Monday 27 September 2021

Ireland: The oppression remedy - "something in the nature of a lacuna"?

Section 205(1) of the Companies Act 1963 provides that "[a]ny member of a company who complains that the affairs of the company are being conducted or that the powers of the directors of the company are being exercised in a manner oppressive to him or any of the members (including himself), or in disregard of his or their interests as members, may apply to the court for an order under this section".  An identical provision (more or less) is now found in section 212 of the Companies Act 2014.

A recent decision of the Court of Appeal - Kelly v Kelly [2021] IECA 244 - is significant because of the discussion it contains regarding the remit of section 205 and, in particular, whether "the powers of the directors of the company" were only those exercised collectively by the board and not, therefore, by an individual director. Counsel making this argument accepted that if it were correct it would mean, as Mr Justice Haughton put it, that there was "... something in the nature of a lacuna  in s.205(1) as it could not apply to a deadlocked board where one director was alleging oppression by another director" (para. [136]). 

The Court of Appeal unanimously rejected counsel's argument, with Mr Justice Haughton finding that to interpret "powers of the directors" as referring only to the powers of directors at board level was an unduly narrow interpretation.  His Lordship stated (paras. [154] and [155]):

.... the term 'powers of the directors' must be construed to include an exercise of one or more powers by one or more directors in an oppressive manner.  Thus the oppression could consist of the exercise of one power or multiple powers and equally it could be such exercise by one or more than one of the directors of the company.  There is no reason to distinguish between the plural in 'powers' and the plural in 'directors'".

.... In my view ... [section 205] was always intended to be a provision conferring on the court a wide jurisdiction to afford a remedy where it found oppression in the conduct of the affairs of the company or in the exercise of the powers of directors, and to avoid the winding up of a company where that is not necessary and can be avoided, particularly where there are a number of employees..."

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