Prevention of oppression and mismanagement

In a housing society every member has one vote, and whatever the majority decides usually stands. A company works differently: votes follow shares, so a family holding sixty per cent can outvote everyone else on everything. Suppose that family starts paying itself large salaries, stops sending notices of meetings to the others, and issues new shares only to its own members. Do the smaller shareholders have to sit and watch? The Companies Act says no, and gives them an application to the National Company Law Tribunal under sections 241 to 246.

In two minutes

The general rule is that the majority rules and courts do not interfere in a company's internal affairs, but under s.241 a qualified body of members can apply to the Tribunal where the company's affairs are conducted in a manner prejudicial or oppressive to members or the company, and the Tribunal can make almost any order that ends the wrong (s.242).

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