One of the characteristics of the Companies Act 1993 (Act) is the wide range of remedies available to shareholders. As a shareholder you have a number of options available if you feel you have been wronged by the company, by other shareholders or by individual directors.
The Companies Act offers a number of actions for disgruntled shareholders including:
A personal action which can be brought when there is a wrong done to your personal rights as a current or former shareholder. These are taken against a director for a breach of a duty owed to you as a shareholder.A derivative action, where an individual shareholder sues the directors in the name of and on behalf of the company. This is particularly useful, as most statutory directors' duties are owed to the company rather than to the shareholders individually. Often the company will be unwilling to act as it is under the control of the directors who are alleged to have breached their duties.Other statutory rights you have as a shareholder include:
the right to request a statement of rights, to inspect the company 's records and to obtain information about the shares held by the companythe right to ensure that the company appoints an auditor to audit the financial statements of the companythe right to vote against the company entering into a major transaction and if the resolution is passed, to require the company to purchase your shares at fair valuethe right to apply to the court for a variety of orders, if you consider that you have been, are, or are likely to be unfairly prejudiced by any act of the company, or by any conduct of the company 's affairs. Such orders include:
-directing that the company 's records be rectified
-setting aside an action taken by the company or the board which is in breach of the Act or the company 's constitution
-requiring the company or another person to buy your shares or to pay you compensation
-regulating the future conduct of the company 's affairs
-altering or adding to the company 's constitution
-appointing a receiver for the company
-putting the company into liquidation.A useful way of anticipating solutions for contentious issues that may arise between shareholders is to contractually prescribe suitable remedies and dispute resolution mechanisms in the form of a shareholders' agreement.
This is a private contractual arrangement between the shareholders. A shareholders' agreement is recommended in closely held companies to record the rights and obligations of shareholders.
This is a general summary only and should not be taken as a substitute for specific advice.
If you would like further information about shareholders ' agreements or regarding the rights and remedies for shareholders, please contact Michael Brooker or Jasmin Chew:
michael.brooker phillipsfox.com
jasmin.chew phillipsfox.com
Web site:
Phillips Fox