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What Is Shareholder Oppression?

No successful business embraces a 'less is more' philosophy. Unfortunately, the same often holds true for the distribution of power in majority and minority shareholder relationships. Though that doesn't always create friction, sometimes majority shareholders use that power as a way to treat minority members unfairly. Oregon law protects against such actions. Over the course of the next few weeks we'll attempt to illustrate how, highlighting the general principals of shareholder oppression law, as well as some of its case-specific nuances.

Generally, minority shareholder oppression is cemented into Oregon case law as,

"burdensome, harsh and wrongful conduct; a lack of probity and fair dealing in the affairs of a company to the prejudice of some of its members; or a visual departure from the standards of fair dealing, and a violation of fair play on which every shareholder who entrusts his money to a company is entitled to rely."

Baker v. Commercial Body Builders, Inc., 264 Or. 614, 628-29 (1973). Of course after reading that definition, adopted by the Oregon Supreme Court some forty years ago, no clearer picture emerges as to what minority oppression is. As a result, Oregon courts are required to look at the particular facts in each given case to determine whether the actions amount to minority oppression.

Some of the conduct those courts have held to constitute oppression include:

  • Low dividend payments
  • Low bonus payments
  • Refusal to allocate economic benefits to minority shareholders
  • Purchasing a minority's shares at an inadequately low price.
  • Use of corporate assets by a majority shareholder for personal use

Minority shareholder oppression, however, will likely never be established simply by looking at actions in a vacuum. Whether conduct amounts to oppression will require consideration of how the business is formed, the business's general practices and the reasonable expectations of the minority shareholders.

Though it's sometimes challenging to prove, shareholder oppression law in Oregon is designed to help minority shareholders who have been cheated, or otherwise treated unfairly. If you think you are being treated unfairly due to your status as a minority shareholder, a business law attorney can help.

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