3.4.1.1 The origin of the oppression remedy: dissolution legislation

The term "oppression", as a ground for dissolution, was first introduced in Illinois in section 86 (a) (3) of the 1933 Act.1 Hereby courts were given the power to dissolve a corporation upon the petition of a shareholder when certain "oppressive" conduct by the controlling shareholders could be identified.2 This 1933 Act was later considered as the basis for section 90 (a) (2), later section 97 (a) (2), and finally section 14.30 (2) (ii) of the various versions of the oppression remedy in the RMBCA.3 Section 14.30 (2) (ii) reads: "the court may dissolve a corporation in a proceeding by a shareholder if it is established that the directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent". In this provision, the term "oppressive" attracts a great deal of literature from commentators because it is not as familiar a concept as "illegal" or "fraudulent".

To date, thirty-seven states across America have provided for statutory involuntary dissolution if oppressive conduct has been identified.4 As most of these statutes do not define oppression, the construction of this term varies among states, for example it may be "abusive conduct, recurring breaches of fiduciary duty, or frustration of a shareholder's reasonable expectations."5 In the rest of the states, such as Delaware, Florida, Kansas, Massachusetts and Louisiana, where no oppression remedy has been enacted for aggrieved shareholders, relevant cases are mainly reasoned on the basis of entire faimess or breach of fiduciary duties through common law.6 As we see, therefore, in the USA, either by the oppression remedy or by the fiduciary duty analysis from common law, oppressive behaviour can be tracked down. This is a remedy with which China is not familiar. Questions such as whether China has this remedy or not and how it could be applied are discussed in Chapter 5.