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Colonial Cases

Bank of China v. Lepissier, 1894

[company law]

Bank of China v. Lepissier

French Consular Court, Shanghai
Source: North China Herald, 27 April, 1894

WE have already referred briefly to the judgment given by the French Consular Court here in the case in which the Bank of China, etc., sued M. Lepissier for the amount of the unpaid call on shares registered in his name.  When it was known that the Court had found in favour of M. Lepissier, there was a general feeling that though the finding might be legally right it was totally wrong, as a shareholder who would take a dividend if things went well with the Bank should be prepared to pay a call if things went badly; particularly as in becoming a shareholder he agreed to be bound by the Bank's Articles of Association. It was farther felt that this was a very important decision to all local companies which have shareholders of all nationalities, agreeing to be bound by English law, but apparently able to get out of this engagement by the agency of the French Consular Court.  It is not to be supposed, however, prima facie, that a Court consisting of M. G. Dubail, as President, and Messrs. Oriou and Vouillement as Assessors, would give such a seemingly unjust decision unless the law compelled them to; and it is therefore worth while to examine the judgment in this case a little more in detail.
  After stating who the plaintiff and defendant are, it is mentioned that the defendant, M. Lepissier, subscribed originally for 15 shares in the Bank, and when the capital was doubled for another 15 shares. Becoming dissatisfied with the way the business of the Bank was carried on, he determined to sell his shares, which he did in June, 1892, and received a note from the Hongkong and Shanghai Bank telling him that the sum of Tls. 147.81 had been carried to his credit as a result of the sale. It is added that the nominal value of each share was £10, of which £1 5s. was paid up, so that the shares were subject to further calls; and that every transfer of a share must be signed by the transferor and the transferee, and the transferor would be treated as the proprietor until the name of the transferee was registered in the transfer book; and that no transfer of a share not fully paid up, or subject to claim, could be made without the consent of the Directors. It is then mentioned that a call was made last year payable on the 1st of November last, and that M. Lepissier refused to pay his quota on the ground that he was not a shareholder.
  The Bank therefore pleads:-
  That M. Lepissier is registered in the books of the Bank as holding 30 shares allotted to him on applications signed by him in which he undertook to be subject to the Bank's statutes.
  That the Bank has no knowledge of M. Lepissier having sold his shares, nor who is the transferee, because no transfer has been made in the registers, which is against the Bank's statutes, and it was not until the call was made that the defendant said that he had sold his shares, which he had no right to do without the approval of the Board.
  That M. Lepissier could not prove that he had ever asked for his shares to be transferred, and is therefore still the responsible proprietor, with recourse against his transferee.
  On his side M. Lepissier contends:-
  That the Bank of China, etc., be nonsuited on the ground that it is not in conformity with French law, inasmuch as one-fourth of the capital is not paid up, and no meeting of the Shanghai shareholders has ever been called:
  Seeing that the affairs of the Bank are in a lamentable condition, its funds having been spent even before they are called, so that the call is not in the shareholders' interest;
  That while the ordinary shares are worth nothing, founders' shares are quoted at 2,000 per cent premium, owing to the dividend of Tls. 35 a share paid on them;
  That the defendant is no longer a shareholder having sold his shares and got the money in June, 1892, and cannot be called upon to pay another man's debt;
  That the obligation to have transfers registered is only intended to prevent fictitious sales and the putting forward of men of straw; and there is only the Bank's evidence that M. Lepissier is still registered as a shareholder, as the transfer book is in its control, and it may be its fault that the defendant's name is still on the register.
  The above is practically M. Lepissier's defence and the Court finds after due consideration of his defence and of the documents for which it asked:-
  That the constitution of the Bank is not in conformity with French law, which requires one-fourth of the capital to be paid up;
  That the Balance Sheet of the Bank dated the 30th December, 1893, shows assets in silver valued at $1,394,546, which are taken at 3s to the dollar and 1s. 4 ¾ to the rupee, while the actual rates at that date were 2s 3d to the dollar, and 1s 3 1/32 to the rupee or 25 per cent for the dollar and 10 ¼ per cent for the rupee below the valuation in the Balance Sheet;
That, to come down to practical facts, the amount of the assets already mentioned would have to be diminished by about 18 per cent or approximately £250,000 Sterling, and if the amount at debit of Profit and Loss is added, the total loss, more than £366,000 sterling, exceeds the paid-up capital, which only amounts altogether to £278,371 sterling;
  That there has been, owing to the depreciation of silver, a farther heavy fall since the 30th of December; and that the defendant is justified in refusing to pay a call as long as a Balance Sheet is not drawn up based on the real valuation of the assets.
  The Court nonsuits the Bank and orders it to pay the costs of the action.
  The judgment, it will be seen, does not go so far as has been represented; it does not attempt to decide whether M. Lepissier is still a shareholder or not, nor does it say that M. Lepissier could not be made to pay his calls, if the Bank were properly constituted. It exonerates M. Lepissier on the ground that the Bank is not properly constituted, and that it does not come into Court with clean hands itself. The decision is no doubt in accordance with French law; and it is a very valuable one, because there are a number of insurance companies which have less than one-fourth of their capital paid up, and which are therefore not in conformity with French law, and could not, apparently, successfully sue their French shareholders if they have any.


Source: North China Herald, 29 June, 1894

  The following is Article 1 in the Convention dated 30th April, 1862, between Great Britain and France relative to Joint Stock Companies, which was relied on in the Judgment of the French Consular Court at Shanghai in the case brought by the Bank of China. It was published in the Government Gazette of 26th July, 1862:
Convention between Her Majesty and the Emperor of the French, relative to Joint Stock Companies.
  Signed at Paris, 30th April, 1862.
  Ratifications exchanged at Paris, 15th May, 1862.
  Her Majesty the Queen of the United Kingdom of Great Britain and Ireland, and his Majesty the Emperor of the French, having judged it expedient to come to an understanding in order to define, within their respective dominions and possessions, the position of commercial, industrial and financial companies  and associations constituted and authorised in conformity with the law in force in either of the two countries, have resolved to conclude a Convention for that purpose, and have named as their plenipotentiaries, that is to say .  .  .  .  
  The high contracting parties declare that they mutually grant to all companies and other associations, commercial, industrial, or financial, constituted as authorised in conformity with the laws in force in either of the two countries, the power of exercising all their rights, and of appearing before the Tribunals, whether for the purpose of bringing an action, or for defending the same, throughout the dominions and possessions of the other Power, subject to the sole condition of conforming to the laws of such dominions  and possessions. .  .  .   [Signed.]

Published by Centre for Comparative Law, History and Governance at Macquarie Law School