Shareholder oppression Occurs when the majority shareholders in a corporation take action that unfairly prejudices the minority. It most commonly occurs in close corporations because the lack of a public market for shares leaves minority shareholders particularly vulnerable since minority shareholders cannot escape mistreatment by selling their stock and exiting the corporation Majority shareholders may harm the economic interests of the minority by refusing to declare dividends or attempting a squeeze-out. Squeeze-out (also known as freeze-out): the compulsory acquisition of the stakes of a small group of shareholders from a joint-stock company by means of cash compensation Allows one or more shareholders who collectively hold a majority of shares in a corporation to gain ownership of remaining shares in that corporation. The majority shareholders incorporate a second corporation, which initiates a merger with the original corporation. The shareholders using this technique are then in a position to dictate the plan of merger. They force the minority stockholders in the original corporation to accept a cash payment for their shares, effectively "freezing them out" of the resulting company. May also physically lock the minority out of the corporate premises May even deny the minority the right to inspect corporate records and books (they have to file/sue to look at the records) The possibility of shareholder oppression arguably increased when corporate law was changed to eliminate the common law right of minority shareholders to veto fundamental corporate changes such as mergers. The business judgment rule and notions of majority rule have allowed shareholder majorities to use the minority's investment without paying for it (as long as it is deemed to be done bonafide in the interest of the company as a whole) May also be difficult to determine the suitable way to protect the rights of the minority shareholder without destroying the corporation, while still respecting the rights of the majority shareholder. Examples of minority shareholder oppression: Refusing their rights to be paid fair value for his/her share Disregard of rights granted to them by statues or companys constitution Alteration of articles to be in the favor of the majority shareholders Dilution of equity stake or voting rights Self-interested transactions by controllers (expense account) Negligent/inefficient management Allowed little to no participations in profits Illiquidity Limited access to info about companys affairs Compulsory acquisition of shares

Example of a case: EON Bank and Hong Leong; Foss v Harbottle