Bushell v Faith [1970] AC 1099

Court: House of Lords

Facts: Three siblings were equal shareholders and directors in a company. At the outset, one brother introduced a provision in Article 9 of the company’s constitution which granted his shares triple voting power in the event of a resolution to remove him from the board. Despite this, the other two siblings passed a resolution to remove him from the board. Under section 184 of the Companies Act 1948 (now section 168 of the Companies Act 2006), directors could be removed by an ordinary resolution.

Issue: Does Article 9 in the company’s constitution infringe section 184 of the Companies Act 1948 (now section 168 of the Companies Act 2006)?

Held: Article 9 was enforceable, preventing the removal of the brother from the board. The House of Lords upheld the provision, acknowledging that while it was designed to circumvent the statutory removal process, the law allowed for weighted voting rights.

Key Judicial Statement: Lord Reid noted, “Article 9 of the Articles of Association of this company is obviously designed to evade section 184(1) of the Companies Act, 1948. But the practice of giving special voting rights or special lack of voting rights to a particular class of shares is old and is recognised in Article 2 of Table A in the First Schedule to the 1948 Act … we must take the law as we find it.”

💡 Leveluplaw: A director can protect himself from removal by including weighted voting rights in the company's articles, provided that such provisions are legally permissible. Section 184 does not automatically invalidate such provisions if they conform to statutory and common law principles regarding share classes and voting rights.