Scottish Court of Session Decisions

The Companies Act 1867 enacts:—Section 25—“Every share in any company shall be deemed and taken to have been issued and to be held subject to the payment of the whole amount thereof in cash unless the same shall have been otherwise determined by a contract duly made in writing and filed with the Registrar of Joint-Stock Companies at or before the issue of such shares.”

The Companies Act 1898 enacts:—Section 1, sub-section 1—“Whenever before or after the commencement of the Act any shares in the capital of any company under the Companies Acts 1862 and 1890 credited as fully or partly paid up, shall have been or may be issued for a consideration other than cash, and at or before the issue of such shares no contract or no sufficient contract is filed with the Registrar of Joint-Stock Companies, in compliance with section 25 of the Companies Act 1867, the company, or any person interested in such shares, or any of them, may apply to the Court for relief, and the Court, if satisfied that the omission to file a contract or sufficient contract was accidental or due to inadvertence, or that for any reason it is just and equitable to grant relief, may make an order for the filing with the Registrar of a sufficient contract in writing, and directing that on such contract being filed within a specified period it shall in relation to such shares operate as if it had been duly filed with the Registrar aforesaid before the issue of such shares.” Subsection 4—“Where the Court in any such case is satisfied that the filing of the requisite contract would cause delay or inconvenience or is impracticable, it may in lieu thereof direct the filing of a memorandum in writing in a form approved by the Court, specifying the consideration for which the shares were issued, and may direct that on such memorandum being filed within a specified period it shall in relation to such shares operate as if it were a sufficient contract in writing within the meaning of section 25 of the Companies Act 1867, and had been duly filed with the Registrar aforesaid before the issue of such shares.”

In May 1898 a provisional agreement was entered into between Alexander Ferguson, distiller, Glasgow, and H. M. Nairn, as trustee for a proposed company, to be called B. Smyth & Company, Limited, by which Ferguson agreed to sell, and Nairn as trustee foresaid to purchase, the business of B. Smyth & Company, wine merchants, Calcutta. By clause 2 of the provisional agreement it was provided that the price or consideration for said sale should be a certain sum in cash, and the issue to the vendor or his nominees of 3000 of the cumulative preference shares or of the ordinary shares, or of either or both, as fully paid-up, or cash or fully paid-up shares, at the option of the directors.” It was further provided by clause 14 that “the company shall cause this agreement with or without modification or some other sufficient contract, to be filed with the Registrar of Joint-Stock Companies before any of said shares are allotted.” On 20th June 1898 the provisional agreement was filed with the Registrar of Joint-Stock Companies.

On June 20th 1898 B. Smyth & Company, Limited, was incorporated under the Companies Acts.

On July 2nd 1898 the directors of the Company, in pursuance of the said provisional agreement, passed the following resolution:—“The board, under the option of the provisional agreement, allotted as fully paid-up to the vendor 1000 preference shares of [£10 each] and 2000 ordinary shares of [£10 each] in respect and to account of the purchase price payable to him under the provisional agreement, and authorised the secretary to issue scrip therefor in implement of the agreement.”

Of the same date 1000 preference and 2000 ordinary shares were issued to Ferguson.

On September 23rd 1898 a formal agreement between the company, Ferguson, and Nairn, adopting the aforesaid provisional agreement, was filed with the Registrar of Joint Stock Companies.

On February 25, 1901, Ferguson, on the narrative that it was doubtful whether the provisions of section 25 of the Companies Act 1867 had been sufficiently complied with, presented a petition to the Court for authority to file a contract or memorandum in writing with the Registrar of Joint-Stock Companies under the provisions of section 1 of the Companies Act 1898 (quoted supra). He stated that he now held only 375 preference and 1100 ordinary shares out of those originally issued to him, the rest having been at his request allotted to various other persons.

The petitioner prayed the Court—“To find that the omission timeously to file a contract with the Registrar of Joint-Stock Companies in respect of the said 1000 preference shares and 2000 ordinary shares numbered as aforesaid was due to inadvertence, or that in the circumstances the relief craved is just and equitable, and to direct the company to file with the Registrar of Joint-Stock Companies the said adoptive agreement of 14th July 1898, or otherwise a memorandum in writing in the form of a draft to be lodged by the petitioner, or in such form as to your Lordships shall seem proper; to direct that on such agreement or memorandum duly stamped specifying the consideration for which the shares were issued being filed within such specified time as to your Lordships shall seem proper, it shall, in relation to such shares, operate as if it were a sufficient contract in writing within the meaning

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of section 25 of the Companies Act 1867, duly filed, with the Registrar before the issue of such shares.”

No answers were lodged.

On 20th March 1901 the Court remitted to the Hon. J. W. Moncreiff, W.S., to inquire and report as to the regularity of the procedure and the facts and circumstances set forth in the petition.

Mr Moncreiff lodged a report, wherein, after narrating the foregoing facts and the procedure in the petition, he made the following statement:—“I have to point out, however, that it is stated on page 5 of the petition that of the said 1000 preference and 2000 ordinary shares originally allotted to the petitioner the petitioner at the date of the petition held only 375 preference shares and 1100 ordinary shares, the remainder of his original holding having been transferred to other shareholders. The petitioner thus asks the Court to grant an order relative to shares which are held by other parties on whom service of the petition has not been made, and who may be in ignorance of the whole proceedings. So far as I am aware, in all petitions at the instance of individual shareholders under the Companies Act of 1898 which have come before the Court of Session, the petitioners have either been the holders of all the shares affected by the omission to file a contract, or they have asked the Court for authority to file a memorandum dealing only with the shares held by themselves, and it appears to me that where, as in the present instance, the petition is at the instance of an individual shareholder who holds only a certain number of the shares affected by the omission timeously to file a contract, the company itself should have been conjoined with the petitioning shareholder, and the petition should have been served on all holders of shares to be affected by the filing of the contractor memorandum under authority of the Court. The agents for the petitioner, however, have referred me to the case of Whitefriars Financial Company, Limited, [1899], 1 Ch. 184, in which application for relief was made by six out of 113 interested shareholders. Justice Kekewich held that he must follow the words of subsection 1 of section 1 of the Act, according to which ‘any person interested in such shares, or any of them,’ may apply for relief, and that application for relief was sufficiently made by the six shareholders, and he accordingly authorised the filing with the Registrar of a memorandum relative to the shares held by the whole 113 shareholders. It is for your Lordships to determine whether the procedure allowed by Justice Kekewich may be adopted in the present case, to the effect that the petitioner may competently apply to the Court for authority to file a contract or memorandum relative to shares which are not held by him.… As the adoptive agreement of 14th July 1898 has already been filed with the Registrar, it cannot be refiled, and should your Lordships grant the prayer of the petition it would be necessary in the present case to file a mernorandum as allowed by the statute. The agents for the petitioner have lodged in process the draft of the memorandum which they suggest should be filed, and it appears to me to be in order.” He also stated that since the date of the petition B Smyth & Company, Limited, had gone into liquidation, and the petition had been served on the liquidator.

After hearing counsel for the petitioner,