Shareholders' remedies for mismanagement by company directors

Abstract

The shareholder is the lifeblood of most companies today while the company director is one of the most important instruments used for the running of those companies, hence the importance of proper legislation to regulate the way that these two figures interact. Conflicting interests between the shareholder and the company director have proven to pose serious threats to the delicate framework of companies worldwide. Directors enjoy a privileged position in the running of a company without having any funds invested in the company (unless the director is also a shareholder, which is the case in most small, private companies). The shareholder, who is risking his investment, is left with limited powers, which can be exercised mainly during the annual general meeting. A majority shareholder would, in many cases, find these powers sufficient enough to influence and control the directors of the company. On the other hand, the minority shareholder is left with very little powers if any at all. Although the majority shareholder enjoys the above-mentioned powers there are still several occasions where he finds himself molested by some act or omission of the company director. In many legal structures worldwide, Company law has, over the years, aimed at providing remedies for all kinds of shareholders including particular remedies for the minority shareholder. Current legislation and jurisprudence, in particular of UK origin, provide a lengthy analysis on the matter. Company law aims at striking a balance between the obligations of the company director and the rights of the shareholders. This task has proved to be elusive as the number of problems that have arisen over the decades are so diverse in nature that legislators were obliged to provide a remedy at law which allows wide discretionary powers to the Court in order to adapt to the many different situations that company problems can pose.