Shareholder Oppression

Shareholder oppression remedies – to buy-back or wind up?

Two common remedies for shareholder oppression include a buy-out order, where one shareholder is ordered to purchase the oppressed shareholder’s shares, or a winding up order, where the Court forces the company into administration or liquidation.  In the case of Snell v Glatis (No 2) [2020] NSWA 166, the New South Wales Court of Appeal considered the complications involved in a buy-out order following a finding of shareholder oppression, and instead made a winding-up order.  This article considers this case and remedies for shareholder oppression. [Read more…]

Shareholder oppression – combined effect adds up

Threats of oppression can arise from numerous circumstances, such as disagreements between partners or other situations which leave a minority shareholder feeling they have been treated poorly.  The case of Jolan Pty Ltd v Essential Investments Pty Ltd (No 2) [2021] FCA 1533 is interesting on its face, primarily because there was a shareholders’ agreement as one of its governing documents and it was the combinations of actions which were ultimately held to be oppressive.  It was also one of the first decisions of newly appointed Queensland-based Federal Court judge, Justice Kylie Downes. [Read more…]

Shareholder oppression – the early warning signs

Some of the early warning signs

  • The entity and its structure
  • Relationship with accountants and lawyers
  • Related contracts
  • Skills acquisition that causes redundancy
  • Exclusion from management
  • Access to information
  • Non-flexible negotiator

Shareholder oppression – a taxonomy of corporate wrongs

Shareholder oppression (Oppression) is the business battleground where equity holders fight for their share of the business’ equity value.  Unfortunately, it is all too common.  Oppressive conduct (Conduct) is broadly defined in section 232 of the Corporations Act 2001 (Cth) (Act) as when: [Read more…]

Shareholder’s inspection allowed despite distrust

The case of Rasley (Singapore) Pte Ltd v Financial & Energy Exchange Ltd [2020] FCA 1462 involved an application to the Federal Court by a shareholder (Rasley (Singapore) Pte Ltd) (Rasley/Plaintiff) to inspect the books of the defendant (Financial & Energy Exchange Ltd) (Financial/Defendant) pursuant to section 247A of the Corporations Act 2001(Cth) and at common law because of its standing as a shareholder. Section 247A provides that the Court may only make orders if it is satisfied that an applicant is acting in good faith and for a proper purpose. [Read more…]

Shareholder oppression – the early warning signs

The usual definition of shareholder oppression (Oppression) is something that occurs when a majority of shareholders in a company misuse their power to oppress minority shareholders.  That said oppression is not limited to situations of majority and minority, it can occur when the disputants have equal shareholding  but there is an imbalance of control (or power) caused by a variety of statutory and contractual controls that were agreed to at the start of the relationship. [Read more…]

Just and equitable winding up for shareholder oppression

In matters involving the oppression of minority shareholders by the majority the usual legal remedy is to pursue relief for oppression as contained in sections 232 and 233 of the Corporations Act 2001 (Cth)(Act). However section 233(2) of the act also allows for an aggrieved party to seek an order winding up the company on just and equitable ground as if the order were made under section 461.  Section 233(2) represents the intersection of the just and equitable winding up and shareholder oppression. [Read more…]

Director misappropriating funds found to be oppressive

Shareholder oppression usually occurs when a majority shareholder(s) misuses their power to oppress the minority shareholder(s).   The test for “oppression” is an objective one and is contained in Section 232 of the Corporations Act 2001 (Cth) (Act).   For instance, where a director is found to have breached their fiduciary duty because they have misappropriated funds or assets this can be considered as being oppressive conduct.  This was the case in Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452 (Martin) when an executive director misappropriated and misused company funds and assets and was held to have breached his fiduciary duties. [Read more…]

Shareholder oppression – valuation issues

Shareholder oppression or minority shareholder oppression can occur when the majority (shareholder(s)) in an entity misuse their majority to oppress or control the minority shareholders.  There are is not a limited number or combination of activities which the majority may engage in to oppress the minority, sometimes referred to as “sharp practice” or “board room tactics”, the possibilities are almost infinite. [Read more…]

Shareholder oppression – Victorian Supreme Court adopts pilot program to resolve oppression claims

On 1 October 2014 (Commencement), the Victorian Supreme Court commenced a pilot program to deal with applications under section 232 of the Corporations Act 2001 (Cth) (Act).  Practice Note No. 5 of 2014 (Practice Note) describes the new process for dealing with applications to Court seeking relief under section 233 of the Act.  The Practice Note states that the Court will operate a six (6) month pilot program (Program) to deal with oppression actions, for the stated aim of “just, efficient, timely and cost-effective resolution of the real issues in dispute”.

[Read more…]

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