Victoria court clears administrator to transfer crowd-funded shares in Kester Black DOCA

The Supreme Court of Victoria has approved deed administrator Stephen Dixon’s application to compulsorily transfer more than 1,300 crowd-sourced funding (CSF) shareholder interests in Kester Black to founder Anna Ross, rejecting arguments that the administrator’s 2024 appointment was invalid or that the transfer would prejudice other shareholders.

Stephen Dixon of Hamilton Murphy was appointed administrator to the skincare and makeup brand on 19 July 2024. By that time, the company owed money to various creditors, including Anna Ross herself, owed $220,000. The company had previously raised over $2 million in a 2021 crowdfunding campaign, but sustained losses in the three years leading up to its administration.

Mr Dixon sold the business and assets to New New New Pty Ltd, a company owned by Fergus Sully (Ms Ross’s husband), for $146,220 after concluding that Ms Ross held the commercial knowledge essential to the brand’s viability, that an open-market sale would not succeed without her involvement, and that the transaction was fair because it preserved jobs and transferred accrued employee entitlements. A DOCA proposal was then put forth by Mr Sully, which required the deed administrator, upon receipt of the DOCA contribution, to take all reasonable steps to transfer all shares held by third parties, other than those held by Ms Ross and Mr Sully, to Ms Ross.

Because the company had more than 1,600 shareholders, the deed administrator sought leave under section 444GA of the Corporations Act to compulsorily transfer all of the shares. The Court granted the administration’s application, finding that the dormant cosmetics company had no residual equity value and that the transfer would not unfairly prejudice members. The company’s business had already been sold during the administration, the only remaining asset was a small potential preference claim, and the related-party loan owed to Ms Ross far exceeded any conceivable recovery, meaning shareholders sat hopelessly out of the money in both the DOCA and a liquidation.

The Court also rejected arguments that the administrator’s 2024 appointment was invalid due to a breach of the two-director rule for CSF companies, concluding that the company’s constitution allowed valid action by a sole director and that the statutory breach did not void the appointment. More than 500 shareholders had consented to the transfer, ASIC raised no objection, and no objecting shareholder provided evidence of any residual share value. The Court exercised its discretion to grant leave for the transfer, and held that concerns about alleged undervalue sales, governance misconduct, or phoenix activity were not supported by admissible evidence and had no bearing on the narrow statutory test.

Read the decision here.

Duncan Willis (instructed by Capstone Koroneos) represented the administrator.