The High Court has said it will validate Lake Communications Limited’s creation of additional authorised share capital by implication and the allotment of shares to its sole member, subject to the filing of a supplemental affidavit. The court has not yet made the order: the proposed order is conditional on that affidavit being filed.
In a judgment delivered on 24 November 2011, Miss Justice Laffoy found that the company’s purported creation and allotment of 283,745 ordinary shares was invalid. Lake Communications had agreed in July 2009 to issue 291,469 shares to Inter-Tel Lake Limited in exchange for shares in three companies in the Mitel Group. But only 7,724 authorised ordinary shares remained available, and the company had not formally increased its authorised share capital or adopted a general-meeting resolution authorising the allotment.
The company petitioned under section 89 of the Companies Act 1963 for declarations validating both the additional share capital and the allotment. The judge concluded that the invalidity could be addressed under that section and that validation would be just and equitable. The application was non-contentious; the sole member was the only other party affected, and the judge found no third-party prejudice or adverse public-policy concern. She accepted that the transaction was intended to restructure the group, not to obtain a tax advantage, and attributed the failure to complete the required formalities to an oversight during implementation of complex transactions.
The court said no notice of the petition to other parties was necessary. It also changed the form of the requested declaration: the share capital was not formally created in accordance with the law, so the declaration would validate its “creation by implication.”
Before making the order, the court requires a supplemental affidavit from a director or secretary of Inter-Tel Lake Limited. It must establish when the member passed resolutions supporting the transaction and exhibit the minutes. The original affidavit did not state the date or include those minutes.
Subject to that filing, the proposed order would validate the share capital increase and allotment, direct Lake Communications to deliver the order and a share-capital minute to the Registrar of Companies within 21 days of the order’s perfection, and require publication of notice in Iris Oifigiúil within 21 days of registration.