Prospectus Question: Burt and Ernie had both just caught the investment bug. Burt invested in Telecorp Ltd a communications company which was hitching its future prospects to the National Broadband Network (NBN). Ernie invested in a new corporation that promised a personal development regime delivered through a national network of personal training studios, Hyper Active Ltd. When Burt made his investment he relied on word of mouth from friends and documents produced by the corporation which stated: This is a once in a lifetime chance our corporation is positioned to take advantage of the NBN because of our close links to government. When Ernie invested, he relied on a prospectus that said: Your future personal success is guaranteed through this move. Both investments failed. Answer the following questions:

c) Imagine the facts change. This time the only evidence available is that Burt and Ernie are shareholders in Telecorp Ltd and Hyper Active Ltd, respectively, and that both companies have collapsed. Burt and Ernie wish to know if they could be preferred creditors in an insolvency. They are also interested in whether they might be able to access funds of the related companies of the ones in which they invested. Briefly advise Burt and Ernie. Is there further information you would need to answer that question? (7.5 marks)

d) Imagine the facts of the case change again. This time Burt and Ernie are members of two corporations ABC and XYZ. As investors of ABC, Burt and Ernie are unimpressed with the decision taken by management to outsource work and they seek to prevent directors from doing that. In XYZ they represent only 1% of the companys voting shares and seek to prevent their expropriation from the company. Discuss their prospects of success in both cases. Would your answer for either scenario alter if a takeover was announced? (10 marks)