EIC Services Ltd v Phipps [2003] EWHC 1507

Court: High Court

Facts: The case involved bonus shares issued from the share premium account. The validity of these shares was questioned due to the lack of formal shareholder approval. The Duomatic principle was invoked to argue that informal unanimous consent should suffice.

Held (High Court): The court found that the Duomatic principle did not apply in this case. The necessary conditions for the principle—unanimous consent with full knowledge—were not met.

Key Judicial Statement: Neuberger J explained, “The essence of the Duomatic principle, as I see it, is that, where the articles of a company require a course to be approved by a group of shareholders at a general meeting, that requirement can be avoided if all members of the group, being aware of the relevant facts, either give their approval to that course, or so conduct themselves as to make it inequitable for them to deny that they have given their approval.”

💡 Leveluplaw: For the Duomatic principle to apply, it is essential that consent is both unanimous and fully informed. The principle cannot be used if the necessary conditions of knowledge and unanimous agreement are not met.