Business > STUDY GUIDE > Australian National University - BUSN 7057Week 8 (All)

Australian National University - BUSN 7057Week 8

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Week 9: 1. At SAFPL, the relationship between David and Jason is becoming very acrimonious. David says to Jason that he should ‘stop making trouble’ in the company. David is confident that Patricia and Nick will always support him in decisions relating to the company and that (because Steven never attends meetings of SAFPL) he will always have enough votes to control the general meeting. So David tells Jason that if he keeps making trouble he will ask his siblings to approve the transfer of the profitable durum wheat business to a new company, in which the Henry grandchildren have no financial interest. Could David, Patricia and Nick pass such a resolution at a general meeting of SAFPL? See [¶9-100] – [¶9-210] Members of a company typically have a right to vote on matters such as: the composition of the board of directors; certain transactions affecting share capital; variations of class rights; adoption of, and amendment to, the internal governance rules – see Chapter 7. However, even if members have the power to pass a resolution over a matter, there are still limits on their powers. It is possible for members who are able to exercise a majority of the votes in a company to use their voting power to exploit those members who are the minority. To prevent this, there are principles referred to as theequitable limitation on majority voting power. This means that the majority cannot make decisions that are unfair or unreasonable to minority members. The equitable limitation can apply to a number of actions of the majority. However, many of the cases that have come before the courts concern situations where the majority has voted to amend the company’s constitution. Examples not involving the constitution include: vote to approve the sale of assets of the company to themselves or inappropriately take away the company’s assets: Menier v Hooper’s Telegraph Works vote to approve certain benefits to themselves that are not available to the minority: Biala Pty Ltd v Mallina Holdings Ltd (No 2). Application of law Even if this was an example where the general meeting has the power to approve this decision (ie the complete sale of the company’s assets), the effect is to deprive the company of its operational assets an

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