1. In Re New British Iron Company, [1898] 1 Ch.

324

The articles of association of a company required its directors to possess a share qualification; and provided that the remuneration of the board “shall be an annual sum to be paid out of the funds of the company”. The company passed an extraordinary resolution in favour of winding-up voluntarily, and an order was made continuing the voluntary winding-up under the supervision of the Court. At the commencement of the winding-up a considerable sum was due to the directors of the company, for directors' fees and in the winding-up they claimed to rank as ordinary creditors in respect of this sum, notwithstanding s. 38 of the Companies Act, 1862. The articles of association of a company required its directors to possess a share qualification; and provided that the remuneration of the board “shall be an annual sum of 1000l. to be paid out of the funds of the company”. Held, that although these provisions in the articles were only part of the contract between the shareholders inter se, the provisions were, on the directors being employed and accepting office on the footing of them, embodied in the contract between the company and the directors; that the remuneration was not due to the directors in their character of members, but under the contract so embodying the provisions; and that, in the winding-up of the company, the directors were entitled to rank as ordinary creditors in respect of the remuneration due to them at the commencement of the winding-up.

2. Borland's Trustee v. Steel Brothers & Co.Ltd., [1901] 1 Ch 279.

The plaintiff was the trustee in bankruptcy of Mr. J. E. Borland, and he claimed a declaration that the defendant company were not entitled to require the transfer of certain shares held by the bankrupt at any price whatever, and that the transfer articles of the company purporting to give them power to compel such transfer were void. The defendant company was a private company formed to acquire the business of Steel Brothers & Co., in which the bankrupt had been a partner. The company carried on business as merchants and commercial agents and rice millers.
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Ltd. but he still held seventy-three ordinary shares. It was held. articles of association contained a clause in which it was stated that the plaintiff should be solicitor to the company. The plaintiff brought an action against the company for breach of contract in not employing him as solicitor to transact their legal business on the terms of the articles. and were duly registered. and the company incorporated under the Companies Act. and the plaintiff was appointed trustee of his estate. Eley v. At this date he had parted with all his preference shares.Borland was adjudicated bankrupt. He was then neither a “manager” or “assistant. The effect of them is that the trustee in bankruptcy is forced to part with the shares at something less than their true value. for the usual and accustomed fees and charges. and should transact all the legal business of the company. 1862. and the result is that the asset is not fully available for the creditors. and should not be removed from his office. It was held that. that the articles of association were a matter between the shareholders inter se. unless for misconduct. 2 . The articles of the company provided that if any member became insolvent his shares would be sold by the directors for a price fixed by them. or the shareholders and the directors. and did not create any contract between the plaintiff and the company. It was held that shares having been purchased on the terms and conditions contained in the articles. and cannot prevail when bankruptcy has supervened. (1876) 1 ExD 88. The Positive Government Security Life Assurance Company. The articles were signed by seven members of the company. but ultimately the company ceased to employ him and employed other solicitors. the embers are bound to the company by the provisions of the memorandum and articles. it was not open to the trustee of an insolvent member to say that those terms were not binding. In this case. The plaintiff acted as solicitor to the company for some time. including parliamentary business.” The questions of perpetuity have been raised and the articles constitute a fraud upon the bankruptcy laws. 3.

Guinness v. An injunction to restrain the association from employing Chapman as secretary. 3.050. On December 18. 5. the plaintiff issued a writ against the association and Chapman claiming: 1.000.4. and that the income. 2. that article 8 was invalid. An injunction to restrain 3 .. and that the capital of the company was £1. and in a way not incidental or conducive to the attainment of those objects. The inspection took place in May. An injunction to restrain the defendants from taking any steps to expel the plaintiff from the association. [1915] 1 Ch. the B fund was to belong to the owners of B shares. should be applied so as to make good to the holders of A shares a preferential dividend of £5 per cent on the amounts paid up on the A shares. By the memorandum of association of a company limited by shares it was stated that the objects of the company were. the cultivation of lands in Ireland. 1906. 881. The plaintiff was elected as a member in ‘Kent or Romney Marsh Sheep-Breeders’ Association' and a written notice of his election was sent by the secretary with an intimation that his flock would be inspected. and other similar purposes there specified. Land Corporation of Ireland. and to restrain Chapman from acting as secretary.000 A shares of £5 each. as it purported to make the B capital applicable to purposes not within the objects of the company as defined by the memorandum of association. and 3500 B shares of £100 each. Subject to this. and to do all such other things as the company might deem incidental or conducive to the attainment of any of those objects. The profits of the company. It was held. 1914. (1882) 22 ChD 349. and that the directors must be restrained from acting upon it. were to be applied in payment of a noncumulative dividend of £5 per cent to the B shareholders. Hickman v. By the 8th of the contemporaneous articles of association it was provided that the capital produced by the issue of B shares should be invested. divided into 140. and the surplus was to be divided rateably between the A shareholders and B shareholders according to the amounts paid up on their respective shares. Kent or Romney Marsh Sheep breeders' Association. and so far as necessary the capital. after paying the £5 per cent dividend to the A shareholders.

Mr. Riche. Further or other relief.the defendants from doing any acts in derogation of the plaintiff's rights as a member. 5. v. An order that all minutes be expunged which did not accurately record the proceedings of the association. It was held that. 653 Ashbury Railway Carriage and Iron Company was carrying on a very extensive business in making things needed for a railway company.R. and consequential relief. An injunction to restrain Chapman from calling any meeting of the association except in accordance with the rules. 8. 4 of the Arbitration Act. Damages for unlawfully refusing to register the plaintiff's sheep and a declaration that the plaintiff was entitled to have his sheep registered.L. 4. it is clear on the authorities that if there is a submission to arbitration within the meaning of the Arbitration Act. there is a prima facie duty cast upon the Court to act upon such an agreement. (1874-75) L. 10. and that the matters in question in the action be referred to arbitration in accordance with the provisions of article 49. An injunction to restrain the defendants from incorrectly recording such resolutions in the minutes. Ashbury Railway Carriage and Iron Co. A declaration that the plaintiff was entitled to have the resolutions and proceedings of the association and of any committee thereof truly and accurately entered in the minutes. 4 and direct that the matters in dispute in this action be referred to arbitration accordingly. Hector Riche. 6. The defendants issued a summons asking that all further proceedings in the action be stayed pursuant to s. 7. the Defendant in Error. or alternatively under the submission to arbitration contained in the plaintiff's written application for membership. 6. the contract so made between the plaintiff and the association is also a submission in writing within the true meaning and intent of the Arbitration Act. 9. It was said that. Costs. and made an order to stay under s. 7 H. The Belgian Government granted to certain persons named Gillon and Bertsoen a 4 . but had not been concerned in the construction of railways themselves. and in particular that the entry be expunged stating that a certain committee appointed to inspect the plaintiff's sheep and to see that they were tattooed was appointed on Chapman's motion and not on the plaintiff's motion. was carrying on business in Belgium for the construction of the line. Ltd.

so that even the subsequent assent of the whole body of shareholders would have no power to ratify it. Thirdly. The Court was to be at liberty to draw inferences of fact. the acts of the Directors. and of meetings of the Company. the declaration of the objects of the company made in the Memorandum of Association. The purpose of the formation of the company was. and consequently the profit from the construction of the line would be increased. being of a nature not included in the Memorandum of Association. The arrangement was for the Ashbury Company to purchase the concession from Messrs. Riche and the directors of the Ashbury Company agreed to form a company to work the concession. Gillon for £70. Riche should construct the line and the Ashbury company undertakes to supply the requisite funds—was said to have been adopted because the rails. represented that company. as beyond the provisions of the statute. In this negotiation. supplied by a Belgian house would be free from the duty that the Belgian Government imposed on rails imported from England. Riche began and for some time continued the works for the construction of the line and the Ashbury directors paid. 958 5 . The question of ultra vires was to depend on the following considerations. the words of several of the Articles of Association. and entered into the contracts. [1924] A. &c.. Difficulties about payment arose as the work went on.C. A contract made by the directors of such a company upon a matter not included in the Memorandum of Association is ultra vires of the directors. it cannot be ratified even by the assent of the whole body of shareholders.000. 7. Ltd v Lewis. Nor can such a contract be rendered binding on the company though afterwards expressly assented to at a general meeting of shareholders. Riche brought an action for damages for breach of contract. Hence held that this contract. Official Receiver and Liquidator of Jubilee Cotton Mills. was ultra vires not only of the directors but of the whole company.provisional concession for making a line of railway. one of the directors of the English company. Firstly. Secondly. and to give the contract for its construction to Messrs. Being in its inception void. the English shareholders not adopting the views of their directors as to the speculation. and is not binding on the company.

Rayfield v Hands and Others. as the Court found on the facts. included any portion of the day on which the company was incorporated and did not mean "from the commencement of the next day". is not wholly void. but really to provide for promotion profits. who obtained a considerable sum by realizing them. also assuming that the allotment was void. and that the words "from the date of incorporation" which provided that the company from the date of incorporation mentioned in the certificate was a body corporate capable of exercising all the functions of an incorporated company. consequently that the allotment of shares and debentures was not void on the ground that it was made before the company came into existence. The greater part of these shares and debentures was transferred to the respondent.The respondent. the respondent. was a promoter of a company formed for the purchase of a cotton mill and the carrying on of the business of cotton spinners. 8. [1960] Ch. that an allotment of shares and debentures made before filing a statement in lieu of prospectus. having been put by the company in control of something out of which he made a profit. the official receiver and liquidator issued a misfeasance summons against the respondent to render him liable for certain secret profits alleged to have been made by him as promoter. It was held. though the shares were in fact worthless. It was held that. before filing any statement in lieu of prospectus. 1. but apparently it was not in fact signed by the registrar. The company. as having been made before a statement in lieu of prospectus was filed. 6 . The company having been compulsorily wound up. The respondent objected that there had been no valid issue or allotment of the shares and debentures alleged to constitute the profit. was bound to account to the company for that profit. allotted a large number of fully paid shares and debentures to the vendor as the ostensible consideration for the purchase. the certificate of incorporation was conclusive as to the date on which the company was incorporated. The memorandum and articles of association of the company were accepted by the Registrar of Joint Stock Companies and the certificate of incorporation was dated on that day.

Shuttleworth v Cox Brothers and Co. that he should join the company as a party in addition to the directors. as directors of the company. was the registered holder of 725 of those shares. of which 2. was a private company carrying on business as builders and contractors. having a share capital of £4.B. and (3) that an inquiry be ordered if necessary to ascertain such fair value.Field-Davis Ltd. and which provided that the directors "will take the said shares equally between them at a fair value. That article 11 was concerned with the relationship between the plaintiff as a member and the defendants. The plaintiff. and for an order that the directors should purchase such shares at a fair value:It was held: that upon their true construction the articles required the directors to purchase the plaintiff's shares at a fair price. Alfred William Scales and Donald Davies were at all material times the sole directors of the company. by his statement of claim asked (1) that the fair value of the plaintiff's said shares might be determined by the court. And also held that it was not necessary. on the ground that the articles imposed no such liability upon them. the plaintiff by a notice in writing informed the defendants.000 ordinary shares of £1 each. or in default of agreement. Later. Ltd. Frank Leslie Rayfield. The defendants denied any liability to take up and pay for the shares and the plaintiff. a company limited by shares. divided into 4." In accordance with article 11 the plaintiff so notified the directors. Gordon Wyndham Hands. and Others. but as members of the company. who contended that they need not take and pay for the plaintiff's shares. 9 7 . of his intention to transfer his 725 shares to them as provided by article 11.000. (Maidenhead). article 11 of the articles of association of which required him to inform the directors of his intention to transfer shares in the company. and the defendants. The plaintiff was a shareholder in a company. not as directors. (2) that the defendants be ordered to purchase such shares at their fair value in such proportions as they might agree upon. for the plaintiff to succeed in his action.900 fully-paid shares had been issued. On the plaintiff's claim for the determination of the fair value of his shares. [1927] 2 K. 9. then equally.

between the plaintiff and the company contained in the articles in their original form was subject to the statutory power of alteration and that if the alteration was bona fide for the benefit of the company it was valid and there was no breach of that contract. was a works manager and a director of the defendant company. consequently. In an action by the plaintiff for breach of an alleged contract contained in the original articles that he should be a permanent director. there was no ground for questioning the decision of the shareholders that the alteration was for the benefit of the company. if any. and for a declaration that he was still a director of the company. The defendant company was incorporated to acquire and take over as going concerns and carry on the business of English and foreign timber merchants and builders' merchants then carried on by the plaintiff.namely.The plaintiff. The capital of the company was 25. that. therefore. under the style of Cox Brothers & Co.000 shares of 1 each. claimed damages for having been dismissed from his office of manager and wrongfully excluded from his position as director and for a declaration that he was still entitled to be a director in the circumstances hereafter mentioned. 8 . a request in writing by all his co-directors that he should resign his office.000 divided into 25. that the plaintiff was not entitled to the relief claimed. Owing to irregularities in the accounts furnished by the plaintiff of sums received by him on the company's account an extraordinary general meeting of the company was held and a special resolution was passed that the articles should be altered by adding a seventh event disqualifying a director . and. Also held. and that they should be permanent directors. The greater number of these shares was held by the directors. The articles of association of a company provided that the plaintiff and four others should be the first directors of the company. There was no evidence of bad faith on the part of the shareholders. there being no evidence of bad faith. that there was no ground for saying that the alteration could not reasonably be considered for the benefit of the company. that the contract. Such a request was subsequently made to the plaintiff. and that each of them should be entitled to hold office so long as he should live unless he should become disqualified from any one of six specified events.

and one S. in consideration of his obtaining for them a contract from the company for the construction of the tramways. & P. It was held. Company on the ground of the fraud of the defendants (promoters of the company). The jury found that these contracts were material to be made known to the intended shareholders of the company. & P. to recover the amount paid by him on certain shares taken by him in the L. and the defendant G. 38 . although they are omitted under the bona fide belief that it is unnecessary to specify them. to G. and that the defendants were liable It was also held. 469 Action brought by the plaintiff under the Companies Act. s.. which proved worthless.D. 9 .R. the other a contract between the defendants. Twycross v Grant and Others.10. that the words “knowingly issuing” mean intentionally issuing a prospectus without inserting the contracts which are required by that section to be specified. (1876-77) L. in omitting from the prospectus two contracts entered into by them as promoters—the one a contract between the defendants C.P.. for the purchase of certain foreign concessions for the construction of tramways which the company was afterwards incorporated to make and work. as to certain payments to be made by C. 1867. 2 C. that the contracts ought to have been specified in the prospectus. & P. C. by means of which fraud the plaintiff had been induced to take the shares.