Chap. III.

Commencement.

Effect of order,

s. 202.

Differences between three modes of winding-up.

A winding-up under supervision is only a continuation of the voluntary winding-up, and, therefore, commences from the commencement of that winding-up.

When an order for winding-up subject to supervision is made, the liquidators appointed (who will usually be the voluntary liquidators) have all the powers of liquidators in a voluntary winding-up, and may exercise those powers without the sanction or intervention of the Court, unless the Court otherwise order (s. 202); at the same time, the Court has the same power over actions and proceedings, making calls, and in all other respects as in a compulsory winding-up (ib.).

In

The practical differences between the three methods of winding-up seem to be that, on the one hand, the delay and expense are greater under a compulsory winding-up than under a voluntary one, while, on the other hand, as all the steps in a compulsory winding-up are taken by the direction of the Court itself, fewer mistakes may be made and less litigation caused than in a voluntary winding-up, where the liquidators carry on the winding-up without that direction; or than in a winding-up under supervision, where they are also usually left with powers equal to those of liquidators in a voluntary winding-up. cases where vast interests are at stake, where the most ample powers the law has given require to be exercised; where there have been transactions justifying investigation; where it may be doubtful whether the property of the shareholders will answer the liabilities, and there is danger to the creditors of the shareholders escaping those liabilities; in all such cases, a winding-up by the Court ought to be preferred to a voluntary winding-up see per Turner, L.J., In re Northumberland, &c., District Banking Co., 2 De G. & J. 357, at p. 378; and though that case was under the earlier "Winding-up Acts," no doubt the same considerations apply under the present Act.

THE NO-LIABILITY MINING COMPANIES ACT.

INTRODUCTION.

"Mining Com.

Most of the provisions of the " Act to incorporate No-liability Victorian
Mining Companies," 44 Vict. No. 23 (1881), hereinafter referred panies Act,
to as the "No-liability Act," seem to be derived from the
Victorian "Mining Companies Act, 1871," 35 Vict. No. 409.
The Victorian enactment is a lengthy statute, on the lines of the
Companies Act," dealing fully with the formation, management,
and winding-up of the companies to be formed under it (a).
The framers of the N.S.W. statute appear to have chosen a few
of the sections of the Victorian Act (unless, indeed, each Act is
derived from some common source), and in a very short statute
(of eighteen sections) have provided for the existence of mining
companies whose members hold shares without any liability for
its debts. The brevity of the N.S.W. Act is, however, gained by
omitting many sections that might very usefully have been
inserted, and thus leaving in doubt the rights and powers of the
companies formed under it. In addition to its own provisions,
certain sections of the "Companies Act" are adopted into the
"No-liability Act"; but they are not of very great value.

The Act contains the following provisions :-
:-

(1) For the incorporation of companies by registration, ss.
1-6, 13:

(2) That shareholders are not to be liable for calls, s. 7:
(3) For forfeiture on non-payment of calls, s. 8:

(4) For a sort of voluntary winding-up, s. 9 :

(5) For the incorporation and registration of companies not
formed under the Act, ss. 10, 11:

(6) For the use of the words no-liability, s. 12:

(7) For the making of calls, ss. 14, 15:

(a) There is a South Australian Act, the " Mining Companies Act, 1881," 44 & 45 Vict. No. 204, closely following the Victorian Act.

Contents of "No-liability Act."

Sections of the "Companies Act."

Omissions in
Act;

be met by rules.

(8) For making rules for the management of the company,
s. 16:

(9) That the company shall have a registered office, s. 17:
(10) That certain sections of the "Companies Act" shall be
adopted as part of the "No-liability Act," s. 18.

The most important sections thus adopted are ss. 70, 81, as to meetings, and ss. 82-86, dealing with special resolutions, and the mode of calling meetings and voting in case there are no regulations for those purposes.

The Act contains no provisions as to transfer of shares, or for keeping a register of shareholders. It does not define a shareholder, nor does it provide for the increase or the reduction of capital, or for alterations in the nominal amount of each share. The useful section, s. 68 of the "Companies Act," as to the making of contracts, is not adopted or enacted; and there is no provision for compulsory winding-up.

Some of the questions raised by the absence of express provision for these matters will be found discussed under various sections of the Act. The rules of the company may, in certain may sometimes cases, successfully supply the omissions of the Act, as, e.g., in defining a "shareholder," providing for the transfer of shares, and for the keeping of a register of shareholders (see the Model Rules, infra); but power to increase or reduce capital can be given only by the statute under which a company is formed; the "No-liability Act" does not give such power, and the omission cannot be supplied by the rules: see note to ss. 6, 16.

Contracts.

Bills of exchange, &c.

In making contracts, a no-liability company is subject to the rule of common law that a corporation can only make contracts (with certain exceptions) under its common seal, though the rigour of this rule has been considerably relaxed: see South of Ireland Colliery Co. v. Waddle, L.R. 3 C.P., at p. 469. Section 68 of the "Companies Act," which enables companies under that Act to make their contracts in the same form as individuals may, has not been adopted by the "No-liability Act"; though s. 87, enabling a company to appoint an attorney to execute deeds, is adopted.

It appears that a no-liability company has no power to accept bills or give promissory notes, as such a company is

formed for mining, not for trading: see Dickinson v. Valpy, 10 B. & C. 128.

prospectus.

A no-liability company, like a company under the "Com- Formation, panies Act," will usually commence its operations by issuing a prospectus, and the remarks already made on the subject of prospectus, and the formation of a company, apply generally to no-liability companies.

plates existing

But it may be here observed that the Act seems to contem- Act contemplate the existence of a company with shareholders, mine and company. machinery, money at its credit, &c., before registration: see the statements in the second schedule. On the other hand the rule of law is that a corporation cannot be bound by, and cannot ratify, contracts made on its behalf before it has any existence : Re Empress Engineering Co., 16 Ch. Div. 125. And how can a non-existent company in any sense own machinery, or agree to issue shares ? It can only be that these matters must be undertaken by trustees on behalf of the proposed company. Yet it seems very advisable that as few matters as possible should be carried out in this way; and although s. 2 is imperative that the statements in the Second Schedule shall be made, yet there does not appear to be any obligation that there should be, e.g., any money at the company's credit or that the company should actually have any plant or machinery; but a true statement must be made in regard to these circumstances. The second statement in the Schedule is of the "place of operations or intended operations;" from which it may be inferred that the mine need not be in actual operation. Further, the eighth statement in the Schedule seems to contemplate that all the contributing shares need not be subscribed before registration. The inference seems to be that a very few shareholders, say four or five, might form themselves at once into a no-liability company, and subsequently issue a prospectus, allot shares, make rules, &c., providing in the rules for the issue of the remaining shares; and this plan would greatly simplify in practice the necessary steps in the formation of the company, inasmuch as there would probably be no difficulty in procuring the attendance at meetings of all the shareholders, and so unanimously making rules, appointing directors, &c. At the

S. 69 of the "Companies

s. 2.

same time, no such device can overcome the legal difficulty of conceiving the existence of any shareholders at all before the formation of the company; and it must be confessed that it appears almost impossible to fulfil strictly this and other requirements of the Act, which are made conditions precedent to registration.

Whether the prospectus is issued by provisional directors or Act" adopted. by the company itself, it must be remembered that s. 69 of the "Companies Act" is adopted by the "No-liability Act"; so that the prospectus must show the names and dates of any contract entered into by the company or its promoters, directors, or trustees; and the validity of any clause in the prospectus waiving notice of any contracts seems very questionable. Either Memorandum, before the issue of the prospectus, if the plan above suggested be adopted, or subsequently, some person acting as manager of the proposed company must make the statements required by s. 2, in the form given in the Second Schedule to the Act. The section is imperative that the statements shall be made; but the Act does not seem to require that the company (or anyone on its behalf) shall possess a mine, machinery, &c., but only that a true statement should be made regarding them. On the other hand, the Act imperatively requires that ten per cent. of the subscribed capital shall be paid-up (as to this see note to s. 2). The statements in the second schedule must be verified by statutory declaration of the manager (s. 2), and the memorandum and declaration must be lodged in the office of the RegistrarGeneral.

Verified by declaration.

Within seven days of such lodgment, a copy of the memorandum Advertisements and declaration must be published in one or more than one newspaper circulating in the district in which the company's operations are being or to be carried on; and a copy of the memorandum and declaration must also be sent to the Government Gazette for publication.

Newspapers,
&c., to be filed

Copies of the newspapers in which publication has been made, with Registrar. and of the Gazette, and also of any rules proposed to be made by the company, must then be sent to the Registrar's office.

Registration, s. 3.

The Registrar, upon receipt of these, enters in his registerbook the date of receipt; and then writes at the foot of the