(i) How secure is her position as Managing Director of Carborundum? In particular, discuss what would be the procedure the Company would have to take to remove her as a managing director. (4 marks)
(ii) Only in this part, assume that Hilary issues 50,000 Carborundum shares at a price of $1 each to Inventions with the requirement that only 1 cent needs to be paid initially. The issue of shares to Inventions was listed down in the Member’s Register of Carborundum. When Ben and Alan find out, they declare the share issue void. Discuss whether the issue of shares is valid and Hilary’s potential liability under the Corporations Act. (8 marks)
(iii) Can Carborundum remove Hilary as its chief engineer? If so, explain how this may be done. If not, explain why not. (3 marks)
Part B Advice to Donald (5 marks)
Assume in this part that the share issue of the extra 50,000 Carborundum shares was held to be void. Donald has heard that the other shareholders want to get rid of him by holding a General Meeting to insert a clause in Carborundum’s Constitution that allows “Inventions Pty Ltd to compulsorily acquire the shares of any member for 10 cents per share”. Discuss the likely success of such an amendment.
Part C Advice to Alan (7 marks)
Alan found out that Ben has entered into the drilling machinery business. He has set up a company called Bendrill Pty Ltd (“Bendrill”) to sell drilling machinery to Carborundum’s existing customers. Alan has been told that Ben approached two of Carborundum’s customers and offered them Bendrill’s products, which are 30% cheaper than Carborundum products. Upon checking in ASIC’s database, Alan finds that Bendrill made a profit of $500,000 in the previous financial year.
Based on the above, Alan wants to know the likelihood of ASIC and/or Carborundum successfully pursuing criminal and/or civil remedies against Ben and/or Bendrill.
Part D Advice to Eric (3 marks)
Eric has a farm that he claims has silver deposits. The land was valued at 1 million dollars in June 2017. He incorporates a company called Silver Pty Ltd (“Silver”) on 2 July 2017. On incorporation, he is Silver’s sole director and shareholder. On 3 July 2017, he then sold the land to Silver for 2 million dollars. In August the company raised 2 million dollars from 30 investors, which was then paid to Eric. In October, a detailed report by an independent geologist established conclusively that there is no silver in the land. Eric is now being sued by Silver after the shareholders removed him as director and appointed two new ones. Discuss the remedies that would be available to Silver.
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