At Madgwicks Lawyers we regularly assist minority shareholders who feel they are being unfairly excluded from their own business. A common concern is ‘my business partner is cutting me out of the business’.

This kind of behaviour may give rise to a legal claim under what is known as the Oppression Regime.

What is oppression of a minority shareholder?

In order for a claim for oppression to be successful, the conduct of the company must be more than simply an action which the shareholder disagrees with. Whilst there needs to be a lack of fair dealing, the conduct does not have to be illegal.

Some examples of oppression include:

• Excluding the minority shareholder from the affairs of the company
• A denial of information or
• Ensuring a legitimate corporate opportunity is given to themselves or an associate, instead of the company.

What will a Court order, if oppression is found?

If a Court finds that the oppression has occurred, it may order the following remedies:

• Forced Share Purchase. The majority shareholders may be ordered to buy out the minority shareholder. Valuation is typically based on what the shares would have been worth had the oppressive conduct not occurred.
• Winding up the Company. This is considered a last resort, but the Court may order the business to be wound up if no other remedy is appropriate.

What you need to Prove?

Success in an oppression claim relies heavily on two things:

1. The oppression – like with all cases, the more evidence you have the better and
2. The value of the shares – the value of the shares is often a highly contentious issue in these cases and good independent expert opinion is essential.

The Takeaway

Companies must conduct their affairs fairly and avoid behaviour that disadvantages minority shareholders. If they don’t, legal consequences can follow, and they can be significant.

If you’re a minority shareholder facing unfair treatment, don’t navigate this alone. The team at Madgwicks Lawyers have deep experience in Shareholder Oppression matters. Contact Catherine Ballantyne , Principal at Madgwicks Lawyers.

The information provided in this article is general in nature and cannot be relied on as legal advice, nor does it create an engagement. Please contact one our Lawyers listed above for advice about your specific situation.