Macdougall v Jersey Imperial Hotel Company Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 23 July 1864 |
| Date | 23 July 1864 |
| Court | High Court of Chancery |
English Reports Citation: 71 E.R. 568
HIGH COURT OF CHANCERY.
S. C. 34 L. J. Ch. 28; 10 L. T. 843; 10 Jur. (N. S.) 1043; 12 W. R. 1142. See Lambert v. Northern Railway of Buenos Ayres Company, 1869, 18 W. R. 181; Elder v. New Zealand Land Improvement Company, 1874, 30 L. T. 287; In re Alexandra Palace Company, 1882, 21 Ch. D. 160; Guiness v. Land Corporation, of Ireland, 1882, 22 Ch. D. 360.
Limited Company. Payment of Interest out of Capital. Powers of Director. Ultra Vires.
[528] macdouuall v. jersey imperial hotel company, limited. July 23, 1864. [S. C. 34 L. J. Ch. 28; 10 L. T. 843; 10 Jur. (N. S.) 1043; 12 W. E. 1142. See Lambert v. Northern Railway of Bmnos Ay res Company, 1869, 18 W. It. 181 ; Elder v. New Zealand Land Impro-uement Company, 1874, 30 L. T. 287 ; In re Alexandra Palace Company, 1882, 21 Ch. D. 160; Guiness v. Land Corporation, of Ireland, 1882, 22 Ch. D. 360.] Limited Company. Payment of Interest out of Capital. Powers of Director*. Ultra Vires. This Court will not interfere to prevent the directors of a limited company from commencing business on the ground that all the nominal capital has not been subscribed for ; nor on the ground that the business actually commenced is on a much smaller scale than that contemplated by the prospectus. But a payment of interest to the shareholders before any profits had been realized out of capital or borrowed monies, even though made in pursuance of a resolution at a general meeting, is ultra vires, and will be restrained by injunction as being in effect a lessening of the capital to the prejudice of creditors. This was a demurrer. The bill stated that the Jersey Imperial Hotel Co. (Limited) was a joint stock company, limited by shares, registered under the Companies Act, 1862, on the 7th May 1863, with a nominal capital of £40,000, in 4000 shares of £10 each; and, by 2 H. & M. m. MACDOUGALL V. JERSEY IMPEEIA L HOTE L COMPANY, LTD. 569 the articles of association, power was given to the company, by special resolution, founded oti a recommendation of the directors, to borrow on debenture or mortgage, " or such other securities as they think fit," any sum not exceeding £20,000. The bill alleged that no power was by the said articles given to the directors to commence business before the whole capital had been subscribed. The bill further stated that, shortly after the registration of the company, a prospectus had been issued by the authority of the directors, which set forth that the intended capital of the company was £40,000 ; and that the object of the company was to build and manage a first-class hotel in the town of St. Heliers, in Jersey, and that the want of accommodation of a superior class had long been felt there. It then alleged that the Plaintiffs, on the faith of tlie said prospectus, and in the expectation that the said capital of £40,000 would be fully subscribed for before the business of the company was commenced, had applied for and obtained shares in the company, and had [529] paid the deposit of 10s. per share required by the said prospectus. Shortly after the said shares had been allotted to the Plaintiffs a call, bringing up the payment to £4 per share, was made upon all the subscribed capital of the company. The Plaintiffs, having iu the meantime discovered that only about two-thirds (£27,000) of the nominal capital had been subscribed for, refused to pay the said call, and thereupon an action at law was brought against them on behalf of the said company, and judgment was recovered against them, and they had thus been compelled to pay the amount of the said call. The first ordinary general meeting of the company was held on the 5th May 1864, and thereat the following special resolutions were proposed :- (1) That interest at £5 per cent, per annum be paid to the shareholders on the amounts paid up by them on their shares from the respective days of payment to the 5th May 1864. (2) That the directors be authorised to borrow and take up on debentures or mortgage of any of the property of the company, or on such other securities as they may think fit, any sum or sums not exceeding £10,000, so soon as the roof shall have been put on the hotel...
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