5/13/2011 Duty to act bona fide in the best interests of the company ·For most companies,.acting in the“company's interest"means acting to promote shareholder value. Brady v Brady [1988]BCLC 20 Nourse L:"the interests of a company,an artificial person, cannot be distinguished from the interests of the persons who are interested in.Who are those persons?Where a company is both going and solvent,first and foremost come the s/ers,present and o doubt future as well." 11 Duty to act bona fide in the best interests of the company The interests of other constituencies could be taken into account provided that so doing furthered the interests of shareholders. Hutton v West Cork Rly Co(1883)23 Ch D654 6
5/13/2011 6 11 • For most companies, acting in the “company’s interest” means acting to promote shareholder value. Brady v Brady [1988] BCLC 20 Nourse LJ: “the interests of a company, an artificial person, cannot be distinguished from the interests of the persons who are interested in. Who are those persons? Where a company is both going and solvent, first and foremost come the s/ers, present and o doubt future as well.” Duty to act bona fide in the best interests of the company 12 • The interests of other constituencies could be taken into account provided that so doing furthered the interests of shareholders. Hutton v West Cork Rly Co (1883) 23 Ch D 654 Duty to act bona fide in the best interests of the company
5/13/2011 Duty to act bona fide in the best interests of the company In the interests of members-default rule only In the absence of contrary intention set out in the co's articles,the co's interests the interests of present and future members as a whole Co could elect to define its interests differently in articles: to be run in the interests of other constituencies or a combination of constituencies >Re Horsely Weight Ltd [1982]Ch 442 13 Duty to act bona fide in the best interests of the company What is intended by the reference to future members? Megarry J in Gaiman refers to both existing and future members What's intended to by the reference to future members? Sensible understanding? What if an individual shareholder's interest diverge? Megarry J in Gaiman refers to the members'interests "as a whole" If the interests conflict,the board is entrusted with maximizing overall s/er interests,which may involve balancing and choosing between the different s/er interests 7
5/13/2011 7 13 • In the interests of members - default rule only In the absence of contrary intention set out in the co’s articles, the co’s interests = the interests of present and future members as a whole Co could elect to define its interests differently in articles: to be run in the interests of other constituencies or a combination of constituencies Re Horsely & Weight Ltd [1982] Ch 442 Duty to act bona fide in the best interests of the company 14 • What is intended by the reference to future members? Megarry J in Gaiman refers to both existing and future members What’s intended to by the reference to future members? Sensible understanding? • What if an individual shareholder’s interest diverge? Megarry J in Gaiman refers to the members’ interests “as a whole” If the interests conflict, the board is entrusted with maximizing overall s/er interests, which may involve balancing and choosing between the different s/er interests Duty to act bona fide in the best interests of the company