Barry White is a director of Overseas Investments Ltd, a company organised under the laws of New Zealand.Barry is a professional accountant as well as a professional director.The other directors of Overseas Investments Ltd are neither accountants nor professional directors.A firm of merchant bankers made a proposal to Overseas Investments Ltd for an investment in New Wave Software Co Ltd, a company also organised under the laws of New Zealand.New Wave Software Co Ltd is a recent 'start-up' and produces financial technology for the banking sector internationally.The investment proposal would require Overseas Investments Ltd to acquire a new issuance of shares in New Wave Software Co Ltd for a cost of $15,000,000.

The board of directors of Overseas Investments Ltd commissioned a firm of investment bankers to investigate and report on New Wave Software Co Ltd.That report was appended to the board paper in support of the investment in New Wave Software Co Ltd.Before writing their report, the investment bankers analysed the financial statements of New Wave Software Co Ltd.Those financial statements disclosed that New Wave Software Co Ltd was profitable and had retained earnings.In fact, the financial statements were fraudulent and New Wave Software Co Ltd was insolvent.A competent audit of the financial statements would have disclosed the fraud, but no audit of the financial statements had occurred before the investment had taken place.Both the report of the investment bankers and the board paper were positive about the investment, and the board of directors of Overseas Investments Ltd resolved to proceed to acquire the shares.New Wave Software Co Ltd went into liquidation not long after the investment, the $15,000,000 of new equity having been transferred to an account in the Caymen Islands and thereafter to places unknown.

The shareholders in Overseas Investments Ltd are extremely unhappy that the company's investment in New Wave Software Co Ltd has been a disaster, and demand that the board files proceedings to recover Overseas Investments Ltd's losses.In the meantime, the merchant and investment bankers have gone bankrupt, New Wave Software Co Ltd has been liquidated, and the officers and employees of that company cannot be located, having departed New Zealand for points unknown.The board of directors of Overseas Investments Ltd does not wish to bring any civil proceedings and refuses to do so.

Required

Advise the shareholders what they should do, giving legal reasons.

Legal Sources

Companies Act 1993, Parts 8 & 9