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Examine critically the rights of minority in a company when the notice to acquire their shares has been served - Essay Example

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Examine critically the rights of minority in a company when the notice to acquire their shares has been served. Introduction The effective protection of the rights of the members of each corporation has been a critical issue for legislators worldwide. Rules have been set for ensuring that all organizational stakeholders are adequately protected…
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Examine critically the rights of minority in a company when the notice to acquire their shares has been served
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Download file to see previous pages Current paper focuses on the examination of the rights of minority shareholders especially in the case that the notice to acquire their shares has been served. The relevant provisions of the Company Act 2006 have been studied, along with the literature published in the particular issue. It is proved that the law gives to the minority shareholders the right to promote the protection of their interests. However, when the notice to acquire their shares has been served to the minority shareholders, then their potentials for protecting their rights are reduced. Still, there are certain legal tools that can help the minority shareholders to secure their share in a particular organization. The effectiveness of these tools is further depended on a series of factors; the perceptions of minority shareholders on their organization and their skills to manage such projects highly affect the success of the efforts of the minority shareholders to secure their position as valuable members of the organization. Rights of minority in companies – overview The role and the rights of minority in modern corporations have been highly studied in the literature. The reference to the rights of minority shareholders in general is necessary in order to understand the potentials of the particular group of persons to seek for legal tools for protecting their rights after a notice to acquire their shares has been served. According to the most common view, minority shareholders have a major disadvantage compared to the majority shareholders: ‘they are not protected by shareholder decision rights’ (Kraakman 2009, p.195). On the other hand, minority shareholders can choose among different legal means for protecting their rights; reference can be made, for example, to the ‘sharing norms, rules and standards’ (Kraakman 2009, p.195). In this context, minority shareholders are given the chance to prohibit outside investors to enter the organization. Indeed, minority shareholders are allowed to make an offer for buying the shares of their organization before these shares are offered to the public in general (Kraakman 2009, p.195). The above right of minority shareholders is part of the ‘preemptive rights framework’ (Kraakman 2009,195). At this point, the rights of minority shareholders are considered as secured, a fact that results to the improvement of communication within the organization, meaning especially the communication between the majority shareholders and the minority shareholders, who are, by the law, vulnerable towards the majority shareholders who can control organizational decisions. However, the power of the above rule has been strongly criticized. More specifically, it is noted that the potential of minority shareholders ‘to refer to the preemption rule’ (Kraakman 2009, p.195) can be limited if such decision is developed by the shareholders. On the other hand, the common law rules seem to protect the minority shareholders more effectively compared to the civil law rules (Mallin 2007). Still, it should be noted that the protection of minority shareholders has not always set as a priority in the UK legal system (Mallin 2007). This fact indicates the potential inability of legislators to realize the level of risks that minority shareholders have to face. Sheikh (2008) emphasizes on the weakness of the existing laws ...Download file to see next pagesRead More
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