Oppression remedy


In corporate law in Commonwealth countries, an oppression remedy is a statutory right available to oppressed shareholders. It empowers the shareholders to bring an action against the corporation in which they own shares when the conduct of the company has an effect that is oppressive, unfairly prejudicial, or unfairly disregards the interests of a shareholder. It was introduced in response to Foss v Harbottle, which had held that where a company's actions were ratified by a majority of the shareholders, the courts will not generally interfere.
It has been widely copied in companies legislation throughout the Commonwealth, including:
The Companies Ordinance of Hong Kong also contains similar provisions.

Introduction in the United Kingdom

An oppression remedy, intended to operate as an alternative to winding up a company, was adopted as s. 210 of the Companies Act 1948, which declared:
In the Companies Act 2006, the relevant provision is expressed in s. 994 :
Conduct that is considered to constitute "unfair prejudice" has been given a broad interpretation, which can include:
The conduct is not confined to a specific group. In Re HR Harmer Ltd, Jenkins LJ noted that the definition is "wide enough to cover oppression by anyone who is taking part in the conduct of the affairs of the company whether de facto or de jure." Therefore, it can cover the actions of:

Application in Canada

Provisions similar to s. 210 of the 1948 UK Act were first introduced into Canadian law through the 1975 passage of the Canada Business Corporations Act. It incorporated recommendations made in 1962 by the UK Jenkins Committee on Company Law for removing the linkage of the remedy with that of winding-up and for broadening its scope. Canadian legislation provides for a broad approach to the oppression remedy. In Peoples Department Stores Inc. v. Wise, the Supreme Court of Canada noted:
A "complainant" is deemed to be a current or former registered security holder, a current or former director or officer, the Director appointed under the CBCA, or "any other person who, in the discretion of a court, is a proper person to make an application under this Part." In that regard, it can include a creditor of the corporation, as well as a trustee appointed under the Bankruptcy and Insolvency Act or a monitor appointed under the Companies' Creditors Arrangement Act.
As in the United Kingdom, oppressive conduct is not restricted to that committed by corporations. In the case of corporate directors, the Supreme Court of Canada in 2017 held that they can be held personally liable for such conduct, but only where:
  1. the oppression remedy request is a fair way of dealing with the situation;
  2. any order made under s. 241 should go no further than necessary to rectify the oppression; and
  3. any such order may serve only to vindicate the reasonable expectations of security holders, creditors, directors or officers in their capacity as corporate stakeholders; but
  4. director liability cannot be a surrogate for other forms of statutory or common law relief, particularly where such other relief may be more fitting in the circumstances.
Applications to the Court have been successful where:
  1. there was lack of a valid corporate purpose for the transaction;
  2. the corporate and its controlling shareholders failed to take reasonable steps to simulate an arm's length transaction;
  3. there was lack of good faith on the part of the corporation's directors;
  4. there was discrimination among shareholders which benefited the majority to the exclusion of the minority;
  5. there was a lack of adequate and appropriate disclosure of material information to minority shareholders; and
  6. there was a plan to eliminate a minority shareholder.
The court's discretion is not unlimited, as the Court of Appeal of Newfoundland and Labrador observed in 2003:
Oppression claims are separate from derivative actions, but the two are not mutually exclusive. However, a derivative action claim can only be instituted by leave of the court, as it is brought by a complainant to sue on behalf of the corporation for a wrong done to the corporation, and any successful claim is binding on all shareholders. This is in contrast to the oppression remedy claim, where a complainant sues on behalf of himself for a wrong he suffers personally as a result of corporate conduct.

Application in Australia

S. 234 of the Corporations Act 2001 provides that the following can apply for an order seeking relief for oppressive conduct:
S. 232 states that the conduct of the company's affairs, an actual or proposed act or omission by or on behalf of a company, or a resolution or proposed resolution by all, or by a class, of the shareholders, must be:
in order for an application to be considered.
The oppression remedy, together with the option available for winding up a company and ASIC's use of the public interest ground in that regard, has received greater exposure and legal development since the onset of the global financial crisis.