The actions which might be taken by Galli for the non-payment of dividends
The court has the power to provide relief under Section 233 of the Corporation Act 2001 (Cth) (The Act) as provided by section 232 of the Act. Under these section a member of the company can claim an order if it is found that the directors are doing an act which is not good for the company or its members because of personal interest. The order may be an injunction or a specified action or to pay compensation to the parties.
Under section 232 of the CA the court has the power to make a decision under section 233 if the company is found to indulge in an act or resolution which may cause harm, oppression or prejudice to the member of the company. The section 233 of the Act provides a very broad range of powers to the courts which involve preventing the directors from doing such act, appointing an administrator, asking the company to be wound up, asking the directors to do a specific act. Any member as per section 234 of the CA of thee company who has been provided with the shares of the company can bring a claim under section 232.
Wayde v NSW Rugby League Limited (1985) 180 CLR in this case the court had discussed about the oppressive remedy available to the members of the company. The court in this case provided a test to determine oppression. It had been provided by the judge that the conduct had to be more than mere disadvantage to the member in order to constitute oppression. It was further added by Brennan J that oppression can take lace even if the actions of the directors was in good faith and within their powers.
As per the facts of the case, Galli Grandchildren can apply for the remedy under the Corporations Act of Australia. The Galli Children can apply before the court for the relief of non-Payment of dividend. As per the provisions of the Act, the directors have the discretion as per the constitution of the company regarding payment of dividend. As per the constitution of the FWPL, the directors have the discretion regarding payment of dividend to Class A shares holders of the company. The victim or the holder of Class A shares may file before the court for non-receipt of dividend (Schultz 2016).
Under the test used in the rugby league case it had been provided clearly that even when the directors are action within their powers and in good faith they can be liable under section 232-233 of the CA for oppression. In the given situation although it is the discretion of directors not to pay dividends and they can claim such action to be in good faith they would still be liable for oppression as the Galli Grandchildren are being subjected to significant disadvantage by their actions.
Galli grandchildren can claim an order under section 233 for non-payment of dividends
Analyzing the benefits of doing a share buyback and the requirements for doing so
A share buyback is a process by which the company buys back the shares from the shareholders. This process of buying back the shares has been identified under the Australian Securities & Investment Commission and the Corporations Act 2001 (Au Yong et al 2014).
The Commission under the Act framed certain guidelines and regulations for the share buybacks. The advantages that the company receives in the process of buying back the shares such as taking advantage of undervalue share price, reduce dilution and increase ownership and enhancing the financial ratios of the company (Mitchell, Izan and Lim 2015).
The rules regarding the share buyback procedure has been stated under section 257B of the Corporations Act 2001. The rules and procedures as per the Act is that an ordinary resolution is to be passed by the shareholders in the meeting or a special resolution to be passed under Section 257C and 257D of the Act respectively. The company needs to lodge all necessary documents related to the share buyback before the ASIC under Section 257E.The company needs to give a 14 days’ notice under section 257F to the ASIC before starting the procedure of share buyback (Akyol and Foo 2013).
There are various types of buyback of shares such as the Equal access buybacks, Selective buybacks, Employee share scheme buybacks, Minimum holding buybacks and On-market buybacks. As per the facts of the case the company will have to make a selective buyback of shares. The selective buy back of shares are applicable only to a particular type of share. The directors need to pass a special resolution of members so that it can be made in good faith and good terms. As per the facts of the case Class A shares a particular type of shares of the company. Therefore, the company needs to choose the rules regarding the Selective buyback of shares of the company (Reddy 2014).
Thus share buyback can be done by following the above discussed requirements
The issue in this case is to determine whetherFWPL get rid of the A Class shares by way of a reduction of capital and if so what is needed and whose consent is required
According to Section 256B(1) of the Corporations Act it has been stated that a company may reduce its share capital when its thinks fit only when the reduction of share capital is fair and reasonable to the company’s member, the company has the ability to pay its creditors and is approved by the members of the company under Section 256C.
The reduction shall be either equal or selective. An equal reduction has three conditions which needs to be fulfilled. The conditions are that it should be related to the ordinary shares and applies to each shareholder of the company in such proportion as they hold shares and the terms of the reduction shall be same for all the shareholders of ordinary shares.
However, if any of these conditions does not apply it shall be considered as selective reduction of share capital (Ferran and Ho 2014).
As per the facts of the given case it should be a selective reduction of share capital as the company FWPL wants reduce shares of Class A. Therefore, the company needs to follow the rules and procedures of the selective reduction of share capital. The company needs to lodge a form 2560 with a notification of reduction in the share capital (Gitman, Juchau and Flanagan 2015). The notification shall consist of the documents relating to the reduction of share capital and a notice of meeting which is proposed to be passed by the resolution. The mention company FWPL is a private limited company so the lodging period should be 22 days before the meeting of the company. The company shall send a notice of meeting to the members with essential documents and particulars (Petty et al 2015). In the general meeting the members must accept the resolution by way of votes in favor of the reduction of share capital of particular class of shares. The reduction of shares involves cancellation of shares which shall be approved by a special resolution passed at a separate meeting of the members whose shares are to be cancelled. After the passing of the resolution the company must lodge Form 2205 within 14 days regarding notification of resolutions (Grinblatt and Titman 2016). After 14 days from the date of notification the company can reduce its share capital and shall lodge a change in the register of company regarding the change in the share capital of the company. In case of selective reduction procedure a special resolution and simple majority consent of the ordinary members would be required which includes no vote by persons who would receive consideration in relation to the reduction or who has a liability to pay unpaid amount on shares which is reduced.
Thus, in this way and procedure the FWPL can get rid of A Class shares by way of reduction of capital.
Akyol, A.C. and Foo, C.C., 2013. Share repurchase reasons and the market reaction to actual share repurchases: Evidence from Australia. International Review of Finance, 13(1), pp.1-37.
Au Yong, H.H., Brown, C. and Ho, C.C.Y., 2014. Off?Market Buybacks in Australia: Evidence of Abnormal Trading around Key Dates. International Review of Finance, 14(4), pp.551-585.
Corporation Act 2001 (Cth)
Ferran, E. and Ho, L.C., 2014. Principles of corporate finance law. Oxford University Press.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU.
Grinblatt, M. and Titman, S., 2016. Financial markets & corporate strategy.
Mitchell, J., Izan, H.Y. and Lim, R., 2015. Australian on-market buy-backs: an examination of valuation issues.
Petty, J.W., Titman, S., Keown, A.J., Martin, P., Martin, J.D. and Burrow, M., 2015. Financial management: Principles and applications. Pearson Higher Education AU.
Reddy Yarram, S., 2014. Factors influencing on-market share repurchase decisions in Australia. Studies in Economics and Finance, 31(3), pp.255-271.
Schultz, A., 2016. Finding the Right Remedy in Minority Shareholder Oppression Law: A Transnational Analysis of Solutions in Closely Held Corporations. Transnat'l L. & Contemp. Probs., 26, p.499.
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA.
Wayde v NSW Rugby League Limited (1985) 180 CLR