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Greenhalgh v Arderne Cinemas

[1951] ch 286

Case summary last updated at 21/01/2020 15:31 by the Oxbridge Notes in-house law team.

Judgement for the case Greenhalgh v Arderne Cinemas

Director of company wanted to sell shares to a third party. Company’s articles provided for right of pre-emption for existing members. Director successfully got special resolution passed removing this right of pre-emption from articles. C, a member of company, challenged this. Held:
 
Lord Evershed MR
·        Bona fide for benefit of company as a whole means shareholder must do what, in his honest opinion, is for benefit of company as a whole.
·        However if there is discrimination towards minority shareholders, resolution will be invalid.
·        ‘Company as a whole’ does not mean company as a distinct entity.
Ø  But rather shareholders as a body.
Contradiction – Evershed proposes subjective test, but later states that if there is discrimination (an objective concept), resolution is invalid. 

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