In the Matter of DONALDSON, COBURN, & KNOX, LIMITED AND
REDUCED.

Company-Reduction of Capital — Extinguishment of shares-Confirmation by the Court-Publication of reasons for reduction -Companies Act, 1899 (Act No. 40, 1899), 88. 39, 40, 41, 42, 45, 46.

A company limited by shares had power under its articles to reduce its capital by paying off capital. Three years after its formation, the company purchased a certain business upon terms of issuing paid up shares to the vendor, and to enable the company to carry out this purchase it duly resolved to increase its capital, and the paid up shares were issued out of this increased capital. It was found that the business so purchased could not be carried on with advantage, and an arrangement was entered into whereby the said business, including certain assets of the company, was to be resold to the vendor; as part of the consideration for the said re-sale the company accepted a surrender of the above-mentioned paid up shares, which were to be cancelled. The arrangement was carried out by special resolution providing that the capital should be reduced by paying off the shares so issued to the above-mentioned vendor and held by him (the capital represented thereby being in excess of the wants of the company), and that such shares should be extinguished.

The company presented a petition praying the Court to confirm the resolution. All the creditors were either paid or assented to the arrangement.

Held, that the reduction of capital was within the powers conferred by the Companies Act, 1899, and should be confirmed.

British and American Trustee and Finance Corporation v. Couper ([1894] A.C. 399) applied.

Held further, that a copy of the above-mentioned agreement for re-sale should be filed with the Registrar-General, and that the advertisement of the order and minate should state that the reduction of capital had been effected as a term of the agreement for re-sale, a copy of which was filed and was open to inspection on payment of the usual fee.

PETITION for reduction of capital.

The company was incorporated in October, 1899, under the Companies Act, as a company limited by shares with a registered office at Wilcannia, in New South Wales. The objects of the company were to carry on a certain business at Wilcannia. The capital of the company was originally 20,000l. divided into 20,000 shares of 11. each, the whole of which were issued; and the total amount of 11. due on each share was paid up except 40781. 108. S.R., Vol. V.

V V

1905.

Dec. 6.

Walker J.

1905.

In December, 1902, the company purchased a certain business In the Matter formerly carried on by William Miller and David James Byers of DONALDSON, at White Cliffs, in New South Wales, upon the terms (inter COBURN, alia) that 3,750 shares of 17. each, fully paid, should be issued to & KNOX, LIMITED AND William Miller. REDUCED.

In order to enable the company to carry out this purchase, the company, under powers contained in its articles, duly resolved to increase its capital to 30,000l., in 30,000 shares of 1l. each; of these shares 27,750 shares have been issued, and 3,750 shares of the new 10,000 shares were issued as fully paid up to William Miller in pursuance of the above-mentioned agreement for purchase. The White Cliffs business turned out to be unprofitable to the company, and the company being desirous of disposing of the same entered into an agreement with William Miller for the re-sale to him of such business, including certain assets of the company. The agreement was dated November 5th, 1904, and as part of the consideration to be given by William Miller for the purchase by him of the said business the company agreed to accept a surrender of the 3,750 shares and cancel them.

2

At an extraordinary general meeting of the company held on November 21st, 1904, a special resolution was passed in pursuance of the articles of association of the company that the capital of the company should be reduced by paying off the 3,750 shares and that such shares should be extinguished, the capital represented thereby being in excess of the wants of the company.

All creditors of the company were either paid or assented to the proposed arrangement.

Rolin, in support of the petition. The reduction of capital is necessary, as the company cannot purchase its own shares.

[WALKER, J. Does not the petition ask for a good deal more than reduction of capital?]

It has been held by the House of Lords that reduction of capital under similar circumstances was within the powers conferred by the Companies Acts: British and American Trustee and Finance Corporation v. Couper ([1894] A.C. 399).

The reasons for reduction need not appear on the minute.

of

[WALKER, J. It is important that the public should know the 1905. consideration for the reduction of capital; but as to that perhaps In the Matter a special order under s. 45 of the Companies Act might be made.] DONALDSON, There would be no objection on our part to filing the agree- & KNOX, ment, and advertising the fact that we have done so.

WALKER, J. I think the case cited is in point and therefore confirm the reduction of capital as asked. [After giving directions as to the advertisement of the order and minute and other usual directions as to the using of the words And reduced,' and approving a minute stating that thenceforth the capital of the company should be 26,250l. divided into 26,250 shares of 11. each instead of 30,000l. divided into 30,000 shares of 11. each; that of the 26,250 shares 24,000 had been issued, and on the said shares so issued the sum of 19,921l. 10s. had been paid up, His Honour continued] Under the powers conferred by s. 45, I direct that the advertisement of the order and minute shall state that the reduction of capital has been effected as a term of the agreement for the sale to William Miller of the business at White Cliffs (referring to it, and giving its date), and that a copy of the agreement has been filed with the Registrar of Companies and is open to inspection on payment of the usual fee; and I order a copy of the agreement to be filed accordingly.

Solicitors Cape, Kent, & Gaden.

COBURN,

LIMITED AND

REDUCED.

INDEX

TO THE

Subject matter of the Cases decided during 1905, and reported in the
State Reports, Vol. V., and the Weekly Notes, Vol. XXII.