Brown v British Abrasive Wheel Co - AbsoluteAstronomy.com

Brown v British Abrasive Wheel Co [1919] 1 Ch 290 is a UK company law case, concerning the validity of an alteration to a company's constitution, which adversely affect the interests of one of the shareholders.

Facts

British Abrasive Wheel Co needed to raise further capital

Capital (economics)

In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...

. The 98% majority were willing to provide this capital if they could buy up the 2% minority. Having failed to effect this buying agreement, the 98% purposed to change the articles of association

Articles of Association

The Continental Association, often known simply as the "Association", was a system created by the First Continental Congress in 1774 for implementing a trade boycott with Great Britain...

to give them the power to purchase the shares of the minority. The proposed article provided for the compulsory purchase of the minority’s shares on certain terms. However, the majority were prepared to insert a provision regarding price which stated that the minority would get a price which the court though was fair.

Judgment

Astbury J held that the alteration was not for the benefit of the company as a whole and could not be made. One reason for this was that there was no direct link between the provision of the extra capital and the alteration of the articles. Although the whole scheme had been to provide the capital after removing the dissenting shareholder

Shareholder

A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....

s, it would in fact have been possible to remove the shareholders and then refuse to provide the capital.

Facts

Judgment

See also