Shareholder disputes commonly arise when there are disagreements between shareholders, company directors or officers regarding the management of a company, shareholders’ rights, company finances or the direction of the business.
These disputes can significantly impact the operation and value of a company if the matters are not appropriately and strategically addressed.
You should seek legal advice when concerns arise, particularly where there are allegations of:
If one of these issues apply to you, early intervention can often assist to preserve the commercial relationship and avoid lengthy litigation.
Your rights as a shareholder differ depending on whether the company is public or private.
In general, shareholders have the right to:
For public companies:
For private companies:
Breach of Directors’ Duties
Directors owe a range of statutory and fiduciary duties to the company and its shareholders under the Corporations Act 2001 (Cth).
The relevant provisions are sections 180-183 which impose duties on directors’ and officers’, such as the:
Further, in certain circumstances, breaches of the duty to act in good faith and for a proper purpose that arises out of recklessness or dishonesty can result in criminal liability (see section 184 of the Corporations Act 2001 (Cth)).
See Corporate Governance Lawyers for more information.
Oppressive Conduct Claims
A shareholder can initiate proceedings when there has been oppressive, unfairly prejudicial or unfairly discriminatory conduct against a member or members of the company.
Under section 232 of the Corporations Act 2001 (Cth), shareholders can apply to the Court where there has been conduct of a company’s affair that is:
Examples of matters where oppressive conduct may be present include:
There are remedies available to shareholders under section 233 of the Corporations Act 2001 (Cth), for example:
Legal proceedings can be brought on behalf of the company for the purpose of taking responsibility, known as a derivative action. An application can be made in accordance with section 237 to commence proceedings under section 236 on behalf of the company, which must be granted leave by the Court. The process is referred to as a Statutory Derivative Action which is the mechanism whereby persons can sue on a company’s behalf. A derivative action is used when a company is failing to take action against a legal claim that is available to them. Should this occur, shareholders and select officers can seek permission from the court to bring proceedings on behalf of the company.
As previously mentioned, a claim brought under section 232 of the Corporations Act 2001 (Cth) has remedies available under section 233.
Further, under section 1324 of the Corporations Act 2001 (Cth), the Court can grant an injunction on the terms that it deems appropriate.
Injunctions are commonly sought in order to:
In order to minimise disputes that arise between shareholders and the company, it can be beneficial to introduce a shareholders’ agreement, which:
Citilawyers understands the commercial and personal complexities that often arise within shareholder disputes. Our team provides strategic and practical advice that is aimed at protecting your interests.
We advise shareholders, directors and companies in relation to:
Whether you are seeking to protect your rights as a shareholder or respond to allegations made against you, Citilawyers can assist you through every stage. Contact us online or call (02) 9233 7737.
Shareholder disputes commonly arise when there are disagreements between shareholders, company directors or officers regarding the management of a company, shareholders’ rights, company finances or the direction of the business.
These disputes can significantly impact the operation and value of a company if the matters are not appropriately and strategically addressed.
You should seek legal advice when concerns arise, particularly where there are allegations of:
If one of these issues apply to you, early intervention can often assist to preserve the commercial relationship and avoid lengthy litigation.
Your rights as a shareholder differ depending on whether the company is public or private.
In general, shareholders have the right to:
For public companies:
For private companies:
Breach of Directors’ Duties
Directors owe a range of statutory and fiduciary duties to the company and its shareholders under the Corporations Act 2001 (Cth).
The relevant provisions are sections 180-183 which impose duties on directors’ and officers’, such as the:
Further, in certain circumstances, breaches of the duty to act in good faith and for a proper purpose that arises out of recklessness or dishonesty can result in criminal liability (see section 184 of the Corporations Act 2001 (Cth)).
See Corporate Governance Lawyers for more information.
Oppressive Conduct Claims
A shareholder can initiate proceedings when there has been oppressive, unfairly prejudicial or unfairly discriminatory conduct against a member or members of the company.
Under section 232 of the Corporations Act 2001 (Cth), shareholders can apply to the Court where there has been conduct of a company’s affair that is:
Examples of matters where oppressive conduct may be present include:
There are remedies available to shareholders under section 233 of the Corporations Act 2001 (Cth), for example:
Legal proceedings can be brought on behalf of the company for the purpose of taking responsibility, known as a derivative action. An application can be made in accordance with section 237 to commence proceedings under section 236 on behalf of the company, which must be granted leave by the Court. The process is referred to as a Statutory Derivative Action which is the mechanism whereby persons can sue on a company’s behalf. A derivative action is used when a company is failing to take action against a legal claim that is available to them. Should this occur, shareholders and select officers can seek permission from the court to bring proceedings on behalf of the company.
As previously mentioned, a claim brought under section 232 of the Corporations Act 2001 (Cth) has remedies available under section 233.
Further, under section 1324 of the Corporations Act 2001 (Cth), the Court can grant an injunction on the terms that it deems appropriate.
Injunctions are commonly sought in order to:
In order to minimise disputes that arise between shareholders and the company, it can be beneficial to introduce a shareholders’ agreement, which:
Citilawyers understands the commercial and personal complexities that often arise within shareholder disputes. Our team provides strategic and practical advice that is aimed at protecting your interests.
We advise shareholders, directors and companies in relation to:
Whether you are seeking to protect your rights as a shareholder or respond to allegations made against you, Citilawyers can assist you through every stage. Contact us online or call (02) 9233 7737.
Not necessarily. Under certain circumstances, a shareholder can be forced to sell their shares. Without a shareholders’ agreement in place, it is very difficult to force a shareholder to sell or transfer their shares.
Without shareholders’ agreement:
Where there has been a dispute, litigious options exist that can result in a shareholder being forced to sell their shares by way of a court order. The Court may deem the buy out of the shares to be the most appropriate remedy available.
With shareholders’ agreement:
Where there is a shareholders’ agreement in place it can become easier to force a shareholder to sell their shares depending on the provisions in the agreement. Circumstances can arise where a shareholder may need to sell or transfer their shares, including:
a) Drag along provisions: occur when the majority shareholders want to force the minority shareholders to sell their shares. Generally, a drag along provision will arise during the sale of a company when the purchaser wants 100% control over the company. Often, the majority shareholders will exercise their discretion to utilise this provision when the minority shareholders attempt to block the sale.
b) Events of Default Provision: An event of default provision is effected when a shareholder commits an event that triggers a default. An event can include a material breach of the shareholders’ agreement. If a default has occurred, a company may be able to force the defaulting shareholder to sell or transfer their shares.
Minority shareholders hold a variety of rights, such as the right to be heard at company meetings and to have access to information. Remedies are available if issues arise. Further, under section 247A, if a shareholder is refused access to information following a request, they can make an application to the court to inspect the company’s books. The application must be made in good faith and for a proper purpose.
Oppression rests on whether the alleged conduct is unfair, harsh, unjust or inequitable. The test for oppression is objective and considers whether in the eyes of a commercial bystander, the conduct is so unfair that it goes against what a reasonable director in the circumstance would have decided. When assessing oppressive conduct, consideration is made towards whether the decision was performed in good faith and with the relevant knowledge and skills.
