A typical claim in a shareholders dispute is when a majority shareholder in control of a company prejudices a minority shareholder by improperly extracting value out of a company. This can be done in different ways, for example by payment of excessive salary or by sale of company assets to connected parties at a low value. Sometimes this can leave the company insolvent. Given that the principal remedy for unfair prejudice is an order requiring the majority shareholder to buy out the minority shareholder it appears to leave the minority shareholder in a no-win situation as the shares are effectively worthless. However, the court will step in to do justice in such a situation and this has been confirmed in the recent Court of Appeal case of Maidment -v- Attwood and others.
Posts tagged: Insolvency
As the recession grinds on a different kind of boardroom dispute is coming into play. Whilst directors must act collectively, they ultimately take responsibility individually. Where a company has become insolvent, or even where it has just lost value, the board, the shareholders or the liquidator may start looking for somebody to blame. When this happens directors must make sure that it is not their head on the block.
As once great retail companies like Woolworths collapse into insolvency and the car giants line up with their begging bowls for handouts from the US Treasury the sheer scale of the recession starts to become more clear. Even the lawyers are not making the money they are used to.