Edinburgh American Land Mortgage Company, Ltd, v Lang's Trustees
| Jurisdiction | Scotland |
| Judgment Date | 02 February 1909 |
| Docket Number | No. 83. |
| Date | 02 February 1909 |
| Court | Court of Session |
Lord Low, Lord Ardwall, Lord Dundas.
Company—Management—Scheme of Arrangement between Company and Members—Company not in Liquidation—Security of Debenture-Holders— Sanction of Court—Companies Act, 1907 (7 Edw. VII. cap. 50), sec. 38.—
The Joint Stock Companies Arrangement Act, 1870, sec. 2, as amended by the Companies Act, 1900, sec. 24, empowers the Court to sanction an arrangement between a company that is being wound up and its creditors, or members, after a meeting of creditors, or members, has been held and a requisite majority obtained, in such manner as to make it binding upon all the creditors, or members.
The Companies Act, 1907, sec. 38, enacts that the Joint Stock Companies Arrangement Act, 1870, shall apply to a company which is not in the course of being wound up in like manner as it applies to a company which is in the course of being wound up.
In a petition under sec. 38 of the Companies Act, 1907, by a company which was not being wound up, to obtain the sanction of the Court to a scheme of arrangement between the various classes of its members, which had been approved by the statutory majorities, but was opposed by a minority of debenture-holders, the Court, being satisfied that the arrangement was one which a reasonable business man might be expected to approve of, sanctioned the scheme.
In re Alabama, &c. Railway CompanyELR, [1891] 1 Ch. 213, followed.
The Edinburgh American Land Mortgage Company, Limited, was incorporated under the Companies Acts in 1878, with a capital of £500,000, divided into 100,000 shares of £5 each.
The objects of the company were, inter alia—(1) to receive money by way of loan, the borrowing power being limited in amount by the memorandum of association to such part of the subscribed capital as should at any time remain unpaid and uncalled; and (2) to lend money on the security of real estate in the United States or Canada, and to invest one-half of the paid-up capital, and any reserve fund, in public funds in Great Britain, the United States, and Canada.
By a private Act in 1897 the directors of the company were authorised, inter alia, from time to time, by resolution, to offer to the holders of the ordinary shares, the option of paying up an aggregate specified amount in advance of calls on such shares, and to convert the amount so paid up into preference stock. Under the provisions of this Act, the uncalled liability of £4 per share was paid up on 7450 shares, which became fully paid shares of £1 each, and the amount thus obtained, was converted into preference stock.
At the date of this petition, the issued capital of the Company amounted to 67,550 shares of £5 each, £1 paid; 7450 shares of £1 each fully paid; and £29,800,41/4 per cent cumulative preference stock: amounting in all to £375,000, of which £270,200 was still uncalled.
Under the power conferred by the memorandum of association, the Company had also borrowed money to the extent of £270,200, the sum of £125,430 being borrowed upon terminable debentures and deposit-receipts, and the sum of £144,770 by the issue of debenture stock, which was redeemable by the Company at and after Martinmas 1905, at the price of £105 for every £100 of stock. No special securities were held by the debenture-holders.
The ordinary shareholders desiring to have the uncalled liability upon their shares terminated under the power conferred by the Act of 1897, and for that purpose to have the borrowing powers of the Company altered, a scheme of arrangement was prepared, and this present petition was presented on behalf of the Company, under section 38 of the Companies Act, 1907, to obtain the sanction of the Court to the scheme.*
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