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"In the case of provisional committees, or the projectors of a company, it is now perfectly well settled law that there is no partnership between them; no common power of binding each other merely by such a relation; each binds himself by his own acts only. There are therefore very few creditors of such a body collectively, though many of one, two, three, or more acting individuals who compose the committee, or are projectors, and so there may be a series of contracts to which there are different contributories, according as they have been authorised by different persons, very few binding all, and those only upon the rare accident of each individual authorizing that particular contract.”
Lastly, it may be noted that where it is intended to apply to the London Stock Exchange to quote the shares of a company in its official list, the following requirements have to be complied with:
The memorandum of association must be printed in extenso on the prospectus.
The articles of the company must prohibit any dealings by the company in its own shares.
The capital must not be less than £50,000.
The shares must be offered to the public.
Upwards of two-thirds of the issue must be bonâ fide subscribed by the public.
The company must be represented by a member of the London Stock Exchange, who is responsible to the committee for the respectability of the company.
THE ISSUE OF SHARES.
SHARES in a company registered under the Companies Acts are personal property.
Each share in the case of a company limited by shares must be distinguished by its appropriate number.
Every share in any company shall be deemed and taken to have been issued and to be held subject to the payment of the whole amount thereof in cash, unless the same shall have been otherwise determined by a contract duly made in writing and [the original] filed with the Registrar of Joint Stock Companies at or before the issue of such shares. [C. A., 1867, s. 25.]
The issue of the shares of a company is usually the result of applications received from members of the public through the medium of the prospectus.
The application is usually in writing on a form supplied with the prospectus, but any written expression of a wish for shares, if followed by allotment, will be sufficient to bind the allottee. An application for shares may also be verbal. [Bloxam's Case, 33 Beav. 529.]
An application may be made either unconditionally or dependant upon the fulfilment of some prior condition. [Rogers' Case. Harrison's Case, 3 Ch. 633.]
The directors of the company accept the application, if approved, by an allotment of shares.
To bind the allottee the fact of the allotment must be communicated to him, in order to shew the applicant that the company has accepted his offer.
The usual form of communication is by a letter of allotment
signed by an officer of the company, and impressed with a penny stamp.
The communication of the fact of allotment may, however, be verbal. [Gunn's Case, 3 Ch. 40.]
The applicant can withdraw his application at any time previous to allotment, as, until acceptance by the company, there is no contract. [Ritso's Case, 4 Ch. D. 774.]
He may, moreover, withdraw his application after allotment and before the fact is communicated to him.
4 Eq. 9; Pentelow's Case, 4 Ch. 178.]
Even after allotment an applicant has been held entitled to repudiate his shares where, between the application and the allotment, the director on the faith of whose name solely he had applied for shares had retired from the board. [Scottish Petroleum Co., 17 Ch. D. 373.]
But the repudiation must be made without delay. It is no ground for repudiation that directors have retired after allotment; for the tenure of office by a director is necessarily liable to be terminated.
Nor is it a sufficient ground for repudiation that certain directors retired before allotment, unless the applicant relied exclusively on their names. [Hallows v. Fernie, 3 Eq. 520; 3 Ch. 467.]
The withdrawal may be made orally, though it should preferably be in writing. [Wilson's Case, 20 L. T. 962.]
If it is brought in any way to the knowledge of the company that the applicant has done anything inconsistent with the continuance of his offer, this will be sufficient to constitute a withdrawal. [Dickenson v. Dodds, 2 Ch. D. 463.]
But notice of the withdrawal, in whatever form, must be given to the company itself.
Thus, notice of withdrawal addressed to the bankers of the company, unless brought to the knowledge of the company before allotment, is not sufficient.
The allotment of shares must be an unqualified acceptance
of the application. The introduction of a new term into the contract, such for instance as the payment of interest, is not a sufficient acceptance to make a binding contract with the allottee. [Harris' Case, 7 Ch. 587.]
The fact of the allotment must in some manner directly or indirectly be brought to the knowledge of the allottee.
Where no notice of allotment was sent to an applicant, he was held not to be liable as a shareholder. [Wallis' Case, 4 Ch. 325.]
Where no notice of an allotment was sent to an applicant, but he subsequently executed a blank transfer of the shares which had been allotted to him, he was held to be liable as a shareholder. [Crawley's Case, 4 Ch. 322.]
Where an application was made through an agent to whom the notice of allotment was afterwards sent, it was held that the applicant was liable. [Levita's Case, 5 Ch. 489.]
Where a company allotted shares to an applicant, and duly addressed and posted to him a letter of allotment, which was never received by him, he was still held to be a shareholder. [Household Fire Co. v. Grant, 4 Ex. D. 216.]
Where a letter of allotment was duly posted and received by an applicant who, before he received it had sent by post a letter declining to take any shares, it was held that he was liable, as the contract was completed when the letter of allotment was put into the post. [McLagan's Case, 51 L. J. Ch. 841; Harris' Case, 7 Ch. 587.]
A notice of allotment, if sent to a wrong address, does not, of course, constitute a binding contract, unless the erroneous address is given by the applicant. [Townsend's Case, 13 Eq. 148.]
The cases shew that it is not necessary that there should be a formal notice of allotment sent to an applicant. It is sufficient if it appears that the applicant was made aware that the company had accepted his application. The mere entry of his name on the register of shareholders is not sufficient for this purpose. [Gunn's Case, 3 Ch. 40.1,
There is one class of shareholders to which no notice of allotment is necessary. The subscribers to the memorandum of association are, by the 23rd section of the Act 1862, bound to take as many shares as they have subscribed for. They are bound to take these shares direct from the company, and to pay for them either in money or in money's worth. [Forbes' Case, 5 Ch. 270.]
Lapse of time is no bar to the continuance of the liability of the subscriber to take the shares from the company. [Sidney's Case, 13 Eq. 228.]
Only in the event of all the shares being subscribed for by and allotted to other persons, is the subscriber relieved from his obligation. [Mackley's Case, 1 Ch. D. 247.]
The subscriber is not bound to take any particular class of shares, as this is a matter not dealt with in the law regarding the memorandum of association. So, where a subscriber signed for fifty ordinary shares, and afterwards took from the company twenty-five preference and twenty-five ordinary shares, he was held to have fulfilled his obligation. [Duke's Case, 1 Ch. D. 620.]
By the 25th section of the Act 1867 all shares are deemed to be issued subject to the payment of the whole amount in cash, except such shares as are issued either as partly or fully paid, under a duly registered contract.
Payment in cash need not mean actual money payment. It is sufficient if at the time of allotment there is an actual debt due and payable to the allottee in cash by the company. [Andress' Case, 8 Ch. D. 126; Rowland's Case, 42 L. T. 785.]
Payment in cash may also mean payment in money's worth. Thus where an agreement was entered into between a company and one of its directors that the latter should give up certain benefits in consideration of a sum of money which was credited to him in the books of the company, and which was afterwards applied towards paying up his shares, this was held to be a cash payment. [Bentley's Case, 12 Ch. D. 850.]