Court High Court Judge sitting George Farwell | Citation(s) [1901] 1 Ch 279 | |
Similar Hickman v Kent or Romney, Ooregum Gold Mining C, Greenhalgh v Arderne Cinemas, Macaura v Northern Assuranc, Foss v Harbottle | ||
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Borland’s Trustee v Steel Brothers & Co Ltd [1901] 1 Ch 279 is a UK company law case, concerning the enforceability of a company's constitution and the nature of a company share. It is also one of the rare exceptions to the rule that a transfer of assets which only takes effect upon a person's bankruptcy is normally void.
Contents
[Case Law Company] ['definition of a share'] Borland's Trustee v Steel Bros & Co. Ltd [1901]
Facts
Steel Bros Ltd’s articles of association said if a member went bankrupt his shares would be transferred to designated persons at a fair price not above par value. Mr JE Borland held 73 £100 shares and went bankrupt, and so the company gave Borland’s trustee in bankruptcy notice of the transfer. The trustee argued the article was void because it compromised ownership and property rights which tended to perpetuity, against the rule against perpetuities. It requested an injunction against the share transfer at all, or at anything less than a fair value
Judgment
Farwell J rejected Borland Trustee’s argument and held the article was valid. The transfer could be made, because the contract engendered in the articles of association are prior to the rights contained in a share. He said the argument that the article was repugnant to absolute ownership needed to assert, wrongly, that a share is a sum of money dealt with by executory limitations. But in fact a share is an interest and consists of ‘a series of mutual covenants entered into by all the shareholders inter se in accordance with section 16 of the Companies Act 1862.’ The argument about perpetuity has no application because the rule against perpetuities does not apply to personal contracts.
Cambridge Gas
The case received affirmative citation in the Privy Council's verdict in the landmark case of Cambridge Gas Transport Corp v Official Committee of Unsecured Creditors (of Navigator Holdings Plc and Others) [2006] UKPC 26, [2007] 1 AC 508.