}
122
The liability of directors and promoters was altered in the United Kingdom by the Directors Liability Act of 1890, the "Statement in lieu of Prospectus" was introduced by the Act of 1907, and the other chauges were made by the Act of 1900. Ordinance, Section 101; Act, Sections 80 to 81, 285; Bill, Clauses 81 to 85, 261.
Commencement of Business.
A company shall not comnience any business or exercise any borrowing powers unless :----
(a.) Cash shares have been allotted up to the minimum
subscription: and
(.) Every director has paid on his cash shares the same amount as the public have to pay on their shares on application and allotment: and
(c.) A statutory declaration by the secretary that the above conditions have been complied with has been filed with the registrar of companies: and
(d) In the case of a company which does not issue a pros- pectus, there has been filed with the registrar of companies a statement in lieu of prospectus.
No contract is binding until the date on which the company is entitled to commence business. If the company commences business in contravention of these provisions, every person who is respousible for the contravention is liable to a fine of $500 a day. These provisions were first introduced in the United Kingdom by the Act of 1900. They are designed (1) to prevent business being begun on insufficient capital, and (2) to make directors take up their shares. Ordinance," „Vil; Act, Section 87; Bill, Clause 88.
Allotment.
As the law stands at present, the directors may go to allot- ment and commence business although only a very small portion of the capital has been applied for. The object of the provisions of the Act and Bill, which were first introduced in the United Kingdom by the Companies Act 1900, is to prevent allotments being made on insufficient applications, and business being com- menced without a reasonable capital. The provisions are as
follows:--
(1) No allotment can be made until a certain amount has been subscribed, and the amount payable on application has been actually paid.
(2) If the minimum subscription is not reached within 40 days from issue of the prospectus all money received from applicants must be returned, and the directors are personally liable for its return.
(3) A return must be filed with the registrar of companies, giving the details of the allotment, and in particular as to shares issued as fully or partly paid up otherwise than in cash. It default is made in filing this return the directors and officers are liable to a fine of $500 a day.
(4) An irregular allotment is voidable at the instance of the applicant within a certain period, and the directors are liable to compensate both the company and the allottee.
(5) A
company shall not commence any business or exercise any borrowing powers unless the minimum amount has been allotted, and every director has actually paid to the company the proper amount on his own shares. Every person responsible for a contravention of this provision is liable to a fine of $500 a day. Ordinance, Nil; Act, Sections 85 to 88; Bill, Clauses 86 to 89.
123
Commissions and Discounts.
Anthority is given to companies to pay commission on taking, underwriting, or placing shares, provided that the rate of com- mission paid is authorised by the articles and is disclosed in the prospectus, statement in lieu of prospectus, circular inviting shares, etc. Any other payment out of capital moneys by way of com- missions, discount, or allowance for taking or placing of shares is expressely prohibited. This latter provision, which was introduced in the United Kingdom by the Companies Act 1900, was intended to stop the practice, formerly very common, of adding large amount to the price payable to the vendors, who then arranged the underwriting, giving large blocks of shures to financiers, who guaranteed that sufficient shares should be taken to provide work- ing capital.
When a company has paid any sums by way of commission in respect of any shares or debentures, the total amount so paid must he stated in every balance sheet of the company until the whole amount bus been written off. (Act of 1907.) Ordinance, Nil;
Act, Sections 89, 90; Bill, Clauses 90, 91,
Payment of Interest out of Capital.
Where shares are issued to raise money to defray the expense constructing works, buildings, or plant, which cannot be made profitable for a lengthened period, the company may pay interest on the amount paid up, provided the payment is authorised by the articles or by special resolation, is sanctioned by the court, and does not exceed a certain rate. This provision was first introduced in the United Kingdom by the Companies Act 1907. Ordinance, Nil; Act, Section 91; Bill, Clause 92.
Information as te Mortgages, Charges, etc,
The Companies Ordinance 1865 requires every limited com- pany ander the Ordinance to keep a register of all mortgages and charges specifically affecting property of the company. The Bill continues this provision, and also provides that every mortgage or charge created after a certain dato (in the United Kingdom, 9 months before the commencement of the Act), and falling within a certain defined and comprehensive class, shall, so far as any se- curity on the company's property or undertaking is thereby con- ferred, he void against the liquidator and any creditor of the com- pany, unless the prescribed particulars of the mortgage or charge are given, and the instrument by which the mortgage or charge is created or evidenced is produced, to the registrar of companies within five weeks after the date of its creation. It also provides that if a receiver or manager be appointed under any such instru- ment, notice of his appointment shall be giveu to the registrar of companies, and that such receiver or manager shall file with the registrar of companies accounts of his receipts and payments. The penalties for default are heavy. These provisions were introduced in the United Kingdom by the Companies Acts of 1900 and 1907.
A floating charge created within 3 months of a winding up is made invalid unless it can be proved that the company was solvent immediately after the creation of the charge. Ordinance, Section 102; Act, Sections 93 to 102, 212; Bill, Clauses 94 to 103, 202.
Auditors.
At present there are no statutory provisions with regard to auditors, nor were there any in the United Kingdom prior to 1900. The Bill requires the company to appoint auditors, and provides that in case of default the Governor may appoint them. Every auditor has a right of access at all times to the books and accounts and vouchers of the company, and is entitled to require from the directors and officers all necessary information and explanation. The auditors must make a report to the shareholders on the ac- counts examined by them, aud on every balance sheet laid before the company during their tenure of office, and the report must state whether they have obtained all the information and explana- tions they have required, and also whether, in their opinion, the
362
272
No comments yet.
Private notes are available after approval.