Sweet, Ness and Light Pty Ltd has been making chocolates in Perth since 1923. The company was commenced by Ivan Light (now deceased) and has had a member of the Light family as chair of the board ever since. At present William (Bill) Light is the chair and he holds 30% of the shares. The other shareholders are Bills sons Jack (20% of the shares) and Daniel (20% of the shares) and their wives, Yvette (10% of the shares) and Jacinta (10% of the shares). There are two non-family shareholders, the long- time company secretary Maxwell Sweet (5% of the shares) and Ivan Lights former business associate Elliot Ness (5% of the shares). The directors of the company are Bill (Chair), Jack (Managing Director), Daniel (an architect), Yvette (an accountant), Maxwell (also secretary of the company) and Elliot (an irregular attender of meetings). Jacinta has long harboured feelings of powerlessness as Bills sons lamely follow whatever their father wants in relation to company matters. Maxwell maintains absolute loyalty to Bill when it comes to company decisions and Elliot takes no active interest in the company.

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At a general meeting last week, members voted on Bills proposal not to pay dividends out of recent profits, but to reinvest them. This is the fourth year in a row that Bill has done this with members approval. In another resolution, the company decided to restructure its shares. There are to be additional shares that will only be available to Bill, Jack, Daniel, Maxwell and Elliot. The reason that Yvette and Jacinta are excluded is because they are seen as threats to the company if their marriages to Bills sons should fail. Maxwell and Elliot are unlikely to take up the additional shares and Jack and Daniel are presently speaking to their financial advisers about their ability to invest more money into the company. Jacinta sees this latest move as evidence that Bill has no interest in preserving a company role for his daughters in law. Sweet, Ness and Light Pty Ltd has had a profitable year; now the question is whether a dividend should be paid. Bill says no dividend should be paid reserves should be increased. Jack agrees with his father. Daniel and Yvette say that they will be guided by the advice of the chief accounting officer. Maxwell and Elliot say that it is up to the family to decide. Jacinta threatens action on the basis of oppression if she does not receive a dividend of 20%.

REQUIRED

As chair what should Bill do? Does the company have to pay dividends?