Mary is a member of EFG Ltd (EFG) which is listed on the ASX.  The company has many debts and has not declared dividends for over a year.  Mary is very unhappy because she wants a return on her investment.  She believes that it is only fair that the company rewards its members for their loyalty.  EFG made a very small profit of around $3,000 last financial year and it has about 1,000 members.   

One day Mary bumps into her brother-in-law Hans.  He is one of EFG's directors.  Mary tells him that she demands that the directors call a meeting next month to declare dividends.  Hans tells her that the company cannot pay the dividends because it is likely to become insolvent within weeks and that it has large debts that it cannot pay.  He tells her to not tell anyone because it is secret information.  Mary is shocked and decides to sell her shares before the company collapses.  The next day she decides to sell her EFG shares and submits an application at 10:30 pm that night after hearing on the television news at 9:45 pm that ABC Ltd's collapse due to insolvency is imminent.

Do the directors have to declare dividends for the last financial year?  Did Mary breach the Corporations Act 2001 (Cth) when she sold her shares in EFG?  Explain using the law.

Answer rating: 100% (QA)

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