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Brown v British Abrasive Wheel Co

[1919] 1 ch 290

Case summary last updated at 21/01/2020 15:01 by the Oxbridge Notes in-house law team.

Judgement for the case Brown v British Abrasive Wheel Co

Company needed urgent capital. Shareholders, holding 98% of shares, were willing to put money up on condition that they could buy out remaining 2% of shareholders. Majority proposed special resolution adding provision to articles to effect that any shareholder was bound to transfer his shares upon request from the holders of over 90% of shares. C, part of 2%, challenged it. Held:
 
·        Majority had acted in good faith when proposing the resolution.
·        However provision was not for benefit of company as a whole.
Ø  But simply for benefit of majority.
·        Thereforealteration of articles was invalid.
·        Very objective test. Notwithstanding majority’s good faith, were held not to be acting in interests of company.

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