Bushell v Faith
A provision in the articles giving a director weighted voting rights on a resolution to remove him is valid, although it can defeat the statutory power to remove directors by ordinary resolution.
Facts
A company had three shareholders, a brother and two sisters, each holding 100 shares, all of whom were directors. The articles provided that, on a resolution to remove a director, that director's shares would carry three votes each. The two sisters wanted to remove their brother as a director, and passed an ordinary resolution to remove him. The brother argued that, under the weighted voting provision, he had 300 votes against their 200, so the resolution was defeated.
Legal principle
The House of Lords held, by a majority, that the weighted voting provision was valid, so the resolution was defeated. Lord Upjohn said that Parliament had not sought to fetter the right of the company to issue a share with such rights or restrictions as it may think fit, and that the statutory provision allowing removal of a director by ordinary resolution did not prevent the articles from attaching weighted votes to shares on a particular resolution. Lord Morris dissented, saying that the provision made a mockery of the statute.
Related cases on the company's constitution and decision making
- Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656
- Ashbury Railway Carriage and Iron Co Ltd v Riche (1875) LR 7 HL 653
- Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988
- Brown v British Abrasive Wheel Co Ltd [1919] 1 Ch 290
- Cane v Jones [1980] 1 WLR 1451
- Re Duomatic Ltd [1969] 2 Ch 365
- Eley v Positive Government Security Life Assurance Co Ltd (1876) 1 Ex D 88
- Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
