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Howard Smith v Ampol Petroleum

[1974] UKPC 3

Case summary last updated at 22/01/2020 16:11 by the Oxbridge Notes in-house law team.

Judgement for the case Howard Smith v Ampol Petroleum

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.

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