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Committees.

Contracts.

ings must consist of the prescribed quorum; and when none is prescribed, of at least one-third of their number. All questions are determined by majorities, and the chairman has a casting vote (sec. 95). At the first meeting of directors held after their original and annual appointments, the directors present choose one of their number as chairman for the following year, and they may also choose a deputy-chairman. If these die, or resign, or become disqualified to act, others are chosen at the next meeting of directors; and the substitute remains in office as long as he in whose place he came would have been entitled to continue (sec. 96). When the chairman and deputy-chairman are both absent from any meeting, the directors present choose some one of their number to act for the occasion (sec. 97).

The directors may appoint committees of their number, with power to do any acts within the sphere of their own authority (sec. 98). Such committees may meet and adjourn as they see fit. Their quorum, if not prescribed, is fixed by the general body of directors; one of the members present is appointed chairman, and all questions are determined by majorities-the chairman having a casting vote (sec. 99).

The directors or their committees may make contracts so as to bind the company as follows: 1. In contracts which require to be by deed, or by agreement in writing, and signed by the parties thereto, the directors or their committees may contract on behalf of and bind the company in writing, either under the company's common seal, or signed by the directors or their committee, or any two of either; and such contract may in the same manner be varied or discharged. 2. In contracts valid by parole, the directors or their committees may contract on behalf of and bind the company by parole only, and may in like manner vary or discharge the same (sec. 100).

The directors are bound to cause all proceedings of the company, of themselves, or of their committees, to be entered in books provided for the purpose, and kept under their superintendence. Every entry must be signed by the chairman of the meeting, and is then to be received as ex facie evidence in courts of justice (sec. 101). Informalities in the appointment of directors or of their committees do not invalidate their proceedings (sec. 102).

Directors, when acting in the lawful execution of their office, Indemnity. do not incur personal liability; but are entitled to indemnity out of the company funds for all payments made by them, and for all losses, costs, and damages incurred by them in the execution of the powers wherewith they have been entrusted. Calls on the capital remaining unpaid may be made for this purpose (sec. 103).

AUDITORS.

Unless otherwise directed, two auditors are elected at the first Auditors. ordinary meeting after obtaining the special act. One of them goes out of office each ensuing year, and another is appointed to supply his place; but the retiring auditor does not go out until another has been elected (sec. 104). The auditors can hold no other office in the company, nor be in any way interested in its concerns, except as shareholders; but unless otherwise prescribed, every auditor must hold at least one share in the undertaking (sec. 105).

The auditors vacate office by rotation, determined in the first Vacancies. instance by ballot or agreement, and afterwards by seniority. Those retiring are immediately re-eligible (sec. 106). Vacancies occurring among the auditors in the course of the year may be filled up by election at any general meeting (sec. 107); and the same provisions apply to the election of auditors as to that of directors (sec. 108).

The directors must deliver to the auditors the balance-sheet and Duties. other periodical accounts fourteen days before the ordinary meeting at which they are produced to the shareholders; and it is the duty of the auditors to examine them, and either make a special report, or simply confirm them. This report is read together with that of the directors at the ordinary meeting. The auditors may employ accountants to aid them in their labours, at the expense of the company (secs. 110, 111).

The directors must take security from every officer entrusted with the monies of the company; and they may demand from such officers an account in writing of all monies received, and how they were expended. These officials must produce the vouchers and receipts, and pay over to the directors or their mandataries the

Duty of

officers to

account.

remaining balance (secs. 112, 113). Summary proceedings may be taken before the sheriff or two justices against parties failing to account. Officers refusing to produce vouchers, books, and other documents, may be imprisoned until they comply; and officers believed to be about to abscond, may be summarily apprehended and detained in custody until they are tried, or give security for their appearance (secs. 115, 116). Proceedings taken against the company officers do not liberate their sureties (sec. 117).

ACCOUNTS.

Books.

The directors are required to keep full and accurate accounts of all monies received or disbursed on behalf of the company. The company books must be balanced fourteen days before each ordinary meeting (unless otherwise prescribed); exact balancesheets must be made up, containing the property and the debts, the profit and the loss; and these balance-sheets must be examined by at least three of the directors, and signed by the then chairman or his deputy. The books and balance-sheet must be open for the inspection of shareholders for fourteen days before and for one month after each ordinary meeting at the principal office, unless otherwise provided; and the balance-sheet, and auditors' report thereon, must be produced at the meeting to the assembled shareholders. A book-keeper appointed by the directors enters the company accounts in books, which he is bound to submit to the inspection of any shareholder demanding it for fourteen days before and one month after every ordinary meeting, under a penalty not exceeding £5 (secs. 118, 119, 120, 121, 122).

BYE-LAWS.

The company has power to make bye-laws for the purpose of regulating their officers and servants, and generally for the proper management of the company affairs, provided these bye-laws do not conflict with the common law of that part of the kingdom where they are to have effect, and with the provisions of the general and special acts. Penalties may be imposed by these bye-laws on the officers and servants of the company, and they are all entitled to a

copy of them. Such bye-laws are sufficiently proved by production of a written or printed copy under the seal of the company (secs. 127, 128, 129, 130).

Every shareholder has a right to inspect the following documents: 1. The shareholders' address book (sec. 10); 2. The register of mortgages and bonds (sec. 48); 3. The register of consolidated stock (sec. 66); 4. The company account books (sec. 120). Shareholders are entitled, moreover, to have copies of the shareholders' address book (sec. 10) and the account books, or of any part of these documents (sec. 122).

The company is bound at all times, after six months from the date of its formation, to keep in the principal business office a copy of the special act printed by the Queen's printers. When the undertaking is a railway, canal, or the like, the works of which are not confined to one place, copies of the special act must in like manner be deposited in the offices of the clerks of the peace of the several counties into which the works extend, and in the office of the town or burgh clerk of any town or burgh within one mile of which the works extend. All persons interested may inspect these copies, and make extracts or copies from them (sec. 165). The special act of any company may at all times be purchased of the Queen's printers.

General rules.

CHAPTER V.

CAPITAL OF COMPANIES, AND ITS DIVISION INTO SHARES.

THE capital of a company is a matter of fundamental importance. If it is too small, the undertaking will not be carried on with much chance of success; if too large, the shareholders will receive a very inadequate return on their shares. The amount should therefore be determined after a very mature and deliberate consideration of all the circumstances and contingencies of the case. It is usually fixed at formation, and forms one of the fundamental conditions of the contract (a). Hence, persons agreeing to take shares in a company with a certain capital, cannot be required to become shareholders if the amount of capital be increased or diminished (b). The contract of copartnery may however be so framed, that the amount of capital originally agreed upon is not an essential condition (c); and persons may agree to take shares in a company when the amount of capital has not been defined. In such cases subscribers cannot escape from the agreement by pleading that the company as formed has a different capital from that originally contemplated (d). Subscribers may also be estopped from maintaining this plea, by conduct, acquiescence, or adoption (e).

In common law companies, the agreed-upon capital specified in the articles of copartnery or other instrument of formation cannot be altered without the consent of all the members. This arises

(a) Monro v. Edinburgh Cemetery Co., 1851, 13 D. 595. See North British Bank v. Collins, 1852, 25 Jur. 119, aff. 15 D. (H. L.) 29, 1 Macq.369; Electric Telegraph Co., 22 Beav. 471.

(b) See Turner v. Mollison, 1833, 11

S. 669; Caledonian Dairy Co., 1834, 12 S. 394.

(c) Previous cases.

(d) Nixon v. Brownlow, 2 H. and N. 455; Norman, 5 De G. M. and G. 648.

(e) Sturrock v. Thoms, 1851, 13 D.762.

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