IV. EXPULSION OF MEMBERS, AND FORFEITURE OF SHARES. expulsion. However much a partner may misconduct himself, or however undesirable it may be to continue him in the concern, it is only by dissolution that he can be got rid of if he insists on remaining partner. To meet cases of this kind, clauses of expulsion are sometimes inserted in the partnership contract, by which power is conferred on the partners, or a certain majority of them, to expel any of their number in certain specified circumstances. Clauses Clauses of of a similar kind are often introduced into the articles of association, or other instrument by which companies are formed, empowering the company or its directors to declare the shares of a member forfeited on his failure to comply with certain regulations. Such clauses are construed strictissimi juris, because of the great facilities they afford for abuse (a). To be effectual, the power of expulsion must be exercised with the utmost bona fides, and with a minute attention to all the regulations and formalities prescribed (b). This power may be abused not only to the prejudice of an obnoxious shareholder, but in order to relieve a favoured member from liabilities. In either case, the forfeiture will be declared invalid if mala fides can be established (c). of expulsion. If the forfeiture is valid, the shareholder ceases to be a mem- Consequences ber of the company to all intents and purposes from its date. He can no longer take any share in the management, or draw dividends; and, on the other hand, though he may be sued for calls made prior to his forfeiture, he is liable for none made subsequent to that event, nor can he be made a contributory on winding up (d). The invalidity of an alleged forfeiture may be established at the Invalidity of (a) Munro v. Cowan and Co., 1813, 17 F. C. 354. (b) Blissetv. Daniel, 10 Ha. 493; Smith v. Mules, 9 Ha. 556; Clarke v. Hart, 6 House of Lords Cases 633; Watson v. Eales, 23 Beav. 294; Richmond's case, 4 K. and J. 305; Harris, 20 Beav. 384. (c) Richmond's case and Painter's case, 4 K. and J. 305. (d) Beresford's case, 3 De G. and S. 175; Baily's case, 15 E. Jur. 29. See Great Nor. Ra. Co. v. Clark, 1856, 18 D. 660; Great Nor. Ra. Co. v. Inglis, 1853, 15 D. 532; Lindsay v. Great Nor. Ra. Co., 1851, 13 D. 457. forfeiture. Forfeiture of shares under the Act 1862. instance of the shareholder (a), at that of the company (b), and at that of creditors, whether they be those of the company or of the shareholder (c); for cases may easily be conceived in which all these may have an interest. An action of damages lies against the company for an illegal or unwarrantable forfeiture, and it is no answer to this that the forfeiture is invalid (d). A company may be interdicted from carrying into effect a declaration of forfeiture made de recenti (e). Clauses of forfeiture providing that shares may be forfeited for non-payment of calls, are intended for the benefit of the company, and do not enable shareholders to escape from the company by refusing to pay calls (ƒ). No statutory provisions are made in the Companies Act of 1862 for the forfeiture of shares; but if the regulations of Table A, Schedule 1, be adopted as the articles of association, the company will be possessed of a body of regulations admirably calculated to ensure a fair and equitable procedure in this matter. The object of the powers of forfeiture contemplated in these regulations is to ensure payment of calls. If a call be not paid on the appointed day, a forfeiture of the defaulting member's shares may be declared. The procedure is as follows:-A notice must be served on the defaulter, as provided by the Act. This notice must contain a requisition to pay the call with interest and expenses on or before a certain day, at the registered office, or some other place where the calls are usually made payable, under penalty of forfeiture. If obedience is not given to this requisition, the shares may be forfeited by a resolution of the directors to that effect, passed subsequently to the day mentioned in the notice. The shares so forfeited become the property of the company, and may be disposed of as a general meeting shall direct. A declaration in writing, narrating the steps of procedure up till the declaration of forfeiture, and the declaration itself, is sufficient evidence against the defaulter; (a) Blisset v. Daniel, 10 Ha. 493; Clarke v. Hart, 6 House of Lords Cases 633; Munro v. Cowan and Co., 1813, 17 F. C. 354. (b) Richmond's case and Painter's case, 4 K. and J. 305. 46. (c) Barton's case, 4 De G. and J. (d) Catchpole v. Ambergate Ra. Co., 1 E. and B. 111. (e) Watson v. Eales, 23 Beav. 294; compare with Prendergast v. Turton, 1 Y. and C. C. C. 98. (f) Richmond's case and Painter's case, 4 K. and J. 305; Moore v. Rawlins, 6 C. B. N. S. 289. and this document, and the receipt of the company for the price of the forfeited shares, constitute a good title to a purchaser, who, on receiving a certificate of proprietorship, is deemed the holder of them, free from all calls due prior to the purchase. He is not bound to see to the application of the purchase money, and his title is not affected by any irregularity in the proceedings. It will be observed that the whole procedure is very similar to that provided under the Company Clauses Consolidation Act, to be afterwards noticed. No statutory provision exists as to forfeiture of shares in relation either to chartered companies or to associations privileged by letters patent. The exercise of such a power, therefore, seems ultra vires of such companies where it is not specially conferred in the charter, or where in letters patent companies it does not form part of the contract of association. By the Companies Clauses Consolidation (Scotland) Act, 1845, it is provided that shareholders failing to make payment of calls with interest for two months from the date when they became payable, may have them declared forfeited by the directors, whether the company have sued for the amount or not (sec. 30). Notice of intention to forfeit must, however, be given by the directors twenty-one days before declaring the forfeiture. This notice may be left at or transmitted by post to the shareholder's usual or last place of abode; and if his residence is not known, or if he be abroad, notice must be given in the Edinburgh Gazette (sec. 31), and in a newspaper circulating in the district where the company's principal place of business is situated (sec. 40). The forfeiture does not take effect till it has been confirmed at a general meeting held after expiration of the two months (sec. 32). The shares may be directed to be sold at that or any subsequent general meeting (sec. 32). The shares are sold either by public auction or private contract. Any shareholder may purchase (sec. 33). A declaration in writing, by some credible neutral person, before the sheriff, of the call, the notice, and the forfeiture in default of payment thereof, having been made and confirmed, is sufficient evidence of the facts set forth, and, together with the treasurer's receipt for the price of the shares, constitute a good title to the purchaser. He is then entitled to a certificate of proprietorship, Forfeiture in chartered and letters patent companies. Forfeiture of 1845. under the Act becomes the holder, and is discharged from all calls due prior to the purchase; he is not bound to see to the application of the purchase money, nor is his title affected by any irregularity in the proceedings (sec. 34) (a). No more shares can be sold than are sufficient to pay the calls, interest and expenses of the procedure; any surplus that may exist must be paid to the defaulter (sec. 35). If payment is made before sale, though after forfeiture, the shares revert to the quondam defaulter (sec. 36) (b). The Companies Clauses Act, 1863 (c), confers a power of cancelling shares on companies incorporated either before or after that date, provided they obtain a special act incorporating Part 1 of that statute. In virtue of its provisions, shares forfeited under the Act 1845 may, if the directors are unable to sell these for a sum equal to the arrears of calls, interest, and expenses, be cancelled by resolution of a general meeting (secs. 3 and 4). A written declaration by any sheriff or justice that such sale could not be effected on the Stock Exchange of Edinburgh, if none in especial is prescribed, is sufficient evidence to warrant cancellation (sec. 5). This cancellation divests the shareholder of all right and interest in the cancelled shares, but does not affect his liability for unpaid calls, interest, and expenses, as at the date of cancellation (sec. 6). Yet from this amount the value of the cancelled shares as this stands at the time must be deducted; and if payment is made before cancellation, the shares revert to their former owners (sec. 7). The company may also, when shares have been forfeited, or when sums payable on shares remain unpaid, cancel them with consent of the holders; but in that case all liabilities attaching to them are at once extinguished (sec. 8). The company also accept surrenders of shares which have not been fully paid up (sec. 9); but no money is to be received either for cancellation or surrender (sec. 10). New shares may be issued in lieu of those cancelled or surrendered, provided their aggregate nominal amount does not exceed that of the latter (sec. 11). (a) See Lindsay v. G. N. Ra. Co. 1851, 13 D. 457, 1 Macq. 112; G. N. Ra. Co. v. Inglis, 1851, 13 D. 497; 1853, 15 D. 532. (b) Great Nor. Ra. Co. v. Clark, 18 D. 660. (c) 26 and 27 Vict. c. 118. CHAPTER VI. CALLS. THE subscribers to joint-stock companies are not in general required to pay up the full amount of their contributions at once, but only by instalments as called for by the company from time to time. The word 'call' is used in three senses. It denotes-1. The fact Meaning of that a demand has been made; 2. The aggregate amount demanded; 3. The proportion of this amount payable by each shareholder in respect of his shares or his guarantee. If the company is unlimited, calls may be made upon the members not only to the extent of the nominal capital, but for as much beyond this as may be necessary to liquidate the company debts. If the company be limited, the members are not liable to pay calls beyond their shares or guarantee, unless it can be shown that they have agreed to do so per expressum or by implication, e.g. by allowing the directors to contract company debts which can only be met in this manner. term. I. MODE OF MAKING CALLS. make calls. By whom and in what manner calls may be validly made, can Who may only be ascertained by reference to the provisions of the act, charter, or articles of association, by which the company's constitution is regulated. It may be observed, however, generally, that calls made by persons not empowered to do so are mere nullities (a); and that when calls are directed to be made by a certain number of persons collectively, a call made by a less number will not in (a) South-East. Ra. Co., 12 A. and E. 497. See Miles v. Bough, 3 Q. B. 845; Edinburgh Ra. Co. v. Hebblewhite, |