Shares Flashcards
Are there restrictions on the transfer of shares?
There are no restrictions on the transfer of shares in a public limited company, but there is in the case of private companies limited by shares and in designated activity companies.
How are shares defined?
Shares are defined in the [Borlands Trustee v Steele Brothers & Co Lyd] as the interests of a shareholder in a company measured by a sum of money.
They are intangible property as you cannot see or touch them. A share is an intangible accumulation of rights, interests and obligations.
Does ownership of shares confer ownership of assets?
The ownership of shares does not confer upon shareholders ownership of the assets of the company.
[Kerry Creamer Ltd v An Bord Bainned Ltd], court held that “no shareholder has any right to any specific portion of the company’s property”.
The distinction arises due to the fact that the company and its shareholders are classes as separate and distinct legal entities.
The Companies Act 2014 described shares in what manner?
- Shares in a company must have a nominal value
- A company may allot shares of different values and currencies.
- The company may issue redeemable shares.
- The shares or other interests in a company shall be classes as personal estate and not be of the nature of real estate.
- Each share in a company shall be distinguished by its appropriate number.
What’s a lien?
A lien is defined as the right to retain possession of something until a claim is satisfied.
A lien arises when shareholders are in debt to the company for the unpaid portion of their shares and the company has the right to retain possession the shares until the outstanding payment is made.
Ordinary shares usually carry what rights and duties?
1 - The right to a variable dividend, when declared by the company.
2 - The right to repayment of capital upon liquidation once all other debts of the company have been settled. In addition, where there is a surplus of funds available on liquidation, ordinary shareholders have the right to share in this surplus.
3 - The right to attend all company meetings and exercise their shareholder rights at these meetings (such as the right to appoint a proxy and vote on resolutions).
A preference dividend is only payable when declared by the company. However, if the company’s constitution mandates the payment of a dividend, it then must be paid. What’s a case where this happened?
Case of [Lafayette Ltd]: It was held that where the company’s constitution provides that a preference shareholder would receive a dividend every year, it should be made, irrespective of whether it was expected or not.
The directors of the company may decline to register the transfer of any share. According to common law, when directors are exercising this right they are required to be acting in good faith and in the best interest of the company as a whole.
Give a case example of this?
[Haffner: Olhausen and Powderly] Mr Justice Black stated that “directors must not exercise this right arbitrarily, capriciously or corruptly. Where they are found to be acting in breach of these obligations, the court can make an order for rectification.
A register of member must be kept by every company stating what?
1 - The names and addresses of its members.
2 - A statement of the number of shares held by each member.
3 - The share numbers
4 - The amount paid on the shares
5 - The date each person’s details were entered into the register of members
6 - The date at which any person ceased to be a member
Case that shows duty of directors to shareholders?
[Percival v Wright] Directors were secretly negotiating the sale of the business.
Ruled that directors cannot make a profit from the shareholders on the basis of their secret knowledge, as they have a fiduciary relationship with the shareholders.
What is the shareholder right to pre-emption?
A company that is allotting shares must first offer them to the existing shareholders in the same proportion as their existing shareholdings before offering them to nonmembers.
Derivative actions are derived from the general rule that the majority voice of the members prevails.
There is an exception to this legal principle which has managed to give minority shareholders some protection through the courts.
What is this case?
[Foss v Harbottle] - Shareholders sued the directors claiming directors of the company had charged the company an exorbitant price for the land. The Plaintiff accused the defendant of having raised money through mortgaging the land, which wasn’t allowed by the object clause of the company.
Held: the company was the proper vehicle for the bringing of an action where the company suffers the wrong. In essence, the power of the company is vested by the members in the board and, if the members do not like what the board does, it is up to them to appoint a different board.
The {Foss v Harbottle} case offers 2 key propositions.
What are they?
1 - If some wrong has allegedly been committed in the course of the company’s affairs, it is the company, in its corporate capacity, that should seek redress, i.e. the proper plaintiff is the company.
2 - Shareholders of a company may not bring proceedings to overturn a decision of the company where that is a decision that the majority would confirm (i.e. the wishes of the majority prevail in a company).
A shareholder can bring what to a court in relation to a company?
1 - A personal action
2 - A derivative action
3 - An action for oppression and/or disregarding members’ interests
What is a derivative action?
A derivative action is one taken by a shareholder, representing all the shareholders, on behalf of the company to redress a wrong committed against the company by a third party.
This action derives from the injury to the company rather than the injury to individual shareholders.
The right to bring this type of action arises where the wrong is done by those who control the company.
