24 Shareholders’ Rights and Remedies © Oxford University Press, 2007. All rights reserved.

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Presentation transcript:

24 Shareholders’ Rights and Remedies © Oxford University Press, All rights reserved.

Shareholder Rights & Remedies Learning Objectives: Understand what remedies are available to shareholders; Explain what rights and duties shareholders have vis- à-vis a company; Explain what is meant by shareholder ratification and what breaches can be ratified; Understand when a derivative action may be available to shareholders.

Shareholder Rights & Remedies cont... MINORITY v MAJORITY SHAREHOLDERS Shareholders are entitled to rights under the Corporations Act 2001 (Cth). Minority shareholders are provided with additional rights and remedies because of their perceived vulnerability: s.232 Corporations Act.

Shareholder Rights & Remedies cont… Minority Shareholders

Shareholder Rights & Remedies cont... SHAREHOLDER RATIFICATION Additional rights given to shareholders include the right to ratify a directors’ breach. Ratification has the effect of excusing a company officers breach. Consider interests of creditors.

Shareholder Rights & Remedies cont… MEMBER RESOLUTIONS Members can also affect company matters by putting forward a resolution. Hurdle requirements for the resolution to be accepted (50% ordinary), (75% special).

Shareholder Rights & Remedies cont… SHAREHOLDER REMEDIES The Corporations Act provides a number of remedies to shareholders including: Oppression Remedy; Injunction; Winding Up Order; Statutory Derivative Action; In addition shareholders have their own personal rights that they can pursue against the company.

Shareholder Rights & Remedies cont… OPPRESSION REMEDY: s.232 Designed to provide minority shareholders with an enforceable remedy against the company for conduct that may have been prejudicial to the minority’s interests.

Shareholder Rights & Remedies cont… Oppression Remedy Under s.233 of the Corporations Act the types of remedy that are available to a litigant are extensive and include: –injunctions, –wind-up orders, –modification of company’s constitution and injunctions.

Shareholder Rights & Remedies cont… Circumstances giving rise to Oppressive Conduct:- factual matrix of the case; material conduct giving rise to the allegation of unfairness; conduct of the majority shareholders; impact of the alleged act on the interests of minority shareholders.

Shareholder Rights & Remedies cont… Additional Remedies Available to Shareholders:- Injunction Winding Up Order Derivative Action Member’s Personal Rights

Shareholder Rights & Remedies cont… STATUTORY DERIVATIVE ACTION: S.236 Major shareholder initiative of the government’s changes to the Corporations Act. Response to the perceived shortcomings of pre-existing remedies where the company was unwilling or unable to act. Provides shareholders with an action against the company whereby proceedings are brought in the company’s name The derivative action has proven to be a successful initiative in both state and federal courts.