charter of the company, and, so accepting it, the articles proceed to Chap. XVI. 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 changes in the internal regulations of the company may from time to time be made.”l In respect of all matters which the Act requires to be in the memorandum, the articles cannot be looked at in order to modify the memorandum which is the dominant instrument. In respect, however, of matters not required by law to be stated in the memorandum, the memorandum and articles, being contemporaneous documents, may be read together; and, if they can be read in two ways, the construction will be preferred which renders them consistent, and if one is clear and the other ambiguous, the first will be used to interpret the second.s As to matters within the powers of the company, the company Resolutions. is, generally speaking, bound by an ordinary resolution of a majority of members present at a duly convened meeting; + and an ordinary resolution may be that of a simple majority of those present, unless the regulations of the company prescribe otherwise. In some cases, either by statute or under the articles of association, "extraordinary or "special" resolutions are necessary. resolution." A special resolution is one passed by a majority of not less than "Special three-fourths of the members present in person or by proxy at a meeting, and confirmed by a simple majority at a subsequent meeting held not less than fourteen days nor more than one month after the first meeting.5 nary resolu An "extraordinary" resolution is a resolution which is passed Extraordiin such a manner as would, if it had been confirmed by a subse- tion. quent meeting, have constituted a special resolution." articles. The regulations or articles of association may, subject to the Alteration of provisions of the Act and of the memorandum, be altered or added to by special resolution. 1 Per Ld. Cairns, Ashbury Co. v. Riche, L. R. 7 H. L. 668; and see Guinness v. Land Corp. of Ireland, 22 Ch. D. 349. Per Bowen, L.J., Guinness v. Land Corp. of Ireland, 22 Ch. D. 381. 3 Per Jessel, M.R., Re Phonix, &c. Steel Co., 44 L. J. Ch. 683; Re Pyle Works, 44 Ch. D. 534. Thus a company may by special N. W. Transportation Co. v. Beatty, 12 App. Cas. 593. 5 Act of 1862, s. 51. 6 S. 129. 7 S. 50. Malleson v. Nat. Insurance Corp., [1894] 1 Ch. 200. See James v. Buena Ventura Co., [1896] 1 Ch. 456. Chap. XVI. resolution alter its articles so as to enable the directors to increase capital by issuing preference shares, though neither the articles nor memorandum authorize any preference among shareholders. A company cannot contract itself out of this statutory right to alter its articles.2 Prospectus. Directors. Breach of trust by directors. It is usual on the formation of a company, or on the issue of further capital, to issue a prospectus. A prospectus must be signed, dated, and registered. It must state all the prescribed particulars, which include the names and addresses of vendors of property to the company and the price, the dates and parties to all material contracts; and full particulars of the interest of every director in the promotion of or the property to be acquired by the company.1 6 5 Ordinary administrative matters are transacted by the directors. If they exceed their authority their acts may bind the company in favour of third parties; and they may be ratified by a majority of the members of the company, on the ground that in matters of internal management the proper tribunal to decide disputes is a general meeting of the shareholders. But if acts of the directors are ultra rires of the company itself, they do not bind the company, and the unanimous consent of all the members cannot validate them, and any one dissentient shareholder may take proceedings to restrain such acts. Directors are in some respects in the position of trustees for the company, and may be made liable to account for any benefit obtained by themselves or for any loss accruing to the company through any breach of their trust.10 Under the Companies (Winding-up) Act, 1890," a director or other officer of a company which 1 Andrews v. Gas Meter Co., [1897] 1 Ch. 361, overruling Hutton v. Scarboro' Hotel Co., 2 Dr. & Sm. 521. See British and American Corp. v. Couper, [1894] A. C. 399, 417. 2 Allen v. Gold Reefs, [1900] 1 Ch. 656; Punt v. Symons, [1903] 2 Ch. 506. 3 Act of 1900, s. 9. 4 Ib. s. 10. Lindley on Companies, Bk. II., Ch. 2, s. 1. 6 Re Bank of Syria, [1900] 2 Ch. 272, [1901] 1 Ch. 115. 7 See Foss v. Harbottle, 2 Hare, 461; 62 R. R. 185; Re London Investment Corp., [1895] 2 Ch. 860. 8 Salomons v. Laing, 12 Beav. 339; Hope v. International Soc., 4 Ch. D. 327; Hoole v. G. W. R. Co., 3 Ch. 262. See notes to Collins v. Blantern, 1 Sm. L. C. 392-396. 9 Re Faure Electric Co., 40 Ch. D. 141; Sheffield Society v. Aizlewood, 44 Ch. D. 452; Re Sharpe, [1892] 1 Ch. 154. See North-West Transportation Co. v. Beatty, 12 App. Cas. 589; Lagunas Co. v. Lagunas Synd., [1899] 2 Ch. 392. 10 Re Sharpe, sup. ; Re Lands Allot. Co., [1894] 1 Ch. 616; Hirsche v. Sims, [1894] A. C. 654; Alexander v. Automatic Co., [1900] 2 Ch. 56. 11 53 & 54 Vict. c. 63, s. 10. is being wound up may be ordered by the Court to repay money Chap. XVI. or restore property which he has misapplied or retained, or for which he has become liable or accountable.1 shareholders against directors or The rule is that nothing connected with internal disputes Actions by between the shareholders is to be made the subject of an action by some one shareholder on behalf of himself and others, unless there be something illegal, oppressive, or fraudulent—unless there be company. something ultra vires on the part of the company quâ company, or on the part of the majority of the company, so that they are not fit persons to determine it; but that every litigation must be in the name of the company if the company really desire it, subject to certain exceptions, as where a fraud is committed by persons who can command a majority of votes, in which case the minority can sue.3 The shares or other interest of any member are personal estate, Shares. transferable as provided by the regulations of the company; and Transfers. each share, where the capital is divided into shares, must be distinguished by its appropriate number. The names of every member must be registered. It will be observed that transfer is not, as under the Companies Clauses Consolidation Act, required to be by deed." The following are the regulations in Table A. of the Act of 1862 as to transfer: Art. 8. "The instrument of transfer of any share in the company shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain a holder of such share until the name of the transferee is entered in the register book in respect thereof." Art. 10. " The company may decline to register any transfer of shares made by a member who is indebted to them."7 The directors of a company are entitled to a reasonable time for considering every transfer before they register it. They may 1 See Re New Mashonaland Co., [1892] 3 Ch. 577; Re Kingston Co. (No. 2), [1896] 1 Ch. 331; Dorey v. Cory, [1901] A. C. 477. See post, p. 294. Per James, L.J., MacDougall v. Gardiner, 1 Ch. D. 13, 21. 3 Per Jessel, M.R., Mason v. Harris 11 Ch. D. 107; Spokes v. Grosvenor Hotel Co., [1897] 2 Q. B. 124. Act of 1862, s. 22; and see s. 24. See, as to the rights of the transferee, Société Générale v. Tramways Union Co., 14 Q. B. D. 451, per Lindley, L.J. 8 1 Chap. XVI. refuse to register a transfer for sufficient reason, or without giving reasons if they act bonâ fide.2 Estoppel. Forged Transfers Leeman's Alteration of capital or name. If a company registers a forged transfer, it can be compelled to re-register the true owner of the shares ;3 and the company may be liable to compensate the innocent transferee if he has altered his position on the faith of a certificate issued to him.' The company will be estopped from denying the title of a transferee from a person to whom it has issued a share certificate, and will be liable in damages for refusal to register such transferee.5 By the Forged Transfers Acts, 1891 and 1892,6 a company has power to pay compensation out of its funds for any loss arising from a transfer of shares in pursuance of a forged transfer. In order to prevent contracts for the sale and purchase of shares and stock in joint stock banking companies, of which the sellers are not possessed, or over which they have no control, an Act, commonly called Leeman's Act, was passed in 1867,7 making void all such contracts which do not specify the distinguishing numbers of such shares or stock, or, if there are no distinguishing numbers, the person or persons in whose name or names the same then stand registered. Dealers on the Stock Exchange have disregarded this Act as impracticable, at the risk of incurring personal liability; but it has been held that the usage of the Stock Exchange to disregard the Act is unreasonable, and not binding on strangers who do not know of such usage; and, by disregarding the Act, a stockbroker may render himself liable for a breach of duty in not making a valid contract." 8 If authorized by its regulations as originally framed, or as altered by special resolution,10 any company limited by shares may modify the conditions contained in its memorandum of association, so as to increase its capital by the issue of new shares, or to consolidate and divide its capital into shares of larger amount, or to convert its paid-up shares into stock, or, subject to the approbation of the Board of Trade, to change its name.11 Under the Acts of 5 Re Ottos Co., sup. 1 Maynard v. Consolidated Kent Corp., [1903] 2 K. B. 121. 2 Re Coalport China Co., [1895] 2 Ch. 404. 3 Barton v. L. & N. W. R. Co., 38 Balkis Co. v. Tomkinson, [1891] 2 Q. 654 & 55 Vict. c. 43; 55 & 56 Vict. c. 36. 730 & 31 Vict. c. 29. 8 Perry v. Barnett, 15 Q. B. D. 388; Seymour v. Bridge, 14 Q. B. D. 460. See Loring v. Davis, 32 Ch. D. 625. 9 Neilson v. James, 9 Q. B. D. 546. 1867 and 1877,1 such companies may reduce their capital, subject, Chap. XVI. except in the case of a reduction by cancellation of unissued shares, to confirmation by the Court; and under the Act of 1867 they may divide their capital or any part of it into shares of smaller amount than is fixed by the memorandum of association.3 (Memoran 1890. The Companies (Memorandum of Association) Act, 1890,+ Companies enables any company registered under the Companies Acts to dum of Assoalter its memorandum of association (or deed of settlement) by a ciation) Act, special resolution, subject to confirmation by an order of the Court. Alterations may be made with respect to the objects of the company, so as to carry on its business more economically or more efficiently; or to attain its main purpose by new or improved means; or to enlarge or change the local area of its operations; or to carry on some business which may conveniently or advantageously be combined with the business of the company; or to restrict or abandon any of its objects. The Act of 1862 does not provide for the making of calls; Calls. that is left to the articles of association or regulations of the company. The power to make calls may be vested in a general meeting of the company; but it is usually given to a quorum of the directors. By the Act of 1867,8 a company may, if authorized by its regulations as originally framed or as altered by special resolution, arrange, on the issue of shares, for a difference between the holders of the shares in the amount and time of payment of calls; and may accept payment in advance of calls, and pay dividends on such payments." The articles of a company usually provide that the shares of members not paying calls shall after notice be forfeited.10 130 & 31 Vict. c. 131, ss. 9-20; and 40 & 41 Vict. c. 26. See Bannatyne v. Direct Spanish Co., 34 Ch. D. 287; Re Direct Spanish Co., ib. 307; Re Pinkney Co., [1892] 3 Ch. 125; British and American Corp. v. Couper, [1894] A. C. 399; Re Colmer, [1897] 1 Ch. 524; Ladies' Dress Assoc. v. Pulbrook, [1900] 2 Q. B. 376; Re Anglo-French Co., [1902] 2 Ch. 845. 40 & 41 Vict. c. 26, s. 5. 3 Act of 1867, ss. 21, 22. 453 & 54 Vict. c. 62. 5 Re N. of England Assoc., [1900] 1 Ch. 481. 6 For observations on this Act, see 8 S. 24. 9 Re Washington Co., [1893] 3 Ch. 95; Lock v. Queensland Co., [1896] A. C. 461. 10 Act of 1862, Table A., Art. 19. |