Member’s remedy
As we know, the company operates under the majority rule.
Therefore, it is very common that the majority will use their influence and
voting power to oppress the minorities. In order to balance the interest of all
shareholders as a whole, the Corporations Act regulated sequences of remedies
to protect company and the minority’s right. Since we have already discussed
the oppressive and unfair conducts, we would focus on other remedies today.
As a separate legal entity, the company has the capacity to
enter legal proceedings itself. However, in some cases the company may
unwilling or unable to do so. Therefore, S.236 give the power of
shareholders/officers to make an application to the court to enter the legal
process on behalf of the company. S.237 further developed on this issue, which
states that the court must grant the application of statutory derivative action
if: the company will not itself bring the proceeding or properly take
responsibility for them; the applicant must act in good faith( not for a private
purpose, but for the company’s good); the application fits the best interest of
company; there is a serious question to be tried, so the claim must not be
frivolous; and the notice of the proceeding is correctly given to the company
itself. In addition, the court may appoint an independent person to investigate
on the situation under S.241. As to prevent collusion between applicant and
defendants, the s.240 sets out the rule which the derivative action could not
be discontinued or settled without court’s permission. The court also has the
power to order the company to cover all costs incurred from this derivative
action.
Furthermore, the court may protect member’s rights by force
a compulsory winding up, even though the company remains solvent. Court may
enter the winding up process whenever it is just and equitable to do so. For
example, when the company is experiencing dead lock, breakdown of mutual trust,
or failure to conduct business for which company was formed can all be treated
as just and equitable reason to wind up the company.
At last, the members may apply to the court or be authorized
by the general meeting resolution to inspect the company’s book. They also have
a statutory right to inspect the shareholder’s register, as long as they do not
utilize this information to contact other members.
No comments:
Post a Comment