Payments were made by a company by way of remuneration to directors without complying with the company’s articles of association in that no resolution authorising the directors to receive remuneration had ever been passed in a general meeting of the company or at all.
Held: Where it could be shown that all the shareholders with the right to attend and vote at a general meeting had assented to some matter which a general meeting of the company could carry into effect, such assent was as binding as a resolution in general meeting and that, since in that case the ordinary shareholders, who were the only shareholders with the right to attend and vote at a general meeting had approved the accounts recording the respective payments to the directors, those payments should not be disturbed. A sole beneficial owner of a company’s share capital could override the decisions of the director. He could also do so informally and without passing a special resolution. However the act had to be intra vires the company.
Buckley J said: ‘Mr Wright, for the liquidator, has contended that where there has been no formal meeting of the company and reliance is placed upon the informal consent of the shareholders the cases indicate that it is necessary to establish that all shareholders have consented . . it seems to me that if it had occurred to Mr Elvins and Mr East, at the time when they were considering the accounts, to take the formal step of constituting themselves a general meeting of the company and passing a formal resolution approving the payment of directors’ salaries, that it would have made the position of the directors who received the remuneration, Mr Elvins and Mr Hanley, secure, and nobody could thereafter have disputed their right to retain their remuneration. The fact that they did not take that formal step but that they nevertheless did apply their minds to the question of whether the drawings . . should be approved . . seems to lead to the conclusion that I ought to regard their consent as being tantamount to a resolution of a general meeting of the company. In other words, I proceed upon the basis that where it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be.’
Judges:
Buckley J
Citations:
[1969] 2 Ch 365, [1969] 2 WLR 114, [1969] 1 All ER 161
Jurisdiction:
England and Wales
Cited by:
applied – Deakin and Others v Faulding and Others; Specialist Group International Ltd v Deakin and Others; etc ChD 31-Jul-2001
Directors of a company authorised payment of bonuses, but the power to do so lay with the shareholders, not the directors. However, the beneficial owner of a share held for him by a nominee could give assent to a motion of the company at a general . .
Cited – Merer v Fisher and Another CA 13-May-2003
A right of pre-emption had misdescribed the property when it was registered. The land was transferred without regard to the right of pre-emption. It was found as a fact that no money passed for the transfer, and the claimants said the unregistered . .
Cited – Ultraframe UK Limited v Clayton, Fielding and Others CA 12-Dec-2003
The company was 100% owned by its designer. He purported to retain the design right.
Held: The designer held the rights in trust for the company. An assignment by a shareholder holding all the shares in a company was possible, but not when the . .
Cited – Ultraframe (UK) Ltd v Fielding and others ChD 27-Jul-2005
The parties had engaged in a bitter 95 day trial in which allegations of forgery, theft, false accounting, blackmail and arson. A company owning patents and other rights had become insolvent, and the real concern was the destination and ownership of . .
Cited – Clark v Cutland CA 18-Jun-2003
One director discovered that his co-director had withdrawn substantial sums from the company. . .
Cited – Schofield v Schofield and Others CA 25-Feb-2011
The claimant sought a declaration that he was the sole remaining director of a company, and that the removal of the defendant, his son, had been successful. The meeting at which the decision had been taken, had not been taken with the full notice . .
Cited – Speechley and Others v Allott and Others CA 10-Mar-2014
The parties disputed the management of a social club. The club owned a bowling green, and bowling members sought to restrain its closure. The appellants now said that the court should not have found at first instance that a meeting had validly . .
Lists of cited by and citing cases may be incomplete.
Company
Updated: 28 July 2022; Ref: scu.183372