Qn 1

Q2)

Nature of Class 1 Shares

- “Class 1” shares issued to Alice would be regarded as a preference share due to its cumulative 5%
dividend ranking despite carrying no vote,[1] and that this was in addition to the ordinary shares issued.
Nature of Art 11 and its implications
- Art 11 exists as an entrenching provision, as it requires more than 50% of the holder of that particular
class of shares, thereby fulfilling 26A (4)(b)(ii), specified conditions are required to be met before a
provision can be altered by special provision.
- Therefore, art 11 requires the consent of all shareholders before it can be amended or removed from
the company constitution, as stated by s 26A (2) of the Companies Act.
Is Resolution 7 valid?
- Resolution 7 will be able to be passed upon special resolution of the members of the company,[2] of
a majority not less than ¾ of the members as, being entitled to do so.[3]
- Resolution 7 does not pertain to Article 11 due to its modification of the number of shares issued,
rather than that of the “rights, obligations and terms regarding that class of shares” as stated in Article
11.

- Issuing no more than 10000 shares, as listed in Resolution 7, also does not represent any adjustment
of the rights, obligations or terms of Class 1 shares as it will fall within the Company’s Articles of
Association, which states that “there should be no more than 15000 shares of Class 1 shares issued."
- As only 5000 shares had been issued till the point the resolution was passed, issuing not more than
10000 shares still falls within the limit of shares issued as stated within the Company’s Articles of
Association.
- Additionally, resolution 7 does not constitute a variation of rights attached to the existing class 1 shares
under Article 74(6) of the Act,[4] as the issuance of 10000 additional Class 1 shares to the existing
5000 shares does not impinge on the limit of 15000 Class 1 shares as authorized by the initial terms set
out in the Company’s Articles of Association.
- Resolution 7 as an addition to the constitution will thus be able to be passed. By extension, resolution
7 is valid assuming that the procedural requirements of the special resolution were met.

Is Resolution 8 valid?
- Resolution 8 purports to delete Article 11, an entrenched provision in the constitution, thereby requiring
the consent of all shareholders before it can be amended or removed from the company constitution.[5]
- As all shareholders, with the exception of Alice, passed the resolution in this instance, it does not
fulfill s 26A (2) of the Companies Act and Resolution 8 is not valid. Thus, Article 11 remains in force.
Possibility of bona fide test

- Assuming the situation whereby Resolution 7 is allowed to pass, and Resolution 8 is not allowed to
pass, there remains a question as to whether the altering of the clause in the constitution will be
permitted by the courts based on the common- law test of “bona fide for the benefit of the company as
a whole”.[6]
- The test for which was refined to whether the alteration of articles was in the honest opinion of the
shareholder for the benefit of the company.[7]
- In the honest opinion of a shareholder in this instance, Resolution 7 would benefit the company as
issuing additional Class 1 shares would help the company raise share capital for their benefit. This is
crucial as Scooter needed some new finance to acquire another firm in Singapore. Alice would be
unable to disprove the validity of Resolution 7.
- An alternative approach to that of Gambotto v WCP Ltd (1995) 182 CLR 432, which states that the
alteration is made for a proper purpose, and does not operate oppressively in relation to minority
shareholders,[8] is also unlikely to hold as Alice still maintains her 5000 shares, and her powers are not
being reduced due to the issuance of more shares.

Conclusion
- Alice will not be able to reject the enactment of Resolution 7 despite verifying that Article 10A of the
Company’s Articles remain unaffected by Resolution 8.
- It is also unlikely that Alice will be able to make a claim in common law that the decision was not
made bona fide for the benefit of the company
- Alternatively Alice may choose to pursue an action in oppression under s 216 of the Companies Act.[9]

Q3a)
- Article 40A may be regarded as an entrenching provision, under new issues of shares requiring special
resolution in a general meeting, as per s 26A (4)(b)(ii) of the Companies Act.
Resolution 2
- Resolution 2 is most likely to be valid as the issuance of ordinary shares had the support of all the
shareholders other than Frank.
- This would fulfill the ¾ majority requirement of a special resolution which would allow Resolution 2
to be passed.
- Additionally, Article 40 A is not contravened since the issuance of the ordinary shares had been
authorized and approved by special resolution at a general meeting.
- Attempting the bona fide test is also unlikely to succeed as the issuance of shares will raise capital for
the company, which in turn is subjectively for the benefit of the company as a whole from the position
of a shareholder.

Resolution 3

- Given that clause 5 was set out in the Memorandum of Association in 2003, prior to the amendments
made in the Companies Act, any clause established within the Constitution upon its formation would
were not able to be altered to the extent and in the manner provided by the Act but not otherwise.[10]

- However, the object clause of the Company is allowed to be altered under s 33 (1) of the Act under
special resolution.[11]

- Given that a special resolution had taken place in this instance, it would seem unlikely that Frank
would be able to disprove the validity of Resolution 3 in statute.
- As stated in Peters’ American Delicacy Co Ltd v Heath (1939) 61 CLR 457, the burden of proof
remains on that of the person challenging the alteration, in this case Frank, to prove there is evidence
of bad faith.
- However, in common law, it be likely that Resolution 3 would be able to be passed in this instance, as
it would not be able to be passed under common law requirements of the bona fide test for the benefit
of the company as a whole.[12]

- In allowing the board ‘to do all such other things as the Board deems fit’ may be too wide a power to
accord to the Board in charge of the company.
- As considered in Shuttleworth v Cox Bros & Co (Maidenhead) Ltd, it was suggested that the court
may conclude that the majority of shareholders cannot honestly think the alteration was to be good for
the company because there exists no ground on which a reasonable person would have arrived at the
same view.[13]
- As such, a reasonable person would view that whilst power is accorded to the board to manage the
company, giving them the discretion to do all such other things as long as they seem fit does not benefit
the company as a whole, even from the position of a shareholder.

- However, here, the shareholders, other than Frank all in fact did agree to the alteration during the
general meeting. This is in line with the test laid out in Shuttleworth that the alteration of articles was,
in the honest opinion of the shareholders for the benefit of the company.[14]

- This obviously shows that the shareholders trusted in their board and their ability to make all decisions
with regard to attaining the object of the company. The court is unlikely to rule Resolution 3 as invalid.

- Additional threshold of director’s duties, since some of them are directors- to be able to prevent any
abuse of the rule?
- Possible use of Gambotto to reflect the oppression of a minority shareholder via the “proper purpose”
approach. However, the rule laid down has been heavily criticized and it appears unlikely that Singapore
would adopt it.
Resolution 4

- The qua-member rule, as laid out in Hickman v Kent,[15] may apply here in Resolution 4 affecting
Clause 10, as the right assigned to him can be treated in a capacity other than that of a member,
which makes the alteration of the article under Resolution 4 invalid.

- Use of his first name “Frank” indicates the Clause to function as personal right rather than that of
a membership right, as it would then reflect that only people of the name “Frank” would be able
to use the power to appoint a maximum of two directors during the general meeting.
Marianne: We can also argue that the right was conferred in Frank in his capacity as a member as every
member has a right to attend general meetings and vote. Clause 10 suggests that Frank's power to
appoint a maximum of 2 directors is restricted to the GENERAL MEETING. If they intended him
to confer rights on him in his capacity as an outsider, it is unlikely why they would only provide
for the exercise of his rights in the GENERAL MEETING.
- Since Frank is the only non-executive director as listed on the facts, there is an assumption that
he is exercising his right as a director rather than that of a member. It would be highly unlikely
that anyone sharing the same first name would have the same power thus treating it as a
membership right
- Since only rights conferred to Frank as a member is enforceable, the Resolution would not be
enforceable in this instance.
- On the facts, under definition of Frank’s role as a non-executive director further reinforces the
fact that the Clause 10 of the memorandum does not hold, since non-executive directors typically
do not work in a full time capacity with the company but
(Marianne: Guys sorry I don't really get the link between the bona fide test and the member's right. Is
it that only a member can apply for the courts to see if an alteration is bona fide for the benefit of
the company as a whole? If this is the case, whether Clause 10 is a member's right or not does not
determine if Frank is a member -> Whether Frank is a member depends on things like whether he
subscribed to the constitution and whether he holds shares (I think).
- Alternatively, if this rule does not hold and Clause 10 is treated as a member’s right, the bona
fide test will apply and it is likely that Resolution 4 and the removal of Clause 10 will not be for
the benefit for the company as a whole.
- Totally removing Frank’s ability to appoint a director would seem like an extreme measure to
take given his current appointment as a director, and there would be no foreseeable benefit for the
company but to remove a dissenting voice in the change of the object of the company. This might
also be an example of bad faith where the alteration was aimed at injuring a minority shareholder
without regard to the company’s interest, reflecting a malicious motive.[16]

- However, there is no evidence of malice here, as Alice was acting in response to Frank’s threat
that it would appoint 2 directors to the board, thereby hindering any possibility of further decisions
requiring a majority decision by the board.
 Why is it bona fide to prevent someone from exercising a right that has been conferred on them by the
constitution tho?
- Since growth remains potentially constant, as stated in the Company’s financial statements,
destabilizing this growth by shifting industries reflects additional potential that Resolution 4 is not
bona fide for the benefit of the company as a whole, and thus is unlikely to be enforced.
Are you substituting the shareholder's views with that of the court? Or are you saying that just because
you might POTENTIALLY destablize growth that this is not bona fide in the interests of the
company? If this is the case, then isn't it that quite a lot of decisions taken by a company to change
business direction would not be bon a fide for the bneefit of the comapny as a whole?
Marianne
1. Prior to 1 April 2004, Memorandum can only be altered if CA specifically empowered it to do so. A
provision was hence entrenched unless it could be altered by unanimous agreement. There was no
unanimous agreement in this case.
2. Assuming that this is not the case, have to see if a resolution is bona fide for the benefit of the company
as a whole to determine if the resolution is valid and binding.
a. Peter’s American Delicacy Co Ltd v Heath: Alteration presumed to be valid unless there
is evidence of bad faith and onus of proof is on person challenging the alteration.
b. In Shuttleworth v Cox Bros & Co, Atkin LJ stated that the only question is whether or not
the shareholders in considering whether they shall alter articles, honestly intend to exercise
their powers for the benefit of the company as a whole. Bankes LJ also alluded to this
objective element in stating that: The alteration may be so oppressive so as to cast suspicion
on the honesty of the persons responsible for it or so extravagant that no reasonable man
could really consider it for the benefit of the Company.
c. The objective element is intended to help the court determine if the shareholders subjectively
exercised their powers of alteration honestly for the benefit of the company as a whole. In
this case, the alteration is indeed so oppressive so as to cast suspicion on the honesty of the
persons responsible for it or so extravagant that no reasonable man could really consider it
for the benefit of the Company. This is because it arbitrarily deprives a minority
member of the entirety of a power granted to him by the Constitution, in the absence
of any wrongdoing or harm caused by him or any reference to potential wrongdoing
or harm by him in the resolution.
c. The alteration is also so oppressive as to cast suspicion on the honesty of the persons
responsible for it. Significance of the fact that Alice also proposed resolution 3 -> The
combination of Resolution 3 and 4 effectively allows the board to do everything they see
fit. Alice and Ben typically formed a majority. Board of directors would be controlled by
Alice and Ben – Did not even provide for Frank to have the power to appoint 1 director. In
such a situation, they would effectively have approximately 67% of the control of the
Board of Directors, the object of the company would be to do what Alice and Ben
wanted, regardless of how onerous it was. Difficult to say that a reasonable man would
have considered Resolution 4 for the benefit of the company as a whole.
 d. In addition, it would have effectively deprived Frank of any ability to effect the
constitution of the board, even though it would likely not affect the outcome of the
board’s decisions, despite the fact that he was appointed as a non-executive director
in name. This buttresses the idea that the amendment was directed against a
particular person for a malicious motive of depriving him of his power as director.
Possible to argue that they exceeded the bona fide aspect? If they gave him the power to
appoint one director at least, Alice and Ben would still be the majority on the board. The
fact that they recognized this explains why there was a gentlemen’s agreement that he
should only appoint 1 director in the past. However, they totally deprived him of the ability
to affect the constitution of the board.
- Might be able to counter this with the fact that you should not impose your own judgment on
what is bona fide for the benefit of the company
d. Is the fact that only one person was deprived of his right indication of a lac of bona fides?
i. In Allen v Gold Reefs of West Africa Ltd, it was held that the mere fact
that only one person was actually affected at that time was not evidence of bad
faith as altered articles applied to all holders of fully paid shares and made no
distinction between them. The majority was also acting in the company’s interests
in taking steps to collect a bad debt.
ii. In this case, the resolution would have deprived Frank of a right that only
he had, and no one else had. Hence it was not bona fide.
iii. On the other hand, can argue that it was in the company’s interests to
prevent a director-shareholder from exercising his constitutional rights when the
sole purpose for doing so was to prevent the managing director from making a
strategic business decision that was in the interests of the company, amongst other
reasons. Court cannot substitute it's own views for the shareholders.
iv. Are there restraints on the ability of the shareholder to exercise their votes?
-> There is no duty to vote altruisticall

 Evidence of malice? There does not appear to be strong evidence that Alice was acting mala fide
towards Frank.
 Difficult to say that power of alteration not intended to apply to Clause 10, as stated in Allen v Gold
Reefs, need strong evidence that there was an intention to exclude the power of alteration.

Q3b)

- Shareholders agreements are contractually binding on all shareholders that have signed it, including
Frank.

- In Russell v Northern Bank Development Corp Ltd,[17] a clause purporting that the company would
not increase share capital except with consent of all parties to the contract was an unlawful attempt to
oust the company’s statutory power to amend the memorandum and increase share capital.
- Held that a company may not contract out of its statutory power to amend the constitution, as the
agreement amongst the shareholders not to vote in favor of any such agreement is valid and enforceable.
- Likewise, the contract here is valid and, to be altered by resolution 2 would be a breach on the
shareholders agreement as a contract between Frank and all the shareholders.
- Frank will be able to pursue contractual remedies such as damages since he is privy to the shareholder
agreement.

[1] Definition in s4 repealed by 2014 Act.

[2] 26 (1) of the Companies Act.
[3] 184 of the Companies Act.
[4] 74 (6) of the Companies Act states,” The issue by a company of preference shares ranking pari passu
with existing preference shares issued by the company shall be deemed to be a variation of the rights
attached to those existing preference shares unless the issue of the first-mentioned shares was authorised
by the terms of issue of the existing preference shares or by the constitution of the company in force at the
time the existing preference shares were issued.” The statute also reverses the position as previously laid
out by Greenhalgh v Arderne Cinemas [1946] 1 All ER 512 (CA), which states that there is no variation
of class rights if the enjoyment of the shares has changed if they still have the same rights.
[5] 26A (2) of the Companies Act.
[6] As laid out in Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656 (CA) at p18.
[7] Shuttleworth v Cox Bros & Co (Maidenhead) Ltd [1927] 2 KB 9 (CA), Atkins LJ at p26.
[8] Gambotto v WCP Ltd (1995) 182 CLR 432 at p46.
[9] S 216 of the Companies Act.
[10] S 26 (1) of the Companies Act (Cap 50, 1967 Rev Ed).
[11] S 33 (1) of the Companies Act.
[12] Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656 (CA) at p18.
[13] Shuttleworth v Cox Bros & Co (Maidenhead) Ltd [1927] 2 KB 9 (CA) at p 18, 24.
[14] Shuttleworth v Cox Bros & Co (Maidenhead) Ltd [1927] 2 KB 9 (CA) at p 26.
[15] Hickman v Kent or Romney Marsh Sheepbreeders’ Association [1915] 1 Ch 881 at p.899
[16] Sidebottom v Kershaw, Leese & Co, Ltd [1920] 1 Ch 154 at 161.
[17] Russell v Northern Bank Development Corp Ltd [1992] 1 WLR 588.
Qn 4

REMEMBER: Need to pierce the corporate veil of both Iskandar and Pilatus.

Fraud

Before we can consider whether the corporate veil should be lifted, we have to see if there is any
independent wrongdoing on the part of the company first. In this case, as Scooter wants to claim
specific performance to acquire the land and buildings from Iskandar, we can assume that there was a
breach of the contractual obligation to transfer Malaysian assets from Pilatus to Scooter.

As per Re Darby, fraud is a ground for piercing the corporate veil. As per Derry v Peek, to prove there
was fraud, we have to show that there was:

a) A misrepresentation
b) Made knowing that it is false, or having no belief that it is true or being reckless as to whether
it is true
c) Intending it to be relied on by the recipient
d) Recipient acts to his or her detriment in reliance on it.

On the facts of the case, it is unclear what is the sequence of events leading up to the breach of
contract.

Implied