Share Capital Reduction and Class Shares

This assignment delves into the complexities of share capital reduction for FWPL, a hypothetical company seeking to reduce its share capital. It examines two primary avenues: dividend distribution utilizing profits and a reduction of share capital. The analysis emphasizes the legal framework governing these actions under Australian law, particularly the Corporations Act 2001, including relevant sections and their implications for shareholders. The assignment also explores potential challenges and considerations FWPL directors must navigate when implementing either strategy.

Running head: COMMERCIAL AND CORPORATION LAW
Commercial and Corporation Law
Name of the Student
Name of the University
Author Note

1COMMERCIAL AND CORPORATION LAW
Table of Contents
Question 1........................................................................................................................................2
Issue.............................................................................................................................................2
Rules............................................................................................................................................2
Application..................................................................................................................................2
Conclusion...................................................................................................................................3
Question 2........................................................................................................................................3
Issue.............................................................................................................................................3
Rules............................................................................................................................................4
Application..................................................................................................................................4
Conclusion...................................................................................................................................4
Question 3........................................................................................................................................5
Issue.............................................................................................................................................5
Rules............................................................................................................................................5
Application..................................................................................................................................5
Conclusion...................................................................................................................................6
Reference.........................................................................................................................................7

2COMMERCIAL AND CORPORATION LAW
Question 1
Issue
According to the case study the fact is Galli grandchildren become angry on the board of
directors of GML because they both have decided of not providing dividend amount of A class
share holder in present year where they want to invest the dividend amount with the fund of the
development of the organic vineyard at Robinvale.
Rules
The corporation act has provided the right for the shade holders where they must have
their dividend amount as basis of the section 254W. The dividend amount is must distributed
among the shareholders who holds in A class of shares and the others share holders of the
company has seem right of having the dividend amount (Dent 2014).
Therefore as per the study it also found that the board of directors of GML also not able
to take any decisions about the distribution of dividend amount to share holder in present year.
However Galli grandchildren think that as they are share holder of the company therefore they
must have the dividend amount (Dent 2014).
Application
Dividend amount is the basic right for the share holders who hold the shares of the
corporation as per the corporation act 2001 of Australia. The dividend amount is earned by the
corporation out of expenses and it distributed among the share holders of the company (Graetz
and Warren 2016). This is the right of the share holders to claim their dividend amount. The
distribution of dividend amount has lies for the duty of the director that they must take all the

3COMMERCIAL AND CORPORATION LAW
initiative steps to provide equally among the share holders of the company. Not only dividend
amount but the corporation has also legislative rights to distribute the partly paid shares and
permanent shares from the earning of the corporation among the share holders of the company
(Legislation.gov.au, 2017).
The share holders have rights to attend the annual general meeting with the director
proposed report and others information related the company and the share holders has must
participate in such activities where the can provide suggestions about the proposed report and
claim their dividend amount (Dent 2014).
Therefore according to the case facts Galli grandchildren have found that the director of
GML has breach their duties to the share holders of the company. They have breached the
section 181, 182, 183 and 184 of the corporation act 2001 (Graetz and Warren 2016).
Conclusion
Now they can take legal action against the board members of the company in respect of
nonpayment of the dividend amount. The directors of the company has decided that not to pay
the dividend amount to the Galli grandchildren and instead of that they want to use the dividend
capital amount for the development of the organic vineyard at Robinvale (Tricker and Tricker
2015).

4COMMERCIAL AND CORPORATION LAW
Question 2
Issue
The share buybacks is one of the most benefit it process of buying shade under the
corporation at now at FWPL Mario and Nick Galli are want to invest on the share by back
process.
Rules
It is a process which helps company to make more benefit out of their own stock of
shares. The company makes an offer to buy their own share from the shoulder take the same
company and later they will again sold back the same share with the shade holders
(Legislation.gov.au, 2017).
Application
In the process the company will make offer with the share holders to buy shares from
them and after same shares are again getting back to the corporation then they can cancel to deal
with the share holder about the share. But to dealing with share buybacks the private companies
have equal access to buy such shares from the other share holders and in the process they can
only able to select particular set of shares which is only make offered for the selected share
holders (Tricker and Tricker 2015). The dividend component and capital component is mainly
used for the processing of share buybacks. Therefore in this process the company lowering the
share numbers the share buybacks process helps to earn more benefits and while increased the
share prices the corporation can get back the capital amount to the share holders or any other
investors who are related to the company (Graetz and Warren 2016).

5COMMERCIAL AND CORPORATION LAW
Conclusion
It is also recognized as one of the best strategic process under the corporation at where
the company makes the best profitable benefit from the stock and surplus cash to the investors
which also make sure to believe them that company is able to pay any share amount to the
investors (Legislation.gov.au, 2017).
Question 3
Issue
According to the case fact alternatively if FWPL want to get rid of the a class shares by
way of a reduction of capital.
Rules
They must follow the corporation at the section 256B of corporation act has stated the
legislation about the reduction without the authorization is not possible by the company itself
(Graetz and Warren 2016). Therefore it only makes it applicable if the company itself makes
reduce of the share capital amounts with a favor and reasonable reason to the entire share holder.
The section 256C of corporation at also stated the provisions that the share holders must reduce
of the share capital (Tricker and Tricker 2015). However the corporation has right to cancel the
share without any consideration on the matter of the reduction of share capital must satisfy all
the terms of the corporation at otherwise it will not applicable of the production of share capital
(Dent 2014).
Application
Therefore recording to the corporation at the reduction of the share only able to process is
the company want to reduce the equal shares to share holders and not selected the production

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they which will be only applicable for each and every holder of ordinary shares in the company
(Legislation.gov.au, 2017). The ordinary shares only help to reduce as for the profit of the
company because the process of the reduction of the amount will be equal for every ordinary
share holders of the company. Therefore if any problem or issues has been arises from the
corporation then it will not make the reduction of the share amount and the conditions applicable
for the selective share holders who hold the selective reduction only (Graetz and Warren 2016).
Conclusion
FWPL company directors are wanted to reduce the share capital from the shareholders.
They must propose a form 2560 notification where they provide the notice of the meeting to
pass the resolution for the reduction of the share capitals and submitting every document which
are related to the reduction (Tricker and Tricker 2015).

7COMMERCIAL AND CORPORATION LAW
Reference
Alstadsæter, A., Jacob, M. and Michaely, R., 2017. Do dividend taxes affect corporate
investment?. Journal of Public Economics, 151, pp.74-83.
Dent Jr, G.W., 2014. Corporate Governance Without Shareholders: A Cautionary Lesson from
Non-Profit Organizations. Del. J. Corp. L., 39, p.93.
Graetz, M.J. and Warren, A.C., 2016. Integration of corporate and shareholder taxes.
Grinblatt, M. and Titman, S., 2016. Financial markets & corporate strategy.
Knepper, W.E., Bailey, D.A., Bowman, K.B., Eblin, R.L. and Lane, R.S., 2016. Duty of Loyalty
(Vol. 1). Liability of Corporate Officers and Directors.
Legislation.gov.au. (2017). Corporations Act 2001. [online] Available at:
https://www.legislation.gov.au/Details/C2013C00605 [Accessed 22 Aug. 2017].
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices.
Oxford University Press, USA.