Company Cases
2025-03-10
A company in voluntary liquidation owed £501 in respect of purchase tax. An offer of 17s. 6d. in the & was made by a nominee of the directors to all the trade creditors and the Commissioners of Customs and Excise. The latter refused this offer, and proceeded to levy distress for the amount owing in respect of purchase tax. The liquidators applied to the court for an order staying the distress:-
HELD: there were no special circumstances which would justify the court in allowing the distress to proceed, it being admitted that the purchase tax was not an assessed tax to which preference was given by the Companies Act, 1929, s. 264.
EDITORIAL NOTE. In the case of a compulsory winding up, the Companies Act, 1929, s. 174 now makes it impossible for a creditor to levy a distress or execution on the goods of the company. The position is that the goods of the company are theoretically in the custody of an officer of the court and no interference with his custody and possession can be allowed. A voluntary winding up, on the other hand, is purely a domestic affair of the company and there is no theoretical reason why a creditor to whom the remedy of distress or execution is available should not exercise that remedy. There is, however, a practical reason why these remedies should be at least controlled by the court, for the purpose of the winding up, whether compulsory or voluntary, is the equitable distribution of the assets of the company among the creditors. When a distress is levied against the goods of a company in voluntary liquidation, the liquidator can always apply to the court to stay the distress, and he is entitled to an order unless the creditor can show that there are special circumstances justifying his proceeding with the distress. It should be noted that it was agreed that the purchase tax was not an assessed tax within the Companies Act, 1929, s. 264, and thus a preferential debt.
Ref: 3 All ENG L.R (1941) -471
2025-03-08
The company owed three of its creditors (amongst whom were two of its directors) sums amounting to £900. On Apr. 1, 1940, at which time the company was insolvent, a debenture for £900, secured by a floating charge, was issued to one Z., who was in fact merely the nominee of one of the creditors. The debenture money was paid into the bank on Apr. 12, and on the same day the company paid these creditors sums exceeding £900 owing to them by the company. On May 3, a petition was presented for the winding up of the company, and the liquidator, pursuant to the Companies Act, 1929, s. 266, claimed that the charge created by the debenture was invalid, on the ground that cash was not paid to the company:-
HELD: the transaction, though in form a payment of cash to the company, was not one in substance. The company merely acted as a conduit pipe to give these unsecured creditors a preference, and the charge was, therefore, invalid.
EDITORIAL NOTE. The test in such a case as this is whether the transaction. is bona fide for the benefit of the company or merely for the benefit of certain creditors to the prejudice of others. The matter is perhaps of more importance than may at first appear, since, when a company is in difficulties, someone can often be found to help a company for the time being if his position can be secured and it is certain that any security he may take will not be held to be invalid by the court.
Ref: 1 All ENG L.R (1941) -545
2025-03-06
On Mar. 24. 1938, the directors of a company made a declaration of solvency under the Companies Act, 1920, n. 230. On Mar. 28, 1938, they passed a resolution that the company should be wound up voluntarily and appointed H. as liquidator. If. carried on the business of the company until May 8, 1939, when an order was made for the com pulsory winding up of the company and a new liquidator appointed. The assets of the company were then realized, and the liquidator asked for the direction of the court as to the order in which the creditors should be paid. At the date of the resolution for voluntary winding up, there were a number of creditors of the company and to most of these H. had paid dividend amounting to 10s. in the £. In carrying on the business of the company, H. had incurred debts which he had not discharged. There were also the costs and expenses of the liquidation, the remuneration of the liquidator, and the costs of the present proceedings. The sum realized was only sufficient to meet a fraction of these items
HELD: n the circumstances, although his judgment had been falsified by the events, H. had reasonably formed the view that it was necessary for the beneficial winding up of the company to carry on the business as he did, and he was, therefore, entitled to his proper remuneration, and the debts incurred in so carrying on the business must be paid in priority to those incurred before the commencement of the voluntary liquidation.
EDITORIAL NOTE. The contest in the present case is between the two classmen of creditors, those whose debts were incurred before the voluntary liquidation and those whose debts were incurred by the liquidator in carrying on the business of E the company. The priority of the latter is held to depend solely upon whether, as a matter of fact, the continuance of the business of the company was for the beneficiate winding up and, therefore, in the interests of the creditors generally. The decision upon this matter of fact is, of course, extremely difficult in the peculiar circumstances of this case, since the period covered is that immediately before the outbreak of war; but, once that question is decided, it is held that the priorities of the creditors F necessarily follows.
Ref: 1 All ENG L.R (1941) -409
2025-03-04
The respondent was the director of a company incorporated under the Companies Act, 1929. The directorship and the whole of the government of the company were in England. The respondent was resident in the United States, and had so been for many years. At no material time was the respondent ever in England, but he devoted his time to furthering the interests of the company in North America. The respondent received remuneration as provided by the company's articles, and it was paid to him as a director without any reference to the particular tasks he performed in North America, in respect of which he received no additional remuneration. It was held by the general commissioners that the respondent was chargeable to income tax upon his remuneration as a director under the provisions of Sched. Providing that tax shall be charged in respect of every public office or employment of profit:-
HELD: (i) a director of a public company is the holder of a public office.
(ii) the company of which the respondent was a director was an English company, and the duties upon him by law were to be exercised D in England, and he was properly assessed to income tax under Sched.
[EDITORIAL NOTE. The importance of this case lies in the fact that it appears hitherto to have been the practice of the revenue not to tax income wholly earned and received abroad, and that the present case, therefore, marks a departure from that practice. Further, the previous cases were decided under Sched. D before the extension of Sched. E in 1927. The present case is, however, rather special E in its facts, since the director received the remuneration here in question generally as a director, and not as remuneration for the special duties he was performing abroad. However, the position is one that quite commonly arises in companies with interests and branches outside the United Kingdom. For the purpose of giving a man greater influence with the local staff and the persons and companies with whom the company does business, such a representative of the company is F made a director. This fact, it would seem, will make him liable to English income tax in respect of his director's fees. No doubt there are ways of arranging the representative's remuneration which will avoid the result in the present case.
Ref: 3 All ENG L.R (1940) -452
2025-03-02
On Nov. 9, 1937, the first defendants issued a debenture to the plaintiffs containing a charge by way of floating security upon their undertaking and property, present and future, including their uncalled capital to secure repayment of a principal sum of £45,000 and further advances with interest. On Dec. 7, 1938, the plaintiffs issued a writ for the purpose of enforcing their debenture, and on Dec. 13, 1938, an order was made in the action appointing a receiver and manager of part only of the property then subject to the debenture, the remaining property being purposely excluded as it is subject to prior charges. H On Mar. 15, 1939, an order was made for the winding up of the company by the court, and on July 10, 1939, the plaintiffs obtained a judgment which, inter alia, ordered an inquiry as to debts and liabilities of the company, which, under the Companies Act, 1929, ss. 78, 264, were payable out of the property subject to the floating charge in priority to the moneys secured by the debenture. The certificate of the registrar made in pursuance of the judgment showed that the debts due to 19 of the 30 creditors included in the schedule were incurred after the appointment of the receiver, and were outstanding at the date of the commencement of the winding up. In fact, none of these debts was incurred in connection with the property of which the receiver was appointed. The plaintiffs asked for an order that these debts were not entitled to priority:-
HELD: the provisions of the Companies Act, 1929, s. 78, do not exclude or prevent the operation of sect. 264 (4) (6), and, to that extent, the preferential debts incurred after the appointment of a receiver and before the date of winding up are entitled to priority over the claims of the debenture holders in accordance with the provisions of sect. 264 (4) (6). Sect. 264 (4) (b) does not operate, however, unless, at the moment of the winding up, there is still a floating charge created by the company. Since the charge, so far as it affected the property in respect of which the receiver was appointed, crystallized on his appointment, the creditors were not entitled to any priority in respect of the proceeds of that property. They were, however, entitled to priority in respect of the property excluded from his appointment, but that was useless to them, owing to the prior in cumbrances.
[EDITORIAL NOTE. After the appointment of a receiver by a debenture holder, C the floating charge created by the debenture becomes crystallized; that is, it becomes a charge upon specific property, and, as such, is entitled to priority over all debts incurred subsequent to the appointment of the receiver. A receiver may, however, be appointed only in respect of part of the property included in a debenture, and then the preferential creditors are only deprived of their priority in respect of that part of the property and retain it over the remaining property. D Generally, however, this will be a barren right, because such a restricted appointment will usually be made for the sole reason that the remaining property is already so heavily in cumbered by specific charges that it is useless to creditors other than the holders of those specific charges.
Ref: 3 All ENG L.R (1940) -324
2025-02-26
The defendant company collected the rents of certain property an agents of the plaintiffs. There were two directors of the company, J. and H., and, on account of the latter's participation in civil defence novices, the company were obliged to employ a clerk to collect the rente on their behalf, but, owing to the clerk's defalcations, the moneys C were never paid into the company's banking account. The plaintiff did not receive proper accounta from the defendant company, and no issued a writ on Feb, 23, 1940, clanning an account of the renta and profita received. On Mar, 19, 1940, they obtained an order for an account. On July 3, 1940, an order was made that the defendant company should pay into court £118 178, 8d, on or before July 17, I 1940. The defendant company failed to pay the money into court, and the plaintiffs accordingly served the order on them at the company's registered office, the order being indorsed as follows: "If you, William Aric’s Justice and James Sydney Herbert, directors of the within named William Jay & Partners, Ltd., neglect to obey this order by the time therein limited you will be liable to process of execution for the purpose of compelling you to obey the same order." The order was not obeyed. E The plaintiffs also asked for leave under R.S.C., Ord. 42, r. 31, to issue a writ of attachment against the two directors, J. and H., for non-compliance with the order HELD: the order on the company was not properly indorsed as required by R.S.C., Ord. 41, r. 5. As it appeared from the evidence of the directors that the objection to the issue of the writ of attachment was not merely a technical one, and as the remedy under R.S.C., Ord. 42, r. 31, was in the discretion of the court, the writ must be refused.
[EDITORIAL NOTE. A judgment against a company or corporate body can be enforced by the usual processes of execution, and, where a judgment or order has been willfully disobeyed, the court may, in its discretion, enforce the order by a writ of sequestration against the corporate property, or by a writ of attachment against the directors. The latter remedies are additional ones and will only be granted by the court where the circumstances of the case render recourse to them necessary in order that justice may be done. This being their nature, the court requires that all the formalities for the protection of the directors of a company shall be strictly observed.
Ref: 4 All ENG L.R (1940) -196
2025-02-25
In Jan., 1937, the appellant entered into a written contract of service with a colliery company to serve the company as a coalminer at their colliery. No notice to terminate the contract was over given to or by the appellant, and the appellant did not thereafter enter into any written contract of service with any other person or company. On June 4, 1987, an order was made under the Companies Act, 1929, s. 154, transferring to the respondent company the property, rights and liabilities of the colliery company, which was dissolved under sect. 153 of the Act. The order was duly published as directed by the court, but did not in fact come to the notice of the appellant. The appellant duly worked at the colliery until Oct. 7, 1937, and received his wages, which were paid weekly by the respondent company as from June 4, 1937. On Oct. 7, 1937, the appellant absented himself without cause from his work at the colliery, and the respondent company sustained a loss of not less than 15s, in consequence thereof. The appellant was charged under the Employers and Workmen Act, 1875, s. 4, with having wrongfully absented himself from, or neglected, the service o the respondent company, who claimed the sum of 15s. for damage for breach of contract. Between the date of the issue of the summon and the date of the hearing before the justices, the appellant continue- to work for, and receive wages from, the respondent company. The justices found that there had been a breach of contract, and ordered the appellant to pay the damages claimed and costs. Thereupon the appeal was brought, and the appellant contended, inter alia, that contract of service existed between him and the respondent company and that the order of the court, dated June 4, 1937, could not, am did not, effect a transfer of a contract of personal service, which law was incapable of assignment:-
HELD (LORD ROMER dissenting): an order made under the Company Act, 1929, s. 154, does not automatically transfer contracts of person service, which are in their nature incapable of being transferred, a a contract of service did not, therefore, exist between the appell and the respondents. per VISCOUNT SIMON, L.C.: the word "contract" does not app in the section at all, and I do not agree with the view expressed in Court of Appeal that a right to the service of an employee is property of the transferor company. Decision of Court of Appeal ([1939 ] 2 All E.R. 668) reversed.
EDITORIAL NOTE. It is a general rule that contracts of personal contemplate that the person employed has been selected with reference ta individual skill, competency or other qualification, and it is, therefore, of essence of the contract that the contracting party is entitled to personal perform and, in default thereof, is entitled to treat the contract as at an end. By r of this rule, it has been said that contracts of personal service are not assig and it is here held that the assignment of contracts of personal service included in a general assignment of all the property of a company about to be dissolved to a new company formed for the purpose of taking over the business of that company.
Ref: 3 ENG L.R (1940) -549
2025-02-12
Three brothers were the registered holders of all the shares in a private company. They were also the directors of the company and the signatories of the articles of association. One of the brothers died and his widow was his sole executrix. She claimed that she was entitled to have her name entered on the register of members as holder of his shares. The surviving brothers claimed that they were entitled to acquire the shares at par, or, alternatively, rectification of the articles so as to give them that right. Art. 11 provided that no share should be transferred to a person who was not a member, and art. 18 provided that all ordinary shares of a deceased member should be offered to the principal shareholders:-
HELD: (i) upon the proper construction of the articles of association, the widow was entitled to be registered as the holder of the ordinary there standing in the name of the deceased brother.
(ii) the court has no jurisdiction to rectify articles of association, even if it is proved that they do not accord with the intention of the signatories at the time when they were entered into. Evans v. Chapman (1) followed. Decision of BENNETT, J. ([1940] 1 All E.R. 392) varied.
[EDITORIAL NOTE. The first point is one of construction only. The second point raises a question which was before the court some 40 years ago but has not been tested since. The longstanding decision of JOYCE, J., is here approved by the B Court of Appeal, and it is confirmed that the statutory provision for alteration ousts the ordinary jurisdiction of the court to rectify documents.
Ref: 3 All ENG L.R (1940) -508
2025-02-10
The defendants, an English company, guaranteed the payment to the plaintiffs, also an English company, of all sums due to the plaintiff in respect of goods supplied by the plaintiffs to a German company. Prior to the outbreak of war, goods to the value of £594 128. 3d. were supplied by the plaintiffs to the German company. The plaintiffs sued on the guarantee, and the defendants contended that in paying third amount they would be guilty of the offence of trading with the enemy within the meaning of the Trading with the Enemy Act, 1939,8. 1 (2) (a) (iii):-
HELD: (i) payment by one English company to another English company of this debt of an enemy in fulfilment of a contract of guarantee would not be a performance or discharge of an obligation of an enemy wahid the meaning of the Trading with the Enemy Act, 1939, 8. 1 (2) (a) (iii). The words in the Act, "discharged any obligation," mean a complete discharge, and not, as in this case, a mere transfer of the obligation, which had still to be met by the German company.
(ii) as the goods had all been delivered prior to the outbreak of war, the company could not be deemed to have traded with the enemy by reason of the terms of proviso (ii) to subsection 2.
[EDITORIAL NOTE. In this case the goods had been delivered before the outbreak of war, and the only matter outstanding between the parties was that of payment. It is held that an English company which, in performance of its obligations under a contract of guarantee with another English company, makes this payment is E not committing the offence of trading with the enemy, and the court points out that a contrary view would lead to the absurd result that, although a creditor might receive payment from the enemy, yet it could not receive payment from a British subject who had guaranteed the debt of the enemy. Although the obligation of the German company to pay the plaintiff was in fact discharged, another obligation, namely, to pay the guarantor, was thereby created, and it is held that such a transfer of the enemy's obligation cannot be a discharge within the meaning of the Act, which contemplates a complete discharge.
Ref: 3 All ENG L.R (1940) -84
2025-02-06
The petitioners had been directors of the respondent company, and had continued to act as such in spite of the fact that, in consequence of a reduction in the capital of the company, they had ceased to hold the requisite number of qualification shares as provided by the articles of association. Thereupon the respondent company had commenced proceedings against them under the Companies Act, 1929, s. 141 (5), which proceedings were still pending before the appropriate court of summary jurisdiction. The petitioners claimed (i) relief under sect. 372 of the Act from liability in respect of fines or penalties which might have been incurred pursuant to sect. 141 (5), and (ii) relief under sect. 372 of the Act from future liability in respect of acts done while they were not qualified to act as directors :-
HELD: (i) as, on the facts, the petitioners, although disqualified, had acted honestly and reasonably, the court was entitled, having regard to all the circumstances of the case, to exercise its discretion in their favour, and to protect them against future or apprehended claims. (ii) the discretion of the court did not, however, extend to the pending proceedings, and the proceedings before the court of summary jurisdiction remained unaffected by the exercise of the discretionary power of the court.
[EDITORIAL NOTE. Where directors have inadvertently acted without qualification they may be granted relief. Upon application to the Chancery Division, they can be granted relief in respect of prospective proceedings, that is to say, proceedings which have not been commenced at the time when the relief is sought. If the proceedings have been commenced, then relief must be sought in the court in which the proceedings are taken, and that is the only court which can grant relief. This His so even where proceedings are taken in a court of summary jurisdiction.
Ref: 2 All ENG L.R (1940) -236
2025-02-05
The directors of the respondent company before an annual meeting sent to stockholders holding stock of the value of £2,500 and over stamped proxies filled in with the names of the directors. The appellant, a smaller stockholder, who had not received a proxy, contended that all stockholders should be treated alike, and that the directors, in taking this course, were contravening the Companies Clauses (Consolidation) Act, 1845, ss. 64, 65, 76. He also contended that the directors, who were also directors of over 140 other companies trading directly and indirectly with the respondent company, were in the position of paid agents or commercial trustees in all these companies and were, therefore, contravening the Companies Clauses (Consolidation) Act, 1845, ss. 85, 86:-
HELD: (i) the course taken by the directors in sending stamped proxies to some only of the shareholders was a pure question of the policy of the company and one with which the court could not interfere. If, as a matter of policy, the stockholders thought that the practice should be changed, they were entitled, if they could and subject to the statutory provisions, to secure the passing of a resolution to that effect at a meeting of the company.
(ii) the statutory provisions in that regard having been complied with, the interest of directors in the contracts of companies of which they were directors was purely a matter of policy for the company itself, and was therefore not a matter which the courts could consider.
[EDITORIAL NOTE. On the first point, the Court of Appeal have had an opportunity of considering a common practice by which large statutory companies arrange for the more economical transaction of the necessary business at the meeting of the company. Though the matter does not seem to have been one of any real legal difficulty, it is clearly one which the lay mind might think of substance, and the clear decision of the Court of Appeal will be very valuable as approving a method of transacting such business which saves such companies and the public generally considerable expense. On the second point, it will be remembered that SCOTT, L.J., recently pointed out (in Cooper v. Luxor (Eastbourne) Ltd. [1939] 4 All E.R., at p. 418) that directors of private companies owe a duty of single-eyed service to the company and must strictly observe the machinery and rules of the Companies Act. In the present case, there had been that strict observance, and the matter thus became one of the policy of the company
Ref: 2 All ENG L.R (1940) -92
2025-01-29
The plaintiff was the sole executrix and beneficiary under the will of her husband, who had held 100 ordinary shares in the defendant company, the remaining ordinary shares being held by his two brothers, the personal defendants to this action. The plaintiff asked for a declaration that she was entitled to have her name entered on the register of members of B the defendant company as the holder of these shares. The personal defendants counterclaimed for a declaration that they were entitled, upon the true construction of the company's articles, to acquire these shares at par, or, alternatively, they claimed for rectification of the articles so as to give them the right so to acquire these shares. Art. 11 provided that no share should be transferred to a person who was not a C member, and art. 18 provided that all ordinary shares of a deceased member should be offered to the principal shareholders:-
HELD: (i) there was no ground for not giving the words in art. 18 the meaning which, prima facie, they had, and, as a matter of construction, the plaintiff's claim failed.
(ii) the personal defendants were, upon the construction of the articles, entitled to a declaration that the plaintiff was bound to offer them the D shares at par.
(iii) the court has no jurisdiction to rectify articles of association even although it should be proved that they do not accord with what is proved to have been the concurrent intention of the signatories at the moment of their signature. Evans v. Chapman (1) followed.
[EDITORIAL NOTE. The first point is one of construction only, but the second raises the question whether the remedy of rectification is available in the case of the articles of association of a limited company. This question was answered in the negative some years ago, and the judge has followed that decision.
Ref: 1 All ENG L.R (1940) -392
2025-01-27
In Jan., 1937, the appellant entered into a written contract of service with a colliery company to serve the company as a coal-miner at their colliery. No notice to terminate the contract was ever given to or by the appellant, and the appellant did not enter thereafter into any written contract of service with any other person or company. On June 4, 1937, an order was made under the Companies Act, 1929, s. 154, transferring to the respondent company the property, rights and liabilities of the colliery company, which was dissolved under sect. 153 of the Act. The order was duly published as directed by the court. C but did not in fact come to the notice of the appellant. The appellant duly worked at the colliery until Oct. 7, 1937, and received his wages, which were paid weekly by the respondent company as from June 4, 1937. On Oct. 7, 1937, the appellant absented himself without cause from his work at the colliery, and the respondent company sustained a loss of not less than 158. in consequence thereof. The appellant was charged, under the Employers and Workmen Act, 1875, s. 4, with having wrongfully absented himself from, or neglected, the service of the respondent company, who claimed the sum of 158. for damages for breach of contract. Between the date of the issue of the summons and the day of the hearing before the justices, the appellant continued to work for, and receive wages from, the respondent company. The justices found that there had been a breach of contract, and ordered E the appellant to pay the damages claimed and costs. Thereupon this appeal was brought, and the appellant contended, inter alia, that no contract of service existed between him and the respondent company. and that the order of the court of June 4, 1937, could not, and did not, effect a transfer of a contract of personal service, which was by law incapable of assignment :-HELD: the words of the Companies Act, 1929, s. 154, are wide enough to cover a contract of service, and the only way in which a transfer can be made in such a case is by substituting the transferee company as the employer. Decision of the Divisional Court ([1938] 4 All E.R. 6) affirmed.
[EDITORIAL NOTE. It is a general rule that contracts of personal service contemplate that the person employed has been selected with reference to his individual skill, competency or other qualification, and it is therefore of the essence of the contract that the contracting party is entitled to personal perform anon and, in default thereof, is entitled to treat the contract as at an end. By reason of this rule, it has been said that contracts of personal service are not assignable, but it is here held that it is possible rest of personal series of personal service to be included in a general assignment of all the property of a company about to be dissolved to a new company formed for the purpose of taking over the business of that company.
Ref: 2 All ENG L.R(1939) -669
2025-01-26
A company had not paid the rates due to a local authority. Upon the local authority presenting a petition for the winding up of the company, the question arose whether, as the local authority could not sue for the rates, it was a "creditor" within the meaning of the Companies Act, 1929, s. 170:-
HELD: although the local authority could not bring an action for the rates, but could only recover them by applying for the issue of a distress warrant, it was a creditor within the meaning of the Companies Act, 1929, s. 170.
EDITORIAL NOTE. It having been recently decided in the Court of Appeal that a local authority has no power to bring an action for the recovery of rates, but is limited to the statutory procedure by distress, it was here contended that, for this reason, the local authority could not be a "creditor" of the company, nor could the company be indebted to the local authority, and that, therefore, the local authority was not in a position to petition for the winding up of the company. This intention, however, is rejected, upon the ground that those provisions of the Companies Act dealing with preferential debts show clearly that rates are a debt of the company.
Ref: 2 All ENG L.R(1939) -549
2025-01-23
A company presented a petition for its compulsory winding up, under the Companies Act, 1929, s. 186 (6), on the ground that it was just and equitable that it should be wound up. The petition was presented as the outcome of a resolution to wind up carried by a majority, which was not a three-fourths majority, of the shareholders. The substantial reasons given for its being just and equitable to wind up were (i) that the majority of shareholders desired to have repaid to them the money which they had tied up in the company, as it was not earning any interest or dividend, and (ii) that there was a state of deadlock and friction which made it impossible for the business of the company to be carried on. The company was not being carried on at a loss:-
HELD: the court ought not to exercise its jurisdiction under the Companies Act, 1929, s. 186 (6), unless some wrong has been done to the company and the company is deprived of its remedies in respect of it by the improper use of voting power of the shareholders, or that the substratum of the company has gone, or that it is impossible, owing to the way in which the voting power is held and to the feelings of the directors towards one another, for the business of the company to be carried on. The petitioner had failed to establish that any of these conditions existed, and the petition ought to be dismissed.
[EDITORIAL NOTE. Generally speaking, where a petition is based upon the ground that it is just and equitable that a company should be wound up, it is not sufficient to show that the company is not earning a profit, or even making a heavy loss, if it is not insolvent. If friction or improper or ultra vires acts are relied upon, they must be acts done in the past, and not those contemplated as likely to be done in the future. The failure of the petition here is mainly upon these grounds.
Ref: Ref: 1 All ENG L.R(1939) -99
2025-01-08
The appellant was a director of three limited companies, one a parent company, the other two being subsidiary companies. The companies were private companies, largely, if not wholly, under the control of the appellant. The subsidiary companies were indebted in certain sums, and were without funds to meet the payment of those sums when they fell due. The parent company had guaranteed the payment of these sums, but it also had no sufficient funds available. In these circumstances the appellant on eight occasions, in the case of the first two by arrangement with the then managing director and in the case of the last six by arrangement with the secretary of the company, purported to advance sufficient money to the parent company to meet these obligations, which, however, were in fact discharged by the C subsidiary company concerned. The payments were made by cheque, in the case of the first payment drawn in favour of the parent company and indorsed over to the subsidiary and in all other cases drawn in favour of the creditors and sent to them by the subsidiary company. The amounts of these cheques were entered in the appellant's ledger account of the parent company, and were debited to the appropriate subsidiary company in the parent company's books. At all material times there were only two directors of all the companies, and the articles required a quorum of two directors for a directors' meeting, and provided that an interested director should not vote, but declared that this prohibition should not apply to "any arrangement for giving a director security for advances or by way of indemnity.". A resolution was passed by the directors purporting to confirm these advances as made at the request of the parent company. The parent company was the E holder of all the debentures issued by the subsidiary companies. All the companies being in liquidation, the appellant sought to prove in the liquidation of the parent company in respect of such advances:-
HELD: (i) the facts of this present case could not be brought within the expression "giving a director security for advances or by way of indemnity." (ii) (SIR WILFRID GREENE, M.R., dissenting) it being impossible for the directors to pass a resolution requesting the advance of these sums, the case was one where an unsought benefit had been conferred on the company by a stranger, the appellant, and the appellant had no equitable right of recoupment against the company.
[EDITORIAL NOTE. The majority of the court have decided this case upon the G absence of any request by the parent company to pay these debts or to relieve it of any liability under its guarantee. The parent company, by reason of there being only one uninterested director, was, as Scott, L.J., phrases it, "paralysed." There was no one who could, under the constitution of the company, make a valid request or a valid ratification of any act done. SIR WILFRID GREENE, M.R., on the other hand, takes a wider view than the other members of the court of the effect of a passage in the judgment of ROMER, L.J., in Bannatyne v. MacIver (4). at p. 109, and finds it possible to bring the facts within the principle there stated. He based the liability of the company to refund such money upon the fact that the payments operated to discharge pro tanto the liability under the parent company’s guarantee.
Ref: Ref: 4 All ENG L.R(1938) -658
2025-01-07
The trustees of a will held 230 shares in a company, and from time to time they had requested that the share certificates should be altered to different amounts, each amount represented by a separate certificate. This request had been complied with on four occasions, but on the fifth occasion the directors of the company objected, and refused to alter the subdivision. It was provided by the articles that every member should be entitled to one certificate for all the shares registered in his name, or to several certificates, each for a part of such shares:- HELD: although the directors in the exercise of their discretion might comply with such a demand, the trustees had no right to demand certificates for different amounts, and were not entitled to an order compelling the directors to issue such certificates.
EDITORIAL NOTE. The terms of the articles in the present case do not precisely follow those of Table A, but are not so different therefrom that the decision may not be useful in considering the duty of directors under Table A. Generally, a shareholder is entitled to the issue of one certificate free of charge, and, upon prepayment of a small fee and the execution of an indemnity, that certificate may be replaced if it is defaced, lost or destroyed. No doubt it is convenient to persons in the position of trustees to have the division of the shares held by them altered from time to time as the beneficial interests in such shares change, Doubtless the directors of a company would within reason raise no objection to the issue of new certificates, but here the contention was that the shareholders were entitled as of right, subject A only to a proper payment, to the issue of certificates for altered amounts. It is decided that there is no such right in the shareholder, although there is nothing to prevent the directors, in the exercise of their discretion, from complying with such a request.
Ref: Ref: 4 All ENG L.R(1938) -12
2025-01-04
An insolvent company asked the court, in the exercise of its juris- diction under the Companies Act, 1929, s. 153, 154, to sanction a scheme whereby its whole undertaking would be transferred to a realization company, all the shares of which were to be allotted to creditors of the company. As the memorandum of association of the company did not give the company as a going concern power to sell or transfer its undertaking, objection was taken that the scheme was ultra vires the company. Objection was also taken on the ground that the scheme could not possibly benefit the shareholders, and that, therefore, the directors ought not to call in aid the machinery of seet. 153 for the benefit of the creditors without the creditors conceding some benefit E to the shareholders. The scheme had been approved as required by the section:
HELD: (i) in the absence of such a power in the memorandum, the scheme was ultra vires the company, and the court had no power to sanction the same under the Companies Act, 1929, ss. 153, 154.
(ii) as the jurisdiction under sec. 153 had been constantly exercised F without regard to the interests of shareholders or classes of creditors having no interest in the assets of the company, no effect could be given to the second objection.
[EDITORIAL NOTE. The provisions of the Companies Act, 1929, s. 153, are for the purpose of binding dissentient parties, and do not enable a company to do anything that it has no power to do under its memorandum or articles of association. The proper remedy in such a case is, therefore, to proceed to a winding up of the company.
Ref: 3 All ENG L.R(1938) -740
2025-01-02
The appellant company in 1919 acquired all the issued ordinary shares of the C. Co. for a cash consideration. In 1936, it acquired practically all the issued preference shares, in consideration of the allotment of preference shares of the appellant company. It was contended that the transfers effecting the acquisition of the preference shares in 1936 were exempt from stamp duty under the Finance Act, 1927, s. 55- HELD: the consideration for the negotiation of the ordinary shares was cash, and not the allotment of shares, and it could not be said that the appellant company had increased its capital with a view to the sequisition of 90 per cent. of the share capital of the Co. The transfers were not entitled to the exemption claimed, and attracted the usual ad valorem conveyance duty. Decision of LAWRENCE, J., ([1937] 4 All E.R. 227) affirmed.[EDITORIAL NOTE. This case severely limits the operation of the exemption in the Finance Act, 1927, s. 55. The decision might have been, as it was in the court below, limited to the question of the earlier acquisition being for cash; but the case now lender support to the view of the commissioners that there must D be an acquisition by the operation of one and the same scheme of not less than 90 per cent. of the shares in consideration only of the allotment of shares in the acquiring company, and the occasion must be a reconstruction or an amalgamation of companies.
Ref: Ref: 2 All ENG L.R(1938) -808
2025-01-01
The S.B. Co., Ltd., had been carrying on a business for a number of years before 1930, and had at no time made any profit. A large sum had accumulated in respect of allowances for wear and tear and trading losses, which had been carried forward from year to year. The U.S. Co. had similarly accumulated allowances in respect of wear and tear and trading allowances. On Aug. 22, 1930, these two companies were amalgamated into one company, but in fact the two businesses were carried on as branches of the one company:-
HELD: the new company was in the position of a successor to the two constituent companies, and was entitled to carry forward the wear and tear allowances, but not those in respect of trading losses.
[EDITORIAL NOTE: A company formed by the amalgamation of two other companies is in law a legal entity distinct from the two constituent companies, but it is, for the purposes of income tax, a successor to the constituent companies, just as an ordinary person may be a successor to a business. It is therefore entitled to carry forward the allowances in respect of wear and tear. The similar question arising upon trading losses was not pressed, and it seems clear that the judge thought that the latter allowances could not be carried forward.
Ref: Ref: 2 All ENG L.R(1938) -569
2024-12-29
A testator who held 143,030 ordinary shares in a private company by his will bequeathed to his wife absolutely 10,000 of those shares in a company. Upon all these shares the company had, under its articles, a first and paramount lien for all debts and liabilities of the testator to the company, and at the date of his death the testator owed. the company £24,424. The question arose whether, as a result of the Administration of Estates Act, 1925, s. 35, which extended the principle of Locke King's Acts, the shares in the hands of the testator's wife should bear a proportion of the charge to which his shares in the company were liable as between him and the company:-
HELD: the lien on the shares created by the articles of association was an equitable charge upon the shares. The Administration of Estates Act, 1925, s. 35, applied to such a charge, and the testator's wife was primarily liable as between herself and the testator's estate to discharge a proportionate part of the debt due by the testator to the company at the time of his death.
[EDITORIAL NOTE. The object of the Administration of Estates Act, 1925, . 35, was to place personal estate on the same footing as that on which real estate had stood since Locke King's Act. The real question here, however, is the exact effect in law of the creation of a paramount lien on the shares by the articles of association. Such a lien is held to be an equitable charge, and, as such, is within the actual words of the section, so that it is unnecessary here to consider the effect of the words "or otherwise" and how far they extend the charges on property which are subject to the section.
Ref: Ref: 2 All ENG L.R(1938) -560
2024-12-28
An estate company borrowed a sum of £310,000 from an insurance company, and as security mortgaged to the lenders property consisting of 75 houses, 8 shops and a block of flats. It was a term of the mort- gage that the principal should be repaid by 80 half-yearly instalments spread over a period of 40 years. The mortgagees' remedies became immediately exercisable if the mortgagors should sell the equity of redemption without the consent of the mortgagees. There was no power under which the mortgagors could sell any one of the properties mortgaged free from the mortgage. The mortgagors were restrained from granting leases for more than three years without the consent of the mortgagees. The term for repayment was suggested by the mortgagors. In this action the mortgagors claimed that they were entitled to redeem the mortgaged property after the expiration of six months' notice upon their paying to the lenders the principal, together with interest and costs. It was contended that a mortgage for a term of 40 years was not void as being a clog on the equity of redemption, and that, in the present case, the mortgagors, being a company, were not entitled to rely upon the equitable principle by reason of the Companies Act, 1929, s. 74. It was also contended that the mortgage deed infringed the rule against perpetuities:-
HELD: (i) the mortgagors were not entitled, upon the construction of the mortgage deed, to repay the whole mortgage debt at any time. The bargain was that repayment was to be made by the stated instalments, and not otherwise. (ii) the postponement of redemption for 40 years, having regard to the provisions of the mortgage deed, was unreasonable, and a clog upon the equity of redemption.
(iii) the rule against perpetuities is inapplicable to mortgages.
(iv) the mortgage was not a debenture within the meaning of the Companies Act, 1929, s. 74.
EDITORIAL NOTE. This case considers a point that has been much discussed since the practice of providing for the repayment of mortgage advances by instalments has become so common. It is clear that the number of instalments may be spread over such a length of time as to make the mortgage practically irredeemable, with the result that there is a clog on the equity, and that is the decision here. It is also held that the rule against perpetuities has no application whatsoever to mortgages.
Ref: Ref: 2 All ENG L.R(1938) -444
2024-12-26
A memorandum of a moneylending transaction stated that the borrowers were taking up an advance of £4,950, and that they were giving a promissory note for that amount bearing interest at 274 per cent. O per annum, payable by instalments, and then authorized and requested the borrowers to retain the £4,950 in payment of the outstanding balances then owing to them. That document was signed by a director and the secretary of the borrowing company for and on behalf of the company. Some payments were made, but later the company went into liquidation, and the moneylenders lodged a proof of the outstanding amount. The proof was accompanied by an affidavit, which in its turn was accom. Pained by a statement showing the sums actually lent, the dates on which they were lent, and the amount of every repayment made. The liquidator rejected such proof, on the ground that it was not signed personally by the borrower, as required by the Moneylenders Act, 1927, s. 6 (1):
HELD: (i) it is not required by the Companies Act, 1929, s. 29, read g with the Moneylenders Act, 1927, s. 6 (1), that the memorandum of a moneylending transaction shall be under the seal of the company, and the signatures of officials for and on behalf of the company were a sufficient compliance with the statutory provisions.
(ii) the reference in the memorandum to outstanding balances was sufficient to satisfy the requirements of the Moneylenders Act, 1927, 8. 6 (2), that it shall contain all the terms of the contract. (iii) the affidavit lodged with the proof, accompanied, as it was, by the statement of account, was sufficient within the Moneylenders Act, 1927, s. 19 (2) (α).
[EDITORIAL NOTE. This case considers the application of the words "signed personally by the borrower," which occur in the Moneylenders Act, 1927, к. 6 (1), to the case of a memorandum of a loan to a company. It is decided that such a memorandum does not require the seal of the company to be affixed thereto, but that it is sufficiently executed if it is signed by the usual officials of the company for and on behalf of the company. The case also considers the requirements of sect. 9 (2) (a) of the 1927 Act, which deals with the affidavit verifying the debt.
Ref: 1 All ENG L.R(1938) -230
2024-12-25
On the formation of a company, half the ordinary shares were allotted to the Minister of Agriculture and Fisheries. The articles provided that such shares were not entitled to rank for ordinary dividend or interest during the "establishment period," which period was to be the first ten years after the incorporation of the company. It was further provided that in the event of a winding up of the company the surplus assets should be applied (after repayment of capital) "in payment to the Minister... in respect of each share held by the Minister... of a sum equivalent to the amount of dividend received on a share of the company issued originally to the public less the amount of dividend received on such share held by the Minister":-
HELD: the amount payable to the Minister in respect of each share was the actual amount which had been received by any other share- holder as dividends. As income tax had been deducted, such amount was the net amount after deduction of tax; but if the company had paid the full amount of the dividends, then it would have been such sum without deduction of tax.
[EDITORIAL NOTE. The importance of the present case lies in the fact that, when the government for some special reason aid a particular industry or section of the public, such aid is often given by the formation of a company the capital of which is in part subscribed from public funds. The construction of the necessary articles to secure the position of the government upon a winding up is therefore of general importance.
Ref: 1 All ENG L.R(1938) -85
2024-12-21
The defendant was in Nov., 1934, appointed receiver and manager of a company, which was the lessee of a cinema. As such receiver he A paid the rent for the December quarter. On Jan. 15, 1935, he was appointed receiver and manager of the company by the court. He was sued as such receiver for the quarter's rent of the premises due in June, 1935, it being contended that, as he was appointed by the court, he was not the agent of the debenture holders but was personally liable for the rent:
HELD: although the receiver was appointed by the court, he would B not be liable on a contract which he had not made himself, and was therefore not liable for the rent sued for.
[EDITORIAL NOTE. A receiver appointed by the court is in a different position to one appointed out of court. He is not the agent of anyone, and if he enters into a contract, he is personally liable thereon; but this is not so in the case of the C rent of the premises in which the business of the company is carried on. He is not a party to, nor is he an assignee of, that contract.
Ref: 4 All ENG L.R (1937) -432
2024-12-19
Those in control of the defendant company were desirous of converting it into a private company, and the plaintiffs were anxious to prevent this being done. With this purpose in view the plaintiffs executed 44 transfers, each being a transfer of five £1 shares for a stated consideration. Each transfer was stamped 18. (which is the correct duty on a transfer for £5), but bore no adjudication stamp. It was proved that no consideration money passed, and that the transfers were not transfers upon a sale of the shares. The company refused to register the transfers for the reason that they were not duly stamped- HELD: (1) the company was justified in refusing to register the transfers. The transfers, not being conveyances on sale, must be stamped either as voluntary conveyances, in which ease the Finance (1909-10) Act, 1910, s. 74 (2), required that the stamp duty should be adjudicated, or under the Schedule to the Stamp Act, 1891, as conveyances or transfers of any kind not there in before described, in which case that Act required them to be stamped 10s.
(ii) following Maynard v. Consolidated Kent Collieries Corpn. (1), the directors, in considering whether the transfer was duly stamped, were entitled to go behind the consideration stated in the transfer.
EDITORIAL NOTE. This case, which is of obvious interest to those concerned with company law, is also of interest to conveyancers. It should be compared with Re Weir and Pitt's Contract (1911), 55 Sol. Jo. 536; 30 Digest 284, 668; and reference should be made to the note upon this subject in HALSBURY, LAWS OF ENGLAND, Ist Edn., Vol. 24, pp. 732, 733, note (6). The matter seems now to stand H thus: If a document has been stamped in respect of a consideration which is substantial and a genuine element in the transaction, it may be duly stamped although that consideration is less than the actual value of the property transferred and the duty has not been adjudicated. On the other hand, it is clear that, where the transfer is, as in the present case, purely voluntary, then the document, although it may be stamped in respect of the value of the property transferred, cannot be accepted unless it also bears an adjudication stamp.
Ref: 4 All ENG L.R (1937) -191
2024-12-14
G. had attended the meetings of a bankrupt's committee of inspection as the holder of a general proxy from a limited company, one of the bankrupt's creditors, which had been appointed a member of the committee. At the time of the receiving order, the bankrupt was en- titled to certain shares which were pledged with a bank as security for a loan. G. purchased these shares from the bank and some of them he resold. It was sought to recover for the benefit of the bankrupt's estate such of the shares as G. retained and the proceeds of sale of such shares as G. had sold, on the terms of repaying to G. the price he had paid to the bank for the shares:-
HELD: (i) G. was under the duties and obligations of a member of a committee of inspection, and was therefore in a fiduciary position in relation to the bankrupt's estate and to those interested in the estate. (ii) even though G. did not appreciate that there was any reason why he was not free to buy as an ordinary purchaser or that in fact the shares were shares which belonged to the estate, the shares retained by G. and the proceeds of the shares resold could be recovered for the benefit of the bankrupt's estate, upon the terms of repaying to G. the price he had to pay the bank for the shares.
EDITORIAL NOTE. The fiduciary relationship of a member of the committee of inspection has long been settled, but the facts of the present case are a little peculiar in that the member of the committee was such as a representative of a limited company. The decision in this case proceeds upon the footing that the representative of the company had deliberately placed himself in the position of a member of the committee and must therefore be treated as such. It may be that the questions how far a limited company can be a member of the committee of inspection and the rights and remedies as between a delegate-member and the company he represents are still to some extent open. They are not fully discussed in the present case.
Ref: 3 All ENG L.R (1936) -611
2024-12-12
By one of the articles of association of the defendant company it was provided that: "The directors may decline to register any transfit of shares made by a member who is indebted to the company, or in ease the transferee shall be a person of whom the directors do not approve or shall be considered by them to be objectionable or the transfer shall be considered as having been made for purposes not conducive to the interest of the company and the directors shall not be bound to specify the grounds upon which the registration of any transfer is declined under this article." A shareholder sought to transfer a number of his shares, but the directors declined to register the transfer. By another article the holder of 1 share had 1 vote, the holder of 5 shares had 2 votes and there was an additional vote for every additional 10 shares, with the result that by splitting a holding of shares, the voting power could be increased. It was alleged that the directors had systematically rejected transfers in order to prevent an increase in the voting power of the shareholders. In an action to enforce registration of the transfer it was sought to adduce evidence that the directors had refused registration in accordance with that systematic practice:
HELD: (i) evidence as to the rejection of transfers on previous occasions was inadmissible, as it could not be material to the issue in the present case. (ii) in the absence of evidence to the contrary the directors must be taken to have acted reasonably and bona fide, and as they were not bound to disclose their reasons, there was no ground for interfering with their exercise of their discretion.
[EDITORIAL NOTE. An attempt was here made to adduce evidence that directors of systematically refused to register transfers of shares which would increase the moting power of shareholders. This result would have been obtained in the case transfers splitting holdings, by reason of the fact that the article providing for e votes of shareholders favored those with small holdings.
Ref: 3 All ENG L.R (1936) -554
2024-12-11
The appellant owned property on the Gatineau River, including a saw mill used for his timber business and a plant for the production and distribution of electricity, both worked by water power. The respondents were attempting to expropriate for the purposes of a scheme for development of hydro-electric power on the river, and had erected a dam with the result that much of his property was submerged and other seriously affected. An action in respect of this damage had proceeded to trial, and judgment had been reserved, when a special Act was passed by the Quebec Legislature to prevent any disturbance of the respondents' operations. The respondents were by the Act to make just and fair compensation to the appellant for all his properties and rights taken or affected, and the court was to determine what properties and rights should upon payment of the compensation become vested in the respondents:-
HELD: (i) the Act did not require the court to vest in the respondents all lands or properties affected, if in its discretion, it thought compensation for injurious affection sufficient.
(ii) the amount of an award may be varied by an appeal court where it is clear that it is based upon a wrong principle of calculation or not justified by the admitted facts.
(iii) although undertakers cannot offer remedial works in lieu of compensation, the offer of land taken or easements over land taken for the restoration of a piling ground and a railway siding was a proper one and ought to be taken into consideration.
EDITORIAL NOTE. In this case the parties had proceeded to contest their rights in court before the power company obtained any special statutory powers for the purpose of their undertaking. It being possible that the court might give judgment in favour of the appellant in the appeal and order the company to remove their dam, a special Act was passed to avoid such a result and to provide for the compulsory purchase of the appellant's land. The appeal deals with the position arising upon the passing of the Act and how far the court can review the calculations of the courts below.
Ref: 3 All ENG L.R (1936) -266
2024-12-09
A company, which desired to vary the constitution of its capital, petitioned the court for an order sanctioning a scheme of arrangement which involved the reduction and subsequent increase, subdivision and consolidation of capital. The capital was to be reduced by converting certain issued ordinary shares of 158. each into ordinary shares of 128. each. The capital was then to be increased by the issue of redeemable preference shares of £1 each and shares of 4s. each. It was part of the scheme that the unissued ordinary shares of 158. each should be subdivided and consolidated into ordinary shares of 12s. each. It was proposed that the minute of reduction to be registered under the Companies Act, 1929, s. 58, should be approved in a form which, after dealing with the reduction, stated the amount and constitution of the share capital at the date of the registration of the minute, but did not give details of the increase, subdivision and consolidation of the capital :-
HELD: the scheme should be sanctioned and the suggested form of order should be approved.
EDITORIAL NOTE. Companies for one reason or another are often anxious to effect an alteration in the arrangement or constitution of their shareholding and to increase or decrease the amount of the preference shares relative to ordinary shares. This case is useful in showing a scheme for such purpose that has had the approval of the court and also the exact form of minute required.
Ref: 2 All ENG L.R (1936) -1651
2024-12-08
In consideration of services rendered and of the transfer of certain rights to the company by him, the company agreed as purchasers "to pay to [the plaintiff] out of the first profits of the purchasers and in to all dividends payable in respect of any shares in the pure- priories capital the sum of £1,000." The balance sheet of the company, for the year ending Mar. 31, 1935, showed a profit of £698 118. 10d., which sum the directors used for writing off preliminary expenses and in making a transfer to certain reserve accounts. The plaintiff con- tended that the £698 118. 10d., being the first profit of the defendant company, he was entitled to payment of that sum in part satisfaction of the £1,000; and that the company by the publication of the balance sheet were estopped from denying that the £698 118. 10d. was a first profit:-
HELD: upon the true construction of the contract the words "the first profits in priority to all dividends" mean profits available for dividends; and the test is whether the purpose to which the directors have applied the sum in dispute is one to which the shareholders could not object if such application deprived them of what would otherwise have been a dividend.
EDITORIAL NOTE. This is a case where the parties have made remuneration dependent upon the "profits" of a company without in their agreement defining the word " profits." Not a little of the difficulty in deciding a matter of this nature arises from the fact that much of the authority upon it deals with the deductions of certain tax payments in the determination of what are profits or net profits. Here the question is what are profits distributable for dividend in the sense whether directors are entitled to the detriment of an employee to write off the preliminary expenses of the promotion of a company or similar non-recurring expenditure or to place profits to a reserve fund in accordance with the provisions of articles of association. The latter of course, allow this to be done, but do not make it imperative. AS TO PROFITS AVAILABLE FOR DIVIDEND, see HALSBURY, Hailsham Edn.,
Ref: 2 All ENG L.R (1936) -1481
2024-12-07
The holder of a debenture issued by a company in 1930, and which was in voluntary liquidation under an extraordinary resolution passed on Dec. 23, 1935, made an application to the court under the Companies Act, 1929, s. 252, for a declaration that upon the true construction of his debenture the company had charged with repayment to the debenture holder of the sum thereby secured all stock as therein defined, which was in the possession of the company on Dec. 23, 1935, the date of the appointment by the debenture holder of a receiver and manager of the property thereby charged and all the machinery and loose plant which was at that date the property of the company. He further applied for an order that the liquidators should pay to him or to the receiver the proceeds realized by the sale of the said stock, machinery and plant. The debenture, which was dated Aug. 26, 1930, provided, inter alia: "The company hereby charges with the said payments by way of floating charge, first, all stock in the possession of the company which has been purchased, acquired or appropriated by the company for the purpose of executing orders obtained by the company for the delivery of piece goods to [the debenture holder].. and, secondly, machinery and the loose plant of the company." The registrar dis missed the summons upon the ground that the debenture holder was not a creditor within sect. 252. The liquidators contended that the property charged by the debenture was confined to property in the possession of the company on Aug. 26, 1930, the date of the debenture :-
HELD: (i) the debenture holder, although a secured creditor, was a creditor within sect. 252 of the Act of 1929 and was entitled to make the application. (ii) the property charged by the debenture included all property of the kinds described therein in the possession of the company on Dec. 23, 1935.
[EDITORIAL NOTE. A dispute having arisen as to the property comprised in a debenture, the debenture holder applied to the court as a creditor under Companies Act, 1929, s. 252, to have the point determined. The registrar as well as the liquidators seem at once to have doubted whether a secured creditor was within the terms of that section and, the matter being argued, the former decided against his juris diction to entertain the application. The court had no difficulty in allowing an appeal from the registrar, and thought it clear that the word "creditor" in the Companies Act, 1929, s. 252, includes a secured creditor.
Ref: 2 All ENG L.R (1936) -1340
2024-12-02
A company went into liquidation under a resolution for a member's voluntary winding up. The liquidator summarily discharged its manageress, who sued the company for wrongful dismissal and obtained judgment in default of defence. She applied for a garnishee order on a bank account in the name of the liquidator. There was no evidence of any other claims on the company. The master refused to make the order absolute, but the judge in chambers reversed his decision. The liquidator appealed:-
HELD: (i) this being a members' voluntary winding up, it must be taken that the company was solvent, as there was no evidence to the contrary. There was therefore no question of all creditors being paid in full and the court might properly refuse to exercise its discretion to stay an execution, and make the garnishee order absolute. (ii) the fact that the account was in the name of the liquidator was immaterial. (iii) the liquidation did not in the circumstances dissolve the employee's existing contract with the company.
[EDITORIAL NOTE. The position under a members' voluntary winding up is quite different from that under a creditors' winding up. In the former, which is the position in the present case, there is a declaration of solvency and, until the contrary is shown, the presumption is that all debts will be paid in full. There is therefore no case for any restriction to be placed upon a creditor issuing execution upon a judgment. This argument applies equally to a garnishee order, and, where the creditor has proceeded in this way, an order absolute can be made. The making of such an order is in the discretion of the court.
Ref: 2 All ENG L.R (1936) -905
2024-11-30
By a deed of guarantee for the repayment of a loan of £250,000 and interest, which recited that the lenders had at the request of the guarantors advanced to the borrowers £250,000 upon security of a charge on certain shares, the guarantors covenanted, in the event of the borrowers failing to make the repayments provided for, forthwith to repay to the lenders the said sum of £250,000 with interest at the rate of 8 per cent. per annum. The deed further provided that what- ever the position between the lenders and the borrowers, the guarantors should be liable for all moneys due as principal debtors and they were not to be released from liability by reason of time being given by the lenders or by their taking no steps to protect their securities. The shares above mentioned were at no time secured and had not in fact been issued. Upon default in repayment of part of the loan the liquidator of the guarantors rejected the proof by the liquidators of the lenders, contending that the security of the charge on the shares was a condition precedent to the guarantee:-
HELD: (i) upon a proper construction of the deed of guarantee, there was no such condition precedent and the guarantors having precluded themselves from equitable protection, were bound by their guarantee as principal debtors. (ii) interest upon the sum outstanding was payable only up to the date on which the petition to wind up the guarantors was presented and not up to the date of the order to winding up. (iii) the rate of interest payable should be reduced from 8 per cent. to 5 per cent. per annum on all outstanding interest.
[EDITORIAL NOTE. This case discusses three quite separate issues: (i) the construction of the guarantee; (ii) the date up to which interest can be charged and
(iii) the rate at which such interest can be charged. The construction point is of interest, as it deals with the effect of the inclusion of the usual clause that the guarantors shall be liable as principal debtors. Draftsmen of guarantees have doubtless considered this clause as relating solely to future events, but it is here used to rebut a plea of non-disclosure of a material fact at the time the guarantee was executed. On the other points conflicting authorities are discussed and the decision is important in these technical matters of company winding up, upon which there has hitherto been some conflict of authority.
Ref: 1 All ENG L.R (1936) - 641
2024-11-28
A bank, incorporated under Russian law in 1910 with its head office in Petrograd, established a branch in London in 1915. In 1921 an action was brought by the London branch for recovery of two sums of moneys due and payable to the plaintiff bank and held by the defendant bank. In 1932 the court made an order staying this action on the ground that the Russian bank, having been dissolved by Russian law shortly after 1917, had ceased to exist. An order for the compulsory winding up of the Russian bank, under the Companies Act, 1929, s. 338, was made in 1932. Later, the court declined to remove the stay in the first action, holding that sect. 338 did not have the effect of re-creating or avoiding the dissolution of the Russian bank. By leave of the court the liquidator thereupon brought the present action, under sect. 191 of the Act of 1929, in the name of the Bank, to recover the said sums of money:- HELD (LORD RUSSELL OF KILLOWEN and LORD MAUGHAM dissenting): as the order for winding up was valid, the order under the Companies Act, 1929, s. 191, giving leave to the liquidator to bring the present action was rightly made, and the action was therefore properly con- statute and could be proceeded with. Orders of the Court of Appeal and Clauson, J., reversed.
[EDITORIAL NOTE. The Bank having been dissolved in Russia became a non-existing person and therefore no action could be brought in its name in England in the ordinary way. There being a branch in England to which certain sums of money were due, an order was made to wind up the branch as an unregistered company. In the ordinary way the making of a winding up order would invest the liquidator with the power to bring or defend any legal proceedings in the name of the company. As such proceedings would be brought in the name of the company, the actual plaintiff would be a non-existent person, and objection could be taken to the action upon this ground. The question therefore arises whether & liberal interpretation shall be given to the statutory powers of a liquidator and thus override this difficulty (the view taken by the majority of their Lordships), or whether full force should be given to the rule that no action can be brought in the name of a non-existent plaintiff (the view taken by the minority).
Ref: 1 All ENG L.R (1936) -505
2024-11-27
A claim was made against a company in liquidation for damages. The liquidator issued a summons to have it determined whether the claims should be allowed and the judge made an order for an enquiry into the amount of damage sustained and that the claimant be per. mitted to prove for the sum so ascertained. The damages were so ascertained by the registrar and a proof carried in. The liquidator rejected the proof on the ground that a shareholder, while retaining his shares, cannot claim damages in respect of any loss in respect of his shares:
HELD: this objection was too late. It should have been taken on the hearing of the summons or on appeal therefrom.
[EDITORIAL NOTE. Generally speaking, trustees in bankruptcy and liquidators are allowed a wide latitude in objecting to claims in order that the rights of creditors may be fully protected. This rule is here in conflict with the rule that a party must bring forward all his claims or defences when the matter is before the court or be estopped from bringing further proceedings. In this case the latter rule prevailed and it would appear that a liquidator cannot reopen a proceeding in a winding up, if he has omitted to carry in all his objections. He can, of course, in general reopen proceedings before the winding up.
Ref: 1 All ENG L.R (1936) -406
2024-11-26
The New South Wales Companies Act, 1899, s.84 (e) is identical with the English Companies Act, 1929, s. 168 (6), and provides for winding up by the Court when, in the opinion of the Court, it is just and equitable that the company should be wound up. A large American company trading in gramophone records formed a subsidiary company in Australia. The directors of the subsidiary company who had previously been agents to the parent company, were interested in a competing company and by a special agreement they were entitled to compete with the subsidiary company. These directors were also the holders of all the preference shares in the subsidiary company and had been guaranteed by the parent company or its nominees that the interest on the preference shares should be fully paid for two years after the date of allotment, and that in the event of the subsidiary company being wound up within the said two years 20s. in the £I would be paid in respect of the capital of the preference shares. Within the period mentioned in the guarantee and at a time when, owing to the general depression in trade, business was bad and the subsidiary company was being carried on at a loss the directors presented a petition to wind up the subsidiary company. HELD: (i) the existence of the guarantee was only material in considering whether a compulsory order shall be made in so far as it biased the evidence on either side. (ii) in considering whether it was just and equitable to wind up the company the criterion was not whether the directors were seeking to obtain the benefit of the guarantee or whether the parent company were seeking to carry on the company until such time as the guarantee had expired and thus avoid liability thereunder; but whether, having regard to all the circumstances, there was at the date of the presentation of the petition a reasonable hope that in time the subsidiary company could be carried on at a profit.
[EDITORIAL NOTE. Though the circumstances of this ease are in some respect peculiar to itself, it contains an exposition by the highest judicial authority of the application of ordinary company law to a complicated set of facts arising from the existence of parent and subsidiary companies and various associated and competing interests. Despite these complications, the question whether the subsidiary company should be wound up or not was decided upon the single issue whether it could in time be made a profit-earning concern. Where the subsidiary company is a public one with a number of small shareholders, this decision may prove a great safeguard to their interests. The Judicial Committee in the course of its judgment treated the law as laid down in Loch v. Blackwood, Ltd. [1924], A.C. 783, as settled, and the power to wind up a company is not confined to cases in which there are grounds analogous to those mentioned in the English Companies Act, 1929, s. 168, or the corresponding enactments in the dominions or colonies, but upon any ground that the Court thinks just and equitable.
Ref: 1 All ENG L.R (1936) - 298
2024-11-25
The Legislature intended to resolve all types of disputes or grievances arising out of the Companies Act expeditiously through a higher rank of Court i. e. either the District Court or the High Court Division, in a summary manner so as to help smoothly flourish the business and commerce without experiencing protracted, time-consuming and complex procedures which are required to be followed/observed/applied by the Civil Courts and, therefore, most of the Company Matters relating to/arising out of/in connection with the grievance of any members of the company or debenture holder of the company are tried/adjudicated upon without taking any oral evidence. However, it does not necessarily mean that the Company Court is not competent to dispose of a company case by taking oral evidence, because there is no provision within the four corners of the Companies Act prohibiting the Company Court to take oral evidence. Rather, the expressions employed in Section 233(3) of the Companies Act, "If after hearing the parties present on the date. ..", implies that there may be petitioner witness/es (PW/s) or respondent witness/es (RW/s) or the Court witnesses/es (CW/s) if the facts and circumstances so warrant, inasmuch as this Court requires to form an opinion "If the Court is of the opinion", (the wordings of Section 233 (3) of the Companies Act) for passing necessary Order and/or Direction.
Ref:17 A.L.R (HCD)(3)(2019) -101
2024-11-24
A company is allowed to hold only one AGM in a Gregorian calendar year and that is why, a company is statutorily duty bound to hold its AGM on or be- fore the 31st December of each Gregorian calendar year. In other words, there shall be only one AGM for every Gregorian calendar year. If a company fails to hold its AGM in the concerned calendar year, it may hold it with the permission of the Company Court in the subsequent year. But the aforesaid AGM shall be treated as the AGM for the calendar year in which it was supposed to be held; not for the calendar year at which it held. So, it follows that whenever one or more overdue AGM/s would be held in a year, those outstanding AGMs shall be recorded as the AGMs for the past concerned years; not for the present calendar year or future calendar year.
Ref:17 A.L.R (2019)(HCD)(3) -26
2024-11-23
There is no provision in the Companies Act stating that a company shall not be allowed to hold its AGM before preparation of its Balance Sheet. Section 183 asks the Board of Directors of every company to lay the Balance Sheet of any period between 1 (one) day to 15 (fifteen) months (with the permission of the Registrar 18 months), which shall not be more than nine months old (with the permission of the Registrar 12 months old) on the date of the AGM. Since the consequence of non-compliance of the above provision is monetary penalty, a company should be diligent to prepare a financial report of any period (for example; financial report of one day, one week, one month, three months, six months, nine months, twelve months and fifteen months) before 31 December of each calendar year, if it wants to place its financial report before the AGM.
Ref: 17 A.L.R (2019)(3)(HCD) -26
2024-11-21
The preconditions of allowing an application for merger/amalgamation of two more companies In an application under Section 228 read with Section 229 of the Companies Act, when, after conducting the meeting with the members and/or the creditors of the petitioner companies as per the Order of the Court, the petitioner-companies (transfer & transferee companies) show the Court that three-fourth in value of the creditors and/or members of each of the companies (transferor and transferee companies) agree to any arrangement of reconstruction/amalgamation/merger and the proposed arrangement is not against the public interest, rather it is aimed at the benefit of both the companies, their members, creditors, employees and other concerns; in other words, if the scheme of amalgamation has been undertaken upon fulfilling the requirements of law laid down in the Sections 228 and 229 of the Companies Act, and the Court finds it to be beneficial for all concerns of the transferee and transferor companies, then, the at same deserves positive consideration by the Court.
Ref: 14 A.L.R (HCD)(3)(2018) -48
2024-11-20
The High Court Division held that the appellate Court below rightly found that if there was any irregularity in the management on the application of holder the affairs of the company could be - inspected by the competent inspector to investigate the affairs of the company and in the said inspection if there appears any criminal liability against the shareholders or any other persons the government could have referred the matter to the Attorney General e or to the Public Prosecutor to bring prosecution in view of section 141 A of the e company Act 1913 and in that view of the matter had there been any irregularity in the management of the company, the criminal - liability required to be fixed under the provisions of section 138 and 141(A) of the Company Act not by a complaint case. In the result, the Rule is discharged.
Ref:10 A.L.R (2017)(2)-68
2024-11-18
The learned Counsel for the respondent-leave petitioners has mainly argued that the High Court Division committed wrong in giving this direction for holding board meetings under section 85(3) of the Companies Act, 1994. The learned Counsel has contained that sub-section 3 of section 85 of the Companies Act is not applicable in respect of board meetings of a company, but it is applicable for annual general meeting only of a company. But Appellate Division does not find this argument of the learned Counsel acceptable at all. Section 85 is regarding provisions as to meetings and votes. The title of this section 85 is "Provision as to meeting and votes". The Appellate Division also held that this very section 85 is very much clear that the provisions provided in this section are with respect to all meetings, namely, annual general meeting, board meeting and other meeting. So, this argument of the learned counsel is not acceptable at all that sub-section 3 of section 85 is applicable in respect of board meetings only of a company.
Ref: 10 A.L.R (AD)(2017)(2) -300
2024-11-16
The range and nature of interests that are contemplated in the statute to be affected by a Section 12 application gets enunciated in the notice provisions of Section 12(3) of the Act. Implicit in Section 12(3) is the issue of service of notices either in the usual manner, or as High Court Division at its discretion may specify otherwise, upon parties already identified in an alteration petition. Indeed, the practice of High Court Division, as is firmly entrenched in keeping with Rules 12 and 13 of the Companies Rules, 2009 ("Rules"), is for advertisement of a matter to be additionally published in daily newspapers especially in the primary interests of creditors and shareholders only. Barring winding-up matters, that is a requirement that High Court Division may at its discretion dispense with, but seldom does so.
Ref: 9 A.L.R (2017)(1) -220
2024-11-14
The concept 'inherent jurisdiction' is far wider than the concept 'inherent power'. This court derives jurisdiction in company matters from two sources, one is section 3 of the Companies Act, 1994, and another is Rule 8 of the Companies Rules, 2009. Therefore, in an appropriate case, this court, in appointing auditor, may exercise its inherent jurisdiction, for ends of justice, particularly when the inaction, neglect of duty or malafide on the part of concerned authority/regularity body is apparent from the materials on record. In other words, provision of Rule 8 of the Companies Rules, 2009 has overriding effect upon sub-rule (3A) of Rule 12 of the SEC Rules, 1987 as well as upon the provision of sub-section (4) of section 210 of the Companies Act, 1994.
Ref: 5 A.L.R (2015)(1)-228
2024-11-13
When Independent Chairman required. Company Bench's view that exceptional circumstances has to be made out for exercising special powers by the court, particularly in the absence of any provision in section 81(2) of the Act that does not require appointment of independent chairman. The Bench has the considered view that an independent Chairman should not be appointed on mere asking for the same or to make it a routine for holding general meeting. There must exist exceptional circumstances to justify appointment of independent chairman and such appointment must be in the interest of the company, not to serve the purpose or whims of any person or group. Such exceptional situation has to be objectively assessed and the powers must be used with circumspection by this court.
Ref: 5 A.L.R (2015)(1) -22
2024-11-11
Windings up a Company by order of the Court and appointment of an liquidator-legal incidences. In the present case, since before filing of Title Suit No. 138 of 2003 the defaulter company was wound up by order of the Court and since a liquidator was appointed for this defaulter company, suit filed without the leave of the court is in contravention of section 250 of the Act and as such the decree passed in Title Suit No. 138 of 2003 without impleading the official liquidator is illegal and invalid.
Ref: 2 A.L.R (AD)(2013)-224
2024-11-10
When a winding up order has been made or a provisional liquidator has been appointed, no suit or other legal proceedings can proceed or commence except by leave of the Court. The policy underlying this provision is to protect the assets for equitable distribution among those entitled, and to prevent the administration being embarrassed by a general scramble of creditors. When a winding up order of a company has been made, the combined effect of sections 250,322 and 328 of the Act is that such order operates automatically as a stay of all actions, executions, distresses etc. against the company subject to the discretion of the Court to allow actions to proceed notwithstanding the winding up.
Ref: 2 A.L.R (AD)(2013)-223
2024-11-08
Sub-section (3) of section 85 of the Act authorizes this Division to give such ancillary of consequential directions as it thinks expedient, while passing an order to call, hold and conduct an AGM, which could not be held in time, upon condonation of delay in holding' the same. Alongside Rule 8 of the Company Rules, 2009, vests 'inherent jurisdiction' in the High Court Division in addition to the statutory jurisdiction vested in it under section-3(1) of the Act in respect of company matters, to pass any order for ends of justice. The board resolution dated 26.5.2011 (taken in it's 189th meeting) to increase paid up capital through IPO is contrary to the express provision of section 155 of the Companies Act read with Article 41 of the Articles of Association of the Bank and such decision is, totally ultrararest and malafide. Hence, incidental order is required to be passed to amend the same to ensure the right of preemption of the existing shareholder-members guaranteed under the provision of section 155 (1) of the Act read with Article 41, by giving direction to issue right share, to increase the paid up capital, as per BRPD Circular Letter No.11 dated 14.8.2008. The application is allowed and the entire period of delay occurred in holding the 13th AGM is condoned. The company is allowed to call and hold the 13th AGM by issuing a fresh notice within 31.11.2012 and by including the agenda relating to issue of 'right shares' as per provision of section 155 of the Companies Act, 1994 read with Article 41, to the existing members and thereby to increase its paid up capital as per direction contained in BRPD Circular Letter No.11 dated 14.8.2008.
Ref: 1 A.L.R (2012) -208
2024-11-07
Time-frame for holding AGM-For all types of companies an AGM must be held for each of the Gregorian calendar year, and though the gap between holding of one AGM to holding of another AGM may be maximum 15 (fifteen) months, but the latest date for holding the AGM for each calendar year is 31st December for the concerned calendar year. The RJSC is competent to extend the time for a maximum period of 90 days or up to 31st December of the concerned calendar year, whichever is earlier, subject to fulfilling the conditions that the application is filed before him well within thirty days of the expiry of the specified period.
Ref: 75 D.L.R (2023) -434
2024-11-05
Transfer shares when the transferor stays abroad-Annual summary statement of the company's capital, share transfer instrument and the affidavit confirming transfer of shares by the Office of the Registrar of the Joint Stock Companies and Firms (RJSC), the Register is to be satisfied that the transferor having been appeared before him has confirmed that the signatures contained in the instrument of transfer are genuine. However, the formalities may be done through commissioning if the transferor, due to any reasonable cause, is not able to attend the office of the RJSC in person. And, if the transferor is a foreigner or staying abroad, in that event, the concerned authorized official of the Embassy of Bangladesh shall certify that the transferor has signed on the share transfer instrument and affidavit in his presence.
Ref: 75 D.L.R (2023) -317
2024-11-04
The Company Court, in the process of winding up of a company, is vested with onerous duties and armed with ample powers under sections 278 and 331 of the Act to summon the suspected persons/entities for the purpose of assessing the quantum of each of person's/entity's liabilities and, thereby, pass appropriate orders/directions, including any restrictive, prohibitive, injunctive and penal orders, upon them for securing the recovery of the money/assets of the company under liquidation.
Ref: 75 D.L.R (2023) -61
2024-11-03
Reason for reduction of share capital requiring permission of the court-A special resolution is required for reducing share capital and, thereafter, the same needs to be approved by the Company Court. And, since the businesses/activities of a company limited by shares set out in Clauses (a) to (d) of section 59(1) of the Act ultimately results in reduction of share capital, they require special resolution and confirmation by the Company Court C inasmuch as reduction under section 59 of the Act involves a return of capital to the s company's shareholders, and since such return of capital goes against the capital maintenance rules, section 59 of the Act requires compliance C with the stringent conditions, adopting a special resolution and confirmation by the Company Court. The capital maintenance rules aim to protect creditors and other company stakeholders by preventing the Directors from paying dividends or returning capital to members other than in limited prescribed circumstances.
Ref: 74 D.L.R (2022) -449
2024-11-02
An 'Official Receiver' means a person, who has been attached to the Company Bench by the Government and s/he shall act as the 'Official Liquidator' whenever the Company Bench appoints her/him in any liquidated- company. An 'Official Receiver' is required to be always attached to the Company Bench and, in absence of such "attached Official Receiver", the Government may appoint a person as the "Official Receiver" for the purpose of attaching the person to this Court and the "attached Official Receiver" having been appointed as the "Official Liquidator" shall assist this Court in dealing with the winding-up matters.
Ref: 74 D.L.R (2022) -190
2024-10-30
When the Club has taken decision to expel the petitioner permanently, having his membership deleted from the Register Book, the provisions of section 43 of the Act are attracted without any contrivance. When any decision's/order's consequence is omission of a member's name from the register book of a company/Club by which the member is aggrieved, a case under section 43 of the Act is prima facie made out, irrespective of the nature of the order. The proposition that this Court wishes to lay down here is that whether the company's order is an administrative order or an order of other nature does not matter in a section 43 application, if the ultimate consequence is removal of a member's name from the register book or inclusion of any person's name therein without sufficient cause.
Ref: 73 D.L.R (2021) -439
2024-10-27
Section 43 of the Act in a very simple expression, sets out as to who can be a petitioner of a section 43 application or, in other words, what are the qualifications for standing as a section 43 application. Section 43 of the Act delineates that in order to be the petitioner under the section, the petitioner has to be either an aggrieved person by the entry/omission of some one's name, including the petitioner's own name, in the book of the company's membership register i.e. a person whose right/interest has been or is likely to be jeopardized/hampered in any manner because of inclusion or deletion of the name from the company's membership register book; any member of the company or the company itself.
Ref: 73 D.L.R (2021) -439
2024-10-26
Section 233 of the Act empower the Court to pass "such Orders as it (this Court) deems fit", in conjunction with the specific power of regulating affairs of a company in a deserving manner, in addition to the vast power of this Court of passing "any ancillary and consequential directions", as authorized/approbated by the provisions of section 85(3) of the Act. This Court is well equipped with ample authority (i) to form a board of directors for any company, (ii) to appoint necessary number of shareholder directors, (iii) to appoint independent director/s and (iv) appoint a Chairman for the Board, out of the share- holder-directors or Independent directors, as per the exigencies of a particular company.
Ref: 73 D.L.R (2021) -270.
2024-10-24
Whether the Company Court is competent to investigate into the title as to membership of a company any party. When an aggrieved person or any member of a company approaches the Company Court complaining that a person's name has been entered in or omitted from the Members' Register illegally, or the fact of becoming/ceasing to become a member of the company has not been recorded in the Members' Register, the Company Court, upon deciding any question of fact and law, may determine the title as to membership of the company of any party to the application.
Ref: 72 D.L.R (2020) -567
2024-10-23
When two or more companies become desirous to enter into any arrangement of merger with each other towards converting themselves into one single entity, they all, as the petitioners, would make an application to the Court under sub-section (1) of section 228 of the Act for directions for convening of the meetings of the members and creditors, if any, for considering the proposed scheme of amalgamation, at first. On such an application, the Court would issue directions for convening of separate meetings of the members and/or creditors or different classes of members and/or creditors, as the case may be. In the meetings of the members and/or creditors, the scheme of amalgamation is required to be approved by majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members, as the case may be. After the scheme is approved by all concerned in their respective meetings, a separate petition then would be - presented to the Court for sanctioning of the - scheme of amalgamation. If the prayer for sanctioning of the scheme of amalgamation has = already been made in the original application, there is no need to file a separate application, but in that event, the fact as to the approval by the three-fourths in value of the members/ creditors should be brought to the notice of this Court by way of filing a supplementary affidavit.
Ref: 72 D.L.R (2020) -75
2024-10-22
The plain meaning and scheme of section 228(2) of the Act, as can be gathered from the a Bengali text which is written in a clearer a version without keeping any ambiguity in understanding the same, is that three-fourths of the shareholders/creditors means three-s fourths of the entire shareholders/ creditors; s there is no scope for any company to interpret the law that three-fourths of the shareholders/ creditors means three-fourths of the present sees in the AGM/EGM. It follows that until and unless the three-fourths of the entire shareholders remains present in the AGM/EGM and approves the scheme of amalgamation, the requirements envisaged in section 228(2) of the Act are not fulfilled.
Ref: 72 D.L.R (2020) -75
2024-10-20
In an application under section 228 read b with section 229 of the Act, when, after conducting the meeting with the members and/ or the creditors of the companies as per the Order of the Court, the petitioner (transfer and transferee companies) show the Court that three-fourth in value of the creditors and/or members of each of the companies (transferor and transferee companies) agree to any arrangement of reconstruction/amalgamation/merger and the proposed arrangement is not against the public interest, rather it is aimed at the benefit of both the companies, their members, creditors, employees and other concerns; in other words, if the scheme of amalgamation has been undertaken upon fulfilling the requirements of law laid down in the sections 228 and 229 of the Act, and the Court finds it to be beneficial for all concerns of the transferee and transferor companies, then, the same deserves positive consideration by the Court.
Ref: 71 D.L.R (2019) -01
2024-10-16
The provisions of section 85(3) of the Act are applicable to any type of meetings of any incorporated company, which include statutory meeting, board meeting, extra- ordinary general meeting (EGM) and annual general meeting (AGM) and when any impracticability arises in calling or holding or conducting any types of meeting, the Court may interfere to facilitate the meeting to that end.
Ref: 71 D.L.R (2019) -229
2024-10-15
If no proceeding has been drawn against the company its director officer for failure to comply with any provisions of the Act, the delinquent company its director officer may file an application for exoneration from the fine penalty and, in the event that any proceeding for failure to comply with the provisions of the Act is pending before the competent Court, the Company Court would not deal with the issue of fine/penalty and simply deal with the issues of civil nature, such condonation of delay towards enabling the company to do the needful in compliance with the various provisions of Act.
Ref: 71 D.L.R (2019) -229
2024-10-14
Any member of a company is entitled to apply for calling, holding and conducting its AGM and, additionally, provisions of section 15/3) of the Act empower the Court to such motu call, hold and conduct the AGM of a company when it becomes impracticable to call and conduct its AGM as per the provisions of the Companies Act or Articles of the company.
Ref: 71 D.L.R (2019)-229
2024-10-09
As regards the submission to pass a direction upon the respondents to buy or purchase the shares of the petitioner (minority), I am of the view that, such an order cannot be passed upon mere asking for the same. It will depend on the facts and circumstances of each case and is a matter of discretion to be exercised by the Court keeping the interest of the company and of the aggrieved shareholders as paramount. The Court should consider if the order to buy out shares of the minority (or of a group) would amount to rewarding the person (s), whether minority or majority, who has/have created a situation prejudicial to the interest of the company or of the aggrieved shareholders. In otherwards, the person who seeks such a relief must have his own hands clean. Nor a petition under section 233 shall be treated as if it is a plaint in a suit for partition.
Ref: 70 D.L.R (2018) -728
2024-10-07
The delay in holding the AGM for the year 2013 was a matter purely attributable to a temporary suspension of the application of section 81 by reason of a demanding IPO process embarked upon by the Company in April, 2013. Pending the successful completion of the IPO as per the regulatory requirements cited by the BSEC it would indeed have been fool- hardy for the Company to press on with a pre- mature holding of the AGM by May, 2014.
Ref: 67 D.L.R (2015)- 326
2024-10-06
Section 81 is a procedural section enabling a company to carry on its business as has to be conducted to the fullest extent possible at a general meeting unless faced with impracticability in doing so. The purposive aspect of the exercise of this Court's discretion is simply "to allow the company to get on with managing its own affairs and not be frustrated by the impracticality of calling or conducting a meeting in the manner prescribed by the Company's articles and the Companies Act"
Ref:67 D.L.R (2015) -326
2024-10-05
Amended definition of "defaulter-borrow- er" under section 5 Ga Ga is a declaratory and clarificatory amendment and, as such, it should be regarded to be already in place in the Act. This amended provision under section 5 Ga Ga should have retrospective effect and, as such, should apply to the petitioner retrospectively. This retrospective application of the - amended definition of "defaulter-borrower" may also be viewed as subsequent withdrawal of exemptions by the amended definition of 'defaulter-borrower' as provided by section 5 Ga Ga of the Act will also be applicable to the petitioner as the same is a declaratory and clarificatory amendment of the term 'defaulter- borrower'.
Ref: 67 D.L.R (2015) -271
2024-10-03
A case of total dead lock in running and managing the affairs of the company as a commercial concern has been made out, on facts and from the circumstances revealed from the averments made by the parties as well as from the materials on record, and no device has been kept in these articles to overcome such dead lock either by forming quorum or by using casting vote, while the intention for separation in both groups is obvious from the fact of filing this petition.
Ref: 66 D.L.R (2014) -461
2024-10-02
A shareholder, even if he had succeeded to prove a case of making allotment of shares (in - his favour) otherwise than in cash, under sub- clause (i) or (ii) of clause (b) of section 151(1) of the Act, however, would have no locus stand to file an application under section 233(1) for not -holding shares equivalent to (not less than) 10% of the paid capital in the company.
Ref: 65 D.L.R (2013) -350
2024-10-01
The powers vested in Bangladesh Bank under section 46 of the Act is a power vested in the regulator to enable it to perform its duties, while the provisions of section 106 of the Companies Act, 1994 vesting power in the members of the company to remove a director is not inconsistent with power vested in Bangladesh Bank under section 46 of the Act. Moreover, the provisions of sections 106 and 108 of the Companies Act, 1994 is protected by section 2 of F the Act.
Ref: 64 D.L.R (2012) -67
2024-09-29
The respondent No. 1, without exercising his jurisdiction under section 193 of the Companies Act has issued the impugned order stating that the same cannot be resolved by himself and the parties were required to take resort to the court of law. This is a failure on the part of the Regis- trar to what he is required by law to do in respect of exercising jurisdiction under the provision of Companies Act. Consequently, the respondent No. 1 when issued the impugned Annexure-O failed in his duty which he ought to have per- formed and, as such, the same must be declared to have been issued without lawful authority and a mandamus is required to compel him to exercise his jurisdiction under section 193 of the Companies Act, 1994.
Ref: 61 D.L.R (2009) -226
2024-09-26
Section 95 of the Companies Act providing no forum thereunder, any dispute arising thereto is to be resolved as a civil dispute resorting to the ordinary civil Court of competent jurisdiction and, as such, the inherent jurisdiction under the Companies Act in the absence of any specific provision therein would not be invoked to enforce the provision of section 95 of the Companies Act, as the said provision is providing procedural matters only and not substitutive provision.
Ref: 61 D.L.R (AD) (2009) -83
2024-09-25
High Court Division must be satisfied that it is impracticable to call a meeting in the manner in which it is to be called-Sections 81(2) and 85(3) of the Act pertain to procedural impractica- bility and not to any impediment imposed by operation of law-That impracticability must be determined primarily in the light of the Articles of the Company and the provision of the Companies Act is to be looked into only when they are silent on a particular matter or the Articles are in conflict with the provisions of the Act. In that view, "impracticability" relates to the internal mechanism of the Company and not to any external influence..
Ref: 59 D.L.R (AD) (2007) -60
2024-09-24
Sustainability of a petition for the winding up of a company on the ground that it is unable to pay its debts does not depend on whether the - company is able to pay the debt of the person who moves the petition; the company must be unable to pay its debts, which means that inability is not one to pay the debt of the person O moving for winding up, but the debt as a whole due by the company.
Ref: 57 D.L.R (2005) -337
2024-09-23
Rectification of register-The section gives the Court wide discretion to decide any matter relating to the rectification of a register of members of a company but such power would not mean to empower the Court to consider and decide each and every difference or dispute between the members of a company.
Ref: 57 D.L.R (2005) -149
2024-09-22
The claim is not undisputedly ascertained, and unless it is admitted, it cannot be said it is a debt and the respondent company is liable to pay the debt. Winding up of a company by Court for debt is not called for where there is a Bonafede dispute relating to the existence of the debt.
Ref: 56 D.L.R (2004) -422
2024-09-21
If for any reason it is impracticable to call, hold and conduct a meeting on the happening of any circumstance the Court being satisfied to that effect to call a meeting in the manner such a meeting is to be called, could pass an order for holding the meetings to be conducted by a neutral Chairman even in the absence of an application.
Ref: 56 D.L.R (AD) (2004) -76
2024-09-19
The Court, in considering a prayer for holding a meeting, should be cautious and in normal circumstances should not supersede the rights and wishes of the share-holders and their representatives, the directors to manage and run the company including holding of their meetings.
Ref: 55 D.L.R (2003) -495
2024-09-18
There is no fetter on the powers of the Court in invoking sub-section 3 of section 85 to call, hold and conduct a meeting and not restricted only to the articles or the Act. However, the Court shall not invoke its power on a mere trifling domestic squabble between the directors but only when it is necessary in the paramount interest of the company, looking at the facts from a reasonable commonsense point of view and acts as a prudent person of business to decide whether it has become impracticable to call a general meeting.
Ref: 55 D.L.R (2003) -495
2024-09-17
Winding up-An order of winding up of a company can be made in the discretion of the Court but under section 250 of the Act, when a winding up order has been made, no suit or other legal proceedings shall be proceeded with or commenced against the company except by leave of the Court. If the proceeding under section 241 of the Companies Act satisfies the requirements of law, it shall certainly find its mark in accordance with law and shall not be disallowed or deviated because of other equally efficacious remedies available to the petitioner in another forum.
Ref: 55 D.L.R (2003)-478
2024-09-16
Balance sheet, no doubt, is a good evidence of acknowledgment of any liability of the company. But the balance sheet should not be accepted as an acknowledgment if it is found that the directors or those who are in control of the company took decision favoring or in furtherance of their interest although that was to the detriment of the company and the minority shareholders.
Ref: 52 D.L.R (2000) -249
2024-09-15
In order to be a valid and complete transfer of share for the company to register in its register of members the instrument of transfer must be executed both by the transferor and the transferee, the instrument of transfer must be duly stamped and such instrument is delivered to the company along with the scripts.
Ref: 52 D.L.R (2000) -160
2024-09-14
The application under section 43 of the Companies Act for the rectification of the Members Register is held to be not maintainable as the said matter has not been earlier referred to the Arbitration Tribunal as provided in section 12 of the Ordinance and/or as stipulated in Article 66 of the Articles of Association of the Chamber of Commerce.
Ref: 51 D.L.R (1999) -538
2024-09-08
In all companies either private or public for holding a board meeting a written notice shall be given to every director and civil Court may not interfere when there is a valid meeting. When there is prima facie and invalid resolution the civil Court can interfere. The respondents are restrained by an order of temporary injunction from acting on the alleged resolution of the Board of Directors.
Ref: 50 D.L.R (1998) -598
2024-09-07
From the conduct of the respondent company and in the manner promises were made, assurances given, new repayment schedules chalked out again and again only to be broken giving the impression that the affairs of the company are not clean and above board, the opinion is that the respondent company is unable to pay its debt and it will be just and equitable if the company is wound up. Hence, it is ordered that the respondent-company is wound up with immediate effect.
Ref: 48 D.L.R (1996) -392
2024-09-03
Judgment of a Division Bench of the High Court Division in an appeal against the Judgment of a Single Company Judge exercising power under section 38 is taken to be non-set, having been passed completely without jurisdiction, a classic example of coram non judice.
Ref: 48 D.L.R (1996) -82
2024-09-02
When a Single Company Judge of the High Court Division is exercising power under section 38 of the Companies Act an appeal from its decision has to be taken by way of leave to the Appellate Division under Article 103(1) of the Constitution.
Ref: 48 D.L.R (1996) -82
2024-09-01
The Original Side Rules framed by the Calcutta High Court under Clause 37 of Letters Patent, 1865 have not been preserved by the Law Reforms Ordinance, 1978. The Original Side Rules therefore have no existence now in the eye of law. Therefore there can be no manner of recourse to Rule 1 of Chapter XXXI of the Original Side Rules for preferring an appeal to a Division Bench from the decision of a Single Company Judge under section 38 of the Companies Act, 1913.
Ref: 48 D.L.R (1996) -82
2024-08-26
The inclusion of a Company of which the Government is the 100% shareholder, in the schedule of the Public Corporation (Management and Co-ordination) Ordinance, 1986 (Ordinance 48 of 1986) does not make the company Public Corporation and the provisions of liquidation as contained in the Companies Act are applicable to such an enterprise in spite of the inclusion of the company in serial No. 32 of the schedule on inclusion of the company in the serial 37 of the members of the consultative committee of public enterprises of the said Ordinance of 1986.Government, while doing commercial or trading business through a company, does not function as a department or organ of the government in its administrative capacity and such a company satisfies all the qualifications of a company within the meaning of the companies Act and the petition for its winding up is competent.
Ref: 46 D.L.R (1994) -552
2024-08-22
Money belonging to the company under liquidation cannot be withdrawn and paid to the Official Liquidator for the purpose of dissolution of another company under liquidation to be used for dissolution of the company which has no assets of its own to meet the costs and expenses of its dissolution. The Official Liquidator is to seek fund from the Government in this connection.
Ref: 45 D.L.R (1993) -482
2024-08-20
Winding up of a Company – Whether mismanagement could be a ground for winding up – There may be certain irregularities and omissions in the management of a company. But mere allegation of mismanagement will not make the company liable to be wound up on the just and equitable reason-Where nothing more is established than that the directors have misappropriated the funds of the company an order for winding up would not be just and equitable. Allegations of misconduct of the directors or that the business has been carried on at a heavy loss are per se not grounds on which the court would order winding up. Where petition by a share-holder contains allegations which all relate to the internal management or mismanagement of the company's affairs, it is a matter for the share-holders themselves to deal with and not one that would call for interference by the court.
Ref: 44 D.L.R (1992) -256
2024-08-19
Default in delivery of share certificate – Quashing of proceeding for such default – It is not the complainant’s case that his share certificates were not made ready within time. Once the share certificates are completed and made ready within time, the liability of the accused persons ends. The law does not provide that the certificates are to be made ready for delivery to the complainant. Non-delivery of the share certificates is not an offence and the proceeding is liable to be quashed.
Ref: 44 D.L.R (1992) -107
2024-08-18
Maintainability of application before the Company Court for rectification of share register – It is a discretion of the Court to see whether the point at issue relating to rectification of share register can be resolved on the basis of materials on record. If the case is complicated and very doubtful and if it appears that without resorting to some procedure other than the summary proceeding u/s 38 of the Act a case cannot be disposed of, the Company Court should not interfere with such a matter. But if it is apparent on the face of the records that legal rights of the parties are clear and can be settled on the basis of the materials on the record, the Company Court can exercises its jurisdiction in the matter.
Ref: 44 D.L.R (1992) -48
2024-08-17
The Banking Companies Ordinance 1962 made special provision for banking companies when they are in liquidation and empowered the High Court Division exclusive jurisdiction to decide any claim by or against a banking company. Though this Ordinance is in addition and not in derogation of the Companies Act or any other law for the time being in force, section 60 of the Banking Companies Ordinance by its non obstante clause made provision to prevail over the Companies Act, Civil Procedure Code or any other law for the time being in force.
Ref: 42 D.L.R (1990) -480
2024-08-16
Winding up on plea of inability to pay debts – collateral security of the appellant company along with the value of the lands where its factory is situated and the value of machineries when taken up together, debts to the petitioner bank were fully secured. In such a position no application for winding up can be maintained.
Ref: 42 D.L.R (1990) -474
2024-08-14
Petitioner bank when not entitled to interest changed against the company related to period of turmoil and for the period from the date of its taking over as abandoned property till date of its released. To allow such interest is absolutely a discretion of the Court. During this period the shareholders and Directors had legal disabilities over the affairs of the company and as such they should not be made to pay interest such period.
Ref: 42 D.L.R (1990) -474
2024-08-13
Winding up of a company – Maintainability of the application for winding up on grounds of inability to pay debts was challenged upon a counter-claim of money by the appellant company. The Court found the counter-claim to be just an allegation, no evidence having been placed before the Court in Support of the counter-claim. Such counter-claim was not acceptable.
Ref: 42 D.L.R (1990) -474
2024-08-12
A company may be wound up the Court upon the resolution that the company be wound up by the Court and on the ground that the Court would be of the opinion that it is just and equitable that the company should be wound up.
Ref: 42 D.L.R (1990) -302
2024-08-11
In view of the provision of section 87 B(f) of the Companies Act, the Board of Directors has authority to appoint a new firm of partners to continue the work of managing agents only by way of temporary arrangement.
20 D.L.R (1968) -1056
2024-08-10
Change of a Company which keeping it identity as the same is possible only under section 11 of the Companies Act after following the prescribed procedure for the purpose.
Ref: 20 D.L.R (1968) -173
2024-08-08
Cost of unsuccessful litigation awarded against official Liquidator –Payable out assets of company in priority to costs of liquidation itself.
Ref: 16 D.L.R (1964) -656
2024-08-07
Power of the High Court to given relief under section 281 (2) is limited to cases when proceeding against a person concerned was not before a Court under section 281 (1).
Reliefs under section 281 are available when the act complained of was the result of a bonafide mistake and all the facts disclosed before the high Court.
Ref: 10 D.L.R (1958) -179
2024-08-06
Director of a company –authority to act, determined by the articles of Association of the Company –Any act done by or contract with a Director falling within the scope of the Articles of Association –legally enforceable.
Articles of association determine the scope of functions of the Directors of a company –Persons dealing with the with the Directors not bound to enquire into the specific resolutions.
Ref: 9 DLR (1957) -1
2024-08-04
-‘Company’, ‘liable to be wound up’, ‘arrangement’, ‘court’ ‘include’, explained –Whether sub-section (6) applicable to unregistered Company deallt with by section 271. –The purpose of section 153---difference between Sa. 153 and 153A.
Ref: 8 DLR -325
2024-08-04
-‘Company’, ‘liable to be wound up’, ‘arrangement’, ‘court’ ‘include’, explained –Whether sub-section (6) applicable to unregistered Company dealt with by section 271. –The purpose of section 153---difference between Sa. 153 and 153A.
Ref: 8 DLR -325
2024-07-18
The High Court Division has discretion under section 248 of the companies Act, 1994 to restrain further proceedings in any suit against the company, not against the guarantors. But in the concerned suit, the company alone is not the defendant, rather two other guarantors are also defendants along with the company and their liability is co-extensive with that of the company (the principal debtor) as per provision of section 128 of the Contract Act, 1872. This situation has to be taken into consideration in exercising discretion, under section 248, while considering a prayer for restraining further proceeding of a suit or proceeding. So, the High Court Division found balance of convenience and inconvenience in favuor of the applicant. Fartex Fashion Wear Limited-Vs.-Mrs.Amena Islam and others.
Ref: 4 ALR -2014 (2) -313
2024-07-17
Board of Directors were competent to issue the right shares.
A plain reading of clause –(c) to sub-section (1) and sub-section (2) of section 155 clearly shows that the shares of a company remain under the control and disposal of the directors and the Board of Directors were competent to issue the right shares in favour of the respondent No.4 in the manner it has been allotted.
Ref:4 ALR -2014 (2) -63
2024-07-16
No director or Directors are or shall be allowed to from any company with the word “Rangs” ethers as a prefix or as a suffix except that owners/shareholder of Rangs Limited shall be entitled to float a company under the name and style of “Rangs” etc. Only owner/shareholders of a company are entitled to float a company under the name that company, no director or directors are or allowed to the same.
The Registrar of Joint Stock Companies Firms can ask any company to change the name and object of that company as the name of the company has similarly and resemblance with the name and object of another company, which was earlier incorporated.
Ref:4 ALR (AD) 2014 -209
2024-07-15
The Appellate Division held that in exercising power under section 193 of the Act in certain matters the Registrar is required to perform quasi-judicial function and is authorized to make some investigation as may be found necessary for discharging his duties including the right of hearing before imposing fine to negligent or defaulting companies, also by engaging section 397 read with section 393 of the Act, to lodge complaints in appropriate Court against those who make false statement through documents required by or for the purpose of any provision of the Act, but such quasi-judicial in no way can be stretched to conduct a hearing as to the managing directorship of the Company which is the domain only of a competent Court, so the Registrar acted beyond his statutory power in the issuing the impugned notice vide annexure-‘K’ to the writ petition asking the writ petitioners to participate in the hearing on the re-instatement of the appellant as managing director of the company.
Ref: 4 ALR (AD) -2014 (2) -13
2024-07-15
When Independent Chairman required.
Company Bench’s view that exceptional circumstances has to be made out for exercising special powers by the court, particularly in the absence of any provision in section 81 (2) of the Act that does not require appointment of the independent chairman. The Bench has the considered that an independent Chairman should not be appointed on mere asking for the same or to make it a routine for holding general meeting. There must exist exceptional circumstances to justify appointment of independent chairman and such appointment must be in the interest of the company, not to serve the purpose or whims of any person or group. Such exceptional situation has to be objectively assessed and the powers must be used with circumspection by this court.
Ref: 5 ALR -2015 (1) - 22