Question
Chess Ltd, an unlisted company, owns and operates a chain of fast food takeaway shops and has been trading profitably. It has two executive and
Chess Ltd, an unlisted company, owns and operates a chain of fast food takeaway shops and has been trading profitably. It has two executive and three non-executive directors. The Board has been pursuing a growth strategy and has resolved to consolidate and grow the Company's assets to fund further expansion. To further this aim the Directors have resolved not to pay a dividend for the next two years. Some shareholders are unhappy about this decision.
The Company's last financial statements disclosed that the Directors had agreed to increase their fees by 50% per annum and that each non-executive Director would be provided with a leased 2020 Audi Q7 motor vehicle for their personal and business use.
One of the larger shareholders has called a special general meeting to discuss the dividend policy. At the same time another shareholder has written to the Company advising that it is considering taking action against the Directors for breach of duty alleging that the increase in directors fees and the provision of Company funded motor vehicles might amount to a diversion of Company funds.
Required
Provide advice to the Directors on their duties, liabilities, and options. Illustrate your answer by reference to relevant Australian legislation and cases. DO NOT refer to Hong Kong Law.
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