LAWS3100 Corporations Law 1/2016, Tutorial Guide

T4 Members / Members Remedies

Week of 11 April 2016

Instructions

Read HRS Ch 8, 9 & 16

Answer Questions in HRS Problem Sets ( 26-200) extracted below
Use our guidance notes and questions (below) to help you answer and
develop your notes

Questions
1. Jason and Jennifer Jones would like more of a say in the affairs of
FWPL. They would like to force a meeting of FWPL to vote on a
resolution to amend the constitution of FWPL to give A Class
shareholders the right to vote on the appointment of directors.
They have asked Mario to convene a members meeting to consider
the resolution but he has refused, saying that it would be futile
because he, Nick and Pia would never agree. Jason and Jennifer
would like your advice on whether the meeting can be held.
See 8-2008-220 and s249C, s249D, s249F Corporations Act
This question involves two separate issues.
1. Who can request or convene a meeting
2. What a general meeting can be called to discuss or decide
Both have to do with the division of power for decision-making in a company.
Rule: Re: 1

Which organ normally has power to convene general meetings of members?

Where does that power come from?
How else can meetings be convened? See Pt 2G.2, Division 2 and identify the
relevant rules (tip: what kind of company is FWPL)?

Rule: Re 2

Which organ normally has power to decide business matters? Directors or the
members in general meeting?
How does rule limit the power of the members to request or call a meeting?
See 249Q CA 2001; NRMA v Scandrett; NRMA Ltd v Parker

LAWS3100 Corporations Law 1/2016, Tutorial Guide

Application of law to the facts: Re: 1

What role do Jason and/or Jennifer have in the company? Can they convene a
meeting under s249C?
What percentage of the voting power do they hold individually or together? Is
this enough power to request a meeting under s249D? Under s249F?

Application of law to the facts: Re: 2

Resolution pertaining to rights attached to the shares and the constitutional

change.
These would/would not be matters under the control of the general meeting.
The organic principle does/does not apply (see Chapter 6).
The variation of class rights procedure does/does not apply (see Chapter 7).

2. Jason decides he can convene a meeting of FWPL under s249F of the

Corporations Act. On 20 January he sends a notice, by mail, to all of
the ordinary shareholders (except Simon, whose address he does
not have) and eight of the A Class shareholders (he does not have
current addresses for the other two) saying that a meeting will be
held on 30 January at his home in Sydney to consider and if thought
fit pass a special resolution to give A Class shareholders a vote on
the election of directors to the FWPL board. Those who cannot
attend in person are invited to dial in via Skype. Jason, Jennifer and
four of their cousins attend the meeting in person, and another
cousin attends by Skype. On a show of hands, everyone votes in
favour of the resolution. Discuss.
See 8-2608-440, 8-600 and ss249H249T and s250J Corporations Act
Issue: The issues in this case relate to the requirements for notice of meetings and
conduct of meetings. How would you express them?
Rule re: Notice of meetings
A key principle of the law governing meetings is that members should receive
adequate notice of the matters to be considered at the meeting.

Notice must be given to whom

o Under s249J
o Under s249K
Notice must comply with s249L which provides:
Section 249L(3) requires that..

LAWS3100 Corporations Law 1/2016, Tutorial Guide

In Residues Treatment & Trading Co Ltd v Southern Resources Ltd it was held
that:
For unlisted companies, the minimum period of notice is days, although
the companys constitution may provide for . under s249H.

Rule re: Conduct of meetings

The meeting then has to be conducted in accordance with the CA 2001 and other
rules of Company Law

Does s249T Corporations Act apply to FWPL? Yes/No & Why?

s249S Corporations Act provides:
s250J Corporations Act provides:

Application of law to the facts

Does Jason have the right to call a meeting and if so, what section applies?
What errors has Jason made in the notice?
Has he done anything correctly?
Is there compliance as to the conduct of the meeting?
What is the significance of the procedural errors? Consider s 1322(3)

Conclusion:

Jason has/has not omitted notice to significant people entitled to notice, and
complied/did not comply with the time period required.

LAWS3100 Corporations Law 1/2016, Tutorial Guide

3. GML owns 92% of the issued shares in Explorer Ltd. The remaining
8% of the shares are held by five individuals, including a Mr Owen
who owns 0.5% of the issued shares. Mr Owen is a high profile
individual who has at times been critical of the Chinese
governments activities in the South China Sea. GML is concerned
that its ongoing association (through Explorer) with Mr Owen may
harm its relationship with its Chinese customers. At a meeting of
Explorer, a resolution is passed amending the constitution of
Explorer, to allow any member who was entitled to at least 90% of
the issued shares of Explorer to acquire compulsorily, the shares of
any other member at a price of $20.00 per share. Explorer shares
have recently been valued by an independent expert at $15.78. Mr
Owen does not attend this meeting and the majority shareholder
(GML) does not vote. The resolution is passed unanimously by the
four other minority shareholders. Mr Owen is challenging the
validity of the amendment. Having regard to the decision in
Gambotto, will his challenge succeed?
Issue / Rule

On what matters can members vote at a GM?

What are the equitable limitations on majority voting power?
What was the holding in Gambotto?

Application of law

How is the holding in Gambotto relevant to this case? Consider whether the
removal of Mr Owens was convenient or necessary? What about the price?

Conclusion: What is your reasonable conclusion?

LAWS3100 Corporations Law 1/2016, Tutorial Guide

4. The constitution of FWPL allows for the directors to pay a dividend
to holders of A Class shares at their discretion. Over many years, the
company had paid a dividend which, although not sizable, was
sufficient for the shareholders who chose to do so, to live on.
However, Mario and his siblings are angry about the discontent that
Jason has been stirring up among the Galli grandchildren, some of
whom they see as lazy and undeserving. So the board of GML
resolves not to pay a dividend to the A Class shareholders this year,
and instead, to retain earnings to fund the development of the
organic vineyard at Robinvale. What action, if any, can the Galli
grandchildren take in respect of non-payment of the dividend?
See 16-210, ss232 and 233 of the Corporations Act and Thomas v H W Thomas Ltd
Issue: Do the grandchildren have an action under s 232?
Law: What is the oppression remedy? What are its requirements?

Who can claim oppression (standing)?

What is oppression (definition)?
What are specific forms of oppression (grounds)?

Application:

Do the grandchildren come within a class of persons referred to under s

234?
Could any of the following arguments be raised about the conduct of the
board? Why / Why not? What case is authority?

Conclusion: What remedies are/are not available?