Re Smith & Fawcett Ltd
| Jurisdiction | England & Wales |
| Date | 1942 |
| Year | 1942 |
| Court | Court of Appeal |
Company - Private company - Transfer of shares - Registration - Refusal - Powers of directors - Motives for refusal - Affidavit evidence.
Article 10 of the articles of association of a private company provided: “The directors may at any time in their absolute and uncontrolled discretion refuse to register any transfer of shares, and cl. 19 of Table A shall be modified accordingly.” The issued capital of the company consisted of 8002 ordinary shares of which the two directors of the company, J. F. and N. S., held 4001 each. J. F. died, and his son as his executor applied to have the testator's shares registered in his name. N. S. refused to consent to the registration, but offered to register 2001 shares and to buy 2000 at a fixed price. The executor applied to the court by way of motion that the register of members of the company might be rectified by inserting his name as the holder of the 4001 shares:—
Held, affirming Simonds J., that art. 10 gave the directors the widest powers to refuse to register a transfer, and that, while such powers are of a fiduciary nature and must be exercised in the interests of the company, there was nothing to show that they had been otherwise exercised.
Affidavit evidence is unsatisfactory evidence of the motives of directors in exercising their powers.
APPEAL from Simonds J.
On December 15, 1937, Smith & Fawcett, Ld., was incorporated as a private company to take over a business carried on by Joseph Fawcett and Norman Smith. The nominal capital of the company was 25,000 l., divided into 10,000 preference and 15,000 ordinary shares of 1 l. each, but only 8002 ordinary shares were issued, 4001 to Fawcett and 4001 to the first defendant, Smith, who were the directors of the company. Art. 10 of the articles of association provided: “The directors may at any time in their absolute and uncontrolled discretion refuse to register any transfer of shares, and cl. 19 of Table A shall be modified accordingly.” Fawcett by his will, dated August 2, 1939, appointed his wife and his son, Edwin Arthur Fawcett, the plaintiff, to be the executors and trustees thereof, and, after making certain provisions applicable during the widowhood of his wife, he bequeathed, on her death, 2000 shares in the company to his daughter, Alice Marjorie Fawcett, and 2001 shares to the plaintiff. Joseph Fawcett died on February 26, 1940. In April, 1940, Mrs. Fawcett and the plaintiff, as executors of Joseph Fawcett, applied to Smith that they should be registered as members of the company, and that the plaintiff should be appointed to be a director of the company. Smith, however, refused to consent to the registration or appointment, but offered to register 2001 shares and to buy 2000 of the shares at a price fixed by himself. In July, 1940, Smith appointed the second defendant, his solicitor, J. W. Feather, to be a director of the company. Mrs. Fawcett died on April 11, 1941. Some time afterwards the plaintiff again asked Smith to register him as a member of the company, but Smith, with the assent of Feather, refused. The plaintiff then applied to the court by way of motion that the register of members of the company might be rectified by inserting his name...
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