Borland's Trustee v Steel Bros & Co Ltd

Steel Bros Ltd's articles of association said if a member went bankrupt his shares would be transferred to designated persons at a fair price not above par value. Mr JE Borland held 73 £100 shares and went bankrupt, and so the company gave Borland's trustee in bankruptcy notice of the transfer. The trustee argued the article was void because it compromised ownership and property rights which tended to perpetuity, against the rule against perpetuities. It requested an injunction against the share transfer at all, or at anything less than a fair value == Judgment ==

Farwell J rejected Borland Trustee's argument and held the article was valid. The transfer could be made, because the contract engendered in the articles of association are prior to the rights contained in a share. He said the argument that the article was repugnant to absolute ownership needed to assert, wrongly, that a share is a sum of money dealt with by executory limitations. But in fact a share is an interest and consists of 'a series of mutual covenants entered into by all the shareholders inter se in accordance with section 16 of the Companies Act 1862.' The argument about perpetuity has no application because the rule against perpetuities does not apply to personal contracts. == Cambridge Gas ==

The case was cited with approval in the decision of the Privy Council in the leading case of Cambridge Gas Transport Corp v Official Committee of Unsecured Creditors (of Navigator Holdings Plc and Others) [2006] UKPC 26, [2007] 1 AC 508. == See also ==