Francis Beaufort Palmer.

Company precedents for use in relation to companies subject to the Companies acts, 1862 to 1890 ... (Volume 2) online

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siijjra, p. 518]. And order that such costs, charges, and expenses,
■when so taxed, be pd out of the assets of the sd coy. Newspaper Co.,
M. E., 22nd June, 1877. B. 1143. And see Heijivood Chemical Co.,
0136 of 1892. Eeg. 19th June, 1893.

See also order in Brentwood Brick Co., loth November, 1878, A. 2089, where the
costs were directed to be taxed ' ' for the purpose of being paid out of the assets of
the company, as and when may be hereafter ordered."

Under the form of supervision order now commonly adopted by Vaughan
Williams, J. (Form 768), aU costs have to be taxed.



Removal of Liquidators and filling up Vacancies.

See, as to this, sect. 150 of 1862, and Forms 770 et seq.

As to what is due caiise for removal, see Section I. Chap. L.

As to the power of Court to remove liquidators appointed by the company, see
sect. 141 of 1862 ; and Ex parte Turner, 9 W. R. 500 ; Ex parte Ftdbrook, 2 De G.
J. & S. 348; Oxford Building Co., 49 L. T. 495. The power to remove in super-
vision cases is either under sects. 141 and 150, or under sects. 93 and 151.

The Court may, on making a supervision order, appoint a liquidator, where the
contributories have not done so by their winding-up resolutions. London Quays Co.,
3 Ch. 394.

But after a supervision order the shareholders may meet, resolve on appointment
of new liquidator, and inform the Coiu't of their wishes. Montrotier Asphalts Co.,
W. N. 1874, 172.



Form 809.

Affidavit of
iitncHs of
liquidator.



1. I have for more than [15 years] last past known, as being well
acquainted with W., of , chartered accountant, the person pro-
posed to bo appointed liqr of the above-named coy.

2. The sd AV. is a member of the firm of , chartered accountants,

and has been a member of such firm for the whole period during which
I have been acquainted with him.

3. The sd W. is a person of respectability and integrity and of good
credit, and in my j udgmout is a fit and proper person to be appointed
liqr of the coy.



REMOVAL OF LIQUIDATOR. 695

Upon tlie applicon of , being the committee appointed by the Form 810.

general body of creditors to represent thoni in the wiuding-np ot the Order rcmov-
above-named coy, &c., Order that B., one of the joint liqrs of the sd iii^' one of two
coy, be and he is hby removed from such office, and the sd K., the and conthm-
other joint liqr, be continued and ho is hby appointed sole liqr of the i^i? tHe other.
sd coy. And order that the applicants and the sd B. and K. bo allowed
their costs of and relating to this applicon out of the assets of the sd
coy [to be taxed]. Colonial Trusts Corporation, M. E., 19th Dec. 1878.
A. 2303.

In tho above case the Kquidators could not agree as to the appomtment of a
solicitor, and accordingly one of them was removed on the application of the com-
mittee. See further as to removal of liquidator, supra.



Upon the applicon of D. and S., creditors of the above-named coy, Form 811.
to remove T. from the office of [off] liqr of sd coy, and to appoint H. Order remov-
in his place and stead, &c., Order that the [off] liqr of sd coy be re- ing liquidator
moved from his office as such [off] liqr as afsd. And order that in his ^„ another"
place and stead the sd H. be appointed [off] liqr of the sd coy. And
[costs]. Moorwood Moor, ^'c. Co., Malins, V.-C, 22nd Nov. 1876.
B. 1940.

The above order, made in a compulsory winding-iip, may be used, with the
necessary variation, in supervision proceedings.



Upon the applicon of P., the [off] liqr, and it appearing that the sd Form 812.
applicant has not received any sum or sums of money or any of the q -,
assets of the sd coy since the date of his appointment as [off] liqr thof , resignation
and the sd applicant desiring to resign his office of such [off] liqr, "^'^*^p/^°
Order that the sd P. be discharged from the office of [off] liqr of the
sd coy, and the sd recognizances and bond be discharged and cancelled.
John Marsland Sf Co., Chitty, J., IGth Ax^ril, 1883. A. 562.



Upon the applicon of the petr in the matters, and of H. and S., two Form 812a.
of the liqrs of the above-named coy, and upon hearing the solors for -d ^^^T
the applicants, and reading the order dated the 2nd Aug. 1884, the ment of two
chief clerk's certificate, dated the 23rd and filed the 28th July, 1890, of three hqui-

' , . dators on

the afft of, &c., and it appearing that G., one of the present liqrs of incapacity of
the above-named coy, is mentally incapacitated and otherwise unfit for third,
business, and the judge having approved of the sd H. and »S. as liqrs
of the above-named coy, without requiring them to give security, doth
hby appoint the sd H., of, &c., and S., of, &c., liqrs of the above-named
coy, in the place of themselves and the sd Gr. And it is ordered that
the sd H. and S. do forthwith lodge in the chambers of the judge their
third and final account as liqrs, in conjunction with the sd Gr., of their



696



WINDING-UP UNDER SUPERVISION.



receipts and i^ayments from the 20tli day of May, 1890, tlie foot of tlie
accounts already rendered by tliem. And it is ordered that the X.
Bank and Y. Bank resply be at liberty to transfer to the sd H. and S.,
as such liqrs as afsd, any moneys standing in the sd banks resply to
the credit of the sd G., H., and S., as such liqrs as afsd. And it is
ordered that the costs of and incidental to and consequent upon this
applicon be costs in the winding-up. Underhanh Mills, 8fc. Co., North,
J., 7th Jan. 1891. B. 108.



Form 813. Dissolution and Destruction of Books.

call^fiiml Upon the ai^plicon of the above-named coy, &c., and it appearing

meeting-. that the affairs of the sd coy are fully wound up. It is ordered that

the liqrs of the fed coy do make up an account and call a general
meeting of the members of the sd coy, as provided by sect. 142 of the
above-mentd Act. Imperial 2Ie7-cantile Credit Association, Bacon, V.-C,
22nd March, 1878.

Formerly, in most cases the liquidator called the final meeting, and procured the
dissolution as in the case of a purely voluntary winding-up, but occasionaUy appli-
cation was made to the Court for an order as above. But after a voluntary winding-
up has come under the supervision of the Court, the proper course appears to be
either to apply for such an order as above, or to apply to the Court for an order for
dissolution under sect. Ill of 1862. See Section I., Chap. LII., and also the
following order : —

Form 813a. Upon the applicon of P., the liqr of the above-named coy, by sum-
mons dated, &c., and upon reading \_si(pervision order~\ an order dated
22nd Nov. 1 893, the certificate of the Registrar (Cos Winding-up) dated,
kc, the afft of P. filed, &c., and the account A. exhibited thereto, the
certificate of the Assistant Secretary of the Board of Trade of the pay-
ment by the applicant to the Cos Liquidation Account of the sum of

1., the a£ft of P. filed, tS:c., and the London Gazette of the 22nd Nov.

1895, And it appearing that the balance of /. by the sd certificate

found to be due from the applicant has been disposed of by him \jtate
lioio\, And it appearing that a general meeting of the coy has been
held pursuant to sect. 142 of the Cos Act, 1862, and that the affairs of
the coy have been completely wound up, and that there is not anything
due either to or from the a^^iilicant as such liqr as afsd. Order that the

sd «& Co., Limtd., be dissolved as from , 189C, And order that

the recognizance dated, &c., entered into by the sd P., and the bond of

the same date entered into by the sd P., together with as his

sureties, bo resply vacated. Mummery and Sons, Limtd. (00299 of
189:3), Hood, Peg., 1st Jan. 189G.



Order for
dissolution in
supervision
proceediugs.



DiHposal of
boolcH.



Sect. 165 of 1862. — AYhcrc any company has been wound up under this Act and
is about to bo disHolved, the books, accounts, and documents of the company and of
the li'^uidutors may be disposed of in the following way ; that is to say, where the



UNCLAIMED DIVIDENDS. 697

company has been wound up by or subject to the supervision of the Coiu't, in such
way as the Court directs.

The application is by ordinary summons of the liquidator, supported by his
affidavit showing that the winding-up has been completed ; that the final meeting
of the company under sect. 142 of 1862 has been duly held, and that at such
meeting the liquidator's final account was received and adopted ; and that the
return to the Registrar of Joint Stock Companies has been duly made, and stating
that in his opinion the books and documents (other than the file of proceedings)
should be destroyed. And see K. 67 of 1862, and Section I., Chap. LII.

The point has more than once arisen whether the dissolution operates as a dis-
charge of the liquidator ; and probably it does.



And it is ordered that the hooks and papers of the sd association, Form 814.
other than the file of proceedings, be destroyed by reducing the same q a , f ,
to pulp. Londo7i and Provincial Supply, Chitty, J., 5th July, 1884. destruction of
B. 2379. books, &c.

Upon, &c. And order that the books, papers, and documents of the
sd coy, other than the file of proceedings, be forthwith destroyed by
fire. Llanrivst Slate Co., M. E., 16th March, 1878. B. COS.

Or,
" Destroyed in the presence of the sd off liqr by reducing the same to
pulp." Bants §- Berks Co., Chitty, J., 7th Jan. 1884. A. 6.

And order the [off] liqr to cut and tear into fragments the books
and papers and documents of the coy other than the documents on the
file of proceedings, so as to render them useless as means of informa-
tion, and that he sell such books and documents when destroyed, and
pay the proceeds thof, if any, to his solor on account of his costs.
Bufalo Hide Co., Chitty, J., 19th April, 1883. A. 635.

And see Section I., Chap. LII.



Unclaimed Dividends.

Where a company is about to be dissolved, it is very commonly found that certain
creditors or contributories, in whose favour dividends have been declared, have not
claimed the same.

The right of such persons is not affected by the non-claim, so as to enable the
Court to divide the fund among the other persons interested, or otherwise to deal
with the same in derogation of the rights conferred by the order declaring the
dividend. Ashler/ v. Ashley, 4 C. Div. 757.

Under the old practice it was usual to pay the amount into Court ; and see
Australian United Co., "W. N. (1877) 37, where upon a reconstruction there were
unclaimed shares, and liberty was given to bring thera into Court. See, also,
Neuchatcl Hock Co., Bacon, V.-C, 15th April, 1886, B. 1983, for order to transfer
to claimant some shares deposited in Court.

But under sect. 15 of 1890, unclaimed dividends will now have to be paid into
the companies liquidation account at the Bank of England. See Section I.,
Chap. XXIV.



&c.



698 WINDING-UP UNDER SUPERVISION.

Form 815. Upon the applicon of W. T. and F. W., the liqrs of the ahove-
Order for named coy, by summons dated, &c., and upon hearing the solors for

payment out the apj)licants, and upon reading the orders dated, &c., It is ordered
liquidation^^ ^-^^^ ^-^^ applicants be at liberty out of the sum of 5,465/. 8^. lid.
account of cash at the Bank of England, standing to the credit of the Cos
exVenses^of'^ Liquidation Account, (1) to make a return to the contributories of the
dissolution, above-named coy of Is. 2d. per share in respect of the shares held
by them in the sd coy, (2) to draw from the sd amount the sum of
250/. to answer the estimated costs of and incidental to the final
winding-up of the above-named coy and dissolution thof, in which
costs one-third of the charges of and incidental to the preparation of
a case laid before counsel in the present year as to the construction of
the Cos (Winding-up) Act, 1890, and the rules thereunder are to be
included, (3) to draw from the sd amount the sum of 89/. 3s. for the
salary of Mr. B., up to the 3rd May, 1891, and (4) to draw the further
sum of 413/. 8s. Sd. and be allowed thereout the sum of 200/. for
their remuneration of and incidental to, and in connection with making
the final return to the shareholders and the dissolution and final
winding-u]p of the coy, and to retain 213/. 8s. 3d. the balance of the
sd sum of 413/. 8s. 3^/. for clerks' services, and for printing, stationery,
and other disbursements of and incidental to the windiug-vip and
dissolution of the sd coy. Overend, Gicniey ^ Co., North, J., 8th Aug.
1891. B. 1068.



699



Section IV.

Arrangements, Compromises, and Recon-
stnictions nnder tlie Act of 1870.



Abeangements and compromises in •winding'-np are generally effected under tlie Provisions of

Joint Stock Companies Arrangement Act, 1870 (33 & 34 Vict. c. 104), which Act of 1870.

provides (sect. 2) that "where any compromise or arrangement shall be proposed

between a company which is, at the time of the passing of this Act or afterwards,

in the course of being wound-up, either voluntarily or by or under the supervision

of the Court under the Companies Acts, 1862 and 1867, or either of them, and the

creditors of such company, or any class of such creditors, it shall be lawfid for the

Court, in addition to any other of its powers, on the application in a summaiy way

of any creditor or the liquidator, to order that a meeting of such creditors or class

of creditors sha,ll be summoned in such manner as the Court shall direct, and if a

majority in number representing three-fourths in value of such creditors or class of

creditors present either in person or by proxy at such meeting shall agree to any

arrangement or compromise, such arrangement or compromise shall, if sanctioned

by an order of the Court, be binding on all such creditors or class of creditors as the

case may be, and also on the liqiddator and contributories of the said company."

The word "company" in the Act means any company liable to be wound-up
under "the Companies Act, 1862" (sect. 3); and the Act shall be read and
construed as part of the Companies Act, 1862 (sect. 4).

The Court having jurisdiction under this Act is, (a) in the case of a winding-up Jurisdiction,
by or under the supervision of the Court — the Coui-t in which the Aviuding-up is
pending, and (b) in the case of a voluntary wiudiug-up — the Coiu-t having jiuris-
diction to make a winding-up oi'der. See Section I., Chap. I.

As to the character of the scheme, the Act imposes no limits on the jui-isdiction Character
of the Court, but there is an implied limit, for it is assumed that the Court will not of scheme,
satiction that which is unjust. Alabama, New Orleans, ^-e. Co., (1891) 1 Ch. 213.

In like manner it was laid down in British and American, &;c. Corp. v. Coupcr,
(1894) A. C. 399, that the jurisdiction of the Court to confirm a resolution for
reducing capital is quite unfettered. ' ' The interests of the dissenting minority
are properly safeguarded by this, that the decision of the majority can only
prevail if it be confirmed by the Court." Fcr Lord Herschell, L. C, ibid. p. 406.

Accordingly, the most diverse schemes of compromise and arrangement have
been sanctioned. Of these the following are the more common : — •

1 . A new company to be formed to take over the assets and liabilities of the old
company ; the debenture holders of the old company to receive debentures or deben-



'00



ARRANGEMENTS— FORMS.



Who may-
apply for
order to siim-
monmeetinars,



Plow applica-
tion made.



Evidence.



Title.



Who are
creditors.



TliKlitH of
BuroticH.



ture stock of, or paid-up shares in, the new company, and the ordinary creditors of
the old company to receive a composition or perhaps paid-up shares in the new
company, and the members of the old company to receive shares in the new company,
with a liability thereon.

2. The debenture holders of the company to receive debenture stock and paid-up
shares in it, and the ordinaiy creditors of the company to be paid a composition
in cash or shares, or both ; the winding-up of the company to be stayed, and the
company to resume business.

3. The creditors of the company to receive a composition of so much in the £ in
cash or specific assets, and the assets to be realized and the shareholders to take any
surplus.

4. The whole of the assets to be sold to some third party, who undertakes to pay
a composition to the creditors, by instalments or otherwise, and also to pay aU the
expenses of the winding-uj).

Looking to the terms of the Act, the liquidator may propose an arrangement,
but it is also open to any creditor to take the initiative ; for the Act expressly
provides that the Court may direct meetings to be held ' ' on the application in a
siunmary way of any creditor or the liquidator." As a general rule, however, the
application is made by the liquidator. However, if he will not move in the matter,
there is no possible objection to the application being made by some creditor who is
interested. Aud a scheme may be sanctioned even where the liquidator objects.

The application to the Court for an order to summon meetings to consider an
arrangement has in the past been made sometimes by motion and sometimes by
summons. All that the Act says is that the application may be made " in a sum-
mary way." But now in the High Court the mode of application is by originating
summons, Vaughan WiUiams, J., having declined to sanction procedure by motion
as being unnecessary and expensive. The apx^lication, however made, should be
supported by a proper affidavit exhibiting the proposed scheme, and stating the
circumstances in which it has been framed, showing the classes of persons which
it is proposed to bind, and stating how it is proposed to convene the meeting, and
what advertisements should suffice to bring it to the knowledge of the various
parties interested. The application should be intituled " In the matter of the
Companies Acts, 1862 to 1<S90," and in the matter of the particular company, and
" In the matter of the Joint Stock Companies Arrangement Act, 1870."

The term " creditor " in the Act of 1870 is to be construed in a wide sense. It
includes "every conceivable class of creditors." Per Bowen, L. J., Alabama New
Orleans Co., (1891) 1 Ch. 243. Accordingly, it includes not merely creditors in
respect of debts presently payable, but creditors in respect of debts still ciu'rent ;
and not merely creditors in the ordinary sense, but persons who can prove for
damages {e.g., policy-holders whose policies are still current) ; and not merely
unsecured creditors, but secured creditors, e.g., debenture holders and debenture
stock holders who have some charge on the assets.

"The language of the section is wide enough to include all creditors ; whether
they hold securities or whether thoy do not hold seciu-ities — they are still creditors ;
and they can come in if they like and prove. If they are amply secured they need
not come — they can hold their securities ; but still they are creditors. Unless this
Act is construed .so as to include all creditors, it appears to me obvious that in a
great many instances the Act would be a dead letter." Per Lindley, L. J., ibid.
pp. 230, 237. See also Midland Coal, S;c. Co., (1895) 1 Ch. 2C7, n., appeal in 11. L.
compromised 74 L. T. 714 ; Wood v. De Mattes, L. R. 1 Ex. 100.

In London Chartcnd Bank of Australia, (1893) 3 Ch. 540, Vaughan Williams, J.,
liold that it was not necessary, in a scheme of arrangement, to reserve rights against
HurcticH.



ARRANGEMENTS — FORMS. 701

The Act contemplates meetings of " such creditors or class of creditors " as it is Meetings,
proposed to make the arrangement with ; and accordingly it has been usual, where
there are several classes, and the arrangement would alfect each class differently, to
call a separate meeting of each class — for example, if tlie arrangement is to tran>fer
the undertaking to a new company, and there are debenture holders, ordinary
creditors, and shareholders in the old company, it has been usual to convene
separate meetings of the debenture holders, and of the creditors, and of the share-
holders. And this is no doubt the proper coui'se to adopt, for it cannot be the
intention of the Act that a collective meeting of several classes shall have power to
bind all classes in cases where the positions and rights of the classes are different.

For example, where some members of a class, e.g., policy-holders, have matured
policies, and the residue current policies, the latter may not be entitled to bind the
former by an an-angement which makes no distinction between matured and current
policies. Sovereign Life v. Bodd, (1892) 2 Q. B. 573 ; and see Re Richards ^- Co., 11
C. Div. 676,

Nevertheless, where there is a class {e.g., debenture holders) the members of
which rank pari passu in point of seciu-ity or for payment, the fact that some
members of the class have a present right to payment whilst others have only a
future right, should not, it is apprehended, be regarded as constituting two classes.

The Act says nothiug about the convention of a meeting of shareholders,
although it provides that when the arrangement is sanctioned it is to be binding on
the liquidator and contributories of the company. Nevertheless, it is usual to
convene a meeting of the contributories where they are affected by the scheme ; but
if they are really not interested in the liquidation, and accordingly are not receiving
anything, then it is not considered necessary to call any such meeting. In any
case, if a meeting of contributories is called, it is considered that a single meeting
is sufficient, and that it is not necessary to pass a special resolution.

Secured creditors are a "class " within the Act. Re Alabama, S;c. Rail. Co., (1891)
1 Ch. 213 ; Empire Mining Co., 44 C. D. 402.

Debentures, debenture stock, and other secui-ities made payable to bearer, are Bearer
not uncommon, and in such cases special care should be taken that the holders have secui'ities.
fair notice of the meeting. This is generally done by directions that the notice con-
vening the meeting shall be advertised in several of the principal newspapers, and,
further, that a circular be seat to all those persons who are known to be creditors
of the company. In the case of bearer securities it has been held that, at a meeting
summoned under the Act, those persons only can be recognized as entitled to vote
who actually produce at the meeting the bearer secmitics to wliich they are entitled.
Wedgwood Coal Co., 6 C. D. 627.

However, it may be that some provision can be made for deposit of bearer
securities and for the delivery of a certificate in favour of the depositor which shall
entitle him to vote without production of the debentures. See Form 821, and note.

The Act of 1870 expressly provides that the decision is to be by the specified Proxies,
majoi'ity "present either in person or by proxy at such meeting." (See sect. 2.)
Accordingly, it is clear that a person entitled to vote in person may vote by proxy,
for the statute in effect says so. On this an important question arises, viz.,
•whether the proxy must be himself a member of the class summoned to the
meeting. Jessel, M.R., in Madras Irrigation Co., "W. N. (1881) 120, held that he
must, on the groimd that "it was well established that for the purpose of a
meeting of any particular class of persons proxies could only be given to and held
by members of that class, and accordingly that the proxies (in that case) given to
the official liquidator were invalid," and this decision is followed by Vaughan
Williams, J.

The writer has not been able to find any prior authority for this so-called " well-



702



ARRANGEMENTS — FORMS.



established " rule, and it is not easy to find any sound reason why the Court should
depart from the -words of the Act, which clearly import that a creditor may be
present and vote by proxy, Avithout any limitations or restriction whatever as to the
status of the proxy.

The rule 46 of the General Order of November, 1862, could not vary the Act, and
Jessel, M.R., held in the case above-mentioned that it did not apply in such cases.
In any case, that rule no longer applies in a compulsory winding-up. To preclude
a creditor or contributory from ai^pointing the liquidator or some outsider to act as
his proxy works inconveniently, and places needless obstacles in the way of
voters.

As to the form of proxy, Vaughan WiUiams, J., requires it to be framed in
special terms. See Form 841, and W. N. (1896) 56. It is, however, submitted that



Online LibraryFrancis Beaufort PalmerCompany precedents for use in relation to companies subject to the Companies acts, 1862 to 1890 ... (Volume 2) → online text (page 91 of 134)