Minority shareholder protection

Question 1

What is a derivative claim?

Answer 1

A claim brought against a director by a member on the behalf of the company on the basis that the director has breached general duties

Question 2

What are the 2 stages to bring a derivative claim to trial? What will the courts consider at each stage?

Answer 2

1. court permission
   - good faith
   - PSC
   - ratified
2. detailed consideration
   - views of members w/o interest

Question 3

What remedies are available for a successful derivative claim? (4)

Answer 3

1. remove director
2. damages
3. injunction
4. recovery of legal costs

Question 4

What is unfair prejudice? (5) Who can bring a claim?

Answer 4

1. negligent mismanagement
2. legitimate expectation
3. excessive renumeration
4. disagreements on policy
5. breach of Articles

Shareholders

Question 5

What is the most common remedy for UP claims? How is the price agreed?

Answer 5

wrongdoers purchase shares of shareholder

i. market price
ii. negotiation
iii. third party valuator

Question 6

What are the 2 stages to an UP claim?

Answer 6

1. they or other members have suffered UP (subjective)
2. acts/omissions of company has resulted in UP (objective)

Question 7

If the company is a quasi-partnership, on what grounds can a member usually bring a claim for UP?

Answer 7

legitimate expectation to be involved in the management of the company

Question 8

When can a member also claim for unfair dismissal?

Answer 8

if they are also an employee (long term service contract)

Question 9

Who can bring a claim for just and equitable winding up? (3)

Answer 9

i. director
ii. member
iii. anyone who has contributed to the assets of the company

Question 10

What must the petitioner prove for a just and equitable winding up?

Answer 10

tangible benefit to the company e.g. surplus on winding up