The recent case of Kohli v Lit and others should serve as a warning to directors that acting against the interests of a minority shareholder could cost them dearly.
In the case, Kohli was a minority shareholder in Sunrise Radio Limited. Kohli alleged that her position had been undermined because shares had been issued at nominal value to a company linked to a Sunrise director; that the company accounts failed to detail directors' remuneration; that the company accounts had been prepared and filed late; and that the company had failed to get shareholder approval for the sale of a property on one of the directors.
In the end, the court found that the sale of the shares ignored the true value of the shares and therefore breached the fiduciary duty the company owed to the shareholders. It also found that whilst the issue of directors remuneration was unintentional, it could see how it would undermine confidence in the directors. In adding all of this to the failure to prepare and submit accounts and the upset over the sale of the property to a company director, the court found a case of unfair prejudice toward Kohli.
The court made an order - as requested by Kohli - that the other directors buy her shares in Sunrise without discount.So, just because a shareholder is in the minority, it's clear that their rights cannot be trampled over.
This was first published in January 2011