Charles Mac Naughten Sir Francis Beaufort Palmer.

Company precedents for use in relation to companies: subject to ..., Volume 2 online

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Spaekman v. Evans, L. R. 3 H. L. 171 ;
Ex parte LittUdale, 9 Ch. 267. [But
liquidator cannot rely on irregularity,
$,g., no sufficient notice before for-
feiture (AusHnU ease, 24 L. T. 932) ;
though contributory can if he desire
to g^t on list. Bottomlej/'s case, 16 Ch.
D. 681.]

No power in regfulatlons. Power not
duly exercised. Blegal scheme for
reducing capital. Hope t. Interna-
tional Society, 4 C. Diy. 827 ; Trevor y.
Whitworth, 12 App. Cas. 409; Lord
WalUeourVs ease, W. N. (1899) 268 ;
Bellerby y. Rowland's Co., supra.

Subsequently acted as a member. Easti^s
ease, 4 Ch. 274.

Where a oontiibatory's name is excluded from the A list, it is not neoessazy or
usual to declare that the order is to be without prejudice to his being placed on the
B list, for it is well settled that the matter remains open. Wright's ease, 12 Eq.
331, 345.

Digitized by





A person not on the refrister mav be fixed m a
contribiitory wliere it can be atkown that^

He is a member, and ought to be on the
register. Wmttoiul't ea$9, 16 0. D.

He agreed to become a member, and
ooght to have been registered. Ser"
cynia Copper Co., (1894) 2 Ch. 403.

Hia shares were ooUnsiTelT forfeited.
Spaekmtm v. Evam, L. R. 8 H. L. 171 ;
JSaparto Trading Co., 12 C. D. 201.

Hia shares were smrendered illegally or
not bond JIde. AddUon's ease, 6 Ch.
294 ; MwgarCt ease, 1 De G. & Sm.
760. See BeUerby ▼. RowUmd^ ie. Co,,

Transfer by him invalid, e,ff., to an in-
fant. Symon's eate, 6 Ch. 298 ; 8outk
London Fish Market Co., 39 C. D.
324. Or made after winding-np order
without consent of Conrt. Sect. 153
of 1862. Onward Building Society,
(1891) 2Q. B. 463.

He accepted office as a director, failed
to qualify within the time specified,
and therefore by the articles was '* to
be deemed" to agree to take the shares
from the coy. But in absence of such
a provision, accepting office, and even
acting, only amount to offer to take.
^utoAi»«on>(MM,(1896) lCh.226; I$aae$'
ease, (1892) 2 Ch. 168 ; Hereynia Co.,
(1894) 2 Ch. 403. And see now sect. 2
of the Ccnnpanies Act, 1900, and
Parti., 8thed., p. 611.

He executed a transfer without know-
ledire or consent of transferee. Cart^
melVe ease, 9 Ch. 691 ; Hennessey* s ease,
8 De G. ft Sm. 191 ; 2 M. ft G. 281 ;
Heritage's eau, 9 Eq. 6.

He executed a tranmer to a fictitious
transferee. CorJleld'sease,W.'N.{lB7Z)

Bnt he may eeoape on the groond that—

He was not in fact registered, and has a
good defence to specific i>erformance.
Barangah Co,, 36 C. Div. 702 ; Black's
case, 8 Ch. 359; West London Com.
Bank, 61 L. T. 807 ; I^revor v. WhU^
worth, 12 App. Cas. 409.

Agreed only to take fully paid shares.
Maedonald, Sons ^ Co., (1894) 1 Ch. 89.

Aoquiesoenoe with knowledge by every
shareholder. Brotherhood's case, 81
Beav. 366; Phosphate of lime Co..
L. R. 7 C. P. 848. [Mere lapse of
time no defence. S. Cj

Surrender not in fact illegal {Wrighfs
case, 7 Ch. 65 ; Dronjield Co., 17 C. Div.
76) ; or acquiescence, as above.

Transferee after attaining majority ac-
quiesced. MitoheWs case, 9 £q. 368 ;
Zumsden's ease, 4 Ch. 31. Shares
transferred by infant to person sui
Juris. QoocVs ca\e. 8 Ch. 206. Com-
pany after knowleoge of infancy guilty
of laches. Parson's case, 8 Eq. 656.

He ceased to be a director before end
of time allowed for qualifying. Salxs*
bury- Jones' ease, (1894) 3 Ch. 366. His
appointment void, because the posses-
sion of the qualification shares was, by
the regrulations, a condition precedent
to the election. Broum's case, 9 Ch. 102 ;
Jeimer's case^ 7 C. Div. 132.

Transferee subsequently acquiesced, and
became bound before winding-up.
MttchelVs case, 9 Eq. 363 ; Lumsden^s
case, 4 Ch. 81.

Digitized by



Table m. — continued.

He snbecribed the memorandnm of asso-
ciation for fihares. Evan's case^ 2 Ch.
427 ; London Coal Co., 6 C. D. 626.

He applied in fictitious name, or of
infant. Pttgh and Sharman*s caae^ 13
£q. 666; Savigny'seate.W, N. (1899) 1.
Procured infant or other incapacitated
person to apply for his benefit.

He traDsferred to some nominee not out
and out. HyanCs ease, 1 De G. F. &
J. 76 ; Kintrea't ease, 6 Gh. 96.

Directors* approval requisite, and was
obtained by misrepresentation in the
transfer or otherwise. Williams^ ease,
9 Eq. 226 ; Rogers' ea^e, 25 L. T. 406 ;
W. W. Williams' ease, 1 0. D. 676 ;
Heritage's ease, 9 Eq. 223.

All the shares allotted to other persons.
MackUy's ease, 1 C. D. 247. He
applied for other shares, which were
to include those for which he signed
memorandum. CMman's ease, 81 C. D.

Shaves allotted to firm ol which he was
a member. Dunster's ease, (1894) 8
Ch. 478.

See oaoee where transfer to infcoit.

Great lapse of time.
Beay. 887.



Liability on

Liability to pay for Shares.

The terms of the Act of 1862 in the case of a company limited by shares, and in
particular the provisions of sects. 7 and 38, leave no doubt about the obligation of
shareholders to pay to the company the full amount of their shares. The words of
sect« 7, limiting the liability of members to ** the amount unpaid on their shares,"
can only mean, as Lord Macnaghten pointed out in the Ooregum case, (1892) A. G.
146, that the liability of the member oontinues so long as any thing remains unpaid
on his shares. Nothing but payment, and payment in full, can put an end to the
liability. '* All the legislation," said his lordship, ** proceeds on the footing <tf
recognizing and maintaining the liability of the individual member to the company
imtil the prescribed limits are reached." The liability under the Act of 1862 was
to pay in money or (with the company's consent) money's worth. Baglan Hatt Co.,
5 Ch. 346. But by sect. 26 of the Companies Act, 1867, the legislature restricted
the power to pay otherwise than in cash by providing that any shares should be
deemed to have been issued and to be held subject to the payment of the whole
amount thereof in cash imless the same should have been otherwise determined by a
contract duly made in writing and filed with the Registrar of Joint Stock Companies
at or before the issue of such shares. And whilst this section was in force, it
followed that once a share was issued it had to be paid up in full in cash unless a
sufficient contract providing for some other mode of payment was duly filed before
such issue. The cash payment section has, however, been repealed by the Com-
panies Act, 1900, as from 31st Deoember, 1900, and accordingly the law is now
restored as it stood under the Act of 1862. Henoe ahares, whether subsocibed in
the memorandum or otherwise taken, may now be paid up in money or (with t]M
oonsent of the company) in money's worth, e.g., by making over to the company
property or rendering to it services. Ifaglan Mall Co., 6 Ch. 846. And it is wdl

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settled that if a valid ooniraot be made for the aooeptonoe by the oompaay of speei-
fied property or servioes of sabstantial Tahie in payment or part payment of aharee
the Conrt will not, whilst the oontraot stands, inquire into the Talne of the oon-
sideration even at the instance of the liquidator. FitlVs com, 6 Ch. 11 ; i2» BagUn
Hall Co., 5 Ch. 846. A reoent attempt in Be Wragg, Limited, (1897) 1 Ch. 796, to
upset this well-established role signally failed. See also Be 7%eatrieai Trutt, (1896)

1 Ch. 771.

The result of these deoisions is that a company may and sometimes does issue
paid-up AtaeB at a discount, that is, as the price of p r oper ty worth in the mariEot
much less than the nominal amount of suoh shares, Mid the transaction, though an
abuse of the Acts, cannot practically be upset ; but except in this way it is not per-
missible or practicable to issue shares on a cash basis at a discount or by way of
bonus. Ooregum Gold Mining Co, t. Boper^ (1892) A. C. 125 ; EddyHone Marine
Insurance Co,y (1893) 3 Ch. 9.

Under sect. 8 of the Companies Act, 1900, a commission may be paid for sub-
scribing the shares where shares are offered to the public for subscription, and thus
in effect the role that shares may not be issued at a discount is ffo tanto relaxed :
that is, the financial result to the company is the same as if the shares were issued
at a discount ; but as a matter of form the transaction is correct : the shares are
fully x>aid up by the subscriber, and the commission is paid him by the company out
of its funds as part of its business expenditure.

The regfistered holder of a share is the person liable in respect thereof (unless. Who is liable,
indeed, it has been validly issued as a paid-up share), and suoh holder is liable
whether he is the beneficial owner or a mere trustee, and whether the company is or
is not cognizant of the trust. Chapman and Barber* s eate, 3 Eq. 301. The cestui que
trtttt cannot be made liable either as shareholder or as a contributory (Buggs^ ease^

2 Dr. k Sm. 459 ; Somervail v. Cree, 4 App. Cas. 648), for there is no privity of
contract between him and the company.

The liability of the registered holder to pay arises in most cases from the opera-
tion of sect. 16 of the Companies Act, 1862, which expressly provides that *' all
moneys payable by any member to the company in pursuance of the conditions and
regulations of the company, or any of such regulations and conditions, shall be
deemed to be a debt due from suoh member to the company " ; and the regulations
generally provide that calls and instalments made payable by the terms of issue
shall be paid when due by the holder to the company. See ** Calls,*' p. 526. Some-
times, however, the regulations are defective in this respect, and in such cases it is
necessary to resort to the contract under which the shares were issued, and to rely
on the promise therein to pay the whole or part by specified instalments. In a
winding-up the liability to pay whatever may be called for arises under sect. 88 of
the Companies Act, 1862.

Decisions on Sect 25 (now repealed) of the Companies

Act, 1867.

Sect 25 of the Companies Act, 1867, ran as follows : — ** Every share in any Filing of
company shall be deemed and taken to have been issued and to be held subject to contracts
the payment of the whole amount thereof in cash, unless the same shall have been ^f^^^t^fiV
otherwise determined by a contract duly made in writing and filed with the
Registrar of Joint Stock Companies at or before the issue of suoh shares."

The result was that, to use Bo wen, L. J.'s language in London CeUuloid Co.,
39 C. D. 204, *' there is a statutory liability to pay the whole amount in cash, which
can only be avoided under the statute in one way, namely, by a registered con-

Digitized by



tract." A registered oontraot under sect. 25 did not, howerer, it mnst be i
bered, exempt the shares from being paid, up in full ; the section only regulated
the mode of payment. Per Lindlej, L. J., In re Addleetone linoleum Co. (1887),
87 G. D. 205. It did not affect the quantum or the adequacy of the consideration.
That was regulated by the Act of 1862, read in the light of the above (p. 510)

The Companies Act, 1898 (see Appendix), enabled the Court to grant rdief in
relation to sect. 25 of the Companies Act, 1867, but sect. 25 is now repealed by
sect. 33 of the Act of 1900 ; but it is desirable to refer to some ol the leading
decisions on the repealed sections, having regard to the peculiar language used by
tbe repealing section. It runs as follows : —
33.— (1.) Section 25 of the Companies Act, 1867, and the other enactments men-
tioned in the schedule to this Act to the extent specified in the third
column of that schedule are hereby repealed.
(2.) No proceedings under section 25 of the Companies Act, 1867, shall be
oommenced after the commencement of this Act.
This provision — ** that no proceeding under sect. 25 shall be commenced after the
commencement of this Act"— may not, as Bigby, L. J., pointed out in BruUm t.
Bumey, Limtd.^ (1901) 1 Ch. 637, cover the entire case. <* Suppoee," said the Lord
Justice, " that a brewery company were to be wound up and there were surplns
assets of which the appellants desired to obtain their share : though no proceedings
could be taken against them under sect. 25, is it dear that they could obtain their
share of the assets in the winding-up ? I think it is not an unreasonable contention
(whether it be well founded or not it is not necessary now to decide) that in the
absence of a contract filed under sect. 25 they would not be able to obtain their
shares of the assets in the winding-up. It might be years before such a question
arose, and meanwhile the shareholders would be placed in a difficult position and
the value of their shares might be seriously imperilled." From this position they
would be rescued if they could obtain, either before or in the winding-up, relief by
being allowed to file a proi>er contract or memorandum nune pro tune, Henoe the
Court in the case cited refused to treat the Act of 1898 aa/unetue <ifieio, and it is
more than probable that its powers may be invoked in many cases in the future.
The commonest cases for relief under the Companiee Act, 1898, are : —

(a) Where no contract in writing at all was filed *' at or before the issue " ol

the shares. See Jackson ^ Co,, (1899) 1 Ch. 348. For the precise
meaning to be attached to the words ** at or before," see I^umel Minm§
Co,, PeeVs eate, 35 C. D. 579, and Anglo-CoUmial SyndieaU, Zimtd., 65
L. T. 847.

(b) Where a contract was filed at or before the issue, but it was insufficient—

(i) Because it was not made between the proper parties. See J>akoM
V. DaUon Time Lock, 66 L. T. 704 ; Bartle/e ease, 10 Ch. 157 ;
Smith y. Brown, (1896) A. C. 614 ; PrUchard's ease, 8 Ch. 960;
Common Petroleum Co,, (1895) 1 Ch. 759; Transvaal Bgplering
Co. y. Albion Transvaal Gold Mines, (1899) 2 Ch. 370.

(ii) Because it was not signed by both parties. Nino EberharH Co.,
43 CD. 118.

(ill) Because it did not specify or correctly specify the consideration
or the general nature of the consideration. Kharaskkoma,
(1897) 2 Ch. 461 ; Robert Watson ^ Co., (1899) 2 Ch. 509 ;
8. Frost i Co., (1898) 2 Ch. 556 ; (1899) 2 Ch. 207 ; Markkam
and Darter's ease, (1899) 2 Ch. 480 ; Tom TU Cpele Co,, Fisher's
ease, 15 T. L. B. 132 ; W. N. (1899) 85 ; MayU Metal Separatimy
Syndicate, W. N« (1898) 159 ; Jackson # Co., (1899) 1 Ch. 348.

Digitized by




seot. 26.

(iv) Beoanfle it was not filed '' at or before the iflsne of the shareB."

See 9upraf (a),
(y) Beoanse it did not state the number of shares to be allotted under
it or gave merelj an option to take shares instead of cash.
Jaek9(m ^ Co,, supra; CoolpardU Mines, 14 T. L. B. 277;
Transvaal Exploring Co. y. AUnon Transvaal Gold Mines, (1899)
2 Oh. 370 ; Delta SyndieaUy 30 C. D. 153 ; Common Fetroleum
Engine Co., (1895) 2 Gh. 759.
(yI) Because the shares were subscribed in the memorandum and the
only contract filed was filed some time afterwards. F. W. Jarvis
^ Co., (1899) 1 Gh. 193; Dalton Time Lock Co. t. Dalton,
66 L. T. 704 (0. A.) ; Archibald D. Doumy, Limited, W. N.
(1900) 152 ; and Ebenezer Timmins ^ Son, limited, 50 W. B. 184 ;
and see HartUy^s ease, 10 Gh. 157, and Whitehead Brothers,
(1899) 1 Gh. 184.
(yii) Where the shares though treated in the books as paid up in cash
were, in fact, issued and credited for a consideration other than
The section used the term ** cash." This did not mean ezclusiYely current coin. Keaninff of
If the company owed to A. 100/., presently payable, and A. owed the company ^^^f®^^ ^"
100/., also presently payable in respect of his shares, and it was agreed between
the parties that the one sum should be set off against the other, ibat amounted to
payment in cash within the section. It was not necessary to go through the idle
form of the company handing the 100/. over and the allottee handing it back again.
Bpairgo^s ease, 8 Gh. 407 ; Whitens case, 12 G. D. 517. Some doubts were thrown on
these cases by Lord Halsbury's obserrations in Johannesburg Hotel Co., (1891) 1 Gh.
at p. 129 (0. A.) ; but the Piiyy Gouncil has recently expressed a yery clear opinion
that Spoirgo^s ease was rightly decided. Laroeque y. Beauehemin, (1897) A. G. 858 ;
North Sydney Investment Co., (1899) A. G. 263. See also Barrow's ease, 14 G. D.
482 ; Coolgardie Mines, 14 L. T. B. 278 ; Jackson # Co., (1899) 1 Gh. 348 ; Transvaal
Exploring Co. y. Albion Transvaal Gold Mines, (1899) 2 Gh. 370; and Eastern and
Australian Steamship Co., 68 L. T. 321.

As to cases where the company is estopped by certificate from alleging that shares
haye not been fully paid, see p. 506.

As to the construction of particular words in the Act, the following cases may be
usefully referred to : —

** Gredited as fully or partly paid for a consideration other than cash." Means
in consideration of property or senrioee or other benefits which the company agrees
to take in payment instead of cash. Tom Tit Cycle Co., FisherU case, 15 T. L. B.
132; W.N. (1899)35.

*< The company or any person interested in such shares or any of them may
apply." See Whitefriars Financial Co., (1899) 1 Gh. 189.

** The Gourt " means the Gourt haying jurisdiction under sect. 35 of the Act of
1862. Lueky Ouss, Limited, 70 L. T, 722 ; Reeves ^ Son, (1899) 1 Gh. 184.

'* Accidental or due to inadyertence." Lucky Guss, supra; Jackson ^ Co., (1899)
1 Gh. 348 ; Tom Tit Cycle Co., 15 T. L. B. 132 ; W. N. (1899) 35.

" Or that for any reason it is just and equitable to grant relief." Boxburghe
Frees, (1899) 1 Gh. 210.

*< Either before or after an order has been made or an efleotiye resolution has
been passed." Welton y. Sqffery, (1897) A. G. 299.

*< On such tenns and conditions." See May's Metal Co., W. N. (1898) 159 ; Tom
Tit Cycle Co., W. N. (1899) 85 ; Farmer's, Limited, (1900) 2 Gh. 442.
** Jb satisfied that the filing of the requisite contract would cause delay or incon-
P. L L

Digitized by




Form 453.

List of oon-
tribatories to
be made out
by liquidator.
Form 42 of

reikience or is impraotioable." See Jaekson ^ Co., (1899) 1 C9i. 192 ; Eee9et f Som,
(1899) 1 Ch. 192.

The application in the Chanoery Diyision is commonly made by motion, bnt may
properly be by summons adjourned into Court {IH{ffln y. Mexican Gold Co.^ W. N.
(1899) 116 ; JFhitefriart Financial Co., (1899) 1 Ch. 184 ; Me Dawson, W. N. (1889)
222) ; in the winding-up Court it should be in Court. Conceuiona Acquintions
Syndicate, 68 L. J. Ch. 49.

The application must be supported by affidavit. The affidayit must not barely
state that the omidsion to file was accidental or due to inadvertenoe, but must set
out the drcumstanoes. Victoria Brick Worka, W. N. (1898) 162; see, further,
Company Precedents, 8th ed., Part I., pp. 1261—1270.

Under sect. 7 of the Companies Act, 1900, a contract and a return haire to be
filed within one month after the allotment of shares *' in whole or in part for a
consideration other than cash.'' But, in ease of default, there is no provision that
the shares are to be deemed to be allotted on a cash basis. Penalties are, however,
imposed in case of default on officers of the company. This default is not cme
which comes within the Act of 1898, but Walton and Bucknill, JJ., as vacation
judges, have, nevertheless, made orders extending the time for filing. Mowar^a
Stores, 47 S. J. 768; Marconi, ^. Co,^ "Times,*' Sept. 17, 1903.

Machinery for Fixing and Enforcing Contributories'


As to the neoeisity for using this method of prooedure, see Wragg, LimiUA^ (1897)
1 Ch. 796, 802.

The following is a list of the contributories of the aboye-named coji
made out by me from the books and papers of the sd coy, together
with their respective addresses and the number of shares [or extent of
interest] to be attributed to each, so far as I have been able to make
out or ascertain the same.

In the first part of the list the persons who are contributories in
their own right are distinguished.

In the second part of the sd list the persons who are contributories
as being representatives of, or being liable to, the debts of others are

Dated this

day of ■


A. B., {OffRecr ant] Liqr,

Digitized by




[^A second sheet is as foUowSy and this is followed hy as many similar
sheets as are necessary to include contributories in their own right ]

In the matter of the Coy, Limtd.

FiBST Part — Oontetbutobies m their Own Eight.

Number in





In what

Number of Shares

(or extent of


[/n practice^ separate sheets of representative contributories are annexed

as follows ;]

In the matter of the Coy, Limtd.

Seooitd Part — Contributories as BEma Befbbsentatives of or


lAdd Tabular Form as in First Part."]

The nsnal entry in the fifth column of the first part is now ** In own right," Entries,
and in the fifth oolnmn of the second part, *' As the ezeontor of A. B., deoeased,"
or <* As the adndnistratoir of A. B., deceased,'' or '* As the trustee in bankruptcy of
C, a member."

Take oare that the serial number once assigned to a contributory is always Serial
assigned to him thronghout the proceedings. number.

The names, addresses, and descriptions contained in the company's register of
members should be accurately transcribed. '* Oare of " is a sufficient address, if so
entered in the regfister.

In preparing the list of contributories the liquidator should carefuUy search the Preparation
register of members (see fupra) and other books and papers, and should frame the ^^ ^i^^-
list with due regard to the rules laid down tifpra, pp. 4 98, 602 et seq, Primd faciei all
persons on the register of members should be enterod in the list, but the liquidator
ihonld look into eaoh case, and if he is satisfied that a name is improperly on the
register he should omit it from the list. See cases in Table I. above. On the
other hand, ho should ascertain whether there are cases in which names not on
the register should be entered in the list (see Table III. abore) ; and whether shares
entered as paid up are really paid np, and in particular whether sect. 25 of the Act
of 1867, if applicable, touches the matter ; see p. 611, tupra.


Form 464.

Take notice that I, the liqr of the above-named coy, have appointed Notioeto

the day ol , 19 — , at of the dock in the noon, ^f appoint-

at [insert place of (^ointment'] , in the county of , to settle ment to settio


Digitized by




lint of oon-
Form 43 of

the list of the oontributoriee of the above-named coy, made out
by me, purBuant to the Cos Acts, 1862 to 1900, and the rules
thereunder, and that you are included in such list in the character
and for the number of shares \_or extent of interest] stated below,
and if no sufficient cause is shown by you to the contrary
at the time and place afisd, the list will be settled, including yon
Dated this — day of — ^, 19 — .

[A. B. C, Off Rear and^ Liqr,
33, Oarey Street, Lincoln's Inn, London, W.C.

To Mr. A. B. [and to Mr. 0. D., his solor].

\^Add Tabular Form as in Form 463, %n$erHng name, Sfc. of Mr. A, B,"]

required at
setuing list.





to yary list.


The above form is Form 43, varied to suit the case of the official reodver.

See Rules 81 and 82 of 1903, supra, p. 503.

Where the official receiver is liquidator he usually gives seven dear days' notice.

At the time and place appointed to settle the list of contributories, the following
will or may be required : —

(1) The list, Form 453 ; (2) Copy memorandum and artidee ; (3) Register of
members and transfers ; (4) Applications for diaree ; (5) Record of notices of allot-
ment given ; (6) Share ledgers ; (7) Minute books, and any other books relating to
the members.

It is not now the practice on settling the list for the liquidator (at any rate, when
the official receiver fills that office) to produce an affidavit identifying the company's

Online LibraryCharles Mac Naughten Sir Francis Beaufort PalmerCompany precedents for use in relation to companies: subject to ..., Volume 2 → online text (page 67 of 152)