there will be no difficulty in raising money on the security of the property.

The amount of the shares will differ according to Shares. the nature of the company. If the objects of the company be popular, it may be advisable to make the shares of small amount, with the view of attracting numerous applicants. Shares of large amount cannot so easily be got rid of, but, when in good hands, afford great facilities for raising money, and are much to be preferred in companies conducting a business of a private nature, and involving a large expenditure. It is to be recollected that, in a company limited by shares, s. 12. the amount of each share may be increased; but can only be diminished subject to the restrictions of the Act of 1867 (a). If it is intended to issue preference shares, provision for their issue should be made in the memorandum and articles of association, or in one of those documents (b).

association.

The memorandum of association fixes only the Articles of essential conditions of a company's existence. The mode of conducting business, the number and qualification of the directors, and generally the whole internal organization, are left to the determination of the company itself.

c. 89, s. 14.

In the case of a company limited by guarantee, or 25 & 26 Vict. unlimited, articles of association must be filed, stating the amount of capital if the company have a capital divided into shares, and if the company have no such

(a) 30 & 31 Vict., c. 131, ss. 9-20.

(b) See page 105.

Observations on constitu

pany.

capital, the number of members with which it proposes to be registered.

Where a company is limited by shares, the regis tration or not of articles of association is left to the option of the company; if it prefer its own form, it files articles of association, containing such provisions as circumstances require; if no articles are filed, the Act intervenes, and declares that Table A. is to constitute the code of regulations for the company.

The points to be especially attended to, in considertion of com- ing the constitution of a company, are treated in Table A. in the following order :-Shares; Calls on shares; Transfers of shares; Transmission of shares; Forfeiture of shares; Conversion of shares into stock; Increase in capital; General meetings; Proceedings at general meetings; Votes of members; Directors; Powers of directors; Disqualification of directors; Rotation of directors; Proceedings of directors; Dividends; Accounts; Audit; Notices. It will be convenient to adopt the same arrangement in the following pages.

Shares.

The first article of Table B. annexed to the Act of 1856, requiring a written acceptance of shares, is omitted in the Act of 1862; the reason of the omission is, that the requirement of a writing on the first allotment of shares gives rise to embarrassing questions with respect to what constitutes a written acceptance. the other hand, when the shares are once allotted, the article is useless, as under the heading "Transfers of Shares," the instrument of transfer is required to be executed by the transferee as well as the transferor.

On

Table A. permits calls to be made at the discretion Calls. of the directors, but shareholders frequently prefer that an article should be inserted defining the intervals at which calls are to be made, and the amount of each call. A provision to that effect should invariably be added, if the prospectus has given any intimation that the calls will be made at stated times, and not be subject to the discretion of the directors.

shares.

c. 89, s. 30.

The Act prohibits the entry of trusts on the register, Transfers of in the case of companies registered in England and 25 & 26 Vict. Ireland. Everything else is left to the regulations of the company, who may prohibit transfers altogether, make the consent of the directors or any other person essential to transfers, or leave the right of transfer unrestricted. Table A. leaves the right unrestricted; and this omission of any restriction probably suits the majority of companies; but whenever a company conducts business of a private character, or is very much dependent on credit, or for any other reason requires the maintenance of an unusually substantial list of shareholders, rather than facilities for bringing shares into the market, an unrestricted power of transferring shares may be very injurious. In such cases it is usual to provide that any shareholder desirous of transferring his shares shall submit the name of the transferee to the directors for approval. If they disapprove, the matter is referred to arbitration. On the other hand, if they approve or fail to testify their disapproval within a limited number of days, the transfer to the proposed transferee may be completed.

The articles should always provide that, on the death Transmission

of shares.

8. 24.

Forfeiture of shares.

Conversion of shares into stock.

25 & 26 Vict. c. 89, ss. 12, 28, 29.

Increase of capital.

-Table A.,

of a shareholder, his personal representatives should be the only persons recognised as having a title to his shares, and regulations similar to those of Table A. should be made with respect to the transmission of shares in the case of the bankruptcy or insolvency of a shareholder, or the marriage of a female shareholder.

It should be borne in mind that the Act itself declares that a transfer of a share by the personal representative of a deceased shareholder shall be valid, without requiring the personal representative to be registered, while the transmission of shares in the case of the company being wound up, is settled by sections 76, 77, 78.

The articles of Table A., with respect to forfeiture may be rendered less stringent by the insertion of a power to redeem forfeited shares at any time before they are disposed of, on payment of the amount of calls due, and of all costs incurred.

When shares are fully paid up, converting them into stock facilitates transfers, and to that extent is an advantage to the shareholders.

The Act permits the conversion, where authorised by the regulations of the company, to be made on due notice being given to the registrar; and the articles of Table A. relating to conversion of shares into stock are introduced for the purpose of enabling the company by a resolution in general meeting to authorise the directors to make the conversion.

An increase of capital affects so seriously the position of the shareholders, that the articles require the

28.

sanction of a special resolution to be given to the issue arts. 26, 27, of new shares.

A special resolution is defined by section 51 of the Act to be a resolution passed by a majority of threefourths of the shareholders present at a general meeting, and confirmed by a majority present at a general meeting, held at an interval of not less than fourteen days, and not more than a month from the date of the previous meeting.

As in the Companies Clauses Consolidation Act, the new shares must be offered (first) to the existing members, and if declined by them, may be disposed of in such manner as the directors think most beneficial to the company.

meetings.

The Act requires that a general meeting should be General held once at least in every year, but lays down no s. 49. other rule on the subject.

The regulations of Table A. provide that the first general meeting shall be held within six months after registration, at such time and place as the directors may determine. Subsequent general meetings are to be held at such time and place as the company may determine, or, if the company prescribe no time, on the first Monday in February in every year.

Table A. arts. 29, 30.

Extraordinary meetings may be convened at any Art. 32. time, and must be convened on a requisition presented

to the directors by one-fifth in number of the members of the company.

at general

ten meetings.

The quorum at general meetings depends on the Proceedings number of the shareholders. If there are but shareholders, the quorum is five; if they exceed

ten,

Art. 37.