To wind-up a whole company or buy-out minority shareholders?

This is what was asked of the QLD Court of Appeal (“QCA”), with judgement delivered on Friday.

It was not in dispute that the majority and minority shareholders were in a ‘quasi-partnership’ and that the relationship had “irretrievably broken down” due to the majority’s conduct – ie oppression, unfair prejudice and discrimination against the minority.

Some harsh findings

The Appeal was about the appropriate remedy for the minority:

(a) wind-up the company (ss 233 or 461); or

(b) force the majority to buy-out the minority (s233).

The QCA dealt with this by assessing the consequences of the events and circumstances of each option and determining reasonableness.

The QCA noted a wind-up is not a “last resort” order, rather if there is an alternative and adequate remedy, the Court would favour that remedy.

In the end, the QCA favoured the option of the wind-up over the buy-out because:

– the valuation of the minority would be expensive, extensive and time consuming

– the real uncertainty that the majority was willing and able to buy-out

– the majority were unlikely able to afford the buy-out without the backing of their holding company, for which there were no undertakings  

Link to the case: http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/qld/QCA/2018/48.html

#SVVoidables

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