Prec. I. become property of company. Power to annul forfeiture. Evidence of forfeiture. Arrears to be paid notwithstanding forfeiture. Effect of for. feiture. of the company, and the directors may sell, re-allot, and other- 37. The directors may, at any time before any share so forfeited shall have been sold, re-allotted, or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit. 38. A certificate in writing, under the hands of two of the directors, and countersigned by the secretary, that a share has been duly forfeited in pursuance of these presents, and stating the time when it was forfeited, shall be conclusive evidence of the facts therein stated as against all persons who would have been entitled to the share but for such forfeiture, and such certificate and the receipt of the company for the price of such share shall constitute a good title to such share. The above clause is in general use and is valuable; the object is to relieve the purchaser of forfeited shares from the onus of examining into the validity of the forfeiture. 39. Any member whose shares have been forfeited shall, notwithstanding, be liable to pay, and shall forthwith pay to the company all calls, instalments, interest, and expenses, owing upon or in respect of such shares at the time of the forfeiture, together with interest thereon, from the time of forfeiture until payment, at 10 per cent. per annum, and the directors may enforce the payment thereof if they think fit. In the absence of such a clause as above, it appears that the forfeiture would be taken to preclude the company from suing for calls. Stocken's Case, 3 Ch. 412. From the same case it appears that the liability under this clause must be treated as a new one, binding under Section 16 of the Act, (see supra, note to Clause 7,) and not as a preservation of the liability existing at the time of forfeiture. It is necessary therefore to prescribe the rate of interest, since the provision in Clause 19 will not apply. Stocken's Case, ubi supra. [39a. The forfeiture of a share shall involve the extinction of all interest in, and also of all claims and demands against the company in respect of the share, and all other rights incident to the share except only such of those rights as by these articles are expressly saved.] Although the above clause is sometimes inserted, it appears to be of little or no value. In substance it merely provides for that which is otherwise provided for, namely, that a forfeited share shall be deemed to be the property of the company. If strictly construed it would deprive a future holder of the share of the right of voting and of receiving dividends, &c. See Stocken's Case, 3 Ch. 412. In Creyke's Case, 5 Ch. 63, it was contended that the forfeiture of shares in a company whose articles contained such a clause freed the forfeiting member from liability even as a past member; but it was held that this was not so. LIEN. Prec. I. 40. The company shall have a first and paramount lien Company's upon all the registered shares and registered stock of each lien on shares. member for his debts, liabilities, and engagements, solely, or jointly, with any other person, to or with the company, whether the period for the payment, fulfilment, or discharge thereof, shall have actually arrived or not. It is usual expressly to give a company a lien as above. It is possible that a lien might be implied though not expressly given, Lindley, 706; but this possibility is not relied on in practice. See Pinkett v. Wright, 2 Ha. 120; 12 Cl. and Fin. 764. As to the above clause, see In re Stockton, &c., Co. 2 Ch. Div. 101; In re Lewis, 6 Ch. 818; Lindley, 706; Buckley, 390. sale. 41. For the purpose of enforcing such lien, the directors may As to ensell the shares or stock subject thereto, without any notice to forcing lien by or consent by the holder of such shares or stock or any other person, but no sale shall be made unless and until default be made in the payment, fulfilment, or discharge of such debts, liabilities, or engagements. The lien is of much greater value if it can be enforced in a summary manner by sale of the share subject to it. Although Table A. indirectly gives a lien (Clause 10,) it does not confer on the company a power of sale. The restriction contained in the latter part of the above clause has only recently come into use, but it seems only fair and equitable. See observations of Jessel, M. R., In re Stockton, &c., Co., ubi supra. sale. 42. The net proceeds of any such sale shall be applied in or Application of towards satisfaction of the debts, liabilities, or engagements, proceeds of and the residue (if any) paid to such member or his representatives. 43. A certificate in writing under the hands of two of the directors and countersigned by the secretary, that the lastmentioned power of sale has arisen and is exerciseable by the Prec. I. company under these presents, shall be conclusive evidence of the facts therein stated. 44. Upon any such sale the directors, or any two of them, may execute a transfer of such shares or stock to the purchaser thereof, and such transfer, with the certificate last aforesaid, shall confer on the purchaser a complete title to such shares or stock. Conversion of shares into stock. Transfer of stock. Rights of holders of stock. Power to CONVERSION OF SHARES INTO STOCK. 45. The company [in general meeting] may convert any paid-up shares into stock. Any company limited by shares, if authorised by its regulations as originally framed, or as altered by special resolution, may convert its paid-up shares into stock. Sec. 12 of the Act. See supra, p. 82. The power is not often exercised, and the clauses relating to it might, if brevity be desired, be omitted. They can at any time be supplied by special resolution. If the words in brackets are omitted the directors will be able to exercise the power under clause 113, infra. See further as to conversion of shares into stock, "Resolutions," notes to Form 10. If desired, the clause may run thus: "The company may by special resolution convert," &c. 46. When any shares have been converted into stock, the several holders of such stock may, thenceforth, transfer their respective interests therein, or any part of such interests, in the manner and subject to the regulations hereinbefore provided. 47. The several holders of stock shall be entitled to participate in the dividends and profits of the company according to the amount of their respective interests in such stock; and such interests shall, in proportion to the amount thereof, confer on the holders thereof respectively the same privileges and advantages, for the purpose of voting at meetings of the company and for other purposes, as would have been conferred by shares of equal amount in the capital of the company, but so that none of such privileges or advantages, except the participation in the dividends and profits of the company, shall be conferred by any such aliquot part of consolidated stock as would not, if existing in shares, have conferred such privileges or advantages. INCREASE OF CAPITAL. 48. The company in general meeting may, from time to time, increase the capital by the creation of new shares of such amount as may be deemed expedient. Any company limited by shares, if authorised to do so by its regulations as originally framed, or as altered by special resolution, may increase its capital. Sec. 12 of the Act. Under the above clause the increase can be effected by a simple resolution passed at an extraordinary meeting. Not uncommonly it is thought better to require the sanction of a special resolution to an increase. Thus: "48a. The company may from time to time by special resolution increase," &c.; or, the directors may be empowered to increase the capital at their discretion. See infra, Miscellaneous Clauses, Form 19. 49. The new shares shall be issued upon such terms and conditions, and with such rights and privileges annexed thereto [as the general meeting, resolving upon the creation thereof, shall direct, and, if no direction be given], as the directors shall determine; and in particular such shares may be issued with a preferential or qualified right to dividends, and in the distribution of assets of the company, and with a special or without any right of voting. See further, infra, Miscellaneous Clauses, Form 19. If clause 48a is used, then omit the words within brackets in the above clause and substitute these: "as by the special resolution creating the same shall be directed, and if no direction be given," &c. See further as to increase of capital, infra, where forms of resolutions, notices, &c., will be found. 50. The company [in general meeting] may, before the issue of any new shares, determine that the same, or any of them, shall be offered in the first instance to all the then members, in proportion to the amount of the capital held by them, or make any other provisions as to the issue and allotment of the new shares; but, in default of any such determination, or so far as the same shall not extend, the new shares shall be subject to Clause 5 hereof. In lieu of the above clause, which is very commonly used, the following, which is similar to clause 27 in Table A., may, if preferred, be substituted: "Subject to any direction to the contrary that may be given by the meeting that sanctions the increase of capital, all new shares shall be offered to the members in proportion to the existing shares held by them, and such offer shall be made by notice specifying the number of shares to which the member is entitled, and limiting a time within which the offer, if not accepted, will be deemed to be declined; and after the expiration of such time, or on the receipt of an intimation from the member to whom such notice is given, that he declines to accept the M Prec. I. How far new shares to rank original shares offered, the directors may dispose of the same in such manner as they think most beneficial to the company." 51. Except so far as otherwise provided by the conditions of with shares in issue, or by these presents, any capital raised by the creation of new shares shall be considered part of the original capital, and shall be subject to the provisions herein contained, with reference to the payment of calls and instalments, transfer and transmission, forfeiture, lien, surrrender, and otherwise. capital. Reduction of capital, &c. Surrender of shares. The above clause ought to be taken into consideration upon any increase of capital. Where, as in this precedent, "the capital" and "shares" are specially interpreted, supra, p. 142, it would seem that this clause might be dispensed with. See also observations of Kindersley, V.-C., in reference thereto. Hutton v. Scarborough, &c., Co., 13 W. R. 1061. As to the operation of the clause, see Harrison v. Mexican Ry. Co., 19 Eq. 358, and Bangor, &c., Co., 20 Eq. 59. REDUCTION OF CAPITAL, CONSOLIDATION AND SUBDIVISION 52. The company may, from time to time, reduce its capital, and may, by consolidation, or subdivision, divide the capital, or any part thereof, into shares of larger or smaller nominal amount. As to reduction of capital, see infra, Resolutions, Form 15, et seq. As to subdivision of shares, see infra, ibid. Form 12, et seq. SURRENDER OF SHARES OR STOCK. 53. The directors may [with the sanction of a general meeting] accept from any member, on such terms and conditions as shall be agreed, a surrender of his shares or stock or any part thereof. The words in brackets are generally omitted. A power to accept surrenders is valid, and a surrender which does not amount to a reduction of capital is not open to any objection, e.g., if a 107. share with 57. paid up be surrendered for two shares of 51. each, credited with 27. 10s. paid up on each share. Teasdale's Case, 9 Ch. 54. But if the surrender would amount to a reduction of capital it would seem that it is only valid if (1) it is bonâ fide for the benefit of the company, or (2) is carried into effect as a reduction of capital in accordance with the Act of 1867. Hope v. International Financial Society, W. N. 1876, 295. In Teasdale's Case, Mellish, L.J., said that "Snell's Case and Campbell's Case, are direct authorities, that where the articles authorise the surrender of shares, such surrender is valid if made bonâ fide and with a view to the benefit of the company. See also Morgan's Case, 1 De G. & Sm. 750; 1 Mac. & G. 225; Lawes' Case, 1 D. M. & G. 421; Bennett's |