Cumbrian Newspapers Group v Cumberland and Westmorland Herald [1986] BCLC 286

• Claimant entered into contract with Defendant, whereby Claimant acquired 10% of the shares in Defendant. 

• As part of deal, was agreed that a resolution would be passed whereby Claimant had a right of pre-emption over shares and right to appoint a director. 

• Many years after deal took place, Defendant sought to pass resolution to revoke class rights in respect of Claimant’s shares. 

• Claimant claimed that it was part of contractual agreement that Claimant would have the rights conferred on it by resolution, and that it was implied term that these rights would not be revoked.

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, 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, X cannot obtain injunction preventing company from acting 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