Re Smith & Fawcett Ltd [1942] Ch 304, [1942] 1 All ER 542, CA
In this case the directors refused to transfer a deceased man’s shares to his son, exercising their 'absolute and uncontrolled discretion without assigning reasons and offered a lesser amount instead.
Lord Greene MR stated that: 'A wide and comprehensive power to directors by their passing a particular transfer the transferee would obtain too great a weight in the councils of the company or might even perhaps obtain control.' Thus the directors had acted in the best interests of the company. The court stated that directors must act 'bona fide in what they consider - not what the court may consider - is in the interests of the company’. However many cases have held that directors may breach their duty to act in the interests of the company, even if they are acting in what they genuinely consider to be an honest manner.
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