Legal Regulation of Business Structures

Legal Regulation of Business Structures
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Contents
Question 1..................................................................................................................................3
A. Recommend Salman, what the procedure for changing a company constitution is, and
whether she can prevent the inclusion of the section allowing the directors to expropriate her
shares?........................................................................................................................................3
B. Recommend Melanie, what alternative, if any, she has for the non-payment of her monthly
payments for the rest of her 12 month contract?........................................................................4
Question 2..................................................................................................................................5
A. Counsel Archibald whether the directors of Chip-Eze Pty Ltd have breached S 181 of the
corporation act 2001 (Cth) or the equivalent equitable duties and what penalties or remedies
might be relevant........................................................................................................................5
B. Advise Faizah whether she has an action against Jordon for breach of directors’ duties for
selling her the shares in Chip-Eze Pty Ltd just prior to it was going into liquidation...............7
Reference List............................................................................................................................9
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Question 1
A. Recommend Salman, what the procedure for changing a company
constitution is, and whether she can prevent the inclusion of the section
allowing the directors to expropriate her shares?
The directors of the company decided to change the company constitution in this case to buy
back shareholdings that are less than the amount of 12 per cent and as Salman had 10 per cent
shareholding her status of shareholder was being purchased back by the organisation. In this
section the method of changing of constitution in a company under the Company Act 2001 is
going to be discussed. The exploration of this section is going to serve as a basis of advice for
Salman regarding her possible efforts that can help in the prevention of the change in the
constitution. It is notable to mention that the directors of the company Astounding gifts Pty
ltd decided that Salman who is an employee of the organisation was going to be provided
with 10 per cent of shareholding within the organisation1. The conflict arose when the
directors gathered information regarding the fact that Salman also took job position as an
accounted in a rival organisation that is Gifts Pty Ltd. Moreover there was also information
regarding the fact that she was trying to act against the interest of the company by trying to
persuade the chief supplier of the organisation Malanie. Malenie was a local handmade craft
gift designer who was the chief supplier of the organisation.
There is a certain process for changing the constitution within an organisation as par the
Corporation act 2001. The constitution of a company is served as the primary contract
between all the individuals working within the organisation. However there are choices of
either having a constitution or a replaceable rule. But as par the case study there is clear
evidence that the organisation has formed its constitution2. After the formation of a
1 Hanrahan, P.F, I. Ramsay and G.P Stapledon, Commercial Applications Of Company Law /
Pamela Hanrahan, Ian Ramsay, Geof Stapledon. - Version Details (2014) Trove
2 Clarke, Thomas, The Evolution Of Directors Duties: Bridging The Divide Between
Corporate Governance And Corporate Social Responsibility - Thomas Clarke, 2007 (2007)
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constitution any change in the constitution can be made after a notice of 21 days as it is a Pty
Ltd company. At least 75 per cent of the votes have to be in favour of making the change.
Salman is a 10 per cent shareholder of the organisation and as mentioned before after the
formation of a constitution to make any alteration in it there has to be a 21 days’ notice that
has to be provided to each of the stakeholders of the organisation 3. So intimation has to be
given to Salman before any change was to be made but the change in the constitution was
done by the directors immediately without giving any information to Salman. Salman also
has a voting right in the proposed alteration however this is not going to be effective in this
case because 75 per cent of votes are only required for the implementation of any change and
as both the directors Kody and Ryder holds 45 per cent of the share each they are likely to be
able to successfully pass their resolution4.
B. Recommend Melanie, what alternative, if any, she has for the non-
payment of her monthly payments for the rest of her 12 month contract?
Melanie is the chief supplier of the organisation. A contract was formed between Melanie and
Ryder for supplying of her gifts and handmade crafts for a period of 12 months in exchange
of a monthly payment of $ 5000. This contract was signed on 26th of April 2018. The contract
was formed between Ryder, the director of the company and 45 per cent shareholder of the
organisation and Melanie. From the 12th of May 2018 they started their monthly payment. On
12th of July they were informed regarding the breach of contract on the part of Melanie. They
were as informed that Melanie on provocation of Salman was also supplying product to a
rival company even though she was in an exclusive contract agreement with the
3 Waring, P, Directorship And Officer Services (2018) Tmf-group.com <https://www.tmf-
group.com/en/services/companies/corporate-secretarial/independent>
4 MARSHALL, SHELLEY and IAN RAMSAY, STAKEHOLDERS AND DIRECTORS’
DUTIES: LAW, THEORY AND EVIDENCE (2012) austlii.edu.au
<http://www.austlii.edu.au/au/journals/UNSWLJ/2012/12.html>
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