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Flashcards in Shares Deck (40):
1

electric company being nationalised. Articles gave the preference shareholders dividend, preference in their liquidation for their basic money. Unusual share. The preference shares had full voting rights. They had majority, they could run the company. Very prudent. They had built  up considerable surplus funds.

Held: Not entitled to any share of the surplus assets. Following Scottish insurance case above. First nail in the surplus assets case.

Re Isle of Thanet Supply Co [1950]

2

Preference members were entitled by articles share of the surplus assets if they went into liquidation. Now the company was proposing to get rid of a reduction of shares, as par, no surplus.Preference shareholders argued it was Not fair because that’s less than what they would get in a liquidation.

Held: you would get what you get in a liquidation is only relevant if the liquidation is likely.

Re William Jones & Sons Ltd [1969]

3

Re William Jones  Sons Ltd [1969]

Preference members were entitled by articles share of the surplus assets if they went into liquidation. Now the company was proposing to get rid of a reduction of shares, as par, no surplus. Preference shareholders argued it was Not fair because that’s less than what they would get in a liquidation.

Held: you would get what you get in a liquidation is only relevant if the liquidation is likely

4

coal company was going into liquidation and wanted to reduce capital by paying off preference members.Company proposed to pay off preference at par and not allow preference right in surplus assets. 

Held: No right in the liquidation of a share of the company's surplus assets.

 

Scottish Insurance v Wilson's & Clyde Coal Co

5

Re Saltdean Estates Co Ltd [1968]

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Company had 50k ordinary shares and £20k preference shares. Company now proposing to pay off the preference shares at less than they were worth on the market. Company was very profitable paying large dividends. So the preference shares objected. The company wanted to replace the preference shares with a loan.

held: Shares can be written off at any time provided they get what they would have got in a liquidation. Part of bargain

6

Company had 50k ordinary shares and £20k preference shares. Company now proposing to pay off the preference shares at less than they were worth on the market. Company was very profitable paying large dividends. So the preference shares objected. The company wanted to replace the preference shares with a loan.

held: Shares can be written off provided they get what they would have got in a liquidation.

Re Saltdean Estates Co Ltd [1968]

7

Scottish Insurance v Wilson's Clyde Coal Co

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coal company was going into liquidation and wanted to reduce capital by paying off preference members.Company proposed to pay off preference at par and not allow preference right in surplus assets. 

Held: No right in the liquidation of a share of the company's surplus assets.

8

Re Isle of Thanet Supply Co [1950]

electric company being nationalised. Articles gave the preference shareholders dividend, preference in their liquidation for their basic money. Unusual share. The preference shares had full voting rights. They had majority, they could run the company. Very prudent. They had built up considerably surplus funds.

Held: Not entitled to any share of the surplus assets even when can run the company.

9

Prudential Assurance v Chatterley-Whitfield Collieries [1949] AC 512

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Insurance company bought a lot of preference shares in chatterly whitfield. Chatterly Whitfield wanted to get rid of the preference shares even though weren't winding up. Preference shareholders didn’t want to go, because they get surplus assets.

Hol:

1. Preference shareholders have no right to be permanent.

2. As long as they get what they would have got in a liquidation. (But that doesn’t amount to much as they have no right to surplus assets.)

10

Re Northern Engineering Industries plc [1994]

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Need 3/4 of the class to remove a class right. 

11

Re Hunting plc [2005] 2 BCLC 211

if you don't make a class right you can get kicked out. 

12

What article is the right to ask for a rectification of the register of a the company's shares

S116 - asks for what?

13

PSC register requires disclosure when?

·          If you have 25% of the shares or the votes.

·         Or are you able to appoint or remove the CEO.

·         Or if you have significant influence.

14

3 steps for transferring shares:

  1. Transfer form and share certificate sent to the buyer
  2. Transferee signs transfer certificate and sends transfer certificate and share certificate to the company
  3. Company registers the new shareholder and issues new share certificate.

15

process and case law for step 1 of transfer

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  • Re Paradise Motor Co Ltd [1968] 2 All ER 625
  • S770(1) -
    • Means Anything (documents etc) that demonstrates a desire to transfer. But this has not transferred legal title. Makes B the equitable title. B will endorse the transfer and send it to the company. A is owning it on trust for B.
    • Transferor executes transfer form and delivers transfer form and the share certificate to the buyer.
      • On the back of an envelope is fine for part 1 of the criteria. Needs to be some sort of instrument attracting stamp duty
  • Nisbet v Shepherd [1994] BCC 91
    • The instrument of transfer doesn’t have to specify price or value.

16

case law and process for step 2 of transfer. 

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2. B will endorse the transfer, send it to the company and accept liability.

  • Transferee executes the transfer form by signing it and sends transfer form and share certificate to the company.

 

  • Dempsey v Celtic FC Ltd [1993] BCC 514
  • Authority for 2nd part of transfer. B will endorse the transfer and accept liability. Needs to sign it unless money owed on the share.

17

case law and process for step 3 of transfer. 

3. Register the share certificate with correct legal titles on the register. Issues share certificate within 2 months. S771(1)

  • Company will put it into the register, change the names and issue new share certificate to B. he is now the legal owner.
  • The company registers the transferee onto the company’s registered shareholders. Legal title is passed her.

18

Claimant buys a share from a third party relying on a valid transfer certificate and share certificate issued by the company?

o   Re Bahia and San Francisco Rlwy (1868) LR 3 QB 584

Held: company is estopped from denying their claim. The claimant has relied on a valid share certificate issued by the company. 

19

The defendant bought a share and received a forged transfer form and a share certificate. The defendant presented the forged transfer form and share certificate to the company. The company changed the register and sent a new share certificate to the defendant.

 

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o   Sheffield Corporation v Barclay [1905] AC 792

  • the presentor of the improper/forged transfer form to the company indemnify's the company of any liability arising from invalid shares.
  • They impliedly warrant the authenticy of the transfer form. 

20

 

A  transfers his share to another person. The company mistakingly sends A back the share certificate. A uses this as a security against B or sells it to B.

  • Longman v Bath Electric Tramways Ltd [1905]
    • the certificate says they were the owner at the time of issue. the certificate does not say they still are. The register would have shown otherwise. 
    • the fraudulence must occur before it is sent to the company, not after. 

21

A buyer of a shares has relied on a forged share certificate. 

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Ruben v Great Fingall Consolidated [1906]

  • Forged share certificates are nullities. A company is not estopped from refusing to register the shareholder who relies on a forged share certificate.

22

What section is the right for directors to refuse registration of shares?


S771 (1) b 

  • 'give transferee notice of refusal together with reasons'
  • 'within 2 months.'

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23

Where board refuses to make a quorum to restrict a transfer?

o   Re Copal Varnish Co Ltd [1917] 2 Ch 349

 

  • · Court said they would order registration. You must decide to register within 2 months. If don’t say within 2 months it is automatically approved.
  • ·  Have to act bona fide, have to give reasons and you have to do within 2 months.

 

24

What basis/case do reasons need to be on when restricting a transfer of shares?

Re Smith v Fawcett [1942] COA

  • Court has to decide did directors subjectively act bona fide for the benefit of the company. 

Village Quay Marina v Acland [1998]PC (Bermuda)

  • Court interfers only in bad faith
  • Directors are prima facie presumed acting in good faith. BOP on claimant.
  • s172 - promoting success of company - (1)f - acting fairly between members. 

25

Personal dispute in the company and director blocks black sheeps transfer out of spite. 

o   Popely v Planarrive ltd [1997] 1 BCLC 8

  • just because you have a personal dispute doesnt mean the reason for blocking transfer wasn't acting bona fide. 

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26

What is a pre emption clause and the procedure?

  • Do X's actions invoke the pre emption clause. The pre emption clause requires Existing shareholders to get first opportunity to purchase available shares in private companies.
  • Seller issues transfer notice to the secretary who offers shares to existing shareholders. if can't agree price then auditor gives value. if still no decision then permitted to sell outside. 

27

What happens if the Company does not have pre emption procedure?

Tett v Phoenix 

·         If no procedure, courts will imply them. Procedure would be similar to formal procedure.

28

Lyle & Scott v Scott trustees [1958]

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  • Accepted purchase price but not issued transfer form or documents.

 

  • Held: desirous of transferring shares. Done everything required to transfer certificates and bound to deliver certificates when asked to do so. 

29

Safeguard Industrial Investments Ltd v Nat Wes Bank Ltd [1982]

 

 

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  • Executor put shares on trust . Beneficiaries strictly stated to not transfer legal title. 

 

  • Held: Not triggered. Pre emption triggered when legal title was transferred.

30

o   Theakston v London Trust plc [1984] BCLC 390

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  • did deal that he was bound to issue transfer notice and voted when asked to. 

 

  • Held: Didnt issue a transfer notice. transfer in beneficial title was irrelevant. 

31

Re Macro (Ipswich) Ltd [1994]

 

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  • Executed the transfer certificate, sending it to the buyer, but didnt complete transform form to company (step 2). 

 

  • Held: triggered. Put himself in position where he must transfer legal title on request. 

32

o   Re Coroin Ltd (No 1) [2012] COA

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  • doesnt invoke the pre emption clause if registered owner remains the same. when buying a holding company. 

33

o   Re Sedgefield Steeplechase Co Ltd [2001]  (Scotto v Peech)

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  • pre emption clause states 'anyone who intends to transfer their shares'.
  • sold beneficial ownership and bound to vote and comply with outsider. 
  • agreement contained a vlause 'strictly not to do anything against the articles'. 

 

  • Hoffman HC: Not triggered. general principle - 'Done nothing inconsistent with articles at that point then not triggered'. 
  • COA: No general principle. Matter of intention and case by case construction.
  • obligation to not do anythig contrary to the articles was enough to demonstrate the requisite intention to invoke was not met. 

34

o   Hurst v Crampton Bros [2003] BCLC 204

  • executed transfer form with company's auditors.

 

  • Held: Triggered

35

o   Rose v Lynx Express [2004] 1 B.C.L.C 455

Pre emption clause applied to any transfer of the legal or beneficial ownership of the shares, and also to any sale or disposition to any legal or equitable interest in a share whether or not be the registered owner.

36

Re Coroin Ltd (No 2) [2013] EWCA

  • breach of pre emption clause is a breach of duty by the directors.
  • Arden – it would be breach but if the shares were registered it would remain valid until it was changed on the register and unless there was a court order. Wouldn’t automatically avoid the transfer.
  • Lj Rymer disagrees– any transfer of breach of transfer clause is breach.

37

what are the benefits and law of a variation of a class right?

 

o   Section 630

·         Class rights can only be altered by special resolution of the class, not the company.

·         By making it a class right, it is unalterable, It is ringfenced and protected.

o   Section 633

·          further protection. Even if 75% approve it, the 15% who didn’t approve it can apply to the court to have it stopped. Why is that? One person might hold 80% of preference shares.

38

What is a class right (with case law)?

 

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A class right is right that individual classes have. they have specific statutory protection. 

o   Cumbrian Newspaper v Cumberland & Westmorland Herald [1986] 2 All ER 816

  • a specific right in the articles to a specific member. 
  • Held: has class right protection

o   Re BML Group Ltd [1994] BCC 502

  • a shareholder had a specific right in the shareholder agreement. 
  • Held: it was like a class right. It was a personal right to this specific individual. Matters because class rights are protected.

39

first way of getting round law on variation of class right

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Sub Division Trick 

 

Greenhalgh v Arderne Cinemas Ltd [1946] 1 All ER 512

  • can divide your shares so you get a higher voting right. 
  • Court said : no your votes are the same as they always were. The fact that this is how your voting power has been reduced is enough. Sceptical decision.

40

Second way of getting round the variation of class right law?

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Purchase of extra class shares 

White v Bristol Aeroplane Co Ltd [1953] Ch 65

  • as ordinary shareholder can issue more preference shares to yourself. used to outvote pre existing preference shares. 
  •  
  • COA: no same votes as you always have. See further down the line. Likely to be overruled. Sceptical. see unfair jurisprud

o   Re John Smith's Tadcaster Brewery Co Ltd [1953] Ch 308

·         White v Bristol is followed. Sceptical.