who have

their shares.

Passing to the second class of objecting contribu- Shareholders tories, viz., those who admit that they once were parted with shareholders, but contend that they did not sustain that character at the time when the company became insolvent.

It is obvious that, in the case of this class of objectors, the validity of the method by which they rid themselves of their shares always comes into question.

The cases arrange themselves under three heads :1. Cases where the shares have been purchased by the company.

2. Cases where the shares have been forfeited.

3. Cases where the shares have been purchased by

ing the order of the L.JJ., 2 Ch. 604. It appears to have been thoughtin Oakes v. Turquand (L. R., 2 H. L. 325), that this case was not well decided before the L.JJ.; but prior to the affirma. tion of their judgment by the House of Lords it was treated as an authority both in Kent v. Freehold Land & Brickmaking Co., 3 Ch. 493, and in Henderson v. Lacon, 5 Eq. 249 and the material distinction between Oakes v. Turquand and this case— that in the latter the shareholder filed his bill without undue delay before the commencement of the winding-up, while in Oakes v. Turquand no such step was taken—is clearly pointed out by the Lord Chancellor and Lord Cairns. According to some of the dicta in the case now under consideration (see the judgment of Lord Westbury), a shareholder who filed his bill before the making of the winding-up order would be entitled to relief, but this has never been decided. See also Fox's case, 5 Eq. 118, where a shareholder, who being in a position to file a bill, wrote to the secretary declining to have anything more to do with the company, and received back his deposit, was held not to be a contributory. Wright's case, 7 Ch. 55.

Purchase of shares by company

third parties, but the transfer has not been completed, or has in some manner contravened the regulations of the company.

First, with respect to the purchase of shares. It appears that the purchase by a company of its own shares, without an express authority, is void (a).

Usually, however, the so-called purchases of shares by the company are merely compromises, by which the company agrees to relieve certain members from their shares, on their conferring some real or fancied benefit on the company.

Such transactions are not within the scope of an authority to purchase shares out of surplus moneys, or any similar power, which assumes the possession of a share to be a benefit and not a loss (b).

On the other hand, if a compromise be beneficial to the company, it will not necessarily be invalidated by the circumstance that it involves an obligation on the part of the company to take shares. At all events, it be confirmed by the company in a general meeting duly summoned, and having full notice of all the particulars of the transaction (c).

may

(a) London and Hamburg Bank, 5 Ch. 444. In Cockburn's case, 4 De G. & Sm. 177, and Bagge's case, 13 Beav. 162, the company had power to purchase.

(b) Morgan's case, 1 M. & G. 225; Lawes' case, 1 De G., M. & G. 421.

(c) This appears to be the result of the authorities; see Lawes' case, ubi supra, Bennett's case, 5 De G., M. & G. 284; Cockburn's case, 4 De G. & Sm. 177; Bagge's case, 13 Beav. 162; ex parte Jessop, 2 De G. & J. 638; 5 Jur. N. S. 1; Burt v. Brit. Nation Life Aɛɛur. Aɛɛccn., 4 De G. & J. 158; Hodgkinson

Moreover, if a company have a power to purchase shares, and exercise acts of ownership over shares when purchased, the formalities requisite to the purchase, for example, the consent of a general meeting, will, after a lapse of years, if there has been no concealment of the nature of the transaction, be presumed to have been properly given (a).

But, of course, directors cannot relieve a member from his shares by an arrangement not within their powers, and not confirmed by the company; and the Court will set aside a transfer of shares made to directors or officers of the company by a shareholder who took them with a view of aiding in getting up the company, and upon an understanding that he was not to be called upon to pay the deposit upon the whole of them (b).

of shares.

A forfeiture of shares, like a purchase of shares, Forfeiture has a double aspect (c). Sometimes it is exercised by the company against an unwilling shareholder; at other times it is resorted to by directors as a means of relieving themselves or particular shareholders from their liabilities.

v. National Live Stock Insur. Society, ib. 422, 5 Jur. N. S. 478, which does not contravene the former cases, as direct fraud was charged. Preston v. Grand Collier Dock Co., 11 Sim. 327, is a peculiar case; Mangles v. Preston Colliery Co., 2 Rail. Ca. 359.

(a) Grady's case, 1 De G., J. & S. 488; Lane's case, ib. 504. (b) Life Assurance Treasury Co., 6 L. T., N. S. 603.

(c) As to notice of forfeiture, Van Dieman's Land Co. v. Cockerell, 1 C. B., N. S. 732; Graham v. Van Dieman's Land Co. 1 H. & N. 541.

Viewed in the first light as a penalty. It appears that a company has no inherent right to forfeit shares on non-payment of calls, but on the contrary, that a specific power must be shown, and that power be strictly pursued or the forfeiture will be invalid, even though confirmed by a general meeting (a).

This supposes that the member whose shares are forfeited does not acquiesce in the forfeiture, for if he do, he will be barred by such acquiescence from claiming a restoration of his right, and would also seem to be free from any claims that may be made on him as a contributory (b).

A forfeiture or cancellation of shares by a board of directors, for the purpose of relieving one of their members from liability, is clearly invalid (c), as such a course is obviously not for the benefit of the company; but the case would seem to be otherwise if the forfeiture or release from liability form the condition or one of the conditions of a compromise, which is

(a) Clarke v. Hart, 6 De G., M. & G. 232, 6 H. L. C. 633; Barton's case, 4 Drew 535, 4 De G. & J. 46. Held valid in Beresford's case, 2 M. & G. 197; ex parte Baily, 15 Jur. 29; Woollaston's case, 4 De G. & J. 437; Knight's case, 2 Ch. 231; Lyster's case, 4 Eq. 232; Kelk's case, 9 Eq. 107. Forfeiture not completed, Bigg's case, 1 Eq. 309, observing on Woollaston's case, and on Moore v. Rawlins, 6 C. B., N. S. 310.

(b) See cases last cited. Held barred in Prendergast v. Turton, 1 Y. & C. C. C. 98; 13 L. J., Ch. 238.

(c) Cancellation of scrip, ex parte Preece, 15 Jur. 528; of shares, Stanhope's case, 3 De G. & Sm. 198, 14 Jur. 610; Gower's case, 6 Eq. 77.

beneficial to the company, and is approved by the company (a).

The question of the validity of an arrangement between directors and shareholders, for the purpose of relieving the latter of liability by the machinery of a forfeiture or surrender of their shares, was much considered in the cases arising under the winding-up of the Agriculturist Cattle Insurance Company. The result seems to be that such an arrangement, though ultra vires of the directors, may be rendered valid by the acquiescence of all the shareholders, and that such acquiescence may be presumed from the notoriety of the transaction, and the length of time during which it has remained unchallenged (b). On the other hand, the arrangement, if a private one, and not communicated to all the other shareholders, will, even after the lapse of years, bo set aside (c). Lord Belhaven's case (d),

(a) Jones's case, 4 Jur. N. S. 448; Richmond's case, 4 Kay & J. 305; Harris v. North Devon Rail. Co., 20 Beav. 384.

(b) This was the case of "the Chippenham compromise,” Brotherhood's case, 31 Beav. 365, 4 De G., F. & J. 566. Evans v. Smallcombe, L. R., 3 H. L. 249. Compare Stewart's case, 1 Ch. 511, and Houldsworth v. Evans, L. R., 3 H. L. 263.

(c) Spackman v. Evans, L. R., 3 H. L. 171. It is difficult to state accurately the result of this case, as the difference of opinion respecting it was so great. The judgment of Lord Westbury, 11 Jur. N. S. 207, when the case was before him, should be carefully examined with those in the House of Lords. Stanhope's case, 1 Ch. 161, and two last cases in preceding note. (d) 3 De G., J. & S. 41, Dixon v. Evans, L. R., 5 H. L. 606. See further as to surrender of shares, Marshall v. Glamorgan Iron Co., 7 Eq. 129; Snell's case, 5 Ch. 22; Addison's case, ib. 294; Hall's case, ib. 707; Adam's case, 13 Eq. 474. A company may,