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    LAw

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    LAw

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    16 views1 page

    LAw 3

    Uploaded by

    XiaoMeiMei
    LAw

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    1. Discuss the cases of Erlanger v New Sombrero Co. and Gluckstein v Barnes.

    There are two duties of a promoter which that promoter is not allowed to derive a profit
    from the sale of his own property to the company unless all material facts are disclosed. If a
    promoter contracts to sell his own property to the company by without making a full disclosure,
    the company may wither repudiate the sale or affirm the contract and recover the profit made
    out of it by the promoter. Either way the dishonest promoter is deprived of his advantage.
    In Erlanger v New Sombrero phosphate Co., a syndicate of which Erlanger was the head
    purchased an island containing mines of phosphate for 55,000 Pounds. E then formed a
    company to buy this island. A contract was made between X and nominee of the syndicate and
    the company for its purchase at 110,000 Pounds. The details of the sale were not disclosed to
    the shareholders or to an independent Board of directors. The company now sought to rescind
    the contract of sale. It was held that as there had been no disclosure by the promoters of the
    profit they were making the company, was entitled to rescind the contract.
    Next, a promoter cannot make either directly or indirectly any profit at the expense of
    the company he promotes, without the knowledge and consent of the company and that if he
    does so, in disregard of this rule, the company can compel, him to account for it. In relation to
    disclosure it may be noted that half disclosure is worse than none.
    In Gluckstein V.Barnes was in difficulties and the debentures were worth very little. A
    syndicate consisting of X, Y and Z purchased a great number of debentures very cheaply. Then
    they purchases Olempia for 140,000 Pounds and sold it to new company, which they promoted
    for 180,000 Pounds. Consequently, the debentures were paid in full out of 140,000 Pounds
    and the syndicate made a profit of 20,000 pounds on debentures discount. X, Y and Z became
    directors of the new company. They disclosed their profit of 40,000 but not their profit of
    20,000. It was held that there was of insufficient disclosure and X, Y and Z must pay 20,000
    to the company.

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