Fraud on the minority, Business Law and Ethics

Fraud on the minority:

The exception of "fraud on the minority" depends, whereas the company is defrauded, on "wrongdoer control," i.e. the individual shareholder must show that the wrongdoers control the company, as where they control the board and general meetings and will not permit an action to be brought in the company's name.  Furthermore, wrongdoer control is essential because cases of misappropriation of property and breach of duty can be ratified by a 51 per cent majority of the members which is not controlled by the wrongdoers.

The wrongdoers will obviously be in the above position if they have voting control as they had, for example, in Menier and Cook.  However, in Prudential Assurance Co. Ltd. v Newman Industries Vinelott, J. held that de facto control was enough, i.e. the company does what the wrongdoers want even though the wrongdoers do not have voting control.  They are able to persuade the majority to follow them.

Posted Date: 1/15/2013 2:56:43 AM | Location : United States

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