If you are a shareholder and you believe that a company, or a shareholder or director of that company, has been conducting its affairs in a manner that is oppressive, unfairly prejudicial, unfairly discriminatory or contrary to your interests as a shareholder (or in any other capacity; for example, as a unit holder in the unit trust of the company), you may have a shareholder oppression matter and be able to seek an order of the Court for any of the following relief:
- The winding up of the company (which is another expression for the liquidation of a company).
- That the company’s existing constitution be modified or repealed.
- Regulating the conduct of the company’s affairs in the future.
- For the purchase of any shares by any shareholder.
- For the purchase of shares with an appropriate reduction in the company’s share capital.
- For the company to institute, prosecute, defend or discontinue specified proceedings (or authorising a shareholder to do so).
- Appointing a receiver or a receiver and manager of any or all of the company’s property.
- Restraining the company or a person from doing a specified act (or requiring the company or a person to do specified act).
The Court, in determining whether or not the alleged conduct is oppressive or unfair, will assess the conduct objectively by placing itself in the shoes of a reasonable and commercial bystander, possessed of any special knowledge of the circumstances (including, for example, the expectations of the shareholders, the intention of the company at the time of the alleged oppression, the conduct of the oppressed shareholder and other relevant factors, as this list is neither exhaustive nor static).
Examples of oppressive conduct
Oppression is fact specific. What is oppressive in one case may not be in another. Examples include:
- Not recognising a shareholder’s status.
- Breaching obligations in the company’s constitution.
- Not providing required or customary financial information.
- Not holding required shareholders’ meetings.
- Improperly appointing or removing directors.
- Excluding from management a shareholder with a reasonable expectation of continued involvement.
- Improper business dealings, such as paying unwarranted management fees or making improvident loans to shareholders.
Examples of unfairly prejudicial conduct
To be “unfairly prejudicial”, conduct must be just what the phrase suggests: conduct that prejudices a shareholder unfairly. Conduct may be prejudicial, but not unfair. Conduct that is not oppressive may still be unfairly prejudicial. Examples include:
- “Squeezing out” a minority shareholder.
- Not disclosing related party transactions.
- Adopting a “poison pill”.
- Paying dividends without formal declaration.
- Paying management fees only to some shareholders.
- Paying abnormal directors’ fees.
Where shareholder oppression is established, the appropriate relief generally will be an order that the majority shareholders or the company purchase the shares of the oppressed shareholder. Of course, the Court may grant other relief as it has a broad discretion to make any order it thinks fit, but the form of relief will usually depend on the specific relief sought by the shareholder, the nature of the oppression and facts of the case.
If you believe that a company is conducting its affairs in a manner that is oppressive or unfair to your interests as a shareholder or in any other capacity and you are suffering shareholder oppression, contact on our expert dispute resolution lawyers for a confidential discussion about your options. Call us on 07 3106 3016 or contact us using the form on this page.