SS Lecture 7 - SS Lecture 7 Overview Restrictions on member...

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1 SS Lecture 7 Overview ± Restrictions on member decision-making: HRS Ch 8 ± Directors: HRS Ch 9 Directors: HRS Ch 9 1 Member dcn-making ± A co = a mini democracy ± Therefore majority rules ± Members decide by voting on a resolution ± Therefore most votes cast for or against resolution will prevail ± Members may exercise voting rights in their own self-interest (even if they are also directors) 2 Why are restrictions needed? ² to stop unfair exploitation of minority shareholders by majority ² not always possible for minority to sell 3 The equitable limitation on majority voting power ± Not a positive duty ± Rule: if majority passes a resolution which no group of reasonable people would think no group of reasonable people would think is within majority’s power, a court can declare the resolution void ± Sometimes overlaps with oppression remedy (later lecture) 4 Applying the equitable limitation ± Do the facts involve a decision by the majority of members that harms the minority? ± The rule applies slightly differently for: ² cases involving constitutional amendment ² cases not involving constitutional amendment 5 Cases other than amendment of constitution ± Taking the company’s property: ² Breach of equitable limitation to use voting power so as to give themselves property, advantages or rights belonging to the company: Ngurli ± Majority unwilling to sue where they are the alleged wrongdoers: Biala 6
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2 Amendments to constitution ± Even where s 136 is complied with, amendment may be invalid due to equitable limitation ± Gambotto deals with: ² amendments that expropriate shares ² other amendments that give rise to conflict 7 Gambotto v WCP Ltd (1994-1995) 182 CLR 432 WCP Ltd 99.7% 0.09% 0.21% Other minority shareholders IEL Mr Gambotto 8 Gambotto facts ± IEL wanted 100% ± 100% = tax($4million)+admstve($4,300/yr) savings ± Sp resolution proposed to alter constitution ± New cl allowing a 90% or > s/hldr to buy compulsorily all New cl allowing a 90% or > s/hldr to buy compulsorily all
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This note was uploaded on 03/13/2010 for the course ECON econ1010 taught by Professor Margretfinch during the Three '08 term at Griffith.

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SS Lecture 7 - SS Lecture 7 Overview Restrictions on member...

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