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| Business Entities
Week
12
In
2013,
three
friends
(Amy,
Lee
and
Chu)
incorporate
Bold
Fresh
Pty
Ltd
to
operate
a
retail
fashion
shop
that
specialized
in
selling
the
latest
trendy
fashion
designs.
Amy
and
Lee
each
held
45%
of
the
issued
shares
in
the
company
and
Chu
held
the
remaining
10%
of
the
shares.
The
companys
constitution
stated
that
all
three
were
directors
of
the
company,
with
Amy
being
appointed
as
the
managing
director.
Chu
is
very
critical
of
Amys
management
but
lacks
the
support
of
Lee
in
confronting
Amy
about
her
style
of
management.
Lee
informs
Amy
about
the
Chus
dissatisfaction.
To
teach
Chu
a
lesson,
Amy
and
Lee
decide
to
incorporate
a
new
company
called
Bolder
and
Fresher
Pty
Ltd
in
which
Amy
and
Lee
are
equal
shareholders.
Bolder
and
Fresher
Pty
Ltd
trades
in
the
neighboring
suburb
and
Amy
and
Lee
divide
their
time
between
the
two
businesses.
Chu
is
incensed
when
he
hears
about
these
developments
but
is
unsure
what
he
can
do
as
he
feels
that
he
has
been
outsmarted
by
his
friends.
Advise
Bold
Fresh
Pty
Ltd,
the
directors
of
that
company
and
Chu
of
their
rights
and
liabilities
with
reference
to
the
Corporations
Act
and
relevant
precedents.
Relevant
Case
Law:
Cook
v
Deeks
Facts:
TCC
was
formed
to
execute
a
tender
for
construction
of
railway
line
for
CPR.
When
contract
successfully
completed
CPR
commenced
negotiations
with
2
directors
of
TCC,
Deeks
and
H,
for
construction
of
another
line.
Deeks,
his
brother
and
H
together
held
3/4
of
capital
in
TCC
with
remainder
held
by
Cook.
Those
4
people
were
the
only
directors
of
TCC.
Cooks
fellow
directors
decided
to
exclude
him
from
any
new
contract,
so
they
formed
a
new
company,
DCC,
in
which
Cook
had
no
interest.
DCC
then
carried
out
the
new
contract.
A
general
meeting
of
TCC
was
held
at
which
Deeks,
his
brother
and
H
used
their
voting
power
to
approve
sale
of
part
of
companys
plant
to
DCC
and
to
declare
that
TCC
had
no
interest
in
new
contract.
Cook
brought
proceedings
against
other
directors
and
DCC
claiming
they
held
contract
for
benefit
of
TCC.
Held
(Lord
Buckmaster
LC):
the
directors
obtained
the
new
contract
in
the
course
of
their
role
as
directors
of
TCC,
and
therefore
that
contract
rightfully
belongs
to
TCC
under
the
duty
not
to
make
secret
profits.
They
cannot
ignore
their
fiduciary
duties
and
divert
new
business
for
their
own
purposes.
An
attempt
by
the
three
directors
(who
constitute
a
majority
of
the
TCC)
to
give
up
the
new
contract
or
ratify
their
own
actions
amounts
to
forfeiting
the
interests
and
property
of
the
minority
of
shareholders
in
favour
of
the
majority,
which
is
not
allowed
the
general
meeting
cannot
make
resolutions
to
oppress
the
minority
Disclaimer:
This
document
is
not
and
does
not
purport
to
be
a
formal
set
of
solutions
or
a
solutions
guide
to
the
tutorial
problems.
Everything
above
is
purely
a
documentation
of
class
collaborations
discussed
in
class.
No
responsibility
is
taken
for
reliance
on
this
document.
2015
Nathan
Huynh
All
Rights
Reserved
Assume
Boulder
is
in
a
similar
line
of
business
and
is
competing
with
Bold
and
Fresh
Breach
of
no
conflict
rule
(s
182)
and
good
faith
obligations
(s
181)
Likely
that
directors
will
try
and
vote
to
ratify
disclosure
of
their
conflict
Conduct
of
companys
affairs,
actual/proposed
act
or
omission,
resolution
or
proposed
resolution
Note,
see
Cook
v
Deeks
Winding
up
extreme,
not
likely
in
this
case
Statutory
Injunction
possible
Disclaimer:
This
document
is
not
and
does
not
purport
to
be
a
formal
set
of
solutions
or
a
solutions
guide
to
the
tutorial
problems.
Everything
above
is
purely
a
documentation
of
class
collaborations
discussed
in
class.
No
responsibility
is
taken
for
reliance
on
this
document.
2015
Nathan
Huynh
All
Rights
Reserved
Week
12
Ben,
Mary
and
Liang
are
the
company
directors
in
QuickCo
Pty
Ltd
(QuickCo),
having
founded
the
company
several
years
ago.
Lately,
QuickCo
has
been
experiencing
unusual
cash
flow
problems
and
may
not
be
able
to
pay
all
of
it's
creditors
their
full
entitlements.
This
is
the
first
time
in
the
company's
history
that
the
business'
cash
flow
has
not
been
sufficient
to
cover
all
liabilities.
The
directors
of
QuickCo
believe
that
the
company's
position
will
improve
as
they
are
currently
negotiating
several
large
contracts
that
would
hopefully
bring
in
sufficient
cash
flow
to
satisfy
all
present
liabilities.
Ben,
Mary
and
Liang
are
concerned
about
their
future
job
prospects
if
the
company
becomes
insolvent.
CreditCo
Pty
Ltd
(CreditCo)
is
a
secured
creditor
of
QuickCo
with
a
1st
registered
mortgage
over
QuickCo's
office
building
(its
most
significant
asset).
CreditCo
is
concerned
because
QuickCo
has
not
made
its
monthly
loan
repayments
over
the
last
2
months.
CreditCo
is
concerned
about
obtaining
repayment
of
the
debt,
but
does
not
want
to
pressure
QuickCo
as
the
company
is
its
largest
business
customer.
If
QuickCo
goes
out
of
business,
CreditCo
will
loose
a
substantial
portion
of
its
business.
CreditCo
is
flexible
about
obtaining
repayment
of
its
debt.
Ezifinance
Pty
Ltd
(Ezifinance)
is
an
unsecured
creditor
of
QuickCo
who
also
has
not
been
paid
for
the
last
2
months
and
is
concerned
about
the
repayment
of
its
debt
by
QuickCo.
QuickCo
is
Ezifinance's
smallest
client
and
the
CEO
of
Ezifinance
would
like
to
clear
the
debt
off
the
company's
books
sooner
rather
than
later.
Advise
each
of
the
following
parties
with
reasons,
and
with
reference
to
the
relevant
sections
of
the
Corporations
Act,
as
to
which
form
of
external
administration
would
best
suit
their
needs.
. (a)
Ben,
Mary
and
Liang
Volunteer
Administration
Disclaimer:
This
document
is
not
and
does
not
purport
to
be
a
formal
set
of
solutions
or
a
solutions
guide
to
the
tutorial
problems.
Everything
above
is
purely
a
documentation
of
class
collaborations
discussed
in
class.
No
responsibility
is
taken
for
reliance
on
this
document.
2015
Nathan
Huynh
All
Rights
Reserved
. (c)
Ezifinance
Issue
a
statutory
demand
(s
459C(2))
Ezifinance
will
then
have
to
either
pay
the
debt
or
risk
compulsory
winding
up
This
way
Exifinance
will
get
its
money
ASAP
Your
answer
should
also
consider
whether
the
party
you
are
advising
is
able
to
initiate
the
form
of
external
administration
you
are
advocating.
Disclaimer:
This
document
is
not
and
does
not
purport
to
be
a
formal
set
of
solutions
or
a
solutions
guide
to
the
tutorial
problems.
Everything
above
is
purely
a
documentation
of
class
collaborations
discussed
in
class.
No
responsibility
is
taken
for
reliance
on
this
document.
2015
Nathan
Huynh
All
Rights
Reserved
Revision
Rubric
Types
of
Business
Entities:
Sole
Trader
Partnership
o Carrying
On
o In
Common
o With
View
to
Profit
Joint
Venture
o Everything
separate,
focus
on
product/not
profit
Trust
o Express
Trust
declaration
of
settlor
Discretionary
Fixed
o Non-express
trusts
Implied
Constructive
Companies
o Propriety
Company
Small
Large
o Public
Company
Body
corporate
Limited
Liability
Corporate
Veil
o Barrier
between
company
and
members
o Can
be
pierced
or
lifted
if
improper
purpose
Corporate
Groups
o Agency
relationship
Constitution/Replaceable
Rules
Incorporation
Contractual
liabilities
Tort
and
Criminal
Liability
o Organic
theory
is
the
mind
and
will
attributable
to
the
company?
o If
not
vicarious
liability
Promoters/Corporate
Fundraising
Promoters
o Fiduciary
duties
o Disclosure
of
interests
Disclaimer:
This
document
is
not
and
does
not
purport
to
be
a
formal
set
of
solutions
or
a
solutions
guide
to
the
tutorial
problems.
Everything
above
is
purely
a
documentation
of
class
collaborations
discussed
in
class.
No
responsibility
is
taken
for
reliance
on
this
document.
2015
Nathan
Huynh
All
Rights
Reserved
Corporate
fundraising
o Prospectus,
profile
statement,
information
sheet
o
o Protection
of
investors
o Statutory
defence
Lack
of
consent,
knowledge,
reasonable
reliance
Objective/Subjective
Share
Capital
Directors
Duties:
General
law:
Statutory duty
Remedies:
Damages
or
compensation
Accounts
of
Profit
Recission
of
contract
Return
of
property
and
constructive
trust
Disclaimer:
This
document
is
not
and
does
not
purport
to
be
a
formal
set
of
solutions
or
a
solutions
guide
to
the
tutorial
problems.
Everything
above
is
purely
a
documentation
of
class
collaborations
discussed
in
class.
No
responsibility
is
taken
for
reliance
on
this
document.
2015
Nathan
Huynh
All
Rights
Reserved
Pecuniary
orders
Disqualification
order
Compensation
order
Relief
by
Court
Relief
by
shareholder
Shareholder
Remedies
Common
Law
Shareholder
Oppression
Statutory
Derivative
Action
Winding
up
Statutory
Injunction
Disclaimer:
This
document
is
not
and
does
not
purport
to
be
a
formal
set
of
solutions
or
a
solutions
guide
to
the
tutorial
problems.
Everything
above
is
purely
a
documentation
of
class
collaborations
discussed
in
class.
No
responsibility
is
taken
for
reliance
on
this
document.
2015
Nathan
Huynh
All
Rights
Reserved