CASE STUDY

In 2015, Claire Mose worked as a luxury fashion designer in a company name Kloe Pty Ltd located in the City of Perth, Western Australia. Claire Mose signed an employment contract and a non-disclosure agreement with Kloe Pty Ltd, and Claire has expressly promised the following provision:

Provision 1: It is agreed that any business opportunity relating to or similar to Kloe's Pty Ltd current or future business opportunity is an opportunity that belongs to Kloe Pty Ltd. It is further agreed that Claire will not directly or indirectly, engage or participate in any business activities similar to Kloe Pty Ltd. This provision will continue to be effective up to 5 years after termination of the employment contract.

In June 2020, Claire terminated her employment contract with Kloe Pty Ltd. On the 31^stof January 2021, being aware of the non-disclosure agreement that she had previously signed with Kloe Pty Ltd, Claire arranged for her sister, Minnie Mose, to incorporate a company named Chance Ltd. Chance Ltd uses a combination of the Replaceable Rules and constitution.

"The provisions of the Corporations Act 2001 (Cth) shall apply to this company except for the following:

Clause 1: The sole object of the company is to design and sell luxury bags.

Clause 2: Daisy Dutch shall be employed as the senior legal consultant until 2025 with remuneration of $50,000 per annum.

Clause 3: Minnie Mose shall be one of the 3 directors for life.

NOTE: A discussion on Contract Law is not required.

Question

In February 2021, the directors of Chance Ltd have decided to pursue the business of design and sell luxury belts in order to make more profits, instead of only selling luxury bags. Chance Ltd has already sold some belts to customers and so far, none of the shareholders are unhappy about this decision.

With reference to the relevant sections of theCorporations Act 2001(Cth) and case law if any, please discuss this scenario using the 4-step process, whether Chance Ltd needs to change the objects clause in order to pursue the business of selling belts.

Does your answer change if the shareholders are unhappy about the decision of selling belts, instead of bags?

Please write your answer here: