PIL Specialist In Dhaka

“A proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company.” – Explain & illustrate.


A share is a certificate representing one unit of ownership in a public company, corporation, mutual fund, or limited partnership.

A shareholder is a person who owns at least one share. The shareholder’s liability is limited to the amount of capital stock they own, which means that they cannot lose more than their original investment. Shareholders own the stock, but not the corporation itself. However, it takes both majority and minority shareholders to complete the ownership of a corporation.

There are two main classes of stock. They are:

1. Common Stock

Most shares of stock are called “common shares”. If you own a share of common stock, you are a partial owner of the company. You are also entitled to certain voting rights regarding company matters. Typically, common stock shareholders receive one vote per share to elect the company’s board of directors although the number of votes is not always directly proportional to the number of shares owned. Common stock shareholders also receive voting rights regarding other company matters such as stock splits and company objectives.

In addition to voting rights, common shareholders sometimes enjoy what are called “preemptive rights.” Preemptive rights allow common shareholders to maintain their proportional ownership in the company in the event that the company issues another offering of stock.

But although common stock entitles its holders to a number of different rights and privileges, it does have one major drawback: common stock shareholders are the last in line to receive the company’s assets. This means that common stock shareholders receive dividend payments only after all preferred shareholders have received their dividend payments. It also means that if the company goes bankrupt, the common stock shareholders receive whatever assets are left over only after all creditors, bondholders, and preferred shareholders have been paid in full.

2. Preferred Stock
The other fundamental category of stock is preferred stock. Like common stock, preferred stock represents partial ownership in a company, although preferred stock shareholders do not enjoy any of the voting rights of common stockholders. Unlike common stock, preferred stock pays a fixed dividend that does not fluctuate, although the company does not have to pay this dividend if it lacks the financial ability to do so. The main benefit to owning preferred stock is that you have a greater claim on the company’s assets than common stockholders. Preferred shareholders always receive their dividends first and, in the event the company goes bankrupt, preferred shareholders are paid off before common stockholders. In general, there are four different types of preferred stock:

  • Cumulative: These shares give their owners the right to “accumulate” dividend payments that were skipped due to financial problems; if the company later resumes paying dividends; cumulative shareholders receive their missed payments first.
  • Non-Cumulative: These shares do not give their owners back payments for skipped dividends.
  • Participating: These shares may receive higher than normal dividend payments if the company turns a larger than expected profit.
  • Convertible: These shares may be converted into a specified number of shares of common stock.


1. Majority Shareholders

Majority shareholder is a shareholder who owns and controls most of a corporation’s stock. Only those persons who own more that 50 percent of a company’s shares can be a majority shareholder. Generally, a majority shareholder has more power than all of the other shareholders combined. A majority Shareholder also has the authority to do things that other shareholders do not have, such as replacing a corporation’s officers or board of directors. Majority shareholder is commonly seen in private companies rather than public companies.

2. Minority Shareholders

A minority friendly shareholders agreement is one which protects the interests of shareholders who own less than 50% of the shares. Such agreements may cover issues such as, among others, the conduct of the affairs of the company, financing, including shareholder contributions, restrictions on transfers of shares, including rights of first refusal, compulsory buyouts and their triggers, death, incapacity or departure of a shareholder, and default of a shareholder pursuant to the agreement. Minority shareholder rights can be protected without unduly restricting management of the company by including provisions regarding the appointment of directors, quorum requirements and provisions to deal with deadlocks in votes of the directors or the shareholders. Conversely, a majority friendly shareholders agreement is one which protects the interests of those who hold a controlling interest in the company.


The rights and entity that comes with the ownership of the shares in a company are rarely fully utilized by the shareholders. This happens because the shareholders are unaware about the rights that they possess as being a shareholder of the company. Similarly, most Company Directors would be alarmed at the strict obligations that they have as regards the Company’s shareholders, which include maintaining a Register of Directors/Secretaries, a Register of Shareholders, and a Register of Director’s Interest in Shares, a Register of Charges and Minute Books. These must be kept open to inspection by shareholders. More shares may represent the more power within the company. That means the greater the share holding of an individual, the chances are greater for that person to possess greater power in the company. This is not only because of the larger amount of share holding by that person but also because of the Companies Act afford greater rights and power to an individual as the size of that person’s shareholding increases.

It is possible for those owning less than 50% of a company to protect themselves from being at the mercy of those holding over 50% of the shares in the company and this is one reason why shareholders should give serious consideration to agreeing a shareholders’ agreement or adopting Ensuring Minority Shareholders rights:

The companies now-a-days are trying to attract skilled employees by offering stock options. While these types of offerings can gain attention and create incentives for key employees, they also create a group of minority shareholders. It is sometimes difficult to ensure the fair treatment of this minority shareholder, especially in small, closely held corporations, where the shares are characteristically determined by the few owners who are often relatives or business associates. When majority shareholders use the attempt to dominate the minority shareholders, litigation can result.

To protect against such oppressive behavior, most states’ laws in USA give minority shareholders some indisputable rights. Though the exactness of the rules varies from state to state, several common law rights have been emerged to protect all the shareholders, including those in the minority, from being dominated by the majority. On the other hand, shareholder agreements or corporate bylaws often contain protections for minority shareholders.

Because a company is a common property of all of its shareholders including both minority and majority shareholders, the majority shareholders, who most of the time control corporate management, holds a responsibility to act generously and exercise, sound managerial judgment to the minority shareholders. The basic assumption is that the majority must not oppress the minority.

Courts take accusations of oppression seriously and use their equitable jurisdiction to even the odds. The remedies available to courts include the appointment of receivers, invalidation of or injunction against the proposed action, payment of damages to shareholders or the corporate fiscal, and in the most egregious cases, dissolution of the corporation.

To protect the rights of all shareholders, including minorities, state corporations laws frequently include the following provisions:

* The right to bring derivative suits against corporate managers. These suits are appropriate when managers are breaching their fiduciary duties.

* The right of appraisal and payment.

* The right of appraisal and payment in the event of a fundamental corporate change, such as a merger, which is opposed by some of the shareholders. Many states allow dissenting shareholders to demand appraisal and payment for their shares from the majority, if a shareholder vote is required for fundamental changes.

* Pre-emptive rights, which allow shareholders to maintain their relative equity in the company when new shares are issued. Pre-emptive rights act as a shareholder’s right of first refusal, allowing shareholders to purchase any new shares issued in their pro rata portion before those shares are offered to others. However, pre-emptive rights are usually subject to limitations.


The following sets out a brief summary of the salient provisions of Bangladeshi company law and regulation relating to rights of shareholders of the Company. It is not, and is not intended to be, an exhaustive or definitive lists of such rights but is intended merely to provide brief details and information relating to such rights.

The rights of the shareholders (including the holders of AIM Securities) of the Company are included in the Bangladesh Companies Act 1994, the Bangladesh Securities and Exchange Ordinance 1969 (together with the Bangladesh Securities and Exchange Commission Act 1993 and the rules made there under) and the rules of the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE); and the Company’s Articles of Association.

Shareholders’ Meetings

Resolutions to be proposed at shareholders’ meetings are classed as either ordinary (requiring a bare majority in number of shares held by persons who attend and vote at the meeting), or special or extraordinary (both requiring a 75 per cent. majority in number of shares held by persons who attend and vote at the meeting).
Bangladesh Companies Act, 1994 requires at least 14 days’ notice to be given to shareholders to call an Annual (or Ordinary) General Meeting (or 21 days if special or extraordinary resolutions are to be proposed at such meeting) and 21 days’ notice for an Extraordinary General Meeting.

An Annual General Meeting of the company must be held once per calendar year and no more than fifteen months after the previous Annual General Meeting. Shareholders should be sent the audited accounts of the company together with directors’ and auditors’ reports thereon, proposed to be laid before such Annual General Meeting together with the notice convening such meeting. Further, the Annual General Meeting of a listed company for a year is required to be held within six months of the company’s year end.
As in the UK, the holders of not less than one tenth of the issued share capital of a company have the ability to requisition an extraordinary general meeting.
A shareholder has the right to receive notice of a shareholders’ meeting; attend such a meeting; and raise an issue related to the businesses conducted at any such meeting.
At any general meeting:

  1. On a show of hands, every member who is present in person shall have one vote; and
  2. On a poll, every member who is present in person or by proxy has one vote for every share of which he is the holder.

The quorum for a Shareholders’ meeting is five persons entitled to vote and present in person. A proxy representing a Shareholder which is a company may not vote unless his appointment as proxy has been approved by a resolution of the directors of the appointing company, which resolution remains in full force and effect at the time of the meeting.
Financial Disclosures

Under the Bangladesh Securities and Exchange Rules, 1987, Bangladeshi listed companies are obliged to prepare annual audited accounts, audited by a chartered accountant, and to send such accounts to the Bangladesh SEC, the relevant stock exchanges and all shareholders of such company at least fourteen days prior to holding of its AGM.
These financial statements, in addition to the requirements of the Securities and Exchange Rules, 1987 and the Bangladesh Companies Act 1994, are required to comply with the International Accounting Standards as adopted by the Institute of the Chartered Accountants of Bangladesh. In auditing these financial statements, the auditors are also required to conduct their audit in conformity with the International Standards of Auditing as adopted by the Institute of the Chartered Accountants of Bangladesh.
Further, the Bangladesh Securities and Exchange Rules, 1987 require Bangladeshi listed companies to prepare half-yearly accounts, which do not have to be audited, but do have to be sent to the Bangladesh SEC, the relevant stock exchanges and all shareholders of such company. The half-yearly accounts must contain a balance sheet, profit and loss account and cash-flow statements prepared in the same way as the annual audited accounts are prepared, and must be sent within one month of the half-year end.

Also, a listed company is subject to continuing disclosure requirements pursuant to the Listing Regulations of the DSE and the CSE. Accordingly, a listed company is required to inform the Bangladesh SEC, the DSE and the CSE immediately of any ”price sensitive information” (as defined above).
In addition, a listed company must notify the Bangladesh SEC, the DSE and the CSE of the following:

any change in its board of directors; and any change in the holding of each director, officer and/or other shareholder of the company who is or has been the legal owner of ten per cent. or above of any class of the company’s listed securities at any point of time within seven days of such change; and  every transfer of share by the company’s sponsors (including every director, promoter and officer) within seven days of such transfer.

Protection of Minority Interests

Minority shareholders who feel that the Company’s affairs are being conducted in a manner prejudicial to their interests may apply to court for relief in a procedure analogous to that contained in the UK Companies Act 1985.
Enquiries into the Company’s Affairs

The holders of not less than 5 percent of the issued share capital of a Bangladeshi listed company can petition to the Bangladesh SEC to make enquirers into the affairs of the company in which they hold shares, or its business and transactions, under the Bangladesh Securities and Exchange Ordinance 1969. If the Bangladesh SEC decides to investigate, it has the power to require the production of information from the company and its directors, officers and employees.


Under the Bangladesh Securities and Exchange Ordinance,1969 and the rules of the DSE and the CSE, when a final or interim dividend is approved by the directors of a Bangladeshi listed company, the DSE, the CSE and the Bangladesh SEC require that decision to be notified to them within 30 (thirty) minutes. The decision (as notified) will be subject to shareholders’ approval in the Annual General Meeting if the dividend is a final dividend. The dividends must be disbursed to the shareholders with 60 days of such declaration.

Issue of Shares

The Bangladesh Companies Act, 1994 also gives shareholders pre-emption rights, which may be misapplied by a resolution of the Directors. However, the Articles of Association of the Company provide that, subject to a Shareholders’ resolution to the contrary, any new shares to be issued must first be issued to the existing Shareholders pro rata to their holdings.

Issue of Redeemable Shares

A Bangladeshi company may issue and redeem redeemable shares with shareholders’ approval in a meeting.
Reduction of Share Capital

A Bangladeshi company may by special resolution reduce its share capital in any manner subject to Court confirmation in a procedure analogous to that contained in the UK Companies Act, 1985.
Share Buy Back

A Bangladeshi company may buy back its own shares only by way of a court-approved reduction of capital.

Financial Assistance to Shareholders for Acquisition of Shares

Subject to certain very limited exceptions, the Company, being a public company, must not give financial assistance to any person for the purposes of the acquisition of any shares in the Company.

Determination Shareholders’ Interests in Shares

As in the UK, the register of members is definitive for determining the members of the Company.

Removal of Directors

The shareholders of a company may, by extraordinary resolution in a general meeting, remove any director and appoint a director to fill that vacancy.
Loans to Directors

The Company is not permitted to make any loans to directors or any person connected with a director, unless the loan is for less than 50 per cent. of the value of the shares in the Company held by the director; is approved by the Company in a general meeting; is approved by the directors; and is specifically referred to in the annual report and accounts of the Company.

Sale of Undertaking or Assets

There is no equivalent to the UK Companies Act 1985 provisions requiring the shareholders to sanction the acquisition or sale of a non-cash asset between a director and the Company.

Under the Bangladesh Companies Act 1994, the directors may not sell the undertaking of the Company without the consent of the shareholders in a general meeting.


Mentioned earlier was the term Shareholders’ Agreement. This is an arrangement among a company’s shareholders describing how the company should be operated and the shareholders’ rights and obligations. It also includes information on the regulation of the shareholders’ relationship, the management of the company, ownership of shares and privileges and protection of shareholders. The shareholders’ agreement is intended to make sure that shareholders are treated fairly and that their rights are protected. The agreement includes sections outlining the fair and legitimate pricing of shares (particularly when sold). It also allows shareholders to make decisions about what outside parties may become future shareholders and provides safeguards for minority positions. In my opinion, such Shareholders’ Agreement (along with relevant laws set by a country’s judicial system) made and implemented will bring about a much required balance of the rights of majority and minority shareholders of a corporation as this balance is an essential factor for the smooth functioning of the corporation.


  • See Wikipedia [www.wikipedia.com]
  • Article on Shareholders’ Rights in Bangladesh
  • Beximco Pharma Investor News
  • See Investor Guide [www.investorguide.com]
  • See www.ecgi.org


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