they could legally carry out their operations and stating the duties and responsibilities of all the components of the corporations: be they shareholders or directors. In UK, the Company Act contains all these rules and regulations for companies established in the United Kingdom and Northern Ireland. However, two versions of the Company Act, namely Company Act 1985 and Company Act 2006 offer varied rights and obligations for shareholders as explained below. Minority shareholders (those whose shareholding is 50% or less), in particular, are given some forms of protection from majority shareholders.
‘A member of a company may apply to the court… for an order under this Part on the ground that the company’s affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of its members generally or of some part of its members…” [Emphatically a “member” means a shareholder]1
Instituting a legal suit: Shareholders could start a legal proceeding against the directors and the companies in case unexpected unfair practices are discovered. This empowers shareholders to boldly challenge the directors or other management members whenever they abused their positions and undermine the integrity of the company’s constitution2. Some of the abuses include but not limited to the misuse of company’s asset, exaggerated self-aggrandisement and absolute breach of company’s rules to satisfy personal interests. So, minority shareholders, for instance, could only use the power of law here to seek redress against the majority shareholders, managers and directors. For the fact that bad management on the part of the directors could destroy the company’s operations and plunge everyone into insolvency, the opposing action by the shareholders would help return sanity to the company’s activities.
A typical instance of when shareholders kicked against the selfish desires of directors who tried to break the company’s rules in pursuit