CORPORATION ACT AS APPLIED IN AUSGOLF LIMITED AND ITS SUBSIADIARIES

INTRODUCTION

Ausgolf limited is a holding corporate of its three subsidiaries Ausgolf Melbourne, Ausgolf Sydney and Ausgolf Brisbane and controls more than fifty per cent share holding in the all three subsidiaries. The three subsidiaries are affiliated, as put in the Corporation Act (2001), corporate are said to be affiliated if they are subsidiaries of the same corporate body.

Bob and Sam are directors of all three subsidiaries with Angela, Yukiko and Paul as the managers of the Ausgolf Sydney, Ausgolf Brisbane and Ausgolf Melbourne respectively.

The three subsidiaries have entered into exclusive contracts with the holding company Ausgolf Limited for Fairways golfing equipment.

COMPLAINT OF BREACH OF CORPORATION ACT BY ANGELA AND PAUL

All three subsidiaries entered into exclusive contracts with the holding company Ausgolf Limited for fairways golfing equipment. Ausgolf Brisbane got a more favorable discount than the other two Ausgolf Melbourne and Ausgolf Sydney by getting a higher discount on the equipment of fifteen percent and the other two each got a discount of five percent.

Angela and Paul are alleging breach of Corporation Act by the holding Company Ausgolf Limited.

Angela and Paul can claim breach of Corporation Act, based on the fact that Bob and Sam had material interest in the Contract because they are directors of the other two subsidiaries Ausgolf Melbourne and Ausgolf Sydney and also directors of the holding company Ausgolf Limited (the company selling the golfing equipment). But in this case there was full disclosure. Angela and Paul before entering into exclusive contracts knew that Sam and Bob were also the directors of Ausgolf limited the company they were transacting with for the golf equipment. According to the Corporation Act (2001) a director who has material in a contract shall be required to disclose fully the extent of his or her interest in the minutes, but such a director can partake in passing a contract by voting if such a contract regards an affiliate company.

Both Sam and Bob had material interest in the contact with Ausgolf Sydney hand Ausgolf Melbourne but as put in the Corporation Act (2001), a contract between a director deemed to have material interest can not be voided based on the relationship between the corporation and the director if full disclosure was applied, there was quorum after counting the vote and the contract was passed reasonable at the time it was passed. In the contract between Ausgolf Melbourne and Ausgolf Sydney there was quorum and the contract was reasonable there Paul and Angela cannot claim breach.

According to the Corporation Act (2001), a meeting is said to have quorum if the holders of a majority shareholding are present in the meeting either in person or in proxy. Ausgolf Limited is the majority shareholders in Ausgolf Melbourne and Ausgolf Sydney respectively with a shareholding of sixty per cent in each of these companies. Sam and Bob were present at both meetings when the proposal to offer each of the subsidiaries a discount of five percent was passed. Angela and Paul the minority shareholders cannot claim breach of Corporation Act because the proposal was passed by a majority shareholder.

A director present in a meeting where a resolution is passed is said to have partaken in the process of passing the resolution as put in the Corporation Act (2001). Both Angela and Paul were present in the respective meeting that passed the propel to offer Ausgolf Sydney and Ausgolf Melbourne discounts of five per cent respectively there fore they cannot claim breach of Corporation Act by Bob and Sam because they were present and did not claim dissent either by requesting the secretary of the meeting to enter it in the minutes or a letter or send mail on the same after meeting was adjourned.

As put in the corporation Act (2001) every director has to exercise due diligence and care in carrying out his or her duties as director. He or she has to ensure they act in the best interest of the corporation they are representing. Bob and Sam gave Ausgolf Brisbane a discount of fifteen per cent for the Fairways golfing equipment because its wants to launch and spread its business in Brisbane. In doing so they were acting in the best interest for Ausgolf Limited therefore can have been said to have exercised due diligence and care. Ausgolf has well established business in Sydney and Melbourne and therefore offered the managers a lesser discount of only five per cent, the managers of Ausgolf Sydney and Ausgolf Melbourne took these as breach of Corporation Act. More over the contract entered into by the affiliates with the holding company were exclusive therefore the terms of each contract were not required to be the same and therefore Angela and Paul cannot use this as the basis for breach of Corporation act by Ausgolf limited.

CONCLUSION

Ausgolf Limited did not breach the Corporation Act in its transaction with Ausgolf Melbourne and Ausgolf Sydney. The contracts were exclusive there the terms of the contract were not supposed to be similar. Their was full disclosure in passing the proposal for the five cent discount quorum was observed, neither managers Paul or Angela claimed dissent and Bob and Sam acted in good faith and followed due diligence when they awarded Ausgolf Brisbane a higher discount in the contract of  fifteen per cent in the contract for purchase of fairways golfing equipment.

Angela and Paul have no legal cause to claim breach of Corporation Act there fore cannot take any action against Ausgolf Limited or Bob and Sam.

 

 

 

 

THE LEASE AGREEMENT OF AUSGOLF MELBOURNE

INTRODUCTION

Ausgolf Melbourne’s lease is expiring at the end of the month and the landlord has resolved that he or she is not renewing the contract because he wants to develop the site. Ausgolf does not want to relocate because the current location is good for business. However Ausgolf Melbourne finds a better location for the business which costs a million dollars and pays two thousand dollars upfront the rest is mortgaged from ABC bank and uses Ausgolf Sydney and Ausgolf Brisbane as guarantors. The guarantee forms are signed in meeting with directors Bob and Sam with a majority vote.

LEGAL IMPLICATIONS AGAINST LANDLORD FOR NOT RENEWING LEASE CONTRACT

According to the land and tenancy board (2007) when the term for the lease comes to and end the tenant does not have to automatically relocate him or can renegotiate for a new lease agreement. If a new lease contract is not agreed upon the tenant can continue to occupy the premises based on the previous terms of lease.

As put in the land and tenancy board (2007) a landlord can fail to renew a contract if he of she wants to develop the site and the development process will hinder occupancy of the building.

Ausgolf Melbourne should access the nature of development that the landlord wants to carry out on the premises and if it does not inhibit the operations of the business

Ausgolf Melbourne should request for renewal or extension of the term of the lease. If the redevelop of the building will inhibit occupancy then Ausgolf should look for an alternative location despite the effect the move will have on the business.

LEGAL IMPLICATIONS OF BOB AND SAM SIGHNING THE GUARANTEE FORMS FOR AUSGOLF MELBOURNE

Bob and Sam signing the guarantee forms for the mortgage for Ausgolf Melbourne on behalf Ausgolf Sydney and Ausgolf Brisbane can be seen as an act of personal interest in the business of Ausgolf Melbourne where they are also the directors. According to the Corporation Act (2001) a director who has material in a contract shall be required to disclose fully the extent of his or her interest in the minutes but such a director can partake in passing a contract by voting if such a contract regards an affiliate company. Angela and Yakiko can not allege breach of Corporation Act as full disclosure requirement was observed, the contract entered into was for an affiliate contract for the affiliate and the signing of the forms was carried out in a legal reasonable manner.

As put in Business Lawyer (2005p.1105-1108), in the corporation act requires every director to exercise due diligence and care in carrying out his or her duties as director. He or she has to ensure they act in the best interest of the corporation they are representing. Sam and Bob signed the guarantee forms for Ausgolf Melbourne mortgage because it was the prudent thing to do under the circumstances Ausgolf lease had expired and the tenant could not renew the lease because he or she was redeveloping the site. Given that Ausgolf Melbourne found a new and better location the course of action was to help secure the location by signing the guarantee forms even if it caused a few operational constraints for the other two subsidiaries.

A director present in a meeting where a resolution is passed is said to have partaken in the process of passing the resolution as put in the Corporation Act (2001). The managers of Ausgolf Sydney and Ausgolf Brisbane were both present at their respective meeting when then the signing of the guarantee forms took place. Even they opposed signing of the guarantee forms but were defeated by a majority vote by Sam and Bob according to the corporation law they took part in passing that resolution. They therefore cannot allege breach of the Corporation Act. An exemption tom this rule is when the director claims dissent by notifying the secretary of the meeting to indicate the same in the minutes or writing a letter claiming dissent or notifying the other share holders after the meeting has adjourned. If Angela felt that the signing of the guarantee forms would affect her subsidiary negatively she should have claimed dissent to stall the process while a better alternative was being reached upon.

According to the Corporation Act (2001), a meeting is said to have quorum if the holders of a majority shareholding are present in the meeting either in person or in proxy. Ausgolf Limited is the majority shareholders in Ausgolf Brisbane and Ausgolf Sydney respectively. Bob and Sam and the two respective managers Yukiko and Angela were present at their respective meetings when the forms were signed. The majority shareholding passed that the guarantee forms be signed and since the requirement for quorum in the meetings held by a corporate was met Angela and Yukiko cannot allege breach of Corporation Act based on this.

CONCLUSION

By signing the guarantee forms for Ausgolf Melbourne forms Bob and Sam did not breach any Corporation Act or general law because they followed due process and were acting in best interest for the Melbourne shop.

The landlord also did not breach any tenancy agreements the lease term was coming to an end and the reason for not renewing the contract was due to redeveloping the site and this could inhibit occupancy of the building.

 

References

Anonymous. 2009. Changes in the Model Business Corporation Act — Proposed Amendments to Incorporate Electronic Technology Amendments. P. (1129-1155)

Australasian Legal Information Institute. 2001. Commonwealth Consolidated Acts:

Corporation Act 2001.As Retrieved on 28th April from.www.austlii.edu.au.

Business lawyer. 2010. Report on the Roles of Boards of Directors and Shareholders of Publicly Owned Corporations and Changes to the Model Business Corporation Act — Adoption of Shareholder Proxy Access Amendments to Chapters 2 and 10.P. (1105-1108).

Landlord and Tenant Board Ontario.2007.Help for tenants. As Retrieved on 28th April From www.ltb.gov.on.ca.

 

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