Public Company – Partnership – Reduction of Contract – Fraud – Recission of Contract – Commencement of Winding-up – Act 25 and 26 Vict. c. 89 (Companies Act 1862), secs. 18, 38, 84, 130
A shareholder in a joint-stock bank, which was registered under the Companies Act of 1862, raised an action of reduction of his contract, alleging that he had been induced to purchase stock through the fraudulent misrepresentations of the directors and the manager. The summons was served on the day before that on which it was resolved to wind-up voluntarily, but after the bank had stopped payment, and after the directors had published a notice summoning a meeting of shareholders for the purpose of passing a resolution to wind up voluntarily, and also after certain men of business, who had been appointed by the directors to make an investigation into the affairs of the bank, had published a report which showed that there was a deficit of over pounds 5,000,000.
In a petition by the shareholder to have his name removed from the register of members and the list of contributories, and to stop calls- held ( aff. judgment of Court of Session) that after the advertisement of the notice of meeting the directors were not entitled to make any alteration in the status of the shareholders, whether by a transfer or by a repudiation of shares which would affect the rights of creditors of the company.
Observed by the Lord Chancellor (Cairns) that the question whether a contract to take shares in a company can be rescinded on the ground of fraud up to the date of the commencement of a winding-up must always depend upon the particular circumstances of the case.
Lord Chancellor (Cairns), Lord Hatherley, Lord Selborne, and Lord Gordon
 UKHL 509, 16 SLR 509
Updated: 04 July 2022; Ref: scu.637962