Sometimes it is deemed more convenient to have a separate agreement for each debenture-holder, instead of one for a number, as in Precedent XI. Such agreements are generally printed if a number have to be executed.

Prec. XII.

PRECEDENT XIII.

AGREEMENT by DEBENTURE-HOLDER to ACCEPT PAYMENT in
PERPETUAL MORTGAGE DEBENTURE STOCK.

AN AGREEMENT made the

day of

Prec.XIII.

between Parties. B., of, &c., of the one part, and The Company, Limited (hereinafter called the company), of the other part: WHEREAS the said B. is entitled to [13] mortgage debentures of the Recitals. company for £100 each, the distinguishing numbers whereof are specified in the first column of the schedule hereto : AND WHEREAS there is now due to the said B., for principal monies and interest upon the said debentures, the sum specified in the second column of the said schedule: AND WHEREAS the directors of the company, in exercise of the powers vested in them by the articles of association thereof, have created a perpetual mortgage debenture stock of the nominal amount of 100,000l., which stock, by virtue of an indenture dated, &c., and made between the company of the one part, and H., L., and P., of the other part, constitutes, subject to the provisions of the said indenture, a first charge upon the property of the company, both present and future, and is to be issued upon certain conditions, a copy whereof is set forth in the schedule to the same indenture: AND WHEREAS the company cannot conveniently pay to the said B. the amount now due to him as aforesaid: NOW THEREFORE IT IS HEREBY AGREED as follows:

Prec. XIII.

Debentures to

1. The said B. shall forthwith give up to the company to be cancelled the said debentures with all coupons for future be exchanged interest belonging thereto, and the company shall thereupon issue to him so much of the said stock as is specified in the third column of the said schedule.

for stock.

Stock to be accepted in full satisfaction.

2. The stock so issued shall be accepted by the said B. in full satisfaction of the said principal monies and interest due to him as aforesaid, and of all claims and demands upon the company in respect of the said debentures.

In the above case the debenture holder gets stock to an amount exceeding by 10 per cent. the principal monies and interest due to him. This bonus is given as an inducement to him to capitalise the arrears of interest and to accept perpetual stock. Instead of making the stock perpetual, it might (of course) be made redeemable at a fixed period, or the company may reserve power to redeem at any time on (say) six months' notice. See further, infra, p. 465.

PRECEDENT XIV.

Prec. XIV.
Parties.

Agreement to issue shares at a discount.

AGREEMENT for the ISSUE of SHARES at a DISCOUNT.
AN AGREEMENT, made the

day of, between The Company, Limited (hereinafter called the company), of the one part, and the several persons whose names are set forth in the first column of the schedule hereto of the other part, whereby it is agreed as follows:

1. Each of the parties hereto of the latter part shall, on or before the day of next, pay to the company the sum of money set opposite his name in the fourth column of the said schedule; and in consideration thereof, the company shall

allot to him the number of shares set opposite his name in the Prec. XIV. fifth column of the said schedule, which shares shall be distin

guished by the numbers set opposite his name in the sixth column of the said schedule, and shall be deemed for all purposes to have been paid up to the extent of £- per share.

2. The company, before any such allotment of shares as Filing of aforesaid is made, shall procure this agreement to be duly filed agreement. with the Registrar of Joint Stock Companies.

As to whether this agreement is legal, see infra, note. If it is, it must, at any rate, be filed pursuant to Section 25 of the Act of 1867.

AS WITNESS the common seal of the company and the hands of the said parties hereto of the latter part, the day and year first above written.

Whether shares in a company, formed under the Companies Act, 1862, can be issued at a discount, has not been decided, and is, "to say the least, questionable," "Lindley," 635, 638. When property or services are to be paid for by a company in shares, the price will, of course, be fixed, with regard to the actual, not the nominal value of the shares; and thus a company may and often does indirectly issue shares at a discount, e.g., a 107. share in consideration of 5l. worth of property. There is no question that such a transaction is valid. If, then, the shares of a company happen to be depreciated, why should it not be at liberty, assuming that its regulations authorise the act, to sell them at their actual value for cash? The members could not complain, for ex hypothesi the regulations, which they can alter, authorise the sale; and it would not seem that the creditors are prejudiced more in this case than in the above, and moreover they have notice of the regulations. However, the point has yet to be decided. Of course, an agreement as to the issue of shares at a discount, must be filed in accordance with Section 25 of the Act of 1867, supra, p. 6.

F

Prec. XIV.

If it is invalid, the filing will not better it; but if it is valid, the filing is essential.

Articles of association very commonly give the executive express power to issue shares at a discount; but until a decision as to its validity has been given, its exercise is not to be recommended.

A considerable number of companies have, however, issued shares at a discount.

BONUS SHARES.

Sometimes the value of a company's property having increased, it is considered desirable to create and distribute, gratis, among its members, new shares, which are to be deemed fully paid up. Such shares are generally called "bonus shares."

Whether bonus shares can be validly issued by a company has not been decided. As between the members, there seems no reason why they should not, provided that the regulations authorise the issue, and that the shares are distributed pro rata among all the members; but as between the company and its creditors, it may be questioned whether it is valid. And if, as appears from what is said above, doubt exists as to the validity of an issue of shares at a discount, à fortiori there must be doubt as to the validity of an issue gratis; for when shares are issued at a discount, some consideration is given for them, since the taker either pays or becomes liable to pay part of the nominal value thereof in cash. Not so in the case of bonus shares.

Mr. Lathom Brown, in his "Treatise on the Act of 1862,” p. 306, gives a clause for insertion in articles authorising an increase of capital, by the issue of paid-up bonus shares to the members; and, in a note, observes : By this clause members may obtain a fair interest in the increased value of their property without diminishing their working capital."

Whether it be legal or not, bonus shares are sometimes issued, and the operation is commonly known as "watering the capital." Thus it is a matter of notoriety that the Anglo-American Telegraph Company, Limited, has from time to time issued bonus shares to the amount of nearly a million and a half nominal value. The writer knows of other

cases.

Sometimes it is provided that every person who takes a debenture of a company shall be entitled to have a fully paid-up share allotted to him by way of bonus. It would appear that an agreement to this effect is valid, provided that it is duly filed pursuant to Section 25 of the Act of 1867. Although the share is called a "bonus share," the allottee gives a valuable consideration, which puts the transaction on a different basis from that on which a gratis allotment stands. See In re Malaga Lead Company, Firmston's Case, 20 Eq. 524.

PRECEDENT XV.

AGREEMENT for the APPOINTMENT of a MANAGER by a Coм- Prec. XV. PANY. Remuneration, Salary, and Share of Profits. Compensation in case of Dismissal.

AN AGREEMENT made the

The

Company, Limited (hereinafter called the company),

of the one part, and A., of

of the other part.

WHEREAS by the articles of association of the company, it Recital. is provided that the said A. shall be the first general manager

of the company:

NOW IT IS HEREBY MUTUALLY AGREED as follows:

1. The said A.

shall be the first general manager of the Appointment company, and as such general manager shall perform the to office. duties and exercise the powers which from time to time may be assigned to or vested in him by the directors of the company.

2. The said A. shall hold the said office, subject as herein- Term. after provided, for the term of

hereof.

years from the date

duties.

3. The said A., unless prevented by ill-health, shall, during A. to perform the said term, devote the whole of his time, attention, and abilities to the business of the company, and shall obey the orders from time to time of the board of directors of the company, and in all respects conform to and comply with the directions and regulations given and made by them, and shall well and faithfully serve the company and use his utmost endeavours to promote the interests thereof.

4. There shall be paid to the said A., as such general Salary. manager, a salary which shall be as follows, namely: The sum

of 3007. for the first year, the sum of 4007. for the second

year, and the sum of 5001. for each succeeding year.

&c., the first paid.

5. The said salary shall commence from the date hereof, and When to be shall be paid quarterly on the day of quarterly payment to be made on the

day of next.

6. In addition to his aforesaid salary, the said A. shall,