325. 326. 327. 328. 329 330. 331. with, but this circumstance must be made known to the creditors, otherwise it will have no effect, and the latter may recover against them. See Cl. 297. In all cases, however, it is well that creditors should take care to enquire into the "status" of the parties projecting a company before allowing them to incur any debts on its behalf, for if the speculation should prove unsuccessful, many obstacles are almost certain to be thrown in the way on their attempting to enforce their claims. This may seem unnecessary advice to shrewd business men, but a glance at the ledgers of a few advertising agents and stationers would satisfactorily prove the contrary. II. AS TO DEBTS INCURRED BY COMPANIES WHICH ARE CARRIED OUT. A company's Articles of Association always provide, or rather should always provide for payment of all preliminary expenses. In nine cases out of ten, therefore, a creditor is generally safe on this score, and with respect to debts incurred after the incorporation of the company, he is also well protected by the provisions of the Act." The company is bound under penalty (see Cl. 32) to have its name mentioned in legible characters in all bills of exchange, promissory notes, cheques, &c., and any director or officer failing to carry out this requirement, will also be personally liable to the holder of such bills, &c., if the same are not duly paid by the company. Assuming the latter to be properly incorporated, any debts incurred by it are recoverable in the ordinary way, while the company continues in operation, and the creditor has only, in case of need, to hand particulars of his claim to a solicitor, who will adopt the necessary measures for enforcing it. Any charge affecting the company's property must be entered in the register of mortgages, which can be inspected by any creditor, see Cl. 38. Any person may also inspect the register of the members of the company. See Cl. 37. It will thus be evident, that if a creditor only exercises ordinary precaution and carefully watches the operation of a company, there will be little fear of his becoming involved in any loss arising from bad debts, more especially if he takes the trouble to inspect the annual returns made to the Registrar, 332. 333. and avails himself generally of the publicity which is now inseparable from the dealings of all joint-stock companies formed under the Act." 66 In the event of the company being wound up, the creditor's interest is also equally well protected by the provisions of the "Act," as will be seen on referring to that portion of this work comprised under the head of "Winding-up," the whole of which every creditor should read if his claim is large enough to make it worth the trouble. But whether it is so or not, he may easily turn to the Index, where he will readily find a clue to the information relating to his particular wants. INSPECTORS. One or more persons (called inspectors) may be appointed to examine into the affairs of any company, either by the Board of Trade or by the company itself, under the following conditions, viz. :— 334. If by the Board of Trade (S. 56 and 57), it may be, upon application by the following persons, supported by such evidence as the "Board" may require, showing good reason for requiring the investigation, and that the applicants are not actuated by malicious motives. 335. (1.) In the case of a banking company having shares, 336. (2.) 337. 338. 339. 340. The Board of Trade may likewise require the applicants to give security for the costs of the inquiry before proceeding to make the appointment.-(S. 57.) If by the company, it must be by special resolution (see Cl. 114), in which case inspectors so appointed shall have exactly the same powers as if the appointment had been made by the Board of Trade, the only exception being, that instead of making their report to the latter, they shall make it in such manner and to such persons as the company in general meeting directs. (S. 60.) In either case it shall be the duty of all officers and agents 341. 342. 343. 344. of the company to produce, for the examination of the inspectors, all books and documents in their custody or power; and any inspector may examine, upon oath, the officers and agents of the company in relation to its business, and may administer such oath accordingly. See Cl. 44, for penalty in case of default of any officer in this respect.-(S. 58 and 60.) When appointed by the Board of Trade, the inspectors report their opinion to that body, and such report shall be written or printed, as it directs. A copy thereof is then forwarded by the "Board" to the company, and a further copy shall, at the request of the members upon whose application the inspection was made, be delivered to them or to any one or more of them. The costs of the inquiry shall also be paid by the latter, unless the Board" directs the same to be paid out of the assets of the company.—(S. 59.) As to copy of report being admissible in evidence, see Cl. 72.-(S. 61.) AS TO DELINQUENT DIRECTORS, OFFICERS, If in the course of the winding-up of a company it appears that any past or present director, manager, liquidator, or other officer, has misapplied or retained in his own hands, or become liable for any monies of the company, or been guilty of any misfeasance or breach of trust, the court may, on the application of any liquidator, creditor, or contributory of the company, although the offence is criminally punishable, examine into the conduct of such offender, and compel him to pay the monies in question, together with interest thereon, or to contribute to the assets of the company by way of compensation in respect of such offence, as the court shall think just.-(S. 165.) If any director, officer, or contributory of any company, wound up under the "Act," destroys, alters or falsifies any books, documents or securities, or makes, or is privy to the making of, any false or fraudulent entry in any book or document of the company with intent to defraud, such offender shall be guilty of a misdemeanor, and on conviction shall be liable to imprisonment for not exceeding two years, with or without hard labour.-(S. 166.) Where any company is being wound up by or under the 345. 346. 347. 348. 349. 350. supervision of the court, if it appears that any past or present director, manager, officer or member, has been guilty of any offence in relation to the company for which he is criminally responsible, the court may, on the application of any person interested in such winding-up, or of its own motion, direct the liquidators to institute and conduct a prosecution for such offence, and order the costs and expenses to be paid out of the assets of the company. (S. 167.) And where a company is being wound up voluntarily, the liquidators, with the previous sanction of the court, may prosecute such offender; and all expenses properly incurred by them shall be payable in like manner out of the assets of the company in priority to all other liabilities.-(S. 168.) If any person wilfully and corruptly gives false evidence in any matter arising under the "Act," he shall, upon conviction, be liable to the penalties of wilful perjury.-(S. 169.) In addition to the foregoing provisions which are contained in the Act itself, any delinquent director, officer or member, may also be prosecuted under another statute, termed the Fraudulent Trustee Act" (20 & 21 Vict., cap. 54). I have therefore given a brief synopsis of such portions of the latter as refer more particularly to public companies, and have placed the numbers of the respective sections opposite to each. (5.) If any director; member, or public officer of a body corporate or public company, shall fraudulently take or misapply, to his own use, any money or property, he shall be guilty of a misdemeanor. (6.) If any director, public officer, or manager of a body corporate or public company, shall, as such, receive or possess himself of the money or property otherwise than in payment of a just debt or demand, and shall, with intent to defraud, omit to make a full and true entry in the books, he shall be guilty of a misdemeanor. (7.) If any director, manager, public officer or member, shall, with fraudulent intent, destroy, mutilate or falsify any of the books, papers, writings or securities, or make, or concur in the making of, any false entry or any material omission in any book, or account, or other document, he shall be guilty of a misdemeanor. (8.) If any director, manager or public officer, shall make, circulate or publish, any written statement or account (or be privy thereto) which he 351. 352. 353. 354. 355. 356. 357. shall know to be false in any material particular, with intent to deceive or defraud any member, shareholder or creditor, or with intent to induce any person to become a shareholder or partner therein, or to intrust or advance any money or property belonging to such company or body corporate, or to enter into any security for the benefit thereof, he shall be guilty of a misde meanor. (9.) Any person receiving any misapplied chattel money or valuable security, knowing the same to be fraudulently disposed of, shall be guilty of a misdemeanor, and may be indicted and convicted thereof, whether the party guilty of the principal misdemeanor shall or shall not have been previously convicted, or shall or shall not be amenable to justice. (10.) Persons found guilty are liable, at the discretion (12.) Nothing in this Act contained, nor any pro- (15.) (16.) Court may allow expenses of prosecution in all Prosecutions under this Act are not triable at the 66 (17.) The word Trustee" shall mean "Liquidator," |