When shareholders’ agreements and articles of association conflict: Court of Appeal declines to imply terms into a shareholders’ agreement

In Dear and Griffith v Jackson [2013] EWCA Civ 89 the Court of Appeal overturned a High Court decision to imply terms into a shareholders’ agreement (“SHA”) in order to resolve a contradiction between the SHA and the articles of association of the relevant company.

Two director-shareholders, Dear and Griffith, entered into an SHA to use their shareholder voting rights to appoint and continue re-appointing Jackson as a fellow director.

The company’s articles of association granted a power to the directors to remove unanimously any director. This power was not affected by any express terms in the SHA.

Dear, Griffith and the other directors exercised this power to dismiss Jackson from office.

Jackson brought a claim for specific performance of the SHA. The High Court ruled in favour of Jackson and implied a term into the SHA preventing Dear and Griffith from exercising the power of removal set out in the company’s articles. Dear and Griffith appealed.

The Court of Appeal held that:

  • the addition of the proposed implied term was not strictly necessary in order for the SHA  to make commercial sense
  • whilst shareholders in a UK company can vote their shares in any way that they wish, directors are subject to statutory duties and it would be difficult to imply a term into an SHA which fetters the parties’ powers to act in their capacity as directors
  • independent directors and future directors who may not know of the existence or terms of the SHA are entitled to assume that the power of removal of directors in the company’s public articles of association are self-standing. For these reasons, it was impermissible to imply the proposed terms into the SHA.


This case reflects the English courts’ long-standing approach to interpreting and implying terms into contracts. It highlights the importance of ensuring that an SHA and related articles of association do not contain contradictory terms, since the articles of association will normally prevail and an English court will not imply terms into the SHA that override the articles of association unless it is satisfied that, if no term were implied, the consequences would contradict what a reasonable person would understand the SHA to mean.

The Court of Appeal’s judgment in Dear and Griffith v Jackson [2013] EWCA Civ 89 can be found here.