Business Law In Minority Oppression Samples †MyAssignmenthelp.com

Question: Discuss about the Business Law In Minority Oppression. Answer: Issue: After going to the facts of this case, the question arises if the majority members of FWPL are involved in minority oppression. For this purpose, it has to be seen, what is the meaning of the term in the operation and move them apply to the court. Rule: Generally, the term minority operation is used for conduct falling under section 232, Corporations Act, 2001. Wide-ranging powers are granted by section 232, which allow the courts to provide relief if companys affairs are being conducted in a way that is against the interests of the shareholders as a whole or if such conduct is aggressive, unfairly prejudicial or unfairly discriminatory against a particular shareholder or group of shareholders, whether in their capacity as shareholders or in some other capacity (Farrar, 2001). In this way, the target of section 32 is the conduct due to which the minority shareholders may have to face some commercial unfairness. The provisions mentioned in this section have been drafted widely. Hence, no limits exist on what may be equal to offending conduct. At the same time, the offending conduct can be companys conduct or its directors or other shareholders (Farrar, 2008). Such conduct is evaluated by the courts by applying an objective test. This test is based on the fact if the conduct in question would have been considered as being unfair by any reasonable commercial bystander. It is not enough that a shareholder has been discriminated or prejudiced (Ford, 1999). This position also requires that there should be an element of unfairness that is something more than a mere disadvantage. Although, there are a wide range of circumstances under which the conduct falling within the purview of section 232 may arise, but it is a difficult task to prove such conduct, particularly in cases where the conduct of the decision also has a legitimate commercial purpose (Whincop, 2001). Practically speaking, generally oppressive conduct takes place when the minority shareholders as to face an unfairness or prejudice due to the abuse of power by majority or its control over the corporation. While the conduct that takes place in bad faith is more probable to be aggressive, but the conduct can be oppressive even if it was lawful and in good faith if it results in being disadvantageous or a burden for the minority that is much more than what would be treated as reasonable commercially. Application: At the same time, oppressive conduct may also occur even in cases where the corporation is treating all the members evenly, for instance, in case of capital raising, where all the members have been invited to take part (Tomasic, 2002). Some instances of the conduct that has been described as being oppressive by the courts include the following:- The issue of shares mainly to dilute. The voting rights of the minority; the non-payment of dividends to the shareholders and making excessive payments to the directors when these decisions cannot be justified objectively under the circumstances of the corporation; persistently refusing to call the meeting of the company in order to prevent the participation of minority shareholders; or applying the ones of the company to benefit the interests of certain shareholders and not the others. Most of the cases of minority operation take place in case of unlisted private companies instead of public companies. This may be so due to the reason that in case of unlisted company, the dissatisfied shareholders can sell its shares, but generally there is no market or ill-liquid market for the shares of minority in case of a private company. Conclusion: Under these circumstances, Galli. Children can also take action under section 232 and claim relief from the court, including an order to issue dividend or to purchase their shares at a price decided by the court. In the present case, Mario and Nick are concerned with the dissatisfaction present among the A class shareholders. Therefore they want, the company to buy out the A class shareholders at the value that has been fixed by independent experts. Under these circumstances the benefits of a share buyback need to be examined. As the name suggests, a share buyback or the repurchase of shares is related with the process when a corporation re-acquires its own stock. In other words, in case of a share buyback, the company buys back its own shares from the shareholders (Weinstock v Beck [2013] HCA 14). A number of rules and regulations have been provided in Australia by the Corporations Act, 2001 and also by the ASIC. The option of share buybacks is considered by the companies due to the following reason. It appears that the directors are of the opinion that a share buyback has a positive impact on the business and also on the shareholders of the company. A share buyback can be described as a capital management strategy. Generally it is considered as a benefit or a reward for the shareholders. Therefore, while it is clear that the investors are benefited by the dividends, as in such a case the money is directly deposited into the bank account of the shareholders, the benefits received are them in case of share buybacks are indirect. In view of the factors mentioned above, by lowering the number of outstanding shares, ultimately helps the company in increasing its share price. In this case, the shareholders are given back their money and it also provides a chance to the investors to capitalize on their investment. At the same time, the management of the company shows that it has confidence in its own company, which can enhance the market sentiment towards the shares of the company. However, there is no absolute guarantee that a share buyback will cause net capital gains, because the price of the shares of the company relies on several factors. However, generally buybacks are considered as an effective way of investing surplus cash and at the same time, boosting the confidence of investors. Although, shared buy back can be inefficient way of using extra cash available with the company, but there are certain cases, when a share buyback may not be in the best interests of the shareholders of the corporation. However, in the end, they can be concluded that share buyback can prove to be an effective way for the management to boost the undervalued share price of the company and to reduce dilution. At the same time, share buybacks also allow the management to show their competence in the operations of the business. But as stated above, every share buyback is not automatically beneficial for the shareholders. Therefore, it is significant that the investors should evaluate the timing and the purpose of the buyback and. They should also consider the overall financial position of the company. Mario and Nick are also required to consider these factors, while making the decision for share buyback. References Farrar, J. H (2001) Corporate governance in Australia and New Zealand (KU956 F24) Farrar, J. H (2008) Corporate governance: theories, principles and practice (SJ100 FAR). Ford, H. A. J (1999). Ford and Austin'sprinciples of corporation law (KD956 F69) (9th ed.). Whincop, M.J., (2001) The Role of the Shareholder in Corporate Governance: A Theoretical Approach 25 Melbourne University Law Review 418 at 432-8 Tomasic, R (2002).Corporations law in Australia (SJ100 TOM). Weinstock v Beck [2013] HCA 14