The position of minority shareholders 309a statement of not more than 1,000 words on the subject matter of the resolution. A lower
percentage can be specified in the company’s articles. Section 294 provides that the expenses
of the company in complying with the request must be paid by the members who requested
the circulation of the resolution, unless the company passes a resolution to excuse them. In
addition, the company can demand a deposit of a reasonable sum to meet these expenses,
unless the company resolves otherwise. If this deposit is not paid the company has no
obligation to circulate the resolution.
The company’s articles might specify the time period within which a proposed written
resolution must be passed. If the articles do not do this, a proposed written resolution will
lapse after 28 days, beginning with the date on which it was circulated.
Unanimous informal consent
Unanimous consent of the members can be substituted for ordinary resolutions and for
some types of special resolutions. In Re Duomatic Ltd (1969)Buckley J said: ‘where it can
be shown that all shareholders who have a right to attend and vote at a general meeting of
the company assent to some matter which a general meeting of the company could carry
into effect, that assent is as binding as a resolution in general meeting would be.’ However,
unanimous consent could not be used to dismiss a director or auditor before the end of his
term of office because the director or auditor would have the right to address the meeting
at which his dismissal was proposed.
The position of minority shareholders
The voting shareholders control a company. A shareholder with more than 50 per cent of
the voting shares can pass an ordinary resolution and could therefore elect and remove the
directors of the company. A shareholder with at least 75 per cent of the shares can pass a
special resolution. Similarly, shareholders who between them can muster over 50 per cent,
or at least 75 per cent, can exercise the different types of control.
These percentages can be vitally important when a person is considering investing in a
company. Let us look at an example. If Bill invites Alan to form a company with him, and
Alan takes 49 per cent of the shares while Bill takes 51 per cent, then their ownership of the
company is almost equal. However, their control of the company is very far from equal, and
Alan should be very wary about accepting such a proposition. Alan would at least have
some degree of ‘negative control,’ in the sense that he could block a special resolution. If
Alan was offered only 25 per cent of the shares he would have very little control, although
he could at least prevent an entrenched article from being altered.
If two shareholders each have 50 per cent of the shares then they will both have negative
control. Neither will be able to force through any resolution without the consent of the
other. This might sound an ideal way to run a company owned by two people, and while
the shareholders get on with each other it probably is. However, if complete deadlock is
reached then the court may well wind the company up (if either party so requests) on the
grounds that this is just and equitable.
The position of minority shareholders is not improved by the rule in Foss vHarbottle.
This states that if a wrong is done to a company then only the company has the right to take
action in respect of that wrong. It also states that a court will not interfere with the internal
management of a company while the company is acting within its powers.
The case itself illustrates the problems which this can cause for minority shareholders.