Deck 5: Membership, Members Power and Dividends

Question 1

It is a requirement that all proprietary companies have an annual general meeting.

Answer 1

False

Question 2

The only way a company can call an extraordinary general meeting is if the directors decide to call one under section 249C of the Corporations Act.

Answer 2

False

Question 3

Jack, Keisha and Sunny are the only directors and shareholders of a company called BigBrand Pty Ltd. BigBrand buys and sells a variety of consumer goods in Australia. Jack is currently travelling overseas negotiating a deal with a supplier. Keisha calls a shareholders' meeting. Jack can participate in the meeting by using Skype.

Answer 3

True

Question 4

The constitution of a company can contain a provision which limits, restricts or prohibits the transfer of shares by shareholders.

Question 5

A company must keep its register of members either at the company's registered business, its principal place of business in the jurisdiction, a place within the jurisdiction where work maintaining the register is done or anywhere else that the directors believe is appropriate to keep the register.

Question 6

Only individuals over the age of 18 can be members of a company.

Question 7

Blue Belle Pty Ltd has six shareholders including Adriano who owns 15% of the voting shares. Blue belle Pty Ltd has no constitution and relies on the replaceable rules. Adriano calls a meeting of members under section 249F of the Corporations Act. While he complied with all the notice requirements, none of the other shareholders attend the meeting. Adriano can validly conduct business at the meeting because 15% of the voting shares are present at the meeting (i.e. the 15% owned by Adriano). Section 249F provides that the minimum amount of voting shares needed to be presented before conducting business is 10%

Question 8

Lexi owns 65% of the shares of AusBank Ltd. AusBank runs a banking business and the directors have recently announced that they passed a directors' resolution to purchase an office building in Sydney for its headquarters. Lexi is furious when she hears about this announcement as she believes the company should be headquartered in Brisbane. She makes a request under section 249D of the Corporations Act in order to pass a shareholders' resolution to overturn the decision to buy the building in Sydney

A) The directors must arrange and hold the meeting in accordance with section 249D.
B) The directors can ignore the request because the meeting is being held for an improper purpose (i.e. to interfere with management decisions).
C) Lexi has no right to make a request under section 249D because she is a majority shareholder.
D) If the directors decided to proceed with the meeting under section 249D, Lexi would have to pay the costs of the meeting.
E) If the company's AGM was scheduled, Lexi could attend the AGM and with no notice ask the shareholders to vote on a resolution to overturn the decision to purchase the building in Sydney.

Question 9

Which of the following details does not need to be recorded by a company in its register of members:

A) The members' names;
B) The members' address;
C) The amount of shares owned by each member;
D) The members' age;
E) Whether the shares are fully paid and, if not, the amount outstanding.

Question 10

Anja is 6 years old and attends a local primary school. As part of a school project, she bakes chocolate chip cookies and sells them to her neighbours. The cookies are delicious and the neighbours ask for more. Soon Anja is baking a large amount of cookies and selling them all over Australia. Anja's father, Jacob, is a lawyer and says Anja should incorporate the cookie business. Jacob said he would act as the director of the company and the shareholders would be Anja (75%) and Jacob (25%). Which of the following is correct:

A) Jacob's plan doesn't work because Anja cannot be a shareholder as shareholders need to be at least 18 years old.
B) Because Jacob is a promoter he does not need to consent to becoming a member.
C) Unless there is something in the constitution that limits the transferability of shares, Jacob could transfer ALL his shares to Anja if they both agreed.
D) As a minority shareholder, Jacob would have no right to enforce the constitution and replaceable rules of the company.
E) If Anja's neighbour was curious as to who owned the shares in the company, there is no way she would be able to get a copy of the register of members of the company.

Question 11

Dora and Valentina are directors of a company called Guadalajara Pty Ltd ("Guadalajara"). Notwithstanding that Guadalajara has been very unprofitable for many years, it still has large amounts of cash on its balance sheet. Dora and Valentina are getting a lot of pressure from the company's shareholders to pay a dividend. Under the Corporations Act in order for a dividend to be paid, Valentina and Dora must ensure that:

A) The company has been profitable;
B) There is sufficient cash to pay the dividend at the time the directors declare the dividend;
C) The company's assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend;
D) The payment of the dividend is fair and reasonable to the company's shareholders as a whole;
E) The payment of the dividend does not materially prejudice the company's ability to pay its creditors.
F) All the above are correct.
G) (c), (d) and (e) are required before the dividend can be paid.

Question 12

How does a person become a member?

Question 13

What is the significance of the register of members?

Question 14

What is a share certificate?

Question 15

How are shares in a company transferred?

Question 16

How is decision-making normally divided between directors and members?

Question 17

Explain the difference between a meeting convened under s 249D and a meeting convened under s 249F.

Question 18

Explain the notice requirements for a members' meeting.

Question 19

What is the role of the chair at a members' meeting.

Question 20

Explain the difference between an ordinary resolution and a special resolution.

Question 21

Give an example of a members' meeting not being held for a proper purpose, and cite a case.

Question 22

What are dividends?