Question 2

Chic Ltd is an Australian proprietary company. Its only business is the distribution of high end fashions through various retail channels. For many years, it has had its garments manufactured in Indonesia from fabrics imported from Europe. It has contracts with the Indonesian manufacturers to make these garments to its specification. The current contracts with Indonesian manufacturers will expire shortly and Chic has negotiated a new supply deal with a Thai manufacturer on significantly cheaper terms. In addition, Chic will also take a large equity in the manufacturer.

Some shareholders are concerned that the new arrangements pose considerable reputational risks for the company whose principal assets are intangible, namely, its brand and retail distribution arrangements. They wanted to stop the transaction and renew the Indonesian supply agreement. At the minimum, they would like the Chic directors to commission and release the results of a reputational risk assessment by an independent expert. They also have concerns about the financial merits of the Thai investment.

Required:

Based on your understanding of company law, advise these shareholders of any rights they may have to address their concerns.