Compulsory acquisition of minority shareholdings

Abstract

The House of Representatives Standing Committee on Legal and Constitutional Affairs, in its report of November 1991, recommended that the Companies and Securities Advisory Committee investigate ways in which protection against compulsory acquisition on unfair terms be made consistently available for minority shareholders. The Australian Securities Commission in its submission to the Committee, stated that ss 701 and 702 provided elaborate safeguards for minority interests. In this article it is argued that the compulsory acquisition provisions in Ch. 6, Corporations Law, though elaborate, may not in fact provide an adequate safe-guard for minority shareholders. In Anglo-Australian jurisprudence the law of compulsory acquisition of minority shares following a takeover evolved from a premise which greatly favoured the majority shareholder. This favouritism has intensified as the law has evolved to the extent that it is now almost impossible for the minority to resist acquisition of its shares. Since compulsory acquisition involves the forcible expropriation of a property right, the reasons for the expropriation must be justified. Minority rights and the development of policy in this context have been swamped by an assumption that takeovers are desirable and that compulsory acquisition is necessary to facilitate them. It is therefore important that this distortion be recognised and a critical evaluation of the efficacy of the rights of the minority be made.