In Re Duomatic Ltd: ChD 1969

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.’
Buckley J
[1969] 2 Ch 365, [1969] 2 WLR 114, [1969] 1 All ER 161
England and Wales
Cited by:
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These lists may be incomplete.
Updated: 16 February 2021; Ref: scu.183372