exclude the other from the management (a). And the fact of one partner being practically excluded from the exercise of this right, has been held to be a sufficient ground for the appointment of a receiver (b) (judicial factor) to manage the concern. This right is generally exercised by voting at meetings, ordinary or extraordinary, convened for the purpose of examining into the management and of passing resolutions. Every partner is entitled to be heard, as well as to vote; and the fact of his not being present, in consequence of want of due notice, may be fatal to the validity of the proceedings. In general, his power to affect the management is confined to the value of his vote; but there are some cases in which his single refusal to concur in a proposed measure will render it incompetent. Of this kind are attempts to change the nature of the business (c), to travel out of the sphere of operation for which the company was formed (d), or to do something forbidden by, plainly at variance with, or obviously not contemplated in, the instrument of formation (e). Modes in right is exer which this cised. RIGHT TO INSPECTION OF COMPANY BOOKS. to company The right which every partner possesses to take part in the Right of access management of the company, necessarily involves that of making books. himself fully cognizant of the state of its affairs. Deprived of this, his chances of sharing profits might be found very illusory; and he might often be involved in ruinous liabilities and losses which he could neither foresee nor prevent. It has therefore come to be regarded as a fixed and fundamental principle of the law of partnership, that every partner is entitled to insist that the company books and accounts shall be accurately kept, and be at all times patent to his inspection (f). So important are these rights con (a) Rowe v. Wood, 2 Jac. and W. 558. (b) Wilson, 1 Swanst. 471; Clegg, 1 Mac. and G. 294. (c) Maxton v. Brown, 1839, 1 D. 367; Fleming v. Campbell, 1845, 7 D. 935. (d) Brown v. Adam, 1848, 10 D. 744; Balfour's Trs. v. Edin. and Nor. Ra. Co., 1848, 10 D. 1240; Wil son v. Glasgow and South-West. Ra. (e) See Powers of Majorities, and (f) Per Lord Eldon in Rowe v. Restrictions on this right. Case of public companies. sidered to be, that they are generally made the subject of special provisions in the partnership contract. In private firms it is usual to entrust the keeping and custody of the books to one of the partners, and it is not uncommon to delegate these duties to a paid assistant or bookkeeper; but whatever arrangement of this kind may be made for purposes of convenience, it is quite settled law, that no partner is entitled to retain the books in his own exclusive custody, to remove them from the place of business, or to put any bar in the way of their being examined and scrutinized by his copartners (a). So fully, indeed, is this principle recognised, that if a partner chooses to enter the partnership accounts in a private book among his own personal matters, this, instead of excluding the scrutiny of his copartners, may entitle them to inspection of all that the private book contains (b). Sometimes, when the nature of the business seems to require it, though this can be but of rare occurrence, it is made a provision of the copartnery contract, that the partners generally shall not have access to the books, but that they shall remain under the sole control of those charged with the active management of the conSuch provisions are not favourites of the law; and they will not be permitted to stand in the way of a rigid scrutiny, if a case calling for investigation is relevantly alleged (c). cern. In public companies with a large and fluctuating membership, the duty of keeping the books and accounts of the concern is necessarily entrusted, like other matters of ordinary management, to the managers or directors. This does not, however, derogate from the right of the shareholders to inspect and scrutinize them. Yet, as it could serve no good purpose, and might often be productive of mischievous consequences, to leave the company books and accounts continually open to the inspection of shareholders, it is usual to insert in the contract certain provisions fixing the times at Wood, 2 Jac. and W. 358, 359, and (a) Greatrix v. Greatrix, 1 De G. 148; Taylor v. Rundell, 1 Y. and C. C. C. 128; Stuart v. Bute, 12 Sim. 460. (b) Freeman v. Fairlie, 3 Mer. 43; Toulmin v. Copland, 3 Y. and C. Ex. 655. (c) Collins v. North British Bank, 1850, 13 D. 349. which they shall be open for inspection, and any restrictions on the exercise of this right which may be deemed advisable. Such provisions and regulations are binding (a); but they will be fairly construed by the Court, and will not be interpreted so as to afford occasion for fraudulent or even unjustifiable concealment (b). Thus, when the contract of a banking company prohibited the shareholders from access to the books, it was held that this provision was applicable only to the case of fair and ordinary management on the part of the directors, and did not bar a shareholder from insisting on exhibition when he had relevantly libelled an action of fraud against the directors (e). Restrictions of any kind on the common law right, which every shareholder, in virtue of being a partner, has to inspection of the company's books, are only effectual where they have received the assent of all the members of the association, adhibited in the instrument of formation, or at some subsequent period when that is competent. They cannot be imposed by resolutions of directors, or even, it should seem, by the will of majorities (d). Were this otherwise, shareholders might be deprived of a powerful means of checking malversation at the very time when its possession was of greatest importance. If directors are required to depone to the contents of the company books, they cannot plead ignorance on the ground of having been excluded from their inspection by their co-officials. They ought to have enforced the rights, since they chose to undertake the duties, of the office (e). Shareholders, like partners, are bound in all company matters to pay due regard to the common interests; and hence they are not entitled to abuse their right of inspecting the company books by publishing their contents to strangers, particularly when the company is involved in litigation (f). And for this reason, when, by a company's special act, shareholders were declared entitled to (a) Baldwin v. Lawrence, 2 Sim. and Stu. 184; Williams v. Prince of Wales Life Co., 23 Beav. 338. (b) Hall v. Connell, 3 Y. and C. Ex. 707. (c) Collins v. North British Bank, 1850, 13 D. 349. Here the Court remitted to an accountant to examine the books and report. See Hall v. (d) See Taylor v. Rundell, 1 Y. and (e) See last cases. (ƒ) Williams v. Prince of Wales Co., supra. Where restric tions are binding. Right of inbe exercised tion. spection must with discre Modes of keeping partnership books. Arrangements as to keeping the books, etc. inspection of the books at all seasonable times, the English courts have refused to enforce this right by mandamus, unless the petitioner could show that he had been denied inspection by the managing body, after alleging as a ground for his application a purpose which seemed reasonable to the Court (a). It would be out of place in a work of this kind to enter into any detailed examination of the different modes of bookkeeping which have been recommended for adoption in private companies and firms, or to pass any judgment on their respective merits. It may be observed, however, that in making choice of a particular method, attention should be given to the nature of the business, and the manner in which it is intended to be carried on. When it does not involve numerous details, and when the partners are not familiar with the refinements of bookkeeping, the more simple the method adopted, so that it have the merit of clearness, the more likely will it be to serve the purpose intended. If, again, the company transactions are numerous and complex, a more artificial and elaborate system of bookkeeping will be required, and the aid of a trained assistant may be advisable. But whatever may be the principles of the system adopted in other respects, it is of essential importance that the firm be treated as a separate person, and that the partners be dealt with as its debtors and creditors. This method of keeping partnership accounts will be found of excellent use in cases of dissolution, and of the death, embarrassment, or bankruptcy of a partner; and it has the advantage of being in exact conformity with the Scottish theory of partnership law, which recognises the quasi person of the firm. Even in England its simplicity and practical utility have led to its general adoption among mercantile men. It will often be found convenient to entrust the duty of keeping and custody of the partnership books to some one of the partners in particular, sometimes to a paid assistant, subject of course in all cases to the supervision of the partners generally. Arrangements of this kind may well be introduced into the contract of copartnery, which should also contain a provision that the books are to lie at the office of the company, and open to the inspection of every partner. This last (a) See Reg. v. Wilts and Berks Canal Co., 3 A. and E. 477; Reg. v. Clear, 4 B. and C. 899. provision, which is a mere affirmance of the common law, has the advantage of preventing misconceptions or disputes. A partner is not only entitled to a full inspection of the company books and accounts, but also to expect that his copartners will, in so far as they are concerned, keep them in a fair and intelligible manner, and communicate to him all that they may know about the state of the company affairs. Hence, if a partner, knowing well the true state of the partnership accounts, should take advantage of this knowledge to make an advantageous agreement with his copartner who was not so well informed, such agreement would be liable to reduction on the head of fraudulent concealment (a). Hence, if in judicial proceedings for accounting between partners, it turns out that no books of accounts have been kept, that they have been destroyed, are wrongfully withheld, or have been so kept as to be unintelligible, every presumption will lie against the partner to whose negligence or misconduct this state of matters is imputable (b). And though it has been agreed, that when accounts have once been made out, examined, and signed, they shall not afterwards be disputed; yet if a partner induces his fellows to sign a fabricated and untrue account in ignorance of its real character, it may be opened up at any time on this being established (c). In companies erected under public authority, special regulations are generally made by the charter or special act for the proper keeping of the company books and accounts, and for affording the members due opportunities of examining and making excerpts from their contents. These provisions are always construed by the courts in such a way as to prevent concealment on the one hand, and unnecessary or hurtful publicity on the other. Act 1845. The provisions of the Companies' Clauses Consolidation (Scot- Companies land) Act, in so far as they relate to the rights of shareholders to take part in the company management, and to inspect and examine the books and accounts, will be found noticed between pages 123 and 131. Their import and application will, however, be best apprehended by a careful study of the Act itself. Any further notice in this place would be a mere unnecessary repetition. (a) See Maddeford v. Austwick, 1 Sim. 89. (b) Gray v. Haigh, 20 Beav. 219; Walmsley v. Walmsley, 3 Iv. and Lat. (c) Oldaker v. Lavender, 6 Sim. 239. |