CL - 1 <1> Shareholder Remedies Oppressive or unfair...

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1 <1> Shareholder Remedies Oppressive or unfair conduct 1. Oppressive or unfair conduct (1) S 232 allows the court to provide members with a wide range of remedies if they can show that the conduct of a company’s affairs is contrary to the interest of the members as a whole, oppressive, unfairly prejudicial or unfairly discriminatory. (2) S 234 sets out the accepted applicants under s 232: A member of the company, even though the application relates to an act or omission that is against the member in a capacity other than a member: S 234 (a). The application may also relate to an act or omission that is against another member in their capacity as a member. A person removed from the register of members because of a selective reduction: s 234(b). A past member if the application relates to the circumstance in which they ceased to be a member: s 234(c). A person to whom a share in the company has been transmitted by will or by operation of law: s 234(d); or A person whom ASIC thinks appropriate having regard to investigations it is conducting, or has conducted, into the company’s affairs or matters connected with the company’s affairs: s 234(e). 2. Examples of oppressive and unfair conduct: Minority shareholders can seek remedies under s 232 if there is: a. Diversion of corporate opportunity Diverting corporate opportunities from the company many account to oppressive or unfair conduct. Fexuto Pty Ltd v Bosnjak Holding Pty Ltd [2001] NSWCA 97 b. Diversion of profits Paying very high director’s salaries and low dividends may be oppressive or unfair conduct. Sanford v Sanford Courier Service Pty Ltd (1986) 5 ACLC 394
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2 The mere fact that dividends were not as high as they could have been is not necessarily an indication of unfairness. Further, of itself, a decision by the directors to pay themselves large bonuses and fees is not oppressive or unfair if the company’s profitability had increased significantly because of their efforts Morgan v 45 Flers Avenue Pty Ltd (1986) 5 ACLC 22 Refer to P516 for more cases c. Exclusion from management In family companies, it may be oppressive or unfair to exclude a family member from the company’s management Fexuto Pty Ltd v Bosnjak Holding Pty Ltd [2001] NSWCA 97 (Family company Case ) Exclusion from management as an example of oppressive or unfair conduct is not confined to family companies. Where a company is a joint venture or quasi-partnership between two or more independent investors, it may be oppressive or unfair to exclude one of the investors from the company’s management. d. Director’s failure to act in the interests of the company It may be oppressive or unfair if directors breach their fiduciary duties and do not permit the company to take action against them. e. Improper share issues 3. Remedies: a. Share buy-out b. Replacement of directors c. Appointment of receiver d. Authorisation of legal action e. Director not to participate in management f. Alteration of constitution g. Winding up Section 1324 Injunctions (p 525) Under s 1324(1)
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