Parke v Daily News [1962] Ch 927

Court: Court of Appeal

Facts: Daily News sold its business and the board proposed to distribute the proceeds to redundant employees. A minority shareholder challenged the payments, claiming they were ultra vires.

Issue: Were the payments to redundant employees ultra vires?

Held: The Court of Appeal found the payments to be ultra vires and thus illegal.

Key Judicial Statement: Plowman J stated, “A gift undirected to the interests of the shareholders... is invalid… Gifts will accordingly be permitted only when they tend either directly or indirectly, to benefit the company in some genuine manner.”

💡 Leveluplaw: Payments or gifts made by a company must benefit the company directly or indirectly. Payments not aligned with the company’s interests are considered ultra vires and illegal.