10 Questions
Greenhalgh was a ______ shareholder of Arderne Cinemas Ltd
minority
The articles of Arderne provided that a shareholder should not sell his shares to an ______ if an existing shareholder was willing to purchase them
outsider
The managing director, who was also Arderne’s ______ shareholder, wished to sell his shares to an outsider
majority
The alteration to the articles permitted the selling of shares to an outsider, provided that it was approved by an ______ resolution
ordinary
Evershed MR stated that 'the company as a whole' means the corporators as a ______ body
general
The ______ test has become prominent in the case.
hypothetical member
The courts have never fully ______ who the hypothetical member actually is.
articulated
To what extent does the hypothetical member ______ from the real member in question?
differ
Are the hypothetical member's interests purely ______?
financial
Evershed MR's test fails to ______ these questions.
answer
Study Notes
Greenhalgh v Arderne Cinemas Ltd Case Summary
- Greenhalgh was a minority shareholder of Arderne Cinemas Ltd, with articles stating that shares cannot be sold to outsiders if an existing shareholder is willing to purchase them.
- The managing director, also the majority shareholder, altered the articles to allow share sales to outsiders, pending approval by an ordinary resolution, which he could easily pass due to his majority shareholding.
- Greenhalgh challenged the alteration, arguing it was not for the benefit of Arderne as a whole.
Legal Ruling and Significance
- The Court held that the alteration was valid, applying the 'hypothetical member' test, which asks whether the proposed change benefits an individual hypothetical member.
- The test considers whether the hypothetical member would be justified in acting in a manner that benefits themselves as an individual.
- The Court also applied the 'discrimination test', which checks if the advantage obtained by the majority is also available to the minority.
- The 'hypothetical member' test has become prominent, while the 'discrimination test' has been somewhat ignored.
Critique of the Ruling
- The 'hypothetical member' test fails to clarify who the hypothetical member is and how they differ from the real member in question.
- The test also does not specify whether the hypothetical member's interests are purely financial or not.
- The courts have not fully articulated the answers to these questions.
Learn about the case of Greenhalgh v Arderne Cinemas Ltd where a minority shareholder challenged the alteration of articles by the majority shareholder to allow selling shares to an outsider. Explore the implications of such actions and the legal principles involved.
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