Key Cases: Company Law

Christopher Shepherd

• Publisher: Routledge
• Year: 2013
• eBook ISBN: 9781444171655
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

Key Cases is the essential series for anyone studying law, including A Level, LLB, ILEX and post-graduate conversion courses.Understanding and memorising leading cases fully is a vital part of the study of law - the clear format, style and explanations of Key Cases will ensure you achieve this.Key Cases provides the simplest and most effective way for you to memorise and absorb the essential cases needed to pass your exams.Key Features: * All essential and leading cases explained* User-friendly layout and style* Cases broken down into key components by use of a clear symbol systemAdditional high-quality revision material is provided on the interactive website: www.unlockingthelaw.co.uk

Chapter 1

Promotion and Formation

1.1 Promoters

1.1.1 ‘Promoters’ Defined

CA	Twycross v Grant (1877) 2 CPD 469

Cockburn CJ

‘A promoter, I apprehend, is one who undertakes to form a company with reference to a given project and to set it going and who undertakes the necessary steps to accomplish that purpose’.

QBD	Whaley Bridge Calico Printing Co v Green (1879) 5 QBD 109

Bowen J defined a promoter as a business term, rather than a legal one:

‘The term promoter is a term not of law, but of business, usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence’.

Giving professional advice will not in itself make a person a promoter: Re Great Wheel Polgooth Co Ltd (1883) 53 LJ Ch 42.

1.1.2 Promoters’ Duties and Remedies for Breach

HL	Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218

	Company promoters purchased the lease of an island in the West Indies for £55,000. The island allegedly contained large quantities of phosphate. The lease was held in the name of a nominee. A prospectus was prepared and there were many subscribers for the company’s shares. The company then purchased the lease from the promoters for £110,000 but the prospectus did not disclose the interests or profit to be made by the promoters. The phosphate turned out to be of low grade. The shareholders replaced the original board of directors, who sought rescission of the contract.
	The court ordered rescission of the contract. The promoters had broken their fiduciary duty to disclose their interest in the lease and their profit on resale to the company. Disclosure should have been made either to an independent board or the shareholders.
	Lord Cairns LC said: ‘They stand in my opinion, undoubtably in a fiduciary position … I do not say that the owner of property may not promote and form a joint stock company, and then sell his property to it, but I do say that if he does he is bound to take care that he sells it to the company through the medium of a board of directors who can and do exercise an independent and intelligent judgment on the transaction, and who are not left under the belief that the property belongs, not to the promoter, but to some other person’.
	Rescission will not be granted if one of the ‘bars’ to rescission applies. These are: (1) affirmation of the contract, (2) lapse of time, (3) acquisition of third party rights, (4) impossibility of restoring the parties to their pre-contractual position, and (5) liquidation of the company.

HL	Gluckstein v Barnes [1900] AC 240

The promoters purchased property for £140,000 and sold it to the company for £180,000. Their profit of £40,000 was disclosed in a prospectus inviting the public to buy shares but it did not disclose a further profit of £20,000, made when they purchased charges on the property at a discount which were later repaid in full.

The promoters were liable to repay the profit to the company as there had been inadequate disclosure.

Rescission was not possible as the company had gone into liquidation and four years had elapsed since the sale of the property to the company. The liquidator’s action was against Gluckstein only but the liability of promoters is both joint and several.

CA	Re Cape Breton Co (1885) 29 Ch D 795

A syndicate, including F, purchased some coal-bearing areas for £5,000. A company was promoted two years later and F became a director. The coal areas were sold to the company for £44,000 without F disclosing his interest as a part owner of the land. The company affirmed the contract but later went into liquidation. The liquidator commenced proceedings against F for breach of duty.

The com...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• Table of Cases
• Preface
• Chapter 1: Promotion and Formation
• Chapter 2: Corporate Personality
• Chapter 3: The Company Constitution
• Chapter 4: Transactions with Outsiders
• Chapter 5: Meetings and Resolutions
• Chapter 6: Share Capital
• Chapter 7: Debentures and Charges
• Chapter 8: Directors
• Chapter 9: Minority Protection
• Chapter 10: Liquidation
• Index