1.2.3 Oppression remedies

A rather less radical way of solving the problem of a locked-up minority shareholder than by winding-up the company is the order of the court for the purchase and transfer of the shares to the co-shareholders, to the company itself or even to others. Obviously, as the court orders this transfer, it does not represent a voluntary purchase. The common situation, in which an oppression remedy is applied, concerns the occasion of oppression of a shareholder. Nonetheless, the application of the oppression remedy may be broader, and may involve other situations as well.

The criterion used in oppression remedies in common-law countries is, broadly speaking, the occurrence of oppressive, unlawful or unfürly prejudicial conduct affecting the shareholder that invokes the remedy in particular, or conduct affecting all shareholders of the company. Oppression remedies in common-law countries often entrust to the court the discretion to issue a variety of orders in respect of providing relief to the shareholder. Usually, one of these orders relates to the forced purchase of the shares by the co-shareholders or by the company itself.

The broad discretion in oppression remedies in common-law countries offered to the courts with respect to providing different kinds of orders contrasts with the discretion of the courts in civil-law countries. Civil-law legislators have created oppression remedies that merely lead to a single order, namely the order for the transfer of the shares. The standards used in oppression remedies in civil-law countries, however, differ to some extent.

Austria, Germany and Switzerland have comparable oppression remedies in place that enable a shareholder to start proceedings in order to exit the company if an important ground (wichtige Grund) justifies this. The oppression remedies in Austria and Germany are acknowledged both in legal literature and in case law, but not in statute.1 In Switzerland, Art. 822 paragraph 1 Swiss Code of Obligations (Obligationenrecht) stipulates that a shareholder is entitled to start exit proceedings on the basis of an important ground.2

In Belgium, a slightly different criterion is used. Section 340 of the Company Law Code (Wetboek van Vennootschappen), which applies to private companies with limited liability, enables a shareholder to start exit proceedings. In these proceedings, a shareholder has to establish a well-founded reason (gegronde reden) to exit the company. The court then has to assess whether there are well-founded reasons for the exit. An order for transfer of shares can only be directed against co-shareholders causing these well-founded reasons.

A middle course between the civil-law standards of reasonable groundsand the common-law standard of unfür prejudice is taken in the Netherlands. The Dutch oppression remedy is found in Article 343 of Book 2 of the DCC. This provision stipulates: