Harman v BML [1994] 1 WLR 893 (Ch)

Facts

• BML was a private company in which Mr. Harman was a minority shareholder.
• Mr. Harman sought to call a general meeting to remove the company’s directors.
• The company’s articles of association vested significant control in the directors, impeding minority shareholders from calling meetings against the board’s wishes.
• The directors refused to assist Mr. Harman’s effort, effectively blocking his statutory rights to request a meeting.
• This resulted in a deadlock, demonstrating the practical obstacles minority shareholders may face.

Issues

1. Whether section 306 of the Companies Act 1985 permits the court to order a company meeting when directors or procedural barriers render standard meeting processes unworkable.
2. Whether the directors’ refusal to cooperate satisfied the statutory requirement of “impracticality” necessary for court intervention.
3. What threshold of “impracticality” must be proven by an applicant seeking a court-ordered meeting under section 306.

Decision

• Justice Hoffmann interpreted “impractical” in section 306 to mean a genuine barrier, not mere inconvenience or increased difficulty, to holding a meeting under the articles.
• The directors’ refusal constituted an actual impediment, making it impossible for Mr. Harman to call a meeting through standard procedures.
• The court exercised its power under section 306 to order a meeting, bypassing the directors’ obstruction.
• The decision affirms the court’s readiness to provide an alternative mechanism for convening meetings where procedural blocks impede shareholder rights.

Legal Principles

• Section 306 of the Companies Act 1985 empowers the court to direct that a company meeting be called if holding one by normal means is impractical.
• The threshold for “impracticality” requires a substantial block, not merely inconvenience or procedural disagreement.
• The purpose of section 306 is to safeguard corporate governance and protect minority shareholders from the misuse of procedural controls by directors or major shareholders.
• The case confirms the judiciary will interpret statutory provisions purposively to uphold fairness and effective participation in company affairs.

Conclusion

Harman v BML establishes that the court will exercise its discretion under section 306 of the Companies Act 1985 in circumstances where procedural mechanisms or director intransigence prevent the holding of essential company meetings. This case sets a clear precedent for protecting minority shareholders and clarifies that only significant barriers, not minor procedural difficulties, justify judicial intervention.