Arbuthnott v Bonnyman and Others: CA 20 May 2015

Appeal from refusal of unfair prejudice petition.
After listing cases: ‘I would extract from them the following principles:
(1) The limitations on the exercise of the power to amend a company’s articles arise because, as in the case of all powers, the manner of their exercise is constrained by the purpose of the power and because the framers of the power of a majority to bind a minority will not, in the absence of clear words, have intended the power to be completely without limitation. These principles may be characterised as principles of law and equity or as implied terms: Allen at 671; Assenagon at 278-280.
(2) A power to amend will be validly exercised if it is exercised in good faith in the interests of the company: Sidebottom at 163
(3) It is for the shareholders, and not the court, to say whether an alteration of the articles is for the benefit of the company but it will not be for the benefit of the company if no reasonable person would consider it to be such: Shuttleworth at 18-19, 23-24, 26-27; Peters’ American Delicacy Co at 488.
(4) The view of shareholders acting in good faith that a proposed alteration of the articles is for the benefit of the company, and which cannot be said to be a view which no reasonable person could hold, is not impugned by the fact that one or more of the shareholders was actually acting under some mistake of fact or lack of knowledge or understanding: Peters’ American Delicacy Co at 491. In other words, the court will not investigate the quality of the subjective views of such shareholders.
(5) The mere fact that the amendment adversely affects, and even if it is intended adversely to affect, one or more minority shareholders and benefit others does not, of itself, invalidate the amendment if the amendment is made in good faith in the interests of the company: Sidebottom at 161, 163-167, 170-173; Shuttleworth; Citco at 490, 493; Peters’ American Delicacy Co at 480, 486.
(6) A power to amend will also be validly exercised, even though the amendment is not for the benefit of the company because it relates to a matter in which the company as an entity has no interest but rather is only for the benefit of shareholders as such or some of them, provided that the amendment does not amount to oppression of the minority or is otherwise unjust or is outside the scope of the power: Peters’ American Delicacy Co at 481, 504, 513, 515; Assenagon.
(7) The burden is on the person impugning the validity of the amendment of the articles to satisfy the court that there are grounds for doing so: Citco at 491; Peters’ American Delicacy Co at 482′

[2015] EWCA Civ 536, [2015] 2 BCLC 627, [2015] BCC 574
Companies Act 2006 994
England and Wales
Cited by:
CitedThe Children’s Investment Fund Foundation (UK) v Attorney General and Others ChD 9-Jun-2017
The court considered the propriety of a payment made by a charitable company to a director for her loss of office. The charity was to transfer a substantial sum to a new charity headed by the departing director.
Held: The court approved the . .
CitedLehtimaki and Others v Cooper SC 29-Jul-2020
Charitable Company- Directors’ Status and Duties
A married couple set up a charitable foundation to assist children in developing countries. When the marriage failed an attempt was made to establish a second foundation with funds from the first, as part of W leaving the Trust. Court approval was . .

Lists of cited by and citing cases may be incomplete.


Updated: 30 December 2021; Ref: scu.546987