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CMA Final · Corporate and Economic Laws · Prevention of Oppression and Mismanagement

Mr Shah, a member, complains under section 241 that a material change has occurred in the company's management through a change in the Board, and that the affairs are likely to be conducted prejudicially to the company's interests. Which statement is correct under section 241(1)(b)?

The complaint is maintainable if the change is not one brought about by or in the interests of creditors, debenture holders or a class of shareholders, and the member has a right to apply under section 244. Likelihood of prejudicial conduct is enough, and a Board alteration qualifies.

  1. AThe complaint is maintainable even if the change was brought about in the interests of creditors, including debenture holders
  2. BThe complaint is maintainable only if oppression has already actually occurred
  3. CThe complaint is maintainable only if the change was made by the ownership of shares and not by a Board alteration
  4. DThe complaint is maintainable if the change is not one brought about by or in the interests of creditors or a class of shareholders, and he has a right to apply under section 244Correct

Explanation

Section 241(1)(b) covers a material change in management or control, whether by Board alteration, ownership of shares or otherwise, excluding changes brought about by or in the interests of creditors, including debenture holders, or any class of shareholders. Likelihood of prejudice suffices, and the member must have a right under section 244. Option A contradicts the exclusion.

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