STATUTORY PROTECTION OF MINORITY

Question 1

1. Remedy of Oppression under S 346

Answer 1

Section 346(1)(a): Oppression Remedy

When can the court act?
-If company affairs are conducted oppressively.
-If company powers are used in a way that:
= Oppresses a member.
= Disregards the interests of members or debenture holders.

*Focuses on present and ongoing oppression or disregard of interests.

Answer 2

Section 346(1)(b): Additional Grounds for Remedy

When can the court provide a remedy?
-If an act of the company has been done or is threatened that:
= Unfairly discriminates against members or debenture holders.
= Is prejudicial to members or debenture holders.
-If a resolution (or proposed resolution) unfairly discriminates or is prejudicial.

*Addresses past or future acts of discrimination or prejudicial conduct.

Question 2

Who Can Take Personal Action Under S 346?

Answer 2

Plaintiffs:
-Members (listed in the company’s register).
-Debenture holders (creditors of the company)

Defendants:
-Directors who have the opportunity to oppress
-Employees authorized to act on the company’s behalf
-The company itself

Question 3

Grounds for Protection under S 346

Answer 3

-Oppression.
-Disregard of interest.
-Discrimination.
-Unfair prejudice

Question 4

OPPRESSION ?

Answer 4

When those in control act unfairly towards other shareholders, harming the company’s ability to function effectively

Question 5

CASES

Answer 5

1. Re HR Harmer Ltd

Situation:
The founder gave shares to his son, making the son the majority shareholder. However, the father still controlled the business, ignoring the wishes of other shareholders and refusing to comply with board resolutions.

Outcome:
The court found that the father’s autocratic behavior was oppressive, making it impossible for the company to operate effectively.

2. Re East West Promotion Pty Ltd

Situation:
Directors and shareholders, Cheetham and McCoy, decided to end their business relationship. McCoy later removed furniture, equipment, books, and stock from the company’s premises and started a competing business.

Outcome: The court held that McCoy’s conduct was oppressive under the equivalent of Section 181.

3. Re Kong Thai Sawmills (Miri) Sdn Bhd

Situation:
The company, held by six brothers, faced internal conflict. Sung, who owned 25% of the shares, brought action against his brothers, Siew and Siong, who together owned 63.5% of the shares. Siew was the chairman, and Siong was a director. Sung, a director, had left the board prior to the action.
Outcome:
This example highlights family-held company conflicts and the potential for oppressive behavior by majority shareholders.

Question 6

? AMOUNT TO ‘UNFAIRLY DISCRIMINATORY & PREJUDICIAL’ ?

Answer 6

Unfairly discriminatory and prejudicial actions are those by the majority or directors that harm the interests of minority shareholders, often by unfair practices or misuse of power.

Question 7

CASES

Answer 7

1.Re Gee Hoe Chan [1991]

Situation:
Directors paid themselves fees and salaries but did not declare dividends.
Outcome:
Court ruled this as unfairly prejudicial to other shareholders.

2. Sanford v Sanford Courier Service Pty Ltd

Situation:
Majority shareholders diverted company business to themselves, paid high salaries, and provided retirement benefits while refusing to pay dividends.
Outcome: Court allowed the minority to take action, ordering the majority to buy the minority’s shares.

Question 8

Remedies Under Section 346(2)

Answer 8

Possible Court Orders:
a) Direct or prohibit actions, cancel transactions or resolutions.
b) Regulate the future conduct of the company’s affairs.
c) Order the purchase of shares or debentures by other members or the company.
d) If the company buys shares, it may reduce share capital.
e) Order the company to be wound up.

Question 9

Derivative Action S 348(5)

Answer 9

Ensures seriousness by requiring court leave to discontinue, compromise, or settle once action is commenced.

Question 10

Injunctions (S 351)

Answer 10

Remedies for Conduct Against the Companies Act 2016:

Apply to Court: ROC or affected persons can apply.
Court Remedies:
Restrain the wrongdoer (S.351(1)).
Require the wrongdoer to do any act (S.351(1)).
Grant interim injunction pending decision (S.351(7)).
Order the wrongdoer to pay damages (S.351(9)).
Order only to pay damages (S.351(9)).

Question 11

Winding Up Petition (S 465(1)(H))

Answer 11

Statutory Remedy for Minority Shareholders:

Just and Equitable Grounds (Examples):

-Main object of the company has failed (Re German Date Coffee).
-Business carried out fraudulently (Re Thomas Edward Brinsmead & Sons Ltd).
-Deadlock in management (Re Yenidje Tobacco Co Ltd).
-Loss of confidence in management (Loch & Anor v John Blackwood Ltd).
-No bona fide intention to manage properly (Re London Country & Coal Co).
-Breakdown of mutual trust and confidence (Ebrahimi v Westbourne Galleries).
-Exclusion from management (Tay Book Choon v Tahansan Sdn Bhd).

Commencement Date of Winding Up by the Court:
S 467(2): Commencement is the date of the winding-up order.