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Business and Globalization Essay

The globalization process of the world has produced the ability to share and discuss many aspects of society and life among world nations. One of the biggest areas that the globalization process is affecting is the area of business. Business is one of the most important aspects of the free world. It not only provides the company with profits it also provides foundational avenues of success for shareholders who purchases pieces of those companies. One of the most interesting aspects of business is the ability of shareholders to own parts of the businesses of their choice. Shareholders are presumably privileged with the ability to help make decisions in the way the company is run. Shareholders have been known to close a company, build a company and change the general direction that a company is headed. Shareholders can play a vital role in the success or failure of a company. They can be as active or as inactive as they desire when it comes to attending shareholder meetings and voting on issues that impact their shares.

Shareholders can band together for a common cause or to try and fight to get things done. Shareholders invest their funds into the company and therefore

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have a vested interest in the outcome and choices that the company makes. One of the problems that is often encountered when it comes to businesses and shareholders is the split that happens. Minority shareholders have constant concerns about losing any power to the majority shareholders. This paper will explore the problem of protection for minority shareholders in United Kingdom business. It will also look at France and compare the protections that are in place for minority shareholders in both nations. The paper will explore and evaluate the efforts of the United Kingdom in protecting the rights and responsibilities of minority shareholders as well as explore the problems that have occurred in the past. While the paper explores the efforts of United Kingdom law when it comes to safeguarding the interests of minority shareholders it also examines other legal systems to see if they do a better job. France, the United States and others are compared and contrasted to see how the United Kingdom system measures up against them.

Statement of Problem The role played by shareholders in any company can be varied. Shareholders are individuals who own shares of the company in question. One person can have many shares, or one share and groups of people can go in together and purchase shares of any company in question. The shareholder is only invented in companies that are public. This means that the individual public members can purchase pieces of the company. When this happens the shareholders are provided certain rights and responsibilities. Majority shareholders and minority shareholders have similar interests but differences in the power they have in the company. This is based on the shareholder being a majority or a minority shareholder in status. The majority shareholders often have protections simply by virtue of being majority shareholders. That majority status gives them voting power and clout that can outnumber the desires and wishes of those who are in the category of minority shareholders.

This can create a situation in which the minority shareholders shares become virtually worthless as they have no say so in the way the company proceeds in its daily and lifelong business actions. The United Kingdom has faced questions about the protections of rights for the minority shareholders of its private businesses and companies. The United Kingdom has laws and measures in place that are designed to protect the interests and concerns of the minority shareholders. This protection needs to be compared to the protections offered in other systems around the world to be sure that it is the best possible minority shareholder situation available. INTRODUCTION Before one can begin to evaluate the protections in the United Kingdom Law for minority shareholders one must first have a firm understanding of the difference between minority and majority shareholders. “Majority shareholders Majority shareholders may have important voting rights that directly affect the running of the company.

In the event of a majority shareholder’s death, these rights would normally pass to the deceased’s dependants[1]. This could affect the company in two ways: The dependants now have the right to a say in the running of the company. But do they have the necessary experience’ And will they share the objectives that the surviving shareholders have for the business[2]'” “Minority shareholders Generally, it is the voting rights attached to a shareholding in a private limited company that gives them their market value. Minority shareholdings may not have significant rights and so the shareholder’s dependants may inherit shares that are virtually worthless. The only likely buyers of such a holding would be the surviving shareholders, but they may be under no obligation to buy[3].” The answer according to experts about both situations is to have installed shareholder protections. The shareholder protections should be legally binding and applied across the board. The United Kingdom has laws in place that state the partnerships and businesses will run their own affairs unless government intervention is warranted. This includes the situation of majority and minority shareholders and the problems that they encounter.

There are protections however for the safeguarding of rights of minority shareholders and those protections are what prevent problems from arising due to the lack of power and clout that the minority shareholder status gives them. HISTORY There are current United Kingdom statutes in place that are there for the protection and safeguarding of the interests of minority shareholders. Those laws allow the minority shareholders to take into court any proposal or buy out that they believe will injure their interests in the company or its future. Recently the legal protections were tested in a case that was publicized for its planned buyout[4]. “KINGFISHER’S PLAN for a pounds 3.2bn buyout of the remaining stake in the Castorama French DIY business ran into immediate trouble yesterday when it was rejected by Castorama’s minority shareholders. The shareholders, who account for 45 per cent of the equity, said they were going to the courts to protect themselves against the planned buyout, saying it violated statutes[5].

Castorama said it “doesn’t consider the Kingfisher offer satisfactory”. The company said it had an alternative plan “which we have proposed for months and would better optimise shareholder value[6].” Under the terms of the original deal between the two companies in 1998 Kingfisher has a right to buy out the remaining shares at a price determined by an independent bank. If the price is deemed fair, Kingfisher can secure control of the business despite the objections of shareholders[7]. The French reaction confirms fears that Kingfisher could get bogged down in a costly and time-consuming legal wrangle to get control of the business it merged with its B&Q operation four years ago. The central problem is that though Kingfisher owns the majority of the shares, control currently lies with the French[8]. ” This illustrates the problems that can arise when a company is based in one nation with one legal system but the majority shareholders belong to members of another nation or system. “The setback came as Kingfisher unveiled a wholesale shake-up, including the Castorama buyout plan, the separation of its electricals business and the impending departure of the long-term chief executive, Sir Geoff Mulcahy.

The Castorama deal will be funded by a pounds 2bn rights issue and new debt facilities[9].” A recent law in the United Kingdom called the Company Law Directive was implemented to assist in the added protection of minority shareholders of companies. The law provides minority shareholders with protection against hostile take overs and acquisitions. “A new EU Company Law Directive governing takeover bids, which will give minority shareholders much more protection against hostile acquisitions, is close to being agreed by the EU’s Member States[10]. The new legislation was due to be resolved earlier but had been blocked by a question mark hanging over the perennial Anglo-Spanish dispute over Gibraltar. At the Council meeting, Ministers heard a progress report from the Spanish and UK delegations concerning their negotiations on Gibraltar in the context of the draft 13th Company Law Directive after a working bilateral solution was found between the two which will not affect the current draft agreement[11].”

The premise of the law is to provide equal protection throughout EU for minority shareholders of companies that are listed on the stock exchange. “The basic aim is to provide equivalent protection throughout the EU for minority shareholders of companies listed on the stock exchange in the event of a change in control and to provide for minimum guidelines for the conduct of takeover bids, particularly as regards the transparency of the procedure[12]. The first proposal was presented in 1989 and amended in 1990. A streamlined framework version was tabled in 1996 and amended in 1997[13]. The Commission says a Directive is the only means by which these objectives can be achieved as they could not be dealt with adequately by Member States acting unilaterally or by a Recommendation which already exists anyway (the European Code of Conduct on transactions of securities, 1977). Protecting shareholders.

But while the proposed Directive seeks to coordinate action by Member States to the extent necessary to afford shareholders a minimum level of protection, the situation is currently far from a level playing field. For instance, in the Netherlands and Germany there is no obligation to make a public offer for all the remaining shares or where such obligation is only limited to a certain percentage. Furthermore, several Member States permit the board of the target company to take defensive measures in the case of a hostile takeover bid without prior consent of the shareholders[14]. This makes corporate acquisitions more difficult.

Moreover, the draft Directive provides the means of determining which is the competent authority for the regulation of a takeover, and which law is applicable, both of which are of crucial importance, particularly in relation to cross- border takeovers. It will also ensure a basic level of disclosure and information, thus guaranteeing transparency during the takeover bid. Indeed, the draft Directive provides for a structure that would allow some existing national differences to stay. However, these differences cannot go as far as to undermine the common principles and requirements set out at Community level[15].”

Bibliography:
[1] http://www.adviceonline.co.uk/topicalcontent/business_protection/ accessed 12-23-2003 [2] http://www.adviceonline.co.uk/topicalcontent/business_protection/ accessed 12-23-2003 [3] http://www.adviceonline.co.uk/topicalcontent/business_protection/ accessed 12-23-2003 [4] Cope, Nigel. Castorama rejects Kingfisher’s buyout plan.(Business) 05/16/2002; The Independent (London, England). [5] Cope, Nigel. Castorama rejects Kingfisher’s buyout plan.(Business) 05/16/2002; The Independent (London, England). [6] Cope, Nigel. Castorama rejects Kingfisher’s buyout plan.(Business) 05/16/2002; The Independent (London, England). [7] Cope, Nigel. Castorama rejects Kingfisher’s buyout plan.(Business) 05/16/2002; The Independent (London, England). [8] Cope, Nigel. Castorama rejects Kingfisher’s buyout plan.(Business) 05/16/2002; The Independent (London, England). [9] Cope, Nigel. Castorama rejects Kingfisher’s buyout plan.(Business) 05/16/2002; The Independent (London, England). [10] COMPANY LAW: NEW TAKEOVER BID AGREEMENT HINGES ON GIBRALTAR DEAL. Date: 12/11/1999; Publication: European Report [11] COMPANY LAW: NEW TAKEOVER BID AGREEMENT HINGES ON GIBRALTAR DEAL. Date: 12/11/1999; Publication: European Report [12] COMPANY LAW: NEW TAKEOVER BID AGREEMENT HINGES ON GIBRALTAR DEAL. Date: 12/11/1999; Publication: European Report [13] COMPANY LAW: NEW TAKEOVER BID AGREEMENT HINGES ON GIBRALTAR DEAL. Date: 12/11/1999; Publication: European Report [14] COMPANY LAW: NEW TAKEOVER BID AGREEMENT HINGES ON GIBRALTAR DEAL. Date: 12/11/1999; Publication: European Report [15] COMPANY LAW: NEW TAKEOVER BID AGREEMENT HINGES ON GIBRALTAR DEAL. Date: 12/11/1999; Publication: European Report

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