ARTICLES OF ASSOCIATION 29
It has been pointed out above that alterations of the
articles purporting to enlarge the powers of a company, or to
deprive the members of a statutory right, are invalid. There
is another limitation on the power of alteration of articles.
Bearing in mind that any alteration of articles involves the
binding of a minority by a majority, it must not be forgotten
that the power must be exercised bond fide for the benefit of
the company as a whole, and no fraud on, or oppression of,
the minority, or want of good faith on the part of the
majority, will be permitted. A fictitious case, put by Lord
Wrenbury, in his well-known book, well illustrates this.
‘Say,’ he says, ‘that there are one thousand shares of £10
each ranking equally for dividend, a special resolution
that shares 1 to goo shall for the future have twice as much
dividend as shares goI to 1000 must be impossible as against
shares gor to 1000.” "It is obvious that it is theoretically
possible for the statutory majority of shareholders to pass
such a resolution, but it is equally clear that any Court
would restrain the company from acting upon the resolution,
inasmuch as it would result in grossly unfair and oppressive
treatment of a helpless minority. Such a resolution would
not be passed bond fide for the benefit of the company as a
whole. In Brown v. British Abrasive Wheel Co. (1919,
I Ch. 290) a proposed alteration was restrained by the Court
as oppressive to the minority; in Sidebottom v. Kershaw
Leese & Co. (1920, 1 Ch. 254) an alteration introducing the
principle of compulsory transfer, in the case of a shareholder
competing with the company, was held to be made bond
fide and was permitted. In Dafen Tinplate Co. v. Llanelly
Steel Co. (1920, 2 Ch. 124) an alteration introducing a general
power to buy out any member, with one specified exception,
at pleasure, was held invalid, as not being genuinely for the
benefit of the company as a whole; but see Shuttleworth v
Cox Bros. & Co. (Maidenhead) (1927, 2 K.B. g, supra).

A statutory restriction on the power of a company to
alter its articles was imposed by the Companies (Foreign
Interests) Act, 1917, s. 1 of which in effect prohibited the
alteration of any article, or regulation, designed to limit
the interest of, or power of control by, aliens, without the
written consent of the Board of Trade. This Act was.
however, repealed by the Companies Act 1928.

A secretary should always make careful note of matters in
which the articles of his company appear to be defective; and
the opportunity should be taken, when meetings of the
company are required for other purposes, to improve the
articles and bring them up-to-date.