STAMP DUTY AND FEES.-A 10s. deed stamp must be impressed before registration on both the Memorandum and Articles. A registration fee of 5s. is payable on both the Articles and notice of the situation of the registered office. The fees payable on the Memorandum are regulated by the number of members the association is declared to consist of in the Articles. Thus for registration of a Company whose number of members as stated in the Articles does not exceed twenty, the fees are £2.

UNLIMITED COMPANIES

Few Companies now register with unlimited liability. With the exception of those parts of the Acts relating to limited liability, the provisions of the Companies Acts, generally speaking, apply to unlimited Companies. The shareholders of such Companies are liable, according to their interests in the Company, to pay all the debts and fulfil all the obligations of the concern. But a contributory in the winding up of an unlimited Company has right of compensation which is unavailing to a contributory of a limited Company. Further, an unlimited Company may purchase its own shares, and thereby reduce its capital without the authority of the Act of 1867.2

The following points of difference with regard to the formation of unlimited Companies as compared with limited Companies may be noted:-(1) The Memorandum is required only to specify the name of the proposed Company, the registered office, and the objects of the Company, but not the capital;3 (2) the capital is required to be stated in the Articles, and the members require to subscribe for one share at the least ; (3) the name of the Company does not require to be published

1 Act 1862, sec. 101; confirmed, Act 1867, sec. 6. In re Pyle Works, 1890, 44 Ch. D. 534.

2 In re Borough Commercial and Building Society, 1893, 2 Ch. 242.

3 Act 1862, sec. 10.

Act 1862, sec. 14.

4

at its place of business or on its business paper; and (4) the Company does not require to keep a Register of Mortgages.

The returns to be made to the Registrar are the same as those for Companies limited by guarantee.2

Unlimited Companies may re-register with limited liability.— For mode of so doing, see Companies Act, 1879, sec. 4.

1 Act 1862, sec. 41.

2 For which see ante.

CHAPTER III

FLOATING OF COMPANY

PROMOTERS.-In the previous chapter the statutory requirements necessary for the incorporation of those Companies which can legally be formed under the Companies Acts were sketched. Attention will now be directed to the legal position of those who set in motion the machinery of the law towards the establishment of a Company.

The formation of a Company must from its very nature be in almost all cases the work of one or more individuals, and the name familiarly given to the pioneers of the concern is "Promoters." The term "promoter" is a term not of law but of business, usefully summing up in a single word a number of business operations familiar to the commercial world, by which a Company is generally brought into existence.1

No hard-and-fast rule can be stated as to who is or who is not a promoter, but the position of persons concerned in the floating of a Company is well defined, and it is this— They stand in a fiduciary position; they have in their hands the creation and moulding of the Company; they have the power of defining how and when and in what shape and under what supervision it shall start into existence and begin to act as a trading corporation. Hence everything that a promoter does must be done with the utmost fairness. No promoter is entitled to receive any secret commission or remuneration 1 Per Bowen, L. J., in Whaley Bridge v. Green, L. R. 5 Q. B. D. 109.

in connection with the promotion or formation of the Company. A promoter is in the same position as an ordinary agent, and cannot receive for himself any benefit derived from the subject on which he is employed without disclosing the fact to his principal. If a promoter has a property which he desires to sell to the Company, it is quite open to him to do so; but upon him, as upon any other person in a fiduciary position, it is incumbent to make a full and a fair disclosure of his interest and position with respect to that property.

The law does not prohibit any person concerned in the floating of a Company, be he promoter or not, from receiving remuneration, but what it does prohibit is the receiving of such remuneration clandestinely. The reason for this is that when a Company is incorporated, its charter prescribes its duties and declares its rights, and all persons becoming shareholders have a right to consider that they are entitled to all the benefits held out to them in the charter, and liable to no obligations beyond those which are there indicated. When a person, believing in the probable success of any particular project, is satisfied with the terms of incorporation, he reasonably advances his money on the faith of those terms, and if the project turns out a failure he has no right to complain. The speculation was one as to the prudence of which he had the means of judging, and no injustice is done to him if in the result he sustains a loss. But the case is very different if behind the disclosed terms of incorporation there are others of which the public have no notice, but which are to be held equally binding on the shareholders as if they had formed part of the charter of corporation. Where there is an agreement to pay someone remuneration which has not been indicated in the deed of incorporation, no approval of those who may happen to be directors at the time when the Company is formed, or of those who may happen at that time to be all the shareholders in the Company, can possibly give it validity, because it is something which the Company itself cannot do,

and which it cannot be authorised to do, either by its then directors or by its then shareholders.1

PRELIMINARY AGREEMENT.-The next matter calling for attention is the contract or agreement whereby the new Company is to get the benefit of or the right to the business to be taken over or commenced by the Company. This is accomplished by what is known as the "preliminary agreement," and is usually arranged before the issue of the prospectus.

The terms of the deed should be carefully and accurately adjusted. Those acting for or on behalf of the Company will see that the seller has right to dispose of the business, that his title thereto is good, that the property in question really exists, that if the Company is to work a patent the patent is valid, and such other details as are usually observed in agreements for sale. Again, the price to be paid should be specifically stated, and the mode of payment set forth. Thus in one case where part of the purchase price was to be "£1000 worth of shares in the new Company, it was held that this meant shares to the market value of £1000, and not shares of the face value of that amount. As regards the seller, he should see that if the purchase price is not to be paid in cash but in shares, the agreement is filed with the Registrar of Joint Stock Companies within one month after the allotment.2 A failure to comply with this requirement does not prejudice the position of the allottee nor make the shares liable to be treated as unpaid. It only subjects the officers of the Company to the penalties provided by the Act.3

The agreement usually takes one or other of the following forms (1) An agreement between the vendor and a trustee for the proposed Company, with a provision therein that in the event of the Company not adopting the agreement it is to be of no effect; or (2) a draft agreement adjusted by the vendor

1 Act 1900, sec. 9, and Mann & Beattie v. Edinburgh Northern Tramways Co., 1892, 19 R. H. L. 7.

2 Act 1900, sec. 7 (1).

3 Ibid. sec. 7 (2).