Strangling the minority shareholders. 

Oppression of minority shareholders:

Amendment in Articles of Association

A public company was in urgent need of further capital which the majority of the members who held 98% of the shares were willing to supply if they could buy out the minority. They tried persuasion of the minority to sell shares to them but the minority refused. They therefore proposed to pass a Special Resolution adding to the Articles a clause whereby any shareholder was bound to transfer his shares upon a request in writing of the holders of 98% of the issued capital.

The court held that this was an attempt to add a clause which will enable the majority to expropriate the shares of the minority who had bought them when there was no such power. Such an attempt was not for the benefit of the company as a whole but for the majority. An injunction was therefore granted to restrain the company from passing the proposed resolution.

[Brown v. British Abrasive Wheel Co. (1919) 1 Ch. 290]

This was one of the earliest case of protection of minority shareholders from the oppressive majority of shareholders.

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