Proper Balance Between Majority and Minority Shareholder.

3704 WordsAug 14, 201115 Pages
North South University LAW 200 Assignment # 2 Prepared for: Barrister A.M. Masum Faculty of Business North South University Prepared by: ID NAME 062 528 030 M.Montasir Imran Khan Section: 02 Page | 1 “A proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company.”- Explain & Illustrate? 1. Introduction: The basic principal relating to the administration of the affairs of a company is that “the will of the majority is supreme”. The general rule is that the decisions of the majority shareholders in a company bind the minority. 1 In a world that recognizes ‘simple majority rules’, minority shareholders of companies are by default vulnerable to oppression,…show more content…
The majority shareholder is often the Based on a study commissioned in April 2004 by Jardine Lloyd Thompson Pte Ltd, there were a total of 19 cases founder of the corporation. 7 of minority shareholder claims (personal and derivative) for oppression under Section 216 of the Companies Act. Page | 3 Shareholders holding minority interests in closely-held corporations are at risk of unfair or oppressive treatment8 by the majority or controlling shareholders, to an extent well beyond that of their counterparts in partnerships or in corporations whose shares are publicly traded. 9 Sometimes directors and officers of closely held corporations that have acted fraudulently or illegally mismanaged the corporation and also acted oppressively or unfairly toward one or more minority shareholders. Shareholder oppression occurs when the majority shareholders in a corporation take action that unfairly prejudices the minority. It most commonly occurs in close corporations because the lack of a public market for shares leaves minority shareholders particularly vulnerable, since minority shareholders cannot escape mistreatment by selling their stock and exiting the corporation.10The majority shareholders may harm the economic interests of the minority by refusing to declare dividends or attempting a squeeze out. Majority may physically lock the minority out of the corporate premises and even deny the minority the right to inspect corporate

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