Prior to the conversion it will always be necessary that the articles should provide for the voting power to be exercised by stockholders.

The articles usually provide for this conversion, and the method of accomplishing this object, and if they are silent upon this latter point it will always be advisable to alter the articles so as to provide for the future status of the stockholders.

In the event of the articles permitting conversion without prescribing the form of resolution to be passed, any resolution of the company in general meeting will be sufficient.

Notice of conversion of shares into stock must be given to the Registrar of Joint Stock Companies. [C. A. 1862, s. 28.] A company may convert any portion or class of its paid-up capital into stock.

SHARE WARRANTS.

The convenience of having shares transferable by delivery occasioned the provisions of the Act 1867, whereby share warrants to bearer can be issued.

Any company which has power by its articles so to do may, with respect to any share which is fully paid up, or with respect to stock, issue a share warrant under the common seal of the company certifying that the bearer of the warrant is entitled to the shares or stock therein specified, and may provide, by coupons or otherwise, for the payment of the future dividends on the shares or stock included in such warrant. Each such share warrant is transferable by delivery.

The bearer of a share warrant may require the company to enter his name on the register as a member in respect of the shares or stock specified in the warrant, which he must at the time of application surrender for cancellation. By such surrender and registration of his name he becomes an ordinary share or stock-holder in the company.

The bearer of a share warrant may exercise all the privileges

of a shareholder if the articles so provide. In cases where a qualification is required, as for a director, the holding of share warrants will not supply the place of such qualification.

The stamp duty chargeable on share warrants is three times the transfer duty reckoned on the nominal value of the shares therein specified. The penalty for issuing a share warrant without being duly stamped is £50.

The sects. 31 and 32 of the Act 1867 regulate the entries respecting share warrants to be made in the register of members of the company, and the return to be made to the Registrar of Joint Stock Companies.

REDUCTION OF CAPITAL.

In the existence of a limited company it not unfrequently happens that it is desirable to reduce the capital of the company in one or more of the following ways:

1. To reduce the liability of members by extinguishing the whole or any part of the uncalled capital.

2. To reduce the nominal capital by cancelling all or any shares in the company which have not been issued. 3. To pay back superfluous capital either with or without extinguishing or reducing the uncalled liability,

if any.

4. To cancel any lost capital or capital unrepresented by available assets.

5. To reduce the paid-up capital by distributing accumulated profits and augmenting, pro tanto, the uncalled liability.

Provision for these various operations is made by the Acts of 1867, 1877, and 1880.

Unless the articles of association of the company provide for the first four of the above operations, the articles must be altered before any one of them is commenced. [West India Steamship Co., 9 Ch. 11, n.]

As to the fifth alternative a special resolution of the com

E

pany is alone necessary, without any provision being contained in the articles.

I. The articles being duly altered so as to admit of the proposed reduction of liability by extinguishing the whole or any part of the uncalled capital, the company must then proceed to pass a special resolution authorising the proposed reduction.

Immediately after the passing of such special resolution the company must add to its name the words "and Reduced " as the last words in its name, until such date as the Court may think fit.

The company must then apply to the Court by petition for an order confirming the reduction.

Every creditor of the company who is entitled to any debt or claim against the company may object to such reduction. The Court may dispense with the consent of any such objecting creditor on security being given for his debt or claim. By the 17th section of the Act 1867 the rights of creditors who are ignorant of the proceedings for the reduction of the capital of the company are preserved.

Sect. 19 of the Act 1867 makes it a misdemeanour for any officer of the company wilfully to conceal the name of any creditor of the company entitled to object to the proposed reduction, or wilfully to misrepresent the nature or amount of the debt or claim of any creditor of the company.

A copy of the order of the Court confirming the reduction, and of a minute (approved by the Court) shewing, with respect to the capital of the company as altered by the order, the amount of such capital, the number of shares into which it is to be divided, and the amount of each share, is to be delivered to the Registrar of Joint Stock Companies for registration, and notice of such registration shall be published in such manner as the Court directs.

This minute, when registered, shall form part of and have the same effect as the memorandum of association of the company. II. Any unissued shares of the company may be at once

cancelled, on the articles being altered for that purpose, without any further formalities than those which the altered articles prescribe.

III. The procedure to pay off any capital which may be in excess of the wants of the company, is identical with that laid down in No. 1.

It is to be observed that the repayment of capital does not augment the uncalled liability in any way.

The uncalled capital may, simultaneously with such repayment, be reduced in any proportion desired.

IV. To enable a company which has lost part of its capital to pay dividends on the remainder, it is of common occurrence for the shareholders to agree to write off as cancelled and lost any capital unrepresented by available assets. As this proceeding is practically only a book entry, and as the position of creditors cannot as a rule be in any way damnified thereby, the creditors are not entitled to object or required to consent to the reduction unless the Court otherwise directs.

It is not necessary for the company to add the words "and Reduced" to its name before presenting its petition for reduction, and the Court may, if it thinks fit, dispense with the affix altogether.

These provisoes are only for cases where the company neither pays back capital nor extinguishes or reduces the liability of its members. In other respects the procedure is similar to No. 1.

V. The reduction of paid-up capital through the medium of the distribution of undivided profits is a new provision introduced by the Act 1880. No intervention of the Court is necessary.

By sect. 3 it is provided that when any company has accumulated a sum of undivided profits which, with the consent of the shareholders, may be distributed among the shareholders in the form of a dividend or bonus, it shall be lawful for the company by special resolution to return the same or any part thereof to the shareholders, in reduction of the paid-up capital

of the company, the unpaid capital being thereby increased by a similar amount. The powers vested in the directors of making calls on the shareholders in respect of moneys unpaid on their shares, shall extend to the amount of the unpaid capital so augmented by such reduction.

A memorandum, together with the special resolution, must be sent to the Registrar of Joint Stock Companies, containing the particulars required by sect. 15 Act 1867 and sect. 4 Act 1877. Until this memorandum is sent the special resolution has no effect.

Any shareholder objecting to receive this repayment of capital is entitled to require the company to retain his proportion in payment to that extent of his future calls. The company must invest this sum and pay him the accruing interest thereon, his shares ranking for dividend as though reduced.

The annual return of members to the Registrar shall specify, in addition to the other particulars, the amounts which any of the shareholders of the company may have so required the company to retain.