The Supreme Court of Victoria’s Oppression Proceeding Program

Shareholder oppression is a significant issue in corporate governance, particularly for small and medium–sized companies.  The Supreme Court of Victoria Oppression Proceeding Program aims to provide an efficient and cost-effective resolution for shareholder disputes.  The Federal Court also has its own program available to parties seeking relief in such cases.

Shareholder Oppression

Shareholder oppression occurs when the conduct of a company’s affairs unfairly prejudices or is oppressive to one or more shareholders.

This usually occurs where there is conflict between competing shareholders or co–owners of a company and manifests itself in various ways, including, amongst other things:

• Excluding minority shareholders from company affairs.
• Denying members access to important financial and other information.
• Diverting corporate opportunities away from the company in question to majority shareholders or associates.
• Unfair allocation of company resources.

The Corporations Act 2001 (Cth) (Corporations Act) provides statutory remedies for such oppression under sections 232 and 233.  These provisions give shareholders access to relief if they believe the company’s conduct has been oppressive or unfairly prejudicial to them.

The Supreme Court’s Oppression Proceeding Program

The Supreme Court of Victoria has instituted a program specifically designed to handle such conflict between shareholders.  This program aims to streamline the resolution process for shareholder disputes, particularly in small and medium–sized companies, where the value of the businesses may be modest.

Key features of the program include:

• Focused approach to oppression claims in small to medium–sized companies.
• Expedited case management.
• Emphasis on cost–effective resolution.

Section 234 of the Corporations Act gives standing to a member or former member (depending on the circumstances) of the Company or a person whom ASIC thinks appropriate having regard to investigations it is conducting or has conducted, to apply for such relief using this Supreme Court program.

Proceedings are commenced by the filing of an application and a concise affidavit (no more than 3 pages) summarising the facts relied upon to demonstrate oppression.  This approach is designed to keep initial legal costs low.

Once filed, the case is scheduled for a case management conference before a judicial registrar or other judicial officer.

At the first case management conference orders are often made which allow for:

1. the production of documents (such as financial statements of the company);
2. the filing of any responsive affidavits;
3. the filing of valuation evidence if necessary (such as the value of the company or shares);
4. referring the matter to mediation which is often held before a court-appointed mediator.

Referring the dispute to a mediation at an early stage of the proceeding provides the parties with an opportunity to resolve the matter in a cost–effective manner and before they expend significant sums of money on litigation.

Remedies Available

If the dispute does not resolve at mediation it can continue to a trial in the usual fashion.

If oppression is established, the Court has broad discretion to order various remedies, including but not limited to:

1. Winding up the company.
2. Modifying or repealing the company’s constitution.
3. Regulating the future conduct of the company’s affairs.
4. Ordering the purchase of shares by one member from another.

Conclusion

The Supreme Court’s Oppression Proceeding Program provides a cost–effective solution for addressing shareholder disputes.  It is important for shareholders to be aware of their rights and what actions they can take if they are oppressed or prejudiced.

We offer and provide a full range of expert services to assist you with these and other issues.  Do not hesitate to reach out to our team of experienced professionals who can advise and assist you.