In Forbes' Case [8 Ch. 768] four persons were named in the articles as directors. It was also provided that every member holding not less than fifty shares should be eligible as a director, it was decided on appeal that the provisions as to qualification did not apply to the original directors. [See also Hamilton's Case, 8 Ch. 548; Brett's Case, 1882, W. N. 185.]

Where the holding of a certain number of shares is a necessary qualification for a director, the mere fact of becoming a director does not amount to a contract by the person so appointed to take that number of unpaid shares direct from the company. [Brown's Case, 9 Ch. 102.]

A director may after his appointment obtain his qualification from any source; he may buy the shares on the market, or he may take a transfer from a friend, but his time for getting the shares expires when he acts as director, and he thereupon becomes bound to take the shares from the company. [Miller's Case, 3 Ch. D. 661; Hampshire Milk Co., 29 W. R. 170.]

Many cases have arisen where directors have joined the board of a new company on a promise by the promoter that he would find their qualification for them, either by a transfer of shares, or by providing the money to enable the intending directors to subscribe for the necessary qualification.

Directors so acting commit a very grave and very reprehensible breach of trust in accepting a qualification from a person who is a vendor to the company, or with whom it might be their duty to deal as trustees for the company. [Carling's Case, 1 Ch. D. 115.]

If there is any agreement or understanding between a vendor and directors relative to the finding of their qualifications before all matters between the vendor and the company are closed, the directors cannot as against the company retain those shares. Any such transfer of shares would be a simple bribe or present to the directors constituting a breach of trust on their part, and a misfeasance in respect of which the

company would be entitled to get trustees what they had so acquired. 115.]

back from its unfaithful [Carling's Case, 1 Ch. D.

Thus in Pearson's Case [5 Ch. D. 336], where a director accepted his qualification from the vendor and then took part in ratifying on behalf of the company a contract for purchase entered into with the vendor, he was held liable for his misfeasance.

Where the money to enable the directors to pay for their qualifying shares was provided by the vendor out of the purchase-money paid by the company, it was held that the directors could not retain the money so paid them by the vendors; that the money had never ceased to be the property of the company, and that there had been in fact no payment by the directors of the money due in respect of the shares. [Hay's Case, 10 Ch. 593.]

There is, however, no objection to a director having his qualification given to him by the vendor or promoter if such director joins the Board after the relations between the vendor or promoter and the company are at an end, and when the gift of the shares can in no sense be a bribe. [Brown's Case, 9 Ch. 102.]

Where directors have improperly obtained shares in the company they are liable at the option of the company to account for the shares in any one of the following ways:

1. The company may claim a re-transfer of all the shares. 2. If the shares have been sold the company may claim to receive the entire profit so realized.

3. If the shares have depreciated in value the company may claim the full nominal amount of the shares of which the company has been deprived.

The company may adopt whichever of these alternatives is most beneficial to itself. [Carling's Case, 1 Ch. D. 126.]

A claim for the value of the shares is a claim for damages and not for debt. [Ex parte Theys, 22 Ch. D. 122.]

THE DUTIES AND POWERS OF DIRECTORS.

The articles usually provide for the appointment of the first directors of the company.

By Table A the first directors are determined by the subscribers to the memorandum, who, until they appoint directors, are deemed to be directors.

Directors are the agents of the company, and have impliedly, by virtue of their position, general powers of management. They have no power to bind the company, except within the limits prescribed by the regulations of the company; and they have not all the powers of the company conferred upon them.

The general powers of management conferred upon the directors by implication extend only to the ordinary course of business of the company. Any further powers must be expressly conferred upon them. With the exception of powers required by the Companies Acts to be exercised by the company in general meeting, there is no limit to the powers which may be expressly conferred upon the directors by the articles of the company. [Strand Music Hall, 13 L. T. 177; Ex parte Walker, 18 Jur. 885.]

Where the articles provide that the business of the company shall be conducted by not less than a certain number of directors, the board must consist of at least that number, or otherwise their acts will be invalid. [Garden Gully Co. v. McLister, 1 App. Cas. 39; Alma Spinning Co., 16 Ch. D. 681.]

of

Where the articles empower the directors to delegate any their powers to committees consisting of members of their body, and also provide that in the construction of the articles words importing the plural number only shall include the singular, it has been held that, under these provisions, the directors could delegate their powers to a single member of their body. [McLagan's Case, 51 L. J. Ch. 841.]

The election of directors is regulated by the articles, which

usually prescribe that the company in general meeting shall from time to time appoint new directors. They usually also contain a clause to the effect that casual vacancies at the board may be filled up by the directors. It has been held that this power is properly exercisable after a general meeting, in respect of a casual vacancy which occurred before such meeting, and which the shareholders had omitted to fill up. [Munster v. Cammell Co., 51 L. J. Ch. 731.]

Unless there be any express power in the articles the company has no inherent powers to remove directors before their term of office has expired. [Imperial Hydropathic Hotel Co. v. Hampson, 1882, W. N. 189.]

Where directors exceed their own authority, while still keeping within the powers of the company, the excess of authority may be ratified by the company in general meeting and rendered binding. [Dronfield Coal Co., 17 Ch. D. 76.] But any such ratification does not in itself extend the authority of the directors so as to authorize them to do similar acts in future. [Irvine v. Union Bank of Australia, 2 App. Cas. 366.]

Directors are bound to exercise the powers given to them for the benefit of the company generally, and not with a view to their own private interests only.

But directors are not under any disability to lend money to their company [Campbell's Case, 4 Ch. D. 470], and, under ordinary circumstances, they may deal with their shares as freely as any other shareholders, provided they do not part with their qualifications. [Gilbert's Case, 5 Ch. 559.]

Without express authority directors cannot delegate their powers. [Howard's Case, 1 Ch. 561.]

Where the articles prescribe certain acts to be done by the board, those acts, to be valid, must be so done. It will not suffice to obtain the individual consent of a quorum of directors [D'Arcy v. Tamar, &c., Co., 2 Ex. 158], but subsequent ratification at a properly convened board will remedy any defect. [Austin's Case, 24 L. T. 932.]

G

Where the articles of a company do not prescribe the number of directors necessary to constitute a quorum, the number who usually act in conducting the business of the company will constitute a quorum. [Lyster's Case, 4 Eq. 233.]

Each director is entitled to be present at every board meeting of the company if duly qualified, and may sustain an action in his own name against the other directors, on the ground of individual injury to himself, for an injunction to restrain them from wrongfully excluding him from acting as director. [Pulbrook v. Richmond Consolidated Co., 9 Ch. D. 610; Munster v. Cammell, &c., Co., 1882, W. N. 97.]

Every director is bound to have a reasonable knowledge of the affairs of the company. He is not necessarily affected with notice of all the transactions entered in the books of the company [Cartmell's Case, 9 Ch. 691], but he is affected with notice of all proceedings of the board, the minutes of which are read and confirmed in his presence. [Ashhurst v. Mason, 20 Eq. 225.]

Generally a director will be presumed to have known everything which in his capacity as a director he should have been acquainted with. There is no presumption of law that a director knows the contents of the books of the company. [Hallmark's Case, 9 Ch. D. 329.]

The knowledge of a director in a transaction in which he had not been concerned on behalf of the company, does not affect the company with notice of the fact. [Peruvian Railways v. Thames Marine Co., 2 Ch. 617; Ebbw Vale Co. Claim, 8 Eq. 14.]

The company is not affected with notice by the knowledge of one director, unless at the time he was acting as a director on behalf of the company, and had no personal reasons for concealing his knowledge. [European Bank, 5 Ch. 358.]

A director is a trustee of his powers of making calls for the general body of shareholders, and must not use them for his own benefit without regard to their interests. [Gilbert's Case, 5 Ch. 559.]