Operations of a company are normally dominated by the decision of majority shareholders. In some occasions, the dominance of majority shareholders in decision making may jeopardize the interests of the minority shareholders. This might be the case because in the course of making decisions, the majority shareholders might, in one way or another, strive to selfishly protect their own interests to the detriment of those of the minority shareholders and the interests and wellbeing of a company at large. In contemplation of this situation, the law has created different statutory tools to protect the rights of minority shareholders against majority shareholders. Such tools include derivative actions, action against unfair prejudice and winding up.
Minority shareholders can petition for winding up of a company under section 281 (1) of the Companies Act, [Act No. 12 of 2002] “the Act”. Under section 281 (1) of the Act, a shareholder may petition to the Court for winding up of a company in their capacity as contributory or contributories. Section 271 of the Act defines a contributory to mean every person liable to contribute to the assets of a company in the event of its being wound up. A shareholder, whether minority or otherwise, is a contributory within the meaning of section 271 of the Act and he is therefore entitled to petition for winding up of a company.
Minority shareholder (s) may petition for winding up of a company on just and equitable grounds as provided for under section 279 (1) (e) of the Act. The provision states that the Court has the power to wind up a company should it be of the opinion that it is just and equitable that the company be wound up. A petitioner is required to show, among other things, that it is important to wind up the company due to deadlock in management of the company’s affairs, disappearance of the company substratum, oppression of minority shareholders’ rights or exclusion of minority shareholder in management of a company. If the petitioner satisfies one or more of these conditions, then the Court shall hold that it is just and equitable that the company be wound up.
In the case of Sebastian Marondo & Anastazia Rugaba v Norway Registers Development East Africa Limited & Another, Winding Up Cause No 26 of 2019, HC-DSM (unreported) the High Court of Tanzania (Commercial Division), Madam Phillip, J: ruled out that the petitioners who are minority shareholders were contributories to the 1st Respondent’s Company and therefore have the right to petition for winding up under the provision of section 280 (1) of the Act.
More so, the Court has the discretion under the law to completely dissolve a company where it is satisfied that the minority shareholders are mistreated or repressed. The remedies under the law, were purposely designated to protect minority shareholders and deal with ranges of shareholders disputes in the course of running and operating a company.