Shareholder’s Liability in case of Fraud Committed by Executives in India

Shareholder’s Liability for the act of Fraud: Section 339 to be read with Section 447
of the Companies Act

Statutory Provisions:

339. Liability for fraudulent conduct of business.—(1) If in the course of the

winding up of a company, it appears that any business of the company has been carried
on with intent to defraud creditors of the company or any other persons or for any
fraudulent purpose, the Tribunal, on the application of the Official Liquidator, or the
Company Liquidator or any creditor or contributory of the company, may, if it thinks
it proper so to do, declare that any person, who is or has been a director, manager, or
officer of the company or any persons who were knowingly parties to the carrying on
of the business in the manner aforesaid shall be personally responsible, without any
limitation of liability, for all or any of the debts or other liabilities of the company as
the Tribunal may direct: Provided that on the hearing of an application under this sub-
section, the Official Liquidator or the Company Liquidator, as the case may be, may
himself give evidence or call witnesses.
(2) Where the Tribunal makes any such declaration, it may give such further directions
as it thinks proper for the purpose of giving effect to that declaration and, in
particular,—
(a) make provision for making the liability of any such person under the
declaration a charge on any debt or obligation due from the company to him, or
on any mortgage or charge or any interest in any mortgage or charge on any
assets of the company held by or vested in him, or any person on his behalf, or
any person claiming as assignee from or through the person liable or any person
acting on his behalf;
(b) make such further order as may be necessary for the purpose of enforcing
any charge imposed under this sub-section.
(3) Where any business of a company is carried on with such intent or for such purpose
as is mentioned in sub-section (1), every person who was knowingly a party to the
carrying on of the business in the manner aforesaid, shall be liable for action under
section 447.
(4) This section shall apply, notwithstanding that the person concerned may be
punishable under any other law for the time being in force in respect of the matters on
the ground of which the declaration is to be made.
Explanation.—For the purposes of this section,—
(a) the expression “assignee” includes any person to whom or in whose favour,
by the directions of the person liable, the debt, obligation, mortgage or charge
was created, issued or transferred or the interest was created, but does not include
an assignee for valuable consideration, not including consideration by way of
marriage, given in good faith and without notice of any of the matters on the
ground of which the declaration is made;
(b) the expression “officer” includes any person in accordance with whose
directions or instructions the directors of the company have been accustomed to
act.

Section 447 of the Companies Act provides for punishment for fraud.

447. Punishment for fraud.—Without prejudice to any liability including repayment

of any debt under this Actor any other law for the time being in force, any person who
is found to be guilty of fraud, involving an amount of at least ten lakh rupees or one
per cent. of the turnover of the company, whichever is lower shall be punishable with
imprisonment for a term which shall not be less than six months but which may extend
to ten years and shall also be liable to fine which shall not be less than the amount
involved in the fraud, but which may extend to three times the amount involved in the
fraud:
Provided that where the fraud in question involves public interest, the term of
imprisonment shall not be less than three years.
Provided further that where the fraud involves an amount less than ten lakh
rupees or one per cent. of the turnover of the company, whichever is lower, and
does not involve public interest, any person guilty of such fraud shall be
punishable with imprisonment for a term which may extend to five years or with
fine which may extend to fifty lakh rupees or with both.
Explanation.—For the purposes of this section—
(i) “fraud”, in relation to affairs of a company or any body corporate, includes any act,
omission, concealment of any fact or abuse of position committed by any person or
any other person with the connivance in any manner, with intent to deceive, to gain
undue advantage from, or to injure the interests of, the company or its shareholders or
its creditors or any other person, whether or not there is any wrongful gain or wrongful
loss;
(ii) “wrongful gain” means the gain by unlawful means of property to which the
person gaining is not legally entitled;
(iii) “wrongful loss” means the loss by unlawful means of property to which the person
losing is legally entitled.

Argument for Oppression and Mismanagement

1. Section 241 of the Companies Act provides for the remedy of oppression and
mismanagement, which the co-founder can claim against the other founder.
2. As per the facts, the co-founder is the minority shareholder and oppression and
mismanagement under Section 241 is a remedy that can be claimed against the
majority shareholder, i.e., the other founder.
3. For the purposes of proving the case of oppression and mismanagement, we
need to fit the facts of our case within the grounds given in cases below and
statutory provisions, considering that it is a fact-based determination.

241. Application to Tribunal for relief in cases of oppression, etc.—(1) Any

member of a company who complains that—
(a) the affairs of the company have been or are being conducted in a manner
prejudicial to public interest or in a manner prejudicial or oppressive to him or
any other member or members or in a manner prejudicial to the interests of the
company; or
(b) the material change, not being a change brought about by, or in the interests
of, any creditors, including debenture holders or any class of shareholders of the
company, has taken place in the management or control of the company,
whether by an alteration in the Board of Directors, or manager, or in the
ownership of the company’s shares, or if it has no share capital, in its
membership, or in any other manner whatsoever, and that by reason of such
change, it is likely that the affairs of the company will be conducted in a manner
prejudicial to its interests or its members or any class of members, may apply to
the Tribunal, provided such member has a right to apply under section 244, for
an order under this Chapter.
(2) The Central Government, if it is of the opinion that the affairs of the company are
being conducted in a manner prejudicial to public interest, it may itself apply to the
Tribunal for an order under this Chapter.
Provided that the applicants under this sub-section, in respect of such company
or class of companies, as may be prescribed, shall be made before the Principal
Bench of the Tribunal which shall be dealt with by such Bench.
(3) Where in the opinion of the Central Government there exist circumstances
suggesting that—
(a) any person concerned in the conduct and management of the affairs of a
company is or has been in connection therewith guilty of fraud, misfeasance,
persistent negligence or default in carrying out his obligations and functions
under the law or of breach of trust; (b) the business of a company is not or has
not been conducted and managed by such person in accordance with sound
business principle or prudent commercial practices;
(c) a company is or has been conducted and managed by such person in a manner
which likely to cause, or has caused, serious injury or damage to the interest of
the trade, industry or business to which such company pertains; or
(d) the business of a company is or has been conducted and managed by such
person with intent to default its creditors, members or any other person or
otherwise for a fraudulent or unlawful purpose or in a manner prejudicial to
public interest, the Central Government may intiate a case against such person
and refer the same to the Tribunal with a request that the Tribunal may inquire
into the case and record a decision as to whether or not such person is a fit and
proper person to hold the officer of director or any other office connected with
the conduct and management of any company.
(4) The person against whom a case is referred to the Tribunal under sub-section (3),
shall be jointed as a respondent to the application.
(5) Every application under sub-section (3)—
(a) shall contain a concise statement of such circumstances and materials as the
Central Government may consider necessary for the purpose of the inquiry; and
(b) shall be signed and verified in the manner laid down in the Code of Civil
Procedure (5 of 1908), for the signature and verification of a plaint in a suit by
the Central Government.

Cases
1. V.S. Krishnan v. Westfort Hi-tech Hospital Ltd (2008) 3 SCC 363 at para.
10- Oppression would be made out:
(a)Where the conduct is harsh, burdensome and wrong.
(b) Where the conduct is mala fide and is for a collateral purpose where although
the ultimate objective may be in the interest of the company, the immediate
purpose would result in an advantage for some shareholders vis-à-vis the others.
(c) The action is against probity and good conduct.
(d) The oppressive act complained of may be fully permissible under law but may
yet be oppressive and, therefore, the test as to whether an action is oppressive or
not is not based on whether it is legally permissible or not since even if legally
permissible, if the action is otherwise against probity, good conduct or is
burdensome, harsh or wrong or is mala fide or for a collateral purpose, it would
amount to oppression under Sections 397 and 398.
(e) Once conduct is found to be oppressive under Sections 397 and 398, the
discretionary power given to the Company Law Board under Section 402 to set
right, remedy or put an end to such oppression is very wide.
(f) As to what are the facts which would give rise to or constitute oppression is
basically a question of fact and, therefore, whether an act is oppressive or not is
fundamentally/basically a question of fact.

1. Many Courts have applied these guidelines verbatim: Ram Parshottam Mittal
v. Hotel Queen Road Pvt. Ltd., (2019) 215 Comp. Cas. 163 (SC) at para. 70;
Suresh Kumar Jalan v. Eastcoast Steel Limited, (2019) 6 MLJ 676 (Mad) at
para. 12.

2. Sangramsinh P. Gaekwad & Ors vs Shantadevi P. Gaekwad

(Dead)Thr.Lrs. &Ors. AIR 2005 SC 809- In this case, it was observed that
deciding oppression cases is a fact-based determination, and the Supreme Court
interpreted the liability of oppression under Section 397 of the Companies Act,
1956. It was also held that the court, before arriving at the conclusion for
oppression, must decide whether it would be just and equitable to order of
winding up of the company
“The jurisdiction of the Court to grant appropriate relief under Section 397 of the
Companies Act indisputably is of wide amplitude. It is also beyond any controversy
that the court while exercising its discretion is not bound by the terms contained in
Section 402 of the Companies Act if in a particular fact situation a further relief or
reliefs, as the court may seem fit and proper, is warranted. (See Bennet Coleman &
Co. Vs. Union of India and Others [(1977) 47 Comp. Cases 92] and Syed Mahomed
Ali Vs. R. Sundaramurthy and others [AIR 1958 Madras 587] But the same would
not mean that Section 397 provides for a remedy for every act of omission or commission
on the part of the Board of Directors. Reliefs must be granted having regard to the
exigencies of the situation and the court must arrive at a conclusion upon analyzing the
materials brought on records that the affairs of the company were such that it would be
just and equitable to order winding up thereof and that the majority acting through the
Board of Directors by reason of abusing their dominant position had oppressed the
minority shareholders. The conduct, thus, complained of must be such so as to oppress
a minority of the members including the petitioners vis-à-vis the shareholders which a
fortiorari must be an act of the majority. Furthermore, the fact situation obtaining in
the case must enable the court to invoke just and equitable rules even if a case has been
made out for winding up for passing an order of winding of the company but such
winding up order would be unfair to the minority members.

The interest of the company vis-`-vis the shareholders must be uppermost in the mind of
the court while granting a relief under the aforementioned provisions of the Companies
Act, 1956.

Mala fide, improper motive, and similar other allegations are trite and must be pleaded
and proved as envisaged in the Code of Civil Procedure. Acts of mala fide are required
to be pleaded with full particulars so as to obtain an appropriate relief.

The remedy under Section 397 of the Companies Act is not an ordinary one. The acts
of oppression must be harsh and wrongful. An isolated incident may not be enough for
grant of relief and continuous course of oppressive conduct on the part of the majority
shareholders is, thus, necessary to be proved. The acts complained of may either be
designed to secure pecuniary advantage to the detriment of the oppressors or wrongful
usurpation of authority.

It has to be borne in mind that when a complaint is made as regard violation of statutory
or contractual right, the shareholder may initiate a proceeding in a civil court but a
 proceeding under Section 397 of the Act would be maintainable only when an
extraordinary situation is brought to the notice of the court keeping in view of the wide
and far-reaching power of the court in relation to the affairs of the company. In this
situation, it is necessary that the alleged illegality in the conduct of the majority
shareholders is pleaded and proved with sufficient clarity and precision. If the pleadings
and/ or the evidence adduced in the proceedings remains unsatisfactory to arrive at a
definite conclusion of oppression or mis- management, the petition must be rejected.”

3. Shanti Prasad Jain vs Kalinga Tubes Limited AIR 1965 SC 1535- The
Supreme Court held that in the case of 'oppression', the majority shareholders
must be oppressing the minority as members and the events have to be
considered not in isolation but as part of a consecutive story. Hence, there must
be continuous acts on the part of the majority shareholders and the conduct must
be burdensome, harsh and wrongful. Mere lack of confidence between the
majority shareholders and minority shareholders would not be enough unless the
lack of confidence springs from oppression of a minority by a majority in
management of the affairs of the company.

4. Mohanlal Ganpatram v. Shri Sayaji Jubilee Cotton and Jute Mills Co. Ltd.,
(1964) 34 Comp. Cas. 777 (Guj) at para 28- The mismanagement remedy
applies when two conditions are fulfilled. First, there must be a material change
in the management or control of the company, which could occur in various
ways, including alteration of the board, manager or ownership of the company
(the cause). Second, such a change must be the reason that the company
conducts its affairs in a manner that is prejudicial to the interests of the company
or its shareholders (the effect). Courts have observed that the mismanagement
remedy is wider than the oppression remedy.

5. Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd. 2021 SCC
OnLine SC 272- Mr. Cyrus Mistry was removed from the position of Executive
Chairman of Tata Sons Limited, and also removed from directorship in various
companies of the Tata Group, by resolutions passed at various board and
shareholder meetings. Considering the removal and the manner thereof as being
oppressive to minority shareholders, viz. Cyrus Investments Pvt. Ltd. and
Sterling Investment Corporation Pvt. Ltd. (shareholders of Tata Group of
Companies and in which Mr. Mistry had a controlling stake), this minority group
filed a complaint alleging prejudice, oppression and mismanagement before the
NCLT. The NCLT ruled against the minority group. The NCLAT ruled in
favour of the minority group and held that the removal of Mr. Mistry was
oppressive/ prejudicial, and hence it ordered the reinstatement of Mr. Mistry as
the Executive Chairman of Tata Sons and as the Director of the various
companies. Tata Sons, challenged the NCLAT order before the Supreme Court,
which finally held that the act of Mr. Mistry’s removal as Executive Chairman of
Tata Sons was not in fact, prejudicial and/ or oppressive to the interests of the
minority group. Further, it noted that in the factual matrix of the case, the
requisite standard to justify the winding up of the company was not met, ruling
that the “just and equitable clause” is triggered only in certain situations, for
instance: (a) where there was a functional deadlock – the inability of members to
co-operate paralyses the company from functioning and (b) where there is a
justifiable lack of confidence on the conduct of the directors. A mere lack of
confidence of minority shareholders in relation to the majority in management
would not be sufficient. Further and specifically in the context that the majority
shareholding of Tata Sons (Private) Limited was held by philanthropic Trusts
and not individuals or corporate entities, the NCLAT’s decision that it was just
and equitable to wind up Tata Sons was flawed as it would only result in those
charitable Trusts starving to death.
Singapore Law on the Liability of Shareholders and Directors Who Are Aware of
Fraud

Background

6. The co-founder played a critical role in building the company, Heads Up For Tails,
from its early stages as an online retail venture to establishing its physical retail
presence. She was actively involved in the launch and operations of one of the first
stores in Bangalore and later took charge of the brand’s overall retail operations. Over
several years, she became a public-facing member of the senior management team and
was widely acknowledged as a co-founder by internal stakeholders, employees, and
investors.
7. As the company grew, it attracted private equity investments during its Series A round.
Multiple PE funds invested in the company, these investors had full knowledge of the
co-founder’s role in founding and operating the company. With growing investor
influence and preparations underway for a Series B round, internal dynamics shifted.
During this period, the co-founder was gradually sidelined and ultimately forced out of
the company.
8. The co-founder had placed personal and professional trust in the founder, including
entrusting him with decisions relating to her equity and corporate representation. She
allowed him to act on her behalf concerning her shares and related paperwork,
assuming that her interests would be safeguarded. It has now come to light that her
shareholding was mismanaged, and key documents such as share transfer forms were
either never executed or handled improperly. These actions were carried out without
her informed consent, and the resulting arrangements were never fairly disclosed to
her.
9. There is evidence suggesting that the founder acted fraudulently in managing her equity
interests and in his representations to her about the status of her position and
shareholding. The parent entity of the company is incorporated in Singapore. The co-
founder’s exclusion from the company occurred in this cross-border corporate context,
involving both Indian operations and a Singapore-based holding structure. These
actions were carried out despite her being known as a co-founder and being materially
involved in the business for several years.
 Research on

10. To what extent can board members, significant investors, promoters be held liable if
they had knowledge of the fraud, or if they ought to have known about it but failed to
act?
11. If these board members or investors had actual knowledge of these fraudulent acts, or
if they were in a position where they reasonably should have known what was going
on, to what extent can they be held accountable for failing to intervene? And also is
this a breach of their duties

Position in Singaporean Law

Relevant legal provisions, Companies Act, 1967

1. Section 4(1) – Defines director
2. Section 157(1) – This provision sets out the statutory duties of directors to act honestly
and use reasonable diligence. If a director knowingly allows fraud to occur, or recklessly
fails to detect it, they may be in breach of this duty.
3. Section 216 – Offers a remedy to shareholders who face unfair prejudice. If a co-
founder is excluded from decision-making, denied access to their shares, or treated
inequitably, they may invoke this section

Extent of liability
1. Section 157. Specifically, the provision obliges a director to act honestly at all times and
to use reasonable diligence in the discharge of the duties of his office
2. It does not purport to be an exhaustive statement of a director's duties. Indeed 157(4)
provides that the section is in addition to and not in derogation of any other rule of
law relating to the duty of liability of directors or officers of a company.
3. A breach of 157 can result in both civil and criminal proceedings
4. Singapore courts have made clear that these duties are based, respectively, on the
general law duties to
1. act bona fide in the interests of the company - Ho Kang Peng v Scintronix
Corp Ltd [12014] SGCA 22, Townsing Henry; George v Jenton Overseas
Investment Pte Ltd (in liquidation) [2007] SGCA 13
2. to exercise care and diligence - In Falmac Limited v ChengJiLai Charlie
[2013] SGHC 113;
5. The consequences for a breach of the statutory duties prescribed under Section 157
are however likely to be more severe, given that criminal' and disqualification.
6. The UK High Court from which singapore act is derived from, in a recent case titled
Item Software (UK) Ltd v Fassihi, affirmed by the UK Court of Appeal has created
a new duty for directors at common law to disclose their own and other aware
misconduct to the company and that failure to disclose is itself a breach of the
common law fiduciary duties.
7. The director is also, like an employee, under a duty of fidelity to his company: see per
Lord Greene MR in Hivac Limited v Park Royal Scientific Instruments Ltd
[1946] Ch 169 at 174.
8. On the face of it, therefore, one might think it a simple proposition that a director
would be under a duty to alert his fellow board members to a nascent commercial threat
to the future prospects of the company - British Midland Tool Ltd v Midland
International Tooling Ltd & Ors, [2003] EWHC 466 (Ch) (Mar 12, 2003)
9. Directors have, both collectively and individually, a continuing duty to acquire and
maintain a sufficient knowledge and understanding of the company's business to enable
them properly to discharge their duties as directors. - Vita Health Laboratories Pte
Ltd v Pang Seng Meng
10. A director should take as much care in the affairs of his company as he would
reasonably take in his own affairs - Multinational Gas and Petrochemical Co v
Multinational Gas and Petrochemical Services Lid [1983]2 All ER; Re John
Fulton & Co Ltd [1932] NI
11. The law hence stands as . thus: the civil standard of care and diligence expected of a
director is objective, namely, whether he has exercised the same degree of care and
diligence as a reasonable director found in his position - Lim Weng Kee v PP
12. If a director knows facts that should excite the suspicion of a reasonable man, he must
make reasonable inquiries or take the consequences of his inaction.
13. A director is not responsible for the frauds of his fellow directors - Cargill v Bower
(1878) 10 ChD 502 at 513-514 (High Court, England).
14. Nor is he under an obligation to supervise the conduct of his co-directors.- Huckerby
v Elliott [1970]1 All ER 189 at 194
15. If however, he has authorised the act or acquiesced in it, he may be held'to be liable -
Walker v Wimborne (1975) 137 CLR 1 at 8 (High Court, Australia); Re Kie Hock
shipping (1971) PteLtd [1985] 1 MLJ 411 (High Court, Singapore)
16. Official Liquidator, Supreme Bank Ltd. v. P.A Tendolkar -
1. 45. It is certainly a question of fact, to be determined upon the evidence in each
case, whether a Director, alleged to be liable for misfeasance, had acted
reasonably as well as honestly and with due diligence, so that he could not be
held liable for conniving at fraud and misappropriation which takes place. A
Director may be shown to be so placed and to have been so closely and so long
 associated personally with the management of the Company that he will be
deemed to be not merely cognizant of but liable for fraud in the conduct of the
business of a Company even though no specific act of dishonesty is proved
against him personally. He cannot shut his eyes to what must be obvious to
everyone who examines the affairs of the Company even superficially. If he does
so he could be held liable for dereliction of duties undertaken by him and
compelled to make good the losses incurred by the Company due to his neglect
even if he is not shown to be guilty of participating in the commission of fraud.
It is enough if his negligence is of such a character as to enable frauds to be
committed and losses thereby incurred by the Company.
17. A company's remedies for breach of duty by its directors may take three forms
1. Sue for damages (in case of negligence or breach of fiduciary duty)
2. In case of breach of fiduciary duty, it may claim any secret profit that the
director has made
3. Exercise of a power in breach of a directors duty may be declared to be invalid
18. A derivative action can be brought against directors who are in control of the company
to compel such directors to account to the company for profits made by appropriating
for themselves a business opportunity which the company would otherwise have
enjoyed.

Remedy under O&M

19. Section 216 of Singapore’s Companies Act explicitly allows any member to seek
remedies when conduct amounts not just to oppression, but also to unfair
discrimination or other prejudice. This includes a wide range of actions beginning from
intentional abuse to include subtler forms of unfair treatment that may still seriously
affect members interests.
20. The focus is on commercial unfairness, not merely illegality or breach of rights.
21. The test is objective: would a reasonable commercial person view the conduct as unfair
to the minority shareholder or other members?
22. There has been a shift from the test of UK’s “oppression” to the "unfair prejudice".
Oppression required proving conduct that was burdensome or harsh. But "unfair
prejudice" focuses more on outcomes—whether a member's interests were unjustly
harmed.
23. Section 216 adopts a broad standard that allows members and shareholders to seek
relief not only in cases of overt oppression but also where conduct is unfairly
discriminatory or prejudicial. The focus is on commercial unfairness, and courts are
not confined to assessing only hostile or high-handed behaviour.
24. The key determinant is the effect of the conduct on the member’s interests,
rather than whether the majority acted with improper motive.
25. Even if the majority’s actions were lawful or procedurally valid, courts will intervene
where the result is commercially unfair. The purpose is to remedy substantive prejudice
rather than punish formal breaches of procedure or bad faith.
26. Singapore courts have consistently emphasized that personal animosity or malicious
intent is not a necessary condition for relief. What matters is whether the minority
member has been unfairly excluded from the benefits of membership or denied their
legitimate expectations. This can include exclusion from management, withholding of
information, dilution of shares, or other actions that materially alter a member’s
position in the company.
27. Legitimate expectations are also important. Where a shareholder reasonably
expects participation in management or a particular role based on prior
dealings, informal agreements, or the structure of the company, frustration of
those expectations without justification may amount to unfair prejudice.
28. This aligns with our present factual scenario which suits and reflects the
commercial realities of small private companies where formal agreements may
not capture the full extent of understanding between members.
29. Courts adopt a flexible, fact-sensitive approach that avoids rigid categorization. Each
case is evaluated on its own terms, based on the company’s structure, past conduct of
the parties, and the nature of the alleged unfairness.
30. There is also an acknowledgment that Singapore’s version of Section 216, though
historically derived from English law, has developed along its own lines. Singapore
courts prefer not to be bound by English developments post-O’Neill v. Phillips,
especially where those decisions reflect a narrower view of what constitutes unfair
prejudice. The Singapore approach is more equitable and commercially realistic,
offering protection even in the absence of illegality.
31. While the section is wide in scope, courts remain cautious not to treat every act of
majority control as automatically prejudicial. Relief is granted only where the overall
impact of the conduct disturbs the balance of fairness between shareholders and
unjustly affects the minority.
32. The following category of people can file u/s 216
1. Member of the company
2. Person, who has shares in the company transmitted to them by operation of law
3. Debenture holder of a company
33. 216(2) is primarily made when some act of the company has been done which is unfairly
discriminatory or prejudicial, with regards to conduct that is oppressive or in disregard
 of an applicant's interests, what is required is that ‘the affairs of the company are being
conducted or the powers of the directors are being exercised in that manner.
34. Member, has been defined to include persons to whom shares are transmitted
by operations of law.
35.
Court Case Relevant Para
Court of Appeal, Re Legal Courts This section does not in terms
England Negotiation Ltd [1999] 2 require that only a minority
BCLC 17 member can apply for relief, but
a controlling member, through
the ordinary powers he
possesses by virtue of his
controlling position, will be able
to remedy any prejudice or
discrimination he has suffered
House of Lords Ebrahimi v Westbourne In deciding whether the
Galleries Ltd petitioner's right had been
infringed, the court should not
restrict itself to the company's
constitutional documents but
have regard to the expectations
and obligations of the members
inter se.

High Court, Re a Company (No 00477 A typical complaint in an unfair

England of 1986) [1986] BCLC 376 conduct case is that contrary to
the understanding between the
parties in a corporate quasi-
partnership that the minority
member will be employed as a
director, the controlling
member in exercise of his strict
legal rights removes the
minority member from his
directorship, depriving him of
his means to earn a salary and
to participate in decision-
making in the company.
Applying the reasoning in the
Ebrahimi case, the jurisdiction
 to remedy unfair conduct
enables the court to protect the
legitimate expectations of the
minority member that he will be
employed as a director and be
involved in management
English In Re A Company (No “(1) The test of unfair prejudice
commercial 005134 of 1986) is objective. (2) It is not
court necessary for the petitioner to
show bad faith. (3) It is not
necessary for the petitioner to
show a conscious intention to
prejudice the petitioner. (4) The
test is one of unfairness, not
unlawfulness.

High Court, Re Ring tower Holdings

England plc

Australian high Wayde v.NewSouth The section requires proof of

court Wales RugbyLeague Ltd oppression or unfairness;
mere evidence of prejudice or
discrimination against a
member is not enough to
invoke the court’s
jurisdiction. In some cases,
where discretionary powers
are exercised, prejudice or
discrimination may indicate
unfairness—but this is not so
 where the discretionary
power expressly
contemplates causing such
prejudice or discrimination.
The term “oppressive,” as
used in section 320, retains
the meaning it had under the
earlier statutory provisions.
At a minimum, it implies
unfairness, and that is the
key issue in the present case.

36. The point is whether the applicant has control, not whether he is majority shareholders
37. Conduct complaints must affect the member, the primary interests of members are the
act, companies’ memorandum, but however these are not exhaustive.