What is Shareholder Oppression?

Shareholder oppression is the unfair treatment of minority shareholders, especially in closely-held corporations, by majority shareholders or those in control of the corporation.

As observed by the court in Davis v. Sheerin:

“Oppressive conduct has been described as an expansive term that is used to cover a multitude of situations dealing with improper conduct, and a narrow definition would be inappropriate. …Courts may determine, according to the facts of the particular case, whether the acts complained of serve to frustrate the legitimate expectations of minority shareholders, or whether the acts are of such severity as to warrant the relief requested.”

Because a corporation operates under the principle of majority rule, the holders of a majority of shares with voting power often abuse their power to further their own interests and to deny minority shareholders three basic expectations: (1) a lucrative job, (2) a meaningful role in management, and (3) a proportionate share of earnings.