Page 59 - Q&A

or exchange of shares, appointing directors in addition to existing directors,
directing the company or any person to pay a shareholder any part of the
consideration paid for shares or the equivalent value thereof, setting aside
a transaction to which the company is a party and payment of appropriate
compensation etc.
Our courts will not always grant relief to a minority shareholder and to some
extent a minority shareholder should be aware of their minority status and that
there may be instances where the majority shareholders resolve a decision
which he does not agree with. An applicant can only be successful if they can
establish that the majority shareholders departed from the standards of fair
dealing or they can rely on unfair discrimination against the minority. Commercial
Legislation does provide minority shareholders with protection, although
this is not open ended. Minority shareholders should therefore be proactive
and request that certain additional measures be built into the MOI of the
company and shareholders agreement which can, to a certain extent, afford
greater protection to the minority shareholders. Such measures may include
the following:

• The inclusion of pre-emption rights. This will ensure that the shares are
offered to the existing shareholders first before being sold to third parties.
This curbs against minority shareholders’ shareholding in the company
from being diluted.
• The provision of specially protected matters. The shareholders agreement
and/or MOI can set forth specific matters which can only be acted on if
the minority shareholders agree to them.
• The representation at board and shareholder level. The shareholders
agreement and/or MOI can set forth that minority shareholders must
be present at shareholder meetings before a quorum is constituted for a
meeting of shareholders. Provisions can further be included to stipulate
that each and every shareholder, notwithstanding his/her/its voting rights,
may appoint a director to the board of the company.
• The inclusion of a tag-along clause. The inclusion of such a clause would
ensure that minority shareholders are given a chance to participate in
any sales which the majority shareholders participate in and that minority
shareholders are not forced to remain as shareholders in a company with
a new majority shareholder.
• The conclusion of a pool shareholders agreement. Minority shareholders
can pool their shares together and vote collectively as a unit to strengthen
their voting position.
• The variation of the standard percentages set out in Section 64 and
Sections 65(8) and 65(9) of the Companies Act.

A minority shareholder is afforded legislative protection to a certain extent.
But before embarking in litigation it is advisable to try a softer angle and

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