Discuss the below:
(Membership, members' meeting and members' remedies)
Question One
(a) Mary shows her share certificate in Gamble Pty Ltd to Cyril. The certificate displays a shareholding of 10,000 ordinary shares. A transfer of shares form is signed and Cyril pays Mary $20,000 for the shares. Cyril lodges the share transfer form and Mary's share certificate with Gamble Pty Ltd. The company secretary of Gamble Ltd writes to Cyril advising that the share certificate accidentally displayed an extra "0" and that only 1,000 shares were owned by Mary and these have been recorded in the share register under his name. The company points out that the register displayed the correct shareholding of 1,000 shares and Cyril should have checked this out. Cyril cannot find Mary who has departed for Iraq.
Advise Cyril.
Question Two
(a) Describe the legal significance of both a share certificate and an entry in a company's share register. Do share certificates have to be issued for all shareholdings?
(b) How does a transfer of shares differ from a transmission of shares?
Question Three
The members of Revolution Ltd are dissatisfied with rule 15 of the company's constitution which gives the directors the power to borrow funds as they see fit. The members wish to amend this clause so that the directors must obtain members approval before any borrowing can take place.
The directors refuse to hold a general meeting to consider the amendment.
REQUIRED:
(i) Are the directors entitled to refuse to hold the general meeting?
(ii) Describe the alternative methods provided in the Corporations Act for the members to place this matter before a members' meeting for consideration.
Question Four
Hiphop Pty Ltd (a company without a constitution) distributes music CD's. Its directors are Spike Hip and Chelsea Hop. Its members are Spike, Chelsea and Fred Flop.
One day Fred hears some exciting new music and inquires into its source. He discovers that the music producer was Rage Records, an organisation that usually used Hiphop Pty Ltd to distribute its music. However, these CD's had been distributed by a company called SC Pty Ltd. Fred searches company records at ASIC and finds SC Pty Ltd has Spike Hip and Chelsea Hop as its directors.
Fred writes to Hiphop challenging the directors over their conflict of interest, claiming that they should give the company the profits SC Pty
Ltd has made from their diversion of Hiphop's business. Spike and Chelsea call a general meeting of Hiphop Pty Ltd and at the general meeting have the votes to successfully pass a resolution approving their actions, authorising them to continue to divert Hiphop's business as they see fit and to retain any profits therefrom.
Advise Fred on the validity of the resolution passed at the general meeting and whether there is anything a minority shareholder can do.