Over 142 years ago this month, the City of Glasgow Bank reported its financial results for 1878. In its disclosures from 30 September 1878, the bank indicated that for each £100 share held by investors in the bank, the market share was £236. This reflected a great sense of confidence in the prospects of the bank by various investors.
The unlimited liability model simply meant that if a bank’s liabilities ever exceeded its assets; the shareholders would be liable for the shortfall. In other words, depositors could suffer no harm in the event of a banking failure. The primary motivation behind depositor protection was simply that the risk aversion associated with depositors was such that if a risk existed that they could lose their deposits they simply would not deposit their money into a bank.
Days before its collapse, CGB had a shareholder register of 1819 individual and institutional shareholders. But such was the scale of the losses at the bank that very few could meet their full obligations to cover the bank’s shortfalls. The reason for the shortfall — a fraud perpetrated by its management — exposed the perils of limited oversight and apathetic directors with no appreciation of fiduciary responsibilities.
When CGB collapsed, the scale of the losses meant that most of its shareholders surrendered their entire estates to cover their share of the shortfall. Even then, only 14% of the shareholders eventually made good on their obligations with the remainder reduced to various levels of distress, penury and ruin.
In his judgment, delivered in June 2020, David Unterhalter reiterated the complexity that exists in the question of fiduciary duty and the rights of shareholders. The essence of the current legal position is simply that directors owe their fiduciary duty to the company and not to shareholders. As a result, shareholders cannot sue directors for losses suffered by them as a result of the loss in the value of a company.
The sum of these factors, simply means that the possibility of disaffected shareholders obtaining any form of relief in the Steinhoff saga, remains elusive not through lack of effort but rather through the limitations inherent in the legal and corporate systems. The irony of the De Bruyn case is that, had it succeeded, it would have meant that shareholders — whose liability is currently limited to what they invest — would have received compensation for the lost value of their investments.
Source: News Formal (newsformal.com)
South Africa Latest News, South Africa Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Steinhoff Investment swings into loss amid legal claimsThe company has made a R9.4bn provision for settlements in the wake of an accounting scandal
Source: BDliveSA - 🏆 12. / 63 Read more »
Steinhoff Investment swings into loss amid legal claimsThe company has made a R9.4bn provision for settlements in the wake of an accounting scandal
Source: BDliveSA - 🏆 12. / 63 Read more »
Gang targets smallholdings in violent robberies in Hartbeespoort areaPolice believe a gang is behind a series of violent home invasions at smallholdings around Hartbeespoort Dam in the North West
Source: TimesLIVE - 🏆 28. / 59 Read more »
Policewoman killed by armed gang during business robbery in KZNHawks spokesperson Simphiwe Mhlongo said members of the Durban Organised Crime Unit were investigating the matter in which a 38-year-old female sergeant was killed.
Source: SowetanLIVE - 🏆 13. / 63 Read more »
Super Saturday: Samir Nurkovic says Kaizer Chiefs deserve the league titleKaizer Chiefs have fought for the Absa Premiership title for more than a year‚ and ultimately deserve it‚ but know that it will take an almighty effort to secure it on “Super Saturday” against desperate Baroka FC‚ striker Samir Nurkovic has said.
Source: SowetanLIVE - 🏆 13. / 63 Read more »