Greenhalgh v Arderne Cinemas Ltd
Benefit to the company as a whole means benefit to the individual hypothetical member, and an alteration is valid if it does not discriminate between majority and minority.
Facts
The articles of Arderne Cinemas gave members a right of pre emption over shares that another member wished to sell to an outsider. Mr Mallard, the majority shareholder, wanted to sell his shares to an outsider, and the company passed a special resolution altering the articles to allow a member to sell to an outsider if an ordinary resolution approved the sale. Mr Greenhalgh, a minority shareholder, who had been in long running disputes with Mr Mallard, challenged the alteration.
Legal principle
The Court of Appeal held that the alteration was valid. Evershed MR said that the phrase the company as a whole does not mean the company as a commercial entity, as distinct from the corporators, but the corporators as a general body. The case may be taken as that of an individual hypothetical member, and the question is whether what is proposed is, in the honest opinion of those who voted in its favour, for that person's benefit. A special resolution would be liable to be impeached if its effect was to discriminate between the majority shareholders and the minority shareholders, so as to give to the former an advantage of which the latter were deprived. Here, the alteration applied equally to all members.
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
- Bushell v Faith [1970] AC 1099
- 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
Studying company law? Our tutors help you understand and apply cases like this in essays, problem questions and exams. Request a quote or browse our law notes.
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.
