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SS Lecture 7 - SS Lecture 7 Overview Restrictions on member...

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1 SS Lecture 7 Overview Restrictions on member decision-making: HRS Ch 8 Directors: HRS Ch 9 Directors: HRS Ch 9 1 Member dcn-making A co = a mini democracy Therefore majority rules Members decide by voting on a resolution Therefore most votes cast for or against resolution will prevail Members may exercise voting rights in their own self-interest (even if they are also directors) 2 Why are restrictions needed? to stop unfair exploitation of minority shareholders by majority not always possible for minority to sell 3 The equitable limitation on majority voting power Not a positive duty Rule: if majority passes a resolution which no group of reasonable people would think no group of reasonable people would think is within majority’s power, a court can declare the resolution void Sometimes overlaps with oppression remedy (later lecture) 4 Applying the equitable limitation Do the facts involve a decision by the majority of members that harms the minority? The rule applies slightly differently for: cases involving constitutional amendment cases not involving constitutional amendment 5 Cases other than amendment of constitution Taking the company’s property: Breach of equitable limitation to use voting power so as to give themselves property, advantages or rights belonging to the company: Ngurli Majority unwilling to sue where they are the alleged wrongdoers: Biala 6
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