Company law 2013 can article of association binding on the shareholders
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Q.. The Articles of a Company provided that the shares of a member who became bankrupt would be offered for sale to other shareholders at a certain price. Is the provision binding on the shareholders?
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Q. A Company, in which the directors hold majority of the shares, altered its articles so as to give power to directors to acquire shares of any shareholder, who competed with the Company’s business, to transfer his shares, at their full value, to any nominee of the directors. S had some shares in the Company, and he was in competition with the Company. Is S bound by the alteration?
Answer- : The power of the members to effect alteration in the Articles by passing special resolution is limited in as much as the alteration must be bonafide and in the interest of the Company. In the given case, alteration requires taking over the shares of only those who competed with the Company’s business. Therefore, empowering the directors to take over shares of such members seems to be in the general interest of the Company as a whole and hence shall be valid. S shall be held bound by the alteration.