BLAW2006 : Noodles Ltd Case Study – Corporations Act and Case Law – Law Assignment Help

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Assignment Task :

QUESTION 1

 

“Directors do not have to follow decisions made by members in general meeting.” Discuss.

QUESTION 2

 

The members of Exterior Ltd have requested the directors to hold a general meeting to discuss the company’s investments.  Advise the directors of their rights and responsibilities under Corporations Act 2001 (Cth) and case law and whether they should accede to the members’ request.  If the directors do not convene the general meeting, what alternative courses of action are available to the members?

QUESTION 3

 

Compute Ltd designs and manufactures computer keyboards.  The managing director of Compute Ltd is Mary Chip and the board of directors has given her the authority to undertake any transaction on behalf of the company up to a spending limit of $350,000.  Any expenditure above this amount requires the approval of the board of directors.  The other directors of the company are Major Quick and Slow Buck.

Mary Chip is on a business trip when she meets Bertie Boffin, an inventor who has designed a revolutionary method of inputting data into computers that could make the keyboard obsolete.  Mary believes she has to act urgently to protect Compute Ltd’s interest so she agrees that Compute Ltd will pay Bertie Boffin $400,000 to buy his invention.  When Mary returns to Compute Ltd, the company’s research and development staff determine that Bertie Boffin’s invention is not a threat to keyboards as Mary thought it might be.  The other directors are angry with Mary for breaching their expenditure limit instruction and order that Compute Ltd should not pay Bertie on the grounds that Mary had no authority to act.

REQUIRED

With reference to Corporations Act and case law, determine whether Bertie Boffin would succeed in enforcing the agreements against Computer Ltd. 

QUESTION 4

Noodles Ltd operates a wholemeal noodle outlet. The company has three directors, Hong, Li and Luwa. Hong is the managing director. Li left school when 

he was 15 and has no further qualifications other than being an expert on wholemeal noodle manufacturing. He is in charge of the manufacturing process. Luwa is a non-executive director and was only appointed to the Board because she comes from a wealthy family and has connections with financial institutions.

Noodles Ltd has been trading profitably until six months ago when a competitor selling seaweed noodles emerged and is rapidly gaining market share. Hong thinks that Noodle Ltd should open up outlets in major shopping centres. 

Hong calls a board meeting and tells Li and Luwa that by opening an outlet in the most expensive and prestigious city shopping centre will solve all the company’s problems. He says that they will have to act quickly as the seaweed noodle competitor is also interested in that outlet. Hong does not tell Li and Luwa that he has not carried out a feasibility study into the financial implications of this proposal. Hong also proposes that they should issue shares to Luwa’s brother to fund the proposal and advises Li and Luwa that this will also prevent the seaweed noodle manufacturer from taking over their company.

Luwa is doubtful about the whole proposal and feels that they are being rushed into making a decision without being given time to consider alternatives. Li however agrees to Hong’s proposal without really understanding the financial implications.

Within 6 months of opening the new outlet, it becomes apparent that the company was not in a financial position to have taken such a step and a proper feasibility study would have shown this. The company is unable to pay its debts and a liquidator has been appointed.

REQUIRED

(a) Advise Hong, Li and Luwa whether they have breached any duties under the Corporations Act and case law in making the decision to open the outlet. Also discuss any defences they may have.

(b) Advise the directors whether they have breached any duties under the Corporations Act and case law in making the decision to issue shares to Luwa’s brother.

(c) Advise the directors of the procedures that should have followed under the Corporations Act in making the decision to issue shares to Luwa’s brother.

 

 

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