The claimant had paid a dividend to its parent company. The claimant’s case was that the payment was in contravention of sections 39 and 43 of the Companies Act 1980, as there were no available profits at the time, and so were ultra vires the claimant. It sued the parent company and the two directors (Mr Wynne-Jones and Mr King), and sought summary judgment. The directors said, and for the purposes of the appeal it was accepted, that at the time of payment of the dividend they were not aware of the relevant requirements of the Companies Act 1980. They also said, and again it was accepted for the purposes of the appeal, that they were advised by the company’s auditors that the sum paid by way of dividend could be paid by way of dividend so long as the dividend was paid by way of available profits. At the time of the appeal the position was that the claimant accepted that the directors should have unconditional leave to defend the claim; the appeal was only against that part of the Judge’s order by which Precision Dippings Marketing Ltd had been given unconditional leave to defend. Repayment was sought under section 44(1) of the 1980 Act.
Held: As to the position of the directors under section 44(1), Dillon LJ: ‘There can be no doubt that because Mr Wynne-Jones and Mr King were the only shareholders in and directors of Marketing and were also the only directors of the company, Marketing must be taken to have known all the facts. But it did not in fact know the terms of sections 39 and 43.’
Judges:
Dillon L.J, Sir Edward Eveleigh
Citations:
[1986] 1 Ch 447
Statutes:
Companies Act 1980 39 43 44(1)
Cited by:
Cited – It’s A Wrap (UK) Ltd v Gula and Another ChD 16-Sep-2005
The defendant company directors were accused of having paid dividends to themselves when the company was in fact making a loss.
Held: A claim might lie, but the pleadings did not phrase it adequately, and an amendment would be improper. Though . .
Lists of cited by and citing cases may be incomplete.
Company
Updated: 30 April 2022; Ref: scu.230900