Erlanger v New Sombrero Phosphate Co
1878 · (1878) 3 App Cas 1218
Posted By lanbuk.com
- Facts
- A syndicate led by Erlanger bought an island with phosphate rights and sold it at a large profit to a company it promoted. The board it appointed was not independent, and the profit was not properly disclosed.
- Issue
- Could the company the purchase?
- Held
- Yes. The House of Lords held that stand in a position. They must disclose their profit to an independent board or to the members. Rescission was granted.
- Principle
- A promoter selling to the company must make full disclosure to an independent board or to the members as a whole.
- Why it matters
- It is the leading case on promoters' duties and the remedy of rescission.
Words and Latin in this note
- Rescission
- Setting a voidable contract aside, so that the parties are put back, as far as possible, where they were before it. Open the note.
- Fiduciary
- A person, such as a trustee, director or agent, who must act loyally for another. He must not profit from his position or put himself in a conflict of interest. Open the note.
- Promoter
- A person who undertakes to form a company for a project and takes the steps to set it going. Under section 50 of the Companies Act 2009 a promoter is a fiduciary and must not make an undisclosed profit. Open the note.
For study only. By lanbuk.com. Always check current sources and consult a qualified professional.