Isle of Man: 'corporate common sense' and the construction of the articles of association

Judgment was given several days ago by His Honour Deemster Doyle in Origo Partners plc v Brooks Macdonald (Case 49 of 2014, High Court). The decision is one of the most important Manx authorities on the construction of a company's articles of association. The case concerned an application for a declaration under section 217 of the Companies Act 2006 in respect of the articles of a public company, Origo Partners plc, with a London Stock Exchange AIM listing and registered under the 2006 Act.

Broadly put, there were two rival interpretations in respect of the meaning of "75% resolution" within the company's articles: did such a resolution require [a] at least 75% of the voting rights cast in respect of the resolution, or [b] at least 75% of the total voting rights (whether voted or not)? Deemster Doyle held that it was the former and in doing so observed (at paras. 126 and 127):

....the construction I have placed on the articles is consistent with market practice and the one which most accords with corporate common sense ... The proper construction of the articles ... allows corporate management a degree of confidence and increases the likelihood that its sensible plans will not be stalled by lack of voter turnout; it saves on management time in regular proxy chasing and may avoid the practical difficulties and commercial obstacles associated with such time-wasting and costly chasing; it reduces additional uncertainty for stakeholders, particularly investors, and it assists in providing a company flexibility to address unforeseeable circumstances where a shareholder vote is required. It also ensures that the affairs of Origo can progress rather than stagnate and it ensures that resolutions are passed on the basis of the wishes of active and constructive shareholders willing and able to participate in the affairs of their company, rather than allowing votes to non-active shareholders not constructively participating to count effectively as a "no" vote with the disastrous default position being that the required majority is never reached and Origo cannot progress in accordance with the majority votes exercised by its members".