Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/3.3.7:3.3.7 Membership requirement

Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/3.3.7

3.3.7 Membership requirement

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

In relation to the notion of prejudice, it is essential to observe how courts have dealt with the requirement that the prejudice is suffered in the capacity of member (qua member). This qua member requirement can be found in both the unfür prejudice remedy and the old oppression remedy. Under the old oppression remedy, only oppression suffered in the capacity of member could be remedied.

In order to prevent the unfür prejudice remedy from playing no significant role, like the oppression remedy that had a strict member requirement, the courts have given a broad view of what interests of members ought to be protected. In the words of Lord Hoffmann in 0 'Neill v. Phillips, the membership requirement should not be interpreted too narrowly or too technically.1 The protected interests of a member may differ, depending on character of the company. In Re a Company (No. 00477 of 1986), Lord Hoffmann gives an illustration of which interests this may concern:

"(...) in the case of a managing director of a large public company who is also the owner of a small holding in the company's shares, it is easy to see the distinction between his interests as a managing director employed under a service contract and his interests as a member. In the case of a small private company in which two or three members have invested their capital by subscribing for shares on the footing that dividends are unlikely but that each will earn his living by working for the company as a director, the distinction may be more elusive. The member's interests as a member who has ventured his capital in the company's business may include a legitimate expectation that he will continue to be employed as a director and his dismissal from that office and exclusion from the management of the company may therefore be unfürly prejudicial to his interests as a member."2

The interests of members concern the rights of the members under statute, the articles of association, as well as legitimate expectations of members. These legitimate expectations follow from the terms, agreements, or understandings based on which the member became associated.3

The unfür prejudice remedy does not protect interests of persons who happen to be a member, but which are not related in any way to the capacity as a member. In this respect the case of Re J E Cade & Son Ltd is of interest.

In Re J E Cade & Son Ltd, a member of a company sought for the application of the unfür prejudice remedy. He wished to join his petition under the unfür prejudice remedy with a claim aimed at the possession of the freehold of a farm, which he owned. The farm was occupied by the company. Wamer J considered that S. 994 only protects the interests as a member and not the interests as to other capacities. The interests as a member did not include the freehold of the farm. Therefore, Wamer J refused to include the claim.4

Deze functie is alleen te gebruiken als je bent ingelogd.