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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Tayside Floorcloth Co., Ltd Petitioners [1923] ScotLR 361 (10 March 1923) URL: http://www.bailii.org/scot/cases/ScotCS/1923/60SLR0361.html Cite as: [1923] ScotLR 361, [1923] SLR 361 |
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Page: 361↓
A limited company presented a petition for confirmation of a special resolution whereby it was proposed to alter its memorandum of association by taking power ( a) to procure the company
Page: 362↓
to be “incorporated, registered, or recognised” abroad, ( b) to sell or let or lease “the undertaking of the company or any branch or part thereof.” The Court confirmed the resolution, subject to the deletion of the word “incorporated” from the proposed new clause, and subject to the proposed clause conferring power to sell being amended so as to read “to sell, let, or lease any branch or part of the undertaking of the company.”
The Companies (Consolidation) Act 1908 enacts—Section 9 (1)—“Subject to the provisions of this section a company may by special resolution alter the provisions of its memorandum of association with respect to the objects of the company, so far as may be required to enable it ( a) to carry on its business more economically or more efficiently; or ( b) to attain its main purpose by new or improved means; or ( c) to enlarge or change the local area of its operations; or ( d) to carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the company; or ( e) to restrict or abandon any of the objects specified in the memorandum.”
The Tayside Floorcloth Company, Limited, incorporated under the Companies Acts 1862 to 1900, petitioners, brought a petition in the Court of Session for confirmation of certain alterations in its memorandum of association.
The petition, inter alia, set forth—“At an extraordinary general meeting of the company, duly convened, and held on 19th October 1922, the following resolution was duly passed in the manner required for the passing of an extraordinary resolution, and at a subsequent extraordinary meeting, also duly convened, held on 9th November 1922, the same was duly confirmed as a special resolution of the company:—‘That the provisions of the memorandum of association of the company with respect to its objects be altered by cancelling the existing clause III thereof and by substituting therefor the following new clause, viz.—III. The objects for which the company is established are—… ( p) To procure the company to be incorporated, registered, or recognised in any foreign country, or in Australia, Canada, India, or any Colony or Dependency of the United Kingdom. … ( r) To sell, or let on rent, or lease the undertaking of the company, or any branch or part thereof, or any of the property, heritable and moveable, of the company, or any right or interest therein, and that for such consideration as the company may think fit, and in particular in consideration to accept shares, stocks, debentures, or securities of any other company in Great Britain or elsewhere having objects altogether or in part similar to those of this company.’”
On 14th December 1922 the Court remitted to Sir George M. Paul, C.S., to report on the petition.
Sir George M. Paul, after narrating the effect of a number of the proposed new clauses, including Clause ( p), reported—“These new clauses may all be found in the memorandum of association of a modern manufacturing concern. … As regards sub-clause ( r), to sell, let, or lease the undertaking of the company or any branch or part thereof, the reporter respectfully refers your Lordships to the unreported case of the Biggar Auction Mart Company, where your Lordships after hearing counsel refused confirmation of a power to sell the main undertaking of the company on the ground that the power of alteration conferred by section 9 of the Companies Act 1908 excludes the allowance of a power to dispose of the undertaking. Your Lordships are also respectfully referred to petition John Walker & Sons, Limited, S.C. 1914, 280, and petition Macfarlane, Strang, & Company, Limited, S.C. 1915, 196. The Act assumes that a company is not to lose its identity, and that an alteration of its objects must be for its advantage as a going and continuing concern. If your Lordships should see fit to refuse power to sell the undertaking, the clause might be expressed thus, ‘to sell, let, or lease any branch or part of the undertaking of the company.’”
The petition came before the First Division on March 10, 1923, when counsel was heard on the petition and report.
The other matter arises on paragraph ( r), where a power is asked “To sell, or let on rent, or lease the undertaking of the company, or any branch or part thereof.” That again is a power which, as the authorities show, the Court does not consider itself entitled to grant. If it were given to a company the effect would be to authorise the company to commit suicide so far as its own undertaking was concerned—in other words, to do something which is inconsistent with the purpose of its incorporation. There is no harm, of course, in the company
Page: 363↓
The Court confirmed the alteration of the memorandum of association subject to the deletion of “incorporated” from clause ( p) and the amendment of clause ( r) as suggested by the reporter.
Counsel for thePetitioners— Lord Kinross. Agents— Shepherd & Wedderburn, W.S.
