Wemyss Collieries Trust, Limtd. v. Melville And Others [1905] ScotLR 43_98 (23 November 1905)

Wemyss Collieries Trust, Limtd. v. Melville And Others [1905] ScotLR 43_98 (23 November 1905)

The directors' power under article 138 to set aside profits to a reserve fund before recommending any dividend is not inconsistent with the subsequent article 7-1 granting preference shareholders an additional non-cumulative dividend. The articles can be read together, and the directors acted within their powers even though the effect was to deprive preference shareholders of the additional 1% dividend for that year.

Citation
[1905] ScotLR 43_98
Parties
First Party (company): Wemyss Collieries Trust, Limited; Second Parties (preference Shareholders): James Melville and Others (Preference Shareholders)
Jurisdiction
Scotland
Judgment Date
23 November 1905
Procedural Posture
Special Case (company Law) / Judgment of the Inner House, First Division, Court of Session
Outcome
For the company (First Party); directors' actions upheld.
Legal Topics
Articles of Association, Directors' Powers, Dividends, Preference Shareholders, Reserve Fund, Capital Rearrangement
Company Law Articles of Association Directors' Powers Dividends Preference Shareholders Reserve Fund Capital Rearrangement

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Parties

Wemyss Collieries Trust, Limited

First Party (company)

James Melville and Others (Preference Shareholders)

Second Parties (preference Shareholders)

Procedural Posture

Special Case (company Law) / Judgment of the Inner House, First Division, Court of Session

Legal Issues

  1. 1 Whether directors may, under the articles of association, apply profits to a reserve fund before paying an additional non-cumulative dividend to preference shareholders, thereby depriving them of that dividend.

Ratio Decidendi

The directors' power under article 138 to set aside profits to a reserve fund before recommending any dividend is not inconsistent with the subsequent article 7-1 granting preference shareholders an additional non-cumulative dividend. The articles can be read together, and the directors acted within their powers even though the effect was to deprive preference shareholders of the additional 1% dividend for that year.

Court Disposition

For the company (First Party); directors' actions upheld.

Orders

  • First question (whether preference shareholders are entitled to have the sum applied to the additional 1% dividend) answered in the negative.
  • Second question (whether directors are entitled to place the sum to reserve before paying the additional dividend) answered in the affirmative.