Law -Shareholders Rights

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  • Topic: Companies Act 2006, Shareholder, Derivative suit
  • Pages : 3 (1113 words )
  • Download(s) : 735
  • Published : April 22, 2012
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Majority shareholders own more than half of outstanding shares in the company whilst minority shareholders own less than 50% of the share capital. Majority shareholders are usually also the directors of the company. They in effect control the operations of the company and their actions may be to their benefit. The law therefore, in light of this possibility provides various legal remedies available to the minority shareholder. In this case Ergan, Arif and Moshe the minority shareholders are unhappy with Pedro and Morgan. However, they might not be able to bring any action against Pedro and Morgan because the doctrine of separate legal personality enables the company to sue and be sued by a member or a third party. Moreover, the wishes of the majority as expressed through votes at properly conducted meetings should always reign over the wishes of the minority. In Foss v harbottle case, action was brought by two shareholders against the alleged fraudulent and illegal transactions by the company’s directors and to make up for the resultant loss to the company. It was held that since the loss was to the company, only the company could bring an action and not the minority shareholders. The rule established in this case was that where the company suffers harm, only the company itself is the true and proper claimant. This principle was further supported by the ruling in Bamford v Bamford [1970] Ch. . Consequently, Ergan, Arif, and Moshe as shareholders might not sue for wrongs done to the company. Similarly, in Burland v Earle (1902) Lord Davey restated the basic rule that the Court will not interfere with the internal management of companies acting within their powers, and in fact has no jurisdiction to do so. There are however exceptions to this rule that Ergan, Arif and Moshe could rely on. Pedro and Morgan have awarded themselves a pay increase even though the company has making marginal profit. This could amount to unfairly prejudicial conduct. In Re...
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