Gwanju Co. Ltd is in need of additional shares. The majority are willing to provide this capital if they could purchase the 20% of the shares held the minority. The minority shareholders refuse to sell to the majority shareholders who then propose to alter the Articles of Association to provide for compulsory acquisition on a specified basis. Discuss the legality or otherwise of this proposal.

An alteration of articles must be bonafide for the benefit of the company as a whole. Regard must be had to existing and future shareholders of the company.

• Whether the alteration is made in good faith or not is for the court to determine on the basis of circumstances.

• In Sidebottom V. Kershow Leese and Co. the plaintiff who was a shareholder of the private company was interested in a business which competed with that of the company was interested in a business which competed with that of the company.

• Members in the general meeting resolved to add to the articles a provision to the effect that a member had to transfer his shares to nominees of directors if a written request requiring him to do so was served upon him the board.

• A request was served upon the plaintiff who filled action challenging the validity of the new article. It was held that the alteration was valid since it was beneficial to the company to get rid of competitors among its members. However, in Brown V. British Abrassive Wheel, a public company required further capital urgently on risk of being wound up. The majority holding 98% of the shares were ready and willing to provide a capital on condition the bought the minority. The minority refused to sell their shares. Subsequently, the majority resolved to add to the articles, a provision to the effect that t member was bound to transfer his shares. If a written request was served upon him holders of not less than 90% of the shares. The minority filed an action challenging the validity of the new article. The alteration was disallowed on the grounds that it was not made in good faith for the benefit of the company as a whole but exclusively for the benefit of the majority.

• In the case of Gwanju Co. Ltd is not bonafide for the benefit of the company as a whole.

• Therefore, minority should file an action in court for the alteration to be disallowed

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