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Cumbrian Newspapers Group v Cumberland and Westmorland Herald

[1986] BCLC 286

Case summary last updated at 21/01/2020 16:30 by the Oxbridge Notes in-house law team.

Judgement for the case Cumbrian Newspapers Group v Cumberland and Westmorland Herald

·        C entered into contract with D, whereby C acquired 10% of the shares in D. 
·        As part of deal, was agreed that a resolution would be passed whereby C had a right of pre-emption over shares and right to appoint a director. 
·        Many years after deal took place, D sought to pass resolution to revoke class rights in respect of C’s shares. 
·        C claimed that it was part of contractual agreement that C would have the rights conferred on it by resolution, and that it was implied term that these rights would not be revoked. Held:
 
Scott J
Contractual Obligation
·       On facts, was no implied contractual obligation.
 
Implied Term
·        Contracts entered into by company cannot deprive members of right to alter articles.
·        Right to alter articles is one of shareholders
Ø  And NOT of company itself
·        Thus where a company has contracted with X not to alter articles:
1)     members may still alter them by special resolution
-        notwithstanding that contract purports to deprive them of this right
2)     if articles are validly altered, Xcannot obtain injunction preventing company fromacting upon them
-        Even if this results in breach of contract.
3)     however X may in suitable cases obtain injunction preventing company from calling a meeting for purpose of altering articles
-        However company is still obliged to carry out its statutory duties with regards to convening of meetings
-        i.e. company cannot refuse to call meeting for purpose of altering articles where this is requested by e.g. a member

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