Instructions:
1.
Address each of the questions, clearly indicating which question your
answer...

Question

Instructions:
1.
Address each of the questions, clearly indicating which question your
answer relates to.
2.
Maximum 2,000 words in total.
3.
Marks will be awarded or deducted for quality of presentation, e.g.
format, structure and referencing.
4.
Students are expected to use legal referencing system - – see additional
reading on blackboard for a copy of Melbourne
University Law Review Association Inc., Australian Guide to Legal Citation
(2010, 3 ed).

Question 1
Cotton
Limited holds 89.5% of the shares in Satin Co Limited. The remaining shares are
held by Silk and several other small investors. The Board of Satin wants the
company to become a wholly owned subsidiary of Cotton Limited as they expect
this will result in both taxation benefits and a saving on accounting fees and
administration charges of about $230,000. Cotton Limited offers to buy the
shares held by Silk and other minority members but they refuse. Arrangements
are made to hold a members meeting to pass a resolution changing the
constitution of Satin by inserting a new clause 53 “any member entitled to 80% or more of the issued shares may
compulsorily acquire all the remaining shares”.Silk and other minority
members receive written notice of the company meeting together with a proxy
form and a valuation certificate stating the shares were worth $2.50 each.
Although the offer is fair Silk does not want to sell her shares and wants to
start legal action to prevent the proposed alteration to the constitution.
Discuss
whether she may succeed in her action.
Would
your answer be different if the real reason for compulsorily acquiring the
shares from Silk was that she discovered operating a business in competition
with Satin Co and was using information gained as a member to take away some of
Satin’s business?

Question 2
Identify
and explain how some parts of the Corporations Act allow certain business
conducted at company meetings to stand notwithstanding that the meeting has not
strictly complied with all the legal requirements of the Act. Please refer to
any relevant case law that supports your answer.
Question 3
Polyester
is a director of Style Pty. Limited involved in making women’s clothing. Has
she breached any duties under the Corporation Act in the following situations?
Situation 1. She arranges with the
company’s bank to transfer an amount of $65,000 from the company account into a
personal bank account held by her in her own name. She uses the funds to
finalise some outstanding personal debts.
Situation 2. As a director she
receives information that the company is in a serious financial position. She
arranges to transfer a larger amount of the assets of the company over a new
proprietary company that she formed with the intention of caring on the same
business.
Situation 3. Contrary to a resolution
of the Board and notwithstanding established business practice that limits
credit to $20,000 she allows a trade debtor (who has a history of bad debts) to
exceed its credit limits by $25,000. The debtor fails to pay the outstanding
amount of $45,000. Can she rely on the business
judgment rule in this situation?

David · Accepted Answer

Solution 1: 
Following are the provisions contained in the law if any of the people desires to take 
over the remaining shares of the company: 
1) below 5%—ASIC, public companies and the responsible entities for a listed MIS 
Can trace beneficial ownership in shares or units, even where voting power is 
Below the 5% level; 5%—substantial holding level which requires the holder to give information 
to a company, responsible entity for a listed MIS and the ASX; over 10%—holder can block 
compulsory acquisition which requires voting power of 90% to be held; 15%—notification may 
be required under the Foreign Acquisitions and Takeovers Act if the bidder is a “foreign person”; 
over 25%—can block special resolutions of the company or MIS; 50% — voting control of the 
target; 75%—holder can ensure special resolutions are passed; 85%—holder must give notice of 
substantial holding and the company must notify shareholders that, at 90%, the person can 
compulsorily acquire the remaining securities;90%—in general, confers the ability to 
compulsorily acquire remaining securities in target; and for certain regulated industries and 
companies, acquisitions prohibited over varying thresholds. 
By studying the above thresholds, we can conclude that Cotton Ltd. cannot takeover remaining 
shares by simply inserting a clause because it hold less than 90% of shares, once cotton ltd. holds 
more than 90% of shares, cotton ltd. can compulsorily takeover the remaining shares, Hence Silk 
will succeed in taking the action against Satin Co. Ltd. 
However if it is noticed that Silk is involved in some transactions which will hinder the business 
of the Satin Co., then as per provisions contained in Section 124 can be applied and shares of 
Silk can be compulsorily undertaken. Following is the explanation of Section 124:- 
Section 124 Legal capacity and powers of a company 
A company has the legal capacity and powers of an individual both in and outside this 
jurisdiction. A company also has all the powers of a body corporate, including the power to: 
issue and cancel shares in the company; issue debentures (despite any rule of law or equity to the 
contrary, this power includes a power to issue debentures that are irredeemable, redeemable only 
if a contingency, however remote, occurs, or redeemable only at the end of a period, however 
long);grant options over unissued shares in the company; distribute any of the company’s 
property among the members, in kind or otherwise; grant a security interest in uncalled capital; 
grant a circulating security interest over the company’s property; arrange for the company to be 
registered or recognized as a body corporate in any place outside this jurisdiction; do anything 
that it is authorized to do by any other law (including a law of a foreign country).A company 
limited by guarantee does not have the power to issue shares. For a company’s power to issue 
bonus, partly—paid, preference and redeemable preference shares, see section 254A.A 
company’s legal capacity to do something is not affected by the fact that the company’s interests 
are not, or would not be, served by doing it.For the avoidance of doubt, this section does not:

Instructions: 1. Address each of the questions, clearly indicating which question your answer relates to. 2. Maximum 2,000 words in total. 3. Marks will be awarded or deducted for quality of...

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