Edward William Donoghue Manson

“ It is a not uncommon practice for a solvent company to pass a resolution to wind up voluntarily for the purpose of reconstructing. The effect of this is to accelerate payment of the security, and the debenture-holders have to accept their principal and interest only, parting with a good security and perhaps a premium which would have accrued to them in a year or two. The company is thus enabled by its own act to redeem the reluctant debenture-holder on terms most advantageous to itself. ”

“ The Companies Act 1907 (s. 39) gives a company a further power by special resolution, confirmed by an order of the court, to reorganize its capital, whether by the consolidation of shares of different classes or by the division of its shares into shares of different classes—but no preference or special privilege attached to any class of shares is to be interfered with except by a resolution passed by a majority of shareholders of that class representing three-fourths of the capital of that class. A limited company cannot reduce its capital without the sanction of the court. ”

“ The debenture-holders give the directors an implied licence to deal with and dispose of the property comprised in the security until the happening of any of the events upon which the debenture-holders’ money becomes under the debenture conditions immediately repayable. Pending this the charge is dormant. The licence extends, however, only to dealings in the ordinary course of business. Payment by a company of its just debts is always in the ordinary course of business, but satisfaction by execution levied in invitum is not. ”

“ A sinking fund is a convenient means frequently resorted to for redemption of a debenture debt, and is especially suitable where the security is of a wasting character, leaseholds, mining property or a patent. Such a fund is formed by the company setting apart a certain sum each year out of the profits of the company after payment of interest on the debentures. ”

“ The right of a preference shareholder is commonly confined to a preferential dividend and this dividend is prima facie cumulative, that is to say if the profits of the particular year are insufficient to pay it the deficiency must be made good out of the profits of subsequent years: but it is very common to give preference shareholders priority also as regards capital in the winding-up. ”

“ An implied power of borrowing, even when it attaches, is too inconvenient to be relied on in practice, and an express power is always now inserted in a joint stock company’s memorandum of association. ”

“ Founders' shares originated with private companies, being a convenient means of securing to the partners in the vendor firm, on conversion, the control of the business as well as the lion’s share of the profits. ”

“ In the United Kingdom, in the case of a company constituted under the Companies Acts 1862-1907 as a company limited by shares, the memorandum of association is required to state—among other matters—the amount of capital with which the company proposes to be registered and the amount of the shares into which such capital is divided. Company statistics show a tendency of late years on the part of companies to register with a smaller nominal capital than they did. ”

“ Its design is to secure that the obligor, i.e. the person giving the bond, will either pay a sum of money, or do or refrain from doing some act; and for this purpose the obligor binds himself in a penalty to the obligee, with a condition added that, if the obligor pays the sum secured—which is usually half the penalty—or does or refrains from doing the specified act, the bond shall be void: otherwise it shall remain in full force. ”

“ In old days, when a bond was forfeit, the whole penalty was recoverable at law and payment post diem could not be pleaded to an action on it, but the court of chancery early interposed to prevent oppression. It held the penalty of a bond to be the form, not the substance of it, a pledge merely to secure repayment of the sum bona fide advanced, and would not permit a man to take more than in conscience he ought, i.e. ”

“ Registered debentures are transferable only in the books of the company. Debentures to bearer are negotiable instruments and pass by delivery. Coupons for interest are attached. Sometimes debentures to bearer are made exchangeable for registered debentures and vice versa. ”

“ An extension of the time for registering may be granted by the court, but it will only be without prejudice to the rights of third persons acquired before actual registration. These provisions for registration as amended are contained in the Companies Act 1908 (§ 93) . ”

“ The same wrong connexion appears in the transition of meaning in “bondage,” properly “tenure in villeinage,” but now used as synonymous with “slavery.” A trace of the early meaning still survives in “bondager” (q.v.) ”

“ If the powers of alteration were abused so as to amount to a fraud by the ordinary shareholders on the minority of preference shareholders the court would probably interfere by injunction. The preferential or other special privileges of any particular class of shareholders are now further safeguarded by s. ”