Board of directors had power to appoint a managing director. However article of company provided that directors were disqualified from voting on any contract in which they had an interest.
Were three directors. Two of them wished to be MD; however each was barred by articles from voting on their own appointment, and each was opposed by their competitor;thusno effective majority of board’s votescould be obtained to appoint anyone MD. General meeting purported to appoint one of the two as MD; competitor challenged decision of general meeting. Held:
· Appointment was valid.
· Here, was not possible for decision to be made at all by board
Ø i.e. as no effective majority could be obtained to pass valid decision.
· Thus rule in Baron v Potter applies to allow shareholders to make decision.