tion (it might be years after the company had commenced trade) of the circumstances attending the original registration (a). The registrar objected to the memorandum of association of a company, when brought to him for registration, as going beyond the prospectus, whereupon the bearer then and there, without any communication with the persons who had signed it, made alterations to remove the registrar's objections, and he at once registered it in the altered form. The company was held to be duly constituted, the certificate of registration being, under this section, conclusive evidence that the requisitions of the Act had been complied with (b). Whether the certificate is conclusive on the question whether or not the provisions of the Act are applicable to the company at all, quære. By the Joint Stock Companies Act, 1856 (19 & 20 Vict. c. 47), s. 115 (see also sect. 13)," The certificate of incorporation given to any existing company in pursuance of this Act shall be conclusive evidence that all the requisitions herein contained in respect of registration under this Act have been complied with." Upon which section Turner, L.J., said, in In re Northumberland and Durham District Banking Company (c), "If a company is not authorized to be registered, it is quite clear that the certificate of incorporation can be of no avail" (d). In the case of a company which had been registered after the presentation of a winding-up petition, Malins, V.C., expressed an opinion that the registration was a mere nullity (e). Whether con clusive that company is one capable of being registered under the Act. Sect. 192, which applies to the registration of existing companies Sect. 192. under Part VII. of the Act, goes on to provide that the certificate shall be conclusive that the company is authorized to be registered under the Act. It is competent for a company to commence business before the whole amount of the nominal capital has been subscribed and all the shares allotted. The Act contemplates a company doing business under such circumstances, as e.g., where provision is made by sect. 56 (2) for the appointment of inspectors on the application of members holding not less than one-fifth part of the shares for the time being issued (ƒ). Business may be commenced before capital fully subscribed. morandum to members. 19. A copy of the memorandum of association, having an- Copies of menexed thereto the articles of association, if any, shall be and articles forwarded to every member, at his request, on payment of the to be given sum of one shilling, or such less sum as may be prescribed by the company for each copy; and if any company makes default in forwarding a copy of the memorandum of association and articles of association, if any, to a member, in pursuance (a) Peel's Case, L. R. 2 Ch. 674, 682. (b) In re Barned's Banking Co., Peel's Case, L. R. 2 Ch. 674. (c) 2 De G. & J. 357, 371. (d) See also Princess of Reuss v. Bos, L. R. 5 H. L. 176. (e) In re Hercules Insurance Co, L. R. 11 Eq. 321; and see s. 153. (f) McDougall v. Jersey Imperial Hotel Co., 12 W. R. 1142. Prohibition against identity of names in companies. Prohibition against certain companies holding land. of this section, the company so making default shall for each offence incur a penalty not exceeding one pound (a). (a) Recovery of penalties, s. 65. 20. No company shall be registered under a name identical with that by which a subsisting company is already registered, or so nearly resembling the same as to be calculated to deceive, except in a case where such subsisting company is in the course of being dissolved, and testifies its consent in such manner as the registrar requires; and if any company, through inadvertence or otherwise, is, without such consent as aforesaid, registered by a name identical with that by which a subsisting company is registered, or so nearly resembling the same as to be calculated to deceive, such firstmentioned company may, with the sanction of the registrar, change its name (a), and upon such change being made the registrar shall enter the new name on the register in the place of the former name, and shall issue a certificate of incorporation altered to meet the circumstances of the case; but no such alteration of name shall affect any rights or obligations of the company, or render defective any legal proceedings instituted or to be instituted by or against the company, and any legal proceedings may be continued or commenced against the company by its new name that might have been continued or commenced against the company by its former name. (a) And see s. 13. In Colonial Life Assurance Co. v. Home and Colonial Assurance Co. (a) and The London Assurance Co. v. The London and Westminster Assurance Co. (b) injunctions to cause the defendants to cease from using so much of their name as was identical with that of the plaintiffs were refused. 21. No company formed for the purpose of promoting art, science, religion, charity, or any other like object, not involving the acquisition of gain by the company or by the individual members thereof, shall, without the sanction of the Board of Trade, hold more than two acres of land; but the Board of Trade may, by licence (a) under the hand of one of their principal secretaries or assistant secretaries, empower (b) 32 L. J. (Ch.) 664. (a) 33 Beav. 548. any such company to hold lands in such quantity and subject to such conditions as they think fit. (a) Sch. II., Form F. Companies other than those named in this section are unrestricted in the matter of holding lands (a). PART II. DISTRIBUTION OF CAPITAL AND LIABILITY OF MEMBERS OF Distribution of Capital. interest in 22. The shares or other interest of any member in a com- Nature of pany under this Act shall be personal estate, capable of being company. transferred in manner provided by the regulations of the company (a), and shall not be of the nature of real estate, and each share shall, in the case of a company having a capital divided into shares, be distinguished by its appropriate number. (a) Sch. I., Table A. (8)—(16). See ss. 14, 15, as to mining companies in the Stannaries Act, 1869 (32 & 33 Vict. c. 19), Stannaries not registered under this Act. By this section the ordinary incidents of partnership in respect of the Shareholder's introduction of new members are excluded, and the shares rendered right to transfer. freely transferable, subject only to any limitations imposed by the articles of the company in respect of the conditions on which a transfer may be effected. Except as restrained by any provision in the articles, the shareholders have the right of going into the market and disposing of and transferring their shares without the consent of directors, or shareholders, or anybody, provided only it is a bonâ fide transaction, as an out-and-out disposal of the property, without retaining any interest in them. And if it is desired by a company that such unlimited power of assignment shall not exist, then a clause must be inserted in the articles whereby the directors shall have the power of rejecting proposed members (b). In the absence of any such provision the directors have no discretionary power of refusing to register a transfer which has been bonâ fide made (c). Moreover, in respect of his right of dealing with his shares a director is in general as free as any other shareholder. He is not in the position (a) s. 18. (b) As to the exercise of such a power, v. infra under this section. (c) In re Smith, Knight & Co., Weston's Case, L. R. 6 Eq. 238; Ibid. 4 Ch. 20; and see the cases cited below. Where the shareholder is also a director. Cases conflict ing. General rules as to shareholder's right to transfer. of a trustee for the general body of the shareholders, so as to be unable to deal with his shares in a manner prejudicial to the interests of his cestuis que trust, but in a vast variety of circumstances is just as free to deal with his shares-except, perhaps, his qualification, which he cannot deal with without giving up his directorship-as any other person (a). In connection with the question of the shareholder's right to transfer a large number of cases have come before the Court, the decisions in which appear in some instances to have turned on distinctions somewhat subtle and refined, so that it is not at first sight easy to reconcile them with each other. It is submitted, however, that there may be drawn from the cases certain broad rules of considerable value for practical guidance, and, subject to the observance of those rules, it is presumed that each case must turn on its own peculiar circumstances. The rules may, perhaps, be shortly stated thus: I. A shareholder may, although the company is in difficulty, or even in extremis, effect a transfer of his shares, and such a transfer will be valid, although made avowedly for the purpose of avoiding liability, although made to a man of straw, although made for a nominal consideration, or although a valuable consideration be expressed but be not in fact paid, or even although the consideration be in fact paid to, not by, the transferee, provided the transaction be bonâ fide an absolute outand-out disposal of the property, without any trust or reservation for the benefit of the transferor (b). II. But if the transaction be colourable and fictitious, and the transfer be merely nominal, and there be any trust or reservation of benefit in favour of the transferor, the transaction is then invalid and the transferor remains liable (c). III. If, further, the transfer be not open and bonâ fide but be made with colour indicating an attempt to escape liability in a manner tainted with fraud, or be made upon an opportunity fraudulently obtained, it cannot be supported (d). And as a special head of this last rule in the case of companies, to whose directors is by the articles given a discretion as to the acceptance of any proposed transferee may be added the following, viz., that:— IV. If, in the case of such a company, the facts have been wilfully mis-stated to the directors, and if the facts were such that, in the opinion of the Court, the directors, if they had known them, would have, or ought to have, in the execution of their duty, refused to register the transfer, then the transfer will be set aside, and the transferor rendered liable (e). (a) Gilbert's Case, L. R. 5 Ch. 559; and see Jessopp's Case, 2 De G. & J. 638; Libri's Case, 30 L. T. (1857) 185, cited infra. (b) De Pass's Case, 4 De G. & J. 544, and cases cited infra; but as to mining companies in the Stannaries, see 32 & 33 Vict. c. 19, s. 35, cited post. (c) Hyam's Case, 1 D. F. & J. 75, and cases cited infra; and see s. 30. (d) Costello's Case, 2 D. F. & J. 302, which Turner, L.J., said lay between De Pass's Case and Hyam's Case; Ex parte Parker, L. R. 2 Ch. 685, et infra. (e) Ex parte Kintrea, L. R. 5 Ch. 95. VALID. I. As establishing the first rule the following cases may be cited: De Pass's Case (a) where P., being aware that the company was in I. TRANSFER difficulties, handed over shares, transferable by delivery, for a nominal consideration to his clerk-and, although it was admitted that the transfer was made in order to relieve P. from his liability, yet the Court being satisfied that it was an out-and-out disposal of the property without any trust or reservation, it was held that P. was not a contributory. Slater's Case (b), in which the consideration was stated to be £25 paid Consideration for the shares, when in fact £30 was paid to the transferee as a considera- mis-stated. tion for his taking the transfer. The company was wound up about a year afterwards, and there being no evidence of fraud, the transfer was held valid. Weston's Case (c), in which a shareholder executed a transfer to a Incorrect adtransferee who gave an address at which he was only an occasional dress. visitor. The directors had not by the articles any discretion as to accepting a proposed transferee, but they refused to register the transfer on the ground that the transferee's address was incorrectly given. It was admitted, on the one hand, that the transferor intended to part with the entire interest in his shares, and on the other, that he executed the transfer with the intention of escaping liability. It was held that the directors were bound to register the transfer, and the register was rectified by the Court by removing the name of the transferor (v. sect. 35, infra). Bishop's Case (d) in which a number of minute circumstances were Description brought forward in order to attempt to shew a trust or reservation of "gentleman." benefit to the transferor. There was no evidence that the company was in a failing state at the time of the transfer, and in the opinion of the Court no trust for the transferor was established. A description of a man of small or no means, living in a house worth only £3 a year, as a "gentleman," is not, under such circumstances, material as a misdescription. The transfer was held valid. Hakim's Case (e), in which the transferee was a clerk in the transferor's firm. There was a stipulation that the transferee should not part with the shares for six months. After the transfer the certificates were given back to the custody of the transferor or of his firm, but this was held perfectly consistent with the restriction placed upon the transfer. The transaction being, therefore, a complete disposal of the shares without retaining any interest in them was valid, although effected with a view to escape liability. Transferee clerk of trans feror. Battie's Case (f), in which the transfer was to a man of straw, by a Description, transfer giving a false description and address of the transferee, and address, and purporting to be for valuable consideration, whereas no consideration (a) 4 De G. & J. 544; and as other early cases, see Jessopp's Case, 2 De G. & J. 638; Libri's Case, 30 L. T. (1857) 185; in the former the transferor was a director, in the latter the chairman of the company; Garstin's Case, 10 W. R. 457. (b) 35 Beav. 391; 14 W. R. 446, and see Lloyd's Case (European Arbitration), (c) L. R. 6 Eq. 238; Ibid. 4 Ch. 20. C Contrast consideration falsely stated. |