Proper Balance Between Majority and Minority Shareholder.
North South University
LAW 200
Assignment # 2
Prepared for:
Barrister A.M. Masum Faculty of Business
North South University
Prepared by:
ID NAME 062 528 030 M.Montasir Imran Khan
Section: 02
Page | 1
“A proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company.”- Explain & Illustrate? 1. Introduction:
The basic principal relating to the administration of the affairs of a company is that “the will of the majority is supreme”. The general rule is that the decisions of the majority shareholders in a company bind the minority. 1 In a world that recognizes ‘simple majority rules’, minority shareholders of companies are by default vulnerable to oppression, disregard and unfair treatment by majority shareholders who are in control of the company. Majority shareholders also have certain obligations to minority shareholders in their capacity of controlling the corporation. In certain cases this minority shareholder right can be exercised directly against a shareholder, without having to go against a corporation or through the derivatives action process.2 In such case a proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company. The oppression of minority or mismanagement of a company by majority therefore calls for some remedial action. 3 Today’s minority shareholders come to the corporation with varied attitudes and agendas. Although their shareholder status results from a variety of circumstances, it is important in each case to make their relationship with the corporation and the other shareholders as productive as possible. This
1 2
Ashok, S. (2009-2010).Company law (p.246-248).India:V.K Enterprise. The right of the majority to have their way has, however, been occasionally abused and the whip of majority has The companies act, 1956 has laid down certain provisions which restrict the unbridled supremacy of the
LAW 200
Assignment # 2
Prepared for:
Barrister A.M. Masum Faculty of Business
North South University
Prepared by:
ID NAME 062 528 030 M.Montasir Imran Khan
Section: 02
Page | 1
“A proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company.”- Explain & Illustrate? 1. Introduction:
The basic principal relating to the administration of the affairs of a company is that “the will of the majority is supreme”. The general rule is that the decisions of the majority shareholders in a company bind the minority. 1 In a world that recognizes ‘simple majority rules’, minority shareholders of companies are by default vulnerable to oppression, disregard and unfair treatment by majority shareholders who are in control of the company. Majority shareholders also have certain obligations to minority shareholders in their capacity of controlling the corporation. In certain cases this minority shareholder right can be exercised directly against a shareholder, without having to go against a corporation or through the derivatives action process.2 In such case a proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company. The oppression of minority or mismanagement of a company by majority therefore calls for some remedial action. 3 Today’s minority shareholders come to the corporation with varied attitudes and agendas. Although their shareholder status results from a variety of circumstances, it is important in each case to make their relationship with the corporation and the other shareholders as productive as possible. This
1 2
Ashok, S. (2009-2010).Company law (p.246-248).India:V.K Enterprise. The right of the majority to have their way has, however, been occasionally abused and the whip of majority has The companies act, 1956 has laid down certain provisions which restrict the unbridled supremacy of the
Bibliography: 1. Ashok, S. (2009-2010).Company law (p.246-248).India:V.K Enterprise. 2. Anonymous, (n.d.).Minority Shareholders (para-5).Retrieved March 2, 2011 from http://www.law-essays-uk.com/resources/free-essays/minority-shareholders.php 3. Anonymous, (n.d.).What is a Majority Shareholder? (Paragraph-3). Retrieved March 2, 2011 from http://www.wisegeek.com/what-is-a-majority-shareholder.htm 4. Majority Shareholder.(n.d.).Retrieved March 3, 2011 from http://www.answers.com/topic/majority-shareholder#ixzz1GPM9cC6j 5. Robert, C. (April 1, 2003). Shareholder rights and remedies in close corporations: Oppression, fiduciary duties, and reasonable expectations (Paragraph-1).Published by Journal of Corporation Law. Retrieved March 3, 2011 from http://www.allbusiness.com/legal/laws/1058708-1.html 6. Benjamin, M. (October 15, 2008). A Voice-Based Framework for Evaluating Claims of Minority Shareholder Oppression in the Close Corporation. Georgetown Law Journal.97. 7. Meinhardt, J.M. (2001).Investor Beware: Protection of Minority Stakeholder Interests in Closely held Limited – Liability Business Organizations (p.288). 8. Spratlin, D.J. (1990), Modern Remedies for Oppression in the Closely Held Corporation (p.405). 9. Grandfield, C. S. (2002), Reasonable Expectations of Minority Shareholders in Closely Held Corporations: The Morality of Small Businesses (p. 381). Page | 14 10. Anonymous,(n.d.).Shareholder Disputes,(paragraph-2).Retrieved March 4, 2011 from http://www.darlingtons.com/site/srvbusiness/srvbusinesslitigationanddisputes/ srvshareholderdisputes/ 11. Roderick, R. (1998). Company shareholders and directors (paragraph-1).Retrieved March 4, 2011 from http://www.law-office.demon.co.uk/art%20power-1.htm 12. Prakash, O.P. (July 29, 2009).Minority Shareholder Rights – Necessities & Limitations. Retrieved March 4,2011from http://www.lawyersclubindia.com/articles/MINORITY-SHAREHOLDER-RIGHTSNECESSITIES-LIMITATIONS-1464.asp 13. Anonymous, (n.d.).Minority Shareholders (paragraph-18).Retrieved March 5, 2011 from http://www.law-essays-uk.com/resources/free-essays/minority-shareholders.php 14. Anonymous, (n.d.).Minority Shareholders (paragraph-8).Retrieved March 5, 2011 from http://www.law-essays-uk.com/resources/free-essays/minority-shareholders.php Page | 15