Section 459 Company Act uk - Statutory Protection of Minority Shareholders

: Statutory Protection of Minority Shareholders language Answer

1 . Introduction : In to answer this it is necessary to discuss about old law , which protect the right minority shareholders , the principle Foss v Harbottle the exception of this case . A minority shareholder who feels aggrieved by virtue of unfairly prejudicial conduct on the part of the minority has powerful avenue for redress in the form of a petition brought under Section 459 of Companies Act 1985 It is also necessary to discuss , whether the rights of minority shareholders have been improved by the

enactment of the Companies Act 2006 . This Act should only be clarifying codifying the existing law rather than creating anything new

2 . Section 14 of the Companies Act 1985 : The constitution of the company according to s14 of the Companies Act 1985 binds the members of the company thereby creating a statutory contract between the members themselves and between the each member and the company . It states that

Subject to the provisions of this Act , the memorandum and articles when registered , bind the company and its members to the same extent as if they respectively had been signed and sealed by each member , and contained covenants on the part of each member to observe all the provisions of the memorandum and articles

One of the questions that arose from the s14 contract is whether it binds the members `inter se . That is , while we know from the above that it binds the members and the company together . In Wood v Odessa Waterworks Co (1889 ) Stirling J considered that `the articles of association constitute a contract not merely between the shareholders and the company , but between each individual shareholder and every other . In Rayfield v hands (1960 ) Vaisey J considered all the conflicting authorities on the issue and concluded that there was a contract inter se which was directly enforceable by one member against another . Vaisey J did not however think that his view was of general application , rather he emphasised the quasi-partnership nature of the company he was dealing with

Since 1948 it has been recognised that minority shareholders need protection going above and beyond their rights under constitution of the company and established principles of the company law . There are always risks that majority shareholders will make use of their dominant position so as to vote themselves large remuneration packages and prevent the company from distributing much to the shareholders in the from of dividends on the shares . In this way the majority can ensure that most or all of the spare cash in the company goes to themselves and that the minority shareholders see little or of it

3 . Foss v . Harbottle and Cookes v Deekes : In a company 's affairs the maxim `majority rule ' prevails . This means that dissatisfied shareholders rarely can act if they feel the company is badly managed to their detriment . The case of Foss v Harbottle clearly indicated that if a wrong done to a company then the...