Exclusion from management as shareholder oppression

Members of a closely held company’s commonly expect to take part in managing its business.  Where those in control shut a member out of their role, this act of exclusion may be oppressive. This article sets out our categorisation of the case law on exclusion from management, which are divided into several distinct subcategories.

Overview of the exclusion from management category of oppression

In shareholder oppression matters, exclusion from management (Exclusion from Management) seems to be an obvious category of oppression which we consider has (4) distinct subcategories:

• exclusion from day-to-day decision-making;
• refusing to comply with agreed board changes;
• removal from management; and
• termination of employment tied to a shareholding.

The number of subcategories is not closed as they are based on our review of the conduct complained of in shareholder oppression cases where Exclusion from Management was alleged.   In this article the term member is used interchangeably with the term shareholder.

The solution to Exclusion from Management lies in an action under section 232 of the Corporations Act 2001(Cth)(Corps Act), which allows a member to apply to the Court where the conduct of a company’s affairs is oppressive to, unfairly prejudicial to, or unfairly discriminatory against a member, or contrary to the interests of the members as a whole.  Where oppression is made out, the Court has a wide discretion to make orders under section 233 of the Corps Act, including an order that those in control purchase the excluded member’s shares at fair value.

What exactly is the Exclusion from Management category of shareholder oppression?

Not all conduct which is argued to fall in the Exclusion from Management category will be held to be oppressive.  The following decisions illustrate how Australian Courts have assessed the conduct complained of that we have categorised as falling in the Exclusion from Management category across a range of fact scenarios.  Together these cases demonstrate the boundaries of several of the  subcategories of Exclusion from Management, where the conduct complaint of was held to be oppressive and where it did not meet the threshold under section 232.

It is common for a shareholder oppression claim to involve multiple acts that are alleged to be oppressive.  This article focuses only on the subcategories of the Exclusion from Management category.

Exclusion from day-to-day decision-making

BAM Property Group Pty Ltd v Imoda Group Holdings Pty Ltd [2019] FCA 1192 (BAM)

In BAM, two (2) brothers, both directors, each held forty-seven percent (47%) of a family business that they both managed.^[1]  The relevant subcategory of conduct was an exclusion from day-to-day decision-making of one (1) director by the other.^[2]  Specifically, this included holding management meetings without him and cancelling those he attended, appointing a general manager over his objection, and instructing staff to deny him entry to the business premises.^[3]

The exclusion from day-to-day decision-making was also achieved through cutting off access to banking, accounting systems and files:  Specifically, the director was denied company information and locked out of the bank accounts and the company’s server.^[4]  Ultimately, the excluded director was left with no option but to resign.^[5]  Derrington J held that this conduct was oppressive because the companies were founded on the equal participation of both brothers in their management.^[6]  See our article about this case.

Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 (Fexuto)

In Fexuto, a family business had been run on an understanding that family members would control it as executive directors.^[7]  The subcategory of conduct in this case was an exclusion from day-to-day decision-making.  This involved the majority shutting out one (1) brother, Bob Bosnjak, from his management authority.^[8]  After a CEO was appointed, Bob Bosnjak was forbidden to give instructions to staff or to take any part in management except through the board or the CEO.^[9]  Additionally, the Court noted that this exclusion was in part effected through a denial of access to information within the company.^[10]

Removal from management

Coombs v Dynasty Pty Ltd (1994) 14 ACSR 60 (Coombs)

In Coombs, the members of a hotel company intended that each would be involved in its management as a quasi-partnership.^[11]  The alleged conduct falls under the subcategory of removal from management: Mr Coombs, a director and minority shareholder, was removed from his position after he refused to sign guarantees of $1.93 million for a company he had never heard of.^[12]  From that point onwards the other members treated the company as their own, and he was denied notices of meetings and access to financial information.^[13]  The removal was held to be oppressive by von Doussa J because it was retaliation for a “patently reasonable” refusal, and because it excluded him from directors’ meetings.^[14]

Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd [2004] FCAFC 153 (Smith Martis)

In Smith Martis, four (4) founders of a financial planning company agreed that each would take part in its management.^[15]  Additionally, it was agreed that if one (1) was removed, the others would buy that person’s shares at fair value.^[16]  The subcategory was removal from management: three (3) of the founders had used their votes to remove the fourth, Mr Martis, as a director.^[17]  The trial judge, Carr J, found that none of the reasons given for removing him had been made out.  Because the remaining founders had excluded Mr Martis from management without offering to buy his shares at fair value, Carr J held that their conduct was oppressive.^[18]  This finding was not challenged on appeal.^[19]

Sharif v Vitruvian Investments Pty Ltd (No 3) [2023] FCA 920 (Sharif)

In Sharif, a co-founder holding fifteen percent (15%) of a start-up worked as its chief executive but was never a director.^[20]  The relevant subcategory of conduct again was a removal from management, although in this case through the sole director’s decision to remove him as CEO.^[21]  Colvin J held this was not oppressive for three (3) reasons.^[22]  First, there was no agreement or common expectation that he would have an ongoing management role.^[23]  Second, the company was not run on a basis akin to a partnership.^[24]  Third, there was no evidence that his requests for information or input had been refused.^[25]

Refusal to comply with agreed board changes

Liu v Miller-Kovacs, in the matter of Privato Enterprises Pty Limited [2025] FCA 1296 (Liu)

Exclusion from Management may also be oppressive where the members who are shut out are majority shareholders.^[26]  In Liu, two (2) purchasers bought ninety-nine percent (99%) of a company on the basis that one (1) vendor would remain a director only until a replacement was found.^[27]  The relevant subcategories were refusal to comply with agreed board changes, and exclusion from day-to-day decision-making. 

The refusal to comply with agreed board changes included the vendor’s failure to sign the minutes that recorded his resignation as sole director and the appointment of the purchasers’ nominee.  This resignation was contrary to the admitted arrangement that he would resign once an Australian citizen was found to replace him so that the members who had bought the business could manage it.[28] 

The vendor then removed the purchasers from the business, resulting in their exclusion from day-to-day decision-making, and purported to transfer their shares back.^[29]  The vendor cut off access to banking, accounting systems and files by withholding the company’s banking passwords, while continuing to pay himself from its account.[30] Halley J held the Exclusion from Management oppressive because it prevented the purchasers from managing the business and flagrantly contravened their entitlement to operate it.^[31]

Termination of employment tied to a shareholding

Boyded Industries Pty Ltd & Anor v Heartland One Pty Ltd & Ors [2025] NSWSC 1344 (Boyded)

Boyded demonstrates that Exclusion from Management will not be oppressive where the excluded member caused the breakdown in the relationship.^[32]  The relevant subcategory here was a termination of employment tied to a shareholding.  A minority shareholder, who held ten percent (10%) through his company, was removed as CEO and as a director of a family car dealership group.^[33]  The removal was carried out by his aunts, who together held sixty percent (60%).^[34]  Nixon J held that this was not oppressive because he had frustrated his aunts’ attempts to have a say in the management of the company and had attempted to take control of a family trust for his own company.^[35]  The Court held that these actions ‘seriously, and justifiably, undermined’ their trust and confidence in him.^[36]

Key takeaways about Exclusion from Management

Exclusion from Management is a real risk in closely held companies run on an informal understanding that each member will help manage the business.  It often happens gradually, through lost access to records of meetings, information and accounts.  It is also commonly paired with conduct that shifts value away from the excluded member.

Links and further references

Legislation

Corporations Act 2001 (Cth)

Cases

BAM Property Group Pty Ltd v Imoda Group Holdings Pty Ltd [2019] FCA 1192

Boyded Industries Pty Ltd & Anor v Heartland One Pty Ltd & Ors [2025] NSWSC 1344

Coombs v Dynasty Pty Ltd (1994) 14 ACSR 60

Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672

Liu v Miller-Kovacs, in the matter of Privato Enterprises Pty Limited [2025] FCA 1296

Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd [2004] FCAFC 153

Sharif v Vitruvian Investments Pty Ltd (No 3) [2023] FCA 920

Further information

If you need advice on Exclusion from Management and shareholder oppression, contact us for a confidential and obligation‑free discussion.

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[1] BAM Property Group Pty Ltd v Imoda Group Holdings Pty Ltd [2019] FCA 1192 at [17]–[19], [31], [52].

[2] BAM Property Group Pty Ltd v Imoda Group Holdings Pty Ltd [2019] FCA 1192 at [62], [70].

[3] BAM Property Group Pty Ltd v Imoda Group Holdings Pty Ltd [2019] FCA 1192 at [42], [57], [60].

[4] BAM Property Group Pty Ltd v Imoda Group Holdings Pty Ltd [2019] FCA 1192 at [42], [71]–[74].

[5] BAM Property Group Pty Ltd v Imoda Group Holdings Pty Ltd [2019] FCA 1192 at [67].

[6] BAM Property Group Pty Ltd v Imoda Group Holdings Pty Ltd [2019] FCA 1192 at [52], [70].

[7] Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 at [79].

[8] Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 at [104], [221], [678].

[9] Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 at [293].

[10] Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 at [671], [678], [690].

[11] Coombs v Dynasty Pty Ltd (1994) 14 ACSR 60 at [3.2].

[12] Coombs v Dynasty Pty Ltd (1994) 14 ACSR 60 at [3.4], [10.10]–[10.13], [10.26].

[13] Coombs v Dynasty Pty Ltd (1994) 14 ACSR 60 at [15.1]–[15.2], [22.7].

[14] Coombs v Dynasty Pty Ltd (1994) 14 ACSR 60 at [10.26], [22.9].

[15] Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd [2004] FCAFC 153 at [2], [42]–[43].

[16] Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd [2004] FCAFC 153 at [42]–[43].

[17] Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd [2004] FCAFC 153 at [39].

[18] Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd [2004] FCAFC 153 at [4], [49]–[50].

[19] Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd [2004] FCAFC 153 at [7].

[20]Sharif v Vitruvian Investments Pty Ltd (No 3) [2023] FCA 920 at [1], [75]–[76], [250].

[21]Sharif v Vitruvian Investments Pty Ltd (No 3) [2023] FCA 920 at [125], [251].

[22]Sharif v Vitruvian Investments Pty Ltd (No 3) [2023] FCA 920 at [253].

[23]Sharif v Vitruvian Investments Pty Ltd (No 3) [2023] FCA 920 at [250].

[24]Sharif v Vitruvian Investments Pty Ltd (No 3) [2023] FCA 920 at [250].

[25]Sharif v Vitruvian Investments Pty Ltd (No 3) [2023] FCA 920 at [251].

[26] Liu v Miller-Kovacs, in the matter of Privato Enterprises Pty Limited [2025] FCA 1296 at [20], [137].

[27] Liu v Miller-Kovacs, in the matter of Privato Enterprises Pty Limited [2025] FCA 1296 at [3], [19]–[20].

[28] Liu v Miller-Kovacs, in the matter of Privato Enterprises Pty Limited [2025] FCA 1296 at [19], [122], [124].

[29] Liu v Miller-Kovacs, in the matter of Privato Enterprises Pty Limited [2025] FCA 1296 at [24], [129]–[130], [137]–[138].

[30] Liu v Miller-Kovacs, in the matter of Privato Enterprises Pty Limited [2025] FCA 1296 at [127], [136].

[31] Liu v Miller-Kovacs, in the matter of Privato Enterprises Pty Limited [2025] FCA 1296 at [135], [137].

[32] Boyded Industries Pty Ltd v Heartland One Pty Ltd [2025] NSWSC 1344 at [585], [606]–[608].

[33] Boyded Industries Pty Ltd v Heartland One Pty Ltd [2025] NSWSC 1344 at [24], [41], [75]–[76].

[34] Boyded Industries Pty Ltd v Heartland One Pty Ltd [2025] NSWSC 1344 at [75]–[76], [608].

[35] Boyded Industries Pty Ltd v Heartland One Pty Ltd [2025] NSWSC 1344 at [53], [71], [479]–[482], [596], [637].

[36] Boyded Industries Pty Ltd v Heartland One Pty Ltd [2025] NSWSC 1344 at [482].

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