Lecture 12 - Membership of Ltd

Question 1

Membership =

Answer 1

Legal ownership whole/ part shareholding in company. Evidenced by necessary entry in Register of Members

Question 2

Who can become member?

Answer 2

Anyone with legal capacity to enter contract can become member. No upper limit.

Question 3

Termination of membership

Answer 3

Legally effective only when name owner removed from Register usually due to:

• Transfer of shares
• Death of member
• Redemption of redeemable shares
• Dissolution of company

Question 4

Register of members contains (4)

Answer 4

• Names and addresses of members
• Number and types of shares
• Amounts paid up for shares
• Dates of becoming and ceasing to be a member
  Must be kept up to date by company.

Question 5

Shares in private company..

Answer 5

Very difficult to value, may not have finite value

Question 6

Rule/ Decisions of majority shareholders

Answer 6

Usually prevail. They have put in most money/ subject to most risk. Regardless wishes of minority.

Question 7

Case for minority/ majority shareholders

Answer 7

Foss v Harbottle 1843 > Victoria park Manchester. Majority shareholders wanted to sell for fraction value. Court upheld views majority.

Question 8

General rule in majority vs minority (3)

Answer 8

• Company is proper claimant (not individual shareholder)
• Doesn’t apply to disputes between shareholders amongst themselves
• Applies without exception where general meeting has power to and does permit act complained of

Question 9

Exceptions to rule (4)

Answer 9

• Where acts complained of are illegal/ ultra vires (outside power company)
• Where resolutions passed through trickery/ misuse proper procedures/ fraud
• If negligent AND one or more majority interests profit
• Majority cannot vote to pass resolution to forfeit rights minority in favour majority (Cook v Deeks 1910).

Question 10

Derivative actions CA 2006

Answer 10

New statutory procedure that allows shareholder to bring claim on behalf company for wrong done to company by directors/ others. But must obtain permission from court to continue with claim.

Question 11

Derivative Claim case

Answer 11

Franbar Holdings Ltd v Patel 2008 > court refused permission continue with claim

Question 12

Unfair prejudice CA 2006

Answer 12

When company’s affairs are being conducted in manner that is unfairly prejudicial to shareholders generally or to some

Question 13

Unfair prejudice case

Answer 13

Cumana Ltd 1986 > Court will outlaw acts complained of if sufficiently unfair

Question 14

Court actions available to minorities (4)

Answer 14

• Wind up company
• Make regulations for future conduct
• Injuction against acts complained of
• Order purchase of minority shares by majority/ company

Question 15

Winding up company (liquidation)

Answer 15

Jurisdiction under The Insolvency Act 1986 - drastic step.

Question 16

Case of winding up company (2)

Answer 16

May be appropriate ‘quasi-partnerships’ eg Westbourne Galleries Ltd 1972. Or where personal relationships paramount eg Jesner v Jarrad 1992.

Question 17

Injunct against acts complained of

Answer 17

Stop/ prevent acts eg Harmer Ltd 1958 > stamp collecting Grandad.

Question 18

Order of purchase minority shares by majority/ company

Answer 18

Mechanism for valuation shares must be comprehensive and binding on both sides

Question 19

Deadlock and motives

Answer 19

When voting rights are equal, and there are opposing views on policy and no casting vote.

Question 20

Cases on deadlock and motives (3)

Answer 20

• West v Blanchet 2000 > Court decided most realistic offer should prevail eg who had money to buy other out
• Astec plc 1999 > No purchase of minority shares allowed as minority had collateral purpose
• London School of Electronics 1985 > court ordered purchase minority shares even though conduct minority also unfair. Teacher fired, LSE set up new BSc, teacher took 12 students with him