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pleted at the date of publication 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 subpurchaser, the amount so payable to each vendor; and (g) the amount, if any, paid or payable as purchase money in cash, shares, or debentures of any such property as aforesaid, specifying the amount payable for good will; and (h) the amount paid or payable as commission for subscribing or procuring or agreeing to procure subscriptions for any shares in the company, or the rate of any such commission; and (i) the amount or estimated amount of preliminary expenses; and (j) the amount paid or intended to be paid to any promoter and the consideration for any such payment; and (k) the dates and parties to every material contract, and a reasonable time and place at which any material contract 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 to any contract entered into more than 3 years before the date of publication of the prospectus; and (?) 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, with a statement of all sums paid or agreed to be paid to him in cash or shares by any person either to qualify him as a director or otherwise for services rendered by him in connection with the formation of the company. In this section the term "vendor" includes lessor, and “purchase money” includes rent. 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 specially referred to in the prospectus, shall be void.

SEC. 7. Statutory meeting.--Every company limited by shares and registered after “January 1, 1901,” shall within a period of not less than 1 month nor more than 3 months from the date at which the company is entitled to commence business, hold a general meeting of the company, which shall be called the statutory meeting?

SEC. 8. Promoters must make good their representations.- Where promoters issued a circular stating that £7,000 had been subscribed for, but in fact that amount had not been subscribed for, in proceedings to wind up the company, the promoters were compelled to make this statement good by contributing as if they owned the amount of stock necessary to bring the amount subscribed up to the £7,000.3

SEC. 9. When promoters are liable for acts of each other.-Promoters are not agents of each other, and are not liable for the acts of each other further than they have agreed to the transaction. 4 Sec. 10. Contracts of promoters.

Promoters are personally liable on contracts made by them in behalf of the unformed corporation. But a certificate of incorporation given by the registrar is conclusive evidence that the company is duly formed.

C.-LIABILITY OF STOCKHOLDERS. Sec. 11. Liability uj present and past members of company.In the event of a company formed under this act being wound up, every present and past member of such company shall be liable to contribute to the assets of the company to an amount sufficient for the payment of the debts and liabilities of the company, and the costs, charges, and expenses of the winding up, and for the payment of such sums as may be required for the adjustment of the rights of the contributories among themselves, with the qualifications following; that is to say

(1) No past member shall be liable to contribute to the assets of the company if he has ceased to be a member for a period of 1 year or upward prior to the commencement of the winding up.

(2) No past member shall be liable to contribute in respect of any debt or liability of the company contracted after the time at which he ceased to be a member.

(3) No past member shall be liable to contribute to the assets of the company unless it appear to the court that the existing members are unable to satisfy the contributions required to be made by them in pursuance of this act.

(4) In the case of a company limited by shares? no contribution in case of dissolution shall be required from any member exceeding the amount, if any, unpaid on the shares in respect to which he is liable as a present or past member.

(5) In the case of a company limited by guarantees no contribution shall be

1 Companies act, 1900, sec. 10.
2See sec. 46 post (Companies act, 1900, sec. 12).
3 In re Royal Victoria Palace Theater Syndicate, 18 L. R. Equity, 661.
4 Reynell v. Lewis, 15 M. and W., 517.
5 Kelner v. Baxter et al., L. R., 2 C. P., 174. See post, sec. 16.
* Companies act, 1900, sec. 1.
7 See post, sec. 39, subd. III.
8 See post, sec. 39, subd. III.

required from any member exceeding the amount of the undertaking entered into on his behalf by the memorandum of association.

(6) Nothing in this act contained shall invalidate any provision contained in any policy of insurance or other contract whereby the liability of individual members upon any such policy or contract is restricted, or whereby the funds of the company are alone made liable in respect of such policy or contract.

(7) No sum due any member, in his character of a member, by way of dividends, profits, or otherwise, shall be deemed to be a debt of the company, payable to such member in a case of competition between himself and any other creditor not being a member of the company; but any such sum may be taken into account, for the purposes of the final adjustment of the rights of the contributories amongst themselves."

SEC. 12. If any company under this act carries on business when the number of its members is less than 7 for a period of 6 months after the number has been so reduced, every person who is a member of such company during the time that it so carries on business after such period of 6 months, and is cognizant of the fact that it is so carrying on business with fewer than 7 members, shall be severally liable for the payment of the whole debts of the company contracted during such time, and may be sued for the same, without the joinder in the action or suit of any other member.

D.-DUTIES AND RESPONSIBILITIES OF DIRECTORS.

SEC. 13. Qualification of directors.-A director is given two months after his appointment to obtain the required stock for a director to own. If he does not within such time get and retain such stock, hís office becomes vacated and he is liable to pay the company for every day he acts as director after this.3

SEC. 14. Liability for statements in prospectus or notice.-(1) Where after the passage of this act a prospectus or notice invites persons to subscribe for shares in or debentures or debenture stock of a company, every person who is a director of the company at the time of the issue of the prospectus or notice, and every person who having authorized such naming of him is named in the prospectus or notice as a director of the company, or as having agreed to become a director of the company either immediately or after an interval of time, and every promoter of the company and every person who has authorized the issue of the prospectus or notice shall be liable to pay compensation to all persons who shall subscribe for any shares, debentures, or debenture stock on the faith of such prospectus or notice for the loss or damage they may have sustained by reason of any untrue statement in the prospectus or notice, or in any report or memorandum appearing on the face thereof, or by reference incorporated therein or issued therewith, unless it is proved

(a) First exception.—With respect to every such untrue statement not purporting to be made upon 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 allotment of the shares, debentures or debenture stock, as the case may be, believe that the statement was true; and

(b) Second exception. — With respect to every such untrue statement purporting to be a statement by or contained in what purports to be a copy of or extract from a report or valuation of an engineer, valuer, accountant, or other expert, that it fairly represented the statement made by such engineer, valuer, accountant, or other expert, or was a correct and fair copy of or extract from the report or valuation: Provided always, That notwithstanding that such untrue statement fairly represented the statement made by such engineer, valuer, accountant, or other expert, or was a correct and fair copy of an extract from the report or valuation, such director, person named, promoter, or other person who authorized the issue of the prospectus or notice as aforesaid shall be liable to pay compensation as aforesaid if it be proved that he had no reasonable ground to believe that the person making the statement, report, or valuation was competent to make it; and

(c) Third exception.—With respect to every such untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document, that it was a correct and fair representation of such statement or copy of or extract from such document, or unless it is proved that having consented to become a director of a company he withdrew his consent before the issue of the prospectus or notice, and that the prospectus or notice was issued without his authority or consent, or that the prospectus or notice was issued without his knowledge or consent, and that on becoming aware of its issue he forthwith gave reasonable public notice that it was so issued without his knowl

1 Companies act, 1862, sec. 38.
2 Companies act, 1862, sec. 48. See post, secs. 21, 22.
3 Companies act, 1900, sec. 3.

edge or consent, or that after the issue of such prospectus or notice and before allotment thereunder, he, on becoming aware of any untrue statement, withdrew his consent thereto, and caused reasonable public notice of such withdrawal and of the reason therefor to be given.

Promoter,how used.—(2) A promoter in this section means a promoter who was a party to the preparation of the prospectus or notice, or of the portion thereof containing such untrue statement, but shall not include any person by reason of his acting in a professional capacity for persons engaged in procuring the formation of the company.

Existing companies obtaining new capital.—(3) Where any company existing at the passing of this act, which has issued shares or debentures, shall be desirous of obtaining further capital by subscriptions for shares or debentures, and for that purpose shall issue a prospectus or notice, no director of such company shall be liable in respect to any statement therein unless he shall have authorized the issue of such prospectus or notice, or have adopted or ratified the same.

Experts.—(4) In this section the word expert " includes any person whose profession gives authority to a statement made by him.”' 1

Sec. 15. Fraud of directors a misdemeanor.—Directors fraudulently appropriating property or keeping fraudulent accounts, or willfully destroying books, or publishing fraudulent statements are guilty of a misdemeanor.

Sec. 16. Power of court to assess damages against delinquent directors, officers, and promoters.—Where in the course of the winding up of a company under the companies acts it appears that any person who has taken part in the formation of the

company, or any past or present director, manager, liquidator, or other officer of the company has misapplied or retained or become liable or accountable for any moneys or property of the company, or been guilty of any misfeasance or breach of trust in relation to the company, the cost may, on the application of the official receiver or of the liquidator of the company, or of any creditor or contributory of the company, examine into the conduct of such promoter, director, manager, liquidator, or other officer of the company, and compel him to repay any moneys or restore any property so misapplied or retained, or for which he has become liable or accountable, together with interest after such date as the court thinks just, or to contribute such sums of money to the assets of the company by way of compensation in respect of such misapplication, retained, misfeasance, or breach of trust as the court thinks just. 3

Sec. 17. Accounts.— The directors must cause true accounts to be kept.*

Sec. 18. Company may have directors with unlimited liability.—Where, after the commencement of this act, a company is formed “under the companies act, 1862,” the liability of the directors or managers of such company, or the managing director, may, if so provided by the memorandum of association, be unlimited.5

Sec. 19. Directors must yearly furnish each member a balance sheet showing the condition of the company.

Sec. 20. Ultra vires application of funds. If the directors of a corporation use the funds of the corporation in ultra vires transactions they are personally liable for such funds.

SEC. 21. Where any order is made for winding up a company by the court, or subject to the supervision of the court, if it appear in the course of such winding up that any past or present director, manager, officer, or member of such company has been guilty of any offense in relation to the company for which he is criminally responsible, the court may, on the application of any person interested in such winding up, or of its own motion, direct the official liquidators * to institute and conduct a prosecution or prosecutions for such offense, and may order the costs and expenses to be paid out of the assets of the company.8

SEC. 22. Where a company is being wound up altogether, voluntarily, if it appears to the liquidators conducting such winding up that any past or present director, manager, officer, or member of such company has been guilty of any offense in relation to the company for which he is criminally responsible, it shall be lawful for the liquidators, with the previous sanction, to prosecute such offender, and all expenses properly incurred by them in such prosecution shall be payable out of the assets of the company in priority to all other liabilities. 9

*

1 The directors liability act, 1890, sec. 3.
224 and 25 Vict., ch. 96, secs. 81-84, and companies act, 1862, sec. 166.
3 Companies winding-up act, 1890, sec. 10.
4 Sce post, secs. 41 and 43. Companies act, 1862, sch. 1, Table A, art. 78.
5 Companies act, 1867, sec. 4.
6See post, secs. 41, 43, and companies act, 1862, Sch. I, Table A, arts. 79–82.

7Cullerne v. London, etc., Society, 252 B. D., 485; London Financial Association 1. Kelk, 26 Ch. Div., 107.

8 Companies act, 1862, sec. 167.
9 The companies act, 1862, sec. 168. See ante, sec. 5, and post, sees. 34,36, 55, 56, 59, 67, 69.

E.- RESTRICTIONS UPON DIRECTORS IN DEALING IN STOCKS AND OTHERWISE.

Sec. 23. Director may deal in shares.Same man director of rival companies.-In dealing with his shares a director is, in general, as free as any other shareholder. A director can not be restrained from acting as director of a rival company.2

SEC. 24. Disqualification of directors.—The office of director shall be vacated-
If he holds any other office or place of profit under the company;
If he becomes bankrupt or insolvent;
If he is concerned in or participates in the profits of any contract with the company.

Exception. But the above rules shall be subject to the following exception: That no director shall vacate his office by reason of his being a member of any company which has entered into contracts with or done any work for the company of which he is a director, nevertheless he shall not vote in respect of such contract or work; and if he does so vote his vote shall not be counted. This applies to companies limited by shares and may be changed by the articles of association or an amendment thereto. 3

SEC. 25. Contracts in which directors are interested may be confirmed. --Shareholders can, by a resolution of a general meeting, duly convened, confirm a contract in which the directors or some of them are interested. 4

F.-REGULATIONS REGARDING PRICES OF PRODUCTS.

The only regulations made are found in the antitrust law under Topic O.

G.-REGULATIONS REGARDING PROFITS AND DIVIDENDS. SEC. 26. Rules as to dividends. The following provisions may be changed by the articles of association on a special resolution, but in the absence of such change apply to all

companies limited by shares: 5 1. The directors may, with the sanction of the company in general meeting, declare a dividend to be paid to the members in proportion to their shares.

2. No dividend shall be payable except out of the profits arising from the business of the company.

3. The directors may deduct from the dividends payable to any member all such sums of money as may be due from him to the company on account of calls or otherwise.

4. The directors may, before recommending any dividend, set aside out of the profits a proper sum to meet contingencies, or for equalizing dividends.

5. No dividend shall bear interest as against the company.

6. When any dividend has been declared notice must be given each shareholder, and all dividends remaining unclaimed for 3 years may be forfeited to the company.

SEC. 27. Profits governed by amount paid on shares.-By the company's regulations or special resolutions dividends may be paid in proportion to the amount paid up on each share, in cases where a larger amount is paid upon some shares than on others.

H.-REGULATIONS REGARDING OWNERSHIP OF STOCK IN OTHER CORPORATIONS, OR

THE COMBINATION OF DIFFERENT COMPANIES.

Sec. 28. Can not own stock of another company. Where a company is incorporated by act of Parliament, and is not by its act of incorporation given power to hold stock in another corporation, the purchase of such stock is ultra vires, and the public, by the attorney-general, can interpose and prevent it.? Where the constitution of a corporation authorizes it to hold stock in another corporation it may do so. 8

1.-REPORTS TO BE MADE TO THE GOVERNMENT.

SEC. 29. Prospectus filed with registrar.-A copy of every prospectus shall be filed with the registrar on or before the date of its publication.

SEC. 30. Return as to allotment.Whenever a company limited by shares makes any

1 Gilbert's case, 5 Ch., 559; South London Fishmarket Co., 39 Ch. Div., 324; Cawley & Co., 42 Ch. Div., 209.

2 London and Mashonaland Co. v. New Mashonaland Co., 1891, W. N., 169.
3 Companies act, 1862, Table A, art. 57.
4 Grant v. United Switchback Co., 40 C. D., 135.
5 Companies act, 1862, secs. 72–77.
6 Companies act, 1867, sec. 24, subd. 3.

7 Great Eastern Railway Co. v. Turner & L. R., Ch. App., 149; Attorney-General v. Great Northern Railway Co., 1 Dr. & Sm., 15.

8 See post, sec. 39; ex parte Contract Corp., 3 Ch., 105; Royal Bank of India Case, 4 Ch., 252. 'Companies act, 1900, sec. 9,

4

allotment of its shares, the company shall within 1 month thereafter file with the registrar (a) a return of the allotments stating the number and nominal amount of the shares comprised in the allotment, the names, addresses, and descriptions of the allottees, and the amount, if any, paid or due and payable on each share; and (b) in case of shares allotted in whole or in part for a consideration other than cash, a contract in writing constituting the title of the allottee to such allotment, together with any contract of sale, or for services or other consideration in respect to which such allotment was made, such contracts being duly stamped, and a return stating the number and nominal amount of shares so allotted, the extent to which they are so treated as paid up, and the consideration for which they have been allotted.

SEC. 31. Report preceding statutory meeting to be filed.The directors shall cause a copy of the reporta preceding the statutory meeting to be filed with the registrar forthwith after the sending thereof to the members of the company:

SEC. 32. Annual report. —Every company under this act, and having a capital divided into shares, shall make, at least once in every year, a list of all persons who, on the fourteenth day succeeding the day on which the ordinary general meeting, or if there is more than one ordinary meeting in each year, the first of such ordinary general meetings is held, are members of the company; and such list shall state the names, addresses, and occupations of all the members therein mentioned, and the number of shares held by each of them, and shall contain a summary specifying the following particulars:

What report must contain: -(1). The amount of the capital of the company and the number of shares into which it is divided.

(2) The number of shares taken from the commencement of the company up to the date of the summary; distinguishing between the shares issued for cash and the shares issued otherwise than for cash or only partly for cash.

(3) The amount of calls made on each share.
14) The total amount of calls received.
(5) The total amount of calls unpaid.
16) The total amount of shares forfeited.

(7) The total amount of debt due from the company in respect of all mortgages and charges which require registration.

(8) The names and addresses of the persons who are the directors of the company at the date of the summary.

(9) The names, addresses, and occupations of the persons who have ceased to be members since the last list was made, and the number of shares held by each of them. The above list and summary shall be contained in a separate part of the register, and shall be completed within 7 days after such 14th day as is mentioned in this section, and a copy shall forthwith be forwarded to the registrar of joint stock companies.

SEC. 33. Penalty for false statement. If any person in any return, report, certificate, balance sheet, or other document required by or for the purposes of this act willfully makes a statement false in any material particular, knowing it to be false, he shall be guilty of a misdemeanor, and shall be liable on conviction on indictment to imprisonment for a term not exceeding 2 years with or without hard labor. 6

SEC. 34. Failure to make report, penalty, Liability of officers.--If any company under this act, and having a capital divided into shares, makes default in complying with the provisions of this act with respect to forwarding such list of members or summary as hereinbefore mentioned to the registrar, such company shall incur a penalty not exceeding £5 for every day during which such default continues, and every director and manager of the company who shall knowingly and willfully authorize or permit such default shall incur the like penalty.7

SEC. 35. Notice to be given of changes.-Every company under this act, having a capital divided into shares, that has consolidated and divided its capital into shares of larger amount than its existing shares, or converted any portion of its capital into stock, shall give notice to the registrar of joint stock companies of such consolida-. tion, division, or conversion, specifying the shares so consolidated, divided, or converted.8

Sec. 36. Notice of increase of capital or members to be given to registrar.–Where a company has a capital divided into shares, whether such shares may or may not

1 Companies act, 1900, sec. 7.
2 See post, sec. 46.
3 See ante, sec. 7.
4 Companies act, 1900, sec. 12, subd. 4.
5 Companies act, 1862, sec. 26, as amended by companies act, 1900, sec. 20.
6 Companies act, 1900, sec. 28.
7 Companies act, 1862, sec. 27.
8 Companies act, 1862, sec. 28.

See post, sec. 64.

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