In 2015 two garden landscape businesses ('Ground Level' run by Mac and Michael; and 'Green Design'...

 

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In 2015 two garden landscape businesses ('Ground Level' run by Mac and Michael; and 'Green Design' run by Leonardo, Winston and George) joined to form GD Pty Ltd ('GD'). Its main business is the supply and installation of garden sculptures and water features. All had experience in garden design and landscaping. For the purposes of start-up capital, the company issued 22,000 shares at $1 each. Mac, Michael, Leonardo, and Winston took up 3000 shares each, and George took 10,000. At the company's first meeting Mac and Michael were elected directors. GD has become a successful company with a good reputation in garden landscaping. Mac and Michael (who are still directors), and Leonardo and Winston, have all become wealthy as a result of the business, however, George has had various personal setbacks and is in financial difficulty. Although the company has not paid dividends for the last 5 years George puts a proposal to the directors that a dividend be paid. Neither Mac nor Michael are in favour of the payment of a dividend and reject George's request. Leonardo and Winston, who have both fallen out with George, and argue constantly with him, support the directors' position. George has begun questioning the directors on their management decisions and finds that they have decided to issue 3000 shares in the company to each of Leonardo and Winston's spouses. George tells the directors that he is against the share issue and asks to see the company's financial records. Mac replies, "it is none of your business" and tells George that decisions as to issuing shares are up to the directors. Since it was formed GD has purchased landscaping materials from Ash Pty Limited ('Ash'). Products supplied by Ash have always arrived on time and been of good quality. GD has recommended Ash to other landscape businesses and GD's accountants have pointed out the savings to the company in dealing with Ash. However, Mac and Michael have recently become majority shareholders in another landscape supplier, Vanity Pty Limited (Vanity'), and they now want to make Vanity the supplier to GD. As major shareholders in Vanity, Mac and Michael will get the benefit of a deal between Vanity and GD. To achieve this goal, they rescind the contract between GD and Ash and immediately enter an agreement with Vanity to supply landscaping products to GD. Vanity's products are 15% more expensive than Ash's. Based on these facts, you are required to answer the following questions. [10+10=20 marks] i) Have the directors breached their duties? Explain your answer. ii) Explain George's position as a shareholder. What are his rights and what orders can he seek? Your answer should include reference to relevant cases, sections and relevant procedures under the Corporations Act 2001 (Cth.). In 2015 two garden landscape businesses ('Ground Level' run by Mac and Michael; and 'Green Design' run by Leonardo, Winston and George) joined to form GD Pty Ltd ('GD'). Its main business is the supply and installation of garden sculptures and water features. All had experience in garden design and landscaping. For the purposes of start-up capital, the company issued 22,000 shares at $1 each. Mac, Michael, Leonardo, and Winston took up 3000 shares each, and George took 10,000. At the company's first meeting Mac and Michael were elected directors. GD has become a successful company with a good reputation in garden landscaping. Mac and Michael (who are still directors), and Leonardo and Winston, have all become wealthy as a result of the business, however, George has had various personal setbacks and is in financial difficulty. Although the company has not paid dividends for the last 5 years George puts a proposal to the directors that a dividend be paid. Neither Mac nor Michael are in favour of the payment of a dividend and reject George's request. Leonardo and Winston, who have both fallen out with George, and argue constantly with him, support the directors' position. George has begun questioning the directors on their management decisions and finds that they have decided to issue 3000 shares in the company to each of Leonardo and Winston's spouses. George tells the directors that he is against the share issue and asks to see the company's financial records. Mac replies, "it is none of your business" and tells George that decisions as to issuing shares are up to the directors. Since it was formed GD has purchased landscaping materials from Ash Pty Limited ('Ash'). Products supplied by Ash have always arrived on time and been of good quality. GD has recommended Ash to other landscape businesses and GD's accountants have pointed out the savings to the company in dealing with Ash. However, Mac and Michael have recently become majority shareholders in another landscape supplier, Vanity Pty Limited (Vanity'), and they now want to make Vanity the supplier to GD. As major shareholders in Vanity, Mac and Michael will get the benefit of a deal between Vanity and GD. To achieve this goal, they rescind the contract between GD and Ash and immediately enter an agreement with Vanity to supply landscaping products to GD. Vanity's products are 15% more expensive than Ash's. Based on these facts, you are required to answer the following questions. [10+10=20 marks] i) Have the directors breached their duties? Explain your answer. ii) Explain George's position as a shareholder. What are his rights and what orders can he seek? Your answer should include reference to relevant cases, sections and relevant procedures under the Corporations Act 2001 (Cth.).

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The Companies act establishes a wide variety of obligations and responsibilities for a director including the most noteworthy of which are To promote ... View the full answer