Table A. and lodged Form of proxy. Number, names of first directors. Subscribers of memorandum to be directors until appointment. 50. The instrument appointing a proxy shall be deposited at the registered office of the company not less than seventy-two hours before the time for holding the meeting at which the person named in such instrument proposes to vote, but no instrument appointing a proxy shall be valid after the expiration of twelve months from the date of its execution, unless it purports to appoint a proxy to act for the appointer during his absence from the colony. 51. Any instrument appointing a proxy shall be in the following form : as my proxy, to vote for me and on my behalf at the ordinary [or extraordinary as the case may be] general meeting of the company to be held on the of day and at any adjournment thereof [or at any meeting of the company that may be held in the or during my absence fron the Colony of year New South Wales]. As witness my hand, this Signed by the said Buckley, pp. 463, 464. day of in the presence of The right to vote by proxy does not exist at common law, but must be conferred by the articles: Harben v. Phillips, 23 Ch. Div. 14, at p. 32. No stamp is required on an instrument appointing a proxy. Directors. 52. The number of the directors and the names of the first directors shall be determined by the subscribers of the memorandum of association. 53. Until directors are appointed the subscribers of the memorandum of association shall be deemed to be directors. Buckley, pp. 464, 465. These articles do not, but articles usually do, prescribe a qualification for directors. An act done by a meeting of a minority of the subscribers of the memorandum is invalid: London and Southern Counties Freehold Co., 31 Ch. D. 223. 54. The future remuneration of the directors, and their re- Table A. muneration for services performed previously to the first general Art. 55. meeting, shall be determined by the company in general meeting. Remuneration. Buckley, pp. 465, 466. This remuneration is in the nature of a gratuity; and unpaid fees due to Is gratuity. directors are due to them in their character of members, and they are to be postponed to outside creditors under s. 36 (7): In re Leicester Club Racecourse Co., e.p. Cannon, 30 Ch. D. 629. Not so the salary of a managing director: Re Dale & Plant, 43 Ch. D. 255. "The granting of pensions and gratuities is only a mode of remunerating the officers of the society for their services; and as such a power is necessarily incident to the general powers of management of the society, the members can remunerate their officers in whatever way they may consider most conducive to the interests of the society and to the most efficient management of the business, and, therefore, a proposed grant for a superannuation fund is not illegal or ultra vires": per Owen, Ch. J. Eq., in McElhone v. A.M.P. Society, 10 N.S.W. L.R. Eq. 50. A company, whose articles of association provided for the directors' remuneration at a certain date, altered these articles by special resolution, which purported to make the altered rate of remuneration effective from a date prior to the special resolution; but the Court of Appeal held that the directors were entitled to remuneration at the old rate up to the date of the resolution: Swabey v. Port Darwin G.M. Co., 1 Megone's Companies Cases, 385 (1889). A grant of a pension to the family of a deceased officer of a bank made in general meeting, has been held valid : Henderson v. Bank of Australasia, 40 Ch. D. 170. Powers of Directors. directors. 55. The business of the company shall be managed by the Management by directors, who may pay all expenses incurred in getting up and registering the company, and may exercise all such powers of the company as are not by the foregoing Act, or by these articles, required to be exercised by the company in general meeting, subject nevertheless to any regulations of these articles, to the provisions of the foregoing Act, and to such regulations, being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting; but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if such regulation had not been made (a) Buckley, pp. 466–477. (a) s. 98; Art. (71). directors. This article formally vests in the directors those powers which, by virtue of Powers of their office, they must necessarily possess; that is, full powers of management of the company subject to the restrictions of the Act, and of the articles, if any Table A. restrictions are imposed by the articles. The company cannot itself act, it must Art. 55. act through other persons, and those persons the directors: Ferguson v. Wilson, 2 Ch. 77, at p. 89. persons. Directors are variously described as the agents, or as trustees, or as managing partners of the company. They are agents of the company, and may bind the company by any acts which are within the scope of the objects of the company; As regards third and this as regards third persons acting bonâ fide with the company, although, in fact, as between themselves and the other shareholders the directors may have exceeded their powers: Royal British Bank v. Turquand, 6 E. & B. 327. And the company is responsible for the false and fraudulent misrepresentations of its agents acting in the course of its business and for its benefit; but not where the misrepresentations are for the agents' own private ends: British Mutual Co. v. Charnwood Forest Co., 18 Q.B. Div. 714; and see Prince v. Nowlan, 5 S.C.R. 304, 310. Are trustees. Dividends out of capital. Knowledge of directors. Secret profits. Placing shares. Right to indemnity. Further, directors are trustees for the company of the powers committed to them, and may be compelled personally to refund moneys of the company misapplied by them in the course of their management, though not where there has been on their part mere innocent mistake, unless it amount to crassa negligentia. In Re Oxford Benefit B. & I. Society, 35 Ch. D. 502, directors were ordered to repay £40,000 improperly paid by them as dividends; and the following propositions were said by Kay, J., to be established :— 1. That directors are quasi trustees of the capital of the company. 2. Directors who improperly pay dividends out of capital are liable to 4. The acquiescence of the shareholders does not affect the creditors in 5. Such an act is a breach of trust, and the remedy is not barred by the "Statute of Limitations." Ib. at p. 509. It is the duty of a director, at any rate, to know and understand the effect of something done at a board meeting at which he is present, and in doing which he concurs: Land Credit Co. of Ireland v. Fermoy, 8 Eq. 7; although he will not be taken to have notice of other matters, as entries in the books of which he is, in fact, ignorant: Hallmark's Case, 9 Ch. Div. 329. A director must account for a secret profit he has made in his office as director, as for a gift made by a promoter while there were questions between the promoter and the company: Eden v. Ridsdale's Railway Lamp and Lighting Co., 23 Q.B. Div. 368. Directors were ordered to repay dividends, directors' remuneration and bonuses to manager, improperly paid out of capital: Leeds Estate B. & I. Co. v. Shepherd, 36 Ch. D. 787. Money paid as commission to a stockbroker for placing shares is an improper application of capital; such payment is ultra vires, and directors will be ordered to refund the money: Re Faure Electric Accumulator Co., 40 Ch. D. 141. But, on the other hand, directors in their character of trustees are entitled to indemnity from their cestuis que trustent for expenses bonâ fide incurred for the benefit of the company: German Mining Co., e.p. Chippendale, 4 D.M. & G. 19; and see Toohey v. McCulla, 10 N.S.W. L.R. Eq. 264, which was a suit by the directors of a mining company against certain shareholders and the personal representatives of certain deceased shareholders, for contribution in respect of an overdraft obtained by the directors at a bank, and afterwards paid off by them, and in respect of certain legal expenses and costs paid by them to their solicitors. It was held by Owen, Ch. J. Eq., that they were entitled to such contribution, the money having been obtained and the legal expenses incurred for the benefit of the company and in accordance with its objects, and the shareholders having ratified the action of their directors. But the principle acted on in e.p. Chippendale, ubi sup., ought not to be extended: per Giffard, L.J., Re National Permanent Building Society, e.p. Williamson, 5 Ch. 313. 56. The continuing directors may act notwithstanding any vacancy in their body. Disqualification of Directors. 57. The office of directors shall be vacated : If he holds any other office or place of profit under the company; If he becomes bankrupt or insolvent ; If he is concerned in or participates in the profits of contract with the company. any But the above rules shall be subject to the following exceptions: That no director shall vacate his office by reason of his being a member of any company which has entered into contracts with or done any work for the company of which he is director; nevertheless he shall not vote in respect of such contract or work; and if he does so vote his vote shall not be counted. Buckley, pp. 477–479. The third ground of disqualification rests on the obvious conflict of duties which would arise in the case of a director who had at stake interests of his own directly opposed to those of the company. Apart from such disqualification, "the principle is firmly and well established, that a person holding a fiduciary position with regard to a company cannot obtain for himself a benefit derived from the employment of the funds of the company in any matter in which he, the director, as such director, may happen to be engaged": Imperial Mercantile Credit Association v. Coleman, 6 Ch. at p. 566; S.C. L.R. 6 H.L. at p. 198. And the reasons for this are "that the company have a right to the services of their directors, whom they remunerate by considerable payments; they have a right to their entire services, they have a right to the voice of every director, and to the advice of every director in giving his opinion upon matters which are brought before the board for consideration; and that the general rule that no trustee can derive any benefit from dealing with those funds of which he is a trustee applies with still greater force to the state of things in which the interest of the trustee deprives the Table A. Art. 57. Disqualifica tion. Table A. company of his benefit and assistance": S.C. L.R. 6 Ch. at pp. 567, 568. Art. 58. Although, semble, the company could by the articles contract that directors might make such profit, S.C. Retirement. Who to retire. Re-eligible. Filling up vacancies. Provisions in case vacancies are not filled. Where directors were prohibited from voting in respect of any contract in which they were personally interested, but had entered into such a contract, the company by an ordinary resolution had power to ratify it: Grant v. United Kingdom Switchback Railways Co., 40 Ch. Div. 135. Rotation of Directors. 58. At the first ordinary meeting after the registration of the company the whole of the directors shall retire from office; and at the first ordinary meeting in every subsequent year one-third of the directors for the time being, or if their number is not a multiple of three, then the number nearest to one-third, shall retire from office. Buckley, pp. 479, 480. This Art. gives the shareholders the right to substitute directors of their own election for the temporary directors appointed under Arts. (52), (53). By Art. (29) the first general meeting must be held within six months after registration, and by Art. (31) such meeting will be an ordinary meeting; under this Art. the directors must retire from office at the first ordinary meeting. Under s. 70 of the Act, q.v., a general meeting must be held within four months after registration; if this, therefore, be an ordinary meeting, the first directors will then retire, but an extraordinary meeting is a sufficient compliance with that section, and then their retirement may be postponed: Lord Claud Hamilton's Case, 8 Ch. 548. 59. The one-third or other nearest number to retire during the first and second years ensuing the first ordinary meeting of the company shall, unless the directors agree among themselves, be determined by ballot In every subsequent year the one-third or other nearest number who have been longest in office shall retire. 60. A retiring director shall be re-eligible. 61. The company at the general meeting at which any directors retire in manner aforesaid shall fill up the vacated offices by electing a like number of persons. 62. If at any meeting at which an election of directors ought to take place the places of the vacating directors are not filled up, the meeting shall stand adjourned till the same day in the next |