money; and this cannot be evaded by any "waiver" clause or condition in the regulations of the company, or in the prospectus or form of application. Secondly, if, notwithstanding the failure of the subscriptions to reach the minimum, the directors proceed to allotment, not only is the allotment "voidable," but directors knowingly taking part in or permitting that allotment will become liable to compensate both the company and the allottees for any loss or damage suffered in consequence of such contravention. It is not easy to see what damage the company can suffer by such a proceeding. But as regards the allottees, their position appears to be as follows: In the first place, they can repudiate their allotments and claim to recover their money from the company. This right they can exercise at any time until the expiration of one month after the holding of the statutory meeting, but not later. If the right is not exercised within that period, their allotments become binding on them, and can no longer be repudiated. But they will still retain their remedy against directors shown to have "knowingly " authorised the improper allotment, namely, by an action for damages, and the measure of the damages will be the pecuniary loss suffered by the allottees by reason of such allotment. That may be nothing, if the shares retain their par value; or it may be anything up to the full amount paid by the allottees, if the shares are worth little or nothing. This right of action may be exercised at any time within two years after the allotment, and, being independent of the right to repudiate the allotment, will not be barred merely because the latter right has been lost or waived; but, whenever exercised, the plaintiff will have to connect his damage directly with the improper allotment-that is, he will have, I conceive, to show that at the date of allotment the shares were intrinsically, and on their own merits, worth less than he paid for them. Section 5, you observe, says that an allotment made in contravention of the Act shall be "voidable at the instance of the "allottee" within a certain limit of time. This means that the allotment is not absolutely null and void, but that the allottee (not however the company) has the right either to repudiate and declare it void as against him, or, on the other hand, to affirm it. If he allows the prescribed time to elapse without repudiating, he can no longer repudiate; or he may, before that date, on discovery of the facts, elect to keep his allotment, in which case, also, he will be bound. And until he repudiates the allotment, it must, I think, be treated, according to the ordinary rules relating to voidable contracts, as valid. For the company cannot dispute its validity, and if the allottee does not, no one else can. The allottee therefore is a "member" of the company, with all the rights of such, including that of dealing with his shares, attending and voting at meetings, etc. He will not lose his right to repudiate by exercising the rights of membership, so long as he remains in ignorance of the facts giving rise to his right to repudiate; though, of course, if he transfers his shares he has nothing left to repudiate, but in that case the transferee would succeed to the same rights as his transferor had. But after the allottee has acquired knowledge of the facts as to the allotment, though he is not bound to make his election at once, he should be very careful, until he has made up his mind one way or the other, to do nothing which might be urged against him as evidence of an election to accept the allotment-e.g., trying to sell, voting at a meeting of shareholders, paying a call, etc. It is to be noted that these sections (except sub-sec. 3 of sec. 4) apply only to the first allotment of shares offered to the public. And it has been suggested that this will offer a loophole for evasion by enabling a first allotment to be made of a nominal or small amount of capital, the statutory conditions as to which can be easily satisfied, and subsequently making a further issue to which these sections will not apply. But there are good reasons for supposing that this will not be practicable. First, in order to have any effect for the purpose supposed, the first issue which is allotted must be of shares offered to the public; and it is therefore highly improbable that on a subsequent issue within a short period, the earlier one should have been forgotten by the alert watchdogs of the Press and the stockmarket, or fail to call forth damaging criticisms. And besides, the Act (sec. 10) prescribes that the prospectus issued upon the occasion of such subsequent issue of capital must disclose the amount offered for subscription and allotted on each previous allotment. And though Parliament has been careless about attaching a sanction to this enactment, I think we may trust the Press to see that it is not disobeyed without attention being called to the fact. Before passing on, I should point out that the concluding words of sub-section 1 of sec. 5 give an allottee a right to avoid an allotment made in contravention of the Act, "notwithstanding that the company is in course of being wound up." This is a new departure; for hitherto a voidable contract to take shares must have been avoided, or at least proceedings to avoid it must have been commenced, before the commencement of a winding-up of the company; the reason being that on the commencement of a winding-up the whole position of affairs is altered and the creditors of the company acquire new rights which would be prejudiced by avoidance of the contract, and it is a settled rule that voidable transactions cannot be rescinded after the rights of innocent third persons have arisen which would be prejudiced by such rescission. This Act introduces an exception to this rule by allowing an allottee to repudiate his allotment on the ground mentioned, even after the commencement of a winding-up of the company. He will be entitled, therefore, to have his name removed from the list of contributories, and recover his money from the assets, if he repudiates within the time allowed. But as regards his right to recover his money, he will, I conceive, have only a right of proof as a creditor, pari passu with the general body of creditors. The Act gives him no preferential right or lien; nor has he any by general law. But what he fails to recover from the company's assets he may, as remarked above, be able to recover from the directors. On the whole, therefore, I think that these new provisions will go far to effect their object of preventing directors going to allotment when the public have damned the venture by withholding their support, unless the directors have managed to secure the success of the issue by getting it "underwritten " at the authorised and published rates; which in itself will be an excellent test of the bona fides and value of the undertaking. THE WORK OF THE LONDON CLEARING HOUSE IN 1900. THE returns of clearing paid through the London Bankers' Clearing House, in the year 1900, amount to a little less than those of the previous year, but as the figures of 1899 were very considerably more than those of 1898, the present decrease leaves 1900 still well ahead of all other years, excepting 1899. The whole decrease is more than accounted for by the falling off in Stock Exchange business, the clearings on Stock Exchange settling days being less by £204,724,000, whilst the decrease in the grand total amounts only to £190,099,000. The figures on Consols settling days show an increase of £35,083,000, and those of the fourths of the month an increase of £13,375,000. These latter are partly accounted for by the fact that several of the Consols settling days fell on the fourth of the month, and in these cases the day's clearing was considerably above the average of fourths alone. The comparative insignificance of the decrease in the grand total is readily seen from the figures in the second table, which gives the average daily clearing for all the classes of days. From the last column of this table it appears that the decline in the daily average taken over the whole year is only about one-fiftieth of the whole. The decrease in the average for ordinary days, that is, excluding from comparison all the three special classes of days, amounts only to about £100,000 or less than a two hundred and fiftieth part of the average amount. It will be seen from the third and fourth tables that the busiest month was January, and the next heaviest, March, but July and the three last months of the year approached very nearly to the March Upon the whole the second half of the year showed the largest |