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Company Law

Rahul (202 Points)

10 May 2007

whether following acts aamounts to opression?

i) Allotment of shares by directors by which existing majority ios reduced to minority.

ii) Allotment of shares by directors by which existing minority shareholders are made to majority.
pls mention the case law also i m referring munish bhandari

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4 Replies

Mohit Jain (CHARTERED ACCOUNTANT) (86 Points)
Replied 10 May 2007

FIND ANSWER TO YOUR QUESTIONS BY REFERING TO SECTIONS 87 TO 89 OF COMPANIES ACT

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and Co (13 Points)
Replied 10 May 2007

Item No.1---Yes
Item No.2----???

adjf (13 Points)
Replied 10 May 2007

The One says:

Majority reduced to minority is, given requisite facts and circumstances, considered to be a case of oppression Re: Foss vs Harbottle.

Now coming to the interesting question of minority oppression on majority this is also possible wherein the minority uses the statutory protection bestowed on it to hold the majority shareholders in a stranglehold through the vieled threat of oppresion litigation. The law will provide protection to the majority in this case u/s 397/398.

Whereas the acts such as in this case are as such allotment of shares to a part of the shareholders without giving other existing shareholders the same right is a case of preferential allotment. The company should take the written consent of the existing shareholders and inform the ROC and Stock Exchanges. In any other case such an allotment would be illegal.

Other points of view are welcome. Give an explanation though for constructive discussion.