Brown v British Abrasive Wheel Co [1919] 1 ch 290

• Company needed urgent capital. Shareholders, holding 98% of shares, were willing to put money up on condition that they could buy out remaining 2% of shareholders.

• Majority proposed special resolution adding provision to articles to effect that any shareholder was bound to transfer his shares upon request from the holders of over 90% of shares.

• Claimant, part of the 2%, challenged it.

Held

• Majority had acted in good faith when proposing the resolution.

• However provision was not for benefit of company as a whole, but simply for benefit of majority.

• Therefore alteration of articles was invalid.

• Very objective test. Notwithstanding majority’s good faith, were held not to be acting in interests of company.