THE Law of Limited Liability Companies, contained in the Companies Act, 1903, and some thousands of judicial decisions, constitutes a branch, or what may, without inaccuracy, be termed a system of law becoming daily of greater importance. Although when the Act of 1882 was passed, the law of companies in New Zealand was substantially the same as the law in England, the two systems have in some measure diverged, less however in matters of principle than of detail. It is the object of these pages to present to the law student, and to the man of business, in a concise form, a statement of the principles and the practice of company law, and to furnish the practising lawyer, not only with the Act of 1903 in a handy form, but also with an index to the New Zealand statute law and decisions, and to the most important English cases affecting New Zealand law and practice, together with references to those provisions of the English Acts which correspond to the New Zealand law. As this book is not intended exclusively for the use of lawyers, it may be convenient to readers to state, at the outset, some of the leading principles of company law-principles which must be borne in mind in interpreting the statutes and in applying their provisions to the varying sets of conditions arising in daily practice. Many principles have been laid down by the English Courts, as the result of the most careful consideration of the company statutes by the ablest minds. These principles are by no means obvious even on a close examination of the statutes. Although, at this date, they are for the most part to be found in judgments of the House of Lords, it is not A company a separate person Memorandum the basis of company's powers. too much to say that some leading principles have, until recently, been but imperfectly understood by company lawyers both on and off the judicial bench. Indeed there are, even now, matters of principle of the first importance as to which there is a diversity of opinion among the highest authorities ; as an example, may be cited, the apparently rudimentary question-whether directors may divide among shareholders the profits of any year's operations, while capital which the company has lost in previous years has not been written off, and the nominal capital of the company reduced accordingly with the leave of the Court? (See the observations of Lord Davey in Dovey v. Cory, 1901, A.C. 477, 493.) Without professing therefore to give an exhaustive statement of the cardinal principles on which the whole body of company law turns, the writer feels justified in saying that it is of importance to every student of company law to grasp at the outset the following propositions : 1 1. A company incorporated under the Companies Act is a legal entity altogether distinct from the personalities of its individual members. It is a legal persona just as much as an individual' but it is a different person altogether from the subscribers to the Memorandum '2 of Association and the other members. Once a company is legally incorporated it must be treated like any other independent person with its rights and liabilities appropriate to itself.'s 1 Sheffield &c., Society, 22 Q.B.D. 470, per Cave, J., at p. 476. 2 Salomon v. Salomon & Co., 1897, A.C. 22, per Lord Macnaghten, at p. 51; and 3 see per Lord Halsbury, at p. 30. 6 2. A company incorporated under the Companies Act is of Association not like a chartered or common law corporation with inherent incorporation common law rights.'1 It is the creature of statute '2 and can and charter of exercise no powers but those expressly or impliedly conferred by the Companies Act and derived from its incorporation thereunder. It is incorporated with reference to a Memorandum of Association which states the ambit and extent of vitality and power which by law are given to the corporation.' The Memorandum is as it were the charter and defines the limitation of the powers of a company to be established under the Act.' The powers exerciseable by any limited liability company incorporated under the Companies Act are therefore confined to : (1) The general powers expressly conferred by the statutes and exerciseable by every company, for example, to change the company's name, to alter its regulations, &c. (2) The special powers embodied in the Memorandum of Association as the specific objects for which the company is established, and such powers as may fairly be regarded as incidental to or consequential upon the attainment of these objects. The objects for which a company is incorporated must be lawful, ..., they must not be contrary to the provisions of the Companies Act nor to the general law. (As to alteration of Memorandum, see chapter on Memorandum of Association infra.) 1Ashbury &c. v. Riche, L.R. 7 H.L. 653, see per Lord Cairns, at pp. 668-670. Sec. 13 of 1903. 44 In Gray v. The Equitable Insurance Association, 6 N.Z. 450, it was held, on the authority of Shrewsbury and Birmingham Railway Company v. North Western Railway Company, 6 H.L.C. 113, at p. 135, "that the Company being a corporation, can bind themselves by any contract, except the contract is prohibited expressly, or by necessary implication on the face of the act of incorporation." That case was not decided under the (E.) Companies Act 1862, and it is submitted that the above statement of the law applies specially to a chartered or common law corporation. In Ashbury &c. v. Riche, ut sup, at p 694, Lord Selbourne says, It seems to me far more accurate to say that the inability of such companies" (i.e., companies incorporated under The (E.) Companies Act 1862) "to make such contracts, rests on an original limitation and circumscription of their powers by the law, and for the purposes of their incorporation, than that it depends on some express or implied prohibition, making acts unlawful which otherwise they would have had a legal capacity to do "; and see Pollock on Contracts, 6th Ed., 698, 699, and New Zealand Flourmillers d'e. v. Timaru Milling Co., 20 N.Z. 650. 6 their nature randum. 3. The business regulations of the company, or, as they are Articles of usually called, the Articles of Association, play a part sub- Association, sidiary to the Memorandum of Association. They accept the and relation Memorandum of Association as the charter of incorporation to Memoof the company, and, so accepting it, the Articles proceed to define the duties, the rights, and the powers of the governing body as between themselves and the company at large, and the mode and form in which the business of the company is to be carried on, and the mode and form in which the changes in the internal regulations of the company may from time to time be made. 'With regard therefore to the Memorandum of Association,' if any act is done by the company which goes beyond that Memorandum, or is not warranted by it, the question will arise whether that which is so done is ultra rires, not only of the directors of the company but of the company itself. With regard to the Articles of Association,' if any act is done by |