Company Law
Lecture 2:
PROMOTERS & PRE-INCORPORATION CONTRACTS James Mendelsohn BS3/16 01484 473607 james.mendelsohn@hud.ac.uk
• • • • •
Corporate personality Artificial, separate legal personality Registration at Companies House Limited liability
Salomon
• Issues arising from separate, artificial legal personality
A. PROMOTERS
• Background • Definition
- no statutory definition - 2 common law definitions
• Twycross v Grant (1877) 2 CPD – someone
who “undertakes to form a company with reference to a given project, and to set it going and… takes the necessary steps to accomplish that purpose” (Cockburn CJ)
• Whaley Bridge Calico Printing Co v Green (1880)
5 QBD 109 – “the term promoter is a term not of law but of business, usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence” (Bowen J)
• NB not a professional adviser (solicitor, accountant) not deemed to be a promoter solely because of actions he does in a professional capacity (Re Great Wheel Polgooth Co (1883) 53 LJ Ch 42)
• The historical problem (C19)
• C20 – legal regulation & Stock Exchange
Listing Rules for public companies
• Still relevant for private companies
Promoters’ fiduciary duties
• Erlanger v New Sombrero Phosphate Co (1878) 3
App Cas 1218):
• “[Promoters] stand, in my opinion, undoubtedly in a
fiduciary position [to their companies]. They have in their hands the creation and moulding of the company; they have the power of defining how, and when, and in what shape, and under what supervision, it shall start into existence and begin to act as a trading corporation.” (Lord Cairns)
Promoters’ fiduciary duties
• “Good faith, fair dealing, full disclosure” • • Promoter may not make a secret profit • • Must declare any interest or profit in any transaction involving the company
Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218):
• If
PROMOTERS & PRE-INCORPORATION CONTRACTS James Mendelsohn BS3/16 01484 473607 james.mendelsohn@hud.ac.uk
• • • • •
Corporate personality Artificial, separate legal personality Registration at Companies House Limited liability
Salomon
• Issues arising from separate, artificial legal personality
A. PROMOTERS
• Background • Definition
- no statutory definition - 2 common law definitions
• Twycross v Grant (1877) 2 CPD – someone
who “undertakes to form a company with reference to a given project, and to set it going and… takes the necessary steps to accomplish that purpose” (Cockburn CJ)
• Whaley Bridge Calico Printing Co v Green (1880)
5 QBD 109 – “the term promoter is a term not of law but of business, usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence” (Bowen J)
• NB not a professional adviser (solicitor, accountant) not deemed to be a promoter solely because of actions he does in a professional capacity (Re Great Wheel Polgooth Co (1883) 53 LJ Ch 42)
• The historical problem (C19)
• C20 – legal regulation & Stock Exchange
Listing Rules for public companies
• Still relevant for private companies
Promoters’ fiduciary duties
• Erlanger v New Sombrero Phosphate Co (1878) 3
App Cas 1218):
• “[Promoters] stand, in my opinion, undoubtedly in a
fiduciary position [to their companies]. They have in their hands the creation and moulding of the company; they have the power of defining how, and when, and in what shape, and under what supervision, it shall start into existence and begin to act as a trading corporation.” (Lord Cairns)
Promoters’ fiduciary duties
• “Good faith, fair dealing, full disclosure” • • Promoter may not make a secret profit • • Must declare any interest or profit in any transaction involving the company
Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218):
• If