THE “business judgment rule” insulates a director from liability for simply making bad decisions. As long as he/she can establish that he/she acted in good faith, did not engage in self-dealing, and kept himself/herself reasonably well-informed of corporate activities, he/she is likely to be protected by the business judgment rule.
The business judgment rule clearly does not protect criminal conduct by executives. Whatever business judgment made by the executive(s) must be in the best interest of the corporate organisation not the executive.
Two types of lawsuits against directors may be brought by shareholders: Shareholder class action lawsuits and shareholder derivative lawsuits.
The difference between the two is largely a difference in form.
In a shareholder class action lawsuit, a shareholder is appointed to represent a class of plaintiffs, namely, the other shareholders of the corporation who have been harmed by the actions of the defendant director.
Shareholder class action lawsuits are particularly useful for action against directors of large public companies that have thousands of shareholders.
In a shareholder derivative lawsuit, a shareholder represents the corporation itself, rather than its shareholders, and sues for a wrong committed by the director against the corporation itself for which the corporation refuses to seek redress, or “make right.”
Before filing a shareholder derivative lawsuit, the shareholder must first demand that the corporation redress the injury, unless such a demand would be obviously futile.
The shareholder may sue the director on behalf of the corporation only if the corporation — effectively, its directors and officers — refuse to redress the harm for which the lawsuit is to be filed.
Although most lawsuits against individual directors are filed by shareholders, non-shareholders may sue individual corporate directors if they have been personally harmed by the actions of the defendant.
Harm to the corporation or to its shareholders does not warrant a third party lawsuit.
Directors can face civil liability for a variety of wrongful acts such as breach of employment contracts, defamation, sexual harassment and fraud.
Minority shareholders possess voting rights in Zimbabwe.
The right to vote extends to all matters requiring a shareholder decision. These include issuing more stock, hiring a corporate officer or merging with another business. Minority shareholders vote either in person, at a stockholders meeting, or by giving a proxy to another shareholder to vote on their behalf in their absence.
Dividend and other distributions
When a distribution is made, including the payment of a dividend, minority shareholders have a right to obtain their proportionate share of the funds. They also have a right to obtain a full accounting of any distribution made by the corporation to shareholders.
In conjunction with their right to vote, minority shareholders maintain the right to vote on whether to issue a dividend or undertake some other type of distribution.
Access to corporate records
After owning stock in a corporation for six months, Zimbabwe law grants minority shareholders the right to examine the books and records of the corporation. This includes everything from financial statements of all types to corporate board meeting minutes. Minority shareholders must request access to corporate records in writing. They legally can designate a lawyer or another individual to review the corporate records on their behalf.
Dissolution of corporation
Minority shareholders can file a lawsuit in court to protect their interests. In addition, Zimbabwean law allows minority shareholders the ability to seek dissolution. Minority shareholders take this extraordinary step when the majority of shareholders controlling the business engage in actions the minority group deems illegal, oppressive or fraudulent. The court makes a final determination on the merits of the allegations made by the minority shareholders.
Laws that seek to protect minority shareholders in Zimbabwe
There are enough legal provisions to punish the executives such as the penal code and the public finance management act chapter 22:19, which defines financial crimes and acts of financial misconduct by public officials.
Chapter 9 of the new Constitution requires the State to “adopt and implement policies and legislation to develop efficiency, competence, accountability, transparency, personal integrity and financial probity in all institutions and agencies of government at every level and in every public institution…”
It is only that most people in this country are averse to these statutes which protect them and therefore, they do not invoke them where necessary. We also have the Company Act…section 195, which stipulates that companies and other entities owned by the State must in addition to complying with the principles set out in section194 (1), conduct their operations so as to maintain commercial viability and abide by generally accepted standards of good corporate governance.
Then Chapter 13, Section 255(1) of the Zimbabwe Anti corruption Commission has the following functions:
a)To investigate and expose cases of corruption in the public and private sectors
b)To combat corruption, theft, misappropriation, abuse of power and other improper conduct in the private and public sectors.
c)To promote honesty, financial discipline and transparency in the public and private sector.
Mandeya Robert is a shareholder activist with Shareholder Activist Zimbabwe. The views contained herein are purerly personal. For your views and comments you can contact him on; email@example.com
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