Q&As

Is it possible (i) to change the articles retrospectively to introduce ‘drag along’ provisions to force a sale of the shares of an untraceable shareholder or (ii) to use the statutory ‘squeeze-out’ provisions to achieve the same result?

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Published on LexisPSL on 29/01/2015

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • Is it possible (i) to change the articles retrospectively to introduce ‘drag along’ provisions to force a sale of the shares of an untraceable shareholder or (ii) to use the statutory ‘squeeze-out’ provisions to achieve the same result?
  • Changing the articles of association ‘retrospectively’
  • Common law limitations on the power to alter articles
  • Statutory claims—unfair prejudice
  • Using the statutory squeeze out provisions

In the context of a proposed sale of a company with an untraceable minority shareholder who cannot take an active part in the sale, this Q&A looks at whether it is possible to change the articles retrospectively so as (i) to introduce compulsory transfer (‘drag along’) provisions to force a sale of the shares of the minority shareholder or (ii) to use the compulsory acquisition (‘squeeze-out’) provisions in Part 28 of the Companies Act 2006 to achieve the same result.

Changing the articles of association ‘retrospectively’

A company's articles may, subject to a few exceptions and limitations, be amended by a special resolution of the company's members under the Companies Act 2006, s 21 (CA 2006). See Practice Note: A company’s constitution.

Changes to a company’s articles take effect from the date of amendment; it is not possible to ‘back date’ them so that they take effect from any earlier date. In M'Arthur (W & A) Ltd v Gulf Line Ltd it was held that the right of a transferee to be put on the register was not affected by a subsequent change to the articles giving directors the power to refuse to register share transfers. The transferee’s rights were dependent on the articles in force at the time of the transfer; these rights could not be altered by the later adoption of the new article.

Having

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