Company Law: Reduction of Share Capital, Breach of Director's Duties, and Calling General Meeting

Running Head: COMPANY LAW
COMPANY LAW
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Name of the University:
Author Note

1COMPANY LAW
Answer One
Issue:
The issue that has been identified in the given scenario is whether Wealthy Ltd. can reduce its
share capital and the procedure involved in reduction of share capital.
Rule:
Section 256 A of the Corporations Act 2001 provides the rules that are necessary to be followed
by a company for the purpose of reducing its share capital.
A company can reduce its share capital in accordance with section 256 B of the Corporations
however such reduction:
 Has to be fair and reasonable to the shareholders of the company
 Must not prejudice the ability of the company to pay off the creditors of the company
 Reduction of share capital is approved under section 256C of the Act
For the purpose of reducing share capital a company requires the approval of the shareholders by
way of either ordinary resolution or by special resolution.
A company is required to notify the ASIC about the reduction of share capital before the meeting
of the shareholders is called. A company is obligated to notify the ASIC about the changes in the
structure of the company after the share capital has been reduced. In case of selective reduction a
company is required to provide a copy of the resolution to the ASIC.
Application

2COMPANY LAW
Thus in this case Wealthy Pty Ltd can successfully reduce the share capital by complying with
the provision as provided in section 256 of the CA. The company has to gain the approval of the
shareholders and must notify the ASIC about the change in the structure of the company post the
reduction
Conclusion
The company Wealthy Ltd can reduce its capital successfully
Answer 2
Issue
The issue that has been identified in the given scenario is whether Morris can take any action
against the directors of H Ltd.
Rule
It has been provided through the section 182 (1) of the Corporations Act 2001 that any director
or officer of a company must not use their position in the company improperly so as to gain a
benefit or advantage for themselves or to detrimentally affect the corporation.
According to section 183 of the aforementioned act it can be stated that any person who obtains
any information by virtue of being an officer, director employee of a company must not misuse
such information to gain personal advantage or to harm the corporation.
If it is assessed by the court that a party contravened the aforementioned sections, a declaration is
made by the court according to the penal provisions mentioned in section 1317 E of the