The Articles of Association.

until he shall have been possessed of his shares three calendar months, unless such shares shall have been acquired or shall have come by bequest, or by marriage, or by succession to an intestate's estate, or by the custom of the city of London, or by any deed of settlement after the death of any person who shall have been entitled for life to the dividends of such shares.

107. Votes may be given either personally or by proxy.

108. The instrument appointing a proxy shall be in writing under the hand of the appointor, or, if such appointor is a corporation, under their common seal, and shall be attested by one or more witnesses.

109. No person shall be appointed a proxy who is not a member of the Company, and the instrument or mandate appointing him shall be deposited at the registered office of the Company not less than forty-eight hours before the time of holding the meeting at which he proposes to vote; but no instrument appointing a proxy shall be valid after the expiration of six months from the date of its execution. 110. Any instrument appointing a proxy shall be in the following form:

I

of

Company Limited.
of

being a member of the
Limited, and entitled to
hereby appoint

of

vote or

in the county Company votes,

as my proxy,

to vote for me and on my behalf at the [ordinary or extraordinary, as the case may be] general meeting of the Company to be held on the

of

day

and at any adjournment thereof [or, at any meeting of the Company that may be held

in the year

1.

As witness my hand, this

Signed by the said

day of

in the presence of

Directors.

DIVIDENDS.

111. The directors may, with the sanction of the Company in general meeting, declare a dividend to be paid to the members in proportion to their shares.

The Articles of Association.

112. No dividend shall be payable except out of the profits arising from the business of the Company.

113. The directors may, before recommending any dividend, set aside out of the profits of the Company such sum as they think proper as a reserved fund to meet contingencies, or for equalising dividends, or for repairing, or maintaining, the works connected with the business of the Company or any part thereof; and the directors may invest the sum so set apart as a reserved fund upon such securities as they, with the sanction of the Company, may select.

114. The directors may deduct from the dividends payable to any member all such sums of money as may be due from him to the Company on account of calls or otherwise.

115. Notice of any dividend that may have been declared shall be given to each member, or sent by post or otherwise to his registered place of abode, and all dividends unclaimed for three years, after having been declared, may be forfeited by the directors for the benefit of the Company.

116. No dividend shall bear interest as against the Company.

NOTICES.

117. Notices requiring to be served by the Company upon any member may be served either personally, or by leaving the same or sending them through the post in a letter addressed to the shareholders at their registered places of abode.

118. All notices directed to be given to the members shall with respect to any share to which persons are jointly entitled be given to whichever of such persons is named first in the register of members; and notice so given shall be sufficient notice to all the holders of such share.

119. All notices required by this act to be given by advertisement shall be advertised in a newspaper circulating in the district in which the registered office of the Company is situate.

120. Any notice, if served by post, shall be deemed to have been served at the time when the letter containing the

Practical Hints for Formation, &c.

same would be delivered in the ordinary course of the post; and in proving such service it shall be sufficient to prove that the letter containing the notice was properly addressed and put into the post office.

To the above Articles of Association, which are applicable to all Companies, there may be added special ones framed to meet the requirements of the particular Company. There will be no difficulty in expressing these, taking care only that the desired object be clearly stated.

The articles, when so completed, should be printed, and a copy of them signed by the same seven shareholders who have signed the Memorandum of Association, to which they should be annexed, and delivered to the registrar. They will be thenceforth the code of laws by which the Company will be regulated; every member will be bound by them as if his hand and seal had been subscribed thereto, and they can be altered only by special resolution, passed in the manner prescribed by the act, and hereafter fully described. A printed copy should also be sent to every member, and copies should be kept for sale to members at a small price.

It is now proposed to offer some suggestions, derived from the author's experience of the working of the machinery of a Joint Stock Company.

Practical Hints for the Formation and Management of a Joint Stock Company.

As for the number of directors, we have but one suggestion to offer. Let them be as few as possible. There is no greater obstruction to

The Board of Directors, &c.

business than a large Board. Five are ample for all purposes. Every additional head is only an addition of doubt, division and delay, and the time which should be devoted to action is wasted in discussion and debate. It is impossible to find a dozen persons who will be of one mind on any subject whatever. As all the members of a direction are of equal authority, each has a right to be heard, each is entitled to equal attention, and each one will be sure to exercise his right, if only to prove that he possesses it. In a large Board, let any proposition, however trifling, be started, and it will be sure to find somebody hesitating or objecting; questions are asked and must be answered; this will lead to discussion, and the business which two or three men, well matched, would dispatch in five minutes, occupies an entire sitting of the Board, while important matters are deferred, and the golden opportunities, the seizing of which is the secret of success, are irrevocably lost. This mistake of having large Boards for the sake of names-for there can be no other use in them is the true reason why Joint Stock Companies are so rarely enabled to compete successfully with individuals, in spite of their advantages in other respects. They want unity of purpose and promptitude in action. Knowing what is their defect, the promoters of Companies should remedy the mischief, so far as they can, by restricting the number of directors to the smallest that is capable of conducting the business. The number we recommend is five, which will probably secure the attendance of three. Having had practical experience both of a Board of twelve and a Board of five, we have no hesitation in

The Board of Directors, &c.

giving the preference to the latter, and earnestly recommending the adoption of that number by Limited Liability Companies of ordinary magnitude. Of course there are projects so large as to require a much larger Board, sufficient to admit of division into several committees for the conduct of sub-departments of the business; but for the usual objects of such Companies, five directors are amply sufficient.

There is another reason for a small number. The responsibility is less divided. In a large Board, every director feels that he is responsible only for a tenth or a twentieth of the blame of error-nay, he is scarcely conscious of any individual responsibility whatever. Precisely as the numbers are diminished does the sense of personal responsibility grow, and we need not say that, in proportion as the directors feel themselves personally interested in the prosperity or otherwise of the concern, so will their attention be given to it. There is also another consideration, not less important. Directors are entitled to liberal remuneration for the time and thought they devote to the affairs of the Company. But the directors' fees are seldom proportioned to the number of directors. Whether the Board be large or small, it is usual to vote the same fee. To the Company it matters not; but in its result to the recipients it is important whether the fee be divisible among twelve or five. In the one case it is scarcely worth attention, in the other it is really a remuneration, and exertion is thus not only stimulated but rewarded.

For all these reasons we recommend that the Articles of Association should provide that