Disputes between your business partners, co-directors or shareholders can quickly derail even the most promising small to medium enterprise. Whether it’s a breakdown in trust, exclusion from decision-making, or the misuse of company assets, these disputes can feel personal – and costly.
Fortunately, the Supreme Court of Victoria offers a streamlined, efficient and cost-effective legal pathway for addressing issues, using provisions under Section 233 of the Corporations Act 2001 (Cth) that deal with oppressive conduct.
For SME leaders, understanding this process can be a critical step toward protecting your role, your investment and your company’s future.
What is oppressive conduct?
Conduct may be considered oppressive if it is unfair, prejudicial or discriminatory to shareholders or other stakeholders. Examples include breaches of fiduciary duty. Directors and shareholders are generally expected to act in the best interests of the company, and this includes not acting in a way that is oppressive or unfairly detrimental to the company or other shareholders, committing a conspiracy to defraud shareholders, excluding a director from participating in company management, or diverting business opportunities for the benefit of another director.
Other examples include issuing shares in a way that is commercially unfair or not authorised by the company’s constitution, removing a director without proper consent, or cancelling shares without following correct legal process.
Commencing proceedings under Section 233
Applications under Section 233 must be made by way of originating process (Form 2), and supported by an affidavit. This is governed by Rule 2.2(1)(a) of the Supreme Court (Corporations) Rules 2013 (Vic). The affidavit must be no longer than three pages and should include a clear summary of the facts that are said to constitute the oppressive conduct.
Where possible, it should also include a preliminary estimate of the value of the company’s shares and must exhibit a current ASIC search of the company. No other documents or exhibits should be included at this stage. The originating process and affidavit must be filed electronically via RedCrest, the Court’s e-filing system. Filing fees can be found on the Supreme Court of Victoria’s website under the Prothonotary’s Office Fees schedule.
Oppression proceeding program: A streamlined approach
Once filed, the application is reviewed by the Corporations List Judge, who determines whether the matter is suitable for the Court’s Oppression Proceeding Program. This program is designed to streamline the process for all applications made under Section 233 of the Act.
Determining whether a matter is appropriate for the Program may be complicated when the application involves a publicly listed company or complex trust structure is involved. However, most oppression cases relate to small or family-run businesses, and the value of the business is not a determining factor. If the matter is considered suitable, it will be referred into the Program.
What happens at the initial conference?
Once the application is referred into the Program and the defendants have filed a Notice of Appearance, the matter is listed for an initial conference before an Associate Judge or Judicial Registrar. Both parties and their legal representatives must attend.
At this conference, the Court will assess whether the matter is suitable for referral to mediation. It may also consider whether any preliminary steps need to be taken first. These steps could include giving the defendant the opportunity to respond with their own short affidavit (no longer than three pages), arranging inspection of company records to support a business valuation, or ordering access to company books.
It is rare at this stage for the Court to order detailed pleadings such as points of claim, points of defence or lengthy affidavits. These are typically deferred until after mediation, if needed. If a request is made for orders outside the powers of the Associate Judge or Registrar, or if the case appears to require judicial oversight, the matter will be referred to the Corporations List Judge.
The mediation process
Matters heard under the Program will be mediated by either an Associate Judge or a Judicial Registrar. In some cases, the Court may direct the parties to participate in external private mediation. If mediation is unsuccessful, the Court may make consent orders for the ongoing management of the case. If no resolution is reached, the matter may be referred to a Judge for further directions or a hearing.
What orders can the Court make?
If the Court finds that oppression has occurred, it can make any order it considers appropriate to resolve the issue and prevent further harm. These orders may include:
- winding up the company
- modifying or repealing the company’s constitution
- regulating future conduct of the company’s affairs
- ordering one party to purchase another’s shares, with or without a reduction of capital
- authorising or requiring legal proceedings to be commenced or stopped in the company’s name
- appointing a receiver or receiver and manager over company property
- restraining a party from taking certain actions or requiring specific conduct.
Why this matters to SMEs
For business owners, directors and shareholders, the Court’s streamlined process provides an accessible and cost-effective way to resolve disputes involving allegations of unfair treatment. The early focus on mediation and limited initial documentation helps to reduce costs and avoid unnecessary complexity.
The Court’s approach reflects a practical understanding of how disputes arise in closely held companies, including family businesses, and aims to facilitate timely and just outcomes without the burden of full litigation unless absolutely necessary.
For SMEs navigating internal disputes, understanding the available legal protections and processes is essential. If you are concerned about unfair or oppressive conduct in your company, obtaining early legal advice can help ensure your interests are protected and the dispute is resolved efficiently.
By Holding Redlich Partner Jessica Tsiakis and Partner Howard Rapke
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