Photo credit: Alexandra Marcu, Unsplash
So what exactly is an 'oppressed shareholder' and why am I using this term?
If you are an oppressed shareholder, it might be because the actions or inaction of a company board is burdensome, unjust or unfair.
Now, I have used the term 'oppressed' because this is the term used in the Corporations Act.
And, below are the steps to take if you are an oppressed shareholder in Australia.
First, to clarify, this article is based on shareholder rights under the Corporations Act.
Now, in the Corporations Act, shareholders are called members.
But ... in this article, I am going to use the term ‘shareholder’ because it's more commonly used in Australia.
Section 232 of the Corporations Act allows courts to make an order if:
So, to further understand shareholder rights, let’s see what’s meant by company ‘affairs’.
Shareholders can get help from courts for oppressive conduct by a company in managing its company affairs.
Now, the meaning of company affairs is very long in section 53 of the Corporations Act because the term company affairs is broad.
However, I have simplified the list where possible. Now, if you are after the exact wording, be sure to visit section 53 of the Corporations Act.
The court may make court orders about a company's oppressive behaviour in managing its company affairs.
So, below is a list of company affairs (from section 53 of the Corporations Act):
Every day dealings like the ones below fall within the meaning of 'affairs', and they include:
Body corporate affairs are covered and include:
and who is a body corporate?
Body corporate meaning: in case you are wondering what a body corporate is - it's a company registered by ASIC in Australia.
Company affairs in management and financial situations include:
Company affairs also cover managed scheme activities:
Voting rights are also covered under company affairs and include:
Conflict of interest matters also fall under company affairs, and these may include:
Now, let's go through the steps you can take (before you go to court) to pursue your shareholder rights.
1. Communicate - Write to the company’s board members (the directors) and let them know about your concerns; and
2. Mediate - if your shareholder agreement has a mediation clause (hopefully it does), raise the issue per the mediation process in your shareholder agreement; and
3. Court - consider court if you cannot resolve any concerns with the company,
I recommend court as step 3 rather than step 1. Why ? To avoid draining your time and bank account. However, I realise there may be cases where you need urgent help.
For urgent help, you can speak to a lawyer about getting an injunction (a court order to either direct a company to do/not do something).
Be aware that there may be a time limit for you to make a legal claim. For example, if you are claiming a beach of a shareholder agreement.
In New South Wales you will have 6 years from the date of the oppressive conduct under contract (e.g. shareholder agreement) to take legal action. This time limit exists because of s.14 of the Limitations Act 1969 in NSW.