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The rights of minority shareholders are frequently in conflict
with those of majority shareholders and directors. One case that
delves into this closely is Wilfred v Dare, 2018 which examines
the concept of reasonable expectation of liquidity and its
intersection with the law of oppression and corporations.
The case revolves around Carolyn Dare, a minority shareholder in
Serad Holdings Limited, a family-owned business. Carolyn argued
that her inability to sell her shares due to the lack of a
third-party market amounted to oppression, which raised questions
about the fair treatment of minority shareholders and the
responsibilities of those in control of the corporation.
The court’s analysis in Wilfred v Dare provides important
insights into the concept of reasonable expectation of liquidity.
It considered various factors, including the capital needs of the
family business and the lack of a third-party market for the
shares, Carolyn’s financial difficulties – which were not
caused by her brothers – and the fact that she had received
her interest in Serad Holdings Limited as a gift as part of an
estate freeze.
This demonstrates that the law of oppression requires courts to
balance the interests of minority shareholders with the legitimate
business interests of the corporation. While minority shareholders
are entitled to fair treatment and protection from oppressive
conduct, they must also consider the broader context of the
corporation’s operations and the impact of their actions on the
business as a whole.
Key Regulations
In this case, the court decided that simply not being able to
sell shares wasn’t enough to be considered oppression. To
understand why, it’s important to look at the basic principles
and how they apply in situations like this:
Reasonable Expectation of Liquidity: The court
evaluated whether Carolyn could reasonably expect to sell her
shares. This assessment considered factors like the company’s
financial needs, her understanding at the time she acquired the
shares, whether there were other ways for her to get value from her
shares, and how she got her shares in the first place.
Oppression and Fair Treatment: The law of
oppression aims to protect minority shareholders from unfair
treatment by the majority. The court must balance the rights of
minority shareholders with the company’s legitimate interests.
In the Wilfred case, the court emphasized that the oppression
remedy doesn’t entitle a shareholder to avoid restrictions on
the liquidity of their shares unless there is clear evidence of
unfair or oppressive behaviour.
Establishing Oppression: To prove oppression, a
shareholder must show that they have been treated unfairly or
ignored. This requires presenting evidence of a consistent pattern
of behaviour or actions that unfairly disadvantage the minority
shareholder.
These principles highlight the complexity of oppression claims
and the need for a thorough understanding of the facts and
circumstances of each case. They also emphasize the importance of
balancing the rights of minority shareholders with the legitimate
business interests of the corporation in applying the law of
oppression.
Successor cases, such as Noble v. North Halton Golf,
2018 and Corber v. Henry, 2023 reaffirmed the
findings in Wilfred v Dare. They emphasized that the
oppression remedy is not designed to relieve a minority shareholder
from the limited liquidity attached to their shares or to provide a
means of exiting the corporation, in the absence of any oppressive
or unfair conduct.
Individuals in a similar situation should be aware of these
principles. Understanding the aspects of liquidity expectations,
oppression, and fair treatment is crucial for protecting minority
shareholder rights and ensuring fair corporate governance
practices. When faced with issues related to reasonable
expectations of liquidity, seeking legal advice and understanding
one’s rights as a shareholder are essential steps in navigating
these complex legal matters.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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