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Investlaw 1+2 (Week 1: Investing in a company (Different types of shares…

- - - - Preference shares
        
        s. 254A(2) & s.254G(2) – co must set out in its constitution or special resolution – the rights of preference shareholders.
        
        more similar to external creditors
        
        preferential right to receive dividend, usually at fixed percentage of issue price (this makes them more immune to ups and downs in profit – even if co doesn’t make much profit, they still get dividends)
        
        preferential right to be repaid capital if co is wound up
        
        restricted voting rights (eg only vote on a proposal to wind up; reduce capital).
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      - Ordinary shares
        �- rank after the holders of preference shares.
        
        Dividends can only be paid out of profits (s 254T) so ordinary shareholders won’t get dividends if no profit is made.
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- - - - Shareholder rights
        
        Shareholders’ rights to receive per-share dividend
        
        Directors have discretion to fix the amount, time and method of payment. <s.254U>
        
        Shareholders do NOT have the right to force a company to pay dividend, even if it has made money available to do so.
        <(Burland v Earle 1902) - directors might want to put $ back into business.>
        
        In exceptional circumstances, refusal to pay dividends would be oppressive or unfair. <s.232, Sanford v Sanford Courier Services>
      - Payment of dividends
        
        Company has Constitution for declaration of dividends => declared final dividend becomes a debt enforceable against the company. <s 254V(2)>
        Otherwise, dividends are revocable (có thể huỷ) before the date of payment - Interim dividend <s 254V (1)>
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        s254T
        
        A dividend may only be paid if assets exceed liabilities of the company. <s.254T (1)a>�
        
        Must be fair to both the shareholders as a whole <254T(1)b> ��
        
        [&] must not materially hurt company’s ability to pay its creditors <s.254T(1)c>�
      - Remedies �
        
        Reduction of capital: directors liable for civil penalty order
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        Insolvent trading
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        Breach of fiduciary duties
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        Injunction (chấp hành) <s.254T; s.1324 - injunction to restrain company from paying dividend>
    - - Typical resolutions (nghị quyết/chủ đề) at a General Meeting:
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        Right to vote for appointment & removal of company directors.
        < public cpn: s 203D; proprietary cpn: s201G and 201H for appointment and s203C for removal>
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        Directors’ remuneration (khen thưởng). <public cpn: s202A�>
        
        Share capital decisions <s257B, s256C, s260B>
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      - Procedures
        
        by poll (s 250E), or by show of hands (s 250J)
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        by Special resolution (in Corporations Act or Constitution), or Ordinary Resolution - majority votes.
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    - - S 251B(1)� A company must allow Members to inspect:
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        Meeting minutes
        
        Registers of members�, must have: -
        
        Acting in good faith
        
        Proper purpose <s.247A>
    - - Internal management governed by:
        Replaceable Rules (RR) <s.141>;
        a company constitution;
        OR both <s. 134>.
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        RR
        
        Only applicable to proprietary companies.
        <s.254D pre-emptive (mua trc shares) right for existing shareholders b4 issues>
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        RR for proprietary companies, but are mandatory for public �<s.249X member have the right to appoint proxies (uỷ quyền)>
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        Constitution
        
        <s.140> Constitution and RR has effect of being a Contract between:
        (a) Company and members
        (b) Company and director
        (c) Member and each other member
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        Company Enforcing Contract on Members:
        <Hickman v Kent 1915 – company enforced K against a member. According to Constitution, member must refer disputes to arbitration, rather than going to court.>
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        Members Enforcing Contract On The Company:
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        Members cannot enforce Constitution provisions which give them the rights in other capacities: eg solicitor or promoter.
        <Eley v Positive Government Security Life Assurance Co
        [1875] – solicitor should have entered an independent employment contract>
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        <s.232> – Members CAN SUE if the breach is contrary to interests of members as a whole, oppressive or unfair.
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        <Hickman’s case> Members can only enforce provisions in contract which confer rights on them, for example:
        
        Right to have the votes counted at general meeting
        
        Right to enforce payment of declared dividend
        
        Right to demand a poll is questionable>
        
        Suing Using the Constitution�
        
        <Foss v Harbottle>: (a) members dont have standing to sue the wrongdoer on behalf of co.
        (b) Members cant challenge breaches of Constitution, if breach is ratified (phê chuẩn) by an ordinary resolution.
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        Abolish: <s.236(3)>
        Derivative action enables members or officers to bring legal action on behalf of a company, if the court grants leave
        
        <S237(2)> Court must grant leave if: “probable company itself won’t sue, person is acting in good faith, in the best interest of the company, serious question to be tried, and notice given to company - 14 days.”
        
        <s.239(1)> A member can bring the legal action even if members may have ratified an internal irregularity.
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        <s254D> Prop. co. must offer shares to existing shareholders of that class. (members can sue for breach of contract with the company)
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        Oppression <s232>:
        A range of remedies will be available, if a court is satisfied that the conduct of the company’s affairs is either:
        
        Contrary to the interests of the members as a whole.
        
        Oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
        
        Whether the action is oppressive (including unfairly prejudicial or discriminatory) or not commonly depends on the “reasonable expectations” of the members.
        
        Was the decision made by the directors a decision that no Board of Directors acting reasonably would have made?
        
        Altering Constitution
        
        Member is not bound (ràng buộc) by requirement to take up more shares; increase liability; restricting transfer; UNLESS agreed by writing. <s140(2)> �
        
        Variation of class rights only varied by approval of special resolution of cpn AND affected class, if procedure is not set out in Constitution <s.246B>
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