Being a shareholder of a company requires investment and can often come with significant responsibilities and decision making powers regarding the day to day operation of a business. In return for such investment, shareholders are often provided with various rights including the capacity to attend shareholder meetings, voting rights over key issues, access company reports and announcements, and the receipt of dividends and other distributions to name a few.
However, what happens when such rights are being curtailed?
The rights of the shareholder are protected by virtue of both the law under the Corporations Act 2001 (Cth) and through the company constitution itself.
Under the Corporations Act shareholders have various avenues to enforce their rights. An important avenue for shareholders is the ‘oppression remedy’. The oppression remedy seeks to ensure that minority shareholders are not unfairly discriminated against by persons that have control of the company. The remedy is particularly relevant if the company is unlisted.
The oppression remedy provides the Court with the power to make orders to remedy conduct that it deems to have been oppressive or unfairly prejudicial to, or unfairly discriminatory against a shareholder of the company. Such circumstances are referred to as being “oppressive”.
There is no single definition by the Courts that outlines the boundaries of oppressive conduct. In determining whether oppressive conduct has taken place, focus needs to be placed on the question of fairness. This involves balancing the prejudice or detriment suffered by the shareholder against the benefit provided to the company as a whole. As part of this balancing exercise, the Court may look at the conduct of the parties over an extended period, rather than one specific occasion.
Examples of oppressive conduct
It is worth noting that the mere disagreement between parties is generally not sufficient to say that oppressive conduct is present. There are certain types of behaviours and/or actions that the Court has deemed to be oppressive, including:
The Court may make any order that it considers appropriate to remedy the oppressive conduct that has taken place. Due to this, any order made by the Court will specific to the circumstances, and what is just and equitable in those circumstances, including the winding up of a company or the amendment of the company constitution. The Court may also sanction those who have acted in a manner deemed to be oppressive.
The first thing to do if you feel that your rights as a shareholder may have been oppressed is to seek legal advice. Issues around shareholder rights and oppressive conduct can often be resolved by way of negotiation, however sometimes Court proceedings are required. Our Litigation & Dispute Resolution Team at Coulter Legal are experienced in providing advice in respect of oppressive conduct and working with clients to resolve matters in an efficient and time-effective manner.
 Corporations Act 2001 (Cth) s 232.
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