7th May.
Hongkong Land Investment and Agency Compiny, Limited, is in the unpleasant predicament of having too much money. As long as the boom lasted, there appeared to be directions in which its large funds could be utilised, but the bubble has burst, enterprise has shrunk up for the present, and the best it can do with its big cash balance is to deposit it with the Hongkong Bank at a bare five per cent. The shareholders are not likely to be pleased with the result of such an operation as that, and the directors accordingly have been casting about for a wider field in which to employ the Company's funds. Unfortunately the Memorandum of Association of the company only allows it to transact business in the Colony of Hongkong and its dependencies, and before the company can employ its funds outside Hongkong, this Memoandum must be varied; and this the company proposed to do by means of fan ordinance, which duly passed the Legislative Council on the 9th of April. Before this ordinance was approved by the Acting Governor, a protest appeared in the Hongkong papers from Mr. J. J. Francis, Q.C., in the form of a letter to the Acting-Governor asking him to disallow the ordinance.
Mr. Francis, whose protest gains additional weight from his being a shareholder in the company, gives several reasons why the ordinance should be disallowed, and he summonses his reasons at the end of his letter, The first is that the managing directors of the company, Messrs. Keswick and Chater, both members of the Legislative Council, introduced the ordinance into the Council without the authority of the shareholders as a body. Mr. Francis does not doubt that they consulted the influential shareholders in Hongkong, and obtained a sutticient number of assents, but they did not take the sense of the members of the company generally in any form, The shareholders unquestionably have ful! confidence in their managing directors, who are irremoveable, but Mr. Francis holds that they ought to have been consulted, and he is evidently not satisfied with the last clause of the bill, "This ordinance shall not take effect unless and until it shall be made to appear to the satisfaction of the Governor that the Company in meeting has by special resolution. approved of the same, such is faction to be evidenced by notification or proclamation under the hand of-the Governor in the Gazette." The next four reasons are so interwoven that it is more convenient to take them together. They come to this; that if the capital of the company is too large, it should be reduced and the superfluous part of it paid back to the shareholders, who would be very glad to get it; if however, the shareholders prefer to widen the Company's sphere of operations, the proper process is reconstruction by wind ing up the present company, either voluntarily or by ordinance, and starting anew one. "Reconstruction under the Companies' acts and ordinances," says Mr. Francis, "is easy and simple and this is an answer to Mr. Keswick's statement in the Legislative Council that "there was another course which the company might have adopted, namely, that of winding up and registering as a mew company, but that course is so cumbrous as to be considered undesirable." Mr. Francis, however, writes that "the real objection to reconstruction is probably that most people interested in the company would like to see its capital reduced and its constitution altered, or the thing wound up." Against this we may be fairly sure that Messrs. Keswick and Chater would not have introduced an ordinance which- could not come ~into force without the assent of the shareholders, unless they were convinced that that assent would be given, Coming to Mr. Francis' sixth reason, it is that: " even if it be desirable to extend the powers of the company, the extension sought for is far too wide and unlimited," which is obviously only a personal opinion. Tt may turn out well or ill to extend the company's operations to other ports and places, but as to this the shareholders would still be in the hands of the managing directors, and would have to trust them as they do al. The seventh objection is that the ordinance is in direct violation of existing imperial and local law on the subject of companies. At present a Memorandum of Association—the shareholders' charter, which is therefore generally made as vague and comprehensive as possible—"can never, in its essentials, be varied or altered even with the assent and good will of every member of the company." The Articles of Association prescribe the means by which the objects of the Memorandum of Association are to be carried into effect, and they can be altered or amended, if the proper steps are taken, but no consent can alter the Memorandum itself, which, as we have said before, is the shareholder's charter. On the faith of that he subscribes his money, and though the law allows a great deal to a majority, it will not allow the smallest shareholder to be deprived of the protection of the Memorandum, which, in the words' of Lord Cairns, quoted by Mr. Francis, "states affirmatively the ambit and extent of vitality and power which by law are given to the Corporation, and negatively that nothing shall be done beyond that ambit ani that no attempt aa be made to than that "Thich is there Specified." use the corporate life for any purpose
The subject is such an important one to every mercantile community that we propose to devote another article to it, in which we shall consider the opinion on Mr. Francis's protest, which the directors of the company in question were fortunate enough to be able to obtain promptly from Mr. Drummond, who was in Hongkong at the time. Meanwhile we reprint in another column, and direct our readers' attention to, the report of the Select Committee of Parliament on the subject of private bills altering memorandums of association of public companies.
Text read from the printed page and cleaned; old type leaves the occasional error.