Re Rose [1969] 2 Ch 365

Facts

• The case considered the validity of actions undertaken by a company without formal shareholder approval at a general meeting.
• Specifically, it addressed whether unanimous shareholder consent, absent a formal meeting, sufficed to authorise company actions such as payments to directors.
• The factual scenario involved shareholders who were aware of and expressly consented to directors receiving payments, without a formal resolution.
• The case gave rise to the “Duomatic principle” in company law, recognising informal consent from all shareholders as equivalent to formal approval in certain circumstances.

Issues

1. Whether actions normally requiring formal shareholder approval at a general meeting could be validly undertaken without such a meeting if all shareholders gave unanimous, informed consent.
2. What conditions are necessary for the Duomatic principle to apply, particularly regarding the nature of shareholder assent and knowledge.
3. What limitations constrain the application of the Duomatic principle, including the necessity of outward expression and the risks of uncertainty or abuse.

Decision

• The court held that where all shareholders, with full knowledge of the relevant facts, had expressly and unanimously consented to a company action, the absence of a formal shareholder resolution did not invalidate the action.
• It accepted that actual assent, rather than probable or assumed assent, was required.
• The court found that there must be some objective evidence—such as documented communication or outward expression—to verify the unanimous consent.
• The lack of a formal meeting did not preclude validity if these strict requirements were satisfied.

Legal Principles

• The Duomatic principle permits actions requiring shareholder approval to be valid where all shareholders, with knowledge of the material facts, unanimously assent, whether that assent is explicit or can reasonably be inferred from conduct.
• Unanimity is essential; the principle cannot apply if any shareholder objects or lacks knowledge of the action.
• Assent must be outwardly manifested—mere internal intent is insufficient. There must be verifiable evidence of consent.
• Company constitutional requirements may prevent application of the principle if formal procedures (e.g., class meetings) are expressly mandated.
• The principle is most compatible with closely-held companies, where informal consent is practicable and verifiable.

Conclusion

The Duomatic principle, as confirmed in Re Rose [1969] 2 Ch 365, enables waiver of formal shareholder meeting requirements where unanimous, informed consent is demonstrated with objective evidence, but is limited by strict prerequisites to safeguard against uncertainty, abuse, and lack of proper corporate governance.