Application of the Duomatic principle

In February 2003 the Court of Appeal provided some guidance on the application of the Duomatic principle. The principle, established by the case In re Duomatic Limited [1969] 2 Ch 365, provides that where all the shareholders who have a right to attend and vote at a general meeting of a company assent to a matter in a shareholders' agreement which could be carried into effect at a general meeting of the company, that assent is as binding as a general meeting ‘s resolution. In the case in question, the Court of Appeal held that it did not matter whether the formal procedures for agreeing on a particular matter were stipulated in the Articles of Association, in the Companies Act 1985 or in a separate contract between the members of the company concerned. What mattered instead was that all the members, who ultimately exercise power over the affairs of the company through their right to attend and vote at a general meeting, had reached an agreement on that matter. Consequently, as long as the members had previously reached an agreement, they were unable to purport that they were not bound by a particular matter simply because the formal procedure for assenting to it was not followed.

Source: Monecor (London) Limited v Euro Brokers Holdings Limited [2003] EWCA Civ 105. Lovells email: [email protected]