Act, and if such capital is found insufficient for such purposes, the company, with the consent of three-fifths of the shareholders present in person or by proxy at any general meeting of the company, specially convened for the purpose, may from time to time raise by the creation and issue of new ordinary shares or stock in their undertaking any further sum or sums of money not exceeding in the whole 50,000.

11. Notwithstanding anything contained in The Gasworks Clauses Act, 1847, the company shall not in any year pay a larger dividend on such new ordinary shares or stock than at the rate of ten pounds in the hundred on the amount for the time being paid up in respect of such shares, or (as the case may be) upon the amount of such stock, but if in any year ending on the 31st day of December there are not profits available for the full payment of that dividend, no part of the deficiency shall be made good out of the profits of any subsequent year, or out of any other funds of the company.

THE THIRD SCHEDULE.

LANDS ON WHICH COMPANY MAY MANUFACTURE GAS.

Forms.

(A.)

Certain lands situate, &c.

(B.)

A piece of land situate, &c.

PETITIONS.

PRECEDENT I.

PETITION to COURT to sanction REDUCTION of CAPITAL.

In the High Court of Justice.

Chancery Division.

Vice-Chancellor

[Or Master of the Rolls.]

Prec. I.

In the matter of the Companies Act, 1867.
And in the matter of the

Limited and Reduced.

To Her Majesty's High Court of Justice:

The humble petition of the

and Reduced :

Showeth as follows:

Company

Company, Limited

1. Your petitioner, the above-named company (hereinafter Incorporation. called the company), was incorporated in the year, under

the Companies Acts, 1862 and 1867, as a company limited by shares.

2. The registered office of the company is situated at

Office.

3. The objects for which the company was established are as Objects. follows:

See infra, p. 610.

4. The capital of the company is 100,000l. divided into Capital. 5,000 shares of 207. each.

5. Shortly after the incorporation of the company it com- Business. menced and has since successfully carried on business.

6. The company has issued 4,200 of its shares, and no more, Shares issued. and the sum of 107. per share has been paid up thereon.

7. By Clause 37 of the articles of association of the company it is provided that the company may from time to time by special resolution reduce its capital.

8. By a special resolution of the company duly passed and confirmed, in accordance with Section 51 of the Companies

Power to reduce capital.

Special reso

lution to re

duce capital.

Prec. I. Act, 1862, at extraordinary general meetings of the company held respectively on the

day of

and day of it was resolved as follows, namely: "That the nominal capital of the company be reduced from 100,0007. divided into 5,000 shares of 201. each to 50,000l. divided into 5,000 shares of 107. each."

Your petitioner the company therefore humbly prays :
(1.) That the said special resolution passed and confirmed
as aforesaid may be confirmed.

(2.) That to this end all inquiries and directions necessary
and proper may be made and given, and that a day may
be fixed on and after which the company shall be at
liberty to discontinue the addition to its name of the
words" and reduced.”

(3.) Or that such further or other order may be made as the nature of the case may require.

And your petitioner will ever pray, &c.

NOTE. It is not intended to serve this petition upon any person.

See further, supra, p. 297, as to reduction of capital under the Act of 1867, and as to the necessity of applying to the Court to confirm the reduction. There are several operations which have been treated as reductions of capital, capable of being sanctioned by the Court.

1. Suppose the capital to be 10,0007. in 107, shares, upon each of which 51. has been paid up. The company desires to reduce the nominal amount of its capital to 5,000l., divided into 57. shares, to the intent that the members may be under no further liability to pay calls; or it may be desired to reduce the nominal capital to 7.0007. in 77. shares, so that the members may be liable to pay further calls to the amount of 21. per share instead of 5l. per share. Each of these operations is indisputably a reduction of capital, which, in the case of a company limited by shares, can only be effected by special resolution confirmed by the Court under the Act of 1867; and the great majority of the reductions of capital sanctioned by the Court involve one or other of such operations.

2. Another operation which is also treated as a reduction of capital within the Act of 1867 is as follows:-Suppose the capital to be 20,0007. in 201. fully paid-up shares. The company finds that a capital of 10,0007, is sufficient for its purposes, and accordingly desires to return 107, per share to its members, and to reduce the nominal amount of each share to 10. There have been several cases in which such an operation has been sanctioned by the Court. Thus in the case of The Telegraph Construction and Maintenance Co., Limited, the nominal capital was 750,0007. in 37,500 shares of 201. each. Of these only 37,3501. had been issued and were fully paid up. The company desired to repay 81. per share and to reduce the shares to 127. each. See In re Telegraph Construction Co.. 10 Eq. 384. The reduction was sanctioned by James, V.-C., in 1870.

Another case of the same kind was that of The Crimble Spinning Co., in which Malins, V.-C., by order dated 29th July, 1876, confirmed the following special resolution: "That 4,500l. of share capital be returned to the shareholders, that is to say, to reduce No. 1 share from 77. 10s. to 5l. 12s. 6d., and to reduce No. 2 shares from 47. 10s. to 31. 78. 6d." It appeared from the petition of the company that some years before a reduction of the company's capital of a similar character had been sanctioned by James, V.-C.

3. The following is another operation which has been treated as a reduction of capital within the meaning of the Act of 1867.

Suppose a company to have a nominal capital of 20,0007. in 107. shares which have been fully paid up, and that it has lost one-half of its capital. The effect is that the company cannot pay any further dividends until the capital is replaced, for dividends can only be paid out of profits. But the members may desire to reduce the nominal capital by writing off and extinguishing the lost moiety thereof to the intent that the payment of dividends may be resumed, and that the nominal amount of the shares may be reduced to something nearer their actual value: or it may be that instead of having lost a portion of its capital it is found that the income of the company is not sufficient to pay more than a very small per-centage on the paid-up capital, and it is therefore desired to reduce the nominal amount of the shares so that they may become saleable at par instead of at a heavy discount.

In the case of the Credit Foncier of England the nominal capital was 2,000,000l., divided into 107. shares. The whole capital had been issued in 1866 as fully paid up, as the consideration for the transfer of the assets of a company in liquidation. In February, 1870, a special resolution was passed reducing the capital to 1,000,000l., divided into 57. shares. In January, 1871, this resolution was confirmed by Malins, V.-C. In re Credit Foncier of England, 11 Eq. 356. The circumstances which rendered the reduction expedient are not stated in the report, but it appears from Cracroft's "Trustees' Guide," (7th Ed.), that the shares before the reduction were selling at a discount of 50 per cent. and upwards. Probably the assets purchased were not worth 2,000,0007.

In the case of the Ebbw Vale Steel, Iron, and Coal Company, Limited, the company having lost part of its capital had passed a special resolution as follows:

"That the nominal capital be reduced from 2,383,000l. in 74,475 shares of 321. each, to 1,712,9257. in 74,475 shares of 237. each, by the extinction on each of such shares of paid-up capital to the extent of 91., to the intent that the present liability of 37. per share on all the shares (except the 525 fully paid-up shares), shall be preserved, notwithstanding such reduction."

A petition was presented to confirm the reduction, but Jessel, M. R., held that the court had no jurisdiction. In re Ebbw Vale, &c., Co., W. N. 1877, 4. The decision appears to be correct, and not necessarily inconsistent with the cases above mentioned, but the observations of the M. R. in giving judgment would go to show that a return or extinction of capital can in no case be effected under the Act of 1867, and that the only operation which can be sanctioned is a reduction of liability as above in case 1. If this is the case, it certainly requires amendment. In the case of Re Kirkstall Brewery, W. N. 1877, 55, Bacon, V.-C., declined to sanction a reduction similar to that sanctioned by Malins, V.-C., in the case of the Credit Foncier, ubi supra, upon the ground that

Prec. I.