Re Duomatic Ltd
Where all the shareholders entitled to vote assent to a matter which a general meeting could carry into effect, their assent is as binding as a resolution passed at a meeting.
Facts
Duomatic paid salaries to two of its directors, who were also its only voting shareholders, without a resolution of the company in general meeting approving the payments, as the articles required. There were also non voting preference shareholders. When the company went into liquidation, the liquidator sought to recover the payments, arguing that they had not been properly authorised.
Legal principle
Buckley J held that the payments had been validly authorised, so they could not be recovered. He said 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. The directors, as the only voting shareholders, had approved the payments. This is known as the Duomatic principle, which is preserved by section 281(4) of the Companies Act 2006.
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
- 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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