Sally has a small shareholding in peat pty ltd which she

Part A:

1. Discuss the proposition that the board of the James Hardie group of companies did the morally right thing in endeavouring to maintain shareholder value when faced with continuing and uncertain tort claims.

2. Coles Ltd leases a number of supermarkets in shopping centres around Australia. In every lease it is provided that Coles Ltd cannot transfer the lease unless the person to whom the lease is transferred is wholly owned by Coles Ltd. Coles Ltd intends to transfer a number of such leases to a company set up and wholly owned by itself, it further intends, after subleasing the premises, to sell all the shares in the new companies to some other company unconnected with itself, thereby avoiding the operation of the bar on the transfer of leases. Advise the shopping centre owners as to whether Coles Ltd would be breaching the leases.

3. Harry, Moe and Joe were practicing as a firm of solicitors operating as a partnership. The partnership agreement was to the effect that no partner could incur expenses chargeable to the firm unless it was done in the ordinary course of business. Joe borrows money from Rich saying it is to buy reference law books for the firm. However, Joe takes the money and sails off to South America never to be seen or heard from again. Advise Rich whether he can bring an action against Harry and Moe individually and separately, Harry and Moe jointly, and/or against the firm. Do not forget to consider whether Rich's rights to take action are limited to being against Joe.

Part B:

1. PCW is a proprietary company the shares in which are divided equally among four shareholders all of whom also serve as directors of the company. The constitution of the company provides the following rules for the event that one of the shareholders wishes to transfer his/her shares.

- The Other shareholders have the right to acquire the shares at a price equal to book value of the shares.

- To the extent that the other shareholders do not exercise the right to acquire the shares, the shareholder can dispose of his/her shares to a third party subject to the unanimous approval of the board of directors.

For some time now there has been disagreement about matters of business policy. One of the shareholders (Mr. Trubel) insists that the company pursue a more aggressive business strategy, while the remaining shareholders are content to follow a more conservative approach. Fed up with the trouble from Mr. Trubel, the other three members vote to remove him from the board of directors and till the position with a friendly party (the company's accountant). Mr. Trubel wants to sever his connection with the business. However, Mr Trubel refuses to sell on grounds that the book value of the shares is only a fraction of their net value as computed by reference to other valuation methods such as capitalized earnings or net asset backing. One of the other members (Ms Kauf) announces her willingness to acquire Mr. Trubel's shares at a price satisfactory to Mr. Trubel. However, the other directors refuse to consent to the transfer on the grounds that the transfer would place too much power in the hands of Ms Kauf.

Discuss the possible rights and remedies of Mr. Trubel and the extent to which the exercise of each would be successful in satisfying Mr Trubel.

2. Sally has a small shareholding in Peat Pty Ltd which she inherited horn her father who was the son of the founder of the company. She also lent $20,000 to the company at an interest rate which is above the current market rate. Eric, her cousin, who is chairman and managing director, was formerly the controlling shareholder, but had since sold the majority of his shares, retaining only a minority holding. The other shareholders are Maurice, Anita and Fred, who together hold 76% of the issued shares and are non-executive directors. Sally thinks that Eric has been corrupt, incompetent and inefficient in the management of the company. Under his management the company has:

a) entered into some unprofitable long term supply contracts with a friend of his, Nigel;

b) acquired expensive real estate which has since diminished in value due to the downturn in the property market;

C) never paid a dividend;

d) paid large amounts of remuneration to Eric and other members of the board; and

e) recently delayed paying creditors.

Until this year, Sally has been a director and had regularly disagreed with Eric on matters of policy. Because of constant fiction between them, the other members of the board and shareholders did not reappoint her to the board at the end of her term of office under the company's internal rules. Sally maintains that Maurice, Anita and Fred acquiesced in Eric's misconduct. She worries about the continuing solvency of the company.

Advise Sally on her rights and remedies.

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