When above modes adopted. Proceedings on amalgamation. Mode (a). Terms. Agreement. Mode (b). passes a special resolution as in the last case, the liquidators carry the sale into effect, and the old companies are then dissolved. Mode (a) can only be adopted where one of the companies desiring to amalgamate has power to acquire the property and liabilities of the other or others. See supra, p. 82. Mode (b), on the other hand, is available in every case, and is often adopted even where there is an ample power to purchase, for the circumstances of the companies, or the terms of the amalgamation, very commonly render the establishment of a new company necessary. It may be convenient here to follow closely the course of proceedings upon an amalgamation in accordance with these two modes. And first, as to mode (a). We will suppose that Company A. and Company B. desire to amalgamate; that the directors of Company B. have full power to purchase the assets of Company A.; and that there are sufficient unallotted shares of Company B. at the disposal of the directors thereof. The first thing is for the directors of the two companies to arrange the terms on which the sale is to be made. They must settle whether the consideration is to consist exclusively of shares, or partly of shares and partly of cash, whether the shares are to be fully or partly paid up, whether Company B. or the liquidator of Company A. is to purchase the interests of dissentients and satisfy the debts of Company A., whether any of the directors of Company A. are to become directors of Company B., and whether Company B. is to compensate any of the officers of Company A. for loss of office, and so forth. When the terms are settled they will be embodied in a conditional agreement. See infra. Notice of the arrangement is then given to the members of Company A. by the directors thereof, and meetings called to pass a special resolution to wind up, appointing a liquidator and directing him to adopt the agreement. The special resolution having been passed, the liquidator adopts the agreement and carries it into effect. Company B. will allot the shares as provided by the agreement; the dissentients will be satisfied as arranged. The debts of Company A. will be paid and liquidated by Company B. or the liquidators of Company A. according to the arrangement. As soon as may be Company A, will be dissolved. It will be observed that the proceedings are very similar to those upon a reconstruction. See supra, p. 552. If the amalgamation is to be effected by a sale to a new company according to mode (b), the terms of amalgamation will be settled between the directors of the companies proposing to amalgamate, and embodied in an agreement made with some person on behalf of the intended new company. Each of the single companies then passes a special resolution as above, and the subsequent course will be the same as above upon amalgamation according to mode (a). An amalgamation according to mode (b) closely resembles a recon struction by means of Section 161, except that it struction of two or more companies instead of one. involves the recon- company to be In every case of amalgamation, the question arises whether the debts, How debts of costs of winding up the selling company, and the obligation of satisfying transferring the dissentient members of that company, are to be borne by the pur- paid. chasing company, or not. The chief advantage of throwing the burden on the purchasing company is that the members of the selling company, who will be called on to sanction the arrangement by special resolution, are more likely to do so if they know precisely how many shares in the purchasing company they are to receive, but this cannot be if the selling company is to bear the burden. On the other hand, the purchasing party may not be willing to accept a burden which is more or less indefinite it may prefer to purchase the assets for a fixed sum. However, in practice the burden is almost always thrown on the purchasing company. Where the burden of paying the debts, costs of winding up, and obli- Where transgation of satisfying dissentient members of the selling company or com- pany to pay its ferring companies is not to be thrown on the purchasing company, the agreement own debts. with the purchasing company will be for the sale of the assets in consideration of a definite number of shares in the purchasing company to be allotted to the liquidators of the selling company or as they direct, and the special resolution of the latter company, besides providing for the winding-up, appointment of liquidators, and adoption of the agreement, will direct the liquidators to sell so many of the shares as may be necessary to pay the debts, costs of winding-up, and to satisfy dissentients, and to apply the proceeds accordingly, and to distribute the remaining shares among the members. Sometimes the agreement provides for the retention by the selling company of sufficient funds to pay its creditors. resolution of In some cases the directors of a company can only acquire the assets When special of another company with the sanction of their own company in general purchasing meeting or by special resolution; and where this is the case as regards a company company to which a sale by way of amalgamation is proposed to be made necessary. under Section 161, the necessary sanction must be obtained; and it ought to be obtained before the selling company is called on to pass the special resolution for winding up, &c., for it would be a serious mishap for the latter company if, after the passing of the resolution to wind up, the agreement fell through. The only course would be to reconstruct or to apply to the court to stay the liquidation. ment of It is very common, upon an amalgamation, to provide that some of As to appointthe directors of the selling company shall become directors of the pur- mirectors of chasing company. Where the amalgamation is effected by means of the selling comformation of and sale to a new company, this is provided for by the pany to be articles of the new company; but if the sale is to be to an existing com- purchasing pany, it is generally necessary to obtain the sanction of the agreement by company. special resolution of that company; for the power of appointing directors directors of Sanction pany. Notices prior to special resolution should be sufficient. Usual form of notice. Objects of purchasing may be more ex tensive than those of selling company. What com panies can amalgamate under section 161. As to name of amalgamated company. is almost always vested in the company in general meeting. See Stace and Worth's case, 4 Ch. 685, and James v. Eve, L. R. 6 H. L. 335. So, too, it may be necessary to get the sanction of a special resolution of the purchasing company where the agreement involves the creation of new shares by that company. Upon an amalgamation it is by no means uncommon to provide for compensation to such of the directors or other officers of the selling company as are not to take office under the purchasing company. Nor is there any objection to such an arrangement provided there is no concealment. Southall v. British Mutual Life Ass. Soc., 6 Ch. 614. Nor is it necessary to call attention to the matter provided that the members are given an opportunity of ascertaining the terms. Ibid. The notices calling general meetings to pass the special resolutions should be sufficiently explicit. They should be accompanied by a circular showing the nature of the plan, and, if no previous communication on the subject has been made to the members, the advantages or necessity which should induce its adoption. The notices ought to contain some reference, direct or indirect, to Section 161 of the Act, particularly if the memorandum or articles contain a power" to amalgamate." See the case of the Imperial Bank of China, &c., v. Bank of Hindustan, &c., 6 Eq. 91. See also Fox's case, 6 Ch. 176. As the validity of the resolutions depends on the sufficiency of the notices, it is a serious mistake not to render them sufficient beyond dispute, and it is now usual to refer expressly to Section 161. See also supra, p. 558. Upon an amalgamation effected under Section 161 of the Act, it is no objection that the objects of the purchasing company are more extensive than those of the selling company, Southall v. British Mutual Life Assurance Society, 11 Eq. 65; nor, indeed, that they are entirely different. Any company capable of being registered under the Act of 1862 (see Part VII. of the Act) may effect a reconstruction or amalgamation under Section 161. It will register and immediately resolve on a voluntary winding-up and sale. Section 180 of the Act provides that such a registration shall not be invalid by reason that it has taken place with a view to the company being wound up, and it has been decided that registration with a view to winding up and selling under Section 161 is not open to objection. Southall v. British Mutual Life Assurance Society, 11 Eq. 65. If it be desired that the purchasing company should assume the name of the selling company, or part of it, the agreement will provide accordingly, and the change will be made, with the consent of the Board of Trade and of the liquidators, under Sections 13 and 20 respectively of the Act. This has been done in various cases, and may be effected in a few days. An amalgamation with a foreign company may be effected under Sec- Amalgamation with foreign tion 161. See supra, p. 555. company. An agreement for sale adopted by the liquidators pursuant to a direction of the company is valid. See supra, p. 555. The agreement may provide for the allotment of the shares to the liquidators, or to the members directly. See supra, p. 55. As to dissentients, see supra, p. 556 et seq. As to their right of action for purchase-money, see supra, p. 557. As to the rights of dissentients being restricted by the articles, see supra, p. 166. Dissentients. Financial ment. An agreement in a winding up to sell the assets in consideration of Clinch v. shares, coupled with a provision that if the realised value should not Corporation. amount to a fixed sum, the deficiency should be made good by a call Invalid agrecon the members of the selling company, is not such a sale as can be made under Section 161. Even if the call was to be made on the assenting members only, it is considered that such a sale would be invalid. "It is sufficient to say that, in my opinion, the liquidators of a company would have no right to place a shareholder of a company in this position, that he must either dissent altogether from the arrangement, and be subject to have his share taken from him at a valuation, or else come in under the arrangement, and thus be forced to subject himself to the liability of guaranteeing the sufficiency of the assets." Per Lord Cairns, L. C., Clinch v. Financial Corporation, 4 Ch. 120. Form 212, supra. The property to be sold under Section 161 is the assets of the company, exclusive of its uncalled capital (if any). S. C. shares. Upon a sale under Section 161 the members of the selling company Premium for cannot be called on to pay a premium for the allotment to them of the shares in the purchasing company. Imperial Bank of China, &c., v. Bank of Hindustan, China, and Japan, 6 Eq. 91; 1 Ch. 339. But a sale may be made in consideration of shares which are to be Sale for partly paid-up shares deemed only in part paid up. In re City and County Investment Co., valid. 13 C. Div. 475; Imperial Mercantile Credit Association, 12 Eq. 504; Hester & Co., 44 L. J. Ch. 757; or in consideration of deferred or preference shares. As to altering articles of association with a view to deprive dissentients of their rights under Section 161, see supra, p. 559. As to validity of sale to a trustee for the new company, see supra, p. 559. As to necessity and mode of securing payment of dissentients, see supra, p. 559. assurance As to the amalgamation and transfer of the business of life assurance Amalgamacompanies, see the Life Assurance Companies Act, 1870 (33 & 34 Vict. tion of life c. 61), ss. 14, 15; Buckley, 534. Under the Act last mentioned, the companies. sanction of the court must be obtained to any transfer or amalgamation. See further, supra, p. 374. P P AMALGAMATION. Form 727. Agreement with a view to amalgamation. Parties. Recitals, Condition. Sale. Part consideration. Compensation to officers of A. Company, AGREEMT with a view to an AMALGAMATION with an existing Co. In the following case a company A. and company B. C. are desirous of amalgamating: the directors of the latter have full power to acquire the assets of the former, and there is a sufficient number of unissued shares in the B. company for the purposes of the agreement. The agreement will be as follows: between N., of on AN AGREEMT made the day of behalf of the A. Co, Limtd, (hereinafter called the A. Co) of the one pt, and the B. C. Co, Limtd (hereinafter called the B. Co) of the other pt. WHAS (recite incorporation of A. Co: capital 40,0001. in 201. shares, with 101. pd up: all the shares issued and fully pd up): AND WHAS the B. Co was incorporated in the year under the Cos Acts, 1862 and 1867 AND WHAS the nominal capital of the B. Co is 60,000l., divided into 6,000 shares of 107. each, whereof 3,000 and no more have been issued and now stand credited in the books of the B. Co as having been fully pd up: AND WHAS it is intended to procure the A. Co to pass special resolutions for a voluntary winding up, appointing liqs, and directing them to adopt and carry into effect this agreemt : NOW IT IS HBY AGREED as follows: 1. This agreemt is conditional on the adoption hereof before the day of next, by the liqs of the A. Co, with the sanction of a special resolution of that co. 2. The A. Co shall sell and the B. Co shall pchase all and singular [supra, Form 723, cl. 1.] 3. As a pt of the conson for the sd sale the B. Co shall pay, satisfy, and discharge all the debts, liabilities, and engagemts of the A. Co now or at the time of such adoption as afsd binding on it, and shall at all times keep the A. Co, &c. [supra, Form 723, cl. 2.] 4. As a further pt [supra, Form 723, cl. 3.] 5. As a further pt of the conson for the sd sale the B. Co shall, within three months from the adoption hereof by the liqs of the old co with such sanction as afsd pay to the sum of -1., to the sum of the 7. apiece, such sums to be accepted by the sd persons in full discharge of all claims by |