Table A. any transaction of the compauy, and no director or other officer of the company is eligible during his continuance in office. (87.) The election of auditors shall be made by the company at their ordinary meeting in each year. (88.) The remuneration of the first auditors shall be fixed by the directors; that of subsequent auditors shall be fixed by the company in general meeting. (89.) Any auditor shall be re-eligible on his quitting office. (90.) If any casual vacancy occurs in the office of any auditor appointed by the company, the directors shall forthwith call an extraordinary general meeting for the purpose of supplying the same. (91.) If no election of auditors is made in manner aforesaid, the Board of Trade may, on the application of not less than five members of the company, appoint an auditor for the current year, and fix the remuneration to be paid to him by the company for his services. (92.) Every auditor shall be supplied with a copy of the balance-sheet, and it shall be his duty to examine the same with the accounts and vouchers relating thereto. (93.) Every auditor shall have a list delivered to him of all books kept by the company, and shall at all reasonable times have access to the books and accounts of the company. He may at the expense of the company employ accountants or other persons to assist him in investigating such accounts, and he may in relation to such accounts examine the directors or any other officer of the company. (94.) The auditors shall make a report to the members upon the balance-sheet and accounts, and in every such report they shall state whether in their opinion the balance-sheet is a full and fair balancesheet, containing the particulars required by these regulations, and properly drawn up, so as to exhibit a true and correct view of the state of the company's affairs; and in case they have called for explanation or information from the directors, whether such explanations or information have been given by the directors, and whether they have been satisfactory; and such report shall be read, together with the report of the directors, at the ordinary meeting. NOTICES. (95.) A notice may be served by the company upon any member either personally, or by sending it through the post in a prepaid letter, addressed to such member at his registered place of abode. (96.) All notices directed to be given to the members shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the register of members, and notice so given shall be sufficient notice to all the holders of such share. (97.) Any notice, if served by post, shall be deemed to have been served at the time when the letter containing the same would be delivered in the ordinary course of the post, and in proving such service it shall be sufficient to prove that the letter containing the notices was properly addressed and put into the post office. Dated the day of 18 NAMES, ADDRESSES AND DESCRIPTION OF SUBSCRIBERS. 16. 5. Guaranteed preference and ordinary shares. 7. Special dividend clause (preference shares, &c. 8. 99 9. Clauses to be used with 7 and 8 10. Founder's shares 11. Bonus warrants 12. Power to acquire specific business 14. 99 15. As to transfer of shares. Pre-emption to members 17. Power to forfeit shares of member suing the company 18. Power to receive calls in advance 254 255 255 256 256 257 259 261 42. Clause for protection of persons dealing with company 44. Remuneration of promoter 45. Audit committee 280 280 280 282 282 283 283 285 286 286 FORM I. The directors shall forthwith affix the seal of the company to an agreement which has been already prepared, and is expressed to be made between A. B., of the one part, and the company of the other part, and shall carry the same agreement into effect. The above is the form used instead of Clause 3, supra, p. 143, where an agreement expressed to be made between the company and the vendor has been prepared with a view to its being executed immediately after the incorporation. See supra, p. 2. The clause may also be framed as follows:-"The company shall forthwith enter into an agreement," &c. Sometimes the agreement is referred to in the memorandum of association, and in such case the clause may run thus:-"The directors shall forthwith affix the seal to the agreement referred to in Paragraph of the memorandum of association of the company." If a copy is given in the articles the clause will run thus :-" The agreement dated, &c., a copy whereof is set forth in the schedule hereto." Sometimes the clause runs thus :-"The company shall forthwith enter into an agreement with A. B. in the words and figures following:" and the agreement is then set out in full. Another form frequently used is this:-"The company hereby ratifics and adopts an agreement dated, &c., and the directors shall carry the same into effect." The object in setting out the agreement in the articles or in a schedule thereto is to give the members the fullest notice of its contents, for every member is taken to know the articles of association. Ernest v. Nicholls, 6 H. L. Cas. 401; Royal British Bank v. Turquand, 6 E. & B. 437; Lindley, 266 ; infra, notes to Form XLII. But it is not necessary, and in the great majority of cases the agreement is not set out but merely referred to. The authority, by the above clause given, will be a complete indemnity to the directors provided that they are not guilty of fraud or gross negligence. See supra, p. 185. It may here be observed that a company cannot, except by Act of Parliament, be brought into existence, bound to perform contracts made on its behalf before its incorporation. Where the legislature incorporates a company and enacts that it shall enter into a contract, or that a contract previously made shall be binding on it, there is, of course, no question as to its liability. But the articles of association of a company formed under the Companies Act, 1862, have not this effect: they merely constitute an agreement between the members (Pritchard's Case, 8 Ch. 956; Eley v. Positive, &c., Co., 10 Ex. Div. 88; Melhado v. Porto Alegre Ry. Co., L. R. 9 C. P. 503), not an agreement between the company and the person with whom the contract has been or is to be made. They are not more effectual than a deed of settlement under 7 & 8 Vict. c. 110; and it was held that a clause in such a deed purporting to ratify and adopt a contract made on behalf of the company before its complete registration did not render the contract binding on the company. Gunn Forms. Forms. Dividend on preference shares. Dividend on deferred shares. Surplus profits. v. London, &c., Co., 12 C. B. N. S. 694. See also Payne v. New South Wales, &c., Co., 10 Ex. 283; 24 L. J. Ex. 117; Hutchinson v. Surrey Consumers, &c., Co., 11 C. P. 689; 21 L. J. C. P. 1. So too a clause in the articles providing that the directors [or the company] shall purchase certain property at a specified price, or appoint some person to an office on certain terms, or pay monies to a promoter or other person, does not operate as a contract between the company and such person. It is merely an agreement between the members and an authority to the directors to enter into the contract. Eley v. Positive, Sc., Co., 1 Ex. Div. 88; Pritchard's Case, 8 Ch. 690; Melhado v. Porto Alegre Ry, Co., L. R. 9 C. P. 503; Overend & Gurney Co. v. Gibbs, L. R. 5 H. L. 480. At the same time, an agreement by a company to do what its pro. moters have undertaken it shall do, may obviously be entered into, and such an agreement, if entered into, and if not ultra vires, will be binding on the company. Lindley, 411; Browning v. Great Central Mining Co., 5 H. & N. 856; 29 L. J. Ex. 399; Pritchard's Case, 8 Ch. 960; Touche v. Metropolitan Co., 6 Ch. 671. And, in the absence of other evidence, such an agreement may be inferred if the company acts on the agreement of the promoter and takes the benefit of it. See the cases last cited. As to the principle on which Edwards v. The Grand Junction Ry. Co., 1 M. & Cr. 650, and similar cases were decided, see Lindley, 413, et seq. FORM II. PREFERENCE AND DEFERRED SHARES. 1. The holders of the preference shares shall be entitled to receive out of the profits of the company, as a first charge, a cumulative preferential dividend of 10 per cent. per annum on the amount, for the time being, paid up on the preference shares held by them respectively. 2. The holders of the deferred shares shall be entitled to receive out of the profits of the company, as a second charge, a cumulative dividend of 5 per cent. per annum on the nominal amount of the deferred shares held by them respectively. 3. The surplus profits shall be divided among the members in proportion to the nominal amount of the capital held by them respectively. Where the original capital of a company is divided into several classes of shares, it is usual to insert clauses defining the rights of the holders, as regards dividends, near the beginning of the articles of association. See supra, p. 146. The clauses generally commence by a statement as to the capital, e.g., "The original capital is 100,000l., divided into 5000 preference shares of 107. each, and 5000 deferred shares of 101. each," and then proceed to define the rights. In some cases another mode is adopted, namely, to insert in that part of the articles which relates to the payment of divi |