Company Law 1 - University of Wolverhampton

The directors seek an alteration of the company’s articles to restrict the managing director’s powersby requiring him to obtain the board’s approval for major policy decisions. Advise the directors.(Wolverhampton LLB by Distance Learning, May 1999, Question 4.)3 Brush Ltd has three directors, Andrew and David who each own 40 per cent of the company’sissued share capital, while the remaining 20 per cent is owned by Roger.Andrew and David have discovered that Roger has been carrying on business in direct competitionwith Brush Ltd. The articles of association of Brush Ltd have now been altered to include thefollowing new articles.‘Any shareholder who competes with the company, may be required to sell his/her shares to a personnominated by the directors of the company.’‘Any member who intends to sell his/her shares, or is required to sell his/her shares, shall informthe directors, who will take the said shares equally between them at a fair value, as determined bythe company’s auditors.’Following the alteration of the articles, Andrew and David gave notice to Roger requiring him tosell his shares to Eric, a person nominated by the directors. Roger has refused to do so and statesthat he considers the new articles to be unlawful and that he has decided to sell his shares to Elizabeth.Advise Roger.(Wolverhampton LLB by Distance Learning, January 2001, Question 4.)