Four directors of the company agreed with each other not to create further share capital. A director seeking to enforce the agreement, appealed against a judgment that the agreement was invalid in seeking to fetter the company’s stautory powers.
Held: A shareholders’ agreement not to increase the share capital of a company was enforceable against the shareholders but not against the company. It could take effect only as a personal contract. Liability to the conflicts rule for nominee directors representing outside interests can be limited by a company’s constitution or the unanimous approval of its shareholders. An agreement by a company to fetter its statutory powers is unenforceable.
Lord Jauncey stated: ‘My Lords while a provision in a company’s articles which restricts its statutory power to alter those articles is invalid an agreement dehors the articles between shareholders as to how they shall exercise their voting rights on a resolution is not necessarily so.’
Lord Jauncey of Tullichettle
Gazette 15-Jul-1992, (1992) BCC 578, [1992] 1 WLR 588, [1992] 3 All ER 161
Northern Ireland
Citing:
Approved – Welton v Saffery 1897
Lord Davey said: ‘Of course, individual shareholders may deal with their own interests by contract in such way as they may think fit. But such contracts, whether made by all or some only of the shareholders, would create personal obligations, or an . .
Cited by:
Cited – Bonham v Crow and others CA 13-Dec-2001
The petitioner complained of unfair prejudice in the way the company had been operated, and sought an order that his shares be bought out. However the judge found that the net value of the company was negative and the shares worthless. The judge had . .
Cited – Grays Timber Products Ltd v Revenue and Customs SC 3-Feb-2010
An assessment to income tax had been raised after the employee resold shares in the company issued through the employees’ share scheme at a price which the Revenue said was above the share value. The company appealed against a finding that tax was . .
Lists of cited by and citing cases may be incomplete.
Updated: 29 August 2021; Ref: scu.88934