7e Rights of Minority Shareholders Flashcards

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1
Q

What rights do minority shareholders have?

A
  • Any member can apply to court to prohibit a payment out of capital by a private company.
  • Any member can prevent the registration of a limited company as an unlimited company.
  • > = 5% can force the inclusion of a resolution on the agenda of the AGM.
  • > = 15% Apply to court to cancel a variation of class rights
  • > = 25% Defeat a special resolution to alter name, alter articles and reduce share capital or wind up company.
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2
Q

What are the 3 legal actions available to minority shareholders?

A
  • Derivative action
  • Claim for unfairly prejudicial conduct
  • Claim for just and equitable winding up
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3
Q

What is a derivative action?

A

Claim on behalf of the company against the directors for breach of duty of negligence.

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4
Q

Re a derivative action, what will the court consider?

A
  • Whether the member is acting in good faith.
  • Whether the company had decided not to pursue the claim.
  • Views of members with no personal interest.
  • Whether the member has the ability to pursue the matter in their own right rather than on behalf of the company.
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5
Q

Re derivative action, what needs to be satisfied for the court to refuse permission?

A
  • Act was authorised beforehand or ratified subsequently.
  • A person acting in accordance with the duty to promote the success of the company would not seek to continue the claim.
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6
Q

Re derivative action, the court may relive a Director of liability if it considers what?

A
  • They acted honestly and reasonably
  • They ought fairly to be excused
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7
Q

Re protection against unfairly prejudicial conduct, list examples of when conduct was deemed unfair prejudice.

A
  • Shareholder dismissed as a director, they may be unfairly prejudiced if company is a quasi-partnership.
  • Failure to pay dividends or call a General Meeting.
  • Improper allotment of shares which allowed majority shareholder to increase their holding.
  • Divert business opportunities from the company.
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8
Q

Re protection against unfairly prejudicial conduct, in order to claim relief, what criteria must be met?

A
  • Petitioner just be a member of the company and complaint must be based on prejudice to them as a member.
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9
Q

Re protection against unfairly prejudicial conduct, if the petition is successful, the court will order whatever it sees fit which is usually what?

A
  • Require company or members to purchase shares at fair price.
  • Authorise court action in company’s name.
  • Regulate future conduct of the company’s affairs.
  • Order company to or not perform an act.
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10
Q

Re just and equitable winding up, the member must show what?

A

That there this no other suitable remedy available.

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11
Q

Re just and equitable winding up, under what circumstances is this the only remedy available?

A
  • Company was initially formed for illegal/fraudulent purpose.
  • Complete deadlock in management of company’s affairs.
  • Shareholders have lost confidence in company’s management.
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