Law Case Study

485 WordsMar 19, 20152 Pages
Part one: 1. A company has power to issue shares by s124 of Corporation Act. And generally there is no restriction on issuing shares, unless In the company’s internal rules The issue varies rights of existing shares Pre-exemption right of shareholders in proprietary company Other directors of ADE can raise capital by issuing shares. 2. There is a principle that a company’s should be viewed as physical fund that must be maintained for the benefit of creditors and future creditors of the company. Trevor v Wbitworth. it requires: 1.company not to purchase its own shares, 2.company not to financially assist the purchase of its shares 3.dividend to be paid only if assets exceeds liability, 4.damages not to be paid to shareholders. Facts show that ADE has liquidity problem, so they raise funds by issuing shares to pay part of the fund for the purchase. This reflects they obey the principle of maintenance of capital (not reduce capital). From the two points, there is no breach of Alan and Eric Part two: 1. Separate legal entity The consequence of separate legal entity is that the assets of the company is its own, not its directors’ or shareholders’. So the funds Office Pty Ltd received its own, not Damien’s 2. Disclose certain interests. Section 191 imposes a duty on director of both public and proprietary companies to disclose particular interests. The facts show Damien has disclosed his interest in Office Pty Ltd, so there is no contravention of his duty. 3. The Corporation Act prohibits a company from giving a person financial assistance to acquire shares in the company or its controlling company, unless the assistance is: Approved by the company’s members Not materially prejudicial to the interest of the company, its members or creditors Or is expressly permitted in another part of

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