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A case of Capricornus Ltd

ISSUE:

Marina, together with the other Russian shareholders were unfairly treated by the company “Capricornus Ltd.”. The voting rights of Marina together with the other Russian shareholders were seized by the company and their shares were sold forcibly.

Rule:

According to Section 125, the companies can limit the powers and objects to the shareholders but an act outside the limitations are considered to be invalid. Under Section 9 Corp Act, the company is found guilty of unfairly treating its shareholders. Under the Section 140, the company is found guilty of breaching the contract with the shareholders. Under Section 249 L, the company miss leaded it shareholders. Under Section 1322 (2) and Section 1322(3), the company is found guilty of substantial injustice and accidental omissions of the notice respectively. Under the section 1322 (3A), Marina and the Russian investors can challenge Capricornus Ltd. for substantial injustice.

Application:

Under the Section 125 of the corporation's act, company Capricornus Ltd, have rights to follow acts that are outside the legislation. The company breached the corporation law as it decided to seize the voting rights of Marina and the other Russian shareholders, to fulfil the terms and conditions forwarded by USA government. In the case of Lion Nathan Australia Pty Ltd vs Coopers Brewery Limited[1], the Supreme Court of Australia mentioned that the companies can opt for the changes in its own constitution in order to get a financial benefit. But this should not be enforced in a narrow manner. The company’s document should clearly mention the purpose of the changes that are amended in the company’s own legislation, its purposes and objectives. In the case of Capricornus Ltd., the purpose and the objectives had not been clearly mentioned. The company is found to breach the law on the basis of resolving the shareholders without concerning the appropriate matter of concern. Thus the company’s decision should be identified by the court as inactive.

Under Section 9 of the corporation's act, the company Capricornus Ltd. is found guilty of unfairly treating the shareholders. In the case ASIC v Drake (No 2)[2], the Supreme Court mentioned that the retail investors my liable to the potential risk of investing in a company may not be guaranteed but the substantial rights of the investors should be protected. The company Capricornus limited was found to forcibly acquire the shares of Marina together with the other shareholders. Though the company was giving the reasonable amount and the price of the shares the company cannot sell the shares of its shareholders forcibly (HASLEY, 2018). Thus, there was fund a breach of section 9 of the corporation's act.

Under the section 140, the company Capricornus limited was found to forcibly end the contract with Marina and the other Russian shareholders. In a separate case Hickman Kent and Romney Marsh Sheep Breeders Association [1915] 1 Ch. 881 110[3], the justice was given in the favour of the members of the company where there were disputes of the arbitration. The court accounted that the forcibly enforced decisions of breaching the contractual terms and the conditions are invalid. Thus, the company is also is guilty of breaching the contract with its shareholders under the section 140 of the corporation's act.

Under the section 249L, the company Capricornus limited is found guilty of misleading Marina and the other Russian shareholders. The section mentions that the full and fair disclosure of the business should be revealed by the company to the shareholders. In a separate Deveraux Holdings Pty Ltd v Pelsart Resources NL (1986) 4 ACLC 12 text 168 [4]the court was found to form a strict view of protecting the common shareholder's rights who do not read the terms and the conditions of the company as a lawyer. The court insisted that the documents and the decisions that the company takes should be fully fair and should not mislead. In the case of Capricornus limited, the company seized the voting rights and forcibly attempted to buy the shares of its Russian shareholders by telling them that they are not Australian citizens. This was not the actual truth. Thus the company Capricornus limited is found guilty under section 249L where it misses leaded it Russian shareholders.

Under the section 1322 (2), the company Capricornus ltd. is found guilty of substantial injustice for the Russian shareholders. The company’s action of enforcing its shareholders to sell tier shares and seize the voting rights on the decision that they are of some other Nationality is found liable to the substantial injustice under the section 1322 (2). In a separate case Bell Resources v Tunbridge Pty Ltd (1988) 6 ACLC 970[5], the supreme court of Australia founded that there was substantial injustice made by the company when the members were not notified about the importance and the fundamental amendments that the company changed into its legislation.  The company Capricornus limited is found guilty as Marina was not notified of the amendments and the decisions.

Under the sections 1322(3) and 1322 (3A), the company is found guilty as it was company’s fault where Marina was not notified of the meeting. Also, Since Marina was unable to take part in the meeting due to technical failure and there is a case of substantial injustice. Thus, the company is found guilty of breaching the law under the section 1322(3) and 1322 (3A).

Conclusion:

Marina and the other Russian shareholders thus can take legal action and challenge the company in the court. The company may be charged under the 125, 9 Corp Act, 140,249 L, 1322 (2), 1322(3) and Section 1322 (3A) of the corporation acts.

Bibliography

ASIC v Drake (No 2)
http://www.halseys.com.au/article/sophisticated-and-wholesale-investors-accountants-certificates-and-afs-licensees-statements

Bell Resources v Tunbridge Pty Ltd (1988) 6 ACLC 970
https://iknow.cch.com.au/document/atagUio385983sl10534568/bell-resources-ltd-v-turnbridge-pty-ltd-ors-supreme-court-of-western-australia-01-july-1988

Deveraux Holdings Pty Ltd v Pelsart Resources NL (1986) 4 ACLC 12 text 168
https://iknow.cch.com.au/document/atagUio386623sl10540643/devereaux-holdings-pty-ltd-v-pelsart-resources-n-l-anor-supreme-court-of-new-south-wales-12-july-1985

Hickman Kent and Romney Marsh Sheep Breeders Association [1915] 1 Ch. 881 110
https://www.lawteacher.net/cases/hickman-v-kent.php

Lion Nathan Australia Pty Ltd vs Coopers Brewery Limited
http://www.mondaq.com/australia/x/221404/Contract+Law/The+Statutory+Contract

Cases

Bell Resources v Tunbridge Pty Ltd (1988) 6 ACLC 970

ASIC v Drake (No 2)

Hickman Kent and Romney Marsh Sheep Breeders Association [1915] 1 Ch. 881 110

Deveraux Holdings Pty Ltd v Pelsart Resources NL (1986) 4 ACLC 12 text 168

Lion Nathan Australia Pty Ltd vs Coopers Brewery Limited

Legislations

Corporations Act 2001

[1] Lion Nathan Australia Pty Ltd vs Coopers Brewery Limited
http://www.mondaq.com/australia/x/221404/Contract+Law/The+Statutory+Contract

[2] ASIC v Drake (No 2)
http://www.halseys.com.au/article/sophisticated-and-wholesale-investors-accountants-certificates-and-afs-licensees-statements               

[3] Hickman Kent and Romney Marsh Sheep Breeders Association [1915] 1 Ch. 881 110
https://www.lawteacher.net/cases/hickman-v-kent.php             

[4] Deveraux Holdings Pty Ltd v Pelsart Resources NL (1986) 4 ACLC 12 text 168
https://iknow.cch.com.au/document/atagUio386623sl10540643/devereaux-holdings-pty-ltd-v-pelsart-resources-n-l-anor-supreme-court-of-new-south-wales-12-july-1985        

[5] Bell Resources v Tunbridge Pty Ltd (1988) 6 ACLC 970
https://iknow.cch.com.au/document/atagUio385983sl10534568/bell-resources-ltd-v-turnbridge-pty-ltd-ors-supreme-court-of-western-australia-01-july-1988       

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