Citation(s) (1883) 23 Ch D 654 | ||
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Court Court of Appeal of England and Wales Similar Howard Smith Ltd v Ampol Pe, Re D'Jan of London Ltd, Greenhalgh v Arderne Cinemas, Aberdeen Rly Co v Blaikie Br, Foss v Harbottle |
Hutton v West Cork Railway Co (1883) 23 Ch D 654 is a UK company law case, which concerns the limits of a director's discretion to spend company funds for the benefit of non-shareholders. It was decided in relation to employees in the context of a company's insolvency proceedings.
Contents
The case's practical significance was limited by cases and statute as in Re Horsley & Weight Ltd, where the Court of Appeal held that a company's substantive object may include making gifts, and under CA 2006 section 172 which entitles and obliges directors to regard interests other than shareholders as a proper exercise of their power.
Facts
According to the law report,
Judgment
Cotton LJ and Bowen LJ held that the money payment was invalid. Baggallay LJ dissented. In the course of his dicta, Bowen LJ held that there is..
So according to Bowen LJ, directors can only spend,
The upshot for a company in insolvency was that directors were not free to make payments to employees, because payments could only be made which were incidental to the business, and an insolvent business had no further business. In English law, the position has been altered by the Insolvency Act 1986, s.187 and the Companies Act 2006, s.247, which allow directors to consider employees directly when a company has gone insolvent.
Significance
The value of the judgment today lies in the general doctrine that during the life of the company, it may conduct itself in a way which benefits stakeholders other than shareholders, but only insofar as that will in the end, albeit indirectly, be in the shareholders' interest. See now, section 172 Companies Act 2006.