Introduction

The anxiety of law is to strike the optimum balance between the principle of
majority rule on one hand and protection of minority shareholders against abuse
of power on the other hand. If the pendulum were to swing too far in favor of
minority shareholders, they may impede the carrying on of the business of
company by oppressing the majority shareholders. Moreover if the law were to
allow minority shareholders unfettered standing to sue, there would be real risk of
multiplicity of litigation.so, allied to this point judiciary has long been reluctant to
interfere in the internal management of companies. The orthodoxy here is that the
management of companies is best left to the judgment of their directors who are
supposedly more commercially aware than the judges and are elected by majority
of members. By considering this point, it would appear that the minority
shareholders are in particularly in weak position within the companys matrix. The
effect of principle of majority rule together with the judiciarys reluctance to
interfere with management decision is that considerable power is given to those
who control boards of directors or general meeting. However, vis-a-vis to this
phenomenon law has provided certain exceptions too to guard the rights of
minority shareholders.

The rule in fuss vs. harbottle 1843

Facts of the case
(a) Two minority shareholders of Victoria Park Company who felt dissatisfied
with the action of four directors of company brought an action against them
on behalf of company the claimant alleged;
(b) That the directors had purchased their own lands for company at over
valuation.
(c) That the property of company had been misapplied and wasted and various
mortgages were given improperly over companys property.
These transactions were allege to be ultra vires and money so borrowed was said
to have been used to pay the directors as sellers of the land.
Judgment
Vice chancellor Wagram dismissed the claim on the ground that when a
wronged is done by directors then it is only the company that has standing
to sue. Injury in question was not suffered by claimant himself but it was
injury against the whole company so the claimant action must fail. To allow
the minority to bring action in these circumstances would frustrate the wishes
of majority. Court established two important rules in this case.
Firstly, the "proper plaintiff rule" is that a wrong done to the company may
be vindicated by the company alone.
Secondly, the "majority rule principle" states that if the alleged wrong can be
confirmed or ratified by a simple majority of members in a general meeting,
then the court will not interfere.

Exceptions to rule in fuss v harbottle

The rule in fuss v harbottle is not an absolute bar to individual shareholders
bringing an action in respect of an alleged wrong .Jenkin LJ in Edwards v
halliwell (1950) enumerate the circumstances in which minority shareholder
may sue.in essence he stated four exceptions to the rule in fuss v harbottle.
(a) Where the act complained of is illegal or is wholly ultra vires the
company.
(b) Where the matter in issue requires the sanction of a special majority or
there has been noncompliance of procedural requirements.
(c) Where a members personal rights have been infringed.
(d) Where fraud has been perpetuated on minority and wrongdoer are in
control.

1.Illegality and ultra vires acts

Where the wrongful act in issue is ultra vires the company then rule in fuss v
harbottle does not apply because the majority of member cannot confirm the
transaction. Similarly Romer J in cotter v national union of seamen (1929) stated
that; an action at the instance of individual member of an incorporated company is
no doubt permissible where majority of members proposing to something that is
ultra vires the corporation or in which the object of action is to recover money
fraudulently withheld from the company by persons, who themselves held the
majority of shares are well known instances.

Smith v croft 1988.

Facts.
The act in question was related to giving of financial assistance to facilitate the
acquisition of share in company contrary to the requirements of companies act
1981: it was illegal and therefore ultra vires the company.

Held:
It was held that shareholder could bring a personal action to restrain the company
from so acting contrary to right as an investor to have the business conducted in
accordance with the memorandum and articles of association.

2. Non-compliance of procedural requirements

An individual shareholder will have locus standi to sue where the act complained
of requires the approval of special majority of members and such a resolution has
not been obtained.

Edwardss v halliwell (1950)

Two members of a trade union obtained a declaration that a resolution increasing
members subscription was invalid because the required two third majority for
such a resolution had not been obtained.
Jenkin LJ said that;
The reason for exception is clear, because if the rule were applied in its
proper way, a company which by its directors had broken its own regulations
 by doing something without passing special resolution which could only be
done by passing special resolution could assert that it alone was the proper
plaintiff in any consequent action and the effect would be to allow company
acting in breach of its articles to do de facto by ordinary resolution that which
according to its own regulations could only be done by special resolution .
But here company had done something wrong rather than victim of being wrong.
So the exception exactly fits the present case.

3. Personal rights of members infringed

Rule in fuss v harbottle will not apply where personal rights of members have been
invaded. If the majority are abusing their powers, and are depriving the minority of
their rights, there the minority are entitled to have their rights maintained by courts.

Pender v lushington (1877)

Facts
Mr. John Pender had bought 1000 shares of direct United States Cable
Company Ltd. He was also chairman of Globe Telegraph and Trust
Company Ltd, a holding company of a large group with competitors to the
Direct United States Cable Company. Mr. Pender had split his votes and
registered the holders under the names of a number of nominees. After more
than three months he then proposed the following motion at a general
meeting.
That it is expedient to put an end to the present antagonism of this company
towards the Anglo-American Telegraph Company and its connections, and
to work this company's cable in friendly alliance with their lines; and that a
committee of shareholders be appointed to be named by the meeting to
confer with the directors as to the best method of giving effect to this
resolution, and to report to the shareholders thereon at such time as the
meeting shall appoint.
The opponents to the motion, including the company's directors and the
chairman, Mr. Lushington, proposed to amend the resolution so it had the
opposite effect. Mr. Pender and his nominees voted against any amendment
and would have won if the votes of the nominees were counted. But Mr.
Lushington refused to have the nominees votes counted. He, along with
other supporters of the motion sued for an injunction.

Held.
Lord Jessel MR held that Pender could have an injunction for his vote to be
recorded. Pender's vote was a property right which could not be interfered
with, nor were the motives in this case such as to make the vote invalid.
Furthermore, as a matter of litigation, Pender could sue in the name of the
company, as well as in his own name. Interference with a personal right
created both a derivative claim and a personal action.

4. Fraud on the minority

Where fraud has been perpetrated by those who hold majority control of
shares of company against company and will not permit an action to be
brought in the name of company then in that case rule provided in fuss v
harbottle will not apply. The effect of fraud will render resolution void.

Burland vs. earl (1902.)

Lord Davey gave the following example of fraudulent conduct.
When the majority are endeavoring directly or indirectly to appropriate
to themselves money, property or advantages which
belong to Company or in which the other shareholders
are entitled to participate.
The essence of the matter seems to be an abuse or misuse of power and
that the term carried its wider equitable meaning. It therefore covers conduct
that is plainly improper but not necessarily deceitful.

Cook v Deeks (1916)

A majority of the directors who were also the majority shareholders of the company,
took the benefit of a contract negotiated on behalf of the company. The directors
sought to ratify their actions by a resolution of the members in general meeting. The
Privy Council found that the directors had breached their Fiduciary duty to the
company and the members resolution was invalid.
Lord Buckmaster took view;
deliberately designed to exclude and used their influence and position
to exclude, the company whose interest it was their first duty to
protect... the benefit of such contract... must be regarded as held on
behalf of the company... [It was] quite certain that directors holding a
majority of votes would not be able to make a present to themselves.
This would be to allow a majority to oppress the minority... Such use of
voting power has never been sanctioned by the court.

Brown v British abrasive wheel company (1919)

Facts
British Abrasive Wheel Co needed to raise further capital. The 98% majority
were willing to provide this capital if they could buy up the 2% minority.
Having failed to effect this buying agreement, the 98% purposed to change
the articles of association to give them the power to purchase the shares of
the minority. The proposed article provided for the compulsory purchase of
the minoritys shares on certain terms. However, the majority were prepared
to insert a provision regarding price which stated that the minority would get
a price which the court thought was fair.

Held
Astbury J held that although there is no allegation of mala fides on the part
of majority shareholders but the alteration was not for the benefit of the
company as a whole and could not be made. One reason for this was that
there was no direct link between the provision of the extra capital and the
alteration of the articles. Although the whole scheme had been to provide the
capital after removing the dissenting shareholders, it would in fact have been
possible to remove the shareholders and then refuse to provide the capital.
The company was stopped from making alteration in articles to benefit the
majority shareholders.
5. The interest of justice
Minority shareholder can sue when the interest of justice so requires. In this
situation rule provided in fuss v harbottle will not apply.
Sir James wigram in fuss v harbottle;
If a case should arise of injury ta a corporation by some part of its
members for which no adequate remedy remains, except that of a suit
by individual cooperators.the claim of justice would be found
superior to any difficulties arising out of technical rules respecting the
mode in which corporations are required to sue.

Prudential assurance ltd v Newman industries ltd 1979

facts
Members of the defendant company had approved in general meeting, of an
acquisition of the assets of another company in which its directors were
substantially interested. The shareholders approval was given on the basis
of a circular. The action was commenced against the directors by the
Prudential as a minority shareholders action alleging that the circular was
tricky and misleading. It sought damages for conspiracy.

Held
The plaintiff have suffered damage and it is in the interest of justice to award
damages to plaintiff against the defendants.

Minority rights under Pakistani law

Pakistani company law provides almost the same rights and remedies for the
protection of minority shareholders rights. Under section 290 of the
companies ordinance 1984 provides that a minority shareholder can prevent
oppression and mismanagement by filing an application to the court. Same
mechanism has been provided under section of 286 of the latest companies
act 2017. Moreover, the securities and exchange commission of Pakistan
has set up a task force to identify weakness and gaps in the current
protection mechanism for the shareholders of companies and suggest ways
and means to overcome these shareholders activism. This consist of
representatives of SECP, three stock exchange and institute of chartered
accountants of Pakistan, principally representing minority shareholders,
institutional investors, nominee of professional accounting bodies and other
stakeholder. It will consider establishing a permanent platform for the
dialogue and cooperation on minority shareholders issues. This will offer a
unique opportunity to diverse stakeholders including minority shareholders
to come together in a spirit of cooperation to address some of the key issues
that challenge minority shareholders rights.SECP is of view that all
shareholders must be remedied in case of any grievance.

Conclusion
In corporate law , an oppression remedy in other words is statutory right
available to every share holder it empowers the shareholder to bring an
action against the corporation in which they own shares when the conduct of
the company has unfairly disregards the interests of shareholder. The
oppression remedy is a powerful tool for rectifying situations in which a
minority shareholder has been treated in a manner which disregards its
reasonable expectations beyond its legal rights.