balance sheet of the company submitted to the ordinary general meeting Form 83. next immediately preceding the time of giving such notice, it shall appear that any loss of capital has been sustained by the company, there shall be deducted from the amount aforesaid, a sum bearing the same ratio thereto, as the amount of capital appearing by such balance sheet to have been lost, bears to the amount of the paid-up capital of the company at the time of giving such notice. This clause will be modified so as to suit the views of the parties. 7. The company in general meeting may make, and from time to time vary, rules as to the mode in which any share or shares specified in any notice served on the company pursuant to Clause 2 hereof, shall be offered to the members, and as to their rights in regard to the purchase thereof, and in particular may give any member or class of members a preferential right to purchase the same. 8. Any share may be transferred by a member, and any share of a deceased member may be transferred by his executors or administrators to any son or daughter, or son-in-law of such member or deceased member, and Clause 1 hereof shall not apply to any such transfer. 9. The directors may refuse to register any transfer of a share (a), where the company has a lien on the share; (b) where it is not proved to their satisfaction that the proposed transferee is a responsible person; (c) where the directors are of opinion that the proposed transferee is not a desirable person to admit to membership. But paragraphs (b) and (c) of this clause shall not apply where the proposed transferee is already a member, nor to a transfer made pursuant to Clause 8 hereof. The company may, from time to time, increase the capital by the Form 84. creation of new shares. The new shares shall be issued upon such terms Increase of and conditions, and with such rights and privileges annexed thereto, as capital. 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. The above clause may be substituted for clauses 48 and 49, supra, p. 110.. The effect will be to vest the power of increasing the capital in the directors by virtue of clause 113 [supra, p. 129], but it is not generally deemed expedient to do this. The sanction of the company in general meeting or by special resolution is usually required. The power to increase its capital at pleasure is a great advantage possessed by a company formed under the Act of 1862 over one governed by the Companies Clauses Consolidation Acts, 1845, which can only increase by special Act. The power is given by s. 12 of the Act of 1862. An increase of capital is so commonly required by companies that the authority is almost always inserted. It is given in table A. But even though not inserted s. 12 of the Act enables a company by special resolution to take the necessary power. And one special resolution is enough. Form 84. Campbell's case, 9 Ch. 1. Whereas, in case a company not having power by its regulations as originally framed to reduce its capital, desires to do so, two special resolutions are necessary. (1.) To alter the regulations; (2.) To resolve on the reduction. In re West India and Pacific Steamship Co., 9 Ch. 11, note (2). Form 85. Power to directors to promote bill in parliament. As to notice of increase of capital to be given to the registrar, see "Notices," infra. The directors may promote, in the next or any ensuing session of parliament, a bill for the dissolution of the company and the incorporation of the members thereof as a company, with objects similar in part or altogether to those of this company, or for conferring any powers on this company which the directors may deem necessary or desirable for carrying out the objects of the company, and may pay the costs of and incident to the promotion of any such bill out of the funds of the company. Such a clause is sometimes inserted. It must, however, be borne in mind that unless expressly or impliedly authorised by its memorandum of association, a company cannot apply any of its funds in defraying the expenses of obtaining an Act altering the constitution of the company. Such an application of its funds is ultra vires the company, and the court will interfere at the instance of even one dissentient member. If, therefore, upon the formation of the company, application for any such Act is contemplated, the memorandum, as well as the articles should be framed accordingly. See supra, p. 72. But, although, if the memorandum be not so framed, the expenses cannot come out of the company's pocket; any of the members are at liberty, at their own expense, to apply for an Act which, if passed, will affect the whole company and change its constitution. Those shareholders who object to the application must oppose it in Parliament. See Lindley, 628, and Ware v. The Grand Junction Waterworks Co., 2 R. & M. 470; and other cases cited in Lindley, ubi supra. See also Mathias v. The Company, &c., of the Berks Canal Navigation, W. N. 1876, p. 91, and (on appeal) p. 158. Form 86. POWER FOR COMPANY TO CONTRACT WITH DIRECTORS. 1. The company may make contracts with any of the directors upon such terms as the directors shall think fit; and a director shall not, by Company may contract with reason of the fiduciary relation subsisting between him and the company, directors. be accountable for any profit made by him in respect of any such contract, nor, subject to the following proviso, in respect of any other contract made with the company in the profits of which he participates or in which he is otherwise interested; provided that the fact of his being so interested therein, and the nature of his interest, be fully and fairly disclosed by him at the meeting of the directors at which the contract is determined on, if his interest then exists, or, in any other case, at the first meeting of the directors after the acquisition of his interest. No director shall vote [nor shall the managing director exercise any discretion as between himself and the company] in respect of any contract or matter in which he is individually interested otherwise than as a member. If desired, the above clauses can be inserted in the articles. Clause 1 will come, supra, p. 122, between Clauses 91 and 92; and Clause 2, supra, p. 123, between Clauses 105 and 106. If these clauses are insertel, sub-sec. (e) of Clause 92, supra, Form 86. p. 123, must be omitted. As a director stands in a fiduciary relation towards the company, he cannot, unless the articles otherwise provide, contract with the company. Albion, &c., Co. v. Martin, 1 Ch. Div. 580. Nor does it make any difference that the contract is open and above board as between the contracting director and his co-directors. Ibid. But a company may unquestionably waive the benefit of the rule. Imperial, §c., Association v. Coleman, 6 Ch. 568; L. R. 6 H. L. 190; Southall v. British Mutual, &c., Society, 6 Ch. 619; Black v. Mallalue, 7 W. R. 303: Adamson's case, 18 Eq. 670; and it has now become very common to do so, and to insert clauses to the effect of the above. It may be convenient here to refer to the well settled rule, that an agent cannot, without the knowledge and consent of his principal, be allowed to make any profit out of the matter of his agency beyond his proper remuneration. This rule applies with peculiar stringency to the directors of joint-stock companies. Hay's case, 10 Ch. 601. The rule is "not a technical or arbitrary rule. It is a rule founded upon the highest and truest principles of morality. No man can, in this court, acting as agent, be allowed to put himself into a position in which his interest and his duty will conflict." Per Lord Cairns, L.C., Parker v. McKenna, 10 Ch. 118. See the above cases and the following : Parker v. Lewis, 8 Ch. 1035; Ottoman Bank v. Farley, 17 W. R. 761; Carling's case, 1 Ch. Div. 123; Morvah, Consols, &c., Co., 2 Ch. Div. 1; Morrison v. Thompson, L. R. 9 Q. B. 480; Pearson's case, 5 C. Div. 336; Dunne v. English, 18 Eq. 524, and Forms 201, 202, 543 et seq., infra. The following is another form sometimes used. It can only be used where the memorandum contains a clause similar to Form 9, or to that effect. A director may make contracts with the company upon such terms as Form 87. the directors think fit, and may, with the sanction of the directors, Another. engage in any transaction (within the company's objects) in partnership, or otherwise in conjunction, with the company, upon such terms as may be agreed on between the parties to such transaction, but he shall not vote in respect of any such matter, and the short particulars of any such contract or transaction showing the nature of his interest, must be forthwith recorded in the minute book of the directors' proceedings. Occasionally the following is used in addition to the above. Power for to contract. Any company or firm of which a director is a member may make Form 88. contracts with the company upon such terms as the directors think fit, provided that the fact of such director being a member thereof be dis- director's firm closed at the meeting of the directors at which the contract is determined on, or at some previous meeting, but he shall not vote in respect of any such contract, and the fact of his being a member of the company or firm must be forthwith recorded as aforesaid. M Form 89. Share of surplus profits to directors. Remuneration of Directors. The following clauses are sometimes used : There shall be paid to the directors as remuneration for their services, the sum of £ per annum, and also the share of surplus profits specified in Clause hereof. [See Form 77.] Such remuneration shall be divided among them in such manner as the directors may from time to time agree [or in such manner that the chairman's share shall be double that of any other director]. Form 90. Commission to directors. There shall be paid to the directors as remuneration for their services, £ per annum, and also, in each year in which a dividend is paid to the members exceeding 6 per cent. on the amount paid up on the shares held by them, the sum of £[100], in respect of every one per cent. of dividend so paid in excess of 6 per cent. Form 91. Directors to The directors shall receive, by way of remuneration, in each year the sum of £ and such further sum as may be equal to 5 per cent. of have percent the net profits of the company in that year, payable out of the surplus age on profits, remaining after payment of the preferential dividend to the holders of A shares, and of a dividend of 7 per cent. per annum on the amount paid up on the ordinary shares, so far as such surplus will extend, and all such remuneration shall be divided so that there shall be given to the chairman of the directors equal parts thereof, and to each of the other directors one equal part thereof. Form 92. Indemnity. 1. Every director, manager, secretary, and other officer or servant of the company, shall be indemnified by the company against, and it shall be the duty of the directors out of the funds of the company to pay, all costs, losses, and expenses which any such officer or servant may incur or become liable to by reason of any contract entered into, or act or deed done by him as such officer or servant, or in any way in the discharge of his duties; and the amount for which such indemnity is provided shall immediately attach as a lien on the property of the company and have priority as between the members over all other claims. The above clause is occasionally inserted. See as to the right to indemnity of directors and other agents, Lindley, 555; see also Story on Agency, 339, et seq. Individual of directors. 2. No director or other officer of the company shall be liable for the Form 93. acts, receipts, neglects, or defaults of any other director or officer, or for joining in any receipt or other act for conformity, or for any loss or responsibility expense happening to the company, through the insufficiency or deficiency of title to any property acquired by order of the directors for or on behalf of the company, or for the insufficiency or deficiency of any security in or upon which any of the monies of the company shall be invested, or for any loss or damage arising from the bankruptcy, insolvency, or tortious act of any person with whom any monies, securities, or effects shall be deposited, or for any other loss, damage, or misfortune whatever which shall happen in the execution of the duties of his respective office or in relation thereto, unless the same happen through his own wilful act or default. The above clause is sometimes inserted. See Lindley, 616, as to liability of directors for acts of each other. As to the right to contribution, see Lindley, 788, et seq.; and Ashurst v. Mason, 20 Eq. 225. In the case last mentioned, shares of a company had (pursuant to an ultra vires resolution of the board) been purchased and transferred into the name of A., a director, in trust for the company. It was held that A, was entitled to contribution from the directors who concurred in the transaction for calls he had paid. See also Power v. Hoey, 19 W. R. 916; and Power v. O'Connor, ibid., 923. Managers. The directors may, from time to time, appoint a general manager of Form 94. the business of the company, and may remove and discharge any such person and appoint a substitute, and the directors shall take such security (if any) for the good conduct and satisfactory discharge of the duties of such general manager as they shall in their discretion think' sufficient. See Erans v. Coventry, 8 De G. M. & G. 835 ; 25 L. J. N. S. Ch. 491, as to taking security. 1. The said shall be the first manager of the company, and Form 95. shall not be removable from office otherwise than by his own resignation Appointment or by special resolution, and shall, while holding that office, devote the of first whole of his time and attention to the business of the company, manager. and shall exercise and perform the functions and duties prescribed by the directors. 2. The salary of the said as such manager shall be at the rate of £ per annum, payable monthly, on the first day of every month; he shall also, while holding such office, be entitled to a commission equal to 5 per cent. on the net profits of the company in each year in which the same shall be more than sufficient to pay a dividend at the rate of per cent. on the paid-up capital of the company. 3. The declaration of the directors, as to the amount of the net profits of the company in each year, shall be conclusive as against the said |