Protection of minority shareholders

A minority shareholder is an individual or entity that owns a minority stake in a public or private company. They provide capital to businesses, which eventually helps in creating jobs and boosting the economy. The protection of minority shareholders is also an important issue for investors as they are more likely to invest in companies that have strong protections for minority shareholders. Therefore, it is always important to protect the rights of minority shareholders of companies.

Minority shareholders are often at a disadvantage compared to the majority shareholders. This is because minority shareholders typically own a smaller percentage of the company's shares, which gives them less voting power and influence over the company's management. On the other hand, the majority shareholders can control the company's board of directors and make decisions that benefit them at the expense of the minority shareholders. Minority shareholders may be subjected to unfair treatment by majority shareholders, such as being denied dividends or being excluded from decision-making. As a result, it creates an issue of trust between majority shareholders and minority shareholders.

In Bangladesh, the Companies Act, 1994 offers certain safeguards for minority shareholders. According to section 233 of the Act, minority shareholders have the right to approach the court and seek remedies if they believe they have been prejudiced by the decisions of the majority shareholders. Subsequently, the court has the authority to issue orders aimed at safeguarding the interests of the minority shareholders. However, to avail this remedy, the minority shareholders would need to hold at least ten percent of the shares in a company with share capital, either individually or jointly. Therefore, when the minority shareholders are discriminated against by the majority shareholders, a petition can be filed under section 233.

If the court is satisfied that the minority shareholders have been oppressed, the court may modify the resolution, regulate the conduct of the company's activities, or amend any provision of the memorandum and articles of association of such company. If the court orders to modify the memorandum or articles of association, such changes may not be reversed without the permission of the court. Acting in contravention to an order passed by the court for protection of minority shareholders would be deemed to be contempt of court and is punishable.

Protecting the rights of minority shareholders means educating them about their rights and encouraging them to participate in the corporate company processes. This will help ensure that minority shareholders are aware of their rights and are able to protect themselves from getting exploited.

The writer is a student of Law at the University of Asia Pacific