BUSN2042 Corporations Law & Shareholders In Super Security Services Pty Ltd - Law Assignment Help

Assignment Task

Part 1
Clark, Peter, Bruce, Donna and Lois are shareholders in Super Security Services Pty Ltd, a company that provides private security services. Bruce and Donna each hold 30 shares, while Clark, Peter and Lois each hold 20 shares in the company. The directors of the company are Donna, Bruce and Clark. The company’s business involves installation of high-tech security systems and provision of services such as guard services, alarm response, video surveillance and intruder detection. The company has been operating reasonably successfully and shareholders have become used to receiving generous dividends every year. Much of the company’s success could be ascribed to Bruce’s ability to design innovative security systems and equipment (Bruce is passionate about inventing new gadgets that have been used very successfully by the company in its operations) and Donna’s ability to create new markets for their products through an extensive set of networks.
In fact, Bruce and Donna are starting to think that the others are not contributing much to the business of the company at all and that they (Bruce and Donna) would be better off running the business on their own.  In order to give effect to these ideas, Bruce and Donna decide to register a new company, BD Security Services Pty Ltd, with Bruce and Donna as directors and equal shareholders. They decide to continue with the business of Super Security Services Pty Ltd for a while, as the company has developed a very strong reputation in the market and regularly receives enquiries from prospective new customers. Bruce and Donna want to use this as an opportunity to build the business of BD Security Services Pty Ltd. Whenever enquiries are made to Super Security Services Pty Ltd in regard to provision of security services, Bruce and Donna advise the prospective clients to approach BD Security Services Pty Ltd instead. They also continue to purchase tools and equipment for the manufacturing of Bruce’s security gadgets through Super Security Services Pty Ltd, but use the end-products for the benefit of BD Security Services Pty Ltd. Clark, who has little understanding of company finances, does not notice anything amiss when financial reports are presented at board meetings. He is very happy when Bruce and Donna suggest that directors should receive a bonus for their hard work, and does not feel too concerned in that event about shareholders not receiving any dividends.
The business of BD Security Services Pty Ltd has taken off very successfully. Lois, who possesses very good investigative powers, eventually discovers that BD Security Services Pty Ltd is owned and operated by Bruce and Donna. She is shocked by her discovery. However, when she confronts Bruce and Donna with the facts that she discovered, they inform her that there is nothing that she can do, as she is only a minority shareholder in Super Security Services Pty Ltd. Lois is also concerned about the shareholders not having received dividends for a while and wonders whether there is something that they can do about that.
Question 1 - Have Bruce and Donna breached any of their statutory  duties detailed in Part  2D.1 of the Corporations Act 2001 (Cth)? 
Question 2 - Could Lois seek any remedies in her capacity as a shareholder?
Question 3 - After inspecting the company's books via a section 247A application, Lois forms the view that Super Security Services Pty Ltd is insolvent.  If this is the case, and the company is wound up, how could the liquidator potentially recover money from Bruce and Donna?
Part 2
Benga Ltd has an issued capital of $1 million consisting of 700 000 ordinary shares and 300 000 10% participating preference shares. The Delacroix family comprise the majority of the company’s directors and also owns the majority of the ordinary shares. Delia, a director of Benga Ltd, owns all of the preference shares.
Under the constitution each share carries one vote irrespective of its class of shares. In addition, the constitution provides that any preference shareholder owning at least 25% of the company’s issued share capital is entitled to be appointed as a director. Benga Ltd has not declared any dividends during the previous two financial years.
The directors initially got along really well. However, Delia has recently started suspecting that some of the directors may have been using company funds to pay personal expenses. She tried to raise this issue at a board meeting, especially as she is concerned about the impact this might be having on the company’s ability to continue to pay its debts, but the other directors got very upset with her when she mentioned this issue.
Shortly thereafter, at a board meeting on 20 May, a majority of the directors decided that the company should issue a further 1 million 10% participating preference shares with a $1 issue price paid to 1 cent. These preference shares will rank equally with Delia’s preference shares. The majority of the board also proposed that the company should issue an additional 500 000 ordinary shares to existing shareholders, proportionate to their existing shareholding in the company.
Delia is concerned about the impact that the proposed share issue would have on her position in the company, especially as she suspects that the other directors may be attempting to squeeze her out from management.
Delia approaches you for advice on 29 May.
Question 4 - Explain in detail what rights Delia has under the Corporations Act 2001 (Cth) in relation to the proposed share issues. 
Question 5 - Explain whether the proposed issues of shares will be subject to disclosure requirements in terms of the Corporations Act 2001 (Cth), and identify the type of disclosure that is required, where relevant.

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