Register of mortgages.

When unregistered mortgage de

bentures void.

Directors may lend,

and so may members.

that debentures by virtue of the repeal contained in section 15 of the same Act, are liberated from the operation of section 8 of the Act of 1878.

And unless a very liberal interpretation should be placed on this section, it would seem that the Act of 1882 does apply to a debenture trust deed, comprising chattels ; and accordingly, that if the deed comprise "personal chattels," it must be framed in the statutory form, and duly registered, or else it will be void so far as regards such chattels. It would not, however, be convenient so to frame or register the deed; and, accordingly, it has become the practice since the Act of 1882 not to rely on a trust deed as regards "personal chattels," but to insert an independent charge in the debentures. This plan effectually secures to the debenture holders a floating charge, subject only to the intervention of execution creditors, and enables the company to state that they are a [first] charge on the whole of its assets, present and future.

By section 43 of the Companies Act, 1862, it is provided that :

"Every limited company under this Act shall keep a register of all mortgages and charges specifically affecting property of the company, and shall enter in such register, in respect of each mortgage or charge, a short description of the property mortgaged or charged, the amount of charge created, and the names of the mortgagees or persons entitled to such charge. If any property of the company is mortgaged or charged without such entry as aforesaid being made, every director, manager, or other officer of the company, who knowingly or wilfully authorises or permits the omission of such entry, shall incur a penalty not exceeding fifty pounds."

Hence it is necessary where mortgage debentures, secured by a mortgage to trustees, are issued, duly to register the mortgage, and if there is not a mortgage to trustees, each mortgage debenture ought to be duly registered.

If a mortgage debenture not duly registered is issued to a director or other officer of the company, it will be invalid as against the creditors of the company in the winding up. Native Iron Ore Co., 2 C. Div. 345. This disability does not apply to members. General South American Co., 2 C. Div. 337. And there are cases in which the rule will not be applied. See Re Borough of Hackney Co., 6 C. Div. 557; Re International, &c., Co., 6 C. Div. 557; Re South Durham Co., 11 C. Div. 579. In the case last mentioned the mortgage was made to partners, one only of whom was a director.

Directors of a company are not under any disability to lend to their company. See cases, supra, p. 131.

Nor are the members of a company under any such disability. Thus In re General South American Co., 2 C. Div. 314, 72,000l. was raised on mortgage debentures at 18 per cent. per annum interest all but 4000l. being advanced by members of the company. They were held valid in the winding up, and to give the holders a charge upon all the property of the company, in priority to the general creditors.

Where there is to be a trust deed to secure debentures, the company's Solicitor's lien. solicitor very commonly acts for the trustees as well as the company.

In such case the solicitor waives his lien on any deeds in his possession

relating to the mortgaged property unless it is expressly reserved. In

re Snell, 6 C. D. 105; In re Mason v. Taylor, W. R. 1878, 245.

It has for some time past been usual to make the interest on deben- Coupons. tures payable on presentation of coupons annexed thereto. When the period for payment approaches a coupon is detached, and is commonly forwarded for collection through a banker. By this means the payment of the interest is facilitated; for, however the coupon be framed, it is generally assumed that the bearer is well entitled to the interest therein specified. There is another convenience in having coupons Convenience attached to a debenture, namely, that the holder can, if in want of cash, of.

cut off and sell the coupons, or any of them, or procure the same to be discounted.

If thought fit the name of the executing director can be signed by As to stampmeans of a stamp. "I see no distinction between using a pen or a ing signature. pencil and using a stamp, where the impression is put upon the paper by the proper hand of the party signing." Per Bovill, C. J., Bennett v. Brumfitt, L. R. 3 C. P. 31. The law in the United States is the same. Pennington v. Bachr, 48 Cal. 565.

The Stamp Act, 1870 (see Schedule) imposes the following duties on Stamps. a mortgage, bond, debenture, or covenant:

(1.) Being the only, or principal, or primary security for the pay- £ s. d. ment or repayment of money not exceeding 251. Exceeding 251. and not exceeding 501.

Debenture.

0 08

0

1 3

For every 100l. and also any fractional part of 1001. of such amount 0 26 (2.) Being a collateral, or auxiliary, or additional, or substituted security, or by way of further assurance for the above-mentioned purpose where the principal or primary security is duly stamped:

For every 1001. and also for any fractional part of 100l. of the amount secured

.00 6

Accordingly a debenture, where there is not any trust deed, should be stamped as above. An instrument which is called a debenture will be chargeable as such, although it may operate as a promissory note. Re British India Steam Co., 7 Q. B. D. 165.

A coupon or warrant for interest attached to or issued with any Coupons. security is exempted from stamp duty by the Stamp Act, 1870. See Schedule, under title, "Bill of Exchange," Exemptions. And see also Enthoven v. Hoyle, 13 C. B. 373, from which it appears that, apart from the above exemption, a coupon in the usual form being a mere token, would require no stamp.

Form 211. [Sometimes the heading states the capital, bankers, and registered office.] Issue of 2000 debentures of £100 each, carrying interest at the rate

Debentures to bearer, &c.

of 6 p. c. p. a.

No.
1. The
day of

Co, Limtd (hereinafter called the co), will, on the

[if any condition for acceleration, add: or on such earlier day as the principal monies hby secured become payable in accordance with the conditions indorsed hereon], pay to the bearer [if debenture to be capable of registration, add: or when registered to the registered holder] on presentation of this debenture the sum of £100.

2. The co will in the meantime pay interest thereon at the rate of p. c. p. a. by equal half-yearly paymts on every day of and -day of [if coupons to be annexed, add: in accordance with the coupons annexed hto]; [if the debenture is to contain a charge, add: 3. The co hby charges with such paymts all its ppty, whatsoever and wheresoever, both present and future, including its uncalled capital for the time being].

4. This debenture is issued subject to the conditions indorsed hereon. Given under the common seal of the co this

-day of—.

Heading. Very commonly a heading as above is used. Sometimes the date of incorporation and other particulars are stated.

Consideration. It is not essential to express the consideration in a deben- Form 211a. ture, but if in any case it is deemed desirable to do so, the instrument will commence as follows:-"In consideration of the sum of 100l. to the above-named company (or to The of- the said company will, &c.," or "The Company, Limited, in consideration of - of will, &c.," or "For valuable consideration already

paid to it by

received The

Company, Limited), paid by

Company will, &c."

-1.

Will Pay. Instead of "will pay," the words "undertakes," "promises," or "binds itself" to pay are sometimes used. Ex parte City Bank, 3 Ch. 153; Crouch v. Credit Foncier, L. R. 8 Q. B. 374; Norton v. Florence Public Works Co., 7 C. Div. 332.

Interest.—If the bearer should not present the debenture for payment at maturity, interest would not be subsequently payable. Interest would however be payable if the company made default, but not, in the absence of express contract, at a higher rate than 5 per cent. per annum. In re Roberts, Goodchap v. Roberts, 14 C. Div. 49; 28 W. R. 870; In re European Central Co., 4 C. Div. 33; 25 W. R. 92.

Bearer. Sometimes debentures are made payable "to A. or to the bearer hereof." As to the validity of a security to bearer, see supra, p. 250, et seq. Order. See Form 218, infra, for debentures to order.

Registration.-Power to register is now very commonly given, in order to meet the views of trustees and others. See supra, p. 250.

Coupons are now commonly issued. See condition 2 as to presentation.
Stamps. See supra, p. 263.

Charge. Some persons prefer to enumerate some of the items charged, e.g., "all the collieries, mining rights, plant, machinery, book-debts, credits and monies of the company, and all other," &c. Sometimes only part of the assets are charged, e.g., "all the property of the company present and future except what is effectually charged by the indenture mentioned in the conditions indorsed hereon," and in that case a clause will be inserted in the conditions referring to the trust deed. See infra, p. 268. This plan is sometimes adopted where it is desired to charge personal chattels in England, inasmuch as the Bills of Sale Act interferes with a charge in the deed. See supra, p. 262, but not uncommonly in such case the debentures purport to charge all the property. As to a charge of uncalled capital, see supra, p. 260.

Language. Where a company is likely to find a foreign market for its debentures, or a vendor so stipulates, the debentures are printed in several languages on the same sheet.

Conditions. If thought fit the debenture can refer to the conditions as subjoined, or they may be set out in the body of the debenture.

The conditions within referred to.

1. This debenture is one of a series of

debentures, each for Form 211b.

securing the principal sum of 7., issued or about to be issued by the Conditions. co. [If the debentures contain a charge, add: The debentures of the sd series are all to rank pari passu as a [first charge] on the ppty hby charged without any preference or priority one over another, and such charge is to be a floating security, [if desired, add] but so that the co is not to be at libty to create any mtge or charge [on its freehold and leasehold land] in priority to the sd debentures].

It was formerly customary to insert words in explanation of the expression floating security, e. g., "and so that the company in the course of its business, and for the purpose of carrying on the same, may sell, lease, exchange, or otherwise deal with its property for the time being as may seem expedient,"

Form 211b. but as the meaning of a floating charge or security is now well settled [supra, p. 258] these words are generally omitted.

A floating security leaves the company at liberty to create specific mortgages, and when it is desired to limit that power, words should be inserted as above. Whether they are operative has not been settled. Sometimes the debentures are to be of various amounts, e. g., "This debenture is one of a series of like debentures for securing principal sums not exceeding £ : each debenture to be for such amount and to be payable at such date as may be agreed."

Where so arranged, the conditions will provide that "the debentures of the above issue (including this debenture) and the debentures of any subsequent issue containing a similar charge, are all to rank pari passu as a floating charge on property charged thereby, but so that the aggregate amount of the principal moneys thereby secured shall not at any one time exceed £ [or exceed the amount of the uncalled [or of the paid-up] capital for the time being] of the company." Or, as in Form 220. If the debentures are to be a first charge, the words "and by way of first charge in such property" can be used, and the debentures can be called First Mortgage Debentures. Reference is sometimes made to an existing prior charge, e. g., "The debentures are to rank pari passu as a second charge on the property, namely, held after such of the mortgage debentures issued by the company in the year as shall for the time being be outstanding." See Gartside v. Silkstone Co., 21 C. D. 762, as to priority between two classes bearing same date.

2. Annexed to this debenture are

coupons, each providing for the paymt of a half-year's interest, and such interest will be payable only on presentation [and delivery] of the coupon referring thereto.

As to coupons, see supra, p. 263.

Presentation includes delivery. Bartlett v. Holmes, 13 C. B. 630; 22 L. J. C. P. 182.

3. The principal monies and interest hby secured will be pd without regard to any equities between the co and the original or any intermediate holder hereof.

This condition is probably implied by the debenture being "to bearer.” (Supra, p. 250) and is very commonly omitted in the case of a debenture to bearer.

4. If the principal monies hby secured shall become payable before the day of, the person presenting this debenture for paymt must surrender therewith the coupons representing subsequent interest; the co, nevertheless, paying the interest for the fraction of the current half-year.

5. The delivery to the co of this debenture and of each of the sd coupons, shall be a good discharge for the principal monies and interest therein respively specified, [and the co shall not be bound to inquire into the title of the respive bearers of such instrumts, or to take notice of any trust affecting such monies, or be affected by express notice of the right, title, or claim of any other person to such monies or instrumts.]

[If there is power to register, add: Nevertheless, when registered the receipt of the registered holder, his exors or admors, shall alone be a good discharge for such principal monies.]

It is more convenient to make the delivery of the instrument, rather than