Company Law An Interactive Approach 2nd Edition Ellie (Larelle) Chapple, Alex Wong, Richard Baumfield, Richard Copp, Robert Cunningham, Akshaya Kamalnath, Katherine Watson, Paul Harpur - Solutions

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Maidstone Pty Ltd (Maidstone) operates a quarry business. The company does not have its own constitution and relies on the replaceable rules under the Corporations Act. The company was formed by Mica and Feros and the shares in it are held as follows: Mica, 100 shares, Feros, 100 shares,
Stefan, Taichi, Siobhan and Felicia are directors of Hedonia Ships Ltd. Hedonia manufactures high- end yachts and is listed on the Australian Securities Exchange (ASX). Hedonia's bank is Baddington Bank Ltd. Hedonia has borrowed $10 million from Baddington Bank on an unsecured basis, which it is
Explain the distribution of funds and deregistration of the company. 1 What is a proof of debt form? 2 List the order of distribution of funds from a liquidation, from first to last. 3 How does deregistration of a company affect directors' and officers' liability?
Identify the different types of assets or compensation that a liquidator is empowered to recover. 1 List the assets of the company that are available to the liquidator. 2 What is a voidable transaction? 3 Under what circumstance can a creditor retain money or property when face with a demand from a
Describe the duties of a liquidator. 1 Who can appoint a liquidator? 2 List a liquidator's duties to the company. 3 List the powers of a liquidator.
Describe the process by which a company is liquidated. 1 What is involved in the liquidation of a company? 2 Under what circumstances might there be a members' voluntary winding up? 3 What are the effects of a creditors' voluntary winding up?
Virginia is a secured creditor of Infinitude Loans Ltd. Virginia has just received a notification that Infinitude Loans has appointed a voluntary administrator. She has no clue what this means for her. Advise Virginia on the following. (a) What does it mean when a company appoints a voluntary
Going for Broke Pty Ltd borrows $500000 from its bank. The bank is granted a security interest in some of Going for Broke's equipment. Going for Broke Pty defaults on the loan and appoints a voluntary administrator. Advise whether the bank is entitled to seize Going for Broke's equipment that is
Garbage Scramble Pty Ltd leases a warehouse owned by Landlordly Pty Ltd. The monthly rent is $5000. Oskar and Shankar, the only directors of Garbage Scramble, enter into a guarantee with Landlordly regarding Garbage Scramble's obligations under the lease. Garbage Scramble does not pay rent for 3
Queensland Rail Constructions Ltd (QRCL) purchases $2 million worth of wood for the Brisbane- Sydney rail line project from Tasmanian Timber Ltd (TTL). After installing tracks are installed between Brisbane and Robina, QRCL is unhappy to observe that the wood components have warped dramatically,
Explain the process of voluntary administration. 1 What is the purpose of a company entering voluntary administration? 2 What are the three possible outcomes once a company has entered administration? 3 What is a deed of company arrangement?
Explain what happens when a company is placed into receivership. 1 Explain what happens when a secured creditor appoints a receiver. 2 What powers does a receiver have? 3 What liabilities does a receiver have?
Explain what it means that a company is insolvent. 1 What is the statutory definition of insolvency? 2 Explain the circumstances in which the court may presume that a company is insolvent. 3 Explain what a statutory demand is and what happens if a company served with a statutory demand fails to
Consider the issue of value. What if the assets are insufficient to meet the amount owing? What if they are worth more than the debt? What happens?
In the statement of financial position of Retrofit Pty Ltd there is an asset called 'goodwill'. Is this worth anything?
Consider the financial impact on the company if it suddenly loses $986 000 of fixed assets. What asset might it have lost?
Has the company received a statutory demand and have court processes been implemented to collect the debt?
Have there been demands from bankers to reduce the overdraft?
Is there unpaid pay-as-you-go withholding (PAYGW) for employees' wages, payroll tax, work cover or superannuation?
Has there been an inability to produce timely audited accounts?
Have any special arrangements been made with creditors?
Are there post-dated cheques?
Do the suppliers want cash on delivery?
Has there been a history of dishonoured cheques?
Recall the following scenario from chapter 9.Kestrel Pty Ltd (Kestrel) is a small family company which operates a business breeding kestrels, eagles, falcons and other large birds of prey. Keenan, Chelsea and Campbell are all siblings and the only directors of Kestrel, and each owns 25 ordinary
Arjun, Delmar and Ferne are the directors of Aloha Pty Ltd. Arjun is the managing director, and Ferne was formerly a banker with an international investment banking firm. Aloha borrowed $10 million from Saskia, a friend of the directors who has extensive financial knowledge, and in return gave her
Joelle, Lee and Lim form a rock band called The Dash. The Dash becomes very successful and in order to better protect their assets, the band members decide to incorporate a company to own all of The Dash's intellectual property. Joelle, Lee and Lim allot themselves 1000 shares each, and each
Recall the following scenario from chapter 9.Stella, Marcus, Ioan and Magda are the only directors of President Watches Pty Ltd (President), a company that sells expensive antique watches. Each director holds one share and they are the only shareholders. The directors have been friends for many
Describe the general law remedies. 1 List the key personal rights to which an individual member of a company is entitled. 2 What actions may be pursued by a member for breaches of their personal membership rights? 3 What is a class action?
Explain the statutory derivative action remedy. 1 What is the statutory derivative action remedy? 2 Why was the statutory derivative action remedy included in the Corporations Act? 3 What conditions must be met if a court is to grant leave to bring a statutory derivative action?
Explain the statutory members' remedies. 1 What tests will a court apply when examining whether conduct is oppressive? 2 In what circumstances could a court find that it is just and equitable that a company be wound up? 3 What is an injunction?
Describe the purpose of members' remedies. 1 In what circumstances can majority shareholders effectively extinguish the rights of minority shareholders? 2 What actions can a member of a company pursue when their rights have been breached? 3 Why are public companies less prone than proprietary
Can Samantha take action against Julian and Bev or does the decision of the majority directors win?
Is there any problem with changing the company constitution to reduce the dividend rate for preference shareholders or to pay a dividend to ordinary shareholders, but not to preference shareholders?
Is there any problem with Julian and Bev each taking a $150 000 bonus?
Mirta Bine is invited to an industry lunch by the board of ASX-listed company Digger Minerals Ltd. Digger's main business is copper mining. When Mirta arrives at the lunch on Friday, three Digger board members tell Mirta they are celebrating, but won't tell her the precise details of the good news.
Which of the following transactions require the company to prepare a prospectus and lodge it with ASIC? (a) Alfred recently quit his job and wants to start a new small business using a proprietary limited company. He intends to fund it by issuing $10 000 of debentures to the public. Would it make a
Wombat Ltd is a large company that needs additional funds to supplement its working capital. It decides to issue additional shares to investors to raise those funds. Under which of the following scenarios would Wombat Ltd need to adhere to the disclosure requirements under Ch 6D of the Corporations
Contrast continuous disclosure requirements with insider trading. 1 What is meant by an 'insider' in the term 'insider trading'? 2 Besides direct trading in the company's securities, what other two types of trading activity could constitute insider trading? 3 What is a 'Chinese wall' in relation to
Compare the continuous disclosure requirements in the Corporations Act and the Australian Securities Exchange Listing Rules. 1 Briefly explain the rationale for continuous disclosure rules. 2 Explain the concept of 'material effect'. 3 List five examples of information that could have a material
Outline the consequences of defective disclosure. 1 What is defective disclosure? 2 What are the three types of statutory liability for defective disclosure? 3 Who can be held liable for defective disclosure?
Summarise the disclosure requirements related to fundraising. 1 List the five main types of disclosure documents in order from least information to most informative. 2 What is meant by the term 'anti-avoidance' in relation to disclosure? 3 Why are secondary sales of securities not generally subject
Describe the annual reporting responsibilities of companies and directors. 1 What are the main components of an annual financial report? 2 How does a directors' report contextualise information in the financial report? 3 How does an auditor's report help financial statement users? Managers?
Identify the regulatory bodies that administer disclosure requirements. 1 List the principal bodies, laws and rules that regulate disclosure requirements. 2 What is ASIC's role? 3 What is the purpose of accounting standards?
Discuss why and how information is publicly disclosed by companies. 1 What is the efficient market hypothesis? 2 Why does the Corporations Act impose disclosure obligations on companies? 3 Distinguish between periodic, specific and continuous disclosure.
How much information regarding Retrofit's operations, including the business negotiations for its purchase, would become publicly available?
What are the regulations that a subsidiary of a public listed company is subject to, and how different are they from the current requirements for Retrofit?
What does that mean? What reporting and disclosure requirements is Clean and Green Limited subject to?
Clean and Green Limited is a public listed company.
Larissa started a clothing business several years ago called Larissa's Leisure Suits. The business is owned by a company called LLS Ltd. The business is successful and Larissa wants to expand. As she needs additional capital, she wants to raise $5 million by issuing shares. One option Larissa is
Alex and Paco recently purchased a block of land in Surfers Paradise for $1 million. They want to develop the land by building an apartment block and selling the apartments at a profit. Unfortunately, Alex and Paco don't have the money to proceed with the development. Alex and Paco come up with a
Explain how lenders can secure their loans. 1 Why is it in the best interests of a lender to register their security interest for a loan? 2 List the priority of security interests, from highest to lowest. 3 Describe the difference between a circulating security interest and a non-circulating
Describe the features of debentures. 1 What is a debenture, as defined by the Corporations Act? 2 List the key characteristics of a secured loan. 3 Why might a lender seek a guarantee from a third party when making a loan to a company?
Explain the role of debt financing. 1 Under what circumstances could the directors of a company be personally liable for the company's debt in relation to debt financing? 2 What is trade finance? 3 Under what circumstances may a company be required to issue a disclosure document related to debt
Describe the different types of shares a company can issue, including equity crowdfunding. 1 What main rights are conferred by ownership of ordinary shares? 2 What main rights are conferred by ownership of preference shares? 3 What is the difference between cumulative preference shares and
Explain the concept of a share issue to finance a company. 1 Define a 'share'. 2 What is the difference between a share issue and a sale of shares? 3 Who determines if and when shares will be issued?
Discuss the broad issues to be considered in choosing between equity and debt to raise funds 1 What is equity financing? 2 What is debt financing? 3 Compare and contrast the costs to the company of choosing equity financing versus debt financing.
What are the implications for Julian and Samantha given the assets owned by each of them? Are these assets at risk? How would you advise them to protect the assets?
What is a personal guarantee?
Why will the bank want security for the loan?
What information will the bank need for the new loan?
Luke, Emily and Ekua run a fast food store in Varsity Lakes through Varsity Grub Pty Ltd, which sells fish and chips and other junk food primarily to local university students. They each own 100 shares and several other investors own another 100 shares between them. Luke, Emily and Ekua are Varsity
Banana Ltd is a public company that grows and sells bananas and other fruit in Western Australia. The directors of Banana Ltd are Mitchell, Kylie and Tao. Potato Ltd is a company which grows potatoes. Potato Ltd approaches Mitchell and Kylie proposing to use Banana Ltd's distribution network to
GV Milk Pty Ltd is a company which sells milk products in Gippsland, Victoria. GV Milk was started by Jill, Lizette, Allan and Kerry-they are all directors and each own 25 shares. They were all dairy farmers who owned neighbouring dairy farms before starting GV Milk. They figured that it would be
Carla Ltd, a New South Wales company, buys shares in Leesa Ltd, a Queensland company, and soon accumulates 19 per cent of the issued shares. Both Carla Ltd and Leesa Ltd are listed companies that trade on the ASX. The Australian Financial Review reports that a takeover bid is imminent. The board of
Wally and Alf know Dermott will vote in favour of changing the constitution because he also doesn't like Mal and, in any event, the company needs the money to undertake some long-overdue capital works. Advise Wally and Alf if they would breach any of their duties to the company by going forward
Mal, Wally and Alf are the only shareholders of Footy Pty Ltd. Each owns 30 shares. Wally and Alf are the only directors. Recently, Wally and Alf had an argument with Mal. It was so acrimonious that Wally and Alf want to change the company's constitution to prevent Mal from ever being a director.
Stella, Marcus, Ioan and Magda are the only directors of President Watches Pty Ltd (President), a company that sells expensive antique watches. Each director holds one share and they are the only shareholders. The directors have been friends for many years and they had all previously worked for the
Oriel, Lars and Reese are directors of Sweetie Pty Ltd. Sweetie owns and operates a very profitable confectionary retailing business. Reese owns 50 shares in Sweetie and Oriel and Lars each own 25 shares. Oriel and Lars have a bitter disagreement with Reese. Lars calls a board meeting and the
Kestrel Pty Ltd (Kestrel) is a small family company which operates a business breeding kestrels, eagles, falcons and other large birds of prey. Keenan, Chelsea and Campbell are all siblings and the only directors of Kestrel, and each owns 25 ordinary shares. Clause 15 of the constitution of Kestrel
Peta is a director of Quagmire Pty Ltd. Quagmire Pty Ltd is a joint venture company between Pewterschmidt Ltd and Lois Pty Ltd. Peta is a nominee director, nominated on to the board by Pewterschmidt Ltd. The managing director tells Peta that she must vote on the board to restrict the development of
Describe the penalties and remedies applicable to a breach of directors' duties. 1 What can a company claim for a breach of the directors' fiduciary duty if it brings an action under common law or equity? 2 Under what circumstances can ASIC seek the disqualification of a director for a breach of
5 Explain the statutory provisions relating to conflict of interest. 1 What two things does the Corporations Act forbid officers of a company from using their position for in relation to conflicts of interest? 2 Who is considered to be a 'related party' of a public company? 3 What must a director
Explain the duty of directors and officers to avoid conflicts of interest under common law. 1 Under what circumstances may a conflict of interest arise? 2 What is meant by 'taking up a corporate opportunity'? 3 What avenues can a director pursue if a conflict of interest arises?
Describe the directors' fiduciary duty to act for a proper purpose. 1 List the proper and the improper purposes for issuing shares. 2 What will the court consider when determining whether there has been a breach of the duty to act for a proper purpose? 3 What defence exists against a charge of a
Describe the directors' fiduciary duty to act in the best interests of the company. 1 How is the 'best interests of the company' defined? 2 Why is the directors' duty to act in the interests of an insolvent company's creditors considered 'an imperfect obligation"? 3 To what extent must company
Describe the directors' fiduciary duty to act in good faith. 1 What is meant by the duty to 'act in good faith?? 2 What issues must be considered in determining whether a director has acted in good faith? 3 What civil penalties may be imposed by ASIC for a breach of the duty of good faith?
What could Julian have done to avoid the problems currently facing Retrofit Pty Ltd?
What action could Julian or the company take?
Does the company have grounds to take action against Tom and Andy?
Elena, Dieter and Adira are friends who work together at a costume hire shop. While Elena and Dieter work in the store serving customers, Adira is a highly skilled costume designer and is responsible for purchasing new costumes. Together, the three decide to start a costume hire business
Regal Cinematic (Burleigh) Ltd owns and operated a cinema in Burleigh Heads on the Gold Coast. Patra, Yu Yan and Rebecca are the only directors of Regal. Patra was appointed the managing director due to her extensive knowledge about operating cinemas. Both Yu Yan and Rebecca are non-executive
Luis is a director of Papadapolis Ltd. Papadapolis Ltd sells toy dolls called 'Cute Kids'. The dolls are not selling well and the company is running low on working capital. To remedy the situation, Luis obtains an unsecured loan of $1 million. Luis thinks that the company will be able to pay the
Notable Stationery Pty Ltd is an Australian company that sells high-end stationery products. Unfortunately, sales have dropped recently. The company hires Rick Pen, a New York-based consultant, to advise it on how to increase sales. Rick is also appointed to the board of Notable Stationery as a
Little Gold Pty Ltd is a gold mining company. The directors of Little Gold are Johan, Bina and Levi. Johan is the managing director. Bina is a well-known gold miner and has a PhD in the geology of gold deposits. Levi was a former investment banker for a large multinational investment bank. Little
Explain the duty to avoid insolvent trading. 1 Under what circumstances may a director be held liable for a company's debts if the company cannot pay? 2 What is the rationale for the directors' duty to prevent insolvent trading? 3 What are the defences to a breach of the duty to prevent insolvent
Explain the defences available to directors for a claim of breach of the duty of care and diligence. 1 What is the 'business judgment rule"? 2 Why is the business judgment rule a legitimate defence? 3 What criteria would be considered in determining whether the business judgment rule defence
Describe the requirements of diligence. 1 In what ways can an officer of a company demonstrate diligence in going about their duties? 2 Under what circumstances will a director not be considered responsible for the action of a delegate? 3 Under what circumstances can an officer rely on the
2 Explain the standard of care required of officers in relation to the company's financial statements. 3 Why is an executive director expected to exhibit a higher standard of care than a non-executive director?
Describe the standard of care applicable to company officers. 1 List the minimum standards of care required of directors and officers, as established in Daniels v Anderson (1995) 13 ACLC
Explain the directors' duty of care and diligence. 1 What are the differences between the duty of care and diligence under the Corporations Act and under common law? 2 To whom is the duty of care and diligence owed? 3 What is 'the reasonable person test'?
Outline the duties and obligations of directors and officers. 1 What are the two broad duties of an officer of company under common law? 2 What are the nine duties the Corporations Act imposes on the officers of a company? 3 What penalties and remedies for a breach of an officer's duties can be
Was the relevant behaviour a 'business judgment'? If the director or officer has failed to properly monitor the company's activities, then this does not amount to making a 'business judgment' and hence the director or officer will not be able to rely on s 180(2).
Is it possible that the officer's judgment was affected by their personal interests in the matter?
Was the material information reasonably available to the director? Did the officer ask for the information or was it too difficult or expensive to obtain?
The competing demands on the board's attention. What other important issues were there for the board to consider?
The state of the company's business at the time. Did the directors understand the financial position of the company and could the company afford to enter into the transaction?
The director's confidence in exploring these matters. What is the knowledge of the officer?
The cost of obtaining the information. Was it costly to get the data or was it reasonably cheap and at hand?
The time available to obtain the information. How long did the officers have to consider the matter?

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Company Law An Interactive Approach 2nd Edition Ellie (Larelle) Chapple, Alex Wong, Richard Baumfield, Richard Copp, Robert Cunningham, Akshaya Kamalnath, Katherine Watson, Paul Harpur - Solutions

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