Residues treatment if appropriate to destroy an

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Residues Treatment }if appropriate To destroy an existing majority or to create a new majority: { Howard Smith} To given preference to a favoured shareholder who will retain management {Howard Smith} To change the voting structure. Pursuant to dividend reinvestment plan To entrench the position of incumbent directors: { Hogg; Advance Bank of Aust} To capitalise profits by issuing bonus shares: { Mills v Mills} For directors to preserve their own control of management by frustrating an attempted takeover, whether out of self-interest or the honest belief that it is for the good of the company that they remain in control: { Hogg v Cramphorn ; Cayne ; Howard Smith } referring to { Fraser v Whalley } Control of a company is a matter for the shareholders to decide whether it is in there interests to sell their shares. To prevent a destabilising interest of a competitor in the market: { Cayne v Global Natural Resources} 4
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“the substantial object the accomplishment of which formed the real ground of the board’s actions” {Dixon J in Mills v Mills} Factors relevant in determining substantial purpose: o Application of the but for test – that is “the power would not have been exercised but for the improper purpose” the directors actions will be invalid {Whitehouse per Mason, Deane and Dawson JJ} o The urgency and critical nature of a particular purpose is relevant {Howard Smith} o If a merely incidental result is improper purpose then this will not constitution a ‘substantial purpose’ {Harlowe’s Nominees} Eg. Diluting class rights when issuing new shares DUTY TO AVOID A CONFLICT OF INTEREST A. Fiduciary Obligations of Directors As {Boardman v Phipps per Lord Upjohn } explained: o a fundamental rule of equity that a person in a fiduciary capacity must not make a profit out of his trust which is part of the wider rule that a trustee must not place himself in a position where his duty and his interest may conflict” Therefore there are two limbs of fiduciary obligations: o 1) Duty to avoid conflicts of interest o 2) Duty to not profit from your position B. General Principles of Duty to Avoid Conflicts Rule B.1 Duty to Avoid Conflicts under Statute Under {s 191(1) Corporations Act} the director who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest unless s 191(2) says otherwise Material personal interest is not defined in the Act but involves: o Personal interest : any interest which directly or indirectly benefits or affects the director financially {McGellin per Murray J} o Materiality : the interest must be one which gives rise to a real or substantial possibility of conflict of interest (see below General Law) Must have capacity to influence the vote of the board {McGellin per Murray J} Under {s 191(2) Corporations Act } the following are not conflicts which are required to be cured by notice: o Interests that are held in common with all other members of the company
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