THE OPPRESSION OF MINORITY SHAREHOLDERS

DOIhttp://doi.org/10.1111/j.1468-2230.1972.tb01325.x
Date01 March 1972
AuthorH. Rajak
Publication Date01 March 1972
THE OPPRESSION
OF
MINORITY
SHAREHOLDERS
IT
is axiomatic that a company acts in accordance with the decisions
taken by the majority of its members willing and able to vote. The
dissenting minority (it‘ there is one) is bound to accept any such
decisions unless
it
is able to show that the power which vests with
the majority has beell abused. Although there are well-established
common law grounds on which minority shareholders may success-
fully impeach the decisions of the majority,’ the reluctance
of
the
court to interfere with the internal management of the company is
well established.
It
is an elementary principle of the law relating
to joint stock companies,” Lord Davey said
‘‘
that the court will
not interfere with the internal management of companies acting
within their powers and in fact has
no
jurisdiction to do
so.”
Companies therefore cannot be made to act in a way not authorised
by their constitutions. This would not be
‘‘
within their powers.”
It
is clear, however, tha.t this limitation is not merely a constitutional
one. Lord Davey himself recognised this, at least in relation to
wrongs done by the majority to the companyYs and
a
dissenting
minority, however small, will be able to challenge successfully certain
acts whether provided
for
in the company’s constitution
or
sought
to be validated subsequently by ratificati~n.~ This is true whether
the wrong was done to the company
or
to the minority shareholders
themselves.’
The principles by which
it
may be determined whether a par-
ticular act is incapable of performance
or
ratification by the company
in spite of the requisiie majority vote are by no means easy to
discern.8 The approach by the court to this question has been
influenced by its reluctance to interfere in the majority decision
of
the company’s members and necessary legislative intervention
facilitating the pursuit of remedies by minority shareholders has
been made from time to time.8
1
Whether the abuse
of
power has wronged the company (in which case
a
derivative action can be lirought provided the abuse falls within the recognised
exceptions to the rule in
,pass
v.
Harbottle)
or the minority shareholder himself
(in which case a peieonal action can be brought). See further Gawer:
Modern
Company
Law
(3rd ed.), pp.
581-595.
2
In
Burland
v.
Earle
[1902!
A.C.
83, 93.
S
Ibid.
The cases in which the minority can maintain such
an
action
[to
redress
a wrong done
to
the conipany] are therefore confined
to
those in which the
acts complained of are
of
a
fraudulent character
or beyond the powers of the
comnanv.”
4
As
i’n
n?enier
v.
Hooper’s Telegraph Works
(1874) 9
Ch.App.
350.
5
See
e.g.
Parke
v.
Daily News
Ltd.
r19621
Ch.
927.
8
Menier
v.
Hooper’s Telegraph Work;
(supra).
7
Allen
v.
Hyatt
(1914)
30
‘T.L.R.
444.
8
See
K.
W.
Wedderburn
[1957]
Camb.L.J.
194.
9
See
e.g.
ss.
5
(2), 12
(1)
of the Companies Act
1948.
156

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