Specific Problems with the Oppression Section

Abstract

There is no doubt that the oppression remedy contained in s.260 of the Corporations Law is a crucial weapon in the shareholder's armoury to correct perceived injustices carried out by the controllers of the company. The oppression section was introduced and amended to overcome the problems associated with the common law rule of Foss v. Harbottle,3 and in particular, to provide the minority shareholder an avenue to recover on behalf of the company. However, the section has created some difficulties of its own and it is the intention of this article to examine these. First, the definition of "affairs of the company" may not include the acts of nominee directors appointed to a subsidiary. This would be unusual considering the widespread use of corporate groups. The second problem that may occur is that it may be argued that a resolution of the general meeting is not an act by or on behalf of the company. If this is the case then the problems associated with the fraud on the minority exception to the rule in Foss v. Harbottle may not have been overcome. The third problem to be considered is whether conduct can be said to be unfairly prejudicial or unfairly discriminatory if it affects all members the same. Furthermore it is necessary to address the term "contrary to the interests of members as a whole", and consider whether this requires the conduct in question to be contrary to each and every member of the corporation. Discussion will also be made as to whether s.260 can be used where there is a specific statutory provision governing the conduct in question, or where members could have their claims in contract in tort.