Foss Vs Harbottle Essay

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Introduction Ho, Lo and Ko are all the members and directors of Lemon limited company with same proportion of shares, while Ho and Lo are also the employees of the company. Three of them are sharing profits equally as director’s remuneration, and Ho and Lo receive fixed salary as an employee. Ho and Lo decided to expand the company further by opening outlet in shopping malls without consulting Ko. Ko need to forgo the sharing of profit as a director for an indefinite period to support the company 's growth, while Ho and Lo will still be able to receive the salary as an employee. Ko is not happy with the expansion plan and therefore asked to be bought out the company, Ho and Lo. In this case, the related area in company law is minority protection from unfair prejudice. The starting point of minority protection is Foss v Harbottle case, where there exceptions to the case to protect the rights of minority. In this essay, by looking through different case, I will discuss how Ko this case is not prohibited by Foss v Harbottle rule, and advise him action that he can take to the…show more content…
Firstly, a company is treated as a separate legal person from its shareholder, if there is any wrongdoing to the company, the proper plaintiff should be the company itself, but not any of the shareholders. Secondly, a court has no power to interfere the internal management of the company if the ordinary majority of the member can ratify the act . With the majority rule, it leaves the minority of the company unprotected, and therefore there are situations where Foss v Harbottle rule will not apply which are ultra vires and illegal contracts, absence/ deficiency regarding actions which require Special Resolution, personal right action and fraud by wrongdoers in control. Under these situations, minority shareholders’ rights are protected regardless of the majority

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