considered that dissentients were sufficiently protected by being enabled to claim the value of their interests as provided by s. 161. However, in Griffith v. Paget, (5 C. D. 894; 6 C. D. 514), the Master of the Rolls was of opinion that this could not have been the intention of the Legislature, because there might be lunatics, infants, persons beyond the seas, and others unable to dissent in the prescribed manner. And if this be so, it follows that such arrangements as those abovementioned cannot be carried out except with the consent of every member of the prejudiced class. No doubt if s. 161 enables the members to determine the mode of distribution, the position of lunatics and others may be prejudiced, but the same result might, it would seem, ensue upon a sale undoubtedly valid, e.g., in consideration of shares only in part paid up. Such shares might be quite unmarketable and yet a lunatic might not be able to dissent. Moreover, in Re City and County Investment Co., 13 C. Div. 475, it was held by the Court of Appeal (Jessel, M. R., & James & Baggallay, L. JJ.) that where a sale has been made under s. 161, it is, in the absence of fraud, valid, even as against creditors, unless a windingup order is made within a year. Yet there might in such case be lunatic and other creditors who could not apply for a winding-up order within the year, and yet might be seriously prejudiced. Why should the legislature be supposed to regard more carefully the interests of lunatic members than those of lunatic creditors? It is submitted that it would not be unreasonable to assume that the legislature (considering that the rights of a member who might think himself prejudiced by a sale were sufficiently protected by giving him power to insist on his interest being purchased) did intend by s. 161 to enable the majority to sell and to authorise the distribution of the shares, &c., on any terms they thought fit, and that the possibility of there being lunatics and others incapable of dissenting may be regarded as a casus omissus. dissent. By s. 161 of the Act members who dissent from the special resolution Time to are allowed seven days from the date of the meeting at which it was passed, i.e., the second meeting, within which they must give notice of dissent. For form of notice, see infra, p. 507. The notice of dissent should not merely express dissent but should also require the liquidators either to abstain from carrying the resolution into effect or to purchase the member's interest. In re Union Bank of Kingston-upon-Hull, 13 C. D. 808. dissent. If a dissentient member fails to give such notice, he must either Failure to accept the benefit offered him by the reconstruction, i.e., he must become give notice of an assenting member, or else he entirely loses his beneficial interest in the old company; for although he will remain entitled to his shares in that company, yet they are shares in a mere husk, for the whole of the assets of the old company are made over to the new company. It was at one time contended that if a dissentient member did not Dissentient express his dissent within the prescribed period he was bound by the not bound to take shares in sale or arrangement, and was consequently under an obligation to accept new company. any shares or other interest in the purchasing company, which were thereby to be allotted to him; but this notion was very soon exploded, and it is now settled that the provision in Section 161, that the sale shall be binding, merely means that a dissentient member cannot impeach the sale. He must either assent or dissent in the prescribed manner, or simply lose. Los's Case, 13 W. R. 883; 34 L. J. Ch. 609; Higg's Case, 2 H. & M. 657; Martin's Case, 2 H. & M. 669; Fox's Case, 6 Ch. 183; Southall v. British Mutual Life Assurance Soc., 6 Ch. 614. But see Griffith v. Paget, 5 C. D. 894; 6 C. D. 514. Form 621, Order on Where any question arises as to whether a member has dissented in time, application can be made to the court to decide the point under s. 138 of the Act: Re Union Bank of Kingston-upon-Hull, 13 C. D. 808. In the case last mentioned, the application was by motion, but the following order was made in a similar case upon an application by summons:— and Upon the application of the liquidators of the above-named company, that the court might determine whether F. of was a member of the summons as to company who had in manner mentioned in s. 161 of the Companies Act, 1862, expressed dissentient. Payment to dissentient. Arbitration. Interest. his dissent from the special resolution passed by the company on the 26th of June last, and confirmed on the 13th July last, in writing addressed to the liquidators of the said company or one of them, and left at the registered office of the company not later than 7 days after the date of the meeting at which such special resolution was passed, and that in case the court should decide that the said F. has so expressed his dissent, the applicants, as such liquidators as aforesaid, might have 14 days' notice, from the date of such decision, to appoint an arbitrator consequent upon the notice of the said F., dated the 27th Dec. 1877, and that the said F. might be ordered to pay the costs of such application, and upon hearing, the solicitors for the applicants and for the said F., and upon reading, &c., the judge being of opinion that the shareholder F. is not a dissentient, within the meaning of the said section, doth order that the said F. pay to the applicants their costs of and consequent of the application [to be taxed]. Direct United States Cable Co., M. R., 26 Feb. 1878. A. 579. A member who has duly dissented is entitled to have the purchasemoney for his interest paid to him; and, when it has been ascertained, he has a right of action against the company. De Rosaz v. Anglo-Italian Bank, 4 Q. B. 462. The price to be paid to dissentients is in default of agreement to be ascertained by arbitration, but if the articles contain provisions for arbitration, it is not necessary to resort to the Companies Clauses Consolidation Act, 1845, as provided by Section 162 of the Act of 1862 : the arbitration should proceed in accordance with the articles. S. C. No interest is payable upon the purchase money until the amount has been ascertained and a demand for payment made. In re United States Cable Co., 48 L. J. 665. A dissentient member whose interest has been purchased under S. 161 does not thereby escape from liability towards the creditors of the company which is being wound up. Vining's Case, 6 Ch. 601. But it would seem that if a winding-up order is not made within a year, the members of the selling company cease to be under any liability to the creditors. In re City and County Investment Co.. 13 C. Div. 475. sentients to As to the source from whence the funds to pay dissentient members is Whence fund to come according to the above plan the new company is bound by the to pay disagreement to provide them. It is necessary to impose this obligation come. on the new company because, by the agreement, the old company is to sell all its property. A mode of reconstruction sometimes adopted is to provide by the agreement for the allotment of the share consideration to the liquidators or their nominees, instead of to the members directly, and not to insert any provision requiring the new company to pay the dissentients. The special resolution of the old company in such case, besides sanctioning the agreement, will direct the liquidators of the old company to raise the funds to pay dissentients by the sale of a sufficient number of the shares in the new company to be allotted pursuant to the agreement, and to distribute the residue of such shares among the assenting members. But the former is the most convenient plan. The result in either case is the same. dissentients Care should be taken so to frame the agreement that dissentient mem- Security of bers shall have sufficient security for the payment of the purchase-money must be refor their interests; otherwise there will be risk of legal proceedings. garded See infra, Form 622, cl. 8, and In re Hester & Co., 44 L. J. N. S. 757; W. N., 1875, 179. Where the selling company has uncalled capital it would seem from the above case that such a clause is unnecessary. It may, however, be doubted how far this is consistent with the principles laid down in Clinch v. Financial Corporation, 4 Ch. 120, and infra, p. 516. pass special The validity of a special resolution sanctioning a sale or arrangement Notice calling under Section 161, essentially depends on the sufficiency of the notices meetings to given convening the meetings. They ought to give the members either resolution. direct or indirect notice that the transaction is to be effected under Section 161. Imperial Bank of China, &c. v. Bank of Hindustan, &c., 6 Eq. 91; Fox's Case, 6 Ch. 176. A notice which states (inter alia) that a resolution is to be proposed authorising the liquidators to sell the assets to another company and to accept compensation in shares is probably sufficient; but the usual plan now is to refer expressly to Section 161. This precludes all doubt. Of course, the reference to Section 161 may be either in the notice or in the accompanying circular (if any). The agreement with the new company must, if it provides for the As to filing issue of paid up shares, be filed pursuant to the 25th Section of the Com- agreement. panies Act, 1867. See supra, p. 12. It is also not unusual to file subsequent agreements between the new company and the members of the old company to whom shares are allotted specifying the shares allotted. But having regard to the decision in Carling's Case, 1 C. Div. 115, and other cases cited supra, p. 13, it would seem that the filing of the principal agreement is sufficient. However, it may be expedient to file a subsequent agreement to identify Remuneration of liquidators. Alteration of articles in derogation of rights of dis sentients. Confirmation of invalid resolution. Order to wind up. Company may register with a view to re construction. Reconstruc tion in wind ing up subject to supervision. the shares allotted to each member of the old company. See supra, p. 11. The liquidators, in a winding up for the purpose of reconstruction, generally act without remuneration, or for a small fee. A company cannot, by an alteration in its articles, made in contemplation of a winding up and proceeding under Section 161 of the Act, deprive dissentient members of the right given them by that Section. Ex parte Fox, 6 Ch. 176. There seems, however, no reason why the rights of dissentient members, under Section 161, should not be restricted by the articles as originally framed. See supra, p. 141. Where the special resolution sanctioning an agreement for a sale under Section 161 is invalid for want of proper notice, the transaction can, nevertheless, be confirmed. Fox's Case, 6 Ch. 176. In order to effect this, the liquidators must call the necessary meetings and procure the members to pass proper special resolutions. It will be remembered that Sec. 161 provides that if an order be made within a year for the winding up the company by or subject to the supervision of the Court, the resolution shall not be of any validity unless sanctioned by the Court. Any company not formed or registered under the Act of 1862, but which is capable of being registered under that Act, may effect a reconstruction under Section 161. In order to do this it will register under the Act, and the reconstruction may then be carried into effect as above mentioned. It is no objection that the registration was made expressly with a view to winding up and selling under Section 161. Southall v. British Mutual Life Assurance Society, 6 Ch. 614. The reconstruction of a company may be effected under Section 161 in a winding up subject to supervision, as well as in a purely voluntary winding up. In re Imperial Mercantile Credit Association, 12 Eq. 504. And in a winding up by or under the supervision of the court a reconstruction may be effected by a sale under s. 95 of the Act to a new company. In re Agra and Masterman's Bank, 12 Eq. 409; 15 W. R. 554. Where a company gets into difficulties a reconstruction and an arrangement with creditors under the Act of 1870 are not uncommonly effected at the same time. See infra, "Arrangements." FORMS. AGREEMENT between LIQUIDATORS of OLD COMPANY and NEW Form 622. COMPANY with a view to the RECONSTRUCTION of the Old Company. Agreement day of with a view between the A. to reconstruc AN AGREEMENT made the tion. Parties. under Recitals. the Companies Acts, 1862 and 1867, with a nominal capital of 100,0007., divided into 10,000 shares of 107. each; AND WHEREAS the whole of the said shares have been issued and the sum of 51. per share stands credited in the books of the old company as having been paid up thereon; AND WHEREAS by special resolution of the old company passed and confirmed at extraordinary general meetings thereof, held respectively the- day of and the- day of, it was resolved (1) That the company should be wound up voluntarily and that the said- and should be and they were thereby appointed liquidators for the purposes of such winding up. (2) That the said liquidators should be and they were thereby authorised to consent to the registration of a new company to be named The Company Limited with a memorandum and articles of association as therein mentioned; and (3) That the draft agreement in the resolution referred to (being the draft of these presents) should be and the same was thereby approved, and that the said liquidators should be and they were thereby authorised to enter into an agreement with such new company (when incorporated) in the terms of the said draft and to carry the same into effect : AND WHEREAS, pursuant to the resolution aforesaid, the new company has since been incorporated under the Companies Acts, 1862 to 1880, with a nominal capital of 50,000l., divided into 10,000 shares of 51. each: AND WHEREAS by the articles of association of the new company, it is provided that the same company shall forthwith execute the agreement therein referred to, being these presents: Now IT IS HEREBY AGREED AS FOLLOWS: 1. The old company and its liquidators shall sell, and the new com- Agreement pany shall purchase: all and singular the goods, chattels, monies, for sale. credits, debts, bills, notes, and things in action of the old company, and |