Gambotto v WCP Ltd

The High Court of Australia considered the case of *Gambotto v WCP Ltd*. The dispute concerned the validity of a company's constitution that allowed it to compulsorily acquire shares from minority shareholders. The shareholders challenging the constitution, the Gambottos, argued that the provision was invalid and sought to prevent the company, WCP Ltd, from exercising its power to acquire their shares.

The central legal issue before the High Court was whether a company's constitution could validly include a provision for the compulsory acquisition of shares from minority shareholders, even if that provision was not in the best interests of those shareholders. Specifically, the Court had to determine if such a provision infringed upon the proprietary rights of shareholders and whether it was a valid exercise of the power to alter a company's constitution.

The Court held that while a company has the power to alter its constitution, this power is not unlimited. It is subject to the general law, including the common law principles that govern the exercise of corporate power. The majority of the Court found that a provision allowing for compulsory acquisition of shares, which effectively expropriates a shareholder's property, must be for the benefit of the company as a whole. If the provision is solely for the benefit of the majority shareholders and is oppressive or unfair to the minority, it will be invalid. The Court distinguished between alterations that are for the benefit of the company and those that are merely for the benefit of the majority.

The High Court ultimately found that the provision in WCP Ltd's constitution was invalid because it was not for the benefit of the company as a whole, but rather for the benefit of the majority shareholders at the expense of the minority. Consequently, the company was restrained from compulsorily acquiring the Gambottos' shares.