EIC Services Ltd. & Anor v Phipps & Ors [2004] EWCA Civ 1069 (30 July 2004)

EIC Services Ltd. & Anor v Phipps & Ors [2004] EWCA Civ 1069 (30 July 2004)

The bonus issue was void because it was made without proper authority (no ordinary resolution) and on the mistaken assumption that all shares were fully paid up, which was fundamental to the transaction. Section 35A(1) did not apply to validate the issue as shareholders receiving bonus shares are not 'persons dealing with the company' within the meaning of the section.

Citation
[2004] EWCA Civ 1069
Parties
First Claimant: EIC Services Ltd; Second Claimant: European Internet Capital Ltd.; First Defendant: Stephen Phipps; Second Defendant: Jonathan Paul; Third Defendant/appellant: Jeremy Lee Barber
Jurisdiction
England and Wales
Judgment Date
30 July 2004
Procedural Posture
Civil Appeal / Appeal From High Court (chancery Division) to Court of Appeal
Outcome
Appeal allowed
Legal Topics
Bonus Shares, Share Capital, Share Premium Account, Common Mistake, Authority of Directors, Companies Act 1985 S.35 a, Table a Articles
Company Law Bonus Shares Share Capital Share Premium Account Common Mistake Authority of Directors Companies Act 1985 S.35 a Table a Articles

Case Brief

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Parties

EIC Services Ltd

First Claimant

European Internet Capital Ltd.

Second Claimant

Stephen Phipps

First Defendant

Jonathan Paul

Second Defendant

Jeremy Lee Barber

Third Defendant/appellant

Procedural Posture

Civil Appeal / Appeal From High Court (chancery Division) to Court of Appeal

Legal Issues

  1. 1 Whether the issue of bonus shares on 15 December 1999 was void for lack of authority and common mistake
  2. 2 Whether section 35A(1) of the Companies Act 1985 could validate the bonus issue

Ratio Decidendi

The bonus issue was void because it was made without proper authority (no ordinary resolution) and on the mistaken assumption that all shares were fully paid up, which was fundamental to the transaction. Section 35A(1) did not apply to validate the issue as shareholders receiving bonus shares are not 'persons dealing with the company' within the meaning of the section.

Court Disposition

Appeal allowed

Orders

  • Declaration that the bonus issue on 15 December 1999 was void