Invalid Sale and Transfer of Shares Due to Lack of Proper Authority
📌 In brief
The Supreme Court of NSW ruled that the sale and transfer of the company's shares were invalid because the director did not have the proper authority to make these decisions according to the company's rules.
⚖️ Legal holding
A director cannot validly sell a company's shares without proper authority under the company's articles of association.
📖 What the law says
This section of the Corporations Act 2001 states that a company's power to make, vary, ratify or discharge a contract, or execute a document (including a deed) can be exercised by an individual who acts with the company's express or implied authority. It also clarifies that such actions do not require the use of a common seal and that delivery is not necessary when executing a document as a deed.
Plain-English explanation — does not replace advice from a legal practitioner.
📚 Full judgment
The summary, holding and questions above are VadeLab’s own material. The official decision itself is published by the court, and we do not reproduce it on this page.
📄 Read the full judgment⚖️ View on the official court website ↗
⚖️ What tends to weigh in cases like this
✅ Tends to be accepted
- The court recognized the need to rectify the company's register of members to accurately reflect the transfers of shares.
- The court validated the claim regarding the lack of proper authority for the sale and transfer of the company's shares.
❌ Tends to be rejected
- The court rejected the argument that the director had the authority to sell the company's shares without proper authorization under the company's articles of association.
- The court dismissed the claim regarding the validity of resolutions approving the director's remuneration and the payment of legal fees on behalf of the company.
- The court refused to validate the payment of disputed director's fees and legal fees due to the lack of proper authority.
Patterns observed in similar cases in this collection — every case is unique.
❓ Frequently asked questions
What was the dispute about?
The dispute was about whether the director had the authority to sell and transfer the company's shares.
How did the court decide, and why?
The court decided that the resolutions were invalid because they were not made according to the company's articles of association.
Which laws or rules were applied?
The Companies Act 1961 (NSW) and the Corporations Act 2001 (Cth) were applied.
What was the argument that mattered most?
The argument that mattered most was that the director lacked the authority to make the resolutions according to the company's rules.
Was the decision for or against the person who brought the case?
The decision was for the person who brought the case, as the court ruled that the sale and transfer of shares were invalid.
What does this mean for someone in a similar situation?
For someone in a similar situation, it means that they must ensure that any resolutions regarding the sale of company shares are made according to the company's articles of association.
What evidence or documents mattered?
The evidence and documents that mattered were the company's articles of association and the resolutions made by the director.