Law OF BUSINESS ASSOCIATIONS

Law OF BUSINESS ASSOCIATIONS

The Problem Coco is a proprietary company that operates many Jewellery retail stores in Australia. Bryan holds 30 per cent of shares in

Coco. Don and his wife hold 60 per cent of shares in the company and the balance is distributed among company employees. Bryan and Don ar
both directors, Don being managing director. The constitution gives Don the powerto nominate a majority ofthe board.

Personal relations between Bryan and Don have seriously deteriorated and Bryan now resents Don’s dominance of board proceedings. Specifically Bryan complains
that board meetings have been conducted without regard to the views of directors otherthan Don, that meetings of Don and his board faction are held before full directors’ meetings to formulate a position and strategy with respect to items arising at board meetings and that Don sometimes restricts the speaking time available to Bryan at board meetings. Bryan and Don do not speak to each other save for absolutely
necessary communications.

In the meantime, Bryan uncovers the following transaction between Coco and Myco Pty Ltd. Myco is one ofthe

several Australian companies importing diamonds from Israel and South Africa. Don is a 20 per cent shareholder of Myco. Myco has recently been awarded by Don a three-year contract to supply Coco. Don has never discussed this transaction with the board.

Bryan is not happy with what is going on in Coco. Advise Bryan of his possible remedies.