Minority Oppression in the context of Corporations Act (Cth) What constitutes oppressive conduct?

This article briefly examines the circumstances wherein the conduct of a majority shareholder or a director of a company can be considered oppressive and when it may not. The list is not meant to be exhaustive as every case turns on its own facts.

Where is the starting point?

Section 232 of the Corporations Act 2011 (Cth) defines oppressive conduct as conduct that is contrary to the interests of the shareholders as a whole. This means that the conduct should be examined as a whole within the context of the full circumstances of the particular case.

Oppressive conduct in a nutshell

The list can be wide, however, for the purposes of this article, any conduct, specifically, by a majority shareholder or a director of a company that is tainted with unfairness, harsh, unjust or inequitable is said to be oppressive.

Can I bring an oppression action against a company in liquidation?

The short answer is no unless the liquidator consents or the shareholder is able to persuade a court that leave should be granted for this action to take place.

What is the test for a conduct to be found oppressive?

The High Court of Australia has settled the test in Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459. The Court in that case directed that the conduct in question should be examined as a whole, within the context of the full circumstances of the case as opposed to being viewed in isolation.

What are the examples of oppressive conduct?

Again, the list is not exhaustive, however, the following can be considered oppressive conduct:

• Breach of fiduciary duties of directors;
• Improper diversion of a business to another entity;
• Appointment of an administrator against members when done for invalid or illegitimate purposes;
• Excessive remuneration; and
• Most importantly, denial of access to information when demanded by a shareholder of a company.

What may not amount to oppressive conduct?

Again, the list is not exhaustive, however, the following may not be considered oppressive conduct:

• Conduct which constituted genuine attempt to save the company; and
• When conduct undertaken or subject to complaint, has the consent of the applicant.

Take-home message

Bearing in mind the test set by the High Court, it is important that before forming any opinion on whether conduct is or is not oppressive, to seek our legal advice so as to minimise your risk and cost, where possible.

For advice or assistance with all business law matters contact the Business Law Team at Aylward Game Solicitors today at 1800 217 217

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Article Source: Oppressive conduct