Scottish Court of Session Decisions

J. B. Harvey presented this petition under the 35th section of the Companies Act 1862, for an order to rectify the register of the Distillers Company (Limited) by deleting his name as holder of 1750 £10 shares, and to ordain the company to concur with him in executing and filing with the Registrar of Joint-Stock Companies a contract providing, inter alia, that the shares to be issued to him should be fully paid-up shares, and to ordain the company, on the contract being so executed and filed, to issue to him 1750 £10 fully paid-up shares, and deliver certificates thereof, and to order notice to be given to the Registrar of Joint-Stock Companies.

The company was formed in 1877 for the purpose of taking-over six distilleries, with their premises, business, and plant. The owners of these distilleries were the promoters of, and vendors of their premises to, the company. By the preliminary agreements between them, dated in 1876 and 1877, it was agreed that the distilleries should be made over to the company as at 1st May 1877, the heritable property to be paid for in debentures of the company, and the moveable property by the issue to the respective owners of shares of the company to be held as paid up to the extent of the valued amount of such property. The proportions in which the owners of the six distilleries should take up the 12,000 shares of £50 each which it was proposed to issue were also fixed, the petitioner's firm being allotted 2540, and no shares were issued to the public.

Agreements, all dated 18th April 1877, were entered into between the owners of each distillery and a law-agent contracting on behalf of the company, providing for the ascertainment by arbitration of the value of each distillery, including its heritable and moveable property, &c., and also for the mode in which the consideration money so ascertained should be paid by the company to the respective vendors. It was provided that the consideration money for the moveable property should be paid by allotment to the vendors, or as they should direct, of (in the case of the petitioner's firm) 2540 shares, and that they should get credit on the said allotted shares up to the value of the moveable property. It was specially provided by the said agreement that “at or before the issue

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of the shares to be allotted as part consideration for the sale hereby agreed to be made, a written contract to the like effect with this agreement, with such modifications as may be considered necessary or expedient, shall be filed with the Registrar of Joint-Stock Companies so far as required by section 25 of the Companies Act 1867.”

The company was registered on 24th April 1877, and entered into possession on 1st May thereafter. The valuations made under arbitration were not completed till 10th June 1878. In the meantime, in order to make up the register of members, the law-agent of the company on 6th August 1877, after communication with the respective firms, and ascertaining in whose names they wished their shares placed, entered the names of the allottees or their nominees as holders of the shares without having previously got a contract executed and filed in terms of the 25th section of the Companies Act 1867.

After the valuation of the petitioner's firm's distillery was completed (June 1878), the amount of the moveable property was credited to the shares, and the balance of the nominal amount of the shares was paid up in cash. The petitioner was in ignorance that a contract had not been filed in terms of the Act of 1867, the carrying out of the transaction having been left to the law-agent. There was afterwards a conversion from £50 shares into £10 shares, and the amount of the petitioner's allotment came to be represented by 1750 £10 shares, for which he held a certificate in which they were described as “fully paid.”

Having been advised that the mode in which the shares had been issued without a contract being executed and filed in terms of the statute was irregular, and that liability still attached for the part of the shares not paid in cash, the petitioner presented this petition, the prayer of which is set forth in the first paragraph of this report

The petition was served on the company and on the petitioner's former partner. Answers were put in for the company admitting the petitioner's statements, explaining that in the circumstances it had been thought unnecessary to file a contract under the statute, but expressing a willingness, on the present entry being deleted from the register, to enter into and file a contract as desired.

On the case being called on the Summar Roll the petitioner moved that the prayer of the petition be granted, or that an inquiry should be made into the facts alleged — New Zealand Kapanga Company, L.R., 18 Eq. 17; Denton Colliery Company, L.R., 18 Eq. 16; see also Droitwich Salt Company, 43 L.J., Ch. 581; Hartley's case, L.R., 10 Ch. 157.