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BUSINESS ORGANISATIONS AND AGENCY 412 MEMBERS’ POWERS AND THE PROTECTION OF MINORITIES 23 MEMBERS’ POWERS AND THE PROTECTION OF MINORITIES 23.1 INTRODUCTION Normally, a company’s powers comprise management and control, with the former lying with the directors and the latter with the members. In many companies, however, especially private ones, the owners and directors may be the same persons, so putting ownership and control in the same hands. The separation of ownership and control therefore finds real expression in large companies and public limited companies. The power of control by members in reality resides with those with majority shares or interest who may take decisions irrespective of the wishes of the minority. Although minorities have the right to participate in decision-making, ultimately only the majority shareholders could control the company or its directors. Sometimes however, the majority may abuse their powers or exercise them in a way detrimental to the interest of the company and its minority shareholders, especially when the majority is large and controls the board of directors. Hence, there is need, in some circumstances to protect company minorities (and the companies) from oppression or abuse of power by the majority. 23.2 LEARNING OBJECTIVES At the end of the chapter, the reader should clearly understand: • The balance of power between owners and directors of companies The powers of control which company members have and how they may be exercised • The need to protect minority shareholders and companies from abuse of power by majorities • The different mechanisms for the protection of minority shareholders and when and how they may be used 23.3 MEMBERS’ POWERS Members of a company are not normally involved in its management, the prerogative of which belongs to the board of directors. Members do not have the power to direct the board of directors on the details of management. They do however, have the prerogative to decide several matters concerning the company’s business through the making and alteration of the articles of association, the passing of resolutions and the power to authorise certain actions of directors. Members also have the power to appoint and remove directors and other officers and the residual power to assume management responsibilities. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 413 MEMBERS’ POWERS AND THE PROTECTION OF MINORITIES 23.3.1 CONTROL THROUGH THE CONSTITUTION AND RESOLUTIONS One crucial way in which members exercise control over their company is the making and alteration of the articles of association. By this power, members are able not only to determine the rules under which the company would be governed but also to change a lot of things in the company, including the name, status, nature of the company’s undertakings, the capacity of the company, and the powers of its directors – ss. 21 & 22 CA 2006. Moreover,
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  • Fall '19
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