Sparx Ltd Case
While considering the case, the primary focus should be made on the analysis of shareholders’ rights and obligations as well as general rules for attending and calling annual general meeting by company members. Hence, Vladimir, the shareholder at Sparx Ltd, possesses 30 % of company’s capital whereas his wife Anushka owns about 5 %. In this respect, two infringements can be observed concerning general rules of calling to a general meeting and concerning the infringement of the voting rights according to the Corporation Laws. In addition, Vladimir will have the right to waive the voting at general meeting because his voice was not taken into consideration while making a decision. With particular reference to the Australian Corporate Law, it is possible to gather another meeting and hold it in accordance with the established rules and procedures. Aside from legal considerations, it is possible to explain the reason for not sending notification to Vladimir, but to Anushka, because both live together and because they are married. Therefore, part of responsibilities is imposed on Anushka who failed to warn his husband about annual general meeting. Yet, initial legal liability should be taken by the Board of Directors who have neglected Vladimir’s rights as a shareholder. They should not have regarded the marital status of the couple because this issue should influence the voting procedures.
When the annual general meeting is planned to be gathered, it is the board duty to send a notice to all shareholders. The notice should contain date, time, and place of the gathering with the agenda issues included into the list (Harris, Hargovan, and Adams, 2009). If the company fails to have the notice of meeting sent to its members, a waiver document should be received from a shareholder where he/she should express his/her consent approving the voting results (Harris, Hargovan, and Adams, 2009).
Considering the first case, it should be stated that “all meetings require notice to be given on their occurrence and the opportunity for members to put forward a motion” (Adams, p. 84). With regard to our case, the company failed to send a notice of meeting to Vladimir and, thus, it deprived him of the right to second a motion. Moreover, in accordance with the section of 249 J, “written notice of a meeting of a company’s members must be given individually to each members entitled to vote at the meeting and to each director. Notice need only be given to 1 member of a joint membership” (Office of Legislative Drafting and Publishing 2001, p. 315). Besides, no rule was observed concerning the delivery of the notice. The company should send it by post to Vladimir’s address disregarding the fact that the shareholder has the same address as Anushka. At the shareholders’ meeting, each member of the company it entitled to vote with regard to the number of shares he/she owns. Usually, shareholders have one vote per share. In case one member is unable to vote, the board may appoint another person to attend a meeting and approve the decision, which is called proxies. However, the case does not reveal any appointments and proxies held by Anushka, which is another legal underpinning to waive the results of the meeting.
Due to the fact that Vladimir owns almost the third part of all shares, he could have had a significant impact on the voting results. Therefore, he could have introduced changes to the amendments and prevent the introduced decision. According to the company’s constitution, the votes are calculated according to the number of shares each member owns which is equal to the number of votes. Therefore, the more shares a member owns, the more chances to bring a particular action and introduce amendments. Shareholders are also entitled their voting rights in accordance with their own purposes and interests.
Aside from the breach of the shareholder’s rights, the date of notice delivery has also been violated. In particular, according to the Corporation Acts (2001), section 249H, “at least 21 days notice must be given of a meeting of a company’s members. However, if a company has a constitution, it may specify a longer, minimum period of notice” (p. 314). The shows that Sparx Ltd has sent the notice on June, 23, which is only 7 days prior to the date of the annual general meeting.
In conclusion, with regard to all the above presented regulations and acts, the case reveals a number of misconceptions that must be taken into the deepest consideration before the final decision is made. With particular references to such aspects as failure to send a notice of the general meeting to each shareholder, negligence of the procedures of sending the notices in terms of time and dates, and company’s negligence of the shareholder’s votes, the amendments made during the meeting can be considered as invalid and Vladimir is entitle to protect his civil and corporate rights in accordance with the Corporations Act (2001).
Case with Company’s Defraud
When it comes to Rhett’s reluctance to check the presence of the contract attached to the authorization form for $ 500 000, it is necessary to refer to the section 180 of the Corporation Act 2001stipulating that
a director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they
- were a director or officer of a corporation in the corporations’ circumstance; and
- occupied the office held by and had the same responsibilities within the corporation as, the director or officer” (Office of Legislative Drafting and Publishing, 2001, p. 210).
In this respect, Rhett should have followed his duties and obligations in accordance with the common and corporate law, having no material interest in his activities. Negligence and lack of liabilities, as a result, led to great losses for the company. Due to the fact, Rhett failed to act in a good faith and interest in the company’s welfare, it is possible to suggest that all actions were oriented on personal welfare. None of his action was supported by the company’s interest. Moreover, negligence and reluctance to follow the company’s constitution was enhanced by his decision to leave the resign from RAT Ltd. Therefore, the company was defrauded because of Rhett’s inappropriate observance of the common law, which caused a detriment to the company. Reckless use of position and information is considered to be a serious offence in accordance with the Corporation Act 2001.
Beside personal improper conduct, Rhett’s duty was also to disclose Melanie’s material personal interest. Director’s duty is to notify other directors about the personal interest that other members of the company have (Australia, CCH Corporate Law Editors, CCH Australia Limited, 2009, p. 230). Hence, Corporations Act 2001, section 191 states, “[a] director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest…” (Office of Legislative Drafting and Publishing, 2001, p. 219). Hence, Rhett’s utmost obligation was to inform other directors about Ashley’s offer of air transport license for the Newcastle- Coffs Harbour Route.
To explain Rhett’s misconduct, it should be stressed that director’s interest in contracts with the company imposes a strict duty to disclose the information about any contract concluded with the shareholders of the corporation. However, general law allows Rhett to have interest in contract and, therefore, there is a high probability that his negligence concerning the authorization form was partially predetermined by his waiver to meet the company’s needs (Tomasic, Bottomley, and McQeen, 2002, p. 376). In addition, the director has also failed to disclose any reasons why he left his position at RAT Ltd. The explanations were not needed afterword because Rhett new positions and business success were, indeed, self-explanatory.
Further on, it is imperative to state that the director’s duty also lies in informing other directors about the extent and the nature of the interest as soon as possible, specifically when it directly relates to the welfare of the company (Tomasic, Bottomley, and McQeen, 2002, p. 376). The case exactly revealed the above-described terms. Rhett was obliged to inform his partners who also have similar liabilities and purposes. Despite the director’s failure to disclose the essence of his interests, Rhett, unfortunately, does not bear responsibility for the transaction taken within the company and, therefore, the validity of the company’s agreement are not affected either. In addition, Rhett does not have the right to conceal the information about his personal material interest because none of the reasons conforms to the terms stipulated in Corporations Act.
Finally, Rhett’s decision to resign from the position deprives him of the duties before the company, in case a written notice is sent to the directors. Therefore, it is necessary to check the legal procedures as well al reasons in accordance to which the director left the office. This might help the company to bring Rhett to the account. Further actions to be taken will involve checking the validity of all contracts as well and accuracy of information disclosure to other directors that may not comply with the Common Law and Corporation Act. Finally, Rhett can be prosecuted for the outcomes of his negligence resulting in the company’s defraud. Finally, Rhett’s negligence can also be considered as a kind of misconduct because his has breached his duties and trust.
Conclusion
In conclusion, the following case pays close attention to the terms of trusts, duty and obligations that a direct should strictly observe. The case also shows what consequences the above displays can have for the company’s welfare. In addition, the case discloses the necessity to focus on the Corporation Act that explains different types of offences as well as breach that can be constituted a threat to a company’s revenue. At this point, Rhett can be accused of his negligence while carrying out his duties as well as reluctance to disclose the information about his personal material interest to other directors.
References
Adams, M. (2005). Australian Essential Corporate Law. New York: Routledge.
Australia, CCH Corporate Law Editors, CCH Australia Limited. (2009). Australian Corporations & Securities Legislation 2009: Corporations Act 2001. Australia: Australia Limited.
Harris, J, Hargovan, A and Adams, M, (2009) Australian Corporate Law, 2nd ed, Sydney: Lexis-Nexis.
Office of Legislative Drafting and Publishing (2001). Corporations Act. Canberra.
Tomasic, R., Bottomley, S., and McQueen, R. (2002). Corporations Law in Australia.