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Sunday, 17 March 2013

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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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