Common Complaints of Minority Shareholders
One of the pillars of company law is the principle of majority rule. Both at the level of the board of directors and the company in general meeting, company decisions are generally1 decided by a simple majority vote. But while the concept of majority rule is fundamental, it carries with it the potential for abuse of power. This book is concerned with the position of minority shareholders where the company's controllers are taking advantage of their more powerful position to oppress the minority.
At the outset, it is necessary to draw certain distinctions, both as to the nature of minority shareholders' complaints and as to the nature of the company in which they occur. Indeed, these two factors are interrelated, since the nature of the company will determine whether and to what extent minority shareholders are affected by particular forms of conduct.
At one end of the spectrum of company types is the listed public company. Here risk bearing and management are separated, and most shareholder complaints therefore relate to dissatisfaction with management. They may stem from disagreements over policy matters, charges of inefficiency or negligence, or, more seriously, that the controllers are profiting at the expense of the company. The one advantage that minority shareholders in listed companies have when faced with these situations is that in many cases they will be able to avoid the problem by selling their shares.
Nevertheless, there are some situations where disposal of their shares will not be a satisfactory option. For example, the conduct of the controllers may have depressed the value of the shares, the minority may not wish to dispose of their stake for personal or strategic reasons, or a sale may not be viable because the shares were purchased as part of an indexed fund.2 The aggrieved shareholders will then have to look to other remedies.
At the other end of the spectrum are corporate quasi-partnerships.____________________