Question B1 (20 Marks)

AccessCo Ltd is a successful computer software company in Sydney which specialises in accounting and business management software and maintains roughly 20% of the market. Management Ltd is a large competitor of AccessCo Ltd with 50% of the market in Sydney for business management software applications. Management Ltd is interested in acquiring AccessCo Ltd's market share to become the dominant player in the Sydney market.

Management Ltd announces on 1 January 2020 that it has acquired 19% of the shares in AccessCo Ltd and is making a full takeover offer for AccessCo Ltd because, in its opinion, 'The current management of AccessCo Ltd is not providing value for shareholders'. In the takeover offer Management Ltd proposes to:

Remove the entire management team of AccessCo Ltd;

Fully integrate AccessCo Ltd's management software business into Management Ltd's business structure which will involve significant redundancies in AccessCo Ltd; and

Allow AccessCo Ltd's accounting software business to remain in its current state with a view to a possible sell-off in the future.

The directors of AccessCo Ltd, who are also shareholders in AccessCo Ltd, are extremely worried by the proposed takeover as they fear for their positions and the future direction of the company.

On 5 January 2020 AccessCo Ltd announced a new share issue proposal that will only apply to shareholders that were registered on 31 December 2019 or before (which specifically excludes Management Ltd). The proposal is in the form of a bonus issue that will provide three free shares for each existing share that a member holds. The effect of the issue is that Management Ltd's shareholding will be substantially diluted and will make it very difficult to mount a successful takeover. All eligible shareholders will receive a substantial benefit by accepting the free shares. The proposed share issue will cost the company $500 million to implement and is likely to eliminate the company's profit for the financial year 2019-2020.

Your Task:

Advise whether the directors of AccessCo Ltd have breached their common law and statutory duties under the Corporations Act 2001 (Cth).

Give reasons for your answer referring to the Corporations Act 2001 (Cth) and/or cases as relevant to support your arguments.