Shareholders’ Rights and Protection of Minority Shareholders

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  • Created on: 15-03-17 23:15
Re Duomatic (1969)
Buckley J: where it can be shown that all the shareholders who have a right to attend amd vote at a gen meeting assent to some matter which a gen meeting of the company could carry into effect, then that assent is as binding as a resolution in gen me
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CA 2006, s 282(1)
Ordinary rsolution; (s 283(1) special resolution); s 281(3): CA 2006 often does not specify which resolution reqd – up to articles of assn (even unanimity)
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Re New Cedos Engineering (1994)
Duomatic principle canot be used where the decision in qn could not have been taken at a meeting
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Re D’Jan of London (1993)
Nothing less than unanimity is sufft re Duomatic principle – member holding 99% not enough
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Baroness Wenlock v The River Dee (1883)
Common law principle: if all the members entitled to vote on a matter are in agreement on that matter, then that agreement is valid, even if no meeting commenced and no resolution took place
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Foss v Harbottle (1843)
Proper claimant principle;internal management principle (e.g. Burland v Earle (1902); irregularity principle (Bamfoprd v Bamford (1970)
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Daniels v Daniels (1978)
Exceptions re Foss rule: Where thoseperons who controlled the company had commited some sort of fraud on the minority
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Taylor v National Union of Mineworker (1985)
Exceptions re Foss rule: where the act complained of is illegal or ultra vires (Simpson v Westminster Palace Hotel (1860))
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Edwards v Halliwell (1950)
Exceptions re Foss rule: where act complained of could only be done or sanctioned by passing of special resolution , derivative action could be brought
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Law Com No 246 (1997)
Law Com agreed with underlying approach in Foss, but thought rules re derivate actionshad become ‘complicated and unwieldy’
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Barrett v Duckett (1995)
Example of fraud: diversion of profits by maj shareholder where there is no altve for min to seek redress – although a DA maybe defeated if there is an ulterior motive
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Cooks v Deeds (1916)
Example of fraud: expropriation of a copmany’s property
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Portfolios of Distinction v Laird (2004)
Second step re DA: there is no other adequate remedy available
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Pavlides v Jensen (1956)
Neg, even gross neg, not enough re fraud (although neg re benefitting (Daniels v Daniels (1978))
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Law Com No 246 (1997)
‘obscurity and complpexity’ of law;exceptions were ‘rigid, old-fashioned and unclear’;new derivative procedure with more modern, flexible and accessible criteria; DA
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CA 2006, s 260(2)
A DC can be brought under Pt 11 or in pursuance of court under s 994
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CA 2006, s 260(3)
A DC can only arise re actual or proposed act or omission re: neg; breach of duty; breach of trust
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CA 2006, s 261(1)
A member who brings a DC must apply to the court for permission to continue with it
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CA 2006, s 263(2)
Mandatory test: court must refuse permission if it is satisfied any of these apply: (a)where person acting in acc with s 172 would not seek to continue the claim;(b)where cause of action arises from act/omission that is yet to occur, that theact/omis
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CA 2006, ** 263(3) and (4)
The discretionary test: court should have regard to views of members who have no personal interest in the matter
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Mission Capital v Sinclair (2008)
Held: national director acting in acc with s 172 would not seek to continue the claim, as the damage suffered by the company is ‘speculative’
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Prudential Assurance v Newman Industries (No 2) (1982)
Members’ claim= ‘misconcieved’ – the loss suffered by members reflected company’s, which could be recovered by company by bringing claim against directors -in such case, company should bring action and the members would not be permitted to recoer the
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Johnson v Gore Wood (2002)
No-reflective loss principle can apply to firm of solicitors; company’s interests and creditor’s intresets should prevail over members’
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Giles v Rhind (2002)
However, NRL principle will not apply where defs actions leave company unable to commence legal proceedings, e.g. where def’s actions cause company such loss that it cannot afford the commence proceedings
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CA 2006, s 994
A member can petition the court for a remedy on ground that the company’s affairs will be, are being, or have been conducted in a manner that is unfairly prejudicial to interests of members generally, or of some part of its members (incg at least one
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Re John Reid & Sons (2003)
Where employee of company, who was also a member of the company, was dismissed by the company, the court refused to grant a remedy on ground that members had brought claim I capacity of employee and not member
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Gamlestaden Fastigheter v Baltic Partners (2007)
C should not be precluded from remedy simply because it would benefit it as creditor and nt as member
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O’Neill v Phillips; Re a Company (1999)
Suffered in capacity as employee, not member; legit expectns argument not convincing; not forced out; legal issue not equitable
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Re London School of Electronics (1986)
No reqt for petitioner to come with clean hands, but unmeritous conduct on petitioner’s behalf might lead courts to hold conduct = not unfair/the remedy should be reduced
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Re Saul D Harrison and Sons (1994)
Neill LJ: the conduct complained of must be unfair and prejudicial
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CA 2006, s 996(1)
Court has considerable remedial flexibility in that it can make such order as it thinks fir for giving relief in respect of the matters compained of
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CA 2006, s 96(2)
Non-exhaustive list of possible orders: (a)order regulating conduct f company’s afiras in future;(b)requiring company to refrain from doing an act, or to perform an act that it ahs failed to perform; (d)requiring company not to make anychanegs to ots
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Re Grandactual (2005)
Although no limitation period, as granting of relief is discretionary, court may refuse remedy where sig period of time elapses between conduct complained of and petition being brought – here, 9 years
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Re Sam Weller & Sons (1990)
Example of unfairly prejudicial conduct: payment of low dividends
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Re Macro (1994)
Example of unfairly prejudicial conduct: serious mismanagement (must be serioud-normal mismanagemet not enough (Re Elgindata (No 1)(1991))
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Re a Company (1986)
Example of unfairly prejudicial conduct: preventing members from obtaining the best prioce for their shares
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Re Cumana (1986)
Example of unfairly prejudicial conduct: payment of excessive remuneration to the directors
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Re London School of Electronics (1986)
Example of unfairly prejudicial conduct: improper transfer of assets
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Re Freudiana Music (1995)
Exemplified long and expense of s 994 cases
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IA 1986, s 122(1)
Circums where winding up may be ordered: (a)company passes spec resn;(g)where court is of opinon that it is just and equitable to do so
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IA 1986, s 125(2)
Court will not order winding up where altve remedy is available and petitioner s actiong unreasonable in seeking winding up
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Re London and County Coal (1866)
Court ordered winding up where company: was fraudulenty promoted
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Re Walter Jacob (1989)
Court ordered winding up where company: was set up for a fraudulent purpose
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Re Yenidje Tobacco (1916)
Court ordered winding up where company: was deadlocked and was unable to make any decisions
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Re German Date Coffee (1982)
Court ordered winding up where company’s objects clause indicated that it had been formed for a specific purpose (the company’s substratum) and it became impossibleto fulfil this purpose
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Lock v John Blackwood (1924)
Court ordered winding up where there was a justifiable loss of confidence in copmany’s management
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Ebrahim v Westbourne Galleries (1973)
Court ordered winding up where there was an exclusion from partition in a small private company, which was based on relationship of mutual trust and confidence
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Other cards in this set

Card 2

Front

Ordinary rsolution; (s 283(1) special resolution); s 281(3): CA 2006 often does not specify which resolution reqd – up to articles of assn (even unanimity)

Back

CA 2006, s 282(1)

Card 3

Front

Duomatic principle canot be used where the decision in qn could not have been taken at a meeting

Back

Preview of the back of card 3

Card 4

Front

Nothing less than unanimity is sufft re Duomatic principle – member holding 99% not enough

Back

Preview of the back of card 4

Card 5

Front

Common law principle: if all the members entitled to vote on a matter are in agreement on that matter, then that agreement is valid, even if no meeting commenced and no resolution took place

Back

Preview of the back of card 5
View more cards

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