CHAPTER II. Part II. Rights and Liabilities of Members. Share Certificates. Calls. Forfeiture and Surrender. Estoppel of the Company. Share Certificates. By Sec. 31 of The Companies Act, 1903, a certificate under the common seal of the company specifying any share or shares or stock held by any member shall be prima facie evidence of the title of the member to the share or shares or stock therein facie evidence specified. Share certificate prima of title. Company estopped by certificate. As against bona fide purchaser without notice. Estopped by certificate In Societe Generale v. Walker, 11 A.C. 20, Lord Selborne said (p. 29): "That certificates are the proper (and, indeed, the only) documentary evidences of title in the possession of a shareholder." A company issuing a share certificate is estopped, as against any person acting in good faith thereon, from denying that the person expressed to be entitled to the shares as therein stated is so entitled: The Balkis &c. Co. v. Tomkinson, 1893, A.C. 396. But the purchaser must take without notice. Thus, where a person purchased "bonus" shares with the word "Bonus " written conspicuously across the certificates, it was held that he should have enquired what that meant, and, the shares having been issued as fully paid-up shares, not being such in fact, the purchaser was held liable for the full nominal value thereof : Eddystone Marine Insurance Co., 1894, W.N. 30. If shares issued as fully paid-up, but not such in fact, are taken by a person in good faith and without notice for valustating shares fully paid-up. able consideration as fully paid-up shares, the company and, on a winding-up, the liquidator, is estopped from denying that the shares were fully paid up, and the onus of proving that the purchaser had notice lies on the person asserting it: Share Certificates. Burkinshaw v. Nicolls, 3 A.C. 1004. In Bloomenthal v. Ford, Part II. 1897, A.C. 156, Lord Herschell said (p. 171) :— Chap. 2. "What the applicant in effect says is quite satisfactory to my mind: that he did not think about it at all; he was told these shares were fully paid up; he believed it, and that was enough for him; he did not care to enquire or to think; on that belief he acted; that belief was a false belief; that false belief was induced by the company. If so, you have every element necessary to make an estoppel and justify the appellant in this appeal." In Parbury's case, 1896, 1 Ch. 100, Parbury gave Wright £500 on Wright promising to procure an allotment to Parbury of 100 fully paid £5 shares in a company. Wright had 100 shares allotted to Parbury as his nominee. The certificate stated untruly that the shares were fully paid. No part of the £500 was ever paid to the company. The company was, on a winding-up, estopped from denying the shares were fully paid; see also Dixon v. Kennaway, 1900, 1 Ch. 833; Bahia and San Francisco &c. Co., L.R. 3 Q.B. 584. In Balkis &c. Co. v. Tomkinson, 1893, A.C. 396, Tomkinson, claiming under a forged transfer, received a certificate from the company, and bona fide acted thereon by selling the shares. He was held by the House of Lords entitled to recover damages from the company by reason of the company's refusal to register his transferee; see Forged Transfers, p. 160 supra. By Sec. 31 (2) of 1903 Every such certificate issued by a company shall have printed thereon particulars of any preferential, deferred, qualified, special or limited rights, privileges or conditions attaching to the shares or stock specified therein, whether attaching by the company's Memorandum or Articles of Association, or any resolution of the company or of the directors. Forms of Share Certificates. ORDINARY (OR PREFERENCE) SHARE CERTIFICATE. Company may damages. be liable in "The No. Company, Limited.” Incorporated under The Companies Act, 1903. CAPITAL. £100,000, divided into 100,000 shares of £1 each, of which 50,000 are THIS IS TO CERTIFY THAT tion), is the registered holder of of (residence and occupaof the above-mentioned ordinary Share Certificates. Part II. Chap. 2. (or preference) shares, numbered to inclusive in the Company, Limited," subject to the terms and conditions of the Memorandum and Articles of Association thereof, and that all the said shares are paid up to the full nominal value thereof (or that the sum of £ has been paid up on each of the said shares, or that the sums endorsed hereon and certified by the secretary of the company as paid up have been paid up on each of the said shares). Given under the common seal of the said company this day Application and allotment money not a call. This certificate is issued on the condition that no transfer of any of the above-mentioned shares can be registered unless and until this certificate has been deposited in the office of the company. See Societe Generale v. Walker, 11 A.C. 20. PARTICULARS TO BE PRINTED ON EACH SHARE CERTIFICATE IN COMPLIANCE WITH SEC. 31 (2) OF 1903. The shares comprised in this certificate entitle the holder to a (cumulative) preferential dividend, at the rate of £6 per cent. per annum, from the profits from time to time available for dividend, and a preferential claim on the surplus assets of the company on a winding-up pari passu with the holders of the remaining preference shares. or The shares comprised in this certificate are ordinary shares and the holders thereof are not entitled to a dividend until the holders of the preference shares in the company's capital have been paid from the profits from time to time available for dividend a (cumulative) dividend at the rate of £6 per cent. per annum. Their right to the surplus assets on a winding-up of the company is also subject to the prior right of the holders of the said preference shares. Calls. A "call" is a claim made by the company on its members for payment of the whole or part of the amount remaining unpaid on members' shares. The word is also used as meaning the amount to be paid: Newry &c. v. Edmunds, 2 Ex. 118, 121. The payment required to be made on an application for or on an allotment of shares is not a call. A call cannot be made until the shares have been allotted: Croskey v. The Bank of Wales, 4 Giff. 314. Calls. Unless the power to make calls is reserved to the members Part II. in general meeting it may be exercised by the directors: Amber- Chap. 2. gate &c. Railway Co. v. Mitchell, 6 Rly. Cas. 235. Directors may Subject to the provisions of the company's regulations, there make calls. must be a quorum of directors validly appointed present at a meeting duly convened: Garden Gully Co. v. McLister, 1 A.C. 39. Also, if the company's regulations provide for a minimum number of directors, that minimum must hold office and have the right to attend the meeting and join if they please: In re Alma Spinning Co., Bottomley's case, 16 C.D. 681; see York Tramways Co. v. Willows, 8 Q.B.D. 685. But directors may not delegate their power to make calls unless authorised: Howard's case, L.R. 1 Ch. 561. A call made at a meeting at which a quorum was not present, but confirmed at a regular meeting, is good: Austin's case, 24 L.T. 932. It seems that the resolution making a call must specify not only the amount of the call, but the time and place at which the call is to be paid: Re Cawley & Co., 42, C.D. 209, 236; but see Johnson v. Lyttle's Iron Agency, 5 C.D. 687, per Jessel, M.R., at p. 691. The writer's view is that the question really depends on the terms of the Articles in each case. Irregular call confirmed. How call made. Governed by If the company's regulations provide that calls may be made only at certain stated intervals and for certain amounts, Articles. they cannot be made otherwise: Baillie v. Edinburgh &c. Co., 3 C. & F. 639. See also Whyte v. Lady Roxburgh, 5 Gaz. 449 ; Lyell &c. Co. v. Harcourt, 5 Gaz. 532. By Sec. 16 of the E. Act of 1862 the liability created by a call is in the nature of a specialty debt. Sec. 24 of the N.Z. Act of 1903 contains no such provision, and the statute of limitations may be pleaded after six years. Although the Court will not interfere with the discretion of the directors in making a call if they act in good faith, yet if the power is not exercised for the benefit of the company, and the call is made mala fide, the Court will interfere: Alexander v. The Automatic Telephone Co., 1900, 2 Ch. 56. It lies on the member alleging mala fides to establish it: Odessa Trams Co. v. Mendel, 8 C.D. 235. In excercising the power of making calls the directors stand in a quasi-fiduciary relation to the general body of members: Gilbert's case, L.R. 5 Ch. 559; Alexander v. The Automatic Telephone Co., 1900, 2 Ch. 56. Call not specialty debt in N.Z. Power must be exercised bona fide. Part II. Directors must enforce call. Estate of deceased regis tered member liable. Liability joint, prima facie. Interest on calls. Interest on payments made in ad vance of calls payable out of capital. Forfeiting member liable for past calls. Forfeiture contemplated by statutes. Calls. But a call may be made, to prevent a transfer of shares, in the interest of the company: Gilbert's case, ut sup. ; or to facilitate the sale of the company's undertaking: N.Z. Gold Extraction Co. v. Peacock, 1894, 1 Q.B. 622. It is the duty of directors to take all reasonable steps to compel every shareholder to pay the amount due by him in respect of a call, and they are guilty of a breach of their duty to the company if they do not take all reasonable means of enforcing that payment: Spackman v. Evans, L.R. 3 H.L. 171, 186. The estate of a deceased shareholder remains liable for payment of calls, whether made before or after death, so long as his name remains upon the register: N.Z. Gold Extraction Co. v. Peacock, ut sup. But where shares are registered in the joint names of two or more owners the liability is joint only, and not joint and several (unless the Articles otherwise provide): Karaskhoma &c., 66 L.J. Ch. 675, at p. 681, per Lindley, L.J. It follows that in case of death of one of two joint holders the survivor is alone liable for calls. The regulations may provide for interest on overdue calls. The power conferred by Sec. 36 of 1903 and by Art. 16 of Table A, of receiving from members money in advance of calls at interest should only be exercised for the benefit of the company as a whole: Sykes's case, 13 Eq. 255; Poole and others' case, 9 C.D. 322. Directors may pay interest on payments made in advance of calls out of capital if there are no profits, provided they do so in good faith and in the honest exercise of the discretion confided to directors: Lock v. Queensland &c. Co., 1896, A.C. 461. A shareholder whose shares have been forfeited for nonpayment of calls may be sued as a debtor to the company for such calls, though he has ceased to be a member: Ladies' Dress &c. v. Pulbrook, 1900, 2 Q.B. 376. See Calls in chapter on Winding-up, and Secs. 36, 37, 72, 156, 174, 199 to 203, 224 (j), and 258 (b) of 1903, and Arts. 11 to 16 of Table A. Forfeiture and Surrender of Shares. Sec. 101 (f) of 1903 and Arts. 17 to 28 of Table A "Show plainly that the legislature intended companies to have the power of forfeiting shares. There is no reference in the Acts to surrender |