company law ans

Topics: Corporations law, Stock, Law Pages: 12 (4063 words) Published: October 5, 2014
Sample Tutorial Answers (HBL221N Company Law)
To answer all legal questions, students are to follow the essential steps of: (1)Identification of the issues in the questions;
(2)State the relevant laws that can be used to resolve the issues in the questions; (3)Application of the relevant laws to the facts in the questions to resolve the issues in the questions (i.e. arguments); and (4)Conclusion based on arguments in Point (3). Your conclusion must resolve your issues in Point (1). NOTE: USE THESE SAMPLE ANSWERS AS A REFERENCE ONLY! THESE ANSWERS WILL NOT HELP YOU PASS YOUR EXAM!

Tutorial 1
Q2. Bristow is a substantial shareholder in Chester-Perry Industries Ltd. A business competitor, Gun and Fames Pty Ltd, is selling in great volume a cookbook similar to one in respect of which Chester-Perry Industries holds the copyright. Bristow believes his company has incurred a substantial loss and his own shares have been reduced in value by $150,000. His solicitors believe an infringement of copyright has occurred. Eccles and Pollock are the directors of Chester-Perry Industries Ltd. They state that they have decided not to litigate because they believe that to take legal action for infringement of copyright is too expensive and risky. Bristow is unsure whether the directors of Chester-Perry Industries have any interest in Gun and Fames Pty Ltd. On the general principles laid down Salomon’s case, can Bristow sue Gun & Fames?

Issue:Can Bristow sue Gun & Fames on behalf of Chester-Perry as a shareholder in Chester-Perry? Relevant law: Salomon.
Application: The House of Lords in Salomon held that upon incorporation, a company becomes a separate legal entity even though its issued shares are beneficially owned by the same person like in Salomon.

Similarly in this question, Chester-Perry is a company that has been incorporated and therefore, is a separate legal entity from all its shareholders. In this case, according to Salomon, Bristow who is a shareholder of Chester-Perry cannot sue Gun & Fames on behalf of Chester-Perry as a company is separate from its shareholders. Conclusion:Bristow cannot sue Gun & Fames on behalf of Chester Perry due to the principle laid down in Salomon where upon incorporation Chester Perry is considered as a separate legal entity from all its shareholders, including Bristow.

Tutorial 2
Q4(a). The Constitution of Big Hopes Pty. Ltd. includes the following provisions:
Rule xi: On any increase in capital the new shares must be offered to members in proportion to their existing shares.
John (an existing shareholder) is distressed when an allotment of a new issue is not made to him. What legal action (if any) may he take?

Issue:What action can John take against Big Hopes for failing to allot new issue of shares to him according to Rule xi of the Constitution?

Relevant law: s.140(1)(a) CA 2001.

Application:s.140(1)(a) states that a constitution of a company is a contract between the company and its shareholders. In this essence, both the company and its shareholders are bind by the constitution.

In this instance, Rule xi of Big Hopes’ constitution states that new shares must be offered to existing shareholders as per their existing shares. However, Big Hopes failed to allot new shares to John as according to his existing shares and have therefore breached its contractual obligation in the constitution under s.140(1)(a).

Conclusion:John can take an action against Big Hope under s.140(1)(a) for breaching its contractual obligation in its constitution for failing to allot the new shares to John as per his existing shares.

Tutorial 3
Q6. John, Ringo, George and Paul incorporate Big Hopes Pty Ltd for their property development business. Big Hopes Pty Ltd was empowered under a provision in its constitution to appoint a managing director....
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