Week 7: Members’ Rights and Remedies in Corporate Law: Sections 232-236

What are members' remedies in corporate law?

Legal relief for unsatisfied members who are unfairly treated, often due to oppressive conduct.

What is the significance of members' remedies?

They provide legal options for members who do not manage or control company affairs and may face conflicting interests.

What does 'Wall Street walk' refer to?

The ability of a member in a publicly listed company to sell shares, especially when share value is down.

What is oppressive conduct according to s232?

Actions by majority shareholders that unfairly disadvantage minority shareholders.

What are the sources of members' remedies?

General law (contract law/equity principles), statutory enforcement of rights, and statutory remedies.

What is a statutory derivative action (SDA)?

A legal action allowing members to enforce the company's rights when the company is unwilling to do so.

What does the term 'fraud on the minority' mean?

Majority shareholders cannot use their voting power for improper purposes that harm minority shareholders.

What two-stage test is applied regarding amendments affecting property rights?

1) Was the amendment for a proper purpose? 2) Was it fair in all circumstances?

What does s140 state about company constitutions?

The constitution is treated as a statutory contract that members can enforce to protect their rights.

What is required for a member to obtain court permission for a statutory derivative action?

The member must prove that the company is unlikely to bring the action and that they are acting in good faith.

What must a member demonstrate regarding the best interests of the company in a statutory derivative action?

That the action is in the best interests of the company and that there are no other means of obtaining redress.

What does s237(3) presume about actions not in the company's best interests?

It presumes that actions are not in the company's best interests if directors acted in good faith and rationally believed in the benefit to the company.

What is the requirement for notice before applying for leave to bring a statutory derivative action?

A written notice of intention to apply for leave must be given to the company 14 days in advance.

What is the role of the majority in amending the constitution?

The majority must prove that any amendments are for a proper purpose and fair to minority shareholders.

What is the legal implication of a member's rights under the company constitution?

Members can only enforce the constitution to protect their rights as members, not in other capacities.

What is the importance of procedural and substantive fairness in amendments affecting shares?

Both fairness aspects are required to validate amendments that affect property rights of minority shareholders.

What is the purpose of a statutory injunction under Section 1324?

To order someone to stop doing something or to make them do something, with possible damages awarded.

Who has standing to seek an injunction under Section 1324?

ASIC or a 'person whose interests are affected.'

What are 'just and equitable grounds' for winding up a company according to Section 461?

Compulsory winding up of a solvent company by court order based on just and equitable grounds.

What is a justifiable lack of confidence in management?

Management conducted affairs in breach of the law

What does 'fraudulent or oppressive conduct' refer to in the context of minority oppression?

Conduct that is oppressive, unfairly prejudicial, or unfairly discriminatory towards minority shareholders.

What constitutes 'commercial unfairness' in minority oppression cases?

Conduct that is oppressive, unfairly prejudicial, or unfairly discriminatory, requiring an objective test of fairness.

What orders can a court make under Section 233 for breaches of Section 232?

To wind up the company, amend the company's constitution, or order the company to purchase the member's shares.

What is the common remedy sought for minority oppression?

Majority members purchasing the shares of the minority.

What indirect action can a member take other than going to court?

Filing a complaint with ASIC or ASX.

What is the role of class actions under the Corporations Act?

They allow members to collectively seek remedies for breaches of rights.