https://legalvision.com.au/what-is-minority-shareholder-oppression/
April 30, 2015
In the operation of companies, majority shareholders can sometimes use their influence for their own benefit, as opposed to those of the companies as a whole. Not only is such conduct illegal, but also it can have the effect of diminishing a shareholdings value, or damage the company generally. Not a particularly welcome scenario for a
minority shareholder. But what can be done about such conduct?
Oppressive Conduct
In general, minority oppression refers to conduct which falls within Section 232 of the
Corporations Act and includes conduct which is contrary to the interests of the shareholders as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against a shareholder or shareholders
. Courts assess oppressive conduct by applying an objective test based on whether the conduct would be viewed as unfair in the eyes of a ‘reasonable person’. Further, the presence of prejudice or discrimination is not enough, there must also be an element of unfairness that goes beyond mere disadvantage.
Remedies for a Minority Shareholder
Remedies for oppressive conduct are available under Section 233 of the
Corporations Act. Under this section, the court has discretion to grant a range of remedies. Specifically, Section 233 of the
Corporations Act empowers the Court to make any order that it considers appropriate in relation to a company in circumstances where
‘the conduct of a company’s affairs is … contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.’
The power that the Court has includes (but is not limited to) to make orders:
- that one or more of the majority shareholders purchase the minority shareholder’s shares at a price determined by the Court;
- that the Company purchase the minority shareholder’s shares;
- that a receiver and manager be appointed and the Company wound up (potential for director resignation);
- that an injunction be granted against the Company or a Director/ majority shareholder to restrain a specific Act
In the judgment of
Roberts v Walter Developments Pty Ltd & Ors (1997) 15 ACLC 882, for example, the court discussed relevant principles relating to business judgment and oppression. In this case it was held that a course of conduct engaged in by the chairman and majority shareholder which included failure to pay dividends, a failure to consider the minority shareholder’s request that the remuneration of the majority shareholder as director be reduced, and a refusal to give the minority shareholder access to company records, was held to be oppressive.
Conclusion
If you’re a minor shareholder and you’re worried about the value of your investment as a result of actions of the majority, you should talk to
commercial lawyer, who will be able to look at your facts, advise you of the applicable law, and negotiate on your behalf
