Question One:

Kestrel Pty Ltd (Kestrel) is a small family company which operates a business breeding kestrels, eagles, falcons and other large birds of prey. Kim, Kourtney and Khloe are all siblings and the only directors of Kestrel and each owns 25 ordinary shares. Clause 15 of the constitution of Kestrel provides that Kim, Kourtney and Khloe shall be a director of Kestrel at all times.

Late last year Kim had a massive fight with the rest of the family and now Kourtney and Khloe won't speak to her and don't want her to have anything to do with the company.At a recent board meeting, Kourtney and Khloe passed the following resolution (Kim voted against the resolution):

Kestrel Pty Ltd (ACN 123 456 789)

Written resolution

Share Issue

Resolved that:

As Kestrel Pty Ltd requires additional capital to purchase more inventory, Kestrel Pty Ltd shall issue 25 ordinary shares to Kourtney and 25 ordinary shares to Khloe in consideration of $5,000.00 for each share.

Signed: Kourtney (Chairperson)

JANUARY 1, 2019

An extraordinary general meeting was held in February where a special resolution was passed removing Clause 15 of the constitution. Thereafter, a second resolution was passed at the meeting removing Kim as a director.

After removing Kim from the board, Kourtney and Khloe attended a board meeting suspending dividends indefinitely and increasing their directors' salary.

After the February meeting, Kourtney and Khloe realized that they could sell bird droppings to farmers to use as fertilizer and make a lot of money. Kourtney and Khloe registered a new company called BirdFert Pty Ltd ("BirdFert") in which they are the only shareholders and directors. BirdFert collects the droppings from Kestrel at no price (utilizing Kestrel's employees) and sells the droppings to famers at a massive profit.

Kim wants to know if (i) it was legitimate for Kourtney and Khloe to award the new shares to themselves; (ii) have Kourtney and Khloe breached any of their duties to the company in connection with their dealings with BirdFert.