How to resolve a minority shareholder oppression dispute

Published 14 Dec 2018

Maintaining good relationships between business stakeholders is key to working towards a cohesive strategic goal. No matter an individual's share in the enterprise, it's important that everyone has their say in how the business is run and other important long-term matters.

Unfortunately, minority shareholders can be left exposed to oppression from majority stakes in the business, which can leave individuals trapped in a business with no say on strategy and no way out.

Luckily, solicitors offer commercial dispute resolution services to help address this issue if it goes too far. Here's how you can resolve a minority shareholder oppression dispute.

What is minority shareholder oppression?

Most businesses have multiple stakeholders that democratically decide on broad-level strategic aims. Different professionals will hold varying share values, meaning individuals that own more shares have a greater say than others on important decisions. What this can lead to, especially when multiple majority shareholders band together, is key individuals controlling an entire business, leaving others with fewer shares unable to oppose decisions.

This behaviour, if left unchecked, traps individuals in a vicious cycle of having no say in how the business is run while being unable to sell their shares and leave.

Why does minority shareholder oppression happen?

Controlling stakes in a business gives majority shareholders power over every decision made from the top-down without having to pay for additional shares. This authority is difficult to achieve, so when this situation arises abusive individuals often try to retain this structure for as long as possible. This includes:

  • Ignoring minority shareholders' requests, especially in analysing financial accounts.
  • Preventing individuals from making decisions that contribute to the business' long-term goals.
  • Blocking minority shareholders from selling their business stake to other internal parties to introduce an opposing voice to the controlling majority.

By doing this, key individuals ensure they retain control over a business. This oppression often happens in family businesses, where fewer stakeholders make it more likely that a majority can band together and trap minority shareholders in a powerless position. 

How can minority shareholder oppression be resolved?

If you find yourself trapped as a minority shareholder with no say over how a business is changing, now is the time to act. Commercial dispute resolution solicitors will discuss your options and attempt to find a middle ground with majority shareholders. This means you can either sell your shares for a fair price or take the dispute to business court.

Malouf Solicitors has a team of commercial mediation experts to help you - reach out to us today!

Please call us on 02 8833 2000 to speak with a lawyer

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