291.

292.

293.

294.

company, or the cost of adjusting the rights of the members among themselves, or of the winding-up; but in the event of the death, bankruptcy, or insolvency of any contributory, or the marriage of a female contributory, the provisions comprised in Cl. 215 to 217 shall also be applicable to the pre

sent case.

EFFECT OF PETITION AND ORDER ON PROCEEDINGS AGAINST
COMPANY.

After presentation of the petition for winding-up, and before making the order the court may, on the application of any creditor, restrain any proceedings against the company or any contributory upon such terms as it thinks fit.-(S. 201.)

Also by section 202, no proceedings shall be commenced or continued against any contributory for a debt of the company, after the order is made, except by leave of the court.

POWER FOR LIQUIDATORS TO SUE ON BEHALF OF THE

COMPANY.

By section 203, if any such company has no power to sue and be sued in a common name, or if for any reason it appears expedient, the court may by its order vest any of the company's property, effects, or rights in the official liquidators, upon which the latter may, in their official or other names, and after giving such indemnity as the court directs, bring or defend any legal proceedings necessary for winding-up the company and recovering its property.

PROVISIONS OF THE ACT TO BE CUMULATIVE.

By section 204, the provisions of this part of the "Act" shall be in addition to, and not in restriction of, any of the provisions with respect to winding-up companies by the court, and the court or official liquidator may, in addition, exercise any of the powers, or do any act in the case of unregistered companies, which might be exercised or done in winding-up companies formed under the "Act;" but an unregistered company shall not be deemed to be a company under the "Act," except in the event of its being wound up, and then only to the extent provided by this part thereof.

295.

296.

297.

PART V.

MISCELLANEOUS MATTERS.

DIRECTORS AND PROMOTERS.

Before a person consents to become a director of a public company, he cannot be too careful in satisfying himself of the accuracy of all the allegations contained in the prospectus proposed to be submitted to the public, for should the latter be framed so as to mislead intending shareholders, he not only compromises his good name, but renders himself liable to actions for recovery of the deposit money. And, moreover, should any false statements be made which show a fraudulent intent to deceive, he will also become criminally amenable to the laws of the land, and all kinds of unpleasant consequences may ensue.

Any promoter (whether a director or not) is liable for all preliminary expenses connected with the getting up of a public company, and unless the payment thereof is expressly provided for in the Articles of Association, the company cannot be called upon after its incorporation to refund the same.

An action tried at Kingston, in April last, before Lord Chief Justice Erle, fully illustrates the liability of a director for preliminary expenses, and a brief report thereof may, therefore, not be out of place.

The action was brought by an advertising firm, against a Mr. Marshall, who was one of the directors of a proposed undertaking, entitled "The Adelaide North Arm Port and Railway Extension Company (Limited)," to recover the sum of £1378 for advertising. It was not attempted to dispute that such sum had been expended by the plaintiffs, but it was urged on behalf of the defendant, that by arrangement all these and other preliminary expenses were to be borne by Mr.

298.

Payne, the projector of the company, and Mr. Allen, who
owned the land, and that the directors were therefore to be
relieved from all liability in respect of the same.
As it was

not proved, however, that the plaintiffs had been made ac-
quainted with this arrangement, they recovered the whole
amount of their claim.

After a company has been incorporated, it is equally important that directors should exercise the greatest care in its administration. In the case Bale v. Cleland and others, tried at Guildford in the month of August last before Baron Martin, it was alleged that the defendants (the directors of the company) had declared a dividend out of the capital, instead of out of the profits of the company, and that in fact there was no profit at all, but on the contrary a loss, and that in consequence of such declaration the plaintiff had been induced to take shares. The action was, therefore, brought to recover the money paid in respect of such shares, and, after two days' hearing, it was agreed to settle the matter by withdrawing a juror, the plaintiff being repaid the money which he claimed. For a full report of this case, the reader is referred to the "Times" of the 11th and 12th of August last. 299. In concluding this brief notice, we would strongly recom

mend all persons who intend becoming directors, to make themselves thoroughly acquainted with the duties and responsibilities which the office entails, and we have accordingly prepared a copious index, in order that such knowledge may be acquired with the least possible expenditure of time and trouble. See also Cl. 93 to 99, and 416 to 420.

AS TO SHAREHOLDERS OR MEMBERS.*

300.

I.

As to becoming a Member. Cl. 300 to 307.

As to the Nature of Members' Interest and Transfer thereof. See Cl. 58 to 62.

III. As to Liability of present and past Members.

IV.

317.

Cl. 308 to

As to the Privileges of Members. Cl. 318 to 323.

I. AS TO BECOMING A MEMBER, &c.

Before subscribing to any company, an intending shareholder should first satisfy himself that the undertaking is

*The words "member" and "shareholder" may, for most purposes, be taken as synonymous.

301.

302.

303.

304.

305.

306.

a bona fide one, and should moreover secure a copy of its Articles of Association, in order to ascertain upon what conditions he assumes a position, which is by no means free from responsibility.

Many persons invest their mouey in public companies very much after the manner of putting it into a lottery and content themselves with the idea that whatever happens their loss is limited, while, at the same time, there is, to say the least, a probability that the company may turn up " trumps," and thus compensate them for the risk. It is not, however, to this class of speculators that we address our remarks; neither is it expected that such persons would take the trouble to read them if we did. But there is yet another, and very numerous class of people, who are constantly seeking for a profitable field of investment for their money, and who, although anxious to avail themselves of the best market, would not be prepared to sacrifice security for the bare prospect of a high rate of interest. It is then to such persons of the latter class as purpose entrusting their money to public companies that we would recommend a perusal of these remarks.

An applicant for shares in a public company may withdraw his application at any time before the allotment takes place, notwithstanding that he has paid his deposit.

The subscribers of the company's Memorandum of Association shall be deemed to have agreed to become members thereof, and, upon registration of the company, shall be entered on the Register of Members accordingly; and every other person who has agreed to become a member, and whose name is entered on such register, shall be deemed to be a member of the company. (S. 23).

If the name of any person is, without sufficient cause, entered in, or omitted from the Register of Members, or if default is made, or unnecessary delay takes place in entering on the register, the fact of any person having ceased to be a member of the company, the person aggrieved should at once apply to a solicitor, who will adopt the necessary proceedings (under sections 35 and 36 of the " Act) for the purpose of obtaining an order to rectify the register.

It is not absolutely necessary that a party should have signed the "Memorandum," or the Articles of Association, to constitute him a member of a company, for the fact of taking shares, whether by application in the prescribed form, or by transfer, constitutes a person a member. In the case of a new company,

307.

308.

309.

310.

however, those persons who omit to sign the Articles of Association, do not become members until the company is incorporated.

A certificate under the common seal of the company, specifying any shares or stock held by a member, shall be prima facie evidence of his title to the same. (S. 31). Should this certificate be worn out or lost, the regulations of the company usually provide for its renewal, on payment of ls. by the member requiring it. (R. 2 and 3). Where, however, forfeited shares are purchased, it is usual to append to the certificate a statutory declaration in writing, that a call in respect of the shares was made-that notice thereof was given that default ensued-and that the forfeiture was made by a resolution of the directors to that effect. This declaration, and a receipt of the company for the purchase-money are held (where the "Articles" so provide) to constitute a good title to such shares. -(R. 22).

As to calls on shares, see Cl. 54 and 55.

Also as to forfeiture of shares, see Cl. 56 and 57.

II. AS TO THE NATURE OF A MEMBER'S INTEREST, AND
TRANSFER THEREOF.

See Cl. 58 to 62.

III. AS TO LIABILITY OF PRESENT AND PAST MEMBERS.

It is a very common occurrence to meet with shareholders who imagine that the moment they have disposed of their shares, all liability in respect thereof ceases. This is not so, however, for by S. 38 every past and present member of a company being wound-up, shall be liable (with the following qualifications) to contribute to its assets to an amount sufficient for payment of the debts and liabilities of the company, the expenses of winding-up the same, and for such sums as may be required for the adjustment of the rights of the contributories amongst themselves.

The qualifications are that,

(1.) No past member shall be so liable if he has ceased to be a member for a year prior to the commencement of the winding-up:

(2.) Such liability shall not extend to any debt of the