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Whether A Legal Claim Can Be Made Against

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Question:

Discuss About The Whether A Legal Claim Can Be Made Against?

 

Answer:

Introducation

According to the Section 53 of Corporation’s Act, activities that are carried on to support the various operations of an organization are called affairs.

It is the motive of Corporations Act 2001 (Cth) to safeguard the interests of all minority stock holders and prevent them from any oppression projected by the directorial board.

As stated in the section 232 of the act, it can be said that the court can prosecute and make orders based on Corporation Act’s section 233, in relation to the organizations operations and objectives. The court can do the same of it sees any omissions or changes that are not clarified, or if the organization doesn’t consider the interests of the shareholders, is oppressive, unfair and makes decisions that may not benefit the interests of the company.

It was stated by the court of law that the compensation can be taken even if the directorial board or the management are not particularly at fault or haven’t breached any of the common laws. It is up to the objective test to decide the guilt of the party, as in the In the case of Waydev NSW Rugby League [1985] HCA 68 case.

In the Jermyn Street Turkish Baths Ltd [1971] 1 WLR 1042 case, it was seen that sometimes probity’s extent can lack due to the various ways of how things might be conducted, all these are connected to how the company conducts its operations and organizes its conduct.

As stated in Section 233, the court, if deems appropriate, can carry on any orders given out through the corporation act’s section 232, which may also include the reduction of the share capital, buying and selling of stock, decisions based on my organizational operations that may occur, any actions that the organization might take legally, decisions on company’s winding up and etc. As stated in the corporation act’s section 234, a member of the organization has the right to apply for an order that is based on the corporation act’s section 233.

It was the company’s policy that extended for several years to pay equal and regular dividends to share holders of the A class category. But, due to certain circumstances, the company deemed the grandchildren of Galli, lazy and aborted their payments then and there. As clearly mentioned in the corporations act’s sections 234 and 233, being legal members of the organization, the grandchildren, can with all rights issue an order under 233 against the organization.

It is also seen that the grandchildren’s situation can fall under the various clauses of the section 232 which involve discriminatory oppressions. This strengthens the claim of the grandchildren and hence solidifies their claiming of the order. It was also mentioned in the previous cases that the directorial board can in no way breach an already solid contract, hence, making it easier for the judges to use the section 232 against the directorial board.

It is possible for the grandchildren to establish an order and a solid claim against the organization.

It is required in this part of the project to study the procedure of share buy-back and the procedure of selective buy-back.

The process of purchasing shares from stock holders of the company and then, by the orders of the ASIC, forfeiting them, is called buying back of shares or simply shares buy-back. It can be said that selective buyback is risky as there is a strong chance of insolvency strike. 

Only a certain selected organizational members are given the facility of buying back shares which can only be reached when a majority vote of 75% is gained in favor of it to progress in a very special resolution of the organization. The voting procedure is not without its restrictions, it is necessary that the people who are in for the voting were not involved in the sales of stock. For the buyback to proceed, it is necessary that with the orders of ASIC, the shares are firstly canceled.

Though the process of share buyback as mentioned previously can only be allowed in certain special situations by the law, it is completely up to the stalk holder whether he wants to buy back the shares or not. As said previously, a majority resolution of the directorial board is a necessary step.

In case there is a selective buy-back of stock, a notice must be passed that would contain all the necessary information of the organization.

 

Application

As stated above, an organization or a company cannot force its stock holders to sell their shares that they own; it’s totally their decision to make. In the given case, it would beneficial for the organization to opt for the process of selective buy back, as their goal here is clear and limited to only a certain group of share holders that is the A class stock holders and not anyone else. Hence, by being selective with their choice, they help in organizing the company in the right manner. Such decisions are taken in order to organize the capital doctrine and come under Corporations act’s section 257 (B).

It’s concluded that the simplest and the most prominent course of action in this case would be that the organization opts for Selective Buy-Back.

This part discusses whether A-Class stock can be subjugated to total removal from the share capital, and if the answer is yes, then what might the necessary conditions be.

It can be said that only of the conditions are supportive enough to indulge the shareholders in a positive scenario and benefit them in all possible degrees then, capital reduction can be considered as countermeasure. The judgment is not just made by examining the organizations ability to pay debts.

The process of cancelation of shares or reduction of capital by the share cancelation in the share capital, including assets that are no longer viable and can be liquidized is called capital reduction. It is very much different from what we had studied in the process of share buy-back as if reduction is financial, it can in no way be stopped, it will continue nevertheless.

It is required that forms Form 2205 or 2560 are given away by the ASIC, approving the reduction of capital, a couple of weeks before equal reduction. Unlike equal reduction, it is required that a special statement is given out by the ASIC in selective reduction process.

If terms are disagreeable or laws broken, the stock holders have the right to reach out to the court of law.

It is required in the process of reduction that all the steps are taken as directed by the common law and sections of the CA. It is necessary that the steps are in favor of benefitting the company and stock holders. The decision will be granted with a 75% majority vote. As stated above, unlike Share buy-back, in reduction, once a decision is taken, its ironclad and cannot be reversed or opposed in any way.

Conclusion

Hence, it’s concluded from the above facts that the reduction process in possible with the majority support of stock holders.

 

References

Corporation Act 2001 (Cth)

Waydev NSW Rugby League [1985] HCA 68

Re Jermyn Street Turkish Baths Ltd [1971] 1 management

OR

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