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There are a number of forms of statutory relief available to shareholders which are a considerable departure from the common law remedies based on the rule in Foss v Harbottle. In the past, where a director breached the duty to act in the interests of the company as a whole, then the only remedy for the shareholders was to bring the matter to a general meeting and vote for the company to take action against the directors. The shareholders themselves had no independent standing. However in modern times there are a number of avenues for relief and redress now available to minority shareholders. Obtaining proper legal advice from a Commercial Lawyer may be greatly useful if you are a shareholder that is considering taking action against a majority shareholder.

Minority shareholder oppression and relief is an area of corporate law that is in continuous flux and development. There are four exceptions to the rule in Foss v Harbottle when the company was not the proper plaintiff, one being where the alleged wrongdoers were in effective control of the company. Another exception is described as being where it was demanded by the justice of the case. Legal authority exists to state that it is desirable to allow a minority shareholder to have standing to bring an action against the company where there was an allegation that there had been a fraud on the minority. Professional legal advice in from a Commercial Lawyer may be of great assistance in this respect.

However the right of a person at general law to bring an action on behalf of a company is abolished, as is the right to intervene in such proceedings. This does not, of course, affect the right of a person to bring an action on their own behalf in respect of a personal right. Where a person seeks to intervene on behalf of the company, they must seek leave of the Court and satisfy the requirements stipulated under corporate law. An example of shareholder oppression is where board of directors had bound the subsidiary to a series of risky transactions for the benefit of the parent company. The shareholder relief available may be that as a member the shareholder had sufficient interest to confer standing to bring proceedings and was entitled to damages. Sound legal advice from a skilled Commercial Lawyer may be advantageous to ensure thorough understanding of actions against a majority shareholder.

Other forms of shareholder relief include a declarations and damages arising out of alleged oppression and breaches of duty by the majority directors. In addition, an interlocutory injunction can be sought to prevent the removal motion being voted upon until the actions for declarations and damages had been disposed of. However this must be tempered with the risk that an order for interim injunctive relief might have the consequence of commercial unfairness and if continued management by the minority directors was unlikely to enhance the company's financial viability. The interlocutory application can be granted if irremediable commercial unfairness could result, or any severe detriment would be suffered by the minority shareholder. Monetary compensation such as damages is also available. Obtaining professional legal advice from a Commercial Lawyer may be greatly beneficial if you think your rights are being infringed by a majority shareholder.

If you would like further information or wish to discuss your shareholder oppression matter with us please do not hesitate to contact us by telephone on (02) 9233 4048 or by email to info@navado.com.au. 

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This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.

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