Citco Banking Corporation v Pusser’s Ltd [2007] UKPC 13

• Was a special resolution to amend articles so as to create a category of class B shares, which had 50 votes per share (as opposed to class A shares, which had one vote each).

• Additional special resolution was passed so as to convert shares of chairman of company into class B shares; this was to ensure that chairman of company remained in absolute control of company.

• Claimant challenged on basis that resolutions had not been passed bona fide in best interests of company, but simply to benefit chairman.

Lord Hoffmann

• Nature of test is subjective.

• For valid challenge to resolution, shareholders must have acted in way that impugns their:

  • Conscience (dishonesty); or

  • Sanity (irrationality)

• Court should avoid analysis of actual commercial benefits to company of alteration.

• Test operates the same regardless of whether alteration is advantageous to shareholders or disadvantageous.

• Gambotto has no support in English authority.

Facts

• If those voting in favour of the special resolutions genuinely though alteration was for benefit of company as a whole, resolutions are valid.

• As they appeared to, alterations are valid.

RELATED CASES

• Gambotto v WCP