CHAPTER IX. DIFFERENT KINDS OF PARTNERS. It is usual, in treatises on partnership law, to make use of certain phrases in order to distinguish from each other the different kinds of partners. These phrases will be here enumerated and explained as they are generally understood. ners. 1. Active or managing partners are such as are in reality Active partmembers of the firm, and act both as its agents and sureties. They are also sometimes styled ostensible partners; but this phrase is ambiguous, as it is often used to indicate nominal partners. 2. Nominal partners are they who appear or are held out to the Nominal world as partners, but who have no real interest in the business. partners. partners. 3. Dormant or sleeping partners are properly such as, whether Dormant known or unknown, have no power of agency to bind the firm; but, while liable for its obligations and entitled to share profits, are passive as to its management. The phrase is often, however, used in the sense of latent or quasi partners. ners. 4. Latent partners, sometimes also called secret or silent part- Latent partners, are persons whose existence as partners is not known to the world; but who, sharing profits, are either de facto partners, or are liable to the world as though they were. Generally speaking, latent partners take as much share in the conduct of the concern as they whose names appear in the firm. 5. Quasi partners, or partners as to the world, are such as, not Quasi partners. being partners inter socios,—that is, partners in the proper sense of the word,—are nevertheless liable for the company obligations by reason of something which they have done, or permitted to be done. of the termin This terminology is useful as conducing to brevity of expres- Imperfection sion; but the phrases employed are not in themselves the most ology. felicitous to express the true import of the legal relations in which the various classes of partners stand to themselves and the public; and, what is still more to be regretted, they have never been defined with any accuracy, and are used in very different senses by different writers. In these circumstances, little use will be made of them in the present treatise; but it is hoped that the explanation given will be sufficient to render their meaning, when they do occur elsewhere, intelligible. CHAPTER X. PUBLIC COMPANIES. PRELIMINARIES TO FORMATION. common law COMMON law companies are formed in the same way as partner- Formation of ships, viz. by agreement. To this writing is not an essential; companies. they may be proved rebus ipsis et factis. In the general case, however, the company is formed by means of a deed, styled company articles, articles of association, deed of settlement, etc. This instrument is signed by all the members, and is supposed to contain the constitution of the company. of incorporated Incorporated companies are formed by their charter, special Formation act, or by registration; and until these have been obtained, the companies. company does not come into existence. Before, however, a public company is formed, whether it be a common law company, a company privileged by letters patent, or incorporated by charter, special act, or registration, a good deal of procedure takes place, which may be called preliminaries to formation. When a company is projected, its promoters generally endeavour Prospectus. to obtain support by publishing to the world in as favourable a manner as possible the nature of the proposed undertaking, the amount of capital required, the number of shares, and the return which the shareholders may expect from their contributions. This is ordinarily done by means of advertisement, circulars, preliminary notices, etc., but principally by issuing a prospectus, which may be regarded as containing the terms upon which the promoters agree to contract with the public. Those who desire to support the undertaking, request the managers to allot them a certain number of shares, and sign the application, which is generally in a printed form. Letter of allotment. Suspensive conditions. Scrip-certificate. If the company be already formed before the prospectus has been issued, as was often the case with common law companies, and is almost always now with registered companies, and if the applicant receive a letter of allotment imposing no new condition, and leaving nothing open for future acceptance or rejection, the application on the one hand and the allotment on the other form a contract based on the prospectus, and the applicant is converted into the shareholder (a). If, however, the letter of allotment be not a simple acceptance of the application, but something more, something less, or something different, it is a new offer which the applicant may either accept or decline (b). An offer not accepted within a reasonable time is held as declined (c). If again it appear from the prospectus, or be otherwise proved to be the intention of the promoters, that the company shall not be formed until something which yet remains to be done shall have been accomplished, the acceptance, which in that case is sub conditione, does not create partnership until the condition has been purified. Thus, in common law companies, it has often been made a suspensive condition, that a certain amount of capital shall be subscribed, certain inventions found workable, or that certain advantages shall be secured before the company is formed; and in undertakings requiring privileges, it is often conditioned that the association shall be formed under royal charter or special act. In such cases the applicant generally receives an acknowledgment, usually termed a scrip-certificate, to the effect that he is entitled to receive a certain number of shares when the company has been duly formed. This certificate does not constitute the holder a partner in the company, but creates a right to acquire, and an obligation to take, a certain number of shares (d); so that when the company is formed, he may compel it to receive him as a shareholder, and it may render him such against his will (e). Scrip-certificates, when stamped, are transferable by mere delivery, and seem to require no indorsement. They therefore often (a) Pulsford v. Richards, 17 Beav. 87; Jennings v. Broughton, ibid. 234. (b) Fox v. Clifton, 6 Bing. 776; ex parte Rye, 3 E. Jur. N. S. 460; Duke v. Andrews, 2 Ex. 290. (c) Carmichael, 17 Sim. 163; Mathew, 3 De G. and S. 234. (d) Jackson v. Cocker, 4 Beav. 59. (e) Kidwelly Canal Co., 2 Price 93; Midland Great Western Rail. Co., 16 M. and W. 804. pass through many hands before the company has obtained its special act, or has otherwise been formed (a). of scrip. When this takes place, the company may register the original Registration allottee, if the scrip-transferree does not come forward (b); and whether he does so or not, the company are entitled to register the original allottee, if they are not satisfied with the solvency of the scrip-transferree. For the contract was made with the allottee, and the company were not parties to the subsequent transferences (c). The company, moreover, may register the scripholders who present themselves, without inquiring whether they are allottees or transferrees (d). If, however, after transfer of scrip, the original allottee be registered without the consent of the scrip-transferree, he becomes a trustee for the latter, and accountable to him for the proceeds of the shares (e). If the company register the scriptransferree, they thereby pass from all claims against the original allottee (ƒ). not partners. Scripholders are in no sense of the word copartners, any more Scripholders than promoters are; yet the possession of the scrip-certificates vests the holders with certain rights. Thus they may apply to the Court to interdict the promoters from misapplying the funds of the concern (g); and where the company is wound up as abortive, the scripholders have been found entitled to share the dividend (h). scrip-certifi The issuing of scrip-certificates, however convenient for some Disuse of the purposes, is attended with many disadvantages, and has often cate. given occasion to fraudulent transactions. It has accordingly very much fallen into disuse. In the case of railway companies Subscribers' and other associations formed by special act, the procedure for formation now generally begins by an agreement, popularly called a subscribers' contract, which is drawn up by the promoters, and (a) Hodges 123. (b) East Lothian Rail. Co. v. Peffers, 1849, 11 D. 1184. (c) Ross v. East Lothian Rail. Co., 1848, 10 D. 1284; Midland G. W. Rail., 5 Rail. Cases 76. (d) Birmingham and Thames Rail. Co., 1 Q. B. 256; Lauder v. Orr and Others, 1853, 15 D. 670; Edin, and Leith R. Co. v. Manson, 1842,4 D. 865. (e) Lauder v. Orr and Others, 1853, 15 D. 670; Beckett v. Bilborough, 8 Hare 188. (f) Bunten v. Barclay, 1854, 16 D. 1002. (g) Bagshaw v. East Union Rail. Co., 7 Hare 114. (h) Madrid and Valencia Rail. Co., 16 E. Jur. 809. contract. |