Amount of shares. Objection to shares only in part paid up. How to get rid of further liability. Whether power to issue preference shares to be inserted in capital clause. Association clause. In company limited by shares. As the capital can be readily increased, there is no object in starting with a very large nominal capital; but no saving is effected by starting with less than 2,0007. capital. The amount of the shares depends on several considerations. If the public are to be invited to apply for shares, the amount should be moderate, for it is generally found that there is a better market for 51. or 107. shares than for larger ones. Indeed 17. shares are very common. Moreover, it is generally expedient not to leave much, if any, liability on the shares issued. So long as shares are not fully paid up, their value, unless in exceptional cases, is impaired by the existence of the liability; and if the company should experience reverses, its shares may become almost unmarketable. Of course, under the Act of 1867, the liability may be reduced or extinguished; but the process is tedious and expensive, and not unlikely to damage the credit of the company. However, so burdensome are shares subject to any considerable liability, that the Act of 1867 is not uncommonly resorted to to get rid of it. Or, what in many cases is much simpler, the company is re-constructed as a company with the same name and objects, but with reduced liability. See infra, "Reconstruction." Of course, however, there may be cases in which the security afforded by the existence of a large amount of uncalled capital may be deemed requisite or expedient, e.g., in a banking or insurance company. Some persons frame the capital clause of the memorandum of a company limited by shares as follows: "The capital of the company is 20,0007., divided into 2,000 shares of 107. each, with power to increase the capital and to issue any of the original shares or shares of increased capital as preferential or guaranteed or deferred shares." See also Form, 17. The object of so framing the clause is to secure the power to issue preference shares, for some doubt existed at one time as to whether a power in the articles alone was sufficient authority. This doubt no longer exists [see note to Form 106], and there seems, therefore, no sufficient reason for so framing the capital clause, except where Table A. is adopted. Where, however, the original capital as stated in the memorandum is, ab initio, intended to be divided into shares of different classes, it is usual to state the fact in the memorandum, e.g., "The capital of the company is 100,000l., divided into 5,000 preference shares of 107. each, and 10,000 deferred shares of 51. each." On referring to the Forms of memoranda of association given below (p. 60 et seq.), it will be seen that each of them closes with a declaration that the subscribers desire to be formed into a company. In a company limited by shares the declaration is as follows: "We, the several persons whose names and addresses are subscribed, are desirous of being formed into a company, in pursuance of this memorandum of association, [and we respectively agree to take the number of shares in the capital of the company set opposite our respective names]." In a company limited by guarantee, or unlimited, the form is the In company same, with the omission of the words enclosed in brackets. limited by guarantee or It will be observed that Section 14 of the Act requires that, "in a unlimited. company limited by guarantee or unlimited, and having a capital divided into shares, each subscriber shall take one share at the least, and shall write opposite his name in the memorandum of association the number of shares he takes." It is generally considered that the word "memorandum" in this paragraph is an error for "articles." See Buckley, p. 13. And there can be little doubt that this is so; for otherwise the Forms C. and D. in Schedule II. to the Act, being memoranda of companies limited by guarantee and unlimited respectively, offend against the rule laid down in Section 14. Thus it will be seen that in each of the Forms C. and D. the company has a capital divided into shares, and yet in neither case does the memorandum specify the number of shares which each subscriber takes. On the other hand, it is to be observed that in each case the articles conclude with a special declaration that: "We, the several persons whose names and addresses are subscribed, agree to take the number of shares in the capital of the company set opposite our respective names," and opposite the name of each subscriber the number of shares he takes is accordingly specified. So that if the word "memorandum" in the paragraph at end of Clause 14 is to be read "articles," the Forms C. and D. are perfectly correct: otherwise the very forms which are given by the Act as examples ex facie offend against the express provisions of the Act. It seems more likely that one word should be wrong in Section 14 than that the Forms C. and D. should be so incorrectly framed. However, the practice of the registrar is to require the number of shares taken to be stated in the memorandum. writing or The memorandum may be in writing, but, where articles are regis- Memorandum tered, it is usually printed with them. If in writing, it is commonly may be in filled in upon a skeleton printed form. It must be signed by at least printed. seven persons, in the presence of, and be attested by, one witness at least. It is very common, though not necessary, for the same witness Witness. to attest the signatures of all the subscribers. The Act provides that a certificate of the incorporation of any com- Certificate pany, given by the registrar, shall be conclusive evidence that all the evidence that requisitions requisitions of the Act in respect of registration have been complied with. of Act comThus in Peel's Case, 2 Ch. 674, the memorandum of a company plied with. when brought to the registrar was objected to by him as being too wide in its terms, whereupon the bearer, then and there, without any communication with the persons who had signed it, made alterations to remove the objections of the registrar, who at once registered it in the altered form. It was held, nevertheless, that the certificate of registration having been issued, Section 13 of the Act applied, and that no person could be allowed to go back and enter into an examination of the circumstances attending the original registration. Infant subscriber. So, also, in the Nassau Phosphate Co., 2 Ch. Div. 610, an order had been made to wind up the company, and it was subsequently discovered that one of the seven subscribers to the memorandum was an infant. It was held, nevertheless, that the winding-up order was valid, since the certificate of registration which had been issued precluded any question. As to how far the conditions contained in the memorandum of association of a company may be modified, see Section 12 of the Act, and memorandum. infra, "Resolutions." Modification of conditions contained in Effect of subscribing memorandum. Subscription an agreement to take and As to the effect of subscribing the memorandum of association: By Section 23 of the Act it is provided that : "The subscribers of the memorandum of association of any company under this Act shall be deemed to have agreed to become members of the company whose memorandum they have subscribed, and upon the registration of the company shall be entered as members on the register of members hereinafter mentioned; and every other person who has agreed to become a member of a company under this Act, and whose name is on the register of members, shall be deemed to be a member of the company." Hence a subscriber to the memorandum is indisputably a member of the company. In a company limited by shares, no subscriber shall take less than one share, and each subscriber shall write opposite to his name the pay for shares. number of shares he takes. Section 8 of the Act. Clause in articles cannot relieve subscriber from liability. As to contract filed pursuant to Section 25 of the Act of 1867. Shares must be paid in cash unless contract filed before issue. The subscriber agrees to take from the company the shares set opposite to his name, and to pay for them in money or money's worth. Mignotti's Case, 4 Eq. 238. The fact that no shares have ever in fact been allotted to him, and that his name has never been put on the register, will not relieve him; Evan's Case, 2 Ch. 427, unless all the shares have been allotted to other persons. Mackley's Case, 1 Ch. Div. 247. As to what is payment in money's worth, see Drummond's Case, 4 Ch. 772; Pell's Case, 8 Eq. 222, and 5 Ch. 11; Jones' Case, 6 Ch. 48. A clause in the articles that shares subscribed for in the memorandum shall be deemed to be fully paid up is ineffectual. Dent's Case, 8 Ch. 776; Crickmer's Case, 10 Ch. 614; Firmstone's Case, 20 Eq. 525. The shares will be liable to payment in cash unless otherwise provided by a contract in writing, filed pursuant to the 25th Section of the Act of 1867. See supra, p. 12. By subscribing the memorandum, a contract is made to pay for the shares in cash, and the effect of Section 25 is, "that the liability to pay in cash cannot be altered at all by subsequent agreement and arrangement with the directors; it can only be affected by a written agreement, which written agreement must be entered into before the shares are issued, and must be registered." Per Mellish, L. J., Fothergill's Case, 8 Ch. 282; Anderson's Case, 7 Ch. Div. 75. The contract must identify the shares, e.g., it should recite the fact of the subscription or intended subscription of the memorandum, and pro vide that, as the consideration for the property or services thereby agreed to be sold or rendered, the shares subscribed for shall be credited with so much per share as paid up. Fothergill's Case, 8 Ch. 270; Coates' Case, 17 Eq. 169. And see Form 7, supra, p. 31. When shares Contract made As to what is meant by the "issue" of the shares, see supra, p. 14. A contract made on behalf of the company before its incorporation is a sufficient contract within Section 25 of the Act of 1867, if it be before incoradopted and acted upon by the company. See supra, p. 15. poration sufficient if filed. Whether subscribe. It does not generally seem expedient, where a preliminary agreement is made for the sale of property to a trustee for a proposed company, intending that the vendor should subscribe the memorandum for the number of vendor should shares which are to be allotted to him, as fully paid up, pursuant to the contract; for there is always the possibility that the company will not adopt the contract. However, in many cases, e. g., in the case of private companies, there is no risk of this, and consequently no danger in subscribing. As to what is payment in cash, see supra, p. 14. The memorandum irrevocably binds a subscriber thereof to take the number of shares set opposite his name from the company, but if he subscribes for preference shares, he may subsequently agree with the company to take ordinary shares instead, for as regards matters not required by the Act to be stated in the memorandum, the contract contained in it is revocable. Duke's Case, 1 Ch. Div. 623. Where a person subscribes the memorandum for shares, no allotment is required to render him liable. In re London & Provincial, &c., Co., 5 Ch. Div. 525. By virtue of the subscription he is entitled to the shares. By Section 19 of the Act it is provided as follows :- randum and "A copy of the memorandum of association, having annexed thereto the articles Member of association, if any, shall be forwarded to any member at his request, on pay- entitled to ment of the sum of one shilling or such less sum as may be prescribed by the com- copy of memopany for each copy, and if any company makes default in forwarding a copy of the articles. memorandum of association and articles of association, if any, to a member in pursuance of this section, the company so making default shall, for each offence, incur a penalty not exceeding 17.” Section 21 of the Act is as follows: "No company formed for the purpose of promoting art, science, religion, charity, Certain comor any other like object, not involving the acquisition of gain by the company or by panies not to the individual members thereof, shall, without the sanction of the Board of Trade, hold more than two hold more than two acres of land; but the Board of Trade may, by licence under the hand of one of their principal secretaries or assistant secretaries, empower any licence. acres without such company to hold lands in such quantity and subject to such conditions as they think fit." As to the nature of the associations to which the above Section To what applies, see Ex parte Hargrove, 10 Ch. 545, note (1). companies the Section Chambers of commerce, law societies, medical institutes, trade protec- applies. tion societies, and the like generally involve the acquisition of gain by the company or by the individual members thereof, and are consequently Stamps and fees. not affected by the above Section. As to what "gain" is, see Ex parte Hargrove, ubi supra. As to stamping the memorandum of association: By Section 11 of the Act, the memorandum is required to bear the same stamp as if it were a deed, i.e., a 10s. stamp. In addition to this it must before registration be stamped with companies fee stamps, in respect of the fees payable under Section 17 of the Act. See supra, p. 46. The tables of fees referred to in Section 17, are as follows :— TABLE B. TABLE OF FEES to be paid to the REGISTRAR of JOINT-STOCK COMPANIES by a company having a capital divided into shares. For registration of a company whose nominal capital does not exceed For registration of a company whose nominal capital exceeds 2,0007., the £ s. d. 200 For registration of any increase of capital made after the first registra- For registration of an existing company, except such companies as are For registering any document hereby required or authorised to be re- 05 0 050 TABLE C. TABLE OF FEES to be paid to the REGISTRAR of JOINT-STOCK COMPANIES by a company not having a capital divided into shares. For registration of a company whose number of members as stated in the . £ s. d. 200 For registration of a company whose number of members, as stated in |