some cases charters are issued under and by authority of Acts of Parliament, as, for example, the charter incorporating the Bank of England. (b) Sometimes an Act of Parliament is specially passed for the purpose of incorporating a company.

For

example, railway companies are often formed by special Acts.

(c) Under the Joint Stock Companies Acts, seven persons can obtain a certificate of incorporation as a company, provided certain conditions are fulfilled. The seven persons usually subscribe their names to two documents, called the memorandum and the articles of association respectively. The memorandum is a concise statement of the objects of the company; the articles are the rules to be followed in carrying out such objects. A memorandum is essential, but the articles are not absolutely necessary, the Acts containing articles that apply where special articles have not been framed. The registrar of joint stock companies issues a certificate that has the effect of incorporating into a company the persons who sign the memorandum, together with such other persons as may from time to time become members of the company.

§ 6. Limited and Unlimited Liability.—The memorandum of a limited company must state that the liability is "limited," and to what extent. In a limited company the liability of members for the debts of the company is limited to the amount stated, and it is usual to limit the liability to the amount of the shares held. In an unlimited company the liability of members is unlimited. In no case, however, can a creditor of a company sue a member of the company for a debt contracted by the company. Creditors have to be content with taking proceedings against the company itself, and if the company cannot pay, proceedings, as we shall see later on, may be taken to wind up the company, and the law will compel every member to contribute that which is due from him in respect of his shares. If the liability, for example, is limited to

£10 a share, and this has not been paid, no more than £10 can be demanded; if £5 has been paid, £5 can be demanded. On the other hand, if the liability be unlimited, each member can be compelled to contribute until all the debts of the company are discharged.

§ 7. Seven Members required.—If a company carries

on business for six months after the number of its members is less than seven, every member who is aware that the number of members has been reduced below the number prescribed by law, becomes personally liable for the payment of all the debts of the company contracted subsequent to such six months. Care therefore should be taken so that the number of members is never less than seven.

§ 8. The Memorandum.—The law requires the memorandum to contain the following particulars in the case of "unlimited" company :—

an

I. The name of the company.

2. The place where the registered office is situated. 3. The objects for which the company is established. If the company be "limited," the memorandum must also contain

4. The word "limited" in addition to the name of the company.

5. A declaration that the liability of the members is limited. 6. The amount of capital divided into shares of a certain amount.

It cannot

The memorandum is the charter of the company, and defines and limits the powers of the company. be altered without the consent of a court.

§ 9. The Articles of Association. The articles of association prescribe the rules to be observed in the administration of the company's affairs. They usually relate to calls upon shares, the transfer and forfeiture of shares, the increase or reduction of capital, the borrowing of money, proceedings at meetings, the election, retirement and powers of directors, the auditing of accounts, the declaration of dividends, winding up, and the distribution of assets. As a rule the articles of association can be altered by the company.

§ 10. Directors.-The articles usually declare that the management of the business shall be vested in the directors. The shareholders are thus excluded from the management, though they necessarily exercise great control through their power of censuring or removing a director. The directors cannot validly do any act not within the powers of the company.

As a rule their powers are prescribed by the articles. The usual powers given are to acquire property, to enter into contracts, to appoint officials and trustees, to bring or defend actions, to give receipts, to refer disputes to arbitration, to invest moneys, to form a reserve fund, and to recommend the amount of the dividend.

§ 11. Shares.-The capital of a company is always, as we have seen, divided into shares. The persons who sign the memorandum and articles have to state opposite their names how many shares they take. Other shareholders obtain shares by applying for them. An application is accepted by the directors allotting the shares, and the posting of the notice of allotment to the applicant makes him liable to take and pay for the shares. The applicant is usually required to remit a portion of the amount of each share when he makes his application, and another portion when the shares are allotted to him. Subsequent payments are termed "calls," and the articles usually authorise the directors to make calls from time to time until the whole amount is paid. Certificates may be issued by the directors certifying the number of shares held by a shareholder, and such certificate is prima facie evidence that the holder owns the shares.

§ 12. Winding up.-A company may be wound up or dissolved (1) compulsorily, (2) voluntarily, or (3) subject to supervision.

1. The Chancery Division of the High Court of Justice will order a company to be wound up—

(a) When the company has passed a resolution requiring the company to be wound up by the court.

(b) When the company does not commence business within a year from its incorporation, or suspends business for a year.

(c) Whenever the number of members is less than seven. (d) When the company is unable to pay its debts. (e) When the court thinks that it is just and equitable that it should be wound up.

The company itself, any shareholder, or a creditor may ask the court to make the order. If the order be made, a liquidator is usually appointed to assist the court; his chief duties are to realise the property of the company and to pay its debts so far as the property will permit.

2. A company may, without going to the court, wind up its affairs voluntarily, but this will not prevent a creditor from asking the court for a compulsory order. Voluntary winding up is often resorted to where it is desired to reconstruct the company on a new basis. The company authorise the winding up by resolution, and appoint a liquidator for the purpose.

3. In some case where a voluntary winding up has been resolved upon, the court may order the winding up to proceed under its supervision. This course has the advantage that the assistance of the court can be readily obtained when necessary.

By an Act of Parliament passed in 1890, the winding up of companies is subject to the control of the Board of Trade. The procedure is similar to that followed in bankruptcy.

§ 13. Mercantile Property.- Mercantile transactions relate usually to moveable property. Such property takes the form of a material thing or a right of action. A bale of cotton is a material thing, but a share in a company is really a right of action. Land or immoveable property is often required for trading purposes, and attention may therefore be directed to some of the more important forms of mercantile property and their chief characteristics.

§ 14. Land.-Land, where it is owned for partnership purposes, is regarded as partnership property. The law will not interfere with its descent, but it will compel the person who takes it to hold it for the benefit of the partnership (§ 116). Land is now liable for the payment of debts.

§ 15. Moveable Property.-Moveable property is the subject of absolute ownership, and hence parties buying

goods are not obliged to trace the title of the vendor, as they have to do in the case of land. Sales in open market as a rule confer a good title (§ 158). Moveables, with certain exceptions, such as heirlooms, fixtures, and growing crops, descend to the executor or administrator for the benefit of the next of kin, subject to the payment of debts.

Special rules are applied to British ships. In order to be entitled to the name and privileges of a British ship she must be owned and registered as one, except in the case of ships not exceeding 15 tons, employed on the rivers and coasts of the United Kingdom or of a British possession. The property in a British ship is regarded as divided into 64 equal parts, and it would apparently follow that 64 is the maximum number of owners. But the law allows any number of persons not exceeding five to be registered as joint owners, such joint owners being regarded as one person for the purpose of registration. A company, too, may be registered in its corporate name. Shares in a ship are transferred by a prescribed form of bill of sale under seal.

The word "chattel" is often used in England to denote moveable property, but the leading classification of property in English law is not "immoveables" and moveables," but "real" and "personal" property. Personal property includes not only moveables, but certain interests in land, such as leaseholds—if the owner of such property dies intestate, the property descends to the next of kin after all debts have been paid. Real property includes all estates that amount to an interest not less than an estate for life.

The

§ 16. Rights of Action.—Moveable property is usually divided into material things and rights of action. former class includes everything that is tangible or possesses a material form; the latter class includes all claims or rights, especially claims to the payment of sums of money. If A. possesses ten sovereigns, the sovereigns are material things; if B. owes A. ten sovereigns, A. has a right to bring an action against B. for the money.

The chief forms of right of action that need be considered are shares, stock, debentures, debenture stock, copyright, designs, patents, trademarks, and goodwill.