Minority Protection
Shareholders generally have the freedom to use their shares as they wish, with the majority’s decisions prevailing in company matters. Typically, a simple majority suffices for resolutions, though exceptional decisions like altering the constitution require a three-quarters majority. Majority shareholders can appoint directors and control the company, potentially disadvantaging minority shareholders. Shareholders owe no fiduciary duties to each other except in rare circumstances involving unique relationships.
Constraints exist to protect minorities from abuse. Directors must act in good faith for the company, and statutory obligations regulate conflicts of interest and unlawful actions. Majority shareholders must exercise their powers for the company’s benefit and cannot override individual shareholder rights or engage in oppression.
Minority shareholders can enforce their rights through the constitution, restrain illegal actions, or, in exceptional cases, bring derivative actions on the company’s behalf if the majority abuses its powers. Remedies for oppression allow courts to address unfair treatment, potentially ordering buyouts or winding up. Winding up may also be sought where trust and confidence between shareholders have broken down, particularly in small, quasi-partnership companies. However, winding up risks significant value loss and is typically a last resort compared to more targeted remedies like buyouts or court-ordered partitioning. Each case depends on its specific circumstances.
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