|
Getting your Trinity Audio player ready...
|
Introduction
The case of Fergusson versus Wilson was one of the landmark cases in the development of the Company Laws, since the case established the fact that the company in itself cannot act independently, or on its own as an individual. Rather, it was laid down that the company needs a representative to act on behalf of it so that the company can have its acts performed by way of someone else. This is why all forms of companies, regardless of whether they are a private company or a public company, are in need to fill the positions of the directors, because the directors of the company work as the representatives of the company. Without the directors to work as the representatives of the company, the shareholders of the company cannot act. This case laid the foundation for the development of these principles.
Facts
The Board ofDirectors of the Washoe United Consolidated Gold and Silver Mining Company Ltd.passed a resolution after the meeting of the promoters of the company was held.The resolution which was passed was related to the advances that were to bemade by the company. This resolution was also affirmed by the Directors of theCompany. Later, the directors passed a resolutionthat the advances made in June and July should be repaid as the funds of thecompany would allow, and that cheques should be given on application.Accordingly, the secretary sent the Plaintiff a scrip certificate for 500 fullypaid-up shares, in repayment of his first advance, and a cheque in repayment ofhis advance payment, with interest thereon. The Plaintiff, not having appliedfor the repayment of his loan, refused to accept the scrip certificate andcheque, which he returned to the secretary.a general meeting of theshareholders was held, which the Plaintiff attended, and he there proposed aresolution that the un-allotted shares in the company should not be disposed ofwithout the consent of the shareholders; but the resolution was negatived, andin its place an amendment was carried to the effect that the un-allotted sharesshould be offered to the registered shareholders pro rata according to theirholdings. However, later the Plaintiff, having, in the meantime ceased to be adirector, filed his bill against the company and the directors, praying that hemight be declared entitled to 700 shares, on which oe1 had been paid, or 500shares, on which oe1, and 100, on which oe2, had been paid, and that thedirectors might be ordered to allot the same accordingly, and that the directorsmight be restrained from allotting the un-allotted shares in such manner as torender it impossible for them to make the allotment
Issues
After having opined that the claim of the plaintiff was a valid claim, the Justices on the bench in Fergusson versus Wilson mainly struggled with the question as to whether there was a possibility of specific performance of the contract that had been formed between the shareholders and the Directors of the company.
Held
The Court held in Fergusson case that the claim of the plaintiff was a valid claim and that the plaintiff was entitled to the shares he so rightfully claimed. In the eyes of the court, the directors of the company did not take a proper course when it came to the claim which was made by the plaintiff before the directors of the company. The Directors knew prior to the allotment of the shares that Plaintiff had already stressed upon a claim on a certain number of shares that were un-allotted. The Directors were also aware of the fact that the defendant had never abandoned or given up on the claim over the un-allotted shares. The Court opined that the Directors of the company should have set aside the number of shares which were in equivalent amount of what would have satisfied the claim of the plaintiff, and should have done so for a reasonable amount of time so as to take into consideration the option where the plaintiff might have abandoned the claim he had made to the un-allotted shares in the company or should have done so in anticipation of the result of the ongoing litigation arising from the claim of the plaintiff.
Analysis
The case of Fergusson versus Wilson laid down the importance of the company’s directors in laying a basis for the actions of the company since the directors are the arms and face of the company. Without the directors working as the agents of the company, the company cannot function as an individual.
