shall invalidate any prior act of the directors which would have been Form 68. valid if such regulation had not been made. The above clause is usual. If it is desired to limit the authority of the directors express provision is accordingly made, but subject thereto, the general powers of the company are almost always given to the directors. See and compare Clause 55 of Table A. 66 And such a general delegation is valid and effectual. Thus In re Patent File Co., 6 Ch. 83, the articles authorised the borrowing of money with the sanction of an extraordinary meeting of the company; they also contained a clause substantially the same as above. The directors overdrew the company's banking account, and being required by the bank to give security, deposited title deeds of property belonging to the company. It was held in the winding-up of the company, that the mortgage was valid. James, L. J., said (inter alia,) that it was 'plain that, under these articles, the directors can do anything which the company could do, unless it is an act which they are specially prohibited from doing. I can find nothing in the memorandum or articles to prevent the directors from making the best terms they can with a creditor of the company by selling or pledging part of the property of the company." And Mellish, L. J., said (inter alia,) “The articles give to the directors the whole powers of the company, subject to the provisions of the articles and of the Companies Act, 1862, and I cannot find anything either in the Act or the articles to prohibit their making a mortgage by deposit. There being nothing in the articles to prohibit the giving of such security, I am of opinion that the company can give it as well for a past debt as a future one." See also Collie's claim, 12 Eq. 246. So also In re Anglo-Danubian, &c., Co., 20 Eq. 339, the articles contained express power to borrow (Clause 29), and also (Clause 66), a general delegation of powers as above. The question was, whether the directors had power to issue debentures at a discount. Jessel, M. R., held that they could: "There is nothing in these articles to limit the amount of interest, the directors might give 10 per cent., 20 per cent., or 30 per cent., and they might give that interest by way of discount. If, therefore, I went on the mere words of the 29th clause, I should hold this was within their powers. But, looking to the 66th clause, I cannot have any possible doubt. The directors can do anything the company can do; and as there are no regulations prescribed by the articles or the company under the 66th clause, they may borrow on any terms they think fit." The above clause is substantially the same as Clause 55 of Table A., and Clause 90 of the Companies Clauses Consolidation Act, 1845. In the recent case of Hampson v. Price's Patent Candle Co., L. J. 45 Ch. 437 ; 34 L. T. 711; 24 W. N. 754, it was held that the last-mentioned clause warranted directors in granting out of the funds of the company gratuities to the workmen employed. to directors. 114. Without prejudice to the general powers conferred by the last Specific preceding clause, and of the other powers conferred by these presents, it po vers given is hereby expressly declared that the directors shall have the following powers: From what is said in the note to Clause 113, it seems that the subsections of this clause, or many of them, might without danger be omitted. Nevertheless, it is usual expressly to confer all, or some of the powers contained in them, and reasons for doing so are not wanting, e.g., 1. Directors like, as far as possible, to have express authority, for where express authority is given by the articles, the company cannot complain that an act of the directors pursuant thereto is ultra vires. Thus where the articles authorised the directors to pay 6,000l. to the promoters of the company it was held, on demurrer, that payment without taxation was not improper. Croskey v. Bank of Wales, 4 Giff. 314; Jur. N. S. 595. So where the articles authorised the directors to acquire a specific business " upon such terms K Form 68. and under such stipulations as to guarantee or otherwise as may be agreed upon," it was held that they were under no obligation to consult the company in general meeting before making the purchase, although the business was insolvent and the purchase would involve undertaking vast liabilities. Overend & Gurney Co. v. Gibbs, L. R. 5 H. L. 480. See also Blakely Ordnance Co., 3 Ch. 159; Bank of Turkey v. Ottoman Bank, 14 W. R. 819; Eley v. Positive, &c., Soc., 1 Ex. Div. 88. 2. It relieves the directors from responsibility, for in the absence of fraud or crassa negligentia, they will not be under any personal liability to the company, even though in the exercise of the powers entrusted to them they are guilty of imprudence and want of judgment which result in a great loss to the company. Overend & Gurney Co. v. Gibbs, ubi supra. May carry agreement into effect. May pay preliminary expenses. May acquire property. May pay for property in debentures, &c. May secure contracts by mortgage. 3. Mortgagees, vendors, and other persons dealing with a company like to see the powers of the directors in black and white. (1.) They may take such steps as they think fit to carry into effect. the said agreement of the day of If Clause 3, supra, p. 96, is inserted, this should be omitted. (2.) They may pay the costs, charges, and expenses, preliminary and incidental to the promotion, formation, establishment, and registration of the company. Such a power will not give a promoter a right of action, in respect of preliminary expenses, against the company. Melhado v. Porto Allegre Ry. Co., 9 C. P. 503 ; at any rate if he is not a party to the articles. Eley v. Positive, &c., Soc., 1 Ex. Div. 88. See also Croskey v. Bank of Wales, 4 Giff. 318, cited supra, and In re Englefield Colliery Co., 8 C. Div. 388, where directors were held liable for monies paid without vouchers or inquiry. See Form 543, infra. (3.) They may purchase or otherwise acquire for the company any property, rights, or privileges, which the company is authorised to acquire, at such price, and generally on such terms and conditions as they think fit. (4.) They may, at their discretion, pay for any rights acquired by, or services rendered to, the company, either wholly or partially in cash or in shares, bonds, debentures, or other securities of the company, and any such shares may be issued either as fully paid up or with such amount credited as paid up thereon as may be agreed upon, and any such bonds, debentures, or other securities may be either specifically charged upon all or any part of the property of the company and its uncalled capital, or not so charged. Debentures issued by a company under a general power of borrowing in part discharge of existing liabilities are valid. Inns of Court Hotel Co., 6 Eq. 82. See also opinion of Blackburn, J., in Webb v. Herne Bay Commiss., L. R. 5 Q. B. 654. If paid-up shares are issued under the above power, a contract in relation thereto may be necessary under s. 25 of the Act of 1867. See further, supra, p. 12. (5.) They may secure the fulfilment of any contracts or engagements entered into by the company, by mortgage or charge of all or any of the property of the company and its unpaid capital for the time being, or in such other manner as they may think fit. (6). They may appoint, and at their discretion remove or suspend, Form 68. such managers, secretaries, officers, clerks, agents, and servants May appoint for permanent, temporary, or special services, as they may from officers, &c. time to time think fit, and may determine their duties and fix their salaries or emoluments, and may require security in such instances and to such amount as they think fit. right to transfer shares. (7). They may attach to any shares, to be issued as the consideration May restrict or part of the consideration for any contract with, or property acquired by, the company, or in payment for services rendered to the company, such conditions as to the transfer thereof as they think fit. It is sometimes found expedient to place a restriction on the right of transfer, e.g., where a large number of shares are issued to a vendor. Of course it must be by agreement, and such an agreement will be valid on the principle in Ashton Vale Iron Co. v. Abbott, W. N. 1876, 119. See also Gray's case, 1 Ch. Div. 664. trustees. (8.) They may appoint any person or persons to accept and hold in May appoint trust for the company any property belonging to the company, or in which it is interested, and may execute and do all such deeds and things as may be requisite to vest the same in such person or persons. and defend actions, &c. (9.) They may institute, conduct, defend, compound, or abandon any May bring legal proceedings by and against the company, or its officers, or otherwise concerning the affairs of the company, and also may compound and allow time for payment or satisfaction of any debts due, and of any claims or demands by or against the company. Every company has an implied power to compromise disputes. Buth's case, 8 C. Div. 334. arbitration. (10.) They may refer any claims or demands by or against the com- May refer to pany to arbitration, and observe and perform the awards. As to arbitration, see further, infra, p. 140. (11.) They may make and give receipts, releases, and other discharges, May give for money payable to the company, and for the claims and receipts. demands of the company. And such receipts will be effectual even though the acting directors are not directors de jure. Mahoney v. East Holyford Mining Co., 7 H. L. 869. company in bankruptcy. (12.) They may act on behalf of the company in all matters relating May act for to bankrupts and insolvents. (13.) They may, from time to time, provide for the management of the May appoint affairs of the company abroad in such manner as they think fit, attornies. and in particular may appoint any persons to be the attornies or Form 68. May invest monies. May give security by way of indemnity. May give percentage to director, &c. May establish reserve fund. agents of the company with such powers and upon such terms as may be thought fit. See note to Clause 9b, supra, p. 98. The above should be inserted where the company is likely to carry on business abroad. (14.) They may invest any of the monies of the company not immediately required for the purposes thereof, upon such securities and in such manner as they may think fit, and they may, from time to time, vary or realise such investments. A power to invest in securities does not warrant an application for a number of shares in a proposed company with a view to promoting it. Joint-Stock Discount Co. v. Brown, 3 Eq. 139; 8 Eq. 381. See also, supra, p. 68. (15.) They may execute in the name and on behalf of the company in The above clause, which has now become very common, will not be inserted unless paragraph (e) of Clause 92, supra, p. 122, is cancelled, and Miscellaneous Clauses, Form 86, inserted in the articles. An interest in profits is often found to render the services of an agent more beneficial to his employer. Apart from a special power, a person standing in a fiduciary relation to the company could not be given such an interest by the board. See further, infra, Miscellaneous Clauses, notes to Form 87. (17.) They may, before recommending any dividend, set aside, out of the profits of the company, such sum as they think proper as a reserve fund to meet contingencies, or for equalising dividends, or for repairing, improving, and maintaining any of the property of the company, and for such other purposes as the directors shall in their absolute discretion think conducive to the interests of the company; and they may invest the several sums so set aside upon such investments as they may think fit, and may, from time to time, deal with and vary such investments, and dispose of all or any part thereof for the benefit of the company, and they may divide the reserve fund into such special funds as they think fit. There can be little doubt that a company can by special resolution provide for the creation of a reserve fund. Binney v. Ince Hall, &c., Co., 35 L. J. Ch. 363. But of course the regulations may be so framed that the whole profits must be divided from time to time. Stringer's case, 4 Ch. 494. (18.) They may, from time to time, make, vary, and repeal byelaws Form 68. for the regulation of the business of the company, its officers and May make servants, or the members of the company, or any section byelaws. thereof. Persons dealing with a company are deemed to have notice of the memorandum and articles of association, but not of byelaws made by the directors. Royal Bank of India's Case, 4 Ch. 252. (19.) They may enter into all such negotiations and contracts, and May make rescind and vary all such contracts, and execute and do all such contracts, &c. company. There can be little doubt that such a clause as above is a sufficient authority to the directors to vary contracts expressly adopted by the articles. See and consider Sahlgreen & Carrall's case, 3 Ch. 323. [114a. Messrs. of SOLICITORS. shall be the solicitors of the company.] First solicitor. In a recent case the articles of the company provided that, "Mr. A. B., of shall be the solicitor of the company, and shall transact all the legal business of the company, including parliamentary business, for the usual and accustomed fees and charges, and shall not be removed from his office unless for misconduct." Mr. A. B. was employed by the company after its corporation, but there was no evidence of any agreement to employ him on the terms mentioned in the articles. He was not a subscriber to the articles, but he was a member of the company. It was held that the articles did not constitute a contract between the company and Mr. A. B., and that he could not sue the company for refusal to employ him. Eley v. Positive Ass. Soc., 1 Ex. Div. 20; S. C. on App. 88. In the Exchequer Division the Court was also of opinion that the employment was intended to be permanent, and that the articles were not a sufficient agreement in writing within s. 4 of the Statute of Frauds. Under the Attornies and Solicitors Act, 1870 (33 & 34 Vict. c. 28), solicitors may make special agreements, in writing, with their clients as to remuneration, e.g., by a gross sum, commission, or salary. The solicitor of a company is very commonly appointed on an agreement under which his remuneration shall in part consist of a fixed salary. Any such agreement ought to be in writing under the above Act. An agreement within the above Act must be signed by the client or else it is void. Re Lewis. Ex parte Munro, 1 Q. B. Div. 727. In the case of a company it should be under the seal or signed by some person on behalf of the company. See supra, P. 4. SECRETARY. [1146. Mr., of, shall be secretary to the company.] See note to Clause 114a, and see supra, p. 43. First secretary. [114c. The directors may appoint a temporary substitute for the Substitute. secretary, who shall, for the purposes of these presents, be deemed to be the secretary.] |