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The board of directors of AF Ltd are concerned about a small group of shareholders who are carrying on a business in competition with ACF Ltd. The directors have asked the members to pass a resolution to alter the articles of association. The alteration would give the directors the power to compulsorily purchase the shares of any shareholder who competes with ACF Ltd.
Task 2
The members passed the resolution, giving the directors the power requested.
Which of the following statements about the validity of the alteration made to AC Ltd’s articles is correct, and for what reason?
A. It is not valid because it forces a shareholder to sell his shares back to ACF Ltd
B. It is valid as it is bona fide in the interests of the company as a whole
C. It is not valid as it is unjustified discrimination against the minority
D. It is valid because it benefits the majority of AC’s shareholdersThe answer is B. No the issue I have is, sometimes MTQs refer to Sidebottom case and some refer to Dafen case. To justify either bonafide in interests of co, or to say it’s not valid to require any shareholder to transfer shares for any reason at any time if the majority SHs want.
HOW TO TELL WHICH CASE APPLIES WHEN?I don’t recognise the case Sidebottom (v Kershaw Leese???) as being anything related to alteration of articles
FROK ACCA EXAM:
However, in Sidebottom v Kershaw Leese & Co (1920), an alteration to the articles to give the directors the power to require any shareholder, who entered into competition with the company, to sell their shares to nominees of the directors at a fair price was held to be valid.I believe the difference is that, in Dafen’s case, the alteration was to require the compulsory sale of shares by any member when they were requested to sell them.
Sidebottom was similar but included the condition precedent that the member so requested to sell was to have been found competing with the company.
OK now?
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