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Can derive some new commercial advantage by virtue of

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can derive some new commercial advantage by virtue of the expropriation” {Gambotto} However note the dissenting judgment in {Gambotto} o “No distinction should be drawn between expropriation that will enable a company to pursue a beneficial course of action that would otherwise be denied to it and expropriation that avoids a detriment to the existing interests of the company” (2) Expropriation must be ‘Fair in All Circumstances” For the expropriation to be fair in all the circumstances, procedural AND substantive fairness need to be present Procedural fairness will include: 11
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Shareholder Remedies o Full disclosure of the purpose of the transaction (including balanced case for the transaction) o Independent value of the shares Substantive fairness will involve o Examination of whether adequate consideration was given for expropriation – ie “fair price” o Expropriation at less than market price is prima facie unfair (3) Consequences of Illegal Expropriation The consequences of an illegal expropriation include: o Breach of duty of care (failure to comply with mandatory procedures) o An exercise of the amended constitutional powers will be invalidated on the basis of oppression (4) Under Statute: Equitable Limitations on Majority Power Under {s 140(2) Corporations Act} unless a member of a company agrees in writing to be bound, they are not bound by a modification of the constitution made after the date on which they became members so far as the modification: o (a) requires the member to take up additional shares o (b) increases the member’s liability to contribute to the shares capital or otherwise pay money to the company o (c) imposes on increase restrictions on the right to transfer the shares already held by the member unless the modification is made: (i) in connection with the company’s change from public to proprietary company (ii) to insert proportional takeover offer approval provisions into the company’s constitution Therefore even under statute there are limitations on what the majority can do to the constitution C.2 Ratification The other category identified in {Gambotto} was using majority shareholder power to ratify breaches of director and Company conduct Shareholders can exercise their voting rights meaning that shareholders can vote in simple (50% or special (75%) resolutions at general meetings Their duty to the company is not fiduciary and may be exercised selfishly {Peters per Dixon J} Therefore shareholders of a Company can vote to ratify (ie. Forgive) SOME breaches of duty by the directors, however: o ANY vote is ineffective if the company is insolvent o Furthermore these votes have no impact on ASIC’s ability to pursue directors (but will release them under general law) (1) Types of Breaches which Shareholders CAN Ratify Majority shareholders can ratify the following general law breaches o Duty of care, skill and diligence {Coleman v Myers; Residues Treatment} o Duty to exercise powers for proper purpose This is particularly the case where shares have been issued to a friendly party to frustrate hostile takeover bid
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