LAW2450: Explain the Legal Concept Indoor Management Rule - Law Assignment Help

Assignment Task:

TASK:

QUESTION ONE

Answer all the following short answer questions. Refer to relevant cases and statutory law in your answers where appropriate.
REQUIRED:

• Explain the legal concept ‘indoor management rule’.
• (3 marks)
• Explain the procedure involved in changing the constitution of a public company, where the replaceable rules apply.
• (3 marks)
• Discuss whether the following people could be appointed the sole director of a proprietary company:
• A permanent resident of Vietnam
• A 16-year-old high-school student
• A director of another proprietary limited company
• A person that has repeatedly breached the Corporations Act 2001

QUESTION TWO
Lucy, Bella, Charlotte, and Toby are the directors and equal shareholders of Great Escapes Pty Ltd (Great Escapes), a travel agency running out of several shop-fronts in Melbourne. They specialise in bespoke travel for Melbourne’s rich and famous. Bella is the Managing Director and Toby is the Chief Financial Officer. Lucy and Charlotte are non-executive directors.
The Company has adopted a written constitution which contains the following clauses:

(36)A directors' meeting may be called by a director giving reasonable notice individually to every other director.

(37) Quorum for directors’ meetings is four directors and the quorum must be present at all times during the meeting.
…
(42) A resolution of the majority of directors may resolve to remove another director of the company.

Business is booming, and Great Escapes has made a great deal of money over the last few years. However, the Board of Directors have rejected Lucy’s proposal to declare a dividend for the last 5 years in a row – and she is getting fed up. The other directors always outvote her, arguing that it is better to keep the profits in reserve and continue to expand the business. Toby is currently investigating the possibility of opening an agency in Sydney.
In May 2018, Lucy was overseas at a travel conference. When Lucy returns to Melbourne she discovers that the other directors have met and passed resolutions to remove her as a director of the company. Lucy did not receive any notice of the director’s meeting. In another resolution, the remaining directors voted to pay themselves $250,000 in bonuses – equating to the entire year’s profit.
Lucy is angry that she has been removed and not paid a bonus and comes to you for your professional advice and opinion.
REQUIRED:
Discuss whether Lucy can bring an action to challenge the validity of the May 2018 Board meeting.

(7.5 marks)
Discuss whether Lucy can bring any action to challenge the other directors’ decision to deny dividends for several years and then pay themselves bonuses?

(7.5 marks)
Total = 15 marks
QUESTION THREE
Refer to the facts relating to Great Escapes Pty Ltd outlined in the previous question.
Great Escapes has a longstanding alliance with a tour company Detour Pty Ltd (Detour). In May 2018, Great Escapes’ financial accounts show that Detour owed the company $15,000. This is a trade credit and there is no applicable security.
However, Lucy discovers that by June 2018 the debt owing to Great Escapes had blown out to $50,000. Toby had approved additional credit to Detour without the knowledge of the other directors. He did this, even though Detour had been taking a long time to pay its overdue account. There are rumours that Detour are insolvent, but this cannot be proven.
REQUIRED:
Advise Lucy about the options that are open to Great Escapes to recover the $50,000 owing from Detour.
(5 marks)
Advise Lucy about the process and potential outcomes if Detour is placed into voluntary administration – and any implications of this for Great Escapes.
(10 marks)
Advise Lucy about whether Toby has breached any of his duties as a director of Great Escapes. Include in your answer the consequences of a breach of duty, whether Lucy could bring an action for compensation on behalf of the company against Toby, and whether there are any defences available.
 

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