Company Law Individual Assignment -
Aussies Mines Ltd has decided to expand, despite recent financial difficulties. The board of directors decides to issue $5million worth of shares in the company to fund the expansion. The following share issues are proposed:
(a) $1 million dollars worth of shares will be offered to one large institutional investor
(b) $1 million dollars worth of shares will be offered to company employees
(c) the balance of $3 million dollars worth of shares will be available for purchase through the Australian Stock Exchange.
Part A - Five months after Sarah purchased $20,000 shares in the company, she discovers that the information she based her decision to invest upon was incorrect. She based her decision to purchase shares on the company's previous year's profit figures. However the auditor made an error in the preparation of these figures for the company and the profit was overstated by 50%. She comes to you for advise. Advise Sarah whether she can collect damages from the company and/or the auditor.
Part B - Will is a minority shareholder of Aussie Mines Ltd. He comes to you and complains that the directors have sold company assets and have used the proceeds from the sale to purchase an island resort in their own names. He also tells you that the directors are the controlling shareholders of the company and they have ratified their own acts at a recent general meeting. Advise Will, who wants to initiate an action against the directors.