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