What are my rights as a minority shareholder?
A majority shareholder is one who owns 50% or more of the shares in a company; they will generally govern the running of the business and can prevent a minority shareholder from making decisions.
If you are a minority shareholder and are being prevented from running the business, you may be able to apply to the court for an appropriate order.
What are my rights?
As a shareholder, you are able to apply to the court, for relief if:
- The affairs of the company are being conducted in a manner that is unfairly prejudicial to your interest as a shareholder; or
- An act, proposed act or omission of the company is or would be prejudicial to your interest as a shareholder.
The court’s powers are wide and they are able to make an order as the court thinks fit to remedy any unfair prejudice.
The most common remedy is for the court to order that the majority shareholder purchase the minority shareholder’s shares. The valuation of the shares would be determined by a method chosen by the court (most likely requiring expert evidence). It is likely that any discount caused by the unfair prejudice will be ignored when calculating the shares’ value.
There is a wide range of alternative remedies available to the court. In exceptional circumstances, the court may order that the majority shareholder sell his shares to the minority shareholder.
Why do I need a solicitor?
Any petition will need to satisfy a court that unfair prejudice has been suffered. The court’s discretion when making an order is wide-ranging and is not limited to the relief sought within the petition.