Decision shares were issued for a proper purpose the

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court that the share was not for a proper purpose on the basis that Woodside did not require further capital. - Decision: Shares were issued for a proper purpose. The court stated “Primarily the power is given to enable capital to be raised when required for the purposes of the company, there may be occasions when the directors may fairly and properly issue shares for other reasons, so long as those reasons relate to a purpose of benefiting the company as a whole, as distinguished from a purpose” Whitehouse v Carlton Hotel Pty Ltd (1987): Carlton Hotel was owned by Mr Whitehouse, who was the governing director which meant that he had control over the management of the company. Control over the voting in the company was achieved by maintaining three classes of shares: 1. Class A shares: Held by Mr Whitehouse and had unrestricted voting powers 2. Class B shares: Held by Mrs Whitehouse, and only permitted voting after the death of Mr Whitehouse 3. Class C shares: Held by the children of Mr and Mrs Whitehouse, which provided profit sharing but no voting rights After Mr and Mrs Whitehouse divorced, Mr Whitehouse issued Class B shares to his two sons (who sided with him). This was done to attempt to ensure that his sons maintained control after his death. Mr Whitehouse subsequently fell out with his sons and directed the company to challenge the share issue as being for an improper purpose. - Decision: The share issue was invalid because Mr Whitehouse’s purpose in issuing the shares was to dilute the control of the company away from his wife and daughters after his death. It was not a proper purpose to issue shares for the purpose of manipulating control. Duty to Avoid Conflicts of Interest – Case Law Transvaal Lands Co v New Belgium (Transvaal) Lands & Development Company [1914]: Two directors (Samuel and Harvey) of Transvaal were also involved in another company called New Belgium (NB). Samuel was a shareholder and director of NB, while Harvey was only a shareholder (holding the shares as trustee for other persons). The two of them persuaded other directors to agree to have Transvaal purchase property from NB without disclosing their interest in that company of the benefit that they would obtain from the purchase (as shareholders of NB). - Decision: Directors acted under a conflict between their duty to promote the interest of Transvaal and their personal benefit in selling property to Transvaal through their other company, NB – even despite that Harvey only held the shares as trustee for other persons. The directors should have disclosed their interest in NB before Transvaal purchased the property. The purchase transaction was rescinded by Transvaal. Cook v Deeks [1916]: Several directors (including two Deeks brothers and another director) of the Toronto Construction Company had a disagreement with one of the other directors, Cook. The directors then negotiated a major construction project on behalf of the company, but diverted the project to a new company that they had established to exclude Cook from the project. The directors then used their shareholdings to
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