Commonwealth of Australia and Maple is an Australian company dealing in the supply of high end office furniture to the Australian corporate market, and boasts a range of high profile businesses.

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Commonwealth of Australia and Maple is an Australian company dealing in the supply of high end office furniture to the Australian corporate market, and boasts a range of high profile businesses.

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Able, Bella, Claude and Zac Brown are the directors of Maple Pty Ltd (‘Maple’). Bella is the Managing Director of Maple. All shares in Maple are held by members of the large and extended Brown family. Maple is an Australian company dealing in the supply of high end office furniture to the Australian corporate market, and boasts a range of high profile businesses as clients. A total of 1000 shares in Maple have been issued: the 4 directors own 200 Management class shares each, and the remaining 20 family members each own 20 Family class shares. All shares have equal voting rights, but Family shares participate in dividends at 10% of the rate of Management class. The company has adopted the replaceable rules under the Corporations Act 2001 (Cth) and the chair of the company is elected at each meeting. Bella likes being ‘in charge’ but she does not like the hard work involved in running the company. Daisy, Bella’s sister, gives advice to Bella about the business. Bella normally takes her advice as Daisy has studied accounting. The family has strong links with the high- end forestry industry in Australia. Zac is also the sole director of a large plantation and sawmilling company. The family are aware of his business interest. Claude and Zac have been discussing a business opportunity which has arisen to open a separate branch Maple, purchasing highest quality timbers and manufacturing exclusive designer pieces for domestic use. Claude and Zac have prepared a business plan for this opportunity and know that large profits can be made from this business stream. However, they know that Bella is against any expansion at this point. Daisy has told Bella that the business should not enter into any further expansion at this point as their cash flow is ‘very tight’. Family members normally accept Bella’s decisions and vote accordingly. Claude and Zac believe that removing the voting rights of Family shares would make business decisions such as this more efficient. Able has been unwell for several months: he has been receiving medical treatment and has not been attending board meetings. Claude and Zac convince Able to give them his proxy to be used at the September Board meeting as they see fit. At the Board meeting, Claude is elected Chairman. Claude and Zac table a resolution to introduce the new business stream. Using Abel’s proxy, Claude and Zac vote for the resolution, which is then adopted. They also put forward a resolution to remove the voting rights of Family shares, which is adopted by the necessary majority. REQUIRED: Bella, Daisy and the rest of the family are very concerned about this outcome. As their legal advisor, you have been asked to consider these issues and suggest any actions which could be taken to protect their interests and the interests of the company. Examine each issue using the ‘Issue, Law, Apply, Conclude’ model.

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The Company being a legal person is involved in the particular case. The company being Maple Pty Ltd. The Issue which has come down in this case is that a new business stream is being sought to be brought forward in the company where the other two directors have tabled a resolution for opting the same. But, they being unaware of the fact that the company is facing cash crunch, and thus their decision might put the company into insolvency.

Shareholders: The number of shareholders in the company total to 14 which includes 10 shareholders from the family class each having 20 shares and 4 directors having 200 management class shares. Every company gives the right to shareholders to turn the decision in their favor or in the best interests of the company and given the present situation of tight cash flow, and that the shareholders have enough votes, they could overturn the decision of non expansion in the current situation. Given that expansion mode is opted by the company and the management at this situation, this could lead to a position of deep debt burden and the company would not be able to repay the debt due to lower cash flow which would put the company into insolvency as well as deprive the long term interests of the shareholders. Every shareholder has a right to attend the board meetings and they have the right to know about the majority rights of vote about the directors so that the shareholders are disclosed about the position of directors and that the decisions taken by them vests benefits to the company or rather the shareholders have the options of putting the major votes in that case. Moreover, the shareholders may overturn the right by voting against such voting shares so that the best interests of the company vests in the right hands and those decisions are taken in quorum to the shareholders voting rights, who have a crucial role to play in decisive matters.

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