Page images

vote of a general meeting. Lord Campbell said that the case was to be determined on that principle, and bowed to the authority of the cases of Natusch v. Irving, Gow on Partn. 126, 257, 2nd ed.; Const v. Harris, Turn. & R. 496; Coleman v. Eastern Counties Railway Company, 10 Beav. 1, establishing the proposition that the funds of a joint stock company established for one undertaking cannot be applied to another. If an attempt to do so is made, such act is ultra vires, and although sanctioned by all the directors and by a large majority of the shareholders, any single shareholder had a right to resist it, and a court of equity will interpose on his behalf by injunction. A railway company cannot apply its funds to make a line of railway different from that described in the act by which the company was constituted; a company established for granting fire and life insurances cannot engage in marine insurances; a company established to make a railway and exercise the trade of carriers upon the line from one town in England to another, cannot add to it the trade of a steam packet company, and no company can ever abandon the business for which it was established, and undertake another. He could not say that Wood, V. C. and K. Bruce, L. J., were wrong in holding that the agreement in question was not ultra vires: for he thought that under that agreement the directors did not abandon the undertaking for which the company was established, and could not be said to engage in any new undertaking. He agreed that the case depended upon the fair construction of the third article of the memorandum of association. There was a difficulty in saying that the letting of so large a portion of the hotel to the Indian Board for so long a time was "carrying on the usual business of an hotel or tavern therein," but he conceived that it was (in the words of the third article) doing a thing otherwise conducive to the attainment of the described objects of the undertaking. An hotel to be used as such still remained in the hands of the company. That hotel was larger than any other hotel in England, and in that portion of the building the usual business of an hotel and tavern was to be carried on. The experienced hotel-keeper, who was to carry it on, swore that, in his opinion, it would be more advantageously carried on in that manner than if the whole building were from the first put under his management as master of the establishment. His lordship relied much upon the consideration that the arrangement was temporary and preliminary and conducive to the ultimate object of the whole building being devoted to the proper business of the hotel. From the large rent immediately to be received by the company for the occupation of the 169 rooms by the India Board, from the monopoly to be enjoyed by the company in supplying so many persons with refreshments, and from the fashionable reputation to be conferred upon the hotel by that association, the opinion ex

pressed by the majority of the shareholders that the arrangement was beneficial to them was likely to be verified. That anticipation would not be sufficient if the original undertaking had been abandoned or if there had been any extension of the original undertaking, but as there was neither abandonment nor extension of the original undertaking, the arrangement might assist instead of obstructing the prosecution of the original undertaking. Lords Cranworth, Chelmsford and Kingsdown concurred in the judgment, and the decree, against which there was an appeal, was affirmed. Ib. pp. 716-720.

By a deed of settlement of a company its business was declared to be "to build or purchase and own or hire iron steam vessels, and to use or let upon hire the same for the purpose of transport of coals or other merchandize from any port or ports of the United Kingdom or elsewhere, to any other port or ports of the United Kingdom or elsewhere, and the powers of the directors were defined to be, "the building or purchasing or hiring of such steam vessels as they should see fit, the general conduct and management of the business of the company, and the controlling, managing and regulating in all other respects except as by the deed otherwise provided of all matters relating to the company and the affairs thereof." The directors, thinking it expedient to sell all the vessels belonging to the company, employed the plaintiff's ship-brokers to procure a purchaser. The plaintiff accordingly negotiated a sale of the vessels upon the terms fixed by the directors with a purchaser; the negotiation, however, went upon an objection urged by his solicitor, that the directors had no power to sell the whole of the vessels except in the event of the winding-up of the company with the consent of the shareholders, which had not been obtained: it was held, that the plaintiffs were not entitled to maintain an action against the directors upon an implied warranty that they had authority to sell, which in point of fact they had Wilson v. Miers, 10 C. B., N. S. 348; 3 L. T., N. S. 780. At an extraordinary general meeting of a joint stock company established for granting insurance on lives, it was resolved to extend the business to marine insurances; the resolutions were afterwards confirmed; a deed embodying them was executed by some but not by all of the shareholders, and in the annual return to the joint stock companies registry office, the business of the company was stated to include marine insurances. The reports of the directors several times alluded to the extension of the business, and on one occasion a report, alluding to such extension, accompanied the dividend warrant. The business, as extended, was carried on for a year and a half, when the company was ordered to be wound up: it was held, that the above-mentioned circumstances were not sufficient to bind the general body of shareholders by acquiescence to the extension of business, which could


only be effected by a new deed executed by all the shareholders, consequently holders of marine policies would not come in as creditors of the company in respect of losses upon such policies, but the holders thereof were allowed to claim in respect of the premiums paid by them. Re Phoenix Life Assurance Company, Burgess & Stork's Case, 31 L. J., Ch. 749; Balfour v. Sea, &c. Association, 27 L. J., C. P. 17; Ex parte P. Wales, John. 80; Ernest v. Nicholls, 6 H. 419; 3 De G. & J. 660; 2 Halkett, 401. See Bagshaw v. Eastern Union Railway Company, 7 Hare, 114; Shelford on Law of Railways, pp. 171, 174, 620-625, 3rd ed., as to the obliga tion of companies to apply their funds to the purposes for which they were subscribed.

The court will not entertain a suit by a shareholder of a public company on behalf of himself and other shareholders to restrain the directors from doing acts which are alleged to be ultra vires, when the plaintiff is really suing by the direction of a rival company, and in order to protect their interest. Forrest v. Manchester, Sheffield and Lincolnshire Railway Company, 7 Jur. N. S. 387; 9 W. R. 818-Westbury, C.

(d) There being no prescribed amount of shares, the determination of the amount is left to the determination of the parties.

(e) See Table (A) pl. 53, post, whereby, until directors are appointed, the subscribers of the memorandum of association are to be directors. They are not required to hold shares, but provision may be made for that in the memorandum of association.

ciation of a

limited by

9. Where a company is formed on the principle Memoranof having the liability of its members limited to such dum of assoamount as the members respectively undertake to company contribute to the assets of the company in the event guaranof the same being wound up, hereinafter referred to fee (a). as a company limited by guarantee, the memorandum of association shall contain the following things, (that is to say,)

(1.) The name of the proposed company, with the addition of the word "limited"

last word in such name:

as the

(2.) The part of the United Kingdom, whether
England, Scotland or Ireland, in which

the registered office of the company is pro-
posed to be situate:

(3.) The objects for which the proposed company.
is to be established:


dum of asso


company (e).

(4.) A declaration that each member undertakes to contribute to the assets of the company, in the event of the same being wound up, during the time that he is a member, or within one year afterwards (b), for payment of the debts and liabilities of the company contracted before the time at which he ceases to be a member, and of the costs, charges and expenses of winding-up the company, and for the adjustment of the rights of the contributories amongst themselves, such amount as may be required, not exceeding a specified amount (c).

(a) This is a new provision.

(b) See sect. 38, pl. 1, post, p. 45.

(c) See sect. 90, post.

10. Where a company is formed on the principle ciation of an of having no limit placed on the liability of its members, hereinafter referred to as an unlimited company, the memorandum of association (d) shall contain the following things, (that is to say,) (1.) The name of the proposed company: (2.) The part of the United Kingdom, whether England, Scotland or Ireland, in which the registered office of the company is proposed to be situate:

Stamp, signature and

effect of me

of associa

tion (f).

(3.) The objects for which the proposed company

is to be established.

(d) See second schedule to this act, form (D), post.
(e) See 19 & 20 Vict. c. 47, s. 5.

11. The memorandum of association shall bear the same stamp as if it were a deed, and shall be morandum signed by each subscriber (g) in the presence of and be attested by one witness at the least, and that attestation shall be a sufficient attestation in Scotland as well as in England and Ireland (h). It shall, when registered, bind the company and the members thereof to the same extent as if each member had subscribed his name and affixed his seal thereto, and there were in the memorandum

contained, on the part of himself, his heirs, executors and administrators, a covenant to observe all the conditions of such memorandum, subject to the provisions of this act.

(f) See 19 & 20 Vict. c. 47, ss. 7, 11.

(g) By the 11th section of the 19 & 20 Vict. c. 47, any person signing a printed copy of the articles of association was to be deemed to have signed such articles if duly stamped, although such copy contained the names of more than seven persons as the "past and present directors," and only seven of them signed the memorandum registered, and the remainder had not taken the shares for which they subscribed; this did not invalidate the shareholders' subscriptions to such printed copies, nor did it afford any evidence of fraud, nor rebut the presumption raised by the register, that the persons whose names appeared thereon were the holders of the shares for which they were registered. New Brunswick and Canada Railway and Land Company v. Boore, 3 H. & N. 249; 27 L. J., Exch. 330.

(h) See sect. 23, post, p. 31.

panies to

randum of

12. Any company limited by shares may so far Power of modify the conditions contained in its memorandum certain comof association, if authorized to do so by its regula- alter memotions as originally framed, or as altered by special associa resolution (b) in manner hereinafter mentioned (c), as tion (a). to increase its capital (d) by the issue of new shares of such amount as it thinks expedient, or to consolidate and divide its capital into shares of larger amount than its existing shares, or to convert its paid-up shares into stock, but, save as aforesaid, and save as is hereinafter provided in the case of a change of name, no alteration shall be made by any company in the conditions contained in its memo

randum of association.

(a) See 19 & 20 Vict. c. 47, s. 37.

(b) A company was incorporated under the 19 & 20 Vict. c. 47, as a limited company, for the purpose of conveying passengers and luggage in patent omnibuses. There were no special articles of association. A majority of more than three-fourths in number and value of the shareholders, present at a general meeting, passed a special resolution empowering the directors to borrow on debentures of the company any sums not exceeding in the whole a certain amount.

« EelmineJätka »