Australia: Oppressed minority shareholders and appropriate relief - Is winding up a solvent company an extreme step?

In most shareholder dispute cases involving allegations of oppression on the minority shareholders, relief is sought under section 233 of the Corporations Act 2001 (Cth) (the Act). This section provides that the Court may (amongst other things) order that a company be wound up. Accordingly, on its face, the provision enables the Court to wind up a company irrespective of whether it is solvent or otherwise successful.

Historically, the Court has shown a general reluctance to order that an otherwise solvent and functioning company be wound up. This approach, however, appears to be changing as demonstrated in the recent, significant decision of the Full Court of the Federal Court (on appeal) in Hillam v Ample Source International (No 2) [2012] FCAFC 73 (Hillam). In Hillam, the Full Court upheld the trial judge's decision to wind up a solvent company (yet to earn income, but with hopeful future prospects) in circumstances where the minority shareholder had been oppressed.

Sections 232 and 233 of the Corporations Act 2001

Section 233 of the Act empowers the Court to make any order that it considers appropriate in relation to a company in circumstances where the requirements of section 232 are met. That power includes making an order that a party purchases shares of another party with an appropriate reduction of the company's share capital or (as indicated above) an order that the company be wound up.

Section 232 of the Act provides that the Court has the discretion to make such an order (or any other order under section 233) if:

  1. the conduct of a company's affairs; or
  2. an actual or proposed act or omission by or on behalf of a company; or
  3. a resolution, or a proposed resolution, of members or a class of members of a company;

    is either:

  4. contrary to the interests of the members as a whole; or
  5. oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity. [emphasis added]

In the decision of Hillam, the Full Court heard an appeal of a trial judge's order that the second respondent, Bonython Metals Group Pty Ltd (BMG), be wound up pursuant to section 233 of the Act by reason of the oppression of a minority shareholder, Ample Source International Ltd (Ample Source). In considering the appeal, the Full Court addressed the issue of whether it was appropriate to wind up a solvent company.

Oppression on the minority shareholder

The trial judge in Ample Source International Ltd v Bonython Metals Group Pty Ltd; Re Bonython Metals Group Pty Ltd (No 6) [2011] FCA 1484 held that there were a number of instances of oppression of the minority shareholder, Ample Source. The oppression was brought about because of the way in which the affairs of BMG were conducted, specifically:

  1. the partial management of BMG in a manner which was commercially unfair to Ample Source;
  2. a failure or reluctance to provide relevant information to Ample Source;
  3. the fact that meetings were arranged in a manner which was not only in breach of the shareholder's agreement, but provided Ample Source with limited opportunity to attend the meetings either at all or with inadequate information; and
  4. that Ample Source was substantially excluded from the management of the company as a nominee director and was not appointed to participate in the management of the company.

The trial judge ordered that BMG be wound up under section 233(a) of the Act.

Buy Out

At trial, Ample Source sought primary relief in the form of a buy out of the majority shares in BMG. The trial judge rejected that claim, finding that there was no evidence of any realistic prospect of a commercially viable solution involving the acquisition of Ample Source's interest for fair value. In the alternative, Ample Source sought that the company be wound up which, as stated, was ultimately granted.

On appeal, the appellants took issue with whether the order to wind up the company was appropriate in the circumstances of the case.

In considering this question, the Full Court referred to the trial judge's finding that a buy out was not an appropriate alternative, highlighting the fact that there was no offer to buy the shares of the minority or of the majority at a fair price, whereas a liquidator could sell the assets on the open market and divide the proceeds, absent a sale of the company's assets to one of the disputing parties. The Full Court expressed its view that it was not only reasonably available to the trial judge to make such a winding up order, but "virtually inevitable" that that should happen.

Although a buy out was not a commercially viable solution in the particular circumstances of Hillam, it may be an appropriate solution in other shareholder disputes. If so, a valuer appointed to value the fair market value of a minority shareholding will need to consider whether a discount should be applied for the minority shareholding. In the case of MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167, the Court of Appeal held that it was inappropriate in the context of the case to apply a minority discount in the case of a valuation done on a net assets backing basis. The Court of Appeal held that:

"the majority shareholder has an interest in ensuring that the minority holding is not acquired by someone who has no relationship with the majority holder of mutual co-operation or trust... The majority holder will therefore be prepared to pay more for the minority shareholding than another person."

Wind Up – An Extreme Step

In support of their contention that the winding up order was inappropriate, the appellants in Hillam argued that the Court's discretionary power to wind up a solvent (and debatably, successful) company was to be exercised only as an extreme step. Here, the appellants relied upon the UK decision of Cumberland Holdings Ltd v Washington H Soul Pattinson & Co Ltd (1977) 13 ALR 561 (Cumberland Holdings) in which Lord Wilberforce said: "to wind up a successful and prosperous company and one which is properly managed must clearly be an extreme step and must require a strong case to be made."

The Full Court held that the case of Cumberland Holdings did not support the appellants' arguments and it did not accept that the Court's discretion to wind up a company in circumstances of oppression was governed by an overarching principle that the winding up should only be ordered as an extreme step.

In considering the exercise of the Court's discretion under section 233 (and indeed, whether that discretion is subject to an overarching consideration as contended by the appellants), the Full Court expressed the view:

"An order to wind up a solvent company may often be too extreme a step to take (and therefore not justified or appropriate but that is very different from proceeding upon any "principle" or assumption that a winding up order of a solvent company is inappropriate. No such implication arises from ss 232 or 233 of the Act, or should be made in those terms. The real question is whether a winding up order was appropriate to deal with and address the grounds for relief which had been established. The answer to that question must be found in the facts of the particular case."


This judgment marks an important reminder that, in shareholder disputes involving oppression of minority shareholders, the Court will not shy away from ordering that a solvent company be wound up. The power conferred on the Courts by section 233 of the Act is a discretionary power that is not subject to overarching principles of fairness, commerciality or a general requirement to resort to winding up in the last instance. Rather, the power is wholly discretionary and, when exercised properly, is difficult to successfully appeal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions