authority may, in respect of transfers or other entries proposed to be Form 136a. registered in the branch register for which such authority is appointed, exercise all the powers of the directors in the same manner and to the same extent and effect as if the directors themselves were actually present in the colony and exercised the same.

2. Subject to the provisions of the Companies (Colonial Registers) Act, 1883, and to the foregoing provisions, the directors may, from time to time, make such provisions as they may think fit respecting the keeping of such branch register or registers.

Any mtge, bond, or other security bearing the common seal of the co Form 137. and issued for valuable conson, shall be binding on the co, not- What withstanding any irregularity touching the authority of the directors to securities issue the same [and no person taking any such security shall be bound to ascertain that the amount then due by the co on mtge or other se- valid. curities does not exceed one-half of the nominal capital of the co].

The words in brackets will of course be modified to suit the circumstances. The above clause is occasionally inserted. In re Patent File Co., 6 Ch. 85. But it would seem to be merely the expression of the rule settled in a series of cases, of which Royal British Bank v. Turquand, 6 E. & B., is a leading one. The rule is that where a company is regulated by an Act of Parliament, general or special, or by deed of settlement or memorandum and articles of association registered in some public office, persons dealing with the directors are bound to read the Act and registered documents, and to see that the proposed dealing is not inconsistent therewith, but that is all: they need not inquire into the regularity of the proceedings. They may assume that all is being done regularly. Thus where the articles give power to borrow with the sanction of a general meeting, a lender need not inquire whether the resolution has been passed. Royal British Bank v. Turquand, ubi supra; Agar v. Athenæum Society, 3 C. B. N. S. 725; 6 W. R. 277. And see Ex parte Eagle Co., 4 K. & J. 549; 6 W. R. 779, as to execution of policies. In re Land Credit of Ireland, 4 Ch. 460, it was held that as the company had power to accept bills, certain acceptances could not be impeached on the ground that they were irregularly issued. So also it has been held that the public is entitled to assume that a person ostensibly acting as the company's agent or director has been duly appointed. Smith v. Hull Glass Co., 11 C. B. 897; In re County Life, 5 Ch. 288; Mahoney v. East Holyford Co., L. R. 7 H. L. 869.

But it would seem that a person is not entitled to assume that a special resolution has been passed. Irvine v. Union Bank, 2 App. Cas. 379.

under seal to

be deemed

No pchase, sale, contract, or agreemt, made or entered into by Form 138. the directors, or act done by the directors, to which the assent of the Acts assented co in general meeting shall be given, shall be afterwards impeached or to by company objected to by reason that the same is not within or is opposed to the not to be business and objects of the co, or that a dissolution of the co may be ultra vires. thereby rendered necessary, or on any other ground whatsoever.

A clause to the above effect is sometimes inserted. See Marshall v. Glamorgan Iron and Coal Co., 7 Eq. 137, in which Giffard, V. C., assumed that it was valid. But having referred to the Ashbury Co. v. Riche, L. R. 7 H. L. 653, it seems ex

impeached as

Form 138. tremely doubtful whether it would be held valid. See also Hope v. International Financial Society, 4 C. Div. 327; and Garden Gully, &c., Co. v. McLister, 1 App. Cas. 54.

Form 139.

Remuneration of promoter.

Form 139a.

In conson of the great labour, expenses, and risk which A. B., one of the subscribers of the memorandum of association, has incurred and been put to in and relating to the promotion and formation of the co, and in registering the memorandum and articles of association thereof, the co shall when and so soon as shares shall have been allotted,

pay to the sd A. B., his exs, ads, or assigns, the sum of -1.

See Croskey v. Bank of Wales, 4 Giff. 317; Madrid Bank v. Pelly, 7 Eq. 412 ; Englefield Colliery Co., 8 C. Div. 388.

66

As between the company and a person who is not a party to the articles of association such a clause as the above does not amount to a contract on which the company could be sued at law. Melbado v. Porto Allegro Ry. Co., L. R. 9 C. P. 503; Eley v. Positive Government Co., 1 Ex. Div. 88. But if the company adopts and takes the benefit of the acts of its promoters they may, at any rate where the regulations provide that they shall be paid out of the funds of the company, have an equitable right to be paid accordingly. Thus in Terrell v. Hutton, 4 H. L. 1093, the regulations (Art. 44) provided that a sufficient part of the funds should be appropriated in payment of the preliminary expenses, and the solicitor who had acted anterior to and after the formation was held entitled to prove. The Lord Chancellor said, Quite independently of the Winding-up Acts it has been long ago established (Lord Cottenham enunciated the proposition many times) that these companies cannot take the benefit of what has been done by those who have formed them without thereby incurring responsibilities to those persons. Now that observation, which has been extended to a very great class of cases under the Winding-up Acts, applies in my mind pre-eminently to a solicitor who is doing that without which the company never could have existed. It is an old and well-known principle in the law that when one person does an act as an agent for some other person, though then quite unknown to that other, if afterwards the latter adopts the Act, it is just the same as if he had authorised it from the beginning. I think that principle will, with the aid of the 44th article, enable your Lordships safely and distinctly to come to a conclusion here. I am not certain that it would not have been sufficient without that article. That which was done for the necessary purpose of forming the company, or in the prosecution of the necessary business of the company after it was formed, is to be treated as a debt of the company ab initio." Lord Brougham and Lord St. Leonards concurred, the latter saying inter alia that "any argument to show that there would be a difficulty, in the way of recovering at law is of itself a sufficient reason for giving the party relief in equity if the demand constitutes an equitable debt." And see Hereford Engineering Co., 2 C. Div. 621; and compare with Empress Engineering Co., 16 C. Div. 125; and Ex parte Pearce & Co., 32 W. R. 131. The two last-mentioned cases go to show that where a company agrees with A. [e.g. the vendor] to pay B. a sum of money [e.g. for the preliminary expenses] B. cannot sue the company for the amount under the contract, though he may be entitled to make some claim on the footing that the company has taken the benefit of his services. Terrell v. Hutton was not cited in these cases. But B. can sue if a trust can be made out, e.g. if it is declared that A. is trustee for B. Empress Engineering Co., ubi supra. And

see Murray v. Flavell, 49 L. T. 690.

Every director, manager, auditor, trustee, member of a committee, Secrecy clause. officer, servant, agent, accountant, or other person employed in the

business of the co, shall, before entering upon his duties, sign a de- Form 139a. clon, pledging himself to observe a strict secrecy respecting all transactions of the co with the customers and the state of accounts with individuals and in matters relating thereto and shall by such declon, pledge himself not to reveal any of the matters which may come to his knowledge in the discharge of his duties, except when required so to do by the directors or by any meeting, or by a court of law, or by the person to whom such matters relate, and, except so far as may be necessary, in order to comply with any of the provisions in these presents contained.

:

The surplus assets of the co upon the winding up thereof shall be Form 140. applied first, in repaying to the holders of the sd preference shares the How surplus amount pd up thereon; then, in repaying to the holders of the deferred assets to be distributed. and other shares the amount pd up on such shares; and the residue (if any) shall be divided among the members in proportion to the nominal amount of the capital held by them respively.

In the absence of special provision the holders of preference shares stand in a winding up on a level with the holders of the ordinary shares. In re London Indiarubber Co., 5 Eq. 519; Griffith v. Bagot, 6 C. D. 511. See supra, p. 166.

If the co shall be wound up the surplus assets shall be applied, in the Form 141. first place, in repaying to the holders of the A. shares the amount pd up Preference to thereon, and the residue shall belong to the holders of the B. shares.

holders of A. shares.

In the event of the co being wound up the surplus assets remaining Form 142. after the return of the whole of the pd-up capital shall belong as to nine- Founders' tenths to the holders of the shares other than the founders' shares, and as shares. to the residue to the holders of the founders' shares.

Special.

In the event of the co being wound up the surplus assets thereof shall Form 143. be applied first, in repaying to the holders of the shares other than those to be issued pursuant to the said agreemt of the day of the full amount pd up on the shares held by them respectively; secondly, in paying to the holders of the shares, to be issued pursuant to the sd agreemt, the amount credited as pd up thereon; and the residue (if any) of such surplus assets shall belong to and be divided among the members in proportion to the nominal amount of capital held by them.

RESOLUTIONS.

Ordinary resolution.

Mode of passing special resolution.

INTRODUCTORY NOTES.

THE regulations of a company generally provide that divers acts shall be done by the company in general meeting-e.g., that officers shall be appointed at the ordinary general meeting, or that the directors may borrow money or declare a dividend or convert shares into stock with the consent of the company in general meeting. In such cases the act will be done on the consent given by a resolution of the members present in person, or by proxy, where proxies are allowed, at a general meeting of the company. Whether the meeting should be an ordinary or an extraordinary one must depend on the nature of the business and the regulations [supra, p. 135]. The meeting must have been duly called [supra, p. 134]. A proper quorum must be present [supra, p. 135]. If a poll is duly demanded regard must be had to the number of votes to which each member is entitled by the regulations of the company.

With regard to "special" and "extraordinary" resolutions :-It is extremely common to provide by the regulations that certain acts shall only be done by special resolution of the company, or by extraordinary resolution. And, moreover, the Acts of 1862 and 1867 require or enable a company to do various things by special or extraordinary resolutions, as will be seen in the notes to the following resolutions. See also index under "Special Resolution."

It will be convenient here to state what is meant by the expressions special resolution and extraordinary resolution respectively ;—

1. As to a special resolution: Section 51 of the Act of 1862 provides that:

"A resolution passed by a company under this Act shall be deemed to be special whenever a resolution has been passed by a majority of not less than three-fourths of such members of the company for the time being entitled according to the regulations of the company to vote, as may be present in person or by proxy (in cases where by the regulations of the company proxies are allowed), at any general meeting of which notice specifying the intention to propose such resolution has been duly given, and such resolution has been confirmed by a majority of such members for the time being entitled according to the regulations of the company to vote, as may be present in person or by proxy at a subsequent general meeting, of which notice has been duly given, and held at an interval of not less than fourteen days, nor more than one month from the

date of the meeting at which such resolution was first passed: at any meeting mentioned in this section, unless a poll is demanded by at least five members, a declaration of the chairman that the resolution has been carried shall be deemed conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of or against the same: notice of any meeting shall, for the purposes of this section, be deemed to be duly given and the meeting duly held, whenever such notice is given and meeting held in manner prescribed by the regulations of the company: in computing the majority under this section when a poll is demanded, reference shall be had to the number of votes to which each member is entitled by the regulations of the company.

Not less than fourteen days in the above section means fourteen clear days. 2. As to an extraordinary resolution: Section 129 of the Act of 1862 What is an provides that:

For the purposes of this Act any resolution shall be deemed to be extraordinary which is passed in such manner as would, if it had been confirmed by a subsequent meeting, have constituted a special resolution as herein before defined."

extraordinary resolution.

As regards the quorum of a meeting to pass a special or extraordinary Quorum. resolution, the section provides that the meeting shall be deemed to be duly held whenever it is held in manner prescribed by the regulations, and it follows that such quorum as the regulations prescribe must be present. Cambrian Co., 23 W. R. 405; 31 L. T. N. S. 773.

Sometimes the quorum of a general meeting provided by the articles is so large that all the existing members if assembled would not constitute a quorum, e.g., where the quorum is to consist of a fixed number of members, say 10, holding a fixed proportional of capital, e.g., 10,0007., and the company proves abortive. But in such case it is conceived that as it is impossible to comply with the clause it becomes inoperative, and section 52 of the Act applies. Brick & Stone Co., W. N., 1878, 140; 22 S. J. 625. That section is as follows :

In default of any regulations as to voting every member shall have one vote, and in default of any regulations as to summoning general meetings a meeting shall be held to be duly summoned, of which seven days' notice in writing has been served on every member in manner in which notices are required to be served by the Table marked A. in the first schedule hereto, and in default of any regulations as to the persons to summon meetings five members shall be competent to summon the same, and in default of any regulations as to who is to be chairman of such meeting it shall be competent for any person elected by the members present to preside.

Where a question is put by the chairman, it is usual, in the first Show of hands. instance, to take a show of hands, and, unless the regulations otherwise provide, this course should be adopted. In re Horbury Bridge Co., 11 C. Div. 109. And it appears from this case that upon a show of hands proxies are not to be regarded-unless, indeed, the regulations otherwise provide-and the number of hands only is to be counted. See also The Queen v. Government Stock Co., 3 Q. B. D. 442; Pulbrook v. New Civil Service, 26 W. R. 11.

As to notices convening meetings to pass resolutions, whether special, Notices of extraordinary, or otherwise, see infra, Form 183, et seq. meetings.