Nemo Seafood International Pty Ltd (Nemo) operates a seafood export and processing business. The directors of Nemo are Marlin and Dory. There are 2,500 issued shares in Nemo, the majority owned by Lake Harbour Pty Ltd, a company also owned and controlled by Marlin and Dory. The day-to-day operation and management of Nemo were undertaken by Marlin and Nemos operations manager, Nigel. Nigel is recommending that Nemo enter into a strategic alliance (merger) with its rival, Jacques Fish Markets (JFM). Under the terms of the merger: (a) Nemo is to issue Jacques, the owner of JFM, with 1,500 new shares, which will represent 3/8 (37.5%) of the total issued shares in the company. Jacques shares will carry superior rights with respect to voting, dividends and repayment of capital than the ordinary shares already held by Lake Harbour and the other shareholders. (b) In return, Jacques will transfer all of his shares in JFM to Nemo. (c) From its profit and loss account, JFM will pay a dividend to Nemo, but payable directly to Nemos shareholders.

Should the existing members of Nemo have any concerns with this proposal? Specifically, consider:

i) As Lake Harbour is the majority shareholder of Nemo, outline the extent to which it could influence the day-to-day management of Nemo. (4 marks)

ii) Is it legal for JSM to pay a dividend direct to Nemos shareholders? (6 marks)

iii) What power does Nemo have to issue new shares? (2 marks)

iv) Should members approval have been first obtained before the new shares in Nemo are issued to Jacques?