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Power Within A Company Cases

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Company Law Supervision III - Cases POWER WITHIN A COMPANY Division of Powers Automatic Self-Cleaning Filter Syndicate [1906]
Quin & Axtens Ltd v Salmon [1909]
Breckland Group Holdings [1989]
Articles of company stated that management of company resided with directors. In addition, shareholders had shareholders' agreement stating that litigation could only be brought on behalf of company with consent of directors. Majority shareholder (D) launched action on behalf of company, other shareholder (C) sought to have action restrained. Held:

1. Principle in Quin & Axtens applies

1. i.e. if decision is one for board to properly make, is not for shareholders to take it themselves

2. This conclusion is backed up by shareholders' agreement

1. i.e. agreement indicates shareholders thought decision was properly one for the board to make

3. Thus as power to litigate was vested in board alone (and not the shareholders), was not one with which general meeting could intervene.

4. Thus litigation restrained.

General Meetings Calling of Meeting Kaye v London Tramway [1898]
Was provisional agreement for sale of an undertaking by one company to another. Purchaser agreed to pay substantial compensation to directors of company to compensate them for loss of office upon sale. Directors called meeting of members to approve purchase, but notice of meeting did not include reference to directors' compensation payments. Held:

1. Notice was invalid

1. i.e. because it was inadequate

2. notice of meetings must be fair and adequate

2. Therefore approval of transaction by shareholders was also inadequate.

Conduct of Meeting Union Music v Watson [2003]
Company with two shareholders. C, the majority shareholder, and D, the minority shareholder, fell out. A prior shareholder agreement between C and D provided that the shareholders should exercise their voting rights so that the company could not hold any meeting or pass any resolutions unless all the shareholders were present. D threatened not to attend any meetings, and C applied for court order a meeting limited to appointment of new director by C (in order to provide valid quorum). Held:

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Section 306 does not allow court to override either: i) equal voting rights; ii) class rights iii) or entrenched rights

1. I.e. where these situations exist, will be presumed that it was intended for one shareholder to be able to block other from acting.

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Relevant factors in exercise of power are: i) Ability of company to run its affairs ii) Right of majority shareholder to exercise his voting power Facts

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Is correct to exercise discretion to order a meeting here: 1) Right in question here was simply a quorum requirement
- And D did not benefit from any special class rights or entrenched rights 2) Shareholdings were not equal

2. Thus meeting called for appointment of new director by C (even though he would be only person present).

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