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The scale of statutory oppression remedies for a shareholder are wide and far reaching. Corporate law provisions dealing minority shareholder oppression indicates that available remedies are to be read broadly and any imposition of limitations on the remedy by courts is to be approached with caution. There are many issues concerning suing a majority shareholder, such as standing, procedure, relief available, costs and likely timeframes.

Firstly, standing to bring an action is dealt with in specific sections of the Corporations Act.  Generally, an application for relief in relation to a company may be made by a member of the company, even if the application relates to an act or omission that is against, the member in a capacity other than as a member; or another member in their capacity as a member; a person who has been removed from the register of members because of a selective reduction of capital; a person who has ceased to be a member of the company if the application relates to the circumstances in which they ceased to be a member; a person to whom a share in the company has been transmitted by will or by operation of law; a person whom ASIC thinks appropriate having regard to investigations it is conducting or has conducted into the company's affairs; or for matters connected with the company's affairs. Sound legal advice from a skilled Commercial Lawyer may be advantageous to ensure thorough understanding of actions against a majority shareholder.

In a situation of a takeover or merger, minority shareholders may have powers to force compulsory acquisition. In particular the powers of minority shareholders to force majority shareholders to buy them out have been strengthened consistently with the new compulsory acquisition powers. Legal authorities have suggested that a majority shareholder do not have a fiduciary relationship with minority shareholders but might have certain obligations to deal with them in good faith and to disclose material facts that affect their interest.  This duty may arise because of the relationship, the factual matrix and imbalance of power. Also, the court, while generally reluctant to interfere in advance with the proceedings of company meetings, will do so in an appropriate case. For instance the court may make ex parte orders to restrain the majority shareholders from voting at a general meeting in favour of a number of resolutions, including a resolution for the removal of a director that oppresses or is unfair towards certain shareholders.  While the balance of convenience would normally favour directors to have discretion to manage their company in any manner they see fit, in some cases, the existence of any contractual rights contended for was a powerful consideration in favour of seeing the status quo maintained, and thus the exercise of voting rights is sometimes restrained to protect certain shareholders. Obtaining professional legal advice from a Commercial Lawyer may be greatly beneficial if you think your rights are being infringed by a majority shareholder.

In practice there is often a competing interest between majority and minority shareholders. In addition, the directors who may also be the majority shareholders and may deliberately commit a fraud on the minority and wilfully deprive them of their rights. The more usual situation is that the majority shareholders simply override the minority interests through the use of a special resolution to legitimise their intentions. For this reason it is important that minority shareholders have avenues for redress and vindication provided by the corporate law framework.

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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