In pender v lushington 1870 6 ch d 70 where a company

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In Pender v. Lushington [1870] 6 Ch D 70 , where a company chairman refused to count the votes of a shareholder, it was held that the chairman had no right to disallow the votes in breach of the company’s articles. Members of a company cannot enforce against the company “outsider rights ”. These are provisions that do not correspond to the general rights of membership available to all shareholders of the same class. Thus, a member cannot normally enforce a right as a director, secretary, solicitor etc., or any other extraneous privileges not arising from membership. A non-member cannot enforce against the company any provisions in the articles. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 387 COMPANY CONSTITUTION AND CONTRACTUAL CAPACITY In Hickman v. Kent and Romney Sheep breeders Association Ltd [1915] 1 Ch 881, at 900 , Astbury J explained the principles governing the enforceability of rights as follows: Firstly, that no articles can constitute a contract between the company and a third person; secondly, that no right purporting to be given by an article to a person, whether a member or not, in a capacity other than that of a member, as for instance a solicitor, promoter, director, can be enforced against the company; and thirdly, that articles regulating the rights and obligations of the members generally as such do create rights and obligations between them and the company respectively. The above principles were applied in the following cases: Eley v. Positive Govt. Security Life Assurance [1876] 1 Ex D 88 The articles of association of the company provided that the claimant who was also a member of the company, should be appointed the company solicitor for life. It was held that the claimant could not enforce that provision. Browne v. La Trinidad [1877] 37 Ch D 1 – A company’s articles contained a provision that in consideration of the sale by B of his property to the company, he would become a member of the company and would be appointed a director for at least four years. B was removed as a director before the stated four years. He never became a member of the company. It was held that even if B had become a member, he could not enforce the provision since it was an outsider right. In Globalink Telecommunications v Wilbury Ltd [2003] 1 BCLC 145 , it was held that the articles do not constitute a contract between a company and its officers but only between the company and its members. A n outsider right may only be enforceable if it is supported by an independent contract or if its enforcement arises from the enforcement of a membership right. This was demonstrated in Quin & Axtens v Salmon [1909] AC 442: A company’s articles provided that any of its two managing directors could veto a decision of the Board of Directors in certain circumstances. The claimant, pursuant to that provision, vetoed a decision of the Board. The veto was ignored. The claimant sued as a member of the company to compel compliance with the articles. It was held that the company, in
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