LAW2001 : Corporate Law : Case Study - Law Assignment

Internal Code - MAS6083

Corporate Law Assignment

Case Study 1: Uninest Limited (‘Uninest’) is a student accommodation provider. A competitor, Urbanlodge Limited (‘Urbanlodge’), is planning a takeover of Uninest as the current management of Uninest is under performing, its share price is declining and it is experiencing cash-flow problems. Uninest’s shares are valued at $10.00 per share. Urbanlodge makes an offer of $12.00 per share. The board of directors of Uninest is aware that Urbanlodge intends to replace the entire management team (board of directors) at Uninest with a new management team, if Urbanlodge is successful in its takeover bid. Christine Neales (‘Neales’) acts as a consultant for Uninest and has negotiated on behalf of Uninest in a number of important transactions in the past, including the acquisition and development of new properties and the negotiation of long leases. Due to her experience in the field, Neales is given great autonomy in decision making in Uninest and the board of directors always follows her directions. Neales devises a strategy to ensure that Urbanlodge’s takeover bid will not succeed. Neales instructs the directors to pass a resolution for Uninest to lend $30 million interest-free to one of its directors, Gilligan, to enable him to purchase shares in Uninest, as this would inflate the share price of Uninest. This would mean that Urbanlodge would have to offer a significantly higher share price in order to succeed in its takeover offer. The directors of Uninest know that Urbanlodge would not be in a position financially to make a higher offer and therefore its takeover bid would not succeed and the directors’ positions on the board of Uninest would not be at risk. All of the directors of Uninest vote in favour of the resolution proposed by Neales, Uninest makes the loan and the directors issue the shares in Uninest to Gilligan. Question : discuss whether Neales would have any liability. Give reasons for your answer and provide relevant statutory law and/or case law as authority for your answer. Case Study 2 : Primo Construction Limited (‘Primo’) is an industrial construction company. Shane is a director and shareholder of Primo. Primo performs construction work for Landstock Limited (‘Landstock’) on an ongoing basis. Shane knows that Landstock is going to call for tenders (offers to perform work) from various construction companies, for a new construction contract to build an industrial warehouse near a major port. The warehouse is to be used for the unpacking and storage of goods from shipping containers. Before the tender process begins, Shane forms a new company called Iconstruct Limited (‘Iconstruct’). Shane is the managing director and a shareholder of Iconstruct. The other directors and shareholders of Primo are unaware of the existence of Iconstruct. Stanley knows that Primo will submit a tender for the contract with Landstock and he also knows what Primo’s tender price will be, based on its construction costs. Iconstruct submits a tender for the contract with Landstock for a lower tender price than Primo’s tender price. The construction contract is awarded by Landstock to Iconstruct due to its lower tender price. If it were not for Iconstruct’s lower tender price, the contract would have been awarded to Primo. Question : a. Discuss whether Shane has breached any of his general law and/or statutory duties as a director. 15 marks b. Outline the remedies and/or penalties which would apply if both the general law and statutory director’s duties referred to in Question (a) above were breached.