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expense of the co execute and do all such assurance [as in Form 1, cl. 6].

day of next at least

shares in

5. Unless before the the co's capital shall have been taken up by responsible persons, either of the parties hereto may by notice in writing to the other rescind this agreemt, and such rescission shall not give rise to any claim for expenses or otherwise.

IN WITNESS, &c.

[Add Schedule containing particulars of patents.]

The above precedent does not deal with foreign patents, but in many cases the right to apply for them is included in the sale. Sometimes the company is only given an option to be exercised within a limited time after communication to acquire patents in respect of improvements and further inventions, so that if the company does not elect to proceed the vendor may himself proceed, and the same plan is sometimes adopted as regards foreign patents. Occasionally special provision is made for obtaining foreign patents and realizing the same by sale or otherwise, and dividing the proceeds, whether consisting of cash, shares or otherwise, between the vendor and the company, or for issuing to the vendor paid-up shares in the company equivalent to a certain proportion of such proceeds.

Sometimes companies are brought out (as in the case of the Electric Light Companies recently formed) with an exclusive licence or concession (acquired for a lump sum in cash, shares or otherwise) to use patented inventions for all or specified purposes within a limited district. But there was great difficulty in framing these concessions satisfactorily, for a patented article duly made and sold carried with it a licence to use the same within the limits of the patent (Betts v. Wilmot, L. R. 6 Ch. 239), and accordingly any person who could duly acquire the patented article outside the district, could sell and use it within the district. The difficulty was met, but by no means effectually, by the insertion of covenants by the grantor and grantee not to sell for use outside their respective districts. However, it seems probable that for the future, instead of such a concession, it will be found advisable to purchase and obtain an assignment of the patent for the particular district, under s. 36 of the Act of 1883, above referred to. That section provides that "A patentee (i.e. the owner for the time being) may assign his patent for any place in or part of the United Kingdom or Isle of Man, as effectually as if the patent were originally granted to extend to that place or part only." This provision appears admirably calculated to facilitate the concession system, and it would seem that where a patent for a district has been sold it will not be lawful to sell or use in that district a patented article made elsewhere. Von Heyden v. Neustadt, 11 C. Div. 230; Betts v. De Vitre, L. R. 5 H. L. 1; Adair v. Young, 12 C. Div. 13; Société des Manufactures de Glace v. Tilghman's Co., 25 C. Div. 1; 32 W. R. 71; Noble's Explosives Co. v. Jones, 9 Ap. Cas. 5.

Form 3.

MISCELLANEOUS PROVISIONS for insertion in AGREEMENTS.

Form 4.

The consideration for the said sale shall be the issue in manner Consideration half the hereinafter provided of fully paid-up shares in the co's capital (hereincapital for the after called vendors' shares), the aggregate nominal value whereof time being.

C

Form 4. shall be equal to the aggregate nominal value of the other shares of the company for the time being issued, but so that the aggregate nominal value of the vendors' shares to be issued as aforesaid shall not exceed 50,0007. And to answer this clause 5,000 of the shares in the original capital of the company shall be set aside, and shall be numbered inclusive.

Form 5.

Guarantee of profits by vendor.

to

The vendors' shares shall be issued to the vendors or the persons deriving title through them respectively in the proportions set forth in the schedule hereto, and at the times following, viz.: at the time fixed for completion by clause hereof so many as shall be equal in nominal value to the nominal value of the other shares then already issued, and the residue from time to time as and when any of the remaining shares (exclusive of any of the vendors' shares) shall be issued. Occasionally a clause as above is used. It is expedient to file further agreements as and when the shares are to be issued, see supra, p. 11.

Upon payment of the cash portion of the purchase-money the vendor shall enter into a covenant with the company for the benefit of the members thereof guaranteeing that the net profits of the company in respect of the said business during each of the three years next following the day of next shall amount to not less than [10] per cent. per annum on the capital of the company for the time being employed therein, and that if there shall be a deficiency in any of the said three years the vendor, his heirs, executors, or administrators, shall, immediately after the same shall have been ascertained and notice thereof given to him or them, pay to the company in trust for the members thereof the amount of such deficiency. The certificate in writing of the auditor or auditors for the time being of the company of the existence and amount of any such deficiency shall, as against the vendor, be conclusive evidence thereof for the purposes of this clause.

Guarantee of Profits.

It is by no means uncommon, where a going business is sold to a company, for the vendor to guarantee that the profits shall, during a limited period, amount to a particular sum. The guarantee is usually given for the benefit of the shareholders, and is stated in the prospectus as an attraction. Where the transaction is bonâ fide (i.e., is not a mere scheme for enabling the company to pay dividends out of capital) the members thereby acquire an independent right, which they will be able to rely on if the profits are insufficient. See Re Gelly Deg Colliery Co., 38 L. T. 440; South Llanharran Co., 12 Ch. Div. 503. But such guarantees require to be very carefully framed. See Stuart's Trusts, 4 C. D. 213, where it was held that the guarantee amounted to a provision for payment of dividends out of capital, and accordingly that the members could not claim the benefit thereof as against the company's creditors. Sometimes the performance of the guarantee is secured by the investment of a fund in the names of trustees. A company can in some cases release a guarantee by a vendor. Sheffield Nickel Co. v. Unwin, 2 Q. B. D. 214. Where several businesses were sold to a company it was held that the discontinuance of one of them did not discharge the vendor from his guarantee. Brown & Co. v. Brown,

35 L. T. 54; 36 L. T. 272. Where there is a guarantee fund, it is sometimes provided that if the profits in any year amount to the guaranteed sum, a part of the fund shall be released. In the South Llanharran Co., ubi supra, it was provided that any monies paid under the guarantee should be repaid out of the surplus profits which in any subsequent year remained after payment of a 10 per cent. dividend for that year.

Form 5.

As between the holders of the 12,000 shares to be allotted to the Form 6. vendors pursuant to clause hereof (which shares are hereinafter Vendors' referred to as the vendors' shares), and the holders of the other shares in shares the capital of the company which have been already, or shall hereafter be deferred. issued not exceeding 20,000 in number (hereinafter referred to as the ordinary shares), the profits of the company, from the first day of January, 1884, to the 31st day of December, 1889, shall be applied, first in paying to the holders of the ordinary shares a cumulative preferential dividend at the rate of 6 per cent. per annum upon the amount for the time being paid up, or credited as paid up on the ordinary shares held by them respectively [not exceeding 107. per share]. Secondly, in paying a dividend at the same rate to the holders of the vendors' shares upon the amount credited as paid up on the vendors' shares held by them respectively [and to the holders of the ordinary shares upon the amount paid up, or credited as paid up on the ordinary shares held by them respectively beyond 107. per share]. Thirdly, the surplus shall be applied in paying dividends on the ordinary shares and the vendors' shares pari passu in proportion to the amount paid up or credited as paid up thereon respectively. PROVIDED ALWAYS that where money has been paid up in advance of calls upon the footing that the same shall carry interest, the same shall not, while carrying interest, confer a right to participate in profits under this clause. Upon each of the certificates of title issued in respect of the vendors' shares or any of them before the 31st day of December, 1889, there shall be indorsed a memorandum in the terms set forth in the schedule hereto.

Sometimes upon the sale of a going concern the vendor agrees to give a limited preference to the shares taken up by the public, as above.

The memorandum will refer to the agreement, and set out the clause, and state that the shares included in the certificate form part of the vendor's shares.

Sometimes where a mining concern is sold to a company and there is a large stock of ore already raised, the vendor desires to reserve an interest in the proceeds, and accordingly stipulates for the issue of certificates as follows:

Form 7.

be issued to vendor

As the residue of the consideration for the said sale the company shall Certificates to issue to the vendor 100 certificates under the company's common seal in the form set forth in the first schedule hereto, and shall also execute and representing a deliver to the vendor Ideed of covenant in the terms set forth in the second schedule hereto.

share in proceeds of ore already raised.

Form 7. Form of certificate.

Form 8.

[blocks in formation]

THIS IS TO CERTIFY that the bearer is entitled to one-hundredth part of one-third part of the net proceeds of the 8,000 tons of ore acquired by the above-named company under the agreemt dated, &c., and made, &c.

This certificate is issued pursuant to clause 5 of the sd agreemt, and the bearer is entitled to the benefit of the trust deed dated, &c., and made, &c., whereby provision is made for the crushing and realisation of the sd ore and for the division from time to time of one-third of the net proceeds among the holders of the sd certificates.

Notice of every dividend declared on the certificates is to be advertised in the Times, and the receipt of the bearer is to be a good discharge for whatever may become payable on this certificate.

Before any dividend will be paid to the bearer this certificate must be produced to the company, and the company is to be at liberty to endorse thereon a memorandum of the payment.

Given under the company's common seal, this

day of

Generally it is more convenient to make the dividends payable on presentation of coupons instead of as above.

The validity of this agreemt shall not be impeached on the ground that the vendors, as promoters or otherwise, stand in a fiduciary relation Agreement not to be disputed to the company, or that the directors, having accepted office at their request, do not constitute an independent board, nor are the vendors to be accountable for any profit made upon the re-sale to the company.

though vendor promotes.

Form 9.

Liberty for vendor to remunerate promoters.

Looking to the principles laid down in New Sombrero Co. v. Erlanger, 3 App. Cas. 1218 (compare British Seamless Paper Box Co., 17 C. Div. 467) there is sometimes considerable difficulty in knowing how to bind a company where the vendors are promoters, e.g., in the case of a private company where they are in substance both vendors, promoters, and purchasers. With a view to preventing any question a clause as above, with suitable modifications, is sometimes inserted in the agreement, and the agreement is referred to in the memorandum of association and is set out or referred to in the articles, and a clause is inserted in the articles as in Form 115.

It is conceived that these precautions (in the absence of fraud) preclude all question.

The vendors are to be at liberty to remunerate for their services L. and M., and any other persons who have assisted or shall assist in forming or promoting the company. Such persons, without further disclosure to the company, shall respectively be at liberty to accept such remuneration, notwithstanding any fiduciary relation (by reason of their being promoters of the company or otherwise) that may subsist between them and the company; and the vendors shall indemnify the company against all claims and demands by such persons in respect of their services aforesaid.

When the vendors undertake to pay preliminary expenses a clause as above is sometimes inserted. As regards the persons named it would seem to be valid, but whether it would protect persons not named is open to question.

As to them it may be said that a promoter cannot retain a secret profit, and Form 9. that the above clause does not afford any disclosure.

If any difference shall arise between the parties hereto touching these Arbitration. presents, or the construction hereof, or any clause or thing herein contained, or any matter in any way connected with these presents, or the operation thereof, or the rights, duties, or liabilities of either party in connection with the premises; then and in every or any such case, the matter in difference shall be referred to two arbitrators, one to be appointed by each of the parties in difference. And upon every or any such reference the costs of and incident to the reference and award respectively shall be in the discretion of the arbitrators, or umpire respectively, who may determine the amount thereof, or direct the same to be taxed, as between solicitor and client, or otherwise, and may award by whom and to whom and in what manner the same shall be borne and paid: And the submission shall be made an order of the High Court of Justice upon the application of either party, and such party may instruct counsel to consent thereto for the other parties, and the death of any party shall not operate as a revocation.

Occasionally a clause as above is inserted in agreements, but its insertion is not to be recommended, for a dispute can generally be settled more speedily and with less expense by the issue of a writ: the presence of the clause sometimes causes grave inconvenience.

ARBITRATION.

The following are some of the effects and consequences of a submission framed as above :

In case of the death, refusal to act or incapacity of any arbitrator appointed by either party, such party will be entitled to substitute a new arbitrator.Section 13 of the Common Law Procedure Act, 1851 (in this note referred to as "the Act").

If one party fail to appoint an arbitrator, either originally or by way of substitution as aforesaid, for seven clear days after the other party shall have appointed an arbitrator, and shall have served the party so failing to appoint with notice in writing, to make the appointment, the party who has appointed an arbitrator may appoint such arbitrator to act as sole arbitrator in the reference. And an award by him will be binding on both parties as if the appointment had been by consent. However, the Court or a judge may revoke such appointment, on such terms as shall seem just.—Section 13 of the Act ; and see Gillett v. Thornton, 19 Eq. 599. Daniel, Forms, p. 1030.

This section does not apply where the reference is to be to three arbitrators,
Gumm v. Hallett, 14 Eq. 55.

If the arbitrators do not appoint an umpire, then either party may serve the arbitrators with a written notice to appoint an umpire; and if, within seven clear days after such notice shall have been served, no umpire be appointed, any judge of the High Court, upon summons to be taken out by the party having served such notice, may appoint an umpire. Such umpire will have the like power to act in the reference, and make an award as if he had been appointed by consent of all parties.-Section 12 of the Act.

The two arbitrators may appoint an umpire at any time within the period during which they have power to make the award, unless they are called upon by notice as above mentioned to make the appointment sooner.-Section 14 of the Act.

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