Minority Shareholders’ Rights and the Majority Rule under Corporate Governance: An Appraisal

• Jurisdiction: South Africa
• Published date: 16 August 2019
• Author: Oluwasegun Isaac Aderibigbe
• Date: 16 August 2019
• Pages: 100-113

MINORITY SHAREHOLDERS’RIGHTS AND THE

MAJORITY RULE UNDER CORPORATE

GOVERNANCE: AN APPRAISAL

OLUWASEGUN ISAAC ADERIBIGBE*

Law lecturer and researcher, Faculty of Law, Bowen University, Iwo, Nigeria

ABSTRACT

This article examines minority shareholders’rights under corporate governance; what those

rights are and what they should be, particularly in developing jurisdictions like Nigeria.

The article subscribes strongly to the quest for the recognition and enforcement of minority

shareholders’rights under corporate governance.

Once a company is incorporated, it assumes a legal status distinct from its subscribers; it

can sue and be sued in its corporate name. Consequently, whenever the company has been

wronged it is only the company that can seek redress;this is founded on the doctrine known

as the majority rule as laid down in Foss v Harbottle.

1

The courts and a number of

corporate laws in developing jurisdictions have over the years laid down several exceptions

to this rule, thereby giving the minority shareholders right to seek redress against the

majority shareholders in certain circumstances. This article interrogates the rationale

behind the exceptions to the majority rule, with a special focus on developing jurisdictions.

The article concludes that the majority rule is tainted with oppressive intentions rather

than being a strategic imperative, particularly in respect of the right of minority

shareholders to seek redressin court and that the strict application of the majority rule may

create some intricate practical and legal problems. The success of the free market economy

depends on the success of companies which rely on the leadership and performance of

directors. The success of companies depends on directors bringing enterprise and integrity

into their relationships with all shareholders,particularly minority shareholders.

This research paper makes a modest contribution to knowledge in the sphere of minority

shareholders’rights and discusses how to facilitate a robust regime of the recognition and

enforcement of minority shareholders rights under corporate governance in developing

countries.

Keywords: minority shareholders, majority rule, corporate governance

L’article met l’accent sur les droits des actionnairesminoritaires; ce que ces droits sont et ce

qu’ils devraient être. La nécessité de la protection des droits des actionnaires minoritaires

découle de la personnalité juridique d’une société. Une fois qu’une entreprise est

incorporée, il assume un statut juridique distinct de ses actionnaires; il peut être justiciable

sous sa dénomination sociale. Par conséquent, lorsque la société a été lésée, il est seulement

l’entreprise qui peut demander réparation, donc la doctrine connue comme la règle de la

majorité prévue dans le cas Foss v. Harbottle. Selon cette règle, pour réparer un

dommage causé à la société ou à la propriété de la société, ou pour fairerespecter les droits de

la société, le demandeur approprié est la société elle-même, et le tribunal ne pourra pas

normalement connaître d’un recours introduit le nom de la société par un actionnaire

* LLB (Hons) LLM MPhil BL MNIM ACIArb (UK), +2348055453177 seguna-

deribigbe@lawyer.com, oluwasegun.aderibigbe@bowenuniversity-edu.org

1

(1843) 2 HARE 461

100

(2016) 3(1) Journal of Comparative Law in Africa 100

© Juta and Company (Pty) Ltd