MOOT QUESTION Dollar Sweets Developments Ltd was incorporated on December 2016 and was floated on...

Question

MOOT QUESTION

Dollar Sweets Developments Ltd was incorporated on December 2016 and was floated on the Australian Securities Exchange (ASX) in June 2017. The company raised $100 million from investors. Dollar Sweets Developments Ltd is primarily involved in the building of shopping centres in Sydney and Melbourne CBD. The company has its own constitution and internal rules which provide that the company’s mission is to develop shopping centres in Sydney and Melbourne CBD. The constitution further provides that the company is not to engage in overseas development unless it receives board and member approval at the general meeting of members. The constitution also states that finances are to be received only from approved Australian financial institutions.

Dollar Sweets Developments Ltd has 4 directors:- Malcolm Blight Trumbell (Chief Executive Officer). William Jeffersen Shorting, Black Jack McEwen and Robert Lee Falcon are non-executive directors. Black Jack is also the company’s secretary.

At a recent board meeting, the board of directors considers whether to expand its development activities into residential apartment developments. William and Robert are keen to expand into residential apartment developments both domestically and overseas. Malcolm, who is a conservative director disagrees vehemently with Shorting and the Falcon and suggests they stick to shopping centers only. Black Jack tells the board he can arrange cheap finance from overseas to expand the business into residential apartment development, especially if the company builds in the United States.

After entering into a series of residential apartment developments in Las Vegas (USA) and New York City (USA)

in 2018 the company exhausts all of its capital following considerable cost overruns in building the residential apartments. The company never received member approval for the residential apartments, nor did the company receive member approval for overseas funding.

Question:

1.HAS THE COMPANY BREACHED ITS CONSTITUTION WITH RESPECT TO THE BORROWING OF FUNDS FROM OVERSEAS FINANCIAL INSTITUTIONS? PLEASE USE RELEVANT CASES AND/OR RELEVANT SECTIONS FROM THE CORPORATIONS ACT.

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Akansha · Accepted Answer

Moot Court Exercise 
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Question- Has the company breached its constitution with respect to the borrowing of funds from overseas financial institutions? Please use relevant cases and/or relevant sections from the corporations’ act.
Answer- In the given case, there is a company which has drawn out a constitution which clearly specifies that the company cannot take certain decisions without holding a meeting and getting favorable votes in that favor. There were certain decisions taken in regard to borrowing finances and areas of operations which shouldn’t have been implemented without running them and getting them approved in the meeting for board members. As a consequence of bad decisions and business uncertainties, the business almost went bankrupt.
The issues identified– Till what extent is the constitution of a company binding upon the directors of the company? What happens when the constitution is not followed through? Another issue at this point is what happens if a general meeting isn’t kept when it should be?

MOOT QUESTION Dollar Sweets Developments Ltd was incorporated on December 2016 and was floated on the Australian Securities Exchange (ASX) in June 2017. The company raised $100 million from investors....

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