Penalty.

Stamps.

If any company makes default in complying with the provisions of the above section, it incurs a penalty not exceeding 17. for each copy in respect of which such default is made; and every director and manager of the company who knowingly and wilfully authorises or permits such default incurs a like penalty. Ibid.

Before registration the articles must be stamped with a 10s. deed stamp, and with a 5s. companies' registration stamp. See supra, p. 58.

ARTICLES OF ASSOCIATION.

THE COMPANIES ACTS, 1862 TO 1880.

Articles of Association of The

Company, Limited.

Form 68.

This form of articles includes most of the clauses usually inserted, and it will be Articles of a found that it can with little difficulty be so altered as to suit the circumstances of company the great majority of the companies from time to time in course of formation. limited by Various special clauses will be found, infra, Form 72, et seq., some of which may be occasionally required.

PRELIMINARY.

Some persons insert the words "It is agreed as follows" at the beginning of the articles, but the words are superfluous. By s. 16 of the Act (supra, p. 93), each member is bound by an implied covenant to conform to the regulations.

shares.

1. The regulations contained in the table marked A. in the first Table A. not schedule to the Companies Act, 1862, shall not apply to the company.

See supra, p. 92. Section 15 of the Act.

to apply.

2. In these presents, unless there be something in the subject or con- Interpretation. text inconsistent therewith,

resolution.

"Special resolution " means a special resolution of the company, passed Special in accordance with Section 51 of the Companies Act, 1862. "Extraordinary resolution" means an extraordinary resolution of the Extraordinary company, passed in accordance with Section 129 of the Companies Act, 1862.

resolution.

"The office" means the registered office for the time being of the The office. company.

"The register" means the register of members to be kept pursuant The register. to Section 25 of the Companies Act, 1862.

"Month" means calendar month.

Month.

"In writing" means written or printed, or partly written and partly In writing. printed.

Words importing the singular number only, include the plural number, and vice versâ.

Words importing the masculine gender only, include the feminine gender.

Words importing persons include corporations.

Some persons insert a long list of words and expressions in the interpretation clause, but the practice is not to be commended. Probably several of the above might be omitted, e.g., "special" and "extraordinary" resolution, but they are

Form 68. retained, because directors and members are not always very familiar with the Act, and it may therefore be convenient to refer thereto. But there seems little use in saying that "the directors" means the "directors for the time being," that "member" means member of the company, and so forth. See also note to Clause 107 of this form.

Seal to be affixed to agreement.

Company's shares not to be purchased.

When business

3. The directors shall forthwith affix the seal to an agreement which has already been prepared and is expressed to be made between of the one part, and the company of the other part, and a copy whereof has, for the purpose of identification, been indorsed with the signatures of A., B., and C., three of the subscribers hereto, and shall carry the same into effect with full power, nevertheless, from time to time to agree to any modification of the terms of such agreement, either before or after the execution thereof.

The above form will be used where plan II., supra, p. 1, is adopted, and the agreement is not mentioned in the memorandum of association. Where it is so mentioned the clause will run thus: "The directors shall forthwith affix the seal to the agreement mentioned in paragraph of Clause 3 of the company's memorandum of association, and shall carry, &c." For other forms, see infra, Forms 71 and 72, and the notes thereto.

[3a. The directors shall not employ the funds of the company or any part thereof in the purchase of shares of the company.]

Where a company desires to obtain the quotation of its shares in the official list of the London Stock Exchange, such a clause as above should be inserted, in order to comply with the rules. See infra, at end of "Prospectuses," for extract from rules. See also Note to Form (10), supra, p. 69.

4. The business of the company may be commenced as soon after the may be com- incorporation of the company as the directors shall think fit, and notwithstanding that part only of the shares may have been allotted.

menced.

Allotment of shares.

This clause is often inserted, but is not necessary, for a company may unquestionably commence business, and the directors may make calls before the whole capital has been issued. McDougall v. Jersey Imperial Hotel Co., 2 H. & M. 528; Ornamental Woodwork Co. v. Brown, 11 W. R. 600; 9 Jur. N. S. 579. The above clause, however, is not useless, since it may prevent misunderstanding.

The terms of the prospectus may, however, give a member an equity to restrain the company from commencing business with a totally insufficient capital. Elder v. New Zealand Land Co., W. N. 1874, 85; 30 L. T. 285. See also Sharpley v. Louth and East Coast Ry. Co., 2 Ch. Div. 663.

5. The shares shall be under the control of the directors, who may allot or otherwise dispose of the same to such persons, on such terms and conditions, and at such times as the directors think fit, [subject, nevertheless, to the stipulations contained in the said agreement with reference to the shares to be allotted in pursuance thereof].

The words in brackets will be omitted if no agreement is referred to in the articles.

Section 25 of the Act of 1867 must be borne in mind; see supra, p. 12, et seq. As to whether shares can be issued at a discount, see supra, p. 38; as to bonus shares, supra, p. 39.

6. The company may make arrangements on the issue of shares for a difference between the holders of such shares in the amount of calls to be paid and the time of payment of such calls.

Form 68.

Shares may be issued subject to different Section 24 of the Act of 1867 provides that nothing in the Act of 1862 shall be conditions as deemed to prevent any company under that Act, if authorised by its regulations, as to calls, &c. originally framed or as altered by special resolution, from doing, inter alia, the above. It seems, therefore, expedient to take the power.

duly paid.

7. If, by the conditions of allotment of any share, the whole or Instalments on part of the amount thereof shall be payable by instalments, every such shares to be instalment shall, when due, be paid to the company by the holder of the share.

It is very common now to issue shares on terms that fixed sums shall be paid on application and allotment, and the balance or a considerable part thereof by instalments at short intervals. It is therefore expedient to insert such a clause as above. By the joint effect of the above clause, and of section 16 of the Act, each instalment will be a debt due to the company, supra, p. 93. In England and Ireland it will be a specialty, and, therefore, recoverable within twenty years. 3 & 4 Will. IV. c. 42, s. 3. Compare Cork and Bandon Ry. Co., 13 C. B. 826. See supra, p. 140, and see, as to section 70 of the Act, infra, p. 101. Unless such a clause is inserted the instalments do not constitute a statutory debt. Care should also be taken that the forfeiture clauses extend to unpaid instalments. See clause 33, infra.

8. The joint holders of a share shall be severally as well as jointly Liability of liable for the payment of all instalments and calls due in respect of such joint holders share.

This clause is not uncommon.

It appears to be very reasonable, and affords an additional security to the company. It extends only to instalments payable and

calls made during the joint lives.

of share.

9. In case of the death of any one or more of the joint holders of any As to survivorregistered shares or registered stock, the survivors shall be the only ship. persons recognised by the company as having any title to or interest in such shares or stock.

This clause is commonly inserted. It is probably not necessary, for in the absence of any provision in the regulations to the contrary, it seems that the rights and liabilities in respect of a share vest in and attach to the survivors or survivor of joint holders. Hill's case, 20 Eq. 595.

recognise

[9a. The company shall not be bound to recognise any contingent, Company not future, partial, or equitable interest in the nature of a trust or other bound to wise, in any share, or any other right, in respect of any share, except an trusts, &c. absolute right thereto, in the person, from time to time, registered as the holder thereof, and, except also, the right of any person under Clause 30 hereof to become a member in respect of, or to transfer, any share.]

The above clause is sometimes inserted and may be useful. It goes further than section 30 of the Act, "No notice of any trust, expressed, implied, or constructive, shall be entered on the register, or be receivable by the registrar in the case of companies under this Act, and registered in England or Ireland." It would seem to enable the company to treat the registered holder of a share as the absolute

H

Form 68.

Companies Seals Act, 1864.

Note as to insertion of clauses relating to preference

shares, &c.

Certificates.

Members' right to.

owner thereof notwithstanding any notice of equities. But the clause cannot prevent a person equitably interested in shares, from procuring the intervention of the Court to protect his rights. Binney v. Ince Hall Coal Co., 35 L. J. Ch. 363 ; Taylor v. Midland Ry. Co., 8 W. R. 401. Nor can the clause prevent an equitable mortgagee from taking the shares out of the reputed ownership of the mortgagor, by giving notice to the company, Ex parte Stewart, 13 W. R. 356; 11 Jur. N. S. 25 ; In re Jackson, 12 Eq. 354. And so, too, as between competing equitable assignees of shares, he who first gives notice to the company, will cæteris paribus, be preferred, notwithstanding the above clause. Buckley, 62.

As to what a company ought to do where it receives notice not to register a transfer, see Tahiti Cotton Co., 17 Eq. 280; Ex parte Rolt, W. N. 1876, 91.

Under section 30 of the Act a trustee who is the registered holder of shares is personally liable. Chapman v. Barber's case, Eq. 361; Hemming v. Maddick, 7 Ch. 395. And the same rule applies to Scotch companies even where the trustees are registered "as trustees." Muir v. City of Glasgow Bank, 4 App. Cas. 337. But a trustee is entitled to be indemnified by his cestui que trust. Hemming v. Maddick, ubi supra; Buckley, 74.

[96. The company may exercise the powers given by the Companies Seals Act, 1864.]

The above clause should be inserted if the objects of the company may require the transaction of business abroad. The Act is 27 Vict. c. 19, and it enables such a company to have a seal for any foreign place, district, or territory. The Act only applies where a company is expressly authorised by its articles, or by special resolution. The directors will, under Clause 113, be able to exercise the power. See also, section 55 of Companies Act, 1862.

NOTE. If the capital of the company is divided into different classes of shares the clauses defining the rights and incidents thereof will here be inserted, e.g. :—

PREFERENCE AND ORDINARY SHARES.

The original capital of the company shall be divided into 1000 preference shares of 107. each, and 1000 ordinary shares of 51. each.

The holders of the preference shares shall be entitled, &c.

The holders of the ordinary shares shall be entitled, &c.

If the division of the capital into different classes of shares is stated in the Memorandum of Association the statement should not be repeated here, but the rights of the shareholders can be defined, e.g. :—

PREFERENCE AND DEFERRED SHARES.

The holders of the preference shares mentioned in the company's memorandum of association shall be entitled, &c.

The holders of the deferred shares, &c.

See various clauses as to preference and other special shares for insertion in articles, infra, Form 73, et seq.

CERTIFICATES.

10. The certificates of registered shares or registered stock shall be issued under the seal of the company, and signed by two directors, and countersigned by the secretary or some other person appointed by the directors.

As to the serious responsibility incurred by a company in issuing certificates, see infra," Certificates," where also will be found forms of certificates.

11. Every member shall be entitled to one certificate for all the