Shareholders

Question 1

What rights cant be enforced under articles even is included in articles

Answer 1

rights outside of capacity as member- personal capacity

Question 2

who is a shareholder agreement (SHA) between? what are the advantage?

Answer 2

contract between some or all of the SH

SHA is kept private

Question 3

what cant SHA restrict?

Answer 3

The statutory powers of the company, but it can be party to other provisions

Question 4

what cant SHA restrict?

Answer 4

The statutory powers of the company, but it can be party to other provisions

Question 5

What protection do SHAs afford SHs?

Answer 5

• rights of actions
• matters reserved in agreement e.g unanimous consent to remove D
• amending SH requires unanimous consent because they are contracts unlike AOA which require 75%

Question 6

What rights so SHs have under CA 2006

Question 7

5% or more- require board to hold GM under s303, require circulation of written statements regarding proposed resolutions to be considered at GM

10% or more- demand a poll vote

more than 25%- block a SR

50%- block OR

more than 50%- pass OR

75% pass- SR

90%- use the short notice procedure to call GM

Question 8

What is a derivative claim?
who can Bring it against who?

Answer 8

claim brought by SH on behalf of company against D who or third party, or both who breached their duty.

Claim may be brought only in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company

SH can bring claim about something which happened before they were SH, but a former SH cannot bring a claim

Question 9

What are the two stages of bringing a derivative claim?

Answer 9

1. Prima facie case- the member bust obtain the permission of the court to bring the claim, ones is on the member to make out a prima facie case.
2. if the application is not dismissed at the first stage, the court will consider a particular criteria:
   - particular regard to evidence before it as to the views of the members who have no personal interest, direct, or indirect in the matter.

This provision makes it harder of a single SH to bring a claim

Question 10

under what circumstances will the court reject the application under stage 1?

Answer 10

1. if someone acting in accordance to s 172 (the duty to promote success) would not bring the claim
2. if company ratified the acts or gave permission to D

Question 11

What if there is no absolute bar in stage one?

Answer 11

the court will consider:
- is the person acting in good faith
- will act likely be ratified?

Question 12

s994 What is claim of unfair prejudice? who is it brought against?

Answer 12

A member can bring a personal action on the grounds that they company is being run in a way that is unfairly prejudicial to their interest as members generally of some members (includes act or omission)

the claim is brought against the company itself

Question 13

what situations would give rise to a claim of unfair prejudice?

Answer 13

• granting excessive renumeration to directors
• directors dealing with associated persons
• non payment of dividends

Question 14

What must the shareholders show? what is the test?

Answer 14

1. company affairs conducted in a way which is unfairly prejudicial to their interest or
2. some act or omission has unfairly prejudiced them

REASONABLE BY STANDER (OBJECTIVE)

Question 15

Will negligent inept management equate to unfair prejudicial?

Answer 15

no, unless serious/ repeated which puts interest of minority SH at risk

Question 16

Will disagreements on company policy equate to unfair prejudicial?

Answer 16

No

Question 17

Will bad faith equate to unfair prejudicial?

Answer 17

no need to show bad faith for petition

Question 18

Will breaches of the AOA equate to unfair prejudicial?

O’Neill v Philips

Answer 18

O’Neill v Philips: “a member will not ordinarily be entitled to complain of unfairness unless there has been some breach of the terms on which he agreed that the affairs of the company should be conducted… [However,] there will be cases in which equitable considerations make it unfair for those conducting the affairs to rely upon their strict legal powers”

Question 19

Will breaches of the AOA equate to unfair prejudicial?

O’Neill v Philips

Answer 19

O’Neill v Philips: “a member will not ordinarily be entitled to complain of unfairness unless there has been some breach of the terms on which he agreed that the affairs of the company should be conducted… [However,] there will be cases in which equitable considerations make it unfair for those conducting the affairs to rely upon their strict legal powers”

Question 20

are claimant conduct relevant?

Answer 20

relevant but no overhang requirement

Question 21

Excessive renumeration

Answer 21

courts will take a wide view of the prejudice

Question 22

are legitimate expectations considered?

Answer 22

Yes, in small companies.

Question 23

What are the remedies for unfair prejudice?

Answer 23

The court has power to grant an order it thinks fit, this can include:
- regulation of future conduct
- orders requiring a company to do/ refrain from certain act
- share purchase order of petitioners shares

Question 24

how will shared be values for purchase order?

Answer 24

court has discretion but:

1. value in articles
2. no discout
3. valuation on the date of order

Question 25

how will shared be values for purchase order?

Answer 25

court has discretion but:

1. value in articles
2. no discout
3. general rule: valuation on the date of order

Question 26

Just and equitable winding up s122 (1)(g) insolvency act 1986

Answer 26

court has discretion to decide if its just and equitable to do so

s122 IA and s994 CA often done together . 994 v expensive