ExpertHard2 marksMultiple Choice
Management, administration and the regulation of companiesSection ASyllabus FCorporate and Business Law
ACCA · Question 20 · Management, administration and the regulation of companies
In a fintech startup, the majority shareholders (who are also the directors) vote to pay themselves massive salaries while refusing to declare any dividends, effectively starving the minority shareholder of any return on their investment.
What is the most appropriate statutory remedy for the minority shareholder?
In a fintech startup, the majority shareholders (who are also the directors) vote to pay themselves massive salaries while refusing to declare any dividends, effectively starving the minority shareholder of any return on their investment.
What is the most appropriate statutory remedy for the minority shareholder?
Answer options:
A.
A derivative claim under s.260 of the Companies Act 2006.
B.
A petition for unfair prejudice under s.994 of the Companies Act 2006.
C.
An application for voluntary liquidation.
D.
A claim for wrongful trading.
How to approach this question
Identify that the harm is being done to the shareholder personally (lack of dividends), not to the company itself. This points to unfair prejudice rather than a derivative claim.
Full Answer
B.A petition for unfair prejudice under s.994 of the Companies Act 2006.✓ Correct
Section 994 of the Companies Act 2006 allows a member of a company to apply to the court for an order on the ground that the company's affairs are being conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members. Excessive director remuneration combined with a refusal to pay dividends is a classic example of unfair prejudice.
Common mistakes
Confusing unfair prejudice (s.994) with a derivative claim (s.260). Derivative claims are for wrongs done *to the company* (e.g., a director stealing company assets).
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