Protection for Minorities

Part 4 – Corporate Governance

Remedy in case of oppression

“A Section 212” will be the new shorthand for applications relating to Oppression and Disregard of Interests.

There is only one new element in this area: now the courts are empowered by statute to award compensation. This was not allowed under the old Section 205, but in practice it was done. The courts would inflate the price of the oppressed shareholder’s shares when ordering the oppressing party to buy them, thus giving an uplift that stood as compensation. Now compensation is provided for in Section 212(3)(d).

Briefly, the important points to bear in mind are:

  1. Only members can seek relief.
  2. But if the petitioner complains of oppression, she may be a director or a creditor.
  3. The petitioner need not be a minority shareholder.
  4. The Courts take each case on its own facts, rather than applying any formulae mechanistically.
  5. If a wrong has been done to the company, the correct approach is to take a derivative action in the name of the company.
  6. A single act of oppression may be enough to ground a petition under Section 212.
  7. The Courts have defined oppression as conduct that is “burdensome, harsh and wrongful”.
  8. Just because an act was done in good faith does not mean it was not oppressive.