#

SECRETARIAL PRACTICE
Every prospectus relating to the issue of the shares and
every balance sheet issued subsequently to the issue at a
discount must contain particulars of the discount allowed,
or so much thereof as has not been written off [s. 47 (3)],
and every annual return subsequent to the issue must contain
particulars of the discount so far as not written off [s. 108 (3)].

Debentures may be issued ‘at a discount, unless the pro-
visions of the memorandum or articles of association prevent
it [re Compagnie Générale, Campbell's Case (1876), 4 Ch. D.
470; Webb v. Shropshire Railways Co. (1893), 3 Ch. 307].
But where debentures issued at a discount are exchangeable
for fully-paid shares this may involve the issue of shares at
a discount and such an issue of debentures would be illegal
Mosely v. Koffyfontein Mines (1904), 2 Ch. 108].

Any discount or commission paid for placing debentures
must be disclosed in a prospectus (s. 35 and the fourth schedule)
or statement in lieu (s. 39 and the fifth schedule), and must
appear in the Annual Summary (s. 108), and particulars
must be given on registration of the debenture [s. 79 (9)].
Moreover, any such discount not written off must be stated
in the balance sheet (s.44).

The previously existing power of a company to pay
brokerage is reserved by the Act [s. 43 (3)]. The power had
been recognised in Metropolitan Coal Association v. Scrimgeour
(1895), 2 Q.B. 604), where 2} per cent. was paid. The basis
of the decision in the case quoted was that 21 per cent. was
a reasonable remuneration for the work done by the brokers
in placing shares. The decision is limited to work done by
stockbrokers, but there appears to be no reason why similar
brokerage should not be paid to any person or company who
bond fide renders similar services.

Commissions may be paid to individuals on the issue of
specific shares, subject, of course, to the provisions of s. 43;
but more commonly they are paid upon a large number of
shares being underwritten. ‘An ‘“‘underwriting” agreement
means an agreement entered into before the shares are
brought before the public, that in the event of the public
not taking up the whole of them, or the number mentioned
in the agreement, the underwriter will, for an agreed com-
mission, take an allotment of such part of the shares as the
public has not applied for’ [per Cotton L.J., in Licensed
Victuallers’ Association (1889), 42 Ch. D. 1, at p. 6]. The
object of underwriting is thus to insure the subscription of
the issue.

The terms of underwriting are now usually embodied in a
definite agreement, but sometimes the agreement takes the