PROXY PAPERS ILLEGAL.

Dunstan Times, Issue 1283, 1 October 1886, Page 1

PROXY PAPERS ILLEGAL.

IMPORTANT TO JOINT STOCK COMPANIES. A decision of much importance to shareholders and secretaries of limited companies, which will doubtless inter* fere considerably with the manage* ment of some concerns, was recently given in the London Courts by Mr Justice Kay, an equity lawyer of eminence. The action was brought to determine the legality of certain pay* ments made by the directors of the Army and Navy Co-operative Society Limited, and amongst those payments was one of LI 20 being the cost of stamped forms of proxy which the directors had issued, with the names of their own nominees filled in as proposed proxies. This, as all who are interested in joint stock companies know, is a common practice with directors ; but it is one which leads to serious abuses, and it is satisfactory to find that it has now in the most emphatic way, been dea dared illegal. The following is a verbatim report of Mr Justice Kay’s judgement, with which every shareholder in such institutions as those referred to should be acquainted “It appears there are a large number of shareholders in the Society, amounting to between 15,000 and 16,000. It has been the practice of the directors to send to each of these shareholders before the general meeting a printed form of proxy, impressed with a penny, stamp and also with a half-penny postage stamp, so that each share* holder who did not attend the meeting might, if he pleased, sign and return the proxy without any expense to himself. These proxy papers were printed and posted, and all the expenses of printing, posting, and stamping them have been from time to time paid out of the funds of the Company, Some of them which have not been used have been returned, and the price of the stamps in such cases has been reco* vered from Somerset House; but if used, or if unused and not returned, of course the stamps have been paid for by the Company. The form of proxy contains the names of several directors, any of whom might act as proxy for the person signing in the order in which they were named, there was no indication on the face of the proxy that any other name might be inserted, and the form authorised the parties to whom it was given to vote as proxy at the particular meeting, and at any adjournment thereof, as also at any poll directed at such meeting or adjournment. It was obvious that such a course of proceedings would practically give the directors power to determine in such manner as they might think fit any questions that might arise at such meeting. Occasionally, it is said, the proxy papers were altered by the insertion by the shareholder of a dif* ferent name; but the average attendance at the meetings was only about 110 members, and no doubt the majority of proxies filled up would appoint the directors named in them, and would be sufficient in number to determine any disputed question that might arise. Now, I confess, without hesitation, my opinion that this is an improper mode of proceeding. The directors have no right to employ the funds - of the Company to get into their own hands the majority of the voting power. It is said that this is sanctioned by the proceedings of other joint stock companies. The attempt to prove this has completely broken down, but everyone famTiav with the proceedings of public com* panies must know from his own observation that it is too often done, and I do not think it is a proceeding which any existing custom can sanction. If the question were put broadly, is it intra vires to use the funds of the Company to induce shareholders to appoint the directors their proxies 1 I conceive that no one can hesitate to answer that question in the negative. It may seem to be a very small thing in the case of each individual shareholder, but the sending out of 10,000 or 15,000 such circulars requires a substantial sura of money. The mere stamp on 15,000 proxies with the half-penny return stamp amounts to L 93 ss, and the question involved seems to me much more important than the mere money consideration. Suoh a proceeding as that, I do not hesitate to say, is a misapplication of the funds beyond the power of a general meeting to sanction. I have not to deal with the case of proxies sent out with a blank to bo filled up by the shareholders with the name of the person who is to use them; but even in that case t do not think it would be right to pay the stamp on the proxy or the postage for the return of for rest xsf News see Fourth Paige.