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Allen v Gold Reefs of West Africa Ltd

The Law Reports Cited authorities 4 Cited in 129 Precedent Map Related
Vincent
JurisdictionEngland & Wales
Judgment Date1900
Date1900
Year1900
CourtCourt of Appeal
[COURT OF APPEAL] ALLEN v. GOLD REEFS OF WEST AFRICA, LIMITED. [1897 A. 585.] SAME v. SAME. [1897 A. 977.] 1900 Jan. 18, 19, 20; Feb. 19. LINDLEY M.R., VAUGHAN WILLIAMS and ROMER L.JJ.

Company - Articles of Association - Shareholder - Vendor's Shares - Fully Paid Shares - Unpaid Shares - Calls - Arrears - Debts - Lien of Company on Unpaid Shares - Alteration of Articles - Special Resolution - Lien on Fully Paid Shares for Arrears of Calls on Unpaid Shares - Contract - Retrospective Effect of Altered Articles - Companies Act, 1862 (25 & 26 Vict. c. 89), s. 50 - General Meetings - Notice - Service - “Member” - Deceased Member - Legal Personal Representatives.

A limited company by one of its articles provided that it should have a lien for all debts and liabilities of any member to the company “upon all shares (not being fully paid) held by such member.”

The company, by way of purchase-money for the property acquired by it, allotted fully paid shares to Z., a nominee of the vendor to the company. Z. also applied for and had allotted to him shares not paid up. He was the only holder of fully paid-up shares. At his death he was indebted to the company in arrears of calls on the unpaid shares, but his assets were insufficient to pay the arrears. Thereupon the company, by special resolution under s. 50 of the Companies Act, 1862, altered the above articles by omitting therefrom the words “not being fully paid,” thus creating a lien on Z.'s fully paid shares:—

Held, by the Court of Appeal (Lindley M.R., Vaughan Williams and Romer L.JJ.), that the company had power to alter its articles by extending its lien to fully paid shares:

Held, also, by Lindley M.R. and Romer L.J. (Vaughan Williams L.J. dissenting), that the lien so extended, having been made in good faith, was enforceable against Z.'s fully paid shares, since he took them subject to the original articles and the power of altering them given to the company by s. 50 of the Act, and did not make any special or implied bargain that they should not be affected by any subsequent alteration of the articles; and that the fact of those shares being vendor's shares allotted in payment for the property purchased by the company, instead of being shares paid for in cash in the ordinary way, was immaterial.

James v. Buena Ventura Nitrate Grounds Syndicate, [1896] 1 Ch. 456, and Andrews v. Gas Meter Co., [1897] 1 Ch. 361, considered as to the “retrospective” effect of an alteration by a company of its articles.

Where, under a company's articles, notice of general meetings is to be given to “members,” and such notice may be served upon any “member” either personally or by sending it prepaid by post addressed to “such member” at his registered address, it is not necessary, in the case of a deceased member, either to send a notice addressed to him at his registered address, or to serve his legal personal representatives unless they have themselves become “members” by formal registration.

Judgment of Kekewich J., [1899] 2 Ch. 40, varied.

APPEAL from the judgment of Kekewich J.F1

The defendant company, the Gold Reefs of West Africa, Limited, was incorporated on July 2, 1895, under the Companies Acts, 1862 to 1890. Clause 5 of the memorandum of association was as follows: “The capital of the company is 90,000l., divided into 360,000 shares of 5s. each. The said shares or any shares issued upon an increase of capital or any portion thereof respectively may be issued fully paid up, at a premium, or at par, and with such preference, privileges or priority over or postponement to the remaining or any other shares of the company in respect of dividends or otherwise as may be determined.” The memorandum was accompanied by articles of association, which provided (art. 2) that the word “member” should mean a registered holder of any share or stock of the company; (art. 22) that if any “member” failed to pay any call, instalment, or interest, the directors might serve a notice on such “member” requiring him to pay the same, together with further interest from the date of the notice, and all expenses incurred by the company through such non-payment; (art. 23) that the notice should name a day on which such call, instalment, or interest was to be paid, and also state that in the event of non-payment the shares in respect of which the call was made or the instalment was payable would be liable to be forfeited; (art. 24) that if the requisitions of the notice were not complied with, any share in respect of which such notice had been given might be forfeited by a resolution of the directors to that effect; (art. 25) that any share so forfeited should be deemed to be the property of the company, and might be disposed of as the directors thought fit; (art. 26) that any member whose shares had been forfeited should, notwithstanding, be liable to pay and should forthwith pay to the company all calls, instalments, interest, and expenses owing upon or in respect of such shares at the time of the forfeiture, together with interest thereon from the time of forfeiture until payment, in the same manner as if the shares had not been forfeited, and to satisfy all (if any) the claims and demands which the company might have enforced in respect of the shares at the time of forfeiture, without any deduction or allowance for the value of the shares at the time of forfeiture; (art. 27) that the forfeiture of a share should involve the extinction at the time of forfeiture of all interest in and all claims and demands against the company in respect of the share, and all other rights and liabilities incidental to the share as between the shareholder and the company, except only such rights and liabilities as were by the articles expressly saved, or as were by the statutes given or imposed in the case of past members; (art. 28) that a record in the minute-book of the company of the forfeiture of a share should be conclusive evidence as against all persons claiming to be entitled to the share as forfeited; (art. 29) “that the company shall have a first and paramount lien for all debts, obligations, and liabilities of any member to or towards the company upon all shares (not being fully paid) held by such member. … Provided always that if the company shall register, or agree to register, any transfer of any share upon which it has such lien as aforesaid without giving to the transferee notice of its claim, the said share shall be freed and discharged from the lien of the company”; (art. 30) that the directors might serve upon any member who was indebted or under obligation to the company a notice requiring him to pay the amount due to the company, or satisfy the said obligation, and stating that if payment were not made, or the obligation satisfied, within a time (not less than fourteen days) specified in such notice, the share held by such member would be liable to be sold; and that if such member should not comply with such notice, the directors might sell such share without further notice; (art. 38) that the directors might, in their discretion, refuse to register the transfer of any shares upon which the company had a lien, and in case the shares proposed to be transferred should be not fully paid up might decline to register a transfer of the same to any person not in their opinion a responsible person; (art. 41) that “the executors or administrators of a deceased member (not being one of several joint holders) shall be the only persons recognised by the company as having any title to the shares registered in the name of such member ….”; (art. 42) that any person becoming entitled to a share in consequence of the death of any member might elect either to be registered himself as a holder, or to have some person nominated by him registered as a transferee thereof; (art. 45) that a person so becoming entitled should, subject to any lien of the company, be entitled to receive dividends, bonuses, or other moneys payable in respect of the share, but should not be entitled to receive notices of, or to attend or vote at meetings of the company, or, save as aforesaid, to any of the rights or privileges of the members, unless and until he should have become a member in respect of the shares; (art. 74) that notice of general meetings should be given to such members as were, under the provisions therein contained, entitled to receive notices; but the accidental omission to give such notice to, or the non-receipt of such notice by, any member, should not invalidate any resolution passed at any such meeting; (art. 88) that no member should be entitled to be present or vote at any meeting unless he had paid all calls and other moneys due from him to the company; and (art. 170) that “a notice may be served by the company upon any member either personally, or by sending it prepaid by post addressed to such member at his registered address as appearing in the register of the members of the company.” The articles contained no special provision for service of notices in the case of a deceased member. With reference to art. 29, it seems that a lien on fully paid-up shares of a company, or the possibility of such a lien, renders them unquotable on the Stock Exchange.

Shares, both fully paid up and not fully paid up, were issued by the company. One Emilio Zuccani, as the nominee of the vendor to the company, had a number of fully paid-up shares allotted to him by way of purchase-money for the property acquired by the company under their memorandum of association, and he held 27,885 of these shares at the time of his death, these shares being his own property. It did not appear that when Zuccani took these shares he entered into any special bargain conferring upon him any special rights in respect of them.

In addition to these fully paid-up shares, Zuccani applied for and had allotted to him 60,000 ordinary 5s. shares, not paid up. These were applied for and allotted on the terms of the company's prospectus (on which no...

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