Question One
In order to obtain the funds necessary to expand its business Growth Ltd is to make a $M20 share issue. Advise the directors of Growth Ltd over the following matters.
REQUIRED:
(a) Can the funds be raised from existing members or anyone else without a prospectus?
(b) Will the directors be safe from prosecution if they provide to investors in a prospectus everything they know that is relevant about the investment? If the company issues a prospectus and the directors then become aware that there is a false and misleading statement in it, what alternatives are available to them under the CA?
(c) Does the CA provide any protection for directors where funds are raised under a prospectus that contains a misleading statement?
Question Two
Donald is a director of Developer Ltd. Donald's wife Daisy has owned a vacant block of land in Disney Street for many years.
Donald attends a board of directors' meeting of Developer Ltd. He learns that the company is planning an amusement park in Disney Street. The directors are to decide at their meeting whether Developer Ltd should commence negotiations with the Disney Street land owners (including Daisy) in order to acquire their property.
(a) Describe Donald's obligations, under the Corporations Act at the above directors' meeting
(b) If Developer Ltd is to purchase Daisy's land, describe the processes required by the Corporations Act that the company must observe
Question Three
Disastrous Ltd, a company without a constitution, is in need of funds to purchase a new factory. The board of directors have been considering various funding alternatives. They have had discussions with a bank to borrow the money and also have sought advice from a stockbroker about a share issue.
Ruth and Raymond, large shareholders in Disastrous Ltd, have both indicated they are going to contest the election of directors at the next annual general meeting and there is a real prospect that they will be successful.
Before the annual general meeting the directors announce that Disastrous Ltd will be making a large share issue to Naomi, a close friend of the current directors. Ruth and Raymond dispute the issue claiming it is to prevent them being elected. The directors say the funds are needed to purchase the factory and produce a report prepared by an independent expert that states the price of the shares issued, is fair.
REQUIRED:
Examine the conduct of the directors and advise Ruth and Raymond whether there is any prospect of the share issue being overturned by a Court.
Part b)
Ignore the facts in part a). An ordinary share issue does proceed and 14 months later the directors decide to offer to buy back 8% of the shares of those members in Western Australia only.
Discuss the procedure involved in relation to the buy back offer.