mm UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY B. MOFFAT BARRISTER, ETC, OSHAWA, ONT. HANDBOOK ON COMPANIES WITH Appendix of Forms FOR SHAREHOLDERS, DIRECTORS, BONDHOLDERS, CORPORA- TION OFFICIALS, BROKERS, BOND DEALERS, SOLICITORS, AUTHORIZED TRUS- TEES AND LIQUIDATORS. BY WILLIAM KASPAR FRASER OF THE TORONTO BAR AUTHOR OF CANADIAN COMPANY FORMS AND PRECEDENTS ; JOINT AUTHOR o COMPANY LAW OF CANADA ASSISTED BY HUGH WILLIAMSON MACDONNELL OF THE TORONTO BAR TORONTO : THE CARSWBLL COMPANY, LIMITED 1922 COPYRIGHT, CANADA, 1922, BY WILLIAM KASPAR FBASEB. PREFACE The companies incorporated in Canada in 1921 alone represent a total share capital exceeding $850,000,000. When it is considered that most of the larger corporations secure a portion of the capital they require 'by public issues of bonds or other securities, some idea can be formed of the vast amount of money invested by the public in com- mercial corporations. While persons without legal training cannot hope to master all the details of the law relating to com- panies in the different jurisdictions in Canada, it is important that those who invest their money in the shares or bonds of companies should have at least a general acquaintance with their rights and liabili- ties. Even a slight knowledge may put an investor on his guard and save him from serious loss and disappointment. It is important that directors and corporation officials should be familiar with the principal legal provisions relating to their own duties and liabilities and those of their companies. They will then be in a position to know when they ought to consult their legal advisers, whose services this book is in no wise intended to supplant. While it is primarily intended for directors, shareholders and bondholders, it is hoped that this IV PREFACE. book will also be useful to lawyers and all who are interested in company law, including brokers, bond- dealers and authorized trustees. Chapters I to XX, XXIV and the Appendix of Forms are the work of Mr. Fraser. Chapters XXI to XXIII are the work of Mr. Macdonnell, who has also compiled the Tables of Fees and the Index. In order to avoid technicalities, the authors have not quoted decided cases which those who are interested in pursuing the subject further may find in the standard text-books on Company Law. The authors have endeavoured to incorporate all statu- tory amendments up to the end of the 1922 sessions of the various legislatures. The references to "Company Law" and "Forms" are respectively to the second edition of Masten and Fraser on Company Law and Canadian Company Forms and Precedents by W. K. Fraser. 120 Bay Street, Toronto. W. K. F. August 1, 1922. H. W. MACD. CONTENTS Chapter Page I. Incorporation 1-19 Nature and characteristics of companies 1 Incorporation 2 Where to incorporate 3 Procedure for obtaining incorporation 4 Dominion 4 Quebec. Manitoba. New Brunswick. Ontario 9 Departmental instructions. Nova Scotia 14 Saskatchewan. Alberta. British Columbia 14 The memorandum of association 14 The articles of association 17 II. Proceedings subsequent to Incorporation 20-43 Organization I. Companies incorporated by letters patent . . 20 (1) Dominion; Manitoba, Quebec, New Brunswick 20 (2) Ontario 25 II. Companies incorporated by memorandum and articles of association 26 Vendors' agreements and further matters inciden- tal to organization 27 j Restrictions on allotment and commencement of business. Restrictions on allotment 29 I. Quebec 29 Manitoba New Brunswick Nova Scotia II. Dominion 29 III. Ontario 30 Saskatchewan Alberta IV. British Columbia 33 Restrictions on commencement of business. Dominion 34 Quebec Manitoba VI CONTENTS. ' Chapter Page II. Proceedings, etc. Continued. Companies with shares of no par value. Dominion; Quebec; New Brunswick.. 35 Ontario 35 Saskatchewan 38 Alberta 39 British Columbia 39 III. The Prospectus 44-68 Statutory requirements as to filing a prospectus. Quebec 46 Manitoba 46 New Brunswick 46 Nova Scotia 47 Dominion ... 47 Ontario 47 Saskatchewan 48 Alberta 48 British Columbia 49 Statutory requirements as to form and contents ... 49 Dominion. Ontario. Nova Scotia. Saskatchewan. Alberta. British Columbia. Remedies of subscriber when prospectus untruth- ful or defective 54 Common law remedies 54 Statutory remedies 55 New Brunswick. Dominion. Ontario. Nova Scotia. Saskatchewan. Alberta. British Columbia. Remedy of subscriber to whom no prospectus has been delivered 59 Ontario 59 Alberta 59 British Columbia 60 Prevention of fraudulent statements by companies 61 Precautions to be observed by prospective pur- chasers or subscribers 61 New companies 61 Established companies 67 IV. Promoters Commissions Underwriting 67-75 Promoters 69 Commissions and underwriting 70 Dominion; New Brunswick; Quebec 71 CONTENTS. Vll Chapter Page IV. Promoters, etc. Continued. Ontario 71 Manitoba 72 Nova Scotia 73 Saskatchewan 73 Alberta 73 British Columbia 74 Precautions to be observed 74 V. Private Companies 76-81 Dominion 76 Ontario 76 British Columbia 76 Procedure for incorporation 77 Conversion of private company into public com- pany 78 Privileges, exemptions and obligations of private companies 79 Close corporation 81 New Brunswick. VI. Share Capital 82-98 Preference shares 83 Creation of preference shares 85 (a) Companies incorporated by letters patent 85 (b) Companies incorporated by registration. 87 Modification of preference shareholders' rights 87 Redemption and re-purchase of preference shares 90 Preference share certificates 92 Shares of no nominal or par value 93 Dominion. Quebec. New Brunswick. VII. Shares 89-127 Acquisition of shares 99 " Allotment of shares 101 Return of allotments 103 Ontario ; Saskatchewan ; Alberta 103 British Columbia 104 Share certificates 104 Loss, destruction or defacement of share certifi- cates 106 Share warrants 106 Liability of shareholders 107 Issue of shares for a consideration other than cash. 108 Issue of shares at a discount 110 Special statutory provisions Ill Calls 121 Enforcement of calls 123 Forfeiture; action ; sale 123 Purchase by company of its own shares 125 Surrender of shares . 126 Vlll CONTENTS. Chapter Page VIII. Transfer of Shares 128-144 Restrictions on transfers 128 Loans on security of shares 130 Transfer practice 131 Tax on transfers of shares and securities 134 (a) All companies 134 (b) Ontario 136 (c) Quebec 138 Statutory provisions relating to transfers of shares. Dominion 139 Ontario 140 Quebec 141 Manitoba 142 New Brunswick 142 Nova Scotia 143 Saskatchewan. Alberta. British Columbia. IX. Directors 145-158 Number, election, vacancies, failure to elect 145 Qualification 148 Disqualification, retirement, removal 149 Remuneration 150 Proceedings 152 Powers of directors 154 Position and liabilities of directors 156 X. Meetings 159-181 First Statutory Meeting: Ontario; Saskatchewan; Alberta; British Col- umbia 159 Nova Scotia 162 Annual Meeting: Companies incorporated by letters patent 162 Special General Meetings: Companies incorporated by letters patent 164 Ordinary General Meetings: Companies incorporated by registration 165 Extraordinary General Meetings: Companies incorporated by registration 167 Notice of meetings 167 Procedure at meetings 169 Proxies 173 Adjournment of meetings 175 Special resolutions and extraordinary resolutions. 177 By-laws requiring confirmation by shareholders.. 179 XI. Borrowing 182-199 Statutory provisions regarding the borrowing of money: Dominion; Ontario; Quebec; Manitoba; New Brunswick . . 182 CONTENTS. IX Chapter Page XI. Borrowing. Continued. Nova Scotia; Saskatchewan, Alberta; British Columbia 184 Specially limited mining companies: Alberta; British Columbia 185 Limitations on the power to borrow and precau- tions to be observed by lenders 185 Bonds, debentures and debenture stock 188 Registration of mortgages and charges 192 XII. Contracts and Officers 200-210 Contracts 200 Officers : Manager, general manager or managing direc- tor 205 President, vice-president 206 Secretary, treasurer 206 Auditors 208 XIII. Head Office 211-216 Summary of statutory provisions . . . . 212 Change of head office 214 XIV. Books and corporate seal 217-225 XV. Dividends 226-235 Procedure 228 Mode of payment Cash dividends Stock divi- dends 231 Reserve fund 232 Dominion income tax 233 Distribution of assets in specie 234 Special statutory provisions: Ontario; Quebec. XVI. Supplementary Letters Patent and Alteration of Memorandum of Association 236-251 Supplementary letters patent: j Procedure for obtaining 236 Cases when supplementary letters patent necessary : Change of name 237 Amendment of letters patent 237 Sub-division of shares 238 Consolidation of shares 239 Increase of capital 239 Decrease of capital 240 Other purposes 243 Petition and documents required 244 Alteration of memorandum of association 247 Change of name 247 Change of registered office 247 Alteration of objects 247 Increase of capital 249 Sub-division of shares . 250 X CONTENTS. Chapter Page XVI. Supplementary Letters Patent, etc. Continued. Consolidation of shares 250 Reduction of capital 251 XVII. Change of name 252-256 XVIII. Sale of assets 257-264 Reconstruction and reorganization 259 Amalgamation 262 XIX. Termination or impairment of corporate existence for reasons other than insolvency 265-275 Surrender of Charter 265 Forfeiture of Letters Patent 268 Forfeiture of certificate of incorporation 269 Defunct companies 269 Removal from register of companies in default or defunct 270 Carrying on business with less than minimum number of shareholders 274 Appointment of inspectors 275 XX. Blue Sky Laws 276-286 Manitoba 276 Saskatchewan. Alberta. Quebec (Mining Companies Act) 283 British Columbia. Extra-provincial companies 284 Mining companies 285 XXI. Extra-provincial Corporations 287-297 Statutory requirements 287 Application for license or registration 288 Holding of land by extra-provincial companies. . . 294 Ontario. Manitoba. Saskatchewan. Alberta. British Columbia. Quebec; New Brunswick; Nova Scotia, Prince Edward Island. XXII. Taxation 298-309 Dominion Income Tax 298 Sales Tax 303 Provincial Taxation on companies: Prince Edward Island 305 Nova Scotia 305 New Brunswick 305 Quebec 306 Ontario 307 Manitoba 308 Saskatchewan 308 Alberta 308 British Columbia 309 CONTENTS. XI Chapter Page XXIII. Returns and documents to be filed 310-333 Dominion 310 Ontario 311 Quebec 314 Manitoba 315 Nova Scotia 317 New Brunswick 319 Saskatchewan 320 Alberta 323 British Columbia 326 XXIV. Winding-up and Insolvency 334-353 Winding-up under provincial legislation 334 The Bankruptcy Act 335 The Dominion Winding-up Act 344 Table of Fees 355-374 Appendix of Forms 375-395 INDEX OF FORMS TAGS Acceptance of draft 204 Agreement for sale of business to a company 376 Allotment of shares letter of 383 resolution of directors 384 return of allotments 384 Application for shares 383 Auditor's certificate 209 Banking and signing officers' resolution 393 Borrowing of money by-law for 391 resolution for 393 Call- notice of 386 resolution making 386 Change of head office, by-law for 394 Commission, Ontario charter provision authorizing payment of, on sale of or subscription for shares 72 Consent to act as director 375 Contract by directors to take qualifying shares 375, 376 Contract under seal, form of execution 202 Contract not under seal, form of execution 204 Dividend, resolution declaring 229 Draft 204 Forfeiture of shares notice of 386 resolution for 387 Increase of capital notice of 393 resolution for 249 Notice of annual meeting 388 Notice of change in registered office 216 Notice of dividend 229 Notice of ordinary general meeting 389 Notice of situation of principal office 23 Notice of situation of registered office 376 Notice of special general meeting 168, 169, 389 Notice, unconditional, of two meetings to pass and confirm special resolution 390 Preference shares, by-law creating 378 Promissory note 205 Proxy 390, 391 Receipt for money paid on application for shares 383 Restriction on transfer of shares, charter provision 77 Share certificates common shares 385 no par shares 382 preference shares (letters patent) 381 preference shares (registration) 382 Transfer of shares common form 388 endorsement on certificate 387 NOTE Each province in Canada has a Companies Act of its own, under which companies may be incorporated, and there is also a Dominion Companies Act, under which companies may be formed with power to carry on business throughout the Dominion. A company is gov- erned by the provisions of the Act under which it is incorporated. Unless otherwise specified, the references to the legislation in the various jurisdictions, eg. : "Dominion (s.s. 5-13) ; Ontario (s.s. 3-8)," are to the sections of the Companies Act of the jurisdiction indicated. Pamphlet copies of the Dominion Act can be got from the Department of the Secretary of State at Ottawa ; and copies of the various Pro- vincial Companies Acts from the Provincial Secretary or Registrar of Companies in the Provincial capital. HANDBOOK ON COMPANIES CHAPTER I. INCORPORATION. Nature and characteristics of companies. In this work only one of the different classes of incorporated bodies will be dealt with, viz., limited companies with a capital divided into shares, incor- porated under the Companies Act of the Dominion or of one of the provinces. These constitute by far the most numerous and important class of com- panies carrying on commercial undertakings in Canada. Such companies are described as "com- panies limited by shares " or ' ' companies with share capital" or "joint stock companies," and are to be distinguished from companies without share capital, corporations, companies limited by guarantee and unlimited companies. Accordingly, wherever the word "company" is used hereafter it is intended to refer to an incorporated body, with a capital divided into shares, which are held by the company's mem- bers or shareholders whose liability is limited by the amount of the capital for which they have subscribed. A company, unlike a partnership, is an entity leg- ally separate and distinct from its individual mem- bers or shareholders. The shareholder may transfer his shares to others under certain prescribed condi- tions, thereby causing himself to cease to be, and his transferee to become, a shareholder. The amount of share capital which the shareholder agrees to take is H.C. 1 2 HANDBOOK OX COMPANIES. the measure of his liability to the company and its creditors. This privilege of limited liability is one of the outstanding advantages conferred by incor- poration. Among other advantages of incorpora- tion is the control which the shareholders can exer- cise over those who manage the company's under- taking, viz., the directors. The latter are special agents and have only such powers as are given them by the governing statute and the regulations of the company. Other characteristic advantages enjoyed by companies are the facilities they possess for obtain- ing capital by the issue of bonds and preference shares and for effecting combinations and amalga- mations. The fact that the company possesses an existence separate from and independent of its members enables it to contract with the latter. The death, bankruptcy or lunacy of a member does not interfere with the continued existence of the com- pany as it does in the case of a partnership. Shares or securities in a prosperous company may be an asset of commercial value which can be used in any other enterprise in which the owner is engaged. Among the external characteristics of a company are the following : It has a name of which the word "limited" forms a part; it has a corporate seal on which the name is engraved; it has a charter or memorandum of association in which among other things the name, objects, capital and number of shares into which it is divided are set forth; it has regulations consisting of by-laws or articles of association. Incorporation. Apart from incorporation by special legislative Act, a mode which is not here considered, incorpora- INCORPORATION. 6 tion is obtained in Canada by following the pro- cedure required by the particular Companies Act under which incorporation is sought and by paying the required departmental fee. Each province has a Companies Act of its own under which companies may be incorporated and there is also a Dominion Companies Act, under which companies may be incorporated with power to carry on business throughout the Dominion. A province, on the other hand, can only confer, on companies incorporated by it, actual powers and rights exercisable within the province; if the company carries on business in another province it must get the right to do so from the latter. This it can do by taking out a license or becoming registered and paying the license or regis- tration fee required. Where to incorporate. If the company's activities are to be confined to one province, it is usually advisable and cheaper to obtain incorporation in that province. If the com- pany proposes to carry on business throughout the Dominion or in several provinces or in* foreign countries, incorporation under the Dominion Act is advisable. If the company's business is primarily provincial but its operations may extend further, the jurisdiction under which to incorporate is a matter of choice, largely to be determined by a computation of the relative incorporation and license fees and taxation. Tables of incorporation and license fees are given at p. 355. It has been held that a Dominion company need not take out a license as a condition precedent to doing business in Ontario and Mani- toba, and the same is probably true under similar legislation in other provinces. In Quebec and 4 HANDBOOK ON COMPANIES. Alberta a Dominion company is not required to take out a license to do business. In Saskatchewan a Dominion company is required to become registered but need not take out a license. If, however, a Do- minion company proposes to hold land in any pro- vince it must 'comply with the local requirements, if any, as to obtaining a license in mortmain. Procedure for obtaining incorporation. Two modes of incorporation are in vogue in Canada, viz., by letters patent, or by certificate of incorporation issued by the Registrar of Companies upon the filing of a memorandum and articles of association. In the following jurisdictions incor- poration takes place by letters patent granting a charter of incorporation: Dominion (ss. 5-13). Ontario (ss. 3-8; 17-22). Quebec (arts. 5961-5967a; 6748). Manitoba (ss. 4-16). New Brunswick (ss. 5-14). The application for letters patent must be by formal petition executed by at least five (Quebec and New Brunswick three) petitioners, each of the full age of twenty-one years. Forms of petition and accompanying documents and pamphlets setting out the procedure are obtainable gratis from the Depart- ment of the Secretary of State of Canada, at Ottawa, for Dominion companies, or from the Department of the Provincial Secretary in the provincial capital for provincial companies. For statutory forms see Forms, pp. 630 ff. The following is an outline of the requirements under the Dominion Act. The requirements in the INCORPORATION. 5 different provinces are similar, with some slight modifications. An application for incorporation must be pre- pared, signed and filed with the department. The application must set out: (a) The proposed corporate name of the com- pany, which shall not be that of any other known company incorporated or unincorporated, or any name liable to be confounded therewith, or otherwise, on public grounds, objectionable, s. 7 (a). It is always advisable before forwarding the application to make inquiry from the department whether the proposed name is acceptable. It is also advisable that the name be as short as possible. "If the name of the proposed company is that of an existing partnership, there must be a written consent to the use of the name, signed by all the members of the partnership, duly verified, and accompanied by an affidavit that the signatories are all the members of the partnership. If the proposed name contains the names of individuals who are not applicants for incorporation, written consents, verified by affidavits of execution, of all such persons should be filed." (Departmental regulations.) If the proposed name is that of an incorporated company, a by-law of the directors of such company authorizing the applica- tion and undertaking that no further business opera- tions will be carried on by the company, and that the letters patent of the existing company will be sur- rendered forthwith, must be filed. If the corporation is defunct the affidavit should show it. Certain names will not be granted, e.g., names including the word "Imperial," or other titles signi- fying royal or government support or patronage, such as "Crown," "King's," etc. 6 HANDBOOK ON COMPANIES. (b) The objects for which the company is to be incorporated : Great care and the services of a competent soli- citor are requisite in drafting the objects of the company, as these can only be changed subsequently by supplementary letters patent. In addition to specific objects, experience has shewn that a number of general clauses and powers should be inserted. See further Company Law, p. 36, and, for examples, Forms, pp. 338 ff. (c) The place within Canada where the head office of the company is to be situate. If the head office is in a township or district, the post office address should be given. (d) The proposed amount of the capital of the company, the number of shares, and the amount of each share. If it is desired that the provisions relating to the issue of preference shares should appear in the let- ters patent, they ought to be set out in the petition. (See further p. 85) : Shares of no nominal or par value : The Acts of the Dominion, New Brunswick and Quebec provide for shares without nominal or par value. Such shares may be issued for such con- sideration as the letters patent prescribe, or as may be fixed by the directors pursuant to authority con- ferred in the letters patent, or if the letters patent do not so provide, then by the consent of two-thirds of each class of shares then outstanding given at a meeting called for that purpose in such manner as is prescribed by the by-laws. Where shares of no nominal or par value are authorized, the letters patent must set out the amount of capital with which the company will carry on business ; this necessitates stating it in the petition. INCORPORATION. 7 The amount (which must not be less than $500) is to be determined as follows : If there are no preferred shares with a preference as to principal, it is a sum equivalent to $5 or some multiple of $5 for every share authorized to be issued. If pre- ferred shares with a preference as to principal are provided for, the nominal amount of such preferred shares must be added. (f) The names (in full, not initials), address and calling of each of the applicants; the names of the applicants, not less than three Dominion and New Brunswick (and not more than fifteen) who are to be the provisional directors of the company. The applicants must be of the full age of twenty-one. (g) The number of shares taken by each applicant. It is usual for each applicant to subscribe for one share and that no payment should be made thereon before incorporation. The petition must be signed by each of the appli- cants and the facts therein stated verified by affidavit of one of the applicants. Signatures by attorney (if any) must be made under specific power of attor- ney duly executed and verified. The original power of attorney or an authenticated notarial copy thereof must be produced with the petition. The application must be accompanied by a memorandum of agree- ment and stock book in duplicate under seal. For the requirements in Manitoba see section 7 of the Mani- toba Act. Signatures to the memorandum of agree- ment and stock book and the petition must be verified by statutory declaration or affidavit of the subscrib- ing witness, who must not be one of the applicants. If the application asks for special provisions in the let- ters patent, e.g., regarding preference shares, and the 8 HANDBOOK ON COMPANIES. signatories of the memorandum of agreement are more numerous than the signatories of the petition, the memorandum of agreement should contain the special provisions asked for in the petition. If incor- poration as a "private" company is desired (see p. 76, below) a clause should be added to the applica- tion stating that incorporation as a private company is sought and setting out the restriction on the transferability of shares which it is desired to have incorporated in the letters patent. The restrictions should also be set out in the memorandum of agree- ment and stock book. Fees. The application for incorporation must be accom- panied by the proper fee according to the tariff. Tariffs, which are based on the authorized capital are given below at pp. 355 ff. If the application is in order, after it has been approved by the department, letters patent are issued incorporating the company as of the date of the letters patent. It is wise care- fully to compare the terms of the letters patent with the petition. Quebec mining companies. Article 6748 (1) of the Quebec Mining Companies Act provides in part as follows: , If applied for in the petition for the incorporation of the company or for supplementary letters patent, it shall be stated in the letters patent that the shareholders incur no personal responsi- bility in excess of the amount of the price paid or agreed to be paid to the company for its shares. Manitoba mining companies. Section 4 of the Mining Companies Act, R.S.M., c. 129, provides that, where application is made INCORPORATION. 9 under the Act for incorporation of any company for mining purposes, the letters patent may, if the peti- tion of the applicants so requires, contain a provision that no liability beyond the amount actually paid upon stock in such company by the subscribers thereto or holders thereof shall attach to such sub- scriber or holder. Ontario. The procedure is fully outlined in the depart- mental instructions which are set out below. If it is desired to hold meetings of shareholders, directors and executive committee of directors (if any) out of Ontario; fix the quorum of directors at less than a majority of the board; pay a commission on the issue of shares to the public; or issue share warrants, these matters must be covered in the peti- tion (see Forms p. 359). Where incorporation as a private company is desired, the procedure above indicated as to Dominion companies may be fol- lowed. If the applicants desire that Part XI of the Act be made applicable to a mining company the necessary words to that effect must be added to the prayer of the petition. Part XI permits the issue of shares at a discount (see p. 112, below). The objects of such a company, i.e., a company "without personal liability," will be expressed in set terms, a copy of which will be supplied by the department on request. Departmental instructions. INCORPORATION OP COMPANIES WITH SHARE CAPITAL. 1. The application for Letters Patent must be by a formal petition, duly executed, with at least two signatures on the page containing the prayer. 2. There must be at least FIVE PETITIONERS. 10 HANDBOOK ON COMPANIES. 3. There must be a memorandum of agreement, in duplicate, duly executed under seal by at least, the five petitioners with, at least, two signatures on the page or sheet containing the under- taking. An agreement made up of two sheets of paper, the one settfng forth the undertaking by itself, and the other carrying all the signatures by themselves, will not be accepted. Such agreement should conform, in its essential features, to the form contained in the schedule to The Ontario Companies Act. 4. The petition, which may be submitted at any time without Gazette notice, must state: (a) The proposed name of the company. Such proposed name must not contain the words " Loan," " Mortgage," " Trust," " Investment " or " Guar- antee " in combination or connection with any of the words " Corporation," " Company," " Association " or " Society " or in combination or connection with any similar collective term, nor the word " Imperial " or other title signifying Royal or Government support or patronage, such as " Crown," " King's," " Queen's," etc., unless there is some real Imperial Crown connection which gives a well-founded claim to recognition, or unless it can be shown on clear evidence that there is a long and ftona fide user, and that the name is so used as not to convey any suggestion of Government support or patron- age; It is the policy of the Department not, to grant names of which the words " Merger," " Amalgamated," " Exten- sion," etc., form a part, unless sufficient evidence is filed to show that the undertaking of the proposed company is a bona fide merger, amalgamation or extension or as the case may be; Evidence must be filed that the name is not objection- able upon any public ground and is not that of any known corporation or association incorporated or unin- corporated, or of any partnership or of any individual, or any name under which any known business is being carried ,on, or so nearly resembling the same as to be calculated to deceive; If the proposed corporate name is that of an existing firm or partnership whose undertaking is to be taken over by the Company a consent to the use of the name, signed by all the members of the firm or partnership, with the execution thereof verified by the affidavit or statutory declaration of a subscribing witness, and an INCORPORATION. 11 affidavit or declaration that the signatories comprise all the members of the firm or partnership, should be filed; If the proposed corporate name is that of an incorpor- ated company, a by-law of the directors of such company authorizing the application and undertaking that no further business operations will be carried on by the company and that the Letters Patent of the existing company will be surrendered forthwith, must be filed; If the name of the proposed company includes that of an individual, a verified consent of that individual should accompany the application. (&) The objects for which the company is to be incorpor- ated: Sections 23 and 24 of The Ontario Companies Act pro- vide wide incidental and ancillary powers. These have been drawn without change from Palmer's Precedents and have been made as wide as possible for the purpose of avoiding repeating them in the Letters Patent; such clauses, therefore, should not be repeated in an appli- cation for Letters Patent, nor should variations of them be inserted. There is, however, no objection to other clauses which are not provided and the insertion of which may be required; (c) The place within Ontario where the head office of the company is to be situate; If the head office of the company is to be situate in a Township or District the Post Office address of company should also be given; (d) The amount of the capital of the company, the number of shares and the amount of each share; (e) If it is desired to create preference shares by Letters Patent, the complete terms in regard to the preference issue should be inserted in the petition and also in the Memorandum of Agreement and Stock Book; (/) The name in full, the place of residence and the calling of each of the applicants; The word " Clerk " must not be used except to describe a clerk in Holy Orders, the Department, of the Honour- able the Attorney-General having ruled that the word may be used for this purpose only; (g) The names of the applicants, not less than three, who are to be the provisional directors of the company; (7i) The number of shares for which each applicant has subscribed in the Memorandum of Agreement and Stock Book; (i) That no public or private interest will be prejudically affected by the incorporation, if such be the fact. 12' HANDBOOK ON COMPANIES. 5. If the applicants desire the insertion of special clauses in the Letters Patent, such special clauses must be set out in the petition. 6. Special conditions regarding preference shares or other- wise intended to have a bearing upon the shares of the company, or the manner in which they, or any portion thereof, shall or may be subscribed for, must be inserted in the petition and in the Memorandum of Agreement and Stock Book, as material parts thereof. 7. If the applicants desire that the company shall be incor- porated as a Private Company, the conditions governing the restriction of the transfer of shares must be inserted in the peti- tion and in the Memorandum of Agreement and Stock Book. It will, however, be sufficient if the Memorandum of Agreement and Stock Book indicates that the company is to be incorporated as a Private Company by inserting the word " Private " before the word " company " without setting out the special conditions therein. 8. The facts in the petition contained must be verified by affidavit to be made by one of the applicants. Such affidavit should also state that each petitioner signing the petition is of the full age of twenty-one. 9. Signatures to the Memorandum of Agreement and Stock Books and petition must be verified by statutory declaration or affidavit of subscribing witness or witnesses. 10. Signatures should be the ordinary business signatures of the applicants and must be witnessed and proved by persons who are not petitioners or directly interested in the formation of the company. 11. Signatures by attorney must be made under a specific and general power, duly executed and verified. 12. Application forms can be obtained upon application to the Department of the Honourable the Provincial Secretary. MINING COMPANIES. (a) If the petitioners for a mining company desire that Part XI of The Ontario Companies Act be made applicable, the necessary words to that effect must be added to the prayer of their petition; (6) The objects of a mining company to which Part XI of the Act is made applicable will be expressed in set terms, a copy of which will be supplied on request. CO-OPERATIVE CORPORATIONS. Where incorporation is desired under the provisions of Part XI A of The Ontario Companies Act, the word " Co-operative " INCORPORATION. 13 must form part of the name. In addition to the regular material for incorporation, it will be necessary, in order to show that the corporation is co-operative within the application of the said Part, to submit the proposed general by-laws of the corporation, which must conform to the provisions of the said Part. PUBLIC UTILITY COMPANIES. Applications for incorporation to operate or control any public utility or municipal franchise, etc., etc., within Part XII. of The Ontario Companies Act are required to file, in addition to the ordinary material, the following: (a) Evidence that the proposed capital is sufficient to carry out the objects for which the company is to be incor- porated; that such capital has been subscribed or under- written and that the applicants are likely to command public trust and confidence in the undertaking; Such evidence should be in the form of an affidavit or statutory declaration; (6) A detailed description of the plant, works and intended operations of the company, and an estimate of their cost; This description should be duly verified and in the case of telephone companies should state the number of instruments and poles, miles of wire, etc.; A rough sketch showing the proposed operation of the company should also be submitted; (c) A copy of the by-laws of every municipality in which the company proposes to operate, duly certified by the Clerk of the Municipality under the corporate seal; (d) If the undertaking is to be carried on, or in so far as it is to be carried on, in territory without municipal organi- zation, a report from the Minister of Lands, Forests and Mines, and an order of The Ontario Railway and Muni- cipal Board approving of the undertaking; (e) If it is proposed that the company shall acquire any plant, works, undertaking, good-will, contract or other property or assets, a detailed statement of the nature and value thereof; This statement should be duly verified. TELEPHONE COMPANIES. These Companies must also submit evidence that the muni- cipal by-laws have been approved by The Ontario Rail- way and Municipal Board. Powers of a telephone company are expressed in set terms, a copy of which will be supplied on request. 14 HANDBOOK ON COMPANIES. It is suggested that the par value of the shares of a telephone company be fixed at a small amount, i.e., $5 or $10, as The Ontario Telephone Act reads that every mem- ber or partner of a company, association or partnership which is afterwards incorporated under The Ontario Com- panies Act shall have allotted to him shares in the new corporation to the value of his share or interest in the company, association or partnership at the date upon which the charter of incorporation is granted. If the interests of the different members of the association vary it might not be possible to observe this provision if the par value is fixed at a large amount. Nova Scotia (ss. 8-12; 14; 18-26; 82). Saskatchewan (ss. 5-10; 15-22; 88-89). Alberta (ss. 5-20; 60). British Columbia (ss. 17 ff. 65; 84). Any three or more persons (British Columbia any five or more persons, except in the case of a private company see p. 77 when two persons will suffice) associated for any lawful purpose to which the authority of the legislature extends, with certain specified exceptions, may form a company, by sub- scribing their names to a memorandum of associa- tion and otherwise complying with the requirements of the Act in respect of registration. The company comes into existence on the issuance by the Registrar of Joint Stock Companies of a certificate stating the name of the company, the date of incorporation and the fact that the company is limited. In British Columbia the certificate states further particulars. The certificate is conclusive evidence that the statutory requirements with re- spect to registration have been complied with. The procedure for obtaining incorporation is as follows : The memorandum of association. Blank forms of memorandum of association, which are substantially the same for each province, INCORPORATION. 15 are obtainable from the Registrar in the provincial capital. For statutory forms see Forms pp. 667 ff. The memorandum must state the following: 1. The name of the proposed company, with the addition of the word "Limited" as the last word of such name. All the above Acts contain a provision with slight variations forbidding the use of the name of an exist- ing company or so nearly resembling such name as to be calculated to deceive, except the name of a company in the course of being dissolved which testi- fies its consent in such manner as the Registrar requires. It is always advisable to make a prelim- inary enquiry from the Registrar whether the pro- posed name is available, and unobjectionable. 2. The place where the registered office of the company is proposed to be situated. The registered office must be in the province of incorporation. This requirement has been eliminated from the Nova Scotia Act. 3. The objects of the company. Great care is requisite in drafting the objects of the company, as these can only be changed with the sanction of the Court. In addition to the specific objects, experience has shown that a number of general clauses and powers should be inserted. See further Company Law, p. 36, and for examples Forms pp. 338 ff. 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. The particulars required as to capital are, first, the authorized capital determined by those respon- 16 HANDBOOK ON COMPANIES. sible for the formation of the company to be requisite, e.g., $100,000; secondly, the number of shares into which the authorized share capital is divided, e.g., 1,000 shares; thirdly, the nominal or par value of the shares, e.g., $100 each. The usual par value of shares is $100, $10, $5, or $1, depending on the nature of the company; the lower par values being common in the case of, e.g., mining and oil companies. The shares may be divided into several classes, e.g., preference and common shares, but such division may be left to be dealt with in the articles of association (see further on preference shares pp. 83 if., below). (In Saskatchewan. 6. That the company does or does not intend to invite the public to subscribe for its shares or debentures.) The memorandum of association must be signed by each subscriber, in the presence of a witness who must attest the signature. The subscriber must add his address and occupation, and each subscriber must take at least one share and write opposite his name the number of shares he takes. Shares sub- scribed for in the memorandum are payable in cash unless some other method of payment is subsequently agreed upon. Any person not under disability, e.g., not an infant, may be a subscriber. The memor- andum need not be printed, though it is advisable that this be done where articles are filed. In British Columbia notice of the situation of the registered office of the company must be delivered to the Registrar with the memorandum (s. 81 (2) ; Form 9 in the second schedule to the Act). The memorandum of association, when signed, must be delivered to the Eegistrar of Joint Stock Companies for filing accompanied by the proper fees. INCORPORATION. 17 For tariff of fees in the different provinces see p. 355, below. In Nova Scotia a copy of the memorandum together with the original must be delivered to the Registrar. Specially limited mining companies. Special provisions are applicable to such com- panies in Saskatchewan, Alberta and British Columbia (see p. 118, below). The articles of association. Every company incorporated under the above Acts has regulations governing such matters as shares, calls on shares, transfer transmission and forfeiture of shares, meetings, votes of members, powers, duties, election remuneration and proceed- ings of directors, dividends, accounts, notices, etc. With respect to its regulations the company may adopt any one of three courses. (1) On the formation of the company 'articles of association' containing a complete set of regula- tions may be drawn up and signed by the subscribers to the memorandum of association and filed with the Registrar of Companies along with the memoran- dum. (2) The company may as an alternative not file any articles of association, in which event the statu- tory regulations appended as a schedule to the Act and known as "Table A" will apply. The statutory regulations are incomplete and unsatisfactory and it is preferable that articles of association complete in themselves and excluding "Table A" be filed. (3) A third course is to file articles of associa- tion, not complete in themselves, but adopting in H.C. 2 18 HANDBOOK ON COMPANIES. part ''Table A" and providing regulations which supplement, partially exclude or modify ''Table A". This is allowable but is unsatisfactory and not advis- able, though it is often done. The articles of associa- tion should be prepared with care and with a view to the special circumstances and needs of the com- pany. Competent legal advice is indispensable. For a form of articles see Forms, p. 38. The articles, which must be divided into para- graphs numbered consecutively, must be signed by each subscriber to the memorandum of association in the presence of a witness who must attest the signature. In Nova Scotia they must be printed; in the other provinces they may be typewritten. The articles, when executed, must be delivered to the Registrar of Companies together with the memo- randum of association for registration. The following additional requirements should be noted in the undermentioned jurisdictions : Saskatchewan (ss. 88, 89). Alberta (s. 60). British Columbia (s. 84). The above Acts contain similar, but not identical, provisions imposing restrictions on the appointment and advertisement of directors. The Alberta section reads as follows : 60. A person shall not be capable of being appointed director of a company by the articles of association and shall not be named as a director or proposed director of a company in any prospectus Issued by or in behalf of the company unless before the registra- tion of the articles or the publication of the prospectus (as the case may be) he has by himself or by his agent authorized in writing: (a) Signed and filed with the registrar a consent in writing to act as such director; and INCORPORATION. 19 (b) Either signed the memorandum of association for a num- ber of shares not less than his qualification if any or signed and filed with the registrar a contract in writing to take from the company and pay for his qualification shares if any. (2) On the application for registration of the memorandum and articles of association of a company the applicant shall deliver to the registrar a list of the persons who have consented to be directors of the company and if this list contains the name of any person who has not so consented the applicant shall be liable on summary conviction to a fine not exceeding $200. (3) Provided that this section shall not apply to a company which does not issue any invitation to the public to subscribe for its shares or to a prospectus issued by or on behalf of a company after the expiration of one year from the date at which the com- pany is entitled to commence business. 1901, c. 20, s. 60. The British Columbia section does not apply to a private company. The Saskatchewan Act provides that s. 89, requir- ing delivery of a list of persons who have consented to be directors, shall not apply to a company which does not issue any invitation to the public to sub- scribe for its shares or debentures, or to a prospectus issued after two years from the date at which the company is entitled to commence business. For form of consent to act as director and agree- ment to take qualification shares, see App. Forms 1 and 2. Every member on request is entitled to receive a copy of the memorandum and articles on payment of fifty cents (Nova Scotia) ; twenty-five cents (Saskatchewan); one dollar (Alberta and British Columbia) or such less sum as the company may prescribe. If the documents are in order and are accepted for filing the Registrar in due course issues his certi- ficate that the company is incorporated and limited. 20 HANDBOOK ON COMPANIES. CHAPTER II. PROCEEDINGS SUBSEQUENT TO INCORPORATION. Organization. I. Companies incorporated by letters patent. Under the Dominion, Ontario, Quebec and New Brunswick Acts companies are incorporated by letters patent, by which the petitioners and any other persons who have become subscribers to the memo- randum of agreement and persons who thereafter become shareholders are constituted a corporation. The letters patent declare the petitioners named as such to be the provisional directors of the company. It is the duty of the provisional directors, with the assistance of the other shareholders (if any), to take the necessary steps to organize the company, i.e., provide it with a board of permanent directors, pass by-laws, etc., so that the company can commence operations. As the provisional directors must be replaced by an equal number of permanent directors, there should be as many provisional directors named as there are to be members of the permanent board. The general procedure is the same in the following jurisdictions, subject to certain variations and addi- tional details. Attention is drawn to these under the heading of the particular jurisdiction involved. (1) Dominion. Manitoba. Quebec. New Brunstvick. The procedure for organizing a company incor- porated under the above Acts is as follows : PROCEEDINGS SUBSEQUENT TO INCORPORATION. 21 1. A meeting of the provisional directors is called. These are usually clerks in the office of the company's solicitor. At this meeting the letters patent of the company are produced; the shares subscribed for in the memorandum of agreement are issued and paid in full. Notices are directed to be sent out for a shareholders' meeting called for the purpose of organizing the company, electing direc- tors, approving general by-laws, a borrowing by-law and a by-law to permit the purchasing of shares in other companies and to transact such other business as may be desirable. As the only shareholders at this stage are the incorporators, these acknowledge in writing the receipt of the notice of the share- holders' meeting. Thus the necessity for sending out the notices is avoided. 2'. The meeting of shareholders approves the proceedings of the provisional directors. The pro- visional directors are elected permanent directors, the election being by ballot. It must be remembered that the provisional directors must be replaced by the same number of permanent directors. The meet- ing then adjourns until after the meeting of the permanent directors, which is held forthwith to pass the by-laws. 3. The permanent directors meet, pass the by- laws, elect officers, approve the form of share certi- ficate and corporate seal and then adjourn. For forms of general by-laws see Forms, pp. 216 ff. In connection with the by-law for the borrowing of money, which is usually passed at this meeting, it should be noted that most banks require a by-law in a special form approved by the bank. Accord- ingly it is advisable to ascertain the name of the bank with which the company proposes to conduct 22 HANDBOOK ON COMPANIES. its banking business and obtain a copy of the required form. It is a convenient practice to pass, in addition to the bank's form of by-law, a general borrowing by-law. See further on borrowing, p. 182, below. If there is to be an issue of preference shares and the provisions relating to the preference shares have not been set out in the letters patent, a by-law creat- ing the issue may be passed at this stage. See further on preference shares, p. 85, below. 4. The adjourned meeting of shareholders re- assembles, ratifies the by-laws and adjourns. 5. The permanent directors meet and resign in succession in favour of the persons who are to act as the actual and continuing directors of the com- pany. Each director, as he resigns, transfers the share of stock held by him to his successor who takes his place on the board. The usual qualification of a director prescribed by the by-laws is the holding of one share, and it is accordingly unnecessary to allot further shares to the incoming directors in order to qualify them, unless the holding of more than one share is required. The new board appoints officers for the ensuing year. The meeting then adjourns. For forms of organization minutes see Forms, pp. 313 ff. In some of the above jurisdictions there are statutory restrictions on the allotment of shares and commencement of business. These are dealt with at pp. 2'9, 34, below. In addition, the following details should be noted under the Dominion, Quebec and Manitoba Acts. PROCEEDINGS SUBSEQUENT TO INCORPORATION. 23 Dominion. The by-laws should provide that the place of the principal office of the .company is to be situated in a designated city or town and at such place therein as the directors may from time to time by resolution appoint. The directors should pass the necessary resolution and cause to be inserted in the Canada Gazette the notice required by s. 30 of the Act. The following form may be used : THE COMPANY, LIMITED. Notice is hereby given that the principal office of The Company, Limited, is situate at room No. on the floor of the building known as " The Building," No. Street, in the City of Secretary. The first auditors of the company may be appointed by the directors and their remuneration fixed, or the appointment may be- left to the first annual meeting of the shareholders (s. 94A). The provisions of s. 75 (2) must be complied with when the prospectus or a statement in lieu of a prospectus is filed. These provisions are as follows: (2) A person named as a director or proposed director in any prospectus, or in any notice in lieu of prospectus, issued by or on behalf of the company, shall not be capable of being appointed director of the company unless, at the time of the publication of the prospectus, he has by himself or by his agent authorized in writing, (i) Signed and filed with the Secretary of State of Canada a consent in writing to act as such director; and, (ii) Either signed the petition for incorporation and memor- andum of agreement and stock book for a number of shares not less than his qualification (if any) or signed and filed with the Secretary of State of Canada a contract in writing to take from the company and pay for his qualification shares (if any). 7-8 Geo. V. c. 25, s. 10. 24 HANDBOOK ON COMPANIES. For forms of consent to act as director and con- tract to take and pay for qualification shares, see App. Forms 3 and 4. Quebec (arts. 6091-6097). Within sixty. days after commencing operations and business every incorporated company, carrying on any labour, trade or business in the province (except banks) must cause to be delivered to the prothonotary of the Superior Court in each district, or to the registrar of each registration division in which it carries on or intends to carry on its operations or business, a declaration made and signed by the president, when its chief office or principal place of business is in the province, or by its principal manager or chief agent in the pro- vince, when it has only branches or agencies therein. The declaration must state the name of the company, where and how it was incorporated, the date of incorporation and where its principal place of busi- ness within the province is situated. Whenever any change takes place in the name of the company, or in its principal place of business in the province, a declaration thereof must be made within sixty days. Manitoba (s. 29a). The Act contains the following provision: 29A. Every company shall, within thirty days after it is organized, file with the Provincial Secretary a copy of its by-laws and a list of the names and residential addresses of its directors, together with a statement of the actual business address of the company, the whole certified by the secretary or some other officer of the company. If any change takes place in the busi- ness address of the company, it shall also send notice of such change to the Provincial Secretary within thirty days thereafter. 6 Geo. V. c. 20, s. 10. PROCEEDINGS SUBSEQUENT TO INCORPORATION. 25 (2) Ontario. Under the Ontario Act, for the purpose of organ- ization, companies may be classified as follows : i. Public companies which offer their shares, debentures or debenture stock to the public for sub- scription (public companies). ii. Private companies (as to which see p. 76, below) and companies which do not offer their shares, debentures or debenture stock to the public for subscription. For companies in class i the general procedure for preliminary organization outlined above at p. 20 may be followed, bearing in mind, however, that the company is not entitled to allot its shares or com- mence business until certain statutory requirements have been complied with. These are dealt with below at pp. 30 and 35. As to companies in class ii the Act provides for the holding of a "first meeting" for the purpose of organization. The terms of the section, which pro- vides for substantially the same procedure as has already been outlined at p. 21 with some additions, are as follows : 43. (1) The provisional directors of a private company or a company which does not offer shares,, debentures or debenture stock to the public for subscription shall call a general meeting of the company to be held at a convenient place within six months from the date of the Letters Patent for the purpose of electing directors, appointing auditors, sanctioning the by-laws of the company, and transacting such other business as may be necessary to enable the company to carry on its undertaking, and shall, at least ten days before the day on which such meeting is to be held, give notice of such meeting by registered letter addressed to each shareholder, setting out in detail the business to be transacted and matters to be considered thereat. (2) The provisional directors shall report to such meeting (a) The number of shares subscribed; (b) The names of the subscribers; 26 HANDBOOK ON COMPANIES. (c) The amount paid thereon; (d) All contracts entered into by or on behalf of the com- pany; (e) The amount of the preliminary expenses, and (/) A financial statement of the affairs of the company signed by the auditors, if any. (3) If the meeting is not called by the provisional directors as aforesaid any three or more shareholders may call the meet- ing. 2 Geo. V. c. 31, s. 41; 8 Geo. V. c. 30, s. 28. II. Companies incorporated by memorandum and articles of association. Under the Nova Scotia, Saskatchewan, Alberta and British Columbia Acts the company is prac- tically organized upon incorporation, by reason oi having in its articles of association a complete code of regulations. At the first meeting of directors it will be neces- sary to appoint officers, make regulations as to meet- ings of directors (unless these have been fully pro- vided for in the articles), approve the form of share certificate and corporate seal. Resolutions of the members providing for the borrowing of money and a resolution of the board appointing the company's bankers will also have to be passed (see p. 184, below). In Nova Scotia (s. 60), Saskatchewan (s. 71) and Alberta (s. 100), the situation of the registered office must be determined and notice thereof given to the registrar. For form see App. Form 5. In British Columbia (s. 81 (2') the notice must be delivered to the registrar with the memorandum. The form is form 9 in the second schedule to the Act. In Saskatchewan, Alberta and British Columbia there are statutory restrictions on the allotment of shares and the commencement of business (see pp. 30, 38, below). PROCEEDINGS SUBSEQUENT TO INCORPORATION. 27 In Saskatchewan the company will have to take out a license to carry on its business (see p. 38, below). Vendors' agreements and further matters incidental to organization. No matter what business the company proposes to carry on, the acquisition of certain assets immediately upon incorporation is usually contem- plated, e.g., mines or mining claims in the case of a mining company; lands, plant, patent rights, etc., in the case of a manufacturing company. An agreement for the purchase of such assets, commonly called a vendors ' agreement or preliminary agreement, will be entered into between the vendor and the company or between the vendor and a trustee for the proposed company before its incorporation. If the latter course is followed, the agreement will have to be adopted by the company after its incor- poration by a distinctly new contract, for the com- pany cannot be bound by a contract made before it comes into existence by some one purporting to act on its behalf. Such contracts commonly provide that a portion or the whole of the consideration pay- able by the company shall consist of shares of the company issued to the vendor or his nominees as fully paid up. For a simple form of such agreement see App. Form 6. In the case of companies incorporated by letters patent a by-law should be passed by the directors authorizing the purchase and the contract should be approved by the directors. The by-law should provide for its submission to the shareholders for ratification, the execution of the contract under the corporate seal by the proper officers and the pay- ment of the consideration and the allotment of shares 28 HANDBOOK ON COMPANIES. (where such form a part of the consideration) on confirmation of the by-law by the shareholders and the execution and delivery of the conveyances or transfers of the property to be acquired. In some jurisdictions the allotment of shares cannot be made without complying with further formalities. These are dealt with below under "Restrictions on allot- ment and commencement of business." In Ontario if the company pays for property acquired by issuing paid-up shares there is the further requirement of authorization by a vote of shareholders present or represented by proxy at a general meeting duly called for considering the matter and holding not less than two-thirds of the issued capital stock repre- sented at the meeting (s. 25). In practice the con- tract is approved in the organization stage by the holders of all the issued capital stock. In the case of companies incorporated by mem- orandum of association (i.e., Nova Scotia, Sas- katchewan, Alberta and British Columbia com- panies) the contract will be authorized by resolution of the directors and confirmed by the members. In all jurisdictions if any director is interested in the sale to the company he must make full dis- closure of his interest and refrain from voting, and it is important that the by-laws or articles, as the case may be, should be properly framed so as to protect a director contracting with the company who makes disclosure and does not vote. If there is to be a public issue of shares or securities the interest of the directors must also be disclosed in the pros- pectus. See further "Directors" at p. 157 and "Prospectus" at p. 52. If the company's shares or securities are to be sold to the public through a broker or underwriter, the execution of a formal agreement for that purpose PROCEEDINGS SUBSEQUENT TO INCORPORATION. 29 should be authorized. See "Underwriting" at p. 70. Where extensive dealing in the company's shares is anticipated, a registrar and transfer agent should be appointed. For the requirements of the registrar and transfer agent see Company Law, p. 349. It is also important that a proper system of accounting be adopted and it is generally advisable to have a set of books opened by a reputable firm of chartered accountants. As to the books required to be kept by the company, see "Books" at p. 217, below. Restrictions on allotment and commencement of business. In most, but not all, jurisdictions, certain require- ments are imposed before the company may allot its shares and/or commence business. Restrictions on allotment. I. Quebec. Manitoba. New Brunswick. Nova Scotia. In the above jurisdictions there are no restric- tions on the allotment of shares. The company can go to allotment as soon as it is incorporated. In Manitoba, however, a company before selling shares or securities in the course of continued and succes- sive acts or by advertising or solicitation must comply with the Sale of Shares Act (see p. 276, below). II. Dominion (s. 43C (1)). Under the Dominion Act a company which does not issue a prospectus on or with reference to its formation is forbidden to allot any of its shares or debentures (which term includes bonds or debenture 30 HANDBOOK ON COMPANIES. stock) unless, before the first allotment of either shares or debentures, there has been filed with the Secretary of State a statement in lieu of prospectus. This document must be signed by every person who is named therein as a director or proposed director or by his agent authorized in writing, and must be in the form and contain the particulars set out in Form F in the schedule to the Act (see p. 47, below). Private companies are exempted from the foregoing provision and can proceed to allotment forthwith after incorporation (see p. 79, below). III. Ontario (ss. 112, 113). Saskatchewan (ss. 94, 95). Alberta (ss. 108, 108a, 109). The restrictions on allotment differ according to the class of company involved. For this purpose companies may be classified as follows: 1. Pros- pectus companies ; 2. non-prospectus companies, and (in Ontario) 3. private companies. 1. Companies upon whose formation a prospectus is issued offering shares to the public. The company may not proceed to allotment of any shares offered to the public for subscription until the following conditions have been complied with: (1) The prospectus, which must comply with the statutory provisions, must have been filed with the Provincial Secretary or Registrar. (2) The prospectus must provide for payment on application of not less than five per cent, of the nominal amount of each share offered. This require- ment does not apply in Alberta to mining companies with specially limited liability (governed by s. 63 of the Alberta Act). As to other requirements see " prospectus" p. 49, below. PROCEEDINGS SUBSEQUENT TO INCORPORATION. 31 (3) The prospectus (and in Saskatchewan and Alberta the memorandum or articles also) must fix the minimum subscription upon which the directors may proceed to allotment. If this is not done, then the minimum is the whole amount offered for sub- scription. It is not unusual to fix the minimum at a nominal amount of one share, and this is a suffi- cient compliance with the requirement. (4) The minimum subscription must have been subscribed and the sum payable on application must have been paid to and received by the company. Actual payment is necessary and a cheque has been held not to constitute payment until it has been cleared. The amount fixed as the minimum sub- scription is to be reckoned exclusively of any amount payable otherwise than in cash. The above requirements, except (2), do not apply to any allotment of shares subsequent to the first allotment of shares offered to the public for subscrip- tion. It is further provided that, if the above condi- tions have not been complied with on the expiration of a specified number of days after the first issue of the prospectus, all money received from the appli- cants for shares shall be forthwith repaid to them without interest. If repayment is not made within a further specified time the directors are jointly and severally liable to repay the money with interest. A director is not liable if he proves that the loss of the money was not due to any misconduct or negligence on his part. Any condition requiring or binding any applicant for shares to waive compliance with any of the above requirements is void. If an allotment is made in contravention of the above provisions, the allotment is voidable at the instance of the applicant within one month after 32 HANDBOOK ON COMPANIES. the holding of the statutory meeting. If a director knowingly contravenes or permits or authorizes the contravention of any of the above provisions, he is to be liable to compensate the company and the allottee for loss, damages or costs. An action for such purpose, however, may not be commenced after the expiration of two years from the date of the allotment. In Saskatchewan and Alberta a company, before selling its shares or securities, must comply with the Sale of Shares Act (see p. 276, below). 2. Companies which do not issue any invitation to the public to subscribe for shares. Ontario (s. 102). A company which does not issue a prospectus on or with reference to its formation is forbidden to allot any of its shares, debentures or debenture stock, unless before the first allotment there has been filed with the Provincial Secretary a state- ment in lieu of a prospectus, signed by every person who is named therein as a director or proposed director or by his agent authorized in writing. The form is Form 5 in the schedule to the Act and is obtainable gratis from the Department. Saskatcheivan (s. 94 (7)). The Act contains the following provisions : (7) In the case of the first allotment of share capital, pay- able in cash, of a company which does not issue any invitation to the public to subscribe for its shares, no allotment shall be made unless the minimum subscription (that is to say) : (a) The amount, if any, fixed by the memorandum, or articles as the minimum subscription upon which the directors may proceed to allotment; or (6) If no amount is so fixed and named, then the whole amount of the share capital other than that issued or PROCEEDINGS SUBSEQUENT TO INCORPORATION. 33 agreed to be issued as fully or partly paid up otherwise than in cash; Has been subscribed and an amount not less than five per cent, of the nominal amount of each share pay- able in cash has been paid to and received by the com- pany. The company must not sell its shares or securi- ties by continued and successive acts or by adver- tising or solicitation without complying with the Sale of Shares Act (see p. 276, below). Alberta. There are no conditions precedent to allotment where the company is not offering the shares or securities to the public and no prospectus has been filed. The company must not sell its shares or securities by continued and successive acts or by advertising or solicitation without complying with the Sale of Shares Act (see p. 277, below). 3. Private company. Ontario. A private company (as to which see p. 76, below) can proceed to allotment forthwith upon incorpora- tion. No preliminary requirements are imposed. IV. British Columbia (ss. 31, 33, 36). Requirements similar to but more elaborate than those above noted are imposed in British Columbia before a public company may allot its shares, bonds or debenture stock. These require- ments and the forms required to be filed are fully set out in the Act and schedules. For the text of the sections see p. 40, below. H.C. 3 34 HANDBOOK ON COMPANIES. Commencement of business. Some of the Acts require a certain proportion of the share capital to be subscribed and paid up before the company may commence operations. The Acts containing such a requirement are Dominion, Quebec and Manitoba. In other jurisdic- tions, viz., Ontario, Saskatchewan, Alberta and Brit- ish Columbia, more elaborate requirements are imposed. In Nova Scotia the company may com- mence operations immediately on incorporation. The same is true in New Brunswick, except where shares of no nominal or par value are issued. Details of these provisions are as follows: Dominion (ss. 26, 86). Quebec (art. 5972). Manitoba (s. 20). These Acts contain a provision that the com- pany shall not commence business or operations (or incur liability Dominion and Quebec) before ten per cent, of its authorized capital has been sub- scribed and paid for. This restriction prohibits, not organization, but the commencement of the busi- ness operations of the company. The payment of ten per cent, of the authorized capital need not be made in cash. The transfer of assets to the company in consideration of the issue of paid-up shares is sufficient and this is the manner in which the above provisions are commonly complied with. The above requirements are directory only and not imperative, and the acts of a company which has not complied with the requirements will not be void. No penalty is expressly imposed in Manitoba. Under the Dominion and Quebec Acts every director who expressly or impliedly authorizes the PKOCEEDINGS SUBSEQUENT TO INCORPORATION. 35 commencement of operations or incurring of lia- bilities before ten per cent, of the authorized capital has been subscribed and paid for is to be jointly and severally liable with the company for the pay- ment of any such liabilities so incurred. In Manitoba s. 20 does not apply to mining com- panies incorporated under the Manitoba Mining Companies Act. Companies tvith no par value shares. Dominion (s. 7B). Quebec (s. 5967a). Neiv Brunsivick (ss. 127-129). Companies with shares of no nominal or par value incorporated under the above Acts are not subject to the above restrictions, but they are pro- hibited from beginning to carry on business or incur debts until the amount of capital stated in the letters patent as the amount with which the company will carry on business has been fully paid in money or in property taken at its actual value (see p. 6, above). Ontario (ss. 114, 115). The restriction against commencing business applies only to companies which offer their shares, debentures or debenture stock to the public for subscription. In other words, it applies to " pros- pectus companies" and not to companies which file only a statement in lieu of a prospectus and make no public offer. Such latter companies may com- mence business immediately on incorporation, although they are subject to the restriction on first allotment of shares above noted. Owing to the fact that it is often difficult to determine whether a com- 36 HANDBOOK ON COMPANIES. pany in selling its shares has made a public offering within the meaning of the Act, and that if it does make a public offering a certificate that the company is entitled to commence business is essential, it is advisable, as a general rule, to file a prospectus and obtain the certificate, even though no public offering in the popular sense is contemplated. Private companies, however, (as to which see p. 79) are not subject to any restriction. The Ontario sections are as follows: 114. (1) A company shall not commence any business or exercise any borrowing powers unless; (a) Shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount not less in the whole than the minimum subscription; and (&) Every director of the company has paid to the company on each of the shares taken or contracted to be taken by him, and for which he is liable to pay in cash, a portion equal to the proportion payable on application and allotment on the shares offered by a public com- pany; and, (c) There has been filed with the Provincial Secretary a statutory declaration by the secretary or one of the directors in the prescribed form that such conditions have been complied with and the Provincial Secretary has certified as provided by sub-section 2. (2) The Provincial Secretary may, on the filing of the statutory declaration, certify that the company is entitled to commence business, and the certificate shall be conclusive evi- dence that the company is so entitled, but upon it being shown that the certificate was made upon false statement or upon the withholding of any material statement the Provincial Secretary may cancel and annul such certificate. (3) Any contract made by a company before the date at which it is entitled to commence business shall be provisional only, and shall not be binding on the company until that date, and on that date it shall become binding. (4) Nothing in this section shall prevent the simultaneous offer for subscription or allotment of any shares, debentures, or debenture stock or the receipt of any money payable on any appli- cation. (5) If any company commences business or exercises borrow- ing powers in contravention of this section every person who is PROCEEDINGS SUBSEQUENT TO INCORPORATION. 37 responsible for the contravention shall, without prejudice to any other liability, incur a penalty not exceeding $50 for every day during which the contravention continues. (6) Where a company has commenced business without hav- ing complied with the requirements of sub-section 1 of section 108 of The Ontario Companies Act, 1907, and the Lieutenant-Governor- in-Council is satisfied that the non-compliance was due to inad- vertence, error or mistake, and that before commencing business the conditions mentioned in clauses (a) and (6) of that section had been complied with, he may authorize the company to file the statutory declaration nunc pro tune, and if it is filed within one month after the date of the Order-in-Council it shall have the same effect as if it had been filed before the company com- menced business. 2 Geo. V. c. 31, s. 112. 115. All sums received by the company or by any promoter, director, officer or agent thereof shall be held in trust by the company or such promoter, director, officer or agent until deposited in a chartered bank to the credit of the company, and shall be so deposited and there remain in trust until the issue of the certificate by the Provincial Secretary. 2 Geo. V. c. 31, s. 113. It will be observed that the above provisions involve compliance with the restrictions on allot- ment described at p. 30, above, i.e., the filing of a prospectus and the allotment of the minimum sub- scription. Every director must have paid the amount payable on application and allotment in respect of the shares subscribed for by him. A statutory declaration as required by sub-section (c) of s. 114 (1) must be filed with the Provincial Secretary. The form is obtainable from the Depart- ment gratis. The fee payable for the certificate is $25. The certificate may be withdrawn if it is shown to have been made on any false statement or upon the withholding of any material statement. What the effect of such withdrawal on existing contracts may be is not stated. Under the circumstances it may be important for persons contracting with a company recently formed to satisfy themselves that 38 HANDBOOK ON COMPANIES. no mis-statements or withholding of material state- ments have taken place. Such persons should insist on production of the certificate, for until the certi- ficate is obtained the contracts of the company are provisional only and not binding on the company. Saskatchewan (ss. 25-28; 120). The company must be registered under the Act. Before registration it must file with the Registrar (1) a certified copy of its charter and by-laws, i.e., its memorandum and articles; (2) ia petition in form B in the schedule to the Act; and (3) a statu- tory declaration of the president, vice-president, secretary or manager in form C in the schedule to the Act. For fees on registration see Tables of Fees, p. 370, below. The company must also be licensed before it may carry on business in Saskatchewan. Upon compli- ance with the provisions of the Act and payment of the fees prescribed, the company is entitled to receive from the registrar a license to carry on business and exercise its powers in Saskatchewan. For fees see Tables of Fees, p. 370, below. A company which invites the public to subscribe for its shares is forbidden to commence any busi- ness or exercise any borrowing powers until it has obtained a certificate showing that it is entitled to commence business. The provisions of the Act in this regard read as follows: COMMENCEMENT OF BUSINESS BY PUBLIC COMPANY. 120. A company shall not commence any business or exercise any borrowing powers unless: (a) Shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount not less in the whole than the minimum subscription; and PEOCEEDINGS SUBSEQUENT TO INCORPORATION. 39 (6) Every director of the company has paid to the company on each of the shares taken or contracted to be taken by him, and for which he is liable to pay in cash a propor- tion equal to the proportion payable on application and allotment on the shares offered for public subscription; and (c) There has been filed with the registrar a statutory declaration by the secretary or one of the directors, in the prescribed form, that the aforesaid conditions have been complied with. (2) The registrar shall, on the filing of the statutory declara- tion, certify that the company is entitled to commence business, and that certificate shall be conclusive evidence that the com- pany is so entitled. (3) Any contract made by a company before the date at which it is entitled to commence business shall be provisional only, and shall not be binding until that date, and on that date it shall become binding. (4) Nothing in this section shall prevent the simultaneous offer for subscription or allotment of any shares and debentures or the receipt of any money payable on application for deben- tures. (5) If any company commences business or exercises borrow- ing powers in contravention of this section, every person who is responsible for the contravention shall, without prejudice to any other liability, be liable to a fine not exceeding $200 for every day during which the contravention continues. (6) Nothing in this section shall apply to any company where there is no invitation to the public to subscribe for its shares. Alberta (s. 107). A company which invites the public to subscribe for its shares is forbidden to commence any business or exercise any borrowing powers until it has obtained a certificate showing that it is entitled to commence business. The provisions of the Act in this regard are identical with those in Saskatchewan above set out. British Columbia (ss. 31, 33, 36). The restrictions on commencing business or exercising borrowing powers apply to all companies except private companies. 40 HANDBOOK ON COMPANIES. The text of the British Columbia sections is as follows : 31. (1) A public company having a share capital shall not: (a) Allot any of its shares or debentures; or (b) Commence any business; or (c) Exercise any borrowing powers, unless: (d) The company has filed with the Registrar a prospectus complying with this Act, or, if the company does not issue any Invitation to the public to subscribe for its shares or debentures, a statement in lieu of prospectus, according to Form 4 in the Second Schedule, naming therein an amount in cash as the minimum subscription upon which the directors may proceed to allotment: Pro- vided that where the company proposes to take over an established business, and does not require or propose to issue any shares or debentures for cash to enable it to carry on that business, the company shall file a state- ment in lieu of prospectus according to Form 5 in fhe Second Schedule, and shall not be required to name therein a minimum subscription; and (e) The minimum subscription so named has been subscribed, and the sum payable on application therefor, which shall not be less than five per cent, of the nominal amount of each share or debenture, has been paid to and received by the company; and (/) The company has filed with the Registrar a statutory declaration as prescribed by section 33; and (0) The Registrar has Issued under his seal of office a certifi- cate that the company is entitled to commence business. (2) The minimum subscription so named: (a) Shall be the amount which the company shall fix as necessary in order that the company may, with a reason- able prospect of success, carry out the plan of opera- tions or conduct the business described in the pros- pectus or statement in lieu of propectus; and (6) Shall be reckoned exclusively of any amount payable to the company otherwise than in cash; and (c) Shall only be expended for the purposes set forth in the statement or prospectus, unless the company by extra- ordinary resolution sanctions its expenditure for some other purpose authorized by the memorandum of the company. ( New ) . (3) (a) All money paid to and received by the company in respect of the minimum subscription shall be deposited as trust PROCEEDINGS SUBSEQUENT TO INCORPORATION. 41 funds to its credit as trustee in a separate account in a branch or agency in the Province of a bank, and the company shall hold and shall declare in its prospectus or statement in lieu of prospectus that it will hold all such moneys in trust to be repaid, if the minimum subscription is not subscribed, in accordance with this section. (&) If any such money is not so deposited and held, the directors of the company shall be jointly and severally liable to repay the money with interest at the rate of six per cent, per annum from the date when it was paid to the company by the subscriber: Provided that a director shall not be liable if he proves that the failure so to deposit and hold the money was not due to any misconduct or neglige'nce on his part. (New). (4) (a) In the case of a company which has filed a prospectus, if the minimum subscription has not been subscribed at the expiration of ninety days after the first issue of the prospectus, all money paid to and received by the company in respect of the minimum subscription shall be forthwith repaid to the sub- scribers without any deduction, but without interest; and if such money is not so repaid within ninety-eight days after the first issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with interest at the rate of six per cent, per annum from the expira- tion of the ninety-eighth day: Provided that a director shall not be liable if he proves that the failure so to repay the money was not due to any misconduct or negligence on his part. (&) In the case of a company which has filed a statement in lieu of prospectus, the periods of ninety and ninety-eight days shall commence respectively from the date on which the state- ment is filed with the Registrar. (5) Nothing in this section shall prevent the simultaneous offer for subscription or allotment of shares and debentures. (6) Any contract made by a company before the date at which it is entitled to commence business shall be provisional only, and shall not be binding on the company until that date, and on that date it shall become binding. (7) Any condition requiring or binding an applicant for shares or debentures to waive compliance with any requirement of this section shall be void. (8) An allotment made by a company to an applicant in contravention of this section Shall be void, and shall be so void notwithstanding that the company is in course of being wound up. (9) Every company which fails to comply with or contra- venes any provision of this section shall be guilty of an offence against this Act. 42 HANDBOOK ON COMPANIES. (10) For the purposes of Forms 4 and 5 In the Second Sched- ule, the expression " vendor " shall have the meaning assigned to It by subsections (5) and (6) of section 90. (11) This section shall not apply (a) to a company incor- porated before the first day of July, 1910, or (6) to a company which has obtained, under the " Companies Act, 1910," or this Act, a certificate entitling it to commence business, or (c) to a company which has before this Act comes into force filed with the Registrar a prospectus or statement in lieu of prospectus, but such company shall, notwithstanding section 270, comply with section 96 of the "Companies Act, 1910." 33. (1) When the minimum subscription has been subscribed, the company shall file with the Registrar a statutory declaration by the directors: (a) According to Form 6 in the Second Schedule, in the case of a company which has filed a statement in lieu of prospectus and has named therein a minimum subscrip- tion; or (6) According to Form 7 in the Second Schedule, in the case of a company which has filed a statement in lieu of prospectus and has not named therein a minimum sub- scription; or (c) According to Form 8 in the Second Schedule, in the case of a company which has filed a prospectus: Provided that where a director was by reason of his absence from the Province or for other good reason unable to and did not perform his duties as a director in relation to the organization of the company pursuant to this Division, he shall not be required to make such a statutory declaration as aforesaid, but in lieu thereof shall make a statutory declaration stating why he was prevented from so performing his duties as a director. (2) Upon the filing of such a statutory declaration as is pre- scribed by this section, the Registrar may issue under his seal of office a certificate that the company is entitled to commence busi- ness, and that certificate shall be conclusive evidence that the company is so entitled. 36. (1) No shares or debentures of a public company allotted or issued or agreed to be allotted or issued to any person for property, services, or any consideration other than cash shall be transferred, sold, or in anywise dealt with or disposed of before the statutory meeting of the company is held pursuant to this Act, and no certificate of any such share or debenture shall be issued or delivered by the company until that meeting is held. (2) A transfer, sale, or other dealing in or disposition of shares or debentures contrary to this section shall be void. PROCEEDINGS SUBSEQUENT TO INCORPORATION. 43 (3) Every company and person who contravenes this section shall be guilty of an offence against this Act, and the directors of the company shall be liable to compensate the company and any person injured for any loss, damage, or costs which the com- pany or such person may have sustained or incurred by a con- travention of this section: Provided that: (a) A director shall not be liable if he proves that the contra- vention was not due to any misconduct or negligence on his part; and (6) Proceedings to recover any such loss, damage, or costs shall not be commenced after the expiration of two years from the date of the contravention. (New). 44 HANDBOOK ON COMPANIES. CHAPTER III. THE PROSPECTUS. One of the most important tasks which those engaged in the formation of a company have to perform is to provide it with capital. Except where a business is being converted into a company and no further capital is required, or the capital is privately subscribed, an offer to the public of the company's shares or bonds is necessary. This is generally made by means of a prospectus or by advertising in the press or by circulars or some similar means, supplemented by personal canvass. In some jurisdictions a prospectus is not com- pulsory, in others the statute requires a prospectus to be issued. The object of the legislative pro- visions relating to the prospectus is to afford the public information in respect of all material cir- cumstances connected with the formation and the organization of the company. These provisions are so onerous that companies frequently effect a pri- vate sale of their shares or bonds, leaving the pur- chaser (usually a broker or an underwriting syn- dicate) to dispose of them to the public. This can be done in some jurisdictions and under certain conditions, but should not be attempted without competent legal advice. Under the Dominion Act the term " prospectus " is defined as "any prospectus, notice, circular, advertisement or other invitation offering to the public for subscription or purchase any shares or debentures of a company" (s. 43); and this defini- tion, with slight modifications, is followed in the Acts THE PKOSPECTUS. 45 of Nova Scotia, Saskatchewan, Alberta and British Columbia. What will constitute an invitation to the public would seem to be a question of fact depending on the circumstances of each case, but the phrase apparently contemplates an offer by the company to anyone who chooses to subscribe or purchase shares. The Ontario Act (s. 99, sub-sec, b) contains a much wider definition of the term "prospectus", as follows: "Any prospectus, notice, circular, adver- tisement or other invitation offering for subscrip- tion or purchase any shares, debentures, debenture stock, or other securities of a company, or published or issued for the purpose of being used to promote or aid in the subscription or purchase of such shares, debentures, debenture stock or securities." Section 99 and the following sections provide that a company which offers its shares, debentures, etc., to the public must file a prospectus, and what con- stitutes an offer to the public is defined in the widest terms. Accordingly, it is difficult for an Ontario company to avoid filing a prospectus and, by reason of the fact that unless a prospectus is filed, a certi- ficate that the company is entitled to commence busi- ness cannot be obtained (see p. 37, above), it will usually be advisable to file a prospectus whether there is a public offering in the ordinary sense or not. The prospectus should be fair and honest throughout. There should be no untrue, ambiguous or misleading statements, nor suppression of any material facts, nor attempt by any other means to create a false impression. Exaggerated and unduly glowing statements should be avoided. The require- ments of the governing statute as to the particulars to be disclosed must be complied with. 46 HANDBOOK ON COMPANIES. In the case of Dominion, Saskatchewan, Alberta and British Columbia companies a person may not be named as a director or proposed director in the prospectus unless certain requirements have been complied with (see pp. 23 and 18, above). The prospectus is usually prepared by the pro- moters with the assistance of the brokers and solici- tors of the company and should be printed. A director is very unwise to sign any prospectus which has not been finally approved by the company's solicitors. Statutory requirements as to filing a prospectus. Quebec. There is no provision as to a prospectus. A mining company, however, whose principal office is outside the province, must comply with special requirements before selling its shares (see p. 283, below) . Manitoba. There is no provision as to a prospectus. The company, however, before selling its shares or securities in the course of continued and successive acts, or by advertising or solicitation, must comply with the Sale of Shares Act (see p. 276, below). New Brunswick (s. 48). A prospectus is not compulsory, nor is there any provision for filing the prospectus (if one is issued) in any government department. However, if any prospectus or notice inviting persons to subscribe for shares is issued, it must specify the dates of, and names of the parties to, any contract entered into by the company, or its directors or trustees. Any THE PROSPECTUS. 47 prospectus or notice not specifying these particulars is to be deemed fraudulent on the part of the pro- moters, directors and officers of the company know- ingly issuing the prospectus or notice, as regards any person taking shares on the faith of the pros- pectus, unless he shall have had notice of such contract. The above provision would seem to make it neces- sary to specify any contract entered into by the com- pany or by a promoter, director, etc., which might reasonably be expected to influence prospective applicants for shares. The safer course would be to specify all such contracts, whether they relate directly or indirectly to the affairs of the company or the promoters, directors, trustees or other persons with whom any negotiations have been carried on. The remedy of a person who has taken shares on the faith of a prospectus which does not comply with the above provision is to sue the persons issuing it for the damages he has suffered. The above pro- vision relates to shares only; subscribers for bonds are not protected. See further Company Law, p. 180. Nova Scotia (ss. 2, 79, 80). If a prospectus is issued it must comply with the statutory requirements (see p. 49, below). Prospectus or statement in lieu of prospectus. Dominion (ss. 43-43D). Ontario (ss. 99-110). Every company, other than a private company (see p. 79) which does not file a prospectus on or with reference to its formation, must file a statement in lieu of prospectus. Until it does so it is forbidden to allot any of its shares or debentures. The state- 48 HANDBOOK ON COMPANIES. ment, which provides for almost the same disclosure as a prospectus, must be in the statutory form appended to the Act (Dominion Form P; Ontario Form 5). The Ontario form is obtainable from the Provincial Secretary gratis. The document is an important one and care must be taken to fill it up correctly. For filing fees see Tables of Fees, pp. 357, 359, below). It has been observed above that an Ontario com- pany will generally be well advised to file a prospectus. Saskatchewan (ss. 84-87). The first allotment of shares offered to the public for subscription is forbidden unless s. 94 is complied with (see p. 30, above). This involves filing a pros- pectus if there is to be a public offering. There is no provision for filing a statement in lieu of pros- pectus. The company must not sell its shares or securities by continued and successive acts or by advertising or solicitation without complying with the Sale of Shares Act (see p. 276, below). Alberta (ss. 58-59, 108a). If shares or bonds are offered to the public for subscription a prospectus must be filed, otherwise the allotment of such shares or bonds is forbidden, and the subscription is not binding on the subscriber,' unless before he subscribes he receives a copy of the prospectus (s. 108a). To take advantage of this provision the subscriber must repudiate promptly. There is no provision for filing a statement in lieu of prospectus. The company must not sell its shares or securities by continued and successive acts or by advertising THE PROSPECTUS. 49 or solicitation without complying with the Sale of Shares Act (see p. 278, below). British Columbia (ss. 31; 89-92). A company (other than a private company) may not allot any of its shares or debentures or commence any business or exercise any borrowing powers unless it has filed a prospectus or a statement in lieu of prospectus. A statement in lieu of prospectus must be according to Form 4 or Form 5 in the sche- dule to the Act as the case may require. For the text of the above provisions see p. 40, above. Special regulations apply in the case of extra-pro- vincial companies and mining companies (see pp. 284, 285, below). Statutory requirements as to form and contents. Dominion (ss. 43 A, 43B). Ontario (ss. 103, 104). Nova Scotia (ss. 79, 80). Saskatchewan (ss. 84, 85). Alberta (ss. 55, 56). British Columbia (ss. 89, 90). In addition to the requirements of a general nature above indicated the following should be noted : 1. Every prospectus must be dated. The date must not be prior to the date of filing, and therefore the prospectus should be post-dated to the date of filing or the date filled in on the date of filing. 2. The prospectus must be (a) signed by every person named therein as a director or proposed director (or Ontario provisional director) or by his agent authorized in writing; (b) filed with the H.C. 4 50 HANDBOOK ON COMPANIES. Secretary of State, Provincial Secretary or Regis- trar, as the case may be, on or before its publication, i.e., its date ; and not issued until filed. Where a written authorization is used it should be verified by affidavit. For filing fee see Tables of Pees, pp. 355 ff, below. 3. The Secretary of State, Provincial Secretary or Registrar, as the case may be, is forbidden to accept any prospectus for filing unless it is dated and signed. 4. The prospectus must state on its face that the prospectus (or Dominion; Nova Scotia; British Columbia a copy of the prospectus) has been filed. If the prospectus is issued without being filed a penalty is imposed. 5. The prospectus should not name a person as director unless the requirements (if any) of the governing Act as to filing his written consent have been complied with (see pp. 2'3, 18, above). 6. The prospectus should set out the various particulars required by the governing Act to be stated. The Dominion and provincial sections which state the particulars required to be disclosed in the pros- pectus are, subject to some variations, the same, all being based on section 81 of the Imperial Act. It should be noted that under the Dominion Act the contents of the letters patent must be set out. In Ontario this is not required. In Saskatchewan and Alberta the contents of the memorandum must be set out. In British Columbia the contents of the memorandum and articles as to the amount of the authorized capital and the shares or classes of shares into which it is divided must be stated. Anyone who proposes to draft a prospectus should have THE PROSPECTUS. 51 before him a copy of the governing Act and follow its provisions closely. Legal advice is necessary. For a form of prospectus see Forms, p. 488. The provisions of section 43B of the Dominion Act, setting out the specific requirements as to par- ticulars to be stated in the prospectus, read as follows : 43B. (1) Every prospectus issued by or on behalf of a com- pany, or by or on behalf of any person who is or has been engaged or interested in the formation of the company, must state, (a) the contents of the letters patent and supplementary letters patent, with the names, descriptions, and addresses of the signatories to the petition for incorpora- tion, and the number of shares subscribed for by them respectively; and the number of founders' or manage- ment or deferred shares, if any, and the nature and extent of the interest of the holders in the property and profits of the company; and, (6) the number of shares, if any, fixed by the by-laws of the company as the qualification of a director, and any pro- vision in the said by-laws as the remuneration of the directors; and, (c) the names, descriptions, and addresses of the directors or proposed directors; and, (d) the minimum subscription on which the directors may proceed to allotment, and the amount payable on appli- cation and allotment on each share; and in the case of a second or subsequent offer of shares, the amount offered for subscriptions on each previous allotment made within the two preceding years, and the amount actually allotted; and the amount, if any, paid on the shares so allotted; and, (e) the number and amount of shares and debentures which within the two preceding years have been issued, or agreed to be issued, as fully or partly paid up otherwise than in cash, and in the latter case the extent to which they are so paid up, and in either case the consideration for which these shares or debentures have been issued or are proposed or intended to be issued; and, (/) the names and addresses of the vendors of any property purchased or acquired by the company, or proposed so to be purchased or acquired, which is to be paid for wholly or partly out of the proceeds of the issue offered 52 HANDBOOK ON COMPANIES. for subscription by the prospectus, or the purchase or acquisition of which has not been completed at the date of issue of the prospectus, and the amount payable in cash, shares, or debentures, to the vendor, and where there is more than one separate vendor, or the company is a sub-purchaser, the amount so payable to each ven- dor: Provided that where the vendors or any of them are a firm the members of the firm shall not be treated as separate vendors; and, (g) the amount (if any) paid or payable as purchase money in cash, shares or debentures, for any such property as aforesaid, specifying the amount (if any) payable for good will; and, (h) the amount (if any) paid within the two preceding years, or payable, as commission for subscribing or agreeing to subscribe, or procuring or agreeing to procure sub- scriptions, for any shares in, or debentures of, the com- pany, or the rate of any such commission: Provided that it shall not be necessary to state the commission payable to sub-underwriters; and, (i) the amount or estimated amount of preliminary expenses; and, (;) the amount paid within the two preceding years or in- tended to be paid to any promoter, and the consideration for any such payment; and, (k) the dates of and parties to every material contract, and a reasonable time and place at which any material con- tract or a copy thereof may be inspected: Provided that this requirement shall not apply to a contract entered into in the ordinary course of the business carried on or intended to be carried on by the company or to any con- tract entered into more than two years before the date of issue of the prospectus; and, (I) the names and addresses of the auditors (if any) of the company; and, (m) full particulars of the nature and extent of the interest (if any) of every director in the promotion of, or in the property proposed to be acquired by, the company, or, where the interest of such a director consists in being a partner in a firm, the nature and extent of the interest of the firm with B, statement of all sums paid or agreed to be paid to him or the firm in cash or shares or otherwise b*y any person either to induce him to become, or to qualify him as, a director, or, otherwise for services rendered by him or by the firm in connection with the promotion or formation of the company; and, THE PROSPECTUS. 53 (w) where the company is a company having shares of more than one class, the right of voting at meetings of the company conferred by the several classes of shares respec- tively. (2) For the purposes of this section every person shall be deemed to be a vendor who has entered into any contract, abso- lute or conditional, for the sale or purchase, or for any option of purchase, of any property to be acquired by the company, in any case where, (a) the purchase money is not fully paid at the date of issue of the prospectus; or, (6) the purchase money is to be paid or satisfied wholly or in part out of the proceeds of the issue offered for sub- scription by the prospectus; or, (c) the contract depends for its validity or fulfilment on the result of that issue. (3) Where any of the property to be acquired by the com- pany is to be taken on lease, this section shall apply as if the expression " vendor " included the lessor, and the expression " purchase money " included the consideration for the lease, and the expression " sub-purchaser " included a sub-lessee.. (4) Any condition requiring or binding any applicant for shares or debentures to waive compliance with any requirement of this section, or purporting to affect him with notice of any contract, document, or matter not specifically referred to in the prospectus, shall be void. (5) Where any such prospectus as is mentioned in this sec- tion is published as a newspaper advertisement, it shall not be necessary in the advertisement to specify the contents of the letters patent and supplementary letters patent, the signatories to the petition for incorporation and the number of shares sub- scribed for by them. (6) In the event of non-compliance with any of the require- ments of this section, a director or other person responsible for the prospectus shall not incur any liability by reason of the non- compliance, if he proves that, (a) as regards any matter not disclosed, he was not cognizant thereof; or, (b) the non-compliance arose from an honest mistake of fact on his part; Provided that in the event of non-compliance with the require- ments contained in paragraph (m) of subsection (1) of this section no director or other person, shall incur any liability in respect of the non-compliance unless it be proved that he had knowledge of the matters not disclosed. 54 HANDBOOK ON COMPANIES. (7) This section shall not apply to a circular or notice invit- ing existing members or debenture holders of a company to subscribe either for shares or for debentures of the company, whether with or without the right to renounce in favor of other persons; but subject as aforesaid, this section shall apply to any prospectus whether issued on or with reference to the formation of a company or subsequently. (8) The requirements of this section as to the letters patent and supplementary letters patent and the qualification, remunera- tion, and interest of directors, the names, descriptions, and addresses of directors or proposed directors, and the amount or estimated amount of preliminary expenses, shall not apply in the case of a prospectus issued more than one year after the date at which the company commenced business. (9) Nothing in this section shall limit or diminish any liabil- ity which any person may incur under the general law or this Act apart from this section. Imp. Act, 1&08, s. 81. Remedies of subscriber when prospectus untruthful or defective. A person who has been induced to subscribe for shares or bonds of a company by misrepresentations or non-disclosure of material facts in a prospectus has certain remedies both at common law and by statute. A summary of these is given below, but as their successful enforcement often depends on highly technical rules and the subscriber's rights may be lost or impaired by delay, a person who has reason to believe that he has been misled should seek com- petent legal advice immediately. Common law remedies. If the prospectus contains a fraudulent misrepre- sentation, which induced him to subscribe, the sub- scriber can bring an action in damages for deceit against the persons responsible for the prospectus. If the subscription was induced by a material mis- representation, even though it was an innocent one, the subscriber can repudiate his subscription and THE PROSPECTUS. 55 demand back what he has paid under it, and if the company does not comply he can bring an action to rescind his subscription and get his money back. Statutory remedies. New Brunswick (s. 48). If the prospectus does not specify the required particulars as to contracts (see p. 46, above) the subscriber who has no notice of the contract is entitled to bring an action for damages against the officers who knowingly issue the prospectus. Dominion (s. 43D). Ontario (s. 107). Nova Scotia (ss. 80, 81). Saskatchewan (s. 87). Alberta (s. 57). British Columbia (s. 92). The subscriber may bring an action against the directors or promoters for compensation for the loss or damage he has sustained by reason of any untrue statement in the prospectus. If the prospectus does not comply with the statutory requirements as to disclosure the subscriber may also have further rights, the exact nature and extent of which have not been finally determined. Under the Ontario Act the directors and other persons responsible for the issuance of the pros- pectus are also liable to a penalty not exceeding $200 for every violation of the provisions of ss. 101-104, unless they excuse themselves as provided in s. 105. In Nova Scotia if the prospectus does not comply with the Act, it is to be deemed fraudulent on the part of the company ; also on the part of promoters, directors and officers unless they excuse themselves as provided in s. 80. 56 HANDBOOK ON COMPANIES. The provisions of the Acts above noted are based on s. 84 of the Imperial Act. The Imperial section takes the place of the Directors' Liability Act of 1890, which was passed for the protection of sub- scribers. Before 1890, the subscriber's only remedy against the persons who had induced him to sub- scribe by means of a prospectus containing untrue statements was by action of deceit. To support such an action it was essential to show that the directors or other persons making the statements did so fraudulently. In other words, it was necessary to show that they had made the statements knowing them to be false, or that they made the statements recklessly, not caring whether they were true or false. Mere carelessness or lack of reasonable grounds for belief in the statements was not enough to make the directors liable. The result was that the subscriber was usually left without a remedy against the persons who had induced him to take shares. Now, if the subscriber can show that a material statement, by which he was induced to take shares, and by reason of which he has sustained damage, is an untrue statement, the directors or other persons responsible under the statute are liable to pay compensation to the subscriber unless they can show that they believed and had reasonable grounds to believe the statement to be true. Special provision is made for statements by experts, officials and public official documents (see the Dominion sec- tion set out below). The provisions of the Dominion, Ontario, Nova Scotia, Saskatchewan, Alberta and British Columbia Acts in respect of directors' liability are similar. The Dominion section is as follows : THE PROSPECTUS. 57 43o. (1) Where a prospectus invites persons to subscribe for shares in or debentures of a company, every person who is a director of the company at the time of the prospectus, and every person who has authorized the naming of him and is named in the prospectus as a director or as having agreed to become a director 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, shall be liable to pay com- pensation to all persons who subscribe for any shares or deben- tures on the faith of the prospectus for the loss or damage they may have sustained by reason of any untrue statement therein, or in any report or memorandum appearing on the face thereof, or by reference incorporated therein or issued therewith, unless it is proved, (a) With respect to every 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 ground to believe, and did up to the time of the allot- ment of the shares or debentures, as the case may be, believe, that the statement was true; and, (ft) With respect to every 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 expert, that it fairly represented the statement, or was a correct and fair copy of or extract from the report or valuation: Provided that the director, person named as director, promoter, or person who authorized the issue of the prospectus, shall be liable to pay compensation as aforesaid if it is 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 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 public official document, that it was a correct and fair repre- sentation of the statement or copy of or extract from the document, unless it is proved (i) that having consented to become a director of the com- pany he withdrew his consent before the issue of the prospectus and that it was issued without his authority or consent; or, (ii) that the prospectus was issued without his knowledge or consent, and that on becoming aware of its issue he forthwith gave reasonable public notice that it was issued without his knowledge or consent; or, 58 HANDBOOK ON COMPANIES. (iii) that after the issue of the prospectus and before allot- ment thereunder, he, on becoming aware of any untrue statement therein, withdrew his consent thereto and gave reasonable public notice of the withdrawal, and of the reason therefor. (2) Where a company existing on the first day of September, one thousand nine hundred and seventeen, has issued shares or debentures, and for the purpose of obtaining further capital by subscriptions for shares or debentures issues a prospectus, a director shall not be liable in respect of any statement therein, unless he has authorized the issue of the prospectus, or has adopted or ratified it. (3) Where the prospectus contains the name of a person as a director of the company, or as having agreed to become a director thereof, and he has not consented to become a director, or has withdrawn his consent before the issue of the prospectus, and has not authorized or consented to the issue thereof, the directors of the company, except any without whose knowledge or consent the prospectus was issued, and any other person who authorized the issue thereof, shall be liable to indemnify the person named as aforesaid against all damages, costs, and expenses to which he may be made liable by reason of his name having been inserted in the prospectus, or in defending himself against any action or legal proceedings brought against him in respect thereof. (4) Every person who, by reason of his being a director or named as a director or as having agreed to become a director, or of his having authorized the issue of the prospectus, becomes liable to make any payment under this section, may recover con- tribution, as in the case of contract, from any other person who, if sued separately, would have been liable to make the same pay- ment, unless the person who has become so liable was, and that other person was not, guilty of fraudulent misrepresentation. (5) For the purposes of this section, The expression " promoter " means a promoter who was a party to the preparation of the prospectus, or of the portion thereof containing the untrue statement, but does not include any person by reason of his acting in a professional capacity for persons engaged in procuring the formation of the company. The expression " expert " includes engineer, valuer, account- ant, and any other person whose profession gives autho- rity to a statement made by him. Imp. Act, 1908, s. 84 (7 & 8 Geo. V., 1917, c. 25, s. 7). THE PROSPECTUS. 59 Remedy of subscriber to whom no prospectus has been delivered. Ontario (s. 101). The Act provides in effect that a subscription is not binding on the subscriber unless a prospectus has been delivered to him. Section 101 reads as follows : 101. (1) Every public company before offering to the public for subscription shares, debentures, debenture stock or other securities shall issue a prospectus as hereinafter set out. (2) All purchases, subscriptions or other acquisitions of shares, debentures, debenture stock or other securities of any company required to file a prospectus or a statement in lieu of a prospectus, shall be deemed, as against the company and the signatories to the prospectus or statement, to be induced by such prospectus or statement, any term, proviso or condition thereof to the contrary notwithstanding. (3) A subscription for shares, debentures or debenture stock shall not be binding on the subscriber unless at or before the subscription there is delivered to him a copy of the prospectus, if any, issued by the company, or if a prospectus has not been issued a copy of the statement mentioned in section 102. (4) The subscriber to be entitled to the benefit of sub-section 3 must elect to withdraw his subscription before or within ten days after notice of the allotment to him of the shares, deben- tures, or debenture stock for which he has subscribed. 2 Geo. V. c. 31, s. 99. Alberta (s. 108a). The Alberta Act contains the following pro- vision : 108paid over to the share- holder in default. Manitoba (Mining Companies Act, E. S. M. c. 129). The Manitoba Mining Companies Act contains the following provisions: 2. Any company incorporated by letters patent under The Companies Act or any Act which it replaced, for mining pur- poses, may, from time to time, dispose of shares and stock at such times, to such persons, and on such terms and conditions, and at such premium or discount, or in such manner, as the directors think advantageous to the company: Provided, however, that no by-law for the reduction or sale of stock at any greater discount, or at any less premium, than what has been 'previously authorized at a general meeting of the share- holders shall be valid or acted upon, until the same has been confirmed at a general meeting. R. S. M. c. 114, s. 2. 3. Where application is hereafter made to the Lieutenant- Governor-in-Council for the incorporation, by letters patent under this Act, of any company for mining purposes, such letters patent may, if the petition of the applicants so requires, contain a ( pro- vision that no liability beyond the amount actually paid upon stock in such company by the subscribers thereto or holders thereof shall attach to such subscriber or holder. R. S. M. c. 114, s. 3. 4. Where the letters patent incorporating any such company contain the provision mentioned in the last preceding section, every certificate of stock issued by the company shall bear upon the face thereof, distinctly written or printed in red ink, after the name of the company, the words " Issued under section 3 of ' The Mining Companies Act,' and non-assessable." Where such stock is issued subject to further assessment, the word " Assessable," or if not subject to further assessments the word " Non-assess- able," shall be used on such certificate, as the case may be. R. S. M. c. 114, s. 4. 5. Every mining company, the charter of which contains the said provision, shall have written or printed on its charter, pros- pectuses, stock certificates, bonds, contracts, agreements, notices, advertisements and other official publications, and in all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed by or on behalf of the company, and in all bills of parcels, invoices and receipts of the company, immediately after or under the name of such company, and shall have engraved upon its seal the words " Non-Personal SHARES. 117 Liability " ; and every such company which refuses or knowingly neglects to comply with this section shall incur a penalty of twenty dollars for every day during which such words are not so kept written or printed; and every director and manager of the company who knowingly and wilfully authorizes or permits such default shall be liable to the like penalty. R. S. R. c. 114, s. 5. 6. If any call or calls on stock in a company so incorporated remain unpaid by the subscriber thereto, or holder thereof, for a period of sixty days after notice and demand of payment, such stock may be declared to be in default, and the secretary of the company may advertise such stock for sale at public auction to the highest bidder for cash by giving notice of such sale in some newspaper published at the place where the principal office of the company is situated, or, in case no newspaper is published thereat, then in a newspaper published in the nearest place to said office, for a period of one month; and said notice shall con- tain the number of the certificate or certificates of such stock, the number of shares, the amount of the assessment due and unpaid and the time and place of sale; and in addition to the ipuiblication of the notice aforesaid, notice shall be personally served upon such stockholder by registered letter mailed to his last known address; and if the subscriber or holder of such stock shall fail to pay the amount due upon such stock, with interest upon the same and costs of advertising, before the time fixed for such sale, the secretary shall proceed to sell the same or such portion thereof as shall suffice to pay such assessment, together with interest and cost of advertising: Provided that, if the price of the stock so sold exceed the amount due with interest and costs thereon, the excess thereof shall be paid to the defaulting stockholder. R. S. M. c. 114, s. 6. 7. No shareholder or subscriber for stock in any company so incorporated shall be personally liable for non-payment of any calls made upon his stock, beyond the forfeiture and sale, in the event ef non-payment of such calls of the amount, if any, already paid on the stock held or subscribed for, nor shall such share- holder or subscriber be personally liable for any debt contracted by the company or for any sum payable by the company, beyond the amount, if any, unpaid by him upon such stock. R. S. M. c. 114, s. 7. APPLICATION OP THE COMPANIES ACT. 8. Notwithstanding anything contained in The Companies Act, the original capital stock of any mining company may be five millions of dollars or less, but shall not exceed that amount except as provided in section 38 of the said Act. R. S. M. c. 114, s. 8; 7-8 Ed. 7, c. 29, s. 1. 118 HANDBOOK ON COMPANIES. 9. Section 20 of The Companies Act shall not apply to mining companies. R. S. M. c. 114, s. 9. 10. Notwithstanding anything contained in this Act the pro- visions of section 35 of The Companies Act shall apply to any company incorporated under this Act, and to the directors, laborers, servants and apprentices thereof. R. S. M. c. 114, s. 10. Mining Companies with specially limited liability. Saskatchewan (s. 70). The Saskatchewan Act provides that the mem- orandum of association of a company whose objects are restricted to mining, may contain a provision limiting the liability of a subscriber or holder of shares to the amount he has actually paid. Section 70, which governs such companies, reads as fol- lows : 70. The memorandum of a company, the objects of which are restricted to acquiring, managing, developing, working and sell- ing mines, mineral claims and mining properties, and the win- ning, getting, treating, refining and marketing of minerals therefrom, may contain a provision that no liability beyond the amount actually paid upon shares and stocks in such company by the subscribers thereto or holders thereof shall attach to such subscriber or holder. (2) The certificate of incorporation issued by any company incorporated under this section shall contain the words " Specially limited 1 as a mining company under section 70 of The Companies Act." (3) Every certificate of shares or stock issued by a company incorporated under this section shall bear upon its face distinctly written or printed in red after the name of the company, the words, "Issued under the provisions of section 70 (respecting mining companies) of The Companies Act." (4) Where such shares or stock are issued subject to further assessment, they shall, in addition, bear the word " Assessable," and if not subject to further assessment, the word " Non-assess- able." (5) Every company incorporated under this vsection shall bear in legible characters on its prospectuses, certificates, bonds, con- tracts, agreements, notices, advertisements and all other official publications, and on all bills of exchange, promissory notes, in- dorsements, cheques and orders of any kind purporting to be signed by or on behalf of the company and on all bills of parcels, SHARES. 119 invoices, receipts and letter heads of the company immediately after or under its name and shall have engraved upon its seal th words " Non-personal Liability." (6) Every such company which refuses or knowingly neglects to comply with the provisions of this section shall be liable to a penalty of $25 for every day during which the default continues, and every director, manager or officer of the company who know- ingly and wilfully authorizes or permits such default shall, upon summary conviction, be liable to the like penalty. (7) In the event of any call or calls on assessable shares in a company incorporated under this section remaining unpaid by the subscriber thereto or holder thereof for a period of sixty days after the notice and demand for payment, such shares may be declared in default and, after advertisement published in some newspaper circulating in the district in which the operations are carried on, or the head office of the company is situated, for a period of one month and containing the following particulars: (a) The number of the certificate or certificates of such shares; (6) The number of shares to be sold; (c) The amount of the assessment due and unpaid; and (d) The time and place of sale; such shares, or such proportion thereof as shall suffice to pay such assessment, together with all proper costs and interest, may be sold at public auction to the highest bidder for cash: Provided that due notice shall be served upon the subscriber or holder of such shares by registered letter to his last known address of the action proposed to be taken by the company, and should he pay the full assessment and costs such sale shall not be held; Provided further that if the price of the shares so sold exceeds the amount due with interest and costs thereon, the excess shall be paid to the defaulting subscriber or holder. (8) No subscriber or shareholder for shares in any company so incorporated shall be personally liable for non-payment of any calls upon his shares beyond the forfeiture and sale in the event of the non-payment of such calls of the amount, if any, already paid on the shares held or subscribed for; nor shall such sub- scriber or shareholder be personally liable for any debt contracted by the company or for any sum payable by the company beyond the amount paid by him upon such shares. Alberta (ss. 63-68). The Alberta Act contains provisions similar to, but more elaborate than, those contained in the 120 HANDBOOK ON COMPANIES. Saskatchewan Act, the Alberta sections being worded so as to expressly include oil and natural gas companies. British Columbia (ss. 2, 21, 136-140). The Act provides for the incorporation of speci- ally limited mining companies. The memorandum of association must be in accordance with Form 3 in the Second Schedule to the Act, and must state, inter alia, the name of the company, with " Limited (Non-Personal Liability)" as the last words in its name; that the objects of the company are restricted to mining, adopting the wording of s. 21 (c) ; that the liability of the members is limited, and no per- sonal liability shall attach to any member. Pro- visions relating to specially limited companies appear in Part VII. of the Act. The more impor- tant of these provisions are as follows : 136. No member of a specially limited company shall be personally liable for the amount (if any) unpaid on his shares or for any debt contracted or payable by the company. R. S. 1911, c. 39, s. 135; 1920, c. 14, s. 9. 137/ (1) Notwithstanding anything in the articles contained, no share in a specially limited company shall be forfeited for failure to pay a call on the day appointed for payment thereof, until the directors have served a notice on the shareholder naming a further day (not earlier than the expiration of sixty days from the date of the notice) for payment of the call, and stating that in the event of non-payment on or before that day the share in respect of which the call was made will be liable to be forfeited. (2) Subject to this section, the regulations in Table A in the First iSchedule relating to the forfeiture of shares for failure to pay a call shall be the regulations of a specially limited company whose articles contain no such regulations. R. S. 1911, c. 39, s. 134; 1920, c. 14, s. 9. 138. (1) Every certificate of shares issued by a specially limited company shall bear upon the face thereof, in conspicuous type, after the name of the company, the words " Issued under Part VII. of the ' Companies Act, 1921,' respecting specially SHAKES. 121 limited mining companies," and where any such share is not fully paid the word " assessable," or if fully paid the word " non- assessable," as the case may be. (2) Every company which makes default in complying with the requirements of this section shall be guilty of an offence against this Act. R. S. 1911, c. 39, s. 132; 1920, c. 14, s. 9. 139. (1) Notwithstanding the provisions of section 108, a specially limited company may pay or allow a discount to any person in consideration of his subscribing or agreeing to sub- scribe for any share of the company, if the payment or allowance of the discount is authorized by the memorandum or articles, and the discount \paid or allowed does not exceed the amount so authorized, and, in the case of shares offered to the public for subscription, the amount so authorized is disclosed in the pros- pectus. . . . Calls. Shares are sometimes paid for in full before or upon allotment ; sometimes the application provides for payment by specified instalments; or a certain amount is paid upon application, a certain amount upon allotment and the balance remains unpaid subject to being called up by the directors. In the absence of contract, the shareholder is not bound to pay anything until the directors call upon him to pay. The directors, in making calls, must observe the provisions and restrictions (if any) of the^gov- erning Act, charter and by-laws or articles. In the absence of special restrictions they may call up the whole amount unpaid at one time, but it is usual to do so by instalments. Where shares have been sub- scribed for on the terms of a prospectus or an agree- ment under which they are to be payable by fixed instalments, the directors cannot increase such instalments, or, by means of calls, make the sub- scriber anticipate the dates of payments. Where a call is made upon all shareholders without Idis- crimination or partiality, the court will not inter- fere to determine whether the call was necessary 122 HANDBOOK ON COMPANIES. or not. The directors must not favor themselves or any group of shareholders. In making calls, the rule is that the assessment should fall equally on all. The directors cannot agree that a shareholder shall not be liable for calls ; nor, after a call has been made, can they release a shareholder from his lia- bility to pay it. The by-laws or articles commonly provide that the directors may from time to time make such calls as they think fit on the shareholders in respect of all moneys unpaid on the shares held by the share- holders respectively and not by the conditions of allotment made payable at fixed times; that each shareholder shall pay the amount of every call to the persons and at the times and places appointed by the directors; that a call may be made payable by instalments ; that it shall be deemed to have been made when the directors' resolution authorizing it was passed; that a specified notice (usually fourteen days) of any call shall be given specifying the time and place of payment and the person to whom pay- ment is to be made ; that interest at the rate speci- fied shall be payable on overdue calls. A call must be made by a quorum of directors, duly qualified, duly elected and at a meeting regu- larly convened. If the meeting is irregularly held or there are other irregularities, the call will be invalid, but a defective call can be subsequently con- firmed at a regular meeting. The by-laws or arti- cles frequently provide that the acts of defectively appointed or disqualified directors shall be valid. For a form of resolution making a call, see App. Form 17. A proper notice must be served on each share- holder, bringing to his attention the fact that a call SHAEES. 123 has been made, and requiring him to pay the amount due in respect of his shares. In some jurisdictions, e.g., Ontario, the notice must state that in default of payment the shares are liable to forfeiture. The terms of the notice and the mode of its ser- vice (usually by mailing), must be in accordance with the by-laws or articles and the resolution mak- ing the call. For form of notice, see App. Form 18. Evidence should be kept that the notice was duly mailed. If a call is not paid on the due date it carries interest at the rate (if any) specified in the governing Act or the by-laws or articles. The Dominion, Quebec and New Brunswick Acts authorize the directors to receive payment in advance of calls. In Nova Scotia, Saskatchewan, Alberta and British Columbia, the articles of the company may contain similar provisions. In Ontario and Manitoba there is no provision for pre-payment. Provisions relating to calls appear in the statutes of the following jurisdictions as indicated : Domin- ion (ss. 58-63) ; Ontario (s. 62) ; Quebec (arts. 5998- 6002); Manitoba (ss. 53-58); New Brunswick (ss. 64-68) ; Nova Scotia (ss. 39, 40, 53, 59, 118) ; Sas- katchewan (ss. 51, 65, 130) ; Alberta (ss. 69, 136) ; and British Columbia (s. 79). Enforcement of calls. 1. Forfeiture. If a call is not paid on the day appointed, the directors are usually entitled, after serving a fur- ther demand or notice on the delinquent shareholder requiring the call to be paid by a certain date, to declare the shares forfeited. The power to forfeit shares must be exercised for the benefit of the com- pany, not, e.g., for the benefit of a shareholder by 124 HANDBOOK ON COMPANIES. relieving him of his shares if these are worth noth- ing. In the latter case, the directors should sue the shareholder for the calls; for it is the duty of the directors to compel the shareholder to pay, and they must bona fide believe that they cannot obtain payment from the shareholder before they are jus- tified in forfeiting the shares. The right of for- feiture must be exercised with the utmost exactness, and in accordance with the provisions of the govern- ing Act, by-laws or articles ; otherwise the forfeiture may be invalid and the shareholder entitled to relief. For form of notice of intended forfeiture and form of resolution forfeiting shares, see App. Forms 19 and 20. Shares cannot be forfeited for non-payment of fixed instalments under a subscription, unless such instalments are assimilated to calls by the govern- ing Act or the company 's regulations ; for such fixed instalments are not calls. The effect of a valid for- feiture is that the person whose shares are forfeited ceases to be a shareholder, and unless the governing Act or the company's regulations otherwise pro- vide, he ceases to be liable for past or future calls. In the case of companies incorporated by memoran- dum and articles, it is commonly provided that the former shareholder remains liable for all calls due at the time of forfeiture. Some Acts provide that the former shareholder remains liable to the com- pany's creditors for the full amount unpaid on his shares at the time of forfeiture, less any sums sub- sequently received by the company (Dominion, Que- bec and New Brunswick). The shareholder is, how- ever, relieved of his liability to the company. Under the Ontario Act, forfeiture ' shall not relieve the shareholder of any liability to the company or to any creditor' (s. 62). SHARES. 125 The by-laws or articles frequently provide that the directors may rescind a forfeiture upon certain terms, but this cannot be done unless the shareholder consents. The provisions relating to forfeiture appear in the following jurisdictions as indicated: Dominion (s. 62) ; Ontario (s. 62) ; Quebec (art. 6001) ; Mani- toba (s. 56) ; New Brunswick (s. 68). The Acts of Nova Scotia, Saskatchewan, Alberta and British Col- umbia leave forfeiture to be dealt with in the articles. 2. Action for amount of call. Where the company 's shares are unsaleable or are worth less than what has been already paid on them, it will be more advantageous to bring an action against the shareholder to enforce payment of the calls than to forfeit the shares. In some jur- isdictions there is a statutory right of action for calls; in others, calls are, in effect, made statutory debts, and recoverable by action, which amounts to the same thing. In most jurisdictions recovery of calls by action is expressly made an alternative to the remedy of forfeiture. 3. Sale of shares (mining companies). The special remedy in some jurisdictions by way of sale of shares for non-payment of calls exists only in the case of mining companies, which have been considered above, at pp. 113 ff. Purchase by company of its own shares. A company, unless expressly authorized by Stat- ute, can not purchase its own shares. The principle is that the company's capital is a fund to be used for the carrying on of the company's business, and the payment of creditors; and the purchase of its own 126 HANDBOOK ON COMPANIES. shares by the company obviously involves a mis- application and reduction of that fund. Subject to special regulations and restrictions for the protec- tion of creditors, the different Acts provide that a company may reduce its capital in various ways, which may include the repayment of paid-up share capital in excess of its needs. See "reduction of capital" below, at p. 240. But short of following such procedure a company cannot directly or indi- rectly (e.g., by carrying on the purchase through a trustee for the company) buy its own shares, or use its moneys for that purpose. Nor will a com- pany be bound by a contract to re-purchase its own shares. This is a point which is sometimes over- looked or concealed by over-zealous stock-salesmen in giving such an undertaking on behalf of the com- pany in order to persuade unwilling purchasers. The above is subject to the statutory provisions in some jurisdictions for the issue of preference shares subject to redemption or re-purchase by the company (see p. 90, above); and to the provisions in some jurisdictions authorizing the purchase of fractions of shares as incident to the consolidation of shares of small par value into shares of larger amount. Surrender of shares. The objections to and the rule against permit- ting a company to re-purchase its own shares apply with equal force to the surrender of shares and the cancellation of an allotment already made. Where, however, a power to forfeit shares has become exer- cisable, a surrender may be taken as a short cut to forfeiture; and also where there is a bona fide dis- pute between the shareholder and the company as SHARES. 127 to whether the shares have 'been legally issued, shares may be taken back by way of compromise, but not where the shareholder admits that he is a shareholder. Legal advice should be taken where it is proposed to accept a surrender of shares. The company 's money may not be used to get rid of a shareholder who is objectionable, or one who desires to retire; but there is nothing to prevent another shareholder, whether he is a director or not, from using his own money to buy the shares and by having them transferred to himself or some third person, thereby accomplishing the same result. After shares have been allotted and notice of allotment given, the subscription and allotment can- not be cancelled, unless there is a bona fide dispute whether the allottee has become a shareholder or not. 128 HANDBOOK ON COMPANIES. CHAPTEK VIII. TRANSFER OF SHARES. A shareholder is entitled to transfer his shares to anyone else, on complying with the regula- tions of the governing Act, by-laws or articles. Shares may be transferred in the manner pre- scribed in the by-laws or articles of the com- pany, which always require a transfer to be in writing signed by the transferor and sometimes also by the transferee. It is also invariably provided by statute or the company's regula- tions that registration of the transfer and entry of the name of the transferee in the register of share- holders in place of the transferor is requisite. Until this is done the transferor remains liable as a share- holder for any amount unpaid on his shares. Fre- quently certificates are endorsed in blank by the holder, and pass through several hands until the last holder fills in his name (which he has implied authority to do), and presents the certificate to the company or to the registrar and transfer agent for registration in 'his own name. The person who is purchasing or lending money on the security of shares should not pay over his money till he is assured that there will be no objection to the transfer being registered. ^ Of ten the governing Act, or the company's by-laws or articles, enable the directors to refuse to permit a transfer by a shareholder indebted to the company, or give the company a lien on, and right of sale over, shares of a shareholder indebted to the company; or restrict the transfer of TRANSFER OF SHARES. 129 shares with calls unpaid or not fully paid, even where no calls are in arrear; or provide that no transfer shall be made to a person of whom the direc- tors do not approve. If the shares are those of a ' * private company, ' ' there is always a restriction on transfers (see p. 76). There may also be a court order in existence enjoining the transfer of specific shares. Upon an ordinary sale of shares the trans- feror is not impliedly bound to procure registration of the transfer; he need only hand the transferee the certificate and the transfer ; but he must not pre- vent or delay registration of the transfer. Specific performance of an agreement to sell shares may be granted. The form of transfer is usually printed on the back of the certificate (App. Form 21), but transfer by a separate document in a special form or in the 1 * usual common form" (App. Form 22), may be pre- scribed. Where a given form is prescribed by the by-laws or articles it should be followed, and the directors should refuse to register a transfer unless it substantially complies with the regulations. If it does, they must permit registration. (See Com- pany Law, p. 333) . Restrictions on transfers. The directors are usually entitled to refuse to permit the transfer of unpaid shares, shares with calls unpaid thereon, or shares of a shareholder indebted to the company. Their authority in this regard is conferred by the Act and by-laws (letters patent companies), or by the articles (memorandum companies). In the case of companies of the latter class, the articles may contain further restrictions, H.C. 9 130 HANDBOOK ON COMPANIES. but in the case of companies incorporated by letters patent the by-laws must not attempt to restrain the transfer of fully paid shares, except where the trans- feror is indebted to the company, and the company is permitted to refuse to allow a transfer in such case. Under the Dominion and Ontario Acts, where it is desired to restrict the transfer of fully paid shares, the company should be incorporated as a "private company." In New Brunswick the trans- fer of shares may be restricted by by-law unani- mously confirmed by the shareholders ("close cor- poration"; see p. 81). Loans on security of shares. It is a common commercial practice o make loans on the security of shares. If the shares are fully paid the lender should take a transfer to himself or a trustee, register the transfer and obtain a new cer- tificate from the company prior to making the advance. This alone will give the lender absolute security. Another method is for the borrower to deposit the share certificates with the lender endorsed in blank, the lender retaining the certifi- cates until the loan is repaid. As the lender does not acquire a complete title to the shares until registra- tion, he runs the risk of having his security defeated. For the company may register a subsequent transfer without requiring production of the certificate, or the company may have a lien on the shares for the indebtedness of the shareholder. Furthermore, until registration of the transfer to the lender, the bor- rower will receive dividends and be entitled to vote on the shares. If the shares are not fully paid up the lender should' take a charge on the shares and notify the TRANSFER OF SHAKES. 131 company, or have the shares pledged to him endorsed in blank. It is almost unnecessary to say that, as a general rule, shares which are not fully paid or shares on which no dividends are being paid are a very undesirable security. If the borrower fails to repay the loan at the appointed time, the lender should take legal advice for the purpose of enforcing his security. Even in the absence of express agreement, the lender may be entitled to foreclose or sell the shares. Transfer practice. Most large companies employ another company (usually a trust company) as registrar and transfer agent to record transfers of shares and issue share certificates. The following are some of the points which commonly arise to be dealt with by the secre- tary, where there is no registrar and transfer agent, or the transfer officer where there is a registrar and transfer agent. (1) Genuineness of signature. The company is bound not to take an existing shareholder off the register unless he has executed a transfer. If it acts on a forged transfer, it is liable to the shareholder in damages, or may have to go into the market and buy other shares to replace those improperly transferred. The company may, as a precaution, advise the registered holder of the transfer, but the protection derived from this prac- tice is apt to be illusory, except in jurisdictions where it is expressly provided for (Ontario, s. 61). It is a more useful precaution to require the person pre- senting the transfer to procure the endorsement to be guaranteed by a bank or by a firm of stockbrok- ers on a recognized stock exchange. 132 HANDBOOK ON COMPANIES. (2) Regularity of endorsement. The signature should correspond exactly with the name on the face of the certificate. Most forms of endorsement printed on the back of the certificate call for the witnessing of the signature of the trans- feror, but the absence of a subscribing witness is not fatal. (3) Change of name. In the case of the marriage of a female share- holder and consequent change of name, a statutory declaration should be required setting out the facts and showing that the names on the face of the certifi- cate and in the endorsement are those of the same person. As shares are personal estate and are governed by the law of the shareholder 's domicile, it is import- ant to obtain the concurrence of the husband in the transfer of shares by a female married shareholder domiciled in a jurisdiction, e.g., the Province of Que- bec, where such concurrence may be requisite, or, where the domicile of the shareholder is in doubt, to obtain a declaration covering the matter. (4) Transfers by executors and administrators. Production of the original probate or letters of administration, or a duly certified copy, should be required, but the company need not examine the will to ascertain whether it confers authority to transfer the shares. By production of the probate the com- pany acquires notice only of the names and addresses of the executors and is not entitled to assume that a transfer by the executors involves a breach of trust. If there is more than one executor or adminis- trator, all should concur in the transfer. TEANSFEE OF SHAEES. 133 In the case of transfers by foreign executors or administrators, the taking out of ancillary letters pro- bate or ancillary administration, or the re-sealing of the probate or letters of administration in the prov- ince where the head office of the company is situated must be exacted. It is furthermore necessary in such cases for the company to require proof of com- pliance with the provisions of the Succession Duty Act of the province in which the register of the com- pany is situated. In most provinces such Acts for- bid the registration of transfers by foreign executors unless succession duty has been paid or a bond given to secure payment thereof. If no succession duty is payable, the executors or administrators should fur- nish the company with a letter from the Provincial Treasurer to that effect. (5) Transfers to and ~by partnership firms. In the case of a transfer to a partnership firm, strictly the new certificate should be made out in the name of the individual partners and not in the name of the firm ; but the existing practice is to regis- ter the firm as shareholder. However, any transfer by the partnership ought to be signed by each indi- vidual partner in his own name, unless the busi- 'ness of the partnership is to deal in shares. (6) Custody of certificates after transfer. A certificate, after transfer, should be cancelled and attached to its counterfoil in the certificate book. If all the shares comprised in the certificate are not transferred, a fresh certificate for the balance is issued to the transferor. (7) Transfers executed under power of attorney. Where the transfer is not signed by the share- holder himself, but by some one as attorney for him, 134 HANDBOOK ON COMPANIES. the original power of attorney must be produced to and retained by the company or the transfer agent. (8) Loss, destruction or defacement of certificate. See p. 106, above. Tax on transfers of shares and securities. (a) All companies. The Dominion Special War Revenue Act, 1915, as amended in 1920, c. 71, and again in 1922, imposes a stamp tax on sales or transfers of shares and bonds of any company. The provision reads as follows : (13) (a) No person shall sell or transfer the stock or shares of any association, company or corporation, or any bond other than a bond of the Dominion of Canada or of any province of Canada, by agreement for sale, entry on the books of the associa- tion, company or corporation, by delivery of share certificates or share warrants or bond endorsed in blank or bond payable to bearer, or in any other manner whatsoever, or accept the transfer or delivery of any stock or share or bond unless in respect of such sale or transfer there is affixed to or impressed upon the document evidencing the ownership of such stock or shares or bond, or a document showing the transfer or agreement for the transfer thereof, an adhesive stamp, or a stamp impressed thereon by 'means of a die of the value of three cents for every one hundred dollars or fraction thereof of the par value of the stock or shares or bond sold or transferred. Provided that in case of sale where the evidence of transfer is shown only by the books of the company the stamp shall be placed or impressed upon such books; and where the change of ownership is by transfer of the certificate or bond the stamp shall be placed or impressed upon the certificate or bond; and in case of an agreement to sell or where the transfer is by delivery of the certificate or bond assigned in blank, or bond payable to bearer, there shall be made and delivered by the seller to the buyer a bill or memorandum of such sale, to which the stamp shall be affixed or impressed; and every bill or memorandum of sale or agreement to sell before mentioned shall show the date thereof, the name of the seller, the amount of the sale, and the matter or thing to which it refers. Provided that the first delivery by a corporation or company of such shares, or debenture stock, in order to effect an issue, or the first issue of a bond or a sale or transfer of any bond between any recognized dealers or brokers, shall not be subject to the tax imposed by this subsection. The Governor-in-Council may make TRANSFER OF SHARES. 135 regulations for the purpose of determining what constitutes a sale or transfer under this subsection. (b) Any person who violates any of the provisions of this sub- section shall be liable to a penalty not exceeding five hundred dollars. The department administering the above Act is the Department of Customs and Inland Kevenue. It should be noted that the tax is imposed on transfers of share warrants, share certificates and bonds ; and on the transfer by delivery of certificates endorsed in blank, notwithstanding that the trans- fer may never be registered in the books of the com- pany. Where a person buys or sells through a broker, delivery of the shares to the broker is deliv- ery to an agent and does not constitute a sale or transfer. Where shares are assigned in blank and deposited with a banker or other person as collateral security for an advance made, or to be made, the transaction is not a sale or transfer within the mean- ing of the Act. In the event of default by the bor- rower, and sale by the lender, the sale constitutes only one taxable transaction. " Stock" as used in the above section, in the opin- ion of the Department, includes debenture stock. In cases where both transferor and transferee are resident outside of Canada, and the whole transac- tion takes place outside of Canada, the tax does not apply; but, if one of the parties resides in Canada, the document which he gives or receives evidencing the transfer or sale must be stamped. The fact that the company's share register is (kept outside of Canada does not affect the foregoing (Ruling, Aug. 13th, 1920). Where shares of no par value are transferred the tax is assessed on the value of the shares at the time of sale (Ruling, Dec. 21st, 1920). 136 HANDBOOK ON COMPANIES. The stamps are obtainable from the local Domin- ion Inland Revenue Office. The recognized stock exchanges have an arrange- ment with the Department whereby the amount of the tax on the transactions which have taken place in the particular exchange is paid at the end of each week. (b) Ontario. The Corporations Tax Act, E. S. 0. 1914, c. 27, s. 12, as amended, provides in part as follows : 12. There shall be levied a tax of three cents, payable by the transferor in money or stamps, for every $100 or frac- tion thereof of the par value upon every change of owner- ship consequent upon the sale, transfer or assignment of shares, or debenture stock issued by any corporation or com- pany made or carried into effect in Ontario; but the first delivery by the corporation or company of such shares, or debenture stock, in order to effect an issue, shall not be subject to the tax imposed by this section. 1 Geo. V. c. 5, s. 2, part; 1920, c. 9, s. 7. Further provisions appear in ss. 12a and follow- ing. Section 15 declares in effect that the tax does not apply to transfers as security or transmissions on death. Corporations are required to make annual returns as to transfers. The form of return is annexed to the form of annual summary obtainable from the department of the Provincial Secretary. It should be noted that transfers of debenture stock as well as shares are taxed. Eegulations regarding the transfer tax have been made by Orders-in-Council, 19th May and 16th June, 1911, copies of which can be obtained from the Department. The regulations provide, inter alia: that transfers shall be held to have been made bona fide for the security of loans, if at the time of making the same the transferor makes an affidavit to that effect; that corporations whose shares are dealt in on any recognized stock exchange may accept the TRANSFER OF SHARES. 137 signed statement of any officer or member of a Stock Exchange, or any one of the member 's firm, that the tax has been paid through the executive of the Exchange; that corporations may accept the signed statement of any member of the Exchange, or any firm to which such member belongs, or any bank or loaning institution, that any transaction is by way of security for a loan or is a loan of stock, where- upon the same shall be free from tax. Where the share register is kept in Ontario, the tax is payable on all transfers, irrespective of the place of residence of the transferor and transferee, and irrespective of where the transfer takes place, on the ground that the transfer really takes place where the register is kept (Ruling, Oct. 19th, 1920). If an Ontario company keeps its share register outside of Ontario, as it may if it takes the proper steps under the Act in that behalf (see p. 219), it is not the practice to pay transfer tax on transfers, where the transaction takes place wholly outside the Province (e.g., a sale on a foreign exchange, where transferor and transferee are both resident outside the jurisdiction). Stamps are obtainable from the Provincial Treasurer's Office, and in Toronto also from the Stamp Office, Osgoode Hall. The tax may be paid, if desired, in money remitted to the Provin- cial Treasurer. The Department has ruled that the transfer tax on shares of no par value is three cents per share. Annual Return. Companies must make an annual return to the Provincial Treasurer, Toronto, showing every sale, transfer, assignment of shares or debenture stock issued, made or carried into effect in Ontario, .to- gether with the amount of transfer tax collected (s. 12a (1)). 138 HANDBOOK ON COMPANIES. A company, however, whose shares or debenture stock are sold upon an incorporated stock exchange is permitted to make a return showing annually the total amount of all sales, transfers, assignments, and the total amount of the transfer tax collected (s. 12a (1) a). A company which has appointed a Trust Com- pany as transfer agent for its shares or debenture stock is permitted, instead of making a return of every sale, transfer, etc., to file a statement from its transfer agent to the effect that the tax on all trans- fers made during the preceding year has been accounted for in accordance with the provisions of the Act and regulations pertaining thereto (s. 12a (1) b). The return and affidavit verifying the same is to form part of and be attached to the annual summary or return required under the Ontario Companies Act to be forwarded on or before the 1st February in each year. (c) Quebec. A tax is imposed on the transfer of shares, bonds, debentures or debenture stock. Articles 1360-1362 of E. S. Q. 1909, as amended, read as follows : 1360. In order to provide for the exigencies of the public service, there shall be levied, in accordance with the rules herein- after set forth, a tax upon every change of ownership consequent upon the sale, transfer or assignment of shares, bonds, debentures or debenture-stock issued by any corporation or company, made or carried into effect in this province; but the first delivery by the corporation or company, of such shares, bonds, debentures or debenture-stock, in order to effect an issue, is not subject to the tax imposed by this article. (6 Ed. VII. c. 12, s. 1; 1 Geq. V. c. 11, s.l). 1361. Such tax shall be paid in money or in adhesive stamps, according to the laws of this province, and particularly In accord- TRANSFER OF SHARES. 139 ance with the provisions of section twenty^third of this chapter respecting stamps (Articles 1443 to 1479), and with any order-in- council passed or to be passed respecting the same. (6 Ed. VII. c. 12, s. 2). 1362. The amount of money which shall foe paid or of stamps which shall be affixed shall be two cents for every hundred dollars or fraction thereof of the par value of such shares, bonds, deben- tures or debenture-stock, sold, transferred or assigned. (6 Ed. VII. c. 12, s. 3). In the case of shares which have no fixed par value, the amount of money which shall be paid or of stamps which shall be affixed shall be two cents for every such share, except when the market value of such share is more than one hundred dollars, in which case the amount shall be two cents for every hundred dollars or fraction thereof of such market value. (7 Geo. V. c. 19). Further provisions appear in arts. 1363-1373. Regulations have been issued and are obtainable from the Treasury Department, Revenue Branch, Quebec. Stamps may be obtained from the Deputy Collector of Provincial Revenue, Montreal. It' desired, the tax may be paid in money. Statutory provisions relating to transfer of shares. The various Acts contain provisions relating to the transfer of shares. The important of these are summarized below. Dominion (ss. 56; 64-68; 83). Shares are personal estate, transferable in the manner prescribed by the Act, letters patent or by- laws. Except for the purpose of exhibiting the rights of the parties, and making transferor and transferee jointly and severally liable to the com- pany and its creditors, a transfer is invalid until it is registered. Transfers made by sale under execu- tion or judgment or order of a Court are excepted. A further exception is made in the case of shares of any company listed and dealt with on any recog- 140 HANDBOOK ON COMPANIES. nized stock exchange, by means of scrip, commonly in use, endorsed in blank and transferable by deliv- ery. Such endorsation and delivery constitute a valid transfer, except for the purpose of voting at meetings. Shares which are not fully paid up can- not be transferred without the consent of the direc- tors. If the directors permit a transfer of shares, which are not fully paid, to a person not apparently having sufficient means to pay them up, they incur liability. Shares with calls thereon in arrear are not to be transferable. The directors may decline to register any transfer of shares belonging to a share- holder who is indebted to the company. A transfer by a personal representative of a deceased share- holder is valid, even though he is not himself a share- holder. Ontario (ss. 55-61, 121). Shares are personal estate, transferable in the manner prescribed by the Act, letters patent or by- laws. Shares not fully paid up cannot be transferred without the consent of the directors. Where any such transfer is made, with the consent of the direc- tors, to a person who is not apparently of sufficient means to pay up such shares, the directors incur liability. The directors may decline to register a transfer of shares belonging to a shareholder who is indebted to the company, if the letters patent or by-laws so provide. If shares with a call thereon unpaid are transferred, both the transferor and transferee are liable for the call. The directors may close the transfer books for two weeks immediately preceding the payment of a dividend. A transfer is not valid until it is registered, except for the pur- pose of exhibiting the rights of the parties, and, if TRANSFER OF SHARES. 141 it is an absolute transfer, making transferor and transferee jointly and severally liable to the com- pany and its creditors. Transfers made by sale under execution or under the order or judgment of a Court are excepted. In case of doubt, when a transfer is presented, the company may notify the owner of the shares. Thereupon, unless the owner takes steps to restrain the transfer, the company may enter the transfer without incurring liability to the owner for doing so. If the name of any person is, without sufficient cause, entered in or omitted from the books of the company, application may be mado to the Court for the rectification of the books. Quebec (arts. 5987; 6003-6008). Shares are moveable property, transferable in the manner prescribed by the Act, letters patent or by-laws. A transfer is not valid until it is entered in the register of transfers, except for the purpose of exhibiting the rights of the parties, and of making transferor and transferee jointly and severally liable to the company and its creditors. Transfers made by sale under execution or judgment or order of a Court are excepted. A further exception is made in the case of shares of any company listed and dealt with on any recognized stock exchange, by means of scrip, commonly in use, endorsed in blank and trans- ferable by delivery. Such endorsation and delivery constitute a valid transfer, except for the purpose of voting at meetings. Shares which are not fully paid up cannot be transferred without the consent of the directors. If the directors permit a transfer of shares, which are not fully paid up, to a person not apparently having sufficient means to pay them up, they incur liability. Shares with calls thereon in 142 HANDBOOK ON COMPANIES. arrear are not to be transferable. The directors may decline to register any transfer of shares belonging to a shareholder who is indebted to the company. A transfer by a representative of a deceased shareholder is valid, even though he is not himself a shareholder. Manitoba (ss. 46, 57, 59-65). Shares are personal estate, transferable in the manner prescribed by the Act, letters patent or by-laws. The directors may refuse to allow the entering of transfers of shares on which a call has been made, which has not been paid in. A transfer is not valid until it has been entered in the books of the company, except for the purpose of exhibiting the rights of the parties, and of making transferor and transferee jointly and severally liable (ad interim) to the company and its creditors. Trans- fers made by sale under execution are excepted. New Brunswick (ss. 50, 70-75). Shares are personal estate, transferable in the manner prescribed by the Act, letters patent or< by-laws. A transfer is not valid until it is entered in the register of transfers, except for the purpose of exhibiting the rights of the parties, and of making transferor and transferee jointly and severally lia- able to the company and its creditors. Transfers made by sale under execution or decree, order or judgment of a Court are excepted. A further excep- tion is made in the case of shares of any company listed and dealt with on any recognized stock exchange, by means of scrip, commonly in use, endorsed in blank and transferable by delivery. Such endorsation and delivery constitute a valid transfer, TRANSFER OF SHARES. 143 except for the purpose of voting at meetings. No transfer of shares, whereof the whole amount, or, if issued at a discount pursuant to s. 52, any part of the issue price, has not been paid in, is to be made without the consent of the directors. Shares are not to be transferable until all previous calls thereon are fully paid. The directors may decline to register any transfer of shares belonging to a shareholder who is indebted to the company. The transfer book may be closed, pursuant to by-law, for five days pre- vious to the declaration of any dividend. The trans- fer book may not be closed more than four times in any one year. A transfer by a personal representa- tive of a deceased shareholder is valid, even though he is not himself a shareholder. The company may be made a "close corporation" by by-law passed by the directors and unanimously confirmed by the shareholders. Thereupon the transfer of shares to persons other than shareholders will be subject to restriction as provided in the by-law. Nova Scotia (ss. 27, 31-37). Saskatchewan (ss. 35, 38-41, 44-48). Alberta (ss. 26, 28-30, 34, 38, 42). British Columbia (ss. 66-71). Shares are personal property and are transfer- able in the manner provided by the articles, where most of the provisions relating to the transfer of shares will be found. No notice of any trust must be entered on the register or be receivable by the regis- trar. In British Columbia, an executor, trustee, etc., may be entered as a member and described as repre- senting, in such capacity, a named estate or person. A transfer of shares of a deceased member by his personal representative, who is not himself a mem- 144 HANDBOOK ON COMPANIES. ber, is to be as valid as though he had himself been a member. The company may, after notice by adver- tisement, close the register of members for periods not exceeding thirty days in each year. If the name of a person is, without sufficient cause, entered in or omitted from the register, or, if default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member, the person aggrieved or the company or any member may apply to the Court for rectification of the register. The register is prima facie evidence of any matters authorized by the Act to be inserted therein. In Saskatchewan and Alberta, a transfer te escape liability, made for a nominal or no considera- tion, or to a person in the menial or domestic service of the transferor, is deemed fraudulent and need not be recognized by the company or a liquidator. DIEECTOES. 145 CHAPTER IX. DIRECTORS. Number, election, vacancies, failure to elect. Dominion (ss. 72-78). Ontario (ss. 83-85, 88-90). Quebec (arts. 6012-6014, 6016-6018). Manitoba (ss. 2'4-33). New Brunswick (ss. 82-88). The affairs of the company must be carried on by a board of directors, consisting of not less than a stated minimum, and in some jurisdictions not more than a stated maximum. The first, or provis- ional, directors must be named as such in the letters patent, and act until they are replaced by others duly appointed in their stead. As to the powers of provisional directors, see Company Law, p. 437. The number of the directors is determined by the by-laws, subject to the statutory limit above men- tioned. Under the Dominion and Quebec Acts, the number may be increased or decreased by by-law, which does not, however, take effect until (a) it has been confirmed by two-thirds in value of the share- holders present at a special general meeting, and (b) a certified copy has been filed with the Department, and (c) published in the Dominion or Provincial Gazette, as the case may be. In Ontario the requirements are the same except that the by-law becomes effective upon confirmation. H.C. 10 146 HANDBOOK ON COMPANIES. In Manitoba the number of the board may be regulated from time to time. In New Brunswick the number of the board may be increased or decreased by by-law, which is not, however, to be valid or to be acted upon unless it is approved by two-thirds in value of the shareholders at an annual meeting or a special general meeting. Upon such approval the by-law becomes effective, and may be acted upon forthwith, unless, prior to its being acted upon, a shareholder or the representative of a shareholder, files with the secretary of the meet- ing a protest against such by-law. If a protest is filed, the by-law is not to become effective or to be acted upon unless or until a copy certified under the seal of the company has been deposited in the office of the Provincial Secretary-Treasurer and approved by him. The directors must be elected by the share- holders in general meeting. The meeting must be held in Canada, in the case of Dominion companies ; within the incorporating province in the case of pro- vincial companies. In Ontario and New Brunswick the meeting may be held outside the province if the letters patent so provide. The by-laws generally provide that the directors hold office for one year, that the election take place at the annual meeting and that retiring directors may be re-elected. In the absence of such by-laws the regulations of the governing Act apply. Among such regulations is a provision that the election of directors must be by ballot. In Manitoba a director may nominate a person to act in his place for a limited period (s. 33). Such a nominee is called an ' ' alternate director. ' ' In New Brunswick there is a special provision (s. 87), whereby a specified minority of the share- DIRECTORS. 147 holders may, acting as a unit, elect one director. Vacancies occurring during the term of office may be filled by the remaining directors from among the qualified shareholders. If the election of directors does not take place at the proper timo, i.e., the annual meeting, the retiring directors continue in office till their successors are elected. Such election may take place at a subsequent meeting of the shareholders. Nova Scotia. Saskatchewan. Alberta. British Columbia. Most of the provisions relating to directors will be found in the articles. The articles, or, if there are none, then the statutory articles contained in Table " A " will provide for the management of the company's affairs by a board of directors. The articles will usually name the first directors, in which event, in some jurisdictions, there is a statu- tory requirement that the persons so named must file a written consent to act and sign the memorandum of association for their qualification shares or file a written contract to take them. See p. 18, above. Sometimes the articles authorize the subscribers to the memorandum to appoint the first directors. The number of the board is generally fixed by the articles, but is sometimes left to be determined in writing by a majority of the sub- scribers to the memorandum. A common provision in articles is that the board shall consist of not less than a stated number and not more than a stated number; that all or a stated proportion of the direc- tors shall retire at the first ordinary meeting of the members in every year, at which meeting their sue- 148 HANDBOOK ON COMPANIES. cessors are to be elected; that retiring directors are to be eligible for re-election and are to continue in office until their successors are appointed; that the company may, in general meeting, increase or reduce the number of directors ; that the directors may fill up a casual vacancy occurring in the board. Qualification. Dominion (s. 75). Ontario (s. 87). Quebec (art. 6015). Manitoba (s. 26). New Brunswick (s. 85). A director, to be qualified, must be or become a shareholder. He must hold the number of shares required by the by-laws ; must hold them absolutely in his own right, and must not be in arrears in re- spect of calls on such shares. The by-laws commonly fix the qualification of a director as the holding of one share. Whether possession of the prescribed qualification is a condition precedent to a valid elec- tion depends on the wording of the Act and by-laws. Under the Dominion Act, where a person is named as director in a prospectus or notice in lieu of prospectus the provisions of s. 75 (2) as to filing a consent and a contract to take his qualification shares must be complied with (see p. 23, above). Nova Scotia (s. 72). Saskatchewan (ss. 88-91). British Columbia (ss. 83-86). The articles commonly require a director to hold a certain number of shares (usually one) as a quali- fication. Apart from such a provision, a person DIRECTORS. 149 need not be a shareholder in order to be a director. If a share qualification is imposed, a director, who is not already qualified, must obtain his qualification within two months (Nova Scotia three months) after his appointment, or within such shorter time as may be fixed by the articles. If he fails to obtain his qualification, he loses his office and cannot be reappointed until he does obtain his qualification. If an unqualified person acts as director after the expiration of the above period or shorter time, he is liable to a penalty. The acts of a director are valid notwithstanding any defect that may afterwards be discovered in his appointment or qualification. In British Columbia, at least one director must reside in the province. As to restrictions on appointing directors or naming persons as directors in a prospectus, see p. 18, above. Alberta (s. 60). The articles commonly require a director to hold a certain number of shares (usually one) as a qualifi- cation. Apart from such a provision, a person need not be a shareholder in order to be a director. As to restrictions on appointing directors or naming persons or directors in a prospectus, see p. 18, above. Disqualification, retirement, removal. The by-laws or articles invariably provide that a director shall ipso facto vacate his office in certain events, which are usually the following: 1. If he becomes bankrupt, or compounds with hia creditors. 2. If he is found lunatic or becomes of unsound mind. 3. If he ceases to hold the required share qualification. 4. If by notice in writing to the company he resigns his office. 150 HANDBOOK ON COMPANIES. 5. If he absents himself from directors' meetings beyond a fixed period without leave. 6. If he holds any office or place of profit in the company, with specified exceptions. In addition, it is sometimes provided that loss of office shall result from participating in the profits of any contract with the company; but more com- monly, in lieu of such a provision, a director is expressly empowered to contract with the company if he discloses his interest and refrains from voting. Furthermore, in Nova Scotia, Saskatchewan and British Columbia a director may lo'se office if he fails to obtain his qualification within the proper time after his appointment (p. 149), above). A director elected for a definite term cannot be removed without cause, before its expiration, but the by-laws or articles commonly permit the shareholders to remove a director by resolution. Remuneration. Directors are not entitled to remuneration unless the by-laws or articles so provide, which they com- monly do. Sometimes remuneration is fixed " at the rate of " so much per year, or so much for each meeting attended, or an annual lump sum to be divided as the directors may determine, or it is pro- vided that the remuneration is to be fixed in general meeting by the shareholders; and sometimes the by-laws provide that the directors may fix their own remuneration. The taking of unauthorized remuneration is a misfeasance, and the directors may be compelled to repay sums taken without authori- zation. They should, therefore, be careful to see that all the requirements in this regard, statutory or otherwise, are rigidly complied with. If the DIRECTORS. 151 directors wish to be reimbursed for their travelling and other expenses of attending meetings, they should see that the by-laws or articles expressly so provide, as otherwise they are not entitled to be reimbursed for such expenses. Statutory provisions. Nova Scotia. Saskatchewan. Alberta. British Columbia. The above Acts are silent as to remuneration. The articles govern the matter. Dominion (ss. 80 (c), 81). Quebec (art. 6020). New Brunswick (ss. 90 (c), 91). Directors may make by-laws for their remunera- tion, which by-laws are only effective (unless sooner confirmed at a general meeting called for the pur- pose) until the next annual meeting, when they must be confirmed or lapse. Ontario (ss. 91, 92). Directors may make by-laws for their remunera- tion, but no by-law for the payment of the president or any director shall be valid or acted upon unless (a) passed at a general meeting, or (b) if passed by the directors, until it has been confirmed at a general meeting. Notwithstanding the foregoing provision, a director is not precluded from receiving a reasonable remuneration for services rendered in another and subordinate capacity, e.g., as salesman, even though a by-law authorizing the payment has not been passed. 152 HANDBOOK ON COMPANIES. Manitoba (s. 32). The directors may make by-laws for their remuneration, but no by-law for the payment of the president or any director shall be valid or acted upon until it has been confirmed at an annual meet- ing or a special general meeting. Proceedings. Directors act at meetings of the board, called by proper notice and at which a quorum is present. If all the directors are present and waive notice, no notice is required; nor is it necessary to send a notice to a director who is out of the country and cannot attend the meeting. The formal acts of the directors are expressed by resolution, or, when the governing Act requires it, e.g., an increase of capital under the Dominion Act, by by-law. A director acting individually cannot exercise the powers of the board. The by-laws or articles will invariably contain full provisions as to the holding of meetings, quorum, notice, etc., and these provisions should be carefully observed. However, strangers dealing with the company, while they are fixed with know- ledge of the governing Companies Act, charter or memorandum and registered articles of the com- pany, are not bound to inquire into the regularity of the " indoor management." They are entitled to assume that formalities relating to the internal management have been complied with, e.g., that a resolution has been regularly passed. To this extent informal acts of the directors may bind the com- pany. The Acts of some of the provinces based on s. 74 of the Imperial Act provide that the acts of a director shall be valid notwithstanding any defect that may afterwards be discovered in his appoint- DIRECTORS. 153 ment or qualification, and well-drawn articles com- monly contain similar provisions. Notice of the business to be transacted at a direc- tors' meeting is not necessary in the absence of a contrary provision in the by-laws or article*. Direc- tors must attend in person and cannot cast their votes by proxy. A quorum must be present for the valid transaction of business, and a director who is personally interested in a resolution and therefore disentitled to vote cannot be counted to make up the quorum. In the case of companies incorporated by letters patent the quorum will be determined by the by-laws. In Ontario the quorum cannot be fixed at less than a majority of the board unless the letters patent provide otherwise. In the case of companies incorporated by memorandum, the articles will fix the quorum or authorize the directors to fix it. The number of directors must not be allowed to fall below the minimum required by the statute, articles or by- laws. The procedure at a directors' meeting is as fol- lows : The president, or in his absence the vice-presi- dent, takes the chair ; or in the absence of both, the directors present elect a chairman. The secretary will produce evidence of service of notice of the meeting. The minutes of the last meeting will be read and directed to be signed as correct. The various items of business are then taken up in order and resolutions moved, seconded and passed. If the by-laws or articles so provide, the chairman has a casting vote in the event of an equality of votes. The minutes should be recorded by the secretary as soon as possible after the meeting and inserted in the minute book. It is advisable to have agenda of 154 HANDBOOK ON COMPANIES. the matters to be taken up prepared, and important resolutions or by-laws drafted, before the meeting. If business of any importance is to be transacted, the company's solicitor should be present at the meet- ing. Powers of directors. Dominion (s. 80). Ontario (ss. 84, 91). Quebec (art. 6020). Manitoba (s. 32). New Brunswick (s. 90). In the above jurisdictions ( except Ontario ) the Act gives the directors general power to administer the affairs of the company and make or cause to be made for the company any description of contract which the company may by law enter into. In addi- tion power is given to pass by-laws relating to a number of specific matters as well as the conduct in all other particulars of the affairs of the company. In Ontario the general power first above mentioned is omitted. As a general rule the directors can do anything that the company can do, except in so far as the statute, letters patent or by-laws require authoriza- tion by a general meeting of shareholders or com- pliance with other requirements. In some matters the governing Act requires the sanction of the share- holders, e.g., to borrow money; or some further requirement may be imposed, e.g., to change the place of head office it is necessary, in addition to the passing and confirmation of a by-law, to advertise the by-law and file a certified copy in the proper Department. Again, as regards other matters, e.g., increasing the capital, the sanction of supplement- DIRECTORS. 155 ary letters patent is required. Some things, on the other hand, e.g., the appointing of auditors, can only be done by the shareholders. These matters are con- sidered elsewhere under their appropriate headings. The management of the company's affairs is in the hands of the directors and cannot be exercised by the shareholders ; nor can the shareholders over- rule or control the directors, except by way of refus- ing to confirm by-laws or resolutions requiring con- firmation. If the shareholders are dissatisfied with the management, their remedy is to elect a new board at the next annual meeting, or resort to the courts if the directors are acting illegally. If dissatisfied shareholders are in the minority and are, therefore, unable to secure the election of their own nominees to the board, it is sometimes difficult for them to bring their views before the board in an effective way. In such situations the following plan may be useful. The shareholders form a permanent protective committee and send their proxies to it. The members of the committee, armed with their proxies, attend all shareholders' meetings and by putting forward the views and criticisms of the com- mittee as a unit they may be able to exercise some voice in the affairs of the company. The directors cannot, of course, do anything which the governing Act forbids, e.g., make loans to shareholders; nor can they validly do anything which is beyond the powers of the company itself. Nova Scotia. Saskatchewan. Alberta. British Columbia. In each of the above jurisdictions the Act leaves the question of the powers of directors to be deter- 156 HANDBOOK ON COMPANIES. mined by the articles. These commonly confer on the directors a general power 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, subject, nevertheless, to any regulation of the articles, to the provisions of the Act, and to such regulations, not being inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting. The governing Act provides that certain things can only be done by the company by special resolution, e.g., alteration of the objects of the company, or reduction of capital ; that certain things can only be done at an annual general meeting, e.g., the appoint- ment of auditors. The articles invariably also pro- vide that certain things shall only be done with the sanction of a meeting of the members. The directors must, of course, exercise their powers in accordance with the provisions of the governing Act and of the articles. If the powers of the directors are found to be unduly restricted by the articles, these can be altered by special resolution of the members (see as to special resolutions, p. 177). Position and liabilities. Directors are trustees of the company's pro- perty and agents of the company in the transactions which they enter into on its behalf. They stand in a fiduciary relationship to the company, from which it follows that they must assume no part nor do any act inconsistent with a proper, free and independent discharge of their duties. Thus, directors' powers must be exercised bona fide in the company's interest and not to serve some personal interest of their own. A director cannot make a secret profit at the DIRECTORS. 157 expense of the company, nor take a secret commis- sion in transactions in which the company is inter- ested. If he does, he must account to the company. It also follows from the director's fiduciary position as trustee that he is disqualified from entering into, or being interested in, contracts with the company, unless authorized by the governing Act, by-laws or regulations, or unless a general meeting of share- holders sanctions the transaction. The by-laws or articles, however, generally contain a provision enabling a director to enter into or be interested in contracts or arrangements with the company, pro- vided he discloses his interest and refrains from voting. If the provisions as to disclosure and not voting are not complied with, the director loses his protection and remains accountable '(see further Company Law, p. 475). In a transaction of any magnitude a director contracting with the company is wise to take independent legal advice. If directors act within their powers; with such care as is reasonably to be expected from them, having regard to their knowledge and experience; and if they act honestly for the benefit of the com- pany, they discharge their duty to the company. They are not bound to have any special qualifica- tions for their office. They may be liable for acts of gross negligence (see Company Law, p. 492) ; but they are not liable when they have been misled through misrepresentation or concealment by regu- larly authorized executive officers of the company, where there was no cause for suspicion. It is advis- able that the by-laws or articles should contain a provision relieving directors from the consequences, of negligence not dishonest. 158 HANDBOOK ON COMPANIES. A director is not bound to take any definite part in the company's affairs. Directors are liable if they wrongfully declare and pay dividends (see p. 226). As to liability for mis-statements in a pros- pectus, see p. 56. The various Companies Acts impose penalties or liability upon directors for infraction of their provisions. A director should familiarize himself with the Companies Act applic- able to his company and see that he is not making himself so liable. One of the most onerous statutory liabilities imposed on directors is the personal liabil- ity for unpaid wages of clerks, workmen, etc. The provision in the Dominion Acts reads as follows: 85. The directors of the company shall be jointly and severally liable to the clerks, labourers, servants and apprentices thereof, for all debts not exceeding six months' wages due for service performed for the company whilst they are such directors respect- tively; but no director shall be liable to an action therefor, unless the company is sued therefor within one year -after the debt becomes due, nor unless such director is sued therefor within one year from the time when he ceases to be such director, nor unless an execution against the company in respect of such debt is returned unsatisfied in whole or in part. 2. The amount unsatisfied on such execution shall be the amount recoverable with costs from the directors. Similar provisions (in some cases slightly modi- fied) are found in other Acts as follows: Ontario (s. 98); Quebec (art. 6023); Quebec Mining Com- panies (art. 6751) ; Manitoba (s. 35) ; Saskatchewan (s. 108); Alberta (s. 54). In some Provinces, e.g., Saskatchewan, Alberta and British Columbia, the liability of directors may be unlimited, if so provided in the memorandum or by special resolution. MEETINGS. 159 CHAPTER X. MEETINGS. The immediate control over the affairs of the com- pany rests with the directors (pp. 155, 156). Some things, however, can only be done by, or with the consent of, the shareholders. Furthermore, as the shareholders elect the board of directors, the ulti- mate control of the company's affairs rests with the majority of the shareholders. By their votes at shareholders' meetings, the shareholders express their views and exercise such right of control over the directors as is conferred on them by the govern- ing Act, by-laws or articles. In the absence of statutory authority, the individual consents of the shareholders, given separately, are not equivalent to a resolution passed at a meeting. Various kinds of meetings are provided for under the different Acts. First statutory meeting. Ontario (s. 43, s. 117). Saskatchewan (s. 74). Alberta (s. 117). British Columbia (ss. 34-36). The Acts of the above provinces provide for a statutory meeting, which must be held within a limited time after the company becomes entitled to commence business. Before the meeting a signed report must be sent out to the shareholders. In Ontario, these provisions only apply to com- panies which make a public offering of their shares, 160 HANDBOOK ON COMPANIES. bonds, etc., i.e., companies which have issued a pros- pectus. A somewhat different provision applies in the case of private companies and companies which make no public offering of their shares or securities. See s. 43 of the Ontario Act at p. 25, above. In Saskatchewan, these provisions only apply to companies which issue an invitation to the public to subscribe for their shares. In Alberta, the provisions as to the statutory meeting and report apply to all companies limited by shares whether they make a public offering or not. In British Columbia, these provisions apply to every company which is not a "private company" (see p. 76). There is some variation between the correspond- ing sections in the different provinces. The Ontario section reads as follows: 117. (1) Every company shall, within a period of not less than one month nor more than three months from the date at which the company is entitled to commence business, hold a general meeting of its shareholders, which shall be called the statutory meeting. [As to notice of meetings, see section 44.] (2) The directors shall, at least ten days before the day on which the meeting is to be held, send to every shareholder a report certified by not less than two directors stating: (a) The total number of shares allotted, distinguishing shares allotted as fully or partly paid up otherwise than in cash, and stating in the case of shares partly paid up the extent to which they are so paid up, and in either case the consideration for which they have been allotted; (6) The total amount of cash received by the company in respect of such shares so distinguished; (c) An abstract of the receipts and payments of the company on capital account to the date of the report, and an account or estimate of the preliminary expenses of the company ; MEETINGS. 161 (d) The names, addresses and descriptions of the directors, auditors, if any, manager, if any, and secretary of the company; and (e) The particulars of any contract, the modification of which is to be submitted to the meeting for its approval, to- gether with the particulars of the modification or pro- posed modification. (3) The report, so far as it relates to the shares allotted by the company, and to the cash received in respect of such shares, and to the receipts and payments of the company on capital ac- count, shall be certified as correct by he auditors, if any, of the company. (4) The directors shall cause a copy of the report so certified to be filed with the Provincial Secretary forthwith after the send- ing thereof to the shareholders. (5) The directors shall cause a list showing the names, descriptions and addresses of the shareholders and the number of shares held by {hem respectively, to ,be produced at the com- mencement of the meeting, and to remain open and accessible to any shareholder during the continuance of the meeting. (6) The shareholders present at the meeting shall be at liberty to discuss any matter relating to the formation of the company, or arising out of the report, whether previous notice has or has not been given, but no resolution of which notice has not been duly given may be passed. (7) The meeting may be adjourned from time to time, and at an adjourned meeting any resolution of which notice has been duly given, either before or subsequently to the former meeting, may be passed, and at the adjourned meeting the same powers may be exercised as at an original meeting. (8) If default is made in filing such report or in holding the statutory meeting, then at the expiration of fourteen days after the last day on which the meeting ought to have been held any shareholder may apply to the Court for the winding up of the company, and the Court may either direct that the company be wound up or give directions for the report being filed or a meet- ing being held, or make such other order as may be deemed just, and may order that the costs of the application be paid by any person who, in the opinion of the Court, is responsible for the default. 2 Geo. V. c. 31, s. 115. The date at which the company is entitled to commence business, from which the period men- tioned in sub-sec. (1) runs, is the date of the certifi- H.C. 11 162 HANDBOOK ON COMPANIES. cate given under s. 114 of the Ontario Act. The notice must state that the meeting is the statutory meeting. For form of notice and of statutory report, see Forms p. 536. In a bona fide case of inadvertent failure to hold the meeting an order directing the meeting to be held may be obtained from the Court on motion supported by affidavit. It is advisable to have the company represented and consent to the order. Nova Scotia (s. 64). Every company must hold a general meeting within four months after the memorandum of asso- ciation is registered. The company is liable to a penalty for default, as are also directors, officers and subscribers to the memorandum, who knowingly authorize or permit such default. If default has been made in holding this meeting, the Court may, on the application of any member of the company, call or direct the calling of a general meeting. Annual meeting. Dominion (ss. 77, 80 (e), 88, 94A, 94B, 105). Ontario (ss. 45, 91 (d), 129, 133, 134). Quebec (arts. 6024, 6024a-6024d). Manitoba (ss. 29, 32). New Brunswick (ss. 35 (2), 86, 90(e)). A general meeting of the shareholders should be held in each year. The by-laws will contain provi- sions as to when the meeting is to be held, the place of meeting, notice, etc. Usually the by-laws leave the time and place of the meeting to be determined by the directors from time to time. Any statutory provisions on the subject must, of course, be observed and cannot be overridden by the by-laws. MEETINGS. 163 The business commonly transacted at the annual meeting includes the reception of the report of the president and directors and auditor on the com- pany's operations and its financial condition, con- firmation of the by-laws (if any) passed since the last shareholders' meeting, election of directors, appointments of auditors and the fixing of their remuneration. It is desirable also to pass a resolu- tion confirming the acts of the directors since the last annual meeting. For form of notice of meeting, see App. Form 23. As to the procedure at the meet- ing, see p. 169, below, and as to the form of minutes, Form, p. 325. Special statutory provisions should be noted as follows : Dominion. Quebec. In the absence of other provisions in the letters patent or by-laws, the meeting must be held at the place of the head office on the fourth Wednesday in January in each year. If directors are elected, the meeting must be held within the Dominion or the Province (Quebec). The directors must lay before the meeting a balance sheet, financial report, report of auditors, etc., as required by the Act and by-laws. The auditors' report must be read to the meeting and is open to the inspection of any shareholder. Ontario. In the absence of other provisions in the letters patent or by-laws, the annual meeting must be held on the fourth Wednesday of January in each year. The meeting must be held at the place where the head office is situated, except when otherwise pro- 164 HANDBOOK ON COMPANIES. vided by the letters patent or by-laws. The meeting may not, however, be held outside of Ontario, unless so authorized by the letters patent or supplement- ary letters patent (s. 52). The directors must, at least seven days before the date of the meeting, send by post to every shareholder a report containing a balance sheet, abstract of income and expenditure, report of auditors, etc., as required by the Act and the by-laws. The report need not be sent to the shareholders if the by-laws so provide, as they com- monly do. The directors' report must be laid before the meeting and the auditors' report must be read at the meeting. Manitoba. If directors are elected, the meeting must be held within the Province. New Brunsivick. The annual meeting can only be held outside the Province if the letters patent so provide. Special general meetings. Dominion (ss. 80 (e), 87). Ontario (s. 46). Quebec (arts. 6020 (e), 6024a, 6024b). Manitoba (s. 32). New Brunsivick (ss. 35 (3), 90 (e)). In the above jurisdictions general meetings of the shareholders, other than annual general meet- ings, may be called from time to time. Such meetings are special general meetings, called for the transac- tion of the business specified in the notice summon- ing them. The business to be transacted is usually the confirmation by the shareholders of a by-law. MEETINGS. 165 passed by the directors and requiring such con- firmation. Instances of such by-laws are by-laws varying the number of directors, changing the place of the head office, authorizing the borrowing of money, increasing or reducing the capital stock. For form of notice of meeting see App. Form 24. The various Acts require in most cases that a stated proportion of the issued shares (usually two-thirds) represented at the meeting must be voted in favor of the confirmation of the by-law. In some cases the additional requirement of confirmation of the by- law by supplementary letters patent is also imposed, e.g., where the capital is increased. These details are dealt with under the topics to which such by- laws relate. The above Acts (except New Brunswick) authorize a stated proportion of shareholders, by requisition, to call or compel the directors to call a special general meeting. Ordinary general meetings. Nova Scotia (ss. 65, 66, 67; Tab. A 64 ff., 70 ff.). Saskatcheivan (s. 73; Tab. A 44 ff., 47 ff.). Alberta (s. 118; Talb. A 30 ff., 35 ff.). British Columbia (ss. 116, 117 ; Tab. A 37, 38, 40 ff.). The articles commonly provide that the general meetings (subsequent to the first or statutory meet- ing) shall be held at such time and place as may be prescribed by the company in general meeting, and, if no other time or place is prescribed, at such time or place as may be determined by the directors. Such meetings are also usually defined in the articles as ''ordinary general meetings," all other meet- ings being defined as ''extraordinary general meetings." The articles further provide for the 166 HANDBOOK ON COMPANIES. mode of calling such meetings and the procedure thereat; and define the business to be transacted at an ordinary meeting, which is usually to consider the profit and loss account, the balance sheet and the reports of directors and auditors, to elect direc- tors and other officers in the place of those retiring, and to sanction dividends. For the form of notice of an ordinary meeting see App. Form 2*5. It is customary for the articles to state that all business other than that above described transacted at any ordinary meeting, and all business transacted at an extraordinary meeting shall be deemed special; and that notice of the general nature of special busi- ness must be given. With articles so worded, special business, if notice thereof is given, can be transacted at an ordinary meeting, but sometimes the articles are so worded that this cannot be done. In such event, if special business is desired to be transacted, the notice will proceed to state that at the same place, on the same day, at a certain hour, or so soon after as the ordinary meeting shall be concluded, an extraordinary meeting will be held, and will specify the business. A general meeting must be held once at least in each year in Nova Scotia and Alberta; in Saskatchewan and British Columbia once at least in every calendar year, and not more than eighteen months (Saskatchewan) or fifteen months (British Columbia) after the holding of the last preceding general meeting. In both Saskatchewan and British Columbia, if the meeting is not so held, a penalty is imposed on the company and directors and officers knowingly parties to the default ; and the Court, after default, on the applica- tion of a member, may call or direct the calling of a general meeting. In British Columbia every general meeting must be held within the Province. MEETINGS. 167 Extraordinary general meetings. Nova Scotia (s. 66; Tab. A 65-69, 70 ff.). Saskatchewan (s. 75; Tab. A 45-46, 47 ff.). Alberta (s. 118; Tab. A 31 ff., 35 ff.). British Columbia (ss. 116-120; Tab. A 38 ff.). Meetings, other than ordinary general meetings, are called extraordinary general meetings, at which only the special business indicated in the notice can be transacted. The articles or Table A invariably authorize the directors to call extra- ordinary general meetings whenever they think proper, and compel them to call such a meeting on the requisition of a stated proportion of the share- holders and provide that, in default of such meeting being called by the directors, the requisitionists may call the meeting. In Nova Scotia, Saskatchewan, Alberta and British Columbia the Acts contain pro- visions, in this regard, which cannot be overridden by the articles. Shareholders desiring themselves to call a meeting by requisition should take legal advice. Notice of meetings. The by-laws or articles usually contain provisions as to the length of notice, mode of giving notice, etc., and these provisions should be followed with the greatest care; otherwise the meeting may be invalid. In the absence of such provisions, the provisions of the governing Act or Table A (in the case of com- panies incorporated by registration) will apply. Every shareholder has the right to notice, and even accidental omission to notify any shareholder may make the meeting irregular, unless the by-laws or articles provide, as they often do, that such acci- dental omission shall not invalidate the meeting. If 168 HANDBOOK ON COMPANIES. all the shareholders are present and do not object to want of notice, notice may be waived. The by- laws or articles usually require service of notice by post. Under some Acts a notice served by post is to be deemed to have been served when the letter containing it would be delivered in the ordinary course of post. Where such provisions apply (e.g., Ontario) it is necessary to allow a sufficient margin of time for the delivery of the letter in computing the interval between the date of the service of notice and the date of the meeting. The secretary should carefully check the names and addresses of the shareholders appearing on the envelopes containing the notice with the register of shareholders and make a statutory declaration of posting the notice. For form, see Forms p. 332. It is convenient to attach the declaration to the minutes of the meeting. The contents of the notice will depend on the nature of the meeting. For forms of notice, see App. Forms 23-26. The by-laws or articles, and, in some cases, the statute, will provide that where special business is to be transacted, the notice must state the general nature of such business. The notice must state the business fairly and accurately, so that the share- holders are put in such a position that each can judge for himself whether he would consent to the proposals coming before the meeting. The notice may be framed in general terms, or may state that the meeting is called for the purpose of considering a specific by-law or resolution. The following are examples : For the purpose of considering and, if approved, ratifying and confirming, with or without modification, a by-law passed by the directors in the words and figures following: (set out by-law verbatim). MEETINGS. 169 For the purpose of considering and, if approved, passing with such amendments in, additions to, or omissions from the same as may be proposed at the meeting, the following resolution: (set out resolution verbatim). To consider and if deemed advisable to confirm, with or with- out modification, a by-law authorizing the directors of the com- pany (set out effect of by-law). If the notice is given in the above form relevant amendments within the scope of the notice are per- missible, but care should be taken that the amend- ment does not go beyond the scope of the notice. The notice must state the date, time and place of the meeting. Once a notice is given, the directors can- not, in the absence of special provisions, by a further notice postpone the meeting. If a meeting is adjourned to a definite time, notice need not be given of the adjourned meeting, but the business which may come before the adjourned meeting is limited to that which might have come before the original meeting. The summoning of meetings should be authorized by the board. The secretary cannot summon a meeting without authority; but the directors, acting as a board, may, before the meeting, ratify an unauthorized notice. Share- holders resident abroad are not entitled to notice in the absence of contrary provisions in the articles or by-laws. Where preference shares are issued with- out voting rights, it will not be necessary to notify preference shareholders, but in such cases it is advis- able that the governing provisions should state that such shareholders shall not be entitled to notice of meetings. Procedure at meetings. Before the meeting the secretary should prepare agenda for the guidance of the chairman. He should 170 HANDBOOK ON COMPANIES. also have available copies of the notice of meeting with proof of service, the minute book, the by-laws or articles, the register of shareholders and a correct list of shareholders, arranged alphabetically, a list of proxies deposited, and any special material, such as reports, resolutions or by-laws to be brought before the meeting. The by-laws or articles usually provide that the president, or in his absence the vice-presi- dent, shall take the chair at meetings. If the articles or by-laws contain no such provision, or if the person entitled to be chairman is not present, the share- holders elect a chairman from among themselves by resolution, duly moved and seconded. The chair- man calls the meeting to order and then will ascer- tain whether there is a quorum present. The num- ber required for a quorum will be stated in the by- laws or articles. If a quorum is not present, no busi- ness can be transacted, but the by-laws or articles frequently provide for such cases, e.g., that the meeting is to stand adjourned to the same day in the next week. If there is no such provision, the meeting lapses. If a quorum is present, the chair- man, after stating such to be the case, has the secre- tary read the notice of meeting, a copy of which with proof of service should be annexed to the minutes. The minutes of the last meeting of shareholders will then be read and be directed to be signed as correct. Frequently the minutes are on motion taken as read. If the meeting is a special general or an extra- ordinary meeting, it will proceed to transact the business specified in the notice. If the meeting is an annual meeting the chairman will read or refer to the directors ' report, and present to the meeting the auditors' report and balance sheet. In some juris- dictions (e.g., Dominion and Ontario) the auditors' MEETINGS. 171 report must be read to the meeting (see "annual meeting" above). The chairman makes an address to the meeting with reference to the foregoing and ends with a motion that the accounts and the direc- tors' report thereon be adopted. Someone seconds the motion, and, after discussion, the motion is put to the meeting. Usually the motion is carried unanimously ; but if the shareholders are dissatisfied, they may refuse to pass the motion, which will amount to a vote of censure, but is otherwise without effect. A majority of the shareholders can, however, put in a new board in place of the outgoing board ; or, if there are any directors whose term of office has not expired, they may remove any one or more of them. This must, of course, be done in accord- ance with the by-laws or articles, which generally impose special formalities in this regard, involving among other things the giving of proper notice of the intended resolution. Another remedy of dis- satisfied shareholders is to appoint, or cause to be appointed, an inspector to investigate the company's affairs (see "Inspectors," page 275). The chairman may, with the approval of the meeting, apply the closure and end discussion. The vote will then be taken, usually in the first instance on a show of hands, on which each shareholder has one vote on his own shares, but no vote on the shares which he may represent by proxy. If, however, under the governing Act or by-laws or articles, a person who is not a shareholder may hold a proxy, he has one vote on a show of hands. It should be noted that, in Ontario, the Act expressly states that a proxy for an absent shareholder shall not vote on a show of hands. A poll may then be demanded by any shareholder, or by the requisite 172 HANDBOOK ON COMPANIES. number, if the regulations state that only a given number of shareholders may demand a poll. The poll will be taken in such manner as the chairman directs, unless the by-laws or articles provide for the manner of taking it, in which case such provi- sions must be followed. In the absence of regula- tions to the contrary the poll may be taken at the meeting. Scrutineers should be appointed by the meeting to take the vote (which should be done in writing) and report the result to the chairman, who declares the result in accordance with such report. The votes of shareholders, if any, in arrear as to calls, or under irregular proxies, will be rejected and the reason for rejection noted. Whether votes may be given by proxy depends on the governing Act or regulations. A shareholder may vote to further his own interests. In the absence of provision in the articles a poll can not be taken by polling papers sent out to the shareholders. A poll is desirable where any matter of importance is to be decided. The Act, by-laws or articles, will usually confer on the chairman a second or casting vote, in the case of a tie. In the case of ian annual or ordinary meeting after the report of the directors has been ap- proved, the meeting then proceeds to deal with the election of directors, the appointment and the fixing of the remuneration of auditors, and the declaration of a dividend (if any) in the case of companies incorporated with memorandum and articles, where the articles so provide. In some jurisdictions, e.g., Dominion and Ontario, the election of directors must be by ballot unless the by-laws otherwise provide (see p. 146, above). The resolution appointing the auditors and fixing their remuneration should be MEETINGS. 173 moved and seconded by shareholders who are not directors or officers. After the ordinary business of the meeting is concluded, the special business, if any, mentioned in the notice of meeting will then be pro- ceeded with. When all the business is finished, on motion made, seconded and carried, the meeting adjourns. Proxies. There is no common law right to vote by proxy, but such right is usually conferred by the governing Act, by-laws or articles. The following are the statutory provisions: Dominion (ss. 80, 88). Manitoba (ss. 30, 32, 58). New Brunstvick (ss. 90, 96 (b)). The above Acts provide that, in default of other provisions in the letters patent or by-laws, at all general meetings of the company every shareholder shall be entitled to as many votes as he holds shares in the company, and such votes may be given in person or by proxy, if such proxy is himself a share- holder (the latter requirement not being imposed in Manitoba). But a shareholder in arrear of calls is not entitled to vote. The directors are entitled by by-law to regulate the requirements as to proxies. The formalities required by the by-laws must be observed, but if there are no by-laws governing the matter nothing more is required for a proxy than its valid execution by the shareholder. For form of proxy, see App. Form 27. Ontario (ss. 50, 51, 81). Quebec (arts. 6024e, 6024f, 6020). Provisions similar to those above noted are in force in Ontario and Quebec ; but must be read, sub- 174 HANDBOOK ON COMPANIES. ject to a special section dealing with proxies. The Ontario section reads as follows, the Quebec section being similar, but omitting the last sub-section. 61. (1) The instrument appointing a proxy shall be in writ- ing under the hand of the appointor, or of his attorney duly authorized in writing, or, if the appointor is a corporation, either under the common seal or under the hand of an officer or attorney so authorized, and shall cease to be valid after the expiration of one year from the date thereof. (2) No -person shall act as a proxy unless he is entitled on his own behalf to be present and vote at the meeting at which he acts as proxy or has been appointed to act at that meeting as proxy for a corporation. (3) A proxy for an absent shareholder shall not have the right to vote on a show of hands. (4) An instrument appointing a proxy may be according to Form 6 or such other form as may be prescribed by the by-laws of the corporation and shall not contain anything but the appoint- ment of the proxy or a revocation of a former instrument appoint- ing a proxy. (5) An instrument appointing a proxy may be revoked at any time. 2 Geo. V. c. 31, s. 49. (6) The directors may by-law prescribe the period of time immediately preceding any special or general meeting of the shareholders within which the instrument appointing the proxy shall be deposited with the company; provided that in no case shall such period of time exceed seventy-two hours immediately preceding the meeting for which such proxy is to be used or acted upon; and further provided that any period of time so fixed shall be specified in the notice calling the meeting. 9 Geo. V. c. 41, 8. 2. For the form provided in sub-sec. (4) above, see App. Form 28. The Quebec form is Form N in the schedule to the Act. Nova Scotia (Tab. A 77-93, ss. 67, 68). Saskatchewan (Tab. A 58-65, s. 80). Alberta (Tab. A 48-51, s. 121). British Columbia (Tab. A 55-58, ss. 119, 128). In the above jurisdictions the provisions as to proxies and voting will be found in the articles or, MEETINGS. 175 if there are no articles, then in Table A. In either event, these regulations must be followed. In default of any regulations as to voting, every mem- ber is to have one vote, but it is usual for the articles to provide that every member shall have one vote for each share held. In Nova Scotia and British Columbia there is a special provision for representa- tion of companies at meetings of other companies of which they are members. The chairman's decision as to the validity of proxies is binding until held by the Court to be wrong. Where the by-laws or articles provide that proxies must be lodged a certain number of hours before a meeting or adjourned meeting, it is not a compliance with the requirement to lodge them a specified number of hours before the poll is taken. The name of the proxy may be left blank and may be subsequently filled in before use by some person authorized. It is advisable, however, to name several persons alternatively. Directors may, at the company's expense, send out forms of proxy in which the directors are named, accom- panied by stamped envelopes for the return of the forms. The instrument appointing a proxy may be revoked before the proxy has voted. All instru- ments appointing proxies should be kept among the company's records. For forms of instruments appointing proxies, see App. Forms 27, 28. Adjournment. The chairman has no power to adjourn a meeting at his own will before it has finished the business for which it was convened, and if he wrongfully adjourns the meeting the shareholders may select a 176 HANDBOOK ON COMPANIES. new chairman and proceed with the business of the meeting. Under the Ontario Act, the chairman may, with the consent of the meeting and subject to such condi- tions as the meeting may decide, adjourn any meet- ing from time to time and from place to place (s. 48). In the case of companies incorporated by regis- tration, the articles usually provide that the chair- man, with the consent of the meeting, may adjourn the same; and Table A of the Alberta Act so pro- vides. Where such a provision is adopted the majority can not compel the chairman to adjourn the meeting if he thinks otherwise. Table A of the Nova Scotia, British Columbia and Saskatchewan Acts makes it compulsory for the chairman to adjourn the meeting if so directed by the meeting, and provides that if a poll is demanded on the ques- tion of adjournment it must be taken forthwith. As an adjourned meeting is a continuation of the original meeting, no new notice is required in the absence of special provisions in the by-laws or articles. The adjournment must, of course, be to a definite place, date and time. In Nova Scotia, Saskatchewan and British Colum- bia, if Table A applies, a new notice is required if the adjournment is for ten days or more. No business may come before the adjourned meeting which could not have come before the original meeting. The matter of adjournment of meetings is referred to in the various Acts as follows : Ontario (s. 48); Nova Scotia (Tab. A 72, 74-76, 80); Sas- katchewan (Tab. A 50, 53, 57) ; Alberta (Tab. A 41) ; British Columbia (Tab. A 43, 46). MEETINGS. 177 Special resolutions and extraordinary resolutions. Nova Scotia (ss. 69,70). Alberta (ss. 120, 122, 123). The above Acts do not define an extraordinary resolution. A resolution is to be deemed special whenever a resolution has been passed by a majority of not less than three-fourths of such members of the company for the time being entitled according to the regulations of the company to vote as may be present in person or by proxy in cases where by the regulations of the company proxies are allowed at any general meeting of which notice specifying the intention to propose such resolution has been duly given; and such resolution has been con- firmed by a majority of such members for the time being entitled according to regulations of the company to vote as may be present in person or by proxy at a subsequent general meeting of which notice has been duly given and held at an interval of not less than fourteen days nor more than one month from the date of the meeting at which such resolution was first passed. (Alberta). In Nova Scotia, whenever a resolution has been unanimously passed at any general meeting, all the members of the company being present in person or by proxy, the resolution is to be deemed a special resolution and no confirmation of such resolution at any subsequent meeting is to be necessary ; provided that notice of the intention to propose such a resolu- tion as a special resolution has been given in the notice calling such a meeting. Saskatchewan (ss. 79, 81, 82). British Columbia (ss. 2, 124, 162). A resolution is an extraordinary resolution when it has been passed by a majority of not less than three- fourths of such members entitled to vote as are present in person or by proxy (where proxies are allowed) at a general meeting of which notice specifying the intention to propose the resolution as- an extraordinary resolution has been duly given. H.C. 12 178 HANDBOOK ON COMPANIES. A special resolution is one which has been (a) Passed in manner required for the passing of an extra- ordinary resolution; and (b) Confirmed by a majority of such members entitled to vote as are present in person or by proxy (where proxies are allowed) at a subsequent general meeting, of which notice has been duly given, and held after an interval of not less than fourteen days, nor more than one month from the date of the first meeting. . In British Columbia the term ' ' special resolution" includes a resolution passed at any general meeting of a private company by a unanimous vote of all members entitled to vote, where all such members are present in person or by proxy (where proxies are allowed), and the notice specifying the intention to propose the resolution states that in case of a unanimous vote no subsequent general meeting to confirm the resolution will be necessary. It will be seen from the above that a special resolution (except in Nova Scotia and British Columbia in some cases) requires passing and con- firmation at two separate meetings. An extra- ordinary resolution only requires to be passed at one meeting. The articles often require the passing of an extraordinary resolution for certain purposes, e.g., the removal of directors. For some purposes, e.g., the alteration of articles, the statute requires a special resolution. The articles themselves often provide that certain things are only to be done by special resolution. In some cases, such as alteration of the company's objects or reduction of its capital, confirmation by the Court is required in addition to a special resolution. The sections of the Acts above noted contain provisions relating to the procedure at meetings at "which special resolutions are passed and confirmed, and such provisions must be carefully followed. It is usual to set out the full text of the resolution in the notices calling the meetings. MEETINGS. 179 A slight amendment of the resolution at the first meeting may be valid, but there can be no amend- ment at the second meeting. The second meeting merely confirms or rejects the resolution previously passed. Unless the articles so permit (as they often do), one notice calling both meetings, the second contingently on the resolution being passed at the first, is invalid. But even if the articles contain no such permission, a second notice can be obviated by stating in the notice that a further extraordinary meeting will be held at (place, date, time) to receive a report of the proceedings of the first meeting, when the resolution, if passed by the requisite majority at the first meeting, will be submitted for confirmation as a special resolution. See App. Form 26. A copy of every special resolution must be for- warded to the registrar for recording within fifteen days from its confirmation. In British Columbia an extraordinary resolution must also be filed with the Registrar. Where articles have been registered, a copy of every special resolution must be annexed to or embodied in every copy of the articles subse- quently .issued. In Nova Scotia special resolutions must be printed. By-laws requiring confirmation. By-laws passed by the directors should be con- firmed by the shareholders at the earliest oppor- tunity. Some by-laws do not take effect until con- firmed; others require compliance with additional formalities before becoming effective, e.g., filing in some government department, advertising, supple- mentary letters patent. These requirements are dealt with under the topics to which they apply. Other 180 HANDBOOK ON COMPANIES. by-laws must be confirmed at or before the next annual meeting after their passage, otherwise they lapse. By-laws respecting agents, officers and servants, under the Dominion, Quebec and New Brunswick Acts, are excepted from the last men- tioned requirement. The more important by-laws, in the different jurisdictions requiring confirmation, are as follows. It should be noted that in some cases confirmation by a stated proportion of the shareholders is requisite. Dominion. For use of company's funds in purchase of stock in other corporations (s. 44). Creating preference shares (s. 48) Such by-laws may also be unanimously sanctioned in writing by the shareholders. Increase or reduction of capital or subdividing shares (ss. 52, 54). Borrowing and issuing securities (s. 69). Altering number of directors or location of head office (s. 76). Generally (ss. 80, 81). Ontario. Distribution of assets (s. 15). Authorizing application for supplementary letters patent (s. 16). Change of name (s. 40). Borrowing and issuing securities (ss. 78, 79). Creating preference shares (ss. 78, 79). Varying number of directors, quorum, changing location of head office (s. 90). Payment of president or directors (s. 92). Purchase of shares in other companies (s. 94). Dividends by mining company (s. 95). Removal of books from head office (s. 119). By-law of mining company authorizing issue of shares at a discount (s. 148). Generally (s. 91). NOTE. Any by-law requiring confirmation may, in lieu of confirmation at a general meeting, be confirmed by the consent in writing of all the shareholders (s. 144). MEETINGS. 181 Quebec. For use of company's funds in purchase of shares in other cor- porations (art. 5985). Creating preference shares (art. 5989). Increase or reduction of capital, subdivision or consolidation of shares (arts. 5993, 5994, 5995). Borrowing and issuing securities (art. 6009). Increase or reduction of directors, change of head office (art. 6016). Generally (art. 6020). Manitoba. Generally (a. 32). Disposal of stock, payment of president or directors (s. 32 (4)). Increase or reduction of capital or subdivision of shares (s. 41). Issue of shares at a discount (s. 45). Purchase of stock in other companies (s. 70). Borrowing and issuing securities (ss. 71, 72). Preference shares in certain cases (s. 75). New Brunswick. Use of funds in purchase of shares of other corporations (s. 49). Issuing shares at a discount, payment of president or direc- tors (s. 52). Preference shares (ss. 53-55). Increase, reduction of capital, subdivision of shares (s. 58). Making company a close corporation (s. 74). Borrowing and issuing securities (s. 77). Change of head office, increase or decrease of directors (s. 85). Generally (s. 91). 182 HANDBOOK ON COMPANIES. CHAPTER XL BORROWING. Every trading company, i.e., a company incor- porated to carry on trade or business for the pur- pose of profit or gain, will usually require to borrow money from time to time ; and such companies have an implied power to borrow money for the purpose of their undertaking. There are various ways in which a company's power to borrow money may be exercised, e.g., by unsecured loan, overdrawing its bank account, by means of bills of exchange or promissory notes, or, for borrowing of a less tem- porary nature, by means of mortgage of its real or personal property, or by an issue of bonds or deben- ture stock. All the Acts, except the British Columbia Act, contain express provisions authorizing the company to borrow money. In British Columbia the power to borrow and mortgage may be given by the memorandum of association, but, if omitted, may be implied on the principle above mentioned. The effect of the provisions of the various Acts is briefly as follows : Statutory provisions regarding the borrowing of money. Dominion (ss. 69-69M). Ontario (ss. 78, 79, 82, 114). Quebec (arts. 60G9-6009a) . Manitoba (ss. 71-72). New Brunswick (s. 77). The company's borrowing powers and the power to give security for moneys borrowed become BOKKOWING. 183 exercisable by the directors upon the passing of a by-law confirmed by a vote of not less than two- thirds in value of the subscribed stock (Ontario "issued capital stock") represented at a general meeting duly called for considering the by-law. Under the Dominion and New Brunswick Acts the directors, if so authorized, may limit or increase the amount to be borrowed. The by-law is usually passed in the course of the organization of the com- pany and confirmed by all the shareholders. The notice of meeting of shareholders to confirm the by- law should specify the terms of the by-law. The authorization to borrow conferred by the by-law should be in general terms. It is desirable that the borrowing by-law should itself provide for the appointment and authorization, by resolution of the board, of the officers who negotiate loans and sign the various instruments in connection therewith. It may be desirable from time to time to change the signing officers, and where this can be done by a board meeting no delay need arise. For a form of borrowing by-law and banking resolution see App. Forms 29, 31. Most banks require the borrowing by-law and the signing officers' resolution to be on the bank's special form, which is obtainable from the bank ; but it is generally advisable in any event to pass and confirm the general form of by-law above mentioned, in addition to the special form required by the bank. Borrowings by discounting of commercial paper, or on bills of exchange or promissory notes drawn, accepted or endorsed by the company, are excepted by the above Acts from the requirement of a borrow- ing by-law, but in practice banks invariably and pro- perly require a by-law before any discounting is done. The power to draw, make or accept bills of 184 HANDBOOK ON COMPANIES. exchange or promissory notes is usually taken in the letters patent of Dominion, Manitoba and Quebec companies. In Ontario (s. 23(1)), and New Bruns- wick (s. 14(1) (1)) the power is one of the ancillary powers conferred by the Act. Nova Scotia (ss. 76, 85-91). Saskatchewan (ss. 122, 12'0). Alberta (ss. 98, 98a, 103, 107), British Columbia (ss. 32, 93-106). In the above jurisdictions (except British Colum- bia) the Act expressly confers the power to borrow and give security, subject to the conditions of, and in addition to, all other powers conferred by the Act. In Saskatchewan and Alberta such powers are, how- ever, forbidden to be exercised, except with the sanc- tion of a resolution of the company previously given in general meeting. In Nova Scotia, the power to execute mortgages of the company's property, or to issue debentures, secured by mortgage or otherwise, is forbidden to be exercised, except with the sanction of a special resolution of the company previously given in general meeting. The directors are usually, by the articles, given express power to borrow and give security (see Forms p. 44), or, under a general clause in the articles, are given the powers of the company. Generally the power to borrow and give security is one of the express objects set out in the memorandum. It is usual, in the organization stage, to have a general borrowing resolution passed by the members, and also to pass, pursuant thereto, a resolution of the board regulating the exercise of the powers conferred by the general borrowing resolution (see App. Forms 30, 31). Most banks BORROWING. 185 require their special forms to be used (see p. 21, above). The power to draw, make or accept bills of exchange or promissory notes is usually taken in the memorandum of companies incorporated under the above Acts. Specially limited mining companies. Alberta (s. 63a (10)). British Columbia (s. 21 (2) (k)). Specially limited mining companies may borrow money. The amount borrowed must not, without the sanction of a general meeting, exceed one quarter of the amount of the capital for the time being paid up. This restriction will not affect any power of borrow- ing money vested in the board of directors under the memorandum or articles (or by-laws; Alberta). Limitations on the power to borrow and precautions to be observed by lenders. The various Companies Acts do not generally prescribe any limit to the amount which a company may borrow, but limitations may be imposed by the letters patent or supplementary letters patent, or the memorandum of association or articles of asso- ciation, as the case may be, and by the borrowing- by-law or resolution, but the express powers con- ferred by the governing Act and by the letters patent or memorandum and articles may not be exceeded. It is, therefore, necessary for persons dealing with the company carefully to scrutinize all the fore- going documents. As to limitation on borrowing powers of mining companies in Alberta and British Columbia, see above. 186 HANDBOOK ON COMPANIES. A lender should assure himself that the com- pany's borrowing by-law or resolution has been sanctioned in strict accordance with the terms of the governing statute, but informalities in the prelimin- ary steps leading to the passing of the by-law or resolution will not prejudice the position of the lender who makes advances bona fide and without notice of such informalities. As regards matters of internal management, such as length of notice of meeting, fullness of notice, etc., in the absence of information to the contrary, the lender is entitled to rely on the written assurance of the company's officers that the by-law or resolution was duly passed. The lender should obtain a copy of the by-law or resolution certified under the company's seal by the president and secretary as having been validly passed. In some cases the lender may assume that the by-law or resolution necessary to sanction the borrowing has been passed (see Company Law, p. 366). The lender should also satisfy himself that the persons who negotiate the loan and sign on the com- pany's behalf have been properly authorized. The lender is not concerned to inquire as to the object of the borrowing, but if he knows that the object is illegal he cannot recover his loan. The giving of security for existing enforceable debts of the company is not borrowing, and in such cases the person taking the security may be pro- tected even though the statutory requirements have been disregarded (see Company Law, p. 369). In some jurisdictions, e.g., Ontario, Saskatche- wan, Alberta and British Columbia, borrowing powers cannot be exercised until the company is entitled to commence business, if the company is one BOEEOWING. 187 which is bound to obtain a certificate from the Pro- vincial Secretary or Registrar that it is so entitled (see p. 34 if., above). A person proposing to lend money to a new company or to any company, if the amount involved is considerable, should take legal advice and see that he gets the best security avail- able. Advances are sometimes attempted to be secured by the issue of treasury shares to the lender. Such security is generally illusory and dangerous and may result in leaving the lender liable as a holder of unpaid shares in the liquidation of the company. There is legislation in every province prohibiting an extra-provincial company or foreign corporation from doing business in the province unless or until it is licensed or registered. Accordingly, in the case of such companies, it is advisable to be satisfied that such regulations have been complied with, or that compliance is unnecessary in the particular transac- tion in question. Where a company mortgages its lands or chattels, the provisions of the local Registry Act or Land Titles Act, or Act dealing with the registration of chattel mortgages, must be complied with in order to give priority to the lender. These Acts require registration of a land mortgage in the proper regis- try or land titles office and the filing of a chattel mortgage within a limited number of days after its execution. In addition, in some jurisdictions, special provisions as to registration with the Secretary of State, Provincial Secretary or Registrar of Com- panies or otherwise, apply in the case of certain designated securities, including bond mortgages (see pp. 192 ff., below). In jurisdictions where no such provisions are in force, a lender may be well advised 188 HANDBOOK ON COMPANIES. to obtain a statutory declaration of a responsible officer of the company that the company has no bonds, debenture stock or other evidences of indebt- edness secured against its assets outstanding, or, if any, a declaration showing what the amount is. It frequently happens that the company's bankers may hold an issue of bonds, an assignment of book debts or a security under s. 88 of the Bank Act to secure moneys advanced, or some of the company's assets, e.g., machinery, may be subject to a lien for unpaid purchase money, in all of which events the lender's security may be postponed in whole or in part to such prior securities or liens. To summarize the more important of the fore- going, the lender should satisfy himself (a) That there is express or implied power to borrow and to give security, including the security in question; (6) That if there is any limitation on borrowing it will not be exceeded by the proposed advance; (c) That the mortgage or other security is in proper form and duly executed; (d) That the security is duly registered, if requiring regis- tration, under the Registry Act or Land Titles Act; Bills of Sale and Chattel Mortgage Act; and/or the governing Companies Act; (e) That all proper searches are made, including a search of the company's register of mortgages and charges and the register kept by the departmental official, where the same are provided for under the governing Act; (/) That the company holds a certificate that it is entitled to commence .business, where such is required; (g) That the company, if an extra-provincial or foreign cor- poration, is properly qualified within the jurisdicion by registra- tion or license; and (It) That a search has been made for receiving orders or authorized assignments under the Bankrupty Act, also whether any petition for a receiving order has been filed with the Bank- ruptcy Registrar. Bonds, debentures and debenture stock. The terms " bonds" and ''debentures" are com- monly used without any distinction of meaning in BORROWING. 189 this country. For the distinction between bonds and debenture stock, which is not a very common security in Canada, see Company Law, p. 387. The term "bond" is not a technical one, but is commonly applied to a security for money, called on its face a bond, and providing for the payment of a specified sum to the owner or bearer with interest in the mean- time. A bond may be a mere promise to pay, or a promise to pay secured by mortgage or charge, either in the bond itself or in a separate deed of trust, or by a combination of both. It is usual and desirable to secure bonds by a separate deed of mortgage and trust in favor of a trust company as trustee for the bondholders, and to have the bonds state on their face that they are issued subject to the terms of the trust deed, the provisions of which are to be deemed incorporated in the bonds. The trust deed usually contains a specific mortgage of the lands and other fixed assets, against which it is registered as an encumbrance in compliance with local registration laws ; it also sometimes contains a specific mortgage of chattels ; also a floating charge on all the other assets and the undertaking of the company present or future. Such a charge attaches to the assets in the varying condition in which they happen to be from time to time, and the company may deal with such assets in the ordinary course of business, until the security has become enforceable and the trustee has determined or become bound to enforce the same. Where the trust deed contains a mortgage of the chattels of the company, whether by way of floating or specific charge, it will be neces- sary to file the trust deed as a chattel mortgage in the jurisdiction where the chattels are situate, if local Bills of Sale and Chattel Mortgage Acts require 190 HANDBOOK ON COMPANIES. such registration (see p. 187, above). As to the nature of a floating charge see further Company Law, p. 389. Bonds usually provide for the payment of the principal at a fixed date, but may be made payable on a contingency, such as default in payment of interest, a winding-up order being made against the company, or the company ceasing to carry on busi- ness. The payment of interest is usually provided for by coupons payable to bearer attached to the bonds, the coupons being detached as they fall due, when they are presented for payment at the bank or other stated place where they are expressed to be payable. Bonds are usually made payable to bearer, with an option to the holder to have them registered and thus made payable to the registered holder, whereupon they can only be transferred by instru- ment in writing signed by the registered holder or his attorney and registered in the bond register at the office of the trustee and such transfer duly noted by endorsement on the bond. It is also pro- vided that a transfer to bearer may subsequently be registered, after which the bond passes by delivery until registered in the name of the holder ; but that, notwithstanding registration, the interest coupons are to continue payable to bearer. Transfer tax is payable on the transfer of bonds (Dominion tax) ; also in Quebec (pp. 134, 138). The position of a bondholder is different from that of a shareholder. A bondholder is a secured creditor, usually a mortgagee; the moneys secured by his bonds are a debt constituting a prior charge on the assets and earnings of the company; and if principal and interest are not paid, the bondholders can take, or can cause to be taken on his behalf, BORROWING. 191 appropriate proceedings for the enforcement of his rights. A shareholder, on the other hand, is a partner rather than a creditor, owning such interest in the assets and earnings of the company as remains after liabilities and charges, including bonds, have been provided for. In other words, the shareholders are the owners of the equity in the business. If there is default under the provisions of the trust deed, i.e., if one of the events happens, on the occurrence of which the security is expressed to become enforceable, such as non-payment of interest for a specified time, or permitting a creditor to levy an execution, the bondholders are entitled to enforce their security. But the bondholders need not always wait until there is default, and the Court will, in a proper case, at the instance of the bond- holders, appoint a receiver, where, e.g., judgments have been recovered against the company and execu- tions are likely to issue ; the principle being that the bondholders need not stand by and see the assets seized by unsecured creditors. The remedies open to bondholders where the bonds are secured by deed of mortgage and trust will depend on the terms of the trust deed, and may include the appointment of a receiver and manager, sale or foreclosure, and such remedies are usually by the trust deed made exercisable by the trustee only on behalf of the bondholders, and not by the bondholders individually. See Company Law, p. 406. Most trust deeds provide for the modification or compromise of the rights of bondholders by the vote of a stated majority at a meeting of the bondholders. It may be sometimes advisable, both in the interests of the company and of the bondholders, to resort to 192 HANDBOOK ON COMPANIES. such provisions, e.g., in order to postpone the due date of the principal and interest, or in order to waive compliance with sinking fund provisions, or in order to permit the issuance of prior lien bonds, etc. If the company gets into difficulties and cannot pay its bond interest, in a great many cases the bondholders cannot hope to get their money back by realizing by means of a sale under the trust deed. Some plan of reorganization or readjustment of the company's indebtedness will then be put forward^ whereby the bondholders will be required to submit to a modification of their security or to take securi- ties of a new company formed to take over the busi- ness of the company. The required majority .of bondholders can bind all the bondholders to an acceptance of the plan. A person proposing to purchase bonds or lend money on the security of bonds, should obtain a legal opinion beforehand. If the bonds are being sold to the public, a copy of the legal opinion obtained by the issuing house will usually be available free of charge. For a discussion of the precautions to be observed by purchasers of securities, see p. 61, above. Registration of mortgages and charges. In addition to the requirements as regards regis- tration of land mortgages or chattel mortgages, in the jurisdictions where the lands or chattels are situ- ated (see p. 187, above) the regulations applicable to companies incorporated under the following Acts should be noted : Dominion. The company must keep a register of mortgages and enter therein certain particulars in respect of BORROWING. 193 all mortgages and charges specifically affecting pro- perty of the company. The ruling of the pages of the register may vary according to circumstances, but it will be sufficient, in most cases, to have six columns under the following headings: Date of mortgage or charge; short description of property mortgaged or charged; amount of charge created; name and address of mortgagee or person entitled to the charge; date of discharge of mortgage or charge. In the case of securities to bearer, the names of the persons entitled thereto are not required. Certain mortgages and charges created after January 1, 1918, must be registered with the Secre-' tary of State. Section 69A provides as follows: 69A. (1) Every mortgage or charge created after the first day of January, nineteen hundred and eighteen, by a company, and being either, (a) a mortgage or charge for the purpose of securing any issue of debentures; or, (b) a mortgage or charge on uncalled share capital of the company; or, (c) a floating charge on the undertaking or property of the company; shall, so far as any security on the company's property or under- taking is thereby conferred, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the mortgage or charge, together with an original of the instru- ment (if any) by which the mortgage or charge is created or evidenced, are delivered to or received by the Secretary of State of Canada, for registration in manner required by this Act, within thirty days after the date of its creation, but without prejudice to any contract or obligation for repayment of the money thereby secured; and when a mortgage or charge becomes void under this section the money secured thereby shall immedi- ately become payable: Provided that, (i) in the case of a mortgage or charge created out of Canada comprising solely property situate outside Canada, the delivery to and the receipt by the Secretary of State of H.C. 13 194 HANDBOOK ON COMPANIES. Canada of a copy of the instrument by which the mort- gage or charge is created or evidenced, verified in the prescribed manner, shall have the same effect for the purposes of this section as the delivery and receipt of the instrument itself, and thirty days after the date on which the instrument or copy could in due course of post, and if despatched with due diligence, have been received in Canada, shall be substituted for thirty days after the date of the creation of the mortgage or charge, as the time within which the particulars and instrument or copy are to be delivered to the Secretary of State of Canada; and, (ii) where the mortgage or charge is created in Canada, but comprises property outside Canada, the instrument creating or purporting to create the mortgage or charge may be sent for registration notwithstanding that fur- ther proceedings may be necessary to make the mortgage or charge valid or effectual according to the law of the country in which the property is situate; and, (Hi) the holding of debentures entitling the holder to a charge on land shall not be deemed to be an interest in land. (2) The Secretary of State of Canada shall keep, with respect to each company, a register in the prescribed form of all the mortgages and charges created by the company after the first day of January, nineteen hundred and eighteen, and requiring regis- tration under this section, and shall, on payment of the prescribed fee, enter in the register, with respect to every such mortgage or charge, the date of creation, the amount secured by it, short particulars of the property mortgaged or charged, and the names of the mortgagees or persons entitled to the charge. (3) Where a series of debentures containing, or giving by reference to any other instrument, any charge to the benefit of which the debenture holders of that series are entitled pari passu, is created by a company, it shall be sufficient if there are delivered to or received by the Secretary of State of Canada, within thirty days after the execution of the deed containing the charge, or, if there is no such deed, after the execution of any debentures of the series, the following particulars: (a) the total amount secured by the whole series; and, (6) the dates of the resolutions authorizing the issue of the series and the date of the covering deed, if any, by which the security is created or defined; and, (c) a general description of the property charged; and, (d) the names of the trustees, if any, for the debenture holders; BORROWING. 195 together with the deed containing the charge, or if there is no such deed, one of the debentures of the series; and the Secretary of 'State of Canada shall, on payment of the prescribed fee, enter those particulars in the register: Provided that, where more than one issue is made of deben- tures in the series, there shall be sent to the Secretary of State of Canada for entry in the register particulars of the date and amount of each issue, but an omission to do this shall not affect the validity of the debentures issued. <4) Where any commission, allowance, or discount, has been paid or made either directly or indirectly by the company to any person in consideration of his subscribing or agreeing to sub- scribe, whether absolutely or conditionally, for any debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any such debentures, the particulars required to be sent for registration under this section shall include particulars as to the amount or rate per cent, of the commission, discount, or allowance so paid or made, but an omission to do this shall not affect the validity of the debentures issued : Provided that the deposit of any debentures as security for any debt of the company shall not for the purposes of this provi- sion be treated as the issue of the debentures at a discount. (5) The Secretary of State of Canada shall give a certificate under his hand of the registration of any mortgage or charge registered in pursuance of this section, stating the amount thereby secured, and the certificate shall be conclusive evidence that the requirements of this section as to registration have been complied with. (6) The company shall cause a copy of every certificate of registration given under this section to be endorsed on every debenture or certificate of debenture stock which is issued by the company, and the payment of which is secured by the mort- gage or charge so registered: Provided that nothing in this sub-section shall be construed as requiring a company to cause a certificate of registration of any mortgage or charge so given to be endorsed on any deben- ture or certificate of debenture stock which has been issued by the company before the mortgage or charge was created. (7) It shall be the duty of the company to send to the Secre- tary of State of Canada for registration the particulars of every mortgage or charge created by the company and of the issues of debentures of a series, requiring registration under this section, but registration of any such mortgage or charge may be effected on the application of any person interested therein. 196 HANDBOOK ON COMPANIES. Where the registration is effected on the application of some person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by him. to the Secretary of State of Canada on the registration. (&) The register kept in pursuance of this section shall be open to inspection by any person on payment of the prescribed fee. (9) Every company shall cause a copy of every instrument creating any mortgage or charge requiring registration under this section to be kept at the registered office of the company: Provided that, in the case of a series of uniform debentures, a copy of one such debenture shall be sufficient. Imp. Act, 1908, B. 93. For fees, see Table of Pees, p. 357, below. Section 69D provides that the company, or any person interested, may, in certain cases, apply to the Court in the province of the company's head office for relief for non-compliance with the requirements as to registration, or on account of omissions or mis-statements with respect to mortgages or charges. Section 69E provides for entry of satisfac- tion by the Secretary of State on the register where the mortgage debt has been paid, and that he is to furnish the company with a copy of such entry if required. Section 69F requires the Secretary of State to keep an index of registered mortgages and charges. Section 691 gives a right of inspection, to creditors and shareholders, of copies of instruments creating mortgages and charges and of the com- pany's register of mortgages. Section 69 J entitles debentures holders to inspect the register of deben- ture holders and to have a copy of the trust deed. See further Company Law, pp. 351-357, 398. Ontario. Section 82(2') provides that a duplicate original of a charge or mortgage, etc., made to secure bonds, BORROWING. 197 debentures, debenture stock or other securities shall be forthwith filed in the office of the Provincial Secretary, as well as registered under the provisions of any other Act in that behalf. Failure to file in accordance with the section does not invalidate the security. Quebec. The company must keep a register of mortgages and enter therein certain particulars in respect of all mortgages and charges affecting property of the company (art. 6025a). As to the particulars to be entered in the register, see p. 193, above. Article 6009a provides that the holder of any debentures or other securities is entitled to a copy of the trust deed on payment of the prescribed fee, and imposes a penalty on the company and its officers for failure to comply with the article. Nova Scotia. Sections 85-91 contain provisions which are similar to those of the Dominion Act above noted, but are somewhat more elaborate. Manitoba. A duplicate original of every charge, mortgage or other instrument of hypothecation or pledge, made to secure bonds, debentures or other securities of a like nature, is to be forthwith filed in the office of the Provincial Secretary (s. 71 (d)). Section 71A provides as follows : 7lA. (1) Every floating lien or charge created by any bond, debenture or other instrument on any personal property of any company shall, so far as any security on the said personal property is thereby conferred, be void as against bona fide pur- chasers or mortgagees for valuable consideration, or the 198 HANDBOOK ON COMPANIES. authorized trustee under The Bankruptcy Act, being chapter 36 of the Statutes of Canada, 9-10 George V. (1919, First .Sess.) and amendments thereto, or any creditor of the company, unless there is registered in the office of the County Court of the judicial division within which is situated the personal property, or any part thereof, upon which the floating lien or charge is created, within twenty-one days after the date of the creation of the said floating lien or charge, an affidavit setting forth the following particulars: (a) The total amount secured by the bond, debenture or other instrument, or series of bonds or debentures. (6) A general description of the property charged. (c) A true copy of the bond, debenture or other instrument, or one of any series of bonds or debentures. (2) Sections 14, 15, 16, 17, 18, 19 and 20 of The Bills of Sale and Chattel Mortgage Act. chapter 17 of the Revised Statutes of Manitoba, 1913, shall, mutatis mutandis, apply to any such affi- davit. Provided that the time for registration of the affidavit in respect of a floating lien or charge created outside the province on personal property within the province shall be within thirty days after the date of the creation thereof. Alberta. The company must keep a register of mortgages specially affecting property of the company and enter therein certain particulars (s. 103 (e)). Every mortgage or charge created after the last day of June, 1922, by any company registered under the Companies Ordinance shall, -so far as any security on the company's property or undertaking is thereby conferred, be void against bona fide purchasers and mortgagees for valuable consideration unless the prescribed particulars of the mortgage or charge, together with the instrument (if any) or a true copy thereof are delivered to or received by the Eegistrar of Companies for registration in the manner required by the ordinance within twenty-one days after the date of its creation, without prejudice to any contract or obligation for repayment of money thereby secured, and when a mortgage or charge BORROWING. 199 becomes void under the section the moneys secured thereby shall immediately become payable (s. 103). British Columbia. Sections 93-103 contain provisions which are similar to those of the Dominion Act above noted, but are somewhat more elaborate. 2"00 HANDBOOK ON COMPANIES. CHAPTER XII. CONTRACTS AND OFFICERS. Contracts. The board of directors, acting as such, as a general rule have power to bind the company by any arrangement or contract which is within the cor- porate powers of the company. In some cases, e.g., a contract to sell or dispose of the undertaking of the company under the Ontario Act, the consent of a specified majority of shareholders is required; and in transactions of (importance the directors fre- quently obtain the approval of the shareholders, even though it may not be strictly required. While the general power of management of the company's affairs is vested in the directors, they commonly delegate, in pursuance of the by-laws or articles, the performance of many acts, including the making of contracts, to an executive committee or to officers and agents of the company. Any con- tract by such committee, officer or agent made in pursuance of a valid delegation will be binding on the company. A person contracting with a company will have to satisfy himself by reference to the governing Act, letters patent or memorandum of association, that the contract is within the powers of the company, and every person will be deemed to have knowledge of their contents. In the case of a company incor- porated by registration, a person contracting with the company is also deemed to have notice of the contents of the registered articles, including any restrictions on the powers of directors and officers, CONTRACTS AND OFFICERS. 201 and any regulations as to the formalities in connec- tion with affixing the corporate seal. As regards the by-laws of companies incorporated by letters patent, these are not public documents, and persons contract- ing with the company are not fixed with knowledge of their contents. Possibly a different rule applies in Manitoba, where a copy of the by-laws must be filed with the Provincial Secretary (s. 29A). Nor are persons dealing with a company bound to inquire into the regularity of matters of internal management, e.g., whether an officer has been validly appointed. Where a contract is made by an officer or agent on the company's behalf, the person deal- ing with him should satisfy himself as to his author- ity. Where the authority of the officer or agent is doubtful, or in transactions of any magnitude, it is advisable to insist on the production of a properly certified copy of a resolution of the board of direc- tors authorizing the specific contract or transaction proposed to be entered into on the company's behalf. Contracts are, however, made daily by companies, where it is impracticable or undesirable for the per- son dealing with the company to inquire into the authority of the person acting on the company's behalf, e.g., where goods are ordered for the com- pany by letter or verbally. In such cases of con- tracts by an agent within his apparent authority the company will usually be liable, unless the other per- son knew of the agent's lack of authority. See Company Law, pp. 139-142. The common law rule was that a corporation was not bound by a contract unless it was under the cor- porate seal; exceptions to the rule are contracts in respect of trivial matters of every-day occurrence, and contracts of trading corporations entered into 2'02 HANDBOOK ON COMPANIES. in the ordinary course of business. Some of the Companies Acts contain provisions relaxing the rule still further by providing that every contract made on behalf of the company by any agent, officer or servant in general accordance with his powers as such under the by-laws (or otherwise Manitoba) is binding on the company, and it is not necessary that the corporate 'Seal be affixed to such contract. In the case of companies incorporated by registration it is only necessary to affix the corporate seal to the con- tract, if a seal would have been necessary in the case of an individual. The above-mentioned statutory provisions relat- ing to contracts appear in the different Acts as follows : Dominion (s. 32). Manitoba (s. 66). Nova Scotia (ss. 75, 77). Saskatchewan (ss. 112, 113). Alberta (ss, 95-97a). British Columbia (s. 127). Notwithstanding the above statutory provisions, it is the practice to execute all important contracts under the corporate seal. Where a contract is so executed, the company is expressed to be one of the parties, and the final clause may read " In witness whereof the company has caused its corporate seal to be hereunto affixed, attested by the hands of its proper officers." The contract will be executed as follows : , Limited Impression of by A. B. corporate President. seal. C. D. Secretary. CONTRACTS AND OFFICERS. 203 In some jurisdictions, a contract made before the company becomes entitled to commence business is only provisional (see Commencement of Business, pp. 34' ff). A .company will not be bound by a contract, made before it comes into existence, by some one purporting to act on its behalf. If a per- son makes a contract on behalf of a company before it comes into existence, he will be personally bound by the contract. He should, therefore, protect himself from liability by a proper clause in the contract. Such a clause should provide that, if the contract is adopted by the proposed company, the liability of the agent or trustee is automatically terminated ; and that, if the contract is not adopted within a limited time, the trustee or agent may rescind the contract. An officer or agent, who makes a contract on behalf of a company, incurs no personal liability to third parties, unless his authority is defective or non-existent, or he fails to make it clear that he signs as officer or agent only. If the company repudiates a contract entered into by an officer or agent without authority, the officer or agent will be liable to the other contracting party in damages for breach of implied warranty of authority. An unau- thorized contract may be ratified by the board of directors, or by the shareholders, where their assent is required. Where a person makes a contract on behalf of a company, without authorization, he should protect himself from personal liability by having the contract expressed to be _ ratification being obtained. If this is not possible, he should have the contract ratified at the earliest opportunity. 2'04 HANDBOOK ON COMPANIES. Any contract, letter or document, not under the corporate seal, should be signed as follows: , Limited. (Official designation). Special care should be taken in the case of bills of exchange, promissory notes and cheques, not only to sign on behalf of the company, but also to state the company's name accurately, followed by the word " Limited " (or its abbreviation, in jurisdictions where this is permitted). Otherwise the person sign- ing such instruments may be personally liable. The by-laws or articles and the banking and signing officers' resolution will provide what officers may sign bills, notes, cheques, etc. A draft by one company on another may be in the foil owing 'form: 11,000. Toronto, January 2, 1921. Three months after date, pay to the order of one thousand dollars, value received. For the A. B. C. Company, Limited. A. X. President. B. Y. Secretary. To X. Y. Z. Company, Limited. The draft may be accepted as follows : For X. Y. Z. Company, Limited, and by its authority; pay- able at the Bank, and Streets Branch, Toronto. L. M. President. N. O. Secretary. CONTRACTS AND OFFICERS. 205 A draft should not be accepted unless it is di- rected to the company, e.g., where it is addressed to the directors. A promissory note may be in the following form : $1,000. Toronto, June 6, 1921. Two months after date, , Limited, promises to pay to or order, the sum of one thousand dollars, value received. For , Limited. By President. Secretary. Cheques may be signed in the same way. In some jurisdictions a company may appoint an attorney, by writing under its corporate seal, authorizing the attorney to execute deeds on the company's behalf. See Dominion (s. 31) ; Ontario (s. 145a) ; Saskatchewan (s. 115); British Colum- bia (s. 129). Officers. Manager, general manager or managing director. The by-laws or articles usually provide for the appointment of a manager, general manager or managing director with more or less wide powers over the administration of the company's affairs. The manager may or may not also be a director. He should be appointed by the board of directors, but it is usually desirable to have in addition an agree- ment under the corporate seal, setting out the terms of the appointment, the powers to be vested in the manager, the remuneration, the duration of, and the method of determining, the employment. It is 2'06 HANDBOOK ON COMPANIES. important that the agreement be so drawn that the directors may exercise control over the manager and. if need arises, dismiss him on reasonable notice or payment in lieu thereof. For form of agreement, see Forms pp. 309, 310. The extent of the manager's authority is governed primarily by the by-laws or articles or by the agreement under which he serves, but the company may become liable for his acts under certain circumstances notwith- standing he has exceeded his authority. (See Com- pany Law, p. 140). The manager has no authority to call meetings of shareholders unless the by-laws or articles so provide. Where the manager is also a director, the by-laws or articles sometimes provide that he is to be called managing director. President, Vice-president. The by-laws or articles generally provide for a president and vice-president, who are usually appointed by the directors at their first meeting after the annual meeting at which directors are elected. Among the usual duties of the president are the following : to preside at all meetings of the board; to act as chairman at, and call to order, meet- ings of shareholders; sign share certificates, deeds and other instruments in the name of the company ; call meetings of the directors. The vice-president is usually authorized by the by-laws or articles to per- form the duties of the president in the event of his absence or inability to act. Secretary, Treasurer. The by-laws or articles provide for the appoint- ment of a secretary. This is done by resolution of the directors ; a contract is not usual. The duties of CONTRACTS AND OFFICERS. 207 the secretary are usually indicated in a general way in the by-laws or articles. He will take minutes of the meetings of directors and shareholders and send out notices of meetings when so directed. He can- not call meetings of shareholders without authoriza- tion. He will have charge of the minute books of the company and of other books, such as the register of shareholders, the stock ledger, register of direc- tors, etc. He will act under and obey the lawful orders of the board, but not of a single director, unless such director happens to be the manager or is otherwise properly authorized to give the instruc- tions. It is usually part of the secretary's duties to certify copies of resolutions, etc., under the com- pany's seal; also, register transfers of shares, except where this duty is delegated to a transfer agent and registrar. But he cannot pass transfers of shares not fully paid up. He is usually by the by-laws or articles designated as one of the signing officers to sign with the president or vice-president, deeds, share certificates, etc. The secretary should be familiar with the governing Companies Act, and by-laws or articles ; he should see that the necessary annual and other returns are filed with the proper departments. As a general rule the secretary has no inherent power to bind the company by contract, although the company may become liable on the principles of the law of agency on contracts made by the secretary on its behalf. The secretary, being a servant or agent of the company, is liable if he accepts any bribe or secret commission from persons having dealings with the company. The various Companies Acts also impose penalties on the secre- tary for various infractions of their provisions, e.g., failure to file the annual summary, falsifying books, 2'08 HANDBOOK ON COMPANIES. etc. A company will not be bound by a share certifi- cate or cheque on which the secretary has forged the names of the directors. The by-laws or articles will provide for the appointment of a treasurer and define his duties. The appointment is made by the directors. The treasurer's duties include the custody of the funds and securities of the company, depositing the same in the company's bank, signing cheques, drafts, etc. The signing authority of the treasurer as regards the company's banking arrangements will be found in the banking and signing officers' resolution (see pp. 183, 184). The offices of secretary and treasurer are often combined, the officer being then called the secretary-treasurer. Auditors. The Acts of the Dominion and of Ontario and most of the other provinces provide for the appoint- ment of auditors and their powers, duties and remuneration. The statutory provisions vary in their details, but most of them include the following : The first auditors may be appointed by the direc- tors ; but thereafter must be appointed at the annual meeting. If this is not done, the departmental official designated by the Act may, on the applica- tion of any shareholder, appoint an auditor for the current year and fix his remuneration. Directors or officers are not eligible. The directors may fill any casual vacancy in the office of auditor. The remuneration of the auditors must be fixed by the shareholders in general meeting, except the remuneration of the first auditors, or auditor appointed to fill a casual vacancy, which may be fixed by the directors. Every auditor has a right of access CONTRACTS AND OFFICERS. 209 to the company's books, accounts and vouchers, and is entitled to require from the directors and officers such information and explanation as may be neces- sary for the performance of his duties. The audi- tors must make a report to the shareholders on the accounts examined by them and on every balance sheet laid before the company in general meeting, and the report must cover the particulars required by the governing Act, which include whether the balance sheet is properly drawn up. The directors and auditors should, of course, satisfy themselves that the provisions of the governing Act in respect of audit and balance sheets have been complied with. The report must be read at the annual meeting. Under the Dominion, Quebec, Saskatchewan and British Columbia Acts the balance sheet must be signed by two directors. The auditors' statement or certificate must be in accordance with the Act which governs the company's affairs. The follow- ing form is sufficient under the Ontario Act : We have examined the books and accounts of Limited, for the year ending December 31, 1920, and, in accordance with section 134(2) of the Ontario Companiea Act, we certify that all our requirements as auditors have been complied with, and report that, in our opinion, the above balance sheet is properly drawn up so as to exhibit a true and correct view of the state of the cor- poration's affairs at December 31, 1920, as shown by its books. The following form is sufficient under the Domi- nion Act : We have examined the accounts of Limited, for the year ending December 31, 1920, and report that, in our opinion, the above balance sheet is properly drawn up so as to exhibit a true and correct view of the state of the company's affairs at December H.C. 14 210 HANDBOOK ON COMPANIES. 31, 1920, according to the best of our information and the explanations given to us and as shown by the books of the company. We have obtained all the information and explanations we have required. Frequently it is necessary to add special remarks as e.g., " inventories have been certified as to quan- tities by the company's officials," or " provision has been made in respect of doubtful accounts and bills receivable," or "no allowance has been made for Dominion income tax." Sometimes the report is expressed to be subject to an accompanying letter. As to the duties of auditors, see Company Law, p. 539. The statutory provisions as to auditors and balance sheets appear in the various Acts as follows : Dominion (ss. 94 A-C; s. 105). Ontario (ss. 127-134; s. 45 (3)). Quebec (arts. 6030 c-d). Nova Scotia (s. 94). Saskatchewan (ss. 127-128). Alberta (ss. 131-133). British Columbia (ss. 109-115). HEAD OFFICE. 211 \ CHAPTER XIII. HEAD OFFICE. Every company must have an office, designated in the various jurisdictions as the head office, chief place of business, registered office, etc. At such office process and notices may be served on the com- pany; and there certain books and documents must be kept, the requirements in this regard varying 1 in the different jurisdictions. The location of the head office may be a matter of some importance as regards municipal taxation, such as business tax and income tax. For this reason it is often desirable, where the circumstances permit it, e.g., in the case of a mining company whose mining operations are carried on in a municipality where such taxation is light, to avoid locating the head office in a large city where such taxes are heavy. If necessary, the place of the head office may be changed. In the case of companies incorporated by letters patent, the application for incorporation must state the place (i.e., the city, town, etc.) where the head office will be situate, and such place will be men- tioned in the letters patent. In the case of com- panies incorporated by registration, the place where the registered office will be situated must be stated in the memorandum. A company may have more than one office. It is not necessary or desirable to designate the exact address of the head office. The by-laws or articles should provide that this may be changed from one 212 HANDBOOK ON COMPANIES. address to another in the city, town, etc., where the head office is situated. The following- is a brief summary of the statu- tory provisions : Dominion. The application must state the place in Canada which is to be the chief place of business (s. 7(c)), which is the legal domicile of the company in Can- ada. Notice of the situation and of any change therein must be published in the Canada Gazette (s. 30(2)). Service of process upon the company at the chief place of business (s. 95) ; books to be kept there (s. 91) ; register of mortgages to be kept there (s. 69H) ; copies of instruments creating mort- gages or charges to be kept there (s. 69A (9) ) ; name to be kept painted or affixed on the outside of every office or place of business in which the business of the company is carried on in letters easily legible and in a conspicuous position (s. 33) ; duplicate of annual summary to be kept there (s. 106(4)). Ontario. The application must state the place in Ontario where the head office is to be situated (s. 5 (2) (c)). All meetings must be held at such place unless the letters patent or by-laws otherwise provide (s. 52). Notice of change of location of the head office must be published (s. 90(3) ). Books must be kept at head office (s. 119). Duplicate of annual summary to be kept posted up at head office (s. 135 (2)). Quebec. The petition for incorporation must state the place within the province where the head office is to HEAD OFFICE. 213 be situated (art. 5962). The head office is the legal domicile; notice of the situation of the office and of any change therein must be published in the Quebec Official Gazette in Form K to the Act (art. 5976). Certain books, including a register of mortgages, must be kept at the head office (arts. 6025-6026). Duplicate of annual summary to be retained at head office (art. 6031 (4)). Manitoba. The application for incorporation must state the place within the province which is to be the chief place of business (s. 5(c)). The name, including the word "Limited" or the contraction "Ltd.," must be kept painted or affixed in letters easily legible in a conspicuous position on the outside of every office (s. 23 (3)). Books to be kept at head office (s. 62). Duplicate of annual summary to be kept posted up at head office (s. 85). New Brunswick. The application for incorporation must state the place within the province which is to be the chief place of business (s. 7 (c)). The company must at all times have an office in the locality in which its chief place of business shall be, which is to be the legal domicile of the company in New Brunswick, and notice of the selection of that office and any change therein is to be advertised in the New Bruns- wick Royal Gazette (s. 35 (1)). Books and the cor- porate seal must be kept at the head office (ss. 97-99 ; 35 (5)). Any summons, notice, etc., may be served at the office where the chief place of business is situate (s. 106). 214 HANDBOOK ON COMPANIES. Nova Scotia. Saskatchewan. Alberta. British Columbia. The memorandum must state the place within the province (except Nova Scotia) where the registered office of the company will be situated. In British Columbia the city, town or county must be stated. The company must have a registered office in the province to which notices, etc., may be addressed. Notice of the situation of the registered office and of any change therein must be given to the registrar. In British Columbia notice of the situation must be delivered to the registrar with the memorandum of association. The name must be kept painted or affixed in a conspicuous position on the outside of every office in letters easily legible. A register of members and of directors must be kept at the regis- tered office. In Alberta and British Columbia copies of mortgages, a register of mortgages, and in Nova Scotia, Alberta and British Columbia a register of debenture holders must be kept at the registered office. See the following statutory provisions : Nova Scotia (ss. 34, 60-62, 74, 88, 116). Saskatchewan (s. 6 (s if the company had not been dissolved. Provision is made for restoring the name of the company to the register on the application of the company or any member or creditor. The appli- cation is to the Court. The Court, if satisfied that the company was, at the time of the striking off, actually carrying on business or in operation and that it is just and proper to do so, may order the name of the company to be restored to the register. If the name of the company is restored, it is to be deemed to have continued in existence. The name of the company may also be struck off the register for non-payment of any fee prescribed by the regulations. The registrar sends the com- pany a registered letter notifying it of its liability, and, at the expiration of one month, if the fee remains unpaid, the company may be struck off with- out further notice. The liability of every director, officer or member of the company continues. If a registered company fails to comply with any of the requirements of the Act in any particular in which no other procedure is prescribed, the name of the company may be struck off the register after notice from the registrar. The name of the com- pany may be restored on application to the Court by the company or a member or creditor. Alberta (s. 24). The registrar may strike a company off the register if he has reasonable cause to believe that it is not carrying on business or in operation. If, after notice, as provided in the Act, the company's name 272 HANDBOOK ON COMPANIES. is struck off the register, the company will be dis- solved. The liability (if any) of every director, managing officer and member continues and may be enforced as if the company had not been dissolved. Provision is made for restoring the name of the company to the register on the application of the company or any member or creditor. The applica- tion is to the Court. The Court, if satisfied that the company was, at the time of the striking off, actually carrying on business or in operation and that it is just and proper to do so, may order the name of the company to be restored to the register. If the name of the company is restored, it is to be deemed to have continued in existence. Provision is also made for striking a company off the register where it is being wound up and the registrar has reasonable cause to believe that no liquidator is acting or that the affairs of the company are fully wound up and the liquidator has failed to make the required returns. British Columbia (ss. 167-171). The name of a company or an extra-provincial company may be struck off the register, where it has failed to file any return, notice or document required to be filed with the registrar pursuant to the Act or any former "Companies Act" for two consecutive years, or the registrar has reasonable cause to believe that the company or extra-provincial com- pany is not carrying on business or in operation. This is done after notice to the company and in the Gazette as provided in the Act. Thereupon, after publication of further notice, the company is to be dissolved ; or, in the case of an extra-provincial com- pany, is to be deemed to have ceased to carry on TERMINATION OF CORPORATE EXISTENCE. 273 business in the province. The liability (if any) of every director, manager, officer and member of the company is to continue and may be enforced as if the company had not been struck off the register. Provision is made for restoring the name of the com- pany to the register on the application of the com- pany or any member or creditor. The application is to the Court. The Court, if satisfied that the com- pany, at the time of the striking off, was carrying on business or in operation, or otherwise that it is just to do so, may order the name of the company to be restored to the register. Thereupon the company is to be deemed to have continued in existence, or, if an extra-provincial company, to be still entitled to carry on business in the province. Special regula- tions as to procedure and otherwise are set out in ss. 168 (2')ff. The registrar may also strike the company off the register on the request of the company. The request is to be made by resolution and there must be filed with the registrar a statutory declaration of two or more directors proving that the company has no debts or liabilities (s. 167(4)). Provision is also made for striking off the register a company or extra-provincial company which is being wound up, if the registrar has reasonable cause to believe that no liquidator is acting or that the affairs of the company are fully wound up or if the returns required to be made by the liquidator have not been made (s. 167(3)). H.C. 18 274 HANDBOOK ON COMPANIES. Carrying on business with less than minimum number of shareholders. Ontario (s. 30). Nova Scotia (s. 95). Saskatchewan (s. 46). Alberta (s. 106). British Columbia (s. 266). In the above jurisdictions serious results may follow if the company carries on business (or in Ontario exercises its corporate powers) with less than the statutory minimum of shareholders. The minimum under the different Acts is as follows: Ontario, 5; Nova Scotia, Saskatchewan and Alberta, 3; British Columbia, 5 in the case of a public company, 2 in the case of a private com- pany. If the company carries on business (or in Ontario exercises its corporate power) for more than six months with less than the legal minimum, every shareholder during the period of default cognizant of the default is to be severally liable for the whole of the debts of the company contracted during the period of default and may be sued for the sum without joinder in the action of any other share- holder. In Ontario the corporation need not be joined either. In Ontario, any shareholder who becomes aware of the default, may exonerate himself from liability by notifying the company and the Provincial Secre- tary as prescribed by s. 30 (3). The company's charter may be revoked if the corporation fails to bring its shareholders up to 5 after notice by the Provincial Secretary (s. 30 (3)). TERMINATION OF COEPOEATE EXISTENCE. 275 The above penalty may be guarded against by transferring shares to enough individuals to bring the number of shareholders up to the required minimum. Appointment of inspectors. Dominion (ss. 92-94). Ontario (,ss. 20, 12*6). Quebec (arts. 6030-6030A). Manitoba (ss. 98-104). New Brunswick (s, 102-3). Nova Scotia (ss. 92, 93). Saskatchewan (ss. 124-126). Alberta (ss. 125-130). British Columbia (ss. 133, 134). All the Acts provide for appointment of inspec- tors to investigate the affairs of the company and to report thereon. In all jurisdictions the appoint- ment may be made by the Court (Ontario, New Brunswick) or a designated official on the applica- tion of shareholders. In some jurisdictions a stated proportion of shareholders is required; in others (e.g., Dominion) the proportion is such as in the opinion of the Department warrants the application. In some jurisdictions there is an additional provi- sion for the appointment of the inspectors by the company, upon a resolution being passed by the shareholders in the manner required. These provi- sions for the appointment of inspectors are rarely made use of. 276 HANDBOOK ON COMPANIES. CHAPTER XX. BLUE SKY LAWS. Manitoba (Sale of Shares Act, 1913, c. 175, as amended). Saskatchewan (Sale of Shares Act, 1920 c. 199). Alberta (Sale of Shares Act, 1916 c. 8, as amended). Each of the above provinces has passed an Act prohibiting, under penalty, the sale or advertising for sale of shares or securities of companies within the province unless permission to do so has been obtained. This permission is granted by the official or body administering the Act in Manitoba, the Public Utility Commissioner; in Saskatchewan, the Local Government Board ; in Alberta, the Board of Public Utility Commissioners. An agent appointed for the purpose of selling shares or securities must take out an annual license under the Act. Securities excepted. Manitoba (s. 3). The Act is not to apply to the sale of certain designated government and municipal securities or to the sale of any stocks, bonds, debentures or other securities authorized by the Commissioner to be sold or listed on any stock exchange which has been approved for the purpose of section 3 by the Com- missioner. Saskatchewan (s. 3). The Act is not to apply to the sale of certain designated government, municipal or public utility BLUE SKY LAWS. 277 securities or securities authorized for the invest- ment of trust funds or shares of certain corpora- tions not incorporated for gain, or to the sale of any stocks, bonds, debentures or other securities author- ized by the Board to be sold or listed on any stock exchange which has been approved for the purpose of section 3 by the Board. Alberta (s. 3). The Act is not to apply to certain designated government or municipal securities or to the sale of any stock, bonds, debentures or other securities authorized by the Board of Public Utility Commis- sioners, or sold or listed on any stock exchange which has been approved for the purpose of section 3 of the Board of Public Utility Commissioners ; nor is the Act to apply to the debentures of any corpora- tion whose stock is so listed, nor to any shares or stock issued by any company in lieu of dividends. Certain a,cts not unlawful. Manitoba (s. 5, c. 105, 1914). The Act contains the provision set out below which is applicable to shares, stocks, bonds and securities of any corporation or company incor- porated by or under the authority of 'the Parliament of Canada or the Legislature of Manitoba "or licensed under the Manitoba Insurance Act or the Manitoba Act respecting the Licensing of Extra-provincial Corporations or subject to taxation under the Cor- porations Taxations Act or the Railway Taxation Act. It Is declared that it shall not be an offence or unlawful for any such corporation or company, or its officers or agents, or for any person who owns shares, stocks, bonds or securities thereof, to sell or attempt to sell any such shares, stocks, bonds or securities when such sale or attempt to sell is not made in the course of continued and successive acts. The printing, pub- 278 HANDBOOK ON COMPANIES. lication or advertisement in any newspaper, magazine or other periodical, or by any other means of display whatsoever, or the issue, putting forth or distribution of any advertisement, cir- cular letter or other paper containing any offer to sell or solici- tation to purchase or intimation of the fact of the issue of any of any such shares, bonds, stocks, or other securities, or solicita- tion by agents or employees, shall be evidence of an attempt to sell in the course of continued and successive acts and in viola- tion of this Act. Saskatchewan (s. 22). The Act contains the provisions set out below which are applicable to the following companies: A company incorporated by or under the authority of the Parliament of Canada or of the Legislature of the Province of Saskatchewan, or licensed under the Saskatchewan Insurance Act, or the Saskatche- wan Companies Act, or subject to taxation under the Corporations Taxation Act, or any of the former Acts or ordinances dealing with the same subject matter as these Acts and for which these Acts are substituted. A company . . . the officers or agents of such company, or any person who owns shares, stocks, bonds or securities thereof, may sell or offer for sale any such shares, stocks, bonds or securi- ties, when such sale or attempted sale is not made in the course of continued and successive acts. (2) The printing, publication or advertisement in any news- paper, magazine or other periodical, or by any other means of display, or the issue, putting forth or distribution of any adver- tisement, circular letter or other paper containing an offer to sell, solicitation to purchase, or intimation of the fact of the issue of any such shares, bonds, stocks or other securities, or solicita- tions by agents or employees, shall be evidence of an attempt to sell in the course of continued and successive acts and in violation of this Act. Alberta (s. 17). The Act contains the following provision : It is declared that it shall not be an offence against this Act or unlawful for any corporation or company, or its officers or BLUE SKY LAWS. 279 agents, or for any person who owns shares, stocks, bonds or securities thereof, to sell or attempt to sell such shares, stocks, bonds or securities, if such sales or attempts to sell are not made in the course of continued and successive acts. The printing, publication or advertisement in any newspaper, maga- zine or other periodical, or by any other means of display whatsoever, or the issue, putting forth or distribution of any advertisement, circular letter or other paper containing any offer to sell or application to purchase or intimation of the fact of the issue of any such shares, bonds or other securities, or solicitation by agents or employees, shall be evidence of an attempt to sell in the course of continued and successive acts in violation of this Act. Application for certificate. Every company is to obtain a certificate before attempting to sell any shares or securities in the province. The exceptions to this requirement are noted above. The fees payable with the application are as follows : Manitoba Piling fee of $5 (s. 7). Saskatchewan Filing fee of $10 (s. 6). Alberta Piling fee depending on the amount of the issue sought to be authorized according to the following tariff: Where the par value of the proposed issue of shares, stock or other securities is under $25,000 $ 10.00 $ 25,000 and under $ 50^,000 15.00 50,000 and under 75,000 20.00 75,000 and under 100,000 25.00 100,000 and under 250,000 35 . 00 250,000 and under 500,000 50.00 500,000 and over 100. 00 The application is usually made by letter. In Alberta forms of application are available. Copies of the Act may be obtained gratis upon application to the official or board administering the Act. Ap- plications must be accompanied by the prescribed 280 HANDBOOK ON COMPANIES. material. The following material is required in Alberta : 1. Copy of charter. 2. Constitution and by-laws. 3. Statement giving plan of proposed business. 4. Copies of contracts re patents or purchase of rights, etc. 5. Itemized account of financial condition, showing the com- pany's property, assets and liabilities. 6. Names of directors and stock subscribed and paid by each. 7. Specimen of share certificate. 8. Prospectus. 9. If the company is not incorporated in Alberta, a written onsent that action may be commenced against it in the proper Court of any judicial district or division in which a cause of action may arise, or in which the plaintiff may reside, by th service of process on the Provincial Secretary. 10. Address of head office. 11. Where property is involved, proof of title must be furn- ished. 12. Contract re commission for sale of shares. Additional material is required in the case of mining and oil companies. Documents must be verified by oath of an author- ized officer of the company. Recorded documents must be further verified as true copies by the officer of whose records they form a part. Additional material may be required. Similar material is required in Manitoba and Saskatchewan. In Manitoba requirement 9 above applies to all companies. In Saskatchewan requirement 9 above is not imposed. In the case of a company which is not organized under the laws of the province (or, in Saskatchewan not organized under the laws of Canada or any pro- vince) the following further material must be filed: A copy of the laws under which the company exists or is incorporated; and (in Manitoba and Alberta) a copy of the charter, articles of incorpora- tion, constitution and by-laws and all amendments BLUE SKY LAWS. 281 and all other papers pertaining to its organization; (in Saskatchewan) a copy of its charter, memoran- dum of agreement or association or constitution and by-laws and all amendments. Amendments. All amendments to the documents filed must be recorded. In Saskatchewan (s. 13) any amendment to certain documents operates a's a revocation of the certificate and licenses issued to agents, but applica- tion for a new certificate may be made (s. 15). Issuance of certificate; revocation. If the application is approved, the certificate is issued. A certificate may be revoked. In Alberta the certificate is to be renewed annually. Agents' license. An agent to sell shares or securities must register as such and he must obtain from the Board or Com- missioner an annual license. The fee in Manitoba and Saskatchewan is $1 for the registration and $1 for the license. In Alberta the fee is $5 for the license. The license is good until the first of January following unless it is sooner revoked. The agent must produce the license to every person with whom he proposes to do business. In Alberta the agent must deliver to the pur- chaser a copy of the contract for purchase as approved by the Board. The contract must have printed on its face in prominent type a notice in the prescribed form (s. 11(3)) to the effect that the shares or securities are not recommended as an investment. If the purchaser does not receive a copy 282 HANDBOOK ON COMPANIES. of such contract, the sale of shares or securities is not binding on him (s. 11 (4)). Licenses to agents may be cancelled under cer- tain circumstances. Power of investigation, etc. A power of investigation is conferred by the Act. It is also provided that a receiver may be ap- pointed and the company's business wound up if the assets are not equal to liabilities and in other specified events. Unlawful advertising. No printer, publisher, newspaper proprietor or other person is to advertise in the province the sale or offer for sale of any shares or securities until the company has obtained a certificate. Special certificate. In Manitoba and Saskatchewan certain classes of companies whose business is undeveloped may obtain a special certificate under certain circum- stances. Such companies must deposit the proceeds of shares, less specified deductions, with a licensed trust company in trust to apply the net proceeds to the development or operation of the undertaking of the company only. Share certificates of such com- panies must have conspicuously written or printed on 'the face of them the words " Development Stock." Annual returns. Every company must file with the Board or Com- missioner every twelve months a verified statement in the prescribed form. The filing fee is $2.50 in Manitoba and Alberta; $5 in Saskatchewan. BLUE SKY LAWS. 283 Penalties. A maximum fine of $500 for violation of the Act, and, in default of payment, imprisonment for a term not exceeding six months may be imposed. Quebec (Mining Companies Act). Paragraph 6 contains the following provisions applicable to mining companies incorporated out- side the province : 6753. No mining company, the principal office whereof is sit- uate outside this Province, can sell, or otherwise alienate, directly or indirectly, in this Province, it shares, stock, stock certificates, debentures or other securities, unless it has previously obtained an authorization for that purpose from the Lieutenant-Governor. 63 V., c. 33, s. 11. 6754. Such authorization shall be given upon petition, if the company: Deposits in the office of the Provincial Secretary a copy of its charter and of its letters-patent; 2. Establishes under oath, if required, that it owns sufficient property and conducts its operations so as to merit public con- fidence; 3. Deposits in the office of the Provincial Secretary a power of attorney appointing a chief agent in this Province for the purpose of receiving service in all actions proceedings taken against it, and declaring where the head office of the company in the Province will ibe. 63 V., c. 33, s. 12. 6755. Before the authorization is granted, the company shall establish, to the satisfaction of the Provincial Secretary or of any other functionary or officer empowered by order of the Lieutenant-Governor-in-Council to report upon such matter, that the facts alleged in its petition are true, and that it offers suffi- cient guarantees to justify the granting of the authorization. For that purpose, the Provincial Secretary or such other officer, may require the production of any document which he deems necessary, and take and keep in writing any evidence under oath or affirmation, and may administer any affirmation or oath required. 63 V., c. 33, s. 13. For further provisions see arts. 6756-6759. 284 HANDBOOK ON COMPANIES. British Columbia. Extra-provincial companies. Companies incorporated or established outside the province are required to be registered under the British Columbia Companies Act (see p. 293, below). Additional requirements are imposed if the company proposes to sell shares or debentures in the prov- ince. These requirements are contained in ss. 143 (3)(b) and (c) and 162 of the Act and read as fol- lows : 143. (3) (&) If the company proposes to sell any of its shares or debentures in the Province, and the company is, undsr the laws of the Province, State, or country where it was incorporated, required to obtain a license or other form of authority before it is permitted to offer for subscription or sale any of its shares or debentures, the statement shall be accompanied by a copy of the license or other form of authority and of the material filed on the application for the license or other form of authority (except in so far as the material is already provided for by this section), verified in manner satis- factory to the Registrar. (New.) (c) If the company proposes to sell any of its shares or deben- tures in the Province and clause (&) does not apply, the company shall file with its statement a prospectus com- plying with this Act, or if it does not intend to offer in the Province such shares or debentures to the public for subscription or purchase, a statement in lieu of pros- pectus according to Form 4 in the Second Schedule, such changes in the prospectus or statement being made as the facts demand, and sections 89 and 90 shall mutatia mutandis apply to every prospectus filed in accordance with this section. (New.) R. S. 19-11, c. 39, ss. 140, 153, 158; 1912, c. 3, s. 27; 1914, c. 12, s. 18. 162. (1) Every company, extra-provincial company, firm, broker, or other person, who, as owner or otherwise, offers in a course of continued and successive acts within the Province for subscription by or sale to the public any shares, debentures, or other securities of an extra-provincial company which is not registered under this Act, shall file with the Registrar: (a) Where a prospectus relating to the shares, debentures, or securities Is issued, a copy of such prospectus, showing BLUE SKY LAWS. 285 the date of its issue and the Province, State, or country in which the company was incorporated, and signed in the presence of a witness by every director of the com- pany; or (b) Where no such prospectus is issued, a statement con- taining the information required by sub-section (1) of section 90 to be set forth in a prospectus, and showing the Province, State, or country in which the company was incorporated, and signed and dated in the presence of a witness by every director of the company; and (c) In either case, an official copy of any license or other form of authority which the company is required to obtain under the laws of the Province, State, or country in which it was incorporated before it is permitted to offer for subscription or sale any of its shares, debentures, or other securities in that Province, State, or country; and {d) Such other information as the Registrar may require: Provided that where clauses (a), (&), (c) and. (d), as the case may be, have been complied with in respect of any company, it. shall not be necessary for the same information to be again filed in respect of that company, but the onus of proving that the requirements of this section have been compiled with shall lie upon the accused. (2) Every company, extra-provincial company, firm, broker, or other person who fails to comply with this section shall be liable to a penalty not exceeding one hundred dollars for each offence. (3) This section shall not apply where the shares, debentures, or other securities are listed on any stock exchange approved by the Lieutenant-Governor-in-Council and proof thereof has been filed with the Registrar. Mining companies. The Mineral Survey and Development Act, 1917, c. 41, as amended by 1920, c. 57, contains the follow- ing provisions applicable to mining companies : PART IV. PROVISIONS FOB PROTECTION OF INVESTORS. 15. Each Resident Engineer shall, upon receiving notice of any advertised or solicited sale of shares in any company or in any claim or mine or mineral property whatsoever, upon state- ments or terms not in accordance with actual facts and condi- 2*86 HANDBOOK ON COMPANIES. tions, notify the Minister of Mines, who upon investigation may, if found necessary, give such notices, either personal or -public, as may be necessary to prevent any injury to investors; and every notice given under this section by the Minister of Mines shall be absolutely privileged. 15 A. (1) When a joint stock company, other than a private company under the " Companies Act," acquires an interest in, or title to, or engages in work on any mining property situate in a Mineral Survey District, it shall forthwith notify the Resident Engineer of that District, and file with him full particulars thereof, and shall also file with him. as soon as it is issued, a copy of every prospectus or statement in lieu of prospectus which is required by the " Companies Act " to be filed with the Regis- trar of Joint Stock Companies. (2) If a joint stock company makes default in complying with any requirement of this section, it shall be liable, on sum- mary conviction, to a fine not exceeding twenty-five dollars for every day during which the default continues, and every director and manager of the company who knowingly and wilfully author- izes or permits the default shall be liable to the like penalty. The practice under the above provisions is for the engineer to make a report to the Minister of Mines if the company's literature contains state- ment at variance with the facts. The Minister of Mines then draws the matter to the attention of the company's officials, and, in the event of non-com- pliance with instructions to cease from the sale of shares by misrepresentation, the full facts are made public. EXTRA-PROVINCIAL COMPANIES. 287 CHAPTER XXI. EXTRA-PROVINCIAL COMPANIES. Statutory requirements. In practically every province of Canada com- panies not locally incorporated are required to become licensed or registered before ''carrying on business ' ' in the province. In every province except Prince Edward Island, however, taking orders for, or buying or selling goods, wares, etc., by travellers or by correspondence, is not considered to be "carry- ing on business," provided that the company has no resident agent or representative nor any office or place of business in the province. In New Brunswick no extra-provincial company is required to take out a license. Dominion companies occupy a unique position. They have a status and powers entitling them to carry on business throughout Canada which no pro- vincial .legislature is entitled to abrogate. The existing legislation of Ontario and Manitoba, making the taking out of a license or becoming registered a condition precedent to doing business in the prov- ince and imposing a penalty for non-compliance with such requirements, has been held to be ultra vires. Doubtless the same is true of the legislation of Nova Scotia and British Columbia. In Prince Edward Island, New Brunswick, Quebec, Alberta and Saskat- chewan, a Dominion company is not required to be licensed ; but in Saskatchewan a Dominion company must be registered. 2B8 HANDBOOK ON COMPANIES. Application for license or registration. Nova Scotia (Domestic, Dominion and Foreign Cor- porations Act, 1912, c. 15 as amended, ss. 21, 24,25,26). All extra-provincial companies must file with the Eegistrar of Joint Stock Companies, Halifax, a statement setting out the information required by s. 2'4. The statement must be verified under oath of one of the principal officers. The form of state- ment is obtainable from the registrar. After the statement has been filed, the company must file an appointment of agent for service of process who must be resident in the province. The form of appointment is obtainable from the registrar. In January of each year the company must file with the registrar a statement verified under oath of its resident agent showing the information required by s. 26. The form of statement is obtainable from the registrar. On the filing of the statement the com- pany is required to pay an annual registration fee based on its nominal capital (see Table of Fees, p. 368). The company must also deliver to the Provincial Treasurer the return required by the Provincial Revenue (Corporations) Act on or before April 1 in each year (see Returns, p. 317, below). For the annual tax payable under this Act see Taxa- tion, p. 305, below. New Brunswick (The Corporations Tax Act, 1920, c. 5, s. 11). Dominion and other extra-provincial companies are not required to take out a license in order to carry on business. They are, however, under the above Act, required to pay annually on June 1 a tax EXTRA-PROVINCIAL COMPANIES. 289 of $100 or $200 according as the capital stock does not exceed or does exceed $100,000. Prince Edward Island (The Taxation Act, 1920, c. 3, ss. 123, 126). Every corporation on which a tax is imposed by s. 120, before it commences business, must file with the Provincial Treasurer, Charlettetown : (a) A true copy of its charter and regulations ; (b) An affidavit that the company is still in existence, etc. Printed forms are obtainable from the Provincial Treasurer. The Provincial Treasurer issues a certificate to the corporation, which must be forth- with published by the corporation for two weeks in the Royal Gazette. Quebec (R. S. Q., 1909, arts. 6098-6110; 6091-6097). Extra-provincial companies (other than Domi- nion companies) must file with the Provincial Secre- tary, Quebec, P.Q. (a) Copy of charter or other deed constituting the company, certified by the officer having the cus- tody of the original ; (b) Power of attorney appointing an agent in the province and declaring where 'the principal office of the corporation is to be established ; (c) Petition; (d) Affidavit that the company is so constituted as to carry out the obligations it may contract; (e) Copy of a resolution of the board of direc- tors authorizing the presentation of the petition, certified under the seal of the company by the chair- man and secretary; H.C. 19 290 HANDBOOK ON COMPANIES. (f ) An affidavit by the secretary, sworn before a notary public, that the name of the company is not that of any other known company, nor liable to be confounded therewith, or otherwise on public grounds objectionable. (g) A certificate from a clerk of a court of justice or other public officer attesting that the notary is a notary public and that his commission is still in force. Copies of documents (b), (c) and (d) above are obtainable from the Provincial Secretary. With the petition there must be remitted the fees payable for the license. The fees are based on the authorized 'capital (see Tables of Fees, p. 363). All extra-provincial companies (including Domi- nion companies) must file the declaration required by arts. 6091 ff. within sixty days after commencing business or operations (see p. 24, above). All extra-provincial corporations (including Dominion companies) are liable to the annual tax under the Companies Tax Act (see p. 306), and must on or before May 1 in each year file in duplicate with the Provincial Treasurer an annual statement (seep. 314). Ontario (Extra-Provincial Corporations Act, K. S. 0. c. 179). Extra-provincial companies must file with the Provincial Secretary, Parliament Buildings, To- ronto : (a) Petition; (b) Affidavit of execution ; (c) Affidavit verifying petition ; (d) Copies of the incorporation papers (charter or memorandum and articles of association) certified by the public officer having the custody thereof ; EXTRA-PROVINCIAL COMPANIES. 291 (e) Power of attorney with consent of attorney to act and affidavit of execution ; (f ) Certified copy of resolution of the board of directors authorizing the application for license. A pamphlet is obtainable gratis from the depart- ment of the Provincial Secretary outlining the pro- cedure. For forms of the documents required see Forms p. 269. The petition must be accompanied by the fees payable for the license, which are based on the amount of the company's capital to be used in Ontario (see Tables of Fees, p. 360). Extra-pro- vincial companies are required to file an annual return on or before February 1st in each year (see p. 311). As to taxes payable by companies doing business in Ontario, see p. 307. Manitoba (Part IV. of Manitoba Companies Act). Extra-provincial companies must file with the Provincial Secretary, Winnipeg : (a) Certified copy of the charter, Act of incor- poration or articles or memorandum of association; (b) Declaration that the company is still in existence, etc.; (c) Power of attorney to some person resident in the province. Forms of declaration and power of attorney are obtainable from the Provincial Secretary. With the above must be remitted the fees payable for the license. The fees are based on the authorized capital (see Tables of Fees, p. 364). Extra-provincial companies are required to file an annual return on or before February 8 in each year (see p. 316). As to taxes payable by extra-provincial com- panies, see p. 308. 292 HANDBOOK ON COMPANIES. Saskatchewan (Companies Act, ss. 25-30). Every extra-provincial company is required within thirty days after commencing business in the province, to be registered, and (unless a Domin- ion company) must also take out a license. The following documents are required to be filed with the Registrar of Joint Stock Companies at Eegina : (a) Certified copy of the charter and by-laws; (b) Petition in form B in the schedule to the Act ; (c) Statutory declaration of the president, vice- president, secretary or manager in form C in the schedule to the Act ; (d) Balance sheet or statement containing the particulars required to be given in the annual state- ment under s. 37 of the Act (see form D in the schedule to the Act) ; (e) Executed power of attorney in form approved by the registrar empowering some person residing in one of the cities or towns of Saskatche- wan to receive service of process. Forms of documents required are obtainable from the registrar. With t/ie application must be remitted the fees payable for registration and license. The fees are based on the authorized capital (see Table of Fees, p. 370). The license expires on December 31 and must be renewed annually. Dominion companies are not required to take out a license, but if carrying on business in Saskatche- wan must, not later than January 1 in each year, file with the registrar a statement in writing (Form E) accompanied by a fee of $5. Annual fees are payable under the Corporations Taxation Act (see Table of Fees, p. 369). EXTRA-PROVINCIAL COMPANIES. 293 Extra-provincial corporations are required, under s. 20 of the Corporations Taxation Act, to file a summary on or before May 1 in each year (see p. 321). Alberta (Foreign Companies Ordinance, c. 14, 1903). Extra-provincial companies (other than Domi- nion companies) are required to be registered. The following documents are required to be filed with the Registrar of Companies, Edmonton: (a) True copy of charter and regulations; (b) Affidavit or statutory declaration that the company is still in existence and authorized to transact business ; (c) Copy of the last balance sheet or statement containing information required to be given in the annual statement made under section 8 of the For- eign Companies Ordinance; (d) A power of attorney appointing some person resident in the province to accept service of pro- cess. Fees based on the authorized capital must be remitted with the application (see Tables of Fees, p. 372). Forms of documents required are obtainable from the registrar. An annual summary is required to be filed with the registrar on or before March 1 (s. 8). As to taxation under the Corporations Taxation Act, see p. 308. British Columbia (Companies Act, Part VIII.). Every extra-provincial company is required to be registered. The documents required to be filed 294 HANDBOOK ON COMPANIES. and the information required to be given are set out in Form 19 in the second schedule to the Act. The form, which is obtainable from the registrar, must be filed with the registrar, at Victoria. Fees based on the authorized capital must be remitted with the application (see Tables of Fees, p. 373). A number of duties and obligations are imposed by ss. 150-157 of the Act. In particular a report according to Form 21 in the second schedule to the Act must be filed with the registrar on or before March 1 in each year. The form is obtainable from the registrar. As to taxation, see p. 309. Holding of land by extra-provincial companies. Ontario (Mortmain and Charitable Uses Act, R. S. 0. 1914, c. 105, amended 1914, c. 2', s. 4, 1921, c. 46; Ontario Companies Act Amendment Act, 1921, c. 58, s. 3). The Act first above mentioned is a general Act prohibiting companies from acquiring and holding land unless licensed to do so. Copies of the regula- tions showing the requirements for obtaining licenses and fees payable are obtainable from the Provincial Secretary. For fees, see Table of Fees, p. 361. Companies which take out a license under the Extra-provincial Corporations Act (see p. 290, above) enjoy the right of acquiring and holding land along with the general right to do business in the province. Companies which for any reason are not required to take out a license under the Extra-pro- vincial Corporations Act must take out the special license under the Mortmain and Charitable Uses Act (called a license in mortmain) empowering them to . EXTRA-PROVINCIAL COMPANIES. 295 acquire, hold and dispose of land. Thus Dominion companies must take out a license in mortmain in order to hold land in Ontario. It should also be noted that section 135 of the Ontario Companies Act (as amended 1921) requir- ing the filing of a return by every corporation wheresoever incorporated doing business in Ontario (excepting corporations taxable under the Corpora- tions Tax Act) provides as follows : (8) No registrar of deeds or land titles officer shall register any instrument made by or in favor of, or purporting to confer any interest in land, whether by way of cau- tion, certificate or otherwise, upon any corporation regarding which he shall have received notice in writ- ing from the Provincial Secretary that such corporation is in arrears in respect to any such statement or return or any tax or fee payable with such statement or return. Manitoba (Companies Act, ss. 112, 119, 127). Unlicensed extra-provincial companies are pro- hibited from holding or dealing in land (s. 119). A company which takes out the ordinary license to do business under Part IV. is to have the same powers to hold and deal with real estate as if the company had been incorporated under Part I. of the Act with power to carry on the business and powers embraced in the license (s. 112). Companies which do not take out the ordinary license may secure a special license for dealing in real estate (s. 127). Saskatchewan (Companies Act, s. 27 (3)). An extra-provincial company which has obtained a license from the registrar may, subject to the pro- visions of its charter, carry on business in all respects as if it had been incorporated under the Act. The only companies, therefore, that might find themselves in difficulty in the matter of holding land would be unlicensed companies. 2'96 HANDBOOK ON COMPANIES. Alberta (Foreign Companies Ordinance, 1903, s. 11; Corporations Taxation Act, s. 2'2). An extra-provincial corporation registered under the ordinance subject to its charter and regulations may acquire, hold and deal with lands (s. 11). The Foreign Companies Ordinance does not apply to Dominion companies. The Corporations Taxation Act provides that no registrar of titles is to register any instrument made in favour of, or purporting to confer any interest in, land, whether by way of caveat or otherwise, upon any company, until he is satisfied that it is not in arrear for any tax or fee- imposed by the Act (s. 22). British Columbia (Companies Act, s. 158). An extra-provincial company not registered as required by Part VIII. is not to be capable of acquir- ing or holding land or any interest therein in the province or registering any title thereto under the Land Eegistry Act (s. 158 (1)). The section does not apply to Dominion companies (s. 158 (4)). Quebec (art. 6104). An extra-provincial corporation which receives a license under section IV. may, subject to the limita- tions and conditions of the license and of the laws of the province, and also subject to the provisions of its charter, acquire, hold, etc., immovable property in the province, to the same extent as if incorporated by letters patent of the Lieutenant-Governor with power to carry on the business and exercise the powers embraced in the license. Dominion companies are not comprised in the definition of " extra-provincial corporations." Special or general licenses to hold real estate may be EXTRA-PROVINCIAL COMPANIES. 297 secured by Dominion, British and U. S. companies undier 8 Geo. V. c. 77 (1918), if they are not able to rely on Article 6112, under which these companies are empowered to acquire and hold land for the prosecution of their business only. New Brunswick (Corporations Tax Act, 1920, s. 16). An extra-provincial corporation paying a tax under the Act may, subject to the provisions of its own charter, Act of incorporation or other creating instrument, acquire, hold, etc., real estate in the province to the same extent and for the same pur- poses and subject to the same conditions and limita- tions as if it had been incorporated under chapter 85 of the Consolidated Statutes, 1903. 298 HANDBOOK ON COMPANIES. CHAPTER XXII. TAXATION. In addition to the taxation imposed on companies by the various provinces (which is dealt with below) there are two important Federal taxes to which com- panies are liable, viz., the Income War Tax and the Sales Tax. DOMINION INCOME TAX. Dominion Income War Tax Act (1917, c. 28, as amended). Rate of tax on companies. Companies pay a normal tax of 10 per cent, on their income exceeding $2,000. If the taxable income is $5,000 or over, they pay an additional tax of 5 per cent, of the amount of such normal tax, making a total of 101/2 per cent. What is income? "Income" means the annual net profit or gain received whether by way of wages, salary, fees, emoluments, or return from any investment, busi- ness, trade or calling, or from any other source, whether derived from sources within Canada or elsewhere. Exemptions from income tax. 1. Interest on any Dominion War Bonds issued free from income tax. 2. Dividends received from corporations subject to the Income War Tax Act. TAXATION. 299 3. The income of companies, the business and assets of which are carried on and situate entirely outside of Canada. 4. Legacies, gifts and proceeds of life insurance policies (but not money earned by the investment of these). A taxpayer is also entitled to exemption on money made by speculation outside the ordinary course of his business. A corporation obviously will not ordinarily be in receipt of such items so as to claim exemption therefor. Deductions from income on account of expenditure. 1. Ordinary expenditure for the purpose of the business. 2'. Interest on money borrowed, including interest on bond issues of the company. 3. Taxes, insurance, repairs and depreciation on buildings. 4. Carrying charges on securities, not exceeding income therefrom. No deduction is allowed for subscriptions to charity, nor may loss on a "side-line" be deducted from the profits of the chief business. Deductions from tax. After the amount of the tax has been determined (all proper deductions having been made), there may be deducted from it, income tax paid to another country on income derived from that coun- try, if this deduction does not exceed the tax that would be payable in Canada on the particular income on which the tax has been paid elsewhere; provided that in the case of a foreign country this deduction is not allowed unless such country allows a similar 300 HANDBOOK ON COMPANIES. credit to persons receiving income from Canada. The United States, among other countries, allows such a credit. Depreciation. It is in the discretion of the Finance Minister to say what ' ' reasonable ' ' depreciation is. In practice the following percentages are allowed : 2 per cent, on stone or concrete buildings. 21/2 per cent, on brick buildings. 5 per cent, on wooden buildings. 5 to 10 per cent, on machinery. 10 per cent, on office furniture and fixtures. As regards automobiles, the practice is to allow (in proportion to the extent of the use in the busi- ness) ; 1st year's use 25 per cent, of cost price; 2nd year's use 15 per cent, of cost price; 3rd and all subsequent years 10 per cent, of cost price. Undivided profits and stock dividends. It is to be noted that when a company does not divide its profits, the individual shareholders may be taxed on their proportion of such undivided profits, if the Finance Minister considers that their amount exceeds the reasonable requirements of the business and that their accumulation is intended to evade the law. Stock dividends are subject to pay- ment of income tax thereon by the recipient in the same manner as dividends paid in cash. Returns. The following returns must be filed. Forms are obtainable from the local Inspector of Taxation or from any post office. TAXATION. 301 1. Form T 2 . (a) What to include income for preceding year. (b) Date 30th April. (c) How made in triplicate, one copy to be kept by taxpayer. (d) Where to be filed two copies with local Inspector of Taxation. 2. Form T 4 . (a) What to include all employees paid $1,000 a year or more. (b) Date 31st March. (c) How made in triplicate, one copy to be kept by taxpayer. (d) Where to be filed two copies with Com- missioner of Taxation, Ottawa. 3. Form T 5 . (a) What to include particulars of share- holders and dividends. (b) Date 31st March. (c) How made in triplicate, one copy to be kept by taxpayer. (d) Where to be filed two copies with Com- missioner of Taxation, Ottawa. 1. As regards Form T 2 , it is to be noted that when a company's fiscal year does not coincide with the calendar year, a return must be made for the fiscal year that ended within the calendar year under report. Companies must not wait for forms to be sent and a demand for the return to be made. The onus is put upon individuals and companies alike to secure the forms and send them in to the inspector by the date named. With the return must be sent 302 HANDBOOK ON COMPANIES. one-quarter of the amount of the tax as estimated by the taxpayer. 2. Form T 4 must show all employees who are paid at the rate of $1,000 a year or more, as well as all fees paid to company officials, directors, etc. 3. Form T 5 must give the names and addresses of all shareholders with particulars of all dividends and bonuses, etc., paid to them. If for any valid reason a return cannot be filed within the time named, application should be made to the District Inspector of Taxation who may grant an extension. The company must itself calculate the amount of its tax and pay one-quarter of it when it files the return. The rest is payable later in three two- monthly instalments, with interest at six per cent. Payment, not made in cash, must be by certified cheque in favour of the Receiver-General. If the company puts the figure too low it becomes auto- matically liable to penalties. Notice from taxation officials. If a company 's figures are accepted, the company will be notified by the Local Inspector. If the Department thinks the income has been understated or that too little has been paid, demand will be made for the balance (with penalties). Appeal. In case of dissatisfaction with the official assess- ment, appeal may be made (within twenty days of the posting of such notice of assessment) first to a Board of Referees and finally to the Exchequer Court of Canada. A special form for this purpose (No. 11) is obtainable from any local inspector. The TAXATION. 303 Board of Referees may increase the official assess- ment. SALES TAX. Special War Revenue Act (1915, c. 8, as amended, 1920, c. 71, 1921, c. 50, ss. 19BB, 19BBB; 1922). There is a Dominion tax imposed on sales of goods by manufacturers, and wholesalers or jobbers, which is payable by the purchaser at the time of such sale to the manufacturer or wholesaler or jobber and by the manufacturer or wholesaler or jobber to the Department of Customs and Excise. Rates. 1. Sales by manufacturers to wholesalers 2 1 / 4 per cent. 2. Sales by wholesalers or jobbers to retailers or consumers 2*4 per cent. 3. Sales by manufacturers direct to retailers or consumers 4y 2 per cent. 4. Importations by manufacturers or whole- salers 3% per cent, on the duty paid value. 5. Importations by retailers or consumers 6 per cent, on the duty paid value. Exemptions. There is a long and miscellaneous list of articles excepted from this tax, ranging all the way from various food products to fuel and material for the construction, equipment and repair of ships. Licenses. Every manufacturer and wholesaler who sells articles subject to the Sales Tax must every year, 304 HANDBOOK ON COMPANIES. before the 31st March, take out a license (fee $2.00), application forms for which and information regard- ing which may be obtained from any Collector of Customs and Excise. This license must be distin- guished from the so-called manufacturer's license which must be taken out (at an annual charge of $2.00) by the manufacturers of playing cards and of wines. A manufacturer, wholesaler or jobber having more than one factory, branch office, warehouse, sales office or other place of business, is not required to take out more than one sales tax license, though each factory, warehouse, etc., must have on file a certified copy of such license. Applications for certified copies should be made to the Collector of Customs and Excise at the time when the original license is applied for. Exportations. When goods, not specifically exempted from the sales tax, are exported from Canada to the United States, there should be endorsed on the invoices a statement to the effect that the goods are subject to a sales tax of 2 1 /4 per cent, when sold in Canada to wholesalers, but that the tax is not applicable on export shipments. Unless this is done, the United States Customs will not only charge duty on an additional value of 2 1/4 per cent, on account of the 2*4 per cent, sales tax on sales to wholesalers, but will also collect from the U. S. importer a penalty of 2*4 per cent. In the case of any tax paid on materials used, wrought into or attached to goods exported, there is provision for a drawback of 99 per cent, of the amount of the tax. TAXATION. 305 PROVINCIAL TAXATION. Prince Edward Island. By the Taxation Act, c. 3, of 1920, taxes are imposed upon certain classes of companies doing business in the province. Nova Scotia. (a) Domestic, Dominion and Foreign Corporations Act, 2' Geo. V. c. 15, as amended. Annual registration fee is payable in January. For amount see Table of Fees. (b) Provincial Revenue (Corporations) Act, c. 3, 1921. Apart from taxes of specified amounts on banks, trust, loan, railway companies, etc., every incor- porated company that carries on any part of its business in Nova Scotia and has a paid-up capital of $25,000 or more, must pay an annual tax of l/10th of 1 per cent, of the paid-up capital, on such part thereof as is employed in Nova Scotia, the minimum to be $2'5.00. The tax is due on the 1st January but not payable until the 1st June of each year (ss. 15, 16). Any company which is liable for any other tax under this Act may deduct the amount of such tax from the amount payable under this section (s. 15), except in the case of a company which carries on in Nova Scotia any part of its business in addition to that in respect of which such other tax is payable under this Act. New Brunswick. The Corporation Tax Act (1920, c. 5). Extra-provincial companies, including Dominion companies, must pay an annual tax of $100 or $200 H.C. 20 306 HANDBOOK ON COMPANIES. according as the capital stock does not exceed or does exceed $100,000. Under section 19, when the company is carrying on business outside New Bruns- wick, a reduction may be made, based on the nature and importance to be carried on in New Brunswick and the amount of capital to be employed therein (8.U). Sections 4 to 10 impose taxes of varying amounts on certain specified companies, such as insurance, trust and loan, building, express, telegraph com- panies, etc. No tax, however, is levied on ordinary industrial companies incorporated in New Bruns- wick. Quebec. The following apply to every incorporated com- pany doing business in Quebec. (a) Companies Tax Act, E. S. C., 1909, Article 1347, as amended, (1) Annual tax of one-tenth of one per cent, on paid-up capital with power to make a reduction, as to the Governor-in- Council may seem just, where head office or the factories, etc., represent- ing the greater part of its corporate assets are outside. (2f) Additional tax of $30 for each place of business, factory or work-shop in Montreal or Quebec, and $15 in any other place, which shall be reduced by half in the case of a company with paid-up capital less than $25,000. (b) R. S. Q. (1909), Articles 1360-1373. Stamp tax of 2 cents for every $100 or fraction thereof of the par value of all shares, bonds, deben- TAXATION. 307 tures or debenture stock sold, transferred or assigned; but such tax is not payable on the first issue of such shares, bonds, etc. Ontario. (a) R. S. 0. (1914), c. 27, as amended 1920. Stamp tax of 3 cents on every sale transfer or assignment of shares or debenture stock of $100 or fraction thereof of the par value, payable by the transferor in money or stamps ; the first issue, how- ever, not to be subject to such tax. Annual returns must be made by the company to the Provincial Treasurer showing every such transfer, sale, etc., and the amount of tax collected (see page 312). (b) Ontario Assessment Act, B. S. O. 1914), c. 195. 1. s. 10. Companies doing business in Ontario are assessed under this Act for a sum to be called "business assessment" on the basis of the assessed value of the land occupied or used by them. The rate varies considerably; a manufacturer is assessed for a sum equal to 60 per cent, of the assessed value, a miller 35 per cent., etc., etc. 2. s. 11 (l)b. In addition to "business assessment" under sec- tion 10, as above, a company is also assessed in respect of any income not derived from the business in respect of which it is assessable under that section. The two last-mentioned taxes are, of course, collected by the various municipalities, not by the central Provincial authorities. 308 HANDBOOK ON COMPANIES. Manitoba. Corporation Taxation Act, R. S. M. (1913), c. 191, as amended 1921. This Act imposes taxes of varying amounts on banks and trust, loan, railway and certain other companies. NOTE. This Act imposes a tax of 2 per cent, on net profits for the year 1921. An Income Tax Act was introduced in 192'2 imposing a tax of 4 per cent, on income exceeding $2,000. The Act was not passed, but doubtless similar legislation will be introduced. Saskatchewan. Corporations Taxation Act, R. S. S. (1920), c. 31, s. 18. For the taxes payable under the Corporations Taxation Act, section 18, see Table of Fees, p. 369). Companies Act, R. S. S. (1920), c. 76; amended 1922. (a) Registration Fees (s. 30). A fee is payable by all companies upon registration, graded accord- ing to the amount of capital. (b) License Fees (s. 27). An annual license fee is payable by all companies other than Dominion companies. See Table of Fees, p. 370. Dominion companies carrying on business in Saskatchewan must file with the registrar a statement in writing (Form E) not later than January 1 in each year accompanied by a fee of $5. Alberta. Corporations Taxation Act, (1920), c. 31. A company which transacts business in Alberta and is not otherwise taxed under the Act, must pay TAXATION. 309 an annual tax of 40 cents for every $1,000 of its authorized capital, but not exceeding $500. Among companies which are subject to special taxes under the Act and which, therefore, do not come under this section, are insurance, loan, land, trust, street rail- way, telegraph, telephone, gas, electric light, and express and grain elevator companies. British Columbia. Taxation Act, c. 222, R. S. C. (1911), as amended. Annual tax of 1 per cent, on assessed value of real property other than than wild land, coal or timber land. A discount of 10 per cent is allowed on current year 's tax if paid before June 30th, 1921. Income and Personal Property Taxation Act (1921), c. 48. (1) Annual tax of 1 per cent, on assessed value of personal property. (2) A graded income tax at rates rising from 1 per cent, on net income not exceeding $2,500 to 15 per cent, on the amount by which the net income exceeds $19,500 and does not exceed $25,700. Where the net income exceeds $25,700 the rate is 10 per cent, on all the net income. 310 HANDBOOK ON COMPANIES. CHAPTER XXIII. RETURNS AND DOCUMENTS TO BE FILED. Under every Act the company is required to file an annual return, known as the annual summary, annual report, etc. The return must be filed with the Provincial Secretary or Registrar of Companies on or before a specified date in each year and must be accompanied by the prescribed filing fee. A duplicate is required to be kept posted up at {he head office or available for inspection at the head office. In addition to the annual return, various notices, documents, by-laws, reports, etc., are required under the different Acts to be filed with the Provincial Secretary or Registrar. Details of the regulations in the various jurisdictions are as fol- lows : Dominion. Annual summary (s. 106) Dominion Companies. 1. What to include information mentioned in section, as of 31st March preceding. 2. Date 1st June. 3. Where to be filed. Secretary of State, Ottawa. 4. How made in duplicate ; signed by the Presi- dent and Manager, or if these are the same person, by President and Secretary, and verified by their affidavits. An affidavit must also be filed proving that the copies are duplicates. 5. Forms obtainable from the Secretary of State. EETURNS AND DOCUMENTS TO BE FILED. 311 6. Fee on filing from $5.00 for a $200,000 com- pany to $25 for a $1,000,000 company. See Tables of Fees, p. 356. Additional returns. The undermentioned sections of the Act require the filing with the Secretary of State of documents as indicated. Section 43 Copy of prospectus (on or before date of publication). " 43C Statement in lieu of prospectus (before allotment of shares or debentures). " 49A All mortgages and charges on com- pany's property (within 30 days after creation ; extension of time if outside Canada). 69B Appointment of receiver or manager (within 14 days) to be given by person obtaining the order. 69C Accounts of receiver or manager (half yearly and on ceasing to act). " 76 Certified copy of by-law making change in number of directors or in chief place of business. Ontario. (a) Companies Act. Annual summary. Section 135 Applies to all companies. 1. What to include information mentioned in section as of 31st December. 2. Date of filing 1st February. 3. Where to be filed Provincial Secretary. 312 HANDBOOK ON COMPANIES. 4. How made in duplicate, verified by affi- davit of president and secretary or two other officers. 5. Fees ranging from $5.00 to $30 accord- ing to the capitalization must be remitted with return. (See Tables of Fees). 6. Forms obtainable from Provincial Secre- tary, Parliament Buildings, Toronto. (b) Corporations Tax Act (s. 12 (a)), applying to all companies. Return of transfers of shares, etc. 1. What to include information as to sale, transfer or assignment of shares or debenture stock. 2. Date of filing 1st February. 3. Where to be filed Provincial Secretary. 4. How made verified by affidavit of presi- dent or secretary, or either of them and one director, or two directors. (See section). 5. Forms obtainable from Assistant Pro- vincial Secretary, Toronto. (c) Ontario Assessment Act, c. 195, E. S. 0. 1914, as amended 1916-18-19-20. The 1920 amendment made dividends derived from shares in manufacturing and mercantile cor- porations taxable in the hands of shareholders. Under section 19 (1) companies whose dividends are thus made liable to taxation against the shareholders as income must, within 30 days of receipt of notice from the assessor, file a return, as of the 31st December preceding, verified by affidavit of some officer setting forth, KETUKNS AND DOCUMENTS TO BE FILED. 313 1. The names of all shareholders resident in the municipality in question, or who ought to be assessed for their income therein; 2. The amount of stock held by each such share- holder ; 3. The amount of dividends and bonuses paid to each in the preceding year. Additional returns. The undermentioned sections of the Companies Act require the filing with the Provincial Secretary of documents as indicated. Section 90 Copy of by-law varying the number of directors or changing the location of the head office. " 102 Statement in lieu of prospectus. " 103 Copy of prospectus (before it is issued). " 114' Statutory declaration of compliance with Part VIII. (public companies). 11 116 Return of allotments by public com- panies (within two months of allot- ment) together with original of con- tract under which shares issued for consideration other than cash. 117 Certified copy of statutory report by public companies (forthwith after sending to shareholders). 136 Return of changes in directors by all companies forthwith. 149 Verified copy of by-law authorizing issue of shares at a discount (trans- mitted by registered post within 24 hours or filed within 5 days). 202 Return by liquidator winding up com- panies (voluntary winding-up). 314 HANDBOOK ON COMPANIES. Quebec. Annual summary (art. 6031) Quebec companies. 1. What to include information mentioned in section, as of June 30th, preceding. 2. Date of filing 1st September. 3. Where to be filed Department of Provin- cial Secretary. 4. How made in duplicate. 5. Forms obtainable from Provincial Secre- tary. 6. Fee on filing $10. Returns under Companies Tax Act, E. S. Q. 1909. Article 1350 (applies to all extra-provincial com- panies, Dominion or otherwise). 1. What to include information as per form 47F. 2. Date on day business is commenced and thereafter annually on 1st May. 3. How made in duplicate, verified by affi- davit of president, vice-president or other officer. 4. Where to be filed Provincial Treasurer, Quebec, P.Q. 5. Forms obtainable from Provincial Treas- urer. Returns of transfers of shares, etc. Article 1368a R. S. Q. 1909, and amendments (applies to all companies, Quebec and extra- provincial, having an office, agency or branch in the province). 1 What to include sale, transfer, etc., of shares, bonds, etc., as per Form 62A. 2. Date 1st July. RETURNS AND DOCUMENTS TO BE FILED. 315 3. How made verified by affidavit of presi- dent or secretary or by chief agent of extra-provincial company named in power of attorney. 4. Where to be filed Provincial Treasurer, Quebec, P.Q. 5. Forms obtainable from Provincial Treas- urer. Additional rdturns, notices, etc. Art. 5986 Contract for payment for shares other- wise than in cash at or before issue of shares or within 30 days thereof. " 5989 Notice when purchase of preferred stock reaches 10 per cent, of capital stock, within 30 days of time such proportion is reached. " 5996 Copy of by-law for increase or reduc- tion of capital stock, within 6 months of being approved by shareholders. 11 6016 Copy of by-law to increase or decrease number of directors or to change situa- tion of head office. j Manitoba. Companies Act. Annual statement (ss. 80-86). 1. What to include information mentioned in s. 80, as of 31st December preceding. 2. Date of filing 8th February. 3. Where filed Provincial Secretary, Winni- peg. 4. How made in duplicate, verified by affi- davit of president and secretary or two directors. 316 HANDBOOK ON COMPANIES. 5. Forms obtainable from Provincial Secre- tary. 6. Fees $1.00 or $2.00 as authorized capital does not or does exceed $100,000. Note. Land companies must show, in addition, number of acres held and when purchased (s. 81). Annual return (s. 120) extra-provincial com- panies licensed under Part IV.). 1. What to include information in section 80. 2. Date of filing 8th February. 3. Where filed Provincial Secretary, Winni- peg. 4. Forms obtainable from Provincial Secre- tary. 5. Fees $5.00 or $10.00 as capital does not or does exceed $100,000. Corporations Taxation Act, E. S. M., c. 191, s. 8. An annual statement must be filed by all corpora- tions carrying on business in Manitoba. The form is obtainable from the Superintendent of Corpora- tion Taxes at Winnipeg, with whom it must be filed on or before April 1, accompanied by the tax payable (see p. 308, above). Sale of Shares Act, R. S. M., c. 175, s. 12. Every company holding a certificate under the Act must file every twelve months with the Public Utilities Commissioner, Winnipeg, a statement accompanied by fee of $2.50. Forms are obtainable from the Commissioner. Additional notices, returns, etc. The undermentioned sections of the Companies Act require the filing with the Provincial Secretary of documents as indicated. RETURNS AND DOCUMENTS TO BE FILED. 317 Section 29 A 1. Certified copy of by-laws and list of directors, etc. (within 30 days after company organized). <4 2. Notice of any change in business address of company (within 30 days). 11 45 Certified copy of by-law authorizing issue of shares aft a discount. " 71 Duplicate original of mortgage, change, etc., made to secure bonds, etc., to be filed forthwith. " 71 A Affidavit respecting floating charges (to be filed in County Court). Nova Scotia. (a) Domestic, Dominion and Foreign Corporations Act, 1912, as amended 1915-16-19-20 (s. 26). (Applies to all companies whether Nova Scotia or extra-provincial companies). 1. What to include name of directors and officers, amount of stock nominal, sub- scribed or issued and paid up. 2. Date month of January. 3. How to be made verified by affidavit of recognized resident agent. 4. Where to be filed Eegistrar of Joint Stock Companies, Halifax. 5. Fees to be paid when return is filed, as required by section 28. (b) Provincial Revenue (Corporations) Act, c. 3, Statutes of 1921. Section 18 requires an annual statement by com- panies with $25,000 or more paid-up capital. 1. What to include information required as prescribed by Governor-in-Council. 318 HANDBOOK ON COMPANIES. 2. Date of filing 1st April. 3. Where to be filed Provincial Treasurer. 4. How to be made Verified by affidavits of president or vice-president, and manager, or as required by Provincial Treasurer. 5. Forms obtainable from Provincial Treas- urer. Notices and returns under Companies Act, 1921, Section 17(6) Certified copy of order confirming alteration of memorandum of asso- ciation within 15 days of date of order. " 23 Original and copy of memorandum and articles. 1 ' 40 Memorandum of particulars required on reduction of paid-up capital. 11 42 Notice of consolidation, division, conversion, etc., of share capital. " 44 Notice of increase of share capital beyond registered capital within 15 days of passing or confirmation of resolution. 11 45 Copy of order confirming re-organi- zation of share-capital within 7 days of making of order. " 46(3) Copy of Court order permitting redemption of preference shares and reduction of share capital. 70 Copy of every special resolution within 15 days of confirmation. 74 Notice of any change among direc- tors or managers. 79(2) Copy of every prospectus on or before date of publication. BETUBNS AND DOCUMENTS TO BE FILED. 319 Section 82(1) Contract for issue of shares other- wise than subject to payment in cash. " 82(2') Office copy of Court order to file contract in special cases. " 85 Copy of any instrument creating any mortgage or charge on com- pany's property within 21 days of creation (or in case of mortgage outside N. S. within 21 days of time, mortgage, if posted with due diligence, would be received in N. S.). 11 86(1) Notice of appointment of receiver or manager within seven days of order or appointment. 86(3) Abstract of receiver's receipts and payments half-yearly and on ceasing to act. " 88(6) Notice of situation .of office where branch register of debenture-hold- ers is kept and of any change in such situation or of discontinuance of office. 99 Notice whether or not company is carrying on business within one month of registrar's inquiry. New Brunswick. (a) Companies Act, 1916. Section 117. Annual summary. 1. What to include information mentioned in section. 2. Date of filing whenever written request is made. 320 HANDBOOK ON COMPANIES. 3. Where to be filed Provincial Secretary- Treasurer. 4. How made verified in manner satisfac- tory to Provincial Secretary-Treasurer. (b) Corporations Tax Act, 1920. A return must be made when the capital stock is changed, as the annual fees are based on this amount. The annual fees $100, when the capital stock does not exceed $100,000, and $200 when the stock exceeds $100,000 are payable on the 1st June, in advance. (Sections 11 and 12). Under section 19, the Lieutenant-Governor-in- Council may reduce the tax on an extra-provincial company if the importance of the business outside the province in comparison with the business within the province warrants it. Returns, as required by the Provincial Secretary-Treasurer, must be made by a company seeking such reduction. Additional notices and returns. Section 85(2) Copy of by-law changing com- pany's head office. " 85(3) Copy of by-law (in certain cases) increasing or decreasing number of directors. Saskatchewan. All companies. Annual summary (to be filed by all companies regis- tered in Saskatchewan wheresoever incor- porated). (a) Companies Act, R. S. S., 1920, c. 76, s. 37. 1. What to include information mentioned in section 37. 2. Date 1st March. BETURNS AND DOCUMENTS TO BE FILED. 321 3. Where filed Registrar of Joint Stock Companies, Eegina. 4. Forms obtainable from registrar. 5. Annual license fees based on capital must be remitted with return. (b) Corporations Taxation Act, E. S. S. 1920, c. 31, s. 20. 1. What to include name, kind of business and such other information as is required by registrar. 2. Date 1st May. 3. How made verified by affidavit of presi- dent and manager or other officers. 4. Forms obtainable from registrar. Dominion companies. Companies Act (B. S. S., 1920, c. 76, s. 27 (7)). A statement in writing (form E in the schedule to the Act) must be filed with the registrar on or before January 1 in each year accompanied by a fee of $5.00. Companies holding certificate under Sale of Shares Act. A statement must be filed with the Local Govern- ment Board, Eegina, every twelve months and not later than thirty days after date of annual meeting. The form is obtainable from the Board. Filing f ee, $5.00. Other returns and notices under Companies Act. Section 13(6) Certified copy of Court order con- firming alteration of memoran- dum ; also copy of memorandum as changed within 15 days from date of order. H.C. 21 322 HANDBOOK ON COMPANIES. Section 24(1) Certified copy (in case of extra- provincial company) of special resolution, supplementary letters patent, Court order, making any change in name, objects, memoran- dum or articles. 31 Notice as to being still in business within one month of registrar's inquiry. " 48 Notice of rectification of register. 53 Notice of consolidation, division, conversion, etc., of share capital. " 56 Notice of increase of share capital beyond registered amount within 15 days of passing of resolution. " 56 Copy of Court order confirming special resolution modifying memo- randum so as to reorganize share capital within 7 days after mak- ing of order. " 62(1) Copy of Court order confirming reduction of share capital, also minute approved by Court show- ing amount of share capital, etc. 64 Court order (in case of extra -pro- vincial company) confirming, or certificate of proper authority evidencing reduction of share capital within two months of reduction becoming effective. 71 Notice of situation and any change in situation of registered office. 81 Copy of any special and extraordin- ary resolution within 15 days from confirmation or passing. RETURNS AND DOCUMENTS TO BE FILED. 323 Section 84 Copy of every prospectus, on or be- fore date of publication. " 88 Consent to act as director before publication of prospectus. " 96(a) Return of number and amount of shares in any allotment, also names, etc., of allottees, and amount paid or payable on each share within one month after allotment. 11 96(b) Written contract, in case of shares allotted in whole or in part for con- sideration other than cash within one month. " 97 Certified copy (in case of company restrained from offering shares >to public) of resolution empowering company to offer shares. 11 109 Copy of register of names, addresses and occupations of directors and managers. " 120 Statutory declaration before com- mencing business. Alberta. (a) The Companies Ordinance, 1901. Annual summary and list of shares (to be filed by all Alberta companies). 1. What to contain information mentioned in section 31, as per Form E. 2. Date of filing within 3 weeks of first ordinary general meeting. 3. Where to be filed registrar of joint stock companies. 324 HANDBOOK ON COMPANIES. 4. How to be made signed by manager or secretary of company. 5. Forms obtainable from registrar. (b) Foreign Companies Ordinance, 1903, c. 14, s. 8. Annual summary to be filed by all extra-provin- cial companies except Dominion com- panies. 1. What to include information mentioned in section, as of 31st December. 2. Date 1st March. 3. How made verified by affidavit of presi- dent and secretary or either of them and one director, or by two directors. 4. Where filed registrar of joint stock com- panies, Edmonton. 5. Fee on filing $5.00. 6. Forms obtainable from registrar. (c) Corporations Taxation Act (1907), c. 19, s. 8, amended, applies to every company doing business in Alberta. 1. What to include information mentioned in section, made up to 31st December preceding. 2. Date 30th June. 3. How made verified by affidavit of presi- dent or other officer. 4. Where filed registrar of joint stock com- panies, Edmonton. 5. Fee $5.00. 6. Forms obtainable from registrar. (d) Sale of Shares Act (1916), c. 8. Companies holding a certificate under the above Act must file with the Board of Public Utility Com- BETUKNS AND DOCUMENTS TO BE FILED. 325 missioners at Edmonton every twelve months a state- ment in the prescribed form obtainable from the Board. Piling fee, $2.50. Further Beturns and Notices. Section 32 Notice of consolidation, re-division, etc., of capital. 11 39 Notice of increase in capital beyond the registered amount, within 15 days of passing of resolution. " 41 Notice of rectification of register. 11 55 Signed copy of every prospectus (be- fore date of publication). " 83 Copy of Court order confirming reduction of capital, together with minute approved by Court show- ing amount, division, etc., of capital as reduced. " 90 Copy of Court order altering objects of company, together with copy of memorandum as altered (within fifteen days from date of order). " 92 Special resolution changing name of company, also other evidence men- tioned in section. ' ' 100 Notice of situation, and of any change in situation, of registered office. * ' 104 Notice of change of directors or man- agers. 107 Statutory declaration by secretary or director as to certain conditions being complied with, before com- mencing business. " 110 A Return of allotments within one month after each allotment. 326 HANDBOOK ON COMPANIES. Section HOB Contract, in case of shares, issued otherwise than for cash, stating allottee's title within one month. " 117 Copy of statutory report " forth- with " after being forwarded to members. " 122 Copy of any special resolution within 15 days after confirmation. British Columbia. Companies Act, 1921. (a) Annual report by British Columbia companies '(sec. 122). 1. What to include information mentioned in section. 2. Date of filing within two weeks of annual general meeting. 3. Where to file registrar of joint stock com- panies. 4. How made signed by a director, manager, or other officer. 5. Forms obtainable from registrar. 6. Fee $1.00. (b) Annual report by extra-provincial companies (s. 156). 1. What to include information mentioned in section, as of 31st December preceding. 2. Date of filing 1st March. 3. Where to file registrar of joint stock com- panies. 4. How made certified by director or other officer. 5. Forms obtainable from registrar. 6. Fee $1.00. EETUENS AND DOCUMENTS TO BE FILED. 327 (c) Taxation Act, 1911. Annual return by special group of companies such as insurance, trust and loan, telegraph, etc. (ss. 136, 142). 1. What to include information mentioned in sections. 2. Date of filing 1st September. 3. Where to be filed Assessor of Victoria Assessment District. 4. How to be made signed by president, director, manager, etc. 5. Forms obtainable from assessor. (In addition, section 143 provides that all cor- porations assessed under Part IV. shall forward to the Minister on or before the 31st January each year, a certified copy of annual balance sheet and profit and loss account as shown by books for year immediately preceding) . Further returns under British Columbia Companies Act. Section 39 Special resolution as to change of name, also statutory declaration as to required publication. 41 Office copy of order effecting alteration of objects, also copy of memorandum as altered, within 15 days of date of order. 43 Copy of resolution effecting in- crease or cancellation of share capital. 44 Copy of resolution effecting con- solidation or subdivision of share capital. 328 HANDBOOK ON COMPANIES. Section 45 Office copy or order for re-organi- zation of share capital (within 15 days of date of order), and resolution as confirmed by order. " 49 Office copy of order confirming resolution for reducing share capital; also copy of minute showing amount of share capital as reduced, the number of shares, etc. (within 15 days of date of order). 51 Memorandum showing required particulars on reduction of paid-up capital out of profits. 52 Copy of extraordinary resolution by companies with terminating or wasting assets or land com- panies for reduction of share capital by distribution of moneys in hand. 56 Copy of special resolution convert- ing mining company limited by shares into a specially limited company or vice versa ; also copy of memorandum as altered. 57 Copy of special resolution con- verting specially incorporated water company into a company limited by shares; also copy of memorandum as altered and copy of the articles adopted. 58 Copy of resolution converting company incorporated by special Act into company limited by shares, also memorandum and articles. RETURNS AND DOCUMENTS TO BE FILED. 329 Section 59 Copy of resolution converting public company into private company. " 60 Documents required by section on conversion of private into public company. " 72 Notice of situation of office where any branch register is kept out- side the Province. " 81 Notice of situation and change of situation of registered office of company. " 84 Consent of proposed director to act (where he has not signed the articles). " 87 Notice of first directors or man- agers (within 15 days after ap- pointment) and any changes in directors or managers within 15 days after the change. 89 Copy of every prospectus duly dated, on or before date it bears. 93(1) Original or true copy of every mortgage of company's pro- perty, within 21 days of its creation, or 30 days, if created outside the Province. 93(2) Copy (within the same periods as above ^respectively) of one of the debentures of a series con- taining any charge to benefit of which the debenture-holders are entitled pari passu, and not covered by a deed creating or defining the security together 330 HANDBOOK ON COMPANIES. with detailed statement as to issue, and if more than one issue, as to each issue. Section 93(3) --Trust deed or copy of debenture, together with particulars of chattels or book accounts, in case of mortgage not required to be registered under ' * Bills of Sale ' ' or "Assignment of Book Ac- counts ' ' Acts. 93(4) Particulars of any mortgage on land only, to which "Land Titles Act" applies (in lieu of instrument or true copy). 93(5) Particulars of mortgage on chat- tels only, to which "Bills of Sale Act" applies (in lieu of instru- ment or true copy). 93(6) Particulars of mortgage on book accounts only, which is required to be registered under "Assign- ment of Book Accounts Act" (in lieu of instrument or true copy). 93(12) Notice of any change in title to property comprised in a mort- gage, or any other change. 94 Office copy of order extending time for registration of mortgage at same time as mortgage in ques- tion. 101 Office copy of order for appoint- ment of a receiver or manager of a company's property, or notice of having taken posses- sion, or of appointment as re- RETURNS AND DOCUMENTS TO BE FILED. 331 ceiver, within 15 days of the order or of taking possession or of the appointment. Section 103 Abstract of receipts and payments iby receiver or manager, once in 6 months and on ceasing to act as receiver, etc., within 14 days of close of period to which ab- stract relates; also within 14 days of ceasing to act as re- ceiver, etc., notice to that effect. " 117 Statutory declaration required in order to be relieved from holding statutory annual meeting. " 122 List of members and summary as to financial position (within 14 days of the first or only ordinary general meeting in the year). " 124 Copy of every special and extra- ordinary resolution, and of every ordinary resolution affecting the articles, within 15 days of confirmation, or of passing, re- spectively. " 125(1) Return of allotments within one month. " 125(2) Contract, if any, to accept pay- ment otherwise than in cash or if no contract, full particulars (within one month). 125(3) Memorandum (instead of con- tract) as to shares issued other- wise than for cash (on order of Court) ; also office copy of Court order. 332 HANDBOOK ON COMPANIES. Section 126 Notice of increase of members (of company without share capital) beyond registered number within 15 days after increase. 1 1 132 Office copy of Court order, author- izing a meeting of creditors or members to effect compromise, etc., within 15 days of order. " 140 Copy of resolution changing ob- jects or powers of a company incorporated under Companies Act, 1897 or 1910 within 15 days after passing. Extra-provincial corporations. Section 152 Notice by extra-provincial com- pany of change in head office or in directors. ' ' 153 Verified copy of any amendment to charter or regulations within one month of taking effect. " 154 Copy of prospectus inviting sub- scriptions. 156 Annual report not later than 1st March yearly. 167(2) Notice of cessation of operations within one month of notifica- tion by registrar of default. " 167(4) Statutory declaration as to debts on application to be struck off. " 168 Office copy of Court order restor- ing any company to register. *' 179 Office copy of order winding up a company within. 15 days from date of order. RETURNS AND DOCUMENTS TO BE FILED. 333 Section 188 Office copy of Court order dissolv- ing company within 15 days of date of order. " 202 Notice of appointment to be filed by liquidator, within 7 days of appointment. " 209 Account of receipts and payments' to be filed twice a year by liqui- dator with District Registrar of Court. " 220 Notice of appointment by liqui- dator in a voluntary winding-up, within 7 days of appointment. " 231 Liquidator's certified summary of receipts and payments once a year when voluntary winding-up continues more than one year. " 233 Liquidator's return of final meet- ing (voluntary winding-up). " 245 Office copy of Court order declar- ing dissolution void, within 7 days of date of order. 334 HANDBOOK ON COMPANIES. CHAPTER XXIII. WINDING-UP AND INSOLVENCY. It has been seen above (p. 265) that in some jurisdictions a company may go out of existence by surrender of charter; that in some jurisdictions it may be noted as a corporation which is not sub- sisting, or may be struck off the register (pp. 269, 270). A company may also go out of existence by being wound up on grounds of insolvency or other- wise. A company's business may also be brought to an end and its assets disposed of to pay creditors by reason of insolvency and proceedings being taken under the Bankruptcy Act. WINDING UP UNDER PROVINCIAL LEGISLATION. Under (provincial legislation contained in 'the Companies Act or in a separate Act a provincially incorporated company may be wound up on various grounds, but not on the ground of insolvency. The company may pass a resolution, in the manner pro- vided for in the governing Act, requiring the com- pany to be wound up. In most jurisdictions the com- pany may also be wound up by the Court or the winding-up continued under the supervision of the Court. A liquidator is appointed who realizes the assets, discharges the liabilities and divides the surplus (if any) among the shareholders. WINDING-UP AND INSOLVENCY. 335 THE BANKRUPTCY ACT (9-10 GEO. V. c. 36 AND AMENDING ACTS). The Bankruptcy Act is a Dominion Act relating to insolvent debtors, including corporations carrying on business in Canada, excepting certain corpora- tions, e.g., banks (s. 2(k)). An insolvent corporation includes a corporation, whether or not it has done or suffered an act of bankruptcy, (i) which is for any reason unable to meet its obligations as they respectively become due, or (ii) which has ceased paying its current obliga- tions in the ordinary course of business, or (iii) the aggregate of whose property is not, at a fair valua- tion, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all its obligations, due and accru- ing due (s. 2'(t)). Before the Bankruptcy Act was passed insolvent corporations were frequently wound up under the Dominion Winding-up Act (see p. 344, below). This Act is still in force and offers an alternative to the use of the Bankruptcy Act. However, leave of the Court is necessary before the Winding-up Act can apply. This leave hitherto has been readily obtainable. Receiving order. If a company commits an act of bankruptcy, a creditor may present a bankruptcy petition to the Court having bankruptcy jurisdiction under the Act. What constitutes an act of bankruptcy is specified in s. 3. The commonest case is permitting an execution to remain unsatisfied. A creditor is not entitled to present a bankruptcy petition unless : (a) The debt owing by the debtor to the petition- ing creditor, or, if two or more creditors join in the HANDBOOK ON COMPANIES. petition, the aggregate amount of debts owing to the several petitioning creditors amounts to $500 ; and (b) The act of bankruptcy on which the petition is grounded occurred within six months before the presentation of the petition (s. 4). The petition must be verified by affidavit, served on the company and presented to the court having jurisdiction in the locality of the debtor (s. 6). The petition must be filed and a copy lodged to be sealed and issued to the petitioner. A copy of the peti- tion with notice of the time and place of the presen- tation and hearing must be served at least 8 days before the presentation and hearing (rules 74 ff.). The court, after proof of the debt and upon being satisfied that the requirements of the Act have been complied with, may make a receiving order, whereby an authorized trustee is appointed receiver. There- upon the property of the company vests in the trus- tee and no creditor who can prove his claim in bank- ruptcy can take any proceedings except with the leave of the court. A secured creditor, however, e.g., a mortgagee, may realize his security (s. 6). Authorized assignment. Where a company's liabilities to creditors pay- able as debts under the Act exceed $500, it may at any time prior to the making of a receiving order, make an assignment to an authorized trustee of all its property for the general benefit of its creditors. Such an assignment is called an authorised assign- ment, and vests the property of the company in the trustee, subject to the rights of secured creditors (s. 10). The form of the document is set out in the schedule to the Act (Form 18). Blank forms may be obtained from any authorized trustee. The WINDING-UP AND INSOLVENCY. 337 assignment should be executed under the corporate seal in pursuance of a resolution of the board of directors and delivered to the trustee. A company cannot, after a petition for a receiving order has been served and before the receiving order is made, make an assignment in order to choose its trustee. Matters requiring attention of trustee. Official name (s. 16). 1. Assignment or receiving order. Within four days of assignment file the assign- ment in Court having jurisdiction in the locality of the debtor (s. 10A). Kegister assignment or receiving order in every district, county or territory in which any real or immovable property is situate (s. 11 (8) (9) (11) (12). Consider whether should notify Banks of assign- ment (s. 34). Publish notice in Canada Gazette (s. 11(4)). Publish notice in local paper not less than six days before meeting of creditors (s. 11(4)). Within five days of assignment or receiving order mail, prepaid and registered, to every creditor notice of meeting, list of creditors, with addresses and amount of their claims (s. 42(2) ). If sheriff has seized property serve with copy of assignment or receiving order (s. 11(3)). Property not divisible amongst creditors (s. 25). Debtor 's statement within seven days of assign- ment or receiving order; verify statement and make inventory (s. 54(1)). H.C. 22 338 HANDBOOK ON COMPANIES. File copy of debtor's statement with registrar (r. 97). Trustee to furnish debtor with instructions how to prepare statement (r. 97). Debtor to attend first meeting of creditors (s. 54(3) ;r. 113). 2. Take possession of property (s. 17(1)). If sheriff has seized goods serve with copy of assignment (s. 11(3)). 3. Insure s. 17(3) (4). Bent ss. 52 and 20. 4. Dominion statistician. Send particulars (s. 24(2')). 5. Meeting of creditors. Hold as soon as possible and within twenty days of assignment or receiving order (s. 42(1) (2)). Within five days of assignment or receiving order mail, prepaid and registered, to every creditor a notice of meeting to be held not later than fifteen days after mailing of notice, and include in said notice a list of the creditors and the amount of their claims and their post office addresses (s. 42(2)). "With notice of first meeting send proxy (s. 42(13)). (Nothing said as to form of proof of debt although advisable to send). Eeports to creditors when required (s. 24(1)). Have chairman sign minutes (s. 77). Have debtor attend first meeting (s. 54(3) ; r. 113). WINDING-UP AND INSOLVENCY. 339 Creditors. On final dividend send particulars (s. 37(2)). Trustee may give notice to creditors who have not proved debt (s. 37(6)). Have creditors prove debts (s. 45). Interest on claims (s. 49). Dividends. Declare dividends with all convenient speed and within six months pay dividends (s. 37(1)). On final dividend send to every creditor par- ticulars as in s. 37 (2). Discharge wages and certain other claims at once (s. 51(2)). Inspectors. Expenses s. 43(4). Solicitors. Costs (s. 67, rr. 57 and 61). Discharge of trustee (r. 107). Keep books at least 6 years (r. 110). Deposit proceeds of sales with chartered bank (s.26(2)). Compositions. If acting under s. 13, send ten days* notice of meeting and otherwise comply with s. 13 (3). Form of proposal (r. 98). 7 days ' notice at least to be given of application to Court for approval and file report (r. 99). In connection with application for approval registrar requires : 1. Eeport of trustee with proof of mailing of notice of meeting, proposal, etc. 340 HANDBOOK ON COMPANIES. 2. If shareholders notified by advertisement, order of Registrar directing advertising; copy of notice with proof of advertising. 3. Minutes of meeting. 4. Debtor's statement. 5. Proof of mailing notice of application for approval. 6. Proof as to creditors. 7. Proof of creditors filing claims and proving same. 8. Registrar's order for hearing. Meeting of creditors. The term " creditor" includes bondholders and shareholders, each class of whom is in meeting to express its views or wishes in the manner prescribed by the General Rules (s. 2(m)). The Act contains provisions as to the procedure at the meeting. A person is not entitled to vote as a creditor at the first or any other meeting of creditors unless he has duly proved his debt and proof has been lodged with the trustee before the time appointed for the meet- ings (s. 42(9) ). Proof is made by statutory declara- tion verifying the debt (s. 45(2') ). See Forms Nos. 47 and 48 in the schedule to the Act. A secured creditor is not entitled to vote until he has proved his claim and valued his security. For the purpose of voting, a secured creditor, unless he surrenders his security (see p. 342, below), must state in his proof the particulars of his security, the date when it was given and the value at which he assesses it, and he is to be entitled to vote only in respect of the balance (if any) due to him after deducting the value of his security (s. 42(10)). WINDING-UP AND INSOLVENCY. 341 A creditor is not to vote in respect of any debt on or secured by a current bill of exchange or promis- sory 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 debtor, and against whom a receiving order has not been made, or by whom an authorized assignment has not been made, as a security in his hands, and to estimate the value thereof, and for the purpose of voting, but not for the purposes of dividend, to deduct it from his proof (s. 42(11)). The chairman of a meeting may admit or reject a proof for the purpose of voting; but his decision is subject to appeal to the court (s. 42(12)). Creditors may vote in person or by proxy deposited with the trustee at or before the meeting at which the proxy is to be used. It is the trustee 's duty to send to each creditor with the notice of the first meeting a proxy in the prescribed form (s. 42(13)). At the first meeting or at a subsequent meeting the creditors appoint one or more (not exceeding five) inspectors. Subsequent proceedings. The trustee is authorized by the Act to do a number of things with the permission in writing of the inspectors, e.g., to sell the property, to carry on the business, to bring or defend actions, make com- promises with creditors. The trustee will proceed to get in all the assets of the company; collect claims against its debtors, and enforce the liability of holders of unpaid shares. As to the liability of unpaid shareholders, see s. 36 ; General Rules 122-130. 342 HANDBOOK ON COMPANIES. From time to time the trustee will report : (a) When required by the inspectors, to every creditor, and (b) When required by any specific creditor, to such creditor showing the condition of the debtor company's estate, the moneys in his hands and par- ticulars of any property remaining unsold (s. 24). The Act contains a provision wtiereby a creditor can, under certain conditions, take proceedings for his own benefit in case the trustee refuses to act (s. 35). Subject to the retention of such sums as may be necessary for the costs of administration or other- wise, the trustee, with all convenient speed, is to declare and distribute dividends amongst the credi- tors who have proved their claims. Such dividend as can be paid is to be paid within six months from the date of the receiving order or assignment, and earlier, if required by the inspectors. Thereafter a further dividend is to be paid whenever the trustee has sufficient money on hand to pay the creditors ten per cent, and more frequently if required by the inspectors, until the estate is wound up and disposed of. For further provisions with regard to dividends, including the final dividend, see s. 37. The trustee may examine any person who is or has been an agent, clerk, servant, officer, director or employee of the debtor corporation (s. 56). As regards claims of secured creditors, see s. 46. A secured creditor has any one of four courses open to him. (1) He may rely on his security. (2) He may realize his security and prove for the balance after deducting the net amount realized. (3) He may surrender his security to the trustee and prove for his whole debt. (4) If he does not either realize WINDING-TJP AND INSOLVENCY. 343 or surrender his security, he must within thirty days of the date of the receiving order or of the making of the authorized assignment, or within such extended time as may be allowed, file with the trustee a statutory declaration setting out full particulars of his security or securities, the date when given, and the value at which he assesses each. The trustee may redeem any security so valued on payment of the assessed value ; or, if he is dissatisfied with the value at which a security is assessed, the trustee may require the property comprised therein to be sold as provided in the Act As to the priority of claims and the rights of landlords, see ss. 51 and 52. Composition, extension or scheme of arrangement (s.13). Provision is made for the submission to creditors of a proposal for a composition in satisfaction of debts, or an extension of time for payment of debts or a scheme of arrangement of the debtor's affairs. The debtor may, either before or after the making of a receiving order or an authorized assignment, require an authorized trustee to convene a meeting of creditors to which the proposal is submitted. If a majority in number of creditors who hold two- thirds in amount of the proved debts resolve to accept the proposal as .made or altered or modified at the request of the meeting, the trustee is to sub- mit it to the court for approval. If the court approves of .the proposal it becomes binding on all the creditors. For details see s. 13; General Rules 98-106. 344 HANDBOOK ON COMPANIES. THE DOMINION WINDING-UP ACT (R. S. C. (1906), C. 144 AND AMENDING ACTS). Any Dominion or Provincial company may be wound up under the Winding-up Act on the ground of insolvency, but leave must be obtained from the Court having bankruptcy jurisdiction under the Bankruptcy Act, unless the company is one to which that Act does not apply, e.g., a loan company. Foreign companies if insolvent and having assets in Canada may also be wound up under the Act. A Dominion company (but not a provincial com- pany) may also be wound up under the Winding-up Act in cases other than those of insolvency. These are set out in s. 11 and include the following: When the company at a special meeting of share- holders called for the purpose has passed a resolu- tion requiring the company to be wound up; when the capital of the company is impaired to the extent of 25 per centum thereof, and when it is shown to the satisfaction of the Court that the lost capital will not be restored within one year ; when the Court is of opinion that for any other reason it is just and equitable that the company should be wound up. "Just and equitable" covers a number of matters. Thus, where the subject matter of the business for which the company was incorporated has disap- peared and the substratum of the company has gone, or where the affairs of the company are brought to a complete deadlock, the company may be wound up on the ground that it is just and equitable to do so. As to who may apply in the above mentioned cases see s. 12. WINDING-UP AND INSOLVENCY. 345 Insolvency. In the vast majority of cases a company is wound up on the ground of insolvency. A company is deemed to be insolvent in the events set out in s. 3 of the Act. Of these the commonest are inability to pay its debts as they become due, and permitting an execution to remain unsatisfied. A company is deemed unable to pay its debts as they become due, whenever a creditor to whom the company is indebted in a sum exceeding $200 then due has served on the company, in the prescribed manner, a demand in writing requiring the company to pay the sum then due, and the company has for 60 days afterwards neglected to pay such sum or to secure or compound for the same to the satisfaction of the creditor. Where the company is insolvent an application for a winding-up order may be made to the Court by the company or by a creditor for the sum of at least $200, or a shareholder in the amount of at least $500. Most applications are made by creditors. Creditors' petition. An application by a creditor is by petition verified by affidavit. The petition and other documents will be prepared by the petitioner's solicitors and served on the company, together with a notice of the time and place of the presentation of the petition. If the petitioning creditor's debt is established or not dis- puted and there is evidence that the company is insolvent within the meaning of the Act and the pro- ceedings taken on the creditor's behalf are regular, he will generally be entitled to a winding-up order as of right as between himself and the company. If the petition, however, is opposed by other creditors, the order may be refused. The Court exercises a 346 HANDBOOK ON COMPANIES. discretion as to whether the order will be granted or not, and an order will be refused or the petition directed to stand over in special cases (see Company Law, pp. 711, 712, 716, 718 ff). Winding-up order and order of reference. If the petitioner is successful, an order is made that the company be wound up under the Act. At the same time an order is made (a) appointing a provisional liquidator; (b) referring it to an Official Eeferee to appoint a permanent liquidator; (c) dele- gating to the Official Referee the powers of the Court and (d) awarding the petitioner the costs of the application. The last mentioned order is called an order of reference or an order of delegation. Effect of winding-up order. The company is to cease carrying on its business from the time of the order, except in so far as is necessary, in the opinion of the liquidator, for the beneficial winding up of the company (s. 20). No transfers of shares except with the sanction of the liquidator under authority of the court may be made (s. 21). No suit, action or other proceedings are to be proceeded with or commenced against the com- pany except with leave of the Court (s. 22). As to when leave will be granted see Company Law, p. 740. Secured creditors, such as mortgagees and bondholders, will not generally be restrained from enforcing their rights, but must first obtain leave from the Court, Attachments, executions, etc., put in force against the estate or effects of the company after the order are void (s. 23). No lien is to be created by the issue or delivery to the sheriff of any writ of execution or WINDING-UP AND INSOLVENCY. 347 by levying upon or seizing under such writ the effects or estate of the company; or by the filing or regis- tering of any memorial or minute of judgment, or by the issue or taking out of any attachment or garnishee order or other process or proceeding if before payment over to the plaintiff of the moneys actually levied, paid or received under such writ, attachment, garnishee order, etc., the winding up of the business of the company has commenced. A lien for costs is excepted (s. 84). Upon appointment of the liquidator all the powers of the directors cease, except in so far as the Court or the liquidator sanctions the continuance of such powers (s. 31). Procedure after the winding-up order. The provisional liquidator will take possession of the books and assets of the company. The official referee or officer of the Court to whom the winding up is referred under the order of delegation requires the provisional liquidator to give security. Certain trust companies are not required to give security (s. 30). A notice to creditors, contributories and shareholders is directed to be advertised calling on them to attend before the Court for the appointment of a permanent liquidator. The provisional liquida- tor is usually appointed permanent liquidator, but the wishes of the majority of creditors are usually followed. A notice to creditors to send in their claims verified by affidavit is published. The liquidator then proceeds to get in the assets and collect moneys owing to the company; he will make a list of persons liable for unpaid shares, submit the list to the official referee who orders such 348 HANDBOOK ON COMPANIES. persons to attend and show cause why they should not be settled on the list of contributories. The official referee proceeds to try the case when a con- tributory disputes his liability. The liquidator will bring in to the official referee a fist of claims filed against the company and will serve a notice on those persons whose right to rank against the estate is disputed by him. The notice requires such persons to appear before the official referee and prove their claims. Contested claims are tried by the official referee and decided by him, subject to the right of appeal conferred by the Act. The liquidator will proceed to sell the company's assets by public auction or by tender as directed by the official referee. The sale is advertised. If the assets are not disposed of at the sale, disposal by private sale will be authorized. When creditors' claims are disposed of, the assets realized and proceedings against contributories or persons liable for misfeasance (see p. 353, below) are disposed of and the judgments against such per- sons realized upon, the solicitors ' costs will be taxed, the remuneration of the liquidator and the dividend to be paid to creditors fixed. After payment of the dividend and costs and remuneration, an order is made discharging the liquidator and directing the concellation of his 'bond. Powers and duties of liquidator. The liquidator, on his appointment, is to take into his custody or under his control all the property and effects, etc., of the company (s. 33) ; prepare a statement of assets and debts within 60 days after his appointment (s. 33A) ; mail to the Dominion Statistician, Ottawa, the documents enumerated in WINDING-UP AND INSOLVENCY. 349 s. 38A promptly after their receipt or preparation. Certain powers are conferred on the liquidator which are exercisable with the approval of the Court, upon such previous notice to the creditors, contribu- tories or shareholders or members as the Court orders (s. 34). Inter alia the liquidator may bring and defend actions, carry on the business of the company so far as is necessary for the beneficial winding up of the company, sell the assets, raise money on the security of the assets of the company (s. 34); appoint a solicitor to assist him (s. 35). With the approval of the Court the liquidator may compromise debts due to the company (s. 36) and make compromises with the creditors (s. 37). Creditors. Meetings of creditors, contributories and share- holders may be directed by the Court to be held (s. 61). In ascertaining the wishes of creditors, regard is to be had to the amount of each creditor's claim (s. 62). The Court may summon creditors to con- sider any proposed arrangement or compromise and if a majority in number representing three- quarters in value of the creditors, or class or classes of creditors, present in person or by proxy at the meeting agree to such arrangement or compromise, it may be sanctioned by the Court and then becomes binding on creditors, liquidator and shareholders (s. 64). Votes at meetings may be given in person or by proxy (s. 66). The Court fixes a time within which creditors must prove their claims. All descriptions of claims, present, future, certain or contingent, may be proved, and where they are for unliquidated dam- ages or are dependent on some contingency, they may be valued (s. 69). 350 HANDBOOK ON COMPANIES. Clerks and employees have a special priority for any arrears of salary or wages due and unpaid at the time of the making of the winding-up order, not exceeding the arrears which have accrued to them during the three months next previous to the date of such order (s. 70). As to the personal liability of directors for such wages see p. 158, above. As to what persons may claim the above priority, see Com- pany Law, pp. 813 ff. As to set off see Company Law, p. 816. Contributories (s. 48-60). The liquidator makes out a list of contributories, i.e., shareholders, showing the names, addresses, descriptions and number of shares in respect of which each contributory appears to be liable. The list is settled by the official referee. When the con- tributory objects to being settled on the list, his case is heard by the official referee who issues an order embodying his decision and awarding costs. A right to appeal is conferred by the Act. Every shareholder is liable to contribute the amount unpaid on his shares or on his liability to the company. As to defences of contributories, see Company Law, pp. 786 if. It should be noted that some of the defences open to a shareholder against a claim for payment by the company, as a going con- cern, are not available against the liquidator. Among these are the defence that the subscription for shares was induced by fraud or misrepresentation; and the defence that the shares were taken subject to a condition subsequent or collateral agreement, e.g., that the shares were to be paid for by the supply of goods, or by crediting remuneration as an officer of the company. A condition precedent on the other WINDING-UP AND INSOLVENCY. 351 hand is a defence. It is a condition precedent where some prerequisite is to be complied with before the contract to subscribe for shares is to become com- plete, e.g., that a definite amount is to be subscribed by others before the application is to become effec- tive. The distinction between a condition precedent and a condition subsequent or collateral agreement is often difficult to determine. As a general rule where a person has trans- ferred his shares and the transfer has been regis- tered, the transferor is no longer liable as a shareholder. In jurisdictions, however, where incor- poration by memorandum and articles is in vogue the Act provides that all persons who have trans- ferred their shares within a year before the winding-up, are liable to be placed on a B list. Persons on the B list are liable to contribute when the persons to whom they transferred their shares fail to pay the calls made on them. Fraudulent and collusive transfers to avoid liability afford no defence. After the lis-t of contributories has been settled the official referee will, if and so far as necessary, authorize the liquidator to levy calls on contribu- tories and enforce payment of calls by an order. The Court will adjust the rights of contributories among themselves. Secured claims (ss. 76-82). Secured creditors, e.g., mortgagees, cannot be compelled to file their claims and prove under the Act, if they prefer to rely on their security and not to ask to share in the distribution of the assets. They must, however, obtain leave of the Court to institute proceedings to enforce their security after a winding-up order has been made. 352 HANDBOOK ON COMPANIES. A secured creditor may (1) Eely on his security and not prove; or (2f) prove under the Act. If he proves under the Act, he must, by affidavit, specify the nature and amount of his security and put a specified value on it. The liquidator may then with the approval of the Court, either (a) consent to the creditor retaining his security at the specified value; or (b) require the creditor to deliver up his security at the specified value to be paid to him out of the estate upon the realization of the security with interest from the date of filing the claim. Whether the creditor retains his security or delivers it up, he may prove for the balance of his claim. Distribution of assets. After the claims of creditors have been allowed or disallowed the liquidator distributes the assets among the persons entitled (s. 74). Claims sent in after a partial distribution, subject to proof and allowance, rank with other claims in any future dis- tribution (s. 75). The property of the company is to be applied in satisfaction of its debts and liabili- ties and the charges, costs and expenses of winding up (s. 91). All costs, charges and expenses pro- perly incurred in the winding-up, including the remuneration of the liquidator, are payable out of the assets in priority to all other claims (s. 92). After the company's creditors have been paid and the costs of the winding up have been satisfied, it is the duty of the liquidator to divide the balance (if any) among the shareholders or members of the company. Such distribution will be made among them according to their rights under the letters patent and by-laws or memorandum and articles of association (s. 93). WINDING-UP AND INSOLVENCY. 353 Preference shares commonly carry a preferential right to the return of capital on a winding-up, in which case the amounts paid in by the preference shareholders must be repaid to them before the common shareholders get anything. Where the preference shares do not confer such right or where the shareholders are all of one class, the surplus assets (unless there is some provision to the con- trary in the governing documents) are divisible among the shareholders equally. Fraudulent preferences and payments. Certain contracts, conveyances and payments by a company which is subsequently wound up, are pre- sumed to be made with intent to defraud creditors, or void or may be upset. See Company Law, p. 836. Misfeasance. Section 123 of the Act reads as follows : 123. When In the course of the winding-up of the business of a company under this Act, it appears that any past or present director, manager, liquidator, receiver, employee or officer of such company has misapplied or retained in his own hands, or become liable or accountable for any moneys of the company, or been guilty of any misfeasance or breach of trust in relation to the company, the court may, on the application of any liquidator, or of any creditor or contributory of the company, notwithstand- ing that the offence is one for which the offender is criminally liable, examine into the conduct of such director, manager, liquidator, receiver, officer or employee, and, upon such examina- tion may make an order requiring him to repay any moneys so misapplied or retained, or for which he has become liable or accountable, together with interest, at such rate as the court thinks just, or to contribute such sums of moneys to the assets of the company, by way of compensation in respect of such mis- application, retention, misfeasance or breach of trust, as the Court thinks fit. R. S., c. 129, s. 83. H.C. 23 TABLE OF FEES Dominion. p. c. 14. AT THE GOVERNMENT HOUSE AT OTTAWA. SATURDAY, the 12th day of January, 1918. PRESENT: HIS EXCELLENCY THE ADMINISTRATOR IN COUNCIL. His Excellency the Administrator in Council is pleased to make and establish and doth hereby make and establish the fol- lowing tariff of fees, under the provisions of Section 24 of the Companies Act as amended by section 6 of the Companies Act Amendment Act, 1917. LETTERS PATENT AND SUPPLEMENTARY LETTERS PATENT. When the proposed capital of the Company is $50,000 or less $100 00 When the proposed capital is more than $50,000, and not more than $200,000 100 08 and $1 for each $1,000 or fractional part thereof in excess of $50,000. When the proposed capital is more than $200,000 and not more than $500,000 250 00 and fifty cents for each $1,000 or fractional part thereof in excess of $200,000. When the proposed capital is more than $500,000 400 00 and twenty cents for every additional $1,000 or frac- tional part thereof. For Letters Patent to any company under Section 7A added to the Companies Act by Section 4 of the Com- panies Act Amendment Act, 1917 (other than a com- pany incorporated for charitable purposes only) . . . 100 0-0 356 HANDBOOK ON COMPANIES. For Letters Patent to any company incorporated for charitable purposes only (other than a war charity when there shall be no fee) 25 00 For Letters Patent to a company under Section 7B added to the Companies Act by Section 4 of the Companies Act Amendment Act, 1917, when no amount at which shares may be sold is set out in the Letters Patent, then the amount of each share shall be fixed at $100 and the fee payable shall be according to the fore- going tariff upon the capital stock calculated on the total amount of such shares either at the price set forth in the Letters Patent cr at the fixed sum or $100 as the case may be. For Supplementary Letters Patent increasing the capi- tal of a company, the fee to be according to the foregoing tariff, but on the increase only, that is, the fee to be the same as for the incorporation of a com- pany with capital equal to the increase. For Supplementary Letters Patent changing the name of a company 50 00 For Supplementary Letters Patent for other purposes.. 100 00 FOR FILING RETURNS. For filing returns under Section 106 of the Companies Act as amended by Section 13 of the Companies Act Amendment Act, 1917, the fee payable upon each return shall be as follows: When the capital stock of the company is $200,000 or less $ 5 00 When the capital stock of the company is more than $200,000, but not more than $500,000 10 00 When the capital stock of the company is more than $500,000, but not more than $1,000,000 25 00 When the capital stock is more than $1,000,000 25 00 and $1 on each $1,000,000 in excess of the first million, but not exceeding $50 in all. For filing return from a company having shares without nominal or par value, the fee payable shall be calcu- lated upon the capitalization of such company shown in such return. TABLE OF FEES. 357 For filing return from a company incorporated for chari- table purposes (other than a war charity when there shall be no fee) 1 00 For filing return from any company incorporated under Section 7A added to the Companies Act by Section 4 of the Companies Act Amendment Act, 1917 (other than a company incorporated for charitable purposes only) 2 00 CERTIFICATES OF REGISTRATION, ETC. For each Certificate of Registration or Deposit of any prospectus, notice or agreement or other such docu- ment filed for that purpose under the provisions of the Companies Act or the Companies Amendment Act, 1917 1 50 His Excellency is also pleased to order that all former Orders in Council respecting the tariff of fees for the incorporation of companies and the tariff of fees established thereunder, shall be and the same are hereby cancelled. RODOLPHE BOUDREAU, Clerk of the Privy Council. The Honourable The Secretary of State. Ontario. FEES 1. Fees must accompany all applications and all documents to be filed. Where the fee does not accompany a document to be filed such document will be returned to the sender forthwith. Vide Section 138 and 139 of the Ontario Companies Act. 2. No cheque will be accepted unless it is marked. 3. Post office orders, postal notes, cheques, drafts, etc., should be payable to the order of the Provincial Treasurer. The following schedule of fees shall be payable for the various services rendered by the Department under the provisions of the Ontario Companies Act and the Extra Provincial Corporations Act: 358 HANDBOOK ON COMPANIES. INCORPORATION WITH SHARE CAPITAL When the proposed capital of an applicant company is $40,000 or less the fee is $100. When the proposed capital is more than $100,000, but does not exceed $100,000, the fee is $100 plus $1 for every $1,000 or frac- tional part thereof in excess of $40,000. When the proposed capital is more than $100,000, but does not exceed $1,000,000, the fee is $160 plus $2.50 for every $10,000 or fractional part thereof in excess of $100,000. When the proposed capital is more than $1,000000 the fee is $385 for the first $1,000 : 000 plus $2.50 for every $10,000 or frac- tional part thereof in excess of $1,000,000. CO-OPERATIVE COMPANIES where the proposed capital does not exceed $10,000 $10. RURAL TELEPHONE COMPANIES and other rural companies com- ing within the provisions of Part XII. of the Ontario Companies Act, where the proposed capital does not exceeed $25,000 $25.00. Where the proposed capital is more than $25,000 the fee is on the same scale as that applying to ordinary share capital com- panies. RURAL CHEESE AND BUTTER COMPANIES, and other rural com- panies of a similar nature, and RURAL CEMETERY COMPANIES, where the proposed capital does not exceed $10,000 $10. Where the capital of a company of the classes in the two next preceding paragraphs referred to exceeds $10,000, but does not exceed $25,000, the fee is $10 plus $1 for every $1,000 or fractional part thereof in excess of $10,000. To take advantage of these special tariffs it must be demon- strated to the satisfaction of the Department that the purposes for which the company is being incorporated bring it within the classes specified. SUPPLEMENTARY LETTERS PATENT. Where the capital of a company is increased, the fee is accord- ing to the foregoing tariff, but on the increase only; that is, the fee is to be the same as for the incorporation of a company with capital equal to the increase. TABLE OF FEES. 359 For any other purpose the fee is $100. Where the fee payable for incorporation is $25 or less, the fee for Supplementary Letters Patent, where the authorized capi- tal is not increased in excess of $25,000, shall be $5. AMALGAMATION. Fees are payable on the same basis as for incorporation. No fee previously paid is taken into account. ORDERS. Changing the name of a company $25 00 Accepting the surrender of a charter 20 00 Accepting the surrender of a charter where the fee pay- able for incorporation is $25 or less 5 00 Accepting the surrender of a charter of a corporation without share capital 5 00 Permitting a company to keep its books out of the Pro- vince 50 00 Approving by-law authorizing distribution of assets.... 10 00 Approving by-law under 'Sec. 162, and filings thereunder. 2 00 CERTIFICATE ENTITLING COMPANY TO COMMENCE BUSINESS. Certificate under Part VIII. of the Ontario Companies Act and filing of necessary documents thereunder $25 00 Certificate where fee payable for incorporation is $25 or less 5 00 j FILING DOCUMENTS. Prospectus $2 00 Statement in lieu of prospectus 2 00 Return of allotment (where the company has not obtained a certificate entitling it to commence business) .... 2 00 Report for statutory meeting 2 00 By-law providing for sale of shares at a discount 5 00 By-law varying number of directors 2 00 By-law changing head office 2 00 By-law fixing quorum of directors 2 00 Notice of resolution passed for winding up 2 00 Liquidator's report on winding up 2 00 Filing duplicate original mortgage under Sec. 82 (2) ... 2 00 Filing power of attorney 2 00 Filing any other document under the Act 2 00 360 HANDBOOK ON COMPANIES. FILING ANNUAL SUMMARIES. The following fees are payable on the filing of the Annual Return of a company having share capital: Where the capital of the company is $40,000 O r under. . . $ 5 00 Where the capital of the company is $100,000 or under. . 10 00 Where the capital of the company is $500,000 or under. . 20 00 Where the capital of the company is $1,000,000 or under. 25 00 Where the capital of the company is over $1,000,000 30 00 Note. The above schedule applies to extra-provincial as well as to Ontario companies. Co-operative Companies. Companies with a capital of $5,000 or under $ 2 00 Companies with a capital of $10,000 or under 3 00 Companies with a capital of $20,000 or under 4 00 Companies with a capital of $40,000 or under 5 00 Companies with a capital over $40,000 10 00 Filing the return of a company without share capital ... 1 00 CORPORATIONS WITHOUT SHARE CAPITAL. Charitable corporations and trusts of a similar nature. . $5 00 War charities No fee All other incorporations without share capital 10 00 Suipplemenary Letters Patent 5 00 Change of name 5 00 Surrender 5 00 EXTRA-PROVINCIAL CORPORATIONS. LICENSES. Fees for Licenses to Extra-provincial Corporations are based on the amount of capital investment in the Province authorized by the License, and are according to the foregoing tariff for incor- poration. SUPPLEMENTARY LICENSE. Where the amount of the authorized capital investment of an Extra-provincial Corporation is increased, the fee is the same as for Supplementary Letters Patent under the Ontario Companies TABLE OF FEES. 361 Act. No fee previously paid for License or Supplementary License is taken into account. Varying powers authorized by original License, where capital is not increased $100 00 Changing the name of an extra-provincial corporation. . 10 00 FILING ANNUAL SUMMARIES. See p. 360 above. SEARCHES, ETC. Search of returns, one year $0 25 Search of returns, two years 35 Search of returns, three years 45 And so on, adding for each year, lOc. Search by mail, additional 25 Copying, uncertified, per folio 08 Copying, certified, per folio 10 Certificate, additional 50 Fee for copy of Letters Patent 2 50 Fee for copy of The Ontario Companies Act in pamphlet form 50 LICENSES IN MORTMAIN. License is granted for a period of 15 years. Fees for licenses in mortmain are based on the value of the land owned by the corporation for the purpose of carrying on its business in the Province of Ontario, and are as follows: The minimum fee is $50 for which the corporation is auth- orized to hold land to the value of $50,000. Where the value of land is over $50,000, but does not exceed $100,000, the fee is $1 per thousand. Where the value of land is over $100,000, but does not exceed $250,000, the fee is $100 plus 50c. for each $1,000 in excess of $100,000. Where the value of land is over $250,000, but does not exceed $500,000, the fee is $175 plus 20c. for each $1,000 in excess of $250,000. Where the value of land is over $500,000 the fee is $225 plus lOc. for each $1,000 in excess of $500,000.* 1 Licenses for 30 years are granted on payment of a fee of 50 per cent, in addition to the usual fee for the shorter term. 362 HANDBOOK ON COMPANIES. Quebec. FEES FOR INCORPORATION OF JOINT STOCK COMPANIES BY LETTERS PATENT, AND FOR ERECTING, BY LETTERS PATENT, CITY AND TOWN MUNICIPALITIES. 1. When the capital is $20,000, or less than $20,000, the fee shall be $40. 2. When the capital is more than $20,000, and less than $50,000, the fee shall be $75. 3. When the capital is $50,000 $100,000, the fee shall be $100. 4. When the capital is $100,000 $150,000, the fee shall be $150. 5. When the capital is $150,000 $200,000, the fee shall be $200. 6. When the capital is $200,000 $300,000, the fee shall be $250. 7. When the capital is $300,000 $400,000, the fee shall be $300. 8. When the capital is $400,000 $500,000, the fee shall be $350. 9. When the capital is $500,00 $600,000, the fee shall be $375. 10. When the capital is $600,000 $700,000, the fee shall be $400. 11. When the capital is $700,000 $800,000, the fee shall be $425. 12. When the capital is $800,000 $900,000, the fee shall be $450. 13. When the capital is $900,000 $1,000,000, the fee shall be $475. 14. When the capital is $1,000,000, the fee shall be $500. 15. For every million dollars of additional capital, or fraction thereof, the fee shall be $100. 16. Upon every application for supplementary letters patent Increasing or reducing the capital, the fee shall be calculated on the actual amount of the increase or reduction in question, and the fee payable shall be the same as that payable on letters patent for the incorporation of a company whose capital is of the same amount as the proposed increase or reduction. In the case of an alteration in the value of shares the fee shall be $25 (arts. 5992, 5996 and 5997, R. S. Q., 1909). 17. Upon every application for supplementary letters patent, other than those for the increase or reduction of capital, or for an alteration in the value of shares, the fee shall be 20% of the amount of the fee for the original incorporation. or more, and less than or more, and less than or more, and less than or more, and less than or more, and less than or more, and less than or more, and less than or more, and less than or more, and less than or more, and less than or more, and less than TABLE OF FEES. 363 18. Upon every application by a subsisting and valid corpora- tion for letters patent to carry on its business under the " Que- bec Companies Act, 1920," the fee shall be 50% of the fee paid at the date of incorporation of the said company, if the application covers only the powers mentioned in article 5967b or in article 5967c and 5967d of the Revised Statutes, 1909. 19. Upon every application for letters patent confirming an agreement for the amalgamation of companies, the fee shall be 50% of the fee payable for letters patent incorporating a com- pany with a capital equal to the total capital of the companies applying for amalgamation (art. 5967b, R. S. Q., 1909). 20. Upon every application for surrender of charter, the fee shall be $50 (5973a, R. S. Q., 1909). 21. Upon every application for creating and issuing any part of the capital stock as preferred stock the fee shall be $25 (R. S. Q., 1909, art. 5989). 22. Upon every application for alteration in the value of shares, the fee shall be $25 (R. S. Q., 1909, art. 5997). 23. Upon the filing and certification of every annual sum- mary the fee shall be $10 (R. S. Q., 1909, art. 6031). 24. Upon every application for letters patent to incorporate a corporation or association without share capital, the fee shall be $25 (R. S. Q., 1909, art. 6084). 25. Upon every application for letters patent to incorporate a town municipality, the fee shall be $150. 26. Upon every application for letters patent to incorporate a city municipality, the fee shall be $250. LICENSES TO EXTRA-PROVINCIAL CORPORATIONS. Tariff of fees to be paid for the license granted to Extra- provincial Commercial Corporations, and Joint Stock Companies, under article 8, chapter 34, IV. Edward VII. 1 When the capital stock of the company is $40,000, or less, the fee will be $100. 2 When the capital stock is over $40,000, but does not exceed $100,000, the fee will be $100, and $1 for every $1,000 or frac- tional part thereof in excess of $40,000. 3 When the capital stock is over $100,000, but does not exceed $1,000,000, the fee will be $160, and $2.50 for every $10,000 or fractional part thereof in excess of $100,000. 4 When the capital stock is over $1,000,000, the fee will be $385, and $2.50 for every $10,000 or fractional part thereof in excess of $1,000,000. 5 When the company has no determined stock, the fee will be $100. 364 HANDBOOK ON COMPANIES. 6 When the company employs only a portion of its capital here, the tariff fee (from 1 to 4), will be charged on such part so employed here, upon an affidavit or solemn declaration, stating what portion is so employed. If the company increases this portion, it must produce an affidavit or declaration thereof, and shall then pay an additional fee to cover the proportion of increased capital so employed in the Province, according to the ahove tariff (from 1 to 4). The Honourable the Secretary may require the company, its officers, directors, clerks and employees to furnish, under oath or otherwise, such information respecting the capital and affairs of the Company as he may deem desirable and necessary. Manitoba. TARIFF OF FEES FOR IETTERS PATENT OF INCORPORATION. By Order-in-Council dated the fourth day of September, A.D. 1919, the following new Tariff of Fees, for Letters Patent of Incorporation and for the issue of Licenses to Extra-provincial Corporations, was brought into force, viz.: In the case of Extra-provincial corporations, the " capital " is the capital employed in the Province. does not exceed and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding and not exceeding for each additional or fraction thereof 20.00 With an extra charge of $5 per folio, for every folio over ten. When the capital Over $ ; 20,000.00 Over 30,000.00 Over 40,000.00 Over 50,000.00 Over 60,000.00 Over 75,000.00 Over 100,000.00 Over 125,000.00 Over 150,000.00 Over 200,000.00 Over 250,000.00 Over 300,000.00 Over 400,000.00 Over 500,000.00 Over 600,000.00 Over 700,000.00 Over 800,000.00 Over 900,000.00 Over 1,000,000.00 $100,000.00 20,000.00 i F 40.00 30,000.00 50.00 40,000.00 60.00 50,000.00 70.00 60,000.00 80.00 75,000.00.... 100.00 100,000.00 120.00 125,000.00 130.00 150,000.00 140.00 200,000.00 150.00 250,000.00 160.00 300,000.00 170.00 400,000.00 180.00 500,000.00 200.00 600,000.00 210.00 700,000.00 220.00 800,000.00 230.00 900,000.00 240.00 1,000,000.00.... 250.00 TABLE OF FEES. 365 And that, in addition to the above fees, applicants must deposit with the Provincial Secretary, with their petition, the further sum of $25 toward payment of the cost of the notice in " The Manitoba Gazette," provided for by section 16 of the said " The Companies Act," any surplus of said sum of $25 to be subsequently returned to the applicants; but if such notice costs more than $25, the applicants must pay the extra cost; And that, in cases of petitions for supplementary letters patent, where the capital stock is increased, the fees to be accord- ing to the above schedule, but on the increase only; and, where the capital stock is not increased, $25, and $5 per folio for every folio over five; And that the fee to be paid tor an Order-in-Council, author- izing the change of name of a company, shall be $25, including the sum of $5 to be paid for notice in " The Manitoba Gazette," as required under section 95. Attention is directed to the additional cost, when the powers petitioned for exceed the average number of words. The number of words in the letters patent of incorporation is 1,000, of which 300 words are allotted for the description of the powers granted. When that number of words is exceeded in denning the powers of the company, then the additional cost is assessed at the rate of 5 for each 100 words, or fraction of that number, over and above 300. FEES FOR REVIVING LETTERS PATENT. Total fees in default $ Order-in-Council 10 . 00 Manitoba Gazette 2 . 40 J. W. ARMSTRONG, Provincial Secretary. Dated at Winnipeg, 4th September, 1919. New Brunswick. (The Companies Act.) 3. The following is the Schedule of Fees payable under the 93rd section of the said Act: (1) When the proposed capital stock of the company is $5,000 or less, the fee to be forty dollars ($40). (2) When the proposed capital stock of the company is above $5,000 and less than $10,000, the fee to be fifty dollars ($50). 366 HANDBOOK ON COMPANIES. (3) When the proposed capital stock of the company is $10,000 and less than $25,000, the fee to be sixty-five dollars ($65). (4) When the proposed capital stock of the company is $25,000 and less than $50,000, the fee to be eighty dollars ($80). (5) When the proposed capital stock of the company is $50,000 and less than $100,000, the fee to be one hun- dred dollars ($100). (6) When the proposed capital stock of the company is $100.000 and less than $200,000, the fee to be one hundred and fifty dollars ($150). (7) When the proposed capital stock of the company is $200,000 and less than $300,000, the fee to be two hundred dollars ($200). (8) When the proposed capital stock of the company is $300,000 and less than $500,000, the fee to be two hundred and fifty dollars ($250). (9) When the proposed capital stock of the company is $500,000 and not more than $1,000,000, the fee to be three hundred dollars ($300). (10) For every $500,000, or any part thereof, in excess of $1,000,000, an additional fee of sixty dollars ($60). (11) On supplementary letters, when application is to in- crease the capital stock, the fees shall be payable upon the increased amount for which letters are applied for, according to the aforegoing scale. In all other cases a fee of $50, but not to exceed the amount paid for original letters patent. 4. All fees must be paid in cash or by an accepted cheque, payable to the order of the Provincial Treasurer or Deputy Treasurer, and must be transmitted by registered letter. ROBERT MURRAY. Provincial Secretary's Office, Predericton, February 22nd, 1914. Nova Scotia. (Companies Act, 1920.) The following, known as Table B, is the table of fees to be paid to the Registrar of Joint Stock Companies by a company having a capital divided into shares: For registration of a company whose nominal share capi- tal does not exceed $5,000 $50 00 TABLE OF FEES. 367 For registration of a company whose nominal share capi- tal exceeds $5,000, but does not exceed $10,000 75 00 For registration of a company whose nominal share capi- tal exceeds $10,000, a fee of $75, and also the follow- ing fees regulated according to the amount of nominal share capital, that is to say: For every one thousand dollars of nominal share capital or part of one thousand dollars after the first $10,000 up to and including $50,000 1 00 For every one thousand dollars of nominal share capital or part of one thousand dollars after the first $50,000 up to and including $100,000 75 For every one thousand dollars of nominal share capital or part of one thousand dollars after the first $100,000 up to and including $250,000 50 For every one thousand dollars nominal share capital or part of one thousand dollars after the first $250,000 up to and including $1,000,000 25 For' every one thousand dollars of nominal share capital or part of one thousand dollars after the first $1,000,000 15 For registration of any increase of capital made after the first registration of a company, the same fees as are payable for registering a new company with a nomi- nal share capital amounting to the original share capital and proposed increased share capital of the first mentioned company, less the amount of the fee paid upon the original registration. For registration of any company under Part VII. of the Act the same fees as are payable in respect to a new company of the same nominal capital. For registering a change of a company's name 25 00 For registration of unlimited company as limited 10 00 For Order-in-Council sanctioning payment of interest out of capital 10 00 For any certificate other than the original certificate of incorporation 2 00 For filing any resolution re capital stock 3 00 For filing a special resolution 3 00 For filing order of Court confirming alteration of memo- randum 5 00 For filing order of Court relating to any document 5 00 For registering copy of order and minute for reduction of capital 5 00 For registering any other document altering Memorandum of Association 3 00 368 HANDBOOK ON COMPANIES. For registering resolution distributing dividend or bonus. 5 00 For filing prospectus 3 00 For filing mortgage 3 00 For filing contract under section 82 3 00 For registering or filing any other document or notice... 2 00 For making any other record of any fact by law author- ized or required to be recorded by the Registrar, but not including prescribed returns or the Memorandum of Association 20* FEES PAYABLE UNDER DOMESTIC, DOMINION AND FOREIGN CORPORATIONS ACT, CHAP. 15 (1912), AS AMENDED. 28. Every corporation holding a certificate of registration shall, in the month of January in each year, pay to the registrar a fee (in this part called an annual registration fee), as follows: In the case of a Domestic Corporation or of a Dominion Corporation: Having a nominal capital not exceeding $ 5,000, a fee of $ 10. Having a nominal capital not exceeding 10,000, a fee of 20. Having a nominal capital not exceeding 25,000, a fee of 30. Having a nominal capital not exceeding 50,000, a fee of 50. Having a nominal capital not exceeding 75,000, a fee of 75. Having a nominal capital not exceeding 100,000, a fee of 100. Having a nominal capital not exceeding 250,000, a fee of 125. Having a nominal capital not exceeding 500,000, a fee of 150. Having a nominal capital not exceeding 1,000,000, a fee of 200. Having a nominal capital exceeding $1,000,000, a fee of $200 and ten cents for every $1,000 of its nominal capital over $1,000,000. In the case of a Foreign Corporation: Having a nominal capital not exceeding $ 10,000, a fee of $ 50. Having a nominal capital not exceeding 50,000, a fee of 100. Having a nominal capital not exceeding 100,000, a fee of 150. Having a nominal capital not exceeding 500,000, a fee of 200. Having a nominal capital exceeding $500,000, a fee of $200, and ten cents for every $1,000 of its nominal capital over $500,000. For the purpose of this section, the amount of the nominal capital of a corporation, the shares of which are issued without any nominal or par value, shall be deemed to be $100 each per share. EXCEPTIONS : Provided, however, that with respect to a Dominion Corpo- ration or to a Foreign Corporation having a nominal capital TABLE OF FEES. 369 exceeding $500,000 and carrying on business in Nova Scotia here- tofore, and carrying on also an established business outside of Nova Scotia in which at least fifty per cent, of its subscribed capital is invested, the Governor-in-Council may reduce the annual registration fee payable under this section to such sum as he may think just, having regard to the nature and import- ance of its business in Nova Scotia and the amount of capital used therein; provided also that with respect to such corporation not carrying on business in Nova Scotia heretofore when apply- ing for registration under this Act the Governor-in-Council may reduce the annual registration fee to such sum as he may think just, having regard to the nature and importance of the business proposed to be carried on in Nova Scotia and the amount of capital proposed to be used therein. A corporation seeking a reduction of the fee under this section shall give to the Registrar such statement and information respecting its business and financial position as he may call for and shall verify the same in such manner as he may require. If any such corporation makes default in paying any annual registration fee, that is due and payable by it as aforesaid, such corporation shall be liable to a penalty of double the amount of the annual registration fee. Every corporation shall pay in addition the following fees: For filing appointment of agent or change of name $ 2 00 For filing document or other notice other than the annual statement 2 00 For registering a change in name of a Dominion or For- eign Corporation 10 00 Saskatchewan. ANNUAL FEES. (Section 18, Corporations Taxation Act). Companies with an authorized capital not exceeding $25,000 $ 10 00 Companies with an authorized capital exceeding $25,000, but not exceeding $50,000 20 00 Companies with an authorized capital exceeding $50,000, but not exceeding $100,000 40 00 Companies with an authorized capital exceeding $100,000, but not exceeding $250,000 50 00 Companies with an authorized capital exceeding $250,000, twenty cents for every $1,000 of capital, with a maxi- mum fee of 500 00 H.C. 24 370 HANDBOOK ON COMPANIES. LICENSE FEES. (Section 27, Companies Act). For every annual license for companies whose authorized capital does not exceed $50,000 $ 5 00 For every annual license for companies whose authorized capital exceeds $50,000 10 00 For every annual license for mutual insurance companies 10 00 REGISTRATION FEES. (Section 30, Companies Act). For registration of a company whose nominal capital does not exceed $20,000 $40 00 For registration of a company whose nominal capital exceeds $20,000, the above fee of 40 00 with the following additional fees regulated accord- ing to the amount of capital, that is to say: For every $5,000 or part of $5,000 after the first $20,000 up to $100,000 5 00 For every $10,000 or part of $10,000 after the first $100,000 up to $500,000 3 00 For every $100,000 or part of $100,000 thereafter 20 00 For registration of mutual companies and companies in- corporated under section 22 of The Companies Act. . 20 00 The fee for registering a company which did not become registered at the time when it commenced business in Saskat- chewan shall be the sum total of the registration fee and the amount of Annual License and Annual Fees which would have been payable had the company become registered when it first commenced business in the province. NOTE. Sub-section 2 of section 30, as amended 1922, provides as follows: "Where an extra-provincial company having nomi- nal capital exceeding $2,000,000 proves to the satisfaction of the registrar that it is actually carrying on an established business beyond Saskatchewan in which at least fifty per cent, of its subscribed capital is invested, the fee payable on registration shall not exceed $540." MISCELLANEOUS. (Section 30, Companies Act). For registration of any increase of capital made after the first registration of the company, the same addi- tional fees as would have been payable if such Increased capital had formed part of the original capital at the time these regulations came into force : TABLE OP FEES. 371 For registering change of name of company $ 5 00 For making a record of any fact authorized or required to be recorded hy the registrar 1 00 For each search 25 For each abstract or copy of any document the sum of 10 cents for each 100 words or part of 100 words. For restoring name of company to register (in addition to all fees and taxes payable) 10 00 January, 1921. NOTE. The term " proposed or authorized capital " includes any increase thereto provided for in the company's memorandum of association or charter, and where the memorandum or charter includes power to increase at any time the amount of the pro- posed or authorized capital the registration fee shall be levied on the maximum amount stated in the memorandum or charter. Alberta. THE COMPANIES ORDINANCE. The following, known as Table B, is the table of fees to be paid to the Registrar by a company having a capital divided into shares : For registration of a company whose nominal capital does not exceed $20,000 $50 00 For registration of a company whose nominal capital exceeds $20,000, the above fee of $50 with the follow- ing additional fees regulated according to the amount of capital, that is to say: For every $5,000 or part of $5,000 after the first $20,000 up to $100,000 5 00 For every $10,000 or part of $10,000 after the first $100,000 up to $500,000 3 00 For ever $100,000 or part of $100,000 thereafter 20 00 For registration of any increase of capital made after the first registration of the company, the same fees as would have been payable if such increased capital had formed part of the original capital at the time of registration For registering change of name of a company 5 00 For registration of any existing company, except such companies as are by this Ordinance exempted from payment of fees in respect of registration under this Ordinance, the same fee as is charged for registering a new company. For registering any document hereby required or auth- orized to be registered other than the memorandum of association * M 372 HANDBOOK ON COMPANIES. For making a record of any fact hereby authorized or required to be recorded by the registrar of a fee of .. 1 00 Fees for each search 25 Fee for publishing the certificate of incorporation in The Alberta Gazette 5 00 Fee for filing articles of association 200 FOREIGN COMPANIES ORDINANCE, 1903. The fees payable on registration, by extra-provincial com- panies, other than Dominion companies, are as follows: Companies with capital not exceeding $100,000 $ 75 00 Companies with capital exceeding $100,000, but not $200,000 125 00 Companies with capital exceeding $200,000, but not $500,000 300 00 Companies with capital exceeding $&00,000, but not $1,000,000 450 00 Companies with capital exceeding $1,000,000, but not $3,000,000 500 00 For every additional $1,000,000 or part thereof over $3,000,000, an additional $100. NOTE: Add $5 for advertising. British Columbia. THIRD SCHEDULE. (Section 257.) FEES. (a) Incorporation and Registration. 1 . For incorporation of a company whose nominal share capital does not exceed $10,000, a fee of $ 25 00 2 . For incorporation of a company whose nominal share capital exceeds $10,000, the above fee of $25, with the following additional fees, regulated according to the amount of nominal share capital, that is to say: For every $5,000 of nominal share capital, or part of $5,000, after the first $10,000, up to $25,000 $5 00 For every $5,000 of nominal share capital, or part of $5,000, after the first $25,000, up to $500,000 2 50 For every $5,000 of nominal share capital, or part of $5,000, after the first $500,000. . 1 25 TABLE OF FEES. 373 3. For incorporation of a company not having a share capital whose number of members, as stated in the articles, does not exceed 20 25 00 4. For incorporation of a company not having a share capital whose number of members, as stated in the articles, exceeds 20, but does not exceed 100 50 00 5. For incorporation of a company not having a share capital whose number of members, as stated in the articles, exceeds 100, the above fee of $50, with an additional $5 for every 50 members or less number than 50 members after the first 100. 6. For registration of any extra-provincial company having a share capital, the same fees as are payable for incorporation under paragraphs 1 and 2. Provided that where the capital or part of the capital of the company is divided into shares having no nominal or par value, the fee for registration shall be calculated according to the sworn value of the gross assets of the company, after deducting there- from the amount (if any) due by the company in respect of mortgages or debentures. 7. For registration of an extra-provincial company not having a share capital, the same fees as are payable for incorporation under paragraphs 3, 4 and 5. 8. In the case of an extra-provincial company having a nominal share capital exceeding $450,000, or assets as aforesaid exceeding $450,000, or more than 1,600 members, as the case may be, and which proves to the satisfaction of the Registrar that it is actually carrying on an established business beyond the Pro- vince in which at least 50 per cent, of its subscribed capital is invested, there shall be accepted in commu- tation of the fees prescribed by paragraphs 6 and 7, a fee of 250 00 (6) Increase of Capital or Members. 9 . For an increase of share capital authorized after the incorporation of a company, the same fees per $5,000 or part of $5,000 as would have been payable under paragraph 2 if such increased capital had formed part of the original capital at the time of incorpora- tion. 10. For any increase in the number of members auth- orized after the incorporation of a company not having a share capital, the same fees as would have been payable under paragraph 4 or 5, as the case 374 HANDBOOK ON COMPANIES. may be, if such increased number had been the num- ber of members originally stated in the articles. 11. For any increase of share capital or assets as afore- said, as the case may be, after registration of an extra-provincial company, the same fees as are pay- able for an increase of share capital under para- graph 9. 12. For any increase in the number of members made by an extra-provincial company not having a share capital after registration, the same fees as are pay- able for an increase of members under paragraph 10. 13. The provisions of paragraph 8 shall apply to any increase under paragraph 11 or 12. (c) Conversion. 14. For conversion of a specially limited company into a company limited by shares 2 50 15. For conversion of a company limited by shares into a specially limited company 2 50 16. For conversion of a company specially incorporated in pursuance of Part VI. of the " Water Clauses Con- solidation Act, 1897," into a company limited by shares 10 00 17. For conversion of a company incorporated by special Act into a company limited by shares 10 00 18. For conversion of a private company into a public company 5 00 19. For conversion of a public company into a private company 2 50 (d) Miscellaneous. 20. For registering or filing any document other than the memorandum 1 00 21. For making a record of any fact hereby authorized or required to be recorded by the Registrar 100 22. For application by an extra-provincial company for registration in lieu of filing fees 2 50 23 . For registration of a mortgage 1 00 24. For restoration of a company or extra-provincial company struck off the register, in addition to filing fees 10 00 25 . For each and every search 25 26. Publication in the Gazette, according to the scale of charges as defined in Schedule A of the " Statutes and Journals Act." APPENDIX FORMS FORM 1 (p. 19). Consent to Act as Director of Limitod. To the Registrar of Joint Stock Companies. I, the undersigned, hereby testify my consent to act as director of Limited, pursuant to section (number) of (specify Act). Signature Address Description Dated at this day of , 192 . FORM 2 (P. 19). Contract by Directors to take and pay for Qualifica- tion Shares in Limited. To the Registrar of Joint Stock Companies. We, the undersigned, having consented to act as directors of Limited, do hereby agree to take from the said company and pay for shares of each, being the prescribed number of qualification shares for the office of director of the said company. Witness Signature Address Description Dated at this day of , 192 . FORM 3 (P. 24). Consent to Act as Director (Dominion Act). To the Secretary of State of Canada: I, the undersigned, hereby testify my consent to act. as director of Limited, pursuant to section 75, sub- 376 HANDBOOK ON COMPANIES. section 2, of the Companies Act, Revised Statutes of Canada, 1906, chapter 79, and Amending Acts. Witness Signature Address Description Dated at this day of , 192 . FORM 4 (P. 24). Consent to take and pay for Qualification Shares (Dominion Act). To the Secretary of State of Canada: I, the undersigned, having consented to act as director of Limited, do hereby agree to take from the said company and pay for one share of a par value of $ , being the prescribed number of qualification shares for the office of director of the company. Witness Signature Address Description Dated at this day of , 192 . FORMS (P. 26). Notice of Situation of Registered Office. The Company, Limited. To the Registrar of Companies: - Notice is hereby given that the registered office of The Company, Limited, is situate at in Province of Dated this day of 192 . Secretary. FORM 6 (PP. 27, 108). Agreement for Sale of Business to a Company. Memorandum of agreement made this day of , 192 , between A.B., of (here- inafter called the Vendor), of the one part, and Limited hereinafter called the Company) of the other part. FORMS. 377 Whereas the Vendor is carrying on the business of manu- facturer of under the firm name of "A. B. & Com- pany "at ; And whereas the Company was, on the day of , 192 , duly incorporated with authorized capital of $40,000, divided into 400 shares of $100 each; Now it is hereby agreed as follows: 1. The Vendor sells and the Company purchases: (a) The goodwill of the said business and the exclusive right to use the name of A.B. as part of the name of the Company. (6) All the lands, buildings, plant, machinery, office furni- ture, stock-in-trade, chattels, goods, effects and things in or about the premises of the Vendor and used in connection with the said business. (c) The moneys, bills, notes and other negotiable instru- ments, book and other debts of the Vendor in the said business and all the Vendor's rights, claims and securities in respect of the said debts, and the benefit of all contracts and engagements to which the Vendor is entitled in connection with the said business. (d) All other property and assets, if any, of the Vendor in connection with the said business. 2. As part of the consideration for the said sale, the Com- pany shall undertake, pay, satisfy, discharge, perform and fulfill all debts, liabilities, contracts and engagements of the Vendor in connection with the said business, and shall indemnify the Vendor, his heirs, executors and administrators against all actions, proceedings, claims and demands in respect thereof. 3. As a further part of the consideration for the said sale, the Company shall allot to the Vendor or his nominees 150 fully paid shares of the capital of the Company of $100 each. 4. The said sale shall take effect as from the date hereof and the vendor shall from the date hereof be deemed to be carrying on the said business on behalf of the Company and shall account to the Company and be indemnified accordingly. 5. The Company shall pay all costs, charges and expenses incurred by the Vendor or the Company of and incidental to the incorporation and organization of the company and negotiations preliminary thereto, including the preparation and completion Of this agreement and carrying of same into effect. 6. The said sale shall be completed on or before the day of next, when the said shares shall be allotted and share certificates issued. 7. These presents are intended to and shall operate as an actual transfer of the property hereby agreed to be sold, but the Vendor shall do, sign and execute all deeds, documents, matters 378 HANDBOOK ON COMPANIES. and things which are convenient or necessary or which counsel may advise, for more completely and effectually carrying out th intention of these presents and for vesting in the Company the property comprised in this agreement. [7. This agreement is conditional on the Company becoming entitled to commence business, and in the event of its not becoming so entitled before the day of next, either party by notice in writing to the other may rescind this agreement.] In witness whereof the Vendor has hereunto set his hand and seal and the Company has executed this agreement under its corporate seal, the day and year first above written. Limited. (Corporate seal) Secretary. President. FORM 7 (P. 85). By-law creating Preference Shares. Limited. By-law No. Creating $200,000 Par Value 8 Per Cent, Cumulative Preference Shares. Whereas it is deemed advisable that 2,000 shares of the capital stock of the Company of the par value of $100 each, aggregating $200,000 par value, be created and issued as prefer- ence shares with the rights and limitations thereto attaching as hereinafter set forth; NOW THEREFORE BE IT ENACTED 8S a by-law Of , Limited, that 2,000 shares of the capital stock of the Company of the par value of $100 each, aggregating $200,000 par value, be and the same are hereby declared to be and are created prefer- ence shares and the same shall be Issued and allotted by the directors from time to time as they may determine and the allottees and any subsequent holders thereof shall respectively be entitled to receive the dividends and shall hold the said shares upon the terms and conditions and with the rights, privileges, preferences, restrictions and qualifications thereof following: FOEMS. 379 1. The holders of the said preference shares shall be entitled to and shall receive half-yearly on the first days of January and July in each year as and when declared by the Board of Directors cumulative dividends on the amount paid up on their shares at the rate of eight per cent, per annum out of the surplus profits of the Company in preference to and with priority over any payment of dividend upon the common shares of the Company. 2. Except as otherwise expressly by law or herein provided, the holders of the said preference shares shall have no right to vote for the election of directors or for any other purpose or to receive notice of any meeting of shareholders so long as the Company shall not be in default in payment of dividend as hereinafter provided. Anything herein contained to the con- trary notwithstanding in case and whenever the Company shall remain in default in payment of the dividend on the said pre- ference shares for a period of sixty days, the holders of the said preference shares shall be entitled to receive notice of all meet- ings and as a class shall have equal voting power with the holders of the common shares as a class while such default continues. 3. In the event of the voluntary liquidation, dissolution or winding-up of the Company or upon any voluntary distribution of the capital assets the holders of the said preference shares (before any distribution is made to the holders of common shares) shall be entitled to receive an amount equal to 110 per cent, of the par value thereof and any unpaid dividends accumu- lated thereon and no more; and on any other distribution of capital assets the holders of the said preference shares (before any distribution is made to the holders of common shares) shall be entitled to receive an amount equal to 100 per cent, of the par value thereof and unpaid dividends accumulated thereon and no more. The holders of the said preference shares shall have no pre-emptive right in or right to subscribe for any additional shares of any class which may hereafter be issued by the Company. 4. The Company shall not, so long as any of the preference shares hereby created shall remain outstanding, except with the consent and approval of the holders of at least 60 per cent, in value of the said preference shares then outstanding given at a meeting specially called for the purpose: (a) Authorize or create any other or additional preference shares ranking in priority to or on a parity with the preference shares hereby created; (ft) Create any mortgage, lien or encumbrance of any kind on any part of the real estate, machinery or fixed assets of the Company [or authorize or issue any bond debenture or other 380 HANDBOOK ON COMPANIES. evidence of indebtedness secured thereon]. This prohibition shall not be deemed to prevent nor shall it operate to prevent the giving of purchase money, mortgages or other purchase money, liens on property to be hereafter acquired by the Company nor the acquisition of property subject to mortgages, liens or encum- brances thereon then existing, nor the giving of mortgages, charges, assignments, liens or other securities created in favor of bankers in the ordinary course of the Company's business and for the purpose of carrying on the same; (c) Sell or otherwise dispose of by conveyance, transfer, lease or otherwise the whole [or any material portion] of the Company's assets and undertaking unless the proceeds of such sale or disposal shall be sufficient to enable the Company to pay, and unless the Company shall pay out of such proceeds all the holders of the said preference shares then outstanding 110 per cent, of par plus any unpaid dividends accumulated thereon. 5. Subject to confirmation by supplementary letters patent the directors of the Company may from time to time pass a by-law whereby the terms hereof and of the foregoing paragraphs may be altered, amended or repealed or the application thereof suspended in any particular case and changes made in the rights, preferences, privileges, restrictions and qualifications attaching to the said preference shares, but such by-law shall be confirmed by the vote at a meeting specially called for the purpose of the holders of at least 60 per cent, in value of the preference shares hereby created and then outstanding, and of at least 60 per cent, in value of the common shares then outstanding [provided that the right of any holder of the said preference shares to receive cumulative preferential dividends at the rate aforesaid and to payment on any distribution of capital assets upon the terms aforesaid shall not be taken away without his consent]. Passed by the directors this day of , 192 . Witness the corporate seal of the Company. (Corporate seal). Secretary. President. Confirmed by the shareholders this day of , 192 . Witness the corporate seal of the Company. (Corporate seal). Secretary. President. FORMS. 381 FORMS (PP. 92, 105). Preference Share Certificate (Companies Incor- porated by Letters Patent). No Shareg. The Company, Limited. Incorporated under the Companies Act. Authorized share capital $400,000, divided into 2,000 eight per cent, cumulative preference shares of $100 each and 2,000 common shares of $100 each. This is to certify that is the owner of fully paid and non-assessable eight per cent, cumu- lative preference shares of the Company, Limited, of the par value of one hundred dollars each, transfer- able in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. The rights, preferences, privileges and restrictions or limita- tions, respectively attaching to the eight per cent, cumulative preference shares are set forth in full in the statement on the reverse of this Certificate, and the holder hereof, by accepting this Certificate, assents to and is bound by the provisions set forth in the said statement. (1) Witness the seal of the said Company and the signature of its duly authorized officers this (date of issuance). (Corporate seal). The Company, Limited. J Secretary. President. (1) If there are a transfer agent and a registrar, add: " This certificate is not valid until countersigned by the transfer agent and registrar;" and, in the margin, " Registered, The Corporation, Registrar, by Transfer Officer." " Countersigned, The Corporation, Limited, Transfer Agent, by Transfer Officer." 382 HANDBOOK ON COMPANIES. FORM 9 (PP. 92, 105). Preference Share Certificate (Companies Incor- porated by Registration). No Shares. The Company, Limited. Incorporated under the Companies Act. Authorized share capital, $400,000, divided into 2,000 eight per cent, cumulative preference shares of $100 each and 2,000 common shares of $100 each. This is to certify that is the holder of fully paid and non-assessable eight per cent, cumulative prefer- ence shares of the Company, Limited, of the par value of one hundred dollars each, numbered to inclusive, transferable in person or by duly authorized attorney upon surrender of this certificate properly endorsed. Witness, etc. FORM 10 (P. 94). No Par Value Share Certificate. No. Shares. Limited. Incorporated under the Dominion Companies Act. Capital stock, 60,000 shares, without nominal or par value. This is to certify that is the owner of fully paid and non-assessable shares in the capital stock of , Limited, transferable only on the books of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. In witness whereof the said Company has caused its cor- porate seal to be affixed hereto and this certificate to be signed by its President and Secretary this day of 192 . For Limited. (Corporate seal). Secretary. President. FORMS. 383 FORM 11 (P. 100). Application for Shares. To Limited, and the directors thereof. I hand you herewith the sum of $100, being a deposit of $10 per share on 10 eight per cent, cumulative preference shares of $100 each in the above named company, and request you to allot to me that number of said shares upon the terms of the company's prospectus dated May 23rd, 1921, and I hereby agree to accept the same or any smaller number that may be allotted to me, and to pay the further instalments as provided by and at the dates specified in the said prospectus, and I authorize you to register me as the holder of the said shares. Ordinary signature. Name in full. Address. Description. Date, , 192 . Witness. FORM 12 (P. 100). Receipt. Received from the sum of $ , being a deposit of $10 per shares on application for eight per cent, cumulative preference shares in the capital of Limited. Dated at Toronto this day of 192 . For Limited. Treasurer. FORM 13 (PP. 100, 102'). Letter of Allotment. Limited. (Address). To Sir: In reply to your application for shares, I am instructed to inform you that the directors have allotted you 10 shares of 384 HANDBOOK ON COMPANIES. $100 each in this Company. The total amount payable on appli- cation and allotment is $500. You have paid on application $100, leaving still to be paid by you $400, which sum I have to request that you will remit to the Company at the above address on or before May 22nd next. Secretary. FORM 14 (P. 102). Resolution of Directors Allotting Shares. Be it resolved that shares be allotted to the persons under- mentioned, in the amounts set opposite each respective name: Name of allottee. Number of shares. *Denoting numbers. A.B. 10 1-10 C.D. 40 11-50 &c. * This column to be used in provinces where shares required to be numbered. And that the Secretary is directed to give notice of allotment to each of the above named persons. FORM 15 (P. 104). Return of Allotments. The Company, Limited. Made pursuant to section of the (specify Act). *Number of the shares allotted payable in cash. Number of the shares allotted payable in cash. *Nominal amount of the shares so allotted $ Nominal amount of the shares so allotted .... $ *Amount paid or due and payable on each such share .$ Amount paid or due and payable on each such share $ Number of the shares allotted for a considera- tion other than cash $ Number of the shares allotted for a considera- tion other than cash $ Nominal amount of the shares so allotted $ Nominal amount of the shares so allotted $ Amount to be treated as paid on each such share $ * Distinguish between different classes of shares, e.g., prefer- ence, common, etc. FORMS. 385 Amount to be treated as paid on each such share $ The consideration for which such (and ) shares have been allotted is as follows: (Here insert short particulars). Names, addresses and descriptions of the allottees. (Here insert particulars in tabular form under headings, date of allotment, full name, address and description of allottee, number of shares allotted with sub-headings for different classes of shares). A contract in writing dated , 192 , constitut- ing the title of the allottee (s) to the allotment of the above shares allotted for a consideration other than cash is filed here- with. Dated this day of , 192 . (Signature) (Relationship to Company) NOTE. In British Columbia, a different form of return, viz., Form 17 in the Schedule to the Act, is required. FORM 16 (P. 105). Common Share Certificate. No Shares. The Company, Limited. Incorporated under the Companies Act. Authorized share capital $500,000, divided into 5,000 shares of $100 each. This is to certify that is the owner of fully paid and non-assessable shares of $100 each of The Company, Limited, transferable only on the books of the Com- pany in person or by attorney on surrender of this certificate properly endorsed. In witness whereof the Company has caused this certificate to be signed by its duly authorized officers and its corporate seal to be hereunto affixed this day of , 192 (Corporate seal) Secretary. President. H.C. 25 386 HANDBOOK ON COMPANIES. FORM 17 (P. 122). Resolution of Directors Making a Call. That a call of $ per share be and the same Is hereby made payable in respect of the amount unpaid on the shares of the Company, and that such call be payable on the day of , 192 , to the Company at the head office, (address). FORM 18 (P. 123). Notice of Call. The Company, Limited. (Address and Date). Sir: I have to notify you that the directors of this Company have made a call upon the shareholders of the Company of $ in respect of each of the shares held by them .Such call is payable to the Company at the head office, (address) on the day of , 192 As the holder of shares the amount payable by you in respect of such call is $ . All cheques should be made payable to the Company, at par, Toronto. In the event of non-payment, the shares in respect of which such call was made will be liable to be forfeited. Yours faithfully, Secretary. To Name and address of shareholder. FORM 19 (P. 124). Notice of Intended Forfeiture. Sir: In my letter of ,192 ,1 gave you notice that at a meeting of the directors held on the day of , 192 , a call was made of $ per share on the holders of shares in this Company in respect of the amounts unpaid thereon. FORMS. 387 I am now instructed to inform you that the directors require you, on or before the day of , 192 . to pay this amount, [together with interest at the rate of six per cent, per annum from the said day of , 192 (the date when the said call became payable), up to the date of payment], to the Company at the head office (address). In the event of non-payment of the said call [and interest] on or before the said day of 192 , at the place aforesaid, the shares in respect of which such call was made will be liable to be forfeited. Yours faithfully, Secretary. To Name and address of shareholder. FORM 20 (P. 124). Eesolution for Forfeiture. That , the holder of shares of $ each [numbered to inclusive] having failed to pay the call of $ per share made , 192 and having failed to comply with the notice served upon him, dated , 192 , the said shares be and the same are hereby forfeited. FORM 21 (P. 129). Form of Transfer Endorsed on Share Certificate. For value received hereby sell, assign and transfer unto , shares of the capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said shares on the books of the within-named Company, with full power of substitution in the premises. Dated , 192 . In the presence of Notice. The signature of the assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement, or any change whatever. 388 HANDBOOK ON COMPANIES. FORM 22 P. (129). Common Form of Transfer of Shares. I, , in consideration of the sum of paid to me by (hereinafter called "the said transferee"), do hereby transfer to the said transferee shares numbered to in the undertaking called , Limited, to hold unto the said transferee, his executors, administrators and assigns, subject to the several conditions on which I held the same at the time of the execu- tion hereof; and I, the transferee, do hereby agree to take the said shares subject to the conditions aforesaid. As witness our hands and seals this day of , 192 . Signed sealed and delivered by the abbove-named in the presence of (seal) Witness : Signature. Address. Occupation. Signed sealed and delivered by the above-named in the presence of (seal) Witness : Signature. Address. Occupation. FORM 23 (PP. 163,168). Notice of Annual Meeting. The Company, Limited. Notice is hereby given that the annual meeting of the share- holders of the above Company will be held at the head office of the Company, No Street, Toronto, on Saturday. June 4th, 1921, at the hour of 12 noon, for the purpose of receiv- ing and considering the annual statement of accounts and balance sheet and the report of the directors and auditors there- on; for the election of directors and other officers; and also for the transaction of any and all business that may come before the meeting. If you are not able to be present, kindly sign and return the enclosed proxy. Dated at Toronto, May 27th, 1921. By order of the Board. Secretary. FORMS. 389 FORM 24 (PP. 165, 168). Notice of Special General Meeting. The Company, Limited. Take notice that a special general meeting of the share- holders of the above Company will be held at Room , Building, in the City of Toronto, on Tuesday, June 14th, 1921, at the hour of 12 o'clock noon, for the purpose of considering and, if approved, confirming with or without modification: 1. By-law No. 5, passed by the directors on the 14th day of April, 1921, increasing the number of directors of the Company from five to seven. 2. By-law No. 6, passed by the directors on the 14th day of April, 1921, authorizing the borrowing of money from the Bank. 3. By-law No. 7, passed by the directors on the 25th day of May, 1921, authorizing the amendment of the trust deed, dated the 1st day of January, 1919, and made between the Company and Trust Company Limited so as to provide (set out briefly the effect of the provisions) and authorizing the execution of a supplemental trust deed pro- viding for such amendment; and further, to transact such other business as may come before the meeting. Dated at Toronto this 1st day of June, 1921. By order of the Board. Secretary. FORM 25 (PP. 166, 168). Notice of Ordinary General Meeting (Companies Incorporated by Registration). The Company, Limited. Notice is hereby given that the Second Ordinary General Meeting of the above Company will be held at the registered office of the Company, No. , Street, Calgary, Alberta, on day the day of . 1921, at o'clock in the noon, for the purpose of receiving and considering the annual statement of accounts and balance sheet and the report of the directors and auditors thereon; for the election of directors; for the appointment of 390 HANDBOOK ON COMPANIES. auditors; to sanction the declaration of a dividend; and to transact the other ordinary business of the Company. Notice is also given that the transfer books and register of members will be closed from the day of to the day of , both days inclusive. Dated this day of , 192 By order of the Board. Secretary. FORM 26 (PP. 168, 179). Unconditional Notice of two Meetings to Pass and Confirm a Special Resolution. The Company, Limited. Notice is hereby given that an extraordinary general meet- ing of the Company will be held at on the day of June, 192 , at o'clock in the noon, when the subjoined resolution will be proposed: (Set out resolution). Notice is hereby also given that an extraordinary general meeting of the Company will be held at on the day of July, 192 , at o'clock in the noon, when a report will be presented of the pro- ceedings at the extraordinary general meeting of the Company to be held on the day of June, 192 , when the above resolution will, if passed by the requisite majority at that meeting, be submitted for confirmation as a special resolution. Should the said resolution not be passed by the requisite majority at the meeting to be held on the day of June, 192 , due notice will be given to the members that the meeting on the day of July, 192 , of which notice is now given, will not be held. Dated this day of , 192 . By order of the Board. Secretary. FORM 27 (PP. 173, 175). Proxy. The Company, Limited. I, t of , a shareholder of The Company, Limited, do hereby appoint of , and either of them, as my proxy, to vote for me and on my FORMS. 391 behalf at the (annual or special as the case may be) general meeting of the Company to be held on the day of , 192 , and at any adjournment thereof. Dated at this day of , 1921. Signature of shareholder. Witness: Signature of witness. FOEM 28 (P. 174). Proxy (Ontario, Form 6). Company, Limited, I, , of , a shareholder of Company, Limited, hereby appoint of (naming the proxy) as my proxy to vote for me and on my behalf at the meeting of the Company, to be held on the day of , 19 , and at any adjournment thereof. Dated this day of , 19 Note (1) Where the appointer is a corporation or an officer of it the necessary changes must be made in the form. (2) Where the instrument is signed by a corporation its common seal must be affixed. FORM 29 (p. 183). By-law for Borrowing Money. BE IT ENACTED as a by-law of the Company, that: 1. The Directors may from time to time borrow money upon the credit of the company; limit or increase the amount to be borrowed; hypothecate, mortgage or pledge the real or personal property of the Company, or both, and give promises and agree- ments to give security to secure any money borrowed for the purposes of the Company; also, may give additional security at any time for any money borrowed or remaining due by the Company.* * Para. 1 may be adapted to follow the wording of the Com- panies Act which applies, e.g. 392 HANDBOOK ON COMPANIES. 2. The Directors may from time to time authorize any direc- tor or directors, officer or officers, employee of the Company, or other person or persons, whether connected with the Company or not, to make arrangements with reference to the money borrowed or to be borrowed as aforesaid, and as to the terms and conditions of the loan thereof, and as to the securities to be given therefor, with power to vary or modify such arrangements, terms and conditions and to give such additional securities for any moneys borrowed or remaining due by the Company as the Directors of the Company may authorize, and generally to manage, transact and settle the borrowing of money by the Company. 3. The Directors may also from time to time authorize any director or directors, officer or officers, employee of the Company or other person or persons, whether connected with the Company or not, to sign, execute and give on behalf of the Company all documents, agreements and promises necessary or desirable for the purposes aforesaid and to draw, make, accept, endorse, exe- cute and issue cheques, promissory notes, bills of exchange, bills of lading and other negotiable or transferable instruments, and the same and all renewals thereof or substitutions therefor so signed shall be binding upon the Company. 4. The powers hereby conferred shall be deemed to be in supplement of and not in substitution for any powers to borrow money for the purposes of the Company possessed by its Directors or officers independently of a Borrowing By-law. Enacted this day of , 192 (Corporate seal President. Secretary. Dominion. 1. The Directors of the Company may from time to time (a) Borrow money upon the credit of the Company; (b) Limit or increase the amount to be borrowed; (c) Issue bonds, debentures, debenture stock or other securities of the Company and pledge or sell the same for such sums and at such prices as may be deemed expedient; (d) Hypothecate, mortgage or pledge the real or personal property of the Company, or both, to secure any such bonds, debentures, debenture stock, or other securities, and any money borrowed for the purposes of the Com- pany. Ontario. 1. The Directors of the Company may from time to time (a) Borrow money; and FORMS. 393 (b) Issue bonds, debentures, debenture stock, both per- petual and terminable, or other securities; (c) Pledge or sell such bonds, debentures or debenture stock, or other securities for such sum and at such prices as may be expedient or be necessary. The Directors may charge, hypothecate, mortgage or pledge any or all of the real or personal property, including book debts and unpaid calls, rights and powers, undertaking and franchises, of the Company to secure any bonds, debentures, debenture stock or other securities, or any liability of the Company. FORM 30 (p. 184). Borrowing Resolution. Be it resolved: That the members of the Company in general meeting assembled hereby sanction the exercise by the Company of all and every power to borrow money and to secure repayment there- of which is conferred upon it by The Companies Act. Without limiting the generality of the foregoing provision, Be it further resolved, that: 1, 2, 3, 4 (paragraphs 1-4 of Form 29). FORM 31 (PP. 183, 184). Banking and Signing Officers' Resolution. , Limited. Resolved : 1. That (specify officers, e.g., the President or Vice-President and Secretary or Treasurer) be and hereby authorized on behalf of the Company, as moneys may be required by the Company, to apply to any person, persons, firm, company, bank or banker, to advance the same on the Company's credit; to make arrangements as to the terms and conditions of the loan thereof and as to the securities to be given therefor; and from time to time to vary or modify such arrangements, terms and conditions; that any of the above hereby empowered on behalf of the Company to sign and deliver from time to time for the moneys so borrowed such agreements, securi- ties, promises to give security, hypothecations and pledges as may be required by lenders of such moneys, also such additional 394 HANDBOOK ON COMPANIES. securities by way of mortgage as the Directors may from time to time authorize. 2. That (specify officers, e.g., the President or Vice-president and Secretary or Treasurer) be and hereby authorized on behalf of the Company to draw, accept, sign, make and agree to pay all or any bills of exchange, promissory notes, cheques and orders for the payment of money; also to execute either special or general waivers of presentment, protest and notice of dishonor of any and all cheques, bills or notes now or hereafter discounted or deposited for any purpose by the Company with any bank or banker, or to which they are parties, or in which they are in any way interested; also to arrange, settle, balance and certify all books and accounts between the Company and its bankers and to receive all paid cheques and vouchers and to sign the form of settlement of balances and release, required by the Company's bankers. 3. That (specify officers, e.g., the President or Vice-President or Secretary or Treasurer) be and hereby authorized on behalf of the Company to negotiate with, deposit with or transfer to the Company's bankers (but for credit of the Com- pany's account only), all or any bills of exchange, promissory notes, cheques or orders for the payment of money and other negotiable paper, and for the said purpose to endorse the same on behalf of the Company. 4. That all documents, securities and other negotiable instru- ments, signed, made, drawn, accepted or endorsed as aforesaid shall be valid and binding upon the Company. 5. That the Company's bankers be furnished with a list of the names of the Directors, Secretary and other officers of the Company authorized to sign for it, together with specimens of their signatures, and that the Company's bankers be from time to time informed in writing of any change of such officers. 6. That this resolution be communicated to the Company's bankers and remain in force until notice in writing to the con- trary is given to them and receipt, of such notice acknowledged by it. FORM 32 (P. 215). By-law Changing Head Office. The Company, Limited. By-law No. Whereas the head office of The Company, Limited, now is at the of , in the County of and Province of FORMS. 395 And whereas it has been deemed expedient that the same should be changed to the of in the said Province; Therefore The Company, Limited, enacts as follows: 1. That the head office of The Company, Limited, be and the same is hereby changed from the of , to the of 2. That this by-law be submitted with all due despatch for the sanction of the shareholders of the Company at a general meeting thereof to be called for considering the same. Enacted this day of , 192 (Corporate seal) President. Secretary. NOTE. If the Company is incorporated under the Dominion or New Brunswick Act read " chief place of business in Can- ada " for " head office " in the above form. FORM 33 (P. 249). Notice of Increase of Capital. The Company, Limited. To the Registrar of Joint Stock Companies. The above-named Company hereby gives you notice, in ac- cordance with section (specify number) of the (specify, Act) that (1) by a resolution of the Company dated the day of 192 , the nominal capital of the company has been increased from $100,000, divided into 1,000 shares of $100 each, to $200,000, by the creation of 1,000 new shares of $100 each. Dated at , this day of , 192 . Secretary. (1) If the capital has been increased by special resolution, read "by special resolution of the company duly passed and confirmed at extraordinary general meetings thereof held respec- tively on the day of and the day of , 192 INDEX ACTION, by subscriber against promoters or directors, 54-50. ADMINISTRATORS transfers by, 132, 133. See TRANSFER OF SHAKES. AGENTS acting within apparent authority, 201. authority of, when contracting for company, 201. personal liability of, 203, 204. ratification of contracts made by, 203. See further, CONTBACTS. AGREEMENTS underwriting of shares, 74, 75. See further, VENDOBS, CON- TRACTS, DIRECTORS. ALLOTMENT OF SHARES cancellation of, 126, 127. definition of, 102. duties of directors in, 102. notice of, constitutes acceptance of offer to take shares, 99. form of, 383. resolution of directors for, 102. restrictions on, 22, 29, 34. British Columbia, 33, 40. Dominion, 29. Manitoba, 29. none in Quebec, New Brunswick, Nova Scotia, 29, 34. Ontario, Saskatchewan, Alberta, 30-33, 276, 277. private company (Ontario) exempt, 33, 76. return of, 103, 104. voidable if improper, 31. ALTERATION OF MEMORANDUM alteration of objects, 247, 248. cancellation of unissued capital, 251. change of head office, 216. change of name, 254, 255. consolidation of shares, 250, 251. decrease of capital, 251. modes of, 240. general provisions respecting, 247. increase of capital, 249. fees, 355 ff. form of resolution for, 249. notice of resolution, 249. ubdivision of shares, statutory provisions respecting, 250. 398 INDEX. AMALGAMATION methods of 262, 263. under statute, 264. ANNUAL MEETING. See MEETINGS. ANNUAL RETURNS. See RETURNS. APPLICATION FOR INCORPORATION. See INCORPORATION. APPLICATION FOR SHARES, 99, 100. See SHARES. ARTICLES OF ASSOCIATION filing of, 18. signature of, 18. preferable to statutory regulations, 17, 18. ASSETS, distribution of. See DIVIDENDS, WINDING-UP. AUDITORS appointment of, 23, 208. certificate of, 209, 210. directors or officers may not be, 208. duties of, 209. remuneration of, 23, 208. statutory provisions respecting, 210. BALANCE SHEET, 163. See AUDITORS. BANKRUPTCY. See WINDING-UP. BANKS, requirements of, respecting borrowing, 183. BILLS, NOTES AND CHEQUES name with word " Limited " must appear on, 204. BLUE SKY LAWS advertising, when unlawful, 282. agent for sale of shares, license of, 281. duties of, 281. annual returns, 282. British Columbia, extra-provincial companies, 284. mining companies, 285. certain acts not unlawful, Alberta, 278. Manitoba, 277. Saskatchewan, 278. certificate, application for, 279, 280. renewal of (Alberta), 281. revocation of, 281. special, 282. investigation, power of, 2l82. Manitoba, Saskatchewan, Alberta, British Columbia, 276-286. penalties, 283. Quebec, extra-provincial mining companies operating in, 283. securities excepted, Alberta, 277. INDEX. 399 BLUE SKY L>A.\yS Continued. securities excepted, Manitoba, 276. Saskatchewan, 276. BONDHOLDERS. See BONDS. BOND MORTGAGE, 189, 190. See BONDS. BONDS definition of, 189. enforcement of security, 191. floating charge, 190. holder of, compared with shareholder, 190. modification of rights of bondholders, 261, 262. payable on contingency, 190. registration of, 190. tax on transfer of, 190, 134-138. trust deed to secure, 189. modification of rights under, 191, 192. remedies under, 191. when to be registered as chattel mortgage, 189. BOOKS inspection of, by shareholders and directors, 219, 222. should be kept, 29, 217. at head office, 213, 219. statutory requirements, 217-224. register of debenture holders, 223. register of directors, 218, 222. register of members, 220, 223. inspection and rectification of, 220, 221. register of mortgages, 198, 222. register of transfers, 218. share certificate book, 218. share ledger, 218, 222. BORROWING banks, requirements, 183. bonds, 188-192. See BONDS. by-law respecting, 21. forms of, 391, 393. lender, precautions to be observed by, 185-188. limitations on, 185. modes of, 182. signing officers, 183. specially limited mining companies, 185. statutory provisions regarding, 182, 183, 184. BUSINESS carrying on, with less than minimum number of shareholders, 274. commencement of. See COMMENCEMENT OF BUSINESS. BY-LAWS authorizing borrowing, 21, 185. irregularity of, 186. 400 INDEX. BY-LAWS Continued. authorizing holding of shares in other companies, 21. authorizing vendors' agreements, 27. confirmation of, by shareholders, 163, 179-181. directors, power of to pass, 154. of letters patent companies, 201. statutory provisions cannot be overridden by, 162. CALLS confirmation of defective, 122. directors in making, must follow Act or charter, 121. enforcement of, 123. action for amount of, 125. forfeiture of shares, 123. effect of, 124. notice of, 386. provisions in various jurisdictions, 125. rescission of, 125. resolution for, 387. sale of shares, 113, 125. fixed instalments not deemed to be, 124. form of resolution, 386. made on resolution of directors, 122. must fall equally on all shareholders, 122. notice of, 122. payment in advance of (Dominion. Quebec, New Brunswick), 123. provisions in various jurisdictions, 122. unpaid, interest on, 123. CANCELLATION OF SHARES, 126, 127. CAPACITY. See POWERS. CAPITAL amount of, how fixed by promoters, 61. authorized, distinguished from " issued," " allotted " and " paid up," 82. decrease of, 82, 240. liability of shareholders subsequent to, 242. modes of, 240, 241. New Brunswick, Ontario, Dominion, 242. Quebec, 243. increase of, 82, 239, 240. Dominion, Quebec, Manitoba, 239. Ontario, New Brunswick, 240. proposed amount of, must be stated in application for incorpora- tion, 6. in memorandum of association, 15. CERTIFICATE OF INCORPORATION, 4, 14. CERTIFICATE, SHARE. See SHABE CERTIFICATES. CHAIRMAN. See PBESIDENT. INDEX. 401 CHANGE OF NAME by order-in-council upon petition, Manitoba, 252. Ontario, 253, 254. ' by Registrar, upon special resolution, Alberta, 255. British Columbia, 255, 256. Saskatchewan, 255. by special resolution, Nova Scotia, 254. by supplementary letters patent, 252. Dominion, Quebec, New Brunswick, 244, 252. fees, 355 ff. CHARGE, FLOATING. See BONDS. CHARTER. See SUBBENDEB OF CHABTEB. CHEQUES, 204. CHIEF PLACE OF BUSINESS See HEAD OFFICE. COMMENCEMENT OF BUSINESS restrictions on, 22, 29, 34. Alberta, 39. apply in Ontario only to " prospectus companies," 35-38, 79. British Columbia, 39-43. no par value share companies (Dominion, Quebec, New Brunswick), 35, 95. proportion of capital required to be paid up, 34. (Dominion, Quebec, Manitoba). need not be in cash, 34. Saskatchewan, 38. COMMISSION, 70-74. See PBOSPECTUS. COMPANY advantages enjoyed by, 1, 2. distinguished from partnership, 1. measure of shareholder's liability, 1. See SHABEHOIDEBS, MIN- ING COMPANIES. CONDITIONAL SUBSCRIPTION, 100. See SHABES. CONSOLIDATION OF SHARES, 239. See SHABES. CONTRACTS agents, power of, to make, 201, 203. bills, notes and cheques, 204. directors, power of, to make, 200. drafts, 204, 205. made before company entitled to commence business, 34, 203. officers, power of, to make, 200. ratification of, 203. H.C. 26 402 INDEX. CONTRACTS Continued. seal, when necessary in making, 201, 202. statutory provisions, 202. (See further under SEAL). signature of, 204. bills, notes and cheques, 204, 205. by attorney, 205. CREDITORS. See WINDING-ITP. DEBENTURE, 188, 189. See BONDS. DEFUNCT COMPANIES Dominion, Ontario, 269, 270. failure to make returns for three years, 269. DIRECTORS agreement to take qualification shares, 375. allotment, duties in respect of, 102. by-laws, power of, to pass, 154. consent of, to act (Saskatchewan, Alberta, British Columbia), 18. Dominion, 23. forms of consent, 375. contracts, power of, to make, 200. disclosure of interest in sale to company, 28, 52, 157. disqualification of, 149. dividends, wrongful declaration of, by, 158, 226. election of, 146. failure to elect, 147. fiduciary relationship of, 156. liable to repay money subscribed for stock if statutory provisions not complied with, 31, 32. liable when business is improperly commenced, 34, 95. (Dominion, Quebec), misfeasance of. See WINDING-UP. meetings of, 152, 153. voting at, 153. negligence of, 157. number of, 145, 146, 147. powers of, 154-156. prospectus, misstatements in, 56. prospectus, restrictions on naming, in, 18. provisional petitioners to be, 20. duties of, 20. qualification of, 22, 148, 149. quorum of, fixed at less than majority, 9. removal of, 149. remuneration of, 150-152. resolutions of, 152. retirement of, 149. return of allotments, duties in respect of, 104. secret profits forbidden, 156. transfer of shares, duties of, respecting, 129. vacancies, 147. INDEX. 403 DIRECTORS Continued. validity of informal acts of, 152. wages, for unpaid, liability of, 158. DISCOUNT, issue of shares and bonds at, 71. DISTRIBUTION OF ASSETS. See DIVIDENDS, WINDING-UP. DIVIDENDS declaration of, 226. based on report of officers, 227. distribution of assets in specie, 234. Ontario, 234. Quebec, 235. Nova Scotia, 235, 248. duties of directors respecting, 226, 227, 228. shareholders of each class to be treated alike, 228. increase of capital to pay, 231, 239, 249. interest on share capital (Nova Scotia, British Columbia), 227. notice of declaration, 229. on no par value shares, 95. payable in cash, 231. or in stock, 231. Ontario, Dominion, Quebec, 232. payable rateably on number of shares held, 230, 231. payment of, where company's property is of wasting nature, 227, 228. procedure in declaring, 228, 229, 230. profits available for, 227. reserve fund, 232. Dominion Income Tax, 233. shareholders exempt from normal tax, 233. stock dividend under, 233. rate of, on preference shares, 92, 105. resolution declaring, forms of, 229. statutory provisions respecting, 226. stock dividends, how payable where no express provision, 232. transfer books, closing of, 230. ELECTIONS. See DIRECTORS, MEETINGS. EXECUTOR. See TRANSFER OF SHARES, WINDING-UP. EXTRA-PROVINCIAL COMPANIES application for license or registration, Alberta, 293. British Columbia, 293. Manitoba, 291. New Brunswick, 288. Nova Scotia, 288. Ontario, 290. Prince Edward Island, 289. Quebec, 289. Saskatchewan, 292. 404 INDEX. EXTRA-PROVINCIAL COMPANIES Continued. holding of land by, 294. Alberta, 296. British Columbia, 296. Manitoba, 295. New Brunswick, 297. Ontario, 294. Quebec, 296. Saskatchewan, 295. license, where required, 287. registration, where required, 287. FEES Alberta, 371, 372. British Columbia, 372-374. Dominion, 355-357. Manitoba, 364, 365. New Brunswick, 365, 366. Nova Scotia, 366-368. Ontario, 357-361. Quebec, 362-364. Saskatchewan, 369-371. FILING RETURNS. See RETURNS AND NOTICES. FLOATING CHARGE. See BONDS. FORFEITURE OF CERTIFICATE OF INCORPORATION Alberta, British Columbia, 269. FORFEITURE OF LETTERS PATENT action by department probably necessary, 268. liability to creditors not affected, 269. when business not commenced within stated period, 268. when charter not used for stated period, 268. FORFEITURE OF SHARES. See SHAKES. FORMS. See INDEX OF FORMS. GENERAL MEETING. See MEETINGS. HEAD OFFICE address of, need not be designated, 211. change of, Dominion, Quebec, 214. 73ew Brunswick, Nova Scotia, Saskatchewan, Alberta, British Columbia, 216. Ontario, Manitoba, 215. notice of situation of, to be published, 23. place of, must be shown in application for incorporation, 6, 15, 211. must be stated in memorandum, 211. INDEX. 405 HEAD OFFICE Continued. statutory provisions, Dominion, Ontario, Quebec, 212. Manitoba, New Brunswick, 213. Nova Scotia, Saskatchewan, Alberta, British Columbia, 214. where advisable to locate, 211. INCORPORATION fees for, must accompany application, 8. mining company, 8, 9. mode of obtaining, 4. by letters patent, 4. by certificate upon filing memorandum of association, 14. petition, in Ontario, 9-13. private company, special clause to be added, 8, 76. specially limited mining companies, 17, 118. where advisable to obtain, 3. INCREASE OF CAPITAL. See CAPITAL. INDOOR MANAGEMENT, 152, 186. INSPECTION. See BOOKS. INSPECTORS appointment of, in various jurisdictions, 275. under Bankruptcy Act, 341. ; INTERNAL MANAGEMENT. See AGENTS, DIBECTOBS, CONTRACTS. LAND, power to acquire, hold. See EXTRA-PROVINCIAL COMPANIES. LETTERS PATENT. See INCORPORATION, SUPPLEMENTARY LETTERS PATENT. LIABILITY of agent. See AGENTS. of directors. See DIRECTORS. of shareholders. See SHAREHOLDERS, SHARES. LICENSE. See BLUE SKY LAWS, EXTRA-PROVINCIAL COMPANIES. LIMITED bills, notes and cheques, use of word on, 204. seal, use of word on, 224. LIQUIDATOR. See WINDING-UP. MANAGER. See OFFICERS. MEETINGS OF SHAREHOLDERS adjournment of, 160, 175, 176. annual, 162-164. business at, 163. form of minutes of, 163. notice of, 163, 388. confirmation of by-laws at, 179-181. extraordinary general, 167. first statutory, 159-162. 406 INDEX. MEETINGS OF SHAREHOLDERS Continued. general powers of, 159. notice of, 167, 160, 387-389. ordinary general, 165. form of notice of, 389. special business at, 166. procedure at, 169-173. proxies, 173-175. forms of, 390, 391. validity of, 175. quorum at, 170. requisition of shareholders, 167. resolutions, extraordinary, 177-179, special, 177-179. special general, 164. form of notice of, 389. voting at, 171, 172. who may summon, 169. MEMORANDUM OF ASSOCIATION declaration of limitation of liability, 15. filing of, 16. forms of, obtainable from Registrar, 14. material to be included in, 15, 16. signature of, 14, 16. subscriber, who may be, 16. MINIMUM SUBSCRIPTION. See PEOSPECTUS. MINING COMPANIES corporate seal of, 224. limitation of shareholders' liability (Manitoba, Quebec), 8, 9. MISREPRESENTATION. See PROSPECTUS, SHAKES. MORTGAGE bond, 189, 190. registration of, 192-199, 219. MORTMAIN, license in (Ontario), 294. NAME OF COMPANY must be free from objection, 5, 15. See CHANGE OF NAME. NOTES, personal liability of agent on, 204. NOTICE OF MEETINGS. See MEETINGS. OBJECTS. See POWEBS. OFFICE. See HEAD OFFICE, REGISTERED OFFICE. OFFICERS auditors. See AUDITORS. INDEX. 407 OFFICERS Continued. manager, appointment of, 205, 206. authority of, 206. president, duties of, 206. secretary, authority of, 207. duties of, 206. treasurer, 208. ORGANIZATION Dominion, Manitoba, Quebec, New Brunswick, 20-24. Nova Scotia, Saskatchewan, Alberta, British Columbia, 26. Ontario, 25. PETITION FOR INCORPORATION fees, 355 ff. forms, 359. matters to be covered in, 9. fixing quorum of directors at less than majority, 9. holding meetings out of jurisdiction, 9. issue of share warrants, 9. payment of commission, 9. .special requirements for certain companies, co-operative, 12. public utility, 13. telephone, 14. POWERS change of, 6, 236. delegation of, 200. statement of, in application for letters patent, 6. in memorandum of association, 15. taking of general, 6. See further, AGENTS, BOKKOWING, CAPITAL. PREFERENCE SHARES advantages of, 83. bonds, in place of, 85. by-law creating issue of, 22. certificates, 92, 93, 95, 96. creation of, in various jurisdictions, 85, 86. supplementary letters patent confirming, 243. cumulative, 83, 84. modification of rights of holders of, 87-90. non-cumulative, 62, 83. non-voting. 62, 84. priorities, 83, 84. redemption and repurchase of, 90-92. PRESIDENT. See OFFICERS. PRIVATE COMPANY conversion of, into public company, 78, 243. definition of, 76. 408 INDEX. PRIVATE COMPANY Continued. incorporation, procedure for, 77. joint holders of shares of, 76. privileges of, 76, 79-^81. provincial requirements, 79-81. public company converted into, 79. transfer of shares, restriction of, 76, 77. PROMOTERS duties of, 69, 70. fiduciary relationship of, 69. profit of, must be disclosed, 69. PROSPECTUS commission, disclosure of, in, 65, 72 ff. contracts, particulars of, 66. definition of, 44, 45. directors named in, 18, 23, 45. failure to deliver to subscriber, 59, 60. filing of, 30. liability of company and directors, 54-56. minimum subscription, fixing of, 31. misleading statements in, 61. precautions to be taken by subscribers, 61-68. bonds, securing of, 62, 63. capitalization, relation of to assets, 61, 62. compliance with Blue Sky Laws, 67, 276. contracts entered into, 63. estimate of earning capacity, 62. management, 64. non-cumulative preference shares, 62. past net profits of existing business taken over, 64. production of prospectus, 65. transfer, in case of purchase from third person, 65. working capital, 64. proper character of, 45. provincial requirements, British Columbia, 40, 49, 284, 285. Dominion, Ontario, 47, 49. Nova Scotia, 47, 49. Quebec, Manitoba, New Brunswick, 46. Saskatchewan, Alberta, 48, 49, 276, 278. untruthful, remedies of subscriber in case of, 54-58, 100. vendors. See VENDOBS. PROXIES. See MEETINGS. PURCHASE OF PROPERTY BY COMPANY. See VENDOBS. QUORUM AT MEETINGS, 170. RECEIVING ORDER. See WINDING-UP. RECONSTRUCTION bondholders, 261. procedure for, 261, 262. INDEX. 409 RECONSTRUCTION Continued. compromise with creditors, 261, 343, 349. modification of bondholders' rights, 262. sale to new company, 259, 260. advantages of, 259. statutory provisions for, 260, 261. voluntary winding-up of vendor company, 260. dissentient shareholder, rights of, 260. REDUCTION OF CAPITAL. See CAPITAL. REGISTER. See BOOKS. REGISTERED OFFICE declaration as to, 24. location of, 15. notice of situation of, 16. REMOVAL FROM REGISTER Alberta, 271. British Columbia, 272. Nova Scotia, 270. Saskatchewan, 270. REMUNERATION. See DIRECTORS, AUDITORS, OFFICERS. RE-ORGANIZATION. See RECONSTRUCTION. REQUISITION meeting called by shareholders by, 167. RESERVE FUND, 232, 233. RESOLUTIONS. See DIRECTORS, MEETINGS. RETURNS AND NOTICES Alberta, 323, 324, 325. British Columbia, 326-333. Dominion, 310, 311. Manitoba, 315, 316, 317. New Brunswick, 319, 320. Nova Scotia, 317, 318, 319. Ontario, 311, 312, 313. Quebec, 314, 315. Saskatchewan, 320-323. SALE OF ASSETS approval of shareholders for, 258. Bulk Sales Acts, compliance with, 258. by liquidator, 258, 259. by mining companies, 257. distribution among shareholders, 259. power to effect, 257. special resolution for, 258. statutory provisions respecting, 257 410 INDEX. SALE OF SHARES commission on, 71-74. amount of, disclosure of, 71. methods of, 70. precautions to be observed, 74. SEAL duplicate (New Brunswick), 225. corporate, officers to sign under, 224. on what documents used, 224. words required, private companies (Ontario), 224. mining companies, 224. word " Limited," use of, 224. official, for use outside province, 225. SECRETARY. See OFFICERS. SHARE CERTIFICATES common, form of, 385. contents of, 104. custody of, after transfer, 133. execution of, 104. form of, approval of, 21. loss or defacement of, 106. mining companies, 112. no par value, 95, 105. preference, form of, 381, 382. dividend, rate of, 92, 105. prima facie evidence of title, 105. SHAREHOLDERS indebted to company, disabilities of, 129. liability of, 107, 108. where number of shareholders reduced below legal minimum, 108. where shares illegally issued at discount, 107. See further SHAKES, TRANSFER OF SHARES, PREFERENCE SHARES. SHARES acquisition of, 99. as consideration for assets sold to company, 101, 108. contract to take, 99, 100, 54, 31, 33, 59. subscription, 99. relief from, 54, 100, 31, 33, 59. transfer, 101, 128. transmission on death of shareholder, 101, 132. agreement for sale of, by broker, 28, 70. application for, 99, 100. calls, 121. See CALLS. cancellation of, 126, 127. INDEX. 411 SHARES Continued. commission for sale of, 71. consolidation of, 239. issue of, at a discount, 102, 110. statutory requirements, 110-121. mining companies Alberta, 119. British Columbia, 120. Manitoba, 116. Ontario, 112. Quebec, 114. Saskatchewan, 118. issue of, for consideration other than cash, 108-110. contract of sale, filing of, 109, 110. issue of, with no par value, 6, 82, 93, 94-98. certificate, 94, 95. conversion into par value shares, 96. conversion of par value into no par value shares, 243. loans on security of, 130. number of, taken by each applicant to be shown in application, 7. purchase by company of its own, 90, 125, 126, 240. sale of, 70. See SAJLE OF SHAKES. sub-division of, 238, 250. surrender of, 126, 127. transfer of shares, 128. See TRANSFER OF SHARES. unpaid, transfer of, may be refused, 129. SHARE WARRANTS, 106. STATEMENT IN LIEU OF PROSPECTUS form of, 47. must be filed prior to allotment (Dominion), 29. Ontario, 32. private companies exempt, 79. STOCK BOOK must accompany application, 7. See BOOKS. SUB-DIVISION OF SHARES. See SHARES. SUMMARY, ANNUAL. See RETURNS AND NOTICES. SUPPLEMENTARY LETTERS PATENT amendment of letters patent, 237, 238. change of name by, 237, 253 consolidation of shares, 239. decrease of capital, 240. fees, 246, 355. increase of capital, 239, 240. preference shares, confirming creation of, 243. procedure, 236, 244. Dominion, 244. Ontario, 245, 246. statutory provisions respecting, 236. sub-division of shares, 238. 412 INDEX. SURRENDER OF CHARTER creditors, satisfaction of, 266. fees, 359 ff. jurisdictions where allowed, 265-267. permission to hand in charter (Dominion), 267. publication of notice of application for, 266. SURRENDER OF SHARES. See SHAKES. TAXATION Dominion Income Tax, 208-303. appeal, 302. deductions, 299. definition of income, 298. depreciation, 300. estimate by tax-payer, 302. exemptions, 298. forms, 301. payment without demand, 301. rate of tax, 298. returns, 300. stock dividends, 300. undivided profits, 300. Provincial. Alberta, 308. Brifish Columbia, 309. Manitoba, 308. New Brunswick, 305. Nova Scotia, 305. Ontario, 307. Prince Edward Island, 305. Quebec, 306. Saskatchewan, 308. Sales Tax, drawback, in case of certain exported goods, 304. exemptions, 303. exportation*, 304. importations, 303. licenses, 303. purchaser, payable by, 303. rates, 303, 304. TRANSFER AGENT, 131. TRANSFER OF SHARES agent, 131. custody of certificates after, 133. directors, duties of respecting, 129. execution of, 131. executors, 132, 133. female shareholder, change of name of, 132. forms of, 387, 388. general provisions respecting, 128. INDEX. 413 TRANSFER OF SHARES Continued. liability of company in case of forgery, 131. partnerships, 133. private company, 76, 130. registration of, 128, 129. restricted by by-law (New Brunswick), 81, 130. statutory requirements, 139-144. tax on, Dominion, 134, 135. Ontario, 136, 137, 138. Quebec, 138, 139. to lender, as security, 130, 131. under power of attorney, 133. TRUST DEiED TO SECURE BONDS. See BONDS. VENDORS agreements of, with company, 27. approval of, by directors, 27, 28. by-law authorizing, 27. directors, disclosure of interest, 28. form of, 376. statutory requirements, 28. See DIRECTORS, PROSPECTUS. VOTING. See DIRECTORS, MEETINGS. WAGES, liability of directors for unpaid, 158. WINDING-UP under Dominion Bankruptcy Act, 335 ff. authorized assignment, 336. bankruptcy petition, when in order, 335, 336. composition, 343. creditors, meeting of, 340. proof of debt by, 340. secured, courses open to, 342. dividends, 342. extension of time, 343. inspectors, 341. priority of claims, 343. receiving order, 335, 336. trustee in bankruptcy, duties of, 337-340. right of, to examine debtor's servants, agents, etc., 342. under Dominion Winding-up Act, cases other than insolvency, 344. insolvency, creditors, meetings of, 349. , petition of, 345. proof of claims by, 349. secured, 351, 352. 414' INDEX. W I NDING-UP Continued. insolvency, contributories, defences of, 350. list of, settlement of, 350. distribution of assets, costs of winding-up, 352. preference shares, 353. surplus, division of, among shareholders, 352. dividends, 348. fraudulent preferences, 353. liquidator, permanent, appointment of, 347, discharge of, 348. duties of, 347, 348. powers of, 348, 349. remuneration of, 348. misfeasance, 353. when company deemed insolvent, 345. winding-up order, application for, 345. effect of, 346, 347. procedure after, 347, 348. under provincial legislation, on grounds other than insolvency, 334. A*; p^ m