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Book/movie review
22/08/2022
Question One
Digitup NL has a constitution that does not repeal any of the replaceable rules of the CA but does provide for two additional matters:
(i) an objects clause provides that the companys activities are restricted to the exploration and extraction of gold and silver.
(ii) another clause provides: Gary Granite is to be the company’s Senior Geologist at a salary of $200,000 pa.
The directors of Digitup NL have decided to ignore the constitution and to carry out the following actions:
to operate a tourist business in outback Australia and to that end the company has contracted with Dodgy Pty Ltd for the purchase of 2 buses.
to sack Gary Granite as senior geologist.
Required
(a) Digitup NL refuses to pay Dodgy Pty Ltd for the buses, arguing that it has no legal capacity to operate a tourist business and that Dodgy would have known this limitation from its name.
Advise Dodgy Pty Ltd.
(b) Gary Granite writes to Digitup NL claiming he cannot be sacked under the companys constitution. He is told he has no contract but he buys some shares in Digitup NL and writes again, this time claiming he has a contract.
Advise Digitup NL.
(c) Advise the directors of Digitup NL if they can amend the constitution? If not, what is the proper process?
[Note: You do not have to consider whether the directors have breached their duties when answering this question.]
Question Two
Julie has been a shareholder in Indahouse Pty Ltd for some years and is upset to receive a letter from the company instructing her to transfer all of her 200 shares to Bob Marley. Julie makes inquiries and discovers that Bob Marley is a close friend of the Indahouse chairperson Al Gee. She also learns that the companys constitution contains a rule that provides the chairperson of the company may, as they see fit, order any member to transfer their shares to any person at a fair market price.
(a) Julie does not wish to sell her shares. Is she bound to observe the order she has received?
Jimmy, another shareholder, discovers that as the company requires more funds the directors plan to issue a parcel of shares to a single investor without the members being able to participate.
(b) Are the directors correct in issuing the shares, as they plan?
[Note: there are insufficient facts to enable you to reach a single conclusion here. You are not told what, if anything, the companys constitution states about share transfers. Provide the alternative answers.]
Question Four
Tipsy Ltd is an importer and distributor of French wines. The Managing Director is Marie and the Company Secretary is Pierre. The company has no constitution and the Board of Directors exercise tight control over the company. The Board has implemented an instruction that their approval is required for any purchase of wine in excess of $50,000.
During the last month the following three transactions and developments occurred:
(a) Marie signed a contract to purchase $55,000 of wine. The other directors do not like the wine and refuse to accept it on the grounds that Marie lacked authority by breaching the purchasing limit set by the Board.
(b) Pierre, in France on holiday, visits one of Tipsy Ltds suppliers. He tastes and likes a new wine and signs a contract for Tipsy Ltd to purchase the wine for $10,000. The board of directors wishes to rescind the contract on the grounds that Pierre had no authority to sign the contract.
(c) The senior executives of Tipsy Ltd were absent at a management seminar and Renee, the companys Office Manager, was left to mind the whole office, including the sales department. When Smashed, a liquor store chain, phoned to place an order, Renee negotiated a price and sold some wine. Edith, the companys Sales Manager, had planned to sell that same wine to another customer at a higher price. Tipsy Ltd advises Smashed that they will not supply the wine as Renee lacked authority.
REQUIRED:
Analysis each transaction, advising on Tipsy Ltds contractual obligations, if any.
[NOTE: Your answers should include a description of the type of authority (if any) for each transaction and include sections of the Corporations Act and cases where appropriate.]
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