Majority shareholders’ power to amend articles of association
by Sharon Fryer & Emma Halton
The Privy Council recently considered a dispute arising out of a majority shareholder resolving to amend the company’s articles of association to allow the company to buy back the shares of anyone found to have made a material misrepresentation in relation to the acquisition of those shares.¹
It held that the amendments were valid, noting that:
- the power to amend the articles must be exercised in good faith, in the interests of the company; but
- it is for the majority shareholders to decide what is in the best interests of the company and the court would only intervene if no reasonable person would consider the amendments to be of benefit to the company.
Therefore, to protect their position, minority shareholders should consider entrenching their rights in a shareholder’s agreement, including a provision that the company’s articles may only be amended with unanimous consent.
¹Staray Capital Ltd v Cha  UKPC 43