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Rh the regulations under them, treat the directors of a company as the persons in whom the management of the company’s affairs is vested. But they also contemplate the

ultimate controlling power as residing in the shareholders. A controlling power of this kind can only assert itself through general meetings; and that it may have proper opportunities of doing so, every company is required to hold a general meeting, commonly called the statutory meeting, within—as fixed by the Companies Act 1900—three months from the date at which it is entitled to commence business. This first statutory meeting acquired new significance under the Companies Act of 1900 and marks an important stage in the early history of a company. Seven days before it takes place the directors are required to send round to the members a certified report informing them of the general state of the company’s affairs—the number of shares allotted, cash received for them, and names and addresses of the members, the amount of preliminary expenses, the particulars of any contract to be submitted to the meeting, &c. Furnished with this report the members come to the meeting in a position to discuss and exercise an intelligent judgment upon the state and prospects of the company. Besides the statutory meeting a company must hold one general meeting at least in every calendar year, and not more than fifteen months after the holding of the last preceding general meeting (Companies (Consolidation) Act 1908, s. 64). This annual general meeting is usually called the ordinary general meeting. Other meetings are extraordinary general meetings. Notices convening a general meeting must inform the shareholders of the particular business to be transacted; otherwise any resolutions passed at the meeting will be invalidated. Voting is generally regulated by the articles. Sometimes a vote is given to a shareholder for every share held by him, but more often a scale is adopted; for instance, one vote is given for every share up to ten, with an additional vote for every five shares beyond the first ten shares up to one hundred, and an additional vote for every ten shares beyond the first hundred. In default of any regulations, every member has one vote only. Sometimes preference shareholders are given no vote at all. A poll may be demanded on any special resolution by three persons unless the articles require five (Companies (Consolidation) Act 1908, s. 69).

A contract to take shares is like any other contract. It is constituted by offer, acceptance and communication of the acceptance to the offerer. The offer in the case of shares is usually in the form of an application in

writing to the company, made in response to a prospectus, requesting the company to allot the applicant a certain number of shares in the undertaking on the terms of the prospectus, and agreeing to accept the shares, or any smaller number, which may be allotted to the applicant. An allottee is under the Companies (Consolidation) Act 1908, s. 86, entitled to rescind his contract where the allotment is irregular, e.g. where the minimum subscription has not been obtained. When an application is accepted the shares are allotted, and a letter of allotment is posted to the applicant. Allotment is the usual, but not the only, evidence of acceptance. As soon as the letter of allotment is posted the contract is complete, even though the letter never reaches the applicant. An application for shares can be withdrawn at any time before acceptance. As soon as the contract is complete, it is the duty of the company to enter the shareholder’s name in the register of members, and to issue to him a certificate under the seal of the company, evidencing his title to the shares.

The register of members plays an important part in the scheme of the company system, under the Companies Act 1862. The principle of limited liability having been once adopted by the legislature, justice required not only

that such limitation of liability should be brought home by every possible means to persons dealing with the company, but also that such persons should know as far as possible what was the limited capital which was the sole fund available to satisfy their claims—what amount had been called up, what remained uncalled, who were the persons to pay, and in what amounts. These data might materially assist a person dealing with the company in determining, whether he would give it credit or not; in any case they are matters which the public had a right to know. The legislature, recognizing this, has exacted as a condition of the privilege of trading with limited liability that the company shall keep a register with those particulars in it, which shall be accessible to the public at all reasonable times. In order that this register may be accurate, and correspond with the true liability of membership for the time being, the court is empowered under the Companies Act 1862, and the Companies (Consolidation) Act 1908, s. 32, to rectify it in a summary way, on application by motion, by ordering the name of a person to be entered on or removed therefrom. This power can be exercised by the court, whether the dispute as to membership is one between the company and an alleged member, or between one alleged member and another, but the machinery of the section is not meant to be used to try claims to rescind agreements to take shares. The proper proceeding in such cases is by action.

The same policy of guarding against an abuse of limited liability is evinced in the Companies Act 1862, which required that shares in the case of a limited company should be paid for in full. The legislature has allowed

such companies to trade with limited liability, but the price of the privilege is that the limited capital to which alone the creditors can look shall at least be a reality. It is therefore ultra vires for a limited company to issue its shares at a discount; but there was nothing in the Companies Act 1862 which required that the shares of a limited company, though they must be paid up in full, must be paid up in cash. They might be paid “in meal or in malt,” and it accordingly became common for shares to be allotted in payment for furniture, plate, advertisements or services. The result was that the consideration was often illusory, shares being issued to be paid for in some commodity which had no certain criterion of value. To remedy this evil the legislature enacted in the Companies Act 1867, s. 25, that every share in any company should be held subject to the payment of the whole amount thereof in cash, unless otherwise determined by a contract in writing filed with the registrar of joint stock companies at or before the issue of the shares. This section not infrequently caused hardship where shares had been honestly paid for in the equivalent of cash, but owing to inadvertence no contract had been filed; and it was repealed by the Companies Act 1900, and the old law restored. In reverting to the earlier law, and allowing shares to be paid for in any adequate consideration, the legislature has, however, exacted a safeguard. It has required the company to file with the registrar of joint stock companies a return stating, in the case of shares allotted in whole or in part for a consideration other than cash, the number of the shares so allotted, and the nature of the consideration—property, services, &c.—for which they have been allotted.

Though every share carries with it the liability to pay up the full amount in cash or its equivalent, the liability is only to pay when and if the directors call for it to be paid up. A call must fix the time and place for payment, otherwise it is bad.

When a person takes shares from a company on the faith of a prospectus containing any false or fraudulent representations of fact material to the contract, he is entitled to rescind the contract. The company cannot keep a contract obtained by the misrepresentation or fraud of its agents. This is an elementary principle of law. The misrepresentation, for purposes of rescission, need not be fraudulent; it is sufficient that it is false in fact: fraud or recklessness of assertion will give the shareholder a further remedy by action of deceit, or under the Directors’ Liability Act 1890 (see supra); but, to entitle a shareholder to rescind, he must show that he took the shares on the faith or partly on the faith of the false representation: if not, it was innocuous. A shareholder claiming to rescind must do so promptly. It is too late to commence proceedings after a winding-up has begun.