Case Study: Company Law
Questions
Question 1
The shares of ABC Limited, a private company are held by Ann and Andy Anderson and Bev and Bob Brown. The Andersons who together hold 90% of the company shares are concerned that the company is in need of further capital but because of family difference, the Andersons are not willing to inject additional funds so long as the Browns are shareholders in the company. They have therefore decided to pass a resolution which will enable the majority acquire compulsorily at full value shares of the minority. Advise Bev and Bob Brown.
Bev and Bob Brown my advise to you is that the Anderson being the majority shareholder of ABC Ltd. can remove you Bev and Bob Brown by ordinary resolution of the company in general meeting, and if you Bev and Bob was appointed by the articles you can be removed by a special resolution passed to alter the articles. The Anderson’s decisions being majority shareholder is binding on you the minority shareholder whether you like it or not it is they who control the company ultimately. However Bev and Bob you can take representative action against the Anderson’s for fraud committed against you Bev and Bob as in the case Eastmanco. Ltd. V Greater London where they stultify the purpose for which the company was formed and deprive you the minority shareholder of your existing prospects of obtaining votes. Being a member of ABC Ltd. you can bring representative action against the Company to protect your personal rights which you Bob and Bev enjoys. There have been a breach of duty owed to you Bob and Bev the minority shareholder cannot be ratified by a majority of shareholders.
Question 2
Discuss the rule in Foss V Harbottle
The rule in Foss V Harbottle illustrates the principle of majority control and minority protection. If a wrong is done to the company then the only proper plaintiff to bring an action to redress the wrong is the company itself and not a shareholder or anyone else. Where the minority’s complaint is that
Question 1
The shares of ABC Limited, a private company are held by Ann and Andy Anderson and Bev and Bob Brown. The Andersons who together hold 90% of the company shares are concerned that the company is in need of further capital but because of family difference, the Andersons are not willing to inject additional funds so long as the Browns are shareholders in the company. They have therefore decided to pass a resolution which will enable the majority acquire compulsorily at full value shares of the minority. Advise Bev and Bob Brown.
Bev and Bob Brown my advise to you is that the Anderson being the majority shareholder of ABC Ltd. can remove you Bev and Bob Brown by ordinary resolution of the company in general meeting, and if you Bev and Bob was appointed by the articles you can be removed by a special resolution passed to alter the articles. The Anderson’s decisions being majority shareholder is binding on you the minority shareholder whether you like it or not it is they who control the company ultimately. However Bev and Bob you can take representative action against the Anderson’s for fraud committed against you Bev and Bob as in the case Eastmanco. Ltd. V Greater London where they stultify the purpose for which the company was formed and deprive you the minority shareholder of your existing prospects of obtaining votes. Being a member of ABC Ltd. you can bring representative action against the Company to protect your personal rights which you Bob and Bev enjoys. There have been a breach of duty owed to you Bob and Bev the minority shareholder cannot be ratified by a majority of shareholders.
Question 2
Discuss the rule in Foss V Harbottle
The rule in Foss V Harbottle illustrates the principle of majority control and minority protection. If a wrong is done to the company then the only proper plaintiff to bring an action to redress the wrong is the company itself and not a shareholder or anyone else. Where the minority’s complaint is that