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10 Cards in this Set
- Front
- Back
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Intro |
A share is a 'chose in action' and the bundle of rights, interest and duties of a share are only applicable following enforcement thereof. The essence of a share is that some form of restriction on the free alienability arises. 2 main restriction to protect the company's 'private' status arise in the form of pre-emption rights and the discretion to refuse to register a shareholder. |
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Pre-Emption Rights |
Essentially the right of 1st refusal when shares are transferred but also in the allotment/issue of new shares. S23 imposes this obligation, but can be excluded via M&A. If shareholders want a particular allotment without pre-emption, this can only be done by passing a special resolution. A company can also apply it's own pre-emption scheme. Safeguard Industrial Investments wording of pre-emption clauses strictly interpreted.Did not apply to transactions on death. Lee & Co v Egan pre-emption defeats contract Phelan v Goodman beneficial rights extend to any transfer of the share Lyle & Scott Ltd v Scott Trustees a share is of no value without the beneficial rights that it confers |
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Share Transfer |
No legal rights on the transferee until he is registered. In Kinsella v Alliance and Dublin Consumer Gas Co. a member is not entitled to vote unless registered. A voluntary assignment occurs by way of gift or sale. Involuntary usually arises by vesting in another due to insolvency. |
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Discretion to Refuse Registration |
Model Reg 3 gives directors the discretion to refuse to transfer shares, provided they are acting in good faith. Re Smith and Fawcett Ltd 2 shareholders, 1 died and left to son. Wide discretion to refuse, only limitation being he must've acted in good faith. Banfi Ltd v Moran background of complaints of improper behaviour and oppression. Refusal based on attempt to prevent the plaintiff from pursuing statutory redress available. Therefore, acting in own best interest and not that of the co. |
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Refusal to Give Reasons |
Directors need not give reasons for refusal Re Hafner left 500 shares but refused registration. Claimed directors refusing to sign would have the effect of starving him of dividends, and the court would infer from refusal to give reasons that it was mala fide. Re Dublin North City Building Co the transferee was an existing member of the co. with further shares to be registered. Director said it would be detrimental to do so and were not compelled to give reasons. Re Cole Port China Company "the court has no right to assume they have done wrong but must assume they have done right" |
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Director's Personal Feelings |
Popely v Planarrive Ltd man, extra-marital affair, refused registration. A personal dislike would not alter the fact that their decisions were taken bona fide in the best interests of the company. Tangey v Clarence Hotel Ltd could refuse to register 'undesirable person'. Could not extend this to refusal to register subsequent shares of existing members. |
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Failure to Make a Decision to Refuse |
Re Hackney Pavillion Ltd deadlock in decision, and registration enforced. Must actively decide to refuse registration. Re Swandale Cleaners Ltd delay of 4 months, power to decline lapsed. Popely v Planarrive where decision made but failure to communicate that decision, still valid. |
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Consequences of Being Refused |
Where paid over purchase price, transferor remains the legal owner but the transferee is the equitable owner. There is a strong case for implying a term that the contract for sale is conditional upon the transferee's registration as a member. |
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Challenging a Refusal to Register |
Section 122 - refusal without sufficient cause. Court can refuse application or order rectification of the register and order payment of compensation by company.C |
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Compulsory Transfer |
Under s204 where a takeover company has obtained acceptance in it's terms by 80% of more of the shareholders, it can issue intention to buy out to the rest. It has 4 months to acquire the 1st 80% and the other 20% within 2months. If objection, a shareholder can lodge an application with the court within 1 month. Walls v PJ Walls Holdings Ltd law should pay attention to the views of the majority who accepted the takeover. Scheme does not need to be complied with 100% to the highest possible standards of fairness, equity and reason. |
