ISSUE:
Were the directors motivated by any purpose of personal gain or advantage?
Whether directors had a proper purpose in issuing shares to Howard Smith?
Whether the directors had the power to allot or alter prior majority shareholder position in the interest of the company?
RULE:
Proper purpose rule’, applies to directors of English companies under s171(b) of the Companies Act 2006. This long-standing equitable rule, codified by the 2006 Act, requires that a director must only exercise powers for the purposes for which they were conferred.