Legal Updates

Declaration of a retroactive bonus after a shareholders dispute arises in oppression

August 11, 2016
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A shareholder of a company filed a claim against the other for oppression due to withdrawal of company funds as management fees and transactions with related parties.  The defendant argued, inter alia, that the claim is of the company and not the other shareholder and thus a derivative claim must be filed.

The Court held that even if the damage is to the company a shareholder has a right of claim in certain cases such as: claim for damage due to breach of a shareholders agreement; damage caused to the shareholder that is different from damage to the others and damage due to oppression of the minority.  In this case not only does the withdrawal of funds is oppression but it is also a breach of the shareholders agreement causing damage to the minority and also the damage was not equally shared by the shareholders but caused only to the minority while the control holder are the one to enjoy the benefit from the withdrawals.

The Court also held that declaration of a bonus retroactively for past years in a decision made after the dispute arose is oppression and the bonus is to be returned.

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