Hilder v Dexter [1902] AC 474
Citation:Hilder v Dexter [1902] AC 474
No link to case - library research required.
Rule of thumb:Are the options to buy shares in the future at a pre-determined price valid? Yes, the Court affirmed the principle of ‘share options’. It affirmed that these are valid even if the price to be paid for them has risen significantly in that time.
Background facts:
The facts of this case were that the Union Gold Coast Mining Ltd was having problems obtain finance. They knew that Hilder was a man with finance who could help them. Hilder was offered a quantity of number of shares at par value/ nominal value as stated at companies house. Hilder was also told that he could have more shares at this par value within 2 years, if he bought the shares. Hilder agreed to buy the initial batch of shares with the guarantee of potentially more in the future. The company started becoming profitable, with the shares worth considerably more than the par value, and Hilder sought to then buy the other shares at par value. Dexter, who was a director in the Gold Coat Mining Ltd, refused to sell these shares to Hilder at par value.
Parties argued:
Hilder took the case to Court and argued that this was what was agreed and the company had to follow. Dexter argued that shares could not be sold for less than their market value as this would be in breach of financial assistance duties and that this contractual term was not enforceable.
Judgment:
The Court held that the contract was enforceable and that Hilder was entitled to the shares at this price – these types of agreements where people are given a guarantee to be able to buy a share for a certain price in the future are valid agreements.
Ratio-decidendi:
‘I am not aware of any law which obliges a company to issue its shares above par because they are saleable at a premium in the market’, Lord Davey
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.