BLAW2006 Company Law for Business
QUESTION 1
ABC Ltd is a public listed company. ABC Ltd’s shareholders are: FinCorp Ltd (40 per cent); SunCorp Ltd (35 per cent); and the remaining 25 per cent shares are held by a diverse group of shareholders.
ABC Ltd has tendered for the construction of a large block of apartments and is likely to be the successful bidder. It will need an injection of funds to construct the block of apartments. The directors of ABC Ltd are concerned that FinCorp Ltd, which has other interests in construction apartments, may launch a takeover of ABC Ltd, which may be accepted by the 25 per cent of diverse shareholders. The directors of ABC Ltd are concerned that if this takeover occurs then they may not only lose their position as directors, but FinCorp Ltd will terminate the employment of many workers of ABC Ltd as FinCorp Ltd has a reputation of using foreign workers rather than local workers.
At a board meeting the directors of ABC Ltd have resolved to allot a substantial number of shares to SunCorp Ltd in consideration for a promise that SunCorp Ltd will arrange finance for the construction of the apartments. The allotment to SunCorp Ltd will have an impact on the shareholding power of FinCorp Ltd to the effect that, after the allotment, FinCorp Ltd will only command 10 per cent of the voting power.
REQUIRED:
Using the relevant provisions of the Corporations Act 2001 (Cth) and case law, advise the directors of ABC Ltd on whether they have exercised their powers for a proper purpose in issuing the shares to SunCorp Ltd.
Note: disregard laws pertaining to takeovers when answering this question.
NOTE: You are required to use the 4-step process in answering this question. The marks allocated for the steps are as follows:
Steps 1 and 2: 6 marks
Steps 3 and 4: 9 marks [15 MARKS]
Type your answer to Question 1 below:
QUESTION 2
Mighty Motors Ltd manufactures motor vehicles and has been making a large number of 4-Wheel Drives that are wasteful on fuel and have poor safety standards. Benjamin Blue is a shareholder in Mighty Motors Ltd. He believes the company is being socially irresponsible by making 4-Wheel Drives and that it makes good economic sense to make small fuel efficient cars due to the high price of petrol. He has been gathering support from other shareholders in favour of the company making this change to its manufacturing and already the holders of 15% of the shares have indicated they will back him.
Benjamin decides that as the directors ignore him, he will have to force Mighty Motors Ltd to consider the matter at a general meeting.
REQUIRED:
With reference to the Corporations Act 2001 (Cth) and any relevant cases discuss, if the members pass a resolution that the company should replace the manufacture of 4-Wheel Drives with small fuel efficient cars, will the directors have to comply with this decision or are there other alternatives Benjamin should have considered?
Note: You are required to use the 4-step process in answering this question. The marks allocated for the steps are as follows:
Steps 1 and 2: 6 marks
Steps 3 and 4: 9 marks [15 MARKS]
Type your answer to Question 2 below:
QUESTION 3
Helen and Gerald incorporated Zion Ltd in 2008. Zion Ltd manufactures and sells wine barrels in Margaret River, Western Australia. The business had been successful until late 2019 when Helen and Gerald the directors of the company, decided to expand the business to manufacture and sell wine barrels interstate. Zion Ltd had to move from the existing warehouse to a larger warehouse which in turn cost more in rent.
Despite repeated requests, Zion Ltd has not paid Bendu Ltd $40,000 owed for the last six months’ rent on the premises. As a result of non-payment the company could be wound up in insolvency.
REQUIRED:
With reference to the Corporations Act 2001 (Cth) and any relevant cases explain the process available for Bendu Ltd to recover the amount owed by Zion Ltd.
Note: You are required to use the 4-step process in answering this question. The marks allocated for the steps are as follows:
Steps 1 and 2: 5 marks
Steps 3 and 4: 5 marks [10 MARKS]
Type your answer to Question 3 below:
QUESTION 4
Stuart Jones is a director of Masonic Ltd, a company that specialises in limestone driveways. Stuart Jones’s parents are the directors of Brick Pave Driveways Pty Ltd and they want to expand their activities by manufacturing limestone slabs. Stuart Jones’s parents are hoping that Masonic Ltd will purchase the limestone slabs from their company.
At the directors’ meeting the Board of Directors of Masonic Ltd are to consider a long-term supply contract to purchase limestone slabs from Brick Pave Driveways Pty Ltd (Stuart Jones’s parents).
REQUIRED:
Discuss the requirements under the Corporations Act 2001 (Cth) that Stuart Jones and the other directors of Masonic Ltd have to comply with when considering this contract with Brick Pave Driveways Pty Ltd (Stuart Jones’s parents).
Note: You are required to use the 4-step process in answering this question. The marks allocated for the steps are as follows:
Steps 1 and 2: 5 marks
Steps 3 and 4: 5 marks [10 MARKS]
Type your answer to Question 4 below: