Shareholder Supremacy in Classical Company Law — With Particular Reference to the Making of Business Decisions by Shareholders on Behalf of Their Company

The premises of classical company law are those of capitalism. Subject to a range of restrictions on withdrawing capital, the rules vest ultimate control of the business in those who provided the equity for the business, the shareholders. But only all the shareholders acting unanimously have complete authority and discretion in relation to the company's affairs. This is in recognition of the fact that shareholders' personal interests are not always aligned and some measure of protection of minorities is inferred. Consistently with these premises, shareholders can, if they wish, through the constitution confer management power on themselves in respect of classes of decision or even in relation to a single matter, ad hoc. Shareholders acting unanimously can achieve the same end more informally. Some doubt was cast on the last of these propositions in the litigation that ended in New Zealand's top court in Ririnui v Landcorp Farming Ltd (2016). In fact, only one judge of five in the Supreme Court addressed the company law issues, but the judges of the Court of Appeal below also expressed doubts. This article argues that these judges were wrong to have these doubts, whether they purported to be founded on classical company law or changes to that law effected by the Companies Act 1993 (NZ). As to the pre-1993 Act law, both the facts and reasoning in Automatic Self-Cleansing Filter Syndicate Co Ltd v Cuninghame (1906) are consistent with the view that shareholders (by supermajority formally, and unanimity informally) can take business decisions for their company over the heads of the board of directors