.0/msohtmlclip1/01/clip_image002.png”> The UNIVERSITY of NEWCASTLE Faculty of Business & Law LEGL2002 Law of Business Organisations Semester 1 2014 Problem Question Assignment – Part B .0/msohtmlclip1/01/clip_image003.png” alt=”Text box: value: 10% due date: friday 16th may 2014 at 5pm word limit: 1000 words maximum (words over the word limit plus 10% may be disregarded by the marker) format: typed using ariel or times new roman font 12 point; line double spacing; 3cm margins top and bottom left and right; referencing: in text referencing following the referencing guide in the assessment folder on blackboard submission: via turnitin (using link in the pqa – part a folder under the assessment tab on blackboard) note: it is your responsibility to keep a copy of the submitted assignment “> PROBLEM QUESTION: BlackJack Properties Pty Limited (“BJ”) is a property development company whose main focus is the acquisition of real estate for housing development in the Hunter Valley region. Melanie Daniel and Sarah are the three directors of BJ and each hold 25% of the total shares. The directors’ shares are all “A” class shares and have voting rights. All three directors are involved in the management of the company. Melanie is the CEO Daniel the CFO and Sarah is Sales and Marketing Manager. The remaining 25% of shares are held by Daniel’s brother Max who is not involved in the management of the company. Max’s shares are “B” class shares. The “B” class shares have only one vote for each 5 shares held except that the shares have normal voting rights (1 vote per share) on a resolution to amend the constitution or to wind up the company. Last year BJ approached large property developer ConneX Ltd (“ConneX”) to propose a joint venture between ConneX and BJ to develop a housing estate in the Cessnock area. After some preliminary negotiations ConneX said it was no longer willing to deal with BJ (this was because ConneX’s controlling shareholder had recently ended a long term relationship with Melanie). Melanie was not aware that ConneX continued to negotiate with Daniel. Daniel invited Sarah to form a new company Crystal Clear Pty Limited (“Crystal”). They used the company to acquire some land near Cessnock. BJ had previously negotiated with the landowner to purchase the same land but had withdrawn because Daniel had advised the Board that the land was too expensive. The Cessnock land was developed in a joint venture between Crystal and ConneX but before the development was completed ConneX withdrew from the deal. Daniel and Sarah did not tell Melanie about the formation of Crystal or the land deal. At the next meeting of BJ’s Board Daniel recommended that BJ purchase the partially developed land from Crystal at a bargain price. Sarah and Melanie agreed. Crystal made a small profit from the deal because ConneX wore the loss. At no time did Daniel and Sarah disclose their interest in Crystal or the profit received from the land deal to Melanie. BJ later sold the completed development for a substantial profit. At a recent board meeting Daniel proposed that BJ should lend $400 000 of the company’s cash reserves to Max to fund his new winemaking venture at an interest rate of 2.2%. Melanie expressed concern about the loan on the grounds that BJ should be maintaining its cash reserves given the impact of the decline in the mining boom on external funding. She was also concerned about the low interest rate and that no security was being given for the loan. Daniel and Sarah outvoted Melanie and the loan was given to Max. Six months later Max advised the directors of BJ that his project had failed and he would be unable to repay the loan. Melanie is furious with Daniel for placing BJ in such a tough financial position. She has also reconciled with her former partner and has discovered Daniel and Sarah’s involvement with ConneX and Crystal and the profit made on the sale of the land at Cessnock. To make matters worse Daniel and Sarah have advised Melanie that they intend to call a general meeting to remove her from the board of directors and to appoint Max as a director in her place. They are also proposing an amendment to the Constitution to change the class of Max’s shares from “B” class to “A” class. BJ has adopted the replaceable rules. The meeting proceeded and the resolutions to amend the constitution and remove Melanie from the board were passed by Max Daniel and Sarah. PART B (10 marks) Advise Melanie as to what action she may take as a minority member of BJ and her prospects of succeeding in such an action in relation to: a. The amendment to the constitution to change Max’s shares from “B” class to “A” class b. Melanie’s removal from the Board
