Automatic Self-Cleansing Filter Syndicate Co. Ltd. v. Cunninghame

"Automatic Self-Cleansing Filter Syndicate Co. Ltd. v. Cunninghame", [1906] 2 Ch. 34 (C.A.) is a landmark English decision in corporate law. The Court of Appeal affirmed the directors control over a corporation and held that the directors were not agents of the shareholders and so were not bound to implement shareholder resolutions.

Background

Automatic Self-Cleansing Filter Syndicate Co. was a company, incorporated in 1896, that sold filtration systems. Among other things, the company's articles of association allocated powers over contracts, negotiations, and property transactions.

McDiarmid, a shareholder, wanted the directors to sell part of the assets of the company. At a shareholders' meeting the shareholders voted in favour of the proposal by 1502 to 1198. The directors, however, did not approve of the resolution and refused to enact it. McDiarmid applied to have the directors forced to enact the resolution.

Opinion of the Court

The Court held that the directors were entitled to reject the offer. They are not agents to the shareholders nor the company. Activities such as the sale of company assets is in the discretion of the directors s198A(1) - "Corporations Act". The shareholders may only interfere with the decisions of the directors through a special resolution by amending the articles of association (Pre 1 July 1998) or the Company's Constitution (Post 1 July 1998).