The Court of Appeal (Civil Division) handed down judgment in the matter of Progress Property Company Ltd v Moorgarth Group Ltd [2009] EWCA Civ 629 on 26th June 2009. The case concerned an appeal against the order of the Chancery Division that the sale of shares it had held in another company to the respondent was not ultra vires. The appellant contended the sale was at an undervalue and was an attempt to distribute assets unlawfully.

The Court considered the relevant case law on the common law rule for the protection of the creditors of a company including Aveling Barford Ltd v Perion Ltd [1989] BCLC 626.The Court held the issue was whether the sale could be considered as something other than a gratuitous distribution to shareholders. This would be determined on the facts as they appeared to the selling director and having regard to the nature and substance of the sale. As the director did not believe the sale to be only for the benefit of shareholders the common law rule did not apply and the appeal was dismissed.