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Company Law shareholders - Case Study Example
Samantha holding 5% of the shares in Filo Ltd as against 52% held together (26% each) by the two directors Richard Anthony and Joan, is obviously a minority shareholder in the company. Even if she garners support of other shareholders, they would still form only 48% as a minority group.
Remedies available to Samantha are bringing action section 994 (old459) of the Companies Act meant for Minority Shareholders' petitions against the directors' misrule etc. and also a derivative action.
From time immemorial, minority shareholder has been discouraged to take action against the directors on the grounds of company being run on majority concept and on the basis of action if any should be taken only by the Company on the directors and not the shareholder in individual capacity. In Foss v Harbottle1, it was observed by the court that minority should rather take necessary action through the internal forum of company meetings. Wigram VC stated that in view of the majority rule, any unlawful conduct of the directors was capable of being ratified by the majority and that it was not possible for the court to intervene. The only exception to the rule as observed by Jenkins LJ in Edwards v Halliwell(1950)2, could be that the minority shareholder should show that the directors accused of fraud were actually in control of the company rather than merely maintaining that majority could not lawfully ratify the wrong acts of the directors.3 In Ebrahimi v Westbourne Galleries Ltd4, the minority shareholder Ebrahimi sued on the basis oppression of minority and winding up on just and equitable grounds. ...