Maple Pty Ltd

Maple Pty Ltd

QUESTION:

Able, Bella, Claude and Zac Brown are the directors of Maple Pty Ltd (‘Maple’). Bella is the Managing Director of Maple.

All shares in Maple are held by members ofthe large and extended Brown family.

Maple is an Australian company dealing in the supply of high end office furniture to the Australian corporate market, and boasts a range of high profile businesses as clients.

A total of 1000 shares in Maple have been issued: the 4 directors own 200 Management class shares each, and the remaining 20 family members each own 2 Family class shares. All shares have equal voting rights, but Family shares participate in dividends at 10% ofthe rate of Management class. The company has adopted the replaceable rules under the Corporations Act 2001 (Cth) and the chair ofthe company is elected at each meeting.

Bella likes being ‘in charge’ but she does not like the hard work involved in running the company. Daisy, Bella’s sister, gives advice to Bella about the business. Bella normally takes her advice as Daisy has studied accounting.

The family has strong links with the high- end forestry industry in Australia. Zac is also the sole director of a large plantation and sawmilling company. The family are aware of his business interest.

Claude and Zac have been discussing a business opportunity which has arisen to open a separate branch

Maple, purchasing highest quality timbers and manufacturing exclusive designer pieces for domestic use.

Claude and Zac have prepared a business plan for this opportunity and know that large profits can be made from this business stream.

However, they know that Bella is against any expansion at this point. Daisy has told Bella that the business should not enter into any further expansion at this point as their cash flow is ‘very tight’.

Family members normally accept Bella’s decisions and vote accordingly. Claude and Zac believe that

removing the voting rights of Family shares would make business decisions such as this more efficient.

Able has been unwell for several months: he has been receiving medical treatment and has not been attending board meetings. Claude and Zac convince Able to give them his proxy to be used at the September Board meeting as they see fit.

At the Board meeting, Claude is elected Chairman. Claude and Zac table a

resolution to introduce the new business stream. Using Abel’s proxy, Claude and Zac vote for the resolution, which is then adopted. They also put forward a resolution to remove the voting rights of Family shares, which is adopted by the necessary majority.

REQUIRED:

Bella, Daisy and the rest ofthe family are very concerned about this outcome. As their legal advisor, you have been asked to

consider these issues and suggest any actions which could be taken to protect their interests and the interests ofthe company.

Examine each issue using the ‘Issue, Law, Apply, Conclude’ model.