英国公司法讲义5

University of Exeter, Business School

Corporate Law 2011/12

Part B (Sections 4-6): FUNDING THE COMPANY

SECTION 5 – SHARE CAPITAL

Material to accompany lectures and lecture slides

Principle of capital maintenance

Re Exchange Banking Co, Flitcroft’s Case (1882) 21 ChD 519:

“The creditor has no debtor but that impalpable thing the corporation, which has no property except the assets of the business. The creditor, therefore … gives credit to that capital, gives credit to the company on the faith of the representation that the capital shall be applied only for the purposes of the business, and he has therefore a right to say that the corporation shall keep its capital and not return it to the shareholders, though it may be a right which he cannot enforce otherwise than on a winding up (Jessel MR)

Trevor v Whitworth (1887) 12 App Cas 409: “One of the main objects of the legislature, in restricting the power of limited companies to reduce the amount of their capital as set forth in the memorandum, is to protect the interest of the outside public who may become their creditors. … Paid-up capital may be diminished or lost in the course of the company’s trading; that is a result which no legislation can prevent; but persons who deal with, and give credit to a limited company, naturally rely upon the fact that the company is trading with a certain amount of capital already paid … and they are entitled to assume that no part of the capital which has been paid into the coffers of the company has been subsequently paid out, except in the legitimate course of business.” (Lord Watson)

Minimum share capital

S. 761

S. 763(1) “The authorised minimum”, in relation to the nominal value of a public company’s allotted share capital is – (a) £50,000 or (b) the prescribed euro equivalent.”

Issue for non-cash consideration

S. 582(1) Shares allotted by a company, and any premium on them, may be paid up in money or money’s worth (including goodwill and know-how).

Re Wragg Ltd [1897] 1 Ch 796:

“Provided a limited company does so honestly and not colourably, and provided that it has not been so imposed upon as to be entitled to be relieved from its bargain … agreements by limited companies to pay for property or services in paid-up shares are valid and binding on the companies and their creditors.” (Lindley LJ)

Salomon v A. Salomon & Co Ltd [1897] AC 22:

“The price on paper was extravagant. It amounted to over £39,000 – a sum which represented the sanguine expectations of a fond owner rather than anything that can be called a businesslike or reasonable estimate of value.” (Lord Macnaghten)

Hong Kong and China Gas Co Ltd v Glen [1914] 1 Ch 527