Outline the ways in which minority shareholders are protected in company law.

As a general rule, companies ought to be managed in a democratic manner in accordance with the articles and the law. As a general rule, the majority will prevail and courts of law only interfere exception.

If for example, the decision is arrived at in contravention of the law or articles or in bad faith company law attempts to safeguard minority interest through judicial propositions and statutory provisions.

Minority Protection at Common Law:
Courts of law have not gone far enough to champion minority interest. However, they will interfere with a majority decision in certain circumstances e.g.:
1. If a decision is arrived at in contravention of the articles or law.
2. If the majority decision is made in bad faith.
3. If the majority has exercised its voting power to:

Benefit at the expense of the minority Expropriate corporate assets etc.

Minority Protection Statute:
Minority protection has for the most part been realized through statutory provisions. The Companies Act contains numerous provisions which expressly safeguard minority interest:

1. Alteration of the objects clause:

Under Section 8(1) of the Act, a company may special resolution alter the objects clause of its memorandum. However, the alteration may be objected to by:

(a) Holders of not less than 15% of nominal value of the company‟s issued share capital
(b) Holders of not less than 15% of any class of shares of the company.
(c) Not less than 15% of the number of members of a company.

The court may cancel the proposed alteration.

2. Variation of class rights:

Under Section 74(1) of the Act, a company whose share capital has been divided into different classes of shares e.g. ordinary, preference, deferred etc may if authorized its

articles or memorandum, vary the rights attached to any class of the shares either a special resolution or written consent of holders of not less than ¾ of that class of shares.

However, holders of not less than 15% may within 30 days of the consent or resolution, apply to the court for the variation to be cancelled.

3. Convention of an AGM in cases of default:

Under Section 13(2) of the Act, if a company fails to hold an AGM, pursuant to Section 131(1), any members of the company may petition the registrar to convene or direct the convention of an AGM. Such an AGM, is duly constituted 1 member present in person or proxy.

4. Requisitioning of an Extraordinary General Meeting:

– Under Section 132(1) of the Act, holders of not less than 1/10 of the paid up capital or total voting rights of the company, may requisition an extra-ordinary General Meeting depositing a requisition with the company.

– If directors do not convene a meeting, within 21 days of the deposit, the requisitionists or not less than 1/12 of them may convene the meeting.

5. Convention of General Meeting:

Under Section 135(1) of the Act, if for any reason, it is impracticable to call a company meeting or conduct a meeting in the manner prescribed the articles or the Act, the court may either on its own motion or upon application, a director or a member entitled to attend and vote, direct convention or conduct of a meeting in accordance with the Act or Articles. Such a meeting is duly constituted 1 member present in person or proxy.

6. Investigation of company affairs inspectors:

Under Section 165(1) of the Act, shareholders may instigate the appointment of one or more competent inspectors to investigate the affairs of the company. The investigation is made an application to the court by:

(a) Not less than 200 members
(b) Holders of not less than 1/10 of the issued shares.
(c) Not less than 1/5 of the number of members in the register.

The applicants must furnish the court with sufficient evidence to justify the appointment.

7. Take-over Bid:

Under Section 210(1) of the Act, if a scheme involving, the transfer of shares or any class of shares in a company to another is proposed, and within 4 months of the offers, holders of not less than 90% of the shares or class there of have accepted the offer, the offering company may at any time within 2 months after the 4 months notify the dissentient shareholders of the offering company its intention to acquire their shares compulsorily. The dissentient shareholders may at any time within 1 month of the notice apply to the court seeking cancellation of the takeover bid and the court may disallow the same as was the case in re Buggle Press Ltd where the majority shareholders had formed a new company to enable them acquire the minority interest in their other company the use of Section 210. The take over bid was disallowed.

8. Winding up under the Just and Equitable Ground:

Under Section 219(f) of the Act, a company may be wound up the court if the court is of the opinion that it is just and equitable that the company should be wound up. The minority may have a company wound up on this ground in case of oppression or where they have justifiably lost confidence in the management of the company.

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