Departure of the Pakistani Courts from the Well-Established Rule of Majority in Corporate Law

Abstract

The common law practice of ancient times is that of majority rule, as enunciated in a well-known case called Foss Vs Harbottle. This case was based upon the proposition that the decisions and choices of the majority shareholders in the company should always prevail. It means if a person holds a greater number of shares in a company, then he should enjoy more privileges in comparison to a person who holds fewer shares. In such circumstances, the minority shareholders should accept the decision of the majority shareholders and they should not ask for a court interference because of the fact that the rule set down in Foss Vs Harbottle did not allow court interference if the majority of the members do not wish for such action by the court. Since this decision seems harsh and unjust, the court, in a subsequent decision, holds that in certain exceptional circumstances, the court can interfere in the internal affairs of the company. The exceptional circumstances may be Ultra Vires acts, where the act done by the members was that which requires a special number of members for its approval, like one third members etc.