ence between parliamentary companies and limited companies registered under the Companies Acts is that a parliamentary company is usually permitted, in case of need, to issue its shares in any additional capital at a discount.

As regards original capital, section 8 of the Companies Clauses Consolidation Act, 1845, which prescribes who shall be shareholders says:

"Every person who shall have subscribed the prescribed sum or upwards to the capital of the company or shall otherwise have become entitled to a share in the company and whose name shall have been entered on the Register of Shareholders hereinafter mentioned shall be deemed a shareholder of the company."

Where the original capital consists of shares, not stock, and is issued by subscription under the section just mentioned and not as fully paid up, it is very doubtful whether the shares can be issued at a discount. Probably not.

In the case of additional capital, however, section 21 of the Companies Clauses Act, 1863, provides that, subject to the provisions I have already mentioned as to the new shares or stock being offered to the holders of ordinary shares or stock when this is at a premium, the company may from time to time dispose of new shares and new stock at such times, to such persons, on such terms and conditions, and in such manner as the directors think advantageous. As originally enacted that section then proceeded as follows:

But so that not less than the full nominal amount of any share or portion of stock be payable or paid in respect thereof.'

This proviso was repealed by the Companies Clauses Act, 1869, which goes on to enact that section 21 of the 1863 Act, as so amended, shall apply to any unissued share capital already authorised by special Act, but subject to a proviso requiring that where shares, although unissued, have already been created by resolution of the company, as above described, a further resolution shall be obtained to sanction the issue of the shares on the altered terms, and subject to a further proviso that the 1869 Act shall not be construed to alter or extend the provisions of any Act relating to share capital in respect of which the amount

of profits to be divided is limited to a fixed rate per centum upon the paid-up capital of the company.

ISSUE OF CAPITAL AS FULLY PAID UP.-As a general rule there is nothing in a company's special Act to prevent the issue of shares as fully paid up in consideration of money's worth instead of money, and the Companies Clauses Acts contain no provision stipulating for the prior registration of a contract in writing or for observance of any other formalities in respect to such an issue. Any such transaction must however be perfectly bonâ fide, and in case of the issue of shares either at a discount or as fully paid up it will be a misfeasance on the part of the directors, for which they will be answerable in damages, if the company does not receive what is, under all the circumstances of the case, a fair equivalent for the shares parted with.

CALLS.-The conditions under which the amount payable upon the shares in a parliamentary company may be called up are usually prescribed in the special Act, which generally includes a provision that not more than one-fifth of the amount of a share shall be called up at one time. In the case, however, of the issue of additional capital by auction or tender the auction clauses, already referred to, provide for the payment up of the full price of the shares, together with any premium, within three months after the sale. Section 24 of the Companies Clauses Consolidation Act, 1845, provides that a company may receive payments from shareholders in advance of calls, and may, in respect thereof, pay interest at such rate, not exceeding the legal rate of interest for the time being, as the shareholder and the company may agree upon.

FORFEITURE And Surrender.-The Companies Clauses Acts contain provisions authorising the forfeiture of shares for non-payment of calls, and allowing the company, in case of forfeiture, either, with the consent of the shareholder and the sanction of a general meeting, to cancel and extinguish the shares, or, without the consent of the shareholder, to sell the shares, and, if it proves impossible to sell them for a sum equal to the arrears of calls, interest, and expenses due thereon, to cancel the shares subject to certain

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conditions and with the authority of the resolution of a general meeting. The cancellation is to be without prejudice to the right to recover subsequently from the shareholder the amount due less the value of the shares. Section 9 of the Companies Clauses Act, 1863, provides that the company may from time to time accept, on such terms as they think fit, surrenders of any shares which have not been fully paid up. Section 10 of the same Act provides that the company shall not refund to any shareholder any sum of money in respect of the cancellation or surrender of any share. Section II makes provision as to the issue of new shares in place of any that have been cancelled or surrendered.

RETURN OF CAPITAL.-The circumstances under which capital paid up in respect of shares may be returned to shareholders, and the consequences to follow from any such return, are not very clearly prescribed under the Companies Clauses Acts, but the strict legal rule against reduction of capital applicable in the case of ordinary limited companies clearly does not apply, since section 121 of the Companies Clauses Consolidation Act, 1845, in dealing with dividends, makes the following provision:

"The company shall not make any dividend whereby their capital stock will be in any degree reduced; provided always that the word 'dividend' shall not be construed to apply to a return of any portion of the capital stock with the consent of all the mortgagees and bond creditors of the company, due notice being given for that purpose at an extraordinary meeting to be convened for that object."

STOCK.-Shares, when fully paid up, may be consolidated into stock with the consent of a specified majority at a general meeting of the company in accordance with provisions in that behalf contained in the 1845 Clauses Act, and a company is sometimes authorised by its special Act to issue capital in the form of stock instead of shares, the stockholders being entitled to rights corresponding to those of shareholders.

BORROWING.-We come now to the question of the raising of capital by means of loans. A parliamentary company

has no power to borrow at all unless authority so to do is contained in the express provisions of the Acts of Parliament by which it is governed, and it cannot borrow by any method other than such as that authority expressly or impliedly covers.

The Companies Clauses Acts deal only with the machinery by which borrowing is to be regulated where it is allowed, and they do not confer any actual power to borrow but leave this to be conferred, if at all, by the special Act. It is the ordinary practice for the special Act of a company to confer such a power, but to limit the amount which may be borrowed. The method of defining the limitation varies considerably in different cases, and careful attention should be paid to the wording of the borrowing clauses. It is the ordinary practice to define the borrowing powers in such a way that the maximum amount authorised to be borrowed shall bear some definite relation to the amount of capital raised by shares or stock. Immediately before the war the proportion commonly allowed was one-third. Under stress of post-war conditions one-half has been allowed in many cases, and some exceptional powers of borrowing have been granted without stipulation as to the raising of share capital. In some cases the plan is adopted of authorising the company to borrow sums not exceeding in the whole one-third part of the capital raised and actually issued by shares or stock, but not to borrow any part thereof until the whole of the shares and stock at the time issued, together with any premium thereon, have been fully paid up. Another plan is to authorise the company to borrow up to a fixed sum (say £300,000 where the share capital is £900,000) but not to borrow any part thereof until the whole of the share capital is issued, and one-half is paid up, and one-fifth part of the amount of each separate share is paid up. Another plan is to divide the share capital into blocks (say of £300,000 each) and to provide that in respect of each block, when it is all issued and one-half is fully paid up and one-fifth of each separate share in the block is paid up, the company may borrow a fixed amount (say £100,000). In addition to any conditions and limitations which may

be prescribed by the special Act, section 38 of the Companies Clauses Consolidation Act, 1845, provides that the order of a general meeting of the company shall be required for sanctioning the raising of any moneys which the company are authorised to borrow on mortgage or bond.

In some cases the rate of interest which the company may pay upon loans is restricted by the prescribing of a maximum in the special Act.

Debenture STOCK.-As an alternative to borrowing on mortgage a company is usually empowered, with the sanction of a prescribed majority of votes at a general meeting of the company (or a majority of three-fifths if no other is prescribed), to create and issue debenture stock in manner provided by Part III of the Companies Clauses Act, 1863. That Act makes the debenture stock, with the interest thereon, a charge upon the undertaking of the company prior to all shares or stock of the company, and gives the interest on debenture stock priority of payment over all dividends or interest on any shares or stock of the company, whether ordinary or preference or guaranteed, and provides that such interest shall rank next to the interest payable on the mortgages or bonds for the time being of the company legally granted before the creation of such stock, but that the holders of the debenture stock shall not, as among themselves, be entitled to any preference or priority. These provisions are however usually varied by the special Act to the extent of making the interest on all debenture stock and all mortgages issued under the Act rank pari passu and have priority over all principal moneys secured by such mortgages.

Section 34 of the 1863 Act provides that the company's powers of borrowing and reborrowing shall, to the extent of the money raised by the issue of debenture stock, be extinguished.

Under section 35 of the same Act "mortgage preference stock" and "funded debt " are classed along with debenture stock, and the provisions of that Act are made applicable to them, as if they were mentioned in place of debenture stock.

Originally the rate of interest on debenture stock was