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7253. In every subsequent year the one-third or other nearest number who have been longest in office shall retire.

7254. A retiring director shall be re-eligible.

7255. The company at the general meeting at which any directors retire in manner aforesaid, shall fill up the vacant offices by electing a like number of persons.

7256. If at any meeting at which an election of directors ought to take place, the places of the vacating directors are not filled up, the meeting shall stand adjourned till the same day in the next week, at the same time and place; and if at such adjourned meeting the places of the vacating directors are not filled up, the vacating directors, or such of them as have not had their places filled up, shall continue in office until the ordinary meeting in the next year, and so on from time to time until their places are filled up.

7257. The company may from time to time, in general meeting, increase or reduce the number of directors, and may also determine in what rotation such increased or reduced number is to go out of office.

7258. Any casual vacancy occurring in the board of directors may be filled up by the directors, but any person so chosen shall retain his office so long only as the vacating director would have retained the same if no vacancy had occurred. 7259. The company, in general meeting, may, by a special resolution (7838), remove any director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead :

7260. The person so appointed shall hold office during such time only as the director in whose place he is appointed would have held the same if he had not been removed.

7261. Proceedings of Directors.—The directors may meet together for the despatch of business, adjourn, and otherwise regulate their meetings as they think fit, and determine the quorum necessary for the transaction of business: questions arising at any meeting shall be decided by a majority of votes: in case of an equality of votes, the chairman shall have a second or casting vote: a director may at any time summon a meeting of the directors.

7262, 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 at the time appointed for holding the same, the directors present shall choose some one of their number to be chairman of such meeting.

7263. 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 them by the directors.

7264. A committee may elect a chairman of their meetings: if no such chairman is elected, or if he is not present at the time appointed for holding the same, the members present shall choose one of their number to be chairman of such meeting.

7265. A committee may meet and adjourn as they think proper: questions arising at any meeting shall be determined by a majority of votes of the members present; and in case of an equality of votes the chairman shall have a second or casting vote.

7266. 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 be afterwards discovered that there was some defect in the appointment of any such directers or persons 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.

7267. Dividends.-The directors may, with the sanction of the company in general meeting, declare a dividend, to be paid to the members in proportion to their shares.

7268. No dividend shall be payable except out of the profits arising from the business of the company.

7269. The directors may, before recommending any dividend, set aside out of the profits of the company such sum as they think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining the works connected with the business of the company or any part thereof; and the directors may invest the sum so set apart.as a reserved fund, upon such securities as they may select.

7270. The directors may deduct from the dividends payable to any member all such sums of money as may be due from him to the company on account of calls or otherwise.

7271. Notice of any dividend that may have been declared shall be given to each member in manner hereinafter mentioned; and all dividends unclaimed for three years after having been declared, may be forfeited by the directors for the benefit of the company.

7272. No dividend shall bear interest as against the company.

7273. Accounts.-The directors shall cause true accounts to be kept of the stock in trade of the company;

7274. Of the sums of money received and expended by the company, and the matter in respect of which such receipt and expenditure takes place; and, 7275. Of the credits and liabilities of the company.

7276. The books of account shall be kept at the registered office of the company, and, subject to any reasonable restrictions as to the time and manner of inspecting the same that may be imposed by the company in general meeting, shall be open to the inspection of the members during the hours of business.

7277. Once at the least in every year the directors shall lay before the company in general meeting a statement of the income and expenditure for the past year, made up to a date not more than three months before such meeting.

7278. The statement so made shall show, arranged under the most conve nient heads, the amount of gross income, distinguishing the several sources from which it has been derived, and the amount of gross expenditure, distinguishing the expense of the establishment, salaries, and other like matters. Every item of expenditure fairly chargeable against the year's income shall be brought into account, so that a just balance of profit and loss may be laid before the meeting; and in cases where any item of expenditure which may in fairness be distributed over several years has been incurred in any one year, the whole amount of such item shall be stated, with the addition of the reasons why only a portion of such expenditure is charged against the income of the year.

7279. A balance-sheet shall be made out in every year, and laid before the company in general meeting, and such balance-sheet shall contain a summary of the property and liabilities of the company, arranged under the heads appearing in the form annexed to this table (7803), or as near thereto as circumstances admit.

7280. A printed copy of such balance-sheet shall, seven days previously to such meeting, be served on every member in the manner in which notices are hereinafter directed to be served.

7281. Audit.-Once at the least in every year the accounts of the company

shall be examined, and the correctness of the balance-sheet ascertained, by one or more auditor or auditors.

7282. The first auditors shall be appointed by the directors; subsequent auditors shall be appointed by the company in general meeting.

7283. If one auditor only is appointed, all the provisions herein contained relating to auditors shall apply to him.

7284. The auditors may Le members of the company; but no person is eligible as an auditor who is interested otherwise than as a member in any transaction of the company, and no director or other officer of the company is eligible during his continuance in office.

7285. The election of auditors shall be made by the company at their ordinary meeting in each year.

7286. The remuneration of the first auditors shall be fixed by the directors; that of subsequent auditors shall be fixed by the company in general meeting. 7287. Any auditor shall be re-eligible on his quitting office.

7288. If any casual vacancy occurs in the office of any auditor appointed by the company, the directors shall forthwith call an extraordinary general meeting for the purpose of supplying the same.

7289. If no election of auditors is made in manner aforesaid, the Board of Trade may, on the application of not less than five members of the company, appoint an auditor for the current year, and fix the remuneration to be paid to him by the company for his services.

7290. Every auditor shall be supplied with a copy of the balance-sheet, and it shall be his duty to examine the same, with the accounts and vouchers relating thereto.

7291. Every auditor shall have a list delivered to him of all books kept by the company, and shall at all reasonable times have access to the books and accounts of the company: he may, at the expense of the company, employ accountants or other persons to assist him in investigating such accounts, and he may, in relation to such accounts, examine the directors or any other officer of the company.

7292. The auditors shall make a report to the members upon the balancesheet and accounts, and in every such report they shall state whether, in their opinion, the balance-sheet is a full and fair balance-sheet, containing the particulars required by these regulations, and properly drawn up, so as to exhibit a true and correct view of the state of the company's affairs; and in case they have called for explanations or information from the directors, whether such explanations or information have been given by the directors, and whether they have been satisfactory; and such report shall be read, together with the report of the directors, at the ordinary meeting.

7293. Notices.-A notice may be served by the company upon any member, either personally, or by sending it through the post in a prepaid letter addressed to such member at his registered place of abode.

7294. All notices directed to be given to the members shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the register of members; and notice so given shall be sufficient notice to all the holders of such share.

7295. Any notice, if served by post, shall be deemed to have been served at the time when the letter containing the same would be delivered in the ordinary course of the post; and in proving such service it shall be suffi cient to prove that the letter containing the notice was properly addressed and put into the post office (a).

(a) See "Post Office.'

missible into articles of association, and fully binding, whereby a promoter may be constituted secretary or managing director; and 7322. Reasonable Condition.—It frequently happens that such appointment is only a reasonable and judicious arrangement; and 7323. Unobjectionable.-When a promoter is appointed secretary or manager under articles of association, with a proviso that he is to hold office until removed by a special resolution (7838), it is generally unobjectionable; but,

7324. Unqualified Term.—If articles of association appoint a secretary or manager for a definite term, it cannot be qualified; or, 7325. For Life.—If such an appointment is for life it is perfectly binding; and

7326. Extravagant Salary. However extravagant a salary may be, if it be stipulated for in articles of association, it must be faithfully paid, unless the claimant consents to forego it; and

7327. Irrevocable.-An unqualified (7324) appointment under articles of association, together with all its consequences, cannot be subsequently revoked by the company under any circumstances; for,

7328. Gross Impropriety.-The only chance of removing an official, contrary to articles of association, is in the unlikely event of his being guilty of unusually outrageous impropriety; in that case, 7329. Removal.-The Court of Chancery is empowered to set aside the appointment; but,

7330. Strong Evidence.-Evidence of the strongest and most unqualified kind, against the fitness of a secretary or managing director, is necessary to induce interference by the Court.

DIRECTORS.

7331. Spontaneous Appointment.-When articles of association are silent about directors (7240), the subscribers to the memorandum of association (7416) are deemed to be the provisional directors, until superseded by others.

SPECIFIC APPOINTMENT.

7332. Various Modes.-The modes of appointing and empowering directors of a company are by no means limited to proceedings resembling those prescribed by the statutory articles; thus,

7333. Perpetual Directors.—A provision in articles of association constituting the subscribers to the memorandum, or their heirs or assigns, perpetual directors is perfectly binding and operative, and cannot be altered without the consent of such directors; and

7334. Benefit of Servants and Operatives.-Whenever it may seem desirable to the proprietor or proprietors of a manufactory or other establishment, to form a company for the purpose of giving their servants and operatives an interest in the business, it is only reasonable to suppose that such proprietor or proprietors would naturally and reasonably seek to retain the inalienable power of management.

QUALIFICATIONS OF DIRECTORS.

7335. No Statutory Distinction. It is remarkable that the statutory articles of association provide for no particular distinction of qualification between ordinary members and members eligible as directors; whereas,

7336. Amount of Investment.—In almost all special articles of association, it is provided that no member shall be qualified as a director who is not possessed of a certain proportion of shares over and above ordinary members; and

7337. Upper Class.—When a company consists of two or more classes of shareholders (7535), it may be only reasonable and desirable that the directors should be chosen from the higher or highest class, reserving or not reserving to the lower classes the power of voting in the replacement of directors.

LACK OF QUALIFICATION.

7338. On several occasions, by design or through oversight, persons have been elected as directors of companies, though not possessing the particular qualification required by the articles (7266); hence,

7339. Question of Authority.-The question has arisen whether a person who does not possess the special qualification provided by the articles of a company, can legally act as a director; and

7340. Election Sufficient.—It has been decided that a person duly elected as a director is fully entitled to act as such, whether he possesses the stipulated qualification or not, and whether the articles are silent on the subject or not (7266); and

7341. Non-Membership.-Though a person elected as a director of a company may not be a member of such company, his nonmembership will not impair his authority as a director, whether the articles stipulate for a special qualification or not; and

7342. Voluntary Disqualification.-If a director of a company thinks proper to sell a portion or the whole of his shares, so as to impair or destroy his stipulated qualification for the office, he is entitled to retain his seat at the board, and to act in every respect as

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