Automatic Self-Cleansing Filter Syndicate Co v Cuninghame [1906] 2 Ch 34

Court: Court of Appeal

Facts: There was a dispute between the board of directors and the shareholders concerning the sale of a strategic asset. The shareholders wished to sell, but the board opposed it. The shareholders passed an ordinary resolution to direct the board to proceed with the sale, but the board ignored the resolution. The shareholders then sued, arguing that the company must adhere to the shareholders' directive.

Issue: Can shareholders issue binding directions to the board on management decisions through an ordinary resolution?

Held: The Court of Appeal held that the decision on the sale of the asset was a matter of day-to-day management and within the board’s discretion. Shareholders cannot direct the board through ordinary resolutions on such management decisions.

Key Judicial Statement: Cozens Hardy LJ stated, “The shareholders have by their express contract mutually stipulated that their common affairs should be managed by certain directors to be appointed by the shareholders in the manner described by other articles, such directors being liable to be removed only by special resolution.”

💡 Leveluplaw: Shareholders cannot interfere with the board’s management decisions by passing ordinary resolutions. Management decisions are within the board's domain, and shareholders’ powers are generally limited to matters specifically reserved to them by the company’s articles or special resolutions.