123. Certificate to be evidence of title Flashcards
- Certificate to be evidence of title
General overview
[123.01] Generally, the share certificate issued under the common seal of the company is prima facie evidence of title of the member named in the certificate as the owner of the shares. Common law cases have consistently held that this gave rise to an estoppel against the company, preventing it from denying to a bona fide purchaser that the person named therein is entitled to the shares. On the other hand, a forged share certificate or forged transfer is a nullity and ineffective to transfer title to the purchaser.
Share certificate estoppel
[123.02] The share certificate is prima facie evidence of title of the member to the shares. The company is estopped from denying, as against a bona fide purchaser of the shares, that the person named is entitled to the shares referred to: Re Bahia and San Francisco Rly Co (1868) LR 3 QB 584 ; Balkis Consolidated Co v Tomkinson [1893] AC 396, HL ; followed in Dixon v Kennaway & Co [1900] 1 Ch 833, Ch D . A similar estoppel operates as regards the amount stated in the certificate to be paid up on the shares: Burkinshaw v Nicolls (1878) 3 App Cas 1004 . The necessary elements of estoppel by negligence are: (a) a duty of care owed to the party seeking to rely on the estoppel; and (b) the negligent conduct must be the proximate or real cause of the loss: see Re Jones Ltd v Waring & Gillow Ltd [1926] AC 670 ; Mercantile Bank of India Ltd v Central Bank of India Ltd [1938] 1 All ER 52 . Mere negligence in dealing with one’s own property does not give rise to estoppel: EG Tan & Co (Pte) v Lim & Tan (Pte) & Anor [1985–1986] SLR(R) 1081; [1986] SGHC 44, HC ; applied Farquharson Brothers & Co v C King & Co [1902] AC 325 . No estoppel can be raised on a document inconsistent with the document itself: Colonial Bank v Hepworth (1887) 36 Ch D 36, Ch D .
[123.03] The company could recover damages from the vendor who had presented the company with the forged transfer initially, even if the presenter had been unaware of the fraud or forgery: Royal Bank of Scotland plc v Sandstone Properties Ltd [1998] 2 BCLC 429 . No estoppel arises against the company in favour of the person who submitted the transfer for registration: Simm v Anglo-American Co (1879) 5 QBD 188, CA . A forged share certificate is a nullity and does not bind the company: Ruben v Great Fingall Consolidated [1906] AC 439, HL ; applied in South London Greyhound Racecourses Ltd v Wake [1931] 1 Ch 496, Ch D . A forged transfer by one co-owner of the other co-owner’s signature on the transfer is a nullity and ineffective. The company is bound to reinstate the shares to the lawful owners: Barton v North Staffordshire Rly Co (1888) 38 Ch D 458, Ch D .
[123.04] The secretary of a company does not, when giving a transferee of shares the usual receipt for the transfer upon its being lodged for registration, thereby bind the company either to recognise the transferee’s title to the shares or to issue the corresponding share certificate: Longman v Bath Electric Tramways Ltd [1905] 1 Ch 646, CA . Upon the winding up of a company, a member who had lent money to the company in exchange for shares (which certificate stated that they were fully-paid shares) was entitled to have his name removed from the list of contributories
Particulars on the certificate
[123.05] Section 123(2) sets out the particulars to be stated on the certificate. Significantly, it is no longer required to state the amount paid up on the shares. It is necessary to state the class of shares, whether fully or partly paid-up shares and amount, if any unpaid on the shares: s 59 of Act No 36 of 2014. The nature of the consideration for the shares, other than cash, must be stated in the filed contract: Re African Gold Concessions and Development Co, Markham and Darter’s case [1899] 1 Ch 414, Ch D . Every shareholder has a right to have the company issue to him a new share certificate for each or more new sub-divided shares: Sharpe v Tophams Ltd [1939] 1 Ch 373, CA. Certificates with transfers endorsed in blank are generally treated as property in themselves, almost analogous to negotiable instruments
Conditional issue of shares
[123.06] Where shares are issued and paid for in respect of a particular project which failed subsequently, the shareholder cannot claim a refund of the moneys that were paid for the shares
