Just like friends and family members, business owners don’t always agree on everything. Most of the time we can have a discussion and map a logical way through the confusion, but sometimes one of the parties to the conversation (or perhaps it’s because they aren’t invited to the conversations) feels that they are being treated unfairly or squeezed out of the business.
Examples of how this might arise include if the majority of directors hold meetings regularly at times when they know one member is not available. Or perhaps a director is being prevented from accessing critical information or isn’t being given a fair say.
There are always 2 sides to the story
It is important for directors to know what is required of them. At a minimum, directors must keep in mind that they owe obligations to the shareholders as a group and have a duty not to behave in a way that is unfairly prejudicial to a shareholder. Business leaders should ensure they are familiar with the role they are required to play, and seek clarification when in doubt.
On the other side of the coin, a shareholder who feels that they are in the minority and are being oppressed or squeezed may have a way out or through the dispute. It is critical to obtain advice on options before things get out of hand.
Options for relief
There are normally a few alternatives available for members of a company who feel they are being prejudiced.
- If there is a Shareholders Agreement (or Unitholders Agreement or Partnership Agreement, depending on structure) then there might be some prescribed processes to follow for a breach of Shareholders Agreements. If there is not an agreement in place between the owners, you should arrange one!
- All directors and trustees must act properly and in the best interests of the shareholders or beneficiaries as a whole, without favouritism or exclusion. A shareholder or beneficiary might have a reason to complain and seek relief if there has been a breach of these duties.
- Further, the Corporations Act provides additional options for shareholders who feel detrimentally treated – this is called “Shareholder Oppression”. Claims for Oppression are managed through a special list in the Supreme Court designed to strip the dispute down to its bones as early as possible and to try and mediate a negotiated solution. It’s a relatively cheap and efficient way of dealing with it and usually doesn’t reach a trial.
We have represented parties who have been oppressed by their colleagues and those who have been accused of doing the oppressing. Whichever side of the fence, call us to understand your position.
Nevett Ford’s Corporate Lawyers in Melbourne has extensive experience in advising on corporate governance best practice and is able to assist clients to resolve the various types of disputes and disagreements that can happen along the journey. It is best to know your rights and obligations under the Corporations Act and any relevant Agreements as soon as possible before any festering discontent gets out of hand. For further information or assistance, please contact us at firstname.lastname@example.org or call us on 03 9614 7111.