Rights of the minority shareholders

This week Your Advocate is Barrister Omar Khan Joy, Advocate, Supreme Court of Bangladesh. He is the head of the chambers of a renowned law firm, namely, 'Legal Counsel', which has expertise mainly in commercial law, family law, labour law, land law, constitutional law, criminal law, and IPR.
 

Query:

I have recently bought some shares at a company. However, my opinions are not being considered as I am only a minority shareholder. Are there any rights for minority shareholders according to relevant laws?

Jahid (Anonymous)

Response:

Thank you for your query. For your information, company matters in Bangladesh are primarily governed by the Companies Act 1994. The rights of the shareholders in a company are according to the number/percentage of shares they possess. Thereby, a shareholder with fewer shares would have lower degree of control and authority over the affairs of the company in contract with shareholders holding larger amount of shares. In simpler words, majority shareholders naturally have more rights to make decisions for and manage the company than minority shareholders as reflected in both the forums of Board of Directors and general meetings of the shareholders. Thus, the decisions taken by the majority can be contrary to the view of the minority shareholder(s). While the majority have more rights and control over the management of the company, the entitlement as a result of their investments comes with higher risks as well.

Section 233 of the Act protects the minority shareholders from actions of the majority that may be 'prejudicial' to one or more shareholders of the company, or, which may discriminate against the interest of any shareholder. However, the protection under section 233 of the Act is conditional. As per section 195 of the Act, the protection under section 233 is subject to the minority shareholder/s holding a minimum of 10% of shares in the company if the company has share capital, and in case the company has no share capital, the minority shareholders having not less than one-fifth the number of a person on the company register of members. Therefore, under the first condition, if a minority shareholder holds, for example, 7% shares, s/he will not be eligible for protection under section 233.

In your case, the first question that arises is whether you were aware of the fact that you would have fewer rights if you become the company's minority shareholder. Companies usually do not vest such decision-making powers to their minority shareholders. It should be articulated in the Articles of Association of the company that you are the shareholder. If there are no decision-making rights, you can bring no claim against the majority for disregarding your opinion in the decision-making process/voting. Your right to file a complaint to the court under section 233 only arises if the majority acts in any manner that is prejudicial (harmful) or discriminatory to you, subject to the conditions in section 195 of the Act. If the majority acts in a prejudicial and/or discriminatory manner and one of the section 195 conditions is met, you can make an application under section 233 to the High Court Division of the Supreme Court of Bangladesh.

However, with the increase in the number of minority shareholders in companies these days, it is best to take preventative measures to protect your rights, such as having a shareholder's agreement or stipulation of further conditions in the Articles of Association prior to subscribing the shares.

I hope my answer will help you find a solution to the issue.

Send us your law related queries to dslawdesk@yahoo.co.uk