ABSTRACT
It has always been recognised that the general meeting has wide powers to ratify or approve acts which are within the powers of the company but which have been carried out in an irregular way and, further, to ratify certain breaches of directors’ duties. So, for example, if the directors act purportedly on behalf of the company in a matter which is outside their authority under the articles, this can be subsequently ratified by the general meeting. In Grant v United Kingdom Switchback Rly Co,139 the directors caused the company to enter into a transaction with a third party, in which all of them except one were interested. The company’s articles prohibited any director from voting on a transaction in which he was interested; therefore, as it stood, the transaction was voidable. However, a general meeting was called, which duly passed an ordinary resolution approving and adopting the transaction, and it was held by the Court of Appeal that no injunction could then be granted to prevent the transaction being carried out. An argument here that upholding the resolution effectively amounted to an alteration of the articles by ordinary resolution failed, Cotton LJ explaining that:
This is not to say, however, that the articles do not bind the general meeting. Here, the ratification was not in breach of the articles, the general meeting was simply adopting a contract which was within the power of the company to make. By contrast, if the general meeting sought to appoint a director at a higher salary than that provided for by the articles, the court would not uphold the appointments. A special resolution to alter the articles would have to be passed first.141
