partners are, in a question with the public, liable in their last farthing for the debts of the partnership, and for the due fulfilment of the obligations undertaken by the partners of the firm for the carrying on of the business. But in the case of corporations created by Statute, whether by special Acts of Parliament, as in the case of railway, gas, and water Companies, or by Memoranda of Association, deriving their force from the Joint Stock Companies Acts, the position of matters is different. Such Companies have not the same powers, privileges, and general incidents as are the attributes of common law partnerships, but such powers, privileges, and incidents only as are conferred upon them by their special Acts or Memoranda of Association. Nor can such Companies be regarded in the light of private partnerships: their shareholders are not exposed to the liabilities and risks to which the members of private partnerships are subject, and their creditors have not the same remedies for obtaining payment of what may be owing to them as have the creditors of private partnerships. Creditors cannot, as in the case of ordinary partnerships, take decree or do diligence against the individual shareholders. Further, the very nature of an incorporation renders it indispensable that there should be a directorial body to carry on the business of the Company; and the constitution of a body of directors, of course, takes away at once the power of any individual member of the Company to bind the Company. But it does more than that, for it creates a presumption of a different kind—a presumption that the whole of the business of the Company is to be done by the directors, and by no one else, and in no other way. Hence the public are entitled to expect that everything that the directors do shall be valid and binding upon the Company. No doubt, in the case of statutory Companies in particular, this presumption must yield to fact, and it may be a fundamental condition of the Company's contract of settlement and a part of its constitution that the directors shall have certain powers, and shall not have certain powers either by themselves or with the consent of a general meeting of the shareholders of the Company. A third party dealing with a Company is bound to make himself acquainted with the conditions of the contract of that Company in so far as they are made public. Under the Joint Stock Companies Acts a third party dealing with such a Company is bound to make himself master, not only of the Statute under which the Company is incorporated, but of its Articles of Association, which are registered for the very purpose of being made public. No good purpose would be served by an attempt to trace when Joint Stock Companies were first instituted, as, like many other inventions in daily use, their origin is involved in obscurity. It is, however, clear from the provisions of an Act passed in 1719,1 commonly called the "Bubble Act," that they must have been in existence prior to that date; for by the Act just mentioned they were deemed to be "public nuisances," and "all offenders therein, being thereof lawfully convicted in any of His Majesty's Courts of Record at Westminster or in Edinburgh or in Dublin, shall be liable to such fines, penalties, and punishment whereunto persons convicted for common and public nuisances are by any of the laws and Statutes of this realm subject and liable." There is no evidence that this Act was ever enforced in Scotland, but it stood unrepealed until 1825. It was then found that during the preceding century, and notwithstanding the provisions of the Act, many Joint Stock Companies had been formed and were then carrying on business in Scotland. The Legislature in that year, so far from challenging the legality of such Companies, did by another Act 2 recognise the unincorporated Joint Stock Companies of Scotland, and enabled them to sue and be sued in the Company name in this preamble: "Whereas the practice has prevailed in Scotland of instituting societies possessing joint stock, the shares of which are either conditionally or unconditionally transferable for the purpose of carrying on banking and other commercial concerns, many of which have transacted business for a number of years to the great advantage of that 2 6 Geo. IV. c. 131. 16 Geo. I. c. 18. country." This Act, which was limited in duration to twelve months, was made perpetual as regards banking Companies by the Act 7 Geo. IV. c. 67. From this time up to 1862 many Acts of Parliament were passed with regard to Companies, but to the provisions of these Acts it is unnecessary here to refer. In consequence of the increasing number and importance of Joint Stock Companies, and the difficulty of determining from among the numerous Acts of Parliament which had been passed with reference to them what was the then existing law on the subject, the Companies Act of 1862 was passed. That Act was intended to form a complete code of Company law for the United Kingdom, embracing in its scope the then existing law, with such amendments as observation and experience had shown to be desirable. Time has demonstrated the fact that the Act was by no means perfect, for since its becoming law it has in part been repealed, while amending Acts have from time to time been passed. It must not be assumed, for the contrary is the case, that all Companies are regulated by the Joint Stock Companies Acts. Besides private partnerships there are (1) Chartered Companies, which are created by Royal Charter granted by the Crown in the exercise of its prerogative or by special Act of Parliament. The Royal Bank of Scotland and the British Linen Company are examples of corporations created by Royal Charter, while the Bank of Scotland is an example of a corporation created by special Act of Parliament; and (2) Companies formed under the Companies Clauses Acts. A consideration of the law relating to such Companies is outwith the scope of the present work, which is limited to those Companies incorporated under the Companies Act of 1862, and Acts explaining and amending the same. CHAPTER II FORMATION OF COMPANIES ACTS OF PARLIAMENT REGULATING JOINT STOCK COMPANIES.The following are the Acts of Parliament which at present regulate Joint Stock Companies, and these, so far as applicable to Scotland, will be found in the Appendix, viz. :— The Companies Act, 1862, 25 & 26 Vict. c. 89. The Companies Seals Act, 1864, 27 & 28 Vict. c. 19. The Companies Act, 1867, 30 & 31 Vict. c. 131. The Joint Stock Companies Arrangement Act, 1870, 33 & 34 Vict. c. 104. The Companies Act, 1877, 40 & 41 Vict. c. 26. The Companies Act, 1880, 43 Vict. c. 19. The Companies (Colonial Registers) Act, 1883, 46 & 47 Vict. c. 30. The Companies Act, 1886, 49 & 50 Vict. c. 23. The Companies (Memorandum of Association) Act, 1890, 53 and 54 Vict. c. 62. The Companies (Winding Up) Act, 1890, '53 & 54 Vict. c. 63.1 The Companies Act, 1900, 63 & 64 Vict. c. 48. The principal Act regulating Joint Stock Companies is that of 1862, and to its provisions attention will now be directed. COMMENCEMENT OF ACT AND PROHIBITION OF PARTNERSHIPS EXCEEDING CERTAIN NUMBER.-The Act came into operation on the 2nd November 1862, and since then no Company, association, or partnership consisting of more than ten persons can be formed for the purpose of carrying on the business of banking, unless it is registered as a Company under the Act, or is formed in pursuance of some other Act of Parliament, or of letters patent; and no Company, association, or partnership consisting of more than twenty persons can be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the Company, association, or partnership, or by the individual members thereof, unless it is registered as a Company under the Act, or is formed in pursuance of some other Act of Parliament, or of letters patent, or is a Company engaged in working mines within and subject to the jurisdiction of the Stannaries.1 The Stannary Courts are Courts in Devonshire and Cornwall for the administration of justice among the workers employed in the tin mines which are there in operation. A consideration of the powers of these Courts is outwith the purview of the present work. Generally stated, the Act applies to all commercial undertakings that have for their object the acquisition of gain. The word "gain" as here used means "acquisition.” It is not limited to pecuniary gain. Still less is it limited to commercial profit. The word "gain" is to be taken as referring to a Company which is formed to acquire something, or in which the individual members are to acquire something as distinguished from a Company formed for spending something, and in which the individual members are simply to give something away, or to spend something, and not to gain anything.2 Effect of forming a Company in Violation of Act.-If in 1 Act, sec. 4. 2 Per Sir G. Jessel, M. R., ex parte Grove & Co., 1875, 10 Ch. at p. 546. |