Company law historically relies on the principle of majority rule. Board and shareholder decisions of companies are usually determined by a simple majority vote. Therefore, the shareholders who hold a minority of the votes, may have little, if any, control or influence over the direction and development of a company.

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.1

Some examples of shareholder oppression that have triggered minority protection remedies include:
- Excluding a minority shareholder from involvement in the affairs of the company;2
- Denial of information; 3
- The diversion of a legitimate corporate opportunity to themselves or associates;4 and
- Deadlock, the inability to maintain a proper corporate governance regime for the company.5

Who may apply for relief?

Standing to bring an action is covered by section 234 of the Act.6 This section provides that, inter alia, the following types of individuals may apply for relief:
(a) A member of the company;
(b) In certain circumstances former members;
(c) A person whom ASIC thinks appropriate having regard to investigations it has conducted.

What Isn’t Shareholder Oppression?

The critical feature of shareholder oppression is that the unfairness must go beyond mere disadvantage. A minority member may resent being outvoted or be dissatisfied at the way the majority is managing a company’s affairs, but this alone will not be enough to constitute oppression.7

Available forms of relief
The court, in exercising its discretion, may grant a remedy appropriate to the circumstances pursuant to section 233 of the Act.

Under this section, the court has a broad discretion to make orders in relation to a company. One common remedy for oppressive conduct is an order that either the company or a member (generally the majority shareholders) buy the oppressed members shares.8

However, other remedies include:

- Regulating the conduct of the company’s affairs;
- Existing constitution be modified or repealed;
- Injunction be ordered to restrain a specific act; and
- Winding up.9

It must be noted that courts are “extremely reluctant to wind up a solvent company”10 … “[i]t is well accepted that the winding up of a solvent and flourishing company should be a last resort”. Courts will consider whether any other relief would be preferable to a winding up order….11

Conclusion
If a minority shareholder is concerned about the actions and conduct of the company, director(s) or majority shareholders they should take steps to ensure that their interests are protected.

 

Disclaimer
This article is intended to provide general information in summary form on legal topics, current at the time of first publication. The contents do not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought in particular matters.




1 Corporations Act 2001 (Cth) s 232.
2 Peter Exton & Anor v Extons Pty Ltd & Ors [2017] VSC 14 at [48].
3 Strategic Management Australia AFL Pty Ltd & Anor v Precision Sports & Entertainment Group Pty Ltd & Ors [2016] VSC 303
4 Re Bright Pine Mills Pty Ltd [1969] VR 1002; Scottish Co-operative Wholesale Soc Ltd v Meyer [1959] AC 324.
5 Antonio Di Gioacchino and Hydrill Pty Ltd (ACN 006 239 318) v Umberto Di Gioacchino and Di Gioacchino & Sons Pty Ltd (ACN 006 855 009) and Wyndham Park Estate Pty Ltd (ACN 088 965 324) [2019] VSC 92 [35].
6 Corporations Act 2001 (Cth) s 234.
7 Thomas v HW Thomas Ltd (1984) 2 ACLC 610.
8 Antonio Di Gioacchino and Hydrill Pty Ltd (ACN 006 239 318) v Umberto Di Gioacchino and Di Gioacchino & Sons Pty Ltd (ACN 006 855 009) and Wyndham Park Estate Pty Ltd (ACN 088 965 324) [2019] VSC 92, [43].
9 Antonio Di Gioacchino and Hydrill Pty Ltd (ACN 006 239 318) v Umberto Di Gioacchino and Di Gioacchino & Sons Pty Ltd (ACN 006 855 009) and Wyndham Park Estate Pty Ltd (ACN 088 965 324) [2019] VSC 92, [43].
10 Antonio Di Gioacchino and Hydrill Pty Ltd (ACN 006 239 318) v Umberto Di Gioacchino and Di Gioacchino & Sons Pty Ltd (ACN 006 855 009) and Wyndham Park Estate Pty Ltd (ACN 088 965 324) [2019] VSC 92, [43].
11 Exton v Extons Pty Ltd (2017) 53 VR 520, 545; 118 ACSR 411, 433.