officer of the company, taking a mortgage and omitting to comply with this section, loses his security as against the creditors of the company. [Wynn Hall Coal Co., 10 Eq. 515; Native Iron Ore Co., 2 Ch. D. 345.]

A solicitor also, though only temporarily employed by the company, who took a security for his costs from the company and neglected to have it registered, was held unable to avail himself of the charge. [Ex parte Valpy, 7 Ch. 289.]

Mortgagees who are not officers of the company are not affected by any imperfection in the register of debentures kept by the company. [General South American Co., 2 Ch. D. 337.]

A mortgage to a firm, one of the partners of which was a director of the company, was not invalidated for want of registration. [Smith's Case, 11 Ch. D. 579.]

So also, where directors took a mortgage and instructed the secretary to make the necessary entries in the register of mortgages which he omitted to do, it was held that as the directors had not "knowingly and wilfully authorized or permitted the omission" the liquidator could not compel them to refund the proceeds of the security. [Hackney Newspaper Co., 3 Ch. D. 669.]

The company's bankers are not officers of the company within this section. [Ex parte National Bank, 14 Eq. 507.]

MORTGAGE DEBENTURES.

Certain companies established under the Companies Acts are authorized to issue mortgage debentures under the provisions of two Acts of Parliament, which provide means for securing the debentures by a system of Government supervision and registration.

These Acts are the Mortgage Debenture Act, 1865, and an Amendment Act, 1870.

Any company proposing to avail itself of these Acts must by its memorandum be limited in its objects to advancing on real estate and interests therein, on rates and dues created by any

legal authority, and on charges and securities on real property issued under any Act of Parliament.

The paid-up capital of any such company must not be less than £100,000, divided into shares of not less than £50 each, with not less than one-tenth nor more than one-half the amount paid up on each.

The company may borrow at any agreed rate of interest on mortgage debentures for not less than £50 each. Each debenture must have not less than six months nor more than ten years to run.

Before borrowing on mortgage debentures the company must deposit with the Registrar of the Land Registry Office securities to the nominal amount of the debentures it proposes to issue.

A valuation of the property by an approved surveyor must also be deposited with the securities, and certain other formalities have from time to time to be observed.

Upon the securities being deposited the company becomes entitled to issue mortgage debentures to the nominal amount of the securities; subject, however, to the restriction that the amount of debentures issued by the company must never exceed ten times the amount of the uncalled subscribed capital.

Each debenture issued by the company must be indorsed with certain prescribed particulars as to the position of the company.

The company has to make quarterly returns to the Registrar of the Land Registry Office as to the amount of debentures issued and securities held by the company, together with other particulars as to the financial position of the company.

Penalties of £500 attach to any person knowingly concerned in issuing debentures exceeding the amount the company is entitled to issue under these Acts, which may be recovered with all costs in the Superior Courts by any person.

The Mortgage Debenture Acts are comparatively seldom used, as most companies prefer to exercise their borrowing powers without the restrictions imposed by the sanction and supervision of a Government office.

CHAPTER XII.

REORGANIZATION.

In the course of the existence of many companies there comes a time when, from reasons either of convenience or necessity, it becomes desirable to reorganise the company and strengthen its position either by a reconstruction on a new basis or by the union of rival companies in one common undertaking.

There is also a third form of reorganization, one which is adopted when the company's difficulties require a settlement to be made with its creditors. To facilitate such compositions with creditors the Joint Stock Companies Arrangement Act, 1870, was passed.

It is obvious that in many cases the ruin of the company is so complete, or the success of its undertaking so hopeless, there remains no chance of resuscitation, and the only thing left to be done is to wind up and dissolve the company.

But there are many companies wound up annually containing in themselves the necessary elements of success, could they only survive the early mistakes and misfortunes which attended their start.

For such companies there is nearly always a future either in reconstruction or amalgamation, if the remedy is only tried in time before the evil has gone too far. If the Arrangement Act has hitherto proved of little real use, it is mainly because few companies possess directors whose interests are vitally involved with the company.

There are, therefore, three forms of reorganization: (1) Reconstruction; (2) Amalgamation; (3) Composition. The two former can be carried out without the interposition of the Court; the third requires its sanction.

RECONSTRUCTION.

It is impossible to imagine the various forms of reconstruction which a company may wish to carry out. It may, however, be said that it is not competent for any board of directors, or even the company itself in general meeting, to alter the position of its members, except under the powers of the Companies Acts, or of its creditors without their individual sanction.

The capital of the company may be increased or reduced with the sanction of the Court; it may be made subject to preferred capital or watered by the creation of fresh ordinary shares. The whole of the property of the company may be mortgaged by an issue of debentures. To all these alterations if duly carried the shareholder cannot personally object; the possibility of these changes forms part of his original contract in taking his shares. But let the company attempt to make him exchange, say his preference shares for ordinary shares, or reduce his guaranteed dividend from 5 to 4 per cent., and his individual consent must be obtained for such an alteration to be binding upon him.

With the creditor nothing can be done by the company without his individual sanction; he is entitled to receive 20s. in the £1 and is entitled to insist upon his rights. Any attempt to make him postpone his claim or accept shares or debentures in payment must necessarily be futile unless the creditor

agrees.

Thus, except reconstruction by alteration of the capital as provided by the Companies Acts, any such proceeding without the assistance of the Court must fail unless there is unanimity amongst the class to which the reorganization is to have reference.

AMALGAMATION.

Amalgamation is the fusion of two or more companies. It can be effected either under powers contained in the memoran

dum and articles of association, or under the sanction of the Court in a winding up.

To amalgamate means to absorb or to be absorbed by another company.

The usual way of effecting an amalgamation is either by one company absorbing the other and giving its own shares in exchange, or by both companies transferring themselves to a third company formed for the purpose of buying up the two.

The amalgamation by means of a third company is generally due to a desire to obtain by a new memorandum larger or additional powers.

The articles usually prescribe the method in which any amalgamation of the company is to take place, and, to render such a proceeding valid, any such directions must be scrupulously followed.

In an amalgamation there are two primary rules to be borne in mind. Short of individual consent no resolution can increase the liability of any member [Clinch v. Financial Corporation, 5 Eq. 450; 4 Ch. 117], and no resolution can compel him to become a member in another company. [Bagshaw's Case, 4 Eq. 341.]

An amalgamation may be on such terms as the company may approve. So long as the liability of any member is not increased, the nominal value of the shares given in exchange is immaterial.

A dissentient shareholder has, it is conceived, no power to prevent any amalgamation under the articles if properly concluded. He has practically no remedy. He must either take his proportion of the shares given in exchange, or he may abandon his interest in the company if he chooses.

One invariable term in any amalgamation is that the absorbing company shall pay the liabilities of the other. It is usual to wind up formally the company so extinct, and, in the case of dissentient shareholders, it is always advisable to do so.