(1) Can a small-holding (minor) shareholder have an influence on how a company is managed? What are the main restrictions and are the number of shares held relevant?
(2) Morris, John and Paul are directors and shareholders of Noosa Property Developments Pty Ltd (NPD), a property development company which owns and operates a restaurant. Morris and John are brothers. John and Paul are friends and partners in an accounting firm. Morris is an unemployed artist and sole parent of three young children. The total number of issued shares in NDP is 6,000 ordinary shares. Each shareholder has 2,000 shares. All the shares are fully paid. NPD has been very successful but has not paid any dividends to its members for the last two years. Profits have instead been invested in further development projects. Morris' wife has recently died and he is very short of money to look after his family. He approaches John and Paul and asks them to consider whether NPD could begin to pay dividends again to its members. John and Paul refuse to consider Morris' request as it would upset the "long-term goals of NPD." Morris is upset by this response and announces that he wants to sell his shares. John and Paul refuse to buy him out and demand that Morris resign as a director because he has lost his objectivity. Morris resigns reluctantly. He asks to see NPD's most recent set of financial statements. John and Paul refuse to provide the information. Morris discovers accidentally that NPD has been paying large "management fees" to John and Paul's accounting firm. Morris consults you as his legal adviser. He wants to know:
(i) Should he bring a derivative or personal action against John and Paul? What factors should he take into account in making this decision? Identify whether there is a derivative action (proceedings on behalf of the company) and explain the relevant law applicable.
(ii) If he brings a personal action, should he bring it under the general law or make an oppression claim under S.232? What factors influence your recommendation? What evidence in the question is relevant to deciding if oppression exists?
(iii) What orders should he seek
(3) What is a company takeover? What interests does the Corporations Act seek to protect? Does it make any difference to the operation of the law if a takeover is conducted via the stock exchange?
(4) What legal obligations apply to directors during a takeover? Does liability attach to other persons whose statements appear in a takeover document.
(5). A Ltd has held 19.9% of B Ltd (a company listed on the Australian Stock Exchange) for two months. The directors of A Ltd wish to gain control of B Ltd as soon as is possible and are considering making an offer to the shareholders of B Ltd. The offer they wish to make is one share in A Ltd plus $1.00 in cash for each share in B Ltd.
What issues concerning the law in relation to takeovers do these facts raise and what must the directors of A Ltd do to achieve their aim?
(6) Solly is a well-known investment adviser. He is selling his luxury motorboat to Mr Lock, the CEO of a large public company. Solly phones Mr Lock and threatens to sell his boat to someone else unless the deal is done soon. Mr Lock says to Solly "Don't say anything but our company is just about to be taken over by Telstrate the largest communications company in Asia, once that is done I will have the $10 million in cash" The next day Solly buys $100,000 worth of Telstrate shares at $5 per share. When news of the successful takeover is publicised the shares rise to $10 per share. Solly sells and makes $5 profit per share. Is this insider trading? Explain your answer.