Company Law

1861 Words8 Pages
Lecture 2: PROMOTERS & PRE-INCORPORATION CONTRACTS James Mendelsohn BS3/16 01484 473607 • • • • • Corporate personality Artificial, separate legal personality Registration at Companies House Limited liability Salomon • Issues arising from separate, artificial legal personality A. PROMOTERS • Background • Definition - no statutory definition - 2 common law definitions • Twycross v Grant (1877) 2 CPD – someone who “undertakes to form a company with reference to a given project, and to set it going and… takes the necessary steps to accomplish that purpose” (Cockburn CJ) • Whaley Bridge Calico Printing Co v Green (1880) 5 QBD 109 – “the term promoter is a term not of law but of…show more content…
• Lagunas Nitrate Co v Lagunas Syndicate [1899] 2 Ch 392 (CA): The promoters were the 1st directors - no independent board; They had an interest in the property which they sold to the company, but disclosed this to prospective shareholders – this was sufficient. Gluckstein v Barnes [1900] AC 240 • • If a company enters into a transaction in which its promoter has an interest, the company can recover from the promoter any profit made on the transaction which was not disclosed to and approved by the company (“secret profit”) – Mr G formed a syndicate to buy a property from the liquidator of an insolvent company, and then resell it. – Mr G & friends also promoted and registered a company to buy the property from their own syndicate. – They appointed themselves as directors of the company. – The syndicate then bought the property from the liquidator, nominally for £140,000. – They then sell it on to the company for £180,000. – In order to fund the purchase, the company invited members of the public to buy shares, for which a prospectus was issued. – The prospectus disclosed a £40,000 profit on the property. – However, the promoters had made an extra profit of £20,000 – This was not disclosed to the prospective shareholders – vague reference to “interim investments” – 4 years later the company went into liquidation – The extra
Open Document