Quin & Axtens Ltd v Salmon [1909] AC 442

Court: House of Lords

Facts: Quin & Axtens Ltd’s articles specified that the company’s business should be managed by the board and that no board decision on certain issues would be valid if either of two directors, Salmon and Axtens, dissented. A general meeting passed a resolution to buy and lease properties, which was supported by a majority of shareholders. Salmon, who opposed the resolution, sought an injunction to prevent the implementation of the resolution.

Issue: Can shareholders override a director's veto on board decisions through a general meeting resolution?

Held: The House of Lords granted the injunction. It was determined that the directors had the authority to manage the business in accordance with the articles, and the shareholders could not override this authority by passing a resolution.

Key Judicial Statement: Lord Loreburn LC observed, “The bargain made between the shareholders is contained in articles 75 and 80 of the articles of association, and it amounts for the purpose in hand to this, that the directors should manage the business; and the company, therefore, are not to manage the business unless there is provision to that effect. Further the directors cannot manage it in a particular way–that is to say, they cannot do certain things if Mr. Salmon or Mr. Axtens objects.”

💡 Leveluplaw: Shareholders cannot bypass a director’s veto on specific decisions if the company’s articles grant the veto power. Management authority vested in the board cannot be overridden by shareholders through general meeting resolutions.