You are on page 1of 6

3/2/2015

MinorityShareholdersRightsProshare

Market Date: 27-02-2015


n Towards Improvement Feb 15 SSS Report (/news/26151.html)

Proshare Law
Home (http://www.proshareng.com) / News & Analysis (http://www.proshareng.com/news)
/ Proshare Law

Articles
Elections (http://www.proshareng.com/articles/ Elections )
Archives (http://www.proshareng.com/articles/Archives)
Bond Market (http://www.proshareng.com/articles/Bond Market)
Frauds & Scandals (http://www.proshareng.com/articles/Frauds & Scandals)
Market Updates (http://www.proshareng.com/articles/Market Updates)
MoneyIssues (http://www.proshareng.com/articles/MoneyIssues)
Mutual Funds (http://www.proshareng.com/articles/Mutual Funds)
NSE & Capital Market (http://www.proshareng.com/articles/NSE & Capital Market )
Opinion & Analysis (http://www.proshareng.com/articles/Opinion & Analysis)
Pensions (http://www.proshareng.com/articles/Pensions)
Proshare Analyst Views (http://www.proshareng.com/articles/Proshare Analyst Views)
Proshare Law (http://www.proshareng.com/articles/Proshare Law)
Q & A with CEO (http://www.proshareng.com/articles/Q & A with CEO)
Regulators (http://www.proshareng.com/articles/Regulators)
Reviews and Outlook (http://www.proshareng.com/articles/Reviews and Outlook)
Taxation (http://www.proshareng.com/articles/Taxation)

http://www.proshareng.com/articles/2201

1/6

3/2/2015

MinorityShareholdersRightsProshare

The Economy (http://www.proshareng.com/articles/The Economy)

Proshare Law (http://www.proshareng.com/articles/Proshare Law)


Read (5985)
151

Tweet

Share
Recommend

Share

Minority Shareholders Rights

LegalAlertforDecember2010:

Introduction

The global economic crises have again highlighted the dereliction in the
responsibilities of the shareholders of companies, who as owners and not
spectators of their companies, should properly oversee the governance and management of their
companies.Andtoinproperinstances,asserttheirlegalrightstoprotecttheirshares/investments
inthesecompanies.

The position of the minority shareholders is usually more precarious as a result of the narrow
understanding of the general legal rule that allows only a company, through its majority
shareholders,toassertthelegalrightsofsuchacompany.Thisrule,commonlyknownastherule
in FossVHarbottle(1843)2Hare461, is intended to avoid multiplicity of law suits and also to
protect our courts of law from interfering in the internal affairs of a company. However, and
sometime, the injury to the company is caused by the majority shareholders or their appointed
Directorstowhichsituationthelawhascreatedexceptionstothisgeneralrule.

MinorityShareholdersRights

Section 81 of the Companies & Allied Matters Act ascribes to every member of an incorporated
company, who has fully paid for his or her shares, a right to attend all the shareholders meetings
of such a company and to speak and vote at such shareholders meetings. The mode of proving
membership of a company is by the possession of a share certificate and the tendering of a
certified true copy of the register of members should such a matter go to litigation. See the
decisioninOrijiv.DorjiTextileMillsLimited(2009)12SC(PartIII)101@108,112113.

All the members of a company also have the right to receive copies of the Memorandum and
ArticlesofAssociationofthecompanyastheydofurtherhavetherighttoreceiveandcommenton
theauditedaccountsofthecompany.

Theminorityshareholdersofacompanyalsohavetherighttobringderivativeactions,inthename

http://www.proshareng.com/articles/2201

2/6

3/2/2015

MinorityShareholdersRightsProshare

of the company, where the wrongdoers are the controlling directors of the company, who have
beingentrustedwiththecontrolandmanagementofthecompany,andwhohavedoneanyofthe
following:
a)EnteredintoanytransactionwhichisillegalorultravirestheMemorandumandArticlesof
Associationofthecompany

b)Committedafraudoneitherthecompanyorontheminorityshareholdersdespiterepeated
noticetorefrainorremedysuchcomplainedofactions

c)Derivedoris/arederivingaprofitorbenefitorprofitedfromtheirnegligenceandorbreach
ofdutyofcare

d) Have by their actions or inactions or omissions infringed upon the individual rights of the
minorityshareholders

e)Areconductingtheaffairsofthecompanyinanunfair,prejudicialandoppressivemanner.

Judicialdecisionsonthismatter,foryourstudy,includethedecisionsinWilliamv.William (1995
1996)ALLNLR283@294302YalajuAmajuv.A.R.E.C(1990)6SC157@175176.

CONCLUSION

The plethora of judicial authorities with the provisions of the Companies & Allied Matters Act are
availabletoallshareholders,includingtheminorityshareholders,toprotecttheirinvestmentrights.
Shareholders should therefore avail themselves of these provisions to avoid more catastrophic
lossesinthefuture.

FossvHarbottle(1843)2Hare461TheRuleInFossvHarbottle

This case is of course the one that lead to the famous rule, now know as "The Rule In Ross v
Harbottle". Two minority shareholders initiated legal proceedings against, among others, the
directorsofthecompany.Theclaimantsaskedthecourttoorderthedefendantstocompensatefor
losses to the company as a result of alleged fraudulent activity. Wigram VC held that since the
companys board of directors was still in existence, and since it was still possible to call a general
meeting of the company, there was nothing to prevent the company from obtaining redress in its
corporate character and thus the action by the claimants could not be sustained: "The corporation
should sue in its own name and in its corporate character, or in the name of someone whom the
lawhasappointedtobeitsrepresentative."

However, the best known and perhaps the clearest statement of the rule in Foss v Harbottle was
actuallysetoutbyJenkinsLJinthecaseofEdwardsvHalliwell:

"The rule in Foss v Harbottle, as I understand it, comes to no more than this. First, the proper
plaintiff in an action in respect of a wrong alleged to be done to a company or association of
personsisprimafaciethecompanyortheassociationofpersonsitself.Secondly,wherethealleged
wrong is a transaction which might be made binding on the company or association and on all its

http://www.proshareng.com/articles/2201

3/6

3/2/2015

MinorityShareholdersRightsProshare

membersbyasimplemajorityofthemembers,noindividualmemberofthecompanyisallowedto
maintain an action in respect of that matter for the simple reason that, if a mere majority of the
members of the company or association is in favour of what has been done, then cadit quaestio.".
The rule established that where the company suffers harm, the company itself is the true and
properclaimant.Thereforetheshareholderscannotgenerallysueforwrongsdonetothecompany.

There are however several exceptions to the rule in Foss v Harbottle that have given rise to a
number of exceptions which include the act complained of is illegal or 'ultra vires' the
requirementofaspecialmajoritypersonalrightsandafraudontheminority.

DISCLAIMERNOTICE: This Legal Alert is a free educational material, for your general information and enlightenment ONLY. This
Alert,byitself,doesnotcreateaClient/Attorneyrelationship.Recipientsarethereforeadvisedtoseekprofessionallegalcounselling
to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are
always welcomed. This Legal Alert is protected by Intellectual Property Law and Regulations and is reproduced by Proshare Nigeria
Limited
under
permission
for
the
Proshare
online
investment
community.
Oserogho
&
Associates
[contactus@oseroghoassociates.com]

Oserogho&Associates
BusinessSolicitors&NotaryPublic
1EngineeringClose2ndFloorSuite206
OffIdowuTaylorStreetVictoriaIsland
P.O.Box56261FalomoIkoyiLagosNigeria
Cell:+234803326475323417655635
Fax/Tel:+23416213014
Tel:+23414811014+23416213014
Website:www.oseroghoassociates.com(http://www.oseroghoassociates.com/)

Tags ()

Comment With Your Facebook or Yahoo! ID


Addacomment...

AlsopostonFacebook

PostingasDxPrashant

Comment

Facebooksocialplugin

Home (http://www.proshareng.com)
About Us (http://www.proshareng.com)
Who We Are (http://www.proshareng.com/about-us)
Our team & Partners (http://www.proshareng.com/about-us/team.php)
Advertise with Us (http://www.proshareng.com/about-us/advertise.php)
News Feed - RSS (http://www.proshareng.com/about-us/feed.php)
Newsletter (http://www.proshareng.com/about-us/newsletter.php)
Policy (http://www.proshareng.com/policy/privacy-policy.php)

http://www.proshareng.com/articles/2201

4/6

3/2/2015

MinorityShareholdersRightsProshare

Contact Us (http://www.proshareng.com/about-us/contact.php)
Volunteer Program (http://www.proshareng.com/volunteer/)
Subscribe / Unsubscribe (http://www.proshareng.com/about-us/subscribe.php)
Network (http://www.proshareng.com/about-us/network.php)

News and Features (http://www.proshareng.com)


News (http://www.proshareng.com/news)
Reports (http://www.proshareng.com/reports/All)
Articles (http://www.proshareng.com/articles/All)

Markets (https://theanalystng.com/market-data/)
Market News and Reports (http://www.proshareng.com/news/Money Market)
Market Data (https://theanalystng.com/market-data/)
Equities (https://theanalystng.com/quote)
ETF's (https://theanalystng.com/market-data/index.php?ref=9)
REIT's (https://theanalystng.com/market-data/index.php?ref=11)
Investor Tools (https://theanalystng.com/tools/)

Resources (http://www.proshareng.com/resources/)
Proshare Text Service (http://www.proshareng.com/resources/index.php#3)
Share Support Service (https://theanalystng.com/terminal/widget/sss.php)
TheAnalyst Subscription (https://theanalystng.com/subscription_module/register1.php)
Event/Training Calendar (http://www.proshareng.com/training/)
Market Directory (http://www.proshareng.com/resources/index.php#7)
E-Invest (Online Trading) (http://www.proshareng.com/resources/index.php#9)
Info Graphics (http://proshareng.com/infographics)
ELECTIONS 2015 (http://www.proshareng.com/election/)

Investment TV (http://webtvng.com/)
Economy & Politics (http://webtvng.com/category/?ref=Economy-And-Politics)
Banking (http://webtvng.com/category/?ref=Banking)
Business (http://webtvng.com/category/?ref=Business)
Investing (http://webtvng.com/category/?ref=Investing)
Products & Services (http://webtvng.com/category/?ref=Products-And-Services)
Sports & Entertainment (http://webtvng.com/category/?ref=Sports-And-Entertainment)

Chat With Us (http://www.proshareng.com)


Discussion Forum (https://theanalystng.com/forum)
Feedback (http://www.proshareng.com/about-us/contact.php)
FAQ (http://www.proshareng.com/chat-with-us/faq.php)
Send an Article (http://www.proshareng.com/chat-with-us/article.php)
Invite WebTV (http://www.proshareng.com/chat-with-us/tv.php)
Request for Rates (http://www.proshareng.com/chat-with-us/rates.php)

http://www.proshareng.com/articles/2201

5/6

3/2/2015

MinorityShareholdersRightsProshare

(http://certs.websiteprotection.com/sealws/?sealId=52084999-d7a4-4f3d-9d70-5c6ecbdd56cb&pop=true)
Go Daddy (https://www.godaddy.com/)
20130807

(http://onlinepublishersng.com/)

(https://smarticon.geotrust.com/smarticonprofile?Referer=http://www.proshareng.com)

http://www.proshareng.com/articles/2201

6/6