Shareholder Remedies, Disclosure and External Administration - Article Example

The Corporations Act 2001 gives reprieve to such aggrieved shareholders. This paper discusses these remedies with specific reference to George’s situation.

Issues

• Does John’s domination during board meetings breach the provisions of the Corporations Act 2001?
• What solution does the law provide in situations where a board member’s opinions are always ignored or downplayed?
• What is the legal effect of excluding a board member during crucial board meetings where strategies and policies are passed?
• What remedies are available to an aggrieved shareholder?

Application

In situations where shareholders are not contented with the actions of directors or where they feel that their rights have been violated, the Corporations Act 2001 provides several remedies available to such shareholders. These remedies are generally geared towards safeguarding the interests of all shareholders within a corporation or company. Generally, directors ought to manage the affairs of a corporation in such a manner as to protect the interests of all stakeholders. In the current scenario, John and Paul seem to be working together in a bid to frustrate George perhaps because together their shareholding capacity exceeds George’s. Some of the remedies available to George therefore include; derivative action, the oppression remedy, winding up, and statutory injunction.

The oppression remedy, as it is commonly referred to, is a remedy available to George under section 232 of the Corporations Act 2001. The law dealing with this remedy is provided for under part 2F.1 which comprises sections 232 to 235. This remedy is commonly used in the case of oppressed minority shareholders. Situations of oppression may include; diversion of business to another business, unlawful payment of excess remuneration to other shareholders, failure to prosecute an action, unfair issue of shares, improper exclusion from participating in the management of a company, denying a shareholder access to information, oppressive conduct at board meetings and misuse of company funds.

Section 232 outlines situations that qualify to be classified as amounting to oppression. An action is considered oppressive if the company conducts its affairs in such an oppressive manner, not in line with shareholders’ interest, is not fair, and in a manner that discriminates. Generally, oppression occurs when power and control are used unfairly to deny a shareholder his rights simply because his shares comprise the minority. Actions are sometimes found to be oppressive even though done lawfully. This happens when such actions result in an unfair disadvantage for shareholders, especially to a level that is not commercially reasonable at all (Hofmann, 2013). Such actions include; issuing of shares with the intention of over-shadowing other shareholders, excess payment to directors and failure to pay dividends without justification, usurping meetings of the company to lock out minority shareholders, unfair use of funds to benefit some and not all shareholders, and exclusion of a shareholder (or representative) from the management and decision-making structures of the company.