(2) APPOINTMENT AND REMOVAL. (b) Qualification Shares. Acceptance of Office retracted.]-When the holding of a certain number of shares is a necessary qualification for a director, the mere acceptance of the office only involves an agreement to have the qualifying shares within a reasonable time after becoming director; and if a person accepting the office retracts the acceptance before the reasonable time for acquiring the shares has expired, and without having acted as director, he will not be fixed with the qualification in the event of the company being afterwards wound up. Pelotas Coffee Co., In re, Karuth's Case, 44 L. J. Ch. 622; L. R. 20 Eq. 506.

Withdrawal before Expiration of Time for Qualifying.]—The articles of association of the S. Company provided that the first directors should, within two months of the date of their appointment, become the registered proprietors of 250 shares of £1 each, and that the first directors of the company should be appointed by a meeting of subscribers to the memorandum of association forthwith after registration. The company was incorporated on January 11, 1884. A meeting of the subscribers to the memorandum was held on the 12th, and R. B. T., who was not a subscriber, was elected to be one of the first directors. On January 14, 1884, a meeting was held of the directors of the company, which R. B. T. attended. A draft prospectus was then settled and signed by the directors present, including R. B. T., which gave the name of R. B. T. as a director. He alleged that he did not know the company was formed before the meeting of the 12th, but thought it was a preliminary meeting. He never attended another meeting, or in any way acted as director, or applied for or was allotted any shares. The company was ordered to be wound up on August 8, 1885. The liquidator claimed to put R. B. T. on the list of contributories for 250 shares, the qualification required for a director :-Held, that if R. B. T. had ever acted as a director, he had withdrawn during the two months allowed for qualifying, and he could not be put on the list of contributories. Self-Acting Sewing Machine Co., In re, 54 L. T. 676; 34 W. R. 758. And see Green's Case, Freehold and General Investment Co., In re, 43 L. J. Ch. 629; L. R. 18 Eq. 428; 30 L. T. 672; 22 W. R. 791.

Withdrawal before Acceptance—Additional Shares.]-At a board meeting of the directors of a limited company, one of the directors verbally agreed to take 450 shares, in addition to the number necessary to qualify him as a director, and, in consideration of that agreement, was elected chairman of the company. He afterwards signed an application for shares in the usual form, except that he struck out the statement that he had paid the deposit. He never paid the deposit, and no allotment was ever made to him :-Held, that his offer to take shares was not shown to have been accepted by the company before it was withdrawn by him, and that he was not liable in respect of the 450 shares. Universal Non-Tariff Fire Insurance Co., In re, Ritso's Case, 4 Ch. D. 744-C. A. Reversing, 34 L. T. 644.

Where a director of a company had signed the articles of association which required as the

qualification of a director that he should hold twenty-five shares, and had applied for that number of shares, and attended several meetings of the board, but retired from the direction before the allotment of shares took place, and the directors afterwards refused to allot him any shares, and returned the deposit -Held, that he was not liable as a contributory on the winding-up of the company. Chapman, Ex P.; General International Agency Co., in re, L. R. 2 Eq. 567; 14 L. T. 752.

Qualified Offer-Refusal of Allotment.]— A., on being invited to become a director of a banking company about to be established, gave a verbal assent, provided he should be satisfied, that a certain proportion of the capital had been subscribed, and that certain persons named in the prospectus as directors would actually join the board. He attended one board meeting, and so far took part in the business as on that occasion to sign a cheque together with one of the directors. On receiving, a few days afterwards, a letter of allotment of the shares necessary to qualify him, he at once returned it, declining at the same time to act as director, as he was not satisfied upon the two points stipulated for by him. The secretary wrote back, stating that A.'s "resignation had been accepted. A. had nothing more to do with the bank :-Held, that he was not liable as a contributory. Austin, Ex p.; Peninsular West Indian and Southern Bank, In re, L. R. 2 Eq. 435; 15 L. T. 140; 14 W. R. 1010.

Forfeiture of Shares-Retiring from Directorship.]-A limited company was registered on November 6, 1874, with articles of association which provided that the share qualification of a director should be the holding of twentyfive shares in the company, that M. and others should be the first directors of the company, and that every director should vacate office by ceasing to be the registered_ holder of his qualifying number of shares. It was also provided that in consideration of the services of the first directors, each of them should receive and be registered as the holder of twenty-five fully paid-up shares, which were to be forfeited in the event of his dying or ceasing to be a director by his own act or default. M. attended a meeting of the directors on November 10, but resigned office on the 12th. He never applied for any shares, but he was placed on the register as the holder of twenty-five shares-Held, that the shares for which he was placed on the register were fully paid-up shares, and that, as he had retired from the directorship, the shares were forfeited, and his name ought to be removed from the list of contributories. Australian Direct Steam Navigation Co., In re, Miller's Case, 5 Ch. D. 70C. A.

Qualification a Condition Precedent to Election.]-The articles of a company, after naming the first six directors, provided that no person should be qualified to be a director who was not a holder of shares in the company of the nominal value of £500. The board, which had power to appoint directors, purported

(2) APPOINTMENT AND REMOVAL. (b) Qualification Shares.

to appoint H., who neither held nor afterwards acquired any shares. He attended two meetings of the board, and resigned his office in two months. On an application by the official liquidator to make him a contributory in respect of fifty shares of £10 each :-Held, that his election as a director was void, and that he could not be made a contributory. Percy and Kelly Nickel, Cobalt and Chrome Iron Mining Co., In re, Hamley's Case, 46 L. J. Ch. 543; 5 Ch. D. 705; 37 L. T. 349; 25 W. R. 600.

Articles of association provided that the directors of the company should have power to appoint any person or persons to be a director or directors at any time before the ordinary general meeting of the company to be held in 1880; that no person should be qualified to be a director who was not a holder of shares or stock in the company to the nominal value of £500; and that no person except the original directors and such persons as might be appointed by them under the previous clause should be qualified to be a director who had not been a holder in his own right of such shares or stock at least six months. J., who was not a holder of shares or stock in the company, was appointed a director by the original directors, and attended several meetings of the board, but he never applied for any shares, and none were ever allotted to him. The company was ordered to be wound up :-Held, that the articles made the possession of the qualification a condition precedent to the appointment of a director, and that J., not having the qualification at the time of his appointment as director, the appointment was void; and, as he never agreed to take any shares, he could not be put on the list of contributories. Hamley's Case, supra, followed. Percy and Kelly Nickel, Cobalt and Chrome Iron Mining Co., In re, Jenner's Case, 47 L. J. Ch. 201; 7 Ch. D. 132; 37 L. T. 807; 26 W. R. 291-C. A.

The Companies Clauses Act, 1845, s. 85, makes the holding of shares a condition precedent to the validity of an appointment to a directorship in any company affected by that statute. Biron's Case, Elham Valley Ry., In re, 38 L. T. 501; 26 W. R. 606.

was

A railway company's Act fixed the directors qualification at fifty shares, and incorporated the Companies Clauses Act, 1845. B. appointed a director before the first general meeting, in place of one of the directors named in the Act, who had died. B. accepted and acted in the office, but never took any shares :Held, that the Companies Clauses Act, 1845, makes the holding the specified number of shares a condition precedent to election; that B.'s appointment was therefore absolutely void, and he could not be made a contributory. Ib.

By a private Act, which incorporated the Companies Clauses Act, 1845, it was enacted that F., and certain other persons named, and all other persons who had already subscribed, or should thereafter subscribe, to the undertaking, should be united into a company for the purposes therein mentioned; that the number of directors should be six; that the qualification of a director should be the possession in his own right of fifty shares; that F.

and certain other persons should be the first directors of the company, and should continue in office until the first ordinary meeting, and that at that meeting the shareholders might either continue in office the directors appointed by the Act, or any of them, or might elect a new body of directors, or directors to supply the place of those not continued in office, the directors appointed by the Act being, if qualified, eligible for re-election. F. acted as a director until the first ordinary meeting, which was held in April, 1867. At that meeting he retired from office, and never afterwards had anything to do with the company. He never applied for any shares, nor were any ever allotted to him, nor was he ever placed on the register of shareholders. In May, 1874, the company was ordered to be wound up :Held, that he must be settled on the list of contributories for fifty shares. Teme Valley Ry., In re, Forbes' Case, 44 L. J. Ch. 356; L. R. 19 Eq: 353; 23 W. R. 402. Distinguished in Barber's Case, infra, 5 Ch. D. 963; 26 W. R. 3-C. A.

It was provided by the articles of a company, that no person not recommended by the board of directors for election as a director should be eligible unless at the time of election he had held twenty shares for two months. B., who was not a shareholder, agreed to become a director, and was unanimously elected at a general meeting at which six of the seven directors, who were then the only shareholders, were present. B. did not act as a director, and before anything further had been done he wrote refusing to be connected with the company. The company, nevertheless, sent him a letter of allotment for twenty shares, of which he took no notice. The company was afterwards ordered to be wound up :-Held, that the fact that six of the seven directors voted for B. at the general meeting, did not amount to a recommendation by the board, as they were not met in the capacity of directors; that B.'s election was therefore void, and that he was not a contributory. East Norfolk Tramways Co., In re, Barber's Case, 5 Ch. D. 963; 26 W. R. 3-C. A.

When the articles of association of a company provided that no person should be eligible in future as a director unless he should hold in his own right at least fifty shares in the company, and that the office of director should be vacated if he should cease to hold the requisite number of shares in the company :Held, that a person who was elected and acted as a director of the company without taking any shares therein was liable in the windingup for the qualification number of shares. Stephenson's Case, British, Colonial and Foreign Property Insurance Corporation, In re, 45 L. J. Ch. 488.

Statutory obligation to take Shares.]-A special Act of Parliament forming a company provided, that there should be four directors, and that the qualification of a director should be the possession of twenty-five shares in the company, and it named K. as one of the first directors. K. signed the Bill in Parliament, which subsequently passed as the Act, but never applied for nor had allotted to him any

(2) APPOINTMENT AND REMOVAL. shares in the company :-Held, in the windingup of the company, that K. was a contributory to the extent of twenty-five shares. Kincaid's Case, North Kent Ry. Extension Co., In re, 40 L. J. Ch. 19; L. R. 11 Eq. 192; 23 L. T. 460; 19 W. R. 122.

(c) Disqualification. (i) Inability to Act.

No Allotment.]-Sect. 36 of the Companies Clauses Act, 1845, is governed by s. 3; and consequently a member of a company may be a shareholder within the meaning of the former section, although no shares have been allotted to him, and no register has been formed. Portal v. Emmens, 46 L. J. C. P. 179; 1 C. P. D. 664; 35 L. T. 882; 25 W. R. 235-C. A.

A special Act formed four promoters into a company, and made them directors of the company till the first ordinary meeting of shareholders, and provided that each director should hold not less than thirty shares. There never was any such meeting, no register of members was ever drawn up, and no shares were ever allotted. The Act embodied an agreement which bound the company to pay the plaintiff a certain sum of money-Held, that in respect to the company's debt to him, each promoter was liable under a scire facias as a shareholder to the extent of thirty shares. Ib. And see Dublin and Metropolitan Junction Ry., Ir. R. 11 Eq. 294; and Kipling v. Todd, 47 L. J. C. P. 617; 3 C. P. D. 550; 39 L. T. 181; 27 W. R. 84-C. A.

Transfer of Qualification Shares-Statutory Member.]-A company was incorporated by a special Act of Parliament in 1882, eight persons being the first members. These eight persons were appointed the first directors of the company "to continue in office until the first ordinary meeting held after the passing of the Act," each director holding forty shares as a qualification. The petitioners were the vestry of St. Mary, Newington, who had recovered judgment in an action for penalties against the company in consequence of the company not having completed certain works - by a stipulated time. No first ordinary meeting was ever held, but after action brought, at a meeting of the directors, the directors allotted to themselves the forty qualification shares to be held by each. The shares were of the value of £25 each, and a call of £5 per share was paid on July 20, 1887, and that sum was expended in paying the costs, charges, and expenses preliminary to, and of and incidental to, the passing of the special Act. On July 21, 1887, five of the directors transferred their shares to a nominee. other shares in the company beyond the directors' qualification shares were ever subscribed for. The vestry having obtained judg ment against the company presented a petition for winding-up :-Held, that the transfers by the directors of their qualification shares were invalid, and, therefore, that there were eight members of the company, and the company came within the 199th section of the Companies Act, 1862. On appeal, the court held that on the construction of the special Act, the eight persons were constituted statutory members as well as statutory directors, with an obligation to continue to hold both characters until the

No

first general meeting; that, therefore, as no first meeting had been held, these eight persons, whether they continued to be holders of shares or not, at all events still continued to be members of the company, and, therefore, there was jurisdiction under s. 199 of the Companies Act, 1862, to make the winding-up order. South London Fish Market Co., In re, 39 Ch. D. 324; 60 L. T. 68; 37 W. R. 3; 1 Meg. 92-C. A.

Cancellation by Directors.]-F. and G. in July, 1866, subscribed, at the request of N., whose firm was constituted a limited company, the memorandum of association for one share each. The company was registered in September, 1866. F. was entered in the register for one share and G. for four shares. They were not, as deposed by F., to incur any liability or to pay any moneys in respect of the shares. G. was, by one of the articles, named a director, and appointed a managing director. By another article it was provided that every director should at the time of his appointment and thenceforth while in office hold four shares, and if he should cease to do so his office should become vacant. G. acted as director for about two months in 1866. F. and G. having been asked to pay the sum due on allotment and the calls, the amounts of which had been debited to them in the company's ledger, they, in November, 1867, requested the directors to cancel the shares, and at a board meeting on November 8, 1867, it was resolved that the request be acceded to, and entries were made in the company's books to that effect. There were articles of association which stated that if calls were not paid the shares would be liable to be forfeited, and that the directors might extinguish or otherwise dispose of any shares which might have been forfeited. In 1876 the company, its business having in 1874 been sold to another company, was ordered to be wound up. G. died many years ago :Held, that F. must be placed on the list of contributories for one share and the executors of G. for four shares. Esparto Trading Co., In re, 48 L. J. Ch. 573; 12 Ch. D. 191.

c. Disqualification.

i. Inability to Act.

The

Certain shareholders of a company by deed appointed a committee to do certain acts. deed contained a proviso, that, in case any member of the committee should die, or decline, or desire to be discharged from acting, or become incapable to act as a member of the committee, the others should have power to nominate another in his stead. One of the committee absconded to America under circumstances strongly evidencing no intention to return -Held, that he thereby became incapable to act within the meaning of the deed. Wilson v. Butler, 4 Bing (N.C.) 748; 6 Scott, 540; 8 L. J. C. P. 143.

:

Vacation of Office-"Absent himself."]— Although there is a difference between the act of absenting oneself," which is purely voluntary, and the fact of being absent,' which is voluntary or involuntary as the case may be;

(c) Disqualification. (i) Inability to Act.

(2) APPOINTMENT AND REMOVAL. (c) Disqualification. (ii) Holding Office. association to refer to such a notorious or avowed insolvency as was spoken of in R. v. Saddlers' Co. (32 L. J. Q. B. 337; 10 H. L. C. 404), there was evidence on which the judge of the City of London Court could find that C. was at the relevant time insolvent within the meaning of the articles of association. London and Counties Assets Co. v. Brighton Grand Concert Hall and Picture Palace (84 L. J. K. B. 991; [1915] 2 K. B. 493; 112 L. T. 380; [1915] H. B. R. 83-C. A.

cerned in any contract with the company, although he might not have participated in any profits therefrom; and further, that the provision was not confined to cases where the director was personally concerned in contracts with the company. Star Steam Laundry Co. v. Dukas, 108 L. T. 367; 57 S. J. 390; 29 T. L. R. 269.