Shareholder oppression

Are you a minority shareholder? Do you know your rights?

Sometimes disputes arise between people who have a financial interest in a company. In privately held companies, people who own a small shareholding (a minority shareholder) may find that their interests are unfairly prejudiced by people who own the majority of the shares in the company. This is known as shareholder oppression.

Minority shareholders: What are your rights?

If decisions are made that adversely affect the rights of a minority shareholder (shareholder oppression), that shareholder may seek orders from the Supreme Court if:

a) the conduct of a company’s affairs; or
b) an act or omission by a company; or
c) a company resolution

prejudices the rights of a shareholder or the shareholders as a whole.

Oppressive conduct can include refusal to provide access to company records, improper exclusion from participation in management of the company, diversion of business to another company and excessive remuneration paid to a controlling shareholder.

Who may seek relief?

Current shareholders may seek orders from the Supreme Court, as may former shareholders if the application relates to circumstances relating to them giving up their shareholding.

What remedies are available?

The Court has wide reaching powers, including the power to order that the company be wound up, a receiver be appointed, for the modification of the company’s constitution or for the purchase of shares by an existing shareholder.

Kalus Kenny Intelex can assist shareholders to exercise their rights under a Shareholders Agreement, including via instituting a shareholder oppression proceeding.

Want to know more? Contact Heather Richardson or Denise Wightman.