32

SECRETARIAL PRACTICE
to the effect that no receipt will be issued for the application
money; the receipt being provided in the allotment letter
or letter of regret. "No form of application can lawfully be
issued unless accompanied by a prospectus complying with
s. 35, except (I) in connection with a bond fide invitation to
underwrite, (2) in relation to shares or debentures not offered
to the public [s. 35 (3)],—as to meaning of public, see p. 44—
and (3) having regard to s. 35 (5) where the offer is made to
existing shareholders or debenture holders of the company
concerned. The effect of s. 35 (3) is clearly to make the issue
of an application form with the usual abridged prospectus
published in the newspapers. illegal; and a breach of the
subsection involves liability to a penalty of £500 for each
breach; semble, every issue of a form is a separate breach.

As appears above, the prohibition does not apply to
forms of application for private subscriptions, but great care
will be necessary to make sure that the invitation cannot
be construed as an invitation to the public. This sub-
section, unlike the corresponding section applicable to foreign
companies [s. 354 (1) (b)] does not contain the words ‘or an
intended company,” but having regard to s. 35 (1) it will
probably be construed as applying to forms of application for
shares in an intended company and to forms of application
for the purchase of shares as well as to forms of application
to subscribe for shares.

In Appendix F will be found the following application
forms: —

No. 8. Application for bonds or stock.

No. 9. Application for shares, where no receipt for ap-

plication money is issued.

No. 10. Application for shares, with receipt for application

money attached.

All the above forms refer to the prospectus and embody
its terms and conditions. as part of the contract. Nos. g and
10 also refer to the memorandum and articles, the terms and
conditions of which are also expressly embodied in the
contract. The applicant, however, when registered as a
member, would necessarily become bound by them. No. 8
does not refer to the memorandum and articles. The bond-
holder, or debenture stock holder, will be a creditor and
not a member of the company. None the less the memoran-
dum and articles are public documents, and he is fixed with
knowledge of their contents.

On receipt of the applications, the secretary will have a
series of application and allotment sheets prepared by. his