· 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
