MINORITY BUY-OUT RIGHT
GENERAL INTRODUCTION.
Minority Buy-Out Right is a litigation remedy.
It is available to a Minority Shareholder.
Buy-Out Right means Buy ones shares at the fair price.
Traditionally Minority Buy-Out Right is available as a measure of
litigation.
However, under the present companies act, Minority Buy-Out
Right available to a minority Shareholder’s as a statutory
remedy.
This is a new concept introduced by the Companies Act No.07 of
2007 to enable the Majority Shareholder to carried out the business
direction as their wish while Minority Shareholder can leave the
company by selling shares at a fair price.
Instances in which minority rights can be exercised has been set out
starting from SECTION 93 TO 99.
SECTION 93 – SHAREHOLDER MAY REQUIRE COMPANY TO
PURCHASE SHARES.
Where a shareholder is entitled to vote on the exercise of the power set
out in paragraph (a) of subsection (1) of section 92 and the proposed
alteration imposes or removes a restriction on the business or activities in
which the company may engage or set out in paragraph (b) or (c) of
subsection (1) of section 92 and the shareholders resolved to exercise those
powers, and –
1
, a) the shareholder cast all the votes attached to shares registered in the
shareholder's name and having the same beneficial owner, against the
exercise of the power; or
b) where the resolution to exercise the power was passed under section
144, the shareholder did not sign the resolution in respect of the
shares registered in the shareholder's name and having the same
beneficial owner,
that shareholder will be entitled to require the company to purchase
those shares in accordance with section 94.
EXPLANATION
As per SECTION 92(1); Notwithstanding anything to the contrary
contained in the articles of a company, when shareholders exercise a power
to-
a) alter the company’s articles:
b) approve a major transaction for the purpose of paragraphs (a) or
(b) of subsection (1) of section 185 of this act.
c) Approve an amalgamation of the company under section 241 of this
act
Such powers shall be exercised by special resolution.
In terms of SECTION 93, where a Special Resolution is passed by a 75%
majority as per SECTION 143, to alter the Articles imposing or removing
a restriction on the business or activities of a Company, OR to approve a
major transaction in terms of Section 185, OR approve an amalgamation
under Section 241, a Shareholder voting against such Resolution, is
entitled to require the Company to purchase his Shares by giving
notice to the Company in terms of Section 94.
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GENERAL INTRODUCTION.
Minority Buy-Out Right is a litigation remedy.
It is available to a Minority Shareholder.
Buy-Out Right means Buy ones shares at the fair price.
Traditionally Minority Buy-Out Right is available as a measure of
litigation.
However, under the present companies act, Minority Buy-Out
Right available to a minority Shareholder’s as a statutory
remedy.
This is a new concept introduced by the Companies Act No.07 of
2007 to enable the Majority Shareholder to carried out the business
direction as their wish while Minority Shareholder can leave the
company by selling shares at a fair price.
Instances in which minority rights can be exercised has been set out
starting from SECTION 93 TO 99.
SECTION 93 – SHAREHOLDER MAY REQUIRE COMPANY TO
PURCHASE SHARES.
Where a shareholder is entitled to vote on the exercise of the power set
out in paragraph (a) of subsection (1) of section 92 and the proposed
alteration imposes or removes a restriction on the business or activities in
which the company may engage or set out in paragraph (b) or (c) of
subsection (1) of section 92 and the shareholders resolved to exercise those
powers, and –
1
, a) the shareholder cast all the votes attached to shares registered in the
shareholder's name and having the same beneficial owner, against the
exercise of the power; or
b) where the resolution to exercise the power was passed under section
144, the shareholder did not sign the resolution in respect of the
shares registered in the shareholder's name and having the same
beneficial owner,
that shareholder will be entitled to require the company to purchase
those shares in accordance with section 94.
EXPLANATION
As per SECTION 92(1); Notwithstanding anything to the contrary
contained in the articles of a company, when shareholders exercise a power
to-
a) alter the company’s articles:
b) approve a major transaction for the purpose of paragraphs (a) or
(b) of subsection (1) of section 185 of this act.
c) Approve an amalgamation of the company under section 241 of this
act
Such powers shall be exercised by special resolution.
In terms of SECTION 93, where a Special Resolution is passed by a 75%
majority as per SECTION 143, to alter the Articles imposing or removing
a restriction on the business or activities of a Company, OR to approve a
major transaction in terms of Section 185, OR approve an amalgamation
under Section 241, a Shareholder voting against such Resolution, is
entitled to require the Company to purchase his Shares by giving
notice to the Company in terms of Section 94.
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