Carborundum Pty Ltd (Carborundum) is a company that was incorporated in July 2014. The main business of the company is the manufacture of drilling machinery for the mining industry. The company has issued 50,000 $ 1 shares as follows: Alan, Ben, Colin and Eric Sanders have 4,000 shares each; Donald Thump, a wealthy industrialist, has 12,000 shares; and the remaining 22,000 issued shares are owned by a company called Inventions Pty Ltd ("Inventions"). The directors and shareholders of Inventions are Hilary and Bill Winton. The Carborundum shares held by Alan, Ben and Colin are fully paid up, whilst the rest of the issued Carborundum shares are paid up only to the extent of one cent per share.

Hilary is the managing director of Carborundum and she is also its chief engineer. The other directors are Ben and Colin. Colin is the Chairman of the Board. Alan is the Company Secretary for Carborundum.

Carborundum's Constitution states,inter alia:

"Clause 3. The sole objects of the company shall be to manufacture of drilling machinery.

Clause 4. Hilary Winton shall be director for life.

Clause 5 The company agrees to employ Hilary Winton as its chief engineer. To amend this clause, there must be 80% approval at a General Meeting. "

Advice to Hilary

Only in this part, assume that Hilary convinces Colin to issue 50,000 $1 shares in Carborundum to Inventions with the requirement that only 1 cent needs to be paid initially. This was decided at a Board Meeting where neither Ben nor Alan was present. Discuss the consequences of this action.