Y Ltd whose articles are similar to Table A, publish a weekly magazine. In one issue an article is critical of the policies of the city commission. A number of Commissioners who are also members of the company requisition a general meeting and secure the passing of an ordinary resolution ordering the company to publish in the next issue a withdrawal of the criticism. The directors of the company are adamant.
The angry commissioners approach you for the purpose of filing an action to compel the directors to publish a withdrawal.
Advise them.
ANSWER
This problem is based on the division of powers between the general meeting and the board.
• Under this principle, each organ has its own sphere of influence as dictated the articles. An organ must as a general rule not interfere with the exercise of a power vested in the other.
• In this case, since the articles of Y Ltd are similar to Table A, then under Article 80, the management of the company affairs is vested in the board except in those matters specifically allotted to the company at general meeting. Alexander Ward &Co. Ltd v Samyang Navigation.
• The directors are in charge of the publication hence the general meeting must not interfere. By passing the resolution, the general meeting is in fact interfering with the exercise of a power vested the articles in the board.
• My advice to the commissioners is that they have no actionable claim against the directors. They cannot sue since the directors are not abusing, exceeding or exercising their powers in contravention of the articles.
• My advise is based on the decision in Scott v Scott where the general meeting purported to compel the directors of the company to pay an interim dividend, which was a power vested in the board. It was held that the resolution could not be given effect. A similar holding was made in Shaw v Shaw where the general meeting purported to interfere with the exercise of a power vested in the board of directors.