The University of Adelaide - COMMLAW 2005

Tutorial Topic: Company membership, Corporate governance & company management

1)April is an Australian expert on South East Asian herbs and spices. She has just been employed by Spice SA Pty Ltd, a South Australian company which specialises in the importation of spices. April is a very good friends with Indianna, a director of Spice SA Pty Ltd, who is also its chief marketing and sales officer. Indianna wants April to the appointed as a director of Spice SA Pty Ltd since she believes that the board of directors would benefit from April’s expert advice.

Over lunch one day, Indianna tells April that she has authority to appoint her to the board of directors and that she has decided to do this. Indianna hasn’t yet got around to telling the other directors of her decision, but she has already begun taking April’s advice on a number of matters affecting the operations of Spice SA Pty Ltd.

In the meantime, it seems that one of the company’s other directors, Ben, has not been paying attention at company meetings. There is some suggestion that he might be preoccupied with his new business venture, a restaurant in Glenelg called Spicy. The other directors, dissatisfied with his performance, decide to call a general meeting on 15 June to remove him as director. Notice of the meeting is provided to the members and Ben on 4 June. At the general meeting, the vote is 60:40 in favour of Ben’s removal.

1. April has been told that she is not a ‘real’ director and seeks your advice as to whether there is any problem with her appointment. What do you tell her?

2. Advise Ben as to the validity of his dismissal.

3. April has also just found out that Spice SA Pty Ltd may be experiencing some financial difficulties. She has heard rumours the company may be insolvent. She wants to know if there is any reason why she should be concerned about the company’s actions at this time (apart from the fact that she might lose her job).

1. Boom Ltd is a public company incorporated on 6 May 1982. Boom has selected 30 June to be its financial year end. When must Boom hold its first annual general meeting?

2. Alicante Pty Ltd is a proprietary company incorporated on 4 July 1989. Alicante has selected 30 June to be its financial year end. When must Alicante hold its annual general meeting for the financial year ended 30 June 2002?

3. How many days’ notice is required to be given to shareholders in each of the following circumstances:

1. Ordinary resolution?

2. Resolution removing an auditor?

3. Meeting of a listed company?

4. Resolution appointing a public co-director?

4. Directors are obliged to ensure that the notice of meeting sent to members is sufficiently clear, such that an ordinary member or investor will upon reading be informed as to the matter upon which they are being asked to vote. True or False? What case authority could you use for this?

5. How many members, or their representatives, must be personally present at the commencement of a meeting to validly constitute a quorum for the following types of companies:

1. Proprietary company with 2 or more members?

2. Public company with 2 or more members?

6. Which one of the following statements best describes a quorum?

1. A board of directors meeting.

2. A pre-determined number of members who must be present in order that the meeting is convened validly.
3. A term used by directors when making unilateral decisions. d) None of the above.

7. When a resolution is first put to a meeting, the vote is initially done by a show of hands. Each member or representative of a corporate member is entitled to how many votes on a show of hands?

1. 2 votes.

2. There is no such thing as voting by a show of hands, all voting by company members is done by a secret ballot.

3. 1 vote.

4. The number of votes on a show of hands is determined in accordance with the company’s constituent documents and the rights attaching to the shares the member owns.

8. Can this be varied by the company’s constitution?

9. Python Pty Ltd has recently passed a special resolution altering the application of the replaceable rules to the company so that no member can require a poll. Marnie and Mimmie believe this is outrageous because it effectively dilutes their voting rights. Marnie’s daughter, Marley, is an accountant and has advised them not to worry because the special resolution when passed was void and still is. Is Marley’s advice, right?

10. Wowee Pty Ltd wants to alter its constitution to provide that 3 members must be present to constitute a quorum. Wowee has 1 million $1 shares which are owned equally by 5 shareholders: Kate, Tate, Betty, Netty and Getty. All of the shareholders are given 21 days’ notice of the meeting. Kate can’t attend and sends her apologies. She also appoints Betty as her proxy. Getty is climbing Mt Everest and simply does not come to the meeting. The resolution cannot be validly passed at the meeting because only 60% of the vote is present and the resolution requires a 3/4 majority of all those entitled to vote. Is this True or False?

11. Wowee Pty Ltd wants to alter its constitution to provide that 3 members must be present to constitute a quorum. Wowee has 1 million $1 shares which are owned equally by 5 shareholders: Kate, Tate, Betty, Netty and Getty. All of the shareholders are given 21 days’ notice of the meeting. Kate can’t attend and sends her apologies. She also appoints Betty as her proxy. Getty is climbing Mt Everest and simply does not come to the meeting. Which of the following statements is the most accurate?

1. The resolution could not be validly passed unless all 3-present voted in favour, as the proxy vote cannot be counted.

2. The resolution could be validly passed by a simple majority of those present.

3. The resolution could be validly passed if Betty (using her vote and Kate’s vote) and Tate vote in favour.
4. The resolution cannot be validly passed because the notice requirements have not been met.
5. The resolution cannot be validly passed because Getty is not in attendance and has not appointed a proxy.

12. Bill is a director of Port Ltd, the owner of a local football team. The team has had mixed success of late and the board has met several times recently to discuss the future of the club. There is some suggestion that quite a few members think that the company should sell its main undertaking, the football team. However, to sell its main undertaking the company would need to pass an ordinary resolution at a general meeting. This is required by the constitution of Port Ltd. Port Ltd’s constitution is otherwise comprised solely of the replaceable rules. The majority of the board has refused to call a meeting at which the suggestion could be put to a vote. Bill feels the members have a right to have their say, and would like to call a meeting. He wants to know if he can do so, and, if not, whether the shareholders can do so themselves. What steps would they need to take?