Notes- Shareholder Remedies

Topics: Bankruptcy, Liquidation, Insolvency law Pages: 8 (2599 words) Published: November 27, 2012
Pages 552-565: Compulsory Liquidation Remedies
1. Introduction
* Deficiency of current law: (1) despite introduction of statutory derivative action, formulation is unclear and scope is uncertain (2) focus on single act/transaction rather than whole picture/pattern/period (3) remedies are directed to particular transaction and confined to restraint of conduct, Recovery of property or ordering of financial compensation * Statutory remedies fall into 2 categories

a. Compulsory liquidation remedies courts can order winding up of company if: - court is of opinion that it is just and equitable that company be wound up s461(k) - directors acted in affairs of company in own interest, not interest of members a whole, or any other manner that appears to be unfair/unjust to other members s461(e) - affairs of company are being conducted in manner that is oppressive or unfairly prejudicial to or unfairly discriminatory against a member or in manner that is contrary to interests of members as a whole s461(f) - act/omission or proposed act/omission by or on behalf of company or a resolution or proposed resolution of a class or members of the company was or would be oppressed or unfairly prejudicial to, unfairly discriminated against a member(s) or was or would be contrary to interest of members as a whole s461(g) b. remedies for oppression or injustice: Pt2F.1 wider range of remedies to oppressed/injustice refer to wk 11 last page

2. The just and equitable ground
a. History and broad scope of the remedy
* just and equitable that company be wound up s461(k) traced back to English Act of 1848 * History p 553-555
b. Re Tivoli Freehold Ltd [1972] VICSC—applying just and equitable rules to wind up co: (i) just and equitable give court a wide discretion which must be exercised judicially (Baird vHenry Lees 1924) question of fact: all circumstances to be considered

(ii) facts rendering it just and equitable to be wound up: more than one category may be applied in relief - determine best fit
(iii) regard to changing circumstances and developments in relation to company practices including relevant changes in law (iv) just and equitable to be wound up if it engages in acts which are entirely outside what can be fairly regarded as having been within the general intention and common understanding of member when they become members (v) wound up due to failure (Galbraith v Meito Shipping CO 1947): failure not evidence by discontinuance of business activities- even if for a lengthy time. TEST of failure: ‘business w/in objects of incorporation should have become at least in the practical sense ‘impossible’ (vi) prime source for ascertaining intention and common understanding of members i the company’s memorandum of association which among other things states its object HELD: equitable and just to be wound up.

c. Ebrahimi v Westbourne Galleries Ltd [1973]
* FACTS: Def via general meeting voted to remove pl from office as director. Pl petitioned to wind up co on just and equitable grounds. * LAW: Where acts show a dissolution of partnership between them, a winding up may be ordered, use of ‘just and equitable’ in partnership act supports this * Rights of members governed by articles of association and have contractual force- court can dispense parties from obligation where they have been excluded from management * Exception: prove that exclusion was not made bona fide in the interest of the company * Elements for just and equitable wind up

i. association formed or continued on basis of personal r/ship involving mutual confidence (usually found where pre-existing partnership in turned into a limited company ii. an agreement, or understanding, that all or some of the shareholders shall participate in the conduct of the business iii. Restrictions upon the transfer of members’ interest in the company so that if confidence is lost one member is removed from management, he cannot take out...
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