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New Zealand law explained for everyone

Companies Act 1993

Enforcement - Personal actions by shareholders

175: Certain conduct deemed prejudicial

You could also call this:

“Actions that can be unfair to shareholders”

If a company doesn’t follow certain rules, it’s considered unfair to shareholders. These rules are about how the company handles its shares and money. For example, the company must give current shareholders the first chance to buy new shares. They also need to be fair about how much they charge for new shares.

The company must follow rules about giving out dividends, which is money paid to shareholders. There are also rules about how the company can buy back its own shares or help others buy them.

The company needs to be careful when changing shareholder rights or making big business deals. If they don’t follow these rules, it’s seen as unfair to shareholders.

Also, when the company’s directors sign official papers, they need to have good reasons for what they’re saying. If they sign without good reasons, that’s also considered unfair to shareholders.

If you want to know more about what’s considered unfair, you can look at section 174 of the Companies Act.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320836.

Topics:
Business > Industry rules
Business > Fair trading
Money and consumer rights > Consumer protection
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174: Prejudiced shareholders, or

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Part 9 Enforcement
Personal actions by shareholders

175Certain conduct deemed prejudicial

  1. Failure to comply with any of the following sections of this Act is conduct which is unfairly prejudicial for the purposes of section 174:

  2. section 45 (which relates to pre-emptive rights to the issue of shares):
    1. section 47 (which relates to the consideration for which shares are issued):
      1. section 53 (which relates to dividends):
        1. section 60 (which relates to offers by a company to acquire its own shares):
          1. section 61 (which relates to special offers to acquire shares):
            1. section 63 (which relates to stock exchange acquisitions subject to prior notice to shareholders):
              1. section 65 (which relates to stock exchange acquisitions not subject to prior notice to shareholders):
                1. section 76 (which relates to the provision of financial assistance by a company to acquire its own shares):
                  1. section 78 (which relates to special financial assistance):
                    1. section 80 (which relates to financial assistance not exceeding 5% of shareholders' funds):
                      1. section 117 (which relates to the alteration of shareholder rights):
                        1. section 129 (which relates to major transactions).

                          1. The signing by the directors of a company of a certificate required by this Act without reasonable grounds existing for an opinion set out in it is conduct that is unfairly prejudicial for the purposes of section 174.