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Hello Sir, I don’t understand this case. Plz explain it to me.
The facts: The claimant was a minority shareholder which had transferred its custom from the defendant
company to another supplier. The majority shareholders of the defendant company sought to protect their
interests by altering the articles to provide for compulsory acquisition of the claimant’s shares.
The new article was not restricted (as it was in Sidebottom’s case above) to acquisition of shares on
specific grounds where benefit to the company would result. It was simply expressed as a power to
acquire the shares of a member. The claimant objected that the alteration was invalid since it was not for
the benefit of the company.
Decision: The alteration was invalid because it ‘enables the majority of the shareholders to compel any
shareholder to transfer his shares’. This wide power could not ‘properly be said to be for the benefit of the
company’. The mere unexpressed intention to use the power in a particular way was not enough.In Sidebottom, the proposed alteration was to enable the majority to buy out any member that was found to be competing with the company
In Dafen, the proposed alteration would allow the majority to buy out any member, at any time, for no apparent reason!
Imagine that you own shares in the Myanmar Telephone Company and you decided to switch your provider to Cable and Wireless
When Myanmar Telephone Company finds out, the holders of the majority of the shares would have the ability to require you to sell your shares. That can’t be fair!
But imagine that you own shares in the Myanmar Telephone Company and, one morning, there is a knock on your door and it’s these same holders of the majority of the shares.
They say to you “We’re going to buy your shares” and there’s NOTHING you can do to prevent it, even though you have done nothing wrong!
The expression “for the benefit of the company as a whole” means that any individual hypothetical member of the future is equally likely to benefit as be disadvantaged by the alteration and, although in Dafen’s case it could be justified, for any future member such as you in the Myanmar Telephone Company situation clearly the alteration would work most unfairly against your interests
OK?
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