Company Law Assignment
Name: Hamza Saif Warraich
The issue that will be discuss here whether the minority shareholders will be protected under the
articles of association by relying on s.33 of the Companies Act 2006 and whether the court will enforce
their rights against those majority shareholders, the dicta of Astbury J in Hickman v Kent would be
relevant here. Minority shareholders are who do not exert control over the board of directors of the
companies and the majority shareholders are defined as those who control the board of directors of
the companies.
The articles regulating the rights and obligations of the members generally create rights and obligations
between them and the company respectively. The article is the company's main constitution, and every
company is required by s.18 of the Company Act 2006 to have articles which contain the rules on how
the company is to be run. If the company or the members wish to enforce the contract between them
under the article, then they may do so by relying on s.33 of the CA 2006.
Nonetheless , Dignam and Lowry (2018) described this provision as "an odd sort of contract", in which
rephrasing the problematic s.14 of the CA 1985 still leave it unclear whether s.33 contract binds the
members inter se, besides the company and its members. In Welton v Saffery, Lord Herschell clarified
that the rights under articles "can only be enforced by or against a member through the company".
These line of judgment cause problem to the minority because if the company is the only one that the
minority can enforce their rights against it then enforcement becomes more complex and the majority
may take advantage of the articles.
Hence, in Rayfield v Hands, it was held that a contract inter se can be directly enforceable by one
member against another, but Vaisey J emphasized that this will only be applicable in the quasi-
partnership nature of the company, where it has few participants who know each other well (Ebrahimi
v Westbourne Galleries). However, Davies (2008) considered that a direct action between
shareholders is possible, and if the law insists on action through the company would promote
multiplicity of actions and involve the company in unnecessary litigation.
Having argued the incompatible authorities, it appears that it would be difficult for the minority
shareholders to be protected under the articles through due to the fluidity of the principles in
administering the rights between members inter se. This can be seen in Eley v Positive Government
Security Life Assurance Co, where due to the fact that the member was not appointed as the company
solicitor, there was no contractual relationship between the member as 'solicitor' and the company.
The House of Lords accepted a general personal right of members to sue to enforce the articles by
allowing a member to obtain an injunction to stop the completion of the transactions entered into in
breach of the articles. This view was, nevertheless, ignored in Beattie v E & F Beattie Ltd, by relying
heavily on Hickman, that viewed that the claim will be successful if the case is framed as member-
director action rather than director-member action, in which the member rights is centered.
Hickman considered such inconsistency should be settled by stating that shareholders were unable to
enforce outsiders' rights since they did not relate to the shareholding. This view has attracted academic
criticism on the basis that all shareholders should have an enforceable right that the company's affairs
Name: Hamza Saif Warraich
The issue that will be discuss here whether the minority shareholders will be protected under the
articles of association by relying on s.33 of the Companies Act 2006 and whether the court will enforce
their rights against those majority shareholders, the dicta of Astbury J in Hickman v Kent would be
relevant here. Minority shareholders are who do not exert control over the board of directors of the
companies and the majority shareholders are defined as those who control the board of directors of
the companies.
The articles regulating the rights and obligations of the members generally create rights and obligations
between them and the company respectively. The article is the company's main constitution, and every
company is required by s.18 of the Company Act 2006 to have articles which contain the rules on how
the company is to be run. If the company or the members wish to enforce the contract between them
under the article, then they may do so by relying on s.33 of the CA 2006.
Nonetheless , Dignam and Lowry (2018) described this provision as "an odd sort of contract", in which
rephrasing the problematic s.14 of the CA 1985 still leave it unclear whether s.33 contract binds the
members inter se, besides the company and its members. In Welton v Saffery, Lord Herschell clarified
that the rights under articles "can only be enforced by or against a member through the company".
These line of judgment cause problem to the minority because if the company is the only one that the
minority can enforce their rights against it then enforcement becomes more complex and the majority
may take advantage of the articles.
Hence, in Rayfield v Hands, it was held that a contract inter se can be directly enforceable by one
member against another, but Vaisey J emphasized that this will only be applicable in the quasi-
partnership nature of the company, where it has few participants who know each other well (Ebrahimi
v Westbourne Galleries). However, Davies (2008) considered that a direct action between
shareholders is possible, and if the law insists on action through the company would promote
multiplicity of actions and involve the company in unnecessary litigation.
Having argued the incompatible authorities, it appears that it would be difficult for the minority
shareholders to be protected under the articles through due to the fluidity of the principles in
administering the rights between members inter se. This can be seen in Eley v Positive Government
Security Life Assurance Co, where due to the fact that the member was not appointed as the company
solicitor, there was no contractual relationship between the member as 'solicitor' and the company.
The House of Lords accepted a general personal right of members to sue to enforce the articles by
allowing a member to obtain an injunction to stop the completion of the transactions entered into in
breach of the articles. This view was, nevertheless, ignored in Beattie v E & F Beattie Ltd, by relying
heavily on Hickman, that viewed that the claim will be successful if the case is framed as member-
director action rather than director-member action, in which the member rights is centered.
Hickman considered such inconsistency should be settled by stating that shareholders were unable to
enforce outsiders' rights since they did not relate to the shareholding. This view has attracted academic
criticism on the basis that all shareholders should have an enforceable right that the company's affairs
