Effects of charter.

Obtaining of charters.

poration proper. Provisions, it is said, were sometimes introduced into Scotch charters, bearing that the members of the company should, notwithstanding incorporation, be liable personally for the company debts, as in a common partnership; but there is great reason to believe that such provisions are either absolute nullities, or may tend to affect the validity of the charter.

Since 1825, the date of the first Letters Patent Act, the law is somewhat altered. If in charters granted since that period no provision is contained to the contrary, the company is a full corporation as of old, with all its rights and privileges; but if the charter contain clauses limiting the period of duration to a fixed term, and eliminating in whole or in part the element of non-liability of the members for the company debts (a), these limitations will be effectual.

The charter provides rules and regulations for the management of the association; and in so far as these extend, they form a code of laws binding on it and its members. Within the limits defined in the charter, the members may pass bye-laws for the management of the corporation; but in other respects they cannot in the least degree modify or innovate the constitution and rules laid down in the incorporating instrument (b). An Act of Parliament may alter or detract from the provisions of a charter, as it may entirely subvert the corporation; but the Crown has no power to vary the terms of a charter once accepted, or to force a new one on an unwilling corporation (c). Without a formal surrender, the Crown may in general alter or modify the terms of an old charter, provided this be consented to by the will of the corporation, which is that of a majority of its members (d); but if the charter have once been confirmed by statute, it cannot afterwards be varied without the authority of the Legislature (e).

To obtain a charter it is necessary to petition the Queen in Council, and to lodge the petition and a draft of the desired charter

(a) 1 Vict. c. 73, ss. 4, 29; and see 6 Geo. IV. c. 91; and Charter of National Bank of Scotland; Parl. Pa. Estimates and Accounts for 1831.

(b) Hill v. Fairweather, 1823, 2 S. 491; Corstorphine v. Trades of Calton, 1834, 12 S. 397. See antea, p. 37; and Somes v. Currie, 1 K. and J. 605.

(c) Grant 18 et seq.; Dr Askew's case, per Yates, J., 4 Burr. 2200.

(d) Grant 18 et seq.; Bull. N. P. 212 c.; R. v. Haythorne, 5 B. and C. 410; R. v. Hughes, 7 B. and C. 708.

(e) Royal Ex. v. Vaughan, 1 Burr. 155; Grant 10; R. v. Miller, 6 T. R. 268.

at the Council Office. These documents are afterwards laid before the Board of Trade, and any other Government officials whose advice may be deemed of importance. But before any report has been made thereon, it is necessary that notice of the application be inserted by the parties applying, three several times in the London Gazette, and in one or more of the newspapers circulating within the county in which it is proposed that the company's principal place of business shall be established, at intervals of not less than a week (a). If the report prove satisfactory, and it be resolved to accede to the prayer of the petition, the charter as finally adjusted is issued under the seal appointed to be used in Scotland in place of the Great Seal, and is duly registered. The Crown cannot incorporate persons against their will; and therefore, to render a charter valid and binding, it must not only be duly granted by the Crown, but accepted by those in whose favour it is issued.

members.

The members of the corporation are such persons only as are Who are declared to be so in the charter, or are subsequently admitted members in terms of the provisions contained in it, or authorized by it to be made for that purpose (b).

Charters, however formally obtained, are not necessarily of Validity of any charters. legal value. If in granting them the Crown has exceeded its prerogative, as by seeking to confer rights or privileges which could only be conceded by the Legislature; or if they have been obtained under a misconception-induced, for example, by false and fraudulent representations, they may be reduced as nullities by the supreme tribunals (c). This may be done in England by the prerogative writ of quo warranto, or by an information in the nature of that writ filed by the Attorney-General, or by scire facias, at the instance or with the concurrence of the Crown (d). In Scotland, the proper form of procedure would seem to be by action of declarator and reduction, at the instance or with the concurrence of the Lord Advocate (e). Those at whose instance and petition.

(a) Wordsworth on Mining and other Companies 235; Lindley 115; 1 Vict. c. 73, s. 32.

(b) See per Yates, J., 4 Burr. 2200; Lindley 114.

(c) Mason v. Mag. of Montrose, 1821, 1 S. 136; Act 1567, c. 18; Macbride v. Lindsay, 1852, 9 Ha. 574.

(d) See Reg. v. East. Archi. Co., 4 De Gex, M. and G. 199, and 1 Ell. and Bl. 310, and 2 ibid. 856; Wharton's Law Lexicon 768; Grant on Corp. 39 et seq.

(e) See Act 1567, c. 18, which gave extraordinary powers to the Court of Session; Bishop of Dunkeld v. Balme

the charter was obtained cannot insist for its reduction, however objectionable its provisions may be, or whatever irregularities may have attended its concession: from this they are barred by their own acts of application and acceptance (a). The same rule would seem to apply to those of the public who have contracted with the corporation on the basis of its validity, at least in so far as their engagements with it are concerned. But as regards acts done by a body pretending to be a corporation, when its charter was in fact invalid, these may seemingly be resisted and called in question by the public, without the necessity of formal proceedings to annul the charter (b). It must be confessed, however, that much obscurity hangs over this branch of corporation law in Scotland.

Letters patent companies not corporations.

How obtained.

Formation of company.

II. LETTERS PATENT COMPANIES.

Companies formed under the provisions of the Letters Patent Acts are not corporations, but are mere common law companies or partnerships possessed of such privileges as are contained in their letters patent.

Letters patent are obtained in the same way, and by adopting the same procedure, as in the case of a royal charter; but the company is not formed by them: their effect is merely to superinduce certain privileges on the company when it has been formed as now to be explained (c).

A company obtaining the privileges of letters patent must be entered into and be formed by a deed of partnership or association (sec. 5). This instrument contains the number of shares into which the undertaking is divided, the name or style of the company, and the names of the members, the date of commencement, the business or purpose, and the principal place of business. These five last particulars may be contained in a schedule attached to the conThe contract must also contain the appointment of two or more officers to sue or be sued on behalf of the company (sec. 5) (d).

tract.

rino, 1630, M. 9892; and compare 15
and 16 Vict. c. 83, s. 43, with Gillespie
v. Young, 1861, 23 D. 357.

(a) See Mill v. Mag. of Montrose as
revd., 1825, 1 W. and S. 570.

(b) See Grant on Corp. 40; Lindley

115.

(c) 7 Gul. IV. and 1 Vict. c. 73, ss. 2 and 5.

(d) See Philipson v. Earl of Egremont, 6 Q. B. 587.

Within three months after the grant of the letters patent, the company must make a return to the General Registry Office at Edinburgh (in the case of a Scotch company), containing the date of the grant, the name of the company, the business and the principal place for carrying it on, the total number of shares regularly numbered in succession, the amount to which each share renders its holders liable, the names and (except in the case of corporations) the places of abode of all the members, and the distinctive number or numbers of shares held by each member. A return must at the same time be made of the name and description of the officers appointed to sue and be sued on its behalf. A form is given in Schedule A attached to the Act (secs. 6 and 16).

After this registration, no change can be made on the company name; and if the principal place of business is changed, a corresponding return, in the form of Schedule B (sec. 7), must be made within three months.

When persons cease to be members of the company, except by transfer of shares made by deed or in writing, or when any additional shareholder is added thereto, a return must in like manner be made; and when a member's name is changed by marriage or otherwise, a return must in like manner be made, setting forth the alteration in terms of Schedule C (sec. 8).

of returns.

All returns must be signed by one of the officers, and verified by a Authentication declaration of such officer, in terms of 5 and 6 Gul. IV. c. 62. In default of such officer, the return must be signed and verified by some member of the company (sec. 14). The form of declaration is given in the Appendix. The return is not rendered invalid by unintentional error, provided a correct return be transmitted within one month thereafter in the form of Sch. F, appended to the Act. The returns are registered by the Lord Clerk Register or his deputy, in books kept for the purpose; and any one is entitled to their inspection on a fee of one shilling, and to a certified copy on payment of a small sum (sec.17). These certified copies are received as evidence (sec. 18).

termination of

No person becoming a member by transfer or otherwise is enti- Creation and tled to recover any share of profits, until duly entered on the register membership. (sec. 20); and persons ceasing to be members, whether by transfer, death, or otherwise, continue liable as members till the transfer or

other fact by which membership ceased has been registered (sec. 21).

Special act.

Parliamentary contract.

CHAPTER XIII.

FORMATION OF COMPANIES UNDER THE COMPANIES
CLAUSES CONSOLIDATION (SCOTLAND) ACT, 1845' (a).

A COMPANY formed under this statute is incorporated and brought under the general provisions of the statute by its special act, which at the same time provides for such peculiarities in its constitution and management as the Legislature deems necessary to enable it to prosecute successfully the ends and purposes of its creation. The clauses and provisions of the general statute are held to be incorporated with and to form part of the special act, except in so far as they are specially varied or rendered inapplicable by the latter. When the expression 'prescribed' occurs in the general statute, it means something prescribed in the special act for the purpose referred to (preamble and secs. 1, 2, and 5).

In order to obtain a special act, the promoters must of course satisfy the Legislature of the public utility of their proposed undertaking. An instrument must be executed termed a parliamentary contract; and certain rules and formalities prescribed by the Standing Orders must be observed and carried out. These orders are published annually, and frequently vary in their details, so that the last edition only can be relied on.

The parliamentary contract is an agreement entered into by the subscribers, whereby each undertakes to pay a sum set opposite his name. The total amount subscribed must equal three-fourths of the expense which has been estimated as the cost of the proposed undertaking. The parliamentary contract' is not to be confused with the subscribers' agreement,' which, as already explained, is a private contract entered into between the promoters and those who agree to take shares in the company when formed. Both are, however, sometimes embodied in the same instrument.

(a) 8 Vict. c. 17.