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Gti Brit, Laws, statufes, etc. C'or peration law
EFFINGHAM WILSON, 11 ROYAL EXCHANGE, E.C.
SWEET & MAXWELL, 3 CHANCERY LANE
PREFACE TO THE SECOND EDITION.
SINCE the publication of the first edition of this book the “prescribed forms” (that is to say, the forms of the various documents, which are liable to registration with the Registrar of Joint Stock Companies under the new Act, and which are required to be drawn in the form prescribed by the Board of Trade) have been prepared at the instance of the Board of Trade, and can now be obtained at Somerset House. These forms have, for the convenience of the reader, been inserted in Appendix II. of this book.
The notes on the new Act have been slightly amplified by adding references to the few decisions of the Courts on the provisions of this Act.
Of these decisions only one is likely to have farreaching effects, viz., the case of Burrows v. Matabele Gold Reef & Estates Co. The judgments of the Court of Appeal in this case establish the following proposition : that a company, which gives by way of commission to the underwriters of its shares an option to call for a specified number of its shares (other than those so underwritten by them) at a specified price, will be acting in contravention of section 8 (2) of the new Act, and that the company will be restrained by the Court from giving effect to such an option. This decision will, it is hoped, put an end to what has hitherto been a common and, it should be added, a very mischievous practice.
P. F. S. 4 Stone Buildings, Lincoln's Inn, W.C.,
1st October, 1901.
PREFACE TO THE FIRST EDITION.
On November 12th 1894 a committee was appointed by the Board of Trade “to inquire what amendments “are necessary in the Acts relating to Joint Stock
Companies incorporated with limited liability, especially with a view to the better prevention of “ fraud in relation to the formation and management “of companies and to consider and report upon the " clauses of a draft bill ”. The committee delivered its report towards the end of June 1895 and embodied their recommendations in a draft bill, which was appended to their report.
This draft bill was again considered and thoroughly sifted by a committee of the House of Lords.
The evidence given to these committees, which is contained in the reports of their proceedings, is in the highest degree instructive and the author desires to acknowledge his indebtedness to these reports.
It must, however, be admitted that, considering the exhaustive nature of the investigations, which preceded the introduction of this measure into Parliament, and the length of time, during which the public has been kept waiting for it, the Act is disappointing in two respects, viz. first, it leaves untouched abuses (such as the formation of one man companies) and numerous difficult questions of law (such as the computation of "profits”), which are urgently in need of being dealt with by the legislature, and secondly some of the provisions, which are contained in the Act, are difficult to understand or work out and others are marred by loose drafting (owing, no doubt, to the numerous amendments, which were carried hurriedly at the last moment without much consideration) and appear to offer loopholes, which may facilitate evasion.
The following are instances of provisions, which are difficult to understand or work out:
Section 2 (1) provides, that a person shall not be capable of being appointed a director by the articles of association, unless certain documents have been filed with the registrar, and section 2 (3) enacts, that section 2 shall not apply to a company, which does not issue any invitation to the public to subscribe for its shares; hence, if a company appoints a director by its articles without issuing any such invitation and the person so appointed acts as a director and after the expiration of (say) six months the company issues such an invitation, the appointment of the director will, it appears, become bad owing to the issue of such invitation ; in other words, the validity of his appointment is made to depend upon an event, which may or may not take place after the date of his appointment (viz. the issuing of such an invitation).
The same difficulty occurs again in section 6, which provides by subsections (1) and (3), that a company shall not commence business or exercise any borrowing powers, unless certain formalities are complied with, and that any contract made by the company