Sidebottom v Kershaw, Leese & Co Ltd
An alteration of the articles allowing the directors to require a member who competed with the company to sell his shares was valid, because it was for the benefit of the company.
Facts
A private company altered its articles to give the directors power to require any member who carried on a business competing with the company to transfer his shares to nominees of the directors, at a fair value. Mr Sidebottom, a minority shareholder, carried on a competing business, and challenged the alteration.
Legal principle
The Court of Appeal held that the alteration was valid, because it was made bona fide for the benefit of the company as a whole. Lord Sterndale MR said that it was for the benefit of the company to be able to remove members who were competing with it, and that the alteration applied to anyone who competed in future, not just to Mr Sidebottom. The case was distinguished from Brown v British Abrasive Wheel Co, where the alteration allowed the majority to buy out any minority shareholder.
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
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