Preface - Trading Trusts

Table of contents

In Australia, trading trusts are often used as an alternative to companies as a way to structure businesses. They can be used by small, family businesses as well as larger enterprises. Sections 232 to 234 of the Corporations Act 2001 (Cth) provide a range of remedies for shareholders subject to oppressive conduct by a corporation.

The Victorian Law Reform Commission (VLRC) has been asked to review the desirability of similar legislative oppression remedies for beneficiaries of trading trusts in Victoria.

In examining protections for beneficiaries, the VLRC has been asked to consider the sufficiency of existing remedies for oppressive conduct by trustees. This raises the question of whether the remedies in the Corporations Act already apply to beneficiaries of trusts. The current legal position is unclear. A line of cases has held that beneficiaries are limited to the conventional forms of equitable relief under trust law.1 However, an alternate line of cases has held that the court’s power under section 232 is not limited to an action against the company, and extends more broadly to the affairs of a company, including trading trusts.2

The VLRC has also been asked to have regard to the interaction between state and Commonwealth laws, and the interests of other parties such as creditors, trustees, directors and employees.

This consultation paper opens discussions about the issues arising from the terms of reference. I encourage anyone who has experience in oppressive behaviour by trustees, skills and knowledge in corporations and trusts law or other insights into the questions raised in the paper, to make a submission by 21 July 2014.

Philip Cummins

The Hon. Philip Cummins AM
Chair, Victorian Law Reform Commission

June 2014

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