The concept of unanimous consent is derived from the English Law principle of unanimous agreement.The concept prescribes, that, the consensual decisions made or approved, whether at the same time or separately, by the sole directors or shareholders of a company outside the prescript of a formal resolution are valid and ...
The concept of unanimous consent is derived from the English Law principle of unanimous agreement.
The concept prescribes, that, the consensual decisions made or approved, whether at the same time or separately, by the sole directors or shareholders of a company outside the prescript of a formal resolution are valid and binding, provided that they are intra vires the Memorandum, Articles of Association and Constitution of the company.
The principle places the transaction on the same pedestal with a transaction that is strictly compliant with the prescribed formalities of a resolution.
The foundation of the concept was laid out in the following four English cases, which are conveniently set out in Sugden & Ors v Beaconhurst Dairies (Pty) Ltd & Ors 1963 (2) SA 174 (E)…,.
In Baroness Wenlock v River Dee Company (1887) 36 Ch. D. 674…, COTTON LJ stated that:
“And, if there is no meeting, which is the regular method of directing how the powers can be exercised, where the power is not given to the directors; and the shareholders can assent to that which is proposed; the Court would never allow it to be said that there was an absence of resolution when all the shareholders, and not only a majority, have expressly assented to that which is being done. That, however, must be confined to cases where the act done is within the powers of the corporation.”
In determining the validity of a contract of purchase concluded by a conflicted Board of Directors, and for which no general meeting of members had been held to approve the agreement, but, where the evidence showed that they all knew of its terms and accepted them, LORD DAVEY, in Salomon v Salomon and Co. Ltd 1897 A.C. 22…, said:
“I think it an inevitable inference, from the circumstances of the case, that every member of the company assented to the purchase, and the company is bound in a matter intra vires by the unanimous agreement of its members.”
Again, in In re Express Engineering Works Ltd 1920 (1) Ch. D. 466…, YOUNGER LJ said:
“In my opinion, the true view is that if you have all the shareholders present, then all the requirements in connection with a meeting of the company are observed, and every competent resolution passed for which no further formality is required by statute becomes binding on the company.”
And, in Parker and Cooper Ltd v Reading 1926 (1) Ch. D. 975…, ASTBURY J said:
“Now, the view I take of both these decisions is that where the transaction is intra vires and honest, and especially if it is for the benefit of the company, it cannot be upset if the assent of all the corporators is given to it. I do not think it matters in the least whether that assent is given at different times or simultaneously.”
The concept was incorporated into the South African law in Sugden & Ors v Beaconhurst Dairies (Pty) Ltd & Ors 1963 (2) SA 174 (E)…, where O'HAGAN J said:
“There is no reason, in my opinion, why the principles followed in these decisions should not apply to the facts of the present case. It is true that sec. 70 dec (2) prescribes the formality of a general meeting for the approval of a resolution to which the sub-section relates; but, inasmuch as the sub-section was designed for the benefit of shareholders, why should the shareholders not be able to waive compliance with the formalities that are ordinarily attendant upon the convening of a general meeting?
In my view, where the only two shareholders and directors express, whether at the same time or not, their joint approval of a transaction contemplated by sec. 70 dec (2), their decision is as valid and effectual as if it had been taken at a general meeting convened with all the formalities prescribed by the Act.
In South Africa, the concept was entrenched in Gohlke & Schneider & Anor v Westies Minerale (EDMS) Bpk & Anor 1970 (2) SA 685 (A) at 693E and H, where TROLLIP JA pertinently coined the phrase 'unanimous assent' thus:
'The Articles, therefore, only empower a general meeting to appoint directors to fill vacancies caused by retirement or removal of directors, a situation which did not arise in the present case. I agree, however, with Mr Coetzee that the members must have inherent or general power to appoint directors to fill other vacancies caused, for example, by resignation, death, incapacity or disqualification.
Usually, as a matter of practice, they would exercise that power by ordinary resolution at a general meeting. But, the Articles neither require that nor prohibit the power from being exercised by their unanimous assent achieved otherwise than at such a meeting.
After all, the holding of a general meeting is only the formal machinery for securing the assent of members or the required majority of them, and, if the assent of all the members is otherwise obtained, why should that not be just as effective?'”
And at p694C-E he continued thus:
“This principle, of unanimous assent, has since been applied in several cases in our Courts: Gompels v Skodawerke of Prague 1942 T.P.D. 167 at pp.172-3 per GREENBERG JP and MILLIN J; Sugden and Others v Beaconhurst Dairies (Pty) Ltd and Others 1963 (2) SA 174 (E) at pp.180-1 per O'HAGAN J; Dublin v Diner 1964 (1) SA 799 (D) at pp.800-1 per MILLER J.
The English cases in which it has been adopted are collected by Gower in Modern Company Law, 3rd ed. at pp.208-10, to which can be added the Irish case referred to in Dublin v Diner by MILLER J, of Peter Buchanan Ltd and Macharg v McVey, published as a note in 1955 A.C. 516 at pp.520-21.
Because the principle, as applied in those cases, is a sound one, giving effect to the substance rather than the mere form of the members assent, I think that we should accept it as being settled law.
Consequently, the assent of all the members and Sarusas, as evinced by the agreement of 28th January 1965, rendered clause 8 binding on all of them just as if they had approved it by ordinary resolution in general meeting.”
The principle was adopted in this country by SMITH J in Stuart Annandale v Material Finance (Private) Limited HH213-02, at p8, thus:
“There might well have been no formal resolution approved by the directors at a meeting of the Board of Directors, but, the fact remains that the directors did in fact agree to the sale of the shares. Paul Clinton was the one who negotiated the sale with Annandale and who actually entered into the agreement with him. The other director, his father, was the one who received a large part of the purchase price. He must have been well aware that the money he was being given was for the shares….,.
They participated therein, even if it was merely by accepting part of the purchase price.
Their combined shareholding was such that, if a meeting of shareholders had been held, they would have been able to carry a resolution to approve the sale because their votes totaled 2,002 whereas the sister held only 1,000 shares.
Accordingly, I am satisfied that the majority of the shareholders of EBC and of Material Finance were well aware of the sale of the CPI shares, and, therefore, of the Property, and had consented thereto.”
And at p11:
“As they are all members of one family, they must have been well aware that this action had been instituted.”
