Intersection of International Arbitration
Agreements and Local Company Law
agreement, a cross border investor will
need to be mindful of the local company
law and local commercial arbitration
provisions.
As in the recent Australian example
of WDR Delaware Corporation v Hydrox
Holdings Pty Ltd; In the Matter of Hydrox
Holdings Pty Ltd [2016] FCA 1164
(Masters Case), local company laws can
confer remedies on shareholders that
may intersect with their shareholders
agreement and its referrals to commercial
arbitration.
shareholder protection rights under
Australian company law, and review
the Masters Case which involved a
subsidiary of Lowe's home improvement
store of the United States and
Woolworths of Australia. The court in
the Masters Case ultimately stayed an
application for dissolving under local
company law, to allow a commercial
arbitration to deal with the substantive
dispute.
In doing so, the court looked to
international precedents.
Remedies for Shareholders
remedies available to shareholders
of a company in dispute are the
oppression remedy and the dissolution
of the company on "just and equitable"
grounds.
The oppression remedy can be
sought if the conduct of the company's
affairs, its acts, omissions or any
of its resolutions, is contrary to the
interests of the shareholders as a whole
or is oppressive, unfairly prejudicial
or unfairly discriminatory against a
shareholder. If such a finding is made,
Australian courts are empowered to
make any order it considers appropriate
in relation to that company.
The oppression remedy has been
interpreted by Australian courts in a
broad manner. The type of conduct
which can give rise to an oppression
claim is varied and fact dependent but is
primarily concerned with unfairness in
the treatment of shareholders.
include situations in which excessive
remuneration is paid to executive
shareholders, shares are issued with
the dominant purpose of reducing a
shareholder's proportional shareholding,
access to books and records are
denied, and company assets are sold on
uncommercial terms.
Examples of orders that Australian
courts have made pursuant to the
oppression remedy include amending
the company's constitution, setting aside
company resolutions, requiring the
payment of compensation by oppressive
directors, and requiring a shareholder
acquire another shareholder's shares.
A separate cause of action exists
if a shareholder wishes to dissolve
the company on "just and equitable"
grounds. The phrase "just and equitable"
is broadly interpreted and many of the
factors that indicate a shareholder is
being treated oppressively are relevant
in determining whether it is "just and
equitable" for a company to be dissolved.
It should be noted that in relation
to both remedies, the courts will not
readily dissolve a solvent company.
The court may be persuaded to do so
in more extreme circumstances, for
example, if there is continued animosity
between shareholders or if it is likely that
oppressive behavior will continue in
the future.
a joint venture company set up to carry
on the Masters hardware business.
Australian publically listed company
Group at Carroll & O'Dea Lawyers. His practice
includes advising on a variety of issues for
businesses including acquisitions and disposals,
joint ventures, contracts and employment
arrangements, international investment, supply,
license and distributorship arrangements and
associated disputes and regulatory issues.
Level 18, St. James Centre
111 Elizabeth Street
Sydney, New South Wales 2000 Australia
codea.com.au