The Court was asked whether an agreement by the company to pay an annuity to the widow (a shareholder) of a former managing director of the company was ultra vires.
Held: Eve J set out three applicable tests: ‘But whether they be made under an express or implied power, all such grants involve an expenditure of the company’s money, and that money can only be spent for the purposes reasonably incidental to the carrying on of the company’s business, and the validity of such grants is to be tested, as is shown in all the authorities, by the answers to three pertinent questions: (i) Is the transaction reasonably incidental to the carrying on of the company’s business? (ii) Is it a bona fide transaction? and (iii) Is it done for the benefit and to promote the prosperity of the company?’
Eve J
[1932] 2 Ch 46
England and Wales
Cited by:
Distingished – Charterbridge Corporation Ltd v Lloyds Bank ChD 1969
Pomeroy Developments (Castleford) Ltd (‘Castleford’) was one of a large group of companies headed by Pomeroy Developments Ltd (‘Pomeroy’). None of the companies ere subsidiaries of Pomeroy, but they had common shareholdings, directors, and officers. . .
Criticised – Rolled Steel Products (Holdings) Ltd v British Steel Corporation and Others CA 1986
The plaintiff company had guaranteed borrowings, using powers within the memorandum of association, but for purposes which were held to be improper, because they were not in the interests of the plaintiff company itself. One issue was whether the . .
Lists of cited by and citing cases may be incomplete.
Company
Updated: 08 January 2022; Ref: scu.654584