GMGT 3030 Lecture Notes - Lecture 4: Majority Rule, Derivative Suit, Well-Founded Relation

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However, in many jurisdictions the members of the company are permitted to ratify transactions which would otherwise fall foul of this principle. It is also largely accepted in most jurisdictions that this principle should be capable of being abrogated in the company"s constitution. Members of a company generally have rights against each other and against the company, as framed under the company"s constitution. However, majority rule can be iniquitous, particularly where there is one controlling shareholder. Accordingly, a number of exceptions have developed in law in relation to the general principle of majority rule. Where the majority shareholder(s) are exercising their votes to perpetrate a fraud on the minority, the courts may permit the minority to sue. Companies generally raise capital for their business ventures either by debt or equity. Capital raised by way of equity is usually raised by issued shares (sometimes called stock (not to be confused with stock-in-trade)) or warrants.

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