Jordan & Anor v Roberts & Ors

This was a first instance Companies Court claim under section 359 of the Companies Act 1985 for rectification of the register of members and for declaratory and injunctive relief. The court examined competing factual accounts of board meetings, allotments, share certificates and documentary records and applied company law principles on a company acquiring its own shares (section 143 1985 Act), formalities for transfers and registration (section 183 1985 Act) and the limits of private agreements between shareholders to alter the company constitution. The judge found that the proper position was that the company had an issued share capital of 40 shares: each claimant held 10 shares; Mrs Roberts held 10 shares; Ms Binns held 9 shares and Ms Viviane Barker held 1 share. The court also held that the claimants and Mrs Roberts were the company’s three directors. The court rejected the defendants’ reliance on a "Shareholders Protective Agreement" as having altered the company’s constitution and rejected attempts to treat unpaid/new shares as effectively cancelled or surrendered to the company without observance of statutory formalities. The judge reserved final decision on injunctive relief but expressed a provisional view that no injunction was needed given the board majority positions and the Articles incorporating Table A regulations on chairing and casting votes.

Background and nature of the application

This was an application by Mrs Cynthia Jordan and Mrs Kim Fazzani under section 359 of the Companies Act 1985 for rectification of the register of members of Home Assistance Services Ltd and for declarations and injunctive relief to secure recognition as shareholders and directors after being ejected from company premises. The defendants (Sheila Roberts and Suzanne Binns) counter-claimed to record a different register and sought injunctions against the claimants.

Procedural posture and issues

• Nature of claim: rectification of register of members and declarations/injunctions to protect status as directors and shareholders.
• Key issues framed by the court: (i) whether purported surrenders, transfers or re-issues of shares (including acquisitions by the company of its own shares) were effective, in light of section 143 of the Companies Act 1985 and related formalities; (ii) whether a "Shareholders Protective Agreement" and related "Terms of Employment" altered the company's constitution or operated only as private contracts; (iii) whether the claimants were validly directors and shareholders following events and documentary entries from late 2007 to mid-2008; and (iv) whether injunctive relief was required.

Evidence and factual findings

The judge scrutinised contemporaneous minutes, share certificates, forms filed at Companies House (forms 288 and 88(2)), two combined registers and electronic materials. He found serious disputes and some documents to be inaccurate or fabricated; he preferred the claimants' evidence on critical points and found that the contemporaneous minutes kept by Ms Binns of the meetings of 10 and 17 January 2008 and the share certificates completed on 17 January 2008 evidenced an intention and act to allot 10 shares each to the four participants, but only 40 shares were properly evidenced as issued. The judge concluded that there had not been proper surrender or transfer to the company of Ms Barker’s one share and that the later attempts to record larger allotments to the defendants were not supported by the required formalities or reliable contemporaneous records.

Legal reasoning and disposition

The court applied section 143 (prohibition on a company acquiring its own shares) and emphasised that the statutory exceptions require shares to be fully paid where relevant and that transfers to a company must comply with section 183 (instrument of transfer and registration). The SPA was treated as a private agreement between shareholders which did not, without more, amend the articles or bind the claimants. The judge considered, but rejected on the facts, arguments that imperfect gifts were completed or should be perfected in equity. Applying these principles to the facts, the court ordered rectification to reflect an issued share capital of 40 shares with the distribution found and declared the claimants and Mrs Roberts to be directors. The court reserved final decision on injunctive relief but indicated a provisional view that injunctive relief was unnecessary because the claimants, with Mrs Roberts, formed a board majority able to control chairing and casting votes under Table A regulations incorporated into the articles.

At first instance the court granted declaratory relief and directed rectification of the register of members. The judge found that the issued share capital was 40 shares and that the claimants each held 10 shares, Mrs Roberts held 10, Ms Binns held 9 and Ms Viviane Barker held 1. The court also held that the three directors were the two claimants and Mrs Roberts. The judge rejected the defendants' reliance on the Shareholders Protective Agreement as altering the constitution, and concluded that purported surrenders/transfers without statutory formalities were ineffective. The court reserved further argument on injunctive relief and expressed a provisional view that an injunction was not required because of the board majority and the articles' incorporation of Table A provisions on chairing and casting votes.