Judgment Title: Charles Kelly Ltd -v- Companies Acts
Composition of Court:
Judgment by: Laffoy J.
Status of Judgment: Approved
Neutral Citation Number:  IEHC 38
THE HIGH COURT
2008 402 COS
IN THE MATTER OF CHARLES KELLY LIMITED
AND IN THE MATTER OF THE COMPANIES ACTS 1963 – 2006
AND IN THE MATTER OF SECTION 205 AND SECTION 213(F) OF THE COMPANIES ACT 1963
EDWARD GERARD KELLY
WILLIAM KELLY AND CHARLES KELLY LIMITED
“Any member of a company who complains that the affairs of the company are being conducted or that the powers of the directors of the company are being exercised in a manner oppressive to him or any of the members (including himself), or in disregard of his or their interests as members, may apply to the court for an order under this section.”
The company in relation to which relief under s. 205 is sought by the petitioner is the company named in the title hereof, Charles Kelly Limited (the company). The company was incorporated on 18th July, 1932. It carries on the business of builders-merchant and retail hardware at Letterkenny, County Donegal. When these proceedings commenced in 2008 it had recorded a turnover of €10m for the previous financial year ending on 30th December, 2007. It has 50 employees.
The petitioner and the first respondent are brothers. Their grandparents and their grandparents’ descendants have been involved in the business of the company since 1932. When the matter came on for hearing on 15th December, 2009 a fundamental problem in the manner in which the case had been presented immediately emerged.
It is stated in the petition that the “authorised share capital of the company is €19,046.07”. That statement did not conform with the requirement of Form No. 1 of Appendix N of the Rules of the Superior Courts 1986 (the Rules). Apart from that it gives a misleading picture of what is at issue on the petition. The petition does not disclose that the petitioner is a member of the company, nor does it disclose the number of shares he holds. What is pleaded in the petition is that the petitioner and the first respondent have over the years conducted and managed the affairs of the company on the basis of acknowledging their equal shareholding in the company and their entitlement to share equally in the management of the company. One of the reliefs sought by the petitioner in the petition is an order directing the company to purchase the petitioner’s shareholding in the company at a fair market value.
In the respondents’ points of defence it is denied that the petitioner and the first respondent have conducted and managed the company’s affairs on the basis that they had equal shareholdings in it.
In the light of the problem which emerged when the petitioner’s case was being opened – that there is a dispute between the petitioner and the first respondent as to whether the petitioner is a member of the company and, if he is, as to the number of shares he holds in the company – it was decided that a modular approach would be adopted to the hearing of the petition and that the Court would decide the following issues first:
(1) whether the petitioner is a member of the company; and
(2) the extent of the petitioner’s shareholding in the company.
The importance of the first issue is that, in order to maintain an application under s. 205, the petitioner must be a member of the company. In accordance with
s. 31 of the Act of 1963, given that he was not an original subscriber to the memorandum of association, he must establish that he agreed to become a member of the company and, crucially, that his name is entered on the register of members.
Approach to determining the issues
In outlining the evidence, I propose setting out what might be referred to as “the big picture” with a view to identifying the current issued share capital of the company. I will then consider what the various share transfers, declarations of trust and other documentation which have been put in evidence show in the light of the evidence of the petitioner and the first respondent. On this aspect of the matter, I will also consider filings which were made in the Companies Registration Office (CRO) in accordance with the statutory requirements of the Companies Acts. I will then consider what the register of members discloses and endeavour to reconcile it with the respective positions adopted by the petitioner and the first respondent.
The current share capital
In 1992, as a result of the settlement of proceedings involving the then minority shareholders in this Court, the company bought back the minority stake pursuant to s. 213 of the Companies Act 1990 and the Court was told that those shares were cancelled. I have had to take that at face value because not all of the documentation reflecting what happened in 1992 was put before the Court. Moreover, the register of members does not reflect the change in the issued share capital.
In consequence of what happened at the EGM in 1992 and subsequently, what the Court is concerned with is the current issued share capital of the company which is the Euro equivalent of IR£7,938 divided into 7,938 shares at the Euro equivalent of IR£1 each.
In this judgment, I will be addressing what happened to the 7,938 shares since November 1981.
The paper transactions and filings
Transactions in 1987
Article 5, insofar as is relevant for present purposes, provides as follows:
“The right of members of the company to transfer shares shall be subject to the following restrictions:
(b) On the death of any member, if his shares shall not be transferred within twelve months from the date of his decease, his executors or administrators, upon the request in writing of the Directors, shall be bound to sell and transfer his shares to a member or members of the Company or to some other person approved of by such Directors at the price fixed and certified by the Auditors as the fair value.”
Article 8 stipulated that the “qualification of a Director shall be the holding of 500 shares in the Company”. Curiously, it did not stipulate a requirement that the holding be registered in the register of members. However, I attach no significance to that in determining the current ownership of the shares.
Apprehending that the death of Mr. Kelly was imminent, in January 1987, the following two transactions were effected by the first respondent:
(1) For nil consideration the first respondent transferred 500 shares to the petitioner. The share transfer form bears the date 26th January, 1987. The petitioner executed a document headed “Declaration of Trust”, which bears the same date, which is addressed to the first respondent, in which the petitioner acknowledged that -
The objective of the share transfer and the declaration of trust was to enable the petitioner to qualify to become a director of the company. The share transfer form was not stamped. It is common case that the petitioner never became registered as the owner of the 500 shares the subject of the share transfer form. The petitioner acknowledges that he acquired and held those shares as trustee for the first respondent.
(2) By a share transfer form of 26th January, 1987 the first respondent transferred one share to his mother, Margaret Mary Kelly (Mrs. Kelly), at nil consideration. The objective of that transfer was that Mrs. Kelly would become a registered shareholder of the company so that, when she succeeded to the shareholding of her husband, Mr. Kelly, on his death, a right of pre-emption under Article 5 of the Articles of Association would not arise. Mrs. Kelly executed a Declaration of Trust on 26th January, 1987 in terms similar to the Declaration of Trust referred to at (1) above. The share transfer in her favour was not stamped, nor was she registered as the owner of one share in the register of members. She appears to have executed an undated transfer back to the first respondent on the same day.
On 26th January, 1987 the directors and secretary of the company approved in writing the share transfers referred to at (1) and (2) above. On the same day, the Board of Directors of the company resolved that the petitioner and the first respondent be appointed directors with effect from 26th January, 1987.
Mr. Kelly died in February 1987 and, on his death, Mrs. Kelly became beneficially entitled to his 4,219 shares in the company. She was also his personal representative.
Before embarking on an outline of what happened subsequently in relation to the ownership of the shares, I think it is worth recording that in the most recent Annual Return (Form B1) filed in the CRO, which was lodged on 16th October, 2007, and is made up to 28th September, 2006, the list of past and present members shows the ownership of the shareholding in the company as follows:
Mr. Kelly: 4,219 shares
The first respondent: 3,218 shares
The petitioner: 500 shares
Mrs. Kelly 1 share
While the aggregate of those shareholdings is 7, 938 shares, which represents the current issued share capital of the company, that breakdown represents the position as it was immediately before the death of Mr. Kelly in 1987, although the shares of the petitioner and the one share of Mrs. Kelly had remained registered in the name of the first respondent.
Things have moved on since then. Unfortunately, on the evidence, all but one of the subsequent transactions does not bear the correct date of the transaction.
Transactions in April 1992
For the reasons set out below, I am satisfied that it is reasonable to infer that in April 1992, sometime before the transfer dated 30th April, 1992, a share transfer form was executed by Mrs. Kelly which bears the date 16th September, 1991 and on which the particulars of the transaction are typed. That was a transfer of the 4,219 shares which Mrs. Kelly had inherited from Mr. Kelly and, in the transfer, she was obviously acting as personal representative of Mr. Kelly, although she is not so described, and was transferring the shares to herself as the beneficial owner thereof. As regards the date which that share transfer form bears, 16th September, 1991, the explanation given by the petitioner for the fact that it was so dated is that the company’s auditors had previously valued the shares of the company as of September 1991 and either the company or the estate of Mr. Kelly did not want to incur the cost of having an up to date valuation done. In any event, the share transfer form was presented to the Revenue Commissioners in October 1992, presumably for adjudication. Clearly on a transfer from Mrs. Kelly, as personal representative of Mr. Kelly, to herself, no ad valorem stamp duty would have been exigible and I am satisfied that the document is admissible. I am also satisfied that it must have been executed prior to the execution of the transfer dated 30th April, 1992 of 500 shares by Mrs. Kelly to the petitioner because, otherwise, Mrs. Kelly would not have title to voluntarily transfer 500 shares to the petitioner. Coincidentally, there is also among the papers put before the Court a share transfer form signed by Mrs. Kelly as “Margaret Kelly”, which is completed in manuscript and bears the date 27th April, 1992 but otherwise is on all fours with the typed transfer which bears the date 16th September, 1991. The existence of this document leads me to believe that Mrs. Kelly effectively vested the shares she inherited from her husband in herself as beneficial owner on 27th April, 1992. Moreover, the directors of the company, including the petitioner and the first respondent, executed a document approving Mrs. Kelly being registered as the registered owner of 4,219 shares registered in the name of Mr. Kelly on 30th April, 1992.
The position, accordingly, as to the ownership of the 7,938 shares in the company which were not the subject of the buy back at the EGM in May 1992 at the time of the EGM was as follows after the EGM:
(a) Mrs. Kelly, as the successor in title of her husband, Mr. Kelly, was the legal and beneficial owner of 3,719 shares, having transferred 500 shares to the petitioner;
(b) the first respondent was the legal and beneficial owner of 3,218 shares;
(c) as regards the 500 shares transferred by the first respondent to the petitioner in 1987, the petitioner was the legal owner of those shares but the respondent was the beneficial owner;
(d) similarly, as regards the one share transferred by the first respondent to Mrs. Kelly in 1987, Mrs. Kelly was the legal owner and the petitioner was the beneficial owner thereof; and
(e) the petitioner was the legal and beneficial owner of the 500 shares transferred by Mrs. Kelly by virtue of the share transfer dated 30th April, 1992.
Transactions in September 1992
At some time subsequent to the EGM two further transactions occurred which are of considerable relevance. Although the relevant share transfer forms are each dated 17th September, 1991, it is common case that they were executed after the EGM in May 1992. The evidence of the petitioner was that they were executed in September 1992. The evidence of the first respondent was that they were executed after the EGM in May 1992. The effect of the transactions was as follows:
(1) Mrs. Kelly transferred 3,938 shares to the petitioner at a consideration of IR£1; and
(2) Mrs. Kelly transferred 249 shares to the first respondent, again at a consideration of IR£1.
The combined effect of the two transfers was that Mrs. Kelly transferred, or more correctly purported to transfer, 4,217 shares. Of course she did not have 4,217 shares; she only had 3,719 shares, because she had already transferred 500 shares to the petitioner by virtue of the transfer of 30th April, 1992. I am satisfied on the evidence that the object of the exercise in September 1992 was that Mrs. Kelly would transfer all but two of her shares in such a way that the petitioner and the first respondent would have an equal shareholding in the company. As the first respondent acknowledged in evidence, Mrs. Kelly transferred 249 shares to him to bring his existing shareholding up to 3,968 shares, which was the number of shares which Mrs. Kelly purported to transfer to the petitioner. I can only conclude that the 500 shares which had already been transferred by Mrs. Kelly to the petitioner were overlooked and that the assumption that Mrs. Kelly had 3,968 shares to transfer was a mistake.
The explanation given for the backdating of the two share transfer forms from post September 1992 to 17th September, 1991 was the same as was proffered for backdating the transfer from Mrs. Kelly to herself – that the company’s then auditors, Price Waterhouse, had already carried out a valuation of shares in September 1991 and the objective was to avoid the expense of having a further valuation carried out. Neither share transfer form is stamped and neither transaction was entered in the register of members.
Transactions in 1995
(ii) a share transfer form executed by the first respondent transferring 3,968 shares in consideration of £1 to the first respondent and the petitioner;
(iii)a declaration executed by the petitioner in which he acknowledged and confirmed that the 3,968 shares which he had transferred from his name into the joint names of himself and the first respondent –
“… are from now to be held by us in joint names as joint tenants (i.e. in the event of my death and my brother surviving me that my interest in the joint holding of shares will cease and all interest will pass to my brother William Joseph automatically by right of survivorship);”
(iv)a similar declaration executed by the first respondent in relation to the 3,968 shares which he had transferred into the joint names of himself and the petitioner;
(v) a share transfer executed by the petitioner in respect of 3,968 shares to himself and the first respondent with the added words: “(in joint names as joint tenants)”; and
(vi)a share transfer executed by the first respondent to himself and the petitioner on the lines of the transfer at (v).
I can only assume that the transfers at (v) and (vi) above were executed on a “belt and braces” basis.
There were also a number of undated transfers in which no consideration was expressed, which were executed, apparently, at the same time: from the petitioner to the first respondent in respect of 3,968 shares; and from the first respondent to the petitioner in respect of 3,968 shares. Two share transfer forms seem to have been signed in blank, one by the petitioner and one by Mrs. Kelly at the same time.
There was consensus between the petitioner and the respondent as to when all of the foregoing documents were executed. Both testified that the transfers were executed in 1995 in the following circumstances. At the beginning of 1995 the petitioner announced his intention to get married later that year. The petitioner’s evidence was that the first respondent was unhappy that, in the event of the death of the petitioner, his wife would have a right to acquire the petitioner’s shares. The petitioner’s evidence was that, on the basis of advice he got, he proposed to the first respondent that they both transfer their respective shareholdings to the pair of them as joint tenants so that, in the event of the death of one, the survivor would become one hundred per cent owner of the company, or, more correctly, all the issued shares except two. The purpose of having the undated transfers executed was with a view to meeting the exigency of one or other of them dying.
As will appear later I am somewhat sceptical as to whether the transfers into joint names were executed in 1995.
Devolution of Mrs. Kelly’s shares
Conclusions in relation to the paper transactions
The first relates to the transfer dated 30th April, 1992. The evidence of the first respondent was that he only became aware of that document a few days before the hearing. It may be that he never saw the actual share transfer form signed by Mrs. Kelly transferring 500 shares to the petitioner, but the fact is that he was a party to the approval given by the directors to the transfer on 30th April, 1992. Therefore, he must have been aware that the transfer was happening at the time.
The second relates to the first respondent’s understanding of Mrs. Kelly’s motivation in transferring all but two of her shares, so that the first respondent and the petitioner would become equally entitled to all of the shares in the company except those two, sometime in 1992 after the EGM. His evidence was that the “whole transfer” was part of “the family arrangement” that they were putting in place. He explained his understanding of “family arrangement” as that the business and the company had been passed on from the generations and that he and the petitioner were acquiring it and that there was a custodial nature to that and what they wanted to do was to preserve the custodial nature.
As regards the documents which the petitioner and the first respondent signed in 1995, the evidence of the first respondent was that he understood those documents to be a temporary arrangements to enable the family arrangements which they were in the process of organising to be put in place. His evidence was that he never really expected them to be implemented. The first respondent also gave evidence of family meetings which took place subsequently. Contemporaneous notes of a meeting held on 31st July, 1995 made by the petitioner were put in evidence. In the notes it was recorded that the first respondent had stated that the 1991/1992 arrangement was “of a temporary nature”. While the petitioner acknowledged that he made that note, his evidence was that he does not know in what context he made it.
As I understand the evidence of the first respondent, his view of his shareholding in the company, not just the 249 shares which Mrs. Kelly transferred to him but also the 3,719 shares which he purchased in 1981, is that all those shares are held by him subject to his responsibilities to other members of the family to allow other members of the family participate in both the benefits and the responsibilities of the company and its business. While that is a worthy position to adopt, in my view, on the evidence it is impossible to conclude that Mrs. Kelly in transferring all but two of her shares in the company in 1992, so as to give the petitioner and the first respondent, both of whom had abandoned careers as accountants to work full-time in the company’s business in the 1980s, equal shareholding in the company, intended that they should hold the shares as trustees only pending the putting in place of some sort of family arrangement which would dilute the ownership of the shares. Further, on the evidence, Mrs. Kelly had little or no input in the meetings of family members in the late 1990s. Whatever aspirations certain family members may have had came to nought.
Accordingly, on the evidence, I am satisfied that currently the first respondent and the petitioner hold their respective shares untrammelled by any trust in favour of their siblings or other members of their family.
As regards the petitioner, as I have already recorded, he acknowledges that the 500 shares which were transferred to him by the first respondent in 1987 were transferred to be held upon trust for the first respondent. He asserts ownership of the 500 shares which were transferred to him by the transfer of 30th April, 1992. On the evidence, I have come to the conclusion that in 1992 after the EGM, Mrs. Kelly decided to transfer her shareholding in the company to the petitioner and the first respondent in such a way as that they would be equally entitled to all of the issued shares in the company except two shares. The fact that she had already transferred 500 shares to the petitioner by virtue of the transfer dated 30th April, 1992 was obviously overlooked. I am satisfied that the intention of Mrs. Kelly was that, following the execution of the transfers by her which bear the date 17th September, 1991, it was her intention that the petitioner should acquire 3,468 shares, so as to give him a total shareholding of 3,968 shares. Further, I am satisfied that, notwithstanding the mistake in the transfer, the transfer should be regarded as having had that effect – nemo dat quod non habet. In any event, it has been regarded by the company as having had that effect for the past eighteen years, as the directors’ reports filed with the financial statements in the CRO establish.
The evidence that the 1995 transactions creating joint ownership were only intended to be temporary arrangements does not accord with the documentary evidence before the Court. Among the documents put in evidence is an undated letter from the company, signed by the petitioner, to Price Waterhouse & Co., in Derry, the text of which is as follows:
“I enclose the forms for stamping as discussed:
(2) Two sets of stock transfer forms, alternate wording, of 17th September, 1991, confirming the joint tenancies set up between William and I.
(3) Copy declarations by William and I confirming the joint tenancy in the interest of clarity as suggested. These for your file and general information only.
The transfer which bears the date 16th September, 1991 was lodged in the stamps branch of the Revenue Commissioners in October 1992 but was returned to Price Waterhouse by the Stamps Adjudication Office in March 1993 “for amendment”. There is no evidence that it was re-lodged. However, the undated letter strongly suggests that the transfers into joint names were contemporaneous with the transfer which bears the date 16th September, 1991, which was executed in September 1992 and that they were not executed in 1995. Of more significance than indicating the proper date of the transfers, however, is the fact that the undated letter clearly indicated that they were intended to have effect.
A letter dated 3rd October, 2008 from the petitioner to the first respondent, which was put in evidence, corroborates what the undated letter clearly indicated – that the transfers into joint names were to take effect. The purpose of the letter was to explain the basis on which fees had been charged by Pricewaterhouse Coopers. The explanation is that the fees were charged for tax advice, including tax advice about the shareholdings of the petitioner and the first respondent in the company – “(separating the joint-tenancies etc.).” The petitioner records in the schedule that, because of the potential liability to capital acquisition tax, the advice “strongly recommended we forget about or split the joint tenancies as soon as possible”.
I am satisfied that the transfers executed to create the joint tenancies were intended to have effect and that they took effect. The Court cannot ignore them.
Leaving aside the issues in relation to –
(b) the lack of stamping of certain documents, and
(c) the lack of registration in the register of members of certain documents,
(1) the petitioner and first respondent are joint owners of 3,968 shares;
(2) the first respondent and the petitioner are joint owners of 3,968 shares; and
(3) the estate of Mrs. Kelly is the owner of 2 shares.
That is inconsistent with what the company, and the petitioner and the first respondent as directors of the company, have been telling the world at large through the directors’ reports both before and after the initiation of these proceedings. However, the petitioner and the first respondent acting together have the capacity to sever the joint tenancy and engineer a situation which reflects what they have been representing as their respective interests.
Register of members
On Folio 9 Mr. Kelly was registered as a member in 1953 and it is recorded that he acquired three tranches of shares, one in 1953 and two in 1981, aggregating 4,219 shares. Mrs. Kelly is shown as having been substituted as a member in place of Mr. Kelly on 30th April, 1992. There is a note on Folio 9 which states:
“Letter requesting registration and probate of will of [Mr. Kelly] presented on 27th April, 1992 showing [Mrs. Kelly] as sole executrix and sole beneficiary.”
That note was signed: “Gerard Kelly – Director
pp Patrick McCafferty – Secretary.
The petitioner testified that Mr. McCafferty, who had been the secretary of the company for many years, was over 90 years of age at the time and that both the petitioner and the first respondent acted as his assistant from time to time. In fact, Mr. McCafferty resigned as secretary of the company on 19th May, 1992. The petitioner also testified that the first respondent had full knowledge of the entries in the register.
Folio 9 also records the transfer dated 30th April, 1992 of 500 shares, the share numbers being set out, transferred by Mrs. Kelly and discloses that the transferee is recorded on Folio 11. Folio 11 records the same transfer and shows the petitioner as having been entered as a member on 30th April, 1992.
The first respondent is registered as a member on Folio 11, the date of entry being 26th March, 1981. It is recorded that he acquired two tranches of shares in 1981 aggregating 3,719 shares.
Accordingly, the current position in relation to the share register is that it records three members and it records their shareholding as follows:
(1) Mrs. Kelly as the owner of 3,719 shares;
(2) the first respondent as the owner of 3,719 shares; and
(3) the petitioner as the owner of 500 shares.
An issue was raised on behalf of the first respondent as to whether the transfer dated 30th April, 1992 of 500 shares to the petitioner was lawfully registered in the register of members. Section 81(1) of the Act of 1963 provides as follows:
“Subject to sub-section (2), and notwithstanding anything in the articles of the company, it shall not be lawful for the company to register a transfer of shares in or debentures of the company unless a proper instrument of transfer has been delivered to the company.”
The issue which arises in relation to the transfer of 30th April, 1992 is that it has never been stamped. The question which arises, accordingly, is whether it is a “proper instrument of transfer” within the meaning of s. 81(1). This issue is dealt with in Courtney on the Law of Private Companies, 2nd Ed., at para. 16.007 as follows:
“One question that arises is whether the phrase ‘proper instrument of transfer’ as used in [the Act of 1963], s. 81, implies that a transfer must be stamped. It is thought, on balance, that it is lawful for a company to register an instrument transferring shares on which stamp duty has not been paid.”
Courtney goes on to quote a passage from the judgment of Leggatt L.J. in Nisbet v. Shepherd  1 BCLC 300 (at p. 305), where it is stated that the corresponding phrase in the United Kingdom analogue of s. 81 does not mean an instrument complying in all respects with statutory requirements; in the context “proper” means no more than “appropriate” or “suitable”; and what is required is that an instrument must be suitable for stamping. Courtney continues:
“It is thought that the foregoing is the correct interpretation of the phrase ‘proper instrument of transfer’. The failure to stamp a stampable document does not invalidate that document, as stamping is simply a Revenue requirement.”
On that last point, Courtney cites the decision of the Supreme Court in Re Motor Racing Circuit Limited (Supreme Court, 31st January, 1997, unreported).
As a matter of principle, it would seem that the company was entitled to register the petitioner as a member notwithstanding that the transfer of 30th April, 1992 was not stamped.
The requirements in relation to the maintenance of a register of members of a company are contained in ss. 116 to 124 inclusive of the Act of 1963. It is a criminal offence for a company to default in complying with the requirements of s. 116. The petitioner and the first respondent, as directors of the company at the material times, must take responsibility for the failure of the company to fulfil its obligations under
Section 124 provides that the register of members shall be prima facie evidence of any matters by the Act directed or authorised to be inserted therein. However, that provision must be considered in the light of s. 123, which provides:
“No notice of any trust, express, implied or constructive, shall be entered on the register or be receivable by the registrar.”
The conclusion I have reached is that the register of members does not properly record the legal ownership of the 7,938 shares representing the current issued share capital of the company, which I conclude coincides with the beneficial ownership. In other words, I consider that the register of members should currently reflect the following ownership:
(2) the petitioner and the first respondent as the owner of 3,968 shares, on the basis that the transfer from Mrs. Kelly to the petitioner took effect as a transfer of 3,468 shares to be added to the 500 shares of which he is now owner on Folio 9 and of the transfer into joint names; and
It is only necessary to consider the pre-emption issue in the context of the transfer by Mrs. Kelly, as personal representative of Mr. Kelly, to herself and the transfer dated 30th April, 1992 of 500 shares by Mrs. Kelly to the petitioner. When the subsequent transfers were made in September 1992 and in 1995 both the petitioner and the first respondent were registered holders of shares in the register of members and recorded as members of the company therein.
Mrs. Kelly’s title to transfer the 500 shares she transferred to the petitioner derived from the will of Mr. Kelly and from the transfer in April 1992 by her, in her capacity as personal representative, to herself as beneficiary of the 4,219 shares she inherited from Mr. Kelly. At the date of that transfer Mrs. Kelly was the holder of one share, which was transferred to her by the first respondent in 1987, although she was not the registered holder of one share. The whole purpose of the transfer of the one share to her in 1987 was to obviate pre-emption rights arising in relation to her inheritance from Mr. Kelly. If any issue had arisen in 1992 as to whether her entitlement to transfer the shares she inherited to herself was the subject of pre-emption rights under article 5, then she could have relied on the transfer of 1987 and procured her registration as a member and the legal owner of one share. However, apparently, no such issue arose and I cannot see how it can arise now, almost eighteen years later. Apart from the petitioner, the first respondent and the personal representative of Mrs. Kelly, none of whom, in the light of their subsequent actions, can complain about the transactions in April 1992, all of the persons who were the registered holders of shares in April 1992 ceased to be registered holders almost eighteen years ago.
I take a similar view in relation to the transfer of 30th April, 1992 in favour of the petitioner. When it was executed, on foot of the 1987 transfer from the first respondent, the petitioner was entitled to be registered as legal owner of the 500 shares transferred to him by the first respondent. Although registration had not taken place, that transfer was clearly acted on, because it was regarded as qualifying the petitioner to become a director of the company. If any issue had arisen that there were pre-emption rights which had to be given effect to under article 5 when Mrs. Kelly wished to transfer 500 shares to the petitioner in 1992, the petitioner could have relied on the 1987 transfer and procured his registration as a member and the registered owner of 500 shares. However, apparently, no such issue arose and I cannot see how such issue could arise now. Apart from that, as I have outlined, the three directors of the company, including the petitioner and the first respondent, approved the transfer by Mrs. Kelly to the petitioner in writing at the time.
(2) the transfer in September 1992 to the petitioner from Mrs. Kelly, which I have held took effect as to 3,468 shares;
(4) the transfer in 1995 by the first respondent of the 3,968 shares into the joint names of himself and the petitioner; and
“On the production of an instrument chargeable with any duty as evidence in any court of civil judicature in any part of the State … notice shall be taken by the judge … of any omission or insufficiency of the stamp on the instrument, and if the instrument is one which may legally be stamped after execution, it may, on payment to the officer of the court whose duty it is to read the instrument … of the amount of the unpaid duty, and the penalty payable on stamping the same, be received in evidence, saving all just exceptions on other grounds.”
When the issue arose at the hearing, counsel for the petitioner indicated that the petitioner would undertake to have the relevant unstamped documents stamped.
The Court is not in a position to assess the stamp duty and penalty payable on the three documents in issue here. Therefore, what I propose is that the petitioner obtain an assessment of the relevant amounts due from the Revenue Commissioners.
Thereafter, s. 127 will have to be complied with. Taking an overview of the matter, I consider that compliance should be effected by the company.
No order will be made in this matter until s. 127(1) has been complied with.
Rectification of the register
As I understand the position, counsel for both sides recognised that it would be necessary for the Court to order the rectification of the register of members to reflect the current issued share capital of the company as a consequence of the buying back and the cancellation of 7,062 shares following the EGM in 1992, and the Court’s findings as to the legal ownership of the shares. The Court has jurisdiction under s. 122 of the Act of 1963, and I propose to make, such an order. The order will direct the company to furnish details of the rectification and a perfected copy of the order of the Court to the Registrar of Companies within 21 days after perfection of the order.
Determination of issues
(2) the petitioner owns 7,936 shares in the company jointly with the first respondent.