BLP WK 4 Flashcards
(19 cards)
What protections are available to minority shareholders to enforce their rights?
Minority shareholders can use several protections including:
* Membership rights under s33 CA06
* Shareholders’ agreements
* Removal of directors under s168 CA06
* Derivative actions under s260 CA06
* Unfair prejudice actions under s994 CA06
* Just and equitable winding up under s122 Insolvency Act 1986
Minority shareholders often face challenges due to majority rule in shareholder decisions.
What is the purpose of a shareholders’ agreement?
A shareholders’ agreement regulates the affairs of a company beyond the Articles and can include provisions such as:
* Unanimous voting over certain matters
* Quorum requirements for GMs
* Dividend policy
* Allotment of new shares
* Provisions for new and departing shareholders
This agreement allows shareholders to outline personal rights and responsibilities.
What rights do shareholders have under CA06?
Shareholders’ rights under CA06 include:
* Receive notice of a GM (s 307)
* Appoint a proxy (s 324)
* Vote at a GM (s 284)
* Receive dividends (if declared)
* Access company accounts (s 423)
* Inspect minutes and registers (s 116)
* Prevent breaches of directors’ duties
* Commence derivative claims (s 260)
* File for unfair prejudice (s 994)
* Petition for just and equitable winding up (s 122 Insolvency Act 1986)
These rights vary based on the percentage of voting share capital held.
What is required for the removal of directors by shareholders?
To remove a director, shareholders must:
* Pass an ordinary resolution
* Provide 28 clear days’ special notice for the removal resolution
* Ensure directors cannot be removed by written resolution (s288(2)(a))
Shareholders have specific procedural requirements for removing directors.
What is a derivative claim?
A derivative claim allows a shareholder to bring an action on behalf of the company for wrongs done to the company that the company has not pursued. The claim must arise from:
* Negligence
* Default
* Breach of duty
* Breach of trust by a director
This claim is initiated by a current member and is a statutory exception to the rule established in Foss v Harbottle.
What is the two stage process for bringing a derivative claim under s260 CA06?
The process for a derivative claim includes:
1. Obtain permission from the court to continue
2. Make a prima facie case
3. Court considers if a person promoting the company’s success would seek to continue the claim
4. Second stage involves detailed consideration of criteria including views of other members
This process is designed to prevent frivolous claims by disgruntled shareholders.
What constitutes unfair prejudice under s994 CA06?
S 994 CA06 allows a member to bring an action on the basis that the company is being run in such a manner that they have suffered unfair prejudice
Unfair prejudice can arise from:
* Excessive remuneration
* Directors dealing with associated persons
* Non-payment of dividends
A claim can be based on past, ongoing, or proposed actions that affect shareholders.
What are the potential remedies for unfair prejudice claims?
Remedies in unfair prejudice claims can include:
* Regulating future conduct of the company
* Preventing certain actions by the company
* Orders for buying the petitioner’s shares
The court has discretion in determining the appropriate remedy.
What are the grounds for a just and equitable winding up?
Just and equitable winding up allows shareholders to petition for the company’s dissolution on the grounds that it is just and equitable to do so.
This remedy is often seen as a last resort for shareholders.
What is the relationship between membership rights and Articles under s33 CA06?
Membership rights are regulated by the Articles under s33 CA06 and include:
* Right to dividends once declared
* Right to share in surplus capital on winding up
* Right to vote at meetings
* Right to receive notice of GMs and AGMs
Non-membership rights are not enforceable under s33, requiring separate agreements.
What is the requirement for amending shareholders’ agreements?
Amendments to shareholders’ agreements require:
* Unanimous agreement of all parties
This contrasts with Articles, which can be amended with a special resolution requiring 75% approval.
What can cause disagreement in share valuation?
Different methods of valuation or interpretations of the articles.
Valuation methods may vary and can lead to disputes among shareholders.
When is the valuation date generally set?
The date on which the court order regarding the shares was made.
This date is crucial for determining the value of shares in legal proceedings.
What should a shareholder do if a method is provided in the articles?
Attempt to use that method first, if it is fair.
This emphasizes the importance of adhering to established protocols in share valuation.
What does the court encourage parties to do regarding share valuation?
Agree on a valuation method, potentially using a third party.
Third-party valuation can help resolve disputes and provide an impartial assessment.
What must a petitioner do if they disagree with a proposed valuation?
Provide reasons for their disagreement.
This requirement ensures that objections are substantiated and not arbitrary.
What is the legal basis for just and equitable winding up?
Section 122 of the Insolvency Act 1986.
This section allows shareholders to petition for winding up based on fairness.
What grounds can be used to wind up a company under Section 122 IA?
It is just and equitable to do so.
This phrase is key in determining the appropriateness of winding up a company.
