QUESTION ONE
Fraser is a shareholder of Digger NL a mining company in Queensland. Digger NI. made a call on the shares of all shareholders under s254P but Fraser did not pay the call by the due date being 12th of December 2016 because he needed money to go on a holiday over the
Christmas period.
Digger NL is a mining company extracting nickel from its site in Townsville in Queensland. ASIC registered the company as a mining company under the Corporations Act 2001
following a review of its constitution. After Digger NL was registered the company's
geologists and engineers determined that some of its land holding was not economically viable for mining activity. However, this land has a significant number of dinosaur fossils and some rare aboriginal paintings and the board of Digger NL resolve to develop a theme park and museum featuring these natural wonders.
Fraser is concerned that the theme park and museum is a risky venture as it is too far from Townsville for tourists to travel and it does not complement to the company's existing business activities.
Advise Fraser whether he has any rights against Digger NL. Also advise Fraser what, if anything, can be done to prevent the company proceeding with the proposed venture.
[10 marks]
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professional relationship with Anna. Advise Sally what steps she should take.
[6 + 6 + 4 = 16 marks]
Question 3.
Southside Developments Pty Ltd owned a valuable piece of land which it intended to develop as a shopping centre. Recently, owing to a change in the companies strategic direction the company decided to sell the land, and as a result, it now has capital in excess of its needs.
The directors of Southside Developments Pty Ltd want to return this excess capital to shareholders. The directors wish to know whether they can return the excess capital in the form of cash payments, or whether it would be more appropriate to return the excess capital to shareholder by engaging in a share capital reduction or possibly a share buy back.
Advise the directors of Southside Developments Pty Ltd with reference to the relevant provisions of the Corporations Act 2001.
[14 marks]
QUESTION 4.
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[14 marks]
QUESTION 4.
Quinn and Sly were directors of Mining Ltd. The company had three other directors. Several months ago, Quinn and Sly realised that some of the old mine shafts which the company had closed down were worth reopening due to high gold prices and advances in mining technology. One mine shaft in particular appeared to be very promising.
Quinn and Sly decided to form another company, Prospect Pty Ltd and try to persuade the board of Mining Ltd to sell the mine to Prospect cheaply. Quinn and Sly told a third director, Grant, that they intended to buy the mine and would appreciate his assistance at the next meeting of the board of directors. They also informed him that they thought that they had a chance to make money on the deal if they bought the mine for $500,000. In fact, it was clear to Quinn and Sly that the mine was worth at least $1,000,000.
At Mining Ltd's next board meeting Grant proposed that the company sell the mine to Prospect Pty Ltd. All of the directors voted in favour of a resolution that the mine be sold to the company for $500,000. Apart from Grant no-one knew that Prospect was owned by Quinn and Sly.
Shortly after this Quinn and Sly resigned their positions on the board of Mining Ltd. Two months after the sale of the mine, the directors of Mining Ltd discovered the truth about the mine which they had sold. The directors, however, decided not to sue Quinn and Sly and passed a resolution to this effect. This resolution was passed partly because the directors thought that Mining Ltd could not afford the risk of an unsuccessful action against Quinn and Sly. The directors were also motivated however, by a strong desire to keep the knowledge of their blunder from the shareholders.
Required:
1. Advise the Board of Mining Ltd whether they would have a cause of action against Quinn and Sly and what that cause of action would be based on.
2. You are consulted by Adam and Elise two of the shareholders of Mining Ltd who found
out about the sale of the mine from a person who used to be a friend of one of the directors. Adam and Elsie wish to take action against Quinn and Sly. How would you advise them?