Majority Oppression: Is It Even Possible?
We have been dealing with a lot of minority oppression cases/ issues in our previous articles. In this article, we will deal with the exact opposite, namely, whether the majority shareholders of a company can be oppressed/ bring an oppression suit.
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 company.
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 court:
“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. This question was raised and dealt with in Kumagai Gumi Co Ltd v Zenecon-Kumagai Sdn Bhd & Ors And Another Application, where 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.
In the case, the court noted that:
“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.”
Hopefully, this brief article provides an insight into the question posted above.
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