The chief executive of the company which owns home furnishings and accessories store Meadows & Byrne is entitled to exercise a 51% voting right to increase the number of directors on the firm’s board, the High Court has ruled.
Freda Hayes, CEO of Blarney Woollen Mills Group, which merged with Meadows & Byrne, has been in dispute with three other directors over whether her shareholding amounted to a majority stake for the purpose of increasing the number of directors.
Ms Hayes contended she enjoyed 51% of the voting rights at board meetings by virtue of her ownership of ordinary shares and a single special share.
The other directors — Patrick Kelleher, Robert Reardon, and Frank Kelleher — denied this.
Ms Hayes left Blarney in 1992 and set up Meadows & Byrne, before rejoining under a merger between the two firms. She said she only joined the combined firm on the basis of getting control over 51% of voting rights given what she said was “my previous experience of disharmony among family” which could hinder effective management and decision- making. She wanted her involvement to be “free from internal wrangling”.
As well as ordinary shares, she holds a single special share provided for under the company’s articles of association and under a shareholder agreement of March 3, 2000.
Mr Justice Max Barrett, in ordering she had an entitlement to a 51% voting right, said the impasse between her and her fellow shareholders arose because of the interpretation of the shareholding agreement and articles of association dealing with voting rights.
Ms Hayes wanted to increase the number of directors from nine to 13 and matters came to a head when she called for an EGM for this purpose.
The judge said it is a general rule of contract law that words in commercial documents must not flout business common sense. The defendants had contended that while Ms Hayes can vary the number of board positions, only the board can appoint directors.
The judge said articles of association did not suggest the power granted to the board was exclusive.
The articles fell “well short” of saying the power could be removed from a general meeting of shareholders. The defendants had advanced an unrealistic proposition which appeared to the court to be entirely wrong.
The judge also found there was no basis for the defendants’ argument over what voting rights Ms Hayes enjoyed in relation to her single special share.
She was entitled to exercise “her minimum 51% voting rights” at a general meeting so as to increase the number of directors and to appoint those directors.
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