Summary

Where all the shareholders of a company had unanimously agreed, at a meeting, to the transfer of company property to certain of those shareholders and directors, the fact that the meeting was termed a "board meeting" and that there was no shareholders' resolution giving prior approval to the transfer, did not mean that the requirements of s.320(1) Companies Act 1985 had not been satisfied.

Facts

Claims by: (i) the joint liquidators of Conegrade ('the company') that a transfer to certain of the company's former directors and shareholders ('the Clarkes') was a preference pursuant to s.239 Insolvency Act 1986; and (ii) the company itself against the Clarkes that the same transfer breached s.320 Companies Act 1985. The minutes of a board meeting in December 1999, attended by the Clarkes and two other directors, recorded that it was agreed that the company would sell a factory, the freehold property of the company, to the Clarkes. At a further board meeting in February 2000 it was agreed that the Clarkes would advance £40,000 to the company, to be treated as fresh consideration for the transfer, and the company would sell the factory for the value of the Clarkes' loan account, which was at that stage £68,428. At a board meeting of 1 March 2000, attended by all shareholders, it was agreed that the factory would be transferred for £125,000. Later that month at a further board meeting the Clarkes agreed to advance a further £20,191.99 to close the company's account with its bankers. On 11 April 2001 the company went into creditor's voluntary liquidation, with an estimated deficiency as against unsecured creditors of more than £300,000. By an agreement of 17 April 2000 between the company and the Clarkes it was agreed that the company would transfer the factory to the Clarkes for the sum of £125,000. At the date of transfer the Clarkes were directors of the company, together with two others, and owned 84.6 per cent of the share capital. The liquidators contended that having regard to the state of the loan accounts at the date of transfer, the transfer operated as a preference to the Clarkes as creditors. The proposed transfer of the factory was decided at the board meeting of 1 March 2000 after the payment of the £40,000. The company's claim was based on there being no shareholders' meeting and therefore no shareholders' resolution giving prior approval to the transfer therefore breaching s.320 of the 1985 Act.

Held

(1) On the facts the court could not consider that more than £60,192 was new money introduced into the company on account of the transfer. (2) Section 320 of the 1985 Act would be satisfied if a meeting was attended by all those who intended to vote. Re Duomatic (1969) 2 Ch 365 and Demite v Protec Health Ltd (1998) BCC 638 considered. Accordingly the transaction where it was agreed that the factory would be sold to the Clarkes was approved 7 March 2000 at a meeting expressly held as a board meeting. The meetings were attended by all shareholders who agreed unanimously to the transfer. There had been no breach of s.320. (3) The Clarkes had been influenced by a desire to create the effect of putting them in a better position than they would have been and thus had breached s.239 of the 1986 Act.