February 11, 2019

Steps to take if you are an oppressed shareholder in Australia

Photo credit:  Alexandra Marcu, Unsplash 

Steps to take if you are an oppressed shareholder in Australia

Updated: 7 December 2019

If you are an oppressed shareholder, it might be because the actions or inaction of a company board are burdensome, unjust or unfair.  

And, below are the steps to take if you are an oppressed shareholder in Australia.

In a hurry? Jump ahead.

Shareholder rights exist under the Corporations Act and we'll cover some of those rights in this article. 

Court orders as a remedy

Section 232 of the Corporations Act allows courts to make an order if: 

  • the company’s conduct in its affairs; or
  • an actual or proposed act or omission by or on behalf of a company; or
  • a resolution or proposed resolution of shareholders or class of shareholders is either:
    • not in the interests of shareholders as a whole; or
    • oppressive, unfairly prejudicial, discriminatory against, a shareholder.

So, to further understand shareholder rights, let’s see what’s meant by company ‘affairs’.

Meaning of 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.

Company affairs examples

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

Every day dealings like the ones below fall within the meaning of 'affairs', and they include:

  • promotion, formation, membership, control, business, trading, transactions and dealings, property, liabilities, income, receipts, losses, outgoings and expenditure. 

Body corporate

Body corporate affairs are covered and include: 

  • determining the identity of the persons who are beneficiaries under the trust, their rights under the trust and any payments that they have received, or are entitled to receive;

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. 

Management and financial arrangements

Company affairs in management and financial situations include:

  • internal management; and 
  • any act or thing done (including any contract made and any transaction entered into) by or on behalf of the body, or to or in relation to the body or its business or property, at a time when:
    • a receiver, or a receiver and manager, is in possession of, or has control over, property of the body; or
    • the body is under administration; or
    • a deed of company arrangement executed by the body has not yet terminated; or
    • a compromise or arrangement made between the body and any other person or persons is being administered; or
    • the body is being wound up;
    • any conduct of such a receiver or of an administrator of the body, of an administrator of such a deed of company arrangement, of a person administering such a compromise or arrangement or of a liquidator or provisional liquidator of the body; and

Management investment schemes

Company affairs also cover managed scheme activities:

  • the ownership of shares in, debentures of, and interests in a managed investment scheme made available by, the body; and
  • acquiring or disposal of shares in, debentures of, or interests in a managed investment scheme made available by, the body; and
  • where the body has made available interests in a managed investment scheme - any matters concerning the financial or business undertaking, scheme, common enterprise or investment contract to which the interests relate; and
  • matters relating to or arising out of the audit of, or working papers or reports of an auditor concerning managed investment schemes.

Voting rights

Voting rights are also covered under company affairs and include: 

  • the power of persons to exercise, or to control the exercise of, the rights to vote attached to shares in the body or to dispose of, or to exercise control over the disposal of, such shares; and

Possible conflicts of interest

Conflict of interest matters also fall under company affairs, and these may include:

  • matters concerned with the determining persons who are or have been financially interested in the success or failure, or apparent success or failure, of the body or are or have been able to control or materially to influence the policy of the body.

Now, let's go through the steps you can take (before you go to court) to pursue your shareholder rights. 

Finally... the steps to take if you are an oppressed shareholder 

1. Communicate 

Write to the company’s board members (the directors) and let them know about your concerns.

2. Mediate 

I 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).

Time limits

Beware 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.

About the author 

Vivian Michael

As founder and lawyer at Michael Law Group, Vivian advises Australia's top entrepreneurs on business and employment matters. Clients benefit from Vivian's commercially focussed and pragmatic legal advice, business experience, and commitment to deliver the best quality business legal services to her clients.

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