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Call

shares, company, paid, payment, shareholders, time, calls and balance

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CALL on shares.—This term may be used in three different significa tions ; it may be the subject-matter of an OPTION (q or it may be the demand for contribution made upon the shareholders by the liquidator of a company in process of winding up [this form of call will be dealt with under the title CONTRIBUTORIES]; or finally, it may be the demand made upon the shareholders by the directors of a company for the payment of the balance, or part thereof, of the amount due from them upon their shares. It is this last form of call which is now engaging our attention.

In the prospectus of every company introduced to the notice of the public a particular prominence is given to the terms of payment upon which the shares are offered. It is very rarely indeed that a company requires the whole nominal amount of the shares to be paid up forthwith upon allotment. The usual formula to be found at the head of a prospectus, immediately below the title of the company, would run somewhat as follows : Capital, £120,000, divided into 120,000 shares of £1 each, pay-able as follows :-2s. 6d. on application, 2s. 6d. on allotment, 5s. two months after allot ment, and the balance when called for.

The meaning of this announcement is that an applicant for shares must enclose 2s. 6d. with his application in respect of each share he applies for, and that he must pay to the company another 2s. 6d. forthwith upon his receipt of the letter of allotment. Two months after allotment he will receive notice to pay the further 5s., and this he must do. And later he may receive a " call ' or "calls" for the balance. The inference intended to be drawn from such an announcement is that the company is going to carry on so profitable a business as not to be likely to require more capital than half the nominal amount, namely, £60,000, to be found by its shareholders as a provision for working purposes ; the balance of capital uncalled being intended to remain outstanding as a reserve against possible developments of the business and unforeseen contin gencies. But unfortunately the imagination of a prospectus writer is, as a rule, so optimistic, and at the same time so unreliable, as to make it dangerous for an intending investor to draw the desired inference and to rely upon it. The probability is that very soon after payment of the instalment due at the two months the directors will find it necessary to make a "call " upon the shareholders for perhaps the whole of the balance of the price of the shares. When that balance has been paid the shares are known as "paid up "; until then they are only "partly paid," with the result that the shareholders may be liable to a call for the balance at any time. With

many companies of good standing the liability to such a call is a very remote one; indeed, all the shares of certain classes of companies are invariably unpaid to the extent of a very high percentage of their nominal value. Such classes of companies include banks end insurance offices, and their shareholders need have little apprehension of calls, though at the same time they should not hold such shares except in proportion to their means to meet the calls if, and when, made. shares, because of this liability, have always a lower price ; but in many cases their price is maintained at almost as high a figure, in proportion to the amount paid up, as if such amount paid up represented their nominal value.

It is to the Articles of Association of a company that the shareholders should look for the regulations as to calls. If there are no articles, Table A should be consulted. Generally, however, it may be laid down that the directors alone have the right to make a call, and even to receive payment thereof by instalments. The call will be taken to have been made at the time when the resolution of the directors was passed which authorised it to be made. When so made the call becomes a debt, and the shareholder may be sued therefor; it is, however, usual for a reasonable time to be given for payment, interest being payable during the period of non-payment after the time so limited. The directors have no right to abstain from enforcing pay ment; to do so would be to commit a breach of their duty to the company. Should it otherwise be impossible to obtain payment, notice may be given to the shareholder that unless the call is paid within a certain time his shares will be forfeited, whereby he will lose the benefit of the instalments he has already paid, and will cease to be a shareholder in the company. But this power of forfeiture must be used for the benefit of the company—to enforce payment of calls, and not to aid shareholders to withdraw from the company and escape their obligations. After forfeiture the shares become the property of the company, the directors of which, it is usually provided, may sell, re-allot, and otherwise dispose of the same in such manner as they think fit ; and the shareholder may still be sued for the calls due and owing at the date of the forfeiture. The shareholder cannot abandon his shares in order to avoid payment of calls. See COMPANIES ; SHARES.

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