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PRACTISE EXAM. 2020pdf.pdf - SP 5 2020 COML 2005 Practice...

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SP 5 2020COML 2005Practice Exam Answer GuideQ1 -COMPULSORY- Shareholders' RemediesJane Hunter is a minority shareholder in Lion Properties Pty Ltd (LPL) with a shareholding of less than 1% ofthe company’s issued shares. Zulu and King each hold40% of the shares in the company and are tired ofhearing frequent complaints from Hunter regarding LPL’s risky development strategies.Over a period the directors of LPL, who have been appointed as a result of Zulu andKing’s voting power, try to make life difficult for Hunter and seek to force her to sell her shares. Life in thecompany has become intolerable for Hunter. But, Hunter is reluctant to sell her shares as she has a sentimentalattachment to them as they were left to her by her grandmother.At the annual general meeting of LPL, Zulu and King, as the largest shareholders, seek to make lifeuncomfortable for Hunter and seek to alter the company’s constitution to allow the Board to appropriateHunter’s shares.Hunter, as a shareholder in LPL, is not happy with her situation and seeks some legaladvice.1. What causes of action and legal remedies are open to Hunter against thedirectors of LPL to make her circumstances more bearable?(15 Marks)2. Does Hunter have the basis for legal action against the dominant shareholders in LPL for their conductat the recent company AGM?(15 Marks)3. Are there any grounds that are available to Hunter for legal action against thecompany itself?(10 Marks)
ANSWERQ1This question requires an examination of causes of action and remedies that are open to aMinority Shareholder against the Directors of the company who may be engaged inoppressive conduct.Hunter would be able to apply for the Statutory Remedy of Shareholder Oppression.The minority oppression remedy is a statutory remedy found in Pt 2F.1 of the Act. The keyprovision is s 232, which is broadly defined by the courts. The remedy was introduced intothe Act to provide more flexible alternatives for problems associated with the exploitation ofminorities than the just and equitable winding up remedy, which was considered to be tooharsh for solvent companies.The minority oppression remedy applies to persons in their capacity as a member orotherwise. However, an application for court orders under s 234 is limited to those, who are,or were, members.This remedy is available when the conduct (or proposed conduct) of a Company is oppressiveor unfairly prejudicial or unfairly discriminatory to a member or to a shareholder as a whole.It involves a3 step process:Step 1Who can apply?(s 234)Step 2Is the conduct oppressive?(s 232)Step 3What remedies are available?(s 233)As a Member of the company, Hunter would be able to apply for the remedy. The remedy foroppressive conduct is available to:234Who can apply for order(a)a member of the company, even if the application relates to an act or omission that isagainst:(i)the member in a capacity other than as a member;OR(ii)another member in their capacity as a member;OR(b)a person who has been removed from the register of members because of a selectivereduction;OR(c)a person who has ceased to be a member of the company if the application relates tothe circumstances in which they ceased to be a memberHunter would need to establish that the conduct was oppressive.

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