Dealing with insiders

Contract of membership

s33(1)

provisions of the co bind the co and its members to the same extent as if there were covenants on the part of the co and of each member to observe those provisions

s21 - alterable by special resolution if 75 percent vote in favor of alteration

binds parties not privy to it e.g future SHs

contract between company and its members

company bound by the constitution

contract between members?

inter se

law is unclear as to how to enforce company's constitution b/w members themselves

allowed in quasi partnerships

proper channel is through co

who can sue?

wrong was

to member

to company

individual SHs ❌

Foss v Harbottle

personal right ✅

Mozley v Alston

D failed to retire by rotation as per AoA

wrong to company

co proper claimant

McDougall v Gardiner

right to poll ⛔

breach could be ratified by majority resolution ❎

pender v lushington - vote at GM. personal right - sue ✅

Outsider rights

Eley v Positive Gov security life assurance

Art - clause - particular member of co to be solicitor

no relation b/w member as solicitor and the co

Salmon v Quinn & Axten

enforcing a member which tangentially affects his right as a D rather than other way around ✅

as long as primary issue to enforce right as member- outsider could be enforced tangentially as well

SH agreements and statutory effects

agreement between

shareholders themselves; or

company and shareholders

regulate rights and obligations belonging to those SHs

if subject matter of agreement effects the statutory obligation of co

may not be enforceable

Punt v Synmons - s21 right to alter articles cannot be ⛔

restrict not the obligation but the requirements under it ✅

Russell v N. bank Dev corpn - co agreed not to increase share capital without agreement of all parties to SH agreement.

contrary to statu prov 🚫

however, SH agreement enforceable against members. not able to vote means co indirectly bound

agreement on how they will exercise their voting rights

altering constitution

s21

special resolution

Re Duomatic principle - unanimous consent (informal)

Clemens v Clemens

exercise of this voting subject to equitable consideration. must be bona fide