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Minority Shareholders: Your protection from Oppression


How do you as a minority shareholder protect yourself from abuse of position by directors who were voted in by the majority shareholders?  You can’t vote them out of office, nor can you control voting at shareholder meetings.

Our law comes to your rescue here, allowing any shareholder or director to apply to court for relief against any conduct by a company, its directors or other controlling officers/entities, that is “oppressive” or “unfairly prejudicial”, or that “unfairly disregards” your interests. Note that the motive for the conduct in question is irrelevant – what counts is the effect that it has on other members.

And, if you succeed in proving such conduct, the court has wide discretionary powers to assist you.

A case in point

Thus in a case recently before the Supreme Court of Appeal, a minority shareholder alleged that two directors appointed by the majority were guilty of misconduct such as “breaches of fiduciary obligations, misappropriation and misuse of assets, misrepresentations, fraud, unauthorised use of company funds and denying [the minority shareholder] its entitlements as a shareholder”.

Despite denials by the directors, the Court came to the minority shareholder’s assistance by ordering the appointment of two independent directors (one a senior advocate, the other a senior auditor) to consider an investigation into these allegations.

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