Company Law Revision Paper

Published: 2021-09-12 17:40:11
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Category: Business Law

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Short Answer Questions: Provide a brief answer including the specific sections and sub-sections that apply under the Corporations Act 2001 (Cth). DO NOT use ILAC method to answer. (a) On 1 February 2012, Mr Lawson was appointed as an administrator of Gogo Pty Ltd by the passing of a resolution by a majority of the directors of the company. Upon appointment, Mr Lawson convened the creditors’ first meeting on 4 February 2012. Is this a valid meeting? b) The creditors of RedHot Pty Ltd (Redhot) appointed Mrs Sherman as the receiver to take possession of the secured property, sell it and use the proceeds to repay the secured debt owed by the company. The receiver borrowed $42,000 from Westpac bank during his appointment; however, there were insufficient funds available from the secured assets realisation to completely pay the debt, so that a shortfall exists. The receiver argued that the Managing Director of Red Hot must pay the shortfall. Does the Managing Director of RedHot have to pay the debt? c) The Scottish Co-operative Wholesale Society Ltd (Scottish Co-op) registered a new company called ‘Scottish Textile & Manufacturing Co Ltd’ (Textile) to manufacture rayon cloth. State licensing was required and experienced managers were needed in order to obtain a licence. Dr Meyer and Mr Lucas were managing directors and shareholders of Textile, although, the Scottish Co-op held the majority of the company’s shares and appointed three other directors to the board. The remaining three directors were also directors of Scottish Co-op. In 2012, the licensing system was terminated by the government.Scottish Co-op used its majority of votes to transfer the entire business to a branch of the Co-op. Scottish Co-op also cut off the supply of raw materials to Textile. Textile could not continue, no profits were made and its share value crashed. Mr Meyer and Mr Lucas were helpless. Advise Mr Meyer and Mr Lucas. Hypothetical Questions Question 2 Stanford Ltd is a public company that was founded by the Scooter family. It now has a large number of shares held by the public and there are five members of the board of directors. However the Scooter family still controls 35% of the shares.Robyn, Jade and Sonali are directors of Stanford and also members of the Scooter family. Robyn and Jade are also the only directors of Harvard Pty Ltd. All of the shares in Harvard are jointly owned by Robyn and Jade. For some time Harvard has had difficulty selling its product because of competition from overseas companies that have low cost production techniques. Robyn and Jade seek to have Stanford buy product from Harvard. They put a proposal to the board of Stanford that Stanford enter into a contract to buy product exclusively from Harvard.Robyn and Jade at all times believed that this was in the best interests of Stanford as they believed that Harvard’s product was superior to other brands and that the new range would be profitable for Stanford. An independent expert report supported Robyn and Jade’s beliefs and this report was provided by Robyn and Jade to the directors prior to the Board meeting. At the board meeting the decision is made to enter into a long term contract with Harvard. The vote is 3-2 in favour with Robyn, Jade and Sonali voting in favour of entering into the contract.The other two directors are unaware of the connection between Harvard and Robyn and Jade. Harvard is very profitable as a result of its long term contract with Stanford. The arrangement turns into a financial disaster for Stanford and as a result the share price falls. Raider Ltd purchases shares in Stanford and gains control of over 50% of the shares. Raider replaces Robyn, Jade and Sonali as directors. Advise the new board if Stanford has any claims against Robyn and Jade and what remedies are available to Stanford under the Corporations Act (DO NOT discuss s 180 of the Corporations Act in your answer)Question 3 On 1 September 2011 Vicki was appointed liquidator of Revitup Pty Ltd in a creditors’ voluntary winding up. Revitup Pty Ltd is a company which sells imported motorcycles. The sole director of Revitup Pty Ltd is Max. Vicki is of the view that basically the business of the company is sound, as the bikes that are sold by Revitup sell very well and turnover is high. Vicki considers that the reason for the insolvency of the company was poor management. Accordingly Vicki is of the view that the business should be allowed to continue for a short time to return it to profitability.Vicki has discovered that on 3 February 2011, the company had entered into a transaction with Bad Bike Hire Pty Ltd under which Revitup sold 20 motorcycles to Bad Bike Hire Pty Ltd which then leased them out on three year terms to customers. The motorcycles were sold to Bad Bike Hire at 50% of their retail value. Vicki discovers that all of the shares in Bad Bike Hire were owned by Max’s wife. When asked about the transactions, Max explains that they were sold cheaply because the market was very slow and there should be a discount for buying 10 motorcycles.The evidence is that there have been no proper accounting records kept for Revitup Pty Ltd since December 2010 when the accountant resigned because his fees were not being paid. As at February 2011, there were a number of other outstanding debts that were unpaid, and the company’s bank had advised that it was not prepared to lend any further funds until significant amounts of the debt owed to the bank was repaid. Vicki seeks advice as to whether she has any claim against Bad Bike Hire in relation to the above transaction under Part 5. 7B of the Corporations Act

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