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Such companies are designated by the nature of the undertaking. A company for commercial or manufacturing purposes must have a licence proportioned to its capital. Companies first established in Russia do not need such a licence. The authority will not be granted to companies for objects contrary to law or good morals, or injurious to the interests of the State. No change can be made in the constitution of the company without special authority. If the shares are not taken up, and the founders wish to abandon the undertaking, the authority would be revoked. Any exemption or privileges will cease by the dissolution of the company or when any forfeiture is incurred. The dissolution must be published and advertised. The shares must be nominal and not to bearer. The terms and conditions are all set forth in the deed. When the shares are to be paid up in several instalments, the scrip may be delivered on the first payment, setting forth the further payments to be made; and, when the last payment has been made, the scrip will be changed for the share. In no case can the share be issued before the amount has been paid up. The founders of the company have the right to reserve to themselves a limited number of shares, not exceeding a fifth of the total number, and the other shares may be allotted to other parties applying for the same. The shares are transferable, but the transfer must be registered. All trade in shares or scrips is prohibited and void. The liability of the shareholders extends only to the amount invested. The management of the company is entrusted to directors appointed by the shareholders. The directors are the agents of the company, and are responsible for the execution of their duties. The directors must give an account of their business, setting forth the state of the funds, the receipts and expenditure, the amount of profit or loss, and the reserve, if any. Every dispute between the company and shareholders must be settled by arbitration. The mode of obtaining the authority from the State is as follows: A petition must be made to the minister setting forth the character of the undertaking, the patent possessed, the amount of capital, the number of shares, the nature of the privileges sought, &c. The petition, with all the documents, is remitted, with the opinion of the minister, to the Council of Ministers, if it refers to a simple company, and to the Council of the Empire if it concerns privileged

Shares must

be in favour

of persons

named.

Trade in

scrips prohibited.

the State.

Authority of companies. Immediately on the authority being granted the deed must be executed, and the company is advertised in the public journals (a).

Spain. Anonymous companies are formed with a capital divided into shares, the company being designated by the object of the undertaking, and the administration being entrusted to a board of directors. Anonymous companies must be formed by the authority of the State. The law relating to partnership applies also to anonymous companies (b).

(a) Russian Code, Regulation of Dec. 6, 1856, §§ 1 to 56.

(b) Spanish Code, §§ 265, 283, &c.

CHAPTER V.

JOINT STOCK COMPANIES.

TORY OBSER

OUR present Joint Stock Companies differ materially from INTRODUCthose Regulated Companies which, from very early times, carried VATIONS. on the commerce in Britain in distant parts of the world. Such companies consisted of a number of persons alike engaged in certain trades and possessing in common certain monopolies, but they had no joint stock. It is only in late years that the idea of trading upon a joint stock has been introduced with such manifest advantage for the purpose of carrying on operations of a permanent character, and requiring a permanent supply of funds. And it was with a view to enable the parties investing to withdraw such funds, without causing a complete abandonment of the undertaking, that such joint stock was divided into transferable shares.

Act.

The first legislative enactments with reference to joint-stock The Bubble companies, commonly called the Bubble Act (a), was one tending to repress the abuses arising out of such transfer of shares. That statute rendered illegal and void the acting or presuming to act as a corporate body, the raising or pretending to raise transferable stock, and the transferring or pretending to transfer or assign any share in such stock without legal authority. In progress of time, however, it became necessary to facilitate the formation of incorporated companies with power to issue and transfer transferable stock, as well as to sue and be sued in the name of its officers, without the limitation of liability usually arising from a charter of incorporation, and power was granted to the Crown (b) to grant certain corporate privileges to trading associations without limiting the liability of their member. Later on it was found expedient to give additional facilities for the for

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Extension of joint-stock companies.

Limited Lia bility Act.

Companies
Bill.

mation of companies, and the Crown was empowered (a) to constitute companies by letters patent with the privilege of suing and being sued in the name of an officer of the company, and to limit the liability of the shareholders to a certain extent only per share as in such letters patent should be declared and limited.

But the immense expansion of commerce greatly encouraged the formation of associations, and even the facilities of obtaining a charter or letters patent from the Crown were found wholly inadequate for the purpose. Many companies were therefore in existence which had no corporate capacity and no power to sue and be sued in the name of their officer. To provide for these increased wants the Joint Stock Companies Act, 1844 (b), was passed, enabling companies to obtain all the corporate privileges by registration, whilst another act was passed with especial reference to railway, canal, and other public purposes (c), and several acts having for their object the winding up and dissolution of joint-stock companies (d). But as yet the power to limit the liability of partners was left in the hands of the Crown, and much dissatisfaction was felt at the mode in which such powers were exercised, the privilege being granted to some and refused to others. Inquiries were then instituted into the principle of limited liability in partnerships, and, after many years of discussion, the Limited Liability Act of 1855 was passed (e), allowing, on certain conditions as to publicity, companies to be formed on limited or unlimited liability. Considerable simplification was afterwards introduced in the whole law of joint stock companies by the Act of 1856, and this act, with two other acts passed in 1857 and 1858 (f) for the winding up of Joint Stock Companies, constitute the present law on joint stock companies, though insurance companies are excepted from those acts, and are, therefore, still governed by the Act of 1844 (g).

Since then an attempt has been made to consolidate the whole law on companies, and a Bill on the subject was passed by the House of Lords and committeed in the House of Commons in the session of 1860. It being now probable that the same

(a) 7 W. IV. and 1 Vict. c. 73.
(b) 7 & 8 Vict. c. 110.

(c) 8 & 9 Vict. c. 116.

(d) 11 & 12 Vict. c. 45; 12 & 13

Vict. c. 108.

(e) 18 & 19 Vict. c. 133.
(f) 19 & 20 Vict. c. 47.

(g) 7 & 8 Vict. c. 108.

bill may pass into law during the present session (1862), we defer giving the statute law on the subject to a later portion of this work.

SECTION I.

WHAT IS A JOINT STOCK COMPANY.

BRITISH LAW.

A joint stock company is a partnership whereof the capital is or is to be divided into shares, transferable without the express consent of all the members. It differs from a partnership in the large and fluctuating number of members of which it is composed, and in the extent of the authority entrusted to its members.

What is a joint stock company.

Joint stock companies are either incorporated or unincor- Joint stock companies porated. Incorporated companies are those incorporated either incorporated or unincorpoby Royal charter by special acts of parliament, such as com- rated. panies for railways, canals, docks, or waterworks, or companies registered under the Joint Stock Companies Act, with a liability limited or unlimited. Unincorporated companies are those formed for mining on the cost-book principle, and constituted under the Letters Patent Act as well as banking companies formed under the 7 Geo. IV. c. 46.

SECTION II.

LIABILITY OF PROJECTORS OF JOINT STOCK COMPANIES.

is formed.

Persons combining as promoters of a joint stock company liability till Copartnership either by charter or under an act of parliament are not the company partners. A company does not exist till it is formed; and each promoter is only liable for that portion of the expenses which he himself either actually or implied by law may be held to have sanctioned (a).

Whoever acts as promoter or member of the provisional committee of any company is liable on all contracts entered into by

(a) Hamilton v. Smith, 28 L. J. Ch. 404.

Projectors contracts they

liable for the

enter into.

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