In this practice area
Disputes between shareholders, and between shareholders and the board, about control of the company, oppression, access to information and exit.
When shareholder disputes arise
Shareholder disputes are most common in private companies where the owners are also the directors and managers. A falling out over strategy, remuneration, dividends or a founder's role can quickly turn into a fight about control. Typical complaints include being removed from the board or from employment, being excluded from information, dilution through share issues, related party transactions, and the majority running the company for its own benefit.
Governance disputes also arise within boards, over the validity of meetings and resolutions, the appointment and removal of directors, and compliance with the company's constitution or a shareholders' agreement.
The legal framework
Under section 232 of the Corporations Act 2001 (Cth), a court may intervene where the conduct of a company's affairs, or an act, omission or resolution, is contrary to the interests of the members as a whole, or is oppressive to, unfairly prejudicial to, or unfairly discriminatory against a member. Section 233 gives the court wide powers, including ordering one party to buy out the other's shares, regulating the company's affairs, amending the constitution, appointing a receiver or winding the company up.
Other tools include the statutory derivative action under sections 236 and 237, which allows a member to bring proceedings on behalf of the company with the court's leave, and an application under section 247A for an order permitting inspection of the company's books. A court may also order a company wound up on the just and equitable ground under section 461(1)(k), for example where there has been a complete breakdown of trust in a quasi-partnership company. The rights set out in a shareholders' agreement, such as pre-emption, drag and tag rights, deadlock provisions and valuation mechanisms, often sit alongside these statutory remedies.
How these matters typically run
The early work is gathering the constitution, any shareholders' agreement, board minutes, financial statements and correspondence, and identifying what the client actually wants. For many minority shareholders, the realistic goal is a fair exit at a fair price. For majority holders, it is often stabilising the business and resolving the dispute without damaging it.
Urgent steps may be needed where a meeting has been called to remove directors, shares are about to be issued, or assets are being moved. Oppression proceedings are usually heard in the Supreme Court or the Federal Court. Valuation evidence from a forensic accountant is frequently central, and the valuation date and whether a minority discount applies can materially change the outcome.
How we act
We act for minority and majority shareholders, directors and companies. We look at the commercial end point first, then work out whether a negotiated buy-out, an application under the shareholders' agreement, or proceedings for oppression or winding up is the best way to get there.