Need to consult with lawyer regarding majority oppression in company?
When we discuss oppression suits in company law, the first impression a lot of us have, including me, is that only the minorities in a company can be oppressed. This is, however, not the case in reality. In fact, majority shareholders can be oppressed as well. For example, whilst A is the majority shareholder of a company, B and C (the minorities) combined can have more voting power than that of A- B and C can actually gang up on A and conduct the companies’ affair in a way that is oppressive and detrimental to the company.
The above scenario is one of the many instances in which a majority shareholder can be oppressed. In light of the circumstances above, the question now becomes, can a majority shareholder raise an oppression suit against the minority shareholders?
What is oppression?
Oppression is an act whereby the action of the company (against their shareholders) departs from the standard of fair dealing and violates the conditions of fair play which a shareholder of the company is entitled to expect as a shareholder of the company1.
However, the courts usually do not intervene with how the company is being run unless there is a clear indication that the company shareholders are being oppressed by the company. As noted by the court2:
“Mismanagement of the company does not necessarily constitute oppression or disregard of a member’s interests. Nor, indeed, does the fact that a member is consistently outvoted mean that he is oppressed or that his interests are being disregarded. It should be remembered that the majority also has rights. Section 216 (the Singapore counterpart of Section 346 of our Companies Act) does not give jurisdiction to the court to interfere with the internal management of companies which are being managed honestly and in accordance with the law.”
So can the majority shareholders of the company raise oppression?
Yes, they can. In Kumagai Gumi Co Ltd v Zenecon-Kumagai Sdn Bhd & Ors And Another Application3, the court pointed out that nowhere in Section 181 (1) of the Companies Act 1965 (and currently Section 346 (1) of the Companies Act 2016) specifically put a label on who can/ cannot be oppressed. Infact, it clearly states “any member or debenture holder of a company may bring an oppression suit if the affairs of the company are being conducted or the powers of the directors are being exercised in an oppressive manner”. The court noted that4:
“That being so, for my part the section seems to admit no ambiguity. The word “oppression” is a word in common use and understanding in the English language. But I would just observe in passing that it does not say who complains of the act “of oppression”; it says “that the affairs of the company are being conducted in a manner oppressive …”. In other words, I think it invites attention, not to events considered in isolation, but to events considered as part of a consecutive story…But I must pause to dismiss, so far as I am concerned, the submission made by Mr Russell (leading counsel for the father before Roxburgh J) to the effect, as I understood it, that the nature of the oppression that the section requires could be in some way affected by the use of the word “minorities”. To start with, I can see no need to introduce any modification into the words of the statute, which seem to me to be sufficiently plain. Secondly, I do not think that the word “minorities” was intended to be introduced at that point. I think the point about the word “minorities” is that it is only where the voting control is elsewhere that a case for the application of the section arises.”
And so there you have it, hopefully, you have after reading this, you will have a little more insight on this issue.
Read our previous article:
- Reflective Loss In Relation to Minority Oppression
- Does Mismanagement of the Company Constitute an act of Oppression?
- Does Failure to Distribute Dividends is Considered as Oppression?
- Company Law 101: Oppression in a Family Company
Need to consult with lawyer regarding oppression suits in company law?
1. Section 346, Companies Act 2016.
2. Re Tong Eng Sdn Bhd (Loh Loon Keng, Petitioner)  1 MLJ 451.
3.  2 MLJ 789.
4. By relying on the judgement of Roxburgh J in Meyer v Scottish Co-operative Wholesale Society Ltd 1954 SC 381.