is not a mortgage to trustees, each mortgage debenture ought to be duly registered. mortgage de If a mortgage debenture not duly registered is issued to a director or When unother officer of the company, it will be invalid as against the creditors registered of the company in the winding up. Thus in The Native Iron Ore Co., bentures void. 2 C. Div. 345, three of the directors had advanced money to the company and taken by way of security a mortgage debenture of the company. The debenture was entered in a register which merely stated the nonregistration does not affect the validity of a mortgage, but directors and other officers cannot avail themselves of an unregistered mortgage in their own favour. In re Native Iron Ore Co., 2 C. Div. 345. This disability does not apply to members. General South American Co., 2 C. Div. 337. And there are cases in which the rule will not be applied. See Re Borough of Hackney Co., 6 C. D. 557; Re International, &c., Co., 6 C. D. 557; Re South Durham Co., 11 C. Div. 579. In the case last mentioned the mortgage was made to partners, one only of whom was a director. Directors of a company are not under any disability to lend to their Directors may lend, company. See cases, supra, p. 112. members. Nor are the members of a company under any such disability. Thus and so may In re General South American Co., ubi supra, p. 230, 72,000l. was raised on mortgage debentures at 18 per cent. per annum interest' all but 40001. being advanced by members of the company. They were held valid in the winding up and to give the holders a charge upon all the property of the company, in priority to the general creditors. Where there is to be a trust deed to secure debentures, the company's Solicitor's lien. solicitor very commonly acts for the trustees as well as the company. In such case the solicitor waives his lien on any deeds in his possession relating to the mortgaged property unless it is expressly reserved. In re Snell, 6 C. D. 105; In re Mason v. Taylor, W. R. 1878, 245. It has for some time past been usual to make the interest on deben- Coupons. tures payable on presentation of coupons annexed thereto. When the period for payment approaches a coupon is detached and is commonly forwarded for collection through a banker. By this means the payment of the interest is facilitated, for, however the coupon be framed, it is generally assumed that the bearer is well entitled to the interest therein specified. There is another convenience in having coupons attached to Convenience a debenture, namely, that the holder can, if in want of cash, cut off and of. sell the coupons or any of them, or procure the same to be discounted. There are two modes of framing these coupons: thus coupon, No. - For three pounds. Half year's interest payable on the 1st January, 1880, at Interest (2.) The A. B., Secretary. Interest coupon No. When coupon a token. When a promissory note. As to stamp ing signature. The above-mentioned company will on the 1st C. D., Director. A coupon similar to Form (1) is a mere token. It "is nothing more than a mere piece of paper; it is no bill of exchange; it is no promissory note, since it wants the essential character of a promissory note, seeing that there is not the name of any person mentioned in it as payee." Per Parke, B., Enthoven v. Hoyle, 21 L. J. C. P. 100; 13 C. B. 373. Hence the purchaser of such an instrument does not obtain any right of action thereon against the company. If he sues, it must be an equitable assignee of the contract to pay the interest contained in the debenture, and he must sue subject to equities: moreover he will not acquire any right to the interest specified in the coupon if his vendor was not entitled thereto, e.g., had stolen, or found, the coupon. The company cannot with complete safety pay the bearer without investigating his title unless the debenture contains a receipt clause applicable to the coupons. But a coupon similar to Form (2) is a promissory note, and is therefore a negotiable instrument. Accordingly it would seem that coupons so framed are possessed of considerable advantages over those in Form (1). Both forms have been in use in the United States for some time past. Thompson v. Lee County, 3 Wallace, 421; Haven v. Grand Junction Co., 109 Mass. 88; but until recently Form (1) alone was in use here. However, coupons in Form (2) are now by no means uncommon here. When such coupons are used it is sometimes considered desirable to insert among the indorsed conditions a clause as follows: "It is intended that the contract contained in each of the said coupons when detached herefrom shall subsist as an independent contract, and that the contract within contained, so far as the same relates to the interest specified in such coupon, shall thereupon determine." For it might otherwise be contended that the simple contract contained in the coupon was merged in the contract under seal. Merger can however be prevented by a declaration of intention to the contrary. It must be borne in mind that coupons in Form (2) cannot be used when the interest payable is less than 20s., for negotiable notes for less than that sum are void, and involve penalties. 48 Geo. III. c. 88, ss. 2 & 3. Of course Form (2) can only be adopted when the company has power to issue promissory notes. See supra, p. 71; but most of the companies that issue debentures can do this. With regard to the execution of coupons in Form (2) the directors will authorise one or more of their body to execute. If thought fit the name of the executing director can be signed by means of a stamp. "I see no distinction between using a pen or a pencil and using a stamp, where the impression is put upon the paper by the proper hand of the party signing. Per Bovill, C. J., Bennett v. Brumfitt, L. R. 3 C. P. 31. The law in the United States is the same. Pennington v. Bachr, 48 Cal. 565. AS TO STAMPS. The Stamp Act, 1870 (see Schedule) imposes the following duties on a mortgage, bond, debenture, or covenant : (1.) Being the only, or principal, or primary security for the payment £ s. d. or repayment of money not exceeding 251. Exceeding 251. and not exceeding 501.. 008 Stamps. Debenture. 501. 1002. For every 1007. and also any fractional part of 1007. of such amount 0 2 6 (2.) Being a collateral, or auxiliary, or additional, or substituted security, or by way of further assurance for the above-mentioned purpose where the principal or primary security is duly stamped : For every 1007., and also for any fractional part of 1007. of the amount secured . 0 0 6 Under the same Act a promissory note is liable to the following Promissory Where the amount or value of the money for which the bill or note is drawn or made does not exceed 57. Exceeds 51. and does not exceed 10. . 0 0 1 0 006 0 note. For every 1007. and also for any fractional part of 1007. of such amount or value If, therefore, a debenture is intended to operate as a promissory note, [Form 164, infra] it should be stamped accordingly, but in other cases it will be stamped as a debenture. Section 9 of the Stamp Act, 1870, provides as follows: : (1.) A stamp which by any word or words on the face of it is appropriated to any particular description of instrument is not to be used, or, if used, is not to be available for an instrument of any other description. (2.) An instrument falling under the particular description to which any stamp is so appropriated as aforesaid, is not to be deemed duly stamped, unless it is stamped with a stamp so appropriated. Section 53 is as follows : (1.) Where a bill of exchange or promissory note has been written on material bearing an impressed stamp of sufficient amount, but of improper denomination, it R Coupons. may be stamped with the proper stamp on payment of the duty, and a penalty of forty shillings if the bill or note be not then payable according to its tenor, and of ten pounds if the same be so payable. (2.) Except as aforesaid, no bill of exchange or promissory note shall be stamped with an impressed stamp after the execution thereof. A coupon or warrant for interest attached to or issued with any security is exempted from stamp duty by the Stamp Act, 1870. See Schedule, under title, "Bill of Exchange," Exemptions. And there can, it would seem, be no doubt that interest coupons are exempt, whether they are framed in Form (1) or Form (2), for the intention of the Act is to charge duties in respect of principal monies not interest. Where, however, coupons in Form (2) are used, it is sometimes thought desirable either to have an adjudication [section 18 of the Stamp Act, 1869] stamp put on each coupon, or else to stamp them as promissory notes. The object of so stamping coupons is to facilitate their transfer by relieving the holder from the necessity of showing that they were originally attached to or issued with a debenture. The additional expense is very trifling. Issue of 2000 debentures of 1007. each, bearing interest at 6 per cent. per annum. Company, Limited (hereinafter called the Company), will, day of [or on such earlier day as the principal monies hereby secured shall become payable in accordance with the conditions indorsed hereon] pay the bearer of this debenture the sum of -7. The words in brackets will be omitted if conditions 5 and 6 are not inserted. They should, however, be inserted whenever the conditions provide for an acceleration of payment. And the company will in the meantime pay interest thereon at the rate of per cent. per annum, by equal half-yearly payments, on the day of and day of in each year, in accordance with the coupons annexed hereto; the first of such half-yearly payments to be made on the day of This debenture is issued upon and subject to the conditions indorsed hereon. Given under the common seal of the company this day of Form 158. Debenture to bearer. Form 158a Coupon. |