Within a company there are many areas of potential disagreement among members. As the range of potential disagreement is very broad, so also is the scope for exploitation and abuse of minority...

Minority shareholders, as the term itself implies, are those shareholders who hold minority
stake in a company. These shareholders do not have any say in day-to-day running of the
company. The majority shareholder or shareholders enjoy effective control over the
company. The company, though a legal person, needs someone to ca
y on its business and
for taking decisions for and on behalf of the company. Since a company is an association of
persons, the law provided for simple majority rule for running the affairs of the company.
However, this rule is susceptible to misuse. (Tomasic,, 2002) As William J. Carney wrote, “But
the creation of power in the majority to effect such changes also created the power to squeeze
out the minority through self-dealing.” The plight of the minority shareholders was described
in Humphrys vs Winous Co., 165 OHIO St. 45,50,133 N.E. 2d 780, 783(1956) in these words,
“there are 51 shares,” said he, “that are worth $250,000. There are 49 shares that are not
worth a __.” These words reflect the irony where the difference of mere 2 % leads to erosion
of value by even 98 %. (Comaster law firm)This is also the reason as to why the controlling
stake in a company commands a premium that is to say that, a buyer is willing to pay a
premium for requiring the shares which enjoy controlling stakes in a company. (Cassidy,
2006)It is said that power co
upts and absolute power co
upts absolutely. The person or the
group of persons enjoying control over the company by way of their majority share holding
tend to act in a way beneficial to a person or the group of persons. Many a time it goes
against the interest of the remaining shareholders collectively refe
ed to as the minority
shareholders. These shareholders may be excluded from active participation in the
management of the company. They do not find any place in the board of the directors or even
in various committees constituted to run the affairs of the company in an orderly and smooth
manner. For example, the majority may decide to purchase its inputs or input services from
another company at much higher than prevailing market prices from another company where
controlling stake is held by them or their associates. This may result in transfer of funds from
one company to another resulting in lower profits and subsequently lower dividends for the
shareholders whereas the notional losses accruing to the majority is offset by the gains made
y their associate company. The law recognises the plight of minority shareholders and
provisions have been made in the Corporations Act 2001 for protection of the rights of the
minority shareholders. Part 2F.1 of the Act ibid, contains the provisions, also known as the
oppression remedy, which allow for various types of reliefs that can be ordered by a court on
the grounds of oppression or unfairness. Going back in history, in 1945, the United Kingdom
Board of Trade Committee or the Cohen committee recommended giving the courts
discretionary power to make orders against the oppression of minority shareholders. (Cassidy,
2006)As such, in 1948 (Abduljammi) an oppression provision was introduced in the United
Kingdom companies’ legislation which was later on adopted by Australia in the form of
Section 186 of the Uniform Companies Act. Tracing its journey, this provision was re-
enacted in section 320 of the company’s code. It was renumbered as Section 260 in the
Corporations Law introduced in 1991 which was amended in 1998 as Section 246AA. In
1999, it was introduced in its present avatar as Sections 232 to 235. Section 232 specifies the
grounds which can be invoked for obtaining an order from the court. In plain words, an
application can be made seeking an order concerning the conduct of its affairs or the actual or
proposed act or omission by or on behalf of the company or a resolution made or proposed to
e made by the members or a class of members. (Comaster law firm) However, the person who
approaches the court will have to prove that the occu
ence or the proposal is either contrary
to the interests of the members or is oppressive to or unfairly...