Belize Telecom Court Case When the Government

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 37.5% of the C. 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 concerning the C. directors appointed by the special shareholder if they should no longer control 37.5% of the C. shares, the C. directors claimed that would remain indefinitely. Because they overlooked this situation, the special shareholder could end up controlling more than the original contract intended. But because there was nothing stated in the original contract, the court had to decide if there was an implied term that would remove the C. directors appointed by the special shareholder.

But the real problem came when the court was forced to decide that something never stated in the original contract did indeed apply to the contract. This is called an implied term, and at least one of the members of the court questioned if the court started putting things into contracts that were not there, because they felt that it was implied, where would it stop. A court could, theoretically, view any issue as implied in a contract when it is no there; it all depends upon the members of the court and their personal opinions. After all, when one considers what is implied, then one must make a decision based on personal feelings about what the writers of the original contract may have wanted.