Question 1

"According to standard law and economics, minority shareholders in closely held corporations (private limited companies) must bargain against opportunism by controlling shareholders before investing. Put simply, you made your bed, now you must lie in it. Yet most courts offer a remedy for shareholder oppression, often premised on the notion that controlling shareholders owe fiduciary duties to the minority or must honour the minority's reasonable expectations." Benjamin Means

With reference to the above statement of a commentator from the USA, critically evaluate the protections afforded to minority shareholders in the UK and discuss their effectiveness in protecting the smaller shareholders from the unfair dominance of the majority shareholders.

Question 2

Indy, Roxy and Jack have, previously run a small, but successful partnership. They decide to incorporate the business and a new company (CAT Ltd) is created. Indy, Roxy and Jack become directors and each take 300 shares in the company. A further 200 shares are issued and allotted to Fergus, a local businessman. The Articles of CAT Ltd provide that (i) no director can be removed without his or her prior consent, (ii) each director is to receive a salary of 150,000 per year, and (iii) any shareholder who wishes to sell his shares must first offer them to the directors. After incorporation the company was successful but no dividends were paid as all the profits were put back into the company, the directors drawing only their salaries of 150,000 each year. Six months ago, Jack had an argument with Indy and Roxy over matters of business policy. After this argument, Indy and Roxy made all the business decisions in advance and outvoted Jack at all the directors' meetings. Jack initially complained but has now lost interest and ceased attending meetings. A month ago, Indy and Roxy voted to remove Jack as a director at a general meeting and to distribute the profits by increasing the directors' salaries to 300,000 per annum. Fergus is aggrieved with the non-payment of dividends.

Requirement

Discuss whether there is any action that Fergus or Jack may take. You should consider unfairly prejudicial conduct and just and equitable winding up in your answer.