Bushell V Faith
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''Bushell v Faith'' 970AC 1099 is a
UK company law British company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directive (European Union), Directives and court cases, the company is th ...
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 largel ...
) 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 The London Stock Exchange (LSE) is a stock exchange based in London, England. the total market value of all companies trading on the LSE stood at US$3.42 trillion. Its current premises are situated in Paternoster Square close to St Paul's Cath ...
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 that, along with the memorandum of association (where applicable), forms the company's constitution. The ...
contain restrictions on removing the
board of directors A board of directors is a governing body that supervises the activities of a business, a nonprofit organization, or a government agency. The powers, duties, and responsibilities of a board of directors are determined by government regulatio ...
.


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 An appellate court, commonly called a court of appeal(s), appeal court, court of second instance or second instance court, is any court of law that is empowered to Hearing (law), hear a Legal case, case upon appeal from a trial court or other ...
( 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 is the upper house of the Parliament of the United Kingdom. Like the lower house, the House of Commons of the United Kingdom, House of Commons, it meets in the Palace of Westminster in London, England. One of the oldest ext ...
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, the former Model Articles 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 dissented in a short opinion. He said: Lord Upjohn approved the provision. He emphasised the Court of Appeal's approval of the provision. Lord Donovan said:


Significance

*Companies listed on the
London Stock Exchange The London Stock Exchange (LSE) is a stock exchange based in London, England. the total market value of all companies trading on the LSE stood at US$3.42 trillion. Its current premises are situated in Paternoster Square close to St Paul's Cath ...
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 petition under
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 largel ...
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.


See also

*
United Kingdom company law British company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal vehicle to ...
* Report of the Committee on Company Law Amendment *'' Russell v Northern Bank Development Corp Ltd'' 9921 WLR 588, a shareholder agreement to which the company was joined, to create no further share capital (contrary to what is now
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 largel ...
s 617) was binding on shareholders but not the company


Notes

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