Chapter V turns to the UK, whose withdrawal remedy has served as the model for similar remedies across the Anglo-Commonwealth. While the ‘unfair prejudice’ remedy was initially a great success that spawned a rapidly developing jurisprudence, the perception of an explosion in shareholder litigation in the courts and mushrooming costs against the backdrop of ongoing civil justice system reforms caused serious backlash in the 1990s. On the judicial front, Lord Hoffmann’s seminal speech in O’Neill v Phillips effectively became the last word on unfair prejudice. Contemporaneously, law reform attempts aimed at addressing the perceived problems of unfair prejudice ultimately led nowhere. The meteoric rise and gradual fall of the unfair prejudice remedy in the UK is a cautionary tale of the power of judges to obstruct, of how one decisive voice prevailed over many divided against themselves, and of the limits of legislative reform in close corporation law.

Chapter VI turns to the US, where various states developed diverse solutions to shareholder conflict for over one hundred close corporation legal forms. While many US states recognize withdrawal as a solution to majority-minority shareholder conflict in US close corporations, several states have resisted or even renounced withdrawal. The attitude towards LLCs, which are rapidly growing in popularity across the US, is more ambivalent, as state legislatures and judges have been slow to respond to problems of intracorporate conflict and oppression. While the contractarian-led scholarly debate on whether corporate law should be mandatory or default is instructive, the reality that withdrawal is often missing from state LLC statutes is not attributable to state legislatures taking reasoned policy positions. Rather, withdrawal’s absence in LLCs is caused by incentives created by federal taxation policy. There are signs that history moves in circles as withdrawal remedies seem to be (re)emerging in LLCs.

The Book’s theoretical core, Chapter II focuses on two fundamental concepts: the close corporation, and withdrawal. After explaining the close corporation’s distinctive features, I set out its cardinal problems: conflict between minority and majority shareholders, and the enhanced risk of inter-shareholder exploitation. Over time, leading jurisdictions have converged upon shareholder exit as the ultimate solution to shareholder conflict. This Chapter introduces the concept of ‘withdrawal remedies’ as legal mechanisms enabling voluntary shareholder exit from the corporation coupled with an enforceable monetary claim for the value of the withdrawing shareholder’s membership interest. I show how withdrawal remedies are the only class of solutions that 1) resolve intractable conflict and 2) protect minority shareholders. Reasons why shareholders (minority and majority) might find access to withdrawal desirable – and why they might not – are analysed by applying insights and concepts from behavioural law and economics such as ‘sticky defaults’ to the close corporation withdrawal context.

This chapter examines two modalities of equitable intervention in corporate governance in cases of shareholder conflict. The first involves the extension of fiduciary duties to controlling shareholders, and the second judicial review on the grounds of oppression. Both forms of intervention are intended to be responsive to pathologies inherent in majoritarian governance in organizations featuring enfranchised members. Notwithstanding long-settled authority in Delaware and other American states for the proposition that controlling shareholders are fiduciaries of minority shareholders, I argue that fiduciary regulation is an inapt modality of equitable intervention given the nature of the problems generated by majority rule in corporations. By comparison, the oppression remedy—favored in commonwealth jurisdictions—enables more apt and effective tailored responses to these problems. The choice between these modalities of intervention implicates a choice between equity’s supplemental contributions to first-order law and its corrective, second-order intervention in first-order law. The chapter concludes with some general reflections on the place of equity in contemporary law.