Protecting interest of the minority Shareholders
Protecting interest of the minority Shareholders
M S Siddiqui
Legal Economist and pursuing PhD in Open University, Malaysia e-mail: shah@banglachemical.com
The over-investment by directors is not good for the stock market and it should be addressed properly to find a way out and safeguard interest of minority shareholders from the experience of other markets, writes M S Siddiqui………………. http://www.thefinancialexpress-bd.com/2013/11/25/5614 In Asian countries including Bangladesh, the controlling ownership of public listed companies are dominated by some families. The problem of minority exploitation may arise when the ownership is highly concentrated in any specific group, especially family ownership. One of the consequences of this is the expropriation of minority shareholder rights.
Apart from family control another limitation of principles of corporate law is the principle of majority rule, sometimes called the “supremacy of majority” rule. Those who invested more in the company bear a greater risk in the event of a business failure, but simultaneously they have a greater degree of control over the company. There is certainly a risk that the majority will take advantage of the minority and that a company will be run at the expense of the minority shareholders.
Any decision of Annual general meeting (AGM) adapted by majority vote and directors are appointed and may be removed from the office at any time by a simple majority at the general meeting. Thus, the directors are motivated to act in the best interests of the majority who appointed them and who may remove them.
Minority shareholder rights expropriation occurred when family ownership directed cash to their own benefit, inefficient projects and connected lending to relatives and friends rather than return it in dividends to minority shareholders. Other expropriation can take the form of profit reallocation, assets misuse, transfer pricing, sell below the market price departments or
M S Siddiqui
Legal Economist and pursuing PhD in Open University, Malaysia e-mail: shah@banglachemical.com
The over-investment by directors is not good for the stock market and it should be addressed properly to find a way out and safeguard interest of minority shareholders from the experience of other markets, writes M S Siddiqui………………. http://www.thefinancialexpress-bd.com/2013/11/25/5614 In Asian countries including Bangladesh, the controlling ownership of public listed companies are dominated by some families. The problem of minority exploitation may arise when the ownership is highly concentrated in any specific group, especially family ownership. One of the consequences of this is the expropriation of minority shareholder rights.
Apart from family control another limitation of principles of corporate law is the principle of majority rule, sometimes called the “supremacy of majority” rule. Those who invested more in the company bear a greater risk in the event of a business failure, but simultaneously they have a greater degree of control over the company. There is certainly a risk that the majority will take advantage of the minority and that a company will be run at the expense of the minority shareholders.
Any decision of Annual general meeting (AGM) adapted by majority vote and directors are appointed and may be removed from the office at any time by a simple majority at the general meeting. Thus, the directors are motivated to act in the best interests of the majority who appointed them and who may remove them.
Minority shareholder rights expropriation occurred when family ownership directed cash to their own benefit, inefficient projects and connected lending to relatives and friends rather than return it in dividends to minority shareholders. Other expropriation can take the form of profit reallocation, assets misuse, transfer pricing, sell below the market price departments or