Memorandum subscription liability: shares listed opposite a subscriber's name attract call liability without formal allotment, while pre-suit interest was denied.
A subscriber to a company's memorandum incurs liability for the shares entered opposite his name without any further allotment, because subscription itself fastens the obligation for calls. An alleged surrender of shares does not extinguish that liability where it is not supported by lawful reduction-of-capital machinery, and an informal release is void. A call is not invalid merely because the resolution later fixes the time and place of payment, and a winding-up declaration is valid if verified as required by statute. Pre-suit interest on unpaid call money was disallowed because no contractual, statutory, or customary basis for a rate had been established.
Issues: (i) Whether a subscriber to the memorandum was liable for calls without a formal allotment of shares; (ii) whether an alleged surrender and acceptance of the shares could extinguish liability; (iii) whether the impugned call and winding-up proceedings were invalid for want of compliance with the Act; and (iv) whether interest on the unpaid call money was recoverable.
Issue (i): Whether a subscriber to the memorandum was liable for calls without a formal allotment of shares.
Analysis: A subscriber to a memorandum of association is treated by the statutory scheme as having agreed to take the shares written opposite his name. The certificate of incorporation is conclusive evidence that the requirements precedent to registration were complied with, and the memorandum itself recorded the number of shares opposite the subscriber's name. On that footing, liability arose by subscription, and no separate allotment was required to fasten liability for calls on the subscriber.
Conclusion: The liability for the call money was upheld against the appellant.
Issue (ii): Whether an alleged surrender and acceptance of the shares could extinguish liability.
Analysis: The evidence did not establish a valid surrender or acceptance. In any event, a surrender of shares which releases the shareholder from liability and reduces uncalled capital is not permissible except in accordance with the law relating to reduction of capital. An informal release of that kind is ultra vires and void unless brought within the statutory machinery for reduction or forfeiture.
Conclusion: The alleged surrender did not extinguish the liability, and the appellant could not rely on it.
Issue (iii): Whether the impugned call and winding-up proceedings were invalid for want of compliance with the Act.
Analysis: The objection to the call failed because the time and place of payment need not necessarily be fixed in the resolution itself if they are appointed subsequently. The challenge to the winding-up proceedings also failed because the declaration under the winding-up provision was verified by affidavit, and the statute did not require an affidavit by each director who signed the declaration.
Conclusion: The call and the winding-up proceedings were held valid.
Issue (iv): Whether interest on the unpaid call money was recoverable.
Analysis: Although the articles permitted interest up to 12 per cent per annum, the directors had not fixed any rate in the particular instance. Interest prior to suit is recoverable only under contract, statute, or usage having the force of law, and none was established on the facts. The contractual foundation was incomplete because no rate had been determined as contemplated by the articles.
Conclusion: The decree for interest up to the date of suit was set aside.
Final Conclusion: The appeal succeeded only to the limited extent of disallowing pre-suit interest, while the decree for the principal call money was maintained.
Ratio Decidendi: A subscriber to a company's memorandum incurs liability for the shares set opposite his name without any further allotment, and an informal surrender of shares that amounts to an unapproved reduction of capital is void.
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