17817-1910-Supplementary-Bills-read-a-first-time--Companies — Page 122

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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 changes were made by the Act of 1900. Ordinance, Section 101: Act, Sections 80 to 84, 285; Bill, Clauses 81 to 85, 261.

Commencement of Business.

A company shall not commence any business or exercise any borrowing powers unless :-

(a.) Cash shares have been allotted up to the minimum

subscription: and

(b.) 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

:

(.) 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 responsible 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, Nil: 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. If 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.