Question Two:

Maci, Bloomi and Sak were friends who had a passion for flower arrangements. They decided to form a company called MBS Flowers Pty Ltd ("MBS") which would undertake a business selling flower arranging services. They all agreed they wanted to be involved in the management of the company and were each appointed as a director. Clause One of the constitution of the company provided that each of Maci, Bloomi and Sak would serve as a director for life. This was the only provision in the constitution - all the other replaceable rules applied to the company.

Bloomi was allotted 15 shares in the company because she had the most flower arrangement skills and the other two were each allotted 10 shares.

The company was very profitable and regularly paid dividends. Unfortunately, Maci and Bloomi started to think that Sak didn't have enough flower arranging talent and they wanted her to leave the company. They had a talk with her, but she said she loved the company and wasn't going anywhere.

Bloomi called a shareholders' meeting and gave appropriate and correct notice to each of the shareholders. Sak was annoyed at Maci and Bloomi and decided not to attend the shareholders' meeting. At the meeting, Maci and Bloomi voted in a favour of a special resolution to amend the constitution to remove Clause One. They then voted unanimously in favour of the second resolution to remove Sak as a director.

Immediately after the shareholders' meeting, Maci and Bloomi held a directors' meeting and passed the following resolutions:

1. "ThedirectorsofMBSFlowersPtyLtdherebyunanimouslyagreetoceasealldividend payments accordance with section 254U of the Corporations Act."
2. "The directors of MBS Flowers Pty Ltd unanimously agree to increase directors' fees by 1000%."
3. "The directors of MBS Flowers Pty Ltd unanimously agree to issue 1000 shares to each Bloomi and Maci in an amount equal to $1000 per share to pay for addition equipment"

Page5of8

D. "The directors of MBS Flowers Pty Ltd unanimously agree to purchase all flowers required in the flower arranging business conducted by MBS Flowers Pty Ltd from Bloomi."

When Sak found out about what happened at the shareholders' meeting and the directors' meeting she complained. Bloomi and Maci said that she could do nothing now that she only held less than .05% of the outstanding shares and was no longer a director.

Part A:

Was Bloomi and Maci able to amend the constitution as they did in accordance with the Corporations Act?(3 marks)

Part B:

Would Sak be successful if she commenced an oppression cause of action?(6 marks) Part C:

Sak thinks the fourth resolution requiring flowers to be purchased from Bloomi gives rise to a conflict of interest or a cause of action under section 182 or 183 of the Corporations Act. Bloomi and Maci told Sak they didn't care when she raised her concerns with them. How could Sak ensure that the company pursued these potential causes of action against Bloomi?(5 marks)

Part D:

Did Bloomi and Maci breach their duty to act for a proper purpose by issuing the shares to themselves?(6 marks)