behalf of the Company and under his seal shall be binding on the Company and have the same effect as as if it were under the common seal of the Company.

Sec. 55 of the English Companies' Act (25 and 26 Vic., e. 89), 1862; and see. 55 of the Indian Companies' Act X. of 1866, verbatim.

Cf. sec 46 of Act XIX. of 1857.

See the Powers of Attorney (Indian) Act VII. of 1882.

82. The Local Government may appoint one or Examinati n more competent inspectors to examine into the of affairs of affairs of any Company under this Act, and to report inspectors. Company by

thereon in such manner as the Local Government may direct upon the applications following (that is to say:

(a) In the case of a banking or any other Company that has a capital divided into shares, upon the application of members holding not less than onefifth part of the whole shares of the Company for the time being issued:

(b) In case of any Company not having a capital divided into shares, upon the application of members being in number not less than one-fifth of the whole number of persons for the time being entered on the register of the Company as members.

Sec. 56 of the English Companies' Act (25 and 26 Vic., c. 89), 1862, which substitutes "Board of Trade" for "Local Government," and in the case of banking Companies provides for the application being made by members "holding not less thau one-third part of the whole shares," &c.; and sec. 56 of the Indian Companies' Act X, of 1866, verbatim. Cf. sec. 48 of Act XIX. of 1857.

"The power given by this section is unfettered, but will doubtless be exercised with the greatest caution, and inspection will only be allowed in cases where the applicant can bring forward strong prima facie evidence to show that the Company is in difficulties, and that the truc character of such difficulties is concealed by the governing body. Looking too, at the Company's powers (see sec. 86 post) to appoint inspectors with the same authority as inspectors appointed by Government, a minority will scarcely be justified in applying to Government, unless they have previously failed in obtaining an inspection by officers appomted by the Company, or can show that such officers have neglected their duties." [Thring, I. 103.]

to be supe

83. The application shall be supported by such Application evidence as the Local Government may require for for inspecthe purpose of showing that the applicants have ported by good reason for requiring such investigation to be evidence. made, and that they are not actuated by malicious motives in instituting the same.

Inspection of

books.

Result of

The Local Government may also require the applicants to give security for payment of the costs of the inquiry before appointing any inspector or inspectors.

Sec. 57 of the English Companies' Act (25 and 26 Vic., c. 89), 1862, substituting "Local Government" for "Board of Trade"; and sec. 57 of the Indian Companies' Act. X. of 1866, verbatim.

84. It shall be the duty of all officers and agents of the Company to produce for the examination of the inspectors all books and documents in their custody or power.

Any inspector may examine upon oath the officers and agents of the Company in relation to its busi

ness.

If any such officer or agent refuses to produce any book or document hereby directed to be produced, or to answer any question relating to the affairs of the Company, he shall incur a penalty not exceeding one hundred rupees in respect of each such offence.

Sec. 58 of the English Companies' Act (25 and 26 Vic., c. 89), 1862; and sec. 58 of the Indian Companies' Act X. of 1866, verbatim, save that the English Act provides a penalty of "five pounds" for "one hundred rupees."

Cf. sec. 49 of Act. XIX. of 1857.

As to inspection of the books of account by the members of the Company see sch. I., table A., art (78) post.

85. Upon the conclusion of the examination, the examination inspectors shall report their opinions to the Local Government. Such report shall be written or printed as the Local Government directs.

how dealt

with.

A copy shall be forwarded by the Local Government to the registered office of 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.

All expenses of and incidental to any such examination as aforesaid shall be defrayed by the members upon whose application the inspectors were appointed, unless the Local Government shall direct the same to be paid out of the assets of the Company, which the Local Government is hereby authorized to do.

Sec. 59 of the English Companies Act (25 and 26 Vic., c. 89), 1862, substituting "Local Government" for "Board of Trade"; and sec. 59 of the Indian Companies' Act X. of 1866, verbatim.

Cf. sec. 50 of Act XIX. of 1857.

a

86. Any Company under this Act may, by special resolution(i), appoint inspectors for the purpose of examining into the affairs of the Company.

The inspectors so appointed shall have the same powers and perform the same duties as inspectors appointed by the Local Government(ii), with this exception, that instead of making their report to the Local Government, they shall make the same in such manner and to such persons as the Company in general meeting directs.

The officers and agents of the Company shall incur the same penalties in case of any refusal to produce any book or document hereby required to be produced to such inspectors, or to answer any question, as they would have incurred if such inspectors had been appointed by the Local Government.

Sec. 60 of the English Companies' Act (25 and 26 Vic., c. 89), 1862, substituting "Local Government" for " Board of Trade"; and see, 60 of the Indian Companies' Act X. of 1866.

(i) Sec. 77 supra.

(ii) Sec. 82-85 supra.

Cf. sec. 51 of Act XIX. of 1857.

Power of Company to appoint inspectors.

be evidence.

87. A copy of the report of any inspectors Report of appointed under this Act authenticated by the seal inspectors to of the Company into whose affairs they have made. inspection, shall be admissible in any legal proceeding as evidence of the opinion of the inspectors in relation to any matter contained in such report.

Sec. 61 of the English Companies' Act (25 and 26 Vie, c. 89), 1862; and sec, 61 of the Indian Companies' Act X. of 1866, verbatim.

Cf. sec. 52 of Act XIX. of 1857.

&c., to spe

88. Every prospectus of a Company, and every Prospectus, notice inviting persons to subscribe for shares in any dates joint stock Company, shall specify the dates and the and names of names of the parties to any agreement enforceable parties to by law which has been entered into by the Com- contracts, pany, or the promoters, directors, or trustees thereof,

certain prior

before the issue of such prospectus or notice (whether subject to adoption by the directors, or the Company, or otherwise), and which might reasonably influence a person in determining whether he would or would not become a shareholder in the Company; and any prospectus or notice not specifying the same shall be deemed fraudulent on the part of the promoters, directors and officers of the Company knowingly issuing the same, as regards any person taking shares in the Company on the faith of such prospectus, unless he has had notice of such

contract.

This section corresponds with the well-known and muchdiscussed section 38 in the English Companies' Act (30. and 31 Vic., c. 181), 1867, verbatim, save and except the words "and which might reasonably influence a person in determining whether he would or would not become a shareholder in the Company," which it is presumed are inserted in the present Act to put some reasonable limit on the "wonderful comprehensiveness" of the section in the English Act.

See Mr. Buckley's note thereto, 4th ed., pp. 504, et seqq.

It is difficult to understand why this section occupies its present position in this Act; it would more naturally have followed sec. 67 supra.

The "singular omission" of the words "or notice" (pointed out by Mr. Buckley, 3rd ed., p. 457) after the words "taking shares in the Company on the faith of such prospectus" is continued in the present

section.

For the judicial interpretations of the section, see the following cases:— Twycross v. Grant, 2 C. P. D., 469 and 491; Sullivan v. Metcalfe, 5 C. P. D., 455.

As to what contracts are not included in it, see Gover's Case, 1 Ch. D. 182; Craig v. Phillips, 3 Ch. D. 722; and see 7 Ch. Div. 249; and Entwistle v. Hodgkinson, W. N. 1877, 46.

As to the meaning of "promoters," see Emma Mining Co. v. Grant, 11 Ch. D, 918; Emma Silver Mining Co. v. Lewis, & C. P. D. 396; Sombrero Phosphate Co. v. Erlanger, 5 C. P Div. 73; 3 App. Ca. 1218; and Whaley Bridge Printing Co. v. Green, 5 Q. B. D. 109.

As to what is necessary to enable the plaintiff in an action for deceit who has taken shares upon the faith of a prospectus to succeed, see the cases cited supra in note to sec. 58.

The words “and which might reasonably influence a person," &c.. practically embody the decisions of Brett. L. J. Cockburn, C. J., Coleridge, C. J., and Lindley and Grove, J. J., in the following cases. respectively, Gover's Case, 1 Ch. Div., 200; Twycross v. Grant, 2 C. P. Div. 546, 539; and Twycross v. Grant, 2 C. P. D. 485, and Mr. Buckley's Summary, at p. 506-507, 4th ed.

The following are the latest cases on the section :

In Sullivan v. Metcalfe, 5 C. P. Div. 455, the plaintiff sued the defendants, who were the directors and promoters of the Diamond Fuel Co., to recover from them the price of the shares in that Company for which he had subscribed, and upon demurrer it was held (Bramwell, L. J., diss.,

that the defendants were liable, inasmuch as the contracts with reference
to the disposal of the purchase-money of the patent which had been
bought by the Company ought to have been specified in the prospec-
tus, pursuant to the 38th section of the Companies' Act, 1867. Thesiger
L.J., at p. 461, says:-"I am content
to adopt the view that
every contract relating to the formation of a Company, or to its capital,
property, or business when formed, or to the position, pecuniary, or
otherwise, in regard to the Company, or its promoters or vendors, of the
directors or other efficers of the Company, and which is material to be
made known to persons invited to take shares in order to enable them
to form a judgment as to the policy of so doing, is a contract within the
meaning of sec. 38, and as such must be disclosed under the circumstances
and to the extent which the section points out, provided that one of the
parties to it is, at its date, or subsequently becomes a promoter, director,
or trustee of the Company ;" and per Baggallay, L. J., p. 465, “upon
the construction then of the language of the section, I am prepared to
hold that every contract, which upon a reasonable construction of its
purport and effect would assist a person in determining whether he
would become a shareholder in the Company is a contract within the
38th section." Bramwell, L. J., adhering to the opinion formerly
expressed by himself (in Twycross v. Grant, 2 C. P. Div. 469), at p. 480,
says: The question is whether the agreements between vend rs and
their agents for the division of the price, or plunder, if plunder it was, are
contracts within the section. I say no. The Company was neither richer
nor poorer on account of the way the spoil was divided among the
spoilers. It may have been a folly or dishonesty to give so much if
the patent was not worth it; or if it was, it may have been a folly or
necessity for the vendors to take so little; but either way, the Company,
I repeat, was neither richer nor poorer on account of the way the price
agreed on was divided." With regard to the words "taking shares on
the faith of such prospectus," Thesiger, L. J. says, ibid. p. 460),
"giving a reasonable meaning to this not very happily worded expression,
no person can be said to have taken shares on the faith of a prospectus,
except a person who can prove to the satisfaction of a jury that he took
his shares on the faith of there being no such contract as that omitted to
be disclosed, and that if such contract had been disclosed to him he would
not have taken his shares."

The plaintiff in an action of deceit must prove that he relied upon the false statement complained of, and if a statement by which plaintiff says he has been deceived is ambiguous, he is bound to state the meaning which he attached to it, and cannot leave the Court to put a meaning upon it. But a trivial statement, though untrue to the knowledge of the defendant, which, in the opinion of the Court, could not have influenced the plaintiff, will not support the action. Smith v. Chadwick, 20 Ch. Div. 27, where it was also held that it must depend on the circumstances of the case whether improperly placing a person's name on the list of directors in the prospectus is a material misstatement. Affirmed 9 Ap. Ca. 187.

Notices.

Company.

89. Any summons, notice, order or other docu- Service of ment required to be served upon the Company may notices on be served by leaving the same, or sending it through the post by a registered letter addressed to the Company, at their registered office(i); and any notice to the Registrar of joint stock Companies may be served by sending it to him through the post by a registered letter, or by delivering it to him or by leaving it for him at his office.