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Shareholders From Unfair Assignment- Help

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 Legal protections aimed at protecting minority shareholders from unfair tactics by the majority

Minority shareholders in the companies face numerous oppression from the majority shareholders in organizations. Majority shareholding in institution places the investor in a stronger position to pass the special resolutions. Majority shareholders implies to an investors that own as well as control more than 51 percent of the corporation’s stock. On the flick side, minority shareholding control less than 50 percent. Therefore, a majority shareholder has more power as compared to the other shareholders combined.

Tim clearly as an investor in the company is a minority shareholders while his other four brothers want to utilize their majority stake in the company. The conversation between the oldest brothers on the phone with another brother is clear view of how majority shareholders treat the minority shareholders. They clearly understand that for any decision to sail through, the majority shareholders must approve through voting. Tim wants to sell his shares and get out the struggling company but the majority vote would prevent his brothers from selling shares as the brothers are against his decision. Therefore, Tim is left with the decision to stick to The Grumpy Grande Pty Ltd (TGG).

The value of his or her shareholding gives him the authority to do things that other shareholders do not have including the ability to replace the corporations management staff and the board of directors. A court cases of Crosby v. Beam, 47 Ohio St. 3d 105 (Ohio 1989), it was held that Majority shareholders possess fiduciary duty to the minority shareholders. However, a majority shareholding has the fiduciary duty not to misuse his power through promoting his personal interests at the expense of the corporate interests. Moreover, the court also held that the majority or controlling shareholders tend to breach the fiduciary duty to minority shareholders especially during the close corporation is used to prevent the minority in the corporation from having an equal opportunity om the corporation. A contrasting court ruling in the court in Smith v. N.C. Motor Speedway, Inc., 1997 NCBC 5 (NCBC 1997) held that the shareholders with inclusion of majority shareholders tend do not owe fiduciary liabilities to the other shareholders when selling their own stock in a given corporation.

One Equitable Remedy

Tim is clearly oppressed in the TGG hence his decision to sell the shares and quit. The other directors in the company clearly understand his stand but want to exercise their power to prevent him from selling shares. The law does not concentrate on the legitimate exercise on power of the majority shareholders. However, the law would prevent such oppression Tim is experiencing such as exercise of power.

The law provides that all shareholders regardless of their stake in the company must be accorded similar treatment, recognition, protection as well as facilitation of the exercise of their right through constant as well as open communication. Tim as a shareholder and director in the company as provided in the law ought to have been given the adequate protection against any unfair conduct on the part of the majority shareholders. The law provides the following aspect in a bid to protect the minority shareholders from oppressive activities.

Shares and Voting rights

The law prescribe that all shareholders are accorded their right to participate and vote during the Annual Stockholder’s meeting. Each of the shareholders is only entitled one vote per common share of stock. The vote is usually administered through either in person, by proxy, or through electronic means. Moreover, the applicable laws and regulations in regard to proxy voting and or voting in absentia are observed to latter. This is to ensure that the directors do not compromise the exercise and pass their issues.  Moreover, the law clearly prescribes that the a shareholder may utilize their voting right through ballot papers provided to him or her after registration and placing the voted ballot in the designated ballot box side usually at the registration area. Additionally, a stockholder can vote electronically through use of any computers in the station for electronic voting at the vicinity of the registration area. A website platform for electronic voting is also  set and proposed resolutions for considerations by the stockholders as well as each proposed resolution is shown on the screen in the front as the voting is carried out.

Tim wants to sell his shares in the TGG company while the others brothers are opposed to the decision and want to manipulate him. I would advise team to seek for an annual stakeholders meeting and table his resolution to the AGM. The directors and shareholders would be compiled to vote the ideas brought forward by the shareholder depending on their opinions. Moreover, the AGM accords the shareholders opportunity to raise their issues in regard to the subject matter. The voting activities in the AGM are protected by the law hence the shareholders will not at any way take advantage of the minority shareholders. The law bars the majority shareholding from altering the share capital of any given institution. Hence, the majority shareholder cannot change the shares structure to their interest so that the minority stakeholders are disadvantaged at any given time. Moreover, they are barred from approving other benefits to themselves including taking loans that are not available to the minority members.

Tim is protected by law from other shareholders who want to utilize the magnitude of their stake in the company. The majority shareholders if not provided in the law would use their power to approve the sale of company assets to themselves and also below the market rate value. The other shareholders clearly understand that Tim is frustrated and would want quite if their continued indecisiveness continues. Such might elaborate the reasons why the directors are not utilizing his ideas and strategies to improve on the company’s profitability. It is because the moment he quits his shares would be diluted and once the company regains its financial muscles it would be their own benefit.

In the court ruling of Menier V Hooper’s Telegraph works and Ngurli Ltd V McCann where the subject matter was taking the company’s property. It was held that the majority stakeholders despite having the highest shares cannot utilize their voting power to allocate themselves institutions’ property, advantages as well as rights. Conflicts between the minority and majority shareholders usually exist right at the birth of an organization and are bound to exist as long as the organizations survives. The ultimate decisions a company makes are depended on the shareholders

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