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2. A British subject who has ordinarily resided in this country goes abroad for an indefinite period. In this case the Board give no real indication of what they are aiming at. They say nothing about duty or business, health or pleasure. It would rather appear that they ought to have said "for an indefinite period or for a definite period of less than three years, which is a very different matter. In any event the official view is that the presumption must be that the individual has gone abroad for occasional residence only. His claim for immunity will not be admitted at first, and in any case it will be admitted only by way of repayment.

3. A British subject who has ordinarily resided in this country and now habitually spends part of each year in this country and part of the same year abroad. This is the real crux of the whole situation. It is exactly what quite a number of people are doing. It is also probably not uncharitable to assume that the main purpose, and a deliberate purpose, of their scheme of life is the income tax benefit which it is intended and hoped to involve. It is quite reasonable to say this in view of the fact that in those cases the scheme of movement is usually so engineered that the total residence in this country within any one tax year shall not amount to six months. The view of the Board is that this will not do, and apparently it makes no difference that no home or residence is maintained in this country. In order to get at what is in the mind of the Board one has to go from the circular to the memorandum, and there the view of the Board upon the six months' rule is stated thus:

The Board do not consider that the case of the British subject dealt with in the foregoing paragraphs falls within this rule, which (that is the rule) is primarily concerned with a different type of case, e.g. the case of the foreigner coming to this country on a visit.



In the report by Mr Jas. W. Inglis, the accountant of Court, to the Judges of the Court of Session on the state of judicial factories and sequestrations falling under his supervision from 31st December 1921 to 31st December 1922, it is stated that during the year there were lodged in his office 63 bank consignation receipts, for sums amounting in all to £84,908, 10s.; 95 bonds under the Judicial Factors Act, 1849; 9 bonds under the Bankruptcy (Scotland) Act, 1913 (section 163); 181 bonds under the Judicial Factors (Scotland) Act, 1880; 43 bonds under the Judicial Factors (Scotland) Act, 1889; 16 other cautionary bonds; 9 inventories of estates under the Guardianship of Infants Act, 1886. There were two applications by testamentary trustees for supervision of their accounts under order of the Court. Of the 344 bonds lodged, 311 were by guarantee companies.

During the year the accountant had before him, under remit from the Court, 225 applications for discharge of judicial factors, and he reported on 16 applications for special powers, and 165 applications for restriction of caution. The number of factory accounts audited and reported on was 2126. The value of the moveable property under the accountant's supervision amounts to £6,029,104; and the heritage, at an average of say 22 years' purchase, £4,011,367; while 27 testamentary estates have been supervised by the accountant, the funds of which amounted to over £3,100,000; total, £13,140,471.

During the year £45,366, 5s. 3d. of consignations have been uplifted, and at 31st December 1922 there were 257 consignation receipts in the accountant's custody, amounting in all to £97,039, 14s. 1d.

In answer to this it is suggested that the Board In terms of the Court of Session Consignations are making quite too much of British allegiance. Act, 1895, there have, in addition, been handed That would be very quickly tested by what over to the King's and Lord Treasurer's Rememwould be the Board's own attitude to a case in brancer, during the year, consignation receipts which the individual lived, say, twenty years for sums amounting to £49, 1s., making the in this country, but is not a natural-born total amount paid to Exchequer (including the British subject and has never been naturalized. balance of funds in hand in 1889) £52,874, 10s. It is perfectly certain that, in the event of that There were 275 sequestrations awarded and gentleman suddenly becoming infected by the 3 re-opened during 1922, while 131 were wound modern spirit of pleasure-seeking and tax-up, and the number in dependence at 31st avoiding (which in these cases closely approxi- December 1922 was 712 (after giving effect to mates to tax-evading) tours and intermittent the provisions of section 159 of the 1913 foreign residence, the Board would at once Bankruptcy Act). say that he remained for all purposes within the United Kingdom tax net, and that British allegiance or no British allegiance was neither here nor there.

In the sequestrations wound up during the year the gross receipts amounted to £88,820, and the debts to £204,897. The average dividend to the ordinary creditors was 3s. 5d.,


the average duration of the sequestrations V. CAP. 40), SECTION 209, SCHEDULE D, CASES 21 years, and the percentage of ordinary I. AND II., RULE 3.—Messrs Rowntree & Co. Ltd. expenses, 18 (including trustees' commission, set aside out of their profits for 1919 the sum 6, and law expenses, 73). of £50,000 which they invested in the name of The accountant concurred in 9 sales of herit-trustees to be held as an invalidity fund for the able property by private bargain, and made 19 special reports on applications for discharge. Discharges were granted to 117 trustees and 42 bankrupts. There were There were 23 accounts of private trust deeds submitted for audit. The amount of consignations in bankruptcy cases in the accountant's custody at 31st December 1922 was £1670, 14s. 7d. There was consigned during the year £188, 7s. 6d. ; uplifted £116, 19s. 4d.; and handed over to the King's and Lord Treasurer's Remembrancer £125, 3s. 6d. (making the total amount paid to Exchequer, £13,781, 17s. 10d.).

AT a meeting of Queensferry Town CouncilProvost Morrison presiding-Mr Harry Wakelin, W.S., Linlithgow, was unanimously appointed Town-Clerk of the Burgh in succession to Mr Peter Miller, solicitor, resigned. Mr Wakelin had filled the office of Depute Town-Clerk for the past eleven years.

MESSRS PATTEN & PRENTICE, solicitors, 18 Kilblain Street, Greenock, intimate that they have assumed as a partner in their business Mr Robert Arkley Reid, solicitor, Greenock. Mr Reid served his apprenticeship with Messrs Fyfe & Murray, writers, Greenock, and Messrs Brownlie, Watson & Beckett, writers, Glasgow, and afterwards entered the Court Department of Messrs M'Grigor, Donald & Co. After a period of war service he returned to the latter firm, and occupied a responsible post in their Conveyancing Department, remaining there until the commencement of last year when he became managing clerk in his present office.

The business will be carried on under the firm name of Patten, Prentice & Reid.

relief of distress among their employees. They claimed to deduct this sum from the profits of the year in order to arrive at the statutory income for the purposes of income tax. Special Commissioners decided adversely to this contention, and their decision was upheld by Rowlatt J. Held that the payment could not be said to have been made exclusively for the purposes of the business carried on by the company, and ought not, therefore, to be deducted in order to determine the annual profits on which income tax was to be charged. Decision of Rowlatt J. affirmed.-Court of Appeal (Sir Ernest Pollock M.R., Warrington L.J., and Eve J.-19th February 1924.

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PUBLIC HIGHWAY.-The defendant on 7th September 1923 left his chauffeur in charge of his car outside 134 Marine Parade, Brighton. The car was on a fairly steep slope. chauffeur went off to get his dinner, leaving the car unattended. Before going he applied the hand-brake and placed a block of wood under the near front wheel. While he was absent a boy of ten climbed into the car which moved backwards and struck the wall below the entrance to 134 Marine Parade, breaking down about 16 feet of the railings. The handbrake of the car was proved to have been in a defective condition. The County Court judge found the defendant liable on account of the negligence of his servant in leaving unattended a car whose brakes were not in proper working order. Held that on the facts proved there was evidence to show that the defendant's

servant had been guilty of negligence.-K.B. Div. (Bailhache and Roche JJ.).-9th April 1924.

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The question of the right of a company limited by shares to accept at its own hand from a member the gratuitous surrender of fully paid shares held by him has come up more than once recently in the writer's practice, and seems worthy of some consideration.

It is generally accepted-and is, indeed, settled law-that, before it can receive from a member such a surrender, the company must, at least, have taken power in its Articles of Association to do so; for there is nothing in the Companies Acts expressly to authorise the acceptance of surrenders. The Articles of Association of many-it may be, of mostcompanies limited by shares, accordingly, contain some clause authorising this. Such provisions vary from the cautious form exemplified in the case of Rowell v. John Rowell & Sons Ltd. ([1912] 2 Ch. 114):

"The Board may at any time (where the law permits) accept the surrender of any shares from any holder thereof desirous of surrendering the same, on such terms as the Board shall in each case determine, and the Board may extinguish or cancel such shares, or may reissue the same either as fully or partly paid up or on such terms (or may sell them) as they may think fit.” (which commits no one to anything) to more articulate forms such as:

"The Directors may accept (a) the surrender of any share by way of compromise of any question as to the holder being properly registered in respect thereof, or of any share which the company is entitled to forfeit, or (b) the gratuitous surrender of any fully paid share. Any share so surrendered may be disposed of in the same manner as a forfeited share.' which may, perhaps, be taken as expressing the draftsman's view of what surrenders the law does permit a company to accept at its own hand.


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But, notwithstanding the existence of such provisions, the extent of a company's power so to accept surrenders has not yet been authoritatively settled. There is, indeed, not a little divergence of view, both judicial and extra-judicial, as to the extent of such power. And while the power has been recognised in several cases-to be afterwards referred to the law, generally, would appear, so far as authoritative decision goes, to be still pretty much where Lord Herschell left it when, in Trevor v. Whitworth (12 App. Cas. 409) (quoting Jessel M.R. in In re Dronfield Silkstone Coal Co. Ltd., 17 Ch. D. 85), he said: "It is not for me to say what the limits of surrender are which

are allowed by the Act. . . . because each case as it arises must be decided on its own merits." The question of the extent to which the power referred to exists is, however, one of importance, for, plainly, if the gratuitous surrender of fully paid shares may be accepted by a company at its own hand, such a surrender may serve to meet a number of cases which would otherwise call for more elaborate and expensive solutions. As already indicated, the Companies Acts contain no provision regarding surrender of shares, but the absence of such provision does not appear to lead to any conclusion, favourable or adverse, as to a company's power to accept surrenders. For a company may do many things which have not been made the subject of statutory provision; and, unless the acceptance of a surrender impinges upon some principle or rule expressed or implied in the statutory provisions under which the company came into being, it would seem that such acceptance, although not expressly authorised, may still well be an act within the company's powers. In its ultimate aspect the right of a shareholder is simply a right to participate in the company's assets. Fundamentally, then, there would seem to be no more reason for requiring statutory authority for the acceptance of a surrender of shares than for the acceptance of the surrender of a debenture, as to which no one would suggest any difficulty.

And, indeed, it is settled that express statutory authority for surrender of shares is not required. Lord Herschell's opinion in Trevor v. v. Whitworth, already referred to, clearly recognises that surrender of shares is a competent proceeding. But, on the other hand, it is plain that questions of infringement of, or incompatibility with, statutory principles or rules might arise and require consideration in the case of a share which could not emerge with regard to a debenture. For example, if the terms upon which a share is to be surrendered involve the release of the holder from liability to the company for the unpaid portion thereof, or the cancellation of the share when surrendered, then, in either case, reduction of capital would be involved, and there would clearly be a conflict between the de plano acceptance of the surrender by the company and the statutory provisions prescribing the methods by which alone a company may reduce its capital. Accordingly, the company could not, at its own hand, accept such a surrender as that above suggested. Or, again, if a company proposed to give to the member a consideration for the surrender, e.g. by making over to him cash or saleable assets, theneven though the share were fully paid, and were not to be cancelled-there would be a purchase by the company of its own shares, and a return


of capital to the member, so that, in this case also, the company could not accept the surrender without taking the steps prescribed by statute for reduction of capital.

But it is, it is submitted, not the fact of surrender by itself which prevents the company acting at its own hand in the cases above suggested, but the fact that the terms of surrender in each case involve reduction of capital, and would, therefore, if carried out de plano, infringe statutory regulations which must in cases of reduction first be observed. For it is manifest that if the member receives nothing in exchange-by way of release from liability or otherwisethe giving up by him of his right to claim a part of its assets must result in "pure gain to the company; and, if there be no cancellation of the share surrendered, then it is difficult, prima facie, to see why there should be anything to prevent the company accepting with both hands the benefit offered.

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Nevertheless doubts as to the possibility or propriety of the acceptance by a company of such surrenders have been suggested from various points of view. It has been questioned, for example, on the ground of an alleged difficulty in defining the position of an uncancelled surrendered share in the company's capital. It has also been disapproved on the ground that the surrender would disturb the equilibrium of the balance sheet and render possible the payment of dividends which could not otherwise be lawfully paid.

The first of these objections, though suggested by one for whose views the writer has the highest respect, does not appear to be very formidable, and seems, in any case, to come a little late. Surrender has already been recognised by the Courts as a competent course in the case of forfeitable shares, and in the case of shares as to the registration of which there is a dispute (Bath's case, 1878, 8 Ch. D. 334), in neither of which cases are the surrendered shares cancelled. And it seems obvious that, so far as the objection under discussion is concerned, no distinction whatever can result from any difference in the occasion of the surrender. Once the transaction is accomplished all alike are surrendered shares, and if a place in the company's capital can be found for one so also can it be found for the others.

It cannot be disputed that shares which have been in the possession of a member but which have come back into the control of the company may continue to exist, and may be issued to a new holder; for that is clearly so in the case of forfeited shares. It seems plain that it must equally be so with regard to forfeitable shares which have been surrendered in lieu of forfeiture. And as it is a common provision

in Articles of Association, with regard to surrendered shares generally, that they are to be dealt with in the same manner as forfeited shares, it does not seem easy to suggest real difficulty in the way of dealing with any surrendered shares. Further, Lord Watson has expressly said that surrendered shares may be reissued (Trevor v. Whitworth, supra). The appropriate category in which to include surrendered and uncancelled shares would, accordingly, appear to be among the unissued capital of the company. That is what, for practical purposes, such shares are. They are under the control of the company, which has no liability to anyone in respect of them, and they may be issued by the company to any "unissued person. The term may in their case carry a different shade of meaning from that which it bears in the case of shares which have never at any time been issued. But just as unmarried " may mean either " never having been married" or "at present capable of being married" (cf. In re Jones, [1915]1 Ch. 246), so "unissued may, it is submitted, legitimately mean either never having been issued or at present capable of being issued." In practice, so far as there is a practice, accountants do include surrendered shares among the unissued capital of the company.

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With regard to the other point, that surrender of shares is objectionable because it would disturb the equilibrium of the balance sheet, it may, perhaps, in the first instance, be observed that this seems rather an odd expression to apply to an operation designed, by getting rid of liability, to restore the real equilibrium of a balance sheet, which presents at the moment only the semblance of an equilibrium through the inclusion on the credit side of items-the debit balances on certain accounts-which represent no real assets at all. But neither this criticism nor the more substantial one that, through the surrenders and the consequent readjustment of the balance sheet, payment may become possible of dividends which could not otherwise be lawfully paid seems to have any validity as an objection to surrender as such.

It is plain that the results objected to would follow equally if a creditor surrendered a claim against the company of sufficient amount, and that no possible objection could, in that case, be taken either to the company's acceptance of the surrender, or to the consequent results. Further, both the results in question are just what are aimed at in many, if not most, cases of reduction of capital, for which the statute provides. There can, therefore, be nothing in such results, or either of them, which is, sua natura, objectionable. And by the gratuitous

surrender of shares, just as much as by the surrender of a creditor's claim, or by a reduction of capital, the company is relieved of the excess of liabilities which previously hampered it. Why then do these results become objectionable when they flow from a surrender of shares; or how do they afford ground for maintaining that a surrender of shares which produces or permits them is objectionable or incompetent? The suggestion appears to be that the results in question, when flowing from a surrender of shares, and the surrender itself as producing or permitting them, are objectionable because they have not received the sanction of the Court, as in the case of a reduction of capital. This suggestion seems to be unsound. For (a), | as already pointed out, the same results would follow and be unexceptionable without the sanction of the Court in the case of a surrender by a creditor, and (b) in any case, even in a reduction of capital, the sanction of the Court is required not to, or because of, the particular results which may follow from the reduction, but, as provided by the statute, to the reduction of capital itself, whatever the circumstances may be. The sanction of the Court cannot, therefore, it is submitted, be necessary either to the validity of the results or to the validity of the surrender, except where the conditions of surrender are such as to involve reduction of capital.

It has already been pointed out that under certain conditions-which are not those attending the gratuitous surrender of a fully paid share-surrender would involve reduction of capital, and so, admittedly, call for the sanction of the Court. But it has been said by CozensHardy L.J. (as he then was), in the case of Bellerby v. Rowland & Marwood's Steamship Co. Ltd. ([1902] 2 Ch. 14), that:

"Every surrender of shares, whether fully paid up or not, involves a reduction of capital, which is unlawful except when sanctioned by the Court. Forfeiture is a statutory exception and is the only exception. For I regard a surrender under circumstances which would justify a forfeiture as merely equivalent to a forfeiture."


also accepts the view of Cozens-Hardy L.J. without reserve (Company Law, 2nd ed., p. 93). Mr Gore Browne's adherence to the faith, however, is not too robust, for on p. 430 (op. cit.) he makes the modified statement: A surrender even of fully paid shares will not generally be lawful without the sanction of the Court," giving the reason (which has already been alluded to) that "this disturbs the equilibrium of the balance sheet and may render the payment of a dividend possible which otherwise would be unlawful "-a quite different ground of objection from that based on the alleged inherent reduction of capital. But Mr Gore Browne seems to become altogether unorthodox when he says (p. 429), The rule is that, where the Articles do not authorise the surrender or forfeiture of shares, neither the Directors nor a majority of the shareholders can, without the sanction of the Court, make a surrender or forfeiture valid," for this would seem to imply that in all cases where the Articles do authorise surrender or forfeiture these steps may be carried out without the sanction of the Court. Such a view would, of course, be quite inconsistent with the view of Cozens-Hardy L.J., and indeed goes far beyond the view suggested in the present article. Limited to forfeiture and surrender in lieu of forfeiture, the passage last quoted would consist with the view of Cozens-Hardy L.J., but there seems nothing in the passage itself, or in its context, so to restrict it.

But if both the learned authors are to be taken as accepting the view of Cozens-Hardy L.J., they, with the learned judge, make a combination sufficiently formidable. Nevertheless, the present writer ventures to think that the learned judge in making the observation in question-it was an obiter dictum and no more, though Younger J. seems to have taken it for more (In re Guardian Assurance Co., [1917] 1 Ch. 431 at p. 442)-laid down too wide a proposition, and that the learned authors have erred in accepting it and stating the law exactly in terms thereof.

For it is difficult to understand how it can be said that the mere surrender, without cancellation, of a fully paid share involves a and this pronouncement has been accepted by reduction of capital. In the case of a forfeited certain learned text-writers as settling the law. share it may be that, as the learned Lord For example, Mr Gore Browne, in his "Hand- Justice says, there is a reduction of capital; book of Company Law" (35th ed., p. 429), says: though, since the share remains in existence "Forfeiting or accepting surrenders of shares and Articles of Association usually provide that are reductions of capital, which in a proper case the holder shall remain liable for the unpaid the Court will sanction"; and again, 'A calls, it does not seem quite clear that, even in forfeiture or surrender of shares is in fact a that case, there is reduction of capital-at reduction of capital." This is the view of least where the unpaid calls would make up Cozens-Hardy L.J. in its entirety. Mr Stiebel- the full amount of the share. But, however to whose work the present writer is indebted for that may be, it is plain that, by the mere much assistance in his daily work-apparently gratuitous surrender of a fully paid share,

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