Canterbury Law Review
SHAREHOLDER APPROVAL OF MAJOR TRANSACTIONS: A CONSIDERATION OF THE OBJECTIVES, OPERATION AND FAILURE OF S 129 OF THE COMPANIES ACT 1993
The focus of this article is the statutory limit on board discretion contained in s 129 of the Companies Act 1993 (NZ) ('the Act'). Section 129(1) provides that a company must not enter into a major transaction, as that term is defined in s 129(2),1 unless the transaction has been approved by a special resolution2 of shareholders or is contingent of such approval being obtained. This section was part of a package of reforms proposed by the Law Commission in its 1989 Report, Company Law: Reform and Restatement ('the 1989 Report')3 to create a 'comprehensive system for protection of minority shareholders'.4 This package of reforms also included the introduction of minority buy-out rights,5 commonly referred to in North American corporate law as 'dissenter or appraisal rights'. These two reforms were included in the Act to provide a pathway for minority dissenting shareholders who vote against a major transaction, to exit the company by having their shares bought-out by the company6 or a third party,7 subject to certain financial safeguards set down in the Act.8 Under the Act minority buy-out rights are also triggered when a shareholder votes against a special resolution to adopt, alter or revoke a constitution and the proposed alteration imposes or removes a restriction on the activities of the company9 and when a minority shareholder votes against a resolution to change class rights.10 Finally, shareholders who vote against a long-form amalgamation pursuant to s 22111 are also entitled to 'require the company to purchase those shares in accordance with section 111'.12
The first part of this article reviews the background to these provisions, both in terms of their historical and theoretical frameworks and the objectives of the New Zealand Law Commission as outlined in its 1989 Report. It then reviews cases that have applied the provisions to date and considers how a combination of the bright line test adopted by the drafters of s 129 and a series of restrictive judicial determinations have operated to limit the impact of this section. It is argued that these factors together with the legislative inadequacies of the buy-out right remedy have operated to sideline what should have been an important governance and regulatory reform of the Act. The second part of this article contains a comparison between the essentially quantitative formulation contained in s 129 with more qualitatively focused North American statutory tests.
The origins of dissent and appraisal rights in the United States have been the subject of some lengthy discussion,13 but it is widely accepted that the first statutory form of appraisal rights in United States corporation law dates back to 1851 in Ohio.14 The generally accepted rationale for the development of such rights was as a form of consideration or compensation for the loss of unanimity in shareholder decision making, although Kanda and Levmore state that the chronology and causality between these two developments is not entirely clear.15 Wertheimer16 comments, after observing that every American state corporate statute contains at least some form of appraisal remedy:
[t]he origin of the appraisal remedy typically is tied to the move in corporate law to majority approval of fundamental corporate changes, and away from a requirement of unanimous shareholder consent. When unanimous approval was no longer required, and shareholder effectively lost their individual right to veto corporate changes, the appraisal remedy was provided for them in return. Thus, the historical explanation for the existence of the appraisal remedy is as a quid pro quo for the loss of shareholders' right to veto fundamental corporatechanges.17
Although appraisal rights arose as a response to the removal of the requirement of unanimous shareholder approval to certain proposed substantial transactions, this historical objective has been described as lacking 'explanatory power for the remedy's continued existence'.18 Certainly, it does not explain the decision to introduce this remedy into New Zealand corporate law when majority shareholder approval had been the norm for many years. Instead, commentators justify the continued use of the remedy in the United States19 under a variety of rationales generally associated with the desirability of minority shareholder protection; although in practical terms, the remedy in the United States 'has been largely hijacked by majority shareholders as a tool for eliminating minority shareholders'.20 One rationale is based on the 'defeated expectations' of minority shareholders, a concept that also exists in the literature and case law in claims of shareholder oppression or unjust detriment. This rationale is based on the belief that shareholders acquire shares in a company with certain expectations as to the nature of the company and type or types of activities the corporation will undertake. Minority expectations however are unlikely to act as check or block on entrepreneurial decisions of management representing the interests of the majority shareholders, when such decisions result in a change of direction for the company. Therefore, it is argued that minority shareholders should be entitled to exit a company in the event of a proposed substantial change in the nature of the company's business, or alteration of rights attached to shares or in the case of a merger.21
A second but related rationale is underpinned by a belief that minority shareholders have a right to fair treatment and therefore the 'minority should be able to jump ship when the master sends it in a new direction'.22 Central to an understanding of the popularity of appraisal rights in the United States is that generally minority shareholders do not have the same level of protection against unfairness or oppression as they do in common law jurisdictions.23 In some states, courts 'have imposed an enhanced fiduciary duty between close corporation shareholders and have allowed an oppressed shareholder to bring a direct cause of action for breach of this duty'.24 Protection in such states is therefore only available to minority shareholders by attempting to enforce these fiduciary duties owed by the majority shareholders to them or by invoking appraisal rights, although the safeguard afforded by such rights varies significantly between states.25
Kanda and Levmore26 proposed an alternative rationale for the continued existence of appraisal rights, clearly influenced by the dominant use by the majority in many states in America of appraisal rights to squeeze out minority shareholders. Focusing on transactions such as consolidations or mergers, they define the purposes of appraisal remedy in terms of inframarginality, reckoning and discovery.27 This approach has been criticised on theoretical grounds28 and also does little to aid a consideration of the New Zealand context as buy-out rights under the Act can only be exercised at the option of the dissenting shareholder,29 although sometimes shareholders may believe they have little real choice but to exit the company. Although the discovery objective, as they define it, highlights the 'usefulness' of the remedy for uncovering 'suspicious non-arm's length bargains or side payments ... and generally deterring misbehaviour'.30
A related argument for the continuance of a right of dissent and consequential appraisal rights is that these rights 'may have a side benefit of protecting shareholders as a class by making unpopular decisions more expensive for management to pursue'.31 However, commentators such as Manning use assertions as to the cost of the remedy, both in terms of the cost to the shareholders it is designed to protect and the financial restraints it imposes on corporation, to argue against the continued existence of the remedy in the United States.32 It should be noted that these specific objections to the appraisal remedy have less weight in the New Zealand context as the Act provides that a company can apply on grounds of financial hardship for an exemption from being required to acquire a minority shareholder's shares.33
Kraakman and others in the seminal text, Anatomy of Corporate Law,34 evaluate exit rights in agency theory terms. They argue that any corporate law system needs to have, as a regulatory strategy, controls as to how principals can enter and exit from a relationship with particular agents. By the use of regulations in this regard, corporate law can attempt to reduce agency costs between shareholders as principals and their agents. Therefore, buy-out or appraisal rights are identified as a method of allowing a principal to escape opportunistic agents ex post, thus providing dissenting shareholders with a method to avoid a prospective loss when they believe a proposed major transaction is a value reducing decision.35
When focusing specifically on the rationale underlying shareholder approval for fundamental changes, different principles emerge. One of the underlying tensions in modern corporate law with its concentration of the importance as a business model based on the delegation of management to the board is the problem of optimal delegation. As Kraakman and others state, while 'the efficiencies of the corporate form require centralising management power, shareholders need not (and generally do not) delegate all authority to act for the corporation to the board of directors'.36 In this text, the authors report the findings of a multi-jurisdictional review of the limits of board power in the context of a proposed significant corporate action. Although they find no commonality in the jurisdictions reviewed as to the circumstances when a board's decision power is limited, they do identify three general tendencies to any such statutory limit. They suggest that in any particular jurisdiction, limits on board discretion have at least one and usually all three of these tendencies. The three tendencies are that shareholders' decision rights exist for transactions that are large relative to the value of the company; when the investment or divestment decision requires broad ranging judgements; and, lastly, when the decision involves a possible conflict of interest for directors, even if this conflict does not rise to the level of a self dealing transaction.37
They identify shareholder decision rights in this context as a governance strategy, expanding the rights of principals to intervene in a firm's management, albeit as ex post ratification of the most fundamental corporate decisions. It is suggested that this function of s 129 as a governance strategy is often overlooked in commentary and case law. However, this attitude is not surprising given that Kraakman and others comment that a corporate law system's decision rights strategies will be much less prominent than its appointment right strategies. Moreover, that this 'disparity is a logical consequence of the fact that the corporate form is designed as a vehicle for the delegation of managerial power and authority to the board of directors'.38
Although the principal purpose of a Memorandum of Association was to govern the relationship between the company and the outside world,39 limits on the capacity of the company contained in the Memorandum also operated to protect shareholders from uncontrolled and unforeseen directorial changes in business direction. However, a consequence of the development through the 20th century of all-purpose object clauses in Memoranda of Association was to undermine its importance. New Zealand law followed this trend and in 1984 amended the Companies Act 1955 to provide that, subject to certain conditions,40 companies had the rights and powers of a natural person.41 One corollary of this evolution was the removal of any real protection afforded to shareholders from fundamental changes to the nature of the business of the company. As the New Zealand Law Commission observed in its 1987 Discussion Paper, 'Company Law',42 that since the 'abolition of the ultra vires doctrine it may be said that shareholders have insufficient protection against substantial and rapid change which may transform the nature of the business'.43
This Discussion Paper identified a number of options for reform including a proposal that all substantial decisions be passed or ratified by the same majority of shareholders as is required for alteration of class rights and by introducing buy-out rights for those who dissent.44 However, the Law Commission at that time was not convinced that the addition of these rights were necessary. The Commission considered that courts already had the power to require a company to acquire minority dissenting shareholders shares under s 209 (of the Companies Act 1955), taking into account that this section had been amended in 1980 to enlarge the range of circumstances in which a court had the power to intervene in cases of shareholder oppression. Also, the Law Commission stated 'there may be substantial difficulties in defining what is a fundamental change'.45 However in the 1989 Report, the New Zealand Law Commission has abandoned such reservations and recommended the adoption of major transaction and buy-out right provisions and included suggested clauses46 in a draft Companies Act that formed part of the Report. The Law Commission had concluded that the oppression remedy, then contained in s 209, was an insufficient remedy in itself because buy-out rights would arise on the occurrence of certain changes to a company or its activities or rights attached to shares, regardless of 'whether or not the action taken by the company is unfairly prejudicial to the shareholder'.47 As Vanessa Mitchell observed the Law Commission views, when read together with the legislation, 'appear to be saying that something can be "unfair" without necessarily being "unfairly prejudicial"'.48
The major transaction requirement in the 1989 Report formed part of a larger package of reforms designed to increase shareholder protection from potential abuse where management of the company is given to the directors.49 In this respect, the requirement that shareholders must approve or sanction fundamental change can be categorised as a governance strategy to increase shareholders' control rights over board decisions. This conclusion is supported by the position of the section within the Act. Section 129 is located in Part 8 of the Act, which is headed 'Directors and Their Powers and Duties' and specifically is grouped with other two sections under the heading 'Powers of Management'.50 Accordingly, the inclusion of the 'major transaction' provision in the Act can be viewed not only as a conduit for minority shareholders to exit a company, but also as a strategy to increase the rights of shareholders as a class. Additionally, the requirement that 75 percent of shareholders must confirm or ratify fundamental transactions ensures the alignment of the interests of the board with those of the shareholders.
The rationales put forward by the Law Commission for adopting this remedy reflect the more mainstream North American 'appraisal right' rationales51 based on shareholder expectations and fairness for minority shareholders (rather than shareholders generally). At paragraph 499 of the 1989 Report, the Law Commission states:
The provision is based on the view that some dealings have such far-reaching effects that they should be referred to shareholders. Shareholders should not find that massive transactions have transformed the company they invested in without warning…What we are concerned with is abrupt and substantialchange which transforms the nature of the enterprise.
Buy-out or appraisal rights provisions were included in the Act among a number of other reforms designed to increase minority shareholders rights and protections, although the introduction of this novel concept into New Zealand corporate law formed a central platform to the reforms.52 The 1989 Report went on to say that buy-out rights create a mechanism for dissenting shareholders to exit a company, when that company has undertaken a 'level of change to which it was unreasonable to require shareholders to submit'.53 Further, this remedy arises for a dissentient shareholder 'where there is an alteration of class rights or a fundamental change to the company',54 and therefore a 'dissenting shareholder does not inevitably have to accept the majority decision. The shareholder will instead have the option of leaving the company'.55
Many commentators viewed the inclusion of these two connected provisions as one of the important innovations of the new Act, particularly as it provides a means of enhancing the rights of the majority to use the corporate structure without the necessity of considering the interests of minority shareholders. As David Goddard56 stated in 199757 the fact that '[t]he majority of shareholders (for major decisions, a 75 per cent majority) has been given much greater freedom to make decisions regarding the future of the company, with the remedy for an aggrieved minority shareholder being (able to) exit at a fair price'58 was one of the successes of New Zealand's new company law. It is difficult to gauge the impact of the major transaction provision to date, however, the small number of buy-out cases that have appeared before the courts59 as a consequence of shareholders dissenting to major transactions, suggests that the provision is not achieving this governance objective.
Although the Law Commission couched the intended purpose for s 129 in its 1989 Report in terms of the need to protect shareholders from 'massive transactions' and from 'abrupt and substantial change', the test for major transaction used in the Draft Act attached to that Report, and in the Act can only be described as quantitative in nature. Section 129(2) defines a major transaction as one where the value of the proposed transaction, whether it is an acquisition or disposition of assets or acquiring rights or interests or incurring obligations or liabilities, is more than half the value of the company's current assets. This statutory formulation requires boards to assess if a proposed transaction has a value greater than 50 percent of the value of the existing assets before the transaction in question. Assets are expressly given a wide definition as including property of any kind, whether tangible or intangible,60 and as a result of an amendment before the section came into force,61 the valuation of contingent liabilities is required to take into account the same factors for valuing contingent liabilities under the solvency test.62 However, reflecting the paucity of cases in which s 129 has been subject to any detailed analysis, there has been little judicial or academic attention given to the appropriate method of valuing assets, although in Cudden v Rodley63 the Court of Appeal stated that the section is 'undoubtedly concerned with the market value' of a company's assets and this statement has been generally accepted as correct in light of the context of the section.64 The 1989 Report does not provide any guidance as to why a bright line, rules based formulation of fundamental change was proposed for the section. Although the quantitative test adopted in s 129 does have the advantage of providing certainty as to which transactions require shareholder approval or sanction, the problem which such a rules base approach is that it is a very blunt test of fundamental change. Clearly the 50 percent trigger will capture some transactions that do not effect fundamental change and allows others, which do not exceed this arbitrary value, to proceed with only board approval, regardless of how fundamentally the transaction may change the business of the company.
One suggestion is that a quantitative test was adopted to be consistent with concurrent amendments to the New Zealand Stock Exchange Listing Manual. This suggestion at first glance does appear to have some merit, at least in terms of timing. In June 1988, the New Zealand Stock Exchange published for consultation a 'Revision of Listing Requirements Exposure Draft' which proposed a number of changes designed in part to discourage 'practices which appear to have damaged the reputation of the New Zealand market generally'.65 A summary of major features attached to the Exposure Draft, stated that a new rule was proposed regarding the disposal of the main undertaking of a company to put in place 'constraints on the entry by companies into acquisition or disposal transactions which would change the known nature of the company'.66 Accordingly the new Listing Manual adopted in 1989 included a new clause 9.1.1 headed 'Change of Main Undertaking' which provided:
An Issuer shall not enter into any transaction or series of linked or related transaction to acquire, sell, lease, let, exchange, or otherwise dispose of (otherwise than by way of charge) its main undertaking or assets of the Issueror assets to be held by the Issuer:
(a) Which would change the essential nature of the business of the Issuer, or
(b) In respect of which the gross value is an amount in excess of 50% of the amount of shareholders' funds of the Issuer immediately before the transaction;except with, or subject to obtaining the prior approval of an ordinary resolution.
It is interesting to note that although this rule contains at first glance both qualitative and quantitative elements, footnote three to the rule specified that the Exchange will readily waive the requirement imposed by clause 9.1.1(b) if the relevant transactions did not involve a material change in the essential nature of its business activities of the issuer as generally known to the market.67 This suggests that at least when the rule was introduced, there was recognition that a transaction valued at 50 percent or greater of shareholder funds may not necessarily result in a fundamental change to the nature of the business. This right of the New Zealand Stock Exchange to waive shareholder approval was removed in 1999, at which time the threshold based on the gross value of shareholder funds was replaced by a threshold of the lesser of the 'Average Market Capitalisation or the Gross Value of the Assets'.68
Obviously as the introduction of this rule in 1989 predated the enactment of the Act, it was not until 1994 that the listing rules were amended by the addition of a footnote drawing the attention of issuers to the need to comply with s 129.69 This reference has been subsequently amended a number of times and rule 9.1.1 currently provides that an issuer should not enter a transaction to which the rule applies except with the prior approval of an ordinary resolution of the issuer or a special resolution if the issuer must obtain approval under s 129 of the Act.70
The relationship between s 129 and the requirements in the listing rules as well as the difference in the language between the 1989 Report and s 129 was highlighted in the 2004 High Court decision of Fletcher Challenge Forests Ltd.71 In this case Salmon J was required to interpret s 129 to determine if it applied to the transactions of an individual company rather the transactions of a group of companies. This case arose out of a complex series of transactions to be undertaken by various subsidiaries of Fletcher Challenge Forests Ltd ('FCF'). FCF was a holding company and listed on the New Zealand Stock Exchange and its assets comprised of shares in and loans to its various subsidiary companies, including three companies which owned certain forestry assets that were proposed to be sold. It was not disputed that the value of the forest assets to be sold by each subsidiary was more than half the total value of each subsidiary company's assets before the sale transaction. Accordingly, each sale was required to be approved by special resolution of the shareholders which given their subsidiary status, was not problematic.
The matter came before the Court as FCF sought a declaratory judgment that, although the value of the assets to be disposed of by the subsidiaries was more than half the value of FCF's total assets before the proposed sales, FCF was not itself undertaking a major transaction. This was on the basis that it was not disposing of its assets or incurring obligations or liabilities and FCF was not a party to any of the transactions. Counsel, appointed to represent the contrary view to that of the company, argued at paragraph 36 that to 'interpret the section as other than including the holding company and its subsidiaries would be to utterly defeat the purpose of the section'.
However, Salmon J took the view that there 'is nothing in the Act itself which would support an interpretation for s 129 different to that conveyed by the words used'.72 As he considered the words of the statute were clear, it was not permissible to find a context outside of the words used regardless that his Honour accepted 'the observations of the Law Commission seem to be at odds with the wording of the section prepared by the Commission'.73 Salmon J preferred the argument put forward by counsel for FCF that, although the Law Commission in the Report had explained the purpose of the major transaction provision in qualitative terms, the wording adopted in the section itself required a quantitative approach based on a calculation of the value of the transaction in light of the total value of the company. In Salmon J's opinion, this quantitative approach did not allow an extended interpretation of the section and the section was to be strictly construed as applying to the value of assets and liabilities of one company.74
As FCF is a listed company, the Court was also required to consider clause 9.1.1 of the listing rules and an identical clause inserted in FCF'S constitution as a requirement of the listing rules.75 The constitution and the listing rules also stated that any references to an issuer, in either document, may extend to all members of the group of companies to which the issuer is the holding company. Accordingly, for the purposes of clause 9.1.1 (and the identical clause in FCF'S constitution), the sale of assets by subsidiaries of FCF was considered to be a transaction of FCF. However, as both the constitution and the listing rules only required a special resolution if s 129 applied to the transaction, and as s 129 had been held not to apply here, the sale only required an ordinary resolution of the shareholders. The obvious advantage of this result for FCF was that s 129 did not apply to the transactions in question and those shareholders who voted against the transaction would not be entitled to require FCF to purchase their shares under the minority buy-out provisions of the Act.76 Therefore, at least for companies subject to the listing rules, while this rule does not operate to provide an exit strategy for disaffected shareholders, it does require that there is at least majority shareholder support for any change to the essential nature or substantial transactions. Although for a listed company the fact that shareholders can freely sell their shares if they decide that the board has entered into a value reducing decision, should also operate to deter substantive abrupt changes of direction.
In a subsequent case, the High Court in Central Avion Holdings Ltd v Palmerston North City Council & Anor77 appeared to take a less literal approach to s 129. The alleged failure to comply with s 129 was secondary to the primary claims of oppressive conduct under s 174 and undue influence by Palmerston North City Council ('PNCC') as majority shareholder on the PNCC appointed directors on the board of Palmerston North Airport Ltd ('PNAL'). The origin of the principal claims was an alleged binding agreement or understanding between PNAL and PNCC as to the circumstances in which PNAL would make a call on unpaid share capital. The claim of non-compliance with s 129 concerned a board decision to proceed with a proposal to extend the runway at Palmerston North Airport. The total cost of the extensions was estimated at $15 million. As at 31 December 2004, PNAL's statement of financial position showed that its current assets were valued at $17,783,967. There was no analysis in the judgment as to composition of these assets, but as the statement of financial position was used, the assumptions adopted in that document as to valuation of assets appear to have been accepted as appropriate. However, Goddard J was not required to find non-compliance with s 129 as she held at paragraph 153 that the runway extension was not a single transaction, but a series of individual transactions. Instead, she concluded that what had been approved was a phased business plan to be implemented in stages, with each stage requiring an individual assessment and approval of funding. As the first stage consisted of transactions valued at less than 50 percent of the assets of the PNAL before the acquisition in question occurred, it did not in the words of Goddard J at paragraph 153 'fall foul of s 129'.78 However, although her Honour principally relied on a quantitative test relying on the wording of s 129(2), she also used a qualitative analysis based on the substance of the transaction to support her analysis. In formulating this qualitative test, she relied on the language of the Law Commission discussed above and concluded that the facts of case were sufficient to take the proposed runway expansion outside the Law Commission's characterisation of the nature of a major transaction in the 1989 Report. Namely, Goddard J concluded that transactions in this case were 'outside of the definition of a single large transaction, of which the investors had no warning and which will abruptly transform the nature of the company'.79 This approach can be criticised as clearly the Law Commission intended that the provision should apply when a series of transactions substantially changes the nature of the business carried on by the company in an unexpected direction.80 In reaching this conclusion, the earlier decision of Paterson J in Hogg v Shephard81 was distinguished on the facts.
In Hogg v Shephard, Paterson J had found a series of individual agreements in reality did constitute one major transaction. As he stated at paragraph 21 'the fact that the 95 sections were sold by 95 individual agreements, does not in my view, deprive the sale of major transaction status'82 because the agreements were all with a single purchaser and on identical terms. He took the view that 'notwithstanding the form of the sale, it was in substance a major transaction'. However, essentially the test he applied was a quantitative one, focusing on the total cost of the sale and the identical character of the sale and purchase agreements without any discussion of whether the transaction changed fundamentally the nature of business.
Overall, although there has been limited judicial analysis of the intended scope of s 129(2), the few cases to date have generally operated to undermine the scope of the provision. Clearly the inherent danger with a rules based approach, such as the approach found in s 129, is that it encourages non-compliance by structuring transactions in a way so as not to trigger the requirement for a special resolution, thereby allowing companies to sidestep the requirement to acquire a dissenting shareholder's shares. This narrowing of the scope of the section is ironic as the Law Commission indicated in its 1989 Report that it had considered legislating an even broader test for fundamental change. The Law Commission stated that it had considered requiring transactions valued at 20 percent of assets as requiring approval by a special resolution of shareholders. One of the reasons that the level was set at 50 percent was that the Law Commission decided that setting a lower level may affect the incidence of buy-out rights.83 Certainly if the level had been set at 20 percent of assets, it is very likely that there would have been more reported cases involving the buy-out right provisions in ss 110-115 of the Act. Under the current regime there have been only three cases84 where the courts have been required to interpret the buy-out rights provisions of the Act arising specifically from the major transaction pathway.85 This is surprising, for although under the Act any dispute on the value of a minority shareholders shares is required to be decided by arbitration, the statutory procedure governing this process has been judicially described as 'defective' and 'substantially flawed'.86 Accordingly it is suggested that it is likely that, if there have been many incidences of this procedure being applied by minority shareholders and companies, more cases would have arisen for judicial determination. As a result of this judicial criticism, the Law Commission87 recommended amending the remedy and these recommendations formed the basis of the Companies (Minority Buy-Out Rights) Amendment Act 200888 which came into force on 16 September 2008. One amendment contained in the Act is a new requirement that companies, when giving shareholders notice of any special resolution under Schedule 1 of the Act, will not only be required to provide the text of that special resolution, but also in the case of a resolution which triggers buy-out rights, the existence of such rights.89 It may be difficult to assess the success of the amendments contained in the Act given that private arbitration has been retained as the method of resolving valuation disputes. However, as companies will be required to advise when buy-out rights arise, there will be greater incentives for companies to structure transactions so as to avoid compliance with s 129 in the future, if the section remains in its current form.
The second half of this article considers the principles based approach found in North American corporate law and considers whether such formulations better protect shareholders from fundamental changes in the nature of the business of an entity.
The Law Commission in its 1989 Report supported the introduction of buy-out rights into New Zealand's corporate law environment as such rights had 'long been a feature of United States corporation statutes ... and has been a feature of the Canadian statutes introduced following the Dickerson Committee Report in 1971'.90 As discussed earlier in this article such rights, known as dissent and appraisal rights, have had a long history in United States corporate law, although they were only introduced in 1975 into the Canada Business Corporations Act ('CBCA') and were based on New York's Business Corporation Act. However, the North American formulations of fundamental change require a more principled approach to the issue.
Under the CBCA, a right of dissent and appraisal,91 arises upon 'a sale, lease or exchange of all or substantially all of the property of a corporation other than in the ordinary course of business of the corporation'.92 Most Canadian states also have some version of this right.93 All states in the United States have some form of requirement that shareholders must agree to fundamental changes and a corresponding right of dissent and appraisal for opposing shareholders.94 Many states have adopted the approach of the American Bar Foundation as set out in the Model Business Corporation Act. Interestingly, the 2000 Revised Model Business Corporation Act provides that unless the articles of incorporation state otherwise, no approval of shareholders is required to sell, lease, exchange or otherwise dispose of any or all of the corporation's assets if the disposition is in the usual and regular course of business. However, any other sale, lease, exchange or other disposition of assets only requires approval, if the disposition would leave the corporation without a significant business activity and a corporation is deemed to have retained significant business activity, if that activity represents at least 25 percent of the total assets.95
However many states have based their dissent and appraisal statutes on earlier forms of the Model Act, which provided that such rights arise in disposition cases, when that disposition was of 'all, or substantially all' assets of a corporation otherwise in the 'usual or regular' course of a corporation's business. Indeed Fletcher Cyclopedia of the Law of Private Corporations in a 2005 revised edition states that the phrase 'all, or substantially all' or comparable phrases have been adopted in all 50 states.96
Accordingly, courts in Canada and the United States have frequently been required to decide if a disposition is of all or substantially all of the assets of a corporation. Some commentators have indicated that the trend in the United States97 and Canada98 is towards a qualitative test based on looking at the 'effect of a transaction not its form when considering these issues',99 although, quantitative analysis of the value of transaction still remains relevant to determining the importance of the property to the business of the company and whether the absence of the property will alter the fundamental character of the business.
In Canada, although some of the earlier cases held that 'substantially all' required there to be a sale that would effectively destroy a corporation's business,100 later cases have rejected this approach as too narrow and instead have focused on whether the transaction is a radical and fundamental change to the corporation.101 In making this decision, the court has to determine what the nature of the corporation's business is and this is a question of fact in each case. In Canadian Broadcasting Corporation Pension Plan v BF Realty Holdings Ltd,102 the Court of Appeal for Ontario endorsed the following two-stage test, originally adopted by the Quebec Court of Appeal in Cogeco Cable v CFCF Inc,103 which provides that a court in making its decision needs to take consider that:
(1) in the interpretation of s 189(3) of the Act, it is appropriate to take into account both quantitative and qualitative criteria;
(2) the concept of 'substantially all of the property' has acquired a special meaning in this area of law;
(3) it is difficult to fix a percentage, but in my view, when the sale involves 75 percent of the value of the property, it ought to be submitted for shareholders approval;
(4) if the case cannot be decided by using the quantitative test, then we must proceed with a qualitative analysis of the transaction;
(5) in such a case, it must be determined whether the proposed transaction constitutes a fundamental reorientation which strikes at the heart of the company's activities, in other words, whether this is a transaction which is out of the ordinary and which substantially affects the company's purpose and existence; and
(6) application of the qualitative test must take quantitative criteria into account; the greater the proportion of property sold in relation to all of the company's property, the more likely we would be to conclude that the transaction strikes at the heart of the company and necessitates the shareholders' approval.104
Although this two stage approach has received some criticism as overly emphasising the importance of the quantitative test,105 it does highlight that a court's focus is a comparison of the nature of the company's business before and after the transaction. Inexorably the question of whether that business is fundamentally altered after the transaction in question will require consideration of what was the ordinary course of business of the company before the transaction.
Similarly in the United States, the essential question is whether a transaction will change the fundamental nature of a corporation. In a recent decision of the Supreme Court of Nebraska in State of Nebraska ex rel. Columbus Metal Industries Inc v Aaron Ferer & Sons Co,106 Miller-Lerman J stated, after reviewing case law from other states, that it 'is generally acknowledged that a principle has emerged from the decisions of other courts that "a disposition of corporate assets may be considered 'substantially all' if either its quantitative or qualitative impact, or both, would fundamentally change the nature of the corporation"'.107 Nebraska's Business Corporation Act is based in the 1984 version of the Model Act and Miller-Lerman J cited with approval the official comment to §12.1 of that Act which provides:
The phrase 'all, or substantially all', chose by the draftsmen of the Model Act, in intended to mean what it literally says, 'all or substantially all'. The phrase 'substantially all' is synonymous with 'nearly all' and was added merely to make it clear that the statutory requirements could not be avoided by retention of some minimal or nominal residue of the original assets ... A sale of several distinct manufacturing lines while retaining one or more lines is normally not a sale of 'all or substantially all' even though the lines being sold are substantial and include a significant fraction of the corporation'sformer business.108
On a similar note, the District Court of Appeal of Florida in South End Imp Group v Mulliken109 commented that that shareholder consent requirements are designed to ensure that 'directors do not fundamentally change the nature of the shareholders' investment without the check and balance of informed shareholder approval'. This ultimately falls upon a consideration of whether there has been a change in the nature of the underlying corporate business, although as O'Neal and Thompson state, establishing what is the nature of the business of a corporation is not always straightforward110 and this acts to the detriment of minority shareholders.
Koehnen states with regard to Canadian corporate law that generally speaking, 'ordinary course of business refers to day-to-day business activities of the sort that a manager can carry out on his own initiative without prior or subsequent reporting to superiors'.111 The issue of what is the ordinary course of business is always a question of fact that a court must determine from the record and activities of the corporation. In a leading Canadian case of 85956 Holdings Ltd v Fayerman Bros. Ltd,112 a decision to sell the inventory of company was held not to be in the ordinary course of business, because a decision had been made not to replace the inventory. This transaction for the company in question, represented approximately only 33 percent of the value of the company, but it was held to have the effect that 'it will be a holding company with no ability to accomplish the purpose or objects for which it is incorporated'.113
In many American States, the applicable statute 'differentiates between a disposition ... made in the usual or regular course of business and a disposition which is not made in the usual or regular course of business. Shareholder approval is required in the latter case; in the former the board of directors has full authority to act alone'.114 Accordingly, American courts have had to consider what is the 'usual or regular' course of business of a corporation, although in contrast to the Canadian position, there does not appear to be a uniform approach. One line of decisions has relied on the purpose and powers in a corporation's charter alone, whereas others have considered the actual operations to determine whether a corporation's sale of assets falls within its regular course of business.115 O'Neal and Thompson conclude that 'in most jurisdictions, whether a corporation's regular course of business for purposes of the sale-of-assets statute is to be tested by the purpose clauses of the corporation's charter or by the business in which the corporation is actually engaged is still an unresolved question'.116
The New Zealand Law Commission did consider whether the major transaction provision in the Act should include an exemption for transactions that were in the 'ordinary course of business'. However, the Commission decided against this exemption given the 'imprecision of such a test and the possibilities of abuse'.117 Instead, they took the view that for any transaction large enough to be caught by the provision, the section should apply to it and the 'shareholders be given an opportunity to determine it, whether or not it can be said to be in the ordinary course of business'.118 There is some merit in this reasoning, but together with the fact that s 129 applies to acquisitions, it does extend the potential application of the provision far beyond its North American counterparts. Further, it is a contestable conclusion given the stated intention for s 129 was to ensure that dissenting shareholders do not inevitably have to accept a 'fundamental change to the nature of the enterprise' which self evidentially should not include a transaction in the ordinary course of business.
It is perhaps not surprising therefore that one of the first cases to consider s 129 took into account 'ordinary course of business' considerations to narrow the application of the section. In Flight Trainers Ltd v McGormick119 one of the allegations was that the affairs of the company in question had been conducted by the two directors in a manner that was unfairly prejudicial to one shareholder in that they had entered into a debenture in contravention of s 129(2)(b). It was accepted by all parties that the debenture had not been the subject of a special resolution or contingent upon one, 'so if it was by definition a major transaction, it would have been entered into [in] contravention of s 129'.120 Salmon J however held that that the debenture was not a disposition within the meaning of s 129(2)(b). Part of his reasoning was a view that Parliament could not have intended that a special resolution would be required every time a company granted a debenture, given the prevalence of their use. Although subsequent cases have not developed this ordinary course of business exception, it should be noted that s 129 was subsequently amended in accordance with this decision. Section 129(2A) provides that a transaction will not be a major transaction under s 129(2)(b) or (c) by reason only that the company is giving a charge secured over assets of the company for the purpose of securing repayment of money or performance of an obligation when the value of which is more that half the value of the assets of the company.121
This difficulty in determining the 'usual and regular' or 'ordinary' course of business of a company highlights one of the areas of uncertainty inherent in such a qualitative approach, although a legislative solution mandating consideration of the actual operations of the business is a solution that has been adopted in some states.122 In the New Zealand context, as the vast majority of companies governed by the Act have no constitutional limits on their capacity to carry on or undertake any business activity or do anything or enter into an transactions,123 it is unlikely that a New Zealand court could or would view the constitutional document as definitive in determining the nature of the business of a company, although shareholder agreements could be indicative of the intentions of shareholders as to the nature or main purpose of the business of a company.
A more substantial, if not fatal, problem with a normal or usual course of business test in the New Zealand context is that s 129 not only differs from the North American provisions in terms of its more qualitative focus, but also in terms of the range of transactions potentially requiring shareholder approval. Section 129 applies not only to dispositions, but also to acquisitions of assets and rights, provided the value of the transaction exceeds the 50 percent value requirement. The inclusion of acquisitions as a qualifying transaction is unique to the New Zealand statutory formulation of fundamental change. The Law Commission did not explain why it chose to include acquisitions within the range of transactions that are covered by s 129 other than a means of ensuring shareholder participation in transformational transactions generally and also it does correspond with the 1989 amendments to the Stock Exchange listing rules. Clearly, with a start up company, establishing whether an acquisition is in the 'usual or regular' or 'ordinary' course of business of a company could potentially be very problematic for both directors and the courts. Although, for start-up companies, the section as currently worded arguably poses substantial difficulties. For such companies, any large purchase could trigger s 129, especially if such companies have little or no capital. Although, this is perhaps mitigated by the fact that for start-up companies, shareholders' and directors' interests should at least initially be aligned, so that shareholder approval should be assured.
The Law Commission did not distinguish between listed and unlisted companies and the universality of the requirement for a special resolution in specified cases proposed by the Law Commission has been retained in s 129. In terms of the buy-out remedy, the Law Commission did however note that the buy-out provision is especially useful for companies 'where there is no ready market for the shares'.124 In theory, for listed companies, if shareholders disagree with the direction of the business of the company, the shareholders already have a market exit option. For this reason, in many American states and the Model Act125 appraisal rights are now exempted for listed companies, although that restriction has been the subject of some criticism.126 However, this approach for countries, such as the United Kingdom and the United States (and arguably New Zealand), where listed companies commonly have a dispersed shareholding base, is consistent with Kraakman's comments that the key governance issue for listed companies is ensuring directors are accountable to shareholders.127 In this context, the New Zealand Exchange's listing rule 9.1.1 falls clearly within this governance framework. However, with smaller or non-listed companies in such jurisdictions, there are different key corporate governance issues. As John Armour recently stated with regard to United Kingdom's private companies, the 'central governance problems concern how to minimise the cost of conflicts of interest between majority and minority shareholders and between shareholders and creditors'.128 While buy-out or appraisal rights are one way to minimise such conflicts for smaller or non-listed companies, the question that remains is whether such rights should continue to apply to listed companies.
One of the major exclusions from the ambit of s 129 is the operation of subsidiaries or the activities of corporate groups. Even prior to the Fletcher Challenge Forests decision, it had been suggested that this approach was a correct interpretation of the section as drafted. For example, the CCH Commentary on the Companies Act at paragraph 129.02 states that in order to avoid arrangements needing approval by special resolution of shareholders and to maintain flexibility, companies may acquire and hold major assets through subsidiaries. O'Neal and Thompson observe that the position in United States corporate law is similar as '[m]ajority shareholders can also avoid a shareholder vote on a corporation's sale of its assets if they find a way of getting the assets into a wholly owned subsidiary and then have the subsidiary sell'.129
In the United States, there is some debate as to whether or not the right of dissent and appraisal is an exclusive remedy available to minority shareholders. For example, Mitchell stated in 1996 'the law on exclusivity varies between jurisdictions and has been changed both by statute and case law'.130 In the New Zealand context, she commented that the New Zealand Companies Act 'does not address this issue', but she suggests that it 'would be highly likely that the New Zealand courts would allow for possible other remedies in cases whether the actions of the corporation or its directors and management were particularly reprehensible'. Further, in cases of fraud or illegality 'it would appear remedies other than appraisal would also be available, in particular the oppression remedy'.131 This question is now apparently settled with, for example, the courts willing to hear claims based on both failure to comply with s 129 as well as prejudice or oppression claim under s 174132 or as the basis for placing a company in liquidation under s 241.133 There is a clear relationship between the right of a shareholder to bring an action under s 174 and non-compliance with s 129 as failure to comply with s 129 is deemed to be an oppressive or prejudicial act to a shareholder.
A useful example of the relationship between these two sections was examined by the High Court in Dunning v Chabro Holdings Ltd134 where it was alleged that Chabro had guaranteed a subsidiary's obligation and provided funds to that subsidiary to enable it to acquire a commercial property. The transactions in question were approved by the shareholders of Chabro by a resolution in lieu of a meeting to which the plaintiff, who held 10 percent of the shares did not consent and in fact had not received notice of the resolution as required by the Act. The judge was not willing to find that the provision of the guarantee and the loan finance did not breach s 129, as detailed evidence of the financial position of Chabro at the time of the resolutions was not presented to the Court. The judge 'was not prepared to speculate to the extent required' given the consequences of non-compliance. However, the fact that a shareholder holding 10 percent of the shares had been excluded from any involvement in the decision-making about 'what was an important transaction to Chabro' reinforced his Honour's view that the company was being operated in a way that was oppressive and unfairly prejudicial to the plaintiff shareholder.
Overall the few cases to date to consider the scope of s 129 have generally taken a very narrow literal approach to s 129. One question that is difficult to assess is the degree of non-compliance with the requirement of shareholder approval for major transactions, given that 'a transaction that satisfies the definition of a major transaction may not necessarily involve a fundamental change to the nature of a company'.135 As Lynne Taylor observed 'an investment company that sells a major asset but replaces it with an almost identical asset — both the sale and purchase fall within the definition of a major transaction but the nature of the company remains unchanged'.136
Overall it appears that the major transactions provision has had little impact as a governance strategy for shareholders as a class, although this is difficult to determine. The bright line formulation of fundamental change used in s 129(2) has led to courts focusing on the value of a transaction, rather than whether the transaction or transaction as a whole will fundamentally change the business of the company. If a North American 'fundamental change' approach had been adopted when the Act was drafted, it may not have actually resulted in different outcomes for the Hogg v Shephard, Central Avion Holdings Ltd v Palmerston North City Council and Flight Trainers Ltd v McGormick cases. In terms of the Fletcher Challenge Forest case, the position is less clear and this would depend on the exact nature of the company's business. However, while most of these cases were probably correctly decided as to whether they involved fundamental change to the business of the respective companies, the rationales put forwarded in the respective judgments is often inconsistent and in combination operate to undermine the statutory objective of the provision.
Therefore, it is recommended that s 129 be amended to require a special majority of shareholders to consent to those transactions that are in essence a fundamental change to the business of the company. However, the certainty provided by the bright-line transaction based test has the advantage of setting a backstop for transactions that are deemed to fundamentally change the business of a company. Accordingly an approach should be adopted which is similar to that set out in the listing rules which requires compliance for transactions that change the essential nature of a company or exceed in value a specified minimum comparative value in relation to the value of the existing assets of the company. This value could be greater than 50 percent of the value of assets and companies would still need to consider the essential nature of the business for transactions with a smaller comparative value. Also, it is recommended that the section be amended to require consideration of the assets and transactions of a subsidiary company or companies, in terms of major transactions of the holding company. In terms of an 'ordinary course of business' exception, as O'Neal and Thompson state '[t]he vagueness of the distinction between transactions within and those not within the usual and regular course of corporation's business makes it difficult for minority shareholders to protect themselves',137 and is not recommended.
[*] Lecturer in Commercial Law, School of Accounting and Commercial Law, Victoria University of Wellington.
 Companies Act 1993 (NZ) s 129(2) provides that a major transaction, in relation to a company, means:
(a) the acquisition of, or an agreement to acquire, whether contingent or not, assets the value of which is more than half the value of the company's assets before the acquisition; or
(b) the disposition of, or an agreement to dispose of, whether contingent or not, assets of the company the value of which is more than half the value of the company's assets before the disposition; or
(c) a transaction that has or is likely to have the effect of the company acquiring rights or interests or incurring obligations or liabilities, including contingent liabilities, the value of which is more than half the value of the company's assets before the transaction.
 Companies Act 1993 (NZ) s 2 defines 'special resolution' as a resolution approved by a majority of 75 percent or, if a higher majority is required by the constitution, that higher majority, of the votes of those shareholdes entitled to vote and voting on the question.
 New Zealand Law Commission, Company Law: Reform and Restatement, Report No 9 (1989).
 Ibid 2.
 Buy-out rights in a limited form already existed in New Zealand corporate and securities law. Section 208 of the Companies Act 1955 (NZ) applied to a shareholder who dissented from an offer to purchase all the shares of the company and of which 90% of other shareholders have accepted (replaced by Part 7 of the Takeovers Code Approval Order 2000 (NZ)) and s 209 of the Companies Act 1955 (NZ) which conferred a power on the High Court to order various forms of relief including the purchase of the minority shareholders shares if just and equitable to do so.
 Companies Act 1993 (NZ) s 112.
 Companies Act 1993 (NZ) s 113.
 Companies Act 1993 (NZ) ss 114-5.
 Companies Act 1993 (NZ) s 110 (a) (i).
 See CompaniesAct 1993 (NZ), s 118 where a shareholder has voted against a special resolution that affects the rights attached to shares (as that term is defined in s 117(2)) is thereby entitled to require the company to purchase those shares in accordance with s 111 of the Act.
 Companies Act 1993 (NZ) s 110(d) further provides that if the triggering resolution as set out in s 110(a)(i) or (ii) is passed by under s 122 by a resolution in lieu of meeting, then the right to require the company to acquire a shareholders shares under s 111 arises upon the shareholder not signing the resolution. Section 122(1) requires that a resolution in lieu of notice to be as valid as if it had been passed at a meeting of shareholders that (a) 75 percent or (b) such other percentage as the constitution may require for passing a special resolution, whichever is the greater, of the shareholders who would be entitled to vote on that resolution at a meeting of shareholder who together hold not less than 75 percent (or any higher percentage as required by the constitution) of the votes to be cast on that resolution.
 Companies Act 1993 (NZ) s110.
 See for example Mary Siegel 'Back to the Future: Appraisal Rights in the Twenty-First Century' (1995) 32 Harvard Journal of Legislation 79, 86-93; Barry M Wertheimer 'The Shareholders' Appraisal Remedy and how Courts determine Fair Value' (1998) 47 Duke Law Journal 613, 618; Alexander Khutorsky 'Coming in from the Cold: Reforming Shareholders Appraisal Rights in Freeze-Out Transactions' (1997) Columbia Business Law Review 133, 137-138 and O'Neal and Thompson's Oppression of Minority Shareholders and LLC Members, (first published 1975, Rev 2d, 2004) Vol 1, 5.19.
 New Zealand Law Commission Report 1989, above n 3, 49.
 Hideki Kanda and Saul Levmore, 'The Appraisal Remedy and the Goals of Corporate Law' (1985) 32 UCLA Law Review 429, 430.
 Wertheimer , above n 13.
 Ibid 614.
 Ibid 614.
 The continued existence of the appraisal remedy has been the subject of frequent criticism. See for example Bayless Manning,'The Shareholder's Appraisal Remedy: An Essay for Frank Coker' (1962) 72 Yale Law Journal 223.
 Vanessa Mitchell, 'The US Approach Towards the Acquisition of Minority Shares: Have we anything to learn?'(1996) 14 Companies and Securities Law Journal, 283, 285.
 Siegel, above n 13, 86-93; Wertheimer, above n 13, 618; Khutorsky, above n 13. 137-138.
 Kanda and Levmore, above n 15, 431.
 Mitchell, above n 20, 286.
 Douglas K Moll 'Shareholder Oppression & "Fair Value: On Discounts, Dates and Dastardly Deeds in the Close Corporation' (2004) 54 Duke Law Journal 293, 304.
 Mitchell, above n 20, 286; and see more generally Robert B Thompson, 'The Shareholders's Cause of Action for Oppression' (1993) 48 Journal of Business Law 699.
 Kanda and Levmore, above n 15.
 Ibid 437-444. Inframarginality is the term used by Kanda and Levmore to describe the phenomena that shareholders may realise ex ante that they will not all appreciate their shares identically, and that the marginal or market price therefore understates their average valuation of these shares. They argue that appraisal rights may better protect shareholders to receive a value reflecting this value because of inframarginality or inelasticity. Reckoning refers to the fact that a fundamental change in company may result confuse or obfuscate a managements performance in the company prior to the occurrence of the fundamental change. Appraisal they argue at the point of change serves as a point of reckoning in that past performance is reckoned and future performance of management can be judged from a benchmark. Thirdly, 'discovery, describes the benefits of appraisal as a right of shareholders to investigate mergers or fundamental change to ensure that the managers of the company as its agents have negotiated such transactions at arms length'.
 Mitchell, above n 20, 290.
 Companies Act 1993 (NZ) s 110.
 Kanda and Levmore, above n 15, 443-444.
 Reinier R Kraakman et al, The Anatomy of Corporate Law: A Comparative and Functional Approach (2004) 140.
 Manning, above n 19.
 Companies Act 1993 (NZ) ss 114-115.
 Kraakman above n 31.
 Ibid 25.
 Ibid 131.
 Ibid 131.
 Ibid 26.
 John Farrar & Mark Russell, Company Law and Securities Regulation in New Zealand (1985) 62.
 Companies registered before 1 January 1984 continued to be regulated by the Second Schedule of the Companies Act 1955 (NZ) and the list of 'incidental and ancillary' objects and powers therein listed unless the company had expressly adopted the new s 15A setting out that the company had the right, powers and privileges of a natural person.
 Companies Act 1955 (NZ) s 15A.
 New Zealand Law Commission, Company Law — A Discussion Paper (1987).
 Ibid para 278.
 Ibid para 278.
 Ibid para 281. In this paragraph the Law Commission also observed at that if a company wanted buy-out rights to be triggered on the happening of certain events, then a company could choose to include a provision to this effect in its Articles, although this observation was clearly contingent on the proposed recommendation, also contained in the Discussion Paper, that the existing strict rules on a company purchasing its own shares should be relaxed.
 New Zealand Law Commission, above n 3, Part V, The Draft Companies Act, clause 99.
 Ibid para 202.
 Mitchell, above n 20, 306.
 New Zealand Law Commission, above n 3, para 85.
 The other two sections are s 128, which sets out the rights of the board to manage the company and s 130 that establishes which of the powers of the board they may delegate.
 In fact the historic justification for appraisal rights was compensation for the loss of the unanimous consent requirement for shareholder agreement to change. See Wertheimer, above n 16.
 New Zealand Law Commission Report 1989, above n 3, 1-2 identifies these other reforms as including provisions to grant standing to shareholders to enforce through the courts, obligations owed to the company and directly to shareholders.
 Ibid para 50.
 Ibid para 49.
 Ibid para 49.
 David Goddard 'Company Law Reform — Lessons from the New Zealand Experience' in Andrew Borrowdale, David Rowe & Lynne Taylor (eds), Company Law Writings: A New Zealand Collection (2002) 145.
 Ibid footnote 1. This states that although the Article first appeared in (1998) 16 C&SLJ 236, the article had been developed from a paper presented at a 'conference on Australia's Corporate Law Economic Reform Program (CLERP) in Canberra in November 1997'.
 Ibid 152.
 Although the Act specifies that private arbitration is to be used to resolve disputes as to valuation, given the significant procedural gaps in the valuation procedure [prior to the amendments introduced by the Companies (Minority Buy-Out Rights) Amendment Act 2008] it is suggested that disputes as to valuation would have been referred to the courts.
 Companies Act 1993 (NZ) s 129(2).
 Companies Amendment Act (No 2) 2004 (NZ) s 8(2).
 Companies Act 1993 (NZ) s 129(2B) provides that matters similar to those relevant to the solvency test under s 4 are to be considered when determining the value of a contingent liability.
 Cudden v Rodley (Unreported, Court of Appeal, Richardson P, Gault, Henry JJ, 31 March 1999) 7.
 See for example Thomson Brookers, Companies Act 1993, 129 Major transactions <http://www.brookersonline.co.nz.helicon.vuw.ac.nz/databases/modus/cns/cscomlaw/ACT-NZLPUB-Y.1993-105~BDY~PT.8~SG.!116~S.129?tid=1285224 & si=57359> at 1 September 2008.
 New Zealand Stock Exchange, Revision of Listing Requirements Exposure Draft: June 1988, Summary of Major Features, (Wellington) 1.
 Ibid 5.
 New Zealand Stock Exchange Listing Rules (1989), s 9, rule 9.1.1, footnote 3.
 From 1 April 2004, rule 9.1.1(b) was amended to apply to transaction 'in respect of which the gross value is in excess of 50% of the Average Market Capitalisation of the Issuer.'
 Footnote 1 to rule 9.1 of the New Zealand Stock Exchange Listing Rules which came into effect on 1 September 1994.
 New Zealand Exchange Limited, rule 9.1.1 as amended from 1 April 2004.
 Fletcher Challenge Forests Ltd (2004) 9 NZCLC 263,447.
 Fletcher Challenge Forests Ltd (2004) 9 NZCLC 263,447, para 37.
 Fletcher Challenge Forests Ltd (2004) 9 NZCLC 263,447, para 40.
 Fletcher Challenge Forests Ltd (2004) 9 NZCLC 263,447.
 Clause 6.1 of the Constitution of Fletcher Challenge Forests Limited contained an identical clause to rule 9.1.1 of the New Zealand Exchange Ltd listing rule by virtue of the requirement in rule 3.1.1 of the New Zealand Exchange Ltd Listing Rules that requires the constitution of an issuer to be consistent with the rules.
 Fletcher Challenge Forests Ltd (2004) 9 NZCLC 263,447, para 29.
 Central Avion Holdings Ltd v Palmerston North City Council & Anor  HC CIV 2003454-559 (Unreported, Goddard J, 15 June 2006).
 Central Avion Holdings Ltd v Palmerston North City Council & Anor  HC CIV 2003454-559 (Unreported, Goddard J, 15 June 2006), para 153.
 Central Avion Holdings Ltd v Palmerston North City Council & Anor  HC CIV 2003454-559 (Unreported, Goddard J, 15 June 2006), para 153.
 See New Zealand Law Commission, above n 3, para 499 in which the Law Commission stated that the major transaction provision is based on the view that 'some dealings have such far-reaching effects that they should be referred to the shareholders. Shareholders should not find that massive transactions have transformed the company they invested in without warning'.
 GHS Hogg and J Haigh & Ors v BH Shephard & Anor (Unreported, HC Auckland, CP 448/02, Paterson J, 4 September 2003).
 GHS Hogg and J Haigh & Ors v BH Shephard & Anor (Unreported, HC Auckland, CP 448/02, Paterson J, 4 September 2003), para 21.
 New Zealand Law Commission, above n 3, para 501.
 Natural Gas Corporation Holdings Ltd v Infratil 1998 Ltd; Trans Tasman Properties Ltd v Gibson  NZHC 293; (2007) 10 NZCLC 264,298 and Hinton v Heartland Meat (NZ) Ltd (1999) 8 NZCLC 261, 885.
 Although in Pacific Lithium v Helmich (1999) 8 NZCLC the sections were examined after the right to have shares bought-out under the Act was exercised after a change in the rights attached to shares under s 118 of the Companies Act 1993 (NZ).
 Natural Gas Corporation Holdings Ltd v Infratil 1998 Ltd  3 NZLR 727, 728.
 New Zealand Law Commission, Minority Buy-Outs, Report No 74 (2001).
 Companies (Minority Buy-Out Rights) Amendment Act 2008, No 69 (NZ).
 Companies (Minority Buy-Out Rights) Amendment Act 2008 (NZ) s 10.
 New Zealand Law Commission, above n 3, para 203.
 Canadian Business Corporations Act, R.S.C. 1985, c C-44, s 190(1).
 Canadian Business Corporations Act, R.S.C. 1985, c C-44, s 189(3).
 Marcus Koehnen, Oppression and Related Remedies (2004) 411.
 Wertheimer, above n 13, 614.
 Chapter 12.02(a) of the Revised Model Business Corporation Act provides that a corporation will be conclusively deemed to have retained a significant continuing business activity if that activity represents at least 25 percent of the total assets at the end of the most recently completed fiscal year, and 25 percent of either income from continuing operations before taxes or revenues from continuing operations for that fiscal year in each case of the corporation and its subsidiaries on a consolidated basis.
 William Meade Fletcher, Fletcher Cylopedia of the Law of Private Corporations (2005 rev) §2949.20.
 Lynne Taylor 'Minority Buy-Out Rights in the Companies Act 1993' (1997) 6 Canterbury Law Review 539, 549.
 Koehnen, above n 93, 416.
 Ibid, 414.
 See 85956 Holdings Ltd v Fayerman Bros Ltd (1986) 32 BLR 204, 211 (Sask CA).
 See Benson v Third Canadian General Investment Trust Ltd (1993) 14 OR. (3d) 493, 507 and Canadian Broadcasting Corp. Pension Plan v BF Realty Ltd (2000) 10 BLR (3d) 188, 205.
 Canadian Broadcasting Corp. Pension Plan v BF Realty Ltd (2000) 10 BLR (3d) 188.
 Cogeco Cable Inc v CFCF Inc [1996AC No 1069,  RJQ 1360.
 Canadian Broadcasting Corp. Pension Plan v BF Realty Ltd (2000) 10 BLR (3d) 188, 205.
 Koehnen, above 93, 414.
 State of Nebraska ex rel. Columbus Metal Industries Inc v Aaron Ferer & Sons Co 272 Neb 758; 725 NW 2d 158 (2006).
 State of Nebraska ex rel. Columbus Metal Industriies Inc v Aaron Ferer & Sons Co 272 Neb 758, 767; 725 NW 2d 158, 166 (2006).
 Neb Rev Stat §21-20, 138(1)(c) (Reissue 1997).
 South End Imp Group v Mulliken 602 So.2d 1327, 1332 (Fla.App. 1992).
 O'Neal and Thompson's, Oppression of Minority Shareholders and LLC Members (first published 1975, Rev 2d, 2004) Vol 1, 5.19.
 Koehnen, above n 93, 415.
 85956 Holdings Ltd v Fayerman Bros Ltd (1986) 25 DLR (4th) 119; (1986) 32 BLR 204 (Sask CA).
 85956 Holdings Ltd v Fayerman Bros Ltd (1986) 25 DLR (4th) 119, 129; 32 BLR 204, 214 (Sask CA).
 O'Neal and Thompson, above n 110, 5.195.
 Ibid, 5.119.
 Ibid, 5-121.
 New Zealand Law Commission Report, above n 3, para 502.
 (1999) 8 NZCLC 261,998.
 Flight Trainers Ltd v McGormick (1999) 8 NZCLC 261,998, 262,007.
 The addition of new subsection s 129(2A) by s 10 of the Companies Act 1993 Amendment Act 2001 (NZ) to extend its application to dispositions under section s 129(2)(b) has been taken as approval of the approach taken in this case.
 In New York following the decision of Eisen v Post 3 NY 2d 518, 169 NYS 2d 15 (1957) the New York Business Corporation Law §909(a) was amended to specific consideration of the usual and regular course of the business actually conducted by the corporation. See O'Neal and Thompson, above n 110, Vol 1, 5.120-121.
 But see Companies Act 1993 (NZ) s 16(2) which provides that a constitution of a company may contain a provision relating to the capacity, rights, powers, or privileges of the company only if the provision restricts the capacity of the company or those rights, powers or privileges.
 New Zealand Law Commission Report, above n 3, para 207.
 O'Neal and Thompson, above n 110, 5-225.
 Ibid 5-223.
 Kraakman, above n 31, 21-22.
 John Armour 'Enforcement Strategies in UK Corporate Governance: A Roadman and Empirical Assessment' (2008) 106/2008 ECGI Working Paper Series in Law 2; see also Paul Davies, Introduction to Company Law (2002) 215-217.
 O'Neal and Thompson, above n 110, 5.126.
 Mitchell, above n 20, 293.
 Ibid 299.
 See GHS Hogg and J Haigh & Ors v BH Shephard &Anor  HC CP 448/02 (Unreported, Patterson J, 4 September 2003), and Dunning v Chabro Holdings Ltd  (Unreported, HC, Auckland, CIV 2005-404-4903, Allan J, 4 September 2006).
 See Flett v JH Flett Ltd (19990 8 NZCLC 261, 893.
 Dunning v Chabro Holdings Ltd  (Unreported, HC, Auckland, CIV 2005-404-4903, Allan J, 4 September 2006).
 Taylor, above n 97, 549.
 O'Neal and Thompson, above n 110, 5.18.