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Corporations Law

In: Business and Management

Submitted By reeftip
Words 3070
Pages 13
Issues
Based on the case scenario, Doris, Betty, and Charlie formed a company called Bechdo Pty Ltd. The three members are the directors and Betty who is major shareholder holds 40% followed by Charlie and Doris who hold 20% each while the 20% is held by the rest. Based on the company constitution, a managing director has capacity to enter into a contract o behalf of the company up to a maximum of $100,000. Moreover, he/she can enter into contracts to the value of $900,000 upon getting consent for the board of directors. In this case, Bechdo Pty Ltd operates without a managing director since none was elected. The major issue is that Betty being the majority shareholder went ahead and entered into contract with BB Ltd, Jillo Pty Ltd, and Con Development Ltd. All the contracts made were over USD 100, 000, and the last two were over USD 900,000. Upon realization of the contracts, a meeting was convened and a resolution was made that stated that Betty acted improperly and failed to discuss the contracts with board members. As a result, the three contracts have been labeled as void and ultra vires and Bechdo Pty does not recognize them. The paper seeks to advise, Bechdo Pty Ltd, BB Ltd, Jillo Pty Ltd, and Con Development Ltd in regard to their liabilities and legal rights to the contract. Moreover, advice is given on legal grounds that may be taken by Bechdo Pty Ltd against Betty, Charlie, and Doris.
Rules
First, a corporation or a limited company is an artificial entity which is independent of its member founders, and is capable of engaging in a contract, suing, or get sued as an entity. Therefore, as an independent entity a limited company can sue its shareholders if they engage in malicious acts which do not abide to the set laws (Chen-Wishart n.d).
A contract is an agreement entered by two or more people. The agreement should be enforceable by the law and it can...

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