Automatic Self-Cleansing Filter Syndicate Co. Ltd. v Cuninghame
Court of Appeal of England and Wales
2 Ch. 34 (Eng. C.A. 1906)
The articles of Automatic Self-Cleansing Filter Syndicate Co., Ltd. (Automatic) vested full management authority in its board of directors, removable only by an extraordinary resolution requiring at least three-fourths shareholder approval. Shareholder McDiarmid (plaintiff), together with allies holding 55% of shares, wanted to sell the company's assets, a step the board opposed as contrary to Automatic's interests. Unable to reach the three-fourths threshold, McDiarmid instead passed a simple-majority resolution ordering the sale and asked the court to force the board to comply; the court refused, and McDiarmid appealed.
Whether a corporation's board of directors is bound to carry out the resolution of a simple majority of the shareholders in violation of the articles of association.