Automatic Self-Cleansing Filter Syndicate Co. Ltd. v Cunninghame
Court of Appeal of England and Wales
2 Ch. 34 (Eng. C.A. 1906)
The articles of the company, Automatic Self-Cleansing Filter Syndicate Co., Ltd. (Automatic), vested the authority to manage the business in a board of directors. Directors were appointed by shareholders and could only be removed by an extraordinary resolution, meaning a vote of at least three-fourths of the shareholders. Further, the directors were empowered under the articles to do anything the company could do not specifically required by statute or the articles themselves to be done by the company and “subject to such regulations as may from time to time be made by extraordinary resolution.” McDiarmid (plaintiff) and others, collectively, owned 55 percent of Automatic’s outstanding shares. McDiarmid wanted to sell the company’s assets, which the board felt was not in Automatic’s best interests. McDiarmid was unable to secure approval of three-fourths of the shareholders. Instead, a simple majority of 55 percent of the outstanding shareholders voted to pass the resolution for the sale of assets. McDiarmid asked the court to force the sale, which the court refused. McDiarmid appealed.
Rule of Law
Holding and Reasoning (Collins, L.)
Dissent (Cozens-Hardy, L.)
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