On appeal from: [2009] EWCA Civ 629
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The issue in this appeal is whether there may have been an unlawful distribution of capital to a shareholder when the appellant (PPC) sold the whole issued share capital of a wholly-owned subsidiary YMS Properties (No 1) Ltd to the respondent (Moorgarth). Supreme Court unanimously dismissed the appeal. Whether a transaction infringes the common law rule against unlawful distributions is a matter of substance and not form. The label attached by the parties is not decisive. The essential issue is how the sale was to be characterised. The courts will not second-guess companies with regard to the appropriateness or wisdom of the terms of any transaction. There may, however, come a point at which, looking at all the relevant factors, an agreement cannot be regarded as involving in substance anything other than a return or distribution of capital, whatever label the parties attached to it.

For judgment, please download: [2010] UKSC 55
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For a non-PDF version of the judgment, please visit: BAILII