What is the core rule from Fergusson v. Wilson?

A company acts through its directors. They are the company’s agents—its hands and face. Their proper acts bind the company.

Could the agreement be specifically enforced?

Specific performance depends on a valid, clear obligation. Where directors acted improperly or ignored prior claims, equity may require corrective allotment.

Why did the plaintiff claim shares?

He had advanced money and staked a claim to unallotted shares before distribution. He sought an order compelling proper allotment and restraining fresh allotments.

What practical lesson should students remember?

Company decisions on allotment must respect existing claims and be made by directors acting properly as the company’s agents.

Fergusson v. Wilson

Court of Appeal in Chancery

1866

(1866) 2 Ch App 77; 15 LT 230

Company Law • Corporate Governance

~7 min read

directors as agents specific performance share allotment company law

Author: Gulzar Hashmi LOCATION: India PUBLISH_DATE: 23 Oct 2025 Slug: fergusson-v-wilson

Quick Summary

This case explains how a company acts: through its directors. They are the company’s agents. Where directors ignore a valid, prior claim to unallotted shares, a court can step in. The suit asked for specific performance—i.e., to force a proper allotment and stop fresh allotments that would defeat the earlier claim.

PRIMARY_KEYWORDS: directors as agents, specific performance
SECONDARY_KEYWORDS: share allotment, company governance
PUBLISH_DATE: 23-10-2025
AUTHOR_NAME: Gulzar Hashmi
LOCATION: India

Issues

Can an agreement between shareholders and directors about shares be specifically enforced by the court?
Do directors, acting as company agents, have to respect prior, valid claims before allotting unissued shares?

Rules

Agency Principle: A company acts only through its directors. Their proper acts bind the company.
Equity & Specific Performance: Courts may order specific performance when there is a clear, enforceable obligation and directors acted improperly to defeat a rightful claim.

Company Law Equity & Remedies

Facts (Timeline)

Promoters’ meeting: Company formed (Washoe United Consolidated Gold & Silver Mining Co. Ltd.); board adopts growth resolutions.

Board step: Loans to the company to be repaid as funds allow; cheques only on request.

Payment sent: Secretary sends plaintiff a scrip for 500 fully paid shares + cheque with interest for first advance.

Plaintiff reacts: Returns scrip and cheque; he had not asked for repayment—he wanted shares/allotment rights respected.

General meeting: Plaintiff’s motion to block sale of unallocated shares fails; amendment prefers pro-rata offer to existing holders.

Suit filed: Plaintiff claims entitlement to stated number of shares and asks court to restrain fresh allotments.

Timeline of key facts in Fergusson v. Wilson

Arguments

Plaintiff

Had a prior, clear claim to unallotted shares tied to his advances.
Directors acted improperly in ignoring his claim during allotment.
Sought specific performance to compel proper allotment and restrain fresh issues.

Company & Directors

Loans could be repaid; scrip + cheque offered accordingly.
Board resolutions guided allotment; general meeting set pro-rata route.
No enforceable right compelling the board’s discretion.

Judgment

The Court held for the plaintiff. Directors, as the company’s agents, should have respected his prior claim to a defined block of unallotted shares. Equity required the shares to be reserved for a reasonable time, or until the dispute was resolved, so that his entitlement was not defeated by fresh allotments.

Ratio (Key Rule)

A company acts through its directors, who are its agents. When directors allocate shares, they must act properly and fairly, recognising prior valid claims; otherwise, the court may order specific performance or restraint to protect those rights.

Why It Matters

Clarifies the agency role of directors in daily corporate actions.
Shows equity’s power to police unfair allotments.
Guides boards: respect existing claims and act transparently.

Key Takeaways

Directors = agents; their proper acts bind the company.
Prior, legitimate claims over unallotted shares must be considered.
Courts can order specific performance to correct improper allotments.

Mnemonic + 3-Step Hook

Mnemonic: “AGENT ACTS, EQUITY CORRECTS.”

Agent: Company acts via directors.
Acts: Allot fairly; honour prior claims.
Corrects: Court can compel or restrain.

IRAC Outline

Issue

Whether shareholder-director arrangements about shares can be specifically enforced, and whether directors must respect prior claims in allotment.

Rule

Company acts through directors (agency). Equity permits specific performance if obligations are clear and board conduct is improper.

Application

Plaintiff’s advance and claim to unallotted shares were known; board still proceeded. Equity requires reserving/allocating to honour the claim.

Conclusion

Plaintiff entitled to relief; directors’ failure corrected by court order to protect the claimed shares.

Glossary

Specific Performance: A court order forcing a party to do exactly what was promised, rather than just pay damages.
Allotment of Shares: The board’s act of issuing unissued shares to applicants or claimants.
Directors as Agents: Principle that directors act on behalf of the company; their proper decisions bind it.