Public Company – Winding-up – List of Contributories – Purchase by Directors as Trustees on behalf of Company – Trafficking in Shares
The memorandum of association of a company limited under the Companies Act of 1862 provided that no transfer of any shares either upon a sale or in consequence of the bankruptcy of any shareholder should be valid or effectual without the consent of a majority of the other shareholders expressed in writing, but that if the other shareholders declined to consent to any such transfer they should be bound to take the shares at the price offered in a case of sale, or at the market price in other cases.
Certain of the directors of the company made a direct purchase of shares from the executors of a deceased partner, and paid for them out of the company funds. A transfer was prepared, and the directors’ names were subsequently entered in the register of shareholders with a notice of trust. In the winding-up of the company, which occurred upwards of a year afterwards, held that, apart from the question of the validity of the transaction, which was a matter for the company or those representing it, and following the decision in Oakes v. Turquand, August 15, 1867, L.E., 2H.L. 325, and Muir’s case, April 7, 1879, ante, p. 483, the directors’ names fall to be placed upon the list of contributories in the interests of the creditors, just like any other parties who professed to hold upon trust.
Opinions (in disagreement with the judgment of the Court of Session) that the purchase of the shares by the directors of the company was ultra vires, as being unauthorised by the memorandum of association.
Lord Chancellor (Cairns), Lord Hatherley, Lord O’Hagan, Lord Blackburn, and Lord Gordon
 UKHL 666, 16 SLR 666
Updated: 04 July 2022; Ref: scu.637963