''Bushell v Faith''

970 Year 970 (Roman numerals, CMLXX) was a common year starting on Saturday (link will display the full calendar) of the Julian calendar, the 970th year of the Common Era (CE) and ''Anno Domini'' designations, the 970th year of the 1st millennium, ...

AC 1099 is a UK company law case, concerning the possibility of weighting votes, and the relationship to section 184 of Companies Act 1948 (the predecessor of s 168 of the

Companies Act 2006 The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largely ...

) which mandates that directors may be removed from a board by ordinary resolution (a simple majority of shareholder votes). The decision is not relevant to companies listed on the

London Stock Exchange London Stock Exchange (LSE) is a stock exchange in the City of London, England, United Kingdom. , the total market value of all companies trading on LSE was £3.9 trillion. Its current premises are situated in Paternoster Square close to St Pau ...

as the listing rules refuse listing where the

articles of association In corporate governance, a company's articles of association (AoA, called articles of incorporation in some jurisdictions) is a document which, along with the memorandum of association (in cases where it exists) form the company's constituti ...

contain restrictions on removing the

board of directors A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organiz ...

Facts

A property company called Bush Court (Southgate) Ltd owned a block of flats. There was £300 capital, 100 shares held by Mr Faith and the other 200 by his two sisters, Mrs Bushell and Dr Bayne. Article 9 of the company constitution said that under a resolution to remove a director, that director's shares would carry three votes each. When the two sisters tried to remove him, Mr Faith recorded 300 votes and the other two, 200 votes together. Ungoed-Thomas J said that the article infringed s 184. The

Court of Appeal A court of appeals, also called a court of appeal, appellate court, appeal court, court of second instance or second instance court, is any court of law that is empowered to hear an appeal of a trial court or other lower tribunal. In much of t ...

( Harman LJ, Russell LJ and Karminski LJ) reversed this decision. The sisters appealed to the House of Lords.

Judgment

The

House of Lords The House of Lords, also known as the House of Peers, is the Bicameralism, upper house of the Parliament of the United Kingdom. Membership is by Life peer, appointment, Hereditary peer, heredity or Lords Spiritual, official function. Like the ...

held that the provision was valid, because there was no express indication by Parliament that it intended otherwise. Lord Reid, giving the first judgment said that But he said that given the recognition of giving weighted votes was recognised in

Table A Table A in UK company law is the old name for the Model Articles or default form of articles of association for companies limited by shares incorporated either in England and Wales or in Scotland before 1 October 2009 where the incorporators do no ...

, the former

Model Articles The Companies (Model Articles) Regulations 2008SI 2008/3229 are the default company constitution for limited companies under UK company law. The Model Articles will apply to a limited company if it does not register its own articles or, if it doe ...

in the Schedule attached to the Companies Act 1948, "we must take the law as we find it". He emphasised the possibility of reform in later enactments.

Lord Morris of Borth-y-Gest John William Morris, Baron Morris of Borth-y-Gest, (11 September 1896 – 9 June 1979) was a judge in England and Wales. He was a Law Lord from 1960 to 1975. Early life Morris was born in Liverpool, where his father was a bank manager. He ...

dissented in a short opinion. He said:

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approved the provision. He emphasised the Court of Appeal's approval of the provision.

Lord Donovan Terence Norbert Donovan, Baron Donovan (13 June 1898 – 12 December 1971) was a British Labour Party politician and later a Lord of Appeal in Ordinary. Biography Born in West Ham, London, Donovan was educated at Brockley Grammar School, b ...

said:

Significance

*Companies listed on the

may not circumvent s 168 by their articles. So this has effect for non-listed companies. The LSE would refuse listing. *Another technique for achieving the same result as in ''Bushell'' is to make three classes of shares, each with the right to appoint one director. You then have the protection against altering class rights. Or you could have a shareholder agreement. *A weighted voting provision could potentially found an

unfair prejudice Unfair prejudice in United Kingdom, company law is a statutory form of action that may be brought by aggrieved shareholders against their company. Under the Companies Act 2006 the relevant provision is s 994, the identical successor to s 459 Compa ...

petition under

s 994. Also, possibility of application by director for winding up order under s 122(1)(g) Insolvency Act 1986 and Companies Act 2006 ss. 994-996). *A quorum provision could state a meeting is inquorate without a particular director. Again, this could give rise to a s 994 petition.

Notes

{{reflist, 2 United Kingdom company case law House of Lords cases 1970 in United Kingdom case law

Facts

Judgment

Significance

See also

Notes