Company Documents

Question 1

Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656, 671

s.21(1): changing articles of association

Answer 1

 A company had a provision in its articles which allowed it to have a lien on shares that were not “fully paid”.
 One shareholder who had fully paid shares and partly paid shares and did not pay calls on the shares.
 The shareholder was indebted to the company so the company changed the articles by special resolution to say that you could have a lien on paid up shares as well.
 Court of appeal held that the amended provision in the articles was valid.

Question 2

• Eley v Positive Life Assurance Co Ltd (1876) 1 Ex D 88

s. 33 CA 2006

Answer 2

 A company was formed, Positive life assurance company.
 The articles were drawn up by Mr Eley who was a solicitor.
 IN the articles he put in a provision which stated that he should be the company solicitor and that he would undertake their legal work and he would be their general solicitor.
 Subsequently the company decided they would dispense with their services.
 Mr Elay brought an application in his position as the company solicitor to challenge that decision.
 *Essentially Mr Eley was not bringing his claim as a shareholder of the company, therefore the articles did not apply to him, consequently he could not insist upon the articles being enforced.

Question 3

*Russell v Northern Bank Development Corporation [1992]

Shareholder’s agreement

Answer 3

 Shareholders agreement that there would be no increase in a company’s share capital unless there was a unanimous written consent between the parties to the agreement.
 A rights issue was proposed to increase share capital by about 4 million, there was a notice of an extraordinary general meeting.
 Russell objected to this under the terms of the agreement between the parties.
 Russell sought an interdict.
 Held that the agreement was valid, could be enforced, so the increase in capital could not go ahead as it was not in compliance with the shareholders agreement.

Question 4

Smith v Henniker-Major [2003] Ch 182

Answer 4

 An inquorate meeting of the board of directors of the company (meeting where there is an insufficient number of people there).
 Two directors were due to be present but only one turned up,
 The director that was at the board meeting was also the chairmen.
 He was purported to assign of a cause of action on the behalf of the company to himself.
 This particular transaction was challenged as the meeting was inquorate.
 The chairman sought to justify the action on the ground of s.35A (s.40(1) of the current legislation).
 Court of Appeal held that this provision s.35A did not apply to validate the inquorate board meeting of the company.
 Held that you could not validate your own error or mistake under s.35A