Form 1.

Whether sufficient to file a subcontract.

Articles not a contract within Section 25.

Meaning of word "cash" in Section 25.

Meaning of
the word
"issue" in
Section 25.

approbate or reprobate the contract. And it would seem that where paid-up
shares are issued under a contract duly filed but ultra rires of the company,
they cannot be treated as unpaid. See Anderson's case, per Jessel, M. R., 7
C. Div. 75, but this seems inconsistent with the word contract being used in
its technical sense.

(6.) As to filing sub-contract.—Where an agreement in writing is made for the
issue of paid-up shares it sometimes happens that the parties desire to avoid
filing it, either on account of its being very long or because it contains
matter which it is inexpedient to expose to public inspection. In such case
it is not uncommon for the parties to execute and file a separate contract,
briefly referring to the principal agreement and providing for the issue of
the paid-up shares. See example, infra, Form 10. To this plan there would
seem to be no objection at any rate if the contract filed shows the considera-
tion for which the shares are issued.

(7.) Articles not a contract in writing.-As a general rule the articles of associa-
tion cannot be deemed a contract in writing within the meaning of s. 25 of
the Act of 1867. Firmstone's case, 20 Eq. 524; Crickmer's case, 10 Ch. 614;
Pritchard's case, 8 Ch. 960. Accordingly, where the articles provide for the
issue to a vendor, promoter, or other person of paid-up shares, a separate
contract in writing must be executed and filed before the issue of the shares.
It may be that the articles can be so framed as to operate as a contract
within s. 25, and in the Appletreewick Lead Mining Co., 18 Eq. 95, it was held
by Malins, V. C., that a contract contained in the articles in that case was
sufficient; but as it is not desirable to run risk in such matters it is expe-
dient to file a separate agreement.

(8.) As to the meaning of the word cash in s. 25.—Shares are to "be deemed to
have been issued and to be held subject to the payment of the whole amount
thereof in cash," unless a contract is filed. The word cash here does not
mean current coin or bank notes merely. Any transaction which in an action
at law for calls on the shares would have supported a plea of payment will
be deemed to be payment in cash. Thus, if a company is indebted to A. in
a sum presently payable, and A. is indebted to the company in respect of
calls or other monies presently payable on his shares, an agreement between
A. and the company that the amount shall be credited as paid up on the
shares is equivalent to payment in cash, and the contract need not be put in
writing or filed. Spargo's case, 8 Ch. 407; see also Adamson's case, 18 Eq.
670; Ferrao's case, 9 Ch. 355; Bentley's case, 12 C. D. 851 ; Barrow's case, 14
C. Div. 433; 28 W. R. 270; Rowland's case, W. N. 1880, 80; 42 L. T. 785; In
re Barrow, &c. Co., 14 C. Div. 400. But in order that a transaction of this
kind may amount to payment in cash, it is essential that there should be a debt
due from the company and presently payable. Thus, where a company agrees
to issue paid-up shares in consideration of property sold, or services rendered,
it is impossible to treat the transaction as a cash payment, because the com-
pany never owed and never intended to owe any cash. Andress' case, 8 C.
Div. 126; see also Pagin & Gill's case, 6 C. Div. 681. And the fact that the
transaction is treated in the books of the company as a cash payment does
not affect the matter. Andress' case, ubi supra ; White's case, 12 C. D. 511.
So too a surrender of a debenture not due cannot be treated as a payment
in cash. Appleyard's case, 49 L. J. Ch. 290. It must be borne in mind that
in order that a transaction may be treated as payment in cash there must be
bona fides. If the transaction is designed with a view to evade the Act, it
will fail. Accordingly it is not uncommon in testimony of bona fides to file
contract, even when a transaction would clearly amount to payment in cash.
(9.) As to meaning of issue.-As the contract must be filed before the "issue" of
the shares, it is of course important to ascertain the meaning of the word
issue in s. 25. It is now settled that the issue is something different from
the allotment of the share or the issue of the certificates of title thereto. A
share is issued when the holder has acquired an absolute right thereto. It

cannot be considered issued before allotment, but it may be considered issued although the certificate of title has not been issued. See Bush's case, 9 Ch. 554; Blyth's case, 4 C. Div. 140; and Clarke's case, 8 C. Div. 642. In order to avoid danger it is best not to allot till the contract has been filed, and contracts should be framed accordingly.

Form 1.

(10.) As to subscribing memorandum.-In framing a preliminary agreement As to vendor providing for the issue of paid-up or partly paid-up shares it must be con- subscribing sidered whether it is desired that the person to whom the shares are to be memorandum issued should or should not subscribe the memorandum of association for the of association. same, since the terms of the agreement will vary accordingly. See clause 2 of the Form at p. 31. It is now settled that where a person subscribes the memorandum for shares he is primâ facie bound to pay in cash, but before the issue of the shares he can, by contract with the company duly filed, arrange that the shares shall be credited as paid-up, for a consideration other than cash. Fothergill's case, 8 Ch. 282; Anderson's case, 7 C. Div. 75.

(11.) Result of not filing contract.-If default is made in the filing of a contract Result of not in writing as to the issue of paid-up shares for a consideration other than filing contract. cash, the persons to whom shares are issued under it will be liable to pay up the shares in cash. It was at one time thought that the company could not make calls in respect of shares so issued. Spargo's case, 8 Ch. 407. But in the recent case of Burkinshaw v. Nicholls, 3 Ap. Case, 1016, Earl Cairns, L. C., was of opinion that the shareholder would have no answer to an action for such calls. The liability attaches not only to the original holder but to transferees who have notice that no contract has been filed. Blyth's case, 4 C. D. 140: In re Newport, &c. Co., Rowland's case, W. N. 1880, 80; 42 L. T. 785. Where, however, shares subject to such a liability are transferred to a bonâ fide purchaser, without notice of the liability, and the company issues to him a certificate of title thereto describing the shares as fully paidup, such purchaser is not under liability. He holds the shares as paid-up. Burkinshaw v. Nicholls, ubi supra. And if the shares are subsequently transferred to a person who has notice that a contract was not filed, they will even in his hands be free from liability. Barrow's case, 14 C. Div. 433; 28 W. R. 270.

(12.) As to party bound to file.-Unless otherwise arranged between the parties, Who is bound the obligation of seeing that the contract is filed rests with the company, and to see to if the company issues the shares before the contract is filed it is liable in filing. damages. In re Government Security Co., Mudford's claim, 14 C. D. 634; 28 W. R. 670.

(13.) Remedy where default in filing.-If shares agreed to be issued as fully paid- Remedy where up for a consideration other than cash have been issued without the filing of default in a proper contract, the Court will, upon the application of the company or of filing. the party aggrieved, make an order to rectify the register by striking out the names of the allottees, to the intent that the contract or a contract may be filed and the shares reissued. New Zealand Kapanga, &c., Co., 18 Eq. 17; Denton Colliery Co., 18 Eq. 16; and see "Orders," infra. But it must be shown that the allottees were ignorant of the omission to file the contract. See the cases last mentioned and the Droitwich Salt Co., W. N. 1874, 133. Instead of applying to the Court, the allottees may in such case apply to the company, and the directors will be justified in cancelling the allotment and removing the allottees' names from the register, and after the contract has been filed, reissuing the shares to the parties entitled thereto. Hartley's case, 10 Ch. 157.

As to issuing shares at a discount and bonus shares, see infra, p. 39.

Form 2.

Parties.

Recitals.

Agreement to sell.

Vendor to do all acts for

keeping patent on

foot, &c., and

to communi

cate improve

ments.

AGREEMENT for SALE to COMPANY of PATENTED INVENTIONS and CONTRACT. Consideration: Cash and Shares. Vendor to give full information as to mode of Working. Contract to be void if 500 Shares not taken within specified period.

This is an example of the form of agreement used in Plan 2, supra, p. 1.

day of

AN AGREEMENT made the between A., of &c., (hereinafter called the vendor), of the one part, and The B. Company Limited (hereinafter called the company), of the other part: WHEREAS the vendor is the inventor of certain inventions in connection with the manufacture and construction of for which he

has obtained Her Majesty's letters patent, and of which he has duly filed specifications: AND WHEREAS the said inventions and letters patent are more particularly described and specified in the schedule hereto : AND WHEREAS the nominal capital of the company is 60,000l., divided into 6,000 shares of 107. each, whereof 3,000 are to be called "A. shares" and 3,000 are to be called "B. shares":

NOW IT IS HEREBY AGREED as follows:

1. The vendor shall sell and the company shall purchase; first, all those the said several inventions and the said letters patent for the same respectively, together with the full benefit of all extensions and prolongations (a) of the terms by the said letters patent respectively granted, and also all improvements (b) on the said inventions which have been already or may hereafter be discovered by the vendor, and all other inventions which have been already or may hereafter be discovered by the vendor in connection with the manufacture and construction of or which can be used for any purpose for which the said inventions specified in the schedule hereto respectively can be used.

(a) As to extensions and prolongations, see Agnew on Patents, 175, et seq. (b) As to the validity of this, see Printing, &c., Co., v. Sampson, 19 Eq. 462; 23 W. R. 463.

2. The vendor shall at the request and costs of the company do all such acts and things as may, from time to time, be considered necessary or expedient by the company for procuring the confirmation of the said letters patent (c) and keeping the said letters patent on foot, and for obtaining, if possible, extensions and prolongations of the terms thereby granted, and shall from time to time communicate to the company all such improvements and other inventions as aforesaid, and, at the request and costs of the company, apply for and obtain letters patent in respect of such improvements or other inventions as aforesaid, or any of them, and shall execute and do all such assurances and things for vesting any letters patent so obtained in the company, and for keeping the same on foot.

(c) As to procuring confirmation of letters patent, where there has been a pre- Form 2. vious publication unknown to the patentee, see 5 & 6 Will. 4, c. 83, s. 2, and the following cases: Stead's Patent, 2 Webs. P. R. 146; Card's Patent, 6 Moo. P. C.-C. 213; Honiball's Patent, 9 Moo. P. C. C. 378; Lamenaude's Patent, 2 Webs. P. R. 171.

sue in case of

3. The company shall, in the event of any infringement of the Power for said letters patent, or any of them, be at liberty to commence, carry company to on, and prosecute in the name of the vendor, his executors, or infringement. administrators, all such actions and proceedings on account thereof as the company may from time to time determine, the company, nevertheless, keeping the vendor, his heirs, executors, and administrators, and his and their estates and effects, indemnified against all costs, damages, expenses, and liabilities incident to or consequent on any such action or proceedings as aforesaid.

up shares.

4. As the consideration for the said sale, the company shall pay to Consideration, cash, and paidthe vendor, on the day of next, the sum of 2,0007. in cash, and shall on or before that day, allot to him or to his nominees the said 2,000 B shares, which shall be deemed for all purposes to be fully paid-up shares, and shall be numbered, &c. [supra, p. 10].

5. No further allotment of A shares shall be made unless and No allotment until 500 at least of such shares shall have been applied for in addition to those already allotted.

6. The purchase shall be completed on the

day of

of A shares till 500 applied for. next, Completion.

at the office of Messrs. the vendor's solicitors, when the vendor shall, at the expense of the company, execute a proper assignment to the company of the said letters patent: Such assignment Form of assignment shall be prepared by the company, and shall contain a covenant by the of letters vendor that the said letters patent are valid and in no wise void or patent. voidable, (d) and also such other covenants and provisions as may be considered necessary by the counsel of the company for giving to the company or its assigns the full benefit of the sale and of the stipulations contained in Clauses 2 and 3 hereof.

(d) There is no implied warranty, upon an agreement for the sale of a patent or of a licence to use it, that the patent is valid, and it is no answer to an action by vendor that the invention is not new, and that the plaintiff is not the true and first owner. See Hall v. Conder, 2 C. B., N. S., 22; Smith v. Neale, ibid., p. 67 ; Trotman v. Wood, 16 C. B., N. S., 479.

7. The vendor shall at all times hereafter, and without making Vendor to any charge therefor, give all such advice, explanation, and instruc- explain mode of using tions to the directors and other officers and workmen of the com- inventions. pany as may be necessary to enable them effectually to exercise and work the inventions to which the company may for the time being be entitled by virtue of this agreement, and shall for such purposes,

at his own cost and expense, from time to time prepare and furnish to the company all necessary plans, drawings, and models.

8. The vendor shall not, for a period of ten years from the date Vendor not hereof, either solely, &c. [Supra, p. 11, clause 9, mutatis mutandis.]

to carry on similar pur

c

Form 2.

day of

9. If, before the next, 500 at least of the said A shares shall not have been applied for, this agreement shall on that day become void, and neither party shall have any claim against the Agreement to other for damages, costs or expenses in relation thereto.

suit for ten years.

be void in certain event. Arbitration.

10. If any doubt, question, difference, or dispute shall arise between the parties hereto touching these presents, or the construction hereof, or any clause or thing herein contained, or any matter in any way connected with these presents, or the operation thereof, or the rights, duties, or liabilities of either party in connection with the premises; then and in every or any such case, the matter in difference shall be referred to a single arbitrator to be appointed by the parties in difference, or, if they cannot agree, then to two arbitrators, one to be appointed by each of the parties in difference, or to an umpire appointed by such arbitrators. The submission shall be subject to the provisions in that behalf contained in the Common Law Procedure Act, 1854, or any then subsisting statutory modification thereof; And upon every or any such reference the costs of and incident to the reference and award respectively shall be in the discretion of the arbitrator, arbitrators, or umpire respectively, who may determine the amount thereof, or direct the same to be taxed, as between solicitor and client, or as between party and party, or otherwise, and may award by whom and to whom and in what manner the same shall be borne and paid; And every or any such reference shall be made a rule of Her Majesty's High Court of Justice upon the application of either party, and such party may instruct counsel to consent thereto for the other parties.

Occasionally a clause as above is inserted.

IN WITNESS, &c.

THE SCHEDULE ABOVE REFERRED TO.

[This will contain particulars of the letters patent.]

Form 3. AGREEMENT for FORMATION of COMPANY by PROMOTER, and for SALE

Parties.

Formation

of company.

of CONCESSION.

day of, between A., of of the other part: WHEREBY IT

AN AGREEMENT made the of the one part, and B., of IS AGREED as follows:

of

1. The said B. shall, before the next [say, six weeks after date], procure the incorporation under the Companies Acts, 1862 to 1880, of a company limited by shares, having for its objects (among other things) the acquisition of the concession hereinafter