Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

In recent months, Brown Family Farming Pty Ltd experienced a lot of internal friction between the company's ten (10) shareholders. You have been called in

In recent months, Brown Family Farming Pty Ltd experienced a lot of  internal friction between the company's ten (10) shareholders. You have been called in to help identify possible causes of action that would help aggrieved members seek legal relief for breaches of general law and/or statutory rules aimed at protecting minority members against harmful conduct of majority shareholders. Case Study: Brown Family Farming Pty Ltd (BFF) was registered in 2010 by the Brown family for the purpose of managing the family's successful farming business. 

According to ASIC records, each of the ten family members (6 brothers and 4 first cousins) are registered as equal shareholders and directors in BFF. Furthermore, due to a restriction in the company constitution, shareholders are prevented from selling or transferring their shares in BFF to anyone outside the remaining shareholders. Although the family members have not always agreed on everything, they have always allowed each member to participate equally in all company and business decisions.

However, since mid-2020, the four cousins learned that the Brown brothers used the Covid lockdowns as an excuse to improperly exclude their cousins from attending board meetings and participate in managing the company's affairs. Furthermore, the four cousins recently learned that two of the Brown brothers (Sam and Neil Brown), used $50,000 of company funds to make unauthorised investments in high risk shares on behalf of the company (which ultimately failed). To make matters worse, Sam and Neil persuaded their four brothers to forgive the $50,000 loss, claiming that Sam and Neil 'were only trying to help'. As a result, the cousins are unable to stand up to the 6 Brown brothers who, as a majority, refuse to take legal action against Sam and Neil to compensate the company for the money they lost. 


Required:
Q1 Mutual trust has broken down between the two family groups. The four cousins wish to cut all ties with the company. Briefly explain some of the problems they face if they tried to leave and why they need the Court's help to overcome this situation.
 Q2 Advise the four Brown cousins about possible common law and statutory causes of action that would help them stand up to the majority shareholders. For each suggested legal action, also suggest related legal remedies. You must refer to relevant case law and sections in the Corporations Act. You must explain how each cause of action will impact and help the four cousins.


Step by Step Solution

3.50 Rating (157 Votes )

There are 3 Steps involved in it

Step: 1

solution 1when a minority shareholders privileges are breached or when the majority acts against the minority s and more broadly the company best inte... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Document Format ( 2 attachments)

PDF file Icon
60bdf2ae870e8_214503.pdf

180 KBs PDF File

Word file Icon
60bdf2ae870e8_214503.docx

120 KBs Word File

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Systems analysis and design

Authors: kenneth e. kendall, julie e. kendall

8th Edition

135094909, 013608916X, 9780135094907, 978-0136089162

More Books

Students also viewed these Accounting questions