Question

The constitution of Big Hopes Pty Ltd contains a clause that enables the majority

shareholders to buy the minority shareholders’ shares at market value. The clause

goes on to provide that this power is given to the majority shareholders so that the

company would not have the added taxation and administrative costs associated with

having such holdings on its share register. Is this legal? Explain whether it would be

possible to alter the constitution. If so, how?

Answer 1

No. This is definitely illegal! All shareholders whether they are majority or minority shareholders hold the very same power. They all should have equal rights and same laws for all shareholders. No one should be given extra power or special powers and preferences just because they are majority shareholders.

It should never be allowed for majority shareholders to be able to buy the shares of the minority shareholders unless the minority are willing to sell it themselves!

The minority shareholders can take legal action against the constitution of Big Hopes Ltd. They can move legally and file a case against them stating that such illegal terms have been put up in their constitution. It is totally against the laws and hence should be corrected.

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