Scottish Court of Session Decisions

The Salem (Oregon) Capitol Flour-Mills Company (Limited) was registered under the Companies Acts 1862 to 1883 on 1st May 1884, and the head office was in Edinburgh. The capital of the company was £100,000, divided into 20,000 shares of £5 each, and it was stated in the memorandum of association that “the first or present issue” was “to consist of £60,000 in 12,000 shares of £5 each, the remaining issue or issues to be made at such future period or periods, and upon such terms, as the directors shall determine.” Only 2562 shares were taken up, upon which was paid up £5 per share, making in all £12,810, subject to a deduction of £120, being the amount of calls unpaid.

The company was quite unsuccessful, and in a report, dated 15th December 1886, issued by the directors, it was stated in reference to the depreciation of the property and the business losses that these “will involve not only the share capital, but the creditors of the company will all suffer more or less according as the properties realise a higher or lower price.” The shareholders were accordingly asked in said report to authorise the directors to proceed with the realisation and winding-up “as if the company were in liquidation.”

Page: 313↓

In these circumstances Messrs Ross T. Smyth & Company, corn merchants, Liverpool, who were creditors of the company, presented a petition for a winding-up order, and the appointment of an official liquidator, on the ground that the company was unable to pay its debts, and it was just and equitable that it be wound up.

Answers were lodged for the company and three of the creditors. It appeared that all the creditors, other than Messrs Ross T. Smyth & Company, were connected with the management of the company.

The respondents stated that there were no assets in this country with which a liquidator could deal, that the property in America was hypothecated to the creditors there, and that a receiver should be appointed in America.

Argued for the respondents—The appointment of a liquidator was unnecessary, and would only involve the company in further expense. The American creditors of the company had secured their own interests by hypothecation and otherwise. There were no assets in this country, and the respondents, who were the whole body of creditors of the company other than Messrs Ross T. Smyth & Company, opposed this application. Their desires must be taken into consideration— in re St Thomas' Dock Company, February 12, 1876, L.R., 2 Ch. D. 116; in re Chapel House Colliery Company, June 28, 1883, L.R., 24 Ch D 259; Story's Conflict of Laws, secs. 409, 599; Bar's International Law (Gillespie's translation), sec. 128.

At advising—