Deadlock Ltd is a small quasi-partnership formed by four people including Mr. Chubb, Mr. Bolton and two other people holding 25 shares each and they are all directors.

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Deadlock Ltd is a small quasi-partnership formed by four people including Mr. Chubb, Mr. Bolton and two other people holding 25 shares each and they are all directors.  The article of association has a clause that on a resolution to remove one of the directors from his post as director, his shares carry four times the votes as other shares.  After some time, the relationship between Mr. Bolton and the other members is soured.  They passed a resolution at a General Meeting in accordance with s.303 CA 1985 terminating his directorship at the end of the year.  They also pass a special resolution that in the interim he is to act solely on the advice and direction of the other directors.  Bolton opposes these measures.  Mr. Chubb refused to allow Mr. Bolton to address the other members at the meeting and since then, he has never been sent notice to attend the board meeting.  

Generally, this case is concerned with the director’s right and minority protection.  In this essay, I will classify and analyse this case according to relevant statutes and cases.

Firstly, s303 CA 1985 allows a company to remove a director by ordinary resolution in a general meeting before the expiration of his period of office notwithstanding anything in the articles of association or any agreement between the company and the director from its board.  However the articles here contain a ‘weighted voting clause’ in Mr. Bolton’s favour.  Although the ordinary resolution has passed, he can demanded a poll and his 25 shares has the right of 100 votes of opposition in a poll, which is more than other directors’ 75 votes, which means the resolution is defeated.  Such clauses were approved by the House of Lords in Bushell v Faith [1970] AC 1099 where the resolution was passed among the three of the directors, Mr. Faith demanded a poll in relation to this resolution, it was provided in the special art 9 of the articles that any share held by the director affected by such resolution carried the right of three votes per share. Although such clauses appear to contravene the principle that a director is always removable by ordinary resolution, the House of Lords in Bushell v Faith said that the clause merely affected the way in which the votes were counted on such a resolution and the case was held that the special art 9 was valid and did not conflict with s303 Company Act 1985.  So the votes are effective and Mr. Bolton will remain as director of the company.  Even if they consider seeking to remove the weighted voting clause and s9 CA 1985 allows a company to alter its articles by special resolution and Mr. Chubb could command the necessary majority.  Mr. Bolton, as shareholder will presumably challenge the alteration as not being made ‘bona fide’ in the best interest for the company. (The case ‘Brown & British Abrasive Wheel Co.[1919]’ was held invalid as the alteration was not for the benefit of the company as a whole, but for the benefit of the majority.)

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Secondly, for the special resolution that in the interim Mr. Bolton is to act solely on the advice and direction of the other directors.  Here the resolution is not abide by the weighted voting clause and the votes will be counted as normal.  Mr. Bolton’s 25 votes can only amount to a quarter.  So even though he opposes this by demanding a poll, the special resolution is effective, for it is passed by three quarters of the votes under both circumstances.

The one thing to notice is that the company has the characteristic of a quasi-partnership, In Ebrahimi v Westbourne ...

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