English Courts Able To Move Quickly Where Shareholders' Interests Put At Risk By Management

Author:Mr William Twidale
Profession:Farrer & Co
 
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Tarling -v- Mission Today Limited (Chancery Division, Rimer J 15 May 2002, unreported)

Section 371 Companies Act 1985 - Power of Court to order meeting

Facts

The Claimant, Mr Tarling, was a 60% shareholder in the Defendant, Mission Today Limited ("the company"), a company which transmitted religious television programmes through its satellite channel.

The company was in a perilous financial position.

There was only one director of the company (who was also a 10% shareholder) who appeared to be mismanaging the company's affairs. The director did not retain the confidence of the company's creditors, on whom the company depended for the transmission of its television programmes, and the creditors made it clear that unless new management was brought in and some arrangement was come to with them within a very short time period, they would cease the company's transmission of its programmes and the company would be forced into liquidation.

Mr Tarling asked the director to convene an extraordinary general meeting for the purpose of considering appointing two new directors to the board, who were experienced in corporate recoveries. These individuals had been identified and had confirmed that they were ready to act if appointed.

The director made it clear that he would not convene an extraordinary general meeting and consequently Mr Tarling was faced with the prospect of himself requisitioning a meeting pursuant to section 368 Companies Act 1985. However, that process would take six weeks and by that time the company would have been forced into liquidation.

Accordingly, Mr Tarling issued a Part 8 claim, pursuant to which he sought an order of the court that an extraordinary general meeting of the company be convened pursuant to section 371 Companies Act 1985 for the purpose of considering and if thought fit passing resolutions appointing the individuals to the board.

Section 371

Section 371 provides:

If for any reason it is impracticable to call a meeting of a company in any manner in which meetings of that company may be called, or to conduct the meeting in manner prescribed by the articles or this Act, the Court may, either of its own motion or on the application -

of any director of the company, or

of any member of the company who would be entitled to vote at the meeting, order a meeting to be called, held and conducted in any manner the Court thinks fit.

Where such an Order is made, the Court may give such ancillary or consequential directions...

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