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Shareholder Oppression:

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Shareholder Oppression occurs when a shareholder, or a group of shareholders, is treated in a manner which is unfair, prejudicial, oppressive and discriminatory. There are various remedies available if you are a shareholder in this position, which can lead up to the most powerful which is an application to wind up a company. Corporate law has empowered the court to give other relief against oppressive conduct of a company's affairs. Over time what constitutes oppression has widened to grant relief in respect of a wider range of unfair conduct. Obtaining proper legal advice from a Commercial Lawyer may be greatly beneficial if you are a shareholder that believes your rights have been infringed upon, or if you are a director that requires advice on what conduct could constitute shareholder oppression.

The definition of shareholder oppression can best be surmised as follows it is ‘the conduct of a company's affairs or an actual or proposed act or omission by or on behalf of a company; or a resolution, or a proposed resolution, of members or a class of members of a company that is either contrary to the interests of the members as a whole; or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.’ Oppressive conduct does not need to be unlawful and proceedings can be instituted by an individual member notwithstanding the rule in Foss v Harbottle- which states that a wrong done to the company may only be vindicated by the company alone and an alleged wrong can be confirmed or ratified by a simple majority. Thus oppressive conduct can now be vindicated by a shareholder derivative action, which means that a minority shareholder can bring a claim on behalf of a company. Professional legal advice in from a Commercial Lawyer may be of great assistance in this respect.

Shareholder oppression is an area of corporate law that continues to evolve and develop over time.  In recent times the scope of derivative action has expanded as previously relief was only available where the conduct complained of was positive and continuing and the available remedies were not as broad, nor as flexible as they are under the currently. In addition the section clearly covers omissions and isolated acts. Sound legal advice from a skilled Commercial Lawyer may be advantageous to ensure thorough understanding of Shareholder oppression.

Examples of actions that constitute shareholder oppression are abuse of voting power by the majority in altering the constitution; improperly condoning a wrong done to the company; or an abuse of power by the directors. Relief can be sought by shareholders regardless of whether the act infringes an individual membership right or a corporate right or whether the member is free to sue on behalf of the company to vindicate its right.  Instances where shareholder relief from oppression is available include where a fraud has been perpetrated by the majority on the minority; where a member seeks to enforce a personal right or to bring a derivative action; or where the grounds for just and equitable winding up are satisfied. The breadth of the oppression provision and the range of flexible orders a court can make when it finds oppression has occurred means that it is one of the most widely used corporate law remedies available to shareholders. Obtaining professional legal advice from a Commercial Lawyer may be greatly beneficial if you are affected by shareholder oppression.

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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