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Supreme Court rectifies share register to remedy oppression by minority shareholder

In the recent decision of In the matter of Crow Inn Pty Limited (No 2) [2020] NSWSC 1749, Rees J granted relief under s 233 of the Corporations Act 2001 (Cth) which included an order amending the company’s share register to record that the oppressed shareholder owned 70%, and the oppressor owned 30%, of the issued share capital. Luke Livingston appeared for the successful plaintiffs.

Justice Rees concluded that, in all the circumstances of the case, it was just and equitable that the minority shareholder return the 10% shares in the company which were transferred to him under a Shareholders Agreement which he had rejected. The Court was satisfied that it was oppressive for the minority shareholder to seek to retain all the benefits conferred by that Agreement while disavowing the burden of it.

The Court concluded that s 233 of the Corporations Act was a more appropriate source of power to amend the share register than s 175. The latter provision does not confer jurisdiction on the Court to rectify the register, but assumes the Court’s general equitable powers to do so. The Court observed that this power to rectify the register is discretionary; the applicant must show a personal equity for the Court to protect, such as where a person’s name is wrongly omitted from the register or a register incorrectly records the number of shares attributed to a person.

Her Honour concluded that the case at hand did not sit easily with the authorities construing s 175. In Crow Inn, the share register was sought to be corrected on the basis that the shares were validly transferred to the minority shareholder in 2015 on conditions specified in the Shareholders Agreements which that shareholder had since rejected and, at the time of rejection, had only partly performed. In those circumstances, the remedy of rectification of the share register was properly sourced in s 233, so as to remove the oppression in the least obtrusive way and to regulate the company’s affairs in the future, such that there would be no further oppression or unfair conduct.

The case is notable also as a recent illustration that, although comparatively rare, it is possible for a minority shareholder to oppress a majority shareholder. Here, the oppression took the form of a minority shareholder with operational control excluding the majority shareholder from management and obstructing efforts by the majority shareholder to remove his capital on reasonable terms.

A copy of the judgment can be found here.

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