Legitimate rights of minority shareholders
Most companies treat minority shareholders as if they have no rights
at all. Company directors receive all the perks and benefits. They
receive salaries, bonuses, cars, and reimbursement of all expenses, even
for the maintenance of their domestic staff including the chauffeur. In
addition, there are those regular 'parties' in five star hotels in the
guise of ‘conferences’ or ‘seminars’, in spite of having ample space in
their own company premises. All such expenses are met by the company,
thereby eroding the shareholders’ benefits.
 A minority shareholder is also a member of the company and he is
entitled to all the rights spelt out in the Companies Act, the
Memorandum and the Articles of Association. If the share market is to be
activated more effectively, it is imperative that the minority
shareholder be adequately protected. In these circumstances, there is an
urgent need to form a Shareholders’ Association.
The Companies Act lists over 150 offences. Most shareholders are
unaware of their rights while the directors and majority shareholders
have a field day at the expense of the minority shareholder.
Statutory rights are conferred on members by the Companies Act. These
rights cannot be taken away by the memorandum of the articles.
Statutory rights include the rights to: * Have shares offered on a
priority basis in case of increase of capital, * Receive notices to
attend and vote at meetings, * Transfer shares, * Receive a share
certificate, * To receive a copy of annual accounts of the company, *
Inspect the register, e.g. members, annual returns, * Appeal to the
Registrar to call an AGM where the board of directors have failed to do
so, * Appeal to the company law board to call a special meeting of the
company, * Participate in the appointment of directors and auditors at
the AGM. Appeal to the Registrar to order an investigation on the
affairs of the company, * To petition the high court for relief in case
of oppression and mismanagement and * Petition the court for winding up
of the company.
Documentary rights are rights given to the members by the memorandum
of articles.
Legal rights are given to the members by the general law, e.g.
Mis-statement or concealment of a material fact in the prospectus, a
person who has been allotted shares can void the contract and claim
damages under the general law.
Proprietary rights include: * The right to participate in the
distribution of dividend proportionately, * The right to participate in
the distribution of assets when the company goes into liquidation, *
Right to equality and honesty by the directors and the majority
shareholders in corporate transactions effecting his or her interest.
e.g. Issue of new share or amending the articles, * Right to be
registered as a shareholder, * the privilege of immunity of personable
liability of company's debts, * the right to information and inspection
of company's records, * the right to bring representative suits on a
course of action on behalf of the company to prevent or remedy
mismanagement or unauthorised acts and to compel the company to enforce
his or her right.
Common law remedies: Equitable and statutory remedies for
infringement of individual rights.
A concerned shareholder
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