Chapter 4. The Protection and Empowerment of Shareholders and other Stakeholders

• Pages: 82-98

CHAPTER 4

THE PROTECTION AND EMPOWERMENT

OF SHAREHOLDERS AND OTHER

STAKEHOLDERS

S F-G

INTRODUCTION

The corporate laws of the region have had their genesis in the now archaic UK

shareholder primacy model, but in the last 20 years the Commonwealth Caribbean

company law statutes have replaced the shareholder primacy model of company law

in favour of the moder n stakeholder theory, which recognises the importance of stake-

holders other than shareholders in the success of companies. The empowerment of

shareholders and other stakeholders is evident through the increased legal responsibil-

ity and accountability found in the various companies legislation and the exposure of

directors and o cers to direct legal actions. The codes of corporate governance in

Jamaica, Barbados and Trinidad and Tobago emphasise the empowerment of share-

holders and other stakeholders, refl ecting the legal position as it relates to the avail-

ability of direct access to the courts and encouragement of institutional shareholder

involvement.

A more recent development in Jamaica is the introduction of whistleblower pro-

tection, which, although limited to employment situations, adds another layer of

stakeholder protection. The recognition of corporate social responsibility (CSR),

though not legislated in the region, is arguably also introduced through the wide

provisions relating to the duties of directors and o cers in the companies legislation

and further in the more recent introduction of CSR in the corporate governance

codes.

This chapter will focus on the developments in the Commonwealth Caribbean

region, which empower stakeholders under the Companies Acts, and the Protected

Disclosures Act ( Jamaica), as well as the Codes of Cor porate Governance.

STAKEHOLDER PROTECTION AND EMPOWERMENT:

PROVISIONS OF COMPANIES ACTS AND CASE LAW

Duties of directors and o cers and corporate social

responsibility

Provisions relating to the duties of directors and o cers under most companies legisla-

tion in the Commonwealth Caribbean include a duty to take into account the interests

of a wide group of stakeholders, other than shareholders, including employees and, in

Chapter 4: Protection & empowerment of shareholders & stakeholders 83

some cases, the community in which the company operates1 when determining what is

in the best interest of the company. The statutes typically state:

In determining what are the best interests of a company, a director shall/must have

regard to the interests of the company’s employees in general as well as to the

interests of its shareholders.2

(Emphasis added)

Recently, the Supreme Court of Canada held that directors may take into account,

inter alia, shareholders, employees, creditors, consumers, governments and the environ-

ment in considering what is in the best interests of the cor poration.

In considering what is in the best interests of the corporation, directors may look to

the interests of, inter alia, shareholders, employees, creditors, consumers,

governments and the environment to inform their decisions.3

(Emphasis added)

Although the provisions of the relevant Companies Acts in the Commonwealth

Caribbean do not go as far as the UK Companies Act,4 which now includes a duty

to consider the interests of an extraordinary large number of stakeholders, including

the interest of employees and the impact on the community and the environment, the

stakeholder theory is now entrenched in the majority of Commonwealth Caribbean

company law.

(ii) The derivative action

The introduction of the Canadian style derivative action has successfully put to bed

the old UK restrictions on minority shareholders and the ability to bring an action on

behalf of the company for a wrong done to the company has gone further to include

1 Antigua and Barbuda Companies Act 1995 (A&B), s 97(2); Barbados Companies Act 2002- Cap

308 (Bds), s 95(2) where the word ‘must’ is used instead of ‘shall’; Dominica Companies Act 1994

(Dom), s 97(2); Guyana Companies Act 1994- Cap 89:01 (Guy), s 96(2) where the word ‘must’ is

used instead of ‘shall’; Jamaica Companies Act 2004 ( Ja), s 174(4) where the word ‘may’ is used

instead of ‘shall’ and refers to shareholders, employees and the community in which the company

operates; St Lucia Companies Act 2008- Cap 13:01 (St Lucia), s 97(2); Trinidad and Tobago

Companies Act 1995- Cap 81:01 (T&T), s 99(2); St Kitts does not have this provision.

2 A&B, s 97(2); Bds, s 95(2) where the word ‘must’ is used instead of ‘shall’; Dom, s 97(2); Guy, s

96(2) where the word ‘must’ is used instead of ‘shall’; Ja, s 174(4); St Lucia, s 97(2); T&T, s99(2); St

Kitts does not have this provision. See also S Ffolkes-Goldson ‘The Commonwealth Caribbean:

The Reform of The Law Relating to the Duties of Directors’ (2003) 24(12) The Company Lawyer

378, 380–381.

3 BCE Inc. v 1976 Debentureholders [2008] 3 SCR 560 [40] confi rming Peoples Department Stores Inc.

(Trustee of) v Wise [2004] 3 SCR 461.

4 UK Companies Act 2006, s 172.