SHAREHOLDERS

Share holder means a person whose name is in the share register Or Who is a Shareholder? Share holder means a person whose name is in the share register Or Who is entitled to have the name in the share register.

Rights / Powers of a Shareholder The Shs can enjoy all rights and powers & be subject to all duties and obligations under the CA.

Exercise of Powers of a Shareholder Sec 90- Powers of a shareholder can be exercised only -at a meeting of shareholders or By a resolution in liue of meetings (Sec 144) Sec 91- a power reserved to shareholders may be exercised by an ordinary resolution (unless otherwise provided by this Act or in the articles of a company) So, powers of a SH can be exercised by - An ordinary resolution A special resolution – Sec 92

Liability of Shareholders Liability is limited as provided for in CA and A of A Not bound by amended Articles or requirement to purchase shares where it would increase the liability unless agreed to in writing. Former holder not liable for calls unless held shares 12 months prior to liquidation If the shares are not fully paid balance due will remain liable.

Share Register – Sec 123 Every company which has issued shares should maintain a share register that records the shares issued by the company. Trusts should not be entered in the share register (S 129) The share register must be kept at the registered office (S116) Sec 126- Every company having more than fifty shareholders should keep an index of the names of the shareholders of the company

Majority Rule and Minority Protection G. A. Chathuri Sajeevi

Majority Rule / Rule in Foss v. Harbottle

Minority Protection Statutory protection Case law

Oppression and Mismanagement Oppression – Sec 224 Affairs of the co. are conducted in an oppressive manner SH apply to court Court makes an order

What type of conduct amount to opression? Oppression and Mismanagement Contd…. What type of conduct amount to opression? Scottish Co-op wholesale society v. meyer Eg: Re A Noble and Sons Ltd Re Harmer

Mismanagement SH apply to court Court makes an order Mismanagement – Sec 225 Mismanagement SH apply to court Court makes an order

Who can make an application? a shareholder or shareholders, during the six months prior to the making of the application- (a) constituted not less than 5%of the total number of shareholders; or (b) held shares which together carried not less than 5%of the voting rights at a general meeting of the company. Sec 232 – who is a shareholder under section 224-228 Joint Shareholders Application

Ramya Apparels Ltd v. Hi-Q Fashions Ltd Case law Unipack Ltd and Another v. Amarasena Ratnam and Others v. Jayathilake Ramya Apparels Ltd v. Hi-Q Fashions Ltd

Powers of the court on application for oppression and mismanagement Sec 228 - the court can provide for appropriate remedies Sec 229 - Where the court makes an alteration in the articles of the company, then, the company should not have power to make any alteration in the articles which is inconsistent with the order. Sec 227 - where a court is of the opinion that the winding up proceedings in respect of a company, would be prejudicial to the interests of a shareholder of the company, the court can act as if an application had been made to the court under sec 224 or 225.

Provisions to limit action under Sec 224 & 225 Sec 226 (4) - Where the SH has made an application vexatiously or without reason or probable cause, the court can - award costs against such shareholder/s direct that such shareholder/s be disqualified from being appointed as a director/ agent/ secretary/ manager of the company for a period not exceeding five years from the date of the order direct that the shareholder/s should not have the right to convene or requisition any meeting of the company or have the right to be present in person or by proxy at any meeting of the company within the aforesaid period, or to vote upon a show of hands or at a poll by person or by proxy at such meeting.

Restraining Orders – Sec 223 conduct that would contravene the articles of the company or any provision of this Act An application can be made by – (a) the company; or (b) a director or © shareholder of the company. court can make an order restraining conduct An order can not be made under this section in relation to a conduct or a course of conduct that has been completed.

Derivative Action Sec 234 Application of a shareholder or director of a company Court grant leave to that shareholder or director to- (a) bring proceedings in the name and on behalf of the company or any subsidiary of that company; or (b) intervene in proceedings to which the company or any subsidiary is a party, for the purpose of continuing, defending, or discontinuing the proceedings on behalf of the company or subsidiary, as the case may be. There are several matters the court should consider in deciding whether to grant leave. Leave to bring proceedings or intervene in proceedings can be granted only if the court is satisfied.

Derivative Action Contd… Where the company or subsidiary does not intend to bring, diligently continue, defend or discontinue the proceedings (S234 (3)(a)) Birch v. Sullivan Decision not to sue can take 3 forms A decision by the directors not to sue Decision by majority of SHs not to sue A decision by members to retify wrongful action Ingre v. Maxwell / Barett v. Duckett Cost of the proceedings Powers of the court Compromises

Amarasekere v. Mitsui And Company Ltd, and Others

Common Law (1) Fraud on the minority Burland v. Carle Fraud- There are 3 aspects of fraud Appropriation of corporate property Negligence Abuse of power Prudential Assurance v. Newman (2) Wrongdoer Control “Where persons against whom the relief is sought themselves hold and control the majority of the shares and will not permit an action to be brought in the name of the co., courts allow SHs to bring an action in order to give remedy for a wrong which would otherwise escape redress.”

Minority buy-out rights Sec 93- Where a shareholder has voted against a Special Resolution regarding (a) alteration of the company's articles (b) approving a major transaction (c) approving an amalgamation of the company Or where the resolution under Sec 144 was passed, the shareholder did not sign the resolution in respect of the shares registered in the shareholder's name that shareholder should be entitled to require the company to purchase his shares.

Interest Group and Alteration of Shareholder Rights As per Sec 99 - A company should not take any action that would affect the rights attached to shares, unless that action has been approved by a special resolution of each interest group. "interest group" in relation to any action or proposal affecting rights attached to shares, means a group of shareholders- (a) whose affected rights are identical; and (b) whose rights are affected by the action or proposal in the same way