ICAEW BL · Chapter 8 · Question 8 of 10
The articles of Quayside Ltd are altered by special resolution so that a member who carries on a business competing with the company can be required to transfer their shares, at a fair value, to persons nominated by the directors. A shareholder who runs a competing business challenges the alteration. What is the most likely outcome?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The alteration is valid if passed bona fide in the interests of the company as a whole
Explanation
A company may alter its articles by special resolution (s21), but the alteration must be made bona fide for the benefit of the company as a whole (Allen v Gold Reefs). Courts have upheld alterations allowing the expropriation of members who compete with the company, because removing a competitor can benefit the company (Sidebottom v Kershaw Leese). Court approval and unanimity are not required.
More Companies: formation, legal personality and constitution MCQs
- Q10Which of the following statements about the differences between a private and a public company limited by shares is correct?
- Q1Kara runs her catering business through Kara's Kitchen Ltd. She holds 99 of its 100 fully paid shares and is its sole director. The…
- Q2Tamsin contracts to sell her warehouse to Harbourside Ltd. Before completion she changes her mind and, to avoid completing the sale…
- Q3Which of the following is NOT required to be delivered to the registrar when applying to register a private company limited by shares?
- Q4After the registrar issues a certificate of incorporation for Fenwick Ltd, a creditor discovers an irregularity in the application for…