The principle of limited liability, or the restriction of the responsi bility of each member to the amount of the capital subscribed by him, which had long been conceded to companies incorporated by Act of Parliament, without baneful effects to the commonwealth, has been at length extended to all joint-stock companies coining within the ope ration of these Acta which chores to adopt their provisions, on the sole condition of obtaining registration and conforming to a few simple rules, whereby the personality of the company is defined. From its operation are excepted all companies established by Act of Parliament, royal charter, or letters patent, all banking or insurance companies, and sesociations engaged in mining In the Stannariem, where companies with a limited liability may be formed conformably to certain local customs, which are generally known as the Cost-Book System.
There now exist, therefore, four classes of joint-stock companies.
1. Trading companies incorporated by special Acts of Parliament. This class includes railway, dock, harbour, and canal companies, many insurance companies, and a vast number of other bodies engaged in every species of profitable employment. Formerly each company thus incorporated WAS governed by the peculiar provisions of the Act which it obtained ; but in order to introduce uniformity, a general Act, applying to all future companies, was passed under the title of 'The Companies' Clauses Consolidation Act,' 8 & 9 Viet. e. 16. This statute contains a complete code for the regulations of the proceedings, the transfer of the shares, and the general management of companies incorporated by Act of Parliament. 'The Lands' Clauses Consolidation Act,' 1845, was passed at the same time, consolidating all those pro visions which it had previously been necessary to insert in the special Act of any company, which required powers of acquiring land compul sorily for the purposes of the undertaking.
The peculiar character of railway undertakings rendered necessary The Railways' Clauses Consolidation Act,' 1845, which Lays down regulations as to the construction of railway works, the amount and mode of enforcing the payment .of tolls and fares, and the making of by-laws for the conduct of their business, which are binding upon all persons whatsoever.
2. A second class of joint-stock companies consists of the very few established under the statute 1 Vict. e. 73, or the preceding Act, 6 Geo. IV. e. 91, which have been already referred to.
3. Banking companies formed since 1844 form a distinct class. They were until recently regulated by the statute 7 & 8 Vict. c. 113, but must now be registered under The Joint-Stock Banking Com panies' Act,' 1857, which preserves the individual liability of the partners, and contains provisions for the company being wound up. Banking companies constituted previous to 1844 may avail themselves of the advantages of the statute, by being registered under its pro visions.
4. The last class of trading corporations are the registered joint stock companies, regulated by the Joint-Stock Companies' Acts, 1856 and 1857, under which seven or more persons may, by subscribing a memorandum of association, and otherwise complying with the requi sitions of the statute in respect of registration, form themselves into an incorporated company, with or without limited liability.
This registration is obtained by delivering to the registrar of joint stock companies a memorandum of association, stating certain par ticulars in a prescribed form. Upon registration being effected, the subscribers, together with such persons as from time to time are admitted to be shareholders in the company, become a body corporate, having a perpetual succession and a common seal, and power to hold lands to a certain extent, and with consent of the Board of Trade to any extent whatever.
The company may hold itself forth to the public as one of which the members are liable with or without limit, according as the founders of it choose to adopt the principle of limited liability or not. Where the liability of the shareholders is limited by the memorandum of association, the word "limited" must be the last in the registered title of the company, and must be to its name.
The statute requires that a register of eholders shall be kept, and that this list be annually revised, and a copy furnished to the registrar of joint-stock companies. This copy is open to public inspection, so that all the particulars of importance respecting the company can be at any time ascertained by persons dealing with it.
The affairs of a registered company are also liable to examination by the Board of Trade ; while the statutes contain a complete code of regulations for winding up a company unable to meet its engagements, or which it is thought desirable to wind up for other reasons. Directors who declare a dividend when the company is insolvent are jointly and severally liable, to the extent of the dividend, for all the debts of the company; and every person concurring or carrying on the business of the company when the number of the partners is less than seven, is severally liable for its debts.
This species of corporation may be dissolved by being wound up, either voluntarily or compulsorily. A voluntary winding up may take place : 1, whenever the period, if any, fixed for the duration of the company expires, or the event, if any, occurs upon which it is to be dissolved ; 2, whenever the company has passed a special resolution requiring its winding up.
A company may be wound up compulsorily : 1, by virtue of a Special resolution to that effect; 2, whenever it does not commence business within a year of its incorporation, or suspends business for a year ; 3, whenever the shareholders are less than seven in number; 4, whenever the company is unable to pay its debts; or, 5, whenever three-fourths of the capital have been lost or become unavailable.
A company is to be deemed unable to pay its debts : 1, whenever a creditor for 501. has served a demand of payment, and the company has for three weeks neglected to pay the claim, or to secure or compound for it to the satisfaction of the creditor ; and, 2, whenever an execution is returned unsatisfied, in whole or in part.
The proceedings take place in the case of companies whose liability is unlimited, in the Court of Chancery ; in the case of companies with limited liability, in the Court of Bankruptcy. (Blackatone's Commen taries, Mr. Kerr's edition, vol. 1, p. 526.)