Chapter 8 Flashcards
Conditions of membership
A person may become a member by
- Subscribing to the memorandum of a company to be incorporated or
- By subsequently agreeing to become a member
Names must be entered into company’s register of members. Law attributes certain rights to members, but not to shareholders.
Relationship between members and directors
A director is in charge of the management of the company. He is not necessarily a member unless he holds shares & is also registered as a member. A member may not interfere with the director’s exercise of powers unless
- The constitution expressly requires them to supervise the directors in their exercise of those powers.
- The board of directors is incompetent or unable to act.
Members Rights and Obligations
- To have every member comply with the provisions of the constitution
- To restrain from any illegal or ultra vires act
- To have access to the records of the company and certain information
- To attend and vote at general meetings
- To be treated fairly
THERE IS NO RIGHT TO
-Receive dividends
Compliance with the company’s constitution
Constitution is a contact between the members so every member is expected to comply with them. Every member is entitled to expect other members to comply with them. Threatened breach of the memorandum of articles may be restrained by injunction. When a breach has occurred, a court order may be sought to nullify it.
Restraint of illegal or ultra vires act
If the company engages in activities outside its objects, members have the right to apply to the court to restrain them from engaging in them.
Access to records and information
A member has the right to inspect free of charge all the registers which a company is required to maintain. He may also inspect the minutes at general meetings of the company at a charge not more than $1. If the company fails to supply him, the company and every officer in default has committed an offence.
Member also has the right to be informed about the financial position of the company. He is entitled to inspect and obtain all documents relating to the charges created over the company’s property. He is entitled to receive a copy of the company’s last audited financial statements, but not entitled to receive unaudited statements.
Attending and Voting at General Meetings
Right to vote may be suspended if the articles provide for the suspension on the grounds of failure to pay all sums personally payable by him in respect to shares of the company.
Fair Treatment
Every member of a company expects to be treated and dealt with fairly. The general principle for decision making is the majority rule. If majority decides on a course of action, there is nothing a minority can do to challenge them if the majority has exercised their rights fairly.
Unfair Treatment
An aggrieved member may apply to Court for relief in any of the situations considered unfair treatment
-Oppressive conduct by directors
-Directors disregarding their interests
-Acts that are unfairly discriminatory
-Acts that are prejudicial towards one or more members
One member apply as a representative of some of them = representative action
For Unfair Treatment, the court may order
- Prohibit or cancel the act complained of
- Regulate conduct of company’s affairs in the future
- Authorize the member to bring civil proceedings on behalf of the company
- Order a buy out of the minority’s interests in the company
- Wind up the company
Proper Plaintiff Rule
If a company is a direct victim of a tort, the members of the company have no right to commence legal action against the wrongdoers in respect to the tort, even if the members suffer indirectly.
