satisfaction of the debts, liabilities, or engagements, and the residue (if Form 68. any) paid to such member, his executors, administrators, or assigns.

sales under

proceeds of 42. Upon any sale in purported exercise of the powers given by sale. clauses 37 and 40 hereof respectively, the directors may cause the pur- Validity of chaser's name to be entered in the register in respect of the shares or clauses 37 stock sold, and the purchaser shall not be bound to see to the regularity and 40. of the proceedings, or to the application of the purchase-money, and after his name has been entered in the register, the validity of the sale shall not be impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only and against the company exclusively.

Compare this Clause with Clause 22 of Table A., which, however, only applies to a sale on forfeiture.

CONVERSION OF SHARES INTO STOCK.

43. The company [in general meeting] may convert any paid-up Conversion of shares into stock.

Any company limited by shares, if authorised by its regulations as originally framed, or as altered by special resolution, may convert its paid-up shares into stock. S. 12 of the Act. See "Resolutions," infra. The power is not often exercised, and the clauses relating to it might, if brevity be desired, be omitted. They can at any time be supplied by special resolution. If the words in brackets are omitted the directors will be able to exercise their general powers, infra.

See further as to conversion of shares into stock, "Resolutions,” infra. If desired, the clause may run thus: "The company may by special resolution convert," &c.

shares into

stock.

stock and

44. When any shares have been converted into stock, the several Transfer of holders of such stock may, thenceforth, transfer their respective interests rights of therein, or any part of such interests, in the manner and subject to the holders. regulations hereinbefore provided. But the directors may from time to time, if they think fit, fix the minimum amount of stock transferable, and direct that fractions of a pound shall not be dealt with, but with power at their discretion to waive such rules in any particular case.

stock-holders.

45. The stock shall confer on the holders thereof respectively the Rights of same privileges and advantages, as regards participation in profits and voting at meetings of the company and for other purposes, as would have been conferred by shares of equal amount in the capital of the company, but so that none of such privileges or advantages, except the participation in profits of the company, shall be conferred by any such aliquot part of consolidated stock as would not, if existing in shares, have conferred such privileges or advantages.

INCREASE OF CAPITAL.

46. The company [in general meeting] may, from time to time, Power to inincrease the capital by the creation of new shares of such amount as crease capital. may be deemed expedient.

Any company limited by shares, if authorised to do so by its regulations as

Form 68. originally framed, or as altered by special resolution, may increase its capital. Section 12 of the Act. Under the above clause the increase can be effected by a simple resolution passed at an extraordinary meeting. Not uncommonly it is thought better to require the sanction of a special resolution to an increase. Thus: "47a. The company may from time to time by special resolution increase," &c. ; or, the words in brackets can be omitted, and in such case the directors will be able to increase the capital at their discretion.

On what conditions new

47. The new shares shall be issued upon such terms and conditions, shares may be and with such rights and privileges annexed thereto [as the general issued. As to meeting, resolving upon the creation thereof, shall direct, and, if no

preferences, &c.

When to be offered to existing members.

direction be given], as the directors shall determine; and in particular such shares may be issued with a preferential or qualified right to dividends, and in the distribution of assets of the company, and with a special or without any right of voting.

See further "Resolutions," infra.

If clause 47a is used, then omit the words within brackets in the above clause and substitute these: "as by the special resolution creating the same shall be directed, and if no direction be given," &c.

See further as to increase of capital, infra, where forms of resolutions, notices, &c., will be found.

48. If at any time the capital, by reason of the issue of preference shares or otherwise, is divided into different classes of shares, all or any of the rights and privileges attached to each class may be modified by agreement between the company and any person purporting to contract on behalf of that class, provided such agreement is confirmed by an extraordinary resolution passed at a separate general meeting of the holders of shares of that class and all the provisions hereinafter contained as to general meetings shall, mutatis mutandis, apply to every such meeting, but so that the quorum thereof shall be members holding or representing by proxy one-tenth of the nominal amount of the issued shares of the class.

:

Where there are different classes of shares great inconvenience is sometimes caused by there being no power for the majority of the members of a class to bind the minority, and accordingly the insertion of a clause as above is desirable.

49. The company [in general meeting] may, before the issue of any new shares, determine that the same, or any of them, shall be offered in the first instance to all the then members, in proportion to the amount of the capital held by them, or make any other provisions as to the issue and allotment of the new shares: but, in default of any such determination, or so far as the same shall not extend, the new shares shall be subject to Clause 5 hereof.

In lieu of the above clause, which is very commonly used, the following, which is similar to the clause 27 in Table A., may, if preferred, be substituted: "Subject to any direction to the contrary that may be given by the meeting that sanctions the increase of capital, all new shares shall be offered to the members in proportion to the existing shares held by them, and such offer shall be made by notice specifying the number of shares to which the member is entitled, and limiting a time within

which the offer, if not accepted, will be deemed to be declined; and after the Form 68. expiration of such time, or on the receipt of an intimation from the member to whom such notice is given, that he declines to accept the shares offered, the directors may dispose of the same in such manner as they think most beneficial to the company."

with shares in

50. Except so far as otherwise provided by the conditions of issue, or How far new by these presents, any capital raised by the creation of new shares shall shares to rank be considered part of the original capital, and shall be subject to the original provisions herein contained, with reference to the payment of calls and capital. instalments, transfer and transmission, forfeiture, lien, surrender, and otherwise.

The above clause ought to be taken into consideration upon any increase of capital. Where, as in some cases, "the capital" and "shares are specially interpreted, it would seem that this clause might be dispensed with. See also observations of Kindersley, V. C., in reference thereto. Hutton v. Scarborough, &c., Co., 13 W. R. 1061. As to the operation of the clause, see Harrison v. Mexican Ry. Co., 19 Eq. 358, and Bangor, &c., Co., 20 Eq. 59.

REDUCTION OF CAPITAL, CONSOLIDATION AND SUBDIVISION OF SHARES.

51. The company may, from time to time, reduce its capital, and Reduction of may consolidate or subdivide its shares, and may cancel any shares that capital, &c. have not been taken or agreed to be taken by any person. Paid up capital may be returned upon the footing that the amount may be called up again in the same manner as if it had never been paid up.

As to reduction of capital, see infra, note to Form 180.

As to consolidation and subdivision of shares, see infra, "Resolutions."

SURRENDER OF SHARES OR STOCK.

shares.

52. The directors may [with the sanction of a general meeting] accept Surrender of from any member, on such terms and conditions as shall be agreed, a surrender of his shares or stock or any part thereof.

The words in brackets are generally omitted.

A power to accept surrenders is valid, and a surrender which does not amount to a reduction of capital is not open to any objection, e.g., if a 107. share with 57. paid up be surrendered for two shares of 51. each, credited with 27. 10s. paid up on each share. Teasdale's case, 9 Ch. 54. But if the surrender would amount to a reduction of capital it would seem that it is only valid if (1) it is bonâ fide for the benefit of the company, or (2) is carried into effect as a reduction of capital in accordance with the Act of 1867. Hope v. International Financial Society, 4 C. Div. 327; In re St. James' Bank, 48 L. J. Ch. 633, Fry, J., held that a company might even pay money upon a surrender where it was for the benefit of the company.

BORROWING POWERS.

borrow.

53. The directors may, from time to time, at their discretion, borrow Power to from the directors, members, or other persons, any sum or sums of money for the purposes of the company [but so that the monies at any

Form 68. one time owing shall not, without the sanction of a general meeting, exceed the nominal amount of the capital.]

Conditions on

may be bor

rowed.

As to loans by directors, see Campbell's case, 4 C. Div. 470; Black v. Mallalue, 5 Jur. N. S. 1018.

The words in brackets may be omitted and the following substituted: "But so that not more than 7. be owing at any one time without the sanction of a general meeting."

Where the company has power to borrow and mortgage, as to which see supra, p. 73, there is no need expressly to delegate the power to the directors, provided that the articles contain a general delegation to them of the powers of the company, as infra. In re Patent File Co., 6 Ch. 83; Gibbs and West's case, 10 Eq. 312; Anglo-Danubian, &c., Co., 20 Eq. 339.

Nevertheless it is usual to give the directors express power. How far the power should be fettered or limited is a matter of arrangement. It is by no means uncommon to vest the power in the directors absolutely. If this is to be done, omit from "but so that" to end of clause. In small companies it is not unusual to require the sanction of a special resolution.

As to the validity of securities given for money borrowed beyond the limit, see the rule in the Royal British Bank v. Turquand, 6 E. & B. 327.

As to personal liability of directors to lenders, where the borrowing powers are exceeded, see Weeks v. Propert, L. R. 8 C. P. 427, and cases there cited. Even where directors have an unrestricted power to borrow they not uncommonly seek the sanction of a general meeting before exercising the power.

54. The directors may raise or secure the repayment of such monies which money in such manner and upon such terms and conditions in all respects as they think fit, and, in particular, by the issue of debentures of the company charged upon all or any part of the property of the company (both present and future), including its uncalled capital for the time being.

Securities may

free from

As to debentures, see infra, " Debentures."

55. Every debenture, or other instrument, for securing the payment be assignable of money, issued by the company, may be so framed that the monies thereby secured shall be assignable free from any equities between the company and the person to whom the same may be issued.

equities.

Register of

mortgages to be kept.

This clause is sometimes inserted. As to its object, see infra, introductory notes to "Debentures." Where a company has power to issue negotiable instruments, the above clause is probably not necessary, supra, p. 71.

56. Any debentures, bonds, or other securities, may be issued at a discount, premium, or otherwise.

This clause is sometimes inserted, but the power to "raise" money given by clause 54, and the general powers given, infra, are probably sufficient. In re Anglo-Danubian Steam, &c., Co., 20 Eq. 341.

57. The directors shall cause a proper register to be kept, in accordance with Section 43 of the Companies Act, 1862, of all mortgages and charges specifically affecting the property of the company.

This clause is inserted by way of reminder. See result of omission to register mortgage infra, introductory notes to "Debentures."

[57a. If any uncalled capital of the company is included in or charged Form 68. by any mortgage or other security, the directors may delegate to the person in whose favour such mortgage or security is executed, or to any other person in trust for him, the power to make calls on the members in respect of such uncalled capital, and to sue in the name of the company or otherwise for the recovery of monies becoming due in respect of calls so made, and to give valid receipts for such monies; and the power so delegated shall subsist during the continuance of the mortgage or security, notwithstanding any change of directors.]

The above is sometimes used. See further as to mortgages of uncalled capital, infra, "Debentures.'

GENERAL MEETINGS.

ing to be held.

58. The first general meeting shall be held at such time, (not being When first more than four months after the registration of the memorandum of general meetassociation of the company,) and at such place as the directors may determine. This meeting shall be called the statutory meeting.

The Companies Act, 1867, requires every company to hold a first meeting within four months after the registration of its memorandum of association. An extraordinary meeting is a sufficient compliance with this provision. Lord Claude Hamilton's Case, 8 Ch. 548.

59. Subsequent general meetings shall be held at such time and place When subseas may be prescribed by the company in general meeting, and, if no quent general meetings to be other time or place is prescribed, a general meeting shall be held in the held. month of in every year at such time and place as may be determined by the directors.

The Act of 1862 provides (s. 49) that "A general meeting of every company under this Act shall be held once at the least in every year." In this section, 'year' means calendar year, i.e., the period of time commencing on the 1st of January, and ending on the 31st of December, and not the period of twelve months, ending upon the anniversary of the registration. Gibson v. Barton, L. R. 10 Q. B. 329.

But it seems that a meeting need not be held in the first year if less than four months of that year remain when the company is registered. Gibson v. Barton, L. R. 10 Q. B. 329. See s. 26 of the Act as to the return of a list of "all persons who on the fourteenth day succeeding the day on which the ordinary meeting is held, are members of the company." Default in forwarding the list renders the company and its directors and managers liable to penalties. See the case last mentioned, and Edmunds v. Foster, 45 L. J. M. C. 41, and Reg. v. Newton, 48 L. J M. C. 77.

Sometimes provision is made for half-yearly meetings.

60. The above-mentioned general meetings shall be called ordinary Distinction general meetings; all other meetings of the company shall be called between ordiextraordinary general meetings.

nary and extraordinary

61. The directors may whenever they think fit, and they shall, upon meetings. a requisition made in writing by members holding in the aggregate [one-fifth of the issued capital], convene an extraordinary meeting.

I

When extraordinary meeting to be called.