Oppression

Question 1

What does section 212 state?

Answer 1

A member may apply to the court for an order where the affairs of the company are being conducted, or powers of the directors are being exercised, in an oppressive manner or in disregard of the applicant member’s interests.

Question 2

What sort of discretion does the court have in granting a remedy?

Answer 2

The court has a wide discretion to bring an end to matters, but can only do so if there is a finding of oppression in the first instance (Re Kush Seafarms Ltd)

Question 3

What is “conduct relating to the affairs of the company” in relation to?

Answer 3

This refers to the general body of shareholders.

Question 4

What are “the powers of directors”?

Answer 4

Their authority pursuant to the constitution (Re Charles Kelly Ltd (No 2)).

Question 5

Who can make a s.212 application?

Answer 5

A member (shareholder who is on the register of members)

Question 6

Does a s.212 application only protect minority shareholders?

Answer 6

No (Re Claddagh Ring Ltd)

Question 7

Can a member who voluntarily agrees to transfer their shares seek a remedy under s.212?

Answer 7

No (Re Via Networks Ltd)

Question 8

What was set out in Re Juras Ltd?

Answer 8

Where a member has their shares compulsorily acquired or forfeited, but their name is still on the register, they may not be barred from an application under s.212.

Question 9

What sort of test will be applied in determining whether or not the affairs of the company are being conducted in an oppressive manner?

Answer 9

Objective judgment based on the facts.

Question 10

Can the restructuring of a group of companies amount to oppression?

Answer 10

Yes

Question 11

What happened in Re Emerald Group Holdings Ltd?

Answer 11

A member successfully petitioned the court on the basis that he was excluded from participating in the benefits of a new company which was fully owned by the respondents.

Question 12

Was bad faith a necessary element in Re Emerald Group?

Answer 12

No, oppression was found despite a lack of bad faith

Question 13

Can serious corporate mismanagement ground an application under s.212?

Answer 13

Yes. This is notwithstanding the fact that the courts are hesitant to interfere with the decision-making of the board of directors.

Question 14

What happened in Re CF Booth Ltd?

Answer 14

The directors began to enjoy substantial increases in their salaries.
This is despite the fact that the company had stopped paying dividends to shareholders.
The Court was satisfied that the remuneration packages did not withstand scrutiny under a commercial objectivity test.
The dividend policy was also found to be a breach of the directors’ duty to exercise their powers for a proper purpose.
The combined effect of both denied the petitioners a return on their investment.

Question 15

Can a s.212 remedy be made in any circumstances where no oppressive conduct exists?

Answer 15

Yes, it may still be used where a petitioner can demonstrate that the affairs of the company or powers of directors are being conducted in disregard of the members’ interests.

Question 16

Are the interests of the members concerned only with their legal rights?

Answer 16

No (Re Westwinds Holdings Co Ltd)

Question 16

Are oppression and a failure to regard members’ interests mutually exclusive?

Answer 16

No

Question 17

What happened in Re Willaims Group Tullamore Ltd?

Answer 17

The company’s constitution allowed for different voting and dividend policies depending on the class of shareholder.
The preference shareholders put forward a special resolution in order to rectify the imbalances.
Even though the correct procedures were followed, and the proposal was put forward in good faith, Barrington J held that the resolutions were in disregard of the members’ interests.
This case suggests that members’ interests can be disregarded in circumstances where there is a reasonable expectation that the status quo is maintained.

Question 18

What does s.212(3) state?

Answer 18

The court may, inter alia:
1. Direct or prohibit any act
2. Cancel or vary any transaction
3. Provide future regulation to the affairs of the company
4. Order the purchase of shares
5. Order the payment of compensation

Question 19

What are the courts trying to achieve in providing a remedy?

Answer 19

To bring an end to the matters complained of.

Question 20

What may the court decide if they make an order related to a member’s shares?

Answer 20

They may order that the company purchase the shares at the value they would have been had the oppressive conduct not occurred (Re Scottish Wholesale)

Question 21

What happened in Re New Ad Advertising Company?

Answer 21

The controlling shareholder and director essentially directed the assets and profits of the company to the benefit of other companies he controlled.
The company was worthless by the time of the proceedings.
The court ordered the director to buy the shares at the value they would have been if not for this diversion of assets.

Question 22

What happens if neither party can afford to purchase the shares?

Answer 22

The court may order the company to purchase them.

Question 23

Can the court order a director engaging in oppressive conduct to step down?

Answer 23

Yes (Re Charles Kelly Ltd (No 2))

Question 24

Can the court order an amendment to the Constitution?

Answer 24

Yes (s.212(5))

Question 25

Are there any circumstances where the court will not grant relief under s.212(3)?

Answer 25

Yes, where the matters complained of cannot be brought to an end (Re Murph’s Restaurant Ltd)

Question 26

What may the court do if the matters can not be brought to an end?

Answer 26

The court may order the winding up of the company, but this is a remedy under section 569(1)(f).