THE COMPANIES ORDINANCE, 1972

Part II.—Incorporation of Companies, Memoranda and Articles of Association and Matters Incidental Thereto

Memorandum of Association

3.—(1) Any two or more persons associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Ordinance in respect of registration, form an incorporated company with limited liability.

(2)  The liability of a member of a company to contribute towards its assets or, in the winding up of the company, toward payment of the debts and liabilities of the company and the costs of the winding up, shall be limited to the amount for the time being not paid up, or credited as paid up, of the nominal value of the shares registered in his name and of the excess (if any) of the issue price of the shares over their nominal value.

(3)  No member of a company shall be personally liable to any person claiming any debt, damages, compensation or other sum whatsoever from it by reason only of being a member of the company.

(4)  For the purpose of the Commercial Code and all other laws a company shall be deemed to be commercial in character whether its objects or activities are commercial or not.

4,—(1) The memorandum of every company shall be in the English language and must state—

(a)   the name of the company, with "Limited" as the last word of the name and the word "Proprietary" as the penultimate word of the name in the case of a proprietary company ;

(b)   that the registered office of the company is to be situate in Seychelles ;

(c)    the objects of the company ; and

(d)    that the liability of the members of the company is limited.

(2)   The objects of the company to be state;! shall be the business or businesses which it is formed to carry on, or the purpose or purposes which it is formed to achieve, and it shall not be necessary or permissible to set out in the memorandum or the articles the powers or means by which the company is to attain its objects.

(3)   The memorandum may not contain—

(a)   a provision that the company may pursue such objects or do such things as its directors or members shall think fit, or shall think conducive or incidental to the achievement of its objects ; or

(b)   a provision that the contents of different parts of the clause or clauses of the memorandum setting out the objects of the company shall be construed independently of one other as though each such part stated the sole objects of the company ; or

(c)   any objects which are not stated with reasonable certaintv.

(4)  The memorandum must state—

(a) the number of shares which the company may issue and the nominal value of those shares, and whether each of those shares has the same nominal value or different nominal values are attributed to shares of different classes ;

(b)   the total of the nominal values of all the shares which the company may issue ("the nominal capital of the company") ; and

(c)   the total of the nominal values of all the shares of each class of shares which the company may issue ("the nominal capital of the company in respect of a class of shares").

(5)  If a company has different classes of shares, the memorandum shall state the rights and obligations of each class (except so far as such rights and obligations are prescribed by this Ordinance or are uniform for all classes of shares), and no rights or obligations attached to shares by the articles, the terms of issue of shares, resolutions of the directors or members of the company or otherwise shall be valid if not set out in the memorandum.

(6)  For the purpose of this Ordinance, shares belong to different classes if different rights or obligations attach to them in respect of dividend, repayment of capital, voting at general meetings of the company, or the times at which, or the amounts by which, the issue price of the shares payable in cash is to be paid to the company; but shares do not belong to different classes merely because the holders of some of them are members of the company and the holders of others of them are not, nor because some of them are issued for a consideration other than cash.

(7) The form of the memorandum of a company shall be in accordance with the form set out in Part I of the First Schedule to this Ordinance, or in the case of a proprietary company, in Part III of the said Schedule, or as near thereto as circumstances permit.

5.-—(1) The subscribers of the memorandum of a company which is not a proprietary company shall write opposite their signature to the memorandum the number of shares in the conapany which they agree to take, being not less- in total than one-tenth of all the shares the company may issue (except shares to be allotted for a consideration other than cash).

(2)  The subscribers of the memorandum of a proprietary company shall by subscribing be deemed to agree jointly and severally to take all the shares which the company may issue, but unless the memorandum otherwise provides, they shall as between themselves take such shares in equal proportions.

(3)  The memorandum must be signed by each subscriber ijl the presence of at least one witness who must attest the signature.

6.—(1) If by an arrangement made before its incorporation any shares of a company are to be paid for by a consideration other than cash, the memorandum shall state the nature of such consideration, its value and the amount by which the shares to be issued in respect of it will be credited as paid up, not exceeding the stated value of such consideration.

(2)  If within five years after the incorporation of a company any consideration for which shares have been issued under subsection (1) is sold by the company for less than the amount by which the shares are credited as paid up in respect of it, or if within the said five years the company is wound up or any of its debenture holders become entitled to realise a security comprising the consideration, and the consideration is sold by the liquidator or by the receiver or any other person acting for the benefit of debenture holders for less than the amount by which the shares are so credited as paid up, the first directors of the company and the person who furnished such consideration shall be jointly and severally liable to pay the difference to the company or the liquidator or the receiver, as the case may be, unless they satisfy the court : —

(a)   that if the consideration had been sold immediately after the incorporation of the company, it would have realised not less than the amount by which the shares are credited as paid up ; or

(b)   that since the acquisition of the consideration by the company, the company has so used, altered or dealt with it, or its nature or condition has so changed, that the amount for which it has been sold does not bear any reasonable relationship to its value at the date of the incorporation of the company.

(3)  If within a year after its incorporation a company issues shares to be paid for by a consideration other than cash, or accepts a consideration other than cash in complete or partial payment for shares which were issued for a consideration in cash, it shall be presumed, unless the contrary is proved, that an arrangement was made before the company was incorporated that the shares were to be paid for by a consideration other than cash, and the directors of the company and the person furnishing the consideration other than cash shall incur the liabilities imposed by the last foregoing subsection.

(4)  If judgment is given against two or more persons under subsection (2) or (3) of this section, the court may order that they shall make such contribution between themselves, or that one or more of them shall indemnify the other or others of them, as to the court shall seem just.

(5)  No shares shall be issued to be paid for by the performance of services after the date of their issue, or by the person to whom they are issued or any other person contracting to perform such services.

(6)  For the purpose of this Ordinance shares are issued for a consideration other than cash unless they are to be paid for wholly by legal tender or by a cheque, banker's drafi; or banker's cheque, or by setting off a debt which is owned by the company and is immediately payable; in such excepted cases the shares are issued for a consideration in cash.

(7)  For the purpose of this section debenture holders shall be deemed to become entitled to enforce their security in the circumstances set out in section 8(1) and (2) of the Companies (Debentures and Floating Charges) Ordinance, 1970.

(8)  If a memorandum is delivered to the Registrar without subsection (1) of this section being complied with, the first directors of the company who are in default shall be guilty of an offence.

(9)  If a person accepts an issue of shares for a consideration other than cash knowing that subsection (1) of this section applies but has not been complied with, he shall be guilty of an offence.

(10)  If within a year after the incorporation of a company an issue of shares is made for a consideration other than cash, or a payment for shares is made otherwise than in cash, the directors of the company and the person to whom the issue is made, or who holds the shares at the time the payment is made (as the case may be), shall be guilty of an offence if they know that the issue or payment is made pursuant to an arrangement made before the company was incorporated and that subsection (1) of this section has not been complied with.

(11)  If shares are issued in contravention of subsection (5) of this section, the directors of the company who are in default and the person to whom the issue is made shall be guilty of an offence.

(12)  An offence under this section shall be punishable by a fine not exceeding ten thousand rupees or imprisonment for not more than two years, or by both such fine and such imprisonment.

(13)  Subsections (1) to (4) and (7) to (10) inclusive shall not apply to a proprietary company.

(14) This section shall not apply to an existing company.

Articles of Association

7. There may in the case of any company be registered, with the memorandum, articles of association signed by the subscribers of the memorandum and prescribing regulations for the company.

8. If a company is incorporated without articles being registered, or if articles are registered but do not exclude the regulations set out in Part II of the First Schedule to this Ordinance, or in the case of a proprietary company, in Part IV cf the said Schedule, those regulations shall, insofar as the registered articles do not exclude or modify them or make express provision for the same matter, be the regulations of the company in the same manner and to the same extent as if they were contained in duly registered articles.

9. Articles shall be in the English language and must—

(a)   be printed ;

(b)   be divided into paragraphs numbered consecutively ; and

(c)   be signed by each subscriber of the memorandum of association in the presence of at least one witness who must attest the signature.

Registration

10.—(1) The memorandum and the articles, if any, shall be delivered to the Registrar, and he shall retain and register them.

(2) (a) Before registering the memorandum and articles the Registrar shall satisfy himself that they comply with the foregoing provisions of this Ordinance and that the objects of the company are lawful.

(b) No company shall be registered by a name which in the opinion of the Registrar is undesirable.

(3) If the Registrar is not satisfied as to any of the matters mentioned in the foregoing subsection, he shall in writing and within one month so inform the person who presented the memorandum and articles for registration, stating his reasons.

(4) Any person aggrieved by the failure of the Registrar to register the memorandum and articles may appeal to the court within one month after the Registrar has informed the person who presented the memorandum and articles for registration under the foregoing subsection, and upon the hearing of such an appeal the Court shall either direct the Registrar to register the memorandum and articles or dismiss the appeal, and the decision of the Court shall be final.

(5) The Mortgage and Registration Ordinance shall not apply to the memorandum and articles of a company.

11.— (1) On the registration of the memorandum of a company the Register shall certify under his hand that the company is incorporated and the date of the registration, the certificate issued by the Registrar shall be in the form set out in the Second Schedule to this Ordinance.

(2)  On and from the date of incorporation mentioned in the certificate of incorporation, the subscribers of the memorandum, together with such other persons as mav from time to time become members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession, but with such liability on the part of the members to contribute to the assets of the company as is mentioned in this Ordinance.

(3)  The Mortgage and Registration Ordinance shall not apply to a certificate of incorporation issued under this section.

12.—{1) A company incorporated under this Ordinance shall have power to hold lands in any part of Seychelles.

(2) This section shall take effect subject to the provisions <$ the Immovable Property (Transfer Restriction) Ordinance, 1963.

13.—(1) A certificate of incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of this Ordinance in respect of registration and of matters precedent and incidental thereto have been complied with, and that the association is a company authorised to be registered and duly registered under this Ordinance.

(2) A signed declaration by a barrister, attorney or notary that all of the said requirements have been complied with shall be produced to the Registrar, and the Registrar may accept such a declaration as sufficient evidence of compliance.

(3) In the case of a proprietary company the said declaration shall state that the company will on its incorporation fulfil the conditions set out in section 24(1) of this Ordinance.

14.—(1) Where it is proved to the satisfaction of the Minister that an association about to be formed as a company is to be formed for promoting commerce, art, science, religion, charity, or any other useful object, and intends to apply its profits or other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Minister mav by licence direct that the association may be registered as a company without the addition of the word "Limited" to its name, and the association may be registered accordingly.

(2)  A licence by the Minister under this section may be granted on such conditions and subject to such limitations as the Minister thinks fit, and those conditions and limitations shall be binding on the association, and shall, if the Minister so directs, be inserted in the memorandum and articles, or in one of those documents.

(3)  The association shall on registration enjoy all the privileges of a company and be subject to all the obligations of a company, except that of using the word "Limited" as part of its name.

(4)  A licence under this section may at anv time be revoked by the Minister, and upon revocation the Registrar shall enter the word "Limited" at the end of the name of the association upon the register, and the association shall cease to enjoy the exemption granted by this section :

Provided that, before a licence is so revoked, the Minister shall give to the association notice in writing of his intention, and shall afford the association an opportunity of stating its opposition to the revocation.

(5)  This section shall not apply to a proprietary company.

General provisions with respect to memorandum and articles

15.—(1) Subject to the provisions of this Ordinance, the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by each member and on behalf of the company, and contained contractual undertakings on the part of each member and the company to observe all the provisions of the memorandum and of the articles.

(2) All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company.

16.—(1) A company shall, on being so required by any member, shareholder or debenture holder of the company send to him a copy of the memorandum and of the articles, if any, subject to payment of a fee of five rupees or such less sum as the company may specify.

(2) If a company makes default in complying with this section, the company and every officer of the company who is in default shall be liable for each offence to a fine of one hundred rupees.

17.—(1) Where an alteration is made in the memorandum or articles of a company, every copy of the memorandum or articles issued after the date of the alteration shall be in accordance with the alteration.

(2) If, where any such alteration has been made, the company at any time after the date of the alteration issues any copies of the memorandum or articles which are not in accordance with the alteration, it shall be liable to a fine of one hundred rupees for each copy so issued, and every officer of the company who is in default shall be liable to the like penalty.

Alteration of the memorandum and articles

18.— (1) Subject to the following provisions of this Ordinance, a company may by special resolution alter or add to any of the provisions of its memorandum. Notice of the meeting called to pass the special resolution shall be given to all shareholders and debenture holders of the company and to the trustees of all debenture trust deeds covering debentures issued by the company in like manner as it is, given to members of the company.

(2)  No company may alter the provisions of its memorandum that its registered office is to be situate in Seychelles.

(3)  The share capital of a company may be altered only in the ways specified in sections 59 and 63.

(4)  Notwithstanding anything in the memorandum or articles of a company, no member of the company shall be bound by an alteration made in the memorandum after the date on which he became a member, if and so far as the alteration requires him to take or subscribe for more shares than the number held hv him a the date on which the alteration is made, or in any way increases his liability as at that date to contribute to the share capital of, or otherwise to pay money to, the company :

Provided that this subsection shall not apply in any case where the member agrees in writing, either before or after the alteration is made, to be bound thereby.

(5)  A company may change its name only if the Registrar has previously approved the proposed new name, and the new name conforms to the requirements of section 4(1) of this Ordinance,

(6)  If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name is registered by a name which, in the opinion of the Registrar, is too like the name by which a company in existence has previously been registered, the first-mentioned company may change its name with the consent of the Registrar, and, if he so directs within six months of its being registered by that name, it shall change it within a period of six weeks from the date of the direction or such longer period as the Registrar may think fit to allow.

If a company makes default in complying with a direction under this subsection, it shall be liable to a fine not exceeding one hundred rupees for every day during which the default continues.

(7)  Where a company changes its name under this section, the Registrar shall enter the new name on the register in place of the former name, and shall issue a certificate of incorporation altered to meet the circumstances of the case,

(8)  A change of name by a company under this section shall not affect any rights or obligations of the corr-piny or render defective any legal proceedings by or against the company, and any legal proceedings that might have been continued or commenced against it by its former name may be continued or commenced against it by its new name.

(9)  Any alteration of or addition to the objects of a company shall be subject to the rules contained in section 4(2) and (3) of this Ordinance.

(10)  No provision of the memorandum required to be contained in it by section 6(1) of this Ordinance shall be altered so, however, that nothing in this subsection shall be construed as prohibiting the deletion of any such provision as aforesaid after the expiration of the period of five years mentioned in section 6(2).

(11)  Alterations and additions made to the memorandum may themselves be altered or added to in like man ner as though they had originally been contained in the memorandum.

(12)  The Mortgage and Registration Ordinance shall not apply to a certificate of incorporation issued under this section.

19.-(1) No alteration of or addition to the memorandum shall be made in respect of the rights or obligations attached to shares of any class, if the company's share capital is divided into different classes of shares, unless, not earlier than one month before the alteration or addition is made, a meeting of the holders of shares of the class in question is held and a resolution consenting to the alteration is passed at the meeting by a majority comprising at least three-quarters of the votes cast.

(2) The provisions of this Ordinance and the articles of the company relating to meetings of a class of shareholders shall apply to a meeting held under the last foregoing subsection, except that the quorum for such a meeting shall be one or more persons present in person or by proxy holding at least one-third of the issued shares of the class in question.

(3) If the company's articles provide for postal voting at general meetings, postal votes may be given at a meeting held under this section.

(4) The memorandum shall be considered as being altered in respect of the rights or obligations attached to a class of shares if—

(a) the words setting them out are altered ; or

{b) the rights are made substantially less advantageous, or the obligations are made substantially more onerous, even though the words stating them are not altered ; or

(c) shares carrying voting rights at general meetings are issued on a capitalisation of profits or reserves to the holders of another class of shares, but not to the holders of the class of shares in question : or

{d) shares of the class in question are issued to the holders of shares of another class on a capitalisation of profits or reserves ; or

(e) the rights or obligations attached to another class of shares are altered or added to in a manner which will or may result in the rights attached to the class of shares in question being substantially less advantageous or the obligations attached to them being substantially more onerous.

(5) This section shall not apply to—

(a)   a class of shares none of which lias been issued ; or

(b)   a class of shares all of which have either been transferred to or redeemed by the company, or are held by the company or by a nominee for it, and none of which have been re-issued.

20.—(1) Subject to the provisions of this Ordinance and to the conditions contained in its memorandum, a company may by special resolution alter its articles.

(2)  Any alteration so made in the articles shall, subject to the provisions of this Ordinance, be as valid as if originally contained therein, and be subject in like manner to alteration by special resolution.

(3)  Section 18(4) shall apply to the alteration of the articles of a company as it applies to an alteration of its memorandum,

21.—(1) Within one month after an alteration of the memorandum or articles has been made, the holders of not less than ten per cent of the company's issued shares, or if it has issued shares of different classes, the holders of not less than ten per cent of the issued shares of any class, may apply to the court to cancel the alteration.

(2)  Within one month after such an alteration has been made the holders of not less than twenty per cent of the company's issued debentures secured by a general floating charge, or if it has issued more than one class of such debentures, the holders of not less than twenty per cent of the issued debentures of any such class, may apply to the court to cancel the alteration.

(3)  An application may be made under either of the two foregoing subsections on behalf of persons who together are entitled to make the applicaton by such one or more of their number as they may appoint in writing for the purpose before the application is made, and such a written appointment may consist of several documents each signed by one or more such persons.

(4)  In determining the number of shares or debentures whose holders may make an application under subsection (1) or (2), no account shall be taken of shares or debentures issued after the alteration of the memorandum or articles is made, and no holder of any such shares or debentures may make or concur in making such an application, or be authorised to make, or authorise any other person to make, such an application by virtue of his holding of any such shares or debentures.

(5)  No shareholder who voted in person or by proxy in favour of an alteration of the company's memorandum or articles, or in favour of the approval of the class of shareholders to which he belongs being given to the alteration, may make an application under subsection (1), or concur in making such an application or be authorised to make, or authorise any other person to make, such an application.

(6)  In determining the number of debentures whose holders may make an application under subsection (2), regard shall be had to the respective principal amounts of the debentures, or if they are redeemable at a premium. to their respective principal amounts plus the highest premium which may be payable on their redemption at any time after the alteration of the memorandum or articles is made ; debentures shall be deemed to belong to different classes if any of the conditions specified in section 69(3) apply.

(7)  An alteration of a company's memorandum or articles shall not take effect until the expiration of one month after it is made, and if an application is made to the court under subsection (1) or (2) during that time, it shall not take effect until the court has confirmed it on each such application.

(8)  On the hearing of an application under subsection (1)  or (2) the court shall cancel the alteration if the applicants satisfy it that the alteration was not authorised by this Ordinance, or did not satisfy the conditions or requirements imposed by this Ordinance at the time the alteration was made.

(9)  On the hearing of an application under subsection (1), the court may cancel the alteration if the applicants satisfy it either—

(a)   that the alteration will operate unfairly or unreasonably to the detriment of the applicants without an adequate compensating advantage being conferred on them ; or

(b)   that the alteration is in respect of the objects of the company, and that the nature, extent or mode of conducting the business which the company has hitherto carried on, or the nature or mode of achieving the purposes which the company has hitherto pursued, will in consequence be so substantially changed that it is not reasonable that the applicants should be constrained to remain shareholders of the company.

(10)  On the hearing of an application under subsection (2)  of this section the court may cancel an alteration if the applicants satisfy it either—

(a)   that the alteration will or may result in a breach of the company's obligations under the debentures held by the applicants or under the debenture trust deed (if any) covering such debentures ; or

(b)   that the alteration is in respect of the objects of the company, and that the nature, extent or mode of conducting the business which the company has hitherto carried on, or the nature or mode of achieving the purposes which the company has hitherto pursued, will in consequence be so substantially changed that the security for the debentures held by the applicants will be substantially and detrimentally affected.

(11) If the court is satisfied that the alteration is objectionable for any of the reasons set out in subsections (9) or (10), it may, instead of cancelling the alteration, confirm it subject to the condition that the company shall acquire the shares or debentures of the applicants in right of which the application is made on payment of the fair market value of such shares or debentures as ascertained by the court, or, if the application is made by the holders of redeemable shares or debentures which the company has the right or is under an obligation to redeem not later than five years after the date of the alteration, on payment of the fair market value of such shares or debentures as ascertained by the court, or the nominal value or principal amount of such shares or debentures plus the highest premium which may be payable on their redemption at any time after the alteration to the memorandum or articles is made, whichever is the greater.

(12)  If the court confirms the alteration subject to the condition mentioned in subsection (II), the alteration shall not be effective until the sum fixed by the court has been paid to the applicants, and if the said sum is not paid within six months after the date of the court's decision, the alteration shall be deemed to have been cancelled by the court.

(13)  If no application to cancel an alteration of the memorandum or articles is made within one month after it is made, or if all such applications are rejected by the court, the validity of the alteration shall not thereafter be questioned in any legal proceedings whatsoever.

(14)  This section, shall not apply to any alteration made to a company's memorandum under section 59 or 63.

(15)  Nothing in this section shall affect the right of any person to make an application to the court under section 136.

22,—(1) A company which has altered its memorandum or article, shall give notice of the date, form and effect of the alteration to the Registrar : —

(a)   if no application is made to the court under section 21, within fifteen days after the expiration of the period for making an application thereunder ; or

(b)   if such an application is made, or if two or more such applications are made, within fifteen days after the drawing up of the order embodying the decision of the court on the last of such applications to be heard, and in that case the notice given to the Registrar shall be accompanied by office copies of the orders made by the court on all such applications.

(2)  If a company makes default in delivering to the Registrar any document required by this section to be delivered to him, the company and every officer of the company who is in default shall be liable to a fine not exceeding one hundred rupees for every day during the first month that the default continues, two hundred and fifty rupees for every day during the next two months that default continues, and five hundred rupees for every day that default continues thereafter.

(3)  This section shall not apply to any alteration of a company's memorandum made under section 59 or 63.

Members and shareholders of companies

23.—(1) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration shall be entered as members in its register of members.

(2)  Every other person who agrees to become a member of a company, and whose name is entered in its register of members, shall be a member of the company.

(3)  The following persons shall be shareholders of the company : —

(a)  a person who is a member of the company under subsection (2);

(b)  a subscriber of the memorandum to whom shares have been issued ;

(c)   the heir or other persons entitled to the shares of a deceased shareholder under his will or on his intestacy, and the trustee in bankruptcy of a bankrupt shareholder ;

(d)   a person who is on his own behalf in possession of a bearer share certificate, whether by himself or by an agent acting for him.

(4)  In this Ordinance references to holders of shares mean the persons who are shareholders in respect of them, and references to holding shares shall be construed accordingly.

(5) In this Ordinance shares shall be considered as having been issued if any person is a shareholder in respect of them.

Proprietary Companies

24.—(I) A company is a proprietary company if—

(a)   the penultimate word of its name is "Proprietary" ;

(b)   it has not more than fifty members, excluding persons who are in the employment of the company (other than directors) and persons who were in the employment of the company (otherwise than as directors) when they became members of the company and have continued to be members of it without interruption since they ceased to be employed by it;

(c)   all its shareholders are members of the company, so however that the heir or other person entitled to the shares of a deceased member under his will or on his intestacy, the trustee in bankruptcy of a bankrupt member and a person in whose favour a transfer of shares has been executed shall not be taken into account for this purpose ;

(d) the company has no preference shares issued and outstanding;

{e) at least three quarters of the issued shares of the company are held by its directors, or if less than three quarters of its issued shares are so held, the company has not more than twenty members ;

(f) all directors of the company are members of it;

(g) none of the members or directors of the company is a corporation, and the company has no holding company.

(2)  If a company is formed as a proprietary company but fails at any time to satisfy all the conditions set out in the foregoing subsection, it shall immediately cease to be a proprietary company, and shall cease to have or use the word "Proprietary" as part of its name.

(3)  If a proprietary company which has ceased to be such a company, or a company which was not formed as a proprietary company, at any time satisfies all the conditions set out in subsection (1) (with the exception of the condition in paragraph {a) of that subsection), it may apply to the Registrar to be treated as a proprietary company, and if the Registrar considers that the company satisfies the said conditions at the date of the application, he shall issue a certificate of incorporation to it in the name it had immediately before the application with the addition of the word "Proprietary" as the penultimate word thereof, and thereupon the company shall become a proprietary company :

Provided that an application may not be made under this subsection if there is subsisting any derivative interest created out of the company's shares or debentures, other than a derivative interest excepted by section 26(1) or (3).

(4)  Subsection (2) of this section shall apply to a company which has become a proprietary company under the last foregoing subsection as from the date of its application to be treated as a proprietary company, but without prejudice to the company again becoming a proprietary company under the last foregoing subsection.

(5)  A proprietary company shall cease to be such a company—

(a)   if the heir or other person entitled to the shares of a deceased member under his will or on his intestacy, or the trustee in bankruptcy of a bankrupt member, or persons deriving title under them respectively, do not become members of the company within nine months after the death of the deceased member or the adjudication in bankruptcy of the bankrupt member, as the case may be ; or

(b)   if the person in whose favour a transfer of shares has been executed, or if two or more such transfers have been executed in respect of the same shares, the person in whose favour the latest transfer has been made, has not become a member of the company within two months after the execution of the transfer or the first of such transfers (as the case may be), unless the transfer or all the transfers (as the case may be) have been cancelled.

(6)  If a company ceases to be a proprietary company under the last foregoing subsection, subsections (3) and (4) shall apply to it, but the Registrar shall not be bound to issue a certificate of incorporation under subsection (3) if he considers that transfers of shares in the company have been made on numerous occasions and have not been registered within the said period of two months in order to conceal from the public the identity of the persons who are or have been substantial shareholders of the company.

(7)  An application under subsection (3) shall be supported by a signed declaration by all the directors of the company that the company satisfies the requirements of that subsection at the date of the declaration, and the Registrar may accept such a declaration as sufficient evidence of the facts stated.

(8)  The cessation of the right to have the word "Proprietary" as part of the name of a company, or the acquisition of that word as part of its name, by virtue of this section shall not be deemed to be a change in the name of the company for the purposes of sections 18 and 22(1) of this Ordinance, but section 18(8) of this Ordinance shall nevertheless apply, and the company shall within fifteen days of such cessation give notice to the Registrar of that fact, the date when the cessation occurred, and the reason for its occurrence.

(9)  A company and any director of the company who is in default shall be guilty of an offence if the company : —

(a)   uses the word "Proprietary" as part of its name when it is not entitled to do so ; or

(b)   applies to the Registrar to be treated as a proprietary company when the conditions mentioned in subsection (1) are not satisfied ; or

(c)   fails to give notice to the Registrar that the word "Proprietary" has ceased to be part of its name in compliance with subsection (8).

(10)  An offence under this section shall be punishable on conviction by a fine not exceeding ten thousand rupees.

(11)  The Mortgage and Registration Ordinance shall not apply to a certificate of incorporation issued under this section.

25.—(1) A proprietary company shall not issue to the public a prospectus or invitation to make deposits with it.

(2) If a proprietary company contravenes the foregoing subsection, it shall immediately cease to be a proprietary company and shall cease to have or use the word "Proprietary" as part of its name, and section 24(3), (4), (7), (8) and (9) of this Ordinance shall apply as though the company had ceased to be a proprietary company under that section,

(3) If a company which has contravened subsection (1) of this section applies to the Registrar to be treated as a proprietary company at any time after the contravention, the Registrar shall not accede to the application unless he is satisfied that the contravention was inadvertent or in consequence of a mistake of fact made in good faith.

(4) A proprietary company which contravenes subsection (1) of this section and its directors who are in default shall be guilty of an offence punishable on conviction by a fine not exceeding ten thousand rupees.

26,—(1) No derivative interest shall be created in shares or debentures of a proprietary company, except—

(a) the interest of a purchaser under a contract of sale which is completed by the vendor executing an instrument of transfer within six months after the date of the contract;

(b) the interests of the heir or other person entitled to the shares or debentures of a deceased holder under his will or on his intestacy ; and

(c) the title or interest of the trustee in bankruptcy of a bankrupt member or debenture holder and the interests of his creditors upon his bankruptcy.

(2)  For the purpose of this Ordinance "derivative interest" means an unregistered transfer, trust, usufruct, mortgage, charge or other security, contract (or option) to purchase or exchange, right of pre-emption, the interest of a person in shares or debentures which are registered in the name of a nominee on his behalf, and the interest of a person- to whom the holder of the shares or debentures has agreed or arranged to pay or transfer the whole or part of the dividends, interest, repayments of capital, principal or premiums, or to transfer or make available distributions of shares, debentures or assets received by him in respect of the shares or debentures in question.

(3)  If a derivative interest other than an interest excepted: from subsection (1) is created or arises in respect of shares or debentures issued by a proprietary company, the company shall immediately cease to be a proprietary company and shall cease to have or use the word "Proprietary" as part of. its name, and section 24(3), (4), (7), (8) and (9) shall aipply as though the company had ceased to be a proprietary company under that section.

27.-(I) The continuing members of a proprietary company shall be entitled to purchase the shares of an outgoing member.

(2) An outgoing member is a member who—

(a) has died or been adjudged bankrupt;

(b) has resigned a directorship of the company ;

(c) has contracted to sell any of his shares ; or

(d) has created a derivative interest in his shares ; and the continuing members are all other members of the company.

3) Upon the occurrence of any of the events specified in subsection (2) of this section, the outgoing member or the heir or other person entitled to his shares on his death under his will or on his intestacy shall notify the secretary of the company of the date and nature of the event, and within seven days after such notification, or if the secretary has not been notified within that time, within seven days after he discovers that the event has occurred, the secretary shall notify the continuing members of the number of shares held by the outgoing member, by the continuing members and by the continuing members who are directors respectively.

(4)  Within three months after the secretary notifies the continuing members of the matters specified in the foregoing subsection, or if he fails to notify any continuing member of those matters within the time limited by that subsection, within four months of the occurrence of the relevant event under subsection (2), any continuing member may by writing addressed to the secretary offer to purchase all or any of the shares of the outgoing member at a price specified therein, but if he fails to make such an offer within the time aforesaid his rights under subsection (1) of this section shall lapse,

(5)  The continuing members who have offered the highest price or the highest sequence of prices for shares equal in the aggregate to the number of shares held by the outgoing member (in this section called "the highest bidders") shall, subject to the next following subsection, be bound and entitled to acquire those shares at the price or prices offered by them respectively, and on paying such price to the secretary, each of them may execute a transfer of the shares which he is entitled to acquire in the name and on behalf of the outgoing member or the heir or other person entitled to the shares on his death or his trustee in bankruptcy (as the case may be).

(6)  Within seven days after the expiration of the period of three months or four months limited by subsection (4) of this section, the secretary shall notify the outgoing member, or his heir or the other person entitled to his shares on his death, or his trustee in bankruptcy (as the case may be) of the offers received by him from the highest bidders (specifying the number of shares which they have respectively offered to purchase and the prices which they have respectively offered for those shares). The outgoing member, or his heir or the other person entitled to his shares on his death, or his trustee in bankruptcy (as the case may be) may within fifteen days thereafter notify the secretary and auditor of the company of his or their unwillingness to transfer the shares of the outgoing member to the highest bidders. In that event the auditor of the company shall within one month after receiving such notification make an estimate of the fair value of the said shares, and if his estimate of their value exceeds the price ov prices offered by any one or more of the highest bidders, subsection (5) shall take effect with the substitution of the value estimated by the auditor for any price bid by a highest bidder which it exceeds. If the auditor's estimate of the value of the said shares does not exceed the price offered by any of the highest bidders, subsection (5) shall take effect as though the outgoing member, or his heir or the other person entitled to his shares on his death, or his trustee in bankruptcy, had not notified the secretary and the auditor of their unwillingness to transfer the said shares to the highest bidders.

(7)  An estimate under the last foregoing subsection shall be made in writing and copies of it shall be sent by the auditor simultaneously to the secretary, the highest bidders and the outgoing member, or his heir or the other person entitled to his shares on his death, or his trustee in bankruptcy (as the case may be). In making his estimate the auditor shall take into account the net value of the company's assets (after deducting its liabilities and contingent and prospective liabilities), its earnings in each of its most recent five complete financial years and its current financial year, the expansion or contraction of the company's undertaking during those five years and the prospect that such expansion or contraction will continue in the future, but the auditor shall not take into account the facts that a purchaser of the shares would acquire them subject to the rights of other members of the company under this section, or that the shares do or do not enable the outgoing member to control the voting at general meetings of the company, or that the shares are not readily saleable.

(8)  If the continuing members offer to acquire less than all the shares of the outgoing member, this section shall apply in respect of the number of shares they offer to acquire, and references in the section to all the continuing members who offer to acquire the shares shall be substituted for references to the highest bidders,

(9)  If two or more highest bidders have offered to acquire shares at the same price, and the number of shares available for them under subsection (5) of this section is less than the total number of shares they have offered to require, this section shall apply as if they had offered to acquire the number of shares available for them, and those shares shall be distributed among them in proportion to the number of shares they have respectively offered to acquire.

(10)  The secretary shall hold any money received under subsection (5) of this section as agent on behalf of the outgoing member or the persons entitled to his shares on his death or his trustee in bankruptcy (as the case may be).

(U) An offence is committed by--

(a)   an outgoing member who does net notify tli.1 secretary in accordance with subsection (3);

(b)   a secretary who does not notify the continuing members in accordance with subsection (3), or the outgoing member, or his heir or the other person entitled to his shares on his death, or his trustee in bankruptcy in accordance with subsection (6);

(c)   an auditor who does not send written copies of his estimate to the secretary, the highest bidders and the outgoing member or his heir or the other person entitled to his shares on his death, or his trustee in bankruptcy, within the period limited by subsection (6).

(12)  An offence under this section shall be punishable on conviction by a fine not exceeding one thousand rupees.

(13)  If the secretary of a company to which this section applies on the death of an outgoing member is unaware of the identity of his heir or of all or some of the persons entitled to his shares on his death under his will or on his intestacy, the secretary may instead of giving notification required by this section to those persons give notifications instead to the Curator of Vacant Estates, and such notifi-tions given to the Curator shall be deemed to be the notifications required by this section.

28.—(1) Any member of a proprietary company may apply to the court for an order that another member shall be expelled from membership of the company.

(2)  An application may be made under this section on any of the following grounds, namely : —

(a)   that the member whose expulsion is sought: —

(i) has been guilty of serious or persistent breaches of the provisions of the memorandum or articles of the company ; or

(ii) has been guilty of conduct seriously detrimental to the interests of the company or its members as a whole ; or

(iii) has an interest or holds a position in another company, corporation, firm or undertaking which is likely to cause him to act to the detriment of the company and to result in substantial harm to it; or

(b)   that the member whose expulsion is sought is a director of the company and :—

(i) has been guilty of serious breaches of duty as such a director ; or

(ii) has been guilty of serious breaches of duty as a director of another company or corporation, or as a partner in a firm ; or

(iii) has been convicted of a criminal offence involving dishonesty.

(3)  If the court in its discretion accedes to the application, the member whose expulsion is sought shall forthwith cease to be a member, and section 27 of this Ordinance shall thereupon apply as though he had become an outgoing member.

(4)  If offers to acquire all the shares of an expelled member are not made within the time limited by section 27(4), the continuing members of the company shall be deemed to have offered to take the shares not bid for at a price equal to their fair value as estimated by the company's auditor under section 27(6) and (7), and the auditor shall

31. No proprietary company may issue bearer share certificates, bearer debentures, or convertible debentures, and any purported issue of such securities shall be void.

32.—(1) Notwithstanding anything contained in sections 27 and 30, two or more members of a proprietary company may lawfully agree that : —

(a)   any one or more of them sh?ll be entitled to require the other or others of them to cast the votes in respect of his or their shares for the reelection of each of the first-mentioned members as a director of the company, or for the payment to each of the first-mentioned members as such directors of agreed remuneration ; or

(b)    on the death or resignation of one or more of them, he or they may nominate one or more other persons (whether members of the company or not) to succeed him or them as a director or directors of the company, and the other parties to the agreement will (if necessary) cast the votes in respect of their shares in the company for the election of each of those persons as a director ; or

(c)   any right of preemption which may become exercisable over the shares of any one or more members shall be exercised so that an agreed price, or not less than an agreed price, is paid in respect of those shares ; or

(d)   on the death or resignation of a directorship of one or more of them, the other or others will not exercise any right of pre-empton over his or their shares, or will not exercise a right of preemption if certain agreed conditions are fulfilled, or unless certain agreed conditions are not fulfilled.

(2) For the purposes of this section price shall be deemed to be an agreed price, and remuneration shall be deemed to be agreed remuneration, if it is either fixed by the agreement or is ascertainable by applying a method of calculation prescribed by it.

(3) If the performance or fulfilment of a contract which is valid under this section would, in the circumstances existing at the time of performance or fulfilment, cause the company of which the parties are members to cease to be a proprietary company, the agreement shall be enforceable only if : —

(a)   the articles of the company do not require its members to abstain from any act whereby the company may cease to be a proprietary company ; QV

(b)   the agreement is authorised or approved by aw ordinary resolution p.-ssed by a general meeting of the company.

Capacity, contracts, authorisation etc.

33.- (1) A company shall, subject to the provisions of section 12, have the same capacity to enter into contracts, incur liabilities, and acquire, hold and dispose of property as an individual of full age who is not under any disability or interdicted, and may sue and be sued in its corporate name.

(2)  The capacity of a company shall not be limited by any provision of its memorandum or articles as to its objects or powers, or as to the powers of its directors or of meetings of its members to act in its name or on its behalf.

(3)  Nothing in this section shall relieve a director or officer of a company from liability to the company for a breach of the provisions of its memorandum or articles, or for entering into transactions unconnected with the promotion or carrying on of the company's business as stated in the memorandum, or the achievement of the purposes there stated, and nothing in this section shall restrict the right of a shareholder to apply to the court under section 136, or to present a petition under section 201, or to present a petition for the winding up of the company.

34.—(1) The directors of a company shall have power to do all acts on its behalf which are necessary for or incidental to the promotion and carrying on of its business as stated in its memorandum, or the achievement of the purposes there stated, and all persons dealing with the company, whether shareholders or not, may act accordingly.

(2)  Each director of a proprietary company and each managing director of any other company shall have power to do the acts mentioned in subsection (1) without the concurrence of any other director.

(3)  Without prejudice to the generality of the foregoing, the directors of a company, each director of a proprietary company and each managing director of any other company shall, subject to any contrary provisions of the memorandum or articles, have power to do the acts specified in the Third Schedule to this Ordinance on behalf of the company.

(4) Nothing in this section shall relieve a director or officer of a company from liability to the company for a breach of the provisions of memorandum or articles, or for entering into transactions unconnected with the promotion or carrying on of the company's business as stated in the memorandum, or the achievement of the purposes there stated ; and nothing in this section shall restrict the right of a shareholder to apply to the court under section 136, or to present a petition under section 201, or to present a petition for the winding up of the company.

35.—(1) Contracts on behalf of a company may be made as follows—

(a)   a contract which, if made between private persons, would be by law required to be in writing, or to be evidenced by writing, or to be signed by the parties to be charged therewith, or by the parties or any party thereto, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied ;

(b)   a contract which if made between private persons would by law be valid although not reduced into writing, may be made orally on behalf of the company by any persons acting under its authority, express or implied.

(2)  A contract made according to this section shall be effectual in law in point of form, and shall bind the company and all other parties thereto.

(3)  A contract made according to this section may be varied or discharged in the same manner in which it is authorised by this section to be made.

36.—(1) A bill of exchange, cheque or promissory note shall be deemed to have been drawn, made, accepted or endorsed on behalf of a company if drawn; made, accepted or endorsed in the name of, or by or on behalf or on account of, the company by any person acting under its authority.

(2) Nothing in this section shall affect section 26(2) of the Bills of Exchange Ordinance, 1959.

37.  A document or proceeding requiring authentication by a company may be signed by a director, secretary, or other authorised officer of the company on its behalf.

38.  A company shall be considered as having notice of any matter if notice of it is given to, or received or obtained by, any director, except a director who obtains such notice for the purpose, or in the course, of committing a breach of duty as a director, or a fraud or wrong upon the company.

39.—(1) A person who deals with the directors of a company, or a director of a proprietary company, or a managing director of any other company, shall not be affected by any irregularity of procedure in connection with the authorisation of the transaction by a general meeting or other meeting of shareholders, or by the directors or any committee of directors, or the non-fulfilment of any condition imposed by the memorandum or articles in connection with the transaction.

(2)  A person who deals with another person who is represented by the directors, or by a director of a proprietary company, or by a managing director of any other company, as having authority to act on the company's behalf in connection with any transaction, may treat the company as bound by the acts of that person done within his apparent authority, even though he has not been authorised by the company to do those acts on its behalf.

(3)  This section shall not entitle anyone to recover a debt from a company, or to enforce any liability against it, or to treat a transaction as binding on it, if in connection with the same matter he has been guilty of a fraud upon the company, or has participated or acquiesced in a fraud committed upon it.