Minority Oppression in the context of Corporations Act (Cth) What constitutes oppressive conduct?

This article briefly examines the circumstances wherein the conduct of a majority shareholder or a director of a company can be considered oppressive and when it may not. The list is not meant to be exhaustive as every case turns on its own facts.

Where is the starting point?

Section 232 of the Corporations Act 2011 (Cth) defines oppressive conduct as conduct that is contrary to the interests of the shareholders as a whole. This means that the conduct should be examined as a whole within the context of the full circumstances of the particular case.

Oppressive conduct in a nutshell

The list can be wide, however, for the purposes of this article, any conduct, specifically, by a majority shareholder or a director of a company that is tainted with unfairness, harsh, unjust or inequitable is said to be oppressive.

Can I bring an oppression action against a company in liquidation?

The short answer is no unless the liquidator consents or the shareholder is able to persuade a court that leave should be granted for this action to take place.

What is the test for a conduct to be found oppressive?

The High Court of Australia has settled the test in Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459. The Court in that case directed that the conduct in question should be examined as a whole, within the context of the full circumstances of the case as opposed to being viewed in isolation.

What are the examples of oppressive conduct?

Again, the list is not exhaustive, however, the following can be considered oppressive conduct:

• Breach of fiduciary duties of directors;
• Improper diversion of a business to another entity;
• Appointment of an administrator against members when done for invalid or illegitimate purposes;
• Excessive remuneration; and
• Most importantly, denial of access to information when demanded by a shareholder of a company.

What may not amount to oppressive conduct?

Again, the list is not exhaustive, however, the following may not be considered oppressive conduct:

• Conduct which constituted genuine attempt to save the company; and
• When conduct undertaken or subject to complaint, has the consent of the applicant.

Take-home message

Bearing in mind the test set by the High Court, it is important that before forming any opinion on whether conduct is or is not oppressive, to seek our legal advice so as to minimise your risk and cost, where possible.

For advice or assistance with all business law matters contact the Business Law Team at Aylward Game Solicitors today at 1800 217 217

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Article Source: Oppressive conduct 

Director ID : The New Requirement for Company Directors in Australia

This article aims to analyze the recent decision of the Australian Securities & Investment Commission (ASIC) requiring all company directors in Australia to obtain a new director identification number (director ID).

What Is Director ID?

In short, it is a unique identifier given to a company director who has verified his/her identity with ASIC.

What is the main reason behind the director ID?

It is designed to prevent the use of false or fraudulent director identities/activities. Once the director’s ID gets recorded in a new database to be administered and operated by the Australian Taxation Office, it will further provide additional measures to trace and hold a director accountable for his/her directorship duties.

Who is required to apply and obtain the director ID?

The new requirement applies to all directors and acting directors who are registered in Australia under the Corporations Act 2001 (Cth), as well as registered foreign companies.

How this new requirement differs from the existing ones?

The law aims to prevent illegal activities by the company directors. Prior to introducing this new requirement, some company directors were able to take advantage of the corporate veil principle that would protect each director from personal accountability in the event their company fails to meet its legal and financial obligations. In this scenario and under the old regime, a director who had failed his/her duty in operating a legal, honest, transparent, and sound business, could have transferred the existing assets of the company on the edge of defaulting its obligation to a new company in order to continue trading and leaving the unpaid debt with the old company and if there was any legal action taken by the creditors, the directors would then shield themselves behind the corporate veil. The whole issue of transferring the assets to avoid liability by the old company to a new one is termed as illegal phoenix activity. However, with the new requirement now in place, it would make it very difficult for a company director who may be considering an act of phoenixing, to do so.

Is there a deadline to apply for a director ID?

The short answer is yes. Existing directors have until 30 November 2022 to apply while new directors appointed between 1 November 2021 and 4 April 2022 must apply within 28 days of their appointment. ASIC requires that as of 5 April 2022, intending directors to apply for director identities before being appointed.

Is it an offence not to apply for director ID?

The short answer is yes. Under the Corporations Act 2001 (Cth), failure to have a director ID when required is an offence. A director who applies for the director ID must also ensure that he/she is not applying for multiple director IDs and does not misrepresent when applying for the director ID.

👉👉 For advice or assistance with all corporate and commercial matters and the latest update contact the Corporate and Commercial Law Team at Aylward Game Solicitors today at 1800 217 217

Article Source: New Requirement for Company Directors in Australia