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Company Law | Statutory Minority Protection Cheat Sheet (DRAFT) by

statutory minority protection answer structutre

This is a draft cheat sheet. It is a work in progress and is not finished yet.

summary of facts

- briefly state case facts
- mention issues at hand
- topics to which question relates

general introd­uction

in contin­uation of the 'majority rule' which commands a weighty part of company law as a whole, minority SHs are bound to the decisions voted in general meetings.
Although this rule generally posses a great many advant­ages, as a conceq­uence, the minority might, at times, may find themselves unfairly discri­minated against.
By way of protec­tion, Statute law henceforth furnishes out some remedial provisions so as to prevent such discri­min­ation to stand
 

section 994 (CA, 2006)

- where the company's affairs or an act/om­ission of or on behalf of the company results in SH being 'unfairly prejud­iced'
- non-ex­hustive list of remedies
BUT, petiti­oners gen. seek order for buyout (purchse of shares by defendant) (Grace v Biagioli)
need do not only apply to Ds. Can also be used against other SH or 3rd parties
- need to prove three elements to succeed
Complained Conduct is an Act/Om­ission of Company
- behaviour MUST concern runnig of business
- courts have adopted an exapnsive approach to this critera
- actions taken by SH or Ds taken outside the 'organs' of the company (Oak Invest­ements)
Graham v Every - pre-em­ption does'nt fall into ambit of 'running of company'
Prejudical to the SH's Interests*
1. Prejud­icial
{{fa-cf SH proviso CA, 200are­t-r­ight}} conduct harms petiti­oner's interests
tested object­ively = delibrate harm or bad faith needn't be shiwn (Re Saul)
2. Interests
petitioner must be SH BUT conduct of complaint needn't affect them in their capacity as SH
exclusion fromm management (Phoenix Office Supplies v. Larven)
Misman­agement - breach of DD's skill & care) (Re Macro)
Excessive renume­ration by D + failure to pay dividends (Re CF Booth)
Breach of fiduciary duties (Re LOEW)
refers to legal rights of SH proviso CA, 2006 | consti­tution | SH agreements
SH rights are quite limited in
hence Courts delibr­ately read 'inter­ests' widely
especially in 'quasi­-pa­rtn­ership' (QP) companies
Ebrahimi v WG - QP require (1) personal rel. b/w SH involving mutual confidence ||| (2) agreement some/all to paricipate in compant management ||| (3) restri­ctions placed on share transfer
QP may exist b/w some SH but not others (Waldron)
QP 'inter­ests' = legitimate expect­ations || equitable consid­era­tions || informal agreements (Re Sam Weller) (Re a Company)
3. Unfairness
prejudice harms petiti­oner's interests unfairly
sometimes, conduct is prejud­icial BUT not unfair
(a) where petiti­oner's own disruptive behaviour resulted in unreas­onable conduct (Waldron)
(b) petitioner given reasonable offer for shares but unreas­onably refused that offer (O'Neill v Phillips)
SHARE VALUATION
- one petiti­oners wins case, will most likely want to buyout (Grace v. Biagiolo)
shares must be valued by 'inide­pendant valuer' (O.Neil v. Phillips)
valuation will normally be done on 'pro rata' basis (no discount to share value applied)
BUT, where person being bought-out worked to company's detriment/ no improv­ements even if no loss, valuation will be discounted
OR, where share was acquired by petitioner through investment (Re Blue Index)
 

section 122(1)(g) (insol­vency Act, 1986)

- winding up of company on just & equitable grounds
measure of last resort
petitioner to exhaust alternate remedies first
only issued where depth of disagr­eement is severe
- based on parten­ership laws (Courts have power to dissolve partne­rship also have power to order 'winding up'
- where SH can show tangible interest in windin­g-up, can file u/s.11­2(1)(g)
- examples include:
4. failure of company's foundation
company's objects become impossible or illegal (Re German Dates Coffee)
5. deadlock
relation b/w parties breaks down w/o any chance of reconc­ili­ation
6. lack of probity (quasi-­par­tne­rship)
lack of confidence in manage­ment's competence in quasi partne­rship (Lock v. John Blackwood)
7. exclusion for management (*quasi partne­rship)
since such operate company through partne­rship (Ebrahimi v. Westbourne Galleries)
8. fraud
where company was founded to perpetuate fraud + winding up is only solution for SH to recover investment (Re Thomas Edward Brinsm­ead**)