, J., in Chambers, 3rd Aug. 1891. A. 1203. Form 753a. Upon the applicon of the pit, and upon hearing counsel for the , ., , , ai)i)lifaiit and tlic solors for the dfts, and upon reading, &c., and the Jjibcrty to ' ^ . . ■*• o' 7 receiver iu dft coy by thoir solors consenting to this order, and the other dfts not FORMS. 1103 oTijocting-, It is ordered that W., tlie rocr appointed by order of Form 753a. 2nd March, 1 892, be at liberty, by his agents in Batavia, to propose ^^^^ ^^^^^j^^ to compromise (and, if accepted, to carry into effect such proposal) the claims with action now pending- against tlio coj' in tlie Batavian Courts at the suit ^^[jroad of A., upon th(j terms of relieving the sd A. and his co-vendors, either wholly or in part, from the guarantee contained in tlie original agroomt for sale of the 18th July, 1890 (and referred to in the prospectus of the coy), that the tobacco crop upon the coy's tobacco estates in Sumatra, for the year 1890, should realize a net profit (after paying all expenses of planting, cultivation, cutting, and shipment to Europe, and all other expenses in connection therewith, except the coy's expenses of administration in London), of at least 13,500^. ; and in the event of such compromise being effected, It is ordered that the deft coy deliver up to the vendors or their nominees all the shares which have been allotted to the vendors or their nominees, and which have been retained by the coy as security for the sd guarantee, or the whole of such shares less such number as, under the terms of any such com- promise, it shall be agreed that the coy may retain as security for the performance of such guarantee in part. And it is ordered that the costs of this applicon be costs in the action. Heritage v. Delhi Bcdazci, Sfc, Limtd, Chitty, J., at Chambers, 22nd June, 1892. A. 914. Upon the applicon of the dft coy, and upon hearing the solors for Form 753b. the applicants and for the pit and for the remaining dft, and upon -r ., , , reading, &c., It is ordered that the dft be at liberty to proceed with promote bill the bill before the present session of Parliament intituled, " A Bill i^i Pailiument, ■'■ . ' ^ &C. to confer further powers upon the Milford Docks Coy and for other purposes," and that B., the recr appointed by order dated 9th Feb. 1892, be at liberty to pay all proper costs, charges and expenses in connection therewith, and be allowed same in his account. And it is ordered that the dft coy bo at libertj' to issue to the London Trust Coy, Limtd, debenture stock " A " for 150/?., interest due to that coy on the 1st July, 1891, and a certificate of indebtedness of the dft com- pany in respect of the subsequent interest. And it is ordered that the dft coy be at liberty to issue to holders of debenture stock "A" on the 1st of July, 1891, who may accept the offer contained in the circular letters dated the 1st and 20th July, 1891, like debenture stock in respect of the several amounts of interest due to them. Sheppard V. Milford Docks Co., (1891, S. No. 3022), Stirling, J., at Chambers, 21st March, 1892. Compare Biickham v. Trustees of Whitehaven, 55 L. T. GQi. Upon the applicon of the liqr, &c. It is ordered that the liqr and Form 754. the recr and manager appointed in the above-mentd action be at Liberty to " liberty to intervene in the liquidation proceedings of the above-named liquidator coy now pending in the High Court of Griqualand, South Africa, and t" intervene 1104 JUDGMENTS AMD ORDEKS. [ClIAP. XIX. Form 754. in liquidation proceedings abroad. to apply to tliat Court that tlie sale of the ppty of the above-named coy may be stayed provisionally pending the reconstruction of the coy, and for this purpose to instruct agents in Kimberley, the expenditure for the afsd purposes not to exceed 1, without the leave of the Court. Liberty to apply. North Eastern Bultfontein (0024 G of 1893), and Posno V. Lau-son (1893, P. 2089), Reg. 14th Nov. 1893. Form 755. Liberty to take pro- ceedings in France. Upon the applicon of pits, &c., order that E,., the recr appointed in this action, be at liberty to take such proceedings as he may be advised in an action now pending in France, before the Civil Tribunal of the Seine, wherein a certain coy called, &c. is pit, and the Latigue Coy is dft. Laiv Guarantee, ^c. v. Latigue Sfc. Coij and others, Cave, J., 13th Oct., 1896. Form 756. Liberty to trustees to appeal. Upon the applicon, &c. of the dfts N. and S., trustees for the first mortgage debenture holders of the dft coy, and upon hearing, &c., order that the applicants be at liberty to appeal against the judgment of the Civil Tribunal of the Seine, Paris, in the actions instituted by H., referred to in the sd order, dated the 20th Jan., 189G, and that they be indemnified against any costs, charges, and expenses incurred by them in connection with such appeal out of any moneys arising from the realization of the security comprised in the trust deed or in the hands of P. the recr in this action, or which may be pd into Court by him, and order that the funds in Court be dealt with as directed in the payment schedule hereto ; the sum of 150/. to be pd to the aj)plicants, being for the purpose of prosecuting the sd appeal and for paying the further bill of costs of H., the legal adviser in Prance of the applicants. The payment schedule provided — " Sell sufficient new consols to raise 150/. cash, pay proceeds to N. and S. dfts." Wilson v. Martini/, Limtd., Yaughan Williams, J., 2nd July, 1896. Liberty to unsecured creditors to defend debon ture actions. Form 756a. Upon applicon of H. & Co., unsecured creditors of the above-named coy, &c., order that upon the applicants indemnifying W., the liqr of the dft coy, against all costs to be incurred by him or which he may become liable to pay by reason of this action being defended in the name of the sd coy, the amount and the form of such indemnity to be settled by the judge or by the llegistrar Cos (Winding-up) in case the parties differ, the future conduct of the defence in this action, on behalf of the dft coy, bo committed to the sd 11. & Co., and order that appli- cants have ten days from the date of this order within wliich to deliver the stateiueiit of defence of dft coy, and order that applicants pay to the dfts, the coy, their costs of tliis applicon, such costs to bo taxed, and order that u[)piicants be at liberty to apply to be recouped tho amount tlicy sliall pay out of tho assets tho subject-matter of this FORMS. ll^^-'^ action, and the costs of pit and of tlie dfts B. and B. of this applicon Form 756a. are to be their costs in this action. Wattes, [on behalf, (i^c] v. Hemp Yarn, Sao Vidio, A'c Co., 10 Oct., 1877, A. 1770. P. 4 R 1106 JUDGMENTS AND ORDERS. [ClIAP. XIX. Foiin 758. Liberty to appoint attorney to carry on business in Russia, &c. UiDon the application of the plaintiff and M., the liqr of the coy, I'fcr and manager [in the action^ Let C, of , in the empire of Kussia, be appointed attorney and agent of the sd M. as such recr, manager, and liqr as afsd, as from 30 June, 1879, to manage the business now carried on by the coy in Eussia, and to superintend and direct all matters relating to the ppty and assets of the coy situate there, and to negotiate for and effect the sale of the works upon the following terms, &c. ; and let M., as such, &c., and the dfts, B. and L., as trees of the deed, &c. execute a power of attorney to the sd C. for the purposes afsd, which power of attorney has been settled and approved by the judge as a proper power of attorney, as appears by the memdm signed, &e. Bell [o« behalf, S^'c.^ v. Russia Copper Co., M. R., 24 Mar., 1870, A. 1445; and subsequent order, 5 Nov., 1879, A. 2180. Form 759. Upon motion, &c. Let the recrs and managers continued in the con- Liberty to send telegram Bolidated action be at liberty to send such telegram as in the 13th paragraph of the sd afft of H. mentd, with the variation, &c. : and costs of all parties of this applicon to be costs in the consolidated action. Ba})y V. Sao Pedro Co., M.E., 15 Mar., 1877, A. 508. Form 760. Liberty to surrender lease. Upon the applicon of T., &c. Order that, without prejudice to any rights which the parties may have against each other, S. and W., the recrs, do surrender to the applicant T. the indenture of lease, dated, &:c., and that the sd recrs do deliver uj) possession to the applicant T. of premises comprised in the sd lease, and of the cottage situate at , afsd, held by the sd coy as yearly tenants to the applicant, and costs of pits, dfts, and recrs of this applicon to be costs in this action. Dairson \on behalf, &:c.'] v. Owen, 7 Feb., 1878, A. 602. Form 761. Receiver in action to give up possession to receiver of first mortgagee. Upon the applicon of H., of, &c. \_ first mortgagee?^, and upon hearing the solors for the applicant, and for W., the liqr, recr, and manager, of the dft coy, and for the pits, and upon reading, &c. It is ordered that the sd W., as such licp, recr, and manager, do forthwith deliver up possession of the messuages and premises, No. — , Lane, in the City of London, to G., of, &c., the recr of the sd ppty appointed by the applicant as first mortgagee thof. Hicks v. Billiter Street Offices Co., and In re Same Co., North, J., at Chambers, 18 June, 1892, A. 900. Form 762. OrdfT for rccoivfr to hdnd ovfT articlc'H to third parfy, ■w-lid cluiiim uamo. rpon tho applicon of the pit by summons, dated, &c., and upon liearing tho solor for the applicant, counsel for C, in tho summons named, and tho solors for tho dfts by llioir liqr, and upon reading, &o. It is ordcrfd that ]>., the recr appointed by tlio sd order, dated tho 7^1 Nov., 18!»], do haTid over to the sd C. tho several articles sot forth Foinis. 11^*~ in tho scliodule to her ecI affidavit, filed the 10 Dec, 1891. And it Form 76?. is ordered that the costs of the recr of and incidental to this applicon be allowed to him in his accounts, llohsoii v. (Jaflcll ^- ('<>., Chitty, J., at Chambers, 19 .Tan., 1892, B. 21 1. Upon tho applicon of the pit, and upon hearing the solors for tho Form 763. applicant and for the dfts, and upon reading, &c., It is ordered that Liberty for the dfts, W., H., and I., be at liberty (notwithstanding that D. and trustees for L. have not given security as directed by tlie sd order dated the oth i^^ji^jj^rs to March, 1892) out of the moneys in their hands as trees to remit to make various the sd L). and L., any sum or sums not exceeding in the whole the sum eonsi^iinen^s. of 3,000^., to be applied by them in or towards all or any of the pur- poses mentd in the sd order dated tlie oth March, 1 892, and that the sd dfts be at liberty to remit to the sd D. and L. the further sum of 800/. to be expended by them in paying the duty payable on the registration of the mortgage to secure the First Debenture Stock of the dft coy on the further lands acquired by the dft coy. And it is ordered that C, the recr and manager, be at liberty to give the necessary orders for stores, consisting of duplicate parts of engines, carriages, and wagons required for working the railway, at a cost not exceeding 3,200/., including the engineer's fee for inspection and the cost of shipment to the Argentine Eepublic, and also to order coal for use on the railway at a cost, including the shipment thof to the Argentine Eepublic, of 1,200/., and to consign such material and coal to the sd D. and L., and to pay sundry small accounts of the coy amounting together to 177/. 9*. 7Ar/. And it is ordered that the sd dfts be at liberty, out of the moneys in their hands as trees, to pay to the sd recr and manager the sd sum of 177/. 9s. 7Af/. and such amounts as he may require for the purchase and shipment of the sd materials and coal and expenses connected therewith, not exceeding the sums of 3,200/. and 1,200/. above mentd. Copp'inyer v. Santa Fe, &,-c. Co., Chitty, J., at Chambers, 28th July, 1892. A. 1321. For an order giving receiver and manager leave to draw cheques for workmen, &c., see Sircrpp v. Joseph Bull, Sons S,- Co., 1892, S. 1720 ; Reg. lltli Dec. 1892. Upon the applicon of the pits, and upon hearing, iSrc., and upon Form 764. reading, &c., It is ordered that, notwithstanding the orders of the j.., ^ 21st Nov. 1890, and 26th Jan. 1891, Y., the recr and manager of the receiver aud business of the Tivoli, Limtd, appointed by the sd order dated the '^J^^^W-" 21st day of Nov. 1890, be at liberty to close the Tivoli, Limtd, and nesses of the businesses thereof, or any of them, at such tin\es as he m:iy. in company, his absolute discretion, think fit. Barrett's Brrirrr;/, \c. Co. v. Tie Tivoli, Limtd, Chitty, J., at Chambers. 8th April. 1891. A, 4l:J. 4 li 2 1108 JUDGMENTS AND ORDERS. [ChAP. XIX. Form 765. Liberty to clo.-*e public houses. Upon the aj)plicon of the pits, ancl upon hearing, &:c., and upon reading, &c., It is ordered that F., the rccr and manager appointed in this action, be at liberty to give up possession or otherwise dispose of the following ppties now held by the above-named dfts, J. Nunneley and Company, the trade in which is being carried on at a loss, viz. : — 1. "The Little AVonder," situate, &c. 2. "The Castle and Falcon," situate at, &c. 3. " The Nottingham Arms," situate at, &c. 4. Maltings, situate at, &c. ; and 5. Stores, at, &c. And the costs of this applicon are to be costs in this action. English, 8fc., Investment Trust v. /. Nunneley ^- Co. (1891), E. 1253, Chitty, J., at Chambers, 23rd Nov. 1891. Order to make calls ■which are charged by debentures (after -wind- ing-up order). Form 766. Upon the applicon of the plaintiff, and upon hearing the solicitors for the applicant and Mr. S., the off recr and liqr of the defendant coy in person, and upon reading the order in the above matters, dated the 4th July, 1891, to wind up the above-named coy, the order in the above action dated the 3rd July, 1891, appointing receiver. It is ordered that, subject to the leave of the Court, the off recr and liqr be at liberty to call up any uncalled capital on the shares held by the contributories of the above-named defendant coy resply. And it is ordered that B., the receiver and manager appointed in this action, be at liberty, in the name of the sd coy, or of the off recr and liqr, to take all such steps as may be necessary to enforce payment of any calls now made and remaining unpaid, and of any calls to be made, such calls, -when recovered, to be pd into Court to the credit of this action "without prejudice to any question. In re A'i?mears ^' Co., 1891, C. 2443. And Compton v. Kinnears ^' Co., Kekewich, J., at Chambers, 4th Dec. 1891. Form 767. Another. Upon motion made this day unto the Eight Honourable the Master of the Eolls by counsel for the Sheffield and South Yorkshire Per- manent Building Society of Sheffield, in the county of York, and F. and M., both of, &c., trees of the late Sheffield and South Y'orkshire Benefit Building and Investment Society, and upon hearing counsel for the liqr of the above-named coy, and uj)on reading the order dated the 12th day of June, 1875, an affidavit of, &c. His honour being of opinion that the Sheffield and South Yorkshire Permanent Building Society have under the mortgage by the sd coy to the sd F. and M., the trees of the sd Sheffield and South York.«hire Benefit Building and Investment Society, dated the 3r(l day of Nov. 1874, a first charge on the unpaid capital of the sd coy, and dii tlie proc( cds of nil future calls made and to be made on the shares in the sd coy, doth order that the FORMS. llOfJ liqrs of the sd coy do get in the sd unpaid capital under the direction Form 767. of the judge, and do phice the same aiid tlie proceeds of all future calls to be made on the shares in the sd coy to a separate account to be entld " Calls in respect of unpaid capital," and the sd unpaid capital and the proceeds of any future calls are not to be dealt with by the sd liqv without notice to the applicants. And it is ordered that the applicants be at liberty to add their costs of this applicou, and of the summons taken out by them in this matter on the loth day of July, 1875, to their afsd mortgage security, and that the costs of the sd liqrs of this applicon and of the sd summons be costs in the winding-up of the sd coy. Phoenix Bessemer Steel Co., M. li., 31st July, 1875, B. 1655; 44 L. J. Ch. 683. For order empoweriug receiver to proceed for arrears of calls where no windinjr- up, see Counsel Y. ll'a.'ihbigton Co., Stirling, J., 21 Dec, 1891, A. 1730. \_Intilided in the Action and in the Winding-up.^ Upon the apjilicon of the plaintiff in the above action by summons, dated, &c., which, upon hearing counsel for the applicant and the solicitors for the defendant B. and for the off recr and liqr of the above-named coy in Chambers, was adjourned to be heard in Court, and coming on accordingly, &c. ; And upon hearing counsel for the appKcant, for the defendant B., and for the off recr and liqr of the sd coy, and upon reading, &c. It is ordered that upon the off recr and liqr of the above-named coy being properly indemnified (such indem- nity to be settled in the Chambers of the Registrar in Cos Winding-up in case the parties differ) against all costs, charges and expenses which the off recr and liqr may be put to or ma}' become liable to pay in respect of the proceedings in the winding-up, and in respect of such actions or other proceedings as are hnfter referred to, the off recr and liqr of the sd coy do take such proceedings as may be necessary- to call up any uncalled capital on the shares held bj'the contributories resply of the sd coy ; And it is ordered that "NY., the receiver in the above action, be at liberty, in the name of the sd coy, to bring such actions or take such other proceedings as may be necessary (except in respect of the shares in the sd coy held by the plaintiff and the defendant B.) for getting in such call and any other moneys due and remaining unpaid in respect of shares held by the contributories resply of the sd coy ; And it is ordered that the amounts due and to become due from the plaintiff and the defendant B. in respect of the shares held by them resply in the sd coy be set off against the amounts due to them resply in respect of the debentures held by them in the sd coy ; And it is ordered that the applicant, the plaintiff F., do paj- to the off recr and liqr his costs of this a2:»plicon, such costs to be taxed, but in such taxa- tion the off recr and liqr is to be allowed no costs of his sd affidavit, filed, &c. ; And it is ordered that the costs of the plaintiff and of the Form 768. Another. I'llO JUDGMENTS AND ORDERS. [CliAP. XIX. Form 768. defendant B. (including in tlie costs of the plaintiff the amount hnbefore directed to be pd by him to the off recr and liqr in respect of his costs of this applicon) be their costs in this action. Foiclcr v. BrocuVs Patent, &fc. Co., 1891, F. 1883 ; V. Wms., J., 2Gth Jan. 18'j;5, reported (1893) ; bi re Broad's Patent, 1 Ch. 724. As a general riilc, another person is not to be allowed to sue in the liquidator's name: Harrison v. St. Eticnne Co., W. N. (1893), p. 108. For order to get in calls when there is no winding-up, see Counsel v. Tfashuiyton Diamond Co., Stirling, J.. 21st Dec, 1891. A. 1730. See Form 489, in the 6th ed. of this work. Part II. Form 769. Order for liquidator to pay calls to debenture holders' re- ceiver. Upon the applicon of 1), Corporation, Limtd, the trustees for first mortgage debentures of above coy, &c., order that B., the off recr and liqr of above-named corporation, do pay over to H. as such recr as afsd, all moneys in his hands or to come to his hands from calls or otherwise, and forming part of the assets of the above coy, subject to the p'ayment thereout to the sd B. as such off recr and liqr of all his fees, costs, charges, and expenses incurred by him in the realization of the assets above referred to. Such costs to be taxed, &c. In winding-up of General Phosphate Corporation, Limtd., Vaughan Williams, J., 13th May, 1896. Form 769a. Order for liquidator to pay moneys to credit of action without prejudice to his remunera- tion, ko. Upon the applicon of F., the liqr of coy, &c. Order that all sums of money which shall be collected by the sd F. as such liqr, being assets of the above-named coy charged to the debenture holders, when they aggregate 200/. be pd by him into Ct to the credit of the above action — " Akers v. Veuve-Monier, i^-c, (1895) A. No. 1 1, liqr's receipts " — and order that as an additional indemnity to the sd F. all sums got in by him pd into such account shall stand charged Avith the paj'ment of all costs, charges, and expenses, including his remuneration, which he may incur or become liable to pay or earn in the realization of the assets of the sd coy, on behalf of the sd receiver in this action, in priority to the sd receiver and the sd debenture holders. Akers v. Veuve-Monier, Sfc, Vaughan Williams, J., 27th Feb., 1896. Form 769b. Upon upphcon by summons dated, *S:c., of the pit, and of H., the Libert yto receiver appointed in this action, &c., order that B., the auctioneer auctioneer to appointed to sell the ppty comprised in the security created by the first a^vaiiccdTo nu^rtgago debenture asset of the dft coy, bo at liberty out of the pay rateH, &c. proceeds of the sale of the sd ppty, other than proceeds of lease- holds, to pay to H. B. T. & Co. the sum of 108/., being the amount advanced by them to the sd receiver on the , to pay rates due from thf> dft c.ny, and also the sum of /., being the amount FORM!?. n ] 1 advanced by tlicm to tho sd receiver on the day of , to pay ^oi'^^i *bab. rent and expenses of distress on the dft coy's premises, together with interest on tho sd two sums at the rate of 5 p.c.p.a. from the respive dates of same Lein<^ advanced, and costs of applicon and costs of action. Jioss [on behalf, ^r.] v. Mediccd Electrical, Sfc, Homer, J., 13th June, 189u. Upon applicon, &c., order that 13., the off recr and liqr of dft coy, Form 770. be at liberty to institute and prosecute sucli proceedings under sect. 10 Liquidator to of the Cos (Winding-up) Act, 1890, against E. and D., the above- proceed under 1 ,. -1 , n r -,. , 0.1 1 ■ \ T^r o n sect. 10 of Act named pits and two oi the directors oi the sd coy, and against W. & Oo., of 1890 and the auditors of the sd coy, and each or any of them as he may be be indemui- advised, and order that the sd 1>. bo indemnified against any costs to be incurred ])y him in connection with such proceedings out of the funds in Ct to the credit of this action and repaying assets of the above-named coy included in the debenture holders' charge, and order that costs of applicant and of pits and dfts of this applicon be costs in action. Rohinso7i v. Montgomeryshire Brewery Coy, Limtd, Yaughan Williams, J., 13 May, 1896. In actions to enforce debentures and debenture stock which cover the whole assets, it often happens that there is some primA facie case for proceedings against the directors or other officers of the company for misfeasance or breach of trust. The debenture holders may prefer not to engage in such litigation, although the amount recovered would belong to them, and the liqiiidator may have no funds with which to proceed. Nevertheless the Court sometimes brings great pressure to bear on the parties to insure the institution and prosecution of the proceedings. The motive, apparentlj^ is to make an example of those who appear to have misconducted themselves, even though the enforced litigation is in the nature of a speculation conducted at the risk and expense of the debenture holders and against their wishes. Upon applicon by summons dated, t\:c., of F., a debenture holder of Form 771. dft coy, having leave to attend the proceedings in this action by order Libertyto dated tho 23rd Ma}', 1894, and upon hearing counsel, &c., order that compromise B., the off receiver and liqr of the dft coy, be at liberty to compromise ^ocecdings, the proceedings commenced by him under sect. 10 of the Cos AViudiug- up Act, 1890, against E. and D., the above-named pits and two of tho directors of the sd coy, and against W. & Co., the auditors of the sd coy, on the terms of the memdum dated, &c., and being the exhibit to the sd afft of M., and order that the costs of all parties bearing on this applicon be their costs in this action. Robinson v. Montgomery- shire Brewery Co., Cave, J., 30th Sept., 1890. Tor order for sale by tender of the interest of the debenture holders and debenture Sale of right stockholders in any moneys that may be recovered from the directors and others in to proceed for respect of any claim by the official receiver and liquidator of the company under nii^ttasance. sect. 10 of the Companies (Winding-up) Act, 1890, with several extraordinary provisions "wath a view to compelling the purchaser to proceed under penalty of 1112 JUDGMENTS AND ORDERS. [ChAP. XIX. Form 771. forfeiture of his rights to the liquidator, see order of Vaughan WillianiK, J., in Woody. Woodhouse and Ttawson, 17th Jan., 1896; W. N. (189(3) 4 (4). In the above case the debenture holders were unwilling to have the proceedings taken, and in the end the judge made an order for sale of the assets as above- mentioned. Form 771a. Order on ap- plication to enforce pro- ceedings for misfeasance. Upon applicon, &c., of liqr \J'or injunction to restrain jilt from com- mitting breach of undertaking to proceed against directors for misfeasance^^ and the debenture holders afsd by their counsel undertaking to proceed with due diligence with the pending summons against directors of the coy under sect. 10 of Act of 1890, and undertaking not to compromise with any director without the leave of the Ct, and to present a report to the Ct every two months, and also undertaking that if the Ct at any time should consider that the sd debenture holders are not pro- ceeding with due diligence with the sd proceedings, the Ct should be at liberty to take the conduct of the sd proceedings out of such hands as they might then be in, and to place them in the hands of such person as the Ct might nominate for the purpose. No order on the applicon, and costs of liqr reserved. Graham \on behalf Sfc.'] v. By water, Tanqueray, Limtd, Vaughan Williams, J., 6th Feb., 1896, The above is another instance of the pressure which was exercised. Reducing receiver's secvurity. Form 771b. Upon the applicon of pit, &c., order that the security given by the sd J., as receiver in this action, by the recognizance entered into by him dated, &:c., and the bond also dated, &c., entered into by the sd J., together with the Society as his sureties be reduced from the sum of /., the amount mentd in the sd bond, to the sum of 1., and that the sd bond of the sd society shall as from the date of this order stand as a security for the sum of 1, and no more, and that the liability of the sd society in respect of the matters mentd in the sd bond be, as from the date of this order, limtd to the sd sum of 1. Grove \_on behalf, ^-c] v. Ford, Lloyd, ^'c. Co., Vaughan Williams, J., 9th Dec, 1895. (Jrdor to dis charge re- ceiver and manager. Form 771c. Upon applicon of pit, &c., order that C, the receiver and manager appointed by sd order dated 11th July, 1895, be discharged, and order sd C. forthwith to pass his first and final account as such receiver and manager, and tliat lie do lodge in Ct as directed in the lodgment .scliodule hereto the amount of the balance, if any, that may be certified to be due from him on passing such account, and in the event of its being certified that there is a balance duo to the sd C. as such receiver on passing the sd account, order that the amount of such balance be pd to the sd C. as directed by the payment schedule hereto, and upon the lodgment in Ct by the sd C. of the balance, if any, that may be FORMS. 1113 certified to be duo from him on passing his sd first and final account, Form 771c. or upon its being- certified that there is a balance due to liini on the passing of such account, order that the recognizance dated, &c., entered into by sd C. together with, &c., as his sureties, be vacated, and order that the funds in Ct be dealt with as directed in the lodgment and payment schedules hereto. The lodgment schedule provided in the first column for lodgment of "The balance, if any, that may be certified to be due from the receiver on passing his first and final account," and the payment schedule provided in the first column, "Out of money on deposit and any interest, pay the balance, if any, due to the receiver on passing his first and final account, the amount to be certified by the Registrar Cos (Winding-up)." Strachey [on behalf, ^'c.J V. The Currie Schools, Limtd, Vaughan Williams, J., 12th Aug., 1896. Upon motion this day made unto this Ct by counsel for the pit ^M., Form 772. and upon hearing counsel for B., the liqr of the above-named deft coy, ^, 7 and upon reading the order of 27th April, 1892, and a joint afft of S. commit liqui- and X., filed Slst May, 1892, and the exhibit therein referred to «^torfor /I 1 • 1 -r. 1 •, -. r contempt, (whereby it appears that B., on the 24th May, 1892, assaiilted and used violence to the sd X., a clerk in the employ of the pits' solors, whilst serving the sd B. with a copy of the sd order of this Ct, dated the 27th day of April, 1892), and a joint afft of the sd B. and H., filed the 14th June, 1892; And this Ct, being of the opinion, upon con- sideration of the facts disclosed by the sd afltts, that the sd B. has been guilty of contempt of this Ct, doth order that the sd B. do stand com- mitted to prison for his sd contempt ; And it is ordered that the sd B, do pay to the pit M. his costs of this applicon and consequent thereon, to be taxed by the taxing master. Nichols v. Armstrong Cycle, 6,-c. Co., Chitty, J., 24th June, 1892. B. 765. Upon the applicon of the defendants, &c. Let the detendant 0. J. S., Form 773. and the defendant coy, be at liberty to convene a meeting of the ~ — : ' — debenture-holders of the defendant coy to be held on Thursday, the debenture 8th Feb. next, at the Hotel, at 2 o'clock in the afternoon, for the lifters to bo purpose of ascertaining their wishes with regard to the sale, or other- wise, of the ppty of the sd coy, and let the costs of this apjilicon and incident thereto be costs in the action. Dawson v. Owen, 22 Jan., 1877, A. 83. For order ou application to conlii-m conditional agreciucut for sale of assets directing the application to stand over meeting of the debenture -holders to be con- vened and result stated, see Vickerman v. Bonvilles Co., Hall, V.-C, 2 August, 1878, B. 1602. For order at trial of action, whereby, after reciting, inter alia, that meeting of 1114 JUDGMENTS AND OiiDEJi.s. [ClIAP. XIX. Form 773. debeuture-holders had been held, and ajjproved the s'^lieme of c .'rapromi.se as fol- lows. Sec, it was ordered that the compromise should be earned into eilect, aad that all proceedings in the action, except such as should be necessary for enforcing the order and carrying out the compromise, ehould be stayed, see Hooper v. Newtoxcn Manure Co., 13 Ap. 1S78, A. 806. See also Chap. XXI., infra. Form 774. Advertise- ment con- vening meeting of debenture- holders. The following are examples convening meetings : — In the High Court of Justice : Chancery Division. Vickerman v. The Bon- viLLES, &c. Company, Limited, and others, and in the matter of the Companies Acts, 1862 and 1867, and in the matter of The Bonvilles, &c. Company, Limited. Notice is hereby given that, pursuant to an order of this Honorable Court, made the 2nd day of August, 1878, a meeting of the debenture-holders of the above company will be held at the Inns of Court Hotel, Holborn, London, on Thursday, the 19th day of September, instant, at one o'clock in the afternoon, for the purpose of considering, and (if approved) to sanction the acceptance of a conditional agree- ment, dated the 11th of July last, for the purchase of the works and property of the company comprised in the particulars of sale dated the 17th of May last, when the works were offered for sale by auction, and subject to the conditions attached to the particulars of sale. Dated the 10th September, 1876. H. B., Receiver, Manager, and Liquidator. Form 775. Title, &c. Another Notice is hby given that, pursuant to an order made in the above action, and dated the day of , 18 — , a general meeting of the holders of the debentures of the above-named coy entld to the benefit of the indenture dated the , 18 — , will be held at the office of the coy, situate at , on Thursday, the day of , 18 — , at 12 o'clock (noon), for the purpose "of , the receiver and manager appointed in the sd action (and to act as chairman of the meeting) explaining the present position of the coy's affairs and submitting certain resolutions for raising the amount required to meet the imme- diate liabilities of the coy, and for providing working capital, and for the creation and issue of further prior lien bonds to secure the sd amount ranking [pari passu with the prior lien bonds of the nominal amount of 12,500/., already issued) as a first charge on the coy's ppty and undertaking in priority to the debentures entld to the benefit of the above-mentd indenture. Dated this day of , 1 8 — , Solors for the Receiver and Manager. Form 776. A nother. In the High Court, &c. All persons holding debentures of the Industrial Coal and Iron Company, Limited, either of Class A. or Class B., are hereby specially invited to attend a Mi'.KTiNO convened by the trustees for the debenture -holders, with the sanction of liirt lordship, the V.-C, Sir R. M., in the above action, dated the 22nd of January instant, to beheld at the Cannon Street Hotel, Cannon Street, in the city of London, oM Thursday, the 8th of February, 1877, at two o'clock in the afternoon, precise tiiiw, ill order ia consider and decide nprm the wchcjno and plan to bo submitted to the judge for dealing with, realization and disposal of tho company's property, as Form 776. directed by the decree in the above action. — Dated the 24th January, 1877. r. &: H., of , solicitor.'^ for the said trustees. Another. Notice to Debeniuee-holdeh.s of IlATcnETT's Hotel Company, Limited. Form 777. In the Hiqh Court of Justice : — Chancery Division. Mr. Justice Stirliuf In the matter of the Companies Acts, 1862 to 1883, and in the matter of Hatchett's Hotel Company, Limited, 1866, D. 1675. Between Horatio David Davies, plaintiff, and Hatchett's Hotel Company, Limited, defendants. . Notice is hereby given that Mr. Jubtice Stirling has directed, a meeting of the debenture- holders of the above-named company to be summoned pursuant to the above statutes for the purpose of ascertaining their wishes with reference to the sale, or otherwise, of the proj^erty of the said comj)any and submitting a resolution as to such sale, and that such meeting will be held on Fiiday, the 17th December, 1886, at three o'clock in the afternoon, at the office of , the official liquidator, Square, in the City of London, at Avhich time and place all the debenture-holders of the said company are requested to attend. Dated this 8th day of December, 1886. , Official Liquidator. Upon the applicou of tho plaintiff for the confirmation and sanction Form 778. and approval of the resolutions of the debenture-holders come to at the meeting of debenture-holders held on the 4th day of December, 1885, resolutions of or come to by the necessary majority of debenture-holders within the ^-bentirre- terms of the debentures, and that the same might be carried into effect, and upon hearing counsel for the applicant, and for the defendant, &c., and the judge being of opinion that the sd resolutions, being the resolutions set out in the Exhibit H. E. S. to the sd affidavit of H. S., and the Exhibit J. McD. to the sd affidavit of J. McD., are valid and binding on the d{>benture-holders, doth approve of their being carried into effect. And it is ordered that the costs of all parties in reference to the sd resolutions and of this applicon be costs in the action, including the dissentient debenture-holders' costs, which are to be pd by the receiver out of the assets along with his costs. Carden v. Albert Palace, Chitty, J., at Chambers, 18th Jan., 1886. The resolution above referred to was one authorizing tho creation of a prior charge. See supra, p. 801. In pursuance, &c., I hby certify that the result of the account and Form 779 inquiry which has been taken and made in pursuance of the judgment \ herein, dated 4th March, 1881, is as follows :— umoSuf The plaintiffs and defendants have attended me by their respective to debenture- solors. ^''^^'''- 1 . In the 3rd column of the schediile hto are set forth the particulars of the principal and interest moneys resply secured by and due under 1116 JUDGMENTS AND OKDERS. [ChAP. XIX, Form 779. or in resjiect of tlie debentures of 100/. eacli, ip(.iied hy the uft CO}' in the sJ judgment nienld. 2. The present bearers of sd debentures are the several persons or firms whose names and descriptions are set forth in the 2nd column of schedule. The evidence produced consists of the several affidavits of, &c., and the sd several debentures. Schedule. Serial No. Names and desrriptions of present bearers of Debentuies. Amount of principal and interest secured and due vmder Debentures. Number of Debentures and their numbers. Total amount due. 1 To the plaintifle 0. of , merchant. £ s. d. 2,000 20 numbered &c. £ s. (I. Interest at 6 per cent, per an- num, from 1st July, 1879, to r2th April, 1881, the date of certificate, less income 202 17 9 2,202 17 9 &c. tax. &c. kc. &c. &c. Oppenheim, v. Wreck Recovery Co. As to master's (formerly Chief Clerk's) certificate, see Ord. LV. rr. 65 ct f^cq. Form 780. Another form of certificate. 1. Having regard to the declaration contained in the sd judgment, the ppty comprised in the charge to which the plaintiff and the other holders of such of the debenture bonds of the defendant coy as were duly issued are, by the sd judgment, declared entld, consists of 1,640Z. 2s. Zd. consols ) • n j. ' , mh Court and 48/. 3s. \0d. cash ) to the credit of this action. 2. The debenture bonds of the defendant coy, which were duly issued, are those numbered 1, 2, 4, 5, 6 and 8, the particulars whereof are set forth in the first part of the schedule hereto. The present holders of such bonds are the several persons whose names are set opposite to such numbers resply, in the third column of the sd first pt of such schedule. The bonds numbered 3, 7, 9 and 10, the particulars whereof are set forth in the second pt of the sd schedule, were not duly issued. 3. There is due and owing to the plaintiff and the other holders of such of the sd dobenturo bonds as were duly issued for principal, the sums set opposite their respective names in the fourth column of the sd first part of such schedule, amounting altogether to 2,020/. I have forborne in the state of the assets to compute interest on tlio sd bonds. A time was iixed, by advertisement, for all persons claiming to be holders of debenture l)ond8 of the sd coy to come in and prove their claims at the chambers of the judge, which time has elapsed, and no other person has come in and made any such claim. actum. FORMS. ]I17 By order dated, &c., J. P, was appointed receiver, without giving Form 780. security of the ppty comprised in the charge, in the pLico of J. C, deceased. Schedule showing in first part, (I) numher of dehenture ; (2) date ; (3) names and addresses ; (4) amount due; (5) total. And in second part, number of debenture, date, and names and addi-esses of holders. In pursuance of the directions given to me by INfr. Justice North, Form 781. the judge to whose Court this action is attached, I hereby certif}' that ^ the result of the inquiries which have been made in pursuance of the chief clerk judgment in this action, dated 3 Feb., 1891, is as follows : — [now master] The plaintiff and defendants have attended by their respective inquiries^ii " solicitors. debenture The defendant coy issued debenture stock to tlie amount of \')0,00i)L, and the whole of such debenture stock is now outstanding and unpaid. The several persons whose names and addresses are set forth in the second and third columns of the 1st schedule hto are tlie holders of such debenture stock, and there is due and payable to such several persons for principal moneys secured by or due under the sd debenture stock the several amounts set opposite to their respective names in the fourth column of such schedule, and for interest thereon at the rate of 6 p.c.p.a. (less income tax) from the 1st of June, 1890, to the date of this certificate, the several sums set opposite to the sd principal sums in the fifth column of such schedule, the total amount due for principal and interest on such debenture stock being set forth in the sixth column of such schedule. The evidence consists of the following affidavits, namely, &c. — Five several debentures for 10,000/. each, and dated the 15th August, 1888, and an indenture dated the loth August, 1 888, and made between, &c., being the debenture trust deed. The ppty and assets comprised in the sd indenture dated the 1.5th August, 1888, or otherwise charged by the sd five debentures of 10,000/. each in the sd indenture mentd other than the sum of 460/. in the judgment mentd, consists of the particulars set forth in the second schedule hereto. The sd ppty and assets can best be realised for the benefit of the sd plaintiff and other holders of the debenture stock by sale of the coy's business and works as a going concern, but it is not advisable to sell at present, and until the coy's works can be sold to advantage the business should be carried on by the receiver and manager. The evidence consists, &c. Thk First Schedule. Bclentnre Stock Holders. 1st col.. Serial number ■2ud col., Xanies. 3rd col.. Addresses. 4tli oul., Amounts. 5th col., Amount du-^ for interest. 6th col.. Total amounts due. Second ScnEDULE. Property and assets comprised iu indenture of loth August, 1888. 1. Freehold land situate at , (Src, and the fixed machinerv, &c. 1118 JUDGMENTS AND ORDERS. [ClIAP. XIX. Form 781. The business heretofore carried on Ly the defendant company and goodwill and " connections thereof. The following trade marks («). The illuminating and heating oils, 12,1;jI, 24 May, 1877, &c. Trade stock, rolling stock, packages, utensils, fittings, stores, three draught horses, carts and gears, and two cob horses, and ti-aps, and harness. — Saltney, the Company's Home Works. Trade stock, packages, utensils, and office furniture. — London Depot. Book debts. 102/. 3s. 5cl., cash balance at the office of the company when receiver took possession, and since absorbed in carrying on the bu.siness. 111., balance to the credit of the company at their bankers at the date when receiver took possession, and since absorbed in carrying on the business. The unexpired terms of tenancies of various offices and works of the company and various contracts of the company for purchase of goods, and for Bale of goods. Dated this 1st day of April, 1892. Form 782. Upon the applicon of the receiver iu this action, and liqr in the winding up, and, &c. Order that the applicant be at liberty to pay to each holder of debentures whose name is stated in the second column of the first part of the schedule to the chief clerk's certificate a divi- dend of bl. in respect of each 100/. debenture held by him, out of the moneys in his hands as such receiver and liqr. Limbert [o7i behalf, S(c.'] V. Mineral Hill, d^'c. Co., 27 Mar. 1877, B. 668. Dividend to debenture holders. Form 783. Order to pay off deben- tures. Further conson. Order that subsequent interest be computed on the several principal sums in the third column of schedule to chief clerk's certificate mentd, to be secured by and due under the debentures in same schedule mentd, at the rate of 6 p.c.p.a. from 13 April, 1881, the date of sd certificate, to the day of payment, to be ascertained by affidavit. Order that the amounts of such subsequent interest, and the total amounts due to the several bearers of debentures in sd schedule mentd for principal and interest in respect of such debentures, be verified by affidavit. Order that out of the 4,500/. cash in Court to the credit of, &c., the several amounts which shall by such affidavit appear to bo due to the several bearers of debentures named in the second column of schedule to sd certificate for principal and interest be paid to such bearers of debentures resply. Tax the costs of the plaintiff and defendants of this action, including in the costs of plaintiff his costs of and relating to applicon for liberty to commence this action. Order that out of the residue of sd cash, after payments afsd, such costs be pd as follows, viz., the costs of plaintiff to W. and tlio costs of defendant coy to . Order that the ultimate residue of sd cash be pd to R., the receiver in the action. Discharge the sd 11. Order him to pass final account and retain balance that shall be certified due from him as off liqr of coy, and thereupon vacate recognizance. Liberty to apply. Oppcnheim [on behalf^ v. Wreck Recovery Co., Fry, J., 29 April, 1881, B. 1206. For order on further consideration for the payment of amount due to bearers of debentures, and fi)r delivery up of debentures with receipts, see liarrij v. Sao Pedro Co., M. R., I Aug., 187«, A. 2787, Ptd. FORMS. nio Upon tho appHcon of tho plaintiff for tho furthr-r conson of this Form 784. action, and upon lioaring- tlie solors for the applicant and for tho Another^ defendant, and for J. P., the receiver, and upon reading tho judgment dated 4 Nov. 1882, and the order dated 3 Oct. 1884, and 9 Jan. 188G, the C. C.'s certificates dated 31 May, 188G, and the 9 Aug. 188G, an affidavit of, &c., filed 3 Dec. 1886, and the certificate of the fund. And it appearing by such last-mentd affidavit of the sd J. P., that since Nov. 30, 1884, the date of his appointment as receiver, he has not received nor pd any sum or sums of money as such receiver, It is ordered that tho sd J. P., the receiver, ho and he is hby discharged. And it is hby referred to tho taxing master to tax the costs of tho plaintiff and the defendant coy, as between solor and client, including in the costs of the plaintiff his costs of and relating to tho ajijjlicon for leave to commence this action, and the sum of 51. allowed to th(> receiver for his remuneration ; the costs of the defendant coy to be exclusive of their costs, which have already been taxed and pd pur- suant to the order made in the matter of, &c., but to include any costs properly incurred by the receiver. And it is ordered that the funds in Court be dealt with as directed by the schedule hereto. And it is ordered that the residue of the funds in Court, after payment of such costs, be apportioned amongst the debenture holders named in the first part of the schedule to the C. C.'s sd certificate, dated 9 Aug. 1886, in proportion to the principal sums appearing by the sd certificate to be duo to them, and that the amount so apportioned, and the names of the persons to whom such amounts are payable, be ascer- tained. Liberty to apply. Payment Schedule. Chappell V. Artistic, cVc. Co., Ld., 1882, C. 1324. Ledger credit as above. Funds to be dealt with : — 1,687/. 13s. Consolidated 3 p.c. Annuities. 24/. 9s. bd. cash. Partictilars of Payments, Transfers, or other operations ordered. Payees, Transferees, or separate Accounts. Amoxmts. Money. Securities. £ s. d. £ s. d. 1,687 13 Out of funds iu Court and in- terest — Pay costs to be taxed under this order. Pay sums to be apportioned to debenturebolders by C. C. 0. to the persons to whom the same shall be certified to be payable. Chappell V. Artistic, S,-c. Co., Limtd. 1882, C. 1324, Chitty, J., 7 Jan. 1887. 11-20 JUDGMENTS AND ORDERS. [ChAP. XIX. Form 785. Order to pay dividends to debenture holders. Upon the applicon by summons, &c. of the dfts the C. Bank, &c., order that the funds in Ct to he dealt with as directed in the payment schedule hereto, the several payments and carryings over thereby directed to he made being in respect of a dividend of 101. p.c. on the amount of the principal sums found due on the several debentures referred to in the third schedule to the registrar's certificate dated, &c., and order that the costs of applicants, of the pit and of the dfts and of the sd M. on sd applicon be taxed, and that such costs when taxed be pd by J., the receiver in this action, out of any moneys in his hands available for the purpose. The payment schedule provided : ' ' Sell new consols — out of proceeds of sale, cash dividends, interest, and so much of the money on deposit as may be necessary, make the pay- ments to the several persons and the carrj'ings over to the several accounts resply mentd in the second column of this schedule, being a dividend at the rate of 10^. p.c. on the principal sums due in respect of the debentures referred to in the third schedule to the certificate of the Registrar of Cos Winding-up, dated the 24th Dec, 1895. Slubber [_on behalf, ^-c] v. Thnmas Daniel ^- Co., Limtd, Vaughan Williams, J., 20th Oct., 1896. Form 786. Another. Upon applicon, &c., order [^clischarge receiver, taxation of cosfs^. And order that the residue of the funds in Ct, after payment of the costs hereinbefore directed to be taxed, be apportioned amongst the deben- ture holders named in the first schedule (Parts I. and II.) to the regis- trar's sd certificate, dated 20th Nov., 1895, in proportion to the principal sums appearing by the sd certificate, to be due to them resply, and that the amounts so apportioned and the names of the persons to whom such amounts are payable resply, be certified by the Registrar Cos (Winding-uj)), and order that the funds in Ctbe dealt with as directed in the payment schedule hereto, and any person interested is to be at liberty to apply as he or she may be advised. The payment schedule provided : " Pay costs to be taxed under this order. Pay sums to be apportioned to debenture holders by the certificate of the Registrar Cos (Winding-up) ;" and the payee's column stated, payees to be " Persons to whom such sums shall by such certificate be certified to be j)ayable." Eoss [oM behalf, i>|-c.] v. Medical Electrical, ^c, Vaughan Williams, J., 13th Dec, 1895. Form 787. Furtlier con- Kidf.ration in chambers. Upon applicon of plaintiff by summons for the further conson of this action, and upon hearing the solors, &c. Tax costs of plaintiff of this action, including his costs of the applicon for liberty to commence this action, and his costs of and relating to the applicon for liberty to jiro- ceed with this action, &c. And order that the funds in Court be dealt with as directed by the schedule hereto. Adjourn further conson. Liberty to apply. FORMS. Payment ScnEimr-E. Title : Ledger credit as above. Funds to 1)0 dealt with : — 1 1,231/. .3 p.c. Annuities. -1121 Form 787. Amounts. Particulars, &c. Sell so much of the Consols as will rffise 6,062/. \()s., being the amount of the dividend of ds. in the £ on sums mentioned in .5th column of 1st schedule to C. C. C. Payee, &c. Out of proceeds, pay. E. C. &c. Sell so"much"more of Jthe Consols as will raise the costs of the plaintiff, M., of S. and E., the trustees, &c., to be taxed_,under this order. Out of proceeds pay the said costs. Sell so much more of the Consols as will raise 742/. lO.v., representing dividend of 5.s. in the £ on claims mentioned in 2nd schedule to C. 0. C, not fuUyjadjudicated on. Money. Securities. 7 10 &c. £ s. d. 11,2.31 Carry over proceeds of sale ' Account of divi-| dends on amount of claims not yet' adjudicated on." I Place on deposit. Moioatt V. Castle Steel, ^'c. Co., Limtd, Chitty, J., 6th May, 1886, B. 1398. [On further consideration] stay proceedings for sale under the sd Form 788. judgment of 2 June, 1885 ; and the defendants, A. and B., hy their Foreclosure, counsel consenting to this order, declare that the first mortgage deben- tures in the statement of claim, and the chief clerk's certificate, dated 17 Nov., 1885, mentd, constituted the first charge, and that the second mortgage debentures in the sd certificate mentd, constituted a second charge, and that the third mortgage debentures in the sd certificate mentd constituted a third charge upon the undertaking and all the P. 4 c 1122 JUDGMENTS AND ORDERS. [ChA.P. XIX. Form 788. ppty, present and futui-e, of the defendant coj', influding tlie callod-up capital of the defendant coy, up to 24 April, 1885, although the sd capital so called up had not been paid, or was not then piyahlo, and, further, that upon the defendants, the N. C. Coy and T. M., or either of them, jDaying to the plaintiffs and to the defendants, A. and B., the sum of 3,000^. on 17 November, 1886, at the Chapel of the Eolls, Rolls Yard, Chancery Lane, between the hours of 11 and 12 o'clock in the forenoon, the plaintiff, and the defendants, A. and B., do assign the assets secured by the said first and second mortgage debentures, and deliver uj), upon oath if required, the sd first and second mortgage debentures, and all title deeds and writings in the custod}' and power of them, or either of them, relating to the sd premises, to the defen- dants, the N. C. Coy and T. M., or to such one of them as shall so redeem the plaintiff, the defendants, A. and B., or to whom they or he shall appoint ; and in case the defendants, the N. C. Coy and T. M., or either of them, shall so redeem the plaintiff and the defendants, A. and B., the person or persons so redeeming the plaintiff and the defendants, A. and B., are, or is, to be at liberty to apply to the Court, as they or he may be advised, and on. such application it is not to be incumbent on such person or persons, corporation or coy, so applying, to give to the plaintiff or to the defendants, A. or B., or any of them, notice thereof. And this order is to be without prejudice to any question which may arise as to the rights or interests of the defendants, the N. C. Coy and T. M., as between themselves to or in the premises charged by the said fii'st and second debentures. But in default of the defendants, the N. C. Coy and T. M., or either of them, paying to the plaintiff, W., and the defendants, A. and B., the said sum of 3,000/. by the time afsd, order that the defendants, the N. C. Coy and T. M , do stand absoluteh' debarred and foreclosed of and from all right, title, interest, and equity of redemption in and to the premises charged by the said first and second mortgage debentures, and every part thereof, and in case of such foreclosure as afsd, it is ordered that the defendants, the N. C. Coy, do convey the premises charged by the first and second mortgage debentures to the plaintiff and the defendants A. and B., for all the estate and interests therein of tlie defendants, the N. C. Coy ; and the parties are to be at liberty to applj- as they may be advised. Welsh v. National Cycle Co., Chitty, J., 17 May, 1880, B. 909; see short report, W. N. (1886) p. 67. Tliat the holders of mortgage debeutures charging the undertaking and property, both present and future, of a coinijany, are entitled to foreclosure, was held by Chittj', .7., in the above case in 188G, and Kekewicjh, J., decided the same way in 1895. SarUrr v. Worlnj, (1894) 2 Ch. 170. (See the judgment following.) But foreclosure may bo impracticable in certain cases. Sec Elias v. Continental, ^-c. Co., (1897) 1 Ch. 511. In such cases nearly the same result can be obtained by an firder ff)r sale, with libertj' for the debenture-holders to bid. See Part II., p. 428. FORMS. M23 Declare that the plaiutiff, as tho holder of nine mortgajre rlebenturps rorm 789. of defendant coy for oOO/. each, dated tlie 2.'3rd of November, 1891, is Foreclosure entld to a charge on all the property, funds, assets, or effects of the order, defendant coy, including its uncalled capital, as the same existed on the 8th of November, 1893 (the date of the resolution to wind up the defendant coy), subject to any charges on specific parts thereof created previously to that date and then subsisting for securing the repayment of the principal moneys and interest on the sd mortgage debentures. And order : — 1. An account of what is due for principal and interest to tlie plaintiff as the holder of all the sd mortgage debentures on the security'- thereof, and for his costs of this action to be taxed by the taxing master ; 2. An inquiry what property, assets, or effects of the defendant coy are comprised in tho sd mortgage debentures, and the charge or security thereby created, and in whom the same are now vested. And order that, ujion the defendants, or any of them, paying to the plaintiff what shall be certified to be due to him as afsd, within six months from the date of the chief clerk's certificate at such time and place as shall be thereby ajDpointed, the plaintiff to deliver up (upon oath if required) the sd debentures and all deeds and writings in his custody or power relating thereto, to the defendants, or to such of them as shall redeem the mortgaged hereditaments and premises, or as he or they shall direct ; and in case the defendants or any of them shall so redeem the plaintiff, the defendant or defendants so redeeming is or are to be at liberty to apply to this Court, iS:c., as in preceding order. But in default of the defendants, or some of them, paying to the plaintiff' what shall be certified to be due to him as afsd by the time afsd, Declare that the plaintiff will be entld to the heredita- ments and premises comprised in the sd debentures free and clear of and from all right, title, interest and equity of redemption of, in and to the sd premises, and to have an absolute conveyance. And it is ordered that in such case the defendant coy, and the liqrs thereof for the time being, do all such acts and execute all such conveyances and deeds as may be necessary for vesting in the plaintiff the sd mortgaged ppty, such conveyances and deeds to be settled by the judge in case the parties differ. And any of the parties are to be at liberty to apply to this Court generally as they may be advised. Sadler v. Worlei/, Kekewich, J., 14 Mar. 1894. The order was made on an originating summons. See also Oldrey v. Unio7i Works, W. N. (1895) 77. Upon the applicon by summons, dated, &c., of the pit, and upon Form 790. hearing the solors for the applicant and for the dft J. B. and for p^^^jj. j v,. C. J. S. the off reer and liqr of the above-named coy, and upon read- taken in part ing the judgment, &c., the chief clerk's certificate in this action dated, amounfdTe"^ &c., and the afft, &c. It is ordered that the book debts due to the 4c 2 1124 JUDGMENTS AND ORDERS. [ChAP. XIX. Form 790. dft coy included in the Exhibit A. to the sd afft of, &c., be assigned to the pit and the dft J. B., to be held by them in equal shares, and to be accepted by them at the full amount stated in the sd exhibit, in part payment (one-half to each), of the amount found due to them resT)ly by the sd chief clerk's certificate. Fowler v. Brand's, &fc. Co., 1891. F. 1833. Eeg. 8 August, 1898. 1125 llECONSTKUCTIOK CHAPTER XX. INTRODUCTORY NOTES. TnERE are three modes of reconstructing a company formed under the Companies Act, 18G2 : — 1. By special Act of Parliament. See further "Special Acts," infra. 2. By means of a sale sanctioned by the Court under the Joint Stock Companies Arrangement Act, 1870. See further, hifra^ and Part II., Sect. IV. 3. By means of a voluntary winding-up and a proceeding under s. 161 of the Act of 1862. 4. By means of an exchange of shares followed by a voluntary winding-up. 5. By means of a sale of the undertaking before winding-up in consideration of shares in a new company, followed by a voluntary winding-up and distribution of such shares. See Form 37, and p. 306, and infra. In this division of the work reconstruction under sect. 161 will be almost exclusively dealt with. That section provides as follows : — " Where any company is proposed to be or is in course of being ■nound up altogether voluntarily, and the whole or a portion of its business or property is proposed to be transferred or .sold to another company, the liquidators of the first-mentioned company may, with the sanction of a special resolution of the com- pany by whom they were appointed, conferring either a general authority on the liquidators, or an authority in respect of any particular an-angement, receive in compensation or part compensation for such transfer or sale, shares, policies, or other like interests in such other company, for the purpose of distribution amongst the members of the company being wound up, or may enter into any other arrangement whereby the members of the company being wound up may, in lieu of receiving cash, shares, policies, or other like interests, or in addition thereto, participate in the profits of, or receive any other benefit from, the purchasing company ; and any sale made or arrangement entered into by the liqiiidators in pursuance of this section shall be binding on the members of the company being wound up ; subject to this proviso, that if any member of the company being wound uji who has not voted in favour of the special resolution passed by the company of which he is a member, at either of the meetings held for passing the same, expresses his dissent from any such special resolution in writing addressed to the liquidators, or one of them, and left at the registered office of the company not later than seven days after the date of the meeting at which such special resolution was passed, such dissentient member may require the liquidators to do one of the following things, as the liquidators may 1126 KECUNiiTKUCTlON. [Chap. XX. prefer ; that is to say, either to abstain from cairyiug such resolution into effect, or to purchase the interest held by such dissentient member at a price to be determined in manner hereinafter mentioned, such purchase -money to be paid before the com- pany is dissolved, and to be raised by the liquidators in such manner as may be determined by special resolution ; no special resolution shall be deemed invalid for the pui'poses of this section by reason that it has passed antecedently to or (con- currently with any resolvition for winding up the company, or for appointing liquidators ; but if an order be made within a year for winding up the company by or subject to the supervision of the Court, such resolution shall not be of any validity unless it is sanctioned bv the Court." The price to be paid to disseutieuts is to be determined in accordauce with sect. 162 of the Act, which is as follows : — Sect. 162. " The price to be paid for the purchase of the interest of any dissentient member may be determined by agreement ; but if the parties dispute about the same, such dispute shall be settled by arbitration, and for the purpose of such arbitration the provisions of the Companies Clauses Consolidation Act, 1845, with respect to the settlement of disputes by arbitration, shall be incorporated with this Act ; and in the construction of such provisions this Act shall be deemed to be the special Act, and ' the company ' shall mean the company that is being wound up, and any appointment by the said incorporated provisions directed to be made under the hand of the secretary, or any two of the directors, may be made under the hand of the liquidator, if only one, or any two or more of the liquidators, if more than one." Eeconstruc- -A- reconstruction under sect. 161, above, has now become a matter of tions common, ordinary occurrence, and may be resorted to with advantage in a variety of cases, of which the following- are examples : — Examples. A. Where the company desires to do something ultra vires, e.g. : — (1) To engage in some business or obtain some powers not covered by the objects set forth in its memorandum of association, and it is considered that proceedings under the Companies (Memorandum of Association) Act, 1890, would be too expen- sive, or would involve too much delay. (2) To issue preference shares, there being no power in the memo- randum or articles to do so. See supra, p. 285. (3) To issue preference shares having a priority over preference shares already issued, notwithstanding the holders of such last-mentioned shares, or some of them, refuse to consent. •See supra, pp. 411, 652. B. Where a company desires, without submitting to the stringent conditions prescribed by the Companies Acts, 1867 and 1877, upon a reduction of capital, to carry into effect any arrangement which would amount to a reduction of capital, pjj. : — (1) To divide part of its paid-up caj)ital, either in cash or in specie, among its members. (2) To reduce the liability on its shares which are only in part paid up. (3) To extinguish all further liability on such shares. (4) To return capital, but with power to call it up again. (5) To cancel lost capital. INTRODUCTUliV NOTES. 1127 C. Where the cuinpauy has exhausted its funds and is satisfied that the only or the best mode of raising further funds is to reconstruct and substitute partly paid-up shares for its fully paid-up shares. The mode in which the reconstruction is carried into effect is as Mode in follows:— which reooii- struction In case A. (1) : — effected. Let it be supposed that the capital of the existing company is Case A. 100,000^., divided into 10,000 shares of 10/. each, that its object is to work a particular mine, and that it desires to have power to acquire and work other mines. The directors, having satisfied themselves that a reconstruction is Prolimiuary expedient, will suggest it at a general meeting and procure a resolu- ^''^P''^- tion in favour of it to be passed, or, as is sometimes done, they will issue a circular to the members or to the largest holders of shares seeking their approval of the plan. If the plan is favourably received, the memorandum and articles of Newcom- a new company will be prepared. The objects of such company will P^°3^- be to acquire and undertake the property and liabilities of the old company, and to acquire and work aiiy mines and mining rights, and such other objects as may be deemed expedient. The capital will be the same as that of the old company. The articles will authorize the directors to purchase and undertake all or any part of the property and liabilities of the old comj^any upon the terms of an agreement therein referred to. Probably by the articles aU, or some, of the directors of the old company will be appointed directors of the new company. The draft of the reconstruction agreement will, at the same time, be prepared. See Form 791. Notice will then be issued by the directors of the old company con- issue of vening an extraordinary meeting of that company to consider certain notice, resolutions which will be set forth in the notice. See Form 794. If the resolutions are passed by the requisite majority at the first meeting, a second one will be called to confirm them, so that they may become special resolutions. See supra, Form 453. And if they are duly confirmed, the new company will bo at once Special reso- incorporated, and the liquidators of the old company and the directors ^^*^°"- of the new company will execute the reconstruction agreement. r d f The agreement will provide for the transfer of aU the property of . ,,, , . .,.„, Agreement, the old company to the new company, in consideration oi the new com- pany undertaking the debts and liabilities of the old comjiany, paying the costs of winding it up, providing the funds necessary to purchase the interest of any dissentient members, and allotting to every assenting member of the old company one share in the new company in respect of each share held by him in the old company. If the matter has been properly managed, the chances are that there Dissentients. will be but few dissentient members (if any). The funds to pay them will be provided by the new company T)y borrowing or otherwise. 1128 RECONSTRTTCTION. [ChAP. XX. Completion of The property of the old company will be in due course made over ^^^®- to the new company, -u-hich will allot its shares as provided hy the agreement. Debt3 The debts and liabilities of the old company (if it has any) will be satisfied. g.^^. ^.j^j ^^ gg soon as possible. Many of the creditors will probably agree to accept the liability of the new instead of the old company ; the rest will be paid. Dissolutiou of As soon as may be the liquidators hold the final meetings (s. 142 of old company. ^-^^ Act), and make the proper return to the registrar (s. 143 of the Act), and at the expiration of three months therefrom the old company is ipso facto dissolved. General or Sect. 161, it will be observed, authorizes a sale sanctioned by a particular special resolution conferring " either a general authority on the liqui- autnority to ^ , . . „ . , ,, liquidators. dators, or an authority m respect oi any particular arrangement. Sometimes a general authority is given ; but in most cases it is limited to a sale on the terms of a particular agreement. Provisional Instead of a draft agreement, as above, it is not uncommon to have '^ "a provisional agreement made between one person on behaK of the old company and another on behalf of the intended new company. In such case the resolution will authorize the liquidators "to adopt" the agreement. Variations in Of course the arrangement must vary according to the circumstances ^ ' of the company, and the object of the reconstruction. Thus in cases A. (2) and (3), siqva, p. 1125 : — Care will be taken that the articles of the new company contain full power to issue preference shares, or the capital of the new company will consist in part of preference shares. In case B. (1) : — Suppose that the shares in the old company are 20/. fully paid up, and that it is desired to return 10/., the agreement will provide that the new company shall, in exchange for each share in the old company, allot one fully paid-up 10/. share in the new company, and pay the sum of 10/. in cash. Or suppose that the object of the reconstruction is to divide in specie some assets of doubtful value, e.r/., debentures of some other company. The new company will, as the consideration for the sale, agree to allot shares to the members of the old company, and to divide the deben- tures among them pro rata. In case B. (2): — Suppose the shares in tlie old company ai'e 20/. with 10/. paid up, and it is desired to reduce the liability to 5/. In such case, one 15/. share in the new company, with 10/. credited as paid up, will be allotted in exchange for each share in the old company. In case B. (3) : — Suppose the shares in the old compan3^ to be 10/. with 11. paid up, and that it is desired to extinguish all further liability. The object INTRODUCTORY NOTES. 1129 ■will be attainerl by allotting one fully paid np 11. share in the new comjiany in exchange for each 10/. share in tlio old oonipany. In case B. (4) : — Suppose the shares in the old company are 10/. fully paid up, and that it is desired to return 5/. per share, but with power to call it up again. In such case the new company will allot one of its 10/. shares credited with 5/. paid up and also pay 51. in cash, in respect of each 10/. share in the old company. In case B. (5) : — Suppose the shares in the old company are 10/. fully paid up, and that 5/. per share has been lost. In such case the new company will allot one 5/. fully paid share in respect of each share in the old company. In case C. : — Suppose that the shares in the old company are 1/. fully paid up (say 100,000), and that it is considered that about 20,000/. or less working capital would suffice. In this case, the shares in the new company will be 1/., with 15*. credited as paid up, and every member will have the option of getting one of these shares for every share in the old company held by him. This is the commonest kind of reconstruction. The amount per share credited varies. Sometimes it is 17*. Ge/., sometimes more and sometimes less. In cases of reconstruction, the new company very commonly takes New company the name of the old one. This is effected under s. 20 of the Act. See taSHhe^'old supra^ p. 666. Immediately after the special resolution to wind up, (Src, name. has been passed by the old company, the liquidators sign the proper consent to the registration of the new company by the same name. Supra, p. 710. The new company is registered by the old name the same or next day, the agreement is forthwith executed, and the new company commences business, thus avoiding any stoppage. Some- times the name is slightly varied, and sometimes a perfectly different one is chosen for the new company. It will be observed that s. 161 only authorizes a sale to a cnmpany. Sale must be Hence a sale to an individual, who is to form a new company, and company. make such profit as he can out of the transaction, is not valid. Bird V. BircPs Patent Sexracje Co., 9 Ch. 358. See Form 685, stipra. An agreement with some person purporting to act on behalf of an intended company, for a sale to him as such agent or to the com- pany, maybe valid {In re Hester ^- Co., 44 L. J. (N. S.) Ch. 757) ; but it is not wise to run the risk involved in thus dealing with the matter. S. 161 does not require that the sale should be made to a company It may be to registered under the Act of 1862. The sale may be to any company, ^^^^eigu corn- English or foreign. Irrigation Co. of France, Ex parte Fox, 6 Ch. 183. It was held in Clinch v. Financial Corporation, 4 Ch. 120, that upon As to selling a sale under s. 161, it was ultra vires to provide that if the assets sold ^"^calkd . ^ . , capital, should not produce a sum sufficient to pay up a specified amount on 113a KECUN.STKUCTIOJS . [CllAP. XX. Liquidators may be directed to adopt agree- ment. Agreement may provide for allotment of shares to members directly. May give option. Limit of time. May empower liquidators to sell unclaimed sliareH. Hale for ])artly jiuid HliaruH. the shares to be allotted as part of the consideration, tlie lic^uidutors of the selling company should make good the deficiency by making a call. But it is not easy to reconcile that construction of s. 161 with subsequent cases. The section contemplates the sale of the company's "property," and it has been laid down in several cases that, in a winding-up, the uncalled capital is part of the property. IFebb v. Whiffin, L. E. 5 H. L. 735 ; Birch v. Cropper, 14 App. Gas. 545. Why, then, cannot there be a sale under s. 161, of such property, or a provision for calling it up and handing over the proceeds ? It has now been held that such a provision is free from objection when the sale is under ss. 95 and 133, and the call is to be made in order to provide for payment of debts. Banh of South Australia (2), (1895) 1 Ch. 578. Moreover, it would seem from Neiv Zealand, Sfc. Co. v. Peacock, (1894) 1 Q. B. 622, that a call may be made just before the winding-up, and that the capital thus called can then be included in the sale. An agreement adopted by the liquidators of a company pursuant to the direction of the company, given by virtue of s. 161, is valid. Southall V. British Mutual Life Assurance Society, 1 1 Eq. 65 ; 6 Oh. 614. The agreement may provide for the allotment of the shares, &c., to the members of the company being wound up directly. See City and Cotinty Investment Co., 13 C. Div. 475, It may be framed so as to give to each member the option of coming in and claiming an allotment of his proportion of shares in the new company. Postlethwaite v. Port Philip Co., 43 C. D. 452. And it may limit a time within which that option must, if at all, be exercised. S. C. And if no time is limited, the option must be exer- cised within a reasonable time. S. C, and Weston v. New Guston Co., 60 L. T. 805; 64 H. L. 815; Zuccani v. Nacupai Co., 61 L. T. 176. Moreover, although it is not essential to make such provision, the agreement may provide that the shares not taken up pursuant to the option may be sold by the liquidator, and the proceeds held for the persons who had the option. Postlethicaite v. Port Philip Co., 43 C. D. 452. As to what is a reasonable time, this must dej^end on the character of the property and on the circumstances, but where the property is of a speculative character (e.y., a mine), and those who claim must pay, or come under a liability to pay, calls, the Court is very ready to exclude a claimant who does not promptly come in. If the option is exercised in due time, but the liquidator fails to allot the shares, and disposes of them elsewhere, the Court has no jurisdiction in the winding-up, even when under supervision, to award damages against the liquidator. IlilVs Waterfall, ^'c. Co., (1896) 1 Ch. 947. A sale imder sect. I'll may bo made in consideration of shares that are only in part credited as paid up. City and County Investment Co., INTRUDL'CTOKV NOTES. 11^1 13 C. Div. 475; Imperial Mercantile Credit Association, 12 E({. 501 ; Hester &; Co., 44 L. J. (N. 8.) Ch. 757 ; Postlethwaite v. Port Philip Co., 43 C. D. 452. But in such case the liquidator should take care that the shares are not allotted to him, but to the shareholders directly, otherwise he may be involved in liabilities which he never contem- plated. DyetCs case, 43 L. T. 85. Upon a sale under s. 161, it is not competent for the reconstruction Mode of agreement or the special resolution to provide for the distribution ^^ " " ^"°' among the members of the shares in the new company, otherwise than in accordance "with the legal rights of the shareholders. G'riJ/ith v. Paffet, 5 C. D. 894. Previously to the decision of Jessel, M.E., in Griffith v. Paget, 5 C. D. 894, it was very generally thought that the members could so determine, and many reconstructions were effected on that footing. For example, where the capital of a company was divided into different classes of shares, e.c/., preference and ordinary, it was not uncommon to reconstruct with a view [iiiter alia) to converting all the shares into shares of uniform character. For this purpose the relative values of the shares in the old company (as a going concern) were approximately ascertained, and the agreement provided for the allotment of the shares in the new^ company accordingly, e.y., two for every preference and one for every ordinary share. So, too, when there were different classes of shares, and the company desired to reconstruct {e.g., to extend its powers), it was not uncommon to adopt a scheme under which the capital of the new company was similarly divided, and the members placed as far as possible in the same position in the new as in the old company. The notion was that any arrangement approved b}' special resolution was valid, even though it might give a particular class of shareholders less than they would have got if the sale had been for cash : for it was considered that dissentients were sufficiently protected by being enabled to claim the value of their interests as provided by s. 161. However, in Griffith v. Paget, 5 C. D. 894 ; 6 C. D. 514, Jessel, M.E., was of opinion that this could not have been the intention of the Legislature, because there might be lunatics, infants, persons beyond the seas, and others unable to dissent in the prescribed manner, and that, although the section authorized a sale for shares or other consideration, it did not authorize any dej)arture from the ordinary rules as to the distribution of surplus assets, and that the consideration must accordingly be distributed just as if it were so much cash, unless every member of a prejudiced class agreed to some other mode of distribution. And that decision has recently been followed in Simpson v. Palace Theatre, 69 L. T. 70 (C. A.). To meet this difficulty a clause as above (p. 470, clause 155) is now very commonly inserted. Moreover, there may be cases in which the desired result can be achieved, notwithstanding Griffith y. Payet. Thus, suppose a company with 100 founders' shares of 1/. each (wortli 1132 RECONSTRUCTION. rCnAP. XX. Time to dissent. Failure to give notice of dissent. Dissentient not bound to take shares in new company. in the martet 500?. each), and 5,000 ordinary shares of 1/. each, worth par. It is desired to reconstruct on the footing that the shares shall all be uniform, and that 500 shares in the new company shall he given for each founder's share in the old company. Griffith v. Po^e;? forbids. But it may be effected thus : Form a new company with power to acquire the undertaking of the old company and any shares in the capital thereof. Let the new company enter into a provisional agree- ment for the acquisition of all the founders' shares on the terms de- sired, viz., 500 of its own for each founder's share, and then let the old company sell its undertaking to the new company, under s. 161, on the footing of a share for share allotment, the new company undertaking, as the beneficial owners of the founders' shares, to make no claim in respect thereof. And see Beeston Pneumatic Tyre Co., AV. N. (1898) 34. By s. 161 of the Act, members who dissent from the special resolu- tion are allowed seven days from the date of the meeting at which it was passed, i.e., the second meeting, within which they must give notice of dissent. For form of notice, see infra, p. 1151. The notice of dissent should not merely express dissent, but should also require the liquidators either to abstain from carrying the resolu- tion into effect or to purchase the member's interest. Union Bank of Kingston-upon-Hull, 13 C. D. 808. It has been held that a notice of dissent served before the confir- matory meeting may, if not withdrawn or returned, be a valid notice within the section. London Sf Westminster Bread Co., W. N. (1890) 3. But it is wiser to follow strictly the terms of the enactment. If a dissentient member fails to give such notice, he must either accept the benefit offered him by" the reconstruction, i.e., he must become an assenting member, or else he entirely loses his beneficial interest in the old company ; for although he will remain entitled to his shares in that company, yet they are shares in a mere husk or vacuum, for the whole of the assets of the old company are made over to the new company. It was at one time contended that if a dissentient member did not express his dissent within the prescribed period, he was bound by the sale or arrangement, and was consequently under an obligation to accept any shares or other interest in the purchasing company, which were thereby to be allotted to him ; but this notion was very soon exploded, and it is now settled that the provision in sect. 161, that the sale shall be binding, merely means that a dissentient member cannot impeach the sale. He must either assent or dissent in the prescribed manner, or simply lose. Los''s case, 13 "W. U. 883 ; Higcfs case, 2 H. & M. 657 ; Martin's case, 2 H. &M. 669 ; Fox's case, 6 Gh. 183; Southall v. British Mutual Life Assurance Soc, 6 Ch. 614 ; Fosilethtvaite v. Port Philip Co., 43 C. D. 452. AVhr-re any question arises as to whether a member has dissented in timf, application can be made to the Court having jurisdiction to wind up the company to decide the point under sect. 138 of the INTRODUCTORY NOTES. 1133 Act. Union Bank nf Kimjston-upon-Hull, 1 3 C. D. 808. In the case last mentioned the application was by motion. A member wlio has duly dissented is entitled to have the purchase- Payment to money for liis interest paid to him ; and, when it has been ascertained, . Vining^s case, 6 Ch. 601. But it may be that if a winding-up order is not made within a 3'ear, the members of the selling company cease to be under any liability to the creditors. City and County Investment Co., 13 C. D. 475. This is, however, by no means clear, for there is nothing in the section to release the members. No doubt the agreement after a year will not be avoided by a winding-uiJ ; but how can that prevent an unpaid creditor from obtaining a compulsory or supervision order, with a view to payment out of the capital which was uncalled at the commencement of the winding-up ? It is conceived that the liability of the members is not at an end until the dissolution of the old com- pany, or until the creditors have become bound by novation. As to the source from whence the funds to pay dissentient members Whence fund are to come : according to the above plan the new company is bound *° P?^ ^^' by the agreement to provide them. It is necessary to impose this come, obligation on the new company, because, by the agreement, the old company is to sell all its property. Sometimes, however, as in Form 79 1 , infra, the funds are in fact provided by the sale of the shares which the dissentients might have claimed, the new company making up any deficiency. A mode of reconstruction sometimes adopted is to provide by the agreement for the allotment of the share consideration to the liquidators or their nominees, instead of to the members directly, and not to insert any provision requiring the new company to pay the dissentients. The agreement in such case, or the special resolution sanctioning the same, will direct the liquidators of the old company to raise the funds to pay dissentients by the sale of a sufficient number of the shares in the new company to be allotted pursuant to the agreement, and to distribute 1134 RECONSTRUCTION. [Chap. XX. Security of dissentients must be regrarded. Notice calling meetings to pass special resolution. As to filing agreement and siipple- menfal ones. the residue of sucli shares among the assenting members. The result in either case is the same. Care should be taken so to frame the agreement that dissentient membprs shall have sufficient spouritv for the pa;^^nent of the purchase- money for their interests ; othorwisp there will bo risk of legal pro- ceedings. See infra^ Form 791, cl. 8 ; Hester &; Co., 44 L. J. fN. S.) Ch. 757; New Flagstaff Co., W. N. (1889) 123.' Where the selling company has uncalled capital, it would soem from the above cases that such a clause is unnecessary. It may, however, be doubted how far this is consistent with the principles laid down in Clinch V. Financial Corporation, 4 Ch. 120. The validity of a special resolution sanctioning a sale or arrange- ment under sect. 161, essentially depends on the sufficiency of the notices given convening the meetings. They ought to give the members either direct or indirect notice that the transaction is to be effected undor sect. 161. Imperial Bank of China, ^'c. v. Bank of Hinchistan, ^c, 6 Eq. 91 ; Ex imrte F'ox, 6 Ch. 176. A notice which states {iiiter alia) that a resolution is to be proposed, authorizing the liquidators to sell the assets to another company, and to accept compensation in shares, is probably sufficient ; but the usual plan now is to refer expressly to sect. 161. This precludes all doubt. Of course, the reference to sect. 161 may be either in the notice or in the accompanying circular (if any). The agreement with the new company must, if it provides for the issue of paid-up shares, be fi.led pursuant to the 25th section of the Companies Act, 1867. See supra, p. 179. It is also not unusual, and seems expedient, to file subsequent agree- ments between the new company and the old company or the members of the old company to whom shares are allotted specifying the shares allotted. And it seems more especially expedient to file such agreements where the principal agreement gives to members of the selling com- pany an option to take up shares in the new company, for in that case the principal agreement does not show what shares are to be issued as paid up. The agreement may, it is conceived, be made between the old com- pany and its liquidators of the one part and the new company of the other part, and can provide for the allotment of specified shares, pursuant to the principal agreement. It should be under seal, inas- much as it might otherwise be contended that it was (for want of a fresh consideration) not a contract. Another plan which is sometimes adopted is to file supplemental contracts made between the acco])ting members and the company, or between some person acting with proper authority on behalf of the accepting members of the one part, and the company of the other part. liut there seems no necessity for the plan, since the old company and the liquidators are the vendors. It is they who sell, and there is no rNTnoiM^ri'OHY notes. n.">5 doubt whatever that a valid agreement between a vendor and purchaser providing for the allotment of paid-up shares forming part of the consideration to the nominees of the vendor effectually protects such nominees. See C'urUn(/s case, 1 Cli. 115; Common Petroleum Engines Co., (1895) 2 Ch. 759 ; and siqn-a, p. 182. On the otlier hand, an agreement to be effective must be signed or sealed by or on behalf of both parties. vVccordingly, an agreement expressed to be made between the new company of the one part, and proj)osed allottees of the other part, sealed by the company, but not signed by such allottees, is insufficient. New Eberhnrdt Co., 43 C. Div. 118. The liquidators, in a winding-up for the purpose of reconstruction, Remuncra- generally act without remuneration, or for a small fee. *;'^'" "* liqui- A . -i , . . . . , , . dator.s. A company cannot, by an alteration m its articles, made m contem- . , . » plation and on the eve of a winding-up, and proceeding under s. 161 articles in of the Act, deprive dissentient members of the right given them bv "^rog-ation of . *• ^ ^ e o .. rights of dis- that section. Ex parte Fox, G Ch. 176. Whether the right can be sentients. restricted by provisions in the original articles, or in the articles as altered by special resolution passed otherwise than in contemplation of winding-up, is by no means clear. See supra, p. 469. Where the special resolution sanctioning an agreement for a sale Confirmation under s. 161 is invalid for want of proper notice or otherwise, the f^^' i'-^'^'»li'l , , , resolution, transaction can, nevertheless, be confirmed. Fox^s case, 6 Ch. 176. In order to effect this, the liquidators must call the necessary meeting and procure the members to pass proper special resolutions. It will be remembered that s. 161 provides that if an order be made Order to wind within a year for the winding up the company by or subject to the "r- supervision of the Court, the resolution shall not be of any validity unless sanctioned by the Court. The Court cannot, it has been held, give the requisite sanction before the winding-up order. Callao Bis, 42 C. Div. 169. Sometimes, in order to preclude danger, a supervision order is at once obtained and the sanction asked for. New Flagstaff Co., W. N. (1889) 123. But query whether Callao Bis, tibi supra, was rightly decided. Any company not formed or registered under the Act of 1862, but Companymay which is capable of being registered under that Act, may efitect a register with reconstruction under s. 161. In order to do this it will register under construction, the Act, and the reconstruction may then be carried into effect as above mentioned. It is no objection that the registration was made exju-essly with a view to winding up and selling under s. 161. SonfJiall v. British Mutual Life Assurance Society, 6 Ch. 614, C. A. Section 161 is only applicable in a purely voluntary winding-up. Reconstruc- Haford Hotel, W. N. (1868) 86. But in a winding-up by or under tio^^ in wind- the supervision of the Court a reconstruction may be effected by a sale CourtT under s. 95 of the Act to a new company, for under that section the Court has powers at least as extensive as those conferred by s. 161 on a liquidator. Agra and Mttsterman''s Bank, 12 Eq. 409; 16 1136 RECONSTRUCTION. [Chap. XX. Reconstruc- tion by ex- change of shares before Tirinding-iip. Reconstruc- tion by sale of under- taking before •winding-up followed by distribution of shares in winding-up. Prelim in aiy agreement for the purpose. W. E. 554; Imperial Mercantile Credit Association., 12 Eq. 504; Cambrian Co., 48 L. T. 114. Where a company gets into difficulties a reconstruction and an arrangement with, creditors under the Act of 1870 are not uncommonly effected at the same time. See infra^ p. 1165. As to a reconstruction by exchange of shares followed by a volun- tary winding-up. This is a mode of reconstruction which, in special cases, is preferable to a proceeding under sect. 161, e.g., where it is desired to reconstruct on a basis which would be in contravention of the rule established in Griffith v. Paget, supra, p. 1131 ; for instance, where the capital consists of preference shares and ordinary shares, and there is no clause in the articles like clause 155, supra, p. 470, and it is desired to reconstruct on the footing that in the new company the preference shareholders shall get preference shares and the ordinary shareholders shall get ordinary shares, or that both classes shall get ordinary shares in the new company in proportion to their market value and not in proportion to their nominal amount. In such cases it is sometimes possible to carry the thing through by an agreement for exchange to be ratified by all the shareholders, and when all have ratified the new company allots the shares, and then the old company goes into liquidation, and the new company, as the owner of all the shares in the old company, calls for and takes a conveyance of the assets of the old company and clears off its liabilities. As to reconstruction by sale of the undertaking before winding-up, followed by a distribution of shares in a winding-up. This course can only be adopted when the memorandum of association contains the requisite power {supra, p. 306) "to sell the undertaking for shares, and the articles contain the requisite power to distribute assets in kind {supra, p. 468). The sale having been made, the old company will pass a resolution to wind up and to distribute the shares in kind. See sitpra, p. 668, Form 390. This plan is best suited to cases in which the shares to be distri- buted are fully paid up. For Form of Agreement for Sale, see supra, p. 218; and for resolution approving same, see Form 806, infra. Sometimes a similar transaction is carried through by making a preliminary agreement ratified by all, or nearly all, the members, providing how their shares in the new company shall be distributed. See Form 53, supra, p. 245. The mere fact that a few of the shareholders refuse to sign or ratify the agreement need not materially hamper the others. 1137 RECONSTRUdTOX. Agreemt between Liqrs of Old Coy aud New Coy with a view Form 791. to the Eeconstruction of the Old Coy. Agreement with a view An Agreemt made the day of between the A. Coy, Limtd to reconstruc- (hufter called the old coy), and and , the liqrs thereof, of *^°°-_ the one part, and the A. Coy, Limtd (hnfter called the new coy), of ^^ ^^^' the other part. Whereas the old coy was incorporated in the year under the Reaitals. Cos Acts, 1862 and 1867, with a nominal capital of 50,000/., divided into 10,000 shares of 51. each: And whereas the whole of the sd shares have been issued, and the sum of 5/. per share stands credited in the books of the old coy as having been pd up thereon : And whereas by special resolution of the old coy passed and confirmed at extraordinary general meetings thereof, held resply the da}- of and the day of , it was resolved : (1) That it was desirable to reconstruct the old coy, and accordingly that the old coy should be wound up voluntarily and that the sd and should be and they were thereby appointed liqrs for the purposes of such winding up. (2) That the sd liqrs should be and they were thereby autho- rised to consent to the registration of a new coy to be named The Coy, Limtd, with a memdm and arts of asson as therein mentd ; and (3) That the draft agreemt in the sd resolution referred to (being the draft of these presents) should be and the same was thereby approved, and that the sd liqrs should be and they were thereby authorised, pursuant to s. 161 of the Cos Act, 1862, to enter into an agreemt with such new coy (when incorporated) in the terms of the sd draft and to carry the same into effect : And whereas, pursuant to the resolution afsd, the new coy has since been incorporated under the Cos Acts, 1862 to 1880, with a nominal capital of 50,000/., divided into 10,000 shares of 51. each : And whereas by the arts of asson of the new coy, it is provided that the same coy shaU forthwith enter into the agreemt therein referred to, being these presents. Now it is HBY AGREED AS FOLLOWS : — 1. The old cov and its liqrs shall transfer, and the new coy shall Agreement ,Ti.iT r • i.iT tor transfer, take over, all and singular the lands, buddings [concessions, patents], goods, chattels, moneys, credits, debts, bills, notes, and things in action of the old coy, and the undertaking, business, and goodwill P. 4 D 1138 RECONSTRUCTION. [Chap. XX. Foi-m 791. New company to pay debts, •Sec. of old company. New company to pay costs of windixi-g up old company. Shares in new company to be allotted to members of old company. Claims to be sent in. thereof, with the full henefit of all coutrac-ts and agreemts, and of all securities in respect of the sd things in action, to which the old coy is entld, and all other the real and personal ppty of the old coy whatso- ever and wheresoever ; subject nevertheless as to all the sd premises to the several mortgages, charges, liens, and incumbrances affecting the same or any part thereof. 2. As a part of the conson for the sd transfer, the new coy shall undertake, pay, satisfy, and discharge all the debts, liabilities, and obligations of the old coy whatsoever, and shall adopt, perform, and fulfil all contracts and engagements now binding on it, and shall at all times keep the old coy, its liqrs, and contributories, indemnified against such debts, liabilities, obligations, contracts, and engagements, and against all actions, proceedings, costs, damages, claims, and demands in respect thereof. 3. As a further part of the conson for the sd transfer, the new coy shaU. pay, and at all times hereafter keep, the old coy, its liqrs, and contributories, indemnified against all the costs and expenses of and incident to the winding up of the old coy, and of carrying the sd transfer into effect. 4. As the residue of the conson for the sd transfer, every member of the old coy shall, in respect of each share therein held by him, be entld as of right to claim an allotment to himself or herself, or to his or her nominee or nominees, of one 1 1, share in the new coy, with the sum of 15s. credited as having been pd up thereon, and the new coy shall allot the shares so claimed. 5. A member entld to claim an allotment as afsd must claim the same within [21] days from the date hereof by sending in to the new coy a claim in writing for an allotment of the shares, and such claim must be signed by the member making the same, and must be accom- panied by a sum of [1] shilling per share claimed, and where it requests that the allotment of shares may be made to a nominee or nominees of such member, it must be countersigned by such nominee or nominees. As to limiting a time for the claims, see supra, p. 1130. In the absence of a specified limit the Court will imply a term, but the claim must be made within a reasonable time, supra, p. 1130 ; but it is not alwaj^s easy to say what is reasonable, as it depends on the circumstances. Notice to be given by company. G. Tlie liqrs of the old coy shall within [7] days from the date hereof, give notice in writing to each member of the old coy, stating the number of shares which the member is entitled to claim as of right under this agreemt, and the amount per share payable on claiming the same, and the situation of the registered office of the new coy and the time within which the claim for an allotment as afsd must be sent in to the now coy, and there must be enclosed there witli proper forms of claim addressed to tlio new coy for signature by tlio member. The notice afsd shall in each case bo given by sending the same through FORMS. 11-^9 the post addressed to tlie member at las or her rcgistt-rod address as Form 791. appearing on tlie register of members. Where the members are to claim within a specified time it is only fair to require notice to be given them at once, otliervviso they miy by oversight lose their rights. 7. As regards tliat proportion of the sd shares in the new coy Sale of un- which members of tlie old coy other than dissentient members hnfter ^J^^^^ *' _ _ shares. mentd shall be entld to claim as afsd, but shall not within the period of [21] days before mentd claim, the sd liqrs shall use their best endeavours to sell the same for what they will fetch, and the net proceeds of sale thereof, after paying all expenses of and incident to the sale, shall be distributed rateably among the members who, if they had claimed, would have been entld to such shares in accordance with their rights and interests, and in substitution for such shares the new coy shall, upon the request of the sd liqrs, allot to such pur- chasers the shares sold to them rcsply credited as afsd, but such request to be effective must be made witliin weeks from the date thereof. In the absence of a specified limit as regards time a liquidator claiming under such a provision must sell and claim allotment ■within a reasonable time. See supra, p. 1 130. And accordingly where a liqiiidator did not claim until after the expiration of some months, it was held by Vaughan Williams, J., that the claim was too late. St. Aiif/ustine Mines, Limited, 2-) April, 189.5. 8. As regards the proportion of the sd shares in the new coy which, Sale of but for their dissent, would have been claimable by those members of /. credited as pd up thereon. Dated this day of . (Signature Name in full Address Description or occupation Where certificates to be sent Form 805. Request for allotment to specified persons. To the liqrs of the A. Coy, incorporated 18 — , and hnfter called the old coy, and to the B. Coy, incorporated 1888, and hnfter called the new coy. Gentlemen, I, the undersigned, , of , a shareholder in the old coy, request that the fully pd-up shares in the new coy, to which I am entld under the reconstruction scheme, may be allotted in manner following : — Names of Allottee or Allottees. Number of Shares to be allotted to each of the Allottees. Date Signature of shareholder Where the shareholder inserts in the above tahle the name of any nominee or nomi7iees besides or instead of his otv?i, such nominee or nominees must sign the following request : — And I, the undersigned, request the new coy to allot to me the share or shares set opposite my name in the above table. Signatures of Allottee or Allottees. Dated this day of FORMS. IIH That the provisional agreeint, dated tlio day of and made Form 806. between A. B. on behalf of the toy of the one part, and The Coy, Resolution Limtd, of the other part, be and the same is hby ratified and con- for .sale of firmed, and tliat the directors be authorised to affix the coy's seal "'^ erasing, thereto in token of such ratification and confirmation, and to carry the same into effect, with such (if any) modifications in the details thereof as they may think fit to assent to. The above is a form of resolution where the undertaking is .sold before winding- up. See p. 1136, suprfi. In the matter of the Companies Act, 1862. Form 807. And in the matter of the • Coy, Limtd. TTT- TV- "^ Notice of dj.s- To and , the linrs of the above-named coy. sent pursuant to s. 161. Take notice that I dissent from the special resolutions of the coy passed and confirmed at general meetings thof, held resply on the day of ■ and day of •. And I hby require you either to abstain from carrying such resolution into effect, or to purchase the interest in the sd coy held by me, at a price to be determined in accordance with sect. 162 of the above-mentd Act. Dated, &c. A. B. of . See Union Bank of Kingston, 13 C. D. 808 ; Anglo-Italian Bank v. Be Rosaz, L. R. 2 Q. B. 452 ; Be Rosaz v. Anglo-Italian Bank, L. R. 4 Q. B. 462, and supra, p. 1133. In the preceding editions of this work a copy of the agreement sanctioned by the Court in Imperial Mercantile Credit Association (12 Eq. 504) was set out, but that form is now omitted for want of space. AN AGEEEMT, made the day of , 1895, between A. of Form 808. , on behalf of himself and all the other holders of shares in the ' Coy, Limtd (hnfter called "the old coy ") of the one part, and B. f^" exchange of , on behalf of the new coy hnfter mentd of the other part. o^ shares. AViiEREAS the old coy was incorporated in the year 1884 under the ComiDanies Acts, 1862 to 1893, as a coy with liability limited by shares. And WHEREAS the nominal capital of the old coy is 300,000/., divided into 10,000 preference shares of 10/. each, and 20,000 ordinary shares of 10/. each. And whereas a coy (hnfter called "the new coj^") is about to be formed and incorporated under the Companies Acts, 1862 to 1893, as a coy with liability limited by shares, and intended to be called "The Coy, Limtd." And whereas the memdm and arts of asson have been prepared, and are approved of by the parties hto. And whereas the capital of the new coy is to be 400,000/., divided into 400,000 shares of 1/. each. 1152 RECONSTRUCTION. [ChAP. XX. Form 808, And whereas it is desirable to make provision for the exchange of shares in the old coy for shares in the new coy, as hnfter provided. Now IT IS HEREBY AGREED as foUowS : 1. When this agreemt becomes absolute, the sd A. and each holder of shares in the old coy who shall have ratified this agreemt shall exchange, his or her, the preference and ordinary shares in the old coy for shares in the new coy, as hnfter provided. 2. The conson for the sd exchange shall in each case be as follows ; that is to say : — Sixteen fully paid-up shares in the new coy of 1/. each for every preference share in the old coy, and twelve fully paid-up shares in the new coy of 1/. each for every ordinary share in the old coy. [3. In order effectually to ratify this agreemt, each holder of shares in the old coy who desires to ratify the same must, after the incor- poration of the new coy, sign and deliver to the Bank, Limtd, -^Q_ — ^ Street, E.G., the bankers of the new coy, a note of ratifi- cation and applicon in respect of the preference shares and another in respect of the ordinary shares in the old coy of such holder, and such applicons shall be framed in the terms of the forms set forth in the schedule hereto, and must be accompanied by the certificate therein referred to.] 4. When this agreemt becomes absolute, the new coy shall allot to the sd A. and to each holder who shall have ratified the same as afsd the fully paid-up shares in the new coy to which such holder shall be entld in exchange as afsd, and thenceforth such holder shall hold his or her shares in the old coy in trust- for the new coy, and shall transfer such shares to the new coy or its nominees if and when required. 5. This agreemt shall become absolute when and so soon as it shall have been ratified as afsd by all the holders of the issued preference shares in the old coy, and by all the holders of tlie issued ordinary shares in the old coy, or by such proportion of the holders of each class afsd of the sd shares, not being less than nine-tenths in value, as l]^Q s(l shall consider sufficient, and shall have been adopted hj the new coy, and if it shall not have been so ratified and adopted before the day of , it shall on that day become void. 6. In conson of the premises, the said B. shall use his best endeavours to procure the incorporation of the new coy and the ratifi- cation and adoption afsd. 7. Each ratifying shareholder afsd shall be deemed to authorize the said A., on behalf of such ratifying holder, (a) to enter into a supple- mental agreemt with the new coy when incorporated for the adoption by the new coy of this agreemt and for the discharge of the sd A. from all liability hereunder, and for the identification of the shares to bo allotted to such ratifying shareholder; and (b) to sign a transfer in uccordanco with clause 4 hereof. 8. Before issuing any of the paid-up shares afsd, the new coy shall FORMS. 1153 cause a sufficient contract, within the meaning' of s. 25 of the Com- Form 808. panics Act, 18fi7, to be filed with the Registrar of Joint Stock Companies. As witness the hands of the parties hto tlie day and year first above written. [The Schedule ahove referkkd to. Applic'(tion Form in nspecl of Prff enure S/mrrx. The Coy, Limtp. To the Coy, Limtd. Gentlemen, — Having lodged with your hankers m}' certificate for preference shares in the Coy, Limtd, I hby ratify the agreomt of the day of , 1895, a copy of which is indorsed hereon, and I request you, pursuant to that agreemt, to allot me fully paid-up shares in your capital (being at the rate of shares for every share held by me in the Coy, Limtd), and I agree to accept such shares and to sign a transfer of all my preference shares in the Coy, Limtd, if and when called on so to do. Signature Name (in full) Address Occupation Date ] The usual jjlan is to omit clause 3 and the schedule, and to send out printed copies of the agreement with words at the foot, " I ratify the agreement of which the above is a copy," and space for a signature, and then ask the member to sign and return the form. The New Coy, Limtd. Form 809. Circular as to distribution Dear Sik or Madam, As you are doubtless aware, the following resolutions were ^°^ specie passed at the extraordinary general meeting of the Coy, Limtd, lield on the 4th day of August, 1895. \_Resolution to tviiid-up and to distribute shares m New Coif in specie, e.g.., see Form 390, p. GG8.J As a holder of ordinary shares in the Coy, Limtd, you are entld to call for the allotment to you or your nominee or nominees of fully paid ordinary shares of 1/. each in the capital of the New Coy, Limtd, and, as you will see from the above resolutions, your election must be made within twenty-one days from the passing of those resolutions. The agreemt providing for the issue of the shares referred to as fully paid has been filed with the Registrar of Joint Stock Cos. Annexed to this circular is a form of request for allotment, and we s-hall be obliged by your signing it and forwarding it to us, accom- panied by the certificate for the shares now held by you, not lator than p. 4 E 1154 RECONSTRUCTION. [Chap. XX. Form 809. the 25tli day of August, 1 895, and the shares will then be allotted in due course in accordance with your wishes. Yours obediently, ]^^][^ I Liquidators. Form of Request for Allotment. To the liqrs of the Coy, Limtd (in liquidation), and to the directors of the New Coy, Limtd. G-ENTLEMEN, I, the undersigned, of , a shareholder in the Coy, Limtd (in liquidation), request that the fully paid-up ordinarj' shares in the New Coy, Limtd which I am entld to call for under a special resolution of the Coy, Limtd, passed on the of , may be allotted in manner following : — Names of Allottees. Addresses. Number of Shares to be allotted. Dated this day of Signature In the case of shares held by more persons than one, each person must sign this request. Where the shareholder inserts in the above table the name of any nominee or nominees besides or instead of his own, such nominee or nominees must sign the following request : — And I, the undersigned, request the directors of the New Coy, Limtd, to allot to me the fully paid shares set opposite my name in the above table, and I authorize the coy to insert my name in their register of members in respect of such shares. (Signatures of nominees . Dated this day of . We request the directors of tlie New sd shares as above. Co}^, Limtd, to allot the — I Liqrs of the — ( Coy, Limtd. 1155 AMALGAMATION. CHAPTER XXI. INTRODUCTORY NOTES. The word "amalgamation" as used in relation to companies under Meaning of the Act of 1862, lias no teclmical meaning-. In its jjopular sense it ramation"^^ " includes such transactions as below. See the Indemnity Case (Albert Arbitration), Eeilly, p. 1 7, in which Lord Cairns used the term in the popular sense ; Stace and Worth's Case, 4 Ch. 682 ; Ei^a Case, 32 L. J. Ch. 207 ; Dout/ati's Case, 8 Ch. 545 ; Wynne's Case, 8 Ch. 1003; Anylo-Austrian v. British, Sfc. Co., 3 Giff. 521 ; 4 De G. F. & J. 341 ; Lindley, 3rd and subsequent editions ; and a transaction is not the less an amalgamation because the terms purchase and sale are used (see Stace and Worth's Case; Dougan's Case; and Wynne's Case, ubi supra) ; nor is it the less a sale because it is called an amalgamation. G. W. R. Co. V. Commrs. of I. R., (1894) 1 Q. B. 507. In the following jiages the words "amalgamation" and " amalga- Meaning of mate" are used indiscriminately to describe two operatioiis : — f^nmxd^ (a) The transfer of all or some part of the assets and liabilities of P^o^s- one or more than one existing company to another existing company, of which all the members of the transferring com- pam^ or companies become, or have the right of becoming, members. (b) The transfer of all or some part of the assets and liabilities of two or more existing companies to a iiew companj', of which all the members of the transferring companies become, or have the right of becoming, members. It will be observed that (b) excludes a reconstruction as already described {supra, pp. 1125 et seq.), which is the transfer of the assets of a single existing company to a new company. See Hooper v. Wester?i Counties, S^-c. Co., 41 W. E. 86. The word "amalgamation," as used in these pages, moreover, gene- 4 E 2 1156 AMALGAMATION. [Chap. XXL Advantages of amalgama- tion. By special Act. Under s. 161. rail}' involves the notion of the dissolution of the transferring company or coni2:)anies. A large company is generally in a much better position to carry on business successfully than a small one. The expense of management in a small company is relatively much more burdensome than in a large one, and in order to keep it down a small company is, veiy commonl}', obliged to employ directors and other officers and agents of inferior business capacity. Again, the shares of a small company are not uncommonly unsaleable, except pex*haps in a local market where the demand may be limited and uncertain. This places a small company at a disadvantage : it may, and often does, find considerable difficulty in i^lacing its original caj)ital, and still greater in raising any further share capital. And not only has a small company difficulty in placing share capital, but it has little or no chance of borrowing on debentures. Hence it is that the amalgamation of small undertakings has for some time been making considerable progress. Moreover, there is in many cases another great inducement to amalgamation, namely the desire to terminate competition. However good competition may be for the jDublic, it is very often ruinous to the parties engaged in it. An amalgamation may be effected : — (1.) By special Act of Parliament. This mode is not very often adopted by companies formed under the Acts of 1862 and 1867. See Chap. XXII., infra. (2.) Under sect. 161 of the Comi^anies Act, 1862. This is the mode generally adopted. (3.) Under a power in the memorandum of association to sell the undertaking for shares in another company (see Form 98, supra, p. 306), combined with a power in the articles to divide assets in a winding-up in specie. Now that the validity of a power to sell the undertaking is established {supra, p. 220), it is not at all uncommon to effect an amalgamation of several companies by forming a new company, which acquires the undertakings of the old comjianies in exchange for shares, and then later on the old companies go into liquidation and distribute the shares. This j)lan is specially applicable where the new company is going to offer its capital, or some part of it, for public subscription, as the arrangements for amalgamation can be made conditional on the new company floating, and then, if it does not float, the agreements can be determined and the old companies can go on as before. However, this course is not always open, for it is not uncommon to find that there is not suflicient power to sell the business. INTRODUCTORY NOTES. 1157 Amalgamation under sect. 161 [supra, p. 1125) of the Companies Act, 1862. Tliore are two modes of offpctiny' an amalg-aniation iiudei" sect. 161 Two modes of the Act of 1862. Thus:- ' ':^^^ tioii uiidtT 8. 161. (a) Company A. and Company B. desire to amalgamate. Com pany A. passes a special resoluti(jn to wind up, appointing j^ode {a\. liquidators, and directing them to sell the assets to Company B. in consideration of shares in that company to be allotted to the members of Company A. Tlie liquidators act accord- ingly, and Company A. is then dissolved. {b) Company A. and Company B. desire to amalgamate. Company Mode (*). C. is formed to acquire their assets and liabilities, and to carry on the amalgamated business. Eacli of tlio old com- panies then passes a special resolution as in the last case, the li(juidators carry the sale into effect, and the old companies are tlien dissohod. Mode (a) can only l)e adopted where one of the companies desiring "When above to amalgamate has power to ac(|uir(> the proi)erty and liabilities of the °^° T^ other or others. See supra, p. 302. Mode (i), on the other hand, is available in every case, and is often adopted, even where there is an ample power to purchase, for the circumstances of the companies, or the terms of the amalgamation, very commonly render the establishment of a new company necessar}-. It may be convenient here to follow closely the course of proceed- Proceedings ings upon an amalgamation in accordance with these two modes. And, ^^j^^ ^ ^^' first, as to mode (a). We will suppose that Company A. and Company B. desire to umal- Mode((7). gamate ; that the directors of Company B. have fuU power to purchase the assets of Compam'- A. ; and that there are sufficient unallotted shares of Companj- B. at the disposal of tlie directors thereof. The first thing is for the directors of the two companies to arrange Terms, the terms on which the sale is to be made. They must settle whether the consideration is to consist exclusively of shares, or partly of shares and partly of cash, whether the shares are to be fully or partly paid up, whether Company B. or the liquidator of Company A. is to pur- chase the interests of dissentients, and satisfy- the debts of Company A., whether any of the directors of Company A. are to become directors of Company B., and whether Company B. is to compensate any of the officers of Company A. for loss of office, and so forth. When the terms are settled they will be embodied in a conditional Agreement, agreement. See infra, Fonn 810. Notice of the arrangement is then given to the members of Company A. hy the directors thereof, and meetings are called to pass a special resolution to wind up, appointing a liquidator, and directing him to adopt the agi-eement. The sj)ecial resolution having been passed, the liquidator adopts the agreement 1158 AMALGAMATJON. [Chap. XXI. Mode (*). How debts of transferring company to be paid. Where trans- forrin^r com- pany to pay its own debts. When special rcBolution of aud carries it into eft'eet. Coiupauv 13. will allot the shares as provided by the agreement ; the dissentients will be satisfied as arranged. The debts of Coniiiauy A. Avill be paid aud liquidated by Company B., or the liquidators of Company A., according to the arrangement. As soon as may be, Compau}^ A. will be dissolved. It will be observed that the proceedings are very similar to tliose upon a reconstruetiou. See supra, p. 1125 et seq. If the amalgamation is to be effected by a sale to a new company according to mode {b), the terms of amalgamation will be settled between the directors of the companies proposing to amalgamate, and embodied in an agreement made with some person on behalf of the intended new company. Each of the single companies then passes a special resolution as above, and the subsequent course will be the same as above upon amalgamation according to mode (a). An amalgamation according to mode {b) closely resembles a recon- struction by means of s. 161, except that it involves the reconstruetiou of two or more companies instead of one. See srqjra, pp. 1125 et seq. In every case of anmlgamation, the question arises whether the debts, costs of winding up the selling company, and the obligation of satisfying the dissentient members of that company, are to be borne by the purchasing company, or not. The chief advantage of thi-owing the burden on the purchasing company is that the members of the selling company, who will be called on to sanction the arrangement by special resolution, are more likely to do so if they know precisely how many shares in the piu'chasing company they are to receive, but this cannot be if the selling company is to bear the burden. On the other hand, the purchasing party may not be willing to accept a burden which is more or less indefinite : it may prefer to purchase the assets for a fixed siun. However, in practice the burden is almost always thrown on the purchasing company. Where the burden oi paying the debts, costs of winding up, and obligation of satisfying dissentient members of the selling company or companies is not to be thrown on the purchasing company, the agreement with the purchasing company will be for the sale of the assets in consideration of a definite number of shares in the purchasing company to be allotted to the liquidators of the selling comj^any, or as they direct, and the special resolution of the latter company, besides providing for the winding up, appointment of liquidators, and adoption of the agreement, will direct the llqui)y autho- rized, pursuant to s. 161 of the Companies Act, 1862, to adopt the sd agreemt and carry the same into effect, with such, if any, moditication as the sd liqrs may think expedient. 1. That it is expedient to effect an amalgamation of tliis coy witli Form 812. the A. Coy, Limtd, and with the B. Coy, Limtd. Resolution for 2. That the following draft agreemts, submitted to this meeting, the amalga- 1 ^ _ mation of two namel> . companies (a) A draft agreemt, dated, &:c., and expressed to be made between ""'ith a third. N., on behalf of the A. Coy. Limtd, of the one part, and this coy, of the other part : 1164 AMALGAMATION. [Chap. XXL Form 812. (b) A draft agreemt, dated, &c., and expressed to be made between ~ E., on behalf of tlio B. Coy, Linitd, of the one part, and this coy, of the other part : be and they are hby approved, and that the directors be and they are hby authorized to execute agreemts in the terms of the sd drafts resj^ly, and to carry the same into effect. 3. That the capital of this coy be increased to 1., by the cr<'atitjn of new shares of /. each. 4. That the directors be and they are hby authorized, upon the adojition of the sd first-mentd agreemt by the liqrs of the A. Coy, Limtd, with the sanction of a special resolution of that coy, to appoint and , two of the present directors of the sd coy, to be directors of this coy. 5. That. [^Swiilar resolution as to B. Coy.^ 6. That the following clause be substituted for clause of the arts of asson of this coy, namely: "The number of directors of the coy shall not exceed twelve, and shall not be less than seven." In the above case three companies. A., B., and C. desire to amalgamate. The transaction is to be effected by the winding-up of A. and B., and sale to C, ■which is to carry on the amalgamated business. Company C. has issued all its shares, and the capital must therefore be increased in order to effect the amalgamation. One of the terms of the arrangement is that two of the directors of each of the A. and B. companies shall be appointed directors of the C. company. In such a case one mode of effecting the transaction is as follows : — Two draft agreements between the A. and B. companies, respectively, and the C. company will be prepared. They will be in the form of that given mpra, p. 1162, mutatis mutandis. These drafts will be submitted to the C. Company, which will pass the above special resolutions. The A. and B. companies will then pass special resolutions as above, p. 1163, and the liquidators will in due course adopt the agreements, which will be earned into effect. The clause in the agreements as to the appointment of the directors will be as follows: — " Upon the adoption of this agreement by the liquidators of the [A] company, with the sanction of a special resolution of that company, and , two of the present directors thereof, shall be appointed directors of the C. company." This clause can of couise be modified so as to enable the A. company in general meeting to select the two directors, or to enable the directors of that company to do so. Form 813. TtcHolution for nmalgama- tion to be effectwl by the formation of a new com- pany. Tliat. \^Amal(j amotion expedient, supra, p. 1163.] 1. Tliat, &c. [ irmf/ up and appointment ofliqrs.~\ 2. Tliat the sd liqrs bo and they are liby authorized to consent to the registration of a new coy to be named " The A. and B. Coy, Lijiitd," with a iiiemdm and arts of asson, which have l)een already prepared willi the privity and approval of the directors of this coy. 3. That llic draft agreemt expressed to be made between the liqrs FORMS. 116' of this coy of the first part, this coy of tho second part, the liqrs of the Form 813. B. Coy, Liintd, of the tliird part, the ]?. Coy, Tjiintd, of the fourth part, and the A. and B. Coy, Limtd, oT llic liftli part, he and the same is lihy approved, and that the sd li([r.s he and tliey are hby directed to enter into an ag-rcement on hehall' of this coy in tlie terms of the sd draft, and to cany tlie same into offoct. In this case coinpauy A. and oompany B. desire to amalgamate, and for divers reasons it is necessary to effect tliis by tlie f(jrmation of a new company to absorb the old ones. Supra, p. 115S. An agreement, expressed to be made between the A. and B. companies and the liquidators thereof respectively, and the new company, will be prepared, or there may be two separate agreements each similar to that, supra, p. 11G2. Each of the A. and B. companies will then pass a second resolution as above. Immediately after tho passing of the resolution the liquidators will sign the proper consent authorizing the registratiou of the A. and B. Company. Avhich will be forthwith incorporated. For Form fif Consent, see supra, p. 710. The primary object of the A. and B. Company, as set forth in the memor.niduiii, will be : — " To purchase or otherwise a(;quire, and to undertake all or any part of the business, property, assets, and liabilities of the following companies, namely : — The A. Company, Limited, The B. Company, Limited, (U- either of them, upon such terms and conditions, and subject to such stipulations as may be agreed on." The memoi'andum will also contain all requisite objects for carrying on the amalgamated business. The articles will authorize the directors to execute the agreement. As soon as may be after the registration of the new company, the agreement will be executed by all parties, and earned into effect. Reconstruction under the Joint Stock Companies Arrangement Act, 1870. It is not proposed in this part of the present work to deal with reconstruction cases under the above Act, inasmuch as the subject falls more properly under the heading of Winding-Up, and is dealt with in detail in Part II. of this work which relates to winding-up. It may, however, be convenient to state shortly the procedure under the above Act, and to give some notion of the schemes of arrangement commonly passed thereunder. As to the Procedure. The company has, in the first instance, to be placed in liquidation either by an effective resolution to wind up voluntarily or by a compulsory order made by the Court. The next ste^j is to prepare a scheme of arrangement for the reconstruction of the company, and to obtain an order of the Court directing meetings to be held of the various classes of creditors whom it is desired to bind, and ahso of the con- tributories. These meetings must in due course be held, and the requisite resolutions approv- ing of the scheme must be passed by the required majorities. The meetings having been held and the resolutions so passed, application must then be made to the Court for an order sanctioning the scheme, which, when so 1166 AMALGAMATION. [CuAP. XXT. sanctioned, becomes binding on the creditors and oontiibutories, aud the old com- pany and its liquidator. The next step is to form the now company (if the scheme involves such formation), and then the requisite agreement and other documents must be executed, and the reconstruction scheme carried into effect. As to the ehariwter of the SchnncK sanctioned. In many cases a scheme has been sanctioned providing for the formation of a new company ; for the transfer of the undertaking of the old company to the new company ; for the issue by the new company to the debenture -holders of the old company of debentures or debenture stock of the new company, payable at a more distant period ; for the undertaking by the new company of the other debts and liabilities of the old company ; and for the issue to the shareholders of the old company of shares in the new company, with a liability thereon of so much per share. The scheme very commonly provides for payment of the debentures or debenture stock which are to be issued to the debenture-holders or debenture stock -holders of the old company at the expiration of a term of ;>, 10, 20, or 30 years. Sometimes there are considerable arrears on the debentures of the old company, and these are in some cases extinguished altogether, and in some cases are satisfied by the issue of debentures or debenture stock, or by the issue of paid-up shares. Where a company is loaded with debentures, the scheme very commonly provides for the creation by the new company of a new series of debentures or debenture stock, ranking in priority to the debentures or debenture stock which are to be given to the debentui'e or debenture stock-holders of the old company. Sometimes the debenture-holders of the old company receive preference shares, or even ordinary shares, in the new company in satisfaction of their debentures, and sometimes they receive only a composition, whether in shares or debentures, in satisfaction of their claims. Sometimes the debentures or debenture stock given to the debenture or debenture stock-holders of the old company carry a right to vote at general meetings of the new company, and a right to appoint and remove one or more directors. This right is sometimes to subsist until the debentures or debenture stock are redeemed, and is sometimes to subsist only for a term, or until the profits arrive at a certain figure. As to the ordinary creditors, the scheme sometimes provides for payment of the , ordinary creditors in full in cash, especially where they are of small amoimt, or the non-payment would be detrimental to the business. Sometimes thej' are given a composition of so much in the pound, payable in cash either by instalments or otherwise. Sometimes they are given debentures or debenture stock, or preference shares or ordinary shares. In some cases the scheme is varied so as to provide for satisfaction of the difi^erent classes of creditors as above, and subject thereto for a stay of the winding-up, so that the company may resume business without the formation of any new company. See further Part II. of this work, Sect. IV., where forms of schemes aud of notices, orders and agreements will be foimd. 1167 SPECIAL ACTS CHAPTER XXII. INTRODUCTORY NOTES. Companies incorporated imder the Companies Act, 1862, occasionally Application find it necessary to apply for special Acts of Parliament. utidei^the^Act Of those which so apply, a considerable number are companies of 1862. formed to carry on gas or water works, for such companies generally require Parliamentary powers in order to carry on business in the most effective manner, and although in some cases a provisional order of the Board of Trade, made under the Gas and Water Facilities Acts [^supra, p. 350], and duly confirmed by Parliament, may be sufficient, there are many cases where such an order cannot be obtained, or where an application to Parliament in the oi'dinary way is deemed preferable. But application by companies other than gas and water are by no lustances. means uncommcm, especially in the following cases : — (a) Wliere it is desired to obtain compulsory powers for the accpii- sition of laud or power to acquire land from persons who can only sell under the Lands Clauses Consolidation Act, 1845. (b) "Where it is desired to obtain general powers to open roads and streets, e.ff., for the purpose of laying tubes, pipes, or wires. (c) Wliere a company desires to acquire special privileges, e.c/., an exclusive right to establish a market or a coal exchange. (d) Where a company desires to obtain an extension of its objects; and, for some reason, proceedings under the Companies Memorandum of Association Act, 1890 (stipra, p. 990), are not likely to be successful. (e) Where a company desires to create preference shares ranking in priority to existing preference shares, or to issue debentures ranking in priority to existing debentures, and is unable to do it except with the authority of Parliament. (f) "\t\niere a company desires to capitalize arrears of preference dividend, or to divide its issued capital into preferred and deferred sections, or to obtain power to reduce its capital without proceeding under the Acts of 1867 and 1877. (g) Where two or more companies desire to amalgamate without winding up. 1168 SPECIAL ACTS. [Chap. XXll. Re-incorpo- ration. As to injunc- tions restrain- ing applica- tions. As to injunc- tions to restrain ap- plication of company's funds in pro- moting bill. Powf-r in jiif-moran- diini. Sometimes where a company incorporated under tlio Act of 1862 applies to'-Parliament for a private Act it takes the opportunity of procuring the dissolution of the company and the re-incorporation of its members as a company subject to the provisions of the Companies Clauses Consolidation Act, 1845. A great many gas and water com- panies have done this. Where an application to Parliament is contemplated, it must bo considered whether there is any danger of the application being im- peded by injunction. Primd facie every person (including a company) has a right to apply to Parliament upon any subject he pleases, but the High Court of Justice, by virtue of the jurisdiction in personam inherited by it from the Court of Chancery, can in a proper case restrain a person from making or proceeding with an application to Parliament, Nevertheless, to justify such an interference, a very special case must be made out, and it has been said that it is difficult to conceive or define what are the cases in which it will be proper for the Court to exercise the jurisdiction. See further Steele v. North Metropolitan Ry. Co., 2 Ch. 237; In re London, Chatham and Dover Co., 5 Ch. 671; Telford Y. Metropolitan Bd. of Works, 13 Eq. 575. In these circum- stances there is rarely any danger of an injunction being granted to restrain the application. Although, however, the Court will not, except as befoi'e mentioned, restrain a company from applying to Parliament, it will, even at the instance of a single dissentient member, restrain the application of the funds of a company in defrapng the expenses of obtaining an Act altering in any way the constitution of the company. Munt v. Shrews- bury and Chester By. Co., 13 Bea^'. 1 ; Simpsoti v. Denison, 10 Ha. 51 ; Great Western By. v. Bushout, 5 De G. & Sm. 290 ; Vance v. East Lane. By. Co., 3 K. &: J. 50 ; Mathias v. Wilts and Berks Canal Co., "W. N. (1876) 91 ; Caledonian Co. v. Soltvay Junction Co., 32 W. E. 164; 49 L. T. 526. In the case last mentioned the Court refused to restrain the company- from applying to Parliament, but the company had to give an undertaking not to apply any of its funds in promoting the bill. Accordingly if with the ajiproval of the majority of the members the company's name is to be used in applying to Parliament for an Act to alter the constitution of the company, those who use it must be pre- pared themselves to undertake the expenses. If the bill becomes law the usual \^infra, p. 1172] clause will have been inserted rec|[uiring the company to pay the expenses, but if it does not become law the expenses cannot be paid out of the company's funds. The directors very commonly undertake tlio risk in such a case, or if necessary a guarantee fund is subscribed by those members who support the application. Of course tlie Court will not restrain the application of the funds in promoting such a ])ill where the memorandum of association of the company gives the requisite power. See supra, p. 307. And this INTRODUCTORY NOTES. 1169 being so it is desirable, where a company is to bo registered under the Act of 1862, and an application to Parliament is in contemplation, or is even remotely pro})a})lo, to give ample powers by tlio mcmorandnm of association. The procodiiro iu regard to private bills is dcscribf-d in May (m Par- Procedure in liamentary Practice, where full information on tlie sul)ject will bo I'^rliameut. found. It may, however, be convenient hero to give a brief outline of the procedure in the cjise of a l>ill promoted by a company regis- tered under the Act of 1802, and in so doing the writer begs to acknowledge his obligations to tlio work above referred to. Where it is desired to obtain a private Act it is necessary to comply Pie^imii ary with certain preliminaiy conditions imposed by the standing orders of '^°^'^i*'o°''' each .of the Houses of Parliament ; for although indulgence is some- times granted where these orders have not been complied with, it is only to be obtained in special cases. The following are short particulars of some of the principal standing- orders which a company ajiplying for an Act has to comply with : — (a) Where it is intended to apply for leave to bring in a bill for incorporating, regulating, or giving powers to a company, and also in most other cases where bills are promoted by companies formed under the Act of 1862, notices containing the prescribed particulars have to be advertised in the Gazette and sometimes in local papers in the months of October or November immediately preceding the application for the bill. (b) On or before the 21st of December the petition for leave to bring in the bill, with a declaration in the prescribed form and a printed copy of the bill annexed, must be deposited in the Private Bill Office. The petition should be superscri})ed "To the honourable tlie Commons of the United Kingdom (tf Great Britain and Ireland in Parliament assembled," and in the case of a company must bo imder its common seal. When the time for depositing documents and complying with the Memorials other preliminary conditions has expired, persons who desire to oppose ^lo-^orders^ the bill can deposit in the Private Bill Office memorials complaining of not complied non-compliance with any of the standing orders. ^' " In due course the petition comes on for examination before one of Examination, the examiners, who ascertains on behalf of each House whether t]i(> standing orders of that House have been complied with by th(> ])V()- moters of the bill. The next step is to present the petition to the House : this must be Presentation done by a member, and if the standing orders have been complied °. P with, the bill is at once ordered to be brought in. The bill is presented by being deposited in the Private Bill Office, and the names of the members ordered to prepare and bring in the bill are printed on the back. P. 4 F 1170 SPECIAL ACTS. [CllAr. XXII. First readini When special resolution usually passed. Opposition in committi^e. stoniii. Referees. C'lnmittee. Report. Third read- ing. The bill wlien brought in will be road a first time, and will then, if necessaiy, be referred to the examiner, in accordance with the standing orders, to report compliance with the orders, which require that : — " In the case of a company formed or registered under the Companies Act, 18C2 : The biU, as introduced or proposed to be introduced in this House, shall be approved by a special resolution of the company." A copy of such special resolution .... shall be deposited in the Px'ivate Bill Office. Tho spoeial resolution required by this standing- order is usually passed in the month of November or December immediately preceding the application, and is in most cases as follows : — " That the bill submittel to this meeting, intituled, ' A bill intituled an Act to, &c.,' be and the same is hereby approved, subject to such additions, alterations, or variations as Parlitiment may think fit to make therein, and the directors shall sanction.'' Persons who desire to oppose the bill can present petitions against it by depositing the same in the Private Bill Office, within ten days after the first reading. Sometimes liberty is given to present a petition after the expiration of the prescribed period. Whether a petitioner is or is not entitled to be heard against a bill is in many cases a question of great nicety. The rides on the subject will be found in May's Parliamentary Practice. All questions of locus standi are decided by the Court of Eeferees. With regard to the Committee : It lies with the promoters to prove to the satisfaction of the Com- mittee the preamble and the propriety of the provisions contained in the bill. The promoters of the b)ill, and such of the petitioners (if any) against it as have been allowed a locus standi, will be heard by their counsel or agents ; if necessary, witnesses will be examined and cross-examined ; and if requisite, amendments will be made. In due course the Committee will rej)ort the bill to the House. The bill subsequently comes on for third reading, preparatory to its being sent to the other House. When the bill has been read a third time it goes to the other House, and after passing through its various stages there tlie Eoyal Assent will be given, and thereupon the bill becomes an Act of Parliament. 1171 SPEC TAT. ACTS The South Wales Colliery Coy (Limtd) Act, 1887. 50 & 51 Yict. c. clxxi. Act extending Objects of a Coij formed tinder the Act of 1802. "Whereas the South Wales Colliery Coy, LiDitd, was incorporated (ni Form 813. the 15th day of February, 1864, under the Companies Act, 1862, and the objects for which the coy was established are defined in clause 3 of the memdm of asson as follows, &c. : — And whereas the coy are desirous of obtaining- powers to soli or lease their undertaking in whole or in part, and their ppty or any j)ortion thereof : And whereas the coy are at a disadvantag'c in carrying ou tlieir business by reason of not having power to purchase and deal in the products of other collieries and iron ore, and the}- are desirous of obtaining further powers for those purj)oses, and it is expedient to alter the memdm of asson in manner hnfter set forth : And whereas the purposes afsd cannot be effected witliout tlio authority of Parliament : May it therefore please your Majesty, &c. 1. This Act may be cited as the South Wales Colliery Coy (Limtd) Short title. Act, 1887. 2. The sd recited third clause of the memorandum of association of Amendment the coy shall, as from the date of this Act, be cancelled, and the °^ memo- following clause shall be substituted for the same, viz. : — • association. The objects for which the coy is established are : — To piu'chase or take upon lease, or otherwise acquire, (j^uarries, seams of coal, ironstone, or other minerals, coal mines, j)its, or collieries in Monmouthshire, South Wales, or elsewhere in Great Britain ; to purchase or take upon lease, or otherwise acquire lands, tenements, and hereditaments convenient to be held therewith, or the liolding of which may be necessary or conducive to the purjioses of the coy ; to search for, work, and get measures of coal, ironstone, or other minerals for export and home consumption ; to construct furnaces, coke-ovens, tramway's, wharves, docks, offices, and all necessary buildings ; and to purchase, hire, or build and repair ships, steam vessels, and boats for the purposes of the coy ; and to do and cari-y ou 4f2 1172 SPECIAL ACTS. [Chap. XXII. Form 813. Saving for acts before the com- mencement of this Act. Act to be reoistered. Expenses of Act. aU such other matters and things as are incidental to or which may be deemed desirable in connection with all or any of the foregoing objects : To sell, lease, sub-lease, assign, or otherwise deal with or dispose of the undertaking in whole or in part, and all or any parts of the colliery, minerals, lands, hereditaments, and real and per- sonal estates, leases, ppty, plant, and effects of the coy, and from time to time to enter into and carry into effect any contracts or agreemts for the purposes afsd, or any of them ; to purchase, sell, and deal in coal and coke, and iron and other ores. 3. Nothing in this Act contained shall affect the validity or invalidity of anj-thing done or pending before or at the commencement of this Act. ^ 4. The coy shall forward to the Eegistrar of Joint Stock Cos a printed copy of this Act, and it shall be recorded by him, and if sucli copy is not so forwarded within three months from the passing of this Act, the coy shall inciu' a penalty not exceeding 10^. for ever}" day after the expiration of those three months during which the copy is omitted to be forwarded, and every director and manager of the coy who knowingly and wilfully authorizes or permits such defaidt shall incur the hke penalty, and every penalty under this section shall be recoverable summarily. 5. The costs, charges, and expenses of preparing, applying for, obtaining, and passing this Act shall be pd by the coy. The above is an example of the many Acts which have from time to time been passed for extending or altering the objects of .companies under the Act of 1862. Since the Companies (Memorandum of Association) Act, 1890, came into operation, supra, p. 990, such Acts wUl be less common, for Parliament will rarely intervene when what is desired can be carried through without its assistance ; but cases will certainly arise ia which a company will want something more than an extension of objects, or will want an extension which the Court, having regard to paragraph 5 of sect. 1 of the Act, has no power to grant, and in such cases the assistance of Parliament will still be required. The following Acts, copies of which can be obtained from the Queen's printers, or from the publishers of this work, furnish various examples of cases in which the inter- vention of Parliament has been obtained : — Amalgama- tion of tramway compaiiieH (consent of general mcetingfl) . The London Tbamways Coy, Limtb (Purchase) Act, 1873. 36 & 37 Vict. c. cciv. This Act empowered several tramway companies to sell and transfer their under- takings to a new company registered under the Act of 1802. The sale was not to take l)lace unless it was approved by tlirec-fifths of the shareholders of the selling company present in person or by proxy at a general meeting, and the sale was to be carried into effect by a conveyance, and the new coy was thereupon to become entitled to the rights, powers, and privileges of the old companies. FOEMS. 117'3 The Cextral Argentine Rail-vtay Coy (Limtd) Act, 1889. Argentine railway. .'52 & 53 Vict. c. li. Ill this case the comjjany liad made a iirovisional agreement with auotlier company to take a lease of the undertaking of such company on certain terms. Doubts had arisen whether the powers in memorandum of first-mentioned company were sufficient, and accordingly the Act extended and elaborated the objects of the company and confirmed the agreement. The BiHGHTox AQUARiuii and I.MrRovEMENTS Act, 1869. Aquarium. .32 & 33 Viet. c. Ixxxviii. The company was originr.lly formed with memorandum and articles. By the Act it was re- incorporated as a Parliamentary company, and all the assets, rights, and liabilities of the dissolved company were vested in the new company, and that com- pany was given S23ecial powers in regard to the construction of the Aquarium and the making of roads, &c. It was also empowered to make and enforce bye-laws. The Scarbohougk Aquarium axd Improvement Act, 1875. Another. 38 & 39 Vict. c. cxlix. This Act empowered tlie company, which was formed under the Act of 18G2, to construct the aquaiium and to make bye-laws. It did not re- incorporate the company; it was left under the Act of 1862. The Westminster Palace Hotel Company's Act, 1864. Hotel company. 27 & 28 Vict. 0. Ixvi. This company was formed imder the Joint Stock Companies Act, 1856. It had let a considerable portion of the hotel to the Secretary of State for India. That lease was impeached in Siin2)soii v. The Westminster Pcdace Hotel Co., 8 H. L. C. 712 ; but it was hold not to be ultra vires. Apparently, however, it was considered desirable to obtain wider powers for dealing with tlie projaerty of the compauj', and accordingly the com- pany was, by this Act, empowered to lease for twenty-one years, and to make arrange- ments as to the occupation of any of its premises, and to acquire additional land in the neighbourhood, and also to sell and dispose of any of its lauds with the sanction of a general meeting. The Telegraphic Construction and Maintenance Coy (Limtd) Extension of Act, 1883 (46 Vict. c. xv). objects. The India-Eubber, &c. Coy (Limtd) Act, 1884 (47 & 48 Vict. c. ci). The Standard Bank of British South Africa (Limtd) Act, 1881 (44 & 45 Vict. c. cxx). {All exteiision of objects.) The Patriotic Assurance Companies Act, 1890. Another. 53 & 54 Vict. c. clxxiii. This company was originally constituted by deed of settlement in 1824, and it was subsequently registered as an unlimited company under the Companies Act, 1862. It became desirable to extend the objects of the company, and to confirm certain trans- actions which had been entered on, and to sub-divide the shares. Accordingly the Act, by sect. 5, defined the objects of the company, and invested it with full power to cany 1174 SPECIAL ACT.S. rCnAP. XXII. on life, maiiue, tire, and re-iusuraiice, and to grant and sell annuities, to purchase and deal in reversioiinry interests, to acquire jiroperty and assets, to purchase and acquire the businesses of other persons, or companies carrying on or owning any business which the company is authorized to carry on, jjowcr to invest, power to compromise, power to deal with its property ; and it sub-divided the shares, authorised the repayment to the members of a small sum per share so as to make tl)e capital jiaid up an even sum, jjro- vided for the cancellaticn of certain shares which had been jjurchased in 1854, and preserved all rights of existing jci'editors as if the Act had not been passed. Extension of COMPAGNIE GrEXiRAI.E DKS Asi'itALTES DE FllANCE (LlMITEl)) ACT, 1 8X'E CoMrA^'Y (Limited) Act, 1890. 53 & 54 Vict. c. clxxii. This company was originally formed by deed of settlement and was registered under the Companies Act, 1862. The Act invested the company with power to acquire and carry on the business of any company carrying on either in or out of the United Kingdom business of a description similar to that for the time being carried on by the company, and to undertake and perform any contracts for acquiring assets or for undertaking or discharging liabilities of any company carrying on such business as aforesaid. To manage, sell, lease, mortgage, or otherwise deal with or dispose of any real or personal property for the time being belonging to or held by or in trust for the company. To do all or any such things as aforesaid, through any corporation, or company, or person, as agent or agents for the company, or by the company as agents for any coi-poration, company, or person, and to do all such other acts as are incidental to or conducive to the attainment of the above objects or any of them. For the purpose of canying on in any colony, dependency, or jjossession of the United Kingdom, or in any foreign country or state, any busmess which the company are for the time being authorized to carry on, the company ma}' form, or assist in forming, any company, and may hold and disj)ose of shares or stock of any company now existing or hereafter to be formed, and may guarantee dividends or interest on the shares or stock of any such company, and may guarantee the fulfilment of all or any contracts and obligations of any such company, but in every case arrangements shall be made for securing to the company the control and management and benefit of the business of anj^ such company. Amalgama- tion. The New Zealand and Australian Land Company (Limited) Act, 1877. 40 & 41 Vict. c. xcv. This was an Act for the amalgamation of the Canterbury and Otago Association, Tiimitcd, and of the New Zealand and Australian Laud Company, Limited. Both fompauies were possessed of extensive estates in tlie colonies. The Act provided for the registration of a new company under the Companies Act, 18G2, with power to amalgamate the undrrtakings of the two companies and with ample powers to carry on 1 FOKMS. 1175 the amalgamated business. The amalgamation was to take effect on the registration of the new company, and thereujwn the assets and lia])ilities of the old companies were to vest in the new company. The Act was to operate both at home and abroad. Dissentient shareholders were given a right to retire and claim payment of the value of tlieir shares, and debentm-e holders were empowered to claim payment in casli. The remedies of creditors abroad were carefully ])roservc(l. The Ockax Accidext and Guarantee CoMrAXY (Limited) Act, 1800. Another. .33 & 54 Yict. e. ccxxix. This Act effected the amalgamation of the Ocean Railway and General Accident Assurance Company and the Ocean and General Guarantee Company, Limited, and it conferred special powers on the amalgamated company in relation to insurance by tlie issue of tickets. The New (Jmental Bank Corporation (Limited) Act, 1889. Silver shares. .52 & 53 Vict. c. cxxii. In this case, as the company had branches in India, China, Japan, and elsewhere, it became desirable that it should have power to issue a portion of its capital in the shape of silver shares. One reason for this being that as a large amount of the com- pany's assets were in the East, and as the silver currency was liable to fluctuation, it was desirable that the capital thus represented should also be expressed in silver currency. 1. [67i0)-/; ilih'.] 2. \_Expla)ialion of memorandum as regards objects.] 3. The company may at any time, and from time to time, create silver capital of such amount as it ma}' determine in substitution for an equivalent amount of its cajjital for the time being unissued, such equivalent to be calculated in sterling at the current rate of exchange on the day of such creation of silver capital. The amount of any silver capital so created shall be expressed in ru^^ees or dollars, some other foreign silver ciuTency or cm-rencies, and shall be divided into shares o such fixed amoun and there shall be attached thereto such rights, privileges, qualifications and condition as the company may determine upon the creation of such silver capital. 4. In every balance-sheet of the company prepared after the issue of any silver capital as aforesaid, the equivalent of the amount for the time being paid up on the shares or stock constituting the silver capital shall be inserted, and such equivalent shall be calcidated in sterling at the cmi'ent rate of exchange at the date of the balance- sheet. & 6. [Separa/c registers to be kept.] 7. [Xotice to Itegistrar of Act.] 8. [Xothi/ig done inraliddtrng.] 9. [Costs of Act.] See Mercantile Bank of India, Limited, Act, 1893 (o6 Vict. c. xxi), to the like effect. The Buenos Aykes and Ensenajja Port Eailway Company's Paid-up Act, 1884. shares in lieu 47 & 48 Yict. c. Ixxxix. In this case the comjDany had issued preference shares, and there were large arrears of dividend. By the Act the company was empowered to arrange with any holder of preference shares for the issue to him of further paid-up shares in satisfaction of the arrears due to him, and the directors were empowered to ari'ange accordingly, and special pro'vision was made as to the distribution of the purchase-money to be received by the company upon a sale or transfer of its railway. of dividends. 1176 Another. SPECIAL ACTS. [Chap. XXII. The Northern Eailway of Buenos Ayres Company's Act, 1885. 48 & 49 Vict. c. Ixx. The company had issued preference shares, and large arrears of dividend were due thereon. Power was given by the Act for tlie holder of guaranteed shares to agree with the company for the extinguishment of the arrears in consideration of the jiayment of a further dividend on the preference stock into which such shares might be converted, and all guaranteed shares, the holders of which should enter into an agreement as afore- said, were to be converted into preference shares. Special provision was made as to the distribution of the net profits of the company, and as to the distribution of proceeds arising from the sale of the railway. Kights of voting were preserved, and trustees were empowered to take advantage of the Act. Deferred payment of arrears of dividend. Special fund to be estab- lished. The Alabama Great Southern Eailway Company's Act, 1888. 51 & 52 Yict. c. clxviii. In this case there was a large arrear of dividend on preference shares, and by the Act the company was empowered to defer payment of the arrears on the footing that interest thereon was to be paid at the rate of 4 j)er cent., and that a fund should be established out of sui-plus profits for paying off such arrears. Trustees were empowered to assent, and provision was made as to dissentient shareholders. Capitalising accumulated profits. The New Eussia Company Act, 1895. 58 Yict. c. xi. In this case the company had large accumulations of profit invested in its business, and provision was made for the issue of fully paid-up ordinary shares by way of bonus equal to 100 per cent, on the issued ordinary shares. Confirming issue of shares at a discount and allowing distribution of proceeds of sale. The Assam Railways and Trading Companies Act, 1897. 60 Yict. c. xvii. Certain shares had been issued at a discount at a time when the shares were not marketable at j)ar. The Act, with certain qualifications, rendered these fully paid up. The Act also made jirovision for the distribution of the proceeds of sale of the company's railways in the event of their being sold to the Government of India, and empowered the company in certain events to pay off some of its shares. Po\v(.T to modify rights of classes of Bhareholders. The Cordova Central Eailway Company (Limited) Act, 1897. 60 & 61 Yict. c. xc. This Act gave power to the company to modify the rights attached to various classes of shares under a scheme of an-angcment of the regulations. Power to Croats; debenture Htock, &c. Tiijc Ekalization and Debenture Corporation oe Scotland (Limited) Act, 1896. This Act gave power to create and issue debenture stock and pei'petual debentures, and to divide the ordinary shares into preferred and ordinary, and jjower to convert capital jiaid up in advance of calls into iireference stock. FORMS. 1177 William Hancock axd CoMrANv (Limited) FimTriER CAriTAL Act, 18!)G. 59 & 60 Vict. c. xlv. This Act gave the company power to create further preference aud ordiuury shares ; the preference shares to rank pari passu with the previous day created preference stock. Power to create further pari passu preference shares. The Colonial Company (Limited) Act, 188L 44 Vict. c. X. This Act subdivided the 50/. sliares into 10/. shares, and provided for the alteration of the register aud books accordingly. The directors were empowered to agree with any holder of five 10/. shares to give him two 10/. ordinary shares, and three 10/. preference shares in exchange for his shares, aud made provision as to the conversion ; and also empowered the directors to return capital paid up in advance of calls, and modified the rights of voting and the qualification of the directors. Subdivision of shares into two classes. The Municipal Trust Company (Limited) Act, 1887. 50 Vict. c. xxxiv. This company was registered under the Act of 1862. A special resolution had been passed dividing its capital into preferred and deferred moieties, and by the Act this resolution was confirmed, aud the oljjects were extended. See also Government Stock Investment Company (Limited) Act, 1887 (.50 Vict. c. xxxii.). Confirmation of special resolution for subdivision of shares into two classes. Extension of objects. The Atlas Steamship Company (Limited) Act, 1890. Power by 53 & 54 Vict. c. ccxv. fP^°if^ ^^r^?^"- tion to divide The principal object of this Act was to enable the company to divide its capital into shares into preference and ordinary shares or stock, and accordingly the company was empowered classes. by special resolution to divide the same in such proportion, and to be distinguished by such denominations as might be determined, and ^Dower was given to attach any preferential or special rights to the divided shares or stock, both as regards dividend and distribution of capital in the winding-up. The Buenos Aykes and Ensenada Poet Eailways Company Act, Substitution 1896, of shares. 59 & 60 Vict. c. xxxi. The Act made alterations in the capital and in the rights attached to the shares, and gave to every preference shareholder for every 100/. of his holding 100/. of new first preference stock, and 50/. of new convertible preference stock. There was power to exchange convertible stock for ordinary shares, and certain arrears of dividend cancelled. The Tasmanian Main Line Eailway Act, 1877. 40 & 41 Vict. c. xcii. In this case the company was entitled to a concession for the construction of a railway in Tasmania. It had issued debentures to bearer for 650,000/. It had con- structed the railway; but further works were necessary to complete it, and it had become desirable to enable the company to raise a loan charged in prioritj'- to the existing debentures. The Act enabled a three-fourths majority of the holders of the existing debentui-es, at a meeting, to assent to an agreement to reduce the rate of interest on the debentures, and to sanction the creation of 100,000/. debentures ranking as a Old deben- tures to be postponed to new (power at meeting of debenture holders) . iirs. SPECIAL ACTS. [Chap. XXil. (irst char<^e, to I'uud the overdue coupons on the existmg debentures, and provision was made enablinfj the shareholders to vote at meetings of the company. Re -incorpora- tion as a Parliament- ary company. Redemption of old de- benture stock by new stock. The Crystal Palace Company's Act, 1877. 40 & 41 Vict. c. exvii. This comjKiuy was originally foi-med in 1853 by deed of settlement, and subsequently obtained charters and Acts of Parliament. It had issued debenture stock and preference stock and ordinary stock, and its affair's had become considerably embarrassed. By the Act the company was re-incorporated as a Parliamentary company, and the assets and liabilities of the dissolved company were vested in the new company. Provision was made for the redemj^tion of the existing debenture stock with the approval of meetings of the stockholders. Power was given to create a new debenture stock and preference stock of a special character, and to be a first charge, and to attach to such debenture stock the right to nominate a director or directors, and various provisions were made as to the ordinary stock, and as to the right of voting at general meetings ; and the company was emijowered to sell and transfer absolutely or demise the Crystal Palace and lands with certain sanctions referred to in the Act. See also the Crystal Palace Company's Act, 1887(50 &51 Vict. c. cxcviii.), providing for the conversion of the several series of debenture stocks into several series of new deben- ture stocks, with a right to vote at meetings of the company. Relief from obligations under leases. Power to pay back to members paid up capital. The Cadogan and Hans Place Estate (Limited) Act, 1890. 53 & 54 Vict. c. xlix. The companj% under a building agreement, had taken leases of a nimiber of plots of gi-ouud from Smith's Charity trustees, the rent in each case being of small amount, say 30/. or 40/. The company had sub-let the premises at a considerable profit rent, and in each case buildings of great value— 10,000/., 20,000/., and 30,000/.— had been erected on the i^lot sub-let. The leases and sub-leases contained certain powers of re-entry for non-payment of rent, &c. Tlie letting value of the buildings was enormously in excess of the original ground rent. The company had sold its profit rent and reversion to vaiious insurance com- panies and others, who had covenanted to pay the ground rent and indemnify the company. The company wanted to reduce its capital by distributing a large fund in hand, and took proceedings accordingly, but Smith's trustees objected, and claimed to have a fund set aside to secure the ground rents, although tlie ground rents were absolutely secure. It was considered that the Court \vould have no jurisdiction to force the trustees to waive their claim, and accordingly the Bill for the above Act was promoted and suc- cessfully carried through Parliament. By the Act the comijany was empowered to distribute its surplus funds in reduction of its capital, and without the sanction of the Court, and the company were to pay Smith's trustees 1,000/. in full satisfaction of all claims in respect of the contingent liabilities. l)iviHion of shares into prfff-rrcd and ordinary. The Nitkate Railways Company (Limited) Conversion of Shares Act, 189L 54 Vict. c. XV. 'J'his Act emi)Owercd the company at any time on the application of any shareholder to convert his ordinary shares into preferred and deferred ordinary shares, that is to say, for cvei-y 100/. of ordinary shares 100/. of prcfoiTcd ordinary shares and also 100/. of dcfened ordinary shares. The preferred ordinary shares were to carry interest at a fixed rate, and the deferred ordinary shares were to take the surplus, but the preferred and deferred shares representing each ordinary share were together only to take the FORMS. 1179 .siiuifc! divideud that tho original ordinary share woukl have takou. The Act coutaiued power for recouversiou and special conditions as to voting in respect of the split shares and power for trustees and others to take advantage of tlio Act, and special jn-ovisious in regard to the riglits and winding up. See also Williams, Hancock and Company, Limited, Conversion of Shares Act, 189.5 .>8 Vict. c. iv.). Compromise NeUCILVTEL A.SPJIALTE (JoMl'AXY (Ll.MlTKl)) Av'V, 18'J2. of action; unification of 55 A'^ict. c. xiv. shares. This Act was passed witli a view to compromising and settling the disputes whicli had arisen in Xettchatcl Asphalte Compn)i>j v. Lee, 41 C. D., page 1. The recitals to the Bill stated the position of the company's cajiital and its circumstances, and the proceedings in the action, and that the plaintiff had ajjpealod to the House of Lords against the decision, and that the apjjeal was still pending, and that a compromise had been arranged which the Act was to give effect to, and the Act converted the preferred .shares and the ordinary shares in the old company into new shares of a uuifonn character at the rate of one 10/. share in the company for each preferred share, and one 10/. share for every 10 ordinary shares, and all proceedings in the action were stayed and the requisite alterations were made in the memoraudiuu of association. The Baxk of Boltox (Limited) Act, 1895. Umfication ^ ' of two classes 58 & 59 Vict. c. xliv. of sharee. The bank in this case had a capital divided into preference and ordinary shares. A committee had recommended a scheme for the equitable amalgamation of the two classes of shares. Notice of the intended application to Parliament was sent to all the shareholders, and the great bulk had consented in writing to the promotion of the Bill, but one shareholder had dissented. The Act provided for the conversion of the existing shares into new shares of one uniform class, and for cancellation of the existing shares, and empowered the dissenting shareholder to call on the company to purchase his shares, and enable the company to purchase the same. The Buenos Aykes and Pacific Eailway Compaxy (Limited) Provision for Act, 1893. scheme of arrangement. 56 Vict. c. ii. This Act empowered the railway company above mentioned and another company closely connected with it, called the Buenos Aj-res and Pacific Railway Equipment and Goods Depot Company (Limited), to formulate a scheme of arrangement, such companies and their various classes of debenture holders, creditors and debenture stockholders and shareholders, and for altering the rights of the classes and for modifying the memo- randum and articles, and for amalgamating if thought tit the two companies, and various other powers. The scheme was to be submitted to the Court for confirmation, and when confirmed was to take eifect and bind all parties as if it had been enacted b}' Parliament. Provision was made by the scheme for meetings of the various classes of persons interested and for the binding of the minority of each class by the voting of the majority. Dublin Distillers' Company (Limited) Act, 1893. Altering 56 Vict. C. vi. situation of registered This Act altered the memorandum of association of the company by substituting the o™'^^^ from word "England" for the word "Ireland" in clause 2 of the memorandum, which -p^^^^or^rl ° declared the situation of the registered office of the company. This alteration was not one capable of being sanctioned by the Court under the Companies (Memorandum of Association) Act, ISOO. England. 1180 SPECIAL ACTS. [Chap. XXII. Power to create prior lien deben- tures. Costa Eicv Eailway Company (Limited) Act, 1803. 56 Yict. c. liii. In this case the connany was formed to acquire concessions for eighteen railways from the Republic of Costa Eica. It had issued first debentures which contained a majority clause enabling a two-thirds majority of the debenture holdera to bind the holder class to any modification or alteration of their rights. It had also issued second debentures but they did not contain any majority clause. The further capital was m-gently required, and resolutions passed for raising the amount in prioiity to the existiuo- secmities. The requisite majority of the first debenture holders had given their consent thereto, but as the second debentures contained no majority clause they could not be bound without the assistance of Parliament. But the consent of three-fourths in value of the second debentiu-es had been obtiiincd in wi-iting to the Act, and accordingly it was enacted that the directors should be at liberty to raise the additional funds by the creation and issue of debentures ranking in priority to the first and second debentures. Power for company to buy its own .shares. Coa'tinentax (Metropolitan) Tramways Company (Limited) Act, 1893. 56 & 57 Yict. c. xc. In this case the company had a concession from the Municipality of Paris for the construction and working of certaia tramways, and the concession was for a term of years expiring in 1910. Provision was made by the company's regulations for the payment of dividends and for the replacement of capital funds with a ^aew to making good the capital on the shares at the expii-ation of the concession. It was found, however, that the fund for replacement of capital, havhig regard to the low rate of raterest obtainable, would not suf&ce, and it was therefore proposed to apply the fund from time to time in the purchase of the company's own shares. Accordingly the Act empowered the company from time to time to employ the replacement of capital funds in purchasing its ov^-n shares, and such shares were to be transferred to the company, and were to be thenceforth treated as extinguished, and the capital reduced accordiugly. And it was provided that the company should not create or issue any further shares, and that its operations should be limited to the particular concession. Appointment of arbitrator to wand-up, with absolute powers. Power to divide shares into pre- fcronce and onliuary. Poktsea Island Building Society Arbitration Act, 56 & 57 Vict. c. clxxxvi. 1893. This Act related to a building society which, by reason of fraud and mismanagement, had got into a position of great difficulty. It was in course of beiug wound up in the Portsmouth County Court. By the Act provision was made for the appointment of an arbitrator by the Lord Chancellor, and the arbitrator was given absolute power to settle all the affairs of the company, and was invested witli all the powers of the High Court of Justice. Under the Act Lord Macnaghten was appointed. The Queensland Investment and Land Companies Mortgage Act, 1894. 57 & 58 Vict. c. ix. niis Act empowered the company to divide any of its shares or stock into preference and ordinary shares or stock as might be determined by special resolution, and to determine the amount of the dividend and the cliaracter thereof, and the rights of voting, and whctlier the capital paid up on a divided share sliould be credited wholly on one of the shares or partly on one and partly on tlie other, and in what proiiortions. The principal object of the Act was to enable the company to offer to shareholders the option of paying up their shares in full, and of converting the capital so paid up into preference shares. FOEMS. iiSl AusTUALiAN Mortgage and Agency CoMrANY (Limited) Act, 1891. Another. 57 Yich c. XXV. This Act was somewhat on the lines of the last-raeutioned Act, and in particular it enabled the directors in making a call to determine tliat the shares on which the call was made should be divided, so that a portion of tlie sliares equal to the amount of tlie call should be converted into a i^reference share. See also Tlie Edinburgh Laud Mortgage Compuuy (Limited) Act, IS'.)? (00 Vict. c. i.\). The Liverpool Waueuousing Company (Limited) Delivery Negotiable Warrants Act, 1896. wa'r^antT 59 Vict. c. xi. The company had acquired a number of warehouses in Liverpool and elsewhere, and the Act empowered the company to issue certificates or warrants for goods warehoused or deposited with it, and provided that such certificates or warrants should bo deemed documents of title to the goods specified therein, and should be transferable by indorse- ment or special indorsement, and that the holder or bearer, where an open indorsement, or indorsee, was to be entitled to the goods as if they were deposited. in his own ware- house. See similar Acts. The Warehouse Owners' Company (Limited) Delivery Warrants Act, 1881 (41: & 45 Vict. c. cxiv) ; and the Livei-pool Grain Storage and Transit Company (Limited) Delivery Wan-ants Act, 1885 (48 & 49 Vict. c. xxxiii). Cordova Central Eailway Company (Limited) Act, 1894. Provision for 57 & 58 Yict. 0. Ixxxvii. a'rr'alTlement. This Act enabled the company to file a scheme of arrangement between tlie company and its debenture stockholders and other creditors and shareholders, and empowered the Court to sanction the scheme. It was very much on the lines of the Buenos Ayres and Pacific, above mentioned, p. 1179. The London Bank of Australia (Limited) Act, 1897. Scheme of arrangement 60 Vict. C. xvill. without Power by this Act was given to the company to submit a scheme of arrangement with ° its holders of deposit receipts to the High Com-t, and the Court was empowered to sanction the same with or without modification. See also The English, Scottish, and Australian Chartered Bank (Limited) Act, 189G (59 Vict. c. xv). 1182 SPECIAL ACTS. [ChAP. XX IT. PROVISIONAL ORDERS. Tramways. — Gas and "Water. — Piers. — Electric Light. Necessity for A company which, without the authority of Parliament, interferes statutory .^^^j^ ^-^^ public streets or roads for the purpose of laying its pipes or authority to ^ -,•-,• t c • mj- o? ^ interfere -with rails, &c., is liable to be indicted for a nuisance. Alhs v. bhepeld streets; q^^ Consumers' Co., 2 B. & E. 767 ; Beg. v. Longton Gas Co., 29 L. J. M. C. 118; 2 L. T. 24 ; 6 Jur.N. S. 601 ; Reg. v. Train, 2 B. &S. 640; Reg. V. United Kingdom Telegraph Co., 2 B. & S. 647. And its operations may in a proper case be restrained by injunction. See Attorney- General V. Cambridge Gas Consutners' Co., 4 Ch. Ap. 71 ; Attorney- General V. Sheffield Gas Consumers' Co., 17 Jur. 677 ; 22 L. J. Ch. 811 ; 3 De G. M. & G. 309. and vrith So, also, in the case of a pier or harbour, it is generally necessary shore. ^^ obtain statutory authority for buildings or other erections which interfere, or may interfere, with the public right of navigation, and are nuisances at common law, whether made by the Crown or by a subject. Attorney-General y. Richards, Anstey, 603 ; Attorney -General V. Terry, 9 Ch. 423 ; Attorney- General v. Lonsdale, 7 Eq. 390; Gann V. Free Fishers of Whitstalle, 11 H. L. C. 192; Attorney-General v. Tomline, 14 C. D. 58 ; Kerr, 240. Crown rights. Moreover, apart from the question of nuisance, there are the Crown rights, as regards the foreshore and bed of the sea, to be dealt with. By the Crown Lands Act, 1 866, the Board of Trade has power to deal with this. Transfer of Prima facie, a company which is possessed of an undertaking con- stituted by special statutory authority cannot dispose of it or delegate to others its powers, duties, and responsibilities, which Parliament has vested in it. Gardner \. London, Chatham and Dover Railivay Co., 2 Ch. 201 ; Blaker v. Herts and Essex TFaterworJcs Co., 41 C. D. 399. And qiifry, whether such an undertaking can be transferred even in a winding-up ? No doubt the Act of 1862 contains wide general powers to sell and transfer the assets ; and in Re Merle, 31 L. T. 448, it was held that under these powers a pier undertaking might be effectually sold and transferred ; but it seems doubtful whether the general words ought to be given such wide operation. See Bishop's Waltham Rail. Co., 2 Ch. 382 ; Ilaiokins v. Gathcrcole, 6 Do G. M. & G. 1 ; Seicard v. Vera Cruz, 10 App. Cas. 68 ; and see also hi re Bradford Navigation Co., 6 Ch. 603. Where, however, +he order or Act constituting the undertaking gives to the promoters a power of sale, either with or without the consent uiidertakin g- PROVISIONAL ORDERS. 11^3 of the Board of Trade [o.-cj., sect. 44 of the TramAvays Act, 1870), there is, of course, no difficulty in exercising that power of sale in a winding- up, if the Board of Trade consents. Provisional orders are made hy the Board of Trade under the Acts Cases for 11 ,. , orders, below mentioned : — Tramways The Tramways Act, 1870 (33 & 34 Vict. c. 78). Gas and Water The Gas and Water Works Facilities Act, 1870 (33 & 34 Vict. c. 70). Piers and Harbours The General Pier and Harbour Act, 18G1 (24 & 25 Vict. c. 4.')). The General Pier and Harbour Act, 1861, Amendment Act. Harbours Transfer Act, 18G2 (2-5 Vict. c. 19). Electric Light The Electric LisrhtinEc Act, 1882 (4;j & 46 Vict. c. .56). The Electric Lightmg Act, 1888 (51 & 52 Vict. c. 12). The Acts above referred to set forth the cases in which provisional orders may be made, and the Eules of the Board of Trade, made under the Acts, can be obtained, either directly or through any bookseller, from the Queen's printers. Eyre & Spottiswoode, East Harding Street, Eleet Street, E.G. Under the Acts and Eules, a j^rovisional order, in most cases, can only be granted with the consent of some local authority, and when this cannot be obtained it is necessary to promote a bill in Parliament in the ordinary way. The draft provisional order has to be prepared by the promoters and deposited and advertised iu accordance with the Act and Rules. The bill to confirm the order is promoted in Parliament by the Board of Trade, and usually passes unopposed, and then the promoters obtain statutory powers at a minimum expense. A large proportion of the provisional orders are made in favour of companies registered under the Companies Act, 18G2, and formed to apply for and obtain the order. Several confirmatory Acts are passed each j^ear, and usually each of these Acts schedule a number of orders. Copies of the Acts can be obtained from the Queen's printers or from the publishers of this work. APPENDIX. (A.) STATUTES. (B.) EULES AND ORDEES, &(; p. ^ ^ ( 11S7 ) APPE:NrDTX. (A.) STATUTES: page The CumiJiinies Act, 1862 1 189 The Companies Act, 1867 1242 The Joint Stock Companies Arrangement Act, 1870 12o0 The Companies Seals Act, 1864 1251 The Life Assurance Companies Act, 1870 , 1252 The Life Assurance Companies Act, 1872 1264 The Companies Act, 1877 1267 The Companies Act, 1879 1268 The Companies Act, 1880 1270 The Companies (Colonial Registers) Act, 1883 [and Clause Amending it] 1272 The Companies Act, 1886 1274 The Preferential Payments in Bankruptcy Act, 1888 1276 The Companies (Memorandum of Association) Act, 1890 1278 The Companies (Winding-up) Act, 1890 1280 The Directors' Liability Act, 1890 1292 The Stamp Act, 1891 (s. 112) 1293 The Companies (Winding-up) Act, 1893 1294 The Preferential Payments in Bankruptcy Amendment Act, 1897 1295 (B.) EULES AND OEDEES, &c. Board of Trade Rules under Life Assurance Acts 1296 General Order of Court of Chancery, March, 1868 1298 Nov. 1897. — Order vesting Jurisdiction in Wright, J 1306 Oct. 1892.— Affidavits in Debenture Actions 1306 Nov. 29. 1895. — Practice Masters' Rule as to Title and Judge in Deben- ture Actions 1306 Oct. 1891. — Queen's Printers' Directions as to Advertisements in Gazette 1307 Note. — For the Orders and Rules in relation to Winding-up^ see Part II. of this Work. a '4 1189 (A.) Statutes. THE COMPANIES ACT, 1862. (25 & 26 Vict. c. 89.) An Act for the Incorporation, Regulation, and Winding-up of Trading Companies and other Associations. [7th August, 1862.] Whereas it is expedient that the laws relating to the incorporation, regulation, and tvinding-up of trading companies and other associations should be consolidated and amended : Be it therefore enacted hg the Queen'' s most Excellent Majestg, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows : {Repealed by S. L. E. Act, 1893.) Preliminary. 1. This Act may be cited for all purposes as "The Companies Act, 1862." Short title. 2. This Act, ivith the exception of such temporary enactment as is hereinafter declared p to come into operation immediately, shall not come into operation until the second day of '-'0"^™P"ce- Kovember, one thousand eight hundred and sixty -two, and the time at which it so comes ^^^^'' '^'^ ■^^^■ into operation is hereinafter referred to as the commencement of this Act. {Repealed by S. L. R. Act, 1893.) 3. For the purposes of this Act a company that carries on the business of insur- Definition of ance in common with any other business or businesses shall be deemed to be an insurance insurance company. company 4. No company, association, or partnership consisting of more than ten persons _ , . . .' shall be formed, after the commencement of this Act, for the purpose of carrying "rohibition of on the business of banking, unless it is registered as a company under this Act, or Partnerships is formed in pursuance of some other Act of Parliament, or of letters patent : and ^^ceedmg no company, association, or partnership consisting of more than twenty persons ^^r*^'*^'^ shall be formed, after the commencement of this Act, for the purpose of can-ying ^'^n^'"^''- on any other business that has for its object the arquLsition of gain by the company, P- 814 association, or partnership, or by the individual members thereof, unless it is registered as a company under this Act, or is formed in pursuance of some other Act of Parliament, or of letters patent, or is a company engaged in working mines within and subject to the jurisdiction of the Stannaries. {See Stannaries Act, 1896.) 5. This Act is divided into nine Parts, relating to the following subject- 'Division of matters : — ^(>t_ The First Part, — to the Constitution and Incorporation of Companies and Associations under this Act : The Second Part, — to the Distribution of the Capital and Liability of Members of Companies and Associations under this Act : {Sects. 22 et seq.) The Third Part, — to the Management and Administration of Companies and Associations under this Act : {Sects. 39 et teq.) 1190 Appendix A. Mode of form- ing company. p. 263 Mode of limiting' liability of members. pp. 28, 263 Memorandum of association of a company limited by .shares, pp. 40, 263, 273 et seq. Memorandum of as.sociation of a company limited by guarantee. l)p. 40, 264, 476 'I sr,,., 562 The Foui-th Part, — to the winding-up of Companies and Assoeiations under this Act : {^cds. 73 ct seq.) The Fifth Part,— to the Registration Office : {Sect. 174.) The Sixth Part, — to Application of this Act to Companies registered under the Joint Stock Companies Acts : (Sects. 175 et seq.) The Seventh Part, — to Companies authorized to register under this Act : (Sects. 179 et seq.) The Eighth Part, — to Application of this Act to um-egistered Companies : (Sects. 199 et seq.) The Ninth Part, — to repeal of Acts, and temporary Provisions. (Sects. 105 et seq.) PART I. CONSTITTTION AND InCOEPOEATION OF COMPANIES AND ASSOCIATIONS UNDEE THIS AcT. Memorandum of Association. 6. Any seven or more persons associated for any lawful purpose may, by sub- scribing their names to a memorandum of association, and otherwise complying ■with the requisitions of this Act in respect of registration, form an incorporated company, with or without limited liability. 7. The liability of the members of a company formed under this Act may, according to the memorandum of association, be limited either to the amount, if any, unpaid on the shares respectively held by them, or to such amount as the members may respectively undertake by the memorandum of association to con- tribute to the assets of the company in the event of its being wound up. 8. Where a company is formed on the principle of having the liability of its members limited to the amount unpaid on their shares, hereinafter referred to as a company limited by shares, the memorandum of association shaU contain the follow- ing things ; (that is to say,) (1.) The name of the proposed company, with the addition of the word "limited " as the last word in such name : (2.) The part of the United Kingdom, whether England, Scotland, or Ireland, in which the registered office of the company is proposed to be situate : (3.) The objects for which the proposed company is to be established : (4.) A declaration that the liability of the members is limited : (5.) The amount of capital with which the company proposes to be registered di\ided into shares of a certain fixed amoimt : Subject to the following regulations : (1.) That no subscriber shall take less than one share : (2.) That each subscriber of the memorandum of association shall write opposite to his name the number of shares he takes. (See Companies Act, 1867, s. 23.) 9. Whore a company is formed on the principle of ha\ang the liability of its members limited to such amount as the members respectively undertake to contri- l)ute to the assets of the company in the event of the same being wound up, herein- after referred to as a company limited by guarantee, the memorandum of association shall contain the following things ; (that is to say,) (1.) The name of the proposed company, with the addition of the word " limited" as the last word in such name : (2.) The part of the United Kingdom, whether England, Scotland, or Ireland, in * which the registered office of the company is proposed to be situate : (3.) The objects for which the proposed company is to bo established: (4.) A declaration tliat each member undertakes to contribute to the assets of the company, in the event of the same being wound up, during the time that Ik; is a mcmlKr, or within one j'-ear afterwards, for payment of the debts and liabilities of the (•omp,anj'^ contracted before the time at which he ceases to be a member, and of the costs, charges, and expc^nses of winding up the company, and for the adjustment of the rights of the eontributories amongst theniselves, such nmninit as may be required, not exceeding a specified amount. The Companies Act, 1862. Act of 1862 1191 10. Where a company is formed on the principle of having no limit placed on the Memorandum liability of its mcmbcrH, hereinafter refcn-ed to as an unlimited company, the memo- of association randnm of association shall contain the following things ; (that is to say,) of an nn- (1.) The name of tlio proposed company : limited com- (2.) The part of the United Kingdom, whether J]ngland, Scotland, or Ireland, in pany. which the registered office of the company is proposed to be situate : ,,,-, ^q 264 (3.) The objects for which the proposed company is to be established. 11. The memorandum of association shall bear the same stamp as if it were a Stamp, deed, and shall be signed by each subscriber in the presence of, and be attested by, signature, one witness at the least, and that attestation shall be a sufficient attestation in Scot- and effect of land as well as in England and Ireland : It shall, when registered, bind the comjjany memorandum and the members thereof to the same extent as if each member had subscribed his of association. name and affixed his seal thereto, and there were in the memorandum contained, on g 005 the i^art of himself, his heirs, executors, and administrators, a covenant to observe gcg ' ' all the conditions of such memorandum, subject to the provisions of this Act. 12. Any company limited by shares may so far modify the conditions contained Power of in its memorandum of association, if authorized to do so by its regulations as origi- certain com- nally framed, or as altered by special resolution in manner hereinafter mentioned, panics to alter as to increase its capital, by the is.sue of new shares of such amount as it thinks memorandum expedient, or to consolidate and divide its capital into shares of larger amount than of association, its existing shares, or to convert its paid-up shai'es into stock, but, save as afore- ,-,,, 40 269 said, and save as is hereinafter provided in the case of a change of name, no altera- £82 358 359 tion shall be made by any company in the conditions contained in its memorandum 372' 408* 409 of association. ^ 65o', 657', 658 (And see Companies Act, 1867, and Companies {Memorandum of Association) Act, 1890.) 13. Any company under this Act, with the sanction of a special resolution of the Power of company passed in manner hereinafter mentioned, and with the approval of the companies to Board of Trade testified in writing- under the hand of one of its secretaries or change name. assistant secretaries, may change its name, and upon such change being made the p. 666 i-egistrar shall enter the new name on the register in the place of the former name, and shall issue a certificate of incorporation altered to meet the circumstances of the case ; but no such alteration of name shall affect any rights or obligations of the company, or render defective any legal proceedings instituted or to be instituted by or against the company, and any legal proceedings may be continued or commenced against the company by its new name that might have been continued or commenced against the company by its former name. Articles of Association. 14. The memorandum of association may, in the case of a company limited by Regulations shares, and shall, in the case of a company limited by guarantee or imlimited, be to be pre- accompanied, when registered by articles of association signed by the subscribers scribed by to the memorandum of association, and prescribing such regulations for the company articles of as the subscribers to the memorandum of association deem expedient : The articles association, shall be expressed in separate paragraphs, numbered arithmetically : They may p^ 264 288 adopt all or any of the provisions contained in the Table marked A. in the first iij ' ' Hchedide hereto : They shall, in the case of a company, whether limited by guarantee or unlimited, that has a capital divided into shares, state the amount of capital vdHh. which the company proposes to be registered ; and in the case of a company, whether limited by guarantee or unlimited, that has not a capital divided into shares, state the number of members with which the company proposes to be registered, for the purpose of enabling the registrar to determine the fees payable on registration : In a company limited by guarantee or unlimited, and having a capital divided into shares, each subscriber shall take one share at the least, and shall write opposite to his name in the memorandum of association the number of shares he takes. 15. In the case of a company limited by shares, if the memorandum of asso- Application elation is not accompanied by articles of association, or in so far as the articles do of Table A. not exclude or modify the regulations contained in the Table marked A. in the first p. 371 schedule hereto, the last-mentioned regidations shall, so far as the same are appli- cable, be deemed to be the regulations of the company in the same manner and to the same extent as if they had been inserted in articles of association, and the articles had been duly registered. 16. The articles of association shall be piinted, they shall bear the same stamp Stamp, as if they were contained in a deed, and shall be signed by each subscriber in the signature, presence of, and be attested by, one witness at the least, and such attestation shall and effect of 1192 Appendix A. articles of association, pp. 5, 69, 71, 371, 373 be a sufficient attestation in Scotland as well as in England and Ireland : When registered, they shall bind the company and the members thereof to the same extent as if each member had subscribed his name and affixed his seal thereto, and there were in such articles contained a covenant on the part of himself, his heirs, executors, and administrators to conform to all the regulations contained in such articles, subject to the provisions of this Act ; and all moneys payable by any member to the company, in pursuance of the conditions and regulations of the company, or any of such conditions or regulations, shall be deemed to be a debt due from such member to the company, and in England and Ireland to be in the nature of a specialty debt. Registration of memo- randum of association and articles of association, with fees, as in Table B. p. 264 Effect of registration, pp. 1, 4, 5, 8, 14, 16, 265 Copies of memorandum and articles to be given to members, p. 289 Prohibition against identity of names in companies, pp. 265, 268, 718, 1129 Prohibition Hgainnt certain com- panir-H )i((ld- utfT liuid. p. 298 General Frovisions. 17. The memorandum of association and the articles of association, if any, shall be delivered to the Registrar of Joint Stock Companies hereinafter mentioned, who shall retain and register the same : There shall be paid to the registrar by a company having a capital divided into shares, in respect of the several matters mentioned in the Table marked B. in the first schedule hereto, the several fees therein specified, or such smaller fees as the Board of Trade may from time to time direct ; and by a company not having a capital divided into shares, in respect of the several matters mentioned in the Table marked C. in the first schedule hereto, the several fees therein specified or such smaller fees as the Board of Trade may from time to time direct : All fees paid to the said registrar in pursuance of this Act shall be paid into the receipt of Her Majesty's Exchequer, and be carried to the account of the Consolidated Fund of the United Kingdom of Great Britain and Ireland. 18. Upon the registration of the memorandum of association, and of the articles of association in cases where articles of association are required by this Act or by the desire of the parties to be registered, the registrar shall certify under his hand that the company is incorporated, and in the case of a limited company that the company is limited : The subscribers of the memorandum of association, together with such other persons as may from time to time become members of the company, shall thereupon be a body corporate by the name contained in the memorandum of association, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal, with power to hold lands, but with such liability on the part of the members to contribute to the assets of the company in the event of the same being wound up as is hereinafter mentioned : A certificate of the incorporation of any company given by the registrar shall be conclusive evidence that all the requisitions of this Act in respect of registration have been complied with. 19. A copy of the memorandum of association, having annexed thereto the articles of association, if any, shall be forwarded to every member, at his request, on payment of the sum of one shilling or such less sum as may be prescribed by the company for each copy ; and if any company makes default in forwarding a copy of the memorandum of association and articles of association, if any, to a member, in pursuance of this section, the company so making default shall for each offence incur a penalty not exceeding one pound. 20. No company shall be registered under a name identical with that by which a subsisting company is already registered, or so nearly resembling the same as to be calculated to deceive, except in a case where such subsisting company is in the course of being dissolved and testifies its consent in such manner as the registrar requires ; and if any company, through inadvertence or otherwise, is, without such consent as aforesaid, registered by a name identical with that by which a subsisting company is registered, or so nearly resembling the same as to be calculated to deceive, such first-mentioned company may, with the sanction of the registrar, change its name, and upon such change being made the registrar shall enter the new name on the register in the place of the former name, and shall issue a certificate of incorpora- tion alt( red to meet the circumstances of the case ; but no such alteration of name shall afiVct any rights or obligations of the company, or render defective any legal proceedings instituted or to be instituted by or against the company, and any legal proceedings may be continued or commenced against the company by its new name that might have been continued or commenced against the company by its former name. 21. No company formed for the puriiosc of promoting art, science, religion, charity, or any other like object, not involving the accjuisition of gain by the comi)Hny or by the individual members thereof, shall, without the sanction of the Board of Trade, hold more than two acres of land ; but the Board of Trade may. The Companies Act, 1862. Act of 1862 lioa by license under the hand of one of their in-iuripal secretaries or assistant secretaries, empower any such company to hokl hinds in such quantity and Huljject to such conditiona as they think fit. PART II. Distribution of Capital and Liauility of Membeus of Companies and Associations under this Act. Distribution of Capital. 22. The shares or other interest of any member in a company under this Act Nature of shall bo personal estate, capable of being- transferred in manner provided bj' the interest in regulations of the company, and shall not bo of the nature of real estate, and each company, share shall, in the case of a company having a capital divided into shares, be dis- p. 397 tinguishcd by its appropriate number. 23. The subscribers of the memorandum of association of any company under Definition of this Act shall be deemed to have agreed to become members of the company whose " member." memorandum they have subscribed, and upon the registration of the comjiany shall pp 19 20 be entered as members on the register of members hereinafter mentioned ; and every 24 288 other person who has agreed to become a member of a company under this Act, and whose name is entered on the register of members, shall be deemed to be a member of the company. 24. Any transfer of the share or other interest of a deceased member of a com- Transfer by pany under this Act, made by his personal representative, shall, notwithstanding personal re- such personal representative may not himself be a member, be of the same validity presentative. as if he had been a member at the time of the execution of the instrument of transfer. 25. Every company under this Act shall cause to be kept in one or more books Register of a register of its members, and there shall be entered therein the following jmr- members, ticulars : 29 (1.) The names and addresses, and the occupations, if any, of the members of the company, with the addition, in the case of a company having a cajntal divided into shares, of a statement of the shares held by each member, distinguishing each share by its number : and of the amount paid or agreed to be considered as paid on the shares of each member : (2.) The date at which the name of any person was entered in the register as a member : (3.) The date at which any person ceased to be a member : And any company acting in contravention of this section shall incur a penalty not exceeding five pounds for every day during which its default in complying with the provisions of this section contiuTics, and every director or manager of the company who shall knowingly and wilfully authorize or permit such contravention shall incur the like penalty. {Extended by Companies Aet, 1867, s. 31.) 26. Every company under this Act, and having a capital divided into shares. Annual list of shall make, once at least in every year, a list of all persons who, on the fourteenth members, day succeeding the day on which the ordinary general meeting, or if there is more p 414 than one ordinary meeting in each year, the first of such ordinary general meetings is held, are members of the company ; and such list shall state the names, addresses, and occupations of all the members therein mentioned, and the number of shares held by each of them, and shall contain a summary specifying the following par- ticulars : (1.) The amount of the capital of the company, and the number of shares into which it is divided : (2.) The number of shares taken from the commencement of the company up to the date of the summary : (3.) The amount of calls made on each share : (4.) The total amount of calls received : {b.) The total amount of calls unpaid : (6.) The total amount of shares forfeited : (7.) The names, addresses, and occupations of the persons who have ceased to be members since the last list was made, and the number of shares held by each of them. The above list and summary shall be contained in a separate part of the register, and shall be completed within seven days after such fourteenth day as is mentioned P. 4 TI 1194 Appendix A. Penalty on company, &c. not keeping a proper register. Company to give notice of consolidation or of conver- sion of capital into stock. Effect of con- version of shares into stock. Entry of trusts on register, pp. 386, 395 Certificate of shares or stock. p. 711 Inspection of register, pp. 30, 31, 711 Power to close rcL'istcr. Notice of incroaHO of caj)ital and of ineinbors to bo given to rcgi.Htiar. p. 708 in this section, and a copy shall forthwith be forwarded to the Registrar of Joint Stock Companies. [Extended hij Companies Act, 1867, s. 32.) 27. If any company under this Act, and having a capital divided into shares, makes default in complying with the provisions of this Act with respect to forward- ing such list of members or summary as is hereinbefore mentioned to the registrar, such company shall incur a penalty not exceeding five pounds for every day during which such default continues, and every director and manager of the comjjany who shall knowingly and wilfully authorize or permit such default shall incur the like penalty. 28. Every company under this Act, having a capital divided into shares, that has consolidated and divided its capital into shares of larger amount than its existing shares, or converted any portion of its capital into stock, shall give notice to the Registrar of Joint Steele Companies of such consolidation, division, or conversion, specifying the shares so consolidated, divided, or converted. 29. AVhere any company under this Act, and having a capital divided into shares, has converted any portion of its capital into stock, and given notice of such conversion to the Registrar, all the provisions of this Act which are applicable to shares only shall cease as to so much of the capital as is converted into stock ; and the register of members hereby required to be kept by the company, and the list of members to be forwarded to the Registrar, shall show the amount of stock held by each member in the list instead of the amount of shares and the particulars relating to shares hereinbefore required. 30. No notice of any trust, expressed, implied, or constructive, shall be entered on the register, or be receivable by the registrar, in the case of comp>anies under this Act and registered in England or Ireland. 31. A certificate, under the common seal of the company, specifying any share or shares or stock held by any member of a company, shall be ]}n7nd facie evidence of the title of the member to the share or shares or stock therein specified. 32. The register of members, commencing from the date of the registration of the company, shall be kept at the registered office of the company hereinafter mentioned : except when closed as hereinafter mentioned, it shall during business hours, but subject to such reasonable restrictions as the company in general meeting may impose, so that not less than two hours in each day be appointed for inspection, be open to the inspection of any member gratis, and to the inspection of any other person on the payment of one shilling, or such less sum as the company may prescribe, for each inspection ; and every such member or other person may require a copy of such register, or of any part thereof, or of such list or summary of members as is hereinbefore mentioned, on payment of sixpence for every hundred words required to be copied : if such inspection or copy is refused, the company shall incur for each refusal a penalty not exceeding two pounds, and a further penalty not exceeding two pounds for every day during which such refusal continues, and every dii-ector and manager of the company who shall knowingly authorize or pennit such refusal shall incur the like penalty ; and in additicm to the above penalty, as res2iects companies registered in England and Ireland, any judge sitting in Chambers, or the vice-warden of the stannaries, in the case of companies subject to his jurisdiction, may by order compel an immediate inspection of the register. 33. Any company under this Act may, upon giving notice by advertisement in some newspaper circidating in the district in which the registered office of the company is situated, close the register of members for any time or times not exceed- ing in the whole thirty days in each year. 34. Where a company has a capital divided into shares, whether such shares may or may not have been converted into stock, notice of any increase in such cajiital bej^ond the registered capital, and where a company has not a capital divided into shares, notice of any increase in the number of members beyond the registered number, sluill be given to the registrar in the case of an increase of ca])ital, witliin fifteen days from the date of the passing of the resolution by which HUili increase has been authorized, and in tlie case of an increase of members within liftf.'CTi days from tlie time at wliich such increase of members lias been resolved on or has taken ])lace, and the registrar shall forthwith record tlie amount of such iticredse of ca])itnl or nunilx'rs: if sucli notice is not given within the period iiforesuid the company in default shall incur a penalty not exceeding five pounds for every day during which such neglect to give notice continues, and every The Companies Act, 18G2. Act of 1862 1190 director niid ninnnid 42 S; 43 Majesty Queen Victoria, chapter one hundred and four, intituled an Act to amend Vict. c. 43. and consolidate the Acts relating to Merchant Shipping, or any Act amending the same, as regards offences in Scotland against that Act, not being offences l\y that Act described as felonies or misdemeanors ; and as to Ireland, in manner directed by the Act passed in the session holden in the fourteenth and Mteeuth years of the 1200 Appendix A. Application of i^enalties. Evidence of proceedings at meetings, pp. 388, 438, 443, 444, 601 Jurisdiction of Vice- warden of Stannaries. Provision as to costs in actions brought by certain limited com- paiiioB. )>. 1068 ])cc](iration in action against mcmbfTH. pp. 390, 1033 reioTi of her Majesty Queen Victoria, chapter ninety-three, intituled an Act to consolidate and ameud the Acts regulating the proceedings of Petty Sessions and the Duties of Justices of the Peace out of Quarter Sessions in Ireland, or any Act amending the same. 66. The justices or sheriff imposing any penalty under this Act may direct the ■whole or any part thereof to be applied in or towards payment of the costs of the proceedings, or in or towards the rewarding the person upon whose information or at whose suit such penalty has been recovered ; and subject to such direction, all penalties shall be paid into the receijit of her Majesty's Exchequer iu such manner as the Treasury may direct, and shall be carried to and form part of the Consoli- dated Fund of the United Kingdom. 67. Every company under this Act shall cause minutes of all resolutions and proceedings of general meetings of the company, and of the directors or managers of the company in cases where there are directors or managers, to be duly entered in books to be from time to time provided for the purpose ; and any such minute as aforesaid, if purjiorting to be signed by the chairman of the meeting at which such resolutions were passed or proceedings had, or by the chaii-man of the next succeed- ing meeting, shall be received as evidence in all legal proceedings ; and until the contrary is proved, every general meeting of the company or meeting of directors or managers in respect of the proceedings of which minutes have been so made shall be deemed to have been duly held and convened, and all resolutions passed thereat or proceedings had, to have been duly passed and had, and all appointments of directors, managers, or liquidators shall be deemed to be valid, and all acts done by such directors, managers, or liquidators shall be valid, notwithstanding any defect that may afterwards be discovered in their api^ointments or qualifications. 68. in the case of companies under this Act, and engaged in working mines within and subject to the jurisdiction of the Stannaries, the Court of the Vice- warden of the Stannaries shall have and exercise the like jm-isdiction and powers, as well on the common law as on the equity side thereof, which it now possesses by custom, usage, or statute in the case of unincoi-porated companies, but only so far as such jurisdiction or powers are consistent with the provisions of this Act and with the constitution of companies, as prescribed or required by this Act ; and for the purpose of giving fuller effect to such jurisdiction in all actions, siiits, or legal proceedings instituted in the said Court, in causes or matters whereof the Court has cognizance, all process issuing out of the same and all orders, rules, demands, notices, warrants, and summonses required or authorized by the practice of the Court to be served on any company whether registered or not registered, or any member or contributory thereof, or any officer, agent, director, manager, or servant thereof, may be served in any part of England without any special order of the vice-warden for that purpose, or by such special order may be served in any part of the United Kingdom of Great Britain and Ireland, or in the adjacent islands, parcel of the dominions of the Crown, on such terms and conditions as the Court shall think fit ; and all decrees, orders, and judgments of the said Court made or pronounced in such causes or matters may be enforced in the same manner in which decrees, orders, and judgments of the Court may now by law be enforced, whether within or beyond the local limits of the Stannaries ; and the seal of the said Court, and the signature of the registrar thereof, shall be judicially noticed by all other Courts and judges in England, and shall require no other proof than the production thereof : the registrar of the said Court, or the assistant registrar, in making sales under any decree or order of the Court shall be entitled to the same privilege of selling by auction or competition without a license, and without being liable to duty, as a judge of the Court of Chancery is entitled to in pursuance of the Acts in that behalf. 69. Wlicre a limited company is plaintiff or pur.suer in any action, suit, or other leg;il proceeding, any judge having jurisdiction in the matter may, if it appears by any credible testimony that there is reason to believe that if the defendant be 8ucces.'-ful in his defence the assets of the company will be insufhcient to pay his costs, rcfjuire suthcient security to be given fur such costs, and may stay all pro- ceedings until such security is given. 70. In any action or suit brought by the company against any member to rc('over any call or other moneys due from such member in his character of member, it shall not be necessary to set forth the S]iecial matter, but it shall be sufficient to allege that the defendant is a member of the company, and is indebted to the com- I)any in resjicct of a call made or other moneys due whereby an action or suit bath accrued to the company. The Companies Act, 1862. Act of 1862 1201 Alteration of Fornix. 71. The forms sot forth in the Second Schedule hereto, or forms as near thereto Board of as circumstances admit, sliall be used in iiU matters to whieli such forms refer: the Trade may Board of Trade may from timo to time make such alterations in the tables and forms alter forms contained in the First Schedule hereto, so that it docs not increase; tht; amount of in schedule, fees payable to the Registrar in the said Schedule mentioned, and in the forms in the Second Schedule, or make such additions to the last-meiitione 1 forms as it deems requisite : any such table or form, when altered, shall be published in the London Gazette, and upon such publication being made such table or form shall have the same force as if it were included in the Schedule to this Act, btit no alteration made by the Board of Trade in the Talde marked A. contained in the First Scliedule shall affect any company registered prior to the date of such alteration, or repeal, as respects such company, any portion of such table. Arbitrations. 72. Any company under this Act may from time to time, by writing under its Power for common seal, agree to refer and may refer to arbitration, in accordance with " The companies to Railway Companies Arbitration Act, 18;)9," any existing or future difference, refer matters question, or other matter whatsoever in dispvxte between itself and any other corn- to arbitration, pany or person, and the companies parties to the arbitration may delegate to the person or persons to whom the reference is made j^ower to settle any terms or to determine any matter capable of being lawfully settled or determined by the com- panies themselves, or by the directors or other managing body of such companies. (And see Arbitration Act, 1889.) 73. All the provisions of "The Railway Companies Arbitration Act, 1859," Provi^^ions of shall be deemed to apply to arbitrations between comjaanies and persons in pursu- 22 & 23 Vict, ance of this Act ; and in the construction of such provi.sions "the companies" shall c. o9 to be deemed to include companies authorized by this Act to refer disputes to arbitra- apply, tion. PART IV. "Winding-up of Companies and Associations under this Act. PrcUminari/. 74. The term "contributory" shall mean every person liable to contribute to Meanino- of the assets of a company under this Act, in the event of the same being wound up : cnntribirtory it shall also, in all proceedings for determining the persons who are to be deemed contributories, and in all proceedings prior to the final determination of such persons, include any person alleged to be a contributory. 75. The liability of any person to contribute to the assets of a company under Nature of this Act, in the event of the same being wound up, shall be deemed to create a debt liability of (in England and Ireland of the nature of a specialty) accruing due from such person contributory, at the time when his liability commenced, but payable at the time or respective times when calls are made as hereinafter mentioned for enforcing such liabiHty ; and it shall be lawfid in the case of the banki'uptcy of any contributory to prove against his estate the estimated value of his liability to future calls as well as calls already made. 76. If any contributory dies either before or after he has been placed on the list Contributories of contributories hereinafter mentioned, his jjersoual repi-esentatives, heirs, and in case of devisees shall be liable in a due course of administration to contribute to the assets death. of the company in discharge of the liability of such deceased contributory and such personal representatives, heirs, and devisees shall be deemed to be contributories accordingly. 77. If any contributory becomes bankrupt, either before or after he has been Contributories placed on the list of contributories, his assignees shall be deemed to represent such in case of bankrupt for all the purposes of the winding-up, and shall be deemed to be contri- bankruptcy, butories accordingly, and may be called vipon to admit to proof against the estate of such bankrupt, or otherwise to allow to be paid out of his assets in due course of law, any moneys due from such bankrupt in respect of his liability to contribute to the assets of the company being wound up ; and for the purposes of this section any person who may have taken the benefit of any Act for the relief of insolvent 1202 Appendix A. debtors before the eleventh day of October one thousand eight hundred and sixty- one shall be deemed to have become bankrupt. Contributories 78. If any female contributory marries, either before or after she has been placed in case of on the list of contributoi-ies, her husband shall during- the continuance of the mar- marriage, riao-e be liable to contribute to the assets of the company the same sum as she would have been liable to contribute if she had not married, and he shall be deemed to be a contributory accordintyly. [See Married irome)i's Property Act, 1882.) Circumstances under "which company may be wound up by Court. pp. 270 et seq. Company •when deemed unable to pay its debts. Definition of "the Court." ApjilicatioTi fi)r winding- UJ) to bo made by petition. Windlng-vp by Court. 79. A company under this Act may be wound up by the Court as hereinafter defined, under the following circumstances ; (that is to say,) (1 . ) Whenever the company has passed a special resolution requiiing the company to be wound up by the Court : (2.) Whenever the company does not commence its business within a year from its incorporation, or suspends its business for the space of a whole year : (3.) Whenever the members are reduced in number to less than seven : (4.) Whenever the company is unable to pay its debts : (o.) Whenever the Court is of opinion that it is just and equitable that the com- pany should be wound up. 80. A company under this Act shall be deemed to be unable to pay its debts : (1.) Whenever a creditor, by assignment or otherwise, to whom the company is indebted, at law or in equity, in a sum exceeding fifty pounds then due, has served on the company, by leaving the same at their registered oflBce, a demand under his hand requiring the company to pay the sum so due, and the company has for the sjjace of three weeks succeeding the service of such demand neglected to pay such sum, or to secure or compound for the same to the reasonable satisfaction of the creditor : (2.) Wlienever, in England and Ireland, execution or other process issued on a jvidgment, decree, or order obtained in any Court in favour of any creditor, at law or in equity in any proceeding instituted by such creditor against the company, is returned unsatisfied in whole or in part : (3.) Whenever, in Scotland, the induciae of a charge for payment on an extract decree, or an extract registered bond, or an extract registered protest have expii-ed without payment being made : (4.) Whenever it is proved to the satisfaction of the Court that the company is unable to pay its debts. 81. The expression '* the Court,'''' as used in this part of this Act, shall mean the following authorities ; {that is to say,) — [In the case of a company engaged in u'orking any mine u-iihin and subject to the Juris- diction of the Stannaries, — the Court of the Jlce Warden of the Stannaries, unless the Vice Warden certifies thai in his opinion the company icould be more advan- tageously wound up in the High Court of Chancery, in which ease '■'■the Courf'' shall mean tlie High Court of Chancery : In the case of a company registered in England that is not engaged in working any such mine as aforesaid, — the High Court of Chancery ;] In the case of a company registered in Ireland, the Court of Chancery in Ireland : [In all cases of companies registered in Scotland, the Court of Sessions in either division thereof :'] Provided that where the Court of Chancery [j« England o;-] Ireland makes an order for wiudiny-up a company under this Act, it may, if it thinks Jit, direct all subsequent pro- ceedings for uinding-up the same to be had in the Court of Bankruptcy having Jurisdiction in the place in which the registered ojfice of the company is situate ; and thereupon such hist-tnentioncd Court of Bankruptcy shall, for the purposes of winding-up the company, be deemed to be " the Court^' tvithUi the meaning of the Act, and shall have for the purposes of such uinding-up all the powers [of the High Court of Chancery, or'] of the Court of Chancery in Ireland, [as the case may require^. {Extended hy Companies Act, 1867, s. 12, b\(t repealed as to England and Wales by C. {W. U.) Act, 1890, s. 33. Sec also s. 32 (2), and s. 1. Portions in brackets previously repealed by S. L. II. Act, 1893.) 82. Any application to the Court for the winding-up of a company under this Act sliall be by jxtition ; it may be presented by the companj', or by any one or more creditor or creditors, contributory or contributories of the company, or by all or any of the above jjarties, together or separately ; and every order which may be made on any such petition shall operate in favour of aU the creditors and all the The Companies Act, 1862. Act of 1862 1203 contributories of the company in the same manner as if it had been made upon the joint petition of a creditor and a contributory. 83. Any JHilyc of (lie Ilhjh Court of Chancery may do in chai)ihcrs any act tvhicli the Power of Conrt is hereby aiilhorized to do. Court. {Extended by Companies Act, 18G7, s. 12. The section was amended by s. 38 of the Stannaries Act, 1869, but repealed in toto by S. L. R. Act, 1893. The whole section, except words in italics, tt>as again repealed by Stannaries Act, 1896, s. 5.) 84. A winding-up of a company by the Court shall bo deemed to commence at Commence- the time of the presentation of the petition for the winding-up. ment of {As to Scotland, see Companies Act, 18S6, s. 3.) winding-up by Court. 85. The Court may, at any time after the presentation of a petition for winding- Court may up a com2)any under this Act, and before making an order for winding-up the o-rant injunc- company, upon the application of the compan}^ or of any creditor or contributory tion. of the company, restrain further proceedings in any action, suit, or jjrocecding against the company, upon such terms as the Court thinks fit ; the Court may also at any time after the presentation of such petition, and before the first appointment of liquidators, appoint provisionally an official liqiudator of tlie estate and effects of the company. {As to Scotland, see Companies Act, 1886, s. 5.) 86. Upon hearing the petition the Court may dismiss the same with or without Course to he piu-- costs, may adjourn the hearing conditionally or unconditionally, and may make any ■"^^t-d by Court interim order, or any other order that it deems just. n^'lf 'n°^ (--is to Scotland, sec Comjjanies Act, 1886, s. 5.) 87. When an order has been made for winding-up a company under this Act no Actions and suits suit, action, or other proceeding shall be proceeded with or commenced against the to be stayed company except with the leave of the Court, and subject to such terms as the Court ^'f.'c'' o^'^r for may impose. " 88. When an order has been made for winding-up a company under this Act, Copy of order a copy of such order shall forthwith be forwai'ded by the company to the Registrar to be forwarded of Joint Stock Companies, w'ho shall make a minute thereof in his books relating to *° registrar. the company. 89. The Court may at any time after an order has been made for winding-up a Power of company, upon the application by motion of any creditor or contributory of the Court to stay company, and upon proof to the satisfaction of the Court that all proceedings in proceedings, relation to such winding-up ought to be stayed, make an order staying the same, ^„ 1010 ct either altogether or for a limited time, on such terms and subject to such conditions gf' as it deems fit. {As to Scotland, see Companies Act, 1886, s. 5.) 90. When an order has been made for winding-up a company limited by Effect of order guarantee, and having a capital divided into shares, any share cajjital that may not on share have been called up shall be deemed to be assets of the company, and to be a debt eajiital of (in England and Ireland of the nature of a specialty) due to the company from each company member to the extent of any sums that may be unpaid on any shares held by him, limited by and payable at such time as may be appointed by the Court. o-uarantee. 91. The Court may, as to all matters relating to the winding-up, have regard Court may to the wishes of the creditors or contributories, as proved to it by any sufficient have re^-ard evidence, and may, if it thinks it expedient, direct meetings of the creditors or to wishes of contributories to be summoned, held, and conducted in such manner as the Court creditors or directs, for the purpose of ascertaining their wishes, and may appoint a person to contribu- act as chairman of any such meeting, and to report the result of such meeting tories. to the Court : in the case of creditors, regai-d is to be had to the value of the debts due to each creditor, and in the case of contributories to the number of votes con- ferred on each contributory by the regulations of the company. {Amended as to Scotland, Companies Act, 1886, s. o. See also C.{JF. U.) Act, 1890, s, 13.) [^Official'] Liquidators. 92. For the purpose of conducting the proceedings in winding-up a company Appointment and assisting the Court therein, there may be appointed a person or persons to be of official called an [ofiicial] liquidator or [official] liquidators ; and the Court having juris- liquidators, diction may appoint such person or persons, either provisionally or otherwise, as it 1204 Appendix A. thinks fit, to the office of [official] liquidator or [official] liquidators ; in all cases if more persons than one are appointed to the office of [official] liquidator, the Court shall declare whether any act hereby required or authorized to be done by the [official] liquidator is to be done by all or any one or more of such persons. The Court may also determine whether any and what security is to he given by any \oJficiar\ liquidator on his appointment ; if no [official] liquidator is appointed, or during any vacancy in such appointment, all the property of the company shall be deemed to be in the custody of the Court. {As to disuse of word ^' ojfieinl,''^ see V. {W. V.) Act, 1890, s. 4, and see s. 6. The icurds in italics repealed as to England and Wales by C. {W. U.) Act, 1890, s. 33.) Resignations, 93. Any [official] liquidator may resign or be removed by the Court on due removals, cause shown : and any vacancy in the office of an [official] lirfuidator appointed by filling up the Court shall be filled by the Court: there shall be paid to the [official] liquidator vacancies, such salary or remuneration, by way of percentage or otherwise, as the Court may and compen- direct ; and if more lic[uidators than one are appointed, such remuneration shall bo sation. distributed amongst them in such proportions as the Court directs. {As to Scotland, see Companies Act, 1886, s. 5.) Style and 94. The [official] liquidator or licpiidators shall be described by the style of the duties of [official] liquidator or [official] liciuidators of the particiilar company in respect of official liqui- which he is or they are apjDointed, and not by his or their individual name or names ; dator. he or they shall take into his or their custody, or under his or their control, all the property, effects, and things in actions to which the company is or appears to be entitled, and shall perform such duties in reference to the winding-up of the com- pany as may be imposed b^ the Court. {Sec C. {jr. U.) Act, ISSO, s. 4.) Powers of 95. The [official] liquidator shall have power, with the sanction of the Court, official to do the following things : liquidator. To bring or defend any action, suit, or prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company : To carry on the business of the company, so far as may be necessary for the beneficial winding-up of the same : To sell the real and personal and heritable and moveable property, effects and thitigs in action of the company by public aiiction or private contract, with power to transfer the whole thereof to any person or company, or to sell the same in parcels : To do all acts and to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, and for that purpose to use, when necessary, the company's seal : To prove, rank, claim, and draw a dividend, in the matter of the bankruptcy or insolvency or sequesti'ation of any contributory, for any balance against the estate of such contributory, and to take and receive dividends in respect of such balance, in the matter of bankruptcy or insolvency or sequestration, as a separate debt due from such bankrupt or insolvent, and rateably with the other separate creditors : To draw, accept, make, and endorse any bill of exchange or promissory note in the name and on behalf of the comjjany, also to raise upon the security of the assets of the company from time to time any requisite sum or sums of money ; and the drawing, accepting, making, or endorsing of every such bill of ex- change or promissory note as aforesaid on behalf of the company shall have the same effect with respect to the liability of such company as if such bill or note had been drawn, accepted, made, or endorsed by or on behalf of such company in the course of carrying on the business thereof : To take out, if necessary, in his official name, letters of administration to any deceased contributory, and to do in his official name any other act that may be necessary for obtaining payment of any moneys clue from a contributory or from his estate, and whidi act cannot be convenientlj^ done in the name of the company ; and in all cases where ho takes out letters of administration, or otherwise uses his official name for obtaining j)ayment of any moneys due from a contributory, euch moneys shall, for the purpose of enabling him to take out such letters or recover such moneys, be deemed to be due to the official liquidator himself : To do and exccufe all such otlier things as may be necessary for winding up the affairs of the company and distributing its assets. {Amended by C. {JF. U.) Act, 1890, s. 12. As to Scotland, see Companies Act, 188G, «. 6.) The Companies Act, 1862. Act of 1862 1205 96. The Court may provide by any order that the [official] liquidator may exercise Discretion any of the above jjowers without the sanction or intervention of the Court, and of official ■where an official liquidator is provisioually appointed may limit and restrict his liquidator, powers by the order appointing- him. {As to Scotland, .see t'uDipanies Act, 188G, *. 5.) 97. The official liquidator may, with the sanction of the Court, appoint a solicitor or Appointment laio agent to assist him in the performance of his duties. of solicitor to {Eepeak'd as to Eiujland and Jfides lnj C. (//'. U.) Act, 1890, *. 33, and see official liqui- «• 1- (■!)•) dator. Ordinary Powers of Court. 98. As soon as may be after making an order for winding-up the company, the Collection Court shall settle a list of contributories, with power to rectify the register of and applica- members in all cases where such rectification is required in pursuance of this Act, tion of assets, and shall cause the assets of the company to be collected, and applied in discharge of its liabilities. (Sec C. {ir. U.) Act, 1890, s. 13.) 99. In settling the list of contributories, the Court shall distinguish between Provisiou as persons who are contributories in their own right and persons who are contributories to represeuta- as being representatives of or being liable to the debts of others ; it shall not be tive eoutribu- necessary, where the personal re2n-eseutative of any deceased contributory is placed tories. on the list, to add the heirs or devisees of such contributory, nevertheless such heirs or devisees may be added as and when the Court thinks fit. {See V. {jr. U.) Act, 1890, s. 13.) 100. The Court may, at any time after making an order for winding-up a Power of company, require any contributory for the time being settled on the list of coutribu- Court to re- tories, trustee, receiver, banker, or agent, or officer of the company, to pay, deliver, quire delivery convey, surrender, or transfer forthwith, or within such time as the Court directs, of property, to or into the hands of the [official] liquidator, any sum or balance, books, pajiers, estate, or effects which happen to be in his hands for the time being, and to which the company is prima facie entitled. {As to ScotUmd, sec Companies Act, 1886, s. 5. See also C. {W. U.) Act, 1890, «. 13.) 101. The Court may, at any time after making an order for winding-up the Power of company, make an order on any contributory for the time being settled on the list Court to order of contributories, directing payment to be made, in manner in the said order men- payment of tioned, of any moneys due from him or from the estate of the person whom he debts by con- represents to the company, exclusive of any moneys which he or the estate of the tributory. person whom he rcj^resents may be liable to contribute by virtue of any call made or to be made by the Court in pursuance of this part of this Act ; and it may, in making such order, when the company is not limited, allow to such contributory by way of set- off any moneys due to him or the estate which he represents from the company on any independent dealing- or contract with the comjjany, but not any moneys due to him as a member of the company in respect of any dividend or profit : Provided that when all the creditors of any company whether limited or unlimited are paid in full, any moneys due on any account whatever to any contributory from the company may be allowed to him by way of set-off against any subsequent call or calls. {Set-off extended to director and manager. Companies Act, 1867, s. 6.) 102. The Court may, at any time after making an order for winding-up a com- Power of pany, and either before or after it has ascertained the sufficiency of the assets of the Court to company, make calls on and order payment thereof by all or any of the coutribii- make calls, tories, for the time being settled on the list of contributories, to the extent of their liability for j)ayment of all or any sums it deems necessary to satisfy the debts and liabilities of the company, and the costs, charges, and expenses of winding it up, and for the adjustment of the rights of the contributories amongst themselves, and it may, in making a call, take into consideration the probability that some of the contributories upon whom the same is made may partly or wholly fail to pav their respective portions of the same. {See C. {jr. U.) Act, 1890, s. 13.) 1206 Appendix A. Power of Court to order payment into bank. Regulation of account witli Coui't. Provision in case of repre- sentative con- tributory not paying moneys ordered. Order conclu- sive evidence. Court may exclude creditors not proving with- in certain time. Court to adjust rights of coutribu- tories. Court to order costs. Dissolution of company, p. 39 Efgistrar to make minute of dissolution of company. Penalty on not reporting dinHolution of company. 103. Tlic Court may order any contributorj^ purchaser, or other person from wh(im money is due to the company to pay the same into the Bank of England or any branch thereof to the account of the [oflicial] liquidator instead of to the [official] liquidator, and such order may bo enforced in the same manner as if it had directed payment to the [official] liquidator. {Sec C. {W. U.) Act, 1890, ss. 11, 15.) 104. All moneys, bills, notes, and other securities paid and delivered into the Bank of England or any branch thereof in the event of a company being wound up by the Court, shall be subject to such order and regulation for the keeping of the account of such moneys and other effects, and for the payment and delivery in, or investment and payment and delivery out of the same as the Coui't may direct. {Sec C. {W. U.) Act, 1890, w. 11, 1.5.) 105. If any person made a contributory as personal representative of a deceased contributory makes default in paying any sum ordered to be paid by him, proceed- ings may be taken for administering the personal and real estates of such deceased contributory, or either of such estates, and of compelling payment thereout of the moneys due. 106. Any order made by the Coui't in pursuance of this Act upon any contri- butory shall, subject to the provisions herein contained for appealing against such order, be conclusive evidence that the moneys, if any, thereby appearing to be due or ordered to be paid are due, and all other pertinent matters stated in such order are to be taken to be truly stated as against all persons, and in all proceedings whatsoever, with the exception of proceedings taken against the real estate of any deceased contributory, in which case such order shall only be primd facie evidence for the purpose of charging his real estate, unless his heirs or devisees were on the list of contributories at the time of the order being made. 107. The Court may fix a certain day or certain days on or within which creditors of the company are to prove their debts or claims, or to be excluded from the benefit of any distribution made before such debts are pro\ed. {A molded as to Scotland, Companies Act, 1886, s. 5; see also C. {TF. U.) Act, 1890, s. 13.) 108. Proceedings in the Court of the Vice-Warden of the Stannaries on proof of debts. {Rep. by Stannaries Act, 1896, s.-5.) 109. The Court shall adjust the rights of the contributories amongst th.cmselves, and distribute any surplus that may remain amongst the parties entitled thereto. 110. The Court may, in the event of the assets being insufficient to satisfy the liabilities, make an order as to the payment out of the estate of the company of the costs, charges, and expenses incurred in winding-up any company in such order of priority as the Court thinks just. 111. "Wlien the afl'airs of the company have been completely wound up, the Court shall make an order that the company be dissolved from the date of such order, and the company shall be dissolved accordingly. 112. Any order so made shall be reported by the official liquidator to the regis- trar, who shall make a minute accordingly in his books of the dissolution of such company. 113. If the [official] liquidator makes default iu reporting to the registrar, in the case of a com] any being wound up by the Court, the order that the company be dissolved, he shall be liable to a penalty not exceeding five pounds for every day during which he is so in default. [114. Petition to be lis pendens.'] {Repealed lij 30 ^- 31 Vict. c. 47, s. 1.) Power of (.'mirt 1o sum- mon pci'Bona Extraordinary Fou-ers of Court. 115. 'I'he (lonrt may, after it has made an order for winding-up the company, Mimirion before it any officer of tlic company or person known or suspected to have in his poHHCHaiou any of the estate or eliects of the company, or supposed to be The Companies Act, 1862. Act of 1862 1207 indebted to the company, or any person -\vlioni the Court may deem eajmble of before it sus- giviuf^ information concerning' tlie trade, dealings, estate, or effects of the comjiany ; pected of and the Court may require any such officer or person to produce any books, papers, having pro- deeds, writings, or other documents in his custody or power rehiting to the com- perty of pany ; and if any person so summoned, after being tendered a reasonable sum for his company. expenses, refuses to come before the Court at the time appointed, liaviiig no lawful impediment (made known to th(; Court at tlie time of its sitting, and allowed by it), the Court may cause such person to be aiiprehended, and brought befoi-e the Court for examination ; nevertheless, in cases where any person claims any lien on papers, deeds, or writings or documents produced by him, such production shall be without prejudice to such lien, and the Court shall have jurisdiction in the winding-up to determine all questions relating to such lien. [Amended as to Hcotland, Compmncs Act, 1886, s. 5.) [116. Special provisions as to Court of Vice-Warden of the Stannaries.] [Repealed by Slannaries Act, 1896, s. 5.) 117. The Court may examine upon oath, either by word of mouth or upon Examination written interrogatories, any person appearing or brought before them in manner of parties by aforesaid concerning the affairs, dealings, estate, or effects of the company, and niay Court, reduce into writing the answers of every such person, and require him to subscribe the same. [Amended as to Scotland, Companies Act, 1886, s. 5.) 118. The Court may, at any time before or after it has made an order for Power to winding-up a company, upon proof being given that there is probable cause arrest con- fer believing that any contributory to such company is about to quit the United tiibutoiy Kingdom, or otherwise abscond or to remove or conceal any of his goods or about to chattels, for the purpose of evading payment of calls, or for avoiding examination abscond, or in respect of the affairs of the company, cause such contributory to be arrested, and to remove or his books, papers, moneys, securities for moneys, goods, and chattels to be seized, conceal any of and him and them to be safely kept until such time as the Court may order. his j)roperty. [As to Scotland, see Companies Act, 1886, s. 5.) 119. Any powers by this Act conferred on the Court shall be deemed to be in Powers of addition to and not in restriction of any other powers subsisting, either at law or Court cumu- in equity, of instituting proceedings against any contributory, or the estate of any lative. contributory, or against any debtor of the company, for the recovery of any call or other sums due from such contributory or debtor, or his estate, and such proceedings may be instituted accordingly. Enforcement of and Appeal from Orders. 120. All orders made by the Court of Chancery in England or Ireland under this Power to Act may be enforced in the same manner in which orders of such Court of Chancery enforce made in any suit pending therein maybe enforced, and for the purposes of this part orders. of this Act the Court of the Vice- Warden of the Stannaries shall, in addition to its ordinarij pntcers, have the same power of enforcing any orders made by it as the Court of Chancery in England has in relation to matters tvithin the jurisdiction of such Court, a)td for the last-mentioned purposes the jurisdiction of the Vice-Warden of the Stannaries shall be deemed to be co-cxtensire in local limits tvith the jurisdiction of the Court of Chancery in England. [See Stannaries Court [Abolition) Act, 1896.) 121. Where an order, interlocutor, or decree has been made in Scotland for Power to winding-up a company by the Court, it shall be competent to the Court in Scotland order con- during ses.'^inn, and to the Lord Ordinary on the Bills during vacation, on production tributories in by the liquidators of a list certified by them of the names of the contributories liable Scotland to in payment of any calls which they may wish to enforce, and of the amount duo by pay calls, each contributory respectively, and of the date when the same became due, to pronounce forthwith a decree against such contributories for payment of the suras bo certified to be due by each of them resjiectivelj', with interest from the said date till payment, at the rate of five pounds per centum per annum, in the same way and to the same eft'ect as if they had sevei-ally consented to registration for execu- tion, on a charge of six days, of a legal obligation to pay such calls and interest ; and such decree may be extracted immediately, and no suspension thereof shall be competent, except on caution or consignation, lualess with special leave of the Court or Lord Ordinary. [See Companies Act, 1886, s. 5.) 1208 Appendix A. Mode of deal- ing -nnth orders to be enforced by other Courts. Appeals from orders. Order made 122. Any order made by the Court in England for or in the course of the in Eno-land to ■windino'-up of a company under this Act shall be enforced in Scotland and Ireland be enforced in in the Courts that would respectively have had jurisdiction iu respect of such Ireland and company if tlie registered oifice of the company has been situate in Scotland or Scotland. Ireland, and iu the same manner in all respects as if such order had been made by the Courts that are hereby required to enforce the same ; and in like manner orders, interlocutors, and decrees made by the Court in Scotland for or in the course of the winding-up of a company shall be enforced in England and Ireland, and orders made by the Court in Ireland for or in the course of winding-up a company shall be enforced in England and Scotland by the Courts which would respectively have had jurisdiction in the matter of such company if the registered office of the company were situate in the division of the United Kingdom where the order is required to be enforced, and in the same manner in all respects as if such order had been made by the Court required to enforce the same in the case of a company within its own jurisdiction. (.SVc «i to Scotland, CoinjMinies Act, 1886, s. 5.) 123. Where any order, interlocutor, or decree made by one Court is required to be enforced by another Court, as hereinbefore provided, an office copy of the order, interlocutor, or decree so made shall be produced to the proper officer of the Court required to enforce the same, and the production of such office copy shall be sufficient evidence of such order, interlocutor, or decree having been made, and thereupon such last-mentioned Court shall take such steps in the matter as may be requisite for enforcing such order, interlocutor, or decree, in the same manner as if it were the order, interlocutor, or decree of the Court enforcing the same. {As to Scotland, see Companies Act, 1886, s. 5.) 124. Rehearings of and appeals from any order or decision made or given in the matter of the winding-up of a company by any Court having jurisdiction under this Act may be had in the same manner and subject to the same conditions in and subject to which appeals may be had from any order or decision of the same Court in cases within its ordinary jurisdiction ; subject to this restriction, that no such rehearing or appeal shall be heard unless notice of the same is given within three zcctks after any order complained of has been made, in manner in which notices of ajjpeal are ordinarily given according to the practice of the Court appealed from, unless such time is extended by the Court of Appeal : provided, (.^-e. [As to Scotland, see Companies Act, 1886, ss. 5, 6. The proviso did not relate to Scotland, and is repealed by Stannaries Act, 1896, s. 5. As to the time, see Jiidicaliire Act, 1894.) Judicial 125. In all proceedings under this part of this Act, all Courts, judges, and notice to be persons judicially acting, and all other officers, judicial or ministerial, of any Court, taken of or employed in enforcing the process of any Court, shall take judicial notice of the siguature of signature of any officer of the Courts of Chancery or Bankruptcy in England or in officers. Ireland, or of the Couit of Session in Scotland, or of the rer/istrar of the Court of the Vice-Warden of the Stannaries, and also of the official seal or stamp of the several offices of the Com-ts of Chancery or Bankruptcy in England or Ireland, or of the Court of Session in Scotland, or of the Court of the Vice- Warden of the Stannaries, when such seal or stamp is appended to or impressed on any document made, issued, or signed under the provisions of this part of the Act, or any official copy thereof. [As to icords in italics, see Stannaries Court [Abolition Act), 1896.) Special com- 126. The Commissioners of the Court of Bankruptcy and the judges of the missioners County Courts in England who sit at places more than twenty miles from the for receiviDg General Post Office, and the commissioners of bankrupt and the assistant barristers evidence. and recorders in Ireland, and the sheriffs of counties in Scotland, shall be com- missioners for tlie purpose of taking evidence under this Act in cases where any company is wound up in any part of the United Kingdom, and it shall be lawful for the Court to refer the whole or any part of the examination of any witnesses under tliis Act to any person hereby appointed commissioner, although such com- missioner is out of the jurisdiction of the Court that made the order or decree for windiiig-u]) the company ; and every such commissioner shall, in addition to any j)ow(r of summoning and examining witnesses, and requiring the productitm or delivery of documeuts, and certifying or punishing defaults by witnesses, wliich he might lawfully exercise as a Commissioner of the Court of lyankruptcy, judge of a County Court, commissioner of bankrupt, assistant barrister, or recorder, or as a bheriff of a county, have in the matter so referred to him all the same powers of The Companies Act, 18G2. Act of 1862 1209 summoning and examining- witnesses, and reipiiriny tlie i)roJiictii)U (jr diliv( ry of documents, and i)unishing defaults by witnesses, and allowing costs and cliarges and expenses to witnesses, as the Court which made the oi'der for winding-up the company has ; and the examination so taken shall bo returned or reported to such last-mentioned Coiu-t in such manner as it directs. {The tvords in italics repealed hi/ S. L. II. Act, 1875.) 127. The Court may direct the examination in Scotland of any jierson for the Court may time being in Scotland, wliether a contributory of the company or not, in i-egard to order the the estate, dealings, or affairs of any company in the course of being wound up, or examination in regard to the estate, dealings, or affairs of any person being a contributory of of persons in the company, so far as the company may be interested therein by reason of his Scotland, being such contributory, and the order or commission to take such examination shall be directed to the sherilT of the county in which the person to be examined is resid- ing or happens to be for the time, and the sheriff shall summon such person to apjjear before him at a time and place to be specified in thesununons for examination upon oath as a witness or as a haver, and to produce any books, papers, deeds, or documents called for which may be in his possession or power, and the sheriff may take such examination either orally or upon written interrogatories, and shall report the same in writing in the usual form to the Court, and shall transmit with such report the books, papers, deeds, or documents produced, if the originals thereof are required and specified by the order, or otherwise such copies thereof or extracts therefrom, authenticated by the sheriff, as may be necessary ; and in case any person so summoned fails to appear at the time and place specified, or appealing refuses to be examined or to make the production required, the sheriff shall proceed against such person as a witness or haver duly cited, and failing to appear or refusing to give evidence or make production may be proceeded against by the law of Scotland ; and the sheriff shall be entitled to such and the like fees, and the witness shall be entitled to such and the like allowances, as sheriffs when acting as commissioners under appointment from the Court of Session and as witnesses and havers are entitled to in the like cases according to the law and practice of Scotland : if any objection is stated to the sheriff by the witness, either on the ground of his incompetency as a witness, or as to the production required to be made, or on any other ground whatever, the sheriff may, if he thinks fit, reporc such objection to the Court, and suspend the examination of such witness until such objection has been disposed of by the Court. [Amended as to Scotland, Coinjmiucs Act, 1886, «. 5.) 128. Any affidavit, affii-mation, or declaration requii-ed to be sworn or made Affidavits, '«;H«/<7CiV e"sddence of the liability of the persons named therein to be contributories : The liquidators may at any time after the passing of the resolution for winding-up the company, and before they have ascertained the sufliciency of the assets of the company, call on all or any of the contributories for the time being' settled on the list of contributories to the extent of their lia- bility to pay all or any sums they deem necessary to satisfy the debts and liabilities of the company, and the costs, charges, and expenses of winding it up, and for the adjustment of the rights of the contributories amongst themselves, and the liquidators may in making a call take into considera- tion the probability that some of the contributories upon whom the same is made may partly or wholly fail to pay their respective portions of the same : The liquidators shall pay the debts of the company, and adjust the rights of the contributories amongst themselves. AVhere a company limited by guarantee, and having a capital divided into is being w'ouiid up voluntarily, any share capital that may not have been called up shall be deemed to be assets of the company and to be a .specialty debt due from each member to the company to the extent of any sums that may be unpaid on any shares lield by liim, and payable at such time as may be appointed by tlif liquidators. 135. A cfniipany about to bo Avound up voluiitarily, or in the course of being wound up voluntarily, may, by an extraordinary resolution, delegate to its creditors, or to any (^onmiittee of its creditors, the power of appointing liquidators or any of tliein, and supplying any vacancies in the appointnient of licpiidators, or may by a lilcf; resolution enter into any aiTangement with respect to the powers to be exer- cised by the liijuidatoi-s, and the manner in which tliey are to be exercised; and any act dime ]»y tlio creditors, in pursuance of sucli delegated power, shall have the BUTiio olfect us if it liad been done by the company. (9. (10.) 134 shares. TiTE Companies Act, Wi2. Act of 1862 1211 136. Any an-aiig-cmeut entered into between a company about to be wound up Avvangement Voluntarily, or in tlie com-se of being wound tip vohmtarily, and its creditors, sliall when binding bo binding on the company if sanctioned by an extraordinary resolution, and on the on creditors, creditors if acceded to l)y three-fourths in number and value of the creditors, sub- ject to such riglit of appeal as is liei'einafter mentioned. 137. Any creditor or coiitributoiy of a company that lias in manno^r aforesaid Power of entered into anj^ arrangement A\ith its creditors may, within three weeks from the creditor or date of the completii)n of such an-angement, aj^peal to the Coiu-t against such contributory an-angement, and the Coiu't may tliereupon, as it thinks just, amend, vary, or to appeal, confirm tlie same. 138. "Wliere a company is being wound up voluntarily, the liquidators or any Power for contributory of the company may apply to the Court in England, Ireland, or Scot- liquidators or land, or to the Lord Ordinary on the bills in Scotland, in time of vacation, to deter- contributories mine any question arising iu the matter of such winding-up, or to exercise, as in voluntary respects the enforcing of calls, or in respect of any other matter, all or any of the winding-up to powers which the Coiu't might exercise if the company were being wound up by the a])ply to Coiu't ; and the Court or Lord Ordiuar}-, in the case aforesaid, if satisfied that the Court, determination of such (][uestion, or the i-ecpiired exercise of power, will be just and beneficial, may accede, wholly or paitially, to such application, on sucli tenus aud subject to such conditions as the Coiu-t thinks fit, or it may make such other order, interlocutor, or decree on such application as the Coiu-t thinks just. {As to mciuniKj of '' Conrt,^'' see C. {IF. U.) Act, 1890, as. 32 (2) 1.) 139. Where a company is being woimd up voluntarily the lic^uidators may from Power of time to time, during the continuance of such winding--up, summon general meetings liquidators to of the company for the pui-pose of obtaining the sanction of the company by special call general resolution or extraordinary resolution, or for any other prui:ioses they think fit ; and meeting. in the event of the winding-up continuing' for more than one year, the liquidators shall summon a g-encral meeting of the company at the end of the first year, and of each succeeding year from the commencement of the winding-up, or as soon there- after as may be convenient, and shall lay before such meeting an account showing their acts and dealings, and the manner in which the winding-up has been con- ducted ditring the preceding year. 140. If any vacancy occurs in the office of liquidators appointed by the company. Power to fill by death, resig-nation, or otherwise, the company iu general meeting may, subject up vacancy in to any arrangement they may have entered into with their creditors, fill up such liquidators, vacancy, and a general meeting for the puipose of filling up such vacancy may bo convened by the continiung liquidators, if any, or by any contributory of the com- pany, and shall be deemed to have been duly held if held in manner prescribed by the regulations of the company, or in such other manner as may, on application by the continuing liquidator, if any, or by any contributory of the company, be deter- mined by the Coiu-t. 141. If from any ca\ise whatever there is no lic|uidator acting in the case of a Power of voluntary winding-up, the Court may, on the application of a contributory, appoint Court to a liquidator or liquidators ; the Coiu't niay also, on due cause shown, remove appoint liqui- any liquidator, and appoint another liquidator to act in the matter of a voluntary dators. winding-np. {As to Scotland, see Companies Act, 1886, s. 5.) 142. As soon as the affaii-s of the company are fully wound up, the liquidators Liquidators shall make up an account showing the manner in which such winding-up has been on conclusion conducted, and the property of the company disposed of ; and thereupon they shall of winding-up call a general meeting of the company for the piu'pose of ha\'iug the account laid to make up before them, and hearing any explanation that may be given by the liquidators : an account, the meeting shall be called by advertisement, specifying the time, place, and object p_ 39 of such meeting ; and such advertisement shall be published one month at least pre\iously to the meeting, as respects comjaanies registered in England in the London Gazette, and as respects companies registered in Scotland in the Edinbiu'gh Gazette, and as respects companies registered in Ireland in the Dublin Gazette. 143. The liquidators shall make a return to the registrar of such meeting having Liquidators been held, and of the date at which the same was held, and on the cxpii-ation of to report three months from the date of the registration of such return the company shall be meeting to deemed to be dissolved : if the liquidators make default in making such retiu'u to registrar, the registrar, they shall iuciu- a penalty not exceeding five pounds for every day p 39 during which such default continues. 4i2 1212 Appendix A. Costs of 144. All costs, charges, and exj^enses properly incuiT(;(l in the voluntary voluntary winding-up of a company, including the remuneration of the liquidators, shall be liquidation. payable out of the assets of the company in priority to all other claims. Savin o- of 145. The voluntary -winding-up of a company shall not be a bar to the right of rights' of ^^y creditor of such company to have the same wound up by the Court, if the creditors. Coui-t is of opinion that the rights of such creditor will be prejudiced by a voluntary winding-up. Power of 146. Where a company is in course of being wound up voluntai-ily, and pro- Court to adopt ceedings are taken for the pui-pose of ha-\dng the same wound up by the Court, the proceedings Court may, if it thinks fit, notwithstanding that it makes an order directing the of voluntary company to be wound up by the Court, provide in such order or in any other order ■winding-up. for the adoption of all or any of the proceedings taken in the course of the voluntary winding-up. Power of Court on ap- plication to direct winding-up, subject to supervision. Petition for winding-up, subject to supervision. Court may have regard to wishes of creditors. Power to Court to appoiiit addi- tional liqui- dators in winding-up Bubject to eupervision. Effect of order of Court for winding-up subject to supervision. Winding-up subject to the Siipervisioti of the Court. 147. ^VTien a resolution has been passed by a company to wind up voluntarily, the Coui't may make an order directing that the voluntary -winding-up should continue, but subject to such super-vision of the Coui-t, and -with such liberty for creditors, contributories, or others to apply to the Coiu-t, and generally upon such terms and subject to such conditions as the Coiu't thinks just. [As to Scotland, see Companies Act, 1886, s. 5.) 148. A petition, praying wholly or in part that a voluntary winding-iip should continue, but subject to the supervision of the Court, and which winding-up is hereinafter refen-ed to as a winding-up subject to the super-pision of the Coiu-t, shall, for the purpose of gi-v-ing jurisdiction to the Coui-t over suits and actions, be deemed to be a jDetition for -v\'iuding-iip the company by the Court. 149. The Coiu-t may, in determining whether a company is to be wound up altogether by the Coiu't or subject to the super-vision of the Court, in the appoint- ment of liquidator or liquidators, and in all other matters relating to the winding- up subject to supervision, have regard to the wishes of the creditors or contributories as proved to it by any sufficient e-vidence, and may direct meetings of the creditors or contributories to be summoned, held, and regulated in stich manner as the Court directs, for the piu-pose of ascertaining theii* wishes, and may appoint a person to act as chairman of any such meeting, and to report the result of such meeting to the Coiui; : in the case of creditors, regard sTiall be had to the value of the debts due to each creditor, and in the case of contributories to the niimber of votes conferred on each contributory by the regulations of the company. {As to Scotland, see Companies Act, 1S86, s. 5.) 150. "VVTiere any order is made by the Coiut for a winding-up subject to the siiper^ision of the Coiu-t, the Coui-t may, in such order or in any subsequent order, appoint any additional liquidator or liqmdators ; and any liquidators so appointed by the Court shall have the same powers, be subject to the same obligations, and in all respects stand in the same position as if they had been appointed by the company : the Court may from time to time remove any liquidators so appointed by the Court, and fill up any vacancy occasioned by such removal, or by death or resignation. [As to Scotland, see Companies Act, 1886, s. 5.) 151. Wlicre an order is made for a -winding-up subject to the supervision of the Court, tlio liquidators appointed to conduct such winding-up may, subject to any restrictions imposed by the Coiu't, exercise all their powers, -nathout the sanction or int(rventi(jn of the Coui't, in the same manner as if the company were being wound up altogetlier vohmtarily ; but, save as aforesaid, any order made by the Court for a winding-uii subject to the supervision of the Court, shall for all purposes, including tlie staying of actions, suits, and other proceedings, be deemed to be fin order of the Court for Avinding-up the company by the Court, and shall confci- full authority on the Couit to make calls, or to enforce calls made by the li(juidators, and ting wound up, all books, accounts, and docu- rp^^ books of ments of the company and of the liquidators shall, as between the eontributorics of ^^^^ company the company, be prhnd facie evidence of the truth of all matters pui-porting to be to be evidence tlierein recorded. 155. Where any company has been wound up under this Act, and is about to be As to disposal dissolved, the books, accounts, and documents of the company and of the liqui- of books, dators may be disposed of in the following way ; that is to say, where the company accounts, and has been wound up by or subject to the super\'ision of the Coiu-t, in such way as documents of the Court directs, and where the company has been wound up voluntarily, in such the company, way as the company by an extraordinary resolution directs ; but after the lapse of five years from the date of such dissolution, no responsibility shall rest on the comi^any or the liquidators, or any one to whom the custody of such books, accounts, and dociiments has been committed, by reason that the same or any of them cannot be made forthcoming to any party or parties claiming to be interested therein. 156. Wlicre an order has been made for winding-up a company by the Court or Inspection of ■subject to the super^'ision of the Coiu-t, the Court may make such order for the in- books, spection by the creditors and contributories of the company of its books and papers ^gQ as the Court thinks just, and any books and papers in the possession of the com- pany may be inspected by creditors or contributories in coiiforniity with the order of tlie Court, but not fiu'ther or otherwise. 157. Any j)erson to whom anything in action belonging to the company is as- Power of signed in pvu'suance of this Act may bring or defend any action or suit relating to assignee to such thing in action in his own name. sue. 158. In the event of any company being wound up under tliis Act, aU debts j^gbts of all payable on a contingency, and all claims against the company, present or futiu-e, (descriptions certain or contingent, ascertained or sounding onlj^ in damages, shall be admissible ^^ ^^ proved, to proof against the company, a just estimate being made, so far as is possible, of the value of all such debts or claims as may be subject to any contiugency or sound only in damages, or for some other reason do not bear a certain value. [As to insolvent companies, see Jud. Act, 1875, s. 10.) 159. The liquidators may, with the sanction of the Coui-t, where the company is General bemg woiuid up by the Court or siibject to the supervision of the Court, and with scheme of the sanction of an extraordinary resoliition of the company where the company is liquidation being wound up altogether voluntarily, pay any classes of creditors ui full, or make maybe sanc- such compromise or other aiTangement as the liquidators may deem expedient with tioned. creditors or persons claiming to be creditors, or persons having or allegiug them- selves to have any claim, present or futiu-e, certain or contingent, ascertained or sounding only in damages against the company, or whereby the company may be rendered liable. [Amended by C. [TF. U.) Act, 1890, s. 12.) 160. The liquidators may, with the sanction of the Court where the company is Power to_ being wound up by the Coiu-t or subject to the super^ision of the Court, and with compromise. the sanction of an extraordinary resolution of the company where the company is being wound iip altogether voluntarily, compromise all calls and liabilities to calls, debts, and liabilities capable of resulting in debts, and all claims, whether present or future, certain or contingent, ascertained or sounding only in damages, subsist- ing or siipposed to subsist between the company and any contributory or alleged contributory, or other debtor or person apprehending liability to the compan}', and aU questions in any way relating to or affecting the assets of the company or the winding-up of the company, upon tho receipt of such sums, payable at such tunes, 1214 Appendix A. Power for liquidators to accept shares, Sec. as a con- sideration for- Eale of pro- perty of company, pp. 219, 220, 306, 307, 468 ct scq., 1125 et seq., 1156 ct scq. Mode of determining price. p. 1126 Certain attachments, sequestra- tions, and executions to be void. Fraudulent preference. Piiwrr of Court ting wound up by tlie Court or subject to the supcr\'ision of the Court, and a resolution for winding-up thr- cfimpany shall, in the case of a voluntary winding-up, bo deemed to correspond with tlic act of bankrupt(\y, in the case of an individual ti-ader ; and any conveyance or assignment made by any company formed under this Act of all its estate and ffPi 'Is to trustees for the benefit of all its eredifors shall be void to all intents. 165. il'lii II- III Ihr ciiiirsr of Ijic ir'uidiiKj-iip of ail y i-uiiiixoiji loidir this Act, it appears that any past or present director, manager, official or other liquidator, or any officer of The Companies Act, 1862. Act of 1862 1215 fiuch company^ has, misapplied or retained in his ouii hands, or become liable or accountable assess for an II iiioiiri/s of the coin pan i/, or been (/Hillij of any misfeasance or breach of trust in damages relation to the company, the Court may, on the application of any liquidator, or of any against delin- creditor or contributory of the company, notivithstandiny that the offence is one for which quent direc- the offender is criminally responsible, examine into the conduct of such director, manager, tors and or otlier officer, and compel him to repay any moneys so misapplicdor retained, or for u-hich officers. he has become liable or accountable, toyether with interest after such rate as tJie Court thinl's just, or to contribute such sums of money to the assets of the company by way of compensation in respect of such misapplication, retainer, misfeasance, or breach of trust, as the Court thinks just . {Repealed as to Enyland and Wales by C. {W. U.) Act, 1890, .<■■. 33, and replaced by s. 10.) 166. If any director, officer, or contributory of any company wound up under Penalty on this Act destroys, mutilates, alters, or falsifies any books, papers, writings, or falsification secimties, or makes or is privy to the making of any false or fraudulent entry in of books, any register, book of account, or other dociunent belonging to tlie company with intent to dcfr;uid or deceive any person, every person so offending shall be deemed to be guilty of a misdemeanor, and upon being convicted shall be liable to imprison- ment for any term not exceeding two years, with or without hard labour. 167. Where any order is made for winding-up a company by the Coui-t or Prosecution subject to the super%'ision of the Court, if it appear in the course of such winding- of delinquent up that any past or present director, manager, officer, or member of such company directors in has been guilty of any offence in relation to the company for which he is criminally the case of responsible, the Coiu-t may, on the application of any person interested in such winding-up "W'iuding-up, or of its own motion, direct the official liquidators, or the liquidators by Court. (as the case may be) , to institute and conduct a prosecution or prosecutions for such offence, and may order the costs and expenses to be paid out of the assets of the company. 168. Where a company is being Avound up altogether voluntarily, if it appear Prosecution to tlie liquidators conducting such winding-up that any past or present dii-ector, of delinquent manager, officer, or member of such company has been guilty of any offence in directors, &c. relation to the company for which he is criminally responsible, it shall be lawful in case of for the liquidators, with the previous sanction of the Court, to prosecute such voluntary offender, and all expenses properly incurred by them in such prosecution sliaU bo winding-up. payable out of the assets of the company in priority to aU other liabilities. 169. If any person, tipon any examination upon oath or affirmation authorized Penalty of under this Act, or in any affida^-it, deposition, or solemn affinnation in or about the perjury, winding-up of any company under this Act, or otherwise in or about any matter arising imder this Act, wilfiilly and corruptly gives false evidence, he shall, upon conviction, be liable to the penalties of wilful perjury. Foicer of Cvurts to mahc Rules. 170. [Power of Lord Chancellor of Great Britain to make rules.] {Extended by Companies Act, 1867, s. 20 ; but repealed by S. L. R. Act, 1881.) 171. In Scotland the Court of Session may make such rules concerning the mode Power of of winding-up as may be necessary by Act of Sederunt ; but, until such rules are Court of made, the general practice of the Coui't of Session in suits pending in such Court Session in shall, so far as the same is applicable, and not inconsistent Avith this Act, apply to Scotland to aU proceedings for Avinding-up a company, and official liquidators shall in all make rules, respects be considered as possessing the same poAvers as any trustee on a banki'iipt estate. {Extended by Companies Act, 1867, «. 20.) 172. [Power to make rules in Stannaries Court.] {Extended by Companies Act, 1867, s. 20 ; but repealed by Stannaries Act, 1896, s. b.) 173. In Ireland the Lord Chancellor of Ireland may, as respects the Avinding-iip Power of Lord of companies in Ireland, Avith the adA^ce and consent of the Master of the Rolls in Chancellor of Ireland, exercise the same poAver of making i-ules as is by this Act hereinbefore Ireland to given to the Lord Chancellor of Great Britain ; but until such rules are made tlie make rules, general practice of the Court of Chancery in Ireland, including the practice hitherto in use in Ireland in winding-up companies, shall, so far as the same is applical.'le and not inconsistent with this Act, apply to aU proceedings for Avinding-iij) a company. {Extended by Companies Act, 1867, ■'• 20.) 1216 Appendix A. PART V. Registration Office. Constitution 174. The registration uf comjianics under this Act shall bo conducted as follows ; of registration (that is to say,) office. (1.) The Board of Trade may from time to time appoint such registrars, assistant registrars, clerks, and scn^ants as they may think necessary for the I'egis- tration of companies under this Act, and remove them at pleasure : (2.) The Board of Trade may make such regulations as they think fit with respect to the duties to be performed by any such registrars, assistant registrars, clerks, and servants as aforesaid : (3.) The Board of Trade may from time to time determine the places at ■which offices for the registration of companies are to be established, so that there be at all times maintained in each of the three parts of the United Kingdom at least one such office, and that no company shall be registered except at an office -Rdthin that part of the United Kingdom in which by the memo- randimi of association the registered office of the company is declared to be established ; and the Board may require that the registrar's office of the Court of the Vice-Warden of the Stannaries shall be one of the offices for the registration of companies formed for working mines within the juris- diction of the Coiu't : C4.) The Board of Trade may from time to time direct a seal or seals to be pre- pared for the authentication of any dociunents required for or connected with the registration of companies : (o.) Every person may inspect the documents kept by the Registrar of Joint Stock Comjjanies ; and there shall be paid for such inspection such fees as may be appointed by the Board of Trade, not exceeding one shilling for each inspection ; and any person may require a certificate of the incorporation of any company, or a copy or extract of any other document or any part of any other document to be certified by the registrar ; and there shall be paid for such certificate of incorporation, certified copy, or extract such fees as the Board of Trade may appoint, not exceeding five shillings for the certificate of incorporation, and not exceeding sixpence for each folio of such copy or extract, or in Scotland for each sheet of two hundred words : (6.) The existing registrar, assistant registrars, clerks, and other officers and servants in the office for the registration of joint stock companies shall, during the pleasure of the Board of Trade, hold the offices and receive the salaries hitherto held and received by them, but they shall in the execution of their duties conform to anv regulations that may be issued by the Board of Trade : (7.) There shall be paid to any registrar, assistant registrar, clerk, or servant that may hereafter be employed in the registration of joint stock com- panies such salary as the Board of Trade may, with the sanction of the Commissioners of the Treasury, direct : (8.) Whenever any act is herein directed to be done to or bj' the Registrar of Joint Stock Companies, such act shall until the Board of Trade otherwise directs, be done in England to or by the existing Registrar of Joint Stock Companies, or in his absence to or by such person as the Board of Trade may for the time being authoiize ; in Scotland to or by the existing Registrar of Joint Stock Companies in Scotland ; and in Ireland to or by the existing Assistant Registrar of Joint Stock Companies for Ireland, or by such person as the Board of Trade may for the time being authorize in Scotland or Ireland, in the abseii(;e of the registrar ; but in the event of tlie Board of Trade altering the constitution of the existing registry office, sucb act shall be done to or by such officer or officers and at such place or places with r('fercncc to the local situation of the registered offices of the com- panies to be registered as the Board of Trade may appoint. PART VI. Al'I'LICATION OF Act to CcWrANIES EEGISTKKED UNDER THE JoiNT StOCK CoMiwNiES Acts. J'cfinition of 175. The expression "Joint Stock Companies Acts" as used in this Act .shall Jfiint St/M'k im .-in •• The Joint St/^)ck Companies Act, lS;i6," " The Joint Stock Companies Acts, The Companies Act, 1862. Act of 1862 1217 18.50, 1857," "The Joint Stt)ck Baiikiiij? Companies Act, 1857," and " Tlic Aft Companies to (liable Joint Stock Bankin^r Companies to bo formed on tlu; Priuciijle of Limited Acts. Liability," or any one or more of sni'li Acts, as the case may require ; but sliall not include the Act passed in the eii^-hth year of the reign of her present Majesty, (thapter one hundi-od and ten. and intituled " An Act for the Registration, Incor- porati(m, and Rcgvdation of Joint Stock Companies." 176. Subject as hereinafter mentioned, this Act, with the exception of Table A. Application of in the first Schedule, .shall apply to companies formed and registered under the said Act to com- Joint Stock Companies Acts, or any of them, in the same manner in the case of a panics formed limited company as if sucli company had been formed and registered under this Act under Joint as a company limited by shares, and in the case of a company otlier than a limited Stock Corn- company as if .such company had been formed and registered as an unlimited com- panics Acts, pany under this Act, vvitii this qualification, that wherever reference is made expressly or impliedly to the date of registration, such date shall bo deemed to refer to the date at which .such companies were respectively registered under the said Joint Stock Companies Acts or any of them, and the power of altering regulations by special resolution given by this Act shall, in the case of any company formed and registered under the said Joint Stock Companies Acts or any of them, extend to altering any provisions contained in the Table marked B. annexed to " The Joint Stock Companies Act, 1856," and .shall also in the case of an unlimited comp.any formed and registered as last aforesaid extend to altering any regTilations relating to the amount of capital or its distribution into shares, notwithstanding such rcgidations are contained in the memorandum of association. 177. This Act shall apply to companies registered but not formed under the said Application of Joint Stock Companies Acts or any of them, in the same manner as it is hereinafter Act to corn- declared to apply to companies registered but not formed under this Act, -with this panics regis- qualification, that wherever reference is made expressly or impliedly to tlie date of tered under registration, such date shall be deemed to refer to the date at which such companies Joint Stcjck Avere respectively registered under the said Joint Stock Companies Acts or any of Companies them. _ Acts. 178. Any company registered under the said Joint Stock Companies Acts or any ]\£o(je of trans- of them may cause its shares to be transferred in manner hitherto in use, or in such feiTiu"- shares, other manner as the company may direct. g-g PART VII. Companies authorized to eegistee tjndee this Act. ■ 179. The following regtdations shall be observed Tvith respect to the registration Regulations of companies under this part of this Act ; (that is to say,) as to registra- (1.) No company having the liability of its members limited by Act of Parliament tion of exist- or letters patent, and not being a joint stock company as hereinafter defijied, ing com- shaU register under this Act in pursuance of this part thereof : panies. (2.) No company having the lialjility of its members limited by Act of Parliament or by letters patent shall register under this Act in piu'suance of this part thereof as an unlimited company, or as a company limited by guarantee : (3.) No company that is not a joint stock company as hereinafter defined shall in pursuance of this part of this Act regi.ster under this Act as a company limited by shares : (4.) No company shall register under this Act in jnu-suance of this part thereof unless an assent to its so registering is given by a majority of such of its members as may be present, personally or by proxy, in eases where proxies are allowed by the regulations of the company, at some general meeting summoned for the purpose : (5.) Where a company not having the liability of its members limited by Act of Parliament or letters patent is about to register as a Limited company, the majority requii'cd to assent as aforesaid shall consist of not less than threc- foiirths of the members present, personally or by proxy, at .such last- mentioned general meeting : (6.) Where a company is about to register as a company limited by guarantee, the assent to its being so registered .shall be accompanied by a resolution declaring that each member undertakes to contribute to the assets of the company, in the event of the same being wound up, diu-ing the time that he is a member, or within (me year afterwards, for payment of tlie debts and liabilities of the company contracted before the time at which he 1218 Appendix A. Companies capable of being reoristered. Definition of joint stock company. Requisitions for registra- tion by com- panies, p. 6T9 Requisitions for registra- tion by exist- ing company not being a joint stock company. Powf-r for existing conij);iiiy to rfrgister amount of ntof:k instead of sliaros. Autlicntica- tion of Btatc- ceased to be a member, and of the costs, charges, and expenses of winding- up the company, and for the adjustment of the rights of the contributories amongst themselves, such amount as may be required, not exceeding a specified amount. In computing any majority under this section when a poll is demanded regard shall be had to the number of votes to which each member is entitled according to the regulations of the company of which he is a member. 180. With the above exceptions, and subject to the foregoing regulations, every company existing at the time of the commencement of this Act, including any com- pany registered under the said Joint Stock Companies Acts, consisting of seven or more members, and any company hereafter fonned in pursuance of any Act of Par- liament other than this Act, or of letters patent, or being a company engaged in working mines within and subject to the jurisdiction of the Stannaries, or being otherwise duly constituted by law, and consisting of seven or more members, may at any time hereafter register itself under this Act as an unlimited company, or a company limited by shares, or a company limited by guarantee ; and no such registration shall be invalid by reason that it has taken place with a view to the company being wound up. 181. For the purjioses of this part of this Act, so far as the same relates to the description of companies empowered to register as companies limited by shares, a joint stock company shall be deemed to be a company ha^dng a peiinanent paid-up or nominal capital of fixed aniovmt, di'S'ided into shares, also of fixed amoixnt, or held and transferable as stock, or divided and held partly in one way and partly in the other, and formed on the principle of ha\'ing for its members the holders of shares in siich capital, or the holders of such stock, and no other persons ; and such company when registered with limited liability under this Act shall be deemed to be a company limited by shares. 182. Proviso as to banking company. [Ecpcaled hy Companies Act, 1879, s. 6.) 183. Previously to the registration in pursuance of tlus part of this Act of any joint stock company there shall be delivered to the registrar the following docu- ments ; (that is to say,) (1.) A list showing the names, addresses, and occupations of all persons who on a day named in such list, and not being more than six clear days before the day of registration, were members of such company, with the addition of the shares held by such persons respectively, distinguishing, in cases where such shares are numbered, each share by its number : (2.) A copy of any Act of Parliament, royal charter, letters patent, deed of settle- ment, contract of copartnery, cost book regulations, or other instrument constituting or regulating the company : (3.) If any such joint stock company is intended to be registered as a limited com- pany, the above list and copy shall be accompanied by a statement specify- ing the following particulars ; (that is to say,) The nominal capital of the company and the number of shares into which it is divided : The number of shares taken and the amount paid on each share : The name of the company, with the addition of the word " limited" as the last word thereof : With the addition, in the case of a company intended to be registered as a company limited by guarantee, of the resolution declaring the amount of the guarantee. 184. Pre\'iously to the registration in pirrsuance of this part of this Act of any company not being a joiiit stock company there shall be delivered to the registrar a li.-t showing the names, addresses, and occupations of the directors or other managers (if any) of the company, also a copy of any Act of Parliament, letters patent, deed of settlement, contract of copartnery, cost book regulations, or other instiiiment constituting or regulating the company, with the addition, in the case of a company intended to be registered as a company lunitcd by guarantee, of the resolution declaring the amount of guarantee. 185. Where a joint stock company authorized to register under this Act has had \]\i- whole or any portion of its cajiital converted into stock, such company shall, as to the (ta])ital s(j convei-ti d, instead of diliveiing to the registrar a statement of shares, ddiver to the registrar a statement of the amount (tf stock belonging to the comi)any, and the names of the persons who were holders of such stock, on some day to 1)(! named in the statement, not more than six clear days before the day of legisti-ation. 186. Ihe lists of members and directors and any other particulars relating to the fxjinpaiiy hereby required to be delivered to the registrars shall bo ^f rified by a The Companies Act, 1862. Act of 1862 1219 declaration of the dii'cctors of the conij^iiiiy delivermg the same, or auy two of tlicin, ments of or of any two other principal officers of the company, made in piu'siianco of the Act existing' passed in the sixth year of the reign of his late Majesty lijug William the Fourth, companies, chapter sixty-two. p. 183 187. The registrar may require such evidence as he thinks necessary for the _ purpose of satisfying himself whether an existing company is or not a joint stock -l^egistrar may company as hen inlx 'fore defined. require eyi- 188. Every haiddng company existing at the date of the passing of this Act ^^^'^^ as to Avliich registers itself as a limited company shall, at least thirty days pre\'ious to i^^'-'^r'^ or obtaining a certificate of registration with limited liability, give notice that it is company, intended so to register the same to every person and partnership firm Avho have a On registra- hanking account A^ath the company, and such notice shall be given cither by deli\'er- tion of bank- ing the same to such person or firm, or learaig the same or putting the same into ing company the post addressed to him or tliem at such addi'css as shall have been last comniuiii- with limited cated or otherwise become known as his or their addi-ess to ov by the ccanpany ; and liability notice in case the company omits to give any such notice as is hereinbefore required to be to be given to given, then as between the company and the person or persons only who are for the customers, time being interested in the account in respect of which such notice ought to have p. 680 been given, and so far as respects such account and all variations thereof down to the time at which such notice shall be given, but not further or otherwise, the cer- tificate of registration ■n'ith limited liability shall have no operation. 189. No fees shall be charged in respect of the registration in pursuance of this Exemption of part of this Act of any company in cases where such company is not registered as a certain corn- limited company, or where pre-\aously to its being registered as a limited company panics from the liability of the shareholders was limited by some other Act of Parliament or by payment of letters patent. fees. 190. Any company authorized by this part of this Act to register with limited Power to liability shall, for the purpose of obtaining registration Math limited liability change company to its name, by adding thereto the word '* limited." chano-ename. 191. Upon compliance w-ith the requisitions in this part of this Act contained Ccrtiftiio of with respect to registration, and on pajmient of such fees, if any, as are payable recristratif n under the Tables marked B. and C. in the first schedule hereto, the registrar shall of^pxistino- certify under his hand that the company so applj'ing for registration is incorporated ooimianip" as a company under this Act, and in the case of a limited company, tliat it is ^ limited, and thereupon such company shall be incorporated, and shall have perpetual succession and a common seal, vidth power to hold lands ; and any banking company in Scotland so incorporated shall be deemed and taken to be a bank incorporated, constituted, or established by or under Act of Parliament. 192. A certificate of incorporation given at any time to any company registered Certificate to in pursuance of this part of this Act shall be conclusive e%idence that all the requi- be evidence sitions herein contained in respect of registration under this Act have been complied of compliance "with, and that the company is authorized to be registered under this Act as a lindtcd -with Act. or unlimited company, as the case may be, and the date of incorporation mentioned in such certificate shall be deemed to be the date at which the company is incorpo- rated under this Act. 193. All such property, real and personal, including all interests and rights in, Transfer of to, and out of property, real and personal, and including obligations and things in pi-opertv to action, as niay belong to or be vested in the company at the date of its registration comnan'v under this Act, shall on registration pass to and vest in the company as incorporated under this Act, for all the estate and interest of the company therein. 194. The registration in pursuance of this part of this-Act of any company shall Registration not affect or prejudice the liability of such company to have enforced against it, or under this Act its right to enforce, any debt or obligation inciu'red, or any contract entered into, not to aifect by, to, with, or on behalf of such company previously to such registration. obligations 195. All such actions, suits, and other legal proceedings as may at the time of inciUTcdpre- the registration of any company registered in piu'suance of this part of this Act Piously to have been commenced by or against such company, or the public officer or any registration, member thereof, may be continued in the same manner as if such registration had Continuation not taken place ; nevertheless execiition shall not isstie against the effects of any of existino- individual member of such company upon any judgment, decree, or order obtained actions and in any action, suit, or proceeding so conrmenced as aforesaid ; but in the event of suits. the property and effects of the company being insufficient to satisfy such judgment, decree, or order, an order may be obtained for A\-indiiig-np the company. 196. Wlien a company is registered under this Act in piu'suauce of this part Effect of thereof, all provisions contained in any Act of Parliament, deed of settlement, con- registration tract of copartnery, cost book regidations, letters patent, or other instmment consti- under Act. tuting or regiilating the company, including, in the case of a company registei'ed 1220 Appendix A. as a company limited by g^iarantee, the resolution dcclarino; the amount of the gnarantee, shall be deemed to be conditions and regulations of the company, in the same manner and w-ith the same incidents as if they were contained in a registered memorandum of association and articles of association ; and all the provisions of this Act shall apply to such company, and the members, contributories, and creditors thereof, in the same manner in all respects as if it had been formed under this Act, subject to the pro'S'isions following ; (that is to say,) (1.) That Table A. in the First Schedule to this Act shall not, unless adopted by special resolution, apply to any company registered under this Act in pur- suance of this part thereof : (2.) That the provisions of this Act relating to the numbering of shares shall not apply to any joint stock company whose shares are not numbered : (3.) That no company shall have power to alter any provision contained in any Act of Parliament relating to the company : (4.) That no company shall have power, without the sanction of the Board of Trade, to alter any provision contained in any letters patent relating to the company : (5.) That in the event of the company being "wound up, every person shall be a contributory, in respect of the debts and liabilities of the company con- tracted prior to registration, who is liable, at law or in equity, to pay or contribute to the payment of any debt or liability of the company con- tracted prior to registration, or to pay or contribute to the payment of any sum for the adjustment of the rights of the members amongst themselves ill respect of any such debt or liability, or to pay or contribute to the pay- ment of the costs, charges, and expenses of winding-up the company so far as relates to such debts or liabilities as aforesaid ; and every such con- tributory shall be liable to contribute to the assets of the company, in the course of the Avinding-up, all sums due from him in respect of any such liability as aforesaid ; and in the event of the death, bankruptcy, or in- solvency of any such contributory as last aforesaid, or marriage of any such contributory being a female, the provisions hereinbefore contained "ndth respect to the representatives, heirs, and de't'isees of deceased contri- butories, and with reference to the assignees of bankrupt or insolvent conti'ibutories, and to the husbands of married contributories, shall apply : (6.) That nothing herein contained shall atithorize any company to alter any such provisions contained in any deed of settlement, contract of copartnery, cost book regailations, letters patent, or other instniment constituting or regu- lating the company, as would, if such company had originally been fonned under this Act, have been contained in the memorandum of association, and are not authorized to be altered by this Act : But nothing herein contained shall derogate from any power of altering its con- stitution or regulations which may be vested in any company registering under this Act in pursuance of this part thereof by virtue of any Act of Parliament, deed of settlement, contract of copartnery, letters patent, or other instrument constituting or regulating the company. {See Companies Act, 1867, s. 47.) Power of 197. The Court may, at any time after the presentation of a petition for C'ourt to rr- winding-up a company, registered in pursuance of this part of this Act, and before strain further making an order for winding-up the company, upon the application by motion of pro(x;tdin<'-s. any creditdr of the company, restrain fiu'ther proceedings in any action, suit, or legal proceeding against any contributory of the company as well as against the company as hereinbefore provided, uptm such tenns as the Court thinks fit. [As to Scotland, see Companies Act, 1886, s. 5.) Order for 198. Where an order has been made for Avindhig-up a company registered in winding- u J) pursuance of this part of tlie Act, in addition to the provasions hereinbefore c impanj'. contained, it is hereby further provided that no suit, action, or other legal proceed- ing shall be comnuiice d or proe'ceded with against any contributory of the company in respect of any debt of the company, except with the leave of the Coiut, and Hubjoct to such terms as the Court may impose. [As to Scotland, sec Companies Act, 1886, s. 5.) The Companies Act, 1862. Act of 1862 1221 PART VIII. Application of Act to Uneegisteeed Companies. 199. Subject as luTciuaftor mciitiuiicd, any partnership, association, or company, Wmdmg-up except railway luiiipaiiii's iacorpuratid by Act of Parliament, consi.stinj^ of more of unregis- than seven members, and not registered under this Act, and hereinafter included tered com- uudor the term um-egistered company, may bo wound up under this Act, and all the panics, provisions of this Act with respect to winding-up shall apply to such company, with the foUowiiig exceptions and additions : (1.) An unregistered company shall, for the purpose of determining the Court having jurisdiction in the matter of the -Hdnding-up, be deemed to be registered in that part of the United Kingdom where its principal place of business is situate ; or if it has a principal place of business situate in more than one part of the United Kingdom, then in each part of the United Kingdom where it has a principal place of business; moreover the principal place of business of an unregistered company, or (where it has a principal place of business situate in more than one part of the United Kingdom) such one of its principal places of business as is situate in that part of the United Kingdom in wliich proceedings are being instituted, shall for all the piu'poses of the -s^dnding-up of such company be deemed to be the registered office of the company : (2.) No unregistered company shall be wound up under this Act voluntarily or subject to the super\dsion of the Coiirt : (3.) The circumstances under which an unregistered company may be woimd up are as follows ; (that is to say,) (ff) Whenever the company is dissolved, or has ceased to cany on busi- ness, or is carrying on business only for the purpose of winding -ujj its affairs ; (A) Whenever the company is unable to pay its debts ; (c) Whenever the Court is of opinion that it is just and equitable that the company should be wound up. (4.) An unregistered company shall, for the pui-poses of this Act, be deemed to be unable to pay its debts, {a) Whenever a creditor to Avhom the company is indebted at law or in equity, by assignment or otherwise, in a sum exceeding fifty poimds then due, has served on the company, by leaving the same at the principal place of business of the company, or by delivering to the secretary or some director or principal officer of the company, or by otherwise serving the same in such manner as the Coiu't may approve or direct, a demand under his hand requiring the company to paj- the sum so due, and the company has for the space of three weeks succeeding the service of .such demand neglected to pay such sum, or to secui-e or compoimd for the same to the satisfaction of the creditor : {!)) Whenever any action, suit, or other proceeding has been instituted against any member of the company for any debt or demand due, or claimed to be due, "from the company, or from him in his character of member of the company, and notice in writing of the institution of such action, suit, or other legal proceeding having been served upon the company by leaving the same at the principal place of business of the company, or by delivering it to the secretary, or some director, manager, or principal officer of the company, or by otherwise serving the same in such manner as the Court may approve or dii-ect, the company has not within ten days after service of such notice paid, secured, or compounded for such debt or demand, or procured such action, suit, or other legal proceeding to be stayed, or in- demnified the defendant to his reasonable satisfaction against such action, suit, or other legal proceeding, and against all costs, damages, and exjienses to be incui-red by him by reason of the same : (c) Wiienever, in England or Ireland, execution or other process issued on a judgment, decree, or order obtained in any Court in favour of any creditor in any proceeding at laAV or in equity instituted by such creditor against the company, or any member thereof as such, or against any per- son authorized to be sued as nominal defendant on behaK of the company, is returned unsatisfied : {(fj Whenever, in the case of an um-egistered company engaged in work- ing mines witliin and subject to the jurisdiction of the Stannaries, a custo- 1322 Appendix A. Who to be deemed a con- tribiitory in the event of company being wound up. Power of Court to re- strain further proceedings. EfPect of order for winding- up company. Provision in case of un- registered company. Provisions in this pai-t of Act cuiuida- tive. uiary decree or order absolvito for the sale of the machinery, mak^rials, and "effects of such mine has been made in a creditor's suit in the Court of the Vice-Warden : (e) Wlienever, in Scotland, the inducite of a charge for payment on an extract decree, or an extract registered bond, or au extract registered pro- test, have expired without payment being made : (/ ) Whenever it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts. {See C. {JF. U.) Act, 1890, s. 32.) 200. In the event of an unregistered company being wound up every person shall be deemed to be a contributory who is liable, at law or in equity, to pay or contribute to the payment of aiiy debt or liability of the company, or to pay or contribute to the payment of any sum for the adjustment of the rights of the members amongst themselves, or to pay or contribute to the payment of the costs, charges, and expenses of -vvinding-up the company, and every siich contributory shaU be liable to contribiite to the assets of the company in the course of the winding-up all sums due from him in respect of any such liability as aforesaid; but in the event of the death, banki'uptcy, or insolvency of any contributory, or mai'riage of any female contributory, the provisions hereinbefore contained Mdth respect to the personal representatives, heirs, and devisees of a deceased contributory, and to the assignees of a bankrupt or insolvent contributory, and to the husband of man-ied contributories, shall applj'. 201. The Coiu-t may, at any time after the presentation of a petition for winding- up an imregistered company, and before making an order for winding-up the com- pany, upon the "application of any creditor of the company, restrain further pro- ceedings in any action, suit, or proceeding against any contributory of the company, or against the company as hereinbefore provided, upon such tenns as the Court thinks fit. [As to Seotkiiid, sec Comjiaiiics Act, 1886, s. 5.) 202. Where an order has been made for winding-up an unregistered company in addition to the provisions hereinbefore contained in the case of companies formed under this Act, it is hereby further provided that no suit, action, or other legal proceeding shall be conuneuced or proceeded mth against any contributory of the company in respect of any debt of the company, except with the leave of the Court, and subject to such terms as the Court may impose. 2C3. If any unregistered company has no power to sue and be sued in a common name, or if for any reason it appears expedient, the Court may, by the order made for winding-up such company, or by any subsequent order, direct that all such pro- perty, real and personal, including all interest, claims, and rights into and out of property, real and personal, and including things in action as may belong to or be vested in the company, or to or in any person or persons on trust for or on behalf of the company or any part of such property, is to vest in the official liquidator or official liquidators, by his or theii" official name or names, and thereupon the same or such part thereof as may be specified in the order shall vest accordingly, and the (jfficial liquidator or official liquidators may, in his or theii' official name or names, or in sucli name or names and after giving such indemnity as the Coiu't directs, Ijring or defend any actions, suits, or other legal proceeding relating to any ijropcrty vested in him or them, or any actions, suits, or other legal proceedings necessary to be brouglit or defended for the pui-poses of effectually winding-up the company and recovering the property thereof. 204. The provisions made by this part of the Act with respect to um-egistered coiiipanicH shall be deemed to be made in addition to and not in restriction of any provisions Ler( inbeforc contained with respect to winding-up companies by the Court, and the Court or (^flicial licjuidator may, in addition to anything contained in this part of the Act, exercise any powers or do any act in the case of unregistered cfinipanies which might be exercised or done by it (jr him in winding-up companies formed under this Act ; but au unregistered company shall not, except in the event of its being wound up, b(! deemed to be a company under this Act, and then onlj- to the extent provided by this part of this Act. The Companies Act, 1862. Act of 1862 1223 PART IX. Repeal of Acts, and Tempoeaet Peovisions. 305. After the commencement of tJiis Act there shall he repealed tiie several Aeti Repeal of specified in the First I'art of the Third Svhedide hereto, with this qtialijicat ion, that so Acts, much of the said Acts as is set forth ia the Second Part of the said Third Schedule shall l>e hcrehij re-enacted and continue in force as if unrepealed. [The part in italics repealed by S. L. R. Act, 1893.) 206. No repeal hereby enacted shall aifect— Saving clan.se (1.) AnijthvKj duly done under any Acts hereby repealed : fis to repeal. (2.) The incorporation of any company registered under any Act hereby repealed : (3.) Any riyht or pricileye acquired or liability incurred under any Act hereby repealed : (1.) Any penalty, forfeiture, or other punishment incurred in respect of any offence ayain^t any Act hereby repealed : (5.) Table B. in the schcdiile annexed to the Joint Stock Companies Act, 18-5G, or any part thereof, so far as the same applies to any company existing at the time of the commencement of this Act. [Sub-s. 4, repealed by S. L. li. Act, 1875 ; sub-ss. I and 3 repealed by S. L. II. Act, 1893.) 207. [Saving of existing proceedings for winding-up.] [Repealed by S. L. R. Act, 1875.) 208. "Where previously to the commencement of this Act any conveyance, inort- Savin'' of gage, or other deed has been made in pursuance of any Act hereby repealed, such conveyance deed shall be of the same force as if this Act had not passed, and for the pTUi^oses of deeds, such deed siich repealed Act shall be deemed to remain in full force. 209. Every insm-ance company completely registered under the Act passed in Compulsory the eighth year of the reign of her i^reseut Majesty, chapter one hundi-cd and ten, reo-istration intituled " An Act for the Registration, Incorporation, and Regulation of Joint Stock of certain Companies," shall on or before the second day of November one thousand eight companies, hundred and sixty-two, and every other company required by any Act hereby re- pealed to register under the said Joint Stock Companies Acts, or one of such Acts, and which has not so registered, shall, on or before the expiration of the thirty-first day from the commencement of this Act, register itself as a company under this Act, in manner and subject to the regulations hereinbefore contained, "with this exception, that no company comi^letely registered under the said Act of the eighth year of the reign of her present Majesty shall be required to deliver to the registrar a copy of its deed of settlement ; and for the purpose of enaljling- such insurance companies as are mentioned in this section to register under this Act, this Act sliall be deemed to come into operation immediately on the passing thereof ; nevertheless the registration of such companies shall not have any effect until the time of the commencement of this Act. No fees shall be charged in respect of the registration of any company reqnu-ed to register by this section. 210. If any company required by the last section to register under this Act Penalty on makes default in complying -nath the provisions thereof, then, from and after the company not day npon which such company is required to register under this Act, until the day registerinir. on which such company is registered under this Act (which it is empowered to do at 21 Vict. cC 14, any time), the following consequences shall ensue ; (that is to say,) s. 28. (1.) The company shall be incapable of suing either at law or in equity, but shall not be incapable of being made a defendant to a suit either at law or in equity : (2.) No di^ddend shall bo payable to any shareholder in such company : (3.) Each dii-ector or manager of the company shall, for each day diu-ing which the company so being in default canies on business incur a penalty not exceeding five pounds, and such penalty niay be recovered by any person, whether a shareholder or not in the company, and be applied by him to his own use : Nevertheless, such default shall not render the company so being in default illeg-al, nor subject it to any penalty or disability, other than as specified in tliis section ; and registration under this Act shall cancel any penalty or forfeiture, and put an end to any disability which any company may have inciu-red under any Act hereby repealed by reason of its not having registered under the said Joint Stock Com- panies Acts, ISoG, 1857, or one of them. 1224 Appendix A. 211 [Temporary power for companies to change registered oftice.] {Rfpcahd Ij>/ S. L. li. Act, 1875.) 212. [Rcstrirtions on issue of certificate.] {Repealed h>j S. L. R. Act, 1875.) FIEST SCHEDULE. pp. 81, 471 TABLE A. ^^ *^^- Regulations foe Management of a Company Limited by Shaees. Shares. (1.) If several persons are registered as joint holders of any share, any one of snch persons may give effectual receipts for any dividend payable in re- spect of such share. (2.) Every member shall, on payment of one shilling, or such less sum as the company in general meeting may prescribe, be entitled to a certificate, under the conmaon seal of the company, specif j-ing the share or shares held by him, and the amount paid up thereon. (3.) If such certificate is worn out or lost, it may be renewed, on payment of one shiUirig, or such less stmi as the company in general meeting may pre- scribe. Calls on Shares. (4.) The directors may from time to time make such calls upon the members in respect of all moneys unpaid on theii" shares as they think fit, pro- vided that twenty- one days' notice at least is given of each call, and each member shall be liable to pay the amoimt of calls so made to the persons and at the times and places appointed by the directors. (5.) A call shall be deemed to have been made at the time when the resolution of the directors authorizing such call was passed. (6.) If tlie call payable in respect of any share is not paid before or on the day appointed for payment thereof, the holder for the time being of such share shall be liable to pay interest for the same at the rate of five pounds per cent, per annum from the day appointed for the payment thereof to the time of the actual payment. (7.) The directors may, if they think fit, receive from any member wiUing to advance the same all or any part of the moneys due upon the shares held by him beyond the sums actually called for ; and upon the moneys so paid in advance, or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made, the company may pay interest at such rate as the member paying such sum in advance and the directors agree upon. Transfers of Shares. p. 398 (8.) Tlie instrument of transfer of any share in the company shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain a holder of such share until the name of the transferee is entered in tlie register book in respect thereof. (9.) Shares in the company shall be transferred in the following form : — I, A. Ji., of , in consideration of the sum of pounds paid to me by by agree to take tlic said share [or shares] subject to the same conditions. As witness our liauds, the day of . The Companies Act, 1862. Act of 1862 122^ (10.) Tlip fonipany in;iy (l(>cliiio to register any transfer of sliarC'S made by a member who is indebted to them. (11.) The transfer books shall be eloscd dnring the foiirti'cn days immediately precodino- tlie ordinary general Tiieeting in each year. TiansiHtHsioit of Shares. (12.) The executors or administrator.s of a deceased member shall be the only persons recognized by the company as having any title to his .share. (13.) Any person becoming entitled to a share in consequence of the death, bank- ruptcy, or insolvency of any mcml)er, or in consequence of the marriage of any female member, may be registered as a member upon such evidence being produced .as may from time to time be required by the company. (11.) Any person who has become entitled to a share in consequence of the death, bankruptcy, or insolvency of any member, tjr in consequence of the mar- riage of an J- female member, may, instead of being registered himself, elect to have some person to be named by him registered as a transferee of such share. (15.) The person so becoming entitled .shall testify such election by executing to his nominee an instrument of transfer of such share. (16.) The instnuxient of transfer sliall be jiresented to the company, accompanied with such evidence as the directors may require to prove the title of the transferor, and thereupon the cf)mpany nhall register the transferee as a member. Forfeiture of Shares. (17.) If any member fails to pay any call on the day appointed for payment thereof, the directors may at any time thereafter, diu'ing such time as the call remains unpaid, serve a notice on him, requiring him to pay such call, together with interest and any expenses that may have accrued by reason of .such non-payment. (18.) The notice shall name a further day on or before which .such call, and all interest and expenses that have accrued by reason of such non-pajnnent, are to be paid. It shall also name the place where payment is to be made (the place so named being cither the registered office of the company or .some other place at which calls of the company are usually made payable) . The notice shall also state that in the event of non-payment at or before the time and at the place appointed the shares in respect of which such call was made will be liable to be forfeited. (19.) If the reqiiisitions of any such notice as aforesaid are not complied with, any share in respect of which such notice has been given may at any time thereafter, before paj-ment of aU calls, interest, and expenses due in respect thereof, has been made, be forfeited, bv a resolution of the directors to that effect. (20.) Any share so forfeited shall be deemed to be the property of the company, and may be disposed of in such manner as the company in general meeting thinks fit. (21.) Any member whose shares have been forfeited .shall notwithstanding be liable to pay to the company all calls owing upon such shares at the time of the forfeitm-e. (22.) A statutory declaration in writing, that the call in respect of a share was P- 397 made and notice thereof given, and that default in pa^Tnent of the call wa.s made, and that the forfeiture of the share was made by a resolution of the dii-ectors to that effect, shall be sufficient evidence of the facts therein stated, as against all persons entitled to such share, and sudi declaration and the receipt of the company for the price of such share, shall constitute a good title to such share, and a certificate of proprietorship shall be delivered to a purchaser, and thereupon he shall be deemed the holder of such share discharged from all calls due prior to such purchase, and he shall not be bound to see to the application of the piu-chase-money. nor shall his title to such share be affected by any irregularity in the pro- ceedings in reference to such sale. P. 4k 1226 Appendix A. Conversion of Share-s into Stock. (23.) The directurs may, with the sanction of the company previously given in general meeting, convert any paid-up shares into stock. (24.) When any shares have been converted into stock, the several holders of svich stock may thenceforth transfer their respective interests therein, or any part of such interests, in the same manner and subject to the same regulations as and subject to which any shares in the capital of the com- pany may be transferred, or as near thereto as circumstances admit. (25.) The several holders of stock shall be entitled to participate in the dividends and profits of the companj' according to the amount of their respective interests in such stock ; and such interests shall, in proportion to the amount thereof, confer on the holders thereof respectively the same privi- leges and advantages for the purpose of voting at meetings of the com- pany, and for other purposes, as would have been conferred by shares of equal amount in the capital of the company ; but so that none of such privileges or advantages, except the participation in the dividends and profits of the company, shall be conferred by any such aHquot part of consolidated stock as would not, if existing in shares, have conferred such privnleges or advantages. It) crease in Capital . (26.) The directors may. vdth. the sanction of a special resolution of the company prevdously given in general meeting, increase its capital by the issue of new shares, such aggregate increase to be of such amoujit, and to be divided into shares of such respective amounts, as the company in general meeting direct, or, if no direction is given, as the directors think expedient. (27.) Subject to any dii-ection to the contrary that may be given by the meeting that sanctions the increase of capital, all new shares shall be offered to the members in proportion to the existing shares held by them, and such offer shall be made by notice specifying the number of shares to which the member is entitled, and limiting a time within which the offer, if not accepted, -ttTll be deemed to be declined, and after the expii-ation of such time, or on the receipt of an intimation from the member to whom such notice is given that he declines to accept the shares oilered, the directors may dispose of the same in such manner as they think most beneficial to the company. (28.) Any capital raised by the creation of new shares shall be considered as part of the original capital, and shall be subject to the same provisions with reference to the pajTnent of calls, and the forfeiture of shares on non-pajTnent of calls, or otherwise, as if it had been part of the original capital. General Meetings. (29.) The first general meeting shall be held at such time, not being more than six months after the registration of the company, ai^d at such place, as the directors may determine. (30.) Subsctpient general meetings shall be held at such time and place as vany be prescribed by the company in general meeting ; and if no other time or ])lace is prescribed, a general meeting shall be held on the first Monday in February in every j^ear, at such place as may be detcnnined by the dii'ectors. (31.) The above-mentioned gi^nernl meetings shall be called ordinary meetings ; all other general meetings shall be called extraordinary. (32.) Tlie directors niaj% whenever they think fit, and they shall upon a requisi- tion made in ■WTiting by not less than one-fifth in number of the members of the company, convene an extraordinary general meeting. (33.) Any re(|uisitif)n made by the members shall express the object of the meeting proposed to be called, and shall bo left at the registered office of the company. (34.) Upon the receipt of such rcqiiisition the directors shall forthwith proceed to convent^ an extraordinary general meeting. If they do not proceed to convene the same within twenty-one days from tlie date of the requisition, the rcquisitionists, or any other mem1)ers anioimting to the reqiiired number, may themselves convene an extraordinary general meeting. The Companies Act, 18G2. Act of 1862 1227 Proceedings at General Meetings. (35.) Seven days' notice at the least, spccifyinf^ the place, the day, and the hour of meetinii:, and in cane of sjjecial hiisiness the general natur.' of such business, shall be given to the members in manner hereinafter mentiijiied, or in such other manner, if any, as may bo prescribed by the company in general meeting ; but the non-receipt of such notice by any member shall not invalidati,' the proceedings at any general meeting'. (30.) All business shall be deemed sjjccial that is transacted at an extraordinary \k 505 meeting, and all that is transacted at an ordinary meeting, ■with the cxceji- tion of saiK'tinning a dividend and the consideration of the accounts, balance sheets, and the ordinary report of the du-eetors. (37.) No business shall be transacted at any general meeting, ex during- the first and second years ensning- the first ordinary meeting of the company shall, unless tlie directors ag-ree among- themselves, Le detenniued by ballot : iu every sub- sequent year the one-third or other nearest number wlio have been longest in office shall retire. (60.) A retiring- director shall be re-clig-ible. (61.) The company at the general meeting at wliieh any directors retii'e in manner aforesaid shall fill up the \acated offices by electing a like number of persons. (62.) If at any nutting- at Mhich an election of directors ought to take place the places of the vacating directors are n(jt filled up, the meeting shall stand adjourned till the same day in the next week, at the same time and place ; and if at such adjourned meeting the places of the vacating dii-ectors are not filled up, the vacating directors, or such of them as have not had their places filled up, shall continue in offi(-e until the ordinary meeting in the next year, and so on from time to time until their places are fiUed up. (63.) The company may from time to time, in general meeting, increase or reduce the number of directors, and may also deteiioinc in what rotation such increased or reduced nrrmber is to go out of office. (64.) Any casual vacancy occurring iu the board of directors may be filled up by the directors, but any person so chosen shall retain his office so long only as the vacating director would have retained the same if no vacancy had occurred. (65.) The company, in general meeting-, may, by a special resolution, remove any director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead : the person so appointed shall hold office during such time only as the dii-ector in whose place he is appointed v^'ould have held the same if he had not been removed. Fioccedings of Dircctora. (66.) The dii-ectors may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they think fit, and determine the quorum necessary for the transaction of business : questions arising at any meeting shall be decided by a majority of votes : in case of an equalitj' of votes the chainnan shall have a second or casting vote : a director may at any time summon a meeting- of the directors. (67.) The dii-ectors may elect a chaii-man of their meetings, and determine the period for which he is to hold office ; but if no such chairman is elected, or if at any meeting the chairman is not present at the time appomted for holding the same, the directors present shall choose some one of their number to be chairman of such meeting. (68.) The directors niay delegate any of their powers to committees consisting of such member or members of their body as they think fit : any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on them by the directors. (69.) A committee may elect a chairman of their meetings : if no siich chaii-man is elected, or if he is not present at the time appointed for holding the same, the members present shall choose one of theii- number to be chairman of such meeting. (70.) A committ^^'e may meet and adjoxu-n as they think proper : questions arising at any meeting shall be determined by a majority of votes of the members present ; and in case of an equality of votes the chairman shall have a second or casting vote. (71.) All acts done by anymeeting of the dii'ectors, or of a committee of directors, or by any person acting as a director, shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such directors or persons acting as aforesaid, or that they or any of them were disqiialified, be as valid as if every such person had been duly appointed and was qualified to be a director. l-'50 Appendix A. Jjivideruh. (72.) The directui's inay, ■vvith the sanction of the company in general meeting, declare a dividend to be paid to the members in proportion to their Hhares. (73.) No -dividend shall be payable except out of the profits arising from the business of the company. (74.) The directors may, before recommending any dividend, set aside out of the profits of the company such sum as they think proper as a reserved fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining the works connected with the business of the comjjany, or any part tliereof : and the directors may invest the sum so set apart as a reserved fund iipon such seciu'ities as they may select. (lb.) The directors may deduct from the dividends payable to any member all such simis of money as may be due from him to the company on account of calls or otherwise. (76.) Notice of any di\ndend that may have been declared shall be given to each member in manner hereinafter mentioned ; and all dividends unclaimed for three years after having been declared may be forfeited by the directors for the benefit of the company. (77.) No dividend shall bear interest as against the company. Accounts. (78.) The directoi-s shall cause true accounts to be kept, — Of the stock in trade of the company : Of the smns of money received and expended by the ct)mpany, and the matter in respect of which such receipt and expenditure takes place ; and, Of the credits and liabilities of the company : The books of accoimt shall be kept at the registered office of the company, and, subject to any reasonable restrictions as to the time and manner of inspecting- the same that may be imposed by the company in general meeting, shall be open to the inspection of the members dtu-ing the hours of business. (79.) Once at the least in every year -the directors shall lay before the company in general meeting a statement of the income and expenditure for the past year, made up to a date not more than thi-ee months before such meeting. (80.) The statement so made shall show, arrang-ed under the most convenient lieads, the amount of gross income, distinguishing the several sources from Avhich it has been derived, and the amount of gxoss expenditure, distinguishing the expense of the establishment, salaries, and other like matters : every item of expend! tva-e fairly chargeable against the year's income shall be brought into account so that a just balance of profit and loss may be laid before the meeting ; and in cases where any item of expenditvu'e which may in fairness be distributed over several j^ears has been incm-rcd in any one year the whole amount of such item shall 1)6 stated, with the addition of the reasons why only a portion of such expenditure is charged against the income of the j'^ear. (81.) A balance-sheet shall be made out in every year, and laid before the companj- in geniral meeting, and such balance-sheet shall contain a siunmary of the property and liabilities of the company arranged under the heads appearing in the form annexed to this table, or as near thereto as circumstances admit. (H2.) A printed cop}' of such balance-sheet shall, seven days prc\aously to such jiHcting, be served on every member in the manner in which notices are hereinafter directed to be served. Audit. '83.) Once at the least in every year the accounts of the company shall be f'xainincd. and the con-ectness of the bnlanc^'-shcet ascertained, by one or more aiidit^ir or auditors. The Companies Act, 1862. Act of 1862 1231 (84.) The first uuclitors sliiiU be itppiuuted Ly the diiV(;tor,s : tsubscqucut auditurs shall be f.ppoiiited by the (loinpan^' in <»'oncral incotiTio;. \So.) If one auditur only is appointed, all the provisions herein contiiined rclatinj^ to auditors shall apply to him. (86.) The auditors may bi^ members of the company ; but no person is eligiVjle as an auditor who is interested otherwise than a.s a member in any transaction of the company ; and no director or other officer of the company is eligible during his continuance in office. (87.) The el(>ction of auditors shall be made by the company at their ordinary meeting in each year. (88.) The remuneration of the first auditors shall be fixed by the directors ; that of subsccpient auditors sliall be fixed by tlie company in general meeting. (89.) Any auditor shall be re-eligible on his nuitting office. (90.) If any casual vacancy occurs in the office of any auditor ai^pointed bj"- the company, the directors shall forthwith call an extraordinary general meeting for the purpose of supplying the same. (91.) If no election of auditors is made in manner afore.said the Board of Trade may, on the application of not less than five members of the company, appoint an auditor for the current year, and fix the remuneration to be paid to him by the company for his services. (92.) Every auditor shall be supplied with a copy of the balance-sheet, and it shall be his duty to examine the same, with the accounts and voiichers relating thereto. (93.) Every auditor shall have a list delivered to him of all books kept by the company, and shall at all reasonable times have access to the books and accounts of the company : he may, at the expense of the company, employ accountants or other persons to assist him in investigating such accounts, and he may in relation to such accoiuits examine the directors or any other officer of the company. (94.) The auditors shall make a report to the members upon the balance-sheet and accounts, and in every such report they shall state whether, in their opinion, the balance-sheet is a full and fair balance-sheet containing the particulars required by these regulations, and propei'ly drawn up so as to exhibit a trtie and coiTect v-iew of the state of the company's affaii's, and in case they have called for explanations or information from the directors, whether such explanations or infomiation have been given by the directors, and whether they have been satisfactory ; and such report shall be read, together with the report of the directors, at the ordinary meeting. JVotices. (95.) A notice maybe served by the company upon any member cither personal! j- or by sending it through the post in a prepaid letter addressed to such member at his registered place of abode. (96.) All notices directed to be given to the members shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the register of members ; .and notice so given shall be sufficient notice to all the holders of such share. (97.) Ajiy notice, if served by post, shall be deemed to have been served at the time when the letter containing the same woiild be delivered in the ordinary coiu'se of the post ; and in proving such service it shall be sufficient to pi'ove that the letter containing the notices was properly addressed and put into the post-office. 1232 Appendix A. COMPANIES, &c. (First Scuedulk.) W o -ii pq ."^ .s s £ « «> S ^ « ^s <0 '^ 5^ !^ " " 5 -S S : ^ 2-S ^ r^ '^ ^ ^' ^ ^ '*^ 4 O tils bo I .s a so CO O w ^ s ^ ? 1 5» »S' ■■^ ■> i- '^ J- ~ a C '§ !i § . a. S ; .5 ■« »= ,^- -2 .^ .i ? ^ -li «• ^ S V o t3 o i ^ SO pq=^ 5 .C ?•?' g's^. > § d ■< m fl M H^ BTS LITIt ompa w a 5U rt W P-i ai f5 E3 Q a^ h • O .^■^ 1-i Ph K^ n > > O u The Companies Act, 1862. Act of 1862 1233 TABLE B. Table of Fees to bo paid to the Reqistrar of Joint Stock Companies by a Company having a Capital divided into Shares. £ s. d. For registration of a company whoso nominal capital does not exceed 2,000/., a fee of 2 For registration of a company whose nominal capital exceeds 2,000/. , the above fee of 2/. , with the following additional fees, regulated accord- ing to the amount of nominal (capital ; (that is to say,) £ s. d. For every 1,000/. of nominal capital, or part of 1,000/., after the first 2,000/. , up t(j 5,000/ 1 For every 1,000/. of nominal capital, or part of 1,000/., after the first 5,000/. , up to 100,000/ 5 For every 1,000/. of nominal capital, or part of 1,000/., after the first 100,000/ 10 For registration of any increase of capital made after the first regis- tration of the company, the same fees per 1 ,000/. , or part of 1 ,000/. , as would have been payable if such increased capital had foi-med part of the original capital at th(^ time of registration. Provided that no company shall be liable to pay in respect of nominal capital, on registration or afterwards, any greater amount of fees than 50/., taking into account in the case of fees payable ou an increase of capital after registration the fees paid on regis- tration. For registration of any existing company, except such companies as are by this Act exempted from payment of fees in respect of regis- tration under this Act, the same fee as is charged for registering a new company. For registering any document hereby required or authorized to be regis- tered, other than the memorandum of association 5 For making a record of any fact hei-eby authorized or required to be recorded by the registrar of companies, a fee of o [_8ec further, p. 290.] TABLE C. Table of Fees to be paid to the Eegisteae of Joint Stock Companies by a Company not having a Capital divided into Shares. For registration of a company whose number of members, as stated £ s. d. in the articles of association, does not exceed 20 2 For registration of a company whose number of members, as stated in the articles of association, exceeds 20, but does not exceed 100. . 5 For registration of a company whose number of members, as stated in the articles of association, exceeds 100, but is not stated to be unlimited, the above fee of 5/., with an additional 5s. for every 50 members, or less number than 50 members after the first 100. For registration of a company in which the nimiber of members is stated in the articles of association to be imlunited, a fee of 20 For registration of any increase on the number of members made after the registration of the company in respect of every 50 members, or less than 50 members, of such increase 5 Provided that no one company shall be liable to pay on the whole a greater fee than 20/. in respect of its number of members, taking into account the fee paid on the fii'st registration of the company. For registration of any existing company, except siich companies as are by this Act exempted from pa^anent uf fees in respect of regis- tration imder tliis Act, the same fee as is charged for registering a new companj'. For registering any document hereby required or authorized to be registered, other than the memorandum of association 5 For making a record of any fact hereby authorized or required to be recorded by the registrar of companies, a fee of 5 [See further, p. 291.] 1234 Appendix A. FORM D. FoiiM OF Statement referred to in Part III. of the Act. * The capital of the company is , (ii\dded into shares of each. The number of shares issued is . Calls to the amount of povmds per share have been made, under which the sum of pounds has been received. The liabilities of the company on the first day of January' {or July) were,— Debts owing to sundry persons bj' the company. On judgment, 1. On specialty, /. On notes or bills, /. On simple contracts, ' /. On estimated liabilities, 1. The assets of the company on that day were — Government seciu'ities [statmg thcm~\ Bills of exchange and promissorj* notes, 1. Cash at the bankers, /. Other securities, /. * If the company has no capital divided into shares, the portion of the statement relutinpr to capital and shares must be omitted. SECOND SCHEDULE. FORM A. Memoeaitottm: of Association of a Company limited b^^ Shares. 1st. The name of the company is "The Eastern Steam Packet Company, Limited." 2nd. The registered office of the company will be situate in England. 3rd. The objects for which the company is established are, " the conveyance of passengers and goods in ships or boats between .such places as the company may from time to time determine, and the doing all such other things as are incidental or conducive to the attaimnent of the above object." 4th. The liability of the members is limited. 5th. The capital of the company is two hundi-ed th(jusand pounds, di^dded into one thousand shares of two hundi-ed pounds each. We, the several persons whose names and addresses are subscribed, are desirous of being formed into a company, in pursuance of this memorandum of association, and we respectively agree to take the number of shares in the capital of the company set opposite our respective names. I Number of Shares Names, Addresses, and Descriptions of Subscribers. j taken by I each Subscriber. ' 1. John Jones, of , in the county of merchant . . 200 ■' 2. John Smith, of , in the county of 25 ' ;i. Thomas Green, of , in the county of 30 " 4. John Tliompson, of , in the coimty of j 40 " .'). Caleb Wliitc, of , in the county of 15 " 6. Andi-ow Brown, of , in the county of 5 " 7. Csesar White, of , in the county of 10 Total shares taken. 325 Dated the 22nd day of November, 1861. Witness to th(> above signatures, A. B.. No. 13. Hute Street, Clerkcnwell, Middlesex. Tin; OoxMPANiES Act, 1862. Act of 1862 1235 FORM B. Memorandum and Auticles of Association of a (Jompanj' limited by Guarantee, and not having- a Capital di^'ided into Shares. Jlemorandtim of Association. 1st. The n;niie of the company is "The Mutual Limdou Marine Association, Limited." '2nd. The registered ofidcc of the comj^any Avill be situate in Eug-land. 3rd. The objects for which the company is established are, ' ' the mutual insui-auce of ships belonging to members of the (company, and tlie doing all such (;ther things as are incidental or conducive to the attainment of the above objects." 4th. Every imnubcr of the company undertakes to contribute to the assets of the company in the event of the same being wound up during the time that he is a member, or within one year afterwards, for payment of the debts and liabilities of the company contracted before the time at wiiicii he ceases to be a member, and the costs, charges, and expenses of winding-up the same, and for the adjustment of the rights of the contributories amongst themselves, such amount as may be required not exceeding ten pounds. We. the several persons whose names and addi'esses are subscribed, are desirous of being formed into a company, in pursuance of this memorandum of association. Names, Addi-esses, and Descriptions of Subscribers. "1. John Jones of , in the county of , merchant. " 2. John Smith of , in the coimty of . "3. Thomas Green of , in the county of . "4. John Thompson of , in the county of . *' 5. Caleb White of , in the county of . ' • 6. Andi-ew Brown of , in the county of . *' 7. Ctesar White of , in the county of . Dated the 22nd day of November, 1861. Witness to the above signatures, A. B., No. 13, Hute Street, Clerkeuwell, Middlesex. Articles of Association to accompany preceding Memorandum of Association. (1.) The company, for the purpose of registration, is declared to consist of five hundred members. (2.) The directors hereinafter mentioned may, whenever the business of the association requires it, regi.ster an increase of members. Definition of Members. (3.) Every person shall be deemed to have agreed to become a member of the company who insures any ship or share in a ship in pursuance of the resTilations hereinafter contained. General Mvetiiiys. (4.) The first general meeting shall be held at such time, not being more than three months after the incorporation of the company, and at such place, as the du'ectors may determine. (5.) Subsequent general meetings shall be held at such time and place as mav be prescribed by the company in general meeting ; and if no other time oV place is prescribed, a general meeting shall be held on the fii-st Monday in February La every year, at such place as may be determined by the directors. (6.) The above-mentioned general meetings shall be called ordinary meetino-s ; all other general meetings shall be called extraordinary. (7.) The directors may, whenever they think fit, and they shall, upon a requisition made in writing by any five or more members, convene an extra nrdinarv general meeting. 1236 Appendix A. (8.) Any reqtiisition made by the members shall express the object of the meeting proposed to be called, and shall be left at the registered office of the com- pnny. (9.) Upon the receipt of suet requisition the directors shall forthwith proceed to convene a general meeting : if they do not proceed to convene the same "within twenty-one days from the date of the requisition, the requisitionists, or any other five members, may themselves convene a meeting. Froceedi)/ff.i at General Meetings. (10.) Seven days' notice at the least, specifying the place, the day, and the hour of meeting, and in case of special business the general nature of such busi- ness, shall' be given to the members in manner hereinafter mentioned, or in such other manner, if any, as may be prescribed by the company iu general meeting ; but the non-receipt of such notice by any member shall not invalidate the proceedings at any general meeting. (11.) All business shall be deemed special that is transacted at an extraordinary meeting, and nil that is transacted at an ordinary meeting, -w-ith the exception of the consideration of the accounts, balance sheets, and the ordinaiy report of the dii'ectors. (12.) No business shall be transacted at any meeting except the declaration of a di'vidend, unless a cpiorum of members is present at the commencement of such business ; and such quorum shall be ascertained as follows ; that is to say, if the members of the company at the time of the meeting do not exceed ten in number, the quorvuu shall be five ; if they exceed ten there shall be added to the above quorum one for every five additional members up to fifty, and one for every ten additional members after fifty, with this limitation, that no qiioiiun shall in any case exceed thirty. (13.) If within one hour from the time appointed for the meeting a quorum of members is not present, the meeting, if convened upon the requisition of the members, shall be dissolved : in any other case it shall stand ad- journed to the same day in the following week at the same time and place ; and if at such adjourned meeting a quorum of members is not present, it .shall be adjourned sine die. (14.) The chairman (if any) of the directors shall preside as chairman at every general meeting of the company. (16.) If there is no such chainnan, or if at any meeting he is not present at the time of holding the same, the members present shall choose some one of their number to be chairman of such meeting'. (16.) The chairman may, with the consent of the meeting, adjourn any meeting from time to time and from place to place, but no business shall be trans- acted at any adjourned meeting other than the business left unfinished at the meeting from which the adjoiu-nment took place. (17.) At any general meeting, unless a poll is demanded by at least five members, a declaration by the chairman that a resolution has been carried, and an entry to that effect in the book of proceedings of the company, shall be sufficient evidence of the fact, without proof of the nvunber or proportion of the votes recorded in favour of or against such resolution. (18.) If a poll is demanded in manner aforesaid, the same shall be taken in such manner as the chainnan directs, and the result of such poll shall be deemed to l)e the resolution of the company in general meeting. 7 'oies of Members. (19.) Every memlxr shall have one vote and no more. (20.) If any member is a lunatic; or idiot he may vote by his committee, ct/rator bonis, or other legal curator. (21.) No member shall be entitled to vote at any meeting unless all moneys due fnjm him to the company have been paid. (22.) Voles may be given either persdiially or by proxies: a proxy shall be a])poiiii((l in writing under the hand of the appointor, or, if such appointor is a (^cirjKiration, under its common stal. (23.) No per-son shall be a])pointed a proxy who is not a member, and the instru- ment a])]) shall be published in one or niori' newsjinjici-H as the Board of I'rade may direct, and after such publica- tiou the Coiurt may order the winding-up of the company in accordance with the The Life Assurance Companies Act, 1870. Act of 1870 1255 Companies Act, 1SG2, upon the application of one or more policy-liolJers or share- holders. 19. If any statement, abstract, or other document required by this Act is false Penalty for in any particular to the knowledj^c of any person who signs the same, such person falsifying shall be liable on conviction thereof on inJictmeut to fine and imprisonment, or on statements, summary conviction thereof to a penalty not exceeding iifty pounds. &c. 20. Every penalty imposed by this Act shall be recovered and applied in the Penalties same manner as penalties imposed by the Companies Act, 18G2, are recoverable and how to be applicable. recovered 21. The Court may order the winding-up of any company, in accordance with "^^' '''I'P ^ the Companies Act, 1862, on the application of one or more policy holders or share- Other circum- holders, upon its being proved to the satisfaction of the Court that the company is stances under insolvent, and in determining whether or not the company is insolvent the Court which corn- shall take into account its contingent or prospective liability under policies and pany may be annuity and other existing contracts ; but the Cotii-t shall not give a hearing to the wound up petition until security for costs for .such amount as the judge shall think reasonable hy the Court shall be given, and until a prima facie case shall also be established to the satisfac- of Chancery, tion of the judge ; and in the case of a proprietary company having an uncalled capital of an amount sufficient, with the future premiums receivable by the com- pany, to make up the actual invested assets equal to the amount of the estimated liabilities, the Court shall suspend further proceedings on the petition for a reason- able time (in the discretion of the Court) to enable the uncalled capital, or a suffi- cient part thereof, to be called up ; and if at the end of the original or any ext(>ndcd time for which the proceedings shall have been suspended, such an amount shall not have been realized by means of calls as, with the already invested assets, to be equal to the liabilities, an order shall be made on the petition as if the company had been proved insolvent. 22. The Court, in the case of a company which has been proved to be insolvent. Power to may, if it thinks fit, reduce the amount of the contracts of the company upon Court to such terms and subject to such conditions as the Court thinks just, in place of reduce con- making a winding-up order. tracts. 23. Any notice which is by this Act required to be sent to any policy hokL r may 1^' *^"° be addressed and sent to the person to whom notices respecting such policy are Notices usually sent, and any notice so addressed and sent shall be deemed and taken to be under this notice to the holder of such policy. Act to policy 24. The Board of Trade shall lay annually before Parliament the statements and innV abstracts of reports deposited with them under this Act during the preceding j^ear. "' 25. This Act shall not affect the Commissioners for the Reduction of the National ^^.p ^q b^ ' Debt, nor the Postmaster General, acting under the authorities vested in ihem ]^^'^ before respectively by the Acts tenth George the Fourth, chapter twenty-fom-,* third and Parliament fourth William the Fourth, chapter fourteen, sixteenth and seventeenth Victoria, ' . chapter forty-five, and twenty -seventh and twenty-eighth Victoria, chapter forty- -t-^ceptions. three. *\_Alleyed from forty-oue, pHrsnant to 34 4- 35 Vict. 1256 Appendix A. 6n fl ^ d 1 h-i 2 P ii Q ^ H W o CCJ o H C/J 1=^ W (rl 1— 1 % Ph P rt rd Ti S c« a) O PI 0) •^ (ZJ •3 g a a 13 02 o n w Hh^OW Ph cj rt ci t< -1^ The Life Assurance Companies Act, 1870. Act of 1870 1259 s s o o bD io s a ^ ^ CO nQ : 3 fl > >&« Ill i - P CO 59 rt ^ bD h-; hi^ a s a '^ i HMM g a -3 1^ 6 bD O O O n '^ a 3 i-< >» a a ^ na s '3 a =« a i:! 0) 1— > fe> • s 0) rQ . o a be ' bo ^ .ae a bn a a 6 Ph CO o a o o o o 4m 2 © t>. rJ:^ cd '-tH P4 O a t»>o <•) D a ^ « o o p< o f> g 5 1:8 ^.2 o a ao =s -a O J ^ a ® o a a CD 01 > ^ be o CI o o OS (^ a oS a oo na aj d tJ a T3 (-' rrl o rJ t^ ,r| «*H ri-1 o o o Ct! o T) cj ri O O o -u cS =2 ^ rQ to '^ ,_, 0) ■^ I pp. 511 etseq^., 3. The word " capital " as used in the Companies Act, 1867, shall include paid- 660 et scq., up capital ; and the power to reduce capital conferred by that Act shall include a 970 ct .scq. power to cancel any lost capital, or any capital unrepresented by available assets, or Construction of to pay off any capital which may be in excess of the wants of the company; and "capital" and paid-up capital may be reduced either with or without extinguishing or reducing power.s to reduce the liability (if any) remaining on tlie shares of the company, and to the extent to ta'ne'j in".30&31 which such liability is not extinguished or reduced it shall be deemed to be j)re- Vict, e I3i. served, notwithstanding anything contained in the Companies Act, 1867. pp. 655, 970 4. The provisions of the Companies Act, 1867, as amended by this Act, shall cf seq. apply to any company reducing its capital in pursuance of this Act and of the Application Companies Act, 1867, as amended by this Act : of ppoW- Provided that where the reduction of the capital of a company does not involve sions of either the diminution of any liability in respect of unpaid capital or the payment to 30 & 31 Vict, any shareholder of any paid-up capital, (,_ \2>\. (1.) The creditors of the company shall not, unless the Court otherwise direct, be entitled to object or required to consent to the reduction ; and (2.) It shall not be necessary before the i^resentation of the petition for confirming the reduction to add, and the Court may, if it thinks it exiDcdient so to do, di.spense altogether with the addition of the words " and reduced," as mentioned in the Companies Act, 1867. 30&31 Vict. In any case that the Court thinks fit so to do, it may require the company to c. 131. publish in such manner as it thinks fit the reasons for the reduction of its capital or such other information in regard to the reduction of its capital as the Coiu't may think expedient with a view to give proper information to the public in relation to the reduction of its capital by a company, and, if the Coiu't thinks fit, the causes which led to such reduction. The minute required to be registered in the case of reduction of capital shall show, in addition to the other particulars required by law, the amount (if any) at the date of the registration of the minute proposed to be deemed to have been paid up on each share. 5. Any company limited by shares may so far modify the conditions contained in Power to re- its memorandum of association, if authorized so to do by its reg'ulations as originally duce capital framed or as altered by special resolution, as to reduce its capital by cancelling any ty the can- shares which, at the date of the passing of such resolution, have not been taken or cellation of agreed to be taken by any person ; and the provisions of the Companies Act, 1867, unissued shall not apply to any reduction of capital made in pursuance of this section. shares. 6. And whereas it is expedient to make provision for the reception as legal Reception evidence of certificates of incorporation other than the original certificates, and of of certified certified copies of or extracts from any documents filed and registered under the copies of Companies Acts, 1862 to 1877: Be it enacted, that any certificate of the incorporation documents of any company given by the registrar or by any assistant registrar for the time as leo-al being shall be received in evidence as if it were the original certificate ; and any evidence, copy of or extract from any of the documents or part of the documents kept and 25 & 26 Vict, registered at any of the ofiices for the registration of joint stock companies in c. 89. England, Scotland, or Ireland, if duly certified to be a true copy under the hand of 30 & 31 Vict, the registrar or one of the assistant registi-ars for the time being, and whom it shall c. 131. not be necessary to prove to be the registrar or a.ssistant registrar, shall, in all legal 40 & 41 Vict, proceedings, civil or criminal, and in all cases whatsoever, be received in evidence c. 20. as of equal validity with the original document. [Words in italics repealed by S. L. E. Act, 1894.) 1268 Appendix A. Short title. Act not to apply to Bank of England. Act to be con- strued with 25 tc 26 Vict. c. 89 30 ic'si Tict. c. 131, and 40 i: 41 Vict. C. 2S. p. 678 Eegistration anew of company. 25 * 26 Vict. c. S9. 30 & 31 Vict. c. 131. 40 & 41 Vict. c. 26. 42 & 43 Vict. c. 76. 25 & 26 Vict. c. 89. pp. 679, 787 Reserve capital of company how provided. 2o Sc 26 Vict. c. 89. 30 & 31 Vict. 0. 131. 40 & 11 Vict. c. 26. 42 & 43 Vict. c. 76. pj). 369, 382. £65 25 & 26 Vict. c. 89, 8. 182, If pealed, aud li.il)iiity of liaiik of issue unlimited in rt'spect of llOtCH. THE COMPANIES ACT, 1879. (42 & 43 YicT. c. 76.) An Act to amend the Law -svitli respect to the Liability of Members of Banking and other Joint Stock Companies ; and for other purposes. [15th August, 1879.] Be it enacted, &c. 1. This Act may be cited as the Companies Act, 1879. 2. This Act shall not apply to the Bank of England. 3. This Act shall, so far as is consistent with the tenor thereof, be construed as one with the Companies Acts, 1862, 1867, and 1877, and those Acts together with this Act may be referred to as the Companies Acts, 1862 to 1879. 4. Subject as in this Act mentioned, any company registered before or after the passing of this Act as an unlimiled company may register under the Companies Acts, 1862 to 1879, as a limited company, or any company already registered as a limited company may re-register vmder the provisions of this Act. The registration of an unlimited company as a limited company in pursuance of this Act shall not affect or prejudice any debts, liabilities, obligations, or contracts inciu'red or entered into by, to, with, or on behalf of such company prior to regis- tration, and ."uch debts, liabilities, contracts, and obligations may be enforced in manner provided by Part VII. of the Companies Act, 1862, in the case of a company registering in pursuance of that Part. 5. An unlimited company may, by the resolution passed by the members when assenting to registration as a limited company under the Companies Acts, 1862 to 1879, and for the purpose of such registration or otherwise, increase the nominal amount of its capital by increasing the nominal amount of each of its shares. Provided always, that no part of such increased capital shall be capable of being called up, except in the event of and for the pnrposes of the company being wound up. And, in cases where no such increase of nominal capital may be resolved upon, an unlimited company may, by such resolution as aforesaid, provide that a portion of its uncalled capital shall not be capable of being called up, except in the event of and for the purposes of the company being wound up. A limited company may by a special resolution declare that any portion of its capital which has not been already called vip shall not be capable of being called up, except in the event of and for the purpose of the company being wound up ; and thereupon such portion of capital shall not be capable of being called up, except in the: event of and fur the purposes of the company being- wound up, 6. Section one hundred and eighty-two of the Comj)anies Act, 1862, is hereby rcp(>al('d, and in place thereof it is enacted as follows: — A bank of issue registered as a limited company, either before or after the passing of this Act, shall not be entitled to limited liability in respect of its notes ; and the members thereof shall continue liable in respect of its notes in the same manner as if it had been registered as an unlimited company ; but in case the general assets of the company are, in the event of the <;onii)auy being wound up, insufficient to satisfy the claims of both tlie note-holders and the general creditors, then the members, after satisfying the reiiiaiiiing demands of the note-holders, shall be liable to contribute towards jiayment of tlie debts of tlie general creditors a sum e(pial to the amount received liy tlie note-h(jl(lers out of the general assets of the company. J''or the ]>uii)i)scs of tliis section the expression "the general assets of the company" nienns the funds available for payment of the general creditor as well as the note-holder. The Companies Ac^r, 1879. Act of 1879. 1209 It shall be lawful for any bank of issue registered as a limited company to make a statement on its notes to the effect that the limited liability does not extend to its notes, and that the members of the company continue liable in respect of its notes in the same manner as if it had been registered as an unlimited company. 7. — (1.) Once at the least in every year tlie accounts of every banking company registered after the passing of this Act as a limited company shall be examined by an auditor or auditors, -who shall be elected annually by the company in general meeting. (2.) A director or officer of the company shall not be capable of being elected auditor of such company. (3.) An auditor on quitting office shall be re-eligiblc. (4.) If any casual vacancy occurs in the office of any auditor the surviving auditor or auditors (if any) may act, but if there is no surviving auditor, the directors shall forthwith call an extraordinary general meeting for the purpose of supplying the vacancy or vacancies in the auditorship. (5.) Every auditor shall have a list delivered to him of all books kept by the com- pany, and shall at all reasonable times have access to the books and accounts of the company ; and any auditor may, in relation to such books and accounts, examine the directors or any other officer of the company : Provided thnt if a banking com- pany has branch banks beyond the limits of Europe, it shall be sufficient if the auditor is allowed access to such copies of and extracts from the books and accounts of oii. p. 665 Company to Bjx'fify amounts vliiili Hliurf,— llolll'TM llllVO required tliem to retain under B. 6 ; alio to THE COMPANIES ACT, 1880. (43 YicT. c. 19.) An Act to amend tTie Companies Acts of 18G2, 1867, 1877, and 1879. [24t]i March, 1880.] Be it enacted, &c. 1. This Act may be cited for all purposes as the Companies Act, 1880. 2. This Act shall, so far as is consistent with the tenor thereof, be construed as one •with the Companies Acts, 186'2, 1867, 1877, and 1879, and the said Acts and this Act may be referred to as the Companies Acts, 1862 to 1880. 3. "When any company has accumulated a sum of undivided profits, which with the consent of the shareholders may be distributed among the shareholders in the form of a dividend or bonus, it shall be lawful for the company, by special resolu- tion, to return the same, or any part thereof, to the shareholders in reduction of the paid-up capital of the company, the unpaid capital being thereby increased by a similar amount. The powers vested in the directors of making calls upon the shareholders in respect of moneys unpaid upon their shares shall extend to the amount of the unpaid capital as augmented by such reduction. 4. No such special resolution as aforesaid shall take effect imtil a memorandum, showing the particulars required by law in the case of a reduction of capital by order of the Court, shall have been produced to and registered by the Registrar of joint stock companies. 5. Upon any reduction of paid-up capital made in pursuance of this Act, it shall be lawful for any shareholder, or for any one or more of several joint shareholders, within one month after the passing of the special resolution for such reduction, to require the company to retain, and the company shall retain accordingly, the whole of the moneys actually paid upon the shares held by such person, either alone or jointly with any other person or persons, and which, in consequence of such reduc- tion, would otherwise be returned to him or them, and thereupon the shares in respect of which the said moneys shall be so retained shall, in regard to the pay- ment of dividends thereon, be deemed to be paid-up to the same extent only as the shares on w-hich payment as aforesaid has been accepted by the shareholders in reduction of their paid-up capital, and the company shall invest and keep invested the moneys so retained in such securities authorized for investment by trustees as tlic company shall determine, and upon the money so invested, or upon so much thereof as from time to time exceeds the amount of calls subsequently made upon the shares in respect of which such moneys shall have been retained, the company shall pay such interest as shall be received by them from time to time on such Recurities, and the amount so retained and invested shall be held to rejjresent the future calls which may be made to replace the capital so reduced on those shares, whether the amount obtained on sale of the whole or such proportion thereof as rei)rescntH the amount of any call when made, i)roduces more or less than the amount of such call. 6. From and after such reduction of capital the company shall specify in the annual lists of members, to be made by them in pursuance of the twenty-sixth Hoction of tlie Comjianies Act, 1862, the amounts ■which any of the shareholders of the comjiany shall have required the company to retain, and the company shall have retained accordingly, in pursuance of tho fifth section of this Act, and the The Companies Act, 18S0. Act of 1880. 1271 conipauy shiiU also spc.nf'y in the .statfiiucuts of uccouut laid before any .) The (Joui't may confirm, either wholly or in part, any such alteration as aforesaid with respect to the objects of the comjiauy if it appears that the alteration is required in order to enable the company — (a.) To carry on its business more economical! >' or more efficiently; or (h.) 'I'd attain its in;iin ])nrpose by new or improved means; or (c.) Tu enlarge or cliMiigc the local area of its opi'ratioiis ; or (d.) To carry ou some business or businesses which under existing circumstances Companies (Memorandum of Association) Act. Act of 1890 1279 may conveniently or advantageously be comLinod with the business of the company ; or (e.) To restrict or abandon any of the objects specified in the memorandum of association or deed of settlement. 2. — (1.) Where a coni])any has altered the provisions of its memorandum of Registration association or deed of settlement with respect to the objects of the company, or has of order to- altered the form of its constitution by substituting a memorandum and articles of gether with association for a deed of settlement, and such alteration has been confirmed by the memorandum Court, an office copy of the order confirming such alteration, together with a as altered or printed copy of the memorandum of associaticm or deed of settlement so altered, or substituted together with a printed eopj- of the substituted memorandum and articles of asso- memorandum ciati(m (as the case may be), shall be delivered by the company to the registrar of joint and articles stock companies within fifteen daj's from the date of the order, and the registrar shall and con- register the same, and shall certify under his hand the registration thereof, and his sequences certificate shall be conclusive evidence that all the requisitions of this Act with thereof, respect to such alteration and the confirmation thereof have been complied with, and thenceforth (but subjec^t to the provisions of this Act) the memorandum or deed of settlement so altered shall be the memorandum of association or deed of settle- ment of the company, or, as the case may bo, such subNtituted memorandum and articles of association shall apply to the compau}^ in the same manner as if the com- pany were a company registered under Part I. of the Companies Act, 18G2, with such memorandum and articles of association, and the company's deed of settlement shall cease to apply to the company. (2.) If a company makes default in delivering to the registrar any document required by this Act to be delivered to him the company shall be liable to a penalty not exceeding ten pounds for every day during which it is in default. 3. — (1.) This Act may be cited as the Companies (Memorandum of Association) Short title Act, 1890. and construc- (2.) This Act and the Companies Acts, 1862 to 1886, shall be construed as one tion. Act, and may be cited collectively as the Companies Acts, 18G2 to 1890. (3.) In this Act the expression "deed of settlement" includes any contract of co-partnery or other instrument constituting or regulating the company and not being an Act of Parliament, a royal charter, or letters patent. {Comjyare C. {IF. U.) Act, 1890, s. 35.) 1280 Appendix A. THE COMPANIES (WINDINa-UP) ACT, 1890. (53 & 54 Vict. c. 63.) Jurisdiction to -wind up companies, p. 972 Conduct of windinjf-up IjiisiiicsH in ili>fh CiMirt. ;iO & ;J7 Vi(;t. c. GG. p. 972 An Act to amend the Law relating to the AVinding-iip of Comj)anies in England and Wales. [18th August, 1890.] Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Par- liament assembled, and by the authority of the same, as follows : 1. — (1.) The Courts having jurisdiction to wind up companies in England and Wales shall be the High Court, the Chancery Courts of the counties palatine of Lancaster and Durham, the County Courts, and the Stannaries Court. (2.) Where the amount of the capital of a company paid up or credited as paid up exceeds ten thousand pounds, a petition to wind up the company or to contiuue the winding-up of the company under the supervision of the Court shall be presented to the High Court, or, in the case of a company situate within the jurisdiction of either of the Palatine Courts aforesaid, either to the High Court or to the Palatine Court having jurisdiction. (3.) Where the amount of the capital of a company paid up or credited as paid up does not exceed ten thousand pounds, and the registered office of the company is situate within the jurisdiction of a County Court having jurisdiction under this Act, a petition to wind up the company or to continue the winding-up of the com- pany under the supervision of the Coui-t.shall be presented to that County Court. (4.) Provided that where a company is formed for working mines within the Stan- naries and is not shown to be actually working mines beyond the limits of the Stan- naries, or to be engaged in any other undertaking beyond those limits, or to have entered into a contract for such working or undertaking, a petition to wind up the company or to continue the winding-up of the company under the supervision of the Court shall be presented to the Stannaries Court whatever may be the amount of the capital of the company and wherever the registered office of the company is situate. (5.) The Lord Chancellor may by order exclude a County Court from having jurisdiction under this Act, and for the purposes of such jurisdiction may attach its district, or any part thereof, to the High Court or to any other County Court, and may revoke or vary any such cider. In exercising his powers under this section the Lord Ciiancellor shall provide that a County Court shall not have jurisdiction under this Act unless it has for the time being jurisdiction in bankruptcy. (6.) Exety Court having jurisdiction under this Act to wind up a company shall for the purposes of that jurisdiction have all the powers of the High Court, and every prescribed officer of the Court shall perform any duties which an officer of the High Court may discharge by order of the judge thereof or otherwise in relation to the M'indiiig-uji of a cfimpany. (7.) Nothing in this section shall invalidate a proceeding by reason of its being taken in a wrong Court. {See fitannaries Court [Abolition) Act, 1896.) 2. Subject to general rules and to orders of transfer made under the authority of the Supreme Court of .Judicature Act, 1873, and the Acts amending it, the juris- diction of the High Court under this Act shall, as the I^onl ('hanccllor nuiy from tim(! to time by gericial oi'der direct, be exercised, cither generally or in specified chisHOH of cuHCH, either by such judge or judges of the Chancery Division of the High Court as the Lord Chancellor may assign to exercise that jurisdiction, or The Companies (Winding-up) Act, 1890. Act of 1890 1281 by the judge who, for tlic time being, exercises the bankruptcy jurisdiction of the High Court. 3. — (1.) The winding-up of a company or any proceedings therein may at any Transfer of time and at any stage, and either with or without ajiplication from any of tlie parties proceedings, thereto, be transferred fi-um one Court to another Court, or may be retained in the Court in which the proceedings were commenced, although it may not be the Court in which tlie proceedings ought to have been commenced. (2.) The jjowers of transfer given by the foregoing provisions of this section may, subject to and in accordance with general rules, bo exei-cised by the Lord Chancellor or by any judge of the High Court having jurisdiction under this Act, or, as regards any case within the jui'isdiction of any other Court, by the judge of that Court. (3.) If any question arises in any winding-up proceeding in a County Court or in the Stannaries Court whieh all the parties to the proceeding, or wliicli one of them and the judge of the Court, may desire to have determined iu the first instance in the High Court, the judge shall state the facts in the form of a special case for the opinion of the High Court, and thereupon the special case and the proceedings, or such of them as may be required, shall be transmitted to the High Court for tlio pm-poses of the determination. 4. — (1.) On an order being made by the Court for winding-up a company Provisions as the officer hereinafter mentioned shall, by virtue of his office, become the jirovisional to liquidator, liquidator of the company, and shall continue to act as such until he or another person becomes liquidator and is capable of acting as such. (2.) The said officer shall be the official receiver, if any, attached to the Court for bankruptcy purposes, or if there is more than one such official receiver, then such one of them as the Board of Trade may appoint, or, if tiiere is no such official receiver, then an officer appointed for the purpose by the Board of Trade. Any such officer shall for the purpose of his duties under this Act be styled the official receiver. (3.) When a person other than the official receiver is appointed liquidator of a company he shall be styled liquidator and not official liquidator of the company, and the provisions of the Companies Acts relating to the official liquidator shall, in their application to him, be construed as if the word "official" were omitted therefrom. Such a person shall not be capable of acting as liquidator until he has notified his appointment to the registrar of joint stock companies and given security iu the manner prescribed to the satisfaction of the Board of Trade. He shall give the official receiver such information and such access to and facilities for inspecting the books and documents of the company, and generallj^ such aid, as may be requisite for enabling that officer to perform his duties under this Act. (4.) If any vacancy occurs in the office of liquidator of a company, the official receiver shall, by virtue of his ofRce, be the liquidator during the vacancy. (5.) The official receiver may be appointed by the Com't provisional liquidator of the company at any time after the presentation of the petition and before a winding- up order has been made. (6.) Where an application is made to the Court to appoint a receiver on behalf of p. 1091 the debenture holders or other creditors of a company the official receiver may be so api^ointed. 6. — (1.) Where the official receiver becomes the liquidator of a company, whether Power to ap- pi'ovisionally or otherwise, he may, if satisfied that the nature of the estate or busi- jioint special ness of the company, or the interests of the creditors or contributories generally, manager, require the appointment of a special manager of the estate or business of the company other than himself, apply to the Court to, and the Court may on such application, appoint a special manager thereof during such time as the Court may direct, with such powers, including any of the powers of a receiver or manager, as may be entrvisted to him by the Court. (2.) The special manager shall give such security and account in such manner as the Board of Trade direct. (3.) The special manager shall receive such remuneration as may be fixed by the Court. 6. — (1 .) When the Court has made an order for winding-up a company the official Meeting of receiver shall summon separate meetings of the creditors and contributories of the creditors, company for the purpose of — (ff) determining whether or not an application is to be made to the Court for appointing a liquidator in the place of the official receiver ; and {!>) determining whether or not an application is to be made to the Court for the appointment of a committee of inspection to act with the liquidator, and ■who are to be the members of such committee if appointed. 1282 Appendix A. statement of company's affairs. Ec'ijort on •winding-up and proceed- ings there- upon. The Court may make any appointment and order required to give effect to any such determination, and if there is a dift'erence between the determinations of the meetings of the creditors and contributories in respect of any of the matters men- tioned in the foregoing provisions the Court shall decide the difference and make such order thereon as the Court may think fit. (2.) The provisions of the First Schedule to this Act shall, subject to such modifi- cations as may be made therein by general rules, apply to any meeting summoned in pursuance of this section. (3.) In case a liquidator is not appointed by the Court the official receiver shall be the liquidator of the company. 7. — (1.) Where the Court has made an order for winding-up a company, there shall be made out and submitted to the official receiver a statement as to the affairs of the company in the prescribed form, verified by affidavit, and shovs^ing the par- ticulars of the assets, debts, and liabilities of the company, the names, residences, and occupations of the creditors of the company, the securities held by them respectively, the dates when the securities were respectively given, and such further or other information as may be prescribed or as the official receiver may require. (2.) The statement shall be submitted and verified by one or more of the joersons who are at the time of the winding-up order the directors and by the iierson who is at that time the secretary or other chief officer of the company, or by such of the persons being or having been directors or officers of the company or having taken part in the formation of the company at any time wdthin one year before the order for winding-up the comjjany, as the official receiver, subject to the direction of the Court, may require to submit, and verify the same. (3.) The statement shall be submitted within fourteen days from the date of the order, or within such extended time as the official receiver or the Coui-t may for special reasons appoint. (4.) Any person making or concurring in making the statement and affidavit required by this section shall be allowed, and shall be paid by the official receiver, out of the assets of the company, such costs and expenses incurred in and about the preparation and making of such statement and affidavit as the official receiver may consider reasonable, subject to an appeal to the Court. (5.) If any person, without reasonable excuse, makes default in complying with the requirements of this section, he shall be liable to a fine not exceeding ten pounds for every day during which the default continues. (6.) Any person stating himself in writing to be a creditor or contributory of the company shall be entitled by himself or by his agent at all reasonable times, on payment of the prescribed fee, to inspect the statement submitted in pursuance of this section, and to a copy thereof or extract therefrom. But any person untruth- fully so stating himself to be a creditor or contributory shall be guilty of a contempt of Court, and shall be punishable accordingly on the application of the liquidator or of the official receiver. 8. — (1.) Where the Court has made an order for winding-up a company, the oflicial receiver shall, as soon as practicable after receipt of the statement of the company's affair's, Submit a preliminary report to the Coui't — (a) as to the amount of capital issued, subscribed, and paid up, and the estimated amount of assets and liabilities ; and {b) if the company has failed, as to the causes of the failure ; and (c) whether in his opinion further inquiry is desirable as to any matter relating to the promotion, formation, or failure of the company, or the conduct of the business thereof. (2.) The official receiver may also, if he thinks fit, make a further report, or further reports, stati:ig the manner in which the company was formed and whether in his opinion any fraud has been committed by any person in the promotion or formation of the company or by any director or other officer of the company in relation to the company since the formation thereof, and any other matters which in his opinion it is desirable to bring to the notice of the Court. (3.) Tlie Court may, after consideration of any such I'cport, direct that any person who has taken any part in the promotion or formation of the company, or has been a director or officer of the company, shall attend before the Court on a day appointed by the Court for that purpose, and be publicly examined as to the promo- tion or foi ination of the com])any, or as to the conduct of the business of the company, or as to bis conduct iind dealings as director or officer of the company. (1.) Tlie official receiver shall take part in the examination, and for that purpose may, if sixcially authorized by the Board of Trade in that behalf, employ a solicitor with or without counsel. The Companies (Winding-up) Act, 1890. Act of 1890 1283 (5.) The liqiiitliitor where the official receivor is not the liquidator and any creditor or contributory of the company may also take part in tlie exauiiuation either personally or by solicitor or counsel. (6.) Tlie Court may put sucli questions to the person examined as to the Court may seem expedient. (7.) The person examined shall be examined on oath, and it shall be his duty to answer all such questions as the Court may put or allow to be put to him. The person examined shall at his own cost, prior to such examination, bo furuislied with a copy of the official receiver's report, and shall also at his own cost be entitled to employ at such examination a solicitor with or without counsel, who shall be at liberty to put such questions to the person examined as the Court may deem just for the pui"j)0se of enablinj^ that person to explain or qualify any answers given by him. Provided always, that if such person is, in the opinion of the Court, exculpated from any charges made or suggested against him, the Court may allow him such costs as the Coiu't in its discretion may think fit. Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him. They shall also be open to the inspection of any creditor or contributory of the company at all reasonable times. (8.) The Court may, if it thinks fit, adjourn the examination from time to time. (9.) A public examination under this section may, if the Court so diiects, and subject to general rules, be held before any judge of County Courts, or before any officer of the Supreme Court, being an official referee, master, registi'ar in bank- ruptcy, or chief clerk, or before any district registrar of the High Court named for the purpose by the Lord Chancellor, or in the case of companies being wound up by a Palatine Court, before a registrar of that Court, and tlie powers of the Court under sub-sections six, seven, and eight of this section may (excej^t as to costs) bo exercised by the person before whom the examination is held. 9. — (1.) A committee of inspection appointed in pursuance of this Act shall Committee of consist of persons being- creditors or contributories of the company or persons holding inspection, general powers of attorney from such persons in such proportions as may be agi'eed on by the meetings of creditors and contributories or as, in case of diiterence, may be determined by the Court. (2.) The committee of inspection shall meet at such times as they from time to time appoint, and, failing such appointment, at least once a mouth ; and the liqui- dator or any member of the committee may also call a meeting of the committee as and when he thinks necessary. (3.) The committee may act by a majority of their members present at a meeting, but shall not act unless a majority of the committee are present at the meeting. (4.) Any member of the committee may resign his office by notice in writing signed by him, and delivered to the liquidator. (5.) If a member of the committee becomes bankrupt, or compounds or arranges with his creditors, or is absent from five consecutive meetings of the committee without the leave of those members of the committee who together vdih himself represent the creditors or contributories as the case may be, his office shall thereupon become vacant. (6.) Any member of the committee representing creditors may be removed by an ordinary resolution at any meeting of creditors of which seven days' notice has been given, stating the object of the meeting. Any member of the committee representing contributories may be removed by an ordinary resolution at any meeting of contributories, of which seven days' notice has been given stating the object of the meeting. (7.) On a vacancy occurring in the office of a member of the committee, the liquidator shall lV>rthwith summon a meeting- of creditors or of contributories, as the case may require, for the pm'pose of filling the vacancy, and the meeting niay, by resolution, re-appoint the same or appoint another creditor or contributory to fill the vacancy. (8.) The continuing members of the committee, provided there be not less than two such continuing members, may act notwithstanding any vacancy in their body. (9.) If there be no committee of inspection, any act or thing or any direction or permission by this Act authorized or required to be done or gi\'en by the committee may be done or given by the Board of Trade on the ajjplication of the liquidator. 10. — (1.) Where in the course of the winding-up of a company under the Com- Power of panies Acts it appears that any person who has taken part in the formation or Court to assesa promotion of the company, or any past or present du-ector, manager, liquidator, or damages other officer of the company, has misapplied or retained or become liable or account- against de- able for any moneys or property of the company, or been guilty of any misfeasance linquent 1284 Appendix A. directors, officers, and promoters, pp. 54, 1024, 1059 Payment of money into Bank of Engrland. Powers of liquidator. or breach of trust in relation to the company, the Court may, on the application of the official receiver, or of the liquidator of the company, or of any creditor or con- tributory of the company, examine into the conduct of such promoter, director, manao-er, liquidator, or other officer of the company, and compel him to repay any moneys or restore any property so misapplied or retained, or for which he has become liable or accountable, together with interest after such rate as the Court thinks just, or to contribute such sums of money to the assets of the company by way of compensation in respect of such misapplication, retainer, misfeasance, or breach of trust as the Court thinks just. (2.) The provisions of this section shall apply in the winding-up of any company under the Companies Acts, whether the same is being wound up by or subject to the supervision of the Court or is being wound up voluntarily, and whether the winding-up commenced before or after the passing of this Act, and notwith- standing that the offence is one for which the offender may be criminally respon- sible. {Amended hj C. {JF. U.) Act, 1893.) 11. — (1.) An account, called the Companies Liquidation Account, shall be kept by the Board of Trade with the Bank of England, and all moneys received by the Board of Trade in respect of proceedings under this Act shall be paid to that account. (2.) Every liquidator of a company which is being wound up by order of the Court shall, in such manner and at such times as the Board of Trade, with the concuiTence of the Treasury, direct, pay the money received by him to the Com- panies Liquidation Account at the Bank of England, and the Board of Trade shall furnish him -n'ith a certificate of receipt of the money so paid. (3.) Provided that, if the committee of inspection satisfy the Board of Trade that for the purpose of caiTying on the business of the company or of obtaining advances, or for any other reason, it is for the advantage of the creditors or contributories that the liquidator should have an account with any other bank, the Board of Trade shall, on the application of the committee of inspection, authorize the lic^uidator to make his payments into and out of such other bank as the com- mittee may select, and thereupon those payments shall be made in the prescribed manner. (4.) If any such licpiidator at any time retains for more than ten days a sum exceeding fifty pounds, or such other amount as the Board of Trade in any parti- cular case authorize him to retain, then, unless he explains the retention to the satisfaction of the Board of Trade, he shall pay interest on the amount so retained in excess at the rate of twenty pounds per centum per annum, and shall be liable to disallowance of all or such part of his remuneration as to the board shall seem just, and to be removed from his office by the board, and shall be liable to pay any expenses occasioned by reason of his default. (o.) All payments out of money standing to the credit of the Board of Trade in the Companies Liquidation Account shall be made by the Bank of England in the prescribed manner. (6.) No liqmdator of a company which is being wound up by order of the Court shall pay any sums received by him as liquidator into his private banking account. 12, — (1.) The liquidator of a company which is being woimd up by the Court may, with the sanction either of the Court or of the committee of inspection, carry on the business of the company, or bring or defend any legal proceeding in the name and on behalf of the company, or exercise any of the powers conferred by section one hundred and fifty-nine or section one hundred and sixty of the Com- panies Act, 1862. (2.) The liquidator of any such company may, without the sanction of the Court or of the committee of inspection, exercise any of the other powers conferred on the liquidator by section ninety-five of the Companies Act, 18C2. (3.) The exercise by the liquidator of the powers referred to in this section shali be subject to the control of the Court, and any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any of those powers. (4."> Tlie liquidator of a company which is being wound up by order of the Court may, with the sanction either of the Court or of the committee of inspection, employ a solicitor or other agent to take any proceedings or do any business which the liquidator is unable to take or do himself. The sanction aforesaid must be a HanetJDii obtained before the (inploymeiit, except in cases of urgency, and in such casoH it must be shown that no undue delay took place in obtaining the sanction. The Companies (Winding-up) Act, 1890. Act of 1890 l-2.s'3 13. General rules may bo made for rcquii-ing or enablin;^'- all or any of the powers Delegation to and duties conferred and imposed on the Court by seetions ninety-one, ninety-eight, liijuidator of ninety-nine, one hundred, one hundi-ed and two, and one hundred and seven of the certain Companies Act, 186'2, to be exercised or perfonned by the liquidator as an oflicer of powers of the Court, and subject to the control of the Court. Court. Provided that the liquidator shall not, without the special leave of the Court, rectify the register of members, and shall not make any call without either the si>ecial leave of the Court or the sanction of the committee of inspecticm. 14. Where a company is being wound up voluntarily or subject to the super- Power for vision of the Court, the official receiver attached to the Court having jurisdiction official to wind up the company may present a petition that the company be wound up by receiver to the Court, and thereupon, if the Court is satisfied that the voluntary winding- up apply as to or winding-up subject to supervision cannot be continued with due regard to the voluntary interests of the creditors or contributories, it may make an order that the company winding-up. be wound up by the Court. 15. — (1.) If the winding-up of a company is not concluded within one year after Information its commencement, the liquidator of the company shall, at such intervals as may as to pending bo prescribed, until the winding-up is concluded, send to the registrar of joint li(^uidations. stock companies a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings in and position of the liquidation. Any person stating himself in writing to be a creditor or contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement submitted in pursuance of this section, and to a copy thereof, or extract therefrom. But any jjerson untruthfully so stating himself to be a creditor or contributory shall be guilty of a contempt of Court, and shall be punishable accordingly on the application of the liquidator or of the official receiver. (2.) If a liquidator makes default in complying with the requirements of this section he shall be liable to a fine not exceeding fifty pounds for each day during which the default continues. (3.) If it appears from any such statement or otherwise that any liquidator of a company has in his hands or under his control any money representing unclaimed or undistributed assets of the company which have remained unclaimed or undistributed for six months after the date of their receipt, the liquidator shall forthwith pay the same to the Companies Liquidation Account at the Bank of England. Every such liquidator shall be entitled to the prescribed certificate of receijit for the moneys so paid, and that certificate shall be an effectual discharge to him in respect thereof. (4.) For the piirpose of ascertaining and getting in any money payable into the Bank of England in pursuance of this section, the like powers may be exercised and by the like authority as are exerciseable under section one hundred and sixty- two of the Bankruptcy Act, 1883, for the purpose of ascertaining and getting in the sums, funds, and dividends referred to in that section. (•5.) Any person claiming to be entitled to any money paid into the Bank of England in pursuance of this section may apply to the Board of Trade for payment of the same, and the Board of Trade may, on a certificate by the liquidator that the person claiming is entitled, make an order for the payment to that person of the sum due. Any person dissatisfied with the decision of the Board of Trade in respect of any claim made in pursuance of this section may appeal to the High Court. (6.) This section shall apply whether the winding-up of the company has com- menced before or after the commencement of this Act. 16. — (1.) Whenever the cash balance standing to the credit of the Companies Investment Liquidation Account is in excess of the amount which in the opinion of the Board of surplus of Trade is required for the time being to answer demands in respect of companies' funds on estates, the Board of Trade shall notify the same to the Treasury, and shall pay o-eneral over the same or any part thereof, as the Treasury may require, to the Treasury, account, to such account as the Treasury may direct, and the Treasiuy may invest the said sums, or any part thereof, in Government securities, to be placed to the credit of the said account. (2.) Whenever any part of the money so invested is, in the opinion of the Board of Trade, required to answer any demands in respect of companies' estates, the Board of Trade shall notify to the Treasury the amount so required, and the Treasury shall thereupon repay to the Board of Trade such sum as may be requii-ed to the credit of the Companies Liquidation Account, and for that purpose may direct the sale of such part of the said securities as may be necessary. (3.) The dividends on the investments under this section shall be paid to such account as the Treasury may direct, and regard shall be had to the amount thus 1286 Appendix A. Separate accounts of particular estates. Interests on balances above two thousand pounds. Certain re- ceipts and fees to be applied in aid of ex- penditure. Audit of liquidator's accounts. Books to be kept by liquidator. Ilelca«c of liquidators. derived in fixing the fees payable in respect of proceedings in the nindlng-up of companies. 17. — (1.) An account shall be kept by the Board of Trade of the receipts and payments in the winding-up of each company, and when the cash balance standing to the credit of the account of any company is in excess of the amount which, ia the opinion of the committee of inspection, is required for the time being to answer demands in respect of that company's estate, the Board of Trade shall, on the request of the committee, invest the amount not so required in Government securities, to be placed to the credit of the said account for the benefit of the said company. ('2.) Whenever any jmrt of the money so invested is, in the opinion of the com- mittee of inspection, required to answer any demands in respect of the estate of the company of the assets of which the money so invested formed part, the Board of Trade shall, on the request of the Committee, raise such sum as may be rec[uired by the sale of such part of the said securities as may be necessary. (3.) The dividends on the investments made under this section shall be paid to the credit of the cunqiany of the assets of which the money so invested formed part. 18. "When the balance at the credit of any company's account in the hands of the Board of Trade exceeds two thousand pounds, and the liquidator gives notice to the Board of Trade that the excess is not required for the purposes of the liciuidation, then such company shall be entitled to interest upon such excess at the rate of two per centitm per annum. 19. The Treasury may from time to time issue to the Board of Trade in aid of the votes of Parliament, out of the receipts arising from fees, fee stamps, and dividends on investments by the Treasury under this Act, any sums which may be necessary to meet the charges estimated by the Board of Trade in respect of salaries and expenses under this Act. 20. — (1.) Every liquidator of a company which is being wound up by order of the Court shall, at such times as may be prescribed, but not less than twice in each year during his tenure of office, send to the Board of Trade, or as they direct, an account of his receipts and payments as such liquidator. (2.) The account shall be in a prescribed form, ^hall be made in duplicate, and shall be Aerified by a statutory declaration in the prescribed form. (3.) The Board of Trade shall cause the accounts so sent to be audited, and for the purpose of the audit the lic[uidator shall furnish the Board with such vouchers and information as the Board may require, and the Board may at any time require the production of and insiject any books or accounts kept by the liquidator. (4.) When any such account has b?en audited, one copy thereof shall be filed and kept by the Board, and the other copy shall be filed with the Court, and each copy shall be open to the inspection of any creditor, or of any person interested. (.5.) The Board of Trade shall cause the account or a summary thereof when audited to be i^rinted, and shall send a printed copy thereof by i^ost to every creditor and contributory. 21. Every liquidator of a company which is being wotmd tip by order of the Court shall keep, in manner prescribed, proper books in which he shall from time to time cause to be made entries or minutes of proceedings at meetings, and of such other matters as may be prescribed, and any creditor or contributory of the company may, subject to the control of the Court, personally or by his agent inspect any such books. 22. — (I.) When the liquidator of a company which is being wound up by order of the Court has realised all the property of the company, or so much thereof as can, in his opinion, be realised without needlessly protracting the liquidation, and distributed a final dividend, if any, to the creditors, and adjusted the rights of the contributories between themselves, and made a final return, if any, to the contribu- tories, or has resigned, or has been removed from his office, the Board of Trade shall, on his application, cause a re])ort on his accounts to be prepared, and on his com- plying with all the requirements of the Board, shall take into consideration the report, and any objection which may be urged by any creditor, or contributory, or person interested against the release of the liquidator, and shall either grant or withhold the release accordingly, subject nevertheless to an appeal to the High Court. (2.) Where the release of a liquidator is withheld the Court may, on the appli- cation of any creditor, or contributory, or person interested, make such order as it thinks just, charging the licpiidator with the consequences of any act or default ho may have dotif; or made contrary to his duty. (3.) An order of the Board releasing the licpiidator shall discharge him from all liability in respect of any act done or default made by him in the administration The Companies (Winding-up) Act, 1890. Act of 1890 1287 of the affairs of tlio company, or otherwise in rchation to his conduct as liquidator, but any such order may be revoked on proof that it was obtained by fraud or by suppression or conccahnont of any material fact. (4.) Where the liquidator has not previously resigned or been removed, his release shall operate as a removal of him from his office. 23. -(1.) Subject to the provisions of the Companies Acts, the liquidator of a Discretionary company which is being wound up by order of the Court shall, in the administration powers of of the property of the company and in the distribution thereof amongst its creditors, liquidator have regard to any directions that may be given by resolution of the creditors or and control contributories at any general meeting, or by the committee of inspection, and any thereof, directions so given by the creditors or contributories at any general meeting shall in case of conflict be deemed to override any directions given by the committee of inspection. (2.) The liqiudator may from time to time summon general meetings of the creditors or contributories for tlie purpose of ascertaining their wishes, and it shall be his duty to summon meetings at s\ich times as tlie creditors or contributories, by resolution, cither at the meeting appointing the liquidator or otherwise, may direct, or whenever requested in writing to do so by one-tenth in value of the creditors or contributories as the case may be. (3.) The liquidator may apply to the Court in manner prescribed for directions in relation to any particular matter arising under the winding-up. (4.) Subject to the provisions of the Companies Acts, the liquidator shall use his own discretion in the management of the estate and its distribution among the creditors. 24. If any person is aggrieved by any act or decision of the liquidator of a Appeal to company which is being wound up by order of the Court, he may apjjly to the Court, Court against and the Court may confirm, reverse, or modify the aot or decision complained of, liquidator, and make such oi-der in the premises as it thinks just. 25. — (1.) The Board of Trade shall take cognizance of the conduct of liquidators Control of of companies which are being wound up by order of the Court, and in the event of Board of any such liquidator not faithfully performing his duties and duh^ observing all the Trade over requirements imposed on him by statute, rules, or otherwise, with respect to the liquidators, performance of his duties, or in the event of any complaint being made to the Board by any creditor or contributory in regard thereto, the Board shall inquire into the matter, and take such action thereon as may be deemed expedient. (2.) The Board may at any time require any liquidator of a company which is being woiind up by order of the Coirrt to answer any inquiry made by them in relation to any winding-up in which the liquidator is engaged, and may, if the Board think fit, apply to the Court to examine on oath the liquidator or any other person concerning the winding-up. (3.) The Board may also direct a local investigation to be made of the books and vouchers of the liquidator of any company which is being wound up by order of the Coui't. ■ 26. — (1.) The Lord Chancellor may, with the concun-ence of the President of the General rules Board of Trade, make general rules for carrying into effect the objects of this Act. and fees. (2.) All general rules made under the foregoing provisions of this section shall be laid before Parliament within three weeks after they are made, if Parliament is then sitting, and if Parliament is not sitting, within three weeks after the beginning of the next session of Parliament, and shall be judicially noticed, and shall have effect as if enacted by this Act. (3.) Any general rule made binder this section shall not come into operation until the expiration of one month after the rule has been made and issued. (4.) There shall be paid in respect of the proceedings under this Act such fees as the Lord Chancellor may, with the sanction of the Treasurj', dii'ect, and the Treasury may direct by whom and in what manner the same are to be collected and accounted for, and to what accoimt they are to be paid. (5.) All rules made and directions given by the Lord Chancellor under the fore- going provisions of this section shall be adopted by the authority for the time being empowered to make rules for regulating the practice or procedure in the Chancery Court of the County Palatine of Lancaster, but as so adopted shall have effect with the .substitution of the words "vice-chancellor" for the word "judge," and the word "registrar " for the words "chief clerk," and of the words " chambers of the registrar" for the words " chambers of the judge" and "judge's chambers," and any directions as to the remuneration to be allowed to officers of that Court in respect of proceedings under this Act shall be subject to the sanction of the Chancellor of the Duchy and County Palatine of Lancaster. 1288 Appendix A. Annual accounts of receipts and expenditure in respect of ■winding-up proceedings. 38 & 39 Vict. Returns hj officers. Officers and 27. — (1.) The Board of Trade may, with the approval of the Treasury, appoint remuneration, such additional officers as may be required by the Board for the execution of this Act, and may dismiss any person so appointed. (2.) The Board of Trade, with the concurrence of the Treasury, shall direct whether any and ^\hat remuneration is to be allowed to any officer of, or person attached to, the Board of Trade, perfonning any duties under this Act, and may vary, increase, or diminish such remuneration as they may think fit. (3.) The Lord Chancellor, with the concurrence of the Treasury, shall direct whether any and what remuneration is to be allowed to any person (other than an officer of the Board of Trade) pe)-forming any duties under this Act, and may vary, increase, or diminish such remuneration as he may think fit. 28. — (1.) The Treasury shall annually cause to be prepared and laid before both Houses of Parliament an account for the year ending with the thirty- first day of March, showing the receipts and expenditure during that year in respect of pro- ceedings under this Act, whether commenced under this or any previous Act, and the provisions of section twenty- eight of the Supreme Court of Judicature Act, 1875, shall apply to the account as if the account had been required by that section. (2.) The accounts of the Board of Trade under this Act shall be audited in such manner as the Treasury direct, and, for the purpose of the account to be laid before Parliament, the Board of Trade shall make such returns and give such information as the Treasury direct. 29. — (1.) The officers of the Courts acting in the winding-up of companies shall make to the Board of Trade such returns of the business of their respective Courts and offices, at such times and in such manner and form as may be pre- scribed, and from such returns the Board of Trade shall cause books to be prepared which shall, under the regulations of the Board, be open for j)ublic information and searches. (2.) The Board of Trade shall also cause a general annual report of all matters, judicial and financial, within this Act to be prepared and laid before both Houses of Parliament. Proceedings 30. — (1.) All documents purporting to be orders or certificates made or issued of Board of by the Board of Trade ancl to be sealed with the seal of the Board, or to be Trade. signed by a secretary or assistant secretary of the Board, or any person authorized in that behalf by the president of the Board, shall be received in evidence and deemed to be such orders or certificates without further proof unless the contrary is shown. (2.) A certificate signed by the President of the Board of Trade that any order made, certificate issued, or act done, is. the order, certificate, or act of the Board of Trade, shall be conclusive evidence of the fact so certified. Application 31. — (1.) This Act shall not, except where it is expressed to have a more of Act. extended application, api^ly to any company which is being wound up in pur- suance of an order made before the commencement of this Act. (2.) For the purposes of this Act a company shall not be deemed to be wound up by order of the Court if the order is to continue a winding-up under the super- vision of the Court. (3.) This Act shall not apply to any company unless the registered office of the company is situate in England or Wales. Interpretation 32. — (1.) In this Act, unless the context otherwise requires, — of terms. " The Companies Acts " means the Companies Act, 1862, and the Acts amending the same. " General rules " means general rides made under this Act, and includes forms. "Prescribed " means prescribed by general rules. " Stannaries Court" means the Court of the Vice -Warden of the Stannaries. 25 & 2G Vict. (2.) In Part IV. of the Companies Act, 1862, and in this Act the expression c. 89. "the Court," when used in relation to a company shall, unless the contrary 5Y2 intention appears, mean the Court having jurisdiction imder this Act to wind up tlie company. p. 40 (3.) For the purposes of this Act the expression "registered office of a com- pany " shall mean the ])Iacc which has been the registered office of the company for the greater part of the six months immediately preceding the presentation of the petition for wiuding-up the company, and shall include, in the case of an unregistered company, any place which in pursuance of section one hundred and ninety-nine of the (Jompanies Act, 1862, is to be deemed the registered office of the company for the purjjfjse of the winding-up thereof. {•See ataiDuifioi Court {Al/ulitioii) Act, 1896.) llcpcal. 33. The enactments mentioned in the second schedule to this Act are hereby The Companies (Winding-up) Act, 1890. Act of 1890 1289 repealed, tis to England and Wales, to the extent appearing in the third culuiuu of that schedule. 34. This Act shall come into operation on the first day of January one thousand Commence- eight hundred and ninety-one. nient ot Act. 35. — (1.) This Act may be cited as the Companies (Winding'- up) Act, 1890. Short title. ('2.) This Act and the Companies Acts, 1862 to 1886, may bo cited together as the Comj^anies Acts, 1862 to 1890. [Compare sect. 3 of last Act.) SCHEDULES. FIRST SCHEDULE. Section 6. Meetings of Ceeditoes and Conteibutoeies. (1.) The meetings of creditors and contributoiies shall be held withia twenty-one days after the date of the winding-up order, or within such further time as the Court may approve, unless a special manager has been appointed, in which case such meetings shall be held within one month from the date of such order, or within such further time as aforesaid. (2.) The official receiver of the company shall summon the meeting by giving not less than seven days' notice of the time and place thereof in the London Gazette and in a local paper. Notice of such meeting shall also be sent by post to every person appearing by the company's books to be a creditor of the company and to every member of the company. (3.) The official receiver shall also, as soon as practicable, send to each creditor mentioned in the company's statement of affairs, and to each person appearing from the company's books, or otherwise, to be a contributory of the company, a summary of the company's statement of affairs, includiug the causes of its failure, and any observations thereon which the official receiver may tliink fit to make ; but the pro- ceedings at any such meeting shall not be invalidated by reason of any suiumary or notice required by these rules not having been sent or received before the meeting. (4.) The meeting shall be held at such place as is in the opinion of the official receiver most convenient for the majority of the creditors and contributories. (5.) The official receiver, or some person nominated by him, shall be the chairman at the meetings. (6.) A person shall not be entitled to vote as a creditor unless he has duly proved a debt to be due to him from the company, and the proof has been duly lodged before the time appointed for the me3tiLig. (7.) A creditor shall not vote in respect of any unliquidated or contingent debt, or any debt the value of which is not ascertained. (8.) For the purpose of voting, a secured creditor shall, unless he surrenders his security, state in his proof the particulars of his security, the date when it was given, and the value at which he assesses it, and shall be entitled to vote only in respect of the balance (if any) diie to him, after deducting the value of his security. If he votes in respect of his whole debt he shall be deemed to have surrendered his security, unless the Court on application is satisfied that the omission to value the security has arisen from inadvertence. (9.) A creditor shall not vote in respect of any debt on or secured by a current bill of exchange or promissory note held by him, unless he is willing to treat the liability to him thereon of every person who is liable thereon antecedently to the company, and against whom a receiving order in bankruptcy has not been made, as a security in his hands, and to estimate the value thereof, and for the purposes of voting, bvit not for the purposes of dividend, to deduct it from his proof. (10.) It shall be competent to the official receiver, or to the liquidator, within twenty-eight days after a proof estimating the value of a security as aforesaid had been made use of in voting at any meeting, to require the creditor to give up the security for the benefit of the creditors generally on payment of the value so estimated, with an addititm thereto of twenty per centum. Provided, that where a creditor has put a value on such security, he may, at any time before he has been required to give up such security as aforesaid, correct such valuation by a new P. -1 O 1290 Appendix A. proof, and dcJuct such new value from his debt, but in tliat case such addition of twenty per centum shall not be made if the liquidator requires the security to be given up. (11.) The chairman of the meeting shall have power to admit or reject a proof for the purpose of voting, but his decision shall be subject to appeal to the Court. If he is in doubt whether the proof of a creditor should be admitted or rejected ho shall mark the proof as objected to, and shall allow the creditor to vote, subject to the vote being- declared invalid in the event of the objection being sustained. (12.) A creditor or a contributory may vote cither in person or by proxy. (13.) Every instrument of proxy shall be in the prescribed form, and shall be issued by an official receiver, or by the liquidator of the company, and every written part thereof shall be in the handwriting of the jDerson giving the proxy, or of any manager or clerk or other person in his regular employment, or of a commissioner to administer oaths in the Supreme Court of Judicature in England. (14.) General and special forms of proxy shall be sent to the creditors and contri- butories with the notice summoning the meeting, and neither the name nor descrip- tion of the official receiver or of any other person shall be jjrinted or inserted in the body of any instrument of proxy before it is so sent. (15.) A creditor or a contributory may give a general proxy to his manager or clerk, or any other person m his regular employment. In such case the instrument of proxy shall state the relation in which the person to act thereunder stands to the creditor or contributory. (16.) A creditor or a contributor}- may give a sj)ecial proxy to any person to vote at any specified meeting, or adjournment thereof — (a) for or against the appointment or continuance in office of any specified person as liquidator or member of the committee of inspection, and (h) on all questions relating to any matter other than those above referred to and arising at any specified meeting or adjournment thereof. (17.) A proxy shall not be used unless it is deposited with the official receiver before the meeting at which it is to be used. (18.) Where it appears to the satisfaction of the Court that any solicitation has been used by or on behalf of a liquidator in obtaining proxies or in procuring the appointment of liquidator, except by the direction of a meeting of creditors or contributories, the Court shall have power, if it think fit, to order that no remuneration shall be allowed to the person by whom or on whose behalf such solicitation may have been exercised, notwithstanding any resolution of the com- mittee of inspection or of the creditors or contributories to the contrary. (19.) A creditor or a contributory " may appoint the official receiver to act in manner prescribed as his general or special proxy. (20.) The chairman of the meeting may, with the consent of the meeting, adjourn the meeting from time to time and from place to place. (21.) A meeting shall not be competent to act for any purpose except the election of a chairman, the proving of debts, and the adjournment of the meeting, unless there are present or represented thereat, at least three creditors or con- tributories, or all the creditors or contributories if their number does not exceed three. (22.) If within half an houi* from the time appointed for the meeting a quorum of creditors or contributories is not present or represented, the meeting shall be adjourned to the same day in the following week at the same time and place, or to such other day as the chairman may appoint, not being less than seven or more than twenty-one days. (23.) The chairman of the meeting shall cause minutes of the proceedings at the meeting to bo dravvTi up, and fairly entered in a book kept for that purpose, and the minutes shall be signed by him or by the chairman of the next ensuing meeting. (24.) No person acting either under a general or a special proxy shall vote in favour of any resolution which would directly or indirectly place himself, his partner or employer, in a position to receive any remuneiation out of the estate of the company otherwise than as a creditor rateably with the other creditors of the company : l^rovidcd thiit where any person holds special proxies to vote for an application to the C'oui't in favour of the appointment of himself as liquidator he nuiy use the said proxies and vote accordingly. The CoMrANiES (WiNDiNO-ur) Act, 1800. Act of 1890 1201 SECOND SCHEDULE. Enactments Repealed as to England and Wales. Session and Chapter. 25 & 26 Vict. c. 89 30 & 31 Vict. c. 131 Title or Short Title. The Companies Act, 1862 The Companies Act, 1867 Extent of Repeal. Section 31. Section eighty-one. In section ninety -two the words "The Court shall determine whether any and what security is to be g'iven by any official liquidator on his appointment." Section ninety -seven. Section one hundred and sixty-five. Sections forty-one to forty-six. 4o2 1292 Appendix A. pp. 106, 110 et seq., 133, 811, 1021, 1011 Short title. Construction. Liability for statements in prospectus, pp. 110, 111, 112 et seq. THE DIREOTOES LIABILITY ACT, 1890. (53 & 54 Vict. c. 6i.) An Act to amend the Law relating to tlie Liability of Directors and others for Statements in Prospectuses and other Documents soliciting applications for Shares or Debentures. [18th August, 1890.] Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parlia- ment assembled, and by the authority of the same, as follows : — 1. This Act may be cited as the Directors Liability Act, 1890. 2. This Act shall be construed as one with the Companies Acts, 1862 to 1890. 3.^(1.) Where after the passing of this Act a prospectus or notice invites per- sons to subscribe for shares in or debentures or debenture stock of a company, every person who is a director of the company at the time of the issue of the prospectus or notice, and every person who having authorized such naming of him is named in the prospectus or notice as a director of the company or as having agreed to become a dii'ector of the company either immediately or after an interval of time, and every promoter of the company, and every person who has authorized the issue of the prospectus or notice, shall be hable to pay compensation to all persons who shall subscribe for any shares, debentures, or debenture stock on the faith of such pro- spectus or notice for the loss or damage they may have sustained by reason of any untrue statement in the prospectus or notice, or in any report or memorandum appearing on the face thereof, or by reference incorporated therein or issued there- with, unless it is proved — {a) With respect to every such untrue statement not purporting to be made on the authority of an expert, or of a jDublic official document or statement, that he had reasonable ground to believe, and did up to the time of the allotment of the shares, debentures, or debenture stock, as the case may be, believe, that the statement was true ; and [h) With respect to every such untrue statement purporting to be a statement by or contained in what purports to be a copy of or extract from a report or valuation of an engineer, valuer, accountant, or other expert, that it fairly repi-esented the statement made by such engineer, valuer, accountant, or other expert, or was a correct and fair copy of or extract from the report or valuation. Provided always, that notwithstanding that such untrue statement fairly represented the statement made by such engineer, valuer, accountant, or other expert, or was a correct and fair copy of an extract from the report or valuation, such director, person named, promoter, or other person, who authorized the issue of the prospectus or notice as afore- said, shall be liable to pay compensation as aforesaid if it be proved that he had no reasonable ground to believe that the person making the statement, report, or valuation was competent to make it ; and (c) With respect to every such untrue statement purjiorting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document, that it was a correct and fair representation of such statement or copy of or extract from such document, or unless it is proved that having consented to become a director of the company he withdrew liis consent before the issue of th(> prospectus or notice, and that the prospectuH or noti(;e was issued witliout liis authority or consent, or that the pro- BpoctuB or notice was issued without his knowledge or consent, and that on becoming" The Directors Liability Act, 1890. Act of 1890 1293 aware of its issue he forthwith gave reasonahlc public notice that it was so issued without his knowledge or consent, or that after the issue of sucli prospectus or notice and before allotment thereunder, he, on becoming aware of any untrue statement therein, withdrew bis consent thereto, and caused reasonable public notice of such withdrawal, and of the reason therefor, to be given. (2.) A promoter in this section means a promoter who was a party to the prepara- tion of the prospe(!tus or notice, or of the portion thereof containing such untrue statement, but shall not include any person by reason of his acting in a professional capacity for persons engaged in procuring the formation of the company. (3.) Where any company existing at the passing of this Act, which has issued shares or debentures, shall be desirous of obtaining further capital by feubscriptions for shares or debentures, and for that purjjose shall issue a prospectus or notice, no director of such company shall be liable in resjiect of any statement therein, unless he shall have authorized the issue of such prospectus or notice, or have adopted or ratified the same. (4.) In this section the word "expert" includes any person whose profession gives authority to a statement made by him. 4. Where any such prospectus or notice as aforesaid contains the name of a Indemnity person as a director of the company, or as having agreed to become a director where name thereof, and such person has not consented to become a director, or has withdrawn of person has his consent before the issue of such prospectus or notice, and has not authorized or been impro- consenttd to the issue thereof, the directors of the company, except any without perly inserted whose knowledge or consent the prospectus or notice was issued, and any other as a director, person who authorized the issue of such prospectus or notice shall be liable to indem- pp_ m^ 2.23 nify the person named as a director of the company, or as having agreed to become a director thereof as aforesaid, against all damages, costs, charges, and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or notice, or in defending himself against any action or legal proceedings brought against him in respect thereof. 5. Every person who by reason of his being a director, or named as a director or Contribution as having agreed to become a director, or of his having authorized the issue of the from co- prospectus or notice, has become liable to make any payment under the provisions directors, &c. of this Act, shall be entitled to recover contribution, as in cases of contract, from p_ m any other person who, if sued separately, would have been liable to make the same payment. THE STAMP ACT, 1891. (54 & 55 Vict. c. 39.) Diiti/ 0)1 Capital of Companies. 112. A statement of the amount which is to form the nominal share capital Charge of of any company to be registered with limited liability shall be delivered to the duty on capi- Registrarof Joint Stock Companies in England, Scotland, or Ireland, and a state- tal of limited meut of the amount of any increase of registered capital of any company now liability registered or to be registered with limited liability shall be delivered to the said companies, registrar, and every such statement shall be charged with an ad valorem stamji duty p gg^ of two shillings for every one hundred pounds and any fraction of one hundred pounds over any multiple of one hundred pounds of the amount of such capital or increase of capital as the case may be. 1294 Appendix A. THE COMPANIES (WINDINa-UP) ACT, 1893. (56 & 57 YicT. c. 68.) An Act to amend Section ten of the Companies ("Winding-up) Act, 1890. [22nd September, 1893.] Be it enacted by the Queen's Most Excellent Majesty, by and mtb the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parlia- ment assembled, and by the authority of the same, as follows : '^'^ 1, j\_n order for payment of money made by the Court under section ten of the 53 & 54 Vict. Companies (Winding-up) Act, 1890, shall be deemed to be a final judgment within c. 63, s. 10. ^Yie meaning of paragraph (g) of sub-s. 1 of sect. 4 of the Bankruptcy Act, 1883. 46 & 47 Vict. c. 52. Short title ^' '^^^^ -^^^ ^^^ ^® *^^*®*^ ^^ " "^^^ Companies ("Winding-up) Act, 1893." Appendix A. Act of 1898 1294a THE COMPANIES ACT, 1898. (61 & 62 Vict. c. 26.) An Act to amend the Companies Act, 18G7. [2ncl August, 1898.] Be it enacted by the Queen's most excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Par- liament assembled, and by the authority of the same, as follows : — 1. — (1.) Whenever, before or after the commencement of this Act, any shares in The Court the capital of any company under the Companies Acts, 1862 and 1890, credited as empowered to fully or partly paid up shall have been or may be issued for a consideration other grant relief than cash, and at or before the issue of such shares no contract or no sufficient for non-com- contract is filed with the Registrar of Joint Stock Companies, in compliance with pliance with section twenty-five of the Companies Act, 1867, the company or any person in- 30 & 31 Vict. terested in such shares or any of them may apply to the Court for relief, and the c. 131, s. 25. Court, if satisfied that the omission to file a contract or sufficient contract was accidental or due to inadvertence, or that for any reason it is j ust and equitable to grant relief, may make an order for the filing with the registrar of a sufficient contract in writing, and directing that on such contract being filed within a specified period it shall, in relation to such shares, operate as if it had been duly filed with the registrar aforesaid before the issue of such shares. (2.) Any such application may be made in the maimer in which an application to rectify the register of members may be made under section thii-ty-five of the Com- panies Act, 1862, and either before or after an order has been made or an effective 25 & 26 Viot. resolution has been passed for the winding-up of such company, and either before c. 89. or after the commencement of any proceedings for enforcing the liability on such shares consequent on the omission aforesaid, and any such application, shall, if not made by the company, be served on the company. (3.) Any such order may be made on such terms and conditions as the Court may think fit, and the Court may make such order as to costs as it deems proper, and may dii-ect that an office copy of the order shall be filed with the registrar aforesaid, and the order shall in all respects have full effect. (4.) Where the Covu-t in any such case is satisfied that the filing of the requisite contract would cause delay or inconvenience, or is impracticable, it may, in lieu thereof, direct the filing of a memorandum in writing, in a form approved by the Court, specifying the consideration for which the shares were issued, and may direct that on such memorandimi being filed within a specified period it shall in relation to such shares operate as if it were a sufficient contract in writing within the meaning of section twenty-five of the Companies Act, 1867, and had been duly filed with the registrar aforesaid before the issue of such shares. The memorandum shall before the filing thereof be stamped with the same amoimt of ad valorem stamp duty as would be chargeable upon the reqviisite contract unless the contract has been produced to the registrar duly stamped, or unless the registrar is otherwise satisfied that the contract was duly stamped. 2. The jurisdiction by the Act given to the Com-t is not by implication to curtail Jurisdiction or derogate from its jiu-isdiction to grant relief in any such case under section cumulative, thirty-five of the Companies Act, 1862, or otherwise. 3. This Act may be cited as the Companies Act, 1898, and shall be read with Short title the Companies Acts, 1862 to 1893. and construc- [NOTE. — The above Act is the outcome of the decision of the Com-t of Appeal in lie Kharaslchoma Exploring Syndicate, (1897) 2 Ch. 451, supra, p. 186. It largely supplements the j)owers conferred on the Court by section thirty-five of the Com - panies Act, 1867. Under that section the Court has power, where section twenty - five of the Act of 1867 has not been complied with, to rectify the register of Pt. I. tion. 1294b The Companies Act, 1898. members by striking ofE the name of a person prejudiced (see supra, pp. 190, 1055) ; but has not power to order the filing of the requisite contract, and a fortiori has not power to order the filing of the contract nunc pro tunc {Harwich Harbour, ^-c. Co., W. N. (1875) 235) ; and the powers of the Court under that section are also limited by the rule (based on Oakes v. Turquand, L. R. 2 H. L. 325) that the Court will not interfere unless the application for an order is made before the commence- ment of the winding-up. The new Act enables the Court to order the contract to be filed nunc pro tunc, and to give relief even where the application is not made until after the commencement of the winding-up. An order may be made in such cases, and on such terms and conditions, as the Court thinks fit ; and, by para. 4 of sect. 1, the Coui't can, in sjDecial circumstances, direct the filing of a memorandum in writing, specifying the consideration, instead of directing the filing of the contract. The application for relief is to be made in England to the High Court, by motion, or sxuiamons, or otherwise ; and, if not made by the company, is to be served on the company ; but the Couit could probably direct notice to be given to other parties interested, e.g., creditors and shareholders. In this respect it is anticipated that the Court will follow the practice adopted in the case of reduction of capital and alteration of objects (see supra, pp. 972, 981 and 1002), i. e., direct notice to be given by adver- tisement of the day fixed for the hearing of the application, and that any one who desires to oppose can attend. The discretion vested in the Court is wide ; and it is hoped that many cases of injustice and hardship will, by proceedings under this Act, be remedied. The Bill for the above Act was drafted by the writer at the request of the Incorporated Law Society, to whom the credit of obtaining this amendment of the law is due.] Act of 1897 1295 THE PEEFERENTIAL PAYMENTS IN BANKRUPTCY AMENDMENT ACT, 1897. (60 & 61 YicT. c. 19.) An Act to amend the Law regarding Preferential Payments in tlie case p. 773 of Companies. [lotli July, 1897.] Be it enacted by the Queen's most excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parlia- ment assembled, and by the authority of the same, as follows : 1. This Act may be cited as the Preferential Payments in Bankruptcy Amend- Short title, ment Act, 1897. 2. In the winding-up of any company under the Companies Act, 1862, and the Priority of Acts amending' the same, the debts mentioned in section one of the Preferential certain debts. Payments in Bankruptcy Act, 1888, shall, so far as the assets of the company 25 & 26 Vict, available for payment of general creditors may be insufficient to meet them, have c_ §9. priority over the claims of holders of debentures or debenture stock under any 51 & 52 Vict, floating charge created by such company, and shall be paid accordingly out of any c, 52. property comprised in or subject to such charge. 3. In case a receiver is appointed on behalf of the holders of any debentures Payment of or debenture stock of a company secured by a floating charge, or in case possession clebts out of is taken by or on behalf of such debenture holders of any property comprised in or assets in subject to such charge, then and in either of such cases, if the company is not at certain cases, the time in course of being wound up, the debts mentioned in section one of the said Preferential Payments Act shall be paid forthwith out of any assets coming to the hands of the receiver, or other person taking possession as aforesaid, in priority to any claim for principal or interest in respect of such debentures or debenture stock. And the periods of time mentioned in the said Act shall be reckoned from the date of the appointment of the receiver or possession being taken as aforesaid, as the case may be. But any payments made under this section shall be recouped as far as may be out of the assets of the company available for paj-ment of general creditors. 4. In the application to Ireland of this Act the Preferential Payments in Bank- Application ruptcy (Ireland) Act, 1889, shall be substituted for the Preferential Payments in to Ireland. Bankruptcy Act, 1888, and in particular section fom- of the said Act of 1889 shall ^^ & 53 Vict. be substituted for section one of the said Act of 1888. c- ^0. 51 & 52 Vict. c. 62. 5. This Act shall not extend to Scotland. -r-. . , « XiXtent of Act. This Act is not retrospective. Re JFaverlei/ Tyjye Writer, "W. N. (1898) 40. 1296 Appendix B. (BJ— Rules and Orders. pp. 974, 975 BOAED OF TEADE EULES UNDEE THE LIFE ASSUEANCE ACTS, 1870 to 1872. The Board of Trade, in pursuance of the powers conferred upon them under the first section of the Life Assurance Companies Act, 187'2, have made the following rules with respect to the payment into the Court of Chancery, and repayment of the deposit required to be made by a life assurance company, in pursuance of the provisions of the Life Assurance Companies Acts, 1870 and 1871 ; the investment of the deposit in securities, the deposit of stocks or secui'ities in lieu of money, and the payment of the interest or dividends from time to time accruing due on any such stocks or seciu-ities. i. In these rules the term " the Court " means the High Court of Chancery in England, and the word "company" means a company as the same is defined in the second section of the Life Assurance Companies Act, 1870. 2. Where any company is required in pursuance of the Life Assurance Companies Acts, 1870 to 1872, to deposit the sum of twenty thousand pounds with the Accountant- General of the Court of Chancery, the said company, or the subscribers of the memorandum of association of the said company, or any of them, as the case may be (in these rules referred to as the promoters), may make application to the Board of Trade for a warrant, and the Board of Trade may thereupon issue their warrant to the promoters for such payment into Court, which warrant shall be a sufiicient authority for the company or persons therein named to pay the money therein mentioned into the Bank of England, in the name and with the privity of the said Accountant- General, and for thut officer to issue directions to such Bank to receive the same, to be placed to his account there, ex parte the company mentioned in such warrant, according to the method (prescribed by statute or general rules or orders of Court or otherwise), for the time being in force respecting the payment of money into the said Court, and without fee or reward. Provided, that in lieu, wholly or in part, of the payment of money, the promoters mav bring into Court, as a deposit, an equivalent .sum of bank annuities, or of any stocks, funds, or securities, in wliich cash under the control of the Court is for the time being permitted to be invested, or of exchequer bills (the value thereof being taken at the price at which the promoters originally purchased the same, as appear- ing by the broker's certificate of that purchase) : and in that case the Board of Trade shall vary their warrant accordingly by directing the transfer or deposit of such amount of stocks, funds, securities, or exchequer biUs by the persons therein named, into the name or to the account of the said Accountant- General in trust to attend the orders of the Court, ex parte the company mentioned in such warrant. 8. At any time when the office of the Accountant- General of the Court of Clianccry is closed, a deposit under these rules may nevertheless bo made, in the manner and subjet't to the regulations provided witli i-espect to deposits by com- panies by s. 88 of the Lands Clauses Consolidation Act, 1845. 4. Where money is so jiaid into the Court of Chancery, the Court may, on the ap|)]ication of the company or the persons named in the warrant of tlio Board of 1'radc, (jr of ihe majority or survivors of such jicrsons, order that the same bo invested in Buch stocks, funds, or securities as the aiiplicants desire and the Court thiiilcs fit. ft. In the subsequent provisions of these rules, the term "the deposit fund" meaiiH tlie money d('i)osited, or the stocks, funds, or securities in which tlie same is invested, or the bank annuities, stocks, funds, securities, or exchequer bills trans- ferred or deposited, as the case may be, and the term " the depositors " moans the comi)aiiy or persons named in the warrant of the Board of Trade authorizing the Board of Trade Rules. Rules of 1872 1297 deposit, or the majority or survivors of tliose persons, their executors, administra- tors or assigns. 6. The Court shall, on the application of the depositors, order the deposit fund to be paid, transferred, or delivered out to the applicants, or as they dii-ect, so soon as it is jiroved to the satisfaction of the Court that the life assurance fund of the com- pany, in respect of which tlu; deposit is made, accumulated out of premiums paid to tlio said company, amounts to the sum of forty thousand pounds. 7. The depositors sluall be entitled to receive payment of the interest or dividends from time to time accruing- on or in respect of the deposit while in Court. And the Court may, from time to time, on the apjilication of the depcjsitors, make such order as may seem fit respecting the payment of the interest, or dividends accordingly. 8. The issuing in any case of any warrant or certificate relating to deposit or to the deposit fund, or any error in any such warrant or certificate, or in relation thereto, shall not make the Board of Trade, or the person signing the warrant or certificate on their behalf, in any manner liable for or in respect of tlie deposit fund, or the interest or dividends accruing on the same, or any part thereof respectively. 9. Any application under these rules to the Court of Chancery shall be made in a summary way by petition. 2Wi Aufjust, 1872. W. R. Malcolm. 1298 Appendix B, GENERAL ORDER AND RULES HIGH COURT OF CHANCERY, TO REGULATE THE MODE OF PROCEEDING UNDER THE COMPANIES ACT, 1862, ISSUED BY THE LORD HIGH CHANCELLOR, Satxteday, 21st day of Maech, 1868. The Eight Honoheable Hugh McCalmont, Baeon Caiens, Lord High Chancellor of Great Britain, with the advice and consent of the Right Honourable John, Loed RoMiLLY, Master of the Rolls ; The Honourable the Vice-ChanceUor, Sie John Stuaet ; and The Honourable the Vice-Chancellor, Sie Richaed Malins, doth hereby, in pursuance and execution of the powers given to him by the Companies Act, 1867, and of all other powers and authorities enabling him in that behalf, order and du'ect in manner following: — Petitions for Winding-i(p. 1. Every petition which shall, after this order comes into operation, be presented for the winding-up of any company by the Court, or subject to the supervision of the Court, and all notices, affidavits, and other proceedings under such petitions, shall be intituled in the matter of the Companies Acts, 1862 and 1867, and of the company to which such petition shall relate. FetitioH to Seduce Capital, pp. 970 et seq. 2. Every petition for an order confirming a special resolution for reducing the capital of a company, and all notices, affidavits, and other proceedings under such petition, shall be intituled in the matter of the Companies Act, 1867, and of tlie company in question. 3. No such petition as mentioned in the 2nd rule of this order shall be placed in the list of petitions by the secretary of the Lord Chancellor or of the Master of the Rolls, as the case may be, until after the expiration of eight clear days from the filing of such certificate as is mentioned in the 14th rule of this order. 4. AVhen any such petition as last aforesaid has been presented, application may be made, ex parte by summons in chambers, to the judge to whose Court the petition is attached, for directions as to the proceedings to be taken for settling the list of creditors entitled to object to the proposed reduction, and the judge may thereupon fix the date with reference to which the list of such creditors is to be made out, pui-- suant to the 13th section of the Companies Act, 1867 ; and may, either at the same time or afterwai'ds, as he shall think fit, give such directions as are mentioned in the .5th and 6th rules of this order. The order upon such summons may be in the Form No. 1 in the schedule hereto, with such variations as the circumstances of the case may require. 5. Notice of the presentation of the petition shall be published at such times, and in such newspapers as the judge sliall direct, so that the first insertion of such notice be made not less than one calendar month before the day of the date fixed, as mentioned in the 4tli rule of this order. Such notice may be in the Form No. 2 in the schedule hereto, with such variations as the circumstances of the case may require. G. The company shall, within such time as the judge shall direct, file in the office of the clerks of records and writs, an affidavit made by some ofticcr or officers of the company competent to make the same, verifying a list containing the names and General Order and Rules, March, 1868. Rules of 1868 1299 addresses of the creditors of tlic company at the date fixed as mentioned in the 4th rnle of this order, and the amounts duo to them respectively, and leave the said list and an office copy of such affidavit, at the chambers of tlie judge. 7. The person making such affidavit sliall state therein his belief that such list is correct, and that there was not at the date so fixed as aforesaid any debt or claim wliich, if that date were the commencement of the winding-up of the company, would be admissible in proof against the company, except the debts sot forth in such list, and shall state his means of knowledge of the matters deposed to in such affi- davit. Such affidavit may be in the Form No. 3 in the schedule hereto, with such variations as the circumstances of the case may require. 8. Copies of such list containing the names and addresses of the creditors, and the total amount due to them, but omitting the amounts duo to them respectively, or (as the judge shall think fit) complete copies of such list, shall be kept at the regis- tered office of the company and at the offices of their solicitors and London agents (if any), and any person desirous of inspecting the same may at anytime during the ordinary hours of business, inspect and take extracts from the same on payment of the sum of one shilling. 9. The company shall, within seven days after the filing of such affidavit, or such further time as the judge may allow, send to each creditor whose name is entered in the said list, a notice stating the amount of the proposed reduction of capital, and the amount of the debt for which such creditor is entered in the said list, and the time (such time to be fixed by the judge) within which, if he claims to be a creditor for a larger amount, he must send in his name and address, and the particulars of his debt or claim, and the name and address of his solicitor (if any) to the solicitor of the company ; and such notice shall be sent through the post in a prepaid letter addressed to each creditor at his last known address or place of abode, and may be in the form or to the efi'ect of the Form No. 4, set forth in the schedule hereto, with such variations as the circumstances of the case may require. 10. Notice of the list of creditors shall, after the filing of the affidavit mentioned in the 6th of these rules, be published at such times, and in such newspapers, as the judge shall direct. Every such notice shall state the amount of the proposed reduction of capital, and the places where the aforesaid list of creditors may be inspected, and the time within which creditors of the company who are not entered on the said list, and are desirous of being entered therein, must send in their names and addresses, and the particulars of their debts or claims, and the names and addresses of their solicitors (if any) to the solicitor of the company ; and such notice may be in the Form No. 5, set forth in the said schedule hereto, with such variations as the circumstances of the case may require. 11. The company shall, within such time as the judge shall direct, file in the office of the clerks of records and writs an affidavit made by the person to whom the par- ticulars of debts or claims are by such notices as are mentioned in the 9th and 10th rules of this order, required to be sent in, stating the result of such notices respec- tively, and verifying a list containing the names and addresses of the persons (if any), who shall have sent in the particulars of their debts or claims in pursuance of such notices respectively, and the amounts of such debts or claims, and some com- petent officer or officers of the company shall join in such affidavit, and shall in such list distinguish which (if any) of such debts and claims are wholly or as to any and what part thereof, admitted by the company, and which (if any) of such debts and claims are wholly, or as to any and what part thereof, disputed by the company. Such affidavit may be in the Form No. 6 in the schedule hereto, with such variations as the circumstances of the case may requii-e ; and such list and an office copy of such affidavit, shall, within such time as the judge shall direct, be left at the chambers of the judge. 12. If any debt or claim, the particulars of which are so sent in, shall not be admitted by the company at its full amount, then, and in eveiy such case, unless the company are willing to set apart and appropriate in such manner as the judge shall direct, the full amount of such debt or claim, the company shall, if the judge think fit so to direct, send to the creditor a notice that he is required to come in and prove such debt or claim, or such part thereof as is not admitted by the company by a day to be therein named, being not less than four clear days after such notice, and being the time appointed by the judge for adjudicating upon such debts and claims, and such notice shall be sent in the manner mentioned in the 9th rule of this order, and may be in the Form No. 7 in the schedule hereto, with such variations as the circumstances of the case may require. 13. Such creditors as come in to prove their debts or claims in pursuance of any such notice as is mentioned in the 1 2th of these rules, shall be allowed their costs of 1300 Appendix B. proof against the company, and be answerable for costs, in the same manner as in the case of persons coming in to prove debts under a decree in a cause. 14. The result of the settlement of the list of creditors shall be stated in a cer- tificate by the chief clerk, and such certificate shall state what debts or claims (if any) have been disallowed, and shall distinguish the debts or claims the full amount of which the company are willing to set apart and appropriate, and the debts or claims (if any) the amount of which has been fixed by inquiry and adjudication in manner provided by sect. 14 of the said Act, and the debts or claims (if any) the full amount of which is not admitted by the company, nor such as the company are willing to set apart and appropriate, and the amount of which has not been fixed by inquiry and adjudication as aforesaid ; and shall show which of the creditors have consented in writing to the proposed reduction, and the total amoimt of the debts due to them, and the total amovmt of the debts or claims, the payment of which has been secured in manner provided by the said 14th section, and the persons to or by whom the same are due or claimed ; but it shall not be necessary to show in such certificate the several amounts of the debts or claims of any persons who have consented in writing- to the proposed reduction or the payment of whose debts or claims has been secured as aforesaid. 15. After the expiration of eight clear days from the filing of such last-mentioned certificate, the petition may be placed in the list of petitions upon a note from the chief clerk to the secretary of the Lord Chancellor or of the Master of the Rolls, as the case may be, stating that the certificate has been filed and become binding. 16. Before the hearing of the petition, notices stating the day on v/hich the same is appointed to be heard shall be published at such times and in such newspapers as the judge shall direct. Such notices may be in the Form No. 8, in the schedule hereto, with such variations as the circumstances of the case may require. 17. Any creditor settled on the said list whose debt or claim has not, before the hearing of the petition, been discharged or determined, or been secured in manner provided by the 14th section of the said Act, and who has not before the hearing signed a consent to the proposed reduction of capital, may, if he think fit, upon giving two clear days' notice to the solicitor of the company of his intention so to do, appear at the hearing of the petition and oppose the application. 18. Where a creditor who appears at the hearing under the last-preceding rule is a creditor, the full amount of whose debt or claim is not admitted by the com- pany, and the validity of such debt or claim has not been inquired into and adju- dicated upon under sect. 14 of the said Act, the costs of and occasioned by his appearance shall be dealt with as to the Court shall seem just, but in all other cases a creditor appearing under the last-preceding rule shall be entitled to the costs of such appearance, unless the Court sh"all be of opinion that in the circumstances of the particular case his costs ought not to be allowed. 19. When the petition comes on to be heard, the Court may, if it shall so think fit, give such directions as may seem proper with reference to the securing in manner mentioned in sect. 14 of the said Act, the payment of the debts or claims of any creditors who do not consent to the proposed reduction ; and the further hearing of the petition may, if the Court shall think fit, be adjourned for the purpose of allowing any steps to be taken with reference to the securing, in manner aforesaid, the payment of such debts or claims. 20. Where the Coui-t makes an order confii-ming a reduction, such order shall give directions, in what manner and in what newspapers, and at what times, notice of the registration of the oider, and of such minute as mentioned in the 15th section of the Companies Act, 18G7, is to be published ; and shall fix the date until which the words '* and reduced" are to be deemed part of the name of the company, as mentioned in the 10th section of the same Act. Fees. 21. Solicitors .shall be entitled to charge and be alloAVcd for duties performed under the Comiiauies Act, 1867, the same fees as they shall for the time being be entitled to charge, and be allowed, for the like duties performed under the Com- panies Act, 1862, unless the Court or judge shall otherwise specially direct. 22. The same fees of Court sliall be paid in relation to jiroceedings in Chancery under the Companies Act, 18C7, as shall for the time being bo payable in relation to like proceedings in Chancery under the Companies Act, 1862, and shall be collected by stumps in manner provided by the general orders of the Court. General Directions. 23. The general orders and practice of the Court, including the course of pro- ceeding and practice in the judges' chambers, shall, in cases not provided for by Forms under Rules of 18G8. Rules of 1868 1301 the Compauics Act, 18G7, or those Rales, ho far as such orders and practice are applicable, and not inconsistent with the said Act or with these Rules, apply to all proceedings in the Court of Chancery under the said Act. 24. The power of tlu; Court and of the judge sitting in chambers to enlarge or abridge the time for doing any act or taking any proceeding, to adjourn or review any proceeding, and to give any direction as to the course of proceeding, shall be the same in proceedings under the Companies Act, I8G7, as iu proceedings under the ordinary jurisdiction of the Court. Commencement of Order. 25. This order shall take effect and come into operation on the 15th day of April, 1868, and shall apply to all proceedings iu Chancery under the said Act, whether commenced before or after that day, but every proceeding taken under the said Act before that day shall have the same validity as it would have had if this order had not been made. Interpretation. 2G. The general interpretation clause of the Consolidated General Orders shall be deemed to extend and apply to the rules of this order, and this order shall be deemed a general order of this Court. Cairns, C. romilly, m.r. John Stuart, V.-C. Richard Malins, V.-C. THE SCHEDULE. No. 1. Form of Order. [Rule 4.] The Master of the Rolls [or, \ In the Matter of the Company, Limited and Vice-Chancellor Sir [ Reduced; and in the Matter of " The Companies at Chambers]. ) Act, 1867." Upon the application of the petitioners by summons, dated , and upon hearing the solicitor for the petitioners, and on reading the petition on the day of preferred unto the Right Honourable the Lord High Chancellor of Great Britain [or, Master of the Rolls], it is Ordered, that an inquiry be made what are the debts, claims, and liabilities of or affecting the said company on the day of , 18 , and that notice of the presentation of the said petition be inserted in [the newspapers] on the day of and [other times of insertion], and that a list of the persons who are creditors of the company on the said day of , and an office copy of the affidavit verifying the same be left at the chambers of the judge on or befoi'e the day of No. 2. [See Rule 5.] In the Matter of The Company, Limited and Reduced ; and in the Matter of " The Companies Act, 1867." Notice is hereby given that a petition for confirming a resolution reducing the capital of the above company from I. to I. , was on the day of presented to [the Lord Chancellor, or the Master of the Rolls], and is now pending ; and that the list of creditors of the company is to be made out as for the day of , 18 . C. and D. of [agents for A. and B., of ], Solicitors to the Company. No. 3. Affidavit verifijinfj List of Creditors. [Rule 7.] In Chancery. In the Matter of The Company, Limited and Reduced ; and in the Matter of " The Companies Act, 1867." I, A. B., of, &c., make oath and say as follows : — - 1. The paper writing now produced and shown to me, and marked with the letter A., contains a list of the creditors of and persons having claims upon the said com- pany on the day of ,18 (the date fixed by the Order in this matter, 1302 Appendix B. (lateil ), together with their respective addresses, aud tlie nature and amount of their respective debts or claims, and such list is, to the best of my knowledge, information, and belief, a true and accurate list of such creditors and persons having claims on the day aforesaid. 2. To the best of my knowledge aud belief there was not, at the date aforesaid, any debt or claim which, if such date were the commencement of the winding-up of the said company, would be admissible in proof against the said company other than and except the debts set forth in the said list. I am enabled to make tliis statement from facts within my knowledge as the of the said company, and from information derived upon investigation of the affairs and the books, docu- ments, aud papers of the said company. Sworn, &c. List of Creditors referred to in the last Form. In the Matter, &c. This list of c]'editors marked A. was produced and shown to A. B., and is the same list of creditors as is referred to iu his affidavit sworn before me this day of , 18 . X. Y., &c. Names, Addresses, and Description of the Creditors. Nature of Debt or Claim. Amount of Debt or Claim. No. 4. [See Kule 9.] In the Matter of The Company, Limited and Reduced ; and in the Matter of " The Companies Act, 1867." To Mr. . You are requested to take notice that a petition has been presented to the Court of Chancery, to confirm a special resohition of the above company, for re- ducing its capital to 1., and that in the list of persons admitted by the com- pany to have been on the day of , creditors of the company your name is entered as a creditor \Jiere state the amount of the deht or nature of the claim']. If you claim to have been on the last -mentioned day a creditor to a larger amount than is stated above, you must, on or before the day of , send the par- ticulars of your claim, and the name and address of yovir solicitor (if any), to the undersigned, at . In default of your so doing, the above entry in the list of creditors will, in all the proceedings under the above application to reduce the capital of the company, be treated as correct. Dated this day of ,18 . A. B., Solicitor for the said Company. No. 5. [See Rule 10.] In the Matter of The Company, Limited and Reduced ; and in the Matter of " The Companies Act, 18G7." Notice is hereby given that a petition has been presented to the Court of Chancery for confirming a resolution of the above company for reducing- its capital from I. to t. A list of the persons admitted to have been creditors of the com- pany on the day of > 18 , may be insiiccted at the offices of the company at , or at the office of , at any time during usual business hours, on payment of the charge of one shilling. Any person who cl;iims to have been on the last-mentioned day and stUl to be a cr< EX. 1313 AGREEMENTS- \b ct seq. validity of securities where limit exceeded, 411 BREACH OF TRUST, assessment of damages in winding-up, Winding-up Act of 1890. .1283. directors, by, 427, 428, 519 liability inter se, 1066 order to make good [1065] fraudulent, reception of illegitimate gains is, 67 paying dividends out of capital is, 519 pleadings [1040] promoters, by, 67 proof in bankruptcy for damages, 109 BREWERY COMPANY, objects [328] BRIBE, agent of company, to, recovery of, 68 commission in nature of, 150 director, to, cannot bo sued for, 436 company may sue briber, 436 liability of director in respect of, 1024 writ and statement of claim in action in respect of [1024, 1042] BROKER, commission and brokerage, whether payment by company is hdra vires, 149 Factors Act, power under, 933 placing shares, 274, 276 pledge of scrip by, 766 AH references are to the pages. Pages in brackets [327] refer to the Forms. 1320 INDEX. BUILDERS' INSTITUTE, objects [354] BUILDING COMPANIES, objects [309, 339] BUILDING ESTATE, objects [309, 338] BUILDING SOCIETIES, advances to, 925 et ^eq. borrowiDg- powers of, as to, 925 dealings with, precautions to be observed in, 925 rules, notice imputed to lenders, 925 BUSINESS, abroad, powers of attorney [725 ei sc/.l acquisition of existing (object clause) [301] ancillary, object clause [302] agreement for sale of, by company [218] to new or intended company [199, 215], and notes commencement of, before capital all issued, 384 clause in articles, as to [384] covenant not to carry on [206], and note going concern, as, sale of [218] guarantee of profits by vendor on sale [211] meetings of company, at, 416 [418], and note power to acquire [302, 481], and notes purchase -money out of profits, implied agreement to carry on. 261 sale as going concern [218, 306] testator's, conversion into company, 550, 551, 605 [606], and note ultra vires, writ in action to restrain carrying on [1027] BYE- LAWS, directors' power to make [451] persons dealing with company not bound to know, 451 CALLS, actions for, 388, 390 evidence clause as to [390], and note provisions of the Act, 1200 statement of claim [1032], and note writs and pleadings [1017—1019, 1032—1036] allotment, payment on, is not, 389 arrangements for difference as to amount and payment [384], and note, 1245 before whole capital issued, may be made, 384 charged by debentures, 666, 786, 796, 797 order to make in windiug-up [1108, 1109] clauses in articles, as to [388 — 393] debt, when a,, 388 deceased member, 389 defence and counterclaim [1034, 1035] delegation of power to make [413] forfeituns of sharcis for non-payment [391 ct seq."], and notes suing for calls after [393], and note future, mortgagcH of, 786 ct seq. directors' ])owerH, 411, 788 getting in, order for, wluire no winding-up, 1109, 1110 injunctions to restrain, 389 instalmciits, paya])lo by. 389 chiuscM ill articles [385], and note. [391, 393) interest on sums dne [-lOn], and note I INDEX. 1321 CALLS — coii/inucd. interest on, when paid iu advance, 391 may be paid out of capital, 391 power to receive advance [391] ranks for payment in winding-up, 391 irregularity as to, 388 »i(tlaj}(fes in making, onus of proof, 389 minute of resolution necessary, 389 notice of [389], and note forms of [68'), 686] payment in advance, 390 [391, 455] when improper, 391 power to make, a trust, 389 receipt of [686] reconstruction, as to, 1129, 1130 resolution, making [672] what should be specified in, 389 minute of, should be made, 389 restriction on amount in articles [389] shares issued as fully paid up, but no contract filed, on, 189 statement of defence [1033], and note Table A., provisions as to, 1224 threatened transfer, as to making calls to prevent, 389 time for payment of, fixing, 388 unqualified persons, by, 388 voluntary liquidation commenced, after, 389 when deemed to have been made [389], and note winding-up, power of Court in, 1205 writ to enforce [1017 — 1019], and notes CANCELLATION OF ALLOTMENT, and re-allotment where contract not filed, 190 CANCELLATION OF CAPITAL, Act of 1867, under, 970, 971, 1243 Act of 1877, under, 970—972, 1267 affidavits in supjiort of petition for [981 et seq.~\ lost or unrepresented by available assets, 970, U72 order confirming [988], and note advertisement of [989], and note, petitions for [977 — 979] advertisements [980, 981], and notes order on [988] resolutions for [661 et sry.], and notes shares, unissued or surrendered, 970, 971 words " and reduced," 972 — 974 dispensing with, 972, 973 order discontinuing [989, 990], and note \_S(C Reduction of Capital.] CAPITAL, accounts, different systems of [521 ct fcq.^ separate, of capital and revenue [498] accretions to, and diminution of, how considered in estimating profits, 521 et scq. advance of calls, paid in, clause in articles [391, 455] interest on, as to, 391, 455 power to receive, nature of, 391 winding-up, order of payment in, 391 alteration of, 282 All references are to the pages. Puflrs in Irarkcts [327] refer t2S et seq. classes of shares, division into, 285, 286, 358 et seq. [361 et seq."], and notes, 411, 45^, 481 [482, 483] preferential and other rights attached to. 286, 358, 359 [410], and note alteration of, 286, 358—360 clauses in articles as to [387, 482, 483] clauses in memorandum as to, 285 [292], 358—360 [361—370], and notes conversion of shares into stock [408] directors' fees may be paid out of, 433 distribution in wiuditg-up (clauses in articles) [500, 501], and note dividends not payable out of, where hmited company, 511 rt seq. dividends out of, 456, 511, 513 ct seq. [1064] writ for injunction [1027, 1028], and notes depreciation of, 522 et seq. division of, into classes, 285, 358 et seq. [361 et seq.'], and notes, 411, 455, 481 [482, 483] duty, on registration, 290, 291, 1293 fixed and circulating, 521, 537, 538 et seq. French law, under, statement of capital in memorandum of company to acquii-e mining property in Frapce [309], and note improperly returned, resohition to confirm [663], and note increase of, clauses in articles [409, 410], and notes [472] Companies Act, 1862, provisions of, 409, 1194, 1226 notice to registrar, 650 [706], 1194 preference shares, 652 resolutions for [650 et seq.] Table A., provisions of, 1226 [.Vcq., 1240 COMMISSION, employes and officers, to, power to give [450], and note underwriting or placing shares, for. 147 et acq. agreement for [160], and note issuing paid-up shares by way of, 151 COMMITTEE, directors, of, delegation of powers to [443], and note power to appoint [443] lunatic, of, shares of, 407 resolution for [672] COMMITTEE OF INSPECTION, Companies (Winding-up) Act, 1890, under, 1283 COMMON LAW CORPORATION, difference from statutory company, 4 COMMON RIGHTS PROTECTION SOCIETY, objects [357] COMMON SEAL, affixing and delivery, 18 clause in articles [453, 492, 493] company, right to have, 16, 17, 1192 custody of [453] documents under, 1 7 not necessarily deed, 19 irregularity in fixing or using, 17 [454], 455 presumption against, 17, 454, 455 official seal [452] presumption of regular fixing, 17, 455 regulations as to use, 17 resolution adopting [672] right to use, in whom vested, 17 [453] Seals Act, 1864,. 1251 who may use, 17 COMPANIES COLONIAL REGISTERS ACT, 1883., 1272 clause in articles [452] COMPANIES (MEMORANDUM OF ASSOCIATION) ACT, 1890.. 1278 extension of objects under, 990 ct seq., 1278 petitions under [994 et scq-l practice under, 994 COMPANIES SEALS ACT, 1864, official seal for use abroad, 19 COMPANIES, under Acts of 1856 and 1857, ae to, 1217 All referencfts are to the pages. Pages in brackeix [327] refer to the Forms. 1328 INDLX. COMPANY, acquiescence, may be bound by, 12 actions in name of {Foss v. Ilarbottki), 1029, 10^0 adoption of contract made before incorporation [216] with modifications [217] adoption of services rendered before formation, 71 agents, appointment of, 8 liability for, 8—12 power to act by, 7 — 12 alone can sue for wrongs to {Fois v. Ilarbottk), 1029, 1030 a person in law, 2 articles of association, provisions of Act of 1862. . 1191 assault, liability for, 9, 10 business abroad, as to, 47 certificate of incorporation, form of [718] characteristics, special, 5 common seal, right to, 16 constructive notice, 12 contempt, may be restrained from continuing, act of, 1 3 contract before incorporation, as to, 70, 71 contracting with member, 3 contracts with, members cannot sue in respect of, 3 non- liability of members in respect of, 3 contracts by, how made, 191 — 195 corporation, is a, 1 corporation, nature of, 1,2 corporation duty, 48 criminal offence, 12 default, striking off register, 1013, 1271 dissolution of, 39 how to be effected, 39 distinction between, and its members, 1, 2 consequences of such distinction, 2, 3 domicile of, 40, 41 equities against, may be enforced, 12 estoppel by acts of agents, 12 estoppel, may be bound by, 12 execution against, 13 execution of deeds by, 18 attorney, by, 721 escrow, in, 18 sealing by corporation imports delivery, 18 executor de soti tort, may be held to be, 12 fees on registration, 1233 formation, provisions of Act of 1862. .1190 fraud, liable for, 9, 10 guarantee, limited by, 479 articles [474 ct seq."] memorandum [293 et .seq.'\ illegal association, provisions of Act of 1862. . 1189 implied powers of, 278 — 280 income tax, as to, il et seq. incorporated, nature of, 1 incorporation of, as to impeaching, 16 incorporation, conclusiveness of certificate, 14, lo indictable offences by, 1 2 " indoor management," presumption of regularity, 17, 37 — 39 none, where notice of irregularity, 39 joint stock, definition of, 1218 laches, when bound, 12 libel against, application of funds in prosecution for, 274 limited by guarantee not having capital divided into shares, form [474] form of nciv articles dividing undertaking into shares or interests [476], and notes as to validity limited by sharcH, provisions of Act of 1862. .1190 made plaintiff without authority, striking out name, 1031 INDEX. 1329 COMPANY— cuhfiu ucd. majority of members, rights of, 32, 33 malicious prosecution, may be sued for, 10 manager (directors) of another company, clauses in articles [488, 489] members of, who are, I'J different modes of becoming, 20 members may sue and be sued by, o memorandum of association, requirements of Act of l8Gi. . 1 1'JO misfeasance by its agents, liability for, 9 name, change of [660], and note, 1191 improper use of, 266 power to change (Act 1862), 1191 negligence, liability, 9 not for profit (s. 23 of Act 1867), payment of interest to members on money borrowed, 295 notice of memorandum and regulations, 35 notice through agents, 12 to directors, if independent, is sufficient, 69 to secretary or clerks in registered office, 9 obligations and liabilities under the Act, 7 "one man," 2, 563—565 order and disposition, rule in bankruptcy not applicable to, 781 partnership law, analogy from, 34 partnership, how constituted, 19 partnership, how far a, 33, 34 patents, as to obtaining, 13 plaintiff, security for costs, 1031 order to give [1069], and note striking out name, 1031 powers to resist interference with its rights, 6 preliminary contracts on behalf of, 70 private, 546 et scq. [570 ct seq.'\ property of, not property of shareholders for time being, 2 ratification by, 9 registration of existing, 1217 re-registration, resolution as to procedui'e, 678 residence of, 40, 41 seal of, 16—18 service on, 40, 1017 shares, limited by, 263 articles of [381 et seq.'] memorandum of [292] treasurer of a friendly society, 13 trespass by, 9 trustee, may be held to be, 12 unlimited, 264 memorandum of association of [300] unregistered, application of Act of 1862. .1221 wrongs done by its agents, liability in respect of, 9 to company, members cannot sue in respect of, 3, 9, 1030 COMPENSATION, Directors' Liability Act, 1890, under, 106 ct seq. COMPETITION, covenant by vendor of business against, 200 COMPOUND INTEREST, when chargeable, 922 COMPROMISE, implied power of company, 278, 448 Joint Stock Companies Arrangement Act, 1870, under, 1250 All references are to the pages. Pages in brackets [327] refer to the Forms. 13a0 INDEX. COMPULSORY RETIREMENT, private company, pi'ovisions for, 584 [585] CONCESSIONS, option to buy [226] sale to promote, agreement for [76] setting aside sale, of, order, 1056 CONCESSIONS COMPANY, object clauses [341] CONCLUSIVE, meaning of term, 15 CONDITION PRECEDENT, application for shares, 25 CONDITIONS, debenture stock, as to issue of [877 et seq."] debentures [821 et seq.'\ " CONDUCIVE," in object clause, 277 et seq. CONFIRMATION, special resolution, of, 644 unauthoilzed acts, of, 9 CONSENT, registration of new company with same name [710] unanimous, of members, to ultra vires act, ineffectual, 3 CONSIDERATION, contracts filed under sect. 25 of Companies Act, 1807. . 182 et seq. failure of, 185 sufficiency of, 183 what is in law, 911, 912 CONSOLIDATION, debentures [908] shares [657, 664] CONSPIRACY, directors paying fictitious dividend, prosecution for, 456 false rumours, creating, 73 making or "rigging the market," 72 CONSTRUCTION, payment of dividends or interest during, 519 written document, how to be made, 806 CONSTRUCTIVE NOTICE, definition of, 800 instances of, 800, 801 CONSULTATIVE COMMITTEE, clause in articles [494] CONTEMPT OF COURT, company, by, 13 liquidator, by, order to commit [1113] CONTRACTORS, payment of dividends through, 519 power of company to act as [308] public works, objects [322] INDEX. 1331 CONTRACTrf, adoi^tion or ratitiwitiuu by oompauy, 70, 71 [21C, 217], and uotc agent oi company, by, S, 102, 193 articles of association, arc not within sect. 25 of Companies Act, 1867 . . 187 contract constituted or implied by, as to, 374 — 377 between members of company, 374 between members themselves, 371, 376 company, by, 191^ — 193 members not entitled to sue on, 3 no right of action against members on, 2 under seal, when to be, 17, 192 conditional, for sale, order approving [1099] directors' powers to enter into and vary [451], and note filing under sect. 25 of Companies Act, 1867. . 179 cf seq., 229, 230 " cash," meaning of, 187 cash with option to take paid-up shares, 188 company proper party to file, 191 failure of consideration, 185 "issue," meaning of, 188 issue of shares to nominees, 182 must fully disclose previous contracts not filed, 185, 186 remedies where not filed, 190, 232 result of not filing, 189 sub-contract, of, 185 subscribing memorandum, as to, 189 shares issued ullro vires, 185 statement of consideration, 186 statement of number and denoting members of shares, 181 sufficient consideration to be shown, 182 what is, 183 winding up, relief in, 191 issue of shares at a discount not protected by filed contract, 182 lease, for, order approving of [1099] liability of agent of company, 193 life assurance companies', reduction of, 1006, 1225 memorandum of association not a contract within s. 25. . 189 minute of board where sufficient memorandum within Statute of Frauds, 194 not filed, applicant must be prompt in applying for relief, 190 no relief in winding up, 191 order for rectification of register [1051, 1055], and notes rectification by directors by cancelment and re- allotment, 191 object clauses as to entering into [302] oral, or parol, 191 — 196 Statute of Frauds, 193, 194 personal liability of trustee or agent on behalf of intended company, 177, 178 personal services, for, 260 to procure, 260 specific performance of, not ordered, 260 preliminary, on behalf of intended company, plans with respect to, 70, 71, 175 et seq. proposal in writing and accepted orally, when binding notwithstanding Statute of Frauds, 194, 195 prospectus to be specified in, 123, 124 provisions of the Act, 1247 ratification by company, 217 rescission, claims and defences [1020, 1023], and notes; [1036 et seq.], and notes resolutions as to [672] result of not fiUng, 189 All references are to the pages. Faffes in hracl;ets [327] refer to the Fornis. 1332 INDEX. COHTRACTS-coi/finual. sale of mine, claim for rescission [1023], and note sale of property, stamp duty under sect. 59 of Stamp Act, 1891 . . 196 et seq. seal, under, 17, 191, 195 shares, to take, 21 et seq. order to rescind [1055] specific performance claimed [1022], and note stamp duty, 195, 196 Statute of Frauds, when agreement to be in writing, 193 ultra vires to restrain company from carrying out, claim and defence [1049, 1050] unfiled, transferee with no notice protected, 189 waiver of sect. 38 of Companies Act, 1867, by applicants, 125 et seq. with agent or trustee for proposed company, 177, 178 CONTRIBUTION, directors' breach of trust, 471 Directors' Liability Act, under, 123 sureties, 924, 962 CONTRIBUTORIES, adjustment of rights, 1206 who are, 1201, 1202 CONVERSION, business into company, of, advantages of, 547 et seq. agreements for [570 et seq.'\ power for, in will, 605 [606] application to Court where will defective, 606 ordinary shares into preference, and rice versa [589] paid-up shares into stock [41], and note resolution for [657] shares into another class [485 et seq."] CO-OPERATIVE FUND, employes' [622] CO-OPERATIVE STORE COMPANY, object clauses [337] COPIES, documents to present to registrar, 974, 1244 memorandum and articles to be sent to members, 289, 1192 CORPORATION, acquiescence, may be bound by, 12 agents, can only act by, 8 liability for acts of, 8— 11 none where acts beyond scope of authority, 12 nor where acts for sole benefit of agent, 1 2 a person in law, 1, 2, 14 particular statutes excepted, 13 assault, may be sued for, 1 attachment, cannot suffer, 13 borrowing, implied power, 784 chartered, natiu'c of. 4 common law, and statutory, distinction between, 4, 5 company is a, 1, 81, 82 but only for certain pm-poses, 4, 268, 269 common seal of, 10 C()nt(;inj)t by, 13 crimiiml oflcnccs, liability for, 10 disHohition of, 39 distinction b(;tw(^cn, and its members, 1, 2 consequences of, 2, 3, 503 INDEX. 1-533 CORPORATION— cwiC/wf^a/. domicile, 40, 41 duty under Customs and Inland Revenue Act, 188.^. .48 exemptions from, 48, 4!) estoppel, 12 execution against property, 13 execution of dcod.s by, 18 escrow, in, 18 sealing- imports delivery, 18 executor dc son tort, may be held to be, 12 fraud of agents, liability for, 10, 11 friendly society, cannot be treasurer of, within meaniug of Friendly Societies Act, ISjr) . . 13 implied powers of, 278 laches, may be guilty of, 12 liability of, for acts of agents, 8 — 12 libel, may be sued for, 9, 10 majority, powers of, 32 misfeasance by agents, 9—11 nature of, 1, 2 partnership, analogy and differences, 34 patent, may apply for, 13 may be granted to, 13 patentee, whether can be, 13 promoter, -whether can be made liable as, \inder Directoi's' Liability Act, 1890. .113 propei'ty of, title not in members, 2 residence of, 40, 41 sequestration of property of, 1 3 service on, out of jurisdiction, 40 ■within the jurisdiction, 1016 suing in name of, 33 title to property of, is in the body corporate, not the members, 2 trespass by agents, 9, 10 trustee, may be held to be, 12 ultra vires acts, aggregate of members cannot sanction, 3 ■will of majority, 32, 33 COSTS, security for, orders for plaintiff company to give [10G9], and note COTTON SPINNERS' COMPANY, object clauses [329] COUNTERCLAIM, defence and [1034, 1035] COUNTY COURTS, jurisdiction, actions by and against companies, 41 ■winding-up, 1280 COUPONS, debentures or debenture stock, 755 forms of [S28, 880] delivery to be good discharge [829], and note interest on debenture stock for [881] presentation includes delivery [829], and note share warrants to [675, 718], and note voucher for fresh [718], and note signature, 811 stamp duty, exemption from, 814 All references are to the pages. I'uffcs in brackets [327] refer to the Forms. 1334 INDEX. COURT, definition in Act of 1862. .1202 Act of 1890.. 1280, 1288 jurisdiction, confirming' reduction of capital, 600, 970, 1243 altering memorandum of association, G69, 990, 1278 COVENANTS, business, against canying on [206], 206, 207 in restraint of, 206, 207 damages for breach, 20" CREDITORS, articles of association, notice of, G6 company only entitled to sue, 3 compromise with, 1250 unsecured, liberty to defend debenture actions [HOt] CRICKET CLUB, objects [332] CRIMINAL LIABILITY, false statements in prospectus, &c., 134 fraudulent prospectus, 135 Larceny Act, 1861, under, 134, 135 prospectus, a " written statement" within, 134 CRIMINAL OFFENCE, company may commit, 12 CUMULATIVE dividends, 482 [482 ct ««-iHmc(L conditions as to issue [877 et seq."] constitution, usual mode, 7;")l constructive notice, natiu'c of, 800 contract to issue, position of lender, 792 contract to take, how enforceable, 791 coupons to bearer certificates, as to [881] delegation, power of trustees [87G] depositing certificates of, as security, 807 directors' powers, 788 dii-ectors taking up, 810 discount, issuing at, 807 position in winding-up, 818 equities of holders, 752 floating charge, operation of, 772 foreclosure, as to, 817 foreign property, mortgage of, 780 [894] provision for conveyance [892] indemnity of trustees, 870, 871 interest on, payment of, 750 provision for payment [881] irregular constitution by mere resolution, 752 irregular issues, 807 joint holders, receipts by [881] legal mortgage of, advantage of, 794 limits of issue, clauses [886 — 888] local trustees, clause as to [893] loss of priority, 793 — 795. majority, power to bind minority, 801 clauses conferring [832, 881] meaning of words, 749 meetings of stockholders, clauses as to [875, 881] notices for [705] naked, priority as to, 793 nature of, 749, 786 notice to holders, clauses in trust deed [875] object clause as to borrowing on [305] order and disposition, as to, 808 payable, when, usual arrangements, 751 perpetual, as to, 769 ct scq. priorities as against other secured creditors, 793 — 795 actual notice, nature of, 800 equitable charge as to, 794, 795 proof in winding-up, 818 property, provision for conveyance [891] prospectus of, 847 provisional certificate to bearer [850] receipt by joint-holders [881] receivers, as to, 817 appointment by Court, 815, 816 redemption clauses [877] redemption price, as to, 751 register of holders, as to, 881 clauses as to [878] remedies of holders, 815 reserve capital, whether chargeable, 787 sale, when power to re-purchase [959] scrip certificates to bearer, 792 security, creation of, 750 security for, how enforced, 751 sinking fund [897] policy clauses [898] All references are to the pages. Fages in brackets [327] refer to the Forms. 4r2 1340 INDEX. DEBENTUEE STOCK— continued. specific performance of contract to take, 791 stamp duties, 812 tenders for [848] time for payment of money secured by, 749 transfer, as to, 809 mode of, 750 trust deeds, securing, as to, 751, 778 advances to lessees [902] application of proceeds clause [888 — 890] borrowing powers of trustees [866] certificate to bearer, provisions as to [880] conditions of issue [877] coupons, as to [881] covenant to convey property [891] covenants with trustees [866] debentures to be issued to trustees [858] delegation power of trustees [876] extraordinary resolution, definition in [885] floating assets to be kept up [901] foreign property, provision for vesting [892] freehold conveyance [856] further assurance, provision for, 869 general assets, interpretation of [855] general form [854] indemnity of trustees [870, 871, 873] insurance, provisions for [867] interest, provision for payment [881] interim power to sell, exchange, &c. [862] investment clause [865] leasehold demise [856] leasehold depreciation clause [868] leasing, company's powers of [864] licences, insurance as to [868] limits of issue, clauses [886 — 888] local trustees, provision for [893] lost certificates, as to [881] meetings of stockholders, provisions for [875, 882] minutes of [885] mortgage, abroad, to be created [894] mortgaged premises, interpretation of [855] mortgages to be cleared off [889] new trustees, power to appoint [877] notice before entry [860] notice to holders [875] power of meetings, 884 power of trustees to employ agents [873] powers of trustees, various, 862, 863 proceeds of sale, disposition of [861] property, covenant to convey [891] receivership, provisions for [865] reconveyance [870] redemption clauses [877] redemption fund [896] register of holders [881] remuneration of trustees [H71] repairing of property [869] sinking funds [896] " Hpccifically mortgaged promises," definition of [855] Hubseijuent securities not to interfere [901] triinKfcrH, provision as to [879] transniisHi(ni, provisions as to, 879 trustees, majority, pr)W('r [876] truHtees' powers to carry ou business [864] trusts to convert [858] uncalled capital clause [894] INDEX. 1341 DEBENTURE STOCK— conthuml. trust deeds, securing', as to — continued. uncalled capital mortgage [891] waiver by trustees as to broaches [876] when security to be enforceable [859] withdrawal of property [874] trustees' lien, priority of, 798 trustees' remuneration [871] trustees' solicitor's lien, 798 uncalled capital, as to, 786 charge on, 78G clause in trust deed [894] underwriting, as to, 156 agreements for [172 — 174] unsecured, as to, 763 various kinds, 753 winding-up petition, 817 DEBENTURE STOCKHOLDERS, majority, powers of [832, 881] to bind minority, 801 not served with judgment, order binding [1034] DEBTS, collection of, on sale to company, condition as to [209] indemnity of vendors against [205] vendors, indemnity against [202] DECEASED MEMBER, notice to executors [697] probate when domiciled abroad, 407 votes in respect of shares of [423] DECEIT, action by allottee for, 106 — 109 fraud must be established, and how, 108, 109 DECLARATION, chairman, of, on show of hands [420], 645 [883] subscribers to memorandum of association, 263, 264, 288 DECLARATION OF TRUST, vendors, by, as to leaseholds [205] DEED OF SETTLEMENT, life assurance company, of, to be printed, 1253 memorandum and articles substituted for, 993 [998] registration under Part VII. of C. A., 1862. .604 DEEDS, clause in articles as to authentication [454] contracts under seal, when, 19 execution abroad, 1198 powers of attorney [726] execution by corporation, seal imports delivery, 18 unless escrow only intended, 18 sealed dociunents are not necessarily, 19 DEFAULT, individual responsibility of directors and others (articles) [470], and note All references are to the pages. Fages in brackets [327] refer to the Forms. 1342 INDEX. DEFENCE AND COUNTER-CLAIM, form [1034, 1035] DEFERRED SHARES, clause in memorandmn [365] DEFUNCT COMPANIES, power to strike off list, 1271 DELAY, bar to rescission of contract to take shares, 101, 102 completion of sale, conditions as to [204] DELEGATION, directors' powers [443] local boards to [451] trustees' power in debenture stock deed [876] DEMAND, debentures payable on [949] DEPOSIT, agreements for security by [938 et seq."] application for shares, return of, 143 bonds, of, agreement as to [249] claim for recovery after application for shares withdrawn [1020] debentures, of, 412 [954] debentures in blank as equitable security [954] employes, by, clauses in articles, 622 goods warrant as equitable secxirity, agreement for [946] proposal to secure overdraft [944] receipt of money on, object clause [305] schemes (for employes), 616 stock certificates, &c., memorandum as to, 940 title deeds by way of mortgage, 915 . memorandum as to [938] DEPRECIATION, profits in relation to, 518 et seq., 528 DIRECTORS, acceptances of company, powers as to [449] accepting other office, as to, 434 accounts, to keep, 459 acquisition of property, power [447] acting as, without qualification, 430, 431 actions against, by members, 33 actions, powers to commence, compound, defend [448] additional, power to appoint (articles) [429] agents of company are, 427 agreement to take qualification shares, 430, 431 allotment of shares by (articles) [384] alternate or substitute, power in articles [491] another company to act as, provision in articles [488, 489] appointment defective, acts of, 443 arbitration, power to refer [449] articles as to [428 et seq.'\ assistant directors, power in articles to appoint [491] audit of accounts, 461 bankruptcy, 434 board meeting, as to, 441 bfjrrowiiig powers of, ill — 413 articles as to [411 — 113] breach of trust, liability inter se, lOfiO orders to make good [1060], and note orders restraining [1065, 1066] INDEX. 1343 T>IREGTORS— colli iHiml. bribe to, claim and defence in action to recover [1012, 1043] bye-laws as to, 451 chairman, 442 cheques, &c., powers as to [449] commencing- business improperly before capital issued, 384 committees of [443] delegation, 443 compromise, power to [448] contracts with company, clause allowing [435] contribution between. 111 in respect of breach of trust, 1067 debentures, taking up, 810 de facto, writ to restrain from acting [1029] delegation of powers, 440 Directors' Liability Act, 1890, right of contribution under, 123 disqualification, clause as to, in articles, 434 participating in profits, 435 disqualified, acts of, 431, 443 dividends, as to [455] due appointment of, to be prcsumeJ, 38 election of, notice before [439] estopped from alleging invalidity of allotment, 22 estoppel, irreg-ular proceedings, 443 exclusion of, claim for injunction [1029], and notes [1061] fiduciary position, 436 first, as to appointment, 429 clause in articles [429] subscribers to memorandum to appoint [429] Table A., as to, 429 where none, how to be appointed, 429 fraud by co-directors, responsibility for, 107 fraudulent action of, against minority, 1030 " gross negligence," meaning of expression, 428 improper application of assets of company, responsibility for, 1066 improperly rejecting votes, restrained, order [1061] incompatible office, accepting, as to, 434 indemnity security, power to give [449] indemnity to (articles) [470], and note independent board, duty of promoters to provide, 64 what constitutes, 65 i-ule not applicable in case of private companies, 64 individual responsibility only (articles) [470], and note insolvency of, 434 irregular acts, ratification by company subsequently, 441 irregular board meeting, 441 irregular proceedings, estoppel, 443 irregularly appointed, 443, 1030 issue of prospectus by, company liable for, 107 liability as trustees, 428 as to acts of co-directors, 471 as to guarantee of loan borrowed ultra vires, 965 where omission to sue, 471 Limitations, Statute of, 428 list, when to be sent to registrar, 1197 local management, clauses in articles [451] managing partner, is not a, 427 managers, power to appoint [447] managing, clauses in articles [440] meeting, resolution without [444] All references are to the pages. Fages in brackets [327] refer to the Forms. 1344 INDEX. DIRECTORS— conti/med. meetings, absence from, disqualification, 435 convening of [442] power of, to convene [442] misfeasance by, 427, 428 Statute of Limitations, 428 present, of qualification, 430, 431 names in prospectus, 90 negligence, liability for, 428 non-attendance, 428 notice to, when notice to company, 67 — 69 notice to independent board, notice to company, 67—69 officers, power to appoint, 447 order restraining, from holding meeting at improper period [1061] order restraining, from improperly rejecting votes [1061] orders to make good a breach of trust [1066], and note order to pay for presentation shares [1059], and notes order to restrain, exclusion of director [1061], and note order to restrain from acting, writ [1029], and note other offices held by, 434 percentage to employes [450] personal liability of, 427 position of, 427 et seq. power in articles for trustees of a will to appoint [490] power to pay for property in shares, &c. [447J powers clause in articles generally effective [445] powers of attorney [449] for foreign management, 452 precluded from contracting with company unless otherwise provided, 436 preliminary agreement, duties as to, 383 preliminary expenses, power to pay [446] presumption of due appointment, 38 proceedings of, clauses in articles, 441, 442 promoters, notice of profits, when sufficient, 69 prospectus, precautions to be taken in framing, 120 proof of issue by, 91 qualification of (articles) [429, 430]. \_And sec Qitalification.] acting without, 431 by way of gift, 431 non- disclosure in prospectus, 98 ceasing to hold, 434 clause in articles [429] " in his own right," meaning, 431 joint holding, 431 liability to take shares for, 430, 431 object of, 429 resignation before acquiring, 430 Stock Exchange requirements, 430 transfer of the shares, 431 quorum, as to, 441 ratification of acts of subordinates, 441 receipts, powers as to [449] rccoveiy of bribe, claim and defence [1012], and note refusal to register transfer, 400, 401 (articles) [4 00] reliance on valuations of assets by actuaries or others, &c., 542 ct seq. removal, power in articles [438] remuneration [432, 444] beyond that provided, misfeasance, 433 only j)ayablo where provided, 433 payincnt out of capital, 433 proof for [132] Hct-ofl as to, 433 sliaro of ])rofitH, commission, &c. [401, 492] suing for, 433 when not qualified, 432 INDEX. i;j45 "DIKECTOnS- con till tied. reserve fund, powei's as to [450] resignation of, 432 clause in articles [431] how to be made, 432 withdrawal of, 435 resolution of, to be equivalent to company's resolution [426] retirement clause in articles [431] rotation clauses in articles, 437 secret profits, claim in action by company against [1024], and note shares improperly received, order to pay value of [1050, lOGO] special agents of company, are, 427 subscribers of memorandum as, 429 sureties for company, indemnity to [967] transfer of shares by, 397 trustees, limitation of liability of, as, 428 power to appoint [448] trustees to some extent, 427 unduly appointed, acting, company alone can complain of, 1029, 1030 unlimited liability, provisions of the Act, 1242 vacancies, acting, notwithstanding, 433 power to fill up [429] validity of acts notwithstanding irregularities, 427, [443], and note wrongful acts, resjionsibility of company for their, 10, 427 DIRECTOES' LIABILITY ACT, 1890. AlO ef .«eq., 1292 action under, who may bring, 115 is an action of debt, not of tort, 112 bankruptcy of director, effect of, 120 claim for damages [1021, 1022], and notes death, effect of, 120 defendant, what he must prove to escape, 117 defendants, who may be made, 116 escape, what necessary to ensure, 114, 117 " expert," who is, 119 indemnity of defendants, as to, 123 contribution, as to, 123 liability under, in respect of statements outside prospectus, 114 limitation, period of, 119 plaintiff's obligations, 115, 116 provisions of, to be observed in framing prospectus, 91 reasonable grounds of defendant's belief, examples of, 118, 119 record of grounds of belief, desirability of, 121, 122 statement of claim by company [1041], and note statement within, what is, 114 subscriber may contract himself out of, 122 subscribers on faith of prospectus, who are, 115 waiver clause, as to, 125—127, 133, 134 what are " reasonable grounds, " 118 what is a " statement " within sect. 3. . 114 what plaintiff must prove, 115, 116 when cause of action arises, 120 who liable under, 113, 115 DISCHARGE, servants, of, by appointment of receiver by Court, 261 DISCLOSURE, considerations, of, as to paid-up shares, 230 promoters, how to make, 68 All references are to the pages. Faffes in brackets [327] refer to the Forms. 1346 INDEX. DISCOUNT, filed contract cannot protect shares issued at, 182 issue of debentures and debenture stock at [413], 807 issue of shares at, 274, 283, 373 DISCOVERY, members' right, 459 DISMISSAL, of company's servants, Tvinding-up order equivalent to, 261 DISQUALIFICATION, directors, of [434, 435], and note acts after [443], and note Table A, provisions of, 1228 DISSENTIENT MEMBERS, winding-up, sect. 161 of Act 1862 (articles) [469, 470], and notes DISSOLUTION, assets overlooked, effect of, 39 how to be effected, 39 DISTRIBUTION OE ASSETS, provision for, in articles, sufficient, 310 sales or arrangements imder sect. 161 of Act 1862 (articles) [469, 470], and notes specie, in (articles) [468], and note object clause [309], and note iinder Liquidation Act, 1868.. 469 winding-up, in (articles) [467 et seq-l, and notes DISTRINGAS NOTICE, 941-943 company bound by statute to attend to, 387 procedure in regard to, 941 — 943 forms [942, 943] DIVIDENDS agreement for funding preferential [236] alteration of rights as to, 649, 650 ascertainment of profits (clauses in articles) [498 et seq.'] capital, out of, ultra vires, 373 [456] form of writ to restrain [1027, 1028], and notes capitalisation by special Act, 1175 cash, prima facie [457] cheques, by post [458] clauses in articles as to [455, 483 et seq."] cumulative or non- cumulative, 359 et seq., 481, 482 debts deducted [457] declaration, how to be made [455] directions as to payment by shareholdei-s [458, 709] fictitious, 456 forged transfer, paid on, 403 improperly paid, viTit to recover [1028], and note interim [457] joint holders [458] leading cases as to payments, 613 et seq. notice of [458] order for payment to debenture holders [1118] payable in land or specie (clause in articles) [457, 475] payment by cheque by post [458] payment out of cajjital, injunctions [1061] injunction r(;fu8ed [10G4] payment out of profits (miscc'llancous notes), 511 r/ seq. power of attorney to receive [7 1 0] INDEX. 1347 I>lYIT)EN'DS—con(i)nied. preference shares, on, 359, 360 agreement to issue stock for [239] arrears in windiug'-up, 4G8 clauses in memorandum [361 ct sci/.'] \_And sec Peefeeence Shaees.] prima facie rights to shareholders [455 J profits, out of, only (clause in articles) [456] recovery of, where improperly paid, writ [1028], and note remainderman and tenant for life, as to [458] resolution to pay [673] retention [458] set-off against call [457] share wan-ants to bearer, as to paying (articles) [675] tenant for life and remainderman, as to [458] transfer of shares, where, carried by [458] unclaimed, as to [458] Limitations, Statute of, 459 warrant for, forms of [707, 708] DIVISION IN SPECIE, in a winding-up, resolution for [668] DIVISION OF SHARES, resolution for [658] DOCK COMPANY, object clauses [328] DOCK WAHRANTS, advances on security of, 928 DOCUMENTS OF TITLE, Factors Act, within, what are, 932 DOMICILE, foreign, deceased member, probate required, 407 DOMICILE OF COMPANY, as to, 40 "DOUBLE ACCOUNT," system of ascertaining profits, 530 system (Court of Appeal in Lee v. Neuchatel Co.), 531 ct seq. DRAPERS, &c. (UNIVERSAL PROVIDERS), COMPANY, object clauses [330, 331] DRAWINGS, conversion of shares into other class [487] redemption of debentures, 772 [834] of debenture stock [896] ELECTION, of allottee, after knowledge of misrepresentation, 105 of directors [437, 438], and notes ELECTRIC COMPANY, object clauses [327, 328] provisional orders, 328, 1182 All references are to the pages. Fages in brackets [327] refer to the Forms. 1348 INDEX. EMPLOYES, action for inducing breach of contract, 261 benefits to, by way of special inducement, 614 schemes for securing, 614 — 616 bond for faithful service [641, 642] bonus to, 275 power to grant, 620 compensation in winding-up, 261 directors [637] dismissal by winding-up, 261 dismissed, to cease to be member [584, 585] fraud or misconduct, dismissal, 262 gratuities and pensions to [619, 620] power of company to grant, &c., 619, 620 incompatible offices, 262, 434 inventions by, 254 notice of dismissal, entitled to, 262 percentage to, directors' powers [450] profit-sharing by, 614 [625, 626] shares (" employes' shares "), clauses in articles as to [621, 622] acquisition of, out of savings, clauses in articles as to [624, 625] specific performance, 261 trade secrets, restrained from revealing, 262 Truck Acts, 616, 617 Workmen's Compensation Act, 1897.. 617, 618 EMPLOYES' BENEFITS, 614—620 [621—642], and notes co-operative fund [622] deposit scheme, 616 [622] deposits [622—624] " employes' shares," acquisition out of savings [621, 622, 624] trust deed to facilitate acquisition [626, 632] guarantee fund, trust deed constituting [639 — 641] guarantee fund scheme, 615 [639]. life assurance scheme, 615 object clause as to [304] participation certificate [632] pension fund, 615 power of company to grant, 619, 620 trust deed [638] profit-sharing scheme, as to, 614 [622, 625] ; shares of special class to employes [621] [ sick and accident fund, 615 i superannuation and pension funds, 615 { trust deed [633, 636] ! Truck Acts, 616, 617 Workmen's Compensation Act, 1897, under, 617 — 619, 642 | EQUITABLE MORTGAGE, i account current, to secure, 919 ct seq. ^ bank, as security to, 911, 912 bankers' lien, as to, 922 bearer securities, memorandum [944] by deposit [916] debentures, certificates, &c. [940] debentures in blank [954] title-deeds [938] by Hharcholdor, notice of, to company, 394, 395 coiii])ouiid interest, as to, 922 consideration for, valuable, what is, 911 contract for, as to enforcing, 915 costs and cxpeiiHCR, what are, covered by, 938 creation of, as to, 910, 911 by verbal contract, 910, 911 directors borrowing in excess of powers, 918 (liHlringas notice, 94 1 INDEX. 1349 EQUITABLE MOmGAGB— continued. documents of title to goods, deposit of, 929, 932 fortification of equitable securities, 918, 919 future property, charge on, 913 how effected, 901 investigation of title, as to, 917, 918 negotiable securities, by deposit of, 9 1 G power of attorney to convey legal estate, 914 property abroad, 913 proposal for [944] object, 944 rights, as against security, 938 shares, of, 38G, 394 stamps on, 93G avoiding, 944 Statute of Frauds, in regard to, 914 uncalled capital, 913 [938] et seq. writing not necessary, 911 EQUITIES, debentures assignable free from, 762 [824] following moneys borrowed ultra vires, 12, 412 lien of company, as against, 394, 39o non-recognition of, as to shares, 385, 386 clause as to [385] statutory provision as to, 386 priorities, 794 ESCROW, nature of, 18 company can execute as, 1 8 ESTATE COMPANIES. object clauses [338, 339] ESTOPPEL, company may be bound by, 12 debenture statement in, 766 director's qualification, 22, 27, 430 membership by, 27, 31 negotiability by, 766 share certificate, 190, 712 EVIDENCE, action for call, in, 390 clause in articles [390] books in winding-up, how far, 1213 certificate of incorporation, 14 certificates of shares, 711 minutes, 444 register of members, 30 show of hands, declaration on, 420 EXCHANGE OF SHARES, in going concern, idtra vires, 448 reconstruction by [1161] EXCLUSIVE LICENCE, agreement to grant, 222 EXECUTION, against company, 13 creditor as against debenture holder, 793 All references are to the pages. Fat/es in brackets [327] refer to the Forms. 4 1350 INDEX EXECUTIVE, committee clause [495] independent as to, 64 EXECUTOR I)E SON TORT, company may be held, 12 EXECUTORS, deceased members, 405 — 407 clauses as to [405, 406] registration as sbareholders, 806 transfer by, 406, 1193 voting by [423] EXPERT, agreement as to employment of [258] who is, under Directors' Liability Act, 1890. .119 EXPLORATION, agreement as to [258] objects clause [319, 320] power to carry out [738] EXTENSION OF OBJECTS, discretion of Court, 992 examples of, 993 petition [994] resolution [669] EXTRAORDINARY GENERAL MEETINGS, adjournment as to, 416 clauses in articles as to [414, 415] notice convening [700] requisition for, clause as to [414, 415] EXTRAORDINARY RESOLUTIONS, conclusiveness of chairman's declaration, 645 defined in Act of 1862. . 1209 defined in debenture trust deed [885] notice of, as to framing, 646 FACTORS ACT, 1889, construction of, 931 pledges and deposit of documents of title, operation as regards, 9 provisions of, 928 et seq. FEES, filing documents, 290 incorporation, payable on, 290, 1233 increase of capital, on, 291, 1233 transfer of shares, on (article) [405] FIDUCIARY RELATION, consequences, 03 directors, 427, 433 promoters, 61 Statute of Limitations, 427. FILING CONTRACTS, paid-up shares as to, 179 consequences of not, 179 ct seq. FINANCIAL COMPANY, object olausoH as to [31b — 321] INDEX. 1351 FIRE INSURANCE COMPANY, object clause as to [31,)] FIRM, appointment as managers [193] FIRST GENERAL MEETINQ, article as to [413] ■when to bo held, 414 FIXED CAPITAL, 538 et seq. FLOATING CHARGE, clauses in debentures and trust deeds qualifying operation, 775 in debentures, operation of, 773 specific mortgages, as to creation notwithstanding, 774 FORECLOSURE, debenture actions, judgments [1121] pleadings [1045, 1049] writ [1024], and notes FOREIGN AFFAIRS, agreements for sale of mines abroad [223, 225] clauses in articles [451] deeds may be executed abroad by attorney, 721 land abroad, security on, 780 powers of attorney, 721 ct seq. [731 et ■scq.'\ registration abroad [308] Seals Act, 1864.. 19, 1251 FORFEITURE OF SHARES, 391—393 articles as to [391 — 393] strictly construed, 391 effect of, 393 notice before [699] order restraining [1059] rectification of register where invalid [1054] resolution [672] shares on bankruptcy of holder, 407 writ to enforce [1017 — 1019], and notes FORGED TRANSFERS, Acts as to, 402, 823 article as to [402] rectification, where acted on, 1052 resolution adopting the Acts, 677 FORGERY, effect of registration, 403, 712 transfer of shares, 398 FORMS, Board of Trade's power to alter, 1201 FOSSy. EARBOTTLH, rule in, 33, 374, 1028—1030 exceptions to, 1030 FOUNDERS' SHARES, advantages of, 367 ct seq. cancellation of, 970 All references are to the pages. Pages in brackets [327] refer to the Forms. 1352 INDEX. FOUNDERS' SHAn^S—continiied. clauses in memorandum as to [364, 365, 3671 history of, 367 kinds of, 360, 365 reduction of capital affecting, 369 voting powers on, 369 special [367] FRACTIONAL CERTIFICATE, on reconstruction [1149] FRAUD, action for damages, 106 agents of company, by, 9, 10 by directors, 106, 513, 1059 CO- director, 107 company, when liable for, 9,10 crimiual liability of directors, 134, 513, 520 death or bankruptcy of person defrauded, 109 discharge in bankruptcy, effect of, 67 joint and several liability, 1022, 1057 liability of both principals and agents, 319 limitations of time, 67, 109 making or rigging market, 72 non- disclosure, when, 108 on minority actions, 33, 1030 promoter, 67 proof on bankruptcy, 67, 109 reproduction of shares for, 91 rigging market, 72 vitiating presumption of notice, 68 FRAUDS, STATUTE OF, as to complying with, 193, 914 FRAUDULENT PREFERENCE, in winding up, 1214 FRIENDLY SOCIETY, corporation cannot be treasurer of, 9, 13 FULLY PAID-UP SHARES, filing contract before issue, 179, 1246 no liability on, 1295 right to refuse transfer of, 400, 401 FUNDING PREFERENTIAL DIVIDENDS, agreement as to [236] certificate [238] FUTURE CALLS, agent for debentures [826] clause in articles [412, 413] mortgaging, 686 [950] GAIN, companies for, must register, 1189 GAS, ()bj(;ct clauHOs [350] Provisional Orders, as to, 1182 GENERAL CHARGE, validity, 772 INDEX. 1353 GENERAL MEETING, adjournment, 416, 510 clause in articles [l^l], and note power for, 421 amendments to motion, 505 casting vote of chairman [419], 419 chairman, as to, 419 clauses in articles [413 ct scq.l, and notes deceased shareholders, representatives of [423] every year, 414, 1197 penalty for omission, 414, 1197 extraordinary, as to convening, 414 clauses in articles, as to, 414 directors' power, 414 requisition as to, 414 [414] first one, when to be held, 413, 1248 joint holders, voting, 423 notice of, clause in articles, 415 what it should contain, 416, 701 notices for various [701, 702] poll, as to, clause in articles [420] demand of, 420 miscellaneous notes as to, 506 et seq. mode of taking, 420 scrutiny at, 421 procedure at, miscellaneous notes, 502 — 511 proxies, blank, 426 deposit of, object of, 424 form of, 423 irregular, 425 miscellaneous notes on, 509, 510 stamps on, 425 quorum, as to, 418 [418] where none [419] requisition for, form of [703] show of hands [419] proxies on, 419 special business, what is, 418 subscribers of memorandum, notice to, 417 Table A., as to, 1226 votes, clauses as to [422] deceased shareholders [423] joint holders [423] miscellaneous notes as to, 509, 510 multiplying by transfer, 422 proxies [423] GENERAL SHIPOWNERS' COMPANY, object clauses [345] GENERAL STORES COMPANY, object clause [330] GENERAL WORDS, object clause, in, 277 [308] GOING CONCERN, agreement to sell business to company as [205, 218] GOLD MINING COMPANY, object clauses [343] All references are to the pages. Faffes in brackets [327] refer to the Forms. P. 4 s 1354 INDEX. GOOD FAITH, what is, 933 GOODWILL, covenants by vendors and others not to compete, 206 purchase of, by company, 267 sale of, points as to, 199 GOVERNING DIRECTOR, clauses as to [590 et seq.'\ GRATUITIES TO EMPLOYES, 620 "GROSS NEGLIGENCE," meaning of expression, 428 GUARANTEE, advances to secure, 923, 924 assets, of [214] bankers and others, to, 923, 924 book debts, condition of sale as to [208] company limited by, memorandum of association of [293, 294] continuing [963], and note construction and operation of, 842 debentures of [841], and note determination by death, 963 directors, security to [967] disclosure, how far necessaiy, 924 dividends of, on sale of shares [247] forbearance, eii'ect, 964 indemnity deed against [967] joint and several, form of [962] of ultra vires advances, 965 profits of, on sale of business [211], and note [246] Statute of Frauds, provisions as to, 924 release of guarantor, by time being given, 964 by loss of securities, &c., 964 clause to contrary [963] GUARANTEE AND INDEMNITY COMPANY, object clauses [315, 316] GUARANTEE COMPANIES, advantages of, 480 list of directors, annual, 1197 memorandum of association of, 204 [293, 294] GUARANTEE FUND, trust deed constituting [639] HANDS, Bhow of [420, 422], and notes, 503 HOTEL COMPANY, object clauses [337] IDENTICAL NAMES, of companies proliibitcd, 1192 ILLEGAL ASSOCIATIONS, Act of 1862, under, 51—53, 314, 1189 INDEX. 1355 IMPLIED CONTRACT, allottee, 26 directors to qualify, 430 to carry on business, 261 transferee, to indemnify, 399 IMPORTERS' COMPANIES, object clauses [346] INABILITY TO PAY DEBTS, winding-up for, 1202 INCIDENTAL AND CONDUCIVE, clause in memorandum, 277 form of [208] INCOME TAX, company's liability, Schedule D., 41, 42 company carrying on business abroad, 46 — 48 overpaid, recovery of, 48 profits and gains, how estimated, 45 deductions allowed, 45, 46 rules as to, 41 INCOMPATIBLE OFFICE, officer accepting, 434 INCORPORATED COMPANY, nature of, 1 — 3 INCORPORATION, certificate of conclusiveness, 14 contracts made by company before, 70, 177 adoptive contract [216] impeaching, as to, 16 INCREASE OF CAPITAL, Act allows, 282 articles as to [409, 410] fees payable on, 291 powers as to, 409 preference shares on (article) [409], 652 resolutions for, 650 et seq. special classes of shares, 651, 652 ct seq. stamp duty on, 290 Table A., provisions as to, 1226 INCUMBRANCES, conditions of sale as to [205] on shares, priorities, 285, 294, 797 priorities, 793 INDEMNITY, directors' security for deed [449] directors and other oflicers, clause in articles [470], and note letter on issue of fresh certificate [718] object clause [315] on transfer of shares, implied, 399 power to give security to directors [449] provisions for trustees in trust deed [869] INDEPENDENT EXECUTIVE, promoters to provide, 64 when not necessary, 64 All references are to the pages. Fagcs in brackets [327] rc/cr to the Foims. 4s2 1356 INDEX. INDICTMENT, company's liability to, 12 INDOOR MANAGEMENT, persons dealing with company not concerned, 37 INFANT, member, position of, 402 memorandum of association, subscriber to, 288 ratification, 402 shares, liability on, 402, 407 transfers to, 401, 402 article as to [401] INJUNCTION RESTRAINING, bankruptcy proceedings against company in France [1067] calls, against, 389 directors from acting, 1030 exclusion of director [1061], and note forfeiture of shares [1059, 1060] holding meeting at improper period [1061] infringement of rights of preference stockholders [1063] issue of preference shares [1063] payment of dividend out of capital [1064] presentation of -winding-up petitions [1067], and note promotion of Act of Parliament, 1168 rejection of votes [1061] use of name of company [1068] ultra vires, amalgamation [1062] dividend out of capital [1064] infringement of rights of preference stockholders [1063] sale of assets [1063] INSOLVENCY, transfer of shares in case of, 397 INSPECTION, members' rights, 460 offer of, in prospectus, effect, 136 register of members, 30 register of mortgages, of, 413, 1196 rights in winding-up, 1213 INSPECTORS, to examine affairs, appointment by Board of Trade or special resolution, 1198 INSTALMENTS, calls payable by, 388, 389 conditions of issue [385], and note forfeiture for non-payment [391], and notes INSURANCE COMPANY, annual returiis, 1197 definition of, in Act of 1862. .1189 extension of objects, 993 objects clauses [313 et scq.'] transfer of business, 1004 [1007] INTENDED COMPANY, contract on behalf, as to, 176 truBtco for, agrcomout with [216] INTENTION, estoppel by, Htatoment whether, 7G6 ruling guide in interpretation, 806 Htiiteiuent of untrue, 94 INDEX. 1357 INTEREST, breach of trust feared, 68 call, on, article as to [390] in advance [391], and notes coupons on debentures [828] debentui'es after maturity, 820 delay in completion, condition as to [204] during construction, 519 promoters, payment by, 68 INTERIM DIVIDEND, resolution to pay [673] directors' powers [457], and note INTERPRETATION, clause as to, in articles [381] object clause [308], and note IXTRA VIRES, cases as to, 275 INVENTIONS, agreement for sale [220, 221] company cannot make, 13 members', company to have [497] power to acquire [303] INVESTIGATION, circular as to [694] inspectors, 1198 INVESTMENT COMPANIES, object clauses [324, 326] INVOICES, name of company to be on, 1196 IRON, ETC. MINES COMPANY, object clauses [343] IRREGULARITIES, outsiders, when not affected by, 37, 412, 444, 455 ratification by directors, 441 ISSUE, paid-up shares, of, agreements [229—232] what is, 188 JOINT HOLDERS, corporation and individual, 402 notices to members who are [465] share certificate, article as to [388] survivorship, clause in articles, 405 transfer by, 398 votes of, at meetings, article [423] "JOINT STOCK COMPANIES ACTS," meaning of term, 1216 JOINT STOCK COMPANIES ARRANGEMENT ACT, 1870.. 1250 reconstruction under, 1165, 1166 All references are to the pages. Pages in brackets [327] refer to the Forms. 1358 INDEX. JUDGMENTS AND ORDERS [1051 ct scq.'] debenture holders' actions, in [1070 et seq."] notice by advertisement of [1082] rectification of register of members [1051 et seq.'], and forms setting aside contract for sale of mine [1058] setting aside sale of concession to company [1056] JURISDICTION, Companies Memorandum of Association Act, 990 rectification of register [1051] reduction of capital, 970 service out of, 40 [210, 467], and notes winding-up, 1280 order vesting in WrigM, J., 1306 KNOWINGLY ISSUE, meaning of, under sect. 38 of Companies Act, 1867. . 124 LABOURERS, preferential payment, 1276, 1295 LACHES, allottees, 102 company may be guilty of, 12 LAND, agreement in writing, when required, 192, 193, 914 company may hold, 1 restrictions in some cases, 298 foreign, mortgaging, 780 LAND TAX, preferential payment, 1276, 1295 LAND AND BUILDING COMPANIES, object clauses [338 — 340] LANDLORDS, condition as to amount of, on sale of leaseholds [204] preferential payment, 1276, 1295 LAUNDRY COMPANY, object clauses [333] LAW MERCHANT, debentures to bearer, negotiability under, 757 LAW SOCIETY, memorandum of association of [294] object clauses [353] LEASE, condition as to assignment [204] notice of [205] power to grant [308] LEGAL ESTATE, injunction to restrain mortgagor from parting with, 919 priority by, 794 protection of, 794 shareH, 398 LEGAL PERSONAL REPRESENTATIVES, of decoaHcd member, not necessarily members, 406 transfer by, 405, 406 voting, 423 INDEX. 1359 LENDING- MONEY, object clause as to [305], and noto LETTERS OF ALLOTMENT, forms of [682 et seq.'\ operation of, 22, G82 stamp on, 682 LETTER OF REGRET, form of [684] LETTERS PATENT, agreement to sell [220], and note LEX SITUS, land abroad, debentures, 780 LIABILITIES, of companies under the Acts, 7 members', 179, 1195 extension by articles, 281 LIBEL, company may be sued for, 10 may sue for, 9, 10 report of meeting', 418 LIBRARY COMPANY, object clauses [337] LICENCES, patents, as to, 222, 223 registration without word " limited," for, 296 [297] notice of application [298] LIEN, bankers', as to, 922 books of company on, 459 clauses in articles [393] operation of, 393 rule in Ilopkinson v. RoU, 395 sale of shares subject to, 396 solicitor, debenture trustees, 798 transfer of shares subject to restrictions, 397, 398 vendors', 797 LIFE ASSURANCE COMPANIES, Acts, 1252 et scq. anialgamation and transfer of business, 1004, 1253 annual returns, 1253 annuitants, 1252 compulsory winding-up, insolvent, 1255 novation, 1265 object clause, as to [312] petition to confirm transfer of business [1007] reduction of contracts, 1006 rules by Board of Trade, 1296 service of notices on policy-holders, 1255 transfer of business, petition for [1007] valuation of claim, 1265 LIFE GOVERNOR'S SHARE, clause in memorandum, as to [360] All references are to the pages. Pages in hraclcets [327] refer to the Forms. 1360 INDEX. LIMITATION (STATUTES OF), action of deceit, 109 breach of trust, 67, 427 Directors' Liability Act, 119 promoters, against, in respect of illegitimate gains, 67 unclaimed dividends, 459 LIMIT OF LIABILITY, by incorporation, advantages, 547 members, 1195 memorandum of association, by, 263 ♦'LIMITED," added to trade-mark after purchase by company, 200 order [1069] omission of word in name by licence, 268, 299, 1245 when used in name of company, 263 LIQUIDATED DAMAGES, provision as to [207] rules as to, 207 LIQUIDATOR, appointment, 1210 calls in name [1108, 1109] control of Board of Trade, 1287 duties and powers, 1203, 1284 remuneration, 1204, 1210 when appointed receiver, 1091 order appointing [1095] LOAN CLUB, object clauses [338] LOCAL BOARD, provision in articles for [451] resolution for [670] LOCAL MANAGEMENT, clauses in articles [451] powers of attorney, 721 [731] et seq. LONDON GAZETTE, rules as to advertising, 1307 LONDON STOCK EXCHANGE, clauses in articles required by or objected to, 384, 388, 389, 393, 399, 400, 411, 430, 444, 460 rules as to quotation and settling days, 144 LOST CERTIFICATE, article, as to [388] certificate, indcrauity on issue of new [718] LUNATIC, shares of, 407 MAJORITY, debeiiturcH and debenture stockholders, rights of, 801 clauses [832, 875] members of company, rights of, 32, 33, 1030 trustees, power of [876], and noto MALICIOUS TROSECUTION, company liable for, 10 INDEX. 1361 MANAGER, agrcemont as to appointment of [253] appoiutinent of, in articles [488 — 492] appointment of liquidator in debenture action, 1091 directors' power to appoint, in articles [447] one company by another [488] receiver and appointment of, in debenture action, 1089 — 1093 [1089, 1093 et seq."] MANAGING DIRECTORS, articles as to [439] private company, in, 598 MANDAMUS, to convene meeting, whether, 414 MARINE, &c., INSURANCE COMPANY, objects [314] MARKETABLE SECURITIES, definition — Stamp Act, 813 MARRIED WOMAN, memorandum of association signed by, 288 transfer of shares to, 402 MATERIAL FACTS, in prospectus, 90, 92, 94 MEAT AND CATTLE IMPORTERS' COMPANY, object clauses [346] MECHANICAL ENGINEERING COMPANY, objects [331] MEDICINES COMPANY, objects [347] MEETINGS, Act of 1862 requires annual, 414 Act of 1867, first, 413 adjourned, are continuation of original, 416, 511 adjournment of, 419, 420 articles as to [419—421] notice, as regards, 416, 511 amendments inconsistent with notice, 416 annual general (articles as to) [414] business at [418] casting vote at, articles [419] chairman, articles as to [419] adjournment by, 420 declaration by, articles [420] debentures and debenture stock holders, 801 under debentures [832] under trust deeds [883] in actions [1114, 1115] declaration of chairman, 420 evidence as to resolution, articles [420] extraordinary business at, 418 "extraordinary" defined [414] first (or statutory), articles as to [413] when held, 414 All references are to the pages. Pages in brackets [327] refer to the Fonns. 1362 INDEX. KE'ETJNGS— continued. general clauses in articles [413 et seq.'\ procedure at, 503 injunction against holding [1061] majority acting unfairly, 422 agreements, relating to, 416, 417 notices of, 416, 417 articles as to [415 — 417] information to be given by, 416 omission to give, articles [417] special resolution, articles [415] where adjournment, 416 " ordinary " defined [414] poll at, 422—426 proceedings at, articles as to [418 — 422] provisions of the Act, 1248 proxies at, 419 adjoiuTiment at, 424 articles as to [419, 420, 422—426] form of [425] questions, how decided at, articles [419] quorum at, articles as to [418, 419] one person not, 418 requisites for, 418 report of, when libellous, 418 requisition for [249] agreement as to [248] articles [414, 415] resolution to caU [673] right to repudiate shares lost by voting at, 107 show of hands at, 419, 420 " special business," articles as to [418] subscribers to memorandum, of, 417 Table A provisions for, 1226 transfer to nominees for purposes of, 422 two, by one notice (special resolution) [415] voluntary winding-up, after, 414 votes at [422 — 426]. \_And see Votes] MEMBERS, acting as, effect on right to repudiate shares, 27, 104 action on behalf of, 1030 administrator of, position of, 405, 407 articles as to shares [405, 406] aggregate of, does not constitute company, 1 , 2 agreement to become, 20, 26, 27 allotment of shares, 22 delay in, 25 notice of, 22 post, by, 23 proof of, 23 when effective, 22 annual list, as to, 414, 1193 application by, as to, 21 before incorporation, 23 conditional, 25 articles, whether a contract with, 371 — 375 bankruptcy of, company not affected by, 3 transniisHion of sharps on, 406, 407 article as to [4 00] become such by agreement, 20, 21 bound by articles of asHO(;iation, 371, 373, 375 can contract with company, 3, 79 INDEX. 1363 MEMBERS— continued. can sue company and be sued, 3 certificate of shares, articles as to [388] cesser of inemLersliip, 28 conditional application to become, 25 confirmation of directors' ultrd vires acts, 3 constitution of membership, 19 contractino; with company, 3 control of internal regulations, 32 copies of memorandum and articles, entitled to, 289, 380 covenants inter se, by articles, 374 creditors of company, may become, 3 death of, articles as shares devolving' [105, 406] definition of, in Act, 1 193 different classes, 285 dissentients under s. 161 (articles) [469, 470], and notes distinction between them and the company, 1, 2 entry upon register, where necessary, 19 — 21 estoppel against, 27 evidence, register, 30 exclusion from poll, 421 executors of, position of, 405 — 407 articles as to [405, 406] further liability imposed by articles, 281 implied contract by, doctrine of, 374 increase of, notice, 1194 increase of capital, rights on (article), [409] notice of [706] infant's position, 26 — 402 liability on shares, 28, 1190, 1195 limitation of, 263 majority, powers of, 32, 33 meetings of, articles as to [413—422] how far bound by, 416 minimum number, 1197 unlimited liability in winding up, 1202 modification of rights of, 411 article as to [410] not the company or owners of its property, 1 notice of regulations, 35 notice giving to, clauses in articles [403, 464] number not to be less than seven, 1197 personal representative of, transfer of shares by, 406 property of company not in, 2 rectification of register of, 1051 et scq. register of, closing, article 30 [405], and note entry on, importance of, 20, 21, 23, 24 publicity as to, 30 rectification of, 1051 et seq., 1195 requirements of Acts, 29, 30 resolution in wi-iting to be equivalent to meetings [426] retiring, not to compete [588] signature to memorandum of association is, 288 status of, when constituted, 24, 26, 27 subscribers to memorandum are, 19, 20 suing and being sued by company, 5 transfers of shares by, allowed unless restricted, 397 ultra vires acts, consent to, 3, 33 unanimous consent to iiltrd vires act, 3 unanimous consent to tdtrd vires, 65 All references are to the pages. Fa^es in brackets [327] refer to the Forms. 1364 INDEX. MEMBBUS—eotttinucd. votes of, articles as to [422 — 427]. \_And see Votes] who are or may become, 19 et seq., 26, 288, 1193 wrongful removal from register of, by, 25 MEMOEANDUM OF ASSOCIATION, adoption of, instead of deed of settlement, 993 agent's signature to, 288 allotment unnecessary, of shares subscribed for in, 289 alteration in, 281, 282, 285, 358 express power reserved, under, 358 [362] objects, of — examples, 993 provisions of the Act, 990, 1278 alteration of signatures to, 265, 288 ambiguity in, explained in articles, 373 articles — how far read to construe, 272, 273 inconsistent with, 373 may be registered with, 371 borrowing powers, when inserted in, 411 capital to be stated in, 263 clauses, 358 [360 et seq.] classes of shares defined by, 285 company limited by guarantee [293, 294] company limited by shares, of [292] company without word "limited" [294] construction of, rules as to, 269 copies to members, 289, 1191 courts having jurisdiction, 972, 994 cumulative preference shares, 359, 360 clauses as to [361 — 364] deferred shares, clause as to [365] differing from articles as to objects, 273 effect of signing, 288 fees payable on, 290 forms of — company limited by shares [292] guarantee company [293, 294] under sect. 23 of Act of 1862 [294] unlimited company [300] founders' shares, clauses as to, 359, 367 [364, 365, 367 French mining property, clause as to [369] fundamental character of, 372 " general words " in objects clause, 277 [308] guarantee clause, 264, 281 guarantee company, 264 [293] under sect. 23 of Act of 1862 [294] implied covenant in, 265 implied equality of shares, exploded doctrine, 286 implied notice of, 35 implied powers in, 278 infant's signature to, 288 intra vires cases of, 275 liability of member — further, may bo imposed by articles, 281 limitation of, 263 life governor's share, clause as to [360] married woman's signature to, 288 members, how bound by, 265 minute of rcduftinn of capiial forms part of, 977 namr; of company in, 263, 265, 266 notice of, to members and persons dealing with company, 35, 36, 37, 101 objects of company, 263, 264 alteration of, 281, 993 general words as to, 277 INDEX. 1365 MEMORANDUM OF ASSOCIATION^— conthiued. objects of company — continued. powers of company limited by, 268, 269 power to extend inoperative, 278 present practice as to stating, 280 " substratum" cases, 270 ct seq. ultra vires cases, 273 ct seq. object clauses (common forms) [302 — 308] accepting bills, t&c. [;506] Acts of Parliament, obtaining [307] advertising products, &c. [307] arrangements with authorities [303] borrowing and mortgaging [305] building, &c. [304] businesses, carrying on and purchasing [302] carrying on other businesses [302] constructing works [305] debentures and debenture stock [305] deposit, receiving money on [305] employes, benefit to [304] foreign registration [308] general words [308] guarantees [305] interpretation clause [308] investment [308] lending money [305] mortgaging [305] partnership, entering into [303] patents [303] promoting companies [304] purchasing other businesses [302] purchasing property, «S:c. [304] remunerating persons employed in floating, &c. [305] selling property [308] selling undertaking [305] shares in other companies [303] trustees, acting as [306, 308] undertaking, sale of [305] object clauses for specific companies, for [312—357] \_See Index at p. 312] ordinary shares, clauses as to [360 et seq.} outsiders' notice of, 427 petitions to extend objects of, 990 [993] preference shares, declaring rights of, 285, 358, 359 clauses as to [360 — 364] pre -preference shares, 361 provisions in, not required by statute, 285 reduction of capital attempted by, 283 registered office to be specified in, 263, 264 registration of, and effect, 204, 1192 relation to articles, 273 reqmrements of statute as to, 263 — 265 seven signatories required, 263 share company, of, 263 shares subscribed in, must be paid for in cash, 189, 28J signature of, 265 special classes of shares, clauses as to, 285 stamps on, 265, 290, 291 subscribers of, allotment not required to, 289 are members, 20, 288 infant, 288 liabiUty of, 1190 may sign by agent, 288 All references are to the pages. Fages in brackets [327] refer to the Forma. 1366 INDEX. MEMORANDUM OF ASSOClATWi^—contmma. "substratum" cases, 270 et seq. ultra vires cases, 273 undei-writing clause by subscribers, 167 unlimited company, of, 264 [300] MEMORANDUM OF ASSOCIATION ACT, 1890, extension of objects under, 990 et seq. conditions may be imposed, 992 examples of, 993 petition to confirm [994, 996] resolutions as to [669] memorandum and articles, petition for [998] practice under, 994 scope of Act, 992 MERCANTILE AGENTS, definition in Factors Act, 1889. .928 et seq. powers of, 928—932 MERCANTILE LAW AMENDMENT ACT, 1856, rights of sureties under, 843 MERCANTILE USAGE, adoption by the Courts as law, 757 MERCERS' COMPANY, objects [3S0] MINES AND MINING COMPANIES, agents, for prospecting, &c. [256, 258] agreement, by company to purchase [223, 225] objects [301, 342, 343] MINIMUM, number of members, 1197 unlimited liability, 1197 winding-up, 1202 MINORITY, debenture-holders, as regards majority, 801 fraud on, suing in company's name, 1030 majority, when bound by, 32 rights of, at meeting, 422 MINUTES, clause in articles [444] contradiction by evidence, 445 debenture stock-holders' proceedings [885] directors' meetings, of, specimens [602] general meetings [444] proof of facts not recorded in, 445 provisions of the Act, 1200 MISCONDUCT, agent, dismissal, 261 directors, of, 438, 1061 liability, in winding-up, 1283 MISFEASANCE, auditors' liability, 463 directors, by, 427 liberty for liquidator to compromise proceedings [1 1 1 1], and note order (jf application to enforce i)roccodings for [1112] proviHioiiH of Act, TiHIj Hale of right to proceed for, 1111 INDEX. 1367 MISREPRESENTATION, action of deceit for, 103 limitatiou of time, 109 action for rescission, 91 [1021] agent, by, 10 ambiguous statements, 95 belief, opinion, ice, 94 circular correcting, 693, 09 1 contracts induced by, voidable, 91 defences available to defendant, 100 Directors' Liability Act, 110 examples of material and immaterial, 97, 98 fact, of, 94 becoming false, before allotment, 101 fraud, wben to be proved, 106 inducement by, proof of, 100, 108 law or fact, 94 pleadings in action for [1036] proof in bankruptcy for, 109 prospectus, in, allottees' remedies, 91 circular correcting, 693 [694] order to rescind contract to take shares [1055] order to set aside sales [1056 et av^.], and notes rectification of register for, 1052 rescission, action for [1021] rumour or suspicion, as to, 102 single, may suffice, 96 statement that A. reports, as to, 100 statements of claim and defence, as to [1036] MISTAKE, omission to file contract before allotment, 190 MODIFICATION, agreement adojiting contract with [217] agreements under clauses of, varying rights [239 — 244] preliminary agreement, of (article) [382] rights, of, meetings of debenture and stockholders [884] members, of, 411 (article) [410] MORTQAGES, appropriation of payments, 919 articles as to [411 — 413] bank, to, present and future advances [958] Bills of Sale Acts, as to, 782 book debts to bank [956] condition of sale as to [205] consideration for, what sufficient, 911 debenture in blank, [954] documents of title (mercantile), 928 equitable, as to, 910 implied power of company to create, 278, 279 land in Scotland or abroad, 780 maturity, pajanent oS before, 922 mercantile agents, by, 928 ci acq, negotiable securities [944] notice before payment of, 922 object clause as to [305] power of attorney to execute, 944 power of company to create, 783 power of directors as to, 788 All references arc to the pages. Fa^es in brackets [327] refer to the Forms. 1368 INDEX. MOKTGAG'ES—cofitinued. present and future advances, to secure [958] priorities, 793 register of, clause in articles [413] inspection of, 413 provisions of Act as to, 1196 reserve capital, 787 shares, of, blank transfer, with, 400, 797 claims as against companies, 394 equitable priorities, 394 specific, priority over floating charge, 774 trading companies' powers to make, 278 uncalled capital, of, article as to [413] banker, to [950] unregistered, validity of, 783, 795 MOTION, amendment to, at general meetings, 505 notice of, formal parts of [1053] to rectify register [1053], and notes MUSICAL SOCIETY, objects [357] MITTXJAL SHIP INSURANCE COMPANY, objects [314], and note compensation to workmen [317] NAME OF COMPANY, changing, 268 when change completed, 666 consent of liquidator to new company taking [710] engraving on seal, 16, 1196 identical, not registered, 265, 1192 improper use of, 266 injunction against, 266 [1068] "limited," when used, 263 when omitted, 296 licence of Board of Trade, 297 member suing in, 32, 33, 1030 memorandum of association, in, 263, 265 order restraining use [1068] order to restore to register of companies [1014] penalty for not publishing, as required by Act, 1196 petition to restore to register [1013] power to change, 1191 publication of, 1196 penalties for default, 1196 purchase of goodwill, tm, 267 reconstruction, same generally used on, 1129 registration of new comi)any with same, consent for [710] resolution changing [OGfJ] restoration of, to register, 1013 "Royal," not generally allowed, 267 similarity, prohibited, 265 ct seq. striking off register on dissolution, 1013 NEGLIGENCE, conii)aTiy, of, 9 directDrs, of, 91, 428 individual responsibility for (articles) [470], and note INDEX. 1369 NEGOTIABLE INSTRUMENTS, Act, provisions of, 1197 article as to [454] debenture to bearer, 756 estoppel by, 76(i mortgage, by deposit, 915 priorities, 797 object clause [30G], and note omission of word '• limited," 306 signature by holder, &c , 1197 title of holder, 915 wrong name of company, liability for, 306 NEGOTIABILITY, 756, 766 NEWSPAPER PROPRIETORS' COMPANY, objects [334] NEW ZEALAND, requirements of local Act as to companies, 730 NOMINEES, issue of shares to, unfiled contract, 182 NON- CUMULATIVE PREFERENCE SHARES, 359 clause in memorandum [362] clause in articles [454], 482 [483] dividends on, 359 resolutions creating, 651 NON- DISCLOSURE, action for, deceit, 106 [1021 f< seq. ; 1036 et seq\ rescission, 96 et seq. circular to remedy, 138 contracts, in prospectus, 123 examples of material and immaterial, 97, 98 fraudulent, when, 108 trade secrets, of, 262 [467] NOTARIAL CERTIFICATES, powers of attorney [744] NOTICE. acceptance of shares [C89] actual or constructive, 800 adjourned meeting, of, 416 advertisement, by, judgment, of [1082] presentation of petition [1002] affidavit of service of, by post [987] allotment of shares, of, 143, 681 posted, but not received, 143 new shares, as to [687] allotment forms, receipts [681 ci seq.'\ articles of association, contents, 35 authentication by company, 464, 681, 1199 building society rules, of, 927 bye-laws, of, not presumed, 451 call, of [685] article, as to [389] instalments [692] All references are to the pages. Pages in brackets [327] refer to the Forms. P. 4 T 1370 INDEX. "NOTICE— coMti/uicd. capital, increase [706], 1191 " clear days," 390 clause in articles, as to [-163] commencement of action, advertisement [1019] company, by, authentication of, 464, 681, 1199 signatures of, 464 company, to, how to be given, 1199 service of, 464 verbal, sufficient, 464 consolidation of shares, 1194 constructive, mercantile documents, 934 nature of, 800, 934 contracts mentioned in prospectus, 70, 71, 132 contract not filed pursuant to sect. 25. . 189 [695] where fraiid, 190 conversion of shares into stock (to registrar), 1 194 debenture holders' meeting [704], 882 debenture stockholders' meetings [705] deceased member, served at address of [466], and note directors, to, vihen independent executive, 69 dissent, of, on reconstruction under sect. 161 [1151] distringas, company boiuid to attend to, 387 documents offered for inspection, of, 69 equitable interests in shares, 385, 386 executors of deceased shareholder, to [697] extraordinary general meeting [700] facts and contracts in memorandum and articles, 35, 36 final instalment, to pay [684] foreign resident members, as to [464] forfeiture of shares, before [699] framing, as to mode of, 701 general meetings, 416 et scq. clauses in articles [415 — 417] construction of , 416 irregularity as to [417], 418 length of, 410, 417 nature of business to be stated, 416 necessity of giving to all members, 418 various forms [702] holders of share warrants, to (ai-ticles), 465 imperfect, of meetings of members, 416, 417 increase of capital [706] increase of members, 1 1 94 independent executive, to, affects companj', 69 instalments, reminder [683] intended registration of transfer, of, 387 [696] inviting share subscriiitions (s. 38 of 1867), 123 judgment order, of, advertisement, by [1082] debenture holders, dispensed with [1080], and note forms [1081 t< ir^.] Order XVI., rule 40 [1081] service of, of [1080], and note jurisdiction, out of, 210 [467], and note knowledge by single director not notice to company, 464 London Gazctlr, in, as to advertising, 1307 Tnimbors resident abroad, as to [464] nifinbrr willi no legist crcd address [464] niciiinraiKltiiii find articles, of, 35, 36 misrepreKentations, circular correcting [693, 694] iriotiou to rc'ctify register, of [1053], and notes oflicc, situation oi [706] ordinary general meeting [700] INDEX. 1371 NOTICE— co«CiH»rrf. postal, to members [465], and note presentation of transfers of shares, 387 [696] provisions in articles [464 et .syy.], and notes registrar of joint stock eompauies [706, 707] registration of executors, &c. as shareholders [697, 698] regret, letter of [684] renunciation of shares [689] resignation of director, of, 432 service of, clause iu agreement as to [225] company, on, 1199 condition of sale as to [210] share certificate ready [685], and note signature may be written or printed [466], and note special resolutions, registrar, to [707] to pass [700] to confirm [702] two meetings by one notice, article [415] stamping signature to, 466 Table A, provisions of Act as to, 1231 time, how counted (articles) [466], and note transfers, as to, lodged for registration, that [403] transferees bound by prior (articles) [465] trusts of shares, of, clause in articles [385], and notes, 395 two meetings by one, 701 winding-up, of, on members abroad, how served (articles) [466], and note NOVATION, life assurance policy-holders (Act), 1265 NUMBER, denoting, in filed contracts, 181 NUMBER OF MEMBERS, carrying on business with less than seven (Act), 1197 partnership, limitation of, 1197 subscribers to memorandum (Act), 1190 OBJECTS OF COMPANY, acts in contravention of, ultra vires, 268 ct seq. instances of, 273 ct, scq. alteration of, 281, 1278 by special Act, 1173 under Act of 1890.. 990 borrowing powers [305] clauses in memorandum as to, 268—270 [301 et seq.'] \_A)td see Memo- EANDUii OF Association] acquisition of existing concern, for [301, 302] common forms [302 — 308] list of forms as regards specific companies, 312 details, setting out in, 279, 280 extension of (Act of 1890), advertisement on order [1004] advertisement of petition [1002] discretion of Court, 992 examples, 993 All references are to the pages. Pages in brackets [327] refer to the Forms. 4t2 1372 INDEX. OBJECTS OF COMFAT, 76, 77] as to binding company by, 70, 71 preliminary expenses, what right to, under articles, 44t} preliminary expenses fund [78] present of shares to directors, 431 order for directors to pay value to company [1059] and notes profit of, 60, 61 concealed, 64 usual modes of making, 61 promotership, commencement of, 62 occasional, -59 professional, 68 pro hdc vice, 59 question of fact, is a, 58 termination of , 63 prospectus, liability in respect of, 68 et seq. prospectus of, when company bound by, 91 protection of, by disclosure and provisions in articles. &c., 68 et seq. purchase by, and re-sale to company, 63 et seq. qualification shares to directors, provided by, 431 recommendations to intending, 74 remuneration by vendors [213, 214] and note. for services adopted by company, 7 1 provision in articles [497] and note re-selling to company at profit, as to, 65, 66 rigging the market, 72 right to sue company for preliminary expenses, articles cannot confer, 446 rights and liabilities inter se, 72 sale to company, orders to set aside [1056 et seq.'] and notes secret profits, accountable for, 63 allowances made on estimating, 67 interest on, liability for, 68 writ to recover [1024] and notes selling to company, obligations, 64 servants or agents may be, 58 services rendered by one or more to others, as to, 72 remuneration for, as to, 72 shares improperly received, ordered to account for value of, lOoU status, a question of fact, 68 underwriting arranged by, 70 vendor, liberty to pay part of consideration to co-promoters [213] who are, 54 PROMOTION, examples of, of companies, 55 et seq. other companies (objects) [304. 320, 322] parliamentary bill, application r)f funds of company for, 11 07 ]iower of company to pay expenses, 1168 PROPERTY OF COMPANY, after acquired, mortgaging, 772, 773, 913 dealings with (objects) [308] distribution in specie [309] and note execution on, 13 floating security on, 772 et seq. power of company over, where implied, 278 et seq. power to acquire (objects) [301 — 304] Alt references are to the pages. I'aoes in /ninbts [327] refer to the Forms. P. 4t 1386 INDEX. PROPERTY OF COMFAiHY—coHtinued. sale of, and dealing with (objects) [308] title to, 2 -wasting, mode of ascertaining profits, 5'2'2 /■( seq., 537 et seq. PROPOSAL, in writing accepted orally, needs no stamp, 195, 196 when binding notwithstanding Statute of Frauds, 194, 195 PROSECUTION, costs of, when company may pay, 274, 276 PROSPECTING, agreement to grant option, as to [232] PROSPECTUS, adoption by company, responsibility, 92 ambiguous statements, danger of, 95 amendment of, by circular, 138, 139 application, form of, 142 attractiveness, 88, 89 care in framing, 89 careless language, danger of, 95, 96 circular disclosing misrepresentation in, 138, 139 company's responsibility, 91 construction of statements, 96 contents of, effect on public, 90 contracts to be specified m, as to dates and parties, 123, 124 not required where shares not offered by, 124 verbal also, 124 when subscriber has notice of, 132 course of preparation, 88, 89 damages, measure of, in s. 38. . 124 death of person defrauded by, 109 debentures and debenture stock, 811 [847, 848] contracts need not be specified in, unless shares also offered by, 124 deceit, action of, 93, 106 limitation, 109 Directors' Liability Act, 1890. .110 or 1292 (set out) contributions and indemnity, 123 how it alters previous law, 111, 112 persons liable under, 113 what are " reasonable grounds," 118, 119 what companies it applies to. 111 what defendant has to prove, 117 what effect has death or bankruptcy, 120 what is a " statement," 114 what plaintiff must prove, 115, 116 what precautions directors and promoters sliould take. 120 what the liability imposed, 116 what the period of limitation, 119, 120 who is an expert, 119 wh(j may be sued, 1 13, 114 wlio may bring action, 115 disclosure, how far required, 93 how to be made, 135 material facts required, 90 et se/i;;/t>nurd. discount issue, in case of, 283 interest on sums paid for shares allowed, 1053 jurisdictiou [lOol] notice of motion for [1053] order for [1053] transfer, after, 401 REDEMPTION, debentures, agreement for extension of time [844] drawings by [896 et st-q.'] REDUCTION OF CAPITAL, accumulated profits, paying otf or redeeming shares out of, 970 Act of 1862, Table A. does not refer to, 282, 283, 970 Act of 1877.. 282, 283, 665, 970, 1267 extension of term " capital," 971 cancellation of capital by, 970 cancellation of shares unissued or surrendered [665], 970 causes of loss, affidavit as to [981] classes of shares, how reduction to fall, 974 clause in articles, 410 completion, 977 Court may confinn any kind of, 970 Courts having jurisdiction, 970 creditors, as to, 975 distribution of profits by way of return, 1270 founders' shares extinguished by, 369 insurance company, affidavit of actuary [986] jurisdiction, Courts having, 970 liabilities of shareholders, by, 970 lost capital, statement of causes m petition [984] minute of, approved by Court, 975 [988] form of, 975 filing with registrar, 977 when registered, to be part of memorandum, 977 order and minutes, notice of, cannot be dispensed with, 974 order confirming [988] order setting down petition, and for advertisement [930] ordinary modes of, 970 paying off [661], 970 paying off, eut of profits [665] petitions to confirm [977 — 979] advertisement of, 972 affidavit in support [981] causes of loss, statement in [984] creditors affected [977] creditors not affected [979] order to place in paper [979], and note title of, 973 where presented, 972 withdrawal of, 990 . procedure, 970 purchase of shares in company's own capital, by, 970 reasons for reduction, advertising, 989 Court may require company to publish, 974 power not often exercised, 974 statement in petition [984] reconstruction to effect, 1128 registration of order and minute, 977 return of capital, by, 970 rules of High Court, 1298 sanction of Court, when required, 970 All references are to the pages. Foffea in brackets [327] refer to the Forms. 1894 INDEX. REDUCTION OF CAVL'HAh- continued. secretary's affidavit proving due calling of meetings [987] special resolution for, procedure after, 971 unissued, of, without sanction of Court, 971 words " and reduced," dispensing with, 971 application for, when made, 972, 973 order dispensing with, 980 when use imperative, 972 EEDUCTION OF CONTRACTS, life assurance companies, of, 1006 REFRESHMENT-ROOM PROPRIETORS' COMPANY, object clauses [335] REGISTER, colonial, provisions of Act as to, 1272 REGISTER COUNTY, priority of incumbrances on land, 795 REGISTER OF COMPANIES, defunct company, striking off name, 1013, 1271 restoration of company's name to, petition and order [1013, 1015], 1271 REGISTER OF MEMBERS, closing of, 30, 405 clause in articles as to [405] power of, 1194 colonial, as to, 1272 company boimd to keep, 29, 1193 contents, 29 delay in applying to be removed from, 31 entry upon, necessary to complete membership, 23 except in case of subscribers to memorandum, 20, 23 not conclusive, 27, 31, 32 holding out, doctrine of, 31 inspection, 29, 30 penalty for obstruction, 1194 right to, 1194 penalty for not keeping, 1194 ^rt/««/(7C)> evidence, 1195 publicity of, 30 object of, 31 rectification of, 30, 190, 283, 401 [1051 ct t72] borrowing [666, 667] extension of directors' powers [666] business, acquisition of [667] call, as to, 389 cancelling lost capital [662] change of name [666], and note classes of shares, reducing, as to, 662 committee, as to [672] common seal, adopting [672] confirmation of irregular, restrained [1062] confirming past returns of capital [663] consolidation of shares [657] contracts as to [672] conversion of preference shares into ordinary [656] shares into preferred and deferred stock [660] shares into stock [6571 creation of debentures [656, 657, 667] debenture stock [666] preference shares, 052 [652 — 655] prior lien debentures, as to. 244 debentures, for issue of [666] debenture holders by, for modification of rights [668], and note debenture holders, of, orders sanctioning [1115] debentures and debenture stock, creation and issue of [666, 667] declaration by chairman, conclusiveness of, 644, 645 directors' equivalent to meetings [426] All references are to the pages. Pages in brackets [327] refer to the Forms. 1398 mDP:x. RESOLUTIONS— cow^mm/. directors, of, 647, 648 distribution of assets in specie [668] dividend, interim [673] division of shares [658] into preference and deferred [659, 660] enforcement of, writ [1028], and note evidence of passing, article as to [420] conclusive, ■what, 644, 645 declaration of chairman, 644, 645 "sufficient" under regulations, 645, 646 extension of objects, for [669] extraordinaiy, 644, 646 forfeiture of shares [672] Forged Transfer Acts, adopting [677] general meetings, of, 643 general observations on, 647, 648 increase of capital [650—657], and notes irregular, order restraining confirmation of [1062] local board, appointment of [670] meeting, to call [673] miscellaneous forms of [671 — 674] name, changing [666] objects, extending or altering [669] ordinary, 643, 646, 647 poTver to rescind [1144] prospectus, approving [672] quorum of meeting for passing, 644 reduction of capital [660 — 665] cancelling lost capital [661] cancelling paid-up shares [665] paying oS capital [661] registration under Act of 1879, as to, 679, 1268 re -registration of company [678, 679>] reserve capital [665] sale of undertaking with view to reconstruction, for [1151 resolution for [1151] shares, consolidation of [&^T\ conversion into stock [657], and note creation of new [650 — 656], and notes ordinaiy, at par, premium to be paid [651] ordinary, at a premium [651] preference [654 — 656] division and sub-division of [658 — 660] share warrants, 674 conditions of issue, declaring [674 — 677] show of hands, as to taking, 645 special, 418, 644 et seq., 701, 1197 copies of, annexed to articles, 380, 1198 definition of, 1197 registration of, 1198 specie, for distribution in a winding-up [668] specified majority, where regulations require, 647 stock, conversion of shares into [057] Table A, modification of [050] nhra vires, writ to set aside [1027] writ of summons, to enforce [1028] RESOLUTIONS OF GENERAL MEETINGS, declaration of chairman as to special, 646 extraordinary resolutions, nature of, 643, 646 notices, as to, 646 ordinary resolutions, nature of, 643 requiring special majorities, 043 show of hands, as to, 645 upecial resolutions, natiure of, 643, 644 INDEX. 1399 RESPONSIBILITY, directors, &c., individual only (articles) [470], imd note RESTORATION, of name of company to register, 1013 petition and order for [1013. 1015] RESTRAINT OF TRADE, contracts in, as to [206], 206, 207 RETIREMENT, compulsory, of members, 584 [584, 585] directors, of, article as to [431], and note, [437] RETURNS TO REGISTRAR, annual, 414, 1193 REVENUE, separate account from capital (clause in articles) [498] whether applicable as profit, 521 et seq. REVERSIONARY INTERESTS, dealings in (objects) [313] REVOCATION, proxy, of, 424 RIGGING THE MARKET, nature and danger of, 72 ROTATION OF DIRECTORS, clause in articles [437] Table A, 1228, 1229 "ROYAL," use by company in name, 267 RULE IN Clayton'' s case, 798 Foss V. Harbotfk, 33 Roy((I British Bunk v. Tnrquand, 37 RULES, Board of Trade, under Life Assurance Acts, 1296 General, of 1868. . 1298 et seq. forms under [1301 et seq.'\ power of Court to make, 1215, 1245, 1287 SALE, amalgamation, with view to, 1155 et seq. agreement for [1162] company, to, orders to set aside [1056 et seq.'], and notes Court, by order of [1096, 1097], and notes debenture actions in [1096], and note delay in completion, interest payable [204], and note directors' power [445] exclusion of objectionable assets on [213] forfeited shares [393], 394 lien, enforcement by, 394 et seq. member to corporation, 3 mining claims, agreement as to [225] object clauses as to [305, 308] All references are to the pages. Payes in brackets [327] refer to the Forma. 1400 INDEX. SALE — continuecJ. orders for, approving couditional contract [1099] confirming, and for payment into Court [1G98] debenture action, in [1096. 1097], and notes liberty for debenture holders to bid [1076], and note liberty to debenture holders to bid and set off [1099] motion, on [1096], and notes patents, of, agreement for [220] power of company, objects [305, 308] promoter, by, to company, 66 reconstruction of company, with view to, 1125 et seq. agreements for [1137 et seq.'], and notes right to proceed for misfeasance, of, 1111 shares of (compulsory retirement). Aln et neq., and forms after forfeiture [393] under lien [396] ultra fires, injunction to restrain [1063] undertaking of company under s. 161 of Act of 1862 [469, 470], and notes agreement for, under power in memorandum [218], 219 clause in memorandum [306] SAW MILLS COMPANY, object clauses [348] SCHEDULE. reference to. incorporates it in the instrument, 875 SCHEME, amalgamation, 1166, 1167 arrangement with creditors, 1165 recouiStruction [1145, 1146] SCHOOL OR COLLEGE COMPANY, object clauses [338] SCIENCE, associations, companies, &c., for promoting, 1245 licence of Board of Trade for registration without word " limited," 296 et seq., 1245 restricted as to holding land, 298 SCIRE FACIAS, whether incorporation can be impeached by. 16 SCOTCH SEQUESTRATION, shares, effect on, 407 SCRIP, certificate to bearer, shares, 851, 852 certificates of debentures, &c., 792, 851 negotiability of certificates to bearer, 766 et »eq. stamp on, 713 SCRUTINY, poll, on, 421 SEAL, imports delivery in case of company, 18 printed circle is not, 399 SEAL OF COMPANY, affixed to deed imports delivery, 18 affixed to instrument, pre8uni])li(in of validity, 17 non-trading comi)uny, rule not iqjplieable, 17 company's right to, 16 INDEX. 1401 SEAL OF COMPANY— fw/], and note power of attorney under [72ii] contracts, to, when requisite, 17 irregular fixing-, clause in articles as to [4j4] name of company to bo engraved on, 16. 1 190 official one, for use abroad, 4r>'2, ]2.')1 presumption of regular fixing, 1 7 regulations as to user, 17 testimonium clause, 193 • what documents to be under, 1 7 who may use, 1 7 SEALS ACT, 1864, clauses in articles [452] power of attorney under [72(1] provisions of Act, 1251 SECRECY, clauses in articles [467] SECRET PROFITS, directors and other officers, 436 directors, promoters, &c.. pleadings [1024], and note, [1042, 1043], and note promoters, 63 SECRETARY', agreement as to appointment of [254] clause in articles appointing [453], and note commission to be paid to [255] directors' power to appoint, in articles [447] indemnity in articles [470] letter by, presumption of regularity, 444 representations of, when binding on company, 262 prima facie, are not, 262 vacating office by becoming director, 434 SECTION 25 OF COMPANIES ACT, 1867, filing contracts under, 179 et xcq. articles not a contract within, 187 '' cash " meaning- of, 187 consideration for contract, 182, 183, 186 denoting numbers of shares, as to. 181 issue, meaning of, 18S parties to, 180, 181 relief in winding-up, when not filed, 191 remedy, when not filed, 1S9 result of not filing, ISi) sub - conti-act, whether sufficient, 185 vltra rircfi contract, as to, 1S5 who bound to see to, 193 SECTION 38 OF COMPANIES ACT, imi . .US e( .seq. abridged prospectus, 124 SECURITIES, custody of, clause in articles [493] plaintift' company, by, 1031, 106S order for [1068] provisions of the Act, 1200 SEQUESTRATION. against corporation, 13 All references are to the pages. Pirt/es i?! brackets [327] refer to the Forms. P. 4 X 1402 INDEX. SERVANTS OF COMPANY, agreement as to employment ['2.55] discliarge of, by winding-up order, 261 by appointment of receiver, 261 proof by, in winding-up, 261 revelation of trade secrets, may be restrained from, 262 SERVICE, affidavit of service by post [987] company, on, mode of, under the Act, 1017 faithful, bond of employe [641] notice of judgment on debenture-holders dispensed with, order [1080], and note notices, of, provisions in agreement [210] in articles [463 et scg.], and notes in debentures, trust deeds, &c. [827, 829, 861, 875] out of jurisdiction, 40, 41, 467 clause in articles [466], and note postal notice [465], and note specific performance of agreements for, 260 winding-up, on members abroad (articles) [466], and note how affected by, 261 SERVICES, agreement for, with company [255] damages for inducement to breach of engagement. 261 discontinuance of, owing to winding-up, 261 faithful, bond for [641] issue of paid-up shares in consideration of, 183, 184 SETTLEMENT, deeds of, for private companies, 604 SHAREHOLDERS. aggregate of, not the company, 1,2" bankruptcy of, 407 company may be sued by, 3 compulsory retirement, 584 [584 et seq."] confirmation of irregular acts of directors by majority, 33 contracting with company, 3 creditors of company, may be, 3 distinct from corporation, 2 consequences of distinction, 2, 3 diffei-ent classes of modification of rights [411], and note execution on company's property, by, 3 fraud on minority of, 1030 internal regulations, control of, 373 majority binding minnrity, 32, 33 except as to nUra circs matters, 33 will of majority is will of corporation, 32 notice of memorandum and articles, 5, 35, 135 right to repudiate shares may be lost by acting as, 104 suing on behalf of himself and others, 1030 cases where permitted, 1030 rule in loss v. HarboKh; 1030 title to company's property is not in, 2 ultra vires acts, action by, in respect of, 1030 imanimous consent to ultra vires acts, 3 SHARE WARRANTS, articles of association clauses [407, 408] conversion of shares into other class [487] coupon to [718], and note vou(;lier for fresh [718] form of [717] notice of general meetings to holder [465], and note provisions of the Act of 1867. . 124G INDEX. 1403 SHARE WARRANTS— co«ositiou as to, 402 nature of, 1103 new clause in articles as to, issue of, iO'J, and note notice of allotment of. 23, 1 13 by post, 23, 113 proof of, 23 notice of memoninduni and articles (if existing) imputed h> applicant for, 101 object clause as to ncipiiriug shares in other companies [303] option to vendor as to taking [212, 213], and note order and disposition clause are not within sect. 44 of Bankruptcy Act, 188 3.. 38 7 order rescinding- contract to fake [1055] ordinary, clauses in memorandum [360 ct .vtv/.] paid-ujj, agreement as to i.ssue pursuant to unfih^d contract [229], and note contracts for issue of, 29, 284 filing same, 179 et scq. issue of, in satisfaction of debenture not yet due, 230 placing, agreements for [158 et seq.'] commission for, 147 el xeq. pooling, agreement for [82, 87] preference, 285 et se/j., 358 ct seq. declaration as to rights and infringements restrained [1063] not necessarily preferential as to capital, 482 order restraining issue [1063] ultra vires issue, writ [1027]. ['SVr Pukfekkxck Sharks] premium, issued at, 384 presentation, order on du'ectors to pay for [1059], and notes provisional certificate [715] purchase by company of its own, order restraining [1065] clause in articles against [384] piu-chascd, cancellation of [663] purchaser's right where lien of company on, 396 qualification of dii-ectors [429, 430] secret gift, 430 recover}' of deposit, where application withdrawn, writ for [1020] rectification of register, interest on sums paid for shares allowed. Iii53 renunciation, letter of [689] repudiation, 31, 91. 102, 103 delay in, 103 eflfectual, 103 effect of forfeiture on right, 103 grounds for, 91 ineffectual, 103 winding-up, effect of, on claim, 103 rescission of contract to take, 91, 96 claims and defences [1020], and notes, [1036 et .sYy.], and notes evidence of misrepresentation and non-disclosure, 96 All references are to the pages. Payes hi brackets [327] refer to the Forms, 1406 INDEX. SBAHES—co/ituiiinl. rescission of contract to take — continued. examples of misrepresentation sufficient to j^ve right, 97 insufficient to give right, 98 grounds of defence to action, 100 none allowed in winding-up, 103 restriction on issue (private companies) [576, 577], and notes on right of transfer [578 ci seq.'\, and notes retention of, by vendor to company, condition as to [209] return of deposit, application for, 143 rights attached to, when alterable, 285, 358, 359 sale of, enforcement of lien, clause in articles [396] silver, creation of. by special Act, 1175 specific performance of contract to allot, 2S form of claim [1022], and note sub-division of, article as to [410] provisions of the Act, 1245 resolution for [658] subscribed for in memorandvim of association to be paid in cash, 289 tenders for [690] transfer, 387, 397 it scq. clauses in articles [398 ct acq.'], and notes in blank, 387 transferee, person improperly registered as, 28 transmission of registered, 405 — 407 " transmission clause " [406] trustee of, liable on, 387 unauthorized application for, liability on, 143 underwriting, 146 — 157 unissued, cancellation of [664], 970 vendors' defen-ed [212] vesting- order of, 398 warrants, 407, 408 articles as to [407, 408] who may take, 26 withdrawal of application, when effectual, 143 SHIP, admii-alty action by part-owner, 229 agreement for sale to company [228] priority of mortgages, 795 SHIP COMPANIES, object clauses [344, 345] SHIP INSURANCE, mutual object clause [314], and note SHIPS' HUSBANDS, appointment of a firm, clause in articles [493. 494] SHOW OF HANDS, annulled by demand of poll, 420 clauses in articles as to [423] general meetings, at [419], and notes voting by, 419, 420 SICK AND ACCIDENT FUND, schemes as to, 615 SIGNATURE, articles of association, to, 371 memorandum of association, of, 265 stamping, by, offectnal, 811 written or printed, as to notices [466], and note SILVER SHARES, Hpecial Act, 1175 INDKX. 1407 SINGLE ACCOUNT, ascertainment of profits by (clause in articles) [498] system of ascertaining- profits, 521 et seq. views of economists, 527 ct se/i. SINGLE SHIP COMPANY, advantag-es of, 345 name of, 345 object clauses [345], and note sale to, admiralty action by part-owner, 229 agreement as to [228] SINKING FUND, clauses in articles [450] debentures [896, 901] redemption by drawings [896 ct tcq.'] SOAP MANUFACTURERS, object clauses [356] SOLICITORS, clause in articles [453] employment of, effect of clause in articles, 375 SOLICITING CUSTOMERS, vendor to company, by, 207 SPECIAL ACTS, altering objects [1171], 1173 amalgamation under, 1156, 1167, 1172, 1174 amending memorandum of association and extending objects, 1171, 1173 application of company's funds in promoting bill, injunctions to restrain, 1168 application for, by companies under Act of 1 862 ..1167 et srq. arbitrator, general, appointed, 1180 capitalizing accumulated profits, 1176 capitalizing arrears of dividend, 1175 cases for, 1167 compromise of disjDute, 1179 creation of debenture stock, 1 176 creation of preference shares, 1177 debentures postponed, 1177 division of shares into preferred and ordinary, 1178 power to divide given, 1180 expenses of obtaining, how provided for, 1168 extension of objects, 1173 injunctions restraining application, as to, 1168 insui'ance tickets, 1 1 75 issue of shares at discount confirmed, 1176 leasing powers and power of sale granted, 1173 modifying rights of shareholders, 1176, 1177 negotiable warehouse warrants, power to issue, 1181 opposition in committee, 1170 paid-up shares in lieu of dividend, authority to issue, 1 175 payment of arrears of dividend deferred and special fund established, 1176 power to company to purchase its own shares, 1180 power to modify rights of shareholders, 1176 preliminary requirements of parliament, 1169 principal standing orders to be complied with, 1169 prior lien, debentures created, 1178 power to create given, 1180 procedure for obtaining, 1169 purchase by company of its owti shares allowed, 1180 A/l references are to the pages, raf/f.i in braekefs [327] refer to the Forms. 1408 i.NDEX. SPECIAL ACTS— continued. redemption of old by new debenture stock, 117S registered office, altering situation, 1179 re -incorporation as parliamentary company, 1168, 1178 relief from oblig'ation under leases, 1178 scheme of arrangement, 1179, 1181 silver shares, 1175 special resolution approving of bill to be passed, 1170 specimens of, 1171 sub-division (.f shares, 1177 substitution of shares, 1177 unification of shares and classes of shares, 1179 warehouse certificates, negotiable, 1181 " SPECIAL BUSINESS," definition in articles [418] SPECIAL CONDITIONS, sale to company, on [202 c( iieq.'\ SPECIAL PATENTS COMPANY, object clauses [332] SPECIAL RESOLUTION, alterations in regulations, 372, 377 c( ^eq., 649, 1197 amendment of, as to, 416, 701, 702 annexed to articles, to be, 380 articles may be altered by, 1197 copies for members, 380 copies as to supplying, 1198 declaration of chairman conclusive, 64-) definition of, 644, 1197 how to be passed, 64o nature of, 644, 649 new regulations, to adopt [650] notice of meeting for passing, 644 notice to registrar [707] passing of, not to be assumed, 412 2)roxies cannot vote on show of hands, 645 quorum, 645 reducing capital [660 — 662] registering, 1198 show of hands on, 645 two meetings convened by one notice (article) [415] SPECIALTY DEBT, instalments on shares, how maj' be made by articles [385], and notes members' liability for, under articles, 371, 373 SPECIE, distribution of assets in, on winding-up (articles) [468], and note jjower in memorandum [309], and note under Liquidation Act, 1808.. 4 69 SPECIFIC PERFORMANCE, agreements for service, 260 company may los(! right to enforce, by delay. 12 contract to allot debontui-es, 791, 792 contract to allot sliares, form of claims [1022], and note lontract to take shares, 2H, 1023 debentures, 791 STAMP DUTY, adhesive stamps and cancellation, 195 agrccmentH by company, 195, 196 allotiiKTit letter, 682 ajijiortionnicut on sale of businc-Hs [208], and note articleft of aHsociation, on. 371, 380 INUEX. 1409 STAMP DVTY-c:outu,>,aL capital, on rcayable on, 19.5, 196 proxy, on instrument of, 425 reconstruction agreement, 1141 scrip certificates of debentures, &c., to bearer, 852 share wan-ants and transfers thereof, 675, 717 statement of amount or increase of capital, 290 transfer of debentures or debenture stock, 812 transfer of shares or stock on sale, 399 shares registered in colonial register, 1273 trust deeds securing debentures or debenture stock. "53, 812 STANNARIES, jurisdiction, 1280 registi'ation of mortgages, 783 STATEMENT, assets and liabilities, annual, required for banking, insurance, and certain other concerns, 1197 STATEMENT OF CLAIM, action for calls [1032], and note may modify writ, 1017 sundiy forms [1032 ef seq.'], and notes STATEMENT OF DEFENCE [1033 ct sf-/.], and notes STATIONERS', &c. COMPANY, object- clauses [334] STATUTE OF FRAUDS, compliance with, as to, 193, 914, 915 contract for sale of debentures containing floating charge is withiu sect. 4.. 810 letter from principal to agent mentioning agreement with third party a sufficient memorandum, 194 minute of board, when sufficient memorandum of oral agreement. 194 STATUTE OF LIMITATIONS, breaches of trust by promoters and directors. 67, 428 deceit, in action of, 109 Directors' Liability Act, 1890. .119 right to dividends, 459 STATUTORY MEETING, provision as to, 414 STATUTORY OBLIGATION, breach may be criminal, 12 drawer of, 125 et seq. All references are to the pages. Taffts in brackets [327] refer to the Forms. 1410 INDEX. STAY OF WINDING-UP PROCEEDINGS, order on petition, form of [1013] petition for, and for resuming business [1010], and notes power of Court, 1010 STEEL. IRON, AND COAL COMPANY. object -clauses [343] STOCK, certificates [716, 853, 854] conversion of shares into, clause in articles [408] effect of, 1194 notice of, 1194 resolutions [657. 660] Table A. provisions, 1226 STOCK EXCHANGE (LONDON). borrowing powers, as to limitation of, 411 delivery of shares on certification, 404 directors' qualification, as to, 430 remuneration, as to, 433 dividends, no set-off against calls, 457 ixnclaimed, forfeiture, 459 fee on lost certificate, as to, 388 form of transfer, 399 lien on shares, 394 mortgaging uncalled capital, as to, 413 power to refuse to register transfer, as to, 400 purchase of company's own shares, 384 resolution of directors without board meeting, as to, 444 restriction on power to make calls. 389 power to refuse registration of transfers, 400 rules as to prospectuses, 144 rules as to quotation and settling days, 144, 145 transfer of shares, as to, 399, 400 authenticity, non-inquiry into, 403 STOCK-IN-TRADE, sale to company at valuation [201], and note SUB-CONTRACT, where sufficient to file under sect. 25 of Act of 1867. . 185 SUB-DIVISION, debentures, of [831] shares, of, article as to [410] can only be under Act of 1867. . 1245 resolutions as to [658 — 660] separate meetings for, after regulations altered to sanction, 650 SUBSCRIBER TO MEMORANDUM OF ASSOCIATION, agent, ho may subscribe by, 288 allotment unnecessary to bind him, 20 bound as such to take shares and pay in cash, 20, 289 director as a, 429 infant as a, 288 is a member, 288 liability unaffected by lapse of time, 20 married woman as a, 288 meetings of, 417 one share at least must be taken, 288 registration not necensary to bind him, 20 "SUBSTRATUM GONE," caseH on winding-uj) on account of, 27" fi Kcq. INDEX. 1411 SUCCESSION, perpetual, of corporation, 1, 5 SUMMARY, capital, .shares, list of members, &c., llt>o SUMMONS, directions, 1031 writs of, forms [831 — 842], and nole= SUPERANNUATION FUNDS, constitution of, 61') trust deed constituting [033] SUPERVISION ORDER, winding-up under, 1212 SURETY, construction and operatiou of contract, 843 charge by, in favour of bank [967] deed of indemnity to, from principal (a company) [067] directors becoming so for company, indemnity to tnem [967] discharge of, what will effect, 964 rights as between principal and debtor, 964 rights as regards dividends from estate of deceased or bankrupt debtor. 965 rules for protection, 962 securities, rights as regai'ds, 964 sued by creditor, judgment against principal debtor not evidence, 965 SURGICAL INSTRUMENT MAKERS' COMPANIES, object clauses [346] SURPLUS ASSETS, distribution amongst different classes (clause in articles) [500, 501], and note distribution in specie in winding-uiJ (articles) [468], and note imder Liquidation Act, 1868. .469 distribution in winding-up (articles) [467 et «ey.], and notes sales or arrangements under s. 161 of Act of 1862 (articles) [469, 470]. and notes winding-up, distribution otherwise than in accordance with legal rights (articles) [468 — 470], and notes meaning of expression, 468 SURRENDER OF LEASE, liberty for [1106] SURRENDER OF SHARES, directors' power to accept, 447 exchange, by way of, 447 purchase, when equivalent to, 448 scheme for, general invalidity of, 448 SURVIVORSHIP, joint holder of shares, amongst, 405, 406 article as to [405] body corporate and another [879], and note SYNDICATES, advantages of incorporated, 81 agreement, form of, constituting [79 — 81] examples of cases where desirable to form, 80, 81 limited by guarantee, forms of articles [474] mode of formation, 81 AU references are to the pages. Tagn in hmchet* [327] refW tjal8ro. 1898. Frier Vos. cloth. Jervis on the Office and Duties of Coroners. — AVitli Forms :iiid I'ncedciits. Sixth Edilioii. By R. E. MELSHEIMER, Barrister-at-Law. I'„sl. Sr„. LSIIS. Frirc lO.v. iid. cloth. Strahan's General View of the Law of Property. — Second Kiiitum. By J. A. STRAIIAN, assisted by J. SINCLAIR BAXTER, Barristers-at- Luw. Demij 8co. 1S97. Frice lis. Gd. c/oth. Smith's Manual of Common Law. — For Practitioners and students. ('(jiii]iiisiMg ihe Finid,niiciilal I'linciples, with useful Practical Rules and Decisions. By JOSIAII W. SMITH, B.C.L., Q.C. Eleventh Edition. By C. SPURLIXC;, Barri.ster-at-Law. J)e>ni/ 8vo. 1898. Frice lbs. cloth. Pollock's Law of Torts : a Treatise on the Principles of ()lilig;itioiis Mrisiiig t'rciiM (Hvil Wrongs in the Common Law. Eo/trth Edition. By Sui KKKDKKICK POLLOCK, Bart., Barrister-at-Law, Author of "Principles of Contract," ice. Jhini/ 8vo. 1897. J'rice 2.')s. cloth. 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