EIC Services Ltd & Anor v Phipps & Ors

EIC Services Ltd & Anor v Phipps & Ors

The bonus issue and allotment of bonus shares were irregular due to some shares not being paid up and lack of shareholder resolution, but these defects did not render the bonus shares void. Section 35A Companies Act 1985 protects shareholders who received bonus shares as persons dealing with the company in good faith. The Duomatic principle did not apply as there was no informed unanimous assent. Any irregularity rendered the shares not paid up, not void.

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
Civil (company Law) / Judgment on Preliminary Issues
Outcome
Bonus issue and allotment not void; defects did not invalidate shares.
Legal Topics
Bonus Shares, Share Capital, Share Premium Account, Duomatic Principle, Common Mistake, Section 35 a Companies Act 1985, Ratification, Validity of Share Allotment
Company Law Bonus Shares Share Capital Share Premium Account Duomatic Principle Common Mistake Section 35 a Companies Act 1985 Ratification +1 more

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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

Civil (company Law) / Judgment on Preliminary Issues

Legal Issues

  1. 1 Were the subscriber and November shares fully paid up at the time of the bonus issue?
  2. 2 Was the bonus issue properly authorised by an ordinary resolution or otherwise?
  3. 3 Does the failure to pay up shares or obtain proper authorisation render the bonus shares void or voidable?

Ratio Decidendi

The bonus issue and allotment of bonus shares were irregular due to some shares not being paid up and lack of shareholder resolution, but these defects did not render the bonus shares void. Section 35A Companies Act 1985 protects shareholders who received bonus shares as persons dealing with the company in good faith. The Duomatic principle did not apply as there was no informed unanimous assent. Any irregularity rendered the shares not paid up, not void.

Court Disposition

Bonus issue and allotment not void; defects did not invalidate shares.

Orders

  • Declaration that the bonus issue and allotment were irregular but not void; if section 35A does not apply to a particular allottee, his bonus shares are not treated as paid up.