Question
Issue: The issue is whether Bonjovi a minority shareholder can take legal action against the directors.Law: According to Companies Act 2016, there are 2 types
Issue: The issue is whether Bonjovi a minority shareholder can take legal action against the directors.Law: According to Companies Act 2016, there are 2 types of shareholders which is majority and minority shareholder. Shareholder can be a person or an entity. Majority shareholders is the person or entity that owns and will have the controls more than 50% of company's outstanding shares. They will have voting power to vote on corporate decision such as deciding who is chosen to be involve in company's board of directors. Minority shareholders is person or entity holds share below 50% of company issued capital and they does not have enough voting power to control the company or influence the company decision. If members personal rights are infringed, individual member can bring legal action to remedy the infringement. If majority perpetrate fraud on minority shareholder, he or she can sue if action of majority shareholder constitutes fraud on minority shareholder. If members personal rights are infringed and majority shareholders perpetrate fraud on minority shareholders, it is considered as minority shareholders is oppressed. Oppression include behavior which is burdensome, harsh, and wrongful. The oppressed must be forced to submit to overbearing act or attitude which is unfair to them. Not paying dividends as high as they could be is not oppressive. The circumstances of oppressive conduct which is no dividend or inadequate dividend is given In the case of Eric Lau Man Hing v Erama Jaya Sdn Bhd & Ors. It held that non payment of dividend together with failure to keep proper records amounted to oppressive conduct in disregard of interest of minority shareholders by the majority shareholders. Disregard of members interest is involve something more than a failure to take into account of minority's interest, there must be awareness of interest and there is an evident decision to override it or brush it aside. According Section 346(1) statutory protection of minority shareholders has given power to court to remedy conduct which involve in oppression, disregard the interest of member, and unfair discrimination or unfairly prejudice. If any above circumstances occurred, minority shareholders can take legal action against the majority shareholder. In the case of Re Gee Hoe Chan Trading Co Pte Ltd (1991), the company has made a profit. The directors paid themselves directors fees and salaries and did not recommend appropriate dividend. The court held there was unfair conduct against minority members. According to Section 132(1) of Company Act 2016 the power to pay dividend is now vested in directors. If the directors fails to recommend dividend despite company making profits and instead reward themselves with high director's fees and salaries, the minority may seek remedies under Section 346. The remedy and actions that can be taken by members are personal action which minority seeks to enforce personal right, asserting that the wrong is done by company. Company is defendant. The action is taken by member in his personal capacity to enforce his personal rights against company. Personal action able to seeks an injunction to restrain breach of articles or declaration that the actions contemplated by company are invalid. According to Section 346(2), remedy available to minority member is direct or prohibit any wrongful act, cancel or vary any transaction or resolution which are oppressive or unfair discriminatory or prejudicial, regulate conduct of affairs of company in future, or order the company to wound up. (Write the APPLICATION and conclusion by refer to the above Issue and Law.)(Below attachement is the question.)
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