M'Lintock v. Campbell [1916] ScotLR 697 (25 May 1916)

M'Lintock v. Campbell [1916] ScotLR 697 (25 May 1916)

By majority, the Court held that the transfer by the director to a person of straw was absolute and bona fide, with no arrangement for the shares to revert, and thus valid. The director, though aware of the company's insolvency, was entitled to transfer his shares to avoid liability, as the law does not impose a higher duty on directors in this context absent fraud or a contrary provision in the articles. The petition for rectification was refused.

Citation
[1916] ScotLR 697
Parties
Petitioner: William M'Lintock, C. A., Glasgow (liquidator of the Cosmopolitan Insurance Corporation, Limited); Respondent: William Campbell
Jurisdiction
Scotland
Judgment Date
25 May 1916
Procedural Posture
Company Law Petition (rectification of Register in Liquidation) / Inner House, First Division, Court of Session – Judgment on Petition for Rectification
Outcome
Petition refused
Legal Topics
Director's Duties, Share Transfer, Winding Up, Rectification of Register, Contributories, Fraudulent Transfer, Qualification Shares
Company Law Insolvency Law Director's Duties Share Transfer Winding Up Rectification of Register Contributories Fraudulent Transfer +1 more

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Parties

William M'Lintock, C. A., Glasgow (liquidator of the Cosmopolitan Insurance Corporation, Limited)

Petitioner

William Campbell

Respondent

Procedural Posture

Company Law Petition (rectification of Register in Liquidation) / Inner House, First Division, Court of Session – Judgment on Petition for Rectification

Legal Issues

  1. 1 Whether a director can, when aware of a company's insolvency, transfer shares to a person of straw to avoid liability for calls and thereby escape liability as a contributory in liquidation.
  2. 2 Whether such a transfer, if absolute, is valid or voidable, particularly where the transferee is impecunious and the transfer is motivated by the director's knowledge of impending liquidation.

Ratio Decidendi

By majority, the Court held that the transfer by the director to a person of straw was absolute and bona fide, with no arrangement for the shares to revert, and thus valid. The director, though aware of the company's insolvency, was entitled to transfer his shares to avoid liability, as the law does not impose a higher duty on directors in this context absent fraud or a contrary provision in the articles. The petition for rectification was refused.

Court Disposition

Petition refused

Orders

  • Prayer of the petition for rectification of the register and list of contributories refused.