Company’s
article gave existing members pre-emptive rights if another member wished to
sell his shares.
article gave existing members pre-emptive rights if another member wished to
sell his shares.
MD
had arranged to sell an outsider some shares and wanted to give effect to this agreement.
had arranged to sell an outsider some shares and wanted to give effect to this agreement.
MD
therefore procured passing of special resolution negativing pre-emptive rights
of existing members.
therefore procured passing of special resolution negativing pre-emptive rights
of existing members.
One
member, G, claimed resolutions were fraud on minority, had not been passed bona
fide in interests of company as whole, and were therefore invalid.
member, G, claimed resolutions were fraud on minority, had not been passed bona
fide in interests of company as whole, and were therefore invalid.
Court
of Appeal disagreed.
of Appeal disagreed.
Resolutions
were not fraud on minority.
were not fraud on minority.
Regarding
bona fide question, Evershed MR –
bona fide question, Evershed MR –
Clear
that ‘bona fide for the benefit of the company as a whole’ meant not two things
[ie (i) bona fide, and (ii) for the interests of the company as a whole] but
one thing –
that ‘bona fide for the benefit of the company as a whole’ meant not two things
[ie (i) bona fide, and (ii) for the interests of the company as a whole] but
one thing –
Shareholder
must proceed on what, in his honest opinion, is for benefit of company as a
whole.
must proceed on what, in his honest opinion, is for benefit of company as a
whole.
‘Company
as a whole’ does not mean company as a commercial entity, distinct from
corporators –
as a whole’ does not mean company as a commercial entity, distinct from
corporators –
Means
corporators as general body.
corporators as general body.
Hence
case may be taken of individual hypothetical member and it may be asked whether
what is proposed is, in honest opinion of those who voted in its favour, for
that person’s benefit.
case may be taken of individual hypothetical member and it may be asked whether
what is proposed is, in honest opinion of those who voted in its favour, for
that person’s benefit.
[ie
Subjective test]
Subjective test]
