The Law Relating to Private Companies – Exam
Removing Directors
• s168 - director may be removed before the expiry of his period of office by OR
at a general meeting once special notice has been given (and cannot be overridden)
• Bushell v Faith - weighted voting by altering articles under s21 (but right of alteration
subject to Allen v Gold Reefs bona fide test)
◦ Citco v Pusser’s - whether reasonable shareholders would consider it to be for
the benefit of the company
◦ also think of BJR - courts reluctant to interfere on merits of business decisions
(IBM UK v Dalgleish)
• s168(5) removal does not deprive of compensation or damages payable
Shareholder Agreements
• breach
◦ damages, or injunction to prevent them from voting
Ways of reaching higher percentage for OR/SR
• dilute share capital s549
◦ but s551 authorisation in articles, s561 pre-emption rights
• transfer shares s544
◦ Russell v Northern Bank - new shareholders not bound by SA
◦ but Art 26(5) MAPA director right to refuse transfer (subject to good faith s172,
Re Smith and Fawcett subjective test, and reasons must be given s771(1)(b))
• weighted voting – Bushell v Faith
• also consider selling shares to another then creating SA to ensure shares sold back after
one year etc
Directors’ Duties
• types of directors
◦ de jure
◦ de facto
▪ duties apply if can prove was acting in capacity of a de facto director (Re
Paycheck Services)
◦ shadow
▪ s251 definition ‘a person in accordance with whose instructions the
directors of the company are accustomed to act'
▪ s213, 214 IA apply
▪ s170(5) the general duties apply to shadow directors where the
corresponding common law rules or equitable principles apply
Removing Directors
• s168 - director may be removed before the expiry of his period of office by OR
at a general meeting once special notice has been given (and cannot be overridden)
• Bushell v Faith - weighted voting by altering articles under s21 (but right of alteration
subject to Allen v Gold Reefs bona fide test)
◦ Citco v Pusser’s - whether reasonable shareholders would consider it to be for
the benefit of the company
◦ also think of BJR - courts reluctant to interfere on merits of business decisions
(IBM UK v Dalgleish)
• s168(5) removal does not deprive of compensation or damages payable
Shareholder Agreements
• breach
◦ damages, or injunction to prevent them from voting
Ways of reaching higher percentage for OR/SR
• dilute share capital s549
◦ but s551 authorisation in articles, s561 pre-emption rights
• transfer shares s544
◦ Russell v Northern Bank - new shareholders not bound by SA
◦ but Art 26(5) MAPA director right to refuse transfer (subject to good faith s172,
Re Smith and Fawcett subjective test, and reasons must be given s771(1)(b))
• weighted voting – Bushell v Faith
• also consider selling shares to another then creating SA to ensure shares sold back after
one year etc
Directors’ Duties
• types of directors
◦ de jure
◦ de facto
▪ duties apply if can prove was acting in capacity of a de facto director (Re
Paycheck Services)
◦ shadow
▪ s251 definition ‘a person in accordance with whose instructions the
directors of the company are accustomed to act'
▪ s213, 214 IA apply
▪ s170(5) the general duties apply to shadow directors where the
corresponding common law rules or equitable principles apply
