Belize Telecom Court Case
When the government of Belize restructured the nation's telecommunication services company it wanted to privatize the company while still maintaining a certain amount of control. To further this goal, the government created a company that would have different classes of shares in that company: ordinary shares, called B. And C. And one special share "Which would be issued to the government and which could only be held by a party authorized by the government." (Belize Attorney General v Belize Telecom) This system allowed for the different shareholders to appoint and remove the eight members of the board of directors, with B. shareholders getting control over two directors, C shareholders four, and the special shareholder the other two. However, there was a provision that allowed the special shareholder, if they owned at least 37.5% of C. shares, to gain control over two of the four C. share appointees.
When the special shareholder did, in fact, control 37.5% of the available C. shares they appointed two more directors. However, later, when they were forced to sell their C. shares, an issue arose as to whether the directors appointed by the special shareholder, when they possessed...
shares, should retain their positions after the special shareholder no longer owned 37.5% of the C. shares. While the original court sided with the special shareholder, and decided that there was no provision for removing the directors, the appeals court reversed this decision and determined that there was an implied term which could remove the directors. In other words, the court decided that the directors were "there by virtue of the special share…," and when that special share no longer existed, they no longer held their positions legitimately. (Belize Attorney General v Belize Telecom)
What the court had to decide was whether, in the absence of any specific language on the subject in the contract itself, the two directors appointed by the special shareholder, when they possessed the 37.5% of C. shares, should retain their position when the special shareholder no longer possessed 37.5% of the C. shares. Because there was nothing in the original contract dealing with this issue, should it arise, the court had to decide if there was an implied term within the contract that would cover this circumstance. As there was nothing stated in the original contract about the situation…
