In a board meeting attended only by the control holder in a company decided to allot shares for an investment of the control holder and to convert shareholders loans given by the control holder into shares, all due to the fact that only the control holder financed the company's operations. The minority holder was given seven days to participate in the injection of funds and avoid dilution. In addition, the minority holder's director was dismissed from his position as director.
The Court held that because the transaction was in conflict of interests the burden of proof to show that it was made with integrity is shifted to the control holder and in this case he did not prove that the allotment of the shares was made for the benefit of the company, as it was not proven that the company's situation at the time of allotment required the allocation of shares. Therefore the Court canceled the allotment of the shares.
Regarding the dismissal of the minority director, such action was carried out pursuant to the articles of association but the Court held that an action pursuant to the constitutional documents of the corporation are not necessarily not oppressive and one need examine whether the action was done in good faith and without jeopardizing the legitimate expectation of the minority. In this case the company was managed by the control holder for years but the minority had a legitimate expectation of a shareholder who founded the company to receive information about the company as well as to express his position as to the company's actions. Therefore, dismissal of the director was illegal.