Eley V Positive Government Life Assurance Law Company Business Partnership Essay

Published Date: 02 Nov 2017

However, the company decided to alter its article so that all directors shall have the power to vote at the annual general meeting. The company cannot alter the article because it is not bona fide, or benefit to the company as a whole. As Chan has the right to nominate two directors onto the company’s board of director, the company wants to constraint the power of Chan. When Chan successfully nominates two directors onto the board of director, he will have the major voting power in the company. Therefore, the company wants to overight the power of Chan. Yet, the alteration is not bona fide, according to the limitations on power to alter article, all alterations must be benefit for the company as whole, or else invalid. Thus, the company cannot alter the article so that all directors shall be elected at the annual general meeting.

As Potato Ltd wishes to appoint Gary as accountant in place of Gan, it has to alter its article. When the company decides to alter the article, it has to determine whether it is benefit to the company as a whole or not. According to the situation, Gan is a member of the company. When the company decides to replace Gan with Gary in the position of account, Gan could not sue the company for breach of contract as the articles just bind the members (shareholders) of the company. It does bind Gan as an employee of the company. Thus, the articles did not create any contract between the company and Gan in his capacity as accountant. The related case is:

Eley v Positive Government Life assurance Co Ltd (1876)

The article of the company provided that Eley was to be appointed as the solicitor of the company and that he should not be from his position unless for misconduct. Some times after the company’s incorporation, Eley was employed as solicitor and he became a member of the company. However, after some period, the directors decided to remove him and replace his position with another person. Thus Eley went to the court and sued the company for breach of contract.

It was held that the articles of the company did not create any contract between the company and Eley in his capacity as solicitor. The employee was considered as outsider and articles did not bind outsiders.

According to the article of the company, directors will buy shares from whomever member who intends to sell his share under the acknowledgement of the directors. When Band wishes to sell his shares and the directors refused to buy the shares, he may seek an alteration of the company’s articles to make sure the article does not bind him from selling his shares to outsiders. Because when the article exists, he could not sell his shares to outsiders. Additionally, if the directors refuse to buy the shares he intends to sell, he could not do anything but just being locked and immoveable in the company. In the shareholder’s right in company law, the law shall protect the minority shareholders against from being forced to sell some or all their shares inequitably. Thus, he could go to the court and seek for alteration for this article so that he can leave the company by selling his shares. The related case is:

Foss v Harbottle (1843)

In this case, Foss and Turton were shareholders in ‘The Victoria Park Company’. The company was formed in a purpose to buy land for use as a pleasure park. The claimants sued the defendants, which are the shareholders and directors of the company for defrauding the company by selling land belonging to them to the company at extraordinary price. Two minority shareholders claimed that the acts of directors in buying their own property for the company’s use and paying themselves a higher price had resulted a loss of the company. The majority shareholders had refused to take action against the directors saying the loss occurred was not responsible by the directors. The minority shareholders then decided to take action against the directors by suing them on court.

It was held that the directors were not guilty as they were capable to confirm with the support of major members and it should be the company itself to act as the proper plaintiff and not the minority shareholders. The court dismissed the case.

Another way for claiming Band’s respective rights is according to the article of the company, directors will buy shares from whomever member who intends to sell his share under the acknowledgement of the directors. When Band wishes to sell his shares and the directors refused to buy the shares, he may seek an alteration of the company’s articles to make sure the directors buy his shares. The alteration focuses on bona fide, for the benefit of the company as a whole. Referring to the duty to Act bona fide in the Interests of the company, directors must always act in good faith in all matters that relate to the company. When the directors refused to buy the shares, they are in contradicting to the company’s interests. Thus, Band may claim his respective rights in altering the article. The related case is:

Rayfield v Hands (1960)

The articles provided that the directors were bound to buy any share from a member who intended to sell. But with condition he/she must inform the directors before selling. The court held this bound the directors to buy the shares. The action was concerned with the relationship between the plaintiff as a member and the directors in their capacity as members. It was not necessary for the company to be party to the action. Articles which required the directors to be members, i.e. to hold qualification shares and to purchase shares from any member who wished to sell, were enforceable.