Scottish Court of Session Decisions

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Cite as: [1889] ScotLR 26_542, [1889] SLR 26_542

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SCOTTISH_SLR_Court_of_Session

Page: 542↓

Court of Session Inner House First Division.

Saturday, June 1. 1889.

26 SLR 542

Taylor

v.

The Union Heritable Securities Company, Limited.

Subject_1Public Company
Subject_2Bankruptcy of a Shareholder
Subject_3Rectification of Register
Subject_4Companies Act 1862 (25 and 26 Vict. cap. 89), secs. 35, 36, 62.
Facts:

A shareholder in a public company which had a large uncalled capital was sequestrated, and after payment of a composition he was re-invested in his estates. Held that the amount unpaid on his shares did not form part of his debts and obligations from which he was discharged in the sequestration proceedings, and an application by him to have the register of the company rectified by the deletion of his name therefrom refused.

Page: 543↓

Headnote:

Robert Taylor, manure merchant, Easter Road, Leith, applied for the rectification of the register of the Union Heritable Securities Company, Limited, by the deletion of his name therefrom as the holder of 75 shares of the company.

Between 1875 and 1877 the petitioner was allotted 75 shares of the Union Heritable Securities Company, Limited, incorporated under the Companies Acts 1862 and 1867. £1 per share was paid on the said shares, and there remained £4 per share uncalled. The company sustained heavy losses from the depression in heritable property. It had paid no dividend since 1885, and in March 1889 a meeting was held to consider whether a call should not be made on the directors.

The petitioner's estates were sequestrated on 29th April 1885, and a trustee was appointed. He paid a composition of 5s. per £, and he was thereafter re-invested in his estate. On 5th May he intimated to the company that he was no longer a shareholder in consequence of the sequestration of his estates.

Argued for the petitioner—Under section 16 of the Companies Act 1862 the £4 per share uncalled formed part of the debt and obligations contracted by the petitioner for which he was liable at the date of his sequestration, and from which he was thereby discharged, and the petitioner was accordingly entitled to have his name removed from the register of members of the company. His intimation to the company was equivalent to a surrender of these shares— Wishart v. City of Glasgow Bank, March 14, 1879, 6 R. 823; Galletly's Trustees v. Lord Advocate, November 12, 1880, 8 R. 74; Companies Act 1862 (25 and 26 Vict. cap. 89), secs. 74, 75.

Argued for the respondents—The articles of association contained provisions for the transfer as well as for the surrender of shares. The petitioner had not complied with these, and he had not, in terms thereof, either transferred or surrendered his shares. The shares had since he acquired them stood in the register of shareholders in the name of the petitioner. All the proceedings in the sequestration took place without any intimation of any kind being sent to the company by the petitioner or the trustee on his sequestrated estates. The bankruptcy of the petitioner and his subsequent reinvestiture did not free him from his liability for calls in respect of these shares, for on his reinvestiture he took his estate with all the liabilities as it stood in the trustee— Gordon v. Glen, January 19, 1828, 6 S. 393.

At advising—

Judgment:

Lord President—In this case the petitioner before his bankruptcy held 75 shares in the Union Heritable Securities Company, Limited, and these shares were thus numbered 7481 to 7530 both inclusive, and 13,214 to 13,238 both inclusive. There is thus no difficulty whatever in identifying these shares as part of the property of the petitioner; and I use the word property advisedly, as shares in a company are property, and in bankruptcy they are often a valuable asset. In the sequestration which followed a trustee was appointed, and a composition of 5s. per £ was paid, and thereafter the bankrupt obtained his discharge all in the usual way. But the respondents say that the petitioner's bankruptcy, his composition settlement, and his subsequent re-investiture in his estate were all unknown to them; that no claim was made in the sequestration on their behalf; and that the first time that they became aware of what had taken place was the service of the petition praying that the petitioner's name might be removed from the list of members of their company.

The name of a shareholder cannot in this summary manner be removed from the list of contributories of a company.

There are only three ways in which this removing can in accordance with the statutes be accomplished—(1) By transfer, (2) by forfeiture, (3) by surrender. The statute does not say that such shares are to cease to exist, but the memorandum and articles of association may and sometimes do make provision for this. In the present case, however, the shares in question must belong to somebody, and it is clear that they belong to the petitioner until he succeeds in getting his name removed from the books of the company. I am therefore for refusing the prayer of this petition.

Lord Shand—Questions of considerable difficulty are likely to arise in dealing with applications like the present. Both as to the extent and mode of ascertainment of the petitioner's liability, and also as to whether, if the liability of the petitioner is to be limited, intimation to that effect ought not to be made to the company within a specified time. In the present case, however, I agree with your Lordship that this application cannot be granted, as no sufficient reason for so doing has been suggested. Bankruptcy followed by retrocession is certainly no sufficient ground, nor is there here anything of the nature of a surrender.

Lord Adam concurred.

Lord Mure was absent.

The Court refused the petition.

Counsel:

Counsel for the Petitioner— Lorimer. Agent— P. Morison, S.S.C.

Counsel for the Respondents— Crole. Agents— J. & R. A. Robertson, S.S.C.
1889