Elliot v Mackie and Sons Ltd; Elliot v Whyte: 1935

Executors of the deceased founder of the company had executed transfers of shares in favour of two of their number and a third party to qualify them as directors of the company under the articles, the trustees and executors wanting adequate representation on the board of directors. The certificates were endorsed to show that the transfers were purely nominal and done only in order to enable the transferees to qualify as directors, the beneficial interest remaining in the transferors. This initiative was objected to by some of the beneficiaries under the deceased’s testamentary settlement. They said that registration of the transfers was ultra vires of the company because the company’s articles provided that shares must be held by a director ‘in his own name and right’, and that the register should be rectified because the transferees’ names had without sufficient cause been entered in the register.
Held: The argument that registration of the transfers was ultra vires of the company because the shares were not held in the transferees’ own right as they had no beneficial interest in them was rejected. It was practice for notice of trusts to be taken in company registers. But Lord President Clyde did not think that this made the relation between the registered trustee and the company in any way different from that which existed in the case of other shareholders. Applying Muir v City of Glasgow Bank (1878) 6 R 392, a trustee has the full right of property in the shares and consequently incurs personally the full liabilities of a shareholder. He added these words: ‘The matter is one in which it is most undesirable to have different interpretations, north and south of the Border, of an expression in common use in the articles of companies whose affairs are regulated by a legislative system which is intended to apply, generally, to both countries; and, whatever view might have been taken – had the matter arisen rebus integris – I think it is too late to open a question which (in England) authority and practice, and (in Scotland) practice conform to that authority, has closed.’
The expression in common use to which this passage refers is the provision in the company’s articles that the qualification was the holding of a certain number of shares in the director’s ‘own name and right.’ The decisive issue was the effect of the entry of the transferees’ names on the register as members of the company, as to which the law on both sides of the Border is the same. The fact that the certificates on the back of the transfers disclosed that the transfers were purely nominal was insufficient to prevent shares that were actually held in trust from constituting a director’s qualification.
Lord Morison said that it was of no concern to the company whether the shareholder was the owner of the shares which he held, or whether third parties were the owners or had interests in them.


Lord President Clyde


1935 SC 81


AppliedMuir v City of Glasgow Bank HL 1878
The bank had failed as the result of a fraud perpertrated by its directors. The liability of the members was unlimited. Lord President Inglis said: ‘Persons becoming partners of a joint stock company, such as the Western Bank, and being registered . .

Cited by:

CitedFarstad Supply As v Enviroco Ltd SC 6-Apr-2011
The court was asked by the parties to a charterparty whether one of them is an ‘Affiliate’ of the charterer for the purposes of provisions in a charterparty by which both the owner and the charterer agreed to indemnify and hold each other harmless . .
Lists of cited by and citing cases may be incomplete.

Scotland, Company

Updated: 11 May 2022; Ref: scu.432930