This is an extract of our Shareholder Rights, Remedies, And Responsibility document, which we sell as part of our Company Law Notes collection written by the top tier of University Of Otago students.
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Company Law Section 5: Shareholder Rights, Remedies and Responsibilities s96 Extended meaning in (b) and (c) People who have applied for registration, and people entitled to have registered. Board of directors have statutory power of management. Re Duomatic Ltd: Rule: Unanimous assent of shareholders would bind the company to do anything within its capacity. Rule still survived 1993 Act. Shareholders can vote for whatever they perceive to be their own self interest - only exception is fraud on the minority. Breach may occur in the context of shareholder disputes - in practice, duties and conflict overlap. Derivative action s165, s110 Minority buyout, s175 Prejudicial Conduct. Derivative Action: s165 confirmed that the company is the proper plaintiff to pursue wrongs against it, but you can take derivative action. Claim by shareholder brought on behalf of the company to enforce a remedy for a wrong. Foss v Harbottle: (Old case)
- Tonia Park co, to develop parts of land in Manchester.
- 80 years after incorporation, company performing badly. Allegations arose that prior to incorporation, its promoters had sold a piece of land to others, then resold the land to the company at an inflated price.
- Self dealing.
- Foss, a shareholder, tried to bring an action against Harbottle for breach of fiduciary duty. Claim failed. Power of majority - majority of shareholders could have excused the breach.
1. Whenever a wrong is done to the company, the proper plaintiff should always be the company.
2. Whatever the majority shareholders are entitled to do or approve, then even if they did do it irregularly or illegally, it would be beyond judicial review. MacFarlane v Barlow:
- Barlow Bros a family company, 3/4 owned by Barlows, 1/4 by MacFarlanes.
- Sole directors Bruce and David Barlow, paying themselves nice salaries.
- Company rented its premises from Mara (owned by Barlows), rent paid at market price.
- Barlow Bros had advanced the purchase price to Mara interest free (losses of about $15,000 per year from lost interest).
- Company very profitable, but if they had paid smaller salaries to Barlows, and got interest, profit would have been $300,000 more per year.
- MacFarlanes brought proceedings against Barlows for excessive salaries and loss of interest, also a corporate opportunity claim. s165(2)(a) likelihood of success - Vrig v Boyle: prudent businessperson test (b)(c)(d) would consider costs, strength of claim, likelihood of relief.
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