CHAPTER VI. CALLS. THE subscribers to joint-stock companies are not in general required to pay up the full amount of their contributions at once, but only by instalments as called for by the company from time to time. The word 'call' is used in three senses. It denotes-1. The fact Meaning of that a demand has been made; 2. The aggregate amount demanded; 3. The proportion of this amount payable by each shareholder in respect of his shares or his guarantee. If the company is unlimited, calls may be made upon the members not only to the extent of the nominal capital, but for as much beyond this as may be necessary to liquidate the company debts. If the company be limited, the members are not liable to pay calls beyond their shares or guarantee, unless it can be shown that they have agreed to do so per expressum or by implication, e.g. by allowing the directors to contract company debts which can only be met in this manner. term. I. MODE OF MAKING CALLS. make calls. By whom and in what manner calls may be validly made, can Who may only be ascertained by reference to the provisions of the act, charter, or articles of association, by which the company's constitution is regulated. It may be observed, however, generally, that calls made by persons not empowered to do so are mere nullities (a); and that when calls are directed to be made by a certain number of persons collectively, a call made by a less number will not in (a) South-East. Ra. Co., 12 A. and E. 497. See Miles v. Bough, 3 Q. B. 845; Edinburgh Ra. Co. v. Hebblewhite, Act 1862. Act 1856. Letters Patent Act 1845. general be held valid (a). All the prescribed formalities must be complied with; for though their want may sometimes be supplied by equivalents, and defenders in actions for calls may sometimes be prevented from pleading informalities by conduct or acquiescence, such contingencies are not to be relied on. When the power to make calls is lodged in directors, a call made by such as possess this character for the time being is valid, though objections may exist to the validity of their appointment (b); and the Court has refused to sustain the objection, that the whole directors by whom the call was made had not been elected at one meeting (c). No rules upon this subject are laid down in the body of the Act of 1862, and the company are left free to adopt such regulations as they choose in their articles of association. The following regulations are, however, to be found in Table A, Schedule 1; and as they are admirably suited for practice, they should always, if possible, be adopted in their entirety. The directors may from time to time make such calls in respect of unpaid monies or shares as they see fit. Twenty-one days' notice must be given of such call; and the places where and the persons to whom calls are to be paid are fixed by the directors (Rule 4). The call is deemed to be made when the resolution is passed (Rule 5). Unpaid calls bear interest at 5 per cent. (Rule 6). The directors may receive from members willing to do so, the whole or any part of the monies due on their shares beyond the amount of the call; and the company shall in that case pay them interest, at such rate as may be agreed upon, on the excess of sums so paid over the amount called up (Rule 7). The provisions in the Companies Act of 1856 are very similar to those of the Companies Clauses Consolidation Act. They are to be found in Table B, No. 2 and No. 46. No provisions on this subject are to be found in the Letters Patent Acts. The provisions of the Act 1845 are as follows: Calls are directed to be made by the company (sec. 23); but (a) Kirk v. Bell, 16 Q. B. 290; Thames Dock Co., 4 Man. and Gra. 552. (b) Swansea Dock Co., 20 L. J. Ex. 447. At least such is the case in companies formed under the Act of 1845, which contains a clause to this effect. (c) Hutcheson v. Halkett, 1847, 10 D. 150. where the special act does not require calls to be made by general meeting, they are in practice made by the directors, whose act is held to be that of the company (a). It would also seem that they may delegate this power to a committee (6). Calls may be made as the company see fit, and at such periods as they deem necessary. But in doing so, care must be taken that the provisions and restrictions of the general and special acts are strictly complied with. The special act commonly fixes the amount of each individual call, the aggregate amount of calls to be made in one year, and the interval between successive calls; and by the general Act it is provided that in all cases twenty-one days' notice at least must be given of each call (sec. 23). The company also appoint the persons to whom, and the times and places at which, payment is to be made. by instal ments. It has ultimately been fixed in England, after some conflicting Calls payable judgments, that there is no legal objection to a call being made payable by instalments (c). But it has been held, in Queen's Bench, that when the times of making and the amount of calls have been prescribed by the special act, it is irregular to make more than one call at a time (d). Unless prohibited by the special act, calls may be made prospectively; that is to say, the resolution to make calls may be prospective (e). When calls are made payable by instalments, no action can be maintained until the last instalment is due (ƒ); and no forfeiture is incurred until there has been a failure to pay the last instalment (g). Calls must be made equally on all the shareholders (h). As regards making of calls, two separate acts are observable: Resolution and 1. The resolution that a call shall be made; and 2. The notice (a) Ambergate Ra. Co., 19 L. J. Ex. 89, 4 Ex. 540; Southampton Ra. Co., 2 Ra. Ca. 215; ex parte Tooke, per Erle, J., 6 Ra. Ca. 1. (b) Great Nor. Ra. Co., 1850, 12 D. 1194; 1852, 24 Jur. 434, 1 Macq. 112. (c) London and North-West. Ra. Co., 6 Ra. Ca. 494; and Birkenhead Ra. Co., 6 Ra. Ca. 498; overruling previous case of Ambergate Ra. Co., 14 E. Jur. 625, and 5 Exch. 459. (d) Stratford and Moreton Ra. Co., 2 B. and Ad. 518; Smith v. Goldsworthy, 4 Q. B. 430, and 12 Law Jour. Q. B. 192. (e) Sheffield, Ashton, and Manchester (f) London and North-West. Ra. (h) Preston v. Grand Collier Dock notice. Resolution. Notice. served in consequence on those liable. It has been ultimately decided in England, that the resolution, as evidenced by the minutes of meeting, is the 'call' in the sense of the general Act (a). This construction has accordingly been applied in determining questions of interval between calls, and liability for calls as between seller and purchaser (b). Its application is not, however, in some cases, free from difficulty. The resolution to make calls must be entered in the minutes of meeting, and authenticated by the signature of the chairman (sec. 101). In practice, rough notes are taken at the time, which, being afterwards extended as minutes in the proper books, are signed by the chairman at the next meeting. If the same person be chairman at both meetings, this method of procedure appears unobjectionable (c). The resolution is generally, as appearing in the minutes, a bare statement that a call of a given amount per share, payable on a certain day, is made on the proprietors. It is not necessary that it should specify the place where, or the person to whom, payment is to be made, provided these particulars be sufficiently set forth in the subsequent notice (d). Care should be taken, when the special act specifies different classes of persons as liable to pay calls, that the resolution be so worded as to embrace the whole (e). The resolution is followed by a 'notice' to the proprietors, which must specify the time and place at which, and the party to whom, payment is to be made. The notice need not bear the company's seal, but must either be signed by two directors, or by the treasurer or secretary. It may either be in writing or in print, or partly in both (sec. 141). It has been decided that the printed signature of the proper officer is a sufficient compliance with the statutory requirements (ƒ). When not dispensed with by the special act, (a) Ex parte Tooke, re Londonderry, etc., Ra. Co., 6 Ra. Ca. 3, 13 Q. B. 998. (b) See North American Colon. Association of Ireland, 19 Law Jour. Q. B. 427. (c) Southampton Dock Co., 1 Man. and Gr. 448; London and Brighton Ra. Co., 2 Man. and Gr. 674; Miles v. Bough, 3 Q. B. 845, and 12 Law Jour. Q. B. 74. (d) Whitehaven and Furness Ra. Co., 1850, 12 D. 829, aff. 7 Bell's App. 79, 22 Jur. 483. The affirmance was on a specialty, but the decision is supported by many English cases. Newry and Enniskillen Ra. Co., 1848, 5 Ra. Ca. 278, and cases there referred to. (e) West London Ra. Co. v. Bernard, 22 Law Jour. Q. B. 68. (f) Great North Ra. Co. v. Inglis, 1850, 12 D. 1194, aff. 1852, 24 Jur. 434, 1 Stuart 749, 1 Macq. 112. these notices must be served on the shareholders individually (a). The special act sometimes substitutes advertisement in the newspapers for personal service, and sometimes requires both forms of publication. The forms necessary to be observed in giving these notices will be found in the appendix. calls. In actions for calls, it is necessary to prove that they were made Actions for at the period prescribed by the Act; and it would seem that a director, when sued for a call, may plead its illegality, though he himself was a party to its being made (b). But in some cases the defender will be estopped from pleading that the call has not been proved, as e.g., where he has expressly promised to pay the calls for which he is sued (c). It is correct pleading to set forth that the calls sued for were made by the parties (whoever they may be) authorized to make them, and that notice was duly given as prescribed; but an objection to the relevancy, for want of specification in this respect, has been overruled (d), and it is too late to insist on it after verdict (e). II. LIABILITY FOR CALLS. As a general rule, it is only persons who have acquired the General rules. character of shareholders or members of a formed company who are liable for calls: for until it is duly formed, the company cannot be said to hold the character either of debtor or creditor; and until a person has joined it, he cannot be said to be liable in contribution either to its capital or in liquidation of its debts. What is necessary to the formation of a company, and what to constitute membership, has been considered in the earlier chapters of this treatise. But it must be observed that persons are sometimes rendered liable for calls even before they have become shareholders. When this happens, it arises from some contract to that effect, into which they have entered either expressly or by implication. Thus, allottees of shares have been in certain circumstances found liable in payment (a) See Edinburgh and Leith Ra. Co., 6 Me. and W. 716; Painter, 3 Ad. and E. 433; Miles v. Bough, 3 Q. B. 845. (b) Stratford Ra. Co., 2 B. and Ad. (c) Miles v. Bough, 3 Q. B. 845. 421. (e) Miles v. Bough, supra. 518. L |