Paige is an extremely talented fashion designer. She comes up with an exciting design for a pink fluffy jacket. She approaches her friends Sarah and Nicola to see if they would be interested in forming a "fast fashion" business to exploit the jacket design she has come up with. Sarah is an experienced financial accountant and Nicola is a supply chain expert. Both Nicola and Sarah believe that they can make money from Paige's design idea and agree to go onto business with Paige.

1. How could Nicola call a shareholders' meeting if both Paige and Sarah were opposed to holding a shareholders' meeting? (2 marks)
2. Sarah and Nicola want to remove Paige as a director. How could they go about doing that? (1 mark)
3. Paige's mother invested $100,000 in the company and was allotted 4% of the outstanding shares. Her mother is always at the company, negotiates contracts on behalf of the company, attends board meetings, directs employees, hires employees and senior staff, is responsible for the books and records, approves large purchases and sales etc. The three directors always listen to her guidance and follow it (believing she knows a lot about business, is smart and also because she has a lot of money invested in the company). What would you advise Paige's mother based on these facts? (3 marks)
4. The company performs extremely well after its formation. PJR needs additional working capital to increase its inventory levels, engage in online marketing activities and open a new store. Paige and Sarah have a dispute with Nicola because she thinks the company should sell a variety of different coloured fluffy jackets and if they raise fresh capital the money should be invested in the new coloured jackets.Paige and Sarah think that they should stick to pink because, after all, this is the reason the company was formed in the first place. Sarah tells Paige that they need to get rid of Nicola but they don't have enough shares to vote her off the board.

At a recent board meeting, Paige and Sarah passed the following resolution (Nicola voted against the resolution):

Pink Jacket Revolution Pty Ltd (ACN 123 456 789)

Written resolution

Share Issue

Resolved that:

As Pink Jacket Revolution Pty Ltd requires additional capital to purchase more inventory, Pink Jacket Revolution Pty Ltd shall issue 10,000 ordinary shares to Sarah and 10,000 ordinary shares to Paige in consideration of $50.00 for each share.

Signed: Paige (Chairperson)

July 1, 2021

The new share issuance meant that Sarah and Paige owned more than 50% of the outstanding shares between them.

An extraordinary general meeting was held in late July where a resolution was passed removing Nicola as a director.

Did Paige and Sarah breach any of their directors' duties by awarding the new shares to themselves? (5 marks)