Mutual Life Insurance Co. of New York v. The Rank Organisation Ltd
Encyclopedia
Mutual Life Insurance Co. of New York v The Rank Organisation Ltd. [1985] BCLC 11 is a UK company law case dealing with "oppression" (or unfair prejudice) under s.20 Companies Act 1948 (now s.994 Companies Act 2006
). Goulding J delivered the judgment at first instance.
Ltd, an entertainment company, decided to offer 20 million ordinary shares to the public, with a preference to existing Rank shareholders. This preference offer did was however extended to shareholders based in the United States and Canada (including Mutual Life), because it was thought not to be in the company's interest to have to register there. Rank's articles of association stated that directors could allot, deal with or dispose of company shares "on such terms as they think proper". But the American and Canadian shareholders (they owned shares "beneficially" through nominee companies, who were defendants alongside Rank in the case) were still unhappy. They said they had been discriminated against, and that was a "breach of contract" because s.20 of the Companies Act 1948 implied shareholders deserved equal treatment (this is the "oppression" provision; see now, s 994 unfair prejudice).
That is what the directors had done. The treatment of the American and Canadian shareholders was not unfair, because their shareholdings and rights had not been affected. Rank shareholders had no right to expect their share interest remain in constant proportion to the others' in the company forever. The counsel
for the petitioners had suggested that a "discriminatory" allotment should only be decided on where no other option were available, but this was clearly going too far to constrain business decisions. Goulding J review all the authorities and summarised (at 24, [1985] BCLC 11),
Companies Act 2006
The Companies Act 2006 is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. It had the distinction of being the longest in British Parliamentary history: with 1,300 sections and covering nearly 700 pages, and containing 16 schedules but it has since...
). Goulding J delivered the judgment at first instance.
Facts
United States and Canadian securities law requires registration of companies for share issues. In 1975 Rank OrganisationRank Organisation
The Rank Organisation was a British entertainment company formed during 1937 and absorbed in 1996 by The Rank Group Plc. It was the largest and most vertically-integrated film company in Britain, owning production, distribution and exhibition facilities....
Ltd, an entertainment company, decided to offer 20 million ordinary shares to the public, with a preference to existing Rank shareholders. This preference offer did was however extended to shareholders based in the United States and Canada (including Mutual Life), because it was thought not to be in the company's interest to have to register there. Rank's articles of association stated that directors could allot, deal with or dispose of company shares "on such terms as they think proper". But the American and Canadian shareholders (they owned shares "beneficially" through nominee companies, who were defendants alongside Rank in the case) were still unhappy. They said they had been discriminated against, and that was a "breach of contract" because s.20 of the Companies Act 1948 implied shareholders deserved equal treatment (this is the "oppression" provision; see now, s 994 unfair prejudice).
Judgment
Goulding J dismissed the shareholders' complaint. He held s 20 did not create a term of the corporate contract that shareholders were to be treated equally in respect of a board resolution (or for that matter a resolution of shareholders in general meeting). The duties of the directors were to exercise their powers to issue shares in good faith, bona fide in the interests of the company and exercise them fairly between shareholders (not necessarily treat shareholders identically).That is what the directors had done. The treatment of the American and Canadian shareholders was not unfair, because their shareholdings and rights had not been affected. Rank shareholders had no right to expect their share interest remain in constant proportion to the others' in the company forever. The counsel
Counsel
A counsel or a counselor gives advice, more particularly in legal matters.-U.K. and Ireland:The legal system in England uses the term counsel as an approximate synonym for a barrister-at-law, and may apply it to mean either a single person who pleads a cause, or collectively, the body of barristers...
for the petitioners had suggested that a "discriminatory" allotment should only be decided on where no other option were available, but this was clearly going too far to constrain business decisions. Goulding J review all the authorities and summarised (at 24, [1985] BCLC 11),