Oppression remedy

For the book, see The Oppression Remedy.

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In corporate law, an oppression remedy is a statutory right available to oppressed shareholders. It empowers the shareholders to bring an action against the corporation in which they own shares when the conduct of the company has an effect that is oppressive, unfairly prejudicial, or unfairly disregards the interests of a shareholder.

An oppression remedy was adopted by the UK Companies Act in 1948^[1] and was widely copied in the companies legislation of other Commonwealth countries. For example, there exists an oppression remedy in s. 241 of the Canada Business Corporations Act.^[2] The Australian Corporations Act 2001 also has an oppression remedy, which is found in s.232 with the orders possible found in s.233.

In Canada the Oppression Remedy is a powerful tool for rectifying situations in which a minority shareholder, director, or in some cases other stakeholder, has been treated in a manner which disregards its reasonable expectations beyond its legal rights. For example, if Director "A" and "B" transfer the assets of the Corporation "X" to Corporation "Y", effectively shutting out Director "C" from the decision making process - Director "A" and "B" can be held personally liable for any financial losses stemming from that transaction. If the corporation subsequently goes bankrupt, the personal assets of Director "A" and "B" can be seized as part of that judgment. Accordingly, this is a powerful tool for rectifying circumstances where directors and/or majority shareholders squeeze-out a minority shareholder, director, or other stakeholder in the business. Costs in many cases are awarded against the defendant on the highest scale - substantial indemnity basis. The risk of a costs award should have the effect of encouraging a rational defendant to make a reasonable settlement offer to the plaintiff at an early stage in the litigation, otherwise the defendant risks incurring significant costs being awarded against him or her at a later stage. In some cases, cost awards against defendants have been upwards of $100,000, in addition to the amount claimed by the plaintiff for the oppressive conduct.

References

1. ^ See currently s. 994 of the Companies Act 2006.
2. ^ See currently s. 241 of the Canada Business Corporations Act ( R.S. 1985, c. C-44 )