Ronan Ltd is a listed company. Paddle Ltd holds 40 percent of the issued shares in Ronan Ltd and Newton Ltd have 35 percent of the shares. The remaining 25 percent is held by a different group of shareholders.

Ronan Ltd has tendered for the construction of a large flour mill and is likely to be the successful bidder. It will need an injection of funds to construct the mill. The directors are concerned that Paddle Ltd, which has other flour mill interests, will launch a takeover of Ronan Ltd and they will lose their positions. They are also concerned that Paddle Ltd will terminate the employment of many of Ronans workers as Paddle Ltd has a reputation of using foreign workers rather than local workers.

At a board meeting the directors resolve to allot a substantial number of shares to Newton Ltd in consideration for a promise that Newton Ltd will arrange finance for the construction of the mill. The allotment to Newton Ltd varies the shareholding power of Paddle Ltd such that, after the allotment, Paddle Ltd will only control 10 percent of the voting power.

REQUIRED:

With reference to the Corporations Act 2001 (Cth) and any relevant cases, advise Paddle Ltd whether they can argue to have the share issue to Newton Ltd set aside.