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For facility of reference, the following pages have been divided into clauses, and numbered from the beginning to the end. “Cl.” placed before a number indicates such a clause.
“S” means the section of the “Companies Act, 1862," referring to the matter in question; and “R," the No. of the Regulation contained in Table A of the first schedule thereof (See Part VII.) It must also be borne in mind, that in every instance where the latter is embodied, the clause containing the same must be read subject to the company having power to alter the regulation in accordance with the provisions of the “Act."
Also, for sake of brevity,—"The Companies Act, 1862," is simply entitled the “ Act." The Registrar of Joint Stock Companies in England, Ireland, Scotland, and the Stannaries respectively, “The Registrar.” And
Company” means companies formed and registered under the “ Act,” unless the context is at variance with such a construction.
THE FORMATION OF PUBLIC COMPANIES.
It is compulsory that the following Companies formed after the commencement of the “ Act” (2nd. November, 1862), shall register under its provisions, unless they are formed in pursuance
of some other Act of Parliament or Letters Patent, —or are engaged in working Mines within and subject to the Jurisdiction of the Stannaries, viz:I. Any company, association, or partnership consisting
of more than ten persons, and formed for the purpose
of carrying on the business of banking, and II. Any company, association, or partnership consisting
of more than twenty persons, formed for the purpose of carrying on any other business that has for its
object the acquisition of gain. (S. 4.) And it may be laid down as a rule that all public Companies, except those which require Special Acts of Parliament or Letters Patent, among which may be cited, Railway Companies and Gas and Water Companies,* must now be formed under and registered in accordance with the provisions of the “i Act.”
It may further be stated that all Companies in existence at the time when the Act came into operation, may register under it, subject, however, to certain conditions, for particulars of which, vide Part 6.
In order to form a Company, there must be, at least, seven persons, (S. 6.) who are prepared to sign a Memorandum of Association, and their first business is to determine the object which is intended to be carried out, and then one of the following forms, viz:
1. A Company unlimited :
3. A Company limited by guarantee. * That is, where these companies require special powers, such as to take land, or to open up highways, &c., for the purpose of laying down pipes.
The first of these forms is, for obvious reasons, daily falling into disuse, and more especially on account of the Members being liable to contribute to the assets of the Company, (in the event of its being wound up), to an unlimited extent.
The second form is the most convenient, and, we may add, the most popular, on account of the liability of its members never exceeding the sum represented by the shares held.
The third form is just as safe, in a pecuniary point of view, as the second ; the only difference being, that the liability is limited to the sum which each Member undertakes or guarantees to subscribe, should occasion require.
PRELIMINARY MEETING,—PROSPECTUS, &c.
5. Having settled the two points mentioned in the last clause,
the modus operandi is a very simple one, and promoters are entirely unfettered by any stipulations as to the method which they shall adopt in bringing the undertaking before the public. Indeed, it not unfrequently occurs that the company is established privately, and the shares taken up, without having recourse to the public at all.
It is customary, however, to hold a preliminary meeting, at which formal resolutions are passed, and carefully entered in a book provided for that purpose.
By these resolutions, provisional directors and officers are appointed, and a prospectus, previously drawn up, is then finally approved of and adopted. We would particularly call attention to the importance of this apparently harmless document, but which, nevertheless, has given cause to much litigation. It requires the most mature and thoughtful consideration of every person connected with the promotion of the undertaking, and should state clearly,
The nature of the proposed company and amount of capital :
The amount proposed to be called up, and the interval between each call :
The names and addresses of Directors and officers, and
The object intended to be carried out, scrupulously avoiding all exaggeration or misrepresentation of facts, as well as any allegation likely to deceive or mislead the public. Should this
precaution not be adopted, the directors will be liable to actions for the recovery of the money paid by applicants for shares ; and, moreover, may be made criminally amenable, if a fraudulent intent can be shown.
See also liability to debts and penalties, Cl. 27, 295, et seq. 6. Another important point to be settled at this meeting, is the
form of the Articles of Association for the future regulation of the company, in order that the solicitor may be instructed to draw the same. All or any of the clauses contained in the Articles given in the Schedule of the “ Act,” (See Table A, Cl. 406,) may be adopted; and should any modification of them be deemed desirable, a resolution should be passed accordingly.
THE ALLOTMENT. 7.
The prospectus having been duly advertised and applications for shares having been made, accompanied by payment of deposit, a list of these should be prepared, on something like the following form.
A few loose sheets, or a small book, will answer the purpose very well, and these may be procured ready printed, with columns for
1. Application number:
9. Regrets.* .
The directors may then proceed to allot the shares and signify the same to the allotees, by enclosing for their signature a letter of allotment, agreeing to accept the shares, and to pay the calls thereon. The latter document should not embody any fresh conditions, but should be in strict accordance with the terms upon which the application was made for the shares, otherwise the applicant may decline to accept the
* In cases where no allotment of shares is made to an applicant, the amount received from him by way of deposit is returned, and inserted in the column headed “Regrets.'
No time should be lost in making the allotments of shares, especially as much inconvenience and annoyance may at any moment arise from the withdrawal of applications for same. It appears that even although deposit has been paid, the applicant may withdraw at any time prior to allotinent.
If a larger number of shares are applied for than can be allotted, the deposit money of the unsuccessful applicants should be returned at once ; and, for this purpose, the
separate column above mentioned is used.
Should a smaller number of shares be allotted to any person than he has applied for, the surplus deposit money is always retained in satisfaction, or part satisfaction, of the sum due on allotment; but if, however, a balance in favour of applicant still remains, it should be returned ; or should there be a deficiency, it must of course be made good by him.
THE MEMORANDUM OF ASSOCIATION.
1. The name of the company :
situated ; and
( See Form D, Cl. 431.)
word : 2. Place of registered office: 3. Object for which it is formed : 4. Declaration of limited liability; and 5. Amount of capital divided into shares. (See Form A,
If limited by guarantee, it must contain (S. 9),
1. Name with “ Limited” as last word :
contribute the amount guaranteed by each, in the