shareholders (workshop 4)

Question 1

what do articles of a company regulate?

Answer 1

they regulate the relationship between the members and between the members and the company.

Question 2

what are the two things that cannot be done with a written resolution?

Answer 2

Remove a director or remove an auditor

Question 3

what is a shareholders agreement?

Answer 3

a contract which outlines the shareholders’ personal rights and obligations

Question 4

what type of resolution do shareholders need to pass to remove a director?

Answer 4

ordinary resolution

Question 5

what is a s303 request?

Answer 5

shareholders have the power to require the calling of a GM; unhappy shareholders can require the directors to call a GM and if they refuse then the unhappy shareholders can call a GM themselves.

Question 6

what is a bushell v faith clause?

Answer 6

if a director is also a shareholder then they have the ability to have weighted voting rights so they can overrule them being removed as a director

Question 7

can a director get compensated for being removed?

Answer 7

any payment would need to be approved via an ordinary resolution unless:
payment doesnt exceed £200
payment was made in good faith

Question 8

what is a derivative claim?

Answer 8

where the shareholder’s right of action is derived from the company’s right of action, which the company has not exercised

Question 9

what is the rule in Foss v Harbottle?

Answer 9

a minority shareholder is not allowed to sue for a wrong committed against a company of which they are a member, even if the company is refusing to take action.

Question 10

why would a member have a derivative claim on behalf of the company? (why would they raise a claim)

Answer 10

in respect of a cause of action vested in the company
seeking a relief on behalf of the company

Question 11

what are the 2 stages of bringing a derivative claim?

Answer 11

1. member must obtain permission of the court to continue a derivative claim
2. court must have particular regard to any evidence it has before it as to the view of the members who have no personal interest, direct or indirect, in the matter

Question 12

what is unfair prejudice?

Answer 12

when a member brings an action on the grounds that the company is being run in such a way that they have suffered unfair prejudice

Question 13

who is the member bringing a claim for (on behalf of who) for a unfair prejudice?

Answer 13

themselves

Question 14

what is the remedy in unfair prejudice?

Answer 14

other shareholders can buy the shares from the shareholder who is unhappy

Question 15

what is the general rule for valuation?

Answer 15

the general rule is the valuation date is the day on which the court order was made in respect of the sale shares

Question 16

what is winding up?

Answer 16

the most serious remedy for a shareholder; where the company is liquidated (shut down) on the grounds that the court believes it is just and equitable to do so

Question 17

is there a minimum number of shareholders to bring a claim under a derivative claim or an unfair prejudicial action?

Answer 17

no there is no minimum

Question 18

under s303 what is the number of % that members must have to call a GM?

Answer 18

members must have at least 5% of the paid-up share capital can requisition a meeting.

Question 19

what are examples of conduct that is unfairly prejudicial to the shareholders interests?

Answer 19

o Negligent or inept management of a company
o Disagreements as to company policy
o Bad faith
o Breaches of the articles of association
o Claimant’s conduct
o Excessive remuneration
o Legitimate expectation = small private companies have a legitimate expectation they will be involved in the management of a company