Notes- Shareholder Remedies

Pages 552-565 despotic Liquidation Remedies 1. Introduction * Deficiency of current law (1) despite insertion of statutory derivative routineion, formulation is unclear and scope is uncertain (2) think on single work on/ exercise rather than whole depiction/pattern/period (3) remedies argon directed to particular transaction and engrossed to restraint of conduct, Rec all overy of prop or cabareting of financial remuneration * Statutory remedies fall into 2 categories a.Compulsory elimination remedies courts kindle pitch thread up of caller-out if court is of moveiment that it is just and ingenuous that club be injure up s461(k) directors acted in affairs of conjunction in ingest entertain, not reside of members a whole, or any former(a) manner that appears to be unfair/ dirty to other members s461(e) affairs of club are be conducted in manner that is oppressive or below the belt prejudicial to or unfairly discriminatory against a member or in manner that is contrary to fills of members as a whole s461(f) act/omission or proposed act/omission by or on behalf of telephoner or a resolution or proposed resolution of a crystallise or members of the confederacy was or would be oppressed or unfairly prejudicial to, unfairly discriminated against a member(s) or was or would be contrary to s reachs of members as a whole s461(g) b. emedies for oppression or injustice Pt2F. 1 replete(p)r range of remedies to oppressed/injustice refer to wk 11 last page 2. The just and genuine ground a. History and loose scope of the remedy * just and trustworthy that society be insult up s461(k) traced back to English Act of 1848 * History p 553-555 b. Re Tivoli Freehold Ltd 1972 VICSCapplying just and equitable rules to end up up co (i) just and equitable give court a wide discretion which must be exercised judicially (Baird vHenry Lees 1924) question of fact all mickle to be considered (ii) facts translation it just and equitable to be appa ll up more than single category whitethorn be applied in fill-in countersink scoop up fit iii) regard to changing circumstances and developments in likeness to company practices including relevant changes in law (iv) just and equitable to be wound up if it engages in acts which are entirely outside what grass be fairly regarded as having been within the normal intention and rough-cut chthonianstanding of member when they become members (v) wound up due to ill fortune (Galbraith v Meito Shipping CO 1947) misfortune not evidence by discontinuance of problem activities- even if for a lengthy time. TEST of failure military control w/in objects of incorporation should have become at least in the practical sense impossible (vi) prime reference book for ascertaining intention and common understanding of members i the companys chronicle of association which among other things states its object HELD equitable and just to be wound up. c.Ebrahimi v Westbourne Galleries Ltd 1973 * FACTS Def via general meeting voted to remove pl from office as director. Pl petitioned to wind up co on just and equitable grounds. * LAW Where acts exhibit a dissolution of confederacy among them, a twist up may be ordered, use of just and equitable in partnership act supports this * Rights of members governed by articles of association and have contractual force- court can dispense parties from obligation where they have been excluded from management * Exception prove that exclusion was not made bona fide in the interest of the company * Elements for just and equitable wind up i. ssociation formed or continued on tail end of personal r/ship involving mutual confidence (usually found where exist partnership in turned into a limited company ii. an agreement, or understanding, that all or any(prenominal) of the stockholders shall participate in the conduct of the business iii. Restrictions upon the transfer of members interest in the company so that if confidence is conf ounded one member is removed from management, he cannot take out his imperil and go elsewhere HELD wind up exclusion of pl was not for best interest of company as whole Application of quasi-partnership analogy in AUSTRALIA * 3 groups of decisions indicate scope of the clause for subjection legal rights to equitable considerations arising from understanding b/wn corporators 1. A.Re Caratti Holdings Ltd constitution gave its governing director power to rent shares of other members at nominal value which they were originally issued power against a particular shareholder, although formally valid is sufficient grounds to apply order for wind up under the clause B. Kokotovich Constructions pty ltd v Wallington winding up order made at the suit of a minority shareholder whose small shareholding was granted on formation of company, under sole proprietor, in recognition of moral partnership founded upon a pre-existing intimate business intercourseship- winding up justified by continuing a nimosity between parties and risk of further oppression and limited nature of the companys activities 2.City Meat CO pty Ltd all company members where members of a single family whod acquired shares via inheritance court held that majority shareholder consistently ignored the rights, expectations and obligations of petitioners distinguish of family- wind up 3. Re Dalkeith Investments Ltd shares in co divided every bit b/wn former spouses and their daughter company was a partnership in corporate form= wind up 3. Directors acting in their own interest * s461(e) permits making of winding up order where directors have acted in affairs of company in their own interest rather than interest of company as a whole, or in a trend that was unfair or unjust to other members * OBJ TEST whether directors have acted in own interest etc or otherwise unfairly/unjustly * 461(e) heed 461(f) and (g) a. Re Cumberlands Holding Ltd 1976 1. directors not limit to whole board act unanimously, ONLY met wh ere shown that the effective majority has acted in its own interest or in the interest of one or more of those board members or even where on directors by about means caused his bequeath to be carried into effect by board with exit of personal interest being preferred 2. directors same application in (e) 3. affairs of the company wide interpretation, not limited to business/trade but encompass corking structure, dividend policy, voting rights, consideration of takeover offers 4. own interest acted in interest of another company of which they are also directors/shareholders 5. interest of members as a hole debate over interests of majority and minority directors preferred interest over that of significant section of members not apply preferred interest over one or more or perhaps some significant section of the members applies 6. appears doesnt carry much weight 7. unjust or unfair discussed elsewhere b. Re Weedmans Ltd 1974 * The directors, other than the main(a)s, failed to ob serve the prerequisite standard of commercial morality * Effect of failure reacted unfairly and unjustly against other members * They could have had the allotment set aside, but didnt postulate for that feature so in absence of a case for relief under Pt2F. 1 there is no other remedy out front the justice other than to wind up. Pages 122-130 Insolvency * Winding up * military volunteer brass instrument * Receivership * Creditors scheme or parade (loan default) 1. Voluntary presidentship * Pt5. A provides an inexpensive occasion capable of being implemented swiftly and flexibly and offering alternative options for creditors for dealing with financially trouble company * Outcomes accessible a. co will resume operation w/ deferred/reduced debt institutionalise under deed of company arrangement approved by creditors b. secured creditor will exercise right to select receiver to obtain re toleratement of its debts by disposal of company assets and who will effectively displace t he administrator time doing so c. Creditors will vote to put company into liquidation * Voluntary presidentship is usually initiated by company itself where directors resolve that a. In their vox populi the company is bankrupt or probably to become belly-up(predicate) at some future time AND b. nd administrator of the company should be appointed s435A * While under administration, administrator has control of companys quality and business s437A * Powers of other corporate officer (i. e. directors) are suspend and may not be exercised except by written favourable reception of administrator s437C(1) * Company officers are not removed from their offices by naming of administrator s437C(2) * Administrator must be a registered recipient who is independent of that company ss448B 448C * C company is solvent ONLY IF able to pay all its debts as and when they become due and payable s95A(1) * Otherwise it is insolvent s95A(2)- test . . ook at cash flow not balance b/wn assets and li abilities * If director of company in financial difficulties allows it to continue to trade and suffer debts while insolvent, they may be personally liable for losses carry on by creditors ss588G s588FA * Voluntary administration offers directors safe harbour from future insolvent trading liability but with loss of control of company affairs, billet and operations to administrator s437A-D * Administrator may be appointed by company s436B or by secured creditor who is entitled to execute a prime over whole or substantially the whole of the companys billet s436C * Administrator to notify secured creditor of their appointment as soon as practical the next business day s2405A(3) * w/in 13 business geezerhood of administrators appointment, a substantial betoken may enforce its charge, usually by appointment of receiver or other actor s441A * if substantial charge opts to enforce charge by virtue of higher(prenominal) power than administrator may supplant the administration s442D (1) * IF the substantial charge must enforce charge in relation to all property of company subject of it and does not have the option of appointing receiver to some small part only of the companys property, if they wish to over override power of administrator s441A(1)(b) all or nothing (Harmer identify) * If no substantial chargee or opt not to enfore charge, there is a general moratorium upon action/proceedings against company and its property by creditors and owners or lessors of property used by company ss440A-D and F * Moratorium provides a period for probe and collective assessment of option w/out scramble for undivided recover.. expectation for proceedings to commence before the administrations offset or in espect of perishable property ss441F-Gs * During admin there us a stay of enforcement of guarantees apt(p) by directors or their relative of a libality of their company without the leave of the court s440J * As soon as practice adminor must investigate the companys bus iness, property and financial circumstances s438A * w/in 5 business days appoint direction of creditors to consult with s436E&F * at this first meeting, creditors may also replace the administrator with person of own choosing s436E(4) * w/in 21 days of appointment, adminor must convene meeting to decide future of company s439A (28days for Christmas and Easter periods) * with the notice ofthe meeting, adminore muyst report to the creditors about companys business, property and financial circumstances s439(4)(a) * at the meeting creditors may resolve company execute deed of company arrangement specified in resolution, administration should end and company return to control of its directors company be wound up s439C * adminor report must include statement of opinion and if deed of company arrangement is propose must include report * resolution is passed at meeting of creditors it is decided on the voice unless carry a poll reg5. 6. 9 * deed of company arrangement might treat groups of creditors differently from order of application of assets under winding up, likely to prompt an application for its verge by court s445D * deed of company arrangement must preserve the priority open to employee creditors in a winding up unless employees agree to waive their priority court may approve alteration of priorities if deed ensures same/better outcome for employee creditors result than from a wind up 444DA * if creditor accept deed then adminor draws up deed for execution by co and deed adminor within 21 days of resolution s444A-444B * voluntary admin end at one time company become subject to deed of company arrangements s435C(1)(b), (2)(a) * creditors right to subvention and unaffected where debt is released by acceptance of terms of deed of co arrangement s444H * deed binds all unsecured and secured creditor, owners, lessors of prop used by co who voted for deed, the company, its officers, shareholders s444D, G * court may order that secured creditors etc who vot ed against the deed are up to now bound by it wgere enforcement of their rights would have material adverse effect on achievement of deeds purpose and their interest will be adequately protected s444D(2), (3) 444F * court may declare deed subjugate or validate it despite contravention Pt5. 3A, s445G * Pt 6D. 2 oblige disclosure obligations do not apply to equity for debt swap * Adminors statement must indicate statement is not a prospectus . . contain less info than prospectus s708(17A) * Court may alter times, the way in which deed operated in relation to a particular co s447A(1) where provisions are being abused the company is solvent s447A(2) * Order wind up power to supervise co under administrator or under deed of co administration s447E Receivership * Securities given by companies to lenders commonly grant the lender right when a defined act of default occurs to appoint a person to take possession and control either of a particular asset or group or assets or whole property . * Court may appoint receiver to protect particular property or funds of the company under s1323(1)(h) * controller refers to a receiver, receiver and manager, mortagagee in possession or its agent s9 * Where receiver is appointed by court, directors powers over property are suspended and revive only upon termination of receivership Winding up a. Appointing of recipient and its consequence winding up process leads to liquidation of co and termination of registration and existence made by court order or voluntary s491(1) by members voluntary wind up= unavailable where insolvent requirement of resolution at separate meetings of members and creditors s491 497 creditors will appoint the liquidator and control the liquidators conduct if 2nd meeting under voluntary admin and resolve to wind up.. moves to creditors voluntary winding up procedure s446A * Etc p 128 b. Order of application of company assets p128 after the liquidator has get the assets of the company, the funds are app lied to discharing the claims of creditors rule all debt and claims in winding up rank equally and if the property of the company is nsufficient to meet them in full, the must be paid proportionally s555 * Priority of debt and repayments where property available for repayment of creditors is insufficient for certain unsecured loans s561 * Unsecured claims are given priority in that they must be paid sequentially s556, 558 (i. e. liquidation expenses, wages, superannuation etc. * W/in each debt of each class all debts are equal rule applies s559 c. Recovering property and payment for benefit of creditors p129 * Pt 5. 7B structure for recovery of property or compensation for benefit of credit of an insolvent company complemented by Pt5. 8A in relation to agreements/transaction to avoid payment of employee entitlement * Pt5. B s588FE avoidable transactions where entered into w/in specific time of winding up * S88FF if voidable transaction liquidator must seek court order concerni ng those transactions and orders let go of the company from debt and orders varying the terms of agreement or declaring them void/unenforceable * p129 d. Schemes of arrangement used by company facing the prospect of insolvency to reconstitute its debts, typically through compromise of creditors claim// initiated by court order that meeting of creditors be convened for approval of explanatory statement to be sent with notice of meeting s411, 412 * Compromise must be approved by court after application to it s411(4)