Questions Two

(a) George, Louis and Archie were directors of Buckingham Ltd, a large retailor that relied heavily on bricks and mortar stores and not particularly much on internet sales. Unbeknown to his fellow directors, Archie set up a family company called Suits Pty Ltd which sold suits, similar to those sold through Buckingham Ltds retail outlets. While on a trade mission for Buckingham, Archie came across the suits at an emerging tailors convention. He gained a heavy discount for his bulk purchase. Still struggling with high overheads, the plight of Buckingham caused George and Louis to have sleepless nights. This sleep deprivation lead to George presenting information to shareholders and the ASX which was incorrect. When Louis observed George making these mistakes, he decided to start delegating tasks and also using advisors. To save money, Louis appointed advisors based on the lowest price and said to George: I do not think we can afford to engage the best. One piece of advice Louis followed was to decrease the companys spending on internet development and concentrate on bricks and mortar store sales. While George and Louis appeared to be stumbling through their work, Archie began trying to influence board decisions so that Buckingham would decline opportunities (eg about taking up new product lines or cheap leases on premises) , which he would then scoop up for Suits Pty Ltd. Charlotte is a minority shareholder who learns of the above. She seeks your advice on all the legal issues arising, particularly eg: those pertaining to directors duties and whether she can take any action on behalf of the company. Advises Charlotte. What further evidence would you need?

(b) This time Charlotte is buying shares in a start up company she wants to invest in through the internet. She is interested in learning from you two things: First, whether there are any laws regulating crowd source funding and if so, what are their key features; and secondly, she wants to know whether the exceptions to the corporate veil rule mean that the liability of shareholders is as risky as partners in a partnership. Critically analyse the relevant law and advise Charlotte as to her enquiries.