COMPANY LAWPart AIssueThe central issue in the given case is to determine if Grand Ltd can issue 5,000 newpreference shares on the same terms as existing preference shares.Relevant LawThe relevant statute governing the issue of the preference shares is Corporations Act 2001. Inaccordance with section 124 of this Act, the company has the right to issue various classes ofshares including the preference shares (Cassidy, 2013). However, as per section 254ACorporations Act 2001, the preference share issue may be conducted by the company only ifthe rights related to the same are clearly defined either in the constitution of the company orhave obtained approval through a special resolution. The various aspects on which there mustbe objective clarity are outlined below (Austlii, 2017a).Capital RepaymentSurplus assets and profits related participationNature of dividends (i.e. cumulative or non-cumulative)Voting rights associatedPriority in relation to dividend and capital payment when compared with other classof sharesAlso, in accordance with section 246C, issuance of preference shares on the same termswould alter the rights of the current preference shares (Austlii, 2017c).ApplicationIn light of the given facts, it is apparent that Grand Ltd (the “issuing entity”) has alreadyissued 5,000 preference shares after the registration through the special resolution routewhich has defined the rights of preference shares. In line with s. 254A, one possible mannerof issuance of preference share is based on the rights mentioned in the Constitution of thecompany which is not valid in the given case as the issuing entity’s Constitution is silent onfuture preference share issue. Thus, the company using special resolution of the members forissuance of incremental 5,000 preference shares can go ahead with the transaction exhibitedthe right granted by s. 124.However, since the company intends to issue them on sameconditions as existing preference shares, thus the rights of the current preference shareholdersmay be adversely impacted particularly at the time of bankruptcy or liquidation. Also,dividend payment may be adversely impacted and hence the approval from the existing1

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