derived by reasonable implication from its charter.1 (6) To contract itself out of the power to alter its Articles.2 (7) To use the funds of the Company for the purpose of making a donation to a public object. Thus a railway Company was interdicted from subscribing a sum out of the Company's funds towards the erection of the Imperial Institute, and it was stated that the proposed subscription was not prevented from being ultra vires by the fact that the establishment of the Institute might benefit the Company by causing an increase of passenger traffic over their line.3

1 Baroness Wenlock v. Dee River Co., 1885, 10 App. Cases, 354.

2 Malleson v. National Insurance and Guarantee Corporation, 1894, 1 Ch. 200.

3 Tomkinson v. South Eastern Railway Co., 1887, 35 Ch. D. 675.

CHAPTER XIII

WINDING UP OF COMPANIES

THE sequestration under the Bankruptcy Acts of a Company formed and registered under the Companies Acts is incompetent.1 The reason is that the Act of 1862 was intended to be a complete code of law applicable to the class of Companies to which it applies, and that the Legislature intended not only to make the provisions of the Act applicable to all such different Companies, but to make them applicable in such a way that the whole law of such Companies as are embraced within the operations of the Statute shall be found within the Statute itself. The only way, therefore, by which a Company can be put an end to is by the machinery of a winding up. While a Company cannot be wound up except under the special provisions in the Companies Acts, a Company may yet be made notour bankrupt,2 so as to regulate the equalisation of diligences, and to enable creditors to reduce preferences.3

WHAT COMPANIES CAN BE WOUND UP. - All Companies registered under the Companies Acts may be wound up. As a Company can be registered in this country although the subscribers to the Memorandum and all the directors are foreigners residing abroad, provided it appears from the Memorandum and Articles of Association that some kind of

1 Standard Property Investment Co. Ltd. v. Dunblane Hydropathic Co. Ltd., 1884, 12 R. 328.

2 Bankruptcy (Scotland) Act, 1856, secs. 4 and 8.

3 Clarke, etc. v. Hinde, Milne, & Co., 1884, 12 R. 347.

management and business in this country is contemplated, the Courts here have jurisdiction to make a winding-up order, although the Company has never, in fact, transacted any business in this country. But a foreign Company with only an agent here cannot be wound up by the Courts of this country.

Besides Companies registered under the Acts, the Act of 18622 contains provisions for the winding up of certain unregistered Companies.

How Companies can be wound up. Winding up can be accomplished in one of the three following ways, viz. :-(1) by the Court; (2) voluntarily; and (3) voluntarily under the supervision of the Court. No restrictive condition in the Articles of Association of a Company can affect the statutory privileges of winding up.3

4

WINDING UP BY THE COURT.-By "the Court," as regards Scotland, is meant the Court of Session in either Division thereof; and when the Court makes a winding-up or a supervision order, or at any time thereafter, it may, if it think fit, direct that all subsequent proceedings be taken before one of the permanent Lords Ordinary, and remit to him accordingly. Thereafter such Lord Ordinary is deemed to be "the Court," and has for the purpose of the winding up all the powers of the Court of Session. The judgments of the Lord Ordinary are subject to review, and he may report to the Division of the Court any matter which may arise in the course of the winding up. A Company may be wound up by the Court in any case where (a) the Company has passed a special resolution requiring the Company to be wound up by the Court; (b) the Company does not commence its business within a year from its incorporation, or suspends its business for the space of a whole year. Mere suspension of business or the abandonment of one of the objects of a Company will not 1 Smyth & Co. v. Salem Flour Mills Co., 1887, 14 R. 441; In re General Company for the Promotion of Land Credit, 1870, 5 Ch. App. 363.

2 Sec. 199.

3 In re Peveril Gold Mines, 1897, 14 T. L. R. 25.

4 As to power of Sheriff to act in certain cases, see Act 1886, sec. 4, and Ranking of Claims, infra.

suffice to bring a case under this provision. It must be shown that the Company has intentionally abandoned its business, or is unable to carry it on ;1 (c) if default is made in filing the report required by sec. 12 of the Act of 1900, or timeously holding the first statutory meeting of the Company;2 (d) the members are reduced in number to less than seven; (e) the Company is unable to pay its debts. A Company is deemed to be unable to pay its debts-(1) whenever a creditor to whom the Company is indebted in a sum exceeding £50 then due, has served on the Company, by leaving the same at its registered office, a demand under his hands requiring the Company to pay the sum so due, and the Company has, for the space of three weeks succeeding the service of such demand, neglected to pay such sum, or to secure or compound for the same to the reasonable satisfaction of the creditor. A creditor is not entitled to a winding-up order where the Company bonâ fide disputes the debt and there is no evidence of insolvency other than noncompliance with the notice served under the Act. It is not a good answer by a Company, against whom a petition for a winding-up order is presented at the instance of a creditor who holds certain security for his debt, to say that the apparent value of the security greatly exceeds the debt, unless it can also be shown that it is truly a marketable security for the amount of the debt.4 The Court is not bound to make an immediate order to wind up a Company upon a petition by a creditor whose debt is admitted and not paid, but may order the petition to stand over to enable the Company to make arrangements for the payment of its debts and the carrying on of its business, and will make such order where there is a reasonable hope of such arrangements being made; (2) whenever in Scotland- -a different rule as to this applies in reference to Companies registered in England and 1 Alliance Heritable Security Co. v. Heritable Property Trust Ltd., 1886, 14 R. 34.

2 Act 1900, sec. 12 (8).

3 Cunninghame and Others v. Walkingshaw Oil Co. Ltd., 1886, 14 R. 87. 4 Commercial Bank of Scotland Ltd. v. Lanark Oil Co. Ltd., 1886, 14 R. 147.

Ireland-the induciæ of a charge for payment on an extract decree, or extract registered bond or protest, has expired without payment being made; or (3) whenever it is proved to the satisfaction of the Court that the Company is unable to pay its debts; or (f) the Court is of opinion that it is just and equitable the Company should be wound up. It is impossible to state in general terms what set of circumstances must coexist before a winding-up order will be granted under this provision. The matter is one for the discretion of the Court. In the following cases a winding-up order has been granted in virtue of the power here conferred :—(1) where the business of the Company was gone and could not be resuscitated; (2) where a mine which the Company had been established to work could not be acquired; (3) where a German patent which the Company was formed to work never had any existence; (4) where a patented invention which the Company was formed to work totally failed and was entirely given up; and (5) where a complete deadlock as to the affairs of the Company had arisen. The Court will not, however, in the exercise of the discretionary power here conferred, grant a winding-up order merely because the Company is a losing concern, the directors have been guilty of misconduct, or the shareholders few and the assets small.

Application for Winding up, and who may apply. The application is made by petition to the Court. It may be presented by the Company, by any one or more creditor or creditors, by any one or more contributory or contributories, or by all or any of these parties together or separately.1 A condition precedent to the granting of a winding-up order is that there are assets belonging to the Company to recover. Every order on a petition operates in favour of all the creditors and contributories in the same manner as if it had been made on the joint petition of a creditor and a contributory. If the petition is presented by a contributory, the Court has a discretion as to issuing a winding-up order, and it will not in 1 Act 1862, sec. 82.