COML2005 Companies and Partnership Law

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    Assignment Requirements:

    o Must use the required textbook and the Corporations Act 2001 (Cth) below: 1. Harris, J, Hargovan, A & Adams, M 2016, ‘Australian Corporate Law’, LexisNexis Butterworths, 5th edition, NSW, Australia. 2. Corporations Act 2001 (Cth): Website:
    o Answer all the five Problem-Solving Questions with the specified word limitation/word counted.
    o No need to present full reference at the end. But do only in-text reference when using points from both Corporations Act and the textbook specified above in first dot.

    Problem Solving Questions:

    Question 1
    National Tiles Ltd is a successful computer software company in Sydney which specialises in accounting and business management software and maintains roughly 20% of the market.
    Frank Ltd is a large competitor of National Tiles Ltd with 50% of the market in Sydney for business management software applications. Frank Ltd is interested in acquiring National Tiles Ltd’s market share to create the dominant player in the Sydney market.
    Frank Ltd announces on 1 January 2017 that it has acquired 19% of the shares in National Tiles Ltd and is making a full takeover offer for National Tiles Ltd because ‘in its opinion the current management of National Tiles Ltd are not providing value for shareholders’. In the takeover offer Frank Ltd proposes to:
    (a)remove the entire management team of National Tiles Ltd;
    (b) fully integrate National Tiles Ltd’s management software business into Frank Ltd’s business structure which will involve significant redundancies in National Tiles Ltd; and
    (c) allow National Tiles Ltd’s accounting software business to remain in its current state with a view to a possible sell off in the future.
    The directors of National Tiles Ltd, who are also shareholders in National Tiles Ltd, are extremely worried by the proposed takeover as they fear for their positions and the future direction of the company.
    On 5 January 2017 National Tiles Ltd announces a new share issue proposal that will only apply to shareholders that were registered on 31 December 2015 or before (which specifically excludes Frank Ltd). The proposal is in the form of a bonus issue that will provide three free shares for each existing share that a member holds. The effect of the issue is that Frank Ltd’s shareholding will be substantially diluted and will make it very difficult to mount a successful takeover. All eligible shareholders will receive a substantial benefit by accepting the free shares. The proposed share issue will cost the company $500 million to implement and is likely to eliminate the company’s profit for the financial year 2016-17.
    Advise whether the directors of National Tiles Ltd have breached their common law and statutory duties under the Corporations Act. (650 words)
    Question 2
    Georgie the director of IT Ltd, assigned property of the company to 3rd party, to settle a personal debt. Pennywise, the company’s accountant, devised and implemented a scheme to assist Georgie to undertake this assignment.
    Is Pennywise liable for his action under section 79 of the Corporations Act? (550 words)
    Question 3
    Barney, Robin and Ted establish a company in which they each take shares. Barney has another job as an accountant and so he contributes most of the money to the new company and receives 60% of the shares in the company. Barney is quite busy with his accountancy practice and so he chooses not to become a director of the company.
    Robin and Ted plan to run the business themselves; each take a 20% shareholding and they also act as officially appointed directors. However, Ted forgets to submit a written acceptance of his role as a director. During the first year the company runs very well with Robin acting as CEO and Ted as company secretary. However, given that Barney owns a majority of the shares in the company, he is consulted about any significant decisions by Robin and Ted. If Barney disagrees with the course of action proposed by Robin and Ted, then normally they will compromise to suit Barney. One day while Barney is inspecting the company’s accounts (which he regularly does) he notices some accounting anomalies which suggest that Robin has been misappropriating funds from the company. Furthermore, Barney believes that the company has been insolvent for some time.
    (a) Does Barney fit within the definition of an officer under the Corporations Act?
    (b) Can Ted avoid liability as a director by arguing that he was not officially appointed (due to the fact that he did not accept his position in writing)? (660 words)
    Question 4
    Joey Tribbiani the CEO of Friends Pty Ltd, a major supplier of medical equipment in Queensland. Joey also has a broad range of personal investments in a number of companies. These investments are managed by his superannuation trustee (his wife) and he has no director control over the trust. Lately, his wife has been investing the trust funds into a number of medical supply companies including Central Perk Ltd, in which she has built up a 10% stake. She has not told Joey about her investment strategy.
    In early August, Friends considers a tendering process for one of its major supply contracts. Central Perk lodges a tender bid and Joey is on the tender committee. As a result of Joey’s recommendation, Central Perk wins the tender contract.
    In October Joey takes over control of his superannuation trust and builds up a further stake in Central Perk so that his trust controls 19% of the company. Joey then pressures the company to appoint his wife onto the board of directors.
    Advise Joey of his obligation under the Corporations Act arising from his dealings with Central Perk. Were his actions in August and October in breach of the non-conflict rule? (600 words)
    Question 5
    Pops Soda Shop is a medium-sized ASX listed entity with approximately 100,000 shareholders. The board of Pops consists if Archie (CEO), Jughead (Chairman), Betty (CFO) and two nonexecutive independent directors, Veronica and Kevin. The company secretary and general counsel is Hiram who is in charge of legal compliance.
    Pops has several major clients including Riversale (a large international industrial firm) which accounts for approximately 30% of its revenues and has been a long-term client. The credit crunch from the past 18 months has caused problems for many of Pops’ client including Riversale, which results in reduced or cancelled orders. This puts significant pressure on the company’s cash flows and management is looking for alternative sources of working capital. Unfortunately, all of the company’s assets are already secured by a floating charge to the bank, and the bank has refused a request to extend the company’s overdraft.
    By early September 2017 the company’s financial position has deteriorated due to the collapse of its major client Riversale into liquidation. The collapse of Riversale put further pressure on the company’s cash flows and the company has to manage its creditors (including suppliers and lessor) by delaying repayment for as long as possible, in most cases until the creditors threaten legal action. As a result, many of its suppliers change their payment terms from 30 days credit to cash on delivery (COD).
    The company continues trading until 1 December 2017, when the ATO lodges a director penalty notice on the company’s board of directors for failure to pay the company’s taxes (which means the directors may be personally liable for the company’s tax obligations).
    (a) Is the company insolvent at any particular time?
    (b) What liability could the directors face if the company were insolvent? Would you the company secretary also face this potential liability? (660 words)
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