Shareholder Oppression

As a shareholder of a company, you have access to a number of remedies should other shareholders or the officers of the company (i.e. directors) abuse their position or act contrary to the interests of the company. One of these powers is to apply for relief from oppression in order to defend your interests in a company. You may have to exercise your rights if the majority of shareholders are acting in their own benefit to the company’s disadvantage or in a way which 'unfairly prejudices or discriminates' against a minority of shareholders.

What is oppression?

Oppression can be widely defined. In broad terms, oppression is conduct by officers or shareholders of the company which adversely impacts the rights of other shareholders.

The Court has taken an objective approach to determining what constitutes oppressive conduct. In Catalano v Managing Australia Destinations Pty Ltd [2014] FCFAC 55, the Federal Court of Australia suggested that oppressive conduct is “conduct that is so unfair that reasonable directors who consider the matter would not have thought the conduct or decision fair”. Mere discrimination or prejudice is insufficient to establish oppression, as there needs to be unfairness that goes beyond ordinary disadvantage.

Examples of shareholder oppression that have surfaced time and time again include:

• The use of company funds for personal gain;
• The failure to exercise director’s duties, or preventing the exercise of director’s duties;
• Unfair payment of dividends;
• Paying excessive remuneration to the party in control of the company;
• Refusing access to company records.

If you feel that you have been oppressed as a shareholder, our experienced lawyers at Frank Legal can ensure that you are fully aware of your rights as a company shareholder, and that your position is protected.

If you have further questions, please contact us at frank@franklaw.com.au.

This is not legal advice.