Directors’ duties to the members as a whole
by Sharon Fryer & Emma Halton
Moore Frères & Co LLC (“MF”) and Otello Corporation ASA (“O”) held 70% and 30%, respectively, of the shares in Last Lion Holdings Ltd (“LLH”). LLH’s board consisted of four directors, three of whom were, in accordance with LLH’s articles of association, appointed by MF and one by O.
MF proposed to purchase O’s shares in LLH, with a view to on-selling a proportion of those shares to a third party (“M”) at a substantial profit. Negotiations between MF and M ended. M then made an offer directly to O, at the price it had been willing to pay to MF, and a sale was agreed in principle.
Under LLH’s articles of association, the directors had power to refuse to register the transfer of shares. The three directors appointed by MF voted to exercise that power, and refused to register the transfer from O to M.
It was held¹ that by using their powers² to prevent the sale, the directors breached their duties (a) to act within their powers and (b) to promote the Company’s success for the benefit of its members³. The court ordered that the transfer be registered.
While the facts of the case were quite unusual, and it seems unlikely that the court could have accepted any other outcome, it is a useful reminder that every director, even one appointed under powers granted to one particular shareholder, has a duty to act in the best interests of the company as a whole.
¹ Otello Corporation ASA v Moore Freres & Company LLC and another  EWHC 2347 (Ch)
² Companies Act 2006 section 171
³ Companies Act 2006 section 172