The protection of minority shareholders, particularly under Section 402 of the Companies Act 1995

Abstract

For over two thousand years, political theorists have tried to establish the best method of governing a community where numbers make it impossible for all to be involved directly in government. Of all the models tried and tested, the one which has proven to be the simplest and most democratic is that of "majority rule" in terms of which the wish of the majority shall prevail over that of the minority. This principle has also been adopted in relation to the management of companies. In fact, since Victorian times, the principle adopted is that the holders of fifty percent plus one of the shares cast at a meeting of the shareholders of the company shall determine the fate of such company. Consequently, the minority has no choice but to submit itself to the will of the majority, unless the Courts interfere at the suit of a minority of the members or of an individual member. However, as stated by Lord Wedderburn, although it is widely accepted that "shareholder democracy" is a practicable concept, it is, however, "fallacious" since any idea of "shareholder control as a counter to managerial power is baseless" (except in the case of small companies), modern company law still champions that phantom.