-Preference Shares-Rights Fixed by Memorandum and Articles No Priority as to Capital-Consent of Holders of Two-thirds to Alteration of Rights - Rateable Reduction Proof of Loss-Fair Scheme-Confirmation of Reduction.]-Where by the memorandum of association of a company the preference shareholders' rights and privileges, given to them by the articles of association, are not to be altered without the sanction in writing of two-thirds of the holders of the issued shares of that class, and the articles repeat that provision and provide that they are to be entitled to dividends at a certain rate on the nominal amount of capital paid up or credited as paid up, such dividends to be cumulative and to be a first charge on the profits in a winding-up, a rateable reduction of the capital of the ordinary and preference shareholders made on a proved loss is not an alteration of those rights and privileges so given to the preference shareholders by the articles, and the sanction in writing of two-thirds is not required.

MACKENZIE & Co., In re, 85 L. J. Ch. 804; [1916] 2 Ch. 450; 115 L. T. 440; 61 S. J. 29-Astbury, J.

Semble, the mere fact that in the memorandum preference shares are stated to be £x per share, with a specified preferential dividend, is no ground simpliciter for refusing to sanction a reduction of capital involving the preference shares. Ib.

64

III. DIRECTORS.

Election of-Notice of Intention to Elect Director Day of Election "' Adjourned Meeting.]-By the articles of association of a company a member could not become a director unless notice was given to the company fourteen clear days before the day of election. The ordinary general meeting was held on December 10, 1915, at which the two defendant directors retired by rotation; but there was no election of directors, and the meeting stood adjourned. On February 21, 1916, notice was given to the company by a shareholder that at the adjourned meeting he would move the election of four named members as directors. The adjourned meeting was held on March 10, 1916, when the chairman ruled the notice to be out of order, and left the chair. The meeting then appointed another chairman, and elected the four to be directors. On motion by shareholders for an interlocutory injunction to restrain the two former directors from acting,-Held, that the day of election was the date of the adjourned meeting on March 10, 1916; that the notice of February 21 was in compliance with the articles, and was not bad because it nominated a member in excess of the vacancies; that the two persons elected in lieu of the two who retired were duly elected; and that an injunction must be granted.

CATESBY v. BURNETT, 85 L. J. Ch. 745; [1916] 2 Ch. 325; 114 L. T. 1022; 32 T. L. R. 380-Eve, J.

Debenture Guarantee Agreement to Appoint Nominees of Guarantor Company as Directors Refusal to Appoint Effect of Nomination-Specific Performance.]-In consideration of the plaintiff company guaranteeing an issue of debentures by the defendant company, the latter agreed to appoint two nominees of the plaintiff company as directors. Two directors were nominated by the plaintiff company, but the defendant company refused to appoint them. On an application to restrain the defendant company from preventing the two nominees from acting as directors, -Held, that the nomination had not the effect of appointing the nominees as directors, and that on the merits the injunction ought not to be granted. Quære, whether a contract to elect as directors the nominees of an outside body will be enforced by a decree for specific performance.

PLANTATIONS TRUST v. BILA (SUMATRA) RUBBER LANDS, LIM., 85 L. J. Ch. 801; 114 L. T. 676-Eve, J.

Appointment Concurrent Powers in Company and in Directors.]-By article 65 of a company's articles of association four named persons were appointed directors, and it was provided that they should, subject to the provisions as to resignation and removal of directors, retain office until a special resolution had been passed to vary the article. Article 66 provided: The directors shall have power to appoint any other persons to be directors at

any time before a special resolution shall be passed bringing into operation the provision as to the retirement of directors by rotation.' Articles 72 to 79 dealt with the rotation of directors, article 74 providing: "The company at any general meeting at which any director retires in manner aforesaid shall . . . unless it be determined to reduce the number of directors, fill up the vacated office by electing a person to be director, and may fill up any other vacancies, and the company may at any general meeting fill up any vacancy arising otherwise than by such retirement of a director, or appoint an additional director or directors

Held, that the passing of the special resolution referred to in article 66 was not a condition precedent to the company's having power under article 74 to appoint directors, and that therefore until such special resolution had been passed the company and the directors had concurrent powers of appointment.

ISAACS v. CHAPMAN, 32 T. L. R. 237-C.A.

Power to Directors to Appoint Managing Director at a Remuneration-Person Appointed Voting-Irregularity-Power in Company to Cure Irregularity.]-The articles of association of a company provided that "A director may contract with the company as vendor, purchaser, or otherwise, and may retain the profits of every such contract without liability to account therefor, but a director shall not vote in respect of any contract in which he is interested." A resolution was passed at a board meeting of the company appointing M. managing director of the company at a remuneration, M. being present and voting in favour of the resolution :-Held, that M., having been present at the meeting, and having accepted the appointment, there was a contract between the company and M. within the meaning of the article, and that the appointment was irregular; but held, that the irregularity could be cured by a vote of the company in general meeting. Barron Potter (83 L. J. Ch. 646; [1914] 1 Ch. 895) applied.

V.

FOSTER v. FOSTER, 85 L. J. Ch. 305; [1916] 1 Ch. 532; 114 L. T. 405-Peterson, J.

An action, alleging (inter alia) that the appointment was invalid, was brought by a shareholder representing a minority of shareholders-Held, that where the irregularity could be cured by the company in general Court meeting the would not interfere. Burland v. Earle (71 L. J. P.C. 1; [1902] A.C. 83) followed. Ib.

Managing Director or Chairman not Appointed for Period of Directorship.]—A board of directors has power to terminate the appointment of one of their number as managing director or chairman as and when it thinks fit. When a director is appointed managing director or chairman he is not necessarily entitled to hold the appointment for the period of his directorship. Ïb.

Quorum of One-No Minutes of Resolution-Parol Evidence Admissible.]-A company was registered without articles of association prior to the Companies (Consolidation) Act, 1908, but articles 76, 88, and 91 of Table A of that Act were identical with those applicable. At the time material there were two directors, and, one only being resident in England, it was agreed between them that he should carry on the business there as sole manager, though no minute was entered of a resolution to that effect. The English director subsequently, acting alone, authorised the sealing and issue of debentures to the plaintiff, who purchased them bona fide. These debentures were sealed in the presence of the English director, and that of the secretary only, article 76 of Table A requiring the presence of two directors and the secretary, and they were duly registered as a series in accordance with sub-section 3 of section 93 of the Companies (Consolidation) Act, 1908-Held, that evidence was admissible that the two directors had agreed that one should act as a quorum, and, though there was no minute of any resolution as to that, the Court would presume that a resolution to that effect was passed. Rotherham Alum and Chemical Co., In re (53 L. J. Ch. 290; 25 Ch. D. 103), and North Hallenbeagle Tin and Copper Mining Co., In re; Knight, ex parte (36 L. J. Ch. 317; L. R. 2 Ch. 321), followed. FIREPROOF DOORS, LIM., In re; UMNEY 0. THE COMPANY, 85 L. J. Ch. 444; [1916] 2 Ch. 142; 114 L. T. 994; 60 S. J. 513 Astbury, J.

No Notice of Irregularity.]-Held, further, that if one director could not form a quorum, which was not clear, it was possible for one to act as such under article 91 of Table A, by which the powers of the directors could be delegated to a committee of one; that in any event, if there did exist irregularities, the plaintiff, who had no notice, was not affected by them. County of Gloucester Banking Co. v. Rudry Merthyr Steam and House Coal Colliery Co. (64 L. J. Ch. 451; [1895] 1 Ch. 629) applied. Ib.

IV. MANAGER AND OFFICERS.

Percentage

44

Remuneration Commission on Annual "Net" Profits - Deduction of Income Tax.] - Income tax is part of the "net profits available for dividend, and where a manager was to have a percentage of "the net profits (if any) of the company for the whole year and "net profits were defined in the agreement to mean the net sum available for dividends as certified by the auditors of the company after payment of all salaries, rent, interest at the rate of 5 per cent. per annum upon capital, and after making such allowances for depreciation as the auditors of the company may advise,"-Held, that the manager was entitled to be paid his percentage on the net profits before deduction of the tax. The principle of Ashton Gas Co. v. Att.-Gen. (75 L. J. Ch. 1; [1906] A.C. 10) applied.

JOHNSTON v. CHESTERGATE HAT MANUFACTURING CO., 84 L. J. Ch. 914; [1915] 2 Ch. 338; 113 L. T. 1148; 59 S. J. 692Sargant, J.

Officer or Servant Person Appointed to Investigate Management.]—The plaintiff was at one time the managing director of a cotton-spinning company, but the company terminated his agreement of service and appointed B., who was an expert in cotton spinning, together with one W., to investigate the management and to make a report. The plaintiff having brought an action against F., the chairman, it was compromised, and an order of Court was made by which the plaintiff undertook not to commence any legal proceedings against any of the company's

directors, officers, or servants" in respect of any disputes between any of them and the plaintiff. B. and W. made their report, and the plaintiff thereupon commenced against B. a libel action founded on statements in the report. On an application by F. the Judge in chambers made an order for the discontinuance of the action against B. as being an action in respect of disputes between the plaintiff and the company's officers or servants Held, that B. was not an officer or servant of the company, and therefore the order for the discontinuance of the action against him was wrong and must be reversed.

OPENSHAW v. FLETCHER, 32 T. L. R. 372 -C.A.

Registration of Series of Debentures-Sealed by One Director-Equitable Charge-Sufficiency of Registration as Series.]-A company was registered without articles of association prior to the Companies (Consolidation) Act, 1908, but articles 76, 88, and 91 of Table A of that Act were identical with those applicable. At the time material there were two directors, and, one only being resident in England, it was agreed between them that he should carry on the business there as sole manager, though no minute was entered of a resolution to that effect. The English director subsequently, acting alone, authorised the sealing and issue of debentures to the plaintiff, who purchased them bona fide. These debentures were sealed in the presence of the English director, and that of the secretary only, article 76 of Table A requiring the presence of two directors and the secretary, and they were duly registered as a series in accordance with sub-section 3 of section 93 of the Companies (Consolidation) Act, 1908 :— Held, that sealing was not necessary to give effect to these debentures. Biggerstaff v. Rowatt's Wharf, Lim.; Howard v. Rowatt's Wharf, Lim. (65 L. J. Ch. 536; [1896]

2 Ch. 93), applied. FIREPROOF DOORS, LIM., In re; UMNEY v. THE COMPANY, 85 L. J. Ch. 444; [1916] 2 Ch. 142; 114 L. T. 994; 60 S. J. 513Astbury, J.

Held, further, that if these debentures were irregular and insufficient they were sufficient evidence of an agreement by the company to issue valid debentures so as to create equitable debentures; and that as such they were evidence of an agreement to issue a series of debentures, and the registration of them as a series under sub-section 3 of section 93 of the Companies (Consolidation) Act, 1908, was sufficient. The principle in Strand Music Hall Co., In re (3 De G. J. & S. 147), and Ross v. Army and Navy Hotel Co. (34 Ch. D. 43; affirming, 55 L. J. Ch. 697) applied. Ib.

Assignment of Debentures to Trustee under Deed of Settlement-Omission to RegisterSubsequent Equitable Charge Created by Settlor Conflicting Equities.]-Where by the terms of a deed of settlement debentures of a company were assigned to a trustee, and the trustee omitted to have his name placed upon

the company's register and permitted the debentures to be held by the settlor, and the settlor subsequently pledged them, the trustee was held not to be in the position of a trustee who had allowed title deeds to remain in the hands of strangers, and his executors were not estopped from setting up a title to the debentures and claiming to be put upon the register. COLEMAN v. LONDON COUNTY AND WESTMINSTER BANK, 85 L. J. Ch. 652; [1916] 2 Ch. 353; 115 L. T. 152-Neville, J.

Although the pledgees had acted honestly, and had taken all proper steps to see that their equitable charge was in order, and had given notice to the company, they had no better equity than a beneficiary under the settlement who was innocent of any act or omission on the part of the trustee, and her earlier right was therefore entitled to priority. Lloyd's Banking Co. v. Jones (54 L. J. Ch. 931; 29 Ch. D. 221) and Walker v. Linom (76 L. J. Ch. 500; [1907] 2 Ch. 104) considered. Ib.

The fact that the pledgees, after learning of the existence of the deed of settlement, obtained a formal transfer of the debentures from the settlor, and induced the company to register the transfer, made no difference to the rights of the parties. Ib.

Fixed Charge-No Further Prior ChargeFloating Charge.]-Where a debenture creates a charge on certain specific assets of the company, and contains in the conditions of the debenture the words "but so that the company is not to be at liberty to create any mortgage or charge in priority to or pari passu with the said debentures," these words will not be construed as implying the creation of a floating charge contrary to the terms of the specific charge already given by the debenture. GRIGSON v. TAPLIN & Co., infra.

appointing a receiver and manager and directing the tenants of those properties which were let to attorn and the mortgagors to deliver to the receiver as such receiver and manager all the stock-in-trade and effects of the businesses, and the receiver stated that he entered into possession though the order did not contain any direction for delivery up of possession of the land, there is no change of occupation within section 16 of the Poor Law Assessment and Collection Act, 1869, or section 211, subsection 3 of the Public Health Act, 1875. Richards v. Kidderminster Overseers (65 L. J. Ch. 502; [1896] 2 Ch. 212) distinguished. Marriage, Neave & Co., In re; North of England Debenture and Assets Corporation v. Marriage, Neave & Co. (65 L. J. Ch. 839; [1896] 2 Ch. 663), applied.

NATIONAL PROVINCIAL BANK OF ENGLAND v. UNITED ELECTRIC THEATRES, 85 L. J. Ch. 106; [1916] 1 Ch. 132; 114 L. T. 276; [1916] H. B. R. 56; 80 J. P. 153; 14 L. G. R. 265; 60 S. J. 274; 32 T. L. R. 174-Astbury, J.

Possession of mortgaged premises is not ordered in a foreclosure action until after foreclosure absolute, and it is not the practice of the Courts in appointing receivers and managers of mortgaged hereditaments to make any order for delivery of possession of land as distinct from the possession of such stockin-trade and effects, including books and documents, as are necessary to enable the managing part of the order to be carried out by the receiver. Ib.

Mortgage-Assignment of Chattels then or thereafter on Premises-Specific or Floating Charge-Debenture-Preferential PaymentsRates.]-Under a mortgage deed freehold property was conveyed and assigned to the mortgagees, together with all the fixed and movable plant, machinery, and fixtures then or thereafter fixed, or placed upon or used in or about the hereditaments and the goodwill of the business of electric theatres, and all the furniture and loose effects then or from time to time placed or used upon the hereditaments. The mortgage contained a provision that the mortgagors should conduct the business in a regular and proper manner, and was made to secure the payment of all moneys then or from time to time owing. The mortgagors had no power to let any of the premises without the consent of the mortgagees :-Held, that the mortgage was not intended to interfere with the ordinary carrying on by the company, who were the mortgagors, of its theatre business, and constituted a charge upon chattels which would in the ordinary course of the business be changed from time to time and was a floating rather than a specific charge and therefore a debenture within section 107 of the Companies (Consolidation) Act, 1908, and rates were payable as preferential payments within the provisions of that section. Ib.

Marriage, Neave & Co., In re; North of England Debenture and Assets Corporation v.

Marriage, Neave & Co. (65 L. J. Ch. 839; [1896] 2 Ch. 663), Government Stock and Other Securities Investment Co. v. Manila Railway (66 L. J. Ch. 102; [1897] A.C. 81), Tailby v. Official Receiver (58 L. J. Q.B. 75; 13 App. Cas. 523), and Yorkshire Woolcombers Association, In re; Houldsworth v. Yorkshire Woolcombers Association (72 L. J. Ch. 635; [1903] 2 Ch. 284; in H.L., sub nom. Illingworth v. Houldsworth (73 L. J. Ch. 739; [1904] A.C. 355), applied. Ib.

Registered Agreement to Give a Charge in Certain Events - Winding-up- Validity.] A director of a company which had an overdraft at its bankers of 3,000l. gave security to the bankers on his own property for the overdraft, and the company thereupon entered into an agreement with him in a certain event to give him a debenture containing a floating charge on the company's assets, and this agreement was registered under section 93 of the Companies (Consolidation) Act, 1908. The event having happened within three months before the winding up of the company, a debenture for 3,000l. and interest, containing a floating charge, was given to the director by the company on February 1, 1915. A resolution for winding up was passed on February 23, 1915-Held, that the debenture was invalidated by section 212 of the Companies (Consolidation) Act, 1908, and that the agreement contained no present charge of which the director could avail himself. LOVE & Co., In re; FRANCIS v. THE COMPANY, 85 L. J. Ch. 281; [1916] 1 Ch. 203; 114 L. T. 395; [1916] H. B. R. 42; 60 S. J. 221; 32 T. L. R. 210-Sargant, J.

Master's Certificate-Summons to Vary.]Held, also, that although the amount due under the debenture in question, together with certain other debentures (the validity of which was not disputed), had been found by a Master's certificate in a debenture-holder's action which had become binding under Order LV. rule 70, there were "special circumstances under rule 71 which entitled the Court to hear a summons by the liquidator to vary the certificate. Ib.

Companies or their liquidators should not as a rule consent on a motion for judgment in a debenture-holder's action to a declaration that the debentures constitute a charge on the company's assets. Ib.

Debt Due from Debenture-holder to Company-Claim of Set-off.]-The defendant, who was the holder of second mortgage debentures issued by the plaintiff company, gave a bill of exchange payable to the company. When the bill became due the debentures had become payable, and the defendant dishonoured the bill. In an action on the bill the defendant claimed to be entitled to set off the debt due on the debentures against the amount of the bill. The second mortgage debenture-holders were not entitled to payment until the first

series of debentures had been redeemed :— Held, that the defendant was not entitled to the set-off, as the effect of it would be to give him a preference over the first debentureholders.

WILKINS & ELKINGTON, LIM. v. MILTON, 32 T. L. R. 618-Darling, J.

VII. MEETINGS OF SHAREHOLDERS.

now

necessary,

Notice to Increase Capital-Extraordinary Resolution-Form of Notice.]-A consolidating statute is not to be interpreted by reference to previous decisions, when the language used is clear and free from ambiguity. Where it is proposed to increase the share capital of a company by an extraordinary resolution, it is having regard to the language of section 69 of the Companies (Consolidation) Act, 1908, that the notice convening the meeting should actually specify the intention to pass the resolution as an extraordinary resolution. It is not enough, as formerly was the case under section 129 of the Companies Act, 1862, for the language of the notice to indicate with sufficient clearness that such is the intention. MACCONNELL v. PRILL & Co., 85 L. J. Ch. 674; [1916] 2 Ch. 57; 115 L. T. 71; 60 S. J. 556; 32 T. L. R. 509-Sargant, J.

Notice of a meeting of a company to propose a resolution to increase its share capital is not sufficient, if it only signifies generally an intention to propose some increase or other. The notice must state specifically the amount by which it is proposed to increase the capital. Ib.

a

Form of Proxy-Articles Effect of Arbitration Clause.] Article 60 of the articles of association of a company provided that "any instrument appointing a proxy shall as nearly as circumstances will admit be in the following form," and then followed a form applicable to voting at one particular meeting. Article 101 provided that if any difference should arise between the company and any member in regard to rights under the articles it should be referred to arbitration. At an extraordinary meeting of the company a resolution that the directors, of whom there were three, should be not more than five and that two named persons should be appointed directors, received majority of votes on a poll, but the chairman declared it lost on the ground that the proxies for certain votes which were recorded in favour of the resolution and without which it would not have received a majority were for voting at any meeting and not at the particular meeting only. The three previous directors then held a directors' meeting and two of them appointed a fourth director, and thereupon the company and the third of the previous directors and the two persons named as directors in the resolution brought an action against the other directors for a declaration that the appointment contained in the resolution was valid. The defendants moved for a stay under the Arbitra