Minority oppression claims on the rise
A clear trend that we have seen in our business in the last few years is the prevalence of shareholder disputes. And in particular, minority oppression claims. The courts are busy and the litigation lawyers are rushed off their feet!
Whilst shareholder oppression claims are brought for myriad different reasons, the key circumstances where we see claims arise time and again are as follows:
- One shareholder is outperforming the other in his or her executive role. Disagreements arise, and the higher performer ends up bullying or oppressing the lower performer.
- One shareholder wants to buy the other out but has no contractual mechanism to allow him or her to do that. Disharmony ensues.
- Dysfunctional family businesses where deep-seated personal or family matters spill over into the Boardroom.
Indeed, the Courts are so busy with these claims that the Victorian Supreme Court has brought in a “fast track” procedure to deal with them more efficiently.
My conservative estimate is that our law firm Mills Oakley bills about 10 times more fees on shareholder disputes than it does for setting things up right in the first place! Great for the lawyers, but not so good for everyone else…
If you are a co-owner of a private business, please recognise that whilst this may bring many strengths, it may also bring some significant additional legal risks.
When you have a shareholders agreement in place, it doesn’t always kill the dispute stone dead. But a good shareholders agreement can certainly play a huge role in narrowing the issues and resolving matters with less pain and cost.