Corporate Law Assignment: Analyzing Shareholder Actions and Duties

This corporate law assignment addresses two key questions concerning Diverse Holdings Pty Ltd and JD Roar Pty Ltd. The first question analyzes whether the majority shareholders of Diverse Holdings acted oppressively, breaching section 232 of the Corporations Act, and if they breached equitable limitations in amending the constitution. It examines the application of relevant case law, including Wayde v New South Wales Rugby League Ltd and Gambotto v WCP Ltd. The second question assesses whether Chandler, Bob, and Tanya violated their statutory duties and failed to disclose conflicts of interest, as outlined in sections 180, 182, 191, and 192 of the Corporations Act. The analysis considers the roles of Chandler, Bob, Tanya, Angela, Jess, and Max in relation to the company's operations and potential breaches of director's duties, including the case of Chew v R and Chameleon Mining NL v Murchison Metals Ltd.

Running head: CORPORATE LAW
CORPORATE LAW
Name of the Student
Name of the University
Author Note

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Question 1
Issue 1
The issue to be discussed would be whether the majority of the shareholders in the
Diverse Holdings Pty Ltd acted in an oppressive manner which would constitute as a breach of s
232 for the constitution amendment.
Law 1
According to the s 136 (2) the company has the authority to modify and alter its
constitution and such should be done with the approval of the members with the help of special
resolutions. It has additionally been stated that even with compliance to such section if the
amendment has been made it can be invalid on the grounds of oppression.
According to s 232 of the Pt 2F 1 of the Corporations Act a breach would be established
if the behavior or the conduct of the affairs of the company were contrary to the proposed
resolution to that of the interred company as a whole or it was considered to be oppressive and
prejudiced against members or a particular member.
It can be understood from the case of Wayde v New South Wales Rugby League Ltd
where a test was conducted to establish for oppression. The results of that test stated that if a
director acts in a way as any other director would in that position then there would be no breach
or oppression.
Application 1
In the case of Wayde v New South Wales Rugby League Ltd there was a rugby league
competition and the constitution of the league stated that the purpose of the league would be to

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work and promote according to the best possible interests of the league. It also authorized the
directors to decide the participations of the clubs who would be able to play. The directors
decided that Western Suburbs would not be participating in the competition which was unfair
discrimination. In this case, the court had held that there was no breach of s 232 even though
there was discrimination but the directors had not been unfair to the team as they had acted
according to the best interests of the company. The solution was to reduce the number of
participants in the league. Therefore, from the above analysis it can be understood that if the
directors act in the best interests of any corporation then there would not be any breach according
to the above-mentioned section. In this particular scenario, the shareholders had 50% of their
assets in Hayden Street property. According to the constitution of the company it had been stated
that the above mentioned property up to a specific amount without ant rent. Therefore, it can be
understood that since this was in accordance to the benefit of the commercial interest of the
company such did not constitute as a breach.
Conclusion 1
Therefore, there was no breach of s 232 of the above-mentioned Act as such was in the
benefit of the commercial interest of the company.
Issue 2
The issue that is to be discussed in this part would be whether the majority of the
shareholder in the Diverse Holdings constituted as a breach of the equitable limitation for the
amendment in the constitution.

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Law 2
According to S 136 (2) of the Corporations Act the amendment of the constitution can be
modified through passing of special resolutions. However, the regulation would impose
limitations which would be known as equity limitation on the majority of the voting powers in
order to protect the interests of the minority shareholders. If the amendment would be considered
to be resulting in some kind of advantage even then such would not necessarily breach the
equitable limitation.
According to this Biala Pty. Ltd. & Anor v. Mallina Holdings Ltd. (1993) 11 ACSR 785
it can be understood that if a resolution has been passed with respect to the company and if such
power or authority does not lie with the shareholders then the resolution would be considered to
be void due to equitable limitation.
It can be understood from the Gambotto case where the court established the test which would
help in accessing the amendment’s validity if such gives rise to the conflict among the members.
The amendment would be valid only if it is done through proper purpose.
Application 2
According to the Gambotto case if there has been any amendment made under the
constitution if the majority of the members should agree upon the company then such and if it
rises conflicts between the members then it might not be valid. The validity would be through
fairness and reasonable way. If the amendment is for a proper or reasonable purpose and agreed
upon by majority of the members then such would be valid. In the particular scenario, there were
property which was rent free. The company was thinking of expanding their operations. One of

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the members proposed to get rent value for the property independently valued. It was denied by
Emma and Liz. Emma after such had proposed to pay rent on all the leases of the Hayden Street
Property which would make the members pay rent for the commercial space or instead vacate the
premises within two months time period. It was agreed by nine members out of ten which made
it a majority of ninety percent. Liz had objected. From this scenario, it can be understood that the
amendment was made in a reasonable way and with a proper purpose therefore, such was valid.
There was no equitable limitation in this scenario since the members had the power or the
authority to pass a resolution and such resolution was for the benefit of the company.
Conclusion 2
Therefore, it can be understood that the amendment to modify the Constitution was valid
and agreed upon by majority of the members and such was done with proper purpose.
Question 2
Issue 1
The primary issue in this regard is that whether Chandler and Bob have caused the
violation of their statutory duty in order to evade conflicts.
Law 1
Section 9 as provided in the Corporations Act of the year 2001 states that the term
‘director’ may include individuals, who are not validly elected as director, however, they
perform the responsibilities of directors, and are generally called the de-facto directors.
Section 180 (1) as provided in the Corporations Act of the year 2001 states that the
directors who are a part of the company need to work with due care and diligence and properly
conduct and carry on their duties which would be for the benefit of the company.

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Section 182 as provided in the Corporations Act of the year 2001 states that any
particular director, employee, secretary or officer shall not utilize the positions that they hold in
an improper manner, in order to secure benefits for themselves or become the reason for any
harm or disadvantage to the organization.
In the case of Chew v R, it was mentioned that the duty in relation to good faith mandates
the directors of organization to perform the responsibilities in an honest manner and exercise the
authorities and powers for the welfare and betterment of the organization.
Application 1
In the given scenario, Chandler is the company secretary of the organization named JD
Roar Pty Ltd. Chandler and Bob is also the owner of the organization named Bigfoot Pty Ltd.
This fact was not known by the other officials in the JD Roar Pty Ltd. Chandler and Bob also did
not disclose the matter that the register regarding conflict disclosures was outdated.
Applying the rule as provided in section 182 of the Corporations Act of the year 2001, it
may be stated that Chandler, the company secretary, and Bob, the managing director, of the JD
Roar organization have contradicted the aforementioned section, and have utilized their position
in order to secure benefits for themselves and caused disadvantage to the organization named JD
Roar Pty Ltd.
Applying the rule as provided in the case of Chew v R, it may be stated that Chandler and
Bob have not performed their responsibilities in an honest manner and did not utilize their
authorities for the welfare and betterment of the organization named JD Roar.
Angela, Jess and Max were non-executive directors and they did not attend the meetings
on a regular basis. They depended on Bob, Tanya and Chandler to carry out the duties as non-

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executive directors. Therefore, Angela, Jess and Max were breaching the duties of the directors
under section 180 (1).
Conclusion 1
In conclusion, it may be said that Chandler and Bob have caused a violation of their
statutory duties in order to evade conflicts.
Issue 2
The primary issue in this regard is that whether Chandler, Bob and Tanya caused a
violation of their responsibilities by failing to disclose the conflict of interests regarding
themselves, as provided in section 191 of the Corporations Act of the year 2001.
Law 2
Section 191 as provided in the Corporations Act of the year 2001 states that the directors
of an organization are accountable to inform and alert other directors of that particular
organization regarding any private interest when there is presence of a conflict. It provides that
any particular director of an organization having any kind of private interest regarding any matter
in connection to the activities or undertakings of that particular organization, must deliver a
notice to other directors of that particular organization.
Section 192 as provided in the Corporations Act of the year 2001 mentions that the
aforementioned Act allows any particular director of an organization who may have any private
interest, to deliver a ‘standing notice’ regarding the level and nature of that particular interest as
per the aforementioned Act.
In the case of Chameleon Mining NL v Murchison Metals Ltd, it was held that the
accused held a fiduciary position and hence violated the statutory responsibilities of the directors.

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It was held that the conduct of the directors caused a violation regarding ‘conflict of interest’ and
responsibilities related to secret gains and profits.
In the case of McGellin v Mount King Mining NL, it was stated that whether any
particular interest shall be considered as a substantial private interest, is determined by the fact
that whether that particular director has any kind of beneficial interest, for instance, through
shareholding.
Application 2
In the given scenario, Chandler is regarded as company secretary, and Bob is regarded as
the managing director, of the organization named JD Roar. Tanya is only a senior executive of
the aforementioned organization, although she contributes significantly to the organization.
However, unbeknownst to other officials of the organization, Chandler, Tanya and Bob hold
shares in the organization named Bigfoot.
Applying the law as provided in section 191 of the aforementioned Act, it may be said
that Chandler, Bob and Tanya have not informed or delivered any particular notice to JD Roar
organization regarding their owning of shares in Bigfoot organization.
Applying the rule of section 192 of the aforementioned Act, it may be said that no
‘standing notice’ is delivered by Chandler, Bob or Tanya regarding the extent and nature of their
interests in Bigfoot.
Applying the rule of Chameleon Mining NL v Murchison Metals Ltd, it may be said that
the actions of Chandler, Bob and Tanya caused a violation of ‘conflict of interest’ and
responsibilities regarding secret gains.

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Conclusion 2
In conclusion, it may be said that Chandler, Bob and Tanya have caused a violation by
failing to disclose ‘conflict of interest’ to other officials.

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References
Chameleon Mining NL v Murchison Metals Ltd, (2010) FCA 1129
Chew v R (1992) HCA 18.
Corporations Act 2001 (Cth)
Gambotto v WCP Ltd (1995) 182 CLR 432.
McGellin v Mount King Mining NL (1998) 144 FLR 228
Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459