Part A: Problem Question (500 words) 5 marks and 5% of the subject
The case selected relates to legal principles that are covered in the unit. The second part of the written assessment is based on a hypothetical factual situation relating to business transactions within a business structure. Students are required to discuss and analyse the likely outcomes for the parties concerned, including their rights, obligations and remedies, identifying the legal issues and applying legal principles to the hypothetical scenario.
Jean, Aldrin and Sanal are executive directors and equal shareholders of ‘Grand Rialto Pty Ltd' (Rialto), an Australian east coast residential development company which builds townhouses in the trendy inner suburbs of Brisbane, Melbourne, and Sydney. Jeans works in sales and marketing, and Aldrin and Sanal in legal and finance respectively. Aldrin and Sanal are also non-executive directors and equal shareholders in a business consultancy company called ‘A&S Consultants Pty Ltd' (AS).
Rialto has never distributed a dividend despite it being very profitable. Jean wants to buy a 2017 Jaguar F Type sports car, but his salary package is not enough to buy the sports car. At the next director's meeting he puts a motion to the board to distribute a $100,000 dividend to each shareholder. However, both Aldrin and Sanal vote against a dividend distribution and tell Jean that the business is still growing and in need of funds. Jean wants to see the most recent financial statements, but Sanal claims that the statements have not yet been finalised.
Jean really wants the sports car so he offers Aldrin and Sanal his shares for a reasonable $100,000. The shareholder's agreement limits the sale of shares to existing shareholders at a reasonable price. However, Aldrin and Sanal decline Jean's offer and pass a motion at a shareholders meeting that Jean be dismissed as a director because he is acting in an erratic manner and not fit to be a director.
As Jean begins to clear out his desk, Richelle, the bookkeeper, hands Jean the most recent financial statements that show that AS has been paid $300,000 in consultancy fees in the last 3 months. Jean is furious over his dismissal and the AS payment because he believes that the payment is unreasonably excessive.
Solve the issues as to whether Jean has any rights, obligations, and remedies in the circumstances.