EIC Services Ltd & Anor v Phipps & Ors [2003] EWHC 1507 (Ch) (13 March 2003)

EIC Services Ltd & Anor v Phipps & Ors [2003] EWHC 1507 (Ch) (13 March 2003)

Subscriber shares were fully paid up by set-off of expenses before the bonus issue. November shares were not paid up by assignment of business plan rights before the bonus issue, but payment by set-off of expenses was established. Bonus issue was not properly authorised by ordinary resolution as required by Regulation 110, but shareholder assent and subsequent ratification sufficed under the Duomatic principle. Bonus shares are validly issued and not void, even if procedural irregularities occurred.

Citation
[2003] EWHC 1507 (Ch)
Parties
Claimant: EIC Services Limited; Claimant: European Internet Capital Limited; Defendant: Stephen Lawry Phipps; Defendant: Jonathan Paul; Defendant: Jeremy Lee Barber; Defendant: Stella Sutton; Defendant: Hambros Bank Nominees Limited
Jurisdiction
England and Wales
Judgment Date
13 March 2003
Procedural Posture
Chancery Division Preliminary Issues / Judgment on Preliminary Issues
Outcome
Preliminary issues determined; bonus shares validly issued.
Legal Topics
Bonus Share Issue, Share Capital, Share Premium Account, Payment for Shares, Authorisation of Capitalisation, Validity of Share Allotment, Ratification by Shareholders
Company Law Bonus Share Issue Share Capital Share Premium Account Payment for Shares Authorisation of Capitalisation Validity of Share Allotment Ratification by Shareholders

Case Brief

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Parties

EIC Services Limited

Claimant

European Internet Capital Limited

Claimant

Stephen Lawry Phipps

Defendant

Jonathan Paul

Defendant

Jeremy Lee Barber

Defendant

Stella Sutton

Defendant

Hambros Bank Nominees Limited

Defendant

Procedural Posture

Chancery Division Preliminary Issues / Judgment on Preliminary Issues

Legal Issues

  1. 1 Were subscriber shares fully paid up at the time of the bonus issue?
  2. 2 Were November 1999 shares fully paid up at the time of the bonus issue?
  3. 3 Was the bonus issue validly authorised by shareholders?

Ratio Decidendi

Subscriber shares were fully paid up by set-off of expenses before the bonus issue. November shares were not paid up by assignment of business plan rights before the bonus issue, but payment by set-off of expenses was established. Bonus issue was not properly authorised by ordinary resolution as required by Regulation 110, but shareholder assent and subsequent ratification sufficed under the Duomatic principle. Bonus shares are validly issued and not void, even if procedural irregularities occurred.

Court Disposition

Preliminary issues determined; bonus shares validly issued.

Orders

  • Subscriber shares deemed fully paid up before bonus issue.
  • November shares deemed fully paid up by set-off of expenses.