SOME ASPECTS OF THE LAW RELATING TO COMPANY CONTROL
| Author | Geoffrey Hornsey |
| DOI | http://doi.org/10.1111/j.1468-2230.1950.tb00181.x |
| Published date | 01 October 1950 |
| Date | 01 October 1950 |
SOME
A-lSPECTS
OF
TITE
LAIY
REL,ATING
TO
COMPANY
CON'L'ROL
OF
all the changes in the law embodied in the Companies Act,
1948,
that which has enjoyed, perhaps, the widest measure of approval
is the provision which necessitates,
in
certain cases, the publication
of
group accounts. Such accounts are required where there exists
the holding company-subsidiary relationship,
i.e.,
where one com-
pany controls another. For this purpose there was necessary a
definition of control,
or
rather a statement as to the circumstances
in which the law would consider such control to exist. But that
provision is not the only one relating to control which is
to
be found
in the statute book, for several have been found necessary for taxa-
tion purposes, and it is
of
interest to compare these with the
provision
of
the Companies Act.
The simplest
of
these provisions is to be found in the Finance
Act,
1040,'
and it states that in the case of a company in which the
directors have a controlling interest, in computing profits,
no
deduction shall be made in respect of directors' remuneration. The
expression
'
controlling interest
'
was also used in the Finance Act,
1937,2
with regard to the calculation of profits
to
determine liability
to pay National Defence Contribution. As to what shall constitute
this
'
controlling interest
'
the statutes are silent, but,
ns
might
perhaps be expected from thc use of the word
'
interest
',
the courts
have brought the statutes into operation only where control is
exercised through the holding
of
shares-though it was decided
in
Commissioners
of
Inland Revenue
v.
J.
Bibbg
4
SonsJ
that
such shareholding might be either beneficial
or
as trustee for others,
since the statute referred not to any pecuniary benefit obtained
from thc shares, but to the power which they gave of influencing
corporate decisions.' This power, in the form of ability to
pass
resolutions, depends on the holding
of
a voting majority, and
the courts are strict in their demand for a holding of more
than
50
per cent.
of
the voting rights.5 This is illustrated
by the rcccnt case,
C.I.R.
V.
Monnick,O
where four persons each
held
500
shares in a company, only these shares having been issued.
1
Section
33
(5).
2
Schedule
I\',
para.
7
(b).
J
[1945]
1
All
E.R.
667.
4
See
per
Lord
Russell
of
Killowen
at
p.
66'3.
J
It
was
argued in
British
America? Tobacco
Co.
v.
C.
I.
It.
[1943]
A.C.
335
that
the
term
'
controlling interest impo:ts control, not only
of
a
bare majority
of
shares.
but
of
Ruth
proportion
of
the
total number
as
would
secure
the
passing
of
a
special resolution
or
any othcr resolution
for
wliich
a
special
rnajority
is required.
This argumcnt
mas,
howcver, rejected.
d
Reported in
Accountant,
Aug.
6,
19.19,
at
1'.
147.
470
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