Right and protection of interest of the minority shareholders

8 August 2016

Abstract This paper examines “Rights and Protection of the Interest of the Minority Shareholders” I will discuss the recent development, issues and legal practices in the subject in Bangladesh perspective as well as international. Rights of Minority Shareholder and protection of their rights is now talked topics as new problems are emerging regarding the issues. A few initiatives have taken by national level and problems are gradually increasing, therefore some recommendation has been prescribed in the paper. 1. Introduction:

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There are various problems founds in Bangladesh in order to enforcing the rights and interests of minority shareholders. Minority shareholder are oppressed and neglected due to the system of controlling trend by the family members who owned the company and controls the company. Therefore rights of those minority shareholders become unprotected. Thus a gradual attention is growing up and more importance and emphasizes has to be given to protects the rights of the minority shareholders. 2. Defining Minority shareholder

Minority shareholder is a shareholder who owns less than 50 percent of the total shares of a corporation’s stock. A minority shareholder does not have the voting control of the corporation; neither can s/he single-handedly elect the directors of the corporation. They even don’t have any real say in the running of the company or corporation A shareholder who holds a significant amount of stock in a company but still has less than 51% is a minority shareholder. While technically even a person who owns one share is a minority shareholder, the term most frequently applies to persons and companies with large stakes.

The corporate shareholders that do not have a controlling interest in the company are known as “minority shareholders. ” 2Minority rights are of course typical to common shares, but other types of corporate securities may need protection against a majority power. By reference to “minority” rights, shareholders having a minority position. Some clarifications are needed here, for a better understanding of what a “minority” . Minority is a relational legal concept, whose definition needs the notion of majority.

Majority is often defined by reference to the voting power, or to the capital prevalence. The two parameters do not necessarily coincide, as it is shown by such devices as then on-voting shares, or, at the other extreme, shares with overwhelming power, such as the much-disputed “golden share”. Therefore “minority” is a floating concept. The majority power is usually visible at general meetings. The general meeting is the institutional gathering of shareholders. It is the “legislative” forum of the company, where decisions are taken.

It is often regarded as the “supreme” organ of the company, although the laws vary in what concerns the division of power between this body and the board of directors. The fact remains that the general meeting elects the board, approves the accounts, amends the articles of association (the “articles”), and decides on major matter of the company life. 3 3. Rights of the minority shareholders Minority Shareholder Rights Minority Shareholder Rights Minority shareholder rights consist of rights that are generally available to all shareholders and rights that may be available under state close corporation laws.

Corporations are governed by state law and shareholder rights are set out in the corporate statute of the company’s state of incorporation. Typical rights are: •The right to vote on the election of directors; •The right to amend corporate bylaws; •The right to amend articles of incorporation; •The right to vote on major corporate events such as mergers, liquidation, or the sale of substantially all the corporation’s assets; •The right to take action through a written consent; •The right to annual stockholder meetings; •The right to call special stockholder meetings; and

The right to inspect books and records and the list of shareholders. However, minority shareholders often find that they are unable to exercise the above rights because the majority shareholder(s) control the corporation. Minority shareholders should address this issue by exercising their freedom to contractually secure greater rights than the corporate statute explicitly allows. In some states, “close corporation” statutes allow minority shareholders greater flexibility to preserve minority shareholder rights through contracts such as Buy sell and Shareholder Agreements.

Rights Under The Memorandum And Articles Of Association. The Memorandum and Articles of Association (“M&A”) of a company are the constitutional documents of a company. The M&A are important documents as they set out and regulate among other things the objects of the company and the manner in which the company to be managed. The M&A take effect in law as a contract between not only the shareholders and the company, but between each individual shareholder and every other. Generally, an affected individual shareholder may bring an action in court to prevent any proposed breach of the M&A.

In appropriate cases, the court may also set aside acts done in breach of the M&A. However, where a third party is involved, the courts may be less prepared to set aside the transaction unless the third party knows or possibly ought to have known of the breach. To further entrench rights under the M&A, the law provides that the M&A can only be amended by a special resolution, that is to say a resolution passed by a majority of not less than three-fourths of the shareholders voting either in person or by proxy at the general meeting of the company.

The M&A is therefore an important starting point for a shareholder who may feel aggrieved. A shareholder is entitled at law to a copy of the M&A, and on request, the company is required to send a copy of the M&A to the shareholder. ii) The Right To Information As the saying goes, knowledge is power. This is no different in the case of the minority shareholder, who often by reason of not being involved in the day to day management of the company, will not possess detailed information on the affairs of the company.

The law strikes a balance from requiring too much disclosure (which may be overly burdensome and affect the ability to maintain a degree of confidence that may be necessary to the running of a business), and the need of shareholders not in management to be informed. The following are some of the sources of information on a company. The registers referred to in sub-paragraphs i), ii), iii) and iv) below may be inspected by a shareholder without charge, and copies may be obtained by payment of a nominal charge.

The register of shareholders. This register which is generally kept at the registered office of the company would provide information as to the names and addresses of the shareholders and their shareholdings. The register of directors, secretaries, managers and auditors. This register which is kept at the registered office of the company would contain certain prescribed information on the personal particulars of these persons and of their appointments.

Separately there is a register of director’s shareholdings kept at the registered office that would among other things show a director’s shareholding in the company or in a related corporation, and whether any director has rights or options to acquire or dispose of shares in the company or a related corporation. The register of substantial shareholders. This register which is kept at the registered office of the company would provide information on persons interested in not less than 5% of the voting shares in the company and the extent of their interest.

The register of debenture holders and the register of charges. These registers are usually kept at the registered office. A debenture is generally a document which creates or acknowledges a debt. The register of debenture holders would provide particulars of debenture holders to whom the company has issued debentures (other than debentures transferable by delivery) and the amount of debentures held by them. The register of charges would provide information relating to most forms of security granted by a company to secure obligations of the company.

The minute book of general meetings. The minute book is kept at the registered office or principal place of business of the company. A shareholder may inspect without charge the minute books which are required to be kept or proceedings of all general meetings of the company. The audited profit and loss accounts of the company, the auditors’ report and the directors’ report. These reports are required to be sent to shareholders not less than 14 days before the general meetings of the company at which the accounts are to be presented.

These documents provide useful information relating to the financial affairs of the company. i)The Registry of Companies. The Registry maintains a record of documents lodged with the registry. Copies of documents containing much of the information described above may be obtained from the Registry. iii) The Right To Attend, Vote And Call General Meetings Of The Company A shareholder has a right to attend any general meeting of the company. A shareholder is also entitled to speak at the meeting.

General meetings of companies are important occasions for minority shareholders, especially of large companies, as it is an occasion to meet and ask questions of the management. Further, shareholders of a company (other than those holding non-voting preference shares) are entitled to vote on any resolution. With one exception, such rights may not be excluded by the M&A of the company. The exception is that the law allows a company to provide in its Articles for suspension of such rights where calls or other sums payable by a shareholder in respect of his or her shares have not been paid.

The General Right To Be Treated Fairly – The Statutory Remedy Under Section 216 Of The Companies Act Section 216 of the Companies Act embodies the general right of a shareholder, in particular a minority shareholder, to be treated fairly. Cases in court dealing with the section show that while the courts recognise the rights of the majority, where there has been a visible departure from the standards of fair play expected on the part of the majority of those in management, the courts may intervene to provide a remedy.

Under the section, a shareholder may apply to court for assistance where: the affairs of the company are being conducted or the powers of the directors are being exercised in a manner oppressive to one or more shareholders or in disregard of his or their interests as shareholders; or some act of the company has been done or is threatened or that some resolution of the shareholders, or any class of them has been passed or is otherwise prejudicial to one or more of the shareholders (including the shareholder making the application).

Under the first ground, the affairs of the company would be conducted in an oppressive manner where there is a visible departure from the standards of fair dealing and a violation of the conditions of fair play that a shareholder is entitled to expert. A case of disregarding the interest of a shareholder will be made out where those in control of the company despite being aware of the interests of the minority make a deliberate decision to override or brush it aside.

Under the second ground, a case may be made out where there are discriminatory acts which cannot be justified with reference to the interest of the company and which operate unfairly. Alternatively, a case may be brought on the ground of unfair prejudice, and in this regard there are a great number on instances where a case of unfair prejudice may be made out. Case law indicates that the courts are more willing to make a finding of unfair prejudice where the conduct complained of is not in accordance with the articles or some other requirement of law.

Exceptionally, conduct that is lawful may, in certain limited circumstances, be unfairly prejudicial. This is, however, the exception rather than the rule. The exception arises in situations where the articles do not reflect the understanding upon which the shareholders were associated. In this regard, if there are legitimate expectations on the part of the shareholder which have been breached, the court may intervene and provide a remedy. In general, however, shareholders (particularly of large companies having many shareholders) have no additional legitimate expectation beyond that conferred on them by the constitution of the company.

If the case is made out under section 216, the court has wide powers to remedy or put an end to the matters complained of. For instance, the court may direct or prohibit any act or cancel or vary any transaction or resolution. The court may also make orders to regulate the conduct of the company in the future. In appropriate cases, the court may authorise civil proceedings to be brought in the name of the company against persons against whom the company has claims. The wide breadth of the powers of the court go so fast as to allow the court to wind up or liquidate the company if such is necessary to remedy or end the matters complained of.

The consequences of winding up a company are further dealt with in Part E of this article. v) The Remedy Of Winding Up The Company The courts may, among other grounds, wind up a company on an application by a shareholder where: the directors have acted in the affairs of the company in their own interests rather than in the interests of the shareholders as a whole, or in any other manner whatever which appears to be unfair or unjust to other shareholders. It is just and equitable to do so.

The courts have made clear that it is wrong to limit the circumstances in which a case for winding up on the just and equitable ground may be made out. The courts, however, often do require some sufficiently serious wrongdoing, improper conduct or breach of some understanding or legitimate expectation on the part of a shareholder. Cases have also shown that the remedy is not only available in cases where some breach or infringement of some legal rights is involved, such as a breach of the M&A, but also breaches of some legitimate expectation on the part of a shareholder that may not be founded on the legal right.

For instance, in small and closely run companies, the courts have on occasion granted the remedy where a shareholder’s legitimate expectation to participate in management was infringed. It should, however, be mentioned that the larger the company and its number of shareholders the more difficult it would be in the circumstances of the case to establish a legitimate expectation. This is because with a large shareholder base, it is more likely that shareholders would regulate their activities by reference to more formal and legal arrangements such as the M&A rather than informal and unwritten arrangements and expectations.

Winding up is a drastic remedy in that it puts into operation a process which would lead to the end of the company. Except for a short period after a winding up order is made, the company would no longer be able to do business and steps would be taken to wind down the company. Investigations into the affairs of the companies including the acts of directors and officers of the company may be undertaken in the process of winding up. Thus, in appropriate cases, the remedy of winding up is a powerful remedy, although often of last report, available to shareholders. vi) The Right to Sue On Behalf Of a Company

There may be occasions where a wrong is done to a company, but the majority or those in control of the company decide to take no action in respect of the wrongdoing. Since the wrong is to the company, the claim has to be brought by the company and a minority shareholder will ordinarily have to abide by the decision of the majority or those in control. This is a usual aspect of majority rule. However, where the act complained of is beyond the objects of the company as set out in the memorandum of the company, any shareholder may sue to have the transaction restrained.

This is This right at general law is supplemented by section 216A of the Companies Act which sets out a procedure to allow a shareholder to apply to court in appropriate cases to allow an action by the company to proceed. The procedure under section 216A is, however, not available in respect of companies listed on the Singapore Exchange. However, there is nothing to preclude a claim being brought under general law in the case of listed companies. Because the majority has no right to require the company to do something beyond its objects.

Further, exceptionally the courts in the interests of justice would, applying general law, allow such a claim to be brought by the minority, especially where there has been an abuse of power. A common instance where the minority has been allowed to bring or maintain the action is where the majority of those in control have stifled legitimate claims being brought against themselves. 5 vii) Warranty When a shareholder’s agreement includes a warrant of shares, it specifically lists who owns what amount of shares.

As a minority shareholder, it’s useful to know the total number of shares outstanding, and the percentage of ownership held by other shareholders. viii) Pre-Emptive Rights With pre-emptive rights, a minority shareholder is guaranteed the right to purchase any new shares issued. This protects your percentage of ownership. However, it can also cause delays in stock sales and turn away institutional investors. ix) Right of First Refusal Right of first refusal is similar to pre-emptive rights.

However, right of first refusal focuses on existing stock, not the issuance of new shares. With first refusal rights, any stock sold by an existing shareholder must first be offered to other existing shareholders on a pro-rated basis to maintain percentage ownership x) Piggyback Rights When a majority shareholder sells her shares, a minority shareholder has the right to be included in the deal. This is called “piggybacking. ” It protects your investment should the company be sold. 6 xi) Inspection rights –

A minority stockholder has the right to inspect the corporation’s stock ledger, a list of its stockholders and its other books and records (and to make copies of such items). There are, however, certain formal procedural requirements that the stockholder must comply with, including making a written demand upon the corporation, “under oath” and stating a “proper purpose. ” Derivative lawsuits are generally brought when directors and/or officers of the corporation have breached their fiduciary duty owed to the corporation.

There are two broad categories of breach of fiduciary duty: a breach of duty of loyalty or a breach of duty of care. For example, a minority stockholder could bring a derivative suit against a director or officer who allegedly used the corporation’s assets for personal gain (a breach of duty of loyalty). The stockholder must typically first make a written demand on the corporation’s board of directors to be permitted to proceed with a derivative suit. The board can either accept or reject the demand.

Delaware law, however, recognizes a “futility” exception and excuses demand if the stockholder alleges particularized facts creating a reasonable doubt that the directors are disinterested and independent or that the challenged transaction “was otherwise the product of a valid business judgment. ”7 In many circumstances, a minority shareholder may be affected by a wrong done, not to them personally but to the company by the majority. For example, diversion of contracts from the company to the directors personally.

The minority shareholder faces an impossible task in attempting to force directors into bringing an action against themselves. In certain circumstances the courts will allow a minority shareholder to bring a claim in the company’s name. The minority shareholder has no greater right to relief than the company would have were it to bring an action itself. Any financial award accrues to the company itself. Personal Claims All shareholders have rights that they can enforce against the company and other shareholders whether or not a formal shareholders’ agreement has been reached.

These include objection to alteration to the Memorandum and Articles of Association, the variation of class rights, the giving of financial assistance and the enforcement of directors’ duties, prevention of ultra vires transactions and in relation to certain take-over offers. The Memorandum and Articles of Association represent a statutory agreement between the shareholders and the company as to how the company is to be run. The court will enforce a breach of that agreement. An otherwise proper attempt to vary the articles can be actionable if it affects rights already in existence or the majority has not acted in good faith.

Protection of the minority shareholder A minority shareholder has certain statutory rights, depending on the size of its stake in the company. Under English law, an interest of 25% gives the shareholder the power to block the passing of special or extraordinary resolutions, which covers a limited but important number of matters. However, a minority shareholder cannot block ordinary resolutions, which are decided by majority vote and are required for most decisions of the company.

A minority shareholder may also, in extreme circumstances, be able to apply to the court on the basis of conduct which amounts to unfair prejudice by majority shareholders, but the remedy is limited and rarely a satisfactory protection. Given the limitations of the protection afforded by statute, minority shareholders will seek express contractual protections in the shareholders’ agreement and/or bylaws of the company. A minority shareholder with a large stake or in a strong bargaining position may seek a right to appoint a director supported by a requirement that its representative is a necessary part of a quorum.

It is also important to have veto rights over certain important matters (known as reserved matters) which can then be entrenched at board or shareholder level, through the requirement that they be subject to unanimous or super-majority approval. Additional protections for minority shareholders may include tag-along rights, and establishing a put option, whereby majority shareholders can be obliged to purchase the shares of the minority shareholder in accordance with a pre-determined price formula and at a defined stage. 9 5.

Principle of supremacy of the majority and minority Protection The affairs of the company are controlled by the decision of the majority shareholders passed in the general meeting of the company. In this sense, the directors have wide power to control, direct and manage the affair of the company. So the principle is that “the courts will not in general” intervene at the instance of shareholders in matters of internal administration, and will not interfere with the management of the company by its directors so long as they are acting within the power conferred on them under the articles of the company.

So once what is decided by the majority of the shareholders shall not be the subject to the court’s interference on the application of a shareholder unless there is any violation of law. 11This is called the principle of supremacy of the majority shareholders which was established in the famous case of Foss vs Harbottle. In this case the court rejected the action brought by the shareholders contending that injury, if any was injury to the corporation as a whole and to the plaintiff’s exclusively and therefore, action should have been brought by the corporation itself and not by the minority shareholders.

Again in 1875 the principle of foss vs harbottle was adopted in another case namely, Mac Doug all vs Gardiner. In the same way, in the case of Burland vs Earle. Lord davery observed it is an elementary principle of law relating to joint stock companies that the court will not interfere with the internal management of companies acting within their power and has in fact no jurisdiction to do so. Again it is clear law that in order to redress a wrong done to the company or to recover money or damages due to the company, the action should prima facie be brought by the company itself.

In the case of Bhajekar vs Shinkar the managing afents of a company were appointed by the directors of the company. Latter on the appointment was confirmed at two general meeting of the company. But some of the shareholders objected the appointment on the ground that their appointment was against the interest of the company. But the court rejected the contention of the minority application. Protection of minority shareholders- From our previous discussion we see that the decision of majority shareholder prevails. But it does not happen in all the situations.

In such cases and every shareholder has the right to sue the company or to the directors to enforce right. In American jurisdiction it is termed as “derivative action”. However the principle of minority shareholder right to sue of a single shareholder is an exception to the principle laid down in the case foss vs harbottle. The exceptional situations where minority shareholders can enforce their right a follow- Ultra vires acts. Illegal acts. Acts required special majority. Fraud on minority. Infringement of personal membership right.

Wrongdoers in control. Oppression and mis management. Ultra vires- If the majority of the shareholders do any act which is not permissible by the memorandum or articles of association of a company then it will be amounted s ultra vires act and for this type of ultra vires act, the minority is entitled to fail a suit to enforce right. 12 Bharat insurance co Ltd vs kanhaiya lal In another case of lowe vs fahey the funds of the company was used for some extraneous purpose which was not authorized by the memorandum of the company.

It was held that the court had jurisdictopn to pass an order not only against the guilty members and directors but also against 3rd persons who knowingly received such money or improperly the wrongful use. Illegal acts- The principle laid down in foss vs harbottle shall not be applicable where the act is question is illegal . so if the majority does act which is not permissible by law , the minority can take tep to enforce their right. Acts required special majority- to do certain acts, a special majority of threeforth of the total shareholders are required.

Sometimes, it is the mandate of the memorandum and the articles that without special majority of the three –forth of the member, the company is barred to do certain acts. In such cases if the company does any act without passing any special resolution, a single shareholder can file a suit to refrain the company from doing such acts. 13 Fruad on minority- as discussed earlier that law is always vigilant to protect the interest of the minority. So the rule of FOSS VS HARBOTTLE has no application where the decision of majority constitutes fraud on minority.

Infringement of personal membership right- Each and every member of a company belongs to some membership rights such as right to attend meeting, right to receive dividends, right to vote etc. If the 14articles provides any specific right for any particular type of shareholder, any deprivation of the right will entitle him to file to enforce his right15. Wrongdoers in control- An individual shareholder will be justified to bring an action in case of any wrong caused by the majority of the shareholders controlling the power. Oppression and mis-management-

Lastly, if it happens that by oppression and mis-management, the right of the minority shareholders are infringed,they are allowed to bring an action. 16 6. Why minority rights are needed- There are various answers to this question. The most obvious are those connected with the ethical dimension of the problem. Minority is the “weakest link”. It lives in a complex, difficult and sometimes unfriendly environment. Protection compensates minority for various deficiencies and the lack of equality. In terms of economic analysis the minority problem is an “agency” and oversight problem.

Investors delegate the power to manage their money to somebody else – who are prone to opportunistic behavior, i. e. selfish management, diversion of profits or commitment to unprofitable projects. The agent is the board, as it happens in a typical Berlet and Means company, with dispersed ownership. The “separation of ownership from control” vests the board with the ultimate power over the company and the investors’ money. But ownership may also be concentrated in large blocks of shareholders, who appoint or are identified with the management.

The problem then is protection against a majority or even against great blocks of minority shareholders, who are able to influence the management or extract benefits for themselves under discriminatory practices. It is obvious that the two types of agency (shareholders/board, minority/majority) differ substantially, although the legal strategies for dealing with them can be categorized under the same headings. A striking difference of the two situations is that removal of the board is a drastic solution to the first agency problem, but not available for the second.

Minority rights are mostly necessary where exit is not legally possible (therefore in privately held companies) or, even if possible, is not a viable solution, either because the value of the shares is depressed, or for personal or strategic reasons. Minority rights canal so be beneficial, because they make equity investments attractive; they keep the cost of capital for the company low; they contribute to a more efficient functioning of the company itself (here the view of the minority as a “subsidiary” organ is relevant); they help to prevent losses to the economy.

It is obvious that the kinds and the intensity of minority rights have to be adapted to the various patterns of ownership in each country, the corporate culture, the economic level, the financial techniques etc. For example, in a pattern of concentrate downer ship the main type of problem will be abuse of power by a dominant shareholder, whereas in systems of dispersed ownership the problem will be rather expropriation by the management and theft of the control premium.

It is also obvious that protection of minority does not need to come solely from company law. Other branches of law canal so be relevant, such as capital markets, securities and stock exchange law (this has already been mentioned), competition or insolvency law. Corporate governance rules and accounting standards are also essential, and so is the quality of enforcement of rights. Finally, one should not forget the protective and disciplinary function of the market itself, and in particular the prospect of a takeover.

Legal Provision as to Protection of Minority Our companies act, 1994 provides different provisions for protection of the interest of the minority shareholders. Legal provisions under the companies act, for the protection of the interest of the minority are stated here. Investigation of affairs of company by inspectors- Under section- 195 provides that to observe the affairs of the company and to see whether the rights of the minority re well protected, the government may appoint one or more competent inspectors.

Under section-196 also provides that in the case of a company having share capital, not less than one-tenth and in the case of a company not having a share capital, not less than one-fifth of the members file such application for inspectors. The application shall be supported by evidence and if is found that there is oppression against minority then the government or the court may take steps, on the basis of the report of such inspectors, to restore of the minority.

Court’s power to protect the interest of the minority- Where it is found that- the affairs of the company are being conducted or the power of the directors are being exercised in a manner prejudicial to one or more of its member or debenture holders. or the company is likely to act in a manner which discriminated or likely to discriminate the interest of the member or debenture holder. Or a resolution has been passed which discriminates the members or the debenture holders. Then on the application of the member in number as stated earlier, the court may take steps to protect the minority interests. 18 Procedure to be followed:

Hearing of the petition: On receipt of the application from the aggrieved members, the court shall send a copy of such application and fix a date for hearing . 19 Order passed by the court: After hearing the petition if the court is of the opinion that the interest of the minority member are really affected, the court may pass a director either: To cancel or modify any resolution or transaction; or To regulate the conduct the company’s affairs; or To amend any provision of the memorandum and articles of the company; or To pass any order which the court may think fit.

Amendment not to be made without the leave of the court: Where any amendment is made in the memorandum or articles of the company by an order of the court, the company shall not, without leave of the court, make any amendment therein or take any action which is inconsistent with the directors of the court. 21 Informing the registrar: Where the court directs to amend any document, the company shall within 14 days from the making of such order, inform the registrar in writing and send a copy thereof.

In default, the company and its officers who are involved of such default shall be liable to a fine not exceeding one thousand taka [s. 233-(5)] 7. Comparison between UK, India and Bangladesh regarding the protection of the interests of Minority shareholder The origin of the provision of minority shareholders’ protection, i. e. , section 233 of the Bangladeshi Companies Act 1994 is section 210 of the UK Companies Act 1948 which provided an alternative remedy in cases of oppression. 22Therefore in Bangladesh, this concept is emerged from the corporate laws of the UK.

On the other hand, The OECD Principles of Corporate Governance 2004 provides specific guidance for policymakers, regulators and market participants in improving the regulatory framework for the benefit of the minority and the non-controlling shareholders in corporate sectors. A Statutory Safeguard in the UK Concerning the Minority Shareholders’ Interest in the UK, a series of Companies Acts has been enacted up to the Companies Act 2006. The present present Companies Act has also pointed out the provision regarding minority shareholders’ protection.

The Corporate laws of the UK include certain provisions to protect the interest of the minority and the non-controlling shareholders. India has totally different legal framework in order to safeguard the invests of small investors. The Indian Companies Act, 2013 S. 151 stipulates that A listed Company May have one director elected by such small shareholders in such a manner and under such a terms and conditions as may be presented. “Small Shareholder” means a shareholder holding shares of the nominal value of not more than twenty thousand rupees or any such other sum as may be prescribed.

There are no poicy shareholders, but BSEC has made a legal provision that will leave the minority shareholders marginalized. Having no option to exercise their rights due to the majority rule, they lose their voice. The over investment by directors is not good for the stock market and it should be addressed properly to find a way out and safeguard interest of minority shareholders from the experience of other markets. 23 8. Recommendation: In Bangladesh proper implication of minority shareholders right in the corporate laws is a challenging issue for the government and the regulators.

Rights of minority shareholders should be protected for development of capital market of Bangladesh. Government should take proper steps to provide minority shareholders with adequate protection from exploitation by controlling shareholders by strengthening disclosure requirements. When in a company voting involves the matters which have a material impact on minority shareholders it shall be required to provide its shareholders the opportunity to cast vote through the internet.

There must have provision in corporate laws to pay damages where the aggrieved minority shareholders have suffered from financial loss. The complaining petitioners should have a right of recovery of litigation expenses from the company. Positive relation between management and minority shareholders is indispensable. 9. Conclusion: Good corporate governance practices ensure that high quality information is provided to investors as well as the general public to ensure that companies sustain the support and trust of their investors and the public.

In a country where the state has been the primary economic actor, it is important that the burgeoning private sector prove that it has the ability to maintain high standards and operate in the best interests of the people. Good corporate governance helps, too, to ensure that corporations take into account the interests of a wide range of constituencies, as well as of the communities within which they operate. This, in turn, helps to assure that corporations operate for the benefit of society as a whole. Therefore ensuring the right of minority share holder good governance practice is needed.

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