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The Articles of Association.

directors to that effect, shall be sufficient evidence of the facts therein stated, as against all persons entitled to such share, and such declaration and the receipt of the Company for the price of such share shall constitute a good title to such share, and a certificate of proprietorship shall be delivered to a purchaser, and thereupon he shall be deemed the holder of such share discharged from all calls due prior to such purchase, and he shall not be bound to see to the application of the purchase money, nor shall his title to such share be effected by any irregularity in the proceedings in reference to such sale.

INCREASE OF STOCK.

32. The directors may, with the sanction of the Company previously given in general meeting, convert any paid up shares into stock.

33. When any shares have been converted into stock, the several holders of such stock may thenceforth transfer their respective interests therein, or any part of such interests, in the same manner and subject to the same regulations as and subject to which any shares in the capital of the Company may be transferred, or as near thereto as circumstances admit.

34. The several holders of stock shall be entitled to participate in the dividends and profits of the Company according to the amount of their respective interests in such stock; and such interests shall, in proportion to the amount thereof, confer on the holders thereof respectively the same privileges and advantages for the purpose of voting at meetings of the Company, and for other purposes, as would have been conferred by shares of equal amount in the capital of the Company; but so that none of such privileges or advantages, except the participation in the dividends and profits of the Company, shall be conferred by any such aliquot part of consolidated stock as would not, if existing in shares, have conferred such privileges or advantages.

INCREASE OF CAPITAL.

35. The Company may, by special resolution, as hereinafter provided, increase its capital to a sum not exceeding

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The Articles of Association.

by the issue of new shares, such increase to be of such amount, and divided into shares of such amount, as the Company in general meeting may determine.

36. Subject to any direction to the contrary that may be given by the meeting that sanctions the increase of capital, all new shares shall be offered to the members in proportion to the existing shares held by them, and such offer shall be made by notice specifying the number of shares to which the member is entitled, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and after the expiration of such time, or on the receipt of an intimation from the member to whom such notice is given that he declines to accept the shares offered, the directors may dispose of the same in such manner as they think most beneficial to the Company.

NOTE.

The regulations prescribe no limit. But that is an omission which the articles should supply.

37. Such increased capital shall for all purposes be considered part of the original capital, and subject to the same provisions, in all respects, whether with reference to calls, or forfeiture, or otherwise, as if it had been part of the original capital.

MANAGEMENT OF THE COMPANY.

38. The business and affairs of the Company shall be conducted by the board of directors.

39. The manager (or secretary) of the Company shall be in all things subject to the control of the directors, and shall have no authority whatever beyond that which is given to him by the directors by resolution passed and recorded in the manner hereafter provided.

NOTE. Neither of these articles is to be found in the regulations, but their utility is obvious. The act contemplates, although it does not prescribe, the changing of the name of secretary into that of manager, and it is desirable that the

The Articles of Association.

new name should not be understood as conferring any greater powers than the former one. It is necessary for the protection of the Company that the manager should have no authority to act at his own discretion without the authority of the board, otherwise he might involve the Company in serious liabilities. He should be required in all cases to take his instructions from the directors, who can, of course, where they think fit to do so, vest in him general powers for the accomplishment of a defined object. But these should be carefully and clearly recorded in the minute-book that contains the proceedings of the board.

THE DIRECTORS.

40. The business of the Company shall be conducted by seven directors.

NOTE. This number is merely suggested as that which is found in practice to be most convenient for the conduct of the business of a Company.

41. The qualification of a director shall be the possession in his own right of fifty shares at the least for six months previous to his election as a director, except in the cases of the directors who are herein named as the first directors of the Company.

42. The first directors of the Company shall be A.B., of, &c. (naming them), who shall continue to be directors until disqualified by ceasing to be shareholders in the Company, or by any of the acts or defaults hereinafter named, until they shall retire in the manner prescribed by the next article.

43. At the first ordinary meeting after the incorporation of the Company, all the directors shall retire from office, but shall be eligible for re-election.

The Articles of Association.

44. At the first ordinary meeting all the directors shall be elected. At the first ordinary meeting in every subsequent year one-third of the directors for the time being, or if their number is not a multiple of three, then the number nearest to one-third, shall retire from office; it shall be determined by ballot which of the directors are so to retire in the first and second years, and afterwards those shall retire who have been longest in office.

45. A retiring director shall be always eligible to be reelected.

46. Twenty-one days' notice at least shall be given to the Company by any person offering himself for election as a director, or by any person proposing another to be a director, and fourteen days at least before the general meeting a notice shall be posted to each shareholder of the names of the persons so proposed to be directors, and no person shall be eligible to be a director unless such notices shall have been given.

47. The Company shall at the general meeting fill up any vacancies in the office of director. But if at any meeting at which an election of directors ought to take place, no such election is made for want of properly qualified candidates, or any other cause, the meeting shall be adjourned for one month, and notice of the vacancies in the office of director, and of the cause and the time and place of such adjourned meeting, shall be forthwith sent by post to every shareholder, and until such adjourned meeting shall be holden and such vacancies filled, the former directors shall continue to act.

48. The Company may from time to time, by special resolution, increase or reduce the number of directors, so that the same shall not be less than three, and may also determine in what rotation such increased or reduced number shall go out of office.

49. Any casual vacancy occurring in the board of directors may be filled up by the directors; but any person so chosen shall retain his office so long only as the vacating director would have retained the same if no vacancy had occurred.

50. The Company, in general meeting, may, by a special

The Articles of Association.

resolution, remove any director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead: The person so appointed shall hold office during such time only as the director in whose place he is appointed would have held the same if he had not been removed.

NOTE. It will be seen that the greater part of these regulations, which were not found in the table appended to the former act, have been borrowed from this work by the framer of the new act. They were suggested by actual experience. They were never omitted from the old deeds of settlement, and still less can they be dispensed with now that such great facility is given to roguery. It does not follow, because the law has provided impunity for fraud, that, therefore, Companies themselves should make no provision against it.

POWERS OF DIRECTORS.

51. The directors shall manage the business of the Company, and exercise all such powers as are not by the statute, or by these Articles of Association, declared to be vested in the Company in general meeting; subject nevertheless to the regulations prescribed by these articles, and to such resolutions, not being inconsistent with these articles or the statute, as may be passed by the Company or general meeting. But no resolution of the Company in general meeting shall invalidate any prior act of the directors, which would have been valid if such resolution had not been passed.

52. The continuing directors may act notwithstanding any vacancy in their body.

DISQUALIFICATION OF DIRECTORS.

53. The office of director shall be vacated—

If he ceases to hold the qualification as a shareholder above required;

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