Discuss how English Company Law addresses the concern regarding the protection of minority shareholders?

Essay by abidbarmaUniversity, Bachelor'sC+, April 2005

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The law concerning separate legal personality is largely governed by the 19th century case Foss v Harbottle, this case translates the doctrine of separate legal personality, the statutory contract and the principle of the majority rule. In Foss v Harbottle two members of the Victoria park Co brought an action against five directors and promoters alleging that they had misapplied the company's assets and had improperly mortgaged it property. The plaintiffs wanted to claim any losses that were suffered by the company. However the court held that loss in question was not suffered by the plaintiff's alone but the company it self. Also the fact that it was open to the majority in a general meeting for consent showed that the plaintiff claim had to fail.

The rationale behind is that a company is a separate legal entity with an identity of its own bound by the articles and the memorandum of association.

This contract lays down the basis of the legal relationship between the company and its members. As a result the member agrees to be bound by the decisions of the majority. Once a resolution is passed by the majority of the share holders any dissenting members will nevertheless be bound by it.

It may seem that minority shareholders are in a weak position in a company. That they would not be able to exercise any influence on the company and are effectively suppressed by majority shareholders. However, English law acknowledges the concerns of minority share holders and is trying to strike an optimum balance between the majority rule on one hand and the rights of share holders on the other.

Minority shareholders are those members holding 50% or less of the company's share have little power within the company as they cannot be certain of passing...