Company was subject to rival takeover bids from two of its shareholders. One bidder had 55% of shares, but was clear that the other offer was better for company. Thus directors of company allotted $10 million of new shares to preferred bidder to give him majority. Held:
· Power is exercised properly where “substantial purpose”for which power was exercised is proper.
Ø ‘Substantial purpose’: i.e. the dominant or primary purpose
· On facts, issue of shares was entirely to dilute power of majority shareholder.
· Thus was breach of duty.