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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Scottish India-Rubber Co., Ltd Petitioners [1919] ScotLR 56 (15 October 1919) URL: http://www.bailii.org/scot/cases/ScotCS/1919/57SLR0056.html Cite as: [1919] ScotLR 56, [1919] SLR 56 |
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Page: 56↓
The memorandum of association of a company provided that its share capital was £5000 divided into 4000 ordinary shares of £1 each and 1000 deferred shares of £1 each, with power to divide the shares in the present or future capital of the company into several classes, and to attach thereto respectively any preferential, deferred, qualified, or special rights, privileges, or conditions. 3500 of the ordinary shares and 1000 of the deferred shares were issued and were fully paid up. By resolution of an extraordinary general meeting, confirmed at a subsequent extraordinary general meeting, the company passed a special resolution deleting the above-quoted provisions of the memorandum of association, and substituting therefor the following—“The share capital of the company is £5000, divided into 5000 ordinary shares of £1 each,” with similar power to divide into classes and attach conditions. The company, without passing any resolution to reorganise capital by consolidating existing shares, presented a petition for confirmation of the special resolution, for direction for filing a copy of the order of the Court with the Registrar, and for notification of the registration of the order in the Edinburgh Gazette. The Court granted the prayer of the petition.
The Companies (Consolidation) Act 1908 (8 Edw. VII, cap. 69) provides—Section 45—“(1) A company limited by shares may, by special resolution confirmed by an order of the court, modify the conditions contained in its memorandum so as to reorganise its share capital, whether by the consolidation of shares of different classes, or by the division of its shares into shares of different classes: Provided that no preference or special privilege attached to or belonging to
Page: 57↓
any class of shares shall be interfered with, except by a resolution passed by a majority in number of shareholders of that class holding three-fourths of the share capital of that class, and confirmed at a meeting of shareholders of that class, in the same manner as a special resolution of the company is required to be confirmed, and every resolution so passed shall bind all shareholders of the class. (2) Where an order is made under this section an office copy thereof shall be filed with the Registrar of Companies within seven days after the making of the order, or within such further time as the court may allow, and the resolution shall not take effect until such a copy has been so filed.” The Scottish India-Rubber Company, Limited, petitioners, presented a petition of which the prayer was in the following terms:—“To confirm the alteration of the provisions of the company's memorandum of association with respect to its objects set forth in the said special resolution of the company and of the deferred shareholders of the company passed on 9th November 1917 and confirmed on the 26th November 1917, or to do further or otherwise in the premises as to your Lordships may seem proper.”
The petitioners averred, inter alia, “that the … special resolution [in question] was submitted to and approved of by a separate meeting of the deferred shareholders of the company, … and that approval was confirmed at a subsequent meeting of the deferred shareholders called for the purpose of considering such confirmation.”
No answers were lodged, and on 24th December 1917 the Lord Ordinary officiating on the Bills (
The reporter reported as follows:—“The petition is stated to be one for ‘confirmation of alteration in the memorandum of association,’ and prays that your Lordships shall' confirm the alteration of the provisions of the company's memorandum of association with respect to its objects set forth in ‘a special resolution of the company passed on 9th November 1917 and confirmed on 26th November 1917. In point of fact the special resolution set forth in the petition makes no alteration on the provisions of the company's memorandum with respect to its objects, and the statements in the petition show that what is aimed at is an alteration or reorganisation of the share capital. The Scottish India-Rubber Company, Limited, was incorporated under the Companies (Consolidation) Act 1908 on 10th May 1910. The share capital was £5000 divided into 4000 ordinary shares of £1 each and 1000 deferred shares of £1 each. It is stated that of the above share capital there have been issued 3500 ordinary shares of £1 each fully paid, and 1000 deferred shares of £1 each fully paid. Messrs Hourston & Macfarlane, C. A., Glasgow, the auditors of the company, certify as to this statement being correct at the date of presenting the petition, and that since the petition was presented further 50 ordinary shares have been issued. As already mentioned by the reporter, it appears that while the petition prays your Lordships to confirm an alteration of the company's memorandum with respect of its objects, the statements in the petition show that what is contemplated is an alteration or reorganisation of capital. The company was incorporated with two classes of shares, viz., ordinary shares and deferred shares, and apparently now desires to have only one class of shares, and proposes to achieve this end by the surrender of the deferred shares to the company and a consolidation of the surrendered shares with the existing ordinary shares. Apparently the company do not propose to issue new shares in exchange for the surrendered shares, nor to reduce the capital by the amount of the surrendered shares. The company apparently intends to hold the shares so converted ‘available for subscription and allotment as ordinary shares.’ The company endeavours to attain its object by passing a special resolution deleting clause 5 of its memorandum and resolving that in lieu thereof there shall be substituted a new clause. Clause 5 of the memorandum is in the following terms:—‘The share capital of the company is five thousand pounds, divided into four thousand ordinary shares of one pound each and one thousanddeferred shares of one pound each, with power from time to time to increase the same and also with power to divide the shares in the present or future capital of the company into several classes, and to attach thereto, respectively, any preferential, deferred, qualified, or special rights, privileges, or conditions. The ordinary shares shall confer the right to a dividend of five per cent. per annum on the capital paid up thereon before any dividend is paid on the deferred shares, and any surplus profits thereafter shall be divisible rateably among both classes of shares. The ordinary shares shall rank in the case of winding up in priority to the deferred shares.’ The special resolution of the company making the alteration is in the following terms:—‘That clause 5 of the memorandum of association shall be deleted and that in lieu thereof there shall be substituted the following clause “The share capital of the company is £5000, divided into 5000 ordinary of £1 each, with power from time to time to increase or reduce the same, and also with power to divide the shares in the present or future capital of the company into several classes and to attach thereto respectively any preferential, deferred, qualified or special rights, privileges, or conditions.” ‘The reporter is respectfully of opinion that where a company reorganises its capital under the powers given by section 45 of the Act the Court should not be asked to confirm an alteration in the memorandum, but to confirm the special resolution of the company modifying the conditions contained in the memorandum and to direct an office copy of the order of the Court to be filed with the registrar. The reporter understands that it is the practice of your Lordships also to direct that notice of the
Page: 58↓
Thereafter the petitioners lodged a minute in which they proposed, if the Court so permitted and required, to amend the prayer of the petition by deleting the part of the prayer quoted supra and by substituting therefor the following—“To confirm the said special resolution of the company passed on 9th November 1917 and confirmed on 26th November 1917, modifying the conditions contained in the company's memorandum of association and to direct that a copy of the order of Court be filed with the registrar, and that notice of the registration of the order be given in the Edinburgh Gazette.”
Thereafter the reporter, having had the minute laid before him, issued a supplementary report in which he repeated the two paragraphs of his former report, last above quoted.
After hearing counsel the Court, without delivering opinions, granted the prayer of the petition amended as suggested in the minute.
Counsel for the Petitioners— Gentles. Agents— Macrae, Flett, & Rennie,
