"member."

45. The subscribers of the memorandum of Definition of association of any Company under this Act shall be deemed to have agreed to become members of the Company whose memorandum they have subscribed, and upon the registration of the Company shall be entered as members on the register of members hereinafter mentioned (i); and every other person who has agreed with a Company under this Act to become a member of such Company, and whose name is entered on the register of members, shall be deemed to be a member of the Company.

Sec. 23 of the English Companies' Act (25 and 26 Vic., c. 89), 1862, and sec. 22 of the Indian Companies' Act X. of 1866 verbatim.

(i) See sec. 47 post, and note thereto.

Cf. also Act XIX. of 1857, s. 17.

N. B. The register is not conclusive, see sec. 60 post.

of Association

The memorandum of association referred to in this section is the regis. Memorandum tered memorandum. See The Guzerat Spinning and Wearing Company v. the registered Girdharlal Dalpatram, I. L. R. 5 Bom. 425, adopting the view of the memorandumi. section taken in Anandji Visram v Nariad S. and W. Co., I. L. R. 1 Bom., at p. 328. The agreement must be with the Company as such, see The Guzerat Co. v. Girdharlal Dalpatram, ubi supra, I. L. R.

duplicate of

Quare, whether it is enough to constitute a person a member of a Signature of Company under the earlier part of this section, to subscribe a true copy, memorandum. of the memorandum of association. See Guzerat Co. v. Girdharlal Dalpatrum, ubi supra, where, however, it was not necessary to decide this point, inasmuch as what the defendant had signed was not even a true copy of the memorandum of association, and see Buckley, 4th ed., p. 45.

1857.

By sec. 18 of Act XIX. of 1857, it was provided that the transferor Laches of of shares should be deemed the holder until the name of the transferee vendor in effecting should be entered in the register book; consequently a sale by the allottee transfer under of shares in a Company registered under that Act, who had signed the Act XIX of memorandum and articles of association, to a director under circumstances which disclosed laches on the part of the vendor in complying with that section was held of no effect; as although directors may by their conduct preclude themselves from objecting to the completeness of a transfer, yet the act of an individual director acting in his private capacity could not and ought not to bind the Board, unless it had ratified or authorized his conduct. IN RE The East Indian Trading and Banking Company ; Jamnadas Savaklal's case, 3 Bom. H. C. O. C. J., 113. Compare with this case IN RE Dronfield Silkstone Coal Co., 17 Ch. Div. 76, and IN RE Mercantile Credit and Financial Association, ex-parte Dalvi, 3 Bom. H. C. O. C. J. 125.

Those persons only are liable who have agreed to become shareholders, and whose names appear on the register; and even this is not strictly accurate, because a man may be a shareholder and be liable who has simply agreed to become a shareholder, although his name is not de facto on the register," Buckley, 4th ed., 40.

As to rectifying the register before a winding-up see sec. 58 post; and after a winding-up sec. 147 post.

As to subscribers to the memorandum see Buckley, 4th ed., 41-46.

Agreement to become a member.

RE Esparto
Trading Co.

As to the mode of transferring shares under this Act, see articles (8)-(11) of Table A (First Schedule), post.

A transfer may be registered at the request of the transferor sec. 29 supra, and as to transfer by personal representative see sec. 46 post.

A request to the directors of a Company by two subscribers of the memorandum to cancel their shares, although acceded to and entries to that effect made in the Company's books, was held not to exonerate those subscribers from liability as contributories. IN RE Esparto Trading Co., 12 Ch. Div. 191. (See post, sec. 124.)

1. Directors acting under articles which contain a director's qualification clause. By Art. 53 of Table A post (First Schedule), subscribers of the memorandum of association are to be deemed directors until directors are appointed.

In IN RE Esparto Trading Co., ubi supra, one of the above-mentioned subscribers to the memorandum who was entered in the register for four shares was by one of the articles named a director and was appointed a managing director. By another article it was provided that every director should at the time of his appointment" and thenceforth while in office. hold four shares, and if he should cease to do so, his office should become vacant. The subscriber in question acted as director for about two months in 1866. In 1867 his shares were cancelled at his request, and entries made in the Company's books to that effect. In 1876 the Company was ordered to be wound up, and the executors of the subscriber, who had died long previously, were placed on the list of contributories in respect of his four shares.

66

66

66

66

66

46

66

"The words," says Hall, V. C., at p. 202, "are not the same as in the “cases in which the words of the qualification clause have been such that "the holding of shares previously to the appointment was essential, i. e. " a condition precedent to the appointment, and Hamley's case (5 Ch. Div. 705) and Jenner's case (7 Ch. Div. 132) are cases of that kind. In "those cases the articles of association provided that no person should be qualified to be a director who was not a holder of shares. So in Stock's case (4 D. J. and S. 426) the words were, no person shall be eligible' as a director of the Company, unless he shall hold, in his own right, fifty shares at least. In the present case the words shall at the time of "his appointment' exclude, as regards the directors appointed by the article, of whom Goddard (the subscriber of the memorandum) was one, a subsequent acquisition of shares, which in cases where the holding of the shares was not, upon the construction of the articles, a condition precedent to appointment, has been held to be sufficient. In Forbes' case (L. R. 8 Ch. 768, 770) there was in the articles of association a clause "that any member holding not less than fifty shares shall be eligible' as a director, and then followed a clause naming certain persons, and any "other qualified persons named by them, directors until the first meeting. "It was held, as in Stock's case, that the qualification was inapplicable to "the named directors: shall be eligible' excluded from the qualification "clause persons who had not to be elected.' Ordinarily a qualification "clause has been held to apply to directors named in the articles. This "is a question of construction. In Forbes' case (L. R. 19 Eq. 353) the "articles provided that the qualification of a director should be fifty I shares. This was held by the Master of the Rolls to apply to directors "named in the Act of Parliament.

66

66

66

"The decisions in Kincaid's case (L. R. 11 Eq. 192), and Portal v. "Emmens (1 C. P. D. 201), and Miller's case (3 Ch. D. 661, 5 Ch. Div. 70), are similar.

66

"In this case I think that the words 'shall at the time of his appoint"ment' do not exclude the directors named in the articles. Goddard "did, I consider, hold from the date of his appointment four shares, that

"is, the one he signed the memorandum of association for and three others I think directly Goddard was appointed he became a director and 66 holder of four shares."

See further IN RE Hampshire Co-operative Milk Co., Purcell's case, 29 W. R. 170.

But where no qualification is necessary, the mere fact of acting as a director of a Company, and of attendance at meetings in that character is not enough to fix a man with knowledge that his name has been entered on the share register, and with consequent liability, if he neither applied for shares nor received any notice of allotment. Nor is there any presumption of law that a director knows the contents of the books of the Company. IN RE Wincham Ship-building, Boiler, and Salt Co., Hallmark's case, 9 Ch. Div. 329.

Moreover beneficial ownership was held not necessary for a qualification where the articles of association provided that no person should be eligible as a director unless he held as registered member in his own right capital of the nominal value of £500 at least; " and therefore a registered holder of the required capital was properly eligible, though he had transferred his shares to another. Pulbrook v. Richmond Consolidated Mining Co., 9 Ch. Div. 610.

See Buckley, 4th ed., 46, for the principle on which all the cases on director's qualification may be reconciled.

The latest case on this subject is IN RE Columbia Chemical Factory Manure and Phosphate Works, Hewitt's case and Brett's case, 25 Ch. Div. 283. In that case the Company was registered in June 1879. Brett and Hewitt signed the memorandum of association as subscribers for one share each; and by the articles they were named as original directors, and it was provided that the qualification of a director should be fifty shares. They attended meetings of the directors, but no shares were allotted to them, nor did their names appear on the register for any shares except those for which they had signed the memorandum. In September Erett resigned his office, but Hewitt continued a director. No business was ever done by the Company, and in November a resolution was passed to wind up the Company. Upon an application by the liquidator to place Brett and Hewitt upon the list of contributories for fifty shares each it was held by the Court of Appeal (affirming the decision of Kay J.) that assuming that the contract entered into by Brett and Hewitt to obtain a qualification amounted to an agreement to take fifty shares within the 23rd section of the Companies' Act, 1862, they were entitled to a reasonable time for performing the agreement, and that under the circumstances such reasonable time had not elapsed at the commencement of the winding-up of the Company; and consequently they could not be held liable as contributories for the fifty shares. The Court, however, not being agreed upon the question, declined to express an opinion whether the contract amounted to an agreement to take the fifty shares within the 23rd section.

All the cases bearing upon the question of directors' qualification will be found collected in this case, and are thus summed up by Kay, J., at p. 286.

66

The cases on this subject seem to be divisible into the following classes:

(1). When under similar articles a director has simply accepted the office, and then it is held he is not a contributory.

(2). When, after accepting, and while he is a director, shares have been registered in his name, and then he is presumed to know what was done, and to have accepted such shares.

(3). Where the articles make the possession of the qualification of shares a condition precedent, and then it is held that the director may have been improperly appointed, and he is not a contributory.

Agreement.

A question of fact.

Agreement

must be with the Company.

(4). There is a separate class of cases in which, by virtue of the special terms of the articles or of the Company's charter, a director on accepting the office becomes ipso facto a shareholder."

Per Brett, M. R. at pp. 295, 296. "But it will be found that when the directors have been held liable, either the shares had been entered in the register or treated as allotted in the other books of the Company.... ..... In the present case, as the directors named in the articles signed the memorandum for one share each only, it could not have been intended that they should not act before they had the qualification. If it had been so they would have been required to sign the memorandum for the amount of shares necessary to give the qualification. In the present case, the Company, though formally coustituted, never had any business existence."

66

2. Persons other than directors.-As to what is an agreement," see Sec. 2 of the Indian Contract Act IX. of 1872 (cl. e), see also Chap. I. of that Act with reference to the communication, acceptance and revocation of proposals; and see and consider the following cases:-Byrne & Co. v. Leon Van Tienhoven & Co., 5 C. P. D. 344; 49 L. J. C. P. [N. S.] 316; which was followed in Stevenson v. Maclean, 5 Q. B. D. 346; In The Household Fire, &c., Accident Insurance Co. v. Grant, 4 Ex. Div. 216, it was held (Bramwell, L J., diss.) that the defendant to whom shares had been allotted on his application was a shareholder, although the letter posted and addressed to him containing notice of allotment was never received by him, and The British and American Telegraph Co. v. Colson was overruled.

But by the exercise of due diligence on the part of the allottee of shares he may be entitled to have his allotment cancelled, and his name removed from the list of shareholders, see IN RE Scottish Petroleum Co., Anderson's case, 17 Ch. D... 373 post.

The question whether a person has agreed to become a member of a Company is one of fact, per Fry, J., IN RE Albion Assurance Society, Winstone's case, 12 Ch. D. 239, 246. There it was held that Miss Winstone, by signing a proposal for a policy with profits whereby she agreed to execute the articles of association when required, and by signing the policy which recited the proposal, and that she had agreed to become a member upon the basis of that contract, and that the policy was to be subject to the articles of association, and by paying the premiums on the policy (which by the articles of association was to be deemed an agreement to become a member in respect thereof) had acceded to the articles and had agreed to become an assurance member of the Company, and was accordingly liable as a contributory.

N.B. In the above case it was afterwards held that, though the policyholders were contributories, they could not be called upon to contribute until the shareholders had been exhausted. See IN RE Albion Assurance Society, 15 Ch. D. 79; affirmed 16 Ch. Div. 83, and see post, Sec. 124, (on Contributories) and note thereto.

In another case, however, relating to the same Assurance Society, it was held that a policy-holder having assigned his policy ceased to be liable as a contributory, although no other person had been made liable to contribute in respect of his policy in his stead. Brown's case, 18 Ch. D. 639, see post, sec. 124 (on Contributories), and notes thereto. See further IN RE Albion Life Assurance Society, Sander's case, 20 Ch. D. 403, where the assignees of a policy were held not to be contributories, inasmuch as a certain condition precedent to registration which was directed by the articles of association had not been satisfied or waived, see sec. 124 post,

and notes thereto.

The agreement to take shares must be with the Company in existence at the time of the agreement. See The Gujerat S. and W. Co. v. Girdharlal Dalpatram, I. L. R. 5 Bom. 425 supra,

In IN RE Alliance Financial Association, Blaney's case, 3 Bom. H. C. O. C. J. 106, an allotment of five shares in the Company was made to B. without any application by him for shares, but he paid the deposit on them, and afterwards went to the office of the Solicitor of the Company, in order, as he said, to sign the documents necessary to make him a shareholder, and did sign certain sheets of paper, not annexed, as he said, to the memorandum or articles of association. It was held that there had been an acceptance of the shares by B. sufficient to constitute him a shareholder under Act XIX. of 1857.

See the other points decided in the above case, supra.

shareholder.

As to the mode in which a shareholder may exonerate himself by selling Exoneration by his shares to the Company itself see IN RE The Mercantile Credit and Financial Association; ex parte M. R. Dalvi, 3 Bom. H. C. O. C. J. 125, and Cf. IN RE Dronfield Silkstone Coal Co., 17 Ch. Div. 76. But a sale to an individual director acting in his private capacity is not enough. IN RE The East Indian Trading and Banking Co.; Jamnadas Savaklal's case, 3 Bom. II. C. O. C. J. 113.

Where shares are held by a firm they should stand in the name of the firm. See The London, Bombay, and Mediterranean Bank v. Bhanji Zutani, I. L. R. 2 Bom. 116, see post, note to sec. 124.

tered memoran

A material variance between the registered memorandum of association Variance and that signed by the defendant's munim, who had authority in that be- between regishalf, was held sufficient in the absence of laches or other special circum- dum and the one stances, to exonerate the defendant from liability. Anandji Visram v. actually signed. The Nariad Spinning and Weaving Co., I. L. R. 1 Bon. 320. See Felgate's case, 2 D. G. F. and J. 456.

other.

Where a husband applied for shares in the name of his wife and the Shares taken in Company accepted a wife as a shareholder without any misrepresentation the name of anor concealment on the part of the husband, the husband's estate was held not liable in respect of the wife's shares, and the wife's name was kept on the list of contributories. IN RE London, Bombay, and Mediterranean Bank, 18 Ch. D .581. See post, note to sec. 124. "But what I do not find here," said Sir C. Hall, V. C. (p. 586), “is that element which I think exists in all cases in which a person has been put upon the register who is not the person whose name was originally there. I do not find any case in which that has been done where there has been no concealment of the real transaction from the Company, and they have thought fit to accept the person as a shareholder. There is no misrepresentation or concealment in this case as to infancy or otherwise which will enable the Court to act."

For the cases relating to shares applied for and taken in the name of infants, See Buckley, 4th ed. 69.

Per Earl Cairns, L. C., in Buchan's case, 4 Ap. Ca. 549, 588, an Executors. executor whose testator has held shares in a joint stock Company has generally one of two courses open to him. He may have the shares transferred into his name, and become to all intents and purposes a partner in the Company. He may, on the other hand, not wish to have the shares transferred into his own name, and he ought in that case to have a reasonable time allowed him to sell the shares, and to produce a purchaser who will take a transfer of them.

executors

Per Lord Selborne, in Buchan's case, 4 Ap. Ca. 595 et seq. The Trustees and case of trustees who take a transfer of shares in their names differs, in distinguished. principle, from that of executors, who merely intimate their title as executors to a Company, in order to claim and exercise the rights which belong to them as the legal representatives of their testator... Trustees have not, in any proper sense of the word, a representative character, but executors have... Having representative rights, it is impossible that they should not be entitled to produce the legal evidence of them to the Company, for the purpose of having their title is some way recorded and recognized, without making themselves personally liable.