LAW CASES STATUE PERSON EXTRA
5. SHAREHOLDERS’ RIGHTS AND MINORITY
PROTECTION
Majority rule:
The majority of SH should get their way
Law Commission: ‘SH remedies: A Consultation Paper; 1997 Number 142: The will
of the majority should prevail in the running of the business
Majority are entitled to ‘vote selfishly’, to cast their votes in their own interest: North-
West Transportation v Beauty 1887
Advantages: Relatively quick, settles disputes, prevents outside interference,
democratic, saves the courts from making business judgements
Minority SH are those who have a small number of shares in a company and as a
result they lack power to control the company or have influence
There must be some protection for minority SH, through exceptions to the right of
majority to impose their wished. Flourentzou: the minority SH is not completely
powerless1
Brenda Hannigan: Most of the disputes that may arise involve minority SH who seek
redress as the majority can secure redress for themselves through the exercise of their
voting power
Lord Hoffmann: Rights of minority SH is an important and rapidly developing branch
of law
Paterson: Protection of the minority SH has been introduced with the aim that the
approach toward them will be fair since they lack control over the company
Spence and Pheasant: minority SH are not totally powerless, there are ways to control
the excess of the majority
Exceptions to majority rule:
Personal rights:
S33(1): the provision of a company’s constitution binds the company and its members
to the same extent as if there were covenants on the part of the company and of each
member to observe those provisions.
o Limited scope to bring claims
Hickman v Kent (Romney Marsh Sheep-Breeders’ Association) 1915: Constitution
stated that is there was a dispute, the first step would be to use dispute resolution: an
internal management doctrine. By going straight to the courts, Hickman had failed to
observe the constitution and breached his contractual duty.
o Courts will respect company freedom
The law prevents individual SH actions where the company’s failure amounts only to
an internal irregularity
Internal governance is private matter and shouldn’t be subject to judicial scrutiny
1
N Flourentzou, ‘Minority Shareholders: Applicability of Unfair Prejudice’ [2014]
Page 1 of 9
5. SHAREHOLDERS’ RIGHTS AND MINORITY
PROTECTION
Majority rule:
The majority of SH should get their way
Law Commission: ‘SH remedies: A Consultation Paper; 1997 Number 142: The will
of the majority should prevail in the running of the business
Majority are entitled to ‘vote selfishly’, to cast their votes in their own interest: North-
West Transportation v Beauty 1887
Advantages: Relatively quick, settles disputes, prevents outside interference,
democratic, saves the courts from making business judgements
Minority SH are those who have a small number of shares in a company and as a
result they lack power to control the company or have influence
There must be some protection for minority SH, through exceptions to the right of
majority to impose their wished. Flourentzou: the minority SH is not completely
powerless1
Brenda Hannigan: Most of the disputes that may arise involve minority SH who seek
redress as the majority can secure redress for themselves through the exercise of their
voting power
Lord Hoffmann: Rights of minority SH is an important and rapidly developing branch
of law
Paterson: Protection of the minority SH has been introduced with the aim that the
approach toward them will be fair since they lack control over the company
Spence and Pheasant: minority SH are not totally powerless, there are ways to control
the excess of the majority
Exceptions to majority rule:
Personal rights:
S33(1): the provision of a company’s constitution binds the company and its members
to the same extent as if there were covenants on the part of the company and of each
member to observe those provisions.
o Limited scope to bring claims
Hickman v Kent (Romney Marsh Sheep-Breeders’ Association) 1915: Constitution
stated that is there was a dispute, the first step would be to use dispute resolution: an
internal management doctrine. By going straight to the courts, Hickman had failed to
observe the constitution and breached his contractual duty.
o Courts will respect company freedom
The law prevents individual SH actions where the company’s failure amounts only to
an internal irregularity
Internal governance is private matter and shouldn’t be subject to judicial scrutiny
1
N Flourentzou, ‘Minority Shareholders: Applicability of Unfair Prejudice’ [2014]
Page 1 of 9
