Australian Corporate Law Case Study: Trump Development Limited

This case study analyzes a breach of the constitution by Trump Development Limited, focusing on the actions of its directors. The company, initially focused on real estate, sought to expand into casino developments, financed by overseas institutions, against its constitution's provisions. The case explores the conflict between the majority directors' expansion plans and a minority shareholder's conservative stance. It delves into the interpretation of Article 141 of the Australian Corporations Act, differentiating between a company's constitution and replaceable rules. The analysis considers directors' duties, including acting in the company's best interest and avoiding conflicts of interest. The study examines the implications of the directors amending the company's constitution and the resulting liabilities. It uses legal references to support its arguments.

Australian corporate Law 1
AUSTRALIAN CORPORATE LAW
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Australian corporate Law 2
Australian Corporate Law
Trump Development limited Company has breached its constitution by borrowing money
to expand its operations from overseas financial institutions against the company’s constitution
provisions that requires it to source financing from the Approved Australian Financial
Institutions. It is important to note that the company has 4 directors whereby the majority 3
directors are keen to expand the company’s portfolio to include Casino developments in
Caribbean, Atlantic City and Las Vegas. The company’s constitution allows the minority
shareholders in a company to negotiate their terms of relationship with the others as well as to
protect their interests. In this particular case, a more conservative director Hillary was not in
agreement with the other three Big Donald, Little Marco and Bernie to deviate from Core
Company’s objective of developing residential properties in Sydney Melbourne and other capital
cities.
Article 141 of the Australian Corporations Act, states that a company’s constitution is
clear and supreme than the replaceable rules because it provides the framework through which
the management of the affair of the company are anchored1. Replaceable rules can be enacted by
majority of the shareholders in the interest of the company but should not violate the
constitution2. In this particular case, one of the non-executive directors Slick Willy flouted the
provisions of the company’s constitution by seeking funding from overseas financial institutions
to enhance expansion of Trump Development Limited into casino markets which terrible failed
as a result of capital exhaustion. As a result the company ended up experiencing cost overruns in
1 Cassidy, Julie. Concise Corporations Law. St, Leichhardt NSW: Federation Press, 2006.
2 Australia. Australian Corporations & Securities Legislation 2011: Corporations Act 2001,
ASIC Act 2001, related regulations. Sydney: CCH Australia Limited, 2011.

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building the casinos therefore limit its capacity to continue its core operations in the real estate
sector.
Directors have the duty to act in the interest of the company by engaging in actions that
benefit the shareholders. They also have a duty to avoid a conflict of interest by engaging in
transactions for the sole purpose of improving the prospects of the company3. Looking at this
particular case, the three directors were acting in the interest of the company by expanding the
company’s portfolio to include casinos because that would earn Trump development more
revenues and profits. It is important to acknowledge that the company’s constitution generally
specifies the rules that govern the activities if the company, its directors and shareholders.
The corporations Act does not prescribe the rules that must be incorporated in companies’
constitutions. On that regard, the company through its directors can choose to modify the
provisions of the constitution through replaceable rules. This is done through a vote by the
directors and each of their votes carries equal vote4. The majority are supposed to pass any
constitutional amendment resolution. In this case, if the three directors amended the company’s
constitution regarding the financing of companies operation to include overseas financial
institutions, then they will not have violated the constitution and neither have they violated the
Australian corporations Ac. Once it has been proved that the directors were acting in the best
interest of the company, the resultant liabilities cannot be blamed on the company because they
took an investment risk whose outcome can either be positive or negative.
Bibliography
3 Roman Tomasic, Stephen Bottomley, Rob McQueen. Corporations Law in Australia. St,
Leichhardt NSW: Federation Press, 2002.
4 —. Corporations Law: Text and Essential Cases. St, Leichhardt NSW : Federation Press , 2013.

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Australia. Australian Corporations & Securities Legislation 2011: Corporations Act 2001, ASIC
Act 2001, related regulations. Sydney: CCH Australia Limited, 2011.
Cassidy, Julie. Concise Corporations Law. St, Leichhardt NSW: Federation Press, 2006.
—. Corporations Law: Text and Essential Cases. St, Leichhardt NSW : Federation Press , 2013.
Roman Tomasic, Stephen Bottomley, Rob McQueen. Corporations Law in Australia. St,
Leichhardt NSW: Federation Press, 2002.