If you’re in the world of corporations and companies, you may have come across the term ‘oppressive conduct’. But what is it and what does it mean in the context of minority shareholding? Let’s delve into this topic and discuss everything about oppressive conduct.
Defining Oppressive Conduct: the Corporations Act and Common Law
To understand Oppressive Conduct, we must first understand it’s meaning under the law that governs corporations: the Corporations Act. Specifically, section 232 details what conduct can be deemed ‘oppressive’. Minority oppression or oppressive conduct is seen to be conduct that is:
- contrary to the interests of the shareholders as a whole; or
- oppressive to, unfairly prejudicial to, or unfairly discriminatory against a shareholder or shareholders.
The common law through the courts also assesses oppressive conduct. They apply an objective test based on whether a ‘reasonable person’ would view the conduct as unfair. They note that the presence of prejudice or discrimination is not enough; there must also be an element of unfairness that goes beyond disadvantage.
Examples of Oppressive Conduct
Oppressive conduct and unfair treatment in a company can take many forms. We have listed some examples below:
- Improper diversion of a business to another entity;
- Misuse of company funds;
- Oppressive conduct at board meetings;
- Improper issue of shares
- Denial of access to information;
- Exclusion from participation in management.
Remedies for Oppressive Conduct
A court can rule on remedies for those affected by oppressive conduct.
The court can make orders to cause:
- the majority shareholders to purchase the minority shareholder’s shares at a price determined by the Court;
- the Company to purchase the minority shareholder’s shares;
- a receiver and manager to be appointed, and the Company wound up (with potential for a director resignation);
- an injunction to be granted against the Company; or
- a director or majority shareholder to refrain from a specific act.
We’ve now defined and examined the concept of oppressive conduct. If you’d like to know more about this topic, or corporate law matters, we’ve got some exciting news! We’re soon to release our first edition of The Definitive Guide to Australian Company Law, a book detailing all things corporate law. From setting up a company, to what replaceable rules and constitutions are, we will delve into the answers to our client’s frequent questions about Corporate law. Stay tuned for more information on this wonderful resource, coming soon!
If you need assistance in regards to corporate law or oppressive conduct issues, contact our team of experienced corporate lawyers and tax accountants. You can submit an online enquiry or call us on +61 2 9223 9166 to arrange a teleconference or appointment.