EIC Services Ltd. & Anor v Phipps & Ors

EIC Services Ltd. & Anor v Phipps & Ors

The bonus issue of 15 December 1999 was void because it proceeded on the mistaken assumption that all shares were fully paid and that the directors had authority to capitalise the share premium account and issue fully paid bonus shares; section 35A(1) did not apply as shareholders receiving bonus shares are not 'persons dealing with the company' within the meaning of the section.

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) on Preliminary Issues
Outcome
Appeal allowed
Legal Topics
Bonus Shares, Share Capital, Share Premium Account, Common Mistake, Authority of Directors, Section 35 a Companies Act 1985
Company Law Bonus Shares Share Capital Share Premium Account Common Mistake Authority of Directors Section 35 a Companies Act 1985

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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) on Preliminary Issues

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) Companies Act 1985 validated the bonus issue

Ratio Decidendi

The bonus issue of 15 December 1999 was void because it proceeded on the mistaken assumption that all shares were fully paid and that the directors had authority to capitalise the share premium account and issue fully paid bonus shares; section 35A(1) did not apply 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