The House was asked whether shares in a company held by directors as trustees could be aggregated with shares held by them beneficially for the purpose of determining whether the directors had ‘a controlling interest’ in the company.
Russell of Killowen said: ‘When the section speaks of directors having a controlling interest in a company, what it is immediately concerned with in using the words ‘controlling interest’ is not the extent to which the individuals are beneficially interested in the profits of the company as a going concern or in the surplus assets in a winding up, but the extent to which they have vested in them the power of controlling by votes the decisions which will bind the company in the shape of resolutions passed by the shareholders in general meeting. In other words, the test which is to exclude a company’s business from subsection (9)(a) and include it in (9)(b), is the voting power of its directors, not their beneficial interest in the company.
For the purpose of such a test the fact that a vote-carrying share is vested in a director as trustee seems immaterial. The power is there, and though it be exercised in breach of trust or even in breach of an injunction, the vote would be validly cast vis-a-vis the company, and the resolution until rescinded would be binding on it.’
Lord Macmillan said: ‘The question whether the directors of the respondent company have the control of it by their voting power as shareholders must in my view be determined by the memorandum and articles of the company and by the register of shareholders. By the constitution of the company, as I have already mentioned, the voting power is vested in the ordinary shareholders and the register shows that the directors hold a majority of these shares . .
So far as the company is concerned the relation between such of its shareholders as happen to be trustees and their beneficiaries is res inter alios. It may be that a trustee shareholder may, as between himself and his cestuis que trust, be under a duty to exercise his vote in a particular manner, or a shareholder may be bound under contract to vote in a particular way (cf Puddephatt v Leith). But with such restrictions the company has nothing to do. It must accept and act upon the shareholder’s vote notwithstanding that it may be given contrary to some duty which he owes to outsiders. The remedy for such breach lies elsewhere.’
Lord Porter said: ‘The phrase is a composite one and the combination means no more than that the directors must have an interest such as enables them to control the activities of the company: it does not require some personal financial interest on their part which control enables them to exploit. It may be that trustees can ultimately be brought to book for activities which would not lay a beneficial owner open to attack or complaint. Nevertheless for good or ill the trustee like the beneficial owner controls, though if his powers be wrongly exercised they may in some way or other be capable of being challenged.’
Lord Simonds said: ‘What, my Lords, constitutes a controlling interest in a company? It is the power by the exercise of voting rights to carry a resolution at a general meeting of the company. Can the directors of the respondent company by the exercise of their voting rights carry such a resolution? Yes: for they are the registered holders of more than half the ordinary shares of the company. Therefore they have a controlling interest in the company . .
Those who by their votes can control the company do not the less control it because they may themselves be amenable to some external control. Theirs is the control, though in the exercise of it they may be guilty of some breach of obligation whether of conscience or of law. It is impossible (an impossibility long recognised in company law) to enter into an investigation whether the registered holder of a share is to any and what extent the beneficial owner. A clean cut there must be.’
Macmillan, Russell of Killowen, Porter, Simonds LL
 1 All ER 667,  UKHL TC – 29 – 167, 29 TC 167
Distinguished – Bermuda Cablevision Limited and others v Colica Trust Company Limited PC 6-Oct-1997
(Bermuda) An alternative remedy to winding up is available to a shareholder where oppressive conduct is alleged, though the main thrust is that the conduct is unlawful. . .
Lists of cited by and citing cases may be incomplete.
Income Tax, Company
Updated: 28 June 2022; Ref: scu.221572