Oppression Remedies
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In
corporate law Corporate law (also known as company law or enterprise law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corpora ...
in
Commonwealth A commonwealth is a traditional English term for a political community founded for the common good. The noun "commonwealth", meaning "public welfare, general good or advantage", dates from the 15th century. Originally a phrase (the common-wealth ...
countries, an oppression remedy is a statutory right available to oppressed shareholders. It empowers the shareholders to bring an action against the corporation in which they own shares when the conduct of the company has an effect that is oppressive, unfairly prejudicial, or unfairly disregards the interests of a shareholder. It was introduced in response to ''
Foss v Harbottle ''Foss v Harbottle'' (1843) 2 Hare 46167 ER 189is a leading English precedent in corporate law. In any action in which a wrong is alleged to have been done to a company, the proper claimant is the company itself. This is known as "the proper pla ...
'', which had held that where a company's actions were ratified by a majority of the shareholders, the courts will not generally interfere. It has been widely copied in companies legislation throughout the
Commonwealth A commonwealth is a traditional English term for a political community founded for the common good. The noun "commonwealth", meaning "public welfare, general good or advantage", dates from the 15th century. Originally a phrase (the common-wealth ...
, including: :* the ''
Canada Business Corporations Act The ''Canada Business Corporations Act'' (CBCA; ) is an act of the Parliament of Canada regulating Canadian business corporations. Corporations in Canada may be incorporated federally, under the CBCA, or provincially under a similar provincial l ...
'', and :* the ''
Corporations Act 2001 The ''Corporations Act 2001'' is an Act of the Parliament of Australia, which sets out the laws dealing with business entities in Australia. The company is the Act's primary focus, but other entities, such as partnerships and managed invest ...
'' of Australia :* the ''
Companies Act 1993 The Companies Act is an Act of Parliament passed in New Zealand in 1993. The Act regulates companies, and replaces the earlier Companies Act of 1955. Case law * '' Allied Concrete Ltd v Meltzer -'' Decision determining the meaning of "gave val ...
'' of New Zealand :* the '' Companies Act, 2008'' of South Africa :* the ''Companies Act'' of Singapore :* the ''
Companies Act 1965 The Companies Act 1965 (), is a Malaysian law which relates to companies. Structure The Companies Act 1965, in its current form (15 August 2007), consists of 12 Parts containing 374 sections and 10 schedules (including 36 amendments). * Part I: Pr ...
'' of Malaysia The ''Companies Ordinance'' of Hong Kong also contains similar provisions.


Introduction in the United Kingdom

An oppression remedy, intended to operate as an alternative to
winding up Liquidation is the process in accounting by which a company is brought to an end. The assets and property of the business are redistributed. When a firm has been liquidated, it is sometimes referred to as wound-up or dissolved, although di ...
a company, was adopted as s. 210 of the ''
Companies Act 1948 The Companies Act 1948 ( 11 & 12 Geo. 6. c. 38) was an Act of the Parliament of the United Kingdom, which regulated UK company law. Its descendant is the Companies Act 2006. Cases decided under this Act *'' Bushell v Faith'' 970AC 1099 *'' Sc ...
'', which declared: In the ''
Companies Act 2006 The Companies Act 2006 (c. 46) is an act of the Parliament of the United Kingdom which forms the primary source of UK company law. The act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largel ...
'', the relevant provision is expressed in s. 994 (and the Secretary of State has similar authority under s. 995): Conduct that is considered to constitute "unfair prejudice" has been given a broad interpretation, which can include: :* exclusion from management in circumstances where there is a legitimate expectation of participation; :* the diversion of business to another company in which the majority shareholder holds an interest; :* the awarding by the majority shareholder to himself of excessive financial benefits; and :* abuses of power and breaches of the Articles of Association. The conduct is not confined to a specific group. In ''Re HR Harmer Ltd'', Jenkins LJ noted that the definition is "wide enough to cover oppression by anyone who is taking part in the conduct of the affairs of the company whether '' de facto'' or ''
de jure In law and government, ''de jure'' (; ; ) describes practices that are officially recognized by laws or other formal norms, regardless of whether the practice exists in reality. The phrase is often used in contrast with '' de facto'' ('from fa ...
''." Therefore, it can cover the actions of: :* directors, :* a controlling shareholder, :* persons with ''de facto'' control of the company, :* a class of shareholders, or :* conduct of a related company.


Application in Canada

Provisions similar to s. 210 of the 1948 UK Act were first introduced into Canadian law through the 1975 passage of the ''
Canada Business Corporations Act The ''Canada Business Corporations Act'' (CBCA; ) is an act of the Parliament of Canada regulating Canadian business corporations. Corporations in Canada may be incorporated federally, under the CBCA, or provincially under a similar provincial l ...
''. It incorporated recommendations made in 1962 by the UK Jenkins Committee on Company Law for removing the linkage of the remedy with that of
winding-up Liquidation is the process in accounting by which a company is brought to an end. The assets and property of the business are redistributed. When a firm has been liquidated, it is sometimes referred to as wound-up or dissolved, although di ...
and for broadening its scope. Canadian legislation (both federally and in all provinces) provides for a broad approach to the oppression remedy (). In '' Peoples Department Stores Inc. (Trustee of) v. Wise'', the
Supreme Court of Canada The Supreme Court of Canada (SCC; , ) is the highest court in the judicial system of Canada. It comprises nine justices, whose decisions are the ultimate application of Canadian law, and grants permission to between 40 and 75 litigants eac ...
noted: A "complainant" is deemed to be a current or former registered security holder, a current or former director or officer, the Director appointed under the ''CBCA'', or "any other person who, in the discretion of a court, is a proper person to make an application under this Part." In that regard, it can include a creditor of the corporation (but not every creditor will qualify), as well as a trustee appointed under the ''
Bankruptcy and Insolvency Act The ''Bankruptcy and Insolvency Act'' (BIA; ) is one of the statutes that regulates the law on bankruptcy and insolvency in Canada. It governs bankruptcies, consumer and commercial proposals, and receiverships in Canada. It also governs the Off ...
'' or a monitor appointed under the ''
Companies' Creditors Arrangement Act The ''Companies' Creditors Arrangement Act'' (CCAA; ) is a statute of the Parliament of Canada that allows insolvent corporations owing their creditors in excess of $5 million to restructure their businesses and financial affairs. The CCAA with ...
''. As in the United Kingdom, oppressive conduct is not restricted to that committed by corporations. In the case of corporate directors, the Supreme Court of Canada in 2017 held that they can be held personally liable for such conduct, but only where: #the oppression remedy request is a fair way of dealing with the situation; #any order made under s. 241(3) should go no further than necessary to rectify the oppression; and #any such order may serve only to vindicate the reasonable expectations of security holders, creditors, directors or officers in their capacity as corporate stakeholders; but #director liability cannot be a surrogate for other forms of statutory or common law relief, particularly where such other relief may be more fitting in the circumstances. Applications to the Court have been successful where: #there was lack of a valid corporate purpose for the transaction; #the corporate and its controlling shareholders failed to take reasonable steps to simulate an
arm's length The arm's length principle (ALP) is the condition or the fact that the parties of a transaction are independent and on an equal footing. Such a transaction is known as an "arm's-length transaction". It is used specifically in contract law to ar ...
transaction; #there was lack of good faith on the part of the corporation's directors; #there was discrimination among shareholders which benefited the majority to the exclusion of the minority; #there was a lack of adequate and appropriate disclosure of material information to minority shareholders; and #there was a plan to eliminate a minority shareholder. The court's discretion is not unlimited, as the Court of Appeal of Newfoundland and Labrador observed in 2003: :* The result of the exercise of the discretion contained in subsection 371(3) must be the rectification of the oppressive conduct. If it has some other result the remedy would be one which is not authorized by law. :* Any rectification of a matter complained of can only be made with respect to the person’s interest as a shareholder, creditor, director or officer. :* Persons who are shareholders, officers and directors of companies may have other personal interests which are intimately connected to a transaction. However, it is only their interests as shareholder, officer or director as such which are protected by section 371 of the Act. The provisions of that section cannot be used to protect or to advance directly or indirectly their other personal interests. :* The law is clear that when determining whether there has been oppression of a minority shareholder, the court must determine what the reasonable expectations of that person were according to the arrangements which existed between the principals. :* They must be expectations which could be said to have been, or ought to have been, considered as part of the compact of the shareholders. :* The determination of reasonable expectations will also ..have an important bearing upon the decision as to what is a just remedy in a particular case. :* The remedy must not be unjust to the others involved. Oppression claims are separate from
derivative action A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation against a third party. Often, the third party is an insider of the corporation, such as an executive officer or director. Shareholder derivative suits are ...
s, but the two are not mutually exclusive. However, a derivative action claim can only be instituted by leave of the court, as it is brought by a complainant to sue on behalf of the corporation for a wrong done to the corporation, and any successful claim is binding on all shareholders. This is in contrast to the oppression remedy claim, where a complainant sues on behalf of himself for a wrong he suffers personally as a result of corporate conduct., discussing


Application in Australia

S. 234 of the ''
Corporations Act 2001 The ''Corporations Act 2001'' is an Act of the Parliament of Australia, which sets out the laws dealing with business entities in Australia. The company is the Act's primary focus, but other entities, such as partnerships and managed invest ...
'' provides that the following can apply for an order seeking relief for oppressive conduct: :* a member of the company, on behalf of himself or another member, :* a person who has been removed from the register of members, or has ceased to be a member under circumstances which are the substance of the application, :* a person to whom a share in the company has been transmitted by will or by operation of law, or :* any other person, with the consent of the
Australian Securities and Investments Commission The Australian Securities and Investments Commission (ASIC) is an independent commission of the Australian Government tasked as the national corporate regulator. ASIC's role is to regulate company and financial services and enforce laws to pro ...
, in connection to a current or prior investigation into the company conducted by ASIC. S. 232 states that the conduct of the company's affairs, an actual or proposed act or omission by or on behalf of a company, or a resolution or proposed resolution by all, or by a class, of the shareholders, must be: :* contrary to the interests of the shareholders as a whole; or :* oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a shareholder or shareholders whether in that capacity or in any other capacity, in order for an application to be considered. The oppression remedy, together with the option available for winding up a company and ASIC's use of the public interest ground in that regard, has received greater exposure and legal development since the
2008 financial crisis The 2008 financial crisis, also known as the global financial crisis (GFC), was a major worldwide financial crisis centered in the United States. The causes of the 2008 crisis included excessive speculation on housing values by both homeowners ...
.


References


Further reading

* * * {{cite journal, last1= Ben-Ishai, first1= Stephanie, author-link1 = Stephanie Ben-Ishai, first2 = Poonam, last2= Puri, title = The Canadian Oppression Remedy Judicially Considered: 1995{{en dash2001, ssrn = 1427819, year = 2004, volume = 30, pages = 79{{en dash114, journal = Queen's Law Journal Corporate law