Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286

Facts

  • Arderne Cinemas Ltd passed a special resolution to subdivide its existing 5 shilling shares into five 1 shilling shares, maintaining proportional ownership for shareholders.
  • Subsequently, a resolution permitted holders of the new 1 shilling shares to purchase an additional five shares for each share owned.
  • Mr. Greenhalgh, a minority shareholder, argued his voting power was unfairly diluted and alleged the scheme aimed to shift control to Mr. Mallard, the managing director who possessed a significant shareholding.
  • Mr. Greenhalgh claimed the company’s actions were prejudicial to minority shareholders and contrived to transfer control.

Issues

  1. Whether the subdivision and subsequent offer of shares constituted an improper variation of share class rights or an unfair dilution of minority voting power.
  2. Whether such alterations must benefit the company as a whole, rather than just the majority shareholders.
  3. Whether the resolutions in question were implemented in accordance with the company's articles and for bona fide purposes.

Decision

  • The Court of Appeal dismissed Mr. Greenhalgh’s appeal, finding no impropriety in the share subdivision or subsequent offer.
  • It was held that changes impacting voting power are not automatically invalid if conducted honestly and for the company's benefit.
  • The court found no evidence of ulterior motives or harm to the company’s general interests.
  • The resolutions were deemed compliant with the company’s articles of association and properly executed.

Legal Principles

  • A variation of share class rights or dilution of voting power is permissible if done honestly for the benefit of the company as a whole, not merely for the majority’s advantage.
  • The "benefit of the company as a whole" test requires an objective assessment focused on the company’s broader interests, which may align but are not identical with the majority’s interests.
  • Company articles of association provide the framework for adjusting class rights; adherence to these provisions is essential.
  • Merely reducing minority voting rights does not, on its own, render a resolution invalid unless it breaches good faith or proper purpose requirements.

Conclusion

The Court of Appeal in Greenhalgh v Arderne Cinemas Ltd confirmed that share class variations or share issues which reduce minority voting power are valid if made honestly, for the benefit of the company as a whole, and in accordance with the articles of association, distinguishing such conduct from cases motivated by bad faith or aimed at oppressing minorities.

The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.
No resources available.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Job Test Prep
One-time Fee
$90-350

Note the above prices are approximate and based on prices listed on the respective websites as of May 2025. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

All-in-one Learning Platform

Everything you need to master your assessments and job tests in one place

  • Comprehensive Content

    Access thousands of fully explained questions and cases across multiple subjects

  • Visual Learning

    Understand complex concepts with intuitive diagrams and flowcharts

  • Focused Practice

    Prepare for assessments with targeted practice materials and expert guidance

  • Personalized Learning

    Track your progress and focus on areas where you need improvement

  • Affordable Access

    Get quality educational resources at a fraction of traditional costs

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal