Abstract:
The protection of minority shareholders has become an increasingly critical
concern in corporate governance, particularly in jurisdictions with high
ownership concentration, such as Sri Lanka. In the contemporary corporate
world, activists often strive to ensure that all shareholders of a company,
regardless of their stake size, receive fair treatment in decision-making processes
and equitable treatment within corporations, as disparities among the
shareholders can lead to dissent and potential conflicts which can be injurious for
the success of a company. This article critically examines the adequacy of legal
safeguards available to minority shareholders under the Companies Act No. 7 of
2007 of Sri Lanka. When drawing upon the foundational common law principle
of ‘Majority Rule’ laid down in the Foss v. Harbottle case, it states any wrong
done to the company must be remedied by the company not individual
shareholders. In other words, the company is a separate legal entity, and only the
company (usually through a majority vote of shareholders) can sue to enforce its
rights. This paper reconnoiters how statutory interventions have evolved to
mitigate the potential for majority shareholder abuse. It also explores how the
Companies Act No. 7 of 2007 and common law principles aid the protection of
minority shareholders. The study analyzes key remedial provisions such as
derivative actions, oppression remedies, minority-buy-out and the just and
equitable winding-up mechanism. This research is based on primary texts such as
legislation written on shareholder rights and case law and secondary sources such
as journal articles, textbooks, research reports, past case studies concerning
subject matter and comparative analysis with foreign jurisdiction UK. The essay
gauges whether these statutory protections offer sufficient recourse to minority
shareholders facing marginalization, unfair prejudice, or expropriation. The
findings suggest that while the Sri Lankan legal framework offers several formal
protections, practical enforcement challenges and judicial dogmatism may hinder
their efficacy. To ensure a fair balance between majority control and minority
rights it is recommended to continually develop the judicial interpretation and
minority activism to the effective practice of the intent of the Companies Act of
Sri Lanka which gives significant protection to the minority shareholders.
