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Corporation Law

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Submitted By deryck180
Words 2225
Pages 9
Assignment
Word Count (including footnotes):1997

Due Date: 16/4/2012
Name of Tutor: Michael Duffy
Name of Unit: Corporation law

Question 1
(a).
Issue: can shareholders force the company comply with the replaceable rule and clause2.1?
Under s134, a company’s internal management may be governed by provisions of the Corporations Act that apply to the company as replaceable rules, by constitution, or by a combination of both. Orchard Downs Pty ltd’s internal management is governed almost exclusively by its own constitution. The only replaceable rules it uses are the replaceable rule in s201G and the replaceable rule in s203C.
In this case, Norm, Sean and Anne are the only shareholders of Orchard Downs Pty Ltd. They received a letter informing them that the board had appointment Betty as a director without holding a general meeting. The shareholders were all unsatisfied with appointment of Betty. However, the board of directors told them that as s201G was a replaceable rule, they were not obliged to comply with it. Under s135(3), a failure to comply with applicable replaceable rules is not of itself a contravention of the Corporations Act. However, the constitution and replaceable rules have effect as a contract. Hence, the shareholders can sue the company breach the contract.
Section 140(1)(a) provides that a company’s constitution (if any) and replaceable have effect as a contract between the company and each member, under which each person agrees to observe and perform the constitution and rules as far as they apply to that person. Members can force company to comply with constitutional provisions that affect them in capacity as members.(Hickman v Kent or Romney Marsh Sheep-Breeders’ Assoc case)
In this case, the shareholders were all troubled by the appointment of Betty without

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