Reflective Loss In Relation to Minority Oppression

We have assisted numerous client with minority oppression and shareholder dispute. Talk with our business lawyer today!


What is Reflective Loss?

Reflective loss is a principle in law that prevents a shareholder of a company from suing the company for the loss he suffered when the loss mirrors the loss sustained by the company (hence the term “reflective loss”) as a result.

In Johnson v Gore Wood1, the court held that the term reflective loss includes the diminution of the value of shares of a shareholder; loss of dividends, and all other payments which the shareholder might have obtained from the company if it had not been deprived of its funds.

Generally, the courts are reluctant to allow a claim premised on the concept of reflective loss. As noted by the court2:

But what he cannot do is to recover damages merely because the company in which he is interested has suffered damage. He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a ‘loss’ is merely a reflection of the loss suffered by the company. The shareholder does not suffer any personal loss. His only ‘loss’ is through the company, in the diminution in the value of the net assets of the company…

Why?

This is to prevent what the courts called “double recovery” i.e. where both the company and the shareholders of the company claim for loss against the wrongdoer. In Rinota Construction Sdn Bhd v Mascon Rinotas Sdn Bhd & Ors3, the court noted that:

“If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the Company and its creditors and other shareholders. Neither course can be permitted. This is a matter of principle; there is no discretion involved. Justice to the defendant requires the exclusion of one claim or the other; protection of the interests of the company‘s creditors requires that it is the company which is allowed to recover to the exclusion of the shareholder.”

What is minority oppression?

Minority oppression was defined in Re Kong Thai Sawmill (Miri) Sdn Bhd4 as conduct by the majority shareholders which visibly departs from the standards of fair dealing and a violation of the conditions of fair play against the minority shareholders5. In order to successfully raise a claim on minority oppression, the court held that:

  1. There must be identifiable conduct that is deemed to be unfair against the minority shareholder before that conduct is deemed to be oppressive against the minority; and
  2. The oppression must not be a past oppression i.e. it must be a present one that continued on to the day of the proceedings.

Therefore, a mere breakdown of a personal relationship between the shareholders stemming from the fact the majority of shareholders have breached their fiduciary duty is no considered a minority oppression6. The minority shareholder cannot raise minority oppression merely because he cannot see eye to eye with the majority shareholder.

Can minority shareholders claim for minority oppression under such circumstances?

No. Where the loss suffered by the minority shareholder is merely reflective of the loss suffered by the company, ‘the general rule is that the reflective loss is not recoverable by the minority, as the company is the proper plaintiff to bring an action against the wrongdoing controllers7.

What can be done then?

Essentially, under the “reflective loss” principle, a shareholder cannot sue to recover damages for themselves in relation to wrongs done to the company. This does not mean it is the end of the line for the shareholders who have been wronged- the court has propounded the theory that the proper course is to bring a derivative action on behalf of the company. However, this is a story for another day8.

Other previous articles you may interested:

  1. Remedies for Shareholder Dispute
  2. Oppression in a Family Company
  3. Does Failure to Distribute Dividends is Considered as Oppression?
  4. Does the Mismanagement of the Company Constitute an act of Oppression?
  5. Business Law Firm Malaysia
  6. Company Secretary Malaysia
  7. Company Registration Malaysia

We have assisted numerous client with minority oppression and shareholder dispute. Talk with our business lawyer today!


  1. [2002] 2 AC 1.

2. Prudential Assurance v Newman Industries No 2 [1982] Ch 204.

3. [2018] 1 MLJ 141.

4. [1978] 2 MLJ 227.

5. Elder v & Watson Ltd 1952 SC 49.

6. Pan-Pacific Construction Holdings Sdn Bhd v Ngiu-Kee Corporations (M) Bhd & Anor [2016] 6 CLJ 721.

7. Tai May Chean v New Way Capital Sdn Bhd & Anor [2019] MLJU 1561.

8. Lee Yee Wuen v Lee Kai Wuen & Ors [2020] MLJU 1902.