trustee or agent for or on behalf of them or any of them, and whether such contract be entered into with the promoters or directors or any of them or any other person whomsoever within two years before the issue of such prospectus whether subject to adoption by the directors of the company or otherwise, and shall also state a place where such contract if in writing may be inspected, which place must be the registered office of the company, if that is yet organized, provided that this subdivision of this section shall not apply to a contract entered into by the company after its incorporation in the ordinary course of the business carried on by the company, unless stock or bonds are issued or to be issued as a consideration;

3. The contents of the articles of incorporation, if any, with the names and addresses of the subscribers thereto and the number of shares subscribed for by them respectively, together with the number of shares fixed as the qualification of a director;

4. The consideration paid or to be paid, and if so, how and when, for any property purchased or acquired or to be purchased or acquired by the company and from whom and when purchased or acquired, with a brief description of the nature of the property and its location if physical property, and whether any part and if so, how much of such consideration money is for good will;

5. The amount, if any, payable as commission, bonus, or reward for subscribing or agreeing to subscribe or procuring or agreeing to procure subscriptions for or for underwriting or guaranteeing the sale of any shares in the company or the rate of any such commission;

6. The minimum subscription upon which the directors will allot the shares subscribed, and begin business;

7. The minimum amount payable on application and allotment on each share;

8. The number and amount of shares issued or agreed to be issued as fully or partly paid up otherwise than in money, and in the latter case the extent to which they are so paid up, and in either case the consideration for which and the person or persons to whom such shares have been issued or are proposed or intended to be issued;

9. The names and addresses of the vendors of any property purchased or acquired by the company or to be so purchased or acquired, which is to be paid for wholly or partly out of the proceeds of the issue offered for subscription by the prospectus or the purchase or acquisition of which has not been completed at the date of publication of the prospectus and where there is more than one vendor or the company is a sub-purchaser, the amount payable in money or shares to each vendor;

10. The amount or estimated amount of preliminary

expenses;

11. The amount paid or intended to be paid in cash or shares or otherwise, to or for any promoter and the consideration therefor;

12. The amount intended to be reserved for working capital; 13. The proposed application of the proceeds of the issue of the shares; and

14. The names and addresses of the auditors or intended auditors, if any, of the company.

A prospectus which does not comply with the preceding section shall be deemed to be fraudulent on the part of the responsible parties knowingly issuing the same.*

Every person taking shares on the faith of such prospectus unless he had actual notice of the particulars omitted from the prospectus shall, in addition to any other remedy he may have, be entitled to sue for rescission of his contract to take shares.

*Parties are fully defined in bill.

In the event of non-compliance with any of the requirements of this act with respect to a prospectus, any person aggrieved shall be entitled to compensation from any person knowingly issuing the same, unless in ways enumerated in the act he can fully exonerate himself. Provisions are fully made also to prevent fraud through the acts of irresponsible persons acting as virtual agents.

For the purpose of this act every contract and fact is material which would influence the judgment of a prudent investor in determining whether he would subscribe for the shares offered by the prospectus.

Any condition requiring an applicant for shares to waive, and any agreement to waive, due compliance with this act or purporting to affect him with notice of any document or matter not specifically referred to in the prospectus shall be void.

Every promoter is in a fiduciary relation toward a company which he is engaged in promoting, and consequently he must make full disclosure as provided in the bill of his relations to and dealings with the company.

Balance-Sheet*

Every company and the directors and managers thereof1. Shall cause to be kept proper books of account in which shall be kept full, true, and complete accounts of the affairs and transactions of the company, and

2. Shall once at least in each year cause the accounts of the company to be balanced and a balance-sheet in this act referred to as the shareholders' balance-sheet to be prepared, which balance-sheet after being duly audited shall be

*It will be observed that this balance-sheet is not published, but is given to the shareholders. Of course, in the case of large companies whose stocks are on the stock market, this is equivalent to publication; while a small private corporation with but few members would be able to confine knowledge of its affairs to its few stockholders and the proper officers of the state.

laid before the members of the company in next general meeting; and

3. Shall cause a copy of such shareholders' balance-sheet so audited to be sent to the registered address of every member of the company at least seven days before the meeting at which it is to be laid before the members of the company and a copy to be deposited at the registered office of the company for the inspection of the members of the company during a period of at least seven days before that meeting, and every shareholder in the company or any person acting in his behalf shall be entitled to other copies thereof on payment of twenty-five cents each.

The shareholders' balance-sheet shall be in such form as is directed by the certificate of incorporation or the by-laws or by a resolution of the company and shall show in every

case

1. The amount of share capital authorized, the amount issued, and the amount paid up thereon, distinguishing the amount of share capital paid up in money and the amount paid otherwise than in money, with statement of nature of the consideration and the arrears of calls due, and the specific amounts issued during the two years next preceding;

2. The amount of debts due by the company, specifying the security if any, allocated for each debt and distinguishing the amount of mortgages, debentures, and floating charges against the general assets of the company, the amount of the reserve fund, if any, and the amount of any contingent liabilities;

3. The amount of all current assets, after making a proper deduction for debts considered to be bad or doubtful; any debts due from directors or other officers to be separately stated;

4. Whether the assets other than debts due to the company are taken at cost price or by valuation, or on what other

basis they are reckoned, and whether any and if so what amount of percentage has been written off and what other provision, if any, has been made for depreciation;

5. The gross amount of the year's earnings, the deductions made from the same for fixed charges of interest and taxes and the surplus, if any, available for dividends;

6. The amount by which the gross value of the assets of the company has been increased since the last balance-sheet in consequence of any increase in the valuation of real or personal property belonging to the company;

7. The amount of property, if any, for which shares were issued, which has been sold since the last report with a full disclosure of the consideration therefor in detail, the parties to the contract, and the real parties in interest.

The shareholders' balance-sheet shall be accompanied by a certificate signed by two or more of the directors on behalf of the board stating that in their opinion the balance-sheet is drawn up so as to exhibit a correct view of the state of the company's affairs and that in their opinion the statement is

correct.

A copy of the balance-sheet shall be sent to each director at least ten days before the annual meeting, and unless he formally at or before the meeting makes statement to the contrary, he shall be held to have also signed the report.

Duties of Auditors

The auditors of every company are to give detailed reports prescribed in the Act.

If the auditors or any one of them think there is just cause to disapprove of any part of the said accounts presented to the members of the company, they or any one of them may disallow any part of the said accounts so disapproved of and shall report their or his disapproval in writing on the accounts and balance-sheet.