Scottish Court of Session Decisions

The Companies (Consolidation) Act 1908 (8 Edw. VII, cap. 69), which provides in sections 46 to 52 and in section 55 for the reduction of the share capital of a company, enacts—Section 47—“Where a company has passed and confirmed a resolution for reducing share capital it may apply by petition to the Court for an order confirming the reduction.” Section 50—“The Court, if satisfied with respect to every creditor of the company who under this Act is entitled to object to the reduction, that either his consent to the reduction has been obtained or his debt or claim has been discharged or has determined or has been secured, may make an order confirming the reduction on such terms and conditions as it thinks fit.” Section 55—“In any case of reduction of share capital the Court may require the company to publish as the Court directs the reasons for reduction, or such other information in regard thereto as the Court may think expedient with a view to give proper information to the public, and, if the Court thinks fit, the causes which led to the reduction.”

Messrs G. Mackay & Company, Limited and Reduced, petitioners, presented a petition under the Companies (Consolidation) Act 1908, secs. 46 to 52 and sec. 55, for confirmation of the reduction of the capital of the company. The circumstances rendering the petition necessary were the following:—The company was a private company within the meaning of section 121 of the Companies (Consolidation) Act 1908. It was a purely family concern. By the articles of association it was provided that the company might by special resolution reduce its capital, and “that the holders of any class of shares might, by an extraordinary resolution passed at a meeting of such holders, consent to any scheme for the reduction of the company's capital affecting such class of shares, and that such resolution should be binding on all the holders of the shares of that class.” A resolution reducing the capital of the company was passed at an extraordinary general meeting of the company, and confirmed at a subsequent extraordinary general meeting.

The crave of the petition was in the following terms:—“May it therefore please your Lordships primo ( a) to dispense with intimation and advertisement of this petition, or alternatively ( b) to appoint intimation of this petition to be made on the walls and in the minute-book in common form, and to be advertised once in the Edinburgh Gazette and once in the Scotsman newspaper; to allow all concerned to lodge answers, if so advised, within eight days after such intimation and advertisement, and hoc statu and during the dependence of this petition to dispense with the words ‘and reduced’ as part of the name of the company; and secundo, to make an order confirming the reduction of capital resolved on by the special resolution passed on 26th October and confirmed on 13th November 1914, set forth in the petition, approving of the minute set forth in the petition directing the registration of said confirmation order and minute by the registrar of joint stock companies, and (on said order and minute being registered by said registrar) notice of such registration to be given by advertisement once in the Edinburgh Gazette, and dispensing altogether with the addition of the words ‘and reduced’ as part of the name of the company, and decerning; or to do otherwise in the premises as to your Lordships shall seem proper.”

Argued for the petitioners—The company being a purely family concern, the proposed reduction being fair and equitable, and no question of public interest being involved, the Court might dispense with intimation and advertisement. In the case of the British and Burmese Steam Navigation Company, Limited, December 10, 1879, 7 R. 379, the Court had granted a similar petition

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under a previous statute without ordering intimation. Since then the law had been extended in favour of the petitioners by the Companies (Consolidation) Act 1908 (8 Edw. VII, cap. 69). It was unnecessary in such a case to show that the capital proposed to be reduced was lost or unrepresented by available assets— in re Louisiana and Southern States Real Estate and Mortgage Company, [1909] 2 Ch 552. The reason was that the Court had jurisdiction to reduce the capital, and creditors not being concerned, the questions for its consideration were—(1) Were the interests of the public who might take shares in the company threatened by the proposed reduction? (2) Was the reduction fair and equitable to the shareholders?— Poole and Others v. National Bank of China, Limited, [1907] AC 229, Lord Macnaghten at 238. Here the public were not interested, and the reduction was approved by the shareholders, so that there was no object in advertisement.