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creditor will have a more certain security to rely on than he can possibly have in the best conducted com[any limited by shares.

A further addition to the Act of 1856 is made by winding up of unregisLe 8th Part of the Act of 1862, which substitutes for terei companies. The Winding-up Acts of 1848-49 the system of windg up by the Court initiated by the Act of 1856, and plies it to all partnerships, associations, or comLies consisting of more than seven members, although they are neither registered nor incorporated under the At of 1862. With the exceptions that have been Lentioned, there is no material difference between the

ctments of the Act of 1862 and those of the Acts 41856-57-58 above referred to; and it is unnecesry here to go further into the details of that Act, as mode in which companies are formed, regulated, wound up under its provisions forms the subjectLatter of the following pages.

Nor is it necessary here to do more than mention Companies Act, 1867 (a), which amends in several pects the Act of 1862.

Law Amend

28 & 29 Vict.

This chapter would, however, be incomplete if fur- Partnership her mention were not made of the Act to amend the ment Act, Law of Partnership, 28 & 29 Vict. c. 86. The effect c. 86. of that Act is to declare that participation in the prots of a trader shall not of itself make the recipients of ch profits partners with the trader.

The first section addresses itself to lenders of money,

(a) 30 & 31 Vict. c. 131 for observations on Act, see Part II. chapter 8.

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and provides that the advance of money by way of loan to a trader on condition of receiving a rate of interest varying with the profits, or a share of the profits, shall not of itself constitute the lender a partner with the trader, or render him responsible as such. The benefit of this privilege, however, is considerably narrowed by the fifth section, which enacts that in the event of the trader being adjudged bankrupt or compounding with his creditors, the lender is not to recover any portion of his principal or interest till the other creditors have been satisfied.

To secure the benefit of the Act, the contract for the loan must be in writing.

By the second section, agents and servants may be remunerated by a share of the profits without incurring the liabilities of partners.

The third section provides that an annuity may be granted out of profits to the widow or child of a deceased trader without exposing them to the liabili- | ties of partnership. Similarly, under section four, a person selling the goodwill of his business on condi tion of receiving an annuity or other portion of the profits of the business in consideration of the sale made by him, is not to be deemed a partner, or be subject to the liabilities of the person carrying on the business (a).

A Bill, having the same object in view as the lastmentioned Act, was brought into the House of Commoms by Mr. Lowe, in 1856, with a view to place

(a) The Act itself will be found in App. III.

private firms on a par, so far as was possible, with joint-stock companies, by enabling them to offer capitalists the same inducements of sharing in profits of trade that were held out by the trading companies. The Bill, however, was abandoned in consequence of a motion being carried that loans made to traders in pursuance of its provisions should be gazetted, as it was thought better to give up the measure altogether than to pass it with a restriction which would prevent its being of any substantial benefit to the mercantile community (a).

The rights and obligations of members of inchoate companies will form the subject of the next chapter.

(a) As to construction of this Act, and the effect of the case of Cox v. Hickman, 8 H. L. C. 268, see above, page 3.



Prospectus. THE first step usually taken in the formation of a company is the publication of a prospectus (a). This document is prepared by the promoters of the company. and it is on the faith of its representations that the public accept shares (b).

Form of prospectus.

Its form is so familiar as hardly to require notice. It begins by announcing the capital of the company, and its distribution into shares. Then follows an array of persons who form the provisional committee. To these succeed the names of the bankers, solicitors, and secretary of the company. A description of the undertaking, and an assurance of the certainty of its success fill up half a dozen more paragraphs; and the document concludes by a form of application for shares, addressed to the directors of the company, in which the signatary requests to have allotted to him a certain number of shares in the company, and undertakes to pay a deposit thereon, and sometimes to sign

(a) Under the Act of 1862, incorporation is so readily attained that the prospectus is not usually issued before the company is incorporated. Thus, there is no provisional com mittee, but a list of directors is inserted, and the difficulties as to liability for preliminary expenses below referred to (p. 31) do not arise.

(b) Observations on nature and office of prospectus; Peek v. Gurney, L. R., 6 H. L. 377.

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a subscription contract, subscriber's agreement, articles of association, or other document, when required by e provisional committee or the directors. The prospectus is generally considered by the pro- Promoter rs as a document in which they are at liberty to misreprep forward in high relief all the advantages of the prospectus.

liable for

sentation in

pany, and to throw into the background all its diffialtes. Such a practice is most dangerous. A certain cat of colouring as to prospective advantages may dubt be safely indulged in; but misstatement or cealment of any material fact will not be permitted, and a promoter is liable to make good to allottees the age they have sustained by taking shares on the cht of what afterwards proves to be a misrepresentation on his part.


For example, the promoters of a company called Gerhard v. the Iberian Silver Lead Ore Company, declared by her prospectus, that they did not hesitate to guarantee to the bearers of 1,200 shares, mentioned in the propectus, a minimum annual dividend of 331. per


Mr. Gerhard took shares on the faith of this prors, and finding, as might have been expected, that the guarantee was not fulfilled, brought an action ast one of the promoters, for recovery of damages in respect of the loss incurred by him through the false representation in the prospectus.

The court held that the plaintiff was entitled to reover, observing, that they considered it to be clear law, that if A. fraudulently make a representation, which is false, and which he knows to be false, to B.,

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