Nimit, Deepa, Shang and Libo propose to create an insurance company, Australasia Insurance Glory Pty Ltd (Glory). For this purpose, Nimit and Deepa were in charge of registering the company with ASIC, while Libo was asked to find suitable premises for the business. Shang is not involved in the creation of the company. However, there is an understanding that Shang will receive $6,000 from the creation of the company.
Before the registration of the company is completed, Libo entered into a contract to lease the premises from Landlord Ltd for $4,000 a month. The contract was signed by Libo, on behalf of Australasia Insurance Glory Pty Ltd. Two weeks later, the company is formed and the board of directors of the company consists of Nathan (as managing director), Nimit (as non-executive director), Max (as chairman) and Mitra (as non-executive director). Libo presents the contract to the board. However, the board does not wish to be bound by the contract because the company can lease the same premises for $1,500 a month. Further, the board of directors discovered that Shang and Deepa made a profit of $50,000 each from the creation of the company. This amount was not declared to the board of directors. The board would like to know if they can recover this amount. The directors are keen to raise more money quickly and, as a result, the board of directors passes a resolution to raise capital by issuing debentures to members of the public. On the urging of the directors, Nathan puts an advertisement in Australian Financial Review for interested investors detailing the rights and obligations that come with the debentures. Kushmani (a member in Glory who holds 6 per cent of the votes in the company) wishes to call for a members' meeting to:
• remove Nathan from his position; and
• force the board of directors to sell certain assets that are causing the company to lose money.
The board would like to know if they need to call for the meeting, especially when they know that the proposed resolutions will not pass.
Advise Landlord, the promoters, Kushmani, Glory and the directors of the company on their rights and obligations.