When Equal Isn’t Equal – Shareholder Oppression In An Australian Private Equity Context

The recent novel case of WIJOAV Services Pty Ltd v Goldstone Private Equity Pty Ltd [2025] FCA 622 (WIJOAV v Goldstone) has confirmed that the statutory shareholder oppression regime can apply to the operation of limited partnerships managed by a company and found that a 50% shareholder in a private equity fund could be oppressed by their 50% co-investor.

Against that backdrop, it’s important for private equity participants to have an understanding of the risks and potential mitigants for shareholder oppression. 

Shareholder oppression

Shareholder oppression broadly refers to conduct, acts and omissions in relation to a company which are:¹

1. contrary to the interests of the members as a whole; or 
2. oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members.

These two tests apply separately. In the former case, courts will assess whether conduct adheres to accepted standards of corporate behaviour or is in accordance with how reasonable directors would act in attending to the affairs of the company. In the latter case, courts will consider whether there has been ‘commercial unfairness’, which is judged by reference to the viewpoint of an objective commercial bystander.

These provisions sit alongside the fiduciary and statutory duties of directors and officers of companies (for instance, the duty to act honestly, in good faith in the best interests of the company and for a proper purpose). However, the scope is not the same; conduct can be oppressive while still being lawful or not involving a breach of these duties.

Where shareholder oppression does occur, courts can make a range of orders remedying it. These include prohibiting or requiring specified actions, forced sales of shares or capital reductions and, where necessary, even winding up the company in question.

Common oppressive circumstances

While these provisions apply broadly, our experience is that certain circumstances are more at risk of involving oppressive actions. In particular:

1. Forced sales or redemptions of shares held by minority shareholders.
2. Issuances of shares at substantial discounts to market prices or which are dilutive to a particular shareholder’s stake in the company.
3. Utilising voting power to alter key documents, such as the company’s constitution. 
4. Exclusion or removal of a director or member of management of a company or a vehicle (e.g. a limited partnership) operated by that company. 
5. Restricting or failing to pay dividends.
6. Denial of access to information.

The oppression remedy is also used mostly in relation to companies with few shareholders and where shareholders are often involved in the management of the company. It goes without saying that this is a common setting for private equity structures and portfolio companies.

Reducing the risk of oppressive conduct

1. Robust documents

A comprehensive and well drafted shareholders’ agreement and constitution which address potential friction points and clearly outline the parties’ respective rights and obligations is critical for heading off arguments that conduct is contrary to some other understanding between the parties. 

While the legitimate exercise of a power under a shareholders’ agreement or constitution does not guarantee there has been no oppression, courts are far less likely to intervene where the relevant rights and risk in question were clearly agreed in advance. 

2. Process matters

Practically speaking, oppression claims will often arise in connection with significant, potentially unpopular corporate actions (e.g. forced sales or dilutive share issuances). Shareholders may perceive that such decisions are ill conceived or that they are being unfairly targeted by them. Courts will also generally expect a degree of commercial reasonableness and transparency in decision-making and a failure to properly involve shareholders or provide information can support a finding of oppression.

To mitigate this, shareholders and boards should ensure that there is a rigorous process in place around any material decisions, including fully documenting the decision-making process (e.g. demonstrating via board records that other options were genuinely considered, such as alternative financing in lieu of a dilutive share issuance), adherence to agreed protocols and giving affected shareholders appropriate notice, information and an opportunity to be heard where appropriate. 

3. Consider a commercial solution

Where a company was formed on the understanding that each venturer would participate in management, exclusion of a member without a fair exit opportunity is usually oppressive.

If relations break down between investors, it can be worth considering a commercial solution before seeking to enforce strict legal rights. Courts have repeatedly expressed that in these cases, solutions such as affording minority shareholders with an opportunity for a negotiated exit or a timely, unconditional offer by the majority to purchase the minority’s shares at fair value, supported by an independent valuation, can negate oppression. 

WIJOAV v Goldstone 

Returning to WIJOAV v Goldstone, the case centred around the breakdown of the business relationship between Ms Commins and her co-investor, Mr Angelis, who, via their investment vehicles, each held a 50% interest in two companies (the Goldstone Companies). 

The Goldstone Companies carried on a venture capital private equity business (the Goldstone Fund) via two limited partnerships: Goldstone Private Equity VCLP, LP (VCLP) and its general partner Goldstone Private Equity VCMP (VCMP). Ms Commins, as a limited partner in VCMP via related trusts, was entitled to 80% of the carried interest paid by VCLP to VCMP.

Ms Commins served as Managing Director of both Goldstone Companies and was responsible for sourcing, executing and managing VCLP’s investments until she was purportedly terminated for allegations of serious misconduct and excluded from management and decision-making of the Goldstone Fund by Mr Angelis. 

Ms Commins and her investment vehicle (WIJOAV) commenced proceedings alleging that she had been wrongfully terminated and that, in excluding her from management, the affairs of the Goldstone Companies had been conducted in an oppressive manner. 

Decision

The Court found in favour of Ms Commins and WIJOAV on both points, determining that her termination and exclusion from the Goldstone Fund were unjustified and ultimately resulted from Ms Commins refusal to transfer part of a portfolio company’s book of work to Mr Angelis’ son’s business. In doing so, the Court made several notable findings:

1. Equal shareholding, but not equal power: While shareholder oppression is often framed in terms of a ‘majority’ and ‘minority’, the Court found that there was no reason why a 50% shareholder could not claim oppressive conduct where there was unequal power in the ability of the shareholders to control the company’s affairs. 

   In this case, Mr Angelis was able to exercise rights under the VCLP deed to effectively exclude Ms Commins from the Goldstone Fund, notwithstanding her management rights under the relevant shareholder’s deed, leading to a power imbalance.

2. Oppression and limited partnerships: Strictly speaking, the shareholder oppression regime applies to companies. However, as in many private equity structures, the affairs of VCLP and VCMP were so closely intermingled with the Goldstone Companies that the control and management of each could not be separated. 

   Given this, the Court accepted that Ms Commins exclusion from the management of VCLP formed part of the oppressive conduct in question. This finding confirms that shareholder oppression actions can extend to the conduct of limited partnerships managed by a company.

3. Forced buy-outs of LP interests: The Court’s statutory power to remedy oppressive conduct is limited to orders ‘in relation to the company’. Notwithstanding this, the Court ordered that Mr Angelis should be required to buy-out not only WIJOAV’s shares in the Goldstone Companies, but also Ms Commins’ interests in VCMP as a limited partner (i.e. her entitlement to carried interest). 

The Court was willing to grant this remedy on the basis of the fundamental and pervasive relationship between the Goldstone Companies and Ms Commins’ partnership interests in VCMP. Otherwise, Ms Commins would potentially be waiting for many years until Mr Angelis realised the investments in the funds’ portfolio companies, with no ability on her part to manage the relevant investments or earn her carried interest.

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.