''Ooregum Gold Mining Co of India v Roper''

892 Year 892 ( DCCCXCII) was a leap year starting on Saturday (link will display the full calendar) of the Julian calendar. Events By place Europe * Summer – Poppo II, duke of Thuringia (Central Germany), is deposed by King Arnul ...

AC 125 is an old and controversial English company law case concerning shares. It concerns the rule that shares should not be issued "at a discount" on the price at which they were issued. Under

United Kingdom company law The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal ...

the rule is now codified in

Companies Act 2006 The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largely ...

, sections 552 and 580.

Facts

The Ooregum Gold Mining Co of India issued 120,000 shares at £1 each. Shareholders said they wanted to sell on the shares for 5 shillings, (i.e. 25

new pence The United Kingdom, British decimal one penny (1p) coin is a unit of currency and denomination of Coins of the United Kingdom, sterling coinage worth one-hundredth of one Pound sterling, pound. Its Obverse and reverse, obverse has featured the ...

) one quarter of the value the shares were issued at, but that the buyers would be credited with a full £1 in the company. This would mean that shareholders would get a 15 shilling (75 new pence) discount. At the time of the litigation, the share price stood at £2 14s. The shareholders at the time of the purchase (who now wanted money to pay off a debenture) even though they had voted for the issue, then turned around to the buyers and argued that shares were prohibited from being issued at a discount, and that the transaction was void.

Judgment

The House of Lords agreed that shares must not be issued at a discount. It was concerned with the potential effects on creditors. Although it is arguable that any capital increase would benefit creditors (hence speaking in favour of not preventing issue at a discount), the Lords held the proper technical route would be for the company to reduce the nominal value of the shares (as seen in the later case of ''

Greenhalgh v Arderne Cinemas Ltd ''Greenhalgh v Arderne Cinemas Ltd (No 2)'' 9461 All ER 512; 951Ch 286 is UK company law case concerning the issue of shares, and "fraud on the minority", as an exception to the rule in ''Foss v Harbottle''. Facts Mr Greenhalgh was a minority sh ...

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Ch 286). Lord Halsbury LC said the following. Lord Watson noted that otherwise, ‘so long as the company honestly regards the consideration as fairly representing the nominal value of the shares in cash, its estimate ought not to be critically examined.’

Notes

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References

* United Kingdom company case law House of Lords cases 1892 in United Kingdom case law Gold in India Mining in India

Facts

Judgment

See also

Notes

References