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Book/movie review
22/08/2022
Directors Duties
You and your business partners are directors in a company called High Rise Developments Limited which specialises in body corporate management of units in Perth. Recently High Rise Developments has been successful in being contracted to manage some new high rise residential unit developments in Adelaide Terrace on the edge of the Perth CBD.
Owners of the units pay quarterly body corporate management fees to High Rise Developments for the cleaning of common areas like entrance foyers, cleaning of pools, maintenance of lifts and management of remote entry for residents into basement car parks. The previous body corporate company awarded maintenance and cleaning contracts to various companies in Perth, which you and your business partner adopted when taking over the body corporate management of various unit blocks.
You are chatting to your friend Mr Paul Shonky over coffee at a caf in South Perth and he mentions that his wife Mrs Shonky operates a commercial cleaning company. Mrs Shonky supplies quotes for cleaning and maintenance of various common areas in unit developments that your company manages.
You peruse the quotes they appear to be excessive but you are keen to help out Mrs Shonky as you know that her cleaning business needs more contracts and Mr Shonky is your old school friend from Wesley College in Perth.
a. Is there a potential breach of fiduciary duties in this scenario?
b. Is there any course of action that you as a Director could take to avoid a potential breach of directors duties?
Refer to the Corporations Act 2001 in your answer to the above questions.
Question 2
Members’ Rights and Remedies
Malta Harbour Pty Ltd is a private family company established by an elderly entrepreneur Mr Steve Gang. He holds 500 shares. Recently he appointed his two sons, Malcolm and Lester as directors and allocated 100 shares to each of them. All three became the only directors and shareholders.
Despite his advanced age Mr Gang operated the company as if it was his personal business empire. He paid himself large bonuses to conceal company profits and to maintain his three former wives.
He never consults his sons about the business. He uses his voting powers to ignore any complaints at meetings. The sons discover that Mr Gang personally accepted and profited from several large business transactions that the company itself should have acquired.
With reference to the Corporations Act 2001, explain whether the two sons can claim ‘oppression’ and if so, what orders may a court make in their favour?
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