Deck 6: Members Remedies

Question 1

Only members can bring an application under section 237 of the Corporations Act 2001 (Cth) to seek leave to bring an action on behalf of the company.

Answer 1

False

Question 2

Jackie is a director of Bingo Ltd. Michelle and Barack own all the shares of Bingo Ltd between them. At the time Bingo Ltd was formed, Michelle and Barack told Jackie that he could stay on the board of Bingo Ltd for as long as he wanted to be a board member. At all material times Jackie had an expectation that he would be a board member. Michelle and Barack back out of their assurances and vote Jackie off the board. Jackie would be successful in pursuing an oppression claim under section 232 of the Corporations Act 2001 (Cth).

Answer 2

False

Question 3

Shareholders can potentially rely on section 1324 to obtain an injunction.

Answer 3

True

Question 4

An officer or former officer of a company can seek to bring a statutory derivative claim.

Question 5

The only people who have standing to seek an injunction under section 1324 are ASIC and any person whose interest have been or would be affected by conduct that contravenes the Corporations Act 2001 (Cth).

Question 6

Members' personal rights are sourced from a number of places including the company's constitution, the Corporations Act 2001 (Cth) and any agreements between a member and the company such as a shareholders' agreements.

Question 7

Which of the following could potentially form the basis of a successful winding up application under section 461(1)(k) Corporations Act (Cth) 2001:

A) A deadlock in management;
B) Fraud or misconduct;
C) A failure of substratum;
D) A breakdown in mutual trust;
E) All of the above.

Question 8

Lulu, Bucky and Mookie are directors of Baseball Pty Ltd. Mookie also holds 1% of the shares issued by Baseball Pty Ltd with Lulu and Bucky holding the balance of the shares. Lulu and Bucky vote Mookie off the board, increase their directors' fees, cease all dividend payments and take certain corporate opportunities belonging to Baseball Pty Ltd for their own benefit. Which of the following is correct:

A) Mookie could not commence an oppression action under section 232 because she is a director;
B) If Mookie was successful in perusing a derivative claims against Lulu and Bucky for breaches of their fiduciary duties, she would get to keep 100% of the proceeds from the lawsuit;
C) Lulu and Bucky's conduct would never be a breach of section 232 as they were acting within the scope of their power under section 198A of the Corporations Act (Cth) 2001;
D) If a court found that Lulu and Bucky breached section 232 Corporations Act (Cth) 2001, Mookie could seek to have the other directors buy out her shares in the company;
E) If a court found that Lulu and Bucky breached section 232 Corporations Act (Cth) 2001, they both could potentially go to jail.

Question 9

Members in a company have a number of statutory rights. Which of the following is NOT a right of members in the Corporations Act 2001 (Cth)?

A) The right to seek a correction of the share register;
B) The right to overrule bad management decisions made by directors;
C) The right to inspect the register of members;
D) The right to apply to inspect the company's books;
E) The right to request directors call a general meeting at the company's expense if the member(s) holds more than 5% of the voting shares issued by the company.

Question 10

Roch, Paco and Talbot are the directors of Mountain Breeze Pty Ltd ("Mountain Breeze"). Roch and Paco hold all the shares issued by Mountain Breeze between them. Mountain Breeze has a significant amount of debt. Roch and Paco pass a directors' resolution approving the sale of certain assets held by Mountain Breeze to another company they control at below market prices. This is clearly a breach of Roch and Paco's duty to avoid a conflict of interest and also a breach of sections 182 and 183 of the Corporations Act 2001 (Cth). Which of the following is correct:

A) Talbot could not seek to bring a derivative action for the breaches because he is not a member of Mountain Breeze;
B) The creditors could sue the directors for breaching their fiduciary and statutory duties;
C) The creditors could seek an injunction under section 1324 preventing the company from transferring the assets on the basis that the creditors' interests would be affected Roch and Paco's breaches of the Corporations Act (Cth) 2001;
D) Talbot could bring an oppression action under section 232 of the Corporations Act (Cth) 2001 for the acts done by Roch and Paco;
E) Talbot could sue Roch and Paco for breaches of their statutory and fiduciary duties.

Question 11

Why do company members need specific remedies?

Question 12

Who is entitled to apply for an oppression remedy?

Question 13

What is 'oppressive conduct' within the meaning of s 232 of the Corporations Act?

Question 14

Discuss five remedies available for an oppression action under section 232 Corporations Act 2001 (Cth).

Question 15

In what circumstances can a member seek to have the company wound up? Why would a member do this?

Question 16

What elements need to be satisfied under section 237(2) of the Corporations Act 2001 (Cth) before a court must grant leave for an applicant to bring a proceeding on behalf of a company?

Question 17

What are some examples of members' personal rights?