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whom they had reasonable grounds for believing competent, or
(3) That the statement was a fair representation of an official
(4) Any director may show that he withdrew his consent to the prospectus and gave public notice of the fact.
MEETINGS AND RESOLUTIONS
As stated above, the directors manage the affairs of the company on behalf of the shareholders; but the shareholders themselves have some voice in the matter, in that amongst other business they themselves, at the meetings of the members, usually appoint new directors, or retain existing ones. There are several kinds of meetings which are held by companiessome compulsory, others optional and there are also various kinds of resolutions that can be passed at these meetings.
Meetings of a Company.
Shareholders' meetings are of three kinds
Statutory Meeting.—This is a general meeting, which must be held not less than one month and not more than three months from the date on which the company is entitled to commence business, (p) and a report must be sent to all shareholders seven days beforehand stating the particulars set out in Section 65 of the Act, viz. :
(1) The total number of shares allotted, distinguishing shares
allotted as fully paid or partly paid up otherwise than in cash, and stating in the case of shares partly paid up the extent to which they are so paid up, and in either case the consideration for which they have been allotted:
(2) The total amount of cash received by the company in respect of all the shares allotted, distinguished as aforesaid:
(3) An abstract of the receipts of the company on account of its capital, whether from shares or debentures, and of the payments made thereout, up to a date within seven days of the date of the report, exhibiting under distinctive headings the receipts of the company from shares and debentures and other sources, the payments made thereout, and particulars concerning the balance remaining in hand, and an account or estimate of the preliminary expenses of the company:
(p) See ante, p. 260.
(4) The names, addresses, and descriptions of the directors, auditors (if any), managers (if any), and secretary of the company; and
(5) The particulars of any contract, the modification of which is to be submitted to the meeting for its approval, together with the particulars of the modification or proposed modification.
This ensures that all members shall be aware of the exact position of the company.
Ordinary Meetings.-Usually the Articles make provision as to ordinary meetings, which may be held as frequently as required. Generally, only one such meeting is held in the year, and this is termed the Annual General Meeting. Under Section 64 of the Act one must be held in every calendar year, and never more than fifteen months from the preceding meeting.
Extraordinary Meetings.-The directors may call a special meeting, termed an Extraordinary Meeting, if there is any business to be transacted that cannot wait till the next annual meeting; and, under Section 66 of the Act, the members have the power to compel the directors to call such a meeting at any time. The members who wish the meeting to be called must hold at least one-tenth of the issued shares of the company upon which all calls or other sums then due have been paid. The necessary procedure is as follows:
(1) The requisition must state the objects of the meeting, and must be signed by the requisitionists and deposited at the registered office of the company, and may consist of several documents in like form, each signed by one or more requisitionists.
(2) If the directors do not proceed to cause a meeting to be held within twenty-one days from the date of the requisition being so deposited, the requisitionists, or a majority of them in value, may themselves convene the meeting, but any meeting so convened shall not be held after three months from the date of the deposit. (3) If at any such meeting a resolution requiring confirmation at another meeting is passed, the directors shall forthwith convene a further extraordinary general meeting; and if the directors do not convene the meeting within. seven days from the date of the passing of the first resolution, the requisitionists, or a majority of them in value, may themselves convene the meeting.
(4) Any meeting convened under this section by the requisitionists shall be convened in the same manner, as nearly
as possible, as that in which meetings are to be convened by the directors.
This power may be extended by the Articles, but it cannot be restricted.
The above meetings are all general meetings, and similar business may be transacted at each, e.g., it is not necessary to call an extraordinary meeting to pass an "extraordinary resolution providing the necessary formalities are observed as mentioned below.
The quorum is generally provided in the Articles; but, if not mentioned therein, at least three members must be present. If so provided in the Articles, a member may vote by proxy, but not otherwise.
Position as to Meetings generally.
The directors hold meetings from time to time, at which they discuss the details of the management and policy of the business. Such meetings are known as Board meetings; and it is the result of these deliberations that gives authority to the acts of the directors, for the directors must act as a board and not as individuals, unless the Articles otherwise provide. It is essential that accurate records should be kept of the proceedings at all meetings, whether of the company or of the directors. For this purpose, Minutes are written of all that takes place, which are read at the next meeting and, if approved as a correct statement, are signed by the Chairman. Such Minutes are then admissible as evidence of what took place at a particular meeting.
Every shareholder present at a shareholders' meeting has one vote unless, as is usual, the Articles provide that the voting shall depend on the number of shares held. Resolutions are put to the meeting by the Chairman, and voting is by show of hands and proxies do not count. If dissatisfied, any five members may then demand a poll in the case of an ordinary resolution, or three members in the case of a special resolution. A poll is taken by members signing a paper for or against the resolution, and a proxy is counted as a vote if so provided by the Articles. Sometimes the Articles provide that SCRUTINEERS shall be appointed to examine the votes given and to report as to the correctness of the result. In that case they must be appointed, and they may be appointed even if the Articles do not so provide.
In matters that affect the company as a whole, every member is entitled to be present at a company meeting of any kind; but where any particular rights are affected, only the shareholders of that particular class of shares are entitled to be present and vote.
Resolutions of a Company.
The resolutions at meetings of shareholders are of three kinds :
Ordinary Resolution.-A resolution passed by a majority of members present at the meeting.
This is used for ordinary routine matters, e.g., to elect directors or to pass the accounts.
Special Resolution.-A special resolution necessitates two meetings. At the first the resolution must be passed by a threequarters majority of the members present, and confirmed at the second by a simple majority. The second meeting must be held not less than fourteen days nor more than one month after the first.
Such resolutions are required, inter alia, in order to alter the Articles or to sub-divide shares.
Extraordinary Resolution. This is a resolution passed by a three-quarters majority of those present; it does not require confirmation. Notice must have been given beforehand of the intention to propose the resolution as an extraordinary resolution.
It may be used to wind-up a company voluntarily on the ground that it is unable to carry on its business by reason of its liabilities.
All resolutions must be moved and amendments may be proposed in the usual way. A copy of every special or extraordinary resolution must be sent to the Registrar within fifteen days of the confirmation or passing, as the case may be.
ACCOUNTS AND AUDITORS
The directors are bound to keep proper accounts and to render to the Registrar certain statements every year, these being included in the "Annual Summary."
An auditor or auditors must be appointed each year by the company at the annual general meeting. The first auditors are usually named in the Articles, and their names and addresses must be given in the prospectus. The appointment of auditor to a company is an important matter and is fully dealt with in Sections 112 and 113 of the Act. If appointed by the Articles, or at the annual general meeting, he is an officer of the company and equally liable with the other officers for a breach of trust.
The auditors have a right of access at all times to the company's books, accounts, and vouchers, and are entitled to demand
any information or explanation from the officers of the company. After examination of the books and balance sheet, the auditors report to the shareholders on
(1) Whether or not they have obtained all necessary information and explanations;
(2) Whether, in their opinion, the balance sheet exhibits a true and correct statement of the affairs of the com
The balance sheet, which should be signed by two directors, must have the auditors' report attached to it, or it must be referred to therein, and the report must be read at the general meeting.
In addition to keeping proper books of account, the company must keep the following statutory books :
Register of Members;
Register of Directors or Managers;
Register of Mortgages and Charges;
Annual Summary of Capital and Shares Book.
Definition of a Private Company.
A "private company" is defined in the Act of 1908, as amended by the Act of 1913, as one which by its articles
(1) Restricts the right to transfer its shares ;
(2) Limits the number of its members to fifty; (But an excess over fifty consisting of employees of the company or those who were members while employees and have remained members, is allowed.)
(3) Prohibits any invitation to the public to subscribe for any shares or debentures of the company.
Any private company which fails to comply with these provisions ceases to be entitled to the privileges of a private company. But if the default was caused by accident or inadvertence, the court may grant relief.
Very often members of the same family hold all the shares in a private company and, in any case, all the shares are held by very few persons. Only two persons are needed to form such a company, and this method of limiting the liability of persons is being largely adopted. Even if practically all the shares are held by one man, the company is, nevertheless, regarded in law as having a persona entirely distinct from him; and the company is not deemed to have knowledge of a matter simply because the principal member is aware of it.