Honey Publications Pty Ltd (Honey)is a small proprietary com pany that publishes a range of digital subscription magazines and special interest periodicals. Honey was founded by the Honey family in the 1960s during the "Great Magazine Boom". Mr Honey and Mrs Honey together hold 75% of the companys shares and their children, Alexis Honey and Daniel Honey , hold 10% each. The remaining 5% is held by a cousin of Alexis and Daniet, Willy Rafter. Mr Honey, Mrs Honey and Willy Rafter are all directors of Honey.

Honey had been a very profitable company from its beginning until 2020when magazine sales started to decline. To make the matters worse, Mr and Ms Honey have been giving through a divorce which threatens the integrity of the entire company. Mrs Honey has the support of her daughter Alexis Honey whist Mr Honey has the undying support of his son, Daniel Honey. Fearful of "what will happen" after they finalize their divorce. Mr Honey uses his power to issue 300,000 shares to his son Daniel in return. Daniel promises to always vote in line with the fathers wishes. Mrs Honey then decides that she will issue Alexis 350,000 shares, Alexis also promises to vote in line with her mothers wishes. Honey starts to descend into disarray with many key employees deciding to leave the company.

Whilst the other family members are distracted with the divorce proceedings, Willy Rafter secretly transfers several valuable company assets to Honey Pot Pty Ltd, a company that wholly owned and controlled by Willy. Willy places the Honey company seal on the contracts for transfer of the assets to Honey- Pot Ltd and signs off as witness. Once the transfer of assets has been completed , Willy buys a one way ticket to the Banana Republic and leaves his relatives without saying goodbye...

A. Are Mr and Mrs Honey permitted to issue shares to bolster their respective positions within the company? Explain whether Mr and Mrs Honey would be in breach of the director duties with reference to the relevant law. Make sure you answer using IRAC structure and refer to any relevant sections from the Corporations Act 2001(Cth) and case law(15 marks)

B. Explain whether Willy Rafter followed the correct procedure under the Corporations act 2001(Cth) for validly binding Honey in contract. Advise whether the contract will be legally valid or not. Make sure you answer using IRAC structure and refer to any relevant sections from the Corporations Act 2001(Cth) and case law.(10 marks)