16

SECRETARIAL PRACTICE
minimum subscription as a condition precedent to allotment
and in. insisting that a company should not commence
business unless shares held subject to the payment of the
whole amount thereof in cash had been allotted to an amount
not less than the minimum subscription was presumably to
ensure that a company should have adequate means for its
intended operations; but as under that Act the minimum
subscription could be fixed at seven shares, that object was not
necessarily attained. The Companies Act, 1928 (see s. 35),
altered the law in this respect and now (under s. 39 of the
Companies Act, 1929), before any allotment is made of any
share capital offered to the public for subscription there
must have been subscribed—
(a) the amount stated in the prospectus as the minimum
amount which in the opinion of the directors must be
raised by the issue of share capital to provide for

(i) the purchase price of any property purchased or
to be purchased which is to be defrayed in whole
or in part out of the proceeds of the issue.

(ii) any preliminary expenses or underwriting com-
mission payable by the company.

(iii) the repayment of any moneys borrowed by the
company in respect of any of the foregoing
matters, and

(iv) working capital,

and (b) the sum payable on application for the amount so stated
must have been paid to and received by the company.

The amount so stated must be reckoned exclusively

of any amount payable otherwise than in cash, and

is referred to in the Act as the minimum subscription.

Under the old law a sum paid by cheque could not be

treated as paid to and received by the company until

the cheque had been cleared [Mears v. Western Canada

Co. (1905), 2 Ch. 353], but under s. 39 a sum is to be

deemed to have been paid to and received by the

Company if a cheque for that sum has been received by

the Company in good faith and the directors have no

reason for suspecting that the cheque will not be paid.

The amount payable on application in respect of each

share must not be less than five per cent. of the nominal

amount of the share.

5. The allotment having been made, every director must,

unless he has already done so, pay to the company on each
of the shares taken or contracted to be taken by him, and for