Shareholder Oppression Lawyers Brisbane

Our Lawyers advise on all aspects of shareholder oppression and directors disputes, as these terms are commonly referred to.  Shareholder oppression, also called minority shareholder oppression (Oppression), is something that can occur when a “majority” of shareholders misuse their power to oppress the minority.  Oppression is not limited to situations of majority and minority. It can occur when the disputants control equal shareholdings but for some reason there is an imbalance of control (or power) caused by a variety of statutory and contractual controls that were either agreed to or implemented during the evolution of the relationship.  It is the undue exertion of this control which is the hallmark of Oppression.  

---

On this page

• Quick summary of shareholder oppression
• What constitutes shareholder oppression?
• Practical tips for shareholders suspecting oppression
• Shareholder oppression in legislation
• When does shareholder litigation makes commercial sense?
• Who can commence proceedings for shareholder oppression?
• Relief available for oppressive conduct
• Examples of oppressive conduct
• Key takeaways about oppression matters
• FAQs
• Send an enquiry

---

Quick summary of shareholder oppression

Shareholder oppression occurs when a company’s affairs are conducted in a way that is unfairly prejudicial, unfairly discriminatory or oppressive to one or more shareholders.  These disputes often involve exclusion from management, misuse of company control, unfair dilution, withheld information or derogation of shareholder rights or interests.

What constitutes shareholder oppression?

In plain English, shareholder oppression means company power is being used in a way that is unfair to a shareholder.  This often arises in private companies where a minority shareholder is locked out of management, denied information, diluted, or deprived of the practical value of their shares.

Shareholder oppression disputes commonly involve:

• exclusion from management or decision-making;
• denial of access to company information;
• diversion of business opportunities;
• misuse of company funds or assets;
• unfair share issues or dilution;
• refusal to declare dividends in improper circumstances; and
• breakdowns in quasi-partnership or family company relationships.

---

Practical tips for shareholders suspecting oppression

---

Shareholder oppression in legislation

Section 232 of the Corporations Act 2001 (Cth) (Corporations Act) sets out the grounds on which a Court may make an order under section 233.  This section empowers the Court to make any orders necessary as a remedy if the conduct of the company’s affairs is either:

• contrary to the interests of the members as a whole; or
• oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members.

Section 234 of the Corporations Act lists the persons entitled to apply for relief under section 233 and includes current and past shareholders.

The key concept emerging from the case law is the requirement of an objective assessment of “fairness” which will depend upon the context including the nature of the company and its operations.  For example, conduct that is “fair” as between arm’s length business people might not be considered fair in the context of a family company.

• “Commercial fairness” in the context of a commercial Company is to be assessed objectively by a commercial bystander.
• “Fairness” in a family Company is to be assessed from the perspective of the reasonable person involved with the type of Company under examination.
• Lord Cooper in Elder v Elder and Watson (1952) S.C. 49, stated:
  “The conduct complained of should at the lowest involve a visible departure from the standards of fair dealing and a violation of the conditions of fair play on which every shareholder who entrusts his money to a Company is entitled to rely.”
• In Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97, Spigelman CJ observed that the statutory formulation of “oppression” confers a wide-ranging remedial jurisdiction on the court and that jurisdiction should not be confined by technical distinctions.
• The test propounded by Young J in Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 704 suggested that the Court should ask:
  “… whether objectively in the eyes of a commercial bystander, there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair…”

Corporate narcissists and shareholder oppression

The unfortunate reality is that a large majority of shareholder oppression matters involve the actions of people who would seem to have “narcissistic personality disorder” and its many variants, including some sociopaths.

——— Is your dispute viable?

When Shareholder litigation makes commercial sense

——— Are you eligible to initiate proceedings?

Who can commence legal proceedings for shareholder oppression?

Shareholder oppression proceedings are usually brought by a current or former shareholder, or another eligible person under the Corporations Act 2001 (Cth).   Any related directors within a company that is a current or former shareholder facing oppression may also make a claim for oppression.

Section 234 of the Corporations Act states that the following groups can initiate apply for remedies against oppression:

1. Current shareholders;
2. Former shareholders whose removal or resignation related to the alleged oppresion;
3. Any person who has been given a share by will or by operation of law; or
4. Any person that ASIC deems appropriate.

——— Legal Remedies

What the court can order in your favour

The Court has wide powers under section 233 of the Act to make any order it considers appropriate.  If a shareholder can prove that the conduct of a Company’s affairs is oppressive, the Federal Court of Australia or a State Supreme Court may make any of the following orders:

——— Common Examples

Conduct giving rise to shareholder oppression

Minority shareholders may seek legal remedies when majority shareholders act in any of the following ways.

Key takeaways about shareholder oppression

• Shareholder oppression may occur where a company is run in a way that is unfairly prejudicial, discriminatory or oppressive to a shareholder.
• Common examples include excluding a shareholder from management, withholding company information, misusing company funds, diverting business opportunities or diluting a shareholder’s interest.
• These disputes often arise in private companies where relationships between shareholders or directors have broken down.
• Urgent advice may be needed to protect the company, preserve evidence and prevent further harm.
• Possible remedies include a buy-out order, access to company records, compensation, injunctions or, in serious cases, winding up the company.

Need advice about shareholder oppression or a shareholder dispute? Call Dundas Lawyers on 07 3221 0013 or submit an enquiry online.

Our approach to resolving shareholder oppression

Dundas Lawyers’ approach to shareholder oppression matters combines commercial litigation experience with a practical understanding of company law, director disputes and shareholder rights.  We help clients identify the oppressive conduct, preserve evidence, assess commercial leverage and choose the most effective remedy.  We use our Uncommon Nous to pursue practical outcomes through negotiation, urgent Court relief, buy-out arrangements or formal proceedings.

---

Further reading

For further reading on the topic of shareholder oppression, see the following articles written by the team at Dundas Lawyers:

• Commercial purpose may not excuse oppressive conduct — Hylepin Pty Ltd v Doshay Pty Ltd considered whether conduct undertaken for a commercial purpose can still amount to shareholder oppression.  See: Can a ‘commercial purpose’ excuse shareholder oppression?
• Accountants may be exposed to liability — third parties may face liability if they are involved in conduct that forms part of a shareholder oppression claim.  See: Accountant liability in shareholder oppression cases.
• Oppression remedies may extend beyond companies.  See: Can a unit trust be wound up by the oppression remedies?
• Cancellation of shares may be oppressive.  See: Cancellation of shares held to be oppressive.
• Shareholders may seek access to company books.  See: Shareholders’ rights to inspect books under s 247A Corporations Act.

Disclaimer
This page contains contains general commentary only about shareholder oppression.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

---

Need a lawyer to advise on shareholder oppression?

For a confidential, no obligation initial telephone call to find out how we can help your business gain an uncommon advantage in initiating or defending allegations of shareholder oppression please phone our team on either 1300 386 529 or 07 3221 0013.

Complete the form below and we will respond to your enquiry within one (1) business day from the moment you press Submit.

Recent insights about shareholder oppression and directors disputes