Protection of minority members—a quick guide

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Protection of minority members—a quick guide
  • What is a minority member?
  • Action a minority member can take
  • Unfair prejudice petitions—a quick guide
  • Basis for an unfair prejudice petition
  • Powers of the court when a successful unfair prejudice petition is made
  • Power of the court to make an order for the purchase of shares
  • Filings following a court order
  • Derivative claims—a quick guide
  • Basis for a derivative claim
  • More...

Protection of minority members—a quick guide

A minority member in a company does not have much power to influence its management or any majority member(s) and, therefore, sometimes their interests are disregarded. Should they need to protect their position, a minority member may do so in a number of ways, eg, they may bring an unfair prejudice claim, pursue a derivative action or seek a winding-up petition.

What is a minority member?

There is no definition of a minority member in the Companies Act 2006 (CA 2006). In practice, members of a company with a share capital will normally be minority members (or shareholders) if they hold less than 50% of the shares in a company that have voting rights attached, meaning that they cannot block ordinary resolutions that are proposed for approval. A minority member may also be a person who holds less than 25% of the shares in a company that have voting rights attached, meaning that they cannot block special resolutions proposed for approval.

Action a minority member can take

The two most common claims brought by minority members to protect their interests are:

  1. a claim that they have been unfairly prejudiced by the way the affairs of the company are being conducted, and

  2. a derivative claim under CA 2006

This Practice Note focuses on giving a quick guide to the key aspects of unfair prejudice claims

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