Regal (Hastings) Ltd v Gulliver

Facts

Regal wanted to take leases of two cinemas through a subsidiary. The landlord required the subsidiary's capital to be fully subscribed. Regal could not afford all the shares, so the directors bought some themselves and later sold at a profit.

Issue

Were the directors liable to account for their profit?

Held

Yes. They obtained the shares by reason of their position and in the course of their office. They had to account, though they acted in good faith and the company could not have bought the shares.

Principle

Directors must account for profits made from their position unless the company consents.

Why it matters

It is the leading case on the no-profit rule.

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