Capacity

Companies

A limited company did not have power to gratuitously transfer assets.  There was a presumption that it did not have such power where it is incorporated for the purpose of a trading business which does not contemplate gift.

There was a tendency to interpret objects and Memorandum of a company as being for commercial purposes towards the business.  However, a company may have published to transfer assets gratuitously.

The Companies Act 2014 gives companies the power to do anything which a person can do. However Dedicated Activity Companies remain subject to limitations on their powers.

The issue frequently arose in relation to transactions between companies which are associated through a common corporate or more commonly non-corporate controller.  On the face of it, each company is an independent entity and its interests are not served by transferring assets for the benefit of other companies owned by its shareholder.  The issue still arises in relation to a DAC.

Statutory corporations are likely to be prohibited from using their funds other than for their statutory purpose.  In essence, they are trustees of their funds and they may not make gifts if this is not contemplated by their powers.  Many statutory corporations including in particular local authorities have been given powers to make gratuitous and honorary payments and transfers in the appropriate context.

Gifts by Persons Lacking Capacity

Gifts by minors are voidable by them.  The right to avoid terminates if the minor on obtaining the age of minority affirms or does not repudiate the disposition.

Persons who are mentally incapable whether or not formally made Wards of Court do not have the capacity to make gifts.  Gifts by them are void even if made in a lucid interval before a person is formally found of unsound mind may be set aside by the judge in Wards of Court proceedings.

A person suffering from an incapacity other than the mental incapacity has the capacity to make a gift provided he can clearly understand and communicate what he is doing.

A person who is in a state of intoxication such as not to be mentally competent is void.  A gift by a person who is not in such a state of intoxication but is known to be in a drunken state may be set aside if unfair advantage of his drunken state is taken by the donee.

Receipt by Person Lacking Capacity

Persons who have mental capacity are generally competent to receive gifts.  Infants may receive gifts other than a legal estate in land.  They may avoid a gift on attaining the age of majority.

Where a property is transferred to an infant, it is deemed to be held under a trust of land.  The infant has an equitable estate only.  He cannot give a valid receipt for monies paid in pursuance of an instrument unless the instrument expressly authorises him or more commonly a representative such as a parent to do so.

A gift may be made for the benefit of the public.  This would be subject to laws in relation to a charitable trust.  There are limitations on the extent to which gifts can be made in perpetuity, formerly applicable.  Charity law governs generally the extent and use of gifts given for public purposes.

Local authorities and many statutory have powers to receive gifts.

Protected / Vulnerable Groups

Persons in a fiduciary position such as trustees may not unless specifically authorised make gifts of property out of the trust or company asset.  If it is appropriate to make voluntary payments or donations, an application to the court may be appropriate in the case of trustee for approval.

Generally, a person in a fiduciary position may not receive a secret gift.  An agent may not receive a gift from a third party in connection with the trust or company affair.

A gift to a trustee by a beneficiary may be set aside.  A gift by a beneficiary to an executor is regarded with suspicion.  There are statutory restrictions on officers of friendly and industrial and provident societies receiving nominations from members and unless they are relatives.

Deceased Parties

A gift alleged to have been given by a deceased person requires strong corroborative evidence.  It is unlikely that the unsupported testimony of the alleged donee will suffice.  There is no absolute rule but such claim must be examined scrupulously, circumstantial proof may be available.

A person who is dead at the time of the gift may not take a benefit under it and accordingly, it does not accrue for the benefit of his representatives or beneficiaries/successors.