Scottish Court of Session Decisions

No answers were lodged, and on 24th December 1917 the Lord Ordinary officiating on the Bills ( Hunter) remitted to George H. Boyd, solicitor, to inquire into and report upon the facts and circumstances set forth in the petition, as to the reasons for the proposed alteration of the company's memorandum of association, and as to the regularity of the present proceedings.

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↓