Form 260. notice shall be deemed to constitute the company the agent of the retiring member for the sale of the share to any member of the company, at the fair value, and such authority shall not be revocable, and, if the company shall, within the space of twenty-eight days, &c.

Arbitration.

Default by retiring member.

Default by co.

How shares

to be offered to members.

4. In case any difference arises between the retiring member and the purchasing member as to the fair value of a share, the difference shall be referred to arbitration in manner hereinafter provided [but so that the amount awarded shall not in any case exceed by more than [10] p. c. the capital pd up on the shares].

The words in brackets are occasionally inserted.

Sometimes it is provided that "the fair value," or "the current transfer price," shall be a sum equal to the amount paid up on the share, or a sum to be fixed by the auditor, or a sum to be fixed at the ordinary general meeting in each year, e.g. :—

"At the ordinary general meeting in each year the company shall, by resolution, declare what is the fair value of a share, and, upon any sale pursuant to Cl. hereof, the amount so declared, with the addition thereto of 5 per cent. per annum from the date of the meeting to the date of the completion of such sale (less any dividend in the meantime paid), shall be deemed to be the fair value for the purpose of Cl. hereof."

Sometimes Cl. 4 is omitted, and, instead of giving, by Cl. 6, free right to transfer at any price, it is provided that the party may sell and transfer to any person, but so that the price shall not be less than the sum specified in the transfer notice, with provisions for statutory declarations by vendor and purchaser as to the price, &c. Sometimes it is provided that, in case of difference, the auditor shall fix the fair value.

5. If in any case the retiring member, after having become bound as afsd, makes default in transferring the share, the co may receive the pchase-money, and shall thereupon cause the name of the purchasing member to be entered in the register as the holder of the share, and shall hold the pchase-money in trust for the retiring member. The receipt of the co for the pchase-money shall be a good discharge to the purchasing member, and after his name has been entered in the register in purported exercise of the afsd power, the validity of the proceedings shall not be questioned by any person.

6. If the co shall not, within the space of twenty-eight days after being served with the transfer notice, find a member willing to pchase the shares, and give notice in manner afsd, the retiring member shall at any time within three calendar months afterwards be at libty, subject to Clause 9 hereof, to sell and transfer the shares (or those not placed) to any person and at any price.

7. The co in general meeting may make and from time to time vary rules as to the mode in which any shares specified in any notice served on the co pursuant to clause 2 hereof shall be offered to the members, and as to their rights in regard to the pchase thereof, and in parlar may give any member or class of members a preferential right to pchase the Until otherwise determined, every such share shall be offered to the members in such order as shall be determined by lots drawn in

same.

regard thereto, and the lots shall be drawn in such manner as the Form 260. directors think fit.

Sometimes it is provided that the shares shall be offered, (a), as in Form 259, or, (b), to the shareholders successively, according to the number of shares held by them, or, (c), to some particular shareholder, e.g., the founder, or, (d), to the members whose names are entered in a register of applicants in rotation.

transfer to

son, &c.

8. Any share may be transferred by a member to any son or daughter, Right to or son-in-law, or wife or husband of such member, and any share of a deceased member may be transferred by his exs or ads to any son or daughter, or son-in-law, widow, or widower of such deceased member, and Clause 1 hereof shall not apply to any such transfer.

Sometimes power is also given to transfer, with the approval of the board, to the trustees of any settlement made by a member, or to any person who has been appointed or elected a director.

to refuse transfer.

9. The directors may refuse to register any transfer of a share, (a), General power where the co has a lien on the share; (b), where it is not proved to their satisfon that the proposed transferee is a responsible person; (c) where the directors are of an opinion that the proposed transferee is not a desirable person to admit to membership. But paragraphs (b) and (c) of this clause shall not apply where the proposed transferee is already a member [holding more than shares], nor to a transfer made pur

suant to Clause 8 hereof.

Sometimes the words in brackets are inserted so as to exclude small shareholders from the benefit of the exception.

TRANSMISSION.

The transmission clauses are usually framed as above, p. 117, and, where the right of transfer to strangers is restricted, as in Form 260, the executors and others claiming by transmission will be bound thereby. Sometimes it is desired, in the event of death, to provide for paying out part of the capital of the deceased. This cannot be effectually provided for in the case of a limited company, since it would amount to a reduction of capital. To meet this difficulty it is not uncommon, where a business is converted into a company, to provide that the vendors shall take part of the consideration in debentures, which can, if desired, be framed so that the interest shall only be payable out of profits [supra, p. 275], and so that the principal shall not be called in till the death of the person to whom they are issued. See Form 220, supra.

COMPULSORY RETIREMENT.

The

Provisions for compulsory retirement are becoming very common. power to enforce retirement in certain specified cases (e.g., where a member ceases to be employed by the company), is commonly vested in the directors. See Form 261 et seq. But it is frequently deemed desirable to enable a large majority of the shareholders (e.g., nine-tenths in value) to exercise the power without assigning any reason. Such a power seems peculiarly desirable where the great mass of the capital is likely to be vested in a few persons.

Form 260.

Form 261.

dismissed employé.

Suppose, for example, that a shareholder who has been brought into a company merely to keep the number up to seven, or because he appeared to be a deserving employé, is found to be objectionable, he cannot, in the absence of such a power, be got rid of against his will, except by winding up the company. Sometimes the power is vested in the original owner of the company's business and his executors, so long as a specified number of shares stand in his name, and is so framed that he or they may take the shares at the fair value, or at a specified price, e.g., par.

Whenever any member of the co [holding less than shares] who Retirement of is employed by the co in any capacity, is dismissed from such employmt [for breach of faith, misconduct, or other offence which] the directors [deem prejudicial to the interests of the co they] may at any time within days after his dismissal, resolve that such member do retire, and thereupon he shall be deemed to have served the co with notice pursuant to Clause hereof, and to have specified therein the amount pd up on his shares as the fair value. Notice of the passing of any such resolution shall be given to the member affected thereby.

Form 262. Another.

Form 263. Compulsory retirement.

Form 264. Compulsory retirement.

Whenever any holder of any C shares ceases to be employed by the co the directors may at any time within days afterwards resolve co, &c.

Sometimes the power is not confined as in Form 261 to dismissal, but is framed as above or is exercisable only as regards a particular class of shares. Occasionally the holder is given a limited time to retire, and only in default is deemed to have given the notice.

The holders for the time being of nine-tenths of the issued capital may at any time serve the co with a requisition to enforce the transfer of any parlar shares not held by the requisitionists. The co shall forthwith give to the holder of such shares notice in writing of the requisition (with a copy of this clause subjoined), and unless within 14 days afterwards the holder shall give to the co notice of his desire to transfer the same, he shall be deemed at the expiration of that period to have given such notice in accordance with Clause hereof, and to have specified therein the amount pd up on the shares as the sum he fixes as the fair value. For the pposes of this clause any person entled to transfer a share under the transmission clause shall be deemed the holder of such share.

See note above as to compulsory retirement. This form can be used where the regulations contain provisions as in Form 260, but where those provisions are not used a more elaborate form is requisite, as, for example, the following:

1. The registered holders for the time being of not less than ninetenths of the issued shares may at any time serve the co with a requisition in writing requiring the co to enforce the transfer of any parlar shares not held by the requisitionists.

2. When any such requisition has been served the co shall give notice in writing thereof to the owner of the shares (hereinafter called the

owner), and he shall thenceforth hold the same subject to the following Form 264. provisions :

3. At any time within 28 days after the service of such requisition the co may on behalf of the owner contract with any member or members of the co for the sale to him or them at the fair value of the shares or any pt thereof, and upon any such contract being made shall forthwith give notice thereof to the owner.

Sometimes the member is given the option of finding a purchaser himself, thus:-" At the expiration of fourteen days after the service of such notice (unless the owner shall in the interval transfer the shares with the approval of the directors) the company may at any time within twenty-eight days, to be computed, &c.

4. The fair value of the shares contracted to be sold as afsd shall be ascertained as follows, that is to say when any such contract has been made, the person with whom the same is made (hereinafter called the purchasing member) must within seven days after the date of the contract give to the owner notice in writing, stating the sum at which he estimates the fair value of the shares, and the sum so stated shall be deemed to be the fair value if it is not less than the amount of the capital pd up on the shares, plus ten p. c. If it is less than that amount the owner may within seven days after being served with such notice serve purchasing members with a notice in writing, stating that he disputes the estimate contd in the first notice, and specifying the sum he is willing to accept as the fair value. If the co, within seven days, assents and notifies to the owner such assent, such last-mentd sum shall be deemed the fair value, and if the purchasing member does not assent within such seven days, he shall be deemed to dissent, and the difference as to the fair value shall be referred to arbitration [but so that the sum awarded as the fair value shall not exceed the amount of the capital pd up on the shares by more than -l. p. c.].

5. When the fair value has been ascertained as afsd the pehase shall be completed at such time and place as the purchasing member shall notify to the owner, and thereupon the owner shall transfer the shares to the purchasing member [or his nominee, approved by the co], and the purchasing member shall pay the fair value thereof to the owner.

6. At any time before the fair value has been ascertained, the purchasing member may deposit in some [London] bank in the name of two trustees nominated by the co a sum equal to the capital pd upon the shares contracted to be sold to him, plus twenty p. c., to be held by them as a security for the paymt to the owner of the fair value of such shares, when ascertained, and thereupon the owner shall, at the request of the purchasing member, transfer the shares to him or his nominee, provided such nominee is approved by the co.

7. If in any case the owner makes default in transferring the shares, as hinbefore provided, the co may remove his name from the register in respect of such shares, and may enter the name of the purchasing member, or his nominee afsd, as to holders, and the validity of the

Form 264. proceedings shall not subsequently be impeached by any person. But the co shall not act under this clause unless and until the fair value has been ascertained and pd to the co in trust for the owner or the amount mentd in the last preceding clause hereof has been duly deposited as thereby provided.

8. If by reason of default on the pt of the purchasing member the pchase is not completed within fourteen days after the fair value of the shares has been ascertained, the owner may, by notice in writing to the purchasing member, annul the contract for sale.

9. In the seven last preceding clauses hereof "the owner" means the registered holder of the shares and the exs or ads of a registered holder whilst any shares or stock remain standing in the name of such registered holder.

10. Any such reference as afsd shall be made to two persons, one to be appointed by each of the parties in difference, and the cost of and incident to the reference and award shall be in the discretion of the arbitrators or umpire who may determine the amount thereof, or direct the same to be taxed as between solor and client, or otherwise, and may award by whom and to whom and in what manner the same shall be borne and pd, and the submission may be made an order of the High Court of Justice on the applicon ex parte of either party and the death of any party shall not operate as a revocation.

If the regulations contain provisions for arbitration, this clause will not be requisite.

11. The co in general meeting may from time to time determine the order or manner in which the members shall be at libty to tender for the shares to be taken, pursuant to any such requisition as afsd, and generally as to their rights or privileges in regard thereto And until otherwise determined, the co, as soon as conveniently may be after the service of the requisition, shall give notice in writing to each member specifying the share, and stating that he is at libty within a time to be limtd therein, to tender for the pchase of the whole or any pt thereof at the fair value as provided by the co's articles of association, and each member shall be at libty to make a tender in writing, delivered at the office within the time so limtd for such shares, or any pt thereof, and the co, on behalf of the owner, shall accept the tenders so made, if sufficient shares be available, and if the shares tendered for exceed the amount available, the tenders shall rank for acceptance in such order as shall be settled by lot, and the directors may cause lots to be drawn accordingly, and no director shall be precluded from tendering, and any difficulty as to apportionment shall be settled by the directors.

Forfeiture.

Occasionally in a private company the provisions for forfeiture may be omitted, it being considered that the provisions for lien are sufficient