6. Companies: Members Flashcards
What are the two requirements for a dividends to be declared?
- Must be paid from profits available for the purpose
- Must not render a company insolvent
What are profits available for the purpose?
Basically net profits
What is a preference share?
A share paid a dividend based on a fixed % ahead of ordinary shareholders, which rolls over and accumulates if unpaid, but usually lacking voting rights
Even if profits are available, who must still recommend a dividend?
The board
After the board resolve to recommend a dividend, how is it declared?
The recommendation is approved by the shareholders, who declare the dividend by ordinary resolution
Can the shareholders decline a dividend, or change the amount?
The shareholders can decline to approve the dividend, and they can lower its amount. They cannot increase the amount.
What is an unlawful dividend?
A dividend payable other than out of profits available for the purpose
In what circumstances will a shareholder be liable to repay an unlawful dividend?
If, when the distribution was made, they knew or had reasonable grounds to believe it was unlawful
Who is personally liable if a dividend is declared unlawfully?
The directors
What are preference shareholders’ voting rights typically limited to?
Decisions that affect their class rights
When may a shareholder bring a derivative claim, and against whom is it brought?
When the shareholder believes a director has or is about to breach a duty owed to the company and it appears the board are not acting to prevent this, the shareholder can bring a claim against the offending director
Only who can bring a derivative action?
- Shareholders
- Those to whom shares were transferred through operation of law, e.g. inheritance
Are shadow directors considered directors for the purpose of derivative claims?
Yes
Can a shareholder assert a claim which arose before they became a shareholder?
Yes
What must the court do if the shareholder does not show a prima facie case?
Dismiss the claim
If the shareholder does show a prima facie case, the court must be satisfied of one of what two things at the second stage for them to dismiss the claim?
- A person acting to promote the best interests of the company would not seek to continue the claim, or
- The action was authorised by the company or authorisation would be likely
Who receives any damages awarded in a derivative claim?
The company
What can a shareholder, even a minority, do if they feel they are being unfairly prejudiced?
Petition the court for a remedy
If a minority shareholder is successful in their petition, what is the most likely remedy?
The minority shareholder is bought out
What must any shareholder be able to show to apply to have a company wound up?
- The company is solvent, and
- It is just and equitable to wind it up
How long after a director leaves must their service contract be retained for inspection by the shareholders?
At least one year
