IRAC Method

I = Issue: Decide from the facts what the major issues are. It will help to break the facts down by identifying the main parties, then asking what their relationships are, what transactions have been entered into, and what events have occurred. R = Rule of law: With your knowledge of the Corporations Act, case law containing company rules and other sources of company law, you need to make a decision about which legal rule or rules are relevant to the facts before you. Having identified the right rule or legal principle,you need to state it clearly and say where it comes from. A = Application to the facts: You will then need to 'apply the law to the facts' C = Conclusion: You should come to a conclusion based on your argument.

Question

George and Matt are the directors of The Great Aussie Barbecue Pty Ltd (GAB), a businessthat supplies barbecues and accessories to both small business owners and to homebarbecue enthusiasts. George and Matt each own 500 shares in the company. George is thepublic face of the company. He was a finalist on MasterChef Australia in 2017 and is wellknown for his barbecue recipes. Each barbecue sold included one of George's recipe books. Matt has a business and accounting degree and looked after the company records. Matt realised that the company was in dire financial difficulties in October 2021. At thebeginning of the pandemic, many people bought barbecues so they could enjoy delicious meals cooked in their own backyards, however, eventually the number of new customers dwindled. Matt told George over coffee one morning that cash flow was a bit tight, but did notfurther elaborate. Matt seemed confident that this was a temporary issue as the governmenthad indicated that by December 2021, the economy would fully re-open and he was surebusiness would pick up. By March 2022, customer numbers did not pick up. George noticed a pile of "final demand"notices from suppliers on Matt's desk and asked to see the actual accounts rather thancontinuing to rely on Matt's assurances. It was only then that George realised that the company was insolvent. The company wentinto liquidation in June 2022, owing large sums of money to its creditors.

Assume that in May 2022, GAB was just starting to recover financially.

The stress of keeping the business a going concern has been too much for George. He has just received an offer from Channel ZX to host a celebrity cooking show three evenings per week and he leaps at the offer. George transfers his 500 shares in the company to his wife, Gloria who has recently retired from her teaching job.

Gloria approaches Matt about selling some of his shares in GAB to her eldest daughter, Bridget. Bridget has expressed a keen interest in owning shares and learning the ropes as a 'junior' director of GAB. Matt thinks this is a great idea, it will mean he can spend less time managing the company and more time with family. Matt transfers 250 shares to Bridget.

With their combined shareholding of 750 shares, Gloria and Bridget pass a resolution that requires the minority shareholder Matt, who now has 250 shares, to sell his shares to the majority for a nominal value. Matt is furious when he realises that he has been taken advantage of by Gloria.

Follow the IRAC method to advise Matt as to whether he can petition for compulsory winding up of the company based on the 'just and equitable' ground contained in s. 461(1)(k) of the Corporations Act 2001 (Cth). [10 marks]