Unit 17 - Remedies, enforcement or rights and regulatory agencies.

Question 1

Discuss the majority rule.

Answer 1

• Shareholders must follow the decisions made by the majority (even if it harms the minority), as long as the actions are legal and comply with the company’s MOI and rules.
• Company won’t interfere if the majority’s actions are legal.

Question 2

Which actions are not in accordance with the law ?

Answer 2

• Illegal acts.
• Acts in contravention of the Act, MOI or company rules.
• Acts which are “fraud on the minority”.

Question 3

What is the remedy for fraud on the minority ?

Answer 3

Personal or representative action.

Question 4

Discuss a security holder declaratory order.

Answer 4

A securities holder of a company can apply to a court for adeclaratory order; or any appropriate order necessary to:

• Protect any right.
• Rectify harm done by Company or Directors due to an act or omission.
• Which contravened the Act, MOI or rules or violated any right.

Question 5

Who can serve a statutory demand ?

Answer 5

Shareholders, directors, prescribed officers, trade unions, or anyone granted legal standing by the court.

Question 6

Discuss the company’s response to the demand.

Answer 6

The company has 15 business days to apply to court to dismiss the demand if it is frivolous; vexatious; without merit.

Question 7

Discuss derivative action.

Answer 7

If the company doesn’t act, the person who made the statutory demand can bring a derivative action.

Question 8

What are the conditions for derivative action ?

Answer 8

• The company failed to take steps.
• The investigation wasn’t impartial.
• The company accepted an inadequate report.
• The company acted inconsistently.
• The company served a refusal notic

Question 9

In which cases can the applicant go directly to court without serving a statutory demand
first ?

Answer 9

• There’s a risk of irreparable harm or substantial prejudice.
• There’s a reasonable chance the company will not prevent the harm.
• The court’s requirements are met.

Question 10

What if the company decided not to pursue or defend the proceedings ?

Answer 10

There is a presumption that allowing the derivative action is not in the company’s best interests, unless:

• All directors acted in good faith and for a proper purpose.
• No director had a personal financial interest.
• Directors were informed and reasonably believed the decision was in the company’s best interests.