Notice calling meetings to pass special resolution.

As to filing agreement.

Remuneration

that the purchasing company shall pay dissentients, but from the above case it would seem that this might not be regarded as a sufficient security, unless the selling company had uncalled capital; and accordingly a clause is now sometimes inserted giving the liquidators a lien on the assets for the amount payable to dissentients, and the right to retain possession until they are satisfied. This appears to remove any ground for complaint by dissentients, as in Hester & Co., ubi supra.

But where the selling company has uncalled capital it would seem from the above case that such a clause is unnecessary. It may, however, be doubted how far this is consistent with the principles laid down in Clinch v. Financial Corporation, 4 Ch. 120, and infra, p. 539.

The validity of a special resolution sanctioning a sale or arrangement under Section 161, essentially depends on the sufficiency of the notices given convening the meetings. They ought to give the members either direct or indirect notice that the transaction is to be effected under Section 161. Imperial Bank of China, &c. v. Bank of Hindustan, &c., 6 Eq. 91; Fox's Case, 6 Ch. 176. A notice which states (inter alia) that a resolution is to be proposed authorising the liquidators to sell the assets to another company and to accept compensation in shares is probably sufficient; but the usual plan now is to refer expressly to Section 161. See supra, p. 310. This precludes all doubt. Of course, the reference to Section 161 may be either in the notice or in the accompanying circular (if any).

The agreement with the new company must, if it provides for the issue of paid up shares, be filed pursuant to the 25th Section of the Companies Act, 1867. See supra, p. 6.

It is also not unusual to file subsequent agreements between the new company and the members of the old company to whom shares are allotted specifying the shares allotted. But having regard to the decision in Carling's Case, 1 Ch. Div. 115, and other cases cited supra, p. 10, it would seem that the filing of the principal agreement is sufficient.

However, it may be expedient to file a subsequent agreement to identify the shares allotted to each member of the old company. See supra, p. 11.

The liquidators, in a winding up for the purpose of reconstrucof liquidators. tion, generally act without remuneration, or for a small fee. A company cannot, by an alteration in its articles, made in

Alteration of

contemplation of a winding up, and proceeding under Section articles in 161 of the Act, deprive dissentient members of the right rights of disderogation of given them by that section. Ex parte Fox, 6 Ch. 176. There sentients. seems, however, no reason why the rights of dissentient members, under Section 161, should not be restricted by the articles as originally framed. See supra, p. 199.

of invalid

Where the special resolution sanctioning an agreement for a Confirmation sale under Section 161 is invalid for want of proper notice, resolution. the transaction can, nevertheless, be confirmed. Fox's Case, 6 Ch. 176. In order to effect this, the liquidators must call the necessary meetings and procure the members to pass proper special resolutions.

up.

a view to re

It will be remembered that Sec. 161 provides that if an Order to wind order be made within a year for the winding up the company by or subject to the supervision of the Court, the resolution shall not be of any validity unless sanctioned by the Court. Any company not formed or registered under the Act of Company may 1862, but which is capable of being registered under that Act, register with may effect a reconstruction under Section 161. In order to do construction. this it will register under the Act, and the reconstruction may then be carried into effect as above mentioned. objection that the registration was made expressly with a view to winding up and selling under Section 161. Southall v. British Mutual Life Assurance Society, 6 Ch. 614.

It is no

tion in winding up subject to supervision.

The reconstruction of a company may be effected under ReconstrucSection 161 in a winding up subject to supervision, as well as in a purely voluntary winding up. In re Imperial Mercantile Credit Association, 12 Eq. 504.

In a compulsory winding up, an arrangement is sometimes carried into effect which in substance is very similar to a reconstruction under Section 161, viz., a sale of the whole assets is sanctioned under Section 95 to a new company for a certain sum in cash, with the option to each member of the old company to accept payment for his interest in the old company in shares in the new company. See In re Agra and Masterman's Bank, 12 Eq. 409; 15 W. R. 554, in which the reconstruction of a company winding up subject to supervision was effected by sale under Section 95 of the Act.

A reconstruction and an arrangement with creditors under the Act of 1870 are not uncommonly effected at the same time. See infra, 591.

Reconstruc

tion in compulsory wind. ing up.

RECONSTRUCTION-FORMS.

Forms.

SCHEME I.

In this case the shares of the existing company are 107., with 57. paid up. The object of the reconstruction is to get rid of all further liability and to give to the reconstructed company more extensive objects than those of the existing one.

As to the procedure, see supra, p. 478, et seq.

The special resolutions will be as follows :

1. That the company be wound up voluntarily, and that A. B., of, and C. D., of, be and they are hereby appointed liquidators for the purposes of such winding up.

2. That the following scheme of reconstruction be and the same is hereby approved, namely:-That a new company be incorporated under the Companies Acts, 1862 and 1867, as a company limited by shares by the name of The Company, Limited, with a capital of 50,000l., divided into 10,000 shares of 57. each, and having power to acquire and take over the business, property, and liabilities of this company; and that the said liquidators be and they are hereby authorised, pursuant to Section 161 of the Companies Act, 1862, to sell to such new company upon such terms, and subject to such conditions as they shall think fit, all or any part of the property of this company, but so that the new company shall undertake all the liabilities of this company, shall pay the costs of winding it up, and provide the funds (if any) which may be required to purchase the interests of any dissentient members whose interests the liquidators may have to purchase, and that every member of this company shall in respect of each share therein held by him, be entitled to require the new company to allot to him one of its 57. shares, with the sum of 51. credited as paid up thereon, and that the said liquidators be and they are hereby authorised to execute and do all such assurances and things as may be necessary for carrying the said scheme into effect.

These resolutions having been duly passed, the new company will be incorporated. See supra, p. 479, and the following agreement will be executed :

A.,

AN AGREEMENT made the

of

day of

and B., of the liquidators of The

between Forms. Com- Parties.

pany, Limited, of the first part, the said company (hereinafter called the old company), of the second part, and The

Company, Limited (hereinafter called the new company), of the third part: WHEREAS the old company was incorporated Recitals. in the year, under the Companies Acts, 1862 and 1867, with a nominal capital of 100,000l. divided into 10,000 shares of 10%. each: AND WHEREAS the whole of the said shares have been issued, and the sum of 5l. per share stands credited in the books of the company as having been paid up thereon: AND WHEREAS by special resolution of the old company passed and confirmed at general meetings thereof, held respectively on the day of and day of, it was resolved that the old company be wound up voluntarily, and that the said A. and B. be and they were thereby appointed liquidators thereof, and it was resolved that the following scheme be and the same was thereby adopted, namely: That a new company be incorporated under the Companies Acts, 1862 and 1867, as a company limited by shares, by the name of The Company, Limited, with a capital of 50,000l., divided into 10,000 shares of 51. each, and having power to acquire and take over the business, property, and liabilities of the old company, and that [supra, p. 488]: AND WHEREAS the new company has since been incorporated under the Companies Acts, 1862 and 1867, with a nominal capital of 50,000l., divided into 10,000 shares of 57. each: AND WHEREAS the objects of the new company as set forth in the memorandum of association thereof, are (among other things) to purchase or otherwise acquire all or any part of the property of the old company, and to undertake the liabilities thereof: AND WHEREAS by the articles of association of the new company, it is provided that the same company shall forthwith execute the agreement therein referred to, being these presents: Now IT IS HEREBY AGREED AS

FOLLOWS:

1. The old company and its liquidators shall sell, and the new Agreement company shall purchase: all and singular the goods, chattels, for sale. monies, credits, debts, bills, notes, and things in action of the old company, and the undertaking, business, and goodwill thereof, with the full benefit of all contracts and agreements, and of all securities in respect of the said things in action, to which

Forms.

New company to pay debts, &c., of old company.

New company to pay costs of winding up old company.

Shares in new company to be allotted to members of old company.

Provision for

payment of dissentients.

the old company is entitled, and all other the real and personal property of the old company whatsoever and wheresoever; subject nevertheless as to all the said premises to the several mortgages, charges, liens, and incumbrances affecting the same or any part thereof, and saving to the old company its uncalled capital. 2. As a part of the consideration for the said sale the new company shall pay, satisfy, and discharge all the debts, liabilities, and obligations of the old company whatsoever, and shall adopt, perform, and fulfil all contracts and engagements now binding on it, and shall at all times keep the old company, its liquidators and contributories, indemnified against such debts, liabilities, obligations, contracts, and engagements, and against all actions, proceedings, costs, damages, claims, and demands, in respect thereof.

3. As a further part of the consideration of the said sale, the new company shall pay and at all times hereafter keep the old company, its liquidators and contributories, indemnified against all the costs and expenses of and incident to the winding up of the old company, and of carrying the said sale into effect.

4. As the residue of the consideration for the said sale every member of the old company shall, in respect of each share therein held by him, be entitled [at any time before the day of

next] to require the new company to allot to him, or to his nominee or nominees, one 57. share in the new company with the sum of 57. credited as having been paid up thereon, and any member of the old company who shall take the benefits by this clause offered to him, shall accept the same in full satisfaction and discharge of all claims and demands in respect of his interest in the assets of the old company.

66

Suppose the shares in the old company to be 107., fully paid up, and that it is desired to return 57. per share to the members. In such case, if the new company is to have power to call up the amount again, the clause will provide, that every member, &c., shall be entitled, &c., to require the new company to pay to him the sum of 57. in cash, and to allot to him or to his nominee or nominees one 107. share in the new company, with the sum of 5l. credited as having been paid up thereon." If the new company is not to have power to call up the 5l. again, the shares will be 57. each, and will be allotted as fully paid up. Of course, instead of cash, debentures or other securities may be issued,

5. If the liquidators of the old company shall, in order to carry the said sale into effect, have occasion to purchase the