must be resorted to; but if the subjects adjudged be so small that present payment cannot be obtained in this manner, it is probable that the creditor would be allowed to proceed against a shareholder for the balance of his debt without delay. When in Scotland a charge has been given to a firm or copartnery, it forms a sufficient warrant for diligence against any one of the partners, and the only remedy is by suspension when the evil done is perhaps irremediable. Fortunately, there is no authority for extending this very loose and dangerous practice to the case of corporations; and, therefore, if it be determined to proceed against a shareholder, in consequence of diligence against the company having proved unproductive, a new charge must be given him individually. This procedure supplies, though in a somewhat imperfect form, the place of the scire facias, by enabling the shareholder to ascertain in a suspension that the corporation property has been fully exhausted, and that he is not called upon to pay more than is really due, before diligence proceeds against either his goods or his person. This liability to contribute towards liquidation of the corporation debts is limited in various ways. 1. It is only available after exhaustion of the company property; 2. It cannot exceed the amount still remaining unpaid on the shares; and 3. It applies only to the holder of shares, and ceases the moment he has de facto ceased by transfer or otherwise to be a shareholder. It has been decided in England, that it only attaches to such persons as hold shares at the time when execution against the company is found to be ineffectual, and therefore does not apply to such as had relinquished their shares before that time, even though they should have been shareholders both when judgment was obtained and execution had issued against the company (a). It has been decided, however, that the register, though conclusive, is not the only evidence of membership; and therefore, when a creditor was prevented from inspecting the register, he was allowed a scire facias against a person who he swore was a shareholder to the best of his belief, that belief being founded on information received from the company officials (b). (a) Nixon v Green, 11 Ex. 550; Nixon v. Brownlow, 3 H. and N. 686. (b) Rustrick v. The Derbyshire Ra. Co., 9 Ex. 149. Charge must be given of new to share holders. Limitation of contribute. liability to Register not the only evi dence of membership. Winding up does not stop recourse against a shareholder. Companies Act of 1862. Loss of privilege. The mere fact that the company is in the course of being wound up, and that the creditor will consequently be paid in course of time, does not preclude him from proceeding against a shareholder as allowed by the statute (a). The Companies Act of 1862 provides, as has been already seen, for the formation by registration of incorporated companies, both with limited and unlimited liability. With respect to such as are registered with limited liability, it provides that where the limitation is by shares, no member shall be required to contribute beyond the amount unpaid on his shares (sec. 38, No. 4); and that where the limitation is by guarantee, no contribution shall be required from any member exceeding the amount of his guarantee (sec. 38, No. 5). If the company is not registered with limited liability, the members are liable to be made contributories to the full extent of its debts and obligations (sec. 38). It must be observed, however, that even in this last case the members are in a very different position from that occupied by the partners of an unincorporated firm or company. The latter are liable singuli in solidum, and any one of their number may be proceeded against by a creditor for the whole of such debts as he has constituted against the concern; whereas the former are only liable as joint contributories, and that liability can only be made available by winding up the concern. Therefore no decree against the company will warrant diligence against any of its members. In this respect, members of companies formed under this Act, whether limited or unlimited, are more favourably situated than shareholders in companies formed under the Companies Clauses Act of 1845. This important privilege may, however, be lost in certain circumstances. 1. If the 1. If the company carries on business for six months with less than seven members, every member aware of the fact becomes liable singuli in solidum for all debts contracted during that period (sec. 48). 2. Persons signing any bill of exchange, promissory-note, cheque, or order for money or goods, in which the full name of the company is not used as directed, become liable for the full amount unless relieved by the company (secs. 41 and 42). 3. Existing banking companies, which register as limited companies without giving due notice to the customers as required (a) Morisse v. The Royal British Bank, 1 C. B. N. S. 67. by the Act, remain liable to such customers as have not received. notice, in the same way as if no registration had taken place (sec. 188). of liability. The liability of members to be made contributories does not Termination terminate by the mere fact of their ceasing to be members. On this subject the statutory provisions are somewhat peculiar. By sec. 38 it is declared-1. That no past member shall be liable to contribute to the assets of the company, if he has ceased to be a member for one year or upwards prior to the commencement of the winding up. 2. That no past member shall be liable to contribution, in respect of a debt contracted after his membership ceased. 3. That no past member shall be liable to contribute, unless it appears to the Court that the existing members are unable to contribute the amount required to liquidate the company liabilities. members of to registration. It must be observed, that when companies previously existing Liability of are registered under the Act of 1862, whether with or without companies existing prior limited liability, the liability of such of the members as were liable for debts contracted prior to registration is in no way diminished. The only alteration appears to be, that whereas the creditor might formerly have proceeded against them directly on constituting his debt against the company, he must now take the more orderly method of rendering their liability available in a winding up of the concern (sec. 196, No. 5). 1 Vict. c. 73. Companies governed by the Letters Patent Act, 7 Will. IV. 7 Will. Iv. and and 1 Vict. c. 73, though possessed of some of the privileges, hardly deserve the name, of corporations. The liability of the shareholders is limited or unlimited, according to the letters patent conferred on the company (secs. 21 and 24); but the Act does not make provision for regular winding up and enforcing contribution by calls equally made. It would therefore rather seem that, in the absence of some provision in the letters patent to the contrary, a creditor who has obtained decree against the company may use diligence against any one of the members, as in the case of an ordinary partnership. CHAPTER XIX. Private firms. Questions with the public. Questions inter socios. LIABILITY OF TRUSTEES HOLDING SHARES IN A IN dealing with this question, a distinction must be made between private partnerships and public companies. In the former, the rights as well as the liabilities of a member attach to him as an individual specially selected as a socius by his copartners; in the latter, they attach to the shares, by whomsoever they may chance for the time being to be held. In the case of private partnership, persons incur unlimited liability to the public not only by being de facto partners, but also by holding themselves out as such, or otherwise assuming the responsibilities of quasi partnership. In a question, therefore, with the public creditor, there can be no doubt that trustees standing in any of these positions incur a full personal liability. The public have not in general the means of knowing, and they are not bound to inquire into, any latent equities which may exist in the case of persons occupying ostensibly the position of partners (a). Yet if it could be shown, in the case of a particular creditor, that at the time his debt was contracted with the firm he was aware that a partner was such in a fiduciary character only, it would seem equitable to restrict the recourse to the trust funds. When the question of liability arises inter socios, the liability of a trustee to contribute will obviously depend on what arrangement was made between him and his fellows,-whether, in short, they (a) Gordon v. Anderson, 1862, 24 D. 315. See per Lord Kinloch in Lumsden v. Buchanan, 1864, 2 Macph. 704; per Lord Justice-Clerk, same case, p. 711; ex parte Garland, 10 Ves. 110; ex parte Richardson, 1 Buch. 202. M'Laren on Trusts ii. 12. agreed to accept him as a partner in his personal or in his fiduciary character. The presumption of law would seem to be for the former, and the onus of proving the latter will lie on the partner (a). In public companies the liabilities of trustees taking shares will, in a question with the world, fall to be regulated by the same principles as we have already seen to be applicable in the case of private partnerships; that is to say, they will be held to have bound themselves as ordinary shareholders, whatever liabilities that relation may involve. socios. When the question arises inter socios, the presumption for per- Questions inter sonal liability will be almost as strong as when it arises with the public creditor. The reason of this is, that in all that concerns transference of shares or admission of members, the shareholders have as little to do as the public. The management of such matters is committed to the directors, who must act in accordance with the constitution of the company. Now, the power to admit members with a liability limited to that of trustees, is in fact a power to admit some persons with privileges not possessed by the others, or rather with a right of indemnity against the others for all losses and debts of the concern beyond the amount of the trust funds,—a power which never can be presumed, and which could only be validly exercised where it was specially conferred in the instrument of formation. It would therefore seem that an arrangement by which the liability of certain shareholders is inter socios limited to that of trustees, can only be validly entered into when the directors have special powers to that effect, or when it has received the sanction of the whole body of shareholders, or at least of a general meeting (b). When shareholders are entered on the register as trustees eo nomine, this is intended merely to mark the property vested in them as belonging to the trust estate, and is quite consistent with their personal liability either to the company or its creditors (c). (a) See per Lord Justice-Clerk in Lumsden v. Buchanan, supra, and opinions of the judges generally. (b) Lumsden v. Buchanan, as revd. on appeal June 22, 1865; and see, in particular, the opinion of the Lord Justice-Clerk, which was adopted in the House of Lords, and which contains a full exposition of the legal principles involved in questions of (c) Per Lord Westbury, Ch., in |