1. In Re New British Iron Company, [1898] 1 Ch.

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The articles of association of a company required its directors to possess a share qualification; and provided that the remuneration of the board shall be an annual sum to be paid out of the funds of the company. The company passed an extraordinary resolution in favour of winding-up voluntarily, and an order was made continuing the voluntary winding-up under the supervision of the Court. At the commencement of the winding-up a considerable sum was due to the directors of the company, for directors' fees and in the winding-up they claimed to rank as ordinary creditors in respect of this sum, notwithstanding s. 38 of the Companies Act, 1862. The articles of association of a company required its directors to possess a share qualification; and provided that the remuneration of the board shall be an annual sum of 1000l. to be paid out of the funds of the company. Held, that although these provisions in the articles were only part of the contract between the shareholders inter se, the provisions were, on the directors being employed and accepting office on the footing of them, embodied in the contract between the company and the directors; that the remuneration was not due to the directors in their character of members, but under the contract so embodying the provisions; and that, in the winding-up of the company, the directors were entitled to rank as ordinary creditors in respect of the remuneration due to them at the commencement of the winding-up.

2. Borland's Trustee v. Steel Brothers & [Link]., [1901] 1 Ch 279.

The plaintiff was the trustee in bankruptcy of Mr. J. E. Borland, and he claimed a declaration that the defendant company were not entitled to require the transfer of certain shares held by the bankrupt at any price whatever, and that the transfer articles of the company purporting to give them power to compel such transfer were void. The defendant company was a private company formed to acquire the business of Steel Brothers & Co., in which the bankrupt had been a partner. The company carried on business as merchants and commercial agents and rice millers.
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Borland was adjudicated bankrupt, and the plaintiff was appointed trustee of his estate. At this date he had parted with all his preference shares; but he still held seventy-three ordinary shares. He was then neither a manager or assistant. The questions of perpetuity have been raised and the articles constitute a fraud upon the bankruptcy laws, and cannot prevail when bankruptcy has supervened. The effect of them is that the trustee in bankruptcy is forced to part with the shares at something less than their true value, and the result is that the asset is not fully available for the creditors. It was held that, the embers are bound to the company by the provisions of the memorandum and articles. The articles of the company provided that if any member became insolvent his shares would be sold by the directors for a price fixed by them. It was held that shares having been purchased on the terms and conditions contained in the articles, it was not open to the trustee of an insolvent member to say that those terms were not binding.

3. Eley v. The Positive Government Security Life Assurance Company, Ltd, (1876) 1

ExD 88. In this case, articles of association contained a clause in which it was stated that the plaintiff should be solicitor to the company, and should transact all the legal business of the company, including parliamentary business, for the usual and accustomed fees and charges, and should not be removed from his office, unless for misconduct. The articles were signed by seven members of the company, and were duly registered, and the company incorporated under the Companies Act, 1862. The plaintiff acted as solicitor to the company for some time, but ultimately the company ceased to employ him and employed other solicitors. The plaintiff brought an action against the company for breach of contract in not employing him as solicitor to transact their legal business on the terms of the articles. It was held, that the articles of association were a matter between the shareholders inter se, or the shareholders and the directors, and did not create any contract between the plaintiff and the company.

4. Guinness v. Land Corporation of Ireland, (1882) 22 ChD 349.

By the memorandum of association of a company limited by shares it was stated that the objects of the company were, the cultivation of lands in Ireland, and other similar purposes there specified, and to do all such other things as the company might deem incidental or conducive to the attainment of any of those objects, and that the capital of the company was 1,050,000, divided into 140,000 A shares of 5 each, and 3500 B shares of 100 each. By the 8th of the contemporaneous articles of association it was provided that the capital produced by the issue of B shares should be invested, and that the income, and so far as necessary the capital, should be applied so as to make good to the holders of A shares a preferential dividend of 5 per cent on the amounts paid up on the A shares. Subject to this, the B fund was to belong to the owners of B shares. The profits of the company, after paying the 5 per cent dividend to the A shareholders, were to be applied in payment of a noncumulative dividend of 5 per cent to the B shareholders, and the surplus was to be divided rateably between the A shareholders and B shareholders according to the amounts paid up on their respective shares. It was held, that article 8 was invalid, as it purported to make the B capital applicable to purposes not within the objects of the company as defined by the memorandum of association, and in a way not incidental or conducive to the attainment of those objects, and that the directors must be restrained from acting upon it.

5. Hickman v. Kent or Romney Marsh Sheep breeders' Association., [1915] 1 Ch.

881. The plaintiff was elected as a member in Kent or Romney Marsh Sheep-Breeders Association' and a written notice of his election was sent by the secretary with an intimation that his flock would be inspected. The inspection took place in May, 1906. On December 18, 1914, the plaintiff issued a writ against the association and Chapman claiming: 1. An injunction to restrain the association from employing Chapman as secretary, and to restrain Chapman from acting as secretary. 2. An injunction to restrain the defendants from taking any steps to expel the plaintiff from the association. 3. An injunction to restrain
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the defendants from doing any acts in derogation of the plaintiff's rights as a member. 4. A declaration that the plaintiff was entitled to have the resolutions and proceedings of the association and of any committee thereof truly and accurately entered in the minutes, and consequential relief. 5. An injunction to restrain the defendants from incorrectly recording such resolutions in the minutes. 6. An order that all minutes be expunged which did not accurately record the proceedings of the association, and in particular that the entry be expunged stating that a certain committee appointed to inspect the plaintiff's sheep and to see that they were tattooed was appointed on Chapman's motion and not on the plaintiff's motion. 7. An injunction to restrain Chapman from calling any meeting of the association except in accordance with the rules. 8. Damages for unlawfully refusing to register the plaintiff's sheep and a declaration that the plaintiff was entitled to have his sheep registered. 9. Further or other relief. 10. Costs. The defendants issued a summons asking that all further proceedings in the action be stayed pursuant to s. 4 of the Arbitration Act, and that the matters in question in the action be referred to arbitration in accordance with the provisions of article 49, or alternatively under the submission to arbitration contained in the plaintiff's written application for membership. It was held that, it is clear on the authorities that if there is a submission to arbitration within the meaning of the Arbitration Act, there is a prima facie duty cast upon the Court to act upon such an agreement. It was said that, the contract so made between the plaintiff and the association is also a submission in writing within the true meaning and intent of the Arbitration Act, and made an order to stay under s. 4 and direct that the matters in dispute in this action be referred to arbitration accordingly.

6. Ashbury Railway Carriage and Iron Co. Ltd. v. Hector Riche, (1874-75) L.R. 7

H.L. 653 Ashbury Railway Carriage and Iron Company was carrying on a very extensive business in making things needed for a railway company, but had not been concerned in the construction of railways themselves. Mr. Riche, the Defendant in Error, was carrying on business in Belgium for the construction of the line. The Belgian Government granted to certain persons named Gillon and Bertsoen a
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provisional concession for making a line of railway. Riche and the directors of the Ashbury Company agreed to form a company to work the concession. The arrangement was for the Ashbury Company to purchase the concession from Messrs. Gillon for 70,000, and to give the contract for its construction to Messrs. In this negotiation, one of the directors of the English company, represented that company, and entered into the contracts. The purpose of the formation of the company was, Riche should construct the line and the Ashbury company undertakes to supply the requisite fundswas said to have been adopted because the rails, &c., supplied by a Belgian house would be free from the duty that the Belgian Government imposed on rails imported from England, and consequently the profit from the construction of the line would be increased. Riche began and for some time continued the works for the construction of the line and the Ashbury directors paid. Difficulties about payment arose as the work went on, the English shareholders not adopting the views of their directors as to the speculation. Riche brought an action for damages for breach of contract. The Court was to be at liberty to draw inferences of fact. The question of ultra vires was to depend on the following considerations. Firstly, the declaration of the objects of the company made in the Memorandum of Association. Secondly, the words of several of the Articles of Association. Thirdly, the acts of the Directors, and of meetings of the Company. A contract made by the directors of such a company upon a matter not included in the Memorandum of Association is ultra vires of the directors, and is not binding on the company. Nor can such a contract be rendered binding on the company though afterwards expressly assented to at a general meeting of shareholders. Being in its inception void, as beyond the provisions of the statute, it cannot be ratified even by the assent of the whole body of shareholders. Hence held that this contract, being of a nature not included in the Memorandum of Association, was ultra vires not only of the directors but of the whole company, so that even the subsequent assent of the whole body of shareholders would have no power to ratify it.

7. Official Receiver and Liquidator of Jubilee Cotton Mills, Ltd v Lewis, [1924] A.C.

958
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The respondent, as the Court found on the facts, was a promoter of a company formed for the purchase of a cotton mill and the carrying on of the business of cotton spinners. The memorandum and articles of association of the company were accepted by the Registrar of Joint Stock Companies and the certificate of incorporation was dated on that day, but apparently it was not in fact signed by the registrar. The company, before filing any statement in lieu of prospectus, allotted a large number of fully paid shares and debentures to the vendor as the ostensible consideration for the purchase, but really to provide for promotion profits. The greater part of these shares and debentures was transferred to the respondent, who obtained a considerable sum by realizing them, though the shares were in fact worthless. The company having been compulsorily wound up, the official receiver and liquidator issued a misfeasance summons against the respondent to render him liable for certain secret profits alleged to have been made by him as promoter. The respondent objected that there had been no valid issue or allotment of the shares and debentures alleged to constitute the profit. It was held that, the certificate of incorporation was conclusive as to the date on which the company was incorporated, and that the words "from the date of incorporation" which provided that the company from the date of incorporation mentioned in the certificate was a body corporate capable of exercising all the functions of an incorporated company, included any portion of the day on which the company was incorporated and did not mean "from the commencement of the next day"; consequently that the allotment of shares and debentures was not void on the ground that it was made before the company came into existence, also assuming that the allotment was void, as having been made before a statement in lieu of prospectus was filed, the respondent, having been put by the company in control of something out of which he made a profit, was bound to account to the company for that profit. It was held, that an allotment of shares and debentures made before filing a statement in lieu of prospectus, is not wholly void.

8. Rayfield v Hands and Others, [1960] Ch. 1.

Field-Davis Ltd. was a private company carrying on business as builders and contractors, a company limited by shares, having a share capital of 4,000, divided into 4,000 ordinary shares of 1 each, of which 2,900 fully-paid shares had been issued. The plaintiff, Frank Leslie Rayfield, was the registered holder of 725 of those shares, and the defendants, Gordon Wyndham Hands, Alfred William Scales and Donald Davies were at all material times the sole directors of the company. Later, the plaintiff by a notice in writing informed the defendants, as directors of the company, of his intention to transfer his 725 shares to them as provided by article 11. The defendants denied any liability to take up and pay for the shares and the plaintiff, by his statement of claim asked (1) that the fair value of the plaintiff's said shares might be determined by the court, (2) that the defendants be ordered to purchase such shares at their fair value in such proportions as they might agree upon, or in default of agreement, then equally, and (3) that an inquiry be ordered if necessary to ascertain such fair value. The plaintiff was a shareholder in a company, article 11 of the articles of association of which required him to inform the directors of his intention to transfer shares in the company, and which provided that the directors "will take the said shares equally between them at a fair value." In accordance with article 11 the plaintiff so notified the directors, who contended that they need not take and pay for the plaintiff's shares, on the ground that the articles imposed no such liability upon them. On the plaintiff's claim for the determination of the fair value of his shares, and for an order that the directors should purchase such shares at a fair value:It was held: that upon their true construction the articles required the directors to purchase the plaintiff's shares at a fair price. That article 11 was concerned with the relationship between the plaintiff as a member and the defendants, not as directors, but as members of the company. And also held that it was not necessary, for the plaintiff to succeed in his action, that he should join the company as a party in addition to the directors.

9. Shuttleworth v Cox Brothers and Co. (Maidenhead), Ltd, and Others, [1927] 2 K.B.

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The plaintiff, was a works manager and a director of the defendant company, claimed damages for having been dismissed from his office of manager and wrongfully excluded from his position as director and for a declaration that he was still entitled to be a director in the circumstances hereafter mentioned. The defendant company was incorporated to acquire and take over as going concerns and carry on the business of English and foreign timber merchants and builders' merchants then carried on by the plaintiff, under the style of Cox Brothers & Co. The capital of the company was 25,000 divided into 25,000 shares of 1 each. The greater number of these shares was held by the directors. The articles of association of a company provided that the plaintiff and four others should be the first directors of the company, and that they should be permanent directors, and that each of them should be entitled to hold office so long as he should live unless he should become disqualified from any one of six specified events. Owing to irregularities in the accounts furnished by the plaintiff of sums received by him on the company's account an extraordinary general meeting of the company was held and a special resolution was passed that the articles should be altered by adding a seventh event disqualifying a director - namely, a request in writing by all his co-directors that he should resign his office. Such a request was subsequently made to the plaintiff. There was no evidence of bad faith on the part of the shareholders. In an action by the plaintiff for breach of an alleged contract contained in the original articles that he should be a permanent director, and for a declaration that he was still a director of the company. Also held, that the contract, if any, between the plaintiff and the company contained in the articles in their original form was subject to the statutory power of alteration and that if the alteration was bona fide for the benefit of the company it was valid and there was no breach of that contract; that there was no ground for saying that the alteration could not reasonably be considered for the benefit of the company; that, therefore, there being no evidence of bad faith, there was no ground for questioning the decision of the shareholders that the alteration was for the benefit of the company; and, consequently, that the plaintiff was not entitled to the relief claimed.

10.

Twycross v Grant and Others, (1876-77) L.R. 2 C.P.D. 469

Action brought by the plaintiff under the Companies Act, 1867, s. 38 , to recover the amount paid by him on certain shares taken by him in the L. Company on the ground of the fraud of the defendants (promoters of the company), in omitting from the prospectus two contracts entered into by them as promotersthe one a contract between the defendants C. & P. and one S., for the purchase of certain foreign concessions for the construction of tramways which the company was afterwards incorporated to make and work; the other a contract between the defendants, C. & P. and the defendant G., as to certain payments to be made by C. & P. to G. in consideration of his obtaining for them a contract from the company for the construction of the tramways, by means of which fraud the plaintiff had been induced to take the shares, which proved worthless. The jury found that these contracts were material to be made known to the intended shareholders of the company. It was held, that the contracts ought to have been specified in the prospectus, and that the defendants were liable It was also held, that the words knowingly issuing mean intentionally issuing a prospectus without inserting the contracts which are required by that section to be specified, although they are omitted under the bona fide belief that it is unnecessary to specify them.