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Form 117. whole powers of the company, subject to the provisions of the articles and of the Companies Act, 1862, and I cannot find anything either in the Act or the articles to prohibit their making a mortgage by deposit. . . . . There being nothing in the articles to prohibit the giving of such security, I am of opinion that the company can give it as well for a past debt as a future one." See also Collie's claim, 12 Eq. 246.

Specific powers given to directors.

See also In re Anglo-Danubian, &c., Co., 29 Eq. 339, the articles contained express power to borrow (Clause 29), and also (Clause 66), a general delegation of powers as above. The question was, whether the directors had power to issue debentures at a discount. Jessel, M.R., held that they could: "There is nothing in these articles to limit the amount of interest, the directors might give 10 per cent., 20 per cent., or 30 per cent., and they might give that interest by way of discount. If, therefore, I went on the mere words of the 29th clause, I should hold this was within their powers. But, looking to the 66th clause, I cannot have any possible doubt. The directors can do anything the company can do; and as there are no regulations prescribed by the articles or the company under the 66th clause, they may borrow on any terms they think fit."

The above clause is substantially the same as Clause 55 of Table A., and Clause 90 of the Companies Clauses Consolidation Act, 1845. In the recent case of Hampson v. Price's Patent Candle Co., L. J. 45 Ch. 437; 34 L. T. 711; 24 W. R. 754, it was held that the last-mentioned clause warranted directors in granting out of the funds of the company gratuities to the workmen employed.

Where the directors propose to enter into some contract, or do something of which the majority disapprove, it may sometimes be practicable to make a regulation under the above clause; and if the directors threaten to disobey, an action can be brought in the name of the company to restrain them.

114. Without prejudice to the general powers conferred by the last preceding clause, and of the other powers conferred by these presents, it is hby expressly declared that the directors shall have the following powers, that is to say, power:

From what is said in the note to Clause 113, it seems that many of the sub-sections of this clause might without danger be omitted. Nevertheless, it is usual expressly to confer all, or some of the powers contained in them, and reasons for doing so are not wanting, e. g., 1. Directors like, as far as possible, to have express authority, for where express authority is given by the articles, the company cannot complain that an act of the directors pursuant thereto is ultra vires. Thus where the articles authorised the directors to pay 6,000l. to the promoters of the company, it was held, on demurrer, that payment without taxation was not improper. Croskey v. Bank of Wales, 4 Giff. 314; 9 Jur. N. S. 595. See however Englefield Co., 8 C. Div. 388; Marzetti's case, 28 W. R. 541. So where the articles authorised the directors to acquire a specific business "upon such terms and under such stipulations as to guarantee or otherwise as may be agreed upon," it was held that they were under no obligation to consult the company in general meeting before making the purchase, although the business was insolvent, and the purchase would involve undertaking vast liabilities. Overend & Gurney Co. v. Gibbs, L. R. 5 H. L. 480. See also Blakely Ordnance Co., 3 Ch. 159; Bank of Turkey v. Ottoman Bank, 14 W. R. 819; Eley v. Positive, &c., Soc., 1 Ex. Div. 88.

2. It relieves the directors from responsibility, for in the absence of fraud or crassa negligentia, they will not be under any personal liability to the company, even though in the exercise of the powers entrusted to them they are guilty of imprudence and want of judgment, which result in a great loss to the company. Overend & Gurney Co. v. Gibbs, ubi supra.

3. Mortgagees, vendors, and other persons dealing with a company like to see the powers of the directors in black and white.

(1.) To take such steps as they think fit to carry into effect the sd Form 117.

agreemt of the

day of

If Clause 3, supra, is inserted, this should be omitted.

To carry agreement into effect.

(2.) To pay the costs, charges, and expenses, preliminary and inci- To pay dental to the promotion, formation, establishmt, and registra- preliminary

tion of the co.

Such a power will not give a promoter a right of action, in respect of preliminary expenses, against the company. Melhado v. Porto Allegre Ry. Co., 9 C. P. 503; at any rate if he is not a party to the articles. Eley v. Positive, &c., Soc., 1 Ex. Div. 88. See also Croskey v. Bank of Wales, 4 Giff. 318, cited supra, and In re Englefield Colliery Co., 8 C. Div. 388, where directors were held liable for monies paid without vouchers or inquiry.

expenses.

(3.) To pchase or otherwise acquire for the co any ppty, rights, or To acquire privileges, which the co is authorised to acquire, at such property. price, and generally on such terms and conditions as they think fit.

(4.) At their discretion, to pay for any rights acquired by, or ser- To pay for vices rendered to, the co, either wholly or partially in cash or property in debentures, in shares, bonds, debentures, or other securities of the co, and &c. any such shares may be issued either as fully pd up or with such amount credited as pd up thereon as may be agreed upon, and any such bonds, debentures, or other securities may be either specifically charged upon all or any pt of the ppty of the co and its uncalled capital, or not so charged.

Debentures issued by a company under a general power of borrowing in part discharge of existing liabilities are valid. Inns of Court Hotel Co., 6 Eq. 82. See also opinion of Blackburn, J., in Webb v. Herne Bay Commiss., L. R. 5 Q. B. 654.

If paid-up shares are issued under the above power, a thereto may be necessary under s. 25 of the Act of 1867. p. 12.

contract in relation
See further, supra,

(5.) To secure the fulfilmt of any contracts or engagemts entered To secure into by the co, by mtge or charge of all or any of the ppty of contracts by the co and its unpd capital for the time being, or in such other manner as they may think fit.

mortgage.

(6.) To appoint, and at their discretion remove or suspend, such To appoint managers, secretaries, officers, clerks, agents, and servants for officers, &c. permanent, temporary, or special services, as they may from

time to time think fit, and to determine their duties and fix
their salaries or emolumts, and to require security in such
instances and to such amount as they think fit.

(7.) To accept from any member, on such terms and conditions as To accept
shall be agreed, a surrender of his shares or stock or any part
thereof.

A power to accept surrenders is valid, and a surrender which does not amount to a reduction of capital is not open to any objection, e. g., if a 101. share with

surrender of shares.

Form 117. 51. paid up be surrendered for two shares of 51. each, credited with 21. 10spaid up on each share. Teasdale's case, 9 Ch. 54. But if the surrender would amount to a reduction of capital it would seem that it is only valid if (1) it is bona fide for the benefit of the company, or (2) is carried into effect as a reduction of capital in accordance with the Act of 1867. Hope v. International Financial Society, 4 C. Div. 327; In re Dronfield Co., 17 C. Div. 76, in which case it was held that a company might even pay money upon a surrender where it was for the benefit of the company. See supra, Form 66, and note at end of this form.

To appoint trustees.

To bring and defend actions,

&c.

To refer to arbitration.

To give receipts.

To act for company in bankruptcy. To appoint attornies.

To invest monies.

(8.) To appoint any person or persons to accept and hold in trust for the co any ppty belonging to the co, or in which it is interested, or for any other pposes, and to execute and do all such deeds and things as may be requisite in relation to any such trust.

(9.) To institute, conduct, defend, compound, or abandon any legal proceedings by and against the co, or its officers, or otherwise concerning the affairs of the co, and also to compound and allow time for paymt or satisfon of any debts due, and of any claims or demands by or against the co.

Every company has an implied power to compromise disputes. Bath's case, 8 C. Div. 334. Such a clause does not authorise directors to pay costs of petition to wind up the company presented by themselves. Smith v. Duke of Manchester, 24 C. D. 611; 32 W. R. 83.

(10.) To refer any claims or demands by or against the co to arbitration, and observe and perform the awards.

As to arbitration, see further, supra, p. 21.

(11.) To make and give receipts, releases, and other discharges, for money payable to the co, and for the claims and demands of the co.

And such receipts will be effectual, even though the acting directors are not directors de jure. Mahoney v. East Holyford Mining Co., L. R. 7 H. L. 869.

(12.) To act on behalf of the co in all matters relating to bankrupts and insolvents.

(13.) From time to time, to provide for the managemt of the affairs of the co abroad in such manner as they think fit, and in parlar to appoint any persons to be the attornies or agents of the co with such powers (including power to sub-delegate) and upon such terms as may be thought fit.

The above should be inserted where the company is likely to carry on business abroad, or Form 136, infra, may be used. As to sub-delegation, see supra, Clause 104, and Stuart v. Norton, 9 W. R. 320.

(14.) To invest and deal with any of the monies of the co not immediately required for the pposes thereof, upon such securities and in such manner as they may think fit, and from time to time to vary or realise such investmts.

A power to invest in securities does not warrant an application for a number

of shares in a proposed company with a view to promoting it. Joint-Stock Dis- Form 117. count Co. v. Brown, 3 Eq. 139; 8 Eq. 381.

(15.) To execute in the name and on behalf of the co in favour of To give security by any director or other person who may incur or be about to way of incur any personal liability, whether as principal or surety, indemnity. for the benefit of the co, such mtges of the co's ppty (present and future) as they think fit, and any such mtge may contain a power of sale and such other powers, covenants, and provisions, as shall be agreed on.

centage to

(16.) To give to any officer, or other person employed by the co, a To give percommission on the profits of any parlar business or trans- director, &c. action, or a share in the general profits of the co, and such commission, or share of profits, shall be treated as pt of the working expenses of the co.

An interest in profits is often found to render the services of an agent more beneficial to his employer. Apart from a special power, a person standing in a fiduciary relation to the company could not be given such an interest by the board.

reserve fund.

(17.) Before recommending any dividend, to set aside, out of the To establish profits of the co, such sum as they think proper as a reserve fund to meet contingencies, or for equalising dividends, or for repairing, improving, and maintaining any of the ppty of the co, and for such other pposes as the directors shall in their absolute discretion think conducive to the interests of the co; and to invest the several sums so set aside upon such investmts as they may think fit, and, from time to time, to deal with and vary such investmts, and dispose of all or any pt thereof for the benefit of the co, and to divide the reserve fund into such special funds as they think fit.

Where the regulations do not provide for the retention of any part of the profits by way of reserve, the articles can no doubt be altered so as to give the power. Binney v. Ince Hall Co., 35 L. J. Ch. 363. And prima facie there is nothing to compel a company to divide the whole of its profits, though the regulations might be so framed. Stringer's case, 4 Ch. 494.

Of course the above power does not relieve the company from its obligation to provide for depreciation, and otherwise keep its capital intact. Davison v. Gillies, 16 C. D. 347; Guiness v. Land Corporation of Ireland, 22 C. Div. 319; and infra, p. 169.

Where the regulations appropriate the reserve fund to specific purposes, they can be altered. Walker v. London Tramways Co., 12 C. D. 705.

(18.) From time to time to make, vary, and repeal byelaws for the May make regulation of the business of the co, its officers and servants, byelaws. or the members of the co, or any section thereof.

Persons dealing with a company are deemed to have notice of the memorandum and articles of association, but not of byelaws made by the directors. Royal Bank of India's case, 4 Ch. 252.

Form 117. May make contracts, &c.

(19.) To enter into all such negotiations and contracts, and rescind and vary all such contracts, and execute and do all such acts, deeds, and things in the name and on behalf of the co as they may consider expedient for or in relation to any of the matters afsd, or otherwise for the pposes of the co.

There can be little doubt that such a clause as above is a sufficient authority to the directors to vary contracts expressly adopted by the articles. See and consider Sahlgreen & Carrall's case, 3 Ch. 323.

irst solicitor.

[114a. Messrs.

SOLICITORS.

of ——, shall be solors of the co.]

In a recent case the articles of the company provided that, “Mr. A. B., of -, shall be the solicitor of the company, and shall transact all the legal business of the company, including parliamentary business, for the usual and accustomed fees and charges, and shall not be removed from his office unless for misconduct." Mr. A. B. was employed by the company after its corporation, but there was no evidence of any agreement to employ him on the terms mentioned in the articles. He was not a subscriber to the articles, but he was a member of the company. It was held that the articles did not constitute a contract between the company and Mr. A. B., and that he could not sue the company for refusal to employ him. Eley v. Positive Ass. Soc., 1 Ex. Div. 20; S. C. on App. 88. In the Exchequer Division the Court was also of opinion that the employment was intended to be permanent, and that the articles were not a sufficient agreement in writing within section 4 of the Statute of Frauds.

First secretary.
Substitute.

SECRETARY.

[1146. Mr., of, shall be secretary to the co.]

[114c. The directors may appoint a temporary substitute for the secretary, who shall, for the pposes of these presents, be deemed to be the secretary.]

Custody of seal.

THE SEAL.

[115. The directors shall provide for the safe custody of the seal, and the seal shall never be used except by the authority of the directors previously given and in the presence of two directors at the least, who shall sign every instrumt to which the seal is affixed, and every such instrumt shall be countersigned by the secretary or some other person appointed by the directors.]

A clause as above is sometimes inserted, and when there is such a provision everyone dealing with the company is deemed to have notice of it, but such a person is not bound to ascertain that de facto directors have been duly appointed. In re County Life Soc., 5 Ch. 288; Mahony v. East Holyford Mining Co., L. R. 7 H. L. 869.

In case foreign or colonial business is in contemplation, Form 136 can be inserted here.

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