Section 232 of the Corporations Act 2001 (Cth) is one of the most powerful tools available to shareholders who are being treated unfairly by those in control of a company. This article explains what the provision does, when it applies, and what outcomes shareholders can pursue.
What Does Section 232 Say?
Section 232 allows the Court to make an order where the conduct of a company’s affairs, or an actual or proposed act or omission by or on behalf of the company, or a resolution of members, is: (a) contrary to the interests of the members as a whole; or (b) oppressive to, unfairly prejudicial to, or unfairly discriminatory against a member — whether in their capacity as a member or in any other capacity.
This is a deliberately broad provision. Courts have applied it to a wide range of conduct and do not require a shareholder to establish all elements — any one of the grounds is sufficient.
Who Can Bring a Claim?
Under section 234, an application may be made by a member of the company, a person who has been removed from the register as a member, a person entitled to be registered as a member, or ASIC.
What Conduct Has Courts Found Oppressive?
- Removal of a shareholder from their role as director or employee contrary to a reasonable expectation of ongoing involvement
- Payment of excessive remuneration to majority shareholder-directors while paying no dividends to minority shareholders
- Issuance of shares to dilute a minority shareholder’s interest without legitimate commercial justification
- Diversion of company business or contracts to a related entity controlled by the majority
- Refusal to provide financial records or company information
- Exclusion from board meetings and decision-making
What Orders Can the Court Make?
If oppression is established, section 233 gives the Court an extremely wide discretion. Orders that have been made include: winding up the company, modifying the company’s constitution, regulating the company’s affairs, ordering a share purchase (buyout), appointing a receiver, and restraining specified conduct. In practice, the most common outcome sought is a buyout order — requiring one set of shareholders to purchase the other’s shares at a fair value determined by an independent expert.
How EAGLEGATE Can Help
Oppression claims require careful preparation. They must be well-pleaded, strongly evidenced and properly framed. EAGLEGATE advises shareholders on the merits of oppression claims early — saving time and cost — and pursues outcomes through negotiation or litigation in Brisbane and Queensland. Contact our team for a confidential consultation.