Forms. Power to appoint committees. Powers may be delegated to committee. Expenses to be paid. How funds to be invested. How investment to be authorised. ing such trustee or trustees, to be vested in his or their name or names, or under their or his legal contract jointly with any continuing or other trustee or trustees, or solely, as the case may be, or may be so directed or intended as aforesaid. FORM XXXVII. LOCAL AND OTHER COMMITTEES. The following clauses are sometimes inserted, but Sub-section 11a, supra, p. 187, is generally found sufficient. 1. The directors may, from time to time, appoint and remove such local committees in the United Kingdom, or elsewhere, consisting of such person or persons as the directors may think fit, and may determine and regulate the quorum, duties, procedure, and remuneration of any such committee. 2. The directors may delegate to any local committee such of the powers, authorities, and discretions of the directors as they think expedient, and every local committee shall make all such returns, and furnish all such accounts, as the directors shall from time to time prescribe or require, and every local committee shall be in all respects subject to the control of the directors. 3. The directors may pay the expenses, occasioned by any of the matters aforesaid, out of the funds of the company. FORM XXXVIII. INVESTMENT OF MONIES. The following clauses are such as are used in an investment company. 1. The directors shall invest the monies of the company which shall not from time to time be required as working capital, in such of the investments specified in the memorandum of association of the company, as they shall think fit; Provided always that the directors shall not invest more than one-tenth part of the capital of the company in any one investment. 2. All investments and reinvestments of the monies of the company, pursuant to the last preceding clause hereof, shall be authorised by a resolution passed at a meeting of the directors by three-fourths of the directors present, of whom the chairman, or acting chairman, shall be one. Forms. ments. 3. The directors may make temporary investments of the monies of the company, in or upon any of the public stocks or As to temfunds, or government securities of the United Kingdom or porary investIndia, or in stock of the Bank of England, or may place such monies on deposit at interest, or otherwise, at any bank or discount establishment, and may, from time to time, at their discretion, realise such investments and call in such monies. 4. The directors, with the sanction of a resolution passed at As to sale of permanent a meeting of the directors by three-fourths of the directors. investments. present, of whom the chairman or acting chairman shall be one, and specifically referring to the investments to be dealt with, may sell and dispose of any of the investments made under Clause 1 hereof. ment. 5. Upon every such sale as last aforesaid a sum equal to the Re-investoriginal cost of the investments sold shall be reinvested in the manner provided by Clause 1 hereof. loss on sale. 6. If the net proceeds of such sale exceed the amount of the As to profit or original cost, including the expenses of the investment, the profit realised by such sale shall be carried to the revenue account, or to the reserve fund as and in such proportion as the directors shall determine; but, if the amount so realised shall be less than the original cost, the deficiency shall be made up, in such manner as the directors shall determine, out of the revenue account and reserve fund, or either of them. FORM XXXIX. INSPECTION. For other forms, see supra, p. 192. which mem bers entitled to inspect books, &c. The secretary shall allow, between the hours of ten in the Conditions on forenoon and twelve at noon, such inspection of the register of members as is provided by the statutes, but so that every member or other person, before inspecting any such register, shall sign his name in a book kept for that purpose; and shall allow, before every ordinary meeting, to any member who shall apply for the same, an inspection of such of the books of account of the company, and at such times and under such restrictions as the directors may determine, but shall not allow any further or other inspection of the books, papers, or documents of the company. Forms. How bills, &c., to be accepted. Under what FORM XL. ACCEPTANCE OF BILLS, ETC. All cheques, bills of exchange, promissory notes, and other negotiable instruments, shall be drawn, accepted, made, or indorsed, for and on behalf of the company by one or more of the directors, and shall be countersigned by the secretary. The above and the following clause are not uncommon. FORM XLI. The secretary shall affix the seal with the authority of the conditions seal directors, and in the presence of one director at least, to all to be affixed to instru ments. What securities, under seal, to be instruments required to be sealed, and all such instruments shall be countersigned by the secretary. FORM XLII. PROTECTION OF PERSONS DEALING WITH COMPANY. Any mortgage, bond, or other security, bearing the common seal of the company, and issued for valuable consideration, shall deemed valid. be binding on the company, notwithstanding any irregularity touching the authority of the directors to issue the same; [and no person, taking any such security, shall be bound to ascertain that the amount then due by the company on mortgage or other securities does not exceed one half of the nominal capital of the company]. The words in brackets will, mutatis mutandis, be inserted where the borrowing power is limited. The above clause is occasionally inserted. In re Patent File Co., 6 Ch. 85. But it would seem to be merely the expression of that which is the law, as settled in a series of cases, of which The Royal British Bank v. Turquand, 6 E. & B. 327, is a leading one. The principle on which this case was decided is well known, and has been repeatedly acted upon; namely, that persons dealing with the directors of a company are bound to know the statute regulating it, and to examine the deed of settlement, or, as to companies formed under the Act of 1862, the memorandum and articles of association; but that is all, e.g., they are not bound, where a resolution is necessary to authorise the doing of some act of the directors, to see that it has been passed, nor are they bound to see that the directors have been duly appointed. Thus, in the case above mentioned, the directors had power to borrow on the bonds of the company such sums, as by a general resolution of the company, might be authorised. They issue a bond for 1,000l., which was not authorised by any resolution of the company. It was held binding on the company. Jervis, C.J., in affirming the decision of the Court below, said: "We may now take for granted, that the dealings with these companies are not like dealings with other partnerships, and that the parties dealing with them are bound to read the statute and the deed of settlement; but they are not bound to do more. And the party here, on reading the deed of settlement, would find not a prohibition from borrowing, but a permission to do so on certain conditions. Finding that the authority might be made complete by a resolution, he would have a right to infer the fact of a resolution authorising that which, on the face of the document, appeared to be legitimately done." So in Agar v. Athenæum, &c., Society, 3 C. B. N. S. 725; 6 W. R. 277; the directors had power to borrow, but only with the consent of an extraordinary general meeting of shareholders. They did borrow by issuing debentures sealed with the seal of the company, and signed by two of themselves; and it was held that these debentures were binding on the company, although no such authority to borrow had been conferred. Cockburn, C.J., said, that the Court was "bound by the case of Turquand v. The Royal British Bank, where the power to borrow was almost identical with this; and the Court held that a plea founded on an alleged want of a resolution was bad." So in Ex parte The Eagle Co., 4 K. & J. 549; 6 W. R. 779, a claim was made against an assurance society, in respect of an agreement, not under seal, for a policy. By the deed of settlement, policies were to be under seal. The claim was allowed. The judgment of Wood, V.-C., contains the following: "There is no doubt an important distinction to be drawn, and is drawn, in the case of The Royal British Bank v. Turquand, between that which, upon the face of it, is manifestly imperfect, when tested by the requirements of the deed of settlement of the company, and that which contains nothing to indicate that those requirements have not been complied with. Thus, where the deed requires certain instruments to be made under the common seal of the company, every person contracting with the company can see at once whether that requisition is complied with, and he is bound to do so; but where, as in the case I have last referred to, the conditions required by the deed consist of certain internal arrangements of the company, for instance, resolutions at meetings and the like, if the party contracting with the directors finds the acts which they undertake to do, to be within the scope of their power under the deed, he has a right to assume that all such conditions have been complied with. In the case last supposed, he is not bound to inquire whether the resolutions have been duly passed, or the like, otherwise he would be bound to go further back, and to inquire whether the meetings have been duly summoned and to ascer tain a variety of other matters into which, if it were necessary to make such inquiry, it would be impossible for the company to carry on the business for which it is formed." So, also, it has been held that the public is entitled to assume that a person acting as agent of a company has been duly appointed by the directors, where, by the company's deed of settlement, they have power to appoint persons to carry on its business. Smith v. Hull Glass Co., 11 C. B. 897. The same principle applies to directors, and accordingly it has been held that a person who effects a policy with a life assurance company is Forms. Forms. Acts assented to by company not to be impeached as ultra vires. Payment to promoter. not bound to inquire whether the persons signing the policy as directors have been legally appointed directors, or are empowered to use the seal of the company. In re County Life Assurance Soc., 5 Ch. 288. This decision was followed by the House of Lords in the recent case of Mahony v. East Holyford Mining Co., 7 H. L. 869. See further, Lindley, 268, et seq. In the Pooley Hall Colliery, Co., 18 W. R. 201; 21 L. T. 690, the directors had power to incur debts, and borrow on mortgage, so that the liabilities of the company should never, without the sanction of a general meeting, exceed 8,0007. They issued, without such sanction, debentures when the liabilities exceeded 8,000l. Romilly, M.R., held (1869) the debentures "not voidable, but void." The principle laid down in the Royal British Bank v. Turquand, ubi supra, was not alluded to in the case, and it is submitted that the decision is inconsistent with it. Lindley (p. 286) says that " whether, if the limit is not set by statute, an excessive exercise of a power to borrow would be held altogether invalid, or would be held valid in favour of bonâ fide lenders, without actual notice of such exercise, has not yet been determined. But it is difficult to see why the principles of The Royal British Bank v. Turquand should not be applied in such case." As to the personal liability of directors borrowing in excess of company's powers, &c., see Weeks v. Propert, L. R. 8 C. P. 427. FORM XLIII. No purchase, sale, contract, or agreement, made or entered into by the directors, or act done by the directors, to which the assent of the company in general meeting shall be given, shall be afterwards impeached or objected to by reason that the same is not within or is opposed to the business and objects of the company, or that a dissolution of the company may be thereby rendered necessary, or on any other ground whatsoever. A clause to the above effect is sometimes inserted. See Marshall v. Glamorgan Iron and Coal Co., 7 Eq. 137, in which Giffard, V.-C., assumed that it was valid. But see and consider Hope v. International Financial Society, W. N. 1876, 257; and Garden Gully, &c., Co. v. McLister, 1 App. Cas. 54. See also supra, p. 86. FORM XLIV. REMUNERATION OF PROMOTER. In consideration of the great labour, expenses, and risk which A. B., one of the subscribers of the memorandum of association, has incurred and been put to in and relating to the promotion and formation of the company, and in registering the memorandum and articles of association thereof, the company shall, when and so soon as shares shall have been allotted, pay to the said A. B., his executors, administrators, or assigns, the sum of -1. See Croskey v. Bank of Water., 4 Giff. 317. |