Shareholder remedies, court actions, non-court actions, derivative actions, access to information, minority buy-outs, rights attaching to a share

1. Shareholders &
Companies Act 1996 (NZ)
S 96: a person whose name is en- tered in the share register as a holder of one or more shares
 shareholders provide the capital for the company
 S97 limits the liability of the shareholder to the value of the share
S36 Powers that attach to a share
 right to appoint a director(s) and auditor(s)
 Right to vote at annual general meetings
 Right to on vote on
Ordinary resolutions (s.104)
Special resolutions (must be more than 75%) (s.105)
 Right to inspect records (s.126 & s.216)
 Right to take derivative action
 Right to an annual report
 Right to adopt, alter, revoke a constitution
 Right to put the company into liquidation
 Right to receive dividends
 Right to review management (s. 109)
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2. Disgruntled/Upset Shareholder?
S 97 sets out the definition of shareholder
Non-Court Remedies Available to Shareholders
Court Remedies Available to Shareholders
 cheaper and easier to implement
 The shareholder will want to gather infor- mation/evidence if they have a issue they want to resolve
 The Companies Act 1996 provides the Shareholder with provisions to aid the shareholder
 Not as easy to implement and the share- holder(s) will have to make an application to the Courts
 There has to be a decision from the Court allowing the shareholder(s) the right to take action
...the cost—who will pay?
...the parties—this scenario is the company (shareholders) against the company (directors)
...the likelihood of succeeding
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3. Non-Court Remedies Available to Shareholders
S215-218 Inspection of records
Shareholders have the right to inspect specific information
 Constitution, director’s details, minutes of meetings, past AGM’s and any information publicly available (Interest registers etc)
S178 Written Request of Information
 This is information that is not publicly available
 The company can refuse with reasonable and justifiable grounds
 Useful provision as it allows shareholders to gain access to information not publicly availa- ble and maybe sensitive
 There may be costs involved
S110-115 Minority Buyout
 In this situation the shareholder may request the company to buy their shares.
 They have to give notice to the company (s.111)
 The price has to be fair and rea- sonable (s.112)
 A 3rd party may purchase the shares (s113)
 The Court may grant an exemp- tion (cause the company’s finan- cial health may be jeopardised) (s 114)
 Can apply to the Court for exemp- tion if the company becomes in- solvent because of the purchase
Company can attract a fine if they refuse to comply with the requests for inspection of
records
Infratil Case: where the cost of the share price was disputed in a minority buy out request — the Court found in favour of Infratil — that the price had to be fair and reasonable
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4. Court Remedies Available to
Shareholders
Involves an application to the Courts
Range of remedies available to the Shareholder (s96 &s97)
 s70—make the director do what he ought to do
 S91– rectification of the share register
 S31—contractual and other remedies
 s164—injunctions
 S165—derivative actions
 S169, 171, 172 personal actions agains the directors of the company
 S174, 241—Oppression remedies
 S179 Investigation of records
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5. Derivative Action taken by a
Shareholder
The shareholder has to have ‘standing’ before the Court before an action can advance for a derivative action (s164)
- this costs money!!!!
The Court will consider the following matters for a Derivative Ac- tion: (s165(2))
 the likelihood of the proceedings succeeding
 Costs of the action relative to the relief that the sharehold- ers want
 Any other previous actions (and relief won) in the past
 The interests of the company if the proceedings are com- menced, continued, defended or discontinued
Derivative Action is looked upon by the Court as a very serious action. The shareholders (the owners of the company) are usually taking the directors (the oversight of the company) to Court.
Vrij v Boyle: The shareholders had a complaint against the di- rector Boyle. They claimed that he was directing business away from their company towards is family company. This was found to be a breach of his fiduciary duty—the claim was al- lowed to proceed.
McFarlane v Barlow: the company was very profitable and the directors decided to pay themselves huge (unreasonable) wag- es. Shareholders claimed that the directors had breached their duties of acting in good faith, use of their powers for a proper purpose—therefore a breach of their fiduciary duties.—the claim was allowed to proceed.
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