The Role Of Representatives Of Minority Shareholders

Running Head: MERGER AND ACQUISITION
MERGER AND AQUISITION
Name of the Student
Name of the University
Author Note

MERGER AND ACQUISITION1
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Minority Shareholders............................................................................................................2
Minority Shareholders’ Protection in Australia.....................................................................5
Conclusion................................................................................................................................10
Reference..................................................................................................................................11

MERGER AND ACQUISITION2
Introduction
Merger and acquisition are part of the corporate finances, strategy and management
that deals with joining with or purchasing the other entities. M&A is the general term used
for describing consolidation of the assets or entities with the help of different types of the
financial transactions such as consolidation, mergers, tender offers, assets purchase and
acquisition of management. Further, minority interest or minority investment is referred to
non-controlling share in the entity held by the investor or the other entity such as private
equity firm is having non-controlling share in company. Usually, the minority investment is
less than fifty percent of total company’s outstanding shares1. Hence, this assignment will
evaluate the ways in which laws seeks for protecting minority investors in context of the
changes in control transactions and evaluation will be done on the effectiveness of rules and
their impact on way transactions are conducted in the Australia.
Discussion
Minority Shareholders
A minority shareholder is the equity holder in the entity, who is not having control of
voting. Generally, they hold less than fifty percent interest in the company. Minority
shareholders often suffers oppression and the abuse in face of the leading majority
shareholders. The remedies of minority shareholders are increasingly becoming vital. The
major objective of the remedies of minority shareholders is providing mechanism for the
minority shareholders for enforcing and protecting their rights, when they are having
reasonable level of grounds for believing the fact that they have been violated by majority
shareholders or directors. In addition, strongest available remedies in action against board
1 Harry Gray, Chad Greenway and Robert Feeney, "Portfolio Company Best Practices—Post-Acquisition
Transition: Preserving Customer Relationships When Company Founders Depart" (2015) 19(1) The Journal of
Private Equity.

MERGER AND ACQUISITION3
members and management for the unfairly or oppressive prejudicial conduct is the oppression
remedy2.
Self-dealing is the key issues in corporate governance. It is the company insider’s use
of the corporate assets for the personal gain. The most common examples of this includes
related-party transactions. Informal relations of business and higher ownership concentration
can help in creating perfect environment for such kind of transactions. This allows the
controlling shareholders to get profit at the expense of financial health of entity. It is because
the assets of company are sold at the excessive lower price, assets are being purchased at the
inflated price or the loans, are given by entity for controlling shareholders on the terms that is
far better than offers of market3.
The empirical research indicates that the stricter regulations of the self-dealing is
related with the greater investment of equity and the lower concentration of ownership. This
particular conclusion is in line with the view that the stronger protection of law makes the
minority investors much more confident regarding their investments. This helps in reducing
requirement for concentrated ownership for mitigating flaws in the corporate governance.
Another aspects of the corporate law are the indicative of strength of the minority
shareholders protections. Hence, standards of corporate governance in some of the areas are
important, for instance those related to the board independence and composition, entity
disclosure and transparency and shareholders rights relating to management and boards of
directors. In these particular corporate governance areas, sound rules and regulations help in
minimizing agency problem in between the minority and majority shareholders and that
between minority shareholders, management and board of directors4.
2 Dariga Tokpayeva, "Legal Protection For Foreign Investors In Kazakhstan" [2015] SSRN Electronic Journal.
3 Satu Matikainen, "The British Parliament And Minority Protection Under The League Of Nations, 1929-33"
(2016) 35(1) Parliamentary History.
4 Ugur Lel, "Can Institutional Investors Restrain Earnings Management Activities In Weak Investor Protection
Countries? The Role Of Foreign And Domestic Institutional Investors" [2013] SSRN Electronic Journal.