Naliaka owns 10% of the issued shares in Pendo Limited. There are two directors Wanyonyi and Wafula who have an eccentric style of management. They own 45% of the issued shares. Naliaka understands that Wanyonyi and Wafula want to merge Pendo Ltd. with another more profitable company that the two directors wholly own. If this plan goes ahead, Naliaka‟s shareholding will be reduced to 3% of the merged business. Naliaka is financially dependent on the dividends she gets from Pendo Limited and that future dividends may be much less. Advise Naliaka of her legal position and protection under the law if any.

Naliaka owns 10% of the issued shares in Pendo Limited. There are two directors Wanyonyi and Wafula who have an eccentric style of management. They own 45% of the issued shares. Naliaka understands that Wanyonyi and Wafula want to merge Pendo Ltd. with another more profitable company that the two directors wholly own.
If this plan goes ahead, Naliaka‟s shareholding will be reduced to 3% of the merged business. Naliaka is financially dependent on the dividends she gets from Pendo Limited and that future dividends may be much less.
Advise Naliaka of her legal position and protection under the law if any.
ANSWER
b) As a shareholder, Naliaka is protected law in that at Common Law, though a majority shareholder is free to vote selfishly, he must always do so in the best interest of the company otherwise the decision is questionable in a court of law. As was the case in Menier v Hooper Telegraph Wires.
In this case, since the proposed merger purports to benefit the majority shareholders at the expense of the minority i.e. Naliaka, the decision to merge is challengeable in a court of law.
My advise to Naliaka is therefore to sue the majority shareholders and the company for disallowance of the merger. My advise is based on the decision in Menier v HooperTelegraph Wires where the majority shareholders purported to benefit at the expense of the minority.