Company Law Essay

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This question involves the rights and duties of the members in their dealings with each other and with the company. The articles of association are the primary source of the provisions determining these internal relationships, and they will form the basis of this question and also be combined with aspects of directors' duties, variation of class rights and s459 of the Companies Act 1985. I will split the issues that arise in this question into two parts. The first part would be to deal with Sheila, and to establish whether she can prevent the alteration of the objects of the company. The second part would be to advise Damien and Donald on whether they have been unfairly prejudiced in their removal from the Board.

First of all, let us first look at whether Sheila can prevent the alteration of the objects of the company. We are told that after Liam's death, his widow inherits his shares. Sheila is therefore a member of the company and can attend company meetings and vote on resolutions. We are also told that ‘the objects of the company are to carry on the business of restaurateurs'. The concept of Cool Cooks Ltd. changing into the estate agency business might seem slightly strange, but the law will not intervene to restrain the directors from pursuing a different policy or business, even where it is a new venture in which the company has no expertise as seen in this case here. For example, in Re A Company (No 002567 of 1982) (1983), a minority shareholder in a company which objects are to engage in advertising failed in his attempt to prevent the company from using some of its surplus funds in opening a wine bar. The simplest remedy for Sheila is to sell her shares and seek a better investment, but it is unlikely that a shareholder will find a ready market for a minority shareholding in a private company unless the directors or other shareholders wish to buy the shares. There are however ways in which shareholders can make their objections known to the court...
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