The court set aside a forfeiture of shares for non-payment of a call. The decisions of the directors to forfeit the shares and to transfer the forfeited shares to the group holding company were flawed, though not improperly motivated, because the directors regarded forfeiture to be the inevitable result of non-payment of the call and had acted without giving any consideration to possible alternative courses of action or exercising a genuine discretion whether to forfeit, as they were bound to do.
As to the directors’ duty where a shareholder could not take rights up: ‘where it is known or foreseen that the minority shareholder or shareholders will or may not have the money or inclination to subscribe, the directors should, in fulfilment of the requirement of even-handedness and fairness, consider what price could and should be extracted from those willing and able to subscribe. They should not unthinkingly issue shares at par. In a simple case where the majority are acting in unison, full value may be required. In other cases, a discount for the assumption of increased risk, or to make the offer attractive to those interested in subscribing, may be appropriate. Quite where the price will fall within the permissible range will depend on the particular circumstances of any given case. What is clear to my mind, however, is that the fiduciary nature of the power requires a board to consider these matters fairly, in the interests of all groups of shareholders and having regard to the foreseeable range of responses. The impact of that duty may be more acute if the board members, or those in a position to control or influence them, stand to benefit appreciably from the exercise of the power in a particular way. Any failure to give proper consideration to the price in the light of the factors I have mentioned may, and ordinarily will, amount to a breach of fiduciary duty.’
Judges:
Mr John Randall QC
Citations:
[2005] 1 BCLC 175
Jurisdiction:
England and Wales
Citing:
Applied – Ex parte Glossop; Re a Company (No 00370 or 1987) ChD 1988
The court heard a complaint as to the non payment of dividends. Harman J said: ‘It is, in my judgment, vital to remember that actions of boards of directors cannot simply be justified by invoking the incantation ‘a decision taken bona fide in the . .
Applied – Abacus Trust Company (Isle of Man) Colyb Limited v Barr, Barr, and Barr ChD 6-Feb-2003
The court considered the Rule in Hastings-Bass, and specifically (1) whether the trustee’s decision is open to challenge when the failure to take a consideration into account is not attributable to a breach of fiduciary duty on the part of the . .
Cited by:
Cited – Kohli v Lit and Others ChD 13-Nov-2009
The claimant asserted that the other shareholders had acted in a manner unfairly prejudicial to her within the company.
Held: The claimant was allowed to bring in without prejudice correspondence to contradict evidence by the defendant which . .
Cited – Pitt and Another v Holt and Others ChD 18-Jan-2010
The deceased had created a settlement in favour of his wife. He suffered serious injury and placed the damages in trust, but in a form which created an unnecessary liability to Inheritance Tax on his death. The wife’s mental health act receiver now . .
Cited – Pitt and Another v Holt and Another ChD 18-Jan-2010
The claimant sought to unravel a settlement she had made as receiver for her late husband, saying that it had been made without consideration of its Inheritance Tax implications. The Revenue said that there was no operative mistake so as to allow . .
Lists of cited by and citing cases may be incomplete.
Company
Updated: 28 June 2022; Ref: scu.378393
