This case aims at establishing whether the directors of Snowzone Pty Ltd have breached their duties. The first thing to note is that an impeding conflict has ensued between James and the current directors as they try to impose company laws that he sees as oppressive and misplaced. The UK law provides for the occasion where a company can present an injunction to a director who has breached his responsibilities. On top of that, in a case such as the one that is presented, rescinding a contract may be a resort if it is established beyond reasonable doubt that the director(s) have a vested interest on the same.
James as a shareholder holds no legal right to make a claim to the directors if he feels he has incurred a loss due to the way they are handling their activities. A breach of duty that has been recorded or reported on the side of the directors should be addressed by the company and not by the shareholders. According to Arnitage (2011) high levels of investment in relation to cash flows when combined with dividend payouts have caused companies serious financial deficits making them borrow to overcome. The logic behind this reasoning is that even if there is a loss, it cannot be recovered by apprehending the directors. Part 23 of the Companies Act 2006 sets out the laws that govern the distribution of profit in forms such as dividends. In this case, James feels that he is entitled to the dividends. However, the directors have succeeded in manipulating the other shareholders against the move and he (James) is seen as a troubleshooter.
The decisions made by the shareholders should be independent. The company holds the final decision whether to buffer back the profits to boost the sales or the operations of the company or to distribute it to the shareholders in the form of dividends. Each company has a dividend policy that is used to decide whether the company will allocate dividends or the way the profits shall be allocated. However, in this case, the company through the directors has erred by trying to change some policies that would be used to deny James the voting power to go against the laws that he feels are oppressive. The board of directors meets and makes the decision whether the company shall pay any dividends to its shareholders. The law provides that in case the shareholders are not happy with the way the allocation of dividends is conducted, they should liaise with the board of directors which should then make it as a proposal during the next meeting. Therefore, James does not stand a chance to alter the way the decision on dividends is being made on personal basis.
The directors should act in the best interest of the company as a whole. By considering that they are shareholders in Zabriski Pty Limited, their act of calling an abnormal meeting to authenticate the transfer is not legit. They have therefore breached their duty. On top of that, by trying to reduce the power of the voters through the shares, they are trying to turn the leadership of the company into an autocracy where the decisions that will be followed will be the minds of a few. The directors should avoid the situational conflict that has emerged and which is provided for in the Corporations Act 2001. If a change of the hardware providers should be changed, impartiality should be exhibited and it is not a must that the same company that they are shareholders should be awarded the contract.
Companies often use the dividends to reward their loyal shareholders. In fact, most investors will invest their money in a company that is giving the highest dividends. However, it is the role of the managing directors or the board of directors to sit and decide whether the company will be in a position to pay the dividends. It is against logic for a company that is struggling to stand financially to pay the dividends. In some instances, the shareholders may feel that the company has a right to pay the dividends if it is enjoying a good run in terms of returns. In our case, there is no evidence that the company is struggling financially. The decision to deny the shareholders the dividends, James included is malicious and not founded on solid claims. Including so many family members among the shareholders is a way of swaying the votes when it comes to making a concrete decision. The voting should be fair and impartiality should be withheld. In a situation where the voters are linked in a familial manner, the voting may not be as free and fair as expected.
It is on this note that the conduct of the directors should be probed and a comprehensive report produced. The shareholders who are liberal thinkers can also file a claim in the name of the company against the directors to stop further actions that will compromise the integrity of the company. In a situation where the directors are simply quenching their interests, the interests of the majority may not be a priority. The abnormal general meeting that was called for should therefore be disallowed and the normal protocol followed when conducting such a serious activity. On top of that, since it has been established that the directors are shareholders in Zabriski Pty Company, it is hard to establish the motives they have by trying to award it the contract of delivering the hardware to the company. The process of awarding the tender is biased and other companies should be considered if Nicola Pty Limited should be denied the tender in the favor of Zabriski.
Therefore, in conclusion, the directors have breached their duties by trying to sway the company to satisfy their own interests. Changing the constitution to satisfy the interests of a few people in the company is gross misconduct that should call for their impeachment. James as a shareholder should mobilize other shareholders to vote against the proposed changes. On top of that, he can sue the directors by assuming the position of the company and citing the alleged activities that are against the law on company governance.
The Corporation’s Act 2001 sets the provisions on legal entities. Sections 127 and 129 of the Corporations Act 2001 provide that once an individual or individuals form a corporation, it becomes a new and independent legal entity. The company is therefore completely separate from the ones who formed it. In this case, the government authority seller has no legal authority to stop Trent from buying more land. This is based on the provisions of the act and the fact that upon formation of the company, he becomes a different entity from the company. Therefore, the land that he bought earlier will be registered under his name while the new one will be registered under the name of the company.
The provisions makes it clear in cases of disputes where the company is sued as a different entity from the ones who are managing or owning it. The same should be applied in a case where its ownership is in question. Trent can therefore have the basis to file a legal claim against the government authority representative who has stopped him from making the purchase on the basis that he had made a purchase in the past. He has not violated the policy that was set to prevent cases of hoarding that would limit the number of people who benefits from the auction plan. The Corporations Act 2001 provides the company with all the powers to make transactions as an individual. The company can therefore take part in all dealings that an individual would engage in.
The laws that govern corporations are complex to make sure that issues such as legal identity are established. Section 124 of the Corporations Law 2001 provides that a company has the legal capacity and the constitutional powers as those of an individual. Under this section, a company has the power to issue shares and also that to cancel them. The individuals who manage and run the companies are not linked to them in any way and in cases such as legal pursuance, the company will forge ahead as an independent entity having its own counsel and engaging in activities as an individual. The corporations are taxable. By being taxable entities, it means that the owners are shielded from personal liabilities. This is the main issue that Trent will use to sue or file a claim in this case. If he will be treated as a different entity when it comes to paying taxes, then the same should apply when requesting to buy the piece of land. Since he is not disputing the fact that he bought the land in another instance therefore standing no chance to buy another section of the land as a personal entity, his company should be accorded the right to engage in the transaction.
Trent will be successful in case he sues the government authority for denying him the chance to own land in the name of his company. He owns the company with his wife so they are the sole signatories in matters pertaining to the company and any transactions that may be transacted therewith. However, as the law stipulates, the company and Trent are two legal entities. They should therefore be treated as such. A legal entity will engage in activities such as business transactions, issuing and cancelling of shares and mergers that will facilitate its success. This means that despite the fact that Trent and his wife are the sole signatories in the company, the government authority representative should not view them as they are but as the directors of the company that needs to buy the land.
Bibliography
Corporations Act 2001 (UK)
Companies Act 2006 (UK)
Andrew R. K. The Corporate Objective. Cheltenham: Edward Elgar Publishing, 2011. pp. 186.
Seth, A. Demand for Dividends: the Case of UK Water Companies. University of Edinburgh, 2011.
