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Questions and Answers
According to Lord Greene MR, how are the rights affected in the case of Greenhalgh?
What did Lord Evershed MR conclude about the £5000 payment in the derivative action case?
In the case discussed, why did Lord Evershed MR find the alteration of the articles legitimate?
What does Lord Greene MR imply about Greenhalgh's control position?
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According to Lord Evershed MR, why was it wrong to criticize the alteration of the articles?
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What was the main issue in the case of Greenhalgh v Arderne Cinemas Ltd (No 2)?
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What was Mr Greenhalgh's primary concern in the case?
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What was the significance of having two classes of shares in Arderne Cinemas?
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How did Mr Mallard plan to transfer his shares to Mr Sol Sheckman?
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Why did Mr Greenhalgh argue that the article change allowing external shareholders was invalid?
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What did Mr Greenhalgh request as a remedy in the case?
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Study Notes
Greenhalgh v Arderne Cinemas Ltd (No 2)
- Lord Greene MR held that the rights of the minority shareholders remain unaffected despite the change in control of the company.
- The change in control occurred due to the subdivision of the 10-shilling shares into 2-shilling shares, with each share carrying one vote.
Facts of the Case
- Mr. Greenhalgh was a minority shareholder in Arderne Cinemas, fighting to prevent majority shareholder Mr. Mallard from selling control.
- The company had two classes of shares: 10-shilling shares and 2-shilling shares, with each class carrying one vote.
- The articles of association initially restricted share transfers to non-members, but a special resolution changed the articles to allow existing shareholders to offer shares to outsiders.
The Dispute
- Mr. Mallard, the majority shareholder, wanted to transfer his shares to Mr. Sol Sheckman for 6 shillings each and £5000, and resign from the board.
- Mr. Greenhalgh opposed the transfer, claiming it was a fraud on minority shareholders and sought compensation.
Judgment
- Lord Evershed MR held that the £5000 payment was not a fraud on the minority, as none of the majority voters were voting for personal gain.
- The alteration of the articles was legitimate, as it was done properly.
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Description
Test your knowledge on the UK company law case of Greenhalgh v Arderne Cinemas Ltd (No 2) which revolves around the issue of shares and 'fraud on the minority'. Explore the details of the case involving Mr Greenhalgh as a minority shareholder in a battle against the majority shareholder to prevent the selling of control.
