Company Law (LAWS2301 )

Statutory interpretation by the context of the Act and its clauses to determine the meaning of ‘equitable treatment’ in  a hypothetical provision of the Corporations Act 2001 (Cth)  saying:"In event of a restructuring of a public company including but not limited to the spin-off of a division, the company must ensure equitable treatment of all shareholders, considering long term interests of the company. what constitutes equitable treatment and major restructuring shall be determined in the context of each individual case." 

Meads Ltd is a successful clothing manufacturer.  The company has an issued share capital of 100,000 shares. The current value is $1.50 per shares. Meads decides to sell one of its factories for $500,000.  The directors do not like a minority shareholder called Jane and wish to get rid of her.  The company announces that it has no present or future use of this money and they propose to return the excess to their shareholders.  Consider the options that the Board below and discuss whether they will be successful:

1. A share-buyback of 20% of all shares at $1.50 per share;

1. A share-buyback of Jane’s shares at $ 2 per share;

1. A capital reduction to give all shareholders 50 cents per share?

1. A capital reduction to give only Jane $1 per share and then to cancel her shares?

Question 1

Smith subscribed for shares in Mineral Importers Limited relying on a prospectus which showed that over the previous ten years the company had made large and progressively increasing profits. While the statements in the prospectus were prima facie correct, they did not disclose that the bulk of the company's business had been with a country called Utopia and that business from this part of the world had been severely impacted by civil war.  The full facts have now become known and the shares are now worth less than half the price paid by Smith.

What legal redress is available against the directors of Mineral Importers Ltd and the company itself?

Question 2

Meads Ltd is a successful clothing manufacturer.  The company has an issued share capital of 100,000 shares. The current value is $1.50 per shares. Meads decides to sell one of its factories for $500,000.  The directors do not like a minority shareholder called Jane and wish to get rid of her.  The company announces that it has no present or future use of this money and they propose to return the excess to their shareholders.  Consider the options that the Board below and discuss whether they will be successful:

(A) share-buyback of 20% of all shares at $1.50 per share;

(B) A share-buyback of Jane’s shares at $ 2 per share;

(C) A capital reduction to give all shareholders 50 cents per share?

(D) A capital reduction to give only Jane $1 per share and then to cancel her shares?