Corporations Law Question:

Case Study 3

In 2012, three friends (Amy, Lee and Chu) incorporate Bold Fresh Pty Ltd to operate a retail fashion shop that specialized in selling the latest trendy fashion designs. Amy and Lee each held 45% of the issued shares in the company and Chu held the remaining 10% of the shares. The companys constitution stated that all three were directors of the company, with Amy being appointed as the managing director.

Chu is very critical of Amys management but lacks the support of Lee in confronting Amy about her style of management. Lee informs Amy about the Chus dissatisfaction with her management style. To teach Chu a lesson, Amy and Lee decide to incorporate a new company called Bolder and Fresher Pty Ltd in which Amy and Lee are equal shareholders. Bolder and Fresher Pty Ltd trades in the neighbouring suburb and Amy and Lee divide their time between the two businesses.

Chu is unhappy when he hears about these developments but is unsure what he can do as he feels that he has been outsmarted by his friends.

Advise Chu whether:

Amy and lee have breached any directors duties owed to Bold Fresh Pty Ltd under the common law and under the Corporation Act; andThe remedies available to Bold Fresh Pty Ltd and ASIC for breach of duties identified above in part (a).