216. Personal remedies in cases of oppression or injustice Flashcards
- Personal remedies in cases of oppression or injustice
General overview
[216.01] Although the will of the majority will prevail in a company, s 216 was enacted to enable minority shareholders to apply to the courts for relief in cases of abuse or potential abuse of majority power. Briefly, the court would grant relief where the majority’s exercise of power is oppressive or in disregard of the minority’s interest as members, or where some corporate act or resolution unfairly discriminates against or is otherwise prejudicial to the minority: s 216(1)(a) and (b). Any member or holder of a debenture is entitled to apply to the courts under s 216 for relief. This statutory relief is often used by members in a closely-held company than in a publicly listed company as most public shareholders will sell off their shares in the open market than commence a s 216 action. It is a personal right of the member that has been breached or infringed. On the other hand, if the company suffers loss of damage by virtue of the acts or conduct of the directors, the proper plaintiff is the company. A member may sue in the company’s name where the wrongdoers are in control of the board and would not take up legal action against themselves. This is called a derivative action, which may arise under common law (the exception to the rule in Foss v Harbottle (1843) 2 Hare 461 , Vice Chancellor’s Court) or under s 216A.
