THE COMPANIES ACT of 1961 - Supreme Court Library ...

THE COMPANIES ACT of 1961

10 Eliz. 2 No. 55

31

An Act to Consolidate and Amend the Law relating to Companies. [Assented to 28 December 1961]

PART I-PRELIMINARY 1. Short title. This Act may be cited as "The Companies Act of 1961."

2. Commencement. This Act shall come into operation on a day to be fixed by Proclamation of the Governor in Council published in the Government Gazette.

The Act came into operation on 1 July 1962. See Proclamation published Gazette 24 February 1962, p.563.

The corresponding or similar sections referred to in the annotations to this Act are contained in the following Acts:-

u.K. 11 and 12 Geo. 6, 1948 (Imperial). N.S.W. New South Wales No. 33 of 1936 as amended. Vic. Victoria No. 6455 of 1958. Qld. Queensland 22 Geo. 5 No. 53 as amended. S.A. South Australia Companies Act, 1934-1%0. W.A. Western Australia Companies Act, 1943-1960. Tas. Tasmania No. 29 of 1959.

These Acts (with the exception of the English Act) have now been replaced by:-

N.S.W. Companies Act, 1961. No. 71 of 1961. Vic. Companies Act, 1961, No. 6839. S.A. Companies Act, 1962, No. 56 of 1962. W.A. Companies Act, 1961, No. 82 of 1961. Tas. Companies Act, 1962, No. 66 of 1962.

which are uniform with the Queensland Companies Act of 1961, 10 Eliz. 2 No. 25.

3. Division of Act into Parts, etc. This Act is divided into Parts, Divisions and Subdivisions as follows:-

PART I-PRELIMINARY (ss. 1-6); PART II-ADMINISTRATION OF ACT (ss. 7-13); PART III-CONSTITUTION OF COMPANIES (ss. 14-36);

Division I-Incorporation (ss. 14-18); Division 2-Powers (ss. 19-36);

PART IV-SHARES, DEBENTURES AND CHARGES (ss. 37-110); Division I-Prospectuses (ss. 37-47); Division 2-Restrictions on Allotment, and Commencement of

Business (ss. 48-53); Division 3-Shares (ss. 54-69); Division 4-Debentures (ss. 70-75); Division 5-Interests other than Shares, Debentures, etc. (ss.

76-89); Division 6-Title and Transfers (ss. 90-99); Division 7-Registration of Charges (ss. 100-110);

PART V-MANAGEMENT AND ADMINISTRATION (ss. 111-160); Division I-Office and Name (ss. 111-113); Division 2-Directors and Officers (ss. 114-134);

32 COMPANIES

Division 3-Meetings and Proceedings (ss. 135-149); Division 4-Register of Members (ss. 150-157); Division 5-Annual Return (ss. 158-160);

PART VI-AcCOUNTS AND AUDIT (ss. 161-180); Division I-Accounts (ss. 161-164); Division 2-Audit (ss. 165-167); Division 3-Inspection (ss. 168-171); Division 4-Special Investigations (ss. 172-180);

Vol. 2

PART VII-ARRANGEMENTS AND RECONSTRUCTIONS (ss. 181-186);

PART VIII-RECEIVERS AND MANAGERS (ss. 187-197);

PART IX-OFFICIAL MANAGEMENT (ss. 198-215);

PART X-WINDING Up (ss. 216-318); Division I-Preliminary (ss. 216-220); Division 2-Winding Up by the Court (ss. 221-253);

Subdivision (1 )-Genera1 (ss. 221-230); Subdivision (2)-Liquidators (ss. 231-240); Subdivision (3 )-Committees of Inspection (ss. 241-242); Subdivision (4)-General Powers of Court (ss. 243-253);

Division 3-Voluntary Winding Up (ss. 254-276); Subdivision (1 )-Introductory (ss. 254-257); Subdivision (2)-Provisions applicable only to Members' Vol

untary Winding Up (ss. 258-259); Subdivision (3)-Provisions applicable only to Creditors' Vol

untary Winding Up (ss. 260-263); Subdivision (4)-Provisions applicable to every Voluntary

Winding Up (ss. 264-276); Division 4-Provisions applicable to every Mode of Winding Up

(ss. 277-313); Subdivision (1 )-General (ss. 277-290); Subdivision (2)-Proof and Ranking of Claims (ss. 291-292); Subdivision (3)-EfIect on other Transactions (ss. 293-299); Subdivision (4 )-OfIences (ss. 300-306); Subdivision (5)-Dissolution (ss. 307-313);

Division 5-Winding Up of Unregistered Companies (ss. 314-318);

PART XI-VARIOUS TYPES OF COMPANIES, ETC. (ss. 319-361); Division I-No-Liability Companies (ss. 319-333); Division 2-Investment Companies (ss. 334-343); Division 3-Foreign Companies (ss. 344-361);

PART XII-GENERAL (ss. 362-384); Division I-Enforcement of Act (ss. 362-373); Division 2-0fIences (ss. 374-381); Division 3-Miscellaneous (ss. 382-384).

4. (1) Repeals First Schedule. The Acts specified in the First Schedule are repealed.

COMPANIES ACT OF 1961 ss. 3, 4 33

(2) Transitory provisions. Unless the contrary intention appears in this Act-

(a) all persons, things, and circumstances appointed or created by or under any of the repealed Acts or existing or continuing under any of such Acts immediately before the commencement of this Act shall under and subject to this Act continue to have the same status operation and effect as they respectively would have had if such Acts had not been so repealed and so far as they could have been made, passed, given, taken, issued or done under this Act shall, subject to this Act, have effect as if made, passed, given, taken, issued or done under this Act; and

(b) in particular and without affecting the generality of the foregoing paragraph, such repeal shall not disturb the continuity of status, operation or effect of any Order in Council, order, rule, regulation, scale of fees, appointment, conveyance, mortgage, deed, agreement, resolution, direction, instrument, document, memorandum, articles, incorporation, nomination, affidavit, call, forfeiture, minute, assignment, register, registration, transfer, list, licence, certificate, security, notice, compromise, arrangement, right, priority, liability, duty, obligation, proceeding, matter, or thing made, done, effected, given, issued, passed, taken, validated, entered into, executed, lodged, accrued, incurred, existing, pending, or acquired by or under any of such repealed Acts before the commencement of this Act and so far as it could have been made, done, effected, given, issued, passed, taken, validated, entered into, executed, lodged. accrued, incurred, existing, pending, or required by or under this Act shall, subject to this Act, have effect as if made, done. effected, given, issued, passed, taken, validated, entered into. executed, lodged, accrued, incurred, existing, pending, or acquired by or under this Act.

(3) Nothing in this Act shall affect Table A of the First Schedule to the repealed Act or any part thereof (either as originally enacted or as altered in pursuance of any statutory power) or the corresponding Table in any former enactment relating to companies (either as originally enacted or as so altered) so far as the same applies to any company existing at the commencement of this Act.

(4) The provisions of this Act with respect to winding up other than the provisions of subdivision (5) of Division 4 of Part X shall not apply to any company or society of which the winding up has commenced before the commencement of this Act, but every such company or society shall be wound up in the same manner and with the same incidents as if this Act had not been passed and for the purposes of the winding up the Act or Acts under which the winding up commenced shall be deemed to remain in full force.

(5) Where in any other Act a reference is made to the repealed Act or any corresponding previous enactment or any provision of any such Act or enactment, that reference shall be read as a reference to this Act or to the corresponding provision (if any) of this Act.

(6) All registrars, deputy registrars and other officers appointed under the repealed Act and in office immediately before the commencement of

2

34 COMPANIES Vol. 2

this Act shall without further or other appointment. be deemed to have been appointed to their respective offices for the purposes of this Act and. subject to this Act. shall continue to hold those offices respectively in terms of their respective appointments.

(7) The repeal of the repealed Act shall not affect the incorporation of any company registered and incorporated thereunder or under any corresponding previous enactment and in the application of this Act to such companies this Act shall apply in the same manner-

(a) in the case of a limited company other than a company limited by guarantee and a company limited both by shares and guarantee as if the company had been incorporated under this Act as a company limited by shares;

(b) in the case of a no-liability company as if the company had been incorporated under this Act as a no-liability company;

(c) in the case of a company limited by guarantee. as if the company had been incorporated under this Act as a company limited by guarantee;

(d) in the case of a company limited both by shares and guarantee as if the company had been incorporated under this Act as a company limited both by shares and guarantee; and

(e) in the case of an unlimited company. as if the company had been incorporated under this Act as an unlimited company.

but any reference in this Act express or implied. to the date of registration of such a company shall be construed as a reference to the date upon which the company was registered under the repealed Act or under any corresponding previous enactment.

(8) This Act shall apply to every corporation registered. but not incorporated under the repealed Act or any corresponding previous enactment in the same manner as it is declared to apply to corporations registered but not incorporated under this Act.

(9) Any register kept under the repealed Act or any corresponding previous enactment shall be deemed part of the register to be kept under the corresponding provisions of this Act.

(10) All funds and accounts constituted under this Act shall be deemed to be in continuation of the corresponding funds and accounts constituted under the repealed Act or any corresponding previous enactment.

(11) Paragraph (c) of subsection (1) of section nine shall not apply to any person appointed as auditor of a proprietary company before the commencement of this Act until the expiration of twelve months after the commencement of this Act or the expiration of the term of his appointment whichever first occurs.

(12) Nothing in this section shall prejudice or affect the operation of any of the provisions of "The Acts Interpretation Acts. 1954 to 1960."

N.S.W. ss. 3, 4; Vic. s. 2; Qld. S5. 4, 6, 7; S.A. s. 2; W.A. s. 4; Tas. 5. 2. Act referred to:

Acts Interpretation Acts, 1954 to 1962, title ACTS OF PARLIAMENT. Subsection (12), see especially Acts Interpretation Acts, 1954 to 1962, ss. 20, 21.

title ACTS OF PARLIAMENT.

COMPANIES ACT OF 1961 SS. 4, 5 35

5. (1) Interpretation. In this Act unless the contrary intention appears-

"Annual general meeting", in relation to a company, means It

meeting of the company required to be held by section one hundred and thirty-six;

"Annual return" means-(a) in relation to a company having a share capital-the return

required to be made by section one hundred and fifty-eight; and

(b) in relation to a company not having a share capital-the return required to be made by section one hundred and fiftynine,

and includes any document accompanying the return. "Articles" means articles of association; "Banking corporation" means a bank as defined in section five of

the Banking Act 1959 of the Commonwealth as amended from time to time;

"Board" means the Companies Auditors Board constituted under section eight;

"Books" includes accounts deeds writings and documents;

"Branch register" means-(a) in relation to a company, a branch register of members

of the company kept in pursuance of section one hundred and fifty-seven; and

(b) in relation to a foreign company, a branch register of members of the company kept in pursuance of section three hundred and fifty-four;

"Certified", in relation to a copy of a document, means certified in the prescribed manner to be a true copy of the document and, in relation to a translation of a document, means certified in the prescribed manner to be a correct translation of the document into the English language;

"Charge" includes a mortgage and any agreement to give or execute a charge or mortgage whether upon demand or otherwise;

"Company" means a company incorporated pursuant to this Act or pursuant to any corresponding previous enactment;

"Company having a share capital" includes an unlimited company with a share capital;

"Company limited by guarantee" means a company formed on the principle of having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up;

"Company limited by shares" means a company formed on the principle of having the liability of its members limited by the memorandum to the amount (if any) unpaid on the shares respectively held by them;

"Contributory", in relation to a company, means a person liable to contribute to the assets of the company in the event of its

36 COMPANIES Vol. 2

being wound up; and includes the holder of fully paid shares in the company and prior to the final determination of the persons who are contributories, includes any person alleged to be a contributory;

"Corporation" means any body corporate formed or incorporated whether in the State or outside the State and includes any foreign company but does not include-

(a) any body corporate that is incorporated within the Commonwealth and is a public authority or an instrumentality or agency of the Crown; or

(b) any corporation sole;

"Court" means the Supreme Court or a Judge thereof; "Creditors' voluntary winding up" means a winding up under

Division 3 of Part X, other than a members' voluntary winding up;

"Crown Law Officer" means the Attorney-General, Minister for Justice or Solicitor-General;

"Debenture" includes debenture stock bonds notes and any other securities of a corporation whether constituting a charge on the assets of the corporation or not;

"Default penalty" means a default penalty within the meaning of section three hundred and eighty;

"Director" includes any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the directors of a corporation are accustomed to act;

"Document" includes summons, order and other legal process, and notice and register;

"Emoluments" includes fees percentages and other payments made or consideration given directly or indirectly to a director or auditor of a company or of any holding company or subsidiary of that company. whether as a director or auditor or otherwise in connection with the affairs of such company, and the money value of any allowances or perquisites;

"Exempt proprietary company" means a proprietary company no share in which is, by virtue of subsections (7) and (8) of this section, deemed to be owned by a public company;

"Expert" includes engineer valuer accountant and any other person whose profession or reputation gives authority to a statement made by him;

"Filed" means filed under this Act or any corresponding previous enactment;

"Financial year". in relation to any corporation, means the period in respect of which any profit and loss account of the corporation laid before it in general meeting is made up, whether that period is a year or not;

"Foreign company" means-(a) a company corporation society association or other body

incorporated outside the State; or (b) an unincorporated society association or other body which

COMPANIES ACT OF 1961 s.S 37

under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the society association or body duly appointed for that purpose and which does not have its head office or principal place of business in the State;

"Limited company" means a company limited by shares or by guarantee or both by shares and guarantee but does not include a no-liability company;

"Lodged" means lodged under this Act or any corresponding previous enactment;

"Manager", in relation to a company, means the principal executive officer of the company for the time being by whatever name called and whether or not he is a director;

"Marketable securities" means debentures funds stocks shares or bonds of any Government or of any local government authority or of any corporation or society and includes any right or option in respect of shares in any corporation and any interest as defined in section seventy-six;

"Members' voluntary winding up" means a winding up under Division 3 of Part X where a declaration has been made and lodged in pursuance of section two hundred and fiftyseven;

"Memorandum" means memorandum of association;

"Minimum subscription" in relation to any shares offered to the public for subscription means the amount stated in the prospectus relating to the offer in pursuance of subparagraph (a) of paragraph 4 of the Fifth Schedule as the minimum amount which in the opinion of the directors must be raised by the issue of the shares so offered;

"Mining company" means a company the sole objects of which are mining purposes;

"Mining purposes" means purposes of prospecting for or obtaining by any mode or method or of selling or otherwise disposing of ores metals minerals and all products of mining and includes all or any of such purposes whether carried on in the State or elsewhere and purposes necessary for or incidental to the foregoing purposes but does not include quarrying operations for the sale purpose of obtaining stone for building road making or similar purposes;

"Minister" means the Minister for Justice and Attorney-General or other Minister of the Crown for the time being charged with the administration of this Act;

"No-liability company" means a company in which the acceptance of a share does not constitute a contract to pay calls;

"Officer" in relation to a corporation includes-(a) any director secretary or employee of the corporation; (b) a receiver and manager of any part of the undertaking of

the corporation appointed under a power contained in any instrument; and

38 COMPANIES Vol. 2

(c) any liquidator of a company appointed in a voluntary winding up,

but does not include-(d) any receiver who is not also a manager; (e) any receiver and manager appointed by the Court; or (f) any liquidator appointed by the Court or by the creditors;

"Official liquidator" means a person appointed as an official liquidator by or under section eleven;

"Official manager" means a person appointed as an official manager under Part IX;

"Part" means Part of this Act;

"Prescribed" means prescribed by or under this Act or by the rules;

"Principal register", in relation to a company, means the register of members of the company kept in pursuance of section one hundred and fifty-one;

"Printed" includes type-written or lithographed or reproduced by any mechanical means;

"Profit and loss account" includes income and expenditure account, revenue account or any other account showing the results of the business of a corporation for a period;

"Promoter" in relation to a prospectus issued by or in connection with a corporation means a promoter of the corporation who was a party to the preparation of the prospectus or of any relevant portion thereof, but does not include any person by reason only of his acting in a professional capacity;

"Proprietary company" means-(a) any company which immediately prior to the commence

ment of this Act was a private company under the provisions of the repealed Act;

(b) any company incorporated as a proprietary company by virtue of section fifteen; or

(c) any company converted into a proprietary company pursuant to the provisions of subsection (1) of section twentysix.

being a company which has not ceased to be a proprietary company under section twenty-six or twenty-seven;

"Prospectus" means any prospectus notice circular advertisement or invitation inviting applications or offers from the public to subscribe for or purchase or offering to the public for subscription or purchase any shares in or debentures of or any units of shares in or units of debentures of a corporation or proposed corporation;

"Public company" means a company other than a proprietary company;

"Public Curator" means the Public Curator within the meaning of "The Public Curator Acts, 1915 to 1957";

"Registered" means registered under this Act or any corresponding previous enactment;

COMPANIES ACT OF 1961 s.5 39

"Registered company auditor" means a person registered as such under section nine and in relation to a corporation not being a company includes a person qualified to act as the auditor of the corporation under the law of the place in which the corporation is incorporated;

"Registered liquidator" means a person registered as such under section nine;

"Registrar" subject to subsection (9) of this section means a Registrar of Companies under this Act and includes any Deputy or Assistant Registrar of Companies;

"Regulations" means regulations under this Act; "Repealed Act" means "The Companies Act of 1931," as

amended; "Resolution for voluntary winding up" means the resolution re-

ferred to in section two hundred and fifty-four; "Rules" means rules of Court; "Schedule" means Schedule to this Act; "Section" means section of this Act; "Share" means share in the share capital of a corporation and

includes stock except where a distinction between stock and shares is expressed or implied;

"State" means the State of Queensland; "Statutory meeting" means the meeting referred to in section one

hundred and thirty-five; "Statutory report" means the report referred to in section one

hundred and thirty-five; "Table A" means Table A in the Fourth Schedule; "Table B" means Table B in the Fourth Schedule; "This Act" includes any regulations; "Unit" in relation to a share, debenture or other interest means

any right or interest therein, by whatever term called; "Unlimited company" means a company formed on the principle

of having no limit placed on the liability of its members.

(2) Directors. For the purposes of this Act a person shall not be regarded as a person in accordance with whose directions or instructions the directors of a company are accustomed to act by reason only that the directors act on advice given by him in a professional capacity.

(3) When statement untrue. For the purposes of this Act a statement included in a prospectus or statement in lieu of prospectus shall be deemed to be untrue if it is misleading in the form and context in which it is included.

(4) When statement included in prospectus. For the purposes of this Act a statement shall be deemed to be included in a prospectus or statement in lieu of prospectus if it is contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued therewith.

(5) Invitation to lend money deemed invitation to purchase debentures. For the purposes of this Act any invitation to the public to deposit

COMPANIES Vol. 2

money with or to lend money to a corporation shall be deemed to be an invitation to subscribe for or purchase debentures of the corporation.

(6) As to what constitutes an offer to the- public. Any reference in this Act to offering shares or debentures to the public shall, unless the contrary intention appears. be construed as including a reference to offering them to any section of the public, whether selected as clients of the person issuing the prospectus or in any other manner; but a bona fide offer or invitation with respect to shares or debentures shall not be deemed to be an offer to the public if it is-

(a) an offer or invitation to enter into an underwriting agreement; (b) made to a person whose ordinary business it is to buy or sell

shares or debentures whether as principal or agent; ( c) made to existing members or debenture holders of a corpora

tion and relates to shares in or debentures of that corporation; or

(d) made to existing members of a company within the meaning of section two hundred and seventy and relates to shares in the corporation within the meaning of that section.

(7) For the purposes of the definition of "Exempt proprietary company" in subsection (I) of this section. a share in a proprietary company shall be deemed to be owned by a public company if any beneficial interest in the share is held, directly or indirectly, by-

(a) a public company; (b) a proprietary company a beneficial interest in a share in which

is held. directly or indirectly. by a public company; or (c) a proprietary company a beneficial interest in a share in which

is held. directly or indirectly. by a proprietary company a beneficial interest in a share in which is held, directly or indirectly. by-

(i) a public company; or (ii) another proprietary company a beneficial interest in a share

in which is held. directly or indirectly, otherwise than by a natural person.

(8) For the purposes of subsection (7) of this section. but without limiting the generality of that subsection-

(a) a reference in that subsection to a public company shall be read as including a reference to a foreign company other than a foreign company that (whether or not Division 3 of Part XI applies to it) is a foreign company of a kind referred to in subsection (5) of section three hundred and forty-eight;

(b) a reference in that subsection to a public company or to a proprietary company shall be read as not including a reference to a company in respect of which a license under section twenty-four. or under any corresponding previous enactment, is in force;

(c) where a corporation holds a beneficial interest in a redeemable preference share in a proprietary company and-

(i) no voting rights attach to the share; or

COMPANIES ACT OF 1961 S.S 41

(ii) any voting rights attaching to the share are exercisable only in special circumstances and do not include the right (except where any dividend in respect of the share is in arrears) to vote at an election of directors of the proprietary company-

the share shall be treated as if the beneficial interest in the share were held by a natural person; and

(d) a person (including a corporation) shall be deemed to hold a beneficial interest in a share-

(i) if that person, either alone or together with other persons, is entitled (otherwise than as trustee for, on behalf of or on account of, another person) to receive, directly or indirectly, any dividends in respect of the share or to exercise, or to control the exercise of, any rights attaching to the share; or

(ii) if that person, being a corporation, holds any beneficial interest in a share of another corporation which holds, or a subsidiary of which holds, any beneficial interest in that first-mentioned share.

(9) Save as provided in section seventy-six and section one hundred and unless the contrary intention appears a reference in this Act to the Registrar shall, in relation to a company or a foreign company registered in the State, be read as a reference to the Registrar at the place whereat the company or foreign company is registered.

u.K. ss. 154, 455; N.S.W. ss.6, 107, 137; Vic. s. 3; Qld. s. 5; SA. s. 8; W.A. s. 3; Tas. s. 3.

Acts referred to: Public Curator Acts, 1915 to 1957, title TRUSTEES AND EXECUTORS. Banking Act, 1959, No.6 (Commonwealth).

Subsection (1):-Charge-See Robson v. Smith, [1895] 2 Ch. 118; Everitt v. Automatic

Weighing Machine Co., [1892] 3 Ch. 506; Hall v. Richards, [1961] A.L.R. 816.

Company-See Re Whelan, deceased, [1961] V.R. 706. A company is a legal entity, distinct from its members, Salomon v. Salomon & Co. Ltd., [1897] A.c. 22, H.L.

Contributory-See Switchback Railway and Outdoor Amusements Co. (1890), 16 V.L.R. 339; Gray v. Stevenson (1899), 25 Y.L.R. 476; Re Melbourne Parking Station, [1929] A.L.R. 224; Re A. E. Higgim Pty. Ltd. (in liquidation), [1930] Y.L.R. 21. Contributories in respect of unregistered companies are defined by s. 316, post.

Crown Law Officer-See also Department of Justice Act of 1957, title CONSTITUTION.

Debenture-See Knightsbridge Estates Trust Ltd. v. Byrne, [1940] A.c. 613; [1940] 2 All E.R. 401; Barcelo v. Electrolytic Zinc. Co. of Australasia Ltd. (1932),48 C.L.R. 391; R. v. Findlater, [1939] 1 All E.R. 82. See also Part IV and s. 374, post.

Director-Whether a servant of the company, see Dunston v. Imperial Gas Light and Coke Co. (1832), 3 B. & Ad. 125; Hutton v. West Cork Ry. Co. (1883), 23 Ch. D. 654; Moriarty v. Regents Garage & Engineering Co. Ltd., [1921] 1 K.B. 423 (reversed by Court of Appeal on another point); Re Newspaper Proprietary Syndicate Ltd., [1900] 2 Ch. 349; H. Holdsworth Pty. Ltd. v. Caddies, [1955] 1 All E.R. 725; Tooheys Ltd. v. Commissioner of Stamp Duties, [1962] A.L.R. 195.

Whether a worker, see Lee v. Lee's Air Farming Ltd., [1961] A.c. 12; [1960] 3 All E.R. 420.

Document-See Hill v. R., [1945] K.B. 329; [1945] 1 All E.R. 414; Tucker (I. H.) & Co. Ltd. v. Board of Trade, [1955] 2 AU E.R. 522.

42 COMPANIES Vol. 2

Emoluments-See Re Wickham & Paddington Corporation's Arbitration, [1946] 2 All E.R. 68.

Exempt proprietary company-The standard of proof required where a company claims exemption is high, see Re Prenn's Settlement, [1961] 1 All E.R. 833. See also Qualter, Hall & Co. Ltd. v. Board of Trade, [1961] 3 All E.R. 389.

Manager-See Gibson v. Barton (1875), L.R. 10 Q.B. 329; Re Johnson (B.) & Co. (Builders) Ltd., [1955] 2 All E.R. 755.

Memorandum-See Ashbury Railway Carriage & Iron Co. v. Riche (1875), L.R. 7 H.L. 653.

Officer-See Re Imperial Land Co. of Marseilles; Re National Bank (1870), L.R. 10 Eq. 298.

Profit and loss account-See Federal Commissioner of Taxation v. Miller A nderson Ltd. (1946), 73 C.L.R. 341.

Promoter-See Tracy v. Mandalay Pty. Ltd. (1953), 88 C.L.R. 215; Twycross v. Grant (1877), 2 C.P.D. 469; Wilkins v. Davies (1890), 16 V.L.R. 70; Williams v. Robinson (1891), 12 L.R. (N.S.W.) (E.) 34.

Prospectus-See Nash v. Lynde, [1929] A.c. 158; Government Stock and Other Securities Investment Co. Ltd. v. Christopher, [1956] 1 All E.R. 490. See also ss. 37-47, post.

Share-The classic definition is generally accepted to be that of Farwell, J, in Borland's Trustees v. Steel, [1901] 1 Ch. 279, at p. 288: "A share is the interest ... of money of a more or less amount." See also Re Paulin, [1935] 1 K.B. 26; I.R.C. v. Crossman, [1937] A.c. 26; Singer v. Williams, [1921] 1 A.c. 41.

As to the meaning of "capital" in this definition, see Channel Collieries Trust v. Dover, [1914] 1 Ch. 568; Incorporated Interests Pty. Ltd. v. Federal Commissioner of Taxation (1943), 67 C.L.R. 508; Re Federal Traders Ltd., [1934] S.A.S.R. 174.

Subsection (3): For when an omission makes a statement untrue, see lng/Will v. Hardy (1885), 19 S.A.L.R. 64; Commonwealth Homes {Il1d Investment Co. Ltd. v. Smith (1938), 59 C.L.R. 443.

6. Definition of subsidiary and holding company. (1) For the purposes of this Act. a corporation shall. subject to the provisions of subsection (3) of this section, be deemed to be a subsidiary of another corporation. if.-

(a) that other corporation-(i) controls the composition of the board of directors of the

first-mentioned corporation; (ii) controls more than half of the voting power of the first-

mentioned corporation; or ~ (iii) holds more than half of the issued share capital of the first

mentioned corporation (excluding any part thereof which carries no right to participate beyond a specified amount in a distribution of either profits or capital); or

(b) the first-mentioned corporation is a subsidiary of any corporation which is that other corporation's subsidiary.

(2) For the purposes of subsection (1) of this section. the composition of a corporation's board of directors shall be deemed to be controlled by another corporation if that other corporation by the exercise of some power exercisable by it without the consent or concurrence of any other person can appoint or remove all or a majority of the directors, and for the purposes of this provision that other corporation shall be deemed to have power to make such an appointment if-

(a) a person cannot be appointed as a director without the exercise in his favour by that other corporation of such a power; or

COMPANIES ACT OF 1961 ss.5·' 43

(b) a person's appointment as a director follows necessarily f~om his being a director or other officer of that other corporatIon.

(3) In determining whether one corporation is a subsidiary of another corporation-

(a) any shares held or power exercisable by that other corporation in a fiduciary capacity shall be treated as not held or exercisable by it;

(b) subject to paragraph (c) and paragraph (d) of this subsection, any shares held or power exercisable-

(i) by any person as a nominee for that other corporation (except where that other corporation is concerned only in a fiduciary capacity); or

(ii) by, or by a nominee for, a subsidiary of that other corpora· tion, not being a subsidiary which is concerned only in a fiduciary capacity,

shall be treated as held or exercisable by that other corporation;

(c) any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first·mentioned corporation or of a trust deed for securing any issue of such debentures shall be disregarded; and

(d) any shares held or power exercisable by, or by a nominee for, that other corporation or its subsidiary (not being held or exercisable as mentioned in paragraph (c) of this subsection) shall be treated as not held or exercisable by that other cor· poration if the ordinary business of that other corporation or its subsidiary, as the case may be, includes the lending of money and the shares are held or power is exercisable as aforesaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business.

(4) A reference in this Act to the holding company of a company or other corporation shall be read as a reference to a corporation of which that last-mentioned company or corporation is a subsidiary.

(5) Where a corporation-(a) is the holding company of another corporation; (b) is a subsidiary of another corporation; or (c) is a subsidiary of the holding company of another corporation,

that first-mentioned corporation and that other corporation shall for the purposes of this Act be deemed to be related to each other.

lJ.K. s. 154; N.S.W. s. 107; Vic. s.3 (4); Qld. s. 137; S.A. s. 146; W.A. s. 130; Tas. s. 3 (5).

A company is a legal entity distinct from its members, Salomon v. Salomon & Co. Ltd., [1897] A.c. 22 H.L.; Tunstall v. Steigmann (1962),2 W.L.R. 1045; [1962] 2 All E.R. 417.

Subsection (1) (a) (iii), "right to participate beyond a specified amount," see Birch v. Cropper (1889), 14 App. Cas. 525.

Membership of holding company, see s. \7, post.

PART II-ADMINISTRATION OF ACT

7. (1) Registrar of Companies. Subject to "The Public Service Acts, 1922 to 1960," there may be appointed such Registrars of Companies as are required for the purposes of this Act. A Registrar so appointed shall

44 COMPANIES Vol. 2

have the charge and control of the Companies Office at the place whereat he is appointed and shall carry out the duties and functions vested by or under this or any other Act in the Registrar.

(2) Deputy and Assistant Registrars and officers. Subject to "The Public Service Acts. 1922 to 1960." there may be appointed such Deputy or Assistant Registrars of Companies and other officers as are required for the purposes of this Act.

(3) Anything by this Act appointed or authorized or required to be done or signed by a Registrar may be done or signed by any such Deputy or Assistant Registrar and shall be as valid and effectual as if done or signed by the Registrar.

(4) Certain signatures to be judicially noticed. All courts judges and persons acting judicially shall take judicial notice of the seal and signature of a Registrar and of any Deputy or Assistant Registrar.

(5) Officers appointed under subsection (2) of this section shall be under the direction of. and shall perform such duties as may be assigned by, the Registrar.

(6) For the purpose of ascertaining whether a company is complying with the provisions of this Act. the Registrar or any person authorized by him may inspect any book, minute book. register or record required by or under this Act to be kept by the company.

(7) No person shall make an inspection in pursuance of subsection (6) of this section unless he has made a declaration in the prescribed form.

(8) A person-(a) who makes an inspection in pursuance of subsection (6) of

this section before he has made a declaration referred to in subsection (7) of this section; or

(b) who after making such a declaration makes, except for the purposes of this Act or in the course of any criminal proceedings. a record of. or divulges or communicates to any other person. any information which he has acquired by reason of such an inspection.

shall be guilty of an offence against this Act. Penalty: One hundred pounds.

(9) A company or any officer shall on being required by the Registrar or a person so authorized produce any such book, register or record.

Penalty: One hundred pounds.

(10) A company or any officer shall not obstruct or hinder the Registrar or person so authorized while exercising any of the powers referred to in subsection (6) of this section.


(11) Fees. There shall be paid to the Registrar the fees specified in the Second Schedule.

(12) The Governor in Council may from time to time by Order in Council alter the Table of Fees in the Second Schedule so that the fees payable under the Second Schedule may be increased or reduced by the

COMPANIES ACT OF 1961 ss.7-9 4S

alteration and so that fees to be paid to the Registrar in respect of other matters or things not provided for in that Schedule may be prescribed.

(13) Company registration offices. For the purposes of the registration of companies under this Act, there shall be offices at Brisbane. Rockhampton and Townsville, and at such other places as the Governor in Council may appoint.

N.S.W. s.7; Vic. s.4; Qld. ss.8, 381A; S.A s. 315; W.A. s. 391; Tas. s.5. Act referred to:

Public Service Acts, 1922 to 1960, title PUBLIC SERVICE. For further functions and powers of the Registrar, see ss. 11-13; 306 (3). (6),

post. The Registrar's functions are sometimes quasi-judicial, Bowman v. Secular Society Ltd., [1917] AC.406; [1916-17] All E.R. Rep. 1.

8. Companies Auditors Board. (1) For the purposes of this Act there shall be a Companies Auditors Board the functions of which shall be

(a) to report to the Minister on any matters relating to the operation of Part VI which the Board has investigated either on its own motion or at the request of the Minister; and

(b) to effect and control the registration of company auditors and liquidators as hereinafter prescribed.

(2) The Public Accountants Registration Board of Queensland as constituted for the time being under "The Public Accountants Registration Acts, 1946 to 1954." shall be and shall constitute the Board.

(3) Any two members of the Board shall have and may exercise all or any of the powers or authorities of the Board.

( 4) Each member of the Board shall be entitled to such fees and allowances as are prescribed.

(5) The person for the time being holding office as chairman of the Public Accountants Registration Board of Queensland shall be ex officio the chairman of the Board.

(6) The person for the time being holding office as secretary of the Public Accountants Registration Board of Queensland shall be ex officio the secretary of the Board.

Vic. s.5; S.A. ss.370, 371; W.A ss. 137, 138, 402, 406; Tas. s. 138. Act referred to:

Public Accountants Registration Acts, 1946 to 1954, title ACCOUNTANTS.

9. Company auditors and liquidators. (1) A person shall not consent to be appointed, and shall not act, as auditor for any company and shall not prepare, for or on behalf of a company. any report required by this Act to be prepared by a registered company auditor-

(a) if he is not a registered company auditor; (b) if he is indebted to the company or to a corporation that is

deemed to be related to that company by virtue of subsection (5) of section six in an amount exceeding five hundred pounds; or

(c) except where the company is an exempt proprietary company, if he is-

(i) an officer of the company; (ii) a partner, employer or employee of an officer of the com

pany; or

46 COMPANIES Vol. 2

(iii) a partner or employee of an employee of an officer of the company.


(2) For the purposes of subsection (1) of this section. a person shall be deemed to be an officer of a company if he is an officer of a corporation that is deemed to be related to the company by virtue of subsection (5) of section six or has. at any time within the preceding period of twelve months. been an officer or promoter of the company or of such a corporation.

(3) For the purposes of this section. a person shall not be deemed to be an officer by reason only of his having been appointed as auditor of a corporation or. for any purpose relating to taxation. a public officer of a corporation.

(4) A firm shall not consent to be appointed. and shall not act, as auditor for any company and shall not prepare, for or on behalf of a company, any report required by this Act to be prepared by a registered company auditor unless-

(a) all the partners of the firm resident in Australia are registered company auditors and. where the firm is not registered as a firm under the law of the State, a return showing the full names and addresses of all the partners of the firm has been lodged with the Registrar; and

(b) no partner is disqualified under the provisions of paragraph (b) or (c) of subsection (1) of this section from acting as the auditor of the company.

(5) If a firm contravenes subsection (4) of this section each partner of the firm shall be guilty of an offence.


(6) No company or person shall appoint a person as auditor of a company unless that lastmentioned person has prior to such appointment consented in writing to act as such auditor, and no company or person shall appoint a firm as auditor of a company unless the firm has prior to such appointment consented, in writing under the hand of at least one partner of the firm, to act as such auditor.

(7) Any person-(a) who is a member of the Institute of Chartered Accountants

in Australia or the Australian Society of Accountants or any other body established outside Australia prescribed on the recommendation of the Board as a body for the purposes of this subsection;

(b) who is a registered company auditor in any State or territory of the Commonwealth other than this State;

(c) who holds a degree or diploma from any University in the Commonwealth and has passed examinations in the course for such degree or diploma in such subjects, under whatever name, as the appropriate authority of the University certifies to the Board to represent a course of study in accountancy or auditing of three years and in commercial law (incIudincr company law) of two years' duration; b


(d) who holds the certificate of an associate in accountancy of the University of Queensland or the certificate in accountancy of a prescribed Technical College; or

(e) who has satisfied the Board that he has a thorough knowledge of accounts and auditing and of the provisions of this Act and of such other subjects as are prescribed,

shall, if the Board is satisfied with his general conduct and character, be entitled on the payment of the prescribed fee to be registered as a company auditor or, if he is a registered company auditor, to the renewal of his registration.

(8) Any registered company auditor may apply to the Board for registration as a liquidator and the Board if satisfied as to his experience and capacity shall, on payment of the prescribed fee, register such person as a registered liquidator.

(9) Every registration including a renewal of registration of a company auditor or liquidator other than a registration under subsection (10) of this section shall be in force until the thirty-first day of March in the year following the year in which the registration was effected.

(10) Notwithstanding any other provision of this section but subject to subsection (13) and subsection (17) of this section any person who is registered as a public accountant under and within the meaning of "The Public Accountants Registration Acts, 1946 to 1954," shall be entitled without any application in that behalf and without payment of any fee to be registered as a registered company auditor and a registered liquidator.

(11) The Board, after giving notice to any person who is a registered company auditor or a registered liquidator, may inquire into the conduct and character as well as the abilities of the person but shall not do so without giving to the person an opportunity of being heard.

(] 2) For the purposes of an inquiry pursuant to subsection (1 I) of this section the Chairman of the Board may by notice in the prescribed form require any person to appear at the inquiry and to give evidence on oath or affirmation (which the chairman is hereby authorized to administer) as to any matter in relation to the subject matter of the inquiry and the notice may require the production of all or any books and documents in the custody or under the control of that person.

( 13) If at any inquiry by the Board a person who is a registered company auditor or a registered liquidator is found to have been guilty of any conduct discreditable to an auditor or liquidator, as the case may be, or is found to be incapable of performing the duties of a registered company auditor or a registered liquidator, as the case may be, the Board may as it thinks fit punish or deal with him in anyone or more of the following ways:-

(a) admonish or reprimand him; (b) require him to pay the costs of and incidental to the inquiry

by the Board; (c) require him to give an undertaking to abstain from some

specific conduct; (d) impose on him a fine not exceeding fifty pounds; (e) suspend his registration for a period not exceeding one year; or (f) cancel his registration and order the removal of his name from

the register.

48 COMPANIES Vol. 2

(14) The amount of any fine or costs so imposed may be recovered in any court of competent jurisdiction as a debt due to the Crown.

(15) Any person aggrieved by any decision of the Board may, within three months from the date of his receiving notice thereof, appeal to the Court from such decision and thereupon the Court may, if it thinks fit, confirm, vary or reverse the decision and, if it thinks fit, may direct the Board to register any person whom the Board has refused to register.

(16) When the name of any person registered as a company auditor and liquidator pursuant to subsection (10) of this section has been removed from the Register of Public Accountants of Queensland pursuant to section twenty-four of "The Public Accountants Registration Acts, 1946 to 1954," the Board may cancel the registration of that person as a registered company auditor and a registered liquidator and remove his name from the register.

(17) Where the registration of any person has been cancelled under this section that person shall not be re-registered without the express direction of the Board.

(18) Any register kept for the purposes of this section may be kept in conjunction with the register kept for the purposes of "The Public Accountants Registration Acts, 1946 to 1954."

Vic. s.5; S.A. ss.370, 371; W.A. ss. 137, l38, 402, 406; Tas. s. 138. Act referred to:

Public Accountants Registration Acts, 1946 to 1954, title ACCOUNTANTS. Subsection (13): "Conduct discreditable," cf. the principles relating to "profes

sional misconduct" or "infamous conduct in a professional respect." See Allinson v. General Council of Medical Education & Registration, [1894] 1 Q.B. 750; Re B., a Solicitor, [1938] St. R. Qd. 361; Clyne v. New South Wales Bar Association (1960), 104 c.L.R. 186; [1960] A.L.R.574.

Subsection (15):-"Person aggrieved"-See Re Sidebotham; Ex parte Sidebotham (1880), 14

Ch. D. 458. Appointment and remuneration of liquidators-See ss. 165 et seq. Appoint

ment of liquidators in winding-up by the Court, see s. 231, post; in voluntary winding-up, see ss. 258, 268.

Appointment of official liquidators-See s. 11, post. Control over liquidators by the Court-See s. 278, post.

10. Disqualification of liquidators. (1) Except with the leave of the Court or in the case of a members' voluntary winding up of an exempt proprietary company, a person shall not consent to be appointed, and shall not act, as liquidator of a company-

(a) if he is not a registered liquidator or a corporation (including the Public Curator) authorised by an Act to act as a liquidator;

(b) if he is indebted to the company or to a corporation that is deemed to be related to the company by virtue of subsection (5) of section six in an amount exceeding five hundred pounds; or

(c) subject to subsection (3) of this section, if he is(i) an officer of the company;

(ii) a partner, employer or employee of an officer of the company;or

(iii) a partner or employee of an employee of an officer of the company.


,------

COMPANIES ACT OF 1961 ss.9-12 49

(2) For the purposes of subsection (1) of this section, a person shall be deemed to be an officer of a company if he is an officer of a corporation that is deemed to be related to the company by virtue of subsection (5) of section six or has, at any time within the preceding period of twentyfour months, been an officer or promoter of the company or of such a corporation.

(3) Paragraph (c) of subsection (1) of this section shall not apply to prevent a person from consenting to being appointed, or from acting, as liquidator of a company if, by a resolution carried by a majority of the creditors in number and value present in person or by proxy and voting at a meeting of which seven days' notice has been given to every creditor stating the object of the meeting, it is determined that that paragraph shall not so apply.

(4) A person shall not be appointed as liquidator of a company unless he has prior to such appointment consented in writing to act as such liquidator.

(5) Nothing in this section shall affect any appointment of a liquidator made before the commencement of this Act.

Vic. s. 202 (1); S.A. SS. 293, 371; W.A. s. 184.

11. Official liquidators. (1) For the purpose of conducting proceedings in winding up companies and assisting the Court therein, the Minister may from time to time appoint as many registered liquidators as he thinks fit to be official liquidators, and may require of each of them such security for the due fulfilment of his duties as such as is prescribed, and may revoke any appointment so made.

(2) Where the security prescribed under subsection (1) of this section is a bond to Her Majesty and her successors with or without sureties, the Court may, on application and on being satisfied that any condition of the bond has been broken, order the Registrar of the Court to assign the bond to any person named in the order.

(3) The person to whom the bond is assigned, his executors or administrators, shall upon the assignment be entitled to sue upon the bond in his or their own name or names as if the bond had in the first instance been given to him or them and shall be entitled to receive thereon as trustee for all persons interested the full amount recoverable in respect of any breach of the condition of the bond.

(4) The Public Curator shall be ex officio an official liquidator. N.S.W. s. 222; Vic. s. 8; Qld. s. 184; W.A. s. 196.

12. (1) Registers. The Registrar shall subject to this Act keep such registers as he considers necessary in such form as he thinks fit.

(2) Inspection of documents lodged with Registrar. Any person may, on payment of the prescribed fee-

(a) inspect any document filed or lodged with the Registrar; or (b) require a certificate of the incorporation of any company or

any other certificate issued under this Act or a copy of or extract from any document kept by the Registrar to be given or certified by the Registrar.

(3) Evidentiary value of copies certified by Registrar. A copy of or extract from any document filed or lodged at the office of the Registrar certified to be a true copy or extract under the hand and seal of the Registrar shall in any proceedings be admissible in evidence as of equal validity with the original document.

50 COMPANIES Vol. 2

(4) Evidence of statutory requirements. In any legal proceedings a certificate under the hand and seal of the Registrar that a requirement of this Act specified in the certificate-

(a) had or had not been complied with at a date or within a period specified in the certificate; or

(b) had been complied with upon a date specified in the certificate but not before that date,

shall be received as prima facie evidence of the matters specified in the certificate.

(5) If the Registrar is of opinion that any document submitted to him-

(a) contains matter contrary to law; (b) by reason of any omission or misdescription has not been

duly completed; (c) does not comply with the requirements of this Act; or (d) contains any error, alteration or erasure,

he may refuse to register or receive the document and request that the document be appropriately amended or completed and re-submitted or that a fresh document be submitted in its place.

(6) Appeal. Any person aggrieved by the refusal of the Registrar to register any corporation or to register or receive any document or by any other act or decision of the Registrar may appeal to the Court which may confirm the refusal act or decision or give such directions in the matter as seem proper or otherwise determine the matter but this subsection shall not apply to any act or decision of the Registrar-

(a) in respect of which any provision in the nature of an appeal or review is expressly provided in this Act; or

(b) which is declared by this Act to be conclusive or final or is embodied in any document declared by this Act to be conclusive evidence of any act matter or thing.

(7) Destruction, etc., of old records. Subject to the proVISIOns of Part IV of "The Libraries Acts, 1943 to 1949," the Registrar may, if in his opinion it is no longer necessary or desirable to retain them, destroy-

(a) in the case of a corporation-(i) any return of allotment of shares for cash which has been

lodged or filed for not less than ten years; Oi) any annual return or balance sheet that has been lodged or

filed for not less than ten years or any document creating or evidencing a charge or the complete or partial satisfaction of a charge where a memorandum of satisfaction of the charge has been registered for not less than ten years; or

(iii) any other document (other than the memorandum and articles or any other documents affecting them) which has been lodged, filed or registered for not less than fifteen years; or

(b) in the case of a corporation that has been dissolved or has ceased to be registered for not less than fifteen years, any document lodged filed or registered.

COMPANIES ACT OF 1961 ss.12,13 51

(8) Enforcement of duty to make returns. If a corporation or person, having made default in complying with-

(a) any provision of this Act or of any other law which requires the lodging or filing in any manner with the Registrar of any return account or other document or the giving of notice to him on any matter; or

(b) any request of the Registrar to amend or complete and re-submit any document or to submit a fresh document,

fails to make good the default within fourteen days after the service on the corporation or person of a notice requiring it to be done, the Court or any court of summary jurisdiction may, on an application by any member or creditor of the corporation or by the Registrar, make an order directing the corporation and any officer thereof or such person to make good the default within such time as is specified in the order.

(9) Any such order may provide that all costs of and incidental to the application shall be borne by the corporation or by any officers of the corporation responsible for the default or by such person.

(10) Nothing in this section shall prejudice the operation of any enactment imposing penalties on a corporation or its officers or such person in respect of any such default as aforesaid.

N.S.W. SS. 369, 378; Vic. s. 6; Qld. ss. 9, 377; S.A. ss. 316, 320; W.A. ss. 392, 396-401; Tas. s. 7.

Act referred to: Libraries Acts, 1943 to 1949, title EDUCATION.

Subsection (3), see also Evidence and Discovery Acts, 1867 to 1962, s.42; Evidence Act, 1898, ss. II, 13, title EVIDENCE; State and Territorial Laws and Records Recognition Act, 1901-1950, s.16 (Commonwealth).

Subsection (6), on appeals from Registrar, see Re Liege Investments Ply. Ltd., [1940] V.L.R. 448; see also s. 22 and notes, post.

As to "person aggrieved," see Re Sidebotham. Ex parte Side both am (1880), 14 Ch. D. 458.

13. Re-Iodging of lost registered documents. (1) If in the case of any corporation incorporated or registered in the State the memorandum or articles or any other document relating to the corporation filed or lodged with the Registrar has been lost or destroyed, the corporation may apply to the Registrar for leave to lodge a copy of the document as originally filed or lodged.

(2) On such application being made the Registrar may direct notice thereof to be given to such persons and in such manner as he thinks fit.

(3) The Registrar upon being satisfied-(a) that the original document has been lost or destroyed; (b) of the date of the filing or lodging thereof with the Registrar;

and (c) that a copy of such document produced to the Registrar is a

correct copy, may certify upon such copy that he is so satisfied and direct that such copy be lodged in the manner required by law in respect of the original.

( 4) Upon the lodgment the copy for all purposes shall, from such date as is mentioned in the certificate as the date of the filing or lodging of the original with the Registrar, have the same force and effect as the original.

52 COMPANIES Vol. 2

(5) The Court may. by order upon application by any person aggrieved and after notice to any other person whom the Court directs. confirm, vary or rescind the certificate and the order may be lodged with the Registrar and shall be registered by him, but no payments contracts dealings acts and things made had or done in good faith before the registration of such order and upon the faith of and in reliance upon the certificate shall be invalidated or affected by such variation or rescission.

(6) No fee shall be payable upon the lodging of a document lodged in pursuance of this section.

Vic. s.7; S.A. s.378; W.A. s.413; Tas. s.9. Subsection (5), "person aggrieved," see Re Sidebotham, Ex parte Sidebotham

(1880), 14 Ch. D. 458.

PART III-CONSTITUTION OF COMPANIES

Division I-Incorporation

14. (1) Formation of companies. Subject to this Act any five or more persons or, where the company to be formed wiII be a proprietary company, any two or more persons associated for any lawful purpose may by subscribing their names to a memorandum and complying with the requirements as to registration form an incorporated company.

(2) A company may be-(a) a company limited by shares; (b) a company limited by guarantee; (c) a company limited both by shares and guarantee; (d) an unlimited company; or (e) in the case of a mining company, a no-liability company.

(3) Prohibition of unincorporated associations of more than twenty members for gain. No association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any business which has for its object the acquisition of gain by the association or partnership or the individual members thereof unless it is incorporated under this Act or is formed in pursuance of some other Act or letters patent.

U.K. s.434; N.S.W. ss. 8, 9; Vic. s. 12; Qld. ss. 12, 13; S.A. ss. 9, 10; W.A. ss. II, 12; Tas. s. 12.

"Persons" includes bodies corporate, Acts Interpretation Acts, 1954 to 1962, 5.36, title ACTS OF PARLIAMENT.

Proprietary Company, see s. 15, post. For special provisions relating to No-Liability Companies, Investment Com-

panies, Foreign Companies, see Part XI, post. Reduction of number of members below legal minimum, see s. 36, post. Liability of members, see s. 218. Crimes with respect to memorandum, see Criminal Code, s. 504, title

CRIMINAL LAW. As to formation of companies, see also the Friendly Societies Acts, 1913 to

1959, s. 37, title SOCIETIES; the Sugar Works Act of 1911, ss. 26-28; the Co-operative Sugar Works Act of 1914, ss. 6, 7, title SUGAR.

"Any five or more persons"-The persons may all be nominees of the same person who may virtually be the sole owner of the concern, the others having only a nominal interest, Salomon v. Salomon & Co. Ltd., [1897] A.c. 22, H.L.; cf. Rainham Chemical Works Ltd. v. Belvedere Fish Guano Co., [1921] 2 A.c. 465; [1921J All E.R. 48; but see R. v. Grubb, [1915] 2 K.B. 683; [1914-15J All E.R. 667.

COMPANIES ACT OF 1961 ss.13·15 53

"Association"-See Re Commonwealth Homes and Investment Co. Ltd., [1943] S.A.S.R. 211; Re Proprietary Articles Trade Association of South Australia Incor· porated, [1949] S.A.S.R. 88.

"Any lawful purpose"-See Bowman v. Secular Society Ltd., [1917] AC.406; [1916-17] All E.R. I; see generally 10 English and Empire Digest (Rp!.) 1174 et seq.

Illegal Association-The effect of this section is to make illegal all associations formed contrary to its provisions. Such associations cannot sue or be sued, Shaw v. Benson (1883). II Q.B.D. 563; Hume v. Record Reign Jubilee Syndicate (1899), 80 L.T. 404; Phillips v. Davies (1888), 5 T.L.R. 98; Waller v. Gipps (1885), 6 N.S.W.L.R. (Eq.) 123. But where it was proved at the trial that the company was not legally incorporated, a trustee for the company (who was its co-plaintiff) was allowed to maintain the action, Sisters G.M., NL. v. Colton (1903),29 V.L.R. 591. The Court has declined jurisdiction to wind up such an association on the application of a member, Re South-West Milk Producers' Assoc. (1924),27 W.AL.R. 27.

Such an association is nevertheless liable to innocent third parties upon agreements with such parties, Mailer v. Clayton (1898), I W.A.L.R. 3.

See also J. A. Hemphill & Sons Pty. Ltd. v. Chaff and Hay Acquisition Committee (1947), 74 C.L.R. 375.

"Carrying on any business"-Carrying on business exists only where there is a joint relation of persons for the common purpose of performing jointly a succession of acts, and not where the relation exists for a purpose which is to be completed by the performance of one act, Smith v. Anderson (1880), 15 Ch. D. 247; Melbourne Trust Ltd. v. Commissioner of Taxes (1912), 15 C.L.R. 274; [1914] A.C. 1001; Re Tasmanian Forests Pty. Ltd. (1932),27 Tas. L.R. 15.

A syndicate consisting of more than 20 persons formed for the purpose of purchasing a large block of land, of subdividing it, and reselling it in small allotments at a profit, is not a company, association, or partnership having for its object the acquisition of gain, Ballantyne v. Raphael (1889), 15 V.L.R. 538. See also Herbert v. Greathead, [1936] N.Z.G.L.R. 143; Sunkissed Bananas Ltd. v. Banana Growers' Federation (1935), 35 N.S.W.S.R.526.

See also Armour v. Liverpool Corporation, [1939] Ch. 422; [1939] 1 All E.R. 363. "Gain"-Gain is not limited to pecuniary gain, Re Arthur A verage Association,

Ex parte Hardgrave & Co. (1875), 10 Ch. App. 542; Re Russell Institution, Figgins v. Baghino, [1892] 2 Ch. 72. The gain may be that of individual members, Re Riverton Sheep Dip, [1943] S.A.S.R. 344.

"Subscribing their names"-A man's name may be subscribed by an agent, Re Whitley Partners Ltd. (1886), 32 Ch. D. 337. For the effect of subscribing the memorandum, see ss. 16, 18, post.

"Memorandum"-For implied powers, see s. 19 and Third Schedule-Powers. Nature of shares-See s. 90, post; Fisher v. Fisher (1917), 23 C.L.R. 337;

Borland's Trustee v. Steel, [1901] 1 Ch. 279; Australian Metropolitan Life Assurance Co. Ltd. v. Ure (1923), 33 c.L.R. 199. See also paper by L. W. H. Butts, The Rights and Disabilities of Minority Shareholders, published as a supplement to The Secretary, Australian Edition, July 1959.

"Formed" means formed in the State, Russian Commercial and Industrial Bank v. Comptoir d'Escompte de Mulhouse, [1925] Ac. 112; [1924] All E.R. 381.

"Formed in pursuance of some other Act"-See Re I/fracombe Permanent Mutual Benefit Building Society, [1901] I Ch. 102.

As to companies required to be registered under this section and the effect of non-registration, see further 6 Halsbury's Laws of England, 3rd ed., p. 793; 9 English and Empire Digest (Rpl.), p.79; vol. 10, p. 1177. See also Paterson and Ednie, Australian Company Law, p. 154.

15. (1) Proprietary company. A company having a share capital (other than a no-liability company) may be incorporated as a proprietary company if its memorandum or articles-

(a) restricts the right to transfer its shares; (b) limits to not more than fifty the number of its members

(counting joint holders of shares as one person and not count· ing any person in the employment of the company or of its subsidiary or any person who while previously in the employment of the company or of its subsidiary was and thereafter has continued to be a member of the company);

54 COMPANIES Vol. Z

(c) prohibits any invitation to the public to subscribe for any shares in or debentures of the company; and

(d) prohibits any invitation to the public to deposit money with the company for fixed periods or payable at caII, whether bearing or not bearing interest.

(2) A proprietary company may by special resolution alter any restriction referred to in paragraph (a) or the limitation referred to in paragraph (b) of subsection (1) of this section but so that a restriction or limitation as required by the relevant paragraph still remains.

(3) Transitional. A proprietary company that immediately before the commencement of this Act was a private company under the repealed Act, may by special resolution alter the provisions of its memorandum or articles so far as is necessary to impose the restrictions, limitations and prohibitions referred to in subsection (1) of this section.

(4) Where and so long as the memorandum or articles of a proprietary company that immediately before the commencement of this Act was a private company under the repealed Act include the prohibition referred to in paragraph (c) of subsection (1) of this section the articles of the company shall be deemed to include the prohibition referred to in paragraph (d) of that subsection.

(5) Any provision required under subsection (1) of this section to be included in the memorandum or articles of a proprietary company which is included or deemed pursuant to subsection (4) of this section to be included in the memorandum or articles of a proprietary company that immediately before the commencement of this Act was a private' company under the repealed Act shall for the purposes of section twentyseven be deemed to have been required under subsection (1) of this section to be included in the memorandum or articles of the company.

U.K. s. 28; N.S.W. s. 37; Vic. s. 13; Qld. s. 38; S.A. s. 37; W.A. s. 37; Tas. s. 13. The minimum number of members is two. See ss. 14, 36, 222 (I). A shareholder in a private company has a property in his shares which he has,

a right to dispose of, subject to any express restrictions in the articles of association, Re Copal Varnish Co. Ltd., [1917] 2 Ch. 349; [1916-17] All E.R. p.914. See also s. 90, post; Australian Metropolitan Life Assurance Co. Ltd. v. Ure (1923), 33 eL.R. 199.

"Persons who are in the employment of the company"'-This does not include a managing or other director, Normanby v. Ind, Coope & Co. Ltd., [1908] I Ch.84, 104; Re Lee, Behrens & Co. Ltd., [1932] 2 Ch. 46; [1932] All E.R. 889; see also notes to s. 5 (J), ante.

Right to transfer-In order to cut down the inherent right to transfer, restrictive words must be clear, Greenhalgh v. Mallard, [1943] 2 All E.R. 234. See also Re Smilh & Fawcett Ltd., [1942] I All E.R. 542; [1942] Ch. 304, on discretion to refuse registration of a transfer.

Invitation to deposit money-See Eros Finance Ply. Ltd. v. Attorney-General, [1956] V.L.R. 320.

A proprietary company may for the purposes of the criminal law be deemed to be a public company, R. v. Davies, [1954] 3 All E.R. 335.

16. (1) Registration and incorporation. Persons desiring the incorporation of a company shall lodge the memorandum and the articles (if any) of the proposed company with the Registrar together with the other documents required to be lodged by or under this Act, and the Registrar on payment of the appropriate fees shall subject to this Act register the company by registering the memorandum and articles (if any).

COMPANIES ACT OF 1961 55.15,16 55

(2) Statutory declarations. The Registrar may if he thinks fit require a statutory declaration to be made by a qualified legal practitioner engaged in the formation of the company or by a person named in the articles as a director or secretary of the company to be lodged stating that all or any of the requirements of this Act have been complied with, and the Registrar may accept such a declaration as sufficient evidence of compliance.

(3) Certificate of incorporation. On the registration of the memorandum the Registrar shall certify under his hand and seal that the company is on and from the date specified in the certificate incorporated, and that the company is-

(a) a company limited by shares; (b) a company limited by guarantee; (c) a company limited both by shares and guarantee; (d) an unlimited company; or (e) a no-liability company,

as the case may be and where applicable that it is a proprietary company. (4) Effect of incorporation. On and from the date of incorporation

specified in the certificate of incorporation but subject to this Act the subscribers to the memorandum together with such other persons as may from time to time become members of the company shall be a body corporate by the name contained in the memorandum capable forthwith of exercising all the functions of an incorporated company and of suing and being sued and having perpetual succession and a common seal with power to hold land but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is provided by this Act.

(5) Members of company. The subscribers to the memorandum shall be deemed to have agreed to become members of the company and on the incorporation of the company shall be entered as members in its register of members, and every other person who agrees to become a member of a company and whose name is entered in its register of members shall be a member of the company.

u.K. ss. 12-15, 26; N.S.W. ss. 27, 28, 30, 36; Vic. s. 14; Qld. ss. 24, 25, 27, 37; S.A. ss. 23, 26, 36; W.A. ss. 24-26, 36; Tas. s. 14.

A list of the persons who have consented to be directors must be filed on application for registration, s. 115.

"Shall register"-These words are imperative. But the Registrar has a discretion or duty under s. 14 not to register an association which is formed for an unlawful purpose or when the requirements of the Act have not been complied with, and he has a duty or discretion under s. 22 not to register a company with a name identical with or so nearly resembling the name of an existing company as to be calculated to deceive. See per Lord Reading, C.l .. in R. v. Registrar oj Companies, Ex parte Bowen, [1914] 3 K.B. 1161. See also Acts Interpretation Acts, 1954 to 1962, s. 26, title ACTS OF PARLIAMENT; R. v. Registrar of Joint Stock Companies, Ex parte More, [1931] 2 K.B. 197.

Also if the objects of the company are not properly stated as required by s. 18 (1) (b), the Registrar has a discretion to refuse registration, Cotman v. Brougham, [1918] A.c. 514; [1918-19] All E.R. 265.

Certificate of Incorporation-Until revoked the certificate is conclusive, s. 372 post, and see Bowman v. Secular Society Ltd., [1917] A.C. 406; [1916-17] All E.R. I. And see 9 English and Empire Digest (RpJ.) , p.78. But the certificate does not determine the question of the legality of the objects, ibid.; H. A. Stephenson & Son Ltd. v. Gil/anders, Arbuthnot & Co. (1931), 45 C.L.R. 476.

Apart from the certificate of incorporation, the Court will accept, as proof of incorporation. the mention of an incorporated company in a statute, R. v. Connell (1895), 6 Q.L.J. 209; or evidence of carrying on business under the corporate name

56 COMPANIES Vol. 2

and other evidence of user, R. v. Cawley (1896), 7 Q.L.I. 45; Lipke v. Goombungee Co-operative Dairy Co. Ltd., [1908] St. R. Qd. 103; [1908] Q.W.N. 23; C/anchy v. Field and Vickery Ltd., [1921] Q.w.N. 9; 14 Q.J.P.R. 151; 15 Q.I.P.R. 46; R. v. Waldermann (1882), 1 N.Z.L.R. 141, c.A.; R. v. Seidel, [1923] S.A.S.R. 522; or appearing to a writ and defending an action in the corporate name, Lipke v. Goomhungee Co-op. Ltd., supra; Clanchy v. Field and Vickery Ltd., supra; or holding itself out as an incorporated company, Gale v. Wingello Coal Ltd. (1890), 11 N.S.W.L.R. (L.) 79. But there must be something to indicate that the alleged company was a corporation as distinct from a partnership, R. v. Whitehouse (1896), 6 Q.L.l. 313.

A plaintiff company must prove incorporation or, if a foreign company, registration, Hansen v. Millars' Karri & Jarrah Co. (1905),7 W.A.L.R. 266; ct. Gascoyne Meat Co. v. Abdul Karim (1911), 13 W.A.L.R. 173. As to whether, in an action by a company, want of evidence that the company is incorporated is a proper ground for non-suit or for striking the action out for want of a plaintiff, see Lyell Hydraulic Sluicing Co. Ltd. v. Harcourt (1903), 23 N.Z.L.R. 168.

Sue and be sued-As to power of a company to sue and be sued for defamation, see Barnes & Co. Ltd. v. Sharpe (1910), 11 C.L.R. 462; Colonial Mutual Life Assurance Soc. Ltd. v. Producers and Citizens Co-operative Assurance Co. (1931), 46 C.L.R.41.

A company cannot be a next friend of an infant, R.S.C. (1900), Order 3, rule 17. title SUPREME COURT; Re Stewart (1893), 5 Q.L.l. 81.

For what constitutes residence in this State for purposes of jurisdiction, see Pritchard v. Howard Smith & SallS Ltd. (1891), 4 Q.L.J.64. As to jurisdiction of Magistrates Courts, see Magistrates Courts Acts, 1921 to 1954, s.4 (7), title MAGISTRATES COURTS.

As to question of domicil or residence of companies, see further Waterloo Pastoral Company v. Federal Commissioner of Taxation (1946), 72 c.L.R. 262; Bullock v. Unit Construction Co. Ltd., [1959] 3 All E.R. 831; Cheshire, Private [Illernational Law, 5th ed., p. 193.

Common seal-For use of common seal on contracts, etc., see s. 35, post. Notwithstanding the provision in the section that a company shall have power

to hold lands, it cannot do so unless the holding of lands falls within the ambit of its objects as defined by the memorandum, Re Registrar-General (1900), 21 N.S.W.L.R. (L.) 225; but see s. 19, implied powers, and Third Schedule--clause 9. A shareholder has no capacity to lodge a caveat against any interest in land of the company in which he holds shares, Re a Caveat, [1931] S.A.S.R.502.

Subscribers-A subscriber to the memorandum becomes a member whether entered on the

register or not, Re London, Hamburgh, & Continelllal Exchange Bank, Evans's Case (1867),2 Ch. App. 427. The agreement is to take the shares from the company and pay for them, Re Normanhy Copper Mining Co. Ltd. (1876), 4 S.c.R. 223. It is not sufficient if he take fully paid-up shares under a contract for sale to the company in payment of the purchase price, the contract as a subscriber being independent of any other contract entitling or enabling him to take shares, Re Pen' Alit Silver Lead Mining Co., Fothergill's Case (1873), 8 Ch. App. 270; Re South Blackpool Hotel Co., Migotli's Case (1867), L.R. 4 Eq. 238; Re Heyford Ironworks Co., Forbes & Judd's Case (1870),5 Ch. App. 270; McMeekin v. Southland Coal Co. Ltd. (1914), 33 N.Z.L.R. 654; Re The Berrima District Farm & Dairy Co. Ltd. (1898), 19 N.S.W.L.R. (Eq.) 36. Subscribers' shares are deemed to have been issued at the date of the registration of the company, see Dalton Time Lock Co. v. Dalton (1892), 66 L.T. 704, C.A.; Re Timmins (Ehenezer) & Sons Ltd., [1902] 1 Ch. 238. Misrepresentation by a promoter is no ground for rescission of the contract formed by signing the memorandum, Re Metal Constituents Ltd., Lurgan's (Lord) Case, [1902] I Ch.707.

A company has no power to release a subscriber, Re United Service Co., Hall's Case (1870), 5 Ch. App. 707; Re London & Provincial Consolidated Coal Co. (1877), 5 Ch. D. 525, and cf. Trevor v. Whitworth (1887), 12 App. Cas. 409.

For further cases on the liability of subscribers of the memorandum, see 9 English and Empire Digest (Rpl.), pp. 88-94.

Agreement to become member-Generally an agreement to become a member takes the form of a written

application. If the company accept the application the shares are allotted to the applicant and his name entered in the register of members. The "allotment" consists in an acceptance of the offer of the applicant, thus constituting a binding contract to take the shares, Re Florence Land & Public Works Co., Nicol's Case, Tufnell &


Ponsonby's Case (1885), 29 Ch. D. 421, 426, and an appropriation of shares by the directors of the company to the applicant, Spitzel v. Chinese Corporation Ltd. (1899), 80 L.T. 347, 351. But the acceptance of the application must be communicated to the applicant; otherwise there is no contract, Re Richmond Hill Hotel Co., Pel/att's Case (1867),2 Ch.App. 527; Re Darling Downs Brewery Ltd. (1899),9 Q.L.I. 225. There need not be any formal or written notice, but entry in the register of shareholders is not sufficient, Re Universal Banking Corpn., Gunn's Case (1867), 3 Ch. App. 40. Notice of allotment may be sent by post and the contract is complete when the notice is posted although not received, Re Imperial Land Co. of Marseilles, Townsend's Case (1871), L.R. 13 Eq. 148; Household Fire Insurance Co. v. Grant (1879),4 Ex. D. 216, and see Henthorn v. Fraser, [1892] 2 Ch. 27. Where the offer to take shares is conditional and acceptance of the condition is refused, there is no contract, Re New Monte Christo G.M. Co., [1903] Q.W.N. 52. Where an applicant had received no notice of allotment, but had been sent notice of several calls and of a meeting of shareholders and creditors, the contract to take shares was held to be complete, Farmers Mercantile Union and Chaff Mills Ltd. v. Coade (1921), 30 C.L.R. 113. For further cases as to notice of allotment, see 9 English and Empire Digest (Rpl.), p. 286.

Merely acting as a director does not constitute an agreement to take the requisite qualifying shares, Re Agricultural Shipping Co. Ltd., [1911] St. R. Qd. 34; [1911] Q.W.N. 10; cf. Re Melbourne Parking Station Ltd., {l929] AL.R. 224.

Where an application for shares is conditional on a certain event happening, the applicant cannot be placed on the list of contributories where that event has not happened, Metropolitan Milk Supply Ltd. v. Paulsen, [1933] St. R. Qd. 53; 27 Q.I.P.R. 1; Re Andersens Ltd., [1931] St. R. Qd. 265; Re Gambrinus Lager Beer Brewery Co. (1886), 12 V.L.R. 446; but he may be where the parties have by their subsequent conduct shown an intention to waive any right they had to insist on the condition. See Re Australian Producers and Traders Ltd., {1906] V.L.R. 511; R~ Yarra Pictures Limited, [1919] V.L.R. 667. See also notes to ss. 112, 211.

Where the prospectus stated that the company would be declared fonned on applications being made for 500 shares, but it was formed before that time by agreement without the consent of an applicant, who had relied on the prospectus, it was held that that applicant had never become a member in respect of shares issued to him, Re Fresh Food Co. Ltd., [1903] St. R. Qd. 162. For other cases on the question whether an agreement to take shares has been concluded, see Davison v. Vickery's Motors Ltd. (1925), 37 c.L.R. 1; Re The Wattamolla Dairy Co. Ltd. (1892), 3 N.S.W.B.C. 21; Metropolitan Milk Supply Ltd. v. Paulsen, supra; Re Darling Downs Brewery Ltd. (1899), 9 Q.L.I. 225; Re Queensland Cooperative Fruit Products Ltd., [1931] Q.W.N. 10; In the matter of the Switchback Railway, etc., Co. (1890), 16 V.L.R. 339; Essendon Land Tramway Co. v. Upton (1891), 17 V.L.R. 248; Re The Mercantile Bank, Ex parte Bagley (1894), 20 V.L.R. 489; Re Heights of Maribyrnong Co.; Re Vickery (1897),22 V.L.R. 432; Re The Australian Producers and Traders Ltd., [1906] V.L.R. 511; Tumbling Waters Freehold Co. v. Juriet (1874),8 S.A.L.R. 131; Re Murray Engineering Co. Ltd., [1924] S.A.S.R. 121; Malthouse v. Adelaide Milk Supply Co-op. Ltd., [1922] S.A.S.R.572; Re F. H. Ring & Co. Ltd., [1924] S.AS.R. 138; Thorpe v. Westralian Farmers Ltd. (1917), 19 W.AL.R. 110; Re Radio Chain Stores Ltd., [1932] N.Z.L.R. 1048; Re Tobacconists Ltd., [1931] N.Z.L.R. 289. Where under the articles £10 should have been paid upon allotment of a share, this payment was held not to be a condition precedent to the power to allot, Farmers Mercantile Union and Chaff Mills Ltd. v. Coade (1921), 30 C.L.R. 113; cf. North Eleanor Gold Mining Co. Ltd. v. Coles (1876), 10 S.A.L.R. 38.

Register of members-See s. 151, post. Pre-incorporation contract-For an example of a nullity in the fonn of a con

tract purporting to be made by the promoter and prospective director of a limited company which at the date of the contract was non-existent, see Newbourne v. Sensolid (Great Britain) Ltd., [1954] 1 Q.B. 45; [1953] 1 All E.R. 708.

As to moneys subscribed upon the terms that the subscriber shall have the option to have his subscription applied as payment on application for shares, see Luke v. Waite (1905), 2 C.L.R.252.

Generally with regard to the contract to take shares, see 9 English and Empire Digest (Rpl.) , pp. 240-244. As to conditional applications for shares, see ibid., pp. 244-253, and, for cases on allotments made conditionally, see ibid., pp. 282-284.

If there is unreasonable delay in making an allotment the applicant may repudiate the contract, Re Ramsgate Victoria Hotel Co. v. Montefiore, Ramsgate Victoria Hotel Co. v. Goldsmid (1866), L.R. 1 Exch. 109; but he must do so

58 COMPANIES Vol. Z

promptly, Re Land Loan Mortgage & General Trust Co. of South Africa, Boyle's Case (1885), 54 L.J. Ch. 550. And see 9 English and Empire Digest (Rp!.), p. 284.

The allotment will not be invalid because of some irregularity in the appointment of the directors constituting the board making the allotment, see s. 153, post, and cf. Royal British Bank v. Turquand (1856), 6 E. & B. 327.

It seems that an invalid allotment may be ratified subsequently by a properly constituted board, and that in such a case if the allottee has had notice of the irregularly made allotment he cannot withdraw if the ratification take place within a reasonable time, Bolton Partners v. Lambert (1889), 41 Ch. D. 295; Re Portuguese Consolidated Copper Mines Ltd. (1889), 42 Ch. D. 160.

Lapse of time, together with knowledge that his name is on the share register under circumstances calling on a person to take some action, may amount to assent to a contract to take shares, Re Renown Rubber Ltd., [1933) S1. R. Qd. 324; but not where there is no knowledge of the registration, Re Agricultural Shipping Co. Ltd .• [1911) St.R.Qd. 34; [1911) Q.w.N.I0.

It is the duty of a person who knows that he is considered by the members of a company to be a member of that company and who acts as such, to ascertain the nature of the company. Where circumstances occur which are calculated to raise in such person's mind a suspicion that the company is not identical with that which he agreed to join, but no inquiry is made, and he allows his name to remain on the share register for years, he cannot afterwards repudiate his liability for calls, Essendon Land and Finance Association v. Kilgour (1897), 24 V.L.R. 136. See also Osborne Park Land and Investment Co. Ltd. v. Pegg (1892), 18 V.L.R. 515; Metropolitan Milk Supply Ltd. v. Paulsen, [1933) S1. R. Qd. 53; 27 Q.J.P.R. 1.

As to whether "member" includes so-called past members within the meaning of s. 218, post, see judgment of Roxburgh J. in Re Consolidated Goldfields of New Zealand Ltd., [1953) Ch. 689; [1953] I All E.R.791.

The rule that a man may take shares in a trustee's name without being himself liable cannot reasonably apply either to a case of fraud or to the case where the supposed trustee is incapable of holding shares so as to be responsible, Victorian Mortgage and Deposit Bank v. Australian Financial Agency, etc., Co. and Lucas (1893), 19 V.L.R. at p.693.

See also 6 Halsbury's Laws of England, 3rd ed., p. 235.

17. Membership of holding company. (1) A corporation cannot be a member of a company which is its holding company, and any allotment or transfer of shares in a company to its subsidiary shall be void,

(2) Subsection (l) of this section shall not apply where the subsidiary is concerned as personal representative. or where it is concerned as trustee, unless the holding company or a subsidiary thereof is beneficially interested under the trust and is not so interested only by way of security for the purposes of a transaction entered into by it in the ordinary course of a business which includes the lending of money.

(3) This section shall not prevent a subsidiary which is, at the commencement of this Act, a member of its holding company, from continuing to be a member but, subject to subsection (2) of this section the subsidiary shall have no right to vote at meetings of the holding company or any class of members thereof.

(4) This section shall not prevent a subsidiary from continuing to be a member of its holding company if, at the time when it becomes a subsidiary thereof, it already holds shares in that holding company, but

(a) subject to subsection (2) of this section, the subsidiary shall have no right to vote at meetings of the holding company or any class of members thereof; and

(b) the subsidiary shall within the period of twelve months or such longer period as the Court may allow after becoming the subsidiary of its holding company, dispose of all of its shares in the holding company.


(5) Subject to subsection (2) of this section, subsection (1), subsection (3) and subsection (4) thereof shall apply in relation to a nominee for a corporation which is a subsidiary, as if references in those subsections to such a corporation included references to a nominee for it.

(6) In relation to a holding company that is either a company limited by guarantee or an unlimited company, the reference in this section to shares, whether or not it has a share capital, shall be construed as including a reference to the interest of its members as such, whatever the form of that interest.

U.K. s.27. For definition of holding and subsidiary companies, see s. 6, ante.

18. Requirements as to memorandum. (1) The memorandum of every company shall be printed and divided into numbered paragraphs and dated and shall state, in addition to other requirements-

(a) the name of the company; (b) the objects of the company; (c) unless the company is an unlimited company, the amount of

share capital (if any) with which the company proposes to be registered and the division thereof into shares of a fixed amount;

(d) if the company is a company limited by shares, that the liability of the members is limited;

(e) if the company is a company limited by guarantee, that the liability of the members is limited and that each member undertakes to contribute to the assets of the company, in the event of its being wound up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company contracted before he ceases to be a member and of the costs charges and expenses of winding up and for adjustment of the rights of the contributories among themselves, such amount as may be required not exceeding a specified amount in addition to the amount (if any) unpaid on any shares held by him;

(f) if the company is an unlimited company, that the liability of the members is unlimited;

(g) if the company is a no-liability company, that the acceptance of shares in the company shaH not constitute a contract to pay calls in respect of the shares or to make any contribution towards the debts and liabilities of the company;

(h) the full names addresses and occupations of the subscribers thereto; and

(i) that such subscribers are desirous of being formed into a company in pursuance of the memorandum and (where the company is to have a share capital) respectively agree to take the number of shares in the capital of the company set out opposite their respective names.

(2) Each subscriber to the memorandum shall, if the company is to have a share capital, in his own handwriting state in words the number of shares (not less than one) that he agrees to take and, whether or not the company is to have a share capital, shall sign the memorandum in the presence of at least one witness (not being another subscriber) who shall attest the signature and add his address.

60 COMPANIES Vol. 2

(3) A statement in the memorandum of a company limited by shares that the liability of members is limited shall mean that the liability of the members is limited to the amount (if any) unpaid on the shares respectively held by them.

(4) The memorandum shall bear the same stamp as if it were a deed. N.S.W. ss. 10-13; Vic. s. IS; Qld. ss. 14, 15; S.A. ss. 14, 35; W.A. ss. 13-15;

Tas. s. IS. Names of companies, see ss. 22-24, post. As to improper use of the words

"limited," "no-liability," see s. 377, post. Alteration of capital, see ss. 62-64, post. Alteration of liability of members, see s. 25, post. No-liability companies, see ss. 319 et seq. The memorandum and articles are contemporaneous documents and must be

read together so that an ambiguity in the one may be resolved by reference to the other, Re South Durham Brewery Co. (1885),31 Ch.D. 261; Re Southern Brazilian Rio Grande do SuI Railway Co. Ltd .. [1905] 2 Ch. 79; but where an inconsistency exists between the memorandum and articles the memorandum transcends the articles which are pro tanto void, Guinness v. Land Corporation of Ireland (1882), 22 Ch. D. 349. Where the memorandum is clear a doubt as to its meaning cannot be raised by reference to the articles, Re Duncan Gilmour & Co. Ltd .. [1952] 2 All E.R. 871.

For one circumstance in which articles may not be referred to in aid of the construction of the memorandum, see Re Wedgwood Coal and Iron Co., Anderson's Case (1877), 7 Ch. D. 75; Guinness v. Land Corporation of Ireland (1882), 22 Ch. 0.349.

In construing the memorandum the name of the company may be taken into consideration, McGregor v. Pilhama Co-operative Co. Ltd. (1907), 26 N.Z.L.R.933; Re Crown Bank (1890), 44 Ch. D. 634.

Objects, not powers, are to be stated, Cotman v. Brougham, [1918] A.c. 514; [1918-19] All E.R.265.

The distinction between objects and powers is illustrated by North of England Zoological Society v. Chester Rural District Council, [1958] 3 All E.R. 535. See also Christchurch City Corporation v. Flamingo Coffee Lounge Ltd., [1959] N.Z.L.R.986 as to the ambit of an objects clause.

Any transaction which does not either expressly or by reasonable implication come within the objects of the company as stated in the memorandum is ultra vires and void, Ashbury Railway and Carriage Co. v. Riche (1875), L.R. 7 H.L. 653. No action by the company can be brought upon it or to secure an interest springing directly from it, Mountain Homes Land Investment Co. v. Marshall (1890), 17 V.L.R.545.

As to implied powers, see s. 19 and Third Schedule-Powers. For the purpose of determining whether a company has exceeded its consti

tutional powers, money due on overdraft to the company's bankers in respect of payments made in carrying on the ordinary business of the company is not to be regarded as a loan and the debt is not to be regarded as dependent upon the company's borrowing powers, Normanby Copper Mining Co. v. Corfield (1879), 1 Q.L.J. Supp. 3. The same applies to a loan made by an individual by way of payment off of such an overdraft of a company in order to relieve the pressure of the bank upon it (ibid.).

For power of a company to take an assignment of a debt to enable itself to present a bankruptcy petition against the debtor, see Dowling v. Colonial Mllt/lal Life Assurance Soc. Ltd. (1915), 20 C.L.R. 509.

As to power of a company to enter into partnership with another person for the purpose of carrying on the business for which it was established, see Goulburn Valley Butter Factory Co. v. Bank of New South Wales (1900),25 V.L.R. 702. See also Victorian Mortgage and Deposit Bank v. Australian Financial Agency and Guarantee Co. (1893), 19 V.L.R.680; Ex parte Home Colonial Assets and Debentures Co. (1892), 14 A.L.T. 40. As to what may be validly contained in a memorandum, see Re L. Slutzkin Pty. Ltd., [1932] V.L.R.229.

A person subscribing the memorandum undertakes a liability in the nature of a specialty debt to pay for the shares therein taken by him, Re Normanby Copper Mining Co. Ltd. (1876), 4 S.C.R. 223. See also notes to s. 16, ante; and see s. 33 (2), post.


For precedents of "objects clauses," see Australian Encyclopredia of Forms and Precedents, title COMPANIES.

For the stamp duty on deeds, see the Stamp Acts, 1894 to 1962, First Schedule, title STAMP DUTIES.

Although the memorandum must be stamped as a deed, it is not a deed, and therefore it is not necessary that the authority of an agent to sign for a subscriber should be by deed, Re Whitley Partners Ltd. (1886), 32 Ch. D. 337.

The effect of signing the memorandum is dealt with by s. 16 (5), ante.

Division 2-Powers

19. Powers. Third Schedule. The powers of a company shall include(a) power to make donations for patriotic or for charitable pur

poses; (b) power to transact any lawful business in aid of the Common

wealth in the prosecution of any war in which the Commonwealth is engaged; and

(c) unless expressly excluded or modified by the memorandum or articles, the powers set forth in the Third Schedule.

N.Z. 1955 No.63, s. 16; Vic. s. 15 (3); S.A s. 35; W.A s. 35; Tas. s. 15. Patriotic purposes-d. Re Tyson; Tyson v. Webb (1906), S.R. (N.S.W.) 91;

Lewis v. Benson, [1944] V.L.R. 106; Attorney-General v. National Provincial and Union Bank of England, [1924] AC. 262; [1923] All E.R. 123.

Charitable purposes-See Chesterman v. Commissioner of Taxation (1925), 37 C.L.R. 317; Hobart Savings Bank and Launceston Bank for Savings v. Federal Commissioner of Taxation (1930),43 C.L.R. 364; Williams' Trusts v. Inland Revenue Commissioners, [1947] AC. 447; [1947] 1 All E.R. 513; South Melbourne (City of) v. Y.M.C.A., [1960] V.R. 709; Hall Parke v. Daily News Ltd., [1961] 1 All E.R. 695; Oppenheim v. Tobacco Securities Trust Co. Ltd., [1951] 1 All E.R. 31; Taylor v. Taylor (1910), 10 C.L.R.218; Jackson v. Commissioner of Taxation (1920), 27 C.L.R. 503; Roman Catholic Archbishop of Melbourne v. Lawlor (1934),51 C.L.R. 1. See further 4 Halsbury's Laws of England, 3rd ed., p. 213 et seq.

20. Ultra vires transactions. (1) No act of a company (including the entering into of an agreement by the company) and no conveyance or transfer of property, whether real or personal, to or by a company shall be invalid by reason only of the fact that the company was without capacity or power to do such act or to execute or take such conveyance or transfer.

(2) Any such lack of capacity or power may be asserted or relied upon only in-

(a) proceedings against the company by any member of the company or, where the company has issued debentures secured by a floating charge over all or any of the company's property by the holder of any of those debentures or the trustees for the holders of those debentures to restrain the doing of any act or acts or the conveyance or transfer of any property to or by the company;

(b) any proceedings by the company or by any member of the company against the present or former officers of the company; or

(c) any petition by the Crown Law Officer to wind up the company.

(3) If the unauthorized act, conveyance or transfer sought to be restrained in any proceedings under paragraph (a) of subsection (2) of this section is being or is to be performed or made pursuant to any

62 COMPANIES Vol. 2

contract to which the company is a party, the Court may if all the parties to the contract are parties to the proceedings and if the Court deems it to be just and equitable set aside and restrain the performance of the contract and may allow to the company or to the other parties to the contract (as the case requires) compensation for the loss or damage sustained by either of them which may result from the action of the Court in setting aside and restraining the performance of the contract but anticipated profits to be derived from the performance of the contract shall not be awarded by the Court as a loss or damage sustained.

Capacity-For a survey of the history of the modem doctrine of corporate capacity, see Paterson and Ednie, Australian Company Law, pp. 170-173.

Ultra vires-Any transaction which does not either expressly or by reasonable implication come within the objects of the company as stated in its memorandum is ultra vires and void; nor may it be subsequently ratified even by the assent of the whole body of shareholders, Ashbury Railway and Carriage Co. v. Riche (1875), L.R. 7 H.L. 653. The term is not synonymous with "illegality," ibid. See also H. A. Stephenson & Son Ltd. (in liquidation) v. Gi/fanders, Arbuthnot & Co. (1931), 45 C.L.R. 476; Brownett v. Newton (1941), 64 C.L.R. 439; Re Charles Atkins & Co. Ltd., (1929) S.A.S.R. 129.

As to implied powers, see s. 19 and Third Schedule. The doctrine of ultra vires ought to be reasonably, and not unreasonably

understood and applied, and whatever may fairly be regarded as incidental to, or consequential upon the objects ought not (unless expressly prohibited) to be held to be ultra vires, Attorney-General v. Great Eastern Railway Co. (1880), 5 App. Cas. 473. See also London County Coullcil v. Attorney-General, (1902) A.C. 165; Baroness Wenlock v. River Dee Co. (1885), 10 App. Cas. 354; Deuchar v. Gas Light and Coke Co., (1925) A.C. 691; (1925) All E.R. 720.

An outsider who deals with a company is bound to acquaint himself with the memorandum and articles, Royal British Bank v. Turquand (1856), 6 E. & B. 327. The outsider is deemed to have constructive notice of the powers of the company so that if the dealing is in fact ultra vires the company he may suffer loss, Re Jon Beaufort (London) Ltd., [1953) 1 All E.R. 634. See also Re K. L. Tractors Ltd. (in liquidation), (1961) A.L.R.410; (1960-61), 106 C.L.R.318.

Capacity in particular matters-See Re Fischer, (1960) A.L.R. 666 (to accept a guarantee); Dowling v. Colonial Mutual Life Assurance Ltd. (1915),20 C.L.R. 509 (to take assignment of a debt); Normanby Copper Mining Co. v. Corfield (1879), I Q.LJ. Supp. 3; Sinclair v. Brougham, [1914) A.C. 398; [1914-15] All E.R. 622 (to borrow).

Construction of objects-See H. A. StephensDn & Sons Ltd. (in liquidation) v. Gillanders, Arbuthnot & Co. (1931), 45 c.L.R. 476; Peoples Prudential Assurance Co. Ltd. v. Australian Federal Life and General Assurance Co. Ltd. (1935), 35 S.R. (N.S.w.) 253.

As to the reference which may be had to the articles, as a contemporaneolls document, see Re South Durham Brewerv Co. (1885), 3 I Ch. D. 261; Re Duncan Gilmour & Co. Ltd., (1952) 2 All E.R.· 871; Re Wedgwood Coal and Iron Co., Anderson's Case (1877),7 Ch. D. 75.

As to the reference which may be had to the name of the company, see Re Crown Bank (1890), 44 Ch. D. 634; McGregor v. Pilhama Co-operative Co. Ltd. (1907). 26 N.Z.LR. 933.

As to a general enabling objects clause, see E)'ans v. Brunner, Mond & Co., [1921) 1 Ch. 359; Peruvian Railways Co. v. Thames and Mersey Marine Insurance Co. (1867), L.R. 2 Ch. App. 617.

Main objects and interdependent objects-There is a rule of construction that where one object appears to be the main object and the others ancillary and subservient objects, the latter will be construed as limited by the main object, Re Haven Gold Mining Co. (1882), 20 Ch.D. 151; Re Amalgamated Syndicate, [1897) 2 Ch. 600. As to the effectiveness of an "interdependent objects clause," see Stephens v. Mysore Reefs (Kangundy) Mining Co., [1902] I Ch. 745; Re E. K. Cole Ltd., [1945] 1 All E.R. 521n.; Nakhooda v. Northern Industries Ltd., [1950] 1 S.A.L.R. 808; Christchurch City Corporation v. Flamingo Coffee Lounge Ltd., [1959] N.Z.L.R. 986; Anglo Overseas Agencies Ltd. v. Green, [1960] 3 All E.R. 244.

Objects and powers-For the distinction between the two, see Cotman v. Brougham, [1918] A.C. 514; [1918-19) All E.R. 265; Baroness Wenlock v. River Dee Co. (1885), 10 App. Cas. 354.

COMPANIES ACT OF 1961 ss. 20-22 63

Note that s. 19 (c), ante, ascribes to companies the powers contained in the Third Schedule, post, "unless expressly excluded or modified" by the memorandum or articles.

21. General provisions as to alteration of memorandum. (1) The memorandum of a company may be altered to the extent and in the manner provided by this Act but not otherwise.

(2) In addition to observing and subject to any other provision of this Act requiring the lodging with the Registrar of any resolution of a company or order of the Court or other document affecting the memorandum of a company, the company shall within fourteen days after the passing of any such resolution or the making of any such order lodge with the Registrar a copy of such resolution or other document or an office copy of such order together with (unless the Registrar dispenses therewith) a printed copy of the memorandum as altered, and if default is made in complying with this subsection the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. (3) The Registrar shall register every resolution order or other

document lodged with him under this Act that affects the memorandum of a company and shall certify the registration of every such order, and on such registration and not before, the alteration of the memorandum shall take effect.

(4) The certificate of the Registrar shall be conclusive evidence that all the requirements of this Act with respect to the alteration and any confirmation thereof have been complied with.

(5) Notice of the registration shall be published in such manner (if any) as the Court or the Registrar directs.

(6) The Registrar shall where appropriate issue a certificate of incorporation in accordance with the alteration made to the memorandum.

N.S.W. s. 14; Vic. s. 16; Qld. s. 16; S.A. 55. 16, 17; W.A. s. 17; Tas. s. 16. Express provision for alteration is made by ss. 28 (objects), 23 (name) and 64

(share capital). As to alterations increasing liability to contribute to share capital, see s. 33. Issued copies of the memorandum must embody alterations made therein, s. 34.

22_ Names of companies. (1) Except with the consent of the Crown Law Officer, a company shall not be registered by a name that, in the opinion of the Registrar, is undesirable or is a name, or a name of a kind, that the Crown Law Officer has directed the Registrar not to accept for registration.

(2) The Crown Law Officer shall cause a direction given by him under subsection (1) of this section to be published in the Government Gazette and a copy of the direction to be forwarded to the AttorneyGeneral of the Commonwealth and the Attorney-General of each State of the Commonwealth.

(3) A limited company shall have "Limited" or the abbreviation "Ltd." as part of and at the end of its name.

(4) A no-liability company shall have "No-Liability" or the abbreviation "N.L." as part of and at the end of its name.

(5) A proprietary company shall have the word "Proprietary" or the abbreviation "Pty." as part of its name, inserted immediately before

64 COMPANIES Vol. 2

the word "Limited" or before the abbreviation "Ltd." or in the case of an unlimited company, at the end of its name.

(6) No description of a company shall be deemed inadequate or incorrect by reason of the use of-

(a) the abbreviation "Co." or "Coy." in lieu of the word "Company" contained in the name of a company;

(b) the abbreviation "Pty." in lieu of the word "Proprietary" contained in the name of a company;

(c) the abbreviation "Ltd." in lieu of the word "Limited" contained in the name of a company;

(d) the symbol "&" in lieu of the word "and" contained in the name of a company;

(e) the abbreviation "N.L." in lieu of the word "No-Liability" contained in the name of a company; or

(f) any of such words in lieu of the corresponding abbreviation or symbol contained in the name of a company.

(7) A person may apply in the prescribed form to the Registrar for the reservation of a name set out in the application as

(a) the name of an intended company; (b) the name to which a company proposes to change its name; or (c) the name under which a foreign company proposes to be

registered, either originally or on change of name.

(8) If the Registrar is satisfied as to the bona fides of the application and that the proposed name is a name by which the intended company, company or foreign company could be registered without contravention of subsection (1) of this section, he shall reserve the proposed name for a period of two months from the date of the lodging of the application.

(9) If, at any time during a period for which a name is reserved, application is made to the Registrar for an extension of that period and the Registrar is satisfied as to the bona fides of the application, he may extend that period for a further period of two months.

(10) During a period for which a name is reserved, no company, foreign company, person, firm or society (other than the intended company, company or foreign company in respect of which the name is reserved) shall be registered under this Act or under any other Act, whether originally or on change of name, under the reserved name or under any other name that, in the opinion of the Registrar, so closely resembles the reserved name as to be likely to be mistaken for that name.

(11) The reservation of a name under this section in respect of an intended company, company or foreign company does not in itself entitle the intended company, company or foreign company to be registered by that name, either originally or on change of name.

u.K. s. 17; N.S.W. ss. 10, 11, 32, 37, 44; Vic. s. 17; Qld. s.29; S.A. s. 27; W.A. s. 28; Tas. s. 17.

Direction of Crown Law Officer published Gazette 2 July 1962, p. 1373. Discretion of Registrar, see also s. 23, post. Use of word "Limited" or abbreviation "Ltd.", see s. 24, post. Foreign companies, sec s. 344, post. Undesirable-One consideration would of course be that the proposed name is

so like another as to be calculated to deceive.


The question whether the name proposed so nearly resembles the name of an existing company as to be calculated to deceive is one of discretion for the Registrar to determine, and the Court will not interfere unless satisfied that the Registrar has not exercised any discretion or has exercised it upon some wrong principle of law or been influenced by extraneous considerations which he ought not to have taken into account, R. v. Companies Registrar, [1912] 3 K.B. 23.

The test to be applied in determining whether a name is calculated to deceive is the effect on the minds of the general public. Where therefore customers of an existing company would be likely to be deceived into dealing with the new company in mistake for the old, the name will not be allowed, National Timber Co. Ltd. v. National Hardware, Timber, and Machinery Co. Ltd., [1923] N.Z.L.R. 1258 (names as in title); Re Lewis R. Eady & Son Ltd., [1928] N.Z.L.R. 181 ("Arthur Eady Ltd.," "Kenneth Eady Ltd.," and "Lewis Eady Ltd."). For a case at common law, see Masters v. Cameron, [1904] St. R. Qd. 137; {1904] Q.W.N.46.

\Vhen one company seeks to restrain another from trading under or using such second company's name on the ground that there would be a likelihood of deception and confusion it is in every case a question of fact whether there is such a likelihood, and it is material to consider the real objects of and the nature of the two companies, Austral Canning Co. Pty. Ltd. v. Austral Grain and Produce Proprietary Ltd. (1912). 34 A.L.T. 37; 18 A.L.R. 354. In Mount Balfour Copper Mines No Liability v. Mount Balfour Mines No Liability, [1909] V.L.R. 542, it was held that the name of the plaintiff company was sufficiently distinctive to entitle it to protection; see also Salvitis Proprietary Limited v. Registrar of Trade Marks (1907). 4 C.L.R. 941; Retailers Association of Queensland Ltd. v. Queensland Retail Traders' Association of Grocers, Drapers and General Stores, [1955] St. R. Qd. 369.

Other considerations than the likelihood of deception may make a proposed name undesirable. Thus if the name presented to the Registrar for registration contained scandalous or obscene words he would be justified in refusing registration, R. v. Registrar of Companies, Ex parte Bowen, [1914] 3 K.B. 1161, at p. 1167.

For further cases, see 9 English and Empire Digest (Rp!.), pp.60-68. The court may grant an injunction to restrain the registration of a name sub

stantially similar to the registered name of an existing company, see Australian Salt Co. Ltd. v. South Australia Salt Ltd., [1947] S.A.S.R. 377. For other cases in which injunctions have been sought, see Australian Guarantee Corporation Ltd. v. Sydney Guarantee Corporation Ltd. (1951),68 W.N. (N.S.W.) 124; Whatmore and Others v. General Transport Co. Ltd., [1947] St. R. Qd. 219.

Judicial control of Registrar's discretion-Prerogative writs may issue against the Registrar, see R. v. Registrar of Companies, [1912] 2 K.B. 23; R. v. Registrar of Companies (A.C.T.), Ex parte Ganke (1960), 1 F.L.R.I09.

Except with the consent of the Crown Law Officer-The court would be loth to question on a prerogative writ any decision which the Crown Law Officer might reach in the exercise of his power of consenting under s. 22 (I), see R. v. A ttorneyGeneral (1888),4 T.L.R. 488.

23. Change of name. (1) A company may by special resolution and with the approval of the Registrar change its name to a name by which the company could be registered without contravention of subsection (1) of section twenty-two.

(2) If the name of a company is (whether through inadvertence or otherwise and whether originally or by change of name) a name by which the company could not be registered without contravention of subsection (I) of section twenty-two the company may by special resolution change its name to a name by which the company could be registered without contravention of that subsection and, if the Registrar so directs. shall so change it within six weeks after the date of direction or such longer period as the Registrar allows unless the Crown Law Officer by written notice annuls such direction, and if the company fails to comply with the direction it shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty.

(3) Where the name of a company incorporated pursuant to a previous enactment corresponding with this Act has not been changed

3

66 COMPANIES Vol. 2

since the commencement of this Act, the Registrar shall not, except with the approval of the Crown Law Officer, exercise his power under subsection (2) of this section to direct the company to change its name.

( 4) A change of name pursuant to this Act shall not affect the identity of the company or any rights or obligations of the company or render defective any legal proceedings by or against the company, and any legal proceedings that might have been continued or commenced by or against it by its former name may be continued or commenced by or against it by its new name.

(5) Where a company proposes to change its name, it shall give by post twenty-one days' written notice specifying the intention to propose the resolution as a special resolution and to submit it for passing to a meeting of the company to be held on a day specified in the notice.

(6) The notice shall be sent to all members, and to all trustees for debenture holders and if there are no trustees for any class of debenture holders to all debenture holders of that class whose names are, at the time of the posting of the notice, known to the company.

U.K. s. 18; N.S.W. s. 35; Vic. s. 18; Qld. s. 31; S.A. s. 29; W.A. s. 30; Tas. s. 18. For what constitutes a special resolution, see s. 144. Semble, the change of name is not complete until the new name is entered on

the register and the altered certificate of incorporation is issued, Shackleford, Ford & Co. v. Dangerfield (1868), L.R. 3 c.P. 407; but where, after resolution to change the name and prior to entry on the register and issue of the certificate, a company had passed a resolution for winding up under the new name and there could be no doubt as to the identity of the company, it was held that the winding-up resolution was effective, Re Roberts Clinics Ltd., [1934] St. R. Qd. 85.

A trustee company has power under this section to change its name, Re Thomas, [1950] V.L.R. 289.

24. Omission of "Limited" in name of charitable and other companies. (I) Where it is proved to the satisfaction of the Crown Law Officer that a proposed limited company is being formed for the purpose of providing recreation or amusement or promoting commerce industry art science religion charity pension or superannuation schemes or any other object useful to the community, and will apply its profits (if any) or other income in promoting its objects and will prohibit the payment of any dividend to its members, the Crown Law Officer may (after requiring, if he thinks fit, the proposal to be advertised in such manner as he directs either generally or in a particular case) by licence direct that it be registered as a company with limited liability without the addition of the word "Limited" to its name, and the company may be registered accordingly.

(2) Where it is proved to the satisfaction of the Crown Law Officer(a) that the objects of a limited company are restricted to those

specified in subsection ( I ) of this section and to objects incidental or conducive thereto; and

(b) that by its constitution the company is required to apply its profits (if any) or other income in promoting its objects and is prohibited from paying any dividend to its members,

the Crown Law Officer may by licence authorize the company to change its name to a name which does not contain the word "Limited", being a name approved by the Registrar.

(3) A licence under this section may be issued on such conditions as the Crown Law Officer thinks fit, and those conditions shall be binding


on the company and shall if the Crown Law Officer so directs be inserted in the memorandum or articles of the company and a memorandum or articles may by special resolution be altered to give effect to any such direction.

( 4) The company shall while the licence is in force be exempted from complying with the provisions of this Act relating to the use of the word "Limited" as any part of its name, and except where the Crown Law Officer otherwise directs the lodging of annual returns and of returns of particulars of directors, managers and secretaries and the publication of accounts.

(5) A licence under this section or under any corresponding previous enactment may at any time be revoked by the Crown Law Officer and upon revocation the Registrar shall enter the word "Limited" at the end of the name of the company upon the register, and the company shall thereupon cease to enjoy the exemptions and privileges granted by reason of the licence by this Act but before a licence is so revoked the Crown Law Officer shall give to the company notice in writing of his intention and shall afford it an opportunity to be heard.

U.K. s. 19; N.S.W. s. 34; Vic. s. 19; Qld. s. 30; S.A. s. 28; W.A. s. 29; Tas. s. 19. As to names of companies, see also ss. 22, 23, ante. Objects-See North of England Zoological Society v. Chester Rural District

COl/neil, [1958) 3 All E.R. 535. As to alteration of the objects of a company having a licence under this section,

see Re St. Hilda's Incorporated College, Cheltenham, [1901) 1 Ch.556. For form of memorandum of a company within this section (also for form of

articles) see Australian Encyclopredia of Forms and Precedents, title COMPANIES.

25. Registration of unlimited company as limited, etc. (1) Subject to this section, an unlimited company may convert to a limited company or a company limited by guarantee may convert to a company limited both by shares and guarantee by passing a special resolution determining so to convert and lodging with the Registrar for registration a copy of the resolution.

(2) On the lodging of the copy of the resolution the Registrar shall, subject to this Act-

(a) register the copy; (b) make such endorsements in or alterations to his registers as

are necessary to record the effect of the resolution with respect to the conversion; and

(c) issue to the company a certificate of incorporation of the company altered to meet the circumstances of the case and cancel the previous certificate of incorporation of the company.

(3) On issuing the certificate of incorporation the Registrar may by notice in writing served on the company dispense with the lodging by the company of any documents which had been lodged with him on the occasion of or subsequent to the incorporation of the company.

(4) The conversion shall take effect on the issue of the certificate of incorporation under subsection (2) of this section.

(5) A conversion of a company pursuant to this section shall not affect the identity of the company or any rights or obligations of the company or render defective any legal proceedings by or against the company and any legal proceedings that could have been continued or

68 COMPANIES Vol. 2

commenced by or against it prior to such conversion may, notwithstanding the conversion, be continued or commenced by or against it after such conversion.

u.K. s. 16; N.S.W. s. 31; Vic. s. 20; Qld. s. 28; S.A. s. 26; W.A. s. 27; Tas. s. 20. Special resolution, see s. 144 post.

26. (1) Change from public to proprietary company. A public company having a share capital (other than a no-liability company) may convert to a proprietary company by lodging with the Registrar a copy of a special resolution-

(a) determining to convert to a proprietary company and specifying an appropriate alteration to its name; and

(b) altering the provisions of its memorandum or articles so far as is necessary to impose the restrictions limitations and prohibitions referred to in subsection (I) of section fifteen.

(2) Change from proprietary to public company. A proprietary company may, subject to anything contained in its memorandum or articles, convert to a public company by lodging with the Registrar

(a) a copy of a special resolution determining to convert to a public company and specifying an appropriate alteration to its name;

(b) a statement in lieu of prospectus; and (c) a statutory declaration in the prescribed form verifying that

paragraph (b) of subsection (2) of section fifty-two has been complied with,

and thereupon the restrictions limitations and prohibitions required by subsection (I) of section fifteen as embodied in the memorandum or articles of such company shall cease to form part of the memorandum or articles.

(3) On compliance by a company with the provisions of either of subsection (1) and subsection (2) of this section and on the issue of a certificate of incorporation of the company altered accordingly the company shall be a proprietary company or a public company (as the case requires).

( 4) A conversion of a company pursuant to subsection (1) or subsection (2) of this section shall not affect the identity of the company or any rights or obligations of the company or render defective any legal proceedings by or against the company, and any legal proceedings that could have been continued or commenced by or against it prior to the conversion may notwithstanding any change in the company's name or capacity in consequence of the conversion be continued or commenced by or against it after the conversion.

N.S.W. s. 37; Vic. s. 21; Qld. ss.38, 39; S.A. s. 37; W.A. s.37; Tas. s. 21. Special resolution, see s. 144, post.

27. Default in complying with requirements as to proprietary companies. (I) Where. on the application of the Crown Law Officer or of any member or creditor of a proprietary company, the Court is satisfied that default has been made in relation to the company in complying with any of the provisions which are required under paragraphs (c) or (d) of subsection (1) of section fifteen to be included in the memorandum or articles of a proprietary company the Court may by order. determine that, on such date as the Court specifies in its order, the company ceased to be a proprietary company.

COMPANIES ACT OF 1961 ss. 25·27 69

(2) Where-(a) default has been made in relation to the company in complying

with the provisions which are required under paragraph (b) of subsection (1) of section fifteen to be included in the memorandum or articles of a proprietary company;

(b) a company has been convicted of an offence under subsection (7) of this section;

(c) the memorandum or articles of the company have been altered so that they no longer include all the provisions required under subsection (1) of section fifteen to be included in the memorandum or articles of a proprietary company; or

(d) the company has ceased to have a share capital, the Registrar may by notice served on the company determine that on such date as is specified in the notice the company ceased to be a proprietary company.

(3) Where, under this section, the Court or the Registrar determines that a company has ceased to be a proprietary company-

(a) the company shall be a public company and shall be deemed to have been a public company on and from the date specified in the order or notice;

(b) the company shall, on the date so specified, be deemed to have changed its name by the omission from the name of the word "Proprietary" or the abbreviation "Pty.", as the case requires; and

(c) the company shall. within a period of fourteen days after the date of the order or the notice, lodge with the Registrar

(i) a statement in lieu of prospectus; (ii) a statutory declaration in the prescribed form verifying that

paragraph (b) of subsection (2) of section fifty·two has been complied with; and

(iii) where an order has been made under subsection (1) of this section an office copy of the order.

(4) Where the Court is satisfied that a default. alteration or non· inclusion referred to in subsection (1) or subsection (2) of this section has occurred but that it was accidental or due to inadvertence or to some other sufficient cause or that on other grounds it is just and equitable to grant relief, the Court may, on such terms and conditions as to the Court seem just and expedient. determine that the company has not ceased to be a proprietary company.

(5) A company that. by virtue of a determination made under this section, has become a public company shall not convert to a proprietary company without the leave of the Court.

(6) If default is made in complying with paragraph (c) of subsection (3) of this section, the company, and every officer of the company who is in default. shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. (7) Where any subscription for shares in or debentures of, or any

deposit of money with, a proprietary company is arranged by or through a solicitor, broker, agent or any other person (whether an officer of the company or not) who invites the public to make use of his services in arranging investments or who holds himself out to the public as being in a position to arrange investments, the company. every person, including

70 COMPANIES Vol. 2

an officer of the company. who is a party to the arrangement, shall be guilty of an offence against this Act.

Penalty: Five hundred pounds. This subsection shall not apply to any such subscription or deposit

made by the spouse of the person by or through whom the subscription or deposit was arranged or by the parent. brother, sister, uncle, aunt, nephew, niece, lineal descendant or adopted child of that person or of his spouse.

(8) Where in the case of a proprietary company default is made in complying with any of the provisions which are required under subsection ( 1) of section fifteen to be included in the memorandum or articles of a proprietary company, the company and every officer of the company who is in default, shall be guilty of an offence against this Act.

Penalty: Five hundred pounds. U.K. s.29; N.S.W. ss. 39, 40; Vic. s. 22; Qld. s. 39; S.A. 5S. 41, 42; W.A. ss. 38,

39; Tas. s. 22. A proprietary company is barred by this section from attempting to do indirectly

what it could not, by virtue of s 15, ante, do directly. "Accidental, or due to inadvertence"-See Re Jackson & Co. Ltd., [1899] I Ch.

348; West Bromwich Case; Hazel v. Lewisham (Viscount); Fellowes', Lellow's & Kendrick's Cases (1911),6 O'M.& H. 256.

28. Alterations of objects in memorandum. (1) Subject to this section a company may by special resolution alter the provisions of its memorandum with respect to the objects of the company.

(2) Where a company proposes to alter its memorandum with respect to the objects of the company, it shall give by post twenty-one days' written notice specifying the intention to propose the resolution as a special resolution and to submit it for passing to a meeting of the company to be held on a day specified in the notice.

(3) The notice shall be given to all members, and to all trustees for debenture holders and if there are no trustees for any class of debenture holders to all debenture holders of that class whose names are, at the time of the posting of the notice, known to the company.

( 4) The Court may in the case of any person or class of persons for such reasons as to it seem sufficient dispense with the notice required by subsection (2) of this section,

(5) If an application for the cancellation of an alteration is made to the Court in accordance with this section by-

(a) the holders of not less in the aggregate than ten per centum in nominal value of the company's issued share capital or any class of that capital or, if the company is not limited by shares, not less than ten per centum of the company's members; or

(b) the holders of not less than ten per centum in nominal value of the company's debentures,

the alteration shall not have effect except so far as it is confirmed by the Court.

(6) The application shall be made within twenty-one days after the date on which the resolution altering the company's objects was passed, and may be made on behalf of the persons entitled to make the application by such one or more of their number as they appoint in writing for the purpose,


(7) On the application the Court-

(a) shall have regard to the rights and interests of the members of the company or of any class of them as well as to the rights and interests of the creditors;

(b) may if it thinks fit adjourn the proceedings in order that an arrangement may be made to the satisfaction of the Court for the purchase (otherwise than by the company) of the interests of dissentient members;

(c) may give such directions and make such orders as it thinks ex'pedient for facilitating or carrying into effect any such arrangement; and

(d) may make an order cancelling the alteration or confirming the alteration either wholly or in part and on such terms and conditions as it thinks fit.

(8) Notwithstanding any other provision of this Act a copy of a resolution altering the objects of a company shall not be lodged with the Registrar before the expiration of twenty-one days after the passing of the resolution or if any application to the Court has been made, before the application has been determined by the Court (whichever is the later).

(9) A copy of the resolution shall be lodged with the Registrar by the company within fourteen days after the expiration of the twenty-one days referred to in subsection (8) of this section, but if an application has been made to the Court in accordance with this section, the copy shall be lodged with the Registrar together with an office copy of the order of the Court within fourteen days after the application has been determined by the Court.

u.K. s. 5; N.S.W. s. 15; Vic. s. 23; Qld. s. 17; S.A. s. 17; W.A. s. 18; Tas. s. 23.

As to special resolutions, see s. 144.

Trustees for debenture holders, see s. 74, post.

Notices of the meetings for passing the resolution are not required to be served upon shareholders resident beyond the jurisdiction, Re Vale of Clwydd Coal Mining Co. Ltd. (1912),29 W.N.(N.S.W.) 189.

There is no power to alter the memorandum so as to validate past acts of the directors, invalid when they were done, Re Southern Cross Biscuit Co. Ltd. (1906), 26 N.Z.L.R. 557.

A special resolution passed by a limited company for the alteration of its memorandum of association by enlarging the class of permitted shareholders, as defined therein, is not a resolution for the alteration of the "objects" of the company within the meaning of this section, and the Court has no jurisdiction to confirm it, Re Gippsland and Northern Co-operative Selling and Insurance Co. Ltd., [1918J V.L.R.451. See also Re International Harvester Co. of Australia Ply. Ltd., [1953] V.L.R.669.

A company engaged in an industry was allowed to include in its objects power to lend money to persons having dealings with the company, Re Kaupokonui Co-op. Dairy Factory Co. Ltd. (1910), 13 N.Z.G.L.R. 381.

A company may delete an entire objects clause and substitute another containing many new objects covering a very wide and varied field of operations, Re Broken Hill Ply. Co. Ltd., [1940] V.L.R.323.

An alteration of objects may entail an alteration of the company's name, Re Tilt's Cafes Ltd., [1925] V.L.R. 565.

As to alteration of objects by the Court, see s. 186, post.

Shareholders objecting to the alteration of objects may be allowed their costs although an order confirming the alteration is made, Re Parent Tyre Co., [1923] 2 Ch. 222.

72 COMPANIES Vol. 2

29. Articles of association. (1) There may in the case of a company limited by shares or a no-liability company and there shall in the case of a company limited by guarantee or limited both by shares and guarantee or an unlimited company be registered with the memorandum. articles signed by the subscribers to the memorandum prescribing regulations for the company.

(2) Articles shall(a) be printed; (b) be divided into numbered paragraphs; (c) be signed by each subscriber to the memorandum in the

presence of at least one witness (not being another subscriber) who shall attest the signature and add his address; and

(d) bear the same stamp as if they were contained in a deed.

(3) In the case of an unlimited company the articles, if the company has a share capital, shall state the amount of share capital with which the company proposes to be registered and the division thereof into shares of a fixed amount.

(4) In the case of an unlimited company or a company limited by guarantee or a company limited both by shares and guarantee the articles shall state the number of members with which the company proposes to be registered.

(5) Where a company to which subsection (4) of this section applies increases the number of its members beyond the registered number. it shall within one month after the increase was resolved on or took place. lodge with the Registrar notice of the increase.

(6) Every company which makes default in complying with subsection (5) of this section and every officer of the company who is in default in complying with that subsection shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. U.K. ss.6, 7; N.S.W. ss. 16, 17, 19; Vic. 5.24; Qld. ss. 18, 19, 21; S.A. 55. 18,

20; W.A. 55. 19, 20; Tas. s. 24. As to forms of articles, see Fourth Schedule, post. See also Australian Encyclo

predia of Forms and Precedents, title COMPANIES. For crimes with respect to articles of companies, see the Criminal Code,

s. 504, title CRIMINAL LAW. For definition "printed," see s. 5. The memorandum and articles are subject to the general law, e.g., against

restraint of trade, Otaraia Co-operative Co. v. Flynn, [1930] N.Z.G.L.R. 74; Heron v. Port Huon Fruitgrowers Ltd. (1922), 30 C.L.R. 315; and gain no validity from being registered, Shalloon v. Cheddar Valley, etc., [1924] N.Z.L.R.561.

The articles of association are subject to the Act itself, and where they are inconsistent with the Act the latter must prevail, James v. Evening Standard Newspaper Co. (1895), 21 Y.L.R.399.

Scm hie, shareholders should not be taken to have agreed to an article in the articles of association of a company which purports to enable forfeiture of moneys due to them in the capacity of creditors of the company, Re British Australian Wool Realisation Association Ltd., [1932] V.L.R. 34, at p. 53.

For an illustration of how articles of association should be construed, so as to give them reasonable business efficacy, see Holmes v. Keyes, [1958] 2 All E.R. 129. See also Rayfield v. Hands, [1958] 2 All E.R. 194.

Semble, questions of construction of the articles may be determined, where the facts are not in dispute, on an Originating Summons under the Rules of the Supreme Court (1900), title SUPREME COURT; see Re Victorian Artists' Society; Sweatman v. Victorian Artists' Society (1920),41 A.L.T. 152.


For the stamp duty payable on a deed, see the Stamp Acts, 1894 to 1962, First Schedule, title STAMP DUTIES.

Typewriting was not formerly sufficient, Re The Companies Act, 1863 (1901), 10 Q.L.J. (N.C.) 52, but now appears to be so by virtue of the definition of "printed" in s.5.

Articles which had been registered and acted upon for many years by the company, although not signed, were held valid in Ho Tung v. Man On Insurance Co. Ltd., [1902] A.c. 232; cf. Atherton v. Plane Creek Central Mill Co. Ltd., [1914} St. R. Qd. 73; [1914] Q.W.N. 12.

It has been held that, where more persons than seven have signed the memorandum, it is not necessary for more than seven of them to sign the articles. See Re Australian Banking Co. of Sydney (1891), 12 N.S.W.L.R. (Eq.) 237. But, with the provisions considered in that case, cf. this section which appears to be mandatory.

Articles may be altered under s. 31, post.

30. Adoption of Table A or B of Fourth Schedule. (1) Articles may adopt all or any of the regulations contained in Table A or, in the case of a no-liability company, in Table B.

(2) In the case of a company limited by shares incorporated after the commencement of this Act, if articles are not registered. or if articles are registered then in so far as the articles do not exclude or modify the regulations contained in Table A those regulations shall so far as applicable be the articles of the company in the same manner and to the same extent as if they were contained in registered articles.

(3) In the case of a no·liability company incorporated after the commencement of this Act if articles are not registered or if articles are registered then in so far as the articles do not exclude or modify the regulations contained in Table B those regulations shall so far as applicable be the articles of the company in the same manner and to the same extent as if they were contained in registered articles.

U.K. s. 8; N.S.W. ss. 18, 44; Vic. s.25; Qld. s.20; S.A. s. 19; W.A. ss. 19, 20; Tas. s.25.

In the event of any inconsistency between Table A and the body of this Act, the provision in the body of the Act will prevail, King Gold Mining Co Ltd. v. Cock (1912), 31 N.Z.L.R. 1166.

Clear words are necessary to exclude Table A, McCurdy v. Gorrie (1913), 32 N.Z.L.R. 769; Fisher v. Black and White Publishing Co., [1901] 1 Ch. 174.

As a matter of construction the Acts Interpretation Acts, 1954 to 1 %2, title ACTS OF PARLIAMENT, may be held to govern special articles when used with those contained in Table A, Fell v. Derby Leather Co. Ltd., [1931] 2 Ch. 252; [1931J All E.R. Rep. 636, or even where Table A is expressly excluded but there are numerous articles nearly coincident with those in Table A, Broadwater Tin Mining Co. v. Oliver (1874), 4 S.C.R. 91.

31. Alteration of articles. (1) Subject to this Act and to any conditions in its memorandum. a company may by special resolution alter or add to its articles.

(2) Any alteration or addition so made in the articles shall. subject to this Act on and from the date of the special resolution. or such later date as is specified in the resolution, be as valid as if originally contained therein and be subject in like manner to alteration by special resolution.

(3) Subject to this section, any company shall have the power and shall be deemed always to have had the power to amend its articles by the adoption of all or any of the regulations contained in Table A, or in the case of a no-liability company, contained in Table B by reference only

74 COMPANIES Vol. 2

to the regulations in the Table or to the numbers of particular regulations contained therein, without being required in the special resolution effecting the amendment to set out the text of the regulations so adopted.

u.K. s. 10; N.S.W. s.20; Vic. s.26; Qld. s.22; S.A. s. 21; W.A. s.22; Tas. s.26. Special resolutions, see s. 144 For precedents of special resolution, see Australian

Encyclop:edia of Forms and Precedents, title COMPANIES. Alteration of articles increasing liability of members, see s. 33, post. Alteration of articles after alteration has been made by the court, see s. 186, post. Where a resolution effecting an alteration had been confirmed at a meeting held

prematurely, but the alteration had been acted upon for a number of years, it was held that the alteration had been validated by the acquiescence of the shareholders, Atherton v. Plane Creek Central Mill Co. Ltd .. [1914] St. R. Qd. 73; [1914] Q.W.N. 12; cf. Ho Tung v. Man On Insurance Co. Ltd., [1902] A.C. 232.

An injunction will not go to restrain a company from acting on a legally carried resolution to alter articles, merely because there have been irregularities in its passage, Wright v. Dairymen and Farmers' Union Journal Co. Ltd. (1907),27 N.Z.L.R. 181.

The Court has no jurisdiction to rectify a mistake in articles of association. Such a mistake can only be altered by special resolution, Evans v. Chapman (1902), 86 L.T. 381.

The power of a company to alter its articles is unlimited, except that such an alteration cannot substantially alter the memorandum, Bundaberg Land & Building Soc. v. Lee, B.C.R., 6 September 1892.

A company cannot contract itself out of the right to alter its articles, Walker v. London Tramways Co. (1879), 12 Ch. D. 705.

A company c:mnot by an alteration of its articles alter contracts between itself and outsiders or between itself and its shareholders otherwise than in respect of their shares, and will be restrained from acting on any alterations in the articles so as to create a breach of any such contract, see Allen v. Gold Reefs of West Africa Ltd., [1900] 1 Ch. 656; McDonald v. Normanby Co-op. Dairy Factory Co. Ltd., [1923] N.Z.L.R. 122; SoutJzem Foundries (1926) Ltd. v. Shirlaw, [1940] A.c. 701; [1940] 2 All E.R. 445. But as between the company and its members as such, the company may alter its articles although affecting the rights of members or a class of members, the contract between the company and its members being subject to the power to alter articles, see Allen v. Gold Reefs of West Africa Ltd., [1900] 1 Ch. 656; Re Adelaide, etc., Tramway Co. Ltd., [1907] S.A.L.R. 35. But the power must be exercised bona fide and for the benefit of the company as a whole and not for the benefit of the majority of the members at the expense of a minority, Allen v. Gold Reefs of West Africa, supra. The question is one for the shareholders acting bona fide and not for the Court, and the Court will not interfere with the action of the shareholders except on grounds for interference with the verdict of a jury, Shuttleworth v. Cox Bros. & Co. Ltd., [1927] 2 K.B. 9; [1927] All E.R. Rep. 498. As to alterations increasing liability of members, see s. 34.

See further 9 English and Empire Digest (Rpl.), p. 591; 6 Halsbury's Laws of England, 3rd ed., p. 271.

Grounds on which a company's alteration of its articles of association will be declared invalid were considered by the High Court in Peters' American Delicacy Co. Ltd. v. Heath (1939), 61 C.L.R.457.

As to restricting the power of alteration of articles by virtue of a provision contained in the memorandum, see Arnold and Others v. Regent Press Pty. Ltd .. (1957] St. R. Qd. 211.

Where articles provide for the continuance of a certain state of affairs "until otherwise determined by the company," the determination may be made by an ordinary resolution and is not an alteration of the articles, Re Trade Typesetters L(d., [1946] S.A.S.R. 124.

32. As to memorandum and articles of companies limited by guarantee. (l) In the case of a company limited by guarantee and not having a share capital and registered on or after the twenty-first day of March one thousand nine hundred and thirty-two every provision in the memorandum or articles or in any resolution of the company purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member shall be void.


(2) For the purposes of the provisions of this Act relating to the memorandum of a company limited by guarantee and of this section, every provision in the memorandum or articles or in any resolution of a company limited by guarantee and registered on or after the date specified in subsection (1) of this section purporting to divide the undertaking of the company into shares or interests shall be treated as a provision for a share capital notwithstanding that the nominal amount or number of the shares or interests is not specified thereby.

U.K. s. 21; N.S.W. s.23; Vic. s.27; Qld. s.33; S.A. s. 31; Tas. s.27. This section is apparently designed to prevent a repetition of the position dis

closed in Malleson v. General Mineral Syndicate, {1894] 3 Ch. 538, and to prevent the formation of limited companies with shares of no nominal value.

Divisible profits-For the permissible source of dividends, see s. 376, post. For precedents of memoranda, see Australian Encyclopredia of Forms and Precedents, title COMPANIES.

33. (1) Effect of memorandum and articles. SUbject to this Act the memorandum and articles shall when registered bind the company and the members thereof to the same extent as if they respectively had been signed and sealed by each member and contained covenants on the part of each member to observe all the provisions of the memorandum and of the articles.

(2) Subject to the provisions of this Act relating to no-liability companies all money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company, and shall be of the nature of a specialty debt.

(3) As to effect of alterations on members who do not consent. Notwithstanding anything in the memorandum or articles of a company no member of the company, unless either before or after the alteration is made he agrees in writing to be bound thereby, shall be bound by an alteration made in the memorandum or articles after the date on which he became a member so far as the alteration requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made or in any way increases his liability as at that date to contribute to the share capital of or otherwise to pay money to the company.

u.K. ss. 20, 22; N.S.W. 5S. 22, 24; Vic. s. 28; Qld. ss. 32, 34; S.A. ss. 30, 32; W.A. ss. 3 I, 32; Tas. s. 28.

This section does not in terms say that the implied covenant by the members is with the company, but it seems quite clear that this is so and that the memorandum and articles constitute a contract between the company and its members in respect of their rights as such, Hickman v. Kent or Romney Marsh Sheepbreeders' Assn., [1915} 1 Ch. 881; [1914-15] All E.R. Rep. 900; Bradford Banking Co. Ltd. v. Briggs & Co. Ltd. (1886), 12 App. Cas. 29, 33; Imperial Hydropathic Hotel Co., Blackpool, v. Hampson (1882),23 Ch. D. I, 13; Commissioners of Stamps v. Parbury Estates Ltd. (1913), 16 C.L.R. 521; Beattie v. Beal/ie, [1938J Ch. 708; [1938] 3 All E.R. 214.

But it seems that the company is not bound to members in relation to matters not affecting the members as such. For example, a provision in the articles that a member shall be employed as solicitor for the company is not enforceable against the company, Eley v. Positive Government Security Life Assurance Co. (1876), 1 Ex. D. 88. Nor is a provision that a contract entered into by a member with a trustee for the company should be adopted by the company, Browne v. La Trinidad (1887), 37 Ch. D. I; nor is a provision appointing a managing director, Re Standard Salt and Alkali Ltd., Ex parte Lahiff, [1934] S.A.S.R. 168.

The effect of this section is to be limited to binding members while they are members, Land Mortgage Bank of Victoria v. Reid, [1909] V.L.R.284.

It has in some cases been held that the articles do not themselves constitute a contract, but from them the terms of an implied contract may be gathered where

76 COMPANIES Vol. 2

there has been part perfonnance, Swabey v. Port Darwin Gold Mining Co. (1889), I Meg. 385; Re International Cable Co. Ltd. (1892),8 T.L.R. 316; Re New British Iron Co., Ex parte Beckwith, [1898] 1 Ch. 324. For further cases with regard to the effect of this section as between the company and its members, see 9 English and Empire Digest (Rpl.) , pp. 85-88.

Whilst the articles regulate the rights of members inter se, there is no contract between the individual members which can be enforced. In case of any breach by a member of the provisions of the articles it is, as a general rule, for the company to take proceedings, Foss v. Harbottle (1843), 2 Hare, 461; Burland v. Earle, [1902] A.c. 83. Where the persons against whom relief is sought for a wrong done to the company or by way of recovery of moneys or damages due to the company, themselves hold and control a majority of the shares of the company and will not pennit an action to be brought in the name of the company, the shareholders complaining may sue in their own names, Atherton v. Plane Creek Central Mill Co. Ltd., [1914] St. R. Qd. 73; [1914] Q.W.N. 12; Burland v. Earle, supra; Dutton v. Gorton (1916), 23 C.L.R. 362; Miles v. Sydney Meat Preserving Co. (1912), 16 C.L.R. 50; 17 C.L.R. 639; Campbell v. Kitchen & Sons Ltd. (1910), 12 C.L.R. 513, 515.

As to the right of a member to be heard before the directors exercise a discretionary power to deprive him of rights under articles, see Graham v. Sinclair (1918),25 C.L.R. 102.

The effect of this section is to raise contractual rights between members inter sc, Rayfield v. Hands, [1960] Ch. I; [1958] 2 All E.R. 194.

The articles do not constitute a contract between the company and outsiders. Thus a provision in the articles for payment by the company of promotion expenses gives the promoters no right of action, Melhado v. Porto Alegre Rly. Co. (1874), L.R. 9 c.P. 503; and see Re Rotherham Alum & Chemical Co. (1883),25 Ch. D. 103.

For the distinction between the effect of this section as to articles which are in substance regulations and articles which are in substance not regulations but contracts, see McDonald v. Normanby Co-op. Dairy Factory Co. Ltd., [1923] N.Z.L.R. 122, and Johnson v. Eltham Co-op. Dairy Factory Co. Ltd., [1931] N.Z.L.R. 216, where it was held that alterations of articles imposing an obligation on members to take further shares did not bind members not consenting to the alterations.

An article may be unenforceable as being in restraint of trade, Tasmanian Hopgrowers Pool Ltd. v. Wilton (1926), 22 Tas. L.R. 16; Parker & Co. Ltd. v. Woollands (1924), 26 W.A.L.R. 172; Heron v. Port Huon Fruitgrowers' Co-operative Assoc. Ltd. (1922), 30 C.L.R. 315; cf. Pakenham Upper Fruit Co. Ltd. v. Crosby (1924). 35 C.L.R. 386; and if in restraint of trade it will be bad unless there is some consideration between company and shareholder, Parker & Co. Ltd. v. Woollands, supra.

Subsection (2) deals with moneys payable by a member in his character as member, Land Mortgage Bank of Victoria v. Reid, [1909] V.L.R.284.

The liability of a husband and wife in respect of shares in a company held by them jointly survives to the latter on the death of her husband, Mercantile Bank of Australia v. Dinwoodie (1902), 28 V.L.R. 491.

As to whether shareholders are entitled to compel a company to carry on business in the interests of shareholders generally and with a view to making profits, see Miles v. Sydney Meat Preserving Co. Ltd. (1913), 17 C.L.R. 639; 16 C.L.R. 50.

Where the board of directors deliberately embarks upon an activity which is ultra vires, the company is responsible for torts committed in the carrying out of that activity to the same extent and in the same cases as it would have been liable if the activity in question had been intra vires, White v. Northern Publishing Co. Ltd., [1939] N.Z. Gaz. L.R. 316.

As to specialty debt, see R. v. Williams, [1942] A.C. 541; [1942] 2 All E.R. 95. As to alterations of the memorandum, see s.21, and notes thereto. As to

alterations of the articles, see s. 31.

34. Copies of memorandum and articles. (1) A company shall on being so required by any member send to him a copy of the memorandum and of the articles (if any) subject to payment of one pound or the cost thereof, whichever is the less.

(2) Where an alteration is made in the memorandum or articles of a company, a copy of the memorandum or articles shall not be issued by the company after the date of alteration unless-

(a) the copy is in accordance with the alteration; or

COMPANIES ACT OF 1961 ss. 33·35 77

(b) a printed copy of the order or resolution making the alteration is annexed to the copy of the memorandum or articles and the particular clauses or articles affected are indicated in ink.

(3) Where an agreement required to be lodged with the Registrar under section one hundred and forty·six affects the memorandum or articles of a company, a copy of the memorandum or articles shall not be issued by the company after the agreement is entered into unless a copy of the agreement is annexed to the copy of the memorandum or articles.

(4) If default is made in complying with this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Ten pounds. U.K. SS. 24, 25; N.S.W. ss. 25, 26; Vic. s. 29; Qld. ss. 35, 36; S.A. ss. 33, 34;

W.A. ss. 33, 34; Tas. s. 29. Alterations to memorandum, see s. 21, ante; alterations to articles, see s. 31, ante.

35. (1) Form of contracts. Contracts on behalf of a company may be made as follows:-

(a) a contract which if made between private persons would be by law required to be in writing under seal may be made on behalf of the company in writing under the common seal of the company;

(b) a contract which if made between private persons would be by law required to be in writing signed by the parties to be charged therewith may be made on behalf of the company in writing signed by any person acting under its authority express or implied;

(c) a contract which if made between private persons would by law be valid although made by parol only (and not reduced into writing) may be made by parol on behalf of the company by any person acting under its authority express or implied,

and any contract so made shall be effectual in law and shall bind the company and its successors and all other parties thereto and may be varied or discharged in the manner in which it is authorized to be made.

(2) Authentication of documents. A document or proceeding requiring authentication by a company may be signed by an authorized officer of the company and need not be under its common seal.

(3) Execution of deeds. A company may by writing under its common seal empower any person either generally or in respect of any specified matters as its agent or attorney to execute deeds on its behalf and a deed signed by such an agent or attorney on behalf of the com· pany and under his seal or, subject to subsection (5) of this section, under the appropriate official seal of the company shall bind the company and have the same effect as if it were under its common seal.

( 4) The authority of any such agent or attorney shall as between the company and any person dealing with him continue during the period (if any) mentioned in the instrument conferring the authority, or if no period is there mentioned then until notice of the revocation or determina· tion of his authority has been given to the person dealing with him.

(5) Official seal for use abroad. A company whose objects require or comprise the transaction of business outside the State may, if authorized by its articles, have for use in any place outside the State an

78 COMPANIES Vol. 2

official seal, which shall be a facsimile of the common seal of the company with the addition on its face of the name of every place where it is to be used and the person affixing any such official seal shall in writing under his hand certify on the instrument to which it is affixed the date on which and the place at which it is affixed.

u.K. ss.32-36; N.S.W. ss.348, 351, 352; Vic. s.30; Qld. ss.41, 43-45; S.A. ss.44-48; W.A. ss.41-45; Tas. s. III.

For contracts required to be in writing, see Statute of Frauds and Limitations of 1867, s. 5. title FRAUDS; the Sale of Goods Act of 1896, s. 7, title MERCANTILE LAW.

As to necessity of delivery of a deed executed by a company, see Windsor Refrigerator Co. Ltd. v. Branch Nominees Ltd., [19601 2 All E.R. 568.

Contracts made prior to the time when a company is entitled to commence business are provisional only until that time, s. 52. No person can contract on behalf of a company not then incorporated, nor can the company after incorporation ratify the purported contract, Kelner v. Baxter (1867), L.R. 2 c.P. 174; Natal Land and Colonization Co. v. Pauline Colliery Syndicate, [1904] A.c. 120.

"Any person acting under its authority"-As a general rule the directors acting as a board have authority to bind the company. But the authority may be restricted by the articles of association. Where the selling of houses was part of the ordinary business of the company it was held that the secretary had implied authority to sign a contract for sale on the company's behalf, Beer v. London and Paris Hotel Co. (1875), L.R. 20 Eq. 412.

One effect of this section is to require that a provision in a written contract in favour of a company party thereto can be waived by the company only in writing, Brallnheck v. Mercantile Building, Land and Investment Co. Ltd. (1887), 9 N.S.W.L.R. (L.) 9.

As to verbal retainer of a solicitor by a company, see Gale v. Wingello Coal Mining Co. Ltd. (1890), II N.S.W.L.R. (L.) 79.

The execution of a contract not in conformity with this section may nevertheless be sllch evidence that a company was privy to the contract as to operate or estop it, Re A hurn (1908), 27 N.Z.L.R. 442 (deed of assignment for benefit of creditors executed by director). A contract to pay may be implied after consideration executed and benefit accepted, Lawford v. Billericay Rural District Council, [1903] I K.B.772. A company is bound by a lease of land where it has sealed the lease but the parts have not been exchanged, Beesly v. Hallwood Estates Ltd., [1961] I Ch. 105; [1960] 2 All E.R. 314.

Where articles of association provided that the directors had power to take a lease, and that they might delegate their powers to the managing director, it was held that a party to a lease signed by the managing director was entitled to aSSllme that, for the purposes of this section, the managing director had authority to sign, Plomley v. T. K. Ste{lnes Ltd. (1898), 19 N.S.W.L.R. (L.) 215. As to the power of a managing director to bind the company, see L. & M. Newman Pty. Ltd. v. Cappers Pty. Ltd. (1960), 77 W.N. (N.S.W.) 379; [1960] N.S.W.R. 143.

As to the form of signature on behalf of the company, see Re Fraser & Co. Ltd. (1897),19 A.L.T. 97.

The authority to draw bills of exchange may be given by the articles or may be implied from the nature of the company's business, Re Cunningham & Co. Ltd., Simpson's Claim (1887), 36 Ch. D. 532. See also s. 19 (c), ante, and Third Schedule, ci. 15, post.

The section is not intended to put a limitation on the persons whom a company is entitled to appoint to act as its agents for any purpose, Wilson's Laundry Pty. Ltd. v. Patmoy, [1961] N.S.W.R. 499.

The execution of dealings with land under the Real Property Acts, 1861 to 1960, title REAL PROPERTY, is provided for by s. 114 of that Act.

For a form of power of attorney conferring authority to affix the official seal used abroad, see Australian Encyclopredia of Forms and Precedents, title COMPANIES.

36. Prohibition of carrying on business with fewer than statutory minimum of members. If at any time the number of members of a company is reduced in the case of a proprietary company (other than a proprietary company the whole of the issued sha:es of which are held by a


holding company that is a public company or a public company under the law of any other State or Territory of the Commonwealth) below two or in the case of any other company below five and it carries on business for more than six months while the number is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognizant of the fact that it is carrying on business with fewer than two or five members (as the case may be) shall be severally liable for the payment of the whole debts of the company contracted during the time that it so carries on business after those six months and may be severally sued therefor, and the company and every such member shall be guilty of an offence against this Act if the company so carries on business after those six months.

Penalty: Fifty pounds. Default penalty. U.K. s. 31; N.S.W. s. 347; Vic. s. 31; Qld. s.40; S.A. s. 43; W.A. s.40; Tas. s.30. As to number of members, see also s. 14, ante. A company may be wound up by the Court where the number of members falls

below that stated in this section, s. 222 0), (d), post. A member holding shares in a fiduciary capacity may be counted to make up

the requisite number, Salomon v. Salomon & Co., [1897] A.C. 22, at p. 30; but not so the trustee of a bankrupt member or the personal representative of a deceased member, Re Bowling & Welby's Contract, [1895] 1 Ch.663.

A sale of shares by one member to another, which has the effect of reducing the number of members below that prescribed, is not on that account invalid, Walsh v. Stephens (1873), 3 S.C.R. 98.

Where the number of members is reduced below the statutory number, the company is not thereby deprived of power to pass the necessary resolution for winding up the company, Re Johnston,Dunster, and Co. (1890), 17 V.L.R. 100.

Where a person purchased all the shares in and assets of a company and placed the shares in the names of nominees of his own, who appointed directors, who appointed him managing director, it was held that the company had an existence distinct from, and independent of, him, Goulburn Valley Butter Factory Company Pty. Ltd. v. Bank at New South Wales (1900), 25 V.L.R. 702.

Where the number of members falls below that prescribed each member is entitled to take part in the management of the company, Walsh v. Stephens (1873), 3 S.C.R.98.

PART IV-SHARES, DEBENTURES AND CHARGES

Division I-Prospectuses

37. Requirement to issue form of application for shares or debentures with a prospectus. (1) A person shall not issue, circulate or distribute any form of application for shares in or debentures of a corporation unless the form is issued, circulated or distributed together with a prospectus which complies with the requirements of this Act.

Penalty: One thousand pounds. (2) Subsection (1) of this section shall not apply if the form of

application is issued in connection with shares or debentures which are not offered to the public but otherwise that subsection shall apply to any such form of application whether issued on or with reference to the formation of a corporation or subsequently.

U.K. s. 38 (3), (5); N.S.W. s. 137; Vic. s. 32; Qld. ss.46, 47; S.A. s. 50; W.A. s.47; Tas. s. 31.

For the meaning of "prospectus," see s. 5 and s. 43. Civil liability for mis-statements in a prospectus, see s. 46, post; liability for

false statements generally in documents, see s. 375, post. Allotment in relation to this section, see ss. 48, 50, post. Where a prospectus relates to the issue of shares at a discount, see s. 59, post.

80 COMPANIES Vol. 2

Forms of prospectuses, see Australian Encyclopredia of Forms and Precedents, title COMPANIES. For statutory provisions as to contents, see Fifth Schedule, post.

Forms of statements in lieu of prospectus, see Australian Encyclopredia of Forms and Precedents, title COMPANIES. For statutory provisions as to contents, see Sixth Schedule, post.

As to c1. 12 of Part I of the Fifth Schedule, see Re Australian United Insurance Co. Ltd., [1924] V.L.R. 146, and cf. s. 58, post.

Non-compliance or contravention does not confer a right to rescission, but only gives a right of action for damages against directors and others who are responsible for issuing the prospectus, and damage must be proved, Re Wimbledon Olympia Ltd., [191OJ I Ch. 630; Re South of England Natural Gas & Petroleum Co. Ltd., [1911] 1 Ch. 573; Whittlesea Land Co. v. Gutheil (1892), 18 V.L.R. 557; Elder's Trustee & Executor Co. Ltd. v. Commonwealth Homes and Investment Co. Ltd. (1941), 65 C.L.R.603.

The general law with regard to actions for damages for breach of a statutory duty applies, see Atkinson v. Newcastle & Gateshead Waterworks Co. (1877), 2 Ex. D. 441; Picton Municipality v. Geldert, [1893] A.C. 524; Johnston & Toronto Type Foundry Co. v. Toronto Consumers' Gas Co., [1898] A.c. 447; and see 13 English and Empire Digest (Rp!.), p. 317, and Vo!' 9, p. III.

A person damaged by misleading or untrue statements in a prospectus may:(i) Bring an action for damages or compensation against the persons made

liable by s. 46, who, however, may escape liability upon proof of any of the matters therein specified;

(ii) Repudiate the allotment of shares to him and claim rescission of the contract;

(iii) Bring an action of deceit.

These last two remedies are available under the general law. As to (ii), it is the duty of those who issue a prospectus "not only to abstain

from stating as fact that which is not so, but to omit no one fact within their knowledge the existence of which might in any degree affect the nature or extent or quality of the privileges and advantages which the prospectus holds out as inducements to take shares," New Brunswick & Canada Ry. etc., Co. v. Muggeridge (1860), I Drew. & Sm. 363; cf. Central Ry. of Venezuela v. Kisch (1867), L.R. 2 H.L. 99; Henderson v. Lacon (1867), L.R. 5 Eg. 249.

The fact that the prospectus does not disclose all the facts known to the directors will not entitle an allottee to claim rescission of the contract unless the omission has the effect of rendering the prospectus positively misleading, McKeown v. BoudardPeveril Gear Co. (1896),65 L.l. Ch. 735; and see Peek v. Gurney (1873), L.R. 6 H.L. 377; Commonwcalth Homes and Im'estment Co. Ltd. v. Smith (1938), 59 C.L.R. 443.

But in an action for rescission on the ground of misrepresentation it is not necessary to prove fraud or that the misrepresentation was made dishonestly, Derry \'. Pcck (1889), 14 App. Cas. 337, 359.

If a misleading prospectus is issued before the formation of a company an allottee of shares may repudiate if in fact the prospectus forms the basis of a contract hetween the company and the allottee, Re Metropolitan Coal Consumcrs' Association, Karberg's Casc, [1892] 3 Ch. I.

Misrepresentation by one director will affect the company and will give grounds for rescission, Hila Manufacturing Co. Ltd. v. Williamson (1911), 28 T.L.R. 164.

Misrepresentation by a promoter may be ground for rescission, Re Photographic Co. of Soutlz Australia (1884), 18 S.A.L.R. 13.

But if a person acting as agent for another is not misled his principal cannot rescind the contract. Hyslop v. Morel (1891), 7 T.L.R. 263; and see generally 9 English and Empire Digest (Rp!.), p. 118.

Where the prospectus is substantially different from the memorandum or articles, the agreement to take shares is void unless the applicant continues to act as a member of the company after having notice of the difference, Tumbling Waters Freehold Co. v. Juliet (1874), 8 S.A.L.R. 131; but note s. 33, ante, which appears to make registration of the memorandum and articles notice to an applicant for shares. Statements in prospectuses divergent from the contents of the memorandum or articles have the effect of collateral warranties, Re Commonwealth Homes and Investment Co. Ltd., [1943] S.A.S.R. 211.

Where two grounds for rescission exist and the shareholder by his conduct has lost the right to rescind on one ground, he may still rescind on the other, Elder's


Trustee & Executor Co. Ltd. v. Commonwealth Homes and Investment Co. Ltd. (1941), 65 C.L.R. 603. The rescission is effective, although exercised on the eve of the company's liquidation, ibid.

As to the effect of acceptance of a share certificate upon a person seeking to deny that he is a member of the company, see Re James Burton & Son Ltd., [1927] 2 Ch. 132. A person may be liable to account for the profits on shares, although they were void when issued, if he has dealt with them as validly issued, Jubilee Cotton Mills Ltd. v. Lewis, {1924] A.c. 958.

As to (iii), to sustain an action for deceit, actual fraud must be proved or such a withholding of facts as to render the prospectus as it stands absolutely false. In that respect an action for deceit differs from an action for rescission founded on misrepresentation, Derry v. Peek (1889), 14 App. Cas. 337, 359.

Persons becoming directors after the issue of the prospectus were held not liable in an action for deceit merely because they did not satisfy themselves of the truth of the statements and had no reason to suppose them to be false, having honestly relied on the representations of others, but they must not have known of the falsehood, Moore v. Burke (1865),4 F. & F. 258.

To sustain the action the allottee must be shown to have been damaged, Macleay v. Tail, [1906] A.c. 24; R. v. Kylsanl (Lord), [1932] 1 K.B.442; [1931J All E.R. Rep. 179; R. v. Bishirgian, [1936] 1 All E.R. 586.

And see generally 9 English and Empire Digest (Rpl.), p. 124.

38. As to invitations to the public to deposit money with companies. ( 1) No invitation to the public to deposit money with or to lend money to any corporation shall be made unless a debenture is intended to be issued in respect of every deposit or loan so made and a debenture shall as soon as practicable be issued in respect of every deposit or loan so made.

(2) Where an invitation is made to the public to deposit money with or lend money to any corporation and such deposit or loan is not to be secured by a charge over all or any of the corporation's assets the invitation shall legibly and prominently state that the document to be issued acknowledging the deposit or loan of money made pursuant to the invitation is to be an unsecured note or an unsecured deposit note, as the case may be, and shall not state that such document is to be a debenture.

(3) Where any document is issued by a corporation (being one of a series of such documents) which either expressly or by implication acknowledges the indebtedness of the corporation in respect of money borrowed by it but is not secured by a charge over all or any of the corporation's assets the documents shall be described as an unsecured note or as an unsecured deposit note and shall not be described as a debenture.

(4) Nothing in this section shall apply to a prescribed corporation and nothing in this Act shall require a prospectus to be issued in connection with any invitation to the public to deposit money with a prescribed corporation.

(5) In subsection (4) of this section, "prescribed corporation" means-

(a) a banking corporation; (b) a corporation that is declared by the Governor in Council by

notice in the Government Gazette to be an authorized dealer in the short term money market; or

(c) a corporation that-(i) is a pastoral company in respect of which an exemption

granted under section eleven of the Banking Act, 1959 of the Commonwealth, or that Act as amended from time to time, is in force; or

82 COMPANIES Vol. 2

(ii) is registered under a law of the Commonwealth relating to life insurance or is a corporation the whole of the issued shares of which are held beneficially by a corporation so registered.

and is declared by the Governor in Council by notice in the Government Gazette to be a prescribed corporation for the purposes of this section.

(6) The Governor in Council may. by notice in the Government Gazette-

(a) specify terms and conditions subject to which subsection (4) of this section shall have effect in relation to a corporation specified in paragraph (c) of subsection (5) of this section; or

(b) vary or revoke any declaration or specification made under this section.

(7) Every corporation which contravenes this section and every officer of a corporation who is in default under this section shall be guilty of an offence against this Act.

Penalty: One thousand pounds. N.S.W. s. 137A; Vic. s. 36; Qld. s.47A; Tas. s. 35. Act referred to:

Banking Act. 1959 (Commonwealth). Declarations under subsection (5) of this section have been notified in the

Gazette of 2 July 1962. p. 1374. Registration of charges. see Division 7 of Part IV. post. Note that s. 5 (5), ant~.

makes an invitation to the public to deposit or lend money, etc., an invitation to subscribe for or purchase debentures.

39. Contents of prospectuses. Fifth Schedule. (1) To comply with the requirements of this Act a prospectus-

(a) shall be printed in type of a size not less than the type known as eight point Times unless the Registrar. before the issuing. advertising. circulating or distributing of the prospectus in the State. certifies in writing that the type and size of letters are legible and satisfactory;

(b) shalI be dated and that date shall, unless the contrary is proved. be taken as the date of issue of the prospectus;

( c) shall as to one copy be lodged with the Registrar as required by this Act and shall state that a copy of the prospectus has been so lodged and shall also state immediately after such statement that the Registrar takes no responsibility as to its contents;

(d) shall, subject to the provisions contained in Part III of the Fifth Schedule. state the matters specified in Part T of that Schedule and set out the reports specified in Part IT of that Schedule;

(e) shall, where the persons making any report specified in Part IT of the Fifth Schedule have made therein. or have. without giving the reasons. indicated therein. any such adjustments as are mentioned in paragraph 31 of that Schedule. have endorsed thereon or attached thereto. a statement by those persons setting out the adjustments and giving the reasons therefor;

(f) shall contain a statement that no shares or debentures or that no shares and debentures (as the case requires) shall be allotted on the basis of the prospectus later than six months after the date of the issue of the prospectus;

(g)

(h)


shall, if it contains any statement made by an expert or contained in what purports to be a copy of or extract from a report memorandum or valuation of an expert, state t?e date on which the statement report memorandum or valuatIOn was made and whether or not it was prepared by the expert for incorporation in the prospectus;

shall not contain the name of any person as a trustee for holders of debentures or as an auditor or a banker or a solicitor or a stock broker or share broker of the corporation or proposed corporation or of or in relation to the issue or proposed issue of shares or debentures unless that person has consented in writing before the issue of the prospectus to act in that capacity in relation to the prospectus and, in the case of a company or proposed company, a copy verified as prescribed of the consent has been lodged with the Registrar; and

(i) shall where the prospectus offers shares in or debentures of a foreign company incorporated or to be incorporated, in addition, contain particulars with respect to-

(i) the instrument constituting or defining the constitution of the company;

(ii) the enactments or provisions having the force of an enactment by or under which the incorporation of the company was effected or is to be effected;

(iii) an address in the State where such instrument, enactments or provisions or certified copies thereof, may be inspected;

(iv) the date on which and the place where the company was or is to be incorporated; and

(v) whether the company has established a place of business in the State and, if so, the address of its principal office in this State.

(2) Subparagraphs (i), (ii) and (iii) of paragraph (i) of subsection (I) of this section shall not apply in case of a prospectus issued more than two years after the day on which the company is entitled to commence business, and in the application to a foreign company of Part 1 of the Fifth Schedule for the purposes of that subsection paragraph 2 of that Part of that Schedule shall have effect as if a reference to the constitution of the company were substituted for a reference to the articles.

(3) A condition requiring or binding an applicant for shares in or debentures of a corporation to waive compliance with any requirement of this section, or purporting to affect him with notice of any contract document or matter not specifically referred to in the prospectus shall be void.

(4) In the event of non-compliance with or contravention of any of the requirements set out in this section, a director or other person responsible for the prospectus shall not incur any liability by reason of the non-compliance or contravention, if-

(a) as regards any matter not disclosed, he proves that he was not cognizant thereof;

(b) he proves that the non-compliance or contravention arose from an honest mistake on his part concerning the facts; or

84 COMPANIES Vol. 2

(c) the non-compliance or contravention was in respect of matter which in the opinion of the court dealing with the case was immaterial or was otherwise such as ought, in the opinion of that court, having regard to all the circumstances of the case, reasonably to be excused.

(5) In the event of failure to include in a prospectus a statement with respect to the matters specified in paragraph 17 of the Fifth Schedule no director or other person shall incur any liability in respect of the failure unless it is proved that he had knowledge of the matters not disclosed.

(6) Subsections (4) and (5) of this section shall apply only in relation to the operation of subsection (1) of section thirty-seven and shall not limit or diminish any liability which a person may otherwise incur under this Act or any other enactment or rule of law.

U.K. ss. 37, 38; N.S.W. ss. 136-137; Vic. ss. 37, 303 (1); Qld. ss. 46, 47; SA s.49; W.A. ss. 46-47; Tas. s. 36.

With this section, see also notes to s. 37, ante. Compare the definition of "prospectus" in s. 5, ante, with the decision in

Government Stock and Other Securities Investment Co. Ltd. v. Christopher, [1956] I All E.R. 490.

To be within this section the document must be issued as a prospectus and invite an application for shares or debentures, Nash v. Lynde, [1929] A.c. 158. The application form for shares, when it contains more than the mere form for application, may constitute a prospectus, Re Shortland Flat Gold Mining Co. Ltd. (1910), 29 N.Z.L.R. 931.

A prospectus marked "private and confidential, not for publication," and circulated among friends of the directors, is not a prospectus within the meaning of this section, Sherwell v. Combined Incandescent Mantles Syndicates Ltd. (1907), 23 T.L.R. 482. But see Re South of England Natural Gas & Petroleum Co. Ltd., [191 I] 1 Ch. 573.

As to cl. 12 of Part I of the Fifth Schedule, see Re Australian United Insurance Co. Ltd., [1924] V.L.R. 146.

Where a company is incorporated otherwise than under the State Acts, the origin of its incorporation must be shown; cf. Re Cherry's Trusts; Robinson v. Trustees for Wesleyan Methodist Chapel Purposes (Registered), [1914] I Ch. 83.

40. Certain advertisements deemed to be prospectuses. ( 1 ) Every advertisement offering or calling attention to an offer or intended offer of shares in or debentures of a corporation or proposed corporation to the public for subscription or purchase shall be deemed to be a prospectus (and all enactments and rules of law as to the contents of prospectuses and as to liability in respect of statements in and omissions from prospectuses or otherwise relating to prospectuses shall apply and have effect accordingly) if it contains any information or matter other than the following:-

(a) the number and description of the shares or debentures concerned;

(b) the name and date of registration of the corporation and its paid up share capital;

(c) the general nature of the main business or proposed main business of the corporation;

(d) the names, addresses and occupations of(i) the directors or proposed directors; (ii) the brokers or underwriters to the issue; and (iii) in the case of debentures, the trustee for the debenture

holders;


(e) the name of the Stock Exchange of which the brokers or underwriters to the issue are members; and

(f) particulars of the opening and closing dates of the offer and the time and place at which copies of the full prospectus and forms of application for the shares or debentures may be obtained,

and unless it states that applications for shares or debentures will proceed only on one of the forms of application referred to in and attached to a printed copy of the prospectus.

(2) No statement that, or to the effect that, the advertisement is not a prospectus shall affect the operation of this section.

(3) This section shall apply to advertisements published or disseminated in the State by newspaper broadcasting television cinematograph or any other means whatsoever.

(4) Where an advertisement that is deemed to be a prospectus by virtue of subsection (I) of this section does not comply with the requirements of this Act as to prospectuses, the person who published or disseminated the advertisement, and every officer of the corporation concerned, or other person, who knowingly authorized or permitted the publication or dissemination, shall be guilty of an offence against this Act.

Penalty: Five hundred pounds.

(5) For the purposes of this section where-(a) an advertisement offering or calling attention to an offer or

intended offer of shares in or debentures of a corporation or proposed corporation to the public for subscription or purchase is published or disseminated;

(b) the person who published or disseminated the advertisement before so doing, obtained a certificate signed by at least two directors of the corporation, or two proposed directors of the proposed corporation, that the proposed advertisement is an advertisement that will not be deemed to be a prospectus by virtue of subsection (1) of this section; and

(c) the advertisement is not patently an advertisement that is deemed to be a prospectus by virtue of -that subsection,

the corporation and each person who signed the certificate shall be deemed to be the persons who published or disseminated the advertisement, but no other person shall be deemed to be such a person.

(6) Any person who has obtained a certificate referred to in paragraph (b) of subsection (5) of this section shall when so requested by the Registrar forthwith deliver the certificate to the Registrar.

Penalty: Five hundred pounds. Default penalty.

(7) Nothing in this section shall limit or diminish any liability which any person may incur under any rule of law or under any enactment of this Act apart from this section.

South Africa No. 46 of 1952. s. 56 (3) (c); N.S.W. s. 138; Vic. s. 37 (4); Qld. s. 47c; Tas. s. 36 (6).

See also ss. 39, 43, and notes.

41. (1) As to retention of over-subscriptions in debenture issues. A corporation shall not accept or retain subscriptions to a debenture issue in

86 COMPANIES Vol. 2

excess of the amount of the issue as disclosed in the prospectus unless the corporation has specified in the prospectus-

(a) that it expressly reserves the right to accept or retain oversubscriptions; and

(b) a limit on the amount of over-subscriptions that may be accepted or retained.

(2) As to statement of asset-backing. Where a corporation specifies in a prospectus relating to a debenture issue that it reserves the right to accept or retain over-subscriptions-

(a) the corporation shall not make, authorize or permit any statement or reference as to the asset-backing for the issue to be made or contained in any prospectus relating to the issue. other than a statement or reference to the total assets and the total liabilities of the corporation; and

(b) the prospectus shall contain a statement or reference as to what the total assets and total liabilities of the corporation would be if over-subscriptions to the limit specified in the prospectus were accepted or retained.

Penalty: One thousand pounds.

42. (1) Registration of prospectus. A prospectus shall not be issued by any person unless a copy thereof has first been registered by the Registrar.

(2) The Registrar shall not register a copy of any prospectus unless-

(a) the copy signed by every director and by every person who is named therein as a proposed director of the corporation or by his agent authorized in writing is lodged with the Registrar on or before the date of its issue;

(b) the prospectus appears to comply with the requirements of this Act or the Registrar is satisfied, if the corporation is a foreign company incorporated in another State or Territory of the Commonwealth. that-

(i) the prospectus has been registered or is acceptable for registration by the Registrar of Companies in that other State or Territory; and

(ii) the prospectus complies with the requirements of paragraph (i) of subsection (1) of section thirty-nine; and

(c) there are also lodged with the Registrar copies verified as prescribed of any consents required by section forty-five to the issue of the prospectus and of all material contracts referred to in the prospectus or, in the case of such a contract not reduced into writing, a memorandum giving full particulars thereof verified as prescribed.

(3) If a prospectus is issued without a copy thereof having been so registered the corporation and every person who is knowingly a party to the issue of the prospectus shall be guilty of an offence against this Act.

Penalty: Two hundred and fifty pounds.

(4) Copy of contracts, etc., to be kept for inspection at registered office. Every corporation shall cause a true copy of every document

COMPANIES ACT OF 1961 ss.41.43 87

referred to in paragraph (c) of subsection (2) of this section to be deposited within seven days after registration of the prospectus at the registered office of the corporation in the State and if it has no registered office in the State at the address in the State specified in the prospectus for that purpose and shall keep each such copy, for a period of at least six months after the registration of the prospectus, for the inspection of the members and creditors of the corporation without fee.

U.K. s. 41; N.S.W. s. 136; Vic. s. 38; Qld. s.46; S.A. s. 50; W.A. ss.46, 47; Tas. s. 37.

See also ss. 37, 39, ante, and notes. Registered office, see ss. Ill, 112, post.

43. Document containing offer of shares for sale to be deemed prospectus. (1) Where a corporation allots or agrees to allot to any person any shares in or debentures of the corporation with a view to all or any of them being offered for sale to the public, any document by which the offer for sale to the public is made shall for all purposes be deemed to be a prospectus issued by the corporation, and all enactments and rules of law as to the contents of prospectuses and to liability in respect of statements and non-disclosures in prospectuses, or otherwise relating to prospectuses, shall apply and have effect accordingly as if the shares or debentures had been offered to the public and as if persons accepting the offer in respect of any shares or debentures were subscribers therefor but without prejudice to the liability, if any, of the persons by whom the offer is made, in respect of statements or non·disclosures in the document or otherwise.

(2) For the purposes of this Act it shall, unless the contrary is proved, be evidence that an allotment of, or an agreement to allot, shares or debentures was made with a view to the shares or debentures being offered for sale to the public if it is shown-

(a) that an offer of the shares or debentures or of any of them for sale to the public was made within six months after the allotment or agreement to allot; or

(b) that at the date when the offer was made the whole con· sideration to be received by the corporation in respect of the shares or debentures had not been so received.

(3) The requirements of this Division as to prospectuses shall have effect as though the persons making an offer to which this section relates were persons named in a prospectus as directors of a corporation.

(4) In addition to complying with the other requirements of this Division the document making the offer shall state-

(a) the net amount of the consideration received or to be received by the corporation in respect of shares or debentures to which the offer relates; and

(b) the place and time at which the contract under which the shares or debentures have been or are to be allotted may be inspected.

(5) Where an offer to which this section relates is made by a cor· poration or a firm, it shall be sufficient if the document referred to in subsection (1) of this section is signed on behalf of the corporation or

88 COMPANIES Vol. 2

firm by two directors of the corporation or not less than half of the members of the firm, as the case may be, and any such director or member may sign by his agent authorized in writing.

U.K. s.45; N.S.W. s. 141; Vic. s. 39; Qld. s.50; S.A. s.54; W.A. s. 51; Tas. s. 38. This section should be read with ss. 37, 39, 42, 46. See also, as to restrictions on going from place to place offering shares for sub·

scription or sale, s. 374, post. The object of the section is to make a company and its directors and others

liable for statements made in any "offer for sale" of shares or debentures already issued or agreed to be issued in the same way as if the "offer for sale" were a prospectus. The "offer for sale" was not formerly a prospectus, see Urquhart v. Stracey, [1928] N.I. 162. Such a document was held not to be a prospectus in Government Stock and Other Securities Investment Co. Ltd. v. Christopher, [1956] I All E.R. 490.

44. Allotment of shares and debentures where prospectus indicates application to list on stock exchange. (1) Where a prospectus states or implies that application has been or will be made for permission for the shares or debentures offered thereby to be listed for quotation on the official list of any Stock Exchange, any allotment made on an application in pursuance of the prospectus shall, subject to subsection (3) of this section whenever made, be void if-

(a) the permission is not applied for in the form for the time being required by the Stock Exchange before the third day on which the Stock Exchange is open after the date of issue of the prospectus; or

(b) the permission is not granted before the expiration of six weeks from the date of the issue of the prospectus or such longer period not exceeding twelve weeks from the date of the issue as is, within the said six weeks, notified to the applicant by or on behalf of the Stock Exchange.

(2) Where the permission has not been applied for, or has not been granted as aforesaid, the corporation shall, subject to subsection (3) of this section, forthwith repay without interest all money received from applicants in pursuance of the prospectus, and if any such money is not repaid within fourteen days after the corporation so becomes liable to repay it then in addition to the liability of the corporation the directors of the corporation shall be jointly and severally liable to repay that money with interest at the rate of five per centum per annum from the expiration of such fourteen days.

(3) Where-(a) permIssIon is not applied for as specified in paragraph (a) of

subsection (1) of this section; or (b) permission is not granted as specified in paragraph (b) of that

subsection, the Crown Law Officer may by notice published in the Government Gazette on the application of the corporation, made before any share or debenture is purported to be allotted, exempt the corporation from compliance with all or any of the requirements of subsection (1) or subsection (2) of this section.

(4) A director shall not be so liable under subsection (2) of this section if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

COMPANIES ACT OF 1961 S5. 43, 44 89

(5) Any condition requiring or binding any applicant for shares or debentures to waive compliance with any requirement of this section or purporting to do so shall be void.

(6) Without limiting the application of any of its provisions this section shall have effect-

(a) in relation to any shares or debentures agreed to be taken by a person underwriting an offer thereof contained in a prospectus as if he had applied therefor in pursuance of the prospectus; and

(b) in relation to a prospectus offering shares for sale as if-(i) a reference to sale were substituted for a reference to

allotment; (ii) the persons by whom the offer is made. and not the cor

poration were liable under subsection (2) of this section to repay money received from applicants. and references to the corporation's liability under that subsection were construed accordingly; and

(iii) for the reference in subsection (7) of this section to the corporation and every officer of the corporation who is in default there were substituted a reference to any person by or through whom the offer is made and who knowingly and wilfully authorizes or permits the default.

(7) All money received as aforesaid shall be kept in a separate bank account so long as the corporation may become liable to repay it under subsection (2) of this section and if default is made in complying with this subsection. the corporation and every officer of the corporation who is in default shall be guilty of an offence against this Act.


(8) Where the Stock Exchange has within the time specified in paragraph (b) of subsection (1) of this section granted permission subject to compliance with any requirement specified by the Stock Exchange. permission will be deemed to have been granted by the Stock Exchange if the directors have given to the Stock Exchange an undertaking in writing to comply with the requirements of the Stock Exchange. but if any such undertaking is not complied with each director who is in default shall be guilty of an offence against this Act.

Penalty: Imprisonment for three months or Five hundred pounds.

(9) A person shall not issue a prospectus inviting persons to subscribe for shares in or debentures of a corporation if it inc1udes-

(a) an untrue statement that permission has been granted for those shares or debentures to be dealt in or quoted or listed on any Stock Exchange; or

(b) any statement in any way referring to any such permission or to any application or intended application for any such permission. or to dealing in or quoting or listing the shares or debentures on any Stock Exchange. or to any requirements of a Stock Exchange unless that statement is or is to the effect that permission has been granted or that application has been or will be made to the Stock Exchange within three days of the issue of the prospectus.

Penalty: Imprisonment for six months or Five hundred pounds.

90 COMPANIES Vol. 2

(10) Where a prospectus contains a statement to the effect that the memorandum and articles of the corporation comply or have been drawn so as to comply with the requirements of any Stock Exchange, the prospectus shall, unless the contrary intention appears from the prospectus, be deemed for the purposes of this section to imply that application has been, or will be, made for permission for the shares or debentures offered by the prospectus to be listed for quotation on the official list of the Stock Exchange.

U.K. s. 51; Vic. s.40; Tas. s. 39. Repay all money, see Re Nanwa Gold Mines Ltd; Ballantyne v. Nanwa Gold

Mines Ltd., [1955] 3 All E.R.219.

45. Expert's consent to issue of prospectus containing statement by him. (1) A prospectus inviting subscription for or purchase of shares in or debentures of a corporation and including a statement purporting to be made by an expert or to be based on a statement made by an expert shall not be issued unless-

(a) he has given, and has not before delivery of a copy of the prospectus for registration withdrawn, his written consent to the issue thereof with the statement included in the form and context in which it is included; and

(b) there appears in the prospectus a statement that he has given and has not withdrawn his consent.

(2) If any prospectus is issued in contravention of this section the corporation and every person who is knowingly a party to the issue thereof shall be guilty of an offence against this Act.

Penalty: Five hundred pounds. U.K. s.40; Vic. s.41; Tas. s.40. For matters which may eXCUlpate an expert, see s. 46, post.

46. Civil liability for mis-statements in prospectus. (1) Subject to this section, each of the following persons shall be liable to pay compensation to all persons who subscribe for or purchase any shares or debentures on the faith of a prospectus for any loss or damage sustained by reason of any untrue statement therein, or by reason of the wilful non-disclosure therein of any matter of which he had knowledge and which he knew to be material, that is to say every person who-

(a) is a director of the corporation at the time of the issue of the prospectus;

(b) authorized or caused himself to be named and is named in the prospectus as a director or as having agreed to become a director either immediately or after an interval of time;

(c) is a promoter of the corporation; or

(d) authorized or caused the issue of the prospectus.

(2) Notwithstanding anything in subsection (I) of this section, where the consent of an expert is required to the issue of a prospectus and he has given that consent, he shall not by reason only thereof be liable as a person who has authorized or caused the issue of the prospectus except in respect of an untrue statement purporting to be made by him as an expert, and the inclusion in the prospectus of a name of a person as a


trustee for debenture holders auditor banker solicitor or stock or share broker shall not for that reason alone be construed as an authorization by such person of the issue of the prospectus.

(3) No person shall be so liable if he proves-(a) that, having consented to become a director of the corporation,

he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent;

(b) that the prospectus was issued without his knowledge or consent and he gave reasonable public notice thereof forthwith after he became aware of its issue;

(c) that after the issue of the prospectus and before allotment or sale thereunder he, on becoming aware of any untrue statement therein, withdrew his consent and gave reasonable public notice of the withdrawal and of the reason therefor; or

(d) that-0) as regards every untrue statement not purporting to be made

on the authority of an expert or of a public official document or statement, he had reasonable ground to believe, and did up to the time of the allotment or sale of the shares or debentures believe, that the statement was true;

(ii) as regards every untrue statement purporting to be a statement made by an expert or to be based on a statement made by an expert or contained in what purports to be a copy of or extract from a report or valuation of an expert, it fairly represented the statement, or was a correct and fair copy of or extract from the report or valuation, and he had reasonable ground to believe and did up to the time of the issue of the prospectus believe that the person making the statement was competent to make it and that that person had given the consent required by section forty-five to the issue of the prospectus and had not withdrawn that consent before delivery of a copy of the prospectus for registration, or, to the defendant's knowledge, before any allotment or sale thereunder; and

(iii) as regards every untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document, it was a correct and fair representation of the statement or copy of or extract from the document.

( 4) Subsection (3) of this section shall not apply in the case of a person liable, by reason of his having given a consent required of him by section forty-five as a person who has authorized or caused the issue of the prospectus in respect of an untrue statement purporting to have been made by him as an expert.

(5) A person who apart from this subsection would under subsection (l) of this section be liable, by reason of his having given a consent required of him by section forty-five as a person who has authorized the issue of a prospectus in respect of an untrue statement purporting to be made by him as an expert shall not be so liable if he proves-

(a) that, having given his consent under section forty-five to the issue of the prospectus, he withdrew it in writing before a copy of the prospectus was lodged with the Registrar;

92 COMPANIES Vol. 2

(b) that, after a copy of the prospectus was lodged with the Registrar and before allotment or sale thereunder, he, on becoming aware of the untrue statement, withdrew his consent in writing and gave reasonable public notice of the withdrawal and of the reasons therefor; or

(c) that he was competent to make the statement and that he had reasonable ground to believe and did up to the time of the allotment or sale of the shares or debentures believe that the statement was true.

(6) Where-(a) the prospectus contains the name of a person as a director

of the corporation, or as having agreed to become a director, and he has not consented to become a director, or has withdrawn his consent before the issue of the prospectus, and has not authorized or consented to the issue thereof; or

(b) the consent of a person is required under section forty-five to the issue of the prospectus and he either has not given that consent or has withdrawn it before the issue of the prospectus,

the directors of the corporation except any without whose knowledge or consent the prospectus was issued, and any other person who authorized or caused the issue thereof shall be liable to indemnify the person so named or whose consent was so required against all damages costs and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or of the inclusion therein of a statement purporting to be made by him as an expert, or in defending himself against any action or legal proceeding brought against him in respect thereof.

U.K. s.43; N.S.W. s. 140; Vic. s.42; Qld. s.49; S.A. s. 53; W.A. s. 50; Tas. s.41. For what constitutes a prospectus, see ss. 5, 39, 40, 42, 43. As to liability for false statements, see also ss. 47, 375; the Criminal Code,

ss. 438, 439, title CRIMINAL LAW. The provisions of the section alter the law laid down in Derry v. Peek (1889),

14 App. Cas. 337, so far as persons issuing a prospectus on the one hand and persons taking shares or debentures on the other hand are concerned, see per Cozens-Hardy, L.J., in McConllel v. Wright, [1903] 1 Ch. 546, 558.

The absence of election to repudiate shares as against the company does not affect the cause of action under this section, Bundle v. Davies, [1932] N.Z.L.R. 1097.

Promoter-Note the definition in s. 5, ante. One who brings a company into existence by taking an active part in fonning it

or in procuring persons to join it as soon as it is technically formed is a promoter within the meaning of this subsection, Wheal Ellen Gold Mining Co. No Liability v. Read (1908), 7 C.L.R. 34. For further cases on the question who are promoters, see 9 English and Empire Digest (Rp!.) , p. 33.

"Shall be liable to pay compensation"-An action for compensation within this section is not an action for "penalties damages or sums given to the party grieved" within the meaning of s. 22 of the Statute of Frauds and Limitations of 1867 (title FRAUDS), and the two years' limitation imposed by that section does not apply, Thomson v. Clan morris, [1900] 1 Ch. 718.

As to the measure of damages, see Stevens v. Hoare (1904), 20 T.L.R. 407; McConnel v. Wright, [1903] 1 Ch. 546; Potts v. Miller (1940), 64 C.L.R. 282. The measure of damages is the same as in an action for deceit, Clark v. Urquhart, {1930] A.c. 28.

"On the faith of a prospectus"-For the meaning of this expression, see Arnison v. Smith (1889),41 Ch. D. 348; Mac/eay v. Tait, [1906] A.C. 24; Johnston v. Friends Motor Co. Ltd. (1910), 10 C.L.R. 365.

"Any untrue statement"-This includes a misleading statement, Greenwood v. Leather Shod Wheel Co., [1900] I Ch.421.


Belief in the truth of statements founded merely on the statement of a co·director will not exonerate a director under the section, Bundlev. Davies, [1932] N.Z.L.R. 1097.

Uncorroborated statements of a vendor-promoter to a company do not, per se, afford "reasonable grounds" to a director for believing them to be true, Adams v. Thrift, [1915] 2 Ch.21.

A defendant pleading reasonable grounds of belief may be ordered to give particulars of such grounds, Alman v. Oppert, [1901] 2 K.B. 576.

Repudiation of a prospectus by statement of defence does not, semble, amount to "reasonable public notice," Drincqbier v. Wood, [1899] 1 Ch. 393.

It is thought that in addition to the right of indemnity given by the section, there would be a right against the company under the general law of agency. See 1 English and Empire Digest (Rpl.), p.617.

As to an action by one promoter against another under the section, see Gerson v. Simpson, [1903] 2 K.B. 197.

According to the principles of private international law an action will not lie in one state on the legislative provision of another state corresponding to the section in respect to a company incorporated in that other state, Barrow v. De Garis (1926), 29 W.A.L.R. 4.

See generally 6 Halsbury's Laws of England, 3rd ed., p. 184.

47. Criminal liability for statement in prospectus. (1) Where in a prospectus there is any untrue statement or wilful non·disclosure any person who authorized or caused the issue of the prospectus shall be guilty of an offence against this Act unless he proves either that the statement or non-disclosure was immaterial or that he had reasonable ground to believe and did, up to the time of the issue of the prospectus, believe the state· ment was true or the non-disclosure immaterial.

Penalty: Imprisonment for one year or One thousand pounds or both.

(2) A person shall not be deemed to have authorized or caused the issue of a prospectus by reason only of his having given the consent required by this Division to the inclusion therein of a statement purporting to be made by him as an expert.

U.K. s.44; Vic. s.43; Tas. s.42. See also s. 375, post, and the Criminal Code, ss. 438, 439, title CRIMINAL

LAW. "Immaterial" presumably means immaterial in the sense that even if the truth

had been told, a reasonably prudent investor would still have applied for shares, see Macleay v. Tait, [1906] A.C.24.

Division 2-Restrictions on Allotment and Commencement of Business

48. Prohibition of allotment unless minimum subscription received. (1) No allotment shall be made of any shares in a company offered to the public unless-

(a) the minimum SUbscription has been subscribed; and (b) the sum payable on application for the shares so subscribed

has been received by the company, but if a cheque for the sum payable has been received by the company, the sum shall be deemed not to have been received by the company until the cheque is paid by the bank on which it is drawn.

(2) The minimum subscription shall be-(a) calculated on the nominal value of each share, and where the

shares are issued at a premium on the nominal value of, and the amount of the premium payable on, each share; and

94 COMPANIES Vol. 2

(b) reckoned exclusively of any amount payable otherwise than in cash.

(3) The amount payable on application on each share offered to the public except in the case of a no-liability company shall not be less than five per centum of the nominal amount of the share.

(4) If the conditions referred to in paragraph (a) and paragraph (b) of subsection (l) of this section have not been satisfied on the expiration of four months after the first issue of the prospectus, all money received from applicants for shares shall be forthwith repaid to them without interest, and, if any such money is not so repaid within five months after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with interest at the rate of five per centum per annum from the expiration of the period of five months but a director shall not be so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

(5) An allotment made by a company to an applicant in contravention of the provisions of this section or of subsection (1) of section fifty shall be voidable at the option of the applicant which option may be exercised by written notice served on the company within one month after the holding of the statutory meeting of the company and not later, or, in any case where the company is not required to hold a statutory meeting, or where the allotment is made after the holding of the statutory meeting within one month after the date of the allotment, and not later, and the allotment shall be so voidable notwithstanding that the company is in course of being wound up.

(6) Every director of a company who knowingly contravenes or permits or authorizes the contravention of any of the provisions of this section or of subsection (1) of section fifty shall be guilty of an offence against this Act and shall be liable in addition to the penalty or punishment for the offence to compensate the company and the allottee respectively for any loss damages or costs which the company or the allottee has sustained or incurred thereby but no proceedings for the recovery of any such compensation shall be commenced after the expiration of two years from the date of the allotment.

(7) Any condition requiring or binding any applicant for shares to waive compliance with any requirement of this section shall be void.

(8) No company shall allot, and no officer or promoter of a company or a proposed company shall authorize or permit to be allotted, shares or debentures to the public on the basis of a prospectus after the expiration of six months from the issue of the prospectus.

Penalty: Five hundred pounds. (9) Where an allotment of shares or debentures is made on the

basis of a prospectus after the expiration of six months from the issue of the prospectus, such allotment shall not by reason only of that fact be voidable or void.

u.K. ss. 47, 49; N.S.W. ss. 142, 144; Vic. s. 34; Qld. s. 51; S.A. ss. 56, 58; W.A. s. 53; Tas. s. 33.

"Offered to the public"-An offer is not the less made to the public because it is sent to shareholders or debenture-holders as well as to other persons, or because it is not advertised in the public newspapers. But if it is sent solely to the shareholders or debenture-holders of the company, there is no offer to the public (per Farwell, L.J., in Burrows v. Matabele Gold Reefs and Estates Co. Ltd., [1901] 2 Ch. 23, at p.27, virtually overruled on other grounds by Hi/der v. Dexter, [1902] A.c. 474).

COMPANIES ACf OF 1961 ss. 48, 49 95

Shares taken by subscribing the memorandum are not part of the "share capital of a company offered to the public," and, in consequence, a subscriber to the memorandum is not entitled to relief under s. 53 in respect of shares so taken, Wilson v. Hawke's Bay Farmers' Meat Co. Ltd. (19l3), 33 N.Z.L.R.538.

See also Maxwell v. Williams, [1931] N.Z.G.L.R. 214; Sherwell v. Combined Incandescent Mantles Syndicate Ltd. (1907), 23 T.L.R.482; Re South of England Natural Gas and Petroleum Co. Ltd., [1911] 1 Ch. 573; Nash v. Lynde, {1929] A.c. 158, at p. 171.

"For subscription"-The offer of partly paid-up shares in a new company to ~hareholders of an old company is not an "offer of shares to the public for subscription," Booth v. New Afrikander Gold Mining Co. Ltd., [1903] I Ch.295.

The provisions as to repayment apply only before allotment. After allotment the allotment is voidable by the applicant under s. 53 (1), Burton v. Bevan, [1908] 2 Ch. 240.

"Month" ordinarily means calendar month, Acts Interpretation Acts, 1954 to 1962, s. 36, title ACTS OF PARLIAMENT, vol. 1, p. 95.

Notice of avoidance within the month, followed by prompt legal proceedings after the month, is sufficient, Re National Motor Mail-Coach Co. Ltd.; Antis' and McLean's Claims, [1908] 2 Ch. 228. As to the effect of laches in bringing proceedings, see McDonald v. Wairakei Ltd., [1924] N.Z.L.R. 201; Re Concrete Construction (W.A.) Ltd. (1929), 32 W.A.L.R. I; Commonwealth Homes and Investment Co. Ltd. v. Smith (1937), 59 C.L.R. 443; Marshall v. Commonwealth Homes and Investment Co. Ltd., [1941] S.A.S.R. 74.

It is the duty of the directors to allot the shares comprised in the minimum ~ubscription at the same time. Otherwise a breach of the section is committed, Smerdon v. McElwain, [1934] N.Z.L.R. 259.

In the case of an allotment which is subsequent to the first allotment of shares offered to the public for subscription, the Act does not require that the minimum amount payable on application as fixed by the Act shall be paid in cash, Re Producers Real Estate and Finance Co. Ltd., [1932] V.L.R.474.

The directors have no power to allot shares on an application which reserves an option to pay for the shares in goods, Re Queensland Co-operative Fruit Products Ltd., [1931] Q.W.N. 10.

"Statutory meeting" means the meeting required to be held by s. 135, post, and since that meeting cannot be held until the requirements of s. 33, ante, have been complied with, time under this section cannot begin to run before they have been complied with, Shortland Flat G.M. Co. Ltd. v. Kneebone (1912), 31 N.Z.L.R. 1039. But notice of avoidance is effective under this section even though given before the statutory meeting, Re Frank Harris Granite Co. Ltd. (No. I) (1913), 32 N.Z.L.R. 835.

"Knowingly contravenes" means contravenes with knowledge of the facts. A director cannot escape liability by pleading ignorance of the law, but a director does not make himself responsible for an act done at a meeting at which he was not present, and which is complete without further confirmation, by voting at a subsequent meeting for the confirmation of the minutes of the previous meeting, Burton v. Bevan, [1908] 2 Ch.240.

The measure of damages under this section is the difference between the price paid by the applicant for the shares and the real value of the shares at the time of the allotment, Smerdon v. McElwain, [1934] N.Z.L.R. 259.

For the effect of a premature allotment, see Commonwealth Homes and Investment Co. Ltd. v. Smith (1937), 59 C.L.R. 443; Elder's Trustee & Executor Co. Ltd. v. Commonwealth Homes and Investment Co. Ltd. (1942), 65 C.L.R.603; [1941] A.L.R. 302; Marshall v. Commonwealth Homes and Investment Co. Ltd., [1941] S.A.S.R. 74.

For forms of notice of avoidance, notice of allotment, see Australian Encyclopredia of Forms and Precedents, title COMPANIES.

49. Application moneys to be he,ld in trust until allotment. (1) All application and other moneys paid prior to allotment by any applicant on account of shares or debentures offered to the public shall until the allotment of such shares or debentures be held by the company. or in the case of an intended company by the persons named in the prospectus as proposed directors and by the promoters. upon trust for the applicant.

96 COMPANIES Vol. 2

but there shall be no obligation or duty on any bank or third person with whom any such moneys have been deposited to inquire into or see to the proper application of such moneys so long as such bank or person acts in good faith.

(2) If default is made in complying with this section every officer of the company in default or, in the case of an intended company, every person named in the prospectus as a proposed director and every promoter who knowingly and wilfully authorizes or permits the default shall be guilty of an offence against this Act.

Penalty: Five hundred pounds. N.S.W. s. 345; Vic. s. 35; S.A. s. 55; W.A. s. 52; Tas. s. 34.

50. Restriction on allotment in certain cases. (1) A public company having a share capital which does not issue a prospectus on or with reference to its formation shall not allot any of its shares or debentures unless at least three days before the first allotment of either shares or debentures there has been lodged with the Registrar a statement in lieu of prospectus which complies with the requirements of this Act.


Penalty: Five hundred pounds. U.K. s.48; N.S.W. s. 143; Vic. s. 32; Qld. s. 52; S.A. s.57; W.A. s. 54; Tas. s. 3l. An allotment made in contravention of this section is void, Re Blair Open

Hearth Furnace Co. Ltd., [1913] 1 Ch. 390; Re Jubilee Cotloll Mills Ltd., [1922] I Ch. 100; [1923] 1 Ch. 1; Re James Burton & Son Ltd., [1927] 2 Ch. 132.

For forms of statements in lieu of prospectuses, see Australian Encyclopredia of Forms and Precedents, title COMPANIES, and Sixth Schedule, post.

51. Requirements as to statements in lieu of prospectus. Sixth Schedule. (1) To comply with the requirements of this Act a statement in lieu of prospectus lodged by or on behalf of a company-

(a) shall be signed by every person who is named therein as a director or a proposed director of the company or by his agent authorized in writing;

(b) shaIl, subject to the provisions contained in Part III of the Sixth Schedule, be in the form of and state the matters specified in Part I of that Schedule and set out the reports specified in Part II of that Schedule; and

(c) shaIl, where the persons making any report specified in Part II of that Schedule have made therein or have, without giving the reasons, indicated therein any such adjustments as are mentioned in paragraph 5 of that Schedule, have endorsed thereon or attached thereto a written statement signed by those persons setting out the adjustments and giving the reasons therefor.

(2) The Registrar shall not accept for registration any statement in lieu of prospectus unless it appears to him to comply with the requirements of this Act.

(3) Where in any statement in lieu of prospectus, there is any untrue statement or wilful non-disclosure any director who signed the statement in lieu of prospectus shall be guilty of an offence against this Act unless


he proves either that the untrue statement or non-disclosure was immaterial or that he had reasonable ground to believe and d1d, up to the time of the delivery for registration of the statement in lieu of prospectus, believe that the untrue statement was true or the non-disclosure immaterial.

Penalty: Imprisonment for one year or Five hundred pounds or both.

U.K. s. 48; Vic. s.44; Qld. s. 52; Tas. s. 43. See notes to s. 50, ante.

52. (1) Restrictions on commencement of business without issue of prospectus or statement in lieu. Where a company having a share capital has issued a prospectus inviting the public to subscribe for its shares the company shall not commence any business or exercise any borrowing power-

(a) if any money is or may become liable to be repaid to applicants for any shares or debentures offered for public subscription by reason of any failure to apply for or obtain permission for listing for quotation on any Stock Exchange; or

(b) unless-(i) shares held subject to the payment of the whole amount

thereof in cash have been allotted to an amount not less in the whole than the minimum subscription;

(ii) every director has paid to the company on each of the shares taken or contracted to be taken by him, and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares offered for public subscription; and

(iii) there has been lodged with the Registrar a statutory declaration by the secretary or one of the directors of the company in the prescribed form verifying that the above conditions have been complied with.

(2) Where a public company having a share capital has not issued a prospectus inviting the public to subscribe for its shares the company shall not commence any business or exercise any borrowing power unless-

(a) there has been lodged with the Registrar a statement in lieu of prospectus which complies with the provisions of this Act;

(b) every director of the company has paid to the company on each of the shares taken or contracted to be taken by him, and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares payable in cash; and

(c) there has been lodged with the Registrar a statutory declaration by the secretary or one of the directors of the company in the prescribed form verifying that paragraph (b) of this subsection has been complied with.

(3) The Registrar shall on the lodging of the statutory declaration in accordance with this section certify that the company is entitled to commence business and to exercise its borrowing powers and that certificate shall be conclusive evidence thereof.

4

98 COMPANIES Vol. 2

(4) Any contract made by a company before the date at which it is entitled to commence business shall be provisional only and shall not be binding on the company until that date, and on that date it shall become binding.

(5) Where shares and debentures are offered simultaneously by a company for subscription nothing in this section shall prevent the receipt by the company of any money payable on application for the debentures.

(6) Penalty. If any company commences business or exercises borrowing powers in contravention of this section every person who is responsible for the contravention shall be guilty of an offence against this Act.

Penalty: Two hundred pounds. Default penalty: Fifty pounds. u.K. s. 109; N.S.W. s.77; Vic. s. 33; Qld. s. 106; S.A. s. 118; W.A. s. 102;

Tas. s. 32. The minimum subscription is defined by s. 48, ante. Delivery of a statement in lieu of a prospectus is provided for by ss. 50, 51,

ante. For penalty for wilfully false statements in documents required for purposes of

this section, see s. 375. If a company does not commence business within a year after incorporation

it may be wound up by the Court, s. 222 (1) (c). Apart from subsection (1) (b), directors cannot properly differentiate in their

own favour between themselves and members of the public applying for shares, Alexander v. Automatic Telephone Co., [1900] 2 Ch. 56.

As to the certificate of the Registrar being conclusive evidence of the facts therein stated, see Re Blair Open Hearth Furnace Co. Ltd., [1914] 1 Ch. 390; Lyell Hydraulic Sluicing Co. Ltd. v. Harcourt (1903), 23 N.Z.L.R. 168.

As to the meaning of "provisional," see Re "Otto" Electrical Manufacturing Co .. [1906] 2 Ch. 390.

An action for breach of warranty of authority may be maintainable against directors who have entered into contracts on behalf of the company not binding for want of compliance with the provisions of this section, see Brownett v. Newton (1941), 64 C.L.R. 439.

53. Restriction on varying contracts referred to in prospectus, etc. A company shall not before the statutory meeting vary the terms of a contract referred to in the prospectus or statement in lieu of prospectus, unless the variation is made subject to the approval of the statutory meeting.

u.K. s.42; N.S.W. s. 139; Vic. s.45; Qld. s.48; S.A. s. 52; W.A. s.49; Tas. s.44. As to the statutory meeting, see s. 135, post. At the meeting, no resolution may

be passed of which notice has not been given in accordance with the articles, s. 135, post.

A contract made by a company before it is entitled to commence business is provisional only until it is so entitled, s. 52, ante.

As to approval of variation, see Rc Australian United Insurance Co. Ltd .. [1924] V.L.R.146.

Division 3-Shares

54. Return as to allotments. (1) Where a company makes any allotment of its shares, or any of its shares are deemed to have been allotted under subsection (6) of this section, the company shall within one month thereafter lodge with the Registrar a return of the allotments stating-

(a) the number and nominal amounts of the shares comprised in the allotment;


(b) the amount (if any) paid. deemed to be paid. or due and payable on the allotment of each share;

(c) where the capital of the company is divided into shares of different classes the class of shares to which each share comprised in the allotment belongs; and

(d) subject to subsection (2) of this section the full name or the surname and at least one Christian or other name and other initials and the address of each of the allottees and the number and class of shares allotted to him.

(2) The particulars mentioned in paragraph (d) of subsection (1) of this section need not be included in the return-

(a) where the shares have been allotted for cash by a no-liability company; or

(b) where a company to which the provisions of subsection (1) of section one hundred and sixty apply has allotted shares-

(i) for cash; or (ii) for a consideration other than cash and the number of per

sons to whom the shares have been allotted exceeds five hundred.

(3) Where shares are allotted or deemed to have been allotted as fully or partly paid up otherwise than in cash and the allotment is made pursuant to a contract in writing the company shall lodge with the return the contract evidencing the entitlement of the allottee or a copy of any such contract certified as prescribed.

( 4) If a certified copy of a contract is lodged the original contract duly stamped shall be produced at the same time to the Registrar.

(5) Where shares are allotted or are deemed to have been allotted as fully or partly paid up otherwise than in cash and the allotment is made-

(a) pursuant to a contract not reduced to writing; (b) pursuant to a provision in the memorandum or articles; or ( c) in satisfaction of a dividend declared in favour of. but not

payable in cash to the shareholders. or where an account Of

reserve has been applied directly in paying up shares already issued.

the company shall lodge with the return a statement containing such particulars as are prescribed.

(6) For the purposes of this section any shares issued without formal allotment to subscribers to the memorandum shall be deemed to have been allotted to such subscribers on the date of the incorporation of the company.

(7) In a case to which paragraph (a) of subsection (5) of this section relates. the statement containing the prescribed particulars shall be stamped with the same stamp duty as would have been payable if the contract had been reduced to writing and the statement containing those particulars shall be deemed to be an instrument within the meaning of "The Stamp Acts. 1894 to 1961." and the Registrar may. as a condition of receiving the return require the duty payable on the statement to be adjudicated under the provisions of those Acts.

100 COMPANIES Vol. 2

(8) If default is made in complying with this section every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Two hundred pounds. Default penalty: Fifty pounds.

U.K. s.52; N.S.W. s. 145; Vic. s.46; Qld. s.54; S.A. s.59; W.A. s. 56; Tas. s.45. Act referred to:

Stamp Acts, 1894 to 1962, title STAMP DUTIES. . "Month" means calendar month (Acts Interpretation Acts, 1954 to 1962 s. 35,

title ACTS OF PARLIAMENT). ' Subscribers to the memorandum are deemed to have agreed to become members,

s. 16. ante. For penalty for false and misleading statements, see s. 375, post.

. Where the memorandum or articles so provide, shares may be issued as fully paid up, Re Normanby Copper Mining Co. Ltd. (1876), 4 S.C.R. 223.

As to return of allotments, see Re A. E. Higgins Ply. Ltd. (In Liquidation), [1930] V.L.R. 21.

Contract-Generally the contract for sale or in respect of services will constitute the title of the allottee, in which case that contract alone will be delivered. But sometimes the vendor or other person entitled is under an obligation to secure the allotment to be made to other persons, in which case the contract constituting the title of such persons must be delivered as well. It seems that any contract must be signed by all parties to satisfy this section, Re Ncw Eberhardt Co., Ex parte Menzies (1889), 43 Ch. D. 118.

As to what constitutes a contract for the purpose of the section, see Smith v. Brown, [1896] A.c. 614 (deed of sale and resolution); Re Hidden Star Gold Milling Co. (1888), 10 N.S.W.L.R. (Eq.) 35 (contract not signed by company); Re PhillipStephan Photo., ctc., Co. Ltd. (1890), 12 N.S.W.L.R. (Eq.) II (statements in memorandum of association); Re Lingham Timber Co. Ltd. (1899), 21 N.S.W.L.R. (Eq.) 52 (contract incomplete); Re The Lode Hill Till Mining Co. Ltd. (1893), 3 N.S.W.B.C. 68 (w hether contract complete).

"Consideration" means a consideration in accordance with the general principles of the law of contract. As to what is valuable consideration for a contract to take shares, see Re Mount Clara Copper Milling Co. Ltd. (1875), 4 Q.S.c.R. 112. As to what is a sufficient statement of the nature of the consideration, see Re Frost (S.) and Co. Ltd., [1899] 2 Ch.207; Re Robert Watson & Co. Ltd., [1899] 2 Ch.509.

Payment in cash-Any bona fide transaction between a company and a shareholder which in fact amounts to a payment, is a payment in cash, see Re Pell' Alit .'Ii/vcr Lead Millillg Co., Fothergill's Case (1873), 8 Ch. App. 270; Re HarmollY and MOlltague Till and Copper Minillg Co., Spargo's Case (1873), 8 Ch. App. 407; Larocque v. Beauchemin. [1897] A.c. 358; Randall v. Santa Claus Gold Mining Co. (Liquidator) (1906), 8 W.A.L.R. 36.

Where the member agrees with the company that he will renounce the benefit of a prior contract with the company in consideration of the company agreeing to credit a sum of money towards making certain shares already held by him fully paid up, payment is thereby made in cash, Re Paraguassu Steam Tramway Co., Adamson's Case (1874), L.R. 18 Eq. 670. See also Re Regent United Service Stores, Ex parte Bentley (1870), 12 Ch. D. 850.

Where there is a hona fide existing liability to pay cash, this does not cease to be payment in cash for the purposes of this section because, on the basis of this money value, the company and the shareholder agree that payment for a consideration passing from the shareholder to the company shall be made by crediting the shareholder with the amount due on his shares, Re Cameron Shoe Co. Ltd., [1928] S.A.S.R. 408.

Shares are allotted for payment in cash where the shareholders have paid cash to the promoter of a company before its incorporation in consideration of a promise by the promoter to have issued to them fully paid shares, and the company subsequently adopts the promoter's acceptance of these moneys, Re Frank Harris Granite Co. Ltd., [1916] N.Z.G.L.R. 235.

As to what constitutes payment in cash, see further Goldsmith v. Colonial Finance, etc., Ltd. (1908), 8 C.L.R. 241; Mainka v. Custodian of Expropriated Property (1924), 34 C.L.R.297; Re Goodman Bros., [1927] S.A.S.R. 571; Randall


v. Santa Claus Gold Mining Co. Ltd. (1906),8 W.A.L.R. 36; R. Harding & Co. Ltd. (In Liq.) v. Hamilton, [1929] N.Z.L.R. 338; J. C. Williamson's Tivoli Vaudeville Pty. Ltd. v. Federal Commissioner of Taxation (1929),42 C.L.R. 452; 9 English and Empire Digest (Rpl.), p.313.

Set-off and counter-payment-When the liability upon shares and the liability upon a cross demand against the company of a sum certain immediately payable are mutually extinguished by an agreed set-off, this amounts to payment in cash. See North Sydney, etc., Co. Ltd. v. Higgins, [1899] A.C.263; Commissioner of Stamp Duties v. Perpetual Trustees Co. Ltd. (\929), 43 C.L.R. 247. When there are counterpayments in cash, the question whether there is a merely illusory payment in cash turns on whether the counter-payment restores the first payment to the payer Or is an expenditure by the company in the discharge of its liabilities or for some other legitimate purpose, Joseph v. Campbell (1933), 50 C.L.R. 317. See also Re Paraguassu Steam Tramroad Co., Ferrao's Case (1874), 9 Ch. App. 355.

Transfer of fully paid-up shares-If a company issues share certificates which state that the person to whom they are issued is the owner of certain fully paid-up shares, it and its liquidator on a winding up will be estopped as against persons who, on the faith of such representation, and without notice to the contrary, have taken transfers of the shares as fully paid up, from showing that in fact the shares were not fully paid up, Re Darling Downs Brewery Ltd. (1899), 9 Q.L.J. 225; Re Victoria Silicate Brick Co., Ex parte Martin, [1912] V.L.R. 442; [1913] V.L.R. 71. See also Re Household Supplies Pty. Ltd., Ex parte McKay (1924), 45 A.L.T. 96.

Default-"Default" has been held to imply wilful continued neglect, Dorte v. South African Super-Aeration Ltd. (1904), 20 T.L.R. 425.

Every officer-This includes a liquidator in a voluntary winding-up, Re X. Co. Ltd., [1907] 2 Ch. 92.

Extension of time--The Act does not provide (as did the repealed Act, s.54) for recourse to the Court for relief from the consequences of an accidental or inadvertent failure to comply with the provisions of this section. Whether the power is to be gleaned from either or both of ss. 365, 366, post, has not yet, to the knowledge of the editors, been judicially decided. However, the following notes are included.

Semble, the Court should prima facie exercise its discretion to grant relief by extension of time where the case of omission to file a contract is shown to fall within the terms of the relieving provision, Re United Carrying Co. Ltd. (1924), 24 S.R.(N.S.W.) 413. See also Commissioner of Stamps v. Parbury Estates Ltd. (1913), 16 C.L.R. 521.

Extension of time has been granted over three years after the time when a contract should have been registered, Re Anderson & Munro Ltd., [1924] S.c. 222.

For a form of order, see Re Central Ice Works Pty. Ltd., [1934] Q.W.N.4. Forms-For forms of return of allotment, forms constituting the title of

nominees to the allotment of shares, agreements for sale in consideration of an allotment, forms of particulars of an unwritten contract relating to shares paid otherwise than in cash, see Australian Encyclopredia of Forms and Precedents, title COMPANIES.

55. Differences in calls and payments, etc. A company if so authorized by its articles may-

(a) make arrangements on the issue of shares for varying the amounts and times of payment of calls as between shareholders;

(b) accept from any member the whole or a part of the amount remaining unpaid on any shares although no part of that amount has been called up; and

(c) except in the case of a no-liability company pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.

U.K. s. 59; N.S.W. s. 151; Vic. s.47; Qld. s.60; S.A. s. 65; W.A. s.62: Tas. s.46. See Fourth Schedule, Table A, arts. 13, 18, 19, post; Table 'B, art. 9, post. As to who is a member, see s. 16, ante. As to share-holding qualifications of directors, see s. 116, post. Prima facie there is an implied condition of equality between shareholders, and

the powers given by the articles should not be used against some of the shareholders


because they have been dilatory in paying previous calls and caused the company trouble and expense, Galloway v. Halle Concerts Society, [1915] 2 Ch. 233; [1914-15] All E.R. Rep. 543.

Nor can the directors so use their powers as to obtain a benefit for themselves at the expense of other shareholders, Alexander v. Automatic Telephone Co., {1900] 2 Ch. 56.

Payments made in advance by shareholders in respect of uncalled capital must be treated as advanced pro tanto in satisfaction of future calls, Liquidators of South Canterbury Building Society v. Stumbles (1893), 12 N.Z.L.R. 58; Re Smith alld Landreth Ltd., Ex parte Landreth, [1961] N.Z.L.R.572.

Where directors unlawfully agreed to pay a "dividend" at a specified rate upon moneys paid but not called up on shares it was held that the word "dividend" was not employed per incuriam so as to constitute a contract to pay interest, Re Federal Deposit Bank, [1937] St. R. Qd. 282.

It is a question of construction whether the memorandum or articles of association provide that arrears of dividend on cumulative preference shares shall be payable in a winding-up, Re F. de long & Co. Ltd., [1946] 1 All E.R. 556; [1946] Ch.211; 62 T.L.R. 312.

56. Reserved liability. A limited company may by special resolution determine that any portion of its share capital which has not been already called up shall not be capable of being called up except in the event and for the purposes of the company being wound up, and thereupon that portion of its share capital shall not be capable of being called up except in the event and for the purposes of the company being wound up, but no such resolution shall prejudice the rights of any person acquired before the passing of the resolution.

U.K. s.60; N.S.W. s. 152; Vic. s.47 (3); Qld. s. 61: S.A. s.66; W.A. s. 63; Tas. s.46.

As to special resolutions, see s. 144. Shall not be capable of being called up-A company may wish, for its own

reasons, to preserve a fund intact to be available in the event of a winding-up for payment of unsecured creditors. A provision to that effect in its articles may not be sufficient to achieve that end, for the articles might be amended. see Mallesoll v. National Insurance and Guarantee Corporation, [1894] 1 Ch. 200. This section enables capital to be so reserved. However, it is important to note the statutory procedure, viz. of passing a special resolution, for the failUle to do so in Malleson's Case, supra, brought to nothing the attempt to reserve a portion of the capital, notwithstanding the articles designed for the purpose.

Normally, a company with the appropriate borrowing power may charge its uncalled capital, Arnstead v. Land Company of Australasia (1893), 14 L.R. (N.S.W.) (E.) 330. But a special resolution passed under this section operates to raise a statutory disability to call up capital except in the event of a winding-up, and the uncalled capital so affected may not be charged, see Re Mayfair Property Co.; Bartlett v. Mayfair Property Co., [1898] 2 Ch. 28.

57. Share warrants. (1) A company shall not issue any share warrant.

(2) The bearer of a share warrant issued before the commencement of this Act shall be entitled, on surrendering it for cancellation, to have his name entered as a member in the register of members.

(3) The company shall be responsible for any loss incurred by any person by reason of the company entering in the register the name of a bearer of a share warrant issued before the commencement of this Act in respect of the shares therein specified without the warrant being surrendered and cancelled.

(4) Subject to this Act, the bearer of a share warrant issued before the commencement of this Act may, if the articles of the company so


provide, be deemed to be a member of the company within the m~aning of this Act either to the full extent or for any purpose defined m the articles.

N.S.W. s.80; Vic. s.47 (4); Tas. s.46. A share warrant is a negotiable instrument, Webb, Hale & Co. v. Alexandria

Waler Co. Ltd. (1905),21 T.L.R.572. A dividend warrant for payment of dividends upon three and a half per cent.

stocks is not a negotiable instrument assignable by mere delivery, Partridge v. Bank of England (1846), 9 Q.B. 396.

58. Power to pay certain commissions and prohibition of payment of all other commissions, discounts, etc. (1) A company may pay a commission to any person in consideration of his subscribing or agreeing to subscribe whether absolutely or conditionally for any shares, or procuring or agree· ing to procure subscriptions, whether absolute or conditional, for any shares in the company, if-

(a) the payment is authorized by the articles;

(b) the commission does not exceed ten per centum of the price at which the shares are issued or the amount or rate authorized by the articles, whichever is the less;

(c) the amount or rate of the commission is-(i) in the case of shares offered to the public for subscription,

disclosed in the prospectus; and (ii) in the case of shares not so offered, disclosed in the state·

ment in lieu of prospectus, or in a statement in the prescribed form signed in like manner as a statement in lieu of pros· pectus and lodged before the payment of the commission with the Registrar, and, where a circular or notice not being a prospectus inviting subscription for the shares is issued, also disclosed in that circular or notice; and

(d) the number of shares which persons have agreed for a com· mission to subscribe absolutely is disclosed in like manner.

(2) Except as provided in subsection (1) of this section, no com· pany shall apply any of its shares or capital money either directly or indirectly in payment of any commission discount or allowance to any person in consideration of his subscribing or agreeing to subscribe whether absolutely or conditionally for any shares or procuring or agreeing to procure subscriptions whether absolute or conditional for any shares in the company, whether the shares or money are so applied by being added to the purchase money of any property acquired by the company or to the contract price of any work to be executed for the company, or the money is paid out of the nominal purchase money or contract price or otherwise.

(3) Nothing in this section shall affect the power of any company to pay such brokerage (in addition to or in lieu of the commission referred to in subsection (1) of this section) as it has heretofore been lawful for a company to pay but the amount or rate per centum of the brokerage paid or agreed to be paid by the company shall (in the case of shares offered to the public for subscription) be disclosed in the prospectus or (in the case of shares not offered to the public for subscription) be dis· closed in the statement in lieu of prospectus or in a statement in the prescribed form signed in like manner as a statement in lieu of prospectus


and lodged before the payment of the brokerage with the Registrar, and, where a circular or notice not being a prospectus inviting subscription for the shares is issued, also disclosed in that circular or notice.

(4) A vendor to, promoter of, or other person who receives payment in money or shares from, a company shall have power to apply any part of the money or shares so received in payment of any commission the payment of which if made directly by the company would have been lawful under this section.

(5) If default is made in complying with the provisions of this section relating to the lodging with the Registrar of the statement in the prescribed form, the company and every officer of the company who is in default shall be guilty of an offence against this Act.


u.K. s.53; N.S.W. s. 146; Vic. s.48; Qld. s. 55; S.A. s.60; W.A. s. 57; Tas. s.47. In relation to prospectuses, see Fifth Schedule, Part I, d. 12, post. In relation to statements in lieu of prospectus, see Sixth Schedule, post. For the permitted duration of an option to take up shares, see s. 68, post. Provisions of artides-A contract for a rate of commission higher than that

allowed by the articles is not wholly ultra vires, but is available to the extent allowed by the articles, Maxwell v. Williams and Etan lee Cream Co. Ltd., [1931] N.Z.G.L.R. 214. It appears that if the articles authorize payment of commission at a rate per cent., the commission must be calculated in that way, and the company cannot agree to payment of a fixed sum. See Booth v. New Afrikander Gold Mining Co. Ltd., [1903] I Ch.295.

Gifts of capital-Directors have no power to make gifts out of the company's capital in the guise of commission, Wairakei Ltd. v. Cleave, [1925] N.z.L.R. 624.

Promoter selling his property to company-A promoter stands in a fiduciary relationship to the company, Erlanger v. New Sombrero Phosphate Co. (1878), 3 App. Cas. 1218. In the absence of approval by an independent board of directors after full disclosure, sales by a promoter of his property to the new company are in the same position as any other sales by a trustee of his property to a person towards whom he stands in a fiduciary relation-they are voidable at the mere option of the purchaser, Traey v. Mandalay Pty. Ltd. (1953), 88 c.L.R. 215.

Prospectus-As to amount or rate of commission in the case of shares offered for public subscription, see Re Australian United Insurance Co. Ltd., [1924] V.L.R. 146.

Option at par-An option to take further shares at par does not constitute a commission, discount, or allowance, where, at the time the option is exercised, the shares are at a premium in the market, Hilder v. Dexter, [1902] A,C. 474.

Advice of the Court-The Court refused to determine the question whether issue of shares at a discount was valid where it appeared that the parties were not genuine litigants but desired merely to obtain the advice of the Court, Hatfield v. Cummins & Campbell Ltd., [1912] St. R. Qd. 85; [1912] Q.W.N.18.

Statement in lieu of prospectus-The statement in lieu of prospectus must be filed before allotment, otherwise the brokerage is not payable, Andreae v. Zinc l'vfines of Great Britain Ltd., [1918] 2 K.B.454,

Brokerage-As to what is brokerage, see Andreae v. Zinc Mines of Great Britain Ltd., supra; Metropolitan Coal Consumers Association v, Scrimgeour, 0895] 2 Q.B. 604.

Issue of shares at discount-It is possible to issue shares at a discount only in accordance with the provisions of s. 59, post. Attempts to issue shares at a discount, under the colour of paying a commission, are not permitted, Re Brooks Steam Motors Ltd., [1934] D.L.R. 648; Keatinge v. Paringa Consolidated Mines Ltd. (1902), 18 T.L.R. 266; [1902] W.N. 15.

Private companies-The provisions of this section apply as well to private companies as to public companies, Dominion of Canada General Trading and Investment Syndicate v. Brigstocke, [1911] 2 K.B. 648.

See generally 6 Halsbury's Laws of England, 3rd ed., pp. 146-149.


59. Power to issue shares at a discount (1) Subject to this section a company may issue shares at a discount of a class already issued if-

(a) the issue of the shares at a discount is authorized by resolution passed in general meeting of the company, and is confirmed by order of the Court;

(b) the resolution specifies the maximum rate of discount at which the shares are to be issued;

(c) at the date of the issue not less than one year has elapsed since the date on which the company was entitled to commence business; and

(d) the shares are issued within one month after the date on which the issue is confirmed by order of the Court or within such extended time as the Court allows.

(2) The Court, if having regard to all the circumstances of the case it thinks proper to do so, may make an order confirming the issue on such terms and conditions as it thinks fit.

(3) Every prospectus relating to the issue of the shares shall contain particulars of the discount allowed or of so much of that discount as has not been written off at the date of the issue of the prospectus.

(4) Notwithstanding any provision of its articles, a company shall not issue at a discount shares of any class unless it first offers the shares to every holder of shares of that class in the company proportionately to the number of those shares held by him.

(5) Every such offer shall be made by notice specifying the number of shares to which the member is entitled and limiting a time not being less than twenty-one days within which the offer may be accepted.

(6) If any such offer is not accepted within the time limited by the notice the shares may be issued on terms not more favourable than those offered to the shareholders.

(7) If default is made in complying with this section, the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. (8) This section shall not affect the right of a no-liability company

to issue shares at a discount. U.K. s. 57; N.S.W. s. 150; Vic. s.49; Qld. s.59; S.A. s.64; W.A. s. 61; Tas. s.48. As to circumstances in which companies are entitled to pay commissions and

brokerage on shares, see s. 58, ante. For the date on which a company is entitled to commence business, see s. 52, ante.

The annual return of the company must show particulars of the discount on shares issued, see s. 158, post, and Eighth Schedule, Part I, d. 3 (h), post.

As to default penalties, see s. 380, post. For an example of the sanction of the Court to an issue of shares at a discount

which had been so issued in error, see Re Derham and Allen Ltd., [1946] Ch. 31. See also Re Crawford, Ex parte Autoterms Ltd. (1943), 13 A.B.C. 188.

60. Issue of shares at premium. (1) Where a company issues shares for which a premium is received by the company, whether in cash or in the form of other valuable consideration, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account called the "share premium account", and the provisions of this Act relating to the reduction of the share capital of a company shall subject to this section apply as if the share premium account were paid up share capital of the company.


(2) The share premium account may be applied-(a) in paying up un-issued shares to be issued to members of the

company as fully paid bonus shares; (b) in paying up in whole or in part the balance unpaid on shares

previously issued to members of the company; (c) in the payment of dividends if such dividends are satisfied by

the issue of shares to members of the company; ( d ) in writing off-

(i) the preliminary expenses of the company; or (ii) the expenses of, or the commission or brokerage paid or

discount allowed on, any issue of shares or debentures of the company;

(e) in providing for the premium payable on redemption of debentures or redeemable preference shares; or

(f) in the case of a company that carries on life insurance business in Australia by appropriation or transfer to any statutory fund established and maintained pursuant to the provisions of the law of the Commonwealth relating to life insurance.

(3) Where a company has before the commencement of this Act issued any shares at a premium, this section shall apply as if the shares had been issued after the commencement of this Act but any part of the premiums which has been so applied that it does not at the commencement of this Act form an identifiable part of the company's reserves within the meaning of the Ninth Schedule shall be disregarded in determining the sum to be included in the share premium account.

U.K. s. 56; Vic. s. 50; Tas. s. 49. As to the statutory articles in relation to capitalization, see Table A, arts. 106,

107; Table B, arts. 88, 89, post. Before the enactment of legislation in the form of this section, there was no

statutory prohibition preventing the distribution of share premiums as dividend, Drown v. Gaumont-British Picture Corporation Ltd., [1937] Ch.402; [1937] 2 All E.R.609.

A company is not obliged to issue shares above par because they are saleable at a premium in the open market, McCann v. Myall Ltd., [1953] S.A.S.R.233.

"In cash or in the form of other valuable consideration"-This phraseology appears to have been employed in consequence of the decision in Henry Head & Co. Ltd. v. Ropner Holdings Ltd., [1951] 2 All E.R. 994; [1952] Ch.124.

Where the reduction of share capital, including the writing down of part or the writing off of the whole, of the share premium account is confirmed by the court, the minute approved by the court should not refer to the writing down or the writing off of the share premium account, Re Paringa Mining and Exploration Co. Ltd., [1957] 3 All E.R. 424.

Where a return of share premium account is made to shareholders by recourse to the provisions of the Act relating to reduction of capital, this section takes the share premium account out of the category of divisible profit and prevents its distribution by way of dividend; and where any part of the share premium account is distributed among shareholders, the transaction is to be treated as if the company is reducing its capital by paying paid-up share capital, so that moneys thus distributed fall into the hands of the recipient as a capital asset, Re Duff's Settlement Trusts; National Provincial Bank Ltd. v. Gregson, [1951] Ch.923; [1951] 2 All E.R.534.

61. Redeemable preference shares. (1) Subject to this section a company having a share capital may, if so authorized by its articles, issue preference shares which are, or at the option of the company are to be liable to be redeemed and the redemption shall be effected only on such terms and in such manner as is provided by the articles.


(2) The redemption shall not be taken as reducing the amount of authorized share capital of the company.

(3) The shares shall not be redeemed-(a) except out of profits which would otherwise be available for

dividend. or out of the proceeds of a fresh issue of shares made for the purposes of the redemption; and

(b) unless they are fully paid up. (4) The premium. if any. payable on redemption shall be provided

for out of profits or the share premium account before the shares are redeemed.

(5) Where any such shares are redeemed otherwise than out of the proceeds of a fresh issue. there shall out of profits which would otherwise have been available for dividend be transferred to a reserve called the "capital redemption reserve" a sum equal to the nominal amount of the shares redeemed. and the provisions of this Act relating to the reduction of the share capital of a company shall. except as provided in this section. apply as if the capital redemption reserve were paid up share capital of the company.

(6) Where in pursuance of this section a company has redeemed or is about to redeem any preference shares. it may issue shares up to the nominal amount of the shares redeemed or to be redeemed as if those shares had never been issued. and accordingly the share capital of the company shall not for the purposes of any fee under this Act be deemed to be increased by such issue but where new shares are issued before the redemption of the old shares, the new shares shall not, so far as relates to any fee under this Act, be deemed to have been issued in pursuance of this subsection unless the old shares have been redeemed within one month after the issue of the new shares.

(7) The capital redemption reserve may be applied in paying up un-issued shares of the company to be issued to members of the company as fully paid bonus shares.

(8) If a company redeems any redeemable preference shares it shall within fourteen days after so doing give notice thereof to the Registrar specifying the shares redeemed.

u.K. s.58; N.S.W. s. 149, 154; Vic. s. 51; Qld. s.58; S.A. s.63; W.A. s.60; Tas. s.50.

The Supreme Court has certain jurisdiction to modify the rights of holders of preference shares, under the Financial Emergency Act of 1931, s. 17D, title COMMONWEALTH AND STATES.

For references in Table A to redeemable preference shares, see Fourth Schedule, art. 3, post.

As to capitalization, see Fourth Schedule, Table A, arts. 106, 107; Table B, arts. 88, 89, post.

As to disclosure in the balance sheet of capital consisting of redeemable prefer-ence shares, see Ninth Schedule, c!. 2 (h). post.

As to the funds which are available for dividend, see s. 376, post. As to perpetual debentures, see s. 72, post. In the absence of an enabling statutory provision such as this section, a company

could not issue redeemable shares, because to attempt to do so would be to contravene a fundamental principle of company law, namely, that a company cannot purchase its own shares, Trevor v. Whitworth (1887), 12 App. Cas. 409.

This section authorises the issue of redeemable preference shares, but does not authorise the conversion into redeemable preference shares of shares already issued Re St. James' Court Estate Ltd., [1944] Ch.6. '

As to the application of the English capital reduction provisions to a capital redemption reserve, see Buckley on the Companies Acts, 13th ed., at pp. 145, 146.

See also s. 64, post.


62. (1) Power of company to alter its share capital. A company if so authorized by its articles may in general meeting alter the conditions of its memorandum in anyone or more of the following ways:-

(a) increase its share capital by the creation of new shares of such amount as it thinks expedient;

(b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;

(c) convert all or any of its paid up shares into stock and reconvert that stock into paid up shares of any denomination;

(d) subdivide its shares or any of them into shares of smaller amount than is fixed by the memorandum, so however that in the subdivision the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;

(e) cancel shares which at the date of the passing of the resolution in that behalf have not been taken or agreed to be taken by any person or which have been forfeited and diminish the amount of its share capital by the amount of the shares so . cancelled.

(2) Cancellations. A cancellation of shares under this section shall not be deemed to be a reduction of share capital within the meaning of this Act.

(3) As to share capital of unlimited company on re-registration. An unlimited company having a share capital may by any resolution passed for the purposes of subsection (1) of section twenty-five-

(a) increase the nominal amount of its share capital by increasing the nominal amount of each of its shares, but subject to the condition that no part of the increased capital shall be capable of being called up except in the event and for the purposes of the company being wound up; and

(b) in addition or alternatively, provide that a specified portion of its uncalled share capital shall not be capable of being called up except in the event and for the purposes of the company being wound up.

(4) Notice of increase of share capital. Where a company has increased its share capital beyond the registered capital, it shall within fourteen days after the passing of the resolution authorizing the increase lodge with the Registrar notice of the increase.

(5) If any company fails to comply with the provisions of subsection (4) of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. u.K. ss. 61, 64; N.S.W. ss. 153, 155; Vic. s. 52; Qld. ss.62, 64, 65; S.A. ss.67,

69, 70; W.A. ss. 64, 66; Tas. s. 51. For relevant articles, see Fourth Schedule, Tables A and B, post Reduction of capital is dealt with by s. 64, post. For validation by the court of the invalid creation, issue or allotment of shares,

see s. 63, post. Articles-The articles must be followed strictly, Gas Meter Co. Ltd. v. Diaphragm

alld Gelleral Leather Co. Ltd. (1925), 41 T.L.R. 342.


Where a company is not "so authorized by its articles," the articles must first be altered as required to confer the authority before the power can be exercised, Imperial Hydropathic Hotel Co.; Blackpool v. Hampson (1882), 23 Ch. D. 1; Boschoek Pty. Co. v. Fuke, [1906] 1 Ch. 148; Re Bank of North Queensland Ltd. (1898), 9 Q.L.1. (N.C.) 20.

All the powers conferred by the section can, semble, validly be exercised contingently on the happening of a future event, such as the confirmation by the court of a resolution for reduction of capital, Re Salinas of Mexico, [1919] W.N. 311. See also Re Welsbach Incandescent Gas Light Co., [1904] 1 Ch. 87; Re Australian Estates and Mortgage Co., [1910] 1 Ch. 414.

Increase-The power to increase must be found in the articles, which may if necessary be altered with that purpose in view, a single special resolution authorizing the particular transaction being sufficient without a previous resolution altering the articles, Re Bank of Hindustan, China, and Japan; Campbell's Case; Hippisley's Case; Alison's Case (1873), 9 Ch. App. 1. But see Re Metropolitan Cemetery Co., [1934] S.c. 65.

A limited company, having no authority under its memorandum or articles to create any preference between different classes of shares, may by special resolution alter its articles so as to authorise an issue of preference shares by way of an increase in capital, Andrews v. Gas Meter Co., [1897] 1 Ch. 361. Since such an increase does not vary or affect class rights, consents of class meetings will not in general be necessary, White v. Bristol Aeroplane Co. Ltd., [1953] Ch. 65; [1953] I All E.R. 40; Rc John Smith's Tadcaster Brewery Co. Ltd., [1953] Ch. 308; [1953] 1 All E.R. 518.

Where articles allow the increase of share capital no special resolution altering the articles is necessary before increasing such capital, Yam Creek G.M. Co. v. Wadham (1874), 8 S.A.L.R. 141.

Notice of a meeting called for the purpose of resolving upon an increase of capital must specify the amount by which it is proposed to so increase, MacConnell v. E. Prill & Co. Ltd., [1916] 2 Ch. 57.

The provisions relating to notice of increase of share capital are directory merely and shares issued in pursuance of the increase are well issued even where they have not been observed, Winn's G.M. Co. Ltd. v. Wild (1874), 8 S.A.L.R.66.

Consolidate and divide-Consolidation and division may be effected by the same resolution, provided that fractional holdings do not thereby result, Re North Cheshire Brewery Co. Ltd. (1920),64 Sol.Jo. 463.

Conversion into stock-As to the difference between "shares" and "stock" see Morrice v. Aylmer (1875), L.R. 7 H.L. 717, but note the definition of share in s.5, ante. As to conversion of shares into stock, see Re Home and Foreign Investmcnt and Agency Co. Ltd., [1912] 1 Ch.72.

Subdivision-On subdivision of shares in relation to voting powers, see Greenhalgh v. Arderne Cinemas Ltd., [1946] 1 All E.R. 512.

Where, after an authorised subdivision of shares the reduced shares which correspond to an original share can be traced to a transferee, he, and not the transferor, will be liable in respect of such shares, Re Financial Corporation; Feiling's and Rimington's Case (1867), 2 Ch. App. 714; Re New Zealand Banking Corporation; Sewell's Case (1868), 3 Ch.App. 131.

Subdivision and cancellation-See Re Castiglione, Erskine & Co. Ltd., [1958] 2 All E.R. 455 (and in relation to the filing of a minute, cf. s. 64, post).

Cancellation-The power of cancellation under this section is not a reduction of capital as contemplated by s. 64, post, for here it is only unissued capital that is affected. This section does not limit the power of the court under s. 64, post, to sanction a reduction of issued capital, Re Ormiston Coal Co., [1949] S.c. 516.

63. Validation of shares improperly issued. Where a company has purported to issue or allot shares and the creation, issue or allotment of those shares was invalid by reason of any provision of this Act or any other Act or of the memorandum or articles of the company or otherwise, or the terms of issue or allotment were inconsistent with or unauthorized by any such provision, the Court may, upon application made by the company or by a holder or mortgagee of any of those shares or by a creditor of the company and upon being satisfied that in all the circumstances it is just and equitable so to do, make an order validating the issue or allotment of those shares or confirming the terms of issue or


allotment thereof or both, and upon an office copy of the order being lodged with the Registrar those shares shall be deemed to have been validly issued or allotted upon the terms of the issue or allotment thereof.

The section commits to the court an absolute discretion. The expression "in all the circumstances" suggests that the jurisdiction of the court under the section "is not confined to the mere question whether there had been an infraction of the law," d. Allcroft v. Lord Bishop of London; Ughton v. Lord Bishop of London, [1891] A.c. 666, at p. 675.

A possible application of the section is in circumstances such as, for example, those disclosed in Re Derham and Allen Ltd., [1946] 1 Ch. 31.

64. Special resolution for reduction of share capital. ( 1) Subject to confirmation by the Court a company may if so authorized by its articles by special resolution reduce its share capital in any way and in particular, without limiting the generality of the foregoing, may do all or any of the following: -

(a) extinguish or reduce the liability on any of its shares in respect of share capital not paid up;

(b) cancel any paid up capital which is lost or unrepresented by available assets; or

(c) payoff any paid up share capital which is in excess of the needs of the company,

and may as far as necessary alter its memorandum by reducing the amount of its share capital and of its shares accordingly.

(2) Where the proposed reduction of share capital involves either diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, and in any other case if the Court so directs-

(a) every creditor of the company who at the date fixed by the Court is entitled to any debt or claim which, if that date were the commencement of the winding up of the company, would be admissible in proof against the company shall be entitled to object to the reduction;

(b) the Court, unless satisfied on affidavit that there are no such creditors, shall settle a list of creditors so entitled to object and for that purpose shall ascertain as far as possible without requiring an application from any creditor the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a final day on or before which creditors not entered on the list may claim to be so entered; and

(c) where a creditor entered on the list whose debt or claim is not discharged or has not determined does not consent to the reduction, the Court may dispense with the consent of that creditor on the company securing payment of his debt or claim by appropriating as the Court directs-

(i) if the company admits the full amount of the debt or claim or though not admitting it is willing to provide for it, the full amount of the debt or claim; or

(ii) if the company does not admit and is not willing to provide for the full amount of the debt or claim or if the amount is contingent or not ascertained, an amount fixed by the Court after the like inquiry and adjudication as if the company were being wound up by the Court.


(3) Notwithstanding the provisions of subsection (2) of this section the Court may, having regard to any special circumstances of any case, direct that all or any of the provisions of that subsection shall not apply as regards any class of creditors.

(4) The Court, if satisfied with respect to every creditor who under subsection (2) of this section is entitled to object, that either his consent to the reduction has been obtained or his debt or claim has been discharged or has determined or has been secured may make an order confirming the reduction on such terms and conditions as it thinks fit and may by order-

(a) if for any special reason it thinks proper so to do, direct that the company shall, during such period (commencing on or at any time after the date of the order) as is specified in the order add to its name as the last words thereof the words "and reduced"; and

(b) require the company to publish as the Court directs the reasons for reduction or such other information as the Court thinks expedient and, if the Court thinks fit, the causes which led to the reduction.

(5) An order made under subsection (4) of this section shall show the amount of the share capital of the company as altered by the order, the number of shares into which it is to be divided and the amount of each share and the amount, if any, at the date of the order deemed to be paid up on each share.

(6) On the lodging of an office copy of the order the resolution for reducing share capital as confirmed by the order so lodged shall take effect.

(7) The certificate of the Registrar shall be conclusive evidence that all the requirements of this Act with respect to reduction of share capital have been complied with and that the share capital of the company is such as is stated in the order.

(8) On the lodging of the copy of the order the particulars shown in the order pursuant to subsection (5) of this section shall be deemed to be substituted for the corresponding particulars in the memorandum and such substitution and any addition ordered by the Court to be made to the name of the company shall (in the case of any addition to the name, for such period as is specified in the order of the Court) be deemed to be alterations of the memorandum for the purposes of this Act.

(9) A member, past or present, shall not be liable in respect of any share to any call or contribution exceeding in amount the difference (if any) between the amount of the share as fixed by the order and the amount paid, or the reduced amount (if any) which is to be deemed to have been paid, on the share (as the case may be) but where any creditor entitled to object to the reduction is, by reason of his ignorance of the proceedings for reduction or of their nature and effect with respect to his claim, not entered on the list of creditors, and after the reduction the company is unable, within the meaning of the provisions of this Act with


respect to winding up by the Court to pay the amount of his debt or claim-

(a) every person who was a member of the company at the date of the lodging of the copy of the order for reduction shall be liable to contribute for the payment of that debt or claim an amount not exceeding the amount which he would have been liable to contribute if the company had commenced to be wound up on the day before the said date; and

(b) if the company is wound up the Court, on the application of any such creditor and proof of his ignorance of the proceedings for reduction or of their nature and effect with respect to his claim may, if it thinks fit, settle accordingly a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list as if they were ordinary contributories in a winding up,

but nothing in this subsection shall affect the rights of the contributories among themselves.

(10) Every officer of the company who-(a) wilfully conceals the name of any creditor entitled to object to

the reduction; (b) wilfully misrepresents the nature or amount of the debt or

claim of any creditor; or (c) aids abets or is privy to any such concealment or mis

representation, shall be guilty of an indictable offence.

Penalty: Imprisonment for three years.

( 11) This section shall not apply to an unlimited company, but nothing in this Act shall preclude an unlimited company from reducing in any way its share capital, including any amount in its share premium account.

u.K. ss.66-71; N.S.W. ss.158-163; Vic. s.53; Qld. ss.67-70; S.A. ss.74-81; W.A. s. 71; Tas. s. 52.

As to special resolutions, see s. 144, post. As to the Statutory articles, see Fourth Schedule, Table A, art. 42; Table B, art. 25, post.

The general liability of members as contributories is defined by s. 218, post. For the time of commencement of winding-up, see ss. 223, 255, post. A company is deemed to be unable to pay its debts in circumstances mentioned in s. 222, post. For debts and claims provable in winding-up, see s. 291, post.

A reduction of capital by way of cancellation of unissued shares does not require confirmation by the court if carried out under s. 62, ante.

For further relief which the court may afford in cases of oppression, see s. 186, post.

For offences which may be committed by directors or officers of companies upon a reduction of capital, see the Criminal Code, s. 531, title CRIMINAL LAW.

Prohibition on return of capital-No payment by way of return of capital may be made other than an authorized reduction of capital, Hill v. Permanent Trustee Co. of N.S.W. Ltd., [1930] A.C.720; [1930] All E.R. Rep. 87; Re Brisbane Puntowners' Assoc. (1893), 5 Q.L.I. 54; Dimbula Valley (Ceylon) Tea Co. Ltd. v. Laurie, [1961] Ch. 353; [1961] 1 All E.R. 769. Thus the purchase by a company of its own shares is illegal, Trevor v. Whitworth (1887), 12 App. Cas. 409; Parry v. Bundaberg Foundry Co .. [1933] St. R. Qd. 139; Re Federal Bank of Australia (1893),20 V.L.R. 199. See also Union Trustee Co. v. Greater Melbourne Realty Co. (1932), 47 C.L.R. 44.

What constitutes reduction-See Holmes v. Newcastle-upon-Tyne Freehold Abattoir Co. (1875), 1 Ch. D. 682.


A reconstruction agreement whereby a company agrees to sell a capital asset for cash and shares, and whereby the cash is to go to the company and the shares to the shareholders, amounts to an illegal reduction of capital and is ultra vires, A ustralasian Oil Exploration Ltd. v. Lachberg (1958), 101 C.L.R. 119; [1959] A.L.R. 65. But repayment of application money on a bona fide compromise is not a reduction, Commonwealth Homes and Investment Co. Ltd. v. MacKellar (1939), 63 c.L.R. 351; [1939] A.L.R.470; cf. Re Cameron Shoe Co. Ltd., [1930] S.A.S.R. 329.

A limited company having power to invest its capital, and acting within the scope of its business as described in its memorandum, is at liberty to surrender part of a particular investment with a view to improving the remainder, and such a surrender is not a reduction of capital, Thomson v. Trustees, Executors and Securities Insurance Corporation, [1895] 2 Ch. 454.

Surrender of shares-Although a company cannot reduce its capital except with the sanction of the court, a surrender of shares which the company is in a position to forfeit appears to be unobjectionable, see Trevor v. Whitworth (1887), 12 App. Cas. 409; Union Trustee of Australia Ltd. v. Greater Melbourne Realty Co. Pty. Ltd. (in liquidation) (1932), 47 C.L.R.44; [1932] A.L.R. 178; Re Dominion Chair Co. Ltd., [1957] N.Z.L.R.609.

Surrender or release to trustee--The surrender or release by a shareholder of his fully-paid ordinary shares to a trustee of the company is not forbidden by any principle of company law where the company does not payout any money or money's worth for the shares, and there is no reduction of capital, Moore v. Northwood (1960,) 22 D.L.R. 698.

A purported forfeiture of shares pursuant to a resolution of members at a general meeting was held ultra vires the company because no ground of forfeiture existed, Re Mattawarrangala Copper Mining Co. Ltd. (1874), 8 S.A.L.R. 137.

Confirmation by the court-The court's confirmation is required in order to ensure that all preliminaries required by the statute have been observed and that the interests of shareholders, creditors and the public are adequately protected, Re Preston MOlors Pty. Ltd., [1957] V.R.lll.

The court has a wide discretion to sanction a reduction, Re Credit Assurance and Guarantee Corpn. Ltd., [1902] 2 Ch. 601, but will not sanction a reduction if it sees that it would work unfairly as against any shareholders who do not consent to it, Bannatyne v. Direct Spanish Telegraph Co. (1886), 34 Ch. D. 287.

The court's power is discretionary and it may impose conditions, Re Credit Assurance Guarantee Corporation Ltd., supra; Re Newbery-Vautin (Patents) Gold Extraction Co. Ltd., [1892] 3 Ch. 127n.

Onus of proof-The onus of proof is on the one who alleges the reduction to be unfair and inequitable, Re Old Silkstone Collieries Ltd., [1954] Ch. 169; [1954J I All E.R. 68.

It is the function of the court on an application to confirm a reduction of capital to see--" (i) That proper steps have been taken by the company to reduce, proper notices have been given, meetings held, and resolutions passed; (ii) that the resolutions are not ultra vires of the statute or the memorandum of association; (iii) that no undue preference is given; (iv) that creditors are not injured. It is not for the court to inquire or to decide as to the wisdom or unwisdom of the steps proposed to be taken."-Per Stout c.J., in Re E. W. Mills Ltd., [1925] N.Z.L.R. 227. The court should also consider "the effect of the scheme upon the public interest in respect of future creditors and future shareholders."-Per Salmond J., in Re R. O. Clark Ltd., [1921] N.Z.L.R.533.

Confirmation was refused of a scheme proposing to cancel a large number of fully paid shares and to issue debentures to shareholders in lieu thereof, the effect of which would be to render the company insolvent, Re R. O. Clark Ltd., supra.

For cases in which confirmation was granted, see Re Picturesque Atlas and Publishing Co. Ltd. (1892), 13 N.S.W.L.R. (Eq.) 44; Re Rhodesian Manufacturing Co. Ltd., [1927] S.A.L.R. 310; Re Adelaide Mortgage and Investment Co. Ltd., [1928J S.A.S.R. 478.

Motive for reduction-The motive for the reduction is not the concern of the court, Ex parte Westburn Sugar Refineries Ltd., [1951] A.C. 625; [1951] 1 All E.R. 881.

Mode of reduction-The power of reduction is general and extends to every possible mode of reducing capital, Re Phoebe Gold Mining Co., [1900J W.N. 182; Re Hoare & Co. Ltd. and Reduced, [1910] W.N.87.

The Act does not prescribe the manner in which the reduction of capital is to be effected. Nor is there any limitation of the power of the court to confirm the


reduction, except that it must first be satisfied that all the creditors entitled to object to the reduction have either consented or been paid or secured and the reduction must be fair and equitable, British and American Trustee and Finance Corporation v. Couper, [1894] A.C. 399; Re Credit Assurance and Guarantee Corporation Ltd., [1902] 2 Ch.601; Poole v. National Bank of China, [1907] AC.229; Re Daniel Clifford Investments Ltd., [1948] S.AS.R.278.

The power must be exercised by the company in general meeting; it is not sufficient for the directors to do it, even if this is authorized by the articles, Re Blakely Ltd., [1959] N.Z.L.R 1355.

Articles-If there be no authority in the articles, they must first be altered to give such authority, Re West India and Pacific Steamship Co. (1868), 9 Ch. App. lin.; Re Patent Invert Sugar Co. (1885), 31 Ch. D. 166; Re Bank of North Queensland Ltd. (1898), 9 Q.L.I. (N.C.) 20.

A power of alteration contained in the memorandum was held to be ineffective to effect a valid alteration in Re Dexine Patent Packing and Rubber Co. (1903), 88 L.T. 791.

Resolution-The resolution altering the articles must be completely passed before an effective resolution for reduction can be passed thereunder, Re Bank of North Queensland Ltd. (1898), 9 Q.L.I. (N.C.) 20.

The resolution must identify the particular shares to be affected, Re R. O. Clark Ltd., [1921] N.Z.L.R. 533; Re Kyabram and District Co-operative Co. Ltd., 0925] V.L.R. 501.

Lost or unrepresented by available assets-As to the meaning of this expression, see Re Welshach Incandescent Gas Light Co. Ltd., [1904] 1 Ch.87. Only one of these alternatives need be proved, Re Hoare & Co. Ltd. and Reduced, [1904] 2 Ch. 208; [1904-1907] All E.R. Rep. 635.

Capital in excess-The matter to be proved is not that the money, but that the capital, is in excess of the wants.

In Re Kleinschmidt Bros. Pty. Ltd., [1942] Q.W.N. 4, the cancellation of certain fully-paid shares held by four shareholders, as part of the consideration for the sale of portion of the company's assets to the said shareholders, was held to be a payment off of paid-up share capital which was in excess of the wants of the company. See also Re Picturesque Atlas and Puhlishing Co. Ltd. (1892), 13 L.R. (N.S.W.) (E.) 44.

Incidence of reduction on members-There is no rule that where the articles provide that in a winding-up losses are to be borne by members in proportion to the capital paid up on their shares, the same principle must be applied in the case of a reduction as between shares in the same class with different amounts paid up, Re Credit Assurance and Guarantee Corporation Ltd., [1902] 2 Ch. 601; cf. Carruth v. Imperial Chemical Industries Ltd., [1937] AC. 707; [1937] 2 All E.R.422.

As to an amendment of articles objected to upon the ground that it was ultra vires the company to effect the rights of classes of members as sought, see Arnold v. Regent Press Pty. Ltd., [1957] st. R. Qd. 211.

Payment in specie-It is competent to return capital to members by way of shares which the company holds already, or is entitled to receive, in another company, Ex parte Westhurn Sugar Refineries Ltd., [1951] A.C. 625; [1951] 1 All E.R. 881. Payment may be made in kind and not in cash, Re Preston Motors Pty. Ltd., [1955] V.L.R. Ill.

As to stamp duty involved on distribution in specie, see A rchihald Howie Pty. Ltd. v. Commissioner of Stamp Duties (N.S.W.) (1948), 77 C.L.R. 143; Shaw Savill & Albion Co. Ltd. v. Commissioner of Inland Revenue, [1956] N.Z.L.R. 211; Dm'is Investments Pty. Ltd. v. Commissioner of Stamp Duties (N.S.W.) , [1958] AL.R. 561.

Payment in excess of amount of reduction-As to whether this is permissible. see Ex parte Westburn Sugar Refineries Ltd., [1951] A.C. 625; 1 All E.R. 881; Inland Revenue Commissioners v. Universal Grinding Wheel Co. Ltd., [1955] A.C. 807; [1955] 2 All E.R. 29; Re Blackhurn Cool Stores Pty. Ltd., [1939] V.L.R. 351.

Reduction upon condition that capital returned may subsequently be called up-See Re Stevenson, Anderson & Co. Ltd., [1951] S.C. 346; Re Southern Acceptance Corporation Ltd., [1954] S.AS.R.242.

Creditors-Semble. shareholders to whom dividends are due and unpaid arc not "creditors" within subsection (2) (b), Re Squatting Investment Co. Ltd. and Reduced (1900), 6 AL.R. (C.N.) 1.

As to dispensing with a list of creditors, see Re John Bishop & Sons Ltd., [1930] Q.W.N. 18; Re Cooneana Coal and Iron Co. Ltd. (1890), 4 Q.L.I. 13; Re Lams(J1l Store Service Co. Ltd., [1895] 2 Ch. 726; Re Chambers & C/utten Ltd., [1920] V.L.R. 330; Re Ballarat Land Mortgage and Agency Co. (1897), 3 AL.R. 216.

COMPANIES ACT OF 1961 5S. 64, 65 115

The court may dispense with, or shorten, the notice under subsection (2) (b), where the rights of creditors are not affected, Re Toowoomba Foundry, etc., Co. Ltd. (1899), 9 Q.L.J. (N.C.) 92; Re Shillitos Pty. Ltd., [1937] Q.W.N. 31; Re A. Lesser & Co. Pty. Ltd., [1929] V.L.R.316; Re Antwerp Waterworks Co. Ltd., [1931] W.N. (Eng.) 186. See also Re John Bishop & Sons Ltd., {1930] Q.W.N. 18; Re J. Ireland Ltd. (1923), 40 N.S.W.W.N. 44; Re English Electric Co. oj Australia Ltd. (1923), 40 N.S.W.W.N. 19; Re United States Amusements Ltd. (1912),29 N.S.W.W.N. 214.

See, for further cases, 9 English and Empire Digest (Rpl.), p. 168. For additional instances in which the court dispensed with notice, the rights of

creditors not being affected, see Re Shillitos Pty. Ltd., [1937] Q.W.N. 31; Re Roma Street Investment Ltd., [1938] Q.W.N.23; Re Watson, Ferguson & Co. Ltd., [1940] Q.W.N. 1; Re Toowoomba Acceptances Pty. Ltd., [1940] Q.W.N.24; Re Ruhamah Property Co. Ltd., [1946] Q.W.N.32; Re Dominion (Pty.) Ltd., [1946] Q.W.N.40. In the five last of these cases the court, having made an order on a summons for directions, heard the petition for confirmation of the reduction of capital instanter; in the four last the resolution involved repayment of paid-up share capital to the shareholders. See also Re Colton, Palmer & Preston Ltd., [1936] S.A.S.R.434; Re Allstral Development Pty. Ltd., [1942] V.L.R.81.

And reduced-In Re Adelaide Mortgage and Illvestment Co. Ltd., supra, the words "and reduced" were directed to be added until one month after the last of the notices ordered to be published.

Publication of reasons-See Re LlYllvi, Tondu and Ogmore Coal and Iron Co. (1877), 37 L.T. 373 (company not required to publish reasons); Re Truman, Hanhllry, Buxton & Co. Ltd., [1910] 2 Ch. 498 (company required to publish reasons).

Certificate of the Registrar-The certificate of the Registrar is conclusive of the reduction even though the company had no power by its articles to reduce capital, Re Walker & Smith Ltd. (1903),72 L.J. Ch. 572; so too if the resolution had been irregularly passed, Ladies' Dress Assoc. Ltd. v. Pulbrook, [1900] 2 Q.B. 376.

Dismissal of petition-The court may, on the application of creditors, dismiss a petition for reduction on the ground of want of prosecution; and also order the company to pay the applicants' costs of application and the costs of proving their debt in the proceedings on the petition, Re Capitol Corporation Ltd., Ex parte West alld Ritchie (1933), 50 W.N. (N.S.W.) 67.

Section 62-As to a transaction which may be effected in part under s. 62, ante, and in part under this section, see Re Castiglione, Erskine & Co. Ltd., [1958] 2 All E.R.455.

Forms-For form of resolution, see Australian Encyclop;edia of Forms and Precedents, title COMPANIES. For form of notice of the petition, see Re Ballarat Land Mortgage and Agency Co. (1897), 3 A.L.R. 216; Re Squatting Investment Co. (\899),5 A.L.R. (C.N.) 89 (in which see also form of order on petition).

A short form may be adopted on the publication of the notice of registration, Rc Kyabram and District Co-operative Co. Ltd., 0925] V.L.R. 501. See further as to the form to be published, Re North Pole Ice Co. Ltd. and Reduced, [1924] W.N. 131.

65. Rights of holders of classes of shares. (1) If in the case of a company the share capital of which is divided into different classes of shares provision is made by the memorandum or articles for authorizing the variation or abrogation of the rights attached to any class of shares in the company, subject to the consent of any specified proportion of the holders of the issued shares of that class or the sanction of a resolution passed at a separate meeting of the holders of those shares, and in pursuance of the said provision the rights attached to any such class of shares are at any time varied or abrogated the holders of not less in the aggregate than ten per centum of the issued shares of that class, being persons who did not consent to or vote in favour of the resolution for the variation or abrogation, may apply to the Court to have the variation or abrogation cancelled, and, if any such application is made, the variation or abrogation shall not have effect until confirmed by the Court.

(2) An applica~ion shall not be invalid by reason of the applicants or any of them havmg consented to or voted m favour of the resolution


for the variation or abrogation if the Court is satisfied that any material fact was not disclosed by the company to those applicants before they so consented or voted.

(3) The application shall be made within one month after the date on which the consent was given or the resolution was passed or such further time as the Court allows, and may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they appoint in writing.

(4) On the application the Court, after hearing the applicant and any other persons who apply to the Court to be heard and appear to the Court to be interested, may, if satisfied having regard to all the circumstances of the case that the variation or abrogation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation or abrogation as the case may be and shall, if not so satisfied, confirm it, and the decision of the Court shall be final.

(5) The company shall within fourteen days after the making of an order by the Court on any such application lodge an office copy of the order with the Registrar and if default is made in complying with this provision the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: One hundred pounds. Default penalty. (6) The issue by a company of preference shares ranking pari passu

with existing preference shares issued by the company shall be deemed to be a variation of the rights attached to those existing preference shares unless the issue of the first-mentioned shares was authorized by the terms of issue of the existing preference shares or by the articles of the company in force at the time the existing preference shares were issued.

u.K. s.72; N.S.W. s. 164; Vic. s.54; Qld. s.73; S.A. s. 82; W.A. s. 78; Tas. s.53. For another remedy available to a member in cases of oppression, see s. 186,

post. As to default penalties, see s. 380, post. For a comprehensive discussion as to the rights and disabilities of minority

shareholders, see article by L. W. H. Butts in The Secretary, Aust. ed., July 1959. The word "class" is a vague and non-technical term which, in the case of gifts,

refers to "all those who shall come within a certain category or description defined by a general or collective formula," see Pearks v. Moseley (1880), 5 App. Cas. 714, at p. 723. In company matters, the term "must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest," Sovereign Life Assurance Co. v. Dodd, [1892] 2 Q.B. 573, at p. 583.

The rights attaching to a class of shares may be affected by a transaction, yet not varied, Greenhalgh v. Arderne Cinemas Ltd. and Mallard, [1945] 2 All E.R. 719; [1946] I All E.R. 512 (C.A.).

An application made by a person on behalf of himself and others must establish that before so applying he was appointed in writing for the purpose by those on whose behalf he acts, Re Suburban and Provincial Stores, [1943] Ch. 156; [1943] I All E.R. 342. Further, he must show that such authority was communicated to him, Re Sound City (Films), [1946] 2 All E.R. 521; [1947] Ch. 169.

Even though this section confers upon the holders of a certain portion of the issued shares of a class the right to seek intervention by the court, it appears that any member may seek an injunction to restrain amendment of the articles in respect of class rights, Carruth v. Imperial Chemical Industries Ltd., [1937] A.C. 707; [1937] 2 All E.R. 422.

As to the right of a minority to sue, see Foss v. Harbottle (1843),2 Hare 461; Mozley v. Alston (1847), I Ph. 790; Burland v. Earle, [1902] A.C. 83.

Directors advising or urging a particular course of action upon members or a particular class of members have a duty to make full disclosure of all material facts within their knowledge, Bulfin v. Bebarfald's Ltd. (1938),38 S.R. (N.S.W.) 423.


66. Rights of holders of preference shares to he set out in memorandum or articles. (1) No company shall allot any preference shares or convert any issued shares into preference shares unless there is set out in its memorandum or articles the rights of the holders of those shares with respect to repayment of capital, participation in surplus assets and profits, cumulative or non-cumulative dividends, voting, and priority of payment of capital and dividend in relation to other shares or other classes of preference shares.


Penalty: One hundred pounds. Vic. s. 55; Tas. s. 54. As to the distribution of assets in a winding-up, see s.247, post. As to voting, see Division 3 of Part V, post; as to restrictions on allotment, see

Division 2 of Part IV, ante. In the event of a winding-up the onus lies on the preference shareholders to

show that their rights are not exhaustively defined in the articles, and to prove that they are entitled to share in surplus assets after the ordinary capital has been paid, Scottish Insurance Corporation Ltd. v. Wilson's and Clyde Coal Co. Ltd., [1949] A.c. 462; [1949] 1 All E.R. 1068; Re Isle of Thanet Electricity Supply Co. Ltd., [1949] 2 All E.R. 1060; [1950] Ch. 161; Re John Smith's Tadcaster Brewery Co. Ltd., [1952] 2 All E.R.751 (reversed on other grounds, [1953] 1 All E.R. 518).

67. Dealing by a company in its own shares, etc. (1) Except as is otherwise expressly provided by this Act no company shall give, whether directly or indirectly and whether by means of a loan guarantee or the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the company or, where the company is a subsidiary, in its holding company or in any way purchase deal in or lend money on its own shares.

(2) Nothing in subsection (l) of this section shall prohibit-(a) where the lending of money is part of the ordinary business

of a company, the lending of money by the company in the ordinary course of its business;

(b) the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase of or subscription for fully paid shares in the company or its holding company, being a purchase or subscription by trustees of or for shares to be held by or for the benefit of employees of the company, including any director holding a salaried employment or office in the company; or

(c) the making by a company of loans to persons, other than directors, bona fide in the employment of the company or of a subsidiary of the company with a view to enabling those persons to purchase fully paid shares in the company to be held by themselves by way of beneficial ownership.

(3) If there is any contravention of this section, the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Imprisonment for three months or Five hundred pounds. UK. s. 54; N.S.W. s. 148; Vic. s. 56; Qld. s. 57; S.A. s. 62; W.A. s. 154; Tas. s. 55. A company cannot make use of its funds or assets to purchase or traffic in its

own shares, Trevor v. Whitworth (1887), 12 App. Cas. 409; Parry v. Bundaberg

1 J 8 COMPANIES Vol. 2

Foundry Co., [1933] St. R. Qd. 139; but see Durack v. West Australian Trustee Executor & Agency Coy. Ltd. (1944), 72 c.L.R. 189.

This section is designed to prevent schemes whereby a company might by indirect means in effect purchase its own shares. One method was for a syndicate to purchase a majority of the shares in a company, borrowing the money temporarily from a bank on the security of the shares. The syndicate then procured their nominees to be appointed directors of the company and the directors lent the syndicate out of the company's funds sufficient money to payoff the bank.

This section was held to be declaratory and not to create any new offence, R. v. Lorang (1931), 22 Cr. App. Rep. 167.

The word "purchase" in this section does not include the acquisition of shares by subscription or allotment, Re V. G. M. Holdings Ltd., [1942] 1 All E.R. 224; (1942), 58 T.L.R. 131.

Generally, on the mischief at which this section is aimed, see Victor Battery Co. Ltd. v. Curry's Ltd., [1946] 1 All E.R.519; [1946] eh.242.

For transactions which were held to have offended this section, see Shearer Transport Co. Pty. Ltd. v. McGrath, [1956] V.L.R. 316; Ullioll Trustee Co. of Australia Ltd. v. Greater Melbourne Realty Co. Pty. Ltd. (in liquidation) (1932), 47 C.L.R.44; [1932] A.L.R. 178.

For transactions which were held not to have offended the section, see Dyason v. 1. C. Hutton Pty. Ltd., [1935] A.L.R.419; Re Harlem Pty. Ltd. (in liquidation)' [1950] V.L.R. 449; Commonwealth Homes and Investment Co. Ltd. v. MacKellar (1939), 63 C.L.R. 351; [1939] A.L.R.470; Victor Battery Co. Ltd. v. Curry's Ltd .• [1946] Ch.242; [1946] 1 All E.R.519.

68. Options over unissued shares. (1) An option granted by a public company after the commencement of this Act which enables any person to take up un-issued shares of the company after a period of five years has elapsed from the date on which the option was granted shall be void.

(2) Subsection (1) of this section shall not apply in any case where the holders of debentures have an option to take up shares of the company by way of redemption of the debentures.

69. Power of company to pay interest out of capital in certain cases. Where any shares of a company are issued for the purpose of raising money to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be made profitable for a long period, the company may pay interest on so much of such share capital as is for the time being paid up and charge the interest so paid to capital as part of the cost of the construction or provision but-

(a) no such payment shall be made unless it is authorized, by the articles or by special resolution. and is approved by the Court;

(b) before approving of any such payment, the Court may at the expense of the company appoint a person to inquire and report as to the circumstances of the case, and may require the company to give security for the payment of the costs of the inquiry;

(c) the payment shall be made only for such period as is determined by the Court, but in no case extending beyond a period of twelve months after the works or buildings have been actually completed or the plant provided;

(d) the rate of interest shaH in no case exceed five per centum per annum or such other rate as is for the time being prescribed; and


(e) the payment of the interest shall not operate as a reduction of the amount paid up on the shares in respect of which it is paid.

U.K. s.65; N.S.W. s. 157; Vic. s. 57; Qld. s.66; S.A. s. 71; W.A. s. 68; Tas. s.56. As to prohibition on payment of dividends except out of profit, see s. 376, post. As to reduction on the amount paid up on shares, see s. 64, ante. "Interest" is compensation for delay in payment. As applied to a share of

;profits for trading, it is inaccurately used, Bond v. Barrow Haematite Steel Co., [1902] 1 Ch.353.

It has been held that there is no general rule of law precluding interest on money borrowed (as distinguished from money resulting from an issue of shares) for the purpose of constructing works being charged during the period of such con.struction to capital account, Hinds v. Buenos Ayres Grand National Tramways Co. Ltd., [1906] 2 Ch. 654; but see Re Alexandra Palace Co. (1882), 21 Ch. D. 149.

Division 4-Debentures

70. Register of debenture holders and copies of trust deed. (1) Every company which issues debentures shall keep a register of holders of the debentures at the registered office of the company or at some other place in the State.

(2) Every company shall within seven days after the register is first kept at a place other than the registered office lodge with the Registrar notice of the place where the register is kept and shall within seven days after any change in the place at which the register is kept lodge with the Registrar notice of the change.

(3) The register shall except when duly closed be open to the inspection of the registered holder of any debentures and of any holder of shares in the company and shall contain particulars of the names and addresses of the debenture holders and the amount of debentures held by them.

( 4 ) For the purposes of this section a register shall be deemed to be duly closed if closed in accordance with provisions contained in the articles or in the debentures or debenture stock certificates, or in the trust deed or other document relating to or securing the debentures. during such periods (not exceeding in the aggregate thirty days in any calendar year) as is therein specified.

(5) Every registered holder of debentures and every holder of shares in a company shall at his request be supplied by the company with a copy of the register of the holders of debentures of the company or any part thereof on payment of two shillings for every hundred words or part thereof required to be copied. but the copy need not include any particulars as to any debenture holder other than his name and address and the debentures held by him.

(6) A copy of any trust deed relating to or securing any issue of debentures shall be forwarded by the company to a holder of those debentures at his request on payment of the sum of ten shillings or such less sum as is fixed by the company. or where the copy has to be specially made to meet the request on payment of two shillings for every hundred words or part thereof required to be copied.

(7) If inspection is refused. or a copy is refused or not forwarded within a reasonable time (but not more than thirty days) after a request


has been made pursuant to this section, the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. UK. s. 87; N.S.W. s. 169; Vic. s.58; Qld. s.97; S.A. s.94; W.A. s. 90; Tas. s. 57. As to register of members, see s. 151, post; as to registered office, see ss. 111,

112, post. As to registration of mortgages, including mortgages created by or to secure

debentures, see Division 7 of this Part, post. As to default penalties, see s. 380, post. In Lemon v. Austin Friars Investment Trust Ltd., [1926] Ch. 1, it was held that

income stock certificates were debentures within the meaning of the section, and the register of income stock certificates was open to the inspection of the registered holders of any of the income stock certificates.

71. Specific performance of contracts. A contract with a company to take up and pay for any debentures of the company may be enforced by an order for specific performance.

UK. s. 92; N.S.W. s. 172; Vic. s. 59; Qld. s. 100; S.A. s. 97; W.A. s. 93; Tas. s. 58. As to contracts on behalf of a company, see s. 35, ante. A company cannot enforce specific performance or recover damages after

forfeiting the debentures for non-payment of calJs, Kuala Pahi Rubber Estates Ltd. v. Mowbray (1914), 111 L.T. 1072; [1914] W.N. 321; and see generally 10 English and Empire Digest (Rp!.), p. 785.

Where a debenture empowers a debenture holder to appoint a receiver and manager of the property charged with power to sell, the court has jurisdiction to entertain an application by the debenture holder asking for the court's sanction to a sale by the receiver and manager; and by the consent of all parties the court may authorize such a sale to be carried out out of court, Bond v. North Mount Farrell Co. No Liability, [1931] V.L.R. 144.

72. Perpetual debentures. A condition contained in any debenture or in any deed for securing any debentures whether the debenture or deed is issued or made before or after the commencement of this Act shall not be invalid by reason only that the debentures are thereby made irredeemable or redeemable only on the happening of a contingency however remote or on the expiration of a period however long, any rule of law or equity to the contrary notwithstanding.

UK. s.89; N.S.W. s. 170; Vic. s.60; Qld. s. 98; S.A. s.95; W.A. s. 91; Tas. s. 59. As to what provisions in the memorandum will authorize the issue of irredeem

able debenture stock, see Re Southern Brazilian Rio Grande do Sui Railway Co. Ltd., [1905] 2 Ch. 78.

Compare Re Tewkesbury Gas Co., [1911] 2 Ch.279; [1912] 1 Ch.1. "Redeemable" may mean merely "liable to be redeemed," Re Chicago and

North West Granaries Co. Ltd., [1898] 1 Ch.263. See generalJy 10 English and Empire Digest (Rp!.), p. 803. As to the circumstances in which the court may direct that the security for

irredeemable debentures, or debentures redeemable only on the happening of a contingency or at an uncertain time may be enforced, see s. 74, post.

As to whether debentures can ever be strictly "irredeemable," see Wallace v. Universal Automatic Machines Co., [1894] 2 Ch. 547.

73. Re-issue of redeemed debentures. (1) Where a company has redeemed any debentures whether before or after the commencement of this Act-

(a) unless any provision to the contrary. whether express or implied. is contained in the articles or in any contract entered into by the company; or


(b) unless the company has, by passing a resolution to that effect or by some other act, manifested its intention that the debentures shall be cancelled,

the company shall have and shall be deemed always to have had power to re-issue the debentures, either by re-issuing the same debentures or by jssuing other debentures in their place but the re-issue of a debenture or the issue of one debenture in place of another under this subsection, whether the re-issue or issue was made before or after the commencement of this Act, shall not be regarded as the issue of a new debenture for the purpose of any provision limiting the amount or number of debentures that may be issued by the company.

(2) After the re-issue the person entitled to the debentures shall have and shall be deemed always to have had the same priorities as if the debentures had never been redeemed.

(3) Where a company has either before or after the commencement of this Act deposited any of its debentures to secure advances on current account or otherwise, the debentures shall not be deemed to have been redeemed by reason only of the account of the company having ceased to be in debit while the debentures remain so deposited.

( 4) Where any debentures that have been redeemed before the twenty-first day of March one thousand nine hundred and thirty-two have been re-issued after that date and before the commencement of this Act, or are re-issued after the commencement of this Act, the re-issue of the debentures shall not prejudice and shall be deemed never to have prejudiced any right or priority which any person would have had under or by virtue of any charge created before the twenty-first day of March, one thousand nine hundred and thirty-two if section sixteen of "The Companies Act Amendment Act of 1909," as originally enacted, had been enacted in this Act instead of this section.

(5) Notwithstanding any other provision of this section, for the purposes of any Act relating to stamp duties the re-issue of a debenture or the issue of another debenture in its place under the power by this section given to, or deemed to have been possessed by, a company, whether the re-issue or issue was made before or after the commencement of this Act, shall be deemed to be the issue of a new debenture.

(6) Any person lending money on the security of a debenture re-issued under this section which appears to be duly stamped may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp duty or any penalty in respect thereof, unless he had notice or, but for his negligence, might have discovered that the debenture was not duly stamped. This subsection does not affect the liability of the company to pay the proper stamp duty and penalty.

u.K. s. 90; N.S.W. s. 171; Vic. s. 61; Qld. s. 99; S.A. s. 96; W.A. s. 92; Tas. s. 60. Act referred to:

Repealed by Act of 1931, s. 4. This section preserves the priority of debentures as of the date of original issue,

Fitzgerald v. Persse, [1908] 1 I.R. 279. The new debentures must contain the same terms as the originals with the same

date for redemption, Re Antofagasta (Chile) and Bolivia Railway Co. Ltd.'s Trust Deed; Antofagasta (Chile) and Bolivia Railway Co. Ltd. v. Schroder, [1939] Ch.732; [1939] 2 All E.R. 461.

As to contracts made on behalf of the company, see s. 35, ante. The company's balance sheet must give particulars of any redeemed debentures

which the company has power to reissue, ss. 162, 341, and Ninth Schedule, art. 2 (e), post.

Stamp duty-As to stamp duty, see the Stamp Acts, 1894 to 1962, First Schedule (sub-title "Mortgage, Bond, Debenture and Covenant"), s. 4A, title STAMP DUTIES.

122 COMPANIES Vol. 2:

74. (1) Trustee for debenture holders. Every corporation offering debentures to the public for subscription in the State shall (except where a debenture is given by one instrument to not more than twenty-five persons without any right to subdivide their interests) make provision in the debentures or in a trust deed for the appointment of-

(a) a company that is not an exempt proprietary company; or (b) a foreign company incorporated in any State or Territory of

the Commonwealth not being an exempt proprietary company under the law of the State or Territory in which it is incorporated,

as trustee for the holders of the debentures.

(2) A corporation shall not allot any debenture until the appointment provided for in the debentures or in the trust deed pursuant to subsection (1) of this section has been made.

(3) The debentures or deed shall contain covenants by the corporation, or if it does not expressly contain those covenants shall be deemed to contain covenants, to the following effect:-

(a) that the corporation will use its best endeavours to carryon and conduct its business in a proper and efficient manner;

(b) that, to the same extent as if the trustee for the holders of the debentures or any registered company auditor appointed by the trustee were a director of the corporation it will-

(i) make available for its or his inspection the whole of the accounting or other records of the corporation; and

(ii) give to it or him such information as it or he requires with respect to all matters relating to the accounting or other records of the corporation; and

(c) that the corporation will, on the application of holders of debentures of any class holding not less than one-tenth in nominal value of the issued debentures of that class delivered to its· registered office by giving notice-

(i) to each of the holders of the debentures (other than debentures payable to bearer) of that class at his address as specified in the register of debentures; and

(ii) by an advertisement in a daily newspaper circulating generally throughout the State addressed to all holders of debentures of that class,

summon a meeting to consider the accounts and balance-sheet which were laid before the last preceding annual general meeting of the corporation and to give to the trustee directions in relation to the exercise of the trustee's powers, such meeting to be held at a time and place specified in the notice and advertisement under the chairmanship of a person nominated by the trustee or such other person as is appointed in that behalf by the holders of debentures present at the meeting.

(4) Where any debenture given or trust deed made after the commencement of this Act does not expressly contain the covenants referred to in subsection (3) of this section the corporation and every officer of the corporation who is in default shall be guilty of an offence against this Act.



(5) Without leave of the Court, a company or foreign company shall not be appointed, hold office or act as trustee for the holders of debentures of a corporation referred to in subsection (1) of this section jf that company or foreign company is-

(a) a director of the corporation; (b) a shareholder which holds its shares in the corporation bene

ficially; (c) a creditor of the corporation; (d) a corporation that has entered into a guarantee in respect of

the principal debt secured by those debentures or in respect of interest thereon; or

(e) a corporation that is by virtue of subsection (5) of section six deemed to be related to-

(i) any company or foreign company specifioo in paragraphs (a) to (d) inclusive of this subsection; or

(ii) the corporation referred to in subsection (1) of this section. For the purposes of this subsection, the Public Curator and the

<companies to which "The Queensland Trustees, Limited, Acts, 1888 to 1959," or "The Union Trustee Company of Australia, Limited, Acts, 1890 to 1959," relate shall until the contrary is shown, be deemed not to be the beneficial owner of any share registered in his or its name.

(6) Notwithstanding the provisions of subsection (5) of this section(a) a banking corporation; (b) a corporation authorized to transact life insurance business

in Australia under the law of the Commonwealth relating to life insurance;

(c) a corporation authorized by the law of any State or Territory to take in its own name a grant of probate or letters of administration of the estate of a deceased person; or

(d) a corporation that is deemed by virtue of subsection (5) of section six to be related to any such corporation,

may be appointed, hold office and act as a trustee for the holders of debentures of a corporation notwithstanding the fact that-

(e) it holds a first mortgage over any land of the corporation to secure the repayment of any debt which is not secured in any other way;

(f) it is the holder of any debentures issued by the corporation to the public;

(g) it is the holder of any debentures to which it is not beneficially entitled;

(h) it is a creditor by virtue only of the fact that it is the trustee for debenture holders under a debenture or trust deed and only in accordance with the terms of that debenture or trust deed;

.(i) it is a creditor of the corporation if the amount owed by the corporation to it and to any company that is deemed by virtue of subsection (5) of section six to be related to it excluding any amounts referred to in paragraphs (e), (f), (g) and (h) of this subsection does not exceed one-tenth of the amount that will be owed by the corporation under the debentures proposed to be offered to the public within three months of the appointment of the trustee; or


(j) it is a shareholder of the corporation if its holding does not entitle it to control more than ten per centum of the voting power of the corporation.

(7) Nothing in subsection (5) of this section shall affect the operation of any debentures or trust deed issued or executed before the commencement of this Act or apply to the trustee for the holders of any such debentures unless pursuant to any such trust deed a further offer of debentures is made to the public after the commencement of this Act.

(8) The corporation shall in writing furnish the trustee, whether or not any demand therefor has been made, with particulars (within twentyone days after the creation of the charge) of any charge created by the corporation, other than a charge created in the ordinary course of the business of the corporation and when the amount to be advanced is indeterminate, particulars (within seven days after the advance) of the amount or amounts in fact advanced but where any such advances are merged in a current account with bankers or trade creditors it shall be sufficient for particulars of the net amount outstanding in respect of any such advances to be furnished every three months.

(9) The Court mayan the application of the trustee order a meeting (to be held and conducted in such manner as the Court thinks fit, under the chairmanship of a person nominated by the trustee or such other person as the meeting appoints) of the holders of debentures of any class to be called to consider any matters in which they are concerned and advise the trustee thereon and may give such ancillary or consequential directions as it thinks fit.

(10) The trustee shall exercise diligence in ascertaining whether or not the assets of the corporation which constitute or may constitute the security for the debentures are sufficient or are likely to become sufficient to discharge the principal debt and any interest thereon.

(11) Enforceability of certain debentures. Notwithstanding anything in any debenture or trust deed the security for any debentures which are irredeemable or redeemable only on the happening of a contingency or at an uncertain time shall be enforceable forthwith or at such time as the Court directs if, on the application of a debenture holder (where there is no trustee for debenture holders) or the trustee, the Court is satisfied that-

(a) at the time of the issue of the debentures the assets of the corporation which constituted or were intended to constitute the security therefor were sufficient or likely to become sufficient to discharge the principal debt and any interest thereon;

(b) the security, if realised under the circumstances existing at the time of the application, would be likely to bring not more than sixty per centum of the principal sum of moneys outstanding (regard being had to all prior charges, if any); and

(c) the assets covered by the security, on a fair valuation on the basis of a going concern, are worth less than the principal sum and the corporation is not earning the interest payable on the principal sum or (where no definite rate of interest is payable) interest thereon at such rate as the Court considers would be a fair rate to expect from a similar investment, after allowing a reasonable amount for depreciation.

COMPANIES ACT OF 1961 85.74,75 125

(12) Subsection (11) of this section shall not affect any power to vary rights or accept any compromise or arrangement created by the terms of the debentures or under a compromise or arrangement between the corporation and creditors.

(13) The Public Curator may be appointed the trustee for debenture holders under and for the purposes of this section.

(14) If default is made in complying with any provision of this section, other than the provisions of subsections (3) or (4) of this section, or with a covenant contained or deemed to be contained in a debenture or trust deed by virtue of subsection (3) of this section, the corporation and every officer of the corporation who is in default shall be guilty of an offence against this Act.

Penalty: Two hundred pounds. Default penalty. N.S.W. s. I72A; Vic. s.62; Qld. s. 100A; Tas. s.61. Acts referred to:

Queensland Trustees Limited Acts, 1888 to 1961, title TRUSTEES AND EXECUTORS.

Union Trustee Company of Australia Limited Acts, 1890 to 1961, title TRUSTEES AND EXECUTORS.

As to the liability of a trustee for debenture holders, see s. 75, post. As to accounts and balance sheet, see ss. 161 et seq., Ninth Schedule, post.

As to registered company auditors, see ss. 8, 9, ante. As to registered office, see ss. 111, 112, post. As to register of debentures, see s. 70, ante. As to annual general meeting, see s. 136, post.

As to registration of charges, see ss. 100 et seq., post. As to redeemable or irredeemable debentures, see s. 72, ante. As to compromises and arrangements, see ss. 181 et seq., post.

As to what is meant by a corporation that is deemed to be related to another, see s. 6, ante.

For forms of trust deeds, see Australian Encyclopredia of Forms and Precedents, title COMPANIES.

75. Liability of trustee for debenture holders. (1) Subject to this section, any provision contained in a trust deed relating to or securing an issue of debentures, or in any contract with the holders of debentures secured by a trust deed, shall be void in so far as it would have the effect of exempting a trustee thereof from or indemnifying it against liability for breach of trust where it fails to show the degree of care and diligence required of it as trustee having regard to the provisions of the trust deed or contract conferring on it any powers, authorities or discretions.

(2) Subsection (1) of this section shall not invalidate-(a) any release otherwise validly given in respect of anything done

or omitted to be done by a trustee before the giving of the release; or

(b) any provision enabling such a release to be given-(i) on the agreement thereto of a majority of not less than

three-fourths in nominal value of the debenture holders present and voting in person or, where proxies are permitted, by proxy at a meeting summoned for the purpose; and

(ii) either with respect to specific acts or omissions or on the dissolution of the trustee or its ceasing to act.


(3) Subsection (1) of this section shall not operate-

(a) to invalidate any provision in force at the commencement of this Act so long as any trustee then entitled to the benefit of that provision remains a trustee of the deed in question; or

(b) to deprive any trustee of any exemption or right to be indemnified in respect of anything done or omitted to be done by it while any such provision was in force.

u.K. s.88; Qld. s. 100B. A trustee may invoke those provisions of other State legislation which enable

the court to relieve a trustee who can show that he acted honestly and reasonably and ought fairly to be excused. A professional trustee may be less readily relieved from liability, especially where he has not taken all reasonable steps to make good the breach, National Trustees Company of Australasia Ltd. v. General Finance Company of Australasia Ltd., [1905] A.c. 373.

As to proxies, cf. s. 141, post.

Division 5-Interests other than Shares, Debentures, etc.

76. Interpretation. (1) In the Division and in the Seventh Schedule, unless the contrary intention appears-

"Company" means a public company, and includes a company that is a public company under the law of a proclaimed State and is registered as a foreign company in this State;

"Financial year," in relation to a deed, means the period of twelve months ending on the thirtieth day of June or on such other date as is specified in lieu thereof in the deed;

"Interest" means any right to participate or interest whether enforceable or not and whether actual prospective or contingent-

(a) in any profits assets or realisation of any financial or business undertaking or scheme whether in the State or elsewhere;

(b) in any common enterprise whether in the State or elsewhere in which the holder of the right or interest is led to expect profits rent or interest from the efforts of the promoter of the enterprise or a third party; or

(c) in any investment contract, whether or not the right or interest is evidenced by a formal document and whether or not the right or interest relates to a physical asset, but does not include-

(d) any share in or debenture of a corporation; (e) any interest in or arising out of a policy of life insurance; (f) any interest in a partnership agreement; (g) any interest in a common fund established and kept under

"The Public Curator Acts, 1915 to 1957," "The Queensland Trustees, Limited, Acts, 1888 to 1959," or "The Union Trustee Company of Australia, Limited, Acts, 1890 to 1959"; or

(h) any prescribed right or interest or any right or interest of a prescribed class or kind declared by regulation to be an exempt right or interest for the purposes of this Division;


"Investment contract" means any contract scheme or arrangement which in substance and irrespective of the form thereof involves the investment of money in or under such circumstances that the investor acquires or may acquire an interest in or right in respect of property which under or in accordance with the terms of investment will or may at the option of the investor be used or employed in common with any other interest in or right in respect of property acquired in or under like circumstances;

"Management company," in relation to any interests issued or proposed to be issued or any deed that relates to any interests issued or proposed to be issued, means a company by or on behalf of which the interests have been or are proposed to be issued and includes any person for the time being exercising the functions of the management company;

"Proclaimed State" means a State or Territory of the Commonwealth declared by Proclamation to be a proclaimed State or Territory for the purposes of this Division;

"Registrar" means the Registrar at Brisbane. (2) A reference in this Division to a deed shall be read as including

a reference to any instrument amending or affecting the deed. (3) Every deed approved under the repealed Act shall be deemed to

contain covenants to the effect of the covenants required to be contained in a deed under subsection ( I ) of section eighty except the covenants required under subparagraphs (i), (ii) and (iii) of paragraph (b) of that subsection and subsections (2), (3), (4) and (5) of that section shall apply thereto.

N.S.W. s. 173A; Vic. s. 63 (l); Qld. s. 83A; S.A. s. 114a; W.A. s. 98A; Tas. s. 62 (l). Acts referred to:

Public Curator Acts, 1915 to 1957, title TRUSTEES AND EXECUTORS. Queensland Trustees Limited Acts, 1888 to 1961, title TRUSTEES AND

EXECUTORS. Union Trustee Company of Australia Limited Acts, 1890 to 1961, title

TRUSTEES AND EXECUTORS. New South Wales, Victoria, South Australia and Western Australia have been

declared to be proclaimed States and the Australian Capital Territory has been declared to be a proclaimed Territory for the purposes of this Division (Proclamation Gazette 2 July 1962, p. 1375); Tasmania has been declared to be a proclaimed State for the purposes of this Division (Proclamation Gazette 9 February 1963, p. 614); Northern Territory of Australia has been declared to be a proclaimed Territory for the purposes of this Division (Proclamation Gazette 6 July 1963, p. 1076).

Unit compared with share-"a share confers upon the holder no legal or equitable interest in the assets of the company; it is a separate piece of property; and if a portion of the company's assets is distributed among the shareholders the question whether it comes to them as income or as capital depends upon whether the corpus of their property (their shares) remains intact despite the distribution ... But a unit under the trust deed before us confers a proprietary interest in all the property which for the time being is subject to the trust of the deed," Charles v. Federal Commissioner of Taxation (1954),90 C.L.R. 598, at p.609; [1954] A.L.R. 405, at p. 409.

Accumulation of income under unit trust-It has been held in England that in a particular unit trust deed, the provisions of the Law of Property Act, 1925, s. 164 (1), which regulates the periods of permitted accumulations of income, have no application, see Re A.E.G. Unit Trust (Managers) Ltd.'s Deed; Midland Bank Executor and Trustee Co. Ltd. v. A.E.G. Unit Trust (Managers) Ltd., [1957] Ch. 415; [1957] 2 All E.R. 506.

For notes on comparative legislation and cases decided thereunder, see Paterson and Ednie, Australian Company Law, pp.289 et seq.


77. Approved deeds. For the purposes of this Division, a deed shall be an approved deed if-

(a) the Registrar has granted his approval to the deed under this Division or under any corresponding previous enactment; and

(b) the Crown Law Officer has granted his approval under this Division or under any corresponding previous enactment to the trustee or representative appointed for the purposes of the deed acting as trustee or representative and that approval has not been revoked and the trustee or representative has not ceased to hold office.

Qld. s. 83B; S.A. s. 114b; W.A. s. 98B. Within this section, see also ss. 78, 79, 83, post.

78. Approval of deeds. (1) Where a deed makes provIsion for the appointment of a company as trustee for or representative of the holders of interests issued or proposed to be issued by a company. the Registrar may. subject to this section. grant his approval to the deed.

(2) The Registrar shall not grant his approval to a deed unless the deed-

(a) complies with the requirements of this Division; and (b) makes provision for such other matters and things as are

required by or under the regulations to be included in the deed.

(3) Within seven days after a deed has been approved under this section. the management company shall lodge in the office of the Registrar the deed. or a copy of the deed verified by statutory declaration. and the copy shall for all purposes. in the absence of proof that it is not a true copy. be regarded as an original.

N.S.W. s. 173D; Vic. s. 63 (4); Qld. s. 83c; S.A. s. 114c; W.A. s. 98c; Tas. s. 62 (4). Compare Re Electrical and Industrial Development Trust; Allied Investors Trusts

Ltd. v. Board of Trade, [1956] 1 All E.R. 162; [1956] Ch.232. As to the covenants to be included in the deed, see s. 80, post.

79. Approval of trustees. (1) The Crown Law Officer may, subject to such terms and conditions as he thinks fit, grant his approval to a company acting as trustee or representative for the purposes of a deed.

(2) The Crown Law Officer may. at any time. by reason of a breach of a term or condition subject to which the approval was granted or for any other reason. revoke an approval granted by him under this section or under any corresponding previous enactment.

N.S.W. s. 173E; Vic. s. 63 (5); Qld. s. 83D; S.A. s. 114d; W.A. s. 98D; Tas. s. 62 (5). The term deed includes any instrument amending or affecting the deed, s. 76,

ante. As to approval under any corresponding previous enactment, see s.77, ante.

80. Covenants to be included in deeds. (1) A deed shall, for the purposes of paragraph (a) of subsection (2) of section seventy-eight contain covenants to the following effect. namely:-

(a) a covenant binding the management company that it will use its best endeavours to carry on and conduct its business in a proper and efficient manner and to ensure that any undertaking, scheme or enterprise to which the deed relates is carried on and conducted in a proper and efficient manner;

5

COMPANIES ACT OF 1961 s5.77-80 129

(b) covenants binding the management company-(i) that the management company will pay to the trustee or

representative, within thirty days after their receipt by the company, any moneys that, under the deed, are payable by the company to the trustee or representative;

(ii) that the management company will not sell any interest to which the deed relates otherwise than at a price calculated in accordance with the provisions of the deed;

(iii) that the management company will, at the request of the holder of an interest, purchase that interest from the holder and that the purchase price will be a price calculated in accordance with the provisions of the deed; and

(iv) that the management company will not, without the approval of the trustee or representative, publish or cause to be published any advertisement circular or other document containing any statement with respect to the sale price of interests to which the deed relates or the yield therefrom or containing any invitation to buy interests;

(c) covenants binding the trustee or representative that it will(i) exercise all due diligence and vigilance in carrying out its

functions and duties and in watching the rights and interests of the holders of the interests to which the deed relates;

(ii) keep or cause to be kept proper books of account in relation to those interests;

(iii) cause those accounts to be audited at the end of each financial year by a registered company auditor; and

(iv) send or cause to be sent by post a statement of the accounts, with the report of the auditor thereon within two months of the end of the financial year, to each of the holders of those interests;

(d) a covenant binding the management company and the trustee or representative, respectively, that no moneys available for investment under the deed will be invested in or lent to the management company, or to the trustee or representative, or to any company (other than a banking corporation or a corporation declared pursuant to paragraph (b) of subsection (51 of section thirty-eight to be an authorized dealer in the shortterm money market) which is by virtue of subsection (5) of section six deemed to be related to the management company or to the trustee or representative;

(e) a covenant binding the management company that, to the same extent as if the trustee or representative were a director of the company, the company will-

(i) make available to the trustee or representative, or to any registered company auditor appointed by it, for inspection the whole of the books of the company whether kept at the registered office or elsewhere; and

(ii) give to the trustee or representative or to any such auditor such oral or written information as it or he requires with respect to all matters relating to the undertaking, scheme or enterprise of the company or any property (whether acquired before or after the date of the deed) of the company or otherwise relating to the affairs thereof;


(f) a covenant binding the management company that the management company will make available, or ensure that there is made available, to the trustee or representative such details as the trustee or representative requires with respect to all matters relating to the undertaking, scheme or enterprise to which the deed relates;

(g) covenants binding the management company and the trustee or representative, respectively, that the management company or the trustee or representative, as the case may be, will not exercise the right to vote in respect of any shares relating to the interests to which the deed relates held by the management company, trustee or representative at any election for directors of a corporation whose shares are so held, without the consent of the majority of the holders of the interests to which the deed relates present in person and voting given at a meeting of those holders summoned in the manner provided for in subparagraphs (i) and (ii) of paragraph (h) of this subsection for the purpose of authorizing the exercise of the right at the next election; and

(h) a covenant binding the management company that the management company will within twenty-one days after an application is delivered to the company at its registered office, being an application by not less than fifty, or one-tenth in number, whichever is the less, of the holders of the interests to which the deed relates-

(i) by sending notice by post of the proposed meeting at least seven days before the proposed meeting to each of those holders at his last known address or in the case of joint holders to the joint holder whose name stands first in the company's records; and

(ii) by publishing at least fourteen days before the proposed meeting an advertisement giving notice of the meeting in a daily newspaper circulating generally throughout the State,

summon a meeting of the holders for the purpose of laying before the meeting the accounts and balance-sheet which were laid before the last preceding annual general meeting of the management company or the last audited statement of accounts of the trustee or representative, and for the purpose of giving to the trustee or representative such directions as the meeting thinks proper.

(2) A meeting summoned for the purposes of a covenant contained in a deed in pursuance of paragraph (g) or (h) of subsection (1) of this section shall be held at the time and place specified in the notice and advertisement being a time not later than two months after the giving of the notice under the chairmanship of-

(a) such person as is appointed in that behalf by the holders of the interests to which the deed relates present at the meeting; or

(b) where no such appointment is made, a nominee of the trustee or representative approved by the Registrar,

and shall be conducted in accordance with the provisions of the deed or, in so far as the deed makes no provision, as directed by the chairman of the meeting.


(3) Notwithstanding anything to the contrary contained in an approved deed, the undertaking, scheme, ent~rprise~ contrac~ or arran~ement to which the deed relates may be contIllued III operatIOn or eXIstence if it appears to be in the interests of the holders of the interests to which the deed relates during such period as is or such periods as are agreed upon by the trustee or representative and the management company.

( 4) Where a direction is given to the trustee or representative at a meeting summoned pursuant to a covenant complying with paragraph (h) of subsection (1) of this section, the trustee or representative-

(a) shall comply with the direction unless it is inconsistent with the deed or this Act; and

(b) shall not be liable for anything done or omitted to be done by it by reason only of its following that direction.

(5) Where the trustee or representative is of the opinion that any direction so given is inconsistent with the deed or this Act or is otherwise objectionable, it may apply to the Court for an order confirming, setting aside or varying the direction and the Court may make such order as it thinks fit.

N.S.W. s. 173F; Vic. s. 63 (6); Qld. s. 83E; S.A. s. 114e; W.A. s. 98E; Tas. s. 62 (10). As to company auditors, see ss. 8, 9, ante. As to registered office, see ss. 111,

112, post. As to voting, see ss. 139, 140, 141, post; Tables A and B, post. As to trustee, see s. 79, ante. For what is meant by a corporation which is deemed to be related to another corporation, see s. 6, ante.

As to the term "business," see Smith v. Anderson (1880), 15 Ch. D. 247; Kensington & Knightshridge Electric Lighting Co. v. Notting Hill Electric Lighting Co. (1918), 87 L.J.K.B. 1076; Re Williams' Will Trusts; Chartered Bank of India, Australia and China v. Williams, [1953] 1 All E.R. 536; Re Pszon, [1946] 2 D.L.R. 507.

81. Interests to be issued by companies only. No person except a company or an agent of a company authorized in that behalf under the seal of the company shall issue or offer to the public for subscription or purchase or shall invite the public to subscribe for or purchase any interest.

N.S.W. s. 173B; Vic. s. 63 (2); Qld. s.83F; S.A. s. 114f; W.A. s. 98F; Tas. s. 62 (2). As to the seal, see s. 113; Table A, art. 96; Table B, art. 79, post. See also, as

to the manner in which contracts may be made on behalf of a company, s. 35, ante.

82. Statement to be issued. (1) Before a company or an agent of a company issues or offers to the public for subscription or purchase or invites the public to subscribe for or purchase any interest the company shall issue or cause to be issued a statement in writing in connection therewith which statement shall for all purposes be deemed to be a prospectus issued by a company, and subject to subsection (2) of this section, all provisions of this Act and rules of law relating to prospectuses or to the offering or to an intended offering of shares for subscription or purchase to the public shall with such adaptations as are necessary apply and have efIect accordingly as if the interest were shares offered or intended to be offered to the public for subscription or purchase and as if persons accepting any offer or invitation in respect of or subscribing for or purchasing any such interest were subscribers for shares.

(2) Subject to subsection (3) of this section, the statement shall set out-

(a) the matters and reports specified in the Seventh Schedule; and


(b) such other matters as are required by or under the regulations to be set out in the statement,

with such adaptations as the circumstances of each case require and the Registrar approves.

(3) A matter or report referred to in subsection (2) of this section may be omitted from a statement if, having regard to the nature of the interest, the Registrar is of the opinion that the matter or report is not appropriate for inclusion in the statement and has by writing under his hand approved the omission.

N.S.W. s. 173c; Vic. s. 63 (3); Qld. s.83G; SA s. 114g; W.A. s. 98G; Tas. s. 62 (3). As to prospectus, see Division I of Part IV, ante. As to the terms "company"

and "interest," see s. 76, ante.

83. No issue without approved deed and approved trustee'. (1) A person shall not issue or offer to the public for subscription or purchase or invite the public to subscribe for or purchase any interest unless, at the time of the issue, offer or invitation, there is in force, in relation to the interest, a deed that is an approved deed.

(2) A person shall not in any deed, prospectus statement, advertisement or other document relating to any interest make any reference to an approval of a deed or of a trustee or representative granted under this Division.

N.S.W. s. 173D; Vic. s.63(4); Qld. s.83H; SA s. 114h; W.A. s. 98H; Tas. s. 62 (4). As to approved deeds, see s. 77, ante. As to trustees, see s. 79, ante. As to the term "interest," see s. 76, ante.

84. Register of interest holders. (1) The management company shall in respect of each deed with which the company is concerned keep a register of the holders of interests under the deed and enter therein-

(a) the names and addresses of the holders; (b) the extent of the holding of each holder and, if his interest

consists of a specific interest in any property, a description of the property and its location sufficient to identify it;

(c) the date at which the name of each person was entered in the register as a holder; and

(d) the date at which any person ceased to be a holder.

(2) The provisions of Division 4 of Part V shall so far as are applicable and with such adaptations as are necessary apply to and in relation to the register.

(3) A management company which-(a) keeps a register of holders of interests at a place within three

miles of the office of the Registrar; and (b) provides reasonable accommodation and facilities for persons

to inspect and take copies of its list of interest holders, need not comply with the provisions of paragraph (a) of subsection (1) of section eighty-five in relation to the deed under which the interests are held unless the Governor in Council by Order in Council published in the Government Gazette otherwise directs.

As to the provisions excusing a management company from the requirements relating to returns, cf. s. 160, post.

As to the terms "company," "interest," "management company," see s. 76, ante.


85. Returns, information, etc., relating to interests. (1) Where a deed is or has at any time been an approved deed, the management company shall, so long as the deed or any deed in substitution in whole or in part for the deed, remains in force, lodge with the Registrar, within two months after the end of each financial year applicable to the deed-

(a) a return containing a list of all persons who, at the end of the financial year, were holders of the interests to which the deed relates, showing the name and address of each holder and the extent of his holding and, if his interest consists of a specific interest in any property, a description of the property and its location sufficient to identify;

(b) a summary of-(i) all purchases and sales of land and marketable securities

affecting the interests of the holders during the financial year; and

(ii) all other investments affecting the interests of the holders made during the financial year, showing the descriptions and quantities of those investments;

(c) a statement of the total amount of brokerage affecting the interests of the holders paid or charged by the management company during the financial year and the proportion thereof paid to any stock or share broker, or any partner employee or nominee of any stock or share broker, who is an officer of the company, and the proportion retained by the company;

(d) a list of all parcels of land and marketable securities and other investments, held by the trustee or representative in relation to the deed, as at the end of the financial year, showing the value of the land, securities or other investments and the basis of valuations; and

(e) such other statements and particulars (if any) as may be prescribed.

(2) Any document required to be lodged with the Registrar by the management company under subsection (1) of this section shall be signed by at least one director of the management company.

(3) A company to which subsection (1) of this section applies shall, if so requested by any holder of an interest to which the deed relates within a period of one month after the end of the financial year, send by post or cause to be sent by post to the holder, within two months after the end of the financial year, a copy of the documents which the company is required to lodge with the Registrar by virtue of paragraphs (b) to (e) (inclusive) of subsection (1) of this section.

N.S.W. s. 173G; Vic. s. 63 (8); Qld. s. 83J; S.A. s. 114j; W.A. s. 98J; Tas. s. 62 (12), (13), (14).

As to brokerage, see s. 58, ante. As to approved deed, see s. 77, ante. As to the terms "financial year," "interest," "management company," see s. 76, ante.

86. Penalty for contravention of Division, etc. (1) A person shall not(a) contravene or fail to comply with a provision of this Division;

or (b) fail to comply with a covenant contained or deemed to be

contained in any deed that is or at any time has been an approved deed.

Penalty: Imprisonment for twelve months or Five hundred pounds.


(2) A person shall not be relieved from any liability to any holder of an interest by reason of any contravention of, or failure to comply with, a provision of this Division.

N.S.W. ss. 173H, 1731; Vic. s. 63 (9), (10); Qld. ss. 83K, 83L; S.A. ss. 114k, 1141; W.A. ss. 98K, 98L; Tas. s. 62 (15), (16).

As to covenants, see s. 80, allte. As to approved deeds, see s. 77, allte. For the consequences which may ensue upon a failure to comply with any provision of the deed, see s. 87, post.

As to the term "interest," see s. 76, ante.

87. Winding up of schemes, etc. (1) Where the management company under a deed is in liquidation or where, in the opinion of the trustee or representative, the management company has ceased to carryon business or has, to the prejudice of holders of interests to which the deed relates, failed to comply with any provision of the deed, the trustee or representative shall summon a meeting of the holders.

(2) A meeting under subsection (I) of this section shall be summoned-

(a) by sending by post notice of the proposed meeting at least twenty-one days before the proposed meeting to each holder at his last known address, or, in the case of joint holders to the joint holder whose name stands first in the company's records; and

(b) by publishing, at least twenty-one days before the proposed meeting, an advertisement giving notice of the meeting in a daily newspaper circulating generally throughout the State.

(3) The provisions of subsection (2) of section eighty shall apply to such a meeting as if the meeting were a meeting referred to in that subsection.

(4) If at any such meeting a resolution is passed by a majority of not less than three-fourths in value of the holders of the interests present in person and voting at the meeting that the undertaking, scheme, enterprise, contract or arrangement to which the deed relates be wound up, the trustee or representative shall apply to the Court for an order confirming the resolution.

(5) On an application by the trustee or representative the Court may, if it is satisfied that it is in the interest of the holders of the interests, confirm the resolution and may make such orders as it thinks necessary or expedient for the effective winding up of the undertaking, scheme, enterprise, contract or arrangement.

As to the trustee, see s. 79, ante. As to the register of holders of interests, see s. 84, ante. As to winding-up, see Part X, post.

As to the terms "interest," "management company," see s. 76, ante.

88. (1) Power to exempt from compliance with Division and nonapplication of Division in certain circumstances. The Crown Law Officer may, by notice published in the Government Gazette, exempt any company. subject to such terms and conditions as are specified in the notice, from complying with all or any of the provisions of this Division in relation to any interest, or class of interests, specified in the notice. and may, by notice published in the Government Gazette, revoke such a notice or vary it in such manner as he thinks fit.


(2) Non-application of Division to personal representative, etc. This Division shall not apply in the case of the sale of any interest by a personal representative, liquidator, receiver or trustee in bankruptcy in the normal course of realization of assets.

N.S.W. s. l76J; Vic. s.63 (11); Qld. s.83M; S.A. s. 114m; W.A. s.98M; Tas. s. 62 (17).

As to the disposal of assets by a liquidator, see Part X, post. As to the disposal of assets by a receiver in bankruptcy, see Bankruptcy Act, 1924-1960 (Commonwealth).

As to the terms "company," "interest," see s. 76, ante.

89. Liability of trustees. (1) Subject to this section, any provision contained in a deed that is or at any time has been an approved deed, or in any contract with the holders of interests to which such a deed relates, shall be void in so far as it would have the effect of exempting a trustee or representative under the deed from, or indemnifying it against, liability for breach of trust where it fails to show the degree of care and diligence required of it as trustee or representative having regard to the provisions of the deed conferring on it any powers, authorities or discretions.

(2) Subsection (1) of this section shall not invalidate-(a) any release otherwise validly given in respect of anything done

or omitted to be done by a trustee or representative before the giving of the release; or

(b) any provision enabling such a release to be given-(i) on the agreement thereto of a majority of not less than three

fourths in nominal value of holders of interests present in person and voting at a meeting summoned for the purpose; and

(ii) either with respect to specific acts or omissions or on the trustee or representative ceasing to act.

U.K. s. 88; Qld. s. 83N; S.A. s. 114n; W.A. s. 98N. As to approved deeds, see s. 77, ante. As to meetings, cf. ss. 80, 87, ante. As to

the liability of trustees, cf. s. 75, ante. As to the term "interest," see s. 76. ante.

Division 6-Title and Transfers

90. Natnre of shares. The shares or other interest of any member in a company shall be personal estate, transferable in the manner provided by the articles, and shall not be of the nature of real estate.

U.K. s.73; N.S.W. s. 174; Vic. s.64; Qld. s.74; S.A. s. 83; W.A. s. 81; Tas. s.63. As to shares owned by married women, see the Married Women's Property Acts,

1890 to 1952, ss. 8-11, 24, title MARRIAGE AND DIVORCE. As to share warrants, see s. 57, ante. As to restriction on the right to transfer

shares in a proprietary company, see s. 15, ante. For the relevant statutory articles, see Fourth Schedule, Table A, Table B,

Transfer of Shares, Transmission of Shares, post. As to the title of shares in the event of the bankruptcy of the holder, see

Bankruptcy Act, 1924-1960, ss. 60, 91, 105 (Commonwealth). As to the term "interests," see s. 76, ante. See also notes to the definition of "share" in s. 5 (I), ante. Share distinguished from an interest-See Charles v. Federal Commissioner of

Taxation (1954), 90 C.L.R. 598, at p.609; [1954] A.L.R. 405, at p.409. Whether shares "securities"-Whether at the present day the word "securities"

in a legal document, in the absence of context, includes shares as well as mortgages on land or other property, seems to be left in some doubt. See Re Rayner; Rayner v. Rayner, [1904] I Ch. 176; Singer v. Williams, [1921] 1 A.C.41.


Choses in action-Shares have often been called choses in action: Humble v. Mitchell (1839), 11 Ad. & El. 205, at p.208; R. v. Williams, {1942] AC. 541, at p.549; [1942] 2 All E.R. 95, at p.97.

However, a share is distinguishable from other choses in action in that an assignment of it is ineffectual to confer the fullest enjoyment until the name of the assignee has been entered on the register; see s. 16, ante.

"Primarily a share in a company is a piece of property conferring rights in relation to distributions of income and of capital," Peters' American Delicacy Co. Ltd. v. Heath (1939), 61 C.L.R.457, at p. 503; [1939] AL.R. 124, at p. 136.

Situs of shares-"Shares in a company are things in action which have in a sense no real situs; but it is now settled law that for the purposes of taxation under a statute ... they must be treated as having a situs, which may be merely of a fictional nature," R. v. Williams, [1942] AC. 541, at p. 549; [1942] 2 All E.R. 95, at p. 97.

Certificate--The certificate is not the title, but evidence of the title to shares, Shropshire Union Railways and Canal Co. v. R. (1875), L.R. 7 H.L. 496.

Whether share is sum of money-"A share is not a sum of money settled in the way suggested, but it is an interest measured by a sum of money and made up of various rights contained in the contract, including the right of a sum of money of more or less amount," Borland's Trustee v. Steel Brothers & Co. Ltd., [1901] 1 Ch. 279, at p. 288.

Home-unit schemes-See Paterson & Ednie, Australian Company Law, p. 304. Shareholder's property in assets of company-A company is an entity distinct

from its corporators, Salomon v. Salomon & Co. Ltd., [1897] A.C. 22, and since the title to the company's assets vests in the company, no corporator, no matter how great the proportion of shares held by him, has any property legal or equitable in the assets of the company, Macaura v. Northern Assurance Co. Ltd., [1925] A.C.619; [1925] All E.R. Rep. 51; Commissioner of Stamp Duties (N.S.W.) v. Millar (1932), 48 C.L.R.618; [1933] AL.R. 134.

Gift-A share may be the subject of a gift made inter vivos or by will. But it must be a perfected gift if the donee is to take the title, Milroy v. Lord (1862), 4 De G. F. & J. 264. Yet if the only step required to be taken in order to perfect a gift of shares is an act which the donee himself may perform (e.g. procuring registration of the transfer), the gift may be complete; so that if the donor seeks to recall the gift, or dies before perfecting it, the donee may take the last requisite step to obtain the legal title, Re Rose, [1948] 2 All E.R. 971; [1949] Ch.78; Re Rose, [1952] I All E.R. 1217; [1952] Ch.499.

Mortgage-A transfer signed in blank operates as an agreement to create a legal mortgage, Harrold v. Plenty, [1901] 2 Ch.314, and the mortgagee can turn the equitable mortgage thus created into a legal one by completing the signed transfer and obtaining registration of it, Re Tahiti Callan Co.; Ex parte Sargent (1874), 17 L.R. Eq. 273.

A mortgage of shares carries with it the right to the dividends and the mortgagee is not estopped from asserting his charge on the dividends by having allowed the mortgagor to receive them, Kenyon v. Watson (1901), II Q.L.J. 103; II Q.L.J. (N.C.) 37. Notice given to the company by a second mortgagee of the dividends

does not affect the priority of the first mortgagee in relation to such dividends (ibid.).

Equitable mortgage of shares-See Tobin v. Melrose, [1951] S.AS.R. 139.

Trust-See Ellison v. Ellison (1802),6 Yes. 656. The rule that a man may take shares in a trustee's name without himself being personally liable, cannot reasonably apply either to a case of fraud or to the case where the supposed trustee is incapable of holding shares so as to be responsible, Victorian Mortgage and Deposit Bank Ltd. v. Australian Finance Agency and Guarantee Co. (1893), 19 V.L.R. 680.

Insolvency and bankruptcy-The official assignee of an insolvent member of a company is entitled, by virtue of his property in the shares, to have his name placed on the register of members, subject to any restrictions imposed by the memorandum or articles, Wood v. W. G. Dean Pty. Ltd. (1929), 43 C.L.R.77.

Executors and other personal representatives-Although they are not registered, personal representatives may participate in a company's affairs except where the statute or articles require a decision to be made personally by a member. Irregularity in registration does not affect the personal representative's rights as a member, Ansett v. Guinea Airways Ltd., [1945] S.AS.R.94.


Surrender of shares-There may be no objection to the surrender of shares which are liable to a forfeiture, Trevor v. Whitworth (1887), 12 App. Cas. 409; Re Brisbane Puntowners' Association (1893), 5 Q.L.J. 54; Union Trustee Co. of Australia Ltd. v. Greater Melbourne Realty Co. Pty. Ltd. (1932), 47 C.L.R.44; [1932] AL.R. 178.

Where a share was wrongly supposed to be forfeited and was re-issued it was held that the person to whom it was re-issued did not become a member, Wellington Bowling Club v. Sievwright, [1925] N.Z.G.L.R.227.

Lien-On broker's liens over shares, see Tobin v. Melrose, [1951] S.A.L.R.139. By virtue of the articles, a company may become entitled to a lien on shares. See Fourth Schedule, Table A, arts. 9-12, post.

Equitable interest-For what amounts to a voluntary assignment of an equitable interest in shares, see Re Dougherty, [1903] st. R. Qd. 45; [1903] Q.W.N. 7; Anning v. AIming (1907), 4 C.L.R. 1049.

Prohibition of transfer of shares-Since this section makes shares transferable, an article purporting to prohibit transfer altogether is void, Wellington Bowling Club v. Sievwright, [1925] NZ.G.L.R.227.

Power to refuse transfer-Any power given by the articles to directors to refuse registration of transfers must be exercised bona fide and honestly in the interests of the company, but the onus lies on a person impeaching its exercise to prove that it has not been so exercised, Australian Metropolitan Life Assurance Co. Ltd. v. Ure (1923), 33 C.L.R. 199; New Lambton Land and Coal Co. Ltd. v. London Bank of Australia Ltd. (1904), I C.L.R. 524; Manning River Co-op. Dairy Co. Ltd. v. Shoesmith (1915), 19 C.L.R.714. It must also be exercised with due regard to the interests of the transferee, and also possibly to those of the transferor and the creditors of the company, Re Australian Mont de Piete Loan and Deposit Company, Ex parte Alexander, [1907] V.L.R.660. See also Australian Deposit and Mortgage Bank v. Robertson (1897), 22 Y.L.R.549. A discretion in directors to refuse to register a transfer of shares though in terms absolute is in the nature of a trust and therefore must not be exercised capriciously or unjustly, Re Alfred Shaw and Co. Ltd., Hughes' Case (1895), 21 V.L.R.599.

Even if under the articles directors are not given power to refuse to register a transfer, they are not bound to register a transfer which is merely colourable and not bona fide, Re Balhannah Mining Co. Ltd. (1877), 11 S.A.L.R. 52.

In Australian Deposit and Mortgage Bank v. Robertson (1897), 22 V.L.R. 549, it was held that directors were entitled to decline to accept an insolvent person as transferee.

" ... a share, being personal property, is prima facie transferable, although the conditions of the transfer are to be found in the terms laid down in the articles. If the right to transfer, which is inherent in property of this kind, is to be taken away or cut down, it seems to me that it should be done by language of sufficient clarity to make it apparent that that was the intention," Greenhalgh v. Mallard, [1943] 2 All E.R. 234, at p. 237.

Transfer by way of mortgage-In Re Commercial Banking Co. of Sydney Ltd., Hall's Casc (1899), 9 B.C. (N.S.W.) 47, the directors were held to be entitled to refuse to register a transfer by way of mortgage only.

Indebtedness of shareholder-Where the articles provide that a transfer may be refused during any indebtedness of the shareholder, the company can refuse to transfer the shares when the shareholder owes legal costs to the company, Robinson v. Lady Alice Gold Mining Co. (Ltd.) (1876), 10 S.AL.R. 197.

"Until otherwise determined"-The articles may also contain a provIsion restricting transfers "until otherwise determined" by the company, in which case other restrictions may be made by the company by an ordinary resolution of its general meeting, Re Trade Typesetters Ltd., [1946] S.AS.R. 124.

Transfer by agent-It is the duty of the company to inquire into the authority of an agent purporting to transfer on behalf of the owner, Christoe v. Golden Crown G.M. Co. Ltd. (1887), 3 Q.L.J. 1.

Production of share certificate-A company may refuse registration of a transfer until the share certificate is produced or its absence is accounted for Societe Generale de Paris v. Walker (1885), II App. Cas. 20. '

Reasonable period for refusal-Where directors fail during a reasonable period to exercise a power of refusal to register, a transferee becomes entitled to have his transfer registered, Re Queensland Mines Agency Ltd. (1900), 10 Q.L.J. 52, 75.


Irregular-A transfer which is irregular for non-compliance with the articles, but which has been acted on by the parties and the company, is binding in a liquidation, Wairakei Ltd. v. Cleave, [1925] N.Z.L.R.624.

Restrictions-Where a company had articles which had not been registered, but which imposed restrictions on transfer of shares, it was held that transferees for value without notice of the restrictions, where transfers had been registered, were not bound by them, Re People's Auctioneering Co. Ltd., [1923] N.Z.G.L.R. 434.

Damages for wrongful refusal to register-A transferee of shares whom a company unlawfully refuses to register is entitled in an action for damages for loss of the shares to the value of the shares at the time of the company's refusal to register him, McLaughlin v. Bank of Victoria (1894), 20 V.L.R. 433.

Right of action-It is a condition precedent to the accrual of a right of action for not transferring shares in pursuance of a sale thereof that the purchaser should have tendered an instrument of transfer to the vendor for execution, Baynes v. Osborne (1872), 4 S.C.R. 1.

Liability of registered holder-The registered holder of certain shares who had sold them on condition that his interest in them should not pass until the purchase money was paid executed a transfer of the shares to the purchaser which was lodged with the secretary of the company for registration. The purchase money was not paid, and no change was made in the register. The registered holder was held liable for calls made after the execution of the transfer, being still the registered holder at the date when the action against him was brought, Essendon Land, etc., Co. v. Upton (1891),17 Y.L.R. 248.

See also Great Amalgamated Gold Reefing Co. Ltd. v. Carstairs (1877), II S.A.L.R. 50; Re Parara Mining and Smelting Co. Ltd. (1879), 13 S.A.L.R. 117.

Liability of transferor-The transferor of shares was held to remain liable for calls due and owing at the date of the transfer, notwithstanding that the company duly registered the transfer and recovered judgment and issued execution in respect of the calls upon the transferee, Motor & Cash Orders Ltd. (in liquidation) v. O'Mara (1936), 36 S.R. (N.S.W.) 243. Where a call is owing at the time of forfeiture a member may still be liable therefor, Land Mortgage Bank v. McConnell (1902), 28 V.L.R. 19.

Generally-See further 9 English and Empire Digest (Rp!.) , pp. 231, 232, 388.

91. Numbering of shares. (1) Each share in a company shall be distinguished by an appropriate number.

(2) Notwithstanding subsection (1) of this section-(a) if at any time all the issued shares in a company or all the

issued shares therein of a particular class are fully paid up and rank equally for all purposes, none of those shares need thereafter have a distinguishing number so long as each of those shares remains fully paid up and ranks equally for all purposes with all shares of the same class for the time being issued and fully paid up; or

(b) if all the issued shares in a company are evidenced by certificates in accordance with the provisions of section ninety-two and each certificate is distinguished by an appropriate number and that number is recorded in the register of members, none of those shares need have a distinguishing number.

U.K. s.74; N.S.W. s. 174; Vic. s. 65; Qld. s.74; S.A. s. 83; W.A. s. 81; Tas. s.64. As to caUs on shares, see Fourth Schedule. Tables A and B, Calls on Shares,

post. As to the conversion of shares into stock, see s. 62, ante; Fourth Schedule, Tables A and B, Conversion of Shares into Stock, post. As to classes of shares, see Fourth Schedule, Tables A and B, art. 4, post. As to share certificates, see s. 92, post. As to the register of members, see ss. 150 et seq., post.

92. Certificate to be evidence of title. (1) A certificate under the common or official seal of a company specifying any shares held by any member of the company shall be prima facie evidence of the title of the member to the shares.


(2) Every share certificate shall be under the common seal of the company or (in the case of a share certificate relating to shares on a branch register) the common or official seal of the company and shall state-

(a) the name of the company and the authority under which the company is constituted;

(b) the address of the registered office of the company in the State, or, where the certificate is issued by a branch office, the address of that branch office; and

(c) the nominal value and the class of the shares and the extent to which the shares are paid up.

(3) Failure to comply with this section shall not affect the rights of any holder of shares.


U.K. s.81; N.S.W. s.180; Vic. s.66; Qld. s.80; S.A. s.90; W.A. s. 87 (4); Tas. s.65.

As to the seal, see ss. 16 ante, 93 post; Fourth Schedule, Table A. art. 96; Table B, art. 79, post. As to the registered office, see ss. III, 112, post. As to share warrants, see s. 57, ante. As to branch registers, see s. 157, post. As to names of companies, see ss. 22-24, ante.

Certificate-The certificate is an assertion by the company that the grantee is the registered shareholder entitled to the shares in the certificate, Balkis Consolidated Co. v. Tomkinson, [1893] A.C. 3%, and that the amount certified to be paid has been paid, so long as the transferee is a bona fide transferee without notice to the contrary, Burkinshaw v. Nicolls (1878),3 App. Cas. 1004. The company is accordingly estopped as against any person altering his position to his detriment on the faith of the representations in the certificate from denying that the facts are as therein stated; but an erroneous certificate does not confer a title to the shares, Balkis Consolidated Co. v. Tomkinson, supra. As to whether the company is estopped by a forged certificate from disputing the claims of persons purporting to make title thereunder, see Ruben v. Great Fingal! Consolidated, [1906] A.C. 439; South London Greyhound Racecourses Ltd. v. Wake, [1931] I Ch.496; [1930] All E.R. Rep. 496; Whitechurch (George) Ltd. v. Cavanagh, [1902] A.c. 117.

Estoppel-A company may be estopped, by issuing certificates for shares or entry of shares on the register as fully paid up, from denying that they are so paid up, not only as against a transferee of the shares, but also as against the original allottee, Re Darling Downs Brewery Ltd. (1899), 9 Q.L.J. 225; Re Normanby Copper Mining Co. Ltd. (1876), 4 Q.S.C.R. 223; Re Bonang Gold Mining Co. Ltd. (1897), 18 L.R. (N.S.W.) (E.) 141; Re Phillip-Stephan Photo. Litho and Typographic Process Co. Ltd.; Fergusson's Case (1890) 12 L.R. (N.S.W.) (E.) II.

The company is not estopped from denying the purchaser's title by the mere fact that it has treated him as a shareholder, Foster v. Tyne Pontoon & Dry Docks & Renwick (1893),63 L.J. (Q.B.) 50.

Damages recoverable-When shares are purchased from a person having no title thereto, on the faith of a certificate issued by the company that the vendor is the duly registered holder thereof, the purchaser is entitled as against the company to damages, the measure of which is the market value of the shares on the date when the company first refused to recognisc the purchaser as a shareholder, together with interest thereon, Daily Telegraph Newspaper Co. Ltd. v. Cohen (1905), 5 S.R. (N.S.w.) 520.

Legal title-Legal title passes on registration, but something short of registration may be sufficient, Nanney v. Morgan (1888),37 Ch. D. 346; Peat v. Clayton, [1906] I Ch. 659.

Equitable title-Where an equitable title arises, as prior to registration, the proposed transferee is wise to inquire into the beneficial ownership and to obtain a legal title by registration, lest he be postponed to a prior equitable title or to a legal title, Moore v. North Western Bank, [1891] 2 Ch. 599.

As to the right of parties to shares for which they have certificates, but of which transfers have been made to others, see Henderson v. Coulson (1889), 6 T.L.R. 28.


93. Company may have duplicate common seal. A company may if authorized by its articles have a duplicate common seal which shall be a facsimile of the common seal of the company with the addition on its face of the words "Share Seal" and a certificate under such duplicate seal shall be deemed to be sealed with the common seal of the company for the purposes of this Act.

Vic. s. 66 (4).

As to the sealing of certificates, see s. 92, ante.

94. Loss or destruction of certificates. (1) Subject to subsection (2) of this section where a certificate or other document of title to shares or debentures is lost or destroyed, the company shall on payment of a fee not exceeding five shillings issue a duplicate certificate or document in lieu thereof to the owner on his application accompanied by-

(a) a statutory declaration that the certificate or document has been lost or destroyed, and has not been pledged sold or otherwise disposed of, and, if lost, that proper searches have been made; and

(b) an undertaking in writing that if it is found or received by the owner it will be returned to the company.

(2) The directors of the company may, before accepting an application for the issue of a duplicate certificate or document, require the applicant-

(a) to cause an advertisement to be inserted in a daily newspaper circulating in a place specified by the directors stating that the certificate or document has been lost or destroyed and that the owner intends after the expiration of fourteen days after the publication of the advertisement to apply to the company for a duplicate; or

(b) to furnish a bond for an amount equal to at least the current market value of the shares or debentures indemnifying the company against loss following on the production of the original certificate or document,

or may require the applicant to do both of those things. N.S.W. s. 182; Vic. s.66 (3); S.A. s. 379; W.A. s.414; Tas. s.65. As to debentures, see Division 4 of Part IV, ante. As to certificates for shares,

see s. 92, ante. As to numbering of shares, see s. 91, ante. As to the entitlement of a member to receive a certificate, see Fourth Schedule, Tables A and B, art. 8, post.

95. (1) Instrument of transfer. Notwithstanding anything in its articles a company shall not register a transfer of shares or debentures unless a proper instrument of transfer has been delivered to the company, but this subsection shall not prejudice any power to register as a shareholder or debenture holder any person to whom the right to any shares in or debentures of the company has been transmitted by operation of law.

(2) Transfer by persoual representatives. A transfer of the share, debenture or other interest of a deceased member made by his personal representative shall, although the personal representative is not himself a member of the company, be as valid as if he had been such a member at the time of the execution of the instrument of transfer.


(3) Where the personal representative of a deceased member duly constituted as such under the law of any other State or Territory of the Commonwealth-

(a) executes an instrument of transfer of a share or debenture of the deceased member to himself or to another person; and

(b) delivers the instrument to the company, together with an affidavit made by him to the effect that, to the best of his knowledge, information and belief, no grant of representation of the estate of the deceased member has been applied for or made in the State and no application for such a grant will be made, being an affidavit sworn within the period of fourteen days immediately preceding the date of delivery of the affidavit to the company,

the company shall register the transfer and pay to the personal representative any dividends or other moneys accrued in respect of the share or debenture up to the time of the execution of the instrument, but this subsection shall not operate so as to require the company to do any act or thing which it would not have been required to do if the personal representative were the personal representative of the deceased member duly constituted under the law of the State.

( 4) Any transfer or payment made in pursuance of subsection (3) of this section, and any receipt or acknowledgment of such a payment, shall for all purposes be as valid and effectual as if the personal representative were the personal representative of the deceased member duly constituted under the law of the State.

(5) The production to a company of any document which is under the law of the State or under the law of any other State or Territory of the Commonwealth sufficient evidence of probate of the will, or letters of administration of the estate, of a deceased person having been granted to some person shall be accepted by the company, notwithstanding anything in its articles, as sufficient evidence of the grant.

U.K. ss.75, 76, 82; N.S.W. ss.175, 176, 181; Vic. s.67; Qld. ss.75, 76; S.A. ss. 84, 85; W.A. ss. 82, 83, 89; Tas. s. 66.

Sce also the Stamp Acts, 1894 to 1962, ss. 31, 31A, 53A, First Schedule, "Conveyance or Transfer," title STAMP DUTIES. And see Re Tobacconists Ltd., [1931] N.Z.L.R. 289.

No notice of trusts is to be entered in the register, but see s. 156, post. See as to transfer and transmission of shares, Fourth Schedule, Table A, arts. 20-27; Table B, arts. 12-18, post. As to shares registered on branch registers, see s. 157, post. As to transfer of shares after the commencement of winding-up, see s.227, post. See further on registration at the request of a transferor, s. 96, post.

Transfer-All the personal representatives must join in the transfer, Barton v. London and N.W. Rly. Co. (1889),24 Q.B.D. 77.

Rights of personal representatives-In the absence of any provision in the articles, the personal representatives have the rights of the deceased, at any rate so as to claim an allotment to which the deceased would have been entitled, James v. Buena Ventura Nitrate Grounds Syndicate Ltd., [1896] I Ch. 456. See also Ansett v. Guinea Airways Ltd., [1945] S.A.S.R.94.

Conflicting article-An article providing that on the death of a director his shares were to be deemed to have passed to his wife if she survived him, and requiring registration of her as the holder, was held to conflict with this section and to be invalid, Re Greene; Greene v. Greene, [1949] Ch. 333; [1949] I All E.R. 167.

Forged transfer-As to the right of the purchaser in due course, when the forgery is discovered and the shares are claimed by the rightful owner, to recover damages against the company, see Re Bahia and San Francisco Ry. Co. (1868), 3 L.R.Q.B. 584.


Where the company registers a forged transfer, it is not estopped by such registration from removing the name of the transferee from the register when it discovers the forgery, Simm v. Anglo-American Telegraph Co. (1879), 5 Q.B.D. 188.

A party claiming under a forged transfer who obtai::1s registration thereof and a new certificate, is bound, even though he acted in good faith, to indemnify the company, Sheffield Corporation v. Barclay, [1905] AC. 392; Welch v. Bank of England, [1955] Ch.508; {l955] 1 All E.R.811.

Whether testamentary instrument-A present agreement for the sale of shares held as at the date of death was held not to be a testamentary instrument within the meaning of the Wills Act, 1958 (Vic.), and was, therefore, not void for failure to comply with the requirements of that Act in Beyer v. Beyer, [1960] V.R. 126.

96. Registration of transfer at request of transferor. (1) On the request in writing of the transferor of any share, debenture or other interest in a company the company shall enter in the appropriate register the name of the transferee in the same manner and subject to the same conditions as if the application for the entry were made by the transferee.

(2) On the request in writing of the transferor of a share or debenture the company shall by notice in writing require the person having the possession, custody or control of the share certificate or debenture and the instrument of transfer thereof or either of them to bring it or them into the office of the company within a stated period, being not less than seven and not more than twenty-eight days after the date of the notice, to have the share certificate or debenture cancelled or rectified and the transfer registered or otherwise dealt with.

(3) If any person refuses or neglects to comply with a notice given under subsection (2) of this section the transferor may apply to a Judge to issue a summons for that person to appear before the Court and show cause why the documents mentioned in the notice should not be delivered up or produced as required by the notice.

( 4) Upon appearance of a person so summoned the Court may examine him upon oath and receive other evidence, or if he does not appear after being duly served with such summons, the Court may receive evidence in his absence; and in either case the Court may order him to deliver up such documents to the company upon such terms or conditions as to the Court seem fit, and the costs of the summons and proceedings thereon shall be in the discretion of the Court.

(5) Lists of share certificates or debentures called in under this section and not brought in shall be exhibited in the office of the company and shall be advertised in the Government Gazette and in such newspapers and at such times as the company thinks fit.

u.K. s. 77; N.S.W. s. 177; Vic. s. 68; Qld. s. 77; S.A ss. 86, 88; W.A ss. 84, 86; Tas. s.67.

Semble "office" means "registered office"; but see s. 152, post. As to the register of members, see s. 151, post.

Stamp Duty-A company is under no duty to a transferor to register a transfer which has not been stamped in accordance with law, Re Tobacconists Ltd., [19311 N.Z.L.R. 289.

Duty of transferee--It is the duty of the transferee to get himself registered, Skinner v. City of London Marine Insurance Corporation (1885), 14 Q.B.D. 882.

Failure of transferor to have name removed-Where a transfer had been duly lodged, but the directors had failed to register it and the transferor had taken no steps to have his name taken off the register, it was held that he was liable for a call thereafter made, Great Amalgamated Gold Refining Co. Ltd. v. Carstairs (1877), 11 S.AL.R. 50. But under similar circumstances it was held that the transferor was entitled to have the register rectified, he not having been guilty of negligence although he had done nothing for four years, Re Parara Mining and Smelting Co. Ltd. (1879), 13 S.A.L.R. 117.


See also Essendon Land, Tramway, and Investment Co. v. Upton (1891), 17 V.L.R.248.

Supervening winding-up--Where a transferor failed for the period of a year prior to winding-up to see that a transfer lodged by him was registered, it was held that he was not entitled to have his name taken off the register after winding-up, Re Petone Building Construction Co. Ltd., [1932] N.Z.G.L.R. 455.

Authority of agent-It is the duty of a company, before registering a transfer signed by a person purporting to be an agent for the registered holder, to ascertain whether such person in fact had authority, Christoe v. Golden Crown Mining Co. Ltd. (1887),3 Q.L.J. 1.

Indemnity-A transferee of shares is liable to indemnify his transferor against calls made after the giving of the transfer, even though at the time of such calls the transferee had himself given a further transfer, Alexander v. Caro (1888), 22 S.A.L.R. 134. It has been held that a contract for sale of shares on the London Stock Exchange does not import an undertaking by the vendor that the company will register the transferee, London Founders Association v. Clarke (1888), 20 Q.B.D.576.

Implied terms-In the absence of any contrary stipulation in a contract for the sale of shares, certain terms will be implied. For examples, see London Founders Association Ltd. v. Clarke (1888), 20 Q.B.D. 576; Stray v. Russell (1859), I E. & E. 888; (1860), I E. & E. 916; Hooper v. Herts, [1906] 1 Ch. 549; Spencer v. Ashworth, Partington & Co. [1925] 1 K.B.589; [1925] All E.R. Rep. 324; Thompson v. Daunt (1890), 10 L.R. (N.S.W.) (L.) 132.

Priorities-A transferee of shares, until such transfer has been registered, is merely an equitable owner of the shares and as such liable to be postponed to those having prior equities, Re Mount David Gold Mining Co. (No Liability) (1898), 19 L.R. (N.S.w.) (E.) 95.

97. Notice of refusal to register transfer. (1) If a company refuses to register a transfer of any shares, debentures or other interests in the company it shall, within two months after the date on which the transfer was lodged with it, send to the transferee notice of the refusal.


Penalty: Fifty pounds. Default penalty. U.K. s.78; N.S.W. s. 178; Vic. s.69; Qld. s.78; S.A. s. 87; W.A. s.85; Tas. s. 68. For the statutory regulation conferring a power to refuse to register a transfer,

see Fourth Schedule, Table A, art. 22, post. As to the refusal of directors to register a transfer, see notes to s. 90, ante. As to certificate consequent upon a regular transfer, see s. 99, post.

As to the register of members, see ss. 150 et seq., post. As to the register of debenture holders, see s.70, ante. As to the register of holders of other interests, see s. 84, ante.

98. Certification of transfers. (1) The certification by a company of any instrument of transfer of shares, debentures or other interests in the company shall be taken as a representation by the company to any person acting on the faith of the certification that there have been produced to the company such documents as on the face of them show a prima facie title to the shares, debentures or other interests in the transferor named in the instrument of transfer but not as a representation that the transferor has any title to the shares, debentures or other interests.

(2) Where any person acts on the faith of a false certification by a company made negligently, the company shall be under the same liability to him as if the certification had been made fraudulently.

(3) Where any certification is expressed to be limited to forty-two days or any longer period from the date of certification the company and


its officers shall not in the absence of fraud be liable in respect of the registration of any transfer of shares, debentures or other interests comprised in the certification after the expiration of the period so limited or any extension thereof given by the company if the instrument of transfer has not within that period been lodged with the company for registration.

( 4 ) For the purposes of this section-(a) an instrument of transfer shall be deemed to be certificated if

it bears the words "certificate lodged" or words to the like effect;

(b) the certification of an instrument of transfer shall be deemed to be made by a company if-

(i) the person issuing the instrument is a person authorized to issue certificated instruments of transfer on the company's behalf; and

(ii) the certification is signed by a person authorized to certificate transfers on the company's behalf or by any officer either of the company or of a corporation so authorized; and

(c) a certification that purports to be authenticated by a person's signature or initials (whether hand-written or not) shall be deemed to be signed by him unless it is shown that the signature or initials were not placed there by him and were not placed there by any other person authorized to use the signature or initials for the purpose of certificating transfers on the company's behalf.

U.K. s. 79; Vic. s. 70; Tas. s. 69. As to instruments of transfer, see s. 95, ante. As to interests other than shares

or debentures, see s. 76, ante. This section enacts the views expressed in Bishop v. Balkis Consolidated Co.

Ltd. (1890), 25 Q.B.D. 77, 512. Certification merely amounts to a representation that the transferor has a prima

facie title. It does not warrant the validity of the documents lodged, see Longman v. Bath Electric Tramways Ltd., [1905] 1 Ch.646.

99. (1) Duties of company with respect to issue of certificates. Every company shall within two months after the allotment of any of its shares or debentures, and within one month after the date on which a transfer (other than such a transfer as the company is for any reason entitled to refuse to register and does not register) of any of its shares or debentures is lodg~d with the company, complete and have ready for delivery all the appropriate certificates and debentures in connection with the allotment or transfer, unless the conditions of issue of the shares or debentures otherwise provide.


Penalty: Fifty pounds. Default penalty. (3) Power of Court where default in issue of certificates. If any

company on which a notice has been served requiring the company to make good any default in complying with the provisions of this section fails to make good the default within ten days after the service of the notice, the Court may, on the application of the person entitled to have the certificates or the debentures delivered to him, make an order directing


the company and any officer of the company to make good the default within such time as is specified in the order, and the order may provide that all costs of and incidental to the application shall be borne by the company or by any officer of the company in default in such proportions as the Court thinks fit.

U.K. s.80; N.S.W. s. 179; Vic. s.71; Qld. s.79; S.A. s. 89; W.A. s. 87; Tas. s.70. For the statutory regulation empowering the directors to refuse to register a

transfer, see Fourth Schedule, Table A, art. 22, post. As to notice in the event of a refusal to register, see s. 97, ante.

As to the allotment of shares generally, see the earlier divisions of Part IV, ante. As to debentures generally, see Division 4 of Part IV, ante. As to the instruments of transfer, see s. 95, ante,

"Month" means calendar month. See Acts Interpretation Acts, 1954 to 1962, s.36, title ACTS OF PARLIAMENT.

For the obligation of the company not to register a transfer which is not properly stamped, see the Stamp Acts, 1894 to 1962, s. 31, title STAMP DUTIES.

Damages-As to the time from which damages may be claimed for failure to deliver a share certificate, see Ardlethan Options Ltd. v. Easdown (1915),20 C.L.R. 285, noting that no such section as this applied in that case.

Subdivision of certificate-On payment of any prescribed fee, a shareholder has a right to require in a proper case share certificates made out for amounts differing from those for which a certificate has been issued, Sharpe v. Tophams Ltd., [1939] 1 All E.R. 123.

Registered proprietor may sue-The registered proprietor of shares is entitled to sue for the certificates although the beneficial interest may be in another person, Chomley v. Union Bank of Australia Ltd., [1951] S.A.S.R. 152.

Division 7-Registration of Charges

100. Registration of charges. (1) Subject to this Division, where a charge to which this section applies is created by a company, there shall be lodged with the Registrar for registration within thirty days after the creation of the charge a statement of the prescribed particulars and-

(a) the instrument (if any) by which the charge is created or evidenced; or

(b) a copy thereof together with an affidavit verifying the execution of the charge and also verifying the copy as being a true copy of the instrument,

and if this section is not complied with in relation to the charge the charge shall, so far as any security on the company's property or under· taking is thereby conferred, be void against the liquidator and any creditor of the company.

(2) Nothing in subsection (1) of this section shall prejudice any contract or obligation for repayment of the money secured by a charge and when a charge becomes void under this section the money secured thereby shall immediately become payable.

(3) The charges to which this section applies are-(a) a charge (other than a charge solely on land) to secure any

issue of debentures; (b) a charge on uncalled share capital of a company; (c) a charge or an assignment created or evidenced by an instru·

ment (including instruments creating or evidencing absolute bills of sale) which if executed by an individual would be of limited effect if not registered under "The Bills of Sale and Other Instruments Act of 1955," or "The Liens on Crops of Sugar Cane Acts, 1931 to 1951";


(d) a floating charge on the undertaking or property of a company;

(e) a charge on calls made but not paid; (f) a charge on a ship or aircraft or any share in a ship or air

craft; (g) subject to any law of the Commonwealth, a charge on good

will, on a patent or licence under a patent, on a trade mark, or on a copyright or a licence under a copyright; and

(h) a charge on the book debts of a company.

(4) Where a charge created in the State afrects property outside the State, the instrument creating or purporting to create the charge or a copy thereof accompanied by the verifying affidavit may be lodged for registration under and in accordance with subsection (1) of this section notwithstanding that further proceedings may be necessary to make the charge valid or effectual according to the law of the place in which the property is situate.

(5) Where a series of debentures containing or giving by reference to any other instrument any charge to the benefit of which the debenture' holders of that series are entitled equally is created by a company, it shalt be sufficient if there are lodged with the Registrar for registration within thirty days after the execution of the deed containing the charge, or if there is no such deed after the execution of the first debenture of the series, a statement containing the following particulars:-

(a) the total amount secured by the whole series; (b) the dates of the resolutions authorizing the issue of the series

and the date of the covering deed (if any) by which the security is created or defined;

(c) a general description of the property charged; and (d) the name of the trustee (if any) for the debenture holders,

together with-(e) the deed containing the charge; or (f) a copy of the deed and an affidavit verifying the execution of

the deed and verifying the copy to be a true copy; or (g) if there is no such deed, a copy of one of the debentures of

the series and an affidavit verifying the copy to be a true copy.

(6) For the purposes of subsection (5) of this section where more than one issue is made of debentures in the series there shall be lodged within thirty days after each issue particulars of the date and amount of each issue, but an omission so to do shall not affect the validity of the debentures issued.

(7) Where any commission allowance or discount has been paid or made either directly or indirectly by a company to any person in consideration of his, whether absolutely or conditionally, subscribing or agreeing to subscribe or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any debentures the particulars required to be lodged under this section shall include particulars as to the amount or rate per centum of the commission, allowance or discount so paid or made, but omission so to do shall not affect the validity of the debentures issued.


(8) The deposit of any debentures as security for any debt of the company shall not for the purposes of subsection (7) of this section be treated as the issue of the debentures at a discount.

(9) No charge or assignment to which this section applies need be filed or registered under "The Bills of Sale and Other Instruments Act of 1955" or "The Liens on Crops of Sugar Cane Acts, 1931 to 1951."

(10) Where a charge requiring registration under this section is created before the lapse of thirty days after the creation of a prior unregistered charge, and comprises all or any part of the property comprised in the prior charge, and the subsequent charge is given as a security for the same debt as is secured by the prior charge, or any part of that debt, then to the extent to which the subsequent charge is a security for the same debt or part thereof, and so far as respects the property comprised in the prior charge, the subsequent charge shall not be operative or have any validity unless it is proved to the satisfaction of the court that it was given in good faith for the purpose of correcting some material error in the prior charge or under other proper circumstances and not for the purpose of avoiding or evading the provisions of this Division.

(11) In this Division "Registrar" means the Registrar at Brisbane. U.K. s. 95; N.S.W. ss. 185, 192; Vic. s.72; Qld. ss. 84, 85; S.A. ss.99, 100,

108, 109; Tas. s. 71. Acts referred to:

Bills of Sale and Other Instruments Act of 1955, title MERCANTILE LAW. Liens on Crops of Sugar Cane Acts, 1931 to 1961, title SUGAR.

As to copies of charging instruments, see s. 107, post. As to documents made out of the State, see s. 108, post. As to charges created before the commencement of this Act, see s. 109, post. As to extension of time for registration, see s. 106, ante.

For penalty for false and misleading statements in documents, see s. 375, post. For the application of this section to foreign companies, see s. 110, post.

As to debentures generally, see Division 4 of Part IV, ante. Registered-A distinction is intended to be drawn throughout this section

between "lodging for registration" (which is an act required to be done by the company, though it may be done by another person, and which is effected by lodging or placing in the hands of the Registrar of Companies the necessary documents) and "registration" (which is the act of the Registrar of Companies). The condition of validity is not registration within thirty days but lodging within thirty days for registration. The time of registration of the instrument of charge is not specifically provided for. The duty of the Registrar of Companies is to register it as soon as it is clear that nothing stands in the way of registration, Re Nirens & Sons Pty. Ltd., [1947] V.L.R.480. See also Ida H. Gold Mining Co. v. Jones (1904), 7 W.A.L.R.29.

Registrar failing to note charge-Where a mortgagee has done everything he is required by this section to do for the purpose of registering a mortgage, registration is effective in his favour, notwithstanding that the registrar may have failed properly to note the charge, Re Inglis Bros. Ltd .. [1932] N.Z.L.R. 874.

Date of its creation-A mortgage is created when the deed or instrument of mortgage or charge is executed and not at the date when money is subsequently advancd on it, Esberger & Son Ltd. v. Capital and Counties Bank. [1913] 2 Ch. 366, nor at the date of the agreement to advance, Re Columbian Fireproofing Co., [1910] 2 Ch. 120. And see 10 English and Empire Digest (Rp\.), p.815.

Charge-"A charge differs altogether from a mortgage. By a charge the title is not transferred, but the person creating the charge merely says that out of a particular fund he will discharge a particular debt. But a charge differs from an assignment. A charge on a debt confers rights on the person to whom the charge is given to have it enforced by an assignment-not by action against the debtor, but hy proceedings against the person who created the charge to assign the debt," Burlinson v. Hall (1884), 12 Q.B.D. 347, at p. 350.


"The word 'charge' may well be used to describe a burden imposed upon land, and if a payment has to be made in respect of land, and it can only be enjoyed subject to the liability for that payment, I cannot think that there would be any great straining of language if it were spoken of as charged upon the land," Payne v. Esdaile (1888), 13 App. Cas. 613, at pp.623, 624.

See also Robson v. Smith, [1895] 2 Ch. 118. Lien-"A lien is a right in one man to retain that which is in his possession,

belonging to another, till certain demands of him, the person in possession, are satisfied," Hammonds v. Barclay (1802), 2 East 227, at p. 235.

See also James Bibby Ltd. v. Woods and Howard, [1949] 2 All E.R. 1; [1949] 2 K.B.449.

Debentures-Registration under this section of a series of debentures protects documents which, through some technical defect, can only be upheld as agreement for those debentures, and it is not necessary to register such agreements separately, Re Fireproof Doors Ltd., [1916] 2 Ch. 142; [1916-17] All E.R. Rep. 931. And see Re Harrowgate Estates Ltd., [1903] 1 Ch.498; Cunard S.S. Co. Ltd. v. Hopwood, [1908] 2 Ch.564; and 10 English and Empire Digest (Rp!.) , p.813. Failure to register a deed created to support debentures which are properly registered does not afTect the validity of the debentures, Re Holmes (Samuel) Ltd. (1923), 58 I.L.T. 9; nor does the failure to register a collateral agreement providing for the subdivision of one of the registered debentures, Richard Brady Franks Ltd. v. Price (1936), 37 S.R. (N.s.W.) 37; (1937), 58 C.L.R. 112.

Foreclosure-As to an order for foreclosure under debentures creating a floating charge and a bill of sale, see Poyser v. Mount Shamrock Gold Co. Ltd. (1895), 6 Q.L.J. 276.

Escrow-As to the efTect of delivery of debenture as an escrow and subsequent liquidation before fulfilment of conditions, see Richard Brady Franks Ltd. v. Price (1937), 37 S.R. (N.S.w.) 37; 468.

Book debts-"Book debts" means such debts as ought to be entered in such books as ought to be kept in the business in question, and as would, if properly kept, sufficiently disclose the company's business transactions and financial position from time to time, Motor Credits Ltd. v. W. F. Wollaston Ltd. (In Liq.) (1929), 29 N.S.W.S.R. 227 (hire under hire-purchase agreements and purchase money payable at option of hirers). As to whether the expression includes future book debts, see Blackwoods Ltd. v. Chartres (1931), 48 N.S.W.W.N. 208; Re W. F. Le Cornu Ltd., [1931] S.A.S.R. 425. See also Robertson v. Grigg (1932), 47 C.L.R. 257; Tailby v. Official Receiver (1888), 13 App. Cas. 523.

For an example of a letter of authority held to be an equitable assignment by way of security and to constitute a charge on the book debts of the company (which had gone into voluntary liquidation), see Re Kent and Sussex Sawmills Ltd., [1946] 2 All E.R.638; (1946). 62 T.L.R.747.

As to an absolute assignment of part of a book debt which is to fall due in the future, see Ashby, Warner & Co. Ltd. v. Simmons, [1936] 2 All E.R.697; (1936), 52 T.L.R. 613.

Mortgage on book debts-As to what constitutes a mortgage on book debts, see Re Law, Car and General Insurance Corpn. Ltd., [1911] W.N. (Eng.) 91, 101; [1911-13] All E.R.Rep.1024.

Priority of floating charges-Where a company gave a floating charge over goods purchased to secure part of the purchase price, the debenture was held to take priority over a debenture prior in time, notwithstanding that the prior debenture contained a provision that no mortgage or charge was to be given by the company in priority thereto, Mathieson v. Wahlen (1928),28 S.R. (N.S.W.) 189.

Floating chargc-A "floating charge ... is ambulatory and shifting in its nature, hovering over and so to speak floating with the property which it is intended to affect, until some event occurs or some act is done which causes it to settle or fasten on the subject of the charge within its reach and grasp," JIlingworth v. Houldsworth, [1904] A.c. 355, at p. 358.

See also Evans v. Rival Granite Quarries Ltd., [1910] 2 K.B.979; Re Otway Coal Co. Ltd., [1953] V.L.R.557.

Void as against the liquidator and any creditor-An unregistered mortgage is void as against a subsequent registered encumbrancer even though he had, at the time of taking his own security, express notice of the prior charge, Rc Monolithic Building Co., Tacon v. Monolithic Building Co., [1915] 1 Ch. 643; [1914-15] All E.R. Rep. 249.


As to severability of a mortgage void under this section as to part only of security given, see Mount Burnett Ltd. (in liquidation) v. Chambers. [1929] N.Z.L.R.609.

For a case in which an unregistered security was held good in so far as it included mining leases although not registered, see Re Dittmer Gold Mining Co. Ltd. (No.1), [1954] St. R. Qd. 255; (No.2), [1954] St. R. Qd. 266.

Mistake-The fact that a mortgage executed by a company, and which contains false recitals inserted by mistake, has been registered, does not prevent the court from afterwards rectifying the mortgage, Caulfield, Elsternwick, and Malvern Tramway Co. v. Royal Bank (1911), 17 AL.R. 91.

Charges given outside the State-As to the application of this section to mortgages, etc., given outside the State of Queensland, see Re Australian Federal Life and General Assurance Co. Ltd. (In Liq.), [1931] V.L.R. 317; Re Dittmer Gold Mining Co. Ltd. (No.1) and (No.2), supra.

As to the effect, in a winding-up, of failure on the part of a local company to comply with the provision corresponding to this section in the law of another State as regards assets situated in that State, see Re Commonwealth Agricultural Service Engineers Ltd., [1928] S.AS.R. 342.

See also Hockey v. Mother of Gold Consolidated Mines Ltd. (1903),29 V.L.R. 196. Right to inspect-The right to inspect the register of mortgages includes the

right to take copies or extracts, Nelson v. Anglo-American Land Mortgage Agency Co., [1897] 1 Ch. 130.

Charges imposed on company-It seems clear that the section of itself does not apply to charges imposed on the company without its concurrence, Re Overseas Aviation Engineering (G.B.) Ltd .. [1962] 1 All E.R. 930.

101. Duty to register charges. (1) Documents and particulars required to be lodged for registration in accordance with section one hundred may be lodged for registration by the company concerned or by any person interested in the documents, but if default is made in complying with that section the company and every officer of the company who is in default shall be guilty of an offence against this Act.


(2) Where registration is effected by some person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by him on the registration.

u.K. s. 96; N.S.W. s. 186; Vic. s.73; Qld. s. 85 (6); S.A s. 101; Tas. s.72. As to the duty of the Registrar to register, see s. 103, post. As to the particulars,

see ss. 100, ante, and 103, post. "Any person" includes a solicitor or agent although for the purpose of hostile

litigation, Re Credit Co. (1879), 11 Ch. D. 256.

102. Duty of company to register charges existing on property acquired. (1) Where a company acquires any property which is subject to a charge of any such kind as would, if it had been created by the company after the acquisition of the property, have been required to be registered under this Division or, where a foreign company becomes registered in the State and has prior to such registration created a charge which if it had been created by the company while it was registered in the State would have been required to be registered under this Division or, where a foreign company becomes registered in the State and has prior to such registration acquired property which is subject to a charge of any such kind as would if it had been created by the company after the acquisition and while it was registered in the State have been required to be registered under this Division, the company shall cause a statement of the prescribed particulars and the instrument by which the charge was created or is evidenced or a copy thereof accompanied by an affidavit containing such particulars as


are prescribed, and where a copy is lodged also verifying it as a true copy thereof, to be lodged with the Registrar for registration within thirty days after the date on which the acquisition is completed or the date of the registration of the company in the State (as the case may be).

(2) If default is made in complying with this section, the company or foreign company and every officer of the company or foreign company who is in default, shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. u.K. s. 97; Vic. s.74; Qld. s.87; S.A. s. 102; Tas. s.73. As to the duty of the Registrar to register, see s. 103, post. As to the particulars,

see SS. 100, ante, and 103, post.

103. Register of charges to be kept by Registrar. (1) The Registrar shall keep a register of all the charges lodged for registration under this Division and shall enter in the register with respect to those charges the following particulars:-

(a) in the case of a charge to the benefit of which the holders of a series of debentures are entitled, such particulars as are required to be contained in a statement furnished under subsection (5) of section one hundred; and

(b) in the case of any other charge-(i) if the charge is a charge created by the company, the date

of its creation, and if the charge was a charge existing on property acquired by the company the date of the acquisition of the property;

(ii) the amount secured by the charge; (iii) a description sufficient to identify the property charged; and (iv) the name of the person entitled to the charge.

(2) The Registrar shall issue a certificate of every registration stating if applicable the amount secured by the charge and the certificate shall be conclusive evidence that the requirements as to registration have been complied with.

u.K. s. 98; N.S.W. s. 187; Vic. s.75; Qld. s. 86; S.A. s. 103; Tas. s.74. For the effect of the Registrar's failure properly to note a charge, see Re English

Bros. Ltd., [1932] N.Z.L.R.874. For the power of the court to correct errors in the particulars, see s. 106;

Re Harrowgate Estates Ltd., [1903] I Ch.498. As to the effect of the Registrar's certificate as evidence, see Re Y olland;

Husson v. Birkett Ltd., [1908] I Ch. 152; National Provincial and Union Bank of England v. Charnley, [1924] I K.B. 431; Richard Brady Franks Ltd. v. Price (1936), 37 S.R. (NS.W.) 37; (1937),58 C.L.R. 112.

104. Endorsement of certificate of registration on debentures. (1) The company shall cause to be endorsed on every debenture forming one of a series of debentures, or certificate of debenture stock which is issued by the company and the payment of which is secured by a charge so registered-

(a) a copy of the certificate of registration; or (b) a statement that the registration has been effected and the

date of registration.


(2) Nothing in subsection (1) of this section shall be construed as requiring a company to cause a certificate of, or statement relating to the, registration of any charge to be endorsed on any debenture or certificate ()f debenture stock which has been issued by the company before the charge was registered.

(3) Every person who knowingly and wilfully authorizes or permits the delivery of any debenture or certificate of debenture stock which is not endorsed as required by this section shall be guilty of an offence against this Act.

Penalty: One hundred pounds. u.K. s. 99; N.S.W. s. 188; Vic. s.76; Qld. s.85 (5); S.A. s. 104; Tas. s.75.

105. Entries of satisfaction and release of property from charge. (1) Where, with respect to any registered charge-

(a) the debt for which the charge was given has been paid or satisfied in whole or in part; or

(b) the property or undertaking charged or any part thereof has been released from the charge or has ceased to form part of the company's property or undertaking,

the company may lodge with the Registrar in the prescribed form a memorandum of satisfaction in whole or in part, or of the fact that the property or undertaking or any part thereof has been released from the charge or has ceased to form part of the company's property or undertaking, as the case may be, and the Registrar shall enter particulars of that memorandum in the register.

(2) The memorandum must be supported by evidence sufficient to satisfy the Registrar of the payment satisfaction release or ceasing referred to in subsection (1) of this section.

u.K. s. 100; N.S.W s. 189; Vic. s.77; Qld. s. 93; S.A. s. 105; Tas. s.76. As to the register of charge, see s. 103, ante. As to the particulars with respect

to the creation of charges, see ss. 100, 103, ante. In Re Light & Co., [1917] W.N.77, the court ordered the cancellation of an

erroneous entry of satisfaction. See also Re Legal and General Co., [1901] W.N.72.

106. Extension of time and rectification of register of charges. The Court, on being satisfied that the omission to register a charge (whether under this or any corresponding previous enactment) within the time required or that the omission or mis-statement of any particular with respect to any such charge or in a memorandum of satisfaction was accidental or due to inadvertence or to some other sufficient cause or is not of a nature to prejudice the position of creditors or shareholders or that on other grounds it is just and equitable to grant relief, may on the application of the company or any person interested and on such terms and conditions as seem to the Court just and expedient order that the time for registration be extended or that the omission or mis-statement be rectified.

u.K. s. 101; N.S.W. s. 190; Vic. s.78; Qld. s.92; S.A. s. 106; Tas. s.77. The time for registration of charges is prescribed by ss. 100, 102, ante, 108, post.

As to the register of charges to be kept by the Registrar, see s. 103, ante. As to the particulars to be stated for the purposes of registration, see s. 100, ante. As to the memorandum of satisfaction, see s. 105, ante.

With the words "whether under this or any corresponding previous enactment," cf. s. 109, post.

For a further dispensatory power conferred on the court, see s. 366, post.


Accidental-" ... the common meaning [of accident] is ruled neither by logic nor by etymology, but by custom, and no formula will precisely express its usage for all cases," Trim Joint District School Board of Management v. Kelly, [1914] A.c. 667, at p. 681. See also Fenton v. Thorley, [1903] A.c. 443.

Accidental or due to inadvertence-Where there was positive evidence that parties were ignorant of the provisions of an Act requiring the filing of a document and hence failed to file it, it was held a proper case to use the remedial powers as being an omission that was accidental or due to inadvertence, Re Jackson & Co. Ltd., [1899] 1 Ch.348. See however on the question of ignorance, West Bromwich Case; Hazel v. Lewisham (Viscount); Fellowes', Lellow's & Kendrick's Cases (1911), 6 O·M. & H. 256, at p.287.

Evidence-It is most important that the court should be fully informed as to the circumstances which gave rise to the omission to register within the proper time, and that (he evidence should not, as is so often the case, merely state that the matter was accidental and due to inadvertence without particularising the reasons for the breach of the statutory requirements and the surrounding circumstances, Re Kris Cruisers Ltd., [1948] 2 All E.R. 1105; [1949] 1 Ch. 138.

See also Re Dalgety & Co. Ltd., [1928] N.Z.L.R. 731; Re Bootie Cold Storage & Ice Co., [1901] W.N.54; Re Tingri Tea Co. Ltd., [1901) W.N. 165.

Just and equitable to grant relief-As, e.g., owing (0 ignorance of the provisions of the Act, Re Mendip Press Ltd. (1901), 18 T.L.R. 38; Re Beattie (E. & F.) Ltd. (1901), 45 Sol. Jo. 671; and see the cases cited in 10 English and Empire Digest (Rpl.), p. 815.

"The words 'just and equitable' are words of the widest significance and do not limit the jurisdiction of the court to any case. It is a question of fact, and each case must depend on its own oircumstances," Re Kurilpa Protestant Hall Pty. Ltd., [1946] St.R.Qd.170, at p.183.

Terms and conditions as seem just and expedient-The order ought to contain the words: "but that this order be without prejudice to the rights of parties acquired prior to the time when such debentures shall be actually registered," Re Joplin Brewery Co. Ltd., [1902] 1 Ch.79; Re Spiral Globe Ltd., [1902] 1 Ch. 396. See also Rc Kris Cruisers Ltd., [1948] 2 All E.R. 1105; [1949] Ch. 138.

Equality as between debenture holders-Where some debentures did not require registration, but others which had been issued at a later time did require registration, the court ordered that provisions should be included in the order to preserve the rights of equality of the debenture holders inter se, Re Johnson (I. C.) & Co. Ltd., [1902] 2 Ch. 101; Re Parramatta Electric Supply Co. Ltd. (1919),19 S.R. (N.S.W.) 103.

Unsecured creditors-As to protection by the court of the interests of unsecured creditors, cf. the English decisions in Re M.l.G. Trust Ltd., [1933) Ch.542; 149 L.T. 56; [1934] A.C. 252; Re Kris Cruisers Ltd., [1948] 2 AlI E.R. 1105; [1949J Ch. 138, with the AustraJian and New Zealand decisions in Re a Limited Company (1928), 28 S.R. (N.S.W.) 364; Re Dalgety & Co. Ltd., [1928] N.Z.L.R. 731; Re Cinema Art Films Ltd., [1930] N.Z.L.R.500.

107. Company to keep copies of charging instruments and register of charges. (1) Every company shall cause a copy of every instrument creating any charge requiring registration under this Division to be kept at the registered office of the company but in the case of a series of debentures the keeping of a copy of one debenture of the series shall be sufficient for the purposes of this subsection.

(2) Every company shall keep at the registered office of the company a register of charges and enter therein all charges specifically affecting property of the company and all floating charges on the undertaking or any property of the company, giving in each case a short description of the property charged the amount of the charge and (except in the case of securities to bearer) the names of the persons entitled thereto.

(3) The copies of instruments and the register of charges kept in pursuance of this section shall be open to the inspection of any creditor or member of the company without fee, and the register of charges shall


also be open to the inspection of any other person on payment of such fee not exceeding five shillings for each inspection as is fixed by the company.

(4) If default is made in complying with any of the prOVIsIons of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: One hundred pounds. Default penalty.

u.K. ss.103-105; N.S.W. ss.193-198; Vic. s.80; Qld. s.95; S.A. ss.II0-112; W.A. ss. 95-97; Tas. s.79.

As to the registered office, see ss. 111, 112, post. As to a floating charge, see notes to s. 100, ante.

As against creditors-The omission to register debentures under this section, although the debentures are held by a director, does not render them invalid against the creditors of the company, Wright v. Horton (1887), 12 App. Cas. 371; Re Globe New Patent Iron and Steel Co. Ltd. (1879), 48 L.J. Ch. 295.

Neglect by secretary-Neglect by the secretary to carry out the instructions of directors to register a charge is not such an act as will affect the directors with having "knowingly and wilfully authorised or permitted the omission" of the entry, Re Hackney Borough Newspaper Co. (1876), 3 Ch. D. 669.

Member-The expression "member" includes in this context a solicitor or agent, although for the purposes of hostile litigation, Re Credit Co. (1879), 11 Ch. D. 256.

Winding-up supervening-The right to inspect has been held to cease on the commencement of winding-up, Somerset v. Land Securities Co., [1897] W.N. 29; Re Kent Coalfields Syndicate, [1898] 1 Q.B. 754; but note that creditors' and contributories' rights of inspection are safeguarded thereafter by the provisions of s. 248, post.

See generally 10 English and Empire Digest (Rpl.) , p.81O.

108. Documents made out of the State. Where under this Division an instrument deed statement or other document is required to be lodged with the Registrar within a specified time, the time so specified shall, by force of this section, in relation to an instrument deed statement or other document executed or made in a place out of the State, be extended by seven days or such further period as the Registrar may from time to time allow.

Vic. s. 72 (l); Qld. s. 85 (l). For the date of the creation of a charge, see note to s. 100, ante.

109. Charges, etc., created before commencement of Act. Except as is otherwise expressly provided this Division shall apply to any charge that at the date of the commencement of this Act was registerable under the repealed Act but which at that date was not registered under that Act.

110. Application of Division. A reference in this Division to a company shall be read as including a reference to a foreign company to which Division 3 of Part XI applies, but nothing in this Division applies to a charge on property outside the State of a foreign company.

N.S.W. s. 198; S.A. s. 113.

Division 3 of Part XI, post, applies to a foreign company only if it has a place of business or is carrying on business within the State, s. 344, post.


PART V-MANAGEMENT AND ADMINISTRATION

Division I-Office and Name

111. Registered office of company. (1) A company shall as from the day on which it begins to carryon business or as from the fourteenth day after the date of its incorporation, whichever is the earlier, have a registered office within the State to which all communications and notices may be addressed and which shall be open and accessible to the public for not less than three hours between the hours of nine o'clock in the morning and five o'clock in the evening each day, Saturdays, Sundays and holidays excepted.

(2) If default is made in complying with subsection (1) of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. u.K. s. 107; N.S.W. s. 75; Vic. s. 95; Qld. s. 104; S.A. s. 115; W.A. s. 99; Tas. s. 80. Documents may be served by leaving them at. or sending them by post to, the

registered office, s. 362, post. As to service in this manner on foreign companies, see ss. 346, 351, post.

As to the registered office of a foreign company, see s. 346, post. As to the requirement that a register of members be kept at the registered office, see s. 152, post.

Registered office given up-The [Registrar's] office had a record of the situation of a company's registered office, but in fact that registered office had long since been given up. Where a person who had knowledge of this fact nevertheless directed documents by post to the address disclosed in the [Registrar's] office, it was held not to be good service within the meaning of the Victorian section corresponding with s. 362, post; Rc Otway Coal Co. Ltd., [1953] V.L.R. 557.

112. Office hours. (1) Notice in the prescribed form of the situation of the registered office, the days and hours during which it is open and accessible to the public, and of any change therein shall be lodged with the Registrar within one month after the date of incorporation or of any such change as the case may be but no notice of the days and hours, during which the office is open and accessible to the public shall be required if the office is open for at least five hours between ten o'clock in the forenoon and four o'clock in the afternoon of each day, Saturdays, Sundays and holidays excepted.

(2) If default is made in complying with this section the company and every officer of the company who is in default shall be guilty of an: offence against this Act.

Penalty: Fifty pounds. Default penalty. u.K. s. 107; N.S.W. s. 75; Vic. s. 95; Qld. s. 104; S.A. s. 115; W.A. s. 99; Tas. s. 80. As to the date of incorporation, see s. 16, antc. In the case of foreign companies"

see as to notice, s. 346, post. Default penalty, see s. 380, post.

113. (1) Publication of name. The name of a company shall appear in: legible characters on-

(a) its seal; and (b) all business letters, statements of account, invoices, official

notices, publications, bills of exchange, promissory notes, endorsements, cheques, orders, receipts and letters of credit of or purporting to be issued or signed by or on behalf of the company,

and if default is made in complying with this subsection the company shall be guilty of an offence against this Act.


(2) If an officer of a company or any person on its behalf-(a) uses or authorizes the use of any seal purporting to be a

seal of the company whereon its name does not so appear; (b) issues or authorizes the issue of any business letter statement

of account invoice or official notice or publication of the company wherein its name is not so mentioned; or

(c) signs issues or authorizes to be signed or issued on behalf of the company any bill of exchange. promissory note. cheque or other negotiable instrument or any indorsement. order. receipt or letter of credit wherein its name is not so mentioned.

he shall be guilty of an offence against this Act. and where he has signed issued or authorized to be signed or issued on behalf of the company any bilI of exchange. promissory note or other negotiable instrument or any indorsement thereon or order wherein that name is not so mentioned. he shall in addition be liable to the holder of the instrument or order for the amount due thereon unless it is paid by the company.

(3) Name to be displayed on all offices. Every company shall paint or affix and keep painted or affixed. on the outside of every office or place in which its business is carried on. in a conspicuous position in letters easily legible its name and also. in the case of the registered office. the words "Registered Office" and if it fails so to do the company shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. u.K. s.108; N.S.W. s.76; Vic. s.96; Qld. s.105; S.A. s. 117; W.A. s.lOl;

Tas. s.81. A company exempted under s. 24, ante, is excused from compliance with this

section. As to the form of contracts made on behalf of a company, see s. 35, ante. As to the registered office, see s. 111, ante. Note that s. 283, post, requires in certain circumstances the words "in liquidation"

to be added to the name of a company. Contract-Failure by a company to make a contract with a stranger in its

registered name does not invalidate the contract under this section, Moreland Metal Co. Ltd. v. Cowlishaw (1919), 19 N.S.W.S.R. 231.

Seal-A seal consisting of an adhesive paper label with the name of the company printed and inscribed on it is a sufficient seal within the meaning of the section, Hoe v. Lee (1902), 3 N.S.W.S.R. 30.

Liability-As to liability of directors and others under this section, see Atkins & Co. v. Wardle (1889), 58 L.J.Q.B. 377, affirmed 5 T.L.R. 734; Derma/inc Co. Ltd. v. Ashworth (1905), 21 T.L.R. 510.

Bills of Exchange-With the provisions attaching personal liability to a person signing a bill of exchange in contravention of the section, cf. the Bills of Exchange Act, 1909-1958, ss.30, 31 (Commonwealth). As to the circumstances in which personal liability may arise, see Lindsay v. Walker and Lord (1870), 4 S.A.L.R. 106.

Misnomer in writ-Where a company was wrongly described in a writ as a firm it was held that there was a mere misnomer and not the substitution of a new defendant, Whittam v. W. 1. Daniel & Co. Ltd., [1961] 3 All E.R.796.

Publication of name-As to sufficient publication of name, see Stacey & Co. Ltd. v. Wallis (1912), 106 L.T.544; Electrical Equipment of Allst. Ltd. v. Peters, [1957] S.R. (N.S.W.) 361.

Division 2-Directors and Officers 114. Directors. (1) Every public company shall have at least three <iirectors and every proprietary company shall have at least one director.

(2) In the case of a public company at least two directors shall be natural persons who ordinarily reside within the Commonwealth and in the case of a proprietary company at least one director shall be a natural' person who ordinarily so resides.


(3) Subsection (2) of this section shall not apply to a company incorporated before the commencement of this Act until a period of six months has elapsed from the commencement of the Act.

U.K. s. 176; N.S.W. s. 120; Vic. s.97; Qld. s.149; S.A. s. 160; W.A. s. 145; Tas. s.83.

Note the provisions of s. 134, post, which contemplate that a corporation can be a director of a company. This does not, of course, affect the provisions of this section requiring a minimum number of natural persons as directors.

The articles of association usually provide for the appointment and removal of directors; see Fourth Schedule, Table A, arts. 63 et seq.; Table B, arts. 46 et seq., post.

As to powers of directors generally, see Atherton v. Plane Creek Central Mill Co. Ltd., {1914] St. R. Qd. 73; [1914] Q.w.N. 12.

On directors' duty of good faith to company as a whole in exercise of their powers, see Bulfin v. Bebar/ald's Ltd. (1938), 38 N.S.W.S.R. 423; Mills v. Mills (1937-1938), 60 C.L.R. 150; Re Investment Executive Trust 0/ New Zealand Ltd., {1937] N.Z.L.R.815.

115. Restrictions on appointment or advertisement of director. (1) A person shall not be named as a director or proposed director in the memorandum or articles of a company or in a prospectus or a statement in lieu of prospectus, unless before the registration of the memorandum or articles or the issue of the prospectus or the lodging of the statement in lieu of prospectus (as the case may be) he has by himself or by his agent authorized in writing for the purpose signed and lodged with the Registrar a consent in writing to act as a director and-

(a) signed the memorandum for a number of shares not less than his qualification, if any;

(b) signed and lodged with the Registrar an undertaking in writing to take from the company and pay for his qualification shares, if any;

( c) made and lodged with the Registrar a statutory declaration to the effect that a number of shares, not less than his qualification, if any, is registered in his name; or

(d) (in the case of a company formed or intended to be formed by way of reconstruction of another corporation or group of corporations or to acquire the shares in another corporation or group of corporations), made and lodged with the Registrar a statutory declaration that he was a shareholder in that other corporation or in one or more of the corporations of that group, and that as a shareholder he will be entitled to receive and have registered in his name a number of shares not less than his qualification, by virtue of the terms of an agreement relating to the reconstruction.

(2) Where a person has signed and lodged an undertaking to take and pay for his qualification shares, he shall, as regards those shares, be in the same position as if he had signed the memorandum for that number of shares.

(3) The foregoing provisions of this section (other than the provisions relating to the signing of a consent to act as director) shall not apply to-

(a) a company not having a share capital; (b) a proprietary company; or


(c) a prospectus or a statement in lieu of prospectus issued or lodged with the Registrar by or on behalf of a company or the articles adopted by a company after the expiration of one year from the date on which the company was entitled to commence business.

(4) On the lodging of the memorandum of a company for registration the persons desiring the incorporation of the company shall also lodge with the Registrar a list, certified by one of those persons to be correct, of the persons who have consented to be directors of the company, and if the list contains the name of any person who has not so consented the person who certified the list to be correct shall be guilty of an offence against this Act.

u.K. s.181; N.S.W. s.121; Vic. s.98; Qld. s.150; S.A. s. 161; W.A. s.146; Tas. s.84.

As to qualification shares, see s. 116; Fourth Schedule, Table A, art. 71; Table B, art. 54, post.

As to insertion of names of directors in a prospectus or statement in lieu of prospectus, see further ss. 40, 43, 46, 51, ante.

As to liability for wilfully false statements in documents for the purposes of this section, see s. 375, post. As to liability of a person who had signed the memorandum, see s. 16, ante.

As to certain advertisements and documents that are deemed to be prospectuses, see ss. 40, 43, ante. For the requirements of the Act as to statements in lieu of prospectuses, see s. 51, ante.

Signed the memorandum-By signing the memorandum a person actually takes the shares opposite his name, Re Timmins (Ebenezer) & Sons Ltd., I1902] 1 Ch.238, at p.243.

Undertaking to take and pay for qualification shares - By signing such an undertaking, a director becomes a member. An agreement "to take and pay for my qualification shares" will not, in the absence of allotment and entry in the registcr, impose liability to be placed on the list of contributories in a winding-up, Re Melbourne Parking Station Ltd., I1929] A.L.R. 224.

For form of undertaking to take and pay for qualification shares, see Australian Encyclopredia of Forms and Precedents, title COMPANIES.

Qualification shares-The question of when time begins to run within which qualification shares must be acquired was considered in Holmes v. Keyes, [1958] 2 All E.R. 129.

Othcr statutory restrictions-A number of Acts contain provisions prohibiting particular public functionaries from acting as directors or taking part in the management of joint stock companies. See, for instance, the Main Roads Acts, 1920 to 1962, s.3, title ROADS; the Railways Acts, 1914 to 1961, s.9, title RAILWAYS AND TRAMWAYS; the Industrial Conciliation and Arbitration Act of 1961, s.9, title LABOUR; the Land Act of 1962, s. 30, title LAND.

116. Qualification of director. (1) Without affecting the operation of any of the preceding provisions of this Division, every director, who is by the articles required to hold a specified share qualification and who is not already qualified, shall obtain his qualification within two months after his appointment or such shorter period as is fixed by the articles.

(2) Unless otherwise provided by the articles the qualification of any director of a company must be held by him solely and not as one of several joint holders.

(3) A director shall vacate his office if he has not within the period referred to in subsection (1) of this section obtained his qualification or if after so obtaining it he ceases at any time to hold his qualification.

Penalty: Two hundred pounds. Default penalty.


(4) A person vacating office under this section shall be incapable of being re-appointed as director until he has obtained his qualification.


For the statutory articles relating to qualifying shares, see Fourth Schedule, Table A, art. 71; Table B, art. 54, post.

Election of directors-On election of directors, see Robert Batcheller & Sons Ltd. v. Batcheller, [1945] I All E.R. 522.

Obligation to hold shares-Apart from provision in the articles, there is no obligation on a director to hold shares, De Ruvigne's Case (1877), 5 Ch. D. 306.

Payment for shares - Where a company's articles provided that no person indebted for calls should be eligible for the office of director, and a director had given his promissory notes in payment of certain calls, it was held that he was not qualified for office, Umphclby v. Wilkie (1874), 5 A.I.R. 108.

Registration necessary-Qualification is not complete till registration. See Spencer v. Kennedy, [1926] Ch. 125; [1925] All E.R. Rep. 135.

Failure to acquire qualification-For an illustration of the consequences of failure to observe the requirements of similar provisions of the English legislation, see Holmes v. Keyes, [1958] 1 All E.R.72I; [1958] Ch.670.

Holding as trustee - A director may hold the necessary shares as trustee, Pulbrook v. Richmond Consolidated Mining Co. (1878), 9 Ch. D. 610, or receive them as a gift, Brown's Case (1873), 9 Ch. App. 102.

Variation of qualification - As to the effect of the share qualification being raised, see Molineux v. London, Birmingham, and Manchester Insurance Co. Ltd., [1902] 2 K.B. 589.

As to consequences of reduction of directors' share qualification below minimum value on reduction of company's capital, see Re Gilt Edge Safety Glass Ltd., [1940] 2 All E.R.237; [1940] Ch.495.

Proprietary interest-A single shareholder may sue the company to enforce any individual right of his own, e.g. his right to have his vote recorded, Pulbrook v. Richmond Consolidated Mining Co. (1878), 9 Ch. D. 610. This principle was employed in Hayes v. Bristol Plallt Hire Ltd., [1957] I All E.R. 685, to enable a director to proceed with an action for equitable relief where he was wrongly excluded from the board of directors.

117. Undischarged bankrupts acting as directors. (1) Every person who being an undischarged bankrupt acts as director of, or directly or indirectly takes part in or is concerned in the management of, any corporation except with the leave of the Court shall be guilty of an offence against this Act.

Penalty: Imprisonment for six months or Five hundred pounds or both.

(2) The Court shall not give leave under this section unless notice of intention to apply therefor has been served on the Crown Law Officer and on the Official Receiver under any law of the Commonwealth relating to bankruptcy, and the Crown Law Officer and the Official Receiver or either of them may be represented at the hearing of and may oppose the granting of the application.

u.K. s. 187; N.S.W. s. 123; Vic. s. 100; Qld. s. 152; S.A. s. 163; W.A. s. 148; Tas. s.86.

See also Fourth Schedule, Table A, art. 72; Table B, art. 55, post. Leave of the court-Leave was refused in Re Kingsgate Rare Metals Ply. Ltd.,

[1940] Q.W.N.30.

118. Appointment of directors to be voted on individually. (1) At a general meeting of a public company, a motion for the appointment of two or more persons as directors by a single resolution shall not be made unless a resolution that it shall be so made has first been agreed to by the meeting without any vote being given against it.


(2) A resolution passed in pursuance of a mot~on :n:tade in con· tra vention of this section shall be void, whether or not Its bemg so moved was objected to at the time.

(3) Where a resolution pursuant to a motion made in contravention of this section is passed no provision for the automatic re-appointment of retiring directors in default of another appointment shall apply.

(4) For the purposes of this section, a motion for approving a person's appointment or for nominating a person for appointment shall be treated as a motion for his appointment.

(5) Nothing in this section shall apply to a resolution altering the company's articles.

(6) Nothing in this section prevents the election of two or more directors by ballot or poll.

U.K. s. 183; Vic. s. 101; Tas. s.87. Note that this section applies only to public companies. As to meetings, see Division 3 of Part V, post. For the statutory articles respecting general meetings and appointment of

directors, see Fourth Schedule, Tables A, B, General Meetings, Proceedings at General Meetings, Directors: Appointment, etc., post.

As to alteration of articles, see s. 31, ante.

119. Validity of acts of directors and officers. The acts of a director or manager or secretary shall be valid notwithstanding any defect that may afterwards be discovered in his appointment or qualification.

U.K. s. 180; N.S.W. s. 124; Vic. s. 102; Qld. s. 153; S.A. s. 164; W.A. s. 149; Tas. s.88.

For provisions empowering the court to grant relief to officers of a corporation in proceedings against them for negligence, default, breach of duty, or breach of trust, see s. 365, post.

As to minutes of a company recording appointment of officers, see s. 148, post. For statutory articles relating to acts of directors, see Fourth Schedule, Table A,

art. 89; Table B, art. 72, post. As to secretaries, see s. 132, post. Every company shall keep at its registered office a register of its directors,

managers and secretaries, s. 134, post. General-The position is the same as regards both rights and liabilities. See

Briton Medical General Life Assoc. v. Jones (1889), 61 L.T. 384; British Asbestos Co. Ltd. v. Boyd, [1903] 2 Ch. 439; Transport Ltd. v. Schonberg (1905), 21 T.L.R. 305; Dawson v. African Consolidated Land and Trading Co., [1898] 1 Ch.6 (validity of calls); A. M. Spicer and Son Pty. Ltd. v. Spicer (1931), 47 C.L.R. 151.

A company cannot set up an irregularity against a shareholder who has in consequence changed his position, Bargate v. Shortridge (1855), 5 H.L. Cas. 297. See further 9 English and Empire Digest (Rp\.), p. 458.


Directors de facto-As a generalisation it may be said that the effect of this section is that as between the company and persons having no notice to the contrary, directors, etc., de facto are as good as directors, etc., de jure, Channel Collieries Trust Ltd. v. Dover, St. Margaret's and Martin Mill Light Railway Co., [1914] 2 Ch. 506, at p. 515; [1914-15] All E.R. Rep. 265, at p.269.

No appointment at all-The section does not apply where there has been no appointment at all, Morris v. Kanssen, [1946] A.C. 459; [1946] 1 All E.R. 586; Grant v. John Grant & Sons Pty. Ltd. (1950),82 C.L.R. I, at p. 34.

Procedural slip-The section entitles a person to treat a transaction as binding on the company only when it is entered into b¥ directors who were regularly appointed in substance; the only defect in the appomtment which it cures is a mere procedural slip, Morris v. Kanssen, [1946] A.C.459; [1946] 1 All E.R. 586.


Rule in Royal British Bank v. Turquand-A stranger dealing with a company has the right to assume, as against the company, that all matters of internal management have been duly complied with, Royal British Bank v. Turquand (1855), 5 E.&B. 248; (1856),6 E.&B. 327.

But a person dealing with a director with notice of an irregularity must submit to avoidance of the transaction notwithstanding that some other article may purport to validate the transaction, People's Prudential Assurance Ltd. v. Australian Federal Life and General Assurance Ltd. (1935), 35 S.R. (N.S.W.) 253.

Note that the section, by its own terms, is narrower in scope than the rule in Royal British Bank v. TlIrquand. Furthermore the rule in Turquand's Case avails only him who seeks to enforce an obligation against the company; but a company can rely on the section if, for example, it should seek to enforce a call against members when the board which made the call was irregularly appointed, Dawson v. African Consolidated Land and Trading Co., [1898] 1 Ch. 6.

See further as to the rule in Turquand's Case, Houghton & Co. v. Nothard, Lowe & Wills Ltd., [1927] 1 KB. 246; [1927] All E.R. Rep. 97; Kreditbank Cassell G.m.h.H. v. Schenkers Ltd., [1927] 1 KB. 826; [1927] All E.R. Rep. 421; British Thomson-Houston Co. Ltd. v. Federated European Bank Ltd., [1932] 2 KB. 176; [1932] All E.R. Rep. 448; Re Hapytoz Pty. Ltd. (in liquidation), [1937] V.L.R. 40; Goulhurn Valley Butter Co. Pty. Ltd. v. Bank of N.S.W. (1900), 25 V.L.R. 702; Rama Corporation Ltd. v. Proved Tin and General Investments Ltd., [1952] 2 Q.B. 147; [1952] 1 All E.R. 554.

Manager-For the purpose of attracting criminal liability, a person who, without having been appointed an officer of the company, has in fact acted throughout as the manager of its affairs may be the manager, R. v. Lawson, [1905] 1 K.B. 541.

120. Removal of directors. (1) A public company may by ordinary resolution remove a director before the expiration of his period of office, notwithstanding anything in its articles or in any agreement between it and him but where any director so removed was appointed to represent the interests of any particular class of shareholders or debenture holders the resolution to remove him shall not take effect until his successor has been appointed.

(2) Special notice shall be required of any resolution to remove a director under this section or to appoint some person in place of a director so removed at the meeting at which he is removed, and on receipt of notice of an intended resolution to remove a director under this section the company shall forthwith send a copy thereof to the director concerned, and the director (whether or not he is a member of the company) shall be entitled to be heard on the resolution at the meeting.

(3) Where notice is given pursuant to subsection (2) of this section and the director concerned makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so-

(a) in any notice of the resolution given to members of the company state the fact of the representations having been made; and

(b) send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company),

and if a copy of the representations is not so sent because they were received too late or because of the company's default the director may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting.


( 4) Notwithstanding the foregoing provisions of this section, copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Court is satisfied that the rights conferred by this section are being abused to secure needless publicity for defamatory matter and the Court may order the company's costs on an application under this section to be paid in whole or in part by the director, notwithstanding that he is not a party to the application.

(5) A vacancy created by the removal of a director under this section, if not filled at the meeting at which he is removed, may be filled as a casual vacancy.

(6) A person appointed director in place of a person removed under this section shall be treated, for the purpose of determining the time at which he or any other director is to retire, as if he had become a director on the day on which the person in whose place he is appointed was last appointed a director.

(7) Nothing in the foregoing provisions of this section shall be taken as depriving a person removed thereunder of compensation or damages payable to him in respect of the termination of his appointment as director or of any appointment terminating with that as director or as derogating from any power to remove a director which may exist apart from this section.

(8) A director of a public company shall not be removed by. or be required to vacate his office, by reason of any resolution request or notice of the directors or any of them notwithstanding anything in the articles or any agreement.

u.K. s. 184; Vic. s. !O3; Tas. s.89. Note that this section applies only to public companies. As 10 the filling of ca'lI~l v~cancies, see Fourth Schedule, Table A, art. 68;

Table B, art. 51. post. As to the removal of directors, see Fourth Schedule, Table A, art. 69; Table n, art. 52, post.

As to the vacation of ofIice of director, see Fourth Schedule, Table A, art. 72; Table B, art. 55, post.

As to compensation for loss of ofiice, see s. 129, post. For resolutions requiring special notice, see s. 145, post. \Vrongful removal of director-See Hayes v. Bristol Plant Hire Ltd., [1957]

All E.R. 685.

121. Age limit for directors. ( 1) Subject to the provisions of this section no person of or over the age of seventy-two years shall be appointed a director of a public company or of a subsidiary of a public company.

(2) The office of a director of a public company or of a subsidiary of a public company shall become vacant at the conclusion of the annual general meeting commencing next after he attains the age of seventy-two years or if he has attained the age of seventy-two years before the commencemcnt of this Act at the conclusion of the annual general meeting commencing next after the commencement of this Act.

(3) Any act done by a person as director shall be valid notwithstanding that it is afterwards discovered that his appointment had terminated by virtuc of subsection (2) of this section.

6


( 4) Where the office of a director has become vacant by virtue of subsection (2) of this section no provision for the automatic re-appointment of retiring directors in default of another appointment shall apply in relation to that director.

(5) If any such vacancy has not been filled at the meeting at which the office became vacant the office may be filled as a casual vacancy.

(6) Notwithstanding anything in this section a person of or over the age of seventy-two years may by a resolution of which no shorter notice than that required to be given to the members of the company of an annual general meeting has been duly given, passed by a majority of not less than three-fourths of such members of the company as being entitled so to do vote in person or, where proxies are allowed, by proxy, at a general meeting of that company, be appointed or reappointed as a director of that company to hold ofIlce until the next annual general meeting of the company or be authorized to continue in office as a director until the next annual general meeting of the company.

(7) Nothing in this section shall limit or affect the operation of any provision of the memorandum or articles of a company preventing any person from being appointed a director or requiring any director to vacate his ofIice at any age less than seventy-two years.

U.K. s. 185. Note that the section applies to directors of public companies and subsidiaries

of public companies. As to the annual general meeting, see s. 136, post. As to meetings generally,

see Division 3 of Part V; Fourth Schedule, Tables A, B. Proceedings at General Meetings, post.

As to the validity of acts of a director, see further s. 119, (llltC.

As to the filling of casual vacancies, see Fourth Schedule, Table A, art. 68; Table B, art. 51, post. For further provisions relating to the vacation of office. see Fourth Schedule, Table A, art. 72; Table B, art. 55, post.

122. Power to restrain certain persons from managing companies. (1) Where a person is convicted whether within or without the State-

(a) on indictment of any offence in connection with the promotion formation or management of a corporation;

(b) of any offence involving fraud or dishonesty punishable on conviction with imprisonment for three months or more; or

(c) of any offence under section one hundred and twenty-four or under section three hundred and three.

and that person, within a period of five years after his conviction or, if he is sentenced to imprisonment, after his release from prison, without the leave of the Court is a director or promoter of or is in any way whether directly or indirectly concerned or takes part in the management of a company he shall be guilty of an offence against this Act.

Penalty: Imprisonment for six months or Two hundred pounds or both.

(2) A person intending to apply for the leave of the Court under this section shall give to the Crown Law Officer not less than ten days' notice of his intention so to apply.

COMPANIES ACT OF 1961 5s.121-123 163

(3) On the hearing of any application under this section the Crown Law Officer may be represented at the hearing of and may oppose the granting of the application.

U.K. s. 188; N.S.W. s. 255; Vic. s. 104; Qld. s. 224; S.A. s. 290; W.A. ss. 226, 281; Tas. s. 90.

As to responsibility of persons for fraudulent trading, see s. 304, post. Note the provisions of s. 124, post, which impose on a director the duty to act honestly, diligently and so as not to gain an improper advantage for himself or to cause detriment to the company.

As to liabililY where proper accounts are not kept, see s. 303, post. With the provisions of this section relating to seeking the leave of the court,

cf. s. 117, lIlll<!.

123. Disclosure of interests in contracts, property, offices, etc. (1) Subject to this section every director of a company who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company shall as soon as practicable after the relevant facts have come to his knowledge declare the nature of his interest at a meeting of the directors of the company.

(2) The requirements of subsection (1) of this section shall not apply in any case where the interest of the director consists only of being a member or creditor of a corporation which is interested in a contract or proposed contract with the first-mentioned company if the interest of the director may properly be regarded as not being a material interest.

(3) A director of a company shall not be deemed to be interested or to have been at any time interested in any contract or proposed contract by reason only-

(a) in a case where the contract or proposed contract relates to any loan to the company-that he has guaranteed or joined in guaranteeing the re-payment of the loan or any part of the loan; or

(b) in a case where the contract or proposed contract has been or will be made with or for the benefit of or on behalf of a corporation which by virtue of the provisions of subsection (5) of section six is deemed to be related to the company-that he is a director of that corporation,

and this subsection shall have effect not only for the purposes of this Act but also for the purposes of any other law, but shall not affect the operation of any provision in the articles of the company.

(4) For the purposes of subsection (1) of this section, a general notice given to the directors of a company by a director to the effect that he is an officer or a member of a specified company or a member of a specified firm and is to be regarded as interested in any contract which may, after the date of the notice, be made with that company or firm shall be deemed to be a sufficient declaration of interest in relation to any contract so made, but no such notice shall be of effect unless either it is given at a meeting of the directors or the director takes reasonable steps to insure that it is brought up and read at the next meeting of the directors after it is given.

(5) Every director of a company who holds any office or possesses any property whereby whether directly or indirectly duties or interests might be created in conflict with his duties or interests as director shall declare at a meeting of the directors of the company the fact and the nature character and extent of the conflict.


(6) The declaration shall be made at the first meeting of the directors held-

(a) after the commencement of this Act; (b) after he becomes a director; or (c) (if already a director) after he commenced to hold the office

or to possess the property, as the case requires.

(7) The secretary of the company shall record every declaration under this section in the minutes of the meeting at which it was made.

(8) Except as provided in subsection (3) of this section this section shall be in addition to and not in derogation of the operation of any rule of law or any provision in the articles restricting a director from having any interest in contracts with the company or from holding offices or possessing properties involving duties or interests in conflict with his duties or interests as a director.

Penalty: Five hundred pounds. u.K. s. 199; N.S.W. s. 129; Vic. s. 106; Qld. ss. 156, 157; S.A s. 167; W.A s. 154;

Tas. s. 92. As to contracts in which a director is directly or indirectly interested, see further

Fourth Schedule, Table A, art. 72; Table B, art. 55, post. As to a corporation that is deemed to be related to another, see s. 6, ante. In a scheme under s. 182, post, the interests of the directors are directed to be

disclosed. Directors are agents-There is ample authority to say that directors are agents

of the company: see, for example, Ferguson v. Wilson (1866), L.R. 2 Ch.App. 77; North West Co-operative Freezing and Call/zing Co. Ltd. v. Easton (1915), 11 Tas. L.R.65; Smith v. Anderson (1880). 15 Ch. D. 247.

Whether directors are trustees-There is also authority to say that directors are both trustees and agents: see, for example, Great Eastern Railway Co. v. Turner (1872), L.R. 8 Ch. App. 149; and that directors are trustees: see, for example, Re Forest of Dean Coal Mining Co. (1878), 10 Ch. D. 450; York and North Midland Railway Co. v. Hudson (1845), 16 Beav. 4115.

It has been observed, however, that directors are not, in the strict sense, trustees. See, for example, Re Lands Allotment Co., [1894] 1 Ch. 616, at p. 631; Grimwade v. Mutual Society (1884), 52 L.T.409, at p.461.

Directors are fiduciary agents-"Directors of a company arc fiduciary agents, and a power conferred upon them cannot be exercised in order to obtain some private advantage, or for any purpose foreign to the power," Mills v. Mills (1938), 1)0 C.L.R. 150, at p. 185. See also Peters' American Delicacy Co. Ltd. v. Heath (1939), 61 C.L.R.457; [1939] AL.R. 124; Fllrs Ltd. v. Tomkies (1935), 54 C.L.R. 583; Couve v. J. Pierre Couve Ltd. (1933),49 C.L.R. 486; A. M. Spicer & Son Pty. Ltd. v. Spicer (1931), 47 C.L.R. 151; Ardll'than Options Ltd. v. Easdowl1 (1915). 20 C.L.R. 285.

From this it follows that a director must account to the company for any profit made by him as a result of his position, Regal (Hastings) Ltd. v. Gulliver, [1942] 1 All E.R. 378. But a director is not trustee for individual shareholders, Percival v. Wright, [1902] 2 Ch.421.

The capacity of a director is distinct from that of a member; so there is nothing to prevent a director from voting as a memher upon any question in which he may have an interest, Nortlz-West Transportation Co. Ltd. v. Beatty (1887), 12 App. Cas. 589. But in so doing he may not retain any secret profit, Cook v. Deeks, [1916] 1 AC. 554; [19/6-17] All E.R. Rep. 285. See also Peters' American Delicacy Co. Ltd. v. Heath (1939), 61 C.L.R.457, at pp.482, 504, 512; Mills v. Mills (1938), 60 C.L.R. 150, at p.164.

On a director's duty of good faith to the company as a whole in exercise of his powers, see Bulfin v. Bebar/ald's Ltd. (1938), 38 S.R. (N.S.W.) 423; Mills v. Mills (1938). 60 C.L.R. 150; Re Investmcnt Executivc Trust 0/ New Zealand Ltd., [1937] NZ.L.R. 815.

See also 6 Halsbury's Laws of England. 3rd cd., p. 274; 9 English and Empire Digest (Rpl.) , p. 518; Vol. 10, p. 1267.


124. As to the duty and liability of officers. (1) A director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office.

(2) An officer of a company shall not make use of any information acquired by virtue of his position as an officer to gain directly or indirectly an improper advantage for himself or to cause detriment to the company.

(3) An officer who commits a breach of any of the provisions of this section shall be-

(a) liable to the company for any profit made by him or for any damage suffered by the company as a result of the breach of any of those provisions; and

(b) guilty of an offence against this Act. Penalty: Five hundred pounds. ( 4) This section is in addition to and not in derogation of any other

enactment or rule of law relating to the duty or liability of directors or officers of a company.

Vic. s. 107; Tas. s. 93. As to the power of the court to grant relief in certain circumstances, see s, 365.

post, As to the mode of the exercise by directors of their powers, see further the notes

to s, 123, ante, For a discussion of the responsibilities of directors, see a paper by the Honourable

Sir Douglas Menzies, KB.E" 33 ALJ.l56, See generally, as to the obligation to act honestly, Corio Guarantee Corporation

Ltd, v, McCallum, [1956] V.L.R,755, On the want of good faith in the exercise of directors' powers, see McCann v,

Ngurli, [1953] S,AS.R.233, and cf. McCann v. Myall Ltd., [1952] S.A Law Soc. Jdg. Sch. Reports 218.

125. Loans to directors. (1) A company shall not make a loan to a director of the company or of a company which by virtue of subsection (5) of section six is deemed to be related to that company, or enter into any guarantee or provide any security in connection with a loan made to such a director by any other person but nothing in this section shall apply-

(a) to anything done by a company which is for the time being an exempt proprietary company;

(b) to anything done by a subsidiary in relation to such a director, where the director is its holding company;

(c) subject to subsection (2) of this section, to anything done to provide such a director with funds to meet expenditure in· curred or to be incurred by him for the purposes of the company or for the purpose of enabling him properly to perform his duties as an officer of the company;

(d) subject to subsection (2) of this section, to anything done to provide such a director who is engaged in the full·time em· ployment of the company or its holding company, as the case may be, with funds to meet expenditure incurred or to be incurred by him in purchasing or otherwise acquiring a home;

(e) to any loan made to such a director who is engaged in the full·time employment of the company or its holding company, as the case may be, where the company has at a general meeting approved of a scheme for the making of loans to employees of the company and the loan is in accordance with that scheme; or


(f) in the case of a company whose ordinary business includes the lending of money or the giving of ~uarantees in connection with loans made by other persons, to anything done by the company in the ordinary course of that business.

(2) Paragraph (c) or paragraph (d) of subsection (1) of this section shall not authorize the making of any loan, or the entering into any guarantee, or the provision of any security except-

(a) with the prior approval of the company given at a general meeting at which the purposes of the expenditure and the amount of the loan or the extent of the guarantee or security, as the case may be, are disclosed; or

(b) on condition that, if the approval of the company is not given as aforesaid at or before the next following annual general meeting, the loan shall be repaid or the liability under the guarantee or security shall be discharged, as the case may be, within six months from the conclusion of that meeting.

(3) Where the approval of the company is not given as required by any such condition the directors authorizing the making of the loan or the entering into the guarantee or the provision of the security shall be jointly and severally liable to indemnify the company against any loss arising therefrom.

(4) Where a company contravenes the provisions of this section any director who authorizes the making of any loan, the entering into any guarantee or the providing of any security contrary to the provisions of this section shall be guilty of an offence against this Act.

Penalty: Two hundred pounds.

(5) Nothing in this section shall operate to prevent the company from recovering the amount of any loan or amount for which it becomes liable under any guarantee entered into or in respect of any security given contrary to the provisions of this section.

(6) Before a person accepts from a proprietary company any guarantee or security referred to in subsection (1) of this section, that person may require the company to furnish him with a certificate signed by a director and the secretary of the company certifying that the company is an exempt proprietary company.

(7) Where the guarantee or security has been accepted by the person after the certificate is so furnished the person may enforce the guarantee or security against the company notwithstanding that at the time the certificate was furnished or the guarantee or security was accepted the' company was not an exempt proprietary company.

(8) A director or secretary of a company who furnishes a person with such a certificate that is false shall be guilty of an offence against this Act.

Penalty: Imprisonment for six months or Two hundred pounds. u.K. s, 190.

As to a company that is deemed to be related to another, see s. 6, ante. See also s. 6 in relation to the terms "holding company:' "subsidiary company."

In so far as this section enables the company to recover moneys in respect of a security. it is evidently designed with the decision in Victor Battery Co. Ltd. v. Curry's Ltd., [1946] Ch.242; [1946] 1 All E.R. 519, in mind.


126. Register of directors' shareholdings, etc. (1) Every company shall keep a register showing with respect to each director of the company (other than a director that is its holding company) the number description and amount of any shares in or debentures of the company or a corporation that is deemed to be related to that company by virtue of subsection (5) of section six which are held by or in trust for him or of which he has any right to become the holder (whether on payment or not) but the register need not include shares in any corporation which is the wholly-owned subsidiary of another corporation.

(2) Where by virtue of subsection (1) of this section an entry is or should have been made in the register in relation to any director by reason of a transaction entered into after the commencement of this Act and while he is a director the register shall also show the date of and price or other consideration for the transaction and where there is an interval between the agreement for any such transaction and the completion thereof the date shall be that of the agreement.

(3) If default is made in complying with subsection (1) or subsection (2) of this section (not being a default due to the failure of a director to give notice of any matter to the company as required by section one hundred and twenty-seven or a default due to a director giving incorrect information to the company) or if any inspection required under this section is refused or any copy required thereunder is not sent within a reasonable time, the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Five hundred pounds. Default penalty.

(4) The nature and extent of a director's interest or right in or over any shares or debentures recorded in relation to him in the register shall, if he so requires, be indicated in the register.

(5) The company shall not by virtue of anything done for the purposes of this section be affected with notice of or put upon inquiry as to the rights of any person in relation to any shares or debentures.

(6) The register shall subject to the provisions of this section be kept at the company's registered office and shall be open to inspection during ordinary business hours by any person acting on behalf of the Crown Law Officer and, during the period beginning twenty-one days before the date of the company's annual general meeting and ending five days after the date of its conclusion, to the inspection of any member or holder of debentures of the company.

(7) The Crown Law Officer may at any time require the company to furnish him with a copy of the register or any part thereof.

(8) The register shall also be produced at the commencement of the company's annual general meeting and remain open and accessible duri~g the continuance of the meeting to any person attending the meet mg.

(9) If default is made in complying with subsection (6) or subsection (8) of this section every officer of the company who is in default shall be guilty of an offence against this Act.



(10) For the purposes of this section a director of a company shall be deemed to hold or to have an interest or a right in or over any shares or debentures if a corporation other than the company holds them or has that interest or right in or over them and-

(a) that corporation or its directors are accustomed to act in accordance with his directions or instructions; or

(b) he is entitled to exercise or control the exercise of one-third or more of the voting power at any general meeting of that corporation.

(11) Any reference in this section to shares or to debentures shall be read as including a reference to options to take up shares or to options to take up debentures as the case may be.

U.K. s. 195. As to a company that is deemed to be related to another, see s. 6, ante. See

also s. 6 in relation to the terms "holding company," "subsidiary company." As to the register of directors, managers and secretaries, see s. 134, post. As to

wholly owned subsidiaries, see s. 140, post. As to the registered office, see ss. 111,112, ante. As to the annual general

meeting, see s. 136, post. With the provisions of this section as to notice of, or inquiry as to the rights

of a person in relation to any shares or debentures, cf. s. 156, post. In relation to options to take up shares, see s. 68, ante.

Note also the provisions of s. 127, post.

127. Genel'al duty to make disclosure. (I) Every director shall give notice to the company of such matters relating to himself as may be necessary for the purposes of sections one hundred and twenty-six, one hundred and thirty-four, one hundred and eighty-four and the Tenth Schedule.

(2) Any such notice shall be in writing and, if it is not given at a meeting of the directors, the director giving it shall take reasonable steps to secure that it is brought up and read at the next meeting of directors after it is given.

Penalty: Five hundred pounds. u.K. s. 198. As to meetings of directors, see Fourth Schedule, Tables A, B, Proceedings of

Directors, post.

128. Prohibition of tax-free payments to directors. (1) A company shall not pay a director remuneration (whether as director or otherwise) free of income tax, or otherwise calculated by reference to or varying with' the amount of his income tax, or the rate of income tax, except under a contract which was in force before the first day of October one thousand nine hundred and sixty-one, and which provides expressly, and not by reference to the articles, for payment of such remuneration.

(2) Any provision contained in a company's articles, or in any contract other than a contract referred to in subsection (1) of this section or in any resolution of a company or of a company's directors for payment to a director of remuneration free of income tax or otherwise calculated by reference to or varying with the amount of his income tax or the rate of income tax shall have effect as if it provided for payment as a gross sum subject to income tax, of the net sum for which it actually provides.


(3) This section shall not apply to remuneration due before the commencement of this Act or in respect of a period before the commencement of this Act.

(4) Where a company contravenes the provisions of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Five hundred pounds. U.K. s. 189. As to the detennination of the remuneration of directors, see further Fourth

Schedule, Table A, art. 70; Table B, art. 53, post. See further, as to payments to directors, s. 129, post. As to disclosure in the profit and loss account of the total amount paid to the

directors as remuneration, see Ninth Schedule, cl. 1, post.

129. (1) Payments to director for loss of office, etc. It shall not be lawful-

(a) for a company to make to any director any payment by way of compensation for loss of office as a director of that company or of a subsidiary of that company or as consideration for or in connection with his retirement from any such office; or

(b) for any payment to be made to any director of a company in connection with the transfer of the whole or any part of the undertaking or property of the company,

unless particulars with respect to the proposed payment (including the amount thereof) have been disclosed to the members of the company and the proposal has been approved by the company in general meeting and when any such payment has been unlawfully made the amount received by the director shall be deemed to have been received by him in trust for the company.

(2) Where such a payment is to be made to a director in connection with the transfer to any person, as a result of an offer made to shareholders, of all or any of the shares in the company, that director shall take all reasonable steps to secure that particulars with respect to the proposed payment, including the amount thereof, shall be included in or sent with any notice of the offer made for their shares which is given to any shareholders unless these particulars are furnished to the shareholders by virtue of section one hundred and eighty-four.

(3) A director who fails to comply with subsection (2) cif this section, and a person who has been properly required by a director to include in or send with any notice under this section the particulars required by that subsection and who fails so to do, shall be guilty of an offence against this Act, and if the requirements of that subsection are not complied with any sum received by the director on account of the payment shall be deemed to have been received by him in trust for any person who has sold his shares as a result of the offer made.

(4) If in connection with any such transfer the price to be paid to a director of the company whose office is to be abolished or who is to retire from office for any shares in the company held by him is in excess of the price which could at the time have been obtained by other holders of the like shares or any valuable consideration is given to any such director, the excess or the money value of the consideration, as the case may be, shall, for the purposes of this section, be deemed to have been a payment made to him by way of compensation for loss of office or as consideration for or in connection with his retirement from office.


(5) As to payments to directors. Any reference in this section to payments to any director of a company by way of compensation for loss of office or as consideration for or in connection with his retirement from office shall not include-

(a) any payment under an agreement entered into before the commencement of this Act;

(b) any payment under an agreement particulars whereof have been disclosed to and approved by the company in general meeting;

(c) any bona fide payment by way of damages for breach of contract;

(d) any bona fide payment by way of pension or lump sum payment in respect of past services including any superannuation or retiring allowance superannuation gratuity or similar payment where the value or amount of the pension or payment (except in so far as it is attributable to contributions made by the director) does not exceed the total emoluments of the director in the three years immediately preceding his retirement or death; or

(e) any payment to a director pursuant to an agreement made between the company and him before he became a director of the company as the consideration or part of the consideration for the director agreeing to serve the company as a director.

(6) This section shall be in addition to and not in derogation of any rule of law requiring disclosure to be made with respect to any such payments or any other like payment.

u.K. ss. 191-194; N.SW. s. 130; Vic. s. 108; Qld. s. 158; S.A. s. 168; W.A. s. 155; Tas. s.94.

Compare the provisions of s. 185, post. Section 184, post, relates to take-over olTers. As to general meetings, see ss. 135 et seq., post.

The articles must provide for any payment sought to be made by way of compensation for loss of office, Re George Newman & Co., [1895] 1 Ch. 674.

As to the term "subsidiary company," see s. 6, ante.

130. Provisions as to assignment of office. (1) If in the case of any public company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any such assignment of oflice shall, notwithstanding anything in the said provision, be of no effect until approved by a special resolution of the company.

(2) This section shall not be construed so as to prevent the appointment by a director (if authorized by the articles and subject thereto) of an alternate or substitute director to act for or on behalf of the director during his inability for any time to act as director.

u.K. s.204; N.S.W. s. 131; Vic. s. 109; Qld. s. 159; S.A. s. 169; W.A. s. 156; Tas. s. 95.

Note that this section refers only to public companies. As to special resolutions, see s. 144, post. As (0 alternate or substitute directors,

see Fourth Schedule, Table A, art. 82; Table B, art. 65, post. Appointment of directors by outsider-So long as the articles require directors

to be appointed by the members in general meeting, the directors cannot confer on any outsider the power of appointing directors, James v. Eve (1873), L.R. 6 H.L. 335; but the articles may expressly so provide, though the court will not enforce the appointment of a person as director who is objectionable to the company on personal grounds, British Murac Syndicate Ltd. v. A/perton Rubber Co. Ltd., [1915] 2 Ch. 186; [1914-15] All E.R. Rep. 346.

COMPANIES ACT OF 1961 5S. 129-132 171

131. Powers to require disclosure of directors' emoluments. (1) If a company is served with a notice sent by or on behalf of-

(a) at least ten per centum of the total number of members of the company; or

(b) the holders in aggregate of not less than ten per centum in nominal value of the company's issued share capital, .

requiring the emoluments of the directors of the company or of a subsidiary to be disclosed the company shall forthwith-

(c) prepare or cause to be prepared an audited statement showing the total emoluments paid to each of the directors of the company and to each director of a subsidiary including any amount paid by way of salary for the financial year immediately preceding the service of the notice;

(d) lay the statement before the company in general meeting; and (e) forward a copy of the statement to all persons entitled to

receive notice of general meetings of the company. (2) If default is made in complying with any of the provisions of

this section the company and every director of the company shall be guilty of an offence against this Act.

Penalty: Five hundred pounds. U.K. s. 196; N.S.W. s. 128; Vic. Ninth Schedule; Qld. s. 155; S.A. s. 166. As to the persons who are entitled to receive notice of general meetings, see

Fourth Schedule, Tahle A, art. 111; Table B, art. 93, post. As to service of documents (which include notices, s. 5, ante) on a company,

see s. 362, post. Further as to disclosure of the total of the amount paid to directors as

remuneration, see Ninth Schedule, cl. 1, post. As to the term "subsidiary company," see s. 6, ante. Where a director's voting and taking inordinate fees amounted to an appropria

tion of the company's funds, an abuse of his undoubted majority powers and a deprivation of the minority of their rights, his conduct was held to be fraudulent and he was ordered to repay the fees, Maddams v. Miller's (/nvcrcargill) Ltd. [1937] N.Z.L.R. 843.

See 6 Halsbury's Laws of England, 3rd ed., p. 289.

132. Secretary. (1) Every company shall have one or more secretaries each of whom shall be a natural person and one of whom shall be a person who ordinarily resides in the State.

(2) The sale director of a proprietary company shall not be or act as secretary for the company.

(3) The secretary shall be appointed by the directors and shall be present at the registered office of the company by himself or his agent or clerk on the days and at the hours during which the registered office is to be accessible to the public.

(4) Anything required or authorized to be done by or in relation to the secretary may, if the office is vacant or for any other reason the secretary is not capable of acting, be done by or in relation to any assistant or deputy secretary or, if there is no assistant or deputy secretary capable of acting, by or in relation to any officer of the company authorized generally or specially in that behalf by the directors.

(5) A provision requiring or authorizing a thing to be done by or in relation to a director and the secretary shall not be satisfied by its beino dOI?-e by or in relation to the same person acting both as director and a;' or In place of, the secretary.


(6) Subsection (1) of this section shall not apply to a company incorporated before the commencement of this Act until a period of six months has elap.,;ed from the commencement of the Act.

u.K. ss. 177-179; Vic. s.110; S.A. s. 116; W.A. s.100; Tas. s.96.

As to the registered office, see ss. 111, 112, ante. As to the register of directors, managers and secretaries, see s. 134, post.

Authority of secretary-A company is not responsible for representations made by an agent outside the scope of his authority as when an officer of the company, not being a director, answers inquiries which do not properly fall within the business deputed to him, Partridge v. Albert Life Assurance Co. (1872), 16 Sol. Jo. 199.

Prima facie it is not within the authority of the secretary to make representations; evidence must be adduced of authority given to him to make them; he is a "mere servant"; his position is that he is to do what he is told, and no person can assume that he has any authority to represent anything at aU, Barnett v. South London Tramways Co. (1887), 18 Q.B.D. 815. Quaere whether modern commercial practice has not given to company secretaries a more authoritative position than is indicated in the above cases. In any case the articles should be inspected to find the secretary's given powers and duties. It is not uncommon to find that the directors may delegate certain of their powers, and a secretary may be invested therewith, not as secretary, but as a delegate.

Liability of secretary-A secretary is an officer of the company (s. 5, ante) and therefore is affected by the provisions of s. 124, ante. See further Re Morvah COllsols Tin Mining Co., McKay's Case (1875), 2 Ch. D. 1.

133. Provisions indemnifying directors or officers. (1) Any proVISion, whether contained in the articles or in any contract with a company or otherwise, for exempting any officer or auditor of the company from, or indemnifying him against, any liability which by law would otherwise attach to him in respect of any negligence default breach of duty or breach of trust of which he may be guilty in relation to the company, shall be void.

(2) Notwithstanding anything in this section a company may pursuant to its articles or otherwise indemnify any officer or auditor against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application in relation thereto in which relief is under this Act granted to him by the Court.


As to the relief which the court may grant, see s. 365, post. As to auditors, see ss. 8, 9, allte.

With this section, cf. Fourth Schedule, Table A, art. 113; Table B, art. 96, post.

This section is intended to make void the article in common use exempting directors and others from liability except for loss due to their "wilful neglect or default," see Re City Equitahle Fire Insurallce Co. Ltd., [1925] Ch.407; [1924] All E.R. Rep. 485, or the still wider article sometimes employed exempting directors and others from liability except in the case of actual dishonesty, see Re Brazilian Rubber Plalltations & Estates Ltd., [1911] 1 Ch.425.

Where indemnity may be given-The relieving provisions of this section may not avail where a director acted outside the ambit of his duties, Tomlinson v. Scottish Amalgamated Silks (Liquidators), [1935] S.C. (H.L.) 1.

134. Register of directors managers and secretaries. (1) Every company shall keep at its registered office a register of its directors managers and secretaries.


(2) The register shall contain with respect to each director his consent in writing to appointment as such and shall specify-

(a) in the case of an individual, his present Christian or other name and surname, any former Christian or other name or surname, his usual residential address, and his business occupation (if any);

.(b) in the case of a corporation, its corporate name and registered or principal office; and

(c) particulars of any other directorships of public companies or companies which are subsidiaries of public companies held by the director but it shall not be necessary for the register to contain particulars of directorships held by a director in a company that by virtue of subsection (5) of section six is deemed to be related to that company.

(3) Where a person is a director in one or more subsidiaries of the same holding company it shall be sufficient compliance with the provisions of subsection (2) of this section if it is disclosed that the person is the holder of one or more directorships in that group of companies and the group may be described by the name of the holding company with the addition of the word "Group".

( 4) The register shall specify with respect to each manager and secretary his full name and address and other occupation (if any).

(5) The register shall be open to the inspection of any member of the company without charge and of any other person on payment of five shillings, or such less sum as the company requires, for each inspection.

(6) The company shall lodge with the Registrar-(a) within one month after incorporation, a return in the pre

scribed form containing the particulars required to be specified in the register;

(b) within one month after a person ceases to be, or becomes a director of the company, a return in the prescribed form notifying the Registrar of the change and containing, with respect to each then director of the company, the particulars required to be specified in the register;

(c) within one month after a person becomes a manager or secretary of the company, a return in ~\1e prescribed form notifying the Registrar of that fact and specifying the full name, address and other occupation (if any) of that person; and

(d) within one month after a person ceases to be a manager or secretary of the company, a return in the prescribed form notifying the Registrar of that fact.

(7) Every company registered under the repealed Act of any corresponding previous enactment shall within three months after the commencement of this Act lodge with the Registrar a return in the prescribed form containing such of the matters and particulars required by this section to be specified in the register as are not included in a return of directors managers or secretaries lodged with the Registrar.

(8) If default is made in complying with any provision of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.



(9) A certificate of the Registrar stating that from any return lodged with the Registrar pursuant to this section it appears that at any time specified in the certificate any person was a director manager or secretary of a specified company shall, in all courts and by all persons having power to take evidence for the purposes of this Act, be received as prima facie evidence of the facts stated therein and for the purposes of this subsection a person who appears from any return so lodged to be a director manager or secretary of a company shall be deemed to continue as such until by a subsequent return so lodged or by a notification of change in the prescribed form so lodged it appears that he has ceased to be such a director manager or secretary.


Further, as to the particulars referred to, see s 158 and Eighth Schedule, post. As to the registered ofIice, see ss. 111, 112, ante. As to a company that is deemed

to be related to another, see s. 6, allie. For the duty of directors to make disclosure of certain matters for the purposes

of this section, see s. 127. ante. As to the terms "holding company," "subsidiary company," see s. 6, anle.

Division 3-Meetings and Proceedings

135. Statutory meeting and statutory report. (1) Every public company that is a limited company and has a share capital and every no-liability company shall within a period of not less than one month and not more than three months after the date at which it is entitled to commence business hold a general meeting of the members of the company to be called the "statutory meeting".

(2) The directors shall at least seven days before the day on which the meeting is to be held forward a report to be called the "statutory report" to every member of the company.

(3) The statutory report shall be certified by not less than two directors of the company and shall state-

(a) the total number of shares allotted distinguishing shares allotted as fully or partly paid up otherwise than in cash, and stating in the case of shares partly paid up the extent to which they are so paid up, and in either case the consideration for which they have been allotted;

(b) the total amount of cash received by the company in respect of all the shares allotted and so distinguished;

(c) an abstract of the receipts of the company and of the payments made thereout up to a date within seven days of the date of the report exhibiting under distinctive headings the receipts from shares and debentures and other sources the payments made thereout and particulars concernina the balance remaining in hand, and an account or estim~te of the preliminary expenses;

(d) the names and addresses and descriptions of the directors trustees for holders of debentures (if any) auditors (if any) managers (if any) and secretaries of the company; and

( e) the particulars of any contract the modification of which is to be submitted to the meeting for its approval together with' the particulars of the modification or proposed modification.

( 4) The statutory report shall, so far as it relates to the shares allotted and to the cash received in respect of such shares and to the receipts and


payments on capital account, be examined and reported upon by the auditors (if any).

(5) The directors shall cause a copy of the statutory report and the auditor's report (if any) to be lodged with the Registrar at least seven' days before the date of the statutory meeting.

(6) The directors shall cause a list showing the names and addresses of the members and the number of shares held by them respectively to be produced at the commencement of the meeting and to remain open and accessible to any member during the continuance of the meeting.

(7) The members present at the meeting shall be at liberty to discuss any matter relating to the formation of the company or arising out of the statutory report, whether previous notice has been given or not, but no resolution of which notice has not been given in accordance with the articles may be passed.

(8) The meeting may adjourn from time to time and at any adjourned meeting any resolution of which notice has been given in accordance with the articles either before or subsequently to the former meeting may be passed and the adjourned meeting shall have the same powers as an original meeting.

(9) The meeting may by ordinary resolution appoint a committee or committees of inquiry, and at any adjourned meeting a special resolution may be passed that the company be wound up if notwithstanding any other provision of this Act at least seven days notice of intention to propose the resolution has been given to every member of the company.

(10) In the event of any default in complying with the provisions of this section every officer of the company who is in default and every director of the company who fails to take all reasonable steps to secure compliance with the provisions of this section shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. U.K. s. 130; N.S.W. s.93; Vic. s. 113; Qld. s. 123; S.A. s. 132; W.A. s. 115;

Tas. s. 99. As to special resolutions, see s. 144, post. As to secretaries, see s. 132, ante.

As to trustees for debenture holders, see s. 74, ante. A company may be wound up by the Court where default is made in delivering

the statutory report to the registrar or in holding the statutory meeting, s. 222, post. As to the effect of resolutions at adjourned meetings, see s. 147, post. For the date at which a company is entitled to commence business, see s. 52,

ante. For liability for false and misleading statements in documents required for pur

poses of this section, see s. 375, post. Validly held-The statutory meeting cannot be validly held until the require

ments of s. 52, ante, have been complied with, Shortland Flat G.M. Co. Ltd. v. Kneehone (1912), 31 N.Z.L.R.1039.

Notice - A meeting held at the right time, but convened by notices not announcing that it is intended to be the statutory meeting, is not properly convened as a statutory meeting, Gardner v. lredale, [1912] 1 Ch.700. For form of notice, see Australian Encyclop<edia of Forms and Precedents, title COMPANIES.

Adjourned meeting-On the sufficiency of notice of an adjourned meeting, see Rohert Batcheller & Sons Ltd. v. Batcheller, [1945] 1 All E.R. 522.

When meeting completed-Where the business of the meeting and voting on a poll was completed on one day and the counting of votes was completed on the following day, it was held that an appointment which the poll decided dated from the date of the ascertainment of the result of the poll, Holmes v. Keyes, [1958] 2 All E.R. 129.

Date of offence-As to the date on which an offence under this section is committed, see Smedley v. Companies' Registrar, [1919] I K.B. 97; [1918-19] All E.R. Rep. 848.


136. Annual general meeting. (1) A general meeting of every company to be called the "annual general meeting" shall in addition to any other meeting be held at least once in every calendar year and not more than fifteen months after the holding of the last preceding annual general meeting, but so long as a company holds its first annual general meeting within eighteen months of its incorporation, it need not hold it in the year of its incorporation or in the following year.

(2) Notwithstanding the provisions of subsection (1) of this section the Registrar on the application of the company, may if for any special reason he thinks fit so to do, extend the period of fifteen months or eighteen months referred to in that subsection, notwithstanding that such period is so extended beyond the calendar year.

(3) Subject to notice being given to all persons entitled to receive notice of the meeting a general meeting may be held at any time and the company may resolve that any meeting held or summoned to be held shall be the annual general meeting of the company.

( 4) If default is made in holding an annual general meeting-(a) the company and every officer of the company who is in

default shall be guilty of an offence against this Act; and (b) the Court may on the application of any member order a

general meeting to be called. U.K. s. 131; N.S.W. s.92; Vic. s.114; Qld. s.122; S.A. s. 131; W.A. s.114;

Tas. s. 100. For accounts to be laid before the annual general meeting, see ss. 161, 162, and

Ninth Schedule, post. For the statutory articles respecting the annual meeting, see Fourth Schedule, Table A, art. 43; Table B, art. 26, post. As to persons entitled to receive notice of general meetings, see Fourth Schedule, Table A, art. 111, Table B, art. 93, post.

In relation to the court calling or directing a general meeting, see also s. 142, post.

For the date of incorporation, see s. 16, ante. An auditor or auditors must be appointed at the annual general meeting, s. 165,

post. It is immaterial whether the meeting be ordinary or extraordinary, Hamilton's

(Lord Claud) Case (1873), 8 Ch. App. 548. Two ofiences-The section created two separate offences, that of not holding the

meeting within the calendar year, and that of not holding it within 15 months after the last meeting, Smedley v. Registrar of Companies, [1919] 1 K.B. 97; [1918·19] All E.R. Rep. 848.

Delegation to directors-A general meeting cannot delegate to a director the power to declare a dividend or to decide when a dividend shall be paid, Parry v. Bundaberg Foundry Co. Ltd., [1933] St. R. Qd. 139.

Notice to specify-The notice should specify the meeting as an annual general meeting, Gardner v. fredale, [1912] 1 Ch. 700.

Calendar ycar-The expression "calendar year" would presumably refer to the year commencing I January and ending 31 December and not the year beginning and ending on the anniversary of the incorporation of the company, Gibson v. Barton (1875), 10 Q.B. 329.

Court may order meeting-As to a meeting directed by the court where there has been a statutory breach of duty of directors in failing to call an annual meeting and where the chairman has improperly refused to allow proxy holders representing the majority shareholders to take part in the meeting which he convened and which accordingly proved abortive, see Re Routlcy's Holdings Ltd. (1960), 22 D.L.R. 410.

137. Convening of extraordinary general meE.'ting on requisition. (1) The directors of a company, notwithstanding anything in its articles, shall on the requisition of members holding at the date of the deposit of the


requisition not less than one-tenth of such of the paid-up capital as at the date of the deposit carries the right of voting at general meetings or, in the case of a company not having a share capital, of members representing not less than one-tenth of the total voting rights of all members having at that date a right to vote at general meetings, forthwith proceed duly to convene an extraordinary general meeting of the company to be held as soon as practicable but in any case not later than two months after the receipt by the company of the requisition.

(2) The requisition shall state the objects of the meeting and shall be signed by the requisitionists and deposited at the registered office of the company, and may consist of several documents in like form each signed by one or more requisitionists.

(3) If the directors do not within twenty-one days after the date of the deposit of the requisition proceed to convene a meeting the requisitionists, or any of them representing more than one-half of the total voting rights of all of them, may themselves, in the same manner as nearly as possible as that in which meetings are to be convened by directors, convene a meeting, but any meeting so convened shall not be held after the expiration of three months from that date.

(4) Any reasonable expenses incurred by the requisitionists by reason of the failure of the directors to convene a meeting shall be paid to the requisitionists by the company, and any sum so paid shall be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration in respect of their services to such of the directors as were in default.

(5) A meeting at which a special resolution is to be proposed shall be deemed not to be duly convened by the directors if they do not give such notice thereof as is required by this Act in the case of special resolutions.

U.K. s.132; N.S.W. s.94; Vic. s.115; Qld. s.124; S.A. s. 133: W.A. s.116; Tas. s. 101.

As to calling of meetings, see also s. 138; Fourth Schedule, Table A, art. 44; Table B, art. 27, post.

For form of requisition for calling meeting, see Australian Encyclopa;dia of Forms and Precedents, title COMPANIES.

By requisitionists-Where a meeting is called by requisitionists. it may only transact business spccified in the requisition, Ball v. Metal Industries Ltd., [1957] S.c. 315.

By directors-The meeting must be convened by the directors sitting as a board, and is irregular if convened by notice given by the secretary by the consent of the directors separately obtained, Re Haycraft Gold Reduction and Mining Co., [1900] 2 Ch.230; Re State of Wyoming Syndicate, [1901] 2 Ch.431. But an irregular notice given by the secretary may be ratified by the directors at a board meeting. See Hooper v. Kerr, Stuart, & Co. Ltd. (1900), 83 L.T. 729.

Joint holders-Where a requisition is made by joint holders, all should sign, Patent Wood Keg Syndicate Ltd. v. Pearse (1906), 50 Sol. 10. 650.

In like form-As to the expression "in like form," see Fruit alld Vegetable Growers' Association Ltd. v. Kekewich, [1912] 2 Ch. 52.

Power of requisitionists-The power of requisitionists to convcne a meeting under the section is not a personal proprietary right but a ministerial right vested in them as quasi officials of the company. In consequence they are not entitled deliberately to convene the meeting for a date when many shareholders will not be able to attend, Adams v. Adhesives Pty. Ltd., (1932), 32 S.R. (N.S.W.) 308.

Withdrawal of requisitionist-Where the requisition is in order and duly lodged the subsequent withdrawal by one of the requisitionists does not affect the rights of the remaining requisitionists to call the meeting, South Norseman Gold Mines No Liability v. MacDonald, [1937] S.A.S.R. 53.



138. Calling of meetings. (1) So far as the articles do not make other provision in that behalf, two or more members holding not less than onetenth of the issued share capital or, if the company has not a share capital, not less than five per centum in number of the members of the company may call a meeting of the company.

(2) A meeting of a company or of a class of members, other than a meeting for the passing of a special resolution, shall be called by notice in writing of not less than seven days or such longer period as is provided in the articles.

(3) A meeting shall, notwithstanding that it is called by notice shorter than is required by subsection (2) of this section be deemed to be duly called if it is so agreed-

(a) in the case of a meeting called as the annual general meeting, by all the members entitled to attend and vote thereat; or

(b) in the case of any other meeting, by a majority in the number of the members having a right to attend and vote thereat, being a majority which together holds not less than ninety-five per centum in nominal value of the shares giving a right to attend and vote or, in the case of a company not having a' share capital, together representing not less than ninety-five per centum of the total voting rights at that meeting of all the members.

(4) So far as the articles do not make other provision in that behalf notice of every meeting shall be served on every member having a right to attend and vote thereat in the manner in which notices are required to be served by Table A.

(5) The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any member shall not invalidate proceedings at a meeting.

u.K. ss. 133, 134; N.S.W. s.95; Vic. s. 116; Qld. s. 125; S.A. s. 134; W.A. s. 117; Tas. s. 102.

For the provisions as to quorum in the statutory articles, see Fourth Schcdule, Table A, art. 47; Table B, art. 30, post.

For a remedy in cases of oppression, see s. 186, post. Where directors act in their own interests, or unfairly or unjustly, the court may make a winding-up order, s. 222, post.

As to convening an extraordinary general meeting on requisition, see s. 137, ante. As to the annual general meeting, see s. 136, ante.

As to the manner in which notices are required to be served by Table A, see Fourth Schedule, Table A, arts. 108-110, post. As to special resolutions, see s. 144, post. As to the power of the court to order meetings, see s. 142, post.

One-tenth of the issued share capital-The "one-tenth of the issued share capital" referred to in the English Act of 1908, s. 66 (I), was one-tenth of that part of the issued capital of the company upon which all calls or other sums then due have been paid, and not one-tenth of the issued share capital of the company the holders of which one-tenth had paid all calls, etc., thereon, Fruit and Vegetable Growers' Association Ltd. v. Kekewich, [1912] 2 Ch. 52. Compare however the language of s. 137, ante, which speaks of "one-tenth of ... the paid-up capital."

Notice-As to what is proper notice of a meeting in the absence of express provisions, see Re Merchants and Shippers S.S. Co. Ltd. (1916),33 N.S.W.W.N. 192.

For what is sufficient notice of a meeting to consider a motion for liquidation where such liquidation will, according to the articles. have the effect of postponing the rights of holders of a particular class of shares to participate in the assets until capital paid up on other shares has been repaid, see Ryan v. Edna May JUllction G.M. Co. (1916),21 c.L.R. 487.


In the absence of provision in the articles it is not necessary to give notice to shareholders of an adjourned meeting, James v. Rymill, [1932] S.AS.R. 364.

Generally as to notices which a company is required to give to its shareholders, and particularly in time of war to shareholders in enemy and enemy-occupied territory, see Re Anglo-International Bank Ltd., [1943] 2 All E.R.88; [1943] Ch.233.

Where articles of association required that every general meeting should be convened by seven days' notice inserted twice in one newspaper, it was held that both insertions must take place at least seven days before the meeting, Dalrymple v. Prince of Wales and Bonshaw United Co. (1895), 16 AL.T. 168.

Quorum at a meeting, and notice of its calling were discussed in W'alsh v. Stephens (1873), 3 Q.S.C.R. 98.

Interference by the court-See generally, as to interference by the court in the internal management of a company, Foss v. Harbottle (1843), 2 Hare 461; 9 English and Empire Digest (Rpl.) 662; Cotter v, National Union of Seamen, [1929] 2 Ch. 58; [1929] All E.R. Rep. 342; Burland v. Earle, [1902] AC. 83.

The rule in Foss v. Harbottle, supra, is qualified by the limitation that a majority of shareholders is not entitled to commit a fraud on the minority, Millers (/nvercargi/l) Ltd. v. Maddams, [1938] N.Z.L.R.490.

See also Oliver v. North Nuggetty Ajax Co., No Liability, [1912] V.L.R.4l6; Ngurli Ltd. v. McCann (1953), 90 C.L.R. 425.

Consent of members-A company is bound in a matter intra vires by the unanimous agreement of all its corporators, Parker & Cooper Ltd. v. Reading, [1926] I Ch.975; [1926] All E.R. Rep. 323; Bobbie Pins Ltd. v. Robertson, [1950] N.Z.L.R. 301; and although a meeting which had been held was described in the minutes as a directors' meeting, all the five shareholders were present and they might well have turned it into a general meeting and transacted the same business, so that an act done at such a meeting was not invalid, Re Express Engineering Works Ltd., [1920] 1 Ch.466.

Irregularities-Irregularities taking place at a meeting attended by all members can be cured by the unanimous consent of such members, Re Oxted Motor Co. Ltd., [1921] 3 K.B. 32; [1921] All E.R. Rep. 646. See Re Stanley W. Johnson Ply. Ltd., [1936] Y.L.R. 59, where Re Oxtcd Motor Co. Ltd., supra, was distinguished.

Accidental omission-The deliberate withholding of notice of meeting, caused by the erroneous belief on the part of the directors that certain persons are no longer members of the company, is not an "accidental omission" within the meaning of the section, Musselwhite v. C. H. A1ussclll'hitc & Son Limited, [1962] 2 \V.L.R. 374. See also Re Merchants alld Shippers 5.5. Co. Limited (1916), 17 S.R. (N.S.W.) 21.

As to articles governing meetings and votes. see generally 9 English and Empire Digest (Rpl.) 599.

139. Articles as to right to demand a poll. (1) Any provision contained in a company's articles shall be void in so far as it would have the effect-

(a) of excluding the right to demand a poll at a general meeting on any question or matter other than the election of the chairman of the meeting or the adjournment of the meeting;

(b) of making inefTective a demand for a poll on any question or matter other than the election of the chairman of the meeting or the adjournment of the meeting that is made-

(i) by not less than five members having the right to vote at the meeting;

(ii) by a member or members representing not less than onetenth of the total voting rights of all the members having the right to vote at the meeting; or

(iii) by a member or members holding shares in the company conferring a right to vote at the meeting, being shares on which an~ aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right; or

ISO COMPANIES Vol. 2

(c) of requiring the instrument appointing a proxy or any other document necessary to show the validity of or otherwise relating to the appointment of a proxy to be received by the company or any other person more than forty-eight hours before a meeting or adjourned meeting in order that the appointment may be effective thereat.

(2) The instrument appointing a proxy to vote at a meeting of a company shall be deemed to confer authority to demand or join in demanding a poll, and for the purposes of subsection (1) of this section a demand by a person as proxy for a member of the company shall be deemed to be the same as a demand by the member.

U.K. s. 137; Vic. s. 119 (3); Qld. s. 127 (4); S.A. s. 136 (4); W.A. s. 119 (3); Tas. s. 105 (4).

As to proxies, polls and voting generally, see Fourth Schedule, Tables A, B, Proceedings at General Meetings, post. As to resolutions passed at adjourned meetings, see s. 147, post. As to proxies, see s. 141, post.

Proxies-For observations on the time by which proxies may be lodged, see Re Dorman, l"ollg & Co. Ltd., [1934] Ch. 635, at pp.662-4; [1933] All E.R. Rep. 460, at pp.468-471.

140. Quorum, chairman, voting, etc., at meetings. (1) So far as the articles do not make other provision in that behalf-

(a) in the case of a proprietary company two members of the company, and in the case of any other company three members, personally present shall be a quorum;

(b) any member elected by the members present at a meeting may be chairman thereof; and

(c) in the case of a company having a share capital every member shall have one vote in respect of each share or each ten pounds of stock held by him, and in any other case every member shall have one vote.

(2) On a poll taken at a meeting a person entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way.

(3) A corporation may by resolution of its directors or other governing body-

(a) if it is a member of a company, authorize such person as it thinks fit to act as its representative either at a particular meeting or at all meetings of the company or of any class of members; or

(b) if it is a creditor (including a holder of debentures) of a company, authorize such person as it thinks fit to act as its representative either at a particular meeting or at all meetings of any creditors of the company,

and a person so authorized shall in accordance with his authority and until his authority is revoked by the corporation be entitled to exercise the same powers on behalf of the corporation as the corporation could exercise if it were an individual member creditor or holder of debentures of the company.

(4) Where-(a) a person present at a meeting is authorized to act as the

representative of a corporation at the meeting by virtue of an authority given by the corporation under subsection (3) of this section; and


(b) the person is not otherwise entitled to be present at the meeting,

the corporation shall, for the purposes of subsection (1) of this section, be deemed to be personally present at the meeting.

(5) A certificate under the seal of the corporation shall be prima facie evidence of the appointment or of the revocation of the appointment (as the case may be) of a representative pursuant to the provisions of subsection (3) of this section.

(6) Where a holding company holds the whole of the issued shares of a subsidiary and a minute is signed by a representative of the holding company authorized pursuant to subsection (3) of this section stating that any act matter or thing, or any ordinary or special resolution, required by this Act or by the articles of the subsidiary to be made performed or passed by or at an ordinary general meeting or an extraordinary general meeting of the subsidiary has been made performed or passed, that act matter thing or resolution shall, for all purposes, be deemed to have been duly made performed or passed by or at an ordinary general meeting, or as the case requires, by or at an extraordinary general meeting of the subsidiary.

(7) Where by or under any provision of this Act any notice, copy of a resolution, or other document relating to any matter is required to be lodged by a company with the Registrar, and a minute referred to in subsection (6) of this section is signed by the representative in pursuance of that subsection and the minute relates to such a matter the company shall within one month after the signing of the minute lodge a copy thereof with the Registrar.

u.K. s. 139; N.S.W. ss. 95, 96; Vic. s. 117; Qld. ss. 125, 126; S.A. ss. 134, 135; W.A. ss. 117, 118; Tas. s.103.

For provisions as to quorum in the statutory articles, see Fourth Schedule, Table A, art. 47; Table B, art. 3D, post. For provisions as to voting in the statutory articles, see Fourth Schedule, Table A, art. 54; Table B, art. 37, post.

As to the conversion of shares into stock, see s. 62, ante; Fourth Schedule, Tables A, B, Conversion of Shares into Stock, post.

As to the terms "holding company," "subsidiary company," see s. 6, ante.

Present-'Vhere the articles required the presence of a certain member, and the member was represented at the meeting by his attorney, it was held that "present" means "personally present," M. Harris Ltd., [1956] S.C. 207.

Proxy voting-As to voting at company meetings, see Ansett v. Butler Air Transport Ltd. (No.1) (1957),75 W.N. (N.S.W.) 299; Ansett v. Butler Air Transport Ltd. (No.2) (1958), 75 W.N. (N.S.w.) 306.

Quorum-Each joint holder of shares in a company in which all shares are held by four joint holders, is a member for the purpose of constituting a quorum, see Re Transcontinental Hotel Ltd., [1947] S.A.S.R.49.

141. Proxies. (1) Subject to subsection (2) of this section, a member of a company entitled to attend and vote at a meeting of the company, or at a meeting of any class of members of the company, shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of the member at the meeting and a proxy appointed to attend and vote instead of a member shall also have the same right as the member to speak at the meeting, but unless the articles otherwise provide a proxy shall not be entitled to vote except on a poll.


(2) A member of a proprietary company shall not be entitled to appoint another person as his proxy under subsection (1) of this section except-

(a) in accordance with the articles of the company; or (b) with the leave of the Court.

(3) In every notice calling a meeting of a public company having a share capital or a meeting of any class of members of such a public company there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy or. where that is allowed. one or more proxies to attend and vote instead of the member. and that a proxy need not also be a member and if default is made in complying with this subsection as respects any meeting. every officer of the company who is in default shall be guilty of an offence against this Act.

(4) Any person who authorizes or permits an invitation to appoint as proxy a person or one of a number of persons specified in the invitation to be issued at the company's expense to some only of the members entitled to be sent a notice of the meeting and to vote thereat by proxy shall be guilty of an offence against this Act.


(5) No person shall be guilty of an offence under subsection (4) of this section by reason only of the issue to a member at his request of a form of appointment naming the proxy or a list of persons willing to act as proxies if the form or list is available on request in writing to every member entitled to vote at the meeting by proxy.

U.K. s. 136; Vic. s. 117 (5); Tas. s. 103 (6).

As to annual general meetings, see s. 136, ante. As to extraordinary general meetings, see s. 137, ante. As to polls, see s. 139, ante. As to voting, see s. 140, ante. As to the persons entitled to receive notice of meetings, see Fourth Schedule, Table A, art. Ill; Table B, art. 93, post.

For form of appointment of a proxy, see Fourth Schedule, Table A, art. 60; Table B, art. 43, post.

By proxy or in person-Under articles of association which confer a right to vote in person or by proxy, every shareholder has an option to vote by either method. This option is not lost by appointing a proxy, and continues up to the moment a vote is taken. If a shareholder does vote in person he does not thereby revoke the proxy; he merely exercises his option to vote in person. making it unnecessary for the proxy to be used at all. By voting in person he exhausts his voting right and has no other left, Ansett v. Butler Air Transport Ltd. (No.2) (1958), 75 W.N. (N.S.W.) 306. See also Clifton v. Mount Morgan LId. (1940), 40 S.R. (N.SW.) 31.

Proxy of personal representative-The personal representative of a deceased member, prior to his registration as a member, may appoint a proxy unless the articles of association expressly forbid it. A nsclt v. Guinea A irways Ltd .. [1945] S.A.S.R. 94.

142. Power of Court to order meeting. (!) If for any reason it is impracticable to call a meeting in any manner in which meetings may be called or to conduct the meeting in the manner prescribed by the articles or this Act the Court may, either of its own motion or on the application of any director or of any member who would be entitled to vote at the meeting, order a meeting to be called held and conducted in such manner as the Court thinks fit, and may give such ancillary or consequential


directions as it thinks expedient, including a direction that one member present in person or by proxy shall be deemed to constitute a meeting.

(2) Any meeting called held and conducted in accordance with any order made pursuant to this section shall for all purposes be deemed to be a meeting duly called held and conducted.

U.K. s. 135; N.S.W. s. 95; Vic. s. 118; S.A. s. 134 (2); Tas. s. 104. The court may order meetings under s. 181, post. Impracticable-"J think the expression 'impracticable ... to conduct the meeting

of the company in manner prescribed by the articles' is sufficient to COver a case in which it is impracticable, owing to the terms of the articles and the state of shareholding in the company, to get a quorum present," Edinburgh Workmen's Houses Improvement Co. Ltd., [1934] S.L.T. 513, at p. 516. See also Re El Sombrero Ltd., [1958] 1 Ch. 900; [1958] 3 All E.R. 1.

143. Circulation of members' resolutions, etc. (1) Subject to this section a company shall on the requisition in writing of such number of members of the company as is specified in subsection (2) of this section and (unless the company otherwise resolves) at the expense of the requisitionists-

(a) give to members of the company entitled to receive notice of the next annual general meeting notice of any resolution which may properly be moved and is intended to be moved at that meeting; and

(b) circulate to members entitled to have notice of any general meeting sent to them any statement of not more than one thousand words with respect to the matter referred to in any proposed resolution or the business to be dealt with at that meeting.

(2) The number of members necessary for a requisition under subsection (1) of this section shall be-

(a) any number of members representing not less than onetwentieth of the total voting rights of all the members having at the date of the requisition a right to vote at the meeting to which the requisition relates; or

(b) not less than one hundred members holding shares in the company on which there has been paid up an average sum, per member, of not less than one hundred pounds.

(3) Notice of a resolution referred to in subsection (1) of this section shall be given, and any statement so referred to shall be circulated, to members of the company entitled to have notice of the meeting sent to them by serving a copy of the resolution or statement on each member in any manner permitted for service of notice of the meeting, and notice of the resolution shall be given to any other member of the company by giving notice of the general effect of the resolution in any manner permitted for giving him notice of meetings of the company, and the copy shall be served, or notice of the effect of the resolution shall be given, as the case may be, in the same manner and, so far as practicable, at the same time as notice of the meeting and, where it is not practicable for it to be served or given at that time, it shall be served or given as soon as practicable thereafter.


(4) A company shall not be bound under this section to give notice of any resolution or to circulate any statement unless-

(a) a copy of the requisition signed by the requisitionists (or two or more copies which between them contain the signatures of all the req uisitionists) is deposited at the registered office of the company-

(i) in the case of a requisition requiring notice of a resolution, not less than six weeks before the meeting; and

(ii) in the case of any other requisition, not less than one week before the meeting; and

(b) there is deposited or tendered with the requisition a sum reasonably sufficient to meet the company's expenses in giving effect thereto,

but if, after a copy of a requisition requiring notice of a resolution has been deposited at the registered office of the company, an annual general meeting is called for a date six weeks or less after the copy has been deposited, the copy though not deposited within the time required by this subsection shall be deemed to have been properly deposited for the purposes thereof.

(5) The company shall not be bound under this section to circulate any statement if, on the application either of the company or of any other person who claims to be aggrieved, the Court is satisfied that the rights conferred by this section are being abused to secure needless publicity for defamatory matter and the Court may order the company's costs on an application under this section to be paid in whole or in part by the requisitionists, notwithstanding that they are not parties to the application.

(6) Notwithstanding anything in the company's articles, the business which may be dealt with at an annual general meeting shall include any resolution of which notice is given in accordance with this section, and for the purposes of this subsection notice shall be deemed to have been so given notwithstanding the accidental omission. in giving it, of one or more members.

(7) In the event of any default in complying with the provisions of this section, the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Five hundred pounds. u.K. s. 140. As to the persons entitled to receive notice of meetings, see Fourth Schedule,

Table A, art. 111; Table B, art. 93, post. As to notices to members. see Fourth Schedule, Table A, arts. 108-110; Table B, arts. 90-92, post.

As to the registered omce, see ss. 111, 112, ante. Further as to requisitions for meetings, see ss. 137, 138, ante. With the provisions

of this section relating to circulating statements, cf. s. 120. ante.

144. Special resolutions. (1) A resolution shall be a special resolution when it has been passed by a majority of not less than three-fourths of such members as being entitled so to do vote in person or, where proxies are allowed, by proxy, at a general meeting of which not less than twentyone days' notice specifying the intention to propose the resolution as a special resolution has been duly given.

(2) Notwithstanding the provisions of subsection (1) of this section, if it is so agreed by a majority in number of the members having the right to attend and vote at the meeting, being a majority which together


holds not less than ninety-five per centum in nominal value of the shares giving that right or. in the case of a company not having a share capital. together representing not less than ninety-five per centum of the total voting rights at that meeting. a resolution may be proposed and passed .as a special resolution at a meeting of which less than twenty-one days' notIce has been given.

(3) At any meeting at which a special resolution is submitted a declaration of the chairman that the resolution is carried shall unless a poll is demanded be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution.

( 4) At any meeting at which a special resolution is submitted a poll shall be deemed to be effectively demanded if demanded-

(a) by such number of members for the time being entitled under the articles to vote at the meeting as is specified in the articles. but it shall not in any case be necessary for more than five members to make the demand; or

(b) if no such provision is made by the articles. by three members so entitled. or by one member or two members so entitled, if that member holds or those two members together hold not less than ten per centum of the paid-up share capital of the company.

(5) In computing the majority on a poll demanded on the question that a special resolution be passed reference shall be had to the number of votes cast for and against the resolution and to the number of votes to which each member is entitled by this Act or the articles of the company.

(6) For the purposes of this section notice of a meeting shall be deemed to he duly given and the meeting shall be deemed to be duly held when the notice is given and the meeting held in manner provided by this Act or by the articles.

(7) Transitory provisions. Any extraordinary resolution duly and appropriately passed before the commencement of this Act shall for the purposes of this Act be treated as a special resolution.

(8) Where in the case of a company incorporated before the commencement of this Act any matter is required or permitted to be done by extraordinary resolution that matter may be done by special resolution.

u.K. s. 141; N.S.W. s.97; Vic. s. 119; Qld. s. 127; S.A. s. 136; W.A. s. 119; Tas. s. 105.

As to voting by proxy, see s. 141, ante. As to the notice of meetings and the number of votes to which members are entitled, see ss. 137, 138, 140, ante.

The instmment appointing a proxy is deemed to confer authority to demand a poll, s. 139, <Ill/e.

Note that the extraordinary resolution has now been discarded, but the necessary transitory provisions are included to permit this to be done without disturbance.

For form of notice of special resolution, see Australian Encyclopredia of Forms and Precedents, title COMPANIES.

Short notice-As to waiver of the requirements of the section with respect to notice, see Re Oxted Motor Co., [1921] 3 K.B.32; [1921] All E.R. Rep. 646. See also Re Toowoomba Acceptanees Ply. Ltd., [1940] Q.W.N.24.

As to implied waiver, see Re Joyce Bros. Pry. Ltd. (1938), 55 W.N. (N.S.W.) 192. Acts of directors done pursuant to a resolution of shareholders which was

invalid for want of proper notice may nevertheless be ratified and thus given validity by means of a separate resolution passed at a further meeting, where the notice is on the agenda to be dealt with, Calhoun v. Green, [1919] V.L.R. 196; and such further meeting may be held on the eve of liquidation, ibid.


Failure to give noticc-A resolution under this section is ineffectivc as a special [or extraordinary] resolution if there is a failure to give notice to anyone member entitled to vote, even where that member has executed an unregistered transfer of his shares and the transferee was present at the meeting, Re Sander's Ltd. (1932), 49 N.S.W.W.N.220; Re Clayton & Buscke Ltd. (1913), 33 N.Z.L.R.245.

Validity-A special resolution for alteration of articles, which is defective on account of an irregularity, may be validated by long acquiescence on the part of shareholders, Atherton v. Plane Creek Central Mill Co. Ltd., [1914] st. R. Qd. 73; [1914] Q.W.N. 12; Ho Tung v. Man On Insurance Co., Ltd., [1902] AC. 232.

In Rc Pearce, Duff & Co. Ltd., [1960] 3 All E.R. 222, it was hcld that though there had been short service of a notice convening a meeting. since every shareholder had consented to the resolutions no shareholder could be heard to say that the resolutions in question had not been validly passed. A resolution was held valid notwithstanding the accidental omission to give notice to nine shareholders who held 101 share,; out of a total of 692,718 shares, Re West Canadian Collieries Lid .. [1962] 1 All E.R. 26.

Notice to indicate spccial resolution-The notice should clearly indicate that the resolution is "special" and not leave it to be inferred, MacConnell v. Prill (E.) & Co. Ltd., [1916] 2 Ch. 57; Rc North Victoria Deep Lead Gold Mines LuI., [1934] AL.R. 221.

N otice-The notice need not set out the resolution to be proposed in the very words of the relevant section, but should substantially set forth the nature of the business to be dealt with and the resolution to be proposed, Re Bridgport Old Brewery Co. (1867),2 Ch. App. 191; Re Silkstone Fall Colliery Co. (1875), I Ch. D. 38; IngleH'ood Mining Venture Ltd. v. Price (1872), 6 S.AL.R.2. Thus it is permissible without further notice to pass an amendment as to how the resolution should be carried into elIect, Re Picturcsquc Atlas, etc., Co. Ltd. (1892), 13 N.SW.L.R. (Eq.) 44.

Notices must give a reasonable indication of the proposal but are not to be construed with excessive strictness, Carruth v. Imperial Chemical Industries Ltd., [1937] AC. 707.

A notice stating business to be "to consider the financial position of the company" is not sufficient notice under this section of a resolution to wind up, Liquidators of South Canterbury Building Society v. Stumbles (1893), 12 N.Z.L.R.58. See also Ryan v. Edna May Junction G.M. Co. (1916), 21 C.L.R.487.

The invalidity of one of two resolutions in the one notice will not invalidate the other if they are separate and distinct, Thomson v. Henderson's Transvaal Estates Ltd" [1908] I Ch. 765. If they are not separate and distinct, then both are void, Re Imperial Bank of China, India, and Japan (1866), I Ch. App. 339, at p. 347.

Notice of a resolution stating that it was desirable to reduce the company's capital to one half, and that the other half should be repaid to shareholders was held to be proper notice of a resolution for reduction of capital, Re Picturesque Atlas and Publishing Co. Ltd. (1892), 13 L.R. (N.SW.) (E.) 44.

The court has restrained directors from acting upon a special resolution the notice for which did not fully disclose the circumstances surrounding the matter to be voted upon, Baillic v. Oriental Telephonc and Electric Co. Ltd., [1915] I Ch.503; Colhoun v. Grecn, [1919] V.L.R. 196.

Generally as to the contents of the notice, see 9 English and Empire Digest (Rp!.), p.601.

Notice to enemy-The right of a person who is an enemy to receive notices is suspended in time of war, Re Anglo-International Bank Ltd., [1943] 2 All E.R. 88; [1943] Ch. 233.

Shareholders resident outside Commonwealth-As to notices to members who are resident outside the Commonwealth, see Re Vale of Clwydd Coal Mining Co. Ltd. (1912), 29 W.N. (N.S.W.) 189; Re Merchants & Shippers' Steamship Lines Ltd. (1917), 17 S.R. (N.S.W.) 146. See also Re Warden & Hotchkiss Ltd., [1945] 1 All E.R. 507.

Quorum present-The passing of a resol lItion is prima facie evidence that a quorum was present, McLean Bros. & Rigg Ltd. v. Grice (1906), 4 C.L.R. 835.

Conflict between articles and Act-A special resolution carried in the manner provided by the Act is valid notwithstanding that the articles of association provide for a different procedure, James v. Evening Standard Newspaper Co, (1895), 21 V.L.R. 399.


Declaration by chairman-The declaration of the chairman of the meeting is conclusive evidence of the counting of the votes, but does not cover any irregularity or informality in the meeting itself, Re Fraser and Company, Ex parte lames (1896), 22 V.L.R. 385. It does not operate to validate a resolution that has been passed in the absence of a quorum, Re British Empire Petroleum Co. Ltd. (1915), 17 N.Z.G.L.R. 295. As to the conclusiveness of the declaration, see further Re Hadleigh Castle Gold Mines Ltd., [1900] 2 Ch.419.

Demand for poll-A demand for a poll by a person holding a proxy does not constitute also a demand by the members represented by virtue of the proxy so as to make up the requisite number of three, Re Rhodesian Manufacturing Co. Ltd., [1927] S.A.S.R. 310.

As to joint holders demanding a poll, see Siemens Bros. & Co. v. Burns, [1918] 2 Ch. 324.

The requirement in a company's articles that a poll shall be taken immediately means that the poll shall be taken as soon as practicable in all the circumstances. See lackson v. Hamlyn, [1953] 1 All E.R. 887; [1953] Ch. 577; [1953] 2 W.L.R. 709. Proxies deposited in the interval between the demand for a poll and the resumed meeting will be invalid (ibid.).

Generally-See 6 Halsbury's Laws of England, 3rd ed., p. 345; 9 English and Empire Digest (Rpl.), p.618.

145. Resolution requiring special notice. Where by this Act special notice is required of a resolution, the resolution shall not be effective unless notice of the intention to move it has been given to the company not less than twenty-eight days before the meeting at which it is moved, and the company shall give its members notice of any such resolution at the same time and in the same manner as it gives notice of the meeting or, if that is not practicable, shall give them notice thereof, in any manner allowed by the articles, not less than fourteen days before the meeting, but if after notice of the intention to move such a resolution has been given to the company, a meeting is called for a date twentyeight days or less after the notice has been given, the notice, although not given to the company within the time required by this section, shall be deemed to be properly given.

U.K. s. 142: Vic. s. 120; Tas. s. 106. For the statutory articles in relation to notices, see Fourth Schedule, Tables A,

B, Notices, post.

146. Registration and copies of certain resolutions and agreements. (1) A printed copy of-

(a) every special resolution; and (b) every resolution or agreement which has been agreed to by

all the members of some class of shareholders but which, if not so agreed to, would not have been effective for its purpose unless it had been passed by some particular majority or otherwise in some particular manner,

shall except where otherwise expressly provided by this Act within one month after the passing or making thereof, be lodged by the company with the Registrar.

(2) Where articles have not been registered a printed copy of every resolution or agreement to which this section applies shall be forwarded to any member at his request on payment of two shillings and sixpence or such less sum as the company directs.

(3) In the event of any default in complying with subsection (1) of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.



(4) In the event of any default in complying with the provisions of subsection (2) of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Five pounds for each copy in respect of which default is made.

U.K. s.143; N.S.W. s.98; Vic. s. 121; Qld. s. 128; S.A. s. 137; \v.A. s. 121; Tas. s. 107.

As it would be a fraud on the law to register a copy of a resolution under this Act if no such resolution had been passed, the presumption against fraud makes a certified copy of a copy so registered prima facie evidence of a valid resolution, McLean Bros. & Rigg Ltd. v. Grice (1906), 4 C.L.R. 835.

147. Resolutions at adjourned meetings. Where a resolution is passed at an adjourned meeting of a company or of holders of any class of shares or of directors the resolution shaIl for all purposes be treated as having been passed on the date on which it was in fact passed and not on any earlier date.

U.K. s. 144; N.S.W. s. 99; Vic. s. 122; Qld. s. 129; S.A. s. 138; W.A. s. 122; Tas. s. 108.

Compare s. 288, post, which makes like provision in relation to meetings of creditors and contributories. As to adjournment, see further Fourth Schedule, Table A, art. 50; Table B, art. 33, post.

As to meetings of directors, see Fourth Schedule, Table A, arts. 79 et seq.; Table B, arts. 62 et seq., post. As to meetings of members, see ss. 135 et seq., ante.

Compare Catesby v. Burnett, [1916] 2 Ch. 325, where the election of directors at an adjourned meeting in accordance with a notice given after the first meeting was held to be valid. But see Neuschild v. British Equatorial Oil Co., [1925] Ch. 346.

An adjourned meeting is legally the same meeting, Scadding v. Lorant (1851), 3 H.L. Cas. 418.

Where articles provide for unfinished business only being dealt with at an adjourned meeting, the question whether particular business is unfinished is a question of fact, Montgomerie's Brewery Co. Ltd. v. Spencer (1889), 20 A.L.T. 260.

148. Minutes of proceedings. (1) Every company shall causc-(a) minutes of alI proceedings of general meetings and of meetings

of its directors and of its managers (if any) to be entered in books kept for that purpose; and

(b) those minutes to be signed by the chairman of the meeting at which the proceedings were had, or by the chairman of the next succeeding meeting.

(2) Any minute so entered that purports to be signed as provided in subsection (1) of this section shaIl be evidence of the proceedings to which it relates.

(3) Where minutes have been so entered and signed, then until the contrary is proved-

(a) the meeting shaII be deemed to have been duly held and convened;

(b) all proceedings had thereat shall be deemed to have been duly had; and

(c) all appointments of officers or liquidators made thereat shall be deemed to be valid.



Penalty: One hundred pounds. Default penalty. u.K. s. 145; N.S.W. s. 100; Vic. s. 123; Qld. s. 130; S.A. s. 139; W.A. s. 123;

Tas. s. 109. As to proceedings of directors. see Fourth Schedule, Tables A, B, Proceedings

of Directors, post. As to general meetings, see ss. 135 et seq., ante. Further as to minutes to be kept, see Fourth Schedule, Table A, art. 78; Table B, art. 61, post.

Note that s. 369, post, permits the use of loose-leaf books. Evidence--"Evidence" does not mean conclusive evidence, Re Indian Zoedone

Co. (1884), 26 Ch. D. 70 (other evidence admitted); Re Leicester Mortgage Co. (1894), 38 Sol. Jo. 531, 564. But see Kerr v. Mottram Ltd., [1940] 2 All E.R. 629; [1940] Ch.657.

Minutes of resolutions of the directors for the making of calls, and for the winding-up of a joint stock company, entered in a book used for roughly drafting minutes before entering them in the formal minute book, and signed by the chairman, are evidence under this section of all the conditions precedent to the validity of such resolutions, Legal and General Life Assurance Company v. Gill (1878), 4 V.L.R. (L.) 204.

The signature of the chairman in the minute book to a resolution adopting an agreement may be sufficient to satisfy the Statute of Frauds, Jones v. Victoria Graving Dock Co. (1877), 2 Q.B.D.314. See also Re Strathblaine Estates Ltd., [1948] 1 All E.R. 162; [1948] Ch.228.

Statements in the minutes that certain directors were present at a meeting and that they took part in the proceedings constitute evidence against such directors on a criminal charge, inasmuch as their presence at, and the part they took in, the meeting are part of the proceedings of the meeting, R. v. Staples (1893), 19 V.L.R. 47.

Oral evidence of what took place at a meeting is admissible where capable of resolving an ambiguity in minutes, Westralia, etc., Co. v. Long (1897), 23 V.L.R. 36.

A minute is evidence that the notice convening the meeting contained the requisite information, Inglewood Mining Venture Ltd. v. Priee (1872), 6 S.A.L.R. 2.

Presumptive evidence-Where an act is done which can be done legally only after the performance of some prior act, proof of the act first mentioned is presumptive evidence that the prior act has been done, McLean Bros. & Rigg v. Grice (1906), 4 C.L.R. 835. This presumption is applicable to the proceedings of corporations and therefore proof of the passing of an extraordinary resolution for voluntarily winding-up is prima facie evidence, if a quorum was necessary at such meeting, that a quorum was present (ibid.). See also Knight's Case (1867), 2 eh. App. 321.

If no minutes or no complete minutes are forthcoming it is to be presumed against the company that whatever ought to have been submitted at any general meeting was so submitted, Re British Provident Life and Fire Assurance Society (1863), I De G. J. & Sm. 504.

As to omissions, see Re Fireproof Doors Ltd., [1916] 2 Ch. 142; [1916-17] All E.R. Rep. 931.

Validity-This section does not permanently validate an appointment of directors as against a company which is ignorant of the invalidity, Re Renown Rubber Ltd., [1933] St. R. Qd. 324. See now s. 119, ante.

As to validation of appointments, see also Federal Alutual, etc .. Co. v. Donaghy (1888), 14 V.L.R. 857; Re Neokratine Safety Explosive Co. of N.S.W. Ltd. (1891), 12 N.S.W.L.R. (Eq.) 269; Re Equitable Insurance Assoc. of New Zealand (1892), II N.Z.L.R.605.

Presumption of regularity-The provision whereby regularity is to be presumed should be liberally construed, Essendon Lands and Finance Association v. Kilgour (1897), 24 V.L.R. 136.

So far as regards the appointment of directors it means that it shall be deemed valid until the contrary is proved, and the onus of proof of its invalidity rests upon those who impeach it; acts done by a director de facto elected as such before the board of directors is made aware of the fact that his appointment is defective will be valid, Buzolic Damp Resisting, etc., Co. v. Cornwell (1885), II y.L.R. 371. The section validates acts done by liquidators who were not or could never have been legally appointed if there is nothing on the face of the proceedings to indicate that they have in any way been improperly appointed, and validates acts done by them


up to the lime when the validity of their appointment is called in question, although they could never have been legally done, Mercantile Bank of Australia v. Dinwoodie (1902), 28 V.L.R. 491, at p. 501. See also Re Fraser alld Co., Ex parle James (1896), 22 V.L.R. 385.

Validity of resolution not recorded~lt is not essential to the validity of a resolution at a general meeting that it be entered in the minutes. It may be proved aliunde, Palmer v. Mapourika Gold Dredging Co. Ltd. (1904), 23 N.Z.L.R.585.

Generally~See further as to minutes, Jones v. Victoria Graving Dock Co. (1877), 2 Q.B.D. 314 (Statute of Frauds satisfied); 9 English and Empire Digest (Rpl.) , pp. 548, 620.

149. Inspection of minute books. (1) The books containing the minutes of proceedings of any general meeting shall be kept by the company at the registered office or the principal place of business in the State of the company, and shall be open to the inspection of any member without charge.

(2) Any member shall be entitled to be furnished within seven days after he has made a request in writing in that behalf to the company with a copy of any minutes specified in subsection (1) of this section at a charge not exceeding two shillings for every hundred words thereof.

(3) If any copy required under this section is not so furnished the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Twenty pounds. Default penalty. U.K. s. 146; N.S.W. s. 101; Vic. s. 124; Qld. s. 131; S.A. s. 140; W.A. s. 124;

Tas. s. 110. As to the registered onice, see ss. 111, 112, allte. As to minute books, see s. 148,

ante. As to general meetings, see s. 135, (IntI'; Fourth Schedule, Tables A, B, Proceedings at General Meetings, post.

This section does not in terms give any right to inspect minutes of the proceedings of directors; d. R. v. Mariqllita & New Granada Milling Co. (1858), I E. & E. 289.

The right of beneficiaries of shares held on trust by directors on their behalf to inspect a company's documents is no greater than the right conferred upon the shareholders by statute or by the articles, Butt v. Kelson, [1952] 1 All E.R. 167; [1952] Ch. 197.

Division 4-Register of Members

150. Non-application of the Division to mutual life assurance companies. Nothing in this Division other than subsection (5) of section one hundred and fifty-three shall apply to a mutual life assurance company limited by guarantee so long as that company complies with the provisions of the law of the Commonwealth for the time being in force relating to the keeping of registers, indexes and other records relating to its members.

Vic. s. 125; Tas. s.112. Law of the Commonwealth~See the Life Insurance Act, 1945-1961 (Common

wealth). For the form of registers and indexes, see s. 369, post.

151. (1) Register and index of members. Every company shall keep a register of its members and enter therein-

(a) the names and addresses of the members, and in the case of a company having a share capital a statement of the shares held by each member, distinguishing each share by its number (if any) or by the number (if any) of the certificate evidencing the member's holding and of the amount paid or agreed to be considered as paid on the shares of each member;

(b)

(c)


the date at which the name of each person was entered in the register as a member; the date at which any person who ceased to be a member during the previous seven years so ceased to be a member; and

(d) in the case of a company having a share capital, the date of every allotment of shares to members and the number of shares comprised in each allotment.

(2) Notwithstanding anything in subsection (1) of this section where the company has converted any of its shares into stock and given notice af the conversion to the Registrar, the company shall alter the register to show the amount of stock or number of stock units held by each member instead of the number of shares and the particulars relating to shares specified in paragraph (a) of subsection (1) of this section.

(3) Notwithstanding anything in subsection (l) of this section a company may keep the names and particulars relating to persons who have ceased to be members of the company separately and the names and particulars relating to former members need not be supplied to any person who applies for a copy of the register unless he specifically requests the names and particulars of former members.

(4) The register of members shall be prima facie evidence of any matters inserted therein as required or authorized by this Act.

(5) Index of members of company. Every company having more than fifty members shall, unless the register of members is in such a form as to constitute in itself an index, keep an index in convenient form of the names of the members and shall, within fourteen days after the date on which any alteration is made in the register of members, make any necessary alteration in the index.

(6) The index shall in respect of each member contain a sufficient indication to enable the account of that member in the register to be readily found.


Penalty: Fifty pounds. Default penalty. u.K. 5S. 110, 118; N.S.W. ss. 78, 85; Vic. s. 126; Qld. ss. 107, 108; S.A. S5. 119,

120,126; W.A. 5s.103, 104, 109: Tas. 5.113. As to the form of registers, see s. 369, post. Further as to the entry of names

on the register consequent on death or insolvency, see Fourth Schedule, Table A, arts. 24-27, post. Further as to the conversion of shares into stock, see s. 62, ante.

Branch registers are deemed to be part of the register, s. 157, post. For the persons who are members of the company, see s. 16, ante. With respect

to shares held jointly, see Fourth Schedule, Table A, arts. 8, 15,55, 105; Table B, arts. 8, 38, 87, post.

As to registration in the register of members of transfers of shares, see ss. 95 et seq., allte.

As to entry of the Public Curator in the boo\"s of a company as proprietor of shares, sec the Public Curator Acts, 1915 to 1957, ss. 60, 62 (d), 113 (2), title TRUSTEES AND EXECUTORS.

Register-As to what constitutes a register of members, see Re Land Credit Co. of Ire/and, Weikersheim's Case (1873), 8 Ch. App. 831. As to what is a sufficient register to be evidence under this section, see Re F. H. Ring & Co. Ltd., [1924] S.A.S.R. 138.


Entries-It is improper to make entries in the register other than those allowed by the Act, Re H. T. Saunders & Co. Ltd., [1908] 1 Ch.415. Notices of liens claimed by the company should not be entered therein, Re W. Key & Son Ltd., [1902] 1 Ch. 467.

Absence of particulars in register-The absence of the particulars in the register prescribed by this section invalidates a purported registration. But an exception exists where the registration refers to the executors or other personal representatives of a deceased member, Ansett v. Guinea Airways Ltd., [1945] S.A.S.R. 94.

Unauthorised entry of name-Where a transferee's name had been put on the register without authority, but he was subsequently acknowledged as a member by the receipt of moneys from him, he was held a member of the company and rightfully on the register, Hood v. Ivanhoe South G.M. Co., [1899] S.A.L.R. 146.

Shares and stock-For the difference between shares and stock, see Morrice v. Aylmer (1875), L.R.7 H.L.717.

Prima facie evidence-The register is only prima facie evidence of membership, Metropolitan Milk Supply Ltd. v. Paulsen, [1933] St. R. Qd. 53; 27 Q.J.P.R. I. The register is not conclusive evidence of the facts stated therein, Reese River Silver Mining Co. v. Smith (1869), L.R. 4 H.L. 64. When evidence is given rebutting statements in the register, the onus of proving membership is on the person who claims membership, l'vlctropolitan Milk Supply Ltd. v. Paulsen, supra.

If it is necessary to prove that a meeting has been duly convened, it is not necessary to follow the practice which at one time obtained, of exhibiting the register to the deponent's affidavit; it is sufficient if the deponent proves that the register has been properly kept and contained the name and last known address of every person who was at the relevant date a member, Re Debenture Corporatioll (1931), 47 T.L.R. 399.

Criminal liability-As to fraudulent uttering of untrue lists of members, see the Criminal Code, s. 504, title CRIMINAL LAW.

Generally-See 9 English and Empire Digest eRp!.) , p.212.

152. Where register to be kept. (1) The register of members and index (if any) shall be kept at the registered office of the company, but

(a) if the work of making them up is done at another office of the company within the State, they may be kept at that other office; or

(b) if the company arranges with some other person to make up the register and index (if any) on its behalf they may be kept at the office of that other person at which the work is done if that office is within the State.

(2) Every company shall, within seven days after the register and index (if any) are first kept at a place other than the registered office, lodge with the Registrar notice of the place where the register and index (if any) are kept and shall within seven days after any change in the place at which the register and index (if any) are kept lodge with the Registrar notice of the change.


Penalty: Fifty pounds. Default penalty. U.K. s. 110; N.S.W. s.81; Vic. s.127; Qld. s. 110; S.A. s. 122; W.A. s.105;

Tas. s. 115. As to hranch registers, see s. 157, post. For the form of registers and indexes,

see s. 369. post. For the consequences of default by an agent in complying with the provisions of this section, see s. 154, post.

Lien over register-In consequence of the share register having to be kept at the company's office, no possessory lien ean be acquired over it, Re Stock ridge & Co. Ltd., [1923] N.Z.L.R. 221. But in view of the provisions of this section which enable the register to be kept elsewhere than at the registered office, this authority is now of doubtful application.

Generally-See further 9 English and Empire Digest eRp\.) , p.212; 10 English and Empire Digest eRp!.), p. 1214.


153. Inspection and closing of register. (1) A company may, on giving not less than fourteen days' notice by advertisement in some daily newspaper circulating generally throughout the State, close the register of members or any class of members for any time or times, but so that no part of the register shall be closed for more than thirty days in the aggregate in any calendar year.

(2) The register and index shall be open to the inspection of any member without charge and of any other person on payment for each inspection of five shillings or such less sum as the company requires.

(3) Any member or other person may request the company to furnish him with a copy of the register, or of any part thereof, but only so far as it relates to names addresses number of shares held and amounts paid on shares, on payment in advance of two shillings or such less sum as the company requires for every hundred words or fractional part thereof required to be copied and the company shall cause any copy so requested by any person to be sent to that person within a period of twenty-one days commencing on the day next after the day on which the request is received by the company.

(4) If any copy so requested is not sent within the period prescribed by subsection (3) of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Twenty pounds. Default penalty.

(5) Any member of a mutual life assurance company, being a company limited by guarantee, shall be entitled to inspect any register, index or other record of the company that relates to the members of the company, but may make copies of or take extracts from such a register, index or record only in relation to names, addresses and voting entitlements of the members of the company.

U.K. s. 115; N.S.W. SS. 81, 82; Vic. s. 128; Qld. ss. 110, 111; S.A. ss. 122,123; W.A. ss. 105, 106; Tas. s. 116.

As to closing the branch registers, see s. 157, post. As to closing the register, see further Fourth Schedule, Table A, art. 23; Table B, art. 14, post. Generally as to the register, see ss. 151, 152, ante.

For the consequences of default by an agent in complying with the provisions of this section, see s. 154, post.

Inspection - As to the inspection of, and right to make extracts from, the register, see Boord v. African Consolidated Land and Trading Co., [1898] 1 Ch.596; Re Balaghat Gold Mining Co., [1901] 2 K.B.665.

Any other person-The object of giving rights of inspection to non-members is to enable them to ascertain on what assets they may rely, Re Overend, Gurney & Co. (1867), L.R. 2 H.L. 325.

Winding-up supervening-The right afforded by this section ceases upon the commencement of the winding-up of the company, and is replaced by s. 248, post. See Re Kent Coalfields Syndicate, [1898] 1 Q.B. 754.

Preserving books in statu quo-Where a shareholder sued to enforce rights to inspect books of the company, an interlocutory injunction was granted preserving the books in statu quo until the hearing, Emmott v. Queensland Mercantile Co. Ltd. (1892), 4 Q.L.1. 166.

154. Consequences of default by agent. Where, by virtue of paragraph (b) of subsection (1) of section one hundred and fifty-two, the register of members is kept at the office of some person other than the company, and by reason of any default of his the company fails to comply with subsection (1) or subsection (2) of that section or section one hundred and fifty-three or with any requirements of this Act as to the production

7


of the register, that other person shall be liable to the same penalties as if he were an officer of the company who was in default, and the power of the Court under section three hundred and seventy-three shall extend to the making of orders against that other person and his officers and servants.

U.K. s. 114.

For the power of the court to compel compliance with the provisions of the Act relating to inspection of registers, among other records, see s. 373, post.

155. Power of Court to rectify register. (1) H-(a) the name of any person is without sufficient cause entered in

or omitted from the register; or (b) default is made or unnecessary delay takes place in entering

in the register the fact of any person having ceased to be a member,

the person aggrieved or any member of the company may apply to the Court for rectification of the register, and the Court may refuse the application or may order rectification of the register and payment by the company of any damages sustained by any party to the application.

(2) On any application under subsection (l) of this section the Court may decide-

(a) any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members or between members or alleged members on the one hand and the company on the other hand; and

(b) generally, any question necessary or expedient to be decided for the rectification of the register.

(3) Where a company is required by this Act to lodge a return containing a list of its members with the Registrar, the Court when making an order for rectification of the register shall by its order direct a notice of the rectification to be so lodged.


For jurisdiction of the court to rectify the register of a corporation incorporated under the law of any other country, State or Territory, having a branch register in the State, see s. 157, post.

For forms for use on application, and form of order, see Atkin's Encyclopaedia of Court Forms and Precedents, Vol. 6A, pp. 178-180; Re Rockhampton Aerial Services Ltd., [1937] Q.W.N.47.

Without sufficient cause-When a person becomes registered as a result of misrepresentation, that entry will have been made without sufficient cause, Ex parte Ward (1868), L.R. 3 Exch. 180.

Default or delay-As to what constitutes default or unnecessary delay, see Re Joint Stock Discount Co. Ltd. (1867), 36 L.J. Ch. 472; cf. also Marshall v. Glamorgan Iron and Coal Co. (1868), L.R. 7 Eq. 129. See also Ansett v. Butler Air Transport Ltd. (No.1) (1957),75 W.N. (N.S.W.) 299; Tucker v. Mulligan, Ex parte Federal Bank oj Australia (1902), 28 V.L.R. 1.

Notice-On an application by a transferee, he should either serve the transferor with notice of the application or excuse his not doing so, Re Gippsland Steam Navigation Company, Ex parte Chuck (1875), 1 V.L.R. (Eq.) 141.

Amendment-Where a liquidator took out an originating summons seeking relief under this section under his own name, whereas it should have been taken out in the name of the company, an amendment was allowed by consent to substitute the name of the company, Re W.A. Holiday Resorts Ltd. (in liquidation), [1961] W.A.R. 152.


Nominees-Where a party beneficially interested in shares applies to have transfers registered to persons who have executed them as his nominees, the court has power to amend the application by joining the nominees as applicants, New Lambton Land and Coal Co. Ltd. v. London Bank of Australia Ltd. (1904), 1 C.L.R.524.

Jurisdiction-The jurisdiction under this section is not exhaustive of the jurisdiction of the court, and the court may alter the register in .:ases other than those specified, Burns v. Siemens Bros. Dynamo Works, [1919] 1 Ch. 225.

The jurisdiction under this section is general, but its exercise is discretionary, Re Gresham Life Assurance Society (1872), 8 Ch. App. 446. Where the interests of third parties are concerned, the court will not exercise its discretionary jurisdiction in their absence, Re Greater British Insurance Corpn. Ltd. (1920), 124 L.T. 194; New Lambton Land and Coal Co. Ltd. v. London Bank of Australia Ltd. (l9Q4), 1 C.L.R. 524.

The court will not order a vendor's name to be removed from the register and the purchaser's name substituted where the parties cannot be placed in statu quo, Curwen v. Yan Yean Land Co. Ltd. (1891), 17 V.L.R.64.

Discretion-An order under this section is a discretionary remedy, Re W.A. Holiday Resorts Ltd. (in liquidation), [1961] W.A.R. 152. A judge has a discretion to refuse an order for rectification if he is not satisfied as to the justice of the case, Re lrrigable Estates Co. Ltd. (1894).20 V.L.R. 492. Notice however that the language of the present section omits the express words of the former Victorian section "if satisfied of the justice of the case." Such an application was refused where it appeared that the applicant, the original holder of shares, and a third party had acted in concert to take advantage of the provisions of an Act as to selling shares under an execution for the purpose of enabling the original holder of the shares to get rid of an anticipated liability thereon, Re McCracken's Brewery Co., Ex parte Quinlivan (1899), 24 V.L.R. 803.

Parties-It is not necessary that a suit for rectification of the share register should be brought by all the shareholders in the company other than the defendants or by one or more of the shareholders on behalf of themselves and all others, Ansett v. Butler Air Transport Ltd. (No.1) (1957), 75 W.N. (N.S.W.) 299.

Directors' powers-Where directors have power to decline to accept a transfer the court has no jurisdiction after liquidation to exercise the discretion which rested with the directors, Re Chatsworth Estate Coy., Re Clarke. Ex parte Hartnell (1892). 18 V.L.R. 442; nor when the directors have power to decline to register a transfer will the court order the vendor's name to be removed from the register and the purchaser's name substituted where it appears that the directors have never been asked to exercise the discretion given by the articles, Ex parte Perchard (1890). 12 A.L.T. 60. Where directors fail during a reasonable period to exercise a power to refuse registration of a transfer, the transferee is entitled to have the register rectified by registration of the transfer, Re Queensland Mines Agency Ltd. (1900). 10 Q.L.J. 52,75; 10 Q.L.J. (N.C.) 14,23.

Imposing condition-In ordering rectification of the register, the court has no power to impose a condition that the applicant shall give to the company a guarantee in respect of all calls for which the transferor would have been liable if his name had remained on the register, New Lambton Land and Coal Co. Ltd. v. London Bank of Australia Ltd. (1904), 1 C.L.R. 524. See also McLaughlin v. Daily Telegraph Newspaper Co. Ltd. (1906),4 C.L.R. 548.

Dispute-If there is some dispute requiring investigation, the English practice is for the judge not to make an order for rectification, but to make an order dismissing the application and leaving it open to the applicant to bring an action, Re Greater Products Development Corpn. Ltd. (1924), 40 T.L.R. 488; cf. the practice in New South Wales, as to which see Re Property Insurance Co. (1929),46 N.S.W.W.N. 209; Re Tokenhouse Securities Ltd. (1931), 48 N.S.W.W.N.239.

Winding-up supervening-The power of rectification is exercisable whether the company is in liquidation or not. See ss. 244, 252, 274; Re Custom House Motor Co. Ltd., [1928] St. R. Qd. 338; Re Sussex Brick Co., [1904] I Ch.598; [1904-07] All E.R. Rep. 673. But commencement of a winding-up will affect the right to rectification for misrepresentation or irregularities, Oakes v. Turquand (1867), L.R. 2 H.L. 325; Re Lucks Ltd., [1928] V.L.R. 466; Murray v. Leonard Heat Electric Co. Ltd., [1922] V.L.R. 728. Rectification may be granted after commencement of winding-up where litigation raising the question of membership has been commenced prior to winding-up, Re Fresh Food and Preserving Co. Ltd., [1903] St. R. Qd. 162, or where the alleged member had never agreed to take shares, ibid.; Re Queensland Co-operative Fruit Products Ltd., [1931] Q.W.N. 10; Re Andersens Ltd., [1931] St. R. Qd. 265; Re Queensland Linseed Industries Ltd .• [1936] Q.W.N. 35.


Where an accountant in a bank became registered holder of shares in a company as trustee for the bank and subsequently transferred the shares to a nominee of the bank, and the company went insolvent, the accountant successfully applied to have the register rectified by removing his name and substituting that of the bank, his duties as trustee having ceased as soon as he had transferred the shares at the request of the bank, Re Chatsworth Estate Company, Ex parte Marriott (1892), 18 V.LR. 400. See also Re Commercial Bank, Ex parte Mason (1897), 18 A.LT.241.

Where an application is made on the grounds that the prospectus did not mention the minimum subscription, it must be made before the commencement of the winding-up, Re Concrete Construction (W.A.) Ltd. (1929), 32 W.A.LR. 1; Commonwealth Homes and Investment Co. Ltd. v. Smith (1937), 57 C.LR. 443.

Estoppel-Where a transfer of shares is believed to have been registered, a company may be estopped from denying that the transfer has been registered and the transferor's name may be removed from the list of contributories, Re City of Melbourne Bank, Alston's Case (1896), 22 V.LR.243.

Agreement to take shares-Shares applied for by a man "for" his son were allotted to the son and the application and allotment moneys paid by the father. On the company going into liquidation the son repudiated the shares and his name was removed from the list of contributories. The father's name was then placed on the list. It was held that he was entitled to have his name removed as he had not agreed to take the shares for himself in his son's name, Re Leonard Heat Electric Co. Ltd., Ex parte Barnes, [1923] V.LR. 659. But see Victorian Mortgage and Deposit Bank v. Australian Financial Agency, etc., Co. and Lucas (1893), 19 V.LR. 680. The court will not order a vendor's name to be removed from the register and the purchaser's name substituted where parties cannot be placed in statu quo, Curwen v. Yan Yean Land Co. (1891), 17 V.LR.64.

Void issue of shares-As to rectification consequent upon a void issue of shares, see Grant v. John Grant & Sons Pty. Ltd. (1950),82 C.LR. 1; [1951] A.LR. (C.N.) 1047; Re N.S.W. Refrigerating and Meat Export Co. Ltd. (1894),15 LR. (N.S.W.) (E.) 121.

Want of directors no bar to rectification-Where the company had no existing directors, and it was not possible to appoint directors, an order was made that the company should, within a prescribed time, rectify the register, and, in default of its doing so, the secretary of the company should be at liberty to rectify it, Re Corowa Boiling Down Co. Ltd. (1923), 40 N.S.W.W.N. 151.

Rectification has been ordered where directors were unable to act through the absence of a quorum, Re Chas. Jeffries & Sons Pty. Ltd., [1949] V.LR. 190.

Subscribers' shares-The court will not cancel shares in respect of which the memorandum was signed, Re Berrima District Farm and Dairy Co. Ltd. (1898), 19 LR. (N.S.W.) (E.) 36.

Assignee in insolvency-Where there was no provision to the contrary in the company's articles it was held that the assignee in insolvency of a shareholder had a right to be registered as a member of the company in respect of the insolvent's shares, and the register was ordered to be rectified accordingly, Wood v. W. and G. Dean Proprietary Limited (1929), 43 C.LR. 77.

Power of attorney-As to a transfer, executed under power of attorney, of shares owned by an insane person, see McLaughlin v. Daily Telegraph (No.2), 1 C.LR. 243,479; [1904] A.c. 776. See also Gibbons v. Wright (1954), 91 C.LR. 423, at pp. 439, 445; [1954] A.LR. 383.

Right to rectification-The right to rectification may be lost where a shareholder does not repudiate his shares within a reasonable time after he becomes aware of the facts entitling him to relief, Civil Service Co-operative Soc. v. Blyth (1914), 17 C.LR. 601; Pentelow's Case (1869), 4 Ch. App. 178. But it must be shown affirmatively that the plaintiffs knew that their names were actually on the register, Buttsworth v. Sydney Investments Ltd. (1932), 49 W.N. (N.S.W.) 176.

The principles applicable to the case where a man has a right to have his own name removed from the register of shareholders, apply equally to a case where plaintiffs seek to have the names of others removed, Ansett v. Butler Air Transport Ltd. (No.1) (1957), 75 W.N. (N.S.W.) 299.

Repudiation-Where a person has never become a shareholder it is sufficient to repudiate by notification to the company, Re Queensland Linseed Industries Ltd., [1936] Q.W.N. 35. Acting as a member will not operate to affirm the contract if before so acting the shareholder has definitely elected to avoid the contract (ibid.). See also Dubbo Refrigeration and Boiling Down Co. Ltd. v. Madden (1893), 14 LR. (N.S.W.) 474; Re Gambrinus Lager Beer Brewery Co. Ltd. (1886), 12 V.LR.446.


Unsuccessful applications-Applications under this section were unsuccessful in the cases of Re Chatsworth Estate Co., Ex parte Hartnell (1892), 18 V.L.R. 442; Re City and County Property Bank, Weedon's Case (1896), 22 V.L.R.235; Re Heights oj Maribyrnong Estute Co., Re Vickery (1897), 22 V.L.R. 432. See also Johnston v. Friends Motor Co. Ltd. (1910), \0 C.L.R. 365; 16 AL.R.627.

Repudiating shareholder-A repudiating shareholder should not only repudiate, but should also have his name removed from the register or commence proceedings to have it removed before the winding-up of the company, Re Fire, Marine, and Accident Indemnity Co., Ex parte Burdekin (1889), 11 AL.T. 46.

Any delay by the repudiating shareholder will be subject to laches, Re Photographic Company oj South Australia (1884), 18 S.A.L.R. 13; cf. Elder's Trustee and Executor Co. Ltd v. Commonwealth Homes and Investment Co. Ltd. (1941), 65 C.L.R.603; [1941] AL.R. 302. However a person who is placed on the register after withdrawing his subscription is not required to remove his name therefrom, as he is not a member, Great Amalgamated Gold Mining Co. Ltd. v. Morris (1877), 11 S.A.L.R. 9.

It is not necessary that applications be made by all persons desiring relief, Ansett v. Butler Air Transport Ltd. (No.1) (1957), 75 W.N. (N.S.W.) 299.

N arne removed-The right on an application under this section to an order for rectification i~ not defeated by the fact that the company had removed the name from the register before the application, Re A ustralian Slate Quarries Ltd. (1930), 31 S.R. (N.S.W.) I.

Damages-For cases in which damages were awarded, see Re Wattamolla Dairy Co. Ltd. (1892), 3 N.S.W.B.C. 21; Re New South Wales and Queensland Smelting and R. Co. Ltd. (1887), 3 N.S.w.W.N. 99.

Return of money - As to whether a successful applicant to have his name removed from the register is entitled to an order for return of moneys paid in respect of the shares, see Re Fresh Food and Preserving Co. Ltd., [1903] St. R. Qd. 162; Re Australian Slate Quarries Ltd. (1930), 31 S.R. (N.S.W.) I.

Whether court order necessary-As a general rule, rectification of the register ought not to be effected without an order of the court. See Re Derham and Allen Ltd., [1946] Ch. 31, and McNicoll and Hurst v. Central Piggery Co. Ltd., [1949] St. R. Qd. 240. But see Commonwealth Homes and Investment Co. Ltd. v. Mackellar (1939), 63 C.L.R. 351; [1939] AL.R.470.

Company may apply-In Re Indo-China Steam Navigation Co., [1917] 2 Ch. 100; [1916-17] All E.R. Rep. 793, the application for rectification was made by the company.

Generally-For further cases, see 9 English and Empire Digest (Rpl.), p. 216; 6 Halsbury's Laws of England, 3rd ed., p. 216.

156. Limitation of liability of trustee, etc., registered as owner of shares. (1) Any trustee executor or administrator of the estate of any deceased person who was registered in a register or branch register kept in the State as the holder of a share in any corporation may become registered as the holder of that share as trustee executor or administrator of that estate and shaH in respect of that share be subject to the same liabilities and no more as he would have been subject to if the share had remained registered in the name of the deceased person.

(2) Any trustee executor or administrator of the estate of any deceased person who was equitably entitled to a share in any corporation being a share registered in a register or branch register kept in the State may with the consent of the corporation and of the registered holder of that share become registered as the holder of the share as trustee, executor or administrator of that estate and shaH in respect of the share be subject to the same liabilities and no more as he would have been subject to if the share had been registered in the name of the deceased person.

(3) Shares in a corporation registered in a register or branch register kept in the State and held by a trustee in respect of a particular trust may with the consent of the corporation be marked in the register or branch register in such a way as to identify them as being held in respect of the trust.


(4) Except as provided in this section no notice of any trust expressed implied or constructive shall be entered on the register or be receivable by the Registrar and no liabilities shall be affected by anything done in pursuance of subsection (1), (2) or (3) of this section and the corporation concerned shall not be affected with notice of any trust by anything so done.

(5) A person who holds shares in a proprietary company as trustee for, or otherwise on behalf or on account of, a corporation shall-

(a) if the shares are so held at the commencement of this Act, within one month after such commencement; or

(b) if the shares are acquired and so held after the commencement of this Act, within one month after they are so acquired,

give the secretary of the proprietary company notice in writing that he so holds the shares.

(6) Nothing in this section shall in any way derogate from or otherwise affect the provisions of section sixty of "The Public Curator Acts, 1915 to 1957."

u.K. s. 117; N.S.W. s.84; Vic. s. 130; Qld. s. 113; S.A. s. 125; W.A. s. 108; Tas. s. 118.

Act referred to: Public Curator Acts, 1915 to 1957, title TRUSTEES AND EXECUTORS.

With regard to transfers by personal representatives, see s. 95, ante. As to branch registers, see s. 157, post. As to register, see s. 151, ante.

As to registration of shares in the name of the Public Curator, see the Public Curator Acts, 1915 to 1957, ss. 60, 62 (d), 113 (2), title TRUSTEES AND EXECUTORS.

Executors-Apparently executors are entitled to have their names on the register without being described as such. See Re T. H. Saunders & Co. Ltd., [1908] I Ch.415.

Trustee-A person who has not become or agreed to become a member of a company cannot be made liable for calls due on shares held in another person's name. The fact that shares are held in trust for a person not a member of the company does not enable the company to pass over the trustees and fasten the liability of a shareholder directly upon such cestui que trust, although it may be unable to enforce the performance of the obligations of a shareholder by the trustee, Melhourne and Bingera Mining Syndicate v. Brougham (1886), 12 V.L.R. 902. See also Re Hogg, Rohinson, & Co. Pty. Ltd., [1933] V.L.R.416.

Partners-Partners are not entitled to be entered on the register in their firm name, Re Vagliano A nthracite Collieries Ltd. (1910), 79 L.I. Ch. 769.

Equities-For a case in which the equitable rights of purchasers of shares when the full purchase price had been paid but the transfers had not been registered were held to prevail over a subsequent equitable right under a charging order, Hawks v. McArthur, [1951] 1 All E.R.22.

Generally-See also 6 Halsbury's Laws of England, 3rd ed., p. 212.

157. Branch registers. (1) A company having a share capital may cause to be kept in any place outside the State a branch register of members which shall be deemed to be part of the company's register of members.

(2) The company shall lodge with the Registrar notice of the situation of the office where any branch register is kept and of any change in its situation, and if it is discontinued of its discontinuance, and any such notice shall be lodged within one month after the opening of the office or of the change or discontinuance. as the case may be.

(3) A branch register shall be kept in the same manner in which the principal register is by this Act required to be kept except that the advertisement required before the register is closed shall be inserted in some newspaper circulating generally in the district where the branch register is kept.


(4) The company shall transmit to the office at which its principal register is kept a copy of every entry in its branch register as soon as may be after the entry is made, and shall cause to be kept at that office duly entered up from time to time a duplicate of its branch register, which shall for all purposes of this Act be deemed to be part of the principal register.

(5) Subject to the provisions of this section with respect to the duplicate register the shares registered in a branch register shall be distinguished from the shares registered in the principal register, and no transaction with respect to any shares registered in a branch register shall during the continuance of that registration be registered in any other register.

(6) A company may discontinue a branch register and thereupon all entries in that register shall be transferred to some other branch register kept by the company in the same place or to the plincipal register.

(7) If by virtue of the law in force in any other country, State or Territory any corporation incorporated under that law keeps in the State a branch register of its members resident in the State, the Governor in Council may by Order in Council published in the Government Gazette declare that the provisions of this Act relating to inspection place of keeping and rectification of registers of members shall, subject to any modifications specified in the Order in Council, apply to and in relation to any such branch register kept in the State as they apply to and in relation to the rel!isters of companies under this Act and thereupon those provisions shall apply accordingly.

(8) If default is made in complying with this section the company and every officer of the company who is in default and every person who, pursuant to section one hundred and fifty-two has arranged to make up the principal register, and who is in default shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. u.K. ss. 119-123; N.S.W. ss. 86, 87; Vic. s. 131; Qld. S8. 116, 117; S.A. 88.127,

128; W.A. s. 110; Tas. s. 119. As to register of members, see ss. 151 et seq., ante. Provision for closing the

register after advertisement is made by s. 153, ante. For rectification, see s. 155, ante.

Division 5-Annual Return

158_ Annual return by a company having a share capital. (1) Every company having a share capital shall make a return containing the particulars referred to in Part I of the Eighth Schedule and accompanied by such copies of documents as are required to be included in the return in accordance with Part II of that Schedule and such of the certificates and other particulars prescribed in that Part as are applicable to the company.

(2) The return shall be in accordance with the form set out in Part II of the Eighth Schedule or as near thereto as circumstances admit and shall be made up to the date of the annual general meeting of the company in the year or a date not later than the fourteenth day after the date of the annual general meeting.

(3) In the case of a company keeping a branch register the particulars of the entries in that register shall, so far as they relate to matters which are required to be stated in the return, be included in the return made next after copies of those entries are received at the registered office of the company.


( 4) The annual return signed by a director or by the manager or secretary of the company shall be lodged with the Registrar within one month or in the case of a company keeping pursuant to its articles a branch register in any place outside the Commonwealth within two months after the annual general meeting.

(5) If a company fails to comply with this section, the company and every officer of the company who is in default shall be guilty of an offence against this Act.


u.K. s. 124; N.S.W. ss. 88, 90; Vic. s. 132; Qld. s. 118; S.A. s. 129; W.A. s. 112; Tas. s. 120.

As to the contents of the balance-sheet, see ss. 161, 162 and Ninth Schedule, post. As to the auditor's report, see s. 167, post. As to requirements in respect of foreign companies, see Division 3 of Part XI, post. As to branch registers, see s. 157, ante.

Certain companies licensed to dispense with the use of the word "Limited" are required to file certain returns, s. 24, ante.

As to the registered office, see ss. III, 112, ante. As to false and misleading statements, see s. 375, post.

General meeting-Directors cannot set up as a defence to proceedings brought under the penal provisions of this section, that the ordinary general meeting of the company has not been held, Park v. Lawton, {1911] I K.B. 588. Where the ordinary general meeting has been properly convened, but has in accordance with the articles been adjourned sine die for want of the quorum prescribed by the articles, it will be taken to have been held for the purposes of this section, Fletcher v. New Zealand Glue Co. Ltd. (1911), 31 N.Z.L.R.129.

In relation to a company being struck off the register because of failure to render the annual return, etc., see Re Moses & Cohen Ltd., [1957] 3 All E.R.232.

Penal provisions-See Re Bishop (1878), 4 V.L.R. (L.) 287, as to whether offences in respect of a number of days may be included in one summons.

159. Annual return by company not having a share capital. (1) A company not having a share capital shall, within one month after each annual general meeting of the company, lodge with the Registrar a return in the prescribed form containing the particulars referred to in subsection (2) of this section and made up to the date of the annual general meeting or a date not later than the fourteenth day after the date of the annual general meeting.

(2) The return shall contain-(a) the address of the registered office of the company; (b) in a case in which the register of members is, under this Act,

kept elsewhere than at that office, the address of the place where it is kept;

(c) particulars of the total amount of the indebtedness of the company in respect of all charges which are required to be registered with the Registrar at Brisbane;

(d) all such particulars with respect to the persons who on the day to which the return is made up are the directors, managers or secretaries of the company as are required to be contained in the register of directors, managers and secretaries;

(e) the name and address of the auditor of the company; and (f) such other matters relating to the accounts of the company and

to the unclaimed moneys held by the company as are prescribed.


(3) If a company fails to comply with this section, the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: One hundred pounds. Default penalty. u.K. s. 125; N.S.W. s. 89; Vic. s. 133; Qld. s. 119; S.A. s. 130; W.A. s. 113;

Tas. s. 121. As to the registered office, see ss. 111, 112, ante. As to the register of members

being kept elsewhere than at the registered office, see s. 152, ante. As to charges which are required to be registered, see s. 100, ante. As to the register of directors, managers and secretaries, see s. 134, ante.

As to auditors generally, see ss. 165 et seq., post.

160. Exemption of certain companies. Eighth Schedule. (1) A public company which-

(a) has more than five hundred members; (b) keeps its principal share register at a place within three miles

of the office of the Registrar whereat it is registered; and (c) provides reasonable accommodation and facilities for persons to

inspect and take copies of its list of members and its particulars of shares transferred,

need not comply with such of the provisions of this Division and the Eighth Schedule as relate to the inclusion in the annual return of a list of members if there is included in the annual return a certificate by the secretary that the company is of a kind to which this subsection applies.

(2) The Governor in Council may by Order in Council published in the Government Gazette require any company to which subsection (1) of this section applies to comply with all or any of the provisions of this Division or of the Eighth Schedule referred to in subsection (I) of this section.

(3) If default is made in complying with an Order in Council made under subsection (2) of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: One hundred pounds. Default penalty. Vic. s. 134; Tas. s. 122. As to inspection of the register, see s. 153, ante. As to the annual return, see

ss. 158, 159, ante, Eighth Schedule, post.

PART VI-ACCOUNTS AND AUDIT

Division I-Accounts

161. Accounts to be kept. (1) Every company and the directors and managers thereof shall cause to be kept in the English language such accounting and other records as will sufficiently explain the transactions and financial position of the company and enable true and fair profit and loss accounts and balance-sheets and any documents required to be attached thereto to be prepared from time to time, and shall cause those records to be kept in such manner as to enable them to be conveniently and properly audited.

(2) The company shaH retain the records referred to in subsection (1) of this section for seven years after the completion of the transactions or operations to which they respectively relate.


(3) The records referred to in subsection (1) of this section shall be kept at the registered oftice of the company or at such other place as the directors think fit and shall at all times be open to inspection by the directors.

(4) If accounting and other records are kept by the company at a place outside the State there shall be sent to and kept at a place in the State and be at all times open to inspection by the directors such statements and returns with respect to the business dealt with in the records so kept as will enable to be prepared true and fair profit and loss accounts and balancesheets and any documents required to be attached thereto.

(5) The Court may in any particular case order that the accounting and other records of a company be open to inspection by a registered company auditor acting for a director, but only upon an undertaking in writing given to the Court that information acquired by the auditor during his inspection shall not be disclosed by him except to that director.

(6) If default is made in complying with any of the provisions of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Imprisonment for three months or One hundred pounds. Default penalty.


As to the registered office, see ss. III, 112, ante. For the right of auditors to attend a general meeting at which accounts are laid before the company, see s. 167, post. As to accounts, see further Fourth Schedule, Table A, art. 97; Table B, art. 80, post. For penal provisions relating to the failure to keep proper books of account, see s. 303, post.

As to registered company auditors, see ss. 8, 9, ante. For the form in which books of account may be kept, see s. 369, post. For an order to compel production and inspection of books where an offence is suspected, see s. 368, post. As to provisions in articles or any contract exempting or indemnifying officers from liability, see s. 133, ante.

For the power of the court to grant relief, see s. 365, post. As to the duties and powers of auditors, see s. 167, post. As to false and misleading statements, see s. 375, post. For offences in relation to destruction, falsification, etc., of books, see s. 301, post.

As to retention of records by the Registrar, see s. 12, ante. As to the retention of records in winding-up and after the dissolution of a company, see s. 284, post. As to the right to make copies of certain documents, see s. 370, post. The Registrar has certain powers of inspection, s.7, ante.

For other provisions requiring the keeping of accounts, see s. 80 (trustees for other interests); s. 195 (receivers and managers); s. 205 (official manager); s. 281 (liquidator); s.313 (Registrar).

Criminal liability-For criminal offences in relation to books and accounts, see the Criminal Code, Chapter XLII, title CRIMINAL LAW.

Books of account-For a discussion of what are books of account within the meaning of the Bankruptcy Act, 1924-1960 (Commonwealth), s.209 (g), see Re Crimmins (\ 956), 18 A.B.c. 53, at pp. 54, 55.

Whether balance-sheet account stated-It was held that a balance-sheet signed by directors, not animo contrahendi, but in performance of their duties as directors, is not an account stated involving a fresh promise by the directors so signing, lohn Shaw & Sons (Salford) Ltd. v. Shaw, [1935] 2 K.B. 113; [1935] All E.R. 456.

Copies-As to making copies, see s. 370, post. It has been held in relation to similar provisions in the Local Government Act, 1919 (N.S.W.), that a right to take notes is incidental to the right of inspection, Downey v. Prior, [1961] A.L.R.310.


162. Profit and loss account, balance-sheet and directors' report. (1) The directors of every company shall at some date not later than eighteen months after the incorporation of the company and subsequently once at least in every calendar year at intervals of not more than fifteen months lay before the company in general meeting a profit and loss account for the period since the preceding account (or in the case of the first account, since the incorporation of the company) made up to a date not more than six months before the date of the meeting.

(2) Notwithstanding the provisions of subsection (I) of this section the Registrar on application by the company, if for any special reason he thinks fit so to do, may extend the period of eighteen months referred to in that subsection and with respect to any year extend the period of six months referred to in that subsection, notwithstanding that that period is so extended beyond the calendar year.

(3) The directors of every company shall cause to be made out, and to be laid before the company in general meeting with the profit and loss account required by subsection (1) of this section a balance-sheet as at the date to which the profit and loss account is made up.

(4) Where a company is required by the provisions of section one hundred and sixty-five to appoint an auditor, the profit and loss account and the balance-sheet of the company shall be duly audited before they are laid before the company in general meeting as required by this section.

(5) The directors of a company shall cause to be attached to every balance-sheet made out pursuant to this section a report signed by or on behalf of the directors with respect to the state of the company's affairs.

(6) Each report to which subsection (5) of this section relates shall state-

(a) whether or not the results of the company's operations in the period covered by the profit and loss account have in the opinion of the directors been materially affected by items of an abnormal character;

(b) the amount, if any, which has been paid or declared or which they recommend should be paid by way of dividend;

(c) the amount, if any, which they propose to carry to the reserve fund. general reserve or reserve account shown specifically on the balance-sheet or to a reserve fund general reserve or reserve account to be shown specifically on a subsequent balance-sheet; and

(d) where the directors are of the opinion that any current assets would not at least realise the value at which they are shown in the accounts of the company their opinion as to the amount that those current assets might reasonably be expected to realise in the ordinary course of business of the company.

(7) In subsection (6) of this section without affecting the general ity of the expression "items of an abnormal character" that expression includes-

(a) any change in accounting principles adopted since the last report;

(b) any transfers to or from reserves or provisions; (c) any writing off of substantial amounts of bad debts;


(d) any substantial increase or decrease in the value of trading stock owing to a change in the basis of valuation of the whole or any part of the trading stock;

(e) any item of an unusual nature or value which appears in the accounts; and

(f) any absence from the accounts of any material item usually included therein.

(8) Where any option has been granted during the period covered by the profit and loss account to take up unissued shares of a company the report required by subsection (5) of this section shall state-

(a) the name of the person to whom the option has been granted; (b) the number and class of shares in respect of which the option

has been granted; (c) the date of expiration of the option; (d) the basis upon which the option may be exercised; and (e) whether the person to whom the option has been granted has

any right to participate by virtue of the option in any share issue of any other company.

(9) Each report required by subsection (5) of this section shall specify-

(a) particulars of shares issued during the period to which the report relates by virtue of the exercise of options to take up unissued shares of the company, whether granted before or during that period; and

(b) the number and class of unissued shares of the company under option as at the end of that period, the price, or method of fixing the price, of issue of those shares, the date of expiration of the option and the rights, if any, of the persons to whom the options have been granted to participate by virtue of the options in any share issue of any other company.

(10) The provisions of paragraph (a) of subsection (8) of this section shall not apply in any case where the option to take up shares of the company has been conferred generally on all the holders of a class of shares or debentures of the company.

(11) Every balance-sheet referred to in subsection (3) of this section shall give a true and fair view of the state of affairs of the company as at the end of the period to which it relates and every profit and loss account referred to in subsection (1) of this section shall give a true and fair view of the profit or loss of the company for the period of accounting as shown in the accounting and other records of the company, and without affecting the generality of the foregoing, every such balance-sheet and profit and loss account shall comply with the requirements of the Ninth Schedule so far as applicable thereto, but where under the law of the Commonwealth relating to banking a company is required to prepare a balance-sheet and profit and loss account annually a balance-sheet and a profit and loss account each of which complies with that law shall be deemed to comply with the provisions of this Act relating to the form and content of balance-sheets and profit and loss accounts and the provisions of subsection (5) of this section shall not apply to any such balance-sheet.


(12) Every balance-sheet and profit and loss account of a company shall be accompanied by a statement signed on behalf of the directors by two directors of the company, or in the case of a proprietary company having one director only, by that director, stating that in their or his opinion-

(a) the profit and loss account is drawn up so as to give a true and fair view of the results of the business of the company for the period covered by the account; and

(b) the balance-sheet is drawn up so as to exhibit a true and fair view of the state of affairs of the company as at the end of that period.

(13) Every balance-sheet and profit and loss account laid before a company in general meeting shall be accompanied by a statutory declaration by the secretary of the company verifying to the best of his knowledge and belief the correctness of the balance-sheet and profit and loss account.

(14) Any document (other than a balance-sheet prepared in accordance with this Act) or advertisement published, issued or circulated by or on behalf of a company (other than a banking company) shall not contain any direct or indirect representation that the company has any reserve unless the representation is accompanied-

(a) if the reserve is invested outside the business of the companyby a statement showing the manner in which and the secunty upon which it is invested; or

(b) if the reserve is being used in the bl.'siness of the company-by a statement to the effect that the reperve is being so used.

(15) None of the preceding provisions of this section shall apply to a company registered under the law of the Commonwealth relating to life insurance but every such company shall lodge with the Registrar a copy of every balance-sheet revenue account and profit and loss account which it is required to lodge under that law within nine months after the expiration of the period in respect of which the balance-sheet revenue account and profit and loss account was prepared.

U.K. ss. 148, 149, 156, 157; N.S.W. ss. 103, 104, 110; Vic. s. 137; Qld. ss. 133, 134; S.A. ss. 142, 148, 149; W.A. s. 126; Tas. ss. 131, 132.

As to dividends, see Fourth Schedule, Table A, arts. 98 et seq.; Table B, arts. 81 et seq., post. As to transfers to or from reserves or provisions, see Ninth Schedule, post. As to reserves shown in the balance sheet, see Ninth Schedule, post.

For the statutory requirements relating to balance sheets of foreign companies, see s. 348, post. As to a subsidiary company incorporated outside the State, see Ninth Schedule, Holding and Subsidiary Companies, post.

Further as to the liability of directors, see ss. 124, ante, 163, post. As to the auditor's report, see s. 167, post.

Directors' responsibility respecting value of assets - Before presenting their annual report and balance-sheet to the shareholders, and before recommending a dividend, directors should have a detailed and complete list of the company's assets and investments prepared for their own use and information, and ought not to be satisfied as to the value of the company's assets merely by the assurance of their chairman, however apparently distinguished and honourable, nor with the expression with the belief of their auditors, however competent and trustworthy, Re City Equitable Fire Insurance Co. Ltd., [1925] Ch.407; [1924] All E.R. Rep. 485.

Where balance-sheets were delusive in that they over-estimated the assets of the company and the directors did not know the true state of the company's affairs but relied on the manager who had prepared the balance-sheets without themselves exercising any judgment, it was held that the directors had fallen short of the standard of care which they ought to have exercised in the affairs of the company, Leeds Estate Building and Investment Co. v. Shepherd (1887), 36 Ch. D. 787.


Entries in books-When responsible officers are employed, a director is not, in the absence of suspicious circumstances, bound to examine the entries in the books before signing, Re Denham & Co. (1883), 25 Ch. D. 752.

Liability-As to the liability of directors, see Young v. Brownlee & Co. Ltd., [1911] S.C. 677.

Dividends-Dividends are payable out of profits only, or pursuant to s. 60, ante; see s. 376, post.

Profits-As to what are profits, see W. Thomas & Co. Ltd. v. Commissioner of Taxation (1931), 45 C.L.R.539; Webb v. Australian Deposit and Mortgage Bank Ltd. (1910), II C.L.R. 223; Commissioner of Taxes v. Melbourne Trust Ltd., [1914] A.C. IDOl.

Generally-See Paterson & Ednie, Australian Company Law, pp. 397-401.

163. Penalty. (1) If any director of a company fails to take all reasonable steps to secure compliance by the company with the foregoing provisions of this Division or has by his own wilful act been the cause of any default by the company thereunder, he shall be guilty of an offence against this Act.

Penalty: Imprisonment for six months or Two hundred pounds.

(2) In any proceedings against a person for failure to take reasonable steps to secure compliance by a company with the foregoing provisions of this Division it shall be a defence to prove that he had reasonable ground to believe and did believe that a competent and reliable person was charged with the duty of seeing that those provisions were complied with and was in a position to discharge that duty.

(3) A person shall not be sentenced to imprisonment for any offence under this section unless in the opinion of the court dealing with the case the offence was committed wilfully.

U.K. s. 147 (4); N.S.W. s. 102; Vic. s. 138; Qld. s. 133 (3); S.A. s. 142 (3); W.A. s. 126; Tas. s. 134.

As to liability when proper accounts are not kept, see s. 303, post. As to false and misleading statements, see s. 375, post. Further as to power of

the court to grant relief in certain circumstances, see s. 365, post. Certain provisions seeking to exempt officers and auditors from liability are

rendered void by s. 133, ante.

164. Members of company entitled to balance-sheet, etc. (1) A copy of every profit and loss account and balance-sheet (including every document required by law to be attached thereto) which is to be laid before a company in general meeting accompanied, if the company is required by this Act to appoint an auditor, by a copy of the auditor's report thereon shall, not less than seven days before the date of the meeting, be sent to all persons entitled to receive notice of general meetings of the company.

(2) Any member of a company whether he is or is not entitled to have sent to him copies of the profit and loss accounts and balance-sheets to whom copies have not been sent and any holder of debentures shall, on a request being made by him to the company, be furnished by the company without charge with a copy of the last profit and loss account and balancesheet of the company (including every document required by this Act to be attached thereto) together with a copy of the auditor's report (if any) thereon.

(3) If default is made in complying with subsection (1) or (2) of this section the company and every officer of the company who is in default


shall be guilty of an offence against this Act, unless it is proved that that person has already made a demand for and been furnished with a copy of the document.

Penalty: Twenty pounds. Default penalty.

(4) Nothing in this section shall apply to a mutual life assurance company limited by guarantee registered under the law of the Commonwealth relating to life insurance.

U.K. s. 158; N.S.W. s. III; Vic. s. 139; Qld. s. 140; S.A. s. 150; W.A. s. 134; Tas. s. 135.

For the power of the court to compel compliance, see s. 373, post. As to general meetings, see ss. 135 et seq., ante. As to audit generally, see s. 165

et seq., post. As to profit and loss account, balance-sheet and directors' report, see s. 162,

ante. As to persons entitled to notice of general meetings, see Fourth Schedule, Table A, art. III; Table B, art. 93, post. A copy of the last balance-sheet and profit and loss account is to be included in the annual return, see Eighth Schedule, post.

Life assurance companies-See the Life Insurance Act, 1945-1961 (Commonwealth).

Division 2-Audit

165. Appointment and remuneration of auditors. (1) At any time before the first annual general meeting of a company, the directors of the company may appoint, or (if the directors do not make an appointment) the company at a general meeting may appoint, a person or persons to be the auditor or auditors of the company, and any auditor so appointed shall, subject to this section, hold office until the first annual general meeting.

(2) A company shall at each annual general meeting of the company appoint a person or persons to be the auditor or auditors of the company, and any auditor so appointed shall, subject to this section, hold office until the next annual general meeting of the company.

(3) Subject to subsections (7) and (8) of this section, the directors of a company may fill any casual vacancy in the office of auditor of the company, but while such a vacancy continues the surviving or continuing auditor or auditors, if any, may act.

(4) An auditor of a company may be removed from office by resolution of the company at a general meeting of which special notice has been given, but not otherwise.

(5) Where special notice of a resolution to remove an auditor is received by a company-

(a) it shall forthwith send a copy of the notice to the auditor concerned and to the Board; and

(b) the auditor may, within seven days after the receipt by him of the copy of the notice, make representations in writing to the company (not exceeding a reasonable length) and request that, prior to the meeting at which the resolution is to be considered, a copy of the representations be sent by the company to every member of the company to whom notice of the meeting is sent.

(6) Unless the Board on the application of the company otherwise orders, the company shall send a copy of the representations as so requested and the auditor may (without prejudice to his right to be heard orally) require that the representations be read out at the meeting.


(7) Where an auditor of a company is removed from office in pursuance of subsection (4) of this section at a general meeting of the company-

(a) the company may, at the meeting, by a resolution passed by a majority of not less than three-fourths of such members of the company as being entitled so to do vote in person or, where proxies are allowed, by proxy, forthwith appoint another person nominated at the meeting as auditor; or

(b) the meeting may be adjourned to a date not earlier than twenty days and not later than thirty days after the meeting and the company may by ordinary resolution appoint another person as auditor, being a person notice of whose nomination as auditor has, at least ten days before the adjourned meeting, been received by the company.

(8) A company shall, forthwith after the removal of an auditor from office in pursuance of subsection (4) of this section, give notice in writing of the removal to the Board and, if the company does not appoint another auditor under subsection (7) of this section, the Board shall appoint an auditor.

(9) An auditor appointed in pursuance of subsection (7) or (8) of this section shall, subject to this section, hold office until the next annual general meeting of the company.

(10) Notwithstanding the provisions of this section, it shall not be necessary for an exempt proprietary company to appoint an auditor at a particular annual general meeting of the company, if-

(a) all the members of the company have agreed at or before the meeting that it is not necessary for the company to appoint an auditor at that meeting; and

(b) the secretary of the company has recorded a minute to that effect in the book containing the minutes of proceedings of general meetings of the company.

(11) If a company required by this section to appoint an auditor or auditors does not do so, the Board may on the application in writing of any member of the company make the appointment.

(12) A person shall not be capable of being appointed auditor of a company at an annual general meeting unless he held office as auditor of the company immediately before the meeting or notice of his nomination as auditor was given to the company by a member of the company not less than twenty-one days before the meeting.

(13) Where notice of nomination of a person as an auditor of a company is received by the company whether for appointment at an adjourned meeting under subsection (7) of this section or at an annual general meeting, the company shall, not less than seven days before the adjourned meeting or the annual general meeting, send a copy of the notice to the person nominated, to each auditor (if any) of the company and to each person entitled to receive notice of general meetings of the company.

(14) If, after notice of nomination of a person as an auditor of a company has been given to the company, the annual general meeting of the company is called for a date twenty-one days or less after the notice has been given, subsection (12) of this section shall not apply in relation to the person and, if the annual general meeting is called for a date not

COMPANIES ACf OF 1961 ss. 165, 166 209

more than seven days after the notice has been given and a copy of the notice is, at the time notice of the meeting is given, sent to each person to whom, under subsection (13) of this section, it is required to be sent, the company shall be deemed to have complied with that subsection in relation to the notice.

(15) The fees and expenses of an auditor of a company-

(a) in the case of an auditor appointed by the company at a general meeting-shall be fixed by the company in general meeting or, if so authorized by the members at the last preceding annual general meeting, by the directors; and

(b) in the case of an auditor appointed by the directors or by the Board-may be fixed by the directors or by the Board, as the case may be and, if not so fixed, shall be fixed as provided in paragraph (a) of this subsection as if the auditor had been appointed by the company.

(16) Unless the company in general meeting otherwise directs, an auditor shall, in addition to the fees and expenses fixed under subsection (15) of this section, be entitled to receive from the company such reasonable travelling and accommodation expenses as are necessarily incurred by him in the performance of his duties as auditor.

u.K. 5S. 159-161; N.S.W. s. 113; Vic. s. 141; Qld. ss. 142, 143; S.A. s. 153; W.A. s. 137; Tas. s. 137.

Note that the section does not confine its scope to public companies; but it does make an exception in the case of an exempt proprietary company in certain circumstances.

As to auditors, see generally ss. 8, 9, ante. Where audit requirements apply, the financial statements shall be audited before they are laid before the company in general meeting, s. 162, ante.

As to resolutions requiring special notice, see s. 145, ante. As to the Board, see ss. 8 et seq., ante. As to the annual general meeting, see s. 136, ante.

A number of Acts provide that particular public officers shall not act as auditors. See, for example, the Main Roads Acts, 1920 to 1962, s. 3 (2), title ROADS; the Railways Acts, 1914 to 1961, s.9, title RAILWAYS AND TRAMWAYS; the Land Act of 1962, s. 30 (4), title LAND; the Industrial Conciliation and Arbitration Act of 1962, s. 9 (2), title LABOUR.

166. Auditor's remuneration. (1) If a company is served with a notice sent by or on behalf of-

(a) at least ten per centum of the total number of members of the company; or

(b) the holders in aggregate of not less than ten per centum in nominal value of the company's issued share capital,

requiring particulars of all emoluments paid to or receivable by the auditor of the company or any person who is a partner or employer or employee of the auditor, by or from the company or any subsidiary in respect of services other than aUditing services rendered to the company, the company shall forthwith-

(c) prepare or cause to be prepared a statement showing particulars of all emoluments paid to the auditor or other person and of the services in respect of which the payments have been made for the financial year immediately preceding the service of such notice;


(d) forward a copy of the statement to all persons entitled to receive notice of general meetings of the company; and

(e) lay such statement before the company in general meeting.

(2) If default is made in complying with any of the provisions of this section the company and every director of the company who is in default shall be guilty of an offence against this Act.


As to service of documents on a company, see s. 362, post. As to persons entitled to receive notices of meetings, see Fourth Schedule, Table A, art. 111; Table B, art. 93, post.

As to general meetings, see ss. 135 et seq., ante. As to auditors, see s. 165, ante. Further as to disclosure of remuneration paid to auditors, see Ninth Schedule, post.

Will the requirement of this section that the company shall "prepare ... a statement ... " of emoluments, cf. the provisions of s.131, ante, which require the company to "prepare ... an audited statement."

167. Powers and duties of auditors as to reports on accounts. (1) Every auditor of a company shall report to the members as to every balance-sheet and profit and loss account laid before the company in general meeting during his tenure of office and shall state in the report whether, in his opinion-

(a) the balance-sheet and profit and loss account are properly drawn up in accordance with the provisions of this Act and so as to give a true and fair view of the state of the company's affairs; and

(b) the accounting and other records (incl ud ing registers) examined by him are properly kept in accordance with the provisions of this Act.

(2) Every auditor shall state in his report-

(a) if he has not obtained all the information and explanations that he required;

(b) if, in his opinion, proper accounting and other records (including registers) have not been kept by the company;

(c) if, in his opinion, the returns submitted from branches not visited by the auditor are inadequate;

(d) if, in his opinion, according to the best of his information and the explanations given to him and as shown by the accounting and other records of the company the profit and loss account is not in agreement with the company's accounting and other records or is not properly drawn up so as to give a true and fair view of the results of the business of the company for the period of accounting;

(e) if, in his opinion. according to the best of his information and the explanations given to him and as shown by the accounting and other records of the company, the balance-sheet is not in agreement with the company's accounting and other records or is not properly drawn up so as to give a true and fair view of the state of the company's affairs as at the end of the period of accounting; and

(f)


if, in his opinion, according to the best of his information and the explanations given to him, the accounting and other records (including registers), the balance-sheet and the profit and loss account do not give the information required by this Act,

and shall give particulars of any failure or shortcoming in respect of any of the matters referred to in this subsection.

(3) Every auditor shall have a right of access at all times to the accounting and other records (including registers) of the company and shall be entitled to require from the officers of the company such information and explanation as he desires for the audit.

(4) The auditor's report shall be attached to the balance-sheet and the profit and loss account and shall, if any member so requires, be read before the company in general meeting and shall be open to inspection by any member.

(5) The auditor shall be entitled to attend any general meeting of the company and to receive all notices of and other communications relating to any general meeting which any member is entitled to receive and to be heard at any general meeting which he attends on any part of the business of the meeting which concerns him as auditor.

(6) Any officer of a company who refuses or fails without lawful justification to allow any auditor access to any accounting and other records (including registers) of the company in his custody or power or to give any information possessed by him as and when required or who otherwise hinders, obstructs or delays an auditor in the performance of his duties or the exercise of his powers shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. u.K. s. 162; N.S.W. s. 115; Vic. s. 142; Qld. s. 144; S.A. s. 155; W.A. s. 139;

Tas. s. 139. See also as to accounts, ss. 161, 162, ante; Ninth Schedule, post. The records

shall be kept in such manner as to enable them to be conveniently and promptly audited, s. 161, ante, s. 303, post.

The court may order an inspection by a registered company auditor acting for a director, s. 161, ante. As to the right to receive copies of financial statements and auditor's report, see s. 164, ante.

Provisions indemnifying auditors against liability arising from negligence, etc., are void, s. 133, ante. The court has power to grant relief in certain circumstances, s. 365, post.

A copy of the auditor's report is to be included in the annual return, see Eighth Schedule, post. As to the auditor's report on financial statements of holding and subsidiary companies, see Ninth Schedule, post.

The Registrar may require balance-sheets of foreign companies to be accompanied by documents presented by this Act, s. 348, post.

As to returns submitted from branches, d. s. 161, ante. As to false and misleading statements in reports, etc., see s. 375, post.

In relation to the covenant respecting audit in a trust deed for interests other than shares, debentures, etc., see s. 80, ante. As to the audit of accounts of receivers and managers, see s. 195, post. As to the audit of the accounts of a liquidator, see s. 281, post. As to the audit of certain accounts of the Registrar, see s. 313, post. In relation to official management, see s. 202, post.

Status-Auditors are the servants of the company, and the court will not by mandatory injunction force upon the company auditors whom the shareholders do not desire to act. Nor are the auditors entitled as of right to a mandatory order giving them access to the company's books, where they have been discharged by the directors, without any steps being taken to ascertain whether the shareholders desire them to act, Cuff v. London and County Land and Building Co., [1912] 1 Ch.440.


Report to members-The auditor's duty to "report to members" should be read as referring to the members in general meeting. No rights are conferred upon individual shareholders, Re Alien, Craig & Co. (London) Ltd., II934] 1 Ch.483; [1934) All E.R. Rep. 301. The auditor's duty to report to members is satisfied by forwarding the report to the secretary of the company, ibid.

The auditor is liable only to his client, and not to third parties with whom he has no contractual relationship, Candler v. Crane Christmas & Co., [1951] I All E.R. 426; [1951) 2 K.B. 164.

Duties and responsibilities-The duties of auditors were fully considered in Re City Equitable Fire Insurance Co. Ltd., [1925] Ch. 407. The auditors' responsibility depends, subject to statutory duties, on the special contract of engagement, if any, and, if none, on the articles of association (but note s. 133, ante). Their duty under this section depends upon the information given and explanations furnished to them. The onus is on the auditors to ask for information on matters which call for further explanation. An auditor must make personal inspection of securities when practicable. If securities are not in proper custody it is the auditor's duty to require that the matter be put right, and to report non-compliance to the members of the company, and this whether he can make personal inspection or not. Auditors must not be content with a certificate that securities are in the possession of a particular person or firm or company unless in their judgment the person, firm, or company is trustworthy and in the ordinary course of business keeps securities (ibid.). See also Leeds Estate Building and Investment Co. v. Shepherd (1887), 36 Ch. D. 787; F omenta Ltd. v. Selsdon Ltd., [1958] 1 All E.R. 11.

For other illustrations of the duties of auditors, see Re Republic of Bolivia Exploration Syndicate Ltd., [1914] 1 Ch. 139; [1911-13) All E.R. Rep. p. 654 (should be conversant with articles); Squire (Henry) Cash Chemist Ltd. v. Ball, Baker & Co., Mead v. Same (1911), 106 L.T.197 (should point out to directors anything that appears to be wrong); and 9 English and Empire Digest (Rpl.), p. 587.

Standards of care and skill-See the observations of Lord Denning in Fomento Ltd. v. Selsdon Ltd., II 958] 1 All E.R. 11, at p. 23.

Statute of Limitations-The Statute of Limitations may be pleaded where an auditor is proceeded against for negligence or breach of duty; but not for fraud or fraudulent breach of trust, Leeds Estate Building and Investment Co. v. Shepherd (1887), 36 Ch. D. 787.

Generally-See Paterson and Ednie, Australian Company Law, pp.408-413; 6 Halsbury's Laws of England, 3rd ed., p. 385.

Division 3-Inspection

168. Application and interpretation. (1) This Division does not authorize any investigation into the life insurance business of a company.

(2) In this Division "officer or agent" in relation to a corporation includes-

(a) a director banker solicitor or auditor of the corporation;

(b) a person who at any time-(i) has been a person referred to in paragraph (a) of this sub

section; or (ii) has been otherwise employed or appointed by the corporation;

(c) a person who-(i) has in his possession any property of the corporation; (ii) is indebted to the corporation; or

(iii) is capable of giving information concerning the promotion, formation, trading, dealings, affairs or property of the corporation; and


(d) where there are reasonable grounds for suspecting or believing that a person is a person referred to in paragraph (C) of this subsection, that person.

N.S.W. s. 118 (4); Vic. s.143; W.A. s. 142 (4); Tas. s.140. As to production and inspection of books where an offence is suspected, see

s. 368, post.

As to life assurance companies, see the Life Insurance Act, 1945-1961 (Commonwealth) .

169. Investigation of affairs of company by inspectors at direction of Governor in Council. (1) The Governor in Council may appoint one or more inspectors to investigate the affairs of a company or such aspects of the affairs of a company as are specified in the instrument of appoint· ment and to report thereon in such manner as the Governor in Council directs-

(a) in the case of a company (not being a banking corporation) having a share capital, on the application of not less than two hundred members or of members holding not less than onetenth of the shares issued or on the application of holders of debentures holding not less than one-fifth in nominal value of debentures issued;

(b) in the case of a company not having a share capital, on the application of not less than one-fifth in number of the persons on the company's register of members; or

(c) in the case of a banking corporation having a share capital, on the application of members holding not less than one-third of the shares issued.

(2) The application shall be supported by such evidence as the Governor in Council requires as to the reasons for the application and the motives of the applicants in requiring the investigation, and the Governor in Council may before appointing an inspector require the applicants to give security to such amount as he thinks fit for payment of the costs of the investigation.

(3) An inspector may, and if so directed by the Crown Law Officer shall, make interim reports to the Governor in Council and on the conclusion of the investigation the inspector shall report his opinion on or in relation to the affairs that he has been appointed to investigate together with the facts upon which his opinion is based to the Governor in Council, and a copy of the report shall be forwarded by the Governor in Council to the registered office of the company, and a further copy shall at the request of the applicants be delivered to them.

(4) The Governor in Council may if he is of the opinion that it is necessary in the public interest so to do cause the report to be printed and published.

(5) If from the report it appears to the Governor in Council that any person has been guilty of any offence in relation to the company, the Governor in Council may refer the matter to the Crown Law Officer.

(6) If where any matter is referred to the Crown Law Officer under subsection (5) of this section he considers that the case is one in which a prosecution ought to be instituted he shall cause a prosecution to be instituted accordingly and all officers and agents of the company (other


than the defendant in the proceedings), shall on being required by the Crown Law Officer so to do give all assistance in connection with the prosecution which they are reasonably able to give.

(7) If from any report under this section it appears to the Crown Law Officer that proceedings ought in the public interest to be brought by any company dealt with by the report for the recovery of damages in respect of any fraud misfeasance or other misconduct in connection with the promotion or formation of that company or in the management of its affairs or for the recovery of any property of the company which has been misapplied or wrongfully retained he may himself bring proceedings for that purpose in the name of the company.

u.K. s. 165; N.S.W. s. 116; Vic. s. 144; Qld. ss. 145, 146; S.A. s. 156; W.A. ss. 140, 143; Tas. s. 141.

As to privileged communications, see s. 367, post. As to who are officers and agents, see s. 168, ante. As to the registered office, see ss. 111, 112, ante.

For the power of the court to grant relief in certain circumstances, see s. 365, post.

As to the evidentiary effect of the report, see s. 171, post. A writ of prohibition will not issue against an inspector, Re Grosvenor, etc.,

Hotel Co. (1897), 76 L.T. 337. The mere fact of ruinous loss sustained by the company is not in itself a ground

for appointing an inspector; there must be misconduct, concealment or oppression alleged, Re Mercantile Finance Co. (1894), 12 N.Z.L.R.248.

An officer or agent of the company is not justified in refusing to answer merely on the ground that a shorthand-writer is present, where the presence of a shorthandwriter is reasonably necessary for the carrying out of the inspector's duty under the statute, Re Gaumont British Picture Corporation Ltd., [1940] 2 All E.R. 415; [1940] Ch.506.

170. Investigation by resolution of company. (1) A company may by special resolution appoint one or more inspectors to investigate its affairs.

(2) On the conclusion of the investigation the inspector shall report his opinion in such manner and to such persons as the company in general meeting directs.


As to general meetings, see ss. 135 et seq., ante. As to special resolutions, see s. 144, ante.

Semhle, if the appointment, proceedings and report of the inspectors are regularly made, conducted and given, the court will not interfere, see Burland v. Earle, [1902] A.C. 83.

171. Procedure and costs of inquiry. (1) If an inspector appointed to investigate the affairs of a company thinks it necessary for the purposes of the investigation to investigate also the affairs of any other corporation which is or has at any relevant time been deemed to be or to have been related to that company by virtue of subsection (5) of section six he shall have power so to do, and shaH report on the affairs of the other corporation so far as he thinks the results of the investigation thereof are relevant to the investigation of the affairs of the company.

(2) Every officer and agent of a corporation the affairs of which are being investigated under this Division shall if required by an inspector appointed under this Division produce to the inspector all books and documents in his custody or power and shall give to the inspector all assistance in connection with the investigation which he is reasonably able to give.


(3) An inspector may, by notice in the prescribed form, require any officer or agent of any corporation whose affairs are being investigated under this Division to appear for examination on oath or affirmation (which he is hereby authorized to administer) in relation to its business and the notice may require the production of all books and documents in the custody or under the control of that officer or agent.

(4) If any officer or agent of any corporation the affairs of which are being investigated under this Division fails to comply with the requirements of any notice issued under subsection (3) of this section or fails or refuses to answer any question which is put to him by an inspector with respect to the affairs of the corporation, the inspector may certify the failure or refusal under his hand to the Court, which may thereupon inquire into the case and, after hearing any witnesses against or on behalf of the alleged offender and any statement offered in defence, punish the offender in like manner as if he had been guilty of contempt of the Court.

(5) No person who is or has formerly been an officer or agent of a corporation the affairs of which are being investigated under this Division shall be entitled to refuse to answer any question which is relevant or material to the investigation on the ground that his answer might tend to incriminate him but if he claims that the answer to any question might incriminate him and but for this subsection he would have been entitled to refuse to answer the question the answer to the question shall not be used in any subsequent criminal proceedings except in the case of a charge against him for perjury committed by him in answer to that question.

(6) Except as expressly provided in subsection (5) of this section any person shall be entitled to refuse to answer a question on the ground that the answer might tend to incriminate him.

(7) An inspector may cause notes of any examination under this Division to be recorded and reduced to writing and to be read to or by and signed by the person examined and any such signed notes may except in the case of any answer which that person would not have been required to give but for the provisions of subsection (5) of this section thereafter be used in evidence in any legal proceedings against that person.

(8) The expenses of and incidental to an investigation under this Division (including the costs of any proceedings brought by the Crown Law Officer in the name of the company) shall be paid-

(a) where as a result of the investigation a prosecution is instituted, subject to appropriation by Parliament out of the consolidated revenue; or

(b) in any other case, by the company investigated or if the Governor in Council so directs by the applicants or in part by the company and in part by the applicants.

(9) Notwithstanding the provisions of subsection (8) of this section-(a) if the company fails to pay the whole or any part of the sum

which it is so liable to pay, the applicants shall make good the deficiency up to the amount by which the security given by them under this Division exceeds the amount (if any) which they have under subsection (8) of this section been directed by the Governor in Council to pay; and

(b) any balance of the expenses not paid either by the company or the applicants shall be paid, subject to appropriation by Parliament, out of the consolidated revenue.


(10) A copy of the report of any inspector appointed under this Division certified as correct by the Crown Law Officer shall be admissible in any legal proceeding as evidence of the opinion and of the facts upon which the opinion is based of the inspector in relation to any matter contained in the report.

U.K. ss. 166-171; N.S.W. s. 116; Vic. s. 146; Qld. ss. 145, 146; S.A. ss. 156, 157; W.A. s. 140; Tas. s.143.

As to a corporation that is deemed to be related to another, see s. 6, ante. As to who are officers and agents, see s. 168, ante. As to privileged communications, see s. 367, post.

Recording of proceedings-An inspector may cause notes to be recorded by a shorthand-writer, Re Gaumont British Picture Corporation Ltd., [1940] 2 All E.R. 415; [1940] Ch.506.

Expenses-The "expenses" referred to are those of the Crown and not an inspector, and the subsection does not confer on an inspector any right to sue either the Crown or the company for his expenses, Parr v. Australasian Asiatic Trading & Engineering Co. Pty. Ltd., [1958] V.R. 198.

Division 4-Special Investigations

172. Application and interpretation. (1) In this Division-"Company to which this Division applies" means a company or

foreign company declared by the Governor in Council in pursuance of this section to be a company to which this Division applies;

"Officer or agent" has the same meaning as in section one hundred and sixty-eight.

(2) Subject to subsection (3) of this section, the Governor in Council may, by Proclamation published in the Government Gazette, declare that a company or foreign company is a company to which this Division applies.

(3) A declaration shall not be made in respect of a company or foreign company in pursuance of this section unless-

(a) the Governor in Council is satisfied that a prima facie case has been established that, for the protection of the public, the holders of interests to which the provisions of Division 5 of Part IV apply or the shareholders or creditors of the company or foreign company, it is desirable that the affairs of the company or foreign company should be investigated under this Division; or

(b) in the case of a foreign company, the appropriate authority of another country, State or Territory has requested that a declaration be made in pursuance of this section in respect of the company.

Vic. s. 147; Qld. s. 145 (8); W.A. s. 143; Tas. s. 144. As to foreign companies, see ss. 344 et seq., post.

173. Appointment of investigators. (1) The Governor in Council may appoint one or more inspectors to investigate the affairs of any company to which this Division applies and to report thereon in such manner as the Governor in Council directs.

(2) An appointment under this section shall in all respects have the same force and effect as an appointment of an inspector or inspectors under Division 3 of this Part and for the purposes of this Division the provisions


of and powers conferred by that Division shall with such adaptations as are necessary extend and apply accordingly except that-

(a) the inspector shall report his opinion to the Crown Law Officer; and

(b) the expenses of and incidental to the investigation shall be paid, subject to appropriation by Parliament, out of the consolidated revenue.

(3) Notwithstanding the provisions of subsection (2) of this section the Governor in Council may direct that the expenses or any portion thereof shall be paid by the company or any person who requested that the appointment be made and if the Governor in Council so directs any balance of the expenses shall be paid, subject to appropriation by Parliament, out of the consolidated revenue.

(4) An inspector may employ such persons as he considers necessary and in writing authorize any such person to do anything he could himself do, except to examine on oath or affirmation.

(5) Any officer or agent of a corporation who-(a) refuses or fails to produce any book or document to any person

who produces a written authority of an inspector given pursuant to subsection (4) of this section; or

(b) refuses or fails to answer any question lawfully put to him by any such person,

shall be liable to be dealt with in the same manner as is provided in subsection (4) of section one hundred and seventy-one for refusing or failing to comply with the request of an inspector.

Vic. s. 148; Qld. s. 145 (8); S.A. s. 158a; Tas. s. 145. As to privileged communications, see s. 367, post. As to who are officers and

agents, see s. 168, ante. Expenses-See Parr v. Australasian Asiatic Trading & Engineering Co. Pty. Ltd .•

[1958] V.R. 198, noted to s. 171, ante.

174. Suspension of actions and proceedings by company, etc. (1) On and after the appointment of an inspector in respect of any company to which this Division applies until the expiration of three months after the inspector has presented his final report to the Crown Law Officer no action or proceeding shall without the consent of the Crown Law Officer be commenced or proceeded with in any court-

(a) by the company upon or in respect of any contract bill of exchange or promissory note; or

(b) by the holder or any other person in respect of any bill of exchange or promissory note made drawn or accepted by or issued transferred negotiated or endorsed by or to the company unless the holder or other person-

(i) at the time of the negotiation transfer issue endorsement or delivery thereof to him gave therefor adequate pecuniary consideration; and

(ii) was not at the time of the negotiation transfer issue endorsement or delivery thereof to him or at any time within three years before that time a shareholder officer agent or employee of the company or the wife or husband of any shareholder officer agent or employee of the company.


(2) Any action or proceeding which is commenced or proceeded with in contravention of this section shall be void and of no effect.

Vic. s. 149; Tas. s. 146.

As to the form of contracts by or on behalf of a company, see s. 35, ante.

175. Winding up of company. (1) Application to the Court-

(a) in the case of a company, for the winding up of the company; or

(b) in the case of a foreign company, for the winding up so far as the assets of the company within the State are concerned of the affairs of the company,

may be made on petition of the Crown Law Officer at any time after a report has been made in respect of the company by an inspector under this Division whereupon the provisions of this Act shall, with such adaptations as are necessary, apply as if-

(c) (in the case of a company) a winding up petition had been duly presented to the Court by the company; and

(d) (in the case of a foreign company) a petition for an order for the affairs of the company so far as assets within the State are concerned to be wound up within the State had been duly presented to the Court by a creditor or contributory of the company upon the liquidation of the company in the place in which it is incorporated.

(2) Where (in the case of a foreign company) on any petition under subsection (1) of this section an order is made for the affairs of the company so far as assets within the State are concerned to be wound up within the State the company shall not carryon business or establish or keep a place of business within the State.

Vic. s. 150; Qld. s. 145 (8); Tas. s. 147.

As to winding-up, see Part X, post. As to carrying on business, see s. 344, post. As to foreign companies generally, see ss. 344 et seq., post.

Material facts-In relation to the corresponding provisions of the former Queensland Act, it was held that the Crown Law Officer should state in his petition the material facts on which it appeared to him to be expedient to present a petition, Re National Petroleum Ltd., [1958] Qd. R. 482. If the petition does not state the material facts, the petition should be dismissed, and no amendment should be allowed, ibid.

Inadmissible--A petition contained a paragraph which set out at length certain conclusions and recommendations expressed by an inspector in his report, and a copy of the report itself was exhibited to the affidavit verifying the petition. It was held that the paragraph and report, not being allegations of facts verified by affidavit in the prescribed form, were inadmissible as evidence, Re Chemical Plastics Ltd., [1951] V.L.R. 136.

176. Penalties. (1) Any person who with intent to defeat the purposes of this Division or to delay or obstruct the carrying out of an investigation under this Division-

(a) destroys or alters any book document or record of or relating to a company to which this Division applies; or


(b) sends or attempts to send or conspires with any other person to send out of the State any such book document or record or any property of any description belonging to or in the disposition or under the control of such a company,

shall be guilty of an offence against this Act. Penalty: Imprisonment for two years or Five hundred pounds. (2) If in any prosecution for an offence against this section it is proved

that the person charged with the offence-(a) has destroyed or altered any book, document or record of or

relating to the company; or (b) has sent or attempted to send or conspired to send out of the

State any book, document or record or any property of any description belonging to or in the disposition or under the control of the company,

the onus of proving that in so doing he had not acted with intent to defeat the purposes of this Division or to delay or obstruct the carrying out of an investigation under this Division shall lie on him.

Vic. s. 151; Tas. s. 148. For the companies to which this Division applies, see s. 172, ante. Criminal liability-See also the Criminal Code, Chapter XLII, title CRIMINAL

LAW.

177. Appointment and powers of inspectors to investigate ownership of company. (1) Where it appears to the Crown Law Officer that there is good reason so to do, he may appoint one or more inspectors to investigate and report on the membership of any company and otherwise with respect to the company for the purpose of determining the true persons who are or have been financially interested in the success or failure (real or apparent) of the company or able to control or materially to influence the policy of the company.

(2) The appointment of an inspector under this section may define the scope of his investigation, whether as respects the matters or the period to which it is to extend or otherwise, and in particular may limit the investigation to matters connected with particular shares or debentures.

(3) Where an application for an investigation under this section with respect to particular shares or debentures of a company is made to the Crown Law Officer by members of the company, and the number of applicants or the amount of the shares held by them is not less than that required for an application for the appointment of an inspector under Division 3 of this Part, the Crown Law Officer shall appoint an inspector to conduct the investigation unless he is satisfied that the application is vexatious, and the inspector's appointment shall not exclude from the scope of his investigation any matter which the application seeks to have included therein, except in so far as the Crown Law Officer is satisfied that it is unreasonable for that matter to be investigated.

(4) Subject to the terms of an inspector's appointment his powers shall extend to the investigation of any circumstances suggesting the existence of an arrangement or understanding which, though not legally binding, is or was observed or likely to be observed in practice and which is relevant to the purposes of his investigation.

(5) For the purposes of any investigation under this section the provisions of Division 3 of this Part shall apply with the necessary


modifications of references to the affairs of the company or to those of any other corporation, but so, that-

(a) that Division shall apply in relation to all persons who are or have been, or whom the inspector has reasonable cause to believe to be or to have been, financially interested in the success or failure or the apparent success or failure of the company or any other corporation the membership of which is investigated with that of the company, or able to control or materially to influence the policy thereof, including persons concerned only on behalf of others, as they apply in relation to officers and agents of the company or of the other corporation, as the case may be; and

(b) the Crown Law Officer shall not be bound to furnish the company or any other person with a copy of any report by an inspector appointed under this section or with a complete copy thereof if he is of opinion that there is good reason for not divulging the contents of the report or of parts thereof, but shall cause to be kept by the Registrar a copy of the report or, as the case may be, the parts of the report, as respects which he is not of that opinion.

(6) The expenses of any investigation under this section shall be paid, subject to appropriation by Parliament, out of the consolidated revenue.

u.K. s. 172; N.Z. No. 63 of 1955, s. 176. As to who are officers and agents, see s. 168, ante. For the companies to which

this Division applies, see s. 172, ante. Expenses-See Parr v. Australasian Asiatic Trading & Engineering Co. Pty. Ltd.,

[1958] V.R. 198, noted to s. 171, ante.

178. Power to require information as to persons interested in shares or debentures. (1) Where it appears to the Crown Law Officer that there is good reason to investigate the ownership of any shares in or debentures of a company and that it is unnecessary to appoint an inspector for the purpose, he may require any person whom he has reasonable cause to believe-

(a) to be or to have been interested in those shares or debentures; or

(b) to act or to have acted in relation to those shares or debentures as the solicitor or agent of some person interested therein,

to give to the Crown Law Officer any information which the first-mentioned person has or can reasonably be expected to obtain as to the present and past interests in those shares or debentures and the names and addresses of the persons interested and of any persons who act or have acted on their behalf in relation to the ~hares or debentures.

(2) For the purposes of this section, a person shall be deemed to have an interest in a share or debenture if he has any right to acquire or dispose of the share or debenture or any interest therein or to vote in respect thereof, or if his consent is necessary for the exercise of any of the rights of other persons interested therein, or if other persons interested therein can be required or are accustomed to exercise their rights in accordance with his instructions.


(3) Any person who fails to give any information required of him under this section, or who in giving any such information makes any statement which he knows to be false in a material particular. or recklessly makes any statement which is false in a material particular, shall be guilty of an offence against this Act.

Penalty: Imprisonment for six months or Five hundred pounds or both. U.K. s. 173; N.Z. No. 63 of 1955, s. 177. For the companies to which this Division applies, see s. 172, ante.

179. Power to impose restrictions on shares or debentnres. (1) Where in connection with an investigation under section one hundred and seventyseven or section one hundred and seventy-eight. it appears to the Crown Law Officer that there is difficulty in finding out the relevant facts about any shares (whether issued or to be issued), and that the difficulty is due wholly or mainly to the unwillingness of the persons concerned or any of them to assist the investigation as required by this Act, the Crown Law Officer may by order published in the Government Gazette direct that the shares are until further order subject to the following restrictions:-

(a) that any transfer of those shares, or in the case of unissued shares, any transfer of the right to be issued therewith and any issue thereof. shall be void;

(b) that no voting rights shall be exercisable in respect of those shares;

(c) that no further shares shall be issued in right of those shares or in pursuance of any offer made to the holder thereof; and

(d) that except in a liquidation, no payment shall be made of any sums due from the company on those shares, whether in respect of capital or otherwise.

(2) Where the Crown Law Officer makes an order directing that shares are subject to the restrictions referred to in subsection (1) of this section or, having made such an order in relation to any shares, refuses to make an order directing that the shares shall cease to be subject to those restrictions, any person aggrieved thereby may apply to the Court. and the Court may, if it sees fit, direct that the shares shall cease to be subject to those restrictions.

(3) Any order of the Crown Law Officer or of the Court directing that shares shall cease to be subject to the restrictions referred to in subsection ( 1) of this section, which is expressed to be made with a view to permitting a transfer of those shares, may continue the application of paragraphs (c) and (d) of subsection (1) of this section, in relation to those shares, either in whole or in part, so far as those paragraphs relate to any right acquired or offer made before the transfer.

(4) Where any shares are for the time being subject to any restrictions referred to in subsection (1) of this section, any person wh<r-

(a) having knowledge that the shares are subject to any such restrictions, exercises or purports to exercise any right to dispose of those shares, or of any right to be issued with the shares;

(b) votes in respect of those shares, whether as holder or proxy, or appoints a proxy to vote in respect thereof; or


(c) being the holder of any of those shares, fails to notify the fact of their being subject to those restrictions to any person whom he does not know to be aware of that fact but does know to be entitled, apart from those restrictions, to vote in respect of those shares whether as holder or proxy,

shall be guilty of an offence against this Act. Penalty: Imprisonment for six months or Five hundred pounds or both.

(5) Where shares in any company are issued in contravention of the restrictions imposed pursuant to subsection (1) of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.


(6) A prosecution shall not be instituted under this section except by or with the consent of the Crown Law Officer.

(7) This section shall apply in relation to debentures as it applies in relation to shares.

u.K. s. 174; N.Z. No. 63 of 1955, s. 178.

180. Inspectors appointed in other States. Where-(a) under a law of another State or Territory of the Commonwealth

corresponding with this Division an inspector has been appointed to investigate the affairs of a corporation: and

(b) the Governor in Council of this State determines that, in connection with that investigation, it is expedient that an investigation be made in this State,

the Governor in Council may by Order in Council published in the Government Gazette declare that the inspector so appointed shall have the same powers and duties in this State in relation to the investigation as if the corporation were a company to which this Division applies and the inspector had been appointed under section one hundred and seventy-three and thereupon the inspector shall have those powers and duties.

For the powers and duties of inspectors, see ss. 168-173, ante. "Company to which this Division applies," see s. 172, ante.

PART VII-ARRANGEMENTS AND RECONSTRUCTIONS

181. (1) Power to compromise with creditors and members. Where a compromise or arrangement is proposed between a company and its creditors or any class of them or between the company and its members or any class of them the Court may on the application in a summary way of the company or of any creditor or member of the company, or in the case of a company being wound up of the liquidator, order a meeting of the creditors or class of creditors or of the members of the company or class of members to be summoned in such manner as the Court directs.

(2) If a majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members present and voting either in person or by proxy at the meeting agrees to any compromise or arrangement the compromise or arrangement shall if approved by order of the Court be binding on all the creditors or class of creditors or on the members or class of members (as the case may be) and also on the company or, in the case of a company in the course of being wound up, on the liquidator and contributories of the company.


(3) The Court may grant its approval to a compromise or arrangement subject to such alterations or conditions as it thinks just.

(4) An order under subsection (2) of this section shall have no effect until an office copy of the order is lodged with the Registrar, and upon being so lodged, the order shall take effect on and from the date of lodgment or such earlier date as the Court may determine and as may be specified in the order.

(5) Subject to subsection (6) of this section, a copy of every order made under subsection (2) of this section shall be annexed to every copy of the memorandum of the company issued after the order has been made, or, in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company.

(6) The Court may, by order, exempt a company from compliance with the requirements of subsection (5) of this section or determine the period during which the company shall so comply.

(7) Where any such compromise or arrangement (whether or not for the purposes of or in connection with a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies) has been proposed, the directors of the company shall-

(a) if a meeting of the members of the company by resolution so directs, instruct such accountants or solicitors or both as are named in the resolution to report on the proposals and forward their report or reports to the directors as soon as may be; and

(b) make such report or reports available at the registered office of the company for inspection by the shareholders and creditors of the company at least seven days before the date of any meeting ordered by the Court to be summoned as provided in subsection (I) of this section.

(8) Every company which makes default in complying with subsection (5) or subsection (7) of this section and every officer of the company who is in default, shall be guilty of an offence against this Act.


(9) Power of Court to restrain proceedings. Where no order has been made or resolution passed for the winding up of a company and any such compromise or arrangement has been proposed between the company and its creditors or any class of such creditors, the Court may, in addition to any of its powers, on the application in a summary way of the company or of any member or creditor of the company, restrain further proceedings in any action or proceeding against the company except by leave of the Court and subject to such terms as the Court imposes.

(10) Interpretation. In this section-"Arrangement" includes a re-organisation of the share capital of a

company by the consolidation of shares of different classes or by the division of shares into shares of different classes or by both these methods;

"Company" means any corporation or society liable to be wound up under this Act.

U.K. s. 206; N.S.W. s. 133; Vic. SS. 89, 90; Qld. s. 161; S.A. s. 171; W.A. s. 158; Tas. SS. 123, 124.


As to winding-up, see Part X, post. Copies of the memorandum may be obtained pursuant to s.34, ante. As to classes of shares, see Fourth Schedule, Tables A, B, art. 4, post. As to liquidators, see ss. 231-240, post. As to proxies, see s. 141, ante, Fourth Schedule, Tables A, B, Proceedings at General Meetings, post.

As to consolidation and division of shares, see s. 62, ante. For provisions for facilitating reconstruction and amalgamation of companies, see s. 183, post. As to the explanatory statement which must accompany the notice, see s. 182, post.

For form of order sanctioning a compromise or arrangement, see Re Queensland Deposit Bank Ltd. (1892), 4 Q.L.I. 179.

Arrangement-The word "arrangement" is one of wide import, Mercantile Investment and General Trust Co. v. International Co. of Mexico (1891), [1893] 1 Ch. 484. In this section its meaning will not be limited to something akin to a compromise, Re Guardian Assurance Co., [1917] 1 Ch.431.

Compromise or arrangement-As to what constitutes a compromise or arrangement which the court will sanction under this section, see Isles v. Daily Mail Newspaper Ltd. (1912), 14 c.L.R. 193; [1912] St. R. Qd. 125; [1912] Q.W.N. 21; Re Guardian Assurance Co., [1917] 1 Ch.431.

Reconstruction-See the remarks of Chitty I. in Hooper v. Western Counties & South Wales Telephone Co. Ltd. (1892), 68 L.T. 78, at pp. 79, 80, and of Buckley I. in Re South African Supply & Cold Storage Co.; Wild v. South African Supply & Cold Storage Co., [1904] 2 Ch.268, at p.286.

Further as to the meaning of "reconstruction" see Webb v. Federal Commissioner of Taxation (1922), 30 C.L.R.450, at pp.471-2; 28 A.L.R.284.

Creditors-For the purposes of this section, every person who has a pecuniary claim, whether actual or contingent, against a company is a creditor, Re Midlands Coal, Coke and Iron Co.; Craig's Claim, [1895] 1 Ch.267.

Before the court can act under this section, it must be possible to estimate the value of the claims of individual creditors, Re Albert Life Assurance Co. (1871), 6 Ch. App. 381.

Secured creditors-Debenture holders and other secured creditors may be creditors and bound by a scheme, even though it deprives them of their security wholly or in part, Re Alabama, New Orleans, Texas and Pacific lunction Railway Co., [1891] I Ch.213.

Class of creditors-Where there is a different state of fact existing among different creditors which may differently affect their minds and their judgment, they must be divided into different classes. A class must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest, Sovereign Life Assurance Co. Ltd. v. Dodd, [1892] 2 Q.B. 573.

As to whether secured creditors with securities of different value, and having various rates of interest, are members of a "class of creditors," see Re Carlton Brewery Ltd. (1902), 8 A.L.R. (C.N.) 37.

Separate meetings-As to ordering separate meetings of different classes of creditors, see Re Commercial Bank of Australia (1893), 19 V.L.R. 333. See also Re Safety Fix Pty. Ltd., [1962] V.R.467.

Power to alter court order-Quaere, whether the court has power to alter an order made by the court directing a meeting of creditors to be held under this section, Re McCracken's Brewery Co. (1899), 24 V.L.R.784.

Advertisement-Notice of an application for the court's sanction should be advertised to enable any creditor desiring to object to do so, Re Queensland Deposit Bank and Building Society Ltd. (1897),8 Q.L.I. (N.C.) 91.

Where the court directed notices of a meeting to be served by post and advertisements, and through inadvertence, the advertisements were not inserted as directed, the court ordered the matter to proceed, notwithstanding the omission, Re AngloSpanish Tartar Refineries Ltd. (1924), 68 Sol. 10.738.

Entitlement of creditors to vote-Creditors who, under a scheme under which they have agreed to accept debentures in discharge of their debts, have had letters of allotment sent to them, and whose names have been entered in the register of debenture-holders, are entitled to vote at a meeting of debenture-holders, although no debentures have been issued to them or even sealed by the company, Dey v. Rubber & Mercantile Corporation Ltd., [1923] 2 Ch. 528; [1923] All E.R. Rep. 526.

Foreign creditors-In Re English Scottish and Australian Chartered Bank, {l893] 3 Ch. 385, it was held that the votes of Australian creditors could be counted in determining the result of a meeting of creditors held in England.


Class of members-See Re United Providence Assurance Co. Ltd., [1910] 2 Ch.477.

Meetings outside State-Quaere, whether the court has power to order meetings of creditors to be held outside the State, Re Freehold Investment and Banking Company (1895), 1 A.L.R. 12; Re Standard Bank of Australia (1895), 1 A.L.R. 14. Where separate liquidations were proceeding in Great Britain and Victoria, it was held that, the company being domiciled and practically all the assets being situated in Victoria, meetings of creditors directed by the court in Victoria should be held in Victoria only, Re City of Melbourne Bank Ltd. (1897), 19 A.L.T. 80.

Majority-The requisite majority of creditors of a company to agree to a scheme is three-fourths of those creditors of the company assembled at the meeting, and not three-fourths of all the creditors of the company, Re Commercial Bank of Australia (1893), 19 V.L.R.333.

Practice on petition-It is not necessary in all cases to aver in the petition that the company is carrying on business, Re Great Universal Stores Ltd., [1960] 1 All E.R.252.

Jurisdiction of court to sanction scheme-The first duty of the court is to see that the resolutions are passed by the statutory majority, at a meeting duly convened and held; upon that depends the jurisdiction of the court to sanction the scheme, Re Dorman, Long & Co. Ltd., [1934] Ch.635; [1933] All E.R. Rep. 460. See also Re Imperial Chemical Industries Ltd., [1936] 1 Ch. 587; [1936] 2 All E.R. 463; affirmed [1937] A.C.707; [1937] 2 All E.R.422.

Essential qualities of scheme-The court, before sanctioning a scheme of compromise or arrangement will consider whether it is such as men of business might reasonably regard as a fair scheme, and likely to be beneficial to all classes of creditors concerned, and must be satisfied that as far as possible the approval of the majority of creditors was founded on sufficient information as to the financial position and prospects of the company, Re Commercial Bank of Australia (1893), 19 V.L.R. 333.

For conditions under which the court will sanction a scheme even if it thinks the scheme in some respects prejudicial, or a pure speculation, see Re City of Melbourne Bank (1897), 19 A.L.T. 80. Where the assets of a company in liquidation are plainly insufficient to pay creditors in full, and the shareholders have, therefore, no apparent possibility of an interest in the assets, a scheme may be sanctioned without consulting the shareholders, although it excludes them absolutely (ibid.).

The court will not sanction a compromise or arrangement if it is inequitable in itself or if the approval of the majority has not been fairly obtained or if for any reason the scheme appears to be unreasonable, Re Premier Permanent Building, etc., Association (1899),20 A.L.T. 225; see also Re A. W. Allen Ltd., [1930] V.L.R.251.

Scope of section-The reconstruction of an existing company and the sale of its entire undertaking and assets for shares in a new foreign company may be effected under this section, Re Anglo-Continental Supply Co., [1922] 2 Ch.723.

A scheme will be sanctioned under this section, although providing for an arrangement between the various classes of members, inter se, as well as between the company and the different classes of members, Re Odhams Press Ltd., [1925] W.N.I0.

The court refused to sanction a scheme on application under the corresponding section of the former Victorian Act as the objective sought could have been attained under [so 28, ante], Re International Harvester Co. of Australia Pty. Ltd., {1953] V.L.R. 669.

Reorganisation by division' into classes of shares without alteration of the memorandum may be carried out apart from this section if powers are conferred by the articles, Re Australian Estates & Mortgage Co. Ltd., [1910] 1 Ch.414.

Transfer to another company - As to schemes involving the transfer of the undertaking of one company to another company in consideration of shares in the transferee company, see s.270; and see Re Needhams Ltd., [1923] W.N.289.

Such a scheme will not be sanctioned under this section if the rights of dissentient members are not provided for, Re General Motor Cab Co. Ltd., [1913] 1 Ch.377.

See also Re New England Gold Mining Co. Ltd. (1892), 13 L.R. (N.S.W.) (E.) 171, where the bona fides of such a scheme was considered.

Limitation of court's powers-The court has no power to sanction a scheme which would involve the doing of any act ultra vires of the company, Re Oceanic Steam Navigation Co. Ltd., [1938] 3 All E.R.740. Nor can the court sanction a scheme which would conflict with other provisions of this Act, Re St. James' Court Estates Ltd., [1944] Ch.6.

8


Scheme involving reduction of capital-The provisions in this Act authorizing the reduction of capital must be complied with, see s. 64, ante, and Re Stephen Walters & Sons Ltd., [1926] W.N.236.

Binding force of scheme-See Re Guardian Assurance Co. Ltd., [1917] 1 Ch.431, at p. 441.

Once raised in operation, a scheme does not operate as an agreement between the parties. It has statutory force, so that the discharge under the scheme of one of several debtors who are jointly and severally liable does not discharge the others, Re Garner Motors Ltd., [1937] Ch. 594; [1937] 1 All E.R.671.

A company bound by a scheme cannot vary the scheme by mere agreement with other parties affected, Srimati Premila Devi v. Peoples Bank of Northern India Ltd. (in Liquidation), [1938] 4 All E.R. 337.

Sanction by court subject to amendments-The court will not sanction a scheme subject to amendments if the necessary amendments would be so numerous and so radical that the court would virtually have to recast the scheme, Re Premier Permanent Building, etc., Assoc. (1899), 20 A.L.T. 225.

Sanction by consent-A scheme was sanctioned, and a meeting was dispensed with when the scheme was agreed to by all parties, Re Barry & Roberts Pty. Ltd., [1947] Q.w.N. 43.

Impugning scheme once sanctioned-Once a scheme was sanctioned, it was held to be too late to impugn it upon the ground only that there had been no separate meetings, Excelsior Land Investment and Building Co. and Bank Ltd. v. Phelan (1898), 19 L.R. (N.S.W.) 59.

Subsequent liquidation-A compromise or arrangement does not acquire by virtue of the sanction of the court any further effect than that which an agreement to the same effect would have. Where, therefore, the company subsequently goes into liquidation without the compromise or arrangement being completed, the creditors under it are remitted to their original rights and may prove for the full amount of their debts, Re Alfred Shaw & Co. (1897), 8 Q.L.J.48; 8 Q.L.J. (N.C.) 44.

Power of court to restrain proceedings-The power to restrain proceedings is to be exercised according to judicial discretion. The section does not impose any fetter thereon, and it is undesirable that by decision the court should, by enunciating prima facie rules or otherwise, impose any such fetter, Re Clements Langford Pty. Ltd., [1961] V.R.453.

See also Re G.A.E. Pty. Ltd., [1962] V.R.252. Liquidator representing company-For the purpose of arriving at a scheme of

arrangement whereby the remaining assets of a company, which had been partly wound up, were transferred to a new company, the liquidator was held to represent the company in liquidation, Re City of Melbourne Bank (1897), 19 A.L.T.80.

See also Re New England Gold Mining Co. Ltd. (1892), 13 L.R. (N.S.W.) (E.) 171.

Generally, see Paterson and Ednie, Australian Company Law, pp. 427-432; 10 English and Empire Digest (Rpl.) , p. 1126; 6 Halsbury's Laws of England, 3rd ed., p. 764.

182. Information as to compromise with creditors and members. ( 1) Where a meeting is summoned under section one hundred and eighty-one there shall-

(a) with every notice summoning the meeting which is sent to a creditor or member, be sent also a statement explaining the effect of the compromise or arrangement and in particular stating any material interests of the directors, whether as directors or as members or as creditors of the company or otherwise, and the effect thereon of the compromise or arrangement in so far as it is different from the effect on the like interests of other persons; and

(b) in every notice summoning the meeting which is given by advertisement. be included either such a statement or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of such a statement.


(2) Where the compromise or arrangement affects the rights of debenture holders, the statement shall give the like explanation with respect to the trustees for the debenture holders as under subsection (1) of this section, a statement is required to give with respect to the directors.

(3) Where a notice given by advertisement includes a notification that copies of such a statement can be obtained, every creditor or member entitled to attend the meeting shall on making application in the manner indicated by the notice be furnished by the company free of charge with a copy of the statement.

(4) Each director and each trustee for debenture holders shall give notice to the company of such matters relating to himself as may be necessary for the purposes of this section.

(5) Where default is made in complying with any requirement of this section, the company and every officer of the company who is in default shall be guilty of an offence against this Act.


(6) For the purpose of subsection (5) of this section the liquidator of the company and any trustee for debenture holders shall be deemed to be an officer of the company.

(7) Notwithstanding the provisions of subsection (5) of this section a person shall not be liable under that subsection if he shows that the default was due to the refusal of any other person, being a director or trustee for debenture holders, to supply the necessary particulars as to his interests.

U.K. s. 207; Vic. s. 91; Tas. s. 125. As to debentures generally, see Division 4 of Part IV, ante. As to the statutory

requirements relating to the disclosure of interests by directors, see s. 123, ante. For the power of the court to grant relief in certain circumstances, see s. 365, post.

The requirements of this section must be strictly complied with, Re Rankin & Blackmore Ltd., [1950] S.C. 218; Re Peter Scott & Co. Ltd., [1950] S.C. 507.

183. Provision for facilitating reconstruction and amalgamation of companies. (1) Where an application is made to the Court under this Part for the approval of a compromise or arrangement and it is shown to the Court that the compromise or arrangement has been proposed for the purposes of or in connection with a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies and that under the scheme the whole or any part of the undertaking or the property of any company concerned in the scheme (in this section referred to as the "transferor company") is to be transferred to another company (in this section referred to as the "transferee company"), the Court may either by the order approving the compromise or arrangement or by any subsequent order provide for all or any of the following matters:-

(a) the transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of the transferor company;

(b) the allotting or appropriation by the transferee company of any shares, debentures, policies or other like interests in that company which under the compromise or arrangement are to be allotted or appropriated by that company to or for any person;

(c) the continuation by or against the transferee company of any legal proceedings pending by or against the transferor company;

(d) the dissolution, without winding up, of the transferor company;


(e) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement;

(f) such incidental consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out.

(2) Where an order made under this section provides for the transfer of property or liabilities, then by virtue of the order that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of the transferee company, free in the case of any particular property if the order so directs, from any charge which is by virtue of the compromise or arrangement to cease to have effect.

(3) Where an order is made under this section every company in relation to which the order is made shall lodge an office copy thereof with the Registrar and where the order relates to land an office copy of the order-

(a) with the Registrar of Titles in the case of land subject to the provisions of "The Real Property Acts, 1861 to 1960";

(b) with the person or authority charged with registering instruments evidencing the title held under the Crown for a lesser estate than freehold in the land concerned in the case of land subject to the provisions of any Act relating to Crown land (including any Act relating to mining or mining tenures); or

(c) with the Registrar of Titles in the case of land held for an estate of freehold not subject to "The Real Property Acts, 1861 to 1960,"

within seven days after the making of the order, and every company which makes default in complying with this subsection and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: One hundred pounds. Default penalty. ( 4) In this section-

"Liabilities" includes duties; "Property" includes property rights and powers of every description.

(5) Notwithstanding the provisions of subsection (10) of section one hundred and eighty-one "company" in this section does not include any company other than a company as defined in section five.

u.K. s.208; N.S.W. s. 134; Vic. s. 92; Qld. s. 162; S.A. s. 172; W.A. s. 159; Tas. s. 126.

Act referred to: Real Property Acts, 1861 to 1960, title REAL PROPERTY.

As to other interests, see ss. 76-89, ante. As to dissolution without winding-up, see s. 308, post.

Reconstruction-For meaning of the term "reconstruction," see Webb v. Federal Commissioner of Taxation (1922), 30 C.L.R. 450, at p. 472. See also notes to s. 181, ante; 6 Halsbury's Laws of England, 3rd ed., p. 764.

Stamp duty-As to liability to stamp duty of the sale of assets and undertaking to the new company in consideration of issue of shares in the new company, see Hooper & Harrison (Queensland) Ltd. v. Commissioner of Stamp Duties (1924), 35 C.L.R. 318; [1924] St. R. Qd. 102; [1924] Q.W.N.22; Queensland Meat Export Co. Ltd. v. Commissioners of Stamps, [1917] A.C.624; [1917] St. R. Qd. 39; [1917] Q.W.N.6.

Practice-On the practice governing orders made under the provisions of this section, see Re Langham Hotel Co. Ltd., [1946] 1 All E.R. 319; 62 T.L.R. 128.

Sale by liquidator-Provisions with regard to sale by a liquidator in consideration of shares in another company are made by s. 270, post.

COMPANIES ACI' OF 1961 ss.183,184 229

184. Take-over offers. (1) In this section and in the Tenth Schedule"Offeree corporation" in relation to a take-over scheme or a take

over offer, means the corporation, to shares in which, the scheme or offer relates;

"Offeror corporation" in relation to a take-over scheme or a takeover offer, means the corporation or proposed corporation by or on behalf of which any take-over offer under the scheme, or the take-over offer, is made or to be made;

"Take-over offer" means an offer or proposed offer for the acquisition of shares under a take-over scheme;

"Take-over scheme" means a scheme involving the making of offers for the acquisition by or on behalf of a corporation or on behalf of a proposed corporation-(a) of all the shares in another corporation or of all the shares

of a particular class in another corporation; or (b) of any shares in another corporation which (together with

shares, if any, already held beneficially by the firstmentioned corporation or by any other corporation that is deemed by virtue of subsection (5) of section six to be related to that corporation) carry the right to exercise, or control the exercise of, not less than one-third of the voting power at any general meeting of the other corporation.

(2) A take-over offer shall not be made unless-(a) the offeror corporation has, not earlier than twenty-eight days,

and not later than fourteen days, before the offer is made, given or caused to be given to the offeree corporation notice in writing of the take-over scheme containing particulars of the terms of the take-over offers to be made under the scheme, together with a statement that complies with the requirements set out in Part B of the Tenth Schedule; and

(b) the offer complies with the requirements set out in Part A of that Schedule and there is attached to the offer-

(i) a copy of the statement given or caused to be given by the offeror corporation to the offeree corporation in pursuance of paragraph (a) of this subsection; and

(ii) if the offeree corporation gives or causes to be given to the offeror corporation a statement in pursuance of paragraph (a) of subsection (3) of this section or in pursuance of any corresponding enactment of another State or Territory of the Commonwealth-a copy of that statement.

(3) Where an offeree corporation receives a notice and statement given in pursuance of subsection (2) of this section or in pursuance of any corresponding enactment of another State or Territory of the Commonwealth, the offeree corporation shall either-

(a) give or cause to be given to the offeror corporation, within fourteen days after the receipt of the notice and statement, a statement in writing that complies with the requirements set out in Part C of the Tenth Schedule; or

(b) give or cause to be given to each holder of shares in the offeree corporation to which the take-over scheme relates, within fourteen days after take-over offers are first made to shareholders under the take-over scheme, such a statement in writing.


(4) A statement given or caused to be given by an offeree corporation in pursuance of subsection (3) of this section may contain such information in addition to that required by Part C of the Tenth Schedule as the directors of the offeree corporation think fit.

(5) Where take-over offers are made under a take-over scheme, the offeror corporation shall forthwith give notice in writing to the offeree corporation that offers have been made under the scheme and of the date of the offers.

(6) Where a take-over offer is made in contravention of this section or an offeror corporation fails to comply with subsection (5) of this section, the offeror corporation, and every officer of the corporation who is in default, shall be guilty of an offence against this Act, and, where an offeree corporation fails to comply with subsection (3) of this section, the offeree corporation, and every officer of that corporation who is in default shall be guilty of an offence against this Act.

Penalty: Imprisonment for three months or Five hundred pounds.

(7) The provisions of sections forty-six and forty-seven shall apply to and in relation to a statement given by an offeror corporation to an offeree corporation in pursuance of paragraph (a) of subsection (2) of this section, and to any copy of such a statement, as if-

(a) each reference in those sections to a prospectus were a reference to such a statement or a copy of such a statement;

(b) the reference in subsection (1) of section forty-six to persons who subscribe for or purchase any shares or debentures were a reference to a person who accepts a take-over offer; and

(c) each reference in those sections to the allotment or sale of shares or debentures were a reference to the acceptance of a take-over offer.

(8) Regulations may be made varying the requirements set out in any Part of the Tenth Schedule, either by omitting or altering any such requirement or by adding additional requirements and any reference in this section to the requirements of a Part of the Tenth Schedule shall be read as a reference to those requirements as so varied from time to time.

(9) Regulations may be made making provision for and in relation to the granting of exemptions from all or any of the provisions of this section or the requirements set out in the Tenth Schedule.

(10) Regulations may be made requiring the lodging with the Registrar or a Stock Exchange, or both, of-

(a) copies of any notice or statement given in pursuance of this section; or

(b) notice in the prescribed form and containing such particulars as are prescribed of the giving of such a notice or statement.

As to a corporation which is deemed to be related to another, see s. 6, ante. As to civil and criminal liability for certain statements in prospectuses, see ss. 46, 47, respectively, ante.

Further, as to the power to make regulations, see s. 384, post. Legal concepts in take-over-For an analysis of the legal concepts involved in

a take-over transaction, see Ridge Nominees Ltd. v. I.R.C., [1961] 2 All E.R. 354. Given to the offeree corporation notice in writing-These words appear to have

rendered obsolete that part of the decision in Australian Consolidated Press Ltd. v. Australian Newsprint Mills Holding Ltd. (1960), 105 c.L.R. 473; {1961] A.L.R.217, which held that a bidding company could address its offer directly to shareholders in the other company.


185. Power to acquire shares of shareholders dissenting from scheme or contract approved by majority. (1) Where a scheme or contract involving the transfer of shares or any class of shares in a company (in this section referred to as the "transferor company") to another company or corporation (in this section referred to as the "transferee company") has within four months after the making of the offer in that behalf by the transferee company been approved as to the shares or as to each class of shares whose transfer is involved by the holders of not less than nine-tenths in nominal value of those shares or of the shares of that class (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary), the transferee company may at any time within two months after the offer has been so approved give notice in the prescribed manner to any dissenting shareholder that it desires to acquire his shares, and when such a notice is given the transferee company shall, unless on an application made by the dissenting shareholder within one month from the date on which the notice was given or within seven days of a statement being supplied to a dissenting shareholder pursuant to subsection (3) of this section (whichever is the later) the Court thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee company.

(2) Notwithstanding anything in subsection (1) of this section where shares in the transferor company of the same class or classes as the shares whose transfer is involved are already held as aforesaid to a nominal value greater than one-tenth of the aggregate of their nominal value and that of the shares (other than those already held as aforesaid) whose transfer is involved the provisions of subsection (1) of this section shall not apply unless-

(a) the transferee company offers the same terms to all holders of the shares (other than those already held as aforesaid) whose transfer is involved or, where those shares include shares of different classes, of each class of them; and

(b) the holders who approve the scheme or contract, besides holding not less than nine-tenths in nominal value of the shares (other than those already held as aforesaid) whose transfer is involved, are not less than three-fourths in number of the holders of those shares.

(3) Where a transferee company has given notice to any dissenting shareholder that it desires to acquire his shares the dissenting shareholder shall be entitled to require the company by a demand in writing served on that company within one month from the date on which the notice was given to be supplied with a statement in writing of the names and addresses of all other dissenting shareholders as shown in the register of members and the transferee company shall not be entitled and bound to acquire the shares of the dissenting shareholders until fourteen days after the posting of the statement of such names and addresses to the dissenting shareholder.

( 4) Where in pursuance of any such scheme or contract shares in a company are transferred to another company or its nominee and those shares together with any other shares in the first-mentioned company held by, or by a nominee for, the transferee company or its subsidiary at the date of the transfer comprise or include nine-tenths in nominal value of


the shares in the first-mentioned company or of any class of those shares, then-

(a) the transferee company shall within one month from the date of the transfer (unless on a previous transfer in pursuance of the scheme or contract it has already complied with this requirement) give notice of that fact in the prescribed manner to the holders of the remaining shares or of the remaining shares of that class who have not assented to the scheme or contract; and

(b) any such holder may within three months from the giving of the notice to him require the transferee company to acquire the shares in question,

and where a shareholder gives notice under paragraph (b) of this subsection with respect to any shares, the transferee company shall be entitled and bound to acquire those shares on the terms on which under the scheme or contract the shares of the approving shareholders were transferred to it, or on such other terms as are agreed or as the Court on the application of either the transferee company or the shareholder thinks fit to order.

(5) Where a notice has been given by the transferee company under subsection (1) of this section and the Court has not, on an application made by the dissenting shareholder, ordered to the contrary, the transferee company shall, after the expiration of one month after the date on which the notice has been given or, if an application to the Court by the dissenting shareholder is then pending, after that application has been disposed of, transmit a copy of the notice to the transferor company together with an instrument of transfer executed, on behalf of the shareholder by any person appointed by the transferee company, and on its own behalf by the transferee company, and pay allot or transfer to the transferor company the amount or other consideration representing the price payable by the transferee company for the shares which by virtue of this section that company is entitled to acquire, and the transferor company shall thereupon register the transferee company as the holder of those shares.

(6) Any sums received by the transferor company under this section shall be paid into a separate bank account, and any such sums and any other consideration so received shall be held by that company in trust for the several persons entitled to the shares in respect of which they were respectively received.

(7) Where any consideration other than cash is held in trust by a company for any person under the provisions of this section it may, after the expiration of two years and shall before the expiration of ten years from the date on which such consideration was allotted or transferred to it, transfer such consideration to the Public Curator.

(8) The Public Curator shall sell or dispose of any consideration so received in such manner as he thinks fit and shall deal with the proceeds of such sale or disposal as if it were moneys paid to him pursuant to the provisions of Division 3 of Part V of "The Public Curator Acts, 1915 to 1957."

(9) In this section "dissenting shareholder" includes a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract.


(10) In relation to an offer made by the transferee company to shareholders of the transferor company before the commencement of this Act, this section shall have effect as if-

(a) the words "the shares of that class (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary)" in subsection (1) of this section were omitted and the words "the shares affected" were inserted in lieu thereof;

(b) subsections (2) and (4) of this section were omitted; and (c) the words "together with an instrument of transfer executed.

on behalf of the shareholder by any person appointed by the transferee company, and on its own behalf by the transferee company", in subsection (5) of this section were omitted.


Act referred to: Public Curator Acts, 1915 to 1957, title TRUSTEES AND EXECUTORS.

As to transfer of shares, see ss. 90-99, ante. As to classes of shares, see Fourth Schedule, Tables A, B, art. 4, post.

As to the term "subsidiary", see s. 6, ante. Scheme - The word "scheme" indicates a less exact notion than the word

"contract", Australian Consolidated Press Ltd. v. Australian Newsprint Mills Holdings Ltd. (1960), 105 C.L.R.473; [1961] A.L.R. 217.

Powers of court-For the powers of the court under this section, see Re Hoare & Co. Ltd. (1933), 150 L.T. 374; [1933] All E.R. 105; Re Castner-Kellner Alkali Co., [1930] 2 Ch. 349.

Fair scheme-Where a scheme or contract has been approved by the necessary majority of the shareholders affected, the offer thereby made to the shareholders will be treated as prima facie a fair one and the onus will therefore rest on a dissentient who seeks relief under this section to show otherwise, Re Hoare & Co. Ltd. (1933), 150 L.T. 374; [1933] All E.R. 105; Re Evertite Locknuts Ltd., [1945] 1 AI! E.R. 401; (1945] Ch.220; Re Press Caps Ltd., [1949] 1 All E.R. 1013; [1949] Ch.434.

In order that the court may intervene the dissenting shareholder must satisfy the court that the scheme is unfair, Re Evertite Locknuts (1938) Ltd., [1945] 1 All E.R. 401.

The onus of showing that a scheme is fair may sometimes rest on the acquirin~ company, Re Bugle Press Ltd., [1960] 1 All E.R. 768; [1960] 3 All E.R. 791; [1961J Ch.271. Unfairness is patent unfairness, Re Sussex Brick Co. Ltd., [1960] 1 All E.R.772; [1960] 2 W.L.R. 665.

Within four months-It is competent to fix a period within, but shorter than. the four months within which the offer must be accepted, Re Western M anu/acturing (Reading) Ltd., [1955] 3 All E.R.733; [1956] 1 Ch.436.

Stamp duty-As to stamp duty on transfer of dissentients' shares, see Ridge Nominees Limited v. I.R.C., [1962] 2 W.L.R.3.

186. Remedy in cases of oppression. (1) Any member of a company who complains that the affairs of the company are being conducted in a manner oppressive to one or more of the members (including himself) mayor, following on a report by an inspector under this Act, the Crown Law Officer may apply to the Court for an order under this section.

(2) If the Court is of opinion that the company's affairs are being so conducted the Court may, with a view to bringing to an end the matters complained of-

(a) except where paragraph (b) of this subsection applies make an order that the company be wound up; or


(b) Where the Court is of opinion that to wind up the company would unfairly prejudice the member or the members referred to in subsection (1) of this section, but otherwise the facts would justify the making of a winding up order on the grounds that it is just and equitable that the company be wound up. or that, for any other reason it is just and equitable to make an order (other than a winding up order) under this section make such order as it thinks fit whether for regulating the conduct of the company's affairs in future or for the purchase of the shares of any members by other members or by the company and. in the case of a purchase by the company, for the reduction accordingly of the company's capital, or otherwise.

(3) Where an order that the company be wound up is made pursuant to paragraph (a) of subsection (2) of this section the provisions of this Act relating to winding up of a company shall, with such adaptations as are necessary, apply as if the order had been made upon a petition duly presented to the Court by the company.

(4) Where an order under this section makes any alteration in or addition to any company's memorandum or articles, then, notwithstanding anything in any other provision of this Act, but subject to the provisions of the order, the company concerned shall not have power without the leave of the Court to make any further alteration in or addition to the memorandum or articles inconsistent with the provisions of the order but subject to the foregoing provisions of this subsection the alterations or additions made by the order shall be of the same effect as if duly made by resolution of the company.

(5) An office copy of any order made under this section shall be lodged by the applicant with the Registrar within fourteen days after the making of the order.

(6) If default is made in complying with subsection (5) of this section, the company and every officer of the company who is in default, shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. U.K. s. 210; Vic. s. 94; Qld. s. 379A; Tas. s. 128. In relation to reports by an inspector, see Divisions 3 and 4 of Part VI, ante.

As to winding-up orders, see Part X, post. Further, as to alteration of the memorandum, see ss. 21, 23, 25, 26, 28, ante. Further, as to alteration of the articles, see s. 31, ante. As to reduction of capital, see s. 64, ante. In relation to winding-up on the ground that it is just and equitable, see s. 222, post.

Objective of section-The section is aimed at putting an end to a continuing state of affairs, not at compensating the petitioners for a wrong which is no longer a continuing wrong, Meyer v. Scottish Textile & Manufacturing Co., [1954] S.L.T. 273; [1954] S.c. 381. See also Scottish Co-operative Wholesale Society Ltd. v. Meyer, [19581 3 All E. R. 66.

Oppressive to members-The oppression alleged must have been suffered by members in the capacity of members; and oppression suffered as directors will not found a petition under this section, though it may be sufficient to support a petition for winding-up by the court under the just and equitable rule, Re H. R. Harmer Ltd., {1958] 3 All E.R. 689.

Alteration of articles oppressive--An alteration of articles may be oppressive if it is not for the benefit of the company as a whole, Australian Fixed Trusts Pty. Ltd. v. Clyde Industries Ltd., [1959] S.R. (N.S.W.) 33.

Conduct the subject of complaint-Conduct the subject of complaint would have to involve, in order to entitle the applicant to obtain relief, at least a visible departure from the standards of fair dealing and a violation of the conditions of fair play upon which every shareholder who entrusts his money to a company is entitled to rely, Elder v. Elder and Watson Ltd., [1952] S.C. 49.


Relief sought in the petition-The petition should state in clear terms the general nature of the relief sought, Re Antigen Laboratories Ltd., [1951] 1 All E.R. 110; Meyer v. Scottish Textile & Manufacturing Co., [1954] S.L.T. 273; [1954] S.C. 381.

Affidavit in support-"I can imagine few cases of petitions presented under [this section] in which it would be wise, or even possible, to rely merely on the statutory affidavit," Re S. A. Hawken Ltd., [1950] 2 All E.R. 408, at p.409.

Action by members-Sometimes it is preferable to proceed by ordinary action taken by one or more members against the directors or other members for the benefit of the company as a whole. See, for example, Burland v. Earle, I1902] AC. 83; Cook v. Deeks, [1916] 1 AC. 554; [1916-17] All E.R. Rep. 285; Pavlides v. Jensen, [1956] 2 All E.R.518.

PART VIII-RECEIVERS AND MANAGERS

187. Disqnalification for appointment as receiver. (1) The following shall not be qualified to be appointed and shall not act as receiver of the property of a company:-

(a) a corporation; (b) an undischarged bankrupt; (c) a mortgagee of any property of the company an auditor of the

company or an officer of the company or of any corporation which is a mortgagee of the property of the company;

(d) any person who is not a registered liquidator.

(2) Nothing in paragraph (a) or paragraph (d) of subsection (1) of this section shall apply to any corporation (induding the Public Curator) authorized by any Act to act as receiver of the property of a company.

(3) Nothing in this section shall disqualify a person from acting as receiver of the property of a company if acting under an appointment made before the commencement of this Act.

U.K. ss. 366,367; N.S.w. s.335; Vic. s. 81; Qld. s.302; S.A. s. 311; W.A. s.362; Tas. s. 149.

In relation to registered liquidators, see ss. 8, 9, 10, ante. As to appointment of the Public Trustee as receiver, see also the Public Curator

Acts, 1915 to 1957, s. 46, title TRUSTEES AND EXECUTORS. The matters taken into consideration on the question whether the official

liquidator shall be appointed receiver on behalf of debenture-holders or other creditors, or not, are economy on the one hand, Perry v. Oriemal Hotels Co. (1870), 5 Ch. App. 420, and the nature of the assets to be got in on the other hand, British Linen Co. v. South American and Mexican Co., {l894] 1 Ch. 108, C.A (value of estimated assets just exceeded that of amount secured by debentures, but some bargaining, etc., necessary, which could better be performed by a commercial man).

Prima facie, in winding-up proceedings, the liquidator should be receiver, Re Joshua Stubbs Ltd., Barney v. Joshua Stubbs Ltd. (1891), 1 Ch.475, C.A; and though the receiver (appointed after the commencement of the winding-up) be already functioning, the liquidator will generally be appointed to supplant him, Campbell v. Compagnie Generale de Bellegarde. Re Compagnie Generale de Bellegarde (1876), 2 Ch. D. 181; and see 10 English and Empire Digest (Rpl.), p. 819. An application may be made by a liquidator who wishes to act himself, Strong v. Carlyle Press, [1893] 1 Ch. 268.

For comprehensive notes as to receivers and managers, the circumstances in which they are appointed, the distinction between the two, their powers, etc., see Paterson and Ednie, Australian Company Law, pp.448-451.

188. (1) Liability of receiver. Any receiver or other authorized person entering into possession of any assets of a company for the purpose of enforcing any charge shall, notwithstanding any agreement to the contrary, but without prejudice to his rights against the company or any other person, be liable for debts incurred by him in the course of the


receivership or possession for services rendered goods purchased or property hired leased used or occupied.

(2) Subsection (1) of this section shall not be so construed as to constitute the person entitled to the charge a mortgagee in possession.

(3) Application for directions. A receiver or manager of the property of a company appointed under the powers contained in any instrument may apply to the Court for directions in relation to any matter arising in connection with the performance of his functions.

U.K. s. 369; N.S.W. s. 337; Vic. s. 82; S.A. s. 311; W.A. s. 362; Tas. s. 150. Prior contracts-The application of this section to contracts entered into prior

to the appointment of a receiver was considered in Associated Newspapers Ltd. v. Grinston (1949), 66 W.N. (N.S.W.) 211.

Possession of receiver-In relation to the possession of a receiver, see Australian Mutual Provident Society v. Geo. Myers & Co. Ltd. (in liquidation) (1931), 47 C.L.R. 65; sub nom Australian Mutual Provident Society v. Public Curator of Queensland, [1931] A.L.R.294.


189. Power of Conrt to fix remnneration of receivers or managers. (1) The Court may, on application by the liquidator or the official manager of a company, by order fix the amount to be paid by way of remuneration to any person who. under the powers contained in any instrument. has been appointed as receiver or manager of the property of the company.

(2) The power of the Court shall. where no previous order has been made with respect thereto---

(a) extend to fixing the remuneration for any period before the making of the order or the application therefor;

(b) be exercisable notwithstanding that the receiver or manager has died or ceased to act before the making of the order or the application therefor; and

(c) where the receiver or manager has been paid or has retained for his remuneration for any period before the making of the order any amount in excess of that fixed for that period, extend to requiring him or his personal representatives to account for the excess or such part thereof as may be specified in the order.

(3) The power conferred by paragraph (c) of subsection (2) of this section shall not be exercised as respects any period before the making of the application for the order unless in the opinion of the Court there are special circumstances making it proper for the power to be so exercised.

(4) The Court may from time to time, on an application made either by the liquidator or the official manager or by the receiver or manager, vary or amend an order made under this section.

u.K. s.371; N.S.W. s.338; Vic. s.83; Qld. s.304; S.A. s.312; W.A. s.363; Tas. s. 151.

As to special managers, see s. 246, post. As to official managers, see Part IX, post.

Remuneration-The court has jurisdiction under this section to fix the future remuneration, as from the date of its order, of a receiver even where he has been appointed at an agreed remuneration, Re Greycaine Ltd., [1946] 2 All E.R. 30; [1946] Ch. 269; 62 T.L.R. 390.


The inclusion of the words "for any period before the making of the order" has overruled the effect of that part of the decision in Greycaine Ltd., supra, which denied to the court the power to re-open completed matters.

Recovery of remuneration from debenture-holders - A receiver appointed by debenture-holders pursuant to a debenture rna) be entitled to recover from them his remuneration for services rendered, Deyes v. Wood, [1911] I K.B.806.


190. Appointment of liquidator as receiver. Where an application is made to the Court to appoint a receiver on behalf of the debenture holders or other creditors of a company which is being wound up by the Court the liquidator may be so appointed.

U.K. s. 368; N.S.W. s. 336; Vic. s.84; Qld. s. 302 (4); Tas. s. 152. In relation to winding-up by the court, see Division 2 of Part X, post. Liquidator to be receiver-In the absence of special circumstances, where there

is a winding-up in progress the liquidator should be appointed receiver for debentureholders under this section to avoid expense and conflict, British Linen Co. v. South American & Mexican Co., [1894] 1 Ch. 108.


191. Notification of appointment of receiver. (1) If any person obtains an order for the appointment of a receiver or manager of the property of a company or of the property within the State of any other corporation, or appoints such a receiver or manager under any powers contained in any instrument, he shall within seven days after he has obtained the order or made the appointment lodge notice of the fact with the Registrar.

(2) Where any person appointed receiver or manager of the property of a company or other corporation under the powers contained in any instrument ceases to act as such he shall within seven days thereafter lodge with the Registrar notice to that effect.

(3) Every person who makes default in complying with the requirements of this section shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. U.K. s. 102; N.S.W. s. 191; Vic. s.79; Qld. s.90; S.A. s.107; Tas. s.78. For comprehensive notes as to receivers and managers, the circumstances in

which they are appointed, the distinction between the two, their powers, etc., see Paterson and Ednie, Australian Company Law, pp.448-451.

192. Statement that receiver appointed. (1) Where a receiver or manager of the property of a corporation has been appointed, every invoice order for goods or business letter issued by or on behalf of the corporation or the receiver or manager or the liquidator of the corporation, being a document on or in which the name of the corporation appears, shall contain a statement immediately following the name of the corporation that a receiver or manager has been appointed.

(2) If default is made in complying with this section the corporation and every officer and every liquidator of the corporation and every receiver or manager who knowingly and wilfully authorizes or permits the default shall be guilty of an offence against this Act.

u.K. s. 370; N.S.W. s. 337; Vic. s. 85; Qld. s. 303; Tas. s. 153. As to the appointment of special managers, see s. 246, post. As to publication

of the name of a company, see s. 113, ante. For the power of the court to grant relief in certain circumstances, see s. 365, post.

For comprehensive notes as to receivers and managers, the circumstances in which they are appointed, the distinction between the two, their powers, etc., see Paterson and Ednie, Australian Company Law, pp. 448-451.


193. Provisions as to information where receiver or manager appointed. (1) Where a receiver or manager of the property of a company (in this section and in section one hundred and ninety-four called "the receiver"), is appointed-

(a) the receiver shall forthwith send notice to the company of his appointment;

(b) there shall, within fourteen days after receipt of the notice, or such longer period as may be allowed by the Court or by the receiver, be made out and submitted to the receiver in accordance with section one hundred and ninety-four a statement in the prescribed form as to the affairs of the company; and

(c) the receiver shall within thirty days after receipt of the statement-

(i) lodge with the Registrar, a copy of the statement and of any comments he sees fit to make thereon;

(ii) send to the company, a copy of any such comments as aforesaid or, if he does not see fit to make any comment, a notice to that effect; and

(iii) where the receiver is appointed by or on behalf of the holders of debentures of the company send to the trustees (if any) for those holders, a copy of the statement and his comments thereon.

(2) Subsection (1) of this section shall not apply in relation to the appointment of a receiver or manager to act with an existing receiver or manager or in place of a receiver or manager dying or ceasing to act, except that, where that subsection applies to a receiver or manager who dies or ceases to act before that subsection has been fully complied with, the references in paragraphs (b) and (c) thereof to the receiver shall (subject to subsection (3) of this section) include references to his successor and to any continuing receiver or manager.

(3) Where the company is being wound up this section and section one hundred and ninety-four shall apply notwithstanding that the receiver or manager and the liquidator are the same person, but with any necessary modifications arising from that fact.

(4) If any person makes default in complying with any of the requirements of this section, he shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. U.K. s.372. As to the trustee for debenture holders, see s. 74, ante. As to winding-up, see

Part X, post. In relation to the receiver and manager being one person, see s. 190, ante.

It has been held that the English counterpart of this section is not retrospective in operation, Re Welsh Anthracite Collieries, [1949] 2 All E.R.736; [1950] Ch. 18.

For comprehensive notes as to receivers and managers, the circumstances in which they are appointed, the distinction between the two, their powers, etc., see Paterson and Ednie, Australian Company Law, pp. 448-451.

194. Special provisions as to statement submitted to receiver. (1) The statement as to the affairs of a company required by section one hundred and ninety-three to be submitted to the receiver shall show as at the date of the receiver's appointment the particulars of the company's assets,


debts and liabilities, the names and addresses of its creditors, the securities held by them respectively, the dates when the securities were respectively given and such further or other information as may be prescribed.

(2) The statement shall be submitted by, and be verified by affidavit of, one or more of the persons who were at the date of the receiver's appointment the directors of the company, and by the person who was at that date the secretary of the company, or by such of the persons hereafter in this subsection mentioned as the receiver may require to submit and verify the statement, that is to say-

(a) persons who are or have been officers; (b) persons who have taken part in the formation of the company

at any time within one year before the date of the receiver's appointment;

(c) persons who are in the employment of the company, or have been in the employment of the company within that year, and are in the opinion of the receiver capable of giving the information required;

(d) persons who are or have been within that year officers of or in the employment of a corporation which is, or within that year was, an officer of the company to which the statement relates.

(3) Any person making the statement and affidavit shall be allowed and shall be paid by the receiver (or his successor) out of his receipts, such costs and expenses incurred in and about the preparation and making of the statement and affidavit as the receiver (or his successor) may consider reasonable, subject to an appeal to the Court.

(4) If any person makes default in complying with the requirements of this section, he shall be guilty of an offence against this Act.


(5) References in this section to the receiver's successor shall include a continuing receiver or manager.

U.K. s.373. As to the secretary, see s. 132, ante. In relation to the register of directors,

managers and secretaries, see s. 134, ante. Note that in this section "receiver" is given a special meaning. For comprehensive notes as to receivers and managers, the circumstances in

which they are appointed, the distinction between the two, their powers, etc., see Paterson and Ednie, Australian Company Law, pp.448·451.

195. Lodging of accounts of receivers or managers. (1) Every receiver or manager of the property of a company or of the property within the State of any other corporation shall-

(a) within one month after the expiration of the period of six months from the date of his appointment and of every subsequent period of six months and within one month after he ceases to act as receiver or manager, lodge with the Registrar a detailed account in the prescribed form showing-

(i) his receipts and his payments during each period of six months, or, where he ceases to act as receiver or manager, during the period from the end of the period to which the last preceding account related or from the date of his appointment, as the case may be, up to the date of his so ceasing;


(ii) the aggregate amount of those receipts and payments during all preceding periods since his appointment; and

(iii) where he has been appointed pursuant to the powers contained in any instrument the amount owing under that instrument at the time of his appointment, in the case of the first account, and at the expiration of every six months after his appointment and where he has ceased to act as receiver or manager at the date of his so ceasing and his estimate of the total value of all assets of the company or other corporation which are subject to that instrument; and

(b) before lodging such account, verify by affidavit all accounts and statements referred to therein.

(2) The Registrar may of his own motion or on the application of the company or other corporation or a creditor cause the accounts to be audited by a registered company auditor appointed by the Registrar and for the purpose of the audit the receiver or manager shall furnish the auditor with such vouchers and information as he requires and the auditor may at any time require the production of and inspect any books of account kept by the receiver or manager or any documents or other records relating thereto.

(3) Where the Registrar causes the accounts to be audited upon the request of the company or other corporation or a creditor he may require the applicant to give security for the payment of the cost of the audit.

(4) Every receiver or manager who makes default in complying with the provisions of this section shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. UK. s. 374; N.S.W. s. 339; Vic. s.86; Qld. s.305; S.A. s. 313; W.A. s. 364;

Tas. s. 154. As to false and misleading statements, see s. 375, post. Forms - See Australian Encyc10predia of Forms and Precedents, title COM

PANIES. For comprehensive notes as to receivers and managers, the circumstances in


196. Payments of certain debts out of assets subject to floating charge in priority to claims under charge. (1) Where a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge or possession is taken by or on behalf of debenture holders of any property comprised in or subject to a floating charge, then if the company is not at the time in the course of being wound up, debts which in every winding up are preferential debts and are due by way of wages, salary, annual leave or long service leave and any amount which in a winding up is payable in pursuance of subsection (3) or subsection (5) of section two hundred and ninety-two, shall be paid out of any assets coming to the hands of the receiver or other person taking possession in priority to any claim for principal or interest in respect of the debentures and shall be paid in the same order of priority as is prescribed by that section in respect of those debts and amounts.

(2) For the purposes of subsection (1) of this section the references in paragraphs (b) and (d) of subsection (1) of section two hundred and ninety-two to the commencement of the winding up shall be read as a reference to the date of the appointment of the receiver or of possession being taken as aforesaid (as the case requires).


(3) Any payments made under this section shall be recouped as far as may be out of the assets of the company available for payment of general creditors.

u.K. s.94; N.S.W. s. 173; Vic. s. 87; QId. ss. 101, lOlA; S.A. s. 98; W.A. s. 94; Tas. s. 155.

For debts to be paid in priority on a winding-up, see ss. 292, 294. As to the respective rights of debenture-holders and a landlord seeking to dis

train, see Purcell v. Public Curator of Queensland (1922), 31 C.L.R.220; I1922] St. R. Qd. 25; [1922] Q.W.N.7; 16 Q.J.P.R. 1.

Floating charge-A precise definition is almost impossible, but presumably a charge having the three following characteristics is a "floating charge":-

"(1) If it is a charge on a class of assets of a company, present or future;

(2) If that class is one which, in the ordinary course of the business of the company, would be changing from time to time;

(3) If you find that by the charge it is contemplated that, until some future step is taken by or on behalf of those interested in the charge, the company may carryon its business in the ordinary way as far as concerns the particular class of assets I am dealing with" (per Romer L.J., in Re Yorkshire Woolcombers Association Ltd., Houldsworth v. Yorkshire Woolcombers Association Ltd., [1903] 2 Ch. 284, at p. 295; affirmed sub nomine Wingworth v. Houldsworth, [1904] A.c. 355).

Priority-The priority given to preferential debts by this section applies only in respect of assets subject to a floating charge and not to assets subject to a fixed charge, Re Lewis Merthyr Consolidated Collieries Ltd., [1929] 1 Ch.498. And see Australian Hairdressers, etc., Federation v. Brisbane Salons Pty. Ltd. (1937), 31 Q.J.P. 59 (Mag. Cas.).

The secretary of a company, who was also a managing director, was held entitled, in the circumstances, to be paid in priority to a holder of debentures containing a floating charge, Re Standard Rubber and Leatherboard Co., [1913] V.L.R. 236; but see Re Intercolonial Smelting and Reducing Co. (1887), 13 V.L.R.896.

Set-off - In relation to a pre-existing set-off where a receiver has gone into possession, see Sun Candies Pty. Ltd. v. Polites, [1939] V.L.R. 132.

Application of assets-As to the order of application of assets, insufficient to meet all claims, see Re Glyncorryg Colliery Co. Ltd., [1926] 1 Ch. 951; [1926] All E.R. Rep. 318.

Recoupment-As to the recoupment of rates paid by the receiver, see Re Mannesmann Tube Co. Ltd.; Von Siemens v. Mannesmann Tube Co. Ltd., {I90I] 2 Ch. 93.

Generally-See also 10 English and Empire Digest (Rpl.), p. 770. For comprehensive notes as to receivers and managers, the circumstances in


197. Enforcement of duty of receiver, etc., to make returns. (1) If any receiver or manager of the property of a company-

(a) who has made default in making or lodging any return account or other document or in giving any notice required by law fails to make good the default within fourteen days after the service on him by any member or creditor of the company or trustee for debenture holders of a notice requiring him to do so; or

(b) who has been appointed under the powers contained in any instrument has, after being required at any time by the liquidator of the company so to do failed to render proper accounts of his receipts and payments and to vouch the same and to pay over to the liquidator the amount properly payable to him,

the Court may, on an application made for the purpose, make an order directing him to make good the default within such time as is specified in the order.


(2) In the case of any such default as is mentioned in paragraph (a) of subsection (1) of this section an application for the purposes of this section may be made by any member or creditor of the company or trustee for debenture holders. and in the case of any such default as is mentioned in paragraph (b) of that subsection the application shall be made by the liquidator.

U.K. s. 375; N.S.W. s. 340; Vic. s.88; Qld. s. 306; S.A. s. 314; W.A. s.365; Tas. s. 156.

Compare s. 282, post, which makes provision with respect to defaults by liquidators. As to returns to be made by receivers and managers, see s. 195, ante. As to trustees for debenture-holders, see s. 74, ante.


PART IX-OFFICIAL MANAGEMENT

198. (1) Power of company to call meeting of creditors to appoint official manager. Where a company is unable to pay its debts as and when they become due and payable, in lieu of proceedings being taken in respect of the company under Part X the company may, and shall if so requested in writing by any creditor of the company who has an unsatisfied judgment against the company for a debt of not less than two hundred and fifty pounds, cause a meeting of its creditors to be summoned for the purpose of placing the company under official management and appointing an official manager of the company as provided in this Part.

(2) Procedure for calling meeting of creditors. The meeting shall be held at a time and place convenient to the majority in value of the creditors. and shall be summoned by notices served personaIly or by post on each of the creditors. not less than seven days and not more than fourteen days before the date of meeting and by advertisement of the notice once during that period in a daily newspaper circulating generally throughout the State.

(3) The chairman shall at the meeting determine whether the meeting has been held at a time and place convenient to the majority in value of the creditors and his decision shall be final, unless shown not to be bona fide.

(4) If the chairman decides that the meeting has not been held at a time and place convenient to that majority the meeting shall lapse.

Compare S. Africa No. 46 of 1926 as amended, ss. 195, 196, 197, 197A, 197B, 198. As to the expression "unable to pay its debts," see notes to s. 222, post. As to

winding-up, see Part X, post. As to the appointment of official managers, see s. 201, post. As to the meeting, see s. 200, post. As to accidental omission to give notice of meetings, see s. 214, post.

"The object of the [South African] section is to obviate a company being placed in liquidation if there is some strong probability that by proper management or by proper conservation of its resources it may be able to surmount its difficulties and carry on. It is a special privilege given in favour of a company and is to be authorized only in very special circumstances," Silverman v. Doornhoek Mines Ltd., [1935] T.P.D. 349, at p. 353. See also Samuels v. Nicholls, [1948] 2 S.A.L.R. 255 (W.).

In an application for a judicial management order it is not essential that the court should be satisfied that eventually the company will be able to function satisfactorily. It suffices that the court should be of the opinion that the company will be able to pay its debts and get on an even keel, Guttman v. Sun lands Township (Pty.) Ltd. (in liq.), [1962] 2 S.A.L.R. 348.

For comprehensive notes as to official management, see Paterson and Ednie, Australian Company Law, pp.459-461.


199. Stay of proceedings. Except by leave of the Court and subject to such terms as the Court imposes, after the service of the notices calling the meeting referred to in section one hundred and ninety-eight no action or proceeding in any court shall be proceeded with or commenced against the company until after the meeting or any adjournment thereof or where it is resolved at the meeting that the company be placed under official management until it ceases to be under official management.

Compare s. 226, post. As to the adjournment of meetings, see s. 200, post. As to the time when a company may cease to be under official management, see s. 209, post.

Court-Note that in this section the term "court" is used in two senses. Proceeding-As to what is a proceeding, see Re G.A.E. Pty. Ltd., [1962] V.R. 252. Stay of proceedings-The power of the court refers to pending as well as future

proceedings, Samuel Osborn (S.A.) Ltd. v. United Stone Crushing Co. (Pty.) Ltd. (under jUdicial management), [1938] W.L.D. 229.

Execution-Leave to sue does not comprehend the right to execute on a judgment which might be obtained, nor will the court in granting an order for leave to sue, make an order granting leave to execute on a judgment which might be obtained, as this might well result in a preference to the applicant creditor to which in law he is not entitled. Further leave of the court is required after judgment for the creditor to proceed to execution, Ross v. Northern Machinery and Irrigation (Pty.) Ltd .• [1940] T.P.D. 119.

Subject to such terms as the court imposes-The "Courts should confine themselves to the limited powers which were unquestionably given in the legislation and not assume wider powers which it might seem desirable that they should have," Wire Industries Steel Products and Engineering Co. (Coastal) Ltd. v. Surtees, N.D., [1953] 2 S.A.L.R. 531, at p.540.

Secured creditors-Note the provisions of s. 202 (3), post. For comprehensive notes as to official management, see Paterson and Ednie,

Australian Company Law, pp.459-461.

200. Provisions as to meeting of creditors. The following provisions apply with respect to any meeting of creditors held under section one hundred and ninety-eight-

(a) the company shall submit to the meeting a statement of affairs of the company in writing signed by the directors and auditors thereof, which statement shall be made up to a date not earlier than thirty days before the date of the meeting;

(b) the meeting may by resolution be adjourned from time to time except that a meeting may not be adjourned to a date later than thirty days after the date of the service of the notices calling the meeting;

(c) subject to the provisions of this Part, the creditors present in person, or by proxy shall conduct the proceedings of the meeting as they may determine.

As to proxies, cf. s. 141, ante. Further in relation to a statement of affairs, cf. s. 202, post.

As to accidental omission to give notice of meetings, see s. 214, post. For comprehensive notes as to official management, see Paterson and Ednie,

Australian Company Law, pp. 459-461.

201. Power of creditors to appoint official manager. (1) The creditors of the company may, by special resolution at the meeting or any adjournment thereof-

(a) determine that the company shall for such period (being a period commencing not earlier than fourteen days after the passing of the resolution) and subject to such conditions as are mentioned in the resolution be under the sole management of a person named in the resolution (in this Part called the "official manager") being a person who has consented in writing to act as the official manager;


(b) determine the amount of the salary or remuneration of the official manager or delegate the fixing of the amount to a committee of management; and

(c) if the creditors think it desirable so to do, determine that a committee of management be appointed, being a committee comprising-

(i) three persons who are, and are to be appointed by, creditors of the company by special resolution; and

(ii) two persons who are, and are to be appointed by, members of the company at a general meeting of the company.

(2) Within seven days after the passing of the resolution the company shall-

(a) cause a true copy of the resolution together with the statement of affairs submitted by the company to the meeting or adjournment thereof at which the resolution was passed, to be lodged with the Registrar and notice of the resolution to be published in a daily newspaper circulating generally throughout the State; and

(b) give written notice to creditors and members of(i) the resolution; and (ii) the right of appeal conferred by section two hundred and ten.

As to the statement of affairs, see s. 200, ante. For the duties of the official manager, see s. 205, post. As to the committee of management, see s. 213, post. As to the general meetings of the company, see ss. 135 et seq., ante.

It seems that the giving of notice to creditors should be effected in the same manner as that prescribed in s. 198, ante.

As to the effect of a resolution, and as to the right of appeal to the court, see s. 210, post.

As to the term "special resolution" in this Part, see s. 215, post, and cf. s. 144, ante.


202. Effect of resolution. (1) During the period mentioned in a resolution passed in pursuance of section two hundred and one-

(a) the official manager named therein may perform any of the functions and exercise any of the powers of the directors;

(b) the costs of the official management shall be paid in preference to all other liabilities of the company; and

(c) subject to paragraph (b) of this subsection all liabilities incurred or to be incurred by the official manager shall be payable in the order in which they are incurred and in preference to unsecured debts of the company as at the date of his appointment.

(2) Upon the commencement of the period mentioned in the resolution the directors of the company shall cease to hold office and the official manager shall assume the management of the company and shall within two months after the expiration of six months after the date of the assumption of his management and of every subsequent period of six months or if the Registrar so requires at any time before the expiry of any such period of six months, submit to a meeting of the company and to a meeting of the creditors and lodge with the Registrar, a statement signed by the auditors of the company showing the assets and liabilities of the company, its debts and oblir:ations, together with a report on all such matters and all such other information as may be necessary to enable an assessment of the position of the company to be made.


(3) Nothing in this Part shall prejudice or otherwise affect the rights of any secured creditor of the company.

As to the salary or remuneration of the official manager, see s. 201, ante. As to the resumption by the officers of the company of the management and control thereof, see s. 209, post.

As to the term "secured creditor," see the Bankruptcy Act, 1924-1960, s. 4 (Commonwealth) .

Functions and powers-An official manager may act on proper expert advice, Re N. Gordon (Pty.) Ltd., [1957] 4 S.A.L.R. 628.

Quaere whether an official manager has power to call up uncalled share capital; cf. De Jager v. Karoo Koeldranke En Roomys (Edms.) Beperk, [1956] 3 S.A.L.R. 594, at pp. 599, 600.

For comprehensive notes as to official management, see Paterson and Ednie, Australian Company Law, pp. 459-461.

203. Termination of appointment of official manager. Subject to the provisions of section two hundred and eleven the appointment of a person as official manager may be determined-

(a) by his resignation in writing signed by him and tendered to(i) the committee of management; or (ii) a meeting of creditors;

(b) by special resolution of the creditors passed at a meeting of which special notice has been given; or

(c) by an order of the Court. As to the terms "special notice," "special resolution," in this Part, see s. 215,

post; cf. ss. 144, 145, ante. The court may cancel the appointment of an official manager pursuant to s. 209,

post. Section 211, post, provides for the release of an official manager. As to the committee of management, see s. 213, post. For comprehensive notes as to official management, see Paterson and Ednie,

Australian Company Law, pp.459-461.

204. Appointment of official managel' not to affect appointment and duties of auditors. Notwithstanding the appointment of an official manager of a company and for so long as the company is under official management, the provisions of this Act relating to the appointment and re-appointment of auditors and the rights and duties of auditors continue to apply, and in that application any reference in those provisions to the directors of the company shall be read as a reference to the official manager.

Auditors-As to the appointment of auditors, their rights and duties, see Division 2 of Part VI, ante.


205. Duties of official manager. (1) An official manager, subject to the provisions of this Act and to such provisions of the memorandum and articles of the company as are not inconsistent with the provisions of this Part-

(a) shall as soon after his appointment as may be, proceed to recover and enter into possession of all the assets of the company movable and immovable and shall undertake the management of the company;

(b) shall conduct the management in such manner as he may deem most economical and most beneficial to the interests of the members and the creditors;

246

(c)

(d)

(e)

(f)

(g)

COMPANIES Vol. 2

shall comply with any directions of the creditors which are agreed to by special resolution at any meeting of creditors of which all creditors have been given special notice; shall, if he ceases for any reason to be official manager, within seven days after his resignation or the receipt by him of written notice of his removal from office, give to the Registrar written notice of such resignation or removal; shall comply with all requirements of this Act relating to the keeping of accounts and the lodging of annual returns and per-form all other duties imposed on the company and the directors by this Act; shall convene during the period the company is under his management the annual general meeting and shall furnish to the persons entitled thereto a report containing such information as is required by this Act in the report of directors together with all duly audited accounts of the company at such times and in such form and manner as would have been required from the directors if the company had not been placed under official management; and shall if at any time he is of opinion that the continuance of official management will not enable the company to meet its obligations give notice forthwith by post to all the members and creditors of the company of that opinion.

(2) An official manager who fails to comply with any of the provisions of this section shall be guilty of an offence against this Act.

Penalty: One hundred pounds. With the powers and duties of an official manager, compare those of a liquidator

set forth in, for example, ss. 236-238, 258, 261, 269, post. As to the termination of the appointment of an official manager, see s. 203, ante. As to accounts, see ss. 161 et seq., ante. As to the annual return, see ss. 158

et seq., ante. As to the annual general meeting, see s. 136, ante. As to the accidental omission to give notice of meetings, see s. 214, post. As to the duties of directors, see Division 2 of Part V, ante. As to audit, see ss. 161 et seq., ante.

As to the terms "special notice," "special resolution," in this Part, see s. 215, post; cf. ss. 144, 145, ante.

Management of the company-In South Africa it has been held that since the manager is authorized to carry on the business of the company and conduct all its affairs, he is in the same position as the directors were prior to the official management, and he therefore has power to apply to the court for an order convening a meeting of creditors, Ex parte Cousins, [1948] 1 S.A.L.R. 1130 (D.). However, note the provisions of s. 201, ante, which enable the creditors to impose conditions upon the sole management of the official manager, and to appoint a committee of management. By virtue of s. 213, post, the committee may direct the calling of a meeting of creditors.

Power to pledge credit or borrow-It has been held that a judicial manager may be given power to borrow or pledge the credit of the company, Trevor v. Trevor Construction (1957) Pty. Ltd., [1958] 4 S.A.L.R. 68; but not to the prejudice of shareholders and creditors, Standard Bank of South Africa Ltd. v. Pharmacy Holdings Ltd., [1962] 1 S.A.L.R. 245.


206. Undue preferences in case of official management. (1) Every disposition of its property, which if made by an individual would in the event of his bankruptcy be void or voidable, shall, if made by a company placed under official management and unable to pay all its debts, be void or voidable in like manner and the provisions of the law relating to the estates of bankrupt persons shall with such adaptations as are necessary apply to such a disposition.


(2) For the purposes of this section the date of the passing of the resolution by the creditors appointing the official manager shall be deemed to be the date which corresponds with the date of the presentation of the bankruptcy petition in the case of an individual.

For the resolution appointing the official manager, see s. 201, ante. The special resolution so required is defined by s. 215, post.

In relation to the expression "unable to pay its debts," cf. s. 222, post, and notes thereto.


207. Application of assets during official management and disposal thereof. (1) An official manager shall not without the leave of the Court, or the committee of management or the company granted in general meeting sell, or otherwise dispose of, any of the company's assets, save in the ordinary course of the company's business.

(2) Any moneys of the company becoming available to the official manager shall be applied by him in paying the costs of the official management and in the payment of debts incurred in the conduct by him of the company's business and so far as the circumstances permit in the payment of the debts of the company which were incurred before the date of the resolution appointing an official manager.

(3) Subject to the provisions of section two hundred and two the costs of the official management and the claims of the creditors of the company shall be paid in accordance with subdivision (2) of Division 4 of Part X. as if those costs were costs of the winding up of a company and those claims were claims against a company being wound up and the provisions of that subdivision, with the necessary adaptations. apply to and in relation to those costs and claims accordingly.

As to the resolution appointing the official manager, see s. 201, ante. As to the remuneration of the official manager, see s. 201, ante. As to the proof and ranking of claims, see Subdivision (2) of Division 4 of Part X, post.

By virtue of s. 202, ante, the costs of the official management are to be paid in preference to all other liabilities of the company.


208. Application of certain provisions in winding up to official management. (1) In every case in which a company is placed under official management, the provisions of paragraph (g) of subsection (I) of section two hundred and eighteen and of sections two hundred and forty-eight. three hundred and four. three hundred and five and three hundred and six apply as if the company under official management were a company being wound up and the official manager were the liquidator and any reference in those sections to contributories shall be taken as a reference to members.

(2) The provisions of sections two hundred and forty-nine and two hundred and fifty and when the Court so orders any other section shall apply in an official management as they apply in a winding up by the Court or any winding up of a company which is unable to pay its debts, any reference to the liquidator being taken to be a reference to the official manager and any reference to a contributory a reference to a member of the company.

In relation to the expression "unable to pay its debts," cf. s. 222, post, and see the notes thereto.



209. Cancellation by Court of official management and power of Court to give directions. (1) If at any time, on the application of the official manager or of any creditor of the company or member, it appears to the Court that the purpose for which the official manager was appointed has been fulfilled, or for any reason it is undesirable that the company should remain under official management, the Court may cancel the appointment and thereupon the official manager shall subject to the provisions of section two hundred and eleven cease to be the official manager of the company.

(2) In cancelling the appointment the Court shall give such directions as may be necessary for the resumption of the management and control of the company by the officers thereof and such directions may include directions for the calling of a general meeting of members for the election of directors.

An official manager may resign his office pursuant to s. 203, ante. As to the release of the official manager, see s. 211, post. As to accidental omission to give notice of meetings, see s. 214, post.

See, for notes of South African authorities on a similar section, Paterson and Ednie, Australian Company Law, pp.469-470. As to official management generally, see ibid., pp. 459-461.

210. Subject to appeal, resolution to appoint official manager binding. (1) Where a resolution has been passed in pursuance of subsection (I) of section two hundred and one, the resolution shall, subject to the right of appeal conferred by this section, be binding on the company and the members and creditors of the company.

(2) A creditor or group of creditors to whom the company owes more than ten per centum of the total liabilities of the company to its creditors. or any member or group of members holding not less than ten per centum of the paid up capital of the company, may appeal to the Court against the resolution (in so far as it was passed by virtue of paragraph (a) of subsection (I) of section two hundred and one) at any time within a period of fourteen days after the passing thereof and the Court may, having regard to whether or not the resolution is reasonable and, in particular, to its effect upon the interests of the creditors and the members of the company, amend. vary or cancel the resolution.

(3) Subject to this Part, pending the determination of an appeal under the provisions of this section, the acts of an official manager shall be valid and binding on the company and the members and creditors thereof, notwithstanding that the resolution may be amended, varied or cancelled by the Court to which the appeal is made. 211. Release of official manager. (1) Where the appointment of an official manager has been determined, the adoption by a meeting of the creditors of the reports and accounts of the official manager shall discharge him from all liability in respect of any act done or default made by him in the management of the company or otherwise in relation to his conduct as official manager.

(2) The adoption of the report and accounts shall not release or discharge the official manager if it was obtained by fraud or by suppression or concealment of any material fact nor discharge him from any liability which by virtue of any enactment or rule of law would otherwise attach to him in respect of any nel!ligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company.

(3) If the reports and accounts in respect of the comoany of the official manager are not, within two months of his making of the reports and accounts, adopted by a meeting of creditors, the official manager may apply to the Court for an order of release.


(4) The Court may grant or withhold the release and a release by the Court shall have the same effect as if the reports and accounts had been adopted by a meeting of creditors.

For the modes by which the appointment of an official manager may be determined, see ss. 203, 209, ante.

For comprehensive notes as to official management, see Paterson and Ednie. Australian Company Law, pp.459-461.

212. Documeuts of company under official management to state that fact. (1) Where an official manager of a company has been appointed, every invoice order for goods or business letter issued by or on behalf of the company or the manager, being a document on or in which the name of the company appears, shall contain a statement immediately following the name of the company that an official manager has been appointed.

(2) If default is made in complying with this section the company and every officer and official manager who knowingly and wilfully authorizes or permits the default shall be guilty of an offence against this Act.

In relation to the requirement that the fact that an official manager has been appointed be displayed on certain documents, cf. the provisions of s. 283, post. In relation to offences, see ss. 374 et seq., post. In relation to displaying the name of the company, see s. 113, ante.


213. Functions of committee of management. (1) A committee of management-

(a) shall assist and advise the official manager on any matters relating to the management of the company on which he requires their advice and assistance; and

(b) may appoint a deputy official manager, who while so acting shall have the powers, duties and functions of an official manager, in the absence of the official manager.

(2) A committee may at any time and from time to time direct the official manager to call a meeting of creditors of the company or of members thereof or of both and the official manager shall give effect to the direction.

(3) Subject to this section and the regulations, the provisions of subsections (2) to (9), both inclusive, of section two hundred and forty-two shall apply with respect to committees of management and with respect to the proceedings of and vacancies in committees of management and to the removal of members thereof any reference to the committee of inspection being taken to be a reference to the committee of management, any reference to the liquidator being taken to be a reference to the official manager and any reference to a contributory being taken to be a reference to a member of the company.

As to the composition of a committee of management, see s. 201, ante. Further, in relation to this section, d. the provisions of ss. 241,242, post. As to accidental omission to give notice of meetings, see s. 214, post.


214. Accidental omissiou to give notice. The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any person shall not invalidate proceedings at a meeting held for the purposes of this Part.

With the provisions of this section, cf. Fourth Schedule, Tables A, B. Notices, post; d. also s. 366, post, by virtue of which certain irregularities may be overlooked by the court.


215. Interpretation. For the purposes of this Part-"Special resolution" means a resolution passed by a maJonty in

number representing at least three-fourths in value and one-half in number of the creditors present and voting either in person or by proxy at the meeting, every creditor for under ten pounds being reckoned in value only;

"Special notice" with respect to a meeting of creditors means notice of the meeting given by means of a notice sent to each of the creditors not less than fourteen days and not more than twentyone days before the date of the meeting.

Compare, with the above definitions, the meanings given to the terms in ss. 144, 145, ante.

PART X-WINDING Up Division 1-Preliminary

216. Modes of winding up. ( 1) The winding up of a company may be either-

( a ) by the Court; or (b) voluntary.

(2) Unless the contrary intention appears the provIsIons of this Act with respect to winding up apply to the winding up of a company in either of those modes.

N.S.W. s. 199; Qld. s. 164; S.A. s. 186; W.A. s. 178. As to dissolution, see ss. 272, 307, et seq., post. A company duly incorporated under statutory provisions can be dissolved only

under statutory authority, Guardian Trust and Executors Co. (Ltd.) v. AttorneyGeneral (1911), 31 N.Z.L.R. 428.

217. Crown bouud by certain provisions. The provisions of this Part relating to the remedies against the property of a company, the priorities of debts and the effect of an arrangement with creditors shall bind the Crown.

N.S.W. s. 199 (3). As to priorities of debts, see s. 292, post. As to arrangements with creditors,

see s. 181, ante.

As to whether this section is efficacious to bind the Crown in right of the Commonwealth, see Federal Commissioner of Taxation v. Official Liquidator of E. O. Farley Ltd. (in liq.) (1940), 63 C.L.R. 278; Re K.L. Tractors Ltd. (in liq.), [1961] A.L.R. 410; Re Scottish Loan and Finance Co. Ltd. (1944).44 S.R. (N.S.W.) 461; Re Richard Foreman & Sons Pty. Ltd.; Uther v. Federal Commissioner of Taxation (1947),74 C.L.R. 508; [1947] A.L.R. 589; Commonwealth of Australia v. Bogle (1953), 89 C.L.R. 229; Deputy Federal Commissioner of Taxation for the State of New South Wales v. Brown (1958), 100 C.L.R. 32.

218. Liability as contributories of present and past members. ( 1) On a company being wound up, every present and past member shall be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities and the costs charges and expenses of the winding up and for the adjustment of the rights of the contributories among themselves, subject to the following qualifications:-

(a) a past member shall not be liable to contribute if he has ceased to be a member for one year or more before the commencement of the winding up;

(b) a past member shall not be liable to contribute in respect of any debt or liability of the company contracted after he ceased to be a member;

(c)

(d)

(e)

(f)

(g)


a past member shall not be liable to contribute unless it appears to the Court that the existing members are unable to satisfy the contributions required to be made by them in pursuance of this Act; in the case of a company limited by shares, no contribution shall be required from any member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as a present or past member; in the case of a company limited by guarantee, no contribution shall, subject to subsection (2) of this section, be required from any member exceeding the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up; nothing in this Act shall invalidate any provision contained in any policy of insurance or other contract whereby the liability of individual members on the policy or contract is restricted or whereby the funds of the company are alone made liable in respect of the policy or contract; a sum due to any member in his character of a member by way of dividends, profits or otherwise shall not be a debt of the company payable to that member in a case of competition between himself and any other creditor not a member, but any such sum may be taken into account for the purpose of the final adjustment of the rights of the contributories among themselves.

(2) On the winding up of a company limited both by shares and guarantee every member shall be liable, in addition to the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up, to contribute to the extent of any sums unpaid on any shares held by him.


This section does not apply to no-liability companies, see s. 319, post. As to the adjustment of the rights of contributories, see ss. 247, 264, post. As to when a company limited by guarantee is to be treated as having provision for a share capital, see s. 32, ante. Liability on shares where capital has been reduced is dealt with by s. 64, ante. As to settling the list of contributories, see ss. 244, 252, 269, post. For the commencement of the winding-up, see ss. 223, 255, post.

Holder of fully paid shares as contributory-Note the definition of "contributory" in s. 5, ante, and see Re Anglesea Colliery Co. (1866), L.R. 2 Eq. 379; Re Consolidated Goldfields of New Zealand Ltd., [1953] Ch. 689; [1953] 1 All E.R. 791; Re Phoenix Oil and Transport Co. Ltd., [1957] 3 All E.R. 218.

Contributories as past members-The list of contributories as past members should be settled as soon as conveniently may be, but not in such manner as to determine any question as to the extent of the liability of such contributories respectively, Re Barned's Banking Co.; Andrew's Case (1867), 3 Ch. App. 161.

Past member-A shareholder who has forfeited his shares is not a present member. Re Blakely Ordnance Co.; Needham's Case (1867), L.R. 4 Eq. 135; but he is a past member, and so liable to be placed on the list of contributories, Re Blakely Ordnance Co.; Creyke's Case (1869), 5 Ch. App. 63.

Where a past member bought up, and caused to be released to the company, the only debts due when he ceased to be a member, and remaining due when the winding-up order was made, it was held that no call could be made upon him in the winding-up, Re Blakely Ordnance Co.; Brett's Case (1873), 8 Ch. App. 800; and. where a past member, after he had been placed on the list of contributories, and a call had been made upon him, bought up the debts in respect of which he was liable to contribute, see Re Greening & Co.; Marsh's Case (1871), L.R. 13 Eq.


388. not followed in Re Apex Film Distributors Ltd., [1959] 2 All E.R. 479 (reversed on appeal [1960] 1 AI! E.R. 152). A past member of a company limited by shares may be liable to contribute to its assets in a winding-up, notwithstanding the fact that the existing members, at the date of the commencement of the liquidation, hold fully paid shares only, Re Southern Cross Motor Fuels Ltd.; Ex parte Kelleway, [1926] V.L.R. 527.

The funds contributed by the past members who are contributories form part of the I(eneral assets of the company, and are not to be applied preferentially or exclusively, to those debts which were incurred before those members retired from the company, Webb v. WhifJin (1872), L.R. 5 H.L. 711; Re Blakely Ordnance Co.; Brett's Case (1873), 8 Ch. App. 800.

Personal representatives of past members-The personal representatives of a past member, who was a joint holder of shares, may be placed on the list of contributories. a joint holder being a member of the company. Permanent Trustee Co. of New South Wales Ltd. v. Palmer (1929),42 C.L.R. 277; [1929] AL.R. 153; Re Wool TradinJ? Co. Ltd. (No.2) (1928), 28 S.R. (N.S.W.) 435; but not on the "A" list unless the articles provide to the contrary, Re Wool Trading Co. Ltd. (in liq.) (1928), 28 S.R. (N.S.W.) 106.

Whether fully paid-For cases determining on the facts whether shares were fully paid or not. see Re Darling Downs Brewery Ltd.; Jane Primrose's Case (1899), 9 Q.L.J. 222; Re Darling Downs Brewery Ltd. (1899), 9 Q.L.J. 225.

Provisions purporting to excuse liability-A company cannot, by a provision in its memorandum of association, provide that a shareholder shaH not be liable to pay, in a winding-up the amount uncalled on his shares, Re Slutz kin Ply. Ltd., [1932] V.L.R. 229; nor by its articles provide that calls shall be payable only out of dividends, Woodgers & Calthorpe Ltd. (in liq.) v. Bowring (1935), S.R. (N.S.W.) 483.

Articles-Although shareholders cannot contract to be relieved of their liability in a winding-up to pay calls to meet the debts and liabilities of the company and liabilities in the winding-up, there is complete freedom to prescribe by the articles how mutual rights are to be adjusted and the necessity of making calls may be excluded, Kin!? v. Tait (1936), 57 C.L.R. 715; [1937] A.L.R. 146.

Extinguishing liability-With respect to the power of directors to extinguish liability on shares by signing a composition deed, see Goldsmith v. Colonial Finance, Mortgage, Inv,estment and Guarantee Corporation Ltd. (1909), 8 C.L.R. 241; 15 AL.R. 431.

Issued at discount-In Welton v. Safjery, [1897] AC. 299, it was held that the holders of shares issued at a discount were liable to calls for the amount unpaid on their shaTes for the adjustment of the rights of contributories inter se, as well as for the payment of the company's debts and the costs of winding-up.

Set-off-To constitute payment, for the purposes of subsection (I) (d), by a debt due from the company to the member, there must be an actual consumnated set-off to that effect, Harding & Co. Ltd. (in liq.) v. Hamilton, [1929] N.Z.L.R. 338.

A shareholder cannot, after the commencement of the winding-up, set off a debt due to him from the company against a call made in the winding-up, Re Shadier (A.) Ltd. (1904), S.R. (N.S.W.) 619.

A creditor who is also a shareholder cannot set off the debt due to him by the company against the calls made upon him as a contributory in the winding-up of the company, Mitchell v. Booth, [1927] S.AS.R. 576. But see s. 245 post.

See also Re John Dillon Ltd. (in liq.); Ex parte Jefjeries, [1960] W.A.R. 30. Company limited by guarantee-The limit of liability applies only to the

liability to the company as a member of the company and not to liability towards other members, e.g. as an insurer towards other members of a mutual marine insurance association, who entered their ships in the association, Lion Insllrance Association v. Tucker (1883), 12 Q.B.D. 176; Re Bangor & North Wales Mutual Marine Protection Association; Baird's case, [1899] 2 Ch. 593.

Opinion of liquidators-The affidavits to satisfy the court that a call ought to be made need not go into minute details to show why the liquidators declare themselves only able to realise a certain sum, but reasonable grounds for the opinion of the liquidators must be shown, Helbert v. Banner; Re Barned's Bank (1871), L.R. 5 H.L. 28.

In his character of a member-Remuneration payable under the articles to a director is not a slim due to any member in his character of a member, Re Automatic Bread Baking Co. (1940), S.R. (N.S.W.) 1. See also Re W. H. Eutrope & Sons Pty. Ltd., [1932] V.L.R. 453.


Where, after a company had gone into liquidation a shareholder established his right to payment of a dividend declared before liquidation and recovered judgment for the amount thereof, execution was stayed until further order. Otherwise he might have competed with other creditors of the company, or might have been given a preterence over them contrary to the provisions of the section, Robison Bros., Campbell and Sloss v. Sloss (1892), 14 A.L.T. 145.

Compromise-A compromise by the liquidator with the holder of shares at the date of the winding-up does not extinguish the liability of a former holder as a contributory, Re Natal Investment Co.; Nevill's Case (1870), 6 Ch. App. 43; Re Contract Corporation; Hudson's Case (1871), L.R. 12 Eq. 1; Helbert v. Banner; Re Barned's Bank (1871), L.R. 5 H.L. 28. The compromise does not absolve the present holder from his implied contract to indemnify the transferor against future calls, Roberts v. Crowe (1872), L.R. 7 C.P. 629. The relation between them is not that of principal and surety. but one of primary and secondary liability, ibid.; Helbert v. Banner; Re Barned's Bank (1871), L.R. 5 H.L. 28.

Liability of transferor-As to liability of a transferor for pre-transfer calls where the company has obtained judgment against the transferee and issued execution. see Motors & Cash Orders Ltd. (in. liq.) v. O'Mara (1936), 36 S.R. (N.S.W.) 243.

219. Nature of liability of contribntory. The liability of a contributory shall create a debt of the nature of a specialty accruing due from him at the time when his liability commenced but payable at the times when calls are made for enforcing the liability.


The liability of contributories may be enforced under ss. 245, 269, 274, post. This section applies to unregistered companies, s. 315, post. This section does not apply to no-liability companies, s. 319, post.

Speciality-See Buck v. Robson (1870), L.R. 10 Eq. 629; Re Muggeridge; MugReridge v. Sharp; Ex part,e Bank of London & National Provincial Insurance Association (1870), L.R. 10 Eq. 443; R. v. Williams [1942] A.C. 541; [1942] 2 All E.R.95.

At the time when his liability commenced-The focal date is the date of the contract under which the contributory became a member, Re Vaughan; Ex parte Canwell (1864),4 De G.J. & Sm. 539; Williams v. Harding (1866), L.R. 1 H.L. 9.

Discharge of liability-Where a company is wound up and contributories are discharged from further liability on a composition and a period of twenty years supervenes, every intendment must be made in favour of what was done as having been lawfully and properly done, Watt v. Assets Co.; Bain v. Assets Co., [1905] A.C. 317.

220. (1) Contributories in case of death of member. If a contributory dies, either before or after he has been placed on the list of contributories, his personal representatives shall be liable in due course of administration to contribute to the assets of the company in discharge of his liability and shall be contributories accordingly, and if they make default in paying any money ordered to be paid by them proceedings may be taken for administering the estate of the deceased contributory and for compelling payment thereout of the money due.

(2) Contributories in case of bankruptcy of member. If a contributory becomes bankrupt or assigns his estate for the benefit of his creditors, either before or after he has been placed on the list of contributories

(a) his trustee shall represent him for all the purposes of the winding up and shall be a contributory accordingly; and

(b) there may be proved against his estate the estimated value of his liability to future calls as well as calls already made.

U.K. ss. 215, 216; N.S.W. ss. 203, 204; Vic. ss. 158, 159; Qld. ss. 168, 169; S.A. ss. 190, 191; W.A. ss. 181, 182; Tas. ss. 161, 162.

This section does not apply to no-liability mining companies, see s. 319, post. As to a liquidator's powers, see ss. 236, 269, post.


J?eceased member-A deceased member of a limited company or his estate remams a member of the company for purposes of the articles of association so long as his name remains on the register without notice to the company of his death. New Zealand Gold Extraction Co. (Newberry-Vautin Process) Ltd. v. Peacock, [1894] 1 Q.B. 622.

Executors are liable as contributories in their representative capacity and not personally, Re City of Glasgow Bank; Buchan's Case (1879) 4 App. Cas. 549; unless they apply for and are registered with their consent as the holders of the shares in their individual capacity, Re Cheshire Banking Co.; Duff's Executor's Case (1886), 32 Ch. D. 301.

Executors to provide for contingent liability on shares-Where the executors pay a legacy under the testator's will without providing for any contingent liability in respect of shares, they are liable to pay the amount of the legacy in satisfaction of calls, Taylor v. Taylor (1870), L.R. 10 Eq. 477; Re Medical, Invalid & General Lite Assurance Society; Russell's Executors' Case (1871), 15 Sol. Jo. 790.

Recoupment by executors-They may claim repayment of the legacy from the legatee where, at the time of payment, they had notice of the liability to future calls; but not where the liability had actually become a debt, Jervis v. Wolferstan (1874), L.R. 18 Eq. 18; Whittaker v. Kershaw (1890),45 Ch. D. 320.

Estimated future calls-The liquidator is entitled to prove against the estate of a deceased contributory for the estimated value of future calls and to have a proportional share of the estate set aside to meet it, Re Muggeridge; Mugg,eridge v. Sharp; Ex parte Bank of London & National Provincial Insurance Association (1870), L.R. 10 Eq. 443.

Balance order-Where a "balance order" (i.e. an order to pay a liquidator the amount due in respect of a call on shares made prior to the date of a winding-up resolution) has been obtained by the liquidator against the legal personal representative of a deceased contributory for payment of a call made after the death, such order is not in the nature of a judgment so as to constitute the liquidator a judgment creditor, and leaves untouched all priorities usually existing in the due course of the administration of the estate of a deceased person, including the executor's right of retainer, Re Hubback; International Marine Hydropathic Co. v. Hawes (1885), 29 Ch. D. 934. See also Westmorland Green & Blue Slate Co. v. Feilden, [1891] 3 Ch. 15.

Joint holders-The liability in respect of shares registered in joint names accrues to the survivor, and the executors of the deceased are discharged, Re Maria Anna & Stein bank Coal & Coke Co.; Maxwell's Case; Hill's Case (1875), L.R. 20 Eq. 585; Re Wool Trading Co. Ltd. (in liq.) (1928), 28 S.R. (N.S.W.) 106, but they are liable to be placed upon the list of contributions as executors of a past member, Permanent Trustee Co. of New South Wales Ltd. v. Palmer (1929), 42 C.L.R. 277; [1929] A.L.R. 153. The estate of a person who was a joint tenant of shares is not liable for calls which accrued, but for which judgment was not recovered during the lifetime of such person, National Trustees, Executors and Agency Co. Ltd. v. Walsh (1895),21 V.L.R. 75.

Division 2-Winding up by the Court

Subdivision (1 )-General 221. Application for winding up. (1) A company (whether or not it is being wound up voluntarily) may be wound up under an order of the Court on the petition of-

(a) the company; (b) any creditor, including a contingent or prospective creditor,

of the company; (c) a contributory; (d) the liquidator; (e) the Crown Law Officer pursuant to section one hundred and

seventy-five; or (f) the official manager of the company appointed pursuant to

Part IX, or of any two or more of those parties.

COMPANIES ACT OF 1961 88.220,221 255

(2) Notwithstanding anything in subsection (1) of this section(a) a contributory may not present the petition on any of the

grounds specified in paragraph (a), (b), (c), (e) or (h) of subsection (1) of section two hundred and twenty-two unless-

(i) the number of members is reduced in the case of a proprietary company (other than a proprietary company the whole of the issued shares of which are held by a holding company which is a public company or a public company under the law of any other State or Territory of the Commonwealth) below two or in the case of any other company below five; or

(ii) the shares in respect of which he is a contributory or some of them were originally allotted to him, or have been held by him and registered in his name for at least six months during the eighteen months before the presentation of the petition or have devolved on him through the death of a former holder;

(b) a petition shall not, if the ground of the petition is default in lodging the statutory report or in holding the statutory meeting, be presented by any person except a contributory nor before the expiration of fourteen days after the last day on which the meeting ought to have been held;

(c) the Court shall not hear the petition if presented by a contingent or prospective creditor until such security for costs has been given as the Court thinks reasonable and a prima facie case for winding up has been established to the satisfaction of the Court; and

(d) the Court shall not, where a company is being wound up voluntarily, make a winding up order unless it is satisfied that the voluntary winding up cannot be continued with due regard to the interests of the creditors or contributories.

N.S.W. s. 210; Vic. ss. 161, 214; Qld. ss. 175, 260; S.A. s. 196; W.A. s. 187; Tas. s. 164.

For the last day on which the statutory meeting ought to have been held, see s. 135. ante. For the conse{juences of carrying on business when the _number of members has fallen below the statutory minimum, see s. 36, ante.

Ambit of section-This section is apparently exhaustive, so that a person outside its ambit cannot petition, Re H. L. Bolton Engineering Co. Ltd., [1956] Ch. 577; [1956] 1 All E.R. 799.

Interest of petitioner-A petition for the winding-up of a limited company which failed to show the interest of the petitioner was dismissed in Re Palais Cinema Ltd., [1918] V.L.R. 113. Cf. Re Barrier Reef Trading Co. Ltd., [1929] St. R. Qd. 177.

By the company-Directors have no general powers which authorise them, Upon a resolution passed at a meeting of directors. to present a petition on behalf of the company to have it wound up, Re Standard Bank of Australia (1898). 24 V.L.R. 304, at p. 307, followed in Re Birmacley Products Pry. Ltd., [1943] V.L.R. 29.

By liquidator-A petition by a liquidator on behalf of a company being wound UP should be presented by the company and not by the liquidator in his Own name, Growden v. Wiltshire (1935), 52 C.L.R. 286.

By any creditor-The power to petition for a winding up is a remedy that a creditor possesses against a company unable to pay, in order that he may get contribu.tion from the members to the extent of their uncalled capital, Re Premier Permanent Building, Etc., Association, Ex parte Stewart (1890), 16 V.L.R. 20, at p.24.

Where the petitioner has acquired an unconditional right to payment in full from the sheriff under a writ of fieri facias prior to petitioning, the petition was dismissed and the petitioner ordered to pay the company's costs, Re William Hockley Ltd., [19621 2 All E.R. 111.


Generally every creditor is prima facie entitled to obtain a winding-up order, even though it appears that there will be nothing available for the unsecured creditors, Re Alfred Melson & Co. Ltd., [1906] 1 Ch. 841; Re Crigglestone Coal Co. Ltd., [1906J 2 Ch. 327; [1906] All E.R. Rep. 894, but the court has a discretion, see s. 225. A creditor who cannot obtam payment without winding up tile company IS emitied as between himself and the company ex debito ius/itue to an order, Re London Suburban Bank (1871),6 Ch. App. 641; Re West of Canada Oil Co. (1873), L.R. 17 Eq. 1; Re Concrete Pipes and Cement Products Ltd., [1926] V.L.R. 34.

The rule that if a creditor of a company cannot get paid without winding up the company, it is ex debito justitia: as between the creditor and the company that the creditor should have a winding-up order, means that, a statutory discretion still existing in the Court, it ought to be exercised in favour of a petitioning creditor who cannot get payment of his debt in any other way, Re Concrete Pipes and Cement Products Ltd., [1926) V.L.R. 34. Upon an offer being made by a company in good faith to pay a petitioning creditor's debt, the creditor ceases to be entitled to a winding-up order ex debito justitia: (ibid.). In this case it was held that the company should have the opportunity, by adjournment of the hearing of an appeal, of satisfying the petitioner's debt, conditionally upon making a payment into Court to meet the costs of the petitioner.

A creditor may present a petition even if the company has a right of set-off against the debt owing to the creditor, Re K. L. Tractors Ltd., [1954] V.L.R. 505.

H is no defence to the petition of a debenture-holder that he has other remedies under the debenture, Re North Sydney Investment and Tramway Co. Ltd. (1893), 14 N.S.W.L.R. (Eq.) 367; Re Federal Land Co. (1889), 15 V.L.R. 135.

Where the financial position of a company was hopeless, and the majority in value of creditors desired a winding up, but the majority in number was opposed to it, a winding-up order was made, Re Belmont Land Co. (No.2) (1913), 32 N.Z.L.R. 1017.

Proof that the company has no assets, or that there is good reason for doubting whether the petitioning creditor would gain anything by the winding up, should not be regarded as sufficient reason for refusing to make an order, Re Melbourne Carnivals Pty. Ltd., [1926] V.L.R. 283.

Company creditor as petitioner-A company may present a petition as creditor, Re Federal Land Co. Ltd. (1889), 15 V.L.R. 135; Re New Imperial Tin Mining Co. Ltd. (1886), 12 V.L.R. 775.

Contingent or prospective creditor or creditors-See Re British Equitable Bond & Mortgage Corporation Ltd., [1910] 1 Ch. 574.

Other creditors-Amongst others, the following may petition as creditors; The assignee of a debt (Re London & Birmingham Flint Glass & A lkali Co. Ltd., Ex parte Wright (1859),"1 De G. F. & 1.257; Re Paris Skating Rink Co. (1877), 5 Ch. D. 959), but a petitioner cannot assign his debt and the right to proceed with the petition (Re Paris Skating Rink Co., supra); the equitable assignee of a debt (Re Montgomery Moore Ship Collision Doors Syndicate Limited (1903), 72 L.l. Ch. 624), or of part of a debt (Re Steel Wing Co., [1921] 1 Ch. 349; [1920] All E.R. (Rep.) 292); a judgment creditor for costs of a suit for equitable relief, the judgment being enforceable at a future date (Re Acetylene Gas Co. of Australasia Ltd. (1901), 1 N.S.W.S.R. (Eq.) 102); the executor of a creditor before probate, provided he obtains probate before the hearing of the petition (Re Mawnic & General Life Assurance Co. (1885), 32 Ch. D. 373); a secured creditor (Moor v. Anglo-Italian Bank (1879), 10 Ch. D. 681; Re Portsmouth Borough (Kingston, Fratton, & Southsea) Tramways Co., [1892] 2 Ch. 362); debentureholders. But holders of debenture stock secured by a trust deed, the covenant to pay principal and interest being with the trustees, have been held not to be entitled to present a petition (Re Dunderland Iron Ore Co. Ltd., [1909] 1 Ch. 446).

As a rule the Court will not make an order in respect of a debt under £50, Re Standring & Co. Ltd. (1895), 39 Sol. Jo. 603; Re Fancy Dress Balls Co. Ltd. (1899), 43 Sol. Jo. 657; Re Hyde (w. H.) Ltd. (1900), 44 Sol. 10. 731.. See also s. 222. post. In special circumstances an order will be made, Re Industrial Insurance Association Ltd., [1910] W.N. 245; and see Re Alderney Dairy Co. (1885), 11 V.L.R. 628.

Contributory-The term is defined in s. 5 ante. See further, notes to s. 218, ante. One of two joint shareholders can be a contributory and thus, subject to his compliance with the provisions of this section, is competent to present a petition to wind up the company, Re Peerless Engineering Co. Pty. Ltd. [1955] V.L.R. 170; [1955] A.L.R. 702.


A contributory is entitled ex debito justitice to an order for winding up on any of the grounds provided for in the Act, even though he claims to be a creditor, and his debt is disputed, Re Shelbourne Cheese Manufacturing & Produce Company (1888), 14 V.L.R. 294.

The statutory right of a contributory to petition cannot be excluded or limited by the articles of association of the company, Re Peveril Gold Mines Ltd., [1898] 1 Ch. 122.

A holder of scrip certificates for shares in a company may petition if he admits his liability as a contributory and undertakes to do all acts necessary to his becoming a shareholder, Re Littlehampton, &c., Steamship Co. Ltd. (1865), 2 De G. 1. & Sm. 521.

A petition may be presented by a shareholder who has obtained a judgment that the company should allot shares and register him as a shareholder, though the company has neglected to do so, Re Patent Steam Engine Co. (1878), 8 Ch. D. 464.

The fact that a shareholder is in arrear with a call is not an absolute bar to his presenting a petition, but, as a general rule, the petition will not be allowed to proceed until he has paid the amount of the call into Court. Re Chrystal Reef Gold Mining Co., [1892] 1 Ch. 408; Re Gee Fioor Scrubbing Machine Co. (1898), 42 Sol. 10. 819.

A fully-paid shareholder may present a petition, provided he alleges and proves that the assets of the company are of such an amount that, in the event of a winding up, he would have a tangible share of surplus to receive, Re Rica Gold Washing Co. (1879), 11 Ch. D. 36 distinguished in Re Newman and Howard Ltd., [1961] 2 All E.R. 495; Re Vron Colliery Co. (1882), 20 Ch. D. 442; Re Kaslo-Slocan Mining & Financial Corporation Ltd., [1910] W.N. 13. See also Re National Savings Bank Association (1866), 1 Ch. App. 547; Re Patent Artificial Stone Co. Ltd. (1864), 34 Beav. 185; Re Diamond Fllei Co., [1878] W.N. 11.

The fact that a voluntary liquidation is pending in which there is a probable surplus of assets is not a bar to the petition, but the Court must be satisfied that the rights of contributories will be prejudiced by a voluntary winding up, Re National Distribution of Electricity Co. Ltd., [1902] 2 Ch. 34; Re Greenwood & Co., [1900] 2 Q.B. 306.

Contributory as petitioner-It was held in Re City and Country Bank (1875), 10 Ch. App. 470, that it was no objection to a contributory's petition that it did not on the face of it state that the petitioner had held his shares for the requisite period.

Petition-An order will not be made on a petition based upon a debt which is bona fide disputed, Re Imperial Hydropathic Hotel Co., Blackpool, Ltd. (1882), 49 L.T. 147; Re Gold Hill Mines (1883),23 Ch. D. 210; Re Compagnie Generale des Asphaltes de Paris, Ex parte Neuchatel Asphalte Co., [1883] W.N. 17. Where a petition has been presented, it may be dismissed, Re Brighton Club & Norfolk Hotel Co. Ltd. (1865), 35 Beav. 204; Re General Exchange Bank Ltd. (1866), 14 L.T. 582; Re British Alliance Assllrance Corporation, [1877] W.N. 261, or ordered to stand over, Re Rhydydefed Colliery Co., (1858), 3 De G. & 1. 80; Re Catholic Publishing and Bookselling Co. Ltd. (1864),2 De G. 1. & Sm. 116. Where the dispute is not substantial the Court may decide the matter at the hearing of the petition, Re Imperial Silver Quarries Co. Ltd. (1868), 16 W.R. 1220. The Court may order the amount in dispute to be paid into court, Re Compagnie Generale des Asphaltes de Paris, etc., supra.

And where such a petition is threatened it may be restrained by injunction, Cadiz Waterworks Co. v. Barnett (1874), L.R. 19 Eq. 182; Brown (John) & Co. v. Keeble, [1879] W.N. 173; Niger Merchants Co. v. Capper (1877), 18 Ch. D. 557 n.; Cercle Restaurant Castiglione Co. v. Lavery (1881). 18 Ch. D. 555; New Travellers' Chambers Ltd. v. Cheese & Green (1894), 70 L.T. 271.

Where after service on a company of a petition by a creditor to wind up the company, and before it was advertised, a settlement of the creditor's claim was made, leave was granted to withdraw the petition, Re Bob Todd Enterprises Pty. Ltd., 1957 Q.W.N. 30.

The petition, when allowed, is usually without costs; but costs may be allowed if the petition is supported by creditors for a larger amount, Re Ley ton & Walthamstow Cycle Co. Ltd. (1901), 50 W.R. 93, and costs were allowed wh~re the creditor had met with deliberate refusal by the company, Re World Industrzal Bank Ltd., [1909] W.N. 148. See also Re London & Birmingham Flint Gla~s .& Alkali Co. Ltd., Ex parte Wri{?ht (1859), 1 De G. F. & 1.257; and Re Yate Collieries & Limeworks Co. [1883] W.N. 171.

9


An order will be made where the powers of the liquidator in a voluntary winding up, or winding up under supervision, prove insufficient so far as they affect the interests of the creditors or contributories, and if an official liquidator would possess powers which the liquidator in the voluntary winding up or winding up under supervision would not, and which, in the opinion of the Court, are necessary for efficient winding up. But an order will not be made as a matter of course, and a strong case should be made to show that it is required, Re 1897 Jubilee Sites Syndicate, [1899] 2 Ch. 204.

The Court will not regard any facts disclosed by the affidavit which are not alleged in the petition, Re Buzolich Patent Damp-Resisting and Anti-Fouling Paint Co. Ltd. (1884), 10 V.L.R. (E.) 276. But see now s. 366, post.

A petition may be good without being signed, Re Federal Land Co. (1889), 15 V.L.R. 135.

Voluntary winding-up . . . Interests of the creditors or contributoriesWhere winding-up is ordered by the court, supervening upon a voluntary winding-up, the winding-up commences at the time of the passing of the resolution for the voluntary winding-up, s. 223, post.

The Court will grant a compulsory winding up where there is a serious case for inquiry even where the voluntary liquidation is not shown to be a sham or fraud and the petition is not by creditors, Re Australasian Pictures Productions Ltd., [1925] SI. R. Qd. 249; [1925] Q.W.N. 25; Re Wellington Farmers Meat Co., [1924] N.Z.L.R. 623.

The petitioning creditor is entitled, as between himself and the company, to an order ex debito justitia>; he has not to prove anything beyond the existence of the judgment debt, Re Millward & Co., [1940] I All E.R. 347; [1940] Ch. 333; but as between himself and the other creditors the old rule subsists. namely that the court is bound to have regard not only to the petitioner, but to the other creditors as well, Re Home Remedies Ltd. (1942) 59 T.L.R. 31 [1942] 2 All E.R. 552. See also Re B. Karsberg Ltd., [1955] 3 All ER. 854.

A compulsory winding-up order will not be made ex debito jllstitia> on the application of a creditor of a company where a voluntary winding up is being proceeded with and it appears that the creditor's rights are not endangered. Re Regent's Park Co. (1898), 24 V.L.R. 420. But it has been held that notwithstanding this section the wishes of the general body of creditors will be regarded, even though no prejudice to their rights is shown, Re McLeod & Co. (India) Ltd. (1925), 25 N.SW.S.R. 319.

The facts showing the prejudice must be alleged in the petition for a compulsory winding up, Re Londonderry Ltd. (in fiq.) (1921), 21 N.S.W.S.R. 263.

The interests of a creditor will be prejudiced, for the purposes of this section, where the liquidator in the voluntary winding up is under the control of the shareholders, whose interests are in opposition to those of the creditors, Re McLeod & Co. (India) Ltd. (1925),25 N.S.W.S.R. 319.

Where a large majority of the creditors was opposed to a compulsory winding up, but nearly all of those creditors were holders of nominally paid-up shares as to which a prima facie case was shown that the holders were liable to make contribution, a compulsory winding up was properly ordered Great Fingall Assoc. Gold Mining Co. v Hamess (1906),4 C.L.R. 223.

Where there have been "tricks and malpractices" which might have affected the shareholders and creditors, the winding up should be compulsory, Re Gilbert Machinery Co. (No.2) (1906), 26 N.Z.L.R. 53, Re Medical Battery Co., [1894] 1 Ch. 444.

The court must primarily consider the interests of creditors, Re Bond's Motor Sl'n'ices Ltd., [1953] S.A.S.R. 92.

Generally-See 6 Halsbury's Laws of England, 3rd ed., p. 536; 10 English and Empire Digest (Rp!.) p. 866.

222. (1) Circumstances in which compauy may be wound up by Court. The Court may order the winding up if-

(a) the company has by special resolution resolved that it be wound up by the Court;

(b) default is made by the company in lodging the statutory report or in holding the statutory meeting;

COMPANY ACT OF 1961 ss. 221, 222 259

(c) the company does not commence business within a year from its incorporation or suspends its business for a whole year;

( d) the number of members is reduced in the case of a proprietary company (other than a proprietary company the whole of the issued shares in which are held by a holding company which is a public company or a public company under the law of any other State or Territory of the Commonwealth) below two or in the case of any other company below five;

(e) the company is unable to pay its debts;

(f) directors have acted in the affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever which appears to be unfair or unjust to other members; or

(g) an inspector appointed under section one hundred and sixtynine or section one hundred and seventy has reported that he is of opinion-

(i) that the company cannot pay its debts and should be wound up; or

(ii) that it is in the interests of the public or of the shareholders or of the creditors that the company should be wound up.

(h) the Court is of opinion that it is just and equitable that the company be wound up;

(2) Definition of inability to pay debts. A company shall be deemed to be unable to pay its debts if-

(a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding fifty pounds then due has served on the company by leaving at the registered office a demand under his hand or under the hand of his agent thereunto lawfully authorized requiring the company to pay the sum so due, and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor;

(b) execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part; or

(c) it is proved to the satisfaction of the Court that the company is unable to pay its debts;

and in determining whether a company is unable to pay its debts the Court shall take into account the contingent and prospective liabilities of the company.

u.K. ss. 222, 223; N.S.W. ss. 208, 209; Vic. s. 160; Qld. ss. 173, 174; S.A. ss. 194, 195; W.A. ss. 185, 186; Tas. s. 163.

As to the statu~ory meeting and report, see s. 135, ante. As to the dissolution of defunct compames, see s. 308, post. As to the consequences of reduction of the number of members below the statutory minimum, see s. 36 ante. As to the obligation on directors to act honestly and to use reasonable' diligence, see s. 124 ante. As to the registered office, see S5. 111, 112, ante. As to service upon a company, see s. 362, post. As to the term "special resolution", see s. 144, ante.

See generaJly, the annotations to s. 221, ante.


Statutory meeting and report-A petition cn this ground can only be presented by a shareholder, and 14 days after the Inst day on which the meeting should have been held, see s. 221, ante. Instead of ordering a winding-up, the court may direct the meeting to be held or the report to be delivered, see s. 225, post.

A winding-up order was made on this ground in Re Kent Outcrop Coal Co., 1912 W.N. 26.

Commencement of business-Making calls and incurring debts is not a commencement of business, Re Shelbourne Cheese Manufacturing and Produce Co. (1888), 14 V.L.R. 294.

Where no business has been carried on since incorporation, or for several years after, though all the shares were fully paid and there were no creditors, the Court made a winding-up order on the petition of a shareholder Re Tumacacori Mining Co. (1874), L.R. 17 Eq. 534; so also where the company was formed to protect the name of a foreign company and had a nominal capital and no business, Re Caementium (Parent) Co. Ltd., [1908] W.N. (Eng.) 257.

Where, however, the delay in commencing business is sufficiently accounted for and there is no evidence of any improbability of its commencing business within a reasonable time, the Court will not order the company to be wound up, Re Metropolitan Railway Warehousing Co. Ltd. (1867), 36 L.J. Ch. 827; Re Petershurg/z & Viborg Gas Co., [1874] W.N. 196.

Commencement abroad-Where business was commenced abroad, but not in England, there being an office in London, but it being doubtful whether a general meeting was intended to be held there, and the dealings in the shares were calculated to mislead the public, a winding-up order was made, Reuss v. Bas (1871), L.R. 5 H.L. 176. Cf. Re Capital Fire Insurance Association (1882), 21 Ch. D. 209, where there appeared a bona fide intention to commence business in England.

Or suspends its business-The Court will not make an order on this ground unless there appears to be an intention to abandon the business or inability to carry it on, Re Tomlin Patent Horse Shoe Co. Ltd. (1886), 55 L.T. 314; Re Middlesborough Assembly Rooms Co. (1880), 14 Ch. D. 104.

A company does not cease to carryon business because it has given up part of its business, provided such abandonment does not alter the fundamental principle of the company, Re Norwegian Titanic Iron Co. Ltd. (1865), 35 Beav. 223.

The discretion to be exercised by the Court is a judicial discretion and therefore is subject to review on appeal, R.e Metropolitan Railway Warehousing Co. Ltd. (1867), 36 L.J. Ch. 827.

Number of members-The Court is not bound to make an order for winding-up whenever the number of members falls below the statutory minimum. It may in such a case do so, but will not if the sole object of the petition is to benefit the petitioner at the company's expense, Re Kilner's Ltd. (1941), 31 W.N. (N.S.W.) 158.

Unable to pay its debts-This means commercially insolvent, in that it is unable to pay its debts as they become due. The fact that it has assets which if and when realised would exceed its liabilities does not disprove insolvency, Re European Life Assurance Society (1869), L.R. 9 Eq. 122.

"In determining whether a company is or is not able to pay its debts, with a view to winding it up, the character of the debts and the whole circumstances generally must be considered; and if it is found that the debt or debts were incurred for works necessary to make the business a going conCern, more latitude will be allowed to the company before it is declared to be insolvent"-per Manning, J., in Re Redhead Coal Mining Co. Ltd. (1893),3 N.S.W.B.C. 50.

Proof of inability to pay-Inability to pay debts may be shown by evidence other than non-compliance with a demand, e.g., information to a judgment creditor by the company's solicitor that there are no assets, Re Flagstaff Silver Mining Co. of Utah (1875), L.R. 20 Eq. 268; Re Yate Collieries & Limeworks Co., [1883] W.N. 171, or dishonour by the company of a bill, Re Globe New Patent Iron & Steel Co. (1875), L.R. 20 Eq. 337; Gandy, Petitioner (1912),50 Sc. L.R. 3. But an order will not be made when there is a bona fide dispute as to the petitioner's claim, Re Gold Hill Mines (1883),23 Ch. D. 120.

Paragraphs (a) and (h) of subsection (2) only define particular facts which, when proved, at once establish an inability to pay, but are in no way intended to limit the generality of paragraph (c), Re Premier Permanent Building, etc., Association, Ex parte Stewart (1890), 16 V.L.R. 20, at p. 22.


Demand requiring payment-Any creditor or contributory may take advantage of a demand requiring payment which is not complied with, Re Anglesea Island Coal & Coke Co. Ltd .. Ex part.e Owen (1861), 4 L.T. 684. The assignee of part of a debt cannot serve an effective demand, Re Steel Wing Co. Ltd., [1921] I Ch. 349; [1920] All E.R. Rep. 290. But an order may be founded on neglect to pay on a demand in excess of what is actually due, Cardiff Preserved Coal & Coke Co. v. Norton (1867), 2 Ch. App. 405.

As to what amounts to waiver of demand, see Re Imperial Hydropathic Hotel Co. (1882), 49 L.T. 147.

If a company's omission to pay a debt is because it genuinely disputes its indebtedness, such omission is not a neglect to comply with a demand, Re KL. Tractors Ltd., [1954] V.L.R. 505.

The three weeks must have expired before presentation of the petition, Re Catholic Publishing & Bookselling Co. Ltd. (1864), 2 De G. I. & Sm. 116.

Where the company has no registered office and the demand had been left at the unregistered office, a winding-up order was made, Re British and Foreign Generating Apparatus Co. Ltd. (1865), 12 L.T. 368. See also Re Finn (1906),23 W.N. (N.S.W.) 235, where service upon the secretary of an unregistered association was held sufficient where the secretary appeared by counsel on the hearing.

Non-payment of a promissory note was held sufficient evidence of inability to pay, though other security was held by the petitioning creditor, Re Federal Land Co. Ltd. (1889), 15 V.L.R. 135.

Dispute as to petitioner's claim-An order will not be made when there is a bona fide dispute as to the petitioner's claim, Re Gold Hill Mines (1883), 23 Ch. D. 120.

But where the company is insolvent and there was no doubt the petitioners were creditors for a sum which would otherwise entitle them to a winding-up order, a dispute as to the precise amount owed was not a sufficient answer to the petition, and a winding-up order was made, Re Tweeds Garages Ltd., [1962] 1 All E.R. 121.

Where the debt is disputed and has not been established by the creditor by action, an order for winding up will not be made, Re Anglesea Island Coal & Coke Co. Ltd., Ex parte Owen (1861), 4 L.T. 684; Re London & Paris Banking Corporation (1875), L.R. 19 Eq. 444.

Disputed claim against the petitioning creditor-A judgment creditor in a sum exceeding £50 is prima facie entitled to an order notwithstanding that the debtor company has a disputed claim against the petitioning creditor, Re Douglas (Griggs) Engineering Ltd., [1962] 1 All E.R. 498.

Averment in petition-Where a petition averred that "the assets of the company are of the value of not appreciably more than £40,000 and its liabilities to creditors amount to approximately £45,000 including approximately £10,000 owed to secured and preferential creditors", it was held, on the facts in the absence of contrary evidence, that such allegation was not too vague and ambiguous, Re Chemical Plastics Ltd., [1951] V.L.R. 136.

Directors have acted in the affairs of the company in their own interests-An order was made for the winding-up of an expanding, prosperous and efficient business on the ground that the managing director had acted, with the concurrence or acquiescence of the other directors, in the affairs of the company in a manner unfair or unjust to other members, and on the further ground that it was just and equitable that the order should be made, Re William Brooks & Co. Ltd. (1961), 79 WN. (N.S.W.) 354; [1962] N.S.W.R. 142.

Opinion of inspector-Where a petition contained a paragraph which set out at length certain conclusions and recommendations expressed by an inspector in his report, and a copy of the report inself was exhibited to the affidavit verifying the petition, it was held that since the paragraph and the report were not allegations of fact verified by affidavit in the prescribed form, they were inadmissible in evidence, Re Chemical PlasticJ Ltd., [1951] V.L.R. 136.

Where it appeared after an inspector had completed an investigation that the business of the company could not be carried on consistently with candid and straightforward dealings with the public, from whom further capital was required if the company were to continue to exist. it was held to be just and equitable that the company be wound up, Re Producers Real Estate and Finance Co. Ltd., [1936] V.L.R. 235.


Just and equitable-The words "just and equitable" are not to be construed a. relating only to matters ejusdem generis with the grounds for winding up set out in the earlier part of the section, Re Amalgamated Syndicate, [1897] 2 Ch. 600. The position in Queensland is the same, Re Kurilpa Protestant Hall Pty. Ltd., [1946] St. R. Qd. 170; and in Scotland, Symington v. Symington's Quarries (1906), 8 F (Ct. of Sess.) 121; and in Ireland, Re Newbridge Sanitary Steam Laundry, [1917] 1 I.R. 67.

But the words "just and equitable" are not limited to cases where the substratum of the business is gone (see infra), or when there is a complete deadlock (see infra); and, in the case of a private company which is in substance a partnership, a winding-up order may be made where circumstances would justify a dissolution of partnership, Re Yenidje Tobacco Co. Ltd., [1916] 2 Ch. 426; [1916] All E.R. Rep. 1050. Where a company was in effect a partnership between two shareholders, and the shareholder controlling the voting power was using that power for purposes other than that of turning the capital of the company to the best advantage, it was held to be just and equitable that the company should be wound up, Re Brunswick (Australia) Ltd. (1931), 48 N.S.W.W.N. 242. As the foundation of all ~uch applications there must be a justifiable lack of confidence in the conduct and management of the company's affairs, grounded on a lack of probity in the conduct of the directors-not in regard to their private life or affairs, but in regard to the company's business, Loch v. John Blackwood Ltd., [1924] A.C. 783; [1924] All E.R. Rep. p. 200. Failure to commence business, or the suspension of business. may be an element in deciding whether, in all the circumstances, it is just and equitable that the company should be wound up, Re Southland Woollen Mills, [1929] N.Z.L.R. 289; Re National Portland Cement Co. Ltd., [1930] N.Z.L.R. 564; Re Golden Reef Mining Co. Ltd. (1874), 8 S.A.L.R. 241. The Court will not wind up a company under this paragraph merely because a majority of the shareholders petition on the ground that it is just and equitable to do so, Re Bllzolich. etc., Paint Co. (1884), 10 V.L.R. (Eq.) 276.

Categories-In considering the ground of justice and equity. it is well to bear in mind that facts "rendering it just and equitable that a company should be wound up cannot be resolved into categories. Cases ... merely illustrate the diversity of the circumstances calling for an exercise of the court's discretion in winding up a company because it is just and equitable so to do", Re Straw Products Ltd., [1942] V.L.R. 222 at p. 223. But this "does not. of course mean that the court should reject the assistance provided by the illustrations contained in the decided cases. Still less does it mean that the court is entirely at large in exercising its discretion", Re Wondoflex Textiles Pty. Ltd., [1951] V.L.R. 458 at p. 464.

The grounds generally alleged in applications of this nature are the following:-(a) Substratum of the company gone-It is "just and equitable" to wind up

a company where it has no title to a mine it was formed to work and no prospect of obtaining possession of it (Re Ha1'en Gold Mining Co. (1882), 20 Ch. D. 151); where it fails to obtain a patent for the working of which it was formed (Re German Date Coffee Co. (1882),20 Ch. D. 169); where the main object has failed, even though there are subsidiary powers in the memorandum of association (Re Red Rock Gold Mining Co. Ltd. (1889), 61 L.T. 785; Re Coolgardie Consolidated Gold Mines Ltd. (1897), 76 L.T. 269; Re Amalgamated Syndicate, [1897] 2 Ch. 600. cf. Re N,ew Gas Co. (1877),5 Ch. D. 703): where the business carried on is ultra vires the company (Re Crown Bank (1890). 44 Ch. D. 634; Re Fromm's Extract Co. Ltd. (1901), 17 T.L.R. 302; Re Palace Restallrants Ltd. (1909), 127 L.T. 10. 430); where there is a failure to pursue the objects for which the company was formed by reason of an article of association which renders it practically impossible to hold meeting, of shareholders (Re Kapunda United Tradesmen's Prospecting Co. Ltd. (1874), 8 S.A.L.R. 55). The Court is not entitled to wind up on the ground that the substratum of the company is gone, merely because it comes to the conclusion that the proposed business will result in a loss to the company, Re Wickham & Bullock Island Coal Co. Ltd. (1905), 5 N.S.W.S.R. 365. Where directors have made a fraudulent sale of the whole of the company's property, it is not just and equitable to wind the company up, there being available another remedy which will preserve the substratum of the company, Re Great Cobar Copper Mining Co. Ltd. (1902), 2 N.S.W.S.R. (Eq.) 94. The petition may be ordered to stand over to ascertain the views of shareholders as to a proposed scheme for employment of the company's capital, Re Stratton's Independence Ltd. (1916), 33 T.L.R. 98.

(b)

(c)

(d)

(e)


Where the question whether there has been a complete failure of the company to achieve its objects is still a matter of speculation, no order should be made, Re Columbia Gypsum Co. (1959), 17 D.L.R. 28. In Re Kitson & Co. Ltd., [1946] 1 All E.R. 435, Re German Date Coffee Co. (1882) 20 Ch. D. 169 was explained and distinguished. It was held that so' long as the company can carryon a similar type of business to that which formed its main and paramount object, there can be no destruction of the substratum. See also Re Taldua Rubber Co. Ltd., [1946] 2 All E.R. 763. Impossible to carryon business at a profit-It is "just and equitable" to order a winding up where there is no prospect of ultimate profit, Re Cheltenham Hotel Co. (1850), 16 L.T.O.S. 259; Re General Phosphate Corporation Ltd. (1893), 37 Sol. Jo. 683; Re Brinsmead (Thomas Edward) & Sons, [1897] 1 Ch. 406; D. Davis & Co. Ltd. v. Brunswick (Australia) Ltd., [1936] 1 All E.R. 299. If the company is in fact solvent and able to meet its engagements, the fact that it has suffered continuous loss from its commencement is not a ground for ordering a compulsory winding up, Re Joint Stock Coal Co. (1869), L.R. 8 Eq. 146; Re BuzoUch, etc., Paint Co. (1884), 10 V.L.R. (Eq.) 276; nor is it a ground of itself that the company has for several years past suffered severe loss in the course of its business, Re Anglo-Continental Produce Co. Ltd., [1939] 1 All E.R. 99.

A deadlock in the conduct or management of the affairs of the company -It is "just and equitable" to order a winding up where a complete deadlock has arisen in the management of the company, Re Sailing Ship Kentmere Co., [1897] W.N. 58; Re Fromm's Extract Co. Ltd. (1901), 17 T.L.R. 302; Re Mason Bros. Ltd. (1891), 12 N.S.W.L.R. (Eq.) 183. Where the deadlock is only temporary, as where it exists between two directors and a solution is possible by the appointment of a third under the articles, an order will not be made, Re Furriers' A lliance Ltd. (1906), 51 Sol. 10. 172; Re R. F. Hall & Sons Ltd., [1939] N.Z.L.R. 408. Fraud in the inception of the company-The mere fact of fraud in the formation of the company is not in itself sufficient to induce the Court to make a winding-up order, because the majority of the shareholders would have power to waive the fraud and confirm the transaction affected by it, Re Haven Gold Mining Co. (1882), 20 Ch. D. 151 (fraudulent prospectus); Re Nylstroom Co. Ltd. (1889), 60 L.T. 477 (company defrauded by vendors). But where, in addition, the whole of the subscribed capital is in the hands of fraudulent promoters, an order will be made, Re Brinsmead (Thomas Edward) & Sons, [1897] 1 Ch. 406. See also Re Allstralasian Pictures Productions Ltd., [1925] st. R. Qd. 249; [1925] Q.W.N. 25. Misconduct by the directors.-Misconduct of directors is not per se a ground for winding up, Re Anglo-Greek Steam Co. (1866), L.R. 2 Eq. 1; Re National Live Stock Insurance Co. (1858), 26 Beav. 153; Re Bwlclz y Plwm Co. Ltd. (1867), 17 L.T. 235; Re Gold Co. (1879), 11 Ch. D. 701; nor is the fact that shares have been issued at a discount, Re Pioneers of Mashonaland Syndicate, [1893] 1 Ch. 731, or that the company has acted dishonestly towards the outside public, Re Medical Battery Co., [1894] 1 Ch. 444. When the managing director was guilty of grave irregularities, in making a secret profit, an order was made notwithstanding a resolution of confidence, Re Newbridge Sanitary Steam Laundry Ltd., [1917] 1 I.R. 67; see also Baird v. Lees, [1924] S.C. 83. But a company will not be wound up merely on the ground of isolated acts of fraud by an irremovable governing director where those acts are not likely to be repeated and not likely prejudicially to affect the business of the company, Menard v. Horwood & Co. Ltd. (1922),31 C.L.R. 20; 21 N.S.W.S.R. 750.

(f) Violation of statutory principles of commercial administration-See Baird v. Lees, [1924] S.C. 83; Re Kurilpa Protestant Hall Pty. Ltd., [1946] St. R. Qd. 170.

(g) Other instances-Where a minority shareholder who was also a director was denied access to books of the company and large sums, despite his protests, were lent by direction of the chairman to another company over which such chairman had complete powers of management, an order was made, Re Straw Products Pty. Ltd., [1942] V.L.R. 222.


. Whe~~ the. same persons who are directors of two companies use their posItion m one to secure personally a profit in the other at the expense of the interests of the other company, shareholders of the latter company may have ground for winding-up as just and equitable, Re Waipuna Investments Pty. Ltd., [1956] V.L.R. 115 .

. Applic:ation of partnership pri.nciples-In the case of a private company whIch IS m substance a partnership, the court in exercising its jurisdiction to wind up should apply the same principles as would be applied in a claim for dissolution of partnership, Re Yenidje Tobacco Co. Ltd., [1916J 2 Ch. 426; [1916-17] All E.R. Rep. 1050; Loch v. John Blackwood Ltd., [1924] A.C. 7831; [1924] All E.R. Rep. 200; Re Straw Products Pty. Ltd., [1942] V.L.R. 139, 222.

At the same time, generally speaking, a petition for winding-up, based upon the partnership analogy, cannot succeed if what is complained of is merely a valid exercise of powers conferred in terms by the articles, Re Cuthbert Cooper & Sons Ltd., [1937] Ch. 392; [1937] 2 All E.R. 467; Re Wondo[iex Textiles Ply. Ltd., [1951] V.L.R. 458.

Petition-The petitioner would be wise to ensure that the petition contains every substantial allegation upon which it is intended to rely, "I will totally disregard anything which is in the affidavits, that is not alleged in the petition", Re BlIzolich Patent Damp-Resisting and Anti-Fouling Paint Co. Ltd. (1884), 10 V.L.R. (E.) 276 at p. 280.

As to the detail required in the verifying affidavit, see Re S. A. Hawken Ltd., [1950] 2 All E.R. 408, where the question of the evidence requisite to support a petition was discussed_

Where there was the usual statutory affidavit verifying the petition, but no supporting evidence (as, for example, the articles of association) of a deadlock as alleged in the petition, an order could not be made, Re Davis Investments (East Ham) Ltd., [1961] 3 All E.R. 926.

Foreign company-It has been held that the court has jurisdiction to wind up a foreign company registered under Division 3 of Part XI of this Act, Re Egerton and Gordon Consolidated Gold Mines Co. No Liability, [1908] V.L.R. 22.

Company beyond jurisdiction-Where a company is incorporated beyond the jurisdiction, but has assets and a representative within the jurisdiction, the courts may act in personam under their equitable jurisdiction to administer the local assets for the purpose of winding up, Re Colorado Silver Mining Co. (1884), 2 Q.L.J. 21.

Generally-See 6 Halsbury's Law of England, 3rd Ed., p. 531; 10 English and Empire Digest (Rpl.) p. 852.

223. (1) Commencement of winding up by the Court. Where before the presentation of the petition a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and, unless the Court on proof of fraud or mistake thinks fit otherwise to direct, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken.

(2) In any other case the winding up shall be deemed to have commenced at the time of the presentation of the petition for the winding up.

U.K. s. 229; N.S.W. s. 216; Vic. s. 162; Qld. ss. 180, 261; S.A. s. 202; W.A. s. 192; Tas. s. 165.

For the commencement of a voluntary winding-up see s. 255, post. As to irregularities in proceedings, see further s. 366, post. As to the date of the passing of resolutions at adjourned meetings, see s. 147, ante, cf. s. 288, post.

Relation back-A winding-up was held to relate back to the presentation of the petition for the purpose of operating as a notice of discharge to the servants of a company, Re City of Melbourne Bank (1896), 17 A.L.T. 296.

This section, in conjunction with the Rules, enables the court to review any remuneration voted to a voluntary liquidator, Re Mortimers (London) Ltd., [1937] 2 All E.R. 364; [1937] Ch. 289; 53 T.L.R. 493.

COMPANIES ACT OF 1961 s5.222-225 265

224. (1) As to payment of preliminary costs, etc., by petitioner (other than company or liquidator). The persons, other than the company itself or the liquidator thereof, on whose petition any winding up order is made, shall at their own cost prosecute all proceedings in the winding up until a liquidator has been appointed under this Part.

(2) The liquidator shall, unless the Court orders otherwise, reimburse the petitioner out of the assets of the company the taxed costs incurred by the petitioner in any such proceedings.

(3) Where the company has no assets or not sufficient assets, and in the opinion of the Crown Law Officer any fraud has been committed by any person in the promotion or formation of the company or by any officer of the company in relation to the company since the formation thereof, the taxed costs or so much of them as is not so reimbursed may, with the approval in writing of the Crown Law Officer, to an extent specified by the Crown Law Officer but not in any case exceeding one hundred and fifty pounds, be reimbursed to the petitioner, subject to appropriation by Parliament, out of the consolidated revenue.

( 4) As to costs when order made on petition of company or liquidator. Where any winding up order is made upon the petition of the company or the liquidator thereof, the costs incurred shall, subject to any order of the Court, be paid out of the assets of the company in like manner as if they were the costs of any other petitioner.

Vic. s. 163; Tas. s. 166. Petition of company or liquidator-The usual order as to costs should be

that they be taxed as between solicitor and client, R.e C. B. & M. (Tailors) Ltd., [1932] 1 Ch. 26; [1931] All E.R. Rep. 647.

225. Powers of Court on hearing petition. ( 1) On hearing a winding up petition the Court may dismiss it with or without costs or adjourn the hearing conditionally or unconditionally or make any interim or other order that it thinks fit, but the Court shall not refuse to make a winding up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets or that the company has no assets.

(2) The Court may on the petition coming on for hearing or at any time on the application of the petitioner, the company, or any person who has given notice that he intends to appear on the hearing of the petition-

(a) direct that any notices be given or any steps taken before or after the hearing of the petition;

(b) dispense with any notices being given or steps being taken which are required by this Act, or by the rules, or by any prior order of the Court;

( c) direct that oral evidence be taken on the petition or any matter relating thereto;

(d) direct a speedy hearing or trial of the petition or any issue or matter;

( e ) allow the petition to be amended or withdrawn; and (f) give such directions as to the proceedings as the Court thinks

fit.


( 3) Where the petition is presented by members as contributories on the ground that it is just and equitable that the company should be wound up or that the directors have acted in a manner which appears to be unfair or unjust to other members, the Court, if it is of opinion that-

(a) the petitioners are entitled to relief either by winding up the company or by some other means; and

(b) in the absence of any other remedy it would be just and equitable that the company should be wound up,

shall make a winding up order unless it is also of the opinion both that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.

( 4) Where the petition is presented on the ground of default in lodging the statutory report or in holding the statutory meeting, the Court may instead of making a winding up order, direct that the statutory report shall be lodged or that a meeting shall be held and may order the costs to be paid by any persons who, in the opinion of the Court, are responsible for the default.


In relation to the wishes of creditors or contributories, see s. 289, post. In relation to mortgages of the company's assets, see ss. 100, ('t seq., lIllte. As to another remedy which may be sought in a proper case, see s. 186, allte.

Wishes of majority of creditors-See s. 289, post. Where a petitioning creditor has established a case Which, as against the company may be said to be ex debito justitia', it is neither necessary nor proper for the court to have regard to the wishes of contributories as distinguished from creditors. But in such a case a winding-up order should not be made against the wishes of a properly ascertained majority of creditors unles the petitioner has satisfied the court that in all the circumstances it would not be just or equitable that the wishes of the opposing maiority should prevail, Re MelbollYlle Carnivals Pty. Ltd. (No. 1), [1926J V.L.R. 283.

Where two petitioning creditors claimed that the company owed them £5,350 and fifty-one creditors (out of a total of fifty-six) whose debts amounted to over £41.000 opposed the petition, the Court of Appeal held that such opposition shOUld have led to the petition being dismissed, Re B. Karsi>erg Ltd., [1955J 3 All E.R. 854.

See also Re P. & J. Macrae Ltd., [1961]1 All E.R. 302; Re A. E. Hayter & Sons (Partch ester) Ltd., [1961] 2 All E.R. 176; Re Riviera Pearls Ltd., [1962J 2 All E.R. 194.

Advertisement-It has been held that a petition may be heard though not advertised, Re Federal Land Co. Ltd. (1889), 15 V.L.R. 135.

Adjournment of petition-A lengthy adjournment is not considered advisable if it can be avoided, because the winding-up order, if eventually made, will date back to presentation of the petition and so may invalidate intermediate acts, Re Metropolitan Ry. Warehousing Co. Ltd. (1867), 36 L.J. Ch. 827, and might paralyse the company, Re Chapel House Colliery Co. (1883), 24 Ch. D. 259, 267. Where it is allowed, it is usually on the terms that the company shall not consent to a winding-up order on another petition or wind up voluntarily, and shall give notice to the petitioner of the presentation of any other petition, and consent to the petition being brought on in case any other petition should be presented, Re St. Thomas' Dock Co. (1876), 2 Ch. D. 116; Re St. Nco!s Water Co. (1905), 93 L.T. 788. Where a petition had been presented and a provisional liquidator appointed, another petition presented and advertised on the same day was adjourned to be heard with the first petition, Re Metropolitan Freehold Land and Building Society, B.C.R., Sept. 25, 1891.

Costs when order made-When a winding-up order is made, the rule usually followed is to allow costs to the petitioner and the company, with a further set of costs to the supporting cred.itors, and 3 third to the supporting contributories,


Re Humber Ironworks Co. (1866), L.R. 2 Eq. 15. Creditors and contributories appearing by the same solicitor are usually granted only one set of costs, Re 11>0 Investment Trust Ltd., [1904] 1 Ch. 26; Re Si/berhiltte Supply Co., [1910] W.N. 81.

Costs when petition dismissed-Where the petition is dismissed. the petitioner is. as a general rule. ordered to pay the costs of the company opposing the petition and of any party against whom a personal charge is made and fails, Re Humber Ironworks Co., supra.

A petition may be dismissed without costs. Re Great Northern Copper Mining Co. (1866), 14 W.R. 705. A petitioner will not be given costs where the petition is dismissed, Re Tyneside Permanent B.enefit BUilding Society, [1885] W.N. 148, or where he continues the petition after an offer to pay the debt and costs, Re Adiustable Hors.eshoe Syndicate Ltd., [1890] W.N. 157.

Where the petition was dismissed by reason of the opposition of the majority of creditors. no order as to costs was made. Re R. W. Sharman Ltd., [1957] 1 All E.R. 737; Re A.B.C. Coupler & Engineering Co. Ltd., [1961] 1 All E.R. 354; Re Research Industries Ltd., [1959) S.A.S.R. 290.

Costs where several petitions presented-Where several petitions are presented, the subsequent petitioner is usually granted costs up to the time of notice of the first petition, Re Owen's Wheel & Tire Co. (1873), 22 W.R. 151; Re GenerCiI Financia.l Bank (1882). 20 Ch. D. 276; Re London and Australian Agency (1873). 22 W.R. 45; Re Sheringlzam Del'clopment Co .. [1893] W.N. 5. After that time he may be ordered to pay costs. unless there was good reason for continuing with his petition, Re Joint Stock Coal Co. (1869). L.R. 8 Eq. 146; Rc Accidental and Marine Insurance Co. (1866). 36 L.J. Ch. 75; Re Empire Assurance Corporatioll (1867), 16 L.T. 341. If good re:1son is shown. he will be allowed to share in the set of costs given to the class supporting the petition. Re Humber Ironworks Co. (1866), L.R. 2 Eq. 15; Re United Service Co. (1868), L.R. 7 Eq. 76; Re General Financial Bank (1882), 20 Ch. D. 276: Re Standard Portland Cement Co., [1890] W.N. 91; Re Sco/t & Jacksoll Ltd .. [1891J W.N. 184.

Costs where petitioner withdraws petition-As to costs on withdrawal, see Re District Bank of London (1887), 35 Ch. D. 576; and 10 English and Empire Digest (Rpl.) p. 900.

Petition treated separately-The circumstances of each petition are treated separately, and one will be dismissed with costs if, on its merits, no order would be made, though an order is in fact made on another petition, Re Europeall Banking Co., Ex parte Bayliss (1866), L.R. 2 Eq. 521.

Director appearing-A director against whom a personal charge is brought is entitled to appear separately and to have separate costs if successful, Re A IlgloGreek Steam Co. (1866). L.R. 2 Eq. 1.

Where winding-up by court succeeds voluntary winding-up-As to costs of the petitioning creditor and other supporting creditors and of the liquidator in a voluntary winding up, where a company in course of voluntary liquidation is ordered to be wound up by the Court, see Re Imperial Bank Deposit, etc., Society (1901), 11 Q.L.J. (N.C.) 5. .

Voluntary liquidator appearing-In a case where the voluntary liquidator appeared on the hearing of the petition to answer allegations made against him which were subsequently ordered to be struck out of the petition. he was held to he entitle~ to his costs out of the assets Re Castoll Cushiolling Ltd., [1955] I All E.R. 508.

Amendment of petition-Where the name of the company was mis-spelt in a minor respect in the petition and in the advertisement, leave to amend was given, Re J. & P. Sussman Ltd., [19511j I All E.R. 857.

Failure to comply with rules-Failure to comply with the relevant rules may lead, in certain circumstances, to the petition being dismissed with costs Re Royal Mutual Benefit Building SOciety, [1960] 3 Ali E.R. 460. '

Substitution of petitioner-See Re If/victa Works Ltd. (1894), 38 Sol. Jo. 290; Re Welsh Manufacturillg & Woolstapling Co. (1894), 1 Mans. 533; Re Charles Ltd. (1906), 51 Sol. Jo. 101; Re Paris Skating Rink Co. (1877), 5 Ch. D. 959.

Rehearing of petition--See Re Crown Bank (1890), 44 Ch. D. 634. Withdrawal of petition-The petitioner, being dominus litis, is entitled to

withdraw his petition, subject to liability for costs of those appearing, Re Hereford & S. Wales Wagon & Engineering Co. (1874), L.R. 17 Eq. 423; Re an Insurance Co. (1875), 33 L.T. 49. See also Re Times Life Assurance & Guarantee Co. (1869), L.R. 9 Eq. 382; Re Home Assurance Association (1871) L.R. 12 Eq. 59.

Appeal-As to when an appeal lies as of right to the High Court see Rohert H. Barber & Co. Ltd. v. Simon (1914), 19 c'L.R. 24. '


226. Power to stay or restrain proceedings against company. At any time after the presentation of a winding up petition and before a winding up order has been made, the company or any creditor or contributory may, where any action or proceeding against the company is pending, apply to the Court to stay or restrain further proceedings in the action or proceeding, and the Court may stay or restrain the proceedings accordingly on such terms as it thinks fit.


For the commencement of the winding-up, see s. 223, ante. For further application of this section, see s. 317, post.

Discretion in court-The jurisdiction is discretionary, Re Great Ship Co. Ltd., Parry's Case (1863), 4 De G. 1. & Sm. 63. As to the approach of the court in such matters, see Cook v. "X" Chair Patents Co., [1959] 3 All E.R. 906.

In the absence of special circumstances the court ought to exercise the discretion vested in it of staying all proceedings with a view to securing equal distribution of assets, Bowkett v. Fuller's United Electric Works Ltd., [1923] I K.B. 160; [1922] All E.R. Rep. 281; Anglo-Baltic & Mediterranean Bank v. Barber & Co., [1924] 2 K.B. 410; [1924] All E.R. 226; Re N.S.W. Property Investment Co. (1889), 10 L.R. (N.S.W.) (E.) 214.

Executing creditor having no preferential right-Execution was stayed in a case where the party seeking to execute had no preferential right, Re Ballarat Motors Pty. Ltd. (Zeeng's Execution), [1914] V.L.R. 136.

Action already commenced without leave-As to an order Mllnc pro fIInc enabling an action to commence and proceed where an action had already commenced without leave against a company in liquidation, see Murray v. United Pacific Transport Pty. Ltd., [1960] Q.W.N. 20.

Voluntary winding-up-The section applies in the case of a voluntary winding-up, Re Max Motors Pty. Ltd., [1929] V.L.R. 1.

Foreign winding-up-As to a foreign winding-up, see Primary Producers Bank v. Hughes (1931), 32 S.R. (N.S.W.) 14; Central Queenslalld Meat Preservil1R CO. V. Bllry (1876), 4 Q.S.C.R. 168.

227. Avoidance of dispositions of property, etc. Any disposition of the property of the company including things in action and any transfer of shares or alteration in the status of the members of the company made after the commencement of the winding up by the Court shall unless the Court otherwise orders be void.


As to rectification of the register, see ss. 244, 252, post. For the commencement of the winding-up, see s. 223, allte, s. 255, post.

Discretion in court-The discretion conferred by this section is controlled only by the general principles applicable to judicial discretion, Re Steane's (Bollrnemouth) Ltd., [1950] 1 All E.R. 21. Without such a discretion, the presentation of a petition, whether well founded or not, might paralyse the trade of a company and work its ruin, Re T.W. Construction Ltd., [1954] 1 All E.R. 744.

Disposition of property-The Court will support dispositions of property which are bona fide and in the ordinary course of trade, Re Wiltshire Iron Co., Ex parte Pearson (1868). 3 Ch. App. 443. A creditor who receives part payment after petition presented must refund the amount paid, Re Liverpool Civil Service Assocl1., Ex parte Greenwood (1874).9 Ch. App. 511, even where payment of the debt is without notice of winding-up proceedings, Re Oriental Bank Corpn., Ex parte Guillemill (1884), 28 Ch. D. 634. A director making a payment not in the ordinary course of business is liable to refund the money so paid, Re Neath Harbour Smelting & Rolling Works (1887), 56 L.T. 727.

Attempted disposition-As to the effect of an attempted disposition of property, see Couve v.I. Pierre Couve Ltd. (1933),49 C.L.R. 486.

Ignorance of petition-In the case of a contra~t for the sl.lle of shares ma~e after the petition is presented but in ignorance of Its presentatIon, the Court WIll not compel the purchaser to' complete and register the shares in his name, Re London. Hamburg & Continental Exchange Bank, Emmerson's Case (1866), 1 Ch. App. 433.


Transfer not registered-For cases where the transfer is complete before the commencement of the winding up, but has not been registered, see Re Overend Gurney & Co., Ward & Garfit's Case (1867), L.R. 4 Eq. 189. '

Registration after presentation of petition-As to cases where registration takes place after presentation of the petition, see Re Consols Insurance Assocn., Feigan's Case (1873), 21 W.R. 285; Re Consols insurance Assocn., Glanville's Case (1870), L.R. 10 Eq. 479.

Security upheld-Where after presentation of the petition and before an order for winding up was made a debenture was issued to secure to a debenture-holder (who had knowledge of the petition) a sum advanced by him to enable the company to pay wages and continue to carryon its business, the Court held the debenture to be valid and allowed the holder to add his costs to his security, Re Park Ward & Co. Ltd., [1926] Ch. 828; [1926] All E.R. Rep. 348.

Mortgage over land in trust-A mortgage by a director to secure a debt of a company over land registered in his name but held by him at all times since ihe incorporation of the company solely and exclusively for and on behalf of the company, was held not to be a disposition of the company's property within the meaning of the section, Re Norman King and Co. Pty. Ltd., [1960] S.R. (N.S.W.) 98.

Earlier security-A mortgage of mining leases executed after a winding-up order under a power containea in an earlier security was held "a disposition of property" and void, Re Dittmer Gofd Mines Ltd. (No.3), [1954] St. R. Qd. 275.

Petition not heard-Where a contract was made one day after the presentation of a petition, but the petition was not heard on the original return date, it was held that the court had no jurisdiction to make an order, Re Miles Aircraft Ltd.; Ex parte Barclays Bank Ltd., [1948] 1 Ch. D. 188; [1948] 1 All E.R. 225.

Transfer of shares-The power of the Court to rectify the register to give effect to a transfer made after a winding-up order is not exercised except for very strong reasons, Re Onward Building Society, [1891] 2 Q.B. 463.

Successive transfers-Where successive transfers are sanctioned, the ultimate transferee only is liable to contribute as a present member, the prior transferees being liable as past members, Re National Bank of Wales, Taylor, Phil/ips & Rickard's Cases, [1897] 1 Ch. 298.

Circumstances of authorization-For circumstances in which the Court authorised the registration of a transfer, see Surma Valley Sawmills, Petitioners, II917] S.C. 105.

Alteration in status-The alteration involved in a sanction of the transfer of shares and consequent alteration of the register is not within this prohibition. Re National Bank of Wales, Taylor, Phillips & Rickard's Cases, [1897] 1 Ch. 296.

An arrangement for the shareholders to make advances to the company, which should be treated as loans if the company went on or as payments of the amount unpaid on the shares if the company were wound up, was held to amount to an "alteration of status" of the members, Re Oriental Commercial Bank, Barge's Case (1868), L.R. 5 Eq. 420.

See also Re Blaina Colliery Co., [1926] W.N. 30 (notice to convert into ordinary shares, followed by liquidation before expiration of notice; held an alteration of status after commencement of winding up).

Generally-See 6 Halsbury's Laws of England, 3rd ed., p. 628.

228. Avoidance of certain attachments, etc. Any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of the winding up by the Court shall be void.


In relation to execution, see also ss. 297, 298, 299, post. For the commencement of winding-up by the court, see s. 223, ante. As to a liquidator'S right to recover in respect of certain sales to or by a company, see s. 295, post.

Execution-Where an execution is avoided it is avoided altogether and the creditor retains no interest under it, Re Artistic Colour Printing Co., Ex parte Fourdrinier (1882),21 Ch. D. 510.


Void-Although in terms this section makes aIJ such process as mentioned in it "void to aIJ intents." thl.! section must be read with s. 230, post, and leave of the Court may be obtained to pursue such process, Re Exhall Coal Mining Co. Ltd. (1864), 4 De G. J. & Sm. 377; Re Lancashire Cotton Spinning Co., Ex parte Carnelley (1887), 35 Ch. D. 656; Thomas v. General Finance Agency Co. (1895), 1 AL.R. 28, e.g .. where judgment has been obtained against a company in respect of trust moneys wrongfully retained by it (ibid.).

Put in force-An execution is not "put in force" until possession is taken under it, Re London & Devon Biscuit Co. (1871), L.R. 12 Eq. 190.

Equitable execution-The provision applies to equitable execution, Croshaw v. Lyndhurst Ship Co., [1897] 2 Ch. 154.

Distress not restrained-Proceedings by distress will not be restrained by the Court where the goods seized, although on the premises, do not belong to the company, Re Evening Post Newspaper Co. (1894), 20 V.L.R. 335.

Before winding-up begins-If the execution has been put in force before the winding up began, the power to restrain further proceedings will not be exercised unless special reasons exist making it inequitable to allow the sale, Rc Rolltzdwood Colliery Co., Lee v. Roundwood Colliery Co., [1897] 1 Ch. 373; see Re Great Ship Co. Ltd., Parry's Case (1863), 4 De G. J. & Sm. 63; Ex parte Milwood Colliery Co. (1876). 24 W.R. 898. See also Re Scott, Sibbald & Co. Pty. Ltd. (1906), 6 S.R. (N.S.W.) 643; Re St. George Industrial Co-operative Society Ltd. (1900), 16 W.N. (N.S.W.) 259.

Garnishee order-Service of a garnishee order nisi is an attachment or execution for this purpose. Re Stanhope Silkstone Collieries Co. (1879), II Ch. D. 160.

Distress-With respect to distress, see also Purcell v. Public Curator of Queensland (1922),31 C.L.R. 220; [1922] St. R. Qd. 25; [1922] Q.W.N. 7; 16 Q.J.P.R. I.

229. Petition to be lis pendens. Any petition for winding up a company shall constitute a lis pendens within the meaning of any law relating to the effect of a lis pendens upon purchasers or mortgagees.

N.S.W. s. 215; Vic. s. 165; S.A. s. 201; W.A. s. 191; Tas. s. 170. Lis-"Lis, of course. implies the conception of an issue between two parties.

The decision of a lis. in the ordinary use of legal language, is the decision of that issue", B. Joiznson & Co. (Builders). Ltd. v. Millister of Health, [1947] 2 All E.R. 395 at p. 399.

Doctrine of lis penden.\'-The decisions of the courts are binding not only on litigants but also on those deriving title from them pcndante lite whether with notice of the suit or not. and it is on this doctrine that the effect of a lis pendens on the title of an assign of a litigant depends, Bellamy v. Sabin£' (1857), 26 L.J. (Ch.) 797 at p. 801.

Application of doctrine-The doctrine of lis pendens does not apply to personal property other than chattel interests in land, Wigram v. Buckley, [1894] 3 Ch. 483.

230. (l) Copy of order to be lodged, etc. Within seven days after the making of a winding up order the petitioner shall lodge with the Registrar notice of-

(a) the order and its date; and

(b) the name and address of the liquidator.

(2) On the passing and entering of the winding up order the petitioner shall within seven days-

(a) lodge an office copy of the order with the Registrar;

(b) cause a copy to be served upon the secretary or manager of the company or upon such other person or in such manner as the Court directs; and

(c) deliver a copy to the liquidator with a statement that the requirements of this subsection have been complied with.


(3) Actions stayed on winding up order. When a winding up order has been made or a provisional liquidator has been appointed no action or proceeding shall be proceeded with or commenced against the company except-

(a) by leave of the Court; and (b) in accordance with such terms as the Court imposes.

(4) Effect of order. An order for winding up a company shall operate in favour of all the creditors and contributories of the company as if made on the joint petition of a creditor and of a contributory.

(5) If default is made in complying with subsection (1) or subsection (2) of this section the petitioner shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. U.K. ss. 230-232; N.S.W. ss. 217-219; Vic. s. 166; Qld. ss. 181-183; S.A.

ss. 203-205; W.A. ss. 193-195; Tus. s. 171. As to the appointment of more than one liquidator, see s. 232, post. A

special manager may be appointed under s. 246, post. For powers of a liquidator, see ss. 236, 237, 252, post. Further as to liquidators, see ss. 9, 10, ante.

Leave requisite-The proceedings, which may be restrained or those from which leave must be obtained, include such matters as applications for rectification of the register, Re Onward Building Society, [1891] 2 Q.B. 463, 483; Re South of France Pottery Works Syndicate (1877), 36 L.T. 651; Police court proceedings re rates an penalties, Re Flint, Coal & Cannel Co. (1887), 56 L.J. Ch. 232. See cases cited in 10 English and Empire Digest (R.P.L.), p. 1012. But a counterclaim against the company is not included, see Mersey Steel & Iron Co. v. Naylor, Benzon & Co. (1884), 9 App. Cas. 434; nor is an application under the Real Property Acts 1861 to 1960, s. 72 (title REAL PROPERTY), to notify upon the register re-entry by a lessor, Christoffel v. Mokau Collieries Ltd., [1934] N .Z.L.R. 170. A landlord need not apply to the Court in respect of distress of the goods of a company in liquidation, between which and himself there is no privity, Re Commercial AReney, Banking, & Trading Co. Ltd. (1892), 3 N.S.W.B.C. 36.

Failure to obtain leave-Failure to obtain leave did not vitiate the proceedings, but merely left the liquidator personally liable for costs, Re W. A. Holiday Resorts Ltd. (in liq.), [1961] W.A.R. 152.

Leave to proceed-Where a judgment creditor gets possession of property of a company through the sheriff on a fi. fa., before a petition is presented on which a liquidation order is made, the Court will either allow him to proceed or will secure has position by a preferential charge on the assets or by an order on the official liquidator for payment, Re Tom's Lewis Ponds Silver Mining Co. Ltd. (1891)' 2 N.S.W.B.C. 16. Where leave to sue has been given, the Court will ordinarily allow a successful plaintiff to reap the fruits of his judgment, Re Wanganui Meat Preserving Co. (1892), 12 N.Z.L.R. 148.

The application to commence or proceed with an action against a company must not be made ex parte, see Western & Brazilian Telegraph Co. v. Bibby (1880), 42 L.T. 821; and leave, refused by the winding-up judge, may be given on appeal, see Re St. Cuthbert's Lead Smelting Co., [1866] W.N. 84, 90; McEwan v. London etc., Bank, Re London etc., Bank, [1866] W.N. 363, 407; and Re Strand Hotel Co., [1868] W.N. 2.

Leave granted nunc pro tUlle-Where an action has been commenced without leave, the Court may make an order granting leave, nunc pro tunc, and will do so where grounds are shown on the merits which would have justified leave in the first instance, Thomson v. Mulgoa Irrigation Co. Ltd. (1894), 4 N.S.W.B.C. 33, where, however, the applicants were ordered to pay costs of the application in any event. See also Murray v. United Pacific Transport Pty. Ltd., [19601 \l.w.N.20.

Terms of leave-In De Alba v. Freehold Investment and Banking Co. (1895), 16 A.L.T. 165, the terms imposed on a husband in an action by him against a company in liquidation, for damages arising out of injuries inflicted on his wife by the negligence of the company, were that, the defendant company undertaking to admit liability, the action should be tried by a judge without a


jury. In Re Standard Bank (1898), 5 A.L.R. (C.N.) 5, a permanent liquidator of a company not having been appointed, leave to commence an action against the company was deferred. See also Nott v. South British National Trust Ltd. (1935), 52 W.N. (N.S.W.) 142.

Note the difference between this section and s. 60 (2) of the Bankruptcy Act 1924-1960 (Commonwealth). A mortgagee will normally be given leave to proceed to enforce his security, Re Henry Pound, Son & Hutchins (1889), 42 Ch. D. 402.

Proceedings abroad-This section does not apply to proceedings abroad, but the Court, in the exercise of its equitable jurisdiction, can restrain such proceedings, Re Vocation (Foreign) Ltd., [1932] 2 Ch. 196; [1932] All E.R. Rep. 519. As to the restraining by the Court of a person within the jurisdiction taking or continuing proceedings without the jurisdiction, see 6 Halsbury's Laws of England, 3rd ed., p. 699, and cases there cited.

Costs-As to costs, where leave to proceed is refused or the Court stays proceedings, see Re Poole Firebrick & Blue Clay Co. (1873), L.R. 17 Eq. 268; Walker v. Banagher Distillery Co. (1875), 1 Q.B.D. 129; Re Life Association of England (1864), 34 L.J. Ch. 64; Re East Kent Shipping Co. (1868), 18 L.T. 748; and Rose v. Gardden Lodge Coal Co. (1878), 3 Q.B.D. 235, and other cases cited in 10 English and Empire Digest (Rp!.), p. 1079.

Subdivision (2) -Liquidators

231. (l) Appointment of official liquidator. Subject to subsection (3) of this section, on an order being made for the winding up of a company the Court may appoint an official liquidator to be liquidator of the company.

(2) Provisional liquidator. The Court may appoint an official liquidator provisionally at any time after the presentation of a winding up petition and before the making of a winding up order and the provisional liquidator shall have and may exercise all the functions and powers of a liquidator subject to such limitations and restrictions as may be prescribed by the rules or as the Court may specify in the order appointing him.

(3) Appointment, etc., of liquidators. Unless the Court for reasons which it deems sufficient otherwise orders, the Public Curator shall be appointed to be the liquidator or provisional liquidator of the company.

u.K. ss. 237-239; N.S.W. ss. 220, 221, 226; Vic. s. 167; Qld. ss. 185, 188; S.A. s. 206; W.A. s. 196; Tas. s. 172.

As to the appointment of more than one liquidator, see s. 232, post. A special manager may be appointed under s. 246, post. For powers of a liquidator, see 55. 236, 237, 252, post. Further as to liquidator, see ss. 9, 10, ante.

Who may be appointed-The Court has an unfettered discretion as to whom it appoints as liquidator and in the exercise of that discretion will endeavour to make such an appointment as wiIJ best serve the interests of the parties concerned in the winding up, Re Austral Knitting Mills Ltd. (1926), 43 N.S.W.W.N. 131. A person should not be appointed whose relationship to certain creditors is such that it will be difficult for him to act impartially in the interests of the creditors as a whole, Re Swanbank Collieries Ltd. (1894), 7 Q.L.J. (N.C.) 88.

As to the appointment of more than one liquidator, see s. 232, post; Re Midland [and & Investment Corpn., [1887] W.N. (Eng.) 58; Re Colonial Bank (1896). 14 N.Z.L.R. 484.

Where there is a dispute as to the personnel of the official liquidator, all costs occasioned bv the dispute wiIJ not necessarily be ordered to be paid out of the assets of the company, Re Austral Knittinf.? Mills Ltd. (1926), 43 NS.W.W.N. 131.

Provisional liquidators appointed-In Re Hennessys Self Service Stores Pty, Ltd., [1961) Q.W.N. 23. the court appointed the provisional liquidators, who had acquired a detailed knowledg~ of the affairs of th~ c?mpany, in order to secure the more convenient and economIcal conduct of the wmdmg-up.


Practice-Applications for the appointment of liquidators and auditors should be by way of motion and not by summons, Re Kling Constructions Pry. Ltd., [1961) Q.W.N.30.

Meetings of creditors and contributories-An order was made that the Official Trustee should not summon separate meetings of creditors and contributories for the purpose of determining whether or not an application should be made to the court for the appointment of a liquidator in the place of the Official Trustee; and each of such meetings was dispensed with in Re H. & S. Credits Ltd. (ill Iiq.). [1961] Q.W.N. 51.

232. General provisions as to liquidators. ( 1 ). A liquidator appointed by the Court may resign or on cause shown be removed by the Court.

(2) A provisional liquidator other than the Public Curator shall be entitled to receive such salary or remuneration by way of percentage or otherwise as is determined by the Court.

(3) A liquidator other than the Public Curator shall be entitled to receive such salary or remuneration by way of percentage or otherwise as is determined-

(a) by agreement between the liquidator and the committee of inspection (if any);

(b) failing such agreement or where there is no committee of inspection by a resolution passed at a meeting of creditors by a majority of not less than three-fourths in value and one-half in number of the creditors present in person or by proxy and voting at the meeting and whose debts have been admitted to proof, which meeting shall be convened by the liquidator by a notice to each creditor to which notice shall be attached a statement of all receipts and expenditure by the liquidator and the amount of remuneration sought by him; or

(c) failing a determination in a manner referred to in paragraph (a) or paragraph (b) of this subsection, by the Court.

( 4) Where the salary or remuneration of a liquidator is determined in the manner specified in paragraph (a) of subsection (3) of this section the Court may, on the application of a member or members whose shareholding or shareholdings represents or represent in the aggregate not less than ten per centum of the issued capital of the company, confirm or vary the determination.

(5) Where the salary or remuneration of a liquidator is determined in the manner specified in paragraph (b) of subsection (3) of this section the Court may, on the application of the liquidator or a member or members referred to in subsection (4) of this section, confirm or vary the determination.

(6) A vacancy in the office of a liquidator appointed by the Court shall be filled by the Court.

(7) If more than one liquidator is appointed by the Court, the Court shall declare whether anything by this Act required or authorized to be done by the liquidator is to be done by all or anyone or more of the persons appointed.

(8) Subject to this Act the acts of a liquidator shall be valid notwithstanding any defects that may afterwards be discovered in his appointment or qualification.


(9) The Public Curator shall be entitled to deduct and retain from the proceeds of property realised or debts collected by him as liquidator or provisional liquidator a sum calculated at the rate of five per centum or at such other rate as the Court may determine.

U.K. s. 242; N.S.W. s. 228; Vic. s. 170; Qld. 55. 194-198; S.A. s. 210; W.A s. 200; Tas. s. 175.

A liquidator is liable to be removed under s. 238, post. As to the appointment. removal and remuneration of a liquidator in a voluntary winding-up. see ss. 265, 266. 267, post. As to the release of a liquidator on removal or resignation, see s. 239. post. As to provisional liquidators, see s. 231. ante.

Removal of liquidator-The jurisdiction of the Court to remove a liquidator is not confined to cases where there is personal unfitness in the liquidator. Whenever it is for the general advantage of those interested in the assets of the company th<!t a liquidator should be removed. the Court has power to remove him and appoint a new one, Re Eyton (Adam) Ltd. (1887).36 Ch. D. 299.

The Court will not remove a liquidator for not taking proceedings to recover debts due to the company. where, on materials before it. it is not able to say whether it is. or is not, in the interests of creditors that such proceedings should be taken. Re WhiteclifJs Dredging Co. (1893). 11 N.Z.L.R. 711.

See further. as to removal of liquidators, 10 English and Empire Digest (Rpl.). p.928.

Remuneration-There is no absolute rule governing the remuneration of liquidators; the only rule is that a reasonable remuneration is to be allowed. Re Rose & Co. Ltd. (1897), 3 A.L.R. (C.N.) 65. The remuneration should not be fixed at a certain sum per annum, Re British Bank of Australia (1893). 19 V.L.R. 54: Re Mel1fone Hotel Co. (1897), 3 AL.R. (C.N.) 17.

As to increase of a liquidator's remuneration in order to allow of clerical assistance. see Re Queensland Co-operative Pastoral Co. Ltd. (1888)' 3 Q.L.J. 123.

For fixing and division of the remuneration, see further Re Mysore Reefs Gold Mininx Co. (1886), 34 Ch. D. 14; Re Langham Hotel Co. (1869), 20 L.T. 163; Re Universal DistributinR Co. Ltd. (1933), 48 C.L.R. 171; Re Premier Permanent Bllildill!; Assoc. (J 903), 25 A.L.T. 8; 10 English and Empire Digest, (Rpl.) p. 923.

Costs of determination by the court-Costs. as between solicitor and client, of creditors opposing an application by a liquidator to have his remuneration fixed by the court were ordered to be paid out of the assets in Re Premier Permanent Bllildin):? Association (1903), 25 AL.T. 8.

Leave of absence-As to leave of absence to one of several liquidators, see Re Real Estate MortRage and Deposit Bank (1898), 4 AL.R. (C.N.) 85.

Particular matter-The conduct of a particular matter may be given to a particular liquidator, Re Midland Land and Investment Corpn., [1887] W.N. 58.

Validity of acts-As to the validity of acts of a liquidator, see Stevenson v. Commissioner of Taxation (1937), 37 S.R. (N.s.W.) 84.

233. Custody and vesting of company's property. (I) Where a winding up order has been made or a provisional liquidator has been appointed, the liquidator or provisional liquidator shall take into his custody or under his control all the property and things in action to which the company is or appears to be entitled, and if there is no liquidator all the property of the company shall be in the custody of the Court.

(2) The Court may, on the application of the liquidator, by order direct that all or any part of the property of whatsoever description belonging to the company or held by trustees on its behalf shall vest in the liquidator and thereupon the property to which the order relates shall vest accordingly and the liquidator shall lodge an office copy of the order with the Registrar within fourteen days after the making of the order, and the liquidator may, after giving such indemnity, if any, as the Court directs, bring or defend any action or other legal proceeding which relates to that property or which it is necessary to bring or defend for the purpose of effectually winding up the company and recovering its property.


(3) Notwithstanding the provisions of subsection (2) of this section, the order so far as it relates to land shall not take effect until-

(a) in the case of land subject to the provisions of "The Real Property Acts, 1861 to 1960," an office copy of the order has been lodged with the Registrar of Titles and the Registrar of Titles has made in the register book under those Acts all such entries as are necessary to give effect to the order;

(b) in the case of land subject to the provisions of any Act relating to Crown lands (including any Act relating to mining or mining tenures) an office copy of the order has been lodged with the person or authority charged with registering instruments evidencing the title held under the Crown for a lesser estate than freehold in the land concerned and either-

(i) an appropriate transfer is registered so that the land is transferred to the liquidator; or

(ii) an entry of the vesting is made in the appropriate register kept under the Act to which the land is subject;

(c) in the case of land held for an estate of freehold not subject to the provisions of "The Real Property Acts, 1861 to 1960," an office copy of the order has been lodged with the Registrar of Titles.

(4) An entry made under subparagraph (ii) of paragraph (b) of subsection (3) of this section shall have the same effect as if the land were transferred.

U.K. S5. 243, 244; N.S.W. 5S. 230, 299; Vic. s. 171; Qld. ss. 199, 200; S.A. SS. 211,212; W.A. ss. 201,202; Tas. s. 176.

Act referred to: Real Property Acts 1861 to 1960, title REAL PROPERTY.

Contributories, officers and others may be required by the court to deliver up certain property to the liquidator under s. 245, post; and for the penal provisions for a failure to comply. see s. 300, post. For power to sell the company's property, see s. 236, post.

Liquidator is modified trustee for creditors-The winding-up order constitutes the liquidator a trustee of the property of the company for those who were creditors at the commencement of the winding-up and prevents the Statute of Limitations from running, Re General Rolling Stock Co. (1872), 7 Ch. App. 646; Re Paraguassu Steam Tramroad Co.; Black & Co.'s Case (1872), 8 Ch. App. 254. There is by this section imposed upon the assets of the company, wherever they may be at the time of the winding-up, a trust to be applied in discharge of the liabilities of the company, Delhi Balik's Case (1871), 15 Sol. Jo. 923 at p. 924. See Re Medical Trust Fund (1871), 15 Sol. Jo. 840, where it was said that on the winding-up all claims and demands mature immediately; and see also Re Central Sugar Factories of Brazil; Flack's Case, [1894] I Ch. 369; Re Yagerphone, [1935] Ch. 392; [1935] All E.R. Rep. 803. But see s. 247 as to a creditor who does ont prove within the time limited for that purpose.

But the liquidator is only a trustee in the sense that the property of the company ceases upon the winding-up to belong beneficially to the company and passes into his custody to be applied by him as directed by the statute. The liquidator is not a trustee for each creditor and contributory so as to be .iable in his capacity of trustee for negligence, Knowles v. Scott, [1891] 1 Ch. 717; R,e Hill's Waterfall Estate and Gold Mining Co., [1896] I Ch. 947; Thomas Franklin & Sons Ltd. v. Cameron (1936),36 S.R. (N.S.W.) 286.

Whether a liquidator in a voluntary winding-up is a trustee within the meaning of the English Trustee Act and as such entitled to the benefit of that Act was discussed but not decided in Re Windsor Steam Coal Co., [1929] I Ch. 151. See also Wigan Coal & Iron Co. Ltd. v. Inland Revenlle Commissioners, [1945] 1 All E.R. 392.


Officer of court-For the extent to which the liquidator is an officer of the court, see Re Hiil's Waterfall Estate and Gold Mining Co., [1896] 1 Ch. 947 at p. 954; Re London County Commercial Reinsurance Office, [1922] 2 Ch. 67 at p. 84.

Liability of liquidator-When a voluntary liquidator distributes the assets without taking proper steps to ascertain the creditors and carries through the liquidation to the stage of dissolution, he is liable in damages to unpaid creditors of whose claims he was aware, and who had no notice of the liquidation until after dissolution, Pulsford v. Devenish, [1903] 2 Ch. 625; Argylls Ltd. v. Coxeter (1913).29 T.L.R. 355; James Smith & Sons (Norwood) v. Goodman, [1936] Ch. 216; [1935] All E.R. Rep. 697; Re Armstrong Whitworth Securities Co., [1947] Ch. 673; [1947] 2 All E.R. 479.

If without obtaining proper authorization he applies assets in paying a doubtful claim which is utimately held to be invalid, he will be liable to refund the assets so misapplied, Re Windsor Steam Coal Co., [1929] 1 Ch. 151. But a liquidator is not, in all circumstances, liable if a debt is subsequently shown to have been wrongly admitted; however a high standard of care and diligence is required. Rc Home and Colonial Insurance Co., [1930] I Ch. 102 at pp. 125, 133; [1929] All E.R. Rep. 231. Although in such cases a liquidator may be liable to creditors, his position as regards the shareholders may be different, since they must be taken to be aware of the way in which the company's business is carried on; so that where a company's business was in the main that of marine reinsurance under a participation agreement, which was unenforceable, the court exercised its discretion in favour of the liquidator in so far as reimbursing the shareholders was concerned. Re Home alld Colonial Insurance Co., supra.

Dual representative capacity of liquidator-The liquidator represents both the creditors and the company. The winding-up calls into existence new rights and imposes new liabilities which can be enforced only in the winding-up. Re Whitehouse & Co. (1878), 9 Ch. D. 595; Re Hull & Coullty Ballk; Bllrgess' Case (1880). 15 Ch. D. 507; Re Nlitional Funds Assurallce Co. (1878). 10 Ch. D. 118. The liquidator is bound to collect all the assets and distribute them among the creditors; he may assert rights as against the company and may assume a position against the members which the company itself might not have been in a position to assert, Waterhouse v. Jamieson (1870), L.R. 2 Sc. & Div. 29; Re National Funds A ssurllllce Co., supra. After the supervention of winding-up the liability of a member in respect of his shares arises ex lege and not ex CO/lII'l1ClII, Hallyaj Gupta v. Asthana (1932), L.R. 60 Ind. App. 1.

Money paid under mistake of law-If money is paid to a liquidator under mistake of law, as he is an officer of the court he would no doubt, like a trustee in bankruptcy, be ordered to refund. Re Car/we; Ex parte Simmonds (1885), 16 Q.B.D. 308; Re Brown; Dixon v. Broll'n (1886); 32 Ch. D. 597; Re Opera Ltd., [1891] 2 Ch. 154; and see Re Regent Finance and Guarantee Corporation, [1930] W.N. 84., where the rules in Re Condon; Ex parte James (1874), 9 Ch. App. 609, was applied to acts of a liquidator.

Bankruptcy and winding-up-Winding-up does not effect a cessio bonorum as does bankruptcy, but the company's property remains vested in it as before, Re Wehh (HI) & Co. (Smithfield, London), [1922] 2 Ch. 369; affirmed suh flom, Food Controller v. Cork, [1923] A.c. 647; [1923J All E.R. Rep. 463; Re Farrow's Bank Ltd., [1921] 2 Ch. 164; [1921] All E.R. Rep. 511; Re Wright, a bankrupt; Ex parte Landau v. Trustee, [1949] Ch. 729; [1949] 2 All E.R. 605. Thus whereas a trustee in bankruptcy who does not disclaim onerous property may be personally liable, a liquidator does not incur liability since the property remains vested in the company, Re Katherine et Cie, [1932] 1 Ch. 70; [1931] All E.R. Rep. 125; unless vested in him under this section.

Effect of vesting order-The property vests in the liquidator, not in his personal but his official character. He does not become personally liable in respect of obligations attaching to the property, Graham v. Edge (1888), 20 Q.B.D. 583; 683; Re Ebsworth and Tidy's Contract (1889), 42 Ch. D. 23.

Whether motion may be ex parte-As to whether a vesting order may be obtained on an ex parte motion, see Re Albert Life Assurance Co. (1869), 18 W.R. 91; Re Albion Mutual Permanent Building Society (1888), 57 L.J. Ch. 248; Re Britannia Permanent Benefit Building Society, [1890] W.N. 170.

Taxation of costs-Where more than twelve months have elapsed since the delivery of the company's solicitor's bill of costs but the twelve months expire after the winding-up, the liquidator is entitled to have the bilI taxed, Re Marseilles Extension Railway and Land Co.; Ex parte Evans (1870), L.R, 11 Eq. 151; Re Foss, Bilbrough, Plaskitt and Foss, [1912] 2 Ch. 161; cf. De Bay v. Griffin (1875)


10 Ch. App. 291. Further as to the mode of taxing, see Re Palace Restaurants, [1914] 1 Ch. 492; [1914-15] All E.R. Rep. 1193 and Re Defiant Cycle Co. Ltd., [1955] Ch. 490; [1955] 2 All E.R. 58.

Indemnity in articles-A liquidator is not protected by an article indemnifying officers of the company, since the articles are not a contract with him, at any rate, as against the creditors, Re Home and Colonial Insurance Co. Ltd., [1930] 1 Ch. 102; [1929] All E.R. Rep. 231.

Personal liability for costs-A liquidator will be personally liable for costs given against the company in litigation instituted by him, if he applies the available assets in paying his own solicitor's costs, Re Pacfic Coast Syndicate, [1913] 2 Ch. 26.

234. Statement of company's affairs to be submitted to liquidator. (1) There shall be made out and verified in the prescribed form and manner and submitted to the liquidator a statement as to the affairs of the company as at the date of the winding up order showing-

(a) the particulars of its assets debts and liabilities; (b) the names and addresses of its creditors; (c) the securities held by them respectively; (d) the dates when the securities were respectively given; and (e) such further information as is prescribed or as the liquidator

requires.

(2) The statement shall be submitted by one or more of the persons who are at the date of the winding up order directors, and by the secretary of the company, or by such of the persons hereinafter mentioned as the liquidator, subject to the direction of the Court, requires, that is to say, persons-

(a) who are or have been officers of the company; (b) who have taken part in the formation of the company, at

any time within one year before the date of the winding up order; or

(c) who are or have been within that period officers of or in the employment of a corporation which is, or within that period was, an officer of the company to which the statement relates.

(3) The statement shall be submitted within fourteen days after the date of the winding up order or within such extended time as the liquidator or the Court for special reasons specifies, and the liquidator shall within seven days after its receipt cause a copy of the statement to be filed with the Court and lodged with the Registrar.

( 4) Any person making or concurring in making the statement required by this section may subject to the rules be allowed, and be paid by the liquidator, out of the assets of the company, such costs and expenses incurred in and about the preparation and making of the statement as the liquidator considers reasonable subject to an appeal to the Court.

(5) Every person who without reasonable excuse makes default in complying with the requirements of this section shall be guilty of an offence against this Act.

Penalty: Imprisonment for three months or Five hundred pounds or both. Default penalty.


Generally as to statement of affairs, see Atkin's Court Forms, vol. 6A at pp. 327 et seq. As to the secretary, see s. 132, ante.


De facto director-A person who has legally ceased to be a director, but has. de facto acted as such, may be required to submit a statement, Re New Par Conso/s, [1898] 1 Q.B. 573.

Enforcing delivery of statement-As to enforcing delivery of statement by order made against secretary or other officer, see Re Columbian Gold Mines (1894), 42 W.R. 624, and Re New Par Conso/s, [1898] 1 Q.B. 573.

Default-Default in delivery of the statement is a material circumstance if an order to stay proceedings is sought. Re Telescriptor Syndicate, [1903] 2 Ch. 174.

Statement dispensed with-The statement of affairs was dispensed with, and the substitution of a report directed in Re H. & S. Credits Limited (in liq.), [1961] Q.W.N. 67.

235. Report by liquidator. (1) The liquidator shall as soon as practicable after receipt of the statement of affairs submit a preliminary report to the Court-

(a) as to the amount of capital issued, subscribed and paid up, and the estimated amount of assets and liabilities;

(b) if the company has failed, as to the causes of the failure; and (c) whether in his opinion further inquiry is desirable as to any

matter relating to the promotion, formation or failure of the company or the conduct of the business thereof.

(2) The liquidator may also, if he thinks fit, make further reports stating the manner in which the company was formed and whether in his opinion any fraud has been committed or any material fact has been concealed by any person in its promotion or formation or by any officer in relation to the company since its formation, and specifying any other matter which in his opinion it is desirable to bring to the notice of the Court.

U.K s. 236; N.S.W. ss. 223. 224; Vic. s. 173; Qld. s. 187; S.A. s. 209; W.A. s., 199; Tas s. 178.

As to the statement of affairs, see s. 234, (Inte. In relation to fraudulent trading, see s. 304, post.

Thinks fit-As to the meaning of "thinks fit", see Ex parle Barnes, [1896] A.C. 146.

Privilege of report-As to privileged nature of the report, see Bottomley v. Brougham, [1908] 1 KB. 584; Burr v. Smith, [1909] 2 KB. 306; [1908-10J All E.R. Rep. p. 443.

Further report-In determining whether to make a further report, he is exercising a quasi-judicial function. He must act on his own responsibility, Re Nt:w Terras Tin Milling Co., [1894] 2 Ch. 344. As to whether the making of a further report is a condition precedent to the making of an order for the public examination of a former director under s. 274, post; In the case of a voluntary winding-up, see Re Campbell COl'erillgs Ltd .. [1953] 2 All E,R. 74; [1953] Ch. 488.

236. Powers of liquidator. (1) The liquidator may with the authority either of the Court or of the committee of inspection-

(a) carry on the business of the company so far as is necessary for the beneficial winding up thereof, but the authority shall not be necessary to so carryon the business during the four weeks next after the date of the winding up order;

(b) subject to the provisions of section two hundred and ninetytwo pay any class of creditors in full;

(c) make any compromise or arrangement with creditors or persons claiming to be creditors or having or alleging themselves to have any claim present or future certain or contingent ascertained or sounding only in damages against the company, or whereby the company may be rendered liable; and


(d) compromise any calls and liabilities to calls, debts and liabilities capable of resulting in debts and any claims present or future certain or contingent ascertained or sounding only in damages subsisting or supposed to subsist between the company and a contributory or other debtor or person apprehending liability to the company, and all questions in any way relating to or affecting the assets or the winding up of the company, on such terms as are agreed, and take any security for the discharge of any such call, debt, liability or claim, and give a complete discharge in respect thereof.

(2) The liquidator may-(a) bring or defend any action or other legal proceeding 111 the

name and on behalf of the company; (b) appoint a solicitor to assist him in his duties; (c) sell the real and personal property and things in action of the

company by public auction, public tender or private contract with power to transfer the whole thereof to any person or company or to any association registered under "The Primary Producers' Co-operative Associations Acts, 1923 to 1934," or to sell the same in parcels;

(d) do all acts and execute in the name and on behalf of the company all deeds, receipts and other documents and for that purpose use when necessary the company's seal;

(e) prove rank and claim in the bankruptcy of any contributory or debtor for any balance against his estate, and receive dividends in the bankruptcy in respect of that balance as a separate debt due from the bankrupt and rateable with the other separate creditors;

(f) draw, accept, make and indorse any bill of exchange or promissory note in the name and on behalf of the company with the same effect with respect to the liability of the company as if the bill or note had been drawn, accepted, made or indorsed by or on behalf of the company in the course of its business;

(g) raise on the security of the assets of the company any money requisite;

(h) take out letters of administration of the estate of any deceased contributory or debtor, and do any other act necessary for obtaining payment of any money due from a contributory or debtor or his estate which cannot be conveniently done in the name of the company, and in all such cases the money due shall for the purposes of enabling the liquidator to take out the letters of administration or recover the money be deemed due to the liquidator himself;

(i) compromise any debt due to the company other than calls and liabilities for calls and other than a debt where the amount claimed by the company to be due to it exceeds three hundred pounds;

(j) appoint an agent to do any business which the liquidator is unable to do himself; and

(k) do all such other things as are necessary for winding up the affairs of the company and distributing its a!';sets.


(3) The exercise by the liquidator of the powers conferred by this section shall be subject to the control of the Court, and any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any of those powers.

U.K. s. 245; N.S.W. s. 231; Vic. s. 174; Qld. s. 201; S.A. s. 213; W.A. s. 179.

Act referred to: Primary Producers' Co-operative Associations Acts, 1923 to 1962, title

PRIMARY PRODUCE. With respect to deceased contributories, see s. 220, ante. As to the execution

of contracts on behalf of companies, see s. 35, ante. As to bankrupt contributorie" see also s. 220, ante. As to custody and vesting of property of the company, see s. 233, ante. See also s. 233 ante, as to proceedings with regard to property vested in the liquidator. As to payment of creditors, see ss. 291. 292, post. As to the exercise by a liquidator in a voluntary winding-up of the powers under this section, see s. 269, post. With respect to the control of the court, see also ss. 237, 278, 279, post.

Subject to the provisions of the Act the liquidator shall use his own discretion. s. 237 post. Certain powers may be delegated to the liquidator by the court under s. 252, post. Limitations may be imposed by the court on powers of provisional liquidators under s. 231, ante. As to the exercise of powers where there are several liquidators, see s. 232, ante. For duties of a liquidator in relation to a company's liability for income tax, see Income Tax and Social Services Contribition Assessment Act 1936-1961, s. 215 (Commonwealth).

Sanction of the court-An order may be made in general terms giving the liquidator power to act without further sanction, Re Rochedale Property & General Finance Co. (1879), 12 Ch. D. 775; Re Elsworth & Tidy's Contract (1889), 42 Ch. D. 23; Re Britannia Permanent Building Society (1890), 63 L.T. 304.

Duties of liquidator-For observation on the dJIties of a liquidator, see Ex parte McDonald; Re Partridge, [1961] S.R. (N.S.W.) 622 at p. 629; [1961] N.S.W.R. 15 at p. 21.

Costs on application for sanction-On application for the sanction of the court to a compromise by a liquidator it is necessary to file an affidavit stating specifically the amount, if any, which the contributory has agreed to pay towards the costs of such application. If the contributory has not agreed to pay an}" costs, then that fact should be stated. The costs in respect of such application which the contributory pays are to be paid in the first instance to the liquidator so that they may appear in his accounts, Re Companies Act 1890 (1894), 20 V.L.R. 243.

Carryon business-He may not carryon business with a view to financial reconstruction, Re Wreck Recovery and Salvage Co. (1880), 15 Ch. D. 353, nor may he make a profit out of moneys in his hands, Re Anon (1866), 15 L.T. 170. As to what constitutes carrying on busines as distinguished from realization of assets, see Wilson Box (Foreign Rights) Co. Ltd. v. Brice, [1936] 3 All E.R.728.

The onus of proof that a contract is not required for the beneficial winding up of the company is on the party objecting to the contract, Hire Purchase Furnishing Co. v. Richens (1887), 20 Q.B.D. 387. As to costs of carrying on business, see Regent's Canal Ironworks Co., Ex parte Grissell (1875), 3 Ch. D. 411.

Leave to carryon the business was granted, nunc pro tunc, in Re Patrick Plains Free Press Newspaper Co. Ltd. (1893), 3 N.S.W.B.C. 49. A liquidator cannot be sued personally for debts incurred in carrying on the business, except upon an express contract made with him personally (ibid.)

A liquidator may be liable personally, as well as officially, to his servants or agents in the winding up, Brown v. Cowan (1912), 31 N.Z.LR. 1219.

Where profits arose from the working of leasehold premises charged by debentures such profits were held to be free assets, Re Ward (J.G.) Farmers Association (1899), 18 N.Z.L.R. 158.

So far as is necessary for the beneficial winding-up--It is sufficient if the liquidator bona fide and reasonably forms the opinion that the carrying on of the business is necessary for the beneficial winding-up of the company; the conduct of the liquidator should not be judged by an objective standard after the event, Re Great Eastern Electric Co. Ltd., [1941] 1 Ch. 241; [1941] 1 All E.R. 409.


Compromise or arrangement with creditors-The creditors here mentioned are the same as those described in s. 291, post. As to what is a "compromise or arrangement" see Isles Y. Daily Mail Newspaper Ltd. (1912), 14 C.L.R. 193 (debenture-holders to accept fully paid-up shares in new company in satisfaction of debenture debt). See also Re Contal Radio, [1932] 2 Ch. 66; [1932] All E.R. Rep. 687. The maxim delegatus non potest delegare applies to prevent a liquidator from delegating to an agent his power to compromise, Rendall v. Conroy (1897), 8 Q.L.J. 89; 8 Q.L.J. (N.C.) 60. Where a debtor sets up a compromise as a defence in an action by the company, it lies on the defendant to prove that the statutory requirements have been fulfilled (ibid.).

As to whether a compromise of debts is invalid in the absence of the sanction, see Rendall Y. Conroy (1897), 8 Q.L.J. 89; 8 Q.L.J. (N.C.) 60; Re Stuckey & Co., I1918] Q.W.N. 35.

Compromise with debtors-The Court has no jurisdiction to compel a liquidator to accept a compromise, Re East of England Banking Co., Pearson's Case (1872), 7 Ch. App. 309; Re International Contract Co., Hankey's Case (1872), 41 L.J. Ch. 385. The Court has jurisdiction to set aside a compromise made with its sanction, Re Leeds Banking Co., Ex parte Clarke (1866), 14 L.T. 789, and wilI do so on the ground that the facts are not properly before the shareholders, R,e Central Darjeeling Tea Co. (1866), 15 L.T. 234.

To obtain sanction for a compromise the facts must be fully disclosed, Re Northumberland and Durham District Banking Co., Ex parte Totty (1860), 1 Drew & Sm. 273, and the compromise should be beneficial to the majority of shareholders, Re Risca Coal and Iron Co. (1861), 30 Beay. 528.

The liquidator should state the reasons for his belief that the proposed compromise will be beneficial to the company. An affidavit is also required showing that the contributory has not made away with any of his property for the purpose of evading his liabilities, Re Federal Bank of Australia (1893), 15 A.L.T. 126.

The Court may, under this section, sanction the payment to the English liquidator of the costs, charges, and expenses of a prior winding up in England in full, Re Australian Midas Gold Estates, [1916] V.L.R. 526.

As to the position of dissentient creditors and contributories, see Re Commercial Bank Corporation of India and the East (1869), L.R. 8 Eq. 241; Re Albert Life Assurance Co. (1871), 6 Ch. App. 381.

Action-An action must be brought in the name of the company, not in that of the liquidator, Bolton Y. Darling Downs Building Society, [1935] St. R. Qd. 237 (liquidator in voluntary winding up); Jones v. Davies Franklin Cycle Co. (1902), 27 V.L.R. 649; Re Tongariro Hemp Co. (1909), 12 N.Z.G.L.R. 7.

Proceedings may be sanctioned to be taken by other persons in the name of the liquidator, Harrison v. St. Etienne Brewery Co. (1893), 37 Sol. Jo. 562; Imperial Bank of China, India, and Japan Y. Bank oj Hindustan, China, and Japan (1868), L.R. 6 Eq. 91.

Proceedings by liquidator-A bankruptcy petition should be in the name of the company, not in that of the liquidator, Growden v. Wiltshire (1935), 52 C.L.R. 286. A bankruptcy notice was founded on a misfeasance order directing payment to the liquidator as liquidator. A bankruptcy notice founded on such order and requiring payment to, or securing or compounding to the satisfaction of, the liquidator as liquidator, and describing the counter-claim, set-off, or cross-action as being against the liquidator was held to be sufficient (ibid.).

An official liquidator may, subject to this section, institute a prosecution on behalf of a company where, after due investigation, and after taking proper advice, he thinks such prosecution will be in the interests of the company, Re Premier Permanent Building Society (1890), 16 V.L.R. 424.

Sanction must be obtained before proceedings are commenced, although proceedings may have been ordered in a debenture-holder's action. Re London MetallurRical Co., [1897] 2 Ch. 262.

In Danish Mercantile Co. Ltd. v. Beaumont. [1951] I All E.R. 925; [1951] Ch. 680. the Court of Appeal held that on the ordinary doctrine of ratification the liquidator was entitled to adopt proceedings initiated by a solictor in the name of the company without proper authority.


Sell the real and personal property-Among the assets which may be sold are ciilims for misfeasance against directors, Re Park Gate Waggoll Works Co. (1881), 17 Ch. D. 234. The sale may be for consideration other than cash, Re Agra & Alnsterman's Ballk (1866), L.R. 12 Eq. 509, n.; Re General Exchange Bank (1867), ~S W.R. 477.

Where the liquidator is shown to be interested in any way in the purchase. the sale may be set aside, Silkstone & Haigh Moor Coal Co. v. Edey, [1900] 1 Ch. 167. For a case where the Court ordered the temporary postponement of a proposed sale bv a liquidator, see Premier Permanent Building Association (1899). 5 A.L.R. (C.N.) 38.

A liquidator has been held to be empowered to exercise an option to purchase land and then resell the same, Re BlIirnsdale Food Products Co. Ltd., [1948] V.L.R. 264.

Raise money-As to the priority of debenture-holders in regard to the exercise of this power, see Re Regent's Canal Ironworks Co. (1875), 3 Ch. D. 411.

Appointment of solicitor-A partner of the liquidator may not be appointed solicitor unless he acts without remuneration, Re Universal Private Telegraph Co. ( 1870), 23 L.T. 884. nor may a solicitor be appointed when one of his managing clerks is a member of the committee of inspection. Re Gallard, [1896] 1 Q.B. 68. His retainer is not revoked by the removal of the liquidator who retained him, R. v. London (Lord Mayor), Ex parte Boaler, [1893] 2 Q.B. 146.

Costs-Upon an application by the liquidator for an order to tax the bill of costs of his solicitor in the winding up of the company, a solicitor other than the solicitor for the liquidator will be appointed to attend upon such taxation on behalf of the creditors and contributories of the company. Re Great Ringarooma Alluvial T.M. Co. (1897), 22 V.L.R. 537; Re Australiall United Insurance Co., [19251 V.L.R. 187.

As to the solicitor's costs. see further Re Anglo-Moravian Hungarian Junction Rail Co., Ex parte Watkin (1875). 1 Ch. D. 130; and as to his lien for costs, see Re Union Cement and Brick Co., Ex parte Pulbrook (1869), 4 Ch. App. 627; Re Union Cement and Brick Co. (1872), 26 L.T. 240; Re Anglo-Maltese Hydraulic Dock Co. Ltd. (1885), 54 L.J. Ch. 730; Re Hermann Loog Ltd. (1887),36 Ch. D. 502.

Where an official liquidator applies for an order to have his costs taxed, it should be shown by affidavit whether the persons interested in the winding up have or have not left their names and addresses with the liquidator, so that notice of the taxation may be served on them if the judge so directs, Re Balaclava Estate Co. (1892), 18 V.L.R. 670.

As to liability of a liquidator for costs, see Re Tokenhollse Investments Ltd., [1934] St. R. Qd. 189.

As to the costs of a liquidator appealing without leave, see Re Silver Valley Mines (1882), 21 Ch. D. 381.

Enforce call-As to the power of the liquidator to enforce a call made by directors before the winding uP. see Stone v. City & County Bank (1877), 3 C.P.D. 282.

Vesting-A winding-up order does not vest the property of the company in the liquidator but merely enables him to recover it, as a kind of agent of the company. Re Oriental Bank Corpn. (1884). 10 V.L.R. (Eq.) 154; Jones v. Davies Franklin Cycle Co. (1902), 27 V.L.R. 649.

Set-olI-For set-oII in case of bankruptcy of contributory, see Re Duckworth (1867), 2 Ch. App. 578; Re Anglo-Greek Steam Navigation alld Trading Co., ClIrralli and HaRgard's Claim (1869),4 Ch. App. 174; Re Oxford and Canterbllry Hall Co. Ltd .. Ex parte Morton (1869), 38 L.J. (Ch.) 390; Re Universal Banking Corporation, Ex parte Strang (1870), 5 Ch. App. 492.

Where more than one liquidator-Where there is more than one liquidator, an acceptance should be signed by two or more, unless at the time of appointment, one was empowered to accept, Re London & Mediterranean Balik Ltd. (1867), 36 L.J. Ch. 807.

Distribution of assets-Distribution of assets among contributories is made by the court under s. 247, post, and not under this section, Re Phoenix Oil alld Transport Co. Ltd. (No.2), [1958] 1 All E.R. 158.

Control of court-As to interference by the Court with the realisation of the property, see Re Xeres Wine Co. Ltd. (1865), 13 L.T. 269; Re Oriental Bank Corporation (1887), 56 L.T. 868.


Receive company's mail-It has been held that no order of the Court is necessary to enable a liquidator to receive letters addressed to the company, Re H. L. Davis & Co., B.C.R., May 13, 1893.

Generally-With respect to powers of liquidators generally, see 6 Halsbury's Laws of England, 3rd ed., p. 587; 10 English and Empire Digest (Rpl.) p. 917.

237. Exercise and control of liquidator's powers. (1) Subject to this Part the liquidator shall in the administration of the assets of the company and in the distribution thereof among its creditors have regard to any directions given by resolution of the creditors or contributories at any general meeting or by the committee of inspection, and any directions so given by the creditors or contributories shall in case of conflict override any directions given by the committee of inspection.

(2) The liquidator may summon general meetings of the creditors or contributories for the purpose of ascertaining their wishes, and he shall summon meetings at such times as the creditors or contributories by resolution direct or whenever requested in writing to do so by not less than one-tenth in value of the creditors or contributories.

(3) The liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up.

( 4) Subject to this Part the liquidator shall use his own discretion in the management of the affairs and property of the company and the distribution of its assets.

U.K s. 246; N.S.W. s. 232; Vic. s. 175; Qld. s. 202; S.A. s. 214; W.A. s. 204; Tas. 'S. 180.

As to the right of any creditor or contributory to apply to the court, see s. 236, ante. Where no committee of inspection is appointed, see s. 241, post. As to applications to the court in a voluntary winding-up, see s. 274. post.

Conflict-Whether meetings of creditors or contributories can override directions given bv the committee of inspection in matters for which their sanction is expressly required by any provision of ~he Act, is uncertain, Re Consolidated Diesel Engine Manufacturers Ltd., [1915] 1 Ch. 192; [1914-15] AI! E.R. Rep. 898; questioned in Re Salmon, [1916] 2 KB. 510. See also Re Geiger, [1915] 1 KB. 439; [1914-15] All E.R. Rep. 694; Re North Eastern Insurance Co., [1915] W.N. 210.

Application for directions-Where a liquidator in a voluntary winding-up applied to the court to determine whether a particular claim should be admitted and the court ordered an inquiry and that the amount so found should be admitted. the liquidator could not afterwards reject the proof on some ground which he could have raised previously but did not, Re Aynek Syndicate Ltd., [1936] 1 All E.R. 40fi.

Liquidator may apply for directions-for instances where the power to apply has been used. see Re Australian Home Finance Pty. Ltd. (in liq.), [1956] V.L.R. 1: Re Chemical Plastics Ltd. (in /iq.), [1959] V.R. 570.

238. Payment by liquidator into bank. (1) Every liquidator other than the Public Curator shall, in the manner and at the times prescribed by the rules, pay the money received by him into the bank and account prescribed by the rules or specified by the Court.

(2) If any liquidator retains for more than ten days a sum exceeding twenty-five pounds, or such other amount as the Court in any particular case authorizes him to retain, then unless he explains the retention to the satisfaction of the Court he shall pay interest on the amount so retained in excess computed from the expiration of the ten days until he has complied with the provisions of subsection ( 1) of this section at the rate of twenty per centum per annum, and shall be liable-

(a) to disallowance of all or such part of his remuneration as the Court thinks just;


(b) to be removed from his office by the Court; and (c) to pay any expenses occasioned by reason of his default.

(3) Any liquidator who pays any sums received by him as liquidator into any bank or account other than the bank or account prescribed or specified under subsection (1) of this section shall be guilty of an offence against this Act.

( 4) Where the Public Curator is the liquidator the moneys received by him as liquidator shall be paid into and form part of the common fund established under section eighteen of "The Public Curator Acts, 1915 to 1957," and shall be dealt with in accordance with the provisions of those Acts relating to the common fund.


}\ct referred to: Public Curator }\cts, 1914 to 1957, title TRUSTEES }\ND EXECUTORS.

}\s to the remuneration of a liquidator, see s. 232, ante. Further as to removal by the court, see s. 232, ante. }\s to the release of a liquidator by the court, see s. 239, post.

Garnishee-}\n unclaimed share of surplus assets paid into an account pursuant to this section cannot be attached by way of garnishee, Spence v. Coleman, [1901] 2 K.B. 199.

239. Release of liquidators and dissolution of company. When the liquidator-

(a) has realised all the property of the company or so much thereof as can in his opinion be realised without needlessly protracting the liquidation, and has distributed a final dividend, if any, to the creditors and adjusted the rights of the contributories among themselves and made a final return, if any, to the contributories; or

(b) has resigned or has been removed from his office, he may apply to the Court-

( c) for an order that he be released; or (d) for an order that he be released and that the company be

dissolved. U.K. ss. 251, 274; N.S.W. ss. 237, 259; Vic. ss. 180, 193; Qld. ss. 207, 228;

S.A. s. 219; W.A. ss. 209, 230; Tas. ss. 185, 203. }\s to removal, see ss. 232, 238, ante. Further as to the adjustment of the

rights of contributories amongst themselves, see s. 247, post. Dissolution-Dissolution ends the existence of a company, Salton v. New

Beeston Cycle Co., [1900] 1 Ch. 43; and unless and until it is set aside no proceedings, not alleging fraud nor impeaching the dissolution order, can be brought against any director, officer, or promoter of the company for any misfeasance or breach of trust, COXOIl v. Gorst, [1891] 2 Ch. 73; Thomas Franklin & Sons Ltd. v. Cameron (1936), 36 S.R. (N.S.W.) 286; nor can a creditor prove a debt against the company, Re Westbourne Grove Drapery Co. (1878),39 L.T. 30.

Rights as against company-Such rights are not, however, extinguished and may be enforced if the dissolution is set aside, Re Spottiswoode Dixon & Hunting Ltd., [1912] 1 Ch. 410; [1911-13) }\ll E.R. Rep. 526.

Collateral obligations-Moreover, collateral obligations may be enforced in spite of dissolution, e.g. a surety for the debts of the company will usually be liable in spite of the dissolution, Re Fitzg.eorge, [1905] 1 K.B. 462. The effect of the dissolution of a company upon the liability of a person who has become surety for the debt of a company was considered in Union Bank of Australia Ltd. Vo

Puddy, [1949] V.L.R. 242 at pp. 247, 248.


Assignment-Where the company has assigned a right it may be enforced by the assignee against the dissolved company's debtor, Tolhurst v. Associated Portland Cement Manufacturers, [1903] A.C. 414.

Dissolved in country of incorporation-A company that has been dissolved in its country of incorporation must be treated under English principles of Private International Law as dissolved everywhere, United Service Insurance Co. Ltd. (in liq.) v. Lang (1935),35 S.R. (N.S.W.) 487.

Equality of shares-Evidence was required as to the equality of shares before a dissolution order was made in Re Mount Costigan Lead & Silver Mining Co. Ltd. (1897), 8 B.C. (N.S.W.) 12.

Form of re1ease-See Re Tarrawingee Flux Co. (1903), 28 V.L.R. 715.

240. As to orders for release or dissolution. ( 1) Where an order is made that the company be dissolved the company shall from the date of the order be dissolved accordingly.

(2) The Court-(a) may cause a report on the accounts of the liquidator to be

prepared by the auditor appointed by the Registrar under section two hundred and eighty-one or by some other registered company auditor appointed by the Court;

(b) on the liquidator complying with all the requirements of the Court, shall take into consideration the report and any objection which is urged by the auditor or any creditor or contributory or other person interested against the release of the liquidator; and

(c) shall either grant or withhold the release accordingly.

(3) Where the release of a liquidator is withheld, the Court may on the application of any creditor or contributory or person interested make such order as it thinks just charging the liquidator with the consequences of any act or default which he may have done or made contrary to his duty.

( 4) An order of the Court releasing the liquidator shall discharge him from all liability in respect of any act done or default made by him in the administration of the affairs of the company or otherwise in relation to his conduct as liquidator, but any such order may be revoked on proof that it was obtained by fraud or by suppression or concealment of any material fact.

(5) Where the liquidator has not previously resigned or been removed his release shall operate as a removal from office.

( 6) Where the Court has made-(a) an order that the liquidator be released; or

(b) an order that the liquidator be released and that the company be dissolved,

an office copy of the order shall, within fourteen days after the making thereof, be lodged by the liquidator with the Registrar, and a liquidator who makes default in complying with the requirements of this subsection shall be guilty of an offence against this Act.

Penalty: One hundred pounds. Default penalty. Vic. ss. 180, 193; S.A. ss. 219, 241.


The duty of the liquidator to lodge a copy order with the Registrar may be enforced under s. 282, post. With respect to the disposal of books and papers, see s. 284, post. As to the power of the court to declare the dissolution void, see s. 307, post. Defunct companies, whether in liquidation or not, may be dissolved under s. 308, post. Further, see notes to s. 239, alitI'.

Suppression or concealment-In order to satisfy this section, the suppression or concealment must contain an element of fraud, Re Harris; Ex parte Hasluck, {I899] 2 Q.B. 97.

Subdivision (3) -Committees of Inspection 241. (1) Meetings to determine whether committee of inspection to be appointed. The liquidator shall if requested by any creditor or contributory summon separate meetings of the creditors and contributories for the purpose of determining whether or not the creditors or contributories require the appointment of a committee of inspection to act with the liquidator, and if so who are to be members of the committee.

(2) If there is a difference between the determinations of the meetings of the creditors and contributories the Court shall decide the difference and make such order as it thinks fit.

(3) Powers of Court where no committee of inspection. Where there is no committee of inspection the Court may on the application of the liquidator do any act or thing or give any direction or permission which is by this Part authorized or required to be done or given by the committee.

UK. SS. 252, 254; N.S.W. ss. 238, 240; Vic. s. 181; Qld. s. 208; S.A. ss. 220, 222; W.A. 5S. 210, 212; Tas. s. 186.

As to the representation of contributories and creditors which are corporations, see s. 140, ante. For the application of this section to a committee of inspection appointed in a voluntary winding-up, see s. 262, poSl. The committee of inspection has certain control over the liquidator, see s. 237, alitI'.

Removal of committee of inspection-There is no direct statutory power of removal of a committee of inspection, Re Rubber & Produce Inv,estment Trust, [19151 I Ch. 382; but semble the court would have jurisdiction to remove them by the indirect method, Re Radford & Bright Ltd., [1901] 1 Ch. 272.

Review by court-Where in the winding-up of a company the committee of inspection, of which the majority was composed of contributories, refused to sanction a call on the shares, the court, on the ground that the creditors' claims must have first consideration, granted leave to the liquidator to make the call, Re North Eastern Insurance Co. Ltd. (1915),85 LJ. Ch. 751.

242. Constitution and proceedings of committee of inspection. ( 1) The committee of inspection shall consist of creditors and contributories of the company or persons holding-

(a) general powers of attorney from creditors or contributories; or (b) special authorities from creditors or contributories authorizing

the persons named therein to act on such a committee, appointed by the meetings of creditors and contributories in such proportions as are agreed or in case of difference as are determined by the Court,

(2) The committee shall meet at such times and places as they from time to time appoint, and the liquidator or any member of the committee may also call a meeting of the committee as he thinks necessary.

(3) The committee may act by a majority of their members present at a meeting, but shall not act unless a majority of the committee is present.


( 4) A member of the committee may resign by notice in writing signed by him and delivered to the liquidator.

(5) If a member of the committee becomes bankrupt or assigns his estate for the benefit of his creditors or makes an arrangement with his creditors pursuant to the law of the Commonwealth relating to bankruptcy or is absent from five consecutive meetings of the committee without the leave of those members who together with himself represent the creditors or contributories, as the case may be, his office shall thereupon become vacant.

( 6) A member of the committee may be removed by an ordinary resolution at a meeting of creditors, if he represents creditors, or of contributories, if he represents contributories, of which meeting seven days' notice has been given stating the object of the meeting.

(7) A vacancy in the committee may be filled by the appointment by the committee of the same or another creditor or contributory or person holding a general power or special authority as specified in subsection (1) of this section.

(8) The liquidator may at any time of his own motion and shall within seven days after the request in writing of a creditor or contributory, summon a meeting of creditors or of contributories, as the case requires, to consider any appointment made pursuant to subsection (7) of this section and the meeting may confirm the appointment or revoke the appointment and appoint another creditor or contributory or person holding a general or special authority as specified in subsection (1) of this section, as the case requires, in his stead.

(9) The continuing members of the committee if not less than two may act notwithstanding any vacancy in the committee.


See notes to s. 241, ante.

Subdivision (4) -General Powers of Court 243. Power to stay winding up. ( 1) At any time after an order for winding up has been made the Court may, on the application of the liquidator or of any creditor or contributory and on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings either altogether or for a limited time on such terms and conditions as the Court thinks fit.

(2) On any such application the Court may, before making an order, require the liquidator to furnish a report with respect to any facts or matters which are in his opinion relevant.

(3) An office copy of every order made under this section shall be lodged by the company with the Registrar within fourteen days after the making of the order.

Penalty: Fifty pounds. Default penalty. U.K. s. 256; N.S.W. s. 241; Vic. s. 183; Qld. s. 210; S.A. s. 223; W.A. s. 213;

Tas. s. 188. As to the powers of the court on hearing the petition, see s. 225, ante. As

to restrain of proceedings against the company after presentation of a petition, see s. 226, ante.


Ought to be stayed-To justify a stay of proceedings in a voluntary winding up, it must not merely be in the interests of creditors and shareholders, but it must also not be detrimental to the pUblic. But it is not a ground for refusing a stay as being detrimental to the public, that the stay will enhance the market value of the shares and afford shareholders an opportunity to dispose of their shares to members of the public, Re Goldell Butterfly Gold Milling Co. No Liability, [1916] S.A.L.R. 177.

Discretion in court-For the way in which the discretion of the Court, under this section, will be exercised, see Re Telescriptor Syndicate Ltd., [1903] 2 Ch. 174, and the 10 English and Empire Digest, (Rpl.) 1012. In general, the Court acts upon the same principles, so far as these are applicable, as obtain in regard to rescinding a receiving order or annulling an adjudication in bankruptcy, i.e., it will act in the interests of commercial morality and not merely on the wishes of the creditors; and even if all the creditors have been paid, and desire a stay, the court will refuse to make an order if an investigation seems desirable (ibid.).

Examples of stay-A voluntary liquidation was stayed where a contract for sale of the company's assets failed of completion and it was impossible to resell them except at an under-value, and the company desired to recommence business, Re Filshie, Broadfoot & Co. Ltd., [1913] Q.W.N. 46.

A voluntary liquidation was stayed where there was a reasonable hope of the rehabilitation of a company with no appreciable surplus of assets. See Re Golden Butterfly Gold Mining Co. No. Liability, [1916] S.A.L.R. 177.

On a motion to stay a winding up supported by 208 shareholders the Court adjourned the application and directed that notice of the application be served on the remaining 56 shareholders and advertised, Re Bank of Queensland Ltd. (1870),2 S.C.R. 113.

Creditors paid in full-Where a company has paid creditors in full out of trading profits, a voluntary winding-up was stayed, Re Back/lOuse Ply. Ltd., [1946] Q.W.N. 4. See also Re City Pharmacy (1927), 1 A.L.J. 380.

Voluntary winding-up-A stay may be ordered under this section where the winding up is voluntary; Re S.S. Titian Co. (1888), 58 L.T. 178; Re Schanschieff Electric Battery Syndicate Ltd., [1888] W.N. 166.

Contributory's application-The application of an alleged contributory will not be entertained, unless he admits himself to be a contributory, Re Continental Bank Corporation; Re London & Mediterranean Bank, [1867] W.N. 114.

Foreign company-A winding up in Victoria of an English company was stayed absolutely on a unanimous resolution of the creditors in Re Oriental Banking Corpn. (1884), 10 V.L.R. (Eq.) 154.

Reconstruction-An application may be made under this section to enable steps to be taken for reconstruction of the company with the object of meeting its liabilities and continuing in business, Re Stephen Walters & Sons, [1926] W.N. 236. After reconstruction, the winding up order may be discharged, Re Patent Automatic Knitting Machine Co., [1882] W.N. 97.

Where winding up order disputed-An application under this section is not the correct procedure where the validity of the winding up order is disputed, Re Empire Builders, [1919] W.N. 178. But see Re Serene Shoe Ltd., [1958] 3 All E.R. 316.

Generally-See 6 Halsbury's Laws of England, 3rd ed., p. 754.

244. Settlement of list of contributories and application of assets. ( 1 ) As soon as may be after making a winding up order the Court shall settle a list of contributories and may rectify the register of members in all cases where rectification is required in pursuance of this Part and shall cause the assets of the company to be collected and applied in discharge of its liabilities.

(2) Notwithstanding the provisions of subsection (1) of this section where it appears to the Court that it will not be necessary to make calls on or adjust the rights of contributories, the Court may dispense with the settlement of a list of contributories.


(3) In settling the list of contributories the Court shall distinguish between persons who are contributories in their own right and persons who are contributories as being representatives of or liable for the debts of others.

( 4) The list of contributories when settled shall be prima facie evidence of the liabilities of the persons named therein as contributories.


As to the liability of past and present members as contributories, see s. 218, ante. For power of a liquidator in a voluntary winding-up to settle the list of contributories, see s. 269, post. The liquidator may not rectify the register without the special leave of the court, s. 252, post. This section does not apply to no-liability companies, s. 319, post.

The power to settle the list of contributories may be delegated under s. 252, post, to the liquidator. As to evidence of who are contributories, see s. 151, ante, s. 284, post. As to the list of contributories when capital has been reduced, see s. 64, ante. As to the register, see s. 151, allte.

Settle a list of contributories-The "settlement" of the list of contributories contemplates that this shall be done at a definite stated time and place, when the alleged contributories are to have an opportunity of showing cause, and involves the consideration and determination of whether a person should appear on the list. The meaning of "settling" of the list is not different in compulsory and voluntary winding up. Re Murray Engineering Co. Ltd., [1925] S.A.S.R. 330.

As to an application by a person not notified of intention to settle the list, see Ex parte Lane (1889), 15 V.L.R. 525.

Rectification-For the cases where rectification may be required in pursuance of this Act, see s. 155, ante (I), and Reese River Silver Mining Co. v. Smith (1869), L.R. 4 H.L. 64. In general the Court is guided by the same principles in rectifying the register after the commencement of the winding up as apply when the company is carrying on business in the ordinary way. An application to place the name of a contributory on the list of contributories in respect of a call made at a date earlier than the call in respect of which the name appears on the list is, in effect, an application to rectify the register; and the Court, in dealing with such application, will go into the facts of the case, and treat the register as if it contained the entries which, upon the facts, ought to have been made therein from time to time, McRae's Case (1892), 11 N.Z.L.R. 408.

A shareholder, in the course of winding up, seeking to have his name removed from the list of contributories, on the ground that he was induced to take his shares by fraud, must show that, before the winding up, he had repudiated the contract and taken proceedings to have his name removed from the register, Re Gambrinus Lager Beer Brewery Co. (1886), 12 V.L.R. 446.

As to rectification after misrepresentation inducing taking of shares, see Re Lucks Ltd.; Serpel!'s Case, [1928] V.L.R. 466; Re A. E. Higgins Pty. Ltd. (in liq.); Ex parte Wansley, [1930] V.L.R. 21.

The Court will not, after a company has gone into liquidation, rectify the list of contributories by substituting the transferee of shares for the transferor, unless some default or undue delay is shown on the part of the company, but for which the transfer would have been registered before liquidation, Re Chatsworth Estate Co., Ex parte Jessup (1892), 14 A.L.T. 39. It was held in Re Street & Co. Ltd., Ex parte Parsons (1891), 17 V.L.R. 236, 717, that the holder of shares in respect of which the memorandum of association provided that no calls should be payable, and which were in the memorandum described as "fully paid up", could not be placed on the list of contributories. But see Re L. Slutzkin Pty. Ltd., [1932] V.L.R. 229, where it was held that the memorandum could not excuse from liability for calls in a winding up, if that was what the memorandum purported to do.

Although shareholders cannot, by an article of association or any other contract with the company, be relieved of their liability in a winding up to calls for the amount unpaid on their shares for the purpose of paying the debts and liabilities of the company, of defraying the costs of the winding up and of adjusting the mutual rights of the contributories, there is complete freedom to prescribe, by articles of association, in what manner those mutual rights are to be adjusted and hence to provide for an adjustment whereby the necessity of resorting to uncalled capital to work them out is excluded, King v. Tait (1936), 57 C.L.R. 715; [1937] A.L.R. 146.

10


The court upheld the removal by the company of a name from the register in a bona fide compromise of a dispute, as a valid exercise of the company's powers, Commonwealth Homes and Investment Co. Ltd. v. McKellar (1939), 63 C.L.R. 351; [1939] A.L.R. 470.

Relief was granted on the ground of fraud and mistake in Re Queensland Linseed Industries Ltd., [1936] Q.W.N. 35.

Agreement-Where at the time of the winding up of a company, a person is a registered shareholder under an agreement with the company in conformity with the terms authorised by the memorandum, the liability of such a person as a contributory depends solely on the terms of the agreement, Re Street & Co., Ex parte Parsons (1891), 17 V.L.R. 717, at pp. 722-723; and see Re Colonial Investment and Agency Co. (1893), 19 V.L.R. 381.

Past members-Past members may only be included in the list (or rather the liquidator may only proceed to make out the "B" list of contributories, consisting of past members) if the court is satisfied that the present members will not be able to make the contributions for which they are liable to an extent sufficient to satisfy the liabilities of the company, Andrews' Cas,e (1867), 3 Ch. App. 161; Needham's Case (1867), L.R. 4 Eq. 135; Wright's Case (1871), L.R. 12 Eq. 334 n., 345 n.; McEwen's Case (1871), 6 Ch. App. 582; Helbert v. Banner (1871), L.R. 5 H.L. 28; and 10 English and Empire Digest, (Rpl.) p. 958. See in relation to a broker placed on "B" list, Re Mercantile Bank (in liq.); Ex pane Bagley (1894), 20 V.L.R. 489. See in relation to shares on trust, Re Colonial Investment & Agency Co. Ltd. (in liq.) (1893), 19 V.L.R. 381.

Resettling list-The Court has power to resettle the list, Re Sussex Brick Co., [1904) 1 Ch. 598; [1904-07] All E.R. Rep. 673; and to make a supplementary list, Re Extended Wakatu Gold Mining Co. Ltd. (1894), 13 N.Z.L.R. 544. But where the list is settled by the Court, after hearing the parties, it amounts to a judgment of the Court, and to make a fresh list would be equivalent to setting aside the judgment, European Gold Mining Co. (in /iq.) (1899), 17 N.Z.L.R. 790.

But where the register is rectified after the list of contributories has been settled, the Court may resettle the list, Re Onward Building Society, [1891] 2 Q.B. 463.

Onus of proof-As to onus of proof on an application to the Court to remove a name from the list of contributories as settled by the liquidator, see Re Token/zouse Investments Ltd., [1933] Q.W.N. 42.

No transferee to substitute-It is not fatal to the claim of a transferor to be removed from the list that there is no transferee to substitue, if the circumstances of the case justify an order, so that where the transferee was dead and had no legal personal representative a transferor whose name had been left on the register through the default of the company was removed from the list of contributories, although there was no-one to substitute in his stead, Re Joint-Stock Discount Co.; Pyle's Case (1869), 4 Ch. App. 768.

Discharge of liabilities-The discharge of liabilities referred to in this section is the discharge of those existing at the date of the winding-up, Re United Ports and General Insurance Co. (1877), 46 L.J. Ch. 403. There is no jurisdiction to discharge out of the assets something which is not a debt of the company, e.g. costs of an action prosecuted without leave after winding-up commenced, Re Hull Central Drapery Co. (1880), 15 Ch. D. 326; or statute-barred debts, unless in the case of a solvent company all the members consent, Re A rt Reproduction Co. Ltd., [1952) Ch. 89; [1951) 2 All E.R. 984. But see Re Banque des Marchands de Moscou, [1953) 1 All E.R. 278.

Promoters' names substituted-For a case where promoters' names were substituted in the list of contributories for a mere nominee who was well known to the company to be such, see Re Gem Meat Productions Pty. Ltd. (ill liq.), [1960] W.A.R. 105.

Validity of winding-up order-The validity of the winding-up order cannot be questioned on an application to the court to settle the list, R. v. Trench, Ex parte McDougall (1880), 6 V.L.R. (L.) 309.

Costs-A liquidator cannot be ordered to pay personally the costs of his unsuccessful opposition to an application for removal from the list of contributories, Re Token/zouse Investments Ltd., [1933] Q.W.N. 42.

The costs of a contest by a person unsuccessfully disputing his liability as a contributory must, except in very special circumstances, be paid by him, Re Barned's Banking Co.; Andrews' Case (1867), 3 Ch. App. 161. And where the alleged contributory successfully disputes his liability, he will, in a proper case, receive


his costs out of the assets, Re London, Hamburg and Continental Exchange Bank; Emmerson's Case (1866), L.R. 2 Eq. 231; [1866] 1 Ch. App. 433. In a contest between two persons as to which is the contributory and both of whom are solvent, the liquidator should appear by one counsel only and take no part in the argument. Semble the unsuccessful party will be ordered to pay costs, Re Overend, Gurney & Co.; Musgrave and Hart's Case (1867) L.R. 5 Eq. 193.

Dispense with the settlement-See Re Phoenix Oil and Transport Co. Ltd., [1958] Ch. 560; [1957] 3 All E.R. 218; Re Paragon Holdings Ltd., [1961] 2 All E.R. 41.

Whether a contributory-Instances of cases where the question was whether a person was a contributory include Re Clifton Springs Hotel Ltd. (in liq.); Ex parte Pask, [1939] V.L.R. 27; Re Impex Ltd. (in /iq.), [1940] V.L.R. 138; Re Peter Lalor Home Building Co-operative Society Ltd. (in liq.), [1958] V.R. 165; Re Yarra Pictures Ltd. (in liq.), [1919] V.L.R. 667; Re Victoria Silicate Brick Co. Ltd.; Ex parte Martin, [1913] V.L.R. 71.

245. (l) Delivery of property to liquidator. The Court may require any contributory, trustee, receiver, banker, agent or officer of the company to pay, deliver, convey, surrender or transfer to the liquidator or provisional liquidator forthwith or within such time as the Court directs any money, property, books and papers in his hands to which the company is prima facie entitled.

(2) Payment of debts due by contributory, to company, and extent to which set-off allowed. The Court may make an order directing any contributory for the time being on the list of contributories to pay to the company in the manner directed by the order any money due from him or from the estate of the person whom he represents exclusive of any money payable by him or the estate by virtue of any call in pursuance of this Act, and may-

( a) in the case of an unlimited company, allow to the contributory by way of set-off any money due to him or to the estate which he represents from the company on any independent dealing or contract but not any money due to him as a member of the company in respect of any dividend or profit; and

(b) in the case of any company whether limited or unlimited, when all the creditors are paid in full, allow to the contributory by way of set-off against any subsequent call any money due to him on any account whatever from the company.

(3) Power of Court to make calls. The Court may either before or after it has ascertained the sufficiency of the assets of the company-

(a) make calls on all or any of the contributories for the time being on the list of contributories, to the extent of their liability, for payment of any money which the Court considers necessary to satisfy the debts and liabilities of the company and the costs charges and expenses of winding up and for the adjustment of the rights of the contributories among themselves; and

(b) make an order for payment of any calls so made. and in making a call may take into consideration the probability that some of the contributories may partly or wholly fail to pay the call.

( 4) Payment into bank of moneys due to company. The Court may ~rder any contributory, purchaser or other person from whom money ~s due to the company to pay the amount due into some bank named III such order to the account of the liquidator instead of to the liquidator, and any such order may be enforced in the same manner as if it had directed payment to the liquidator.


(5) All moneys and securities paid or delivered into any bank pursuant to this Division shall be subject in all respects to orders of the Court.

( 6) Order on contributory conclusive evidence. An order made by the Court under this section shall, subject to any right of appeal, be conclusive evidence that the money, if any, thereby appearing to be due or ordered to be paid is due, and all other pertinent matters stated in the order shall be taken to be truly stated as against all persons and in all proceedings.

U.K. ss. 258-262; N.S.W. ss. 243-247; Vic. s. 185; Qld. ss. 212-216; S.A. ss. 225-229; W.A. ss. 215-219; Tas. ss. 190-194.

As to provisions enabling the production and inspection of books where an offence is suspected, see s. 368, post. As to payment by the liquidator into a bank account, see s. 238, ante. As to mutual credits and set-off of debts against debts in the case of winding up an insolvent company, see s. 291, post. For the extent to which this section has application to no-liability companies, see s. 319, post. As to delegation to the liquidator of powers under this section, see s. 252, post. As to the power to summon persons suspected of having possession of the property of the company see s. 249, post.

Creditor and constructive trustee-There is no power to make an order except against the persons named in the section, and therefore the liquidator cannot obtain an order against a creditor. Nor will a constructive trustee come within the section, Ex parte Hawkins (1868), 3 Ch. App. 787.

Solicitor-The company's ordinary solicitor is an officer of the company, and so is any other solicitor employed under a general retainer or for a fixed time or salary, Re Liberator Permanent Benefit Building Society (1894), 71 L.T. 406; Re Harper's Ticket Issuing & Recording Machine Ltd. (1912), 29 T.L.R. 63, but not one who is employed to do particular work, and who charges in th~ ordinary way for the work actually done, Carter's Case (1886), 31 Ch. D. 496; Re Great Wheal Polgooth Co. (1883), 53 L.J. Ch. 42; Re Carpenter & Bristol, Corporation, [1907] 2 K.B. 617. In any event no order can be made against a solicitor in respect of property of the company in his hands on which he has a lien for costs due to him. See generally Re Palace Restaurants, [1914] 1 Ch. 492; [1914-15] All E.R. Rep. 1193.

Auditor-The position of an auditor is similar. The company's auditor is an officer, Re Kingston Cotton Mill Co., [1896] 1 Ch. 6; Re London & General Bank, [1895] 2 Ch. 166, but an accountant employed to do particular work is not, Re Western Counties Steam Bakeries & Milling Co., [1897] 1 Ch. 617. An auditor has no general lien, but is entitled to retain papers given to him for the purpose of performing his duties until his fees are paid, Findlay v . Waddell, [1910] S.C. 670.

Working papers and others brought into existence by an auditor in the preparation of a final audit of a company's books are his property, not that of the company, Chan trey Martin v. Martin, [1953] 2 Q.B. 286; [1953] 2 All E.R.691.

Banker-A banker is struck at by this section only when he holds as banker for and not adversely to the company, Re Imperial Land Co. of Marseilles (1870), L.R. 10 (Eq.) 298.

Debts due-This section applies to calls made, but not paid, before the winding up, but not to calls made in the winding up, Re West of England & South Wales District Bank (1879), 48 L.J. Ch. 463. Where a fully paid-up shareholder is, by mistake, paid by the liquidator a greater share of the surplus assets than he is entitled to receive. he may be placed on the list of contributories and repayment of the amount overpaid to him may be enforced under this section, Re Kaitangata Railway Co. (1903), 22 N.Z.L.R. 588.

Set-off-The purpose of the second portion of subsection (2) is to define the cases where contributories who are liable under the first portion of that subsection may claim the benefit of a set-off, i.e., to provide exceptions to the general rule that, until a contributory has paid up all that is due from him, he cannot receive anything which is owing to him by the company, Grissell's Case (1866), 1 Ch. App. 528; Re West of England Bank, Ex parte Brown (1879), 12 Ch. D. 823. The effect of the second portion is most easily seen by considering separately the cases of a limited and an unlimited company.


In the case of a limited company the general rule is that there is no set-off, except under the concluding portion of the subsection where alI the creditors have been paid in full, Re North Queensland Brick and Pottery Co. Ltd, [1902] St. R. Qd. 286. The general rule holds good whether the winding up is compulsory (Black & Co.'s. Case (1872), 8 Ch. App. 254) or voluntary (Re Whitehouse & Co. (1878), 9 Ch. D. 595; and even where there was a contract between the contributory and the company at the time the shares were issued, that set-off should be allowed, Black's Case, supra; Blakeley's Case (1867), 17 L.T. 307; Re Law, Car, and General Insurance Corporation, [1912] 1 Ch. 405.

In the case of an unlimited company, set-off is allowed in respect of any debt due to a contributory on some independent dealing or contract between him and the company, but not money due to him in his capacity of member of the company by way of dividend or profit, Further, such set-off is only allowed against calls made before, and not after the winding up, Re West of England and South Wales District Bank, Ex parte Branwhite (1879), 48 LJ. Ch. 463. In any event a shareholder who has paid off a debt due by the company, with the acquiescence of the directors is entitled to credit for the amount so paid as against his liability upon the shares, Re Switchback Railway, etc., Co., Ex parte Mount (1890), 16 V.L.R. 339, 341.

A shareholder. who is a creditor of a company which is being wound up, is entitled, on payment of the amount of all calls, to receive dividends at the same time and rate as other creditors, but if the contributory becomes insolvent, the debt due to him may be set-off against calls, as they are mutual debts. If he has not yet become insolvent, but the company is endeavouring to make him insolvent, as for non-payment of calls, he is not entitled to set off the debt due to him against the petitioning creditor's debt, Re Sloss, Ex parte Robison Bros., Campbell, and Sloss Ltd. (1893), 19 V.L.R. 710. A joint debt cannot be set off (ibid.).

A shareholder creditor of a company having assigned his property to trustees for the benefit of his creditors, of which due notice was given to the company, the company having gone into liquidation, and the shareholder being placed on the list of contributories as liable to pay calls which were not paid. it was held that the liquidators must pay to the shareholder's trustees the full amount of the debt due by the company, although the shareholder had not paid his caIls as contributory, Re McKay Harvesting Machinery Co. (1894), 20 V.L.R. 153.

In any event the Court is not compelled to allow a set-off, but it has a discretion to do so, Brasnett's Case (1885), 53 L.T. 569.

As to the right of set-off between a company in liquidation and a bankrupt shareholder, see Re West A ustralian Lighterage, Stevedoring and Trallsport Co. Ltd., Ex parte Bank of New South Wales (1903),5 W.A.L.R. 132.

For cases on set-off against unpaid calIs, see 10 English and Empire Digest (Rpl.), pp. 985, 1123.

Adjustment of the rights of contributories-As to a call "for the adjustment of the rights of the contributories among themselves", see R,e Hodge's Distillery Co., Ex parte Maude (1870), 6 Ch. App. 51; Re National Portland Cement Co., [1933] N.Z.L.R. 1065. In adjusting the rights of contributories inter se, the Court wi\] not take into consideration matters individual to a particular contributory which did not concern the company, e.g., an agreement by one contributory to indemnify another against calls, Addison's Case (1875), L.R. 20 Eq. 620; Shaw's Claim (1875), 10 Ch. App. 177. See also 10 English and Empire Digest (Rpl.), p. 1009.

Before or after-Note the very important words in the section which provide that calIs may be made "either before or after" the sufficiency of the assets has been ascertained. Where there are sufficient assets to payoff the debts and liabilities of the company, and there is no question of adjusting the rights of the contributories inter se, a call should not be made, Helbert v. Banner (1871), L.R. 5 H.L. 28. But on the othe'r hand the general intention of the section is to provide a fund for payment of whatever debts may be ascertained, and the Court need not wait until all claims have been ascertained before making a calI, Re Contract Corporation (1866), 2 Ch. App. 95; Re Barned's Banking Co. (1867), 36 L.I. Ch. 215.

An article that no calls should be made in a winding-up except for the purpose of paying debts and liabilities is invalid, Re Federal Deposit Bank Ltd., [1937] St. R. Qd. 282. Where owing to the invalidity of such an article a provision giving a shareholder an ad.vantage over other shareholders in the distribution of assets becomes a substantially different provision, it falls also (ibid.).


Contributories are liable to pay the full amount of their calls at once, even though by the contract under which they took their shares the calls were only payable by instalments, Re Cordova Union Gold Co., [1891] 2 Ch. 580; Re Pyle Works (1890)' 44 Ch, D. 534, at p. 583; London Provident Building Society v. Morgan, [1893] 2 Q.B. 266, 272. But the Court may allow the call to be made by instalments, Re Imperial Mercantile Credit Association Ltd., Lewis' Case (1873), 42 L.J. Ch. 379; Re Law Guarantee Trust and Accident Society (1910), 26 T.L.R. 565.

Appeal-A court of appeal will not readily interfere with the discretion of a judge who has given leave to make a call, by reducing the amount of the call ordered, Re Contract Corporation Ltd. (1866), 2 Ch. App. 95; Helbert v. Banner (1871), L.R. 5 H.L. 28.

~ecovery of call-The procedure for the recovery of calls from alleged contnbutories provided by this section is not applicable where a list of contributories has not been properly settled, Re Murray Engineering Co. Ltd., [1925] S.A.S.R. 330.

Resisting call-A person settled on the list of contributories cannot resist a summons for a call on the ground that he is not liable on the shares, without taking steps to have the register rectified, Re Tate Bros. Agency and Trading Co. Ltd. (1892), 2 N.S.W.B.C. 80.

Mode of making and enforcing calls-It is not necessary for a liquidator to proceed for an order for payment of a call against all defaulting contributories at the same time, Ewington v. Liquidator of Yaloginda Consols Gold Mining Co. Ltd. (1911), 13 W.A.L.R. 216.

Where an order had been made for payment of a call to a liquidator by name, and he had since died, a further order was made for payment to the liquidator who had been appointed in his place. See Re Henry Hayes & Co. Ltd. (1896), 6 N.S.W.B.C. 91.

An order directing payment of a call by a contributory in a compulsory winding-up may be enforced by attachment (Re E. & B. Chemicals and Wool Treatment PlY. Ltd. [1939] V.L.R. 278).

A liquidator may, in addition to his power to enforce calls by summons in the winding-up, proceed, by way of action, South Canterbury Building Society v. Stumbles (No.2) (1893), 12 N.Z.L.R. 205.

In a voluntary winding-up the Court may make a balance order for payment of calls by virtue of s. 274 post, Re Trocadero Dansant Entatainmellls Ltd., [1930] Q.W.N. 32; Re Murray Engineering Co. Ltd., [1925] S.A.S.R. 330.

As to whether a writ of Ii. fa. can be issued to enforce an order for payment into the bank. see Re United Confectioners (N.S.W.) Ltd. (1931), 31 N.S.W.S.R. 509. But see Re Leeds Banking Co. (1866), 1 Ch. App. 150.

Calls made under the corresponding section in another jurisdiction appear to be enforceable by action in Queensland. See Eveleen Silver Mining Co. Ltd. v. Padman, [1899) S.A.L.R. 56.

Interest on calls-As to interest on unpaid calls, see Re Welsh Flannel & Tweed Co. (1875), L.R. 20 Eq. 360.

Costs-As to the apportionment between defaulting contributories of the costs of applications for orders for payment of calls, see Re Motor Owners Buying Association Ltd. (No.2) (1923), 23 N.S.W.S.R. 537.

Person both creditor and debtor-Where a company is being wound up, a person who is in the position of being both creditor and debtor to the company may prove for the balance due to him by the company, Re Premier Permanent Building Society, Ex parte Australian Alliance Co. (1890), 16 V.L.R. 740.


246. Appointment of special manager. (1) The liquidator may, if satisfied that the nature of the estate or business of the company, or the interests of the creditors or contributories generally, require the appointment of a special manager of the estate or business of the company other than himself, apply to the Court which may appoint a special manager of the estate or business to act during such time as the Court directs with such powers, including any of the powers of a receiver or manager, as are entrusted to him by the Court.


(2) The special manager-(a) shall give such security and account in such manner as the

Court directs; (b) shall receive such remuneration as is fixed by the Court; and (c) may at any time resign by notice in writing addressed to the

liquidator, or on cause shown be removed by the Court. U.K. s. 263; N.S.W. s. 248; Vic. s. 186; Qld. s. 217; S.A. s. 230; W.A.

s. 220; Tas. s. 195. As to receivers and managers, see Part VIII, ante.

247. Claims of creditors and distribution of assets. (I) The Court may fix a date on or before which creditors are to prove their debts or claims or after which they will be excluded from the benefit of any distribution made before those debts are proved.

(2) The Court shall adjust the rights of the contributories among themselves and distribute any surplus among the persons entitled thereto.

(3) The Court may, in the event of the assets being insufficient to satisfy the liabilities, make an order as to the payment out of the assets of the costs charges and expenses incurred in the winding up in such order of priority as the Court thinks just.

U.K. ss. 264, 265, 267; N.S.W. ss. 249, 250, 252; Vic. s. 187; Qld. ss. 218, 219, 221; S.A. ss. 231, 232, 234; W.A. ss. 221, 222; Tas. s. 196.

The powers under this section may be delegated to the liquidator, see s. 252, post. As to contributories generally, see ss. 218, 219, 220, ante.

Voluntary winding-up-The court can make an order under this section when a company is being wound up voluntarily, Re Hamblin & Co. [1917] N.Z.G.L.R. 343.

Failure to prove-Failure to prove a debt within the time fixed does _not mean that the creditor loses all his rights, but only that he is excluded from the benefit of any distribution made before proof. So long as there are funds available, a creditor may prove at any time before the company is actually dissolved, subject to terms as to costs and as regards dividends already paid, Re Kit Hill Tunnel (1881), 16 Ch. D. 590. See also Dicken v. Ballantine, [1939] S.C. 783.

Debenture-holders who had put in claims after the date originally fixed for claims to be made were allowed to rank as creditors in the winding up, in Re Real Estate Mortgage and Deposit Bank (1897), 3 A.L.R. (C.N.) 83.

Rights as contributories-The rights of contributories which will be adjusted under the section are strictly confined to those which the contributories have against each other in their capacity as contributories, e.g., as stated above the right to enforce payment to the full extent of the member's liability and even to enforce a contract contained in the articles to make payments for special purposes beyond the limit of liability provided by the memorandum, Maxwell's Case (1875), L.R. 20 Eq. 585; McKewan's Case (1877), 6 Ch. D. 447; but see Baird's Case [1899] 2 Ch. 593, 598. But contributories cannot, under this section, enforce against each other rights which have nothing to do with their position as contributories (i.e. which do not arise directly out of their several contracts with the company), e.g., rights arising out of a collateral contract on the part of certain contributories to indemnify others, Addison's Case (1875), L.R. 20 Eq. 620, or rights as between tort-feasors, creditors, and contributories, see Re Alexandra Palace Co. (1883), 23 Ch. D. 297.

Surplus assets-A person who is both a debtor to, and a member of, a company cannot participate in a distribution of the assets until he has contributed the amount of his debt, Re Peruvian Railway Construction Co., [1915] 2 Ch. 442. Surplus assets mean, therefore, primarily the assets remaining after payment of debts and costs, Re Crichton's Oil Co., [1902] 2 Ch. 86 cf. Webb v. Federal Commissioner of Taxation (1922), 30 C.L.R. 450 at p. 476; 28 A.L.R. 284 at p. 295. But they may also denote the assets remaining after paying debts, costs, and return of all paid-up capital. When the phrase occurs in the articles


of association, it will be necessary to determine which meaning it is intended to have. Prima facie it has the former meaning, but the provisions of the articles may show that the latter is intended. See Re Rockhampton Prospecting Co. Ltd .. [1905) St. R. Qd. 64; [1905) Q.W.N. 15; Re New Transvaal Co., [1896) 2 Ch. 750; Re Ramel Syndicate, [1911] 1 Ch. 749; Re Peabody Gold Mining Corporation, [1897] W.N. 170. In any event, "surplus assets" always includes uncalled capital, Re Sheppards Corn Malting Co. Ltd., Ex parte Lowenfeld (1893), 70 L.T. 3; and therefore the fact that some contributories have paid up, and others not, must be taken into consideration in adjusting their rights.

The amount realised on the sale of the assets of a company being sufficient to meet all liabilities and leave a surplus, it was held, in Re Metropolitan Bank, [1912] V.L.R. 449, that past members ("8" contributories) were entitled preferentially to be repaid the amounts contributed by them together with interest.

Profits made by the liquidator who carried on the business of the company in liquidation were held to be surplus assets and receivable by shareholders as capital amounts in Union Trustee Co. of Australia v. Watson (1931),48 W.N. (N.S.W.) 102.

Distribution-The rule as to distribution is that surplus assets are capital in which all members of the company are, prima facie, entitled to share on a basis of equality, Brown v. Dale (1878), 9 Ch. D. 78; Birch v. Cropper (1889). 14 App. Cas. 525, 546. A departure from this rule will only be allowed where there is a contract between the members and the company (i.e.. a provision in the memorandum or articles of association) that capital shall be distributed on some other basis. But if such a contract does not relate to the distribution of capital. but merely provides for the payment to certain shareholders of a preferential dividend, the ordinary rule is not altered, Re Eclipse Gold Mining Co. (1874). L.R. 17 Eq. 490, 492; Re Accringt.on Corporation Steam Tramways, [1909] 2 Ch. 40; Re Hawera County Electric Co., [1930) N.Z.L.R. 1000, 1013; Re Foster & Son, [1942) I All E.R. 314; and see 10 English and Empire Digest (Rpl.) p. 1067.

Equality of nominal shareholding-Apart from any special provision in the memorandum or articles, the surplus assets of the company, including the uncalled capital, and assuming that all the shares are of equal nominal value, will be distributed rateably in proportion to the number of shares held by each shareholder; i.e., (1) if the assets are not sufficient to repay to the contributories the amounts paid up on their shares, division will be made so that the loss is borne by each in proportion to the number of shares held. Re Hodge's Distillery Co., Ex parte Maude (1870). 6 Ch. App. 51; and (2) if the assets are more than sufficient to repay the amounts paid up on shares, the surplus, after making each payment, will be divided in proportion to the number of shares held. Birch v. Cropper (1889), 14 App. Cas. 525; Re Madame Tussaud, [1927] 1 Ch. 657.

As regards (2), it is clear that the fact that some shareholders have paid up more than others is duly taken into consideration, for the division of the surplus only takes places after the payment of the amounts paid up on shares, Re Wakefield RollinR Stock Co., [1892) 3 Ch. 165; Re Driffield Gas LiRht Co .. [1898] 1 Ch. 451; Re Weymouth, etc., Steam Packet, [1891] 1 Ch. 66; and see 10 English and Empire Digest: (Rpl.) p. 1065.

As regards (1), the same principal applies by reason of the fact that surplus assets include uncalled capital (see supra), and hence the fact that some shareholders have paid up more than others will be allowed for in any division of losses to be borne or payments to be made to contributories, either by making larger returns to those who have paid more (see cases above) or by making calls Re AngloContinental Corporation of Western Australia, [1898] 1 Ch. 327; Welton v. SafJery, [1897] A.C. 299; Re Anglesea Colliery Co. (1866), 1 Ch. App. 555.

The rights of shareholders (in the absence of express provi.sion in the .articles) to be placed on an equality by the adjustment of the amounts paid up on t~elr shares is so well established that, even where the shareholders had passed resolutIOns for a voluntary winding up on the understanding that no calls would ~~ made unless the assets were insufficient to payoff the debts. the Court, on the petitIOn of a holder of fully-paid shares, directed the liquidators to make a call from the holders of partlypaid shares, Re Provision Merchants Co. Ltd. (1872), 26 L.T .. 862. And where the articles provided that calls should not be made l!pon certam shares beY':)lld a certain amount without the consent of a certain proportion of the shareholders, It was held that the limitation applied only while the company was a going concern and


that holders of fully-paid shares were entitled to have a call made for equalisation, Re Coed Madog Slate Co., [1877] W.N. 190. See also Re Federal Deposit Bank, [1937] St. R. Qd. 282.

And if the shares are not of equal nominal value, equality will, of course, also be excluded to that extent, i.e., after adjustment has been made between contributories as regards the amounts paid up on their shares (see supra), the surplus will be distributed in proportion to the nominal value of the shares, Re Wakefield Roiling Stock Co., [1892] 3 Ch. 165; Re Espuela Land and Cattle Co., [1909] 2 Ch. 187.

Calls in excess of liability-Where calls are made in excess of liability of contributories who have ceased to be members, a refund will be ordered, Re City of London Insurance Co. Ltd., [1932] 1 Ch. 226; [1931] All E.R. Rep. p. 519.

Surplus after repayment of capital-Where assets are sufficient to pay each member's capital and still leave a surplus then such surplus (not being undivided profits) forms part of the fund which at the winding-up represents capital, and in the absence of a contrary provision is divisible in proportion to the members' interest in capital, that is to say, in proportion to the amount of their shares not to the amounts paid on them, Birch v. Cropper (1889), 14 App. Cas. 525; Re WaddinRtoll's Pictures Ltd. (\920), 37 W.N. (N.S.W.) 113. This applies as well to an unlimited company, Re Driftield Gas Light Co., [1898] 1 Ch. 451. Where the nominal amount of one class of shares only has been reduced, then distribution is on the basis of the amounts of the shares as at the date of winding-up, and not as originally prior to reduction, Re Espllela Land alld Cattle Co., [1909] 2 Ch. 187 at p. 192.

Shares with preferred rights-Where the company has issued shares preferred both as to dividend and repayment of capital, two questions may arise, viz.: ( 1) Whether the preference shareholders are entitled to be paid arrears or deficiency of their preferential dividend in addition to their capital in priority to the ordinary shareholders; and (2) Whether in the event of a surplus of assets after repaying capital paid up on both preference and ordinary shares, the preference shareholders are entitled to participate together with the ordinary shareholders in such surplus, or, on the other hand, are limited to repayment of their paid-Up capital.

In these respects the rights of the preference shareholders in each instance turn upon the true construction of the articles or resolutions creating the preference shares. Re Crichton's Oil Co., [1902J 2 Ch. 86.

Question (1):

Where conditional upon declaration of dividend-Where neither articles nor resolution expressly provide for payment of arrears of preference dividend in a winding-up, then if on correct construction of the articles or resolution the right to receive the preferential dividend whilst the company is a going concern is conditional upon declaration of such dividend, those preferential shareholders have no right to receive any arrears or deficiency of such dividend in a winding-up, even where distributable assets include an element of accumulated profits, Re Odessa Waterworks, r1901] 2 Ch. 190 n.; Re Crichton Oil Co., [1902] 2 Ch. 86; Re AccrinRton Corporation Steam Tramways, [1909] 2 Ch. 40; Re Alexallder Stewart & Sons Ltd., r 1929] St. R. Qd. 86; Re Foster & Son, [1942] 1 All E.R. 314; Re Wood, Skinner & Co., [1944] Ch. 323; Re Sheffield Afanujacturillg and Plming Co. Ltd. (1951), 52 S.R. (N.S.W.) 34; Re Collie Power Co. Pty. Ltd. (1952). 54 W.A.L.R. 44.

Where not conditional upon declaration of dividend-On the other h,md, if the articles or resolution are so drawn that profits earned whilst the comp .. ny is a going concern belong to the members whether dividends are declared or not, the distributable assets in a winding-up so far as representing accumulated profits will be divisible according to the rights of respective members to receive profits and thus the preference shareholders will first be entitled to payment out of the available fund of any deficiency of preference dividend. leaving the balance to the ordim;ry shareholders. R(' BridRewater NaviRation Co., [1891] 1 Ch. 155, 2 Ch. 317; Re RislioTJ V. Smyrna & Cassaha Rly Co., rI895J 2 Ch. 265; No.2, p. 596; Re Spanish PmspeclillR Co., [1911] 1 Ch. 92; [1908-101 All E.R. Rep. 573: Dimhllla VuI/c\' (Ceylon) Tea Co. Ltd. v. Laurie, r 1961] 1 All E.R. 769; Inlolld RCI'Clllle COIilmissioners v. Burrell, [1924] 2 K.B. 52; [1924] All E.R. Rep. 672.

Expression of preferred rights-Where preference shares carried the rights to it "cumulative preferential" dividend. and were "to rank bo.th as regards dividends and capital in priority to ordinary shares" but did not confer the right to any


further participation in profits or assets, a right to arrears of dividend was upheld, Re Walter Symons Ltd., [1934] Ch. 308; [1933] All E.R. Rep. 163. Where the word "preferential" was omitted, and the right to further participation was not expressly excluded, the right of preference shareholders to arrears was disallowed, Re Wood, Skinner ~ Co., [1944] Ch. 323. Where there was no reference to ranking, but the rights were otherwise similar to those in Re Walter Symons Ltd., supra, the Court of Appeal approved both Re Walter Symons Ltd. and Re Wood, Skinner & Co. to hold that the preference shareholders were entitled to priority in respect of arrears of dividend, Re F. de long & Co. Ltd., [1946] Ch. 211; [1946] 1 All E.R. 556. Where the preference shareholders were entitled under the articles to "the right to a fixed cumulative preference dividend" and were to rank "both as regards dividends and capital in priority to all other shares", it was held that the preference shareholders were entitled to arrears of dividend in priority, Re E. W. Savory Ltd., [1951] 2 All E.R. 1036; [1951] W.N. 619. See also Re Canada Tea Co. Ltd. (1960), 21 D.L.R. 90.

Where arrears of preference dividend are by the articles or resolution expressly assured in a winding-up to the shareholders, they are entitled to be paid the deficiency in their preferential dividend to the date of winding-up in full out of the available assets whether such assets represent capital or accumulated profits, Re Wharfedale Brewery Co. Ltd., [1952] Ch. 913; [1952] 2 All E.R. 635.

Source-Where moneys are in the liquidator's hands, being arrears of dividend to which shareholders are entitled, then from whatever source those moneys came, whether they represent capital or profits, he distributes them as assets in the winding-up, Inland Revenue Commissioners v. Burrell, [1924] 2 K.B. 52; [1924] All E.R. Rep. 672; Inland Revenue Commissioners v. Pollock and Peel Ltd. [1956] 2 All E.R. 776.

Question 2: Whether shares with preferred rights entitled to participate with ordinary shares

in surplus after capital refund-Where the memorandum, articles or resolution gives a preference as to repayment of capital to preference shareholders, it is a question of construction upon all the relevent provisions whether any surplus is divisible among both preference and ordinary shareholders rateably according to their holdings irrespective of class or whether, on the other hand, preference shareholders are limited to repayment of their capital leaving the whole surplus to the ordinary shareholders.

Construction of memorandum-In construing the rights of preference shareholders to share in the assets in a winding-up regard should be had, first, to the company's memorandum; and the articles of association are referred to only to explain or supplement the memorandum if it is ambiguous or silent on the point, Re Duncan, Gilmollr and Co. Ltd., [1952] 2 All E.R. 871. See also King v. Tait (1936), 57 C.L.R. 715.

Where articles provided that in the event of winding-up certain preference shares "shall rank before the other shares of the company on the property of the company to the extent of repayment of the amounts called up and paid thereon", it was held that this provision constituted a complete statement of the rights of the preference shareholders in a winding-up who consequently were not entitled to participate any further in the assets, Scottish Insllrance Corporation Ltd. v. Wilsons and Clyde Co. Ltd., [1949) A.c. 642; (1949) 1 All E.R. 1068, considered in Dimbula Valley (Ceylon) Tea Co. Ltd. v. Laurie, [1961) 1 All E.R. 769. The onus lies upon the preference shareholders to satisfy the court that, on the true construction of the particular document, they are entitled to share in the surplus assets, Re Isle of Thanet Electric Co. Ltd., [1949) 2 All E.R. 1060; [1950] Ch. 161; Scottish Insurance Corporatioll Ltd. v. Wi/SOilS alld Clyde Co. Ltd., supra; Re lohl! Smith's Tadcaster Brewerv Co. Ltd., [1952) 2 All E.R. 751 (reversed on another point [1953) 1 All E.R. 518; [1953) Ch. 308).

Where the memorandum and articles and the terms of issue of cumulative preference shares were silent as to the right of the holders of those shares to share in the surplus assets it was held that on a distribution of the surplus they were entitled to share in the same way as the ordinary shareholders. Re Sheffield Manufacturing & Plating Co. Ltd. (1951), 52 S.R. (N.S.W.) 34. See also Re Metcalfe (William) & Sons Ltd., [1933) Ch. 142.

Uncalled capital-Where the effect of an article, upon its true construction. was that uncalled capital was not available for distribution amongst shareholders upon liquidation. a call made subsequently to liquidation could only be used to pay


creditors and the expenses of liquidation and any surplus remaining from such call was to be returned to the shareholders who paid the call, Re Australian Group & General Assurance Co. Ltd. (1932), 32 S.R. (N.S.W.) 435.

Profits between end of financial year and winding-up-In respect of profits earned in the period between the close of the company's financial year immediately preceding the commencement of the winding-up and that commencement, preference shareholders are not entitled to participate, Re Foster & Son Ltd., [1942] I All E.R. 314; Re Catalinas Warehouses and Mole Co. Ltd., [1947] 1 All E.R. 51.

Costs, charges and expenses-Afte,r the assets are realised the "costs, charges, and expenses properly incurred" have priority over all other claims. See s. 275, post, which, although it applies primarily to a voluntary winding-up, represents the law on a compulsory winding-up, Webb v. Whiffin (1872), L.R. 5 H.L. 711. at p. 735.

Part of the surplus assets of a Victorian company already the subject of winding-up proceedings in England were applied towards costs of the English winding-up, Re Australian Midas Gold Estates Ltd. (in liq.), [1916] V.L.R. 526.

A contributory who. after the issue of a summons upon him for a balance order in respect of calls due by him, paid the amount to the liquidator, was ordered to pay the costs of the summons, Re Trocadero Dansant Entertainments Ltd., [1930J Q.w.N. 32.

As to order of payment where assets are insufficient and costs of all parties in an unsuccessful application by the liquidator to settle shareholders on the list of contributories have been ordered to be paid out of the assets, see Re PuntolVner.\' Assoc. Ltd. (1893) 6 Q.L.J. 30.

Secured creditors are entitled to be paid in priority to payment of costs and expenses of winding-up, but such portion of those costs and expenses as has been incurred in getting in assets subject to the security should be borne by those assets, Re Universal Distributing Co. Ltd. (1933), 48 C.L.R. 171.

248. Inspection of books by creditors and contributories. The Court may make such order for inspection of the books and papers of the company by creditors and contributories as the Court thinks just, and any books and papers in the possession of the company may be inspected by creditors or contributories accordingly, but not further or otherwise.


Effect of section-Where there is a winding-up, this section supersedes the various sections of the Act giving rights of inspection while the company is a going concern, Re Kent Coalfields Syndicate [1898] 1 Q.B. 754; Somerset v. Land Securities, [1897] W.N. 29, and also any rights given by the articles, Re Yorkshire Fibre Co. (1870). L.R. 9 Eq. 650.

When inspection ordered-Where the debts are large and the transactions of the company h,lve been complex the Court will usually allow inspection without requiring sp~cial circumstances to be shown, Re Birmingham Banking Co., Ex parte Brinslev (1866),36 LJ. Ch. 150, and an order may be made on the allegation that the company was promoted for the purchase and sale of worthless property. Re Homw Hill Gold Mining Co. (1883), 27 Sol. 10. 434.

Inspection will usually only be allowed when it is required for pllrposes of the winding-up and for the benefit of those interested in it, and where the books are in the possession of the company. Thus, where the assets of the company had been sold and the books handed over to a new company. and inspection was asked bv members of the old company in order to establish claims against the directors and promoters of the old company, the order was refused because the inspection was not required for purposes of the winding-up, and also because the books were not in the possession of the old company, Re North Brazilian Sugar Factories (1887). 37 Ch. D. 83.

Inspection--The right to inspect includes the right to take copies, Re Arauco Co .. r 1899] W.N. 134; and the books, which may be inspected. include the register of shares, allotment and agenda books, Lancashire Cotton Spinning Co. v. Greatorex (1866). 14 L.T. 290, and the register of mortgages, Somerset v. Land Securities Co., [18971 W.N. 29.

See further 10 English and Empire Digest. (Rpl.) p. 1040.


249. Power to summon persons connected with company. (1) The Court may summon before it any officer of the company or person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or any person whom the Court deems capable of giving information concerning the promotion, formation, trade dealings, affairs or property of the company.

(2) The Court may examine him on oath concerning the matters mentioned in subsection (1) of this section either by word of mouth or on written interrogatories and may reduce his answers to writing and require him to sign them, and any writing so signed may be used in evidence in any legal proceedings against him.

(3) The Court may require him to produce any books and papers in his custody or power relating to the company, but where he claims any lien on books or papers the production shall be without prejudice to that lien, and the Court shall have jurisdiction to determine all questions relating to that lien.

( 4) An examination under this section or section two hundred and fifty may, if the Court so directs and subject to the rules, be held before any stipendiary magistrate named for the purpose by the Court, and the powers of the Court under this section and section two hundred and fifty may be exercised by such stipendiary magistrate.

(5) Any person summoned before the Court or a stipendiary magistrate for examination under this section may at his own cost employ a solicitor with or without counsel who shall be at liberty to put to him such questions as the Court or the stipendiary magistrate deems just for the purpose of enabling him to explain or qualify any answers given by him.

( 6) If any person so summoned after being tendered a reasonable sum for his expenses refuses to come before the Court at the time appointed not having a lawful excuse, made known to the Court at the time of its sitting and allowed by it, the Court may cause him to be apprehended and brought before the Court for examination.


For offences with respect to failure to deliver up property or documents of the company. see s. 300, post. As to the public examination of promoters, directors, etc., see s. 250, post.

Application-The application for a summons may be made by the liquidator. or a creditor, or contributory, Re Gold Co. (1879), 12 Ch. D. 77.

Of its own motion-The Court may make an order of its own motion if the circumstances seem to require it and no other person takes steps, Re Land Securities Co. (1894),42 W.R. 624.

The liquidator may apply ex parte by written statement, but not by affidavit, so as to avoid giving unnecessary publicity to the proceedings, Re Gold Co., (1879), 12 Ch. D. 77 at pp. 82-83; Re Mutual Live Stock Financial and Agency Co. (1887). 13 V.L.R. 91. The liquidator's statement of facts, upon which application to the Court is made by him under this section, should, both before and after the hearing, be sealed up in an envelope addressed to the judge and opened by the judge alone, Re Norman Turnbull & Co. Ltd. (1924), 41 N.S.W.W.N. 109. Provided the Court is satisfied that the person to be, examined and the subject-matter of examination both come under the section. a prima facie case need not be made out by the liquidator when applying. A case of suspicion may be enough. and the object may be to find out if a suspicion is well founded, Re Gold Co., supra. But where the application is made by a creditor or contributory. he must give notice to the liquidator. and the application must be supported by affidavit, Re Gold Co., supra; Re Sir John Moore Gold Mining Co. (1877), 37 L.T. 242.


When order will be made-The order is not made as of right. The matter is in the discretion of the Court, and the Court will so exercise its discretion as to prevent the powers given by the section from being used for vexatious or oppressive purposes. Thus an order will not be made where it appears that the object is not to assist the winding up but to elicit information which may assist the applicant in other proceedings, Re imperial Continental Water Corporation (1886), 33 Ch. D. 314; Re British Building Stone Co., [1908] 2 Ch. 450; Re London & Northern Bank, Ex parte Archer (1901), 85 L.T. 698. But a liquidator is ordinarily entitled to examine the directors of the compapy under this section, and this right is not affected by the fact that an action is pending between the directors and the company for the purposes of which the liquidator hopes to procure evidence by the examination, Re John Booth & Co. Ltd. (1902), 2 NS.W.S.R. (Eq.) 138. An order was also made for examination where the company was not a party to the action but was interested in its result, Re Empire Motors Ltd., [1933] N.Z.L.R. s. 81. An order was refused as oppressive in Re Maville Hose Ltd., [1939] Ch. 32; [1938] 3 All E.R. 621.

The type of case in which an order will be made is as follows: Any information which relates to the property of a contributory is information concerning the property and effects of the company, Re Land Credit Co. of ireland, Trower and Lawson's Case (1872), L.R. 14 Eq. 8, and therefore his banker may be examined and ordered to produce the books relevant to the contributory's account, Druitt'.\· Case (J872). L.R. 14 Eq. 6.; Re FinanciallnsUf(lnce Co. Ltd. (1867), 36 L.J. Ch. 687: and his relatives may also be examined, Swan's Case (1870), L.R. 10 Eq. 675; Fricker's Case (1871), L.R. 13 Eq. 178, and his debtor, Trower and Lawson's Case, supra.

Capable of giving information-The Court will give power to the liquidator to summon such witnesses only as the Court may deem capable of giving information. Re Broken Hill Smelting Co. (1893), 19 V.L.R. Ill.

Refusal to give information-A summons will not be issued unless the person sought to be summoned has already refused the required information or the information he has given is insufficient or unsatisfactory, Re Ngunguru Coal Co. (1899), 18 N.Z.L.R. 256.

Who may be examined-A person engaged in arranging the amalgamation of the company with another may be examined, Re English Joint Stock Bank (1866), L.R. 3 Eq. 203, but a mere creditor cannot be examined, Re Accidental and Marin~ Insurance Corporation (1867), L.R. 5 Eq. 22.

A person against whom a contributory had a right of indemnity which he has assigned to the Company may be examined, Massey v. Allen (1878), 9 Ch. D. 164.

The Court has power under this section to order the examination of a person who claims to be a creditor of a person who is indebted to a company, although it is not shown that such person knows anything of the trade dealings, estate, or effects of the company, Re City of Melbourne Bank, [1910] V.L.R. 282.

Conduct of examination-The examination is usually entrusted to the liquidator if he is willing to take the proceedings, although a creditor or contributory may also be allowed to participate and to conduct the whole or part of the examination, Whitworth's Case (1881), 50 L.J. Ch. 752. But where the liquidator refuses to apply, or where the application is for the examination of the liquidator himself, the examination may be entrusted to some other person, Re Sir John Moore Gold Minim? Co. (1877), 37 L.T. 242; Re Gold Co. (1879), 12 Ch. D. 77. Where a liquidator declined to undertake the examination on the ground that the funds were not sufficient to run the risk of costs, the examination was entrusted to the contributory applying for it on his undertaking to submit to costs being dealt with as the Court should see fit, and the inquiry was limited to specific assets, no grounds for a general inquiry having been shown, Re North Queensland Brick wzd Pottery Co. Ltd .• r1902) St. R. Qd. 285.

Matters which may be elicited-The only questions which a witness who is examined under this section may refuse to answer are: (a) questions tending to incriminate him, and (b) questions involving a breach of professional confidence. As to (a). see Evidence and Discovery Acts, 1867 to 1962, s. 7, title EVIDENCE. The witness must answer questions as to hearsay, Re Ottoman Co. (1867), 15 W.R. 1069. The witness Coannot object to being examined merely because an action by the company is pending against him, Re Contract Corporation, Ex parte Bateman (1866). 15 W.R. 245; Re Metropolitan (Brush) Electric Light & Power Co., Px p([rte LeavPr (1884), 51 L.T. 817; Re Reliance Taxicab Co. Ltd. (1912), n T.LR. 529; but he may object to answering questions which are put. not for


purposes of the winding up, but to assist the company or the examiner in an action against the witness or some other person, Re North A ustralian Territory (1890), 45 Ch. D. 87; and see Re Lisbon Steam Tramways Co. (1876), 2 Ch. D. 575; Re London & Northern Bank, Ex parte Archer (1901), 85 L.T. 698. But see Re Auto import Co. (Aus.) Ltd. (1924), 25 N.S.W.S.R. 52. And he cannot be examined touching the formation of the company, Re London and Lancashire Paper Mills (1888), 57 L.l. Ch. 766.

For cases on refusal of a witness to be examined. see 10 English and Empire Digest (Rp!.), p. 938.

A liquidator seeking to invalidate a transaction of the company, on the ground that the other party is an unregistered money-lender, cannot obtain production of that partv's books relating to his transactions with persons other than the company, Re Marrickville Timber Co. Ltd. (1921), 21 N.S.W.S.R. 643.

Information as to the names appearing in the share register, and as to the manner in which the names were so placed in the register, is information relating to the trade dealings of a company, Re Broken Hill and Argenton Smeltiflg Co. (1893), 19 V.L.R. Ill.

Mode of proceeding-Every effort will be made by the Court to ensure that undue publicity is not given to the proceedings. The witness may have counsel and solicitor. Re Breech Loading Armoury Co. (1867), L.R. 4 Eq. 453, and see Re Electric TeleRraph Co. of ireland, Ex parte Bunn (1857), 24 Beav. 137; but no other person on his behalf, Re Weslern of Canada Oil, ele., Co. (1877). 6 Ch. D. 109. For purposes of re-examination, in order to explain his examination in chief (which is carried out by the examiner), his counsel and solicitor may take and carry away notes, Re Cambrian Mining Co. (1881),20 Ch. D. 376, but no improper use of such notes will be allowed; they should be destroyed when the proceedings are over, and any unauthorised publication will be treated as a contempt of court, see generally Re Heseltine (W.) & Son Ltd. [1891] W.N. 25; Re Breech Loading Armollrv Co., supra; Re Grey's Brewery Co. (1883),25 Ch. D. 400; Re America/l ExchallRe in Europe Ltd. (1889), 58 L.l. Ch. 706; Re Sir John Moore Gold AfinillR Co. (1877),37 L.T. 242; Re Norman King & Co. Pty. Ltd. [1960] S.R. (N.S.W.) 98.

The notes of the depositions taken at the examination are not to be filed or open to the inspection of any person other than the liquidator except by leave of the Court. see Re John Pringle & Co. Ltd. (1935),35 S.R. (N.S.W.) 95.

The examination itself is private, amI the examiner has no discretion to admit members of the public if their presence is objected to, Re Westel'll of Canada Oil, etc., Co., (1874), L.R. 17 Eq. 1; and neither admitted creditors (who are, generally speaking, entitled to attend all winding-up proceedings at their own expense). nor creditors who have obtained an order giving them leave to attend at their own expense, are entitled to attend as of right, though, if their presence is not objected to. the Court may, at its discretion. permit them to do so, Re Grey's Brewerv Co. (1883). 25 Ch. D. 400; Re Heseltine (w.) & Son Ltd., [[891] W.N. 25: E;npire Assurance Corporation Ltd. (1868), 17 L.T. 488; Re Norwich Elluituhlc Fire insurance Co. (1884), 27 Ch. D. 515.

Attendance-As to what is a reasonable sum for expenses. see Rc A. H. Prcntice Ltd. [1930] Q.W.N. 11.

The witness may be ordered to pay the costs of compelling him to attend, Re Land Credit Co. of Ire/and (1872), L.R. 14 Eq. 8; Re Lisboll SteD/1I Tml/l\I'u\'s (1876),2 Ch. D. 575,583; and if he refuses to answer a proper question. an ord'er may be made compelling him to attend again at his own expense. (ibid. l.

As to costs of examinations under this se~tion which ,!re ancillary to pro-:cedings between the company and the persons examIned, set: Re A lito Import Co. (A list.) Ltd. (No.2) (1925). 25 N.S.W.S.R. 587.

Documents-As to the protection afforded to persons having a lien on the documents which they are required to produce, see Re South Essex Estllar)" etc., Co. (1869). 4 Ch. App. 215; Re Capilal Fire insurance Association (1883),' 24 Ch. D. 408; Graham v. White, [1908] S.c. 309; Findlay v. Waddell, [19101 S.c. 670; Re Hawkes, [1898] 2 Ch. 1; Re Gleebs Pty. Ltd. (In Liq.). [1933] V.L.R. 293 (accountant's lien for work done. production required).

Production of documents may be resisted on the ground of privileoe e g public policy, see Re Har~reaves (Josep'h) Ltd., [1900] 1 Ch. 347, where a ;u~eyo; ~f taxes successfully resIsted productl.on o~ documents relating to a company's mcome tax returns on grounds of publIc polIcy. '


If a witness is ordered to attend and produce books or documents which in fact are not in his order or possession, he must nevertheless attend and explain to the Court why he cannot produce them, Re Leitner Electrical Co. Ltd. (1916), 32 T.L.R. 474.

For circumstances in which a person by reason of his conduct may be precluded from asserting his lien, see Re Allied Glass Manufacturers Ltd. (1936), 53 W.N. (N.S.W.) 137.

Postponement-As to postponement of the examination on the ground that an action is pending, see Re Imperial Continental Water Corporation (1886), 33 Ch. D. 314; Re London & Northern Bank, Ex parte Archer (1901), 85 L.T. 698; Re Empire Motors Ltd., [1933] N.Z.L.R. s. 81.

Form of order-As to form of order for leave to issue a summons, see Re Gibson's Ltd. (1927), 44 N.S.W.W.N. 8.

Civil proceeding-A summons under this section is a "civil proceeding" within the meaning of the Service and Execution of Process Act 1901-1958 (Commonwealth). Cheney v. Spooner (1929) 41 C.L.R. 523; [1929J A.L.R. 173.

250. Power to order public examination of promoters, directors, etc. ( 1) Where the liquidator has made a report under this Part stating that, in his opinion, a fraud has been committed or that any material fact has been concealed by any person in the promotion or formation of the company or by any officer in relation to the company since its formation, the Court may after consideration of the report direct that the person or officer, or any other person who was previously an officer of the company, including any banker, solicitor or auditor, or who is known or suspected to have in his possession any property of the company or is supposed to be indebted to the company or any person whom the Court deems capable of giving information concerning the promotion, formation, trade dealings, affairs or property of the company, shall attend before the Court on a day appointed and be publicly examined as to the promotion or formation or the conduct of the business of the company, or in the case of an officer or former officer as to his conduct and dealings as an officer thereof.

(2) The liquidator and any creditor or contributory may take part in the examination either personally or by solicitor or counsel.

(3) The Court may put or allow to be put such questions to the person examined as the Court thinks fit.

( 4) The person examined shall be examined on oath and shall answer all such questions as the Court puts or allows to be put to him.

( 5) A person ordered to be examined under this section-(a) shall before his examination be furnished with a copy of

the liquidator's report; and

(b) may at his own cost employ a solicitor with or without counsel who shall be at liberty to put to him such questions as the Court deems just for the purpose of enabling him to explain or qualify any answers given by him.

( 6 ) Where a person directed to attend before the Court under subsection (1) of this section applies to the Court to be exculoated from any charges made or suggested against him the liquidator' shall appear on the hearing of the application and call the attention of the Court to any matters which appear to him to be relevant and if the ~ou.rt, after hearing any ~vi~ence given or witnesses called by the liqUIdator, grants the applIcatIOn the Court may allow the applicant such costs as in its discretion it thinks fit.

304 COMPANIES

(7) Notes of the examination(a) shall be reduced to writing;

Vol. 2

(b) shall be read over to or by and signed by the person examined; (c) may thereafter be used in evidence in any legal proceedings

against him; and (d) shall be open to the inspection of any creditor or contributory

at all reasonable times.

(8) The Court may if it thinks fit adjourn the examination from time to time.

u.K. s. 270; N.S.W. s. 254; Vic. s. 190; Qld. s. 223; S.A. s. 236; W.A. s. 225; Tas. ss. 199, 200.

For the obligation of officers to discover property of the company to the liquidator, see s. 300, post. For the power to summon persons connected with the company, see s. 249, ante.

Conditions of jurisdiction-Before the Court can proceed under this subsection it is necessary-

(1) That a "further" report should have been made under s. 235, allte, Ex parte Barnes [1896] A.C. 146; Re Great Kruger Gold A1inilll{ Co., Ex parte Barnard, [1892] 3 Ch. 307.

(2) That the further report should state the opinion of the liquidator that there has been fraud (ibid.). It is not sufficient if the report merely suggests or gives rise to a suspicion of fraud. The liquidator must either state that in his opinion there has been fraud or must state facts which clearly show that it is his opinion, Re General Phosphate Corporation, [1895] I Ch. 3.

(3) That the report should allege fraud against the person in respect of whom the order for a public examination is asked. Re Civil, Nal'al, and Military Out jitters Ltd .. [1899] I Ch. 215; Re Rubber Invention Co. Pty. Ltd., [1908] V.L.R. 414. The report need not use the word "fraud" or any particular language, but it must state such facts as will make out a prima facie case of fraud against the person in question, Re Laxon & Co., [1893] I Ch. 210; Re Birkdale Steam Lalilldry Co., [1893] 2 Q.B. 386.

(4) That the person against whom the fraud is alleged should be one of the persons contemplated by the section. Re National Stores Ltd., [1899] 2 Ch. 773, at p. 776.

Application-The application for an order under this section may be made by the liquidator ex parte, Re Great Kruger, etc. Co., [1892] 3 Ch. 307; Rc Trust and Investment Co. of SOllflz Africa, [1892] 3 Ch. 332.

Resistance to order-The person against whom the order is made may apply to have it discharged, but only on the ground that the Court had no jurisdiction to make it, i.e., that one or more of heads (I )-( 4) above have not been complied with (Re New Travellers' Chambers [1895] I Ch. 395). The allegation of fraud itself cannot. on such an application, be contested (ibid.); and Re Naliollal Slores Ltd., [1899] 2 Ch. 773. The application to discharge must be made within a reasonable time. Two months is too long; fourteen days has been suggested as reasonable, but there is no fixed rule. see Ci\'il, etc., OllTfitten. [1899] I eh. 215, and Re National Stores, supra.

The person examined cannot raise the objection that the proceeding will not benefit the general creditors but only a particular secured creditor. Co/fl'C v. J. Pierre COli I'e Ltd. (1933). 49 C.L.R. 486.

Initiation of proceedings-The court cannot set in motion the proceedings for an examination under this section. Re Camphell Coverings Ltd., [1953] Ch. 488; [1953] 2 All E.R. 74. But s. 274. post, may afford jurisdiction. Rc CiIIllpbell COlwillgs Ltd. (No.2). [1954] Ch. 225; [19541 1 All E.R. 222.

Privilege-The report is absolutely privileged as regards everything ,ct out therein. and therefore no proceedings for libel will lie. Bottomley v. Brougham, [1908] 1 K.B. 584; Bllrr v. Smith, [1909] 2 K.B. 306; [1908-10] All E.R. Rep. 443.


251. Power to arrest absconding contribntory. The Court, at any time before or after making a winding up order, on proof of probable cause for believing that a contributory is about to quit the State or otherwise to abscond or to remove or conceal any of his property for the purpose of evading payment of calls or of avoiding examination respecting the affairs of the company, may cause the contributory to be arrested and his books and papers and movable personal property to be seized and him and them to be safely kept until such time as the Court orders.

U.K. s. 271; N.S.W. s. 256; Vic. s. 191; Qld. s. 225; S.A. s. 238; W.A. s. 227; Tas. s. 20l.

Arrest and seizure: Independent-The court may order the books, etc., to be seized without

making an order for arrest or vice versa; Re Imperial Mercantile Credit Co. (1867), L.R. 5 Eq. 264; Re Cotton Plantation Co. of Natal, [1868] W.N. 79. Ex parte:

Applications for an order under the section may be made ex parte, Re Ulster Land, etc., Investment Co. (1887), 17 L.R. Ir. 591, but the court will not make an order unless the contributory has had an opportunity of denying the debt, Re Cotton Plantation Co. of Natal, supra. On the other hand no action by the person arrested will lie against the informer unless he can show some false statement or suppression of material facts, Daniels v. Fielding (1846), 16 M. & W. 200.

252. Delegation to liquidator of certain powers of Court. Provision may be made by rules enabling or requiring all or any of the powers and duties conferred and imposed on the Court by this Part in respect of-

(a) the holding and conducting of meetings to ascertain the wishes of creditors and contributories;

(b) the settling of lists of contributories, the rectifying of the register of members where required, and the collecting and applying of the assets;

(c) the paying, delivery, conveyance, surrender or transfer of money, property, books or papers to the liquidator;

(d) the making of calls and the adjusting of the rights of contributories; and

(e) the fixing of a time within which debts and claims must be proved,

to be exercised or performed by the liquidator as an officer of the Court and subject to the control of the Court, but the liquidator shall not without the special leave of the Court rectify the register of members, and shall not make any call without either the special leave of the Court or the sanction of the committee of inspection.


In relation to meetings to ascertain wishes, see s. 289, post. Further as to the wishes, ~ee s. ~37, ante. As to the power of the court in relation to settling the Jist of contnbutones, see s. 244, ante. As to the power of the court in relation to the collecting of assets, etc., see s. 245, ante. As to the power of the court in relation to making calls and the adjustment of the rights of contributories, see s. 245. ante. As to the powers of the court in relation to fixing a time for proving, see s. 247. ante.

Sanction of the committee of inspection-If the committee refuse leave. it may be granted by the court, Re North Eastern Insurance Co. Ltd. (1915), 85 LJ. Ch. 751; Re Consolidated Diesel Engine Manufacturers Ltd .. [1915] 1 Ch. 192; [J914-15] All E.R. Rep. 898.

Semble, where a liquidator is exercising the powers under this section. his dutv is specifically laid down and he has no power to depart from it, see Re ChenziC(il Plastics Ltd. (in liq.), [1959] V.R. 570 at p. 575.


253. (1) Powers of Court cumulative. Any powers by this Act conferred on the Court shall be in addition to and not in restriction of any existing powers of instituting proceedings against any contributory or debtor of the company or the estate of any contributory or debtor for the recovery

of any call or other sums. (2) Appeal from order. Subject to the rules an appeal from any

order or decision made or given in the winding up of a company shall lie in the same manner and subject to the same conditions as an appeal from any order or decision of the Court in cases within its ordinary jurisdiction.

U.K. ss. 272, 277; N.S.W., s. 257; Vic. s. 194; Qld. ss. 226, 230; S.A. ss. 239, 376; W.A. s. 228; Tas. ss. 204, 205.

Division 3-Voluntary Winding up

Subdivision (1 )-Introductory 254. Circumstances in which company may be wound up voluntarily. ( 1) A company may be wound up voluntarily if the company so resolves by special resolution.

(2) A. company shall-(a) within seven days after the passing of a resolution for voluntary

winding up lodge a printed copy of the resolution with the Registrar; and

(b) within ten days after the passing of the resolution give notice of the resolution in the Government Gazette.

(3) If the company fails to comply with the provisions of subsection (2) of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. U.K. SS. 278, 279; N.S.W. ss. 260, 261; Vic. s. 195; Qld. ss. 231, 234; S.A. ss.

242, 243; W.A. s. 231; Tas. s. 206. If it is desired that the winding up shall be a members' voluntary winding

up as distinct from a creditors' voluntary winding up, the steps mentioned in s. 257, post, must be taken before sending out notices for the meeting to consider the resolution. As to the lodging of copies of special resolution with the Registrar, see further s. 146, ante. For the application of Part X to unregistered companies, see s. 315, post.

Liberal construction-The sections of the Act dealing with liquidations should be construed liberally, as the object of the Act is to aid liquidations, Mercantile Bank of Australia v. Dinwoodie (1902), 28 V.L.R. 491. See also Jean Biencourt & Co. v. Milnes (1894), 15 A.L.T. 237.

Authority for notice-The notice of the meeting must be issued by the authority of the board of directors, and (unless the articles otherwise provide) must be sanctioned at a board meeting and by the directors individually, see Re Haycraft Cold Reduction and Minin!? Co" [1900] 2 Ch. 230; Re State of Wyomin!? Syndicate. [1901] 2 Ch. 431. A board can ratify a notice issued without authority, Hooper v. Kerr. Stuart. & Co. Ltd. (1900), 83 L.T. 729.

Contents of notice-Notice that the resolution was proposed to be "adopted as special, extraordinary, or otherwise" was held to be good, R,e N.S.W. Property Investment Co. (1889), 10 N.S.W.L.R. (Eq.) 214. See also Ryan v. Edna May Junction C.M. Co. (1916), 21 C.L.R. 487, in which a notice was held sufficient to support a winding-up resolution but not to support a resolution to bring a particular method of distribution of capital into operation.

The resolution must state a distinct ground or grounds for winding-up, Re Household Co-operative Supply Co. (1885), 11 V.L.R. 295.


Validity of resolution-The resolution for voluntary winding up will not be invalid by reason of the fact that other resolutions based on the voluntary liquidation are invalid, Thomson v. Henderson's Transvaal Estates Ltd., [1908] 1 Ch. 765. And similarly it may be that a voluntary winding up, carried out in order to further a scheme of amalgamation, is valid, whereas the amalgamation scheme is ultra vires, Cleve v. Financial Corporation (1873), L.R. 16 Eq. 363. But where the notice of a meeting to pass resolutions for a winding up, coupled with a reconstruction scheme, was sent out, and only a resolution for winding up and the appointment of a liquidator was passed, there being no mention of reconstruction, the resolution to wind up was held invalid, Re Teede and Bishop Ltd. (1901),70 L.J. Ch. 409.

A resolution to wind up will be invalid if there is a failure to give notice to anyone member entitled to vote, even where that member has executed an unregistered transfer of his shares, and the transferee is present at the meeting, Re Sanders Ltd. (1932), 49 W.N. (N.S.W.) 220.

Semble, that where, at a meeting of a company, a vote is taken by show of hands, proxies need not be counted, notwithstanding that the articles provide for voting by proxy, James v. Evening Standard Newspaper Co. (1895), 17 A.L.T. 5; but see s. 144, ante.

Lease-For the purposes of a covenant in a lease, a resolution for winding-up is valid and effectual even if the company is flourishing and whether or not a declaration of solvency has been made and lodged with the Registrar under s. 257, post, so as to bring about a "liquidation", see Horsey v. Steiger, [1898] 2 Q.B. 259; [1899] 2 Q.B. 79; Ewart v. Fryer, [1901] 1 Ch. 499; [1902] A.C. 187.

Proprietary company-As to a winding-up resolution by a proprietary company, see Hickey & Co. v. Sweetapple, [1926] N.Z.G.L.R. 30.

Right to petition-It was held in Re Peveril Gold Mines Ltd., [1898] I Ch. 122, that the right of a contributory to petition for the winding up of the company cannot be excluded or limited by the articles of association, generally on the ground that it would be contrary to the spirit of the then Act (1862). It would appear from a consideration of the observations made in Baring-Gould v. S/zarpington Combined Pick and Shovel Syndicate, [1899] 2 Ch. 80, and Payne v. Cork Co. Ltd., [1900] 1 Ch. 308. that in like manner the rights of shareholders to resolve on the voluntary winding up of a company cannot be so restricted. But, as Lord Davey said. in Welton v. SafJery, [1897] A.C. 299, at p. 331, "of course, individual shareholders may deal with their own interests by contract in such way as they may think fit. But such contracts, whether made by all or some only of the shareholders. would create personal obligations, or an exceptio personalis against themselves only, and would not become a regulation of the company. or be binding on the transferees of the parties to it, or upon new and non-assenting shareholders."

Generally--See 6 Halsbury's Laws of England, 3rd. ed., p. 733; 10 English and Empire Digest (Rpl.) p. 1044.

255. Commencement of winding up. commence at the time of the passing winding up.

A voluntary winding up shall of the resolution for voluntary


Compare in relation to winding-up by the court, see s. 223. ante. The resolution contemplated is a special resolution, see s. 254, ante.

The reference is to the time of the resolution; if necessary. the COllrt will inquire at what particular time of the day the resolution was passed. Hickey & Co. v. Sweetapple, [1926] N.Z.G.L.R. 30; Re McLeod. [1891] N.Z.L.R. 423 (bankruptcy); Re BlllllrJlls. [1908] 2 K.B. 330.

256. Effect of voluntary winding up. ( 1) The company shall from the commencement of the winding up cease to carryon its business, except so far as is in the opinion of the liquidator required for the beneficial winding up thereof, but the corporate state and corporate powers of the company shall notwithstanding anything to the contrary in its articles continue until it is dissolved.


(2) Any transfer of shares, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members made after the commencement of the winding up, shall be void.

u.K. ss. 281. 282; N.S.W. ss. 263, 264; Vic. s. 197; Qld. ss. 232, 235; S.A. ss. 245. 246; W.A. ss. 234, 235; Tas. s. 208.

As to the corporate state and corporate powers of the company, see ss. 16, 19, 20. ante. As to transfers of shares, cf. s. 227, ante. For the commencement of the winding-up, see s. 255, ante. For the date of dissolution, see s. 272, post. As to the powers of the directors on the appointment of a liquidator, see s. 258, post. For the powers of a liquidator in a voluntary winding-up, see s. 269, post.

Existence of company-After a resolution for voluntary winding up, a company exists as a company for the mere purpose of being beneficially wound up, Re London. Bombay, and Mediterranean Bank Ltd., Drew's Case (1867), 36 L.J. Ch. 785.

Property of company-The company's property remains vested in it and does not vest in the liquidator, Re Webb & Co. (Smithfield, London) Ltd., [1922J 2 Ch. 369; Food Controller v. Cork, [1923] A.C. 647; [1923] All E.R. Rep. 463.

As to how far a resolution for voluntary winding-up operates as dismissal of the company's servants, see Reigate v. Union Manufacturing Co. (Ramsbottom), [1918] 1 K.B. 592; [1918-19] All E.R. Rep. 143; Fowler v. Commercial Timber Co. Ltd., [1930] 2 K.B. I; [1930] All E.R. Rep. 224; Smith v. Watson (1899), J N.Z.G.LR. 290; Stanford's Case (1889), 7 N.Z.LR. 484; and 9 English and Empire Digest (Rpl.) p. 565.

Contracts of company-The voluntary winding up of a company is not itself a breach of a continuing contract nor a termination of the contract, R.e Trugrain Co. Ltd., rl921] V.LR. 653.

Required for the beneficial winding-up-As to the burden of proof that a contract entered into between the company and another person after the commencement of the voluntary winding up of the company is not required for the beneficial winding up of the company, see Hire Purchase Furnishing Co. v. Richens (1887), 20 Q.B.D. 387.

Effect on transfers and dealings-This section does not, semble, prohibit or interfere with transfers of debentures after the commencement of the winding up, Re GOY and Co., Ltd., [1900] 2 Ch. 149. at p. 155, and cf. Re Rhodesia Goldfields Ltd., [19101 1 Ch. 239.

As to the. effect of transfers of shares and other dealings after the voluntary winding up of a company, see Re Buzolich Paint Co., Ex parte Barnard (1886t. 12 V.L.R. 215.

The execution of a transfer without the sanction of the liquidator is void only, not illegal, and a contract to transfer shares after the commencement of a voluntary winding up may, therefore, be enforced, although the sanction of the liquidator has not been obtained, Biederman v. Stone (1867), LR. 2 c.P. 504.

A transfer of shares in a company to an infant before a resolution for voluntary winding up was held void at the instance of the liquidator, although the infant, after attaining 21, desired to retain the shares, Re Continental Bank Corpn., Castello's Caw (1869), LR. 8 Eq. 504.

Preference shareholders who had an option to convert their shares into ordinary shares, and who had given notice to convert before the voluntary liquidation, were held entitled to the rights of ordinary shareholders on the expiration of the period of the notice after the liquidation, Re Blaina Colliery Co. Ltd., [1926] W.N. 30.

The power of a voluntary liquidator to sanction a transfer of shares made after the commencement of the winding up involves the power to alter the register of members. and where successive transfers are so sanctioned the ultimate transferee onlv is liable to contribute as a present member, the transferor and prior transferees being liable as past members, Re National Bank of Wales, Taylor, Phillips & Rickards' Cases, [1897] 1 Ch. 298.

A voluntary liquidator is justified in refusing to sanction transfers except on such terms as he thinks fit for the benefit of the company, Cleve v. Financial Corporation (1873), L.R. 16 Eq. 363.

Transfer of shares-In Re Imperial Land Co. of Marseilles, VininR's Cau (1879), 6 Ch. App., at p. 103, Sir G. Mellish, L.J., said, "No doubt the 131st section (corresponding to this section) does seem to contemplate that in some cases of


voluntary winding up there may be a transfer of shares. It is not at all easy to say what those cases are; they may be cases where the articles of association enable the directors to take the shares, or where a compromise has been made."

Form of order-See Re Rocklwmpton Aerial Services Ltd. (in voluntary liq.), [1937] Q.W.N. 47.

Generally-See 6 Halsbury's Laws of England, 3rd ed., p. 745; 10 English and Empire Digest (Rpl.), p. 1053; ibid. vol. 9, p. 412.

257. Declaration of solvency. (1) Where it is proposed to wind up a company voluntarily the directors of the company, or in the case of a company having more than two directors, the majority of the directors may, before the date on which the notices of the meeting at which the resolution for the winding up of the company is to be proposed are sent out, make a written declaration to the effect that they have made an inquiry into the affairs of the company and that at a meeting of directors have formed the opinion that the company will be able to pay its debts in full within a period not exceeding twelve months after the commencement of the winding up.

(2) There shall be attached to the declaration a statement of affairs of the company showing, in the prescribed form-

(a) the assets of the company, and the total amount expected to be realised therefrom;

(b) the liabilities of the company; and

(c) the estimated expenses of winding up, made up to the latest practicable date before the making of the declaration.

(3) A declaration so made shall have no effect for the purposes of this Act unless it is-

(a) made at the meeting of directors referred to in subsection (1) of this section;

(b) made within five weeks immediately preceding the passing of the resolution for voluntary winding up; and

(c) lodged with the Registrar before the date on which the notices of the meeting at which the resolution for the winding up of the company is to be proposed are sent out.

( 4) A director who makes a declaration under this section without having reasonable grounds for the opinion that the company will be able to pay its debts in full within the period stated in the declaration shall be guilty of an offence against this Act.

Penalty: Imprisonment for six months or Five hundred pounds or both.

(5) If the company is wound up in pursuance of a resolution for voluntary winding up passed within a period of five weeks after the making of the declaration, but its debts are not paid or provided for in full within the period stated in the declaration, it shall be presumed until the contrary is shown that the director did not have reasonable grounds for his opinion.


For the commencement of the winding-up, see s 255, ante As to meetings of directors. see Fourth Schedule, Tables A. B, Proceedings of Directors, post.


Subdivision (2 )-Provisions applicable only to Members' Voluntary Winding Up

258. Liquidators. (1) The company in general meeting shall appoint one or more liquidators for the purpose of winding up the affairs and distributing the assets of the company and may fix the remuneration to be paid to him or them.

(2) On the appointment of a liquidator all the powers of the directors shall cease except so far as the liquidator or the company in general meeting with the consent of the liquidator approves the continuance thereof.

(3) If a vacancy occurs by death resignation or otherwise in the office of a liquidator the company in general meeting may fill the vacancy by the appointment of a liquidator and fix the remuneration to be paid to him, and for that purpose a general meeting may be convened by any contributory, or if there were more liquidators than one by the continuing liquidators.

( 4) The meeting shall be held in manner provided by this Act or by the articles or in such manner as is on application by any contributory or by the continuing liquidators determined by the Court.

U.K. ss. 285, 286; N.S.W. ss. 267, 268; Vic. s. 199; Qld. ss. 238, 239; S.A. 5S.

249. 250; W.A. ss. 238, 239; Tas. s. 210. For the power of the court to appoint and remove liquidators, see s,;. 231, 232,

({Ilte, ss. 265, 266, post. As to meetings, see 5S. 136 et seq, ante. In relation to who may be liquidators, see ss. 9, 10, ante, s. 301, post. As to notice of appointment, see s. 280, post.

Contributories as conveners-Contributories who convene a meeting under this section have no further rights with respect to such meeting by virtue of being the conveners, James v. Rymi/l, [19321 S.A.S.R. 364.

Appointment-Where proper notice of intention to move a motion to wind up has been given, it is not necessary to give notice of a motion for uppointment of a liquidator, and a liquidator may be forthwith appointed at the meeting which has passed a winding-up resolution, Re Trench Tubeless Tyre Co., [1900] 1 Ch, 408; Re LolV (1902), 4 N.Z.G.L.R. 207.

It is no objection to a resolution to wind up a company that the rcsolution when passed contains also a resolution for the appointment of named liquidators, .Tames v. Evenillg Standard Newspaper Co. (1895), 21 V.L.R. 399.

Liquidator of associated companies-A liquidator of more than one ,,,"sociated company must act impartially, Re Britton & Millard, [1957] C.L.Y. 465.

Remuneration-A liquidator's remuneration was fixed at "2-1 per cent. on realisation." It was held that he was not entitled to commission on calls made by him for the purpose of equalising the rights of members when the same result might without inconvenience have been achieved by making refunds to members whose shares were more highly paid than those of others, Re Queensland GIIUI'lIIltee Corl'll. Ltd. [1933] QW.N. 15.

As to remuneration of liquidators, see also Re Cartoll Ltd. (1923), 128 L.T. 629; Re A malgamated Syndicates Ltd., [1901] 2 Ch. 181; Re A /Iison, Johnsoll, & Foster Ltd., [1904] 2 K.B. 327.

Where the remuneration of a liquidator in a voluntary winding lip has been fixed by a general meeting, the Court has power to increase that remuneration in a proper case, Re Bril?iltorz Motors Pty. Ltd" [1932] V.L.R. 241.

Officer of court-A liquidator in a voluntary winding up is not :,n officer of the Court for the purposes of the rule under which the Court can order it-, officer to repay money paid under a mistake of law. Re David A. Hamiltoll & Co. Ltd. (Ill Liq.), [1928] N.Z.L.R. 419.

Selling and forfeiting shares-A company in volunwry liquidation ha-; power at its general meeting to elect directors and sanction the exercise by them of powers of enforcing payment of calls by sale or forfeiture of shares, Ladd's Ca.",. r I 893] 3 eh. 450.


Irregularities in proceedings-Where in fact the company was solvent but the directors had failed to make the declaration of solvency and this led to irregularities in relation to the summoning of a meeting of creditors, the court sanctioned the agreement, Re Graziers Inland Meat Co. Ltd., [1956] Q.W.N. 47.

Removal of liquidator-A liquidator was removed and a person nominated by the creditors was appointed in his stead in Re I. M. Wallace Pty. Ltd., [1935] St. R. Qd. 234.

259. (1) Duty of liquidator to call creditors' meeting in case of insolvency. If the liquidator is at any time of the opinion that the company will not be able to payor provide for the payment of its debts in full within the period stated in the declaration made under section two hundred and fifty-seven he shall forthwith summon a meeting of the creditors and lay before the meeting a statement of the assets and liabilities of the company and the notice summoning the meeting shall draw the attention of the creditors to the right conferred upon them by subsection (2) of this section.

(2) The creditors may, at the meeting summoned under subsection ( 1) of this section, appoint some other person to be liquidator for the purpose of winding up the affairs and distributing the assets of the company instead of the liquidator appointed by the company.

(3) If the creditors appoint some other person under subsection (2) of this section the winding up shall thereafter proceed as if the winding up were a creditors' voluntary winding up.

( 4) The liquidator shall within seven days after a meeting has been held pursuant to the provisions of subsection (1) of this section lodge with the Registrar a notice in the prescribed form and if default is made in complying with this subsection the liquidator shall be guilty of an offence against this Act.


(5) Alternative provisions as to annual and final meetings in case of insolvency. Where the liquidator has convened a meeting under subsection (1) of this section and the creditors do not appoint a liquidator instead of the liquidator appointed by the company the winding up shall thereafter proceed as if the winding up were a creditors' voluntary winding up; but the liquidator shall not be required to summon an annual meeting of creditors at the end of the first year from the commencement of the winding up if the meeting held under subsection (1) of this section was held less than three months before the end of that year.

U.K. SS. 288. 291; Vic. s. 200; Qld. s. 236; Tas. s. 211. In relation to a creditors' voluntary winding-up, see ss. 260 et seq. post. The

declaration made under s. 257, ante is the declaration of solvency. For the commencement of the winding-up. see s. 255, ante.

Subdivision (3 )-Provisions applicable only to Creditors' Voluntary Winding Up

260. Meeting of creditors. ( 1) The company shall cause a meeting of the creditors of the company to be summoned for the day, or the day next following the day, on which there is to be held the meeting at which the resolution for voluntary winding up is to be proposed, and shall cause the notices of the meeting of creditors to be sent by post to the creditors simultaneously with the sending of the notices of the meeting of the company.


(2) The company shall convene the meeting at a time and place convenient to the majority in value of the creditors and shall-

(a) give to the creditors at least seven clear days' notice by post of the meeting; and

(b) send to each creditor with the notice a statement showing the names of all creditors and the amounts of their claims.

(3) The company shall cause notice of the meeting of the creditors to be advertised at least seven days before the date of the meeting in the Government Gazette and in a daily newspaper circulating generally throughout the State.

( 4) The directors of the company shall-(a) cause a full statement of the company's affairs, showing in

respect of assets the method and manner in which the valuation of the assets was arrived at, together with a list of the creditors and the es'iimated amount of their claims to be laid before the meeting of creditors; and

(b) appoint one of their number to attend the meeting.

(5) The director so appointed and the secretary shall attend the meeting and disclose to the meeting the company's affairs and the circumstances leading up to the proposed winding up.

(6) The creditors may appoint one of their number or the director appointed under subsection (4) of this section to preside at the meeting.

(7) The chairman shall at the meeting determine whether the meeting has been held at a time and place convenient to the majority in value of the creditors and his decision shall be final.

(8) If the chairman decides that the meeting has not been held at a time and place convenient to that majority the meeting shall lapse and a further meeting shall be summoned by the company as soon as is practicable.

(9) If the meeting of the company is adjourned and the resolution for winding up is passed at an adjourned meeting, any resolution passed at the meeting of the creditors shall have effect as if it had been passed immediately after the passing of the resolution for winding up.

(10) If default is made in complying with this section the company and any officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: One hundred pounds. U.K. s. 293; N.S.W. s. 273; Vic. s. 201: Qld. s. 244; S.A. s. 255: W.A. s. 244:

Tas. s. 212. As to representation at the meeting of a creditor being a corporation. see s. 140,

(Illte. In relation to resolutions at adjourned meetings, cf. s. 288, {lost. At this meeting a committee of inspection may be appointed, see s. 261. {Iool.

Wishes of creditors-The wishes of all creditors. local as well as foreign. mllst be considered. see Re Federal Bank of A l/stralia. The Advertiser. I March 1 X95.

261. Liquidators. ( I) The company shall and the creditors may at their respective meetings nominate a person to be liquidator for the purpose of winding up the affairs and distributing the assets of the company, and if the creditors and the company nominate different persons


the person nominated by the creditors shall be liquidator, and if no person is nominated by the creditors the person nominated by the company shall be liquidator.

(2) Notwithstanding the provisions of subsection (1) of this section where different persons are nominated any director member or creditor may, within seven days after the date on which the nomination was made by the creditors, apply to the Court for an order directing that the person nominated as liquidator by the company shall be liquidator instead of or jointly with the person nominated by the creditors.

(3) The committee of inspection, or if there is no such committee the creditors, may fix the remuneration to be paid to the liquidator.

( 4) On the appointment of a liquidator all the powers of the directors shall cease, except so far as the committee of inspection, or if there is no such committee the creditors, approve the continuance thereof.

(5) If a liquidator, other than a liquidator appointed by or by the direction of the Court dies, resigns or otherwise vacates the office the creditors may fill the vacancy and for the purpose of so doing a meeting of the creditors may be summoned by any two of their number.

U.K. 55. 294, 296, 297; N.S.W. s. 274; Vic. s. 202; Qld. ss. 245, 247,248; Tas. s. 213.

As to who may be liquidators, see S5. 9, 10, ante, s. 301, post. As to notice of appointment, see s. 280, post. As to the power of the court to remove a liquidator, see s. 266, post. As to the extent to which the business of the company may be carried on, see s. 256, ante.

Votes of creditors-As to votes of creditors, see Re Caston Cushioning Ltd., [19551 1 All E.R. 508; Re Bloxwich Iron & Steel Co., [1894] W.N. 111.

262. Committee of inspection. ( 1) The creditors at the meeting summoned pursuant to section two hundred and fifty-nine or section two hundred and sixty or at any subsequent meeting may, if they think fit, appoint a committee of inspection consisting of not more than five persons whether creditors or not, and if such a committee is appointed the company may, either at the meeting at which the resolution for voluntary winding up is passed or at any time subsequently in general meeting, appoint such number of persons but not more than five as it thinks fit to act as members of the committee.

(2) Notwithstanding the provisions of subsection (l) of this section the creditors may, if they think fit, resolve that all or any of the persons so appointed by the company ought not to be members of the committee of inspection and, if the creditors so resolve, the persons mentioned in the resolution shall not, unless the Court otherwise directs, be qualified to act as members of the committee, and on any application to the Court under this subsection the Court may, if it thinks fit, appoint other persons to act as such members in place of the persons mentioned in the resolution.

(3) Subject to this section and the rules the provisions of Subdivision (3) of Division 2 of this Part relating to the proceedings of and vacancies in committees of inspection shall apply with respect to a committee of inspection appointed under this section.


Commjttee of advice-As to power of shareholders to appoint a committee of advice apart from this section, see Re Federal Bank of Australia Ltd. (1894), 20 V.L.R. 199.


263. Property and proceedings. ( 1) Any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of a creditors' voluntary winding up shall be void.

(2) After the commencement of the winding up no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.

(3) The Court may require any contributory, trustee, receiver, banker, agent or officer of the company to pay, deliver, convey, surrender or transfer forthwith or within such time as the Court directs to the liquidator any money, property or books and papers in his hands to which the company is prima facie entitled.

Vic. s. 204; Qld. ss. 177, 179, 212; W.A. s. 274; Tas. s. 215. With this section cf. s. 228, ante. As to the commencement of the winding-up.

see s. 255. ante.,

Subdivision (4 )-Provisions applicable to every Voluntary Winding Up 264. Distribution of property of company. Subject to the provisions of this Act as to preferential payments the property of a company shall, on its winding up, be applied in satisfaction of its liabilities equally, and subject to that application shall unless the articles otherwise provide be distributed among the members according to their rights and interests in the company.

U.K. s. 302; N.S.W. s. 282; Yic. s. 205; Qld. s. 253; S.A. s. 264; W.A. s. 253; Tas. s. 216.

For the extent to which the Crown is bound by the provisions of Part X, see s. 217. ante. Further in relation to the proof and ranking of claims, see 5S. 291, et seq., post. As to undue preferences. see s. 293, post. Contributories are liable to contribute for adiustment of their rights among themselves, see s. 218, ante. With respect to distribution of surplus assets among members. see also notes to s. 247. ante.

Unpaid capital-The property of the company includes the unpaid capital recoverable. Webb v. Wlzijfin (1872), L.R. 5 H.L. 711.

Liabilities--"Liabilities" means liabilities enforceable in a municipal or domestic court and excludes, for example, revenue claims of foreign States (including members of the British Commonwealth), Re Delhi Electric Supply and Traction Co. Ltd., [1954] Ch. 131; [1954] 2 All E.R. 1452; affirmed on this point [1955] A.C. 491; [1955] 1 All E.R. 292.

Statute-barred debts-Statute-barred debts may not be paid if the members object, Re Fleetwood & District Electric Light & Power Syndicate, [1915] 1 Ch. 486; Re Art Reproduction Co., [1952] Ch. 89; [1951] 2 All E.R. 984.

Part payment under prior arrangement-Creditors who have received a payment under an arrangement before the winding up are not, in the absence of fraudulent preference, to lose their right to payment of the balance of their debt equally with other creditors. Re Smith, Knight, & Co., Ex parte Ashbury (1868), L.R. 5 Eq. 223.

Creditors may qualify or renounce their rights to payment, Re Walker Construction Co. Ltd., [1960] N.Z.L.R. 523.

Provisions before distribution-Provision must be made for a liability to future rent by setting aside assets before dividing the surplus amongst shareholders, Oppenheimer v. British & Foreign Exchange & Investment Bank (1877), 6 CIt. D. 744; Gooch v. London Banking Association (1885), 32 Ch. D. 41; Elphinstone (Lord) v. Monkland Iron & Coal Co. (1886), 11 App. Cas. 332.

A liquidator must be careful to see that all creditors are provided for before distribution, Pulsford v. Devenish, [1903] 2 Ch. 625; Argylls Ltd. v. Coxeter (1913), 29 T.L.R. 355, and provide for income tax due to the Crown, Re New Zealand Joint Stock & General Corporation Ltd. (1907), 23 T.L.R. 238, and costs and expenses of the winding UP. see Re Modern Printinfl Prv. Ltd., [1935] Q.W.N. 50.


Priority and order of payments-In relation to priority and order of payments, see Re Modern Printing Pty. Ltd., [1935] Q.W.N. 50; Re Oriental Holdings Pty. Ltd. (in liq.), [1931] V.L.R. 279; Re New Zealand loint Stock Corporation (1907), 23 T.L.R. 238; Re W. H. Eutrope & Sons Pry. Ltd. (in liq.), [1931] V.L.R. 274.

Equities against company-There is nothing in the nature of the right which arises in the liquidator or in winding-up which gives him priority over an equity which was good against the company as a going concern, Re Hogg Robinson and Co. Pty. Ltd. (in liq.), [1933] V.L.R. 416.

Preferred right to surplus-Where the articles or resolution contain an express provision to the effect that in a winding-up the distributable assets are to be applied in paying the preference shareholders any "arrears of dividend" on such shares before any payment to the ordinary shareholders, the preference shareholders are entitled to be paid the deficiency of the preferential dividend to the date of winding-up in full out of the distributable assets, whether representing capital or accumulated profits, Re Wharfedale Brewery Co. Ltd., [1952] 2 All E.R. 635; [19521 Ch. 913.

As to the rights of preference and ordinary shareholders where the rights of the former are not expressed in either memorandum or articles, see Re Marshall, Belfast Ltd., [1956] N.I.L.R. 78.

Specific articles-As to distribution among members according to specific articles. see In re Rockhampton Prospecting Co. Ltd., [1905] St. R. Qd. 64; [1905] Q.W.N. 15; Re Alexander Stewart & Sons Ltd., [1929] St. R. Qd. 86; Re Merchant Navy Supply, [1947] 1 All E.R. 894.

Shares not issued-As to whether the liquidator should, in distributing assets among shareholders, have regard to an allotment of shares which have not in fact been issued. see Re River Transport Co., [1929] Q.W.N. 46.

Distribution in specie-Distribution of assets in specie was permitted in Re South African Supply and Cold Storage Co., [1904] 2 Ch. 268.

Surplus assets consisting of Commonwealth inscribed stock and bonds were allowed to be distributed in specie at their face value in Re Thylungra Pastoral Co. Ltd .. [1933) Q.W.N. 45.

Equality of distribution-Distribution of assets equally is a prominent feature of the Act's scheme; in sections which deal with administration of the assets, no construction which would lead to distribution other than equally has ever been entertained with favour, see Black & Co's Case (1872), 8 Ch. App. 254, at p. 263; King v. Tait (1936) 57 C.L.R. 715; [1937] A.L.R. 146.

A liquidator who neglects his duty to discharge the debts pari passu may be rendered liable in damages, Pulsford v. Devenish, [1903] 2 Ch. 625; Argylls v. Coxeter (1913), 29 T.L.R. 355; James Smith & Sons (Norwood) v. Goodman, [1936] Ch. 216; [1935] All E.R. Rep. 697.

Within reasonable time-The liquidator must deal with the liabilities and distribute within a reasonable time, varying according to the circumstances of the company, Re House Property Co. Ltd., [1954] Ch. 576, at p. 612; [1953] 2 All E.R. 1525. at p. 1545.

Nature of right-The nature of the right of members to assets of the company after its liabilities are satisfied is examined by the Full Court in Miller & Maund Pty. Ltd. v. Commissioner of Stamp Duties, [1959] Tas. S.R. 94.

General-Generally in relation to this section, see Re Royal Mint and Iron King Gold Mining Co. N.L., [1900] S.A.L.R. 58; Re Adelaide, Vnley and Mitcham Tramwav Co. Ltd., [1907] S.A.L.R. 35; Re Federal Traders Ltd., [1934] S.A.S.R. 174.

265. Appointment of liquidator. If from any cause there is no liquidator acting, the Court may appoint a liquidator.


Where the liquidator had died and the only act of administration remaining to be done was the transfer of the sole asset of the company, the court appointed a contributory as liquidator after advertisement of the application, Re Brisbane Hall Co. (1897), 8 Q.L.J. 143; 8 Q.L.J. (N.C.) 92. See also Re Castlemaine Brewery and Wood Brothers & Co., Newcastle, N.S.W., Ltd. (in liq.) (1921), 38 W.N. (N.S.W.) 45.


266. Removal of liquidator. The Court may on cause shown remove a liquidator and appoint another liquidator.

Vic. s. 206; Qld. s. 255; Tas. s. 217.

Who may apply-The power of the Court to remove a liquidator is not restricted to cases where the application is made by a contributory, but where a creditor applies he should show that the other creditors are parties to the application or, very conclusively, that such removal is for the benefit of all the creditors, Re WhitecliDs Dredging Co. (1893), 11 N.Z.L.R. 711.

Creditors' nominee appointed-A liquidator appointed in a members' voluntary winding up was removed and a person nominated by the creditors was appointed in his place in Re I. M. Wallace Pry. Ltd., [1935] St. R. Qd. 234.

Contributory in arrears-A contributory in arrears in payments of calls can only apply for removal of a liquidator on terms of paying the amount due as calls, Re Webb's South Extended Silver Mining Co. Ltd. (1896), 6 N.S.W.B.C. 47.

Grounds-The section empowers the Court to remove a liquidator when, in the interests of creditors, shareholders, or contributories, he should be removed, e.g., if he is a debtor to the company or has a claim against it, Re Mutual Live Stock Financial, etc., Co. (1886), I2 V.L.R. 777; Re Federal Hat Co. (1887), 13 V.L.R. 88, or is unfit, on account of his character or his connexion with directors, debtors, or others against who he might have to proceed, or otherwise, Re Federal Bank of Australia (1893), 20 V.L.R. 199.

Substantial and real interests-The court will look to the substantial and real interests of the persons interested in the winding-up; and a liquidator may be removed although he has been guilty of no impropriety whatever. The fact that another person will act gratuitiously is sufficient reason for removing a liquidator who is receiving a commission, Re Royal Standard Investment Co. Ltd. (1889), 15 V.L.R. 822.

Remove and appoint-As to whether there is power to appoint a liquidator "on cause shown" without at the same time removing a liquidator, see Re Aplin, Brown & Co. Ltd., [1902] St. R. Qd. 67. In that case two liquidators had been appointed without determination as to the exercise of their powers and one of them had died. The Court made an order removing the surviving liquidator and re-appointing him as sole liquidator.

Removal refused-For a case in which removal of a liquidator was refused upon the liquidator undertaking to afford opportunity for the prosecution of legal proceedings against him for his alleged wrongful acts, see Re Geo. A. Bond & Co. Ltd. (1932), 32 N.S.W.S.R. 301.

The Court refused to appoint a liquidator upon the application of a contributory, in place of one desirous of retiring, where the company had had no opportunity of considering the proposed appointment. See Re Victoria Park Racing and Recreation Grounds Co. Ltd. (1913),30 N.S.W.w.N. 126.

Appeal against removal-A liquidator may appeal against the order removing him, Re Adam Eyton Ltd.; Ex parte Charlesworth (1887), 36 Ch. D. 299.

Generally-See further, as to removal of liquidators, 10 English and Empire Digest (Rpl.) pp. 928, 1051.

267. Review of liquidator's remuueration. Any member or creditor or the liquidator may at any time before the dissolution of the company apply to the Court to review the amount of the remuneration of the liquidator, and the decision of the Court shall be final and conclusive.

N.S.W. s. 311; Vic. s. 206 (4); Tas. s. 217. In relation to the dissolution, cf. s. 239, ante, ss. 272, 307 et. seq., post.

Generally, in relation to the remuneration of a liquidator, see Re Queensland Guarantee Corporation Ltd., [1933] Q.W.N. 15.

268. Act of liquidator valid, etc. valid notwithstanding any defects his appointment or qualification.

( 1) The acts of a liquidator shall be that may afterwards be discovered in


(2) Any conveyance, assignment, transfer, mortgage, charge or other disposition of a company's property made by a liquidator shall, notwithstanding any defect or irregularity affecting the validity of the winding up or the appointment of the liquidator be valid in favour of any person taking such property bona fide and for value and without notice of such defect or irregularity.

(3) Every person making or permitting any disposition of property to any liquidator shall be protected and indemnified in so doing notwithstanding any defect or irregularity affecting the validity of the winding up or the appointment of the liquidator not then known to such person.

( 4) For the purposes of this section a disposition of property shall be taken as including a payment of money.

In relation to the registration and disqualification of liquidators, see ss. 9, 10, ante.

With this section, cf. s. 119. ante, and see Morris v. Kanssen, [1946] A.C. 459; [1946] 1 All E.R. 586.

269. Powers and duties of liquidator. (1) The liquidator may-(a) in the case of a members' voluntary winding up, with the

approval of a special resolution of the company and, in the case of a creditors' voluntary winding up, with the approval of the Court or the committee of inspection or, if there is no such committee, a meeting of creditors, exercise any of the powers given by paragraphs (b), (c) and (d) of subsection (1) of section two hundred and thirty-six to a liquidator in a winding up by the Court;

(b) exercise any of the other powers by this Act given to the liquidator in a winding up by the Court;

(c) exercise the power of the Court under this Act of settling a list of contributories, and the list of contributories shall be prima facie evidence of the liability of the persons named therein to be contributories;

(d) exercise the power of the Court of making calls; or ( e) summon general meetings of the company for the purpose

of obtaining the sanction of the company by special resolution in respect of any matter or for any other purpose he thinks fit.

(2) The liquidator shall pay the debts of the company and adjust the rights of the contributories among themselves.

(3) When several liquidators are appointed, any power given by this Act may be exercised by such one or more of them as is determined at the time of their appointment, or in default of such determination by any number not less than two.


For further or other powers, of the liquidator. see s. 236. ante. For appeal from the liquidator to the court, see s. 236. flntl'. As to special resolutions, see s. 144, ante. As to the date of resolutions passed at adjourned meetings, see s. 288, post. For when an arrangement is binding on the company and the creditors. see s. 273, post. Further in relation to contributories, see s. 218. flntl'.

Estoppel-A company cannot be estopped from denying the existence of the sanction to exercise of a power under subsection (I) (a). Rendall v. Conroy (1897). 8 Q.L.J. 89; 8 Q.L.J. (N.C.) 60. A liquidator cannot delegate his power to enter into a compromise with debtors, ibid.

31X COMPANIES Vol. 2

Exercise of other powers-The liquidator in a voluntary winding-up cannot exercise without prior sanction the powers of an official liquidator, Re W. A. Holiday Resorts Ltd. (in liq.) , [1961] W.A.R. 152.

In name of company-A voluntary liquidator can, in general, bring actions only in the name of the company, Bolton v. Darling Downs Building Society, [1935] St. R. Qd. 237.

Settling list of contributories-There is no settlement of the list of contributories where a liquidator merely signs a list of shareholders supplied by the secretary of the company, Re Murray Engineering Co. Ltd., [1925] S.A.S.R. 330.

Where a person's name has been put on the list of contributories, and such person has received no notice of intention to settle such list, the Court will entertain an application by such person to have his name removed and will if necessary rectify the register, Ex parte Lane (1889), 15 V.L.R. 525. See also Re Mercantile Bank, Ex parte Bell (1892), 14 A.L.T. 92.

The list of contributories does not cease to be prima facie evidence merely because the liquidator has put in other inconclusive evidence of the liability of contributories, Re Charms Ltd., [1932] S.A.S.R. 341.

The rules which prescribe the proceedings for settling the list of contributories in a winding-up by the court apply to a voluntary winding-up, Ex parte Lane (1889), 15 V.L.R. 525.

Calls-Liquidators have power to adopt a call ineffectually made by directors, to fix a new date for payment of it, and demand payment of it to themselves, Robison Bros., Campbell and Sloss v. Sloss (1892), 14 A.L.T. 145.

The liquidator may make a call upon partly paid-up shareholders for the purpose of adjusting the rights between them and fully paid-up shareholders, Re AnJ;lesea Colliery Co. (1866), 1 Ch. App. 555; Re Home & Foreign Investment and Agency Co. Ltd., [1912] 1 Ch. 72; Terry v. Carlton & West End Breweries (1896), 22 V.L.R. 33. Further purposes for which uncalled capital may be called up are the satisfaction of the liabilities of the company and the costs, etc., of winding it up and the adjustment of the rights of contributories among themselves. An injunction will be granted to restrain a liquidator from calling up uncalled capital for the purpose of reducing its amount by the device of a sale to a reconstructed company and a subsequent release of the contributories (ibid.).

Where a call is made by a liquidator whose appointment is bad, a contributory is not estopped by delay from impeaching the liquidator's title, Re Equitable Insurance Association of New Zealand (1892), 11 N.Z.L.R. 605.

As to recovery by action in Queensland of calls made under the corresponding provision in another jurisdiction, see Eveleen Silver Mining Co. Ltd. v. Padman, [1899] S.A.L.R. 56.

For form of order on application for payment of calls by shareholders, and as to attachment after personal service of such order, see Re Bal1arat Patent Fuel and Manure Co. (1865), 2 W.W. & A'B. (Eq.) 172.

Debts of a company-The liquidator of a banking company which was being wound up by the court declared a dividend. A customer of the bank who had moneys standing to his credit at the bank at the commencement of the winding-up was ordered by a court of petty sessions to pay a sum of money to the complainant who sought then by proceedings against the company to attach the amount of the dividend payable to the customer. It was held that there was no debt owing or accruing from the bank to the customer which could be attached in garnishee proceedings, National Bank of Australasia Ltd. v. Norris; Primary Producers Bank of A ustralia Ltd. (in liq.), garnishee, [1932] V.L.R. 485.

Where more than one liquidator-As to necessity for both of two liquidators to sue where there has been no determination that one of them may exercise powers, see Up-to-Date Printing Co. Ltd. v. Sutherland, [1932] Q.W.N. 42.

Meetings of liquidators-The section will not allow two out of three liquidators to hold meetings by themselves and to give no opportunity of attending to the other liquidator, who, so far as they are aware, is willing to act with them. Mercantile Bank of Australia v. Dinwoodie (1902), 28 V.L.R. 491, at p. 494.

Leave of absence-As to the liquidator seeking leave of absence from his duties, see Re Real Estate, Mortgage and Deposit Bank (1898), 4 A.L.R. (C.N.) 85.

COMPANIES ACT OF 1961 SSe 269, 270 319

270. Power of liquidator to accept sbares, etc., as consideration for sale of property of company. (1) Where it is proposed that the whole or part of the business or property of a company (in this section called the "company") be transferred or sold to another corporation (in this section called the "corporation"), the liquidator of the company may, with the sanction of a special resolution of the company conferring either a general authority on the liquidator or an authority in respect of any particular arrangement, receive in compensation or part compensation for the transfer or sale shares, debentures, policies or other like interests in the corporation for distribution among the members of the company, or may enter into any other arrangement whereby the members of the company may, in lieu of receiving cash, shares, debentures, policies or other like interests or in addition thereto, participate in the profits of or receive any other benefit from the corporation, and any such transfer sale or arrangement shall be binding on the members of the company.

(2) If any member of the company who did not vote in favour of the special resolution expresses his dissent therefrom in writing addressed to the liquidator and left at the registered office of the liquidator within seven days after the passing of the resolution he may require the liquidator either to abstain from carrying the resolution into effect or to purchase his interest at a price to be determined by agreement or by arbitration in manner provided by this section.

(3) If the liquidator elects to purchase the member's interest, the purchase money shall be paid before the company is dissolved and be raised by the liquidator in such manner as is determined by special resolution.

( 4) A special resolution shall not be invalid for the purposes of this section by reason that it is passed before or concurrently with a resolution for voluntary winding up or for appointing liquidators, but if an order for winding up the company by the Court is made within a year after the passing of the resolution the resolution shall not be valid unless sanctioned by the Court.

(5) For the purposes of an arbitration under this section the "Interdict Act of 1867" shall apply as if there were a submission for reference to two arbitrators, one to be appointed by each party, and the appointment of an arbitrator may be made under the hand of the liquidator, or if there is more than one liquidator then under the hands of any two or more of the liquidators; and the Court may give any directions necessary for the initiation and conduct of the arbitration and such direction shall be binding on the parties.

( 6) In the case of a creditors' voluntary winding up the powers of the liquidator under this section shall not be exercised except with the approval of the Court or the committee of inspection.

U.K. ss. 287, 298; N.S.W. s. 269; Vic. s. 208; Qld. ss. 240, 249; S.A. s. 251; W.A. ss. 240, 249; Tas. s. 219. Act referred to:

Interdict Act of 1867, title PRACTICE. Further as to reconstruction and amalgamation, see ss. 181, 183, 185, ante.

Terminology-This section provides one of the means whereby an amalgamation, reconstruction or reorganization may be carried out, Re Graziers Inland Meat Co., Ltd., [1956] Q.W.N. 47. These terms are not terms of art. "Amalgamation" contemplates a state of things under which two companies are so joined as to form


a third entity, New Zealand Gold Extraction Co. (Newberry-Vautin Process) v. Peacock, [1894] 1 Q.B. 622, at p. 632; or else one company is absorbed into and blended with another company, Re South African Supply & Cold Storage Co., [1904] 2 Ch. 268, at p. 287. A "reconstruction" would seem to be the formation of a new company to take over the assets of an old one, Hooper v. Western Counties & South Wales Telephone Co., [1892] W.N. 148; it involves the idea that substantially the same business shall be carried on by substantially the same persons, Re South African Supply & Cold Storage Co., [1904] 2 Ch. 268.

Enlarged capital-The shares in the new company need not be shares paid up to the same amount as in the old company; this section therefore enables the reconstruction of a company with enlarged capital, Israel v. Atlas Engineering Co. (1889), 10 N.s.W.L.R. (Eq.) 277.

Any such transfer, sale, or arrangement-The words "and any such transfer sale or arrangement shall be binding on the members of the company" do not mean that, unless those members dissent under the section, they are bound to take shares in the new company, but merely that they cannot object to the sale to the transferee company, Re F. H. Ring & Co. Ltd., [1924] S.A.S.R. 138.

Sale-The sale may not be to an individual proposing to form a company, Bird v. Bird's Patent Deodorizing & Utilizing Sewage Co. (1874), 9 Ch. App. 358, though it may be to an agent for a company, Re Hester & Co. Ltd. (1875), 44 L.J. Ch. 757.

Agreement requisite-The transferee company is not, as between itself and shareholders of the transferor company, bound to issue shares to those shareholders, unless there be some agreement with it and those shareholders, Re F. H. Ring & Co. Ltd., [1924] S.A.S.R. 138.

Courses open to shareholder-A majority of shareholders cannot in a sale under this section bind the minority in respect of taking shares in the transferee company: a non-assenting shareholder does not by failure to dissent within seven days, become thereby compelled to take shares. But if he does not so dissent he cannot take advantage of the provision for the purchase of his interest, but must submit to lose his shares altogether if he refuses to take the new shares. A shareholder may: (i) assent. or (ii) dissent and within seven days require his interest to be purchased, or (iii) dissent and abandon all his interest in the company, Re Bank of Hindustan, China and Japan; Ex parte Los (1865), 34 L.J. Ch. 609; Higgs' Case (1865), 2 Hem. & M. 657; Re Bank of Hindustan, China and Japan; Ex parte Martin (1865), 2 Hem. & M. 669.

As to the position of a shareholder who has neither dissented from the resolution nor taken up the shares to which he is entitled in the new company, see Gilmour v. Newcastle Permanent Investment and BUilding Soc. (1897), 18 N.S.W.L.R. (Eq.) 84; Gilbert v. Newcastle Permanent Investment and Building Soc. (1896), 17 N.S.W.LR. (Eq.) 72; Israel v. Atlas Engineering Co. (1889), 10 N.S.W.L.R. (Eq.) 277.

Notice-The notice convening the meeting to pass the special resolution required by this section must state expressly that it is intended to proceed under this section, Imperial Rank of China. India, and Japan v. Bank of Hindustan. China. and Japan (1868). L.R. 6 Eq. 91. But a notice to shareholders of intention to propose a resolution under this section will be good, even though it does not state that the sale is to be under this section, if the shareholders must know that it is to be under the Act, Israel v. Atlas Engineering Co. (1889), 10 L.R. (N.S.W.) (E.) 277.

Interest of directors-If the directors have a special interest in the reconstruction, this should also be disclosed in the notice, Tiessen v. Henderson, [1899] 1 Ch. 861.

Unfair scheme-An unfair scheme may be stopped by dissentient shareholders' obtaining a compulsory winding-up order, Re Consolidated South Rand Mines Deep Ltd., [1909] 1 Ch. 491. See also Re Hester & Co. Ltd. (1875), 44 L.J. Ch. 757 (scheme leaving no assets available for dissentient creditors).

What constitutes acceptance-As to what will constitute, in the event of an amalgamation, an acceptance of shares in the new company, see Challis' Case (1871), 6 Ch. App. 266.

Shares of minority-In the case where it is proposed to acquire compulsorily the shares of a minority, this can be done only if there has been a full disclosure to shareholders at the outset of essential facts, Re John Labbatt Ltd. and Lucky Lager Breweries (1959), 20 D.L.R. 159.


Determined by agreement-The agreement mentioned in the section is an agreement between the dissentient shareholder and the liquidator in the winding up of the company and cannot be supplanted by a clause in the articles, Baring-Gould v. Sharpington Combined Pick & Shovel Syndicate, [1899] 2 Ch. 80.

Dissent-The executors of a deceased member who have not had his shares registered in their own names may dissent, Llewellyn v. Kasintoe Rubber Estates Ltd., [1914] 2 Ch. 670; [1914-15] All E.R. Rep. 558, considered in Victorine Roberts v. Letter "T" Estates Ltd., [1961] 3 W.L.R. 176.

A shareholder who dissents does not thereby cease to be a shareholder so as to escape liability to creditors, Re Imperial Land Co. of Marseilles; Vining's Case (1870), 6 Ch. App. 96.

The right to dissent cannot be excluded by the articles of association, Payne v. Cork Co. Ltd., [1900] 1 Ch. 308; Bisgood v. Henderson's Transvaal Estates Ltd., [1908] 1 Ch. 743; [1908-10] All E.R. Rep. 744.

The transferee of shares whose transfer was not registered (owing to unnecessary delay) at the time of the commencement of the liquidation has been allowed to dissent, Re Sussex Brick Co., [1904] 1 Ch. 598; [1904-07] All E.R. Rep. 673; Re Colonial Finance, Etc. Corpn. (1905), 5 N.S.W.S.R. 506.

Notice of dissent is properly given by sending notice to the liquidator although the question of whether the company is or is not to go into liquidation is to depend on the number of dissentients and the liquidator accordingly will not come into existence until after that number is ascertained, Re Needham's Ltd. (1923), 68 Sol. 10. 236.

The notice of dissent must expressly give the liquidator the option either to abstain from carrying the resolution into effect or to purchase the dissentient member's interest, Re Demerara Rubber Co., Ltd., [1913] 1 Ch. 331.

Within seven days-As to whether the words "within seven days after" require that the notice must be given after the passing of the resolution, see O'Flaherty v. Cm'cary (1934),51 c.L.R. 530.

Creditors-A sale under this section is binding upon the creditors. whose remedy is to come within a year for a compulsory order, Re City and COllntry Investment Co. (1879), 13 Ch. D. 475.

Objecting creditor-A creditor who objects to the transfer of the assets of the old company to the new should petition the court for the winding-up of the company and should not seek to prevent the transfer by injunctions, Gilbert v. Newcastle Permanent Investment and Building Society (1896), 17 L.R. (N.S.W.) (E.) 72.

Left at the registered office of the liquidator-The words "left at the registered office of the liquidator" might, it seems, be "left at the registered office of the company", because at the stage the section contemplates, the liquidator may not be ascertained, see Re Needham's Ltd. (1923), 68 Sol. 10. 236. Cf. s. 287 (3) of the Companies Act 1948 (Imperial).

271. Annual meeting of creditors. (1) If the winding up continues for more than one year, the liquidator shall summon a general meeting of the company in the case of a members' voluntary winding up, and of the company and the creditors in the case of a creditors' voluntary winding up, at the end of the first year from the commencement of the winding up and of each succeeding year or not more than three months thereafter, and shall lay before the meeting an account of his acts and dealings and of the conduct of the winding up during the preceding year.

(2) The liquidator shall cause the notices of the meeting of creditors to be sent by post to the creditors simultaneously with the sending of the notices of the meeting of the company.

(3) Every liquidator who fails to comply with this section shall be guilty of an offence against this Act.

Penalty: One hundred pounds. Default penalty. U.K. ss. 289, 299; N.S.W. ss. 270, 279; Vic. s. 209; Qld. s. 241; S.A. s. 252;

W.A. s. 250; Tas. s. 220. For the time of commencement of the winding-up see s. 255, ante. As to general meetings of the company, see s. 135 et seq., ante. 11


272. Final meeting and dissolution. ( 1) As soon as the affairs of the company are fully wound up the liquidator shall make up an account showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon shall call a general meeting of the company, or in the case of a creditors' voluntary winding up a meeting of the company and the creditors, for the purpose of laying before it the account and giving any explanation thereof.

(2) The meeting shall be called by advertisement published in the Government Gazette and in a daily newspaper circulating generally throughout the State which advertisement shall specify the time, place and object of the meeting and shall be published one month at least before the meeting.

(3) The liquidator shall within seven days after the meeting lodge with the Registrar a return of the holding of the meeting and of its date with a copy of the account attached to such return, and if the return or copy of the account is not so lodged the liquidator shall be guilty of an offence against this Act.


( 4) The quorum at a meeting of the company shall be two and at a meeting of the company and the creditors shall be two members and two creditors and if a quorum is not present at the meeting, the liquidator shall in lieu of the return mentioned in subsection (3) of this section lodge a return (with account attached) that the meeting was duly summoned and that no quorum was present thereat, and upon such a return being lodged the provisions of subsection (3) of this section as to the lodging of the return shall be deemed to have been complied with.

(5) On the expiration of three months after the lodging of the return with the Registrar the company shall be dissolved.

(6) Notwithstanding the provisions of subsection (5) of this section the Court may on the application of the liquidator or of any other person who appears to the Court to be interested make an order deferring the date at which the dissolution of the company is to take effect for such time as the Court thinks fit.

(7) The person on whose application an order of the Court under this section is made shall within fourteen days after the making of the order lodge with the Registrar an office copy of the order, and if he fails so to do he shall be guilty of an offence against this Act.


(8) If the liquidator fails to call a meeting as required by this section he shall be guilty of an offence against this Act.

Penalty: One hundred pounds. Default penalty. U.K. ss. 290, 300; N.S.W. ss. 271, 280; Vic. s. 210; Qld. s. 242; S.A. s. 253;

W.A. s. 251; Tas. s. 221. As to general meetings of the company, see ss. 135 et seq., ante. The corporate

state and powers of the company continue until dissolution, s. 256, ante. As to outstanding assets of a defunct company, see ss. 310 et seq., post. As to disposal of books and papers, see s. 284, post. As to the power of the Registrar to strike a defunct company off the register, see s. 308, post. The duty of the liquidator to lodge documents with the Registrar may be enforced under s. 282, post.


Fully wound up-The words "as soon as the affairs of the company are fully wound up" mean "as far as the liquidators can wind them up", and do not mean that if there is a single asset outstanding or a single debt unpaid the affairs of the company are not to be considered as wound up, Re London & Caledonian Marine Insurance Co. (1879), 11 Ch. D. 140, at p. 143.

On the expiration of three months-After the appropriate return is lodged and time has duly run. the company is dead and the court has no jurisdiction to grant an injunction restraining its dissolution, John Birch & Co. Ltd. v. Patent Cork Asphaltum Co. (1895), 21 V.L.R. 268. But see s. 307, post, for power of the court to declare a dissolution void.

With reference to the provisions enabling the date of dissolution to be deferred, see Re Royal Land Co. Ltd. (1891), 17 V.L.R. 510; John Birch & Co. Ltd. v. Patent Cork Asphaltum Co. Ltd. (1895), 21 V.L.R. 268; and for an instance in which such a postponement of the dissolution is necessary, see Re Eastern Investment Co. Ltd., [1905] 1 Ch. 352.

Vesting order-Where a company has been dissolved under this section before having conveyed property sold by it. an order may be made under the Trustees and Executors Acts, 1897 to 1961, s. 27 (ii.) (d) (title TRUSTEES AND EXECUTORS), vesting the property in the purchaser, Re Clarke and Soloman's Agreem.ents Trusts (1905). 5 N.S.W.S.R. 498. See where a vesting order was made giving a shareholder company land on the distribution of surplus assets, Re Strathblaine Estates Ltd., [1948] Ch. 228; [1948] 1 All E.R. 162. See also s. 309, post, as to the circumstances in which the Registrar may act as representative of a defunct company.

Debt not provided for-If a liquidator has left unpaid a debt of which he had notice, he may after dissolution be personally liable to the creditor. Pulsford v. Devenish, [1903] 2 Ch. 625; Smith (lames) & Sons (Norwood) v. Goodman, [1936] Ch. 216; [1935] All E.R. Rep. 697.

Release of guarantor-As to release, by dissolution, of a guarantor of a company's debenture debt, see Taylor v. Sanders, [1937] V.L.R. 62. A guarantee of interest on a debenture may continue after dissolution, Re Fitzgeorge, [1905] 1 K.B. 462.

Foreclosure-For form of order for foreclosure, where a mortgagor company has been dissolved. see National Mutual Life Association of Australia Ltd. v. National Bank of Australasia Ltd., [1944] Q.W.N. 7.

273. Arrangement when binding on creditors. (1) Any arrangement entered into between a company about to be or in the course of being wound up and its creditors shall subject to the right of appeal under this section be binding on the company if sanctioned by a special resolution, and on the creditors if acceded to by three-fourths in value and one-half in number of the creditors, every creditor for under ten pounds being reckoned in value only.

(2) A creditor shall be accounted a creditor for value for such sum as upon an account fairly stated, after allowing the value of security or liens held by him and the amount of any debt or set-off owing by him to the debtor, appears to be the balance due to him.

(3) Any dispute with regard to the value of any such security or lien or the amount of such debt or set-off may be settled by the Court on the application of the company, the liquidator, or the creditor.

( 4) Any creditor or contributory may within three weeks from the completion of the arrangement appeal to the Court against it, and the Court may thereupon as it thinks just amend vary or confirm the arrangement.


For the power of the liquidator to make arrangements with creditors, see ss. 236. 269, ante. Cf. the provisions of s. 181, ante.


Arrangement-As to the meaning of the term "arrangement", sec also Isles v, Daily Mail Newspaper Ltd, (1912), 14 C.L.R, 193,

For observations on the term "completion of the arrangement", see Re Contal Radio, [1932] 2 Ch. 66; [1932] All E.R. Rep., 687, at p. 689; but semhle the court can only amend, vary or confirm, it cannot set aside the arrangement (ibid).

Any proposal for the payment of any class of creditors or any particular creditor is an arrangement within this section if the transaction proposed is such as a reasonable business man might carry out bona fide in the course of business, Re E. D. White Ltd. (1929), 29 N.S.W.S.R. 389. An agreement by creditors to accept a fixed amount per share from such shareholders as will agree to the scheme is an arrangement, Re Australian Banking Co. (1894), 4 N.S.W.B.e. 34.

The court will not confirm an arrangement unless it provides that the creditors are to be paid pari passu, or unless the unfavoured creditors assent to it, Re Farmers' Freehold Land Co. Ltd. (1892), 3 N.S.W.B.e. 39. Nor wiil it confirm an arrangement which proposes to set up a scheme which is illegal as being prohibited by statute. Re AILstralian MlltlLai Ill1'cstl11ellt (llld Buildillg Co. Ltd. (1889), 9 N.S.W.B.C. 62.

Reference to creditors-As to how far the court will vary a scheme without reference back to the creditors, see Re Australiall Joint Stock BaTIk (1893), 14 N.S.W.L.R. (Eq.) 89; Re Anglo-Australian Investmellt Land, {(Ild Finance Co. Ltd. (1892), 13 N.S.W.L.R. (Eq.) 38; Re Australiall Mutual Inl'cstment and Building Co. Ltd. (1892). 13 N.S.w.L.R. (Eq.) 51.

As to power to confirm a supplementary arrangement, see RC' Sydney & Suburban Building & Land IIlI'C'stment Association Ltd. (1892), 3 N.S.W.B.C. 23.

Statute of Limitations-As to whether confirmation under this section creates a statutory obligation for the purposes of a Statute of Limitations. see DeH'ar v. Excelsior Land Investmcnt and BuildillR Co. (1906), 6 N.S.W.S.R. 433.

274. Application to Court to have questions determined or powers exercised. ( 1) The liquidator or any contributory or creditor may apply to the Court-

(a) to determine any question arising in the winding lip of a company; or

(b) to exercise all or any of the powers which the COllrt might exercise if the company were being wound lip by the Court.

(2) The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficia], may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just.

U.K. s. 307; N.S.W. s. 286; Vic. s. 212; S.A. s. 269; Qld. s. 258; Tas. s. 223. Interpretation-The provisions of this section are to be construed liberally

and a question as to whether a debenture given or a payment made by a company is void as a preference. may be determined upon an application made under this section. Re Evers Motor Co. Ltd. (in voluntary liq.), [1962] Q.W.N. 6.

Just and beneficial-For the meaning of "just and beneficial", see Re Metropolitan Bank, Heiron's Case (1880). 15 eh. D. 139.

For some observations on the desirability of leaving questions which may arise in the course of winding-up to be duly brought before the court under this section rather than to try to determine such possible questions in advance by means of a special nrovision in the winding-up order. see Re HiberniaTl Merchallts Ltd .• [1957] 3 All E.R. 97; [1958] I Ch. 76.

Locus standi-No person other than a liquidator, contributory, or creditor has any locus standi under this section, Re New De Kaap Ltd. [1908] 1 Ch. 589.

Applications-Applications under this section must not be made ex parte, Re Household Co-operath'c Supply Co. (1885), 11 V.L.R. 295; Re Petersoll Ltd., [1927] S1. R. Qd. 134; [1927] Q.W.N. 25. followed in Re Evers Motors Co. Ltd. (in voluntary liq.), [1962] Q.W.N. 6. They must be supported by affidavit, Re Nirvana Soap Co. Ltd. (1920), 37 W.N. eN.S.W.) 87. See too Re Household Co-operative Supply Co., supra; Re Starr-Bo,vkeft Pcrmanent Land (lnd Bui/ding Socicty (1896), 21 V.L.R. 714.


Dissenters to apply-Where the liquidator has allowed a claim against the company, and some shareholders dissent, it is not the liquidator's duty to bring the matter before the court, he should leave the dissenters to do so, Re Licensed Victuallers General Plate Glass Insurance Co. (1867), 17 L.T. 8. But in general it is thought that the application should be made by the liquidator, because contributories may noi be able to obtain an order so unfettered as would be given to the liquidator, Re Penysflog Iron Mining Co., [1874] W.N. 166.

Balance order-On an application for a "balance order" to enforce a call, it lies on the liquidator to bring before the court proper materials to satisfy the court that it would be iust and beneficial to make the order, e.g.: (a) the amount of the assets and liabilities of the company; (b) the probable cost of winding up; (c) facts showing the necessity of requiring payment of the amount of the call in respect of which the order is sought, Re Crown Investment and Tramway Co., Ex parte Fiddes (1893)' 19 V.L.R. 412; 20 V.L.R. 19. On such an application the court may in its discretion fix such rate of interest as it thinks fit, Re Spottiswoode Estate Co. (1895), 21 V.L.R. 334. See also Re Melbourne Banking Corporation (1885), 11 V.L.R. 610.

The court has power to make a balance order for payment of moneys due by contributories in a voluntary winding up, Re Trocadero Dansant Entertainments Ltd., [1930] Q.W.N. 32; Re Murray Engineering Co. Ltd. [1925] S.A.S.R. 330.

Calls-The court may make an ex parte order for payment of calls within a specified time after service upon contributories of the order. within which time they may apply to revoke or vary it. in default of which it will, at the end of that time. be absolute and not liable to be set aside, Re Belmore Silver and Lead Mining Co. (1871), 2 V.R. (Eq.) 126.

Remuneration of liquidator-On an application under this section the court fixed the liquidator's remuneration, Re Brighton Motors Pty. Ltd. (in liq.), [1932] V.L.R. 241.

Unclaimed dividends-The cOl,lrt has jurisdiction to order the payment into court of unclaimed dividends in the hands of a liquidator in the course of a voluntary winding up of a company. Re Mount Dundas and Zeehan Railway Company (1900), 26 V.L.R. 197.

Stay of execution-The court has power under this section to stay further proceedings in the execution of a writ of fl. fa. issued before the winding up, Re Buckley's Swamp Estate Co. (1892), 18 V.L.R. 664. The power to stay execution is the same in the case of a voluntary as in that of a compulsory winding up. The general rule is that execution will be stayed, Re Rex Motors, [1929] V.L.R. 1. But the onus is on the company of satisfying the court that the exercise of the power to stay is "just and beneficial", Woods-Gilbert Rail, etc., Co. v. Little, [1927] V.L.R. 292.

Public examination-The order can be made under this section for the public examination of a. director in a voluntary winding-up. and no further report under s. 235. ante, is required, Re Campbell Coverings Ltd. (No.2), [1954] Ch. 225; [19541 1 All E.R. 222.

Compromises-This section gives the court power to sanction compromises in a voluntary liquidation notwithstanding that they may also be sanctioned by a special resolution under s. 269 ante, Re The British Australian Land and Banking Co. Ltd. (1892), 13 N.S.W.L.R. (Eq.) 42.

Preferences-The question whether a payment is a preference under s. 293, post, is a question which may be dealt with by the court under this section, but the court may exercise a discretion as to whether it will so deal with such questions, Re Marquette Motors Ltd. (1928), 29 N.S.W.S.R. 193.

Binding effect-An order made upon determination of a question under this section binds all parties to the proceedings, and is a final order for purposes of appeal, Re Anglo-Australian Investment Finance and Land Co. Ltd. (1893), 14 N.SW.L.R. (Eq.) 110.

Admissibility of evidence-Questions of admissibility of evidence may be determined on an application under this section, Re L. G. Batten Ply. Ltd. (in voluntary liq.), [1962] Q.W.N. 26.

Stay of winding-up-As to the relationship of this section to s. 243, ante, see Re Serene Shoes Ltd., [1958] 3 All E.R. 316.

Power to summon-The court has power under s. 249, ante, to summon persons suspected of being in possession of property of the company.

Generally-See also 6 Halsbury's Laws of England, 3rd ed., 753.


275. Costs. All proper costs charges and expenses of and incidental to the winding up including the remuneration of the liquidator shall be payable out of the assets of the company in priority to all other claims.


See further, as to priority of costs of liquidation, s. 247, ante. As to the remuneration of liquidators, see ss. 258, 261, 267, ante.

Costs against company-Costs given against a company in liquidation are payable in full out of the assets of the company, Re Wenborn & Co., [1905] 1 Ch. 413; Re Free (Thomas) & Sons Ltd. (1911), 56 Sol. Jo. 175; Re Pacific Coast Syndicate Ltd., [1913] 2 Ch. 26.

Secured creditors-Secured creditors are entitled to be paid in priority to payment of costs and expenses of winding up, but such portion of those costs and expenses as has been incurred in getting in assets subject to the security should be borne bv those assets, Re Universal Distributing Co. Ltd. (1933), 48 C.L.R. 171; Re Raymond, [1928] N.Z.L.R. 115.

Liquidator opposing petition-As to costs of a liquidator who opposes a petition for compulsory winding-up, see Re William Adler & Co .. [1935] Ch. 138; [1934] All E.R. Rep 530.

Long service leave-Long service leave was held payable to employees whose employment continued on in the course of winding-up as part of the costs, charges and expenses of and incidental to the winding-up, under this section and not as preferential claims under s. 292, post, Re Matthew Bros. (in liq.) , [1962] V.R. 262.

Assets insufficient-If assets are insufficient to pay the costs of winding-up, voluntary liquidators are not personally liable for the deficiency, Re Trueman's Estate (1872), L.R. 14 Eq. 278.

276. Limitation on right to wind up voluntarily. Where a petition nas been presented to the Court to wind up a company on the ground that it is unable to pay its debts the company shall not without the leave of the Court resolve that it be wound up voluntarily.

In relation to the ground of inability to pay debts, see s. 222, ante.

Division 4-Provisions applicable to every mode of Winding Up Subdivision (1 )-General

277. Books to be kept by liquidator. Every liquidator shall keep proper books in which he shall cause to be made entries or minutes of proceedings at meetings and of such other matters as are prescribed, and any creditor or contributory may, subject to the control of the Court, personally or by his agent inspect them.


278. Control of Court over liquidators. ( 1) The Court shall take cognisance of the conduct of liquidators, and if a liquidator does not faithfully perform his duties and observe the prescribed requirements or the requirements of the Court or if any complaint is made to the Court by any creditor or contributory or by the Board in regard thereto, the Court shall inquire into the matter and take such action as it thinks fit.

(2) The Registrar or the Board may report to the Court any matter which in his or its opinion is a misfeasance, neglect or omission on the part of the liquidator and the Court may order the liquidator to make good any loss which the estate of the company has sustained thereby and make such other order as it thinks fit.


(3) The Court may at any time require any liquidator to answer any inquiry in relation to the winding up and may examine him or any other person on oath concerning the winding up and may direct an investigation to be made of the books and vouchers of the liquidator.

u.K. s. 250; N.S.W. ss. 235, 236; Vic. s. 179; Qld. s. 206; S.A. s. 218; W.A. s. 208; Tas. s. 184.

For the powers of a liquidator, see ss. 236, 269, ante. As to the Board, see S8. 8, 9, ante. As to who may act as liquidators, see ss. 9, 10, ante.

279. Appeal against decision of liquidator. Any person aggrieved by any act or decision of the liquidator may apply to the Court which may confirm reverse or modify the act or decision complained of and make such order as it thinks just.

Vic. s. 175 (5). Person aggrieved-When proof is admitted, creditors who object to the admission

are "persons aggrieved", Re Taylor, [1934] N.Z.L.R. 117, at p. 127. For a decision under corresponding bankruptcy legislation, see Re a Debtor; Ex parte Debtor v. Dodwell, [1949] W.N. 95; [1949] 1 All E.R. 510.

Appeal-The function of the court on appeal is discussed in Re Kentwood Constructions Ltd., [1960] 2 All E.R. 655.

280. Notice of appointment and address of liquidator. (1) A liquidator shall within fourteen days after his appointment lodge with the Registrar notice in the prescribed form of his appointment and of the situation of his office and in the event of any change in the situation of his office shall within fourteen days after the change lodge with the Registrar notice in the prescribed form of the change.

(2) A liquidator shall within fourteen days after his resignation or removal from office lodge with the Registrar notice thereof in the prescribed form.

(3) If a liquidator fails to comply with any of the provisions of this section he shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. u.K. s. 305; N.S.W. s. 294; Vic. s. 206; Qld. s. 256; S.A. s. 267, W.A. s. 256;

Tas. s. 217. The duty of a liquidator under this section may be enforced under s. 282. As to resignation and removal, see ss. 239, 266, ante.

281. Liquidator's accounts. ( 1) Every liquidator shall, within one month after the expiration of the period of six months from the date of his appointment and of every subsequent period of six months, and in any case within one month after he ceases to act as liquidator, and forthwith after obtaining an order of release, lodge in triplicate with the Registrar in the prescribed form, and verified by statutory declaration, an account of his receipts and payments and a statement of the position in the winding up.


(2) The Registrar may cause the account to be audited by a registered company auditor, and for the purpose of the audit the liquidator shall furnish the auditor with such vouchers and information as he requires, and the auditor may at any time require the production of and inspect any books or accounts kept by the liquidator.


(3) A copy of the account or, if audited, a copy of the audited account, shall be kept by the liquidator and the copy shall be open to the inspection of any creditor or of any person interested at the office of the liquidator.

( 4) The liquidator shall-(a) give notice that the account has been made up to every

creditor and contributory when next forwarding any report, notice of meeting, notice of call or dividend; and

(b) in such notice inform creditors and contributories at what address and between what hours the account may be inspected.

(5) The costs of an audit under this section shall be fixed by the Board and be part of the expenses of winding up.

(6) Notwithstanding the provisions of subsection (1) of this section, the accounts referred to in that subsection may be lodged within such times as may be prescribed in lieu of the times specified in that subsection but so that accounts are lodged at least twice a year.

U.K. s. 249; N.S.W. s. 316; Vic. ss. 178,231; Qld. s. 205; S.A. s. 217; W.A. s. 207; Tas. s. 217.

The duty of a liquidator to send in accounts may be enforced under s. 282, post. The ~ccount should be sent to the Registrar of Companies, Re a Reference, [1934] Q.W.N. 8. Further as to the costs, charges and expenses of winding-up, see s, 247, (Inte. As to the office of the liquidator, see s. 280, ante.

Audit-The section conforms rather to the pattern of the corresponding English section, supra. than to earlier State legislation. In so far as the Registrar is now to discharge cert~in functions in relation to audit of a liquidator's accounts, the section exemplifies the tendency in recent years to enlarge the Registrar's responsibilities.

In view of the frame of the section, some of the cases noted below are of less direct relevance now than formerly. They have nevertheless been included as illustrations of principle.

The court cannot dispense with the appointment of an auditor, Re Premier Permanent BlliidinJ; Land and Investment Association (1900), 26 V.L.R. 403.

The court will not, as a rule, appoint an auditor recommended by the liquidator, but some one unconnected with him, Re South Suburban Land and Finance Companv (1897), 23 V.L.R, 434. See also Re Goulhurn Valley Butter Co. (1899), 25 V.L.R. 334; Re Metropolitan Bank Ltd. (1900), 25 V.L.R. 697; Re Empire Permanent Bui/dinJ; Soc. (1899), 5 A.L.R. (C.N.) 29.

The proposed auditor should give evidence by affidavit that he is not directly or indirectly concerned in the affairs of the company, that he has no interest in them and that he is willing to discharge the duties of auditor, Re Goulburn Valley Butter Co. (1899), 25 V.L.R. 334.

Provision for costs-Before distributing assets a liquidator should make provision for meeting the costs of the audit. See Re Modern Printing Pty. Ltd., [19351 Q.w.N. 50.

282. Liquidator to make good defaults. ( 1) If any liquidator who has made any default in lodging or making any application, return, account or other document, or in giving any notice which he is by law required to lodge make or give, fails to make good the default within fourteen days after the service on him of a notice requiring him to do so, the Court may, on the application of any contributory or creditor of the company or the Registrar, make an order directing the liquidator to make good the default within such time as is specified in the order.


(2) Any order made under subsection (1 ) of this section may provide that all costs of and incidental to the application shall be borne by the liquidator.

(3) Nothing in subsection (1) of this section shall prejudice the operation of any enactment imposing penalties on a liquidator in respect of any such default.


For the validation of acts of certain liquidators, see s. 232, ante. For an example of a penalty provision, see s. 281, ante.

283. Notification that a company is in liquidation. ( 1) Where a company is being wound up every invoice, order for goods or business letter issued by or on behalf of the company or a liquidator of the company or a receiver or manager of the property of the company, being a document on or in which the name of the company appears, shall have the words "in liquidation" added after the name of the company where it first appears therein.

(2) If default is made in complying with this section the company, and every officer of the company or liquidator and every receiver or manager, who knowingly and wilfully authorizes or permits the default, shall be guilty of an offence against this Act.

Penalty: Twenty pounds. U.K. s. 338; N.S.W. s. 313; Vic. s. 230; Qld. s. 289; S.A. s. 205; W.A. s. 286;

Tas. s. 241. Compare s. 192, ante, which relates to receivers. Cf. s. 113, ante, which relates

to publication of the company's name. Further as to names of companies, see ss. 22-24. ante.

284. Books of company. (1) Where a company is being wound up all books and papers of the company and of the liquidator that are relevant to the affairs of the company at or subsequent to the commencement of the winding up of the company shall as between the contributories of the company be prima facie evidence of the truth of all matters purporting to be therein recorded.

(2) When a company has been wound up the liquidator shall retain the books and papers referred to in subsection (1) of this section for a period of five years from the date of dissolution of the company and at the expiration of that period may destroy them.


(3) Notwithstanding subsection (2) of this section, when a company has been wound up, the books and papers referred to in subsection (1) of this section may be destroyed within a period of five years after the dissolution of the company-

(a) in the case of a winding up by the Court, in accordance with the directions of the Court;

(b) in the case of a members' voluntary winding up, as the company by resolution directs; and

(c) in the case of a creditors' voluntary winding up, as the committee of inspection, or, if there is no such committee, as the creditors of the company direct.


(4) No responsibility shall rest on the company or the liquidator by reason of any such book or paper not being forthcoming to any person claiming to be interested therein if such book or paper has been destroyed in accordance with the provisions of this section.

U.K. ss. 340, 341; N.S.W. ss. 314, 315; Vic. s. 231; Qld. ss. 290, 291; S.A. ss. 296. 297; W.A. ss. 287, 288; Tas. s. 242.

As to the date of dissolution, see ss. 240, 272, ante, s. 308, post. As to liquidator's books, see s. 277, ante. For the commencement of winding-up, see ss. 223, 255, ante. For the power of the court to declare a dissolution void, see s. 307, post.

Prima facie evidence-Since the books are no more than prima facie evidence, if the name of a director, an alleged contributory, be found in the register, then even where registration or non-registration is the cardinal point, he may show that his name was not there with his assent and knowledge. Re Barangah Oil Refining Co.; Arnot's Case (1887), 36 Ch. D. 702, at p. 71.2.

Ledger cards kept by a society in respect of a member's indebtedness cannot be called "books and papers" of that society so as to be admitted as evidence of membership. Re Peter Lalor Home BUilding Co-operative Society Ltd. (in liq.); Tuckman v. Dunlop. [1958] V.R. 165.

Returns as evidence-As to whether returns lodged with the Registrar conclude, as against shareholders, the amount to which their shares are paid up, see Re Provincial and Suburban Bank (1880), 6 V.L.R. 145.

Disposal of records-A liquidator in possession of the records of a company in liquidation holds them as an officer of the Supreme Court of Queensland, which is an "institution of the State" within the meaning of s. 21 of the Libraries Acts, 1943 to 1949 (title EDUCATION) and the court has power to direct that with the consent of the State Librarian, those records be deposited with him, Re East Coast Minerals Pty. Ltd. (in liq.), [1961] Q.W.N. 44.

285. Investment of surplus funds on general account. ( 1) Whenever the cash balance standing to the credit of any company in liquidation is in excess of the amount which, in the opinion of the committee of inspection, or, if there is no committee of inspection, of the liquidator, is required for the time being to answer demands in respect of the estate of the company, the liquidator, if so directed in writing by the committee of inspection, or, if there is no committee of inspection, the liquidator himself, may, unless the Court on application by any creditor thinks fit to direct otherwise and so orders, invest the sum or any part thereof in securities issued by the Government of the Commonwealth or a State or place it on deposit at interest with any bank, and any interest received in respect thereof shall form part of the assets of the company.

(2) Whenever any part of the money so invested is, in the opinion of the committee of inspection, or, if there is no committee of inspection, of the liquidator, required to answer any demands in respect of the company's estate, the committee of inspection may direct, or, if there is no committee of inspection, the liquidator may arrange for the sale or realisation of such part of the said securities as is necessary.

U.K. s. 361; Vic. s. 233; Tas. s. 244. As to the committee of inspection, see 5S. 241, 242, ante. For the power of

the liquidator to deal with the assets of the company, see ss. 236, 269, ante. As to payment by the liquidator into a bank account, see s. 238, ante.

286. Unclaimed assets to be paid to Companies Liquidation Account. ( 1) Where a liquidator has in his hands or under his control-

(a) any unclaimed dividend or other moneys which have remained unclaimed for more than six months from the date when the dividend or other moneys became payable; or


(b) after making a final distribution, any unclaimed or undistributed moneys arising from the property of the company,

he shall forthwith pay those moneys to the Treasurer of the State to be placed to the credit of the Companies Liquidation Account and shall be entitled to the prescribed certificate of receipt for the money so paid and that certificate shall be an effectual discharge to him in respect thereof.

(2) The Court may at any time on the application of the Registrar order any liquidator to submit to it an account of any unclaimed or undistributed funds, dividends or other moneys in his hands or under his control verified by affidavit and may direct an audit thereof and may direct him to pay those moneys to the Treasurer of the State to be placed to the credit of the Companies Liquidation Account.

(3) The Governor in Council may direct what percentage of the interest arising from the investment of the moneys standing to the credit of the Companies Liquidation Account shall be paid into the consolidated revenue to recoup any necessary expenses and the remainder of the interest shall be paid to the credit of the account.

( 4) For the purposes of this section the Court may exercise all the powers conferred by this Act with respect to the discovery and realisation of the property of the company and the provisions of this Act with respect thereto shall with such adaptations (if any) as are prescribed apply to proceedings under this section.

(5) The provisions of this section shall not except as expressly declared in this Act deprive any person of any other right or remedy to which he is entitled against the liquidator or any other person.

(6) If any claimant makes any demand against the Treasurer of the State for any money placed to the credit of the Companies Liquidation Account, the Treasurer upon being satisfied that the claimant is the owner of the money shall direct payment thereof to be made to him out of the Account or, if it has been paid into the consolidated revenue, may direct payment of a like amount to be made to him subject to appropriation by Parliament out of the consolidated revenue.

(7) Any person dissatisfied with the decision of the Treasurer in respect of a claim made in pursuance of subsection (6) of this section may appeal to the Court which may confirm, disallow or vary the decision.

(8) Where any unclaimed moneys paid to any claimant are afterwards claimed by any other person, the Treasurer shall not be respo:1sible for the payment of the moneys but such person may have recourse against the claimant to whom the Treasurer has paid them.

(9) Any unclaimed moneys and any interest arising from the investment thereof paid to the credit of the Companies Liquidation Account to the extent to which the said moneys have not been under this section paid out of the Account shall, on the lapse of six years from the date of the payment of the moneys to the credit of the Account, be paid into the consolidated revenue.


With the provisions of this section relating to aUdit. cf. s. 281, ante.


Undistributed moneys-Where a liquidator has in hand assets which (pursuant to a scheme under s. 181, ante) have to be applied for certain specific purposes (not involving payment to beneficiaries) the fund is not "undistributed moneys", within this section, Re Land Mortgage Bank of Florida, [1898] 1 Ch. 444.

Unclaimed moneys-Moneys unclaimed in respect of priority wool certificates, reduction of capital, and liquidator's distribution were held to be "money representing unclaimed assets of the company" within the meaning of s. 222 (4) of the Companies Act, 1928 (Vic.), Re British Australian Wool Realisation Association Ltd. (in liq.), [1932] V.L.R. 34.

287. Expenses of winding up where assets insufficient. ( 1 ) Unless expressly directed to do so by the Registrar, a liquidator shall not be liable to incur any expense in relation to the winding up of a company unless there are sufficient available assets.

(2) The Registrar may on the application of a creditor or a contributory direct a liquidator to incur a particular expense on condition that the creditor or contributory indemnifies the liquidator in respect of the recovery of the amount expended, and if the Registrar so directs, gives such security to secure the amount of the indemnity as the Registrar thinks reasonable.

N.S.W. s. 316; Vic. s. 235; S.A. s. 383; Tas. s. 246.

288. Resolutions passed at adjourned meetings of creditors and contributories. Subject to subsection (9) of section two hundred and sixty, where a resolution is passed at an adjourned meeting of any creditors or contributories of a company, the resolution shall for all purposes be treated as having been passed on the date on which it was in fact passed and not on any earlier date.


Proxies-In relation to proxies not admitted at the initial meeting, see jackson v. Ham/yn, [1953] Ch. 577; [1953] I All E.R. 887.

Generally-See Paterson and Ednie, Australian Company Law, pp. 573, 574.

289. Meetings to ascertain wishes of creditors or contributories. (1) The Court may as to all matters relating to the winding up of a company have regard to the wishes of the creditors or contributories as proved to it by any sufficient evidence, and may if it thinks fit for the purpose of ascertaining those wishes direct meetings of the creditors or contributories to be called held and conducted in such manner as the Court directs, and may appoint a person to act as chairman of any such meeting and to report the result thereof to the Court.

(2) In the case of creditors regard shall be had to the value of each creditor's debt.

(3) In the case of contributories regard shall be had to the number of votes conferred on each contributory by this Act or the articles.


As to the number of votes to which contributories are entitled, see s. 140, ante. As to voting, see further Fourth Schedule, Tables A, B, Procedure at General Meetings, post. Further, see the notes to s. 225, ante.

For delegation of powers under this section to a liquidator in a winding-up by the cOUli, sec s. 252, ante. As to resolutions passed at adjourned meetings, see s. 288. ante.

When section may be invoked-This section may be invoked when a petition is before the court, Re Western of Canada Oil Co. (! 874), L.R. 17 Eq. 1, or as soon as a petition has been presented, Re Be/mont Land Co. (1913), 32 N.Z.L.R. 864.


On petition-The court's discretion under the section is not limited to merely having regard to the wishes of the majority of creditors; and where in the special circumstances of a company having no assets at all, and there being no evidence on the part of those who opposed the petition why the company should continue, a winding-up order should be made, Re Vuma Ltd., [1960] 3 All E.R. 629.

The bare fact of a majority in number and value of the creditors opposing a petition is not in itself sufficient to deprive a petitioning creditor of his right to an order. Re P. & J. Macrae Ltd., [1961] 1 All E.R. 302. See discussion in 35 AL.J. 262, 263.

Having regard to this section, it is still right for the court in deciding whether to make a winding-up order to consider the wishes of the majority of creditors. Although those wishes may not be conclusive, where they are on the face of them reasonable, the court ought to follow those wishes in the absence of special circumstances, Re A.B.C. Coupler & Engineering Co. Ltd., [1961] 1 All E.R. 354.

Further in relation to the wishes of creditors, see Re Concrete Pipes and Cement Products Ltd., [1926] V.L.R. 34, and the notes to s. 225, ante.

Value-In considering the wishes of creditors, regard must be had to the value of each creditor's debt, that is the amount of the debt, not what its actual value may be, as, for example, in a contest between preferential claims and other debts, Re Manakau Timber Co. (1895), 13 N.Z.L.R. 319.

Where meeting held-When a liquidation is proceeding in two COUntries, for the place where the meeting should be held, see Re City of Melbourne Bank Ltd. (in liq.) (1897), 19 AL.T. 80.

Foreign creditors-As to foreign creditors, see Re Standard Bank ot Australia Ltd. (1895), 1 AL.R. 14; Re Federal Bank of Australia, The Advertiser, 1 March 1895.

290. Special commission for receiving evidence. ( 1 ) Stipendiary magistrates shall be commissioners for the purpose of taking evidence under this Part, and the Court may refer the whole or any part of the examination of any witnesses under this Part to any person hereby appointed commissioner.

(2) Every commissioner shall in addition to any powers which he might lawfully exercise as a stipendiary magistrate have in the matter so referred to him all the same powers as the Court of summoning and examining witnesses of requiring the production or delivery of documents of punishing defaults by witnesses and of allowing costs and expenses to witnesses.

(3) Unless otherwise ordered by the Court the taking of evidence by commissioners shall be in open court and shall be open to the public.

( 4) The examination so taken shall be returned or reported to the Court in such manner as the Court directs.

U.K. s. 348; Vic. s. 238; S.A. s. 302; W.A s. 293; Tas. s. 249. In relation to the inspection of books by creditors and contributories, see s. 248,

ante. For the power of the court to summon certain persons, see s. 249, ante. Generally, see s. 300, post. In relation to the report under this Part, see s. 235, ante.

Subdivision (2 )-Proof and Ranking of Claims 291. Proof of debts. ( 1) In every winding up, subject in the case of insolvent companies to the application in accordance with the provisions of this Act of the law of the Commonwealth relating to bankruptcy, all debts payable on a contingency and all claims against the company present or future certain or contingent ascertained or sounding only in damages shall be admissible to proof against the company, a just estimate being made so far as possible of the value of such debts or claims as are subject to any contingency or sound only in damages or for some other reason do not bear a certain value.


(2) Subject to section two hundred and ninety-two in the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and debts provable and the valuation of annuities and future and contingent liabilities as are in force for the time being under the law of the Commonwealth relating to bankruptcy in relation to the estates of bankrupt persons, and all persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company may come in under the winding up and make such claims against the company as they respectively are entitled to by virtue of this section.

U.K. ss. 316, 317; N.S.W. ss. 295,296; Vic. s. 215; Qld. ss. 270, 272; S.A. ss. 277. 278; W.A. ss. 268, 269; Tas. s. 226.

For power to pay classes of creditors in full and to make compromises and arrangements with creditors, see ss. 236, 269, 273, ante.

History of section-The section imitates s. 316 of the Companies Act, 1948 (Imperial). The history of subsection (1) is traced in Page v. Commonwealth Life Assurance Society Ltd. (1935), 36 S.R. (N.s.W.) 85. See also Re Paul & Gray Ltd. (1933). 33 S.R. (N.S.W.) 295.

Contingent claims-A contingent claim is one admissible as a proof for something which might ripen into a right for present payment, Re Telegraph Construction Co. (1870), L.R. 10 Eq. 384, at p. 388. Examples include: workers' compensation-Re Armstrong Whitworth Securities Co., [1947] Ch. 673; [1947] 2 All E.R. 479; annuities-Re Profits & Income Insurance Co., [1929] 1 Ch. 262; [1928] All E.R. Rep. 378; insurance policies-Re Law, Car & General Insurance Corporation, [1913] 2 Ch. 103; [1911-13] All E.R. Rep. 1024; Newport Navigation Co.'s Claim, [1915] 2 Ch. 12; Re Federal Building Assurance Co. Ltd. (1934), 34 S.R. (N.S.W.) 499; leases-Hardy v. Fothergill (1888), 13 App. Cas. 351; Re Hous,e Property & Investment Co. Ltd. [1954] Ch. 576; [1953] 2 All E.R. 1525; continuing damage-Re Trent & Humber Co. (1868), L.R. 6 Eq. 394; 4 Ch. App. 112.

Contingent creditor-'The expression 'contingent creditor' is not defined in the Companies Act 1948 [Imperial] but must, I think, denote a person towards whom, under an existing obligation, the company mayor will become subject to a present liability on the happening of some future event or at some future date", Re William Hockley Ltd., [1962] 2 All E.R. 111, at p. 113.

Value of such debts Or claims-The relevant date for estimation of value is the date of the commencement of winding-up, Re Parana Plantations Ltd., [1948] 1 All E.R. 742.

Payments prior to registration-Payments made on behalf of a company prior to registration or issue of permission to commence business, cannot be proved for unless adopted by the company, Re National Motor Mail-Coach Co. Ltd., Clinton's Claim, [1908] 2 Ch. 515; New Druce-Portland Co. v. Blakiston (1908), 24 T.L.R. 583.

Foreign creditor-Foreign creditors rank equally with local creditors, Re Bank of Qu.eensland Ltd. (1867), 1 S.C.R. 159.

Debts provable-Debts provable on a winding-up include the following:-(a) Claims by shareholders.-A bona fioe purchaser of shares fraudulently

issued, prior to the impeachment of the transaction, is entitled to prove on equal terms with shareholders purchasing at par, Barnard v. Bagshaw (1863), 1 Hem. & M. 69. A contributory who has purchased a debt for less than full value may prove against the company for full value, Re Humber Ironworks Co. (1869), L.R. 8 Eq. 122, and damages for improper forfeiture of shares may be proved for. Re New Chile Gold Mining Co. (1890), 45 Ch. D. 598.

But where both the application for shares and their issue are fraudulent, the shareholder may be removed from the list of contributories. Re Mount James Consolidated Silver Mining Co. Ltd. (1889), 23 SAL.R. 127.

(b) Claims in respect of breaches of contract generally-In Re Orrell Colliery & Fire Brick Co. (1879) 12 Ch. D. 681, the plaintiff was not debarred from bringing forward a claim in the winding-up although a previous action commenced against a company and continued by leave after winding-up order was dismissed for want of prosecution by order before


tria!' Where a company is insolvent and in liquidation a lessor to it may prove for future payments of rent, but it is the duty of the liquidator to reserve assets out of which a dividend on those future payments is to be paid. Where it is in liquidation but not insolvent, he should reserve assets to meet future payments of rent, Re Heinecke and Fox Ltd. (1893), 15 A.L.T. 55.

A judgment debt in respect of a contract ultra vires the company is not provable, Re Jon Beaufort (London) Ltd., [1953] Ch. 131; [1953] 1 All E.R. 634.

As to the effect of liquidation upon existing contracts of the company, and damages for breach, see Mersey fran & Steel Co. v. Naylor, Benson & Co. (1884), 9 App. Cas. 434; Re Tru-Grain Co. Ltd., [1921] V.L.R. 653.

"If what is alleged to be a debt is irrecoverable at law, it cannot be that the claimant can have the same debt recognised as valid so as to enable him to prove it in a winding-up", Re Charles Ellis Pty. Ltd., [1955] V.L.R. 214, at p. 215.

(c) Claims by directors, servants and agents-Unpaid director's fees were held to be debts due to him as a member, and to be postponed to outside creditors. Re Leicester Club & County Racecourse Co., Ex parte Cannon (1885), 30 Ch. D. 629; and see also Re New British Iron Co., Ex parte Beckwith, [1898] 1 Ch. 324, as to remuneration not due as a member.

As to the principle upon which salary and compensation of a manager, terminated by winding up, will be paid, see Re English Joint Stock Bank, Yelland's Case (1867), L.R. 4 Eq. 350. The claim of a promoter and director of a company to payment for services rendered and goods supplied was held not to have been established in Darling Downs Brewery Ltd. (Nicol's Claim) (1899), 9 Q.L.l. 239; 9 Q.L.J. (N.C.) 111.

As to pensions generally, see Re Houghton Main Colliery Co. Ltd., [1956] 3 All E.R. 300. Voluntary pensions are not provable, Re Birkbeck Permanent Benefit Building Society, [1913] 1 Ch. 400.

As to a claim in respect of services rendered to a foreign company, see Re Banque des Marchands de Moscou, [1952] 1 AI! E.R. 1269.

As to the right of servants who may be discharged by winding-up to prove for damages, see Re Intercolonial Smelting and Reducing Co. Ltd. (1887), 13 V.L.R. 896; Re Camberwell Motors Pty. Ltd., [1926] V.L.R. 539; Glass v. Pioneer Rubber Works of Australia Ltd., [1906] V.L.R. 754.

(d) Advances to and payments on behalf of company-See Re Great Western Atmospheric Ry. Co., Wryghte's Case (1852), 21 L.J. Ch. 807, where

money was lent to company on personal security of directors. (e) Claim for indemnity-The trustee in bankruptcy of a person entitled

to indemnity from a company in course of liquidation, who has not made any payment in respect of the liability, cannot prove in the winding up for the full amount of such liability, Re Alfred Shaw & Co. Ltd. (1897), 8 Q.L.J. 70; 8 Q.L.J. (N.C.) 57. His only right of proof is in respect of a contingent liability equal to the estimated amount which the company would be actually liable to pay to him on a balance of accounts (ibid.). See also Re British Provident Life & Fire Assurance Co., etc., Teete's Case, Rumney's Case (1864), 10 L.T. 326, where one company on amalgamation with another agreed to indemnify it against liability.

(f) Claims for rent and rates against liquidator-See Re Wearmouth Crown Glass Co. (1882), 19 Ch. D. 640 (rates), and Re South Kensington Co-op. Stores (1881), 17 Ch. D. 161 (apportionment of rent).

See also Re London Furnislzin!? Co. Ltd. (1938),48 W.N. (N.S.W.), 27, explained in Warrender Estates Ltd. v. Simpson (1933), 50 W.N. (N.S.W.) 177.

(g) Claims on holders of negotiable instruments-See cases in 10 English and Empire Digest (Rp!.), p. 978.

(h) Interest on debts-See Re Hadfield's Patent Cask & Package Co. Ltd., Ex parte Gr.eenwood (1863), 8 L.T. 846 (simple contract debt); Re Humber Ironworks & Shipbuildin!? Co., Warrant Finance Co.'s Case (1869), 4 Ch. App. 643 (date to which interest allowed).

See also Re Paul & Gray Ltd. (1933),33 S.R. (N.S.W.) 295.


(i) Damages--See Page v. Commonwealth Life Asslirance Society (1935), 36 S.R. (N.S.W.) 85; Re Ballarat Motors Pty. Ltd., [1914] V.L.R. 136.

Assignee-In relation to proofs by assignees of debts, see Re ClIl1Iberll'ell Motors Pty. Ltd., [1926] V.L.R. 539.

Unliquidated damages-Unliquidated damages for tort cannot be proved in a winding up of an insolvent company, Re SOllthern Cross Coaches Ltd. (1932), 49 N.S.W.W.N. 230.

Creditor's covenant-A creditor may, by his covenant, preclude himself from obtaining any dividend on his proof until all other creditors have been paid in full, Re N.z. Imperial Cash Register Co. (1913), 32 N.Z.L.R. 981.

Statute of Limitations-As to effect of a Statute of Limitation, see Re Royal Bank of Australia, Ex parte Forest (1860), 29 L.J. Ch. 295, and Re General Rolling Stock Co., Joint Stock Discount Co.'s Claim (1872), 7 Ch. App. 646, where the statute was held not to bar a creditor's claim after order to wind up had been made but permission was given to prove his debt at any time, not disturbing paid dividends. Briefly, a Statute of Limitation, on a winding-up order being made, ceases to run, and the creditor can prove at any time before the company is finally dissolved, provided there is no interference with any dividends already paid, see last cited case and Re River Steamer Co., Mitchell's Claim (1871), 6 Ch. App. 822.

Secured creditors-Secured creditors may rely upon their security, and need not prove at all. See Re Longdendale Cotton Spinning Co. (1878), 8 Ch. D, 150.

Presumption of insolvency-There is a rebuttable presumption of fact that a company which is in liquidation, whether compulsory or voluntary, is insolvent, Re Canada Cycle and Motor Agency, [1931] St. R. Qd. 281; Rogers Ltd. v. MacPhersoll and Rogers Ltd., [1904] Q.W.N, 32. Consequently this provision applies to all companies in liquidation unless it is shown that the assets are sufficient to pay all the creditors in full, Re Milan Tramways Co., Ex parte Theys (1884), 25 Ch. D. 587. Once it is obvious, however, that the company is solvent, such provisions cease to apply, Re Fine Industrial Commodities Ltd., [1955] 3 All E.R. 707; [1956] Ch. 256.

Bankruptcy-The reference in this section to the law of bankruptcy is to be read as to the relevant provisions of the Bankruptcy Act 1924-1960 (Commonwealth). See Re Canada Cycle lind Motor Agellcy, [19311 St. R. Qd. 281. at p. 285; Re London Furnishing Co. Ltd. (1930), 48 W.N. (N.S.W.), 27.

Preferential claims where company insolvent-Where a company is in liquidation and insolvent the priorities of preferential claims are determined by this Act, not by the rules of bankruptcy, Re R. W. Lees Pty. Ltd., Ex parte Pender, [1938] St. R. Od. 220.

In view of the provisions of s. 292 (2), pOSt, subsection (2) of this section must be given a limited meaning, Re St. James' Service Co-operative Ltd. (1942), S.R. (N.S.W.) 274.

Rules in bankruptcy-The section imports the following rules of bankruptcy( 1) Proofs by secured and unsecured creditors-Sec the Bankruptcy Act

1924-1960 (Commonwealth), ss. 4 ("secured creditor"), 60 and rules 234-243.

The bankruptcy rules as to secured creditors arc not wholly applicable, see Moor v. Anglo-Italian Bank (1879), 10 Ch. D. 681.

A secured creditor was allowed to reduce the valuation placed upon his security and to increase the amount proved for by the amount of such reduction, his application not being opposed by the liquidator or other creditors, Re Queens/and flv1erc{lntile and Agc/lcy Co. Ltd. (1893), 5 O.L.l. 53.

Where a mortgagee society had not been paid interest for years and there was very little chance of its ever being paid any portion of principal or interest. it Was held that it should be allowed to prove for the amount of the principal unpaid and interest up to the date of liquidation deducting the value of its security, Re Mercalltilc Fillal1ce, etc., Co. oj A IIstrulia; Re Colonial Mutual Life Assural1cc Society (1896), 22 V.L.R. 381.

Further, as to a secured creditor's proper course with respect to his security, see Harvey v. Commercial Bank of Australia Ltd. (1937), 58 C.L.R. 382; [1938] A.L.R. 58.

COMPANIES ACT OF 1961 S5. 291, 292 337

(2) Debts provable-Debts prQvable in bankruptcy are thQse described in s. 81 Qf the Bankruptcy Act 1924-1960 (CQmmQnwealth) and rules. See, as to' their application, Re British Goldfields of West Africa, [1899] 2 Ch. 7. Generally as to' debts provable in bankruptcy, see 4 English and Empire Digest (Rp!.), p. 276.

(3) Valuation Qf annuities and future and contingent liabilities-See Bankruptcy Act 1924-1960, s. 81 (Commonwealth).

(4) Mutual credit and set-olI-See the Bankruptcy Act 1924-1960, s. 82 (Commonwealth); 4 English and Empire Digest (Rp!.), p. 423; Vol. 10, p. 988; a shareholder who is alsO' a creditor cannot set olI the debt due to him against calls on his shares, Re North Queensland Brick and Pottery Co. Ltd., [1902] St. R. Qd. 286. As to the effect of s. 82 of the Bankruptcy Act 1924-1960, see also Re Canada Cycle and Motor Agency, [1931] S1. R. Qd. 281. See also Hiley v. Peoples Prudential AsslIrance Co. Ltd. (in liq.) (1938), 60 C.L.R. 468; [1938] AL.R. 469.

As to the right of set olI between a company in liquidation and a bankrupt sharehQlder, see Re West Australian Lighterage, Stevedoring lind Transport Co. Ltd.; Ex parte Bank of New South Wales (1903), 5 W.A.L.R. 132.

(5) Double proof-See Re Oriental Commercial Ballk; Ex parte Europeall Bank (1871), 7 Ch. App. 99. See also Re Knight Brothers (1931),

3 A.B.C. 134, at p. 141. (6) ExecutiQn creditors-The bankruptcy provisions restricting the rights of

execution creditors are not imported into the winding-up Qf a company, Re Withernsea Brickworks (1880), 16 Ch. D. 337, 341. But see 55.

298, 299, post.

Rules in bankruptcy not applicable-The following bankruptcy rules are not imported into the winding up of insolvent companies: reputed ownership Re Crumlin Viadllct Works Co. (1879),11 Ch. D. 755; Gorringe v. IrlVell India i(llbber & Gutta Perch a Works (1886), 34 Ch. D. 128; the rule preventing a partner from proving against the joint estate with joint creditors, Re West of Eng/and Bank, Ex parte Brown (1879), 12 Ch. D. 823; a provision of the bankruptcy law enabling a trustee in bankruptcy to apply for the advice and direction of the court as to the priority in which debts should be paid, Re Peterson Ltd., [1927] S1. R. Qd. 134; [1927] Q.W.N. 25; avoidance of bills of sale in certain circumstances, Re D'Epincllil (1882), 20 Ch. D. 217; calculation of interest on debts for purposes Qf dividend, Re ARricultllral Wholesale Society, [1929J 2 Ch. 261; [1929J Ail E.R. Rep. 643; secured creditor as regards presenting petition in certain circumstances, :\1001' v. AIlRlo-ltalian BUllk (1879), 10 Ch. D. 681: limitation of power of trustee in relation to copyright, Rc Health Promotion Ltd., [1931] All E.R. Rep. 59; [1932] I Ch. 65.

As to whether s. 84 (2) of the Bankruptcy Act 1924-1960 (Commonwealth) (empowering the court to give an advantage to creditors indemnifying the company against costs of litigation) is a rule within this section, sec Re A. Slwd/a Ltd. (1904), 5 S.R. (N.S.W.) 33. Re Allied Glass Manufacturers Ltd. (1936). 36 S.R. (N.S.W.) 409. See now s. 292, post.

Generally-As to the application of the Bankruptcy Act 1924-1960 (Commonwealth) see Re Dittmer Gold Mines Ltd. (No. I), [1954] SI. R. Qd. 255.

292. Priorities. ( 1) Subject to the provisions of this Act, in a winding up there shall be paid in priority to all other unsecured debts-

(a) firstly, the costs and expenses of the winding up including the taxed costs of a petitioner payable under section two hundred and twenty-four, the remuneration of the liquidator and the costs of any audit carried out pursuant to section two hundred and eighty-one;

(b) secondly, all wages or salary (whether or not earned wholly or in part by way of commission not being an overriding commission) including any amount payable by way of allowance or reimbursement under any contract of employment or award or agreement regulating conditions of employment,


of any employee not exceeding three hundred pounds whether for time or piece work in respect of services rendered by him to the company within a period of four months before the commencement of the winding up;

(C) thirdly, all amounts not exceeding in any particular case one thousand pounds due in respect of workers' compensation under any law relating to workers' compensation accrued before the commencement of the winding up;

(d) fourthly, all remuneration payable to any employee in respect of annual leave or long service leave or both, or in the case of his death to any other person in his right, accrued in respect of any period before the commencement of the winding up; and

(e) fifthly, the amount of all municipal or other local rates due from the company at the date of the commencement of the winding up and having become due and payable within the twelve months next preceding that date, the amount of all land tax and income tax assessed under any Act or Act of the Commonwealth before the date of the commencement of the winding up and not exceeding in the whole one year's assessment and any amount due and payable by way of repayment of any advance made to the company, or in payment of any amount owing by the company for goods supplied or services rendered to it under any Act or Act of the Commonwealth or law of a Territory of the Commonwealth relating to or providing for the improvement development or settlement of land or the aid development or encouragement of mining.

(2) The debts in each class specified in subsection (l) of this section shall rank equally between themselves, and shall be paid in full, unless the property of the company is insufficient to meet them, in which case they shall abate in equal proportions between themselves.

(3) Where any payment has been made to any employee of the company on account of wages salary annual leave or long service leave out of money advanced by a person for that purpose, the person by whom the money was advanced shall, in a winding up, have a right of priority in respect of the money so advanced and paid, up to the amount by which the sum in respect of which the employee would have been entitled to priority in the winding up has been diminished by reason of the payment, and shall have the same right of priority in respect of that amount as the employee would have had if the payment had not been made.

( 4) So far as the assets of the company available for payment of general creditors are insufficient to meet any preferential debts specified in paragraphs (b) and (d) of subsection (l) of this section and any amount payable in priority by virtue of subsection (3) of this section, those debts shall have priority over the claims of the holders of debentures under any floating charge created by the company, and shall be paid accordingly out of any property comprised in or subject to that charge.

(5) Where the company is under a contract of insurance (entered into before the commencement of the winding up) insured against liability to third parties, then if any such liability is incurred by the company


(either before or after the commencement of the winding up) and an amount in respect of that liability is or has been received by the c?mpany or the liquidator from the insurer the amount shall, after deductmg any expenses of or incidental to getting in such amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability or any part of that liability remaining undischarged in priority to all payments in respect of the debts referred to in subsection (1) of this section.

(6) If the liability of the insurer to the company is less than the liability of the company to the third party nothing in subsection (5) of this section shall limit the rights of the third party in respect of the balance.

(7) The provisions of subsections (5) and (6) of this section shall have effect notwithstanding any agreement to the contrary entered into after the commencement of "The Companies Act Amendment Act of 1942."

(8) Notwithstanding anything in subsection (1) of this section-(a) paragraph (c) of that subsection shall not apply in relation

to the winding up of a company in any case where the company is being wound up voluntarily merely for the purpose of reconstruction or of amalgamation with another company and the right to the compensation has on the reconstruction or amalgamation been preserved to the person entitled thereto, or where the company has entered into a contract with an insurer in respect of any liability under any law relating to workers' compensation; and

(b) where a company has given security for the payment or repayment of any amount to which paragraph (e) of that subsection relates, that paragraph shall apply only in relation to the balance of any such amount remaining due after deducting therefrom the net amount realised from such security.

(9) Where in any winding up assets have been recovered under an indenmity for costs of litigation given by certain creditors, or have been protected or preserved by the payment of moneys or the giving of indenmity by creditors, or where expenses in relation to which a creditor has indemnified a liquidator, have been recovered, the Court may make such order as it deems just with respect to the distribution of those assets and the amount of those expenses so recovered with a view to giving those creditors an advantage over others in consideration of the risk run by them in so doing.

U.K. s. 319; N.S.W. s. 297; Vic. s. 216; Qld. ss. 274, 274A; S.A. s. 179; W.A. s. 271; Tas. s. 227.

Acts referred to-Companies Act Amendment Act of 1942 came into force on 1 January 1943, see Gazette 21 November 1942, p. 1572.

As to workers' compensation, see Workers' Compensation Acts 1916 to 1962, title LABOUR. '

Section 217, ante, binds the Crown in relation to priorities. As to priority over floating charges, see s. 196, ante.

As to priority where a company is insolvent. see s. 291, ante. As to costs and expenses of the winding-up, see ss. 247, 275, ante. As to execution against the assets of the company after commencement of winding-up, see s. 228, ante. For the date of commencement of winding-up, see ss. 223, 255, ante.


For provIsIOns relating to the distribution of property of the company, see s. 264, ante.

Wages and salaries-Directors cannot pay themselves for their services or make presents to themselves out of the company's assets unless authorized so to do by the instrument which regulates the company, or by the shareholders at a properly convened meeting, Re George Newman & Co., [1895] 1 Ch. 674.

As to whether a director is a servant, see Hutton v. West Cork Railw(/y Co. (1883), 23 Ch. D. 654, at p. 672. But see notes to s. 5 (1) "Director", ante.

A winding-up order is a notice of discharge to the manager of a company, and if by his agreement his engagem~nt was terminable by a month's notice, he is entitled to claim "gainst the as:,ets a month's salary in lieu of notice, Re Intercolonial Smelting Co. (1887), 13 V.L.R. 896.

As to who may be eligible for priority in respect of wages and salary, see Re Earle's Shipbuilding and Engineering Co., [1901] W.N. 78; Re Klein (1906), 22 T.L.R. 664 (persons paid by commission); Re Newspaper Proprietary Syndicate Ltd., [1900] 2 Ch. 349 (managing director); Re Beeton & Co. Ltd., [1913] 2 Ch. 279 (director employed as editor of periodical); Re Intercolonial Smelting Co. (1887), 13 V.L.R. 896 (manager); Caimey v. Back, [1906] 2 K.B. 746 (part-time secretary); Re Ashley & Smith Ltd., [1918] 2 Ch. 378; [1918-19] All E.R. Rep. 753 (outside contributors to newspaper); Re Espl(/nade Theatre Ltd. (ill /iq.), [1929] V.L.R. 237.

Floating charge postponed-In Re Standard Rubber and Le(/tlzerboard Co. Pty. Ltd., [1913] V.L.R., it was held that a secretary of a company, who was also a managing director, was entitled to be paid preferentially to a holder of debentures relating to a floating charge.

Winding-up in another State-Where a winding-up order is made as ancillary to a winding-up order in another State, the relevant date is the date of the local order, Re Australiall Federal Life alld General A:'-Sllrallce Co. (in liq.), [1931] V.L.R. 94.

The distribution is governed by the lex fori, Re Commollwealth Agricultural Service Enf{ineers Ltd., [1928] S.A.S.R. 342.

Where a foreign company was in liquidation a clerk or servant appointed by the company in England, where he performed all the work in respect of which he claimed. was held not to be entitled in a winding-up in Victoria to the priority provided for by a provision similar to this section, Re Australian Cycles and Motor Co. Ltd. (ill liq.) (1901), 7 A.L.R. (C.N.) 53. An English provision similar to this section was held to apply in favour of Queensland creditors in a winding·up in Queensland ancillary to a winding-up in England, where debentures had been issued in England by the company, which was English, Berg v. Moullt Chdmers Copper Mines Ltd., [1902] St. R. Qd. 35.

Servants employed in another State have equal priority with servants employed in the State where the winding-up takes place, Re Commonwealth Agricultural Service EnRineers Ltd., [1928] S.A.S.R. 342.

Long-service leave-Long-service leave was held to be payable to employees whose employment continued on in the course of the winding-up as part of the costs, charges and expenses of and incidental to the winding-up under s. 275, ante, and not as preferential claims under this section, Re Matthew Bros. (ill liq.), [1962] V.R.262.

Creditors-An order made by the court in the winding-up of a company giving priority to a certain class of creditors directed that the liquidator should be at liberty to disregard the claim of any creditor to participate unless he established his right within a certain time. Nevertheless two creditors whose informal proofs were, through the negligence of their agents, not rectified within the time fixed, but who afterward~ applied, were admitted as preferential creditors, Re Macredy and Drew Ltd. (1895), 17 A.L.T. 10.

Following moneys-In relation to following moneys in the hands of a company in its liquidation, see Re City of Melbourne BUllk; Ex parte Melbourne and Metropolitan Board of Works (1895), 21 V.L.R. 563; Re Australian Home Finance Pty. Ltd., [19561 V.L.R. 1.

Refund in priority-A customer of a Melbourne bank received from the bank a draft payable to a creditor in London and paid for it with a cheque on his already overdrawn account with the bank. Before the draft matured, the bank went into liquidation and payment was refused. The creditor in London returned the draft to the customer in Melbourne, who had in the meantime discharged the indebtedness to the bank, including the sum represented by the draft. It was held that the


customer was not entitled to obtain from the liquidator a refund of this sum in priority to other creditors of the bank, Re City oj Melbourne Bank; Ferguson's Case (1897), 23 V.L.R. 78.

Where a company acting in a fiduciary capacity sold trust property to one of. its creditors and that creditor, instead of paying money as the price of the goods, merely set off the price as against the company's debt, it was held that the former owner of the property so sold was entitled to come in and prove in the subsequent liquidation of the company as an ordinary creditor only, and was not entitled to be paid as a preferential creditor the full amount of the proceeds of sale out of the funds in the hands of the liquidator, Re Farmers Produce Co.; Ex parte Bishop ( 1894 ), 20 V.L.R. 62.

Waiver of priority-As to whether receiving dividends in the liquidation amounts to waiver of priority, see Re Oriental Holdings Pty. Ltd. (ill liq.), (1931) V.L.R. 279. Cf. now s. 217, ante, in relation to the facts of that case.

Crown as creditor-Debts owing to the governments of other States rank equally with debts owing to the Government of the State in which the winding-up took place, Re Commonwealth Agricultural Service Engineers Ltd., [1928] S.A.S.R. 342. Cf. s. 217, af/te.

Payment of insurance money-In relation to the division of the insurance money under this section amongst several creditors entitled thereto, see Re Bond's MotuI' Services Ltd., [1953] S.A.S.R. 100.

Draft in transit-The D company by a cheque drawn on its account with the C bank, which was then in credit, obtained a draft upon the London office of the bank payable 60 days after sight of the order of T to whom the D company was indebted. During the transit of the draft to T, the C bank went into liquidation and the draft was not accepted on presentation by T. Shortly after liquidation, the D company, not knowing that the draft would not be met in London, paid off its indebtedness to the C bank amounting to a sum larger than that paid for the draft. T endorsed and returned the draft to the D company, which paid T otherwise. It was held that the D company was not entitled to be paid by the liquidator the amount of the draft in full; nOr would the D company have claimed to set off such amount pro tanto when paying its overdraft off, Re City oj Melbourne Bank; Ex parte Denton Mills Hat Factory (1896), 23 V.L.R. 87.

Part of debt preferential-Where it was held that a managing director was entitled to the remuneration he received partly as manager working in the business and partly as director, the court apportioned the remuneration and held that the amount attributable to managerial work was preferential, Re Briggs Pty. Ltd., [1934] QW.N. 48.

As to the application of the section to the remuneration of persons selling wireless apparatus in their spare time. see Re General Radio Co. Ltd., [1929] W.N. 172.

Overdrawn wages account-In relation to a claim by a bank to be preferred, arising out of an overdrawn wages account, see Re E. J. Morel (1934) Ltd., [1961] 1 All E.R. 796.

Subdivision (3 )-Effect on other Transactions 293. Undue preference. (1) Any transfer, mortgage, delivery of goods, payment, execution or other act relating to property made or done by or against a company which, had it been made or done by or against an individual, would in his bankruptcy be void or voidable shall in the event of the company being wound up be void or voidable in like manner.

(2) For the purposes of this section the date which corresponds with the date of presentation of the bankruptcy petition in the case of an individual shall be-

Ca) in the case of a winding up by the Court-C i) the date of the presentation of the petition; or (ii) where before the presentation of the petition a resolution

has been passed by the company for voluntary winding up the date upon which the resolution to wind up the company voluntarily is passed,

whichever is the earlier; and


(b) in the case of a voluntary winding up the date upon which the resolution to wind up the company voluntarily is passed.

(3) Any transfer or assignment by a company of all its property to trustees for the benefit of all its creditors shall be void.

U.K. s. 320; N.S.W. s. 298; Vic. s. 217; Qld. s. 275; S.A s. 281; W.A. s. 273; Tas. s. 228.

As to the avoidance of dispositions of property, etc., see s. 227, anle. As to the custody and vesting of a company's property, see s. 233, ante. As to the power of the court to summon person.s connected with the company, see s. 249, ante. As to the power of the court to order public examination of promoters, directors, etc .. see s. 250. ante.

General-As to the history of corresponding section in the former State Acts, see Paterson and Ednie, Australian Company Law, p. 585.

Operation-The section appears not to be retrospective in its operation. Therefore. if the act under consideration as constituting a possible preference occurred before the coming into operation of the Act, the former Queensland section (supra) will be applicable.

Bankruptcy-The relevant section is s. 95 of the Bankruptcy Act 1924-1960 (Commonwealth). In relation to that section, see Downs Distributing Co. Ply. Ltd. v. Associated Blue Star Stores Ply. Ltd. (in liq.) (1948), 76 C.L.R. 463.

Bona fide purchaser, etc.-Section 95 of the Bankruptcy Act 1924-1960 (Commonwealth) provides that it does not affect a bona fide purchaser for value from the creditor of the bankrupt or a bona fide purchaser. payee or encumbrancer from the bankrupt for value and in the ordinary course of business, but the onus of proof is upon the purchaser, payee or encumbrancer. As to the onus of proof, see Peat v. Gresham Trust Ltd., [1934) AC. 252, at p. 262; [1934) All E.R. Rep. 82; Re Cutts, [1956) 2 All E.R. 537, at p. 541. The court looks at all the circumstances, Re M. KlIshler Ltd., [1943) 1 Ch. 248. To prove a preference, evidence of other acts of preference in favour of other creditors committed at or about the same time is admissible, Re Ramsay; Ex parte Deacon, [1913] 2 K.B. 80.

H ••• s. 95 (1) avoids, not instruments but certain kinds of changes in the legal situation of the person unable to pay his debts. What the subsection clearly intends to make void, where it applies, is the change which, if allowed to be effectual, would dislocate the statutory order of priorities amongst creditors". Bllms v. Stapleton (1959). 102 C.L.R. 97, at p. 104.

Mutual credit and set-otI-Section 82 of the Bankruptcy Act 1924-1960 (Commonwealth) provides for a mutual sct-off of debts between the bankrupt and the person proving a debt against him; but in a winding-up of a company calls due on shares cannot be set off against debts because there are obligations applicable in a winding-up which are not applicable as between individuals. See for example, s. 245. ante.

The money due in respect of calls must be paid for the benefit of creditors, but it will be recouped in so far as there is a surplus after payment of the creditors. See Re WashinRton Diamond Mining Company, [1893] 3 Ch. 95, at p. III (which deals with English provisions corresponding with s. 245, ante). See also notes to ss. 245. 291. ante, and Re a Debtor, [1927] 1 Ch. 410; Rf' Lands Development Association; Kent's Case (1888). 39 Ch. D. 259; Re Ellropeal! Central Railway Co.; Sykes' Case (1872), L.R. 13 Eq. 255; Re Auriferous Properties Ltd., [1898] 1 Ch. 691; R. Harding & Co. (in liq.) v. Hamilton, [1929] N.Z.L.R. 338.

Intention to prefer-Intention to prefer, on the part of the debtor, is not necessary for a transaction to be a preference within the meaning of this section, Re Walsh; Ex parte S. Richards & Co. Ltd.; Official Receiver (Respondent) (1933), 5 AB.C. 166; affirmed sllb nom S. Richards & Co. Ltd. v. Lloyd (1933). 49 C.L.R. 49; 6 AB.C. 150; [1933) AL.R. 293.

Having the effect of giving a preference-The expression " ... having the effect of giving . . . a preference . . ." in s. 95 of the Bankruptcy Act 1924-1960 (Commonwealth). means giving an advantage in fact, and intention, view or object are irrelevant, Re Stevens; Ex parte Official Receiver; McPhee (Respondent) (1929) 1 A.B.C. 90. See also Re Sanderson; Ex parte Trustee in Bankruptcy; Lane's Motors Pty. Ltd. (Respondent) (1930).2 AB.C. 182; Re Mazok; Ex parte Rees; E. Sachs & Co. (Respondent). [1931] St. R. Qd. 19; 2 AB.C. 237; Re Scott; Ex parte Cruikshank (1931), 26 Tas. L.R. 120; 4 AB.C. 8; cf. Humphery v. McMlIllen (1868),7 S.C.R. (N.S.W.), 84 (F.e.); YOllnghllshand v. Courtney (1861). 1 W. & W. (L.) 55 (F.C.).


A preference under this section may not involve moral blame, Re Patrick and Lyon Ltd., [1933] 1 Ch. 786; [1933] All E.R. Rep. 590.

Section inapplicable as between members-The section applies only to creditors and to sureties and guarantors for debts due to creditors, and not as between members, Re Gwawr-y-Gweithyr Industrial and Provident Society Ltd.; Dovey v. Morgan, [1901] 2 K.B. 477.

Creditor-For the purposes of preference, any person is a creditor who would, if winding-up supervened at the moment when the transaction in question took place, have a right of proof as a creditor; it includes therefore a surety under a contingent liability, Re Blackpool Motor Car Co., [1901] 1 Ch. 77. The transaction can be impeached only for the benefit of the general body of creditors, not for the benefit of a single creditor or class of creditors, Re Zucco; Ex parte Cooper (1875), 10 Ch. App. 510; Re Yagerphone Ltd., [1935] Ch. 392; [1935] All E.R. Rep. 803.

Secured creditors-In Albert Gregory Ltd. v. C. Nicol Ltd. (1916), 16 S.R. (N.S.W.) 214. it was held that although a liquidator should not proceed merely to benefit secured creditors, he has a right to do so if he sees fit.

Execution-As to the effect of this section with respect to executions, see Re Scott. Sibbald & Co. Pty. Ltd. (1906), 6 N.S.W.S.R. 643; Re Munn's Maizella Ltd. (1912), 12 N.S.W.S.R. 614; Normanby Copper Mininr.: Co. v. Corfield (1878), 5 S.C.R. 113; 1 Q.L.R. (Pt. III.) 32; Normallby Copper Mining Co. v. Corfield (1879), 1 Q.L.J. Supp. 3; Re Rotomaster Equipment Ltd. (ill liq.), [1956] S.R. (N.S.w.) 149.

Issue of debentures-When a company agrees to issue debentures to a creditor as security for past and future loans, but delays issuing them for a considerable time. in order to retain its credit, the debentures are not voidable under the statute 13 Eliz .. c. 5, Re Lloyd's Furniture Palace Ltd., [1925] Ch. 853; [I925] All E.R. Rep. 893.

A debenture charging all the assets of a company to secure a sum to be applied for the benefit of all the company's creditors is within the section and void. London Joint, City and Midlalld Bank Ltd. v. Dickinson (H.) Ltd., Johnstone Claimant, [19221 W.N. 13.

Reference to court-Questions under this section may be brought before the court under s. 274, ante, Re Marquette Motors Ltd. (1928), 29 S.R. (N.S.W.) 193.

Directors-A security given by an insolvent company to a director, who is aware of its circumstances, is a preference, Re Gaslight Improvement Co. v. Terrell (1870), L.R. 10 Eq. 168.

If a director receives an advantage, greater weight may be attached hy the court to other facts in considering all the circumstances, Re M. Kushler Ltd., [1943] Ch, 248; [1943] 2 All E.R. 22.

Directors are only trustees in a qualified sense for the shareholders, Re Forest of Dean Coal Milling Co. (1878), 10 Ch. D. 450.

Agent-If an agent, knowing his principal to be insolvent, procures payment with a view to a preference, that is a preference within this section, even though the principal relying on the agent honestly thought the payment was made oroperly and in the ordinary course of business, Re Drabble Bros., [1930] 2 Ch. 211; [1930] All E.R. Rep. 450.

Equitable assignment of moneys-An equitable assignment of moneys to become due, e.g. progress payments made under a binding contract, in good faith, for full present and valuable consideration, is not within s. 95 of the Bankruptcy Act 1924-1960 (Commonwealth), Robertson v. Grigg (1932), 47 C.L.R. 257; 5 A.B.C. 199; [1933] A.L.R. 40.

Official management-Undue preferences during official management pursuant to Part IX. ante, are dealt with in s. 206, ante.

Examples of preferences-In Youllghusballd v. Courtlley (1861), 1 W. & W. (L.) 55, it was held that intention or motive was immaterial in preferences under a similar section.

In Re Grezzana; Painter v. Charles Whiting & Chambers Ltd. (No.2) (1932), 5 A.B.C .• a delivery of wheat in exchange for the supply of cornsacks was held to be a de facto preference. See Re Grezzana; Paillter v. Short (1932), 4 A.B.C. 216. where a guarantor was preferred.


Preferences have been held to be created by payment to withdraw 'I writ of execution, Re Bowman; Ex parte Trustee Joseph, Respondent (1931), 4 A.B.C. ISS, by allowing a creditor to retain the proceeds of sale of goods, Re Kelly; Ex varte Young, Trustee; Victorian Producers Co-operative Co. Ltd., Respondents (1932), 4 A.B.C. 258; Re Hardman; Ex parte Official Receiver; Leng Rundle and Sloss, Respondents (1932), 4 AB.C. 207; Re Smith; Ex parte Trustee; J. Bird Pty. Ltd. and Tlllly, Respondents (1933), 6 AB.C. 49; by allowing the purchaser of the debtor's business to pay a creditor, Re Stevens; Ex parte Official Receiver; McPhee, Respondent (1929), 1 AB.C. 90; Re Patullo; Ex parte Official Receiver; Schutt and Barry Flour Mills Pty. Ltd., Respondent (1931), 3 AB.C. 197. Colourable transactions by setting off purchases against debts, were held void as preferences, Sempill v. Vindin (1868), 7 S.C.R. (N.S.W.) 361; Rc Stephenson (1889), 5 W.N. (N.S.W.) 77.

In Re Ruwaldt; Ex parte Fleetwood Smith; Trustees; Commercial Bank of Australia, Respondent (1931), 3 A.B.C. 245, payments made by a wheat pool into the overdrawn account of the debtor at the bank, were held void as preferences, the bank not having acted in good faith.

Motive (or purpose) was held immaterial in S. Richard·' Ltd. v. Lloyd (1933), 49 C.L.R. 49; [1933] A.L.R. 293; Re Sanderson; Ex parte Tmstee in Bankmptcy; Lane's Motors Pty. Ltd., Respondent (1930), 2 A.B.C. 182; Re !vlazok; Ex parte Rees; Sachs, Respondent, [1931] St. R. Qd. 19; 2 AB.C. 237; Re Scott; Ex parte Cruikshank (1931), 26 Tas. L.R. 120; 4 AB.C. 8.

A transaction withdrawing all assets from the remedies to which the other creditors are entitled is void as a preference, Re Thoren; Ex parte Official Assignee; Gmy & Co., Respondents (1909), 9 S.R. (N.S.W.) 681.

There is no preference in assigning future money to repay future advances, Robertson v. Grigg (1932), 47 C.L.R. 257; [1933] A.L.R. 40; nor in granting a fresh mortgage consolidating an old mortgage security with fresh advances, Re Bmy; Goldsbrour.dl & Co., Respondents (1890), 11 L.R. (N.S.W.) 301; nor in granting a bill of sale covering goods to be required with future advances; but it is void as to past advances over goods in stock; Re Levy (1931), 3 A.B.C. 149. In Bllrns v. McFarlane (1940), 64 C.L.R. 108; [1940] A.L.R. 304, it was held that a transaction. being found to have been entered into in good faith, for valuable consideration, and in the ordinary cour,e of business, with a view to placing the finances of a business on a sound basis by turning portion of the assets into cash for the purpose of carrying on the business, meeting obligations, and h~!ving some ready money, was protected by s. 95 of the Bankruptcy Act 1924·1960 (Commonwealth). Where an insolvent paid off his overdraft and released the ~ccurities of his guarantor, that was held a preferential payment, Morris v. National BUllk of Alistralasia (1890), 11 L.R. (N.S.W.) 28.

A de facto preference may not be void if transacted with a bona fide purchaser and not being an act of bankruptcy, Re Markham; Ex parte Official Assignee; Markham, Respolldent (1894), 4 B.C. (N .S.W.) 59; but this saving effect may be prevented by the fact of the payment being long overdue, Re Pillchcs (No.2); Ex parte Oflicial Reeeh'er; A damsoll Strettle & Co., Respondellts (1932). 4 A.H.C. 200; or where payments or securities are accepted in bad faith. Re SlIlilh; Ex parte Official Receiver; Newcll, Respolldcnt (1929), I AB.C. 145; Re Kay; Official Receiver v. Commercial Ballk of A l/stralia Ltd. (1931), 4 A.B.C. 49; Re BO\\'II/{/Il; Ex parte Tmstee ill bankruptcy; National Bank of Australasia, Respondent (1932), 5 A.B.C. 126; Re Bowillan (No.2); Ex parte Trustee; ShU/ito, Respondent (1931). 4 A.B.C. 5; Re Pinches; Ex Parte Official Receil'er; Fa)" Respondent (1931), 3 A.B.C. 1; Bernard R. Shall' & Co. Ltd. v. Primary Produccrs Bal1k oj Australia Ltd., [19321 St. R. Qd. 223; Re McCaliley; Ex parte Officio/ Recch'('r (1931), 4 A.B.C. 77; Re KlolI'as; Ex partc Official Recch'er; Fay, Respondcnt (1933). 6 A.B.C. 89; Re Patl/llo; Ex parte Official Receivcr; Schlitt and Barn' Flour ll,/i/!s Pty. Ltd., Respondent (1931), 3 A.B.C. 197; Re Walsh; Ex partc O/Jicial Receiver; Southern Cross Windmill Co. Ltd., Respondcnt (1933), 5 A.B.C. 17(1: or where there was an agreement to postpone registering a security, Re Jackson (1889). 10 L.R. (N.S.W.) (B) 307; Lyons v. Cohcn (1877), Knox 92: Re Lance; Ex parte Official Receiver; Walker, Respondent (1900), 16 W.N. (N.S.W.) 21 n: Rc Lemon (1894), 15 L.R. (N.S.W.) (B. & P.) 90: Re Wetherill; Ex parte Officio I As,ligncc; Holhorrow, Respondent (1907). 7 S.R. (N.S.W.) 337; Re Walsh; Ex parte Official Assignee (1894), 15 L.R. (N.S.W.) (B. & P.) 101; Re Israel; Ex porte Official AS.I'iRnce; Israel, Resrondent (1895), 16 L.R. (N.S.W.) (B. & P.) 93. But see Morris v. Morris, [1895] A.C. 625, where the postponement of registration was at the request of the lender. and the borrower appeared to be solvent.


There was no preference where a bank had never surrendered its rights as pledgee of hypothecated documents, but had ha~ded them to the bankI1!pt for the purpose of enabling him to sell goods to which the documents gave title, on behalf of and as agent for the bank while still retaining its rights as pledgee, see Re McRae; Bank oj Australasia, Respondent (1934), 7 A.B.C. 64.

Consideration for a transaction may be "valuable", even if it is a past one, Re Smith. Ex parte Trustee; !. Bird Pty. Ltd., Respondent (1933), 6 A.B.C. 49; Re Bond; Ex parte Official Assignee; Bond, Respondent (1894), 16 L.R. (N.S.W.) (D. & P.) 74.

For a case in which it was held that a preferential payment, though for valuable consideration and in the ordinary course of business, was not made in good faith within the meaning of s. 95 of the Bankruptcy Act 1924-1960 (Commonwealth), see Re Pitts and Lehman Ltd. (1940), 40 S.R. (N.S.W.) 614.

Proceedings-Misfeasance proceedings may be taken, Re Washington Diamond MininR Co., [1893] 3 Ch. 95. The transaction may be set aside, Willmott v. London Cellllloid Co. (1886), 34 Ch. D. 147.

Money recovered held in trust-Money recovered by a liquidator as a preference was held in trust for those creditors amongst whom the assets of the company were distributable and not for debenture holders, Re Yagerphone Ltd., [1935] I Ch. 392: [1935] All E.R. Rep. 803.

294. Effect of floating charge. A floating charge on the undertaking or property of the company created within six months of the commencement of the winding up shall, unless it is proved that the company immediately after the creation of the charge was solvent, be invalid except to the amount of any cash paid to the company at the time of or subsequently to the creation of and in consideration for the charge together with interest on that amount at the rate of five per centum per annum.

u.K. s. 322: Vic. s. 218; Qld. s. 276; S.A. s. 282; W.A. s. 275: Tas. s. 229. For the date of commencement of a winding-up, see ss. 223, 225, ante. For

further modifications of rights under a floating charge, see ss. 196, 292, ante. Further in relation to charges, see ss. 100, ct seq., ante.

EfTect of section-The effect of the section is to invalidate a floating charge, but not altogether to avoid the debenture; and where a debenture had been redeemed by payment before the date of the winding-up petition, the liquidator was not entitled to recover the money paid, though he was at liberty to apply to set aside the debenture ,1S a preference or on any other ground, Re Parkes Garage (Syadlincote), [1929] I Ch. 139.

FlOating charge-As to what constitutes a "floating charge" see Illingworth v. Hou!dlwortil, [1904] A.C. 355 and notes to s. 100, allte. See also 10 English and Empire Digest (RpJ.) p. 770.

Cryst:dlize-A floating charge on property of a company ceases to be floating on a winding up taking place. and is said to "crystallize." The company, on the charge becoming fixed, cannot deal therefore with the property so charged except subjed to the charge, see Government Stock and Other Securities Investment Co. v. jUanila Rail. Co., [1897] A.C. 81.

SCOpe of floating charge-As to particular assets to which a floating charge attaches, see Evalls v. Rival Granite Quarries Ltd., [1910] 2 K.B. 979.

Insolvent companies-By reason of this section companies already insolvent are unable to raise money by floating charges on their property for the purpose of securing past debts, see Re Orleans Motor Co., [1911] 2 Ch. 41.

A company is insolvent if it is unable to pay its debts as they come due, Re Patrick & Lyoll Ltd., [1933] Ch. 786; [1933] AlI E.R. Rep. 590.

Cash-As to payment of cash "at the time of the creation of the charge", see Re ColulIlhimz Fireproofing Company, [1910] 2 Ch. 120, and Re Stanton (No.2), [1929] 1 Ch. 180, where it was held that this question was one of fact and all the circumstances of the case are to be considered. See also Re Olderfleet Shiphili/dill!: and EngineerinR Co. Ltd., [1922] 1 I.R. 26.

Note that the wording of this section is "at the time of or subsequently to the creation of ... the charge".

Invalid-For an instance of a charge held invalid under the corresponding English section, see Re Destone Fahrics Ltd., [1941] 1 Ch. 319; [1941] I All E.R. 545. See also Re Dittmer Gold Mines Ltd. (No. 1), [1954] St. R. Qd. 255.


Within six months-Where debentures are issued within six months of the winding-up, but the trust deed relating to the debentures is executed before the six months, the debentures are valid, Re Charles Atkins and Co. Ltd.; Vercoe BuildinRs Ltd. v. Charles Atkins and Co. Ltd., [1929] S.A.S.R. 129.

295. Liquidator's right to recover in respect of certain sales to or by company. (1) Where any property business or undertaking has been acquired by a company for a cash consideration within a period of two years before the commencement of the winding up of the company-

(a) from a person who was at the time of the acquisition a director of the company; or

(b) from a company of which, at the time of the acqulSItIon, a person was a director who was also a director of the firstmentioned company,

the liquidator may recover from the person or company from which the property business or undertaking was acquired any amount by which the cash consideration for the acquisition exceeded the value of the property business or undertaking at the time of its acquisition.

(2) Where any property business or undertaking has been sold by a company for a cash consideration within a period of two years before the commencement of the winding up of the company-

(a) to a person who was at the time of the sale a director of the company; or

(b) to a company of which at the time of the sale a person was a director who was also a director of the company first-mentioned in this subsection,

the liquidator may recover from the person or company to which the property business or undertaking was sold any amount by which the value of the property business or undertaking at the time of the sale exceeded the cash consideration.

(3) For the purposes of this section the value of the property business or undertaking includes the value of any goodwill or profits which might have been made from the business or undertaking or similar considerations.

( 4) In this section "cash consideration" means any consideration payable otherwise than by the issue of shares.

For the commencement of the winding-up, see ss. 223, 255, ante.

296. Disclaimer of onerous property. ( 1) Where any part of the property of a company consists of-

(a) any estate or interest in land which is burdened with onerous covenants;

(b) shares in corporations; (c) unprofitable contracts; or (d) any other property that is unsaleable, or not readily saleable,

by reason of its binding the possessor thereof to the performance of any onerous act, or to the payment of any sum of money,

the liquidator of the company, notwithstanding that he has endeavoured to sell or has taken possession of the property or exercised any act of ownership in relation thereto, may, with the leave of the Court or the


committee of inspection and subject to this section, by writing signed by him, at any time within twelve months after the commencement of the winding up or such extended period as is allowed by the Court or the committee, disclaim the property, but where any such property has not come to the knowledge of the liquidator within one month after the commencement of the winding up, the power of disclaiming may be exercised at any time within twelve months after he has become aware thereof or such extended period as is allowed by the Court or the committee.

(2) The disclaimer shall operate to determine, as from the date of disclaimer, the rights interest and liabilities of the company, and the property of the company, in or in respect of the property disclaimed, but shall not, except so far as is necessary for the purpose of releasing the company and the property of the company from liability, affect the rights or liabilities of any other person.

(3) The Court or the committee before or on granting leave to disclaim may require such notices to be given to persons interested, and impose such terms as a condition of granting leave, and make such other order in the matter as the Court or the committee thinks just.

( 4) The liquidator shall not be entitled to disclaim if an application in writing has been made to him by any person interested in the property requiring him to decide whether he will or will not disclaim, and the liquidator has not, within a period of twenty-eight days after the receipt of the application or such further period as is allowed by the Court or the committee, given notice to the applicant that he intends to apply to the Court or the committee for leave to disclaim, and, in the case of a contract, if the liquidator after such an application in writing does not within that period or further period disclaim the contract the liquidator shall be deemed to have adopted it.

(5) The Court may, on the application of a person who is, as against the liquidator, entitled to the benefit or subject to the burden of a contract made with the company, make an order rescinding the contract on such terms as to payment by or to either party of damages for the non-performance of the contract, or otherwise as the Court thinks just, and any damages payable under the order to that person may be proved by him as a debt in the winding up.

(6) The Court may, on the application of a person who either claims any interest in any disclaimed property or is under any liability not discharged by this Act in respect of any disclaimed property and on hearing such persons as it thinks fit, make an order for the vesting of the property in or the delivery of the property to any person entitled thereto, or to whom it seems just that the property should be delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as the Court thinks just, and on any such vesting order being made and an office copy thereof being lodged with the Registrar and if the order relates to land-

(a) in the case of land subject to the provisions of "The Real Property Acts, 1861 to 1960," with the Registrar of Titles;

(b) in the case of land subject to the provisions of any Act relating to Crown land (including any Act relating to mining or mining tenures), with the person or authority charged with


registering instruments evidencing the title held under the Crown for a lesser estate than freehold in the land concerned; or

(c) in the case of land held for an estate of freehold not subject to "The Real Property Acts, 1861 to 1960," with the Registrar of Titles,

the property comprised therein shall vest accordingly in the person therein named in that behalf without any further conveyance or assignment.

(7) Notwithstanding anything in subsection (6) of this section, where the property disclaimed is of a leasehold nature the Court shall not make a vesting order in favour of any person claiming under the company, whether as under-lessee or as mortgagee, except upon the terms of making that person-

(a) subject to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property at the commencement of the winding up; or

(b) if the Court thinks fit, subject only to the same liabilities and obligations as if the lease had been assigned to that person at that date,

and in either event, if the case so requires, as if the lease had comprised only the property comprised in the vesting order, and any mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interest in and security upon the property, and, if there is no person claiming under the company who is willing to accept an order upon such terms, the Court may vest the estate and interest of the company in the property in any person liable personally or in a representative character and either alone or jointly with the company to perform the lessee's covenants in the lease, freed and discharged from all estates incumbrances and interest created therein by the company.

(8) Any person injured by the operation of a disclaimer under this section shall be deemed to be a creditor of the company to the amount of the injury, and may accordingly prove the amount as a debt in the winding up.


Acts referred to: Real Property Acts 1861 to 1960, title REAL PROPERTY.

For the commencement of the winding-up, see ss. 223, 255, ante. In relation to the custody and vesting of property in a winding-up by the court. see s. 233, ante. As to committee of inspection, see ss. 241, et seq., ante.

For relevant forms, see Atkin's Court Forms, vol. VIA, p. 463. Disclaimer-The purpose of disclaimer is to free the company and its property

from liability, but the rights of third parties arc not afTected thereby because they arc entitled to prove in the winding-up.

Court-The section requires the leave of the court or the committce of inspection in all cases, unlike s. 104 of the Bankruptcy Act 1924-1960 (Commonwealth), which requires leave only in the case of disclaimer of a lease.

Upon what considerations the court will be influenced in permitting a disclaimer, see Re Katherinc et Cic Ltd., [1932] 1 Ch. 70; [1931] All E.R. Rep. 125.

Onerous property-In general only onerous property can be disclaimed. The question whether unencumbered fully-paid shares can be disclaimed was raised but not decided in Wise v. Lansdell, [1921] 1 Ch. 420, at p. 429; [19201 All E.R. Rep. 648.


Land burdened with onerous covenants-Land held by a cemetery company subject to certain covenants giving certain persons the exclusive rights of burial in particular land is "land which is burdened with onerous covenants", Re Nottin:.:ham General Cemetery Co., [1955] Ch. 683; [1955] 2 All E.R. 504.

For a case decided on s. 104 of the Bankruptcy Act 1924-1960 (Commonwealth), where land was held to be burdened with onerous covenants, see Re Exton; Smith v. National Bank of Australasia Ltd. (1932), 5 AB.C. 83.

Vesting-For an example of the terms which a court may see fit to impose on making a vesting order, sec Re Hosking; Ex parte Calder (No.2) (1932), 6 AB.C. 44.

Signature-The section requires the disclaimer to be signed by the liquidator; signature by his solicitor is not enough, Wilson v. WaUani (1880), 5 Ex D. 155.

297. Interpretation. For the purposes of section two hundred and ninetyeight and section two hundred and ninety-nine-

"Goods" includes all chattels personal; "Sheriff" includes any officer charged with the execution of a

writ or other process. Vic. s. 221 (3); Qld. ss. 278 (3),279 (3); S.A. s. 284 (3).

298. Restriction of rights of creditor as to execution or attachment. ( 1) Where a creditor has issued execution against the goods or land of a company or has attached any debt due to the company and the company is subsequently wound up, he shall not be entitled to retain the benefit of the execution or attachment against the liquidator unless he has completed the execution or attachment before the date of the commencement of the winding up but-

(a) where any creditor has had notice of a meeting having been called at which a resolution for voluntary winding up is to be proposed, the date on which the creditor so had notice shall for the purposes of this section be substituted for the date of the commencement of the winding up;

(b) a person who purchases in good faith under a sale by the sheriff any goods of a company on which an execution has been levied shall in all cases acquire a good title to them against the liquidator; and

(c) the rights conferred by this subsection on the liquidator may be set aside by the Court in favour of the creditor to such extent and subject to such terms as the Court thinks fit.

(2) For the purposes of this section-(a) an execution against goods is completed by seizure and sale; (b) an attachment of a debt is completed by receipt of the debt;

and (c) an execution against land is completed by sale or, in the case

of an equitable interest, by the appointment of a receiver. U.K. s. 325; N.S.W. s. 301; Vic. s. 220; Qld. s. 278; S.A. s. 284 (1), (2);

W.A s. 277; Tas. s. 231.

For the date of commencement of winding-up sec 5S. 223, 255, ante. Cf. the Bankruptcy Act 1924-1960, s. 92 (Commonwealth). As to attachments and executions after commencement of a winding-up by the court, see s. 228, ante. As to the terms "goods", "sherif I", see s. 297, antc.

Subsisting execution-The section only applies if at the material date, the commencement of the winding-up, there is a subsisting execution. Hence it does not apply if for any reason the execution has been uncond itionally withdrawn prior to that date, Re Andrew, [1937] Ch. 122, at p. 136; [1936] 3 All E.R. 450.


Execution-In a winding-up the arrest of a ship was held not to be "execution" within the meaning of this section, The Zafiro, [1959] 2 All E.R. 537.

Benefit of the execution-See on the expression "benefit of the execution", Re Andrew, [1937] Ch. 122; [1936] 3 All E.R. 450; Re Walkden Sheet Metal Co. Ltd., [1959] 3 All E.R. 333.

Garnishee-As to where a garnishee order is made as against a company in liquidation, see National Bank of Australasia Ltd. v. Norris; Primary Producers Bank of Australia Ltd. (in /iq.), Garnishee, [1932] V.L.R. 485.

General-See generally Re Rotomaster Equipment Ltd. (in liq.), [1956] S.R. CN.S.W.) 149; Re Bowman; Ex parte Trustee; Joseph, Respondent (1931), 4 A.B.C. 155. 299. Duties of sheriff as to goods taken in execution. ( 1) Subject to the provisions of subsection (3) of this section where any goods of a company are taken in execution and, before the sale thereof or the completion of the execution by the receipt or recovery of the full amount of the levy, notice is served on the sheriff that a provisional liquidator has been appointed or that a winding up order has been made or that a resolution for voluntary winding up has been passed, the sheriff shall, on being so required, deliver the goods and any money seized or received in part satisfaction of the execution to the liquidator, but the costs of the execution shall be a first charge on the goods or moneys so delivered, and the liquidator may sell the goods, or a sufficient part thereof, for the purpose of satisfying that charge.

(2) Subject to the provisions of subsection (3) of this section where under an execution in respect of a judgment for a sum exceeding twenty pounds the goods of a company are sold or money is paid in order to avoid sale, the sheriff shall deduct the costs of the execution from the proceeds of the sale or the money paid and retain the balance for fourteen days and if within that time notice is served on him of a petition for the winding up of the company having been presented or of a meeting having been called at which there is to be proposed a resolution for the voluntary winding up and an order is made or a resolution is passed for the winding up, the sheriff shall pay the balance to the liquidator who shall be entitled to retain it as against the execution creditor.

(3) The rights conferred by this section on the liquidator may be set aside by the Court in favour of the creditor to such extent and subject to such terms as the Court may think fit.


Compare the Bankruptcy Act 1924-1960, s. 93 (Commonwealth). As to winding-up orders, see s. 225, ante. As to the power to restrain certain proceedings against the company, see s. 226, ante. As to the avoidance of certain attachments, etc., see s. 228, ante. As to the appointment of provisional liquidators, see s. 231, ante.

As to the terms "goods", "sheriff", see s. 297, ante. Completion of the execution-In relation to the term "completion of the

execution", see Re Maywald (1933), 7 A.B.C. 9. See further in relation to goods seized in execution, Re Bowman; Ex parte Trustee; Joseph, Respondent (1931), 4 A.B.C. 155.

Money paid to avoid sale-The only sensible construction to place on the relevant provisions of this section is to say that once the debtor pays to an officer of the sheriff a sum of money in order to avoid sale, time begins to run in favour of the creditor, Re Walkden Sheet Metal Co. Ltd., [1959] 3 All E.R. 333, at p. 336.

Consequences of payment to sheriff by debtor company-For the consequences to a petitioning creditor of payment by the debtor company to the sheriff, see Re William Hockley Ltd., [1962] 2 All E.R. 111.

Costs of the execution-The term "costs of the execution" refers only to the sheriff's costs and does not include the creditor's costs of issuing and serving the writ of fi. fa., Re Woods (Bristol) Ltd., [1931] 2 Ch. 320; [1931] All E.R. Rep. 777.

COMPANIES ACT OF 1961 55.298·300 351

Subdivision (4 )-Offences 300. Offences by officers of companies in liquidation. ( 1) Every person who, being a past or present officer of a company which is being wound up--

(a) does not to the best of his knowledge and belief fully and truly discover to the liquidator all the property real and personal of the company, and how and to whom and for what consideration and when the company disposed of any part thereof, except such part as has been disposed of in the ordinary way of the business of the company;

(b) does not deliver up to the liquidator, or as he directs-(i) all the real and personal property of the company in his

custody or under his control and which he is required by law to deliver up; or

(ii) all books and papers in his custody or under his control belonging to the company and which he is required by law to deliver up;

(c) within twelve months next before the commencement of the winding up or at any time thereafter-

(i) has concealed any part of the property of the company to the value of ten pounds or upwards, or has concealed any debt due to or from the company;

(ii) has fraudulently removed any part of the property of the company to the value of ten pounds or upwards;

(iii) has concealed, destroyed, mutilated or falsified, or has been privy to the concealment, destruction, mutilation or falsification of, any book or paper affecting or relating to the property or affairs of the company;

(iv) has made or has been privy to the making of any false entry in any book or paper affecting or relating to the property or affairs of the company;

(v) has fraudulently parted with altered or made any omission in, or has been privy to fraudulent parting with altering or making any omission in, any document affecting or relating to the property or affairs of the company;

(vi) by any false representation or other fraud, has obtained any property for or on behalf of the company on credit which the company has not subsequently paid for;

(vii) has obtained on credit, for or on behalf of the company, under the false pretence that the company is carrying on its business, any property which the company has not subsequently paid for; or

(viii) has pawned, pledged or disposed of any property of the company which has been obtained on credit and has not been paid for, unless such pawning, pledging or disposing was in the ordinary way of the business of the company;

(d) makes any material omission in any statement relating to the affairs of the company;

(e) knowing or believing that a false debt has been proved by any person fails for a period of one month to inform the liquidator thereof;


(f) prevents the production of any book or paper affecting or relating to the property or affairs of the company;

(g) within twelve months next before the commencement of the winding up or at any time thereafter has attempted to account for any part of the property of the company by fictitious losses or expenses; or

(h) within twelve months next before the commencement of the winding up or at any time thereafter has been guilty of any false representation or other fraud for the purpose of obtaining the consent of the creditors of the company or any of them to an agreement with reference to the affairs of the company or to the winding up,

shall be guilty of an offence against this Act and be liable-(a) on conviction on indictment to imprisonment for a term of

two years; or (b) on summary conviction to imprisonment for a term of twelve

months.

(2) It shall be a good defence to a charge under paragraph (a), (b), (d) or subparagraph (i), (vii) or (viii) of paragraph (c) of subsection (1) of this section if the accused proves that he had no intent to defraud, and to a charge under paragraph (f) or subparagraph (iii) or (iv) of paragraph (c) of subsection (l) of this section if he proves that he had no intent to conceal the state of affairs of the company or to defeat the law.

(3) Where any person pawns, pledges or disposes of any property in circumstances which amount to an offence under subparagraph (viii) of paragraph (c) of subsection (1) of this section every person who takes in pawn or pledge or otherwise receives the property knowing it to be pawned, pledged or disposed of in those circumstances shall be guilty of an offence against this Act and be liable-

(a) on conviction on indictment to imprisonment for a term of two years; or

(b) on summary conviction to imprisonment for a term of twelve months.


Compare certain of the offences in bankruptcy under the Bankruptcy Act 1924-1960, s. 210 (Commonwealth). FOr the date of commencement of winding-up see ss. 223, 255, allte. As to examination of directors and officers in relation to the affairs of a company in course of being wound up, see ss. 249, 250 ante. As to delivery of property and books and papers of the company to the liquidator, see s. 245, ante. Further in relation to books of the company, see s. 284, unte. With subsection (1) (e) (iv), cf. the Criminal Code, s. 532, title CRIMINAL LAW.

Onus-The onus of showing concealment, removal or other facts bringing the case within the section is On the prosecution, R. v. Brixton Prison (Governor); Ex parte Shure, [1926] 1 K.B. 127. It is for the accused then to show absence of intent to defraud or conceal, where that is a defence under the section.

Officer-An assistant manager of a bank was held to be an "officer" of a corporation, R. v. Draper (1878), 1 V.R. (L.) 118. As to necessity for proof of appointment as a director, manager or other officer, see R. v. Atkins (1900), 64 J.P. 361; R. v. Lawson, [1905] 1 K.B. 541.

An auditor appointed as such is an officer for the purpose of civil and criminal liability, R. v. Shaeter, [1960] 1 All E.R. 61.


Evidence that at a private meeting of the company's creditors a director disclosed certain property is admissible on a charge of failure to disclose that property to the liquidator, R. v. Wiseman (1901), 71 L.J. (K.B.) 128.

Public examination-As to discovery of property on public examination, see R. v. Wimpo/e. [1931] V.L.R. 201.

Oversight-Failure to disclose due to an oversight may, in special circumstances, amount to no offence, Re Aarons (1880), 6 V.L.R. (I.P. & M.) 56, at pp. 61, 62.

Ordinary course of business-The term "ordinary course of business" was thought not "to be related to any special business carried on by either debtor or creditor, but is concerned with the character of the impeached transaction itself", see Robertson v. Grigg (1932), 47 C.L.R. 257, at p. 273; [1933] A.L.R. 40, at p.46.

301. (1) Inducement to be appointed liquidator. Any person who gives or agrees or offers to give to any member or creditor of a company any valuable consideration with a view of securing his own appointment or nomination, or to securing or preventing the appointment or nomination of some person other than himself, as the company's liquidator shall be guilty of an offence against this Act.


(2) Penalty for falsification of books. Every officer or contributory of any company being wound up who destroys, mutilates, alters or falsifies any books, papers or securities, or makes or is privy to the making of any false or fraudulent entry in any register or book of account or document belonging to the company with intent to defraud or deceive any person shall be guilty of an indictable offence.

Penalty: Imprisonment for two years. U.K. SS. 329,336; N.S.W. s. 304; Vic. ss. 223, 229 (2); Qld. s. 281; S.A. s. 287;

W.A. s. 279; Tas. s. 234. In relation to the validation of acts of certain liquidators, see s. 232, ante. As

to the appointment of liquidators, see ss. 231, 258, ante.

302. Frauds by officers. Every person who while an officer of a company which is subsequently ordered to be wound up by the Court or which subsequently passes a resolution for voluntary winding up--

(a) has by false pretences or by means of any other fraud induced any person to give credit to the company;

(b) with intent to defraud creditors of the company, has made or caused to be made any gift or transfer of or charge on, or has caused or connived at the levying of any execution against, the property of the company; or

(c) with intent to defraud creditors of the company, has concealed or removed any part of the property of the company since or within two months before the date of any unsatisfied judgment or order for payment of money obtained against the company,

shall be guilty of an offence against this Act and be liable-(a) on conviction on indictment to imprisonment for a term of

two years; or

(b) on summary conviction to imprisonment for a term of twelve months.


Compare the Bankruptcy Act 1924·1960, s. 212 (Commonwealth). 12


Obtaining credit by fraud-As to obtaining credit by fraud. compare R. v. Jones, [1898] 1 Q.B. 119, at p. 124; Tilley v. Official Receiver, [1961] A.L.R. 83. See also Criminal Code, ss. 426-428, title CRIMINAL LAW.

Intent-An intent to defraud is necessary, R. v. Brownlow (1910),74 J.P. 240. Credit-In commercial and financial affairs the word "credit" may signify the

financial arrangement in a transaction or the reputation for solvency and honesty which entitles a person desirous of incurring a debt or liability to do so on the terms that payment is to be deferred. In its former meaning it includes the delivery of goods or the advancing of money with the trust that the debtor will have the means to pay and will pay at a future date. The element of trust or confidence in the creditor is not eliminated by taking a promissory note for the debt. It is rather manifested by doing so, Herbert v. R. (1941),64 C.L.R. 461, at p. 467; [1941] A.L.R. 160.

303. Liability where proper accounts not kept. (1) If, on an investigation under any other Part or where a company is wound up, it is shown that proper books of account were not kept by the company throughout the period of two years immediately preceding the commencement of the investigation or winding up or the period between the incorporation of the company and the commencement of the investigation or winding up whichever is the shorter every officer who is in default shall, unless he acted honestly and shows that in the circumstances in which the business of the company was carried on the default was excusable, be guilty of an offence against this Act.

Penalty: Imprisonment for one year or Two hundred pounds.

(2) For the purposes of this section, proper books of account shall be deemed not to have been kept in the case of any company if there have not been kept such books or accounts as are necessary to exhibit and explain the transactions and financial position of the trade or business of the company, including books containing entries from day to day in sufficient detail of all cash received and cash paid, and, where the trade or business has involved dealings in goods, statements of the annual stocktakings and (except in the case of goods sold by way of ordinary retail trade) of all goods sold and purchased, showing the goods and the buyers and sellers thereof in sufficient detail to enable those goods and those buyers and sellers to be identified or if such books or accounts have not been kept in such manner as to enable them to be conveniently and properly audited, whether or not the company has appointed an auditor.

(3) If in the course of the winding up of a company it appears that an officer of the company who was knowingly a party to the contracting of a debt provable in the winding up had, at the time the debt was contracted, no reasonable or probable ground of expectation, after taking into consideration the other liabilities, if any, of the company at the time, of the company being able to pay the debt, the officer shall be guilty of an offence against this Act.

Penalty: Imprisonment for three months or One hundred pounds. U.K. s. 331; N.S.W. s. 306; Vic. s. 225; Qld. s. 283; S.A. s. 289; W.A. s. 280;

Tas. s. 236.

Compare the Bankruptcy Act 1924-1960, s. 213 (Commonwealth). . In relation to investigations, see ss. 168 et seq., ante. As to the obligation of

dIrectors to act honestly, see s. 124, ante. Generally as to accounts to be kept, see ss. 161 et seq., ante, Ninth Schedule,

post.


304. Responsibility for fraudulent trading. ( 1) If in the course of winding up it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the Court on the application of the liquidator or any creditor or contributory of the company may if it thinks proper so to do declare that any person who was knowingly a party to the carrying on of the business in that manner shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court directs.

(2) Where the Court makes any declaration pursuant to subsection ( 1) of this section, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration, and in particular may make provision for making the liability of any person under the declaration a charge on any debt or obligation due from the company to him, or on any charge or any interest in any charge on any assets of the company held by or vested in him or any corporation or person on his behalf, or any person claiming as assignee from or through the person liable or any corporation or person acting on his behalf, and may from time to time make such further order as is necessary for the purpose of enforcing any charge imposed under this subsection.

(3) For the purpose of subsection (2) of this section "assignee" includes any person to whom or in whose favour by the directions of the person liable the debt, obligation or charge was created issued or transferred or the interest created, but does not include an assignee for valuable consideration, not including consideration by way of marriage, given in good faith and without notice of any of the matters on the ground of which the declaration is made.

( 4) Where any business of a company is carried on with the intent or for the purpose mentioned in subsection (1) of this section every person who was knowingly a party to the carrying on of the business with that intent or purpose shall be guilty of an offence against this Act.

Penalty: Imprisonment for one year.

(5) The provisions of this section shall have effect notwithstanding that the person concerned is criminally liable apart from this section in respect of the matters on the ground of which the declaration is made.

(6) On the hearing of an application under subsection (1) of this section the liquidator may himself give evidence or call witnesses.

U.K. s. 332: N.S.W. s. 307; Vic. s. 226; Qld. s. 284; S.A. s. 290; W.A. s. 281; Tas. s. 237.

Defraud. fraudulent purpose-The terms "defraud" and "fraudulent purpose" in the section connote actual dishonesty involving. according to current notions of fair trading amongst commercial men. real moral blame. Re Patrick and Lyon, [1933] Ch. 786; [1933] All E.R. Rep. 590.

Onus-The onus of proving that the person charged has been guilty of dishonesty lies upon the person who so alleges, Re Patrick and Lyon, supra.

Intent-As to the necessity for an express or actual and real intent to defraud creditors see Hardie v. Hanson, [1960] A.L.R. 209.

Generally-Cf. Criminal Code, Chapters XL, XLII, title CRIMINAL LAW.

305. Power of Court to assess damages against delinquent officers, etc. (1) If in the course of winding up it appears that any person who has taken part in the formation or promotion of the company or any past or present liquidator or officer has misapplied or retained or


become liable or accountable for any money or property of the company or been guilty of any misfeasance or breach of trust in relation to the company, the Court may on the application of the liquidator or of any creditor or contributory examine into the conduct of such person liquidator or officer and compel him to repay or restore the money or property or any part thereof with interest at such rate as the Court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication retainer misfeasance or breach of trust as the Court thinks just.

(2) This section shall extend and apply to and in respect of the receipt of any money or property by any officer of the company during the two years preceding the commencement of the winding up whether by way of salary or otherwise appearing to the Court to be unfair or unjust to other members of the company.

(3) The provisions of this section shall have effect notwithstanding that the offence is one for which the offender is criminally liable.


Provisions in articles or contracts exempting officers Or auditors from liability are rendered void by s. 133, ante. Power to grant relief in certain cases is given to the court by s. 365, post.

Compare Criminal Code, Chapter XLII, title CRIMINAL LAW. Procedural-This is a procedure section only, and creates no new or additional

liabilities; it merely provides a summary mode of calling persons to account for acts of impropriety for which they are liable to an action, Re City Equitable Fire Insurance Co. Ltd., [1925] 1 Ch. 407; [1924] All E.R. Rep. 48; Re Canadian Land ReclaiminR and Colonizing Co., Coventry & Dixon's Case (1880), 14 Ch. D. 660; Re B. Johnson & Co. (Bui/ders), [1955) Ch. 634, at p. 647; [1955] 2 All E.R. 775.

Application under section-The section may be put in force on the application of the Official Receiver. or of the liquidator, or of any creditor or contributory, so that, semble, if the court thinks it proper to make and order it may make it on the application of anyone of these, Re National Funds Assurance Co. (1878), 10 Ch. D. 118. But the applicant must, semble, be a person having a pecuniary interest; a fully paid shareholder in a company whose assets are insufficient to pay its debts has probably no locus standi; to apply to recover moneys on the ground of misfeasance, Cavendish Bentinck v. Fenn (1887), 12 App. Cas. 652, at pp. 662, 664, 669.

Discretionary jurisdiction-The jurisdiction under the section is discretionary, Re Home and Colonial Insurance Co., [1930] 1 Ch. 102; [1929) All E.R. Rep. 231.

Bankers-Bankers of the company are not officers thereof so as to be amenable to the iurisdiction given by this section, Re Imperial Land Co. of Marseilles, Re National Bank (1870), L.R. 10 Eq. 298; Re General Provident Assurance Co., Ex parte National Bank (1872), L.R. 14 Eq. 507.

Directors-See. as to the duties of directors, Re City Equitable Fire Insurance Co. Ltd., [1925] 1 Ch. 407; [1924] All E.R. Rep. 485. Payments made by directors to a bank not with the intention to prefer the bank, but in order to discharge their own liabilitv as sureties, do not amount to a misfeasance or breach of trust, Re Linnev & Co., [1925] N.Z.L.R. 907.

Directors receiving paid-up shares, and knowing the company is thereby defrauded, are liable to account jointly and severally for the full value of such shares at the time they were received. Where receipt of gifts is proved, the onus is on the directors to disprove participation in or knowledge of fraud. Where they have misappropriated shares to their own use, the company may take the shares and claim the dividends paid thereon or require the directors to account for the value of the shares. The court has a discretion as to interest thereon, MontRomerie's Brewery Co. v. Blyth (1901), 27 V.L.R. 175. Non-disclosure to shareholders by directors who defraud a company is concealment preventing a Statute of Limitations from running. Knowledge by directors of fraudulent acts of their own does not amount to a notice to the company of such facts (ibid.).

See further as to the responsibilities of directors, Furs Ltd. v. Tomkies (1936), 54 C.L.R. 583.


Ultra vires acts-Ultra vires acts apparently attract the operation of the section . . . as soon as the conclusion is arrived at that the company's money has been

applied by the directors for purposes which the company cannot sanction, it follows that the directors are liable to replace the money, however honestly they may have acted", Re Sharpe, [1892] 1 Ch. 154, at p. 166.

Secretary-Liquidators issued a summons against the secretary asking for a declaration that he was indebted to the company for sums overdrawn with the consent of the managing director. It was held that the section was not applicable to all cases in which a company has a right of action against an officer of the company, but was limited to cases where there had been something in the nature of a breach of duty by an officer of the company as such, which had caused pecuniary loss to the company, Re Etic Ltd., [1928] Ch. 861. The section cannot be used to recover a mere debt (ibid).

Solicitor-In the absence of special circumstances, the company's solicitor is not within the section, Re Liberator Permanent Benefit Building Society (1894), 71 L.T. 406; Re Kingston Cotton Mill Co., [1896] 1 Ch. 6, at p. 14.

Trustees for debenture holders-Semble, trustees for debenture holders are not officers of the company for the purposes of this section, Astley v. New Tivoli, [1899] 1 Ch. 151, at p. 154.

Receiver and manager appointed by a debenture holder-A receiver and manager appointed by a debenture holder is not an officer of the company within s. 5, ante, Re B. Johnson & Co. (Builders) Ltd., [1955] Ch. 634; [1955] 2 AI! E.R. 775.

Liquidator-A liquidator has been held liable for distributing the assets without providing for arrears of income tax, Re Watchmakers' Alliance & Ernest Goode's Stores Ltd. (1905), 5 Tax Cas. 117; Re New Zealand Joint Stock & General Corpn. Ltd. (1907), 23 T.L.R. 238, and for paying a claim on an insurance agreement, which was subsequently rendered invalid by a decision of the courts.

Advice of court-His duty was to take the advice of the court in case of doubt, Home & Colonial insurance Co. Ltd. v. London Guarantee & Accident Co. (1929), 45 T.L.R. 134. A liquidator is not liable to the company in respect of an expense incurred by him in the course of liquidation unless it was incurred by negligence or in breach of trust, New Brilliant Freehold Gold Mining Co. Ltd. v. Mills, [1928] St. R. Qd. 120.

Application by one liquidator-Where two liquidators have been appointed in a voluntary winding up the court has jurisdiction to entertain an application by one liquidator for an inquiry into the conduct of the other, Re Miranda Coal & Iron Co. (1892), 11 N.Z.L.R. 640.

Delay-Where there has been long delay an applicant seeking to take proceedings against the liquidators must show probable grounds for success and account for the delay, Re Colonial Bank (1906) 8 N.Z.O.L.R. 721.

Action brought after dissolution-Where an unsecured creditor of a company which had been dissolved sued a liquidator in negligence it was held that in regard to the matter complained of there was nothing which would support a cause of action after dissolution of the company, Thomas Franklin & Sons Ltd. v. Cameron (1936),36 S.R. (N.S.W.) 286.

Promoter-As to who is a promoter, see s. 5, ante, and Wheal Ellen Gold Minin$? Co. v. Read (1908), 7 C.L.R. 34.

Misfeasance-Misfeasance means something in the nature of a breach of trust, Re Canadian Land Reclaiming & Colonizing Co., Coventry & Dixon's Case (1880), 14 Ch. D. 660.

See also E.B.M. Co. Ltd. v. Dominion Bank, [1937] 3 All E.R. 555. Non-feasance--Something more than mere non-feasance is required, Re Forest

of Dean Coal Minin!? Co. (1878), 10 Ch. D. 450; Re Wedgwood Coal & iron Co. (1882), 47 L.T. 6 I 2. It must be shown that the persons to be made liable did not reallv exercise their judgment and discretion, Re New Mashonaland Exploration Co., [1892] 3 Ch. 577.

Breach of duty-This section does not extend to all cases in which a company has a right of action against an officer, there must be something in the nature of a breach of duty, the direct result of which is a misapplication of the company's assets, Couve v. J. Pierre Couve Ltd. (1933), 49 C.L.R. 486; Re Kingston Cotton Mill Co. (No.2), [1896] 2 Ch. 279; Re Etic Ltd., [1928] Ch. 861.

Reckless conduct-As to reckless conduct, see Re Liverpool Household Stores Association Ltd. (1890),59 L.J. Ch. 616.


Fiduciary agent-A fiduciary or confidential agent, in consequence of the confidence reposed in him, is not entitled to acquire the property of the company for hImself or others in collusion with him, COline v. Gill (1887), 3 Q.L.J. 15.

Other parties-Where a company is in voluntary liquidation subject to supervision, and proceedings are instituted by a committee of shareholders against the directors under this section, the court may order that the plaintiffs be at liberty to use the names of the company and the liquidator in such proceedings Re Dominion Portland Cement Co. (No.2), [1919] N.Z.L.R. 478. '

Though the former provisions for winding-up under the supervision of the court are now gone, the language of the learned judge suggests that this decision may equally apply to a voluntary winding-up.

Protection-As to when protection may be claimed under the Tnlstees and Executors Acts. 1897 to 1961, ss. 25, 51 (title TRUSTEES AND EXECUTORS), see Re Windsor Steam Coal Co., [1929] 1 Ch. [51.

Costs-The court has jurisdiction to order an applicant taking proceedings under this section to give security for costs, but the practice is not to exercise it, Re New Zealand Gllm-Machine Co. Ltd., [1927] N.Z.L.R. 100. Costs may be allowed to a successful defendant. Re Dominion Portland Cement (No.2), [1921] N.Z.G.L.R. 514.

On an application by creditors, costs will be allowed to the liquidator, Re Schniederman Bros., [1917] N.Z.L.R. 65.

Generally-See 10 English and Empire Digest (Rp!.), p. 943; 6 Halsbury's Laws of England, 3rd ed., p. 621.

306. Prosecution of delinquent officers and members of company. ( 1 ) If it appears to the Court, in the course of a winding up by the Court, that any past or present officer, or any member, of the company has been guilty of an offence in relation to the company for which he is criminally liable, the Court may, either on the application of any person interested in the winding up or of its own motion, direct the liquidator either himself to prosecute the offender or to refer the matter to the Crown Law Officer.

(2) If it appears to the liquidator, in the course of a voluntary winding up, that any past or present officer, or any member, of the company has been guilty of any offence in relation to the company for which he is criminally liable, he shall forthwith report the matter to the Crown Law Officer and shall, in respect of information or documents in his possession or under his control which relate to the matter in question, furnish the Crown Law Officer with such information and give to him such access to and facilities for inspecting and taking copies of any documents as he may require.

(3) If it appears to the liquidator, in the course of any winding up, that the company which is being wound up will be unable to pay its unsecured creditors more than ten shillings in the pound, the liquidator shall forthwith report the matter in writing to the Registrar and shall furnish the Registrar with such information and give to him such access to and facilities for inspecting and taking copies of any document as the Registrar may require.

(4) Where any report is made under subsection (2) or subsection (3) of this section the Crown Law Officer may, if he thinks fit, investigate the matter and may, if he thinks expedient, apply to the Court for an order conferring on him or any person designated by him for the purpose with respect to the company concerned all such powers of investigating the affairs of the company as are provided by this Act in the case of a winding up by the Court, but if it appears to him that the


case is not one in which proceedings ought to be taken by him he shall inform the liquidator accordingly, and thereupon, subject to the previous approval of the Court, the liquidator may himself take proceedings against the offender.

(5) If it appears to the Court in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty as aforesaid and that no report with respect to the matter has been made by the liquidator to the Crown Law Officer, the Court may, on the application of any person interested in the winding up or of its own motion, direct the liquidator to make such a report, and on a report being made accordingly the provisions of this section shall have effect as though the report had been made in pursuance of the provisions of subsection (2) of this section.

(6) If, where any matter is reported or referred to the Crown Law Officer or Registrar under this section, he considers that the case is one in which a prosecution ought to be instituted, he may institute proceedings accordingly, and the liquidator and every officer and agent of the company past and present, other than the defendant in the proceedings, shall give the Crown Law Officer or Registrar all assistance in connection with the prosecution which he is reasonably able to give.

(7) For the purpose of subsection (6) of this section "agent" in relation to a company includes any banker or solicitor of the company and any person employed by the company as auditor, whether or not an officer of the company.

( 8) If any person fails or neglects to give assistance in manner required by subsection (6) of this section the Court may on the application of the Crown Law Officer or Registrar direct that person to comply with the requirements of that subsection, and where any application is made under this subsection with respect to a liquidator the Court may, unless it appears that the failure or neglect to comply was due to the liquidator not having in his hands sufficient assets of the company to enable him so to do, direct that the costs of the application shall be borne by the liquidator personally.

(9) The Crown Law Officer may direct that the whole or any part of any costs and expenses properly incurred by the liquidator in proceedings brought by him under this section shall, subject to appropriation by Parliament, be paid out of the consolidated revenue.

(10) Subject 'to any direction given under subsection (9) of this section and to any charges on the assets of the company and any debts to which priority is given by this Act, all such costs and expenses shall be payable out of those assets as part of the costs of winding up.


For powers of investigation of affairs of a company in a winding-up, see 55. 249, 250. ante.

For provisions of the Criminal Code relating to offences in connexion with companies, see ibid, ss. 34, 396, 398, VII, 437-439, 442A-442M, 504, 531, 532, title CRIMINAL LAW.

Examination-An order conferring powers of investigation does not enable the person on whom the powers are conferred to conduct a public examination under s. 250. ante, nor can the court on his application set in motion the procedure for


either a public examination under s. 250, ante, or a private examination under s. 249. ante, Re Campbell Coverings Ltd., [1953] Ch. 488 [1953] 2 All E.R. 74. But see Re Campbell Coverings Ltd. (No.2). [1954] Ch. 225; [1954] 1 All E.R. 222.

Appeal-An appeal against an order directing prosecution is not available to a person proposed to be charged, Ockerhy v. Davies (1921), 23 W.A.L.R. 105.

Subdivision (5 )-Dissolution

307. Power of Court to declare dissolution of company void. ( 1) Where a company has been dissolved the Court may at any time within two years after the date of dissolution, on application of the liquidator of the company or of any other person who appears to the Court to be interested, make an order upon such terms as the Court thinks fit declaring the dissolution to have been void, and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.

(2) The person on whose application the order was made, shall within seven days after the making of the order or such further time as the Court allows lodge with the Registrar an office copy of the order and if he fails so to do shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. U.K. s. 352; N.S.W. s. 322; Vic. s. 240; Qld. s. 298; S.A. s. 304; W.A. s. 295;

Tas. s. 251. For the date of dissolution, see s. 272, ante, s. 308, post.

Within two years-The time limit is two years between the date of dissolution and the date of application, Re Scad Ltd., [1941] 2 All E.R. 466; [1941] Ch. 386. A company had been struck off the register and dissolved under s. 308, post. At the time of the dissolution it had been assessed for tax, but appeals were pending. The appeals could not be proceeded with nor could the In)and Revenue Commissioners apply as creditors under s. 308, post, for the company to be restored to the register. It was held that the Commissioners could apply as persons interested under this section for an order avoiding the dissolution. Re M. Belmont & Co. Ltd., [19511 2 All E.R. 898.

Reconstruction~Where a company which held partly paid-up shares in another company was wound up for purposes of reconstruction and the shares were not transferred to the new company, the cOll).Pany whose shares were so held was held entitled to a declaration avoiding the dissolution of the reconstructed company, Re Spottiswoode. Dixon & Hunting Ltd., [1912] 1 Ch. 410; [1911-13] All E.R. Rep. 526.

Effect of declaration-If the court declares under this section that the dissolution is void. the declaration is not that the dissolution is void at the date of the order, or that it is deemed to be so void. The declaration is that the dissolution was void at the time when the company was supposed to have been dissolved. The result is that the dissolution is void ab initio, and that all the consequences under the Act or otherwise which flow from that dissolution are themselves avoided, Re Dixon Ltd., [1947] 1 All E.R. 279, at p. 281; [1947] Ch. 251, at p. 255.

Corporate existence and activity-However a distinction must be made between the restoration bv an order under this section of the company's corporate existence, on the one hand. and on the other hand its corporate activity, Morris v. Harris, [1927] A.C. 252, at p. 268; [1926] All E.R. Rep. 15. Hence proceedings which were initiated before dissolution and purported to continue thereafter and before avoidance of that dissolution and which abated and became abortive upon that dissolution are not validated by the retrospective operation of a declaration under this section. Morris v. Harris, supra, especially at p. 269; Re Lewis and Smart Ltd., [19541 2 All E.R. 19. But see notes to s. 308, post.

Whether void for limited purpose-The court cannot declare the dissolution void for a limited purpose only, Re Champdany Jute Co. Ltd., [1924] S.C. 209.

Lapse of time-An application eight years after dissolution was refused in Macdonald's (Lord) Curator, [1924] S.C. 163-4.

COMPANIES ACf OF 1961 ss.306-308 361

Bequest to company-In Re Servers of the Blind League, [1960] 2 All E.R.298, an application was made to have the dissolution of a company avoided in order to obtain a bequest to the company, but the court refused the application.

Moneys not recovered-Where it was found, after a company had been dissolved, that moneys due to it had not been recovered before liquidation the court made an order declaring the dissolution void and reserved to the party against whom recovery was proposed, leave to apply to set aside the order, Re Nufioor Pty. Ltd., [1962) Q.W.N. 15.

Condition of restoration-The court cannot impose a penalty beyond costs as a condition of the restoration to the register. Re Moses and Cohen Ltd., [1957] 3 All E.R. 232.

Costs-The question of costs incurred in an action which had proceeded against a company after it had been dissolved and before restoration to the register, was dealt with in Schlieske v. Overseas Construction Co. Pty. Ltd., [1960] V.R. 195.

308. Power of Registrar to strike defunct company off register. (1) Where the Registrar has reasonable cause to believe that a company is not carrying on business or is not in operation, he may send to the company by post a letter to that effect and stating that if an answer showing cause to the contrary is not received within one month from the date thereof a notice will be published in the Government Gazette with a view to striking the name of the company off the register.

(2) Unless the Registrar receives an answer within one month from the date of the letter to the effect that the company is carrying on business or is in operation he may publish in the Government Gazette and send to the company by registered post a notice that at the expiration of three months from the date of that notice the name of the company mentioned therein will unless cause is shown to the contrary be struck off the register and the company will be dissolved.

(3) If in any case where a company is being wound up the Registrar has reasonable cause to believe that-

(a) no liquidator is acting; (b) the affairs of the company are fully wound up and for a

period of six months the liquidator has been in default in lodging any return required to be made by him; or

(c) the affairs of the company have been fully wound up under Division 2 of this Part and there are no assets or the assets available are not sufficient to pay the costs of obtaining an order of the Court dissolving the company,

he may publish in the Government Gazette and send to the company or the liquidator, if any, a notice to the same effect as that referred to in subsection (2) of this section.

( 4) At the expiration of the time mentioned in the notice the Registrar may, unless cause to the contrary is previously shown, strike the name of the company off the register, and shall publish notice thereof in the Government Gazette, and on the publication in the Government Gazette of this notice the company shall be dissolved but

(a) the liability, if any, of every officer and member of the company shall continue and may be enforced as if the company had not been dissolved; and

(b) nothing in this subsection shall affect the power of the Court to wind up a company the name of which has been struck off the register.


(5) If any person feels aggrieved by the name of the company having been struck off the register, the Court on an application made by the person at any time within fifteen years after the name of the company has been so struck off may, if satisfied that the company was, at the time of the striking off, carrying on business or in operation or otherwise that it is just that the name of the company be restored to the register, order the name of the company to be restored to the register, and upon an office copy of the order being lodged with the Registrar the company shall be deemed to have continued in existence as if its name had not been struck off, and the Court may by the order give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off.

( 6) A notice to be sent under this section to a liquidator may be addressed to the liquidator at his last known place of business, and a letter or notice to be sent under this section to a company may be addressed to the company at its registered office or, if no office has been registered, to the care of some officer of the company, or if there is no officer of the company whose name and address are known to the Registrar may be sent to each of the persons who subscribed the memorandum of the company addressed to him at the address mentioned in the memorandum.


For returns required to be made where a company is bemg wound up, see s. 272, ante. A company may be wound up by the court where it suspends its business for a year, s. 222, ante. In relation to service of a notice under this section, cf. s. 362, post.

Where no officers-The court, when ordering the name of a company to be restored to the register, may, if there is no secretary, and there are no directors of the company living or within the jurisdiction, direct the applicant to call meetings of the shareholders to determine how the affairs of the company are to be conducted, Re Gr,eat Southern Lalld Investment Co., [1910] V.L.R. 150.

Application to restore-As to whether an application to restore a company to the register may be made in the names of members or directors, see Re Ullited Mount Rose Prospectors', etc., Co. Ltd., B.C.R., Dec. 2, 1892; Digest, 1861-1924, col. 113.

If the company is in liquidation, the liquidator cannot apply in his own name, but must apply in the name of the company, or join it as applicant, Re Johallllesburg Minin!? and General Syndicate (1901), 45 Sol. Jo. 343. The company may apply even after dissolution but an officer should be made co-applicant so as to have some person responsible in costs to the Registrar, Re Hall (Conrad) & Co. Ltd. (1916), 60 Sol. Jo. 66; [1916] W.N. 275.

The Registrar should be served with notice of an application to restore to the register of companies the name of a company which has been struck ofT the register, Re Railway Estate Sorrento Co. (1900), 6 A.L.R. (C.N.) 73; Re Great Southern Land Investment Co., [1910] V.L.R. 150.

In Re New Timbiqui Gold Mines Ltd., [1961] 1 All E.R. 865, petitioners who became "members" of the company after it was struck off the register were held not entitled to apply for restoration. In order to qualify to be a petitioner under the section, the petitioner must show that at the date on whiCh the company was disso/\'ed he was a member or creditor, and thus anyone who purported to become a member or creditor of the company afterwards whether in ignorance or otherwise of the dissolution of the company is not a person within the section. But note that the language of the Imperial Act (s. 353), is different from this section in so far as in this section the word "person" is used and not the words "company or any member or creditor", which are used in the Imperial Act.

Restoration to register-As to failure to apply within the time limited, see Re Camera Illustrators Pty. Ltd .. [1945] V.L.R. 195. Cf. Re Ovens and Killg Traders Pty. Ltd., [1949] V.L.R. 16.


Where after dissolution a sale of the company's land took place by a receiver duly appointed before dissolution, such sale was held to be validated ex post facto by this section, Re Otway Coal Co. Ltd., [1953] V.L.R. 557. See also Tyma/ls Ltd. v. Craven, [1952] 1 All E.R. 613; [1952] 2 Q.B. 100.

For the circumstances in which the name of a company was ordered to be restored to the register, see Re Railway Estate Sorrento Co. Ltd. (1900), 6 A.L.R. (C.N.) 73.

Condition of restoration-Where default has been made in furnishing returns, including the annual return, and application was subsequently made for restoration to the register. it was held that this section gives jurisdiction to restore or to refuse to restore, and the court has no jurisdiction under this section or otherwise to impose any penalty (other than costs) as a condition of restoration, Re Moses and Cohen Ltd., [1957] 3 All E.R. 232.

Statute of Limitations-As to the effect of the Statute of Limitations upon creditors whose debts were not barred as at the date of dissolution, see Re Donald Kenyon Ltd., [1956] 3 All E.R. 596.

Restoration in order to wind up-As to the restoration of the name of a company to the register in order that it may be wound up, see Re Cambridge Coffee Room Association Ltd., [1952] 1 All E.R. 112.

Former members-For discussion of the effects of this section on persons who have ceased to be members see United Service Insurance Co. Ltd. (in Ziq.) v. Lang (1935),35 S.R. (N.S.w.) 487, at pp. 494-5.

Costs-A company which had been struck off the register was directed to be restored to the register on an undertaking to pay the costs of the striking off and the advertisements as to the restoration, Re No. I Great North New Zealand G.M. Co. Ltd., B.C.R., July 26. 1895; Re Brisbane Gaiety Theatre Co. Ltd., B.C.R .• Sept. 4. 1895; Re Mount Ure G.M. Co., B.C.R., Aug. 4, 1895.

309. Registrar to act as representative of defunct company in certain events. ( 1) Where after a company has been dissolved it is proved to the satisfaction of the Registrar-

(a) that the company if still existing would be legally or equitably bound to carry out complete or give effect to some dealing transaction or matter; and

(b) that in order to carry out complete or give effect thereto some purely administrative act, not discretionary, should have been done by or on behalf of the company, or should be done by or on behalf of the company if still existing,

the Registrar may as representing the company or its liquidator under the provisions of this section do or cause to be done any such act.

(2) The Registrar may execute or sign any relevant instrument or document adding a memorandum stating that he has done so in pursuance of this section, and such execution or signature shall have the same force validity and effect as if the company if existing had duly executed such instrument or document.

(3) Nothing in this section shall in any way derogate from or otherwise affect the provisions of section fifty-six or section 56A of 'The Public Curator Acts, 1915 to 1957."

N.S.W. s. 324; Vic. s. 242; S.A. s. 306; W.A. s. 297; Tas. s. 253.

Act referred to: Public Curator Acts. 1915 to 1957, title TRUSTEES AND EXECUTORS.

As to striking defunct companies off the register, see s. 308, ante. In relation to dissolution, see s. 272, ante. In relation to the form of contracts made on behalf of a company, see s. 35, ante.


310. Outstanding assets of defunct company to vest in Registrar. (1) Where, after a company has been dissolved, there remains any outstanding property, real or personal, including things in action and whether within or outside the State which was vested in the company or to which it was entitled, or over which it had a disposing power at the time it was so dissolved, but which was not got in realised upon or otherwise disposed of or dealt with by the company or its liquidator, such property except called and uncalled capital shall, for the purposes of the following sections of this subdivision and notwithstanding any enactment or rule of law to the contrary, by the operation of this section be and become vested in the Registrar for all the estate and interest therein legal or equitable of the company or its liquidator at the date the company was dissolved, together with all claims rights and remedies which the company or its liquidator then had in respect thereof.

(2) Where any claim right or remedy of the liquidator may under this Act be made exercised or availed of only with the approval or concurrence of the Court or some other person the Registrar may for the purposes of this section make exercise or avail himself of that claim right or remedy without such approval or concurrence.

N.S.W. s. 325; Vic. s. 243; S.A. s. 307; W.A. s. 298; Tas. s. 254. As to the disposal of outstanding interests in property, see s. 311, post. As

to dissolution, see ss. 272, 308, ante. As to the power of the Registrar to do certain acts as representative of a dissolved company, see s. 309, allte.

Vesting-Under the Companies Act 1948 (Imperial), s. 354, outstanding property shall be deemed to be bona vacantia and belongs to the Crown. Under s. 355 of that Act the Crown can disclaim any such property. It has been held that property which under s. 354 of that Act vests in the Crown will be divested by an order made pursuant to s. 307, ante, Re Dixon (C. W.), Ltd., [1947] Ch. 251; [1947] 1 All E.R. 279.

311. Outstanding interests in property how disposed of. (1) Upon proof to the satisfaction of the Registrar that there is vested in him by operation of section three hundred and ten, or of a law of a proclaimed State corresponding with section three hundred and eighteen, any estate or interest in property, whether solely or together with any other person, of a beneficial nature and not merely held in trust, the Registrar may sell or otherwise dispose of or deal with such estate or interest or any part thereof as he sees fit.

(2) The Registrar may sell or otherwise dispose of or deal with such property either solely or in concurrence with any other person in such manner for such consideration by public auction, public tender or private contract upon such terms and conditions as he thinks fit, with power to rescind any contract and resell or otherwise dispose of or deal with such property as he thinks expedient, and may make execute sign and give such contracts, instruments and documents as he thinks necessary.

(3) The Registrar shall be remunerated by such commission, whether by way of percentage or otherwise, as is prescribed in respect of the exercise of the powers conferred upon him by subsection (1) of this section.

( 4) The moneys received by the Registrar in the exercise of any of the powers conferred on him by this subdivision shall be applied in defraying all costs, expenses, commission and fees incidental thereto and


thereafter to any payment authorized by this subdivision and the surplus, if any, shall be deemed to be trust moneys under his control for the purposes of section forty-one of "The Trustees and Executors Act of 1897."

N.S.W. s. 326; Vic. s. 244; S.A. ss. 308, 309; W.A. s. 299; Tas. s. 255.

Act referred to: Trustees and Executors Acts 1897 to 1961, title TRUSTEES AND

EXECUTORS.

In relation to the vesting of outstanding assets of a defunct company, see s. 310, ante. In relation to the outstandipg assets of a defunct unregistered company, see s. 318, post.

For whom money held on trust-A similar section was considered in Re Producers' Oilwell Supplies Ltd., [1943] V.L.R. 141. It was then decided that the moneys were to be held in trust by the Registrar for those persons who would be entitled to receive payment from the company if it were still in existence, and it was accordingly ordered that a creditor of the company be paid his debt out of such moneys, then in court.

Payment out-As to payment out see Re William Bros. Ltd. (1945), 62 W.N. (N.S.W.) 226.

312. Liability of Registrar and Crown as to property vested in Registrar. Property vested in the Registrar by operation of this subdivision shall be liable and subject to all charges, claims and liabilities imposed thereon or affecting such property by reason of any statutory provision as to rates, taxes, charges or any other matter or thing to which such property would have been liable or subject had such property continued in the possession, ownership or occupation of the company but there shall not be imposed on the Registrar or the Crown any duty, obligation or liability whatsoever to do or suffer any act or thing required by any statutory provision to be done or suffered by the owner or occupier other than the satisfaction or payment of any such charges, claims or liabilities out of the assets of the company so far as they are in the opinion of the Registrar properly available for and applicable to such payment.

Vic. s. 245; Tas. s. 256.

In relation to the vesting of outstanding assets of a defunct company, see s. 310, ante. As to the disposal of outstanding interests in property, see s. 311, ante.

313. Accounts and audit. (1) The Registrar shall-(a) record in the register of companies a statement of any

property coming to his hand or under his control or to his knowledge vested in him by operation of this subdivision and of his dealings therewith;

(b) keep accounts of all moneys arising therefrom and of how they have been disposed of; and

(c) keep all accounts, vouchers, receipts and papers relating to such property and moneys.

(2) The Auditor-General shall have all the powers in respect of such accounts as are conferred upon him by any Act relating to audit of public accounts.

N.S.W. s. 328; Vic. s. 246; S.A. s. 310; W.A. s. 301; Tas. s. 257.

In relation to audit, cf. ss. 165 et seq., ante.


Division 5-Winding Up of Unregistered Companies

314. (1) "Unregistered company." For the purposes of this Division "unregistered company" includes "a foreign company and any partnership association or company consisting of more than five members but does not include a company incorporated under this Act or under any corresponding previous enactment.

(2) Provisions of Division cumulative. The provisions of this Division shall be in addition to and not in restriction of any provisions contained in this or any other Act with respect to winding up companies by the Court and the Court or liquidator may exercise any powers or do any act in the case of unregistered companies which might be exercised or done by it or him in winding up companies.

u.K. ss. 398, 404; N.S.W. ss. 329, 334; Vic. s. 248; Qld. ss. 359, 365; S.A. ss. 345. 350; W.A. s. 302; Tas. s. 259.

Number of members-The requirement as to the number of members is not fulfilled if there be fewer than the prescribed number at the rate of petition, Re Bolton Benefit Loan Society, Coop v. Booth (1879), 12 Ch. D. 679, but admissions may estop the association from denying that the requirement is fulfilled, Re South of France Pottery Works Syndicate (1877), 36 L.T. 651.

A member need not be a shareholder, Re South London Fish Market Co. (1888), 39 Ch. D. 324; and cf. Winstone's Case (1879), 12 Ch. D. 239. But the trustee of a bankrupt member is not counted as a member, Re Bowling and Welby's Contract, [1895] 1 Ch. 663.

Unregistered companies-Unregistered friendly societies are within the meaning of "unregistered company", Re Victoria Society, Knottingley, [1913] 1 Ch. 167; and see Re Osmondthorpe Hall Freehold Garden and Building Allotment Society, [1913] W.N. 243; Re Ironfounders (Bradford Branch) Social Club and Institute, [1923] W.N. 127.

A building society not registered under the Companies Act, and being an association consisting of more than the prescribed number of members, comes within the term "unregistered company", Re Premier Permanent Building Society, Ex parte Turner (1890), 16 V.L.R. 424, and Re Premier Permanent Building Society, Ex parte Australian Alliance Assurance Co. (1890), 16 V.L.R. 740.

But the provisions do not apply to an ordinary club or to a literary institute, Re St. James's Club (1852), 2 De G. M. & G. 383; Re Bristol Athenl1'um (1889), 43 Ch. D. 236. An association within s. 14, ante, which is not incorporated may not be wound up pursuant to Part X, Division 5, Re Riverton Sheep Dip, [1943] S.A.S.R. 344.

Associations registered under other Acts-An association registered under the Friendly Societies Acts, 1913 to 1959 (title SOCIETIES) may be wound up under this Division, Re Bundaberg Permanent Building and Investment Soc. Ltd. (1898), 9 Q.L.J. 51; 9 Q.L.J. (N.C.) 9.

In Re St. Kilda and Brighton Railway Co. (1863), 2 W. & W. (I.E. & M.) 69, a company incorporated by a special Act of Council was held not to be within the scope of the then companies winding-up legislation.

Includes a foreign company-In relation to foreign companies, see Re Harry Rickards Tivoli Theatres Ltd., [1931] V.L.R. 305; Re Egerton and Gordon Consolidated Gold Mines Co. No Liability, [1908] V.L.R. 22.

315. Winding up of unregistered companies. ( 1) Subject to this Division any unregistered company may be wound up under this Part, which Part shall apply to an unregistered company with the following adaptations:-

(a) The principal place of business of such company in the State shall for all the purposes of the winding up be the registered office of the company.


(b) No such company shall be wound up voluntarily.

(c) The circumstances in which the company may be wound up are-

(i) if the company is dissolved or has ceased to have a place of business in the State or has a place of business in the State only for the purpose of winding up its affairs or has ceased to carryon business in the State;

(ii) if the company is unable to pay its debts; (iii) if the Court is of opinion that it is just and equitable that

the company should be wound up.

(2) An unregistered company shall be deemed to be unable to pay its debts if-

(a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding fifty pounds then due has served on the company, by leaving at its principal place of business in the State or by delivering to the secretary or some director, manager or principal officer of the company or by otherwise serving in such manner as the Court approves or directs, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks after the service of the demand neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor;

(b) any action or other proceeding has been instituted against any member for any debt or demand due or claimed to be due from the company or from him in his character of member, and, notice in writing of the institution of the action or proceeding having been served on the company by leaving it at its principal place of business in the State or by delivering it to the secretary or some director, manager or principal officer of the company or by otherwise serving it in such manner as the Court approves or directs, the company has not within ten days after service of the notice paid, secured or compounded for the debt or demand or procured the action or proceeding to be stayed or indemnified the defendant to his reasonable satisfaction against the action or proceeding and against all costs, damages and expenses to be incurred by him by reason thereof;

(c) execution or other process issued on a judgment, decree or order obtained in any court in favour of a creditor against the company or any member thereof as such or any person authorized to be sued as nominal defendant on behalf of the company is returned unsatisfied; or

(d) it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts.

(3) A company incorporated outside the State may be wound up as an unregistered company under this Division notwithstanding that it is being wound up or has been dissolved or has otherwise ceased to exist as a company under or by virtue of the laws of the place under which it was incorporated.


( 4) In this section "to carryon business" has the same meaning as it has in section three hundred and forty-four.

U.K. S5. 399, 400; N.S.W. ss. 71, 330; Vic. s. 249; Qld. s. 360; S.A. s. 346; W.A. s. 303; Tas. s. 260.

For the scope of the expression "unregistered company", see s. 314, ante. In relation to the circumstances in which an unregistered company may be wound up, cf. s. 222. ante.

Unregistered at commencement of winding-up--By an unregistered company is meant one which is unregistered at the commencement of the winding-up. Registration subsequent to the winding-up petition being presented is a nullity, Re Hercules Insurance Co. (1871), L.R. 11 Eq.321.

Circumstances in which company may be wound up--See Banque des Man'hands de Moscou v. Kindersley, [1950] 2 All E.R. 105; affirmed [1950] 2 All E.R. 549 (primary conditions for exercise of Court's discretion; assets in England; no machinery in Russian law for distribution; submission to jurisdiction by persons interested). These conditions are independent and not cumulative, ibid.

Incorporated in a foreign country-The winding-up under this Part of a company incorporated in a foreign country operates only as an administration of the local assets of the company which can be dissolved only under the law of the country of its incorporation, Re Alfred Shaw & Co. Ltd. (1897), 8 Q.LJ. 93; 8 Q.L.J. (N.C.) 74; Re Australian Federal Life & General Assurance Co. Ltd. (in liq.), [1931] V.L.R. 317; Re Russell Wilkins & Sons Ltd. (1905), 11 A.L.R. (C.N.) 26; United Service Insurance Co. Ltd. (in liq.) v. Lang (1935), 35 S.R. (N.S.W.) 487.

A company incorporated in another jurisdiction and whose principal place of business is in another jurisdiction, but which has an office and assets in England, may be wound up in England, Re Tovarishestvo Manufactur Liudvig-Rabenek, [1944] 2 All E.R. 556; [1944] Ch. 404. A fortiori if its principal place of business is in England, Re Naamlooze Vennootschap Handelmaatschappij Wokar, [1946] Ch. 98.

Foreign liquidation-The pendency of a foreign liquidation does not affect the jurisdiction to make a winding-up order, Re Commercial Bank of South Australia (1886), 33 Ch. D. 174; Re Naamlooze Vennootschap Handelmaatschappij Wokar, [1946] Ch. 98. An order can be made even if the company has ceased to exist in the country of incorporation, Russian Commercial and Industrial Bank v. Comptoir d'Escompte de Mulhouse, [1925] A.C. 112, at p. 148; [1924]. All E.R. Rep. 381; Russian and English Bank v. Baring Bros. & Co. Ltd., [1932] 1 Ch. 435; [1932] All E.R. Rep. 122. In such cases it is not necessary to prove that the company had, before dissolution, established at some place within the jurisdiction a branch or other business and that that business had ceased, Banque des Marc/lands de Moscou v. Kindersley, [1950] 2 All E.R. 549, at p. 556; [1951] Ch. 112, at p. 125.

But there must be assets within the jurisdiction to administer and persons subiect, or at least submitting, to the jurisdiction who are concerned or interested in the proper distribution of the assets, Re AzofJ-Don Commercial Bank, [1954] 1 All E.R. 947; [1954) Ch. 315.

Form of order-For a discussion on the form of order, see Re Hibernian Merchants Ltd., [1957] 3 All E.R. 97; [1958] Ch. 76.

Winding-up order discharged-A winding-up order was discharged on the ground that the association being unregistered was illegal. Re Padstow Total Loss & Collision Assurance Association (1882), 20 Ch. D. 137.

Number of members-On illegality in the relation to the number of members, see Re Thomas (1884), 14 Q.B.D. 379.

316. Contributories in winding up of unregistered company. (1) On an unregistered company being wound up every person shall be a contributory-

(a) who is liable to payor contribute to the payment of(i) any debt or liability of the company;


(ii) any sum for the adjustment of the rights of the members among themselves; or

(iii) the costs and expenses of winding up; or

(b) where the company has been dissolved in the place in which it is formed or incorporated, who immediately before the dissolution was so liable,

and every contributory shall be liable to contribute to the assets of the company all sums due from him in respect of any such liability.

(2) On the death or bankruptcy of any contributory the provisions of this Act with respect to the personal representatives of deceased contributories and the assignees and trustees of bankrupt contributories respectively shall apply.


As to the death or bankruptcy of a contributory, see s. 220, ante. Generally in relation to contributories within the meaning of this section, d. the provisions of s. 5 ("contributory") and s. 218, ante. For the scope of the expression "unregistered company" see s. 314, ante.

Liability as contributory-The liability of a contributory is determined by the law of the company's domicil, Re Federal Bank of Australia Ltd. (1898), 8 B.C. (N.S.W.) 35.

The liability being in the nature of a special debt, the liquidator can sue the personal representative of a deceased contributory before a call is actually made, and have a fund set aside, Re Muggeridge, Muggeridge v. Sharp, Ex parte Bank of London and National Provincial Insurance Association (1870), L.R. 10 Eq.443.

See Re London Marine Insurance Association, Andrews' and Alexander's Case, Chatt's Cas,e, Cook's Case, Crew's Case (1869), L.R. 8 Eq. 176 (mutual insurance company; winding-up order does not alter the terms of the contract between the parties); Re Professional Lite Assurance Co. (1867), 3 Ch. App. 167 (cost of realizing assets is part of costs in winding-up); Re Agricultural Cattle Insurance Co., Brotherhood's Case (1862), 31 L.1. Ch. 861 (invalid forfeiture, but parties bound by estoppel); Lethbridge v. Adams, Ex parte International Lite Assurance Society (Liquidator) (1872), L.R. 13 Eq. 547 (member liable beyond share as to winding-up, but not as to breaches of contracts). And see 6 Halsbury's Laws of England, 3rd ed., p. 804. A member of a building society who has withdrawn is not liable as a contributory, Re Sheffield & South Yorkshire Permanent Building Soc. (1889), 22 Q.B.D. 470.

Building society-As to who are contributories under this section where a building society is being wound up, see Re Bundab.erg Permanent Building and Investment Society (N. 1) (1898), 9 Q.L.J. 77; 9 Q.L.J. (N.C.) 41.

Costs of winding-up-Presumably costs of a winding-up should be borne in proportion to the members' interests in the assets or liabilities to the debts of the association, Andrews' and Alexander's Case (1869), L.R. 8 Eq. 176, and Preece's and Evans' Case (1852),2 De G. M. & G. 374.

Proof in bankruptcy-As to proof in bankruptcy, see Re Adams, Ex parte Ball (1874), 10 Ch. App. 48.

317. Power of Court to stay or restrain proceedings. (1) The provisions of this Act with respect to staying and restraining actions and proceedings against a company at any time after the presentation of a petition for winding up and before the making of a winding up order shall in the case of an unregistered company where the application to stay or restrain is by a creditor extend to actions and proceedings against any contributory of the company.


(2) Where an order has been made for winding up an unregistered company no action or proceeding shall be proceeded with or commenced against any contributory of the company in respect of any debt of the company except by leave of the Court and subject to such terms as the Court imposes.

U.K. ss. 402, 403; N.S.W. ss. 332, 333; Vic. s. 251; Qld. ss. 362, 363; S.A. ss. 348, 349; W.A. ss. 305, 306; Tas. s. 262.

In relation to staying and restraining proceedings, see ss. 226-230, ante. For the scope of the expression "unregistered company", see s. 314, ante. Generally in relation to contributories within the purview of this section, ci. s. 5 ("contributory") and s. 218, ante.

Stay-An action against a liquidator in his personal capacity may be stayed, apart from questions of leave, under the general jurisdiction of the court, Graham v. Edge (1888), 20 Q.B.D. 683.

Proceedings against any contributory-A contributory need not be sued as such where he has given a promissory note for a debt, though there be evidence that the money was in reality advanced to the company, Re South of France Pottery Works Syndicate (1877), 37 L.T. 260.

Leave of the court-The omission to obtain the leave of the court cannot, in a proper case, be taken advantage of by plea to the further maintenance of an action, but only, if at all, by application to the court in which the proceedings under the winding-up order are being pursued, Gray v. Raper (1866), L.R. 1 C.P. 694.

318. Outstanding assets of defunct unregistered company. (1) Where an unregistered company the place of incorporation or origin of which is in a proclaimed State has been dissolved and there remains in this State any outstanding property, real or personal, including things in action which was vested in the company or to which it was entitled or over which it had a disposing power at the time it was dissolved, but which was not got in realised upon or otherwise disposed of or dealt with by the company or its liquidator before the dissolution the property, except called and uncalled capital shall, by the operation of this section be and become vested, for all the estate and interest therein legal or equitable of the company or its liquidator at the date the company was dissolved, in such person as is entitled thereto according to the law of the place of incorporation or origin of the company.

(2) Where the place of origin of an unregistered company is the State the provisions of sections three hundred and nine to three hundred and thirteen (both inclusive) shall with such adaptations as may be necessary apply in respect of that company.

(3) Where it appears to the Governor in Council that an enactment in force in any State or Territory of the Commonwealth other than this State contains provisions similar to the provisions of this section, he may, by Order in Council published in the Government Gazette, declare that State or Territory to be a proclaimed State for the purposes of this section.

In relation to defunct companies, cf. the provisions of ss. 309-311 ante. Generally, see notes to ss. 314-317 ante.

New South Wales, Victoria and the Australian Capital Territory have been declared to be proclaimed States for the purposes of this section. (See Order in Council published Gazette 2 July 1962, p. 1375.)

Western Australia has been declared to be a proclaimed State for the purposes of this section. (See Order in Council published Gazette 13 October 1962, p. 472.)

Tasmania has been declared to be a proclaimed State for the purposes of this section. (See Order in Council published Gazette 9 February 1963, p. 606.)

South Australia and the Northern Territory of Australia have been declared to be proclaimed States for the purposes of this section. (See Order in Council published Gazette 6 July 1963, p. 1064.)


PART XI-VARIOUS TYPES OF COMPANIES, ETC.

Division I-No-liability Companies 319. Application of Act to no-liability companies. Subject to this Division and save as otherwise expressly provided in this Act the provisions of this Act relating to public companies except sections two hundred and eighteen to two hundred and twenty (both inclusive), two hundred and thirty-six (so far as it relates to calls), two hundred and forty-four and subsection three of section two hundred and fortyfive shall apply to no-liability companies.

Vic. s. 267; Qld. s. 313; Tas. s. 263. A no-liability company cannot be a proprietary company, s. 15, ante.

Note that some of the ensuing sections in Division 1 of Part XI speak of "the company" without the qualification "no-liability".

Return of capital-It was held in Tongkah Compound No Liability v. Meagher, [1952] V.L.R. 41; [1951] AL.R. 669; 83 C.L.R. 489, that a no-liability company could not return capital.

320. Sbareholder not liable to calls or contributions. The acceptance of a share in a no-liability company, whether by original allotment or by transfer, shall not constitute a contract on the part of the person accepting it to pay any calls in respect thereof or any contribution to the debts and liabilities of the company, and such person shall not be liable to be sued for any calls or contributions, but he shall not be entitled to a dividend upon any such share upon which a call is due and unpaid.

N.S.W. s. 43; Vic. 268; Qld. ss. 311,312; S.A s. 184; W.A s. 170; Tas. s. 264. Compare the provisions of s. 33, ante, which enacts subject to the provisions

relating to no-liability companies that money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company, and shall be of the nature of a specialty debt.

Liability-For the distinction between the liability of the shareholder to pay further calls in consequence of being a member on the one hand and, on the other hand, the liability which he incurred in order to become a member, see New Good Hope Consolidated Gold Mines No Liability v. Stutterd, [1916] V.L.R. 580, at p. 592.

Promissory note-A no-liability mining company is entitled to recover on a promissory note made payable at a future date and given in respect of a sum payable on the allotment of shares to the maker of the note, Rutherford Copper Mining Co. v. Ogier (1905), 1 Tas. L.R. 156.

321. Dividends payable on shares held irrespective of amount paid up on shares. Subject to any provisions of the articles relating to preferred deferred or other special classes of shares, dividends when payable to the shareholders in any no-liability company shall be payable to the persons entitled thereto in proportion to the shares held by them respectively, irrespective of the amount paid up or credited as paid up thereon.

N.S.W. s. 44; Vic. s. 269; Tas. s. 265. In relation to dividends, see s. 376, post. In relation to preferred, deferred or

other special classes of shares, see Fourth Schedule, Table B, arts. 2-5 post. Failure to provide for creditors before paying dividend-Where directors with

notice of a claim against the company sold the only asset of the company which was available for payment of its debts and thereupon distributed the proceeds by way of dividend, it was held that those directors were liable, under the Act and the general law, to refund sufficient of such proceeds to satisfy the claims of the creditors, notwithstanding that the directors had not been prosecuted under the Act, Mackie v. Clough (1891), 17 V.L.R. 493.


322. Calls when due. ( 1) The calls upon shares in a no-liability company shall be so made that they shall be payable-

(a) not less than fourteen days from the day on which the call is made; and

(b) on the second Wednesday in a month or if that Wednesday is a public holiday on the next following week-day which is not a public holiday,

and no subsequent call shall be made until after the expiration of seven days from the day upon which the call made immediately previous to it is payable.

(2) A notice shall be printed on the face of all share certificates stating that such Wednesday or other day is the day on which calls are payable.

(3) When a call is made, notice of the amount of the call, and of the day when it is payable and of the place for payment shall not less than seven days before such day be-

(a) published in a daily newspaper circulating generally throughout the State; and

(b) sent by post to each holder of shares on which the call is made.

N.S.W. s. 44; Vic. s. 271; Qld. s. 313; S.A. s. 178; W.A. s. 164; Tas. s. 268. In relation to calls, see Fourth Schedule, Table B, arts. 9-11, post. When call made-A company's call is made when the resolution is passed for

it, not when the call is payable, Hodgson v. Fermoy Extended Gold Mining Co. ReRistered (1866), 3 W.W. & A'B (L.) 70.

Notice of call-Where the notice of call was headed with the name of a company resembling closely, but not identical with, the registered name of the company, it was held that such notice was a sufficient one in the circumstances as pointing the attention of all those called upon to the fact that it was a call of the relevant company, McDougall v. Moonlight Extended Quartz Mining Co. No Liability (1888), 14 V.L.R. 987. Cf. Clarke v. Moonlight Extended Quartz Mining Co. No Liability (1888), 14 V.L.R. 976.

Time and place-The time and place of payment are material, so that if the notice fails to so appoint, then the notice is bad, Clunes and Blackwood Co. v. Coulter (1870), 1 V.R. (L.) 192.

Daily newspaper-As to calls advertised in diverse newspapers appointing diverse times and places for payment, see Melbourne and Newcastle Minmi Colliery Co. (Ltd.) v. Hodgson (1864), 1 W.W. & A'B (L.) 205. A notice by circular instead of by publication in the newspaper was held not to be a sufficient notice, Solomon v. Collingwood Quartz Mining Co. (1867), 4 W.W. & A'B. (L.) 128.

Promise to pay call-A promise by a shareholder to pay a call is evidence that he has received due notice of its having been made, Mount Brown Gold Mining and Crushing Co. Ltd. v. Hughes (1883), 9 V.L.R. (L.) 383.

323. Forfeiture of shares. ( 1) Any share in a no-liability company upon which a call at the expiration of fourteen days after the day for its payment is unpaid is thereupon forfeited without any resolution of directors or other proceedings, and shall subject to this Division be offered for sale by public auction not more than six weeks after the date on which the call is payable.

(2) Such sale shall be advertised not less than fourteen and not more than twenty-one days before the day appointed for the sale in a daily newspaper circulating generally throughout the State.


(3) Where a sale is not held owing to error or inadvertence the sale if held in due course as soon as may be after the discovery of the error or inadvertence shall not be invalid.

( 4) If there is any failure to comply with the provisions of this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.


(5) At any such sale a share forfeited for non-payment of any call may, if the company in accordance with its articles or by ordinary resolution so determines, be offered for sale and sold credited as paid up to the sum of the amount paid up thereon at the time of forfeiture and the amount of such call and the amount of any other calls becoming payable on or before the date of sale.

(6) The proceeds of the sale shall be applied in payment of(a) the expenses of the sale; (b) any expenses necessarily incurred in respect of the forfeiture; ( c) the calls then due and unpaid,

and the balance (if any) shall be paid to the member whose share has been so sold on his delivering to the company the share certificate that relates to the forfeited share.

N.s.W. s. 44; Vic. s. 272; S.A. ss. 178 (6), 179; W.A. s. 164; Tas. s. 269. Further in relation to forfeiture, see Fourth Schedule, Table B, art. 11, post. Valid call-The call must be validly made or the shares will not be forfeited,

Haddow v. Duke Co. No Liability (1892), 18 V.L.R. 155. Section strictly construed-Provisions in the section must be strictly construed,

Wood v. Freehold United Quartz Mining Co. Registered (1870), 1 V.R. (E.) 168. In that case the date for payment advertised was "Thursday, the 31st June", the Thursday being in fact 1 July, and it was held that this was insufficient to warrant a forfeiture as it fixed an impossible day. So too, in Nolan v. Annabella Gold Mining Co. Registered (1869), 6 W.W. & A'B. (M.) 38, where a forfeiture was set aside where the holder in fact had not received proper notice, no attempt having been made to give him notice.

See further, as to deficiency in proceedings for forfeiture, Cushing v. Lady Barkly Gold Mining Co. Registered (1883), 9 V.L.R. 108.

Liability-The liability of the shareholder to pay further calls in consequence of his being a member on the one hand should not be confused with, on the other hand, the liability which he incurred in order to become a member; so that where an applicant for shares undertook to pay a sum certain by instalments and subsequently failed to meet the last of those instalments, it was held that he could be compelled to pay the same, New Good Hope Consolidated Gold Mines No Liability v. Stutterd, [1916] V.L.R. 580.

Parties in proceedings to set aside forfeiture-If a purchaser of shares in a no-liability company from the registered owner brings an action to have an alleged forfeiture thereof declared void, the registered owner must be made a party, Dalrymple v. Prince of Wales and Bonshaw United Gold Mining Co. (1894), 20 V.L.R. 516.

324. Provisions as to sale of forfeited shares. ( 1) The directors may in the case of any share advertised for sale as forfeited for non-payment of a call fix a reserve price not exceeding the sum of the amount of the call due and unpaid on the share at the time of forfeiture and the amount of any other calls becoming payable on or before the date of the sale.

(2) If a bid at least equal to the reserve price so fixed be not made for such share the share may be withdrawn from sale.

374 COMPANIES Vol. Z

(3) Any share so withdrawn from sale and any other share for which no bid is received at the sale shall be held by the directors in trust for the company and shall be disposed of in such manner as the company in accordance with its articles or by ordinary resolution determines but at any meeting of the company no person shall be entitled to any vote in respect of the shares so held by the directors in trust.

(4) Unless otherwise specifically provided by ordinary resolution, the shares to be so disposed of shall first be offered to shareholders for a period of fourteen days before being disposed of in any other manner.

N.S.W. s. 44; Vic. s. 273; Qld. s. 313; S.A. ss. 179-181; W.A. s. 165; Tas. s. 270.

For the provisions relating to advertisement for sale, see s. 323, ante. As to calls, see s. 322, ante; Fourth Schedule, Table B, art. 11, post.

Calls on forfeited shares-It was held, in relation to the Companies Act 1890 (Vic.) that calls cannot be made on shares during the period of their forfeiture, Morley v. Gore (1893), 19 V.L.R. 199.

325. As to shares held by or in trust for company. No call shall have any effect upon any forfeited share which is held by or in trust for the company pursuant to this Division, but such share when re-issued or sold by the company may be credited as paid up to such amount as the company, in accordance with its articles or by ordinary resolution determines.

Vic. s. 274; Qld. s. 303; Tas. s. 271. As to calls, see s. 322, ante. As to forfeited shares, see s. 323, ante. As to

shares held on trust, see s. 324, ante.

326. Sale of shares on non-payment of calls valid although specific numbers not advertised. ( 1) When forfeited shares are sold for nonpayment of any call the sale shall be valid although the specific numbers thereof are not advertised.

(2) In every advertisement it shall be sufficient to give notice of the intended sale of forfeited shares by advertising to the effect that all shares on which a call remains unpaid will be sold.

N.S.W. s. 44; Vic. s. 275; Tas. s. 272. As to calls, see s. 322, ante. As to forfeiture of shares, see s. 323, ante. As

to the advertisement of a sale of forfeited shares, see s. 323, ante. Further as to the sale of forfeited shares, see s. 324, ante.

327. Postponement of sale. (1) Any intended sale of forfeited shares which has been duly advertised may be postponed for not more than twenty-one days from the advertised date of sale or from any date to which the sale has duly been postponed but so that no such intended sale shall be postponed to a date more than ninety days from the first date fixed for the intended sale.

(2) The date to which the sale is postponed shall in respect of every postponement be advertised in a daily newspaper circulating generally throughout the State.

Vic. s. 276; Tas. s. 272. As to the advertisement of the sale of forfeited shares, see ss. 323, 326, ante.

328. Redemption of forfeited shares. (1) Notwithstanding anything in this Division any person, if a share belonging to him has been forfeited, may, at any time up to or on the day previous to that upon which it is intended to sell the share, redeem the share by payment to the company of-

(a) all calls due thereon; and

COMPANIES ACf OF 1961 ss.324·330 375

(b) if the company so requires-(i) a portion, calculated on a pro rata basis, of all expenses

incurred by the company in respect of the forfeiture; and (ii) a portion, calculated on a pro rata basis, of all costs and

expenses of any proceeding which has been taken in respect of the forfeiture.

(2) Upon such payment such person shall be entitled to the share as if the forfeiture had not been incurred.

N.S.W. s. 44; Vic. s. 277; S.A. s. 180; W.A. s. 166; Tas. s. 273. As to the sale of forfeited shares, see s. 324, ante. As to the advertisement of

sale, see ss. 323, 326, ante. As to where payment may be so tendered, see s. 329, post.

As if the forfeiture had not been incurred-Where shares were forfeited and transferred after forfeiture, and the transferee applied to have the register rectified and to have the manager enter his name thereon and issue scrip to him, no tender of calls having been made to the company either before or after forfeiture, it was held that although the representative of a quondam owner would be entitled to redeem the shares, the declaration that "he shall thereupon be entitled to the share as if the forfeiture had not been incurred" in s. 60 of the Mining Companies Act 1884 (Tas.) was not applicable to any transferee of a share, Re Long TlInnel Prospectinl? Syndicate No Liability (1905), 1 Tas. L.R. 49.

The section is not effectual to relate the redemption back to the time of forfeiture; between the two happenings there is a period during whieh the former holder is not a holder of the share, Bostock v. Edgar (1899), 24 V.L.R. 677. Semble, if a shareholder institutes an action as such, and if his shares are forfeited and redeemed before the hearing, the forfeiture will not preclude him from succeeding in the action, ibid., at p. 680.

Fresh right of redemption-If forfeited shares are offered for sale but not sold, a fresh sale may be appointed giving the former holder a fresh right to redeem up to the day previous to the day appointed for the fresh sale, Moore v. Wheal BYielkerno Tin Mining Co. No Liability (1891), 17 V.L.R. 680.

Costs and expenses-the company is not bound to exact a proportion of the costs and expenses referred to in the section. The bother involved in so calculating such costs and expenses may, in the case of a forfeiture of a small parcel of shares, outweigh the value of recoverable costs and expenses.

Restoration of directors-Directors who in consequence of forfeiture lost their office under the articles are not, short of re-election, restored to office upon redemption, Haddow v. Dlike Co. No Liability (1892), 18 V.L.R. 155.

329. Office to be open the day before sale advertised. On the day before that on which a forfeited share is advertised for sale, the company's office shall be open during the hours for which it is by this Act required to be accessible to the public.

Vic. s. 278; Tas. s. 274. As to the advertisement of the sale of forfeited shares, see ss. 323, 326, ante.

As to the hours during which a registered office (but note that this section refers merely to "company's office") is required to be open, see s. 112, ante.

330. Distribution of surplus where cessation of business upon winding up. (1) If on the winding up of a no-liability company there remains any surplus, the surplus shall be distributed amongst the parties entitled thereto in proportion to the shares held by them respectively irrespective of the amount paid up or credited as paid up thereon.

(2) No member who is in arrear in payment of any call but whose shares have not been actually forfeited shall be entitled to share in such distribution until the amount owing in respect of such call has been fully paid and satisfied.


N.S.W. s. 44; Vic. s. 279; Tas. s. 277. With the provisions of this section cf. s. 321, ante, relating to the basis of

payment of dividends. Surplus, parties entitled thereto--As to the meaning of the terms "surplus",

and "parties entitled thereto", see Webb v. Federal Commissioner of Taxation (1922), 30 C.L.R. 476; 28 A.L.R. 284. See also Re Quartz Hill Gold Mining Co. No Liability (1906), 27 A.L.T. (Supp.) 13.

331. Distribution of surplus where cessation of business within twelve months. If a no-liability company ceases to carryon business within twelve months of its incorporation shares issued for cash shall on a winding up, to the extent of the capital contributed by subscribing shareholders, rank in priority to those issued to vendors or promotors or both for other consideration than cash.

Vic. s. 280; Tas. s. 278. As to the date of incorporation, see s. 16, ante. As to the statement in the

annual return relating to shares which are issued subject to payment wholly in cash, and those issued as fully paid up otherwise than in cash, see Eighth Schedule, post.

332. As to rights attaching to preference shares issued to promoters. Notwithstanding anything in the memorandum or articles of a no-liability company the holders of any shares issued to vendors or promoters shall not be entitled to any preference on the winding up of the company.

Vic. s. 281; Tas. s. 279. Compare the provisions of s. 331, ante, which postpones vendors and promoters

in certain circumstances. In relation to the distribution of surplus, see s. 330, ante.

333. Restrictions on tribute arrangements. ( 1) Without the sanction of a special resolution of the company the directors of a no-liability company shall not-

(a) let the whole or portion of a mine or claim on tribute; or (b) make any contract for working any land on tribute.

(2) Subsection (1) of this section shall not preclude the directors of a no-liability company from letting the whole or portion of a mine or claim on tribute, or making any contract for working any land on tribute, for any period not exceeding three months, without the sanction of such a resolution if no such letting or contract has been made within the period of two years immediately preceding the proposed letting or contract.

Vic. s. 282; Tas. s. 280. As to the term "special resolution", see s. 144, ante. Letting-In a similar section (Vic.) where the word "letting" was empolyed,

such term was held not to apply to a tribute agreement which did not amount to a right to the exclusive occupation of the focal land, Chun Goon v. Reform Gold Mining Co., Registered (1881),8 V.L.R. (E.) 128, at p. 137.

Division 2-Investment Companies 334. (1) Interpretation. In this Division unless the contrary intention appears-

"Investment company" means a corporation for the time being declared by Proclamation of the Governor in Council to be an investment company.

"Net tangible assets" means tangible assets at book values less total liabilities at book values and less any aggregate amount by which the book value of the marketable securities held by the corporation exceeds their market value.


(2) Proclamation of investment companies. The Governor in Council may by Proclamation published in the Government Gazette declare to be an investment company any corporation which is engaged primarily in the business of investment in marketable securities for the purpose of revenue and for profit and not for the purpose of exercising control, and the Governor in Council may by like Proclamation revoke any Proclamation declaring a corporation to be an investment company.

Vic. s. 284; W.A. s. 380; Tas. s. 282.

335. Restriction on borrowing by investment companies. (1) An investment company shall not borrow an amount if that amount, or the sum of that amount and amounts previously borrowed by it and not repaid exceeds an amount equivalent to fifty percentum of its net tangible assets.

(2) An investment company shall not borrow an amount otherwise than by the issue of debentures if that amount, or the sum of that amount and amounts previously borrowed by it otherwise than by the issue of debentures and not repaid, exceeds an amount equivalent to twenty-five per centum of its net tangible assets.

(3) In subsection (2) of this section "debentures" does not include a debenture-

(a) that is redeemable, except at the option of the borrower exercised not earlier than two and one-half years after the date of issue of the debenture, within less than five years after that date; or

(b) that is issued to a bank as security for an overdraft. Vic. s. 285; W.A. s. 381; Tas. s. 283. As to the terms "investment company" and "net tangible asests", see s. 334,

ante. With the meaning of "debentures" in this section, cf. s. 5 ("debenture") ante.

Further as to debentures, see ss. 70 et s.eq., ante.

336. Restriction on investments of investment companies. ( 1) An investment company shall not invest an amount in a corporation if that amount, or the sum of that amount and amounts previously invested by it in that corporation and still so invested exceeds an amount equivalent to ten per centum of the net tangible assets of the investment company.

(2) An investment company shall not invest an amount in the ordinary shares of a corporation if that amount, or the sum of that amount and amounts previously invested by it in the ordinary shares of that corporation and still so invested exceeds an amount equivalent to five per centum of the subscribed ordinary share capital of the corporation.

Vic. s. 286; W.A. s. 382; Tas. s. 284. For the meaning of the terms "investment company" and "net tangible assets",

see s. 334, ante.

337. ( 1) Restriction on nnderwriting by investment companies. An investment company shall not underwrite any issue of authorized securities to an amount that, when added to the amount or amounts if any, to which it has previously underwritten a current issue or iss~es of other authorized securities (not being an amount or amounts in respect of which the underwriting obligation has been discharged), exceeds an amount equivalent of forty per centum of its net tangible assets.


(2) An investment company shall not underwrite any issue of non-authorized securities to an amount that, when added to the amount or amounts, if any, to which it has previously underwritten a current issue or issues of other non-authorized securities (not being an amount or amounts in respect of which the underwriting obligation has been discharged), exceeds an amount equivalent to twenty per centum of its net tangible assets.

(3) Provisions for unloading securities underwritten and not taken up. Where-

(a) an investment company has underwritten any issue of securities and, in relation to the underwriting, has not contravened subsection (1) or subsection (2) of this section; and

(b) the investment company, as a result of the underwriting, invests in a corporation, being an investment contrary to section three hundred and thirty-six,

the investment company shall be deemed not to have contravened a provision of that section by reason of so investing in the corporation if, at the expiration of twelve months after so investing-

(c) the amount invested by it in the corporation does not exceed an amount equivalent to ten per centum of the net tangible assets of the investment company; and

(d) it does not hold more than five per centum of the subscribed ordinary share capital of the corporation.

( 4) This section extends to and in relation to sub-underwriting as if the sub-underwriting were underwriting.

( 5) In this section-"Authorized securities" means securities in which, by any Act

of the Commonwealth the State any other State of the Commonwealth or New Zealand, trustees are authorized to invest trust funds in their hands;

"Non-authorized securities" means securities other than authorized securities.

Vic. s. 287; W.A. s. 383; Tas. s. 285. For the meaning of the terms "investment company" and "net tangible assets",

see s. 334, ante.

As to authorized securities. see Trustees and Executors Acts, 1897 to 1961, s. 4, title TRUSTEES AND EXECUTORS.

Underwrite-For the meaning of the term "underwrite", see Re Licensed Victuallers Mutual TradinJ? Association; Ex parte Audain (1889), 42 Ch. D. 1, at pp. 5, 6; Re London-Paris Financial Mining Corporation Ltd. (1897), 13 T.L.R. 569, at pp. 570, 571; Australian Investment Trust v. Strand and Pitt Street Properties, [1932] A.C. 735.

338. Special requirements as to articles and prospectus. (1) An investment company shall not issue a prospectus or permit a prospectus to be issued on its behalf unless the prospectus specifies-

(a) the type of security in which it is among the objects of the company to invest; and

(b) whether it is among the objects of the company to invest within the Commonwealth or outside the Commonwealth or both.


(2) After the expiration of three months after an investment company has been declared to be an investment company, the investment company shall not borrow or invest any moneys, or underwrite or subunderwrite any issue of securities, unless the articles of the company specify the matters referred to in paragraph (a) and paragraph (b) of subsection (1) of this section.

Vic. s. 288; W.A. s. 384; Tas. s. 286.

For the meaning of the term "investment company", see s. 334, ante. Further as to securities, see s. 337, ante. As to the objects of a company, see s. 19, ante, and Third Schedule, post. In relation to prospectuses, see ss. 37 et seq., ante. For the manner in which a company may be declared to be an investment company, see s. 334, ante. For the meaning of the term "underwrite", see notes to s. 337, ante.

339. Not to hold shares in other investment companies. No investment company shall purchase or, after the expiration of three years after it is declared to be an investment company, hold any shares in or debentures of-

(a) any other investment company; or

(b) any corporation incorporated in any other State or Territory of the Commonwealth or in New Zealand which is engaged primarily in the business of investment in marketable securities for the purpose of revenue and for profit and not for the purpose of exercising control and which is specified by Proclamation of the Governor in Council published in the Government Gazette.

Vic. s. 289; W.A. s. 385; Tas. s. 287.

For the meaning of the term "investment company", see s. 334, ante. For the manner in which a corporation may be declared to be an investment company, see s. 334, ante. As to debentures, see ss. 70 et seq., ante, and cf. the provisions of s. 335, ante. Further in relation to securities, see s. 337, ante.

340. Not to specnlate in commodities. ( 1) No investment company shall for the purpose of profit buy or sell or deal in any raw materials or manufactured goods, whether in existence or not, otherwise than by investing in companies trading in such materials or goods.

(2) Subsection (1) of this section shall not apply to or in relation to-

(a) any buying, selling or dealing by an investment company in pursuance of a contract entered into by the investment company before it was declared to be an investment company; or

(b) the selling of or the dealing in raw materials or manufactured goods acquired by the investment company before it was so declared.

Vic. s. 290; W.A. s. 386; Tas. s. 288.

For the meaning of the term "investment company", fee s. 334, ante. For the manner in which a corporation may be declared to be an investment company, see s. 334, ante.


341. Balance-sheets and accounts. ( 1) An investment company shall state under separate headings in every balance-sheet of the investment company, in addition to any other matters required to be stated therein-

(a) the investments of the company in any securities which are not securities referred to in paragraph (h) of subclause (1) of clause 2 of the Ninth Schedule; and

(b) the manner in which the investments of the company have been valued.

(2) An investment company shall attach to every such balancesheet-

(a) a complete list of all purchases and sales of securities by the company during the period to which the accounts relate together with a statement of the total amount of brokerage paid or charged by the company during that period and the proportion thereof paid to any stock or share broker or any employee or nominee of any stock or share broker who is an officer of the company; and

(b) a complete list of all the investments of the company as at the date of the balance-sheet showing the descriptions and quantities of such investments.

(3) An investment company shall show separately in the profit and loss account, in addition to any other matters required to be shown therein, income from underwriting (including sub-underwriting).

Vic. s. 291; W.A. s. 387; Tas. s. 289. As to the meaning of the term "investment company", see s. 334, ante. As

to the profit and loss account and balance sheet. see ss. 161, 162, ante, Ninth Schedule, post. As to underwriting, see s. 337, ante. Further in relation to securities. see s. 337, ante.

342. Investment fluctuation reserve. ( 1) The net profits and losses of an investment company from the purchase and sale of securities shall be respectively credited and debited by the company to a reserve account to be kept by it and to be called the "investment fluctuation reserve".

(2) The investment fluctuation reserve shall not be available for the payment of dividends.

(3) The investment fluctuation reserve shall be available for the payment of income tax payable in respect of profits made on the sale of securities.

Vic. s. 292; W.A. s. 388; Tas. s. 290. As to the term "investment company", see s. 334. ante. Further in relation to

dividends. see s. 376, post. Further as to securities, see s. 337. ante.

343. Penalties. ( 1) If default is made by an investment company in complying with the provisions of this Division the investment company and every officer of the investment company who is in default shall be guilty of an offence against this Act.

Penalty: One thousand pounds. Default penalty: One hundred pounds.

(2) No transaction entered into by the company shall be invalid by reason only of such default.

Vic. s. 293; W.A. s. 389; Tas. s. 291. As to the term "investment company", see s. 334, ante.


Division 3-Foreign Companies 344. (1) Foreign companies to which this Division applies. This Division applies to a foreign company only if it has a place of business or is carrying on business within the State.

(2) Interpretation. In this Division, unless the contrary intention appears-

"Agent" means the person named in a memorandum of appointment or power of attorney lodged under paragraph (e) of subsection ( 1 ) or under subsection (8) of section three hundred and forty-six or under any corresponding previous enactment.

"Carrying on business" includes establishing or using a share transfer or share registration office or administering, managing or otherwise dealing with property situated in the State as an agent, legal personal representative, or trustee, whether by servants or agents or otherwise and "to carry on business" has a corresponding meaning.

(3) Notwithstanding subsection (2) of this section, a foreign company shall not be regarded as carrying on business within the State for the reason only that within the State it-

(a) is or becomes a party to any action or suit or any administrative or arbitration proceeding or effects settlement of an action suit or proceeding or of any claim or dispute;

(b) holds meetings of its directors or shareholders or carries on other activities concerning its internal affairs;

(c) maintains any bank account; (d) effects any sale through an independent contractor; (e) solicits or procures any order which becomes a binding

contract only if such order is accepted outside the State; (f) creates evidence of any debt or creates a charge on real or

personal property; (g) secures or collects any of its debts or enforces its rights in

regard to any securities relating to such debts; (h) conducts an isolated transaction that is completed within a

period of thirty-one days, but not being one of a number of similar transactions repeated from time to time; or

(i) invests any of its funds or holds any property. U.K. ss. 406-423; N.S.W. s. 61; Vic. s. 294; Qld. ss. 321, 335; S.A. s. 351,

W.A. s. 328; Tas. s. 292 (1).

In relation to share transfer or share registration office, see ss. 152-7, ante. Place of business-". . . when the Legislature selected the phrase 'establishes

a place of business' it means something other than 'carrying on business' ", and "the company must have what I may call a local habitation of its own", L.A. v. Huron and Erie Loan and Savings Co., [1911] S.C. 612, at p. 616; approved in Re Tovarishestvo Manufactur Liudvig-Rabenek, [1944] Ch. 404, at p. 408; [1944] 2 All E.R. 556, at p. 560, where a hotel was held to be, during the business visit of the director of a Russian company, the place of business in England of the company.

Carrying on business-For observations upon the term, "carrying on business", see City Finance Co. Ltd. v. Matthew Harvey & Co. Ltd. (1915), 21 C.L.R. 55, at p. §6, and see further Colley v. Meads (1917), 20 W.A.L.R. 1; Lamson Store Service Co. v. Weidenbach & Co.'s Trustees (1904),7 W.A.L.R. 166; Gibson Battle


& Co. Ltd. v. Kin!? & Sons, [1915] S.A.L.R. 14; Pearce v. Tower Manufacturing and Nm'eity Co. (1898), 24 V.L.R. 506, where it was held that the employment of a commercial traveller in Victoria was of itself not "carrying on business".

Recognition-As to recognition of an unincorporated body constituted by a statute of another State, see J. A. Hemphill & Sons Pty. Ltd. v. Chaff and Hay Acquisition Committee (1947), 47 S.R. (N.S.W.) 218.

Whether incorporated-For a case where the court had to consider, in another context, whether an existing body which traded, occupied premises and paid taxes in France was an incorporated body, see Etablissement Baudelot v. R. S. Graham & Co. Ltd. [1953] 1 All E.R. 149.

345. Power of foreign companies to hold land. ( 1) A foreign company registered under this Division shall have power to hold land in the State.

(2) A foreign company not registered under this Division shall not have power to hold land in the State save under the authority of and in accordance in every respect with the terms and conditions of, a permit in writing by the Minister first had and obtained.

Qld. s. 328; S.A. s. 355.

Companies incorporated under the State Acts have, by virtue of s. 16, ante, power to hold land.

To hold land-As to holding land, see Attorney-General v. Parsons, [1956] 1 All E.R. 65; [1956] A.C. 421; Morelle Ltd. v. Waterworth; Rodnal Ltd. v. Ludbrook, [1954] 2 All E.R. 673; [1955] 1 Q.B. 1. A British corporation if so empowered by its Act of incorporation is, independently of any Victorian statutory provisions, capable of holding land in Victoria, Re Transfer oj Land Act 1915 and Transfer from Balfollr to Public Trustee, [1916] V.L.R. 397.

It was formerly held that mandamus would lie to compel registration of land under the Real Property Acts, 1861 to 1960, title REAL PROPERTY, to a foreign company and the question of whether such a company was entitled to hold land was not one with which the Registrar-General should concern himself, Mutual Assurance Society of Victoria v. Registrar-General (1883) 1 Q.L.J. 177.

See also Re Scottish Australian Investment Co.'s Transfer, B.C.R. July 15, 1880; Digest, 1861-1924, col. 129.

346. Documents, etc., to be lodged by foreign companies having place of business in the State. (1) Every foreign company shall, within one month after it establishes a place of business or commences to carry on business within the State, lodge with the Registrar for registration-

(a) a certified copy of the certificate of its incorporation or registration in its place of incorporation or origin or a document of similar effect;

(b) a certified copy of its charter statute or memorandum and articles or other instrument constituting or defining its constitution;

(c) a list of its directors containing similar particulars with respect to its directors as are by this Act required to be contained in the register of the directors, managers and secretaries of a company incorporated under this Act;

(d) where the list includes directors resident in the State who are members of the local board of directors a memorandum duly executed by or on behalf of the foreign company stating the powers of the local directors;

(e) a memorandum of appointment or power of attorney under the seal of the foreign company or executed on its behalf in such manner as to be binding on the company and, in


either case, verified in the prescribed manner, stating the name and address of one or more persons resident in this State, not including a foreign company authorized to accept on its behalf service of process and any notices required to be served on the company;

(f) notice of the situation of its registered office in the State and, unless the office is open and accessible to the public for at least five hours between ten o'clock in the forenoon and four o'clock in the afternoon of each day (Saturdays, Sundays and holidays excepted) the days and hours during which it is open and accessible to the public;

(g) a statutory declaration in the prescribed form made by the agent of the company,

and the Registrar shall register the company under this Division by registration of the documents.

(2) Where a memorandum of appointment or power of attorney lodged with the Registrar in pursuance of paragraph (e) of subsection (1) of this section is executed by a person on behalf of the company, a copy of the deed or document by which that person is authorized to execute the memorandum of appointment or power of attorney, verified by statutory declaration in the prescribed manner, shall be lodged with the Registrar and the copy shall for all purposes be regarded as an original.

(3) Subsection (1) of this section shall apply to a foreign company which was not registered under the repealed Act but which, immediately before the date of commencement of this Act, had a place of business or was carrying on business within the State and, on that date, has a place of business or is carrying on business within the State, as if it established that place of business or commenced to carry on that business on that date.

( 4) A foreign company shall have a registered office within the State to which all communications and notices may be addressed and which shall be open and accessible to the public for not less than three hours between the hours of nine o'clock in the morning and five o'clock in the evening each day, Saturdays, Sundays, and holidays excepted.

(5) An agent, until he ceases to be such in accordance with subsection (7) of this section, shall-

(a) continue to be the agent of the company; (b) be answerable for the doing of all such acts, matters and

things, as are required to be done by the company by or under this Act; and

(c) be personally liable to all penalties imposed on the company for any contravention of any of the provisions of this Act knowingly and wilfully authorized or permitted by him.

(6) A foreign company or its agent may lodge with the Registrar a notice in writing stating that the agent has ceased to be the agent or will cease to be the agent on a date specified in the notice.

(7) The agent in respect of whom the notice has been lodged shall cease to be an agent on the expiration of a period of twenty-one days after the date of lodgment of the notice or on the date of the appointment of another agent the memorandum of whose appointment has been


lodged in accordance with subsection (8) of this section whichever is the earlier, but if the notice states a date on which he is to so cease and the date is later than the expiration of that period, on that date.

(8) Where an agent ceases to be the agent and the company is then without an agent in the State if the company continues to carry on business or has a place of business in the State it shall within twentyone days after the agent ceases to be such, appoint an agent and lodge a memorandum of his appointment and a statutory declaration in accordance with subsection (1) of this section and if not already lodged in pursuance of subsection (2) of this section a copy of the deed or document or power of attorney referred to in that subsection verified in accordance with that subsection.

(9) On the registration of a foreign company under this Division or the lodging with the Registrar of particulars of a change or alteration in a matter referred to in paragraph (c), paragraph (d) or paragraph (f) of section three hundred and forty-seven, the Registrar shall issue a certificate in the prescribed form under his hand and seal which certificate shall be prima facie evidence in all courts of the particulars mentioned in the certificate.

(10) Nothing in this section shall require a foreign company which was registered under the repealed Act immediately before the commencement of this Act as a foreign company to register pursuant to this section, but such a company shall, within one month after the commencement of this Act, lodge with the Registrar such of the documents specified in subsection (1) of this section as have not been lodged by it under the repealed Act.

U.K. s. 407; N.S.W. s. 62; Vic. s. 295; Qld. ss. 322, 325, 333; S.A. s. 352 (1); W.A. s. 329; Tas. s. 293.

In relation to the register of directors, managers and secretaries, cf. s. 134, ante. As to the expressions "place of business" and "carrying on business", see s. 344, ante. As to the registered office, cf. ss. 111, 112, ante. As to the term "agent", see s. 344, ante. As to service on a foreign company, see s. 351, post.

This Act commenced on 1 July 1962, see Gazette 24 February 1962, p. 563. Authorized to accept service-Service upon the person registered in pursuance

of this section is good service notwithstanding that at the date of service the company no longer has any place of business within the jurisdiction, Employers Liability Assurance Corporation v. Sedgwick, Collins & Co., [1927] A.C. 95; [1926] All E.R. Rep. 388; Sabatier v. Trading Co., [1927] 1 Ch. 495. Further in relation to service, see Deverall v. Grant Advertising Illc., [1954] 3 All E.R. 389; [1955] Ch. 111.

Submission to jurisdiction-Registration by a foreign company of a name and address for service under this section amounts to a submission to the local juris.diction, Employers Liability Assurance Corporation v. Sedgwick, Collins & Co., [1927] A.C. 95; [1926] All E.R. Rep. 388.

Certificate prima facie evidence-The certificate in the prescribed form referred to in this section is merely prima facie evidence, Gillett v. National Benefit Life and Property Assurance Co. Ltd. (1918),24 C.L.R. 374, at p. 379; 24 A.L.R. 151.

347. Return to be filed where documents, etc., altered. (1) Where any change or alteration is made in-

(a) the charter statutes memorandum or articles of the foreign company or other instrument lodged with the Registrar;

(b) the directors of the foreign company; (c) the agent or agents of the foreign company or the address of

any agent;


(d) the situation of the registered office of the foreign company in the State or of the days or hours during which it is open and accessible to the public;

(e) the address of the registered office of the foreign company in its place of incorporation or origin;

(f) the name of the foreign company; or (g) the powers of any directors resident in the State who are

members of the local board of directors of the foreign company, the foreign company shall within one month or within such further period as the Registrar in special circumstances allows after the change or alteration lodge with the Registrar particulars of the change or alteration and such documents as the regulations require.

(2) If a foreign company increases its authorized share capital it shall within one month or within such further period as the Registrar in special circumstances allows after such increase lodge with the Registrar notice of the amount from which and of the amount to which it has been so increased.

(3) If a foreign company not having a share capital increases the number of its members beyond the registered number it shall, within one month or within such further period as the Registrar in special circumstances allows after the increase was resolved on or took place, lodge with the Registrar notice of the increase.

U.K. s. 409; N.S.W. s. 67; Vic. s. 296; Qld. s. 324; S.A. s. 359; W.A. s 335; Tas. s. 294.

Further in relation to the name of a foreign company. see s. 350, post. Generally, see s. 346, ante.

348. (1) Balance-sheets. Subject to this section a foreign company shall, at least once in every calendar year and at intervals of not more than fifteen months, lodge with the Registrar a copy of its balance-sheet made up to the end of its last financial year in such form and containing such particulars and including copies of such documents as the company is required to prepare by the law for the time being applicable to that company in the place of its incorporation or origin, together with a statutory declaration in the prescribed form verifying that the copies are true copies of the documents so required.

(2) The Registrar may, if he is of the opinion that the balance-sheet and other documents referred to in subsection (1) of this section do not sufficiently disclose the company's financial position, require the company to lodge a balance-sheet within such period, in such form and containing such particulars and including such documents as the Registrar by notice in writing to the company requires, but this subsection does not authorize the Registrar to require a balance-sheet to contain any particulars or include any documents that would not be required to be furnished if the company were a public company incorporated under this Act.

(3) The company shall comply with the requirements set out in the notice.

( 4) Where a foreign company is not required by the law of the place of its incorporation o~ origin to p~epare a balance-sheet the company shall prepare and lodge WIth the RegIstrar a balance-sheet within such

13


period, in such form and containing such particulars and including such documents as the company would have been required to prepare if the company were a public company incorporated under this Act.

(5) This section does not apply to or in relation to a foreign company-

(a) which is an exempt private company under the law of the United Kingdom relating to companies;

(b) which is included in a class of companies incorporated under the law of another State, Territory or country, being a class of companies which the Governor in Council has declared by Order in Council published in the Government Gazette to be a class of companies of a kind the same or substantially the same as exempt proprietary companies under this Act;

(c) which is included in a class of companies incorporated under the law of another State, Territory or country, being a class of companies which the Governor in Council has declared by Order in Council published in the Government Gazette to be a class of companies of a kind the same or substantially the same as proprietary companies under this Act where no beneficial interest in any share in the company is held, directly or indirectly, otherwise than by a natural person;

(d) which is a company incorporated in the United Kingdom or in any other State or Territory of the Commonwealth and which has, by the law of the place of its incorporation, exemptions and privileges similar to those which are provided for in section twenty-four; or

(e) which is an association incorporated in any other State or Territory of the Commonwealth under an enactment of that place which makes special provision for the incorporation of associations which are formed for the purpose of providing recreation or amusement, or promoting commerce, industry, art, science, religion, charity, pension or superannuation schemes, or any other object useful to the community and which are by their constitutions prohibited from the payment of dividends to their members.

(6) Annual return. A foreign company referred to in paragraph (a), (b) or (c) of subsection (5) of this section shall, at least once in every calendar year, lodge with the Registrar a return in the prescribed form made up to the date of its annual general meeting.

(7) The return shall be lodged within a period of one month after the date to which it is made up or within such further period as the Registrar, in special circumstances, allows.


As to balance sheets, cf. 55. 161. 162, ante. Exempt proprietary companies incorporated under the "Companies Act. 1961"

(New South Wales); the "Companies Act, 1961" (Victoria); the "Companies Ordinance, 1962" (Australian Capital Territory), respectively, have been declared to be a class of companies of a kind the same or substantially the same as exempt proprietary companies under this Act. (See Order in Council published Gazette 2 July, 1962, p. 1375.)

Exempt proprietary companies incorporated under the "Companies Act, 1961-62" (Western Australia) have been declared to be a class of companies of a kind the same as exempt proprietary companies under this Act. (Sec Order in Council published Gazette 13 October, 1962, p. 471.)


Exempt proprietary companies incorporated under t~e "Comp~nies Act 1962" (Tasmania) have been declared to be a class of comparues of a kmd the same as exempt proprietary companies under this Act. (See Order in Council published Gazette 9 February 1963, p. 606.)

Exempt proprietary companies incorporated under the "Companies AC.t, 1962" (South Australia) the "Companies Ordinance 1963" (Northern TerrItory of Australia) have b~en declared to be a class of companies of a kind the same as exempt proprietary companies under this Act. (See Order in Council published Gazette 6 July 1963, p. 1064.)

349. Fees payable by foreign companies in certain cases. ( 1) Wh~re, on the registration of a company as a foreign company or on the lodgmg by a foreign company of a notice under subsection (2) of section three hundred and forty-seven, the Registrar certifies in writing that he is satisfied that the company has established in the State a share transfer or share registration office but has not otherwise carried on, is not otherwise carrying on and does not propose otherwise to carry on business in the State, the liability to pay such part, if any, of the fee payable under Item 18 or 19 of the Second Schedule in respect of the registration or the lodging of the notice as exceeds Five hundred pounds is, by force of this section, suspended until the company commences otherwise to carryon business in the State or fails to comply with subsection (2) of this section, whichever first occurs, but thereupon the company is liable to pay to the Registrar that part of that fee.

(2) A company shall, so long as a suspension under subsection (1) of this section of liability to pay a fee in respect of the company continues, lodge with the Registrar in each year at the time when a copy of its balance-sheet or a return under section three hundred and forty-eight is lodged with the Registrar a notice in the prescribed form containing the prescribed particulars with respect to the business being carried on in the State by the company.

(3) Where a foreign company in respect of which the Registrar has issued a certificate under subsection (1) of this section commences to carryon business in the State otherwise than by reason of establishing or using a share transfer or share registration office, the company shall, within fourteen days after so commencing, lodge with the Registrar notice thereof in the prescribed form.

As to balance sheets, see s. 348, ante. As to a share transfer or share registration office, see s. 344, ante. As to carrying on business, see s. 344, ante.

350. Obligation to state name of foreign company whether limited, State or conntry, where incorporated. A foreign company shall-

(a) except in the case of a banking corporation, conspicuously exhibit outside its registered office and every place of business established by it in the State its name and the place where it is formed or incorporated;

(b) except in the case of a banking corporation, cause its name and the place where it is formed or incorporated to be stated ~n legi?le ch~racters in all its bill-heads and letter paper and III all Its notIces, prospectuses and other official publications; and

(c) if the liability of its members is limited (unless the last word of its name is the word "Limited" or the abbreviation "Ltd."), cause notice of that fact-

(i) to be stated in legible characters in every prospectus issued by it and in all its bill-heads, letter paper, notices, and other official publications in the State; and


(ii) except in the case of a banking corporation to be exhibited outside its registered office and every place of business established by it in the State.

U.K. s. 411; N.S.W. s. 69; Vic. s. 298; Qld. s. 330; S.A s. 360; W.A. s. 336; Tas. s. 296.

In relation to the name of a foreign company, cf. s. 22, ante. In relation to the publication of the name of a foreign company, cf. s. 113, ante.

Banking-For judicial pronouncements upon the terms "banking", see Tennant v. Union Bank of Canada, [1894] AC. 31, at p. 46; Re Bottomgate Industrial Co-operation Society (1891), 65 L.T. 712, at p. 714.

351. Service of notice. A document required to be served on a foreign company shall be sufficiently served-

(a) if addressed to the foreign company and left at or sent by post to its registered office in the State; or

(b) if addressed to an agent of the company and left at or sent by post to his registered address.

U.K. s. 412; NS.W. s. 66; Vic. s. 299; Qld. s. 326; S.A. s. 356; W.A. s. 333; Tas. s. 297.

As to service see also R.S.C. Order 10, rule 6, title SUPREME COURT; District Courts Acts 1958 to 1960, s. 73, title DISTRICT COURTS; Magistrates Court Rules 1960, rule 63, title MAGISTRATES COURTS.

In relation to the agent, see s. 346, ante. In relation to the registered office in the State, see ss. 346, 347, ante.

Ceased to exist-If, before service, the foreign company has ceased to exist in its State of incorporation, all proceedings are a nullity, Lazard Bros. & Co. v. Midland Bank Ltd., [1933] AC. 289; [1932] All E.R. Rep. 571.

Ceased to carryon business-As to whether service under this section is good service upon the company after it has ceased to carryon business in this State, see Gillett v. National Benefit Life and Property Assurance Co. Ltd. (1918), 24 C.L.R. 374; Employers' Liability Assurance Corporation Ltd. v. Sedgwick, Collins & Co. Ltd., [1927] AC. 95; [1926] All E.R. Rep. 388; Sabatier Y. Trading Co., [1927] 1 Ch. 495.

Whether defendant amenable to jurisdiction-Though process be duly served, semble, it may still be that a defendant is not amenable to the jurisdiction of a State court where, for example, it is not registered in the State and it does not appear that it is incorporated under foreign law, Pacific Commercial Co. v. Barnett, [1921] V.L.R. 196.

As to service of a writ issued out of the Supreme Court of New South Wales on a company which was registered and conducted its business only in Victoria, see Commissioner of Road Transport and Tramways v. Green Star Trading Co. Pty. Ltd. (1936),36 S.R. (N.S.W.) 320. See also L. E. Bowman & Co. Pty. Ltd. v. Becketts Ply. Ltd. (1946), 63 W.N. (N.S.w.) 221.

Addresses-If the name of the person named on the register appears on the envelope posted to the registered address, the fact that the name of the foreign company also appears thereon will not make the service bad, Fester, Fothergill and Hartung v. Russian Transport and Insurance Co., [1927] W.N. 27.

Service on attorney-Service of a writ upon an attorney under power was considered in Rudd v. John Griffiths Cycle Co. Ltd. (1897), 23 V.L.R. 350.

Security for costs-As to whether a foreign company may be compelled to give security for costs before suing, see and compare the following cases: Norton & Co. v. Sewell, [1906] V.L.R. 401; J. Earle Hermann Ltd. v. Linden, [1914] V.L.R. 615; Austral Cycle Agency Ltd. v. McCrae (1889), 25 V.L.R. 42; Tasman Beale Ply. Ltd. v. Turnbull (1940), 57 W.N. (N.s.W.) 222.

Statute of Limitations-As to the effect of the Statute of Limitations upon a foreign corporation, not registered, trading, domiciled or resident within !he jurisdiction, see Societe Egyptienne Financiere pour Ie Commerce et L'lndllstne S.A.E. v. Clyde Industries Ltd. (1959), 77 W.N. (N.S.W.) 111; [1960] S.R. (N.S.w.) 360.

. English section-On the corresponding section of the C.ompanies Act 1948 (Imperial) which differs somewhat from the Queensland sectIOn, see Deverall v. Grant Advertising Inc., [1954] 3 All E.R. 389; [1955] Ch. Ill.


352. Cesser of business in the State. ( 1) If a foreign company ceases to have a place of business or to carry on business in the State, it shall within seven days after so ceasing lodge with the Registrar notice of that fact, and as from the day on which the notice is so lodged its obligation to lodge any document (not being a document that ought to have been lodged before that day) with the Registrar shall cease, ~nd the Registrar shall upon the expiration of twelve months after the lodgmg of the notice remove the name of that foreign company from the register.

(2) If a foreign company goes into liquidation or is dissolved in its place of incorporation or origin-

(a) each person who immediately prior to the commencement of the liquidation proceedings was an agent shall, within one month after the commencement of the liquidation or the dissolution or within such further time as the Registrar in special circumstances allows, lodge or cause to be lodged with the Registrar notice of that fact and, when a liquidator is appointed, notice of such appointment; and

(b) the liquidator shall, until a liquidator for the State is duly appointed by the Court, have the powers and functions of a liquidator for the State.

(3) A liquidator of a foreign company appointed for the State by the Court or a person exercising the powers and functions of such a liquidator-

(a) shall, before any distribution of the foreign company's assets is made, by advertisement in a newspaper circulating generally in each State or Territory of the Commonwealth where the foreign company had been carrying on business prior to the liquidation if no liquidator has been appointed for that place, invite all creditors to make their claims against the foreign company within a reasonable time prior to the distribution;

(b) shall not, without obtaining an order of the Court, payout any creditor to the exclusion of any other creditor of the foreign company;

(c) shall, unless otherwise ordered by the Court, only recover and realise the assets of the foreign company in the State and shall pay the net amount so recovered and realised to the liquidator of that foreign company for the place where it was formed or incorporated.

( 4) Where a foreign company has been wound up so far as its assets in the State are concerned and there is no liquidator for the place of its incorporation or origin the liquidator may apply to the Court for directions as to the disposal of the net amount recovered in pursuance of subsection (3) of this section.

(5) On receipt of a notice from an agent that the company has been dissolved the Registrar shall remove the name of the company from the register.

( 6) Where the Registrar has reasonable cause to believe that a foreign company has ceased to carry on business or to have a place of business in the State the provisions of this Act relating to the striking off the register of the names of defunct companies shall with such adaptations as are necessary extend and apply accordingly.


U.K. s. 413 (2); N.S.W. s. 72; Vic. s. 300; Qld. ss. 340, 341, 341A; S.A. s. 361; W.A. ss. 337-340; Tas. s. 298.

In relation to carrying on business, see s. 344, ante. As to striking defunct companies off the register, see s. 308, ante. In relation to liquidators see Part X, ante.

Whether cesser divests land-Cesser of business does not of itself divest land in the State from a foreign company, Re Labor Papers Ltd. & Button's Contract (1925),21 Tas. L.R. 35.

Winding-up in the State-Generally in relation to the winding-up in the State of a company incorporated in England by royal charter, see Re Oriental Bank Corporation (1884), 10 V.L.R. (E.) 154.

353. Restriction on use of certain names. ( 1) Except with the consent of the Crown Law Officer a foreign company shall not be registered by a name that, in the opinion of the Registrar, is undesirable or is a name, or a name of a kind that, the Crown Law Officer has directed the Registrar not to accept for registration.

(2) Except with the consent of the Crown Law Officer, any change in the name of a foreign company shall not be registered if, in the opinion of the Registrar, the new name of the company is undesirable or is a name, or a name of a kind, that the Crown Law Officer has directed the Registrar not to accept for registration, notwithstanding that particulars of the change have been lodged in accordance with section three hundred and forty-seven.

(3) No foreign company to which this Division applies shall use in the State any name other than that under which it is registered under this Division or under any other Act.

( 4) If default is made in complying with subsection (3) of this section the foreign company, every officer of the company who is in default and every agent of the company who knowingly and wilfully authorizes or permits the default shall be guilty of an offence against this Act.

Penalty: One hundred pounds. Default penalty. Vic. s. 301; Qld. s. 334; Tas. s. 299. Generally in relation to names of companies and restriction on the use of

certain names, cf. ss. 22-24, ante. As to the agent of a foreign company, see ss. 344-347, ante. In relation to a change or alteration in the name of a foreign company, see s. 347, ante.

354. The branch register. (l) Subject to this section, a foreign company that has a share capital and has any member who is resident in the State, shall keep at its registered office in the State, or at some other place in the State, a branch register for the purpose of registering shares of members resident in the State who apply to have the shares registered therein.

(2) The company shall not be obliged to keep a branch register pursuant to subsection (1) of this section until after the expiration of one month in the case of a foreign company incorporated within the Commonwealth, and two months in the case of any other foreign company from the receipt by it of an application in writing by a member resident in the State for registration in its branch register in the State of the shares held by the member.

(3) If default is made in complying with subsection (1) of this section, the foreign company, every officer of the company who is in default and every agent of the company who knowingly and wilfully authorizes or permits the default, shall be guilty of an offence against this Act.


COMPANIES ACT OF 1961 55.352-356 391

( 4) This section shall not apply to any foreign company which by its constitution prohibits any invitation to the public to subscribe for shares in the company.

(5) Every such register shall be kept in the manner provided by Division 4 of Part V as though the register were the register of a company and transfers shall be effected on such register in the same manner and at the same charges as on the principal register of the company and transfers lodged at its registered office in the State shall be binding on the company and the Court shall have the same powers in relation to rectification of the register as it has in respect of the register of a company incorporated in the State.

( 6) Where a foreign company opens a branch register in the State it shall within fourteen days after the opening thereof lodge with the Registrar notice of that fact specifying the address where the register is kept.

(7) Where any change is made in the place where the register is kept or where the register is discontinued the company shall within fourteen days of the change or discontinuance lodge notice of the change or discontinuance with the Registrar.

( 8) Where a company or corporation is entitled, pursuant to a law of the place of incorporation of a foreign company corresponding with section one hundred and eighty-five, to give notice to a dissenting shareholder in that foreign company that it desires to acquire any of his shares registered on a branch register kept in the State, this section shall cease to apply to that foreign company until-

(a) the shares have been acquired; or (b) that company or corporation has ceased to be entitled to

acquire the shares. S.A. s. 358A. In relation to invitations to the public. cf. s. 5 (6), ante. In relation to a

foreign company which has a share capital, cf. s. 5 ("company having a share capital") ante. As to the agent of a foreign company, see ss. 344-347, ante. In relation to share transfer or share registration offices, see further s. 349, ante. Generallv in relation to registers of members, cf. ss. 151-157, ante.

The provisions of this section, together with all the other provisions of Division 3, apply to a foreign company which has a place of business or is carrying on business within the State: see 3 The Australian Lawyer (1962), at p. 129.

355. Registration of shares in branch register. SUbject to this Act, on application in that behalf by a member resident in the State the foreign company shall register in a branch register of the company the shares held by a member which are registered in any other register kept by the company.

As to the obligation in certain circumstances to maintain a branch regjster, see s. 354, ante. As to the removal of shares from a branch register, see s. 356, ante.

356. Removal of shares from branch register. Subject to this Act, on application in that behalf by a member holding shares registered in a branch register, the foreign company shall remove the shares from the branch register and register them in such other register as is specified in the application.

As to the obligation in certain circumstances to maintain a branch register, see s. 354, ante. As to the registration of shares in a branch register, see s. 355, ante.


357. Index of members, inspection and closing of branch registers. Sections one hundred and fifty-one, one hundred and fifty-two, and one hundred and fifty-three shall, with such adaptations as are necessary, apply respectively to the index of persons holding shares in a branch register and to the inspection and the closing of the register.

As to the obligation in certain circumstances to maintain a branch re$ister, see s. 354, ante. As to the registration of shares in a branch register, see s. 355, ante.

As to removal of shares from a branch register, see s. 356, ante.

358. Application of provisions of Act relating to transfer. Sections ninetyfive and ninety-six, subsection (I) of section ninety-seven, subsections (I) and (3) of section ninety-nine and section one hundred and fifty-five shall apply with necessary adaptations with respect to the transfer of shares on and the rectification of the branch register of a foreign company.

Further in relation to branch registers, see ss. 354-357, ante, s. 359, post.

359. Branch register to be prima facie evidence A branch register shall be prima facie evidence of any matters by this Division directed or authorized to be inserted therein.

Further in relation to branch registers, see ss. 354-358, ante.

360. Certificate re share bolding. A certificate under the seal of a foreign company specifying any shares held by any member of that company and registered in the branch register shall be prima facie evidence of the title of the member to the shares and the registration of the shares in the branch register.

In relation to branch registers, see ss. 354-359, ante.

361. Penalties. If default is made by any foreign company in complying with any provision of this Division, other than a provision in which a penalty or punishment is expressly mentioned, the company and every officer of the company who is in default and every agent of the company who knowingly and wilfully authorizes or permits the default, shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. Vic. s. 302; Qld. s. 337. As (0 the agent of a foreign company, see ss. 344, 346, 347, ante.

PART XII-GENERAL

Division I-Enforcement of Act 362. Service of documents on company. (I) A document, other than a summons for an offence by a company, may be served on a company by leaving it at or sending it by post to the registered office of the company.

(2) A summons for an offence by a company against this or any other Act may be served by leaving the same at the registered office of the company with some person apparently in the service of the company and apparently of or above the age of sixteen years.

(3) Where reasonable efforts have been made without success to effect service in the manner prescribed by subsection (2) of this section and a stipendiary magistrate is so satisfied by affidavit he may give leave


to effect service of the summons upon a director or secretary of the company or by advertisement or in such other manner as in the circumstances appears to him to be sufficient.

U.K. s. 437; N.S.W. s. 359; Vic. s. 252; Qld. s. 380; SA s. 375 (1); W.A. s. 410 (l); Tas. s. 306.

As to service of a notice in relation to a defunct company, see s. 308, ante. As to the registered office, see ss. 111, 112, ante. Service on foreign companies is provided for by s. 351, ante. As to service by post, see Acts Interpretation Acts, 1954 to 1962, s. 39, title ACTS OF PARLIAMENT, vol. 1, p. 99.

Document-As to the meaning of the term "document", see Hill v. R., [1945] 1 All E.R. 414, at pp. 417·8; [1945] K.B. 329, at pp. 332-3; Tucker (J. H.) & Co. Ltd. v. Board of Trade, [1955] 2 All E.R. 522. The term includes a writ of summons, Taxation Compiler Pty. Ltd. v. Taringa Motors Pty. Ltd., [1938] Q.W.N. 39. See further s. 5, ante.

By post-A document may be sent by registered post or ordinary post, T.o. Supplies (London) Ltd. v. Jerry Creighton Ltd., [1951] 2 All E.R. 992; [1952] 1 K.B. 42.

Registered office-Service must be effected at the registered office. See Vignes v. Smith (Stephen) & Co. Ltd. (1909), 53 Sol. Jo. 716; National Gas Engine Co. Ltd. v. Estate Engineering Co. Ltd., [1913] 2 I.R. 474; and see other cases in 9 English and Empire Digest, (Rp!.) p. 725.

But service at the registered office applies only if the company continues to carryon business in the country, Gillett v. National Benefit Li/e and Property Assurance Co. Ltd. (1918), 24 C.L.R. 374; 24 A.L.R. 151.

Where no registered office-For service on de facto directors where there was no registered office, see Re British and Foreign Generating Apparatus Co. Ltd. (1865), 12 L.T. 368 (demand by creditor); and for cases in which orders were made permitting service on directors, see Gaskell v. Chambers (No.1) (1858), 26 Beav. 252; Re Portable Gas Co. Ltd. (1892), 25 S.A.L.R. 86.

Substituted service-As to substituted service, see Re Otway Coal Co. Ltd., [1953] V.L.R. 557, at p. 563.

Writs and other proceedings-For waiver in the case of service of process, see R,e Taylor, Ex parte Railway Steel & Plant Co. (1878), 8 Ch. D. 183; Wood v. Anderston Foundry Co. (1888), 36 W.R. 918.

See, also, Leske v, S.A. Real Estate Investment Co. Ltd. (1930), 45 C.L.R. 22 (Act requiring address of a person; registered office sufficient).

See also with respect to service of legal proceedings, R.S.C. Order 10, Rule 6, title SUPREME COURT; the District Courts Acts 1958 to 1960, s. 73, title DISTRICT COURTS, the Magistrates Court Rules 1960, rule 63, title MAGISTRATES COURTS.

Petition-As to service of petition where proof of service is unsatisfactory, see Re Victorian Street Railway Company (1865), 2 W.W. & A'B. (E.) 132.

Notice to quit-In relation to the service of a notice to quit, see Hawtrey v. Beau/rant, [1946] 1 All E.R. 296; [1946] K.B. 280.

Summons-A summons to appear before justices may be served on a corporation, registered in England and having its head office there but carrying on business in Victoria, by serving the corresponding secretary of the company in Victoria, Kelly v. Queen's Birthday United Gold Mines Co. Ltd. (1895), 21 V.L.R. 335.

Prior to separation of Queensland-As to service on a company incorporated under a New South Wales Act prior to separation of Queensland from that State. see Patterson v. Australian Steam Navigation Co. (1868), 2 S.C.R. 9.

Resident-A company is not a "resident" of a State within the meaning of s. 75 of the Commonwealth Constitution (title COMMONWEALTH AND STATES). Australian Temperance and General Mutuul Life Assurance Society Ltd. v. Howe (1922), 31 C.L.R. 290; 29 A.L.R. 46.

363. (1) Security for costs. Where a company is plaintiff in any action or other legal proceeding the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that


the company will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.

(2) Costs. The costs of any proceeding before a court under this Act shall be borne by such party to the proceedings as the court may, in its discretion, direct.

u.K. s. 447; N.S.W. ss. 360, 365 (2); Vic. s. 253; Qld. s. 372; S.A. s. 381; W.A. s. 416; Tas. s. 307.

Generally as to security for costs, see R.S.C. (1900). Order 33, rules 14 et seq., title SUPREME COURT.

Plaintiff-For the meaning of "plaintiff", see Crystal Theatres Ltd. v. Fliss (1940), 57 S.R. (N.S.W.) 107.

Defendant company-The section does not apply to a defendant company, though it be the plaintiff in a cross-action, the subject-matter being identical, Accidental & Marine Insurance Co. v. Mercati (1866), L.R. 3 Eq. 200; but it applies to a company bringing a counterclaim, Strong v. Carlyle Press (No.2), [1893] W.N. 51; City of Moscow Gas Co. v. Internatiollal Financial Society (1872), 7 Ch. App. 225.

Caveat proceedings-An applicant in a statutory application to compel a caveator to file his case was held not to be a plaintiff within the meaning of a corresponding provision, Re Anglo-Australian Investment, Finance & Land Co. (1893),9 W.N. (N.S.W.) 128.

Liquidator-A liquidator taking out a misfeasance summons cannot be ordered to give security, Re Strand Wood Co. Ltd., [1904] 2 Ch. 1.

Appeal from winding-up order-As to a company appealing against a w.inding-up order, see Re Photographic Artists' Co-operative Supply Association (1883). 23 Ch. D. 370 (order for security made).

Appeal pending-As to ordering payment out of court where an appeal is pending, see GOillburn VaUey Butter Factory Co. Pty. Ltd. v. Bank of New South Wales (No.2) (1900), 26 V.L.R. 365.

In liquidation-This section applies to companies in the course of voluntary liquidation, which may be ordered under this section to give security for costs in actions in which they are plaintiffs, Victorian Mortgage and D.eposit Bank v. Australian Financial Agency and Guarantee Co. (1892), 18 V.L.R. 754.

The fact that a company is in liquidation is prima facie evidence that it is unable to pay the costs, Northampton Coal, Iron, & Waggon Co. v. Midland Waggon Co. (1878). 7 Ch. D. 500; Rogers Ltd. v. MacPherson and Rogers Ltd., [1904] Q.W.N. 32. Cf. Re Canada Cycle and Motor Agency, [1931] St. R. Qd. 281, at p. 285.

It is not necessary that the company should be in liquidation before such an order is made, (but quaere as to the effect of delay in making the application), Labor Daily Ltd. v. Keller (1939), 56 W.N. (N.S.W.) 113. Nor is it necessary that there should be admissions by the company or unquestionable evidence from the books of the company Or facts relating to the company which show that it will be unable to pay, Clwrchi/l's Ltd. v. Pilcher (1940), 57 W.N. (N.S.W.) 109.

Answer to application-The fact that a foreign company plaintiff in an action carries on business in the State where the action is brought is no answer to an application on behalf of the defendant in the action for security for costs, unless it be shown that the plaintiff has property within the jurisdiction liable to and available for execution of sufficient value to satisfy the probable costs to which the defendant may be entitled, Wi/fley Ore Concentrator Syndicate v. Guthridge (1905), 27 A.L.T. 70. See also Acetylene Gas Co. v. Markwald (1901), 27 V.L.R. 301; J. Earle Hermann Ltd. v. Linden, [1914] V.L.R. 615; Norton v. Sewell, [1906] V.L.R. 401; R.S.C. (1900), Order 33, rule 14, title SUPREME COURT.

However it has been held by a New South Wales District Court judge that this section does not apply to foreign companies, Tasman Beale Ply. Ltd. v. Turnbull (1940), 57 W.N. (N.S.W.) 222.

Delay in applying-Where a defendant knew that in the event of his success the company would not be able to pay his costs, and did not make his application for security until after he had made discovery and had had a third party added, it was held that he had waived his rights under this section, Jennings Ltd. v. Cole, [1934] N.Z.L.R. 165.


Where an application was made four days before the hearing, and there waS insufficient evidence of the plaintiff company being unable to pay the costs, an order was refused, Marrick Productions Pty. Ltd. v. Traders oj Australia Pty. Ltd., [1959] Q.W.N. 11.

The jurisdiction conferred by the section is discretionary and not mandatory, and any serious delay on the part of the defendant in applying must be taken into consideration in exercising the discretion, Foss Export Agency Pty. Ltd. v. Trotman (1949), 67 W.N. eN.S.W.) l.

Amount of security-The amount is in the discretion of the court, but usually the estimated figure at which costs would tax is ordered, imperial Ballk oj China, india, & Japan v. Bank of Hindusfan, China, & Japan (1866), 1 Ch. App. 437; Dominion Brewery Ltd. v. Foster (1897), 77 L.T. 507. In fixing the amount of security the court must have regard to the probable cost to which the defendant will be put. In the absence of any information on that point the court will fix an amount which it considers will be adequate for the services to be rendered, Sunday Times Newspaper Co. Ltd. v. McIntosh (1933), 33 S.R. (N.S.W.) 371. As to how far the court should have regard to the possibility of employment of leading counsel, see ibid.

Generally-See further, 9 English and Empire Digest eRp1.), p. 729; 6 Halsbury's Laws of England, 3rd ed., p. 451.

364. Disposal of shares of shareholder whose whereabouts unknown. ( 1) Where by the exercise of reasonable diligence a company is unable to discover the whereabouts of a shareholder for a period of not less than ten years the company may cause an advertisement to be published in a daily newspaper circulating in the place shown in the register of members as the address of the shareholder stating that the company after the expiration of one month from the date of the advertisement intends to transfer the shares to the Public Curator.

(2) If after the expiration of one month from the date of the advertisement the whereabouts of the shareholder remain unknown, the company may transfer the shares held by the shareholder in the company to the Public Curator and for that purpose may execute for and on behalf of the owner a transfer of those shares to the Public Curator.

(3) The Public Curator shall sell or dispose of any shares so received in such manner and at such time as he thinks fit and shall deal with the proceeds of the sale as if they were moneys paid to him pursuant to the provisions of Division 3 of Part V of "The Public Curator Acts, 1915 to 1957."

Act referred to: Public Curator Acts 1915 to 1957, title TRUSTEES AND EXECUTORS.

As to the register of members, see ss. 150 et seq., ante. In relation to transfers, see ss. 95 et seq., ante.

365. Power to grant relief. ( 1) If in any proceeding for negligence default breach of duty or breach of trust against a person to whom this section applies it appears to the court before which the proceedings are taken that he is or may be liable in respect thereof but that he has acted honestly and reasonably and that, having regard to all the circumstances of the case including those connected with his appointment, he ought fairly to be excused for the negligence default or breach the court may relieve him either wholly or partly from his liability on such terms as the court thinks fit.

(2) Where any person to whom this section applies has reason to apprehend that any claim will or might be made against him in respect of any negligence default breach of duty or breach of trust he


may apply to the Court for relief, and the Court shall have the same power to relieve him as under this section it would have had if it had been a court before which proceedings against him for negligence default breach of duty or breach of trust had been brought.

(3) Where any case to which subsection (1) of this section applies is being tried by a Judge with a jury the Judge after hearing the evidence may, if he is satisfied that the defendant ought in pursuance of that subsection to be relieved either in whole or in part from the liability sought to be enforced against him, withdraw the case in whole or in part from the jury and forthwith direct judgment to be entered for the defendant on such terms as to costs or otherwise as the Judge thinks proper.

( 4) The persons to whom this section applies are(a) officers of a corporation; (b) persons employed by a corporation as auditors, whether they

are or are not officers of the corporation; (c) experts within the meaning of this Act; and (d) any persons who are receivers, receivers and managers or

liquidators appointed or directed by the Court to carry out any duty under this Act in relation to a corporation and all other persons so appointed or so directed.


Further in relation to indemnity, see Fourth Schedule, Table A, art. 113; Table B, art. 96, post. As to auditors, see ss. 165 et seq., ante. As to receivers and managers, see ss. 187 et seq., ante.

Cf. the Trustees and Executors Act, 1897 to 1961, s. 51, title TRUSTEES AND EXECUTORS.

Onus-It is for the applicant to show that, regard being had to all the circumstances, he ought fairly to be excused, Re Franklin & Son Ltd., [1937] 4 All E.R. 43.

D'lties--The whole question of duties of and neglect by directors in relation, inter alia, to articles of association is fully discussed in the judgments (at first instance and on appeal) in Re City Equitable Fire Insurance Co., [1925] Ch. 407 C.A., [1924] All E.R. Rep. 485 (distinguished as regards construction of articles of association, in Re City of London Insurance Co. (1925), 41 T.L.R. 521). See also Re Lasscock's Nurseries Ltd. (in liq.) (1940), 64 C.L.R. 662.

Ultra vires act-The fact that an act was ultra vires does not prevent relief being granted if the director honestly believed it to be intra vires, Re Claridge's Patent Asphalte Co. Ltd., [1921] 1 Ch. 543.

In liquidation-Where the company is in liquidation. the views of the creditors should be obtained, Re Barry and Staines Linoleum Ltd., [1934] Ch. 227, at p. 234. But the opinion of the shareholders or creditors is only one of the circumstances which the court must take into account and it does not follow that, because the shareholders oppose, the court ought not to exercise its jurisdiction, Re Gilt Edge Safety Glass Ltd., [1940] Ch. 495, at p. 502; [1940] 2 All E.R. 237, at p. 238.

Trustees-Further in relation to duties of trustees, see General Finance Agency and Guarantee Co. of Australia Ltd. v. National Trustees Executors and Agencv Co. of Australia Ltd. (1903), 29 V.L.R. 399; affirmed [1905] A.C. 373. .

366. Irregularities in proceedings. (1) No proceeding under this Act shall be invalidated by any defect irregularity or deficiency of notice or time unless the Court is of opinion that substantial injustice has been or may be caused thereby which cannot be remedied by any order of the Court.

(2) The Court may if it thinks fit make an order declaring that such proceeding is valid notwithstanding any such defect irregularity or deficiency.


(3) Without affecting the generality of subsection (1) and subsection (2) of this section or of any other provision of this Act, where any omission defect error or irregularity (including the absence of a quorum at any meeting of the company or of the directors) has occurred in the management or administration of a company whereby any breach of any of the provisions of this Act has occurred, or whereby there has been default in the observance of the memorandum or articles of the company or whereby any proceedings at or in connection with any meeting of the company or of the directors thereof or any assemblage purporting to be such a meeting have been rendered ineffective including the failure to make or lodge any declaration of solvency pursuant to section two hundred and fifty-seven, the Court-

(a) may, either of its own motion or on the application of any interested person, make such order as it thinks fit to rectify or cause to be rectified or to negative or modify or cause to be modified the consequences in law of any such omission defect error or irregularity, or to validate any act matter or thing rendered or alleged to have been rendered invalid by or as a result of any such omission defect error or irregularity;

(b) shall before making any such order satisfy itself that such an order would not do injustice to the company or to any member or creditor thereof;

(c) where any such order is made, may give such ancillary or consequential directions as it thinks fit; and

(d) may determine what notice or summons is to be given to other persons of the intention to make any such application or of the intention to make such an order, and whether and how it should be given or served and whether it should be advertised in any newspaper.

(4) The Court (whether the company is in process of being wound up or not) may enlarge or abridge any time for doing any act or taking any proceeding allowed or limited by this Act or any rules or regulations thereunder upon such terms (if any) as the justice of the case may require and any such enlargement may be ordered although the application for the same is not made until after the time originally allowed or limited.

N.S.W. s. 357; Vic. s. 256; Qld. s. 374; S.A. s. 380; W.A. s. 415; Tas. s. 310. In relation to the registration of charges out of time, special provision is made

by s. 106, ante. In relation to the quorum at meetings of members, see s. 140, ante: Fourth

Schedule. Table A, arts. 47, 48; Table B, arts. 30, 31, post. In relation to the quorum at meetings of directors, see Fourth Schedule, Table A, art. 83; Table B, art. 66, post.

As to meetings of members generally, see ss. 135 et. seq., ante; Fourth Schedule, Tables A, B. General Meetings, Procedure at General Meetings, post. As to meetings of directors generally, see Fourth Schedule, Tables A, B, Proceedings of Directors, post.

Defects and irregularities-Defects and irregularities were held to be cured in Re Town and Suburban Building and Investment Soc., 26 July. 1893; Re Queensland National Bank Ltd., 31 July. 1893; and Re Royal Bank of Queensland Ltd. 7 August, 1893; all reported in Harding on Companies, 1895, Vol. 2, pp. 263-264. '

Further, see Re Graziers Inland Meat Co. Ltd., [1956] Q.W.N. 47; Re West Canadian Collieries Ltd., [1962] 1 All E.R. 26.


Enlarge time-Where, under earlier legislation, an application for registration was made out of time and the Registrar-General refused to register, it was held that this section did not permit the court to cure the defect, Re Liege Investments Pty. Ltd., [1940] V.L.R. 448.

367. Privileged communications. No inspector appointed under this Act shall require disclosure by a solicitor of any privileged communication made to him in that capacity, except as respects the name and address of his client.

U.K. s. 175; Vic. s. 257. As to inspectors, see 5S. 168, et seq., (lllte. Privileged communications-Any communication between a solicitor and his

client, or a person who is communicating with the solicitor with a view to becoming a client, for the purpose of giving or receiving professional legal advice, is privileged, unless it be made in furtherance of some crime or fraud, Minter v. Priest [1930] A.C. 558, at p. 581; [1930] All E.R. Rep. 431, at p. 439.

368. Production and inspection of books where offence suspected. ( 1 ) If on an application made to a Judge of the Court in chambers by the Crown Law Officer there is shown to be reasonable cause to believe that any person has, while an officer of a company, committed an offence in connection with the management of the company's affairs and that evidence of the commission of the offence is to be found in any books or papers of or under the control of the company, an order may be made-

(a) authorizing any person named therein to inspect such books or papers or any of them for the purpose of investigating and obtaining evidence of the offence; or

(b) requiring the secretary or such other officer as is named in the order to produce such books or papers or any of them to a person named in the order at a place so named.

(2) No appeal shall lie against any order or decision of a Judge on or in relation to an application under this section.

U.K. s. 441; Vic. s. 258; Tas. s. 311. As to the secretary, see s. 132, ante. Further in relation to inspection of the

affairs of companies, se.e ss. 168 et seq., ante.

369. Form of registers, etc. ( 1) For the purposes of this Act any register, index, minute book or book of account may be kept either by making entries in a bound book or by recording the matters in question in any other manner.

(2) Where any register, index, minute book or book of account required by this Act to be kept is not kept by making entries in a bound book, but by some other means, reasonable precautions shall be taken for guarding against falsification and for facilitating its discovery, and where default is made in complying with this subsection the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Fifty pounds. Default penalty. U.K. s. 436; Vic. s. 3 (3); S.A. s. 139 (4); W.A. s. 434; Tas. s. 3 (3), (4) .

. As to t~e register of members and index, see ss. 150 et seq., ante. As to the register of dlrec:tors, managers and secretaries, see s. 134, (lnte. As to the register of charges reqUired to be kept by a company, see s. 107, allte. As to minutes see ss. 148. 149, ante. As to accounting and other records required to be kept by a comp<:ny, see s. 161, ante.


370. Inspection of registers. ( 1) Any register minute book or document of a corporation which is by this Act required to be available for inspection shall subject to and in accordance with this Act be available for inspection at the place where in accordance with this Act it is kept during the hours in which the registered office of the corporation in the State is accessible to the public.

(2) Any person permitted by this Act to inspect any register, minute book or document of a corporation may make copies of or take extracts from it and any officer of the corporation who fails to allow any person so permitted to make a copy of or take extracts from the register, minute book or document as the case may be shall be guilty of an offence against this Act.

Vic. s. 95 (4). As to minutes, see s. 148, ante. As to inspection of minute books, see s. 149,

ante. As to the registered office, see ss. 111, 112, ante. As to the register of directors, managers and secretaries, see s. 134, allte. As to the register of charges, see s. 107, ante. As to the register of members, see ss. 150, et seq., ante.

371. Translations of instruments. ( 1) Where under this Act a corporation is required to lodge with the Registrar any instrument certificate contract or document or a certified copy thereof and the same is not written in the English language the corporation shall lodge at the same time with the Registrar a certified translation thereof.

(2) Where under this Act a corporation is required to make available for public inspection any instrument, certificate, contract or document and the same is not written in the English language the corporation shall keep at its registered office in the State a certified translation thereof.

In relation to the documents which certain foreign companies are required to lodge with the Registrar, see ss. 346-349, 352, 354, ante. As to the registered office, see ss. 111, 112, ante.

372. Certificate of incorporation conclusive evidence. A certificate of incorporation under the hand and seal of the Registrar shall be conclusive evidence that all the requirements of this Act in respect of registration and of matters precedent and incidental thereto have been complied with, and that the company referred to therein is duly incorporated under this Act.

U.K. s. 15; N.S.W. s. 30 (1); Vic. s. 14 (4); Qld. s. 27; S.A. s. 25 (1); W.A. s. 26 (1); Tas. s. 14 (4).

As to incorporation, see s. 16, ante. As to the requirements in respect of registration and matters precedent and incidental thereto, see inter alia ss. 14, 15, 18, ante.

Certificate conclusive--Until revoked the certificate is conclusive, Bowman v. Secular Society Ltd., [1917] A.C. 406. But the certificate does not determine the question of the legality of the objects, ibid.; H. A. Stephenson & Son Ltd. v. Gil/anders, Arbuthnot & Co. (1913), 45 C.L.R. 476.

Proof of incorporation otherwise th~n by certificate-Apart from the certificate of incorporation, the court will accept, as proof of incorporation, the mention of an incorporated company in a statute, R. v. Connell (1895), 6 Q.L.J. 209; or evidence of carrying on business under the corporate name and other evidence of user, R. v. Cawley (1896), 7 Q.L.J. 45; Lipke v. Goombunf?ee Co-operative Dairy Co. Ltd., [1908] St. R. Qd. 103; [1908] Q.w.N. 23; Clanchy v. Field and Vickery Ltd., [1921] Q.W.N. 9; 14 Q.J.P.R. 151; 15 Q.J.P.R. 46; R. v. Waldermann (1882), 1 N.Z.L.R. 141 (C.A.); R. v. Seidel, [1923] S.A.S.R. 522; or appearing to a writ and defending an action in the corporate name, Lipke v. Goombungee Co-op. Ltd., supra; Clanchy v. Field and Vickery Ltd., supra; or holding itself out as an


incorporated company, Gale v. Wingello Coal Ltd. (1890). 11 L.R. (N.S.W.) (L.) 79. But there must be something to indicate that the alleged company was a corporation as distinct from a partnership, R. v. Whitehouse (1896), 6 Q.LJ. 313.

373. Court may compel compliance. If any person in contravention of this Act refuses to permit the inspection of any register, minute book or document or to supply a copy of any register, minute book or document the Court may by order compel an immediate inspection of the register, minute book or document or order the copy to be supplied.

N.SW. s. 101; Vic. s. 95 (5). See generally. in relation to inspection, s. 370, ante.

Division 2-0fJences 374. Restriction on offering shares, debentures, etc., for subscription or purchase. ( 1) A person shall not, whether by appointment or otherwise, go from place to place offering shares for subscription or purchase to the public or any member of the public.

(2) Subsection (1) of this section shall not apply in the case of the shares of any corporation which, after notice of intention in the form prescribed to apply for exemption from the provisions of subsection ( 1) of this section has been advertised in the Government Gazette and in a daily newspaper circulating generally throughout the State, has applied to the Governor in Council for such exemption and the application has on the recommendation of the Crown Law Officer been granted but such exemption may at any time be revoked by Order in Council of the Governor in Council published in the Government Gazette.

(3) A person shall not make an offer in writing to any member of the public (not being a person whose ordinary business it is to buy or sell shares, whether as principal or agent) of any shares for purchase, unless the offer is accompanied by a statement in writing (which shall be signed by the person making the offer and dated) containing such particulars as are required by this section to be included therein and otherwise complying with the requirements of this section, or, in the case of shares in a corporation formed or incorporated outside the State, either by such a statement, or by such a prospectus as complies with this Act.

( 4) Subsection (3) of this section shall not apply-(a) where the shares to which the offer relates are shares of a

class which are quoted on, or in respect of which permission to deal has been granted by, any prescribed Stock Exchange in the State and the offer so states and specifies the Stock Exchange;

(b) where the shares to which the offer relates are shares which a corporation has allotted or agreed to allot with a view to their being offered for sale to the public and such offer is accompanied by a document which complies with all enactments and rules of law as to prospectuses; or

(c) where the offer relates to-(i) an interest to which the provisions of Division 5 of Part IV

apply and is accompanied by a statement in writing as required by that Division; or

(ii) deposits or loans to a corporation of the kind referred to in subsection (4) of section thirty-eight.


(5) The statement referred to in subsecti~n (3) of ~is seetio? shall not contain any matter other than the partIculars reqUIred by thIS section to be included therein, and shall not be in characters less large or less legible than any characters used in the offer or in any document sent therewith.

(6) The statement referred to in subsection (3) of this section shall contain particulars as to--

(a) whether the person making the offer is acting as principal or agent and, if as agent,-

(i) the name of his principal; (ii) an address in the State where that principal can be served

with process; and (iii) particulars as to the remuneration payable by the principal

to the agent; (b) the date on which and the place where the corporation was

incorporated and the address of its registered or principal office in its place of incorporation and in the State;

(c) the authorized share capital of the corporation its issued share capital its paid up share capital and the classes into which its share capital is divided and the rights of each class of shareholders in respect of capital, dividends and voting;

(d) the dividends (if any) paid by the corporation on each class of shares during each of the five financial years immediately preceding the offer, and if no dividend has been paid in respect of shares of any particular class during any of those years, a statement to that effeet;

(e) the total amount of any debentures issued by the corporation and outstanding at the date of the statement, together with the rate of interest payable thereon;

(f) the names and addresses of the directors; (g) whether or not the shares offered are fully paid up and if not,

to what extent they are paid up; (h) whether or not the shares are quoted on, or permission to

deal therein has been granted by, any prescribed Stock Exchange in the Commonwealth or elsewhere, and (if so) which, and (if not) a statement that they are not so quoted or that no such permission has been granted;

(i) where the offer relates to units, particulars of the names and addresses of the persons in whom the shares represented by the units are vested, the date of and the parties to any document defini~g the terms on which those shares are held, and an address III the State where that document or a copy thereof can be inspected; and

(j) the last audited balance-sheet of the corporation.

(7) In subsection (6) of this section "corporation" means the corporation by which the shares to which the statement relates were or are to be issued.

(8) Ever~ person w~o acts,. or i~cites causes or procures any person to act, III contraventlOn of thIS sectlOn shall be guilty of an offence against this Act.


Penalty: Imprisonment for six months or Two hundred pounds or both and in the case of a second or subsequent offence imprisonment for twelve months or Five hundred pounds or both.

(9) Where a person convicted of an offence under this section is a corporation, every officer concerned in the management of the corporation shall be guilty of the like offence unless he proves that the act constituting the offence took place without his knowledge or consent.

( 10) Where any person is convicted of having made an offer in contravention of this section, the court before which he is convicted may order that any contract made as a result of the offer shall be void and may give such consequential directions as it thinks proper for the repayment of any money or the re-transfer of any shares and an appeal against the order and any consequential directions shall lie to the Court.

( 11) In this section-"Shares" means shares of a corporation whether a corporation in

existence or to be formed and includes debentures and units and (without affecting the generality of the expression "debentures") all such documents (including those referred to as "bonds") as confer or purport to confer on the holder thereof any claim against a corporation, whether such claim is present or future or certain or contingent or ascertained or sounding only in damages and also includes interests to which the provisions of Division 5 of Part IV apply.

( 12) In this section a reference to an offer or offering of shares for subscription or purchase shall be construed as including an offer of shares by way of barter or exchange and a reference to an offer in writing of shares shall be construed as including an offer by means of broadcasting, television or cinematograph, but where an offer is made by means of broadcastinz, television or cinematograph the statement or prospectus by which the offer is required to be accompanied by virtue of subsection (3) of this section shall be deemed to accompany the offer if-

(a) the statement or prospectus is prepared by the person on whose behalf the offer is made;

(b) the public are informed at the same time and by the same means as that by which the offer is made that a copy of the statement or prospectus will be supplied on request being made at a specified address; and

(c) where request for a copy of a statement or prospectus is made at that address within one month after the offer was made the person making the request is supplied with a copy within seven days after the request was made.

( 13) For the purposes of this section a person shall not in relation to a corporation be regarded as not being a member of the public by reason only that he is a holder of shares in the corporation or a purchaser of goods from the corporation.

( 14) Subject to subsection (15) of this section the provisions of this section shall not apply to offers of shares in any company registered or incorporated under the provisions of any Act specified in subsection (1) of section three hundred and eighty-two.


(15) The Governor in Council may at any time.by O~der in Council published in the Government Gazette declare that ~lS sectIOI?- shall apply to offers of shares in any company referred to III subsectIon ~ 14) of this section and thereupon this section shall have effect accordmgly.

N.S.W. s. 343; Vic. s. 259; Qld. s. 368; SA. s. 368; W.A. s. 369; Tas. s. 313. Note that the section extends to embrace an offer of shares by way of barter

or exchange. In relation to the words "present or future or certain or. contingent. or ascer

tained or sounding only in damages", cf. s. 291, ante. In relatIOn to offenng shares for subscription or purchase to the public, cf. s. 5, ante.

As to the term "person" see Acts Interpretation Acts, 1954 to 1962, s. 36, title ACTS OF PARLIAMENT, vol. 1, p. 97.

From place to place-In relation to the expression "from place to place", see Holland v. Hall (1902), 86 L.T. 355, at p. 357; and cf. Calvert v. MacKenzie, [1937] N.Z.L.R. 966 (where the expression "from house to house" was considered).

Offering for purchase-The language is colloquial and not legal and includes any intimation that shares are available to be purchased which is so framed as to amount to an invitation to purchase them, Ex parte Lovell; Re Buckley (1938), 38 S.R. (N.S.W.) 153. (Note that the actual decision in that case is no longer applicable in view of subsection (12) of this section.)

Shares-In relation to the enlarged meaning ascribed to the term "shares" in this section. see further. Maddaford v. De Vanta, [1951] S.A.S.R. 259.

375. False and misleading statements. (1) Every corporation which advertises circulates or publishes any statement of the amount of its capital which is misleading or in which the amount of nominal or authorized capital is stated without the words "nominal" or "authorized", or in which the amount of capital or authorized or subscribed capital is stated but the amount of paid up capital or the amount of any charge or uncalled capital is not stated, and every officer of the corporation who knowingly authorizes directs or consents to such advertising circulation or publication shall be guilty of an offence against this Act.

(2) Every person who in any return report certificate balance-sheet or other document required by or for the purposes of this Act wilfully makes a statement false in any material particular knowing it to be false shall be guilty of an offence against this Act and be liable-

(a) on conviction on indictment to imprisonment for a term of two years or to a fine of Five hundred pounds or both; or

(b) on summary conviction, to imprisonment for a term of six months or to a fine of Two hundred pounds or both.

U.K. s. 438; Vic. s. 260; Qld. s. 376; S.A. ss. 387, 388; W.A. s. 422; Tas. s. 315.

In rel~tion to civil and criminal liability for mis-statements in a prospectus, see respectively ss. 46, 47, ante. See also the Criminal Code, ss. 438 439, title CRIMINAL LAW. '

As to the requirements of the annual return with respect to the statement of capital, see Eighth Schedule, post.

Advertises. circulates or publishes-In relation to similar words viz. "make circulate or publish", see R. v. Hooley (1922), 16 Cr. App. R. 17i. '

Publish-As to the expression "publish", see McFarlane v. HuitOll, [1899] 1 Ch. 884, at pp. 888-9.

376. Dividends payable from profits only. (1) No dividend shall be payable to the shareholders of any company except out of profits or pursuant to section sixty.


(2) Every director or manager of a company who wilfully pays or permits to be paid any dividend out of what he knows is not profits except pursuant to section sixty-

(a) shall without prejudice to any other liability be guilty of an offence against this Act; and

(b) shall also be liable to the creditors of the company for the amount of the debts due by the company to them respectively to the extent by which the dividends so paid have exceeded the profits and such amount may be recovered by the creditors or the liquidator suing on behalf of the creditors.


(3) If the whole amount is recovered from one director or from the manager he may recover contribution against any other person liable who has directed or consented to such payment.

( 4) No liability by this section imposed on any person shall on the death of such person extend or pass to his executors or administrators nor shall the estate of any such person after his decease be made liable under this section.

(5) In this section "dividend" includes bonus and payment by way of bonus.

Vic. s. 261; Tas. s. 316.

Cf. Fourth Schedule. Table A, art. 100; Table B, art. 83, post. See s. 342, ante, as to the source of dividends payable by investment companies.

In reference to remuneration of a director by way of participation in profits, see the relevant portion of the notes to Table A, art. 92, post. The payment of interest out of capital in certain cases is sanctioned by s. 69, ante. As to the conditions on which payment of dividends out of a share premium account is permitted, see s. 60. ante.

Comparison with English law-Note that the Companies Act 1948 (Imperial) has no section corresponding to this section, although in Table A it contains art. 116. which reads: "No dividend Shall be paid otherwise than out of profits". In England the principle has been formulated by the courts, rather than explicitly by statute. see Macdougall v. Jersey Imperial Hotel Co. Ltd. (1864), 2 Hem. & M. 528; Tr.evor v. Whitworth (1887). 12 App. Cas. 409. at p. 415; Verner v. General and Commercial Investment Trust, [1894] 2 Ch. 239.

For a statement of the principle of prohibition upon the payment of dividends out of capital (or, what really comes to the same thing, from a source other than profits or pursuant to s. 60, ante) see Ammonia Soda Co. v. Chamberlain, [1918] 1 Ch. 266, at p. 292; [1916-17] p,-ll E.R. Rep. 708.

Objective of section-The principle operates for the protection of both shareholders (Macdougall v. Jersey Imperial Hotel Co. Ltd. (1864), 2 Hem. & M. 528), and creditors (Re Exchange Banking Co.; Flitcroft's Case (1882). 21 Ch. D. 519, at PP. 533-4; Guinness v. Land Corporation at Ireland (1882), 22 Ch. D. 349, p. 375; Mackie v. Clough (1891), 17 V.L.R. 493).

Whether profits earned-Subject to the rule against payment of dividends out of capital, such questions as how the profit and loss account shall be made out. whether profits have been earned, and if so whether they shall be distributed, are primarily business questions for the directors or shareholders to determine; and provided they act honestly and in accordance with the company's regulations in so determining them, they discharge all obligations imposed on them by the Act, Dovev v. Cory, [1901] A.C. 477; Jamaica Railway Co. v. Attorney-General of Jamaica, [1893] A.C. 127, at p. 136; Stevinson Hardy & Co. Ltd. v. Smith Wylie (Australia) Ltd. (1940), 57 W.N. (N.S.W.) 9.

Reckoning of profits-See Lee v. Neuchatel Asphalte Co. (1889), 41 Ch. D. I, at p. 21. See also ss. 161, 162, ante and Ninth Schedule, post.


Once profit established-Once a profit of any description is duly and properly established there is nothing in the Act or the general law to forbid the distribution thereof in whole or in part by way of dividend, Lubbock v. British Bank of South America, [1892] 2 Ch. 198; Lee v. Neuchatel Asphalte Co. (1889), 41 Ch. D. l.

This assumes, of course, the silence of the memorandum and articles. Profits-As to the term "profits", see Moore v. Carreras Ltd., [1935] V.L.R.

68. at p. 75; Hayman v. Betta Brushware Pty. Ltd. (1946), 63 W.N. (N.S.W.) 247; Robinson v. Ashton; Ashton v. Robinson (1875), L.R. 20 Eq. 25. at p. 28; Lord Rokebv v. Elliott (1878), 47 L.J. Ch. 764, at pp. 767, 768; Dobbs v. Grand function Waterworks Co. (1883). 9 App. Cas. 49, at p. 55; Badham v. Williams (1902), 86 L.T. 191, at p. 193; fones v. South-West Lancashire Coal Owners

Association Ltd., [1927] A.C. 827, at pp. 833, 834; McClelland v. Hyde, [1942] N.!. 1. at p. 12; Re Income Tax Acts (No.2), [1930] V.L.R. 233, at p. 238; Dal!?ety v. Commissioner of Taxes (1912),31 N.Z.L.R. 260; Rushden Heel Co. Ltd. v. Keene; Rushden Heel Co. v. Inland Revenue Commissioners, [1946] 2 All E.R. 141, at p. 144; Baron (Inspector of Taxes) v. Littman, [1953] A.C. 96, at P. 113; [1952] 2 All E.R. 548, at p. 555; Road Haulage Executive v. Elrick, [1953] A.C. 337. at p. 342-3; [1953] 1 All E.R. 736, at p. 738; Wallaroo and Moonta Minin!? and Smelting Co. Ltd. v. Commissioner of Taxes, [1907] S.A.L.R. 64, at pp. 75-80: Re Commonwealth Homes and Investment Co. Ltd., [1943] S.A.S.R. 211, at p. 227.

The term "profits" is susceptible of more than one meaning, Webb v. Australian Deposit and Mortgage Bank Ltd. (1910), 11 C.L.R. 223, at p. 234; 16 A.L.R. 446, at p. 450; Bishop v. Smyrna & Cassaha Railway Co., [1895] 2 Ch. 265, at pp. 269, 270.

For a discussion of the term "profits" as a basic commercial concept, see Re Spanish Prospecting Co. Ltd., [1911] 1 Ch. 92, at pp. 98-101, but note the caution expressed at p. 101 against the unqualified appiication of the observations in that case as a general principle.

Provisions of memorandum and articles-The first inquiry must be, is there any further guidance, requirement or limitation in the memorandum or articles of association as to what in any particular company constitutes profit which may be distributed by way of dividend, see Davison v. Gillies (1879), 16 Ch. D. 347n.; Lambert v. Neuchatel Asphalte Co. Ltd. (1882), 51 L.J. Ch. 882.

Realized profits-Where articles of association provided that no dividends should be paid except out of "realized profits", it was held that such expression must be taken in its ordinary commercial sense as meaning at least "profits tangible for the purpose of division"; and the directors having treated estimated profits as realized profits and having in fact paid dividends out of capital, were liable as upon a breach of trust to repay the sums improperly paid as dividends, Re Oxford Benefit Building and Investment Society (1886), 35 Ch. D. 502.

Fixed capital and circulating capital-In determining the question of what was the profit, a distinction has been drawn between "fixed capital" and "circulating capital". As to the distinction, see Verner v. General alld Commercial Investment Trust, [1894] 2 Ch. 239, at p. 266; Bond v. Barrow Haematite Steel Co., [1902] 1 Ch. 353, at p. 366; Ammonia Soda Co. v. Chamberlain, [1918] 1 Ch. 266, at pp. 286-7; [1916-17] All E.R. Rep. 708.

Influence of accounting theory and practice-For an installce of the court resorting to the works of learned authors on accounting and auditing, see Dickson v. Federal Commissioner of Taxation (1940), 62 C.L.R. 687, at p. 726.

Previous trading losses-There is nothing necessarily illegal or ultra vires in distributing clear net profit of a company's trading without first making good tradin!? lo&~es incurred in previous accounting periods, at all events, where such earlier tradin/? losses were incurred at a time when there were no profits available to meet them and must, therefore, have been losses of capital, Ammonia Soda Co. v. Chamberlain, [1918] 1 Ch. 266, at pp. 283, 292, 296; [1916-17] All E.R. Reo. 708.

Previous capital losses-For the purpose of ascertaining profit available for dividend, capital and revenue accounts must be treated as distinct, so that loss on capital account need not be restored before declarjng dividends. And if the objects of a company include the exPtalditure of capital in a wasting asset such as a mineral deposit, then even depreciation by the exhaustion of that deposit is not necessarily a charge on revenue, but may be made by the regulations of the company a capital charge, Lee v. Neuchatel Asphalte Co. (1889), 41 Ch. D. 1; Phillips v. Melbourne and Castle maine Soap and Candle Co. Ltd. (1890), 16 V.L.R. 111, at p. 113.


Profit on asset revaluation-Consistently with Lee v. Neuchatel Asphalte Co. (1889), 41 Ch. D. 1, there is no objection in law to a bond fide revaluation of assets and taking them into the books at the revalued figure. And if such revaluation discloses a capital profit, past depreciation charged on revenue may be written back to revenue account; and further, there is nothing illegal in such capital appreciation being set off against past losses on revenue account, inasmuch as without so doing dividends could lawfullly be paid out of current trading profits, Ammonia Soda Co. v. Chamberlain, [1918] 1 Ch. 266; [1916-17] All E.R. Rep. 708; Stapley v. Read Bros., [1924] 2 Ch. 1; [1924] All E.R. Rep. 421.

Revaluation cannot produce profits-"It is, I think, clear that profits cannot be produced, caused, or brought about by a mere process of revaluation. But, though revaluation cannot create profits, it may reveal or disclose profits", Dickson v. Federal Commissioner of Taxation (1940), 62 C.L.R. 687, at p. 705.

Assets looked at as a whole-Capital appreciation must be an appreciation of capital as a whole; a capital accretion of one asset cannot be treated as divisible profit without reference to the result of the whole accounts fairly taken, Foster v. New Trinidad Lake Asphalt Co. Ltd., [1901] 1 Ch. 208, at p. 212; Wall v. London and Provincial Trust Ltd., [1920] 1 Ch. 45; [1920] 2 Ch. 582; Allstrulosian Oil Exploration Ltd. v. Lachberg (1958), 101 C.L.R. 119, at p. 133; [1959] A.L.R. 65, at p. 72.

Discount profit not distributable-See Wall v. London and Provincial Trtls/ Ltd., [1920] 1 Ch. 45. Cf. s. 60, ante.

Capital-The meaning of the term "capital" has been discussed in many cases, inter alia, Lubbock v. British Bank of Solllh Africa, [1892] 2 Ch. 198, at pp. 201, 202; Bond v. Barrow Haematite Steel Co., [1902] 1 Ch. 353, at pp. 364, 365; Inland Revenue Commissioners v. F.P.H. Finance Tmst Ltd., [1944] 1 All E.R. 194, at p. 203.

The term "capital" has a diversity of meanings, Incorporated Inlae.lts Pty. Ltd. v. Federal Commissioner oj Taxation (1943), 67 C.L.R. 508, at p. 513.

'The 'profits' we take to be equivalent to 'the profits of the company'. When in the course of calculating these profits we must take into account 'capital', it is the capital of the company, and we think the nominal capital (to the extent to which it is paid up) most naturally answers to that term", Moore Y. Carreras Ltd., [1935] V.L.R. 68, at p. 75.

What is sometimes called debenture capital is not capital at all in the "triet sense of that word, but is rather money raised by borrowing. There is therefore nothing illegal in the payment out of capital of interest on debentures, Bloxam v. Metropolitan Rail Co. (1868), 3 Ch. App. 337, at p. 350.

Dividend-"I suppose it [the word 'dividend'] is taken from dividendum, the thing to be divided; but it is used in ordinary commercial language as the share of the thing to be divided-that share which is coming to each person who is entitled to share in that division", Staples v. Eastman Photographic Materials Co., [1896] 2 Ch. 303, at pp. 307-8. See also Henry v. Great Northern Railway Co. (1857), 27 L.J. Ch. 1, at pp. 15, 16; Crawford v. North Eastern Railwav Co. (]856), 3 K. & J. 723, at pp. 743, 744. -

As to when the term "dividend" may mean "arrears of dividend", see Re de Jong (F) & Co. Ltd., [1946] 1 All E.R. 556; [1946] Ch. 211.

Real character of distribution-"A limited company not in liquidation can make no payment by way of return of capital to its shareholders except as a step in an authorised reduction of capital. Any other payment made by it by means of which it parts with moneys to its shareholders must and can only be made by way of dividing profits. Whether the payment is called 'dividend' or 'bonus' or any other name, it still must remain a payment on [sic] division of profits", Hill v. Permanent Trustee Co. of N.ew South Wales Ltd., [1930] A.C. 720; [1930] All E.R. Rep. 87, at p. 92.

Bonus-"Suppose a company which is in the habit of maintaining, let me say, a five per cent. dividend, earns in one year, or perhaps in two or three years, some exceptional profits and then proceeds to declare a dividend of five per cent. and a bonus of, let me say, two per cent, that bonus is just as much a dividend as the five per cent. The reason why the directors choose to call it a bonus is that they want to mark it as something which is not regarded as the company's normal rate of dividend, but as something which mayor may not be continued on a future occasion", Picken v. Lord Baljour oj Burleigh, [1945] Ch. 90, at p. 98; slIiI. nom. Pickell v. BrLlce, [1945] 1 All E.R. 73, at p. 76.


This difficulty stems from the implication in the Act that any pro rata distribution may be termed a "dividend"; cf. for example ss. 60 (2) (c), 239 (a), 376 (5), ante. Thus the term is used in relation to fundameptally different events. Further as to the meaning of the term "bonus", see Re Eddystone Marine Insurance Co., L1894] W.N. 30, read subject to the verbal correction made in Re Harriss' Settlement: Crowther v. Harriss (unreported, but referred to in Words and Phrases Judicially Defilled, 1960 Supplement, p. 66).

Reserves out of profits-Articles commonly provide that, before recommending any dividend. the directors may set aside out of profits such reserves as they see fit. Cf. Fourth Schedule, Table A, art. 101: Table B, art. 84, post. The difference if any, between reserves and provisions was discussed in Cruikshallk v. Producers Markets Co-operative Ltd., [1960] W.A.R. 5.

Liability of directors-Where the directors of a no-liability company, having notice of a claim against the company, sold the plant which formed the only asset of the company available for payment of debts and distributed the proceeds in the form of dividends amongst the shareholders, it was held that the directors were liable both under a section corresponding with this section, and under the general law, Mackie v. Clough (1891), 17 V.L.R. 493.

Shareholder a constructive trustee-A shareholder who receives a dividend with knowledge that it has been paid out of capital is a constructive trustee to that extent for the company, Maxam v. Grant [1900] 1 Q.B. 88; Re National Funds Assurance Co. (1878), 10 Ch. D. 118; Re Alexandra Palace Co. (1883), 21 Ch. D. 149; Towers v. African Tug Co., [1904] 1 Ch. 558.

Iniunction to restrain wrongful payment-A shareholder may obtain an injunction to restrain payment of dividends out of capital, Macdougall v. Jersey Imperia! Hotd Co. (1864), 2 Hem. & M. 528.

Assets representing paid-up capital-As to distribution by a company not in liquidation of assets representing paid-up capital, see Stevenson v. Commissioner of Taxation (1936), 37 S.R. (N.S.W.) 84.

Apportionment of dividends where persons entitled thereto in successionDividends are apportionable between life tenant and remainderman under the Distress Replevin and Ejectment Act of 1867, s. 39, title LANDLORD AND TENANT.

To be apportionable under the Act the payment must be declared or expressed to be made for or in respect of some definite period, Re Jowi!!; Jowitt v. Keeling, fl922] 2 Ch. 442, at p. 446; [1922] All E.R. Rep. 331; and this will depend on the terms of the resolution by which the dividend is declared and its effect considered in the light of the company's memorandum and articles of association, Re McCutcheon, deceased: McCutcheon v. Equity Trustees Executors and Agency Co. Ltd .. rJ 960] V.R. 289, at p. 291. However apportionment " ... does not arise until the two conditions of the existence of profits and the determination to distribute corne into existence", Re Wakley; Wakley v. Vachell, [1920] 2 Ch. 205, at p. 217; [1920] All E.R. Rep. 749.

Dividends not declared-If on a winding-up there exist profits which could have been used to pay dividends but no dividend has been declared, the amount received for the shares belongs to corpus, Re Armitage; Armitage v. Garnett, [18931 3 Ch. 337.

Generally-For further notes to this section, see Paterson and Ednie, Australian Company Law, pp. 661-673.

377. Penalty for improper use of words "Limited" and "No-Liability". If any person carries on business under any name or title of which "Limited" or "No-Liability" or any abbreviation thereof is the final word or abbreviation the person shall unless duly incorporated with limited liability or (as the case may be) no liability be guilty of an offence against this Act.

Penalty: Fifty pounds. U.K. s. 439; N.S.W. s. 33;

Tas. s. 317.

Default penalty. Vic. s. 262; Qld. s. 369; S.A. s. 390; W.A. s. 423;

As to use of the word "limited", see ss. 18, 22, 24, ante. As to the words "no liability", see s. 22, ante. In relation to limited liability,

see s. 18, ante.


378. Restriction on use of word "Proprietary". (1) A company shall not use the word "Proprietary" or any abbreviation thereof as part of its name if it does not fulfil the requirements required by this Act to be fulfilled by proprietary companies.

(2) Every company and every officer of a company who commits, causes, directs, or authorizes a breach of this section shall be guilty of an offence against this Act.


(3) Where a company that does not fulfil the requirement,; required by this Act to be fulfilled by proprietary companies has immediately prior to the commencement of this Act lawfully used the word "Proprietary" or any abbreviation thereof as part of its name it shall be deemed not to have committed an offence against this section if within twelve months after the commencement of this Act it ceases to use that word or any abbreviation thereof as part of its name.

Vic. s. 22 (2); Qld. s. 29 (1).

In relation to the requirements to be fulfilled by proprietary companies. see s. 15. ([nte. As to the use of the word "Proprietary", see s. 22, ({nte.

379. General penalty provisions. (1) A person who-(a) does that which by or under this Act he is forbidden to do; or

(b) does not do that which by or under this Act he is required or directed to do; or

(c) otherwise contravenes or fails to comply with any provision of this Act,

shall be guilty of an offence against this Act.

(2) A person who is guilty of an offence against this Act shall be liable on conviction to a penalty or punishment not exceeding the penalty or punishment expressly mentioned as the penalty or punishment for the offence, or if a penalty or punishment is not so mentioned, to a penalty not exceeding fifty pounds.

(3) The penalty or punishment, pecuniary or other, set out in, or at the foot of, any section or part of a section of this Act shall indicate that the offence is punishable upon conviction by a penalty or punishment not exceeding that so set out and where the penalty or punishment is expressed to apply to a part only of the section, it shall apply to that part only.

( 4) Any offence against this Act for which a penalty or punishment upon conviction upon indictment is prescribed shall be an indictable offence.

If a penalty or punishment upon summary conviction for the offence is also prescribed, it may be prosecuted either upon indictment or summarily, but not both upon indictment and summarily.

Vic. s. 263; S.A. s. 391; W.A. s. 424; Tas. s. 318.

As to indictable offences, see the Crimin~\1 Code. s. 3. title CRIMINAL LAW.


380. Default penalty. (1) Where in, or at the foot of, any section or part of a section of this Act there appears the expression "Default Penalty" it shall indicate that any person who is convicted of an offence against this Act in relation to that section or part shall be guilty of a further offence against this Act if the offence continues after he is convicted and liable to an additional penalty for each day during which the offence so continues of not more than the amount expressed in the section or part as the amount of the default penalty or, if an amount is not so expressed of not more than ten pounds.

(2) Where any offence is committed by a person by reason of his failure to comply with any provision of this Act by or under which he is required or directed to do anything within a particular period, that offence, for the purposes of subsection (1) of this section shall be deemed to continue so long as the thing so required or directed to be done by him remains undone, notwithstanding that such period has elapsed.

(3) For the purposes of any provision of this Act which provides that an officer of a company or corporation who is in default is guilty of an offence against this Act or is liable to a penalty or punishment the phrase "officer who is in default" or any like phrase means any officer of the company or corporation who knowingly and wilfully-

(a) is guilty of the offence; or (b) authorizes or permits the commission of the offence.

U.K. s. 440; N.S.W. s. 355; Vic. s. 264; Qld. s. 378; S.A. s. 392; Tas. s. 319. Liability to a default penalty may arise only after conviction. The mode

of expressing liability to a default penalty may be compared with that of expressing liability to a penalty as provided in s. 379, ante.

KnowinglY-As to "knowingly", see, Beck v. Board of Trade (Solicitor) (1932). 76 Sol. 10. 414; Burton v. Bevan, [1908) 2 Ch. 240; Dorte v. South African Super Aeration (1904), 29 T.L.R. 425.

Wilfully-A discusion of a like provision in a company's articles which used the term "wilful default" is to be found in Gould v. Mount Oxide Mines Ltd. (in liq.) (1916), 22 c.L.R. 490, at pp. 528·9.

381. Proceedings how and when taken. ( 1) Except where provision is otherwise made in this Act proceedings for any offence against this Act may be taken by the Registrar or, with the written consent of the Crown Law Officer, by any person.

(2) Notwithstanding anything in any Act proceedings for any offence against this Act may be brought within the period of three years after the commission of the alleged offence or, with the consent of the Crown Law Officer, at any later time.

(3) Unless otherwise provided, all offences against this Act may be prosecuted in a summary way under "The Justices Acts, 1886 to 1960."

( 4) Penalties under this Act when recovered shall, notwithstanding anything in any other Act, be paid into the Consolidated Revenue Fund.

u.K. 5S. 442, 445; Vic. s. 265; Qld. ss. 370, 371; S.A. s. 395; Tas. s. 320. Act referred to:

Justices Acts 1886 to 1960, title JUSTICES. The consent of the Crown Law Officer is requisite in two distinct instances

(i) where proceedings are taken by any person other than the Registrar, and (ii) where proceedings are brought at any time later than three years after the commission of the alleged offence.


Division 3-Miscellaneous 382. Saving of other Acts. (1) Unless otherwise expressly provided, nothing in this Act shall in any way derogate from or otherwise affect any of the provisions of-

(a) "The Building Societies Acts, 1886 to 1958";

(b) "The Friendly Societies Acts, 1913 to 1959";

(c) "The Primary Producers' Co-operative Associations Acts, 1923 to 1934";

(d) "The Co-operative Societies Acts, 1946 to 1951"; and (e) "The Co-operative Housing Societies Acts, 1958 to 1961."

(2) This Act shall be in addition to and not in substitution for the provisions of-

(a) "The Criminal Code";

(b) "The Petroleum Acts, 1923 to 1958"; and

(c) "The Insurance Act of 1960." Acts referred to:

Building Societies Acts 1886 to 1958, title SOCIETIES. Friendly Societies Acts 1913 to 1959, title SOCIETIES. Primary Producers' Co-operative Associations Acts 1923 to 1962, title

PRIMAR Y PRODUCE. Co-operative Societies Acts 1946 to 1962, title SOCIETIES. Co-operative Housing Societies Acts 1958 to 1962, title SOCIETIES. Criminal Code, title CRIMINAL LAW. Petroleum Acts 1923 to 1962, title MINING. Insurance Act of 1960, title INSURANCE.

383. Rules. The power to make rules of the Supreme Court includes power to make rules-

(a) with respect to proceedings and the practice and procedure of the Court under this Act;

(b) with respect to the conferring on the Registrar of the Court, either generally or in any particular case and under such circumstances and on such conditions as may be prescribed, the whole or any part of the jurisdiction and powers of the Court under this Act, and providing for an appeal from such Registrar in the exercise of any such powers and jurisdiction;

(c) with respect of fees of Court to be collected in respect of any proceeding of the Court under this Act;

(d) with respect to any matter or thing which is by this Act required or permitted to be prescribed by rules; and

(e) without limiting the generality of the provisions of this section, with respect to costs and with respect to rules as to meetings ordered by the Court.

N.S.W. s. 380 (2); Vic. s. 10; Qld. s. 384; S.A. s. 372; W.A. s. 407; Tas. s. 323.

For the Companies Rules 1963, see p. 603 post.


384. Regulations. ( 1) The Governor in Council may from time to time make regulations not inconsistent with this Act for or with respect to-

(a) the keeping of registers by the Registrar and the lodging or registration of documents and the time and manner of submission of documents for lodging or registration;

(b) prescribing forms for the purposes of this Act; (c) prescribing times for the lodging of any documents with the

Registrar; (d) all matters or things which by this Act are required or

permitted to be prescribed otherwise than by rules or which are necessary or convenient to be prescribed for giving effect to this Act; and

(e) penalties not exceeding twenty pounds for any breach of the regulations.

(2) Publication of Proclamations, Orders in Conncil, regulations, etc. Every Proclamation, Order in Council, and regulation made under this Act shall-

(a) be published in the Gazette; (b) upon its publication in the Gazette, be judicially noticed

and such publication shall be conclusive evidence of the matters contained therein;

(c) take effect from the date of such publication, unless, in the case of any such Order in Councilor regulation, a later date is specified in that or any other Order in Councilor, as the case may be, regulation for its commencement when in such event it shall take effect from that later date; and

(d) be laid before the Legislative Assembly within fourteen sitting days after such publication if the Legislative Assembly is in session, and if not, then within fourteen sitting days after the commencement of the next session.

(3) If the Legislative Assembly passes a resolution of which notice has been given at any time within fourteen sitting days after any such Proclamation, Order in Council, or regulation has been laid before the Legislative Assembly disallowing such Proclamation, Order in Council, or regulation or part thereof, that Proclamation, Order in Council, or regulation or part shall thereupon cease to have effect, but without prejudice to the validity of anything done in the meantime or to the making of a further Proclamation, Order in Council, or regulation.

N.S.W. s. 380 (1) (3); Vic. s. II; Qld. s. 102; S.A. s. 373; W.A. s. 408; Tas. s. 324.

Instruments fixing fees-As to the validity of instruments fixing fees under statutory power, see Bale v. Sorlie, [1936] 51. R. Qd. 259; Elder's Trustee alld Execlitor Co. Ltd. v. Registrar of Probates (1917), 23 C.L.R. 169.

Laid before Legislative Assembly-As to whether the requirements of publication and laying before the Legislative Assembly are essential to validity or merely directory, see Darrach v. Thomas (1914), 31 W.N. (N.S.W.) 22; Atkinson v. Mllnt, Cottrell & Co. Ltd. (1907), 26 N.Z.L.R. 1153; Dignan v. Australian Steamships Pty. Ltd. (1931),45 C.L.R. 188, at pp. 198, 201 et seq., 205.

For the presumption that all proper steps have been taken in the making of regulations, see Ex parte Kauter (1904), 4 S.R. (N.S.W.) 209.

Regulations-See The Companies Regulations, p. 499 post as amended by The Companies (Amendment) Regulations 1963, see note p. 499 post; see also The Companies (Auditors Bo"rd) Regulations, p. 596 post.

412

Section 4

Year and Number of Act

COMPANIES

SCHEDULES FIRST SCHEDULE

ACTS REPEALED

Title of Act

Vol. 2

-------------------1--------------------------------------------3 Vic. No. 21 6 Vic. No.2

11 Vic. No. 19 11 Vic. No. 56 22 Oeo. V. No. 53

6 Geo. VI. No. 23 2 Eliz. II. No. 15 3 Eliz. II. No. 25 4 Eliz. II. No. 17 9 Eliz. II. No. 24

"The Companies Act of 1839" .. "The Companies (Process) Act of 1842 "

"The Companies (Winding-Up) Act of 1847 " " The Companies (Process) Act of 1848 "

.. "The Companies Act of 1931 "

.. "The Companies Act Amendment Act of 1942 " " The Companies Acts Amendment Act of 1953 " "The Companies Acts Amendment Act of 1954" " The Companies Acts Amendment Act of 1955 " " The Companies Acts Amendment Act of 1960 ,.

---._----------

Section 7 SECOND SCHEDULE TABLE OF FEES TO BE PAID TO THE REGISTRAR

BY A COMPANY HAVING A SHARE CAPITAL

1. For registration of a company whose nominal share £ s. d.

capital does not exceed £5,000 20 a a 2. For registration of a company whose nominal share

capital exceeds £5,000 the above fee of £20 with the following additional fees regulated according to the amount of nominal share capital (that is to say)-

For every £1,000 of nominal share capital, or part of £1,000, after the first £5,000, up to £100,000 1 a a

For every £1,000 of nominal share capital, or part of £1,000, after the first £100,000, up to £500,000

For every £1,000 of nominal share capital, or part of £1,000, after the first £500,000

3. On lodging notice of increase of share capital-an amount equal to the difference (if any) between the amount which would have been payable on first registration by reference to its capital as increased and the amount which would have been payable by reference to its capital immediately before the increase but in the case of a company registered before 31st July, 1960, with a share capital of less than £5,000 the fee shall be £5 per £1,000 or any fractional part of £1,000 for any increase up to £5,000 and thereafter an amount calculated as aforesaid.

BY A COMPANY NOT HAVING A SHARE CAPITAL 4. For registration of a company whose number of

members as stated in the articles of association does not exceed 20

5. For registration of a company whose number of members as stated in the articles of association exceeds 20 but does not exceed lOa but is not stated to be unlimited the fee of £10 (with an additional

a 10 a

a 5 a

5 a a

COMPANIES ACT OF 1961 Scbs. I, [[ 413

SECOND SCHEDULE-continued

lOs. for every 50 members or less number than 50 members after the first 100), but no company shall be liable to pay on the whole a greater fee than £ 1 00 in respect of its number of members taking into account the fee paid on the first registration of the company.

6. For registration of a company in which the number of members is stated in the articles of association to

£ s. d.

be unlimited 100 0 0 7. For registration of the first increase in the number

of members made after the registration of a company, whose number of members as stated in the articles of association does not exceed 20, to a number exceeding 20 but not exceeding 100 5 0 0

8. For registration of any other increase in the number of members of a company in respect of every 50 members or less than 50 members of that increase

GENERAL-BY ANY COMPANY SOCIETY OR ASSOCIATION

9. For every application for consent of the Crown Law

o 10 0

£ s. d.

Officer to use of a name by a corporation 5 0 0 10. For every Order of the Crown Law Officer granting

consent to use of name by a corporation 10 0 0 11. For every approval of the Registrar to the change of

the name of a company (otherwise than a change of name directed by the Registrar pursuant to the provisions of subsection (2) of section twenty-three or a change of name pursuant to subsection (2) of section twenty-four of this Act) 10 0 0

12. For every licence of the Crown Law Officer to dispense with the word "Limited" in the name of a company 10 0 0

13. For approval of the Crown Law Officer to alter the memorandum or articles of the company 2 0 0

14. On lodgment of request to the Registrar to exercise the powers conferred by sections three hundred and nine or three hundred and eleven 1 0 0

15. For every act done by the Registrar as representing a defunct company under section three hundred and nine 1 0 0

16. For every act done by the Registrar as representing a defunct company under section three hundred and eleven 5 0 0

17. On the late lodging of any document under this Act in addition to any other fee- '

(a) if lodged within one month after the period prescribed by law . . . . . . . . 1 0 0

(b) if lodged more than one month after the period prescribed by law, in addition to the fee payable under subparagraph (a) 5 0 0

414 COMPANIES


The Registrar, if satisfied that just cause existed for the late lodgment, may waive in whole or in part the additional fee under paragraph (b).

18. For the registration of a foreign company-(a) subject to paragraphs (c) and (d) and to section

three hundred and forty-nine, for registration of a foreign company having a share capital whose

Vol. 2

£ s. d.

nominal share capital does not exceed £5,000 10 0 0

(b) subject to paragraphs (c) and (d) and to section three hundred and forty-nine, for registration of a foreign company having a share capital whose nominal share capital exceeds £5,000 the above fee of £10 with the following additional fees regulated according to the amount of nominal share capital (that is to say)-

(i) for every £1,000 of nominal share capital, or part of £1,000, after the first £5,000, up to £100,000 0 10 0

(ii) for every £1,000 of nominal share capital, or part of £1,000, after the first £100,000, up to £500,000

( iii) for every £1,000 of nominal share capital, or part of £1,000, after the first £500,000

(c) subject to paragraph (d), for registration of a foreign company having a share capital where the fees prescribed by subparagraphs (a) and (b)

0 5 0

0 1 0

of this paragraph 18 are inapplicable .. 100 0 0

( d) in the case of a corporation having a share capital authorized by the law of any State or Territory of the Commonwealth to take in its own name a grant of probate or letters of administration of the estate of a deceased person

(e) for registration of a foreign company not having a share capital, one half of the appropriate fee prescribed in respect of a company not having a share capital registered or incorporated under Part III of this Act.

As amended by Order in Council, Gazette 2 July 1962 p. 1376; and Order in Council, Gazette 30 March 1963, p. 1322. '

19. On lodging by a foreign company of-(a) noti~e of increase in share capital-subject to

sectIOn three hundred and forty-nine an amount equal to the difference (if any) between the amount which would have been payable on first registration by reference to its capital as increased and the amount which would

50 0 0

COMPANIES ACT OF 1961 Sch.1I 415


have been payable by reference to its capital immediately before the increase but in the case of a foreign company registered before 31 st July, 1960, with a share capital of less than £5,000 the fee shall be £5 per £1,000 or any fractional part of £1,000 for any increase up to £5,000 and thereafter an amount calculated as aforesaid;

(b) notice of any increase in the number of members beyond its registered number-one half of the prescribed fees payable on the increase in the number of members of a company incorporated or registered under Part III.

As amended by Order in Council, Gazette 2 July 1962, p. 1376; and Order in Council, Gazette 30 March 1963, p. 1322.

£ s. d.

20. For registering any charge created by a corporation .. 4 0 0 As amended by Order in Council, Gazette 2 July 1962, p. 1376.

21. For registering particulars of a series of debentures .. 4 0 0 22. For registering particulars of each series of debentures

where more than one issue in the series 2 0 0

23. On an application for the reservation of a name 3 0 0

24. On lodging articles of association of a company 2 0 0

25. On lodging a copy of any special resolution altering the articles of association of a company 2 0 0

26. On lodging a copy of any special resolution altering the objects clause of the memorandum of association of a company 2 0 0

27. On lodging any deed or copy of a deed under section seventy-eight or on lodging any prospectus or statement in lieu of prospectus or statements required under section eighty-two 5 0 0

28. On any subprena served on the Registrar to produce any document in his custody .. 2 0 0

29. On lodging any application under section forty-four or section three hundred and seventy-four 5 0 0

30. On lodging any other application 1 0 0

31. For entry in the register of charges of any memorandum of satisfaction

32. For every certificate issued by the Registrar under any Act

33. For copy or extract made and certified by the Registrar of any document in his custody-

For each copy or extract not exceeding five folios of 72 words to the folio ..

For each additional folio of 72 words

200

1 0 0

100 020

416 COMPANIES


34. For completing and certifying by the Registrar of a copy or extract of any document in his custody of which a printed or typed copy is supplied-

For each copy or extract not exceeding five folios of 72 words to the folio

For each additional folio of 72 words 35. For photographic copies of documents in the custody

of the Registrar-for each sheet copied 36. For search as to availability of any name proposed to

be adopted by an intended company, company or foreign company-for every name searched .. . .

37. For every search or inspection in relation to a particular company of the registers and documents kept by the Registrar, pursuant to Division 7 of Part IV

38. For every other search for and inspection, or search for or inspection, of a document or documents filed by or in relation to a company-

(a) where the number of documents searched or inspected is not more than 3, for each document

(b) where the number of documents searched or inspected is more than 3, for that number of documents

39. On lodging any annual return of a company .. 40. On lodging, registering, depositing, or filing any other

document with or by the Registrar under any Act (where the fee is not specified in any relevant Act or Regulation)

41. On restoring a company or a corporation to the register 42. For every inquiry by letter involving a search for or

extract from any document filed by or in relation to any particular company-

(a) For one document (b) For each subsequent document (c) For each folio of seventy-two words after the

first, for an extract from any such document (additional)

43. For every extract taken or copy made by the Registrar from any document filed, for each folio of seventy-two words, but no such fee shall be less than 2s. Od.

44. On receiving by post, documents in support of the registration of a new company, including memorandum and articles of association upon or for which a registration fee IS payable under this Schedule, an additional fee of

Vol. 2

£ s. d.

o 10 0 010

o 10 0

o 10 0

050

050

100 200

100 10 0 0

o 10 0 026

020

010

100

NOTE.-Fees payable with respect to companies formed or incorporated outside the Commonwealth shall where appropriate be calculated after the conversion of the share capital to Australian currency.

COMPANIES ACT OF 1961

THIRD SCHEDULE (Section 19) POWERS

Schs. II, III 417

N.Z. 1955 No. 63 Second Schedule; Vic. Third Schedule; S.A. s. 35, Second Schedule; W.A. Third Schedule; Tas. Third Schedule.

1. To carry on any other business which may seem to the company capable of being conveniently carried on in connection with its business or calculated directly or indirectly to enhance the value of or render profitable any of the company's property or rights.

2. To acquire and undertake the whole or any part of the business, property, and liabilities of any person or company carrying on any business which the company is authorized to carryon, or possessed of property suitable for the purposes of the company.

3. To apply for, purchase, or otherwise acquire any patents, patent rights, copyrights, trade marks, formulas, licences, concessions, and the like, conferring any exclusive or non-exclusive or limited right to use, or any secret or other information as to, any invention which may seem capable of being used for any of the purposes of the company, or the acquisition of which may seem calculated directly or indirectly to benefit the company; and to use, exercise, develop, or grant licences in respect of, or otherwise turn to account, the property, rights, or information so acquired.

4. To amalgamate or enter into partnership or into any arrangement for sharing of profits, union of interest, co-operation, joint adventure, reciprocal concession, or otherwise, with any person or company carrying on or engaged in or about to carryon or engage in any business or transaction which the company is authorized to carry on or engage in, or any business or transaction capable of being conducted so as directly or indirectly to benefit the company.

5. To take, or otherwise acquire, and hold shares, debentures, or other securities of any other company.

6. To enter into any arrangements with any Government or authority, supreme, municipal, local, or otherwise, that may seem conducive to the company's objects, or any of them; and to obtain from any such Government or authority any rights, privileges, and concessions which the company may think it desirable to obtain; and to carry out, exercise, and comply with any such arrangements, rights, privileges, and concessions.

7. To establish and support or aid in the establishment and support of associations, institutions, funds, trusts, and conveniences calculated to benefit employees or directors or past employees or directors of the company or of its predecessors in business, or the dependants or connections of any such persons; and to grant pensions and allowances; and to make payments towards insurance; and to subscribe or guarantee money for charitable or benevolent objects, or for any exhibition, or for any public, general, or useful object.

S. To promote any other company or companies for the purpose of acquiring or taking over all or any of the property, rights, and liabilities of the company, or for any other purpose which may seem directly or indirectly calculated to benefit the company.

14


THIRD SCHEDULE-continued 9. To purchase, take on lease or in exchange, hire, and otherwise acquire any real and personal property and any rights or privileges which the company may think necessary or convenient for the purposes of its business, and in particular any land, buildings, easements, machinery, plant, and stock in trade.

10. To construct, improve, maintain, develop, work, manage, carry out, or control any buildings, works, factories, mills, roads, ways, tramways, railways, branches or sidings, bridges, reservoirs, watercourses, wharves, warehouses, electric works, shops, stores, and other works and conveniences which may seem calculated directly or indirectly to advance the company's interests; and to contribute to, subsidize, or otherwise assist or take part in the construction, improvement, maintenance, development, working, management, carrying out, or control thereof.

11. To invest and deal with the money of the company not immediately required in such manner as may from time to time be thought fit.

12. To lend and advance money or give credit to any person or company; to guarantee and give guarantees or indemnities for the payment of money or the performance of contracts or obligations by any person or company; to secure or undertake in any way the repayment of moneys lent or advanced to or the liabilities incurred by any person or company, and otherwise to assist any person or company.

13. To borrow or raise or secure the payment of money in such manner as the company may think fit and to secure the same or the repayment or performance of any debt liability contract guarantee or other engagement incurred or to be entered into by the company in any way and in particular by the issue of debentures perpetual or otherwise, charged upon all or any of the company's property (both present and future), including its uncalled capital; and to purchase, redeem, or payoff any such securities.

14. To remunerate any person or company for services rendered, or to be rendered, in placing or assisting to place or guaranteeing the placing of any of the shares in the company's capital or any debentures, or other securities of the company, or in or about the organization, formation, or promotion of the company or the conduct of its business.

15. To draw, make, accept, endorse, discount, execute, and issue promissory notes, bills of exchange, bills of lading, and other negotiable or transferable instruments.

16. To sell or dispose of the undertaking of the company or any part thereof for such consideration as the company may think fit, and in particular for shares, debentures, or securities of any other company having objects altogether or in part similar to those of the company.

17. To adopt such means of making known and advertising the business and products of the company as may seem expedient.

18. To apply for, secure, acquire by grant, legislative enactment, assignment, transfer, purchase, or otherwise, and to exercise, carry out, and enjoy any charter, licence, power, authority, franchise, concession, right, or privilege, which any Government or authority or any corporation or other public body may be empowered to grant; and to pay for, aid in,

COMPANIES ACT OF 1961 Schs. III, IV 419

THIRD SCHEDULE-continued and contribute towards carrying the same into effect; and to appropriate any of the company's shares, debentures, or other securities and assets to defray the necessary costs, charges, and expenses thereof.

19. To apply for, promote, and obtain any statute, order, regulation, or other authorization or enactment which may seem calculated directly or indirectly to benefit the company; and to oppose any bills, proceedings, or applications which may seem calculated directly or indirectly to prejudice the company's interests.

20. To procure the company to be registered or recognised in any country or place outside the State.

21. To sell, improve, manage, develop, exchange, lease, dispose of, turn to account, or otherwise deal with all or any part of the property and rights of the company.

22. To issue and allot fully or partly paid shares in the capital of the company in payment or part payment of any real or personal property purchased or otherwise acquired by the company or any services rendered to the company.

23. To distribute any of the property of the company among the members in kind or otherwise but so that no distribution amounting to a reduction of capital shall be made without the sanction required by law.

24. To take or hold mortgages, liens, and charges to secure payment of the purchase price, or any unpaid balance of the purchase price, of any part of the company's property of whatsoever kind sold by the company, or any money due to the company from purchasers and others.

25. To carry out all or any of the objects of the company and do all or any of the above things in any part of the world and either as principal, agent, contractor, or trustee, or otherwise, and by or through trustees or agents or otherwise, and either alone or in conjunction with others.

26. To do all such other things as are incidental or conducive to the attainment of the objects and the exercise of the powers of the company.

FOURTH SCHEDULE Vic. Fourth Schedule; S.A. First Schedule; Tas. Fourth Schedule.

TABLE A (Sections 5, 30)

REGULATIONS FOR MANAGEMENT OF A COMPANY LIMITED BY SHARES INTERPRETATION

1. In these regulations-"the Act" means "The Companies Act of 1961"; "the seal" means the common seal of the company; "secretary" means any person appointed to perform the duties of

a secretary of the company; "State" means the State of Queensland; expressions referring to writing shall, unless the contrary intention

appears, be construed as including references to printing, lithography, photography and other modes of representing or reproducing words in a visible form;


FOURTH SCHEDULE (TABLE A)-continued words or expressions contained in these regulations shall be

interpreted in accordance with the provisions of "The Acts Interpretation Acts, 1954 to 1960"; and of the Act as in force at the date at which these regulations become binding on the company.

Act referred to: Acts Interpretation Acts 1954 to 1962, title ACTS OF PARLIAMENT.

Articles may adopt all Or any of the following regulations, s. 30, ante. Where no articles are registered, the following regulations apply, ibid. Where articles are registered, the following regulations apply in so far as the articles do not exclude or modify them. ibid.

SHARE CAPITAL AND VARIATION OF RIGHTS 2. Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, but subject to the Act, shares in the company may be issued by the directors and any such share may be issued with such preferred, deferred, or other special rights or such restrictions, whether in regard to dividend, voting, return of capital, or otherwise, as the directors, subject to any ordinary resolution of the company, determine.

Memorandum-Where the memorandum provides for classes of shares and rights thereto attached, see Re Welsbach Incandescent Gas Light Co., [1904] 1 Ch. 87. For the relation of memorandum and articles in this respect, see Campbell v. Rate, [1933] A.C. 91, at p. 98.

Winding-up-As to winding-up in relation to this article, see Re Hackett, [1935] V.L.R. 309; Re Alexander Stewart & Sons Ltd., [1929] St. R. Qd. 86.

Maiority-The majority of shareholders are entitled to use their majority in any legitimate manner and the directors have no right to issue shares with the object of preventing a majority doing so by enabling the directors and their supporters to outvote them, Ansett v. Bwler Air Transport Ltd. (No.1) (1957), 75 W.N. (N.S.w.) 299.

3. Subject to the Act, any preference shares may, with the sanction of an ordinary resolution, be issued on the terms that they are, or at the option of the company are liable, to be redeemed.

4. If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may whether or not the company is being wound up, be varied with the consent in writing of the holders of three-fourths of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of the class. To every such separate general meeting the provisions of these regulations relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be two persons at least holding or representing by proxy one-third of the issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a poll.

Varied-As to "varied", see Greenhalgh v. Arderne Cinemas Ltd., [1945] 2 All E.R. 719; [1946] 1 All E.R. 512. See also White v. Bristol Aeroplane Co. Ltd., [19531 Ch. 65; [1953] 1 All E.R. 40; Re John Smith's Tadcaster Brewery Co. Ltd., [1953] Ch. 308; [1953] 1 All E.R. 518. As to class meetings, and conduct thereof, see Carruth v. Imperial Chemical Industries Ltd., [1937] A.C. 707; [1937] 2 All E.R. 422.

Terminology-For a discussion of the terms "ordinary preferred", "preferred ordinary", "preferred", "preference", "deferred ordinary", "common stock". "deferred stock". "guaranteed or preferred". see Re Powell-Catton's Re-settlement, [1957] Cli. 159; [1957] 1 All E.R. 404.

COMPANIES ACT OF 1961 Sch. IV 421

FOURTH SCHEDULE (TABLE A)-continued 5. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking equally therewith.

6. The company may exercise the powers of paying commissions conferred by the Act, provided that the rate per centum or the amount of the commission paid or agreed to be paid shall be disclosed in the manner required by the Act and the commission shall not exceed the rate of 10 per centum of the price at which the shares in respect whereof the same is paid are issued or an amount equal to 10 per centum of that price (as the case may be). Such commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares or partly in one way and partly in the other. The company may also on any issue of shares pay such brokerage as may be lawful.

7. Except as required by law, no person shall be recognised by the company as holding any share upon any trust, and the company shall not be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future, or partial interest in any share or unit of a share or (except only as by these regulations or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.

S. Every person whose name is entered as a member in the register of members shall be entitled without payment to receive a certificate under the seal of the company in accordance with the Act but in respect of a share or shares held jointly by several persons the company shall not be bound to issue more than one certificate, and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all such holders.

Refusal to furnish certificate-Generally as to the refusal by a company to issue a certificate, see Ardlethall Options Ltd. v. Easdown (1915), 20 C.L.R. 285, at pp. 293, el seq.

LIEN

9. The company shall have a first and paramount lien on every share (not being a fully paid share) for all money (whether presently payable or not) called or payable at a fixed time in respect of that share, and the company shall also have a first and paramount lien on all shares (other than fully paid shares) registered in the name of a single person for all money presently payable by him or his estate to the company, but the directors may at any time declare any share to be wholly or in part exempt from the provisions of this regulation. The company's lien, if any, on a share shall extend to all dividends payable thereon.

Own shares-See Re Hogg, Robinson & Co. Ply. Ltd. (in liq.), [1933] V.L.R. 416. a decision on a section not identical with s. 67, ante.

Fully-paid shares-Semble, a company can, by special resolution, alter its articles so as to extend the lien to fully-paid shares, Allen v. Gold Reefs Of West Africa Ltd., [1900] 1 Ch. 656.

Generally-See 6 Halsbury's Laws of England, 3rd ed., pp. 231, et seq.; 9 English and Empire Digest (Rpl.), pp. 353, et seq.

10. The company may sell, in such manner as the directors think fit, any shares on which the company has a lien, but no sale shall be made unless a sum in respect of which the lien exists is presently payable, nor


FOURTH SCHEDULE (TABLE A)-continued until the expiration of fourteen days after a notice in writing, stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the share, or the person entitled thereto by reason of his death or bankruptcy.

11. To give effect to any such sale the directors may authorize some person to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares comprised in any such transfer, and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

12. The proceeds of the sale shall be received by the company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale.

Whether secured debt-See Re Little (1892), 18 V.L.R. 777, where it was held that where a company had a right under its articles to deduct the amount of a debt from dividends and to refu~e to register a transfer, the debt was not a "secured debt" under the Insolvency Act 1890 (Vic.). As to liens on shares held by trustees, see McLau/?hlin v. Bank of Victoria Ltd. (1894), 20 V.L.R. 433.

CALLS ON SHARES

13. The directors may from time to time make calls upon the members in respect of any money unpaid on their shares (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times, provided that no call shall exceed one-fourth of the nominal value of the share or be payable at less than one month from the date fixed for the payment of the last preceding call, and each member shall (subject to receiving at least fourteen days' notice specifying the time or times and place of payment) pay to the company at the time or times and place so specified the amount called on his shares. A call may be revoked or postponed as the directors may determine.

Repetition of a call subsequent to forfeiture may be proper, Ralldl Gold Mining Co. v. New Balkis. Eerst.eling LId., [1903] 1 K.B. 461; [1904] A.c. 165.

Contracting out-As to contracting out of liability to pay calls, see Re Electric TeleRraph Co. oj Ireland; Bunn's Case (1860),2 De G.F. & 1. 275.

Payment otherwise than in cash-As to satisfaction of a call by payment otherwise than in cash. see Re While Star Line, [1938] Ch. 458; [1938] I All E.R. 607.

Allotment payment-Apart from art. 17, post, allotment payment required is not a call. Croskey v. Bank of Wales (1863), 4 Giff. 314.

Transfer-As to the liability for payment of a call, where in the interval between making and the due date for payment thereof, a transfer of the share has been registered, see Re National Bank of Wales; Taylor's Case, [1897] 1 Ch. 298, at p. 306.

When owing-A call is owing from the day when made. though payable subsequently, Re China Steamship and Labllan Coal Co. Ltd.; Dawes' Case (1869), 38 L.1. Ch. 512.

Notice-As to sufficiency of notice making call payable at registered office, with no person nominated, see Re Kozminsky and Melbourne Stock Exc!zm!ge Agency and Banking Corporation Ltd. (1890), 16 V.L.R. 137. See also as to notice, SII!?arloaf Tin Mining Co. v. Pile (1874), 4 S.C.R. 62.

COMPANIES ACT OF 1961 8ch. IV 423

FOURTH SCHEDULE (TABLE A)-continued Time and place-As to necessity for nominating time and place for payment,

see Robison Bros., Campbell & Sloss v. Sloss (1892), 14 A.L.T. 145, at p. 146; Cizmes & Blackwood Co. v. Coulter (1870), 1 V.R. (L.) 192; Re Kozminsky and Melbourne Stock Exchange Agency and Banking Corporation (1890), 16 V.L.R. 137.

Irregularity-As to irregularity in the appointment of directors purporting to make a call, see Haddow v. Duke Co. No Liability (1892), 18 V.L.R. 155; McIvor Hydraulic Sluicing and Gold Mining Co. Ltd. v. Hughes (1867), 4 W.W. & A'B. (L.) Ill. A call which might otherwise be invalid may sometimes be supported by art. 89, post, Essendon Land and Finance Co. v. Kilgour (1897), 24 V.L.R. 136.

Limitations-Regarding limitation of actions in respect of calls, see Re Warren, deceased, [1918] V.L.R. 209.

Promise to pay-As to the effect of a notice of call where the shareholder promises to pay it, see Mount Brown G.M. and Crushing Co. Ltd. v. Hughes (1883), 9 V.L.R. (L.) 383.

Set-off-As to a set-off against calls, see Re Switchback Railway & Outdoor Amusement Co. Ltd.; Mount's Case (1890), 16 V.L.R. 339.

Writ-Where an action must be resorted to in order to enforce payment of a call, the special endorsement must allege that the company is incorporated under the Act, Commercial Bank of Australia Ltd. v. Hatton (1895), 21 V.L.R. 489.

Concealment in prospectus-Where a prospectus concealed the fact that proposed directors were vendors to the company, that concealment is not a sufficient defence to a shareholder in an action for calls, Whittlesea Land Co. v. Gutheil (1892), 18 V.L.R. 557,

Defence-If the call has been properly made, in order to escape liability to pay it the defendant must show, it seems, that he is not a member, nor ever agreed to become one, Melb(lurne and Bingera Mining Syndicate v. Brougham (1886). 12 V.L.R. 902.

Transfer-If the vendor's name is still on the register, it is immaterial that he had transferred the shares, Essendon Land, Tramway and Investment Co. Ltd. v. UPtOIl (1891), 17 V.L.R. 902; Or that he has affected to surrender the shares, Reeves v. HiKhett (1870), 1 V.L. (L.) 110.

Trusts-Liability for calls cannot be enforced against the cestui que trust entitled to shares standing in the name of a trustee, Melbourne and Bingera Milling Syndicate Ltd. v. Brougham (1886), 12 V.L.R. 902; unless perhaps it can be shown that the trustee has been interposed as a fraudulent device, Victorian Mortgage and Deposit Bank Ltd. v. Australian Financial Agency and Guarantee Co. Ltd. (1893), 19 V.L.R. 680.

Deceased member-As to the liability of a deceased shareholder's estate for calls, see Permanent Trustee Co, of New South Wales Ltd. v. Palmer (1929), 42 C.L.R. 277; [1929] A.L.R. 153.

Call for payment of liabilities only-As to an article that no call shall be made on a winding-up except for payment of liabilities, see King v. Tait (1936), 57 C.L.R. 715.

Magistrates Court-Magistrates Courts ordinarily have jurisdiction in actions to recover cans, see the Magistrates Courts Acts 1921 to 1954, s. 4, title MAGISTRATES COURTS; Great Freehold Mining Estate Ltd. v. Garde (1890), 4 Q.L.J. 9. As to the jurisdiction of a Magistrates Court to hear an action for calls by a British company against a person resident out of the jurisdiction, see Olympia Motor Speedway (Queensland) Ltd. v. Berckelmann (1931), 25 Q.l.P. 110.

14. A call shall be deemed to have been made at the time when the resolution of the directors authorizing the call was passed and may be required to be paid by instalments,

Two calls-Two calls to take effect at different dates may be made at the one meeting, Universal Corporation v. Hughes, [1909] S.C. 1434; but cf. Hodgson v. Fermov Extended Gold Mining Co., Registered (1866), 3 W.W. & A'B. (L.) 70.

15. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof.


FOURTH SCHEDULE (TABLE A)-continued Survivorship-The liability of husband and wife in respect of shares held jointly

by them survives to the wife on the death of the husband, Mercantile Bank of Australia Ltd. v. Dinwoodie (1902), 28 V.L.R. 75.

Personal representatives-A joint holder of shares is a member and his personal representatives are liable to be placed on the list of contributories as personal representatives of a past member, Permanent Trustee Co. oj New South Wales Ltd. v. Palmer (1929), 42 C.L.R. 277; [1929] AL.R. 153.

Judgment not recovered-The estate of a deceased joint holder is not liable for calls accrued but for which judgment has not been recovered in his lifetime, National Trustees Executor and Agency Co. Ltd. v. Walsh (1895), 21 V.L.R. 75.

16. If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the sum from the day appointed for payment thereof to the time of actual payment at such rate not exceeding 8 per centum per annum as the directors may determine, but the directors shall be at liberty to waive payment of that interest wholly or in part.

Calls by liquidator-A provision in the articles as to payment of interest on calls does not apply to calls made by the liquidator, Australian Agency and Guarantee Co. Ltd. v. Clarke (1893), 14 AL.T. 237.

Balance order-As to the rate of interest on application for a balance order, see Re Spottiswoode Estate Co. Ltd. (1895), 21 V.L.R. 334.

17. Any sum which by the terms of issue of a share becomes payable on allotment or at any fixed date, whether on account of the nominal value of the share or by way of premium, shall for the purposes of these regulations be deemed to be a call duly made and payable on the date on which by the terms of issue the same becomes payable, and in case of non-payment all the relevant provisions of these regulations as to payment of interest and expenses, forfeiture, or otherwise shall apply as if the sum had become payable by virtue of a call duly made and notified.

18. The directors may, on the issue of shares, differentiate between the holders as to the amount of calls to be paid and the times of payment.

On the issue-As to the validity of a discriminatory call made in the absence of any such arrangement having been made on the issue, see Galloway v. Halle Concerts Society, [1915] 2 Ch. 233; [1914-15] All E.R. Rep. 543.

19. The directors may, if they think fit, receive from any member willing to advance the same all or any part of the money uncalled and unpaid upon any shares held by him, and upon all or any part of the money so advanced may (until the same would, but for the advance, become payable) pay interest at such rate not exceeding (unless the company in general meeting shall otherwise direct) 8 per centum per annum as may be agreed upon between the directors and the member paying the sum in advance.

Fiduciary power-There is a fiduciary power in the directors, and a mala fide exercise of it for their own interest may be set aside as a fraud on the power, Re European Central Railway Co.; Sykes' Case (1872), L.R. 13 Eq. 255.

Colourable exercise forbidden-This power may not be exercised colourably, so as to pay in substance a dividend irrespective of profits, Lock v. Queensland Investment and Land Mortgage Co., [1896] 1 Ch. 397; [1896] AC. 461.

Separate classes-Shareholders who have paid uncalled moneys in advance have been held to be shareholders of a separate class from fully paid shareholders, Kinf? v. Tail and Federal Deposit Bank Ltd. (1936), 57 C.L.R. 715; [1937] A.L.R. 146.


FOURTH SCHEDULE (TABLE A)-continued TRANSFER OF SHARES

20. Subject to these regulations any member may transfer all or any of his shares by instrument in writing in any usual or common form or in any other form which the directors may approve. The instrument shall be executed by or on behalf of both the transferor and the transferee; and the transferor shall remain the holder of the shares transferred until the transfer is registered and the name of the transferee is entered in the register of members in respect thereof.

Execution-Execution need not be by deed, sealed and delivered. Re Tahiti Cotton Co. (1874), L.R. 17 Eq. 273. But apparently the instrument in this case was under seal, Ortigosa v. Brown (1878), 47 L.J. (Ch.) 168. Semble, a transfer wanting the transferee's execution does not pass the legal title to the shares, ibid. If, however, a transferee has become registered, and acted as a shareholder, he may, notwithstanding lack of execution, be a shareholder, Cunninghame v. City oj Glasgow Bank (1879), 4 App. Cas. 607. Semble, the signature of a transferor to a transfer delivered to the transferee cannot be revoked by notice given to the company, Grundy v. Briggs, [1910] 1 Ch. 444. On purchase of shares, it is ordinarily the duty of the purchaser to prepare the transfer and obtain the vendor's signature, Birkett v. Cowper-Coles (1919), 35 T.L.R. 298.

Power of attorney-A transfer was held invalid when it had been executed by an attorney who was aware when he procured the power of attorney that the shareholder did not know it was a power of attorney, McLaughlin v. Daily Telegraph Newspaper Co. Ltd. (No.2) (1904), 1 C.L.R. 243. Where a transfer is to be executed in reliance upon a power of attorney, that power must confer express authority, Fiedler v. SOllth Mount Lyell Mining Co. Ltd. (1900), 25 V.L.R. 442.

Title-A good equitable security can be given on shares by depositing the scrip and a transfer signed by the mortgagor and undated with the mortgagee. This is so whether the company's articles do or do not require transfers to be by way of deed, Societe Generale de Paris v. Walker (1885), 11 App. Cas. 20; Colonial Bank v. Whinney (1886), 11 App. Cas. 426. Notice to the company is not necessary to perfect the mortgagee's title, Societe Generale de Paris v. Walker, supra. The operation of s. 156, ante, as to notice of trusts may mean that the rule in Dearie v. Hall (1828), 3 Russ. 1, does not apply as to notice in determining priorities. It may be otherwise in the case of liens on shares, Bradford BankinR Co. v. Briggs & Co. (1886), 12 App. Cas. 29. As to the question of equities where blank trunsfers, lodged by way of equitable charge, are subsequently filled in and dealt with, see France v. Clark (1883),22 Ch. D. 830; (1884), 26 Ch. D. 257; Fox v. Martin. [1895] W.N. 36; Easton v. London Joint Stock Bank (1886), 34 Ch. D. 95; London Joint Stock Bank v. Simmons, [1892] A.C. 201; Colonial Bank v. Cady & Williams (1890), 15 App. Cas. 267; Farquarson Bros. v. King & Co., [1902] A.C. 325; Imperial Bank of Canada v. Bank of Hamilton, [1903] A.C. 49.

Waiver-Compliance by the vendor of shares with the requirements of the articles of association in regard to a transfer of shares may be waived by the directors, Re Heights of Maribyrnong Estate Co. (1892), 22 V.L.R. 432.

Validity-As to the effect of a regular course of dealing with transfers by a company not in accordance with formal requirements of its articles, see Straffon's Executors' Case (1852), 1 De G.M. & G. 576. The agreement to transfer on the one part and to accept on the other part shares purporting to be transferr.ed is of the essence of the validity of the transfer. Unless, therefore, the two parties are ad idem the transfer is a nullity, as for example, where the transfer is completed by the inclusion of particular shares which the transferor did n?t agree to transfer or the transferee did not agree to accept, or where the transfer IS a forgery, Tayler v Great Indian Peninsula Railway Co. (1859), 4 De G. & J. 559; Re Blakely Ordinance Co.; Bailey's Case, [1869] W.N. 196; Barton v. North Staffordshire Railway Co. (1888), 38 Ch. D. 458; Welch v. Bank of England, [1955] Ch. 508; [1955] 1 All E.R. 811.

Imperfect gift-Non-registration of a transfer of shares made by a donor does not render the gift imperfect, Re Rose, [1949] Ch. 78; [1948] 2 All E.R. 971 (distinguishing Milroy v. Lord (1862), 4 De G. F. & I. 264).


FOURTH SCHEDULE (TABLE A)-continued True consideration-In determining whether or not a transfer is duly stamped,

the directors may examine into the true consideration for the transfer, Maynard v. Consolidated Kent Collieries Corporation, [1903] 2 K.B. 121; Conybear v. British Briquettes, [1937] 4 All E.R. 191.

Dividend-Where upon a sale of shares there is no special condition as to dividend, the purchaser takes thereunder any dividend with which the shares may be pregnant at the date of sale, although payable in respect of an anterior period, Black v. Homersham (1878), 4 Ex. D. 24; McGowan v. Isis Central Sugar Mill Co. Ltd., [1903] Q.W.N. 24; Re Wimbush, [1940] Ch. 92; [1940] 1 All E.R. 229; Multipar v. Devitt, [1945] 1 All E.R. 298, at p. 301. But the vendor is entitled to all dividends declared before the date of sale, even though such dividends may be payable by instalments on dates after the date of sale, Re Kidner, [1929] 2 Ch. 121; [1929] All E.R. Rep. 551.

21. The instrument of transfer must be left for registration at the registered office of the company together with such fee not exceeding 2s. 6d. as the directors from time to time may require accompanied by the certificate of the shares to which it relates and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer, and thereupon the company shall subject to the powers vested in the directors by these regulations register the transferee as a shareholder and retain the instrument of transfer.

22. The directors may decline to register any transfer of shares not being fully paid shares to a person of whom they do not approve and may also decline to register any transfer of shares on which the company has a lien.

Grounds for refusal-As to grounds for directors refusing to register, see Re Gipps Land Steam Navigation Co. (1875), 1 V.L.R. (E.) 141. See also Re Commercial Banking Co. of Sydney Ltd.; Hall's Case (1899), 9 B.C. (N.S.W.) 41.

Beneficial interest retained-Directors may properly in the exercise of their discretion refuse to register a transfer where the whole beneficial interest in the share is retained by the transferor and where the transfer is made for the purpose of increasing his voting power in the company, Manning River Dairy Co. Ltd. v. Shoesmith (1915), 19 C.L.R. 714; 21 A.L.R. 206.

Defaulting servant-When the directors had power to decline to register any transfer made by a person indebted to the company, the power did not extend to a transfer made by a person in the company's employ who had made default in his accounts, Ex parte Trevascus; Re Wm. McCullock & Co. Ltd. (1879), 5 V.L.R. (L.) 195.

Onus-The onus of proving that the directors showed a want of bona fides in refusing to register a transfer lies on the person alleging it, Australian Metropolitan Life Assurance Co. Ltd. v. Ure (1923), 33 C.L.R. 199; 30 A.L.R. 53.

Assumed name-For a case where the procuring of the registration of an infant as a member to avoid liability was regarded as the application of the person procuring his registration, to be registered under an assumed name, see Victorian MortRaRe and Deposit Bank Ltd. v. Australian Financial Agency and Guarantee Co. Ltd. (1893), 19 V.L.R. 680.

Court-When the articles give power to decline to register a transfer, the court cannot in a winding-up exercise the discretion of the directors, Re Chatsworth Estate Co. Ltd. (1892). 18 V.L.R. 442; and the court will not rectify (he register where it appears that the directors have not been asked to exercise the discretion given them by the articles, Ex parte Perclzard (1890), 12 A.L.T. 60.

Transferee from sheriff-As to whether a transferee from a sheriff under an execution is absolutely entitled to have the transfer registered where the directors have a power to decline to register transfers, see Re McCracken's City Brewery Co. Ltd. (No.2); Ex parte Quinlivan (1899), 24 V.L.R. 803, and Ex parte Trevascus; Re Wm. McCullock & Co. Ltd. (1879), 5 V.L.R. (L.) 195.

23. The registration of transfers may be suspended at such times and for such periods as the directors may from time to time determine not exceeding in the whole thirty days in any year,

COMPANIES ACT OF 1961 Sch.1V 427

FOURTH SCHEDULE (TABLE A)-continued TRANSMISSION OF SHARES

24. In case of the death of a member the survivor or survivors where the deceased was a joint holder, and the legal personal representatives of the deceased where he was a sole holder, shall be the only persons recognised by the company as having any title to his interest in the shares but nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons.

Personal representatives-Until steps are taken to transfer the interest, the deceased shareholder, that is, his estate, remains a member and the representatives are entitled to receive dividends, Re Agriculturalist Cattle Insurance Co.; Baird's Case (1870), 5 Ch. App. 725; and are liable for calls, lames v. Buena Ventura Nitrate Grounds Syndicate, [1896] 1 Ch. 456. Until the representatives either personally accept or validly dispose of the shares, or until the shares are compulsorily transferred, the deceased shareholder's estate remains liable, Re City of Glasgow Bank; Buchan's Case (1879), 4 App. Cas. 549; Heyward v. Wheatley (1853), 3 De G.M. & G. 628.

Representatives may be placed On the list of contributories and in default of payment of calls the estate may be administered, s. 220, ante. If representatives are registered as shareholders, then as between themselves and the company they become liable. s. 16, ante. If, however, they transfer the shares without themselves becoming registered as shareholders, they incur no such liability, s. 95, ante. Before shares can be transferred into the name of the representative so as to make him personally liable, there must be shown a distinct and intelligent request by him that the shares should be so dealt with. If he merely produces to the company for noticing, the grant of probate or administration, this alone will not make him personally liable, Re City of Glasgow Bank; Buchan's Case (1879), 4 App. Cas. 549.

25. Any person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as may from time to time properly be required by the directors and subject as hereinafter provided, elect either to be registered himself as holder of the share or to have some person nominated by him registered as the transferee thereof, but the directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by that member before his death or bankruptcy.

Right to registration-For the right of a representative to have his name entered on the register, see Re City of Glasgow Bank; Buchan's Case (1879), 4 App. Cas. 549; Scott v. Frank F. Scott, etc., Ltd., [1940] Ch. 794; [1940] 3 All E.R. 508. If an executor claims the right to be registered as a member, the company is not entitled. in the absence of anything to the contrary in the articles, to record upon the register that he is such an executor, Re T. H. Saunders & Co., [1908] I Ch. 415; Edwards v. Ransomes and Rapier Ltd. (1930), 143 L.T. 594. Likewise, a trustee in bankruptcy is entitled to a clean registration, Re Key & Son Ltd., [1902] I Ch. 467. As to rights of representatives to be registered notwithstanding pre-emptive rights conferred by particular articles on directors, see Moodie v. W. & l. Shepherd (Bookbinders) Ltd., [1949] 2 All E.R. 1044.

Insolvent-The assignee of an insolvent member of a company is entitled to have his name entered on the register. Such a right is an incident of property in the share; but it is subject to any restriction in the company's memorandum or articles, Wood v. W. & G. Dean Pty. Ltd. (1929),43 C.L.R. 77; [1930] A.L.R. 24.

Decline to register-Although the articles gave an executor the right to become registered or to have some other person registered, the directors were justified in declining to register a transfer pursuant to such an election where the articles further provided that they might decline to register a transfer of shares not fully paid up or to a person of whom they did not approve, Australian Deposit & Mortgage Bank v. Robertson (1897),22 V.L.R. 549.

Joint holder-For the liability of the personal representatives of a past member who was a ioint holder, see Permanent Trustee Co. of New South Wales Ltd. v. Palmer (1929), 42 C.L.R. 277; [1929] A.L.R. 153.


FOURTH SCHEDULE (TABLE A)-continued 26. If the person so becoming entitled elects to be registered himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects. If he elects to have another person registered he shall testify his election by executing to that person a transfer of the share. All the limitations, restrictions, and provisions of these regulations relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or bankruptcy of the member had not occurred and the notice or transfer were a transfer signed by that member.

27. Where the registered holder of any share dies or becomes bankrupt his personal representative or the assignee of his estate, as the case may be, shall, upon the production of such evidence as may from time to time be properly required by the directors in that behalf, be entitled to the same dividends and other advantages, and to the same rights (whether in relation to meetings of the company, or to voting, or otherwise), as the registered holder would have been entitled to if he had not died or become bankrupt and where two or more persons are jointly entitled to any share in consequence of the death of the registered holder they shall, for the purposes of these regulations, be deemed to be joint holders of the share.

Trustee of bankrupt-On the bankruptcy of a registered member, the right to become registered vests in his trustee and thereby the right, subject to the articles, to the legal interest in the shares, Re Camherwell }'1otors Pty. Ltd.; [1926] V.L.R. 539. See also Wood v. W. & C. Dean Pty. Ltd. (1929), 43 C.L.R. 77; [19301 A.L.R. 24.

Rights of bankrupt member-As to the voting rights of a bankrupt member of a company not in liquidation, see Morgan v. Gray, [1953] Ch. 83; [1953] 1 All E.R.213.

Sale of bankrupt's share-As to provisions in articles for compulsory sale of a bankrupt's share, see Borland's Trustee v. Steel Bros. & Co., [1901] 1 Ch. 279.

FORFEITURE OF SHARES

28. If a member fails to pay any call or instalment of a call on the day appointed for payment thereof, the directors may, at any time thereafter during such time as any part of the call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued.

Forfeiture on non-payment of cal\s-An article providing for forfeiture ipso facto on non-payment of calls is ultra vires, Creat Monkland Tribute Co. v. Trueman (1894), 6 Q.L.J. 112; New 3 and 4 North Clanmire Tribute C.M. Co. Ltd. v. Conlan (1900), 10 Q.L.J. 70; 10 Q.L.J. (N.C.) 24.

Requiring payment-The expression "requiring payment" was considered in Crav v. L. Stevenson & Sons Ltd. (in liq.) (1899), 25 V.L.R. 476.

29. The notice shall name a further day (not earlier than the expiration of fourteen days from the date of service of the notice) on or before which the payment required by the notice is to be made, and shall state that in the event of non-payment at or before the time appointed the shares in respect of which the call was made will be liable to be forfeited.

30. If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture.

COMPANIES ACT OF 1961 Scb. IV 429

Dividends-Note that the Public Curator Acts 1915 to 1957, s. 109 A, title TRUSTEES AND EXECUTORS, prohibits the forfeiture of dividends legally payable and distributable. As to dividends, see further arts. 98-105, post.

Power of forfeiture-Forfeiture of shares for non-payment of calls is commonly provided for in companies articles; and when bona fide invoked the power is legitimate, Marshall v. Glamorgan Iron & Coal Co. (1868), L.R. 7 Eq. 129; Re London and Mediterranean Bank; Wright's Case (1868), L.R. 12 Eq. 335 n.

Strictly construed-Where a power of forfeiture exists, it is to be treated as strictissimi juris. Clarke and Chapman v. Hart (1858), 6 H.L. Cas. 633; Srimati Premila Devi v. Peoples Bank oj Northern India, [1938] 4 All E.R. 337.

Strict compliance with the articles relating to forfeiture is essential to a valid forfeiture. Wood v. United Freehold Quartz Mining Co. Registered (1870), 1 V.R. (E.) 168. where the notice of date for payment was held insufficient as it fixed an impossible day. In Reeves v. McCafferty (1870), 1 V.R. (L.) 190, there had been an omission to make certain entries in the share register opposite the forfeited shares. as the rules of the company provided; but it was held that this omission did not prevent a forfeiture if other necessary requirements had been complied with.

For benefit of company-Forfeiture must be for the benefit of the company, not for the shareholder; the duty of directors is to enforce payment of calls made, and only when payment cannot be obtained is the power of forfeiture to be invoked, Re ARriculturalist Cattle Insurance Co.; Stanhope's Case (1866), 1 Ch. App. 161.

Forfeiture ultra vires-Where a forfeiture is ultra vires, no lapse of time can by itself render it valid, Spackman v. Evans (1868), L.R. 3 H.L. 171. If the forfeiture be ultra vires the company itself, that forfeiture may always be set aside, Bellerby v. Rowland and Marwood's St.eamship Co., [1902] 2 Ch. 14. As regards a forfeiture ultra vires the directors, see Re Agriculturalist Insurance Co.; Spackman's Case (1865), 34 L.J. (Ch.) 321, at p. 330. A forfeiture of shares not illegal as being in contravention of any statute but unauthorized by articles, and so ultra vires the directors, may be good if it be shown that every individual shareholder had knowledge of and acquiesced in the transaction, Re Agricllltural Cattle Insurance Co.; Brotherhood's Case (1862), 4 De G.F. & J. 566; Evans v. Smallcombe (1868), L.R. 3 H.L. 249. But acquiescence by a shareholder is no defence to his claim against the company that it wrongfully treated his shares as forfeited when they were not legally forfeited, Clarke v. Moonlight Extended Quartz MininR Co. No Liability (1888), 14 V.L.R. 976.

Collusive-Powers given to directors for one purpose cannot be used by them for another and different purpose, Re Cameron's Coalbrook Steam Coal & Swansea & LOllRher Ry. Co.; Bennett's Case (1854), 5 De G.M. & G. 284. Although the shareholder in whose favour the forfeiture is declared has no knowledge that the power is being used improperly, yet when he comes to claim the benefit of it. the transaction becomes a collusive one and so invalid, Manisty's Case (1873), 17 Sol. Jo. 745.

Parties-In an action for wrongful forfeiture. the person in whose name the shares stood on the register before forfeiture is a necessary party, Gray v. L. Stevenson & Sons Ltd. (in liq.) (1899), 25 V.L.R. 476. See also Cushing v. Lady Barkly Gold Mining Co. (1883), 9 V.L.R. (E.) 108.

Injunction-An invalid or oppressive forfeiture may be restrained by injunction, Johnson v. Lyttle's /ron Agency (1877), 5 Ch. D. 687; Goulton v. London Architectural Brick and Tile Co., [1877] W.N. 141. Where a shareholder is suing for rescission of his contract to take shares. the company will be restrained by injunction from forfeiting before trial, in a proper case, Lamb v. Sambas Rubber Co., [1908] 1 Ch. 845.

A rule providing for expulsion and forfeiture of shares where a shareholder fails to sell milk to the company was held to be valid, Booth v. Dairy Farmers Co-operative Milk Co. Ltd., (1932), 33 S.R. (N.S.W.) 418.

Damages-If the company declare a forfeiture without observing formalities intended for the protection of the shareholder, then the company cannot hold the shareholder liable as a contributory, although the company may be liable to the shareholder in damages Re New Chile Gold Mining Co. (1890), 45 Ch. D. 598. As to the measure of 'damages, where articles provided such as the remedy for an irregular forfeiture, see Haddow v. Duke CQ. No Liability (1892), 18 V.L.R. 155.


FOURTH SCHEDULE (TABLE A)--continued Subscriber not on register-The fact that the name of a subscriber to the

memorandum has not been actually entered on the register, and hence no specified shares have ever been allotted to him, does not prevent the application to him of a power of forfeiture, Re Natal Investment Co.; Snell's Case (1869), 5 Ch. App. 22.

Directors-There must be properly appointed directors to make a call or forfeit shares, Garden Gully United Quartz Mining Co. (Registered) v. McLister (1875), 1 App. Cas. 39, at p. 53.

Means to pay-Directors are not obliged, before forfeiting pursuant to a call regularly made, to inquire .into a shareholder's means to pay, Gray v. L. St.evenson & Sons Ltd. (in /iq.) (1899), 25 V.L.R. 476.

Instalments-For whether calls payable by instalments are owing, see Land MortRaRe Bank of Victoria v. McConnell (1902), 28 V.L.R. 19.

Prospective resolution-As to a prospective resolution. for forfeiture, see Re Home Counties and General Life Assurance Co.; Woollaston's Case (1859), 4 De G. & 1. 437; Painter v. Ford, [1866] W.N. 77.

Notice-As to the formality of notice of forfeiture, see Re State Fire Assurance Co.; Webster's Case (1862),32 L.J. (Ch.) 135; Re Hoylake Rail Co., [1873] W.N. 200; Re North Hallenbeagle MininR Co.; Knight's Case (1867), 2 Ch. App. 321; Re Cobre Copper Mining Co.; Kelk's Case (1869), L.R. 9 Eq. 107.

Forfeiture consummated-As to the point of time when, under particular articles, forfeiture is consummated, see Moore v. Rawlins (1859), 6 C.B. (N.S.) 289; Re East Kongsberg Co.; Bigg's Case (1865), L.R. 1 Eq. 309.

Specific performance-As to specific performance of a contract to forfeit shares on terms. see Harris v. North Devon Rail Co. (1855), 20 Beav. 384.

Surrender-As to surrender, which question sometimes arises in association with forfeiture, see Re Beaconsfield Heights Estate Co. Ltd.; Asher's and Other's Cases (1896). 22 V.L.R. 97.

Compromise-As to compromises involving forfeiture, see Spackman v. Evans (1868), L.R. 3 H.L. 171; Re Agriculturalist Cattle Insurance Co.; Dixon's Case (1872)' L.R. 5 H.L. 606. Where there is a doubt as to whether the propositus is a shareholder or not. see Belhaven's Case (1865), 3 De G.l. & Sm. 41.

Annulment of forfeiture-As to who may institute proceedings to annul a forfeiture. see Sweny v. Smith (1869), L.R. 7 Eq. 324; Bellerby v. Rowland and Marwood's Steamship Co., [1902] 2 Ch. 14. If shares cannot be restored to the shareholder. he may be admitted in a winding-up as a creditor for damages, Re New Chile Gold Mining Co. (1890), 45 Ch. D. 598. Mere laches will not disbar a shareholder from equitable relief unless he has allowed the limitation period to run. Garden Gulley Mining Co. v. McLister (1875), 1 App. Cas. 39; Rule v. Jewell (1881). 18 Ch. D. 660.

Winding-up supervening-As to a forfeiture validly made before the commencement of voluntary winding-up, see Re China Steamship Co.; Dawes' Case (1868), L.R. 6 Eq. 232.

Release-Where a release by directors of a shareholder's liability for unpaid calls was within the powers of the directors under the articles of association, such release was valid. Re Melbourne Locomotive and Engineering Works (in liq.); Neave's Case (1895), 21 V.L.R. 442. See also Goldsmith v. Colonial Finance, Mortgage, Investment and Guarantee Corporation Ltd. (1909), 8 C.L.R. 241.

31. A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the directors think fit, and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the directors think fit.

Terms of re-issue-Forfeited shares may be re-issued credited as paid up to an amount not exceeding that paid by the previous holder and may be so re-issued in consideration of a sum less than the sum credited as paid on them, Morrison v. Trustees. Executors and Securities Insurance Corporation, [1898] W.N. 154; Re Exchange Banking Co. Ltd.; Ramwell's Case (1881), 50 L.J. (Ch.) 827.

New holder-For rights and liabilities of the new holder, see Randt Gold Mining Co. v. New Balkis Eersteling Ltd., [1903] 1 K.B. 461; [1904] A.C. 165.

Re-admission-This article means that if the forfeited member desires to become a member again, then the directors may admit him to membership, Re Exchange Trust Ltd.; Larklvorthy's Case, [1903] 1 Ch. 711.

COMPANIES ACT OF 1961 Scb.IV 431

FOURTH SCHEDULE (TABLE A)-continued Excess-A company is not liable to account to a shareholder for any amount

received on the sale of forfeited shares in excess of the amount owing on the shares, Farr v. Cash Orders (Amalgamated) Ltd. (1935), 35 S.R. (N.S.W.) 380.

Redemption-With regard to the effect of an article giving the holder of forfeited shares a right to redeem them at any time before sale, see Bullen v. South New Zealand G.M. Co. (1882), 1 Q.L.J. 72.

32. A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares, but shall, notwithstanding, remain liable to pay to the company all money which, at the date of forfeiture, was payable by him to the company in respect of the shares (together with interest at the rate of 8 per centum per annum from the date of forfeiture on the money for the time being unpaid if the directors think fit to enforce payment of such interest), but his liability shall cease if and when the company receives payment in full of all such money in respect of the shares.

Effect of article-The effect of a similar article was held not to create a new liability in the shareholder dependent only upon the article, but to continue the original liability laid down by the Act to pay the full amount due on the shares, see Goldsmith v. Colonial Finance, Mortgage, Investment and Guarantee Corporatioll Ltd. (1909), 8 C.L.R. 241, at pp. 250 and 254. This article either continues the old liability which under the Act was a specialty debt, or else creates a new liability as from the date of forfeiture, so that the limitation period runs from the date of forfeiture. James Gillespie & Co. Ltd. v. Reid, [1905] V.L.R. 101. But in Land MortRaRe Bank v. Reid, [1909] V.L.R. 284, such a debt was held not to be a specialty debt within the meaning of s. 16 of the Companies Act 1890 (Vic.).

Payment-The company cannot recover the amount of the share twice over, Re Randt Gold Mining Co., [1904] 2 Ch. 468. And any payment of uncalled capital made by the new holder must enure for the benefit of the original forfeited holder, Re Boiton, [1930] 2 Ch. 48; [1930] All E.R. Rep. 628.

Fraud-Fraud is a good defence to any action upon this article, Aaron's Reefs v. Twiss, [1896] A.c. 273.

Surety-As to release of surety for payment of calls, see Re Darwen alld Pearce, [1927] 1 Ch. 176.

Voting rights-As to voting rights of a member whose shares have been forfeited. see Re Melbourne Banking Corporation Ltd. (1885), 11 V.L.R. 610.

33. A statutory declaration in writing that the declarant is a director or the secretary of the company, and that a share in the company has been duly forfeited on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. 34. The company may receive the consideration, if any, given for a forfeited share on any sale or disposition thereof and may execute a transfer of the share in favour of the person to whom the share is sold or disposed of and he shall thereupon be registered as the holder of the share, and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale, or disposal of the share.

Objective of article-The object of this article is to give the purchaser a good title, Re Randt Gold Mining Co. v. New Balkis, [1903] 1 K.B. 461; [1904] A.C. 165. Cf. s. 95. ante. But a forfeited share may not necessarily be sold, but may be re-issued. in which case s. 95 would not apply.

35. The provisions of these regulations as to forfeiture shall apply in the case of non-payment of any sum which, by the terms or issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium, as if the same had been payable by virtue of a call duly made and notified.


FOURTH SCHEDULE (TABLE A)-continued CONVERSION OF SHARES INTO STOCK

36. The company may by ordinary resolution passed at a general meeting convert any paid up shares into stock and reconvert any stock into paid up shares of any denomination.

37. The holders of stock may transfer the same or any part thereof in the same manner and subject to the same regulations as and subject to which the shares from which the stock arose might previously to conversion have been transferred or as near thereto as circumstances admit but the directors may from time to time fix the minimum amount of stock transferable and restrict or forbid the transfer of fractions of that minimum, but the minimum shall not exceed the nominal amount of the shares from which the stock arose.

Unpaid vendor-If an unpaid vendor remains on the register after the contract of sale. he retains vis a vis the purchaser the prima facie right to vote in respect of those shares. Musselwhite v. C. H. Musselwhite & Son Ltd., [1962] 1 All E.R. 201, at p. 208.

38. The holders of stock shall according to the amount of the stock held by them have the same rights privileges and advantages as regards dividends voting at meetings of the company and other matters as if they held the shares from which the stock arose, but no such privilege or advantage (except participation in the dividends and profits of the company and in the assets on winding up) shall be conferred by any such aliquot part of stock which would not if existing in shares have conferred that privilege or advantage.

39. Such of the regulations of the company as are applicable to paid up shares shall apply to stock, and the words "share" and "shareholder" therein shall include "stock" and "stockholder".

ALTERATION OF CAPITAL

40. The company may from time to time by ordinary resolution(a) increase the share capital by such sum to be divided into

shares of such amount as the resolution shall prescribe; (b) consolidate and divide all or any of its share capital into

shares of larger amount than its existing shares; (c) subdivide its shares or any of them into shares of smaller

amount than is fixed by the memorandum; so however that in the subdivision the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;

(d) cancel shares which at the date of the passing of the resolution in that behalf have not been taken or agreed to be taken by any person or which have been forfeited and diminish the amount of its share capital by the amount of the shares so cancelled.

41. Subject to any direction to the contrary that may be given by the company in general meeting, all new shares shall, before issue, be uffered to such persons as at the date of the offer are entitled to receive notices from the company of general meetings in proportion, as nearly as the circumstances admit, to the amount of the existing


FOURTH SCHEDULE (TABLE A)-continued shares to which they are entitled. The offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and, after the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the directors may dispose of those shares in such manner as they think most beneficial to the company. The directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to shares held by persons entitled to an offer of new shares) cannot, in the opinion of the directors, be conveniently offered under this regulation.

42. The company may by special resolution reduce its share capital, any capital redemption reserve fund or any share premium account in any manner and with, and subject to, any incident authorized, and consent required by law.

Reduction-In relation to reduction of capital. see Carruth v. Imperial Chemical Industries Ltd., [1937] A.C. 707; [1937] 2 All E.R. 422.

GENERAL MEETINGS 43. An annual general meeting of the company shall be held in accordance with the provisions of the Act. All general meetings other than the annual general meetings shall be called extraordinary general meetings.

Meeting-As to the meaning of the word "meeting", see Daimler Co. v. Continental Tyre and Rubber Co. (Great Britain) Ltd., [1916] 2 A.C. 307; [1916-17] All E.R. Rep. 191; Prain & Sons, Petitioners, [1947] S.c. 325; East v. Bennett Bros. Ltd., [1911] 1 Ch. 163. As to extraordinary meetings, see generally Peters' American Delicacy Co. Ltd. v. Heath (1939), 61 C.L.R. 457; [1939] A.L.R. 124.

Compare s. 137, ante.

44. Any director may whenever he thinks fit convene an extraordinary general meeting, and extraordinary general meetings shall be convened on such requisition or in default may be convened by such requisitionists as provided by the Act.

Requisition-Where a rule provided that if a manager did not call a meeting within four days after a requisition had been delivered, then the requisitionists might call a meeting, and they did so by notice given within the four days, it was held that their act was not validated by the subsequent failure of the manager to call the meeting, Aberleldie Gold Mining Co. v. Walters (1876), 2 V.L.R. (E.) 116.

45. Subject to the provisions of the Act relating to special resolutions and agreements for shorter notice, seven days' notice at the least (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which notice is given) specifying the place the day and the hour of meeting and in case of special business the general nature of that business shall be given to such persons as are entitled to receive such notices from the company.

Shareholder outside the State-As to the necessity to give notice to shareholders who live and have their registered addresses outside the State, see Re Warden and Hotchkiss Ltd .. [1945] Ch. 270; [1945] 1 All E.R. 507; Re Vale of Clwydd Coal MininR Co. Ltd. (1912), 29 W.N. (N.S.W.) 189; Re Merchants and Shippers' Steamship Lines Ltd. (1917), 17 S.R. (N.S.W.) 146.

Notice of business-As to notice of business to be transacted, see Boschoek Proprietary Co. v. Fuke, [1906] 1 Ch. 148; Choppington's Collieries v. Johnson, [1944] 1 All E.R. 762.


FOURTH SCHEDULE (TABLE A)-continued The notice should specify the resolution sufficiently. A notice that the meeting

was called "in order to pass or otherwise deal with" a resolution. but which did not describe it as an extraordinary resolution which it was proposed to pass, was held insufficient, Re North Victorian Deep Lepd Gold Mining Co. Ltd., [1934] A.L.R. 221.

Regularity of notice-As to regularity of notice and waiver of irregularities, see Re British Sugar Refining Co. (1857), 3 K. &. J. 408; Re Oxted Motor Co., [1921] 3 K.B. 32; [1921] All E.R. Rep. 646; Re Neokratine Safety Explosive Company of New South Wales Ltd. (1891), 12 L.R. (N.S.W.) (E.) 269.

Rules silent-Where the rules of a mining company do not prescribe any mode of calling a general meeting, it must be called by serving the individual shareholders with notices. Charles v. Barkly Reef Gold Mining Co. (1877), 3 V.L.R. (L.) 101.

46. All business shall be special that is transacted at an extraordinary general meeting, and also all that is transacted at an annual general meeting, with the exception of declaring a dividend, the consideration of the accounts, balance-sheets, and the report of the directors and auditors, the election of directors in the place of those retiring, and the appointment and fixing of the remuneration of the auditors.

Special business-For observations upon special business, pronounced in relation to a similar article, see Grundt v. Great Boulder Proprietary Mines Ltd., [1948] Ch. 145, at p. 156; [1948] 1 All E.R. 21.

PROCEEDINGS AT GENERAL MEETINGS 47. No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business. Save as herein otherwise provided, three members [in the case of a public company] two members [in the case of a proprietary company] present in person shall be a quorum. For the purposes of this regulation "member" includes a member attending as a proxy or as representing a corporation which is a member.

Presence of non-members-As to -. the presence of non-members at a meeting, see Re Quinn and National Catholic Benefit and Thrift Society's Arbitration, [1921] 2 Ch. 318; Carruth v. Imperial Chemical Industries Ltd., [1937] A.C. 707; [1937] 2 All E.R. 422.

Member leaving-As to the departure of a member reducing quorum, see Re Hartley Baird Ltd., [1955] Ch. 143; [1954] 3 All E.R. 695. Cf. Hennessy v. Federation of Irish Manufacturers Ltd., [1947] I.R. 159.

Every member present-Where upon proceedings for a compulsory winding-up the number of members has fallen below the statutory number, a resolution by a lesser number is valid provided that number comprises every member of the company, Re Johnston, Dunster & Co. (1891), 17 V.L.R. 100.

Forfeited shares on trust-The manager of a company who holds forfeited shares as trustee for the company is not qualified to vote or form a quorum in respect of such shares, Re Melbourne Banking Corporation Ltd. (1885), 11 V.L.R. 610.

48. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the same day in the next week at the same time and place, or to such other day and at such other time and place as the directors may determine, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the members present (being not less than two) shall be a quorum.


FOURTH SCHEDULE (TABLE A)-continued 49. The chairman, if any, of the board of directors shall preside as chairman at every general meeting of the company, or if there is no such chairman, or if he is not present within fifteen minutes after the time appointed for the holding of the meeting or is unwilling to act, the members present shall elect one of their number to be chairman of the meeting.

Chairman-As to the chairman's duties generally, see Peters' American Delicacy Co. Ltd. v. Heath (1939), 61 C.L.R. 457, at pp. 478, 479, 489 et seq.; [1939] A.L.R. 124.

50. The chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

Business left unfinished-As to what may be "business left unfinished", see Montgomerie's Brewery Co. Ltd. v. Spencer (1899), 20 A.L.T. 260.

Adjournment-The wording of this article seems to preclude the application of ScaddinR v. Lorant (1851), 3 H.L. Cas. 418. The requirement of notice in case of adjournment for thirty days or more is mandatory and must be strictly followed. Robert Batcheller & Sons v. Batcheller, [1945] Ch. 169; [1945] 1 All E.R. 522.

At common law a public meeting may be adjourned, presumably by the chairman, R. v. D'Oyly (1840), 12 Ad. & El. 139; R. v. St. Pancras (Vestrymen, etc.) (1839), 11 Ad. & El. 15; R. v. Wimbledon Local Board (1882), 8 Q.B.D. 459; but see Salisbury Gold Mining Co. v. Hathorn, [1897] A.C. 268, at p. 275. But this must be for the proper conduct of the business, not for its frustration. A chairman has no power to stop a meeting at his own will and pleasure; the meeting can by itself resolve to proceed with the business for which it has been convened, and appoint another chairman, National Dwellings Society v. Sykes. [1894] 3 Ch. 159; Catesby v. Burnett, [1916] 2 Ch. 325. In the absence of some special provision, a chairman is not bound to adjourn a meeting, even though a majority of members present wish him to do so; he cannot adjourn it of his own mere motion, Salisbury Gold Mining Co. v Hat/10m, [1897] A.C. 268.

Right to seek vote of meeting-As long as there remains business reasonably and properly pertinent to the business of the meeting, the shareholders present are entitled to put their views and to have the vote of the meeting with regard thereto; and the chairman cannot by leaving the chair terminate the meeting before such business is disposed of, Oliver v. North Nuggetty Ajax Co. No Liability, [1912] V.L.R. 416.

51. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded-

(a) by the chairman; (b) by at least three members present in person or by proxy; (c) by any member or members present in person or by proxy

and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

(d) by a member or members holding shares in the company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.


FOURTH SCHEDULE (TABLE A)-continued Unless a poll is so demanded a declaration by the chairman that a

resolution has on a show of hands been carried or carried unanimously or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution. The demand for a poll may be withdrawn.

Resolution never put-Where a resolution, though proposed and seconded, was never put to the meeting, the chairman's declaration that it was duly passed as a special resolution did not validate it, Citizen's Theatre Ltd., Petitioners, [19461 S.C. 14. See generally James v. Evening Standard Newspaper Co. Ltd. (1895), 21 V.L.R. 399.

Chairman demanding poll-The chairman's right to demand a poll must be exercised according to whether he considered it necessary to ascertain the feeling of the meeting, Second Consolidated Trust Ltd. v. Ceylon Amalgamated Tea & Rubber Estates Ltd., [1943] 2 All E.R. 567.

Poll abandoned-For a case where, after a poll had been abandoned with the assent of those demanding it, the resolution was carried on a show of hands and held to be a good resolution, see Montgomerie's Brewery Co. Ltd. v. Spencer (1899), 20 A.L.T. 260.

Interested chairman-The fact that the chairman is interested in the result does not invalidate the declaration, Burland v. Earle, [1902] A.C. 83, unless it be shown that his action was corrupt, Re Consolidated South Rand Mines Deep Ltd., [1909] 1 Ch. 491 (interest in other company). See also Brown v. British Abrasive Wheel Co., [1919] 1 Ch. 290 (majority coercing minority).

Conclusive-Though "conclusive", the declaration may be disputed on the ground of fraud, Wall v. London & Northern Assets Corporation, [1899] 1 Ch. 550; or that it is inaccurate on the face of it, an arithmetical miscalculation having been made. Re Caratal (New) Mines Ltd., [1902] 2 Ch. 498; cf. Wall v. Exchange Investment Corporation Ltd., [1926] Ch. 143; Re Fraser & Co.; Ex parte James (1896), 22 V.L.R. 385.

If it is to be disputed, the declaration should be challenged immediately, Arnot v. United African Lands Ltd., [1901] 1 Ch. 518.

Minute-The minute need not be actually signed at the meeting, West London Railway Co. v. Bernard (1843), 3 Q.B. 873. As to the danger of making subsequent alterations or additions, see Re Cawley & Co. (1889),42 Ch. D. 209, at p. 226.

52. If a poll is duly demanded it shall be taken in such manner and either at once or after an interval or adjournment or otherwise as the chairman directs, and the result of the poll shall be the resolution of the meeting at which the poll was demanded but a poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith.

Demand for poll-As to the chairman's rights to demand a pol!, see Second Consolidated Trust Ltd. v. Ceylon Amalgamated Tea & Rubber Estates Ltd., [1943] 2 All E.R. 567. There cannot be a valid demand for a poll unless there has been a valid show of hands, Carruth v. Imperial Chemical Industries Ltd., [1937] A.c. 707; [1937] 2 All E.R. 422. Where a poll was demanded on a question of adjournment, but it was impossible to take it forthwith, see Jackson v. Hamlyn, [19531 Ch. 577; [1953] 1 All E.R. 887.

53. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a second or casting vote.

54. Subject to any rights or restrictions for the time being attached to any class or classes of shares, at meetings of members or classes of members each member entitled to vote may vote in person or by


FOURTH SCHEDULE (TABLE A)-continued proxy or by attorney and on a show of hands every person present who is a member or a representative of a member shall have one vote, and on a poll every member present in person or by proxy or by attorney or other duly authorized representative shall have one vote for each share he holds.

Director-Apart from any limitation imposed by the articles, a director has the same right as a shareholder to vote at a general meeting, Merryweather's Case (1864), 2 Hem. & M. 254.

Shareholder-A shareholder is entitled to vote as he pleases, and in the absence of any prohibition in the articles, he may vote on any question in which he is personally interested, Elliott v. Richardson (1870), L.R. 5 C.P. 744; Re London and Mercantile Discount Co. (1865), L.R. 1 Eq. 277; Peters' American Delicacy Co. Ltd. v. Heath (1939), 61 C.L.R. 457, at pp. 481, 482, 504, 507, 512. His vote, in the absence of fraud, may be decisive in determining the issue in his own favour, North-West Transportation Co. v Beatty (1887), 12 App. Cas. 589. See also Burland v. Earle, [1902] A.C. 83; Baird v. J. Baird & Co. (Falkirk), [1949] S.L.T. 368; Dutton v. Gorton (1917), 23 C.L.R. 362. A shareholder may for valuable consideration bind himself by agreement as to the manner in which he will in future exercise his vote and such agreement may be enforceable by injunction, Greenwell v. Porter, [1902] 1 Ch. 530; Puddephatt v. Leith, [1916] 1 Ch. 200; [1914-15] All E.R. Rep. 260.

55. In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the register of members.

Division-As to a division of joint holdings sO as to confer votes upon joint holders severally, see Burns v. Siemens Bros. Dynamo Works, [1919] 1 Ch. 225; Dawson v. Dawson, [1945] V.L.R. 99.

Senior-Generally, see Barclays Bank Ltd. v. Inland Revenue Commissioners [1959] 3 All E.R. 140, at p. 146.

56. A member who is of unsound mind or whose person or estate is liable to be dealt with in any way under the law relating to mental health may vote, whether on a show of hands or on a poll, by his committee or by the Public Curator or by such other person as properly has the management of his estate, and any such committee, Public Curator or other person may vote by proxy or attorney.

57. No member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the company have been paid.

58. No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the chairman of the meeting, whose decision shall be final and conclusive.

Ignorance of invalidating circumstances-As to the desirability of an article such as this in view of the possibility that a chairman, or other members present, might at the time of the meeting be ignorant of circumstances which in fact would render a substantial vote invalid, see Buckley on the Companies Acts, 13th ed., at p. 846.


FOURTH SCHEDULE (TABLE A)-continuerl 59. The instrument appointing a proxy shall be in writing (in the common or usual form) under the hand of the appointor or of his attorney duly authorized in writing or, if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorized. A proxy may but need not be a member of the company. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.

60. Where it is desired to afford members an opportunity of voting for or against a resolution the instrument appointing a proxy shall be in the following form or a form as near thereto as circumstances admit:-

Limited. l/We, , of , being a

member/members of the above-named company, hereby appoint , of , or failing him, , of , , as may/our proxy to vote for me/us on my/our behalf at the [annual or extraordinary, as the case may be] general meeting of the company, to be held on the day of ,19 ,and at any adjournment thereof.

Signed this day of , 19

This form is to be used *in fa~outr of the resolution. agams

* Strike out whichever is not desired. [Unless otherwise instructed, the proxy may vote as he thinks fit.]

Common law position-Since there is no common law right in a member of a corporation to vote by proxy, any such right must found on contract and accordingly the provisions of the articles respecting formalities of an instrument appointing a proxy must be observed, Harben v. Phillips (1883), 23 Ch. D. 14.

Discretion to vote-As to the desirability of enlarging in the articles the discretion of the proxy to vote in favour of or against the resolution, see Re Waxed Papers Ltd., [1937] 2 All E.R. 481.

SOliciting proxies-There is no objection to the directors soliciting proxies, using the services of the officers of the company and expending the company's funds for the purpose of putting their policy into effect, Campbell v. Australian Mutual Provident Society (1908), 24 T.L.R. 623; 77 L.J. (P.C.) 117.

Disclosure-It is not essential to the casting of a vote at a meeting by a proxy on behalf of his principal that the proxy should expressly state that he is voting for and On behalf of his principal, Clifton v. Mount Morgan Ltd. (1940), 63 C.L.R. 329.

Shareholder voting-Although a shareholder has given a proxy he may attend and vote personally, Cousins v. International Brick Co. Ltd., [1931] 2 Ch. 90.

61. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the registered office of the company, or at such other place within the State as is specified for that purpose in the notice convening the meeting, not less than forty-eight hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, or, in the case of a poll, not less than twenty-four hours before the time appointed for the taking of the poll, and in default the instrument of proxy shall not be treated as valid.

COMPANIES ACT OF 1961 Sch.IV 439

FOURTH SCHEDULE (TABLE A)-continued 62. A vote given in accordance with the terms of an instrument of proxy or attorney shall be valid notwithstanding the previous death or unsoundness of mind of the principal or revocation of the instrument or of the authority under which the instrument was executed, or the transfer of the share in respect of which the instrument is given, if no intimation in writing of such death, unsoundness of mind, revocation, or transfer as aforesaid has been received by the company at the registered office before the commencement of the meeting or adjourned meeting at which the instrument is used.

DIRECTORS: APPOINTMENT, ETC.

63. The number of the directors and the names of the first directors shall be determined in writing by the subscribers of the memorandum of association or a majority of them.

Nominated in articles-Sometimes directors are nominated in the articles, see for example Matthews v. Newport Block and Tile Co. Pty. Ltd. (in liq.) (1950), 80 C.L.R. 269; Way v. A. G. Way & Co. Pty. Ltd., [1959] V.R. 370. See, however, s. 115, ante.

Powers of first directors-The first directors have the powers of directors for all purposes, the same as elected directors, Eales v. Cumberland Black Lead Mine Co. (1861), 6 H. & N. 481.

Meetings not duly convened-An appointment made by the majority of subscribers was held good, even though the meeting had not been duly convened, Federal Mutual Live Stock Insurance Co. v. Donaghy (1888), 14 V.L.R. 857.

64. At the first annual general meeting of the company all the directors shall retire from office, and at the annual general meeting in every subsequent year one-third of the directors for the time being, or, if their number is not three or a multiple of three, then the number nearest one-third, shall retire from office. A retiring director shall be eligible for re-election.

Meeting not held-Semble, if in any calendar year an annual meeting is not held under an article in this form, those directors who would have retired thereunder will vacate office on the last day of the year, Morris v. Kanssen, [1946] AC. 459, at p. 471; [1946] 1 All E.R. 586, at p. 590.

Particular articles-On the construction of particular articles providing for rotational retirement, see Re Moseley & Sons, [1939] Ch. 719; [1939] 2 All E.R. 791; Eyre v. Milton Pty. Ltd., [1936] Ch. 244; [1935] All E.R. Rep. 286.

Rescission-The power of rescinding the election of directors must be specially provided for, since the inherent power to rescind resolutions does not extend to resolutions for the election of directors, Schaw v. Wekey (1870), 1 V.L.R. (L.) 205; Aberleldie Gold Mining Co. v. Walters (1876), 2 V.L.R. (E.) 116.

65. The directors to retire in every year shall be those who have been longest in office since their last election, but as between persons who became directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot.

By ballot-In a similar article, the words "by ballot" were held to mean "by lot", Eyre v. Milton Pty. Ltd., [1936] Ch. 244; [1935] AI! E.R. Rep. 286.

66. The company at the meeting at which a director so retires may fill the vacated office by electing a person thereto, and in default the retiring director shall, if offering himself for re-election and not being disqualified under the Act from holding office as a director, be deemed to have been re-elected, unless at that meeting it is expressly resolved not to fill the vacated office or unless a resolution for the re-election of that director is put to the meeting and lost.


FOURTH SCHEDULE (TABLE A)-continued Non-existent vacancies-Directors elected to fill non-existent vacancies are

not validly elected, Garden Gully United Quartz Mining Co. v. Schmidt (1876), 1 Wheeler P .C. II.

Retirement-But even an election which is invalid for want of proper notice of the meeting effects the retirement of those directors whose places were to be filled at the meeting, Garden Gully United Quartz Mining Co. v. McLister (1875), 1 App. Cas. 39.

Questioned appointments-Further on the subject of questioned appointments of directors. see Oliver v. North Nuggetty Ajax Co. No Liability, [1912] V.L.R. 416, where an election was held after the chairman had improperly adjourned the meeting and left the chair; Buzolic Patent Damp-Resisting and Anti-Fouling Paint Co. Ltd. v. Cornwell (1885), 11 V.L.R. 371, where the provisions of a validating statute were considered; and Essendon Land and Finance Association Ltd. v. Kilgour (1898), 24 V.L.R. 136.

67. The company may from time to time by ordinary resolution passed at a general meeting increase or reduce the number of directors, and may also determine in what rotation the increased or reduced number is to go out of office.

68. The directors shall have power at any time, and from time to time, to appoint any person to be a director, either to fill a casual vacancy or as an addition to the existing directors, but so that the total number of directors shall not at any time exceed the number fixed in accordance with these regulations. Any director so appointed shall hold office only until the next following annual general meeting, and shall then be eligible for re-election but shall not be taken into account in determining the directors who are to retire by rotation at the meeting.

Subiect to retirement-Where an article provided that "any casual vacancy occurring in the board of directors may be filled up by the directors, but the person so chosen shall be subject to retirement at the same time as if he had become a director on the same day on which the director in whose place he is appointed was last elected a director", it was held that this article deals only with vacancies which occur when the person whose place is to be filIed up was elected under the rotational system, so that he was liable to retire at an annual general meeting of the company some years later and that time has not arrived when the vacancy occurs. It has no appJicatior: to vacancies caused by the deaths of directors nominated in another article which provided that particular directors were to hold office until death, resignation, or cessation of holding a share qualification, see Way v. A. G. Way & Co. Pty. Ltd., [1959] V.R. 370.

69. The company may by ordinary resolution remove any director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead; the person so appointed shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director.

See s. 120, ante, which speaks of a public company.

70. The remuneration of the directors shall from time to time be determined by the company in general meeting. That remuneration shall be deemed to accrue from day to day. The directors may also be paid all travelling, hotel, and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the directors or general meetings of the company or in connection with the business of the company.

Trustee-As to whether and to what extent a director who is a trustee of shares is accountable to his beneficiaries for remuneration he receives as a director, see Re Macadam; Dallow v. Codd, [1946] Ch. 73; [1945] 2 All E.R. 664. Contrast


FOURTH SCHEDULE (TABLE A)-continued Re Lleweliin's Will Trusts, [1949] Ch, 225; [1949] 1 All E.R. 487; Re Gee, [1948] Ch. 284; [1948] 1 All E.R. 498; and generally, Butt v. Kelson, [1952] Ch. 197; I1952] 1 All E.R. 167.

Quantum meruit-As to recovery by a director upon a quantum meruit, see Re Bodega Co., [1904] 1 Ch. 276; Re Consolidated Nickel Mines, [1914] 1 Ch. 883; Craven-Ellis v. Canons Ltd., [1936] 2 K.B. 402; [1936] 2 All E.R. 1066.

Differential remuneration-As to whether a company can discriminate between directors so as to vote them different remuneration, see Foster v. Foster, [1916] 1 Ch. 532; D916-17] All E.R. Rep. 856.

How remuneration determined-Determination to remunerate directors of a going concern must be bona fide, may be made by ordinary resolution and must be at a properly convened meeting, Colhoun v. Green, [1919] V.L.R. 196, at pp. 200, 201.

Past or future services-If the meeting is properly convened on proper notice and the shareholders are acting bona fide and the company is a going concern, they can fix remuneration by an ordinary resolution either as a reward for past services or as a measure of the payments which may be made for services to be rendered, Calhoun v. Green, [1919] V.L.R. 196.

Worker-Where a director of a company performs services for the company and receives payment from the company the question whether his fellow directors employ him as a worker within the meaning of workers' compensation legislation {)n behalf of the company is one of fact, Ross v. Ross & Bowman Pty. Ltd. (1942), 59 W.N. (N.S.W.) 209.

71. The shareholding qualification for directors may be fixed by the ,company in general meeting, and unless and until so fixed shall be one share.

Allotment essential-Mere consent to act as director does not, in the absence of an allotment of shares and entry on the register, amount to an agreement to take shares, Re Melbourne Parking Station Ltd., [1928] A.L.R. 224. See generally Re Camberwell Motors Pty. Ltd. (in liq.), [1926] V.L.R. 539.

Indebted for calls-Where a company's article provided that no person indebted for calls should be eligible for office of director and a director had given his promissory notes in payment of certain calls, it was held he was not qualified for office, Umphelly v. Wilkie (1874), 5 A.J.R. 108.

72. The office of director shall become vacant if the director(a) ceases to be a director by virtue of the Act; (b) becomes bankrupt or makes any arrangement or composition

with his creditors generally; (c) becomes prohibited from being a director by reason of any

order made under the Act; (d) becomes of unsound mind, or a person whose person or

estate is liable to be dealt with in any way under the law relating to mental health;

(e) resigns his office by notice in writing to the company; (f) for more than six months is absent without permission of

the directors from meetings of the directors held during that period;

(g) without the consent of the company in general meeting holds any other office of profit under the company except that of managing director or manager; or

(h) is directly or indirectly interested in any contract or proposed contract with the company and fails to declare the nature of his interest in manner required by the Act.


FOURTH SCHEDULE (TABLE A)-continued Interest in contract-As to a director's liability to account to the company

for profits made by him where paragraph (il) applies, see Furs Ltd. v. Tomkies (1936), 54 C.L.R. 583; Peninsula & Oriental Steam Navigation Co. v. Johnson (1938), 60 C.L.R. 189; George R. Bond & Co. Ltd. v. Bond (1929), 30 S.R. (N.S.W.) 15.

Where the plaintiff was one of the directors of the defendant company and also had a contract with it, the new concurrence by him as a director in acts which rendered the company unable to perform its contract with him was held not to affect his right of action for breach of contract, Glass v. Pioneer Rubber Works of Australia Ltd., [1906] V.L.R. 754.

Entitled to be heard-A director is entitled to be heard upon the question whether his office has been vacated, Turnbull v. West Riding Ath!'etic Club (Leeds) Ltd., [1894] W.N. 4. But where the articles name events upon which a director shall vacate office, then that office is vacant upon the happening of that event, and the board cannot waive the event or condone the act, Re Bodega Co., [1904] 1 Ch. 276.

Conviction-Where articles provided that a director who was "convicted of an indictable offence" should vacate office, a director convicted by a court of summary iurisdiction of an offence for which he might have been indicted was held not to have vacated office, Hastings and Folkestone Glass Works Ltd. v. Kalson, [1949] 1 K.B. 214; [1948] 1 All E.R. 711. See on this point the Criminal Code, s. 659, title CRIMINAL LAW.

Duty to disclose interest-On the duty of the director to disclose his interest, see Gray v. New Augarita Porcupine Mines Ltd., [1952] 3 D.L.R. 1.

POWERS AND DUTIES OF DIRECTORS

73. The business of the company shall be managed by the directors, who may pay all expenses incurred in promoting and registering the company, and may exercise all such powers of the company as are not, by the Act or by these regulations, required to be exercised by the company in general meeting, subject, nevertheless, to any of these regulations, to the provisions of the Act, and to such regulations, being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting; but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if that regulation had not been made.

Control over directors-As to the extent of the members' control over directors, see John Shaw & Sons (Salford) Ltd. v. Shaw, [1935] 2 K.B. 113; [1955] All E.R. Rep. 456; Scott v. Scott, [1943] 1 All E.R. 582; Grundt v. Great Boulder Proprietary Mines Ltd., [1948] Ch. 145; [1948] 1 All E.R. 21; Dowse v. Marks (1913), 13 S.R. (N.S.W.) 332.

Agent, trustee. etc.-Directors are described variously as agents, trustees, managing partners; but these definitions are not exhaustive of directors' powers or responsibilities; and these expressions rather afford useful points of view for the particular occasion and purpose under consideration, Imperial Hydropathic Hotel Co., Blackpool v. Hampson (1882), 23 Ch. D. 1, at p. 12.

Fiduciaries-As to the fiduciary relationship which directors bear to the company, see A. M. Spicer & Son Pty. Ltd. (in liq.) v. Spicer, [1931] A.L.R. 357; 47 C.L.R. 151, especially at p. 175; Furs Ltd. v. Tomkies (1936), 54 C.L.R. 583; Peters' American D.elicacy Co. Ltd. v. Heath (1939), 61 C.L.R. 457, at p. 482; [1939] A.L.R. 124. As to how far directors may go in urging their own views upon a meeting see ibid., at pp. 486 et seq. (C.L.R.). See also Buffin v. Bebarfald's Ltd. (1938), 38 S.R. (N.S.W.) 423.

Directors are the body to whom is delegated the duty of managing the affairs of the company; their duty as such agents is of a fiduciary nature so that they must not in the discharge of such duty allow personal interest to conflict with that of the company, Bendigo Central Freezin[? and Fertilizer Co. Ltd. v. Cunningham, [1919] V.L.R. 387, at p. 394. See also Montgomerie's Brewery Co. Ltd. v. Blyth (1901),27 V.L.R. 175; Hardy v. Phoenix Foundry Co. (1881),7 V.L.R. (L.) 211.


FOURTH SCHEDULE (TABLE A)-continued For a case in which directors' conduct was held to be unobjectionable, as it

did not appear that they had acted mala fide, see Peninsular and Oriental Steam NaviRation Co. v. Johnson (1938), 60 C.L.R. 189.

Powers-The powers of the directors are limited to the powers of the company, e.g. as to accepting surrender of shares, Re Beaconsfield Heights Estate Co. Ltd.; Asher's Field's and Smith's Cases (1896), 22 V.L.R. 97; Mountain Homes Land Investment Co. Ltd. v. Marshall (1891), 17 V.L.R. 545.

Ratification of an unauthorized act of directors requires only the sanction of an ordinary resolution of a general meeting, if the act is within the powers of the company, Calhoun v. Green, [1919] V.L.R. 196. See Toohey v. M'Cul/a (1890), 10 L.R. (N.S.W.) (E.) 264, in relation to ratification inferred from the moving for the adoption of a report containing a full statement of the facts; and City Bank v. Australian Paper Co. (1871), 10 S.C.R. (N.S.W.) 235, in relation to acquiescence of a shareholder.

Admission by directors-A statement by way of admission made by a director simpliciter, who is not shown to have any further authority than such authority as attaches to him by virtue of his position is not admissible as evidence against the company, Butcher v. Longwarry and District Dairymen's Co-operative Association Ltd., [1939] V.L.R. 263, at p. 268. But for another view see Fraser Henleins Pty. Ltd. v. Cody (1945), 70 C.L.R. 100; [1945] A.L.R. 186, and L. & M. Newmall Pty. Ltd. v. Cappers Pty. Ltd.; Capper (Third Party), [1960] N.S.W.R. 143.

Duty owed by directors-For the duty of vigilance required of directors in the discharge and exercise of their duties and powers, see Montgomerie's Brewery Co. Ltd. v. Blyth (1901), 27 V.L.R. 175, at pp. 195 et seq. See also s. 124, ante.

Further powers-It is within the power of directors to pay a servant of the company more than they are bound to pay him, Hardy v. Wilson (1882), 8 V.L.R. (E.) 289; and to sell part of the company's property, Baw Baw Sluicing Co. v. Nicholls (1883), 9 V.L.R. (L.) 208.

As to the power of directors to launch criminal proceedings, see Thurling v. North Cornish Quartz Mining Co. (1872), 3 V.L.R. (L.) 236.

Directors have no general powers which authorize them, upon a resolution passed at a meeting of directors, to present a petition on behalf of the company to have it wound up, Re Standard Bank of Australia (1893),24 V.L.R. 304.

Liability to individual shareholder-A director is not liable to an individual shareholder as such for a mere irregularity on the part of the directors affecting that shareholder in common with other shareholders, Stanley v. Moore (1891), 17 V.L.R. 285.

Knowledge of directors-Where directors are parties to any conduct which is a misfeasance, such knowledge as they have of such fraudulent or improper act cannot be regarded as the knowledge of or notice to the company, Montgomerie's Brewery Co. Ltd. v. Blyth (1901), 27 V.L.R. 175.

Regularity of proceedings of directors-Persons dealing with a company are bound to see that the act of incorporation or deed of settlement authorizes the transaction; they are not bound to inquire into -the regularity of all proceedings, Commercial Bank of Australia Ltd. v. McDonald (1871), 2 V.L.R. (L.) 211. To the like effect, see Re Tyson's Reef Co.; Ex parte Holmes (1866), 3 W.W. & A'B. (L.) 162; Pric.e v. Old Quartz Gold Mining Co. (1896), 2 A.L.R. 13. But where a person dealing with a company has notice of an irregularity, the company may not be liable, Colonial Bank of Australasia v. Lock Fyne Gold Mining Co. (1866), 3 W.W. & A'B. (L.) 168; Re Efron's Tie and Knitting Mills Pty. Ltd., [1932] V.L.R. 8.

Action to recover as against directors-As to who may be the proper plaintiff in an action against direotors to recover moneys lost by the company as a result of acts done by the directors which were outside their powers, see Nankivell v. Beniamin (1892), 18 V.L.R. 543.

74. The directors may exercise all the powers of the company to borrow money and to mortgage or charge its undertaking, property, and uncalled capital, or any part thereof, and to issue debentures and other securities whether outright or as security for any debt, liability, or obligation of the company or of any third party.


FOURTH SCHEDULE (TABLE A)-continued Borrowing-See generally, Bank of South Australia v. Benjamin (1892), 14

A.L.T. 159. Giving a mortgage to a vendor to the company to secure the payment of unpaid purchase money was held not to be borrowing; borrowed money [as described in an article similar to this article] is money obtained by the company, and for which security has been given by the company, Brighton, etc. Co. Ltd. v. Howden (1891). 13 A.L.T. 52.

A valuable discussion on the borrowing powers of companies will be found in Mercantile Bank of India Ltd. v. Chartered Bank of India, Australia and China and Strauss & Co. Ltd. (in /iq.), [1937] 1 All E.R. 231.

75. The directors may exercise all the powers of the company in relation to any official seal for use outside the State and in relation to branch registers.

76. The directors may from time to time by power of attorney appoint any corporation, firm, or person or body of persons, whether nominated directly or indirectly by the directors, to be the attorney or attorneys of the company for such purposes and with such powers, authorities, and discretions (not exceeding those vested in or exercisable by the directors under these regulations) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the directors may think fit and may also authorize any such attorney to delegate all or any of the powers, authorities, and discretions vested in him.

Delegation-As to delegation by directors, see Gould v. MOllnt Oxide Mines Ltd. (in liq.) (1916), 22 C.L.R. 490.

77. All cheques, promissory notes, drafts, bills of exchange, and other negotiable instruments, and all receipts for money paid to the company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as the case may be, by any two directors or in such other manner as the directors from time to time determine.

78. The directors shall cause minutes to be made(a) of all appointments of officers; (b) of names of directors present at all meetings of the company

and of the directors; and (c) of all proceedings at all meetings of the company and of

the directors. Such minutes shall be signed by the chairman of the meeting at

which the proceedings were held or by the chairman of the next succeeding meeting.

What should be entered in minutes-Only such things as are said or done at a meeting of directors by them as such should be entered in the minutes; and the minutes are evidence of such things only as are properly recorded therein, R. v. Staples (1893), 19 V.L.R. 47.

Minutes as evidence-Rough minutes of resolutions of directors for making calls, i.e. in draft form signed by the chairman for entry in regular minute books, were held to be prima facie evidence of the performance of all conditions precedent to the validity of the resolutions, Legal and General Life Assurance Co. Ltd. v. Gill (1878). 4 V.L.R. (L.) 204. Where there is an ambiguity in a minute which was disclosed upon ascertaining the surrounding circumstances, oral evidence may be adduced for the purpose of showing what the resolution really meant, Westralia Pty. Gold Minin!? Co. No Liability v. Long (1897), 23 V.L.R. 36.

Proof aliunde-Although no minutes have been entered in the minute book, the proceedings of the company can be proved otherwise by any admissible evidence, McLean Bros. & Rigg Ltd. v. Grice (1906), 4 C.L.R. 835.


FOURTH SCHEDULE (TABLE A)-continued PROCEEDINGS OF DIRECTORS

79. The directors may meet together for the despatch of business adjourn and otherwise regulate their meetings as they think fit. A director may at any time and the secretary shall on the requisition of a director summon a meeting of the directors.

Place of meeting-Directors may meet, if they choose, at some place other than the registered office, Bullfinch Surprise G.M. Co. No Liability v. Butler (1914), 35 A.L.T. 99; but this article must be read with art. 83, post, ibid.

80. Subject to these regulations questions arising at any meeting of directors shall be decided by a majority of votes and a determination by a majority of directors shall for all purposes be deemed a determination of the directors. In case of an equality of votes the chairman of the meeting shall have a second or casting vote.

81. A director shall not vote in respect of any contract or proposed contract with the company in which he is interested, or any matter arising thereout, and if he does so vote his vote shall not be counted.

Notice of irregularity-A contract entered into with a person having notice of an irregularity is void and not voidable, notwithstanding that another article (cf. art. 89. post) may purport to validate such a transaction, People's Prudential Assurance Co. Ltd. v. Australian Federal Life and General Assurance Ltd. (1935), 35 S.R. (N.S.W.) 253.

82. Any director with the approval of the directors may appoint any person (whether a member of the company or not) to be an alternate or substitute director in his place during such period as he thinks fit. Any person while he so holds office as an alternate or substitute director shall be entitled to notice of meetings of the directors and to attend and vote thereat accordingly, and to exercise all the powers of the appointor in his place. An alternate or substitute director shall not require any share qualification, and shall ipso facto vacate office if the appointor vacates office as a director or removes the appointee from office. Any appointment or removal under this regulation shall be effected by notice in writing under the hand of the director making the same.

83. The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed shall be two.

Quorum-As to quorum being fixed under this article at one, see Re Fireproof Doors, [1916] 2 Ch. 142; [1916-17] All E.R. Rep. 931. As to how far the quorum mllst consist of disinterested persons, see A. M. Spicer & Sons Pty. Ltd. (ill liq.) v. Spicer (1931). 47 C.L.R. 151. at pp. 176. 187; [1931] A.L.R. 357.

Provisional directors-Tn relation to the position of provisional directors with regard to a quorum, see Re New South Wales Refrigerating alld Meat Export Co. Ltd. (1894), 15 L.R. (N.S.w.) (E.) 121.

84. The continuing directors may act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the number fixed by or pursuant to the regulations of the company as the necessary quorum of directors, the continuing directors or director may act for the purpose of increasing the number of directors to that number or of summoning a general meeting of the company, but for no other purpose.


FOURTH SCHEDULE (TABLE A)-continued Continuing-The word "continuing" means continuing after there has once been

a board competent to transact business, Re Sly, [1911] 2 Ch. 430.

85. The directors may elect a chairman of their meetings and determine the period for which he is to hold office, but if no such chairman is elected, or if at any meeting the chairman is not present within ten minutes after the time appointed for holding the meeting, the directors present may choose one of their number to be chairman of the meeting.

Permanent-The appointment of a permanent director as chairman does not of itself entitle him to remain chairman so long as he is a director, Foster v. Foster, [1916] I Ch. 532; rI916-17] All E.R. Rep. 856. Quaere whether there can now be any permanence of tenure of director in view of s. 120, ante.

86. The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the directors.

Delegation-See notes to s. 119, ant,e; Butcher v. Longl"arry and District Dairvmen's Co-operative Association Ltd., [1939] V.L.R. 263.

Presumption of delegation-A delegation may be presumed if one or two directors act for the company in a transaction incidental to its legitimate business, Re Hapytoz Ltd., [1937] V.L.R. 40.

Secretary-For whether a secretary has power to bind the company, see Re Chatsworth Estate Co. Ltd. (1892), 18 V.L.R. 442; Essendon Land, Tramway and Investment Co. Ltd. v. Upton (1891), 17 V.L.R. 248.

87. A committee may elect a chairman of its meetings; if no such chairman is elected, or if at any meeting the chairman is not present within ten minutes after the time appointed for holding the meeting, the members present may choose one of their number to be chairman of the meeting.

88. A committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members present, and in the case of an equality of votes the chairman shall have a second or casting vote.

89. All acts done by any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any such director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director.

Objective of article-This article is designed not to override substantive provisions relating to such appointments, but only to avoid questions being raised as to the validity of any transaction where there has been a slip in the appointment of a director, Morris v. Kanssen, [1946] A.C. 459; [1946] 1 All E.R. 586.

The subsequent discovery is not a discovery of the facts but a discovery that the facts constitute a defect, British Asbestos Co. v. Boyd, [1903] 2 Ch. 439. See also A. M. Spicer & Son Pty. Ltd. (in liq.) v. Spicer (1931),47 C.L.R. 151; [1931] A.L.R. 357; Re Renown Rubber Co. Ltd., [1933] St. R. Qd. 324.

90. A resolution in writing, signed by all the directors for the time being entitled to receive notice of a meeting of the directors, shall be as valid and effectual as if it had been passed at a meeting of the directors duly convened and held. Any such resolution may consist of several documents in like form, each signed by one or more directors.


FOURTH SCHEDULE (TABLE A)-continued

MANAGING DIRECTORS

91. The directors may from time to time appoint one or more of their body to the office of managing director for such period and on such terms as they think fit and, subject to the terms of any agreement entered into in any particular case, may revoke any such appointment. A director so appointed shall not, while holding that office, be subject to retirement by rotation or be taken into account in determining the rotation of retirement of directors, but his appointment shall be automatically determined if he ceases from any cause to be a director.

Not to be removed-As to the circumstances in which there may be implied, in a contract of employment of a managing director for a term of years, a term that he will not be removed during that period, see Sollfhern Foundries (1926) Ltd. v. Shirlaw, [1940] A.C. 701; [1940] 2 All E.R. 445; Shindler v. Northern Raincoat Co. Ltd., [1960] 2 All E.R. 239. See also Carrier Australasia Ltd. v. Hunt (1939), 61 C.L.R. 534. But see, however, Read v. Astoria Garage (Streatham) Ltd., [1952] Ch. 637; [1952] 2 All E.R. 292.

No service agreement-Where there was no service agreement, but the contract was contained in the articles, see Re Farrer (T.N.) Ltd., [1937] Ch. 352; [1937] 2 All E.R. 505.

Presumption that managing director has due powers-Persons dealing with a managing director may properly assume that he has all such powers as could be delegated to him, Goulburn Valley Butter Factory Co. Pty. Ltd. v. Bank of New South Wales, r 1902] A.C. 543.

92. A managing director shall, subject to the terms of any agreement entered into in any particular case, receive such remuneration (whether by way of salary, commission, or participation in profits, or partly in one way and partly in another) as the directors may determine.

Extra service and special exertions-In relation to an article which provided for remuneration for "extra service" or "special exertions", see Matthews v. Newport Block and Tile Co. Pty. Ltd. (in liq.) (1950), 80 C.L.R. 269.

Percentage-For cases where a managing director is entitled to be paid a percentage of the profits of the company, see Rishton v. Grissell (1868). L.R. 5 Eq. 326; Frames v. Bulfontein Mining Co., [1891] 1 Ch. 140; Re Spanish Prospecting Co., [1911J 1 Ch. 92; Ashton Gas Co. v. Attorney-General, [1904] 2 Ch. 621; [1906] A.C. 10; Johnston v. Chestergate Hat Co., [1915] 2 Ch. 338; Edwards v. Saunton Hotel Co., [1943] 1 All E.R. 176; Stewart v. Sashalile Ltd., [1936] 2 All E.R. 1481.

Net profits-Where the remuneration is expressed to be on the basis of "net profits". see Sleigh v. Watt, [1930] V.L.R. 1 (which, however. did not involve a corporation); Tilt v. Tilt's Cafes Ltd., [1930] V.L.R. 31. Neither of the two foregoing case, was followed in Hayman v. Betta Brushware Ply. Lid. (1947). 47 S.R. (N.S.W.) 4, discussed in 20 A.L.I., at pp. 311-2.

93. The directors may entrust to and confer upon a managing director any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit, and either collaterally with or to the exclusion of their own powers, and may from time to time revoke, withdraw, alter, or vary all or any of those powers.

Scope of contract of employment-As to the scope of a managing director's contract of employment, and the power of a board of directors to limit the scope of his duties. see Harold Holdsworth & Co. (Wakefield), Ltd. v. Caddies, [1955] 1 All E.R. 725.

Inquiry as to powers of managing director-Those who deal with a managing director should satisfy themselves by inspection of the articles that he could have the power which he purports to exercise; and if he could, that is sufficient for persons dealing bona fide with him, even if in fact no power to do the act had been given to him, BiRgerstafj v. Rowatt's Wharf, [1896] 2 Ch. 93; Re Queensland Linseed


FOURTH SCHEDULE (TABLE A)-continued Industries Ltd., [1936] Q.W.N. 35. As to banks dealing with a managing director's signature on cheques as drawer or endorser, see Bank of NelV Soutlz Wales v. Goulbllrll Valley Butter Factory Co. Pty. Ltd. (1900), 25 V.L.R. 702; [1902] A.C. 543; UnderlVood (AL) Ltd. v. Bank of Lil-erpool [1924] 1 K.B. 775; [1924] All E.R. Rep. 230.

ASSOCIA TE DIRECTORS

94. The directors may from time to time appoint any person to be an associate director and may from time to time cancel any such appointment. The directors may fix determine and vary the powers duties and remuneration of any person so appointed, but a person so appointed shall not be required to hold any shares to qualify him for appointment nor have any right to attend or vote at any meeting of directors except by the invitation and with the consent of the directors.

SECRETARY

95. The secretary shall in accordance with the Act be appointed by the directors for such term, at such remuneration, and upon such conditions as they may think fit and any secretary so appointed may be removed by them.

SEAL

96. The directors shall provide for the safe custody of the seal, which shall only be used by the authority of the directors or of a committee of the directors authorized by the directors in that behalf, and every instrument to which the seal is affixed shall be signed by a director and shall be countersigned by the secretary or by a second director or by some other person appointed by the directors for the purpose.

General-See Re Efroll's Tic ({nd Knitting Mills PlY. Ltd. (ill liq.), [1932] V.L.R. 8; A. M. Spicer & SOil Pty. Ltd. (in liq.) v. Spicer (1931),47 C.L.R. 151; [19311 A.L.R. 357.

As to where there is a sole director, see s. 132, {IntI'.

ACCOUNTS

97. The directors shall cause proper accounting and other records to be kept and shall distribute copies of balance-sheets as required by the Act and shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounting and other records of the company or any of them shall be open to the inspection of members not being directors, and no member (not being a director) shall have any right of inspecting any account or book or paper of the company except as conferred by statute or authorized by the directors or by the company in general meeting,

DIVIDENDS AND RESERVES

98. The company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the directors,

Distribution-Apart from anything in the memorandum or articles requiring a company to distribute the whole of its profits, it is not bound to do so, Evling v. Israel and Oppenheimer, [1918] 1 Ch. 101. Distribution is an internal matter which the court has no iurisdiction to control or review so long as the internal rules and the Act be not infringed, Burland v. Earle, [1902] A.c. 83; WemY5s Collieries Trust v. Meil'ille (1905). 8 F. (Cl. of Sess.) 143.


FOURTH SCHEDULE (TABLE A)-continued As :0 the adjustment ordered to restore the position of shareholders where an

erroneous basis of distribution had been employed in the past, see Godfrey Phillips Ltd. v. Investment Trust Corporation Ltd., [1953] Ch. 449; [1953] 1 All E.R. 7.

Period to which dividend relates-Whether a dividend paid has been declared or expressed to be made for or .in respect of some definite period, and if so, what period, must depend upon the terms of the resolution by which it is declared and its effect considered in the light of the provision in the memorandum and articles, Re McCutcheon, deceased; McCutcheon v. Equity Trustees, Executors and Agency Co. LTd., [1960] V.R. 289. at p. 291.

99. The directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the company.

100. No dividend shall be paid otherwise than out of profits or shall bear interest against the company.

See <;. :;76. ante.

101. The directors may, before recommending any dividend, set aside out of the profits of the company such sums as they think proper as reserves which shall, at the discretion of the directors, be applicable for any purpose to which the profits of the company may be properly applied, and pending any such application may, at the like discretion, either be employed in the business of the company or be invested in such investments (other than shares in the company) as the directors may from time to time think fit. The directors may also without placing the same to reserve carry forward any profits which they may think prudent not to divide.

Out of the profits-The words "out of the profits of the company" mean "out of the profits available for dividend". Re BlIenos Ayres Great Southern Railwal' Co. Ltd .. [19471 1 All E.R. 729; [1947] Ch. 384. .

102. Subject to the rights of persons, if any, entitled to shares with special rights as to dividend, all dividends shall be declared and paid according to the amounts paid or credited as paid on the shares in respect whereof the dividend is paid, but no amount paid or credited as paid on a share in advance of calls shall be treated for the purposes of this regulation as paid on the share. All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid; but if any share is issued on terms providing that it shall rank for dividend as from a particular date that share shall rank for dividend accordingly.

103. The directors may deduct from any dividend payable to any member all sums of money, if any, presently payable by him to the company on account of calls or otherwise in relation to the shares of the company.

104. Any general meeting declaring a dividend or bonus may direct payment of such dividend or bonus wholly or partly by the distribution of specific assets and in particular of paid-up shares, debentures or debenture stock of any other company or in anyone or more of such ways and the directors shall give effect to such resolution, and where any difficulty arises in regard to such distribution, the directors may

15


FOURTH SCHEDULE (TABLE A)--continued settle the same as they think expedient, and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any members upon the footing of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to the directors.

105. Any dividend, interest, or other money payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the registered address of that one of the joint holders who is first named on the register of members or to such person and to such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. Anyone of two or more joint holders may give effectual receipts for any dividends, bonuses, or other money payable in respect of the shares held by them as joint holders.

Warrants-See s. 57, ante.

Posting-In the absence of provision in the articles, forwarding through the post of a dividend warrant, even though this is the company's usual course and two previous dividends have been so received by the shareholder, is not payment to a shareholder, Acralllan v. South Australian Gas Co., [1910] S.A.L.R. 59.

CAPITALIZATiON OF PROFITS

106. The company in general meeting may upon the recommendation of the directors resolve that it is desirable to capitalize any part of the amount for the time being standing to the credit of any of the company's reserve accounts or to the credit of the profit and loss account or otherwise available for distribution, and accordingly that such sum be set free for distribution amongst the members who would have been entitled thereto if distributed by way of dividend and in the same proportions on condition that the same be not paid in cash but be applied either in or towards paying up any amounts for the time being unpaid on any shares held by such members respectively or paying up in full unissued shares or debentures of the company to be allotted and distributed credited as fully paid up to and amongst such members in the proportion aforesaid, or partly in the one way and partly in the other, and the directors shall give effect to such resolution.

A share premium account and a capital redemption reserve fund may, for the purposes of this regulation, be applied only in the paying up of unissued shares to be issued to members of the company as fully paid bonus shares.

107. Whenever such a resolution as aforesaid shall have been passed the directors shail make all appropriations and applications of the undivided profits resolved to be capitalized thereby, and all allotments and issues of fully paid shares or debentures, if any, and generally shall do all acts and things required to give effect thereto, with full power to the directors to make such provision by the issue of fractional certificates or by payment in cash or otherwise as they think fit for the case of shares or debentures becoming distributable in fractions, and also to authorize any person to enter on behalf of all the members entitled thereto into an agreement with the company providing for the allotment to them respectively, credited as fully paid up, of any further


FOURTH SCHEDULE (TABLE A)-continued shares or debentures to which they may be entitled upon such capitalization, or (as the case may require) for the payment up by the company on their behalf, by the application thereto of their respective proportions of the profits resolved to be capitalized, of the amounts or any part of the amounts remaining unpaid on their existing shares, and any agreement made under such authority shall be effective and binding on all such members.

NOTICES

108. A notice may be given by the company to any member either personally or by sending it by post to him at his registered address, or (if he has no registered address within the State) to the address, if any, within the State supplied by him to the company for the giving of notices to him. Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, prepaying, and posting a letter containing the notice, and to have been effected in the case of a notice of a meeting on the day after the date of its posting, and in any other case at the time at which the letter would be delivered in the ordinary course of post.

Notices-Though in the ordinary run of' things this article operates to affect a member even though the notice may never in fact reach him, this does not always apply. Thus where W had subscribed for shares upon the faith of a misrepresentation which was subsequently corrected by directors in a report posted to W. among other shareholders, but never received by him, and the articles cont:!ined the usual provisions as to notices, it was held that the burden of proving that the report had reached W was on the company, Re London & Stajjordshire Fire Insurance Co. (1883). 24 Ch. D. 149. Learned writers have suggested that. once notice has been given in accordance with this article, it would appear that the receipt thereof is not open to dispute, and cite R. v. Westminster Unions Assessment Committee; Ex parte Woodward & Sons, [1917] 1 K.B. 832. Quaere whether this case would apply with such strictness in the case of a member of a company under this Act. Cf. art. 111, post. and see Re WardclI & Hotchkiss Ltd., [1945] Ch. 270; [1945] 1 All E.R. 507, as to notices to memhers outside the State. As to substituted service on a member, see Re Studcr (1875), 10 Ch. App. 227. As to notice served upon a member who is dead. ,ec James v. Buena Ventura Nitrate Groulld Syndicate, [1896] 1 Ch. 456. and cf. art. 110, post.

109. A notice may be given by the company to the joint holders of a share by giving the notice to the joint holder first named in the register of members in respect of the share.

110. A notice may be given by the company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or assignee of the bankrupt, or by any like description, at the address, if any, within the State supplied for the purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred.

111. (1) Notice of every general meeting shall be given in any manner hereinbefore authorized to-

(a) every member except those members who (having no registered address within the State) have not supplied to the company an address within the State for the giving of notices to them;


FOURTH SCHEDULE (TABLE A)-continued (b) every person entitled to a share in consequence of the death

or bankruptcy of a member who, but for his death or bankruptcy, would be entitled to receive notice of the meeting; and

(c) the auditor for the time being of the company.

(2) No other person shall be entitled to receive notices of general meetings.

WINDING UP

112. If the company is wound up the liquidator may, with the sanction of a special resolution of the company, divide amongst the members in kind the whole or any part of the assets of the company (whether they consist of property of the same kind or not) and may for that purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how the division shall be carried out as between the members or different classes of members. The liquidator may, with the like sanction, vest the whole or any part of any such assets in trustees upon such trusts for the benefit of the contributories as the liquidator, with the like sanction, thinks fit, but so that no member shall be compelled to accept any shares or other securities whereon there is any liability.

INDEMNITY

113. Every director, managing director, agent, auditor, secretary, and other officer for the time being of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application under the Act in which relief is granted to him by the Court in respect of any negligence default breach of duty or breach of trust.

TABLE B (Sections 5, 30) REGULATIONS FOR MANAGEMENT OF A NO-LIABILITY COMPA1\Y

Vic. Fourth Schedule Table B; Tas. Fourth Schedule Table B.

INTERPRETATION 1. In these regulations-

"the Act" means 'The Companies Act of 1961"; "the seal" means the common seal of the company; "secretary" means any person appointed to perform the duties of

a secretary of the company; "State" means the State of Queensland; expressions referring to writing shall, unless the contrary intention

appears, be construed as including references to printing, lithography, photography and other modes of representing or reproducing words in visible form;

words or expressions contained in these regulations shall be interpreted in accordance with the provisions of "The Acts Interpretation Acts, ] 954 to 1960," and of the Act as in force at the date at which these regulations become binding on the company.

Act referred to: Acts Interpretation Acts, 1954 to 1962, title ACTS OF PARLIA\IENT.


FOURTH SCHEDULE (TABLE B)-continued

SHARE CAPITAL AND VARIATION OF RIGHTS 2. Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, but subject to the Act, shares in the company may be issued by the directors and any such share may be issued with such preferred, deferred, or other special rights or such restrictions, whether in regard to dividend, voting, return of capital, or otherwise, as the directors, subject to any ordinary resolution of the company, determine.

3. Subject to the Act, any preference shares may, with the sanction of an ordinary resolution, be issued on the terms that they are, or at the option of the company are liable, to be redeemed.

4. If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the company is being wound up, be varied with the consent in writing of the holders of three-fourths of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of the class. To every such separate general meeting the provisions of these regulations relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be two persons at least holding or representing by proxy one-third of the issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a poll.

5. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shaH, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking equaHy therewith.

6. The company may exercise the powers of paying commISSions conferred by the Act, provided that the rate per centum or the amount of the commission paid or agreed to be paid shaH be disclosed in the manner required by the Act and the commission shall not exceed the rate of 10 per centum of the price at which the shares in respect whereof the same is paid are issued or an amount equal to 10 per centum of that price (as the case may be). Such commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares or partly in one way and partly in the other. The company may also on any issue of shares pay such brokerage as may be lawful.

7. Except as required by law, no person shall be recognised by the company as holding any share upon any trust, and the company shall not be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future, or partial interest in any share or unit of a share or (except only as by these regulations or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.


FOURTH SCHEDULE (TABLE B)-continued 8. Every person whose name is entered as a member in the register of members shall be entitled without payment to receive a certificate under the seal of the company in accordance with the Act but in respect of a share or shares held jointly by several persons the company shall not be bound to issue more than one certificate, and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all such holders.

CALLS ON SHARES 9. The directors may subject to section three hundred and twentytwo of the Act from time to time make calls upon the members in respect of any money unpaid on their shares (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times. A call may be revoked or postponed as the directors may determine.

10. A call shall be deemed to have been made at the time when the resolution of the directors authorizing the call was passed and may be required to bc paid by instalments.

11. At any sale by auction under section three hundred and twenty-three of the Act a share forfeited for non-payment of any call may, if the directors so determinc, be offered for sale and sold credited as paid up to the sum of the amount paid up thereon at the time of forfeiture and the amount of such call and the amount of any other call or calls becoming payable on or before the date of sale.

TRANSFER OF SHARES 12. SUbject to these regulations any member may transfer all or any of his shares by instrument in writing in any usual or common form or in any other form which the directors may approve. The instrument shall bc executed by or on behalf of both the transferor and the transferee and the transferor shall remain the holder of the shares transferred until the transfer is registered and the name of the transferee is entered in the register of members in respect thereof.

13. The instrument of transfer must be left for registration at the registered office of the company together with such fee not exceeding 2s. 6d. as the directors from time to time may require accompanied by the certificate of the shares to which it relates and such other evidence as thc directors may rcasonably require to show the right of the transferor to make the transfer and thereupon the company shall subject to the powers vested in the directors by these regulations register the transferee as a shareholder and retain the instrument of transfer.

14. The registration of transfers may be suspended at such times and for such periods as the directors may from time to time determine, not exceeding in the whole thirty days in any year.

TRANSMISSION OF SHARES 15. In case of the death of a member the survivor or survivors where the deceased was a joint holder, and the legal personal representatives of the deceased where he was a sale holder, shall be the only persons recognised by the company as having any title to his interest in the shares.


FOURTH SCHEDULE (TABLE B)-continued 16. Any person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as may from time to time properly be required by the directors and subject as hereinafter provided, elect either to be registered himself as holder of the share or to have some person nominated by him registered as the transferee thereof.

17. If the person so becoming entitled elects to be registered himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects. If he elects to have another person registered he shall testify his election by executing to that person a transfer of the share. All the provisions of these regulations relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or bankruptcy of the member had not occurred and the notice or transfer were a transfer signed by that member.

18. Where the registered holder of any share dies or becomes bankrupt his personal representative or the assignee of his estate, as the case may be, shall, upon the production of such evidence as may from time to time be properly required by the directors in that behalf, be entitled to the same dividends and other advantages, and to the same rights (whether in relation to meetings of the company, or to voting, or otherwise), as the registered holder would have been entitled to if he had not died or become bankrupt; and where two or more persons are jointly entitled to any share in consequence of the death of the registered holder they shall, for the purposes of these regulations, be deemed to be joint holders of the share.

CONVERSION OF SHARES INTO STOCK

19. The company may by ordinary resolution passed at a general meeting convert any paid up shares into stock and re-convert any stock into paid up shares of any denomination.

20. The holders of stock may transfer the same or any part thereof in the same manner and subject to the same regulations as and subject to which the shares from which the stock arose might previously to conversion have been transferred or as near thereto as circumstances admit, but the directors may from time to time fix the minimum amount of stock transferable and restrict or forbid the transfer of fractions of that minimum, but the minimum shall not exceed the nominal amount of the shares from which the stock arose.

21. The holders of stock shall according to the amount of the stock held by them have the same rights privileges and advantages as regards dividends voting at meetings of the company and other matters as if they held the shares from which the stock arose, but no such privilege or advantage shall be conferred by any such aliquot part of stock which would not if existing in shares have conferred that privilege or advantage.

22. Such of the regulations of the company as are applicable to paid up shares shall apply to stock, and the words "share" and "shareholder" therein shall include "stock" and "stockholder".


FOURTH SCHEDULE (TABLE B)-continued

ALTERATION OF CAPITAL

23. The company may from time to time by ordinary resolution-(a) increase the share capital by such sum to be divided into

shares of such amount as the resolution shall prescribe;

(b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;

(c) subdivide its shares or any of them into shares of smaller amount than is fixed by the memorandum; so however that in the subdivision the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;

(d) cancel shares which at the date of the passing of the resolution in that behalf have not been taken or agreed to be taken by any person or which have been forfeited and diminish the amount of its share capital by the amount of the shares so cancelled.

24. Subject to any direction to the contrary that may be given by the company in general meeting, all new shares shall, before issue, be offered to such persons as at the date of the offer are entitled to receive notices from the company of general meetings in proportion, as nearly as the circumstances admit, to the amount of the existing shares to which they are entitled. The offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and, after the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the directors may dispose of those shares in such manner as they think most beneficial to the company. The directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to shares held by persons entitled to an offer of new shares) cannot, in the opinion of the directors, be conveniently offered under this regulation.

25. The company may by special resolution reduce its share capital, any capital redemption reserve fund or any share premium account in any manner and with, and subject to, any incident authorized, and consent required by law.

GENERAL MEETINGS

26. An annual general meeting of the company shall be held in accordance with the provisions of the Act. All general meetings other than the annual general meeting shall be called extraordinary general meetings.

27. Any director may whenever he thinks fit convene an extraordinary general meeting, and extraordinary general meetings shall be convened on such requisition or in default may be convened by such requisitionists as provided by the Act.


FOURTH SCHEDULE (TABLE B)-continued 28. Subject to the provisions of the Act relating to special resolutions and agreements for shorter notice, seven days' notice at the least (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which notice is given) specifying the place the day and the hour of meeting and in case of special business the general nature of that business shall be given to such persons as are entitled to receive such notices from the company.

29. All business shall be special that is transacted at an extraordinary general meeting, and also all that is transacted at an annual general meeting, with the exception of declaring a dividend, the consideration of the accounts, balance-sheets, and the report of the directors and auditors, the election of directors in the place of those retiring, and the appointment and fixing of the remuneration of the auditors.

PROCEEDINGS AT GENERAL MEETINGS

30. No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business. Save as herein otherwise provided, three members present in person shall be a quorum. For the purposes of this regulation "member" includes a person attending as a proxy or as representing a corporation which is a member.

31. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the same day in the next week at the same time and place, or to such other day and at such other time and place as the directors may determine, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the members present (being not less than two) shall be a quorum.

32. The chairman, if any, of the board of directors shall preside as chairman at every general meeting of the company, or if there is no such chairman, or if he is not present within fifteen minutes after the time appointed for the holding of the meeting or is unwilling to act, the members present shall elect one of their number to be chairman of the meeting.

33. The chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. WJ,en a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

34. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded-

(a) by the chairman; (b) by at least three members present in person or by proxy;


FOURTH SCHEDULE (TABLE B)-continued (C) by any member or members present in person or by proxy

and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

(d) by a member or members holding shares in the company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

Unless a poll is so demanded a declaration by the chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution. The demand for a poll may be withdrawn.

35. If a poll is duly demanded it shall be taken in such manner and either at once or after an interval or adjournment or otherwise as the chairman directs, and the result of the poll shall be the resolution of the meeting at which the poll was demanded but a poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith.

36. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a second or casting vote.

37. Subject to any rights or restnctlOns for the time being attached to any class or classes of shares, at meetings of members or classes of members each member entitled to vote may vote in person or by proxy or by attorney and on a show of hands every person present who is a member or a representative of a member shall have one vote, and on a poll every member present in person or by proxy or by attorney or other duly authorized representative shall have one vote for each share he holds.

38. In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the register of members.

39. A member who is of unsound mind or whose person or estate is liable to be dealt with in any way under the law relating to mental health may vote, whether on a show of hands or on a poll, by his committee or by the Public Curator or by such other person as properly has the management of his estate, and any such committee, Public Curator or other person may vote by proxy or attorney.

40. No member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the company have been paid.


FOURTH SCHEDULE (TABLE B)-continued 41. No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the chairman of the meeting, whose decision shall be final and conclusive.

42. The instrument appointing a proxy shall be in writing in a common or usual form under the hand of the appointor or of his attorney duly authorized in writing or, if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorized. A proxy may but need not be a member of the company. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.

43. Where it is desired to afford members an opportunity of voting for or against a resolution the instrument appointing a proxy shall be in the following form or a form as near thereto as circumstances admit:-

No-Liability I/We , of , being a

member/members of the above-named company, hereby appoint , of , or failing him,

, of , , as my/our proxy to vote for me/us on my/our behalf at the [annual or extraordinary, as the case may be] general meeting of the company, to be held on the day of ,]9, and at any adjournment thereof.

Signed this day of 19

d *in favour of h This form is to be use --.. t e resolution. agamst

'" Strike out whichever is not desired. [Unless otherwise instructed, the proxy may vote as he thinks fit.]

44. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the registered office of the company or at such other place within the State as is specified for that purpose in the notice convening the meeting, not less than forty-eight hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, or, in the case of a poll, not less than twenty-four hours before the time appointed for the taking of the poll, and in default the instrument of proxy shall not be treated as valid.

45. A vote given in accordance with the terms of an instrument of proxy or attorney shall be valid notwithstanding the previous death or unsoundness of mind of the principal or revocation of the instrument or of the authority under which the instrument was executed, or the transfer of the share in respect of which the instrument is given, if no intimation in writing of such death, unsoundness of mind, revocation, or transfer as aforesaid has been received by the company at the registered office before the commencement of the meeting or adjourned meeting at which the instrument is used.


FOURTH SCHEDULE (TABLE B)~ontinued DIRECTORS: APPOINTMENT, ETC.

46. The number of the directors and the names of the first directors shall be determined in writing by the subscribers of the memorandum of association or a majority of them.

47. At the first annual general meeting of the company all the directors shall retire from office, and at the annual general meeting in every subsequent year one-third of the directors for the time being, or, if their number is not three or a multiple of three, then the number nearest one-third, shall retire from office. A retiring director shall be eligible for re-election.

48. The directors to retire in every year shall be those who have been longest in office since their last election, but as between persons who became directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot.

49. The company at the meeting at which a director so retires may fill the vacated office by electing a person thereto, and in default the retiring director shall, if offering himself for re-election and not being disqualified under the Act from holding office as a director, be deemed to have been re-elected, unless at that meeting it is expressly resolved not to fill the vacated office or unless a resolution for the re-election of that director is put to the meeting and lost.

50. The company may from time to time by ordinary resolution passed at a general meeting increase or reduce the number of directors, and may also determine in what rotation the increased or reduced number is to go out of office.

51. The directors shall have power at any time, and from time to time, to appoint any person to be a director, either to fill a casual vacancy or as an addition to the existing directors, but so that the total number of directors shall not at any time exceed the number fixed in accordance with these regulations. Any director so appointed shall hold office only until the next following annual general meeting, and shall then be eligible for re-election but shall not be taken into account in determining the directors who are to retire by rotation at that meeting.

52. The company may by ordinary resolution remove any director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead; the person so appointed shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director.

53. The remuneration of the directors shall from time to time be determined by the company in general meeting. That remuneration shall be deemed to accrue from day to day. The directors may also be paid all travelling, hotel, and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the directors or general meetings of the company or in connection with the business of the company.


FOURTH SCHEDULE (TABLE B)-continued 54. The shareholding qualification for directors may be fixed by the company in general meeting, and unless and until so fixed shall be one share.

55. The office of director shall become vacant if the director( a) ceases to be a director by virtue of the Act; (b) becomes bankrupt or makes any arrangement or composition

with his creditors generally; (c) becomes prohibited from being a director by reason of any

order made under the Act; (d) becomes of unsound mind or a person whose person or

estate is liable to be dealt with in any way under the law relating to mental health;

(e) resigns his office by notice in writing to the company; (f) for more than six months is absent without permission of

the directors from meetings of the directors held during that period;

(g) without the consent of the company in general meeting holds any other office of profit under the company except that of managing director or manager; or

(h) is directly or indirectly interested in any contract or proposed contract with the company and fails to declare the nature of his interest in manner required by the Act.

POWERS AND DUTIES OF DIRECTORS

56. The business of the company shall be managed by the directors, who may pay all expenses incurred in promoting and registering the company, and may exercise all such powers of the company as are not, by the Act or by these regulations, required to be exercised by the company in general meeting, subject, nevertheless, to any of these regulations, to the provisions of the Act, and to such regulations, being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting; but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if that regulation had not been made.

57. The directors may exercise all the powers of the company to borrow money and to mortgage or charge its undertaking, property, and uncalled capital, or any part thereof, and to issue debentures and other securities whether outright or as security for any debt, liability, or obligation of the company or of any third party.

58. The directors may exercise all the powers of the company in relation to any official seal for use outside the State and in relation to branch registers.

59. The directors may from time to time by power of attorney appoint any corporation, firm, or person or body of persons, whether nominated directly or indirectly by the directors, to be the attorney or attorneys of the company for such purposes and with such powers, authoritie~,


FOURTH SCHEDULE (TABLE B)-continued and discretions (not exceeding those vested in or exercisable by the directors under these regulations) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the directors may think fit and may also authorize any such attorney to delegate all or any of the powers, authorities, and discretions vested in him.

60. All cheques, promissory notes, drafts, bills of exchange, and other negotiable instruments, and all receipts for money paid to the company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as the case may be, by any two directors or in such other manner as the directors from time to time determine.

61. The directors shall cause minutes to be made(a) of all appointments of officers; (b) of names of directors present at all meetings of the company

and of the directors; and (c) of all proceedings at all meetings of the company and of

the directors. Such minutes shall be signed by the chairman of the meeting at

which the proceedings were held or by the chairman of the next succeeding meeting.

PROCEEDINGS OF DIRECTORS

62. The directors may meet together for the despatch of business adjourn and otherwise regulate their meetings as they think fit. A director may at any time and the secretary shall on the requisition of a director summon a meeting of the directors.

63. Subject to these regulations questions arising at any meeting of directors shall be decided by a majority of votes and a determination by a majority of directors shall for all purposes be deemed a determination of the directors. In case of an equality of votes the chairman of the meeting shall have a second or casting vote.

64. A director shall not vote in respect of any contract or proposed contract with the company in which he is interested, or any matter arising thereout, and if he does so vote his vote shall not be counted.

65. Any director with the approval of the directors may appoint any person (whether a member of the company or not) to be an alternate or substitute director in his place during such period as he thinks fit. Any person while he so holds office as an alternate or substitute director shall be entitled to notice of meetings of the directors and to attend and vote thereat accordingly, and to exercise all the powers of the appointor in his place. An alternate or substitute director shall not require any share qualification, and shall ipso facto vacate office if the appointor vacates office as a director or removes the appointee from office. Any appointment or removal under this regulation shall be effected by notice in writing under the hand of the director making the same. 66. The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed shall be two.


FOURTH SCHEDULE (TABLE B)-continued 67. The continuing directors may act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the number fixed by or pursuant to the regulations of the company as the necessary quorum of directors, the continuing directors or director may act for the purpose of increasing the number of directors to that number or of summoning a general meeting of the company, but for no other purpose.

68. The directors may elect a chairman of their meetings and determine the period for which he is to hold office; but if no such chairman is elected, or if at any meeting the chairman is not present within ten minutes after the time appointed for holding the meeting, the directors present may choose one of their number to be chairman of the meeting.

69. The directors may delegate any of their powers to committees consisting of such member or members of their body as they think tit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the directors.

70. A committee may elect a chairman of its meetings; if no such chairman is elected, or if at any meeting the chairman is not present within ten minutes after the time appointed for holding the meeting, the members present may choose one of their number to be chairman of the meeting.

71. A committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members present, and in the case of an equality of votes the chairman shall have a second or casting vote.

72. All acts done by any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any such director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director.

73. A resolution in writing, signed by all the directors for the time being entitled to receive notice of a meeting of the directors, shall be as valid and effectual as if it had been passed at a meeting of the directors duly convened and held. Any such resolution may consist of several documents in like form each signed by one or more directors.

MANAGING D1RECTORS

74. The directors may from time to time appoint one or more of their body to the office of managing director for such period and on such terms as they think fit and subject to the terms of any agreement entered into in any particular case, may revoke any such appointment. A director so appointed shall not, while holding that office, be subject to retirement by rotation or be taken into account in determining the rotation of retirement of directors, but his appointment shall be automatically determined if he ceases from any cause to be a director.

75. A managing director shall, subject to the terms of any agreement entered into in any particular case, receive such remuneration (whether by way of salary, commissions, or participation in profits, or partly in one way and partly in another) as the directors may determine.

464 COMPANIES Yo!. 2

FOURTH SCHEDULE (TABLE B)-continued 76. The directors may entrust to and confer upon a managing director any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit, and either collaterally with or to the exclusion of their own powers, and may from time to time revoke, withdraw, alter, or vary all or any of those powers.

ASSOCIA T E DIRECTORS

77. The directors may from time to time appoint any person to be an associate director and may from time to time cancel any such appointment. The directors may fix determine and vary the powers duties and remuneration of any person so appointed, but a person so appointed shall not be required to hold any shares to qualify him for appointment nor have any right to attend or vote at any meeting of directors except by the invitation and with the consent of the directors.

SECRETARY

78. The secretary shall in accordance with the Act be appointed by the directors for such term, at such remuneration, and upon such conditions as they may think fit; and any secretary so appointed may be removed by them.

SEAL

79. The directors shall provide for the safe custody of the seal, which shall only be used by the authority of the directors or of a committee of the directors authorized by the directors in that behalf, and every instrument to which the seal is affixed shall be signed by a director and shall be countersigned by the secretary or by a second director or by some other person appointed by the directors for the purpose.

ACCOUNTS

80. The directors shall cause proper accounting and other records to be kept and shall distribute copies of balance-sheets as required by the Act and shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounting and other records of the company or any of them shall be open to the inspection of members not being directors, and no member (not being a director) shall have any right of inspecting any account or book or paper of the company except as conferred by statute or authorized by the directors or by the company in general meeting.

DIVIDENDS AND RESERVES

81. The company in general meeting may declare dividen~', but no dividend shall exceed the amount recommended by the directors.

82. The directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the company.

83. No dividend shall be paid otherwise than out of profits or ,bll bear interest against the company.

84. The directors may, before recommending any dividend, ,et aside out of the profits of the company such sums as they think proper as reserves which shall, at the discretion of the directors, be applicable for any purpose to which the profits of the company may be properly applied, and pending any such application may, at the like discretion, ·::ither be


FOURTH SCHEDULE (TABLE B)-continued employed in the business of the company or be invested in such investments (other than shares in the company) as the directors may from time to time think fit. The directors may also without placing the same to reserve carry forward any profits which they may think prudent not to divide.

85. Subject to the rights of persons, if any, entitled to shares with special rights as to dividend, all dividends shall be divisible among the members in proportion to the shares held by them respectively irrespective of the amount paid up or credited as paid up thereon, but if any share is issued on terms providing that it shall rank for dividend as from a particular date that share shall rank for dividend accordingly.

86. Any general meeting declaring a dividend or bonus may direct payment of such dividend or bonus wholly or partly by the distribution of specific assets and in particular of paid-up shares, debentures or debenture stock of any other company or in anyone or more of such ways, and the directors shall give effect to such resolution, and where any difficulty arises in regard to such distribution, the directors may settle the same as they think expedient and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any members upon the footing of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to the directors.

87. Any dividend, interest, or other money payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the registered address of that one of the joint holders who is first named on the register of members or to such person and to such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. Anyone of two or more joint holders may give effectual receipts for any dividends, bonuses, or other money payable in respect of the shares held by them as joint holders.

CAPITALIZATION OF PROFITS

88. The company in general meeting may upon the recommendation of the directors resolve that it is desirable to capitalize any part of the amount for the time being standing to the credit of any of the company's reserve accounts or to the credit of the profit and loss account or otherwise available for distribution, and accordingly that such sum be set free for distribution amongst the members who would have been entitled thereto if distributed by way of dividend and in the same proportions on condition that the same be not paid in cash but be applied either in or towards paying up any amounts for the time being unpaid on any shares held by such members respectively or paying up in full unissued shares or debentures of the company to be allotted and distributed credited as fully paid up to and amongst such members in the proportion aforesaid, or partly in the one way and partly in the other, and the directors shall give effe::t to such resolution.

A share premium account and a capital redemption reserve fund may, for the purposes of this regulation, only be applied in the payinO' up of unissued shares to be issued to members of the company as fully paid bonus shares.


FOURTH SCHEDULE (TABLE B)-continued 89. Whenever such a resolution as aforesaid shall have been passed the directors shall make all appropriations and applications of the undivided profits resolved to be capitalized thereby, and all allotments and issues of fully-paid shares or debentures, if any, and generally shall do all acts and things required to give effect thereto, with full power to the directors to make such provision by the issue of fractional certificates or by payment in cash or otherwise as they think fit for the case of shares or debentures becoming distributable in fractions, and also to authorize any person to enter on behalf of all the members entitled thereto into an agreement with the company providing for the allotment to them respectively, credited as fully paid up, of any further shares or debentures to which they may be entitled upon such capitalization, or (as the case may require) for the payment up by the company on their behalf, by the application thereto of their respective proportions of the profits resolved to be capitalized, of the amounts or any part of the amounts remaining unpaid on their existing shares, and any agreement made under such authority shall be effective and binding on all such members.

NOTICES

90. Subject to the provisions of the Act a notice may be given by the company to any member either personally or by sending it by post to him at his registered address, or (if he has no registered address within the State) to the address, if any, within the State supplied by him to the company for the giving of notices to him. Where a notice is sent by post, service of the notice shall be deemed to be effected, by properly addressing, prepaying, and posting a letter containing the notice, and to have been effected in the case of a notice of a meeting on the day after the date of its posting, and in any other case at the time at which the letter would be delivered in the ordinary course of post.

91. A notice may be given by the company to the joint holders of a share by giving the notice to the joint holder first named in the register of members in respect of the share.

92. A notice may be given by the company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or assignee of the bankrupt, or by any like description, at the address, if any, within the State supplied for the purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred. 93. (1) Notice of every general meeting shall be given in any manner hereinbefore authorized to-

(a) every member except those members who (having no registered address within the State) have not supplied to the company an address within the State for the giving of notices to them;

(b) every person entitled to a share in consequence of the death or bankruptcy of a member who, but for his death or bankruptcy, would be entitled to receive notice of the meeting; and

(c) the auditor for the time being of the company.

COMPANIES ACT OF 1961 Scbs. IV, V 467

FOURTH SCHEDULE (TABLE B)-continued (2) No other person shall be entitled to receive notices of general

meetings. WINDING UP

94. If the company is wound up the liquidator may, with the sanction of a special resolution of the company, divide amongst the members in kind the whole or any part of the assets of the company (whether they consist of property of the same kind or not) and may for that purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how the division shall be carried out as between the members or different classes of members. The liquidator may, with the like sanction, vest the whole or any part of any such assets in trustees upon such trusts for the benefit of the contributories as the liquidator, with the like sanction, thinks fit, but so that no member shall be compelled to accept any shares or other securities whereon there is any liability.

95. Subject to the rights of persons, if any, entitled to shares with special rights in a winding up and to the provisions of subsection (2) of section three hundred and thirty of the Act, all moneys and assets that may be legally distributable among members shall be distributed in proportion to the shares held by them respectively irrespective of the amount paid up or credited as paid up thereon, but if a company ceases to carry on business within 12 months of its incorporation, shares issued for cash shall in such distribution to the extent of the capital contributed by subscribing shareholders rank in priority to those issued to vendors or promoters or both for other consideration than cash.

INDEMNITY

96. Every director, managing director, agent, auditor, secretary, and other officer for the time being of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application under the Act in which relief is granted to him by the Court in respect of any negligence default breach of duty or breach of trust.

FIFTH SCHEDULE (Section 39) PROSPECTUS

U.K. Fourth Schedule; N.S.W. Eighth Schedule; Vic. Fifth Schedule: (,lId. Fourth Schedule: S.A. s. 50, Parts A, B, C; W.A. s. 47, Parts A, B. C; 'fas. 'Fifth Schedule.

PART

MATTERS TO BE STATED

1. The number of founders or management or deferred shares, if any, and the nature and extent of the interest of the holders of those shares in the property and profits of the company.

2. The number of shares, if any, fixed by the articles as the qualification of a director, and any provision in the articles as to the remuneration of the directors.

3. The names, descriptions, and addresses of all the directors or proposed directors.


FIFTH SCHEDULE-continued

4. Where the prospectus relates to shares particulars as to-(a) the minimum amount which, in the opinion of the directors,

must be raised by the issue of those shares in order to provide the sums, or, if any part thereof is to be defrayed in any other manner, the balance of the sums, required to be provided in respect of each of-

(i) the purchase price of any property purchased or to be purchased which is to be defrayed in whole or in part out of the proceeds of the issue;

(ii) any preliminary expenses payable by the company, and any commission so payable to any person in consideration of his agreeing to subscribe for, or of his procuring or agreeing to procure subscriptions for, any shares in the company;

(iii) the repayment of any money borrowed by the company in respect of any of the foregoing matters; and

(iv) working capital; and (b) the amounts to be provided in respect of the matters aforesaid

otherwise than out of the proceeds of the issue and the sources out of which those amounts are to be provided.

5. Where the prospectus relates to debentures-(a) particulars as to the limit (if any) existing in respect of the

company's power to borrow or if there is no such limit a statement to that effect;

(b) the amount of subscriptions that are being sought; and (c) a statement as to whether or not the company reserves the

right to accept or retain over-subscriptions and if the company reserves such a right the limit on the right so reserved.

6. The time of the opening of the subscription lists.

7. The amount payable on application and allotment on each share or where such amount may vary during the currency of the offer, the basis of calculation of the amount so payable and, in the case of a second or subsequent offer of shares, the number, description and amount offered for subscription on each previous allotment made within the two preceding years, the number actually allotted, and the amount, if any, paid on the shares so allotted.

8. The number, description, and amount of any shares in or debentures of the company which any person has, or is entitled to be given, an option to subscribe for, together with the following particulars of the option-

(a) the period during which it is exercisable; (b) the price to be paid for shares or debentures subscribed for

under it;

(c) the consideration, if any, given or to be given for it or for the right to it;

(d) the names and addresses of the persons to whom it or the right to it was given or, if given to existing shareholders or debenture holders as such, the relevant shares or debentures.

COMPANIES ACT OF 1961 Scb. V 469

FIFTH SCHEDULE-continued 9. The number and amount of shares and debentures which within the two preceding years have been issued, or agreed to be issued, as fully or partly paid up otherwise than in cash, and in the latter case the extent to which they are so paid up, and in either case the consideration for which those shares or debentures have been issued or are proposed or intended to be issued.

10. (1) With respect to any property to which this paragraph applies(a) the names and addresses of the vendors; (b) the amount payable in cash, shares, or debentures to the

vendor and, where there is more than one separate vendor, or the company is a sub-purchaser, the amount so payable to each vendor;

( c) short particulars of any transaction relating to the property completed within the two preceding years in which any vendor of the property to the company or any person who is, or was at the time of the transaction, a promoter or a director or proposed director of the company had any interest direct or indirect.

(2) The property to which this paragraph applies is property purchased or acquired by the company or by any subsidiary of the company or proposed so to be purchased or acquired, which is to be paid for wholly or partly out of the proceeds of the issue offered for subscription by the prospectus or the purchase or acquisition of which has not been completed at the date of the issue of the prospectus, other than property the contract for the purchase or acquisition whereof was entered into in the ordinary course of the company's or the subsidiary's business, the contract not being made in contemplation of the issue nor the issue in consequence of the contract.

11. The amount, if any, paid or payable as purchase money in cash, shares, or debentures for any property to which the last preceding paragraph applies, specifying the amount, if any, payable for goodwill.

12. The amount, if any, paid within the two preceding years, or payable, as commission (but not including commission to sub-underwriters) for subscribing or agreeing to subscribe, or procuring or agreeing to procure subscriPtions, for any shares in or debentures of the company, or the rate of any such commission, and the names of any directors or promoters or experts or proposed directors who are entitled to receive any such commission and the amount of rate thereof.

13. The amount or estimated amount of preliminary expenses and the persons by whom any of those expenses have been paid or are payable, and the amount or estimated amount of the expenses of the issue and the persons by whom any of those expenses have been paid or are payable.

14. Any amount or benefit paid or given within the two preceding years or intended to be paid or given to any promoter, and the consideration for the payment or the giving of the benefit.

15. The dates of, parties to, and general nature of every material contract, not being a contract entered into in the ordinary course of the business carried on or intended to be carried on by the company or a contract entered into more than two years before the date of issue of the prospectus.


FIFTH SCHEDULE-continued 16. The names and addresses of the auditors, if any, of the company.

17. Full particulars of the nature and extent of the interest, if any, of every director and of every expert in the promotion of, or in the property proposed to be acquired by, the company, or, where the interest of such a director or such an expert consists in being a partner in a firm, the nature and extent of the interest of the firm, with a statement of all sums paid or agreed to be paid to him or to the firm in cash or shares or otherwise by any person in the case of a director either to induce him to become, or to qualify him as, a director, or otherwise for services rendered by him or by the firm in connection with the promotion or formation of the company or (in the case of an expert) for services rendered by him or the firm in connection with the promotion or formation of the company.

18. Where the prospectus relates to shares, if the share capital of the company is divided into different classes of shares, the right of voting at meetings of the company conferred by, and the rights in respect of capital and dividends attached to, the several classes of shares respectively.

19. In the case of a company which has been carrying on business, or of a business which has been carried on, for less than three years, the length of time during which the business of the company or the business to be acquired, as the case may be, has been carried on.

PART II REPORTS TO BE SET OUT

20. (1) A report by a registered company auditor, who shall be named in the prospectus with respect to-

(a) profits and losses and assets and liabilities of the company and of any guarantor company referred to in the prospectus, in accordance with subparagraph (2) or subparagraph (3) of this paragraph, as the case requires; and

(b) the rates of the dividends, if any, paid by the company in respect of each class of shares in respect of each of the five financial years immediately preceding the issue of the prospectus, giving particulars of each such class of shares on which such dividends have been paid and particulars of the cases in which no dividends have been paid in respect of any class of shares in respect of any of those years,

and, if no accounts have been made up in respect of any part of the period of five years ending on a date three months before the issue of the prospectus, containing a statement of that fact.

(2) If the company or the guarantor companies have no subsidiaries, the report shall-

(a) so far as regards profits and losses, deal with the profits or losses of the company and of the guarantor companies referred to in the prospectus in respect of each of the five financial years immediately preceding the last date to which the accounts of the company were made up;

COMPANIES ACT OF 1961 Sch. V 471

FIFTH SCHED ULE-----continued (b) so far as regards assets and liabilities, deal with the assets

and liabilities of the company and of the guarantor companies referred to in the prospectus at the last date to which the accounts of the companies were made up,

which date shall in no case be more than nine months (or, if the Crown Law Officer having regard to the circumstances of any particular case consents thereto in writing, twelve months) before the issue of the prospectus.

(3) If the company or the guarantor companies have subsidiaries, the report shall-

(a) so far as regards profits and losses-(i) deal as aforesaid separately with the company's and the

guarantor companies' (other than subsidiaries) profits or losses as provided by subparagraph (2) hereof and in addition deal as aforesaid either-

(A) as a whole with the combined profits or losses of their subsidiaries; or

(B) individually with the profits or losses of each subsidiary; or

(ii) deal as aforesaid as a whole with the profits or losses of the company and of the guarantor companies and with the combined profits or losses of their subsidiaries;

(b) so far as regards assets and liabilities, deal as aforesaid separately with the company's and the guarantor companies' (other than subsidiaries) assets and liabilities as provided by subparagraph (2) hereof, and in addition deal as aforesaid either-

( i) as a whole with the combined assets and liabilities of its or their subsidiaries, with or without the company's assets and liabilities; or

(ii) individually with the assets and liabilities of each subsidiary,

and shall indicate as respects the profits or losses and assets and liabilities of the subsidiaries the allowance to be made for persons other than members of the company.

21. If the proceeds, or any part of the proceeds, of the issue of the shares or debentures are to be applied directly or indirectly in the purchase of any business, a report by a registered company auditor (who shall be named in the prospectus) with respect to-

(a) the profits or losses of the business in respect of each of the five financial years immediately preceding the last date to which the accounts of the business were made up; and

(b) the assets and liabilities of the business at the last date to which the accounts of the business were made up,

which date shall in no case be more than nine months (or, if the Crown Law Officer having regard to the circumstances of any particular case consents thereto in writing, twelve months) before the issue of the prospectus.


FIFTH SCHEDULE-continued 22. (1) Jf-

(a) the proceeds, or any part of the proceeds, of the issue of the shares or debentures are to be applied directly or indirectly in any manner resulting in the acquisition by the company of shares in any other corporation; and

(b) by reason of that acquisition or anything to be done in consequence thereof or in connection therewith that corporation will become a subsidiary of the company,

a report by a registered company auditor (who shall be named in the the prospectus) with respect to-

(c) the profits or losses of the other corporation in respect of each of the five financial years immediately preceding the last date to which the accounts of the corporation were made up; and

(d) the assets and liabilities of the other corporation at the last date to which the accounts of the corporation were made up,

which date shall in no case be more than nine months (or, if the Crown Law Officer having regard to the circumstances of the particular case consents thereto in writing, twelve months) before the issue of the prospectus-

(2) The report shall-(a) indicate how the profits or losses of the other corporation

dealt with by the report would, in respect of the shares to be acquired, have concerned members of the company and what allowance would have fallen to be made, in relation to assets and liabilities so dealt with, for holders of other shares, if the company had at all material times held the shares to be acquired; and

(b) where the other corporation has subsidiaries, deal with the profits or losses and the asscts and liabilities of the corporation and its subsidiaries in the manner provided by subparagraph (3) of paragraph 20 of this Schedule in relation to the company and its subsidiaries.

23. A report by the directors as to whether after due inquiry by them in relation to the interval beween the date to which the last accounts have been made up and a date not earlier than fourteen days before the issue of the prospeetus-

(a) the business of the company has in their opinion been satisfactorily maintained;

(b) there have in their opinion arisen any circumstances adversely affecting the company's trading or the value of its assets;

(c) the current assets appear in the books at values which are believed to be realisable in the ordinary course of business;

(d) there are any contingent liabilities by reason of any guarantees given by the company or any of its subsidiaries;

(e) there are, since the last annual report, any changes in published reserves or any unusual factors affecting the profit of the company and its subsidiaries.

COMPANIES ACT OF 1961

FIFTH SCHEDULE-continued PART III

Sch. V

PROVISIONS APPLYING TO PARTS I AND II OF THIS SCHEDULE

473

24. Paragraphs 2, 13 (so far as it relates to preliminary expenses), and 17 of this Schedule shall not apply in the case of a prospectus issued more than two years after the date at which the company is entitled to commence business.

25. Every person shall for the purposes of this Schedule be deemed to be a vendor who has entered into any contract, absolute or conditional, for the sale or purchase, or for any option of purchase, of any property to be acquired by the company in any case where-

(a) the purchase money is not fully paid at the date of the issue of the prospectus;

(b) the purchase money is to be paid or satisfied wholly or in part out of the proceeds of the issue offered for subscription by the prospectus; or

(c) the contract depends for its validity or fulfilment on the result of that issue.

26. Where any property to be acquired by the company is to be taken on lease this Schedule shall have effect as if the expression "vendor" included the lessor, and the expression "purchase money" included the consideration for the lease, and the expression "sub-purchaser" included a sub-lessee.

27. References in paragraph 8 of this Schedule to an option to subscribe for shares or debentures shall include an option to acquire them from a person to whom they have been allotted or agreed to be allotted with a view to his offering them for sale, but shall not include an option to subscribe for or acquire shares pursuant to a bona lide underwriting or sub-underwriting agreement.

28. For the purposes of paragraph lOaf this Schedule where the vendors or any of them are a firm, the members of the firm shall not be treated as separate vendors.

29. If in the case of a company which has been carrying on business, or of a business which has been carried on, for less than five years, the accounts of the company or business have only been made up in respect of four years, three years, two years, or one year, Part II of this Schedule shall have effect as if references to four years, three years, two years, or one year, as the case may be, were substituted for references to five years.

30. The expression "financial year" in Part II of this Schedule means the year in respect of which the accounts of the company or of the business, as the case may be, are made up, and where by reason of any alteration of the date on which the financial year of the company or business terminates the accounts of the company or business have been made up for a period greater or less than a year, that greater or less period shall for the purposes of that Part of this Schedule be deemed to be a financial year.

31. Any report required by Part II of this Schedule shall either indicate by way of note any adjustments as respects the figures of any profits or losses or assets and liabilities dealt with by the report which appear to the persons making the report necessary or shall make those adjustments and indicate that adjustments have been made.


SIXTH SCHEDULE (Section 51)

STATEMENT IN LIEU OF PROSPECTUS

U.K. Third and Fifth Schedules; N.S.W. Fourth and Ninth Schedules; Vic. Sixth Schedule; Qld. Fifth Schedule; S.A. Third and Fourth Schedules; W.A. Fourth and Fifth Schedules; Tas. Sixth Schedule.

PART I Statement in Lieu of Prospectus Lodged for Registration by [insert

name of the company]

The nominal share capital of the company Divided into

Amount (if any) of above capital which consists of redeemable preference shares

The date on or before which these shares are, or are liable, to be redeemed

Names, descriptions, and addresses of directors or proposed directors

If the share capital of the company is divided into different classes of shares, the right of voting at meetings of the company conferred by, and the rights in respect of capital and dividends attached to, the several classes of shares respectively

Number and amount of shares and debentures issued within the two years preceding the date of this statement or proposed or agreed to be issued as fully or partly paid up otherwise than in cash

The consideration for the issue or intended issue of those shares and debentures

Number, description, and amount of any shares or debentures which any person has or is entitled to be given an option to subscribe for, or to acquire from a person to whom they have been allotted or agreed to be allotted with a view to his offering them for sale

Period during whieh option is exercisable Price to be paid for shares or debentures

subscribed for or acquired under option Consideration for option or right to option .. Persons to whom option or right to option was

given or, if given to existing shareholders or debenture holders as such, the relevant shares or debentures

Names and addresses of vendors of property purchased or acquired, or proposed to be purchased or acquired by the company except where the contract for its purchase or I

£ shares of £

each: £ shares of £



each: £

1. shares of £ fully paid

2. shares upon which £ per share credited as paid

3. debentures £ 4. Consideration:

1. shares of £ and debentures of £

2. Until 3. £

4. Consideration: 5. Names and addresses:

COMPANIES ACT OF 1961 Scb. VI 475

SIXTH SCHEDULE-continued

acquisition was entered into in the ordinary course of the business intended to be carried on by the company or the amount of the purchase money is not material

Amount (in cash, shares, or debentures) payable to each separate vendor

Amount (if any) paid or payable (in cash or shares or debentures) for any such property, specifying amount (if any) paid or payable for goodwill

Short particulars of any transaction relating to any such property which was completed within the two preceding years and in which any vendor to the company or any person who is, or was at the time thereof, a promoter, director, or proposed director of the company had any interest direct or indirect

Amount (if any) paid or payable as commission for subscribing or agreeing to subscribe or procuring or agreeing to procure subscriptions for any shares or debentures in the company; or

Rate of the commission .. Amount or rate of brokerage The number of shares, if any, which persons

have agreed for a commission to subscribe absolutely

Amount or estimated amount of preliminary expenses

By whom those expenses have been paid or are payable

Amount paid or intended to be paid to any promoter

Consideration for the payment Any other benefit given or intended to be given

to any promoter

Consideration for giving of benefit Dates of, parties to, and general nature of

every material contract (other than contracts entered into in the ordinary course of the business intended to be carried on by the company or entered into more than two years before the delivery of this statement)

Time and place at which the contracts or copies thereof or (1) in the case of a contract not reduced into writing, a memorandum giving full particulars thereof, and (2) in the case of a contract wholly or partly in a foreign

Total purchase price £

Cash £ Shares £ Debentures £

Goodwill £

Amount paid: £ Amount payable: £

per centum

£

Name of promoter: Amount: £ Consideration: Name of promoter: Nature and value of

benefit: Consideration:

476 COMPANIES

SIXTH SCHEDULE-continued language, a copy of a translation thereof in English or embodying a translation in English of the parts in a foreign language, as the case may be, being a translation certified in the prescribed manner to be a correct translation may be inspected

Names and addresses of the auditors of the company (if any)

Full particulars of the nature and extent of the interest of every director, and of every expert, in the promotion of or in the property proposed to be acquired by the company, or, where the interest of such a director or expert consists in being a partner in a firm, the nature and extent of the interest of the firm, with a statement of all sums paid or agreed to be paid to him or to the firm in cash or shares, or otherwise, by any person (in the case of a director) either to induce him to become, or to qualify him as, a director, or otherwise for service rendered by him or by the firm in connection with the promotion or formation of the company or (in the case of an expert) for services rendered by him or the firm in connection with the promotion or formation of the company

And also, in the case of a statement to be lodged by a proprietary company on becoming a public company, the following items:-

Rates of the dividends (if any) paid by the company in respect of each class of shares in the company in each of the five financial years immediately preceding the date of this statement or since the incorporation of the company, whichever period is the shorter

Particulars of the cases in which no dividends have been paid in respect of any class of shares in any of these years -- ---- - ----

PART II

REPORTS TO BE SET OUT

VoJ. 2

1. Where it is proposed to acquire a business, a report by a registered company auditor (who shall be named in the statement) with respect to-

(a) the profits or losses of the business in respect of each of the five financial years immediately preceding the lodging of the statement with the Registrar; and

(b) the assets and liabilities of the business at the last date to which the accounts of the business were made up.

2. (1) Where it is proposed to acquire shares in a corporation which by reason of the acquisition or anything to be done in consequence thereof or in connection therewith will become a subsidiary of the

COMPANIES ACT OF 1961 Sch. VI 477

SIXTH SCHEDULE--continued company, a report by a registered company auditor (who shall be named in the statement) with respect to the profits and losses and assets and liabilities of the other corporation in accordance with subparagraph (2) or subparagraph (3) of this paragraph, as the case requires, indicating how the profits or losses of the other corporation dealt with by the report would, in respect of the shares to be acquired, have concerned members of the company, and what allowance would have fallen to be made, in relation to assets and liabilities so dealt with, for holders of other shares, if the company had at all material times held the shares to be acquired.

(2) If the other corporation has no subsidiaries, the report referred to in subparagraph (1) of this paragraph shall-

(a) so far as regards profits and losses, deal with the profits or losses of the other corporation in respect of each of the five financial years immediately preceding the delivery of the statement to the Registrar; and

(b) so far as regards assets and liabilities, deal with the assets and liabilities of the other corporation at the last date to which the accounts of the corporation were made up.

(3) If the other corporation has subsidiaries, the report referred to in subparagraph (1) of this paragraph shall-

(a) so far as regards profits and losses, deal separately with the other corporation's profits or losses as provided by subparagraph (2) of this paragraph, and in addition deal as aforesaid either-

(i) as a whole with the combined profits or losses of its subsidiaries, or

(ii) individually with the profits or losses of each subsidiaryor, instead of dealing separately with the other corporation's profits or losses, deal as aforesaid as a whole with the profits or losses of the other corporation and with the combined profits or losses of its subsidiaries; and

(b) so far as regards assets and liabilities, deal separately with the other corporation's assets and liabilities as provided by subparagraph (2) of this paragraph, and, in addition, deal as aforesaid either-

(i) as a whole with the combined assets and liabilities of its subsidiaries, with or without the other corporation's assets and liabilities; or

(ii) individually with the assets and liabilities of each subsidiary-

and shall indicate as respects the profits or losses and the assets and liabilities of the subsidiaries the allowance to be made for persons other than members of the company.

NOTE.-Where a company is not required to furnish any of the reports referred to in this Part, a statement to that effect giving the reasons therefor should be furnished. (Signatures of the persons abovenamed

as directors or proposed directors or of their agents authorized in writing)

Date:


PART III PROVISIONS APPLYING TO PARTS I AND II OF THIS SCHEDULE

3. In this Schedule the expression "vendor" includes any person who is a vendor for the purposes of the Fifth Schedule to this Act, and the expression "financial year" has the meaning assigned to it in Part III of that Schedule.

4. If in the case of a business which has been carried on, or of a corporation which has been carrying on business, for less than five years, the accounts of the business or corporation have only been made up in respect of four years, three years, two years, or one year, Part II of this Schcdule shall have effect as if references to four years, three years, two years, or one year, as the case may be, were substituted for references to five years.

S. Any report required by Part II of this Schedule shall either indicate by way of note any adjustments as respects the figures of any profits or losses or assets and liabilities dealt with by the report which appear to the persons making the report necessary or shall make those adjustments and indicate that adjustments have been made.

SEVENTH SCHEDULE (Section 82) STATEMENT REQUIRED PURSUANT TO DIVISION 5 OF PART IV

N.s.W. Fourteenth Schedule; Vic. Seventh Schedule; Qld. Thirteenth Schedule; S.A. regs. 45d, 45e; Tas. Seventh Schedule.

PART I MATTERS REQUIRED TO BE STATED IN STATEMENT

1. The date of the statement.

2. The date of and parties to the deed referred to in section eighty-three.

3. The date of and parties to any deed or instrument by which any of the provisions of the approved deed relating to the interest has been amended or abrogated.

4. The name of the trustee or representative under any such deed and the address of the trustee's or representative's registered office.

S. A summary of the provisions of the deed regulating the retirement, removal and replacement of the trustee or representative.

6. The name of the management company and the address of its registered office.

7. The names, descriptions, and addresses of all the directors of the management company.

8. A summary of the provisions of the deed regulating the retirement, removal and replacement of the management company.

9. The name and address of the auditor of the accounts relating to interests under the deed.

COMPANIES ACT OF 1961 Scbs. VI, VII 479

SEVENTH SCHEDULE-continued 10. A summary of the provisions of the deed regulating the appointment, retirement, removal and replacement of such auditor.

11. The duration, if ascertainable, of the undertaking, scheme, enterprise or investment contract to which the deed relates or if the duration is not ascertainable, that fact.

12. Full particulars with respect to the termination or winding up of the undertaking, scheme, enterprise or investment contract.

13. Such particulars as are sufficient to disclose the true nature of the undertaking, scheme, enterprise or investment contract in respect of which the interest is to be issued or offered to the public for subscription or purchase and the property to which the interest relates.

14. The nature of the interest to be so issued or offered and of any units or sub-units into which the interest is divided and the rights in relation thereto of the persons who become the holders thereof.

15. The address where the register of interest holders is or will be kept and the days on and the hours during which it is or will be accessible to the public.

16. The method of calculation provided by the deed of the price at which the management company may sell the interest or any right in respect thereof or any unit or sub-unit of the interest.

17. Such particulars as are sufficient to describe the duties and obligations imposed on the trustee or representative appointed by the deed relating to the interest.

18. The name and address of each person or corporation with whom or with which a holder of the interest is required, obliged or entitled, in connection with the undertaking, scheme, enterprise or investment contract, to enter into any contract whether by way of lease or otherwise.

19. The full names, descriptions and residential addresses of the directors of each corporation referred to in clause 18 of this Schedule.

20. Whether any real or personal property to which the interest relates is or will become vested in the trustee or representative, the nature and description of such property and the conditions or circumstances under which it is or will become so vested.

21. Where the interest consists of rights or interests in or arising out of an investment relating to property that ordinarily depreciates in value through use or effluxion of time, such particulars as are sufficient to disclose the true particulars of the provision made for the replacement of such property and the source or sources from which such replacement is to be made or from which the cost of such replacement is to be met.

22. The full names and residential addresses of the vendors of any property to which the interest relates, whether such property was purchased or acquired by the management company or by any person or corporation referred to in clause 18 of this Schedule or is proposed to be so purchased or acquired, a full and true description of such property and the amount paid or to be paid therefor to each vendor.


SEVENTH SCHEDULE-continued 23. Such particulars as are sufficient to disclose the true nature and extent of the interest, if any, of each director of the management company, whether as a director, shareholder, partner or otherwise, in the business of each such vendor and in such property.

24. The obligations imposed upon the management company or any other person to purchase from any holder thereof the interest or any rights in respect thereof or the units or sub-units of the interest for which he has subscribed or which he has purchased, and a statement of the method provided by the deed for the calculation of the purchase price thereof.

25. A summary of the rights and obligations of the management company and of the trustee or representative governing the valuation of any investment made or property held in relation to the interest.

26. A summary of the provisions of the deed whereby investments or other property comprising or forming part of the interest to which the deed relates may be varied.

27. Full information regarding the remuneration of the trustee or representative and the management company respectively, the manner in which under the provisions of the deed such remuneration is provided for, and the charges (if any) that will be made by way of such remuneration upon the sale of or SUbscription for any such interest and upon the distribution of income and capital or otherwise in connection with the relevant undertaking, scheme, enterprise or investment contract.

28. Whether the interest or any rights in respect thereof or any units or sub-units of the interest are transferable by the holders thereof and, if so, a summary of the provisions of the deed regulating such transfer.

29. A summary of the provisions of the deed relating to the distribution to the holders of the interest or of units or sub-units of the interest of the income derived from the undertaking, scheme, enterprise or investment contract.

30. Full information as to whether and to what extent any factor other than cash receipts by way of dividend, interest or bonus has been or will be taken into account in calculating the amount of income that will be payable to an interest holder.

31. If any reference is made to the yield of income obtained or likely to be obtained by the holders of the interest or of units or sub-units of the interest, a statement as to whether and to what extent anything other than cash receipts by way of dividends, interest or bonuses has been taken into account in calculating the yield.

32. A summary of the provisions of the Act and of the deed regulating the convening of meetings of holders of the interest or of units or sub-units of the interest.

33. The name and description and the date of commencement of operation of every other undertaking, scheme, enterprise or investment contract involving the issue of interests to the public conducted by the management company within the five years immediately preceding the date of the statement.

COMPANIES ACT OF 1961 Sch. vn 481

SEVENTH SCHEDULE-continued 34. A declaration-

(a) that no units or sub-units of interests purchased or subscribed for pursuant to the statement shall be allotted later than six months after the date appearing in the statement pursuant to paragraph 1 hereof; and

(b) unless the conditions of issue of the units or sub-units expressly provide that certificates be not issued that certificates shall be issued by the trustee or representative to purchasers of or subscribers for units or sub-units of interests purchased or subscribed for pursuant to the statement not more than two months after the allotment of the units or sub-units.

35. A summary of the provisions of the deed with respect to the undertakings-

(a) by or on behalf of the management company relating to the allotment of interests and of units or sub-units of interests to which the deed relates; and

(b) by or on behalf of the trustee or representative relating to the issue to holders of interests and of units or sub-units of interests of certificates of title thereto.

PART II REPORTS TO BE SET OUT IN STATEMENT

36. A report or reports by a person who at the time of making the report or reports was a registered company auditor, and whose name must appear as such in the statement, setting out-

16

(a) such information as sufficiently discloses the number of distributions (if any) of income to holders of interests or of units or sub-units of interests to which the deed relates in each of the five years immediately preceding the date of the statement during which those interests had been in existence, the amount of each distribution and the extent to which each distribution consisted of any component other than dividends, interest and bonuses, and where it consisted of any component other than dividends, interest and bonuses, the nature and value of each of those components;

(b) such information, as sufficiently discloses the selling price and the purchase price, respectively, of those interests, units or sub-units on the date upon which each distribution was made;

(c) such information as sufficiently discloses the selling price and purchase price, respectively, of those interests, units or subunits on such date, being a date within a period of fourteen days immediately preceding the date of the statement as is specified in the relevant report;

(d) in respect of every issue of interests relating to any other undertaking, scheme, enterprise or investment contract conducted or entered into by the management company within the period of five years immediately preceding the date of the statement, similar information to that required under paragraphs (a), (b) and (c) of this clause; and


SEVENTH SCHEDULE----continued (e) the profits or losses of the management company (and of

every corporation with which a holder of the interest is required, obliged or entitled, pursuant to the undertaking, scheme, enterprise or investment contract, to enter into any contract) in respect of each of the five years during which the company and the corporation, respectively, were carrying on business immediately preceding the date of the statement, and the rates of dividend (if any) paid by that company and that corporation in respect of each of those years, and the assets and liabilities of that company and of that corporation as at the last date to which its accounts were made up.

37. If in the case of a company which has been carrying on business, or of a business which has been carried on, for less than five years, the accounts of the company or business have only been made up in respect of four years, three years, two years, or one year, this Schedule shall have effect as if references to four years, three years, two years, or one year, as the case may be, were substituted for references to five years.

EIGHTH SCHEDULE (Sections 158-160) U.K. Sixth Schedule; N.S.W. Sixth Schedule; Vic. Eighth Schedule; Qld.

Sixth Schedule; S.A. Fifth Schedule; W.A. Sixth Schedule; Tas. Eighth Schedule.

PART I CONTENTS OF ANNUAL RETURN OF A COMPANY HAVING A SHARE CAPITAL

1. The address of the registered office of the company.

2. In a case in which the register of members is kept elsewhere than at the registered office, the address of the place where it is kept.

3. A summary, distinguishing between shares issued for cash and shares issued as fully or partly paid up otherwise than in cash, specifying-

(a) the amount of the share capital of the company, and the number of the shares into which it is divided;

(b) the number of shares taken up from the incorporation of the company to the date of the return;

(c) the amount called up on each share; (d) the total amount of calls received, including payments on

application and allotment; (e) the total amount (if any) agreed to be considered as paid on

shares which have been issued as fully or partly paid up otherwise than in cash;

(f) the total amount of calls unpaid; (g) the total amount of the sums, if any, paid by way of

commission in respect of any shares or debentures since the date of the last return;

(h) particulars of the discount allowed on the issue of any shares issued at a discount, or of so much of that discount as has not been written off at the date of the return;

(i) the total amount of the sums, if any, allowed by way of discount in respect of any debentures since the date of the last return;

COMPANIES ACT OF 1961 Schs. VII, VIII

EIGHTH SCHEDULE-continued (j) the total number of shares forfeited; and (k) the total amount (if any) paid on shares forfeited.

483

4. Particulars of the total amount of the indebtedness of the company in respect of all charges which are required to be registered with the Registrar.

S. Except in the case of a no-liability company and in the case of a company exempted under the provision of section one hundred and sixty of "The Companies Act of 1961," a list as at the date of the return or as at such other date as the Registrar authorizes in the case of any company-

(a) containing the names (that is to say at least the surname and one Christian or other name and other initials) and addresses of all persons who on such date are members of the company;

(b) stating the number of shares held by each member at the date of the list; and

(c) if the names are not arranged in alphabetical order, having annexed thereto an index sufficient to enable the name of any person in the list to be easily found.

6. Where the company has converted any of its shares into stock and given notice of the conversion to the Registrar, the list must give particulars as to the amount of stock or the number of stock units instead of the amount of shares.

7. In the case of a company keeping a branch register-(a) references in paragraphs 5 and 6 of this Schedule to particulars

required shall be taken as not including any such particulars contained in the branch register, in so far as copies of the entries containing those particulars are not received at the registered office of the company before the date of the list in question; and

(b) where an annual return or a list of members is dated between the date when any entries are made in the branch register and the date when copies of those entries are received at the registered office of the company, the particulars contained in those entries, so far as relevant to an annual return, shall be included in the next or a subsequent annual return as may be appropriate having regard to the particulars included in that return with respect to the company's register of members.

8. All such particulars with respect to the persons who at the date of the return are the directors of the company and any person who at that date is a manager or secretary of the company as are by this Act required to be contained in the register of directors managers and secretaries.

9. Name and address of the auditor of the company.

10. In the case of a no-liability company particulars of-(a) the date when each call made since the date of the last

return, or in the case of a first return since incorporation was payable;


EIGHTH SCHEDULE-<ontinued (b) the dates since the last return or incorporation when shares

forfeited were offered for sale and the place of offer; (c) the number of shares sold at each sale of forfeited shares

made since the date of the last return or in the case of a first return since the date of incorporation;

(d) the number of shares unsold at each offer for sale of forfeited shares made since the date of the last return or in the case of a first return since the date of incorporation; and

(e) the number of shares disposed of pursuant to subsection (3) of section three hundred and twenty-four of the Act since the date of the last return being shares withdrawn from sale or for which no bid was received.

PART II FORM OF ANNUAL RETURN OF A COMPANY HAVING A SHARE CAPITAL

Annual return of the Limited made up to the day of 19 [being the date of or a date not later than the fourteenth day after the date of the annual general meeting in 19 ].

The date of the annual general meeting of the company was , 19

The address of the registered office of the company is

The address of the place at which the register of members is kept if other than the registered office is

SUMMARY OF SHARE CAPITAL AND SHARES

Nominal share capital £ divided into! .. .. { Total number of shares taken Upl to the{

day of 19 (being the date of the return or other authorised date.)

shares of £ shares of £

Number of shares issued subject to payment wholly in cash

Number of shares issued as fully paid up "otherwise" than in cash

Number of shares issued as partly paid up to the extent of per share otherwise than in cash

2Number of shares (if any) of each class issued at a discount Total amount of discount on the issue of shares which £

has not been written off at the date of this return 3There has been called up on each of shares, £ 3There has been called up on each of shares, £ 3There has been called up on each of shares, £

each each

1 Where there are shares of different kinds or amounts (e.g., Preference and Ordinary. Or £10 and £5) state the numbers and nominal values separately.

2 If the shares are of different kinds, state them separately. 3 Where various amounts have been called or there are shares of different kinds,

state them ~eparately.

COMPANIES ACT OF 1961 Sch. VIII

EIGHTH SCHEDULE~ontinued

SUMMARY OF SHARE CAPITAL AND SHAREs~ontinued

4Total amount of calls received including payments on £ application and allotment

Total amount (if any) agreed to be considered as paid £ on shares which have been issued as fully paid up otherwise than in cash

Total amount (if any) agreed to be considered as paid £ on shares which have been issued as partly paid up to the extent of per share otherwise than in cash

Total amount of calls unpaid £ Total amount of the sums (if any) paid by way of com- £

mission in respect of any shares or debentures since the date of the last return

Total amount of the sums (if any) allowed by way of £ discount in respect of any debentures since the date of the last return

Total number of shares forfeited Total amount paid (if any) on shares forfeited £

5Total amount of the indebtedness of the company in £ respect of all charges which are required to be registered with the Registrar of Companies

4 Include what has been received on forfeited as well as on existing shares.

485

5 State in respect of each charge the registered number thereof. the date of registration and the amount of indebtedness at the date of the return.

COPY OF LAST AUDITED BALANCE-SHEET AND PROFIT AND LOSS ACCOUNT OF THE COMPANY

Except where the company is an exempt proprietary company on the date of the return and has been an exempt proprietary company since the date of the previous return the incorporation of the company or the commencement of this Act, whichever last occurs, or is a company registered under the law of the Commonwealth relating to life insurance this return must include a copy, certified by a director or by the manager or secretary of the company to be a true copy, of the last balance-sheet and of the last profit and loss account which have respectively been audited by the company's auditors (including every document required by law to be annexed or attached thereto) together with a copy of the report of the auditors thereon (certified as aforesaid) and if any such balance-sheet or account is in a foreign language there must also be annexed to it a translation thereof in English certified in the prescribed manner to be a correct translation. If the said last balance-sheet or account did not comply with the requirements of the law as in force at the date of the audit there must be made such additions to and corrections in the said copy as would have been required to be made therein in order to make it comply with the said requirements, and the fact that the said copy has been so amended must be stated thereon. If a company has more than one such audited balance-sheet or profit and loss account since the date of the last return, every such balance-sheet and profit and loss account must be included.

486 COMPANIES

EIGHTH SCHEDULE-continued CERTIFICATE TO BE GIVEN BY ALL COMPANIES

Vol. 2

A certificate in the form set out hereunder shall be given by the secretary or a director of every company and in the case of an exempt proprietary company by both a director and a secretary.

CERTIFICATE

I/We1 after having made due inquiries certify-(a) that the provisions of Division 3 of Part V of "The Public

Curator Acts, 1915 to 1957," relating to unclaimed moneys have been complied with; and

(b) having made an inspection of the share register, that

transfers ~~~~' not been registered since the date

f the last annual return' o the incorporation of the company;

(c) 2 that the company has not since the date of the last annual return issued·3 any invitation to the public to subscribe for any shares in or debentures of the company or to deposit moneys for fixed periods or payable at call;

(d) 4 that the excess of members of the company above fifty (counting joint holders of shares as one person) consists wholly of persons who are in the employment of the co:npany or of its subsidiary or persons who while previously in the employment of the company or of its subsidiary were and thereafter have continued to be members of the company;

(e) 5 that to the best of our knowledge and belief the company is an exempt proprietary company and has been an exempt proprietary company within the meaning of section five of "The Companies Act of 1961"

date of the previous return6 since the incorporation of the company6

commencement of "The Companies Act of 1961";6 (£)1 that on the day of ,19 ,all the

members of the company agreed, pursuant to section one hundred and sixty-five of "The Companies Act of 1961," not to appoint an auditor for the financial year 19

Signature DirectorS Signature Secretary

1 Strike out whichever is inapplicable. 2 Strike out this paragraph if the company is not a proprietary company. 3 In the case of the first annual return of a proprietary company strike out

the words "last annual return" and substitute therefor the words "incorporation of the company."

4 Strike out this paragraph except in the case of a proprietary company whose members exceed fifty.

5 Strike out except in the case of an exempt proprietary company. 6 Strike out if not appropriate. 7 Strike out this paragraph if inapplicable. Note-This paragraph is only

applicable to an exempt proprietary company. 8 NOTE.-A certificate signed by the same person in the capacity of both

director and secretary will not be accepted. See section 132 (5).

COMPANIES ACT OF 1961 Sch. VIII 487

EIGHTH SCHEDULE--continued

Particulars of the

the * Directors Managers Secretaries and A uditors of Limited, at the date of the Annual Return.

Other business

occupation and in the

case of directors

Any former particulars The present Christian or other name Christian or Usual of other

or names and surnamet other name addressj: directorships or names required to

or surname be shown by s. 134

(2) (c) and (3)

(If none, state '0)

Directors

Manager (if any)

Secretaries

Auditors for current financial year

* "Director" includes any person who occupies the position of a director by whatever name called and any person in accordance with whose directions or instructions the directors of a company are accustomed to act.

t In the case of a corporation its corporate name and registered or principal office should be shown.

:j: In the case of directors the address given must be the usual residential address. See s. 134 (2) (a).


EIGHTH SCHEDUL~ontinued

List of persons holding shares in the Limited on the day of date of the return or other authorized date) shares so held.

19 (being the and an account of the

NOTE.-If the names in this list are not arranged in alphabetical order, an index sufficient to enable the name of any person in the list to be readily found must be annexed to this list.

NOTE.-In the case of a no-liability company or a company exempted under the provisions of section one hundred and sixty of "The Companies Act of 1961," this list is not required to be supplied.

Folio in Register Ledger containing Particulars Names and Addresses "Number of Shares held

by existing Memberst

-------------------------------------

* The aggregate number of shares held, and not the distinctive numbers, must be stated. and the column must be added up throughout so as to make one total to agree with that stated in the summary to have been taken up.

t When the shares are of different classes these columns may be subdivided so that the number of each class held may be shown separately. Where any shares have been converted into stock particulars of Vhe amount of stock must be shown.

NO-LIABILITY COMPANIES

Particulars as to calls and sales of forfeited shares (to be given only in the case of a no-liability company)-

(a) the date when each call made since the date of the last return, or in the case of a first return since incorporation was payable;

(b) the dates since the last return or incorporation when shares forfeited were offered for sale and the place of offer;

(c) the number of shares sold at each sale of forfeited shares made since the date of the last return or in the case of a first return since the date of incorporation;

(d) the number of shares unsold at each offer for sale of forfeited shares made since the date of the last return or in the case of a first return since the date of incorporation; and

(e) the number of shares disposed of pursuant to subsection (3) of section three hundred and twenty-four of "The Companies Act of 1961," since the date of the last return, being shares withdrawn from sale or for which no bid was received.

[Signature]

[State whether director or manager or secretary]

COMPANIES ACf OF 1961 Schs. VIII, IX

NINTH SCHEDULE (Sections 162, 341)

ACCOUNTS

U.K. Eighth Schedule; Vic. Ninth Schedule; Tas. Ninth Schedule.

PROFIT AND LOSS ACCOUNT

1. There shall be shown in respect of the period of accounting-

489

(a) the net balance of profit and loss on the company's trading;

(b) income from investments in subsidiaries of the company;

(c) income from other investments distinguishing between income received from any shares and debentures which are dealt in on any prescribed Stock Exchange in the Commonwealth and income received from other sources;

(d) amounts (if any) charged for depreciation or amortization on-

(i) investments; (ii) goodwill;

(iii) fixed assets; (e) the amount of interest on the company's debentures and loans

of fixed term; (f) any profit or loss arising from a sale or revaluation of fixed

or intangible assets if brought into account in determining the company's profit or loss;

(g) the amounts, if material, set aside or proposed to be set aside to, or withdrawn from, reserves;

(h) the amount, if material, set aside to provisions other than provisions for depreciation, renewals or diminution in value of assets or, as the case may be, the amount, if material, withdrawn from such provisions and not applied for the purposes thereof;

(i) the amounts respectively provided for redemption of share capital and for redemption of loans;

(j) provision made for payment of income tax in respect of the period of accounting;

(k) the aggregate amount of the dividends paid and the aggregate amount of the dividend proposed to be paid;

(1) the total of the amount paid to the directors as remuneration for their services, inclusive of all fees percentages bonuses and commissions or other emoluments paid to or receivable by them by or from the company or by or from any subsidiary of the company, and inclusive of commission paid or payable for subscribing or agreeing to subscribe or procuring or agreeing to procure subscriptions for any shares in or debentures of the company or of its holding company or any subsidiary of the company but the salaries and bonuses and commissions paid by way of salary of directors who are engaged in the full time employment of the company or any subsidiary of the company need not be included in this amount; and


NINTH SCHEDULE--continued (m) the total of the amount paid to or receivable by the auditors

as remuneration for their services as auditors inclusive of all fees percentages or other payments or consideration given, by or from the company or by or from any subsidiary of the company.

BALANCE-SHEET

2. (1) There shall be shown as at the end of the period of accounting-(a) the amount of authorized capital and particulars of issued

capital distinguishing between classes of shares and specifying by way of note to the balance-sheet any portion of the share capital which has not already been called up and which is not capable of being called up except in the event and for the purposes of the company being wound up and stating the rates of dividend, and whether participating or cumulative or both, attaching to shares other than ordinary shares, and stating amount of calls in arrear in each class;

(b) the part of the issued capital that consists of redeemable preference shares, the date on or before which these shares are, or are liable, to be redeemed, and the earliest date on which the company has power to redeem those shares, and the amount of the premium (if any) at which those shares are redeemable;

(c) so far as the information is not given in the profit and loss account, any share capital on which interest has been paid out of capital during the financial year, and the rate at which interest has been so paid;

(d) the amount of the share premium account;

(e) particulars of any redeemed debentures which the company has power to re-issue;

(f) under separate headings, so far as they are not written off(i) the preliminary expenses; (ii) any expenses incurred in connection with any issue of

shares or debentures; (iii) any sums paid by way of commission in respect of any

shares or debentures; (iv) any sums allowed by way of discount in respect of any

debentures; (v) the amount of the discount allowed on any issue of shares

at a discount; and (vi) if the amount of the goodwill and of any patents and trade

marks or part of that amount is shown as a separate item in or is otherwise ascertainable from the books of the company, or from any contract for the sale or purchase of any property to be acquired by the company, or from any documents in the possession of the company relating to the stamp duty payable in respect of any such contract or the conveyance of any such property-the said amount so shown or ascertained;

COMPANIES ACT OF 1961 Sch.IX 491

NINTH SCHEDULE-continued (g) the reserves provisions liabilities fixed assets and current

assets classified separately under headings appropriate to the company's business showing separately the provision for taxation and stating the method used to arrive at the amount of assets under each heading but-

(i) where the amount of any class is not material, it may be included under the same heading as some other class; and

(ii) where any assets of one class are not separable from assets of another class, those assets may be included under the same heading;

(h) under separate headings, stating the method used to arrive at the amount of the investments under each heading-

(i) investments in Government municipal and other public debentures stock or bonds;

(ii) investments in subsidiaries of the company; (iii) investments in companies (not being subsidiaries of the

company) the shares in or debentures of which are dealt in on any prescribed stock exchange in the Commonwealth or elsewhere; and

(iv) investments in any other companies;

(i) under separate headings-(i) amounts owing by subsidiaries of the company; (ii) trade debts and bills receivable (other than amounts owing

by subsidiaries of the company); (iii) the amount outstanding of any loan made guaranteed or

secured by the company, being a loan made to a director of the company or of a company which is deemed by virtue of subsection (5) of section six to be related to the company, or a loan made to another company in which a director of the company or of a company which is so deemed to be related to the company owns a controlling interest;

(iv) other debts owing to the company, and where any amounts or debts shown under such a heading include any sums which consist of or are in the nature of interest accommodation charges service charges maintenance charges or insurance premiums those sums shall except to the extent that they have become due and payable and have been demanded be shown as a deduction from the amounts or debts shown under that heading;

(j) balance of profit and loss account; (k) debentures (showing separately amounts that are redeemable

not later than twelve months after the date to which the accounts are made up and amounts that are redeemable later than twelve months after that date);

(I) liabilities (other than debentures bank loans and overdrafts) secured by any charge on the assets whether registered or not (showing separately the aggregate of the amounts that are payable not later than twelve months after the date to


NINTH SCHEDULE--continued which the accounts are made up and the aggregate of the amounts that are payable later than twelve months after that date) ;

(m) bank loans and overdrafts;

(n) amounts borrowed without security (showing separately the aggregate of the amounts that are repayable not later than twelve months after the date to which the accounts are made up and the aggregate of the amounts that are repayable later than twelve months after that date);

(0) amounts owing to subsidiaries of the company;

(p) amounts owing to trade creditors (other than amounts owing to subsidiaries of the company);

(q) other amounts owing by the company;

(r) under separate headings (to be stated by way of note if not otherwise shown)-

(i) contingent liabilities unsecured; (ii) contingent liabilities secured upon the company's assets;

and (iii) where practicable, the aggregate amount, if it is material,

of contracts for capital expenditure, so far as that amount has not been provided for; and

(s) arrears of dividends on preference shares.

(2) For the purposes of this clause, where more than one method is used to arrive at any amount shown in the balance-sheet, there shall be shown in the balance-sheet a separate total in respect of each of the methods so used.

(3) In the case of a no-liability company, the balance-sheet shall show, in addition to the matters required by the foregoing provisions of this clause to be shown-

(a) the total number of shares forfeited; and (b) the number of shares forfeited in respect of each call and

amount of each of those calls.

3. (1) The method of arriving at the amount of any investment or fixed asset shall, subject to subclause (2) of this clause, be to take the difference between-

(a) its cost or, if it stands in the company's books at a valuation other than cost, the amount of the valuation; and

(b) the aggregate amount provided or written off since the date of acquisition or valuation as the case may be, for depreciation or diminution in value.

(2) For the purposes of this clause the net amount at which any assets stand in the company's books at the commencement of this Act (after deduction of the amounts previously provided or written off for depreciation or diminution in value) shall, if the figures relating to the period before the commencement of this Act cannot be obtained without

COMPANIES ACf OF 1961 Sch.IX 493

NINTH SCHEDULE-continued unreasonable expense or delay, be treated as if it were the amount of the valuation of those assets made at the commencement of this Act, and where any of those assets are sold, the said net amount less the amount of the sales shall be treated as if it were the amount of a valuation so made of the remaining assets.

(3) Subclause (1) of this clause shall not apply-(a) to assets for which the figures relating to the period beginning

with the commencement of this Act cannot be obtained without unreasonable expense or delay; or

(b) to assets the replacement of which is provided for wholly or partly-

(i) by making provision for renewals and charging the cost of replacement against the provision so made; or

(ii) by charging the cost of replacement direct to revenue; or (c) to any investments of which the market value (or, in the case

of investments not having a market value, their value as estimated by the directors) is shown either as the amount of the investments or by way of note; or

(d) to goodwill, patents or trade marks.

( 4) For the assets under each heading whose amount is arrived at in accordance with subclause (1) of this clause, there shall be shown

(a) the aggregate of the amounts referred to in paragraph (a) of that subclause; and

(b) the aggregate of the amounts referred to in paragraph (b) thereof.

(5) As respects the assets under each heading whose amount is not arrived at in accordance with subclause (1) of this clause because their replacement is provided for as mentioned in paragraph (b) of subclause (3) of this clause, there shall be stated-

(a) the means by which their replacement is provided for; and (b) the aggregate amount of the provisions (if any) made for

renewals and not used.

HOLDING AND SUBSIDIARY COMPANIES

4. (1) There shall be annexed to the profit and loss account of every holding company-

(a) a separate profit and loss account for each subsidiary of the company; or

(b) a consolidated profit and loss account of the holding company and o~ its subsidiaries eliminating all inter-company transactions.

(2) There shall be clearly stated (by way of note or otherwise) either in the profit and loss account of the holding company or in any document annexed thereto pursuant to subclause ( 1) of this clause the name and place of incorporation of each subsidiary to which that profit. and loss account or other document relates.

(3) There shall be annexed to the balance-sheet of every holding company-

(a) a balance-sheet of each subsidiary of the company; or


NINTH SCHEDULE-continued (b) a consolidated balance-sheet of the holding company and of

its subsidiaries eliminating all inter-company balances.

( 4 ) Such profit and loss accounts and balance-sheets shall be in the same form as the profit and loss account and balance-sheet of the holding company and shall be accompanied by the auditor's report thereon.

(5) In the case of a subsidiary company incorporated outside the State whether it has or has not established a place of business in the State, it shall be sufficient if the separate profit and loss account or balance-sheet (as the case requires) of such subsidiary company is in such form and is so reported upon by auditors and contains such particulars and includes such documents (if any) as the company is required to make out and lay before the company in general meeting by the law for the time being,. applicable to such company in the place where it is incorporated.

(6) If the auditor's report on the balance-sheet or profit and loss account of a subsidiary company is qualified in any way, the separate balance-sheet of the subsidiary company or the consolidated balance-sheet of the holding company (as the case may be) shall contain particulars of the manner in which the report is qualified.

(7) This clause shall not apply to a subsidiary which would not be a subsidiary but for the operation of subparagraphs (i) and (ii) of paragraph (a) of subsection (1) of section six.

GENERAL

5. (1) All amounts shown in profit and loss accounts and balance-sheets shall be quoted in Australian currency, and not otherwise.

(2) Except in the case of the first balance-sheet or profit and loss account laid before the company after the commencement of this Act, there shall be shown in every balance-sheet and profit and loss account the corresponding amounts at the end of the immediately preceding financial year for all items shown in the balance-sheet or profit and loss account.

(3) Every profit and loss account or balance-sheet shall state by way of note-

(a) if any conversion into Australian currency has been made for the purposes of the profit and loss account and balance-sheet the basis of the conversion of the other currency into Australian currency; and

(b) the aggregate quoted market value of any investment of a kind referred to in paragraph (h) of subclause (1) of clause 2 of this Schedule.

TENTH SCHEDULE (Section 184) PART A

REQUIREMENTS WITH WHICH TAKE-OVER OFFERS TO COMPLY

1. The offer shall be dated and shall be dispatched to the offeree within three days of its date and shall state that, except in so far as it and all other take-over offers made under the take-over scheme may be

COMPANIES ACT OF 1961 Schs.IX,X 495

TENTH SCHEDULE-continued totally withdrawn and every person released from any obligation incurred thereunder, it will remain open for acceptance by the offeree for at least one month from that date.

2. The offer shall not be conditional upon the offeree approving or consenting to any payment or other benefit being made or given to any director of the offeree corporation or any corporation which is deemed by virtue of subsection (5) of section six to be related to that corporation as compensation for loss of office or as consideration for, or in connection with, his retirement from office.

3. The offer shall state-(a) whether or not the offer is conditional upon acceptances of

offers made under the take-over scheme being received in respect of a minimum number of shares and, if so, that number;

(b) if the shares are to be acquired in whole or in part for cash, the period within which payment will be made and the method of payment; and

(c) if the shares are to be acquired for a consideration other than cash, the period within which the offeree will receive that consideration.

4. Where the offer is conditional upon acceptances in respect of a minimum number of shares being received, the offer shall specify-

(a) a date as the latest date on which the offeror corporation can declare the offer to have become free from that condition; and

(b) a further period of not less than seven days during which the offer will remain open for acceptance.

PART B REQUIREMENTS WITH WHICH STATEMENT GIVEN BY OFFEROR CORPORATION

TO COMPLY 1. The statement shall-

(a) specify the names,. descriptions and addresses of all the directors of the offeror corporation;

(b) contain a summary of the principal activities of the offeror corporation;

(c) specify the number and description and amount of marketable securities in the offeree corporation held by or on behalf of the offeror corporation, or if none are so held contain a statement to that effect; and

(d) if the shares are to be acquired for a consideration other than wholly in cash-

(i) set out the reports which, if the statement were a prospectus issued on the date on which notice of the take-over scheme is given to the offeree corporation, would be required to be set out in it under paragraphs 20 and 23 in Part II of the Fifth Schedule; and

(ii) specify details of any alterations in the capital structure of the offeror corporation or of any subsidiary of that corporation during the period of five years immediately preceding


TENTH SCHEDULE--continued the date on which notice of the take-over scheme is given to the offeree corporation and particulars of the source of any increase in capital.

2. The statement shall contain particulars of any restriction on the right to transfer the shares to which the take-over scheme relates contained in the memorandum or articles or other instrument constituting or defining the constitution of the offeree corporation which has the effect of requiring the holders of the shares, before transferring them to offer them for purchase to members of the offeree corporation or to any other person and, if there is any such restriction, the arrangements, if any, being made to enable the shares to be transferred in pursuance of the take-over scheme.

3. If the consideration for the acquisition of shares under the take-over scheme is to be satisfied in whole or in part by the payment of cash, the statement shall contain details of the arrangements that have been, or will be, made to secure payment of the cash consideration and, if no such arrangements have been or will be made, shall contain a statement to that effect.

4. The statement shall set out-(a) whether or not it is proposed in connection with the take-over

scheme that any payment or other benefit shall be made or given to any director of the offeree corporation or of any corporation which is by subsection (5) of section six deemed to be related to that corporation as compensation for loss of office or as consideration for, or in connection with, his retirement from office, and if so, particulars of the proposed payment or benefit in respect of each such director;

(b) whether or not there is any other agreement or arrangement made between the offeror corporation and any of the directors of the offeree corporation in connection with or conditional upon the outcome of the scheme, and if so, particulars of any such agreement or arrangement;

(c) whether or not there has been within the knowledge of the offeror corporation any material change in the financial position of the offeree corporation since the date of the last balancesheet laid before the corporation in general meeting, and if so. particulars of any such change; and

(d) whether or not there is any agreement or arrangement whereby any shares acquired by the offeror corporation in pursuance of the scheme will or may be transferred to any other person and, if so-

(i) the names of the persons who are a party to the agreement or arrangement and the number, description and amount of the shares which will or may be so transferred; and

(ii) the number, if any, and description and amount of shares of the offeree corporation held by or on behalf of each of these persons, or if no such shares are so held, a statement to that effect.

COMPANIES ACT OF 1961 Sch.X 497

TENTH SCHEDULE-continued 5. The succeeding provisions of this Part of this Schedule apply only where the consideration to be offered in exchange for shares of the offeree corporation consists in whole or in part of marketable securities issued or to be issued by the offeror corporation or by any other corporation.

6. Where the marketable securities are listed on or dealt in on a Stock Exchange, the statement shall state this fact and specify the Stock Exchanges concerned and specify-

(a) the latest available market sale price prior to the date on which notice of the take-over scheme is given to the offeree corporation;

(b) the highest and lowest market sale price during the three months immediately preceding that date and the respective dates of the relevant sales; and

(c) where the take-over scheme has been the subject of a public announcement in newspapers or by any other means prior to notice of the scheme being given to the offeree corporation, the latest market sale price immediately prior to the public announcement.

7. Where the securities are listed on or dealt in on more than one Stock Exchange, it is sufficient compliance with paragraph (a) of clause 6 if information with respect to the securities is given in relation to the Stock Exchange at which there have been the greatest number of recorded dealings in the securities in the three months immediately preceding the date on which notice of the take-over scheme is given to the offeree corporation.

8. Where the take-over scheme relates to securities which are not listed on or dealt in on a Stock Exchange, the statement shall contain all the information which the offeror corporation may have as to the number, amount and price at which the securities have been sold in the three months immediately preceding the date on which notice of the scheme is given to the offeree corporation and, if the offeror corporation has no such information, a statement to that effect.

PART C REQUIREMENTS WITH WHICH STATEMENT GIVEN BY OFFEREE CORPORATION

TO COMPLY

1. The statement shall indicate-(a) whether or not the board of directors of the offeree corporation

recommends to shareholders the acceptance of take-over offers made, or to be made, by the offeror corporation under the take-over scheme; or

(b) that the board of directors of the offeree corporation does not desire to make a recommendation or considers itself not justified in making a recommendation.

2. The statement shall set out-(a) the number, description and amount of marketable securities

in the offeree corporation held by or on behalf of each director of that corporation or, in the case of a director where none are so held, that fact;


TENTH SCHEDULE--continued (b) in respect of each such director of the offeree corporation by

whom, or on whose behalf, shares to which the take-over scheme relates are held-

(i) whether or not the present intention of the director is to accept any take-over offer that may be made in pursuance of the take-over scheme in respect of those shares; or

(ii) that the director has not decided whether he will accept such a take-over offer.

(c) whether or not any marketable securities of the offeror corporation are held by, or on behalf of, any director of the offeree corporation and, if so, the number, description and amount of the marketable securities so held;

(d) whether or not it is proposed in connection with the take-over scheme that any payment or other benefit shall be made or given to any director of the offeree corporation or of any other corporation which is by virtue of subsection (5) of section six deemed to be related to that corporation as compensation for loss of office or as consideration for, or in connection with, his retirement from office and, if so, particulars of the proposed payment or benefit;

(e) whether or not there is any other agreement or arrangement made between any director of the offeree corporation and any other person in connection with or conditional upon the outcome of the take-over scheme and, if so, particulars of any such agreement or arrangement;

(f) whether or not any director of the offeree corporation has any interest in any contract entered into by the offeror corporation and, if so, particulars of the nature and extent of such interest;

(g) if the shares to which the scheme relates are not listed on or dealt in on a Stock Exchange, all the information which the offeree corporation may have as to the number, amount and price at which any such shares have been sold in the six months preceding the date on which notice of the take-over scheme was given to the offeree corporation; and

(h) whether or not there has been any material change in the financial position of the offeree corporation since the date of the last balance-sheet laid before the corporation in general meeting and, if so, particulars of such change.

THE COMPANIES ACT of 1961 - Supreme Court Library ...

Documents

Transcript of THE COMPANIES ACT of 1961 - Supreme Court Library ...