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pany, although each shareholder was thereby rendered liable to an extent exceeding the amount of his share. Norwich Yarn Company, Ex parte, Bignold's Case, 22 Beav. 143; see German Mining Company's Case, Ex parte Chippendale, 4 De G., M. & G. 19.

The shareholders of a company have been decided to be liable to reimburse the directors money which they had borrowed without authority, but which had been applied in constructing the works of the company. Troup's Case, 29 Beav. 353; Hoare's Case, 30 Ib. 225; Pare v. Clegg, 29 Beav. 589, the case of a friendly society, with power to borrow money.

Where debentures of a company had been given in exchange for Westminster Improvement Bonds, which were held to be invalid against a bona fide purchaser for value, an inquiry was directed as to what benefit the company had derived from the bonds. Athenæum Life Assurance Society v. Pooley, 3 De G. & J. 294. And where money debentures and shares had been given in exchange for Westminster Bonds, the holders of the debentures recovered from the company the difference between the money arising from the bonds, and of which the company received the benefit, and the amount of the money paid for the bonds beyond what had been realized by a sale of some of the shares. Wood's Claim and Brown's Claim, 9 W. R. 366; 10 W. R. 662.

Where, however, the money borrowed without authority is applied by the directors for purposes not in furtherance of the legitimate objects of the company, the directors cannot claim to be reimbursed by the shareholders. Kent Benefit Building Society, 1 Dr. & Sm. 417; see Selwyn v. Harrison, 2 Johns. & H. 334.

An agreement was made between P. and a company represented by one of their directors, whereby P. agreed to sell and the director to purchase certain bonds, in consideration of 4,000l., and debenture notes of the company for 2,000l., and also 3,500 shares in the company on which one pound should be considered to have been paid. The director then took the bonds at 5,7007., their market value, and after paying the 4,000l. to P., paid over the remainder for the use of the company. P. sold his interest in the debenture notes to two persons, who, upon the winding-up of the company, brought in their claims: it was held that the whole transaction was invalid and must be set aside, it being neither a borrowing nor a purchasing under the powers given to the directors by their deed of settlement. Re London and County Assurance Company, Ex parte Wood and Ex parte Brown, 30 L. J., Chan. 373.

A power of borrowing money does not authorize the issue of debentures for any other purpose than to secure money lent. West Cornwall Railway Company v. Mowatt, 12 Jur. 407.

Debentures issued by directors under the seal of their company cannot be enforced by members of the company

Examination of affairs of

who accepted them after having been present at the meeting where the issue of the irregular debentures was sanctioned, and bonâ fide transferees for value from such shareholders are in the same position. Strangers cannot enforce irregular debentures as valid, if they have accepted them with notice that the conditions on which they were issuable had not been fulfilled. If the monies advanced on such irregular securities have been applied by the directors for the benefit of the company with the acquiescence of the shareholders, both parties are precluded from disputing their liability to repay the advance. Payment at the rate of 61. per cent. had been made pursuant to the above debentures, without objection on the part of the shareholders: it was decided that the debenture holders were entitled to subsequent interest at the same rate on their advances, notwithstanding that they were not entitled to recover on the debentures themselves. Re Magdalena Steam Navigation Company, 1 Johns. 690; 6 Jur. N. S. 975; 29 L. J., Ch. 667; 8 W. R. 329.

Although debentures, issued by a joint stock company to a director in payment for work contracted to be done by him for the company, are invalid in his hands under 7 & 8 Vict. c. 110, s. 29, their invalidity will not affect a bonâ fide assignee for valuable consideration without notice, if the company had encouraged him in the belief that they were valid. Re South Essex Gas Light and Coke Company, 31 L. J., Ch. 293.

A bonâ fide purchaser of debentures issued in fraud of the company without notice takes subject to all the equities attaching upon them, and may be restrained from suing on the debentures, although the transfers of them had been duly registered and interest had been paid on them to such purchaser, but such facts had not been communicated to the shareholders. Athenæum Life Assurance Society v. Pooley, 3 De G. & J. 294; 5 Jur. N. S. 129; 28 L. J., Ch. 119.

A bill to restrain a company from an illegal exercise of a power of borrowing is demurrable if the illegal acts sought to be restrained do not appear upon the face of the bill. Nowell v. Andover Railway Company, 3 Giff. 112.

Where debenture holders are, under an act of parliament, entitled to be paid pari passu, one debenture holder cannot obtain an advantage over the others by means of an additional mortgage. De Winton v. Brecon, Mayor, &c., 26 Beav. 533; see Levy v. Mattheson, 2 Giff. 71; 6 Jur. N. S. 1010; 29 L. J., Ch. 385.

Interest payable half yearly on coupons to debentures accrues due de die in diem, and is therefore subject to apportionment. Re Rogers, 1 Drew. & S. 338; 30 L. J., Chan. 153; see 4 & 5 Will. 4, c. 22; Shelford's Real Property Statutes, pp. 509-522 (6th ed.)

56. The board of trade may appoint one or more company by competent inspectors to examine into the affairs of

tors (a).

any company under this act, and to report thereon, inspec-
in such manner as the board may direct, upon the
applications following, (that is to say,)
(1.) In the case of a banking company that has
a capital divided into shares, upon the
application of members holding not less
than one-third part of the whole shares of
the company for the time being issued;
(2.) In the case of any other company that has
a capital divided into shares, upon the
application of members holding not less
than one-fifth part of the whole shares of
the company for the time being issued;
(3.) In the case of any company not having a
capital divided into shares, upon the ap-
plication of members being in number not
less than one-fifth of the whole number of
persons for the time being entered on the
register of the company as members.

(a) This differs from the 48th section, 19 & 20 Vict. c. 47.

for inspec

evidence (b).

57. The application shall be supported by such Application evidence as the board of trade may require for the tion to be purpose of showing that the applicants have good supported by reason for requiring such investigation to be made, and that they are not actuated by malicious motives in instituting the same; the board of trade may also require the applicants to give security for payment of the costs of the inquiry before appointing any inspector or inspectors.

(b) This is a new provision.

books (c).

58. It shall be the duty of all officers and agents Inspection of of the company to produce for the examination of the inspectors all books and documents in their custody or power; any inspector may examine upon oath the officers and agents of the company in relation to its business, and may administer such oath accordingly; if any officer or agent refuses to produce any book or document hereby directed to be produced, or to answer any question relating to the affairs of the company, he shall incur a penalty

Result of examination how dealt with (e).

Power of

company to spectors (a).

appoint in

not exceeding five pounds in respect of each offence (d).

(c) This is nearly the same as the 49th section, 19 & 20 Vict. c. 47.

(d) The mode of recovering penalties is prescribed by the 65th section, post, p. 70.

59. Upon the conclusion of the examination the inspectors shall report their opinion to the board of trade; such report shall be written or printed, as the board of trade directs; a copy shall be forwarded by the board of trade to the registered office of the company, and a further copy shall, at the request of the members upon whose application the inspection was made, be delivered to them or to any one or more of them; all expenses of and incidental to any such examination as aforesaid shall be defrayed by the members (f) upon whose application the inspectors were appointed, unless the board of trade shall direct the same to be paid out of the assets of the company, which it is hereby authorized to do.

(e) The same as the 59th section, 19 & 20 Vict. c. 47. (f) That is personally, and not out of the funds of the company.

60. Any company under this act may by special resolution (b) appoint inspectors for the purpose of examining into the affairs of the company: the inspectors so appointed shall have the same powers and perform the same duties as inspectors appointed by the board of trade, with this exception, that, instead of making their report to the board of trade, they shall make the same in such manner and to such persons as the company in general meeting directs; and the officers and agents of the company shall incur the same penalties, in case of any refusal to produce any book or document hereby required to be produced to such inspectors, or to answer any question, as they would have incurred if such inspector had been appointed by the board of trade.

(a) The same as sect. 51, 19 & 20 Vict. c. 47.
(b) Sect. 51, ante, p. 53.

be evi

61. A copy of the report of any inspectors ap- Report of pointed under this act, authenticated by the seal of inspectors to the company into whose affairs they have made dence (c). inspection, shall be admissible in any legal proceeding as evidence of the opinion of the inspectors in relation to any matter contained in such report.

(c) This differs from the 52nd section, 19 & 20 Vict. c. 47.

Notices.

notices on

62. Any summons, notice, order or other docu- Service of ment required to be served upon the company may company (d). be served by leaving the same, or sending it through the post in a pre-paid letter addressed to the company, at their registered office (e).

(d) The 19 & 20 Vict. c. 47, s. 53, authorized the service by giving the summons, &c. "to any director, secretary or other principal officer of the company." By sect. 16 of the 15 & 16 Vict. c. 76, a writ of summons against a corporation may be served on certain officers therein mentioned, not including a director: it was held, that the 53rd section of the 19 & 20 Vict. c. 45, did not apply to a writ of summons, and that service of a writ of summons against an incorporated company registered under 19 & 20 Vict. c. 47, upon a director of such company, was bad service. Towne v. London and Limerick Steam Ship Company, 5 C. B., N. S. 730; 5 Jur. N. S. 846; 20 L. J., C. P. 217.

(e) A company, though not formally dissolved, had practically ceased to exist, and had no officer or officers. The company having been made defendants in a suit, the Court of Chancery ordered the service of the bill on the late chairman and the secretary to be good service on the company. Gaskell v. Chambers, 26 Beav. 252; 5 Jur. N. S. 52; 28 L. J., Ch. 385.

Where a company is proposed to be wound up, but has no place of business, the court, on an ex parte application, will direct service of the winding-up petition on the chairman and general manager. Re National Credit and Exchange Company (Limited), Re Companies Act, 1862, 11 W. R. 161. See Gen. Order, No. 3, post.

letter.

63. Any document to be served by post on the Rules as to company shall be posted in such time as to admit notices by of its being delivered in the due course of delivery within the period (if any) prescribed for the service thereof; and in proving service of such document it shall be sufficient to prove that such document

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