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5.5 Governance--relief for members.docx - Relief for...

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Relief for Minority MembersMembersRightsoRight to vote (usually one vote per ordinary share):s250Eoright to distributions eg dividends.oright to information eg inspect company’s books:Pt 2F.3 CA;oclass rights where different classes of shares exist:Pt 2 F.2Powers: s198Aoadopting and amending constitution:s 136(2) CAoappointing and removing directors:s 201G, s 203 C, D CAControlling Members & Doctrine of Fraud on the MinorityMuch more important in Pty companies—in public coy shareholders can sell their holding andescape more easilyContextQualification to general principle that shareholders may act in self-interest:Peters AmericanDelicacy v Heath; Allens v Golden Reefs of West Africa(cf. directors & officers)oEquitable limitation not based in fiduciary principle—members not fiduciaries withrespect to each other:Ngurli Ltd v McCannoRationale—Right to vote is an incidence of property in shares—to be exercised &enjoyed to own advantageException to ratification[→relief from liability]RuleMajority must not use voting power for purpose which reasonable person would say is outside thatcontemplated by company’s constitution or replaceable rules:Peters American Delicacy v Heath;Vatcher v PaulControlling memberscannot vote for own benefit at expense of minority—voting powers mustbe exercised bona fide for the benefit of the company as a whole:Ngurli v McCann(majorityshareholders = directors stripping the company of assets—then ratifying breaches with majorityvotesfraud on minority)oVariations of class rights& alterations to constitution:Gambotto[→Constitution]oOther uses of controlling member’s voting power—Appropriatingrights or property:Menier v Hooper’s Telegraph Works(1874);Cook v DeeksMajority refusing to seek remedyafter wrong against company:Biala Pty Ltd vMallina Holdings (No 2)per Ipp J(directors doing wrong against company—directors also majority shareholders—can vote against taking action againstthemselvesfraud against minority)← Whether wrong by majority shareholders or by third partyEnforcementCompanydamaged → company has right of action → derivativeactionCommon law derivative action—abolishedStatutory law derivative action in name of companyMinorityshareholders injured → shareholders have right of action → personalactionCommon law personal action against majority & companyMust prove that persons who abused power also controlled companyStatutory personal action = oppressionaction underss232-234Andrew TrotterLWB334 Corporate Law
DERIVATIVEACTIONS= action person (shareholders) brings when that particular cause of action doesn’t belong to thempersonally but to someone else (company)General RuleProper Plaintiff Rule—Wrong done to a company is properly actionable only by the company,not the shareholders(← Company is a separate legal entity to which wrong can be done &should institute own proceedings)oCommon Law:Foss v Harbottle(fraudulent misapplication of company funds—shareholders sued directors on behalf of themselves & other shareholdersaction mustbe brought in name of company—therefore no standing || shareholder actions may bejustified in some cases but not here)o= Statute:s236(2)(Proceedings brought on behalf of a coy must be brought in thecompany’s name)Internal Management Rule—Members have no right to bring legal action to remedy internalirregularity where it can be remedied by resolution at GM

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Law, Test, Pleading, statute, Andrew Trotter

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