Dante Ltd has an issued capital of $1 million consisting of 700,000 ordinary shares and 300,000 preference shares. The Dante family who comprise the majority of the company's directors owns the majority of the ordinary shares. Lee, a director of Dante Ltd, owns all of the preference shares. Under the constitution each share carries one vote irrespective of its class of shares. In addition, the constitution provides that any preference shareholder owning at least 25 per cent of the company's issued capital is entitled to be appointed as a director. At a recent board meeting a majority of the directors decided:

that the company should issue a further 1 million preference shares with a $1 issue price paid to 1 cent to the ordinary shareholders. These preference shares will rank equally with Lee's preference shares; and

2.

to make a bonus issue of ordinary shares to the existing ordinary shareholders.

Lee believes the share issues will adversely affect the value of her shares.

Explain what rights, if any, she has under ss 246B - 246E of the Corporations Act to prevent the company from carrying out the directors' decisions.

Ardvaark Ltd's directors would like to return as much capital as possible to its shareholders. Its share capital consists of class A shares with a $10 issue price per share paid up to $6 and class B shares which are fully paid.

Advise the directors of the legal requirements regarding the following proposals: (a)

(b) that the company cancels the $4 unpaid on each class A share; and that the company buys back 15% of the class B shares.

3.

Would your advice be different if Ardvaark Ltd had financial difficulties? Explain. Gregory was recently appointed a director of Quick Fit Ltd. As part of his remuneration the company agreed to an arrangement whereby Gregory will borrow $3 million from Southward Bank and Quick Fit Ltd will guarantee this loan. This money will then be paid to Quick Fit Ltd in consideration for an issue of shares to Gregory at a 10% discount to the current market price of the shares.

Advise whether this arrangement is permissible and if not, the consequences of these transactions proceeding and any steps the parties should take.