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“a Proper Balance of the Rights of Majority and Minority Shareholders Is Essential for the Smooth Functioning of the Company.”- Explain & Illustrate?

In: Other Topics

Submitted By Tomalnsu
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North South University

LAW 200
Assignment # 2

Prepared for:
Barrister A.M. Masum Faculty of Business

North South University

Prepared by:
ID NAME 062 528 030 M.Montasir Imran Khan

Section: 02

Page | 1

“A proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company.”- Explain & Illustrate? 1. Introduction:
The basic principal relating to the administration of the affairs of a company is that “the will of the majority is supreme”. The general rule is that the decisions of the majority shareholders in a company bind the minority. 1 In a world that recognizes ‘simple majority rules’, minority shareholders of companies are by default vulnerable to oppression, disregard and unfair treatment by majority shareholders who are in control of the company. Majority shareholders also have certain obligations to minority shareholders in their capacity of controlling the corporation. In certain cases this minority shareholder right can be exercised directly against a shareholder, without having to go against a corporation or through the derivatives action process.2 In such case a proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company. The oppression of minority or mismanagement of a company by majority therefore calls for some remedial action. 3 Today’s minority shareholders come to the corporation with varied attitudes and agendas. Although their shareholder status results from a variety of circumstances, it is important in each case to make their relationship with the corporation and the other shareholders as productive as possible. This

1 2

Ashok, S. (2009-2010).Company law (p.246-248).India:V.K Enterprise. The right of the majority to have their way has, however, been occasionally abused and the whip of majority has The…...

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