Question 2: Shareholders Ernie's Engineering Ltd (EE) is a company that designs and manufactures air conditioning units. Samuel is a minority shareholder in the company. Samuel is seeking advice on certain matters.

a. Samuel is uncertain about how resolutions are passed. You tell him that there are three types of resolution and that the extent to which shareholders need to agree depends on the type of resolution. For each of the three types of resolution: Name the type of resolution Describe the resolution Cite the statutory provision that provides for this type of resolution and Give an example of a decision that would be passed by this type of resolution

b. Samuel notices that company profits seem to have dropped markedly in recent months. Some initial research suggests that this is because a competitor, Coolio Co NZ Ltd (CCNZ) recently started supplying very similar air conditioners in the area. Further research shows that: CCNZ is using a proprietary system developed by EE over which EE has copyright. CCNZ has not purchased the right to use the system. Two of EE's three directors are also directors in CCNZ. Even though it is using EE's systems, CCNZ is struggling financially. Samuel raises the matter with the board. The directors say that they did raise this matter by email with the board of CCNZ, but that they do not want to pursue further action. Samuel consults with a lawyer who tells him that he believes Samuel might be able to bring an action against CCNZ on behalf of EE, and in the name of EE.

i. Samuel is surprised by the lawyer's advice as he believed that the common law does not allow shareholders to bring an action in the name of the company. Explain why Samuel is partly, but not entirely correct.

ii. Apply the relevant statutory provisions to determine whether the court is likely to allow Samuel to bring an action against CCNZ in the name of EE.

iii. Samuel is concerned as he does not have the money to pursue a court action. Assuming Samuel the court allows Samuel to bring the action, explain whether the company might have to bear the costs.

iv. Samuel is concerned that the directors won't provide the information he needs to fully pursue the action. Assuming the court allows him to bring this action, explain to him how this problem might be overcome.