Corporations Law ACC204 Assignment
Added on 2020-03-16
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kaplan business school
CASE STUDY2 | P a g ePart 1IssueFrom the facts of this case study, the main issue which is highlighted is the possibility ofsuccessful action being raised by the grandchildren of Galli for the dividend not being paid forthis year. Rule Section 232 of the Corporations Act, 2001 (Cth) covers the provisions regarding oppressiveconduct or where the conduct is such which can be deemed as unfairly discriminatory of unfairlyprejudicial. Where the conduct under section 232 of this act is established, the court can awardremedies under section 233 of this act as a remedy to the undertaken oppressive conduct (Austlii,2017). Under section 233 the court can order the company to be wound up, or ask themanagement to do a particular task or refrain from doing something, and in this regard, thecompany can be asked to purchase or transmit the shares of an individual (Victorian Law ReformCommission, 2016).Thomas v H W Thomas Ltd (1984) 1 NZLR 686 is a case which proves to be of help here. Thecourt held in this case that the adoption of a conservative financial policy and not paying highdividends could not be deemed as oppressive where the majority have agreed to it and there is alack of factors which could point towards unfairness. In this case, the court presented three basicconditions which were required for making a case of oppressive conduct and for the remedies tobe awarded under the pertinent sections. These three conditions provide thatThe objective with which such conduct is undertaken has to result in such a conditionwhich can be deemed as oppressive, unfairly discriminatory or unfairly prejudicial;There has to be rationale expectations of the parties being left unmet; and Lastly, in case the remedies are used, it would be deemed as just, fair and equitable (NewZealand Official Law Reports, 2017). ApplicationThe case study given here shows that the awarding the dividends was option for themanagement. Hence, there was no compulsion for the company to declare dividends; and on this
CASE STUDY3 | P a g ebasis, A Class shareholders cannot claim an unjustness or unfairness. Applying the case ofThomas v H W Thomas Ltd: The objective of this was not to harm any shareholder but to purchase a vineyard whichwould help the company in expanding their business;The expectations of Mario and his siblings are unjust and seeing someone as lazy andundeserving cannot be rationally cited as oppression. If remedies under section 233 are awarded in this case, they would be unfair for theparties. Conclusion In short, owing to the lack of oppression, the claims of grandchildren of Galli would fail. Part 2IssueFrom the facts of this case study, the main issue which is highlighted is the conditions revolvingaround buyback and its benefits for the company. Rule Buyback of the shares can be best defined as the company repurchasing its shares (Gibson andFraser, 2014). This can be done for various reasons, including increasing the ownership of thecompany; taking advantage of the undervalued shares of the company; bringing down thedilution; and increasing the key financial ratio of the company including the earnings per sharesand return of equity (Kandarpa, 2016). The ASIC, i.e., the Australian Securities and Investments Commission and the Corporations Act,2001 cover the legislative requirements for the shares to be brought back. Division 2 coveredunder Part 2J.1 of the Corporations Act provides the procedure and the requirements which haveto be undertaken for buyback of the shares (Federal Register of Legislation, 2017). Further,based on section 257A of this act, the disclosure requirement details are covered and in thisregard, ASIC’s Regulatory Guide 75 covers the valuation requirement based on the report of theindependent expert (ASIC, 2007).
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